UK's Lonrho gets buyout offer of nearly double its market value

Wed May 15, 2013 7:00am EDT

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(Reuters) - British conglomerate Lonrho Plc LONR.L, whose roots go back more than a 100 years to colonial Africa, received a buyout offer valuing the company about 175 million pounds ($266 million), double its market value at the close on Tuesday.

Lonrho said an investment vehicle controlled by Swiss billionaire Thomas Schmidheiny and Swiss investor Rainer-Marc Frey had offered 10.25 pence for each Lonrho share, a premium of 97.1 percent to Tuesday's closing price.

Lonrho's agribusiness, which accounts for about 60 percent of revenue, supplies fresh fruit, vegetables, meat and fish to retailers in Africa. The business also has a logistics unit and distributorship for John Deere (DE.N) agricultural equipment.

"We believe Lonrho has strong long-term prospects, but the significant capital required to grow the business over time is evident," Schmidheiny said in a statement on Wednesday.

The company's free cash flow has been negative since 2007, according to Thomson Reuters data and its net income has swung between profits and losses for the past several years.

Schmidheiny -- whose estimated net worth of $5.5 billion earned him the rank of fourth-richest man in Switzerland by Forbes magazine in 2012 -- declined to comment further.

Frey, the founder and chairman of investment management company Horizon21 and a director of banking group UBS AG (UBSN.VX), was not immediately available for comment.

"It's a reasonable offer," Daniel Stewart analyst Michael Campbell said, noting it was about equal to annual revenue.

VSA Capital analyst Edward Hugo said the deal highlighted increasing interest in the agricultural sector.

"There's a specific focus on African agriculture," he said. "Lonrho has the right operational footprint down to benefit from this potential massive growth market. These guys think they can do a better job than the existing guys."

Africa's agricultural output, which was valued at $250 billion in 2011, is forecast to double by 2020 and reach $800 billion by 2030, according to Lonrho's latest annual report.

PROFITS AND LOSSES

The bid vehicle, together with other related parties, already controls 19.9 percent of Lonrho.

Lonrho shares rose about 90 percent to 9.86 pence in morning trading on the London Stock Exchange on Wednesday. They had fallen 38.5 percent this year up to Tuesday's close.

The decline in the company's share price is the second biggest this year among 166 industrial conglomerates globally with a market capitalization of at least $100 million, according to Thomson Reuters Starmine.

"The financial performance has been fairly volatile, which has disappointed some investors," VSA Capital's Hugo said. "It's always had a lot of potential, but in the past they've set their expectations too high, maybe hyped it up."

Apart from its core agribusiness, Lonrho is the majority shareholder in airline FastJet Plc (FJET.L). It also owns hotels in Africa and offers port services such as cargo handling.

Lonrho said the bid vehicle, FS Africa, had the support of Lonrho directors and shareholders representing about 18 percent of its outstanding shares.

($1 = 0.6554 British pounds)

(Additional reporting by Patturaja Murugaboopathy in Bangalore, Writing by Brenton Cordeiro,; Editing by Don Sebastian and Ted Kerr)

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