* Gets 840 pence cash and stock approach from Melrose
* Says considering increased offer
* Melrose says shares to make up majority of any bid
* Charter shares up 1.7 percent, Melrose up 0.5 percent
(Adds analyst comment, background, updates shares)
By Adveith Nair
LONDON, July 14 Charter International
said it was considering an improved offer from industrial
investor Melrose that valued the British industrial
toolmaker at 1.4 billion pounds ($2.2 billion).
Charter said on Thursday the 840 pence per share cash and
stock offer -- 8 percent higher than a preliminary offer from
Melrose -- was conditional on financing and due diligence.
It had rejected a previous 780 pence per share proposal.
A top 10 shareholder told Reuters that Charter was trying to
"flush out white knights", including U.S.-based rival Lincoln
Rivals could target Charter to gain control of its welding
tools business ESAB, the second-largest in the world but which
has struggled to keep up with competition as costs rise.
Analysts said Lincoln Electric and Illinois Tool Works
, the world's No.1 and No.3 welding companies, could both
be drawn into the fray and Charter could be sold for as much as
900 pence per share.
Charter shares were up 1.7 percent at 830.5 pence at 1230
GMT, while Melrose shares were up 0.5 percent at 363.7 pence.
Singer Capital Markets analyst Jo Reedman said Charter was
"clearly less hostile to this revised approach" and appeared
more likely to open its books to Melrose, adding the revised
offer was not necessarily a knock-out bid.
"We would expect the management of both Lincoln Electric and
ITW's welding businesses to be concerned about the prospect of
ESAB being acquired by Melrose, with its track record of
investing in and turning round poorly performing businesses,"
CASH AND STOCK BID
Melrose, which looks to buy underperforming industrial
businesses and sell them after restructuring, said the majority
of the revised offer would be satisfied by the issue of new
"Melrose would include a 'mix and match' election within its
proposed offer structure, allowing Charter shareholders to elect
for more cash or more equity consideration, depending on their
and other shareholders' elections," it said.
A cash and stock bid would give Charter shareholders a
chance to gain from any increases in the value of Melrose
shares, which are up 16 percent this year.
Before offer talks were made public, Charter shares fell 27
percent in two months as it battled management issues amid
falling sales at its core unit.
($1 = 0.624 pound)
(Reporting by Rhys Jones and Adveith Nair; Editing by Elaine
Hardcastle and Dan Lalor)