* Unable to launch bid before Prysmian offer closes
* Setback to M&A ambitions of Chinese companies
* Prysmian says confident bid will succeed
* Draka shares close down 8.4 pct, Prysmian up 9.7 pct
(Adds shareholder group comment, details, closing share prices)
By Aaron Gray-Block and Gilbert Kreijger
AMSTERDAM, Jan 6 Chinese group Xinmao dropped an
audacious 1 billion euro ($1.3 billion) bid for Dutch cablemaker
Draka DRAK.AS, leaving Italian peer Prysmian (PRY.MI) free to
form an industry leader through a lower-priced deal.
Xinmao's failure to grab a slice of the fibre optic cable
market by buying an overseas company is a setback to the M&A
ambitions of Chinese companies.
It follows the high-profile collapse last year of a bid for
the General Motors (GM.N) SUV brand Hummer by Sichuan Tengzhong
Heavy Industrial Machinery. [ID:nN24166804]
Xinmao, which gatecrashed Prysmian's agreed cash and share
takeover of Draka in November, conceded defeat on Thursday,
saying it would be unable to launch its own bid before
Prysmian's 870 million euro offer closed.
"Xinmao has, after careful consideration, regretfully
concluded that its intended offer for Draka is no longer
feasible," it said.
The group had faced an uphill battle to bid in time as it
waited for Chinese government approval.
Prysmian's offer, launched on Thursday following regulatory
approval, closes on Feb. 3, some 10 days before the date by
which Xinmao said it would be able to file its bid with Dutch
Key to success for any bidder is Flint Beheer, a family-run
fund which controls 48.5 percent of Draka and has said it will
accept Prysmian's bid. Flint was not available for comment.
"It was basically going to be very difficult process for
Xinmao ... What they need to learn here is that they need to
move faster and get Chinese approvals before and not after the
fact," SNS Securities analyst Martijn den Drijver said.
Draka shares, which had been trading between the value of
the Xinmao and Prysmian offers, closed down 8.4 percent at 17.71
euros, just below the implied value of Prysmian's offer of 17.94
euros. Prysmian bounced 9.7 percent to 14.16 euros on relief it
would not have to raise its bid to win over Draka investors.
The Italian group said it was confident of success.
For a TAKE A LOOK: [ID:nLDE7050XJ]
For M&A deal table: r.reuters.com/kyb46q
"Prysmian shares are now getting a boost ... The threat of a
higher offer, partly in shares, has gone away. All synergies can
now be divided among the original number existing and new
shares," Joop Witteveen, head of Dutch small cap investments at
Draka shareholder Kempen Capital Management, said.
Draka said since an initial approach by French cable
industry leader Nexans (NEXS.PA) in October and Prysmian's bid
there had been time for Xinmao to prepare its offer.
"We have done our fiduciary responsibility. We have
co-operated with Xinmao and Prysmian and ... there was enough
time for Xinmao to arrange approval and financing," Draka said.
Draka had questioned Xinmao's ability to finance its 20.5
euros per share offer, although the Chinese company had
maintained it had funding in place from a Chinese bank.
Xinmao's withdrawal, however, will not necessarily make it
easier for a new rival offer to emerge, such as from Nexans,
said Niels Lemmers at the Dutch shareholders' group VEB.
Any offer must be at least 16.3 percent higher than Draka's
share price prior to the launch of a rival offer for Flint to
cancel its commitment with Prysmian, the offer memorandum shows,
requiring a bid of more than 20 euros per Draka share.
Kempen Capital Management said it would talk to Prysmian
about selling its preference shares, which amount to 5.19
percent of Draka's total outstanding capital. These shares are
unlisted and not subject to Prysmian's offer.
Jack Jonk, head of equities at Delta Lloyd Asset Management
which manages 2 to 3 percent of Draka shares, had not yet
decided whether he would offer Draka shares to Prysmian.
But he did not expect European competition hurdles for the
Prysmian-Draka combination. "Perhaps they will have to sell some
small operations but I do not think this is a problem," he said.
Prysmian is being advised by Goldman Sachs, Mediobanca and
Banca Leonardo. Draka's financial adviser is JP Morgan and its
legal counsel is Allen & Overy. Xinmao was advised by Catalyst
(Writing by Alexander Smith; Editing by Andrew Callus and David
($1 = 0.7609 euro)