September 12, 2011 / 9:56 AM / 8 years ago

Colfax to buy Charter for $2.4 billion, pips Melrose

LONDON (Reuters) - U.S. group Colfax (CFX.N) is to buy British toolmaker Charter International CHTR.L for an agreed 1.53 billion pounds ($2.4 billion) in cash and shares, after beating off rival bidder Melrose NYN.L with a 910 pence per share offer.

Charter, which makes tools and equipment, had opened its books to long-time suitor Melrose two weeks ago after the British manufacturing buyout firm sweetened its approach with an 850 pence offer.

Charter then said on September 4 it was also taking to Colfax, which will now pay 730 pence and 0.1241 new Colfax share per Charter share. Colfax will fund the deal with a mix of an equity issue, new debt facilities and existing cash resources.

“This is a transformational acquisition for Colfax that accelerates our growth strategy,” it said in a statement.

Charter Chairman Lars Emilson said the offer reflected the company’s leading market position and growth potential.

Charter shares were up 5.7 percent at 850 pence at 0940 GMT, while shares in Melrose, which had seen two approaches rejected by Charter, were up 4.4 percent.

The bid battle may not be completely over, however.

U.S. pumps and valves manufacturer Colfax, owned by billionaire brothers Steven and Mitchell Rales, may face a struggle to win over shareholders who think Melrose would do a better job of turning Charter around.

“If Charter’s shareholders likes the Melrose offer, they would love Colfax’s one,” said Daniel Pryor, Colfax’s senior vice-president.

Dominic Convey at Peel Hunt said the rise in the Melrose share price suggested its investors thought the deal was done.

“I think clearly that has been suffering from the overhang of a relatively large rights issue to fund the Charter acquisition,” he told Reuters. “We have seen a little of that unwind this morning as people have perhaps thought that the 9.10 pound bid from Colfax might just seal the deal.” ($1 = 0.629 pound)

Reporting by Kate Holton; Additional reporting by Neil Maidment, Editing by Rosalba O'Brien and Dan Lalor

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