Vita recommends TPG’s fourth offer

Persistence paid off for UK-based foam producer British Vita, as management’s resistance to three previous offers forced Texas Pacific Group (TPG) to raise its bid for the fourth time. The British Vita board is recommending TPG’s 360p per share offer, which, minus a 6.25p per share final dividend, values the company at £668m. The increase came after initial bids of 325p, 335p and 346p per share were rejected on the grounds that they were too low.

The tag represents a substantial premium to Vita’s 261.75p share price at close of business on January 11, the day before TPG’s first proposal was received. The premium is 31% to the 279p share price on February 1, when Vita acknowledged the approach. Following Vita’s acknowledgement, the shares surged by more than 21% on February 2 to a high of 334p. They added a further 8.5% to a high of 362.25p on March 21, before moving back to 354.43p by the close on March 24.

TPG said that directors and large shareholders accounting for 23.6% of British Vita’s issued share capital had pledged to vote in favour of the bid. Behind the scenes, some of the company’s major shareholders had been concerned that TPG might walk away due to previous lack of co-operation from management. Shareholders in British Vita include Morley Fund Managers, Henderson and M&G Group.

British Vita’s board said it believed that the ultimate offer delivered fair value to shareholders. “TPG UK will take control of a well run, cash-generative business, which is well placed to take advantage of the opportunities offered by the markets which it serves,” said David Cotterill, the company’s chairman.

As part of its defence strategy, British Vita announced plans earlier this month to return £185m to shareholders through a 100p per share dividend. The company said then that it had a strong future as an independent entity, despite a rise in raw material costs due to high oil prices.