Christian Salvesen has confirmed that it has received approaches from two parties which, it says, might or mightnot lead to a recommended offer for the company.
It said the indicative offer proposals received by the board were subject to a number of pre-conditions.
“The board is currently continuing discussions and will provide an update to shareholders in due course. There can be no certainty that a formal offer for the company will be forthcoming or as to the terms on which any offer might be made.”
Earlier bid rebuffed
Salvesen has been the target of take-over bids in the past. In 2004 TDG initiated discussions but was rebuffed by Salvesen.
To be successful a potential buyer will have to persuade the Salvesen family of the merits of the bid. The family is estimated to own between 25-30 per cent of the equity in the business making it very difficult for an offer to succeed in the face of their opposition.
There has been a significant speculation about who its bidding. Given current market conditions, it seems unlikely that it would be attractive to a private equity buyer so another third party logistics organisation is the most likely. The most frequently cited name in is Wincanton. While there is an obvious logic to the move, there is a question mark over whether a UK logistics operator would want to put further investment into the domestic market when there are opportunities for higher margins and faster growth in eastern Europe or even the Far East.
Salvesen has been in the process of restructuring its business. In particular, it has put in place a recovery plan for its transport division which has struggling as its manufacturing user base has declined in the UK.
In August, Salvesen signed an agreement for the sale of its frozen vegetable business, to Dutch group Pinguin for £17.2m.
The business consists of vegetable processing, packing and storage activities at three sites in Lincolnshire, located in Bourne, North Thoresby and Easton. In the year ended 31 March 2007 the business reported revenues of £44.6m and operating profit of £700,000.
Chief executive Stewart Oades said: “We are pleased to have reached agreement on the sale of the business and believe that the business will have greater opportunities as a part of Pinguin, whose strategy is focused on frozen vegetables. This disposal marks another important step in our strategy of refocusing around our core activities of logistics and transport.”
In its interim management statement, Salvesen said trading was “broadly in-line with our expectations, which are weighted to the second half of the year”.
“As widely reported, the wet weather in the UK has severely affected crops that are harvested during the summer. As part of our continuing UK Logistics business we process and store frozen vegetables for customers at sites in Grimsby, Hull and Lowestoft. During July, this part of the business felt the first impact of lower volumes and this will impact the first half financial performance for UK Logistics. Looking forward, storage volumes of these products are also likely to be lower than expected during the remainder of the financial year.”
“The UK Transport recovery plan is under way although, as expected, we do not expect to see significant financial benefit until the second half,” the company said.