FKI suitor in £412m takeover approach

Turnaround company Melrose today confirmed it had approached engineering group FKI about a possible takeover valuing the firm at around £412m (€550m).

Melrose, which specialises in engineering investments, said it was considering putting in an offer at 70p a share for Loughborough-based FKI, in a mixture of cash and shares.

The news comes after FKI revealed on Friday that it had received an approach from an unnamed group – news which sent its shares soaring by more than a third.

The approach is the second in less than six months for FKI, with the firm ending discussions with a suitor in August – believed to have been US private equity firm Blackstone.

However, the latest interest comes at almost half the value mooted in last year’s talks, which would have valued FKI at around £765m (€1.02bn).

FKI shares have been under pressure since last summer, as investors are said to have grown nervous over high levels of debt and delays in plans to sell underperforming units, such as Logistex, which makes baggage-handling equipment.

Melrose specialises in snapping up struggling engineering and manufacturing firms to drive shareholder returns before selling them on within two to five years – operating in a similar way to private equity investors.

It said on unveiling interim results in September that its acquisition plans would be unfazed by the credit crunch, given its lack of need to use debt to finance buy-outs.

The group listed on the Alternative Investment Market in 2003, moving on to the main market two years later.

Its takeover target, FKI, employs around 13,000 people across operations in more than 20 countries.