At around close of play on Friday, Williams Holdings Plc came back with a final offer for Racal Electronics Plc, adding 10 pence cash per Racal share on top of its three Williams-for-20 Racal offer – but the decline in Williams’ share price in the period between it making its original bid and last weekend is such that the new offer is actually worth slightly less than the original one. It valued Racal at 54 pence a share – UKP738.8m all told – but Racal shares plunged to around 45 pence in unofficial after-hours trading, signalling big disappointment that the offer was not higher. The bid looks entirely misconceived: it is difficult to believe that the Williams management will be able to run the Racal electronics businesses any better than incumbent management, Racal has promised to spin off the security business next year anyway, giving shareholders that sit on their hands something to look forward to, it is doubtful that Williams shares will appear much more attractive to holders than Racal’s in the near term, and Williams’ borrowings are sufficiently high that it can scarcely afford even the 10 pence a share cash it has added, and certainly couldn’t find much more cash. The fall in the Racal share price suggests that the market has decided that the bid will fail, and that it sees no other is in prospect. The original offer won only 2.8% of acceptances. Rejecting the revised offer, Sir Ernie Harrison said that the original offer was inadequate, and following the clear evidence of success already achieved and in prospect for the future, the new bid undervalues the company by an even greater magnitude.
