Allied Lyons spurns Elders bid

Press, 4 December 1985, Page 42

Allied Lyons spurns Elders bid

PA London Allied Lyons, the British food and drink giant declared an Elders IXL takeover bid “frivolous” and not to be taken seriously. In a formal defence document to the IXL 255 pence (NZ665c) cash offer, Allied’s chairman, Sir Derrick Hol-den-Brown, said: “We believe the case for rejection is immensely strong.” The brewing-based group claimed that market rerating meant Allied’s shares would continue to rise well above current levels before any take-over premium IXL might pay. However, London investors took no notice as the market came off the boil with profit-taking shaving 13 pence (33c) off Friday’s Allied price of 301 pence (785 c Elders’ chairman, Mr John Elliott, admitted when offer documents went out on November 21 that at current market levels they did

not expect a high rate of acceptance. He has not been drawn on raising the bank-financed bid which is increasingly seen as a “sighting shot” to draw Britain’s Office of Fair Trading (OFT). The OFT is due to announce next ' Monday whether the bid will be delayed by a six-month Monopolies and Mergers Commission inquiry. Allied maintained the bitter war of words surrounding the battle in its defence paper to shareholders. Sir Derrick said: “Elders is not suitable to be owner of Allied-Lyons. “It has given no meaningful assurances to our employees, its management is inadequate, it is too small, it has a disappointing record, and it wants to dismember a cohesive, powerful group.” Sir Derrick added: “Elders is strong in one thing only — grossly extravagant

ambition, which despite its bragging is not supported by its own resources.” The document defended Allied’s record, stating that share prices had increased more than four times since 1981, ahead of inflation, the stock market in general and its own sector. Pre-tax profits and earnings per share had grown at compound rates of 18 and 13 per cent respectively. It said the offer “cannot begin to be taken seriously. When measured against each of the most important investment yardsticks of capital value, earnings, and dividends it is a frivolous offer.” Elders’ pre-tax profits a share had grown at less than the inflation rate at seven per cent compound over the past five years while its shares had underperformed the Australian all-ordinaries over the past three years, he said.