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Pilkington’s statement:

‘On 31st October 2005, Pilkington announced that a preliminary approach had been made which might or might not lead to an offer being made for the Company.

‘Nippon Sheet Glass Co. Ltd. (NSG) subsequently confirmed that it had made the approach.

‘The conditional proposal by NSG is for an offer in cash at 150 pence per ordinary share inclusive of the interim dividend. The Board has now informed NSG that its proposed offer falls materially short of a price which the Board is prepared to recommend.

‘Note 7 of Rule 2.4 of the City Code on Takeovers and Mergers requires the Company to point out that this statement is being made by the Company without prior agreement with the potential offer or and that there can therefore be no certainty whether an offer will be made nor as to the terms on which any offer might be made.’

Reaction

A sensitive offer situation is now in progress. Pilkington has informed the press and the market that it has received an approach. Talks are proceeding between NSG and the board of Pilkington, speaking on behalf of the shareholders.

One of the major shareholders, Standard Life, indicated that the 150p per share bid was too low. City analysts have quoted 170p as a reasonable. Trading has pushed the share price over the 150p figure, indicating that the market is confident about this being reached.

Still no formal bid

If NSG does make a formal bid, a takeover is likely to cause little disruption and few casualties.

At the time of writing, Pilkington has only received a possible offer, and potentially, other bidders could be lurking in the background.

The Panel on Takeovers and Mergers is engaged on the announcement a firm offer. NSG would have 28 days from the firm offer date to post the formal legal documents, and would have 60 days to win, or the offer would lapse. A 50 per cent vote by the board would secure the bid.

Entitled

The Panel’s slim rulebook entitles Pilkington to demand that NSG makes a formal offer to stop speculation. The fact that talks are continuing indicates that Pilkington doesn’t feel it is in a siege situation, and that speculation is not damaging business. Such offers are part and parcel of being a public limited company.

Possible outcomes

Of course, the takeover might not happen. The deal would cost Nippon over $2 billion and adversely affect the credit ratings of both businesses.

But if NSG does make a formal bid, a takeover is likely to cause little disruption and few casualties. Pilkington has clear strategic plans and there is little overlap between the businesses. NSG’s interests are mainly in Japan and South East Asia while Pilkington’s are global. It’s really a case of wait and see.