Allied Colloids comes out fighting against Hercules bid

Hercules' hostile takeover bid for Allied Colloids was still raging as Process Engineering went to press, with the UK company attempting to fight off the bid by predicting profits and sales growth.

According to Allied chief executive David Farrar, a series of new products would help boost sales in the coming months, while closer management of raw materials costs and manufacturing efficiency would improve the company's margins. In particular, the recent acquisition of a US polymers business, CPS, would produce a 5 per cent cut in raw materials costs.

The company's half-year results showed pre-tax profits up 52 per cent, at £34 million, while sales jumped 19 per cent to £247 million. The CPS acquisition added £42.9 million in sales and £7.8 million to profits. Margins lifted from 11.3 per cent to 15.1 per cent, and Farrar claims that this trend will continue.

But Hercules was not impressed with the results or the strategy. Chairman Keith Elliott pointed out that, excluding CPS, sales are down on a like-for-like basis, as are return on capital and cashflow. 'Our cash offer [of 155p per share, £1.07 billion] continues to look very generous for a company that has destroyed value and has consistently underperformed,' he says.