Faced with a £26 million pension deficit that would make it impossible to pay dividends for some years, the directors of Dowding & Mills have recommended a cash bid of 20p a share valuing the industrial maintenance company at £30.8 million.
The bidder is Rydenor Investments, a private company formed for the purpose by Christopher Mills, chief investment officer and JO Hambro and Guy Naggar.
They already speak for 49.69 per cent of Dowding's shares. Irrevocable under-takings by Dowding directors to accept - unless a better bid materialises - raise that to 51.88 per cent.
The price represents a 23 per cent premium over that on November 21, the day before before Dowding reported that it had received a preliminary approach that might or might not lead to a bid with an indicated price of 20p. Yesterday the shares finished 112p higher at 1914p.
Rydenor stated that existing employment rights - including pension rights - of Dowding's directors, managers and 1,500 employees will be "fully safeguarded".
It will put two directors on to the board, but intends to works with the existing management led by Tudor Davies, executive chairman.
"It is business as usual," said Mr Davies yesterday. "These people already own 49 per cent. They say it is no change as far as employees are concerned, except that the shares are de-listed on the Stock Exchange
"They have said they want us to continue to reduce the pension deficit and expand by making small acquisitions. the pension rights will be respected and the pension deficit dealt with."
It would have taken three or four years to tackle the deficit out of Dowding's present cash flow, Mr Davies added.
Because of this, the directors took the view that the certainty of Rydenor's cash up front is a better prospect than holding a minority stake in what may be an unquoted company, even with the prospect of a greater long-term return.
Unlike his fellow directors, he has not committed his personal holding of one million shares, bought last March for 121/2p, but said this was for the "purely technical" reason that they are held in his self-invested personal pensions.
The formal decision, therefore, rests with the trustee, Winterthur Life.
Mr Mills, who runs the "activist" North Atlantic Value fund and is said to manage investments worth £2.5 billion, has been involved with Dowding for more than five years. ..SUPL: