March 19, 2018 / 5:47 PM / 7 months ago

France's Michelin bids for UK's Fenner in £1.2 billion mining move

(Reuters) - French tyre maker Michelin plans to buy British engineering company Fenner for 1.2 billion pounds so that it can serve mining companies better and benefit from an industry recovery.

A Michelin logo is seen on media day at the Paris auto show, in Paris, France, September 29, 2016. REUTERS/Benoit Tessier

The mining sector is beginning to invest in new projects and to cautiously expand production as it recovers from a deep commodity markets crash in 2015-16, increasing the amount it spends on new equipment on expansion in minerals such as copper and those used to make batteries.

Michelin has offered 610 pence in cash for each Fenner share, representing a more than 30 percent premium to the British company’s closing price of 466.6 pence on Friday.

Fenner’s directors intend to unanimously recommend its shareholders vote in favour of the acquisition at a meeting in May, the French firm said.

“The acquisition will enable Michelin to accelerate its growth in this (high-technology materials) area, and to strengthen its position as a key player in the recovering mining markets,” Michelin CEO Jean-Dominique Senard said.

It will combine Michelin’s mining tyre and Fenner’s conveyor belt businesses to provide a “comprehensive offering to mining customers”, Michelin told investors. The two firms would also combine their reinforced polymer business.

“We welcome this offer which we feel reflects good value for all shareholders,” Igor Kuzniar, Managing Partner of Teleios Capital, told Reuters in an email.

The Europe-focused activist investment firm own a 5.95 percent stake in Fenner according to Thomson Reuters data.

Fenner, best known for its heavy conveyor belts and reinforced polymer technology, was founded in 1861 and its early products included leather belting for use in power transmission, lacing and hoses.

The company, which reported 655 million pounds in revenue in 2017, also supplies engineered rubber-based products to mining and industrial markets.

Michelin, which expects the deal to add to its earnings in the first full year after completion, said it would benefit from Fenner’s access to Latin America and Asia.

It does not intend to dispose of any “material part” of Fenner’s business and does not expect any job cuts, but would look to delist the British firm from the London Stock Exchange.

M&A ON A ROLL

European mergers and acquisitions activity rose by 47 percent to $257.7 billion from the start of 2018 to the end of last week, Thomson Reuters data shows.

French companies have been buying up British firms, with France’s Schneider Electric deal to combine with Britain’s Aveva Group last year and French shopping centres operator Klepierre’s 4.9 billion pound bid for Hammerson on Monday.

Michelin said it would consider further acquisitions in February, and announced the purchase of a 20 percent stake in German automotive services provider ATU.

Morgan Stanley acted as financial adviser to Michelin, while Rothschild advised Fenner.

Fenner’s shares closed 5.14 percent higher at 490.8 pence on Monday, while Michelin closed 1.73 percent lower.

Reporting by Noor Zainab Hussain in Bengaluru, with additional reporting by Barbara Lewis in London; Editing by David Goodman and Alexander Smith

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