By Lorraine Turner and Martin de Sa'Pinto
LONDON/ZURICH (Reuters) - British company Chloride
Emerson Electric raised its cash offer on Tuesday by more than a third to 375 pence a share, seeking to tempt the British maker of uninterruptible power supplies (UPS) away from an agreed 860 million pound deal with Swiss ABB. [ID:nLDE65S092]
ABB said on Thursday it would walk away from Chloride, whose products protect against power outages at data centers, airports and hospitals. Some ABB investors had expected an increased bid.
"While we still see considerable value in the combination of ABB and Chloride and have a high regard for the Chloride management team, we must take a disciplined approach when assessing potential acquisitions," ABB chief executive Joe Hogan said.
Chloride said it would now enter talks with Emerson.
Its stock was down 4.20 percent to 369.8 pence by 0910 GMT.
On Tuesday, Chloride said Emerson's sweetened offer represented a superior proposal and, under the terms of an agreement previously signed with ABB, it had formally given the Swiss group two days to match or better the 375 pence offer.
BIDDING WAR OVER
Further offers for Chloride were seen as unlikely, drawing a close to the bidding war.
"I can't believe someone will come into the frame now," said Steve Medlicott at Altium Securities. "The price from Emerson was a good price and it reflected cost reductions which ABB could not match."
The departure of Chloride's white knight ABB is a victory -- albeit at $500 million more than he originally offered to pay -- for Emerson Chief Executive David Farr who has headed the company for a decade.
Late last year, Farr said Emerson was seeking to bolster its presence in emerging markets as the U.S. government was doing everything possible "to fundamentally destroy U.S. manufacturers ... (and was) ... wasting trillions of dollars" on bailouts.
But the withdrawal wrong-footed big hedge funds including Davidson Kempner, Centaurus Capital and Mason Capital, who upped their stakes in Chloride on Tuesday anticipating a higher counter-offer.
Six funds, using swaps and derivatives, bought the equivalent of almost a 5 percent stake in Chloride, at prices ranging from 385 to 389p a share, regulatory filings show.
Emerson, whose products range from power tools to thermostats and food-disposal units, is already a U.S. leader in the critical power market and has been keen to grow its UPS business in Europe and elsewhere.
It targets annual cost savings of at least 33 million pounds from Chloride, and possibly "meaningful revenue synergies."
Meanwhile, a deal with Chloride would have allowed ABB into the $8 billion UPS market. ABB was seeking to ally Chloride's products with its global reach and big industrial customer base.
Helvea analyst Alessandro Migliorini said ABB shareholders would be relieved at its withdrawal and, while there was strategic sense to a deal, he agreed a higher bid would be value-destructive.
ABB shares were down 0.6 percent.
Emerson is being advised by Greenhill and JP Morgan Cazenove, while Credit Suisse is advising ABB. Chloride's advisers are Citi and Investec.
(Additional reporting by Quentin Webb in London; Editing by David Holmes and Dan Lalor)
($1 = 0.6697 pound)
