Anger as Unigate's Hillsdown deal fails

UNIGATE'S pounds 1.6bn bid for Hillsdown Holdings collapsed in a welter of recriminations yesterday after the dairy group dramatically walked away from the deal at the last minute.

Unigate claimed it had withdrawn its offer after looking at additional information about Hillsdown's trading performance. "We were not able to support Hillsdown's views of its prospects," it said.

Hillsdown dismissed the claims, saying the information was not materially different from its trading statement to shareholders at its annual meeting earlier this month. It claimed Unigate had got cold feet after taking calls from institutional investors worried about the effects of the deal of the share price. It further hinted at a boardroom split at Unigate with the chairman, Ian Martin, keen on the deal but the chief executive, Sir Ross Buckland, cooler.

According to Hillsdown the talks were proceeding well late into the night at Lazards, Unigate's financial advisers. The talks took place mainly between Sir John Nott and Michael Teacher from Hillsdown and Ian Martin and John Worby, Unigate's chairman and finance director respectively.

Sir Ross arrived later to take part in the talks for the first time. Hillsdown claims that though he appeared satisfied, the Unigate group suddenly broke off for a meeting in a separate room. After two hours they emerged at 1.30am to say the deal was off.

Hillsdown called Unigate's approach to the bid "shambolic". A spokesman added: "This is the fourth time since last August that Unigate has made an approach to Hillsdown. I don't think they will be coming back."

Unigate denied there was a split. "The board was united going into this and united coming out," it said. Unigate did not rule out coming back but indicated that it would be at a lot less than 217p per share.

Unigate's institutional investors were not unhappy about the deal's collapse. One said: "There was a degree of uncertainty as to whether this deal could stake up for Unigate as this price."

David Laing, analyst at Henderson Crosthwaite, said: "You felt there wasn't much value in it for Unigate shareholders at that price. Now Unigate has had a bit of a revolt from its shareholders and Hillsdown has to go back to the drawing board."

Investors were intrigued by the behaviour of Unigate's team. "Ian Martin comes from Grand Metropolitan so he has a deal-making background," one said. "But as chairman his job is to be running the board, not getting involved in things like this. It makes you wonder about his role."

Another said: "There is no shame in walking away from a deal if you don't think it is right.

Unigate's shares had lost almost 100p since news of the deal leaked. They bounced 28.5p to 665p yesterday, reflecting relief that it was dead.

Hillsdown shares fell 23.5p to 183p. The company will now press ahead with its break-up plan that will see shareholders receive shares in three separate quoted companies. The chilled foods and house-building divisions will be floated off while the furniture business will be sold.