Burnfield boss snubs chance to make pounds 1.5m from bid

Brian McGowan, the non-executive chairman of Burnfield, the engineering firm facing an unwelcome bid from Fairey Group, has turned down the chance of making pounds 1.5m by accepting the offer and has invested pounds 630,000 of his personal fortune to back the company's rights issue.

He says the move adds credibility to claims that Fairey's bid undervalues the group and sells shareholders short. "Why else would I risk my own money - and turn down someone else's - if I did not have faith in the company's future?" he asks.

Mr McGowan, better known for his chairmanship of House of Fraser, and as co-founder of Williams Holdings with Nigel Rudd, owns a million Burnfield shares. He became chairman of the group in the 1980s, he says, in a "moment of boredom" while at Williams. He accepts that Burnfield's recent progress has been the cause of much "pain and grief" but insists the group has now turned the corner.

While Fairey has lambasted the group's record - which over the last five years has been poor - Mr McGowan says the company is attractive to its opponents because the two core businesses, Beta and Malvern, are profitable, with solid growth potent- ial, while loss-making operations have been disposed of.

The bid is unusual in that Fairey has said it will walk away if Burnfield proceeds with its seven-for-10 rights issue at 90p a share, to raise pounds 20m for the acquisition of vibration technology company LDS.

On Monday week, Burnfield shareholders will have to make the unusual decision at an EGM to approve the rights, and also, by default, approve or veto the bid.

Fairey's use of selective information highlights one common factor among the three bids to have emerged in the engineering sector in recent weeks.

Triplex Lloyd's pounds 57.8m bid for William Cook has almost come to litigation, after Triplex questioned the validity of the castings company's recent profits forecast. William Cook predicted profits to rise at least 26 per cent, to pounds 10.7m, from pounds 8.47m last year. A source close to William Cook said its advisers "seriously considered issuing writs at the suggestion the profits forecasts were in any way concocted". The arguments illustrate some of the difficulties facing bidders in the current climate. The common threads uniting the three are of industrial logic, and certainly in the case of Fairey for Burnfield, and FKI for Newman Tonks, of two successful businesses using their higher-rated paper to bid for companies trading at much lower valuations - and undervalued by the market.

Mr McGowan said: "When the stock market becomes a bit toppy, predators are always on the lookout for under-rated companies."

A spokesman for FKI agreed that the bidder sees the target as undervalued. But in the case of Newman Tonks, he said, the fault lies firmly with incumbent management. "When you have a problem in your markets, if you're good management you address that problem. Newman Tonks has done nothing," he said.