China group makes move in cable sector takeover fight

The Chinese plan came just hours after news Prysmian had won over Draka, a market leader in cable in China, with its second attempt at a takeover bid. Prysmian's aim is to grab the world cable industry number one spot from another Draka suitor – Nexans of France.

Draka has long been a takeover target. Prysmian, the industry number two, made a failed bid for it in the summer of 2009. A month ago, Draka rejected a bid from Nexans.

The Chinese group's proposed 20.50 euros-per-share offer values Draka's equity at 1 billion euros. This compares with a valuation of just 815 million euros for Prysmian's recommended cash and share bid. Unlisted Xinmao, whose listed subsidiary Xinmao Science and Technology has a market capitalisation of just over $400m, said it had fully committed financing in place for the offer through a vehicle called Tianjin Xinmao S&T Investment Corp. The company said it was confident a deal could be completed in the second quarter of 2011.

"We will invite (the) management and supervisory board of Draka to discuss our proposal. We have not talked to them yet. Xinmao has followed Draka for quite some time but the Nexans bid intrigued them even more. There is no overlap of activities... so we see no antitrust issues," said Joseph Krant of Catalyst Advisers, which is advising Xinmao.

Draka can duck out of the Prysmian deal if another buyer makes an offer that exceeds it by 15 per cent. It can also revise its offer if this happens.

However, Prysmian's chief executive Valerio Battista said he was not considering matching Xinmao's proposed offer, which would be worth 22 per cent more than Prysmian's based on a Prysmian share price of 12.47 euros.

Draka's fate could be decided by its biggest investor, Flint Beheer. The 48.5 per cent shareholder had given an irrevocable commitment to the Prysmian offer.

Flint is a vehicle of the Fentener van Vlissingen family, which has three members in the top 25 richest Dutch people. It bought an initial stake when Draka was spun off from Philips in 1986.

Prysmian and Draka aim to forge a leader in worldwide energy and telecom cables, particularly high-tech, by stitching together Prysmian's southern and Draka's northern European presence.

A deal with Draka would give Prysmian access to its specialist businesses such as elevator and automotive cables, where it is a market leader, as well as its optical fibre operations, where it is number two in the world. Draka is the principal automotive cable supplier of Airbus