Cinven approach to Spice fails to win over leading investor

The Leeds-based company, whose services include checking for unbilled properties and maintaining overhead power lines, has twice rejected what it called "opportunistic" approaches from the buyout firm.

Aviva Investors, which holds about 3.2 per cent of Spice, said the approaches did not reflect progress the group has made.

"Since Cinven's original approach to Spice, we have seen several positive announcements – the EDF renewal, on target results and sale of non-core divisions," said Toby Belsom, fund manager at Aviva Investors.

"Management's turnaround programme is starting to bear fruits – a process that means any bid ought to be based on a significant premium to current price rather than earlier levels."

In May Spice rejected a 56p indicative offer as "opportunistic" and said it "significantly undervalues" the group.

Earlier this month Cinven returned with an offer, priced at between 62p and 65p a share, which valued Spice at between 218m and 229m.

Analysts have previously said Cinven needs to return with 75p a share to get Spice talking.

However, Aviva's view is at odds with former Spice chief executive Simon Rigby, who controls around nine per cent of the company's shares.

He has urged management to open talks with Cinven and told the Yorkshire Post the buyout group would be a "good home" for the firm. Yesterday shares rose 1.8 per cent to close at 57.75p.

Under new chief executive Martin Towers, the former finance director of Yorkshire Water owner Kelda, the group is being restructured to bring down net debt and focus on organic growth.

It has been awarded contract extensions with EDF Energy that will run for five years, and gave away its loss-making gas arm to improve profitability. It sold its telecoms business for 32.8m.

Earlier this month it also reported an 11 per cent increase in underlying revenues to 311m, with pre-tax profit from continuing operations in line with analysts' expectations at 32.7m.

It has also countered Cinven's acquisitive approaches by saying it could itself resume making small, bolt-on acquisitions.

A Spice spokesman said the company was not in talks with Cinven but declined to comment further.