Spice in 'advanced' talks after Cinven approach

Former chief executive Simon Rigby, still a major shareholder, said a 70p per share potential cash offer from Cinven was "compelling" and the Leeds-based group would go to a "good home".

Mr Rigby and his family would net 20.9m from their 8.6 per cent stake.

The Co-operative Asset Management, which has another six per cent, added the price was "about right" and "represents reasonable value".

After resisting Cinven's advances since May, Spice yesterday said it is in "advanced discussions" with the European buyout group.

It also ended talks with another private equity firm, whose late entry to the bidding forced Cinven to sweeten its offer.

"Although the board of Spice believes that the company has a strong future as an independent business, it recognises that, due to the cash nature and premium of the potential offer, it is in shareholders' interests to facilitate further discussions with Cinven," said the group.

"The board intends to recommend the offer of 70p per share from Cinven, if made."

Spice, whose work ranges from checking power lines to installing water meters, was first approached by Cinven with a 56p a share offer at the end of May. The 197m approach was rebuffed as "opportunistic" and "significantly undervaluing" the group. Cinven's later rejected offers ranged from 62p and 65p a share, valuing Spice at between 218m and 229m.

Spice yesterday said a 70p offer would be a 10.7 per cent premium to Wednesday's closing price, and it still plans to pay the final dividend of 1.22p per share. The group added any offer would be subject to due diligence, but would be funded by Cinven.

Spice chief executive Martin Towers said Cinven would be a "good home for the business". "It's a reputable blue chip private equity company and a large one at that," he said. "They will have aspirations for the business."

Analysts previously suggested a bid would need to be between 65p and 75p to be successful.

Mr Towers said: "It's up to shareholders to make their own minds up at the end of the day.

"As far as the board is concerned if we end up with a firm and final offer of 70p a share the board would view to recommend that offer."

It is understood Spice opened its books to Cinven in the past two or three weeks, and had been in negotiations with both bidders up until Wednesday.

Mr Rigby, who left the group in February, said he believed an offer would be accepted.

"The compelling thing is that it's all cash and in these uncertain times cash has got a premium," he said. "I would have thought the certainty of cash would see Cinven getting home at this level.

"It seems like we've had a good competitive process. You always want more – Spice is cheap at 70p. But that's the market we are in and these are uncertain times."

Mr Rigby, who grew Spice from a single contract in 1996, said Cinven is likely to build the business.

"The exciting thing for the company is Cinven do not have a presence in this particular marketplace and therefore they must be going to use Spice as a platform to build themselves a big presence," he said.

"Bearing in mind we're interested in Yorkshire jobs and Yorkshire employment, I think it's a good home and they will invest."

'Don't hold out for higher bid'

Spice shares closed up 5.93 per cent last night at 66.93p.

Analysts at Liberum Capital urged shareholders: "Don't hold out for a higher bid – we believe a higher bid is unlikely.

"Management have terminated all discussions with the other potential offeror and Spice has already been 'in play' for a number of months.

"Cinven have already increased their initial proposal by 25 per cent (from 56p) and we believe are unlikely to increase it further."

They added Cinven has until September 27 to complete due diligence.

Brewin Dolphin analyst Mark Fleetwood said he expects the deal to complete at 70p per share.