Tomkins' 'advanced' £2.9bn takeover talks

The group said it had received an approach worth 325p-per-share from a consortium made up of US private equity firm Onex Corporation and the Canada Pension Plan Investment Board.

Tomkins – which started life in 1925 as a small British manufacturer of buckles and fasteners – has opened its books to the suitor and confirmed due diligence was now at "an advanced stage".

Tomkins said the bidders reserved the right to reduce their offer price in the event that the company's board agrees.

The company's shares soared after the announcement, closing at 294.2p, up 63.9p.

Analysts described it as the latest example of a North American buyer looking to capitalise on sterling's weakness by snapping up British assets.

North American suitors have acquired a number of British engineering companies in recent months.

US conglomerate Emerson Electric acquired power supply systems maker Chloride, URS Corp bought engineering consultancy Scott Wilson Group and Valmont Industries acquired Delta, an industrial engi- neer.

Tomkins, whose range of products includes hosing and tubing as well as power transmission systems, employs around 30,000 staff worldwide.

There are 1,500 employees in the UK where it has six plants, including in Dumfries.

The group got rid of thou-sands of staff during the recession.

It was badly affected by the slump in the car and housing markets, with its large US operations taking the brunt.

Its fortunes have since been revived by car scrappage schemes across the US and Europe, and Tomkins yesterday revealed that sales rose by around 23 per cent in the first six months of 2010.

However, the company warned that it was seeing signs of softening markets.

Sales in early July have been weaker than expected and the company believes the second half of the year will be worse than the first.

News of the takeover proposal followed speculation earlier in the year that Tomkins could be an acquisition target.

The 325p-a-share potential offer would mark a premium on the group's 230p closing price on Friday.

Analyst Xavier Gunner at brokerage Arbuthnot said he expected consensus earning estimates to rise because the company's first-half operating profit looks ahead of schedule, compared with current estimates.

Collins Stewart analyst Mark Wilson said Tomkins' first-half results justified the 325p level of the approach and said he wouldn't be surprised if the company attracted interest from other suitors in both the financial and industrial sectors.

However, he said that time could be against anyone else interested in the company, "given how far down the line this already appears to be".

Mr Gunner said that Onex owned some major manufacturing businesses and should be seen as a serious player.

A former FTSE 100 firm, Tomkins has annual sales of more than 3bn.

The group said recent cost cutting and restructuring efforts have helped shore up profit margins, with underlying earnings of 290 million US dollars (190m) expected for the first half of 2010.

The business was founded as F.H. Tomkins Buckle Company and became a global engineering and industrial firm after embarking on a major expansion programme in the 1980s and 1990s.

Major acquisitions included the US-based Gates Corporation in 1996.

A strategic advance

Tomkins, which dates from the 1920s, expanded rapidly in the 1980s and 1990s. It bought a number of companies, which increased its revenue, product range and global reach.

However, as part of a strategy to focus on its core engineering markets, Tomkins began a process of streamlining its activities.

It sold a number of businesses between 1998 and 2001.

In recent years, Tomkins has attempted to build a "more focused and leaner portfolio of businesses" and this has led to a number of disposals and acquisitions.

Recent examples include the acquisition of Mectrol, a polyurethane belt manufacturer, which has given the company access to new markets.

There have also been a number of strategic acquisitions in the air systems group, which have helped Tomkins to create new products and attract more customers.