Ian Martin: broke off Hillsdown talks.

UNIGATE called off its proposed takeover of the Hillsdown food-to-housebuilding conglomerate early yesterday morning, and immediately precipitated a war of recrimination.

On Thursday morning, both companies issued a joint statement declaring they were in merger talks which would have valued Hillsdown at 217p a share.

The City had been hoping that outline agreement would have been completed on the day.

However, at around 1.30am yesterday, Unigate chairman Ian Martin told Hillsdown's Sir John Nott that the deal was off, with the dairy company side claiming that the decision was a result of its due diligence and its conclusion that it could not share Hillsdown's optimism about its trading prospects.

The Hillsdown side retaliated by saying that since August last year, Unigate had four times been in contact with varying degrees of enthusiasm.

The most serious were the last two when, just more than a fortnight ago, Unigate confirmed that it had made an approach with an offer of 207p but had been rejected.

The latest bid, some 10p higher, had the unanimous recommendation of the Hillsdown board.

There were claims that Unigate had had difficulty in getting some #600m of new equity underwritten, with institutions having been shaken by the sharp decline in the share price since the proposed takeover first became public.

Unigate shares jumped 28.5p to 665p yesterday, while Hillsdown fell back 22.5p to 183p - much the same level prior to the Unigate interest becoming known.

It was suggested earlier in the week that the Unigate board was not totally united about the bid which, if successful, would have involved a difficult and messy series of transactions for Unigate to obtain full value.

It would have meant selling off the Fairview New Homes housebuilding business and also the furniture activities, which together would be worth perhaps #750m compared with the value of the offer of #1580m on the increased terms.

However, that would have taken several months to complete.

There was some surprise that such a consummate corporate strategy operator as Martin would have allowed this situation to have developed. He was in the running to be chief executive of the Grand Metropolitan drinks and foods giant and was responsible for the highly successful acquisition of the Pillsbury foods and Burger King group in the US.

There has been speculation that chief executive Sir Ross Buckland had misgivings about the Hillsdown takeover, although he has been highly successful in re-focusing Unigate from a conglomerate into a company concentrating on food and Wincanton transport.