THE share price movements said more about Unigate than Hillsdown yesterday after the dairy group intimated to the market that it thought the conglomerate was worth 207p per share.
The drop in Unigate begged the question as to whether investors were wondering why it had not moved sooner when Hillsdown was down to little more than 140p earlier this year and at a time when Unigate shareholders were baying for it to go out and spend.
While the chilled foods business is the most attractive part of Hillsdown, the relationship between the two companies after yesterday's statement from Unigate can hardly be friendly and so it would seem almost certain that a full-scale bid will be launched in time.
It would be somewhat ironic if a successful offer left it with the commodity poultry business it sold to Hillsdown for #37m in 1992 and would seem to be buying back for #170m or so although the Unigate camp is anxious to plead that it would be moved up market and would benefit from the same treatment that has been meted out to the highly successful Unigate pigmeat business.
Selling off the unwanted bits and pieces such as housebuilding and furniture would take some time with both sectors currently under pressure as the housebuilding sector is now seeing prices flatten out in the crucial second-hand market.
The benefits from acquisition are pretty obvious.
These take the form of providing Unigate with a much bigger European platform for chilled foods while at home, it will be able to broaden the range of products its sells to the supermarkets and reduce its dependence upon dairy although that activity no longer seems to be necessarily a core part for an indefinite period.
Unigate would have to issue a large number of shares as its cash war chest is probably of the order of just #200m compared with the #1500m it would require even on its own valuation.
However, it does run the risk that it has alerted competitors and so Hillsdown shareholders should sit back and watch the fun as the Unigate move is not in the price to any significant extent.
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