Glen Dimplex may bid for Kenwood

Glen Dimplex, the privately owned electrical products group controlled by Mr Martin Naughton and Mr Lochlann Quinn, may be gearing up for a £53 million sterling (€84.5 million) counter-bid for Kenwood Appliances. A price of £53 million would be sufficient to unwind some of the acceptances obtained by the recommended bidder for Kenwood, the Italian group De'Longhi. Kenwood this week agreed a £46 million sterling takeover by De'Longhi whose products range from air-conditioning to heating and cooking appliances. However, recent Kenwood share purchases by Glen Dimplex above the De'Longhi offer price of 100p sterling are seen as a possible precursor to a counter-bid by the Irish group.

Glen Dimplex chief executive Mr Sean O'Driscoll confirmed that Glen Dimplex had increased its stake in Kenwood to just less than 15 per cent after buying more than two million shares at 105p each. But De'Longhi already holds more than 52 per cent of Kenwood shares in a mixture of irrevocable acceptances, non-irrevocable acceptances and shares it bought in the market from Fidelity, Active Value Fund, other institutional shareholders and the British electrical products manufacturer Pifco.

A spokesman for De'Longhi was unable to state categorically whether these share purchases - which total more than 30 per cent of Kenwood's issued equity - could be unwound if Glen Dimplex made a higher offer. He did state, however, that De'Longhi had hard irrevocable acceptances in respect of 17 per cent of Kenwood shares. A further 3.26 per cent acceptances would lapse if a counter-offer emerged at 115p sterling a share or higher. That price is equivalent to just under £53 million sterling.

Industry sources believe it is unlikely that Glen Dimplex would buy more Kenwood shares at a higher price than the De'Longhi acceptances unless it believed it could unwind enough of these acceptances to have a reasonable chance of success. At the very least, Glen Dimplex's near 15 per cent stake would prevent De'Longhi compulsorily buying its shares. British takeover law requires a bidder to have more than 90 per cent of a company's shares before it can compulsorily acquire the remainder.

Glen Dimplex first took a stake in Kenwood in August 1998 and has been increasing that stake slowly but steadily ever since. This week, however, Glen Dimplex went significantly further when it bought almost 5 per cent of Kenwood shares at 105p within days of De'Longhi agreeing its recommended offer of 100p a share.

Over the past few years, Kenwood has had a torrid time in the market, although the British group has a number of established household brands, notably Kenwood and Ariete. Market sources believe that it would fit perfectly with Glen Dimplex, just as it was also a perfect fit with De'Longhi. In the year to March 2000, Kenwood had sales of £145.4 million sterling and profits before tax and exceptional items of £3 million sterling. In the half year to last September, sales totalled £71.9 million sterling, and profits before tax and exceptionals totalled £400,000.

Late last year, Kenwood appointed accountants Pricewater house Coopers to carry out a strategic review of the group's operations and also disclosed that it had received an approach that might lead to a bid.

At the time, it was thought that Glen Dimplex and Pifco were the likely bidders until this week's announcement of the agreed bid from De'Longhi.

De'Longhi is a long-established family-owned Italian company. In the year to December 1999 it had sales of €577 million and pre-tax profits of €34 million.