Nippon bid puts end to Pilkington speculation

It is thought that Nippon made the approach to Pilkington’s board late last week. But any hopes of a deal could yet be scuppered by Pilkington’s £242 million pension deficit and uncertainty over how Nippon, a company half Pilkington’s size, could fund such a sizeable deal.

Pilkington confirmed the approach yesterday morning, sending its shares 21 per cent higher to 153¾p to value the company at £2 billion.

The glass maker’s directors, chaired by Sir Nigel Rudd, are expected to further discuss Nippon’s approach at a pre-scheduled board meeting tomorrow. Pilkington is due to report its interim results on Thursday, with some analysts speculating that the company could use the occasion to also unveil an agreed takeover deal.

However, the market was awash with rumours last night that Nippon was preparing to kick off its bid with a low offer of up to 155p, to gauge investor support for a takeover.

Pilkington is considered unlikely to fall for less than 170p a share, valuing its equity at £2.2 billion. In addition, Nippon would also have to absorb about £572 million of debt and address Pilkington’s £242 million net pension deficit on a FRS17 basis. The pension liability could be substantially higher if the company was forced to wind up the scheme and buy pensions for all of its members.

The Pensions Regulator said last night that it would look at Pilkington’s pension deficit if asked to do so by the target’s pension trustees.

Nippon’s relationship to Sumitomo, the giant Japanese trading house, was also unclear. Sumitomo is thought to regard Nippon as a subsidiary, although Nippon’s share register suggests otherwise. Neither Pilkington nor Nippon would comment beyond confirming the takeover approach.