Draka highlights doubts about Xinmao bid progress

By Greg Roumeliotis and Terril Jones

AMSTERDAM/BEIJING (BestGrowthStock) – Draka cast more doubt over Chinese bidder Xinmao’s ability to finance and win approvals for its 1 billion euro ($1.3 billion) cash offer for the Dutch cable maker ahead of next week’s bid deadline.

But Xinmao, attracted by Draka’s leading position in optical fiber — No.1 in China and Europe, and No.4 in the United States — insisted on Friday that its bid remained on track.

Draka’s shares slipped slightly to 19.2 euros, some 6 percent below Xinmao’s 20.5 euros-per-share offer, reflecting continuing market skepticism about the Chinese group’s takeover.

The Dutch company, which has already endorsed an 833 million euros cash and share offer by Italy’s Prysmian, said it was uncertain it could reach a deal with Xinmao because of concerns over the latter’s progress on funding and approvals.

“The boards would like to reiterate their view that it remains uncertain that a transaction involving an offer for all of the outstanding shares in Draka can be agreed,” it said.

However, Xinmao said it has the wherewithal to pursue the offer and would provide an update on December 20.

“Xinmao is a serious company backed by serious financing by a serious bank. I don’t know why Draka says it is concerned about the financing…” Xinmao’s Netherlands-based spokesman Kees Jongsma told Reuters.

Draka declined to detail its concerns over Xinmao’s bid financing, although a spokesman said the Chinese firm has made limited progress in securing approvals in China.

Xinmao’s spokesman declined to comment on the issue.

Draka’s shares, which rose as high as 20.06 euros shortly after Xinmao’s late November announcement that it wanted to buy the firm for 20.50 euros a share, have since fallen back to trade at around 19 euros. That is still above the 17.09 euros per share value of Prysmian’s bid. Pysmian shares were up 1.7 percent at 1020 GMT, outperforming Milan’s FTSE MIB.

VIABLE BID

“Draka’s statements today suggest that Xinmao’s chances of coming up with a viable bid coming Monday have decreased although it is still possible,” SNS Securities analysts wrote in a note.

While publicly available details about its finances are thin, one senior Xinmao executive had no doubts his company could successfully reel in Draka, the world’s seventh-largest cable maker by revenue and market cap.

“You don’t need to worry about our capital,” the executive said, pointing out the company is building 22 industrial parks at a total cost of 12 billion yuan, most of it self financed.

Draka said it was helping Xinmao with its due diligence by providing access to a data room as well as to its management and its advisers.

“During the last two days there have been further discussions with Xinmao’s Chairman and CEO, including a site visit to one of Draka’s production facilities,” it added.

Xinmao has said bank financing for its bid is conditional on it reaching final agreement on a merger protocol with Draka.

(Additional reporting by Shengnan Zhang in Beijing and Sara Webb in Amsterdam; Editing by Hans Peters and Alexander Smith)

Draka highlights doubts about Xinmao bid progress