Draka rejects Nexans offer, both weigh options

By Bate Felix and Greg Roumeliotis

PARIS/AMSTERDAM (BestGrowthStock) – Dutch cable maker Draka Holding NV (DRAK.AS: ) has rejected the unsolicited takeover offer worth 731 million euros ($1 billion) from bigger rival Nexans (NEXS.PA: ), saying it undervalued the company.

Nexans, the world’s largest cable manufacturer, replied that its proposed cash bid of 15 euros per share “fully valued the company” at an attractive premium of 28.4 percent over Draka’s average closing share price in the three months before October 18, when it announced its intention to start discussions with Draka.

Nexans said after the market’s close on Wednesday that although Draka’s boards had refused any discussions to date, it remained open to talks and was studying its various options.

Nexans, which has a market capitalization of about 1.5 billion euros, said it would keep the market informed of further developments and provide an update by no later than November 24.

Draka, Europe’s third-largest cable maker, turning over 2.05 billion euros last year in 30 countries — about half Nexans’s sales — said it would “actively review its strategic alternatives, including continuing Draka’s stated stand-alone strategy.”

Draka shares closed up 0.36 percent at 15.45 euros on Wednesday, above the offer, while Nexans shares slipped 1.65 percent to close at 51.70 euros.

Investors and analysts have said Nexans would have to raise the offer, or see it fail, as did a 2009 offer for Draka from Prysmian (PRY.MI: ), the No. 2 player in the cable market.

“I don’t think Nexans will walk away immediately. I think a new offer is possible, in the 16 to 16.5 euros per share range,” SNS Securities analyst Martijn den Drijver said.

Nexans plans to buy Draka to increase its market share and make cost savings.

In the power cable segment, Nexans would help Draka consolidate its presence in the fragmented low-voltage market and combine it with its high-margin high-voltage offering, tapping into demand to replace aging power infrastructure.

Draka is also a market leader in elevator cables. It has designed and provided cables for the 58 lifts of the world’s tallest skyscraper, Dubai’s Burj Khalifa, which towers 828 meters above ground.

Draka acknowledged the intention of its biggest shareholder, Flint Beheer, to conditionally sell its 48.5 percent stake.

A Flint spokeswoman declined to comment.

(Additional reporting by Dominique Vidalon in Paris, Astrid Wendlandt in Paris; Editing by Michael Shields and Will Waterman)

($1=.7166 Euro)

Draka rejects Nexans offer, both weigh options