LONDON -- BTR, the British industrial conglomerate, launched Friday a hostile takeover bid valued at $2.6 billion for Hawker Siddeley, criticizing the target company for a decade of poor business performance.
But, in a statement, the board of Hawker Siddeley, a diversified engineering company, rejected the bid, saying it was inadequate and did not take into account a major restructuring program it has undertaken.
Recommending shareholders reject the offer, Sir Peter Baxendell, Hawker Siddeley's chairman, said: 'We are confident that our strategy will produce significant value for shareholders who wish to be part of a focused electrical and engineering group and not a sprawling conglomerate.'
The move came a day after Hawker Siddeley reported that reorganization costs and an erosion of profit margins pushed half-year pre-tax earnings down 14 percent to the equivalent of $98.9 million.
Blasting management, BTR chairman Sir Owen Green said that 'Hawker Siddeley shareholders have endured their company's underperformance for a decade.'
Current management has 'failed to unlock Hawker Siddeley's potential and has little prospect of doing so,' Green added in a statement.
Union leaders said they would oppose a takeover on the grounds they feared BTR would cut jobs and sell off assets at Hawker Siddeley.
The recession has eaten into Hawker Siddeley's margins in the United States, Britain and Australia, particularly in its engineering division. Its aerospace and instruments and controls divisions have also been hurt badly.
BTR said its stock-and-cash offer valued Hawker Siddeley's shares at $12.74 each, or 15.8 percent more than its closing price Thursday.
After the bid was announced Friday morning, Hawker Siddeley shares shot up by $1.73 to the $12.74 price on the London International Stock Exchange.
The acquisition in the 1980s of manufacturer Thomas Tilling, parent of since-divested hosier Pretty Polly and sports-equipment manufacturer Dunlop, helped BTR mushroom from a small tire and rubber company to a major industrial conglomerate with a market capitalization of more than $12 billion.
Since failing to purchase glass manufacturer Pilkington after a fiercely contested bid in 1987, analysts said, BTR had been looking to make another major acquisition.
Jeff Allum, the analyst tracking conglomerates for the County NatWest brokerage, said Hawker Siddeley's relatively poor margins and the potential for improvement was probably what attracted BTR.
Allum said BTR faces the difficult task of raising profits margins by 4 percentagepoints to around 10 percent, but he thought the conglomerate's past management record, particularly with Dunlop, indicated BTR had a good chance of achieving its aim. BTR would probably sell some other assets if it gained control of Hawker Siddeley, he said.
At $2.6 billion, BTR's bid stands a good chance of succeeding, Allum said, adding it would probably discourage other potential suitors from entering the contest for control of Hawker Siddeley.
Union leaders reacted angrily to news that Hawker Siddeley, one of Britain's oldest engineering companies, might be taken over by BTR.
The Manufacturing Science Finance Union Friday said it would fight the BTR bid, warning it could mean massive job losses at Hawker Siddeley, which has already shed 7,000 jobs since the start of 1990.
Ken Gill, the union's general secretary, said: 'Hawker Siddeley has a long industrial and technological record in the United Kingdom and it is being threatened by a company which is essentially a financial grouping with no specific British interests.'
He said that 'BTR has a record of reducing the assets of their target companies' and that Dunlop Polymer, based in the central English city of Leicester, has lost a third of its workforce since being taken over by BTR in 1985.
BTR sparked controversy in financial circles last month when it announced higher-than-expected interim pre-tax profits of $880 million for the first half this year.
Analysts criticized BTR's adoption of a new accounting practice to include in the results a gain of $155 million from the sale of Pretty Polly.
The BTR bid was the third large takeover move seen on the London stock market this week, following conglomerate Hanson's friendly $604 million bid for construction group Beazer and Williams Holdings' contested $1.19 billion offer for Racal Electronics.
