Don't sell Tomkins on the cheap, Standard Life warns

Standard Life, one of the biggest shareholders in the Tomkins engineering group today fired a shot across the management's bow, warning it not to sell the company on the cheap to potential foreign buyers.

The sharp rebuke from Standard Life came after an announcement on Monday that a £2.9bn takeover approach had been received by Tomkins from a consortium made up of the private equity group Onex Corporation and the Canada Pension Plan Investment Board.

David Cumming, head of UK equities at Standard Life Investments, said he would oppose a deal at that price and expressed "disappointment" that the Tomkins board had agreed to open the company's books after receiving an indicative cash offer of only 325p per share.

"We feel that at this price the proposed bid materially undervalues the group and its prospects. Should the board choose to recommend a bid at this level we will vote against the transaction, as we do not believe that it is in the best interests of shareholders," he said.

Standard Life holds just under 3% of Tomkins, which has been hit by the downturn in demand for automotive parts and has put back any predicted improvement in trading to the end of this year.

The share price leaped 35% to 314p this week after the initial offer valued Tomkins at just under £3bn and the board revealed that due diligence – when the potential bidder gets access to detailed financial information about its target – had reached an advanced stage.

Tomkins, founded in 1925 as FH Tomkins Buckle Company, a small manufacturer of buckles and fasteners, grew to become at one stage one of the most powerful conglomerates in Britain. It owned everything from guns (Smith & Wesson) to buns (Rank Hovis MacDougall), before falling from grace under its then acquisitive chief executive, Greg Hutchings.

But its current chief executive, Jim Nicol, a Canadian, who is said to be the potential beneficiary of nearly £8m if a takeover is successful, has put Tomkins on a sounder footing through asset sales and heavy cost-cutting.

A Tomkins spokeswoman said: "We note the comments from one of our shareholders. We are not in receipt of a formal offer so it is too early to comment at this stage."

The company is seen as attractive to foreign predators because of a new focus on green technologies in the automotive, industrial and construction sectors and also because of the low value of the pound.

Other British companies on the receiving end of bids from abroad recently include International Power, which has reopened talks with French rival GDF Suez, and Chloride, which has just been acquired by a US rival. The national lottery operator Camelot was snapped up in March by one of Canada's largest pension funds, Ontario Teachers' Pension Plan.