CINVEN, the venture capital company, is considering a takeover offer for Novar, the manufacturing group that is facing a £741 million hostile bid from Melrose.

The buyout group is the latest suitor to approach Novar as a white knight in the face of the bid from tiny Melrose, a cash shell company.

Other companies that have indicated their interest in some or all of the conglomerate include General Electric, Schneider Electric and Siemens.

News of the latest approach to the group comes as Melrose posted its offer document for Novar, the cheque-printing to building supplies group.

Melrose claimed that its offer of one new Melrose share and 45p in cash was worth 172.5p a share, a 36 per cent premium to Novar’s closing share price last week.

The value of the bid has risen in line with the increase in the Melrose share price.

When Melrose first offered one share for every Novar share as well as 45p cash, the equity component of the deal was calculated at 100p a share. Melrose shares are now trading at 130p, lifting the value of the bid to just over £741 million.

In a statement, issued in response to the offer document, Novar argued that its shareholders should consider the offer to be worth 145p at the most.

Novar also said that a deal would cost £26 million in advisory fees, and that these would be paid for from its own balance sheet.

Melrose’s directors are also in line for a windfall from the acquisition as they would take up to 10 per cent of any future value increase through an incentive share scheme.

Sir Graham Hearne, Novar’s chairman, said: “There is nothing new in the Melrose offer document. The Melrose proposal undervalues the group and would deprive our shareholders of a substantial element of the upside we are confident we can deliver. We continue to pursue a wide range of opportunities capable of delivering greater value to our shareholders than Melrose’s offer.”

Chris Miller, chairman of Melrose, confirmed that the firm would initially keep the company intact because its operations need to be substantially improved before any part can be sold.

Mr Miller urged Novar shareholders to accept the offer, saying that any hasty break-up of the company would be throwing away potential value.

The Melrose directors believe that two parts of the business that have greatest potential are Indalex, which is the number one aluminium extrusions business in North America and Intelligent Building Systems.

Melrose was formed last year by former Wassall executives Mr Miller and David Roper as a vehicle to acquire underperforming companies. The pair argue that Novar’s managers have wiped £1 billion off Novar’s market value over the past ten years. In contrast, they argue that they delivered Wassall shareholders 18 per cent compound return on investment in the 12 years that they were in charge.

David Roper, Melrose’s chief executive, said: “At Wassall we ran very similar businesses and we are very confident that we can improve these. It would be madness to just sell them before any improvement.”

Novar said that it would continue to examine opportunities to release value from the group. It said that the group would write to shareholders soon to explain its plans for the business under new chief executive Stephen Howard.

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