More companies will be subjected to hostile takeover bids this year than in any other year over the past decade, underwriters warned.

The war in Iraq and the stock market crash will both fuel preda ...

More companies will be subjected to hostile takeover bids this year than in any other year over the past decade, underwriters warned.

The war in Iraq and the stock market crash will both fuel predators' appetites for snapping up unsuspecting victims, said Sandra Ringsell, founder member of underwriting agent TOI.

TOI created a programme of takeover insurance about 15 years ago and now writes the business in conjunction with insurer Hiscox.

Hiscox enterprise risk manager Anka Taylor said 2003 could see the highest number of hostile bids for a decade.

"The previous highest volume of hostile bids in any one year was 25 in 1991, a year which - in terms of the economy and Iraq - shares obvious similarities with 2003.

"We've already seen four such bids this year and we're barely 11 weeks into 2003."

Ringsell said that sectors particularly at risk included engineering and leisure.

Predators would seek engineering firms to cash in on the MoD's expected need to restock with ordnance and equipment following the war in Iraq.

The engineering industry produced four hostile bids in 1991, the largest number from a single sector.

In that year it was followed by the leisure sector, already represented in 2003 by the battle for control of pub and hotel group Six Continents, pursued by entrepreneur Hugh Osmond.

The cost of fighting a bid can run into the millions. Ringsell estimated that Six Continents, recently forced to defend a hostile takeover bid by Hugh Osmond, would face a final bill of between £5m and £8m.

Demand for takeover cover had boomed, with ten new clients signed up since Hiscox introduced a new way of charging for takeover cover about 15 months ago.

This was about 70% up on prior years, Ringsell said.

Typically, companies had been asked to pay about £45,000 a year for £1m of cover. The new Hiscox scheme offers a premium between £10,000 and £20,000 to secure an option guaranteeing the right to buy £1m of cover in the event of a hostile bid for a further one-off premium of about £100,000.

Is your company at risk?
The stock market crash has wiped millions off many companies' values - making some look like bargains for a predator.

Sandra Ringsell identified three factors that could make a predator believe you are an easy target:

  • Yours is a successful company, but trading is down
  • Your company has cut dividends
  • Your company has bought back some of its shares.

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