SCOTTISH bus builder Alexander Dennis has abandoned any plans to bid for Optare, in a dramatic volte-face announced only 24 hours after it revealed its interest in considering an offer for its north of England rival.
It attributed its about-turn to a communication to adviser Noble Grossart that Indian-headquartered Ashok Leyland, which is part of the Hinduja brothers' empire, would not be interested in selling its holding "to anyone at any price". This communication was made through Optare's financial adviser, Cenkos Securities. On December 20 Ashok Leyland announced plans to hike its stake in Optare from 26% to 75.1% through a £4 million share purchase.
Alexander Dennis, which has enjoyed rapid growth and healthy profits under chief executive Colin Robertson, had revealed to the stock market at 7am on Wednesday that it had written to Optare chairman John Fickling requesting information on the business to allow it to assess whether it might be prepared to consider making a cash bid.
Exactly 24 hours later, it revealed it had withdrawn its interest in Optare, which specialises in making small and medium-sized "midi" buses.
Alexander Dennis told the stock market: "The board of Alexander Dennis Limited (ADL) announces that, after careful consideration, it has withdrawn its interest in considering making an offer for the entire issued share capital of Optare.
"Following the announcement (on Wednesday) that ADL might be prepared to consider making an offer, ADL was advised by Optare's financial adviser, Cenkos Securities plc, that, 'We have received confirmation from Ashok Leyland Limited that it has no intention of selling its stake in Optare to anyone at any price.
"As Ashok holds 26% of the issued share capital of Optare and ADL has been unable to obtain any of the information on Optare requested on 23 December 2011, the board of ADL has concluded that it will not pursue further its possible interest."
Shares in Optare jumped 0.15p or 33.3% to 0.6p after Alexander Dennis's statement on Wednesday morning that it had requested information to allow it to assess whether it might make an offer.
This raised the stock market worth of Optare, which employs about 500 people and has the bulk of its workforce at its new manufacturing plant at Sherburn in Elmet in North Yorkshire, by £1.13m to about £4.5m.
The shares fell back 0.025p or 4.2% to 0.575p yesterday on news of the withdrawal, valuing Optare at £4.32m.
Ashok Leyland was set up decades ago as the Indian arm of British Leyland and is now part of the Hinduja Group, which is led by industrialist Srichand Hinduja, who is supported in running this business by brothers Gopichand, Prakash and Ashok.
Under a deal with Optare unveiled on December 20, Ashok Leyland is with associated companies taking up shares at 0.27p each in a £4m placing, which is subject to approval by Optare shareholders at a general meeting on January 6 and will increase the Indian company's stake to 75.1%.
Ashok Leyland is India's second-largest commercial vehicle and diesel engine manufacturer, and Hinduja Group's flagship company in India.
Noting the withdrawal of Alexander Dennis's interest in considering making an offer, Alternative Investment Market-listed Optare said: "Following receipt of a request for information on the afternoon of 23 December, the independent directors sought clarification from Ashok Leyland as to whether they had any interest in selling their stake in Optare.
"ADL's advisers were informed by e-mailed letter on December 24 that Ashok Leyland would not be interested, and in consequence the independent directors asked for clarification as to whether ADL would still be interested in making a possible offer for the remaining 74% of the shares in the company."
Optare added: "The independent directors have at all times sought to act in best interests of shareholders and therefore required to establish that an offer could be made by ADL before providing commercially sensitive information to a competitor. The independent directors have received no further correspondence from ADL or its advisers since December 23. On December 28, Ashok Leyland further confirmed that it had no intention of selling its stake 'at any price' and the independent directors note ADL's reaction to this."
Ashok Leyland acquired a 26% stake in Optare in summer 2010 as part of a long-term strategic alliance.
The Alexander Dennis business, which was rescued in 2004 by a high-profile consortium including Stagecoach co-founders Sir Brian Souter and Ann Gloag, Sir Angus Grossart's Edinburgh-based Noble Grossart merchant bank and businessman and former Rangers owner Sir David Murray, has enjoyed strong growth and healthy profits in spite of recent turbulent economic times.
It is believed Alexander Dennis, which is being advised by Noble Grossart, has weighed a move for Optare in the past.
Optare, which in September announced a rise in first-half losses, has said the proposed £4m placing with Ashok will secure its long-term future.
Alexander Dennis achieved turnover of £283m in the year to December 2010, raising pre-tax profits to £4.53m from £3.21m, and is on track for sales of £360m in 2011, with further growth of 15% to 20% targeted in 2012. Turnover was £172m in the year to September 2006. The company acquired rival Plaxton in Yorkshire in 2007 shortly after Colin Robertson took over as chief executive.
Mr Robertson, who this month took the coveted title of Entrepreneur of the Year in the Entrepreneurial Exchange's awards, has embarked on a drive to ramp up Alexander Dennis's export business. The company now has vehicle-building partners in China, Hong Kong, New Zealand and North America. It has about 2000 staff, including about 900 at Falkirk.