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  1. Technology
July 26, 1988


By CBR Staff Writer

Dowty Group Plc has stepped in as white knight for the Case Group with a recommended UKP82.5m bid and stringent rationalisation plans to propel their combined information technology forces onto the world market. Dowty, classified as miscellaneous and mechanical engineering on the Stock Exchange listings spans a number of interests including mining equipment and aerospace components, but has been putting a lot of effort into its Information Technology data communications equipment group, which contributes 21% to turnover and is the fastest-growing division. If the proposed takeover goes through, that division will be the second largest in Dowty Plc with a combined turnover of UKP157m. Case has recommended the offer to its shareholders on the basis of the more generous financial offer and the better fit between the two in products, distribution channels and management style, than the Gandalf offer. Case reckons that its managing director Peter Burton will remain with the company, but Dowty is noncommittal on the future of the Case top brass. Bruce Brain, managing director of Dowty’s information technology division has promised a programme of rationalisation to achieve a one plant, one sales force, one research and development activity basis for business. This policy will hit hardest in the US where Dowty last year acquired Datatel Inc which supplies T-1 digital multiplexors in direct competition with Case (CI No 790). Brain said that Dowty is unwilling to tolerate the loss-making Rixon in its present form, which has been a constant drain on Case resources since it was acquired back in 1985 and is likely to lose its manufacturing plant. But some rationalisation is also expected in Europe, again in digital multiplexors and also X25 switches although Brain refused to name any figures. The Case name will be retained in Europe and the company will run as a stand-alone unit within the Dowty Information Technology division. The two companies have different identities this side of the Atlantic with Case selling primarily to end-users and Dowty supplying the OEM market. Dowty bought Steebek Systems Ltd, a modem design company, in 1985 and says it needs just one more strong European partner (on top of Case) to ramp up its portfolio in preparation for 1992. The terms of the Dowty offer for Case are 59 new Dowty shares worth 62.5 pence on Monday, plus 133 convertible preference shares valued at 66.5 pence, for every 200 Case shares. A cash alternative of 56.25 pence a Dowty ordinary is available, but Case holders will be stuck with the convertibles. Dowty says the offer values each Case share at 129 pence, based on the 2115.5 pence Dowty share price at the close of business on 25 July, compared with Gandalf’s 109 pence valuation.

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