Pru fires warning shot in Wainhomes buyout move

THE PRUDENTIAL, one of the UK's leading institutional investors, yesterday fired a warning shot at small undervalued companies seeking to go private cheaply when it refused to sell its 12.5 per cent stake to housebuilder Wainhomes' buyout team.

The highly unusual move comes just days after Wainhomes delisted after receiving acceptances from 86.4 per cent of shareholders for its pounds 88m bid. Equivalent to 140p a share the offer was 30p less than the price at which the housebuilder floated five years ago. Prudential sources said this was the first time such action had been taken and reflected disatisfaction with the growing trend among small companies to go private cheaply.

"We feel there are a lot of opportunities for companies to take themselves private at the moment at prices which don't reflect the underlying value of the business.

"We may take the same view in future with other management buyouts," the source warned.

The undervalued nature of the housebuilding sector was revealed earlier this week when the bitterly fought bidding war between Miller and the buyout team seeking to take Cala private ended with the Cala management being forced to offer a 17.5 per cent premium on its initial bid.

The housing market recovery has also added to the perception that the sector is significantly undervalued.