Novar plots spin-off to halt predator

INDUSTRIAL group Novar is considering a separate stock market listing for the jewel in its crown - its cheque-printing business - as part of a defence against a hostile bid by investment vehicle Melrose.

Analysts believe Security Printing Services could be worth up to £600m, including a premium, compared with a stock market value for Novar of £712m at Friday's closing price of 165 1/2p.

Though the flotation of the cheque business is not likely to be mentioned in tomorrow's formal bid defence document to shareholders, it is understood that Novar has instructed bankers to look at spinning off SPS as a listed company. SPS, based in Texas, supplies personalised cheques and bill-paying accessories to 4,000 American financial institutions and had a turnover of £347.4m in 2003.

Previously, Novar, which also has an aluminium business and a building services operation, has talked of selling off all or part of its business. Talks with potential buyers are ongoing. The defence document is likely to focus on attacking the management of Melrose and accusing them of being fat cats.

Novar's new chief executive Stephen Howard is expected to say that Melrose directors, headed by chairman Christopher Miller, are trying to cream off almost £70m if they are successful in turning round the business.

Last week, Melrose, which has offered cash and its own shares for Novar, revealed that its management team would share in ten per cent of any gains if they could double the share price in four years.

Miller defended the reward package, saying: 'I would love to be able to cash a cheque for millions, but that assumes 20% compound growth over four years.'

Novar is also expected to focus on the fact that the dividend per share would be cut under a Melrose takeover because the move would dramatically increase the number of shares in issue.