Analysts suggest an increased offer of around 300p a share would be enough for victory.What’s more, Quebecor’s options are limited. “Whatever valuation you use the current bid is too low.”Nevertheless, few observers expect Watmoughs to retain its independence. They point to management succession problems – long-serving chief executive Patrick Walker returned to the job from semi-retirement last year when his successor resigned, and he has already announced his intention to step down after two years. Most observers argue that the current bid undervalues Watmoughs.”It’s round one to Watmoughs,” said Henderson Crosthwaite analyst Louise Barton. Watmoughs is expected to publish a profit forecast as part of its final bid defence, which is due next week.However, Quebecor immediately hit back by stressing Watmoughs’ dismal recent profit and share price performance. “If they can only achieve a halving of the share price in such favourable conditions, what will they achieve in the more difficult markets of today and tomorrow?” asked Charles Cavell, President and Chief Operating Officer of Quebecor’s international division.Watmoughs’ share price was unchanged at 279.5p – a 22.5p premium to the value of Quebecor’s cash offer – suggesting that investors think the predator will have to raise its bid in order to win. Peter Thal Larsen reports on latest salvoes in the continuing battle.

In the second document posted to shareholders since Quebecor announced its bid in December, Watmoughs pointed to the strong growth in its markets in recent years, fuelled by factors like the increase in newspaper supplements and the rise of supermarket loyalty magazines. The group also painted a rosy picture of its future, pointing to the healthy growth prospects for its operations in Spain and Hungary.
Meanwhile, Watmoughs dropped a strong hint that profits for the year to last December would be stronger than previously expected. Watmoughs, the printing company which is fighting off a pounds 188m hostile bid from Canadian rival Quebecor, launched the second stage of its defence yesterday by emphasising its growth potential and hinting that 1997 profits would be better than expected. “The company continues to trade well and we look forward to additional production capacity coming on stream during the current financial year. We are anticipating that the current year’s outcome will be satisfactory.”Allied said last autumn that “serious accounting irregularities” worth about pounds 2.8m would cut 1997 profit, prompting its shares to fall 18 per cent. But for those difficulties it would have exceeded market forecasts of pounds 19m in pre-tax profit.. The shares closed today at 165.5p, a gain of 41.5p.”If the management were to get it for much less than that I would have thought shareholders were capitulating quite weakly,” he said.

The company enjoyed a good market position in the UK and “quite a nice position” in North America.The company said it had set up a committee of independent directors to consider the offer, and had appointed Credit Suisse First Boston as its adviser.Allied said its sales rose to pounds 231.7m from pounds 227m as earnings per share rose to 16.6p from 16.3p. As changes to directors’ service contracts are not required to be voted upon at an annual meeting they have had no say in the matter.Granada remains adamant that it has done nothing wrong. It said: “The remuneration committee felt that the value of the contracts had been eroded and felt that the management should be compensated.”Some institutions have remained sanguine over the issue “We are not getting too exercised about it,” one said. “It is a matter for the remuneration committee.” Granada said it had no plans for formal meetings with investors to explain the issue but would be happy to arrange briefings if requested.. Shares in Allied Textiles surged 33 per cent yesterday after the group disclosed it was in bid talks with an un-named group that includes some of the company’s directors. The company, which makes yarn, fabrics and carpets through various subsidiaries, made the announcement as it said pre-tax profits for the year to the end of September rose to pounds 16.3m from pounds 15.9m in the previous 12 months.
The possible bid follows a profit warning in November, when the company’s announcement that it had discovered financial irregularities sent its share price tumbling 18 per cent, and comes as the strong pound continues to hamper exports.Peter Morrison, an analyst at Granville Davies, said the company could sell for between 175p and 180p a share, valuing it at around pounds 125m.