Companies in manufacturing are continuing to feel the heat, with rising energy costs and raw material hikes hitting their bottom lines. Consistent margin pressure and uncertainty over the timing of orders are another prominent complaint. The result is that many are looking ripe for takeover at value prices.

A typical example is engineering counter Dickinson Legg, the struggling maker of primary tobacco processing equipment. Its shares gained in value following news of a recommended ‘mandatory’ cash offer from European Tobacco Development, a subsidiary of Italian-based tobacco machinery rival Garbuio. It has taken control of 51.2 per cent of Dickinson Legg, triggering Rule 9 of the City code, under which it has to bid for the rest.

The 17.75p offer price is pitched at an 18.6 per cent premium to the average closing price over the past year, and values Dickinson Legg, which will then de-list, at £6.45 million. Explaining the board’s decision to recommend the offer, chairman Barry Stevenson reflected that the group has been operating in depressed and fiercely competitive markets for some years, and believed consolidation in the tobacco processing equipment sector had been on the cards for some time.

Elsewhere on AIM, Asfare, which supplies products and services for the emergency services and homeland security market, advanced seven per cent to 80p on a well-received trading update. The company flagged up a return to profitability in the second half of the year, which will lead to a significant profits improvement for the full year to March 2006 over 2005. Asfare’s recovery is being driven by rising orders from a number of customers, as well as a clarification of the fire industry’s procurement policy.