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The takeover battle for recruitment agency Imprint (IMP:AIM) is headed into its tenth month as Hydrogen (HYDG:AIM) and OPD (OPD) continue their efforts to win over shareholder support for their rival bids.

Hydrogen has added a share buyback component to its offer, promising to spend £7.5 million within 12 months of a successful takeover. This in addition to a cash sweetener. It has promised to give 0.461 new Hydrogen shares or 110p cash for each Imprint share. The cash element is restricted to a maximum £20.5 million across all shareholders and will be funded by private equity group 3i QPE as part of an earn-in to the enlarged business.

OPD is offering five new shares for each 14 Imprint shares, plus 10p cash per Imprint share. At the end of January, OPD had acceptances representing 22.82% of Imprint’s shareholders. Hydrogen has acceptances from 24.87%, plus letters of intent from 19.65% of Imprint’s investors and letters of support from CFD holders with a 5.55% stake.

Richard Bennett, an analyst at stockbroker Daniel Stewart, believes Hydrogen’s offer ‘is likely to succeed’, albeit with concerns along the way. ‘A key remaining concern for Imprint shareholders will be the risk of a post-deal overhang in Hydrogen stock which could cause the share to fall materially below current levels,’ he says. ‘We believe this is a key reason why Imprint shares are still trading materially below the value of the Hydrogen offer.’

Bennett reckons the new share buyback proposal reduces the risk of the share overhang. The £7.5 million equates to 27.6% of the free float post deal at the current Hydrogen price, excluding management, founder shareholders and 3i QPE who won’t participate in the buyback, says Bennett. He points out that the share buyback value is equal to 8.5 million Imprint shares, which is the same size stake as the two largest Imprint shareholders who have not been named by Hydrogen as supporting its proposals.

Imprint first confirmed a potential takeover approach on 22 June 2007, from OPD. Takeover talks were scrapped on 22 August only for a private equity-backed management buyout proposal to be made a week later. On 7 September, these discussions collapsed and Imprint revealed yet another approach from a different party.

OPD returned to the frame on 31 October with its current offer, followed by Hydrogen’s approach on 6 November. Imprint was hit last year by a profit warning, troubles with its executive search arm and problems holding on to staff. Brian Hamill, chief executive and founder quit as the company’s troubles continued.

Hydrogen is interested in Imprint as a platform for growing business in Asia Pacific and would probably sell the executive search division to Hamill, who has expressed an interest. OPD wants Imprint to expand its operations across Europe and Asia.