The Quarto board of directors has recommended that shareholders reject a tender offer by JO Hambro Capital Management that would give Hambro a majority stake in the company. The board called the tender offer, which Hambro initiated in late July, "opportunistic" and said it undervalues the publishing company. The board said it would be "happy to listen" to other ideas Hambro has for enhancing shareholder value.

Representatives from Hambro questioned Quarto's assertion that their offer undervalued the company, noting that pretax profits fell 10% in the first half of 2003. In a statement, Hambro said it would like the Quarto board to present what it considers the company's fair value and to explain how the company intends to realize that value.

For the first six months of 2003, Quarto's pretax profits were £1.37 million ($2.3 million), down from £1.52 million in the comparable period in 2002. Revenue fell 6.6%, to £29.7 million ($50.8 million). Sales in Quarto's co-edition book division rose 9.3%, to £16.4 million, and earnings increased 30%, to £1.6 million. Sales were down 20.8%, to £13.3 million, in the publishing group due to a loss of a major client in the U.K. as well as soft second-quarter sales in the U.S.

Despite the uneven start, company chairman Laurence Orbach was cautiously optimistic about the balance of the year. Citing a good July and a bit of a rebound in the U.S., Orbach said 2003 "will be another year of progress." One avenue that Quarto may explore to give a meaningful boost to sales is an acquisition, which Orbach mentioned as a possibility earlier this year. Last week he reiterated that "Quarto is seeking an acquisition whosescale could have a significant impact on the company's growth."