Agreed Redland bid may herald shake-up in construction

Lafarge, the French construction giant, yesterday bought a near 30 per cent stake in Redland to cement its pounds 1.8bn bid for the distressed British building group. Andrew Yates believes the deal should herald a European shake-up of the construction industry.

Lafarge's agreed cash bid for Redland will lead to the departure of most of the British building group's top executives.

Paul Hewitt, finance director of Redland, is in line to receive a pay- off in the region of pounds 500,000. Robert Napier, chief executive, stands to get pounds 700,000 in compensation. However, it is still unclear how much Rudolph Agnew, the group's pounds 150,000 a-year chairman, will receive, as he is not on a two-year rolling contract.

Lafarge is likely to embark on a wide-ranging shake-up of Redland's European and US construction operations, including disposing of some businesses, after virtually securing its pounds 1.8bn bid for the group yesterday. According to industry analysts the takeover is likely to lead to some redundancies, especially in France where Redland's aggregates business has faced a torrid time,

Lafarge upped its 320p a share offer to 345p a share late on Tuesday night after a day of intense negotiations. It emerged yesterday that Redland, which had embarked on a break-up of the group designed to ward off Lafarge, realised it would not have been able to return all the disposal proceeds to shareholders before the middle of 1998.

Given the current uncertainty that is plaguing worldwide stock markets, Redland became increasingly concerned that it may not have been able to achieve a decent price for its European and US aggregates businesses. Faced with the possibility that its bid defence could crumble, Redland's board approached Lafarge with the aim of prompting a higher offer.

Mr Napier said yesterday: "We had to evaluate what was best for shareholders. We decided that the longer term programme involving the liquidation of Redland's assets, taken with the uncertainty of the markets and perhaps the creation of a bit more value, was not the right option. We believe the 345p bid offered the best option."

Analysts believe Redland has been able to extract a reasonable price from Lafarge. One analyst said: "Redland has played a great game of spoof. There was a lot of politics involved and it managed to get a decent price." Another source said: "The tactical threat of defence was more powerful than the implementation."

It is thought highly unlikely that any other building groups would try and trump the Lafarge bid.

Redland believes the deal will not be blocked by competition authorities in Europe and the US, a view backed up by City analysts. Kevin Cammack, building analyst at Merrill Lynch said: "There should not be a problem. The aggregates market is so fragmented. The only problem could be in France but given that the two groups were already looking to set up a joint venture there, then they must have checked this out already."

Shares in the construction sector rose sharply yesterday on the back of the deal as City observers expected the move to mark a wave of consolidation.

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