Bottom Line: Plenty of logic in MB-RTZ deal

IF the market is an accurate measure of these things, the possibility of RTZ selling its building products and engineering arm to MB-Caradon is good news for the building group and a matter of indifference to the miner. MB's shares rose 16p to 303p while RTZ ended yesterday 1p higher at 687p.

Arguably, the joint announcement that the two companies are discussing a deal is good news for them both. RTZ has had an unofficial For Sale sign over Pillar for two years now and has made no secret of its desire to focus on the core business of minerals extraction.

MB-Caradon, for its part, would have some explaining to do to shareholders if it had not found a home for its cash pile by the year-end. The pounds 473m proceeds of selling its 25.3 per cent stake in CarnaudMetalbox have been getting a pretty feeble return from the bank since April.

Nothing is signed or sealed yet but there is plenty of logic in the putative deal. MB could find a home for Pillar's door and window frames business in Everest (which it also bought from RTZ). There is no reason to believe it could not make a good fist of running Pillar's jewel in the crown, the MK plug business. And the engineering bits (including part of Indal of the US) should find a reasonably willing buyer at this stage of the cycle.

If, indeed, it comes to that. Yesterday's announcement stressed that negotiations were over the sale of 'a large part' of RTZ Pillar, which complicates the business of assessing the deal but probably in MB- Caradon's favour.

Assuming MB gets to leave the loss-making American bits with RTZ, it is getting a better deal than indicated by the bare figures being suggested of pounds 750m for a division that made just pounds 20m last year.

RTZ, of course, is not just worried about price. A combination of government tax changes and two scrip dividends has slain the ACT dragon, which was part of the reason for holding on to Pillar's UK earnings. And a move into coal mining, via the Nerco and Cordero acquisitions earlier this year, has usurped Pillar's (failed) role as a counter-balance to the cyclicality of metals.

It may be hard to judge the price MB might pay for Pillar. What is almost certain, however, is that, after a period of half- hearted ownership by RTZ, there will be plenty of scope for cost-cutting. Analysts think a deal at pounds 750m would be modestly earnings-enhancing even without wielding the knife.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Content Writer - Global Financial Services

£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Web Developer - PHP

£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Loan Underwriter

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

A nap a day could save your life - and here's why

A nap a day could save your life

A midday nap is 'associated with reduced blood pressure'
If men are so obsessed by sex, why do they clam up when confronted with the grisly realities?

If men are so obsessed by sex...

...why do they clam up when confronted with the grisly realities?
The comedy titans of Avalon on their attempt to save BBC3

Jon Thoday and Richard Allen-Turner

The comedy titans of Avalon on their attempt to save BBC3
The bathing machine is back... but with a difference

Rolling in the deep

The bathing machine is back but with a difference
Part-privatised tests, new age limits, driverless cars: Tories plot motoring revolution

Conservatives plot a motoring revolution

Draft report reveals biggest reform to regulations since driving test introduced in 1935
The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory