Bottom Line: Plenty of logic in MB-RTZ deal
Tuesday 17 August 1993
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.
- 1 Scottish independence: Ireland since 1919 is a lesson for Scotland in what a Yes vote means
- 2 Thailand deaths: Pair's bloodied bodies found naked on Koh Tao beach
- 3 Lego breaks out of the toy box and heads for the gallery
- 4 Julian Assange and Edward Snowden join piracy mogul Kim Dotcom’s political campaign in New Zealand
- 5 Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
Thailand deaths: Pair's bloodied bodies found naked on Koh Tao beach
Jihadi John': MI5 may have identified Isis militant who killed David Haines but options limited
Russia freezes Ukraine into submission: Kiev admits country doesn't have enough fuel for winter
Scottish independence: Police will be on high alert on Friday whatever the result
David Haines beheading: David Cameron says Britain will hunt down Isis 'monsters' shown in video murdering aid worker
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
The political class is doing what Hitler couldn’t – destroying Britain
Scottish independence: Nationalist leader Jim Sillars threatens pro-union companies with 'day of reckoning' after independence
Scottish independence: Yes campaign feels the heat as Alex Salmond's NHS claims come under furious attack
£23m Birmingham cycle scheme is attacked by Tory councillor for not catering to the elderly
Salmond accused of laughing off national debt with ‘what are they going to do: invade?’ joke
iJobs Money & Business
£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
£35000 - £38000 per annum + Benefits: Ashdown Group: Training Coordinator / Pl...
Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)
£400 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...