CINVen vies for Redland brick division

TOM STEVENSON

City Editor

CINVen, the former venture capital subsidiary of British Coal, emerged yesterday as one of four potential buyers of Redland's UK brick manufacturing operations. Redland confirmed it was in talks with CINVen, which recently backed a pounds 63.5m management buyout of the brick-making activities of Christian Salvensen, but said it was too early to say who would end up with the brick business.

CINVen's interest in Chelwood, the Christian Salvesen brick unit, would make it an obvious contender to pick up Redland's business. With a book value of about pounds 130m, the Redland operation would give a combined operation some critical mass in a still highly competitive market.

A CINVen spokesman admitted yesterday the group was one of a small group of potential bidders, but it poured cold water on press reports yesterday that the business might be worth pounds 250m. It is understood that Redland is looking for about net asset value. Together with a US brick business, which is also up for sale, and Terca, a European brick company which was sold in February for pounds 71m, Redland's combined brick operations had net assets at the end of 1995 of pounds 245.9m.

Operating profits of pounds 21.6m were struck last year from sales of pounds 179.2m.

Redland has about 18 per cent of the UK brick market, behind Ibstock, with 19 per cent, and Hanson, which controls 29 per cent, according to government figures for last year. Putting Chelwood together with Redland's business would give CINVen about 23 per cent of the UK bricks market.

Redland confirmed last month that it was also talking to Wieneberger of Austria about a possible sale, but it has so far kept the other two potential buyers close to its chest. Speculation has focused on CRH, the Irish building materials group, and Australia's Boral and Pioneer.

CINVen has been a big player in buyouts over the years, and was recently involved in the acquisition of Dunlop Slazenger from BTR. Other feathers in its cap include Automotive Products, acquired for pounds 181m, and the pounds 108m Wightlink deal.

Redland announced last month it was seeking buyers for its brick businesses as part of a radical restructuring of its European operations which are expected to involve the transfer of all the company's western European tile interests into Braas, its successful 50.8 per cent-owned German subsidiary, in exchange for cash and shares.

The proposed deal would see Redland's shareholding in Braas rise to about 60 per cent and is expected to simplify investment plans and reduce duplication. Although Braas has given Redland exposure to the recent post-unification surge in Germany, recession is taking its toll and the company believes it is the right time to clarify the relationship between the two.

In the year to December, Redland announced a 5 per cent fall in underlying profits to pounds 368m and became the only FT-SE 100 company to announce a dividend cut.