French bid for China Clays

SHARES IN English China Clays jumped by 50 per cent to 240.5p yesterday after the struggling clay and speciality chemicals group found itself on the receiving end of a hostile pounds 680m cash bid from the larger and more diversified French building materials and minerals group Imetal.

The offer values ECC shares at 225p or 41 per cent above the market price at the close of trading last Friday.

It came just five days after the French company gave ECC an ultimatum demanding acceptance of its offer within 48 hours, which ECC rejected on the grounds that it gave insufficient time for serious consideration.

Imetal insists that the offer is not hostile, but the chief executive officer, Patrick Kron, accused the ECC management of failing to exploit the technology available to it, failing to acquire cheap kaolin reserves in Brazil and failing to extract the necessary financial returns from Calgon, the speciality chemicals company ECC bought back in 1993.

Combining the two companies will double the size of Imetal's own ceramics and pigments division, allowing it to improve the range of goods and services it offers to customers worldwide.

Imetal would not spell out possible closures and disposals, but the bid premium can only be justified by the substantial savings a takeover could provide, Mr Kron said.

ECC's head office and the two companies' china clay operations in Georgia are likely to suffer, while Calgon could be sold to the US-based Minerals Technologies group.

ECC is in the grip of a severe downturn in demand from the pottery and paper industries. Sales have fallen 5 per cent over the three years from 1995, operating profits are down 7.7 per cent, pre-tax profits have fallen 10.6 per cent to a forecast pounds 85m in the year just ended.

The dividend of 13p a share is thought to be safe, however, and the shares were yielding over 10 per cent at last week's share price of 160p.

Analysts yesterday took the view that 225p a share is too cheap. But most are forecasting a 10 per cent fall in earnings to 19.4p for 1998, recovering to 20p in 1999, but not regaining 1997 levels until 2000.

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