Glory days gone at Hanson: The great 1980s 'gamekeeper' has laid down its gun, writes David Bowen

HANSON is back. Or is it? Last week the most successful conglomerate of the 1980s announced an agreed dollars 3.2bn ( pounds 2.1bn) bid for Quantum Chemical Corporation, America's largest manufacturer of polyethylene and second biggest retailer of propane gas.

The City reacted positively, marking Hanson's shares up 4p. Market-makers were excited at the sight of Hanson pulling off its first multi-billion pound deal since Consolidated Gold Fields in 1990.

Analysts who have examined the deal are more cautious. They see it as intelligent, but hardly in the mould of the great bids such as Imperial and SCM in the mid-1980s. Then, Hanson identified poorly managed companies that could, with rigorous cost-cutting, become highly profitable. Lord Hanson likened himself to a gamekeeper, bringing down the weakest in the herd. He appeared to thrive on hostile takeovers and showed no mercy to the management of the target company.

Quantum was bought simply because Hanson reckoned it was at the bottom of its cycle. Polyethylene, widely used in packaging, is the ultimate commodity chemical: with high fixed costs, it tends to be very profitable when times are good, and very unprofitable when they are not. Quantum has just spent dollars 1.6bn on new plant and is, Hanson believes, ready to start rolling again. But there was another reason Hanson bought the US company: it could afford to. 'Hanson's rating meant it could only buy what was available,' said Nigel Utley, analyst with Nomura. 'Quantum was one of the few deals it could do.'

The days are gone when the gamekeeper's gun was loaded with share paper so powerful that it could overcome the lumbering giants of British and American industry.

Now Hanson's p/e rating is 11.5, compared with 16 for Tomkins, 16.8 for Williams and 21.2 for the group with which it always used to be compared, BTR. The implication is that Hanson has itself become a lumbering giant.

It has not covered itself in glory in the past few years. It failed to buy Ranks Hovis McDougall last year, after being outbid by Tomkins, and came out badly from the ICI affair (though it never made a bid, it was battered in the publicity battle).

In the short run, Mark Cusack of BZW said, 'it is stymied. It needs to de-gear from this deal.' But in the longer term, Hanson has a more fundamental problem. Without a high p/e ratio, the old Hanson cannot be revived: it relied on having share paper more valuable than its targets, and now it does not. The Quantum deal was neat, and showed some of the old flair. It had similarities with the takeover of Beazer, when Hanson also used its better credit rating to cut debt repayment costs.

Hanson has told analysts there will be more organic growth and that it will be expanding in core areas. 'It is evolving into a more normal animal,' said Andrew Mitchell of Smith New Court. 'What's important is not buying to rape and escape,' added James Ritchie of Morgan Stanley.

Bob Carpenter, of Kleinwort Benson, said he believed Hanson would concentrate on two types of deals: large purchases such as Quantum, which provide another core activity; and bolt-on purchases, such as coal mines to add to its Peabody empire. 'The group will become a bit more focused in seven or eight businesses,' he said.

But will the company really be able to become 'normal'? Hanson's skill is managing decline - that is why it is so successful in cigarettes - and its internal rules do not encourage investment unless it brings a very rapid return.

Furthermore, core areas imply that skills are shared between different parts of the company: in Hanson each unit operates as a separate business, and there is deliberately no attempt at cross-fertilisation. It is a true financially driven conglomerate - not, like BTR or Williams, a hybrid that can claim some industrial logic.

The other question mark hangs over Lords Hanson and White, for so long the driving forces of the group. Most analysts believe they were wrong to announce two years ago that they would stay on for another five years; it was supposed to boost the share price, but did no such thing. The latest deal was presented by Derek Bonham and David Clarke, respectively heads of the UK and US ends of the business, and Hanson and White appear deliberately to be taking a back seat. As everyone in the City knows, though, no conglomerate has maintained its sparkle after the founders have gone. BTR could be the first to break the mould; there is less confidence that Hanson will do the same.

(Photograph omitted)