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Hanson lays axe to debt with pounds 1.5bn US disposals

Hanson took a big step towards its goal of raising pounds 2bn from disposals yesterday, announcing the sale of Cavenham Forest Industries and a part-flotation of Suburban Propane, two of its largest US businesses, for a combined pounds 1.5bn.

The deals will cut a swathe through group borrowings, expected to rise to pounds 4.7bn once Hanson pays pounds 2.5bn for Eastern Group, the regional electricity company it acquired earlier this year. Those debts would have represented 130 per cent of shareholders' funds, a level Derek Bonham, chief executive, said recently would be aggressively reduced.

Mr Bonham said yesterday: "These disposals are part of our programme to concentrate on fewer, larger activities. Proceeds will be used to strengthen the balance sheet and invest in our existing major businesses."

Hanson is focused on chemicals, consumer goods, including tobacco, energy and building materials.

Attention now turns to the timing of Hanson's sale of its stake in the National Grid, which it has said it will unload at some stage. That could raise over pounds 400m, which would be boosted by the widely-tipped disposal of Seven Seas, the vitamin brand.

Hanson says it plans to sell about 62 per cent of Suburban Propane through a public offering of 18.75 million shares in the US's third-largest retail propane distributor. The offer, and a related debt issue, will raise about pounds 500m for Hanson.

Cavenham Forest Industries, which owns and manages 1.75 million acres of prime US timberland and a substantial number of sawmills, is expected to raise a further pounds 1bn. The ninth-largest timberland owner in the US, Cavenham owns some of the world's most productive softwood-growing sites in Oregon, Washington, Louisiana and Mississippi.

Cavenham is being sold on after a dramatic improvement in its underlying performance. Since its acquisition, Cavenham's forest growth has exceeded harvests by 36 per cent and its margins and productivity have increased markedly.

Cavenham came into the group when Sir James Goldsmith swapped it for a stake in Newmont Mining, which Hanson gained through its 1989 takeover of Consolidated Gold Fields.

William Landuyt, chief executive of Hanson Industries, the conglomerate's US arm, said: "Having dramatically increased Cavenham's timber margins and brought its mills up to world-class productivity, these prime assets are now worth more to buyers with specific timber needs or adjacent forests."

The proposed Suburban deal sees Hanson retaining a 32 per cent stake in a new limited partnership designed to allow the company to expand by issuing new partnership units to acquire other propane distributors.