Hanson set to spin off businesses by October
Announcing better than expected first-half figures, the company also spelt out plans to allocate the pounds 3.5bn debt mountain that will remain even after recent disposals which have raised more than pounds 2bn. The core business, which will still be headed by Lord Hanson, will take on negligible borrowings, sparking speculation yesterday that a new round of takeovers may follow the demergers.
Analysts broadly welcomed the new detail yesterday, with some increasing their estimates of the conglomerate's break-up value from around to 210p to 215p. Derek Bonham, chief executive, took the opportunity to unveil names for two of the four businesses to be created. The chemicals arm, which trades mainly in the US and will be quoted only in New York, will be known as Millennium Chemicals. The tobacco business reverts to its former name of Imperial Tobacco.
Both will be spun off on 1 October, with the as yet unnamed Energy division following at the end of January 1997. The rump building materials business will retain the Hanson name.
The chemicals arm, which takes in the Quantum and SCM chemicals businesses as well as Hanson's remaining stake in Suburban Propane and flavouring company Glidco, has been assigned between pounds 1.3bn and pounds 1.4bn of the debt pile, but still believes it will attract an investment grade rating from Standard & Poor's and Moody's.
Imperial Tobacco and Energy will both adopt just over pounds 1bn of group borrowings each, while the rump will take less than pounds 200m. Andrew Dougal, finance director, said that reflected both "new" Hanson's intrinsic cyclicality and the need to reassure bond holders whose long-term debt would remain with Hanson.
The demerger details emerged as Hanson revealed first-half profits of pounds 794m compared with pounds 623m last time, although that figure included a pounds 160m one-off disposal profit from recent sales such as that of Cavenham Forest Industries. Flat underlying profits reflected a better than expected performance from Eastern Group, the former regional electricity company acquired last year, which offset a sharper than forecast fall in profits from Quantum, where lower prices reversed last year's exceptionally high return and profits tumbled 60 per cent to pounds 84m after an 18 per cent sales decline.
Imperial Tobacco, whose brands include Lambert and Butler cigarettes and King Edward cigars, increased profits by 9 per cent to pounds 174m, increasing its UK market share to over 38 per cent. The company, which is the second largest UK manufacturer of tobacco products, said it was targeting the high growth markets of the Far East, which account for more than half the world cigarette market.
In the core building operations, ARC was hit by lower government spending on roads in the UK but sales of Grove cranes continued to move ahead and profits rose from pounds 15m to pounds 23m. Hanson Brick, the UK's largest clay brick maker, experienced weaker demand.
Hanson said yesterday it was in negotiations with the Inland Revenue and US tax authorities over the distribution of shares in the three new companies to existing Hanson shareholders. Andrew Dougal said he was confident that the handout would be tax-free to both UK and US shareholders.
Shareholders who do not wish to hold on to shares in any of the demerging businesses will be offered a low-cost dealing facility, similar to that offered at the time of last year's demerger of a clutch of smaller US businesses under the umbrella of US Industries.
No firm details of the demerger costs were available, but Mr Bonham sought to assure shareholders that much of the preparatory work was done in-house. He said the total cost would be considerably lower than in several recent City deals.
Hanson's shares closed 5p lower yesterday at 192p.
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