Hanson to break up into four companies
The tobacco, chemicals, energy and building group, that more than any other company grew to epitomise the deal-spinning 1980s, is to end its life as a conglomerate within a year, demerging itself into four separately quoted companies.
Lord Hanson, who founded his eponymous empire through the 1965 reverse takeover of a small agricultural supplier, said: "We are making this exciting and radical move to create even greater management and growth opportunities, to improve the operations, profitability and long-term prospects of these four big businesses."
That gloss was not shared by the company's observers, however, who have viewed the break-up as confirmation of the failure of the very concept of conglomerates, one of the dominant corporate ideas of the past three decades. In keeping with the rest of the diversified industrials sector, Hanson has consistently underperformed the rest of the stock market since the beginning of the 1990s as investors switched into more focused groups.
Despite yesterday's 7p rise in the share price to 211.5p, Hanson's shares are worth less today than at the beginning of 1990. Over the past five years, they have lost 35 per cent of their value relative to the wider market.
The demerger, masterminded by the merchant bank Rothschilds, is bound to create a bonanza in professional fees. It is the largest corporate break-up since ICI spun off Zeneca in 1993 and will create four companies, all with sales of more than pounds 2bn. Hanson shareholders will receive shares in each.
Imperial Group, the Embassy and Lambert & Butler tobacco group which Hanson acquired in 1986 at the height of the group's expansion, will regain its stock market quote. Eastern Group, the former regional electricity company, returns to the stock market as part of an energy business that takes in Peabody Coal of the US. There will also be a stand-alone chemicals company, comprising SCM, the recent acquisition Quantum and the remaining stake in Suburban Propane.
The Hanson name will live on as a rump building materials business whose principal subsidiaries include ARC, Hanson Brick and the company's 12.5 per cent stake in the National Grid. It will be the only one of the four companies to be chaired by Lord Hanson, who confirmed that he would step down as planned in 1997. With the succession still unresolved in the core business, attention focused again on the role of Lord Hanson's son, Robert.
The break-up is a victory for Derek Bonham, Hanson's chief executive and the proposed chairman of Imperial and the energy company. Like many of his peers in the sector, he has long argued for a narrowing of Hanson's interests and was a driving force behind the demerger of US Industries.
Mr Bonham said yesterday: "The USI demerger demonstrated that increased focus works and I am sure it will work for us. However, this is a gigantic exercise and although we've started that work, much more lies ahead."
The complexity of the deal is increased by the Anglo-American balance of Hanson, created by the 1973 move to the US of co-founder Lord White and always touted as one of the conglomerate's greatest strengths. The listings of the newly-created companies will also be split between the US and Britain.
Hanson, often accused of asset-stripping and failing to invest in its subsidiaries, has always seen itself as a maximiser or liberator of shareholder value locked into underperforming companies.
In its heyday the company rode on the back of an unmatched deal-making reputation as Lord Hanson and Lord White, who died last August, created a transatlantic group with interests ranging from tobacco to timber. But its market rating languished as its earnings growth ran into the sand.
The fractured legacy of a 30-year-old empire
Put together over the past 10 years since the 1986 acquisition of SCM, the chemicals company will also include the successful recent acquisition Quantum and the 35 per cent of Suburban Propane left over from last year's flotation of the domestic gas company. The rising American star Bill Landuyt will be chairman and chief executive of the New York quoted business. Sales in the year to September 1995 of pounds 2.02bn yielded operating profits of pounds 591m.
The return of a familiar name to the stock market, a bitter final twist to an acrimonious 1986 bid battle. Britain's second largest manufacturer of tobacco products, its principal brands include Regal, Embassy, John Player Special and Lambert & Butler.
Derek Bonham takes the chair with Ronald Fulford as chief executive. Sales last year were pounds 3.57bn with operating profits of pounds 348m.
A creation of the 1990s, the new company puts the American mining operations of Peabody, Southern Ohio Coal and Costain Coal with last year's pounds 2.5bn acquisition of Eastern Group, the electricity company. Management is split between Eastern's former head John Devaney and Irl Engelhardt from Peabody. Derek Bonham oversees as chairman. Energy would have made profits of pounds 460m on sales of pounds 3.53bn had it been part of the group for the full year.
The name lives on as a focused building materials and equipment group, with sales of pounds 2.3bn and operating profits of pounds 286m. Lord Hanson holds on to the chair until his planned retirement next year. Christopher Collins is deputy with former finance director, Andrew Dougal, chief executive. Subsidiary companies include ARC, Cornerstone Construction, the crane business Grove, Hanson Brick and Hanson's holding in the National Grid.
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