Investment: Rugby's pounds 250m sell-off permits Scancem bids
Wednesday 31 March 1999
The UK group yesterday pleased the City with radical plans to sell all its joinery and materials businesses to focus on cement and lime operations.
Rugby said it was in advanced talks with Jeld-Wen, a private US company, over the sale of its US, UK and Australian joinery companies, which make doors and windowframes, and its US distribution subsidiary. The disposals are likely to net Rugby over pounds 250m. They will involve the loss of pounds 700m of sales, 70 per cent of group turnover.
The chief executive, Peter Johnson, said the sales would help Rugby make inroads into the global cement market. "The cement industry is like a jungle and you cannot go into the jungle with one eye on the joinery business," he said.
Funds raised will enable Rugby to participate in the auction for Scancem, owner of Castle Cement, the second-ranked UK cement maker. The Scandinavian company is being sold by its joint owners, Skanska of Sweden and Aker of Norway. The sale has attracted interest from European building materials groups, including CRH of Ireland, France's Lafarge and British group RMC.
Analysts believe Rugby will not be able to buy the whole group, but could bid for its east European assets. Scancem owns firms in Finland, the Baltic States and Poland, which fit with Rugby's Polish business.
The UK company could also buy parts of Castle Cement, although buying the entire group would be blocked on competition grounds.
News of the sales and potential purchases overshadowed Rugby's 1998 results. The group posted a small increase in operating profit to pounds 76.9m on sales down 4 per cent to pounds 1.02bn.
Analysts said the restructuring raised the chance of a bid for Rugby. "[After the disposals] they are a very tidied-up company. If there is a predator, Rugby is doing all the dirty work for them," said David Taylor of Teather & Greenwood.
After the sale of Castle Cement, Rugby will be the only large UK cement producer available to buy. It could attract European giants such as Lafarge and CRH, believe analysts. Profit forecasts for 1999 and the p/e ratio are now academic, but given the bid prospects Rugby's shares, up 2p to 113p yesterday, are a good speculative buy.
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