Investment: Tarmac demerger may add 33% to share value
Thursday 04 February 1999
On some estimates, the split announced on Tuesday could add up to 33 per cent to Tarmac's share value as investors realise that two companies are worth more than one entity.
Industry experts believe the stock - one of the sector's great underperformers - could go even higher on the back of speculation of a takeover of the two companies. The building materials group would be the more attractive target, but even the low-margin construction group could interest some large contractors.
On a purely financial basis, Mike Betts, building analyst at JP Morgan, believes the split - to be completed in six months - values Tarmac at about 150p, compared to 113.25p yesterday.
The building materials unit will be by far the more valuable of the two. According to Mr Betts, putting 1999 operating profit estimates of pounds 181m on a multiple of nine - in line with other materials companies - gives an enterprise value of between pounds 1.5bn and pounds 1.7bn. A similar exercise on the construction business, with profits set to be pounds 38m and a lower multiple of seven, gives a value of about pounds 260m. Take off debt of pounds 300m and other minor items, and the value of the total group comes out at over pounds 1.4bn. This translates to 150p per share, with about 120p accounted for by building materials and more than 20p by construction.
However, most experts agree that further upside could be provided by takeover action. David Taylor at Teather & Greenwood said: "The split will make a takeover of the building materials business more likely. The contracting arm has been essentially a poison pill."
The list of potential bidders is topped by Aggregate Industries. Others include France's Lafarge, the Irish group CRH and Australian giant Pioneer.
In the UK, RMC, Hanson and cement makers Blue Circle and Rugby may be interested. The contracting arm could be taken out, with Amec and John Mowlem the most likely buyers.
- 1 Engineer pictured fixing plane's engine with 'duct tape' by concerned EasyJet passenger
- 2 Two-year-old says goodbye to bin man best friend
- 3 Saudi Arabia mosque bombing: Two volunteer security guards hailed as heroes for stopping Isis suicide bomber reaching worshippers
- 4 There is something wrong but very right about this Bible illustration
- 5 Remove smartphones from the hands of under-18s and maybe they will grow up to be less dumb
Engineer pictured fixing plane's engine with 'duct tape' by concerned EasyJet passenger
Saudi Arabia mosque bombing: Two volunteer security guards hailed as heroes for stopping Isis suicide bomber reaching worshippers
Ancient 2,400-year-old gold bongs discovered in Russia
Porn stars in California may be forced to wear goggles under new legislation
Tampon tax scrapped in Canada after petition convinces conservative government
EU referendum: David Cameron's rules are a 'democratic disgrace', says French-born Scottish politician set to be denied a vote
Migrants in Kos: Photos show real tragedy after Brits abroad complain of 'awkward' holidays
British tourists complain that impoverished boat migrants are making holidays 'awkward' in Kos
A nation of inequality: How the UK is failing to feed its most vulnerable people
Australian man punched in the face for defending Muslim women from abuse on train
David Starkey 'tells Amal Clooney to shut up and stop over-promoting human rights'
iJobs Money & Business
£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...
£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...
£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...
£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...