Blue Circle battle nears the end

Institutional shareholders have come out in support of the beleaguered cement group.
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The Independent Online

The Battle for control of Blue Circle Industries reaches its climax on Wednesday, with the likelihood of Lafarge's £3.5bn bid succeeding still too close to call.

Rick Haythornthwaite, Blue Circle's chief executive, has been buoyed by news that a number of institutions have come out in his favour.

The trend was set by Schroders, the cement group's biggest shareholders, which announced last week that it would not be accepting the 450p-a-share offer of Lafarge, the French aggregates business. It was followed by Standard Life, Foreign & Colonial and Cazanove, all of which pledged not to sell their shares to Lafarge. Other institutional investors are understood to have leant their support anonymously to Mr Haythornthwaite.

However, Lafarge has already bought 30 per cent of Blue Circle shares - the maximum allowed under Takeover Panel rules - and requires only another 20 per cent to secure control. The French company's cause was furthered on Friday when the Canadian Competition Bureau approved the bid, on the condition that Lafarge sells the majority of Blue Circle's Canadian interests.

The fate of Blue Circle, which has mapped out its own defensive strategy to improve the laggardly performance of its shares, depends on the verdicts of the majority of shareholders who, so far, remain uncommitted. Only 7 per cent of the undecided Blue Circle stock is controlled by private investors. The rest is owned by institutions and by arbitrageurs, professional speculators who have bought Blue Circle shares on the assumption that Lafarge's bid would succeed.

Mr Haythornthwaite has spent the past week on a last-minute charm offensive in an attempt to convince wavering investors that the existing management deserves the opportunity to implement its strategic plans.

The deadline for acceptances for Lafarge's bid is 1pm on Wednesday.The result will be announced three-and-a-half hours later. If Lafarge fails to secure more than the requisite 50 per cent of the stock, the fault will probably lie with its decision earlier this month to pitch its revised bid at only 450p. Once it became clear that it would raise February's original bid of 420p, most analysts predicted that Lafarge would come back with an offer closer to 500p in order to secure its prey. At least one fund manager has accused Lafarge of being opportunistic in offering the minimum amount necessary at a time when old economy stocks such as Blue Circle have been hit by the antipathy of investors.

The Asian economic crisis has blighted Blue Circle's operations in Malaysia and the Philippines in recent years. However, Mr Haythornthwaite, who has spent just nine months at the Blue Circle helm, is determined to be given the opportunity to implement his strategic plans, which include a proposal for a share buy-back.