BPB investors demand more than 760p a share from Saint-Gobain

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BPB's biggest shareholders will tell its unwelcome French suitor this week that it must dig far deeper into its pockets to win the British plasterboard maker.

Saint-Gobain's hostile 720p-a-share bid values the Slough-based BPB at £3.6bn, which is widely seen as too mean.

The French have until Friday to lift their offer and are sounding out BPB's biggest shareholders about a price at which they would sell. A higher offer is expected towards the end of the week, tipped to be pitched at about 760p a share. At that price, the likely outcome of the increasingly bitter battle for BPB is far from clear.

The company's biggest shareholders include Legal & General, Standard Life, M&G, Barclays Global Investors, Fidelity and Sprucegrove. Some of these reckon 760p would still be shy of the mark, and say the wider stock market has already risen by about 3 per cent since Saint-Gobain's opening offer.

One major BPB shareholder said: "If Saint-Gobain wants to buy this company, it will have to pay for it. After market adjustment, 760p is a minimal improvement, just scraps. A number of shareholders will say 'non' at that level. They would have to be quite a bit bolder."

Several institutional shareholders - including M&G, the single largest with more than 9 per cent of the company - back BPB's management. One said: "We think the board is doing a very good job in improving performance. It's a good team, on the front foot, and has produced good figures for the business going forward."

Last week, BPB unveiled underlying pre-tax profits of £185m for the six months to the end of September - up 28.5 per cent - and reiterated that it is confident of posting record profits for the full-year of at least £350m.

Sir Ian Gibson, the BPB chairman, pledged £70m in annual savings by 2010, £20m of which has already been delivered. Some £600m will be returned to shareholders as soon as possible. He puts the company's worth at 832p a share.

In contrast Saint-Gobain, whose chairman is Jean-Louis Beffa, cut its forecasts for 2005 operating profits last month on the back of soaring energy and transport costs. It covets BPB as a means to revive its own growth.

City experts also said the likely outcome of the struggle for BPB was too close to call. David Taylor, a construction and building materials analyst at Teather & Greenwood, said: "It will be a close-run thing. Institutions, when asked, say they will stand by the management. But when it comes down to it, in the absence of any better offer, they may well go for it at 760p."

Short-term investors are thought to control about a quarter of the shares. They snapped up stock in the market at about 730p three months ago with a view to making a quick buck. These shareholders, which include several hedge funds, have little interest in the longer-term prospects for the business and are likely to happily sell-out to the French for anywhere north of 750p a share.

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