BPB ups the ante and digs in for bid struggle with French raider

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The Independent Online

The board of BPB will tell shareholders this week that it will not accept a revised bid of less than 800p-a-share from French raider Saint-Gobain, in effect slapping a price tag of £4.1bn on the world's biggest plasterboard maker.

Both sides are now likely to dig in for what is expected to be a drawn-out takeover battle.

BPB will also outline the company's defence strategy in the event of Saint-Gobain making a higher hostile offer. It is understood that this will include making a share buyback of up to £100m.Analysts say that since it can meet its annual interest payments nine times over, there is plenty of scope to raise more debt for any cash distribution to shareholders.

After weeks of speculation, Saint-Gobain made a hostile takeover bid at the end of August of 720p a share, valuing the company at £3.7bn. The bid was rejected immediately.

Last week BPB began its defence, releasing a profit forecast for the year to March 2006 of £350m, over £20m more than analysts had anticipated. The company said this proved that the Saint-Gobain bid "substantially" undervalued the company, even though its own valuation was 715p a share. BPB explained that any bidder would have to pay a takeover premium, which was why the Saint-Gobain figure was too low.

"You own a scarce and valuable asset which is substantially undervalued by Saint-Gobain's offer of 720p per share," the document stated.

But some analysts questioned the 715p-a-share valuation, which was partly based on BPB comparing its rating to US rivals, even though only around 15 per cent of its business is in the States.

Last month, BPB brought forward an announcement of plans to return £350m to shareholders. It also announced that it would hike the dividend for the current financial year by 44 per cent.

In the next fortnight, the board will meet institutional shareholders to persuade them not to accept any revised bid from Saint-Gobain. Under takeover rules, BPB has until 9 October to provide any new information to investors.

If no other company makes a counter-bid for BPB, Saint-Gobain has another month to make a higher offer.

The chairman of Saint-Gobain, Jean-Louis Beffa, wrote to his shareholders last month to explain that his requests for talks had been rebuffed three times by BPB, forcing him to open hostilities.

Analysts said it was likely that the French company would increase the bid because its hostile approach had made it vulnerable to a break-up if it fails.

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