Ennstone rebels call meeting to thwart £48m merger

Rebel shareholders yesterday turned up the heat on the quarrying company Ennstone, in a bid to stonewall its £48.3m takeover of its rival, Johnston Group.

Rebel shareholders yesterday turned up the heat on the quarrying company Ennstone, in a bid to stonewall its £48.3m takeover of its rival, Johnston Group.

North Atlantic Value (NAV), which holds 6.9 per cent of Ennstone shares, has called an extraordinary meeting to block a deal it thinks is too expensive. Johnston is still controlled by the Johnston family, which is backing Ennstone's cash and paper offer.

The bid was tabled just three days after Johnston warned on profits, and equated to an 88 per cent premium to the then share price of 237.5p. But NAV is concerned about a £14.7m pension deficit at Johnston, which provides Buckingham Palace's distinctive amber gravel.

Shortfalls in company pension funds have scuppered several recent takeover attempts including moves by the retail entrepreneur Philip Green for Marks & Spencer and by the private equity house Permira for WH Smith.

NAV, the activist investment vehicle of the fund manager JO Hambro, wants to install Jonathan Scott-Barrett on to Ennstone's board.

Mr Scott-Barrett, a former director of the building materials giant Hanson, would then supervise a root-and-branch review of Ennstone's business. That would include the appointment of an investment bank to explore the possibility of a sale of Ennstone for not less than 42p a share, which would value the company at more than £75m.

NAV claims to speak for a concert party that controls 40 per cent of Ennstone shares. This includes Mirabaud Investment Management, the biggest investor with more than 9 per cent of the firm.

Aggregate Industries, the second-biggest shareholder, with 8 per cent, has yet to declare its position.

Ennstone, which is chaired by Vaughan McLeod, is expected to sell Johnston's engineering business - which makes Saxon fire engines and road sweepers - if the deal is green-lighted by shareholders on 1 September. He will respond to NAV's call for another meeting to discuss its demands within three weeks.

Ennstone, a producer of aggregates, ready mixed concrete, asphalt, natural stone and reconstituted building products, has argued that the Johnston deal is in line with its strategy of strengthening the group's position in the Midlands and central England.

In a letter to shareholders earlier this month, Mr McLeod described NAV's concerns about the strategic direction of the group as "unfounded and misguided".

Ennstone shares slipped 0.5p to 33.5p, a shade above their 12-month low.