Redland to sell French operations
Monday 24 March 1997
Robert Napier, the chief executive, is understood to want to get shot of the French operations in the next few weeks in a move which will in effect unbundle much of what remains of Steetley from Redland. He flew to France last week to put in place a raft of pay packages designed to keep management motivated in the run-up to the disposal.
Analysts are sceptical about Redland's chances of securing a decent price for the French business, however, which is barely profitable despite generating around pounds 300m of sales. The contracting arm causes most alarm and one broker said last week Redland would have little choice but to give the loss-maker away.
Candidates to buy the pounds 240m-turnover aggregates arm include Tarmac and Hanson from the UK, but a sale to a French operator is thought more likely. Lafarge said recently it would be interested in buying the operation but only at a sensible price, which analysts believe might be pounds 240m compared to a book value of pounds 300m.
The acquisition of Steetley was touted five years ago by one broker as the "deal of the decade" but even Mr Napier now admits it was a disaster. Last year, Redland sold its bricks operation, which included ex-Steetley businesses, and it now owns little except Steetley's UK aggregates operations.
The acquisition of Steetley is considered to be the largest single factor in Redland's dramatic underperformance of the market in the past five years, the slashing of the company's dividend and its recent ejection from the FTSE 100 index of leading companies.
Taking a pounds 60m hit on the sale of French business would focus attention on the failure of the Steetley deal and Mr Napier's position, although with no single large shareholder in the company it is not thought there is any institutional pressure on the chief executive to go.
Pressure is rising on Mr Napier, however, to use the proceeds of the French sale to make a substantial acquisition in the UK. With a handful of big construction projects about to start, such as the Channel Tunnel fast link, the Bluewater Park retail park in Kent and a proposed widening of the M25, demand for limited aggregates resources is expected to increase after years of stagnation during the long building recession.
Redland will report an unimpressive set of figures on Thursday.
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