Tarmac holding out for pounds 1.33bn offer

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The Independent Online
TARMAC, THE paving and aggregates group, is understood to be holding out for bid that values it at pounds 1.33bn after rejecting a pounds 1.1bn offer from Anglo American.

The South African mining company, which that listed in London in the spring, is mulling its options after it was unmasked over the weekend as Tarmac's mystery suitor.

Tarmac rejected a 535p cash offer on Friday that valued the UK company at pounds 1.1bn. Some City analysts have valued Tarmac at up to 650p or pounds 1.33bn.

But Anglo is thought to be unwilling to substantially raise its offer following last week's profit warning from Blue Circle, the cement and building materials group.

Tarmac's board, led by chairman Sir John Banham and chief executive Roy Harrison, is thought to be prepared to continue building the group unless a better offer is tendered. But Tarmac, whose share price was as low as 357p less than a fortnight ago, may come under pressure from institutional shareholders to renew efforts to broker a compromise deal.

The position of Philips & Drew, the fund management group which holds 19 per cent of Tarmac, is unclear. Other City institutions are also mulling their options.

A source close to Tarmac said the offer fundamentally undervalues the UK company's existing businesses and future development prospects. Since the demerger of its construction arm, now known as Carillion, in July, Tarmac has been engaged in a wide ranging programme of cost-cutting.

Unless Anglo makes a higher offer, Sir John will take new steps to build on three recent bolt-on acquisitions in a further bid to boost market share and profit margins.

Anglo's move on Tarmac came only weeks after Julian Ogilvie Thompson, the mining giant's chairman, signalled he was looking to spend as much as pounds 3bn on acquisitions. Investment bank Warburg Dillon Read is advising Mr Thompson on the Tarmac negotiations.

Anglo American already has a UK aggregates business through its takeover of associated company Minorco, which paid pounds 330m for the UK division of Tilcon in 1996. A takeover of Tarmac would mark Anglo's first major acquisition in the UK since its May flotation and would position it to compete head- on with Hanson. Tarmac could also see interest from several possible overseas suitors, including Lafarge, the French cement giant, Vulcan Materials of the US and Heidelberger Zement of Germany.

Tarmac shares added a further 32p to close Friday at 513p. The Stock Exchange is understood to be investigating share price movements that occurred prior to Tarmac's admission on Tuesday that it had received an approach.

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