French raise Blue Circle bid to £3.65bn and launch dawn raid

Lafarge yesterday swooped on its bid target Blue Circle Industries, raising its offer for the country's largest cement producer to £3.65bn and grabbing nearly 30 per cent of the company in the market.

On the last day that the French predator could lift its bid, Lafarge increased its offer to 450p from 420p a share but again received a firm rejection from Blue Circle's board.

Some analysts said the tide appeared to be turning in Lafarge's favour. "It looks as though the game is up," said Stephen Rawlinson at Peel Hunt. "It's a cheap price but, in the current market, it will be tough for institutions not to accept."

In a dawn raid, Lafarge snapped up 20 per cent of Blue Circle. The holding was bolstered by a further stake of more than 9 per cent bought by Lafarge's financial adviser, Dresdner Kleinwort Benson, in the afternoon. The improved offer is final, unless another bidder emerges, a move analysts said was unlikely. Lafarge has said it will not pay the final dividend of 11p, in effect valuing its revised offer at 439p

Bertrand Collomb, chairman of Lafarge said: "Nothing's over until it's over, but look at the reaction in the market. We had many more willing sellers than we were able to buy. I'm in a very confident mood."

Lafarge said that Canadian anti-trust rules mean that it could not increase its direct holding in BCI beyond 20 per cent. The two companies have large interests in Canada and a takeover would need clearance from Canadian regulators, which has not yet been received. The offer is conditional on this clearance.

Sources close to Lafarge said that it was admissible, under Canadian law, for DKB to buy the shares and hold them for Lafarge. The sources did not rule out taking Lafarge's beneficial holding beyond 29.9 per cent, but that would Lafarge to drop the conditions to its offer.

David Taylor at Teather & Greenwood, said: "Once you get to this stage, the chances of remaining independent are almost zero. With the shake-up we've seen the markets in recent days, it is very tempting for institutions to take cash right now. Lafarge's bid has been well-timed, aggressive and opportunistic."

Analysts said the volume of shares traded - a massive 286 million - suggested some institutions must be selling out part or all of their holdings. BCI said, however, that most of yesterday's sellers were arbitrage players, not long-term shareholders, although they are thought to have held no more than 15 per cent of BCI.

Rick Haythornthwaite, BCI's chief executive, said his board had no hesitation in rejecting the revised offer. "They could have polished us off with a higher offer but at 450p, we're still in with a fighting chance," he said.

Simon Goodfellow at ING Baring, said the new offer was not a knock-out blow. "There is still a possibility that BCI will remain independent. Institutions will look very hard at this."

No counter-bidders have emerged during the course of the bid and analysts said that the stake taken yesterday by Lafarge would make it difficult for a third party to enter the contest.

Mr Goodfellow said that Lafarge would have needed to offer 475p to be confident of success. "If you believe the figures that Blue Circle has put out during its defence, 439p is not a screamingly good offer," he said.

Lafarge's offer represents a multiple of 18 times BCI earnings for 1999, or a premium of 43 per cent to its share price before speculation of the bid emerged. BCI shares yesterday closed down 0.25p at 433.75p. The offer closes on 3 May.