Trafalgar homes sale triggers Beazer dispute

DAVID HELLIER

Trafalgar House, the troubled and highly indebted engineering-to-shipping conglomerate, last night became embroiled in a war of words with Beazer Homes, the construction group, over plans to sell Trafalgar's housebuilding subsidiary to a third party.

Early in the day Trafalgar said it was in talks with Persimmon, the residential group, over plans to sell its Ideal Homes housebuilding subsidiary.

Later Beazer said it was surprised by the announcement, since it had made its own inquiries about the subsidiary and been told that it was not for sale.

Beazer said it was prepared to pay a premium in excess of net asset value, that the payment would be made in cash and that the company was in a position to move quickly.

Trafalgar responded by saying it had taken into account offers and expressions of interest from a number of parties, including Beazer, but that it had granted a period of exclusivity to Persimmon.

The hoped-for sale to Persimmon, said to be at a price of pounds 156m plus debt, forms part of Trafalgar House's objective to cut group borrowings. Net debt in the group at December was around pounds 270m and is due to peak at around pounds 370m during the first half of the new financial year.

Trafalgar House followers perceived the development positively, although some pointed out the adverse consequences of losing a useful stream of UK profits, which could be set against previous UK losses.

The deal, which will be partly funded by a Persimmon rights issue and additional banking facilities, is expected to be put before Persimmon shareholders by the end of January or in early February. It would make Persimmon one of the largest housebuilders in the UK, building 6,500 units a year. The deal is said to be earnings-enhancing from year one.

A Trafalgar spokesman said that to date there had been no progress on the US withdrawal. He also declined to comment on the possibility of other asset sales to cut group borrowings.

Trafalgar said it hoped to obtain a "fair price" for the Ideal Homes operations, which achieved operating profits of pounds 19m on sales of pounds 309m in 1994/5.

The Ideal Homes subsidiary completed 2,644 homes in the year to end- September 1995 at an average selling price of pounds 66,120. It has 100 active sites in England and Wales and the land bank at end-September stood at 6,645 plots.

"The benefits of the acquisition will come through improved synergies, economies of scale and better margins," a Persimmon spokesman said.

Persimmon shares were trading 10p lower at 199p yesterday, while Trafalgar shares were up 1.75p at 30p.

Investment Column, page 18