BPB relies on growth to thwart Saint-Gobain bid

BPB, the world's largest plasterboard maker, will attempt to fight off a £3.7bn ($6.8bn, E5.5bn) hostile bid by French building materials group Saint-Gobain this week by emphasising its growth prospects as the central plank of its defence strategy.

Saint-Gobain , led by Jean-Louis Beffa, formally launched a takeover bid for the British plasterboard maker - the biggest hostile takeover bid in the UK for four years - on 31 August.BPB rejected the 720p a share offer as inadequate. The bid timetable gives BPB a fortnight to post its defence, which is due by 14 September.

BPB shareholders Insight Investments and Standard Life, which each own about 5%, have already publicly backed the management's rejection of the bid. But BPB's fate could be decided by hedge funds which hold about 15% of the shares.

Paris-listed Saint-Gobain, a £11.4bn titan, wants to combine its insulation business with BPB's plasterboard operations to strengthen its position as the world's leading building materials group. It says the deal is not about achieving cost savings, but growth. The market expects the terms to be sweetened. Saint-Gobain already owns the Jewson building materials chain in the UK; it has 18,500 staff in the UK and Irish Republic, around a 10th of its worldwide workforce.

Beffa, chairman and chief executive, said last month: "We believe BPB will benefit from being part of the Saint-Gobain group. The business rationale for combining the two from a product and geographic perspective is compelling."

It is the first hostile bid for a FTSE 100 company since P&O Princess Cruises' planned tie-up with Royal Caribbean was torpedoed by Carnival of the US in 2001.

BPB has tried to shore up its defences by offering shareholders a £350m payout and a 44% increase in the dividend.

Morgan Stanley said in a research note: "BPB's defence - what do we expect? We anticipate some improvement in regional disclosure, especially in Europe where information is opaque about the group's most important division representing 67% of 2006's estimated ebita [earnings before interest tax and amortisation].

"Currently, the divisional split of northern and western Europe, southern Europe and central and eastern Europe makes it difficult to analyse the group's key markets in isolation. Splitting out the UK, France and Germany might help investors have a stronger understanding of the group's strength and potential in the coming years."

The building supply sector has contracted, along with that of housebuilders; margins are under constant pressure, leading speculators to anticipate a wave of consolidation. Companies such as Blue Circle have been snapped up by French rivals.

600450 BPB relies on growth to thwart Saint-Gobain bid glassonweb.com
Date: 12 September 2005
Source: Thebusinessonline.com

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