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Hanson set to accept takeover offer from Heidelberg

May, 14 2007

(UK) -- Hanson is set to recommend an £11-a-share takeover bid from HeidelbergCement of Germany in a deal that values the last remaining significant heavy materials company under British ownership at about £7.85bn. Both sides were finalising details of the deal on Monday night, and, barring any last-minute hitches, an announcement could be made as early as Tuesday. The deal, which is being financed by Deutsche Bank and Royal Bank of Scotland, represents a multiple of about 12 times Hanson's earnings before interest, tax, depreciation and amortisation. That represents a significant premium to other recent deals in the sector, including Cemex 's $14bn (£7.1bn) takeover of Rinker at 10.4 times ebitda, and Vulcan Materials' $4.6bn takeover of Florida Rock Industries at 11.2 times, according to a recent broker note from Merrill Lynch. HeidelbergCement, which is controlled by German billionaire Adolf Merckle, is keen to acquire Hanson to help increase its market share and boost margins. The group first said it was “reviewing its options” for Hanson on May 3. A takeover would mark the end of one of the greatest British conglomerates, built by Lord Hanson through a series of acquisitions during the 1970s and 1980s. The group was broken up during the 1990s, leaving just the building materials business. As the third-biggest aggregate producer in the US and the second-biggest globally, Hanson provides a natural fit for HeidelbergCement, marrying up its Castle cement plant in the UK with Hanson's aggregates. But Hanson is also attractive because of its extensive reserves. With 50 years of active reserves – where planning permission to extract has been granted – and 82 years of gross reserves, the business is on a very stable footing. However, Hanson told investors last month it would suffer in the first half of the year because of the weak dollar and the difficult residential market in the US. Analysts have speculated that a bid from HeidelbergCement could spark a bidding war among other cement companies that have been consolidating. In 2005, RMC was bought by Cemex of Mexico, while Aggregate Industries was snapped up by Holcim of Switzerland. They believe Lafarge, the world's largest cement maker, and Cemex are considered the most likely counterbidders. However, Lafarge already owns UK companies Blue Circle and Redland and could encounter competition problems. Cemex may find it difficult to digest another significant acquisition so soon after snapping up Rinker. HeidelbergCement and Hanson both declined to comment. By Lina Saigol, European M&A Correspondent