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Hanson: The rise and sale of an empire

May, 16 2007

(UK) -- Once a great British conglomerate, Hanson now leaves these shores in an £8bn German takeover. Derek Pain looks at the sale of a concrete giant Published: 16 May 2007 The agreed £8bn German takeover of Hanson, the building materials giant, means that yet another famous name is set to disappear from the stock market. In recent years such icons as Abbey National, P&O and even Manchester United have fallen to overseas strikes. Now it is the turn of a company that once paraded its Britishness and was created by two peers of the realm who were happy to wave the Union Jack. But Hanson, the product of Lords Hanson and White, is at least departing at a handsome price. The offer from HeidelbergCement of 1,100p a share is said to represent the highest multiple of any major building materials takeover. And any investor who piled into Hanson at the time of the Iraq war has more than trebled their money. When the proposed deal was first intimated the shares were 852p. They closed at 1,107p yesterday, possibly reflecting vague hopes of a counter-bid but more likely the result of Heidelberg buying. The Germans are thought to have picked up around 10 per cent, paying about 1,085p a share. There is also a strong argument for accepting the logic of the takeover that will create the world's second-largest building materials behemoth with more than 70,000 on the payroll. Heidelberg is a leading producer of cement, ready-mixed concrete and concrete products, aggregates and various other building materials. It has modest British interests. Hanson is big in aggregates and building material products. No wonder Bernd Scheifele, the German group's chief executive, described the two companies as "a perfect fit". He expects to achieve synergies of around €200m by 2009. But there are, it seems, no plans for extensive job losses. Hanson's UK headquarters (at Birmingham) and its main US base are, however, likely to be closed. "The overlap between the two businesses is minimal... this deal is not about cutting thousands of jobs", said Mr Scheifele. What he calls "best practice" initiatives as well as some disposals are expected to achieve the cost savings. Disposals are likely to form an essential part of the cash raising exercise that Heidelberg is undertaking to finance the deal and reduce its debt mountain. Hanson's brick businesses, in this country and the US, could be early candidates. A bond issue and a capital increase are already planned. Whether what is regarded as a generous German bid is actually high enough to dissuade possible counter bidders remains to be seen. There are not many names in the frame. Lafarge, the French group ranked as the world's number one, already owns Blue Circle Cement in this country and would almost certainly encounter regulatory problems. Other possible contenders include Cemex of Mexico, already striving to buy an Australian group, and Holcim of Switzerland which, it is felt, is unlikely to want all of the British group. Hanson is the last major building materials group still under British ownership. As the worldwide industry has embarked on a continuous round of consolidation, domestic companies have proved to be particularly vulnerable. There were few dominant family shareholders and most were owned by a wide spread of institutional investors (many with strong overseas connections) and private individuals whose combined shareholding could be quite small. The way the British Government has embraced globalisation has also encouraged the overseas invasion. In the past few years Redland, RMC and Aggregate Industries have fallen into foreign hands. So, of course, have companies in other fields. Although Heidelberg is offering a good price many, who have watched a succession of UK firms disappear into overseas hands, must wonder why Hanson, a remnant of one of the most aggressive, flag waving conglomerates created in the post-war years, has fallen so meekly to a German assault. The man behind Heidelberg is a 71-year-old billionaire, Adolf Merckle. He inherited a chemical wholesaler, developing it into Germany's largest pharmaceutical wholesaler. A keen skier and climber he and his family have in recent years established a wide range of business interests. Heidelberg, a quoted company, is now his major occupation. He and his family have 77 per cent of the shares. The late James Hanson established the Hanson Group, with the late Gordon White, through a series of often aggressive takeovers. They were later ennobled. After forming a partnership in the 1960's, when they started a greeting cards business, they set about creating a conglomerate, then known as the Hanson Trust. It was said that many boards feared a Hanson takeover strike. A Hanson knock on the boardroom door invariably heralded an aggressive attack from the famed marauders. Many directors quickly capitulated. The Hanson/ White approach was to buy what they regarded as under-managed businesses at knock-down prices, often in exchange for what were fully valued shares in Hanson Trust. They moved into such diverse areas as batteries, brickmaking and fertilisers. The old Imperial Tobacco group, that had earlier swallowed the Courage brewing empire, was captured. The duo also developed a strong US operation, run by Lord White. At one time Hanson made great play of its transatlantic involvement, spending heavily on a television advertising campaign, advocating the merits of a company "from here doing rather well over there". By the mid-1980's the group employed more than 90,000. It even felt strong enough to launch a bid for Imperial Chemical Industries, once the bellwether of British industry. But the offer ended in humiliating defeat for what had hitherto been an unstoppable force. Conglomerates eventually fell out of stock market fashion. With Hanson's shares no longer commanding a premium rating, it became impossible to undertake the lucrative, earning-enhancing deals that had made the Hanson Trust, by now just called Hanson, such a powerful force. So corporate raider Lord Hanson, ever the realist, split Hanson into four separate groups. The building materials group now in German sights was one; Imperial was another. Lord Hanson achieved gossip column fame when he was for a time engaged to actress Audrey Hepburn. In his later years he was a convinced Eurosceptic, helping to start anti-EU group Business for Britain. He died, aged 82, in 2004 after a long battle against cancer. Four decades of Hanson 1964 Hanson Trust was created out of the former Wiles Group by James Hanson and Gordon White. Within 10 years, they had collected 24 businesses. 1973 White formed Hanson Industries, a New York subsidiary, making first US purchase in 1974. 1984 Bought conglomerate US Industries and UK brick maker London Brick. 1987 Renamed Hanson PLC. BoughtUS cement maker Kaiser Cement. 1991 Bought Quantum Chemicals for $3.4bn (£1.7bn). Acquired Beazer. 1995 Founder Lord White died. 1996 Demerged operations into four public companies - Millennium Chemicals, Imperial Tobacco, Energy Group and Hanson PLC. 1997 Lord Hanson retired as chairman. 2003 Restructured into Hanson North America, Hanson UK, Hanson Australia, and Hanson Continental Europe and Asia 2004 Founder Lord Hanson died.