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Bidders cast a wider net on sector


THE SCALE of current bid activity involving quoted companies is on a par with the last major restructuring in the industry in the mid-1990s.

But whereas the previous upheavals involved major groups separating their contracting from their house building operations, the current round of bids is motivated by financial criteria, rather than any compelling industrial logic.

Today's bids are driven by private equity groups and other investors in the optimistic belief that, even after the recent run-up in share prices, some major names are sitting on undervalued assets.

None of the offers that have surfaced over the past week for Amec, Crest Nicholson and John Laing have come from within the industry. The US private equity groups First Reserve and Texas Pacific Group which made an approach for Amec are presumably more interested in its oil and gas interests than its construction and infrastructure operations. And it is not thought to be close rivals behind the speculative interest in Berkeley Group and Galliford Try, which has sent their share pr ices racing up over the past week.

Yet the bids are putting added pressure to deliver on the target companies. Amec, in particular, will have a hard job resisting further approaches if its coming review does not provide a compelling formula for realising value by separating its energy and infrastructure-related interests. Any further major contract write-downs will make it particularly vulnerable.

Meanwhile, John Laing would probably do well to avoid recommending any future offers. Henderson's latest 405p-ashare bid tops the offer from Allianz by 5.2 per cent and, with Laing's shares at 419p, the stock market is betting another bid will emerge. Only last September Laing's shares touched 260p, which underlines how the sector has swung into fashion.

And with shares in Carillion, Balfour Beatty and Costain all touching new highs, it seems everybody is potentially in the new bidders' sights.