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City Site - Majors look to consolidate portfolios


DEALS unveiled by Balfour Beatty and Galliford Try over the past week suggest that key players in the construction sector may be less interested in grandiose takeovers than continuing with bolt-on acquisitions and disposals.

By bowing out of the bidding for Mowlem, Balfour Beatty has deprived the City of an eagerly awaited battle for control of the contractor. Balfour's enthusiasm for Mowlem's PFI portfolio was clearly finite yet its interest has probably added 7 per cent to the sum Mowlem's shareholders will receive from Carillion. Its agreement to acquire two non-core Mowlem businesses ? the US construction management group Charter and rail products firm Edgar Allen ? from Carillion for £20 million seems logical enough and should provide some consolation for Balfour.

Meanwhile Galliford Try's £67 million purchase of the Lincolnshire-based house builder Chartdale last week may also point a way forward for corporate activity in the sector.

Coming weeks after Persimmon's acquisition of Senator Homes for £25 million, it shows the major groups are still finding it worthwhile to replenish their land banks by buying up smaller rivals.

The City seemed to approve, pushing Galliford's shares up 11 per cent to 107p.

One of Chartdale's attractions is that the bulk of its 1,350-plot land bank will be used to build houses, rather than adding to the glut of apartments now seen in many town centres across the country.

Chartdale has clearly thrived since it was created through a management buyout from Alfred McAlpine in 1986 although it is difficult to see how its new owner can improve on its latest operating margin of 53.2 per cent .

Barratt reminded the City this week that, while it has seen some positive signs in buyer confidence and sales rates in recent months, ahead of the key spring selling season, it is too early to be sure of market trends.

Against this background, more private house builders may be happy to take advantage of the quoted groups' current enthusiasm to expand.