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City Site - Niche needs are driving acquisitions


THE CONSTRUCTION industry may not be producing deals to rival last week's £7.5 billion bid for Allied Domecq but there is no shortage of corporate activity in the sector. The weak housing market and lower growth forecasts have not prevented a steady stream of construction-related takeovers and sales going ahead.

Last week's sale by Birse of The Cabin Company to Speedy Hire is typical of the type of in-filling, niche acquisitions that firms are focusing on. It gives the indebted Birse £6.25 million in cash and relieves it of a non-core business while helping push Speedy up the rankings in the fragmented temporary hire accommodation sector.

The prospect of major house building mergers, which excited the stock market this year, has yet to materialise.

But this week, Heron stepped up its pursuit of Crest Nicholson by threatening to withdraw its indicative 430p per share offer in the absence of more information. And this month FairBriar said that it had been approached by its chairman Kevin McCabe, who intends to make an offer for the company with two other shareholders.

Following the recent MBO at Countryside, it suggests more management teams at quoted house builders may make offers for their businesses in the face of tough trading.

The building materials sector is also proving fertile ground for the dealmakers. Hanson - which, as the last major UK-owned heavyside materials producer, is widely seen as a bid target itself - is developing an appetite for bolt-on acquisitions.

After the recent acquisition of Marshalls Clay Products, the firm last month paid £120 million for the lightweight block maker Thermalite. Both deals will reinforce its market shares.

Materials firms are also buying overseas. Ennstone has recently made a $4 million US acquisition and is taking full control of its Polish operations. And Wolseley has just bought three European and American distribution businesses worth £37 million, taking its spending on acquisitions this financial year to £259 million.