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City Site - Suitors call as bid fever takes hold


THE NEW year has started as the old one ended and any quoted contracting group that has not yet been approached by a potential suitor must be feeling a bit neglected.

This week's announcement by MJ Gleeson that it has rejected an approach from AIM-listed investment company Castle Acquisitions has shown that potential bid interest in the sector does not end with the major quoted groups.

Indeed, it is a mark of the fevered atmosphere surrounding the sector that nobody seems surprised that a potential bidder should have watched Gleeson's share price climb from 210p a year ago to 345p today before showing its hand ? or that the group's board wasted no time in dismissing the proposal, even though it is worth almost 19 per cent more than its share price in mid-December.

Gleeson has largely redeemed itself in the eyes of the City since the mishaps at its building division that cost it £52 million last year and others may be attracted even if the group is not up for sale.

The group's housing arm has a valuable niche in regeneration and its construction business has a healthy long-term waterrelated workload and a thriving operation working for London Underground.

The bulk of its £600 million order book is linked to partnering agreements with utilities or the public sector. Meanwhile, the group's PFI interests and a commercial property division which underpin its 292p per share net asset value add to its attractions.

With a stock market value of £172 million, a turnover of £420 million and a family stake of 30 per cent, Gleeson might not quite hold the appeal for bidders as Mowlem, John Laing or even Amec.

But the approach shows interest in the sector is broadening and with recent upbeat trading statements from Henry Boot and, this week, from Alfred McAlpine serving to reinforce confidence in the sector, further bids seem inevitable. Arguably the contractors and construction-related support services groups may now offer more scope for consolidation than the pure house builders.