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Concrete and aggregates group ends industry speculation with £900m agreed bid RMC cements future with Rugby takeover

Finance

RMC THIS week launched the first takeover of a British cement maker by a concrete and aggregates group when it announced a £900 million agreed bid for Rugby Group.

The move ends continuing speculation over the fate of Rugby, the smallest of Britain's three largest cement makers and - coming only days after Anglo American launched an agreed bid for Tarmac (see page 3) - could trigger further bids in the sector.

RMC is bidding 137.5 p per share for Rugby, a 40 per cent premium on the cement maker's share price prior to the bid. The deal values the company at £896 million.

It will provide RMC with sources of cement supply in the UK and Poland, as well as giving it its first major operation in Australia.

RMC expects the deal to provide annual savings of £20 million and believes it will be earnings enhancing by 2001.

RMC chief executive Peter Young said there would be 'no dramatic changes' in its sources of cement supply in the UK, and he denied the move had been defensive.

RMC is the largest customer of the British cement industry, buying some 2 million tonnes annually. It is a major customer of Blue Circle and Castle, as well as Rugby, which has around 20 per cent of the UK market.

Rugby has recently invested heavily in new low-cost capacity in the UK, Poland and Australia.

The acquisition will add 8.4 million tonnes to RMC's existing annual worldwide cementcapacity of 11 million tonnes - much of which is in Germany - putting it among Europe's top six cement producers.

Rugby has 3 million tonnes of cement capacity in the UK and is the market leader for pulverised fuel ash.

It has a controlling interest in Polish manufacturer Cementownia Chelm, which has an annual cement capacity of 2.5 million tonnes; and it has a 55 per cent shareholding in Adelaide Brighton, a listed Australian company with 2.9 million tonnes of cement capacity and 800,000 tonnes of lime.

Rugby made pre-tax profits of £98.2 million in 1998 on a turnover of £1,020 million. Job losses are expected to be limited to less than 100.

Hanson has entered the German aggregates market, buying a 75 per cent stake in privately-owned German group RENA Recycling und Naturstein Gmbh for an undisclosed sum. The business includes three limestone and two gravel quarries within a 40-mile radius of Erfurt in Thuringia, central Germany.