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Venture support is City alternative


THE ODDS on Lafarge's bid for Blue Circle succeeding seemed to lengthen last week as two of the UK groups' major shareholders rejected the offer as too low and the bid ran into regulatory problems in Canada.

If Blue Circle does escape with its independence it will have been fortunate.

Had the French materials group pitched its bid much above the 450p on offer, valuing the UK group at £3.65 billion, then few analysts believe it would have survived. As it is, BCI will need to cut costs and continue to stage a recovery in the Far East, if it is not to arouse the interest of another predator in the future.

BCI became vulnerable in the first place because it was deemed to have been slow to cut costs and spent much of the last decadebattling to improve returns at the businesses - notably boilers and bathroom products - which it diversified into in the late '90s.

This lesson does not appear to have been lost on others in the sector and a flurry of corporate activity and restructuring appears to be under way.

In the past week, the merchanting group Wolseley has sold its miscellaneous manufacturing business to a private equity firm Cinven for £136.5 million and Caradon has announced it is selling its bathroom equipment and boilers division for £350 million, while confirming it is pressing ahead with an acquisition of an extrusion business.

Both firms have seen their shares under pressure in recent months and will be able to claim to investors that these deals will sharpen their focus and are worthy of improved share rating.

Elsewhere, the quarrying firm Breedon is set to join forces with Ennstone, while a group of venture capitalists has mounted a bid for the plastic windows and doors group Heywood Williams.

While the trend has not exactly spread to the contractors and house builders, presumably venture capitalists are also backing the management team which is seeking to buy out Fairview.

More management teams who are getting no joy in persuading the City that their shares are worth more must be tempted to also start talking to the venture capitalists.