International bidders swoop as fears of interest rate hike and US downturn leave materials sector vulnerable.
Two of Britain’s best-known materials producers were this week under siege from foreign bidders.

On Monday, Rugby Group, which supplies cement and aggregates to the building industry, was approached by an unnamed buyer. Rugby has a market value of £742.9m and is Britain’s 11th largest building materials firm.

Last week Tarmac, which recently demerged its construction division, held off a bid from South African mining company Anglo-American. But analysts say that Tarmac, which has a market value of £1.05bn, is still vulnerable to a further bid by Anglo-American.

Shares in building materials firms have slumped in recent months because of fears that interest rates are set to rise before Christmas.

And although interest rate rise fears have affected all construction stocks, many materials companies have a presence in the USA and have also been hit by fears of US downturn.

Analysts have welcomed the moves for Rugby and Tarmac. They say that European investment funds will only put money into companies that are bigger than CRH, the biggest materials producer listed in the UK, worth £4.4bn. They argue that the only way UK producers can attract investment is through a merger or takeover.

Talks between Tarmac and Anglo-American collapsed on Monday after Tarmac chief executive Roy Harrison rejected a 550p-a-share bid, valuing Tarmac at £1.13bn. Analysts believe that Tarmac could be persuaded to sell at 600p a share.

Analysts are expecting a flurry of activity. “With the stocks this cheap you can go down the whole bloody list and match them up,” said one analyst. They say Anglo-American could now be looking at other UK material producers, such as Hepworth, Aggregate Industries and builders merchant and materials supplier Meyer International.

RMC, the UK’s largest cement producer, is believed to be eyeing up Rugby. But some analysts say talk of a bid might be a smokescreen to deflect attention from a £34m price-fixing fine imposed by the German Federal Cartel Office on Monday.

  • It is understood that the Stock Exchange has launched an investigation into share-buying by some members of the Tarmac board.

    Chief executive Roy Harrison, finance director Chris Bunker and non-executive director Sir Anthony Gill all bought large chunks of stock in the company in the weeks running up to the announcement of the Anglo-American bid.