Hanson Breakup Leaves City Cold

By Patrick Hosking and Paul Farrelly | The Independent (London, England), February 4, 1996 | Go to article overview
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Hanson Breakup Leaves City Cold

Patrick Hosking and Paul Farrelly, The Independent (London, England)

HANSON'S shock decision to break itself up has been given a sceptical reception by institutional investors, while City advisers are stampeding to win a slice of the new business on offer.

Dick Barfield, chief investment manager of Standard Life, Hanson's second biggest shareholder with a 2.1 per cent stake, commented: "It's not clear to us that the sum of the parts will be greater than the whole."

Like most institutions, Standard Life has become increasingly concerned about where Hanson's future earnings growth will come from.

"We're still not sure what the answer is," Mr Barfield said. "It {the breakup} is a brave thing to do. But it's not clear that these four companies are going to perform any better individually."

Hanson stunned the stock market last week with its plans to demerge its energy, chemicals and tobacco divisions as separately quoted companies, leaving a rump Hanson consisting of the building materials and equipment businesses.

A 3.6 per cent decline in the Hanson share price in the three days since the announcement suggests investors are far from convinced that the breakup makes any sense.

Another institutional investor, Leslie Robb, managing director of Scottish Widows Investment Management, said: "I see Hanson as a company that's lost its way and had nowhere to go. It's a collection of dull businesses and I see no real value in the shares, even on a demerged basis." Scottish Widows holds 0.7 per cent of Hanson.

Another leading fund manager said: "I think the market is right to be cynical. Given the dividend and cash-flow worries, the loss of the central treasury and lack of growth, the sum of the parts will be worth less than the whole."

But it has become apparent that the company was under enormous pressure to do something to halt its share price underperformance. One fund manager said: "Virtually every institution has put to Hanson their views that this could not go on. We have certainly talked to them."

While institutional investors view the breakup with indifference or outright suspicion, City advisers have been queuing for what promises to be a bonanza of fresh work for merchant banks, brokers, lawyers and auditors.

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