Redland in pounds 800m tiles sale to repel hostile bidder

Redland is expected to announce next week the sale of its majority stake in RBB, the European roof tiles business, to the subsidiary's German family shareholders for around pounds 800m. Andrew Yates reports on the building group's desperate attempt to stave off a pounds 1.7bn hostile bid from Lafarge, the French construction giant.

Redland is believed to be close to concluding a deal which will see it sell its 56.5 per cent in RBB to the Braas family, who already own the minority shareholding in the business. It hopes to raise at least pounds 800m from the deal. Redland will then return most of the proceeds to shareholders.

The deal could be announced before next Wednesday, the day by which Redland has to publish its final defence document aimed at persuading shareholders to repel Lafarge's unwanted bid.

St Gobain, the French building group which has been advised by the NM Rothschild merchant bank, is understood to have been interested in acquiring RBB. However, after weeks of intense negotiations, Redland is understood to have chosen to side with the German family shareholders.

The move could pave the way for a complete break up of the troubled British building materials group. Redland is already in talks with rivals about selling off some or all of its US and European aggregates businesses. Although these talks are at an early stage, Redland is thought to be confident that it can achieve more disposals.

Lafarge has made a 320p a share cash offer for Redland, which values the company at nearly pounds 1.7bn. Redland intends to try and convince investors in its defence document that the proceeds from the sale of RBB, together with the value of the remaining business are worth more than the 320p per share on offer.

However, Redland's move is unlikely to signal the end of the bid battle. Some analysts estimate that the RBB stake is worth more than pounds 1bn. Lafarge is likely argue that Redland has sold the business cheaply to get a quick sale in order to scotch the French group's takeover. Some of the disposal proceeds will also be eaten up by the capital gains tax Redland will be forced to pay on completion of the sale.

City observers believe that Lafarge will mount a concerted campaign to convince Redland's shareholders to accept a cash-in-hand offer rather than wait to receive the proceeds of the disposal programme. It will be forced to raise its offer, however, if it cannot muster enough support to block the sale of the RBB stake. Lafarge has until 3 December to make a higher offer. Shareholders must decide on the takeover by 17 December.

Redland has been forced to break itself in the absence of a ``white knight'' coming to its rescue and launching an agreed bid. One building analyst said: "Redland needed to pull something out of the hat. After a dreadful performance, the Lafarge bid put them up against it. The management simply could not have got away with promising jam tomorrow any more."

Redland's decision to sell RBB throws the future of Robert Napier, the group's embattled chief executive, into doubt. He is understood to have been instrumental in negotiating a deal with Helga Bruhn-Braas, the Braas family representative who resigned from Redland's board to concentrate on making a bid for the roof tile business.

However, Mr Napier has presided over Redland's share price collapse over the last few years and sources suggest he may have to step down.

Redland has been dogged by poor European construction markets, particularly the alarming slump in the German building industry which had enjoyed years of rapid expansion. It has also suffered from the legacy of paying way over the odds for the pounds 1bn acquisition of Steetley, the Midland brickmaker.

Profit warning followed profit warning and, before the Lafarge approach, the shares fell to a low of 220p, compared to a price of 634p in 1994.