Tarmac rejects £1.1bn bid offer by unnamed suitor

Tarmac, the recently-demerged UK building materials firm, yesterday said it had rejected an offer of 535p a share, which would value the group at £1.1bn.

Tarmac, the recently-demerged UK building materials firm, yesterday said it had rejected an offer of 535p a share, which would value the group at £1.1bn.

Tarmac announced on 26 October that it had received an approach from an unnamed party "which may or may not lead to an offer being made for the company". The group's board said yesterday that the bid offer "fundamentally undervalues the business and prospects of Tarmac".

Roy Harrison, Tarmac's chief executive, said: "We'll be back to work on Monday to focus on growing the quality and quantity of the business."

Analysts say the most likely suitors for the group are RMC, which produces and supplies building and construction materials; AI, the engineering group; Lafarge, the France-based group, or Minorco, the South African subsidiary of Anglo American.

Pioneer, the Australian firm which had previously been touted as a potential bidder, has ruled itself out of the talks.

Tarmac and AI held merger talks last year, but failed to agree on management issues.

Harvey Robinson, an analyst at ABN Amro, said: "I think it's Minorco. They have the money and they have the business in the UK to realise synergies."

He added that the price of 535p a share seriously undervalued Tarmac. "It's worth at least £6 a share," he said.

Earlier this week, the London Stock Exchange launched a probe into share dealings in Tarmac after the group's shares jumped 10 per cent shortly before Tarmac announced it had been approached by an unnamed bidder on Tuesday.

Tarmac demerged from its construction arm, now called Carillon, and relisted as a separate company in July. Prior to the bid hopes, the slimmed group's shares had fallen steadily and last week hit a low of 352p. Since Tuesday's announcement, they have risen about 40 per cent and yesterday closed up 32p at 512p.

Tarmac provides materials to heavy building companies. Earlier this month the group posted pre-tax profits of £31.8m for the six months to 30 June on turnover of £662.8m.