UK: The enhancement of Hanson. (3 of 8)

UK: The enhancement of Hanson. (3 of 8) - A year after munching through Ever Ready, Hanson was at it again. In February 1983 it scuttled a near-agreed deal between Gerald Ronson's Bassishaw and retail group UDS. Bassishaw's £217 million cash bid was quic

Last Updated: 31 Aug 2010

A year after munching through Ever Ready, Hanson was at it again. In February 1983 it scuttled a near-agreed deal between Gerald Ronson's Bassishaw and retail group UDS. Bassishaw's £217 million cash bid was quickly outdone by a Hanson bid worth £255 million. The choice caused a split in the board but in the end shareholders delivered the prize to Hanson and Ronson took a £12 million profit and left.

The break-up from there was classic. John Collier, Richard Shops and Orbit HiFi were all sold, reaping £152 million within six months. Allders, the UK's biggest duty-free shops and department store chain, was retained and within three years was making more money than the whole of the pre-dismembered UDS. In 1989 Allders chief executive Harvey Lipsith led a £224 million MBO. "It is very difficult for retailing businesses to consistently achieve Hanson targets," he says now. The result for Hanson - an intake of near £380 million plus six years' worth of profits, all for a partly paper deal costing in the end £260 million.

The fire sale was barely over when, in October 1983, the City learned that the newly ennobled Lord Hanson (he was given a life peerage by Prime Minister Margaret Thatcher in June of that year) had picked up 9% of London Brick "as an investment". The full bid came in December. A battle with London Brick's soaring share price ensued, forcing Hanson to raise its bid from £170 million to nearly £250 million. Analysts tut-tutted.

Initially the concern over the price paid seemed justified. James Bristow, former head of London Brick, was soon at pains to point out a fall in market share, a rise in prices and a drop in quality. But Hanson's Martin Taylor maintains that large-scale modernisation since then has consolidated London Brick's position as Britain's biggest brickmaker - and a low-cost one at that.

In 1984 the pendulum swung back "over there". For years Gordon White's "ferrets" had kept tabs on US Industries, a mini-conglomerate with £1 billion in sales and sagging profits. In the spring of '84, when a group of managers decided to buy it out, White cobbled together a counter-offer over two days. Within weeks the $530 million recommended bid was won, making Hanson Industries the 100th largest company in the US. Golden parachutes for the top US executives, including $5 million to the chairman, inflamed criticism. Such cherries created a conflict of interest, it was rightly said.

In the next year, with a failed bid for Powell Duffryn still niggling at him, Lord Hanson appeared to take to navel gazing, setting off fears that the great man had lost his touch. A June 1985 cash call for £520 million put a fire under the price of several tipped UK targets - but when the next bid came it was in the US. This bid was the biggest, and the ugliest, so far.

SCM Corporation, a New York conglomerate with names like Smith Corona and paints company Glidden, had just restructured after some pedestrian times, and was looking to a brighter future. From the start, as news of the $745 million Hanson bid sank in at SCM's plush headquarters, Paul Elicker, the group's pugnacious boss, refused to speak to Sir Gordon White. SCM's views towards the British predators - eloquently described by one of their camp as "bad people" - came out instead in a wave of highly publicised court cases. Sir Gordon admitted later: "I wouldn't have gone ahead if I had known we would have got involved in the type of ethics we saw displayed."

At one stage Lord Hanson found himself in a Manhattan dock under a television-style attack by the SCM lawyer for allegedly receiving kickbacks from Hanson advisers. While this stab hit nothing but air, the main battle continued over allegations from Hanson that a joint SCM management and Merrill Lynch buyout of SCM had been skewed so as to undervalue the company and to lock out any other bidders by means of a "poison pill". Hanson initially lost its case, but won on appeal.

SCM was duly towed in for inspection at a cost of $930 million and stripped of its lavish offices, central staff and company jet. Over the next two years Durkee Famous Foods, paper and chemical interests and the big R and D spend, Glidden, were sold, the last to an acquaintance soon to be re-met: ICI. This brought in $1,006 million, a nice wad over the total paid, and left Hanson with Smith Corona (floated for $340 million) and the titanium dioxide business.

Find this article useful?

Get more great articles like this in your inbox every lunchtime


Get your essential reading delivered. Subscribe to Management Today