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Lafarge has reviewed Blue Circle's defence document issued earlier today. In its continuing efforts to challenge Lafarge's 420p per share cash offer, Blue Circle has now abandoned all pretence of a long-term growth strategy.
By pledging to return capital to shareholders, Blue Circle appears to have acknowledged that the market has doubts about its future performance. It has resorted to stretching its balance sheet and compromising its much-vaunted acquisition strategy in an eleventh-hour attempt to preserve its independence.
Under Blue Circle's proposal, shareholders are promised the consolation prize of 48p per share and a possible further payment later this year. They would be left with a residual investment in a cash-strapped company, severely hampered in its ability to make any significant acquisitions and condemned to remain in the second division of world cement producers:
- The mechanism for returning capital to shareholders, which is dependent on an uncertain and ill-defined disposal programme, highlights the financial constraints on Blue Circle
- Blue Circle has eliminated its margin for error. Given its over dependence on a small number of historically volatile markets, Blue Circle would have no headroom to accommodate any slippage in its unrealistic assumptions about profitability in developing markets and operational improvements
- Blue Circle would not be able to pursue its stated strategy of consolidating the second-tier cement market. The timing and pace of that consolidation has never been in Blue Circle's gift; its ability to respond quickly even to small acquisition opportunities is now more limited.
In conclusion, Blue Circle's proposal would seriously compromise its long-term strategy and would make it a much riskier investment.
Dresdner Kleinwort Benson, which is regulated in the United Kingdom by The Securities and Futures Authority Limited, is acting for Lafarge and Lafarge Minerals and no one else in connection with the Offer and will not be responsible to anyone other than Lafarge and Lafarge Minerals for providing the protections afforded to customers of Dresdner Kleinwort Benson or for giving advice in relation to the Offer.
BNP UK Corporate Finance, a division of BNP London Branch which is a branch of Banque Nationale de Paris S.A., and Paribas, the London branch of Paribas S.A., (together "BNP Paribas") which are regulated in the United Kingdom by The Securities and Futures Authority Limited, are acting for Lafarge and Lafarge Minerals and no one else in connection with the Offer and will not be responsible to anyone other than Lafarge and Lafarge Minerals for providing the protections afforded to customers of BNP Paribas or for giving advice in relation to the Offer.
Dresdner Kleinwort Benson and BNP Paribas have approved this announcement solely for the purposes of Section 57 of the Financial Services Act 1986.