KINGSPAN, the Cavan building materials group, will have to offer a premium on the assets value of Ward Building Systems, a British building materials firm, before any bid would be considered.
A spokesman for Rugby Group, the British parent of Ward told The Irish Times that any offers for its metal building products division, which includes Ward, would have to be in excess of net asset value. Kingspan last week said it may make an offer for Ward, noting that it was an underbidder three years ago when Rugby bought the company.
The spokesman said no bids had been lodged "nor had the group sought offers". However, there have been "a large number of inquiries". He would not name the interested parties, nor would he comment on Kingspan's statement.
Rugby, announcing its 1995 results last month, said it intended to dispose of its metal building products division to allow it to concentrate on the core businesses. That division generated an operating profit of £7.1 million sterling on £170.1 million sales in 1995.
Ward is understood to account for more than 50 per cent of sales and profits. It has three main businesses: structural steel, steel buildings and components for buildings.
Rugby's metal building products division has two other companies. ROM which manufactures mesh and wire fencing and ZND is in the same business but operates in Holland. The Dutch business incurred a small loss last year.
Rugby has said it is more interested in selling the division as a whole rather than piecemeal. So it may favour a single bidder for the division.
No net asset figures are available. However, an estimate of the division's value can be made on the basis of a profit multiple.
The division has been financing its own development and there is no debt. The profit after tax would amount to around £4.8 million. Taking a p/e multiple, based on the FT building sector of 11 to 14, would indicate a value in excess of £50 million.
Kingspan, which last week announced a rise in pre tax profit from £4.7 million in 1994 to £6.1 million in 1996 in 1996, would almost double its historic profits if it succeeded with a bid. Strong profit is expected this year, and some brokers are predicting a rise to £10 million.
Kingspan is in a strong financial position with no gearing, so it has plenty of scope to finance a bid with a mixture of borrowing and a placing of new shares. It has an equity market capitalisation of £74 million.
Rugby purchased the businesses from a receiver in 1992 for around £15 million sterling and is likely to receive substantially more in a sale. However, the spokesman said that Rugby put in "a lot of management time" in turning it around.
