Kilsaran Concrete Products Limited said yesterday it was considering the possibility of making an offer for rival building materials group, Readymix.
However, it said the matter was at a very early stage and no approach had been made to the Readymix board, which is 63 per cent owned by British-based building materials group RMC.
The announcement was made at the request of the Irish Takeover Panel following a rise in the Readymix share price yesterday. The shares closed eight cents, or 6.4 per cent, higher last night at €1.33.
Kilsaran said that there was no guarantee that an offer would be made but said a further announcement would be made in due course.
However, the fact that RMC holds such a large stake in the company rules out a hostile bid. RMC has been struggling in recent years and analysts believe any approach to acquire its stake in Readymix would be taken seriously.
The remaining 37 per cent of Readymix is held by a mixture of institutional and private investors. Bank of Ireland Asset Management is the largest of these, with a 10 per cent stake.
However, Kilsaran may not be the only interested party, with some market sources predicting its announcement would trigger further expressions of interest, leading to an auction for the company.
It is understood that members of the management team have already been looking at financing options to fund a management buyout (MBO).
One market source described the company as "paradise for the private equity world", given the solid shape of the business, the low share price which is well off last year's high of €1.85 and its good cashflow. Analysts estimate free cashflow is of the order of €19 million per annum before interest costs.
Mr Sean Quinn, whose concrete and cement operations are based in Fermanagh and Cavan, is also thought likely to be interested in developments.
Readymix, which is led by Mr John McNerney and chaired by Mr Martin Rafferty, has operations in the Republic, Northern Ireland and the Isle of Man.
Last month, it reported a 16 per cent drop in pre-tax profits to €21.6 million as a slowdown in construction and restructuring costs hit the bottom line.
At the end of last year, it had debt of €28.8 million, leaving it with gearing of just 24 per cent.
Kilsaran is a private family-owned company based in county Louth and led by Mr Dermot McKeown.
The latest accounts filed with the Companies Office show that it recorded pre-tax profits of €16.4 million in the year ended June 30th, 1999 on turnover of €58.7 million. Net assets at this date were around €60 million.
