Lovell sale called off

Mansell's reverse takeover of Lovell has been called off. The two parties blame the stockmarket's lack of interest in smaller companies, particularly those within the construction sector.

When the Mansell/Lovell talks started, the merged group's anticipated market capitalisation was £80 million. But a 30 per cent dive in the City's valuation criteria in the past three months knocked a hole in that prospect and the new combined business was likely to start life with a valuation of little more than £50 million, hardly encouraging for Mansell's existing shareholders.

David Heppell, chief executive of Lovell, said last week: "I am disappointed that market conditions have intervened to such an extent that this transaction is no longer viable.

"We will now press ahead with our existing programme to further improve our financial performance. Our order book remains strong."

Lovell shares, suspended at 12.5p at the start of the takeover talks, came back on the market last week at an opening price of 10.75p.

David Beardsmore, Mansell's chief executive, said: "We continue to believe that this deal made sound commercial sense for Mansell and Lovell, but the timing is evidently not right.

"Mansell's board remains committed to a flotation when market conditions are right and shareholder value can be properly realised. Until that time we will continue to pursue our strategy for growth in the refurbishment and maintenance sectors."

Mansell made a pre-tax profit of £4.7 million last year, on turnover of £180 million, last year. Turnover in the current year will jump to £400 million as a result of Mansell's £18 million purchase of the Hall and Tawse business from Alfred McAlpine 12 months ago.

Lovell ended four years of lossmaking this spring with an interim profit of £500,000 in the six months to March 1998. Turnover was £120 million.

When announcing those figures, Heppell said that having succeeded in putting the group back on its feet, he was now looking to new investment. "A takeover is one possibility," he said. "We need capital because Lovell's current assets are earmarked to pay down debt."

Last week Heppell said that he was not in talks with any other company. "The Mansell merger has taken up a lot of management time," he said. "The important thing is that Lovell now gets back to work."

Lovell's problems stem from land and property it bought in America prior to 1990. Three quarters of this has now been sold: Lovell took big hits three years ago in order to reduce these assets to breakeven and has conducted a review of the remaining non-core assets.

Asked if there could be further writedowns in the full year's results, Heppell said: "We will make some adjustments."