Rok puts Galliford bid on backburner

Rok effectively signalled that its £110m bid for Galliford Try was over late on Friday last week when director Mark Kay told the Stock Exchange that he had been buying additional shares in his own company - taking his total shareholding to more than 4.2%.
One analyst said: "The City would not like a scenario of Rok ramping its share price higher when 25% of its bid for Galliford is in its own shares."
Galliford remained unmoved by the 51p-a-share offer from Rok earlier in the week, a 4p-a-share improvement on an earlier bid. But this is still well short of the 60p figure the City feels would be the threshold needed for Galliford's board to offer Garvis Snook, Rok's ambitious chief executive, an invitation to the negotiating table.
Another analyst said: "We believe that Snook can expand Rok, but Galliford is a challenge too far; Rok's market value is £65m compared with Galliford's £140m figure.
"It is too far even for him to expect to get Galliford, then sell on its housebuilding division in order to get its construction business effectively for nothing."
Galliford Try's problems stem from loss-making contracts in its construction business. But that division has been made more attractive following Andy Sturgess' arrival from Skanska as managing director of construction. He has turned the business around and it is in line for a margin of 1% this year, contributing to a total group profit of £20m, according to brokers' estimates.
Galliford Try's housebuilding division's landbank and work-in-progress is worth about £100m.
Rok's bid may speed up an internal process at Galliford that could result in Sturgess mounting a management buy-out for the revitalised construction business, leaving behind a pure housebuilding group that might then be snapped up as part of the on-going consolidation in the sector.
<F06E> Meanwhile, Galliford Try has pulled out of a £6m project to build a theatre and conference centre in Wrexham.
Sturgess said: "We were selected as preferred bidder, but then Wrexham Council made various changes to the project. The council didn't agree with our inclusions in terms of time and cost, so we decided not to progress with the project."
The council is now talking to the contractor that put in the second lowest tender.