Hanson Plc

Prof Ashutosh Kumar Sinha

IIM Lucknow
 Diversification Discount
• Does diversification destroy value?
– 1990s
• Diversified firms traded at a discount
– relative to single segment firms in the same industry
– Compared to the firms value that would result if the
diversified firm were split into its different businesses
– An unsettled question so far
• There is as much evidence of firms destroying value by staying
diversified, as that single segment firms are destroying value by
not diversifying
• On average, diversification is now not believed to destroy value

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Wealth Destruction on a Massive Scale

Ref: Moeller, Schlingemann and Stulz, 2005, Journal of Finance

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Wealth Destruction on a Massive Scale

Ref: Moeller, Schlingemann and Stulz, 2005, Journal of Finance

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 After 1991
• Attempted acquisition of Imperial Chemical Industries resulted
in failure

• 1995
– Some manufacturing facilities spun off: US Industries

• 1996
– Hanson Trust broken up into 4:
• Hanson Plc; Imperial Tobacco; The Energy Group; Millennium
Chemicals

• Dec 1997
– Lord Hanson steps down as Chairman

• May 2007
– Heidelberg Cement acquired Hanson Plc for about 8 billion pounds sterling
– Combined entity: second largest cement and building materials company in the
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 Thank You

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