Ti Group To Double Polymer Activity
The purchase will lift sales from TIs polymer engineering operations to 300 million a year. This is very much an acquisition for growth, said Tony Sumner, corporate affairs director.
There was virtually no overlap in the products, and TI would be able to expand the market for Forshedas range throughout the world from its Scandinavian base.
Sonny Lindquist, chief executive of Forsheda who is staying on with TI, said the takeover would complement and strengthen Forshedas own manufacturing. The deal, which is expected to be earnings enhancing in the first 12 months, fits TIs strategy of using its strong balance sheet to make bolt-on acquisitions.
In August the group said it was considering several opportunities for John Crane, the seals and polymer engineering division, which contributed profits of 47.9 million to an interim total of 125.3 million. The acquisition will leave the group, which had 71 million cash at the end of the first half, with gearing of about 30 per cent at December year-end.
Sumner said there was scope for further acquisitions, given the right opportunity. Over the past two years Forsheda has been boosted by the weakness of the Swedish krona, achieving a gross profit margin of 18 per cent in 1994 and 15 per cent last year.
But its performance has since slipped back as the krona has strengthened. The B shares, listed in Stockholm, rose steadily from SKr105, at the end of last year, to SKr162 (16) at the end of September, just before they were suspended pending the bid.
TI is paying SKr247.5 for each Forsheda A share, and SKr225 for each B share. The 10 per cent premium for the 1.13 million unlisted A shares all owned by Agora Group, the founding familys holding company reflects the higher voting rights.
Agora, which also has 648,000 B shares, has given an irrevocable undertaking to sell all its holding to TI. The Agora stake represents 20.6 per cent of the shares and 63.6 per cent of the voting rights. Forsheda, with annual turnover of SKr1.5 billion, has restructured heavily after slipping into loss in 1991 to focus its operations on sealing systems in rubber and plastics.
More than one-third of its turnover is accounted for by sales to the automotive industry, especially heavy truck and earthmoving equipment manufacturers.
The group has been controlled by the Sporre family through Agoras A shares since it was founded 50 years ago by brothers Sten and Erik Sporre.
Its main breakthrough was the invention of the V ring rubber seal used in rotating axles. Today it manufactures in Sweden, Italy, France, Norway and the US.