Arthur Lee agrees 55m pounds Carclo bid: Merger will create Yorkshire steel products group with turnover of pounds 160m
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Your support makes all the difference.CARCLO Engineering, the Leeds- based engineer, has launched an agreed pounds 55m takeover bid for Arthur Lee, the Sheffield-based stainless steel, wire and plastics group.
The merger of the two Yorkshire companies will create a group with extensive interests in steel product manufacturing and a combined turnover of pounds 160m. Net borrowings are expected to total about 7 per cent of net assets, estimated at pounds 70m.
The two have held on-off merger discussions since May 1990, when Carclo started to acquire shares in its target through market purchases. Last November it increased the stake to almost 30 per cent with the purchase of a 22 per cent interest from GM Firth.
Carclo is offering seven shares for nine in Arthur Lee - equivalent to 163.3p a share - or a cash alternative of 151.7p each. Arthur Lee shareholders will also receive a special interim dividend of 4p a share.
The bid is being accompanied by a profit estimate from both companies. Carclo expects pre-tax profits of at least pounds 8m for the year ended 31 March and earnings of 13.6p.
In the previous year it made taxable profits of pounds 5.6m after exceptional charges of pounds 1.2m. The group is forecasting a final dividend of 3.4p, lifting the total by 10 per cent to 8.6p.
Arthur Lee predicts profits before tax of at least pounds 2.1m for the half-year ended 31 March, against pounds 604,000 for the corresponding period in 1992.
Analysts said the terms value Arthur Lee on an exit earnings multiple of about 20. John Ewart, Carclo's chairman, said the bid would enhance the group's earnings next year.
The two companies believe that the merger will generate efficiency gains in their wire and wire rope businesses. In addition, they hope to make significant cost savings with the integration of the two head offices at Arthur Lee's premises in Sheffield.
The enlarged board will include five Arthur Lee directors, including Peter Lee, the chairman, who will become the enlarged group's deputy head.
Carclo shares closed 13p lower at 210p yesterday, while Arthur Lee jumped 16p to 158p.
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