BTP set to buy rival's assets: Deal will let MTM's bankers recover pounds 90m of their loans and take 30% in chemicals group

BTP, the speciality chemicals group, is paying pounds 100m for most of the assets of its crisis-ridden rival MTM, which has debts of pounds 120m and is being investigated by the Serious Fraud Office.

Under the deal MTM's bankers, a 14- strong consortium led by Chase Manhattan, will get back pounds 90m of their loans. They intend to convert the remaining pounds 30m of outstanding debt into 38.7 million MTM shares to give them a 29.9 per cent stake in the group.

Earlier this month MTM agreed a three-year refinancing deal with its bankers, under which the banks planned to exchange pounds 40m of their loans for 80 per cent of the enlarged equity of the company.

MTM shareholders will be asked to approve both the BTP purchase and, as a fall-back, the bank refinancing plan, at an extraordinary meeting on 24 May. They are being told by the MTM board that, failing approval, the company may be unable to trade and shareholders would be unlikely to see any surplus from a liquidation.

To help pay for the purchase BTP is raising pounds 72.2m by way of a two-for- five rights issue at 185p. It estimates pre-tax profits were pounds 20.4m in the year to 31 March against pounds 18.2m, and forecasts a 5 per cent rise in the dividend to 9.3p with a final of 6.05p.

MTM hit serious problems in March 1992 when its auditors, BDO Binder Hamlyn, refused to sign off the 1991 accounts. Following two subsequent warnings of a profits shortfall Richard Lines, the then chairman who founded MTM in 1979, and Tom Baxter, the finance director, resigned.

Frank Buckley, chairman, said that BTP, anxious to expand into the US where MTM was big, had put forward outline proposals to MTM for an agreed takeover bid in February and begun a due diligence review. But its proposals were withdrawn at the end of March when BTP was told that the SFO was formally looking into the shortfall in MTM's profits in 1991.

BTP, whose shares rose by 11p to 250p, is buying six businesses with sales of pounds 64.6m and operating profits of pounds 5.6m in 1992. Three operations together lost pounds 4.6m but BTP expects to eliminate these losses quickly by changing product mix and putting its own chemicals through seriously underutilised capacity.

MTM saw worse-than-expected pre- tax losses of pounds 59.2m in 1992 after incurring an exceptional charge of pounds 48.5m.

If the BTP sale is approved a much- shrunken MTM will be left mainly with a profitless agrochemicals businesses based on three sites and its Rudby Hall head office. MTM closed 1p lower at 10.5p.