Bottom Line: Polythene package

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The Independent Online
NOT SO long ago Robin Williams and Simon Beart were corporate financiers at Salomon Brothers. Now they are busy turning Britton, formerly the shell company Firstland Oil and Gas, into a packaging business.

They agreed their first significant deal yesterday with the purchase of Taco, a Cheshire-based polythene film producer, for pounds 32m. The company is raising this money by issuing shares to the vendors, placing further shares with investors, and holding a rights issue.

While the chief executive and finance director are worryingly short on operational experience, it is possible to see why they have chosen polythene as their field of endeavour.

Production is highly fragmented and Britton can mop up market share by acquiring small players. It will be exposed to both commodity polythene, which is a mature business that will be run to generate cash, and the more sophisticated, wider-margin polythene that finds uses in disposable nappies and sanitary towels.

If Taco lives up to expectations the whole group should make pounds 2.4m taxable profits this calendar year. In 1994, the first full year with Taco on board, profits could be pounds 5.9m - equivalent to earnings per share of 0.8p - on sales of pounds 40m. The 10p rights and placing price is 12.5 times projected 1994 earnings, compared with a paper and packaging sector p/e ratio of 15.

The rights and placing price has been pitched at a 42 per cent discount to yesterday's suspension price. Tempting for adventurous investors.