Bowater makes 295m pounds cash call

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The Independent Online
BOWATER, the packaging, printing and building materials group, yesterday became the latest company to jump on the rights issue bandwagon with a one-for-six cash call to raise pounds 295m.

Proceeds from the issue, priced at 400p a share, will be used to fund the acquisition of Specialty Coatings International, a US industrial coatings company, for dollars 434m including debt.

Bowater said it was unwilling to finance the purchase from borrowings as group debts had increased from 35 per cent to 57 per cent of shareholders' funds last year, due to sterling devaluation.

The deal will double Bowater's sales in the coated films and papers market to about pounds 500m, accounting for a quarter of total annual turnover.

However, SCI's paper manufacturing operations, comprising five US mills, are soon to be sold off by Bowater.

Yesterday's move also sparked speculation that Bowater may dispose of its building materials division to concentrate on its core activities - packaging, security printing and industrial coatings.

Following SCI's purchase, these will account for almost 80 per cent of Bowater's turnover, making its building materials activities - which include windows and door manufacturing - an increasingly peripheral part of Bowater's expansion plans. Their sale could generate great interest in the European sector.

Last year, SCI made operating profits of dollars 49m on sales of dollars 568m and its net debt totalled dollars 126m.

The rights issue has been launched in two instalments. The second instalment of pounds 200m will be triggered only if SCI's purchase is cleared by US authorities.

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