Berghaus Inernational Fashion has traded with Russia for 25 years. About one-fifth of its product is sold in the UK, primarily through Marks & Spencer. The rest is to north-west Continental Europe.
The Dutch concern's output for Marks is sold under the St Michael label. However, products for the Continent and Russia are sold under the Berghaus, Damo and Polar Bear brands. The company is a separate enterprise from Berghaus, a subsidiary of the sportswear company Pentland, which makes camping gear.
Russell Walls, Coats Viyella finance director, said the main reason for buying Berghaus was to give Coats an entry into a Continental European distribution network. Coats is hoping to use the network to feed through other kinds of its ladieswear.
He said the company was also excited by the opportunity to trade with Russia.
Coats Viyella yesterday placed 15 million shares with institutions at 218p to raise the funds to pay for the acquisition. The placing price was pitched at a 4 per cent discount to yesterday's opening price of 227p, but the shares dropped 3p to close at 224p.
The acquisition is likely to make an immediately positive impact on profits and earnings per share. Analysts at the securities house BZW yesterday pushed their prediction for taxable profits for the year ending this December up to pounds 142m from pounds 139m. Earnings are predicted at 14.1p, a 38 per cent increase on the figure for 1992.
Coats is holding an analysts' presentation on Tuesday to explain the strategy behind the acquisition. It is also expected to talk about plans to explore the burgeoning markets in the Far East, particularly India.
Mr Walls said the pounds 35m purchase price was equivalent to 10 times Berghaus's after-tax profits for the 12 months to 31 December. Berghaus made profits before interest and tax of pounds 4.6m on sales of pounds 80m. It has net assets of pounds 13.6m.
Sir David Alliance, chairman, said: 'The acquisition fulfils one of the strategic aims of our clothing division to build a European network.'
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