Cookson unveils pounds 252m US purchase

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The Independent Online
COOKSON GROUP, the industrial plumbing and refractory business, yesterday unveiled its proposed pounds 252m purchase of the US-listed Premier Refractories International after word of the deal leaked on Wall Street.

The group declined to reveal the full benefits of the deal, whose consideration is a mixture of cash and shares, for fear of weakening its negotiating position ahead of completion.

Cookson is in the high-margin business of producing plumbing which withstands extreme temperatures in steel production. The Premier deal will expand its lower margin interest in monolithic products used for ferrying molten material. Together, the two activities account for around 70 per cent of Cookson's revenues.

Cookson is paying 0.83 times sales for Premier, which has turnover of $368m (pounds 226m) in the nine months to 31 January 1999. Analysts predict the tie-up could yield $35m annually in savings, doubling Premier's profits and halving that multiple. Forecast sales for the combined group are $1.2bn (pounds 700m).

Strategically, the two companies would have the ability to offer steel-makers entire solutions, rather than separate products.

Premier has no market share in emerging markets, whereas Cookson sells to almost every major steel producer in the world. Mr Howard plans to use Cookson's existing customer base in eastern Europe, India and south- east Asia to grow Premier's sales. He said yesterday that the group still had around pounds 200m of firepower to make opportunistic acquisitions.

The shares, which have tipped up from 96.5p in October, gained 3.5p to 184p on yesterday's announcement. That isbelow the 1996 level of 327p. But now some emerging markets are recovering, this deal could signal a turn in Cookson's fortunes.

Merrill Lynch forecasts profits of pounds 120m in 1999 and earnings of 12.4p per share, ignoring the effects of Premier. That putsshares on a forward p/e of 14. If Mr Howard can clinch this deal, that will seem cheap.