Double sale nets pounds 81m for Harrisons: Focus shifts to growth markets

HARRISONS & Crosfield, the chemicals to building supplies conglomerate, is building up its acquisitions war chest with the sale of its consumer foods business for pounds 81.6m.

The disposal of Telford Foods and H&C Cereales follows a strategy review which concluded that the group should concentrate on growth markets where it can establish a leading market position. Consumer foods, like Indonesian palm oil - where it sold its plantations last month - was not one of these.

George Paul, Harrisons' chairman, said: 'It is always sad to see one's jewels go, but I am convinced it is the right decision.' He added that the group had considered adding to the consumer foods business but had concluded that it was more sensible to sell it.

It is, however, looking for acquisitions in other areas of its business although there is 'nothing imminent'. Any purchases are likely to be medium-sized bolt-ons to its existing business areas of timber supplies, builders' merchants or chemicals.

Yesterday's disposal will virtually eliminate its borrowings, which were already cut from 48 to 14 per cent of net assets by the plantation disposal. Mr Paul said he would be prepared to increase gearing to 60 per cent if the right acquisition became available, but only if it had a clear strategy for reducing it below 50 per cent. A rights issue is 'almost out of the question', he added.

Telford is the leading manufacturer of own-label packaged soups and also makes cereals and dessert mixes for supermarket chains, while H&C Cereales makes breakfast cereals in France. Together they made pounds 9.6m operating profits out of a total of pounds 128.6m in the year to December, and had net assets of pounds 30.2m.

They are being acquired by Koninklijke BolsWessanen (BW), the Dutch food and beverage group that owns Cheshire Wholefoods, the muesli manufacturer which also supplies own-label cereals. It is paying pounds 74.4m in cash and will take on pounds 7.2m of debt.

This disposal, like the plantations sale, will produce a substantial profit for Harrisons as the combined cost of the two companies was just pounds 11.5m. Both sales will, however, dilute its earnings until the proceeds are re-invested. Its shares were unchanged at 189p.

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