Flotation will value Inspec at pounds 100m

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The Independent Online
INSPEC, the chemicals company created two years ago by a buyout from British Petroleum, is to float on the Stock Exchange with an initial market value of pounds 100m, writes Robert Cole.

About pounds 36m of new money will be raised, which will be used to ease Inspec's onerous debt burden. It carries pounds 30m of ordinary borrowings and will use flotation proceeds to repay a further pounds 12m of preference shares.

Following the flotation, debt is expected to be about pounds 7m - equivalent to 30 per cent of net assets.

The buyout took place at the nadir in BP's recent history, shortly after the high-profile departure of the chairman and chief executive, Robert Horton, and while the oil giant was trying to reduce borrowings.

The Inspec buyout team paid BP pounds 40m for the businesses. The float, pencilled in for later this month, values the company at a 150 per cent premium. In the intervening period Inspec made an acquisition in the US for dollars 20m.

Half the money was put up by venture capitalists, including Candover and Advent International. The other half was raised from banks including Bank of Scotland and Morgan Grenfell.

Directors also put up pounds 500,000 and following the issue will retain a 20 per cent stake in the company. Eighty-five per cent of Inspec's workforce also own shares.

Inspec sells all over the world but two-thirds of turnover is divided between the UK, the US, Germany and the Netherlands. It has avoided the supply of commodity chemicals, preferring materials it can sell for specialist use in small quantities. This strategy has allowed Inspec to earn more generous profit margins.

Inspec increased turnover by 16 per cent to pounds 49m last year and earned pounds 7m of operating profit. The operating profit margin improved from 10.9 to 14.4 per cent.