Harrisons pays pounds 280m for US chemicals group

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The Independent Online
Harrisons & Crosfield accelerated its transformation from conglomerate to speciality chemicals group yesterday with a pounds 280m deal to buy a US chemical additives producer. As Chris Godsmark, Business Correspondent, reports, Harrisons also revealed a bigger than expected pounds 400m special payout to its shareholders.

Harrisons is buying Rheox, a US company which it claimed was the world leader in chemical additives that control the viscosity of products such as coatings and adhesives. The New Jersey business, owned by the NL Industries group, employs 370 staff and owns a Californian opencast clay mine.

Rheox made profits of $39m last year on sales of $135m, but Harrisons insisted the $465m (pounds 280m) purchase price was good value, compared with some recent chemicals deals. It will be financed from cash resources and a new pounds 450m loan facility.

"We are paying 11.8 times earnings for this company. If you look at other valuations, such as ICI's deal to buy Unilever's speciality chemicals business, that is distinctly low," said Bill Turcan, Harrisons' chief executive.

Mr Turcan said the purchase was likely to be the last big acquisition for at least a year and completed the group's "breakout" from a troubled petfoods and chemicals conglomerate. Harrisons has so far raised pounds 479m from a disposal programme, including pounds 318m from the sale of Harcros, its builders' merchants arm to Meyer International, owner of the Jewson chain. Earlier this month it raised a further pounds 106m from the sale of Edward Baker Petfoods.

Harrisons gave its shareholders an unexpected boost by announcing a pounds 402m share buy-back plan, worth 56p a share. The company had previously said the payout would be not less than 50p a share, worth pounds 359m. However, investors will not receive a final dividend for this year, compared with last year's 5.4p final payout. Harrisons shares rose 6.5p to 139p on the news.

The group dampened hopes of a sale of BOCM Pauls and Pauls Malt, its food and agriculture businesses, blaming adverse market conditions, including the BSE crisis.