Howden rights issue to fund Danish purchase

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The Independent Online
HOWDEN, the Scottish engineer that was brought low by a Danish tunnelling contract, is to buy a fan manufacturer in Denmark funded by a two-for-seven rights issue at 52p.

The company's shares, which fell from grace in 1990 to a low of 31p, eased 4p on the news to 59p. At their peak they were 140p.

Howden, the leading industrial fan maker outside Japan, is paying a total of pounds 22m for Novenco, 65 per cent of whose sales are in Scandinavia, where Howden has only a small presence.

Novenco, owned by Danisco, Denmark's biggest sugar producer, with a turnover of about pounds 1.5bn, made a loss last year although it is thought to be moving towards break-even.

Clive Thompson, an analyst at Allied Provincial, said: 'The deal makes a lot of sense. It is a good strategic move and gives Howden access to a big base of installed fans from which to generate sales of spare parts.'

Howden, which will integrate its own fan operations with Novenco, sees little problem in reversing losses.

Konrad Johnsen, chief executive, said: 'A merger of the two groups will create a strong group with a broad product and market spread. There is considerable potential for increasing profitability.'

The rights issue will raise pounds 31.4m, with the balance of the proceeds being used to reduce borrowings. Gearing is expected to fall to less than 15 per cent by the end of the financial year.

The acquisition of Novenco is seen as the latest step in Howden's rehabilitation after cost overruns and losses of pounds 10m on a pounds 40m contract to dig twin rail tunnels in Denmark devastated profits in 1991.

Gearing soared to more than 100 per cent and the dividend was cut. Not until December last year was a potentially ruinous piece of litigation relating to the contract settled out of court.

A final dividend of 1.4p, making a total of 2.15p for the full year, is forecast. Holders of rights issue shares will qualify for the payout.