Kalon set for French merger

Click to follow
The Independent Online
Kalon, the decorative paints manufacturer based in Batley, is poised to merge with a paints company controlled by the French oil-group, Total, writes James Bethell.

The deal will more than treble the turnover of the £160m-a-year British paints group and will lead to savings of up to £15m a year, according to bankers close to the transaction. The larger French company, which has profit margins of about 8 per cent, will benefit from improved management under a board dominated by executives from Kalon, which enjoys profit margins of 13 per cent, analysts said.

Total's paint subsidiary, Euridep, has six factories in France.It will bid for a third of Kalon's shares, currently trading at 105p, and take up a rights issue worth Fr494m (£60m), leaving Euridep with a 51-65 per cent stake in the merged company.

Shareholders in Kalon, who saw the value of their shares collapse after a profits warning in December 1994, will be offered a 10p special dividend and a limited number will be offered a cash alternative worth 140p.

Kalon also published end-of-year results yesterday, which saw pre-tax profits rise 5 per cent to a record-breaking £19.6m on a turnover of £157.3m. The annual dividend rose 7 per cent from 4.2p to 4.5p.

Under Mike Hennessy, chief executive, company profits had risen from £4.5m in 1989 to £18.9m in 1993, sending shares from 24.5p to a high of 191.5p in May 1994. But recently the share price had nearly halved to a close yesterday of 105p because of fears of rising titanium oxide prices, troubles in the DIY market and the sale of Texas, an important client, to Homebase.