Marley in $140m US purchase

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The Independent Online

Marley, the building products group, is spending $140m (£87.7m) to acquire Syroco, a US company that makes plastic furniture .

The purchase is to be financed partly by a one-for-six rights issue, which will raise £51.8m, with the rest funded by a bank loan.

Syroco's plastics technology, which is used in manufacturing garden and some indoor furniture, is similar to that used by Marley in its UK operations.

The move fits with Marley's strategy of concentrating on its plastics and automotive operations while withdrawing from concrete and clay building products businesses.

Syroco made an operating profit of $20.8m on a turnover of $95.5m in the year to December. Marley expects the full-year contribution in 1996 to be around the same level.

David Trapnell, chief executive, said that while in a full year the acquisition should enhance group earnings it might dilute earnings in the current year. Mr Trapnell said: "We have been saying for the last three years that our strategic direction will continue to be to develop our plastics business, particularly overseas. This is one such opportunity.

"It fits very well with our existing businesses in the US. They [Syroco] are in a growth market, and they are a leading player."

The financing arrangements for the American purchase mean that Marley's gearing is increasing to 43 per cent from 32 per cent. The company said that it was comfortable with this level.

Although Marley under chairman Sir George Russell reported a big improvement in performance in the year to December when it announced its results earlier this month, analysts have been concerned that the company will find it difficult to expand in the UK in current market conditions.

Pre-tax profit was £58.7m in 1994, a turnaround from a loss of £2m in the previous year. Turnover was £667m.

Plastic furniture sales are heavily dependent on the housing market, which is currently in the doldrums.

Syroco has manufacturing plants in New York, Arkansas and California. It sells to the public through warehouse clubs, catalogues and supermarket chains.

The news of the rights issue and the warning of a possible dilution of earnings this year sent Marley's share price down 11.5p to close at 122p yesterday.

The rights issue is being underwritten by SG Warburg and Credit Lyonnais Securities.