Matthey agrees to buy ACI

MAGNUS GRIMOND

Johnson Matthey is moving to boost its advanced-materials business with a $170m (pounds 106m) agreed acquisition of Advance Circuits Inc, a US electronic- materials company. The deal is being financed largely by a pounds 117m rights issue, with shareholders being offered one new share at 500p for every eight held.

Analysts' reactions to the deal were generally favourable yesterday. JM's shares ended 1p ahead at 588p.

ACI's main business is making multi-layer printed-circuit boards (PCBs) for equipment ranging from mobile telephones to computers. The company has seen sales grow at a compound rate of close to 13 per cent a year over the past four years, significantly in excess of the 2.8 per cent growth experienced by the market as a whole.

JM believes ACI will benefit from recent industry consolidation. Sales of $144m last year ranked ACI number four in the US PCB market, and number one in the emerging field of plastic packaging for laminated PCBs. "The technology this company has is one of its major attractions to us," said JM director Gordon Thorburn.

He shrugged aside a preliminary investigation into ACI's business being conducted by the US Department of Defense, which accounts for around 20 per cent of its business. Although uncertain of what the investigation concerned, he said that after taking legal advice JM was "satisfied that it was not a material threat to either ACI or Johnson Matthey".

Pre-tax profits were $11.4m in the nine months to May, against $13.9m for the previous year. ACI will boost JM's electronic-materials arm, which has seen profits grow from pounds 2.5m in 1991/92 to pounds 18.8m last year.

The rights issue is being part-underwritten by Minorco, which has an indirect stake of 19.7 per cent in JM.

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