David Roache, finance director, said: "We are not about to spend money tomorrow or get on the bandwagon that appears to be running in the speciality chemicals sector of paying excessively high prices for businesses."
He said the group has already targeted a number of potential acquisitions in the pounds 60m-pounds 80m range,.
"We are not going to spend money on businesses that are going for 18 times earnings," he said. "If it takes us time to buy a business with growth potential at a sensible price then it takes us time."
Blagden will sell the packaging unit to Drum Holdings in a move that makes it the latest UK company to focus on its specialty chemicals.
It said it would receive pounds 82.6m in cash, while Drum would assume pounds 6.5m in Blagden debt and other monies. Drum is an investment company established by NatWest Equity Partners and Union Bank of Switzerland.
By selling the division, which makes up nearly 60 per cent of sales, Blagden will generate resources to boost investments in an area analysts said has become increasingly attractive in recent years.
Other chemical companies including Elementis, Laporte and ICI have shed major assets in the last year to build specialty operations, a diverse business that makes raw materials for food, consumer products, cars, paint and other manufacturing.
Blagden shares surged 29p or 18 per cent, to close at 188.5p.
The UK and European specialty chemicals industry has seen a spate of corporate activity in recent years as companies move to position themselves in what they see as more profitable ends of the industry. The largest deals were ICI's purchase of Unilever's chemical assets for pounds 4.8bn and Clariant's purchase of Hoechst's specialty chemical assets for pounds 1.9bn last year. Already this year, Ciba outbid Hercules to buy Allied Colloids last month for more than pounds 1bn, and a week ago Akzo Nobel announced it was in talks to acquire Courtaulds, Britain's third-biggest chemical company.
Blagden said that when the sale was completed it would focus activities on its growing specialty chemical businesses by reinvesting the proceeds to accelerate the organic growth and to finance the acquisition of a new chemicals business. Blagden's packaging business is a leading supplier of steel drums to the European oil and steel industry through seven new plants in the UK, Belgium, the Netherlands, France and Spain. It makes or reconditions more than 10 million steel drums a year, the second-biggest such company in Europe.
Blagden reported a 12 per cent increase in pre-tax profits before exceptionals to pounds 16.4m in the year to the end-December 1997. The consensus analysts' forecast was for pre-tax profit of pounds 16.5m. Sales dropped to pounds 224.5m from pounds 240.5m, which it said was "largely due to exchange translation impact of pounds 22.1m". The company boosted its dividend to 3.6p from 3.2p a year earlier.
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