Siebe asks for 184m pounds: Controls group moves for loss-making Eckardt through rights issue

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The Independent Online
SIEBE, the international controls and engineering group, is raising pounds 184.3m by way of a rights issue to buy Eckardt, a German manufacturer of process automation and control systems, and to refinance Eberle and Schmidt, two other European controls businesses it bought earlier this year.

The group will buy Eckardt, which is privately owned, in two stages. Initially, it will subscribe for new shares representing 52 per cent of the enlarged voting share capital for DM30m ( pounds 12m), which will be used virtually to eliminate Eckardt's bank borrowings. It then plans to exercise an option to buy all the remaining shares for about DM179m next October.

Siebe is also looking for other acquisitions and is engaged in due diligence on a small potential acquisition in the controls field. Some 38.9 million new shares will be issued at 485p under the terms of the rights issue on a basis of one new ordinary share for every 10 ordinary shares held.

Allen M Yurko, Siebe's managing director, said that Eckardt was a good strategic fit. It would complement the Foxboro control systems business in Europe, he added.

Eckardt made a loss before tax of DM6.1m on turnover of DM230.7m in the year to 31 December 1992. Its net assets were DM29.1m at the year end after taking account of DM33.8m bank loans, but the Siebe board believes this considerably undervalues property and other tangible assets.

Mr Yurko said: 'We are very, very optimistic about our ability to turn this company into a major cash generator within the next 12 to 18 months.'

Siebe itself is trading in line with the board's expectations and has a strong order book. Conditions have improved in North and South America and South-east Asia, but Japan and Europe are still depressed. Results for the half-year to 30 September 1993 will be announced in early December.

The board expects to pay an interim dividend of 3.66p (net), which compares with 3.3275p for the corresponding period last year. The new ordinary shares will be eligible for this dividend.

Barrie Stephens, chairman, said: 'The time is propitious. I want to stress that this was not an opportunistic event.

'We intend to continue to reduce our gearing. We felt that we had fully met our commitment on gearing made to our shareholders three and a quarter years ago. We wanted to refinance the purchases of Eberle and Schmidt and we have bundled Eckardt into a triumvirate and have turned to our shareholders and asked for some cash from them. A very modest amount. . .'

Pro-forma gearing was below 55 per cent before acquisitions at 30 September. This is almost in line with the commitment given to shareholders in August 1990 to have gearing below 50 per cent. After the rights issue it will be approximately 39 per cent. Gearing should fall further after Eckardt's assets have been realued.

The Eckardt acquisition is subject to the approval of the German Cartel Office.

The shares rose 8p to 573p.

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