Williams plans pounds 1bn disposals

Conglomerate to realign around service companies in effort to improve share rating
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The Independent Online
Williams, the Yale locks to Rawlplugs industrial group, is planning a pounds 1bn programme of disposals over the next 18 months in an attempt to realign the group on its security and firefighting equipment businesses and deliver greater returns to shareholders.

The proceeds from the disposals will be used to pay off debt and finance investment in the Kidde fire protection and Yale security products businesses - and new acquisitions in those business areas.

The programme will focus on Williams' building products and home improvements businesses, many held over from its days as an acquisitive conglomerate in the 1980s.

First on the auction block will be the UK-oriented home improvements business, which contains such household names as Valor gas fires, Smallbone kitchens, Breville toasters and Dreamland electric blankets. It made profits of around pounds 3m last year on a turnover of around pounds 100m, and analysts believe it will fetch between pounds 70m and pounds 80m.

City observers have been expecting the sale for some time, as the home improvement brands are limited to the UK and the company recently confirmed its desire to concentrate on turning Yale and Kidde into world-beaters.

Williams is expected to announce an agreement in principle within the next three weeks, and the due diligence will be completed by January. Sir Nigel Rudd, chairman of Williams (who is profiled on page 7) acknowledged the need to deliver more shareholder value but would not comment on the sale.

City sources believe that he favours a sale to the current management of the home improvements division, backed by ven- ture capital, in a similar deal to the recent management buyout of the Williams electronics business. In that deal, Williams retained a minority stake.

The company is keen to extract a fair price for the business, however, and rumours of a trade buyer emerging with a higher offer have been doing the rounds for the last month.

Once the home improvements division is sold, Williams will turn its attention to the rest of its building products businesses. Next to go will be the water heaters and curtain rail companies, Rawlplug and Swish, which made operating profits of around pounds 25m last year. They are expected to raise pounds 230m.

Then late next year or early in 1998, the American paints division, worth some pounds 250m, and the fillings and coatings business, which includes household names such as Cuprinol and Polyfilla, might go to market. This last division is one of the jewels in Williams's industrial crown, achieving margins in excess of 20 per cent last year on the way to profits of pounds 54m in 1995, a quarter of the group's total profits for the year. Its asking price would be at least pounds 500m.

The disposal programme is being driven by the persistent sluggishness of the Williams share price, which has underperformed the market by 25 per cent in the last year, and at 336.5p is trading only 6.5p above the price of its 1994 rights issue. This is despite turning in consistent profits growth and disposing of marginal electronics and engineering businesses in the last three years.

Colin Porter, analyst at stockbroker Albert E Sharp, welcomed the proposed sales of the building products businesses. "Fire protection and security are the two divisions capable of global growth, but Williams has to prove they can reinvest the proceeds of their asset sales wisely."

Mr Porter said that one of the underlying reasons for the disposal programme was that Williams did not want to be known as a diversified industrial and was seeking reclassification as a support services company, which might lead to a upwards re-rating of the shares based on the higher prevailing price-earnings ratio of that sector.

Williams is no stranger to selling and spinning off businesses. It demerged Pendragon, its car dealership arm, in 1989, and the following year sold Crown and Berger paints, which it had acquired in 1987, to the Swedish group Akzo.

In the last 10 years it has changed its look almost entirely, ridding itself of the traditional industrial businesses of forgings, plastics and engineering products, and reshaping the group around the acquisitions of Pilgrim House (which brought Kidde into the group) and Yale & Valor in 1991.