World of Leather shares leap on agreed pounds 14m bid from UNO

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The Independent Online
UNO, the specialist retailer of upholstered furniture, yesterday acquired World of Leather, a smaller rival, in an agreed bid worth pounds 14.3m, which the City thinks will create a more dynamic combination.

Shares in UNO jumped by almost 10 per cent, although it will have to find at least pounds 6m to fund a cash alternative for WOL directors who want out.

The deal brings together two companies from the opposite end of the soft furnishings world. UNO sells low-cost suites in the pounds 1,000 range from 10 large sites while World of Leather's suites fetch around pounds 2,000 from 31 much smaller outlets.

UNO is offering 0.43542 of its new shares for each World of Leather share, valuing WOL at 118p based on UNO shares at 271p.

This represents a 41 per cent premium to the market price on Monday, the day before WOL announced it was in bid discussions. UNO's shares subsequently jumped 24p to 295p, however, which now values the paper offer at 128p.

Richard Taylor, WOL's joint managing director and finance director will join the UNO board, while the chairman Ramon Benardout, Michael Bernadout and the other joint managing director, Peter Sheldon, will stand down.

However, with the exception of Mr Sheldon, the WOL directors who control 42 per cent of the shares will take an alternative cash offer of 108p rather than UNO's paper.

WOL has been in and out of the black in recent years but yesterday reported a 10 per cent increase in turnover to pounds 32.2m and profit of pounds 1.025m for 1996, compared with a pounds 517,000 loss in 1995. It made a rights issue in 1994 to finance expansion but blames unfavourable market conditions and high site prices for its sluggish performance.

UNO made a profit before tax of pounds 1.06m in the year to the end of April 1996 on a turnover of pounds 24.2m, followed by a half-time profit of pounds 306,000 in the six months to last November. It is now forecasting a profit of pounds 2.8m before tax and exceptional costs of last year's flotation for the year to April 1997.

The terms value the combined businesses at over pounds 50m and will give them 13 per cent of the leather upholstery market, which is expected to grow by 50 per cent over the next four years. UNO plans to invest in World of Leather, but the two businesses will continue to operate in their own market sectors, and retain separate fascias.

UNO's chairman and chief executive, Paul Rosenblatt, admitted the acquisition would dilute earnings in the current year but expects the deal to enhance earnings in 1998.

If the deal goes through UNO will seek to transfer from AIM to the main London market.