Born-again MTM goes shopping for CSM: Ex-high-flyer fights back to black

MTM, the rump of the specialty chemicals company mostly sold to BTP last summer, opened a new chapter yesterday when it disclosed a small operating profit for 1993 and proposed its first acquisition.

One of the highest flyers of the 1980s, MTM began to crumble in early 1992 after its founder- chairman, Richard Lines, fell foul of the company's auditors, which led to massive restatements of past profits.

The company's troubles culminated in an investigation by the Serious Fraud Office and the North Yorkshire police, who are still looking into MTM's 1991 accounts.

Meanwhile, the new MTM is trying to regain its footing under the chairman David Swallow. The acquisition of Colin Stewart Minchem (CSM), a Cheshire-based chemicals company specialising in detergent components, 'represents the first step in our strategy to rebuild', said Mr Swallow.

Shareholders will be asked to fund some of the pounds 10.5m initial consideration for CSM. The offer to MTM shareholders, who will deliver their verdict at an extraordinary general meeting on 7 April, comprises three new ordinary shares at 60p each for every eight held on 11 March.

MTM may pay a further pounds 1.3m, depending on CSM's profits in 1994 and 1995. With the assumption of pounds 2.1m of debt and pounds 800,000 of expenses, the total cost of CSM could run to pounds 14.7m. CSM's management team, headed by Peter Kitching, will be staying on with a 5 per cent holding in MTM's expanded share base.

MTM will pay pounds 5.8m out of its cash balance of pounds 12m, with pounds 6.8m coming from shareholders.

The company will still have about pounds 5m left over to fund acquisitions and is trying to sell about pounds 1m of property assets, including Rudby Hall, MTM's elegant Cleveland headquarters in the heady days before its virtual collapse.

MTM's next step is to begin the search in earnest for a chief executive. Since the departure of Ken Schofield last summer Mr Swallow has been running the business, but he wants to resume a non-executive role.

MTM's small operating profit of pounds 1.2m for the year to 31 December does not fully reflect a much- improved balance sheet, with net assets of about pounds 20m compared with net liabilities of the same order in 1992.

'The financial state of the company is very sound,' said Jeremy Chantry of Kleinwort Benson Securities, which lists MTM as a 'speculative buy'. He added: 'They are on their way from rock-bottom back to having a business again.'