Jul 5 2004
Heywood Williams Group PLC announces that Bristolpipe Corporation, a US subsidiary of the Group, has entered into a conditional agreement for the sale of Bristolpipe’s business, trading assets and trading liabilities to a subsidiary of Westlake Chemical Corporation, for a cash consideration of US$33.0 million (£18.2 million). The consideration is subject to adjustment by reference to, inter alia, the level of working capital at completion.
The disposal is conditional, inter alia, upon the approval of Heywood Williams’ shareholders. The notice convening an extraordinary general meeting of shareholders recommending approval of the disposal will be dispatched to shareholders shortly.
Bristolpipe produces extruded PVC and ABS pipe products for a wide range of applications including domestic and commercial DWV (drainage, waste and venting), underground water and sewer pipe and telecommunications cable ducting and is a leading supplier east of the Mississippi. It is headquartered in Elkhart, Indiana and operates three manufacturing plants located in Indiana, Pennsylvania and Georgia, and has approximately 200 employees. For the year ended 31 December 2003, Bristolpipe generated an operating profit of US$3.9 million (£2.4 million) on turnover of US$114.1 million (£70.4 million). EBITDA for the year ended 31 December 2003 was US$6.1 million (£3.8 million). The net assets of Bristolpipe at 31 December 2003 were US$27.3 million (£15.3 million). It is expected that Bristolpipe will generate an operating profit of approximately US$3.3 million (£1.8 million) for the first half of 2004.
Following the restructuring programme, commenced by Heywood Williams in late 2003, the Board is focusing the Group on developing its continuing operations, supported by a strong balance sheet with a low level of borrowings. The sale of Bristolpipe enables the exit from an activity which provides limited strategic opportunities for the Group. Bristolpipe operates in a highly cyclical and commoditised market, and competes with a number of larger, vertically integrated operators. As a result of these factors, Bristolpipe’s earnings profile exhibits a significant degree of volatility from year to year. The current year has seen improved operational performance and near-term prospects in the market in which Bristolpipe participates. The Board believes this provides a favourable context for the disposal of Bristolpipe to a vertically integrated group at a fair price.
The pre-tax net cash proceeds arising from the disposal are expected to be approximately £17.2 million (after expenses, including any applicable VAT) and will be used to reduce general corporate borrowings. The disposal will result in a US current tax liability of approximately £1.5 million. At completion, the effect of the disposal on the consolidated net assets of the Group is expected to be an increase of approximately £6.0 million. The disposal is expected to be significantly dilutive to earnings per share in 2004. Commenting on the proposed disposal of Bristolpipe, Robert Barr, Heywood Williams’ Group Chief Executive, said:
“The disposal of Bristolpipe strengthens our balance sheet and enhances our ability to build and develop our continuing operations. The restructuring of the Heywood Williams business, which began late last year, continues to make progress towards establishing a stronger and more focused Group. The Board unanimously recommends that shareholders vote in favour of this disposal.”
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