More,about Courtauld--
Courtaulds Plans Massive Restructuring To Boost Shareholder
Value
02/25/98
Dow Jones Online News
(Copyright (c) 1998, Dow Jones & Company, Inc.)
LONDON -(Dow Jones)- Slumbering chemicals concern Courtaulds
PLC unveiled its plan Wednesday to boost shareholder value in a radical
restructuring plan involving each of Courtauld 's three divisions.
Its star-performing coatings and sealants division will be spun off as a
separately listed company called International Coatings PLC; the fibers
and chemicals unit, which has been hurt by unfavorable foreign-exchange
rates, will cut 500 jobs in a major cost-cutting program; and the polymer
products division will be sold.
The moves come a little more than a year after Courtaulds (COU)
described its flagship man-made fiber brand, Tencel , and the polymer
products and Asian coatings businesses as the company's "growth
drivers." Now Tencel is about to take a loss, polymers is to be sold,
Asian growth is stalled and coatings will soon be spun off.
Analysts applauded the new measures, but some tempered their sighs of
"about time" with concerns about the complex spinoff process which lies
ahead.
"I think it's a welcome and slightly overdue radical restructuring of the
group which will allow the market and the company to focus more clearly
on its future growth and direction," said Martin Evans, head of research at
Sutherlands Ltd.
"But one should acknowledge it's going to be a long road. This is a
complicated process. It's very early days for a recovery story," he said.
Evans warned the market's euphoric response may be short-lived as
investors realize the complexity of the task facing Courtaulds.
Dresdner Kleinwort Benson analyst Michael Eastwood greeted the news
warmly. He sees the stock hitting 400 pence in the long term.
He said the polymer products unit could sell for about 240 million pounds
($396.1 million), proceeds which would substantially reduce Courtauld
's net debt, believed to be about 440 million pounds.
Evans said the sale price could be higher, given an industry average of
about two-times sales. The unit had sales of 228 million pounds in the
year to March 1997, leading to a 19 million pound operating profit.
Courtaulds chief executive Gordon Campbell told Dow Jones the
polymer products unit "doesn't quite fit" into Courtaulds new model.
Campbell said the "complex" spinoff will "release shareholder value by
creating two much more highly focused companies in strong positions."
However, he said the spinoff would obviously take months rather than
weeks, with shareholder approval likely to be some way off.
- By Michael Reid; 44-171-832-8163; mreid@ap.org
Copyright (c) 1998 Dow Jones & Company, Inc.
All Rights Reserved.
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