Adare may bid for British label manufacturing firm

Adare Printing is gearing up for a bid for the British labels manufacturer Ferguson after buying a 12

Adare Printing is gearing up for a bid for the British labels manufacturer Ferguson after buying a 12.4 per cent stake in the market at a cost of around £3 million sterling. Ferguson is currently capitalised at just over £27 million but any bid for the group would probably have to be pitched above £30 million.

Adare bought just over 4 million Ferguson shares last Thursday to bring its stake in Ferguson to 5 million shares or 12.4 per cent of the total. That buying followed a statement from Ferguson the previous day which disclosed that the group was "actively exploring" opportunities which might lead to a merger or alliance.

Since then Ferguson shares have risen sharply and were trading yesterday at 65p, compared to the 38p immediately before the announcement of talks on a possible merger. The shares have traded as high as 120p and as low as 20p this year as the market reacted negatively to a dismal trading performance by Ferguson.

Adare finance director, Mr Peter Lynch, said Adare has not had talks with Ferguson previously but said that the purchase of the 12.4 per cent stake is not a hostile move. "It's not a hostile move, we have asked to meet the company and its advisers in a friendly manner to see how we can move ahead."

READ MORE

He declined to speculate on what the Irish group might do if the Ferguson board treats the move by Adare as hostile, but industry source believe that Adare would not have spent £3 million already unless it had firm intentions of making a bid, with or without the support of the Ferguson board.

Adare has been an acquisitive group since it emerged from the former Castletown Press and in recent years has expanded rapidly in the UK through the acquisition of Prontaprint for £24 million sterling and Kalamazoo for £12 million sterling. The group is, however, in strong shape to fund an acquisition of the scale of Ferguson with April 1998 gearing of just 25 per cent, a debt level that is likely to have fallen further in the half-year ending next week.

Ferguson had had an erratic trading performance in recent years and in the year to last February pre-tax profits collapsed from £11.6 million to £4.8 million with sales from continuing operations down from £139 million to £132.5 million. The group conceded at the time that mistakes had been made in a reorganisation and relocation programme during the year.

Since then, Ferguson has carried out a major review of its operations, leading to a decision last month to put its textiles labelling business in the UK up for sale. Ferguson chairman Mr James Tyrell also warned at the time that its self-adhesive labelling business in the UK and Germany were suffering from difficult market conditions and were unlikely to contribute to operating profits this year.

Mr Tyrrell added, however, that the prospects for growth in the self-adhesive labelling business while its speciality businesses, Morplan, Design Mark, Hindson and British Publishing were trading in line with expectations.

Last week, just before Adare starting buying its shares in the market, Ferguson reported a poor set of half-year results, with sales down from £69 million to £61 million with operating profits down from £4.2 million to just £100,000. At the end of the half year, Ferguson had borrowings of £12.9 million, a gearing of 39 per cent.