IN its largest acquisition yet, the Clondalkin Group is to take over the Dutch owned plastic packaging company Van der Windt for £58 million.
Clondalkin is paying £39.2 million in cash and taking over debt of just under £18.8 million to acquire the share capital of the profitable Van der Windt group as well as factories and land owned by the company.
Clondalkin's deputy chairman, Mr Henry Lund, said the deal will strengthen his group's position in Europe and will give "a decent boost" to earnings per share. There are significant opportunities for synergies with other group companies in Holland, Britain and Ireland, he said. "There are possibilities for our companies to supply Van der Windt and for them to supply us," he said.
The acquisition, which has been agreed in principle, "will provide greater balance in terms of foreign currency, investment and earnings potential," Mr Lund said.
It will be funded out of cash flow and borrowings and the group will not have to took to shareholders for funds. "It makes sense to rely on debt and cash flow. We have a very strong cash flow and with low interest rates it makes sense to borrow when you can pay down debt quickly. Equity is the dearest form of finance," Mr Lund said.
When the deal is completed total group debt will rise to £75 million. But Mr Lund said this debt will be paid down in 24 months out of cash flow. After payment of the cash consideration, the debt of the enlarged group will be about two times annual cash flow profit before tax plus depreciation. Interest costs will be covered ten times by earnings.
Van der Windt specialises in the manufacture, trade and distribution of packaging material for agricultural, industrial and consumer market. The management and sales teams will remain in place.
The company, a subsidiary of the Dutch publicly quoted group NV Koninklijke KNP, has its headquarters and distribution centre in the Netherlands, with manufacturing operations in the Netherlands and Germany.
Van der Windt has sales companies in Belgium, Britain and Denmark and its primary market is the Netherlands, followed by Germany and Belgium. It employs 570 people.
The company reported pre-tax profit of £7.3 million for 1995 on sales of £100.7 million. On sales and profit measures Van der Windt is just under half the size of Clondalkin its sales and profit levels are 40 per cent of those of Clondalkin.
Profits after tax of £5.5 million at Van der Windt meant that Clondalkin will pay 10.6 times earnings when debt is included. Van der Windt has net assets of £17 million. Its £4.2 million depreciation charge for 1995 indicates that plant and machinery are modern. KNP is selling Van der Windt to concentrate on it core paper making operations.
After the deal was announced Clondalkin shares rose 25p to close at 485p.
The group, which reported a 22 per cent rise in pre-tax profit to £18.3 million for 1995, has pursued a programme of expansion through organic growth and acquisition. It now has 27 operating companies in five countries, with flexible packaging operations in Ireland, Britain, the Netherlands and the US.
Clondalkin's expansion will continue. "I would be surprised if this is the last deal we do in 1996. We are looking at opportunities in the US and in Europe. We could do the same size deal again without recourse to shareholders," Mr Lund said.
