IWP International has expanded into Poland through the acquisition of a 60 per cent stake in Polbita, a distributor of house bold and personal care products in Poland and eastern Europe. The deal amounts to $4.6 million (£2.9 million).
Polbita, with headquarters in Warsaw, has 16 regional sales offices in Poland and recently opened an outlet in Moscow. It recorded a pre tax profit of $522,000 on turn over of $45 million in 1995. Profits are expected to double this year, while sales are projected to rise to $70 million.
Set up in 1990, it is now the largest company in its sector in Poland. It fell heavily into debt following a failed attempt to prepare it for a public flotation. That attempt cost it about $2 million, according to IWP chief executive Mr Joe Moran, and was mainly responsible for Polbita's negative shareholders' funds of $1.1 million at the end of 1995.
The deal is expected to be earnings neutral in the first year after taking an expected 20 per cent devaluation of the Polish currency into account. It should add a penny to earnings per share in the second year, IWP director Mr Richard Haves said.
Polbita was under financial pressure to recapitalise. This has been effected by IWP and International UNP Holdings, a Canadian investment company which will have a 30 per cent stake. UNP, which has been actively involved in investing in businesses in Poland, paid $2.3 million for its minority stake.
The vendor, a Polish/US businessman, receives $1.1 million and a further $1 million in five years time. The bulk off the consideration goes into Polbita, whose shareholders funds will rise to $3.7 million. Local management will own the remaining 10 per cent.
The Polbita board will have three members, two of whom will be IWP nominees. The company will be managed by IWP personnel. IWP has an option to buy out the 40 per cent minority share holding. The consideration will be based on a 10 times multiple of the average annual net profits over a three year period.
The acquisition, IWP said, would enable it to develop a significant distribution business in eastern Europe and provided an opportunity to increase the sale of its existing range of household and personal care products in a rapidly growing market.
