WATERFORD Wedgwood will meet senior management of Royal Doulton, the publicly quoted British china manufacturer, next week. This follows the group's strategic acquisition of a 14.9 per cent stake in loss-making rival Royal Doulton, for £11.1 million sterling (€17.4 million).
The meeting will discuss ways in which Wedgwood (Waterford Wedgwood's subsidiary) and Royal Doulton, rivals in the china market, can co-operate in the competitive ceramics market, according to industry sources. Senior Waterford Wedgwood executives are understood to have informed the Royal Doulton board of the investment before making the announcement. A statement from Royal Doulton neither endorsed nor rejected the investment.
While Waterford Wedgwood has not ruled out increasing its shareholding, the investment is not viewed as a prelude to a takeover bid, unless Royal Doulton received an offer from another party. The strategy, however, will make it more difficult for a rival bid to succeed.
Waterford Wedgwood, which is not seeking board representation, has described the stake as a "strategic investment" and said it had "no intention of making an offer for all of the issued share capital of Royal Doulton, nor of acquiring a shareholding which would trigger an obligation to make an offer for Royal Doulton". But it said it reserved the right to reconsider its position "in the event of a third party offer for Royal Doulton".
Waterford Wedgwood bought the 12.38 million Royal Doulton shares at 90p sterling per share yesterday morning when they were quoted at 78p. They later rose 10p to 88p. The shares were bought from about five institutions shareholders who are retaining their remaining holdings indicating institutional support for Waterford Wedgwood's move.
Mr Richard Barnes, group finance director, said the purchase represented "good value", provided closer co-operation between the two companies and gave it "flexibility". But he was adamant the group had "no intention" of making a bid for the whole company. "We are pursuing our strategy of becoming the world's largest luxury lifestyle group." There has been a neutral reaction from Royal Doulton. It noted the announcement and said following its capital raising earlier this year "designed to restore equilibrium to its balance sheet, Royal Doulton is pursuing a comprehensive programme of investment in, and rationalisation of, its businesses". It stressed it had "an outstanding brand portfolio and strong positions in major market worldwide and stressed its determination "to realise the values of those brands and strategic market positions to the benefit of all its shareholders, employees and customers".
Royal Doulton recently shocked the market with the disclosure that it had lost £10£12 million in sales, representing about 5 per cent of annual turnover, as the introduction of new software systems delayed deliveries by up to 10 weeks. That led to a 23.5p slump in the share price to 79.5p.
It also had to spend £1 million to solve the problems. And the company informed its shareholders that "weekly deliveries have now returned to the levels experienced prior to the introduction of the new systems, and order backlogs are expected to return to previous levels by the year-end".
Nevertheless losses for the year are expected to exceed analysts forecasts of £16 million; it already reported pre-tax losses of £14.4 million at the half-way stage.
Royal Doulton has been undergoing a major rationalisation programme, announcing the laying off of 1,200 employees, a fifth of its workforce, last December. Also, in a debt-reducing exercise, it cut stocks and raised £31 million in a share issue.
Royal Doulton generates sales of some £225 million and has several well-known products. These include Royal Crown Derby, Minton, Royal Doulton and Royal Albert. It has three plants in Stoke-on-Trent and one in Indonesia.
