Irish-based crystal and china maker Waterford Wedgwood today said it was advanced talks on a possible cash offer at 12 pence per share for chinaware manufacturers Royal Doulton.
Waterford also warned that that the first half pre-tax profit will be significantly below consensus market forecasts. The company also said it is proposing a fully underwritten €100 million five-for-three rights issue at €0.06 per share, which represents a 53.8 per cent discount to yesterday's closing price, to pay for the Royal Doulton bid.
In a statement, the company said due diligence on Royal Doulton has been completed "to the satisfaction of Waterford Wedgwood, but certain other matters remain to be resolved" and that subject to the resolution of these matters, the board of Royal Doulton intends to recommend the offer.
Waterford chairman Mr Anthony O'Reilly said: "The possible acquisition of Royal Doulton would transform Wedgwood. The benefits of such a deal are immediately apparent.
"With Royal Doulton's restructuring largely completed, we could add Royal Doulton's revenues to our top-line sales without greatly increasing our costs. This would increase the profitability of the combined businesses."
The company said the acquisition will enable it to integrate Royal Doulton with minimal disruption and lay down the foundation for improved profitability.
Waterford Wedgwood currently holds 21.16 per cent of Royal Doulton. On its trading update, the company said sales in the six months to September 30th were disappointing at €356 million, with like-for-like sales, excluding exchange and All-Clad, coming in at 5 per cent below the corresponding period last year.
It attributed some of the fall in sales to the fact that the company had refocused its retail distribution in US.
Group chief executive Mr Redmond O'Donoghue said: "While trading performance in the six months to September 30th was behind last year, we are confident that planned marketing initiatives and the previously announced cost saving measures will lead to a reversal of this trend."
The rights issue is fully underwritten by a company controlled by Mr O'Reilly and deputy chairman Mr Peter John Goulandris, and J&E Davy.
Mr O'Reilly and Mr Goulandris families have confirmed their intention to take up their full rights entitlements. Waterford Wedgwood also announced that it has secured a new facility led by Burdale Financial Ltd, a subsidiary of Wachovia Corp to replace in full the previous bank syndicate.
The new facility is secured on the assets of the group and has a term of up to four years.