Barlo Group, the plastics and radiator firm, has acquired two plastics operating subsidiaries of BASF, one of the largest international chemical companies, for deutschmark 15 million (£5.8 million).
Although the consideration is modest, it is a significant expansion and will double Barlo's plastic sales. The subsidiaries, Resart in Mainz, Germany, and Critesa outside Barcelona, in Spain, constitute BASF's acrylic and polycarbonate plastics business.
The two businesses are understood to generate annual sales of some DM 130 million (£50 million). Barlo's sales from plastics amounted to £50.4 million last year, or just under half group sales of £112.4 million. There is no breakdown of Barlo's profits by product. The two subsidiaries recorded a loss of DM 12.5 million (£4.8 million) before non-recurring and exceptional costs in the ten months to October 31st 1997. Barlo said the results also include "other costs which would not be ongoing under Barlo's ownership". While it is difficult to quantify the potential earnings benefits because of further rationalisation and redundancy costs, the acquisition has the potential to increase Barlo's earnings significantly. Dr Tony Mullins, managing director, said he has a "very clear turnaround strategy".
Barlo noted it will now have a strong market position within Europe across a wide range of extruded plastic products. Freehold production sites in Mainz and Barcelona have 24,000 tonnes of sheet capacity and 22,000 tonnes of polymerisation capacity.
The acquired products are complementary to the activities of the group's Belgian and Czech subsidiaries which trade under the IRG name. The combined grouping, said Barlo, will place the enlarged business in a leading position in Europe with over 30,000 tones of extruded sheet capacity and 7,000 tonnes of cast sheet capacity. And there is capacity for 22,000 tonnes of polymerisation. Rationalisation has already taken place at the German plant, the results of which, have yet to come through. Further rationalisation is planned. The acrylic sheet previously produced by IRG in Belgium will now be produced in Restart where spare capacity exists while the Belgian plant will expand its polystyrene production.
BASF will continue to act as agent for some of the products. It has also agreed to supply acrylic based raw material to Barlo at agreed rates for the next three years with options for further extensions. The consideration for the BASF subsidiaries equates to the net assets being acquired. The net assets consist of DM0.05 million equity and inter-group loans of DM14.95 million. It is understood that the underlying value of the assets is much higher than the book values. The overall affect on group gearing "should not be material", Barlo said. The gearing amounted to 26 per cent last September.
