Industrial holding group IWP International has made an agreed bid of some £51.3 million sterling (£60 million) for British-based Jeyes Group, a move that will provide it with critical mass in its household products division.

Jeyes, which has operations in Britain and Germany, manufactures well-known household cleaning agents such as Jeyes Fluid, Parazone and Bloo toilet flush.

The Irish company is offering 50 new IWP shares for every 73 Jeyes shares or the equivalent of 250p sterling for each Jeyes share based on the middle-market price for an IWP share at close of business on May 6th.

This represents a premium of 54 per cent over the Jeyes share price, before the company announced it was in talks, which might lead to an offer. IWP will also make available £16.2 million in either cash or loan notes for shareholders who want an alternative to the share offer.

The offer has received irrevocable support from the Jeyes board, which holds around 1 per cent of the shares, while IWP has also secured commitments to accept the offer from shareholders representing a further 32.3 per cent of the share capital, mainly institutional investors.

IWP believes it will be able to extract significant cost savings and synergies from merging the two companies, amounting to £3.8 million in the first year.

"The activities of Jeyes and IWP are largely complementary and economies of scale achieved by combining both groups' activities will create an enhanced and more competitive group," IWP said.

Jeyes is a publicly-quoted company and IWP expects to save £1.5 million in plc costs. Both companies have similar businesses in Britain and streamlining these should save another £1.5 million. Manufacturing rationalisation will result in savings of a further £800,000.

IWP does not expect to retain all of Jeyes five manufacturing plants but it said there would not be major job losses as a result of the acquisition.

Jeyes operating management will stay on with the company, including the managing directors of the British and German operations. Chief executive, Mr David Callear, will remain as a consultant for at least six months.

Once-off reorganisation costs are likely to amount to between £5 and £6 million.

"The acquisition is a big step in achieving the critical mass we're after," said Mr Neil Popham, director of IWP's personal care and household division.

It will allow IWP to employ category management techniques with big retailers who tend to look to one supplier to provide a whole range of products.

"Previously we operated on only 30 per cent of the shelf in toilet care but, with Jeyes, we will be able to operate on 100 per cent of the shelf," he said.

IWP first spoke to Mr Callear about Jeyes in September 1994. The business was not in great shape at the time but, over the last three years, it has made considerable progress and is now a sound, well-managed business in good financial health with a good balance of brands and private label products, Mr Popham said.

"We realised always that Jeyes was a fantastic fit for IWP," said chief executive, Mr Joe Moran. IWP had a very good personal care business with turnover of £150 million in the full year but its household products division was still quite small. "Our objective was to acquire a household products business in the UK or France."

IWP is paying a multiple of more than 20 for Jeyes which reported pre-tax profits of £2.4 million last year. But Mr Moran pointed out that brokers were forecasting that Jeyes would make pre-tax profits of £3.6 million£3.9 million this year. Jeyes has net assets of around £25 million so the goodwill involved is some £26 million and the deal will leave IWP with interest cover of five to six times, down from eight.

Analysts said the purchase looked like a good one and was in line with IWP's strategy of acquiring capacity in the household goods sector.

"It gives them a strong niche position," said ABN-Amro, adding that it should add 6 to 7 per cent to earnings next year.

Although the multiple being paid was high, analysts said there was plenty of scope for cost savings and IWP was also acquiring well-known brands.

IWP's share price was unchanged at 425p yesterday while Jeyes gained 54.5p to 241p.