Kingspan to buy Navan insulation business for €87m

Kingspan has agreed to acquire the Navan-based insulation business, Xtratherm, for €87 million.

The business, which is part owned by the family of former small business lobbyist Eoghan Hynes, makes polystyrene-based insulation for the building industries in Britain and Ireland.

Kingspan will pay €67 million to acquire the business, €46.7 million of it upfront, as well as assuming €20 million of debt.

A further €20.3 million will be payable based on the exercise of put and call options over the shares of a subsidiary company after April 1st, 2007.

In addition, Kingspan will enter into an option agreement to buy a UK property used by Xtratherm for €11 million.

The principal beneficiaries of the sale are Mr Hynes, a former chairman of the Irish Small and Medium-Sized Enterprise Association (Isme), and his family.

Between them, they own 42 per cent of Leanort, the holding company for the Xtratherm and Hytherm businesses being acquired by Kingspan. As a result, they stand to make about €28 million from the sale.

The acquisition will be funded from Kingspan's existing resources and is expected to result in up to €20 million of savings on capital expenditure. It is also expected to be earnings enhancing from 2007.

"The acquisition gives Kingspan access to production capacity in the United Kingdom at a time when demand for insulation products is expected to increase due to economic and regulatory pressures," the company said.

Kingspan is expected to benefit from the introduction of new UK regulations which will require buildings to be more energy efficient.

Xtratherm, which has a facility in Chesterfield, Britain, reported pretax profits of €6 million on sales of €68 million last year.

Net assets are expected to be more than €17 million at completion.

Most of the senior management team are expected to remain with the business following the sale.

The agreement, which bolsters Kingspan's position in the Irish insulation market, is subject to Competition Authority approval.

Shares in Kingspan, which said last month that it was in talks to buy Xtratherm, fell by 25 cent, or 1.9 per cent, to €13.05 yesterday but analysts welcomed the deal.

"The price is full enough, based on historic multiples, but the fit is good. They have scope to improve margins and to get benefits on the buying side," said John Sheehan, analyst at NCB Stockbrokers.

Kingspan also said yesterday that trading remained in line with the levels indicated at its annual meeting in May.

At the time, the Cavan-based company said it expected operating profits and earnings per share to be well ahead of 2005 and said they should beat market expectations.