Zehnder favourite to buy Jones firms

The Swiss engineering group Zehnder is the front-runner to buy some of Jones Group's manufacturing businesses, particularly the Runtalrad radiator business in Thomastown, Co Kilkenny, informed sources have told The Irish Times.

Zehnder owns 21 per cent of Jones, having bought into the Irish company in 1992 at 275p per share. With Jones shares currently trading at 160p - a rise of 35p since the company disclosed it was planning to sell its ships and the manufacturing businesses and distribute some of the proceeds to shareholders - Zehnder is still sitting on a paper loss of 115p per share - more than £3 million.

The sale of the assets would, however, go some way towards eliminating Zehnder's accumulated losses, as the sell-offs will lead to a cash distribution to shareholders of as much as 100p per share.

The Swiss group is involved in the manufacture of high-quality radiators and Runtalrad would fit in well with its own business. But Runtalrad - and most of the other manufacturing businesses - are thought to be trading poorly, and the consideration for Runtalrad is likely to be modest.

The document on the ships' disposal shows that Jones will make a profit of £400,000 on the transaction, when account is taken of the £1.3 million cost of the disposal. The £20.6 million proceeds of the disposal compare with a shipbroker's valuation of the two ships of £19.7 million.

Financial information on the Rathcarra shows that it made an operating profit of more than £1 million in 1996. The Rathboyne - bought by Jones in May 1997 - is not included in the profit and loss accounts. The sale of the ships will see fixed assets in the balance sheet fall from £45.7 million to £26.9 million.

The document also shows that Jones chief executive, Mr Pat Nevin, had his service contract with the group "modified" last September. Mr Nevin has a basic salary of £115,000 a year and also stands to receive a 1998 bonus of £100,000, if Jones's cash position after the sale of the ships and the manufacturing businesses is £13.6 million. If the cash position is in excess of £13.6 million, Mr Nevin will receive 5 per cent of the excess.

Finance director, Mr Jim McLoughlin receives basic salary and director's fees of £90,000 a year and, under a similar arrangement as Mr Nevin, will receive a bonus of £67,000 if Jones's cash is at least £13.6 million after the sale of the assets.