Waterford Wedgwood is to make a 105.8 million deutschmark (£40.5 million) bid to acquire the shares it does not already own in Rosenthal, the publicly-quoted German manufacturer of porcelain brands.
The offer amounts to DM200 per share, representing an 18 per cent increase on the price quoted on the Frankfurt Stock Exchange before the announcement.
Waterford Wedgwood said it had bought shares in the market yesterday, building its stake from the previous 31.4 per cent to 32.2 per cent, through the purchase of 7,700 shares, the vast bulk of which were purchased at DM199 a share. The total cost was in the region of £580,000.
Mr Ottmar Kusel, chief executive of Rosenthal, said the best hope for his company was to be tied to a strong international partner. He expects to see an intensification of the "already strategic alliance" between the two companies. Together, he added, Rosenthal would become a leading manufacturer in the luxury goods sector. NCB, which recommended the Rosenthal shares at DM140 last August, said the proposed offer by Waterford Wedgwood was "too cheap". However, BNP, another firm of brokers, considers the offer "fair" and has advised shareholders to accept. BNP has expressed doubts that the share price would reach DM200, or more, within the next 12 months.
The outstanding shares in Rosenthal are widely spread among institutions and private investors, while directors and employees own 9 per cent. The largest outside shareholding is a 3.5 per cent stake held by a private German investor. There is not much trading in the shares. Waterford Wedgwood was expected to mop up the outstanding shares but the move now looks opportune. Rosenthal, which manufactures a number of brands, including those designed by Versace, has been involved in a rationalisation programme and could now be nearing the breakeven point.
It incurred a pre-tax loss of DM44.6 million in 1996. The losses were reduced to DM7.8 million in the first half of 1997. Rosenthal has said it could make a modest profit in 1998 and hopes to make a 5 per cent to 7 per cent return on sales in 1999. It would be more costly to wait for a turnaround to make a bid. The consideration will be funded from Waterford Wedgwood's internal sources.
That will push its gearing up from 35.8 per cent to around 85 per cent, based on the two companies' balance sheets in December 1996. Waterford Wedgwood's financial position has improved since then, and Rosenthal's is probably unchanged, so the gearing at the end of this year could be in the range 70 per cent to 75 per cent. That will inhibit any further large acquisitions for some time in the absence of outside funding.
"The offer will further strengthen Waterford Wedgwood's global reach by increasing our presence in Continental Europe and by marketing Rosenthal's products in the UK, Ireland, US and Japan, through improving distribution channels," said chairman, Dr Tony O'Reilly. Waterford Wedgwood purchased a 9.1 per cent stake in Rosenthal for around £3 million last December. It now owns, or has agreed to acquire, 31.4 per cent (after a participation in a rights issue). And it holds options over a further 13.5 per cent. Assuming all other outstanding shares are acquired, the offer will amount to £40.5 million.
