Heywood Williams Group PLC announces that it has agreed to sell its Plastic Systems Division (HW Plastics) to Latium Plastics Holdings Limited for a cash consideration of £3 million. In addition, Latium will assume certain product rectification liabilities and obligations as part of the purchase of HW Plastics. As a result, the prior provisions for future cash outflows of approximately £17.0 million associated with potential product rectification claims (i.e. ‘pinking’) are now no longer required.

This stems from the 1 July statement from the HW Board to focus on the development and distribution of its branded building products – Mila hardware and US based LaSalle Bristol – which together account for 80 per cent of Group turnover. The disposal is conditional only on the approval of Heywood Williams’ shareholders.

HW Plastics (including Spectus and Kestrel BCE) is one of the leading manufacturers of PVC-U windows systems and cellular buildings products. It operates two manufacturing plants located in Macclesfield and Scunthorpe and a distribution centre located in Trentham. It has approximately 600 employees.

At completion, the net cash proceeds are expected to be £1.2 million after expenses, which will be used, primarily, to fund a one-off contribution to the Group’s defined benefits pension scheme of £1.0 million. The disposal is not expected to result in any tax liabilities.

Heywood Williams has also agreed, subject to completion, to make a contribution of £0.35 million in each of the three years following completion towards rental payments at HW Plastics’ leasehold property at Trentham; fund the outstanding cash required to complete the committed expenditure in respect of the Elite 70 bevelled tooling project (some £0.7 million); and to procure minor building repairs at Trentham (some £0.3 million).

Commenting on the disposal of HW Plastics, Robert Barr, Heywood Williams’ Group Chief Executive, said: ‘This disposal enhances our ability to grow the Group by focusing on the design, development, marketing and distribution of branded building products. We are selling HW Plastics at a fair price, eliminating potential future operating losses and also removing the future potential cash outflows associated with product rectification. This is a satisfactory outcome for both companies and provides continuation of employment for the employees of HW Plastics.’

That is a very clean exit from plastic systems

For Brian Kennedy’s Latium Group, the purchase brings a window systems supplier is back in the group. Latium’s extensive portfolio includes retail installation businesses Weatherseal and its subsidiary Supreme O Glaze, conservatory systems specialist Wendland, roofline manufacturer Celuform, St Helens Glass and CT Glass. Latium retains links with Everest after its MBO.

Alarm bells

But the deal must ring alarm bells for Duraflex, which supplies window systems to several Latium companies. (Latium bought Duraflex in the Caradon sale and then sold it to Masco.) So, a good deal for both sides? ‘From the City perspective HW has certainly out-performed.’ said Jon Simmons, a spokesman for HW from Financial Dynamics. ‘Don’t forget that it (the plastics business) lost £5.4 million last year.

‘That is a very clean exit from plastics systems.’ he added For Latium, the benefits to the Group are obvious. The challenge now will be to limit the payouts for pinking, which HW estimated at £17m. The time limit on these claims is 2009 and effective remedial work might be the best action.

Source

Glass Age