Yule Catto in £376m German deal

Yule Catto, which has bases in Batley and Ossett, and Stallingborough in North East Lincolnshire, also announced a four-for-three rights issue to raise 225m gross.

The firm said it had bought the PolymerLatex Group - an established player in the development, production and distribution of emulsion polymer products - because it was a "transformational" opportunity to acquire a leading emulsion polymers franchise.

Cost savings are expected to be "at least" 20m with the majority of it through efficiency improvements in manufacturing, selling, general and administrative functions. About 30 per cent of this will be felt next year with the full benefit coming from 2012.

The savings will come at a 20m cost with the "significant majority" in 2011 and the remainder the following year. The Yule Catto board said it would make extra capital expenditure of about 23m to realise the savings although expects this to be offset.

The deal will give Yule Catto an increased scale and market share, a broader product offering and an improved new product pipeline, it said.

Adrian Whitfield, chief executive of Yule Catto, said: "The (deal) creates a group with increased scale, an enhanced product portfolio, stronger market positions and greater efficiencies, all of which provide a foundation from which to grow and compete more effectively in a consolidating emulsion polymers market.

"At the same time, it supports our long-term strategy by providing a stronger platform and the necessary cash generation to accelerate our growth in emerging markets.

"With meaningful potential synergies, it is a financially attractive deal which is expected to be accretive to earnings from the first year of ownership and significantly accretive thereafter."

The deal will also boost the firm's position in the xSBR latex market by adding European manufacturing assets, new end markets and development opportunities.

Yule Catto will also have access to a modern, purpose-built nitrile latex capacity in Malaysia, giving it the opportunity to expand its product offering in the growing market for synthetic latex protective gloves and in Asia, as well as access to extra manufacturing expertise, research and development and technical service skills.

The value of the deal is made up of 157m euros (133 million) to acquire the entire issued share capital of PolymerLatex and the assumption of the group's net debt of €286 million (243 million).

The enlarged Group will continue to fund the PolymerLatex group's unfunded pension liability, estimated at 31m euros (26 million) as at 31 December 2009.

PolymerLatex's underlying sales for the six months to 30 June 2010 279.6m and underlying EBITDA was €33.8m.