James Crean, which up to now insisted it was keeping its electrical division, has agreed to sell it to WF Electrical plc, a British wholesale electrical distributor, for £18.8 million (€23.87 million). It will incur a sizeable loss of £17 million (€21.59 million) on its disposal. The deal is subject to approval by the shareholders of Crean and WF. The companies being sold are J & N Wade and OLC, and assets with a book value of £1 million sterling, held by Crean, form part of the deal. The consideration consists of £10.5 million sterling cash and £5.5 million sterling five-year redeemable convertible bank-guaranteed loan notes with a fixed rate of interest of 4.75 per cent. The notes are convertible into 831,666 WF shares. The decision to sell the electrical division, Crean said, was based on a "review of the prospect for recovery within that division and a review of the need to conclude the restructuring process which has been underway for some time". That review concluded that the prospects of short-term improvement in the electrical wholesaling industry as a whole were low and that the timescale for recovery was likely to be protracted.
Also, according to Crean, the disposal "would be a significant step in completing the restructuring of Crean". The Crean board concluded that "the value gain at Crean shareholder level, relative to the negotiated terms, which would result from a recovery of the electrical division, would be too little and too slow to justify the consequential slow-down in the wider restructuring of Crean".
The electrical division recorded an operating profit of £720,000 in 1998, while net assets amounted to £10.8 million. The net assets on completion are expected to be £14.9 million. The provision of £17 million is made up of £14.1 million goodwill and £2.9 million in related tax assets.
WF chairman, Mr John Ray, said there is significant potential to improve OLC and Wades' performance "through the introduction of WF's existing sales, marketing and logistics capabilities and management resources". However, WF has noticed a slowing in some sectors of construction and "accordingly, our outlook for the short-term is more cautious than it has been for some time".
