WATERFORD Wedgwood has confirmed its intention to acquire a 9.1 per cent stake in Rosenthal for around £3 million as part of a strategic alliance with the German porcelain company. It also has an option to acquire a further IS per, cent of Rosenthal over the next four years. The deal is subject to approval by Rosenthal's shareholders at an extraordinary general meeting to be held on January 31st, 1997.
The initial 9.1 per cent will be acquired through the issue of 60,000 new Rosenthal shares "at or close to the prevailing market price
Waterford Wedgwood said. "In the early years", said finance director, Mr Richard Barnes, the deal will have a "neutral" impact on earnings.
Rosenthal has been incurring losses and generated sales of DM330 million (£115.3 million) in 1995. Losses came to DM17.5 million (£7.6 million).
"This is an outstanding opportunity to forge a true strategic alliance with another of the world's great tabletop companies," according to Waterford Wedgwood chairman, Dr Tony O'Reilly. "I am sure that, together, we can restore the fortunes of Rosenthal to the benefit of employees and shareholders alike, as Waterford Wedgwood continues to grow in the luxury brand business."
Rosenthal has about 40 studio house stores in Germany and 80 per cent of its sales are domestic. Italy is the next-largest, accounting for 8 per cent while the remaining 12 per cent is in other world markets. It does not sell to Britain, the US, Australia and Japan, markets in which some of Waterford Wedgwood products are strong.
The Rosenthal connection is expected to help Wedgwood sales in Germany and other Continental European markets. Waterford crystal sales to Germany are negligible. Collaboration in manufacturing will further enhance profitability, according to Waterford Wedgwood.
The initial deal will push up borrowings from £35 million at the end of 1995 to £38 million but these are expected to fall to £33 million at the end of the year, as free cash flow comes into the balance sheet. Gearing will be a comfortable 20 per cent.
The intention is to grew Rosenthal products through the Waterford Wedgwood distribution network. Waterford Wedgwood has been talking to the German group for 21/2 years, Mr Barne said. It has already been distributing Rosenthal products in Canada.
Rosenthal has restrictive voting rights. Under existing rules, the maximum votes for an individual shareholder is 5 per cent. However, Rosenthal is to seek the removal of this restriction at the extraordinary general meeting.
Rosenthal has a 12-member supervisory board, of which six represent the workforce and six the shareholders. Under the deal Waterford Wedgwood will have board representation but this has not been spelled out.
The option to acquire the further 15 per cent stake will be exercisable at varying dates and prices up to December 31st, 2000. This will involve existing shares. Waterford Wedgwood could increase is take up to 49 per cent before it would be forced to make a bid for the remaining equity. This is not an immediate prospect.
Speculation about Waterford Wedgwood's interest in the German company was first raised by a report in Germany's Focus magazine in June which said Waterford Wedgwood was interested in acquiring a stake.