Heywood Williams: investor revolt grows

UK construction products group Heywood Williams will have to deal with a growing shareholder revolt against a proposed rescue package that would involve the banks taking an 80% stake in a GBP 21 milli…

UK construction products group Heywood Williams will have to deal with a growing shareholder revolt against a proposed rescue package that would involve the banks taking an 80% stake in a GBP 21 million debt-for-equity swap. The Halifax business has been hit by the crisis in the construction industry and has eliminated almost 600 jobs over the past 18 months due to a 40% decrease in demand for its products. Chief executive of Heywood Williams, Robert Barr, said that he believes this restructuring agreement will secure the long-term future of the group, save 1,000 jobs and ensure the business remains in Yorkshire. Robin Graham, a businessman with a 7% stake in the company, said he would vote against the rescue proposals. Graham said in a statement: “The situation that Heywood Williams has found itself in is clearly very unfortunate and extremely sad for the employees of the company, who have worked incredibly hard but are in no position to influence the direction of the company, and indeed the creditors and the company“s many shareholders. “I will be opposing this rescue package in its present form because I want to see a better plan.” There were also reports that another businessman Paul Bell, with a 27% stake, was planning to tell the Stock Exchange that he will vote against the restructuring plan. Moreover, the company“s independent pension trustee has also agreed to defer repair contributions to the pension scheme, which has a deficit of GBP 43.5 million, until 2014. If the rescue package is approved, the company will delist from the London Stock Exchange after 41 years. The restructuring, which is to be voted by shareholders today, 20 October 2009, will result in the banking syndicate – including Lloyds and National Australia Bank – and its board representative holding 80 per cent of the issued share capital. Ten per cent will be held by existing shareholders, while executive board members and some senior managers holding the remaining 10%. The company informed its shareholders that if the proposal were not to be approved, it would “immediately have material and very detrimental consequences for the group” which would destroy any share value. In a statement issued on 12 October, the company said: “This restructuring will secure over 1,000 jobs, fresh investment and a long term future for Heywood Williams. The banks will write off GBP 21 million of debt, increase funding by GBP 6 million and become 80% shareholders in the business. The banks have insisted that the current management team continue to run the business as a condition of the restructuring. A wide range of alternatives have been considered, but this is the only plan that can secure the long term future of the business for the benefit of all stakeholders.” Approximately 80% of the group“s sales are branded building products sold to the home improvement and residential new build markets across Europe and North America. In 2008, Heywood Williams“ revenues dropped 12.5% to GBP 219 million, and in August 2009, the company said it would continue to face “very difficult” market conditions.