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Waterford Wedgwood may be interested in Doulton

Irish luxury goods maker Waterford Wedgwood Plc may be interested in buying one or more of Royal Doulton Plc well-known china brands to bolster its own product range, but is unlikely to bid for the en…

Irish luxury goods maker Waterford Wedgwood Plc may be interested in buying one or more of Royal Doulton Plc well-known china brands to bolster its own product range, but is unlikely to bid for the entire debt-laden UK china maker, analysts say. Whether Doulton would approve a brand sale is another matter. But some analysts believe its future may depend on mending its balance sheet, which leaves Waterford in a strong negotiating position to take some brands off Doulton“s hands in return for much-needed cash. Waterford has indicated it isn“t planning a full takeover at the moment, but Waterford Wedgwood already holds nearly a quarter of Doulton“s shares. Speculation that Waterford may be interested in some brands arose the first week of March, when it managed to force the delay until this Friday of a meeting of Doulton“s shareholders called to approve a GBP 19 million rights issue. The Irish company said it had alternative proposals that would alleviate the need for a cash call – which would dilute its own stake in Doulton. Doulton has debt of around GBP 24.3 million and has already sold several brands, including Caithness Glass for GBP 6.1 million, or 70% of that brand“s annual sales. In 2000, it sold the more upmarket Royal Crown Derby brand for GBP 16.5 million, or twice its annual sales. Analysts say Waterford looks poised to pick off brands like Royal Albert or Minton, regarded as two of Royal Doulton“s high-end luxury brands. Royal Albert china had sales of GBP 27 million in 2001, while Minton had sales of GBP 9 million. And Waterford Wedgwood is known for its enthusiasm for brands, which include Wedgwood pottery and Waterford crystal. Doulton“s sales on continuing activities fell 6% to GBP 166 million in 2001, while its operating loss narrowed to GBP 12.4 million from a GBP14.7 million loss in 2000. At its current share price of 14.75 pence in London, Doulton is capitalized at just GBP 12 million and would be easily digestible by Waterford Wedgwood if the latter wanted a takeover. Waterford Wedgwood is capitalized at EUR 600 million and its shares are currently quoted at 73 cents in Dublin. Earlier this month the Irish company reported a 52% decline in pretax profit for 2001, although its sales exceeded the EUR 1 billion-mark for the second consecutive year. Waterford Wedgwood is highly acquisitive, but a hostile takeover would be out of character. In recent years, it has bought US cookware maker All-Clad Inc., plus Rosenthal and Hutschenreuther, two German porcelain makers. Since the beginning of March, Waterford has been building on its stake in Doulton and currently holds 21.2%. It said it doesn“t plan imminently to increase its stake in Doulton to above the critical 29.9% level, which would force it to make a formal offer under UK takeover law. Still, Waterford said it “reserves its right to reconsider its position in the event Royal Doulton was to receive an offer from a third party.” Since it bought an initial 14.9% stake in Doulton in 1999, it has vociferously said it held the stake for “defensive” reasons. Market watchers say Waterford is opposed to the rights issue because it will dilute its stake in Doulton and diminish its influence on the future direction of the company. For the last 10 years, Waterford Wedgwood has campaigned against overcapacity in the ceramics industry worldwide, a spokesman said, who refused further comment on the company“s intentions towards Doulton.

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