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View Diary: WI Sen Breaking: Bowater Bought Johnson's Company in '86 for 17M, Sold it to Johnson for 2M in '97! (63 comments)

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  •  I understand your reasoning - but remain (0+ / 0-)

    unpersuaded as to the magnitude of the value discrepancy in play. Aside from the fact that the offered example in now way dispenses with the obvious property vs. business sale issue, there is the wrinkle that we cannot know what the deal was without access to Rexam's '97 books.

    As for what the business at '97 sale was worth to Rexam, there are a couple of snippets I came across - from Rexam's description of the disposition of non-core businesses in '97-98 time period.

    Restructuring strategies at European corporation Rexam led to the formation of Rexam Octagon in 1996, with the specific purpose of selling 20 firms which no longer fitted in with the corporate identity. Octagon's 20 businesses made a loss of 5 million pounds sterling in 1996 with total sales of 311 million pounds sterling. Rexam employed a team of financial advisers to dispose of Octagon for the best price possible within 18 months. The sale of 17 firms by August 1997 produced equity of 100 million pounds sterling.

    Now if Pacur was part of Octagon - then it might be that it was over-valued in the '86 acquisition and devalued at the time of the '97 Johnson procurement.
    the second snippet was here:

    In December 1996 a separate subsidiary called Octagon was created that combined about 20 businesses identified as noncore and earmarked for disposal. With these actions, Rexam took a goodwill writeoff of £254 million during 1996, resulting in a net loss for the year of £238 million.

    During 1997 Rexam divested 17 of the Octagon businesses as well as an additional three non-Octagon units. The jettisoned operations represented more than ten percent, or about £260 million, of group sales. The pruning continued in 1998 and 1999, with the completion of the Octagon disposal program and the selling off of several other businesses. In February 1999 Rexam sold its corrugated packaging division -- an operation that comprised the bulk of the company's industrial packaging sector -- SCA Packaging International BV for £195 million. Rexam began selling off its printing division in 1999 and in October sold its last windows manufacturing operation, Bowater Windows Limited, to a management-led buyout team for £122.5 million. The last of these sales left Rexam's building and engineering sector with just two operations: MiTek and TBS Engineering.

    They bundled together stuff that didn't fit Rexam's desired profile and stuff that was clearly under-performing. There is no way to know if Pacur was more like the latter (short sale) or more like the latter (just did not fit).

    •  I'm pretty sure they weren't part of Octagon... (0+ / 0-)

      Here's the whole Business Wire story when Bowater bought Pacur:

      Business Wire

      December 18, 1986, Thursday

      BOWATER-IND/PACUR; Bowater Industries PLC announces U.S. acquisition of Pacur Inc.

      LENGTH: 405 words

      DATELINE: LONDON

      Bowater Industries plc announced the acquisition of the whole of the share capital of Pacur Inc. of Oshkosh, Wis. for an initial payment of U.S. $13 million in cash with a further maximum sum of U.S. $4 million payable in 1990 contingent on the results over the next three years.

      The acquisition of Pacur, a specialist producer of cast films, is a further step forward in Bowater Industries' strategy of increasing its presence in packaging and allied markets in the United States and nearer home, through the acquisition and development of businesses with good growth and profit prospects.

      Pacur will operate as a free standing business within Bowater Packaging and Associated Products. It will form part of their growing U.S. group joining StarTex Corp. and Camvac International Inc. who operate in blown film extrusion and metalized films and papers.

      Pacur is an established custom extruder of cast films, supplying extruded sheet and laminates as rollstock to converters and end users. Principal applications are for convenience food and medical and pharmaceutical packaging.
      At its modern and well-equipped facilities in Oshkosh, set up in 1979, the company processes high performance resins, particularly polyester and copolyester, with capabilities in coextrusion, coating and laminating. Their expertise complements that of StarTex in blown film technology.

      In the year to Dec. 31, 1986, Pacur is expected to return a pretax profit of U.S. $1.9 million on sales of U.S. $14 million.

      Pacur's president, Ron Johnson, will continue to lead the company and maintain its development and expansion under Bowater ownership.

      Bowater Industries has made 11 acquisitions during 1986 for some 79 million pounds in furtherance of its strategy of expansion, especially in the fields of packaging and builders merchants.

      Bowater Industries plc is an international holding company with operations in the United Kingdom, the United States, Australia, and the Far East. Primarily a manufacturer and retailer of building materials, Bowater is actively expanding into packaging as a manufacturer of plastic drums, intermediate bulk containers, liquid packaging and cartoning systems.

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