Acquisition of insulation maker

Cash-strapped Superglass sold to Russian rival

Ken MunroScottish insulation company Superglass is being acquired in an £8.7 million recommended cash offer by a Russian rival.

The loss-making manufacturer of glass wool, based in Stirling, is being acquired by Moscow based Inflection, part of Russian tycoon Sergey Kolesnikov’s TechnoNICOL  group, one of the world’s largest insulation makers.

The Superglass board said that despite making progress through a turnaround plan it could not see a future as an independent company.

In a statement to the stock exchange it admitted to the pressures it was under and how a sale of the business to a large rival had become the best solution.

It said its status as a quoted company meant its trading position was always open to public scrutiny and this has worked against it.

It would need to raise more finance, not least to replace its only furnace, and this could not be guaranteed.

The government’s withdrawal of an energy-efficiency scheme was already having an effect on demand and the uncertainty following the Brexit decision made matters worse.

Inflection is committed to the management and 150-strong workforce and says it has investment plans including a major distribution deal for TechnoNICOL products through Superglass.

The remuneration committee of Superglass has also agreed that CEO Ken Munro (pictured), former finance director Chris Lea and production director Mark Atherton will each be entitled to a cash bonus equivalent to 20% of their respective annual base salaries, representing £35,000, £26,000 and £22,000 respectively.

Mr Kolesnikov, the sole shareholder of Inflection, who is also the president and managing partner of the TechnoNICOL group of companies, considers Superglass to be “a good strategic fit for a potential commercial partnership with the TechnoNICOL group”, giving his company a presence in the UK and Irish insulation markets.

He believes Superglass is likely, over time, to become the leading distributor of TechnoNICOL Construction’s products in the region.

In a statement to the stock exchange, Superglass says the Offer will also enable Superglass it to benefit from the “financial support and certainty that Inflection is able to provide”

In addition, it said the offer gives all Superglass shareholders the opportunity to exit at a substantial premium, thereby removing the uncertainty that they may otherwise be subject to, given the relative illiquidity in the shares as well as the relatively volatile share price over the past two years.

The  5.6p per share bid represents a 114% premium to last night’s closing price of 2.62p.

Superglass’s main shareholder, holding 38% of the company is backing the offer which has irrevocables totalling 63%.

> Daily Business comment: The takeover will provide Superglass with the capital certainty it requires to survive and thrive in a market suffering from overcapacity.

Its statement about the need for refinancing by a rival confirms comments about the benefits of foreign takeovers made on this website this week following the ARM Holdings acquisition.

Superglass has undertaken a series of recapitalisation exercises to reduce its debts and costs and to finance a major programme of capital investment at its plant in Stirling.

It needed this to compete with the other leading players in the UK glasswool insulation market which has suffered a prolonged period of price weakness and subdued demand.

Matters were made more problematic by he almost complete withdrawal of the UK Government-sponsored domestic energy efficiency schemes.

Progress has been made on a turnaround plan, but the company is still making a loss.

Overcapacity in the UK glasswool insulation market stretched financial resources compared to its principal competitors mean the plan continues to carry some risk.

The company now says the UK’s recent decision to vote to leave the European Union has added a new layer of operational and financial risk.

The board has been exploring a new plan to save in excess of £700,000 for a capital outlay of approximately £2.7m. However, funding for this project is not in place and beyond its available debt facilities.

It also needs to find £4m to replace its sole operating furnace the company’s capacity and would rely on cash flow to go back to shareholders.

Interestingly, the company says its quoted status, requiring it to publicly disclose its financial and trading position, has “materially disadvantaged management’s efforts to stabilise the business and implement the turnaround plan”.

It states in the offer document that quoted status also carries “significant administrative and compliance costs which have been an additional drain on cash at a time when Superglass could ill afford it.”

Being a supplier of a limited product range operating from a single manufacturing plant represents a “strategic challenge” which the company has been in the process of attempting to address in order to build a sustainable long term future.


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