Lenzing acquire Tencel (2004)

Points to Note:

• This take-over will be approved by the EC because Tencel's sales in 2003 were worth less than  €100 million ($119 million)
• "This is by far the best solution..." (It would be interesting to know what Lenzing paid CVC.)
• "The fastest growing part of the [Tencel] market is wipes".
• New capacity expected soon in Asia.

Lenzing AG has agreed to acquire, for an undisclosed sum, Tencel, its main competitor in the growing market for lyocell cellulose fiber, in which both companies are facing the prospect of strong competition from new Asian producers.

Although the deal gives Lenzing a monopoly in lyocell capacity in both Europe and North America, the takeover is unlikely to be barred by competition authorities. Tencel’s sales of around €100 million ($119 million) in 2003 are below the threshold above which its acquisition would have to be approved by the European Commission (EC).

Three years ago, the EC blocked a move by CVC, the international financial group, to take over Lenzing and merge it with its fibers subsidiary, Acordis, of which Tencel was then a part.

“We’ve examined the competition implications very carefully,” says a Lenzing spokesperson. “The deal is totally different from the one which was proposed three years ago.”

“Not only is Tencel not big enough to come under antitrust rules, but it formed only a small part of what was Acordis, whose major business like Lenzing’s was viscose fibers,” she adds.

UK-based Tencel, which has a total of around 60,000 tons per year of operating capacity in Mobile, Ala., and in Grimsby, England, was last year spun off from Acordis in order to make it easier to divest.

“Our owners have been trying to dispose of Tencel for the last three years,” says Mike Proctor, chief executive of Tencel whose fiber is marketed under the Tencel brand name. “This is by far the best solution for all stakeholders.

Seismic changes in man-made cellulosics: Part 1 - Lenzing takes Tencel (2004)

Here is Part 1 of the full text of an article from International Textiles Bulletin at the time of the Lenzing take over of Tencel. Points to note:

• Both CVC and Lenzing had expected the 2001 take-over of Lenzing to be allowed.
• Maybe to make the deal more palatable to the authorities, CVC closed their 2 best viscose operations (Mobile - Alabama and Grimbsy).
• The closures came at time when it was apparent that the viscose revival which had commenced in 1999 was real, and driven in part by demand for viscose in the new hydroentangled nonwoven wet-wipes.
• The Mobile viscose plant was a leading supplier of fibre for nonwovens and, strangely, was closed in order to keep what we thought was the less efficient and more polluting Lenzing Lowland plant open.  (More info needed here)

The long-rumoured acquisition of  Tencel from Acordis by Lenzing has at last been confirmed in a move that finally brings together the operations of the companies whose patents were pooled following an acrimonious battle over the rights to lyocell technology in the closing years of the last century.  Ever since Acordis’s major shareholder, CVC Partners tried – and failed - to capitalize on their acquisition of the old fibre businesses of Courtaulds and Akzo Nobel by adding Lenzing to the family, the industry has been waiting for this sort of rationalisation.

In October 2001 the European Commission prohibited the acquisition of Austria’s Lenzing by the UK’s CVC Partners Group Ltd, but only after plant closures apparently made in the anticipation of such a deal going through.  In April 2001, Acordis decided to close its Mobile viscose plant, one of the largest and lowest cost viscose fibre operations in the Western World, leaving the ageing Lenzing Lowland plant as the only source of viscose staple on the North American continent.   Acordis had earlier announced the  closure of Grimsby, the last viscose staple plant in the UK, and another remarkably efficient converter of wood cellulose into fibres.  Both Mobile and Grimsby specialised in low cost fibre for the world nonwoven market, leaving the Acordis Kelheim viscose plant, traditionally a textile fibre plant, as the only remaining Acordis source for the nonwovens industry.  

With the market for viscose in textiles declining in both Europe and America, some rationalization was inevitable, but to those observers expecting the nonwoven demand for viscose to rise on a wipe-fuelled boom, taking out the two key nonwoven plants seemed odd.  Lenzing’s Austrian plant had also specialised in textiles, and for many years Lenzing had been  a poor second to Courtaulds, and then Acordis in nonwoven market supply.  But the Acordis viscose closures left a vacuum into which Lenzing was sucked, along with Tencel and lyocell, and Birla.  Birla, India’s and the world’s biggest viscose producer realised that if they could change some of their enormous textile viscose capacity to supply European and American nonwoven requirements, they too had a rare opportunity to break into new and growing markets.

(Click here for Part 2..)

Akzo Nobel Offers Premium For Courtaulds (1998)

This is a comprehensive story of the Exodus deal noting the exceptional shareholder value obtained by Gordon Campbell.

Akzo Nobel made an agreed-upon offer of 450 pence ($7.51) per share for Courtaulds on April 20, and analysts do not expect a counter bid.

The offer values Courtaulds at £1.83 billion ($3 billion), about 91 percent of its sales of £2.1 billion in the year until the end of March, and 11 times operating profit of £166 million.

The offer also represents a premium of 66 percent above the share price of 271.5 pence on February 24, when Courtaulds announced plans to split its coatings and sealants and fibers and chemicals operations into two separate entities, while selling off its polymer products business.

The offer is 25 percent above the share price of 361 pence at the end of March, shortly before Akzo Nobel revealed it was discussing a possible takeover with Courtaulds.

Courtaulds' board is recommending the offer to shareholders on the grounds that it is consistent with the strategy behind the company's original demerger plans.

"Our proposal to demerge the component parts of Courtaulds was designed to enhance shareholder value," says Courtaulds CEO Gordon Campbell. "This offer adds further value and certainty for Courtaulds' shareholders. For employees, the creation of stronger businesses in both the coatings and fibers industries can only be in their best interests."

Acordis shuts US Tencel plant (1999)

Acordis, the wholly-owned subsidiary of Akzo Nobel, is halting production of Tencel at its 43000 tonne/year Mobile, Alabama, US, plant,focusing operations at its other 42000 tonne/year plant in Grimsby, UK.

The company blames current market conditions for the closure and said the Tencel operations have been making a loss since the start of the Asian crisis. 'Until the Asian crisis, demand frequently exceeded our ability to supply,' said David Wilkinson, Acordis director responsible for Tencel.

Some sources believe Tencel's problem, since its launch in 1992, lies with its relatively high price relative to other fibres.

But Acordis maintains this is a temporary setback. The Mobile plant will be maintained in operational condition so that it can be brought back onstream when demand improves.

Acordis remains committed to Tencel, adding that programmes with major

Tencel Shrinks to Fit (1999)

• Tencel Mobile plant is shut.  
• Doubts about its (Tencel's) future.  
• It's enormous development and patent battle costs resulted in huge cost burden.
• Donald Anderson is quoted:  production difficulties constrained sales even before the Japanese (luxury) market slowdown.
• No possibility of targeting commodity markets.

Acordis' decision to mothball the 43000 tonne/year Tencel plant at Mobile, Alabama, and concentrate production at the newer 42000 tonne/year Grimsby, UK, unit coincides with Lenzing announcing that its 12000 tonne/year Austrian line will under-run throughout 1999 while work proceeds on debottlenecking it to 20 000 tonne/year.

Lyocell, the generic name for the wonder fibre, the development costs of which left Courtaulds defenceless in the face of the Akzo Nobel approach and probably lay behind the recent departure of Lenzing's ceo Heinrich Stepniczka, is not fulfilling its early promise.

'We believe in lyocell,' says Lenzing spokeswoman, Rosemarie Schuller, tacitly admitting the doubts everyone feels about its future.

Acordis set to face the world on its own two feet (1998)

Akzo Nobel is to split off its fibres business, Acordis, in the second half of 1999. Created as a result of Akzo Nobel's takeover of Courtaulds earlier this year, Acordis has sales of around Dfl6bn ($12bn), and will operate as a separate business under Akzo Nobel from 1 January 1999. It will be the world's largest dedicated fibres production company.

On demerging, Akzo Nobel shareholders will be given Acordis shares, although details are not yet finalised.

Acordis employs around 19 000 people worldwide and will have its headquarters in Derby, UK. It will be registered in the Netherlands. Integration of the Courtaulds and Akzo Nobel fibres businesses is already under way. 'The Courtaulds and Akzo products are different, but do form a comprehensive range,' said Acordis. The main thrust of the integration is in aligning management and organisational styles.

Chairman of the supervisory board will be Gordon Campbell, former chief executive of Courtaulds. The day-to-day running of Acordis will be the responsibility of Folkert Blaisse, currently Akzo Nobel's director responsible for fibres. He will step down to concentrate on managing and developing Acordis. Meanwhile, the finance officer will be Patrick Shanley, formerly financial director of Courtaulds, and Peter Rogers of Courtaulds will be deputy chief executive of Acordis.

The group has production facilities in Germany, the Netherlands, the UK, the US, Brazil, Italy, Spain and Poland, where it makes synthetic fibres and speciality materials for industrial, textile, medical and hygiene applications.

14 December 1998 00:00 [Source: ICB]

Courtaulds Name can't be used for Fibres (1998)

Akzo Nobel has to completely eliminate the name Courtaulds from its operations because of a deal on the splitting of Courtaulds into two separate entities in 1990. The units and subsidiaries of Courtaulds PLC are mostly changing their name to Akzo Nobel following the takeover of the company by Akzo Nobel.

When the former Courtaulds group was divided into Courtaulds PLC, the fibers, chemicals and paints operation, and Courtaulds Textiles, the fabrics and clothing business, the two agreed that if one was taken over, the rights to the name would revert to the other.

"Since the demerger, there has been a lot of confusion about what is a long established name," says a Courtaulds Textiles spokesperson. "Now that we have exclusive rights to it, we can create a much stronger corporate image and identity."

Meanwhile, Akzo Nobel is starting limited production of the cellulosic fiber lyocell, sold under the brand name Tencel, at its new 42,000-ton-per-year plant at Grimsby, UK. The unit, built by Courtaulds, was originally scheduled to start up in late 1997.

21 September 1998  [Source: ICB Americas]

Lyocell Market Falters Despite Early Confidence (1998)

• Tencel market collapses.
• Soft Denim accounted for 80% of Tencel sales during expansion.
• Dyeing and finishing problems slow uptake in other fabrics.
• Courtaulds and Lenzing delay further capacity increase (but Courtaulds Tencel plant at Grimsby is ready to start)
• Lenzing cut back R&D and marketing for lyocell.  "Looking for ways to minimise new plant start-up loss".
• Setback for Akzo-Nobel plan to float-off the combined Courtaulds/Akzo Fibres operation (Acordis)

The growth in sales of lyocell, the new cellulosic fiber, has fallen so sharply that Courtaulds and Lenzing, its two manufacturers, have had to put back plans for production increases.  Lenzing has postponed, by at least one or two years, plans to debottleneck its 12,000-metric-ton-per-year lyocell plant at Heiligenkreuz, Austria, and build a second line of similar capacity.  Courtaulds has delayed until next year the full operation of a 42,000-ton lyocell plant at Grimsby, UK, its first European lyocell plant. That facility's start up has already been postponed twice.
The company, which will shortly change its name to Akzo Nobel PLC following its takeover by Akzo Nobel this summer, hailed lyocell as a "wonder fiber" when it was the first to launch the product in 1992 under the brand name Tencel.

Courtaulds predicted that lyocell, the first major new fiber in 30 years, would supplant viscose rayon as the main cellulosic fiber, with global output reaching 1 million tons per year early in the next century and 2 million tons by 2020.

Now the high hopes attached to the fiber have faded, and analysts say lyocell will take far longer to make significant inroads into the man-made fibers market.

Courtaulds pushed up capacity at its first Tencel facility in Mobile, Ala., to 55,000

Akzo Nobel wins Courtaulds (1998)

...but they don't want the Fibres business.  The combined Akzo/Courtaulds fibres operations will be demerged, floated or just sold by the end of the decade.

Undervalued! The 450p/share offer is double the Courtaulds share price of a few months earlier.

The Tencel investment is seen as "one of the main reasons why Courtaulds hit hard times", but would "eventually make a strong contribution to profits".

Courtaulds' board has recommended shareholders accept Akzo Nobel's £1.83bn ($3bn) offer. Restructuring plans have been shelved and instead Courtaulds' chief executive, Gordon Campbell, is headed for a seat on the board of the enlarged company and a chief executive officer role when the combined fibres businesses are demerged.

There appears to be some disagreement over whether the 450p bid undervalues Courtaulds' assets. The acid test will be whether an alternative bidder emerges over the coming weeks. Cees van Lede, Akzo Nobel's chief executive officer, claims the offer is 'fair and more importantly certain value'.

The logic of the deal for both companies and their employees is compelling. The geographical and product portfolios have very little overlap. Redundancies are unlikely as is the possibility of production facility closures.

Cees van Lede claims the purchase of Courtaulds, 'the Rolls Royce of UK coatings and fibres', is a 'win-win deal', strengthening both the coatings and fibres businesses. It fits perfectly with Akzo Nobel's long-term strategic aims of being a world leader in coatings and eventually spinning off fibres as an independent business.

The combined coatings business now becomes a world leader. Combined 1997 coatings sales of Dfl11.5bn ($5.65bn) compare with Sherwin Williams at Dfl9.5bn and ICI at Dfl7bn.

While Akzo Nobel is big in decorative paints, car refinishes and wood, Courtaulds is a world leader in marine and yacht coatings, heavy-duty protective coatings and aerospace sealants.

If any anti-trust problems arise with the EU it is likely to be in the aerospace

Akzo Nobel bids for the whole of Courtaulds (1998)

Akzo Nobel last week confirmed it had made a play for UK coatings and fibres company Courtaulds. The Dutch group issued a statement which said that it was 'in talks with Courtaulds that may or may not lead to a cash offer' of an anticipated 450p/share, worth £1.8bn ($2.8bn).  The bid from Akzo Nobel, expected after Easter, provides Courtaulds with an alternative to its split plans.

Should the deal go through it would make Akzo Nobel - currently number three - the global leader in the paints and coatings league. Akzo Nobel said that post acquisition it would look at options for spinning off the combined fibres business which may include a demerger.

London analysts were generally positive towards the Akzo Nobel move saying it would create greater shareholder value for Courtaulds, but agreed that finding a buyer for the fibres business would prove tricky. Peter Mackey at Dresdner Kleinwort Benson said: 'Just putting the two together makes a bigger poorly operating business.'

But while both companies are involved in viscose production, it is the coatings

Courtaulds splits fibres & chemicals from paints (1998)

450 redundancies in R&D at Coventry and Spondon.  A rare quote from Andy Hopkins (now sadly deceased) who, as the Cellulosics Technology Director, was speaking for the "hardest hit R&D Department in Coventry which is losing 100 jobs"

• Tencel will suffer but not as much as viscose.
• Courtaulds swaps OPP film for Hoechst's shares in European Viscose.
• The polymers business is put up for sale.
• The demerger creates a successful paints/sealants business and a struggling Fibres and Chemicals business.

Courtaulds is to de-merge its coatings operation into a separate business, International Coatings, leaving its hard-pressed fibres and chemicals division to sink or swim on its own. In the meantime, it is looking for a buyer for its polymers business - expected to raise more than £200m ($320m). The fibres and chemicals operation, which will retain the Courtaulds name, faces a heavily oversupplied market, increasing price competition from Asia, rock-bottom polyester prices, and a strong pound. It has been approaching rivals with proposals for joint ventures and mutual cuts in capacity but the industry - composed of much smaller companies - is wary of Courtaulds' size.

A de-merged fibres business would be a less daunting joint venture partner. Chief executive Gordon Campbell said: 'As a self-standing business it will be better placed to explore options which will facilitate the rationalisation of the fibres industry.'Simultaneously, the company announced a total of 500 job losses in the UK at its Coventry and Derby plants, aimed at saving £15m annually. Hardest hit is the research and technology department in Coventry, which is losing 100 jobs. Andy Hopkins, celluloids technology director, said: 'We

Courtaulds announces major restructuring (1998)

UK group Courtaulds on Wednesday announced a radical restructuring, including a separate listing for its coatings and sealants business, the sale of its polymer products activities and a major cost reduction programme in fibres and chemicals.

The group plans to cut about 500 fibres and chemicals jobs in the UK. It will also keep its global viscose fibre capacity under "constant review" Courtaulds said. The group has agreed to sell to Hoechst its minority stake in an oriented polypropylene (OPP) film joint venture, and to acquire Hoechst's stake in the European fibres joint venture.

Courtaulds' initial announcement did not say if it had a buyer for the polymer products business, which like fibres and chemicals has been hit hard by the

Tencel Asia postponed indefinitely: Courtaulds open to a bid (1998)

Asia's growing economic crisis has forced Courtaulds, the chemicals group, to postpone plans for the construction of a £150m fibre plant in the Far East.

Gordon Campbell, chief executive of Courtaulds, said: "We were looking to set up a plant in Indonesia or Korea. But now we would like a bit of time to see what happens over there."  The new plant would have produced Tencel, Courtaulds' new "wonder fibre" and its location was to be announced last autumn. 

Building delays at the group's new £120m Tencel factory in Grimsby meant the construction of the Asian plant had already been put back by several months. Now the downturn in the Far East has lead to it being postponed indefinitely.

Courtaulds said that the economic crisis had already led to a dramatic fall in imports to the area from the West, with orders drying up at some of Courtaulds businesses. Mr Campbell said Asian economies would react to the severe problems at home by dumping their products on the developed world. "They will try to export their way out of trouble," he said.

Tencel beginning to pay off but Courtaulds falls from Footsie (1996)

It's goodbye to Courtaulds, the chemical group will almost certainly today be given its marching orders from the prestigious Footsie blue chip share index.

Shares are bumping along near their 12-month lows; Courtaulds' stock market valuation has fallen to around £1.6bn.  Courtaulds has looked vulnerable for some time. In the past few months Courtaulds has slumped from 487.5p to 384p, off 4.5p yesterday. 

Interim figures devastated Courtaulds. Profits fell £4m to £64m, prompting estimates for this year and next to be cut. The group's massive investment in wonder fibre, Tencel, is beginning to pay off but other parts of the business are struggling.

DEREK PAIN

  

the independent, WEDNESDAY 11 DECEMBER 1996

COURTAULDS ACTS TO REDUCE DEBT (1996)

More on the sell-offs to finance Tencel.  The sums now add up to £104 million:  similar to the cost of the Grimsby SL3 plant?

Amtico, the vinyl flooring manufacturer, was sold by Courtaulds for £49m in accordance with the company's strategy of focusing on its coatings and fibres businesses. Courtaulds will continue to hold a 10% share of Amtico, from which it may receive an additional £3.8m if performance objectives are achieved. The revenue from the sale will reduce Courtaulds' debt (£376m in September 1995) in order to finance future development of Tencel lyocell fibre. A further £40m income is expected from a joint venture with Hoechst involving oriented polypropylene film.

Anon., Text. Mon., Feb. 1996, p. 3

COURTAULDS SELLS CELLOPHANE TO UCB TO CUT TENCEL DEBT (1996)

£15m doesn't seem a lot for the massive Cellophane viscose plant at Bridgwater.  Clearly the Tencel debt at this time was in need of attention! 

Courtaulds has sold its cellulose film business Cellophane to UCB for £15m. Cellophane transparent film has been used since the 1930s to wrap chocolates and cigarette packets. After intense competition from other films, production is now 20,000tpy, one third of its 1940s peak. Courtaulds sold Amtico for £49m in December 1995. Both sales were non core businesses and proceeds will be used to cut debts incurred in establishing Tencel, its new fibres brand. 

Green D., Financ. Times., no. 32,877, 9 Jan. 1996, p. 17

COURTAULDS RAISES £49M FROM AMTICO TO FINANCE TENCEL (1995)

Compared with the upbeat last post (Sept 95) this one suggests all may not be well in the accounts dept.

A management buy-out team has purchased Courtaulds' Amtico luxury vinyl flooring unit for £49m cash. Courtaulds will keep a 10% stake in the business and may receive a further £3.8m if certain performance targets are met. This sell-off coincides with Courtaulds' strategy of focusing on fibres and coatings. The company has received shareholders' approval for its oriented polypropylene film joint venture with Hoechst. Proceeds from the sale and the joint venture are to be used to reduce debt, which would reduce gearing from 53% to 40% and give the group room to finance the capital investment needed to develop Tencel, its new fibre. 

Harverson P., Financ. Times, no. 32,865, 22 Dec. 1995, p. 20

Maybe the Tencel development was straining Group finances at this time.  Amtico seemed to be just the sort of high quality, high value brand Courtaulds needed to grow, and PP film in 96 looked better in the medium term than Cellophane.

Tencel capacity doubles in Mobile (1993)

Here's another Exodus story from The Independent of 18th November 1993 which also mentions the Mobile Tencel expansion and "another 4 plants in the Far East" (?!)

COURTAULDS, the chemicals and fibres group, yesterday surprised the City with a plan to shut down six manufacturing plants with a loss of 650 jobs in Europe.

The cuts were announced as Courtaulds reported taxable profits of pounds 96m, up from pounds 88m, for the half year to 30 September. Earnings rose from 18.1p to 19.5p and the dividend has been improved from 3.8p to 4p.

However, the results were below expectations and news of the closures and a dismal trading outlook led analysts to downgrade full-year profit estimates. Martin Evans of Hoare Govett slashed his taxable forecast by pounds 30m to pounds 150m before exceptional items. The shares dived 44p to 432p.

Courtaulds said the closures would cost about pounds 52m this year and were prompted by difficult trading conditions and falling exports to the Far East, which was becoming increasingly self-sufficient.

As a result it was accelerating its plant closures in Europe and would also integrate the aerospace sealants business with its coatings arm. The changes will reduce the number of coatings factories by a third to 12. Most of the job losses will be in Continental Europe although about 100 could be lost in Britain.

The group is expanding in other sectors. It is building a second factory to produce Tencel, a synthetic fibre, at a cost of pounds 90m, to meet growing demand in the US and Japan. The plant will more than double production capacity. Separately, it is also setting up four plants in the Far East.

Courtaulds closing 6 coatings plants, expanding Tencel (1993)

COURTAULDS, the chemicals and fibres group, yesterday surprised the City with a plan to shut down six manufacturing plants with a loss of 650 jobs in Europe.

Courtaulds said the closures would cost about £52m this year and were prompted by difficult trading conditions and falling exports to the Far East, which was becoming increasingly self-sufficient.

As a result it was accelerating its plant closures in Europe and would also integrate the aerospace sealants business with its coatings arm. The changes will reduce the number of coatings factories by a third to 12. Most of the job losses will be in Continental Europe although about 100 could be lost in Britain.

The group is expanding in other sectors. It is building a second factory to produce Tencel, a synthetic fibre, at a cost of £90m, to meet growing demand in the US and Japan. The plant will more than double production capacity. Separately, it is also setting up four plants in the Far East.

NEIL THAPAR , the independent

 

THURSDAY 18 NOVEMBER 1993

EXODUS Part 1: COURTAULDS TO SELL SAICCOR DISSOLVING PULP INTERESTS TO SAPPI (1988)

As part of its aim to become a 'more focussed' growth company Courtaulds plc has signed unconditional agreements for the sale of its dissolving pulp interests, which include its interests in Saiccor (Pty) Ltd, South Africa, and Speciality Pulp Trading Ltd and supporting companies, Hong Kong, to a South African consortium represented by Sappi Ltd for £207 million. Sappi is also to purchase the 50% Courtaulds holding in unbleached kraft pulp producer Usutu Pulp Co. Ltd, subject to approval by the Swaziland government. Sappi estimates that the acquisitions will raise annual sales by 83% to 2.4 billion rand.


 Anon., Wall St. J., vol. VI, no. 117, 18 July 1988, p. 4

The cash realised was used to fund the purchase Product Research and Chemicals Corporation in the USA. It was part of the new strategy of reducing dependence on cyclical commodity businesses such as fibres in favour of the "stickies" - high-value polymers for paints and adhesives - and heralded a series of US acquisitions.  (Distancing Courtaulds from the "apartheid" troubles in South Africa were part of the reasoning at that time.)