The Business Engineer

by Douglas Friedli

This week sees the launch of The Business Engineer, a regular slot which will examine a range of issues linked with the deals that are shaping the manufacturing industry market.

We will be taking a monthly look at the latest mergers and acquisitions, divestments and buy-outs, and will explore the business and financial issues facing engineering firms seeking to grow.

This week we kick off with a round-up of the top acquisitions in the engineering sector so far this year, and look at what’s driving them.

{{DEAL WATCH: The top deals in the engineering sector over the firstquarter of 1999

The company The deal Price Date effective

Ford Motor Company (US) acquired Volvo Car (Sweden) £3.9bn MarchGEC (UK) acquired Reltec (US) £1.3bn MarchNational Grid Group (UK) divested stake in Energis (UK) £1.2bn FebNational Grid Group (UK) acquired Eastern Utilities(US) £387m FebIllinois Tool Works (US) acquired repair business of Morgan Crucible (UK) £175m MarchMettis Group (UK) acquired 8 engineering businesses from National Industries Group (Kuwait) £171m FebTyco International (US) acquired metals processing business of Glynwed (UK) £145m MarchDura Automotive Systems (US) acquired Adwest (UK) £125m MarchFirst Technology (UK) acquired Control Devices Inc (US) £90m MarchCorning Inc (US) acquired telecoms cables business of BICC (UK) £82m AprilWilliams (UK) acquired Proteg Incendie (France) £53m FebBlue Circle Industries acquired Fortune Cement (UK) (Philippines) £52m JanuaryRockwell Automation (UK) acquired EJA Engineering (UK) £50m January

Source: Corpfin}}

GEC, which late last month acquired Fore in the US for £2.6bn, signalled its move into the US telecoms sector by buying Reltec in March.

Both deals are part of GEC’s attempt to transform itself into a high-growth global IT company. Chief executive Lord Simpson believes Reltec and Fore will give GEC a technological portfolio equal to competitors such as Alcatel and Siemens. Further expansion is likely to be aimed at increasing market share and expanding outside the US.

Another company after an image change is Glynwed, which has been selling, rather than buying, in the US. It sold most of its metals businesses to Tyco for £145m in March, and the remainder to Niagara for £21m in April. The company’s management regarded metals processing as too cyclical and bad for its image.

Glynwed now has about £300m to spend on acquisitions in the pipe systems and food services sectors.

Mettis Group was formed in February when 3i bought eight engineering companies from National Industries Group of Kuwait. The relative strengths of the aerospace and medical sectors which Mettis is involved in gave it a value considerably higher than its £70m sales.

The group could make more acquisitions to exploit the relative cheapness of engineering stocks, 3i has said. But a deal has yet to be announced.

Mettis is being set up for a stock market listing, which could take place in 2002. The group is headed by Des Kavanagh, who led Sheffield Forgemasters’ aerospace arm in a management buy-out 11 years ago.