TI pauses to digest its spoils

TI group last week completed its acquisition of automotive fuel-pump maker Marwal, buying Magneti Marelli’s 51% share of the company for $73m (£45.5m). The group sees the move as an `infill’ operation rather than a continuation of its strategic acquisitions programme, following chairman Sir Christopher Lewinton’s declaration at the start of August that the £1.5bn […]

TI group last week completed its acquisition of automotive fuel-pump maker Marwal, buying Magneti Marelli’s 51% share of the company for $73m (£45.5m).

The group sees the move as an `infill’ operation rather than a continuation of its strategic acquisitions programme, following chairman Sir Christopher Lewinton’s declaration at the start of August that the £1.5bn of businesses snapped up in the previous 18 months now need `bedding down’.

His statement came as TI announced the £275m acquisition of German polymers business Busak & Shamban. The company is to be combined with TI’s Forsheda operation to form a new, £400m polymer product division employing 7,000 people worldwide.

Busak, which makes and distributes polymer seals and bearings worldwide, has a strong position on the continent and the division would use its US presence to expand into Latin America and the Asia Pacific region.

TI’s decision to concentrate on organic growth comes three months after aggressive US buy-out firm Kohlberg Kravis Roberts took a 5% stake in the group, prompting speculation of even more acquisitions. But Lewinton said more deals were not now needed.

`Recent acquisitions have doubled the number of markets the group can address. We are confident that we are well positioned to generate double-digit profit growth.

`The recent deals will need a degree of digestion – we do not need any more.’

Lewinton’s announcement followed better-than-expected half-year results. Organic sales rose 3% and pre-tax, pre-exceptional profits rose 7% to £130.4m.

The news was welcomed by the City, where TI shares have been rising steadily in recent weeks. They gained another 6.5p to 424p on the back of the results.

Analyst Andrew Chambers of SG Securities, which has moved its stance on the company from `hold’ to `buy’, said he has upgraded his current-year profit estimates for TIgroup from £228m to £245m.

`They are working hard on the acquisitions and gave a slightly better-than-expected performance in the first half,’ Chambers said. `This, plus the prospect of 10% earnings growth, made a small positive for me.’

The Busak & Shamban acquisition follows the recent £356m purchase of US fuel systems maker Walbro, which is to be integrated into TI’s new automotive systems division.