In the Industry

May 1999

HONG KONG

Johnson Electric to buy Lear business for HK$2.4b

JOHNSON Electric Holdings has announced it has agreed to acquire Electric Motor Systems from United States auto parts maker Lear Corporation for HK$2.4 billion. Johnson Electric posted a 43 per cent growth in net profits to HK$406 million for the six months to September. Brokers estimated that the company, with cash on hand of HK$2 billion, is in a strong financial position to go on aggressive expansion. The acquisition will be finalised by cash reserves and short-term bank facilities which are expected to be repaid from internal cash flows, the company said.

Johnson Electric is the second largest motor manufacturer in the world while Lear is the world's largest supplier of automotive interiors, with 1998 sales of more than HK$12 billion. `The acquisition represents a major strategic initiative in building Johnson Electric's global reach,'' said Patrick Wang Shui-chung, chairman and chief executive of Johnson Electric.

Electric Motor Systems, comprising two principal operating units, Gate and North America Motors, is a leading manufacturer of micromotors both in Europe and North America. It had sales of HK$2.7 billion in 1998. ``Divesting the motor business will allow us to focus on the interior and electronic systems, core to us as an interior integrator for car makers worldwide,'' said Ken Way, Lear head.

Mar 1999

UNITED KINDOM

HOUSEHOLD GOODS: Kenwood shares tumble after profits warning
Shares in Kenwood, the UK manufacturer of kitchen appliances, fell by 19p to close at 76p after the company warned on Wednesday that it expected to make a loss in the second half and said that trading in a number of key markets including eastern Europe and South Africa had continued to deteriorate.

The company said that tough trading conditions and the strong pound meant that it expected to make a pre-tax loss in the second half of the year to April 2 and the result for the full year was expected to break even before tax and exceptional items.

Kenwood, which makes the Kenwood Chef and other kitchen appliances, said that it planned to shut its subsidiary in New Zealand and carry out a restructuring programme in South Africa, Poland and Germany. It said that these and other restructuring plans would result in significant exceptional charges in the full year.

It said that it was accelerating its new product programme which plans to launch 17 products ranging from kettles and toasters to irons. It is also accelerating the transfer of further production to China from its UK base which has cut 250 jobs in the past two years. In the first half of the year, Kenwood subcontracted 29 per cent of its manufacturing to China, up from 26 per cent.
In December, Kenwood said that underlying interim profits had fallen from GBP 2.2m to GBP 900,000 and the company had been hit by falling sales of its core food processors and fryers in the UK and at the time warned that profits in the second half would be no higher than in the first. The company reported an GBP 1.1m loss in 1996-97.
The company said that continuing difficult market conditions had prompted it to shift from being a vertically integrated manufacturer to being a focused brand-led company.
In the past year there has been speculation that the company could be a takeover target. Pifco was interested in the company in 1996 and Glen Dimplex, the Irish owner of Morphy Richards, took a 3.5 per cent stake in August.
(Financial Times)


Aug 98

USA

Salton/Maxim Housewares, Inc. To Acquire Toastmaster Inc.
Salton/Maxim Housewares, Inc. and Toastmaster Inc. announced on Aug 27, 1998 that they have entered into a definitive merger agreement for the acquisition of Toastmaster by Salton. The agreement provides for Toastmaster shareholders to receive US$7.00 per share in cash, or a total purchase price of approximately US$53.2 million plus the assumption of approximately US$47.9 million in debt. The Company intends to finance the transaction through its US$215 million credit facility with Lehman Brothers, announced previously.

Toastmaster generated revenues of US$155.3 million in the twelve months ended June 30, 1998.

Under the terms of the agreement, a subsidiary of Salton will merge with and into Toastmaster, with Toastmaster continuing as a wholly owned subsidiary of Salton following consummation of the merger. The transaction is expected to close in the last calendar quarter of 1998, and is subject to, among other things, expiration or termination of the Hart-Scott-Rodino Act waiting period and the approval of the holders of 66 2/3% of the outstanding shares of Toastmaster common stock.

Leonhard Dreimann, Chief Executive Officer of Salton, said, ``The acquisition of Toastmaster and its wide array of products is a clear execution of our strategy of increasing market share by marketing products under established brand names and servicing the needs of a broad range of retailers. While Salton and Toastmaster both focus on the small household appliance market, Toastmaster brings different, but very complimentary strengths to our Company. These strengths include its strong brand names of Toastmaster® and Ingraham®, and its broad range of time products. We expect that substantial revenue increases will be realized as we leverage these benefits to better serve our customers and expand our market share. We also believe that the acquisition will produce substantial economies over time as we combine the capabilities of the companies and generate cost savings.''

Salton/Maxim Housewares, Inc. designs and markets an extensive line of kitchen and home appliances, personal and beauty care products and decorative quartz wall and alarm clocks under the brand names Salton®, Maxim®, Breadman®, Juiceman®, Salton Creation®, Salton Time®, White- Westinghouse®, and Farberware®. The Company also designs and markets a broad range of tabletop products, including china, crystal and glassware, under the brand names Block® China, Atlantis® Crystal, and Gear®.

Toastmaster Inc., with headquarters in Columbia, Missouri, designs, manufactures, markets and services a wide array of electrical consumer appliances and timepieces under the brand names of Toastmaster® and Ingraham®.

Statements made in this press release that state Salton's and Toastmaster's, or the management's intentions, hopes, beliefs, expectations, or predictions of the future include ``forward-looking statements'' within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended. It is important to note that actual results could differ materially from those projected in such forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those projected in such forward-looking statements is contained from time to time in the companies' quarterly and annual reports filed with the Securities and Exchange Commission.

(SOURCE: Toastmaster Inc.)

Jun 98


Hong Kong

Electrical fans of the brand believed to have caused the fire were removed from shelves yesterday. Chain store Watson's withdrew Pierre Cardin fans with the model number AT-28T pending test results from the Electrical and Mechanical Services Department. The fan involved in the fire was an HST-1, which is no longer sold in Hong Kong. Watson's has sold about 2,800 of the $199 AT-28T fans since April. Mannings, which sold 3,000 Pierre Cardin fans last year, said it had no plan to recall them. "No faults have been found with the products so far," a spokesman said. Government inspectors have taken two fans for safety tests. Tests conducted by the Polytechnic University's electrical and mechanical engineering department showed one fan did not have an earth line. The supplier said it was waiting for government reports. The Consumer Council warned people not to operate electrical fans overnight, saying tests had shown that more than 70 per cent of them were sub-standard.
(Source: SCM Post June 9, 1998)

USA

Black & Decker Sells Household Products Business
June 29, 1998. The Black & Decker Corporation closed on the sale of its household products business in North America and Latin America, excluding Brazil, to Windmere-Durable Holdings, Inc., for $315 million. Black & Decker is retaining its lighting and cleaning products and will incorporate them into consumer power tool operations. (Further ref: B&D Press release)

Sunbeam Makes Cuts
June, 1998. After Sunbeam Corporation cut 6,400 jobs, nearly 40 percent of its workforce, in an effort to reduce costs at the recently acquired Coleman, First Alert, and Mr. Coffee businesses, it appears more cutting was required. Sunbeam's CEO, Al Dunlop, nicknamed Chain Saw Al for his personnel shaving, was let go. Peter A. Langerman replaces Mr. Dunlop as chairman, and Jerry Levin, chairman of Revlon, Inc., was appointed acting chief executive.

May 98

USA

Product recalls:
Baby Monitor Model 618: Gerry Baby Products is recalling about 86k rechargeable baby monitors, which were made in China and sold under the Clear Choice brand. The recall was made because when an electrical short circuit occurs, the rechargeable battery which is installed in the monitor's host unit can cause the host unit to smoke and flame.
(Source: CPSC)

Product recalls:
GE Heavy-Duty Grounding Triple Taps: GE Lighting division is recalling about 50k outlet converters, which were made in China. The recall was made because the ground connector receptacles are oversized and can cause loose ground contacts.
(Source: CPSC)

Hong Kong
New Electrical Products (Safety) Regulation: This is now in full effect starting from May 98.

Feb 98

United Kingdom
Pifco boils up margins boost
Strong sales of the Millennium kettle, which uses a patented flat element, helped to lift interim operating profits from continuing operations at Pifco Holdings by more than a third. The electrical goods manufacturer reported operating profits up from £1.39m to £1.91m for the six months to October 31. At the pre-tax level, which took in an exceptional property gain of £376,000, profits were £2.07m compared with £1.82m. Turnover rose from £21.3m to £24.2m, helped by the first full six months of Millennium kettle sales. In addition Mountain Breeze, a maker of air treatment products acquired in late 1996, moved into the black.

COMMENT
Lurid peppermint green toasters are among the 30 new products to be launched in the second half - and it is the innovative goods that are driving margins up. The group, which a year ago was interested in buying its much bigger rival Kenwood Appliances, has also achieved a good balance between manufacturing and outsourcing. Its ambitions remain high - including a desire to raise the level of exports from 25 to 50 per cent. Forecasts for the full year were edged up to about £4m (£3.8m) yesterday. The shares rose 7½p to 196½p, leaving the prospective multiple at a lowly 9.5. A decent acquisition - and the cash pile should hit about £10m by the year end - would spark renewed interest.
(Source: By David Blackwell - Financial Times)


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