THE family which has owned jute industry survivor Scott & Fyfe for more than a century is selling the manufacturer to its employees to secure the business's future for the benefit of Tayport in Fife.
Hamish Tough, who owns 26% of the industrial textiles manufacturer, and sons Richard and David, who each hold 37%, are selling their shares to an employee benefits trust (EBT) in a deal believed to be worth about £5 million.
Scott & Fyfe, which makes carpet and underlay backing, as well as materials for packaging reinforcement, irrigation, lining pipes, abrasives manufacturing, and the automotive industry, will provide funds to the EBT to make this purchase. Richard and David Tough will pay Capital Gains Tax at the entrepreneurs' relief rate of 10%, and then reinvest their net proceeds in the form of redeemable Preference shares which will be repaid over a period of years.
They are believed to be putting nearly £2m each back into the company in this way, thus helping finance the employee buyout, and will remain directors of the firm.
Hamish Tough, who reinvented the firm in the 1960s with the advent of polypropylene to become a leading player in the flexible industrial bulk container business, will retain his sale proceeds.
Scott & Fyfe, which employs 100 people, has an annual turnover of about £12m and is profitable. Its export markets include Australia, the US, France, Germany, Spain, Israel, and Canada.
Hamish Tough, now 78, was succeeded as chairman of Scott & Fyfe in 2009 by Nick Kuenssberg, who was managing director of Dawson International in the 1990s. Dawson owned Pringle knitwear when Mr Kuenssberg was MD.
Mr Kuenssberg said: "The family recognise the debt they owe to Tayport because it is very much a Tayport company. It is by far the largest employer of Tayport."
Explaining why the family was not selling to an external buyer, he added: "There aren't a lot of people wanting to buy textiles companies at the moment. They [the family] want the company to remain, and thrive, at Tayport. The last thing the family want is someone buying the customers, closing it down, and taking the business elsewhere."
Declaring the firm had not explored whether there were external buyers, and alluding to his time at Dawson , he said: "I know a little bit about the textiles industry. I think it is pretty unlikely there would have been a long list of buyers at a sensible price."
Emphasising the business was cashflow-positive and profitable, Mr Kuenssberg added: "The key thing is that this is not a distress sale. It is not the family running away with the money, leaving the company to fester."
He noted that, after the latest triennial valuation of its pension fund, Scott & Fyfe had in the first quarter of 2012 paid off the entire £1.6 million deficit on the scheme.
Mr Kuenssberg, father of ITV News business editor Laura Kuenssberg, brought in John Lupton as chief executive of Scott & Fyfe in 2010. Mr Lupton, a former executive of US group Terex who was based at the heavy machinery maker's site at Motherwell in North Lanarkshire, was chosen from 130 candidates.
Mr Lupton and Mr Kuenssberg have overseen a diversification of Scott & Fyfe's activities to make it less reliant on difficult packaging and carpet markets, and to take it into more niche sectors and boost overseas sales.
Each of the 100 employees will receive a one-off award of 1500 shares, believed to be worth about £500. They will, collectively, be entitled to 5% of the annual profit of the company in shares and will have the opportunity to buy shares each year. They will have to cash in their shares if they leave the company.
The EBT will always own a majority of the company. Workers will have the right to elect an employee director to the board.
Mr Kuenssberg said economic development agency Scottish Enterprise had subsidised advisory fees for the employee buy-out. The deal, due to be completed by the yearend, has been supported by SE's Cooperative Development Scotland unit and specialist employee buyout consultancy Baxi Partnership.
Mr Kuenssberg said, were the company to be "sold or liquidated for any reason", the ultimate beneficiary of the EBT, after any pension deficit had been settled, would be the Tayport community, with the money going to "good causes".
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