Coats and Tootal sew up a #395m merger

continue to be located in Glagow. Both Tootal and Coats Viyella have

their registered offices in Manchester.

THE two top players in the proposed merger between Coats Viyella,

Europe's biggest textile group, and Tootal, whose combined sales exceed

#2340m, insisted yesterday that there are no worries that it could

trigger a reference to the Monopolies and Mergers Commission and there

had been no prior agreement on any possible disposals with the Office of

Fair Trading.

Nor was it felt that there would be any problem with the European

Commission. ''It is not an issue,'' said Coats chief executive Sir David

Alliance and his comment was echoed by Tootal's chief executive Mr

Geoffrey Maddrell. Sir David said that the combined group's share of the

international thread market would be less than 20%, much lower than has

been speculated though the figure is much higher for some domestic

markets. ''We have taken advice and are relaxed and comfortable,'' said

Sir David.

Terms of the offer by Coats are one new Coats Ordinary share plus 400p

cash for every four Tootal shares, valuing them at just under 139p each

and the whole of the equity at #395m with Coats standing at 155p, up 1p.

There is a cash alternative of 133p a share and Tootal shareholders can

opt to receive Coats Patons Variable Rate Loan Notes for all or part of

the cash side of the offer.

The terms, which have been hammered out over the last three days

although the two companies have, in fact, been talking for months, are

lower than the 140p to 150p a share which analysts had estimated would

be necessary to win Tootal.

On the other hand, the circumstances of the merger contained a bizarre

element anyway in that Sir David had agreed a sudden deal with

Australian textile entrepreneur Mr Abraham Goldberg, who has been

building up his own stake in Tootal and who made an abortive bid for the

company in 1985, that if bid terms could be agreed by midnight,

Thursday, Goldberg would sell his 25% holding to Coats. If terms could

not be agreed Coats was to sell its 5% holding in Tootal to Goldberg in

the event of him staging a bid.

Sir David would not reveal yesterday whether the instigation for this

came from Mr Goldberg or himself. But Coats had been talking to Tootal

before Mr Goldberg appeared on the scene and, it seems, attempted to

frustrate the plan. Tootal would have been under some pressure to accept

what terms it could get under these circumstances.

The combined group will be called Coats Viyella and it is not intended

that there will be any change in brand names or, indeed, any major

changes initially. After a year the situation will be reviewed and the

group will set out its strategy. There will be rationalisation but Sir

David was quick to emphasise that this could also create jobs.

In terms of the running of the merged group, the Tootal team will

clearly be playing a key part, enhancing the belief felt in some

quarters that Coats Patons could do with strengthening in this

direction. Sir David will be chairman and chief executive but Mr

Geoffrey Maddrell and fellow Tootal directors Mr Anthony Habgood and Mr

James Harrison will join the Coats Viyella board as executive directors.

Mr Maddrell will assume the role of group managing director

responsible for operational activities. And Mr James McAdam of Coats,

recently confirmed as chief operating officer will now step down from

this role and continue as deputy chairman. Mr Maddrell will chair an

executive committee of the board and all chairmen of operating divisions

and key central staff will report to him. Group finance, personnel and

strategy directors will also have a direct line of responsibility to Sir

David as chairman.

Both companies say that the merger would bring significant benefits in

terms of industrial and financial synergies and combining management

expertise. The portfolio of complementary have or can attain ''leading

worldwide positions in a number of textile and related markets''. Coats

Viyella points to its strengths in Europe, South America and India while

Tootal's strengths are in North America and the Far East including

China.

Among the benefits listed are the creation of a UK-based group with a

comprehensive worldwide market presence in textiles, particularly in

sewing thread products, allow penetration of markets for sewing products

in developing countries without costly duplication of investment, and

combine Tootal's sourcing network for fabrics and garments with Coats

Viyella's distribution and marketing strengths anf flexible production

facilities in the UK.

Both Coats Viyella and Tootal have felt the chill wind of increased

competition in the UK.