My Toughest
Decision
ONE of last year's most interesting industrial stories focused on the fate of Glasgow-based engineering firm, Clyde Blowers.
Faced with a stock market which thought his company was worth a lot less than he did, chairman and chief executive, Jim McColl found himself between a rock and a hard place.
I TOOK the toughest decision of my business career only four months ago and it was to take Clyde Blowers back into private ownership.
More than 80% of our business is overseas and this international exposure in a period when sterling has been exceptionally strong, and many overseas markets have been in difficulties lay behind my decision.
The company had begun to feel the effects of the South-east Asia crisis in late 1997. Therefore, when we reported our half-year results to February 1998, we downgraded our profit forecasts for the year. Not surprisingly our share price fell to 175p but I do not think many of our investors initially really understood the gravity of what was going on in South-east Asia.
As it became apparent that the crisis was of unprecedented magnitude, our share price continued to fall.
Market sentiment was also against the engineering sector generally and smaller companies in particular. We took every possible step to help the market understand the true value of Clyde Blowers, including the publication of a detailed valuation of the company by our brokers, they placed a value on it of 200p per share.
But still our share price fell. I had investors phoning me to ask me if the stock market professionals knew something that the shareholders did not.
One customer with whom we were negotiating asked me if there was something fundamentally wrong with the company. Of course, there wasn't - although we had downgraded our forecast we were still on course for an outstanding performance with a 30% increase in profit before tax but the share price issue clouded everything.
When shares were traded for 43p in after-hour's dealing, I knew that the time had come to act. I was now particularly concerned that we might end up losing some of our best people.
I decided to try to take the company back into private ownership. I can clearly remember reaching the decision. I felt very positively that this was the right thing to try to do. As it was, we were very vulnerable to being snapped up cheaply.
With advice and backing from 3i and the Bank of Scotland, the senior management team was able to launch a buy-back bid for the company at 165p per share. We obviously had a fiduciary duty to get the best value for shareholders and this is where our non-executive directors came into their own to ensure fair play all round.
I'm pleased to say that by the start of 1999 the shareholders had overwhelmingly accepted the buy-out offer.
q Jim McColl was speaking to Stuart Paul of the University of Paisley.
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