EVC board says sell in the short term, but offers long term hope

EVC board says sell in the short term, but offers long term hope

The directors of EVC International have been knocked off the fence in their approach to a bid by INEOS to buy the shares in EVC that it doesn't already own. The bid was made in December through an INEOS associate company, Hawkslease Finance Company, and is part of a proposal to put 10 per cent of EVC's shares into an employee share ownership scheme. As most of the EVC board are themselves employees of INEOS they stand to benefit from the proposal, so abstained in expressing an opinion to shareholders. Only William Prinselaar, who is an independent member of the board, actually opposed the proposal.

But the Dutch stock exchange has ruled that the board members may not take a neutral position over the bid, so the board has issued a go-stop recommendation to shareholders. In the next two to three years, it says, EVC is unlikely to build shareholder value or pay dividends because of the current depressed market conditions, so it recommends accepting Hawkslease's offer. Over the longer term, three to five years, the board is anticipating growth, so for long term shareholders it is recommending they do not sell to Hawkslease.

Because of the Hawkslease bid EVC has brought its end of year reporting forward, and has published 10 months (to October 31) figures which show an overall improvement in its fortunes compared with the same period in 2001. While turnover was 0·9 per cent down at Eur 904·7 million (Eur 912·6 million) the operating result rose from a loss of Eur 22·7 million to a profit of Eur 6·2 million, and the group's net loss decreased from Eur 52·9 million in 2001 to Eur 12·4 million.

But against these improvement EVC has warned that the trading conditions for PVC producers which had improved in the first half of 2002 started to weaken again in the third quarter, and the tightening of ethylene prices due to uncertainties from the Venezuelan oil problems and the Middle East political situation means that margins are again under downward pressure.