A Dutch Deal Would Create Trading Giant

INTERNATIONAL BUSINESS;
Published: Tuesday, May 16, 1995

A big Dutch trading company, Hagemeyer N.V., announced an agreement in principle today to buy a Dutch rival, Borsumij Wehry N.V., in a stock deal worth as much as $468 million. The deal would create one of the world's five largest trading companies, with annual revenue of roughly $5 billion.

The two companies distribute and sell automotive, electronics, consumer and professional brand-name products.

Hagemeyer's chairman, Andrew Land, said two of Borsumij's top executives, Jan Noordam, the chairman, and Allard van der Graaf, a board member, would resign when the merger was completed. The two are under investigation by the Dutch Justice Ministry on suspicion of insider-trading violations in connection with a proposed buyout of EHCO KLM Kleding N.V., which makes industrial uniforms.

A spokesman for the Amsterdam district attorney's office, Jan Merton, declined to comment, pending the investigation. Mr. Noordam and Mr. van der Graaf did not attend today's news conference and were not available for comment at their headquarters in The Hague.

Both Hagemeyer and Borsumij are active in fast-growing markets in Southeast Asia. Mr. Land said the deal would give Hagemeyer access to the Latin American market, where Borsumij's 70 percent-owned unit, Ceteco, is strong in consumer electronics and household goods.

The deal will involve swapping 4.5 Borsumij shares for each Hagemeyer share, reflecting the ratio of stock prices on March 31, Mr. Land said. Borsumij shareholders will also receive one share in a Borsumij unit, Stokvis Union, for every 13.5 Borsumij shares they hold.

Mr. Land said the deal could result in a company with an operating profit of about $250 million and 17,000 employees worldwide.

"It is a straight takeover," remarked Michael Molenaar, an analyst with Robeco Effectenbank. "They call it a merger because it sounds nicer to Borsumij's employees and shareholders."

As of now, Hagemeyer is 51 percent-owned by the First Pacific Company of Hong Kong. The stake would be reduced to 37 percent as a result of the deal. Thomas Yasuda, First Pacific's executive director, said his company could "retain the new holding as a core strategic holding."

Hagemeyer said the final success of the transaction depended on whether an acquisition of Borsumij would help raise its own earnings. The companies are carrying out a financial and strategic review expected to take two months.

On the Dutch stock exchange today, Hagemeyer's shares rose a little more than 1 percent. Borsumij's shares jumped 14.2 percent.

After news of the preliminary agreement broke in Hong Kong, First Pacific's shares jumped 7.59 percent, to 7.80 Hong Kong dollars -- a little more than $1. After the market closed, further trades brought the price back down to 7.65 Hong Kong dollars.