Novar plc

Novar plc

Fate	Acquired by Honeywell
Founded	1985 (as Caradon Ltd)
Defunct	1 April 2005
Headquarters	Weybridge, Surrey, England, UK

Novar plc was an international group based in the United Kingdom with core activities in Security Systems, Aluminium Extrusion and Cheque Printing. It was bought by Honeywell in 2005, and its activities merged. Under its previous name, MB-Caradon plc, it was a constituent of the FTSE 100 Index.

History of Novar

Novar was the name adopted by Caradon in 2001 which had by that point acquired its character after a result of a complex series of mergers, acquisitions, and divestments. Caradon itself had been incorporated in 1985, but the company as a whole traces its origins to those of the giant of the British packaging and tinning industry, Metal Box. In 1989 MB Group (as Metal Box was by then known) had merged with Caradon to create MB-Caradon. In 1993 MB-Caradon divested itself of its packaging roots and given this dropped the MB element of the name to become Caradon. A change in the strategy of the company towards developing a profile for providing holistic building security and controls solutions led to another name change in 2001, when the company became known as Novar. In 2005, after a period of streamlining and divestment, the company was bought by Honeywell, previously one of its biggest competitors in the Building Security and Controls sector.

1921 – 1945: Founding of Metal Box to World War II

In 1921 the Allied Tin Box Makers was formed by four family firms of tin box makers, Hudson Scott, F. Atkins & Co., Henry Grant & Co., and Barclay & Fry, as a natural progression from the close cooperation they had participated in during the First World War. In that war, the British Tin Box Manufacturers Federation had been faced with dealing with government restrictions on tin whilst having to meet the needs of supplying the ration tin used by British troops. A year later they became Metal Box & Printing Industries. In the late 1920s Metal Box, to avoid a takeover by American Can, arranged a partnership with American Can's U.S. rival, Continental Can, giving Metal Box exclusive right in Great Britain to purchase canning machinery, technical advice, training, and patent licenses from Continental Can. A year later Metal Box bought out British Can, American Can's subsidiary. These deals were arranged by Robert Barlow who also wanted to bring all member companies under one authority and ignored those on the board who opposed him. In 1931 Barlow saw off an attempt by the managing director of Barclay & Fry to have him fired and by 1935 he was in complete control of Metal Box and had succeeded in centralizing sales and supplies, and rationalizing production functions. During the Great Depression the company purchased smaller canmakers and by 1937, Metal Box was selling 335 million cans a year. Where it encountered problems at suppliers it considered a takeover and grew in this fashion also.

Metal Box's income from security cheque printing was good, this business having been inherited from one of the four founding family firms, Barclay & Fry, which had been established in 1855 by Robert Barclay who had printed cheques for a distant relative's bank, Barclays Bank. The income from printing combined with turnover from machine manufacturing and interests in mining was double that of its income from the cans themselves. Profits rose from £103,480 in 1931 to £316,368 in 1939 for Metal Box. Throughout the decade interests internationally grew and Metal Box was to expand within Europe and the British colonies, while Continental Can would develop interests in the rest of the world. World War II changed Metal Box's direction with it producing gas mask containers, casings for antitank mines, shell casings and ration tins by the millions. Even so, due to strict government controls, company profits fell to £242,428 in 1945.^[1]

1945 – 1970: Diversification

After the war Metal Box quickly moving toward paper, foil, and plastic container products as the postwar economy began to improve. It also still dominated the British can and carton market. By the 1960s, Metal Box was the leading packaging supplier to some of the largest companies in the world, including Unilever, Nestlé, Heinz, Imperial Tobacco, BAT, ICI, Hoechst, and Shell. Throughout this period there were a number of Managing Directors although Barlow still maintained overall control until his retirement in 1961. In 1950, reacting to a U.S. Department of Justice investigation, cooperation between Continental Can and Metal Box was restricted to machinery and technical information with all mutual ventures and attempts at market controls being dropped. In 1967 the Board of Trade referred the British can industry to the Monopolies Commission, which ruled that Metal Box was operating a monopoly^[2] However, the Commission concluded that this did not harm the public interest and even praised Metal Box for passing on savings to its customers. However, its exclusive arrangements with customers and with suppliers were ended. By 1970, through acquisition^[3] Metal Box had widened its product line to include plastic film, aerosols, central heating, and engineering.^[1]

1970s - Movement away from packaging and the deal with Carnaud

In the 1970s, under the direction of Chairman and Chief Executive Alex Page, the company diversified outside of packaging, primarily through acquisitions, into the manufacturing of radiators used in central heating systems as well as a machinery. In late 1975 a new diversified products group was created, alongside a packaging group that included Metal Box's traditional businesses and the company relocated headquarters from central London to Reading, Berkshire.^[4] Sales reached the $1 billion mark in 1976. In 1978 the company abandoned its licensing deal with Continental Can, which resulted in increased competition at home and abroad. But in 1979 Metal Box opened a two-piece can plant in Carson, California, that eventually would supply Pepsi-Cola with 625 million cans a year.^[5] In Europe Metal Box sought to build on its existing operations in southern Europe and entered into a licensing agreement with France's Carnaud^[6] By the end of the 1970s revenues had reached $2.7 billion.^[7]

1980s - From recession to MB-Caradon

By the mid-1980s Dr. Brian Smith, the man who had turned around ICI, had been brought in as chairman to steady a company that had been rocked by the recession.^[7] By 1988, the group was renamed the MB Group, and Murray Stuart, formerly the finance director, became chief executive. The name change emphasized the move away from the Metal Box tinning roots. The company was now Europe's largest manufacturer of central heating radiators, through its Stelrad unit^[8]; the Stelrad Doulton brand in bathroom products was strong; and its Clarke Checks subsidiary had become the fourth largest printer of cheques in the United States. 1988 also saw the company become a 25.5% stakeholder in the third largest packaging company in the world, when, in October 1988 MB's packaging operations merged with those of Carnaud to form CMB Packaging SA, based in Brussels.^[9] Although Carnaud gained management control, MB Group was able to used the £240 million in cash it received from the merger to further bolster its nonpackaging units which it did in September 1989, acquiring American Bank Stationery Co to enlarge its U.S. cheque printing operations.

Previously, in 1985, a company called Caradon had been founded through a £61 million management buyout of the U.K. building products division of Reed International. In 1987 this company went public to become Caradon plc. Caradon was brand driven having some of the most recognisable names in British plumbing, including Twyfords bathroom and sanitary products, Mira showers, Terrain plastic pipes, and Celuform plastic timber. This company was an obvious fit for the direction in which MB Group was moving, and in October 1989 MB acquired Caradon plc in a £337.6 million reverse takeover, with half the amount in cash and half in Caradon shares converted to those of MB.^[10] MB-Caradon plc was formed, Smith retired and MB's chief executive, Stuart, became chairman of the new company, with Peter Jansen, Caradon's chief, becoming chief executive.

1990s: MB-Caradon to Caradon to Novar

In April 1993 MB-Caradon's sold its stake in Carnaud MetalBox ("CMB"). Within five months, MB-Caradon then paid £800 million for RTZ Corp.'s RTZ Pillar industrial products group gaining construction, general engineering, automotive, and aviation operations. With the company now having divested itself of its Metal Box tinning roots, it was decided to drop the "MB" from the company's name, thus MB-Caradon became Caradon.^[11] The company was a leader in doors and windows, as well as plumbing and electrical products, structural and engineering operations, and security printing. In 1994, sales reached £1.61 billion, while operating profits were a record £205.4 million. In 1995, Caradon extended its reach further into Eyrope with the acquisition of a 43 percent stake in Weru Aktiengesellschaft, the German leader in doors and windows. The combined effect of a sharp fall in sales of US doors and windows, raw materials cost increases and a U.K. building industry general depression led to a fall in operating profits to £127.1 million. The resulting restructuring led to 1,600 jobs being eliminated and the directors of the five divisions now reporting directly to the CEO. Also, in December 1996, Caradon sold off 18 non-core businesses for a total of £220 million ($360 million), including most of its European engineering and distribution operations, whilst increasing its stake in Weru to almost 80 percent. By late 1997, a further collapse of the windows and doors business both in the USA and in the United Kingdom, led to a change in leadership. Jurgen Hintz, former head of Carnaud MetalBox, was appointed CEO.^[12] Hintz set about trying to strengthen the company's corporate identity. The company's wide range of unrelated interests made this a difficult task and so he looked to selling off some of the company's less promising businesses. First to go were the door and window businesses, then the interests in plastic pipes and garage doors. In October 2000 it sold its plumbing business to HSBC Private Equity for £442 million. Hintz considered that the company's true strength lay in the various brands concerned with building security and controls, coined the intelligent building systems unit. Caradon was already the sole supplier of sprinkler systems to the Wal-Mart chain, as well as the lighting and temperature control units for Sainsbury's. ^[13]

2000 - 2005: Novar and the Honeywell takeover

In October 2000 Hintz was still forced to admit that "in essence, Caradon has no real core business." and in December 2000 the UK Active Value Fund, an investment group that owned a 10 percent stake in Caradon, called for an emergency shareholder meeting to reevaluate the company's strategy. Active Value wanted to force the company to commit to a single core business as well as put a freeze on acquisitions of more than £10 million, and buy back £130 million of its own shares. Hintz repelled this action by promising to undertake a thorough restructuring.^[14] The first thing that happened was that the company considered its overall branding. Caradon as a name had been most associated with plumbing and bathroom products, businesses that had now been sold off. Therefore the time was ripe for a name change. The name adopted was Novar plc, in early 2001. Novar was in fact the name of one of the company's North American subsidiaries, Novar Controls Corporation. However, the name was picked because it conveyed a meaning of freshness and a new start. Almost immediately, the company posted strong full year results seemingly vindicating Hintz.^[15] The company proceeded on three fronts with three divisions: IAS (Indalex Aluminum Solutions), concerned with aluminium Extrusion; SPS (Security Printing Services), concerned with cheque printing; and IBS (Intelligent Building Systems) being the most diverse, concerned with providing security and controls systems to businesses. This third division was brand led, with the name Novar taking a back seat to the more recognised names in the industry that were owned by Novar PLC, such as Trend, Gent, visiOprime, MK and Friedland, (this is with the obvious exception of Novar Controls in the United States. However, the company did not fulfill the hoped for stabilisation of its corporate profile, and issued a number of profit warnings to the London Stock Exchange^[16] in the years up to 2004.

In 2004, Melrose, a tiny AIM-listed company led by a former Hanson executive that was set up specifically to look for companies to buy,^[17] made two attempts to but Novar, the higher one being valued at £625m, both of which were rejected. Then in December 2004, Honeywell made a £1.2bn ($2.3bn) bid which the board of Novar recommended.^[18][19] The acquisition was finalised on 31 March 2005. Dave Cote, Honeywell Chairman and Chief Executive Officer, said of the acquisition: "Novar is a great investment for Honeywell. The IBS business fits perfectly with our ACS business and significantly strengthens our European fire detection, environmental controls, security, and services businesses. We are working hard to quickly and efficiently integrate this business into Honeywell." However, he made it clear that IAS and SPS would be sold quickly because although strong businesses in their respective industries they did not fit with the Honeywell portfolio.^[20]

Principal subsidiaries prior to sale to Honeywell

The subsidiaries were:^[21]

• Intelligent Building Systems Division
  • MK Electric Limited
  • Friedland Limited
  • Esser^{[disambiguation needed ]} Security Systems GmbH (Germany);
  • Esser-effeff Alarm GmbH (Germany);
  • Gent Limited;
  • Eltek Fire and Safety Systems AS (Norway);
  • visiOprime Limited (UK);
  • Trend Control Systems Limited;
  • Novar Controls Corporation (U.S.A.);
  • Innovex Controls Inc. (U.S.A.);
  • Brand-Rex Limited;
  • Albert Ackermann GmbH & Co. KG (Germany);
• Indalex Aluminum Solutions Division
  • Indalex (U.S.A./Canada);
  • Mideast Aluminum (U.S.A.);
  • Indal Technologies Inc. (Canada);
  • Indalloy (Canada);
  • Brampton Foundries Limited (Canada);
• Security Printing Services Division
  • Clarke American Checks, Inc. (U.S.A.);
  • Checks in the Mail, Inc. (U.S.A.)

References

1. ^ ^{a b} Reader, W.J., Metal Box: A History, London: Heinemann, 1976.
2. ^ Metal Box was in 1967 supplying 77 percent of all metal containers, 63 percent of aerosols, and 80 percent of open-top cans.
3. ^ In Britain Metal Box had acquired Wallis Tin Stamping Co., Brown Bibby & Gregory, and Flexible Packaging
4. ^ Oates, David, "Metal Box Re-Packages Its Operations", International Management, May 1976, pp. 10-13.
5. ^ "Metal Box Aims to Kick Continental Can", World Business Weekly, September 1, 1980, pp. 10-11.
6. ^ Whereby Metal Box provided equipment and expertise for a two-piece can plant near Brussels to be built by Carnaud. Cans from the plant were to be sold in the Benelux countries and parts of France and West Germany.
7. ^ ^{a b} Foster, Geoffrey, "The Remaking of Metal Box", Management Today, January 1985, pp. 43-51.
8. ^ Stelrad was boosted further in 1988 with the acquisition of the leading producer of radiators in continental Europe, Henrad Beheer of Belgium
9. ^ Campbell, Colin, "MB Ties Up Packaging Interests with Carnaud", The Times (London), October 27, 1988, p. 25.
10. ^ Bowditch, Gillian, "Caradon Agrees £337m Deal with MB Group", The Times (London), October 4, 1989, p. 31.
11. ^ Urry, Maggie, "Bold Deal Soothes Anxious Onlookers", Financial Times, August 26, 1993, p. 19.
12. ^ Taylor, Andrew, "Caradon Signals Boardroom Shake-up: Building Products Group Poised to Name New Chief Executive", Financial Times (London), November 14, 1997, p. 17
13. ^ Information on Novar plc
14. ^ Felsted, Andrea, "Caradon Defends Acquisition Strategy", Financial Times (London), December 29, 2000, p. 18.
15. ^ Telegraph - Hintz vindicated as Novar hits £186m
16. ^ "UK Active Value Fund's Bryan Myerson, with 11.2% of Novar, said he was furious at the company's second profit warning and may call an EGM to force CEO Jurgen Hintz to resign." The Daily Telegraph Saturday 20 October 2001
17. ^ Independent On-line: "Business Bid battle looms as Novar rejects Melrose" (8 November 2004)
18. ^ Honeywell offers £1.2bn for Novar BBC News, 13 December 2004
19. ^ The offer was £798m or £1.85 per share for each Novar share, with another £331m for preference shares and debt.
20. ^ Honeywell Completes Acquisition of Novar plc; Final Clearance from European Commission Confirmed - Business Wire, March 31, 2005
21. ^ Novar PLC Annual Report and Accounts 2002 to 2004

Further reading

• Reader, W.J., Metal Box: A History, London: Heinemann, 1976.
• Foster, Geoffrey, "The Remaking of Metal Box", Management Today, January 1985, pp. 43-51.