A major piece of news to have broken since I last aired my thoughts in this column is that a group of Dutch investors is poised to make a bid for Royal Ten Cate.
The consortium behind the proposed bid values the company at an impressive €675 million, but more importantly has also agreed additional funds to invest in TenCate. The formal bid, which is anticipated in September or October 2015, has already won the support of the TenCate’s Executive and Supervisory Boards, as well as stakeholders representing a significant proportion of the shares the consortium seeks to buy.
Royal Ten Cate’s latest financial report (for the first half of 2015) shows some of the reasons that the consortium is interested in its acquisition. Revenues and profits have increased healthily since the corresponding period in 2014, at a time when many companies are still struggling or at least consolidating in the wake of ongoing global economic misadventures.
However big or small the organization you work for, and we should not forget that many in the technical textiles sector are small and medium enterprises (SMEs), there are still crucial lessons to be learned from the principal reasons given by President and Chief Executive Officer (CEO), Loek de Vries, for TenCate’s current success.
His company focuses on products with high added-value and continually strives to improve on these using its core expertise. It has recently divested peripheral interests, such the digital ink supplier Xennia Technologies, stating that it had learned all it needed to from the association to begin to launch, in 2014, commercial products (outdoor fabrics) in the growing sector for digitally printed textiles (see below).
At the same time, TenCate does not limit itself to a single market; indeed, the financial results record areas where sales have dropped owing to factors, such as the sluggishness of other industries, beyond TenCate’s control. By being active in just enough areas that a proper focus can be maintained on each, TenCate is able to grow some of its businesses enough to more than compensate for those affected by external factors. Despite its size, the company focuses on just five core markets: Protective Fabrics; Advanced Composites; Advanced Armour; Geosynthetics; (artificial) Grass.
Finally, even though one of its businesses, Advanced Armour, continues to make a loss, this does not deter the company from investing time and money to turn things around, in particular in the development of what it sees as an important new product, the active blast countermeasure system (TenCate ABDS). Acquired in 2012, this is one of the replacements that TenCate is backing to compensate when existing successful products wane or hit the downturn of a cyclical market.
With the company’s track record of success to date, and the promise of investment to come, few would back against this approach, certainly not the consortium seeking to be the new owner, who back the existing strategy and are prepared to find significant funds to support it.