Print this Page 

February 2011 - Radford Yarns

Announcement to NZX - Conditional purchase of a 75% interest in Radford Yarn Technologies

The Directors of Cavalier Corporation ("Cavalier") advise that Cavalier has entered into a conditional agreement to purchase a 75% interest in the Radford Yarn Technologies business ("Radford Yarns").

The agreement is subject to various operational conditions being fulfilled within the next 10 business days at which time the parties will proceed to settlement.

Christchurch-based Radford Yarns was founded in 1992 by two of its current director-shareholders, Edward (Woody) Radford and Joseph (Jack) Radford. Set up initially as a manufacturer of apparel and other novel and exotic yarns, it has grown to become a highly-respected world-class producer of premium felted wool yarns which are sold to high-end rug and carpet makers around the world, including Cavalier's broadloom carpet operation, Cavalier Bremworth.

In 2009, Radford Yarns was accorded the Best Technical Yarn Award at Domotex Hanover, Europe's main flooring trade show, and Radford Yarns continues to lead the world in felted yarn technology.

Felting, which is achieved by subjecting woollen slivers to axial forces as they are drawn through a temperature-controlled felting liquor, allows for a wide range of yarn styles and types to be produced that cannot be replicated using conventional yarn spinning methods. As a result, these unique-looking yarns are able to support the highly distinctive looking wool carpets which are particularly well suited for the premium end of the market.

The proposed transaction will be effected through a new company set up to acquire the assets, intellectual property and goodwill of Radford Yarns. Cavalier has agreed to subscribe for a 75% shareholding in the new company whilst the current management team (including founders, Woody and Jack Radford) will take up the remaining 25%.

The new company will have net operating assets of around $7 million, $6.5 million being the assets acquired in the original purchase and the balance being the increase in working capital required to support the business. Paid-up capital of the new company will be $3.4 million, with $850,000 of that coming from the Radford Yarns senior management for their 25% share in the new company and the balance funded by Cavalier from borrowings.

The purchase of the Radford Yarns is a very positive and symbiotic initiative and will allow:

• Radford Yarns to continue to maximise the market potential of this unique technology within its existing and established customer base; and
• Cavalier Bremworth to not only expand its iconic "Bremworth Collection" range (which now boasts four felted products, with more under development) and underpin its product differentiation strategy into the foreseeable future, but also access new market segments in Australia, North Asia and North America.

The intention is for Radford Yarns to continue to retain its own identity in the market place (through continuity in management, sales representation, sales people and brands) with the positives from the proposed transaction coming from the synergies that will naturally arise from this acquisition - from product development through to manufacturing and marketing across Radford Yarns and Cavalier Bremworth.

In its first full year, the new company is expected to have a turnover of $7 million and EBITD (earnings before interest, tax and depreciation) of $1 million. However, the more significant benefits will come from within Cavalier Bremworth.

The Directors will update shareholders again when the agreement is declared unconditional and the parties proceed to settlement.

Wayne Chung
Managing Director
18 February 2011

Top of the Page 

Print this Page