Schaffer Corporation Limited has moved to increase its stake in Australian Leather Holdings (ALH) from 42% to 83%. The proposed acquisition follows Schaffer's recent announcement of a record full year operating profit before tax of $10.9 million and net profit after tax of $8.0 million for the year ending 30 June 2001.

Schaffer Corporation will pay $5.9m to the retiring shareholders for their ordinary shares. ALH will pay $6.5m to existing shareholders under a proposed preference share buyback of which Schaffer Corporation will receive $2.5m. The net funding requirement for Schaffer Corporation is therefore $3.4m of which $1.4m is deferred for 12 months. The acquisition will increase Schaffer Corporation's ownership of ALH to 83% with the balance being held by ALH management. The purchase by Schaffer Corporation of the majority of the ALH shares is conditional on ALH buying back all of the outstanding preference shares for $6.5 million, which is in turn conditional upon the approval of ALH senior lenders and shareholders.

Schaffer Corporation Managing Director Mr John Schaffer said that the acquisition would be earnings per share positive for the company. Following the acquisition Schaffer Corporation will have majority interests in businesses that employ 800 people in Australia and another 230 people in Mexico.

"The ALH acquisition cements our position as a significant industrial company with controlling interests in a balanced mix of high quality businesses," Mr Schaffer said.The Schaffer Corporation leather businesses will include Howe Leather (83%) and Gosh Leather (83%). Schaffer Corporation also has other significant industrial and property interests.

"ALH achieved another strong financial result in the 2000-2001 financial year, with an EBIT of $14.5million on revenue of $220m. It is a successful, internationally competitive, low-cost leather producer operating primarily in the automotive components industry and is an accredited supplier to BMW, GM, Ford, Subaru, Toyota, Mitsubishi and Honda" Mr Schaffer said.

Mr Schaffer added that he is enthusiastic about the long term prospects for the automotive leather business and looks forward to working closely with the ALH management team to build a sustainable global business.