Building products firm Royal Group Technologies Ltd. of Woodbridge, Ontario, is negotiating to sell its 60 percent stake in Royal Alliance, the injection molder that produces its Gracious Living consumer products.
Royal Alliance does molding in one plant at Royal Group's sprawling headquarters in Woodbridge. The divestiture is part of Royal's focus on selling noncore assets, said Mark Badger, vice president of corporate communications.
``By culling the portfolio a bit, we get greater leverage on capital and management time,'' Badger said by telephone July 28.
The firm also plans to sell its wholly owned Baron Metal Industries subsidiary and Roadex Transport, through which it operates a fleet of 77 tractors and 168 trailers.
The three business units had combined sales of C$131 million (US$109 million) last year.
In addition to the North American operations, Royal Group is negotiating to sell its interest in its Polish subsidiary. Since its operations began in that country in 1998, it has had losses of C$24 million.
``Part of our strategic exercise is to stop the bleeders,'' Badger said.
The divestitures are part of a four-part management plan to improve financial performance and refinance the company, officials announced July 15.
In addition to its divestitures, Royal Group also named James Lawn its chief financial officer. Lawn has served as CFO of several publicly owned companies, officials said.
In the meantime, Royal itself remains on the auction block, and on July 25, potential bidders began due diligence. Potential bidders include hedge fund Cerberus Capital Management LP of New York.
Asked if the divestitures are part of cleaning up the business to make it attractive to potential bidders, Badger said, ``This action is intended to create shareholder value, whether it's sold or not.''
The firm will announce its second-quarter results Aug. 12.
Management of Royal Alliance owns the remaining 40 percent of the firm.
