Novar plc - Company Profile, Information, Business Description, History, Background Information on Novar plc

Novar House
24 Queens Road
Surrey KT13 9UX
United Kingdom

Company Perspectives:

Novar plc is an international group whose core activities are: Intelligent Building Systems; Indalex Aluminum Solutions; Security Printing Services. Our new name for the group, Novar plc, signifies our continued transformation from low growth industrial businesses into higher growth markets. We believe Novar has the positive connotations we want for our businesses going forward providing enhanced customer solutions and increasing technology in the markets we share.

History of Novar plc

Novar plc is a U.K.-based corporation consisting of three primary business segments: security systems, aluminum product manufacturing, and secure check printing services. Although the company was founded only in 1985, as a result of a complex series of mergers, acquisitions, and divestments, it actually traces its origins to those of Metal Box plc, a pioneer in the British tinning industry and eventually a giant in packaging in general. In 1989 MB Group (the former Metal Box) merged with Caradon (which was formed in 1985 as a spinoff from Reed International) to create MB-Caradon PLC. Then in 1993 MB-Caradon divested itself of its packaging roots and soon underwent another name change, becoming Caradon plc. Another name change came in 2001, when the company became known as Novar plc. The beginning of the 21st century found Novar searching for ways to divest itself of a number of its holdings, in the hope of streamlining its image and committing to a single core business.

Early Roots of the Tinning Industry

The canning of foods, or "tinning" as it is often called in Britain, has been a common method for preserving food for about a century. Before that time, all foods had to be purchased fresh, salted, or dried. The industry that developed to produce these cans, or "tins," in Britain was controlled originally by numerous family firms, each with a small tin can making factory in which workers could turn out 200 cans in an hour. These family concerns were small, profitable, and only mildly competitive in such a large market.

One of the family canmakers was initially a printing business established in 1855 by Robert Barclay, a Quaker. His main customer was Barclay's Bank (owned by distant relatives), for whom he printed checks. Barclay's brother-in-law, John Fry, joined him as a partner in 1867, and their company, Barclay & Fry, became Britain's largest check printer. With the help of some technical information sold to him by an early industrial spy in France, Barclay developed the process of offset lithography and tried to sell it to many other firms. He died of a stroke in 1876 before any sale could be finalized.

The new printing process ended up being leased to Huntley, Boorne & Stevens, tin box makers for the biscuit company Huntley & Palmer (the two Huntleys also were related). Huntley & Palmer was the first manufacturer to use the offset process to print designs on their own tins; prior to that their tins had been hand-painted. Soon, Carr's Biscuits also were using printed tins; these were manufactured by their Quaker relatives, Hudson Scott & Sons. Sometime during the 1890s, Barclay & Fry decided to use their offset process themselves, but they remained primarily stationery printers.

Decorated biscuit tins were very popular throughout Great Britain and many homes had quite large collections of them. There were Alice in Wonderland designs, tins to commemorate every grand occasion, and tins resembling miniature cottages or featuring birds, books, or beauty spots. The tin making industry grew and since labor costs were low, profits were high. Soon, the Trade Boards Act required tin manufacturers to improve worker conditions and wages, and this caused some of the employers to form the British Tin Box Manufacturers Federation to protect their interests.

Founding Metal Box in 1921

World War I brought more business to the industry; a new product had to be manufactured--the ration tin used by British troops. Due to government restrictions on tin, many of the companies in the Federation cooperated closely, and after the war, in 1921, four of these tin box makers, Hudson Scott, F. Atkins & Co., Henry Grant & Co., and Barclay & Fry, formed the Allied Tin Box Makers, Ltd. A year later they changed their name to Metal Box & Printing Industries. From the beginning it was understood that each of the member companies would remain private, but that all would cooperate in controlling the market and making acquisitions.

Before long, however, the group's comfortable control of their market was threatened by the importation of an American method of semiautomatic can making that could produce 200 cans every minute. G.E. Williamson's family firm, which had refused to join the manufacturers' group, purchased the new American machinery in 1927 and began to produce cans for the government's Fruit & Vegetable Research Station in Gloucestershire. The research organization was interested in advanced canning methods in order to increase the markets for British farm produce.

Inevitably, with its superior technology, the U.S. canning industry quickly became interested in the British market. American Can moved in first by purchasing a small independent company and renaming it the British Can Company, Ltd. It then attempted to acquire Metal Box & Printing Industries. In its determination to resist a takeover, however, Metal Box arranged a partnership that not only kept it independent, but defined and nurtured its growth. The company signed an agreement with American Can's U.S. rival, Continental Can. The two firms exchanged stock shares and Metal Box was given the exclusive right in Great Britain to purchase canning machinery, technical advice, training, and patent licenses from Continental Can. This effectively eliminated the competition, as no other British company was able to purchase the technology. In little more than a year, British Can was in disarray. Metal Box agreed to buy it out on the condition that American Can stayed out of Great Britain and Ireland for the next 21 years.

These deals, illegal under the business laws of later decades, had been arranged by Metal Box's Robert Barlow. Still under 40, Barlow was now the head of Britain's canning monopoly and determined to make it even larger. But his aggressive managerial style alienated most of the old family leaders of the group's companies, and many resigned from the board of directors. Barlow wanted to bring all member companies under one authority and ignored those on the board who opposed him. He set up an executive committee with two others, Hepworth and Crabtree, to make policy decisions and, essentially, to circumvent the board.

In 1931 Barlow's committee instituted a single accounting system for all member companies in an attempt to force some kind of uniformity on them under a newly created head office. The managing director of Barclay & Fry tried to have Barlow fired, but Barlow called a meeting of the entire board and convinced them that his plan would make the company stronger still. As Barlow consolidated his position he banished some of his detractors to plants in South Africa and demanded the resignations of others. By 1935 he was in complete control of Metal Box and had, in large part, succeeded in centralizing sales and supplies, and rationalizing production functions, for all of the company's plants.

Succeeding in Spite of the Great Depression

Metal Box experienced nothing but success during the Great Depression. As smaller canmakers collapsed, the company purchased them, and by 1937, Metal Box was selling 335 million cans a year. Following the American example, Metal Box had begun to manufacture the equipment needed to seal the cans onsite and sold this machinery to its customers. Metal Box was not interested in expanding into the field of food production, but it did open a publicity department to increase interest in canned foods. Whenever there were difficulties, either with suppliers or customers, Metal Box considered a takeover. For example, inefficient management at a tin plate supplier in South Wales led Metal Box, with the help of Continental Can, to purchase the company.

Surprisingly, Metal Box's income from security check printing combined with turnover from machine manufacturing and interests in mining, and so on, was double that of its income from the cans themselves. Profits rose dramatically for Metal Box in the 1930s--from £103,480 in 1931 to £316,368 in 1939.

Throughout the decade Barlow had maintained a strong interest in foreign markets. Partnerships or subsidiaries had been formed in France, The Netherlands, Belgium, India, and South Africa. Continental Can was still Metal Box's mentor and main partner and the two essentially divided up the world markets between themselves. Metal Box was to expand within Europe and the British colonies, while Continental Can would develop interests in the rest of the world.

In the late 1930s, the innovative company planned to produce new forms of packaging such as card containers with metal ends and cans with wax lining for beer. The onslaught of World War II, however, curtailed new production in favor of equipment for the troops. Containers for gas masks were easy to make in tin box factories, and Metal Box produced 140 million of them for the government. The paint tin production lines were adapted to produce casings for antitank mines. Shell casings and ration tins also were produced by the millions. Even so, due to strict government controls, company profits fell to £242,428 in 1945.

Expanding into Other Forms of Packaging Following World War II

In 1943, as the war turned in the Allies' favor, Barlow established a committee to plan new forms of packaging that could be exploited as soon as the war was over. Consequently, Metal Box was an innovator in the field, quickly moving toward paper, foil, and plastic container products as the postwar economy began to improve. But Metal Box still dominated the British can and carton market. Between 1941 and 1961, eight new factories were built or purchased, and 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.

After the war, Metal Box was more than ready for further organizational changes. The accounting department was restructured and a financial comptroller was appointed. In addition, administrative functions were more clearly defined and brought under central control, and subsidiaries were made more accountable to central management. Barlow retained his position as executive chairman, but in 1946, he brought in D.W. Brough as his managing director. Brough had been in charge of operations in South Africa; nevertheless, he lasted less than two years. Barlow replaced him with two executives, G.S. Samways and D. Ducat, and these two men served as joint managing directors until Samways's resignation in 1954; Ducat then served alone, but Barlow still maintained overall control until his retirement in 1961.

In the late 1940s, the U.S. Department of Justice filed an antitrust suit against Continental Can and began to investigate its arrangements with Metal Box. The two companies hastily modified their agreement in 1950 and cooperation between them was restricted to machinery and technical information; all mutual ventures and attempts at market controls were dropped. The modified agreement was renewed and slightly expanded in 1970 and was slated to continue until 1990.

Up to 1970, Metal Box had continued to expand both at home and abroad. In Britain, Wallis Tin Stamping Co., Brown Bibby & Gregory, and Flexible Packaging were all acquired, widening Metal Box's product line to include plastic film, aerosols, central heating, and engineering. The company established facilities or subsidiaries in Italy, Malaysia, Tanzania, Japan, and Iran, and upgraded the older plants in India, France, and South Africa. Even so, Metal Box still conducted three-quarters of its business in the United Kingdom.

In 1967 the Board of Trade referred the British can industry to the Monopolies Commission, which ruled that Metal Box was operating a monopoly--supplying 77 percent of all metal containers, 63 percent of aerosols, and 80 percent of open-top cans. Nevertheless, the Commission concluded that the company's monopoly did not harm the public interest and did not find Metal Box lacking in efficiency, innovations, or service. Its report even praised Metal Box for passing on savings to its customers. But the company was instructed to terminate all of its exclusive arrangements, both with customers and with suppliers. Thus, in one stroke, Barlow's market control procedures were ended.

Diversifying Beyond Packaging in the 1970s

The 1970s were a decade of significant changes for Metal Box. Under the direction of Chairman and Chief Executive Alex Page, the company began to make serious moves to diversify outside of packaging, a mature industry unable to support long-term growth. The company's diversification was a measured one, however, and the areas targeted--although seemingly far removed from packaging--were nonetheless considered similar in terms of the manufacturing technology involved. Thus the company had by the mid-1970s begun to build--primarily through acquisitions--significant operations in the manufacturing of radiators used in central heating systems as well as a machinery building group. In late 1975 a company reorganization highlighted the importance of these new ventures when they were placed into a new diversified products group, alongside a packaging group that included Metal Box's traditional businesses. Also in 1975 the company moved its headquarters from central London to Reading. Sales reached the $1 billion mark in 1976.

As the 1970s progressed, Metal Box's packaging unit faced a climate of increasing competition at home and abroad. The company opened itself to further competition in 1978 when it abandoned its licensing deal with Continental Can, which immediately began to build a plant in Wales to make two-piece aluminum cans. By this time, two-piece cans were considered state of the art because they used 40 percent fewer raw materials in their manufacture. Metal Box had moved to set up its factories to make two-piece cans, but was initially thwarted by its workforce, which balked at the continuous production process needed for the manufacturing to be most efficient. Eventually, in 1982, Metal Box had to abandon two-piece manufacturing at one of its plants and decided to close another one, but did manage to initiate two-piece production at other plants.

While dealing with these troubles at home, the company increasingly looked overseas for opportunities for growth. 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. The company also acquired Risdon Manufacturing, a maker of cosmetics packaging based in Connecticut. In Europe Metal Box sought to build on its existing operations in southern Europe (which were primarily in Italy, Greece, and Portugal), by entering into a licensing agreement with France's Carnaud, 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. As a result of these overseas moves, the portion of Metal Box profits derived outside the United Kingdom increased from 41.4 percent in 1977 to 55.5 percent in 1980. By the end of the 1970s revenues had reached $2.7 billion.

Blockbuster Deals in the 1980s

Metal Box barely survived through a difficult period in the early 1980s, ravaged by a recession and hampered by a management team that lacked the kind of forward thinkers needed in an environment marked by increasing competition. By the mid-1980s Dr. Brian Smith had been brought in as chairman; previously, he had helped to turn around ICI. In January 1988 Murray Stuart became chief executive of the newly named MB Group, after having joined the company as finance director in 1981. Smith and Stuart would by the end of the decade engineer deals that completely transformed the company.

The name change reflected a desire to deemphasize the company's tinning roots. By the late 1980s MB Group had steadily built up its nonpackaging operations to the point where it was Europe's largest manufacturer of central heating radiators, through its Stelrad unit; it had developed a bathroom products business with the Stelrad Doulton brand; and its Clarke Checks subsidiary--built through a series of small acquisitions--had become the fourth largest printer of checks in the United States. Stelrad was boosted further in 1988 with the acquisition of the leading producer of radiators in continental Europe, Henrad Beheer of Belgium.

Smith and Stuart next surprised many observers when they agreed in October 1988 to merge MB's packaging operations with those of Carnaud to form CMB Packaging SA, based in Brussels. CMB, of which MB initially held a 25.5 percent stake, immediately became the third largest packaging company in the world and was better able to compete on the global stage than MB packaging could on its own. Carnaud gained management control of the new company, but more important to MB was the £240 million in cash it received from the merger, money it could use to further bolster its nonpackaging units. MB did just that in September 1989 when it acquired American Bank Stationery Co. for £193.7 million, beefing up its U.S. security printing operations.

Another blockbuster deal for Smith and Stuart came only one month later. After a year of negotiations, 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. Caradon had been founded in 1985 through a £61 million management buyout of the U.K. building products division of Reed International, the U.K. publishing giant. Caradon, which had gone public in 1987, was a perfect fit with MB's central heating and bathroom products since its top brands were Twyfords bathroom and sanitary products, Mira showers, Terrain plastic pipes, and Celuform plastic timber. Following the acquisition, Smith retired and the newly named MB-Caradon PLC was headed by Stuart as chairman and Peter Jansen, Caradon's chief, as chief executive and in charge of day-to-day operations.

1990s and Beyond

Not surprisingly, MB-Caradon next sold its stake in CMB (at the time known as Carnaud MetalBox), and thus divested itself of its Metal Box roots. The £467.5 million ($700 million) generated by the April 1993 sale was used almost immediately when MB-Caradon paid £800 million ($1.2 billion) for RTZ Corp.'s RTZ Pillar industrial products group in August of that same year. Pillar brought with it construction, general engineering, automotive, and aviation operations. Yet another name change followed on the heels of this acquisition when MB-Caradon became Caradon plc.

By 1994, through these and other deals, Caradon had established itself as a leader in doors and windows, with its other operations being plumbing products, electrical products, structural and engineering operations, and security printing. That year, sales nearly doubled, having reached £1.61 billion, while operating profits were a record £205.4 million.

The following year Caradon acquired a 43 percent stake in Weru Aktiengesellschaft, a German leader in doors and windows. Later in the year, however, profits suffered as sales of doors and windows in the United States fell sharply, the cost of raw materials used to make plastic products rose, and the U.K. building industry suffered a general depression. Operating profits fell as a result, to £127.1 million, and sales increased only 6.4 percent.

In response Jansen launched a restructuring late in 1995: 1,600 jobs were eliminated, a layer of management was jettisoned so that the directors of the five divisions reported directly to Jansen, and noncore businesses began to be divested. In December 1996 Caradon sold off 18 businesses for a total of £220 million ($360 million), including most of its European engineering and distribution operations. Meanwhile, the company spent £48.2 million ($75 million) for another 30 percent of Weru, bringing its total stake to almost 80 percent.

The 1996 divestments were in many cases long overdue (some dated back to the merger of MB Group and the original Caradon; others came with RTZ Pillar) and were a key to a possible company turnaround. More divestments were certainly possible, and the North American engineering and security printing units were the leading candidates. Caradon was also likely to make further acquisitions in the late 1990s to beef up its already considerable building products operations, which accounted for 80 percent of overall company sales in 1996.

New Challenges in the 21st Century

By late 1997, after suffering heavy losses in its windows and doors business both at home and in the United States, Caradon decided it was time for the company to begin heading in a new direction. In November, Jurgen Hintz, former head of Carnaud MetalBox, was appointed new chief executive officer. At first glance it appeared as if his primary task would be to devise a business strategy that would establish the company as a leader in the building products industry. Caradon's root problem, however, actually had more to do with the diversity of its holdings. Because the company was unable to boast a leading market position in any single enterprise, a sudden downturn in a particular business sector often had a significantly negative impact on investor confidence. Upon taking control, Hintz recognized right away that it would be extremely difficult to build a solid profile, along with brand recognition, for a corporation with such a wide range of unrelated interests. In the wake of the recent slump in the building supplies industry, the new CEO felt compelled to consider other ways to bolster Caradon's corporate identity.

The first step involved selling off some of the company's less promising businesses. Not long after Hintz assumed command, Caradon dumped its door and window businesses. The company's interests in plastic pipes and garage doors soon followed, and in October 2000 it sold its plumbing business to HSBC Private Equity for £442 million. On the one hand, the most logical new focus for the company lay in its intelligent building systems unit. The company had been building some momentum in this market for some time; it 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, a major British supermarket chain. At the same time, Hintz clearly remained open to the possibility of further diversification, assuming the right opportunity came along. His goal was not necessarily to streamline the conglomerate completely, but to reinvest the capital from its recent divestments into business segments that would offer long-term profitability.

Such a radical transformation could hardly be expected to reap dividends overnight, and the late 1990s proved to be a time of great uncertainty for the company. As late as October 2000 Hintz was still forced to admit that "in essence, Caradon has no real core business." Unfortunately, a number of the company's investors agreed with this assessment. 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. The group's main goal was to force the company to commit to a single core business, put a freeze on acquisitions of more than £10 million, and buy back £130 million of its own shares. Hintz was able to repel this action, at least temporarily, by promising to undertake a thorough restructuring. One immediate result of the reorganization was the adoption of the company's new name, Novar plc, in early 2001. While the UK Active group remained skeptical of the direction the company was taking, it was clear that Hintz had brought an aggressiveness to Novar's business strategy that had been lacking. What was still unclear by the year 2002 was which of Novar's three primary businesses would serve as the foundation of the company's future.

Principal Subsidiaries: MK Electric Limited; Friedland Limited; Esser Security Systems GmbH (Germany); Esser-effeff Alarm GmbH (Germany); Gent Limited; Eltek Fire and Safety Systems AS (Norway); 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 (U.S.A./Canada); Mideast Aluminum (U.S.A.); Indal Technologies Inc. (Canada); Indalloy (Canada); Brampton Foundries Limited (Canada); Clarke American Checks, Inc. (U.S.A.); Checks in the Mail, Inc. (U.S.A.)

Principal Divisions: Doors & Windows; Electrical; Structural & Engineering; Security Printing.

Principal Competitors: Alcoa Inc. (U.S.A.); Deluxe Corporation (U.S.A.); Tyco International Ltd. (U.S.A.)


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