Invensys split and £1.5bn sell-off

INVENSYS chief executive Rick Haythornthwaite revealed his master plan to rescue the troubled engineering group. The industrial components and systems divisions, with sales of £2.3bn, are to be sold to raise £1.5bn and halve the group's £3bn of debt. What remains will be reorganised into two core divisions.

Haythornthwaite plans to go ahead with bond issues this year and next. Today he promised there would not be a rights issue and pledged returns for investors 'across the cycle averaging at least twice GDP'.

The market initially reacted enthusiastically, making Invensys one of the FTSE 100's top risers before the price fell 13p to 96p after Haythornthwaite warned that this year's final dividend could be in doubt.

He said it would be determined on the basis of second-half performance and prospects for the year ahead. The two core divisions will have total annual sales of £4bn. Nine of the 14 executives who will run them will be new blood, though there could be some executive casualties.

The group, advised by Boston boutique management consultancy Parthenon Associates for a multi-million pound fee, has lost 11,000 jobs in the past two years and Haythornthwaite does not expect any more significant cuts. He confirmed that chairman Lord Marshall will remain in his post until he retires next year. The changes will result in asset write-downs of £240m, including a £55m hit on the inventory.

The divisions for sale include such engineering brand names as Rexnord, Fasco Motors, Sensor Systems, Drive Systems, BAE Automated Systems and CompAir. Two of them, Flow Control and Energy Storage, have already been sold or are subject to negotiation. One analyst estimated that these two divisions could contribute as much as £1.7bn towards debt reduction.

Meanwhile, current trading for the group in the second half was described by Haythornthwaite as mixed. Appliance and climate control sales were recovering but there was continued weakness in the difficult telecoms and IT market, he said. The group's financial year ends on 31 March.