Perfect Pieces Specialists in British Pottery

Most of the assets of Waterford Wedgwood have been sold to US private equity company KPS Capital for an undisclosed amount. The now-completed deal has been on the cards ever since Waterford Wedgwood went into administration but concerns have persisted over the number and scale of job cuts that may result.

Controversially, KPS has not bought any of Waterford Wedgwood’s assets in Ireland – only the stock. This means that the Waterford factory and its employees are currently standing idle, with redundancy a distinct possibility.

There is some hope that KPS will agree a deal with the Irish government to turn the plant into a modern visitors centre making “artisanal” glassware, but this has not yet been finalised and would depend on substantial investment from the Irish government.

KPS has made no secret of its intention to increase the amount of offshore production – both in Asia and Eastern Europe – meaning that jobs at the former Wedgwood and Royal Doulton factories in the UK could be at risk, too.

KPS says that it plans to “aggressively grow the hell out of it [Waterford Wedgwood]” and that is will now be operated as one efficient company, targeting new overseas markets and large luxury hotel groups such as Four Seasons and Ritz Carlton.

The deal excludes all of the old company’s liabilities so the new Waterford Wedgwood will start with a clean slate. KPS are promising to invest up to €100m in its new acquisition – we’ll have to wait and see how they get on.

The Waterford Wedgwood group has been sold to American private equity company KPS Capital. The deal, which was widely expected, was announced on Friday.

It includes Waterford, Wedgwood and Royal Doulton but excludes Rosenthal, which was also a part of the Waterford Wedgwood empire.

There have been no announcements yet on job prospects for the firm’s Stoke-on-Trent and Waterford based manufacturing staff. According to one report, KPS have not agreed to take over the Waterford manufacturing plant, which stopped production on 5th January when the firm went into receivership. There are fears that more Wedgwood jobs will go abroad – the company already employs more than 1,500 workers at its plant in Indonesia.

The chances of the Wedgwood family succeeding in their bid to demerge Wedgwood from Waterford and run the firm independently again are looking increasingly slim this week.

Both the Irish Times and the Staffordshire newspaper The Sentinel have reported that early bidders KPS Capital look to be favourites to secure a deal to buy the whole Waterford Wedgwood group, possibly with a contribution from the Irish government.

Unsurprisingly, Wedgwood staff are strongly in favour of the Wedgwood family bid as they believe this would reduce the chance of job losses for Wedgwood’s Barlaston staff. On the other hand, a purchase by private equity group KPS Capital is widely expected to translate to expanded offshore production and a reduction in Wedgwood’s UK production facilities, although this has not been confirmed by KPS.

According to The Sentinel, staff at Wedgwood’s Barlaston plant have been told to “clear up” and old stock is being “smashed up”, leading the workers to believe that a purchase deal is close to completion.

The Times reports that Thomas R. Wedgwood, a direct descendent of Josiah Wedgwood, is putting together a bid to buy back Wedgwood into family ownership.

Apparently, the bid is being backed by Middle Eastern money (when is anything not, these days?) and is due to be submitted this week. It would entail a demerger from Waterford, turning Wedgwood back into an independent company.

The bid sounds attractive – perhaps more attractive than the other known bid from American equity fund KPS Capital, which The Times says apparently left the Wedgwood family “ignited with worry” about the future of the Wedgwood brand and its British employees.

Thomas Wedgwood was until recently Wedgwood’s Asia Director and believes that Asia should be seen as a lucrative potential market, rather than simply a cheap manufacturing base. According to The Times, the latter strategy is a “one-way route to oblivion”. 37% of Wedgwood sales are currently generated in Asia, but Mr. Wedgwood believes this has the potential to rise as high as 60%.

Thomas Wedgwood believes that the company’s products need to become “just inaccessible enough to be aspirational” – turning Wedgwood back into a true luxury brand. It’s an idea that many fans of the company (including me) will probably empathise with but I don’t know how successful it would be.

Time will tell.

As I predicted in my last post on Wedgwood, the company looks likely to be bought out of administration, according to the BBC. Perhaps unsurprisingly, the interested party is an American private equity firm called KPS Capital.

I say unsurprisingly because the largest part of Waterford Wedgwood’s market is the USA. The deal looks likely to include most of the Waterford Wedgwood group – presumably including its three main brands, Waterford, Wedgwood and Royal Doulton.

KPS Capital appear to be a ‘distressed specialist’ fund – sometimes less flatteringly described as a vulture fund – who specialise in buying companies with financial problems. The upshot of this is that they will get the company for a very keen price – but if no one else bids against them, that seems fair, really.

According to The Times, the proposed deal with KPS is likely to leave its two main investors in recent years, Sir Anthony O’Reilly and Peter Goulandris, around £360m out of pocket.

There is no word yet on whether Waterford Wedgwood’s 1,900 UK employees would keep their jobs. However, even before going into administration Wedgwood were planning further outsourcing of ceramics production, so it seems likely that any new owner would do the same – if not more.

The majority of Wedgwood and Royal Doulton production has already been moved overseas and takes place in Jakarta, Indonesia, where the company employs 1,500 people on production.

Wedgwood should have been planning its 250th birthday celebrations this year. Instead, its parent company Waterford Wedgwood has today called in the administrators to the Barlaston, Stoke-based company.

Founded by Josiah Wedgwood in 1759, Wedgwood has been responsible for some of the finest ceramics ever made in the UK and is a byword for quality and innovation.

Or at least it was.

As Jorn Madslien comments in his article on the BBC website, Wedgwood has for too long been trading on former glories without really doing anything innovative.

Production of most wares has been outsourced to Indonesia in recent years – where the company employs around three times the number of people it employs in the UK. The problem is that sales of traditional fine china dining ware have been falling steadily.

Why? At a guess, the culture of ultra-cheap, Asian imports, Ikea and laptop dining in front of the television.

Fine china dinner wares don’t really fit in, do they?

Economic conditions haven’t helped either. The Euro’s strength against the US dollar and the lack of availability of debt refinancing have hit the company hard over the last year, perhaps tipping the balance and bringing us to today’s announcement.

What Next?

Wedgwood has a brand that is undoubtedly still valuable. I am sure it will be successfully sold, with or without its accompanying factories. The question is can anyone find something innovative and profitable to do with it – and is it still relevant at all?

A visit to the newly-reopened Wedgwood Museum reveals just how high a standard any new owners should seek to aspire to. It’s a tough challenge and one that I would not envy. Part of me feels that the time for such wares has simply passed.

Worse still, part of me feels that no likely investor will have the foresight or imagination to find a genuine, innovative solution for the future – and instead will seek to milk the value of the brand by continuing to produce more of the same. Rather like what’s happened to Poole Pottery.

What do you think?