Devro returns to its roots as film arm sold

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SAUSAGE-CASING company Devro has given up on its venture into breath fresheners and anti-snoring devices, selling its specialist thin-film division to a new business backed by Tate & Lyle and Scottish Enterprise.

The Moodiesburn company announced in March 2006 that it would develop new products for medical and cosmetic use, claiming the growth of the division was a "key project" for the year. The new lines included devices to prevent snoring, stem bleeding and freshen breath.

However, Peter Page, who joined Devro as chief executive in April, has decided to focus on the group's core products for the food industry, prompting the surprise disposal.

Devro said BioFilm Holdings, a new business backed by Tate & Lyle Ventures and SE's Scottish Ventures Fund, had bought the division for a "nominal initial sum".

If the company is later sold by its new backers, Devro is in line for a further payment of up to 3.6 million.

Trevor Morgan, Devro's business development director, resigned from the board yesterday to head the new business.

Morgan, who had been with Devro for more than 25 years, was unavailable for comment. However, Devro said BioFilm's new owners planned to invest some 3m in the business. Page said the technology behind BioFilm was "clearly proven" given the interest of its backers, but owing to the time it could take to get the product lines to profitability the business was a more appropriate investment for venture capitalists.

"To get it to the next stage would require a considerable investment," Page noted. "Our decision is that it's better for us to concentrate our investment on our core competencies around collagen products."

He said products for the food industry gave Devro "plenty of opportunities" for growth.

Devro is likely to have lost money on BioFilm through researching the new product lines and setting the division up, although Page would not comment on past spending. "I'm just looking forward, picking up from where I took responsibility," he stressed. "I would certainly see that as a positive for everyone concerned."

The sale is part of a review by Page, who is set to update the market on the company's plans on 24 January.

While he would not comment on the likely outcome of the review, it is expected to cover the company's drive into new markets rather than further disposals or a new diversification of the business.

Shares in Devro edged up 1p to 92p, giving the company a market value of about 150m, on relief the firm had not had to pay to dispose of BioFilm.

Devro was an unlikely spin-out of Johnson & Johnson in a 108m management buyout in 1991. It listed on the London Stock Exchange two years later.

In January, shares in Devro soared when it announced it was in takeover talks which could lead to a bid of 150p a share. The approach was widely believed to be from Irish racing millionaire John Magnier, who owned around 14 per cent. The talks were called off in April and Magnier sold his shares. House-broker Investec is forecasting a pre-tax profit of 14.4m in 2007, down from 17.3m in 2006.