DAWSON International has signed a non-binding agreement to sell its cashmere spinning business to a Chinese supplier that has previously tried to buy the entire company.
Shares in the Kinross-based textile company jumped 43 per cent yesterday after it revealed that it was in talks with Zhongyin Cashmere, which is based in the city of Lingwu, in the Ningxia province of central China.
Dawson said it had signed a non
-binding heads of agreement contract with Zhongyin over the possible sale of Todd & Duncan, its cashmere yarn spinning business.
The company said there was no certainty a deal would go ahead, with any sale conditional on the completion of due diligence by Zhongyin and detailed contractual negotiation.
As well as being a supplier of raw cashmere products to Dawson, Zhongyin has been involved in lengthy takeover talks with it in the past.
In August 2007 Dawson confirmed it was in talks with Zhongyin over a sale of all or part of the company.
Dawson, which has previously owned the Pringle of Scotland brand, entered a takeover period that lasted ten months, although when it announced the talks had ended in June, chairman Mike Hartley said a sale of the group was never close to being completed.
"The talks were always very premature and (a sale] always seemed like it was very remote to me," Hartley told The Scotsman.
A spokeswoman said the latest talks were at a preliminary stage, declining to give details of the heads of agreement document or whether the negotiations were exclusive.
Despite this the Chinese company, which has more than 2,000 employees, has already given assurances that suggest the impact of a sale on Scotland will be minimal.
"In the event of the transaction being completed, Zhongyin has indicated that it is committed to maintaining the existing Scottish manufacturing base, its workforce and the integrity of Todd & Duncan's market leading product quality," Dawson said in a statement.
Todd & Duncan supplies wholesale yarn to garment companies, including Barrie, Dawson's luxury cashmere garment business. It has 210 staff, all based in Kinross.
In its interim results for the six months to the end of June, Dawson said the performance of Todd & Duncan was improving, reporting increased sales and improved margins, as well as benefiting from the strength of the euro. During the period the company made a £700,000 operating profit on sales of £15.8m. In 2007 the business manufactured 300 tonnes of cashmere yarn, and had net operating assets of £17.5m.
Shares in Dawson International , which is listed on the Aim, rose 0.38p to 1.25p.
