TIDMCOB
RNS Number : 7128D
Cobham plc
02 February 2018
Legal Entity Identifier: 213800A41R9NL49E5632
Cobham Agrees Divestment of AvComm and Wireless Test and
Measurement Businesses for US$455m
Transaction Overview
Cobham plc ("Cobham" or "the Group") announces that on 1
February 2018 it entered into a conditional agreement to divest its
AvComm and Wireless test and measurement businesses to Viavi
Solutions Inc. for an all-cash consideration of US$455m
(approximately GBP325m), payable on completion (subject to certain
post-completion adjustments and expenses). The transaction is
subject to US Hart-Scott-Rodino anti-trust clearance and other
customary conditions to completion, which is anticipated within the
first half of 2018.
Cobham's AvComm business is based in Wichita, Kansas and
provides synthetic test, monitoring and control solutions for radio
and avionics test, with the Stevenage, UK based Wireless business
providing advanced validation tools for mobile and IP networks. The
businesses are part of Cobham's Communications and Connectivity
Sector.
Strategic Benefits
After considering a range of strategic options for the Group's
test and measurement businesses, the Board has concluded that
divestment is the best way to generate shareholder value and bring
strategic benefits to Cobham:
-- It simplifies the Group's portfolio of technologies and
capabilities, focusing the Group on its defence, aerospace and
space markets where it has competitive advantage;
-- It reduces the Group's risk profile by exiting businesses
where there was little technology, customer or market overlap,
avoiding the need for investment in additional specialist
expertise;
-- It strengthens the Group's balance sheet.
Although managed as part of its Wireless business unit, Cobham's
distributed antenna systems business, based in Chesham, UK is not
part of this transaction.
Financial Effects
In the year ended 31 December 2017, the AvComm and Wireless test
and measurement businesses recorded aggregate revenue of
approximately GBP170m and contributed approximately GBP25m(1) to
underlying operating profit, before restructuring costs of
approximately GBP2m and on an unaudited basis. The aggregate
unaudited gross assets of the businesses, including goodwill and
intangibles, were approximately GBP155m at 31 December 2017.
It is anticipated that there will be an improvement in overall
market conditions for the businesses, driven by the development and
global roll-out of next generation 5G mobile networks, with the
value achieved in part reflecting the growth in profitability over
time. The transaction will be slightly dilutive to the Group's
underlying operating profit margin.
Use of Proceeds
The Group is continuing to progress a turnaround in its
financial and operational performance and, as previously announced,
there are some significant contract exposures and other contingent
liabilities that remain to be retired. In the light of these
remaining uncertainties, the Board intends to use the net
divestment proceeds (subject to certain post-completion adjustments
and expenses) to strengthen the balance sheet and, coupled with
existing cash, to pay down approximately GBP440m of debt. This will
include the repayment of private placement debt, which will result
in estimated accelerated interest costs (make-whole payments) of
approximately GBP30m. The debt repayment will improve the
efficiency of the Group's balance sheet on completion of the
transaction by removing borrowings, which are no longer required.
After the accelerated interest costs, which it is expected will be
incurred in H1 2018, the Group's future interest expense will be
reduced by approximately GBP18m per full year.
David Lockwood, Cobham Chief Executive Officer, said:
"I am delighted that we have been able to conclude the portfolio
review of the AvComm and Wireless test and measurement businesses
expeditiously, after a competitive auction process."
"Today's announcement is a good deal for Cobham shareholders, as
we can now focus on delivering value-add technology and
capabilities to our defence, aerospace and space customers,
supported by a more resilient balance sheet."
Advisors
Evercore is acting as exclusive financial advisor to Cobham and
Bond, Schoeneck & King PLLC and Baker & McKenzie LLP are
serving as legal counsel.
Investor Briefing and Conference Call at 08.00 on 2 February
2018
David Lockwood, CEO, and David Mellors, CFO, will host a
conference call for investors and analysts at 08.00 UK time on
Friday, 2 February 2018.
The call can be accessed by ringing +44 (0)800 279 6549,
conference ID 5598579. Please dial in from 07.45 to avoid
queuing.
A replay facility will be available for seven days, by dialling
+44 (0)871 700 0145, conference ID 5598579.
The information contained within this announcement is considered
to constitute inside information as stipulated under the Market
Abuse Regulations (EU) No.596/2014 ("MAR"). Upon the publication of
this announcement via a Regulatory Information Service, this inside
information will be considered to be in the public domain.
- ends -
Enquiries:
Cobham plc
Julian Wais, Director
of Investor Relations +44 (0)1202 857998
MHP Communications
Reg Hoare/Tim Rowntree +44 (0)20 3128 8100
Notes:
1. The contribution to underlying operating profit is stated
before the allocation of central charges.
2. The Group's preliminary results will be announced on 1 March
2018.
3. This document contains 'forward-looking statements' with
respect to the financial condition, results of operations and
business of Cobham and to certain of Cobham's plans and objectives
with respect to these items.
Forward-looking statements are sometimes but not always
identified by their use of a date in the future or such words as
'anticipates', 'aims', 'due', 'could', 'may', 'should', 'expects',
'believes', 'intends', 'plans', 'targets', 'goal', or 'estimates'.
By their very nature forward-looking statements are inherently
unpredictable, speculative and involve risk and uncertainty because
they relate to events and depend on circumstances that may or will
occur in the future.
There are various factors that could cause actual results and
developments to differ materially from those expressed or implied
by these forward-looking statements. These factors include, but are
not limited to, changes in the economies, political situations and
markets in which the Group operates; changes in government
priorities due to programme reviews or revisions to strategic
objectives; changes in the regulatory or competition frameworks in
which the Group operates; the impact of legal or other proceedings
against or which affect the Group; changes to or delays in
programmes in which the Group is involved; the completion of
acquisitions and divestitures and changes in commodity prices,
inflation or exchange rates.
All written or verbal forward-looking statements, made in this
document or made subsequently, which are attributable to Cobham or
any other member of the Group or persons acting on their behalf,
are expressly qualified in their entirety by the factors referred
to above. Cobham does not intend to update these forward-looking
statements.
4. Cobham offers an innovative range of technologies and
services to solve challenging problems in commercial, defence and
security markets, from deep space to the depths of the ocean.
We employ around 11,000 people primarily in the USA, UK, Europe
and Australia, and have customers and partners in over 100
countries, with market leading positions in: wireless, audio, video
and data communications, including satellite communications;
defence electronics; air-to-air refuelling; aviation services; life
support and mission equipment.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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