TIDMESNT
RNS Number : 6101B
Essentra plc
03 October 2022
The following typographical amendment has been made to the 'Sale
of Filters business to Centaury Management Limited and completion
of the sale of Packaging business to Mayr-Melnhof Group'
announcement released on 3 October at 07:00 under RNS 4578B.
The original announcement incorrectly stated, both in the
section entitled "Principal details of the transaction", and in
Note 4, that up to GBP20m deferred earn-out consideration would be
payable in two tranches of up to GBP10m for each of 2022 and 2023,
respectively. This should instead state that up to GBP20m deferred
earn-out consideration would be payable in two tranches of up to
GBP10m for each of 2023 and 2024, respectively.
All other details set out in the announcement are correct, and
remain unchanged. The full amended text is shown below.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION. FOR IMMEDIATE
RELEASE
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN
PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD
CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH
JURISDICTION
ESSENTRA PLC
A leading global provider of essential components and
solutions
SALE OF FILTERS BUSINESS TO CENTAURY MANAGEMENT LIMITED
AND COMPLETION OF THE SALE OF PACKAGING BUSINESS TO MAYR-MELNHOF
GROUP
-- Sale of the Filters business to a wholly owned subsidiary of
Centaury Management Limited for an enterprise value of
approximately GBP262.1m, including 100% consolidation of certain
joint ventures(1) , implying a June 2022 LTM adjusted operating
profit multiple of 8.2x(2,3)
-- Consideration is comprised of approximately GBP200m initial
consideration due on completion (on a cash-free, debt-free basis
and subject to customary adjustments) and up to GBP20m deferred
earn-out consideration(4)
-- The transaction is expected to complete no later than 31
January 2023. A Class 1 circular and notice of General Meeting will
be published in due course
-- The Board intends to use the net transaction proceeds to make
a small contribution to its defined benefit pension schemes and
prepay a portion of US private placement debt
-- The sale of the Packaging business to Mayr-Melnhof completed on 1 October 2022
-- The Board intends to return approximately GBP150m to
shareholders via a special dividend after the Filters disposal has
completed
-- After completion of the sales of the Filters business,
Essentra will be established as a pure play components business,
with a healthy balance sheet, providing flexibility to pursue
organic and inorganic growth opportunities
In line with the previously announced strategic review, Essentra
plc ("Essentra" or the "Company") today announces the disposal of
Essentra Filter Holdings Limited ("Filters" or the "Target") to
Frank Acquisition Four Limited (the "Purchaser"). The top holding
company of Frank Acquisition Four Limited is Centaury Management
Limited, which is owned and controlled by the investment office of
the Markus family. The consideration is comprised of approximately
GBP200m initial consideration due on completion (on a cash-free,
debt-free basis and subject to customary adjustments as set out
below) and up to GBP20m deferred earn-out consideration following
completion(4) . The transaction values the Filters business at an
enterprise value of approximately GBP262.1m, including 100%
consolidation of certain joint ventures(1) .
The transaction is subject to conditions which are set out
further below including approval by Essentra's shareholders. The
Class 1 circular and notice of General Meeting will be published in
due course. The transaction is expected to complete no later than
31 January 2023.
The Board intends to use the proceeds to reduce Essentra's debt
position by offering to prepay a portion of US private placement
("USPP") notes issued under its 2021 note purchase agreement(5) and
to make a small contribution to Essentra's defined benefit pension
schemes. After the disposal of the Filters business has completed,
the Board intends to return approximately GBP150m of the residual
net transaction proceeds from the disposals of Filters and
Packaging to shareholders via a special dividend.
The transaction will further strengthen the Group's balance
sheet and, after accounting for the repayment of USPP debt and
special dividend, the Board's intention is for the Group to have a
net financial leverage of approximately 0x. This will provide
Essentra Components with the flexibility to pursue value creating
organic and inorganic opportunities, including future bolt-on
acquisitions.
The Components business continues to perform well, benefitting
from its broad geographic reach (Americas 30%; Europe and Rest of
World 55%; Asia 15%). A Q3 trading statement will be released on 26
October 2022.
Commenting on today's announcement, Paul Forman, Chief Executive
said:
"The strategic review of Filters was launched in October 2021
and has built on the significant progress the division has made
since 2017 when announcing its strategy for future growth. The
business is delivering on all of the strategic "game changers" and
has attractive long-term growth prospects. I am confident that
Filters will continue to make excellent progress under its new
ownership.
The sale of Filters marks the final step of our journey to
become a pure play components business. Essentra has a bright
future as a leading global manufacturer and distributor of
components with a clear strategy and significant opportunities to
accelerate growth and expand market share. This transaction
strengthens Essentra's balance sheet and enables the Group to
return a meaningful portion of the proceeds to shareholders whilst
maintaining the flexibility to invest in organic and inorganic
growth."
Principal details of the transaction
On 2 October 2022, Essentra International Limited (the
"Seller"), Essentra and the Purchaser entered into a Sale and
Purchase Agreement, pursuant to which the Seller agreed, on the
terms and subject to the conditions of the Sale and Purchase
Agreement, to sell Filters to the Purchaser.
The consideration payable by the Purchaser comprises
approximately GBP200m initial consideration, subject to adjustments
after completion by way of a customary completion accounts mechanic
in relation to cash, debt and working capital, and up to GBP20m
deferred earn-out consideration payable in two tranches of up to
GBP10m for each of 2023 and 2024, respectively, as agreed with the
Purchaser in the Sale and Purchase Agreement. The customary
adjustments, which are expected to reduce the initial cash
consideration by approximately GBP35m, will include certain pension
and other liabilities, including approximately GBP16m of IFRS 16
lease liabilities, which will transfer out of the Group.
The Seller has given certain warranties and indemnities to the
Purchaser that are customary for a transaction of this nature and
size.
The transaction is conditional upon various conditions,
including the satisfaction (or waiver, where applicable) of the
following:
-- Approval of a resolution approving the transaction by
shareholders at a General Meeting of Essentra
-- The completion (in all material respects) of a group
reorganisation to achieve the separation of Filters from the
remainder of the Essentra group
-- There not being in force any applicable law that prohibits or
renders illegal the sale or purchase of shares
The Board expects that, subject to the satisfaction and/or
waiver (where applicable) of the conditions to the transaction,
completion will occur no later than 31 January 2023.
Essentra has agreed to pay a fee of GBP5.0m, if, in order to
comply with its fiduciary duties, the Board exercises its right to
withdraw, suspend, qualify or adversely modify or amend its
recommendation in relation to the disposal, except to the extent
that such change of recommendation is caused by certain breaches of
the Purchaser's obligations under the Sale and Purchase Agreement,
or the Seller is otherwise entitled to terminate the Sale and
Purchase Agreement pursuant to its terms.
For the year ended 31 December 2021 Filters delivered adjusted
operating profit of GBP28.2m (2) . T he gross assets at 30 June
2022 were GBP249.7m (6) .
Class 1 transaction
The transaction constitutes a Class 1 transaction under the
Listing Rules. Completion is therefore conditional upon the
approval of Essentra's shareholders and a circular will be sent to
the Company's shareholders in due course. Completion is also
subject to customary closing conditions as set out above.
Peel Hunt LLP is acting as sole sponsor to Essentra in regard to
the sale of the Filters business. Goldman Sachs International is
acting as exclusive financial advisor to Essentra in regard to the
sale of the Filters business. Lazard & Co., Limited is acting
as independent financial adviser to the Board of Essentra.
Completion of the sale of Packaging to Mayr-Melnhof Group
Further to the announcement on 24 June 2022, Essentra is pleased
to confirm, following receipt of regulatory approvals and
shareholder approval, the successful completion of the disposal of
ESNT Packaging & Securing Solutions Limited and Essentra
Packaging US Inc and their respective subsidiary companies
("Packaging") to Mayr-Melnhof Group ("MM") for GBP312 million on a
cash free, debt free basis and subject to customary adjustments.
The transaction completed on 1 October 2022.
As previously communicated, the transaction excludes Packaging's
business in India (which represents less than 1% of Group
revenues). The Company is pleased to announce that this business
has been sold to BBM Bommidala who will be well placed to integrate
the Bangalore site into their current portfolio.
Market Abuse Regulation statement
This announcement contains inside information.
The person responsible for arranging the release of this
announcement on behalf of the Company is Jon Green, Company
Secretary of Essentra.
Investor enquiries: Media enquiries:
Essentra plc Tulchan Communications LLP
Jack Clarke, Chief Financial Officer Olivia Peters
Claire Goodman, Group Investor Relations Lisa Jarrett-Kerr
Manager Tel: +44 (0)20 7353 4200
Tel: +44 (0)1908 359100
Notes
1. The enterprise value of up to GBP262.1m is based on 100%
consolidation of certain joint venture entities (China Tobacco
Essentra (Xiamen) Filters Co., Ltd and ITC Essentra Limited) (the
"JVs"), which are accounted for as subsidiaries of Essentra in its
consolidated financial statements due to a control achieved via
board membership. Of this GBP262.1m enterprise value, GBP42.1m
relates to the Filters' business non-controlling interests in the
JVs
2. The term adjusted excludes the impact of amortisation of
acquired intangible assets and adjusting items
3. Multiple of 8.2x based on an enterprise value of GBP262.1m
and June 2022 LTM adjusted operating profit of GBP31.8m. Based on
100% share of the JV and includes earn-out consideration of up to
GBP20m
4. Up to GBP20m deferred earn-out consideration (up to GBP10m
achievable for each of 2023 and 2024, respectively)
5. 2021 USPP repayments are on a pro rata basis at par and without make-whole premium
6. The value of gross assets excludes intercompany receivables
and cash which will be settled as part of the transaction
Cautionary forward-looking statement
This announcement contains forward-looking statements based on
current expectations and assumptions. Various known and unknown
risks, uncertainties and other factors may cause actual results to
differ from any future results or developments expressed or implied
by the forward-looking statement. Each forward-looking statement
speaks only as of the date of this announcement. The Company
accepts no obligation to revise or publicly update these
forward-looking statements or adjust them to future events or
developments, whether as a result of new information, future events
or otherwise, except to the extent legally required.
The release, publication or distribution of this announcement in
jurisdictions other than the United Kingdom may be restricted by
law and, therefore, any persons who are subject to the laws of any
jurisdiction other than the United Kingdom should inform themselves
about, and observe, any applicable requirements. Any failure to
comply with these requirements or restrictions may constitute a
violation of the securities laws or regulations of any such
jurisdiction. This announcement has been prepared for the purposes
of complying with English law and the UK Listing Rules and the
information disclosed may not be the same as that which would have
been disclosed if this announcement had been prepared in accordance
with the laws and regulations of any jurisdiction outside of
England.
No offer or solicitation
This announcement does not constitute or form part of any offer
or invitation to purchase, otherwise acquire, subscribe for, sell,
otherwise dispose of or issue, or any solicitation of any offer to
sell, otherwise dispose of, issue, purchase, otherwise acquire or
subscribe for, any security.
No profit forecasts or estimates
No statement in this announcement is intended as a profit
forecast or estimate for any period.
Important information relating to financial advisers for the
Filters transaction
Peel Hunt LLP ("Peel Hunt"), which is authorised and regulated
in the United Kingdom by the Financial Conduct Authority, is acting
exclusively for Essentra plc as sponsor and for no one else in
connection with the transaction and will not be responsible to
anyone other than Essentra plc for providing the protections
afforded to clients of Peel Hunt or for providing advice in
relation to in this announcement. Apart from the responsibilities
and liabilities, if any, which may be imposed upon Peel Hunt by
FSMA or the regulatory regime established thereunder, Peel Hunt and
its subsidiaries, branches and affiliates, and such entities'
respective directors, officers, employees and agents do not accept
any duty, responsibility or liability whatsoever or make any
representation or warranty, express or implied, concerning the
contents of this announcement, including its accuracy, completeness
or verification, or concerning any other statement made or
purported to be made by it, or on its behalf, in connection with
Essentra plc or the transaction, and nothing in this announcement
is, or shall be relied upon as, a promise or representation in this
respect, whether as to the past or future. Peel Hunt accordingly
disclaims, to the fullest extent permitted by law, all and any
responsibility and liability whether arising in tort, contract or
otherwise (save as referred to above) which it might otherwise have
in respect of this announcement, or any such statement.
Goldman Sachs International ("Goldman Sachs"), which is
authorised by the Prudential Regulation Authority and regulated by
the Financial Conduct Authority and the Prudential Regulation
Authority in the United Kingdom, is acting exclusively as financial
adviser to the Board of Essentra plc and no one else in connection
with the transaction and will not be responsible to anyone other
than the Board of Essentra plc for providing the protections
afforded to clients of Goldman Sachs nor for providing advice in
relation to the transaction or any other matters referred to in
this announcement. Neither Goldman Sachs nor any of its affiliates
owes or accepts any duty, liability or responsibility whatsoever
(whether direct or indirect, whether in contract, in tort, under
statute or otherwise) to any person who is not a client of Goldman
Sachs in connection with the transaction, this announcement, any
statement contained herein or otherwise.
Lazard & Co., Limited ("Lazard"), which is authorised and
regulated in the United Kingdom by the Financial Conduct Authority,
is acting exclusively as financial adviser to the Board of Essentra
plc and no one else in connection with the transaction and will not
be responsible to anyone other than the Board of Essentra plc for
providing the protections afforded to clients of Lazard, nor for
providing advice to any other person in relation to the transaction
or any other matters referred to in this announcement. Neither
Lazard nor any of its affiliates owes or accepts any duty,
liability or responsibility whatsoever (whether direct or indirect,
whether in contract, in tort, under statute or otherwise) to any
person who is not a client of Lazard in connection with this
announcement, any statement contained herein or otherwise.
Notes to Editors
About Essentra plc
Essentra plc is a FTSE 250 company and a leading global provider
of essential components and solutions. As a result of the
completion of the sale of Packaging to MM, the Group is now
organised into two global divisions. Essentra focuses on the light
manufacture and distribution of high volume, enabling components
which serve customers in a wide variety of end-markets and
geographies.
Headquartered in the United Kingdom, Essentra's global network
extends to 32 countries and includes over 4,500 employees, 25
principal manufacturing facilities, 28 sales & distribution
operations and two research & development centres. For further
information, please visit www.essentraplc.com.
Essentra Components
Essentra Components is a global market leading manufacturer and
distributor of plastic injection moulded, vinyl dip moulded and
metal items. Operating in 25 countries worldwide, 13 manufacturing
facilities and 23 sales & distribution centres serve more than
79,000 customers with a rapid supply of low cost but essential
products for a variety of applications in industries such as
equipment manufacturing, automotive, fabrication, electronics and
construction. The division also includes the Reid Supply business,
which provides a wide range of branded hardware supplies to a broad
base of industrial customers, largely located in the US
Mid-West.
Essentra Filters
Essentra Filters is the only global independent cigarette filter
supplier. Currently headquartered in Singapore, the division has 12
sites across nine countries, including two innovation centres,
providing a flexible infrastructure strategically positioned to
serve the tobacco sector. The business supplies a wide range of
value-adding high-quality innovative filters, packaging solutions
to the roll your own segment and analytical laboratory services for
ingredient measurement to the industry: Essentra's offering also
includes Heat Not Burn and e-cigarette solutions to the rapidly
evolving market for Next Generation Products. The division also
includes the Tear Tapes business, which is globally recognised as
the leading manufacturer and supplier of pressure-sensitive tear
tapes, that are largely used in the tobacco, e-commerce, food and
beverage and specialist packaging sectors.
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