TIDMMLIN
RNS Number : 5109H
Molins PLC
08 June 2017
8 June 2017
AIM: MLIN
Molins PLC
("Molins", "the Company" or "the Group")
Global packaging solutions group
Proposed Sale of Molins Instrumentation & Tobacco Machinery
division
and Notice of General Meeting
Molins, the global packaging solutions group, today announces
that it has entered into a conditional agreement with G.D S.p.A., a
wholly owned subsidiary of Coesia S.p.A., to sell its
Instrumentation & Tobacco Machinery division ("I&TM") for a
gross cash consideration of GBP30 million on a cash free debt free
basis. In line with the Company's strategy, the net proceeds of the
Sale will primarily be used to invest in the Group's packaging
machinery activities to capitalise on the attractive growth
opportunities in their end markets.
Highlights
-- The Sale provides the opportunity to accelerate the Group's
strategy to be a global leader of packaging solutions and will
provide the platform to invest in the Group's existing Langen and
Molins Technologies businesses and acquire complementary
businesses
-- Gross consideration for I&TM of GBP30 million, with net
cash proceeds after fees and taxation expected to be GBP27.3
million, similar to the book value of the net assets, including
goodwill, being sold
-- The Company has agreed to make a one-off contribution to the
Molins UK Pension Fund of 10% (approximately GBP2.7 million) of the
net cash proceeds and has formalised an agreement with the Fund's
trustees following the completion of the valuation as at 30 June
2015
-- GBP1.5 million of the consideration will be retained within
an escrow account for up to two years in accordance with warranties
and indemnities given by Molins in the Sale Agreement
-- Balance of net proceeds of GBP23.1 million will be retained
to execute growth strategy, strengthen the Group's balance sheet
and leave it in a cash-positive position
-- As part of the transaction the Company has agreed to transfer
the name 'Molins' to G.D, an Italian leading supplier of tobacco
machinery - following completion, Molins will retain the right to
use the name for a period of six months
-- The first part of Molins' financial year has resulted in
order intake in all parts of Molins being at levels ahead of the
same period last year, with trading also ahead
-- Completion subject to conditions including the approval of
Shareholders at a General Meeting to be held on 27 June 2017
Panmure Gordon (UK) Limited is acting as financial adviser,
nominated adviser and sole broker to the Company.
Commenting on the Sale, Tony Steels, Chief Executive, said:
"The Sale will provide Molins with the platform to accelerate
the execution of its strategy to invest in growth packaging
machinery sectors.
Molins has a presence in large and attractive growth markets, an
enviable portfolio of global multinational customers, an impressive
range of innovative technologies and above all a very talented and
engaged workforce. With the proceeds from the sale of I&TM, I
am even more confident about the growth opportunities for the
Group."
Notice is therefore given of a General Meeting of the Company,
at which Shareholders will be asked to approve the Sale by way of
an ordinary resolution. The General Meeting will be held at the
registered offices of Molins PLC, Rockingham Drive, Linford Wood
East, Milton Keynes MK14 6LY at 2.00 p.m. on 27 June 2017. A
circular, including notice of the General Meeting ("Circular"),
will today be posted to Shareholders and a copy will also be made
available to view on the Company's website at www.molins.com.
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No. 596/2014.
For further information, please
contact: Tel: +44 (0)
Molins PLC 1908 246870
Tony Steels, Chief Executive
David Cowen, Group Finance Director
Panmure Gordon (UK) Limited Tel: +44 (0)
Karri Vuori/James Greenwood - 20 7886 2500
Financial Adviser
Andrew Potts, Peter Steel, James
Stearns - Nominated Adviser &
Broker
Hudson Sandler Tel: +44 (0)
Nick Lyon, Jasper Bartlett 20 7796 4133
Expected Timetable of Principal Events
Date of the Circular 8 June 2017
Latest time and date for receipt 2.00 p.m. on
of Form of Proxy in respect of 25 June 2017
the General Meeting
Date and time of the General 2.00 p.m. on
Meeting 27 June 2017
Anticipated completion of the On or around
Sale 31 July 2017
1. Each of the times and dates in the above timetable is subject
to change. If any of the above times and/or dates change, the
revised times and/or dates will be notified to Shareholders by
announcement on a Regulatory Information Service.
2. All of the above times refer to London time unless otherwise
stated.
3. Completion of the Sale is conditional upon approval by
Shareholders of the Resolution.
Panmure Gordon (UK) Limited, which is authorised and regulated
in the United Kingdom by the Financial Conduct Authority, is acting
exclusively for Molins PLC and no one else in connection with the
matters referred to in this announcement and apart from the
responsibilities and liabilities, if any, which may be imposed on
Panmure Gordon (UK) Limited by the Financial Services and Markets
Act 2000 and the regulatory regime established thereunder, Panmure
Gordon (UK) Limited will not be responsible to anyone other than
Molins PLC for providing the protections afforded to clients of
Panmure Gordon (UK) Limited or for providing advice in relation to
the matters referred to in this announcement.
This announcement includes statements that are, or may be deemed
to be, "forward-looking statements". These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms "believes", "plans", "targets",
"continues", "expects", "intends", "may", "will", "would" or
"should", or in each case, their negative or other variations or
comparable terminology. They appear in a number of places
throughout this announcement and include statements regarding the
Group's and the Directors' intentions, beliefs or current
expectations concerning, among other things, the Group's prospects,
growth strategies and the industries in which the Group operates.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances.
A number of factors could cause actual results and developments to
differ materially from those expressed or implied by the
forward-looking statements, including without limitation:
conditions in the markets, market position of the Group, earnings,
financial position, cash flows, return on capital, anticipated
investments and capital expenditures, changing business or other
market conditions and general economic conditions.
ADDITIONAL INFORMATION
The following information has been extracted from the
Circular.
...........................................................................................................................
LETTER FROM THE CHAIRMAN
Dear Shareholder
Proposed sale of I&TM and Notice of General Meeting
1. Introduction
The Company announced today that it has entered into a
conditional agreement with G.D pursuant to which it has agreed to
sell I&TM, which includes the trademarks relating to Cerulean
and Molins Tobacco Machinery, including the name 'Molins'. The
Transaction values I&TM on a cash free debt free basis at GBP30
million.
The Consideration payable to the Group of GBP30 million will be
adjusted by the value of the Net Financial Position and the extent
to which the Net Working Capital is higher or lower than a target
value at Completion, to be calculated through a completion accounts
process. Of the net consideration, an amount of GBP1.5 million will
be held in escrow for a period of up to two years, as security to
G.D for possible future warranty and indemnity claims against the
Company. After taking into account the Group's costs, including
fees and taxation costs, associated with the Sale of approximately
GBP2.7 million, it is expected that the net proceeds of the Sale
receivable by the Company (including the amount held in escrow at
Completion) will be approximately GBP27.3 million. The principal
terms of the Sale Agreement are summarised in paragraph 8
below.
As a consequence of the size of the consideration arising from
the Sale relative to the Company's market capitalisation, pursuant
to Rule 15 of the AIM Rules, the Sale is deemed to constitute a
disposal resulting in a fundamental change of business of the
Company, which requires the approval, by way of an ordinary
resolution, of the Shareholders at the General Meeting.
The purpose of the Circular is to provide Shareholders with
further information on the Sale and the Resolution, as well as the
Company's ongoing strategy, and the reasons why the Directors
consider that the Sale is in the best interests of the Company and
its shareholders as a whole. The Directors unanimously recommend
that you vote in favour of the Resolution.
2. Background to and reasons for the Sale
Overview
Following his appointment as the Company's Chief Executive in
June 2016, Tony Steels initiated a comprehensive review of the
Group's strategic direction, with a focus on market opportunities
and operational efficiency.
The conclusions of the strategic review process, which are set
out in the Company's announcement of its final results for the year
ended 31 December 2016, recognised that the Group's accessible
markets have two contrasting dynamics:
-- the pharmaceutical, healthcare, nutrition and beverage
end-markets for the Group's Packaging Machinery division are
expanding at around 5 per cent. per annum and have attractive
underlying long-term growth drivers such as urbanisation,
convenience and health awareness; and
-- I&TM's nicotine delivery market, although cash generative
and relatively stable, is undergoing a shift as sales of
traditional products are under pressure due to health awareness and
government tax schemes and the introduction to the market of a
large number of new nicotine delivery products.
In light of these contrasting market dynamics, together with
positive progress in the Packaging Machinery division arising from
the initial implementation of the plans identified from the
strategic review, the Board believes that the Sale is consistent
with the strategy adopted by the Board and will enhance the
platform from which to accelerate the growth of the Continuing
Group.
The Sale follows an unsolicited approach from Coesia (the
ultimate owner of G.D) to Molins to acquire I&TM. The Board has
concluded, as summarised below, that the Sale is in the best
interests of the Company and Shareholders.
Information on I&TM
I&TM comprises Cerulean, the Group's quality control,
testing and analytical instrumentation business and Molins Tobacco
Machinery, which designs, manufactures and services secondary
tobacco processing machinery. As at 31 December 2016, 354 people
were employed within I&TM.
Cerulean, based in Milton Keynes, UK, with an international
network of sales and service offices, develops, assembles, sells
and maintains process and quality instruments mainly for the
tobacco sector, with a small proportion of its business in other
FMCG sectors.
Molins Tobacco Machinery operates globally from its headquarters
in Princes Risborough, UK, where the central engineering, sales and
logistics teams are located. Additional sales and service
operations are based in the USA, Brazil and Singapore, with
manufacturing facilities in the Czech Republic and Brazil.
For the year ended 31 December 2016, I&TM generated turnover
and a profit before interest and taxation of GBP38.6 million and
GBP0.3 million respectively, the latter after the recharge of
certain central costs of the Group of GBP1.9 million which will
remain with the Continuing Group immediately following the
Transaction. As I&TM is not required to prepare its own
consolidated accounts, its post-tax profits or losses are not
disclosed.
At 31 December 2016, I&TM had gross assets of GBP30.2
million and net assets of GBP21.3 million. In addition the Group
carried goodwill arising on consolidation in relation to Cerulean
on its balance sheet, amounting to GBP7.8 million at 31 December
2016.
The value of I&TM's unaudited net assets, including
goodwill, at 31 March 2017, which is the date being used as the
reference point to agree with G.D the value of net assets that will
be transferred on Completion, was GBP28.5 million. With
consideration of GBP30 million, fees and taxes arising from the
Transaction estimated at approximately GBP2.7 million and the
release of certain items held in the Group's balance sheet, it is
expected that the Sale will generate a broadly neutral profit and
loss impact.
Reasons for the Sale
I&TM is heavily reliant upon the tobacco industry, the
market for which is not growing. Furthermore, the cigarette making
and packing capacities in many regions of the world are in excess
of consumption. Together with strong competition in this area of
the market, demand for Molins Tobacco Machinery's new machinery is
lower than it has been historically, and typically at prices that
deliver profit margins that are lower than in the rest of the
Group. The tobacco industry is undergoing a transformation, with
the introduction of heat-not-burn products set to progressively
displace sales of traditional cigarettes. This change will require
significant and timely investments in new product development, as
yet not planned within Molins. Cerulean is the market-leading
supplier of quality control instruments and its performance has
been, and continues to be, strong. Cerulean is, however, subject to
increasing competitive pressures.
Whilst the Board believes that I&TM has a strong portfolio
of products, its market position is well-established and it would
continue to benefit from being part of the Group, the Board has
considered the strategic options available to I&TM following
Coesia's unsolicited approach. The Board has concluded that
I&TM would benefit from being part of a larger group with a
greater presence in the tobacco market. In light of these factors,
the Board entered into negotiations with G.D leading to the
Sale.
The Sale provides the opportunity to convert the value of all
I&TM related assets, including intangible assets, into cash.
The Sale will also:
-- provide the Board with the platform to execute its strategy
of focusing on attractive growth markets;
-- provide Molins with greater potential to invest in and
acquire complementary businesses in its packaging machinery
activities; and
-- strengthen the Continuing Group's balance sheet, leaving it
in a net cash-positive position and not reliant on debt funding
over the short-term.
The Board has therefore concluded that the Sale is in the best
interests of the Company and its Shareholders, thereby providing
the Board with the opportunity to accelerate the execution of its
strategy for the Continuing Group.
3. Illustrative financial effects of the Sale
On a pro-forma basis, i.e. excluding I&TM, for the year
ended 31 December 2016, the Continuing Group would have recorded
revenues of GBP41.5 million (2015: GBP51.0 million) and a loss
before non-underlying items (reorganisation costs and pension
administration costs), interest and tax of GBP1.2 million (2015:
GBP2.6 million profit).
The Packaging Machinery division recorded a strong performance
in 2015, generating good levels of profitability even if all the
Group's central costs had been allocated against this division on a
pro-forma basis. Trading in 2016 suffered as a result of entering
the year with a lower order book and order intake in the year,
except for the last few months, was lower than expected. This
resulted in the operational efficiencies of the businesses
suffering through under-utilisation. The opportunity to reduce the
cost base of the business was taken towards the end of 2016. With
strong order intake in the last few months of 2016 continuing in
the first five months of 2017 the Board believes that the division
is well placed to match 2015's sales levels. Whilst the division's
profitability will, in the short-term, be impacted by the
allocation of all of the Group's central costs, the impact of this
is expected to be dissipated as the Continuing Group grows.
On a pro-forma basis, to illustrate the effect on the net cash
position of the Continuing Group had Completion occurred on 31
December 2016 and, thereby, included the Group's net cash position
of GBP0.8 million at that date, the GBP27.3 million net proceeds
receivable by the Company from the Sale (including GBP1.5 million
to be held in escrow but less amounts payable in respect of fees
and taxes arising from the Transaction of approximately GBP2.7
million), less approximately GBP2.7 million that will be paid to
the Fund shortly after Completion (see paragraph 9 below), the
Continuing Group would have had net cash of GBP25.4 million.
Other than the Group's net cash position at 31 December 2016,
all of the figures in this paragraph 3 are unaudited. This
pro-forma analysis has been prepared for illustrative purposes
only.
4. Use of Proceeds
It is expected that the net Consideration receivable by the
Company on Completion, after fees and taxes, will be GBP27.3
million. GBP1.5 million of these net cash proceeds will be retained
within an escrow account, GBP0.75 million of which will be released
after 12 months and the balance after 24 months, subject to any
deductions arising from valid warranty or indemnity claims made by
G.D under the Sale Agreement. The Company has agreed with the
Fund's trustees to make a one-off contribution to the Fund of 10
per cent. of the net cash proceeds of approximately GBP2.7 million.
The balance of the net proceeds of GBP23.1 million will be used to
repay any outstanding bank debt the Company might have at that time
and the rest will be retained by the Company to execute its growth
strategy for the Continuing Group, as outlined in further detail
below.
At Completion, Lloyds Bank plc will cease to provide borrowing
facilities to the Continuing Group, but will continue to provide
day to day banking arrangements. In the short-term following
Completion, Molins will not have a requirement for borrowing
facilities. The requirement for debt funding over the medium-term
will be re-evaluated from time to time as the Board's plans for the
Continuing Group develop.
5. Strategy for the Continuing Group
Overview
Following Completion, the Continuing Group will comprise Langen
Group and Molins Technologies, which together make up the packaging
machinery activities of the Group. As at 31 December 2016, 303
people were employed within the Continuing Group.
Langen is a designer and manufacturer of cartoning machinery,
case packers, end-of-line and robotic packaging solutions, with
locations in Canada and the Netherlands, and service engineers
across the world, servicing a global customer base including a
portfolio of household brands, as well as a provider of complete
turnkey projects involving design and integration of packaging
systems. Molins Technologies is a specialist engineering business,
developing innovative technology and associated production and
packaging machinery, located in Coventry, UK.
The Continuing Group's operations are mainly focused on the
global pharmaceutical, healthcare, food and beverage sectors, all
of which are attractive end-markets with long-term growth
characteristics. It has an extensive portfolio of innovative
solutions which are well matched to its customers' needs, supported
by a global organisation of highly skilled, motivated
employees.
The vision of the Continuing Group is to be a global leader of
packaging solutions, focused on these attractive growth markets.
This will be enhanced by a world class services programme which the
Board believes has strong growth potential, aimed at proactively
supporting our customers worldwide in order to help them optimise
their operational efficiencies. As a result of the Sale, Molins
will be focused entirely on these growth markets. At present,
Langen is focused principally on secondary packaging and Molins
Technologies on both primary and secondary packaging and in
combination they provide full line solutions in our target markets.
Molins Technologies can open new opportunities by partnering with
customers at the onset of new product development, supporting them
with feasibility studies and concept engineering capabilities, from
which Langen can subsequently benefit. This places the business in
a strong position to support the Continuing Group's customers over
the life cycle of their investment projects, rather than only at
the secondary stage as is often the case at present.
Growth of the Continuing Group will be supported by investment
in internal capabilities and product innovation, as well as the
development of a stronger services organisation supporting these
organic growth opportunities.
Acquisition strategy
In addition to organic growth, the Company will seek
opportunities to grow through acquisition that will enhance the
Continuing Group's customer proposition offering full line
packaging solutions from product fill to palletisation, enhanced by
life-cycle service and support programmes that help customers
optimise their returns on investment. In addition, acquisitions
that broaden the Continuing Group's accessible markets will provide
increased opportunities to promote its complete solutions
concept.
The Board's acquisition strategy will therefore principally
focus on further developing the Continuing Group's proposition of
being a complete line packing solution provider to its current and
prospective customers.
The Board's intended focus is on two key areas: innovative
upstream fill solutions and higher volume technology solutions,
although the Board would consider opportunities in the broader
packaging machinery sector, focused on attractive growth markets,
in order to increase the Continuing Group's customer engagement and
to expand the customer base. In the services area, the Board will
seek to add to the Continuing Group's capabilities to provide
comprehensive asset life-cycle services from within its internal
resources, but which could be supplemented by acquisition. As such,
it is expected that acquisitions will be in adjacent and/or
complementary areas to the Continuing Group rather than
transformational acquisitions in unrelated areas.
Acquisition targets are expected to be focused on serving
speciality markets with valued added products that also have the
potential for international market expansion, and with strong
technology and customer relationships. With regards to financial
metrics, acquisitions will be required to meet strict financial
criteria, including profitability, cash flow and return on
investment, save that selected acquisitions with visibility over
significant cost-saving opportunities could be identified. All
acquisitions will be subject to a detailed plan to ensure that they
are fully integrated into the Continuing Group in a way that
optimises the synergies created by the enlargement of the
Group.
6. Current trading and prospects
Molins entered the 2017 financial year with an order book that
was substantially stronger than at the start of 2016, with the
increase arising in the Packaging Machinery division, demonstrating
some early progress in the implementation of the new strategy. The
first part of the year has resulted in order intake in all parts of
Molins being at levels ahead of the same period last year.
In particular, order intake in the Continuing Group at the end
of May 2017 was considerably ahead of order intake for the same
period last year. Trading is as expected and ahead of last year in
all parts of the Continuing Group, such that the Board is confident
that the Continuing Group's sales in 2017 are likely to be
significantly ahead of last year.
The Board is confident that the implementation of the strategy
will appropriately position the Continuing Group, both commercially
and in its product offering, such that it can readily capitalise on
the opportunities available to it. The Board believes that
prospects in the medium-term are positive, with the Continuing
Group's focus on the development of and investment in growth
markets, and improving the operational effectiveness of the
business, supported by a globally co-ordinated management team.
7. Information on the buyer
G.D is a leading supplier of high-technology machinery for
cigarette making and packing, filter production, other tobacco
products, and special products. It is headquartered in Bologna,
Italy and has branches and service centres worldwide, providing an
extensive sales and service network. G.D has annual sales of more
than 700 million Euros and 2,600 employees. G.D is a 100 per cent.
owned subsidiary of Coesia, a Bologna-based privately-owned group
of innovation-based industrial and packaging solutions companies
operating globally, with annual sales of 1.5 billion Euros and
6,000 employees.
8. Summary of the Transaction structure
MPRD is at the date of the Circular a wholly owned subsidiary of
the Company and has been incorporated for the purposes of effecting
the Transaction. Under the Sale Agreement, the entire issued share
capital of MPRD will be transferred to G.D subject to the
satisfaction of the relevant conditions detailed further below.
The Company, Molins Overseas Holdings Limited and MPRD will
enter into the applicable Transfer Documents under which the trade
and net assets relating to I&TM (save for the US Assets and the
Post March 2002 IP) will be transferred to MPRD prior to
Completion. The shares in the Overseas Subsidiaries will also be
transferred to MPRD under the Transfer Documents.
The US Assets will then be transferred on Completion to G.D USA,
Inc, a subsidiary of Coesia, under the US Asset Transfer
Agreement.
The Post March 2002 IP will be transferred to MPRD immediately
following Completion under a separate assignment deed.
A brief description of the Sale Agreement and other key aspects
of the Transaction is set out below.
Sale Agreement
Pursuant to the Sale Agreement, the Company has agreed to sell
I&TM for a consideration of GBP30 million on a cash free debt
free basis payable on Completion (subject to GBP1.5 million being
retained in escrow). G.D will also pay in cash to Molins the value
of the Net Financial Position, which at 31 March 2017 was GBP3.6
million and which will be adjusted to reflect the actual Net
Financial Position at Completion. In addition, to the extent Net
Working Capital at Completion is less than GBP11.7 million Molins
will reimburse the value of any shortfall to G.D. If Net Working
Capital is higher than GBP13.2 million at Completion, G.D will
compensate Molins for the value of any difference. At 31 March 2017
the value of Net Working Capital was GBP11.6 million.
Completion is subject to the satisfaction of a number of
conditions, including approval by Shareholders of the Sale at the
General Meeting and completion by the Company of the Transfer
Documents. Shareholders should note that although completion of the
Transfer Documents is largely within the control of the Company,
certain registrations must be made in a number of overseas
jurisdictions. Completion will not take place until these
registrations are effected, which is likely to take several weeks,
with a date of 31 July 2017 being targeted. The Board will make a
further announcement as regards the timing of Completion in due
course. G.D may terminate the Sale Agreement in certain
circumstances considered standard for an arrangement of this
nature.
A detailed explanation of the principal terms of the Sale
Agreement is set out below.
Transitional Services Agreement
The Company and MPRD have agreed to enter into transitional
services agreements pursuant to which:
-- the Company will provide MPRD with certain IT and administration services; and
-- MPRD will provide certain administration services and make
office space available to the Company.
The respective obligations on the Company and MPRD under these
agreements will terminate six months after Completion at the
latest.
Change of name
The Company has agreed as part of the Transaction to transfer
the name "Molins" to MPRD. MPRD has agreed to licence back to the
Company the use of the name for a period of six months following
Completion, after which the Company will be required to change its
name and remove all associated "Molins" branding. The Board is
authorised under the Company's articles of association to change
the Company's name by passing a Board resolution.
9. Arrangement with the Fund
The Company has formalised an agreement with the Fund's
trustees, following the completion of the funding valuation as at
30 June 2015 and in consideration of the Sale. The principal terms
of the agreement are as follows:
-- Molins will continue to pay a sum of GBP1.8 million per annum
to the Fund (increasing at 2.1 per cent. per annum) in deficit
recovery payments;
-- if underlying operating profit (operating profit before
non-underlying items) in any year is in excess of GBP5.5 million,
the Company will pay to the Fund an amount of 33 per cent. of the
difference between the annual underlying operating profit and
GBP5.5 million, subject to a cap on underlying operating profit of
GBP10 million for the purpose of calculating this payment; this
part of the agreement will fall away in 2021 if the funding deficit
is above certain levels;
-- the Company will pay a one-off amount to the Fund of 10 per
cent. of the net proceeds (after costs and taxation) of the Sale on
Completion, which is expected to be approximately GBP2.7 million;
and
-- payment of dividends by Molins will not exceed the value of
payments being made to the Fund in any one year.
The next funding valuation will be carried out as at 30 June
2018 and every three years thereafter, and the agreement between
the Company and the Fund will be reassessed at each of those
valuations.
10. General Meeting
A notice convening the General Meeting, which is to be held at
the offices of Molins, Rockingham Drive, Linford Wood East, Milton
Keynes, MK14 6LY at 2.00 p.m. on 27 June 2017, is set out at the
end of the Circular, at which an ordinary resolution will be
proposed to approve the sale of I&TM, which constitutes a
disposal resulting in a fundamental change of business of the
Company under AIM Rule 15.
11. Directors' recommendation
The Directors believe that the Sale is in the best interests of
the Company and shareholders as a whole and unanimously recommend
the Shareholders vote in favour of the Resolution as they intend to
do in respect of their own beneficial holdings amounting, in
aggregate, to 143,519 Ordinary Shares, representing approximately
0.7 per cent. of the Company's issued share capital.
SUMMARY OF THE PRINCIPAL TERMS AND CONDITIONS OF THE SALE
AGREEMENT
Under the Sale Agreement Molins has agreed to sell and G.D has
agreed to purchase: (i) the entire issued share capital of MPRD;
(ii) the US Assets; (iii) the Vendor Outstanding Payable; and (iv)
the Post March 2002 IP. Molins Overseas Holdings Limited has also
agreed to sell and G.D has agreed to purchase the MOHL Outstanding
Payable.
The key terms of the Sale Agreement are as follows:
Consideration
The cash amount payable to the Company on Completion is the
Consideration of GBP30 million plus GBP3.6 million being the
estimated Net Financial Position. This amount is subject to a pound
for pound adjustment (upwards or downwards) to the extent that: (i)
the Net Financial Position at Completion is more or less than the
Net Financial Position at 31 March 2017 of GBP3.6 million; and (ii)
Net Working Capital at Completion is more than GBP13.2 million or
to the extent Net Working Capital at Completion is less than
GBP11.7 million.
GBP1.5 million of the Consideration will be retained for a
period of 24 months in an escrow account in respect of potential
warranty and indemnity claims under the Sale Agreement. Half of the
retention will be released from the escrow account after 12 months
if no claims have been made which exceed GBP0.75 million in
aggregate.
Condition
Completion is conditional upon: (i) the passing of the
Resolution by Shareholders; (ii) completion of the Hive-Out; (iii)
the Company consulting with its UK employees related to I&TM
regarding their transfer to MPRD; (iv) the Company seeking certain
consents from key customers and suppliers to the assignment of
their contracts from the Company to MPRD; (v) no warranty claims
arising prior to Completion which would have a material adverse
effect on I&TM; and (vi) certain negative confirmations being
made in respect of the Company's arrangements with the trustees of
the Fund.
Conduct Covenants
Between the date of the Sale Agreement and Completion the
Company is required to comply with a series of obligations that
ensure Molins operates I&TM in its ordinary course, in
compliance with applicable laws and preserves and protects its
assets and goodwill, including existing relationships with
customers and suppliers so as to maintain the business as a going
concern.
Warranties, Tax Covenant, Indemnities
The Sale Agreement contains customary warranties about the
corporate history of MPRD and I&TM. The warranties are given by
the Company at the date of the Sale Agreement and are repeated
again at Completion.
The Sale Agreement also contains a tax covenant in favour of G.D
which includes customary provisions relating to the tax affairs of
MPRD as at Completion. The Sale Agreement contains a number of
indemnities in favour of G.D including in respect of (i) losses
connected to the Hive-Out arising during a period of five years
from Completion; (ii) losses related to assets excluded from the
Sale; (iii) losses arising out of certain claims during a period of
three years from Completion from employees transferring to MPRD;
and (iv) certain liabilities that may arise in respect of the
Molins UK Pension Fund.
The Company's liability in respect of indemnity claims is capped
at the Consideration and (except in certain specified cases) there
is no time limit on when indemnity claims may be brought. The
Company will only be liable in respect of warranty claims under the
Sale Agreement to the extent that such claims exceed GBP30,000
individually and GBP200,000 in aggregate. In addition the maximum
liability of the Company under the Sale Agreement in respect of all
warranty claims (other than those relating to capacity, title and
solvency) is capped at GBP3.0 million.
Claims for breach of warranties must be brought within two years
of Completion and claims for breach of tax warranty or the tax
covenant must be brought within seven years of Completion.
Right to Terminate
G.D is entitled to elect not to complete the Sale Agreement if
there is any breach of the Warranties between the date of the Sale
Agreement and Completion which would have or which would reasonably
be expected to have a material adverse effect on I&TM.
If the relevant conditions have not been satisfied, or waived,
within a longstop date of four months from the date of the Sale
Agreement, then the Sale Agreement shall immediately cease to have
effect, unless otherwise agreed by the parties.
Non-Compete
The Company has given covenants to G.D not to compete with the
business of I&TM or to solicit customers or certain employees
of I&TM for the period of two years from Completion.
Governing Law
The Sale Agreement is governed by English law.
DEFINITIONS
The following definitions apply throughout this announcement
unless the context requires otherwise:
"Act" the Companies Act 2006
"AIM" the AIM market operated
by London Stock Exchange
"AIM Rules" the AIM Rules for Companies
published by London Stock
Exchange from time to
time
"Board" or "Directors" the board of directors
of the Company whose names
appear on page 6 of the
Circular
"Business Day" a day (other than a Saturday
or Sunday) when banks
are usually open for business
in London
"Coesia" Coesia S.p.A., a company
incorporated in Italy
"Cerulean" the trade and assets owned
by Molins PLC relating
to the Cerulean business,
the trade and assets owned
by Cerulean Corporation,
a wholly owned subsidiary
of Molins PLC, and the
entire share capital of
Cerulean Shanghai Co Ltd
(a company incorporated
in China) and Cerulean
GmbH (a company incorporated
in Germany) which are
ultimately wholly owned
subsidiaries of Molins
PLC
"Company" or "Molins" Molins PLC, a company
incorporated in England
and Wales with registered
number 124855
"Completion" completion of the Sale
on the terms set out in
the Sale
Agreement
"Consideration" the cash amount of GBP30
million on a cash free
debt free basis
"Form of Proxy" the form of proxy for
use by Shareholders in
connection with the General
Meeting, which is enclosed
with the Circular
"Fund" Molins UK Pension Fund
"G.D" G.D S.p.A., a company
incorporated in Italy,
being a wholly owned subsidiary
of Coesia
"General Meeting" the general meeting of
the Company convened for
2.00 p.m. on 27 June 2017,
notice of which is set
out at the end of the
Circular
"Group" or "Continuing the Company and its subsidiaries,
Group" either before or after
Completion, as the context
requires
"Hive-Out" the transfer prior to
Completion of Cerulean
and Molins Tobacco Machinery
to MPRD (save for the
US Assets and Post March
2002 IP)
"IFRS" International Financial
Reporting Standards
"Instrumentation & Tobacco the businesses of Cerulean
Machinery" and "I&TM" and Molins Tobacco Machinery
which together comprise
the trade and assets of
the Company's instrumentation
and tobacco machinery
division, including the
US Assets, together with
the trademarks associated
with these businesses,
including that of 'Molins',
and Post March 2002 IP
"London Stock Exchange" London Stock Exchange
plc
"Molins Tobacco Machinery" the trade and assets owned
by Molins PLC relating
to the Molins Tobacco
Machinery business, the
trade and assets of Molins
Richmond, Inc, a wholly
owned subsidiary of Molins
PLC, and the entire share
capital of Molins do Brasil
Maquinas Automaticas Ltda
(a company incorporated
in Brazil), Molins sro
(a company incorporated
in Czech Republic) and
Molins Far East Pte Ltd
(a company incorporated
in Singapore) which are
ultimately wholly owned
subsidiaries of Molins
PLC
"MOHL Outstanding Payable" the sum payable by MPRD
to Molins Overseas Holdings
Limited in respect of
the transfer of the shares
in Cerulean GmbH, Cerulean
Shanghai Co Ltd, Molins
do Brasil Maquinas Automaticas
Ltda and Molins Far East
Pte Ltd
"MPRD" MPRD Limited, a company
incorporated in England
and Wales with the registered
number 10688784
"Net Financial Position" net cash less debt and
debt-like items of I&TM
"Net Working Capital" net working capital, excluding
Net Financial Position,
of I&TM
"Notice of General Meeting" the notice of General
Meeting set out at the
end of the Circular
"Ordinary Shares" ordinary shares of 25
pence each in the capital
of the Company
"Overseas Subsidiaries" Molins sro, Cerulean GmbH,
Cerulean Shanghai Co Ltd,
Molins do Brasil Maquinas
Automaticas Ltda and Molins
Far East Pte Ltd
"Packaging Machinery division" the Group's packaging
machinery business comprising
Langen Group and Molins
Technologies
"Panmure Gordon" Panmure Gordon (UK) Limited,
the Company's financial
adviser, nominated adviser
and broker, which is incorporated
in England and Wales with
the registered number
4915201
"Post March 2002 IP" intellectual property
created in relation to
I&TM after 31 March 2002
"Preference Shareholder" a holder of Preference
Shares
"Preference Shares" 6 per cent. fixed cumulative
preference shares of GBP1
each in the Company, of
which 900,000 are in issue
"Resolution" the resolution to be proposed
at the General Meeting
and set out in the Notice
of General Meeting at
the end of the Circular
"Sale" or "Transaction" the proposed sale by the
Company of I&TM to G.D
pursuant to the Sale Agreement
"Shareholder" a holder of Ordinary Shares
"Sale Agreement" the conditional sale and
purchase agreement dated
7 June 2017 between the
Company, Molins Overseas
Holdings Limited and G.D
"Subsidiary" has the meaning given
to it in section 1159
of the Companies Act 2006
"Transfer Documents" the transfer agreements,
assignments, licences
and other agreements in
connection with the Hive-Out
to be executed prior to
Completion
"UK" and "United Kingdom" the United Kingdom of
Great Britain and Northern
Ireland
"Vendor Outstanding Payable" the sum payable by MPRD
to the Company in respect
of the transfer of the
I&TM business (excluding
Post March 2002 IP) owned
directly by the Company
"US Assets" the assets transferred
under the US Asset Transfer
Agreement
"US Asset Transfer Agreement" the asset transfer agreement
under which the assets
of Cerulean Corporation
and Molins Richmond, Inc.
are transferred to G.D
USA, Inc on Completion
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCFPMATMBAMMJR
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June 08, 2017 02:00 ET (06:00 GMT)
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