REG - 600 Group PLC - Proposed disposal of Machine Tool Solutions

600Announcement

07/03/2022 07:00

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RNS Number : 7763D  600 Group PLC  07 March 2022

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
EU REGULATION 596/2014, AS AMENDED (AS IT FORMS PART OF UK DOMESTIC LAW BY
VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018).

 

7 March 2022

 

The 600 Group PLC

(the "Group" or the "Company")

 

Proposed disposal of the Machine Tool Solutions Division

 

and

 

Notice of General Meeting

 

The 600 Group PLC (AIM: SIXH), the diversified industrial engineering company,
today announces that it and certain other Group companies have entered into a
conditional sale and purchase agreement with Timesavers Acquisition, LLC (the
"Buyer") relating to the disposal of the entire issued share capital of each
of 600 UK Limited, Colchester GmbH, 600 Machinery Australia Pty Ltd and
Clausing Industrial, Inc, which together comprise the Group's Machine Tool
Solutions Division (the "Disposal").

 

Highlights:

 

·      Total cash consideration of US$21 million payable on completion

 

·      The Disposal will complete the shift of the Group's strategy
towards its growing industrial laser systems business

 

·      The net proceeds of the Disposal will provide the Group with the
resources with which to pay down its existing debts and provide significant
additional resources with which to invest in organic and inorganic growth
strategies focused on industrial laser systems

 

Paul Dupee, Chairman of The 600 Group, commented:

 

"The Group's strategic focus on our industrial laser systems businesses has
already successfully generated higher margins, large new customer wins and a
record order book. The proposed disposal of our Machine Tool Solutions
Division is the culmination of this strategy and will provide the Group with
the funds to strengthen our balance sheet and further accelerate the growth of
our laser division.

 

"Industrial lasers are deployed by the Group's blue-chip customers across
multiple industries and applications. The investment we have made to date in
our two laser businesses - Control Micro Systems and TYKMA Electrox - puts the
Group in a commanding position to offer higher-margin, customised products
with the pricing power to withstand market pressures. We believe this is a
highly attractive yet fragmented market and we will now be even better
positioned to focus the Group's efforts on capitalising on this opportunity."
 

 

The Disposal will result in a fundamental change in the business of the
Company for the purposes of Rule 15 of the AIM Rules for Companies and
completion of the Disposal is therefore conditional upon the approval of
Shareholders. Shareholder approval for the Disposal will be sought at a
general meeting of the Company to be held at the offices of Pinsent Masons
LLP, 1 Park Row, Leeds, LS1 5AB on Thursday 24 March 2022 at 3.00 p.m.

 

A circular convening a General Meeting to consider and approve the Disposal is
expected to be published and posted to shareholders shortly (the "Circular")
along with a Notice of General Meeting (the "Notice") and form of proxy. The
Circular, Notice and form of proxy, when published, will be made available on
the Group's website (www.600group.com (http://www.600group.com) ).

 

Background to and reasons for the Disposal

 

On 15 November 2021, the Company announced that trading in the first six
months of its current financial year saw a strong recovery from the COVID-19
pandemic with industrial activity now back above pre-Covid-19 pandemic levels
and a record order book and enquiry pipeline. The Company announced that it
had continued to see particularly strong demand in its Laser Division; with
Control Micro Systems Inc, winning large new orders and TYKMA Inc. continuing
to transition from commoditised products to a more custom machine focus.

 

The Board considers that the industrial laser system market is highly
attractive and has for some time been transitioning the Group's strategy
towards this division. The Laser Division's internal sales operation and
distribution network now serves both TYKMA Electrox and CMS and further
synergy benefits are being gained in cross fertilization of technology and
product knowledge between the two businesses.

 

The Disposal, if approved by Shareholders and completed, will complete the
Group's shift towards its higher-margin industrial laser systems business, for
which the Group continues to see particularly strong demand within a highly
fragmented market, notwithstanding disruption and price increases in the
supply chain. For the first half of the current financial year, the industrial
laser systems division had revenues of $15.2 million (H1 FY21: $9.8 million)
and operating profit of $1.8 million (H1 FY21: $0.2 million).

 

In the six months ended 30 September 2021, the assets of the Disposal, being
the Group's Machine Tool Solutions Division, generated unaudited revenues of
$18.8 million (H1 FY21: $15.5 million), unaudited adjusted operating profit of
$0.8m (H1 FY21: $0.7 million) and had net assets of $21.6 million, excluding
allocation of head office and other unattributed liabilities. The Machine Tool
Solutions Division had also been subject to disruption and price increases
within its supply chain, which has been affecting the wider industry.

 

The Company continues to perform in line with the Board's expectations with
both the total order book and the Laser Division order book up over 70% year
on year.

 

The net proceeds of the Disposal will provide the Company with the resources
with which to pay down the Group's existing debts and provide significant
additional resources with which to invest in organic and inorganic growth
strategies as an industrial laser system focused Group.

 

Principal terms of the Disposal

 

The Disposal will be effected by the sale to the Buyer of the entire issued
share capital of each of 600 UK Limited, Colchester GmbH, 600 Machinery
Australia Pty Ltd and Clausing Industrial Inc., for cash consideration payable
on completion of US$21 million.

 

The Disposal is subject to fulfilment of conditions including, inter alia, the
approval of the Shareholders at the General Meeting, the Buyer obtaining all
of the requisite financing and consents in order to consummate the transaction
and to operate the business, the issue of a customary representations and
warranty insurance policy, there being no claims, proceedings, investigations
or inquiries pending or threatened before any court or governmental body in
connection with the Disposal and there being no material adverse effect on the
financial condition, or results of operations of, the Target Companies or the
ability of the Target Companies or any of the Sellers to perform their
obligations or complete the Disposal.

 

Should any of the conditions to the Disposal sale and purchase agreement
remain unsatisfied as at the long stop date of 8 April 2022, the Disposal may
be terminated by either the Group or the Buyer.

 

The cash consideration is subject to adjustment (up or down) in respect of the
actual working capital in the Disposal group at closing compared to the amount
estimated in the sale and purchase agreement.

 

Recommendation

 

The Board considers the Disposal to be in the best interests of the Company
and its Shareholders as a whole. Accordingly, the Board recommends that you
vote in favour of the Resolution, as those Directors who hold Shares intend to
do in respect of their own aggregate holdings of 24,292,535 Shares
representing approximately 20.68 per cent. of the Shares in issue at the date
of this document.

 

Capitalised terms used but not defined in this announcement have the same
meaning as defined in the Circular.

 

 

Enquiries:

 

 The 600 Group PLC

 Paul Dupee, Chairman                                  Tel: +1-407-818-1123

 Instinctif Partners                                   Tel: 0207 457 2020

 Tim McCall

 Cenkos Securities plc (Nominated Adviser and Broker)  Tel: 020 7397 8900

 Ben Jeynes / Max Gould (Corporate Finance)

 Alex Pollen / Henry Nicol (Sales)

 

About The 600 Group PLC

The 600 Group PLC is a distributor, designer and manufacturer of industrial
products with three principle areas of activities:

Industrial Laser Systems

Industrial laser systems cover laser marking and processing including cutting,
drilling, ablation and a host of other niche applications in the marking and
micro machining sectors. They require no consumables and can operate on a
continuous high speed basis and can be integrated into customers' production
lines. The businesses have their own technology and proprietary software.
Customer applications are diverse and range from aerospace to medical and
pharmaceuticals. The requirement for increased product and component
traceability is one of the market drivers.

Machine Tools

The business has a strong reputation in the market for metal turning machines.
Products range from small conventional machines for education markets, CNC
workshop machines and CNC production machines. Selected outsourcing partners
support the manufacturing of these machines and they are marketed through the
Group's wholly owned international sales organisation and a global
distribution network.

Precision Engineered Components

Machine spares are distributed to customers globally to help maintain the
installed base of group machines which number in excess of 100,000.
Additionally, work holding products are sold via specialist distributors to
OEMs, including other machine builders.

More information on the Group can be viewed at: www.600group.com
(http://www.600group.com/)

 

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