REG - Chamberlin PLC - Sale of Petrel Limited

ChamberlinAnnouncement

21/02/2024 12:15

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RNS Number : 9579D  Chamberlin PLC  21 February 2024

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE MARKET
ABUSE REGULATION (EU NO. 596/2014) AS IT FORMS PART OF UK DOMESTIC LAW BY
VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 (AS AMENDED) ("MAR"). UPON
THE PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE,
THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

 

21 February 2024

Chamberlin plc

("Chamberlin", the "Company" or the "Group")

 

Sale of Petrel Limited

 

Chamberlin plc (AIM: CMH.L), the specialist castings and engineering group, is
pleased to announce that it has entered into an agreement for the conditional
sale of Petrel Limited ("Petrel") to Project Apollo Limited (the "Purchaser"),
a subsidiary of Longacre Group, for a total cash consideration of £3 million
(on a cash free, debt free and normalised working capital basis) ("Headline
Consideration") (the "Disposal").

 

The sale of Petrel will provide the Group with the financial resources and
balance sheet strength that it needs to focus on its core iron foundry and
machining operations at Chamberlin and Hill Castings Ltd ("CHC") and Russell
Ductile Castings Ltd ("RDC"), and for both businesses to pursue their
respective strategies with greater impetus. The Board believes this is the
start of an exciting new chapter for the Company as it moves forward with
improved working capital resources to invest in the development of steel
production at RDC and spheroidal graphite iron production at CHC.

 

The proceeds of the Disposal are expected to both reduce the Group's
liabilities by approximately £2.6 million and contribute an exceptional
profit of no less than £2.0 million, in FY24.

 

Completion of the Disposal is solely conditional upon the Purchaser being
satisfied that Petrel has ceased to participate in, and is no longer an
employer in, the Chamberlin and Hill Staff Pension and Life Assurance Scheme
("Chamberlin DB Pension Scheme"), which is expected to occur within the next
three business days. In order to fund the satisfaction of this condition, the
Purchaser has agreed to pay £0.85 million of the Headline Consideration upon
entering into the Disposal arrangements (being an amount which has been
confirmed by the actuary of the Chamberlin DB Pension Scheme). A separate
announcement will be released by the Company once the Disposal has completed.

 

The remaining Headline Consideration will then become payable immediately on
completion but with £0.25 million of the Headline Consideration being
deferred, contingent upon the completion of certain dilapidation works by
Chamberlin in respect of the property in which Petrel operates and will
sub-let from Chamberlin following completion ("Property") (such works being
expected to complete before the end of April 2024).

 

The Headline Consideration of £3 million (which is subject to adjustments for
net debt and normalised working capital immediately prior to completion)
represents approximately 83.6% of Chamberlin's market capitalisation based on
the closing mid-market price of 2.0 pence per ordinary share as at 20 February
2024.

 

As well as satisfying Petrel's statutory liability to the Chamberlin DB
Pension Scheme, the net proceeds of the Disposal will also be used to pay
£0.65 million to HSBC to reduce the Group's debt (namely its asset finance
loan and invoice finance facility) and release certain charges over the shares
and assets of Petrel, with the balance of the net proceeds, assuming the
deferred consideration is paid in full, of approximately £1.1 million being
applied to the Group's growth strategy and working capital.

 

The Chamberlin DB Pension Scheme deficit has been reduced from £5.5 million
in March 2019 to approximately £0.4 million following completion of the
Disposal with the deficit recovery plan reduced from 13 years to 4 years.

 

Petrel is a specialist industrial (hazardous area) manufacturer and
distributor of lighting and electrical installation products with customers
being supplied with ATEX approved products throughout the UK, EU and
International markets in key sectors including oil & gas, petrochemical,
marine and defence. Petrel employs 25 staff from its premises in Kitts Green,
Birmingham, all of whom will be retained under the ownership of Project Apollo
Limited. Petrel's turnover in the year to 31 May 2023 was £3.83 million and
profit before tax was £0.56 million. The book value of Petrel's assets as at
31 May 2023 was £4.5 million.

 

The agreement governing the Disposal contains market standard warranties and
restrictive covenants in favour of the Purchaser. Further, Chamberlin has
agreed to provide an indemnity (capped at the Headline Consideration) as a
result of any liability incurred by Petrel in respect of the Chamberlin DB
Pension Scheme following completion, as well as an indemnity (capped at
£0.175 million) as a result of any liability incurred by Petrel in respect of
Chamberlin's agreed dilapidation liability over the Property. The agreement
also contains market standard termination rights governing the period between
exchange and completion. Chamberlin has also agreed to enter into, on
completion of the Disposal, a six-month transitional services agreement with
Petrel in order to support its transition away from the Chamberlin group of
companies.

 

Keith Butler-Wheelhouse, Chairman, commented:

 

"This exciting transaction will enable the Group to grow and develop its core
business operations from a stronger financial footing. We believe that
Longacre Group are the ideal new owner for the business and are well
positioned to support Petrel and the ongoing development of its strategy."

 

 

This Announcement is released by Chamberlin plc and contains inside
information for the purposes of Article 7 of MAR, and is disclosed in
accordance with the Company's obligations under Article 17 of MAR.

 

For the purposes of MAR, Article 2 of Commission Implementing Regulation (EU)
2016/1055 and the UK version of such implementing regulation (as
amended), the person responsible for arranging for the release of this
Announcement on behalf of the Company is Kevin Price, Chief Executive
Officer.

 

Enquiries:

 

 Chamberlin plc                           T: 01922 707100

 Kevin Price, Chief Executive Officer

 Alan Tomlinson, Finance Director

 Cavendish Capital Markets Limited        T: 020 7220 0500

 (Nominated Adviser and Joint Broker)

 Katy Birkin

 Stephen Keys

 George Lawson

 Peterhouse Capital Limited               T: 020 7469 0930

 (Joint Broker)

 Lucy Williams

 Duncan Vasey

 

 

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