REG - Essentra plc - Sale of Packaging Business

EssentraAnnouncement

24/06/2022 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220624:nRSX0946Qa&default-theme=true

RNS Number : 0946Q  Essentra plc  24 June 2022

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

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

FOR IMMEDIATE RELEASE

 

ESSENTRA PLC

A leading global provider of essential components and solutions

 

SALE OF PACKAGING BUSINESS TO MAYR-MELNHOF

 

In line with the previously announced strategic review, Essentra plc
("Essentra" or the "Company") today announces the disposal of ESNT Packaging
& Securing Solutions Limited and Essentra Packaging US Inc and their
respective subsidiary companies ("Packaging") to Mayr-Melnhof Group ("MM"), a
leading producer of carton board and folding cartons based in Austria, for a
cash consideration of £312(1) million, on a cash-free, debt-free basis and
subject to customary adjustments.

 

The transaction is subject to various conditions which are set out further
below including a shareholder vote for Essentra. The Class 1 circular and
notice of General Meeting will be published in due course with the transaction
set to complete in Q4 2022.

 

The Board intends to use the proceeds to further strengthen Essentra's balance
sheet, and make a small contribution to Essentra's defined benefit pension
schemes.

 

The strategic review of Essentra's Filters division is progressing in line
with expectations and, following the conclusion of this review, the Board will
determine the best use of cash on the Company's balance sheet, carefully
taking into consideration the imperative of maximising shareholder value after
allowing for sufficient flexibility of the Components business to pursue value
creating opportunities.

 

Commenting on today's announcement, Paul Forman, Chief Executive said:

 

"The sale of Packaging marks a significant step on our journey to become a
pure play Components business. A substantial amount of work has gone into
improving the Packaging division over the last few years and I would like to
thank all colleagues for their commitment and hard work whilst part of
Essentra. I wish them all the best for the future. I am sure that the business
will continue to make excellent progress under the ownership of Mayr-Melnhof.

 

Essentra has a bright future as a global leading manufacturer and distributor
of components with a clear strategy and significant opportunities to
accelerate growth and expand market share. This transaction will enhance
Essentra's balance sheet strength and enable the Group to participate in
further investment activity."

 

 

 

 

 

 

 

 

 

Details of the transaction

On 24 June 2022, Essentra International Limited and US NewCo, LLC (the
"Sellers"), MM Packaging GmbH (the "Purchaser") and Mayr-Melnhof Karton AG
entered a Sale and Purchase Agreement, pursuant to which the Sellers agreed,
on the terms and subject to the conditions of the Sale and Purchase Agreement,
to sell Packaging to the Purchaser.

The consideration payable by the Purchaser at Completion is £312m, subject to
adjustments after Completion by way of a standard completion accounts
mechanics to allow for changes in cash, debt and working capital.

Prior to completion of the transaction, Essentra will undertake a group
reorganisation to achieve the separation of Packaging from the remainder of
the Essentra group by transferring certain assets that are currently part of
Packaging to the retained Essentra group and transferring certain other assets
currently part of the Essentra group to Packaging.

Under the terms of the Sale and Purchase Agreement, the Purchaser has
irrevocably granted to the UK Seller an option (the "Put Option") to require
the Purchaser to purchase the UK Shares from the UK Seller. The Put Option may
be exercised within five business days following the date on which the
information and consultation process with the works council of Essentra
Packaging S.a.r.l. is deemed to have completed in accordance with the laws of
France.

The Sellers have given certain warranties and indemnities to the Purchaser
that are customary for a transaction of this nature and size. These include,
among other things, warranties that the Sellers own the shares in the Target
Companies free and clear from any encumbrances and that each Seller has the
requisite power and authority to enter into and perform the Sale and Purchase
Agreement and other Transaction Documents. The Sellers' warranties also
include statements regarding the UK Shares and the US Shares; financial
statements; material contracts; insolvency; licences; litigation and
compliance with laws; intellectual property, information technology and
business information; property; environmental matters; employment and
incentives; pensions; and tax affairs.

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

·     Exercise of the Put Option

·     Completion of the reorganisation

·     Satisfaction of certain regulatory conditions

The Purchaser has agreed to take any and all steps to fulfil the regulatory
conditions at the earliest date.

The Board expects that, subject to the satisfaction and/or waiver (where
applicable) of the conditions precedent to the transaction, completion will
occur in Q4 2022.

The transaction excludes Essentra Packaging's business in India. Whilst not
material to the Group (less than 1% of revenue), the Company will be reviewing
options for this business moving forward.

 

For the year ended 31 December 2021, Packaging excluding India delivered
adjusted operating profit of £15.8m pre-standalone cost adjustments, and the
gross assets(2) were £519.1m.

 

 

 

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, including
anti-trust clearance in certain jurisdictions.

 

 

Credit Suisse International is acting as sole sponsor and exclusive financial
advisor to Essentra plc in regard to the sale of the Packaging business.
Lazard & Co., Limited is acting as independent financial adviser to the
Board of Essentra.

 

 

Notes

1.   £312m implies a multiple of 12.4x based on LTM May EBITDA of £25.2m
which includes standalone costs of £6.1m

2.   The value of gross assets excludes intercompany receivables and cash
which will be settled as part of the transaction

 

 

Market Abuse Regulation statement

 

This announcement contains inside information.

 

Enquiries

 Essentra plc                                       Tulchan Communications LLP

 Jack Clarke, Chief Financial Officer               Olivia Peters

 Claire Goodman, Group Investor Relations Manager   Martin Robinson

 Lucy Yank, Group Communications Director           Tel: +44 (0)20 7353 4200

 Tel: +44 (0)1908 359100

 

The person responsible for arranging the release of this announcement on
behalf of the Company is Jon Green, Company Secretary of Essentra plc.

 

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

Credit Suisse International ("Credit Suisse"), which is authorised by the PRA
and regulated by the FCA and the PRA in the United Kingdom, is acting as
financial adviser for Essentra plc and no one else in connection with the
transaction only and will not regard any other person as its client in
relation to the transaction or any other matter referred to in this
announcement and will not be responsible to anyone other than Essentra plc for
providing the protections afforded to clients of Credit Suisse, nor for
providing advice to any other person in relation to the content of this
announcement or any other matter referenced herein.

Neither Credit Suisse nor any of its subsidiaries, branches or 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 Credit Suisse in connection with 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. Organised into three 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 34
countries and includes 8,327 employees, 47 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 Packaging

Essentra Packaging is one of only two multicontinental suppliers of a full
secondary packaging range to the health and personal care sectors, with 23
facilities across three geographic regions. The division's innovative products
include cartons, leaflets, self-adhesive labels and printed foils used in
blister packs, which help customers to meet the rapidly-changing requirements
of these end-markets and can also be combined with Essentra's authentication
solutions to help the fight against counterfeiting.

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.

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  DISPPUQGQUPPUAC