Coats Group PLC on Tuesday it has agreed to sell its European Zip business to Aequita SE & Co KGaA for an expected $1.0 million in cash after deducting debt items.

Coats is a Bristol, England-based manufacturer of industrial thread and footwear components. Aequita is a Munich-based private equity firm. The sale to be completed in the third quarter.

Coats said the disposal of European Zips is in line with the company’s strategic initiatives announced in March last year. The sold business had $50 million in revenue in 2022 but operating margins ‘well below the group average’, Coats explained on Tuesday.

‘The group has commenced a number of strategic projects to improve margins by optimising the portfolio and footprint, improving the overall cost base efficiency, and mitigating structural labour availability issues in the US,’ Coats said in its 2021 annual report, which was released in March 2022.

Coats said that the strategic initiatives would result in incremental adjusted operating profit of $50 million by 2024, with total cash exceptional costs around $35 million.

Shares in Coats were up 0.4% at 69.60 pence in London on Tuesday morning.

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