- Successful disposal of packaging and filters business
- Proceeds go towards debt reduction and special dividend
- Shares jump after languishing at year-low
Industrial group Essentra (ESNT) announced it had agreed the sale of its filters division to a private buyer, delivering on its promise to become a pure-play components business.
Investors applauded the news, sending the shares up as much as 15% to 211p after they ended last week at a low for the year of 182p.
GAME-CHANGING
Having recently completed the sale of its packaging unit to Austrian firm Mayr-Menhof, Essentra revealed it had agreed to sell its filters business to the Markus family office for an EV (enterprise value, or equity plus debt) of £262.1 million.
The deal, which includes the consolidation of certain joint ventures, values the unit at just over eight times operating profits for the year to the end of June and is expected to complete by the end of January next year.
Payment consists of an up-front payment of £200 million and up to £20 million of deferred payments depending on the unit’s performance.
Outgoing chief executive Paul Forman said Essentra was ‘delivering on all of the strategic 'game changers' and has attractive long-term growth prospects’ as a pure-play components business.
SHREWD USE OF FUNDS
The firm said it would use the sale proceeds to reduce its gearing to zero by offering to bring forward the repayment of its US private debt and to top up its defined benefit pension schemes.
It also intends to return £150 million from the joint sales of the filters and packaging units to shareholders by way of a special dividend, while leaving it with ‘the flexibility to pursue value creating organic and inorganic opportunities, including future bolt-on acquisitions’.
Having completed the group’s strategic transformation, Forman is stepping down at the end of the year with Scott Fawcett, currently managing director of the components business, set to take his place.
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