4th Jan 2005 07:00
API Group PLC04 January 2005 4 January 2005 API Group plc Proposed disposal of API Converted Products API Group plc, the specialist packaging group, announced today the proposeddisposal of its Converted Products businesses for a cash consideration of up to£12.2m. The sale is conditional upon the approval of shareholders, which will be soughtat an Extraordinary General Meeting to be held on 20 January 2005 or shortlythereafter, and is in line with comments made in the preliminary resultsannouncement in November. API Converted Products comprises three businesses specialising in the coating offilm and paper with either adhesive or silicon, and in the manufacture ofpolypropylene film. Its products are used principally in the packaging industry. The operating profit, before exceptional items, goodwill amortisation and shareof joint venture losses of Converted Products for the financial year ended 30September 2004 reduced to £0.2m (2003 - £0.9 million), on sales down 4.6 percent. to £32.6m (2003 - £34.2m). The cash consideration of £12.2m comprises: • Initial consideration of £9.0m (less any repayment of intra-group debt), payable on Completion • Between £1.25m and £2.0m deferred consideration, payable two years after Completion • 50% of the amount by which earnings before interest and tax for the three years ending 30 September 2007 exceeds £2.1m, up to a maximum of £1.2m. The net proceeds from the sale will be applied to reduce Group debt. Commenting on the disposal David Walton, who was appointed as API Group ChiefExecutive in May 2004, said: "The sale of Converted Products follows that of Metallised Paper announced inDecember and represents another very significant step towards refocusing theGroup on its core Foils and Laminates activities, where we believe there areattractive opportunities for further development. In future, the new managementof API will be concentrating its efforts on these businesses with a view tobuilding on their good progress during 2004, achieving further improvement inboth sales and profitability and creating value for our shareholders." Enquiries: David Walton, Chief Executive, API Group plc 020 7653 3300 Tim Spratt/Michelle Morton, Financial Dynamics 020 7831 3113 API Group plc (the "Company") Proposed disposal of API Converted Products Introduction The Board of API Group plc is pleased to announce that that the Group hasentered into a conditional Disposal Agreement for the sale of API ConvertedProducts, for a consideration of up to £12.2 million before estimated costs ofdisposal of £475,000 and incentive payments to members of the Converted Productsmanagement team estimated at £300,000. API Converted Products specialises incoating film and paper, and in the manufacture of polypropylene film. Acomprehensive sale process has been conducted and the Board believes that thistransaction optimises value for Shareholders. In view of the size of the Disposal relative to the market value of the Company,the sale is conditional upon the approval of Shareholders. A circular toShareholders, including a notice convening an Extraordinary General Meeting toseek Shareholder approval for the Disposal, is expected to be posted toShareholders in the first week of January 2005. The Disposal is also conditional upon the agreements pursuant to which the Buyerand the Property Buyers expect to receive funding for the Disposal becomingunconditional in accordance with their respective terms and being completed. TheBoard has no control over the satisfaction of that condition and is, therefore,unable to guarantee that it will be satisfied. The Board has, however, obtainedcertain contractual undertakings from the shareholders of the Buyer and theProperty Buyers in relation to the matters which are required for thesatisfaction of that condition. Those undertakings are summarised in theCircular. Background to and reasons for the Disposal In recent years, the Group has implemented a series of restructuring andreorganisation initiatives in order to address underperformance in some of itsbusinesses. Good progress has been made in the Foils and Laminates Business, butimprovement in the Metallised Paper and the Converted Products divisions hasbeen slower. The Group's strategy has been to focus on the development of thecore Foils and Laminates Business and therefore a comprehensive sale process hasbeen conducted for the Group's non-core businesses. As part of this strategy, the Group announced on 8 December 2004 the successfulsale of its loss-making Metallised Paper business, for a deferred considerationof £0.5 million. The sale of Converted Products will complete the process ofrefocusing the Group on its core activity of manufacturing reflective packagingmaterials, a sector which the Board believes has excellent prospects for growth. Information on API Converted Products Converted Products specialises in coating film and paper with either adhesive orsilicon, and in the manufacture of polypropylene film. It principally suppliesthe packaging industry and consists of three businesses: Tenza, Coated Productsand Filmcast, which produce the following products: • Tenza - a range of self-adhesive products, including packing list envelopes ("document enclosed" envelopes), laminates, book-covering films and self-adhesive labels. The products are sold mainly into the stationery, packaging and labelling supplies market segments; • Coated Products - silicone-coated papers and films providing special performance characteristics such as release, non-stick and non-absorbent properties. The products are used in medical, hygiene, food and industrial applications; and • Filmcast - cast polypropylene films manufactured through mono and co- extrusion processes. The co-extruded films provide special performance features such as controlled moisture retention, or high puncture and tear resistance. The films have a variety of applications in the food, media, medical and stationery market segments. Products are sold either as base materials for further conversion, or asfinished goods to both end-users and distributors. The principal geographicalsales focus is the UK and Europe. There are also customers in South America, theMiddle East, the Far East, and Australia. The division employs approximately 250 people and occupies freehold andleasehold properties located in Saxmundham, Suffolk (Tenza), Cheltenham,Gloucestershire (Coated Products) and Nelson, Lancashire (Filmcast), which werevalued by independent chartered surveyors in August 2004 at approximately £2.2million, £1.75 million and £1.64 million respectively. All three properties arebeing sold as part of the Disposal. The following table is a summary of the key financial information of the APIConverted Products Division: Year ended 30 September 2002 2003 2004 £'000 £'000 £'000 Turnover 35,279 34,186 32,599Gross profit 7,844 7,439 5,494Operating profit (before goodwill amortisation, exceptional items 1,262 857 83and share of joint venture losses)Loss before tax (2,697) (606) (1,563)Loss after tax (2,779) (277) (915) Principal terms of the Disposal The Disposal is conditional upon the approval of Shareholders which will besought at the Extraordinary General Meeting. As noted above, the Disposal isalso conditional upon the agreements pursuant to which the Buyer and theProperty Buyers expect to receive funding for the Disposal becomingunconditional in accordance with their respective terms and being completed. Under the terms of the Disposal Agreement and subject to the Disposal Agreementbeing completed, the Group will receive total cash consideration of up to £12.2million. The consideration, all of which is payable in cash, is due to be paidas follows: (1) £9.0 million (less any repayment of intra-group debt) is due to bepaid on Completion, subject to adjustment after Completion to the extent thatthe net assets of Converted Products at Completion (excluding, for this purpose,the values attributable to land and buildings) are higher or lower than£10,621,000. Interest will accrue from Completion on the amount of any suchadjustment at a rate equal to 5 per cent. above the base rate from time to timeof Barclays Bank plc; (2) £2.0 million is due to be paid on the second anniversary ofCompletion. This sum will be reduced to £1.25 million if Swanson PlasticsCorporation validly exercises its right (which arises upon a change of controlof Coated Products) to wind-up, or to acquire from Coated Products theshareholding of Coated Products in, A.S. Holdings (UK) Limited, the jointventure company established by Swanson Plastics Corporation and Coated Products;and (3) if the earnings before interest and tax of Converted Products in theperiod between 1 October 2004 and 30 September 2007 exceeds £2,139,000, afurther amount is due to be paid equal to the lesser of £1,200,000 and 50 percent. of such excess. Any such further amount is due to be paid followingagreement or determination of the amount of such earnings. The pro forma net assets of the Continuing Group following the Disposal(prepared on the bases which will be set out in the Circular to Shareholders)will be £41,392,000. The net proceeds of the Disposal, after having paid the transaction expenses,will be used to reduce the Group's bank debt. Information on the Buyer and the Property Buyers The Buyer and the Property Buyers are (or are expected at Completion to be) eachwholly-owned by Nigel Craig Trilk and Martin Paul Urquhart, who are also theironly directors. The Buyer and the Property Buyers have entered into aconditional agreement for the provision of funding for the Disposal by GECommercial Finance Limited. Current trading and future prospects The Group The Group's core Foils and Laminates Business performed strongly during the lastfinancial year despite experiencing tough trading conditions. Whilst theseconditions have remained, and are expected to continue to be challenging, theGroup's operations have been trading satisfactorily and the benefits fromrestructuring and other initiatives continue to be felt. Following the Disposal, management will be able to focus on the core Foils andLaminates Business, where the Board believes there are interesting developmentpossibilities and where the Board believes that the best opportunities forfurther improvements in sales and profitability and the creation of value forthe Group's shareholders lie. Initiatives currently being implemented include: (1) greater emphasis being placed upon product technology, innovation andservice levels, which the Board believes are positive differentiating factorsfor the Foils and Laminates Business and provide a route to sales and profitgrowth; (2) continued phased capital investment programme intended to upgrade themanufacturing capabilities of the Foils and Laminates Business; and (3) continued investment in new ERP systems supplied by Oracle, whichwill provide much of the business systems infrastructure for the Foils andLaminates Business and which is intended to improve the effectiveness andautomation of the business processes. The Board views the financial and trading prospects of the Group with confidenceand expects further improvement in the Group's performance in 2005. Converted Products The operating profit, before exceptional items, goodwill amortisation and shareof joint venture losses for Converted Products for the financial year ended 30September 2004 reduced to £174,000 on sales down 4.6 per cent. to £32.6 million.Since then, the business has continued to trade broadly in line with the Board'sexpectations. The investment in upgrading certain equipment at Filmcast isunderway, which the Board believes will enable it to increase its output andproduct range. Recommendation The Directors, who have been advised by both Numis Securities Limited and RSMRobson Rhodes LLP, consider the Disposal to be in the best interests of theCompany and of the Shareholders as a whole. In providing advice to theDirectors, each of Numis Securities Limited and RSM Robson Rhodes LLP have takeninto account the Directors' commercial assessments. Accordingly, the Board willrecommend Shareholders to vote in favour of the resolution to be proposed at theExtraordinary General Meeting. Definitions The following definitions apply throughout this announcement: Act means the Companies Act 1985, as amended; API Converted Products or means together, Coated Products, Tenza, Filmcast, the CheltenhamConverted Products Property and the Saxmundham Property API-Stace means the Company's wholly-owned subsidiary, API-Stace Limited (registered in England and Wales with number 2850332), which is and will remain a member of the Continuing Group; Board or Directors means the directors of the Company; Buyer means MC 335 Limited (registered in England & Wales with number 5270955); Cheltenham Property means the freehold and leasehold land and buildings at Gloucester Road, Cheltenham occupied by Coated Products; Coated Products means the Company's wholly-owned subsidiary, API Coated Products Limited (registered in England and Wales with number 375718); Company means API Group plc (registered in England and Wales with number 169249); Completion means completion of the Disposal; Continuing Group means the Group as constituted after the Disposal has taken place; Disposal means, together, the proposed disposal by the Company and Learoyd of the entire issued share capitals of Coated Products, Tenza and Filmcast and the proposed disposal by API-Stace of the Cheltenham Property and the Saxmundham Property, in each case pursuant to the Disposal Agreement; Disposal Agreement means the conditional agreement dated 4 January 2005 and made between the Company, Learoyd, API-Stace, the Buyer, the Property Buyers, Nigel Craig Trilk and Martin Paul Urquhart relating to the Disposal; Extraordinary General Business means the extraordinary general meeting of the Company to consider a resolution to approve the Disposal and which is expected to be convened for Thursday, 20 January 2005, or shortly thereafter; Filmcast means the Company's wholly-owned subsidiary, Filmcast Extrusions Limited (registered in England and Wales with number 2683570); Foils and Laminates Business means the Company's foil and laminate products manufacturing division; Group means the Company and its subsidiaries (as defined in sections 736 and 736A of the Act); Learoyd means the Company's wholly-owned subsidiary, Learoyd Group Limited (registered in England and Wales with number 3037060), which is and will remain a member of the Continuing Group; Metallised Paper means the division of Henry & Leigh Slater Limited (a wholly-owned subsidiary of the Company) which division was sold by Henry & Leigh Slater Limited on 8 December 2004 and which manufactured a range of specialised aluminium-coated papers for use in cigarette packaging and as label papers in the food and drinks industries; Property Buyers means MC 336 Limited (registered in England and Wales with number 5270881) and MC 337 Limited (registered in England and Wales with number 5270877); Saxmundham Property means the freehold land lying to the south of Carlton Road, Saxmundham occupied by Tenza; Shareholders means holders of Shares;Shares means the ordinary shares of 25p each in the capital of the Company; and Tenza means the Company's wholly-owned subsidiary, API Tenza Limited (registered in England and Wales with number 2027635). This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Abrdn Property