31st Jul 2006 09:16
Scapa Group PLC31 July 2006 Date: 31 July 2006 Scapa Group plc Proposed disposal of Megolon Introduction Following the announcement on 8 June of the proposed sale of the MegolonDivision ("Megolon") subject to due diligence, the Board of Scapa announcestoday that Scapa UK Limited ("Scapa UK") has entered into a conditionalagreement to sell the business and assets of Megolon to Alphagary Limited("Alphagary"), a subsidiary of Rockwood Holdings Inc, for a consideration of£16.75 million in cash (before transaction costs and taxation), subject topossible adjustment by reference to stock value at Completion. It is theintention that the cash proceeds from this transaction will be applied to repaysecured borrowings in full ahead of the expiry of the medium term facility inSeptember 2007. The proposed disposal is expected to be earnings neutral in theshort term. In view of the size of the proposed disposal relative to the Group, the proposeddisposal is conditional upon the approval of shareholders. A circular,incorporating notice of an extraordinary general meeting, is expected to beposted to shareholders shortly. The proposed disposal is also conditional upon receipt of various merger controlclearances and it is anticipated that Completion will take place at the end ofSeptember 2006. Principal terms of the Proposed Disposal Pursuant to the terms of the sale agreement, Alphagary will pay £16.75m in cashto Scapa UK on Completion. Alphagary is to acquire the fixed assets,intellectual property, stock and goodwill in Megolon, together with the Group'sfreehold property at Columbine Street, Openshaw, Manchester, and will take overthe orders and other contracts of Megolon which are outstanding at Completion.The Group is to grant a licence to Alphagary in respect of that part of theproperty at Manchester Road, Ashton occupied by Megolon. The Group will alsoprovide support to Alphagary pursuant to a transitional services arrangement. Background to and reasons for the Disposal During the second half of the year we completed a major review of the Company.Scapa has good technology in the specialist adhesive tape market where technicalperformance and service are paramount and good margins are attained.Unfortunately a number of poorly performing acquisitions and investments in pastyears give us little room for manoeuvre and as a first step we have decided tosell a number of our peripheral operations to pay down our debt and improve ourfinancial position. Whilst the performance of the Megolon compounding operations has continued to besatisfactory, it is not a core part of the Group's ongoing business and theBoard has concluded that the proposed disposal is in the best interests ofShareholders. Information on Megolon The Megolon business supplies halogen free compounds with fire retardant and lowsmoke properties for sheathing and insulation. Products are sold internationallywith over 80 per cent. of sales made outside the UK. In the year to 31 March 2006 Megolon had sales of £20.3m and trading profit of£1.1m. Gross assets at 31 March 2006, subject to the transaction, were £6.7m. Enquiries:- Calvin O'Connor, Chief Executive; Telephone 0161 301 7430 Colin White, Finance Director; Telephone 0161 301 7430 Steve Baldwin, JP Morgan Cazenove; Telephone 0207 588 2828 Jonathan Walker, JP Morgan Cazenove; Telephone 0207 588 2828 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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