LONDON, UK: Essentra plc announced the disposal of Essentra Filter Holdings Limited to Frank Acquisition Four Limited. The top holding company of Frank Acquisition Four Limited is Centaury Management Limited, which is owned and controlled by the investment office of the Markus family.
The consideration is comprised of approximately £200 million initial consideration due on completion (on a cash-free, debt-free basis and subject to customary adjustments as set out below) and up to £20 million deferred earn-out consideration following completion.
The transaction values the Filters business at an enterprise value of approximately £262.1 million, including 100% consolidation of certain joint ventures.
The transaction is subject to conditions which are set out further below including approval by Essentra’s shareholders. The Class 1 circular and notice of General Meeting will be published in due course. The transaction is expected to complete no later than 31 January 2023.
The Board intends to use the proceeds to reduce Essentra’s debt position by offering to prepay a portion of US private placement (“USPP”) notes issued under its 2021 note purchase agreement5 and to make a small contribution to Essentra’s defined benefit pension schemes.
After the disposal of the Filters business has completed, the Board intends to return approximately £150m of the residual net transaction proceeds from the disposals of Filters and Packaging to shareholders via a special dividend.
The transaction will further strengthen the Group’s balance sheet and, after accounting for the repayment of USPP debt and special dividend, the Board’s intention is for the Group to have a net financial leverage of approximately 0x. This will provide Essentra Components with the flexibility to pursue value creating organic and inorganic opportunities, including future bolt-on acquisitions.
The Components business continues to perform well, benefitting from its broad geographic reach (Americas 30%; Europe and Rest of World 55%; Asia 15%). A Q3 trading statement will be released on 26 October 2022.
Commenting on today’s announcement, Paul Forman, Chief Executive said: “The strategic review of Essentra Filter Holdings was launched in October 2021 and has built on the significant progress the division has made since 2017 when announcing its strategy for future growth. The business is delivering on all of the strategic “game changers” and has attractive long-term growth prospects. I am confident that Filters will continue to make excellent progress under its new ownership.
The sale of Filters marks the final step of our journey to become a pure play components business. Essentra has a bright future as a leading global manufacturer and distributor of components with a clear strategy and significant opportunities to accelerate growth and expand market share. This transaction strengthens Essentra’s balance sheet and enables the Group to return a meaningful portion of the proceeds to shareholders whilst maintaining the flexibility to invest in organic and inorganic growth.”