Low & Bonar has agreed to dispose of its agro-textiles business (comprising a part of its Building & Industrial global business unit), for a cash consideration of €7 million ($8 million) to IFG Exelto NV (“IFG”), part of Swedish industrial group Duroc. IFG is a leading worldwide manufacturer of polypropylene, polyethylene, polyamide fiber and filament yarns.
The disposal will comprise the sale of the main assets of the agro-textiles business in both Europe and the U.S., including the roup’s factory in Lokeren, Belgium, and its inventory, with the consideration payable in cash upon completion, subject to normal working capital mechanics.
The disposal is expected to complete no later than September 30, 2017, subject to the fulfilment of a number of conditions, including the satisfactory completion of an information and consultation process with the employees affected by the disposal, which commenced on July 11. Under the terms of the agreement, all employees will transfer with the business and no redundancies are anticipated.
The disposal is in line with the management’s stated aim of improving operating margins in all its global business units. The agro-textiles business is profitable, with an established market position and an excellent customer base but requires investment to take it through its next stage of development in improving its efficiency and performance. The business has scope to grow with the support of IFG, but is non-core to Low & Bonar’s future strategic aims.
The agro-textile business delivered a turnover of £19.9 million ($25.6 million) in year to November 30, 2016 and the disposal will generate an anticipated £10 million ($12.9 million) non-recurring loss in the second half of the year. The net proceeds of the disposal will be used to reduce the group’s net borrowings, providing flexibility and headroom to fund more profitable and cash-generative opportunities. It is anticipated that the disposal will be marginally dilutive to the group’s earnings per share in the current financial year but improve the quality of business and Group margins.
Brett Simpson, group chief executive, comments: “Our stated strategy is to actively manage our portfolio of businesses, to increase sustainable cash generation and invest in areas where we can achieve a clear competitive advantage. This disposal will enable us to reduce complexity and focus our efforts on those areas of our business where we can offer our customers a differentiated value proposition and build long-lasting customer relationships.”