In statements released today (3 October), the company said that in line with the review, it has disposed Essentra Filter Holdings to Frank Acquisition Four.
The top holding company of Frank Acquisition Four is Centaury Management, which is owned and controlled by the investment office of the Markus family.
The consideration is comprised of approximately £200m initial consideration due on completion, on a cash-free, debt-free basis and subject to customary adjustments, and up to £20m deferred earn-out consideration following completion
The transaction values the Filters business at an enterprise value of approximately £262.1m, including 100% consolidation of certain joint ventures.
The deal is expected to complete no later than 31 January 2023 and the conditions that the transaction is subject to include approval by Essentra's shareholders.
Essentra’s board intends to use the proceeds to reduce the company’s debt position by offering to prepay a portion of US private placement notes (USPP) issued under its 2021 note purchase agreement 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, it said, will provide Essentra Components with the flexibility to pursue value creating organic and inorganic opportunities, including future bolt-on acquisitions.
For the year ended 31 December 2021, Filters delivered adjusted operating profit of £28.2m.
Following the successful completion of the strategic reviews of the Filters and Packaging divisions, the latter of which resulted in a sale to Mayr-Melnhof Group in a deal worth £312m that completed on Saturday (1 October), Paul Forman has decided to step down from his role as chief executive of Essentra at the end of the current financial year on 31 December 2022.
Forman, who joined the business in 2017, will be succeeded by Scott Fawcett, currently the managing director of Essentra’s Components division. Fawcett will join the board on 1 January 2023.
Forman will work closely with Fawcett and the board to ensure a smooth transition and support the transition to a pure play components business.
Essentra said the Components business continues to perform well, benefitting from its broad geographic reach (Americas 30%; Europe and Rest of World 55%; Asia 15%).
On the sale of the Filters division, Forman said: “The strategic review of Filters 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.”
Thanking Forman for his “outstanding contribution to Essentra during his tenure as CEO”, chairman Paul Lester said: “Under his careful stewardship and excellent leadership, the group has been transformed from a weak state and restored to long term profitable growth.
“All this – and material growth in profitability – has been achieved despite multiple external headwinds in recent years. Paul will leave the board with our very best wishes and our sincere thanks and appreciation for all that he has achieved.
“Following a thorough review, the Nominations Committee unanimously recommended to the board that Scott be appointed as the company's new chief executive. Scott has extensive knowledge and experience of the Components business and a successful track record of developing and expanding the division both organically and through acquisition.
“I look forward to continuing to work with Scott as the company embarks on the new phase of its journey.”
Forman added “it has been a huge privilege to be part of the Essentra family, and I am immensely proud of all that we have achieved”, while Fawcett said he was delighted to be taking on his new role “at a pivotal point in the company's journey”.
“I would like to thank Paul for his support in establishing the Components growth strategy and his mentorship and guidance throughout his tenure and wish him well for the future,” he added.
The Packaging division sale to Mayr-Melnhof Group excluded Packaging's business in India, which represented less than 1% of group revenues. This has now been sold to BBM Bommidala, which Essentra said “will be well placed” to integrate the Bangalore site into its current portfolio.
