Rexam, the global consumer packing company, is proposing to sell its Personal Care business in two parts and return the majority of the proceeds to its shareholders.
The Cosmetics, Toiletries and Household care products unit (CTH) and the High Barrier Food packaging division (HBF) will be sold for a combined total of $709m in cash (£452m at current exchange rates).
A binding offer of $459m has been recieved from an affiliate of Sun Capital Partners for CTH, while a subsidiary of Silgan Holdings has agreed to acquire HBF for $250m, also in cash.
The transactions are expected to complete in the third quarter of 2012 for HBF and the fourth quarter of 2012 for CTH and are conditional on certain regulatory approvals.
As a result of the sale, Rexam will carry out a restructuring programme to remove residual overheads which, together with certain separation costs, will result in exceptional charge of some £40m in 2012, of which £25m will be cash costs. Going forward, there will be £7.0m of annual retained fixed costs which will be absorbed by the Beverage Cans and Healthcare businesses.
In total, the Personal Care business employs some 7,000 people in Europe, the US and Asia. In 2011, the business had sales of £502m and underlying operating profit of £38m before central overheads (CTH: £26m and HBF: £12m). As at 31 December 2011, it had gross assets of £650m (CTH: £611m and HBF: £39m) and liabilities of £112m (CTH: £103m and HBF: £9.0m).
It is expected that there will be an impairment charge of some £200m at the half year arising from the sale of CTH, which will be broadly offset in the second half by a gain on the sale of HBF, associated foreign exchange gains and tax credits.
Following the completion of the sales, Rexam plans to return around £370m (at current exchange rates) to shareholders which it is anticipated will be effected by way of a redeemable B share scheme together with a share consolidation.
The move was welcomed by the market on Tuesday afternoon, with shares trading 2.31% higher at 433.4p by 14:36.
City sources predict the FTSE 100 will open around 50 points higher than yesterday's close of 6,630, with investors expecting welcome dovish comments from the soon-to-be Chair of the Federal Reserve Janet Yellen. [14 Nov '13]
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