12 Mar 2015 07:00
12 March 2015
Bioquell PLC("Bioquell" or the "Company")
Proposed disposal of TRaC Global Limited ("TRaC") for £44.5 million
Bioquell PLC (LSE symbol: BQE), the provider of specialist microbiological control technologies to the international Healthcare, Life Science and Defence markets today announces the proposed disposal of its specialist testing services subsidiary, TRaC, to Element Materials Technology Group Holdings Limited ("Element") for a cash consideration of £44.5 million (the "Disposal").
Highlights
§ Total consideration of £44.5 million, payable in cash on completion
§ For the year ended 31 December 2013, TRaC had revenues of £16.8 million, operating profit of £3.4 million and gross assets of £12.9 million
§ Gross cash proceeds from the Disposal equate to approximately 105 pence per Bioquell share, compared to the closing price per Bioquell share of 82 pence on 11 March 2015
§ The Board of Bioquell expects that the majority of the net cash proceeds arising from the Disposal will be returned to Bioquell shareholders in due course
§ The Disposal to Element will allow TRaC to pursue further growth opportunities within a larger testing, inspection and certification ("TIC") business, while providing value to Bioquell shareholders not currently reflected in Bioquell's market value
§ Following the Disposal, Bioquell will comprise a focussed biological contamination control business ("Bio division") selling into the international Life Sciences, Healthcare and Defence markets. The Bio division had revenues of £27.9 million for the year ended 31 December 2013
§ The Disposal constitutes a Class 1 transaction under the UK Listing Rules and is therefore conditional upon the approval of Bioquell shareholders. Directors of Bioquell, who together control directly or indirectly approximately 33.4% of the issued share capital of Bioquell, have given irrevocable undertakings to vote in favour of the Disposal
§ The Disposal is expected to generate an exceptional profit before expenses of approximately £35.4 million
Bioquell will be announcing its preliminary results for the year ended 31 December, 2014 on Wednesday, 18 March, 2015
Commenting on the sale of TRaC, Nigel Keen, Chairman of Bioquell said:
"The Board of Bioquell decided earlier this year to seek offers for TRaC in order to simplify the Group and realise value for shareholders. Over the last ten years we have grown TRaC into a highly successful specialist testing business and I am delighted that we are now able to demonstrate to shareholders the significant value that we have created.
"It has become increasingly clear that the time is right to sell TRaC. The improved prospects of our main Bio division - due to an improved product mix and targeted cost savings - and the inherent value of TRaC have not been properly reflected in the Bioquell share price over recent months. The disposal will enable us to focus on our core Bio-decontamination business and take advantage of the growing opportunities in our core Healthcare, Life Sciences and Defence markets."
Enquiries:
Bioquell PLC - 01264 835 900
Nigel Keen - Chairman
Nick Adams - Chief Executive
Michael Roller - Finance Director
Investec - 020 7597 4000
Keith Anderson
Daniel Adams
Citigate Dewe Rogerson - 020 7638 9571
Malcolm Robertson
This announcement has been issued by, and is the sole responsibility of, Bioquell PLC.
Investec Bank plc, which is authorised by the Prudential Regulation Authority ("PRA") and regulated by the FCA and the PRA, is acting exclusively for Bioquell in relation to the Disposal. Investec is not acting for any other person and Investec will not be responsible to any person other than Bioquell for providing the protections afforded to clients of Investec or for providing advice in relation to the Disposal or in relation to the contents of or any transaction or arrangement referred to in this announcement.
Bioquell PLC ("Bioquell" or "the Company")
Proposed disposal of TRaC Global Limited ("TRaC")
The Board of Bioquell is pleased to announce the proposed disposal of its subsidiary, TRaC, to Element Materials Technology Group Holdings Limited ("Element") for a cash consideration of £44.5 million (the "Disposal"). The Disposal recognises the inherent value in the TRaC business for Bioquell shareholders not currently reflected in the market value of Bioquell, and leaves the Company focused on its biological contamination control business selling into the international Life Sciences, Healthcare and Defence markets.
Background to and reasons for the Disposal
After significant cost reductions over the last two years and the completion of a substantial new product development programme, coupled with improving market conditions in its core sectors, the Board of Bioquell believes that the group's Bio division is well placed to enjoy good organic growth with an innovative and modern range of products and services.
In addition, the Board believes that TRaC has reached a size and stage in its development where the company would be able to grow faster if owned by a larger Testing, Inspection and Certification ("TIC") group.
Over recent years Bioquell has received a number of approaches in relation to TRaC from trade and financial buyers. As the improved prospects for the Bio Division and the inherent value of TRaC have not been properly reflected in the Bioquell share price, the Board of Bioquell decided earlier this year to seek offers for TRaC in order to simplify the Group and realise value for Bioquell shareholders. This process has culminated in the Disposal.
Further information on the transaction
Bioquell announces that it has entered into a binding share purchase agreement with Element to sell the entire issued share capital of TRaC Global Limited for £44.5 million.
Because of its size, the Disposal constitutes a Class 1 transaction under the UK Listing Rules and is therefore conditional on the approval of Bioquell shareholders. A circular containing further information on the disposal of TRaC as well as a notice convening a general meeting to approve the Disposal will be sent to Bioquell shareholders as soon as practicable.
Directors of Bioquell, who together control directly or indirectly approximately 33.4 percent. of the issued share capital of the Company, have signed irrevocable undertakings to vote in favour of the resolution relating to the Disposal.
Financial effects of the Transaction and use of proceeds
Gross cash proceeds from the Disposal equate to approximately 105 pence per Bioquell share, compared to the closing price per Bioquell share of 82 pence on 11 March 2015. The Board of Bioquell envisages that the majority of the net cash proceeds from the sale of TRaC will be returned to Bioquell shareholders in due course. It is expected that the Disposal will have a dilutive effect on underlying earnings per Bioquell share in the current financial year ending 31 December 2015. This statement is not intended to be, and should not be construed as, a profit forecast and should not be interpreted to mean the underlying earnings per Bioquell share for the current or future financial years will necessarily match, or be greater or less than, the historical underlying earnings per Bioquell share.
The Disposal is expected to generate an exceptional profit before expenses of approximately £35.4 million.
Information on TRaC
TRaC is a specialist Testing, Regulatory and Compliance business operating in the TIC sector with its headquarters in Malvern. The majority of its testing activities relate to product development and not manufactured output or 'end of line' testing.
TRaC's two core activities comprise: (i) EMC - electromagnetic compatibility - testing; and (ii) environmental testing, which largely relates to dynamic vibration. The two largest sectors TRaC serves are aerospace and defence - although it has a broad range of clients in a number of other sectors including telecoms, healthcare and other industrials.
For the year ended 31 December 2013, TRaC had revenues of £16.8 million, operating profit before tax of £3.4 million and gross assets of £12.9 million. TRaC currently employs 193 people. For the year ended 31 December 2014, TRaC had unaudited revenues of £18.0 million.
Information on the profile and strategy of the Retained Group
Bioquell's Bio division had revenues of £27.9 million in 2013. (Bioquell announced in a pre-close statement on 15 January 2015 that the division had unaudited revenues of £27.3 million for the year ended 31 December, 2014.) It develops, markets and sells internationally a range of products and services for germ eradication and containment. The division is a world leader in the use of hydrogen peroxide vapour ("HPV") bio-decontamination technology to eradicate micro-organisms from facilities, rooms and equipment within the Life Sciences and Healthcare markets. It also provides microbiological containment products, including the QUBE aseptic work station and the Pod - which is used to provide single patient rooms in hospitals with open-plan multi-bed units. The division also provides specialist decontamination services and consumables associated with its HPV technology as well as selling a range of specialist chemical, biological, radiological and nuclear ("CBRN") filtration systems for the defence market.
Life Sciences
The Life Sciences market is international, highly regulated and relatively fragmented. It comprises a range of disciplines including research & development, clinical trials and production which are carried out around the world in universities, research organisations and corporations. Bioquell is principally interested in the development and production of biologics where the need for aseptic facilities is critical and there is strong regulatory pressure to comply with the relevant standards.
Healthcare
Bioquell's Healthcare market principally relates to acute care hospitals around the world which are facing clinical or financial problems associated with antibiotic resistant bacteria and hospital acquired infection ("HAI").
Defence
Recent unrest in the Middle East and Eastern Europe has increased activity in a number of defence markets. Moreover, the use of Sarin chemical warfare agent in Syria has helped underscore the need for CBRN protection on military vehicles and installations. These market trends have helped generate higher levels of interest in our CBRN defence products over the last couple of years.
Strategy
During 2014 the Bio division's cost base was reduced substantially, particularly in relation to engineering resources. Significant changes were also made to the management of Bioquell's American and Asian subsidiaries. The benefit of these cost reductions and management changes will be seen in the financial performance of the Bio division in 2015.
The international Life Sciences and Healthcare markets are continuing to change. The Board of Bioquell believes that these changes will give rise to interesting opportunities for organic growth for its Bio division, particularly in relation to the increasing problems associated with antimicrobial resistance. The substantial modifications made to the division's product portfolio, including the imminent launch of a new product for the healthcare sector, puts Bioquell in a strong position for 2015.
Information on Element
Element comprises a global network of laboratories with experts specialising in materials testing and product qualification testing for the Aerospace, Oil and Gas and the Transportation and Industrial sectors. Element has more than 1,600 scientists, engineers and technicians working in 45 facilities located throughout the United States and Europe.
3i invested in Element in December 2010, acquiring a majority stake in the business. Under 3i's ownership, Element has increased its international reach across Europe and the US, where it is the largest independent materials testing company. Since 2010, revenues have increased from approximately US$100 million to in excess of US$250 million. This expansion has been achieved through consistently strong organic growth and by pursuing a successful build-and-buy strategy through which eight acquisitions across Europe and the US have been successfully completed.
Expected timetable to Completion
A circular, containing further details of the Disposal and the resolution to approve the Disposal (the "Resolution"), the Board's recommendation to vote in favour of the Resolution, and the notice of general meeting, will be sent to Bioquell shareholders as soon as practicable. Completion of the Disposal is expected to occur by 30 April 2015.
Forward-looking statements
Certain statements made in this announcement constitute forward-looking statements. Forward-looking statements can be identified by the use of words such as "may", "will", "should", "predict", "assurance", "aim", "hope", "risk", "expect", "intend", "estimate", "anticipate", "believe", "plan", "seek", "continue" or other similar expressions that are predictive or indicative of future events. All statements other than statements of historical facts included in this announcement, including, without limitation, those regarding the Group's expectations, intentions and beliefs concerning, amongst other things, the Group's results of operations, financial position, growth strategy, prospects, dividend policy and the industries in which the Group operates, are forward-looking statements. By their nature, such forward-looking statements involve known and unknown risks, uncertainties and other factors, many of which are outside the control of the Group and its Directors, which may cause the actual results, performance, achievements, cash flows, dividends of the Group or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. As such, forward-looking statements are no guarantee of future performance.
Such forward-looking statements are based on numerous assumptions regarding the Group's present and future business strategies and the environment in which the Group will operate in the future. Among the important factors that could cause the Group's actual results, performance or achievements to differ materially from those in the forward-looking statements include, among others, economic conditions in the relevant markets of the world, market position of the Company or its subsidiaries, earnings, financial position, cash flows, return on capital and operating margins, political uncertainty, the actions of competitors, activities by governmental authorities such as changes in taxation or regulation, changing business or other market conditions and general economic conditions and such other risk factors as may be identified in the "Risk Factors" section of the Circular. Forward-looking statements should, therefore, be construed in light of such risk factors and undue reliance should not be placed on forward-looking statements. These forward-looking statements speak only as of the date of this announcement and are not intended to give assurance as to future results. The Company will update this announcement as required by applicable law, including the City Code, Listing Rules, Prospectus Rules and/or the Disclosure and Transparency Rules of the FCA, but otherwise expressly disclaims any such obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in Bioquell's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.