Carclo Regulatory News (CAR)

26 May 2005 07:02

Carclo plc26 May 2005 26 May 2005 Carclo plc Proposed disposal of ECC Card Clothing Highlights • Carclo plc ("Carclo" or "the Group") has today received a binding offer from NV Bekaert SA ("Bekaert") for its ECC Card Clothing business ("ECC") for a total consideration of up to £8.6 million payable in cash • Carclo's remaining specialist wire business, ECC supplies consumable wire products to the textile industry worldwide. The business comprises eight companies located in the UK, France, Italy, Turkey, the USA, Canada, India and China • £6.5 million is payable on completion with further payments of up to £2.1 million dependent upon the achievement of certain performance criteria in the two year period following 31 May 2005 • Completion of the disposal is conditional, inter alia, upon satisfactory completion of the UK and French employee consultation processes, Turkish merger clearance and the approval by shareholders of the acceptance of the offer and the subsequent disposal at an extraordinary general meeting • Completion of the disposal is expected to occur on or around 13 June 2005 - Ends - Enquiries: Carclo plc 01924 268040Ian Williamson, Chief ExecutiveRobert Brooksbank, Finance Director Dresdner Kleinwort Wasserstein Limited 020 7623 8000Michael CovingtonAlex Thomas Weber Shandwick Square Mile 020 7067 0700Richard HewsSusanne Walker Dresdner Kleinwort Wasserstein, which is authorised and regulated by theFinancial Services Authority, is acting for Carclo plc and no-one else inconnection with the contents of this announcement and will not be responsible toanyone other than Carclo plc for providing the protections afforded to customersof Dresdner Kleinwort Wasserstein, or for affording advice in relation to thecontents of this announcement or any matter referred to herein. 26 May 2005 Carclo plc Proposed disposal of ECC Card Clothing Introduction On 20 May 2005 it was announced that Carclo plc ("Carclo" or "the Group") hadentered into discussions with a third party regarding the possible disposal itsECC Card Clothing business ("ECC"). Today Carclo announces that it has receiveda binding offer from NV Bekaert SA ("Bekaert") for the sale of ECC to Bekaertfor a total consideration of up to £8.6 million, payable in cash. Of this, £6.5million is payable on completion, which is expected to occur on or around 13June 2005, with further payments of up to £2.1 million dependent upon theachievement of certain performance criteria in the two years following 31 May2005. The additional consideration would be payable as follows: up to £0.6million on or before 31 July 2006 and up to £1.5 million on or before 31 July2007. Completion of the disposal is conditional, inter alia, upon satisfactorycompletion of the UK and French employee consultation processes, Turkish mergerclearance and the approval by shareholders of the acceptance of the offer andthe subsequent disposal at an extraordinary general meeting. Strategy and background to and reasons for the Disposal In 1997 Carclo commenced a strategy of expanding its high quality TechnicalPlastics operations through a series of focused acquisitions, initially in theUK and subsequently in the USA. Carclo's Technical Plastics operations havebeen further developed with the establishment of facilities in the CzechRepublic, China and India. In conjunction with the development of TechnicalPlastics, Carclo has sought to streamline its operations through the disposal ofits non core metal processing businesses. The main disposals undertaken by Carclo included the disposal of a steel stripbusiness for cash consideration of £19.3 million in 1999 and a specialist wirebusiness for £5.2 million in cash in 2001 (which also generated cash income of£6.4 million from the disposal of surplus property previously occupied by thisbusiness). Other disposals of non core metal processing businesses havegenerated £11.9 million in cash since 1997. Carclo has now received an offer from Bekaert to acquire ECC, the remainingspecialist wire business. ECC supplies consumable wire products to the textile industry world-wide. As aresult of changes in tariff structures, the textile industry has gone through aperiod of uncertainty and some restructuring of the ECC business has beennecessary to maintain a competitive position in the market. In particular plansare underway to consolidate UK manufacturing onto one site in Cleckheaton inlate 2005 and to expand the newly commissioned manufacturing facility in China. The Board believes that the interests of ECC and the Group are best served ifthis restructuring takes place outside the Group. Having received an offer forECC from Bekaert which appropriately reflects the value of the business, theBoard has concluded that it should pursue the proposed disposal. Bekaert is aworld class supplier of a range of wire products and ECC fits well with itsexisting businesses. Current trading and prospects On 1 April 2005, Carclo issued the following period end update: "The board anticipates that the trading outcome for the year ended 31 March 2005will be in line with its expectations. As forecast, the Group delivered a strong performance in the last quarter. TheTechnical Plastics division benefited from good automotive volumes and arecovery in divisional operating profits. We are now seeing the real benefit ofthe ongoing re-structuring programme and this should provide the base forfurther progress in the new financial year. In general, demand has stabilised.We have some concerns over the strength of demand for automotive components inthe USA, but the medical market remains buoyant. We have seen encouraging growth in our Chinese Technical Plastics operationwhich is now profitable. The Indian Joint Venture which was set up tomanufacture control cables will become fully operational during our nextfinancial year. ECC has experienced a difficult year but the order book is now improving and thenew China facility is performing well. The development of our new technologies continues to progress well and weanticipate that the Conductive Inkjet Technology joint venture will commencegenerating revenues in the new financial year." Since this time, trading has continued satisfactorily in line with management'sexpectations. Looking ahead, management will continue its focus on improvingsales whilst also delivering the planned efficiencies from the re-structuringprogramme. The Board will also continue to realise value from properties, whereappropriate. The Board remains confident in the prospects for the ContinuingGroup for the current financial year. Information on ECC The ECC business comprises eight companies located in the UK, France, Italy,Turkey, the USA, Canada, India and China. The facilities in the UK, France,India and China manufacture a range of card clothing products which are soldthroughout the world. In addition the operations in the USA, Italy, Turkey andCanada provide a fitting and distribution service for card clothing products inthose geographic regions. For the year ended 31 March 2004 the ECC business reported sales of £17.6million and operating profit of £0.7 million before exceptional costs of £0.1million incurred in relation to restructuring. For the six months ended 30September 2004, the ECC business reported sales of £8.2 million and an operatingprofit of £0.1 million before exceptional costs of £0.1 million incurred inrelation to restructuring. As at 30 September 2004 the net asset value of theassets of the ECC business which are subject to the disposal amounted toapproximately £8.6 million. The unaudited management accounts of ECC for the year to 31 March 2005 showsales and underlying profit below the prior year. ECC had a slow start to theyear ended 31 March 2005, with demand improving towards the end of the financialyear. The new Chinese facility experienced a good end to the financial year withgrowing activity levels. Principal terms and conditions of the Disposal The offer letter from Bekaert provides that the offer made to purchase ECC canonly be accepted if certain conditions are satisfied, including, inter alia,satisfactory conclusion of the UK and French employee consultation process, theapproval by shareholders of the acceptance of the offer and the subsequentdisposal at the proposed extraordinary general meeting and Turkish mergerclearance having been obtained. If the conditions have not been satisfied by 17June 2005 (or any later date agreed by Carclo and Bekaert), the offer willlapse. Under the sale and purchase agreement, to be signed upon acceptance of theoffer, Carclo will sell (or procure the sale of) ECC to Bekaert for a cashconsideration of up to £8.6 million. Of this cash consideration, £6.5 millionwill be payable on completion with further payments of up to £2.1 milliondependent upon the achievement of certain performance criteria in the two yearsto 31 May 2007. One element of these further payments is payable (up to a maximum of £1.7million) dependent upon sales of card clothing products by the ECC and Bekaertbusinesses in China for the years ending 31 May 2006 and 31 May 2007. Aninitial payment (up to a maximum of £0.6 million), is payable on or before 31July 2006 with the balance payable on or before 31 July 2007. A further amountof up to a maximum of £425,000 will be paid to the extent that the costs ofconsolidating the UK operations of ECC onto one site in Cleckheaton are lessthan the agreed budget during the twenty four month period to 31 May 2007. Excluded from the transaction are the main freehold properties occupied by theUK and French ECC businesses, the UK trade debts and the UK bank balances. Theproperties will be retained by Carclo and leased to Bekaert with effect fromcompletion or, for the French property, as soon as practicable followingcompletion. The unaudited operating assets of ECC at 31 March 2005 were £11.1 million.Property with a net book value of £2.2 million is being retained, which will beadded to Carclo's surplus property portfolio, together with the UK trade debtsof £1.2 million which will be realised for cash and the net bank overdraft ofECC UK which amounted to £0.5 million. The balance of the assets, which aresubject to the disposal, will be sold at their prevailing net book value of £8.2million. This will be settled by way of the initial consideration of £6.5million and the first element of the deferred consideration of up to £1.7million. Further information A circular to shareholders providing further information on the disposal, andcontaining a notice of the extraordinary general meeting to be held at theoffices of Weber Shandwick Square Mile, Fox Court, 14 Gray's Inn Road, LondonWC1X 8WS on 13 June 2005 at 11.30 a.m., will be posted to shareholders shortly. - Ends - Enquiries: Carclo plc 01924 268040Ian Williamson, Chief ExecutiveRobert Brooksbank, Finance Director Dresdner Kleinwort Wasserstein Limited 020 7623 8000Michael CovingtonAlex Thomas Weber Shandwick Square Mile 020 7067 0700Richard HewsSusanne Walker Dresdner Kleinwort Wasserstein, which is authorised and regulated by theFinancial Services Authority, is acting for Carclo plc and no-one else inconnection with the contents of this announcement and will not be responsible toanyone other than Carclo plc for providing the protections afforded to customersof Dresdner Kleinwort Wasserstein, or for affording advice in relation to thecontents of this announcement or any matter referred to herein. 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