Coral Products Regulatory News (CRU)

Coral Products PLC

(the "Company" or "Coral")

Proposed disposal - Coral Products (Mouldings) Ltd and Interpack Ltd

Coral Products PLC, (the "Company") a specialist in the design, manufacture and supply of injection moulded plastic products based in Haydock, Merseyside announces that it has entered into a share purchase agreement (the "Agreement") for the conditional sale of Coral Products (Mouldings) Limited ("CPL") and Interpack Limited ("Interpack") (together the "Sale Companies") for an estimated initial net cash consideration of £7.9 million (the "Disposal") to One51 ES Plastics (UK) Ltd (the "Purchaser").

The estimated initial net cash consideration of £7.9 million is payable on completion and is subject to an adjustment following the preparation of completion accounts and adjusting for certain liabilities. Completion is expected to occur in February 2021, with a back-stop date of 30 April 2021.

The Company will continue to hold the freehold for the Haydock site from which CPL operates and intends to enter into a 10-year lease with the Purchaser at rent of £300,000 per annum with a 5-year break clause and rent review after 5 years.

One51 ES Plastics (UK) Ltd is the UK subsidiary of IPL Plastics Group ("IPL"). IPL's turnover is in excess of USD 700 million with operations in the United States, Canada, Europe and China. IPL operates across three divisions: consumer packaging solutions, large format packaging and environmental solutions and returnable packaging solutions. IPL has 15 plants, 9 of which are based in North America, and employs over 2,000 people.

Pursuant to the terms of the Agreement, the Company has conditionally agreed to sell, and the Purchaser has conditionally agreed to purchase the entire issued share capital of the Sale Companies, comprising CPL and Interpack.

The Agreement is conditional, inter alia, on:

(1) Shareholder approval and completion of the Agreement. The Disposal is deemed to constitute a fundamental change of business of the Company under AIM Rule 15 and is therefore conditional on Shareholder approval at a General Meeting of the Company to be convened in due course, and

(2) the completion of certain works at the Company's Haydock site, expected to be finalised on or before 31 January 2021.

As is customary, the Company will make certain warranties and give certain indemnities to the Purchaser in respective of the Sale Companies' historic business.

The Company will be subject to restrictive covenants for a period of 36 months from completion of the sale during which time the Company will be restricted from competing with the Sale Companies provided only that these restrictions shall not apply to the Company's retained group companies existing customer base.

Michael Wood, CEO of the Company, will resign from the Company's board on completion of the sale as he will be joining the Purchaser as part of the sale agreement.

Joseph Grimmond, currently Non-executive Chairman, will be appointed Executive Chairman of the Company.

The Company will ensure that a normal level of working capital remains within the Sale Companies at completion. The final consideration due to the Company is subject to other customary adjustments at completion, such as the actual working capital at completion against an agreed target level and adjustments for cash or debt items.

At completion, the estimated initial net cash consideration of circa £7.9 million will be paid by the Purchaser to the Company.

Background and proceeds of Disposal

Following the Disposal, the continuing group will consist of Coral Products plc, Tatra Rotalac Limited and Global One-Pack Limited (together the "Continuing Group").

The Board believes that the Disposal provides the Company with the opportunity to crystallise an attractive return on invested capital with respect to the Sale Companies, reduce net debt and also to provide additional financial flexibility to further develop and support the recent progress of the Continuing Group.

Current Group Structure

The Group currently comprises four operating companies engaged in the manufacture and supply of a range of injected, blow moulded and extruded plastic products into a diverse range of sectors including food packaging, personal care, household, healthcare, on-line totes, telecoms and rail. The Group has operations in the UK with manufacturing facilities in Haydock, Merseyside, and Wythenshawe, Greater Manchester as well as a distribution facility in Hyde, Greater Manchester.

The table below provides an overview of the activities within each wholly owned subsidiary of the Company:

Financial information relating to the Sale Companies

Set out below is key financial information on the Sale Companies for the year ended 30 April 2019:

Financial effects of the proposed Disposal and use of Proceeds

A pro forma Group balance sheet (based on the based on the unaudited balance sheet figures of the Group's published interims for the six months ended 31 October 2020) showing the impact of the Disposal is set out below:

Strategy for the Continuing Group

Following the Disposal, the Continuing Group will comprise:

· Coral Products Plc, the Group holding company;

· Tatra Rotalac Limited which specialises in the manufacture of plastic extrusions and injection mouldings, Tatra manufacture round, square and oval tubes as well as rigid and flexible profile extrusions, co-extrusions and injection mouldings; and

· Global One-Pak Limited, a leading supplier of lotion pumps, triggers and mist sprayers.

Summarised financial information on the Continuing Group's operating companies' businesses, as extracted from the unaudited management accounts for the 7 months ended 30 November 2020 is set out below:

*Pre-tax profits are stated before management charges and Covid related exceptionals

The Company's board believe there is a potential to further develop the Continuing Group in terms of sales and profits.

Following completion of the Disposal, the Board will conduct a review to determine the most advantageous route to deliver shareholder value and apply the net proceeds from the Disposal.

A Circular setting out the proposals will shortly be posted to shareholders.

This announcement contains inside information for the purpose of Article 7 of the EU Regulation 596/2014 and has been arranged for release by Sharon Tinsley, Finance Director of the Company. The Directors of the Company take responsibility for this announcement.

For further information, please contact:

This announcement contains unaudited information and forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts and undue reliance should not be placed on any such statement because they speak only as at the date of this document and are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and Coral's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. Coral undertakes no obligation to revise or update any forward-looking statement contained within this announcement, regardless of whether those statements are affected as a result of new information, future events or otherwise, save as required by law and regulations.