Last checked at 1 Jul 2010 10:04
Eleco plc
("Eleco" or "the Group")
Disposal of Eleco Bauprodukte GmbH
Eleco announces the sale of the entire issued share capital of Eleco Bauprodukte GmbH ("EBP"), its wholly-owned German connector plate business, to MiTek Industries GmbH ("MiTek"), a subsidiary of MiTek Holdings, Inc., a Delaware U.S. corporation, for a total consideration of £3.9 million on 30 June 2010.
The consideration has been satisfied by the issue of £3.9m of Loan Notes of MiTek, redeemable in full on 30 June 2010. There are no conditions attaching to the redemption thereof.
The agreed consideration reflects what both parties consider to be the maintainable profits of EBP in normal market conditions together with the potential to be realised from the integration of EBP's business into the MiTek group. As a consequence of difficult trading conditions and other issues in the year to 30 June 2010, EBP is expected to make a loss before tax of £369,000; however, its average contribution profit before interest and tax to Eleco in the three years ended 30 June 2009 was £1,003,000.
EBP's assets were depleted during the year by losses and exceptional costs, as a result of which it will have net assets of approx £112,000 at completion of the disposal. In addition to the net assets of EBP as reflected in its books and records, MiTek will receive significant intellectual property assets as part of the transaction. During the current financial year, EBP purchased connector plates valued at £317,000 from GangNail Systems a fellow Eleco subsidiary; such purchases will cease following completion.
Eleco also announces the cessation of the EBP-related legal dispute noted in the interim results for the Group as announced on 5 March 2010. Legal costs related to the resolution of this dispute amounted to £554,000 at 31 December 2009. Since then additional legal costs of £417,000 have been incurred, resulting in total legal costs incurred and expensed in the year of £971,000.
The proceeds of the sale of EBP will strengthen the Group's balance sheet and the cessation of the EBP related legal dispute will result in the cessation of the significant legal costs incurred in connection with the dispute. Therefore, as a consequence, Eleco will be much better placed to implement its recovery strategy.
John Ketteley, Executive Chairman, commented:
"This transaction represents a significant improvement to Eleco's balance sheet, brings clarity to our strategy and frees up valuable management time that can now be applied to other parts of our business."
Enquiries:
John Ketteley, Eleco plc - 01920 443830
Bruce Garrow, Collins Stewart Europe Limited - 020 7523 8350