Last checked at 9 Feb 2009 16:21
Volex Group plc
9 February 2009
Volex Group plc
("Volex Group" or the "Group")
Proposed sale of Volex Wiring Systems Limited ("VWS") (the "Transaction")
The Board of Volex Group is pleased to announce that it has today entered into a conditional agreement to sell its wiring harness business, which is currently a division of the Group, to Ionix Holdings Limited ("IHL"), a management buyout vehicle led by Bill Taylor, Vice President of Global Operations at Volex Group. Following completion of the Transaction, Bill Taylor will be resigning from his position with the Group.
Principal terms and conditions of the Transaction
Under the terms of the Transaction agreement entered into by Volex Group and IHL, the Group has agreed to sell VWS to IHL for a nominal consideration of £1 payable in cash on completion. Immediately prior to the sale of VWS, Volex Group will transfer the wiring harness business and assets into VWS, a subsidiary company of the Group.
In addition Volex Group has agreed to extend the following payments to IHL under the terms of the Transaction agreement:
£608,000, payable on completion, to assist in the future development of the wiring harness business; and
Up to a maximum of £250,000, conditional upon the average Euro / Sterling exchange rate in the seven month period following completion of the Transaction.
Due to the size of the Transaction relative to the Group, the Transaction is deemed to be a Class 1 transaction under the Listing Rules and is therefore conditional upon the approval of shareholders at an Extraordinary General Meeting ("EGM"). Accordingly, a Shareholder Circular containing further details of the Transaction and Notice of EGM will be sent to shareholders in due course.
The Group has received irrevocable undertakings from certain institutional shareholders to vote in favour of the Transaction at the EGM in respect of their entire holdings representing, in aggregate, approximately 51 per cent of the issued share capital of Volex Group.
The Transaction is expected to complete by 31 March 2009.
Background to and reasons for the Transaction
The wiring harness business, which will be transferred into VWS, designs, manufactures and supplies sophisticated, multi-drop harnesses used in; commercial and off-highway vehicles; aerospace and industrial engines; avionics and flight management systems; defence applications such as weapons systems and armoured vehicles; renewable energy and environmental vehicles; and both surface and submerged marine.
The gross assets which are the subject of the Transaction were valued at £18.8 million at 5 October 2008. In the 27 weeks ended 5 October 2008, the wiring harness business generated revenues of £21.2m (£17.1m in the 26 weeks to 30 September 2007) and reported an operating loss of £2.0m (operating loss of £1.2m in the 26 weeks to 30 September 2007).
Having conducted a thorough review of the strategic options available to the wiring harness business, the Directors believe that it is in the best interests of the wider Group and its shareholders to sell this division to IHL. This decision is consistent with the Group's strategy of developing its core, profitable divisions and will enable increased management focus on the ongoing growth of the remaining divisions of this business; Volex Power Products and Volex Interconnect.
Information on the continuing Group
Volex Power Products is the market leader in the design, manufacture and supply of power cords for use by original equipment manufacturers worldwide. In the 27 weeks to 5 October 2008, Volex Power Products reported revenues of £80.3m (£65.9m in the 26 weeks to 30 September 2007) and operating profit of £3.7m (£4.8m in the 26 weeks to 30 September 2007).
On 22 September 2008 the Board of Volex Group announced that it was investigating the potential for realising value from Volex Power Products. Having assessed the strategic options currently available, the Board considers that, at this time, long-term shareholder value will be maximised by retaining this division. The Board will however continue to evaluate all strategic options available to it.
Volex Interconnect designs and develops products which carry signals within and/or between equipment for applications such as communications, networking and computing products and medical and industrial equipment. In the 27 weeks to 5 October 2008, Volex Interconnect reported revenues of £53.6m (£43.3m in the 26 weeks to 30 September 2007) and operating profit of £0.8m (£0.5m in the 26 weeks to 30 September 2007).
Current trading update
Current market conditions make it difficult to forecast the outlook for the second half of the year ending 31 March 2009; however, in the period since the announcement of our interim results in November 2008, revenue in the Interconnect markets has remained in line with expectations and ahead of the previous year. In particular, the India Interconnect business continues to make strong revenue gains from the roll out of wireless infrastructure. Although, during the third quarter we saw a reduction in demand for Power Products, which was in line with other consumer product companies, we have aggressively managed the associated cost base to protect profits and cashflow.
Whilst we remain cautious about the impact of the current global economic conditions, we believe that the structural improvements we have implemented, combined with the favourable impact of lower commodity prices and the stronger US Dollar, allow the Board to remain comfortable with the trading outlook for the financial year. We will issue our next interim management statement on February 19th.
Further information
A Shareholder Circular containing further details of the Transaction, including the Notice of the EGM, will be sent to shareholders in due course.
Mike McTighe, Chairman of Volex Group, said:
"I am very pleased to announce the disposal of the wiring harness division. The sale is a positive step forward for the Group, enabling us to focus on ensuring the continued success of the profitable and growing Power Products and Interconnect divisions.
Our priority in the short-term will be to work closely with IHL to minimise the effect of these changes on customers, suppliers and employees, to ensure as smooth a transition as possible. I would like to take this opportunity to thank the management and employees of the wiring harness business for their contribution to the Group."
Enquiries:
| Volex Group plc | |
| Heejae Chae, Group Chief Executive | 01925 830 101 |
| Andrew Cherry, Interim Group Finance Director | 01925 844 604 |
| Rothschild | |
| Scott Sheldon | 020 7280 5000 |
| Greg Cant | 0161 827 3800 |
| Weber Shandwick | 020 7067 0700 |
| Terry Garrett | |
| Nick Dibden | |
| James White |
N M Rothschild & Sons Limited ("Rothschild"), which is authorised and regulated by the Financial Services Authority in the United Kingdom, is acting for Volex Group and no one else in relation to matters described in this announcement and will not be responsible to anyone other than Volex Group for providing the protections afforded to clients of Rothschild nor for providing advice in relation to the matters described in this announcement.