Disposal of Dynacast

RNS Number : 8984H

Melrose PLC

06 June 2011

 



6 June 2011

Melrose PLC

Melrose PLC announces the sale of Dynacast

Melrose PLC ('Melrose') announces that it has signed an agreement for the disposal of its Dynacast division ('Dynacast') to a newly incorporated company, KDI Holdings Inc, managed by Kenner & Company, Inc. ('Kenner & Company').

Highlights:

·    The consideration comprises US$590.0 million in cash payable on completion, in addition Dynacast takes with it US$17.1 million of net pension liabilities¹. This equates to an enterprise value of £370 million².  Melrose also retains all cash generated by Dynacast up to completion.

·    At like for like exchange rates, the enterprise value is equivalent to 1.4x 2010 revenue, 7.7x 2010 headline³ EBITDA⁴ and 9.1x 2010 headline³ operating profit.

·    During the six years of Melrose's ownership from May 2005:

·    The enterprise value of Dynacast has increased from £197 million to £370 million.

·    The equity value in Dynacast has increased by four times.

·    Nearly £1 billion in cash will have been generated from the original £429 million McKechnie and Dynacast acquisition.

·   The Board intends to return the Dynacast cash proceeds, net of costs, to shareholders following completion of the Disposal. 

·    The Disposal is conditional, amongst other things, upon obtaining regulatory clearances in the relevant jurisdictions in which Dynacast operates. Closing is expected during August 2011.

Christopher Miller, Chairman of Melrose, stated,

"The sale of Dynacast marks another successful milestone for Melrose.   As a result of the improvement in its performance we have quadrupled the shareholders' investment in Dynacast within six years. Almost £1 billion of cash will have been generated from McKechnie & Dynacast which were acquired for £429 million in 2005. This is an excellent validation of the Melrose model and our strategy of operational improvement and value realisation.

"We remain confident in the outlook for Melrose particularly given the strong prospects of our Energy and Lifting divisions which have good exposure to high growth end-user markets such as energy and oil & gas.

"We are actively seeking an acquisition where we believe we can add substantial value.

We thank all the employees of Dynacast for their dedicated service in our ownership and are confident of the future for Dynacast in its continued development under Kenner & Company."

Simon Newman, the CEO of Dynacast, and his management team will remain with Dynacast in their current positions and it will operate as an independent company.

Melrose is being advised by Rothschild.  

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Contacts:

M:Communications
Financial PR
Nick Miles/Ann-marie Wilkinson/Andrew Benbow	[phone]
Rothschild
Financial Advisor
Ravi Gupta/Aadeesh Aggarwal/Yuri Shakhmin	[phone]

Rothschild, which is regulated and authorised in the United Kingdom by the Financial Services Authority, is acting only for Melrose and no-one else in connection with the Disposal and will not regard any other person as its client or be responsible to any person other than Melrose for providing the protections afforded to clients of Rothschild, or for providing advice in relation to the Disposal or the contents of this document.

Notes to Editors

Information on Dynacast

Dynacast is a leading global provider of precision die cast components for a wide variety of industries including healthcare, consumer electronics, computers and peripherals, and automotive.

Dynacast has extensive engineering expertise to manufacture small parts with complex geometries and tight tolerances in a single step using zinc, aluminum and magnesium alloys; metals that have excellent manufacturing, physical, and mechanical characteristics .

Dynacast has manufacturing operations and engineering support in 20 locations throughout the world including North America, Europe and Asia.  Dynacast takes pride in reliably serving its many regional and global customers through value engineering; developing component solutions that add value and product differential.

In the year ended 31 December 2010 under IFRS, Dynacast generated revenue, headline³ EBITDA⁴ and headline³ operating profit of US$427.3 million, US$78.6 million and US$66.7 million respectively. Total Dynacast net assets and gross assets were US$400.3 million and US$538.7 million respectively as at 31 December 2010.

Information on KDI Holdings Inc and Kenner & Company, Inc

KDI Holdings Inc is a Delaware-incorporated company formed by a consortium of financial investors for the purpose of the Dynacast acquisition.

Founded in 1986 by Mr. Jeffrey L. Kenner and headquartered in New York, Kenner & Company is a private investment firm specialising in leveraged buyouts and venture capital investments. It seeks to acquire ownership positions in private operating companies that need capital for growth or liquidity for current shareholders.

¹ Dynacast pension schemes had assets of US$12.9 million and liabilities of US$30.0 million as at 31 December 2010

² Based on £1 = $1.64 exchange rate

³ Before exceptional costs, exceptional income and intangible asset amortisation

⁴ Operating profit before depreciation and amortisation

 

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