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Sale of Speciality Coating Systems ("SCS") for $55.5M

Published on 2006-01-03. Author : SpecialChem

Cookson Group plc ("Cookson"), the leading materials science company, announces that on 31 December 2005 it sold SCS, a business which forms part of the Assembly Materials sector of Cookson's Electronics division, to Bunker Hill Capital for US$55.5 million (£32.3 million*). The consideration was satisfied by way of an immediate cash payment of US$54.0 million (£31.4 million*), with an additional US$1.5 million (£0.9 million*) to be paid upon closing of the sale of the SCS China business in early 2006. The consideration will be subject to completion balance sheet adjustments in respect of working capital and capital expenditure, which are not expected to be material.

The sale of SCS is part of Cookson's strategy of achieving progressive debt reduction through, in part, non-core business disposals, and brings the proceeds from disposals agreed in 2005 up to the £100 million targeted by the end of 2006.

SCS comprises a group of companies and business assets with its main operations in the USA, Europe and Asia-Pacific. Its primary business is the service application of a specialty conformal coating product principally for use in automotive, electronic and medical applications.

On an International Financial Reporting Standards ("IFRS") basis, for the year ended 31 December 2004, SCS generated a trading profit** of £4.3 million on revenue of £19 million. As at 31 December 2004, SCS had gross assets of £18 million and gross liabilities of £2 million. For the six months ended 30 June 2005, SCS generated a trading profit** of £2.1 million on revenue of £9 million. As at 30 June 2005, SCS had gross assets of £19 million and gross liabilities of £2 million and employed 285 people.

The net cash proceeds from the sale will strengthen Cookson's balance sheet and provide greater financial flexibility. Additionally, Cookson will consider making advanced payments into its UK pension scheme to reduce the existing deficit.

In January 2005, Cookson announced a target of raising over £100 million from disposal proceeds by the end of 2006. In the six month period to 30 June 2005, proceeds from disposals totalled £13 million. Furthermore, on 15 December it was announced that a conditional agreement had been entered into to sell Cookson's Laminates business for US$91 million (£53 million*). On completion of that disposal (expected in February 2006) together with some further property disposals completed recently and including the proceeds from this transaction, Cookson will have generated disposal proceeds of over £100 million.

Commenting on the sale of SCS, Nick Salmon, Chief Executive of Cookson Group plc, said:

"SCS is a good quality business, as reflected in the price achieved. However, it does not fit strategically with our core electronics business, and the sale represents further significant progress in terms of our strategy of progressive debt reduction. Following the recent announcement regarding the sale of our Laminates business, this deal means we have achieved our strategic goal of raising £100 million through disposals, a year ahead of schedule.

"Our strategic plan also involves achieving significant improvements in profitability, and our third quarter trading update in early November demonstrated that we are making solid progress in this regard as well."

In January 2005, Cookson announced its strategy which focuses on performance enhancement, debt reduction and the disposal of non-core activities.

Cookson's objectives include improving profitability, with targeted return on sales by 2007 of 10% in both the Ceramics and Electronics divisions and a return on net sales value (i.e. excluding the precious metals content) of 15% for the Precious Metals division. Cookson also plans to reduce total debt significantly over the next 2-3 years. This will be achieved through a combination of strong operational cash flow - from improved profitability and working capital management - and a disposal programme which will raise over £100 million from the sale of a number of non-core activities and assets by the end of 2006. In addition, Cookson intends to resume a sustainable dividend payment as soon as possible with dividends funded from free cash flow.

About Cookson Group plc

Cookson Group plc is a leading materials science company which provides materials, processes and services to customers worldwide. The Group's operations are formed into three divisions - Ceramics, Electronics and Precious Metals.

The Ceramics division is the world leader in the supply of advanced flow control and refractory products and systems to the iron and steel industry and is also a leading supplier of specialist ceramics products and refractory linings to the steel, glass, foundry and other industries.

The Electronics division is a leading supplier of materials and services to fabricators and assemblers of printed circuit boards and semiconductor packaging and to industrial markets including automotive and construction.

The Precious Metals division is a leading supplier to the jewellery industry of fabricated precious metals products.

Headquartered in London, Cookson employs some 16,000 people in more than 35 countries and sells its products in over 100 countries.

* translated at an exchange rate of US$1.718/£1

** trading profit consists of profit from operations before central Group and Divisional cost allocations, rationalisation costs, amortisation and impairment of intangible assets and profit/(loss) relating to fixed assets

Source: Cookson


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