Premier Farnell : Proposed disposal of Akron Brass for US$224.2 million to create a more focused business

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Disposal

Premier Farnell plc ('Premier Farnell') today announces that, together with its wholly owned subsidiaries, Celdis Limited and Premier Farnell Corp., it has entered into a conditional agreement with respect to the sale of Akron Brass Holding Corp. ('Akron Brass') to IDEX Corporation for cash consideration of US$224.2 million (the 'Disposal').

Highlights

• Total consideration of US$224.2 million (£153.8 million), payable in cash on completion, subject to customary adjustments.
• Represents an attractive enterprise valuation of approximately 8.8x Akron Brass FY15 EBITDA.
• The Disposal will enable further focus on executing the initiatives identified as part of its operational review to restore growth in profitability in FY17 and provide increased financial flexibility to pursue growth opportunities within the core electronics distribution business.
• Net cash proceeds arising from the Disposal will be used to reduce Premier Farnell's existing indebtedness and to redeem its preference shares.
• As announced on 17 September 2015, the Board's dividend policy is to target a dividend cover in the range of 1.5x to 2.0x; the Board intends to maintain this policy following the Disposal.
• Completion is expected by the end of March 2016.

The Disposal is a Class 1 transaction for Premier Farnell under the Listing Rules and is therefore conditional, amongst other things, upon the approval of shareholders. A circular containing further details of the Disposal and the notice convening a general meeting will be sent to Premier Farnell shareholders in due course.

Mark Whiteling, Premier Farnell Interim Chief Executive, said:

'Following the completion of the operational review and the conclusions announced in December 2015, the sale of Akron Brass marks the next important milestone in the strategic refocusing of Premier Farnell. The review confirmed that there are significant opportunities to improve the operational and financial performance of Premier Farnell. The sale of Akron Brass will enable us to focus on executing the initiatives identified as part of our review in order to restore growth in profitability in FY17.'

Following the year end on 31 January, the FY16 profit outcome is expected to be broadly in line with recent guidance.

Lazard & Co., Limited ('Lazard') is acting as lead financial adviser in relation to the Disposal. Barclays Bank PLC, acting through its Investment Bank ('Barclays') is acting as sponsor and financial adviser to Premier Farnell in relation to the Disposal.

This summary should be read in conjunction with the full text of this announcement.

Premier Farnell expects to announce its preliminary results for the year ended 31 January 2016 on 17 March 2016.

For further information, please contact:

Premier Farnell plc
Mark Whiteling, Interim Chief Executive Officer
Helen Willis , Interim Chief Financial Officer

+44 (0) 20 7851 4107

FTI Consulting
Richard Mountain

+44 (0) 20 3727 1374

Lazard & Co., Limited
Nicholas Shott
Cyrus Kapadia
Vasco Litchfield

+44 (0) 20 7851 4107

Barclays Bank PLC
Mark Astaire
+44 (0)20 3134 5180

Alex de Souza
+44 (0)20 3134 1063

Nicola Tennent
+44 (0)20 3134 9801

Premier Farnell's announcements (including this announcement and the circular, when published) and presentations are available at www.premierfarnell.com together with business information and links to all other group web sites.

Proposed disposal of Akron Brass for US$224.2 million to create a more focused business

1. Introduction

Premier Farnell plc ('Premier Farnell' or the 'Company') today announces that, together with its wholly owned subsidiaries, Celdis Limited and Premier Farnell Corp. (the 'Sellers'), it has entered into a conditional agreement with IDEX Corporation (the 'Purchaser') with respect to the sale of Akron Brass Holding Corp. ('Akron Brass') for a consideration of US$224.2 million (£153.8 million) payable in cash on completion, subject to customary adjustments (the 'Disposal').

The Disposal is a Class 1 transaction for the Company (together with its subsidiaries, the 'Premier Farnell Group') under the Listing Rules and is therefore conditional, amongst other things, upon the approval of shareholders.

A circular containing further details of the Disposal, and the notice convening a general meeting, at which the resolutions to give the necessary shareholder approval will be proposed, will be sent to shareholders of Premier Farnell in due course.

2. Background to and reasons for the Disposal

In July 2015, Premier Farnell reported that Premier Farnell Group sales per day momentum had slowed significantly, particularly in the North American and UK markets, affected by a more difficult trading environment. The Company had implemented a number of initiatives to drive sales and margin performance and deliver cost savings. Weakness in certain core markets and prevailing exchange rates resulted in adjusted operating profit declining 9.9% in the first half of the financial year ending 31 January 2016.

The Board therefore announced that it had initiated a review of the Premier Farnell Group's global electronics distribution business. The purpose of that review was to address some of the challenges facing that business, as well as positioning it to exploit opportunities. The scope of the review covered all aspects of this business including:

• Trading - a focus on customer proposition and experience and the costs of servicing those customers by business channel;
• Operations - product acquisition cost, product range and network design;
• Support - the cost of support functions and overheads; and
• Working capital - targeted improvements.

In September 2015, the Board announced that, to enable focus and allow investment in the core electronics distribution business, it had decided that the Premier Farnell Group would seek to sell Akron Brass, which is considered not to fit strategically within the Premier Farnell Group.

The sale process leading to the proposed Disposal attracted a significant number of interested parties. The Board believes that this competitive process has ensured that the cash consideration of US$224.2 million recognises the market position and future prospects of Akron Brass and provides an attractive valuation.

3. Information on Akron Brass

Akron Brass is a leader in engineered life safety products and solutions for fire fighting and emergency response applications. Since 1918, Akron Brass has been providing engineered life-safety products to the municipal fire fighting equipment, industrial fire and vapour mitigation, commercial vehicle, and emergency medical rescue and transport markets. Its products are designed to improve the safety and efficiency of personnel and equipment engaged in the suppression of fire. Its headquarters is in Wooster, Ohio (with manufacturing facilities in Columbus, Ohio and Washington, Illinois) and it sells through its own field sales force and through distributors to customers all over the world. It has a significant share of the North American market for the products it sells and seeks to grow by broadening its product range and reaching new geographic and industrial markets, assisted by appropriate acquisitions.

Akron Brass's safety and emergency response solutions were expanded through the acquisitions of GFE Manufacturing (2004), Weldon Technologies (2005) and Reach Engineering (2013), which broadened the portfolio of products and which support a technology platform that underpins the company's growth strategy of providing integrated equipment and electronic control technology to the first-responder market.

Details of key individuals important to Akron Brass Group

4. Information on the Purchaser

IDEX Corporation is a publicly traded global applied solutions provider specialising in fluid and metering technologies, health and science technologies, and fire, safety and other diversified products in high-growth markets. IDEX Corporation was incorporated in Delaware on 24 September 1987 and trades under the symbol 'IEX' on the New York Stock Exchange and Chicago Stock Exchange. Headquartered in Lake Forest, Illinois, the company has operating facilities across five continents with more than 6,700 employees worldwide.

5. Use of proceeds and financial effects of the Disposal

The net cash proceeds arising from the Disposal are expected to be approximately £124.8 million.

It is Premier Farnell's intention to use the net cash proceeds from the Disposal to reduce the debt of the Premier Farnell Group and to redeem its cumulative convertible redeemable preference shares in April 2016. The Company intends to apply the net cash proceeds as follows: first, to redeem its cumulative convertible redeemable preference shares in full on the redemption date in April 2016 (the redemption amount currently stands at approximately £53.6 million); second, to repay an aggregate amount of US$50.0 million to lenders under its US private placement notes at par on a pro rata basis across all notes; and third, to use the remaining net cash proceeds to reduce drawings under its revolving credit facility.

In the financial year ended 1 February 2015, the Akron Brass Group (as defined below) contributed operating profit of £14.7 million to Premier Farnell. As at 1 February 2015, the Akron Brass Group had gross assets of £86.2 million.

6. Dividend Policy

The Board is confident that Premier Farnell Group's strategy will deliver value to shareholders over the medium term. As announced on 17 September 2015, the Board's dividend policy is to target a dividend cover in the range of 1.5x to 2.0x. The Board intends to maintain this policy following the Disposal.

7. Terms of the Disposal

Under the terms of a share sale agreement which was signed today, the Sellers have conditionally agreed to sell their stock in Akron Brass Holding Corp., which comprises all the stock in Akron Brass Holding Corp., the holding company of Akron Brass Company (together the 'Akron Brass Group'), to the Purchaser.

The consideration of US$224.2 million for the Disposal is payable in cash on completion of the Disposal, subject to customary adjustments. The consideration is based on an enterprise valuation of Akron Brass of US$225 million.

Completion is conditional upon, among other things, applicable waiting periods under US anti-trust regulation having expired or been terminated and the approval of shareholders at a general meeting of Premier Farnell.

In the event that (a) the Premier Farnell directors accept a competing bid to acquire Akron Brass in accordance with the terms of the share sale agreement and enter into a definitive contract with the relevant third party, (b) the Premier Farnell directors either do not give or they withdraw their recommendation that shareholders vote in favour of the Disposal or (c) the Company's shareholders do not approve the transaction at the general meeting, a break fee will become payable to the Purchaser of US$2,242,000.

8. Expected timetable to completion

A circular containing further details of the Disposal and the notice convening a general meeting will be sent to Premier Farnell shareholders in due course. Completion of the Disposal is expected to occur by the end of March 2016.

9. Advisers

Lazard is acting as lead financial adviser in relation to the Disposal. Barclays is acting as sponsor and financial adviser to Premier Farnell in relation to the Disposal.

Premier Farnell plc issued this content on 05 February 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 05 February 2016 07:56:03 UTC

Original Document: http://www.premierfarnell.com/content/proposed-disposal-akron-brass-us2242-million-create-more-focused-business