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IMI plc announces the disposal of its Beverage Dispense and Merchandising divisions for $1.1 billion and a proposed return of cash to shareholders of £620 million
IMI plc (“IMI” or the “Group”), the international engineering group, today announces that it has reached an agreement to sell its Beverage Dispense and Merchandising divisions (together the “Retail Dispense” business) to The Marmon Group (“Marmon”), a Berkshire Hathaway company, for a cash consideration of $1.1 billion (£690 million) (the “Disposal”), subject to customary adjustments for the amount of working capital, cash and debt in the Retail Dispense business at completion. Subject to regulatory approvals, it is expected that the Disposal will complete in early 2014.
Following the Disposal, IMI will have a portfolio of highly differentiated, market leading flow control businesses entirely focused on industrial end markets.
The Board of IMI proposes that, subject to completion of the Disposal, IMI will return cash of £620 million to shareholders (the "Return of Cash") and contribute £70 million to the IMI UK Pension Fund.
Reasons for the Disposal
IMI announced in March 2013 that it was exploring options to divest the majority of the Merchandising business. During this process the Group received an alternative unsolicited proposal from Marmon, one of the interested parties, for the entire Retail Dispense business. The Board, having taken external financial advice, believes that the price of $1.1 billion fully recognises the strong operating improvements achieved in Retail Dispense over the last few years and the future prospects of the business.
The Disposal results in a greater concentration of IMI’s business in its sweetspot of operation. For IMI this sweetspot is where it can deploy its differentiated fluid technologies in global market niches where it already has, or can aspire to, a leadership position and which benefit from a heightened exposure to the long-term mega-trends of climate change, resource scarcity, urbanisation and an ageing population.
The Disposal will enable IMI to consolidate its focus around flow control solutions in attractive industrial markets and will be a further significant step towards IMI’s stated objective of increasing the proportion of sweetspot revenues to 75% by 2017. Based on IMI’s interim results for the 6 months ended 30 June 2013, the proportion of Group revenues, excluding Retail Dispense, in the sweetspot was 71%.
Return of Cash and additional pension contribution
In line with IMI’s capital allocation policy and the Board’s commitment to maintaining an efficient balance sheet, it is proposed that, subject to completion of the Disposal, £620 million of cash will be returned to shareholders by way of a “B and C share” scheme which will offer shareholders the opportunity to choose whether to receive the cash as an income and/or capital payment (and which will be accompanied by a share consolidation).
The proposed Return of Cash will require shareholder approval. A circular containing details of the proposed Return of Cash, the action recommended to be taken by IMI shareholders and a notice of General Meeting (including the requisite shareholder resolutions) will be sent to IMI shareholders following completion of the Disposal.
Subject to completion of the Disposal, the Board also intends to make an additional cash contribution payment of £70 million to the IMI UK Pension Fund (the “Fund”). This funding is over and above the existing recovery plan agreed with the Fund trustee and substantially reduces the Fund’s current IAS19 deficit. This will support the ongoing strategy for the Fund to remove volatility risk where appropriate and to move towards self-sufficiency funding levels over the next few years.
In March 2013, IMI announced a programme to buy back up to £175 million of shares over the following twelve months. To date, IMI has bought back £85 million of shares and this programme is continuing.
Martin Lamb, Chief Executive of IMI, said:
“The disposal of Retail Dispense is a major step for IMI. It positions IMI as a highly differentiated, market leading flow control business focused entirely on industrial end markets. With these end markets set to benefit further from favourable structural trends such as climate change and urbanisation, and cumulative investments in R&D gaining traction, the prospects for accelerated long term growth are encouraging. The creation of a more focused flow control business also paves the way for higher technical and operational synergies, and, in time, greater process integration.
“The Beverage Dispense and Merchandising businesses have been improved significantly over the last few years as they have focused their efforts on higher added value and more differentiated opportunities. Operating margins have improved considerably as a result, and this is reflected in the Disposal price. I particularly wish to thank all our employees in the Retail Dispense business for their efforts and commitment over many years in which they have made a first class contribution to IMI. I believe that Marmon, with its scale and focus on the retail space, will be an excellent long term owner of the business.”
Frank Ptak, Chief Executive of Marmon, said:
“We look forward to welcoming all of the employees of IMI’s Beverage Dispense and Merchandising businesses into Marmon. With world-class products and people, these businesses share Marmon’s commitment to innovation, quality and customer satisfaction.
“The IMI Beverage Dispense and Merchandising businesses will become an integral part of the Marmon Retail Technologies company, one of three Marmon companies that together comprise approximately 160 independent manufacturing and service businesses worldwide.”
John Goody, President of the Marmon Retail Technologies company, said:
“These strong businesses are an excellent strategic fit with our existing operations in the food service and retail industries as well as with our decentralized business model.”
IMI has received financial advice from J.P. Morgan Cazenove and Citigroup Global Markets Limited in relation to the Disposal and the proposed Return of Cash. Robert W. Baird & Co. Incorporated were the lead advisers on the Merchandising disposal process.
IMI has also issued a separate Interim Management Statement this morning. A conference call will be held today at 8:30am UK, hosted by Martin Lamb, Chief Executive and Douglas Hurt, Finance Director. Participants are requested to dial in at least 10 minutes before the start of the call.
Details for the call are as follows:
Standard International Access: +44 (0) 1452 555566
Conference ID # 86050665
A replay of this call will be available until 12 November, 2013 by dialling +44 (0)1452 550 000 and the conference ID number above.
Will Shaw IMI Tel: +44 (0)121 717 3712
Suzanne Bartch StockWell Communications Tel: +44 (0)20 7240 2486
This announcement assumes an exchange rate of 1.594 USD/GBP when stating the GBP amount for the consideration for the Disposal.
IMI, the international engineering company, designs, manufactures and services bespoke solutions that control the precise movement of fluids. Its innovative technologies, built around valves and actuators, enable vital processes to operate safely, cleanly, efficiently and cost effectively.
It works with customers across a range of high growth sectors, including energy, oil and gas, energy efficient buildings, rail, commercial vehicles and beverage dispense all of which are benefiting from the impact of long term global trends including climate change, urbanisation, resource scarcity and ageing population.
The Group employs over 15,000 people, has manufacturing facilities in more than 20 countries worldwide and operates a global service network. IMI is listed on the London Stock Exchange and is a member of the FTSE100. Further information is available on the IMI website at www.imiplc.com.
Retail Dispense business
The Retail Dispense business comprises IMI’s Beverage Dispense and Merchandising divisions and has approximately 3,100 employees. These employees will transfer with the business on substantially equivalent terms of employment.
Beverage Dispense, is a global leader in beverage dispensing solutions and associated merchandising for leading brand owners and major retailers. Beverage Dispense includes the Cornelius, 3-Wire and Display Technologies businesses. Cornelius delivers still and carbonated dispense solutions and has a reputation for excellent technical innovation which has been reinforced by the success of new products for faster growing market segments such as water, juice, frozen beverages and smoothies. 3-Wire is a leading provider of supply chain solutions and parts distribution to the beverage and foodservice industries in North America and Display Technologies develops value-added in store merchandising solutions that drive impulse sales for customers in the beverage and bulk food sector.
The Merchandising division is a global provider of retail merchandising and marketing solutions and includes the DCI-Artform and Cannon Equipment businesses. DCI-Artform’s unique use of analytical and data driven Retail Science methodologies and end-customer insights benefits brands and retailers by driving measurable increases in end-customer loyalty, sales and return-on-investment and brand compliance. DCI Artform works with some of the world’s leading brands and retailers across a variety of attractive and growing end markets, most notably Transportation, Cosmetics, Consumer Electronics and Grocery. Cannon Equipment manufactures material handling carts and automation equipment used in the dairy, newspaper and various other industries.
In the year ended 31 December 2012, the Retail Dispense business reported revenues of £496 million and segmental operating profit of £72.9 million. At 30 June 2013, it had gross assets of £291 million.
The Marmon Group, a subsidiary of Berkshire Hathaway Inc., is a global, diversified industrial organization. Marmon comprises three autonomous companies consisting of approximately 160 independent manufacturing and service businesses. These businesses operate approximately 300 manufacturing, distribution and service facilities, and employ more than 17,000 people worldwide. Revenues exceeded $7billion in 2012.
Marmon Contact: David Dees, 312-845-5343