TIDMIMB
RNS Number : 9490K
Imperial Brands PLC
27 April 2020
IMPERIAL BRANDS PLC
27 April 2020
Imperial Brands PLC agrees sale of Worldwide Premium Cigar
Business for EUR1,225 million with proceeds to be used to reduce
debt
Imperial Brands PLC ("Imperial") is pleased to announce it has
agreed the sale of its worldwide premium cigar businesses ("Premium
Cigars") to investment consortia of individual investors in two
distinct transactions for a total consideration of EUR1,225 million
(GBP1,074 million), which represents a multiple of 11.8x FY19
EBITDA on a standalone basis. The disposal reinforces Imperial's
focus on simplifying its business and realising value for
shareholders.
The sale multiple recognises the luxury nature of the
businesses' products and their international growth profile. After
adjusting for tax and other costs, the disposals are expected to
realise net cash proceeds of around EUR1,094 million (GBP958
million). The proceeds will be used for debt reduction and will
reduce September 2019 pro-forma net debt to EBITDA leverage by c
0.2 times.
Joint Interim Chief Executives Dominic Brisby and Joerg
Biebernick said: "We are delighted to be able to announce the sale
of Premium Cigars in the current challenging global environment. It
has been a complex transaction involving joint venture partners and
assets across multiple geographies and we would like to thank
everyone involved for working so hard to get the deal agreed."
"This disposal reinforces our strategic ambition of becoming a
leaner and more agile organisation and the proceeds will realise
value for shareholders by reducing debt as part of our ongoing
focus on active capital management."
"We believe we have found the right long-term owners for Premium
Cigars; they are committed to investing in the business to maximise
future growth opportunities and are well positioned to further
develop operations internationally."
The sale will take place in two transactions documented under
two sale agreements: one for the USA business ("Premium Cigar
USA"); and another for the Rest of the World business ("Premium
Cigar RoW").
In respect of the transactions:
-- Gemstone Investment Holding Ltd will acquire Premium Cigar
USA for a total consideration of EUR185 million (GBP162 million).
This transaction is subject to the fulfilment of certain
conditions, including customary antitrust and other regulatory
clearances.
-- Allied Cigar Corporation, S.L will acquire Premium Cigar RoW
for a total consideration of EUR1,040 million (GBP912 million).
This transaction is subject to the fulfilment of certain
conditions, including customary antitrust and other regulatory
clearances.
-- The transactions are expected to close in the third quarter
of calendar year 2020. The Premium Cigar RoW transaction includes
the sale of the Dominican Republic handmade premium cigar factory
which is expected to close in 2021.
-- Of the Premium Cigar RoW transaction consideration, EUR88
million (GBP77 million) will be deferred for 12 months from close
and EUR69 million (GBP61 million) will be deferred and contingent
upon transfer of the Dominican Republic factory.
The Premium Cigar business contributed GBP80 million of profit
before tax in the year to 30 September 2019. The business comprises
assets that are wholly owned as well as investments in a number of
joint ventures, which results in a different accounting treatment
for the two asset types:
-- The wholly owned assets represented GBP226 million of net
revenue and GBP30 million of adjusted operating profit of the
Africa, Asia and Australasia division for the year to 30 September
2019.
-- Our investments in the Premium Cigar joint ventures are
accounted for using the equity method and our share of the profit
after tax is GBP50 million for the year to 30 September 2019.
Pro-forma earnings dilution in the financial year to 30
September 2019 is around 6 pence per share*. As at 30 September
2019, the gross assets of Premium Cigars were GBP1,287 million and
net assets were GBP1,111 million. An update on asset values and
expected adjustments to foreign exchange reserves resulting from
the transaction will be provided on publication of Imperial's
interim results for the six months to 31 March 2020.
Imperial is being advised by AZ Capital on the agreed sales of
Premium Cigar USA and Premium Cigar RoW.
* Earnings dilution calculation based on FY19 reported results
& assumes 100% of proceeds are used to reduce debt, reducing
the need for further financing in the short term, based on an
implied equivalent coupon of 2.75% in the current volatile market
conditions.
ENDS
Investor Contacts Media Contacts
+44 (0)7970 328 +44 (0)7967 467
Peter Durman 903 Alex Parsons 241
+44 (0)7964 110 +44 (0)7967 467
Matt Sharff 921 Simon Evans 684
+44 (0)7581 052
James King 880
Background on Premium Cigars
The business comprises assets purchased as part of Imperial's
acquisition of Altadis in 2008, and the disposal consists of two
transaction perimeters:
Premium Cigar US
-- Tabacalera USA, which is responsible for the business'
premium cigar operations in the US, the world's largest premium
cigar market, including:
o The assets and other property of Altadis USA, which is
responsible for the distribution of premium cigars in the US;
o Leading online retail platforms, including JR Cigar, cigar.com
and Serious Cigars;
o A specialist brick-and-mortar retailer, Casa de Montecristo,
with 28 stores across the USA.
Premium Cigar RoW
-- Cuban premium cigar interests, including:
o A 50 per cent stake in Habanos S.A., which exports hand-made
cigars from Cuba and is responsible for international marketing
activities. Habanos products include world-renowned Cuban brands
such as Cohiba, Montecristo and Romeo y Julieta.
o A 50 per cent stake in Altabana S.L., which is responsible for
the distribution of Cuban cigars worldwide through its network of
over 20 subsidiary distributors.
o A 50 per cent stake in Internacional Cubana de Tabaco, S.A.,
which is responsible for the manufacturing of Cuban premium
machine-made cigars.
o A 50 per cent stake in Promotora de Cigarros, S.L., which
manages the distribution of the Cuban premium machine-made cigar
portfolio worldwide.
-- Other sales of premium cigar products through Tabacalera SA including:
o Exclusive distribution of Cuban handmade cigars in Spain;
o Non-Cuban premium handmade cigar sales operations outside the
US, including Vegafina, the bestselling non-Cuban brand outside the
US.
-- Premium cigar manufacturing facilities in Honduras and
Dominican Republic. The Dominican Republic factory manufactures
both mass market cigars and premium cigars and will be physically
separated to enable the sale of the premium cigar facilities. All
employees, other than those involved with mass market cigars in the
Dominican Republic factory, will transfer to the new owner Allied
Cigar Corporation, S.L.
Cautionary Statement
Certain statements in this announcement constitute or may
constitute forward-looking statements. Any statement in this
announcement that is not a statement of historical fact including,
without limitation, those regarding the Company's future
expectations, operations, financial performance, financial
condition and business is or may be a forward-looking statement.
Such forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially
from those projected or implied in any forward-looking statement.
These risks and uncertainties include, among other factors,
changing economic, financial, business or other market conditions.
These and other factors could adversely affect the outcome and
financial effects of the plans and events described in this
announcement. As a result, you are cautioned not to place any
reliance on such forward-looking statements. The forward-looking
statements reflect knowledge and information available at the date
of this announcement and the Company undertakes no obligation to
update its view of such risks and uncertainties or to update the
forward-looking statements contained herein. Nothing in this
announcement should be construed as a profit forecast or profit
estimate and no statement in this announcement should be
interpreted to mean that the future earnings per share of the
Company for current or future financial years will necessarily
match or exceed the historical or published earnings per share of
the Company. This announcement has been prepared for, and only for
the members of the Company, as a body, and no other persons. The
Company, its Directors, employees, agents or advisers do not accept
or assume responsibility to any other person to whom this
announcement is shown or into whose hands it may come and any such
responsibility or liability is expressly disclaimed.
This information is provided by RNS, the news service of the
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contact rns@lseg.com or visit www.rns.com.
END
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