Thread manufacturer Coats Group PLC on Tuesday said it has signed a deal to sell its business in Brazil and Argentina.

The unit will be sold to Reelpar SA, a local entity backed by a Sao Paulo, Brazil-based private equity firm.

The deal is expected to close this month.

Coats expects to see a 50 basis point annualised lift to adjusted operating margins as a result of the deal.

It will fund $10 million to Reelpar to support a restructuring of the Brazil and Argentina business.

‘An exit from the Brazil and Argentina business is in line with Coats’ strategic initiatives, announced in March, to accelerate profitable sales growth and transform the company,’ Coats said.

In March, the company had kicked off a ‘number of strategic projects’ aimed at improving margins and optimising its portfolio.

‘These projects will result in anticipated incremental adjusted operating profit of $50 million by 2024. Total cash exceptional costs are expected to be around $35 million,’ Coats said at the time.

Coats shares were 1.7% higher at 66.32 pence each in London on Tuesday morning, outperforming the wider FTSE 250 index, which was up 0.9%.

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