- Molten Metals sold for £75 million
- Part of new streamlining strategy
- Proceeds include £20 million cash
There was a rare serving of good news this morning from specialist material maker Morgan Advanced Materials (MGAM), whose stock has been in the doldrums since peaking in mid-2021.
The shares, which are roughly half their value of four years ago, added 4p or 2% to 211p on a quiet day for markets ahead of Fed chair Jerome Powell’s annual Jackson Hole speech.
STRATEGIC PROGRESS
The FTSE 250 firm announced it had agreed to sell its MMS (Molten Metal Systems) business, including a 75% stake in Morganite Crucible India, to UK steel manufacturing equipment and material maker Vesuvius (VSVS) for a total consideration of £75.8 million.
MMS is part of Morgan’s thermal products division, providing crucible products and melting solutions used in the manufacturing of non-ferrous metals like aluminium, copper, brass, bronze, zinc and precious metals, and last year turned over £42.5 million or less than 5% of group revenue.
The sale price represents a multiple of 14.6 times the unit’s 2024 adjusted operating profit, before deducting capital gains tax.
The deal represents part of new chief executive Damien Caby’s push to simplify the group and generate higher returns by focusing on faster-growing markets.
‘This disposal demonstrates the disciplined approach we take to our portfolio. We remain focused on delivering against our strategic initiatives and believe today's transaction will realise significant value for shareholders, as well as better positioning the group to deliver higher organic growth returns,’ said Caby.
A fortnight ago (7 August), Morgan posted a sharp drop in first-half earnings and warned its full-year profit would be at the bottom end of market estimates due to ‘challenging markets’ sending its shares down 13% to 196p.
BUYBACK TO CONTINUE
The deal is structured as a takeover of Morgan’s 75% shareholding in its Indian subsidiary MCIL by Vesuvius’s subsidiary Foseco India or FIL, with FIL issuing shares to Morgan to the value of £55.8 million plus £20 million in cash which gives Morgan ‘optionality both for investment in growth and enhanced shareholder returns’.
Last November, Morgan announced a buyback of up to £40 million, and today it confirmed that having completed the first tranche of £10 million and reviewed the second tranche, which is up to £4.7 million so far, it is happy to press ahead with the third tranche.
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