600 Group announces possible 80pc sale of US laser businesses

6th Oct 2023 13:14

(Sharecast News) - Industrial engineering specialist the 600 Group announced the signing of a non-binding letter of intent (LOI) through its wholly-owned US division to potentially offload a majority interest in its TYKMA Electrox and Control Micro Systems industrial laser operations in the United States.

The AIM-traded firm said the prospective buyer is an unnamed US-based, operationally-focussed mid-market private equity firm.

Under the provisions outlined in the LOI, the potential disposal implied that the 600 Group would part with an 80% stake in its laser businesses - TYKMA Electrox and Control Micro Systems - for $9.5m in cash, subject to customary working capital adjustments.

The group planned to hold onto a 20% interest in the businesses, which would be subject to a put-and-call option arrangement between the parties involved, providing an option exercisable by either entity 30 days following the close of the 2025 and 2026 financial years, assuming EBITDA at the laser businesses surpassed pre-agreed targets.

If the disposal is realised, the initial cash proceeds to the group were expected to be adequate to nullify all of its existing bank borrowings while also contributing substantial operating cash.

Despite the LOI not binding and remaining dependent on a formal contract, the 600 Group said its US subsidiary had granted the counterparty a binding 90-day period of exclusivity to finalise a proposed disposal.

The 600 Group said it had incorporated provisions to gain shareholder approval for the potential disposal.

Should that come to pass, the subsidiary was committed to covering the counterparty's reasonably incurred expenses if the group's shareholders rejected the disposal.

If the subsidiary followed an alternative proposal related to a similar transaction during the exclusivity period, it had agreed to pay the counterparty a termination fee of $0.5m.

"The group's industrial laser businesses continue to be well placed in their respective highly fragmented markets," said chairman Paul Dupee.

"Whilst non-binding, the entry of the letter of intent with the counterparty provides scope for TYKMA and CMS, and the group, to partner with a US private equity firm in the continued future growth of the industrial laser business."

Reporting by Josh White for Sharecast.com.