Mativ Announces Proposed Sale of Engineered Papers Business for $620 Million
Summary
Our talented and dedicated employees will continue to deliver outstanding products and service to EP’s long-standing customer base, and we are confident in a smooth transition.” “ The sale process has also given us the opportunity to rebalance our capital allocation approach, with the top near-term priority being debt reduction. In addition to paying down debt from the sale proceeds, we are also right-sizing our dividend to align with our reshaped portfolio, support continued near-term de-leveraging, and position the Company for future growth investments. We believe our stock represents an attractive value and expect to opportunistically execute share repurchases going forward.” “ Since our July 2022 merger, the management team and Board of Directors have been committed to making deliberate and carefully considered decisions to unlock the long-term value we see in Mativ as a leading specialty materials provider. Ltd., an affiliate of BMJ, is based in Singapore and is part of a successful, Indonesian-based privately held group of diversified companies serving a wide variety of industries, such as banking, tobacco, consumer electronics, telecommunications, fast moving consumer goods, e-commerce, plantation, hotels & real estate, and many others • The potential buyer is expected to fund the proposed transaction with existing cash balance and is not dependent on capital markets for financing • The gross sale price of $620 million reflects approximate 6.5x multiple on EP’s trailing 12-month Adjusted EBITDA (as of June 30, 2023 quarter); trailing 12-month sales for EP were approximately $530 million • Expected net transaction proceeds of approximately $575 million will be used primarily to reduce debt; net proceeds represent approximately 35% of outstanding net debt • Engineered Papers financial results will be reported as assets held for sale beginning in 3Q:23 • The Company intends to adjust the annualized dividend of $1.60 per share to $0.40 per share, effective for the September 2023 dividend payment; this represents a total annual dividend payment reduction from $88 million to $22 million • Management estimates the new dividend will represent approximately 25% of annualized free cash flow post-transaction, reflecting a more growth-oriented and balanced allocation of capital • Further, the Company has approved a $30 million stock buyback program; while opportunistic repurchases are expected to be executed, debt reduction will continue to be the primary use of excess cash flow in the near-term • The Company believes its total post-transaction near-term sales would be approximately $2.2 billion with an Adjusted EBITDA margin of approximately 13% • Following the transaction, the Company expects to deliver long-term annualized sales growth in the 3% to 5% range, and multi-year margin expansion toward our 15% target • As a result of debt reduction upon close, a rebalanced capital allocation strategy, and expected core EBITDA growth, the Company believes it will be within its targeted credit agreement net leverage range of 2.5x to 3.5x by the end of 2024 • Following the transaction, Mativ will no longer have exposure to the tobacco industry • Mativ management will hold a conference call and webcast today, August 1st at 10:00 am ET to discuss the transaction. The Company’s two operating segments, Advanced Technical Materials and Fiber-Based Solutions, target premium applications across diversified and growing end-markets, from filtration to healthcare to sustainable packaging.