Agriculture and engineering group Carr’s has entered into a conditional agreement to sell its interests in the Carr’s Billington Agriculture business to Edward Billington and Son for total consideration of up to £44.5 million.
The vendor said the deal would allow it to focus on its specialized agriculture and engineering divisions, which both offer “greater opportunity for growth and have historically achieved higher profit margins.”
The deal, which follows a strategic review designed to increase shareholder value, produces an implied selling multiple of 6.4x 2021 Adjusted EBITDA.
Net cash proceeds of approximately £29.6 million are expected by Carr’s, with the group expected to be in a net cash position at the end.
Growth initiatives that will be supported by the product over the next three years include the international growth of the specialist agriculture division through investments of around £10 million in manufacturing capacity and plant upgrades ; financing targeted acquisitions for the same division; and provide approximately £4 million of additional cash to the engineering division to fund potential new, larger, longer-term customer contracts.
In addition, once the deal is complete, Carr’s board intends to determine the benefits to shareholders of arranging a full buyout of the group’s defined benefit pension scheme for approximately £4 million. .
Carr Executive Chairman Peter Page said: “Today we are establishing a clear strategy for growth in earnings and shareholder value. This proposed transaction will allow Carr’s to focus on its specialty agriculture and engineering divisions and provide funding for strategic growth and investment, enabling us to leverage our industry-leading positions in these two higher margin divisions.
“The agricultural supplies division, operating as Carr’s Billington Agriculture, has been a key part of the group’s growth and development over the past 20 years. Following the strategic review, the board is confident “That now is the time for a single owner, single management team to drive the business forward. We believe that Edward Billington and Son, with their long-term commitment to the industry, is well placed to fulfill this role.”
Page added, “This transaction represents a compelling and immediate realization of value for all of our shareholders, streamlines the business and provides the Board of Directors with clear strategic direction to drive future growth. We look forward to providing an update on further progress in due course.
Investec Bank is Carr’s corporate sponsor and broker.