Sale of Australian Consumer Tissue and License Extension

06 Dec 2018

Asaleo Care announces $180 million sale of Australian Consumer Tissue business and 5-year extension of License Agreement with Essity

  • $180 million sale of Australian Consumer Tissue business
  • In principle Agreement to 5-year extension of Trade Mark and Technology License Agreement with Essity to 2027
  • The Company will retain its Australasian Personal Care and B2B operations, as well as the Consumer Tissue business in New Zealand and Pacific Islands
  • Retained businesses have better margins, lower capital intensity, and strong cash flow
  • The sale is expected to improve EBITDA margin and be accretive to Group FY19 EBITDA forecast

1. Sale of Australian Consumer Tissue

Asaleo Care today announced the sale of its Australian Consumer Tissue business to Solaris Paper Pty Ltd. Under the terms of the transaction1, Solaris Paper has agreed to pay Asaleo Care $180 million, resulting in a book profit on sale of between $15-20 million. The Australian Consumer Tissue business includes leading brands Sorbent toilet and facial tissue, Handee Ultra paper towel, and Deeko serviettes and disposable tableware.

The Company will retain its Consumer Tissue business in New Zealand, including Purex toilet tissue, Sorbent toilet and facial tissue and Handee towel. It will also retain its Consumer Tissue business in Fiji and Pacific Islands, which distributes the Orchid and Viti brands for toilet, towel and facial tissue, and serviettes.

Solaris Paper is an Australian operated company that distributes high quality toilet and tissue paper products throughout the Australasia region to both the Retail and Away From Home markets. They have a converting facility in Sydney and are part of a global organisation vertically integrated from the manufacture of pulp through to the conversion of finished tissue products.

The transaction value represents a multiple of over 10x pro forma EBITDA2 reflecting strong historic profitability and the underlying value of the Box Hill property despite current year earnings being materially lower than in recent years. The sale is expected to be completed during the first quarter of 2019, and is not expected to encounter any competition issues.

On announcing the sale, Asaleo Care Chairman, Mr Harry Boon, said: "The decision to divest the Australian Consumer Tissue business flows from the comprehensive strategic review initiated by the Company in the first half 2018. This transaction represents a win-win, with significant strategic value for both companies, and positions both well for future growth. The sale will enable us to concentrate on our core, higher margin and less capital-intensive businesses in Personal Care and B2B, and continue to innovate and invest in our brands for long-term growth."

CEO and Managing Director, Mr Sid Takla, said: "The objectives of the strategic review were firstly, to drive profitable growth through our brands by being more consumer and customer focused and second, to build a resilient business model that delivers sustainable, long-term growth. We believe this transaction delivers on both objectives. The core Personal Care and B2B brands and businesses offer higher margins, stronger sales growth and less volatile returns.

Proceeds from the sale will significantly strengthen the Group's balance sheet, reduce net debt and improve the Company's leverage ratio. Following completion of the transaction, the Company's leverage ratio is expected to be at the bottom of our target range of 1.5 x to 2.5x," said Mr Takla."

An update on the payment of dividends will be provided with the Full Year results in February 2019.

2. Extension of license agreement with Essity

Asaleo Care has secured in principle agreement for a 5-year extension to its Trade Mark and Technology Licensing Agreement (TMTLA) with Essity to 2027. The TMTLA provides technology, marketing and sales rights for the Tork and Tena brands, and a pipeline to world-leading research, development and innovation for all of our brands. Tork is the world's number one professional hygiene brand and TENA is the global leader in products for incontinence.

3. Future business profile

Asaleo Care will continue to be a market leader in Personal Care and Professional Hygiene across Australasia. It will also retain its cost competitive consumer tissue business in New Zealand and the Pacific Islands. Over half of future revenue will be generated from the B2B channel which has grown strongly over recent years and where Asaleo Care is the market-leader in Australasia.

Cash generation will also be stronger as the Australian Consumer Tissue business has historically consumed some 30% of the Group's capital spending. This will support continued investment in Personal Care and Professional Hygiene in Australasia, with its highly recognisable brands of Libra, TENA, and Tork.

Webcast

Asaleo Care will hold a webcast at 10:30 am AEST today – details are:

http://streamcast.com.au/asaleo/06Dec18/

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About Asaleo Care

Asaleo Care is a leading personal care and hygiene company that manufactures, markets, distributes and sells Personal Care and Tissue products. Asaleo Care's portfolio of market-leading brands includes Sorbent, Handee Ultra, Deeko, Purex, Libra, Treasures, TENA, Tork, Viti and Orchid. The Company has 16 manufacturing and distribution facilities throughout Australia, New Zealand and Fiji and employs 1,000 people.

INVESTORS:
Lyndal York, Chief Financial Officer
P: +61 3 9258 0715
E: lyndal.york@asaleocare.com

MEDIA:
Sandi Harwood, Corporate Communications Manager
M: +61 411 027 006
P: +61 3 9258 0634
E: sandi.harwood@asaleocare.com