Household cleaning products company Pental (ASX: PTL), the brand behind WhiteKing bleach and Jiffy firelighters, has decided to divest its Pental Consumer Products Business and manufacturing facility.
Pental intends to sell its Consumer Products division (excluding Duracell and Bondi Soap) and the Shepparton manufacturing facility to Selleys, a division of chemical industry company DuluxGroup, for a total price of $60 million. This sale will be made on a debt-free and cash-free basis, with adjustments and certain conditions to be met. These conditions include obtaining shareholder approval and having an independent expert confirm that the transaction is “fair and reasonable”.
Considering the total sale price along with the anticipated standard adjustments, the conclusion of the Duracell distributorship, as well as debtors and creditors, it equates to roughly 118% of Pental’s current market capitalisation, which is $53.7 million
Pental Managing Director, Charlie McLeish, said, “What we are announcing today creates a simplified and more focused business, while also realising value for shareholders. Selleys is a highly regarded business with significant capabilities within the Consumer Products space, including Household Cleaning. We believe that they are well equipped to continue to enhance the reputation of our products, including our flagship brand White King, as well as provide great opportunities for our employees.”
In FY23, Pental saw a minor revenue decline of 1.8% as it accumulated losses. Its underlying EBITDA was down 23.4% on FY22 to $11.2 million. Its finance costs increased by 94.2% to $367k, as its net profit fell by 23.2% to $4.8 million. Pental’s cash in hand declined by 40.5% to $4.8 million. With earnings, profit and cash down, the Company’s consumer products divestment could be its cost control bid.
Going forward, Pental will transform to become a specialised eCommerce enterprise with a strong foundation in Aussie gift hampers specialist Hampers with Bite. The Company has also implemented various strategic plans aimed at sustaining its growth and creating lasting value for shareholders.
McLeish added, “As a standalone eCommerce business, the Company will have a more targeted strategy and greater financial flexibility to invest in strategic growth initiatives, business acquisitions and technology development. It will also be a less complex business, which will enable a significant reduction in corporate overhead costs.”
Finally, Pental intends to acquire complementary assets to expand its product range and venture into new markets.
After completing the sale and making the anticipated dividend and capital return payments, totaling around $54.5 million, covering transaction and separation expenses (approximately $5 million), and settling the bank debt ($1.3 million), Pental says that it will come out with a robust and positive net cash balance. Its shareholders are supportive of this plan.
Pental’s major shareholders, Alan Johnstone and John Homewood, plan to vote their combined 19.9% of shares in favour. They intend to vote their remaining 19.07% of shares in favour as well, in the absence of a superior proposal. Another significant shareholder, Kevin Bamford (holding 3.91% of shares), also supports the deal, and independent director Mark Hardgrave (holding 0.21% of shares) similarly intends to vote in favour.
Chairman, Mark Hardgrave, commented, “The Board unanimously recommends this transaction to shareholders. Moving forward, we will seek to bolster both the Board and management team with further industry expertise.”
The transaction is set to be finalised on or around October 30, 2023, and as a result, the Company intends to return approximately 31 cents per share back to shareholders.
Alinda is a Business Reporter for The Sentiment
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