Cobham plc Cobham Agrees Divestment of AvComm and Wireless (7128D)

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RNS Number : 7128D

Cobham plc

02 February 2018

Legal Entity Identifier: 213800A41R9NL49E5632

Cobham Agrees Divestment of AvComm and Wireless Test and Measurement Businesses for US$455m

Transaction Overview

Cobham plc ("Cobham" or "the Group") announces that on 1 February 2018 it entered into a conditional agreement to divest its AvComm and Wireless test and measurement businesses to Viavi Solutions Inc. for an all-cash consideration of US$455m (approximately GBP325m), payable on completion (subject to certain post-completion adjustments and expenses). The transaction is subject to US Hart-Scott-Rodino anti-trust clearance and other customary conditions to completion, which is anticipated within the first half of 2018.

Cobham's AvComm business is based in Wichita, Kansas and provides synthetic test, monitoring and control solutions for radio and avionics test, with the Stevenage, UK based Wireless business providing advanced validation tools for mobile and IP networks. The businesses are part of Cobham's Communications and Connectivity Sector.

Strategic Benefits

After considering a range of strategic options for the Group's test and measurement businesses, the Board has concluded that divestment is the best way to generate shareholder value and bring strategic benefits to Cobham:

-- It simplifies the Group's portfolio of technologies and capabilities, focusing the Group on its defence, aerospace and space markets where it has competitive advantage;

-- It reduces the Group's risk profile by exiting businesses where there was little technology, customer or market overlap, avoiding the need for investment in additional specialist expertise;

   --     It strengthens the Group's balance sheet. 

Although managed as part of its Wireless business unit, Cobham's distributed antenna systems business, based in Chesham, UK is not part of this transaction.

Financial Effects

In the year ended 31 December 2017, the AvComm and Wireless test and measurement businesses recorded aggregate revenue of approximately GBP170m and contributed approximately GBP25m(1) to underlying operating profit, before restructuring costs of approximately GBP2m and on an unaudited basis. The aggregate unaudited gross assets of the businesses, including goodwill and intangibles, were approximately GBP155m at 31 December 2017.

It is anticipated that there will be an improvement in overall market conditions for the businesses, driven by the development and global roll-out of next generation 5G mobile networks, with the value achieved in part reflecting the growth in profitability over time. The transaction will be slightly dilutive to the Group's underlying operating profit margin.

Use of Proceeds

The Group is continuing to progress a turnaround in its financial and operational performance and, as previously announced, there are some significant contract exposures and other contingent liabilities that remain to be retired. In the light of these remaining uncertainties, the Board intends to use the net divestment proceeds (subject to certain post-completion adjustments and expenses) to strengthen the balance sheet and, coupled with existing cash, to pay down approximately GBP440m of debt. This will include the repayment of private placement debt, which will result in estimated accelerated interest costs (make-whole payments) of approximately GBP30m. The debt repayment will improve the efficiency of the Group's balance sheet on completion of the transaction by removing borrowings, which are no longer required. After the accelerated interest costs, which it is expected will be incurred in H1 2018, the Group's future interest expense will be reduced by approximately GBP18m per full year.

David Lockwood, Cobham Chief Executive Officer, said:

"I am delighted that we have been able to conclude the portfolio review of the AvComm and Wireless test and measurement businesses expeditiously, after a competitive auction process."

"Today's announcement is a good deal for Cobham shareholders, as we can now focus on delivering value-add technology and capabilities to our defence, aerospace and space customers, supported by a more resilient balance sheet."

Advisors

Evercore is acting as exclusive financial advisor to Cobham and Bond, Schoeneck & King PLLC and Baker & McKenzie LLP are serving as legal counsel.

Investor Briefing and Conference Call at 08.00 on 2 February 2018

David Lockwood, CEO, and David Mellors, CFO, will host a conference call for investors and analysts at 08.00 UK time on Friday, 2 February 2018.

The call can be accessed by ringing [phone], conference ID 5598579. Please dial in from 07.45 to avoid queuing.

A replay facility will be available for seven days, by dialling [phone], conference ID 5598579.

The information contained within this announcement is considered to constitute inside information as stipulated under the Market Abuse Regulations (EU) No.596/2014 ("MAR"). Upon the publication of this announcement via a Regulatory Information Service, this inside information will be considered to be in the public domain.

- ends -

Enquiries:

 
 Cobham plc 
  Julian Wais, Director 
  of Investor Relations        [phone] 
  MHP Communications 
  Reg Hoare/Tim Rowntree      [phone] 
 

Notes:

1. The contribution to underlying operating profit is stated before the allocation of central charges.

2. The Group's preliminary results will be announced on 1 March 2018.

3. This document contains 'forward-looking statements' with respect to the financial condition, results of operations and business of Cobham and to certain of Cobham's plans and objectives with respect to these items.

Forward-looking statements are sometimes but not always identified by their use of a date in the future or such words as 'anticipates', 'aims', 'due', 'could', 'may', 'should', 'expects', 'believes', 'intends', 'plans', 'targets', 'goal', or 'estimates'. By their very nature forward-looking statements are inherently unpredictable, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that may or will occur in the future.

There are various factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, changes in the economies, political situations and markets in which the Group operates; changes in government priorities due to programme reviews or revisions to strategic objectives; changes in the regulatory or competition frameworks in which the Group operates; the impact of legal or other proceedings against or which affect the Group; changes to or delays in programmes in which the Group is involved; the completion of acquisitions and divestitures and changes in commodity prices, inflation or exchange rates.

All written or verbal forward-looking statements, made in this document or made subsequently, which are attributable to Cobham or any other member of the Group or persons acting on their behalf, are expressly qualified in their entirety by the factors referred to above. Cobham does not intend to update these forward-looking statements.

4. Cobham offers an innovative range of technologies and services to solve challenging problems in commercial, defence and security markets, from deep space to the depths of the ocean.

We employ around 11,000 people primarily in the USA, UK, Europe and Australia, and have customers and partners in over 100 countries, with market leading positions in: wireless, audio, video and data communications, including satellite communications; defence electronics; air-to-air refuelling; aviation services; life support and mission equipment.

This information is provided by RNS

The company news service from the London Stock Exchange

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February 02, 2018 02:00 ET (07:00 GMT)