Pental Ltd (ASX:PTL) shares surged 27% higher intra-day to 40 cents after entering a transaction to sell its consumer products business and the Shepparton manufacturing facility to Selleys, a division of DuluxGroup for $60 million on a debt and cash free basis.
The transaction will be subject to completion adjustments and certain conditions precedent, including shareholder approval and an independent expert concluding that the transaction is fair and reasonable.
The Pental board believes this transaction represents significant value recognition for shareholders.
Moving forward, Pental will transition into a dedicated e-commerce business underpinned by its e-commerce hamper and gifting business ‘Hampers with Bite’.
Transaction details
The proposed transaction is expected to complete on or around 30 October 2023, following shareholder approval and satisfaction of other conditions precedent.
Following completion of the transaction, Pental intends to return ~31 cents per share back to shareholders via special dividends and capital return (total up to ~$54.5 million).
Pental’s directors have unanimously recommended that Pental shareholders vote in favour of the sale in the absence of a superior proposal and subject to an independent expert concluding that the transaction is fair and reasonable.
Pental’s major shareholders have already informed the company that they are supportive of the transaction and have provided unconditional (~19.90%) and conditional (~22.98%) commitments to vote in favour of the transaction.
Focus on organic growth
Pental remains optimistic about the growth opportunities that lie ahead and throughout FY23 the company implemented several strategic initiatives to ensure it continues to grow long-term shareholder value.
These initiatives have built the underlying infrastructure required to accelerate organic growth.
Pental will also implement a targeted acquisition growth strategy to complement its existing product offering and enter new markets.
“Opportunity for significant shareholder value”
“What we are announcing today creates a simplified and more focused business, while also realising value for shareholders,” said Pental managing director Charlie McLeish.
“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.
“Selleys is committed to retaining manufacturing in Shepparton, offering employment to all current employees and growing the Pental consumer products business over time.
“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.
“We believe that the proposed transaction represents an opportunity for significant shareholder value relative to our market capitalisation. For many years our business has been underpinned by long-term supportive shareholders, and as such we are implementing a dividend reinvestment plan to ensure shareholders have the opportunity to re-invest as we embark on our next phase of growth.”