SGL Group signed agreement to sell its graphite electrode business to Showa Denko

Enterprise value of 350 million euros agreed

21-Oct-2016 - Germany

SGL Carbon SE signed the sale and purchase agreement to sell its graphite electrode (GE) business to Showa Denko (Japan). The two parties have agreed on an enterprise value (cash and debt free) of 350 million euros, which, after deduction of standard debt-like items (mainly pension and restructuring provisions) results in cash proceeds of at least 200 million euros. The final proceeds will be determined based on the balance sheets at closing. The transaction is subject to customary closing conditions, relating in particular to antitrust approvals. Closing is expected in the first half of 2017.

Following the closing of the transaction, approximately 900 employees and six production sites in Germany, Austria, Spain, USA, and Malaysia will be transferred from SGL Group to their new owner.

The sale will result in impairment charges of 40-50 million euros in the current fiscal year of SGL Group, which are related to transaction costs and the continuation of the GE business until the closing date. The cash proceeds equal the book value as of September 30, 2016. Thus, the transaction does not trigger any write-downs on the book value in the GE business.

To maximize proceeds, the CFL/CE business, which is also part of the business unit PP, will be sold separately, with the sales process to be continued in early 2017. Given the outcome of the GE sale, SGL Group is now confident to achieve more than the book value of the former business unit PP in the aggregated transactions.

SGL Group is convinced that the proceeds of the GE sale and the expected proceeds of the CFL/CE sale will contribute to a significant reduction of the Group's net debt position and thereby improve the balance sheet ratios. In addition, the company is currently evaluating the merits and viability of a potential near term rights issue utilising the existing authorized capital framework to further improve the capital structure and restore key financial metrics to create a solid foundation for its growth businesses CFM and GMS.

Against the backdrop of the disposal procedures for the GE and the CFL/CE businesses, the measures to adjust the administrative structures to a smaller SGL Group following the entire PP disposal, and the related other transitional matters in connection with the repositioning of the SGL Group to focus on its growth businesses CFM and GMS, the company decided to withdraw its guidance as provided in its report on the first half year 2016 with immediate effect, and to abstain for the time being from providing any short term profit guidance during this transformation phase. SGL Group plans to resume providing a new profit guidance around the time of the publication of its 2016 annual report in March 2017.

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