Volex disposal will cost up to £850,000
CABLE maker Volex is selling its loss making wiring harness division to a management team, in a deal that will cost it as much as £850,000.
The Warrington-based manufacturer has agreed to sell Volex Wiring Systems Limited to Ionix Holdings Limited, a management buyout vehicle for a nominal £1.
Volex will also pay Ionix £608,000 on completion, with a further payment of up to £250,000 in the seven months after the transaction, to “to assist in the future development” of the business, which designs and manufactures multi-drop harnesses used in vehicles, aerospace engines, avionics, and defence applications.
Although it has gross assets of £18.8m, the division reported an operating loss of £2m in the six months ended October 5, 2008, on revenues of £21.2m.
In a statement the company said the decision to sell the business is consistent with the group’s strategy of developing its core, profitable divisions.
Mike McTighe, chairman of Volex Group, said: “The sale is a positive step forward for the group, enabling us to focus on ensuring the continued success of the profitable and growing Power Products and Interconnect divisions.
“Our priority in the short-term will be to work closely with IHL to minimise the effect of these changes on customers, suppliers and employees, to ensure as smooth a transition as possible.”
The MBO is led by Bill Taylor, vice president of global operations at Volex Group, who will resign from his position on completion.
The transaction should complete by the end of March, although it does need shareholder approval. However, the group has already had undertakings to vote in favour of the transaction from institutional shareholders representing 51% of the group.
In the six months to October 5, pre-tax profits across the group fell from £2.8m last time to £1.1m, while turnover was up from £126.3m to £155.1m.
In September 2008, Volex announced it is planning to sell the Power products division or float it on the Asian stock market. This division, which supplies cables for computers, white goods, TV sets, household appliances and power tools, accounts for 54 % of group revenues.
But the group has announced that it will retain the division for the time being, adding that the board will “continue to evaluate all strategic options”.
In a trading update, the company said revenue in the Interconnect division has remained in line with expectations and ahead of the previous year. It added that the third quarter had seen a reduction in demand for Power Products, but said it had “aggressively managed” the associated cost base to protect profits and cash flow.
