Cookson to split into two new listed companies

Cookson Group plans to split into two new listed companies on December 19th with the current Chairman, Jeff Harris, and Chief Executive Officer (CEO), Nick Salmon, retiring at the same time.

Following a strategic review, the board of Cookson has decided to split its businesses into two separate listed companies in what it is calling a 'demerger'. Its Performance Material division will form a specialty chemicals company called Alent, while the Cookson Group, consisting principally its Engineered Ceramics division, will be renamed Vesuvius.

The rationale behind the move is that it will enable improved performance, and that this, together with improved investor understanding should eliminate any "conglomerate discount" in each company's valuation.

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The board believes that each company will rank as FTSE 250 business, with Alent classified within the 'Specialty Chemicals' segment and Vesuvius remaining classified within the 'General Industrials' segment.

VesuviusVesuvius will specialise in metal flow engineering, developing, manufacturing and marketing mission-critical advanced ceramic consumable products and systems to demanding applications, primarily in the global steel and foundry industries. For the year ended December 31st 2011, its revenue and adjusted trading profit were £1,818m and £191m, respectively.

Franois Wanecq, the current CEO of Cookson's Engineered Ceramics division, will become the head of Vesuvius and the Chairman will be John McDonough, formerly CEO of Carillion plc.

AlentAlent will be supply advanced surface treatment plating chemicals and electronics assembly materials. Its principal end-market is global electronics production, which accounts for approximately three-quarters of net sales value with the automotive and industrial end-markets the balance.

For the year ended December 31st 2011, Alent's net sales value and adjusted trading profit were £418m and £96m, respectively.

Steve Corbett, the current CEO of Cookson's Performance Materials division, will become the CEO of Alent and the Chairman will be Peter Hill, currently a member of the Cookson Board and formerly CEO of Laird plc.

One-off cash costs arising on the demerger are expected to be approximately £35m. The aggregate level of on-going, incremental costs to the businesses resulting from the split are expected to be approximately £3m a year, relating to additional central headquarters costs and higher borrowing costs.

In addition, a one-off cash payment, currently estimated at approximately £32m, will be made into the UK defined benefit pension plan at demerger. This payment effectively represents accelerated funding of the UK Plan's actuarial deficit, which will be retained by Vesuvius.

If approved the demerger will take place on December 19th. On completion, for every current Cookson share, investors will hold one ordinary share in Vesuvius and one in Alent.

The boards of each company are recommending final dividends for 2012 that aggregate to to 15p per Cookson Share. Vesuvius intends to pay 9.5p per Vesuvius share and Alent intends to pay 5.5p per Alent share, with each to be paid to shareholders in June 2013 following the standard shareholder approval process and what was Cookson's normal timetable for a final dividend payment.

CM