Coats Group PLC (LON:COAT) is selling its non-core North America Crafts business to Spinrite Acquisition Corp, a leading provider of craft products in North America for US$37mln in cash.
The FTSE 250-listed industrial thread manufacturer said the sale proceeds will initially be used to reduce group net debt.
READ: Coats Group expanding into the Cloud with US$12mln purchase of apparel industry software solutions provider
The company added that it also continues to seek further value accretive bolt-on acquisitions in the strategic focus areas of high growth and high-tech Performance Materials and Software Solutions businesses.
It said the sale of North America Crafts, which is subject to customary closing conditions, is expected to complete during the following weeks.
Rajiv Sharma, Coats’ group chief executive commented: "The sale of our standalone North America Crafts business allows us to focus completely on our high performing business-to-business global Apparel and Footwear, and Performance Materials businesses. It also gives North America Crafts more opportunities to grow by being part of a large crafting group."
On 20 December, Coats announced an expansion into the Cloud with the acquisition of ThreadSol, which provides software solutions for the apparel and footwear industries, for a cash consideration of up to US$12mln. The group said ThreadSol's cloud-based digital applications provide an excellent fit with its existing Coats Global Services business.
Earlier in the month, Coats said it was investing US$5mln in a “disruptive technology” that it believes has the potential to revolutionise the thread industry. The firm said it was paying the money for a 9.5% share in Israeli-based technology start-up, Twine Solutions.
In a note to clients, analysts at Peel Hunt commented: “This removes the weakest part and remaining non-core part of the business. We expect the business to have made c$2.5m last year and a similar level in 2019, so the disposal is c1% dilutive initially. Operating margin of ongoing business increases 80bp to 14.3%.”
Peel Hunt reiterated a ‘buy’ rating and 100p price target on Coats shares, which in afternoon trading were 1.6% higher at 83.70p.
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