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Blackmoor Expense Partners – Letter to Chris Brinsmead, Chairman of Scapa

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LONDON–(Business WIRE)–A letter from Blackmoor Expenditure Associates to Chris Brinsmead, Chairman of Scapa Group plc, outlining Blackmoor’s full self-assurance in Scapa’s firm technique and the explanations why Schweitzer-Mauduit Worldwide Inc.’s bid is not agent of Scapa’s worth now or its sizeable upcoming progress and value development possible in the coming years owing to a variety of components.

Blackmoor Investment decision Partners Limited

35 Dover Road



3 March 2021

Chris Brinsmead

Scapa Group plc

Manchester Road


Increased Manchester


Pricey Chris,

We have experienced a further opportunity to talk with Heejae and your advisors considering the fact that our letter of 2 February. We preferred to update you on our considering and posture.

As we reviewed beforehand, Scapa Group plc (“Scapa” or the “Company”) has experienced numerous challenges in the final 24 months which have demanded expenditure and held back again the Company’s economic performance. We think that the Business is now effectively positioned, with the ideal technique and the needed resources, to provide on its prospective as established out by you and the rest of the leadership group.

Now is not the time to offer the Organization, and undoubtedly not at Schweitzer-Mauduit International Inc.’s (“SWM” or the “Bidder”) reduced bid of GBp210/share. The Firm is a beneficial asset nowadays with considerable likely in the coming 2-5 decades:

  • The Business and the Bidder both equally cite 2020 multiples. 2020’s earnings had been frustrated at both of those divisional and Group degree and are not consultant of the Company’s intrinsic worth the 2020 interval incorporated a selection of worries at earnings and buying and selling margin concentrations main to the Organization reporting Group EBITDA falling 13.5% from 2019 to 2020 (EBITDA margin fell from 14.7% in 2019 to 12.4% in 2020).
  • In the Industrial division, the issues ended up internally pushed. We have an understanding of that corrective action was taken, a self-help agenda initiated, and overall performance has enhanced. Even though COVID-19 has impacted a variety of sectors – automotive, development, shopper – we also fully grasp that those sectors are going through a solid recovery and the division’s income is now monitoring higher than pre-COVID-19 levels. That administration commentary and our evaluation underpin our look at that the Industrial division can mature at 2%-3% pa (market place growth) for the coming 5-10 decades and accomplish 13%-14% investing1 margins (13.1% in 2019 vs. 11.6% in 2020).
  • The Healthcare division is just one of the couple world CDMO platforms (agreement, advancement, and manufacturing organisations) and is properly positioned for each natural and increase-on acquisition pushed advancement in the coming yrs, being extremely regarded globally for its growth and manufacuting abilities. Whilst the Convatec customer decline was a backward step and impacted scale efficiencies, modern technological innovation transfers and organic progress potential clients are encouraging Heejae and his workforce verified in November 2020 that they have self-confidence in a ‘robust pipeline’ of further technological innovation transfers, a restoration from de-stocking and elective deferrals, and highlighted the Company’s CDMO possible with spectacular NPD growth (new product or service improvement). That management commentary and our investigation underpin our see that the Health care division can expand at 5%-10% pa (market progress+NPD+technologies transfer) for the coming 5-10 decades and attain mid-teenager trading margins (as for every pre-Convatec deal/scale reduction, 14.8% in 2019 vs. 9.% in 2020).
  • At a Team amount, the Firm has invested to create a sturdy system and has for that reason numerous accretive acquisition alternatives which are useful but which are not factored in as they are forward seeking. Next, the Organization has an outstanding USD84m legal assert from Convatec, which has substantial likely worth that selling now would dismiss.

SWM’s bid is backward seeking, is selective on the interval it promotes itself, and gives no benefit to the sizeable improvement prospective in the coming several years that exist as a final result of your and the executives’ efforts around the modern many years. Our advancement and profitability assumptions propose a focus on 2022/2023 EBITDA of ca.GBP50m, which is supported by various market aspect analysts that address the Company, e.g., Jefferies: released an update on 17 December 2020, 2022/23 EBITDA concentrate on of GBP49.7m, 12 month goal share rate of GBp210/share, and 12 thirty day period upside focus on share price of GBp290/share.

Assuming a fair price of 12x EBITDA (a blend of Industrial and Healthcare market place multiples, and supported by Mergermarket evaluation in their posting of 24 February 2021) on 2022/2023 EBITDA, and assuming the Company is credit card debt absolutely free by that time, this implies a 2 yr ahead target share price tag of ca.GBp320/share. Even if we change that focus on share rate for time and execution hazard, selling currently at GBp210 in not an beautiful choice.

We keep on to maintain 5,983,577 shares or 3.2% of the share cash of the Corporation, and based mostly on the opportunity outlined higher than we will vote versus the SWM scheme. We have spoken with a selection of our fellow shareholders and we strongly consider that the recent scheme will not move at possibly the price or the quantity check amounts.

We recognise that you and the Board have proposed the scheme and Heejae has executed an irrevocable undertaking. We want to reiterate in the strongest attainable terms that a ‘no’ vote for the plan is not a vote of no self confidence in you and the team. It is quite the reverse. We thoroughly guidance Heejae and his workforce and believe in their skill to full the strategic journey they began a amount of several years back and supply the probable that they established out to realise.

For your facts, we will be sharing these views with our comply with shareholders and the media as proper.

We stay at your disposal to focus on our situation.

Sincerely yours.

Blackmoor Financial investment Companions Minimal


About Blackmoor Expenditure Partners Confined

An industrially minded, lengthy-phrase investor in and supportive operator of superior top quality European community companies.

We commonly possess important minority stakes in our businesses, and partner with administration and fellow shareholders to carry out value creation strategies.

Blackmoor is an independent expense agency wholly owned by its Companions.

1 As defined by the Firm, investing gain = financial gain in advance of exceptional products, acquisition charges, amortisation of intangible property and legacy pensions charges = EBITDA soon after Depreciation. | Newsphere by AF themes.