Current Report No.: 27/2020

Date of preparation: 20.07.2020

Abbreviated name of the Issuer: CIECH S.A.

Subject: Preliminary agreement for the sale of shares in CIECH Żywice Sp. z o.o. 

Legal basis: Art. 17. 1 of the MAR – inside information 

Report:

The Management Board of CIECH S.A. (the “Company”, “Issuer”) herewith informs that on 20.07.2020, the Issuer and LERG S.A. with its registered office in Pustków-Osiedle entered into a preliminary agreement (the “Transaction”) for the sale of 74,677 shares representing 100% of the share capital in Ciech Żywice Sp. z o.o. (the “Shares” and “CIECH Żywice” respectively). On 20 July 2020, the Supervisory Board of the Issuer adopted a resolution approving the conclusion of the Transaction in question.  

The Management Board of the Issuer decided to enter into the Transaction due to the consistent implementation of the adopted CIECH Group’s Strategy for 2019-2021 (the “Strategy”). The completion of the Transaction will help to simplify and organise the structure of the CIECH Group and facilitate the focus on the development of the main business lines, thus supporting the achievement of the main goal of the Strategy, i.e. the creation of an effective and fully diversified chemical holding company, generating long-term positive value for its shareholders.

The value of the Transaction (equal to the value of the enterprise being sold, EV (enterprise value)), taking into account, among others, the share purchase price, is approximately PLN 160 million, which means the EV/EBITDA transaction multiplier calculated for the last twelve months of 7.6.

Revenues of CIECH Żywice from third-party customers amounted to approx. PLN 298 million in 2019 and approx. PLN 266 million in the period from July 2019 to the end of June 2020. 

CIECH Żywice is involved entirely in the production and sale of nearly 1,000 products, including epoxy resins (approx. 40% of its sales), saturated polyester (approx. 10% of sales) and unsaturated resins (approx. 50% of sales). CIECH Żywice exports about 50% of its products, mainly to European countries.

The purchaser - LERG S.A. - is the largest Polish manufacturer and one of the leading Central European manufacturers of synthetic resins, specialising in the production of polyester resins.

Closing of the Transaction and settlement of the sale price is scheduled within several months, after the parties to the Transaction have met certain standard conditions, including consent of the Office of Competition and Consumer Protection (UOKiK) to carry out the concentration to be obtained by LERG S.A.

The method of future recognition of the Transaction in the Issuer's consolidated financial statements is still subject to analysis and will be determined, among others, in consultation with the Issuer's auditor.

This Current Report makes reference to Current Report No. 34/2018 of 5 December 2018, in which the Company informed on the adoption of the Strategy, Current Report No. 8/2019 of 19 March 2019, in which the Company informed on the commencement of a detailed review of options for changes in the corporate and organisational structure and in the structure of assets of the CIECH Group, Current Report No. 42/2019 of 11 October 2019, in which the Company advised on the commencement of the review of strategic options, relevant to the Resins business area, Current Report No. 45/2019 of 31 October 2019, in which the Company informed on the adoption by the Issuer's direct subsidiaries, CIECH Sarzyna S.A. (“CIECH Sarzyna”) and CIECH Żywice of a plan of the division of CIECH Sarzyna by transferring the Resins business area to CIECH Żywice, Current Report No. 47/2019 of 25 November 2019 on the adoption of the concept of reorganisation of the CIECH Group, Current Report No. 1/2020 of 2 January 2020 on the registration of the division of CIECH Sarzyna, and Current Report No. 26/2020 of 20.07.2020 on the disclosure of delayed inside information on the commencement of negotiations with a perspective investor for the sale of CIECH Żywice. 

Legal basis: Article 17.1 of the Regulation of the European Parliament and of the Council (EU) No. 596/2014 of 16 April 2014 on Market Abuse (the Market Abuse Regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC (Official Journal of the European Union L No. 173, p. 1).

Signatures of the Company’s representatives:: 

Dawid Jakubowicz – President of the Management Board

Jarosław Romanowski - Member of the Management Board