Balda sells Malaysian operations to management due to losses

Germany-based processor Balda is selling its site in Ipoh, Malaysia, under a management buyout, due to losses it has made in the financial year 2012/2013, as a result of a weaker consumer electronics sector. Effective 31 March 2013, Blue Ocean Genius will acquire all shares of the subsidiary Balda Solutions Malaysia(BSM). Excluded from the sale are the land and factory building, which will remain in the possession of the Balda Group as key assets and will be rented back to BSM. Blue Ocean has the option of acquiring the land and building in the medium term at their market value, taking into account the rental payments made to that point.

Blue Ocean is majority-owned by James Lim, Managing Director of BSM. The Ipoh site, which produces plastics products for the consumer electronics industry and is part of the Balda Technical segment, was restructured in 2012 under his leadership.

The decision to sell the site was made after a thorough analysis of the site's strategic prospects. One determining factor was Balda's policy of focusing on applications for injection moulding solutions that offer the opportunity for long-term growth and a sustainable operating return on sales of at least 15%. In the first three quarters of the 2012/2013 financial year (1 July 2012 to 31 March 2013), the site has made an operating loss. From the fourth quarter of the 2012/2013 financial year, the site will have no further negative effect on earnings. For this reason, the transaction will positively affect the development of earnings before interest, taxes, depreciation and amortisation (EBITDA) in the current financial year.

The closing of the transaction, being subject to the granting of regulatory approval, will result in non-cash effects on earnings in the amount of approximately EUR7 million. Regardless of this, Balda AG continues to expect a clearly positive consolidated profit for the 2012/2013 financial year.

Blue Ocean is paying a symbolic price to acquire the shares of BSM without the land and building. Based on the contractual arrangements with the buyer, Balda expects the transaction to result in a cash inflow of around EUR6 million over the next three years, primarily through rental income.

Dominik Müser, Chief Executive Officer of Balda AG: 'The sale of the Ipoh site is another key step towards profitable growth for the Balda Group. The urgently needed strategic development of activities in Malaysia would have required substantial investments in the coming years in a weak environment for consumer electronics. Following the sale of the loss-making site, all of our Group's activities are now profitable. At the same time, by holding on to the land and building, we have retained valuable assets in Malaysia.


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