CPH Chemie + Papier Holding AG Spin-off Notes

May 15, 2024 Update

On March 20, 2024, CPH Chemie + Papier Holding AG (SWX: CPHN) announced that it will break up into two public companies.

Currently,  the company is today a listed industrial holding company with three independent divisions operating in different markets. The fast-growing Chemistry and Packaging divisions, which are well positioned in global niche markets, contrast with the regional paper business, which focuses on cost leadership and is more volatile. The fluctuations in the paper business make it increasingly difficult to predict the development of earnings at Group level.

The spin-off will consist of the paper business and real estate in Perlen, Switzerland. It will be called Perlen Industrieholding AG. It will trade over the couner.

The Board of Directors is convinced that Perlen Papier can operate successfully in the rele-vant markets by consistently implementing its last-man-standing strategy. Thanks to the pursuit of a cost leadership strategy, long-term customer relationships, a strong balance sheet and excellent know-how, it should be able to outperform its competitors during the consolidation process and thus continue to generate sufficient margins over the cycle in the future. In addition, Perlen Papier already operates in a virtually CO2-neutral manner and thus differentiates itself from the competition. With this strategy, Perlen Papier is in a position to master the volatility of the paper business with a downward trend in demand. In the 2023 financial year, the paper business generated revenues of CHF 262 million and an EBITDA of CHF 37 million. The spin-off will be virtually debt free and pay regular dividends.

The RemainCo will consist of the Chemistry and Packaging Divisions. It will be called CPH Group AG. It will trade on the SIX Swiss Exchange.

CPH Group AG continues to pursue its proven differentiation strategy in its two divisions, Chemistry and Packaging, with a consistent focus on international niche markets that offer above-average growth opportunities, both organically and through acquisitions, as well as continuous innovation and customer proximity. Combined revenues are growing at 3-5% per year. EBITDA margins of 16-18% and high free cash flows are achieved. In the 2023 financial year, turnover totalled CHF 361 million and EBITDA reached CHF 65 million.

Rationale for the spin-off: Management believes that the volatility of the paper business is hurting the multiple that the total business receives.

Company slide deck.

Key Questions:

  • Who are the best comps for the spin-off and for the remainco?
  • Will anyone want to trade the spin-off if it’s going to trade over the counter?