Matthews International to Sell SGK Brand Solutions

Transaction Overview - Matthews International Corporation will sell its interest in SGK Brand Solutions to a newly formed entity created by affiliates of SGS & Co, combining SGK and SGS [7] - The transaction involves $350 million in total upfront consideration, including $250 million in cash, $50 million in preferred equity, and $50 million in retained trade receivables [8] - Matthews will retain a 40% interest in the new entity, which has an initial enterprise value of approximately $900 million, representing an adjusted EBITDA multiple of 9x [7][8] Financial Impact - The new entity is projected to realize over $50 million in annual cost synergies over a 30-month integration period [9] - Matthews plans to use the $250 million cash proceeds primarily for immediate debt repayment, with future consideration also directed toward reducing debt [10] - Following the transaction, Matthews will account for its investment in the new entity using the equity basis of accounting, ceasing full consolidation of SGK in its financial statements [10] Strategic Rationale - The transaction aligns with Matthews' strategy to streamline its business structure and maximize shareholder value by focusing on core operations [11] - The deal provides a path for a full exit from the SGK business at a strong valuation while prioritizing debt reduction [11] - The integration of SGK and SGS is expected to create significant value through synergies and operational efficiencies [9] Leadership and Integration - Gary R Kohl, current President of SGK, will lead the new entity as CEO, while Matthew T Gresge, CEO of SGS, will serve as Executive Chairman of the Board [9] - The leadership team will work closely to ensure a smooth integration of the combined businesses [9] Transaction Timeline and Conditions - The transaction is expected to close in mid-2025, subject to customary closing conditions, including regulatory approvals [11] Advisors - J P Morgan Securities LLC is serving as financial advisor to Matthews, with K&L Gates as lead transaction counsel and Covington & Burling LLP as antitrust counsel [12] - Orrick, Herrington & Sutcliffe is serving as legal counsel to SGS on the transaction [12] Company Profiles - SGS & Co is a global brand agency with nearly 4,800 associates across 30+ countries, delivering speed and quality brand work through technology and teams [4] - SGK Brand Solutions is a leading provider of brand creation, activation, and stewardship services across various market verticals, including food and beverage, home and personal care, and lifestyle [13] - Matthews International Corporation is a global provider of memorialization products, industrial technologies, and brand solutions, with over 11,000 employees in more than 30 countries [14]