Matthews International Divests SGK Brand Solutions for Growth

Matthews International Sells SGK Brand Solutions

In an exciting move, Matthews International Corporation has announced its decision to sell SGK Brand Solutions to a new entity formed by affiliates of SGS & Co. This strategic sale marks a significant moment in Matthews’ journey as it aims to enhance operational efficiency and focus on debt reduction.

Transaction Highlights

As part of this agreement, Matthews is set to receive $350 million in upfront consideration. This includes $250 million in cash at the deal's closing, $50 million as preferred equity in the new entity, and the retention of around $50 million in trade receivables from the company's securitization program. Notably, Matthews will also hold a 40% interest in the new company.

The New Entity’s Value and Structure

The new entity, which will integrate SGK with SGS, boasts an initial enterprise value of close to $900 million. This valuation indicates an impressive adjusted EBITDA multiple of 9x based on trailing twelve months.

Strategic Management and Future Directions

Looking forward, the newly formed company is expected to generate annual cost synergies of over $50 million during a projected integration period of around 30 months. This synergy will open doors for significant value creation from Matthews' ownership share. Leadership roles have been established, with Gary R. Kohl, the current President of SGK, stepping in as the new entity's CEO, while Matthew T. Gresge, the present CEO of SGS, will assume the role of Executive Chairman.

Debt Repayment Focus

Matthews plans to allocate the immediate cash proceeds from this sale—predominantly the $250 million—toward debt repayment. This move represents a pivotal step in Matthews’ strategy to streamline operations and fortify its financial standing. Other considerations from this transaction will also be directed towards debt reduction efforts.

CEO Insights on the Sale

Joseph Bartolacci, CEO of Matthews, expressed confidence in this transaction, noting the long-standing process of maximizing the value of its diverse business units, including SGK. Bartolacci stated, "This transaction provides Matthews with the immediate cash needed to prioritize debt repayment while paving the way for an favorable exit from SGK at a strong valuation." He reinforced the company’s commitment to ongoing reviews of strategic alternatives to further enhance shareholder value.

Looking Ahead

The completion of this transaction is anticipated by mid-2025, pending regulatory approvals and customary closing conditions. Such timely completion will allow Matthews to solidify its focus on strengthening its core operations while benefiting from its strategic interests in the new entity.

About SGK Brand Solutions and SGS & Co

SGK Brand Solutions is recognized for its focus on brand creation, activation, and stewardship. It provides comprehensive solutions across various market verticals, successfully catering to the food, beverage, personal care, and lifestyle sectors.

On the other hand, SGS & Co stands out as a global brand agency with nearly 4,800 associates in over 30 countries. They emphasize speed and quality in brand work, utilizing technology and skilled teams to deliver top-notch outcomes for clients.

About Matthews International

Matthews International Corporation is a prominent global entity providing memorialization products, industrial technologies, and brand solutions. The Memorialization segment is a significant supplier of products aiding families in their transition from grief to remembrance. With over 11,000 employees globally, Matthews is dedicated to offering the highest quality of products and services across its diverse portfolio.

Frequently Asked Questions

What did Matthews International announce recently?

Matthews International announced the sale of its SGK Brand Solutions to a newly formed company affiliated with SGS & Co.

What is the value of the transaction?

The transaction is valued at $350 million in total upfront consideration, which includes cash, preferred equity, and receivables.

What will Matthews do with the proceeds from the sale?

Matthews plans to use the cash proceeds primarily for debt repayment.

Who will lead the new entity formed from the merger?

Gary R. Kohl, the current President of SGK, will serve as CEO, with Matthew T. Gresge of SGS as Executive Chairman.

When is the transaction expected to be completed?

The completion of the transaction is anticipated by mid-2025, subject to regulatory approvals.

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