Sale of Molten Metal Systems business (“MMS”)

Sale of Molten Metal Systems business

Morgan Advanced Materials plc ("Morgan" or the "Group"), the global manufacturer of advanced carbon and ceramic materials for complex and technologically demanding applications, announces that it has reached an agreement to sell its MMS business unit, including the Group's 75.0% shareholding in Morganite Crucible (India) Ltd ("MCIL"), to Vesuvius plc ("Vesuvius"). The total consideration payable to Morgan is £75.8m, as set out in further detail below. The transaction is expected to complete by early October 2025.

The disposal of MMS simplifies Morgan, and is in line with the Group's strategy to accelerate its organic growth and generate higher returns by focusing on specific faster growing markets. The sale is expected to improve the financial position of the Group and provide optionality both for investment in growth and enhanced shareholder returns in line with our capital allocation priorities.

MMS is part of Morgan's Thermal Products segment and provides crucibles products and melting solutions used in the production of non-ferrous metals, including zinc, aluminium, copper, brass, bronze and precious metals. It has operations in China, Germany and India and in 2024 generated revenue of £42.5m (4% of Morgan's total 2024 revenue) and adjusted operating profit of £5.2m. The total consideration payable to Morgan of £75.8m represents a multiple of 14.6x MMS' 2024 adjusted operating profit. After allowing for capital gains tax of c. £7.3m on the disposal of the shareholding in MCIL, the adjusted total consideration represents a multiple of 13.2x 2024 adjusted operating profit.

The transaction is structured as an acquisition of Morgan's 75% shareholding in its Indian listed subsidiary, MCIL, by Vesuvius' Indian listed subsidiary, Foseco India Ltd ("FIL"), with consideration for the acquisition being the issuance of new FIL shares to Morgan (the "Indian Transaction"), plus a cash acquisition of the remainder of the MMS business by Vesuvius (the "Rest of World Transaction"). As consideration for the Indian Transaction, Morgan will receive 1.2m shares in FIL, which represents a c. 15% shareholding in FIL valued at approximately £55.8m. In addition, Morgan will receive £20m in cash as gross consideration for the Rest of World Transaction (subject to customary post-completion cash, debt and working capital adjustments and prior to any taxes, fees and other expenses related to the overall MMS transaction). Morgan's shareholding in FIL will represent a smaller relative shareholding in a larger, more liquid publicly traded Indian company than its shareholding in MCIL today. Morgan's FIL shares will be subject to a 6 month lock-up period post completion, in accordance with applicable Indian regulations.

Damien Caby, Chief Executive Officer, said:

"This disposal demonstrates the disciplined approach we take to our portfolio. It leaves Morgan more simple and better aligned to our strategy. We remain focused on delivering against our strategic initiatives and believe that today's transaction will realise significant value for shareholders, as well as better positioning the Group to deliver higher organic growth returns."

The transaction is conditional on the approval of the Indian Transaction by FIL shareholders. Vesuvius, which indirectly holds 75.0% of FIL shares, has undertaken to Morgan to vote in favour of the Indian Transaction. The transaction is not subject to the approval of the shareholders of either Morgan or Vesuvius.

Gleacher Shacklock acted as financial adviser to Morgan on the transaction.

The agreed share exchange ratio for the Indian Transaction is 0.274 FIL shares for every 1 MCIL share currently owned by Morgan, in accordance with applicable Indian regulations. The 1.2m FIL shares that Morgan will receive under the Indian Transaction in respect of its 4.2m MCIL shares have a current value of £55.8m. Under the transaction structure of the Indian Transaction, the share exchange ratio is set within certain Indian regulatory limits.

Total gross consideration receivable by Morgan is therefore expected to have a value of approximately £75.8m, being the aggregate of: (i) £55.8m, being the current value of the 1.2m FIL shares to be issued to Morgan on completion of the Indian Transaction; and (ii) £20m cash proceeds from the Rest of World Transaction.

On an enterprise value basis, the transaction implies a total enterprise value for MMS of £92.7m, calculated based on the total consideration of £75.8m plus the value of the 25% minority interest in MCIL, representing 1.4m shares valued at the same implied price per share received by Morgan in the Indian Transaction (implying total minorities value of £18.6m), less the MCIL net cash balance of 202m INR (£1.7m) per the latest published balance sheet dated 31 March 2025.

The following exchange rates have been used in the above calculations: £1 = 117 INR.

In the Group's last full financial year, the year ended 31 December 2024, the MMS business unit generated revenue of £42.5m, out of reported revenue of £418.2m for the Thermal Products segment which MMS sits within, and adjusted operating profit of £5.2m, out of reported Thermal Products adjusted operating profit of £40.0m.