Catalyst Technologies to be sold to Honeywell for £1.8 billion

The transaction is expected to deliver net sale proceeds of £1.6 billion to JM, subject to customary closing adjustments.

Following the sale of CT, JM will be repositioned as a highly streamlined group focused on Clean Air and PGMS, driving sustained strong cash generation to support attractive ongoing returns to shareholders. The sale of CT, together with the compelling investment proposition of JM, are expected to deliver substantial value to JM shareholders.

Key highlights

• Highly attractive CT sale valuation: enterprise value of £1.8 billion on a cash and debt-free basis, representing a transaction multiple of 13.3x EBITDA.
• Significant cash return to shareholders: £1.4 billion (equivalent to 88% of expected net sale proceeds and £8 per JM share) expected to be returned to shareholders following completion of the transaction, which is expected by 1H26.
• JM to be repositioned as a highly streamlined group with a compelling investment proposition focused on delivering sustained strong cash generation and attractive ongoing cash returns to shareholders.
• Sustained scale and leadership: JM to be focused on its global Clean Air and PGMS businesses, operating in large and durable addressable markets with attractive long-term prospects.
• Deep and longstanding platinum group metals expertise: underpinning JM’s commercial presence and position.
• Operating profit growth: enhanced operating efficiencies as JM transitions to a more focused and rationalised operating model, supporting the delivery of at least mid-single digit CAGR in pro forma underlying operating profit from FY2024/25 to FY2027/28.
• Sustained strong cash generation: a material increase in JM cash generation to at least £250 million of JM free cash flow by FY2027/28, underpinned by growth in underlying operating profit, capex reducing to close to maintenance levels and material working capital benefits.
• Higher ongoing returns to shareholders under a refreshed capital allocation framework, in addition to the cash return pursuant to the Transaction: total annual cash returns to shareholders of at least £130 million for FY2025/263, growing to at least £200 million for FY2026/27 and beyond.
• Delivering substantial near, mid and longer-term value for JM shareholders through the sale of CT and continued exposure to the attractive investment proposition of JM.

Patrick Thomas, Chair of Johnson Matthey, said: "On behalf of the Board, we are pleased to announce the sale of CT which, together with the refreshed strategy of the Group, represents a strategically and financially compelling proposition for shareholders. The transaction realises significant value for shareholders, creating a Group with the core strengths, focus and discipline to deliver strong returns for shareholders into the future."

Liam Condon, CEO of Johnson Matthey, stated: “Today’s announcement represents a significant milestone in the history of Johnson Matthey. Following on from the divestment of our Medical Devices business at a highly attractive valuation, we have now agreed to the sale of our Catalyst Technologies business for £1.8 billion. This allows JM to realise a very attractive valuation for this business that fully reflects its strong long-term growth prospects. We will now fundamentally re-shape Johnson Matthey into a more focused and leaner business. This will better position us to leverage our strong capabilities and leading market positions in Clean Air and PGM Services to drive a step change in sustainable cash generation with higher returns to shareholders. JM is a great company and we are confident that the actions we have announced today will deliver substantial and sustainable value to our shareholders.”

Strategic rationale and benefits of the transaction

CT is a global leader in the licensing of process technology and supply of catalysts. Under JM’s strategy, CT has delivered significant commercial wins and partnerships, and developed a pipeline of more than 150 projects in its sustainable technologies portfolio that is expected to deliver attractive long-term profitable growth as the world transitions to net zero.

Following a period of engagement with Honeywell, the Board of JM concluded that the terms of the transaction represent a compelling value proposition for JM shareholders. In particular, the Board believes that:

• The enterprise value of £1.8 billion fully reflects the long-term growth prospects of CT, including the delivery of CT’s sustainable technologies project pipeline.
• The financial terms of the transaction are highly attractive in comparison to key valuation benchmarks.
• The enterprise value of £1.8 billion represents a significant premium to the average CT sell-side analyst valuation of £945 million.
• The implied transaction multiple represents a significant premium to the current JM Group trading multiple of 5.7x FY2024/25 EV/EBITDA.
• The all-cash nature of the consideration will enable a meaningful cash return to JM shareholders, expected to be £1.4 billion (equivalent to £8 per JM share and 88% of expected net sale proceeds).

Following the sale of CT, JM will be focused on its positions in Clean Air and PGMS, in which JM has strong commercial advantages given its deep and longstanding platinum group metals expertise. JM has also launched a number of actions to deliver further enhanced operating efficiencies, sustainably strong operating profit growth, cash generation and attractive returns to JM shareholders over the medium term. Further details on the JM’s strategic and financial investment proposition are set out in JM’s preliminary results announcement for FY2024/25.

On this basis, the Board of JM has unanimously approved the transaction and believes the terms of the Transaction are in the best interests of JM and JM’s shareholders as a whole.

Use of proceeds

Under the terms of the transaction, CT is being sold for an enterprise value of £1.8 billion on a cash and debt-free basis.

After deducting one-off payments and costs associated with the transaction of £0.2 billion (including tax, pension contribution and other transaction costs), this implies total net proceeds of £1.6 billion to JM (subject to customary closing adjustments). JM intends to return £1.4 billion of these proceeds to JM shareholders following the completion of the transaction via an appropriate return of value (return of value). JM expects to provide a further update on the return of value mechanism(s) and timing prior to completion of the transaction.

The remaining £0.2 billion of total net proceeds will be retained by JM for general corporate purposes following completion of the transaction. On a pro forma basis, this implies a reduction in JM leverage multiple, which would be comfortably within JM’s new target leverage range of 1.0x - 1.5x net debt to EBITDA over the medium term.

Next steps

The transaction is subject to customary conditions, including the receipt of certain customary regulatory approvals, and is expected to close by 1H26.

UK Listing Rules

Due to the size of the transaction in relation to JM, it constitutes a significant transaction for the purposes of the UK Listing Rules made by the Financial Conduct Authority (FCA) for the purposes of Part VI of the Financial Services and Markets Act 2000 (as amended), which came into effect on 29 July 2024 (UKLRs) and is therefore notifiable in accordance with UKLR 7.3.1R and 7.3.2R. In accordance with the UKLRs, the transaction is not subject to shareholder approval.

Read the article online at: https://www.hydrocarbonengineering.com/petrochemicals/23052025/catalyst-technologies-to-be-sold-to-honeywell-for-18-billion/