Velan Inc. Completes Major Asbestos Liability Divestiture

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News Summary

Velan Inc. successfully divests its asbestos liabilities to Global Risk Capital for approximately US$143 million, realigning its financial strategy.

Velan Inc. Completes Major Asbestos Liability Divestiture

In a pivotal financial move, Velan Inc., a prominent player in the industrial valve manufacturing sector, has successfully executed a deal to divest its asbestos-related liabilities. The transaction, which was completed recently, saw Velan transfer these liabilities to an affiliate of Global Risk Capital for a noteworthy sum of approximately US$143 million. The initial announcement regarding this significant divestiture was made on January 14, 2025.

Strategic Financial Realignment

This divestiture is not merely a financial maneuver but rather a crucial step in Velan’s broader strategy to realign its financial landscape. By permanently alleviating itself of asbestos-related liabilities, Velan positions itself for more formidable growth and stability in the future. The company managed to achieve this by creating a new subsidiary to hold the transferred liabilities, ensuring that Velan Valve Corp., its existing U.S. subsidiary, can function without the burden of these legacy costs.

Significant Offer from Global Risk Capital

Global Risk Capital, recognized for specializing in the acquisition and management of legacy corporate liabilities, contributed an additional US$7 million towards the transaction. This financial restructuring permanently removes all asbestos-related liabilities from Velan’s balance sheet and provides the company with an indemnity against future claims linked to such liabilities. The clearing of these burdens allows Velan’s management to focus on growth and operational efficiency.

Recent Financial Performance

US$73.4 million from continuing operations, indicating an 18.1% increase compared to the same period last year. The gross profit for this quarter was noted to be impressive at US$28.3 million, showcasing a significant rise from the US$8.2 million reported the previous year.

Despite the overall positive sales growth, the company faced considerable restructuring expenses amounting to US$74.5 million during the quarter, primarily attributed to asbestos-related costs that were anticipated to be cleared by the divestiture. Furthermore, net loss from continuing operations was reported at US$47.8 million, equating to US$2.22 per share. However, the adjusted net income from continuing operations stood at US$8.5 million, or US$0.39 per share, offering a glimmer of hope amid the challenges.

Outlook and Future Ventures

US$298.7 million as of the end of November 2024, with an impressive 83.4% of those orders deliverable within the next 12 months. The company also announced it would be moving forward with the sale of its French subsidiaries, Segault SAS and Velan SAS, to Framatome SAS for US$198.4 million (€192.5 million). This sale has been recognized as meeting the criteria for assets held for sale and discontinued operations, further bolstering the firm’s strategy for expansion beyond asbestos issues.

End of an Era

Founded in Montreal in 1950, Velan Inc. has become a stalwart in the industrial sector, employing over 1,600 people across manufacturing plants in nine countries. This divestiture marks a significant turning point for Velan as it aims to position itself for continued success while mitigating risks from legacy liabilities. The company remains publicly traded on the Toronto Stock Exchange under the ticker symbol VLN, and has announced a dividend of CA$0.03 per common share, payable on February 28, 2025. Velan’s enduring legacy continues as it strides forward, unburdened by the constraints of its past.