Briggs & Stratton Plans Divestitures To Improve Financial Flexibility

(RTTNews) - Briggs & Stratton Corp. (BGG) announced Friday details of its planned strategic repositioning to simplify its business and improve financial flexibility for growth and higher investment returns.

The company plans to sharpen its focus on its global expertise in power application, to simplify organization through strategic divestitures, and a streamlined overall business to drive improved capital returns.

The proceeds from divestitures will be a source of funds to de-lever and improve financial flexibility by significantly reducing debt.

The company expects to incur charges of $35 million to $45 million, of which, about $20 million to $25 million are cash charges, associated with the strategic repositioning plan. The charges are expected to be incurred during fiscal years 2020 and 2021.

The company will be repositioning to focus its businesses with expected annual sales of about $1.0 billion in the design, production and sale of Briggs & Stratton residential engines, Vanguard commercial engines, Briggs & Stratton standby power generation and Vanguard commercial battery systems.

The repositioning includes planned divestitures of the majority of the businesses within the Products Segment, primarily the turf products business headquartered in the U.S. and the pressure washer and portable generator product lines.

The company is pursuing parallel paths to achieve its priority of restoring financial flexibility. By the end of fiscal 2020 (June), the company expects to secure up to $200 million in debt financing as part of a package which will be used in part to retire the $195 million of outstanding senior notes, due December 2020.

In addition, proceeds from the divestitures are expected to exceed the outstanding senior notes and result in significantly lower leverage by the end of fiscal 2021.

J.P. Morgan has been engaged to arrange the debt refinancing and has separately been retained to advise on the divestiture of the turf products business.

Providing long-term financial targets, the company expects 2 to 4 percent organic sales growth with focused growth areas exceeding 10 percent organic sales growth. It also expects greater than 8 percent of adjusted operating margin, 2 to 3 percent free cash flow on sales and less than 3 times debt to adjusted EBITDA.