Image source: © 2025 Krish Capital Pty. Ltd.

Highlights:

  • Senior to sell Aerostructures business to Sullivan Street Partners for up to GBP 200 million.
  • SNR's initial GBP 150 million proceeds to support debt reduction and GBP 40 million share buyback.
  • Company to become focused fluid conveyance and thermal management business post-sale.

Senior (LSE:SNR), a UK-based engineering group specialising in high-technology components and systems, has entered into a binding agreement to sell its Aerostructures business to private equity firm Sullivan Street Partners. The transaction values the Aerostructures business at up to GBP 200 million, including an initial cash consideration of GBP 150 million and a potential earn-out of GBP 50 million contingent on the business’s 2025 EBITDA performance. The disposal marks a significant strategic shift for Senior, enabling the company to operate as a dedicated fluid conveyance and thermal management (FCTM) business. The transaction is expected to complete by the end of 2025, subject to limited closing conditions and regulatory approvals. Net proceeds from the initial consideration, estimated at around GBP 100 million after adjustments and before GBP 12 million in related transaction costs, will be used to reduce net debt and fund a GBP 40 million share buyback programme.

The agreed total enterprise value of up to GBP 200 million represents a 13.1x multiple of Aerostructures' forecast 2024 EBITDA. Of the GBP 150 million initial payment, a portion will be used to cover IFRS 16 lease liabilities and other debt-like items. The remaining amount approximately GBP 100 million in net proceeds will directly support the company’s balance sheet. The optional earn-out payment of up to GBP 50 million, if earned, will be payable in cash during the first half of 2026. Senior noted that the disposal will immediately enhance the group’s adjusted operating profit margin and return on capital employed (ROCE), as Aerostructures carried lower margins and higher capital intensity compared to the rest of the group.

This divestment is in line with Senior’s stated goal of becoming a pure-play fluid conveyance and thermal management company. By exiting Aerostructures, the group aims to simplify its structure and concentrate on its higher-margin, lower-capex core operations, which include products with design-rich intellectual property in markets such as aerospace, defence, power and energy, and semiconductor equipment. Following the completion of the sale, Senior will consist of 19 operating businesses, including one joint venture, spread across 10 countries. The company will maintain a global footprint, supplying engineered components and systems to blue-chip customers in industries considered to have long-term demand resilience.

Senior outlined medium-term financial targets for its continuing operations at an investor event earlier in 2025. These include group adjusted operating margins in the double digits, with the Aerospace segment aiming for mid-teens margins and the Flexonics segment targeting 10–12%. Cash conversion is projected to exceed 85% through the cycle, and ROCE is forecast between 15–20%. These targets will be supported by reduced capital intensity, improved operating margins, and a simplified structure with better working capital efficiency. The company’s capital allocation policy remains focused on reducing leverage targeting a range of 0.5x to 1.5x net debt-to-EBITDA and returning capital to shareholders. The announced £40 million share buyback programme will begin following completion of the transaction and receipt of the initial proceeds. The use of any additional cash proceeds from the contingent payment will be evaluated in line with these priorities.

SNR is trading at 9.96% higher at GBX 206.50 per share as on 18 July 2025.