EL.En. (ELN) Investor Update summary

Transaction overview

• Preliminary agreement signed to sell majority stakes in Penta Laser Zhejiang and Cutlite Penta to YOFC for approximately EUR 55.3 million, with YOFC subscribing to a EUR 2.5 million capital increase in Cutlite Penta, raising its stake to 70%.

• The deal includes the sale of Cutlite Penta S.r.l., its Brazilian subsidiary, and Chinese companies controlled by Penta Laser Zhejiang Ltd. Co.

• El.En. will retain 19.3% of Penta Laser Zhejiang and 30% of Cutlite Penta, with 10% of the latter reserved for a three-year executive incentive plan.

• The transaction values the Chinese business at CNY 504.7 million (about EUR 65.5 million) and Cutlite Penta at EUR 24.7 million.

• Final price subject to adjustments based on 2025-2027 financial performance and indemnity clauses, with a potential 5% reduction.

Financial and operational impact

• The sold business reported H1 2024 revenues of EUR 98 million (down 22.3% YoY), EBIT of EUR 2.6 million (up 120% YoY), and break-even net profit; net debt stood at EUR 39 million as of June 2024.

• Cash inflow from the transaction is expected to be about EUR 53 million, plus the release of EUR 39 million in net debt, improving the net financial position by roughly EUR 92 million.

• The sale is expected to generate a consolidated gross capital gain of about EUR 13.5 million, subject to adjustments and tax considerations.

• No immediate plans for M&A or extraordinary dividends; focus remains on organic growth and potential future opportunities, especially in the medical division.

• Remaining industrial businesses (LASIT, OT-LAS, and laser source unit) are small but profitable, with no disinvestment planned.

Strategic rationale and future outlook

• YOFC brings technical expertise and global reach, offering potential synergies in supply chain, R&D, and international operations.

• The deal enables a strategic focus on the medical business, with future M&A possible but not yet planned.

• Cutlite Penta S.r.l. has been made operationally independent to preserve its Italian identity and technology.

• The agreement includes an option for El.En. to request YOFC to acquire its remaining shares in Cutlite Penta and Penta Laser Zhejiang after 2027.

• The transaction is seen as a strong strategic match, though financially less attractive than a previously considered IPO due to market conditions.