Velan Inc. Completes Landmark Asbestos Liability Divestiture

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News Summary

Velan Inc. has successfully divested its asbestos-related liabilities for approximately US$143 million, marking a major shift in its financial strategy.

Velan Inc. Completes Landmark Asbestos Liability Divestiture

In a significant financial maneuver signaling a robust shift in operations, Velan Inc., a leading Canadian manufacturer of industrial valves, has effectively divested its asbestos-related liabilities. The transaction, announced on January 14, 2025, was successfully concluded on April 4, 2025, marking a new phase for the Montreal-based company. The permanent divestiture came at a substantial cost of approximately US$143 million, a decisive step designed to realign Velan’s financial strategy amidst ongoing challenges.

Strategic Sale and Financial Restructuring

The funding for the asbestos liability divestiture was sourced from Velan’s recent sale of its French subsidiaries to Framatome SAS, a well-known leader in the nuclear energy sector. This sale involved Velan Valves Limited, which effectively transferred 100% of the share capital and voting rights of Segault SAS and Velan S.A.S. The total consideration for this strategic move was flagged at US$198.4 million (€192.5 million), providing financial leverage for Velan’s forthcoming initiatives.

This move is a critical component of Velan’s strategic financial realignment, particularly in light of their third-quarter financial performance for the period ended November 30, 2024. Despite posting a net loss from continuing operations of US$47.8 million (or US$2.22 per share), the company has reported a significant rise in sales, reaching US$73.4 million, which reflects an 18.1% increase compared to the previous year.

Asbestos-Related Costs and Future Outlook

Velan’s restructuring efforts included staggering asbestos-related costs amounting to US$74.5 million during the third quarter. These expenses have weighed down overall financial performance, with EBITDA from continuing operations reported as negative US$60.2 million. Despite these challenges, the outlook remains cautiously optimistic with a projected year-over-year growth in sales for fiscal 2025.

The backlog information as of November 30, 2024, reveals a promising US$298.7 million in backlog, indicating that 83.4% of this backlog is expected to be deliverable within the next 12 months. Velan employs approximately 1,617 individuals across its manufacturing plants in nine countries, suggesting a strong operational base as they pivot to new market opportunities.

Company’s Cash and Debt Positions

As of the end of November, Velan showed a cash position of US$35.1 million, with long-term debt standing at US$19.5 million. The company’s recent strategic decisions, especially in the context of the clean energy and nuclear markets, signify an approach focused on sustainability and resilience in a fluctuating industrial landscape.

The decision to declare a dividend of CA$0.03 per common share, payable on February 28, 2025, indicates a commitment to shareholder returns even amid the restructuring phase.

Conclusion: A New Chapter for Velan Inc.

As Velan Inc. steps away from its asbestos-related liabilities, it is clear that the company’s leadership is positioning itself for growth and stability in emerging energy sectors. The financial moves made in the early months of 2025 lay the groundwork for a revitalized approach to business, with expectations of capitalizing on the expanding markets in clean energy and nuclear technology.

Investors and stakeholders will undoubtedly be watching closely as this esteemed manufacturer charts its course in the coming years, confirming Velan Inc.’s status as a resilient player in the industrial valve market.