Fiberweb Plc (FWEB)

11 November 2011

PART I

Fiberweb plc

("Fiberweb" or the "Company")

Proposed Sale of Hygiene Business for US$286 million (£179 million)

Fiberweb plc announces that it and its wholly-owned subsidiary, Fiberweb Holdings Limited, have entered into binding agreements for the sale of the Hygiene Business to Petropar S.A. ("Petropar") for a total cash consideration of US$286 million (approximately £179 million), comprising of US$260 million payable on Completion and the issue of a US$26 million Guaranteed Note, payable by Petropar by 31 December 2012, and attracting a 6% interest rate.

The sale is conditional on the approval of Fiberweb Shareholders at a general meeting, the approval of Petropar shareholders, the completion of Petropar's funding and completion of a pre-sale reorganisation by the Group.  The transaction is expected to close at the end of 2011.

Highlights

·    This transformational sale will allow Fiberweb to become a focused leader in certain attractive segments of the growing technical fabrics and construction products markets, with leading positions in several attractive market and technology niches, notably in filtration, construction specialties, geosynthetics, agriculture and several medical areas. 

·    The disposal will enable the Group to repay all its existing net debt (£145m as at 31 October 2011) and to employ a much-strengthened balance sheet to accelerate the development of its remaining Industrial business.

·    Taking into account Petropar's assumption of 100% of the FitesaFiberweb Joint Venture's debt and certain pension liabilities, the enterprise value of the transaction is approximately £229 million, representing a 2010 EBITDA multiple of 6.2x and a 2010 EBIT multiple of 14.6x¹.

·    In 2010 the Hygiene Business recorded sales of approximately £193 million, EBIT of approximately £12 million and EBITDA of approximately £26 million (including a 50 per cent. share of the profit after tax from the FitesaFiberweb Joint Venture).  The Hygiene Business had gross assets of £252 million as at 30 June 2011.

·    In 2010, the remaining Industrial Business would have reported sales of approximately £270 million, EBIT of £17 million and EBITDA of £29 million, after taking into account an increased allocation of central overhead costs to the remaining business. 

·    Historically, the Industrial Business has demonstrated higher operating margin and return on capital characteristics than the Hygiene Business.  Following the sale, in the medium-term, the Company is aiming to produce EBIT margins of 8 to 10 per cent., EBITDA margins of 12 to 15 per cent., return on capital employed of over 15 per cent., and sustained growth rates around double the rate of growth in GDP.

·    Following Completion, the Group will have technical fabrics operations in Berlin and Aschersleben in Germany, Biesheim in France, Terno d'Isola in Italy and Old Hickory, Tennessee in the USA, and geosynthetics operations in Maldon and Aberdare in the UK, Melbourne, Australia and at Old Hickory.

·    The Group will move rapidly to review its cost base following Completion, recognising the smaller scale and reduced scope of the business. This review is expected to result in restructuring costs, primarily severance, of approximately £3 million in cash excluding other non-cash impairment and other write-down charges.

·    The Board will maintain the current dividend policy of a payout of at least 30 per cent. of earnings, reflecting both the underlying profitability and cash flow of the Group, but having regard to the cash needs and investment opportunities available to the Group at the time.

¹ Consideration of £178.8 million, Fiberweb's share of the FitesaFiberweb Joint Venture debt of £38.8 million (as at 31 August 2011) and other liabilities being assumed by Petropar of £11.8 million (as at 30 June 2011); 2010 EBITDA for the Hygiene Business of £22.0 million (excluding the FitesaFiberweb Joint Venture) and Fiberweb's share of 2010 EBITDA for the FitesaFiberweb Joint Venture of £15.2 million; 2010 EBIT for the Hygiene Business of £7.5 million (excluding the FitesaFiberweb Joint Venture) and Fiberweb's share of 2010 EBIT for the FitesaFiberweb Joint Venture of £8.2 million

Fiberweb Holdings Limited has agreed to pay Petropar a break fee of approximately £0.7 million in the event Fiberweb Shareholders fail to approve the sale or the Directors withdraw their recommendation of the Disposal Resolution.  Conversely, Petropar has agreed to pay Fiberweb Holdings Limited a break fee of approximately £0.7 million in the event Petropar shareholders fail to approve the purchase or the Petropar Lenders do not provide financing for the purchase. 

A circular giving details of the Disposal and seeking their approval will be dispatched to Fiberweb Shareholders shortly.

Malcolm Coster, Chairman of Fiberweb commented:

"The sale of Fiberweb's hygiene business to Petropar marks the end of the fundamental transformation of Fiberweb that we have been driving since 2006.  The Group will now be focused on industrial specialties with superior returns and prospects and will enjoy a much strengthened balance sheet.  We look forward to accelerating the growth in sales and cashflow of Fiberweb's successful industrial businesses based on strong technical differentiation, outstanding service and leading expertise in understanding the evolving needs of our customers.  Fiberweb's hygiene business will join a successful team focused on that industry, with whom we have enjoyed a fruitful and profitable relationship in recent years."

Lazard & Co., Limited ("Lazard") is acting as sole financial adviser to Fiberweb.

Enquiries

Other Information

This announcement has been issued by, and is the sole responsibility of, Fiberweb.

Lazard, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Fiberweb and no one else in connection with the Disposal and this announcement and will not be responsible to anyone other than Fiberweb for providing the protections afforded to clients of Lazard nor for providing advice in connection with the Disposal or this announcement or any matter referred to herein.

This announcement contains forward-looking statements which are subject to assumptions, risk and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, there can be no assurance that these expectations will prove to have been correct. As these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by those forward-looking statements. Each forward-looking statement is correct only at the date of the particular statement. The Company does not undertake any obligation publicly to update or revise any forward-looking statement as a result of new information, future events or other information, although such forward-looking statements will be publicly updated if required by the Listing Rules, the Prospectus Rules, the Disclosure and Transparency Rules, the rules of the London Stock Exchange or by law.

The release, publication or distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about, and observe, any applicable restrictions or requirements. Any failure to comply with such restrictions may constitute a violation of the securities laws of any such jurisdiction. This announcement has been prepared for the purposes of complying with English law and the Listing Rules and the applicable rules and the information disclosed may not be the same as that which would have been disclosed if this document had been prepared in accordance with the laws and regulations of any jurisdiction outside of England and Wales. The statements contained in this announcement are made as at the date of this announcement, unless some other time is specified in relation to them, and publication of this announcement shall not give rise to any implication that there has been no change in the facts set forth herein since such date. No statement in this announcement is intended as a profit forecast or a profit estimate and no statement in this announcement should be interpreted to mean that earnings per Fiberweb share for the current or future financial years would necessarily match or exceed the historical published earnings per Fiberweb share.

Note:  unless otherwise stated in this document, the exchange rate of US$1.6 to £1 prevailing on 10 November 2011 has been used to present financial information.

This summary should be read in conjunction with the full text of the announcement set out below.

11 November 2011

PART II

Fiberweb plc

("Fiberweb", the "Company" or the "Group")

Proposed Sale of Hygiene Business for US$286 million (£179 million)

1. Introduction

The Company announces today that it and its wholly-owned subsidiary, Fiberweb Holdings, has entered into a conditional agreement with Petropar to sell the Target Group, the owner of the Hygiene Business, for an aggregate consideration of US$286 million (approximately £179 million). Under the terms of the Disposal Agreement, US$260 million (approximately £163 million) of the consideration is payable on Completion. The remaining US$26 million (approximately £16 million) of the consideration will be satisfied by the issue by the Purchaser to Fiberweb Holdings of a Guaranteed Note on Completion.

Petropar will assume all the assets and liabilities in Europe associated with the Hygiene Business including approximately £3 million in relation to certain pension liabilities and will assume all of the debt in the FitesaFiberweb Joint Venture, while the members of the Target Group wholly-owned by Fiberweb will be sold on a cash free, debt free basis subject to certain post-Completion adjustments relating to the amounts of debt, cash and working capital in those members of the Target Group. Taking into account Fiberweb's share of FitesaFiberweb Joint Venture debt and the liabilities to be assumed by Petropar, the enterprise value of the transaction is approximately £229 million, representing a 2010 EBITDA multiple of 6.2x (using a 2010 EBITDA for the Hygiene Business of £22.0 million (excluding the FitesaFiberweb Joint Venture) and Fiberweb's share of 2010 EBITDA for the FitesaFiberweb Joint Venture of £15.2 million) and a 2010 EBIT multiple of 14.6x (using a 2010 EBIT for the Hygiene Business of £7.5 million (excluding the FitesaFiberweb Joint Venture) and Fiberweb's share of 2010 EBIT for the FitesaFiberweb Joint Venture of £8.2 million).

The Disposal is of sufficient size relative to that of the Group to constitute a Class 1 transaction for the purposes of the Listing Rules and is, therefore, conditional upon the approval of Fiberweb Shareholders. A circular convening a general meeting will be dispatched shortly to shareholders and an ordinary resolution to approve the Disposal will be proposed at the General Meeting.  The Disposal is also conditional upon: (i) the Purchaser's shareholders having approved the Disposal; (ii) the completion of the Pre-Sale Reorganisation; and (iii) the Petropar Lenders having become bound (subject only to the satisfaction of any conditions relating to the Disposal Agreement) to provide funds to the Purchaser pursuant to the Petropar Mandate Letter for the purpose of part financing the cash consideration payable on completion of the Disposal.

Under the terms of a break fee agreement entered into between Fiberweb Holdings and the Purchaser on 10 November 2011, in the event that Completion does not occur as a result of: (i) the Fiberweb Shareholders failing to approve the Disposal or the Directors withdrawing their recommendation that Fiberweb Shareholders vote in favour of the Disposal Resolution, Fiberweb Holdings will pay the Purchaser a break fee in an amount equal to £703,013; or (ii) the Purchaser's shareholders failing to approve the Disposal and/or the Petropar Lenders failing to provide funds to the Purchaser pursuant to the Petropar Mandate Letter for the purpose of part financing the cash consideration payable on completion of the Disposal, the Purchaser shall pay Fiberweb Holdings a break fee in an amount equal to £703,013.

Shareholder approval of the Disposal will be sought at a General Meeting to be held at the offices of Baker & McKenzie LLP, 100 New Bridge Street, London EC4V 6JA on a date to be set out in the circular sent to Fiberweb Shareholders convening the General Meeting. 

The Directors unanimously consider that the Disposal is in the best interests of Fiberweb and Fiberweb Shareholders as a whole.

2. Summary Information on the Group

The Fiberweb Group is one of the largest groups by revenue in the specialist nonwoven industry. Fiberweb's primary business is the development, manufacture and marketing of a diverse range of nonwoven products for the industrial and hygiene markets, including everyday products such as baby diapers, feminine care products, filters and construction products.

Fiberweb's business is divided into two segments: the Hygiene Business and the Industrial Business.

The Hygiene Business, which is the subject of the Disposal, differs from Fiberweb's previously reported hygiene division as a result of the following businesses, which were previously reported as part of Fiberweb's hygiene division, being retained within the Continuing Group as part of the Industrial Business:

·    Production and sales of carded products for hygiene applications from the Tenotex business in Italy, which comprised revenues of £30 million in 2010;

·    The fabric softener sheet business in Old Hickory, USA, which comprised revenues of £40 million in 2010;

·    Production and sales of polypropylene spunbond products for hygiene applications from Fiberweb France SAS, which comprised revenues of £17 million in 2010; and

·    The Coronor production line in Germany.

During the last three years, Fiberweb's sales by segment were as follows:

The information provided in the table above is on an entity basis reflecting sales by the entities comprising the Target Group, the owner of the Hygiene Business, and by the entities comprising the Continuing Group, the owner of the Industrial Business. This differs from the segment analysis set out in the audited consolidated financial statements of the Group for the year ended 31 December 2008, wheresegmentation was based on the classification of reporting entities according to the principal market (hygiene or industrial) served by their operational sites, and the audited consolidated financial statements of the Group for the years ended 31 December 2009 and 2010, where profit and losses of individual operating sites were further segmented by the markets served.

3. Summary Information on the Hygiene Business

The Hygiene Business manufactures spunbond, carded and airlaid nonwoven fabrics for major consumer goods companies around the world. The Hygiene Business operates six manufacturing plants in Sweden, Germany, Italy, China and the USA and employs approximately 600 employees.

As described above, the Hygiene Business, unlike the previously reported hygiene division, does not include the Tenotex business in Italy, the Coronor production line in Germany, hygiene spunbond sales from Fiberweb France SAS or the fabric softener sheet business in Old Hickory, USA.

In 2010, approximately 63 per cent. of the Hygiene Business' sales were made to the baby diaper market. A further 19 per cent. of sales were made to the feminine hygiene market and of the Hygiene Business's remaining sales, 15 per cent. were made to the adult incontinence market. The remaining 3 per cent. of sales from the Hygiene Business were industrial sales. The Hygiene Business' largest customer is Procter & Gamble, which accounted for approximately 42 per cent. of the Hygiene Business' sales in 2010.

The Hygiene Business is organised into two global businesses: Consumer Fabrics and Airlaid. The split of revenue for the three years ended 31 December 2010 is shown below.

Consumer Fabrics

In North America, the Hygiene Business produces carded thermal bond material which is used principally for extensible applications such as ear and side panels in baby diapers, resin-bond carded material used principally for acquisition layer materials in baby diapers, and spunbond and spunmelt materials as components for diapers and feminine care products. The Hygiene Business has manufacturing sites in Simpsonville and Green Bay in the US and, through the FitesaFiberweb Joint Venture, in Simpsonville and Washougal in the US, in Gravatai in Brazil and in Queretaro in Mexico.

In Europe, the Hygiene Business has manufacturing sites in Germany, Italy and Sweden and supplies products primarily for baby diapers, feminine care and adult incontinence markets.

Airlaid

In Asia, Fiberweb is the largest airlaid roll goods producer and is a market leader in feminine care applications, supplying many of the leading feminine care producers in China. Fiberweb produces advanced airlaid material for absorption and/or distribution of liquid for use in the manufacture of disposable feminine hygiene products at its Chinese facility based in Tianjin.

David Keough, Vice President Sales & Marketing Consumer Fabrics is deemed by the Company to be key to the operations of the Target Group.

4. Background to and Reasons for the Disposal

The Board believes that the agreed price of US$286 million (approximately £179 million) for the Hygiene Business recognises the high quality of the Hygiene Business and that following the Disposal, Fiberweb's focus of resources on the Industrial business will be in the best interest of Fiberweb Shareholders as a whole, for the following reasons:

·    The Industrial Business has demonstrated higher operating margin and return on capital characteristics than the Hygiene Business, due, amongst other things, to lower levels of customer concentration and less commoditisation;

·    Fiberweb has some highly differentiated offerings in the industrial nonwoven fabrics market, particularly in filtration, geosynthetic and specialty construction segments, which by rewarding technical differentiation, close customer contact, branding strategy and innovation, provide Fiberweb with superior returns;

·    The Industrial Business is now at a stage in its development where the Board considers it would benefit from access to additional funds to invest in expanding over and above that which Fiberweb can currently support;

·    The Board believes that each of the Hygiene Business and the Industrial Business would benefit from increased management focus, which would be achieved through the Disposal and a separation of the two businesses; and

·    The Disposal will allow the Group to repay all its existing debt and to employ a much strengthened balance sheet to accelerate the development of the Industrial Business.

The Board has, therefore, concluded that it is in the best interests of the Company to focus its resources into the creation of a dedicated, and market leading, industrial materials business. Through improved productivity and also continued and sustained efforts and investment in new product development in addition to, potentially, future acquisitions, it is envisaged that Fiberweb's Directors will develop the offering of the Industrial Business.  It is envisaged that this will have the effect of broadening the Industrial Business' portfolio of products, and its appeal to both current and new customers in established and emerging market segments and geographies.

5. Information on the Continuing Group

Following the Disposal, the Group's business will be focussed on the Industrial Business, which, as described above, will also include the Tenotex business in Italy, the production and sales of polypropylene spunbond products for hygiene applications from Fiberweb France SAS, the Coronor production line in Germany and the fabric softener sheet business in Old Hickory, USA, which were previously reported as part of Fiberweb's hygiene division. 

Within the Industrial Business, Fiberweb has built strong positions in selected niche markets including construction and filtration. In 2010, 12 per cent. of the Industrial Business' sales were accounted for by Typar housewrap, an air and moisture management product range for timber-frame residential buildings, and a further 10 per cent. were made to the roofing market, where Fiberweb's products include under-tile breathable underlays and a wide range of associated accessories. Geotextiles and agrotextiles, which provide environmental protection and stability, made up 10 per cent. of the Industrial Business' sales in 2010, and a further 15 per cent. of the Industrial Business' sales were attributable to the highly fragmented filtration market. Other industrials and medical fabrics, including protective clothing, trainer components, industrial wipes, drapes, facemask components and ostomy components, accounted for 17 per cent. of the Industrial Business' sales in 2010, with fabrics for the graphic arts market accounting for the 3 per cent. of sales the Industrial Business' sales in 2010.  Fabric softener sheets accounted for 15 per cent. of the Industrial Business sales in 2010. The remaining 18 per cent. of sales were historically reported within the hygiene segment and included sales made in both the Tenotex and French entities which are being retained in the Industrial Business.

Historically, Fiberweb's industrial division was organised into Americas Industrial, Europe Industrial and Terram. However, following the acquisition of Boddingtons in January 2011, the industrial division was reorganised into Americas Industrial, Europe Industrial and Geosynthetics (which comprises the Terram business, other geotextiles and agrotextiles, the Boddingtons business and the recently acquired Tubex businesses). 

A summary of the Industrial Business results for the three years ended 31 December 2010 is shown below.

Americas Industrial

In North America, Fiberweb operates in a number of areas in construction, filtration, landscape, furniture and bedding, and specialities, primarily from its manufacturing site located in the US at Old Hickory, TN.  In construction, Fiberweb's major products are in housewrap, landscape and geotextile markets.  Fiberweb is a leader in US pool and spa cartridge filtration markets under its strong brand Reemay. Fiberweb also manufactures high performance products for use in the graphic arts industry, such as nil-scratch wipes and dampener covers.  Fiberweb is continuing to invest resources to maintain and grow its position in this business.

In the construction industry, Fiberweb's Typar is a strong and well established brand for housewrap in North America and is the second largest housewrap brand in North America.  In Canada, Typar is the leading market brand. Reemay is well known in the filtration market, including for pool and spa filtration, and Fiberweb continues to work to improve the performance of these products.

This business also includes the Reemay branded fabric softener sheets produced at Fiberweb's site at Old Hickory, USA, which was previously reported as part of Fiberweb's hygiene division.

Europe Industrial

Fiberweb's industrial business in Europe is less developed than in North America.  It serves three main segments: construction, filtration and agriculture.  In Europe, Fiberweb focuses on roofing underlay and speciality polyethylene-based fabrics from its two plants in Germany.  This business includes a plant in France, which produces crop cover fabrics, specialty hygiene spunbond nonwovens and filtration fabrics and also the Tenotex business in Italy and the Coronor business in Germany, which were previously reported as part of Fiberweb's hygiene division.  At Tenotex, fabrics are produced for filtration, general industrial uses as well as hygiene applications, and the Coronor production line produces specialist medical laminates for use in disposable medical gowns and drapes.

Geosynthetics

The Geosynthetics business includes the Terram business, other geotextiles and agrotextiles, the Boddingtons business and the recently acquired Tubex business.  In the UK, Fiberweb's Terram business located in South Wales produces branded geotextiles which have a strong market position in the UK, as well as speciality geosynthetics and constructions for a variety of applications, including into the rail and defence industries.  The Boddingtons business is a leading UK based specialist geosynthetic and accessory manufacturer. In May 2011, Fiberweb completed the acquisition of Tubex, the largest European specialist producer of tree shelters. The Tubex business is complementary to Fiberweb's Acorn tree shelter business which was part of the Boddingtons acquisition.

Strategy of the Continuing Group

The Continuing Group will be a focused leader in certain attractive segments of the growing technical fabrics and construction products markets, with market-leading positions in several attractive market and technology niches, notably in filtration, construction, specialities, geosynthetics, agriculture and several medical areas. The Group intends to exploit these strengths to generate superior returns for shareholders through continued operational improvement in the areas of flexibility, waste and energy reduction and productivity; geographic extension of existing market and brand positions, which are largely in North America and Western Europe and continued technological development in the Group's core areas of polyester, polypropylene and polyethylene nonwoven fabrics and nets, laminates and composites as well as in the Group's core application areas of construction, filtration, agriculture and medical products.  The Group will seek to excel particularly in understanding the evolving needs of its customers and in developing solutions for them, in providing outstanding levels of service and in differentiating its technical offerings. The Group will also move rapidly to review its cost base following Completion, recognising the smaller scale and reduced scope of the Industrial Business. This review is expected to result in restructuring costs, primarily with respect to employee severance payments, of approximately £3 million in cash excluding other non-cash impairment and other write-down charges. The markets which the Group primarily service, notably filtration, medical products, agriculture, graphic arts, drier sheets and geosynthetics are expected to grow at around double the rate of GDP growth for a sustained period. In the medium-term, the Group is aiming to produce EBIT margins of 8 to 10 per cent., EBITDA margins to 12 to 15 per cent. and a return on capital employed of over 15 per cent., with sustained growth rates around double GDP.  In comparison, in 2010, the Group achieved sales growth of approximately 3.3 per cent., EBIT margins of 10.5 per cent., EBITDA margins of 15.7 per cent. and a return on capital employed of 19.1 per cent.

6. Information on the Purchaser

Petropar is a Brazilian holding company with interests in packaging and nonwovens, which is headquartered in Porto Alegre, Rio Grande do Sul and listed on the Sao Paulo Stock Exchange. Petropar is Fiberweb's joint venture partner in the FitesaFiberweb Joint Venture.

7. Principal terms and conditions of the Disposal

The Hygiene Business will be sold to the Purchaser for a total consideration of US$286 million (approximately £179 million). Under the terms of the Disposal Agreement, US$260 million (approximately £163 million) of the consideration is payable in cash on Completion. The remaining US$26 million (approximately £16 million) of the consideration will be satisfied by the issue by the Purchaser to Fiberweb Holdings of the Guaranteed Note on Completion.  The consideration is subject to certain post-Completion adjustments relating to the amounts of debt, cash and working capital in the Target Group (other than the Joint Venture Companies) at Completion.

The Disposal will be effected by way of a sale of the shares held by the Fiberweb Group in each of the Target Companies (which includes Fiberweb's interest in the FitesaFiberweb Joint Venture). A pre-sale reorganisation will be carried out to, inter alia, remove from the Target Group any subsidiaries or other assets which form part of the industrial business of the Company and to transfer to the Target Group any assets of the Hygiene Business that are currently owned outside of the Target Group.

The Disposal is conditional upon the passing by the Fiberweb Shareholders of the Disposal Resolution at the General Meeting. The Disposal is also conditional upon: (i) the Purchaser's shareholders having approved the Disposal; (ii) the completion of the Pre-Sale Reorganisation; and (iii) the Petropar Lenders having become bound (subject only to the satisfaction of any conditions relating to the Disposal Agreement) to provide funds to the Purchaser pursuant to the Petropar Mandate Letter for the purpose of part financing the cash consideration payable on completion of the Disposal.

In the event that the conditions referred to above have not been satisfied by 31 March 2012, the Disposal Agreement will terminate.

8. Use of Proceeds and Financial Effects of the Disposal

At Completion, the gross cash proceeds arising from the Disposal are expected to be approximately US$260 million (approximately £163 million), which will increase to US$286 million (approximately £179 million) (the "Disposal Proceeds") following redemption of the Guaranteed Note.

The Disposal Proceeds will be used by the Continuing Group as follows:

·    Accelerated Payment into the Group's closed defined benefit pension scheme in the US

Following payment out of the Guaranteed Note in full, the Company will consider making a payment of up to US$16 million (approximately £10 million) of the Disposal Proceeds into the Group's closed defined benefit pension scheme in the US as a special lump sum contribution. These funds had a combined deficit of US$22.7 million (approximately £14.2 million) as at 30 June 2011. This accelerated payment, if made, would complement the other significant changes that have already been announced to other post-retirement benefit plans of the Continuing Group in the USA, which are expected to result in a reduction of approximately US$14 million (approximately £8 million) in the Group's pension deficit before 31 December 2011. 

·    Exceptional costs relating to the Disposal and subsequent restructuring of Fiberweb

£5 million (approximately US$8 million) of the Disposal Proceeds will be spent on fees and expenses relating to the transaction, including the necessary bank refinancing likely to be associated with a large transaction of this nature, and a further £3 million will be spent on restructuring initiatives to establish an overhead structure for the Continuing Group consistent with a business of only around 50 per cent. of the Company's current turnover.

·    Break fees with respect to the Company's interest rate swaps

An estimated £1.6 million (approximately US$2.5 million) of the Disposal Proceeds will be spent on break fees that will be incurred in connection with the termination by the Continuing Group of its interest rate swap arrangements following Completion.

·    Reduced Group Indebtedness

The remainder of the Disposal Proceeds on Completion of approximately £153 million (excluding the potential payment into the Continuing Group's closed defined benefit pension scheme in the USA following payment out of the Guaranteed Note) will be used to reduce the net indebtedness of the Continuing Group. The Company intends to seek the consent of the requisite proportion of Lenders under its existing Credit Facilities for the restatement of its existing Credit Facilities, to reduce the Credit Facilities in size to be a US$40 million and €30 million revolving facility, and to make certain other amendments to the terms of its existing Credit Facilities not affecting their pricing. The Company has received commitments from HSBC Bank PLC and Lloyds Bank PLC that, if such consents are not forthcoming, they will provide replacement facilities on the same terms as the proposed restated facilities. At 31 October 2011 Fiberweb Group's net borrowings were approximately £145 million.

·    Investment in Developing the Industrial Business

The Board believes that the reduced leverage of the Continuing Group will provide Fiberweb with a strong financial base, allowing the Directors to continue to develop the industrial business and to support it in achieving its strategic objectives through both organic growth and, potentially, future accretive and synergistic acquisitions.

The Board recognises that immediately following the Disposal, the Continuing Group will be under-leveraged with a correspondingly negative impact on earnings per share. However, given a number of possible acquisition opportunities currently under review and the current macro-economic uncertainty affecting a number of key markets, the Board believes this is an appropriate capital structure for a period of time. The Board will keep the capital structure under review and expects to be able to move to a more efficient position within 12 to 18 months, either through a synergistic acquisition, significant investment projects or through a return of capital to shareholders.

The Disposal is expected to be dilutive to Fiberweb's earnings per share.

9. Dividend Policy

The Board's policy on dividends is to seek to provide Fiberweb Shareholders with a payout of at least 30 per cent. of earnings, reflecting both the underlying profitability and cash flow of the Group, but having regard to the cash needs and investment opportunities available to the Group at the time. This policy will not change as a result of the Disposal.

10. Current Trading and Prospects of the Group

On 11 November 2011, the Group published an Interim Management Statement, which contained commentary on the Group's current trading and prospects.

11. Other Information

This announcement has been issued by, and is the sole responsibility of, Fiberweb.

Lazard, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Fiberweb and no one else in connection with the Disposal and this announcement and will not be responsible to anyone other than Fiberweb for providing the protections afforded to clients of Lazard nor for providing advice in connection with the Disposal or this announcement or any matter referred to herein.

This announcement contains forward-looking statements which are subject to assumptions, risk and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, there can be no assurance that these expectations will prove to have been correct. As these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by those forward-looking statements. Each forward-looking statement is correct only at the date of the particular statement. The Company does not undertake any obligation publicly to update or revise any forward-looking statement as a result of new information, future events or other information, although such forward-looking statements will be publicly updated if required by the Listing Rules, the Prospectus Rules, the Disclosure and Transparency Rules, the rules of the London Stock Exchange or by law.

The release, publication or distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about, and observe, any applicable restrictions or requirements. Any failure to comply with such restrictions may constitute a violation of the securities laws of any such jurisdiction. This announcement has been prepared for the purposes of complying with English law and the Listing Rules and the applicable rules and the information disclosed may not be the same as that which would have been disclosed if this document had been prepared in accordance with the laws and regulations of any jurisdiction outside of England and Wales. The statements contained in this announcement are made as at the date of this announcement, unless some other time is specified in relation to them, and publication of this announcement shall not give rise to any implication that there has been no change in the facts set forth herein since such date. No statement in this announcement is intended as a profit forecast or a profit estimate and no statement in this announcement should be interpreted to mean that earnings per Fiberweb share for the current or future financial years would necessarily match or exceed the historical published earnings per Fiberweb share.

Note:  unless otherwise stated in this document, the exchange rate of US$1.6 to £1 prevailing on 10 November 2011 has been used to present financial information.

ANNEX I

DEFINITIONS

The following definitions apply throughout this document, unless the context requires otherwise: