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Australian packaging and resource recovery group Close the Loop (ASX: CLG) is selling its ISP Tek Services business in Texas to Ivy Technology Holdings for US$10 million ($14 million), with the proceeds and existing cash reserves to be used to retire about US$16 million in outstanding debt.
The divestment marks a strategic pivot for the company as it moves to shed non-core operations and concentrate on its packaging and resource recovery divisions.
Chairman Grant Carman says the transaction is an important milestone in the company's transformation .
“Management is highly confident in the future outlook of the business and believes the streamlined operating platform will enable the company to grow from strength to strength as it executes on the significant opportunities available within its core markets,” says Carman.
"It reflects a disciplined and proactive approach to reshaping the portfolio while ensuring the company remains focused on its highest-performing and most strategic operations.”
Close the Loop, which has operations on five continents with a corporate goal of “zero waste to landfill”, collects and refurbishes products such as laptops, printers, teleconferencing equipment and gaming devices and provides sustainable packaging, which allow for greater recoverability and recyclability.
Settlement terms for the ISO Tek Services sale comprise US$9 million ($12.6 million) payable at completion and a US$1 million ($1.4 million) seller note to be repaid in four quarterly instalments.
Close the Loop says the debt reduction, combined with a refinancing of its residual US$19.5 million ($27.5 million) in debt facilities, is expected to deliver an interest rate reduction of 350 to 400 basis points across the remaining book.
The company is also restructuring two convertible notes, each valued at US$7.5 million ($10.6 million), held by Sammy and Dania Saloum.
Under the first note, US$4.15 million ($5.8 million) will convert to Close the Loop shares at 20c per share, US$2.5 million ($3.5 million) will be repaid in cash, and the remainder will be restructured as a five-year interest-free loan.
The second note, including US$900,000 ($1.27 million) in accrued interest, will convert to shares at 37c per share.
This compares with Close the Loop's current share price of 3.2c per share, up 1c today following the announcement.
Both conversions require shareholder approval at an extraordinary general meeting, with one of the noteholders a related party of the company.
“The company gratefully acknowledges and sincerely appreciates the continued support and confidence shown by Sammy and Dania Saloum in both the company and its management team," says Carman.
"Their belief in the revised strategy and long-term direction of the business has been invaluable and reflects a shared conviction in the significant opportunity ahead."
Carman points to artificial intelligence-driven efficiencies and disciplined capital allocation as key pillars of the company's next phase, flagging EBITDA guidance of $14 million to $16 million for FY27 from the continuing packaging and resource recovery operations.
"The company will become AI-powered, shifting from manual execution to strategic, AI-augmented workflows," he says.
"This will enable employees to focus on high-value strategy and creativity, while using proprietary data to build a distinct competitive advantage through customised, intelligent systems.”
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