RNS No 2763p
INSPEC GROUP PLC
5th August 1998
PART FOUR OF SIX
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LAPORTE PLC
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RECOMMENDED CASH OFFER FOR INSPEC GROUP PLC
-------------------------------------------
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE UNITED
STATES, CANADA, AUSTRALIA OR JAPAN
Introduction
------------
The Boards of Laporte and Inspec announce that they have reached
agreement on the terms of a recommended cash offer to be made by
Lazard Brothers on behalf of Laporte, to acquire the whole of the
issued and to be issued ordinary share capital of Inspec. The
Offer values the share capital of Inspec at approximately UK PDS
611 million on a fully diluted basis, and each ordinary Inspec
Share at 340p.
The directors of Inspec, who have been so advised by Deutsche
Bank, consider the terms of the Offer to be fair and reasonable.
In providing advice to the directors of Inspec, Deutsche Bank has
taken into account the directors' commercial assessments.
The directors of Inspec will unanimously recommend Inspec
Shareholders to accept the Offer. Directors of Inspec have
irrevocably undertaken to accept the Offer in respect of their
personal shareholdings amounting in aggregate to 6.6 million
Inspec Shares representing approximately 4 per cent. of the
existing issued share capital of Inspec. These undertakings are
binding even if a competing offer is announced by a third party.
As a result of market purchases on Tuesday, 4th August, 1998,
Laporte is beneficially interested in 45.6 million Inspec Shares
representing 25.8 per cent of the existing issued share capital.
The Offer will be subject to a number of conditions, including the
passing of an ordinary resolution by Laporte Shareholders to
approve the Offer.
Certain terms used in this announcement are defined in Appendix V.
The Offer
---------
The Offer, which will be subject to the conditions and further
terms set out in Appendix I and to be set out in the formal Offer
document, will be made on the following basis:
for each Inspec Share 340p in cash
and so in proportion for any other number of Inspec Shares held.
The Inspec Shares will be acquired fully paid and free from all
liens, equities, charges, encumbrances and other interests and
together with all rights now or hereafter attaching thereto,
including the right to all dividends and other distributions (if
any) hereafter declared, made or paid.
Value of the Offer
------------------
The consideration available under the Offer:
* values each Inspec Share at 340p;
* values the share capital of Inspec at approximately UK
PDS 611 million on a fully diluted basis;
* represents a premium of 2.3 per cent. to the price of
332.5p, which was the closing middle market price(as
derived from SEDOL) of an Inspec Share at the close of
business on 4th August, 1998, the last practical day
prior to this announcement;
* represents a premium of 39.9 per cent. to the price of
243.0p, which was the closing middle market price(as
derived from SEDOL) of an Inspec Share at the close of
business on 3rd August, 1998, the last dealing day prior
to the announcement by Inspec that it was in advanced
discussions with Laporte;
* represents an historical multiple of 11.5 times the
Inspec operating profit of UK PDS 55.5 million for the
financial year ended 31st December, 1997 and an
historical multiple of 17.7 times the Inspec operating
profit excluding Inspec Belgium of UK PDS 36.0 million
for the year ended 31st December, 1997;
* represents an historical price earnings multiple of 15.8
times the Inspec earnings per share of 22.2p for the
financial year ended 31st December, 1997; and an
historical price earnings multiple of 22.7 times the
Inspec earnings per share excluding Inspec Belgium of
15.4p for the financial year ended 31st December, 1997.
Details on the calculation of the Inspec Group financials
excluding Inspec Belgium are set out in Appendix IV, including the
bases and assumptions for the above calculations.
Further details of the financial effects of acceptance of the
Offer are set out in Appendix III.
The Loan Note Alternative
-------------------------
Inspec Shareholders (other than certain overseas shareholders) who
validly accept the Offer may elect to receive Loan Notes instead
of some or all of the cash consideration which would otherwise be
receivable under the Offer on the following basis:
For every UK PDS 1 of cash under the Offer UK PDS 1 nominal
of Loan Notes
The Loan Notes will be issued, credited as fully paid, in amounts
and multiples of UK PDS 1 nominal amount and will constitute
unsecured obligations of Laporte, but will have the benefit of a
guarantee in respect of principal from Barclays Bank PLC and The
Toronto-Dominion Bank for the first five years after the date of
their first issue. Any fractional entitlements will be satisfied
in cash.
The Loan Notes will bear interest, payable quarterly, at the rate
per annum calculated to be three month LIBOR less 1.0 per cent.
The first interest payment date will be 2nd January, 1999.
Holders of Loan Notes will have the right to redeem some or all
their Loan Notes on 2nd July, 1999 and at quarterly intervals (on
interest payment dates), thereafter. Unless previously redeemed
or purchased, the Loan Notes will be redeemed on 2nd January,
2008.
The Loan Notes will be transferable in amounts and multiples of UK
PDS 100, but no application is intended to be made for the Loan
Notes to be listed or dealt in on any stock exchange or other
trading facility.
Credit Suisse First Boston de Zoete and Bevan Limited, acting as
broker to Laporte, has advised that based on current market
conditions, it estimates the value of Loan Notes would be not less
than 99.4p per UK PDS 1 of nominal value.
If valid elections for the Loan Note Alternative do not result in
the issue of at least UK PDS 2 million of Loan Notes, no Loan
Notes will be issued unless Laporte determines otherwise. No US
person or person within Canada, Japan or Australia who wishes to
accept the Offer may elect to accept the Loan Note Alternative.
Further details of the Loan Notes are contained in Appendix II.
Reasons for the Offer
---------------------
In recent years, the European chemicals sector, in particular, has
entered a phase of significant restructuring and consolidation as
a result of global life science companies spinning off their
chemicals interests. This has been motivated by the need to
support the internationalisation of their customer base, their
need to leverage their skills base across borders and to achieve
scale efficiencies in manufacturing and Research and Development.
Anticipating this emerging environment, Laporte has, over the past
two years, been refocusing its portfolio towards businesses with
the following characteristics:
- niche market leadership;
- sustainable growth prospects;
- international bias; and
- attractive profits and returns.
As part of this refocusing programme, around one third of the
sales and nearly half of the sites that were in the Laporte Group
at the commencement of this programme have now been divested.
For the organic development of the businesses, Laporte has
substantially increased the rate of capital investment in the
remaining businesses, as well as stepping up investment in
Research and Development.
To augment the organic development, Laporte has sought to invest
the financial resources freed up from the refocusing programme by
identifying acquisitions which meet the following criteria:
- growth in Laporte's core activities;
- strengthening of global market positions;
- complementary development, resulting in synergies in
manufacturing, sales and marketing and Research and
Development.
The directors of Laporte believe that Inspec meets its criteria
for developing and enhancing the Laporte Group, referred to above.
The directors of Laporte believe that the acquisition would be
beneficial to Laporte and Inspec as it would:
- reinforce the Enlarged Group as a leading European-based
niche speciality chemicals company, holding strong
positions in most of the markets in which it operates;
- establish a truly global business servicing the
pharmaceutical, agrochemical and life science
industries;
- produce operational synergies as a result of commonality
of customers, marketing and cross-selling opportunities;
- harness complementary strengths in operational and
technical development, technical management and customer
service and support;
- generally expand the Enlarged Group's geographical
coverage in Europe, the Americas and other key
industrial markets worldwide;
- provide the Enlarged Group with even greater Research
and Development resources and capabilities; and
- as a result of all of the above, potentially increase
the rate of growth and generate cost savings in such
areas as administration, corporate overhead, distribution
energy and utilities and other indirect costs.
The directors of Laporte believe that, under Laporte's ownership,
Inspec can achieve its full potential. Following the acquisition,
the Enlarged Group will continue to enjoy a strong financial
position and will benefit from Laporte's management's proven
expertise.
The directors of Laporte expect that (excluding the effects of
goodwill amortisation) the acquisition of Inspec will be earnings
neutral for the first full year following the acquisition which is
expected to be year ended 31st December 1999. This statement
should not be interpreted to mean that the future earnings per
share of Laporte, as enlarged by the acquisition of Inspec, will
necessarily be greater than the historical published earnings per
share of Laporte.
Information on Inspec
---------------------
Inspec is a leading supplier of fine and speciality chemicals.
Its operations are organised by product area into three divisions:
Specialities - small to medium tonnage, high added value
chemicals, which are sold for a wide range of end uses, often to a
performance specification or as a component in a blended
proprietary product.
Fine Chemicals - small tonnage, high value added products of
complex, multi-stage chemical synthesis, mainly used in the life
science industries.
Performance Products - Polyimide foams and fibres and metal
recovery chemicals. The principal applications are insulation,
hot gas filtration and copper extraction.
Inspec's continuing operations had a turnover of UK PDS 394.3
million in the year ended 31st December, 1997. In this period
operating profit on continuing operations was UK PDS 55.5
million; earnings per share were 22.2p. At that date consolidated
net assets were UK PDS 87.1 million.
On 14th April, 1998, Inspec agreed to sell Inspec Belgium to
Ineos, a company led by James Ratcliffe, former Managing Director
of Inspec, for UK PDS 82.2 million. Inspec Belgium generated
sales of UK PDS 140.5 million and operating profit of UK PDS
19.5 million for the year ending 31st December, 1997. As at 31st
December, 1997 Inspec Belgium had net assets of UK PDS 82.6
million.
At the close of business on Tuesday 4th August, 1998, the last
dealing day prior to this announcement, Inspec had a market
capitalisation of approximately UK PDS 588 million. Inspec
announced today its interim results, for the period ended 30th
June, 1998.
Information on Laporte
----------------------
Laporte is a leading UK speciality chemicals manufacturer. The
Laporte Group develops, produces and sells speciality chemicals
and performance materials for niche markets worldwide. The group
operates through four divisions:
Speciality Organics - Laporte is involved in the contract
research, development and manufacture in Europe and North America
of advanced organic intermediates and bulk actives for the
international pharmaceutical, health care, agrochemical, food
additives and speciality polymer industries. The division
produces advanced initiators and catalysts, consisting principally
of organic peroxides and inorganic persulphates for polymer and
chemical synthesis. Laporte is one of the leaders in the
development of novel metallocenes and other emerging forms of
catalysts for the next generation of polymeric compounds.
Pigments and Additives - Laporte is the world's second largest
supplier of iron oxide pigments with major production facilities
in Europe and North America. A complete colour range of pigments
is available to service the construction, coatings and speciality
applications markets with patented granular, powder and slurry
grades, including granular pigment dispensing systems. Laporte is
a world leader in synthetic and organic thickeners for industrial,
domestic, cosmetic and personal hygiene applications. In Europe
there are additional activities in carbonless paper coating clays.
Compounds and Electronic Materials - Laporte is a major specialist
manufacturer of high specification PVC and TPE (thermoplastic
elastomers) materials for data transmission cables and low smoke
electrical insulation, including patented flame retardant
technology, closure seals for the world drinks and beverages
industries and regulated disposable medical components for
surgical procedures and treatments. The division is a leading
producer of materials and chemicals for the semi-conductor and
electronics industries. Products include photo-imaging masks for
the production of silicon chips, ultra pure chemicals for
integrated circuit manufacture and chemicals and processes for
printed circuit board manufacture. Laporte is a world leader in
silicon wafer recycling.
Formulated Products - Laporte is the world's second largest
supplier of primary wood preservatives with a leading position in
the development, production and marketing of specialist
formulations for protective, decorative and remedial treatments.
The division is a supplier of process technology for primary
timber impregnation and a major European supplier of high
performance, disinfection, cleansing and sanitising chemicals,
serving the dairy farm, food processing, drinks, beverage and
institutional catering industries. It is also a leading North
American manufacturer of branded speciality pool and spa
performance chemicals and a supplier of novel environmentally safe
herbicides for the control of intrusive vegetation in irrigation
systems, lakes and ponds.
At the close of business on Tuesday 4th August, 1998, the last
dealing day prior to this announcement, Laporte had a market
capitalisation of approximately UK PDS 1.3 billion.
Current Trading and Prospects
-----------------------------
In the year to 31st December, 1997 Laporte's turnover from
continuing operations was UK PDS 732.8 million, with operating
profit from continuing operations of UK PDS 112.7 million.
Earnings per share were 49.5 p before exceptional items.
Despite the general economic environment and the strength of
sterling which will continue to provide a challenging business
environment, Laporte's strong market positions and continuing
aggressive management of its cost base, together with its strong
investment programme, give the Board confidence in its ability to
perform to the highest levels within the industry.
Key Highlights from the Interim Results for Laporte
---------------------------------------------------
Laporte has announced today interim results for the six months
ended 30th June, 1998.
Sales from continuing operations grew by 2 per cent. to UK PDS
377.2 million and by 5 per cent. at constant exchange rates for
translation. Operating profit from continuing operations was UK
PDS 60.5 million with margins rising to 16.0 per cent. from 15.0
per cent., an increase of UK PDS 5.0 million on the previous year.
Profit before tax was UK PDS 66.8 million, an increase of 4 per
cent. at constant exchange rates over last year. Pre-exceptional
earnings per share rose to 24.9p from 24.8p. As at the half year,
30th June, 1998 the group had equity shareholders' funds of UK
PDS 447.0 million.
Management and employees
------------------------
Laporte attaches great importance to the skills and experience of
the existing management and employees of Inspec and believes that
they will have greater opportunities in the various business
groupings arising out of the acquisition of Inspec by Laporte.
The existing employment rights, including pension rights, of the
management and employees of the Inspec Group will be fully
safeguarded.
John Hollowood, Chairman of Inspec, will join the Board of Laporte
following the acquisition.
Following the acquisition, other executive directors of Inspec
will form part of the executive management team of the Enlarged
Group's Speciality Chemicals Division and will become divisional
directors of the Laporte Group.
Financing of the Offer
----------------------
The Offer will be financed out of a combination of existing cash
resources and new bank facilities provided by Barclays Bank PLC
and The Toronto-Dominion Bank.
Inspec Share Schemes
--------------------
The Offer will extend to any Inspec Shares issued or
unconditionally allotted prior to the date on which the Offer
closes (or such earlier date as Laporte may determine, not being
earlier than the date on which the Offer becomes unconditional as
to acceptances or, if later, the first closing date of the Offer)
as a result of the exercise of options, or other rights granted,
or as a result of conversion of convertible loan stock issued,
under the Inspec Share Schemes.
Appropriate proposals will be made in due course to participants
in, or option holders under, the Inspec Share Schemes if the Offer
becomes or is declared unconditional in all respects.
General
-------
The formal Offer documents and a circular to Laporte shareholders
setting out details of the Offer and convening an Extraordinary
General Meeting of Laporte will be despatched as soon as
practicable.
Save as disclosed above, neither Laporte nor, so far as Laporte is
aware, any party acting in concert with Laporte, owns or controls
any Inspec Shares or holds any options or other rights to purchase
or otherwise receive Inspec Shares or has entered into any
derivative referenced to Inspec Shares.
The availability of the Offer to Inspec Shareholders not resident
in the United Kingdom may be affected by the laws of the relevant
jurisdiction. Inspec Shareholders, who are not resident in the
United Kingdom should inform themselves about and observe any
applicable requirement in relation to their acceptance of the
Offer.
ENQUIRIES
---------
Laporte plc Tel: 0171 399 2400
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James Leng
Michael Kayser
Lazard Brothers & Co., Limited Tel: 0171 588 2721
------------------------------
Nigel Turner
John Wilford
Finsbury Tel: 0171 251 3801
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James Murgatroyd
Tom Hampson
Inspec Group plc Tel: 01703 245 301
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Dr John Hollowood
Deutsche Bank AG London Tel: 0171 545 8000
-----------------------
Jeremy Lucas
Adrian Fisk
Financial Dynamics Tel: 0171 831 3113
------------------
Charles Watson
Lazard Brothers, which is regulated in the United Kingdom by The
Securities and Futures Authority Limited, is acting for Laporte
and no one else in connection with the Offer and will not be
responsible to anyone other than Laporte for providing the
protections afforded to customers of Lazard Brothers, nor for
providing advice in relation to the Offer.
Deutsche Bank, which is regulated in the United Kingdom by The
Securities and Futures Authority Limited, is acting for Inspec and
no one else in connection with the Offer and will not be
responsible to anyone other than Inspec for providing the
protections afforded to customers of Deutsche Bank, nor for
providing advice in relation to the Offer.
The Offer will not be made, directly or indirectly, in or into or
by the use of the mails of, or by any means or instrumentality
(including, without limitation, facsimile transmission, telex or
telephone) of interstate or foreign commerce of, or any facility
of a national securities exchange of, the United States, and the
Offer will not be capable of acceptance by any such use, means,
instrumentality or facility or from within the United States,
Canada, Australia or Japan. Accordingly, except as required by
applicable law, copies of this announcement and any other
documents related to the Offer are not being, and must not be,
mailed or otherwise distributed or sent in or into or from the
United States, Canada, Australia or Japan and persons receiving
such documents (including custodians, nominees and trustees) must
not distribute or send them in, into or from such jurisdictions.
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