Inspec Group PLC - Rec.Offer by Laporte,etc-Pt.6
August 05 1998 - 5:10AM
UK Regulatory
RNS No 2768v
INSPEC GROUP PLC
5th August 1998
PART SIX OF SIX
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LAPORTE PLC
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RECOMMENDED CASH OFFER FOR INSPEC GROUP PLC
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Appendix II
-----------------------------
Particulars of the Loan Notes
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE UNITED
STATES, CANADA, AUSTRALIA OR JAPAN
The Loan Notes will be created by a resolution of the board of
directors of Laporte or a duly authorised committee thereof and
will be constituted by a loan note instrument (the 'Loan Note
Instrument'). The issue of the Loan Notes will be conditional on
the Offer becoming or being declared unconditional in all
respects. The Loan Note Instrument will contain provisions, inter
alia, to the effect set out below:
1. Form, status, registration and transfer
The Loan Notes will be issued in registered form in amounts and
multiples of UK PDS 1, will be transferable in amounts and
multiples of UK PDS 100 (or the entire holding), 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. The Loan Note Instrument will not
contain any restrictions on borrowings or charging or disposal of
assets by Laporte or any member of the Laporte Group.
2. Interest
Interest on the Loan Notes will be calculated on the basis of a
365 day year and will be payable (less any applicable tax)
quarterly in arrear on 2nd January, 2nd April, 2nd July and 2nd
October or, if any such day is not a business day, on the next
succeeding business day ('interest payment dates') in each year in
respect of the interest periods (as defined below) ending on the
day immediately before such dates at the rate specified below,
except that the first payment of interest on the Loan Notes, which
will be made on 2nd January 1999 (or, if such day is not a
business day, on the next succeeding business day), will be in
respect of the period from and including the first date of issue
of the Loan Notes up to (but excluding) 2nd January, 1999. The
period from and including the first date of issue of the Loan
Notes up to (but excluding) 2nd January, 1999 and the period from
(and including) 2nd January, 1999 or any subsequent interest
payment date up to (and excluding) the next following interest
payment date is herein called an 'interest period'.
The rate of interest payable on the Loan Notes for each interest
period will be the rate per annum calculated by Laporte to be 1.0
per cent. below the average (rounded down where necessary to the
nearest whole multiple of one-sixteenth of one per cent.) of the
respective rates per annum at which any two London clearing banks
selected by Laporte are prepared to offer three month sterling
deposits of UK PDS 1,000,000 to leading banks in the London Inter-
Bank Market for sterling at or about 11.00am (London time) on the
first day of the relevant interest period or, if such a day is not
a business day, on the next succeeding business day.
3. Repayment of the Loan Notes
(A) Any Loan Notes not previously repaid or purchased or
cancelled under this paragraph or paragraphs 4 or 5
below will be redeemed in full at par on 2nd January,
2008 or, if such day is not a business day, on the next
succeeding business day (the 'Final Redemption Date')
together with accrued interest (less any applicable tax)
up to (but excluding) that date.
(B) A holder of Loan Notes ('Noteholder') may require all or
any part (being UK PDS 100 in nominal amount or any
multiple thereof) of his holding of Loan Notes to be
repaid at par together with accrued interest up to but
excluding the date of payment (less any applicable tax)
on 2nd July, 1999 (or, if such a day is not a business
day, on the next succeeding business day) and thereafter
on any interest payment date falling prior to the Final
Redemption Date by giving not less than 30 days' notice
in writing to expire on or before the relevant interest
payment date.
(C) If, at any time on or after 2nd July, 2002, 75 per cent.
in nominal value of the Loan Notes has been repaid or
purchased and cancelled or UK PDS 2,000,000 or less in
nominal value of Loan Notes is outstanding, Laporte
shall have the right, on giving not less than 30 days'
notice in writing to the remaining Noteholders, to
redeem all (but not some only) of the outstanding Loan
Notes by payment of the nominal value thereof together
with accrued interest up to but excluding the date of
payment (less any applicable tax).
4. Purchase of the Loan Notes
Laporte may at any time by agreement with the relevant Noteholder
purchase any Loan Notes at any price by tender, private treaty or
otherwise.
5. Cancellation
Any Loan Notes repaid or purchased shall be cancelled and shall
not be available for re-issue.
6. Additional Notes
Each Noteholder shall have the right on giving 60 days' prior
written notice to Laporte to acquire (by subscription at nominal
value of an amount up to or equal to such Noteholder's holding of
Loan Notes, such amount to be payable in full on subscription)
additional loan notes to be issued by a subsidiary of Laporte
(with an appropriate level of net worth) ('Additional Notes') on
terms and conditions substantially the same as those applicable to
the Loan Notes, except that the Additional Notes shall not carry
any right to acquire additional securities and the rate of
interest on the Additional Notes shall be 1.0 per cent below the
rate per annum referred to above in paragraph 2.
7. Modifications
The provisions of the Loan Note Instrument and the rights of the
Noteholders will be subject to modification, abrogation or
compromise in any respect with the sanction of an Extraordinary
Resolution of the Noteholders as defined in the Loan Note
Instrument and with the consent of Laporte.
8. Further Loan Notes
Provisions will be made in the Loan Note Instrument to enable
Laporte to make further issues of loan notes so as to form a
single series with the Loan Notes.
9. Substitution or exchange
The Loan Notes will contain provisions entitling Laporte, without
the consent of the Noteholders, to substitute any member or
members of the Laporte Group resident in the United Kingdom for
tax purposes as the principal debtor or debtors under the Loan
Note Instrument and the Loan Notes (subject to a guarantee by
Laporte if the principal debtor is not Laporte) or to require all
or any of the Noteholders to exchange the Loan Notes for loan
notes issued on the same terms mutatis mutandis by one or more
members of the Laporte Group (subject to a guarantee by Laporte
if it is not the principal debtor).
10. Listing
No application has been or is intended to be made for the Loan
Notes to be listed or dealt in on any stock exchange.
11. Governing law
The Loan Notes and the Loan Note Instrument will be governed by
and construed in accordance with English law.
12. Value
Credit Suisse First Boston de Zoete and Bevan Limited as
stockbroker to Laporte, has advised that, in current market
conditions, it estimates the value of the Loan Notes to be 99.4p
per UK PDS 1 in nominal value.
APPENDIX III
--------------------------------------------
Financial effects of acceptance of the Offer
The following tables, which are for illustrative purposes only,
and on the bases and assumptions set out in the notes below, show
the financial effects of acceptance of the Offer on capital value
and gross income for an accepting holder of one Inspec Share if
the Offer becomes or is declared wholly unconditional.
A. Increase in Capital Value under the terms of the Offer
Cash
Consideration
(p)
Consideration 340.0
Market value of one
Inspec Share(i) 243.0
Increase in capital value 97.0
This represents an
effective increase 39.9%
B. Increase in Gross Income under the terms of the Offer
Cash
Consideration
(p)
Gross income from
re-investment of
cash consideration(ii) 19.1
Gross historic dividend
income from one
Inspec Share(iii) 8.4
Increase in income 10.6
This represents an effective
increase of 126.1%
Notes:
(i) The closing middle-market price (as derived
from SEDOL) of 243p per Inspec Share on 3rd
August, 1998, the last dealing day prior to
the announcement by Inspec that it was in
advanced discussions with Laporte.
(ii) The cash consideration is assumed to be re-
invested so as to yield 5.61 per cent. per
annum, being the Average Gross Redemption
Yield Index for medium coupon UK Government
securities of 5 to 15 years maturity as
published in the Financial Times on 4th
August, 1998, for the last practical day prior
to this announcement.
(iii) The gross dividend income from one Inspec
Share is based on the aggregate of 4.5p (net)
per share, being the final dividend for the
year ended 31st December, 1997 and 2.25p
(net)per share, being the interim dividend for
the half year ended 30th June, 1997, together
with the associated tax credit of 20/80ths on
those dividends.
(iv) No account has been taken of any potential
liability to taxation.
Appendix IV
-------------------------------
Inspec excluding Inspec Belgium
In order to calculate the implied multiples offered by Laporte for
Inspec, operating profit, earnings and earnings per share for the
year to 31st December, 1997 for Inspec excluding Inspec Belgium
for the whole of the year, have been derived after making the
assumptions set out in the notes below. The Inspec financial
information is extracted from the published audited accounts for
the year ended 31st December, 1997; Inspec Belgium financial
information has been extracted from the circular published on 14th
April 1998 relating to the disposal of Inspec Belgium titled
'Proposed disposal of Inspec Belgium'
Pro Forma Financial Information
For the year ended 31st December, 1997
--------------------------------------
Inspec Inspec Adjustments Inspec Excl.
Group Belgium resulting Inspec
from Belgium
Disposal
UK PDS'000 UK PDS'000 UK PDS'000 UK PDS'000
----------------------------------------------
Operating profit 55,475 (19,450) - 36,025
Net interest payable(8,406) - 5,001 (3,405)
Profit on ordinary
activities before
taxation 47,069 (19,450) 5,001 32,620
Tax on profit on
ordinary activities (8,472) - 2,601 (5,871)
Profit on ordinary
activities after
taxation 38,597 (19,450) 7,602 26,749
Equity minority
interests 140 - - 140
Profit for the
financial year 38,737 (19,450) 7,602 26,889
Ordinary dividends (11,787) - - (11,787)
Retained profit for
the year 26,950 (19,450) 7,602 15,102
Earnings per 2p
ordinary share
FRS3 basis 22.2p - - 15.4p
Adjusted earnings
per share 22.2p - - 15.4p
Notes:
(i) The net disposal proceeds of UK PDS 78,068,000 are
received on 1st January, 1997 and are used to reduce
debt. The reduction in interest paid of UK PDS 5.001
million is calculated by applying the 1997 effective
interest rate of 6.41 per cent. to the disposal
proceeds. The effective interest rate was derived by
taking the 1997 net interest charge, (excluding the
interest receivable relating to Musley) of UK PDS 10.4
million and dividing it by the average of the 1996
closing net debt (excluding loans to Musley) of UK PDS
176.7 million and 1997 closing net debt (excluding loans
to Musley) of UK PDS 148.3 million
(ii) It has been assumed that the disposal leaves Inspec's
effective tax rate unchanged at 18.0 per cent.
(iii) The disposal proceeds are assumed to be tax free
(iv) To derive the Inspec operating profit, earnings and
earnings per share excluding Inspec Belgium, it was
assumed that the two companies were stand-alone
businesses and had no commercial relationships (e.g., no
additional cost incurred following the disposal as a
result of being a stand-alone business)
(v) Calculation of earnings per ordinary share is based on
earnings after tax and minority interest and on
174,500,344 ordinary shares, being the weighted average
number of shares in issue during the year ended 31st
December, 1997
Appendix V
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Definitions
The following definitions apply throughout this press release,
unless the context requires otherwise:
'Code' The City Code on Takeovers and Mergers;
'Enlarged Group' the Laporte Group as enlarged by the
acquisition of the Inspec Group;
'Deutsche Bank' Deutsche Bank AG London;
'Inspec' Inspec Group plc;
'Inspec Group' Inspec and its subsidiary undertakings;
'Inspec Share Schemes' the 1995 Inspec Employee Share
Scheme, the 1996 Inspec Employee
Share Scheme, the 1996 Share Option
Scheme, the Inspec Approved Profit
Sharing Scheme, the Inspec Approved
Savings Related Share Option Scheme,
the Inspec Approved Executive Share
Option Scheme and the Inspec
Incentive Share Schemes;
'Inspec Shares' the existing issued and fully paid
ordinary shares of 2p each in Inspec
and any further such shares which
are unconditionally allotted or
issued before the date on which the
Offer closes (or such earlier date,
not being earlier than the date on
which the Offer becomes unconditional
as to acceptances or, if later, the
first closing date, as Laporte may
decide);
'Inspec Shareholders' the holders of Inspec Shares;
'Lazard Brothers' Lazard Brothers & Co., Limited;
'LIBOR' the average (rounded down where
necessary to the nearest whole
multiple of one-sixteenth of one per
cent.) of the respective rates per
annum at which any two London
clearing banks selected by Laporte
are prepared to offer three month
sterling deposits of UK PDS
1,000,000 to leading banks in the
London Inter-Bank Market for
sterling at or about 11.00am (London
time) on the first day of the
relevant interest period or, if such
a day is not a business day, on the
next succeeding business day;
'Laporte' or 'Company' Laporte plc;
'Laporte Group' Laporte and its subsidiary undertakings;
'Listing Rules' the rules and regulations made by
the London Stock Exchange under
Section 142 of the Financial
Services Act 1986 and contained in
the London Stock Exchange's
publication of the same name;
'Loan Note Alternative' the alternative whereby eligible
Inspec Shareholders who validly
accept the Offer may elect to
receive Loan Notes in lieu of all or
part of the cash consideration under
the Offer;
'Loan Notes' the floating rate unsecured loan
notes of Laporte to be issued
pursuant to the Loan Note
Alternative, the principal terms of
which are set out in Appendix II;
'London Stock Exchange' London Stock Exchange Limited;
'Offer' the recommended offer to be made by
Lazard Brothers on behalf of Laporte
to acquire the Inspec Shares not
already owned by Laporte at the time
the offer is made and, where the
context admits, any subsequent
revision, variation, extension or
renewal thereof;
'Panel' The Panel on Takeovers and Mergers;
'SEDOL' Stock Exchange Daily Official List;
'United States' or 'US' the United States of America, its
territories and possessions, any
State of the United States of
America and the District of
Columbia.
END
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