TIDMCLLN
RNS Number : 5477P
Carillion PLC
19 August 2014
THIS ANNOUNCEMENT IS NOT AN ANNOUNCEMENT OF A FIRM INTENTION TO
UNDERTAKE ANY TRANSACTION UNDER RULE 2.7 OF THE CITY CODE ON
TAKEOVERS AND MERGERS (THE "CODE") AND THERE CAN BE NO CERTAINTY
THAT ANY TRANSACTION WILL PROCEED, OR AS TO THE TERMS OF ANY SUCH
TRANSACTION.
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART
IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A
VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT
JURISDICTION.
FOR IMMEDIATE RELEASE 19 August 2014
Carillion offers Balfour Beatty Shareholders a 36% premium
Key Highlights
-- Following discussions with Balfour Beatty's major
shareholders, Carillion announces that it has today put an improved
merger proposal to Balfour Beatty. Carillion hopes that, on the
basis of these improved terms, the Board of Balfour Beatty will now
re-engage in discussions and extend the PUSU deadline.
- 58.268% share for Balfour Beatty shareholders based on the
current undiluted ordinary share capital of each of Balfour Beatty
and Carillion, as well as a cash dividend (or equivalent) of 8.5
pence per Balfour Beatty share (GBP59 million in total). This
values Balfour Beatty at GBP2,086 million(1)
- Balfour Beatty had previously agreed to a 56.5% share for
Balfour Beatty shareholders based on the current undiluted ordinary
share capital of each of Balfour Beatty and Carillion, worth
GBP1,886 million(1)
- Carillion's improved proposal announced today represents a
premium of 36% to the 1 month Volume Weighted Average Price prior
to 24 July 2014 (the trading day immediately preceding the joint
leak announcement)
-- The Board of Carillion continues to believe in the powerful
strategic logic of a merger with Balfour Beatty and that, as a
direct result of the merger, the cost-base of the combined group
could be reduced by at least GBP175 million per annum by the end of
2016(2) , that earnings would consequently be significantly
enhanced from that year(3) and that these cost savings would
represent a capitalised value of over GBP1.5 billion before any
re-rating(4) .
-- Since its announcement on 14 August 2014, Carillion has
continued discussions with Balfour Beatty's major shareholders.
Carillion believes that the revised proposal provides a compelling
case for the Board of Balfour Beatty to request the Panel on
Takeovers and Mergers to extend the PUSU deadline and to resume
discussions with Carillion, particularly when seen in the light of
Balfour Beatty's proposal to continue on a standalone basis,
including the possibility of a return of capital to Balfour Beatty
shareholders of up to GBP200 million.
Philip Green, Chairman of Carillion said "Given the scale of the
prize for shareholders of both Balfour Beatty and Carillion from a
merger of the two companies, the Board of Carillion remains
committed to moving forward in a constructive and collaborative way
with the Board and management of Balfour Beatty to create a
world-class business and very significant value for the
shareholders of both companies".
PUSU Extension
The deadline imposed by the Panel on Takeovers and Mergers for
Carillion to announce a firm offer, or to announce that it does not
intend to make a firm offer, is currently 5:00pm this Thursday 21
August 2014. In order for discussions to continue and for mutual
due diligence to be concluded, Balfour Beatty must request that the
Panel on Takeovers and Mergers extend this deadline.
From the time of full re-engagement by Balfour Beatty, Carillion
expects to be in a position to announce a firm offer for Balfour
Beatty within four weeks.
The Proposed Offer
Carillion's revised proposal is as follows:
-- All-share merger of Carillion and Balfour Beatty;
-- 58.268% share for Balfour Beatty shareholders based on the
current undiluted ordinary share capital of each of Balfour Beatty
and Carillion;
-- In addition to the interim dividend announced by Balfour
Beatty last week and to the 2014 final dividend to which
shareholders of the combined group would be entitled, Balfour
Beatty shareholders to receive an additional cash dividend or
equivalent of 8.5 pence per Balfour Beatty share (GBP59 million in
total);
-- Leadership team of Richard Howson, CEO; Richard Adam, CFO; and Philip Green, Chairman;
-- Three Balfour Beatty non-executive directors to join the Board;
-- Enlarged group to maintain Carillion's progressive dividend policy;
-- Senior management team below board level to be drawn from both companies; and
-- Remaining Parsons Brinckerhoff bidders' reasonable costs to
be covered by Carillion in the event the merger goes ahead (up to
GBP10 million in aggregate).
Premium
Carillion's improved offer represents a premium of:
-- 36% to the 1 month Volume Weighted Average Price prior to 24
July 2014, the trading day immediately preceding the joint leak
announcement;
-- 30% to the closing share price on 24 July 2014; and
-- 22% to the closing share price on 18 August 2014.
Parsons Brinckerhoff
Carillion has repeated to Balfour Beatty that it is willing to
allow it to continue with its Parsons Brinckerhoff auction process,
and to enter into a contract for a sale of Parsons Brinckerhoff
subject to shareholder approval. However, should the merger
proceed, Carillion would expect the disposal of Parsons
Brinckerhoff not to be completed.
Carillion is willing to reimburse the remaining Parsons
Brinckerhoff bidders' reasonable costs (up to GBP10 million in
aggregate) from the date that discussions with Balfour Beatty
resume, in the event that the merger goes ahead and Parsons
Brinckerhoff is not sold.
Carillion will make a further announcement in due course. In the
meantime, there can be no certainty that any offer will be made by
Carillion or as to the terms on which any such offer might be
made.
The Board of Carillion would only proceed with a merger if,
inter alia (i) due diligence were concluded to its satisfaction;
and (ii) the Boards of Carillion and Balfour Beatty were to
recommend a merger to their shareholders. In accordance with Rule
2.5(c)(i) of the Code, Carillion confirms that these pre-conditions
must be satisfied prior to the agreement of any transaction.
Carillion reserves the right to introduce other forms of
consideration and/or to vary the mix of consideration.
In addition, Carillion reserves the right to make an offer for
Balfour Beatty at any time on less favourable terms:
i. with the agreement or recommendation of the Board of Balfour Beatty;
ii. if, otherwise than in the ordinary course, Balfour Beatty
declares, makes or pays any dividend or other return of capital to
its shareholders;
iii. if a third party announces a firm intention to make an
offer for Balfour Beatty on less favourable terms; or
iv. following the announcement by Balfour Beatty of a whitewash
transaction pursuant to the Code.
As required by Rule 2.6(a) of the Code, Carillion is required,
by not later than 5.00 p.m. on 21 August 2014, to either announce a
firm intention to undertake a transaction in accordance with Rule
2.7 of the Code or announce that it does not intend to undertake a
transaction, in which case the announcement will be treated as a
statement to which Rule 2.8 of the Code applies. This deadline may
be extended with the consent of the Takeover Panel in accordance
with Rule 2.6(c) of the Code. Carillion understands that, in
accordance with Rule 2.6(c), the Takeover Panel will take into
account the views of Balfour Beatty in considering whether to grant
such an extension.
This announcement is not being made with the consent of Balfour
Beatty.
Enquiries:
Carillion
John Denning, Director Group Corporate Affairs +44 (0) 1902 316
426
Lazard & Co., Limited (Lead Financial Adviser) +44 (0) 20
7187 2000
Nicholas Shott
Vasco Litchfield
Cyrus Kapadia
Greenhill & Co. International LLP (Financial Adviser) +44
(0) 20 7198 7400
Anthony Parsons
Alex Usher-Smith
HSBC Bank plc (Financial Adviser) +44 (0) 20 7991 8888
Charles Packshaw
Morgan Stanley & Co. International plc (Joint Corporate
Broker)
Peter Moorhouse +44 (0) 20 7425 8000
Oriel Securities (Joint Corporate Broker)
David Arch +44 (0) 20 7710 7600
Finsbury (PR Adviser)
James Murgatroyd +44 (0) 20 7251 3801
Gordon Simpson
Important Notices
This announcement is not intended to and does not constitute or
form part of any offer to sell or subscribe for or any invitation
to purchase or subscribe for any securities or the solicitation of
any vote or approval in any jurisdiction.
Lazard & Co., Limited ("Lazard"), which is authorised and
regulated in the United Kingdom by the Financial Conduct Authority,
is acting as lead financial adviser to Carillion plc ("Carillion")
and no one else in connection with the possible transaction and
will not be responsible to anyone other than Carillion for
providing the protections afforded to clients of Lazard & Co.,
Limited nor for providing advice in relation to the possible
transaction or any other matters referred to in this announcement.
Neither Lazard & Co., Limited nor any of its affiliates owes or
accepts any duty, liability or responsibility whatsoever (whether
direct or indirect, whether in contract, in tort, under statute or
otherwise) to any person who is not a client of Lazard & Co.,
Limited in connection with this announcement, any statement
contained herein, the possible transaction or otherwise.
Greenhill & Co. International LLP ("Greenhill"), which is
authorised and regulated in the United Kingdom by the Financial
Conduct Authority, is acting as financial adviser to Carillion and
no one else in connection with the possible transaction and will
not be responsible to anyone other than Carillion for providing the
protections afforded to clients of Greenhill & Co.
International LLP nor for providing advice in relation to the
possible transaction or any other matters referred to in this
announcement. Neither Greenhill & Co. International LLP nor any
of its affiliates owes or accepts any duty, liability or
responsibility whatsoever (whether direct or indirect, whether in
contract, in tort, under statute or otherwise) to any person who is
not a client of Greenhill & Co. International LLP in connection
with this announcement, any statement contained herein, the
possible transaction or otherwise.
Morgan Stanley & Co. International plc, which is authorised
by the Prudential Regulation Authority and regulated by the
Financial Conduct Authority and the Prudential Regulation Authority
in the United Kingdom, is acting as joint corporate broker to
Carillion, and no one else in connection with the matters referred
to in this announcement. In connection with such matters, Morgan
Stanley & Co. International plc, its affiliates and its and
their respective directors, officers, employees and agents will not
regard any other person as their client, nor will they be
responsible to any other person other than Carillion for providing
the protections afforded to their clients or for providing advice
in connection with the contents of this announcement or any other
matter referred to herein.
Oriel Securities Limited, which is authorised and regulated by
the Financial Conduct Authority in the United Kingdom, is acting as
joint corporate broker to Carillion, and no one else in connection
with the matters referred to in this announcement. In connection
with such matters, Oriel Securities Limited, its affiliates and its
and their respective directors, officers, employees and agents will
not regard any other person as their client, nor will they be
responsible to any other person other than Carillion for providing
the protections afforded to their clients or for providing advice
in connection with the contents of this announcement or any other
matter referred to herein.
HSBC Bank plc ("HSBC"), which is authorised by the Prudential
Regulation Authority and regulated in the United Kingdom by the
Financial Conduct Authority and the Prudential Regulation
Authority, is acting as financial adviser to Carillion and no one
else in connection with the possible transaction and will not be
responsible to anyone other than Carillion for providing the
protections afforded to clients of HSBC Bank plc nor for providing
advice in relation to the possible transaction or any other matters
referred to in this announcement.
Cautionary Note Regarding Forward-Looking Statements
This announcement contains certain forward-looking statements
with respect to the financial condition, results of operations and
business of Carillion and Balfour Beatty and the combined group.
These forward-looking statements can be identified by the fact that
they do not relate only to historical or current facts.
Forward-looking statements often use words such as "anticipate",
"target", "expect", "estimate", "intend", "plan", "goal",
"believe", "hope", "aims", "continue", "will", "may", "should",
"would", "could", or other words of similar meaning. Forward
looking statements include statements relating to the following:
(i) future capital expenditures, expenses, revenues, earnings,
synergies, economic performance, indebtedness, financial condition,
dividend policy, losses and future prospects; (ii) business and
management strategies and the expansion and growth of Carillion's
or Balfour Beatty's operations and potential synergies resulting
from the transaction; and (iii) the effects of government
regulation on Carillion's or Balfour Beatty's business. These
statements are based on assumptions and assessments made by
Carillion, in light of their experience and their perception of
historical trends, current conditions, future developments and
other factors they believe appropriate.
By their nature, forward-looking statements involve risk and
uncertainty, because they relate to events and depend on
circumstances that will occur in the future and the factors
described in the context of such forward-looking statements in this
document could cause actual results and developments to differ
materially from those expressed in or implied by such
forward-looking statements. They are also based upon assumptions.
Many factors may cause the actual results, performance or
achievements of Carillion to be materially different from any
future results, performance or achievements expressed or implied by
the forward-looking statements. Important factors that could cause
actual results, performance or achievements of Carillion to differ
materially from the expectations of Carillion, include, among other
things, general business and economic conditions globally, industry
trends, competition, changes in government and other regulation,
changes in political and economic stability, disruptions in
business operations due to reorganisation activities, tax rates,
interest rate and currency fluctuations, the failure to satisfy any
conditions for the merger on a timely basis or at all, the failure
to satisfy the conditions of any merger if and when implemented
(including approvals or clearances from regulatory and other
agencies and bodies) on a timely basis or at all, the failure of
Carillion to combine with Balfour Beatty on a timely basis or at
all, the inability of the combined group to realise successfully
any anticipated synergies or cost reductions if and when the merger
is implemented, the inability of the combined group to integrate
successfully Carillion and Balfour Beatty's operations and
programmes if and when the merger is implemented, the combined
group incurring and/or experiencing unanticipated costs and/or
delays or difficulties relating to the merger when the merger is
implemented. Such forward-looking statements should therefore be
construed in light of such factors.
Neither Carillion, nor any of its associates or directors,
officers or advisers, provides any representation, assurance or
guarantee that the occurrence of the events expressed or implied in
any forward-looking statements in this announcement will actually
occur. You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date
hereof.
Carillion does not assume any obligation to update or correct
the information contained in this document (whether as a result of
new information, future events or otherwise), except as required by
applicable law.
No Profit Forecasts Or Estimates
No statement in this announcement is intended as a profit
forecast or estimate for any period and no statement in this
announcement should be interpreted to mean that earnings or
earnings per share for Carillion or the combined group, as
appropriate, for the current or future financial years would
necessarily match or exceed the historical published earnings or
earnings per share for Carillion, as appropriate.
Rounding
Certain figures included in this announcement have been
subjected to rounding adjustments.
Publication On Website
A copy of this announcement will be available, subject to
certain restrictions relating to persons resident in restricted
jurisdictions, for inspection on Carillion's website by no later
than 12 noon (London time) on the day following this announcement.
For the avoidance of doubt, the contents of such website are not
incorporated into and do not form part of this announcement.
THIS ANNOUNCEMENT IS NOT AN OFFER TO BUY BALFOUR BEATTY
SECURITIES OR AN INVITATION TO SELL CARILLION SECURITIES IN ANY
JURISDICTION. THE CARILLION SHARES ARE NOT, AND WILL NOT BE,
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 AND MAY NOT BE
OFFERED OR SOLD WITHOUT AN APPLICABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
U.S. SECURITIES ACT OF 1933.
APPENDIX I
SOURCES AND BASES
-- Unless otherwise stated, financial and other information
concerning Carillion and Balfour Beatty has been extracted from
publicly available sources or from Carillion's management sources
(in respect of information relating to Carillion).
-- The figure set out in respect of the proposed aggregate value
of the additional cash dividend (or equivalent) for Balfour Beatty
shareholders has been calculated by multiplying the amount per
Balfour Beatty share by the announced number of Balfour Beatty
shares in issue as at 18 August 2014 of 689,500,514 ordinary
shares.
-- The figure set out for the capitalised value of cost savings
of at least GBP1.5 billion is based on GBP175 million of cost
savings taxed at the 2014 UK corporate tax rate of 21 per cent. and
capitalised at the Last Twelve Month ("LTM") market capitalisation
weighted price to earnings multiple of 11.7 times. The LTM price to
earnings multiple for each of Balfour Beatty and Carillion is
calculated by dividing their respective share prices as at close of
business on 24 July 2014 (sourced from FactSet) by their respective
underlying earnings per share for the 12 month period to June 2014
("LTM underlying earnings per share"). The LTM underlying earnings
per share is calculated as the sum of the underlying earnings per
share in H2 2013 and H1 2014. H2 2013 underlying earnings per share
is calculated as full year 2013 underlying earnings per share less
H1 2013 underlying earnings per share. The underlying earnings per
share information is sourced from the respective company's 2013
annual accounts and their 2013 and 2014 half year results. The
implied price to earnings multiples of Balfour Beatty and Carillion
are then weighted by their respective market capitalisations (as at
close of business on 24 July 2014) to derive the LTM market
capitalisation weighted price to earnings multiple of 11.7
times. This calculation is based on historical earnings per share
in order that this statement is not construed as a profit forecast
under the rules of the Code.
-- The offer values are calculated as follows:
- Under the offer terms announced by Carillion on 14 August
2014, the offer exchange ratio of 0.8104946 new Carillion shares
per Balfour Beatty share would result in 558,836,472 new Carillion
shares being issued. Based on Carillion's closing share price as at
18 August 2014 of 337.4p (sourced from Factset), the implied value
of these shares is GBP1,886 million;
- Under the revised offer terms announced today, the offer
exchange ratio of 0.8712682 new Carillion shares per Balfour Beatty
share would result in 600,739,881 new Carillion shares being
issued. Based on Carillion's closing share price as at 18 August
2014 of 337.4p (sourced from Factset), the implied value of these
shares is GBP2,027 million. Adding the value of the GBP59 million
additional cash dividend or equivalent to the value of the shares
offered implies a total equity value offered for Balfour Beatty of
GBP2,086 million;
- Any comparison of the previous and revised offer values on
this basis does not take into account the possible dilutive effect
of the new Carillion shares issued as part of the improved
offer.
-- The share of the undiluted ordinary equity in the combined
group is based on each of Balfour Beatty and Carillion paying their
respective proposed 2014 interim dividend.
-- The offer premia referenced in the announcement are calculated as follows:
- Offer exchange ratio of 0.8712682 new Carillion shares per
Balfour Beatty share (valued at 294.0 pence per Balfour Beatty
share on the basis of Carillion's closing share price as at 18
August 2014), plus 8.5 pence in cash per Balfour Beatty share,
equivalent to an offer price of 302.5 pence per Balfour Beatty
share;
- This represents a premium of 36% to the volume-weighted
average price of 222.8p per Balfour Beatty share (sourced from
Factset) for the period between 25 June 2014 and 24 July 2014
inclusive;
- This represents a premium of 30% to the share price of 232.1p
per Balfour Beatty share as at market close on 24 July 2014
(sourced from Factset); and
- This represents a premium of 22% to the share price of 248.0p
per Balfour Beatty share as at market close on 18 August 2014
(sourced from Factset).
(1) Offer value is calculated based on Carillion's closing share
price on 18 August 2014. See Appendix I for the full
calculation
(2) Statement made on the basis of publicly available Balfour
Beatty information. The basis of these savings are detailed in
Carillion's 14 August 2014 announcement in Appendices I and III
(3) This statement is not a profit forecast
(4) Calculated using weighted LTM multiple applied to cost-base
reduction achieved by the end of 2016. See Appendix I
This information is provided by RNS
The company news service from the London Stock Exchange
END
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