TIDMCOST TIDMMCHL
RNS Number : 8523Z
Costain Group PLC
21 January 2011
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN
PART, IN, INTO OR FROM THE UNITED STATES OF AMERICA OR ANY
JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS OF SUCH JURISDICTION. THIS IS AN ANNOUNCEMENT FALLING
UNDER RULE 2.4 OF THE TAKEOVER CODE (THE "CODE"). IT DOES NOT
REPRESENT A FIRM INTENTION TO MAKE AN OFFER UNDER RULE 2.5 OF THE
CODE. ACCORDINGLY, THERE CAN BE NO CERTAINTY THAT ANY OFFER WILL
ULTIMATELY BE MADE.
Costain Group PLC
("Costain" or the "Company")
Statement regarding revised share and cash proposal to Mouchel
Group plc ("Mouchel")
This is an announcement falling under Rule 2.4 of the Code. It
does not represent a firm intention to make an offer under Rule 2.5
of the Code. Accordingly, there can be no certainty that any offer
will ultimately be made.
Summary
-- Following extensive discussions with both Costain's and
Mouchel's shareholders, the Board of Costain has, after detailed
consideration tabled, with the Board of Mouchel on 19 January 2011,
a significantly enhanced proposal to make a recommended offer for
Mouchel (the "Revised Proposal")
-- The Revised Proposal comprises 0.5531 new Costain ordinary
shares and 30.0p in cash for each Mouchel share which, based on
Costain's share price of 222.75p as at the close of business on 20
January 2011 (being the last business day prior to the date of this
announcement), in aggregate values each Mouchel share at
approximately 153.2p. A mix and match facility would also be
provided
-- The Revised Proposal represents a premium of approximately
171 per cent. to the closing Mouchel share price of 56.5p per share
on 3 December 2010 (being the last business day prior to Mouchel
entering into its current offer period)
-- The Board of Costain believes that the Revised Proposal is
highly attractive to both Mouchel's and Costain's shareholders and
would:
o create one of the UK's premier solutions providers, with major
capabilities across consulting, construction and care, and meet the
increasing demands of blue chip customers for larger, longer term
"bundled" or multi-disciplinary contracts;
o establish a combined business with enhanced growth prospects
through an enlarged private and public sector customer base and a
combined forward order book of over GBP4 billion;
o provide Mouchel shareholders with a significant equity
interest in a well capitalised, enlarged business, with a clear
strategy for future profitable growth as well as the opportunity to
realise cash for a proportion of their shareholdings;
o provide the necessary robust capital structure to allow
Mouchel, as part of the enlarged Costain group, to meet the
increasing trend towards larger, longer term multi-disciplinary
contracts;
o address the likely continuing constraints on the strategic
development and growth of Mouchel following a debt refinancing;
and
o provide Mouchel with a highly attractive solution to the
strategic and financial issues and uncertainty it faces. These
issues were highlighted in Mouchel's announcement on 6 December
2010, which followed a series of material downgrades to analyst
consensus forecasts for the business during 2010 and set out the
potential for a dilutive equity fundraising and/or business
disposals
-- Costain entered 2011 with a strong order book of GBP2.4
billion and a good pipeline of opportunities. Its solutions-led
approach to meeting customers' needs, coupled with its balance
sheet strength, has enabled Costain to continue this momentum in
recent weeks with a number of further contract awards since the
start of 2011
Commenting on the revised share and cash proposal, the Chairman
of Costain, David Allvey, said:
"The strategic rationale for a combination has been widely
supported and following extensive discussions with both sets of
shareholders we have now significantly enhanced our proposal.
"We firmly believe that a combination of the two businesses is
clearly in the best interests of both sets of shareholders and
would bring resolution to the issues Mouchel faces for the benefit
of its shareholders, customers and employees after a sustained
period of uncertainty. Moreover, as part of a strong Costain group
with a well-capitalised balance sheet, Mouchel would be better
placed to compete effectively for major contracts.
"Having made our first approach to Mouchel seven weeks ago and
as one of a number of options to deliver our strategy, we believe
that our revised proposal is attractive to both sets of
shareholders and should now encourage Mouchel's Board to engage
with us without delay."
This summary should be read in conjunction with the main body of
the announcement which follows.
Costain Group PLC
Statement regarding revised share and cash proposal to
Mouchel
This is an announcement falling under Rule 2.4 of the Code. It
does not represent a firm intention to make an offer under Rule 2.5
of the Code. Accordingly, there can be no certainty that any offer
will ultimately be made.
Further to Costain's announcements on 22 December 2010 and 6
January 2011, the Board of Costain announces that it approached the
Board of Mouchel on 19 January 2011 with a further enhanced
proposal to make a recommended share and cash offer for the entire
issued and to be issued share capital of Mouchel.
Following detailed consideration by the Board of Costain and
discussions with both Costain's and Mouchel's shareholders, the
Board of Costain has tabled the Revised Proposal which comprises
0.5531 new Costain ordinary shares and 30.0p in cash for each
Mouchel share which, based on Costain's share price of 222.75p as
at the close of business on 20 January 2011 (being the last
business day prior to the date of this announcement), in aggregate
values each Mouchel share at approximately 153.2p.
A mix and match facility would also be provided under the
Revised Proposal to allow Mouchel shareholders to elect to receive
additional cash or Costain shares to the extent that other Mouchel
shareholders choose not to take up their cash or share entitlement
in full. The overall proportion of the consideration to be
satisfied in Costain shares and in cash would be fixed.
Benefits of the combination of Costain and Mouchel and the
Revised Proposal
The Board of Costain continues to believe that Mouchel and
Costain are highly complementary businesses and that a combination
would provide significant benefits for both sets of shareholders.
In particular, a combination would:
-- create one of the UK's premier solutions providers, with
major capabilities across consulting, construction and care,
delivered through two respected brands;
-- meet the increasing demands of blue chip customers who are
consolidating their requirements into larger, longer term "bundled"
or multi-disciplinary contracts and thereby significantly increase
the addressable market for both businesses;
-- benefit from enhanced growth prospects through an enlarged
private and public sector customer base and a combined forward
order book of over GBP4 billion;
-- create a more efficient business through the generation of
significant, realisable synergies; and
-- create significant value for both sets of shareholders
through earnings enhancement*, dividend income and the potential
for a re-rating of the combined business.
The Board of Costain believes that the Revised Proposal is
highly attractive to both Mouchel's and Costain's shareholders and
would:
-- provide the necessary robust capital structure to allow
Mouchel, as part of the enlarged Costain group, to meet the
increasing trend towards larger, longer term multi-disciplinary
contracts;
-- address the likely continuing constraints on the strategic
development and growth of Mouchel following a debt refinancing;
and
-- provide Mouchel with a highly attractive solution to the
strategic and financial issues and uncertainty it faces. These
issues were highlighted in Mouchel's announcement on 6 December
2010, which followed a series of material downgrades to analyst
consensus forecasts for the business during 2010 and set out the
potential for a dilutive equity fundraising and/or business
disposals.
*This statement is not a profit forecast and should not be
interpreted to mean that the earnings of Costain for the current
year or future years will necessarily match or exceed the historic
or published earnings of Costain.
Current trading
As indicated in Costain's pre-close trading update on 6 January
2011, Costain continues to perform well and finished the year ended
31 December 2010 in line with Costain's Board's expectations.
Furthermore, Costain entered 2011 with a strong order book of
GBP2.4 billion and a good pipeline of opportunities.
Costain's solutions-led approach to meeting its customers'
needs, coupled with its balance sheet strength, has enabled Costain
to continue this momentum in recent weeks with further contract
award announcements since the start of 2011, including:
-- the GBP59 million highways contract with Neath Port Talbot
County Borough Council;
-- the appointment by Lewisham Council to rebuild four more
schools at a total value of GBP71 million after financial close was
reached on the fourth phase of its Building Schools for the Future
('BSF') project;
-- the contract for construction of the new Walton bridge as
part of a GBP32.3 million scheme for Surrey County Council,
creating the first new major road crossing over the River Thames in
almost 20 years; and
-- the Early Contractor Involvement (ECI) contract with the
Highways Agency to design and construct a major scheme on the A556
between the M56 and M6 motorways.
Further details of the Revised Proposal
The Revised Proposal represents:
-- an increase of approximately 44.8 per cent. over the value of
the original proposal by Costain as announced on 22 December 2010
(being 105.8p per Mouchel ordinary share based on the closing price
per Costain share on 21 December 2010) and approximately 13.5 per
cent. over the value of the revised proposal by Costain as
announced on 6 January 2011 (being 135p per Mouchel ordinary share
based on the closing price per Costain share on 5 January
2011);
-- a premium of approximately 171.2 per cent. to the closing
Mouchel share price of 56.5p per share on 3 December 2010 (being
the last business day prior to Mouchel entering into its current
offer period);
-- a premium of approximately 109.7 per cent. to the closing
Mouchel share price of 73.0p per share on 21 December 2010 (being
the last business day prior to the date of the first announcement
by Costain that it had approached Mouchel); and
-- a premium of approximately 34.7 per cent. to the closing
Mouchel share price of 113.75p per share on 20 January 2011 (being
the last business day prior to the date of this announcement).
The Revised Proposal values the entire issued and to be issued
share capital of Mouchel at GBP175 million on a fully diluted basis
(assuming 1.8 million in the money options), with GBP141 million
(approximately 80 per cent.) of the consideration to be satisfied
in new Costain ordinary shares and GBP34 million (approximately 20
per cent.) in cash. Under the Revised Proposal, Mouchel's
shareholders would receive approximately 50 per cent. of the
enlarged issued share capital of Costain.
Costain's interest in Mouchel has the strong support of
Costain's key lending banks.
The new Costain ordinary shares issued to Mouchel's shareholders
would rank pari passu with the existing Costain ordinary shares,
and the Proposal continues to assume that Mouchel's shareholders
would be entitled to receive any final dividend declared by Costain
in respect of the year ending 31 December 2010. Costain declared a
final dividend of 5.5p per share in respect of the year ended 31
December 2009.
The making of any offer will be subject to a number of
pre-conditions, including the satisfactory completion of due
diligence and the recommendation of the Board of Mouchel. Costain
reserves the right to waive any or all of such pre-conditions. In
addition, Costain reserves the right to make an offer at an
exchange ratio and / or level of cash on less favourable terms in
the event that (i) the Board of Mouchel agrees and recommends any
such change, (ii) a third party announces a firm intention to make
an offer for Mouchel, or (iii) Mouchel announces, declares or pays
a dividend or any other distribution or other payments to its
shareholders, in which case there would be an equivalent reduction
in the value of Costain's offer. Further, Costain reserves the
right to vary the form and/or mix of consideration and/or introduce
other forms of consideration.
Any further announcements will be made as appropriate.
Enquiries:
Costain Group PLC Tel: +44 1628 842
444
Andrew Wyllie, Chief Executive
Tony Bickerstaff, Finance Director
Graham Read, Communications Director
Investec Investment Banking (Financial Tel: +44 20 7597
adviser & broker to Costain) 5970
David Currie
Charles Batten
James Rudd
College Hill (PR adviser to Costain) Tel: +44 20 7457
2020
Mark Garraway
Mike Davies
Adam Aljewicz
A copy of this announcement will shortly be available, free of
charge, on the Company's website at www.costain.com
Investec (which is authorised and regulated in the United
Kingdom by the Financial Services Authority) is acting exclusively
for Costain and for no one else in connection with the possible
offer and will not be responsible to anyone other than Costain for
providing the protections afforded to Investec clients nor for
providing advice in relation to the possible offer or any other
matters referred to in this announcement.
This announcement does not constitute an offer to purchase any
securities, or an offer to sell or the solicitation of an offer to
buy any securities, nor shall there be any offer to purchase or
sell securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful. No offering of securities
may be made in the United States except pursuant to registration
under the US Securities Act of 1933 or an exemption from
registration.
The release, distribution or publication of this announcement in
jurisdictions other than the UK may be restricted by law and
therefore any persons who are subject to the laws of any
jurisdiction other than the UK should inform themselves about and
observe any applicable requirements. If you are resident outside
the UK, you are responsible for first satisfying yourself as to the
full observance of the laws and regulatory requirements of your
jurisdiction.
Unless otherwise determined by Costain, this announcement and
any proposed offer will not be made, directly or indirectly, in or
into any jurisdiction where to do so would violate the laws of that
jurisdiction (a "Restricted Jurisdiction") or the United States, or
by the use of any means or instrumentally (including, without
limitation, telex, facsimile transmission, telephone, internet or
other forms of electronic communication) of interstate or foreign
commerce, or of any facility of a national securities exchange of
any Restricted Jurisdiction or the United States. Unless so
determined by Costain, the proposed offer will not be capable of
acceptance by any such use, means or instrumentally or facility of
any Restricted Jurisdiction or the United States.
Copies of this announcement and documents relating to any offer
will not be, and must not be, directly or indirectly, mailed or
otherwise forwarded (including, without limitation, by telex,
facsimile transmission, telephone, internet or other forms of
electronic communication), distributed or sent in, into or from any
Restricted Jurisdiction or the United States.
Forward looking statements
This announcement contains statements about Costain and Mouchel
that are or may be forward looking statements. All statements other
than statements of historical facts included in this announcement
may be forward looking statements. Without limitation, any
statements preceded or followed by or that include the words
"targets", "plans" "believes", "expects", "aims", "intends",
"will", "may", "anticipates", "estimates", "projects" or words or
terms of similar substance or the negative thereof, are forward
looking statements. Forward looking statements include statements
relating to, among other things: Costain's expected growth markets
over the next decade and the expected benefits of the proposed
combination of Costain and Mouchel.
Such forward looking statements involve risks and uncertainties
that could significantly affect expected results and are based on
certain key assumptions. Many factors could cause actual results to
differ materially from those projected or implied in any forward
looking statements, including, among others, risks relating to the
successful combination of Mouchel with Costain; higher than
anticipated costs relating to the combination of Mouchel with
Costain; and facts relating to Mouchel that may impact the timing
or amount of benefit realised from the combination that are unknown
to Costain. Due to such uncertainties and risks, readers are
cautioned not to place undue reliance on such forward looking
statements, which speak only as of the date hereof. Costain
disclaims any obligation to update any forward looking or other
statements contained herein, except as required by applicable
law.
Disclosure requirements of the Code
Under Rule 8.3(a) of the Code, any person who is interested in
1% or more of any class of relevant securities of an offeree
company or of any paper offeror (being any offeror other than an
offeror in respect of which it has been announced that its offer
is, or is likely to be, solely in cash) must make an Opening
Position Disclosure following the commencement of the offer period
and, if later, following the announcement in which any paper
offeror is first identified. An Opening Position Disclosure must
contain details of the person's interests and short positions in,
and rights to subscribe for, any relevant securities of each of (i)
the offeree company and (ii) any paper offeror(s). An Opening
Position Disclosure by a person to whom Rule 8.3(a) applies must be
made by no later than 3.30 pm (London time) on the 10th business
day following the commencement of the offer period and, if
appropriate, by no later than 3.30 pm (London time) on the 10th
business day following the announcement in which any paper offeror
is first identified. Relevant persons who deal in the relevant
securities of the offeree company or of a paper offeror prior to
the deadline for making an Opening Position Disclosure must instead
make a Dealing Disclosure.
Under Rule 8.3(b) of the Code, any person who is, or becomes,
interested in 1% or more of any class of relevant securities of the
offeree company or of any paper offeror must make a Dealing
Disclosure if the person deals in any relevant securities of the
offeree company or of any paper offeror. A Dealing Disclosure must
contain details of the dealing concerned and of the person's
interests and short positions in, and rights to subscribe for, any
relevant securities of each of (i) the offeree company and (ii) any
paper offeror, save to the extent that these details have
previously been disclosed under Rule 8. A Dealing Disclosure by a
person to whom Rule 8.3(b) applies must be made by no later than
3.30 pm (London time) on the business day following the date of the
relevant dealing.
If two or more persons act together pursuant to an agreement or
understanding, whether formal or informal, to acquire or control an
interest in relevant securities of an offeree company or a paper
offeror they will be deemed to be a single person for the purpose
of Rule 8.3.
Opening Position Disclosures must also be made by the offeree
company and by any offeror and Dealing Disclosures must also be
made by the offeree company, by any offeror and by any persons
acting in concert with any of them (see Rules 8.1, 8.2 and
8.4).
Details of the offeree and offeror companies in respect of whose
relevant securities Opening Position Disclosures and Dealing
Disclosures must be made can be found in the Disclosure Table on
the Takeover Panel's website at www.thetakeoverpanel.org.uk,
including details of the number of relevant securities in issue,
when the offer period commenced and when any offeror was first
identified. If you are in any doubt as to whether you are required
to make an Opening Position Disclosure or a Dealing Disclosure, you
should contact the Panel's Market Surveillance Unit on +44 (0)20
7638 0129.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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