RNS Number:6703G
Management Consulting Group PLC
25 July 2006
Not for release, publication, or distribution in or into the United States of
America, Australia, Canada or Japan.
FOR IMMEDIATE RELEASE
Management Consulting Group PLC
Proposed acquisition of Ineum
Summary
Management Consulting Group PLC (''MCG'' or the ''Company''), the international
management consultancy group, today announces that it has entered into a
conditional agreement whereby it will acquire the entire issued share capital of
Ineum, the largest independent national management consultancy practice in
France (excluding IT systems integrators and outsourcing practices) (1).
The total consideration agreed for the Acquisition is Euro120 million (#81.9
million), which will be satisfied by the payment of Euro54.0 million (#36.9
million) in cash and the issue of 81.0 million New Ordinary Shares. The number
of New Ordinary Shares to be issued was determined on the basis of the average
pounds to euros exchange rate and average Closing Price of Ordinary Shares over
the 30 trading days prior to 25 July 2006. In addition, a maximum of Euro13.8
million (#9.4 million) of net debt will be assumed and refinanced upon
completion of the Acquisition.
The cash element of the consideration and the refinancing of the assumed debt
will be partially satisfied out of MCG's existing cash resources and partially
through a new #30 million multicurrency debt facility. In addition, a new
working capital facility of #20 million will be available to the Enlarged Group.
These facilities will be provided by MCG's relationship bank, Barclays Bank Plc.
The Board believes that the Acquisition is a key development in the execution of
the Group's strategic goal to be a multidisciplinary consulting and professional
services group and will broaden and deepen its existing offerings whilst
diversifying the risks of the Group.
The proposed Acquisition constitutes a Class 1 transaction under the Listing
Rules. Accordingly, it is subject to the approval of Shareholders, which is to
be sought at the Extraordinary General Meeting.
Those of Ineum's shareholders who are receiving New Ordinary Shares as part of
their consideration, namely the Ineum Partners and Jacques Manardo
(non-executive chairman of Ineum), will, immediately following completion of the
Acquisition, together hold 81.0 million Ordinary Shares representing 29.9 per
cent. of the Enlarged Share Capital of MCG. Such persons will be deemed to be
persons acting in concert for the purposes of the Takeover Code until the Panel
determines otherwise.
Overview of Ineum
Ineum is the largest independent, national management consultancy practice
(excluding IT systems integrators and outsourcing practices) in France. It was
created out of the consultancy practice of Deloitte France in 2003, due to
French regulatory changes that restricted the range of services an audit firm is
able to provide to its audit clients.
Since becoming independent, Ineum has developed a reputation in the French
market place for providing high quality consulting services. Ineum's
independence gives it a greater ability to service clients, compared with many
of its competitors, because it does not suffer from the actual or perceived
conflicts of interest associated with the large multidisciplinary firms that
provide consulting, auditing and other services.
Ineum provides, through its industry groups, a broad range of consulting
services relevant to specific industries including operational strategy,
marketing and sales, supply chain management, IT and programme management and
non-industry specific functional expertise in the financial management area. Its
industry groups provide relevant services to the financial, public,
manufacturing, consumer goods, energy and utilities, telecommunications and
media, transportation and middle-market sectors.
Ineum serves the vast majority of major French companies in the CAC 40,
including BNP Paribas, EDF, Schneider, Societe Generale, Veolia and Vivendi. The
company provides services primarily in France, Belgium and Luxembourg.
Benefits of the Acquisition
The Board believes that the Acquisition is a key development in the execution of
the Group's strategic goals. In particular, the Board believes the Acquisition
will have the following key benefits:
Operational
* Secures France's largest independent national management consultancy
(excluding IT systems integrators and outsourcing practices)
* Broadens the Group's range of consulting offerings - industry led
business consulting introduced
* Strong Ineum brand raises the Group's profile in Europe
* Strengthens existing service offerings in France, creating a significant
financial management practice in two of the three largest European markets
* A platform from which to grow industry-led business consulting
* Deepens the Group's talent pool with internationally experienced
partners
Geographic
* Secures a strong position in the world's fourth largest management
consulting market place which is forecast to grow at 7.2 per cent. in 2007 (2)
* Gives access to a client base of leading French businesses, requiring
services in France and internationally
* Diversifies the Group's geographic focus by increasing its European
presence
* Creates a strong platform for further continental European growth
Financial
* Adds a well-managed and profitable business with growing revenues
* Expected to be earnings and operating margin enhancing in 2007 (3)
* Creates an opportunity to reduce unit infrastructure costs
* Reduces exposure to US dollar earnings
* Offers more balanced revenue mix in terms of market and type of services
* Improves capital structure by introducing debt at a level which will not
constrain strategy implementation
Commenting on today's announcement, Rolf Stomberg, Chairman of MCG, said:
''This acquisition is a significant step in the execution of the Group's
strategy. Ineum has an outstanding reputation for first class consulting and we
are confidant that this will be an excellent combination that will bring
benefits for all stakeholders.''
Kevin Parry, Chief Executive of MCG, said:
''I am delighted to welcome the Ineum management and staff to the Group. By
combining the businesses we will significantly enhance the portfolio of services
we are able to offer to existing and prospective clients. Furthermore the
acquisition creates a strong platform for further growth by providing access to
a new quality client base in the world's fourth largest consulting
marketplace.''
Didier Taupin, Chief Executive of Ineum, said:
''We look forward to working with MCG to grow and develop the business. Our
clients are the major French companies and we will now be able to serve both
their local and international requirements even more comprehensively.''
Shareholder approvals
The proposed Acquisition constitutes a Class 1 transaction under the Listing
Rules. Accordingly, it is subject to the approval of Shareholders, which is to
be sought at an Extraordinary General Meeting expected to be held on 30 August
2006. Approval will also be sought at the Extraordinary General Meeting for
various other proposals described in the main body of this announcement.
A circular (also comprising a prospectus for the purposes of Part VI of the
FSMA) (the ''Circular'') containing full details of the proposed Acquisition and
other proposals is expected to be sent to Shareholders on or shortly after 7
August 2006.
Trading update and interim results
The Company currently anticipates releasing its results for the six-month period
ended 30 June 2006 at the same time as it posts the Circular to Shareholders, on
or shortly after 7 August 2006.
As indicated on 12 May 2006, the Group has made significant progress. Proudfoot
Consulting has performed well with all geographies delivering strong revenue
growth. Parson Consulting has shown good revenue growth in all areas with the
exception of North America, where it has suffered from a combination of a softer
than expected market and prospecting deficiencies in the sales function.
Overall, results for the first half are expected to be in line with
expectations.
The information in this summary should be read in conjunction with the main body
of this announcement.
There will be an analysts' presentation at 9.30 a.m. today at the offices of MCG
on the 6th Floor of Fleet Place House, 2 Fleet Place, Holborn Viaduct, London
EC4M 7RF.
Enquiries
Management Consulting Group PLC
Kevin Parry Chief Executive 020 7710 5000
Chris Povey Head of M&A
Mark Currie Finance Director
Rothschild (financial adviser and sponsor)
Sian Westerman 020 7280 5000
Dominic Epton
Hoare Govett Limited (corporate broker)
Neil Collingridge 020 7678 8000
John MacGowan
Maitland
Suzanne Bartch 020 7379 5151
Peter Ogden
N M Rothschild & Sons Limited, which is authorised and regulated in the United
Kingdom by the Financial Services Authority, is acting as financial adviser and
sponsor to MCG and no-one else in connection with the matters referred to herein
and will not be responsible to anyone other than MCG for providing the
protections afforded to clients of N M Rothschild & Sons Limited or for giving
advice in relation to such matters.
Hoare Govett Limited, which is authorised and regulated in the United Kingdom by
the Financial Services Authority, is acting as corporate broker to MCG and
no-one else in connection with the matters referred to herein and will not be
responsible to anyone other than MCG for providing the protections afforded to
clients of Hoare Govett Limited or for giving advice in relation to such
matters.
The contents of this announcement which have been prepared by and are the sole
responsibility of MCG have been approved by N M Rothschild & Sons Limited solely
for the purposes of section 21(2)(b) of the Financial Services and Markets Act
2000.
This announcement includes statements that are, or may be deemed to be,
''forward-looking statements''. These forward-looking statements can be
identified by the use of forward-looking terminology, including the terms
''believes'', ''estimates'', ''plans'', ''anticipates'', ''targets'', ''aims'',
''continues'', ''expects'', ''intends'', ''may'', ''will'', ''would'' or
''should'', or in each case, their negative or other variations or comparable
terminology. These forward-looking statements include all matters that are not
historical facts. They appear in a number of places throughout this announcement
and include statements regarding the Company's, or the Group's intentions,
beliefs or current expectations concerning, among other things, the Company's,
or the Group's results of operations, financial condition, liquidity, prospects,
growth, strategies and the industries in which the Company or the Group
operates. By their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances. A number of
factors could cause actual results and developments to differ materially from
those expressed or implied by the forward-looking statements including, without
limitation: conditions in the markets, market position of the Company or the
Group, earnings, financial position, cash flows, return on capital and operating
margins, anticipated investments and capital expenditures, changing business or
other market conditions and general economic conditions. These and other factors
could adversely affect the outcome and financial effects of the plans and events
described in this announcement. Forward-looking statements contained in this
announcement based on past trends or activities should not be taken as a
representation that such trends or activities will continue in the future.
Subject to any requirement of the UK Listing Authority or London Stock Exchange
or as a matter of law, neither MCG nor Rothschild undertakes any obligation to
update or revise any forward looking statements, whether as a result of new
information, future events or otherwise. Undue reliance should not be placed on
forward-looking statements, which speak only as of the date of this
announcement.
The New Ordinary Shares have not been and will not be registered for sale under
the United States Securities Act of 1933 (the "Securities Act").
This announcement shall not constitute an offer to sell or the solicitation of
an offer to buy the New Ordinary Shares, nor shall there be any sale of the New
Ordinary Shares in any state or other jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such state or jurisdiction. The New Ordinary
Shares are to be offered to shareholders of Ineum in transactions outside the
United States in reliance on Regulation S under the Securities Act. The New
Ordinary Shares may not be offered or sold in the United States except pursuant
to an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state securities laws.
Notes to Editors
MCG currently comprises two businesses: Proudfoot Consulting and Parson
Consulting.
Proudfoot Consulting helps clients to achieve significant increases in
profitability through the implementation of operational improvements leading to
increased sales, lower operating and overhead costs, greater output and lower
capital expenditure. Its clients include BP, National Australia Bank, Newmont
Mining, PSA, Peugeot-Citroen and Societe Generale.
Parson Consulting specialises in financial management consultancy. It is free of
auditing conflicts and provides Sarbanes-Oxley compliant services. It has four
service lines: governance and risk management, operational financial management,
strategic financial management and transaction support. Its clients include
Avis, Citigroup, Ford, General Mills, Kingfisher, Shell and Warner Bros.
Not for release, publication, or distribution in or into the United States of
America, Australia, Canada or Japan.
FOR IMMEDIATE RELEASE
Management Consulting Group PLC
Proposed acquisition of Ineum
1. Introduction
Management Consulting Group PLC (''MCG'' or the ''Company''), the international
management consultancy group, today announces that it has entered into a
conditional agreement whereby it will acquire the entire issued share capital
of Ineum, the largest independent national management consultancy practice in
France (excluding IT systems integrators and outsourcing practices)1.
The total consideration agreed for the Acquisition is Euro120 million (#81.9
million), which will be satisfied by the payment of Euro54.0 million (#36.9
million) in cash and the issue of 81,020,798 New Ordinary Shares. The number of
New Ordinary Shares to be issued was determined on the basis of the average
pounds to euros exchange rate and average Closing Price of Ordinary Shares over
the 30 trading days prior to 25 July 2006. In addition, a maximum of Euro13.8
million (#9.4 million) of net debt will be assumed and refinanced upon
completion of the Acquisition.
The cash element of the consideration and the refinancing of the assumed debt
will be partially satisfied out of MCG's existing cash resources and partially
through a new #30 million multicurrency debt facility. In addition, a new
working capital facility of #20 million will be available to the Enlarged Group.
These facilities will be provided by MCG's relationship bank, Barclays Bank Plc.
The Board believes that the Acquisition is a key development in the execution of
the Group's strategic goal to be a multidisciplinary consulting and professional
services group and will broaden and deepen its existing offerings whilst
diversifying the risks of the Group.
The proposed Acquisition constitutes a Class 1 transaction under the Listing
Rules. Accordingly, it is subject to the approval of Shareholders, which is to
be sought at the Extraordinary General Meeting.
Those of Ineum's shareholders who are receiving New Ordinary Shares as part of
their consideration, namely the Ineum Partners and Jacques Manardo
(non-executive chairman of Ineum), will, immediately following completion of the
Acquisition, together hold 81,020,798 Ordinary Shares representing 29.9 per
cent. of the Enlarged Share Capital of MCG. Such persons will be deemed to be
persons acting in concert for the purposes of the Takeover Code until the Panel
determines otherwise.
2. Information on MCG
The Group currently comprises two specialist consultancies: Proudfoot Consulting
and Parson Consulting.
Proudfoot Consulting implements sustainable operational improvements at no net
annualised cost to its clients through process improvements, People SolutionsTM
and management operating systems. The successful combination of these three
disciplines results in installed change. The change process is project managed
using the proprietary technique of Co-Venture(R) which, through partnership with
Proudfoot Consultant's clients, accelerates the pace of change from the
consulting engagement.
Parson Consulting develops excellence in finance and operations. It assists
chief financial officers by providing valuable financial information and insight
into stakeholders through strategic finance, accounting and finance operations,
governance and risk management, and corporate finance support. It does not
undertake auditing or resell software and is therefore free of conflicts of
interest.
The businesses of the Group are primarily focussed on the main geographical
markets for consulting services, which are currently North America and Europe,
and, in addition, provide services in other smaller consulting markets such as
Australia, Brazil, China and South Africa.
3. Background to, and reasons for, the Acquisition
The Group's strategy is to:
* operate and continually invest in its consultancies and its people to
deliver profitable, sustainable revenue growth that is ahead of the market
rates of growth for the consultancy sector; and
* acquire consultancies that either diversify the range of consulting
offerings available to clients or deepen the coverage of existing Group
offerings. Each consulting offering goes to market through its own brand and
is operated separately with its own dedicated management team.
Group management co-ordinates the introduction of clients as between the
different offerings and seeks to communicate clearly, fairly and regularly with
all of its stakeholders.
The proposed Acquisition secures a high quality consulting practice focused on
France, a key European management consulting market place.
Ineum has client relationships with a vast majority of the companies in the
current CAC 40 (the index of the 40 largest companies by market capitalisation
on the Paris stock market) as well as with 28 of the current 39 French Global
Fortune 500 companies, and has, to some extent, been constrained by its lack of
international presence.
Ineum goes to the market via its industry consulting groups and as a financial
management consultancy. Financial management consulting comprises nine partners
and approximately 125 professionals. Its services are similar to those of Parson
Consulting, but are more developed and more extensive in France when compared
with the existing small French business of Parson Consulting. It is proposed
that the financial management practice of Ineum will be combined with that of
Parson Consulting to provide a step change in the French, European and worldwide
operations. The combined business will trade as Parson Consulting.
Ineum's industry led business will continue to trade under the Ineum brand. This
provides a third consulting offering with industry specialisms.
MCG will continue to invest in the Parson Consulting and Ineum offerings through
recruitment of suitably qualified and experienced people and will continue to
seek bolt-on acquisitions of suitable management consulting businesses.
The Chief Executive Officer of Parson Consulting and Ineum will be Didier
Taupin. He has been President of Ineum since its foundation in 2003, and has an
accomplished track record of growing profitable revenue. Rick Fumo, currently
Chief Executive Officer of Parson Consulting, has indicated a desire to retire
from his position but continue to work with specific clients and will act as
Chairman of the advisers to Parson Consulting. The Group Chief Executive has
agreed that Mr Fumo may resign as Chief Executive Officer of Parson Consulting
with effect from the date of completion of the Acquisition, but he will continue
to manage some important client accounts, assist with the integration of the
financial management businesses of Parson and Ineum and work with the Company's
North American advisers.
In addition, Miguel de Fontenay, currently Vice Chairman of Ineum Consulting,
who has overall market and sales responsibilities for Ineum and each of the
leaders of Ineum's industry led and functional expertise groups, will enhance
the depth of the Group's management capabilities. Mr Fontenay will be appointed
as Senior Vice President of Sales and Global Accounts and will, in addition to
his existing responsibilities, co-ordinate the cross-selling of the Group's
services to clients of the three Group consultancies.
4. Benefits of the Acquisition
The Board believes that the Acquisition is a key development in the execution of
the Group's strategic goals. In particular, the Board believes the Acquisition
will have the following key benefits:
Operational
* Secures France's largest independent national management consultancy
(excluding IT systems integrators and outsourcing practices)
* Broadens the Group's range of consulting offerings - industry led
business consulting introduced
* Strong Ineum brand raises the Group's profile in Europe
* Strengthens existing service offerings in France, creating a significant
financial management practice in two of the three largest European markets
* A platform from which to grow industry-led business consulting
* Deepens the Group's talent pool with internationally experienced
partners
Geographic
* Secures a strong position in the world's fourth largest consulting
market place which is forecast to grow at 7.2 per cent. in 2007 (2)
* Gives access to a client base of leading French businesses, requiring
services in France and internationally
* Diversifies the Group's geographic focus by increasing its European
presence
* Creates a strong platform for further continental European growth
Financial
* Adds a well-managed and profitable business with growing revenues
* Expected to be earnings and operating margin enhancing in 20073
* Creates an opportunity to reduce unit infrastructure costs
* Reduces exposure to US dollar earnings
* Offers more balanced revenue mix in terms of market and type of services
* Improves capital structure by introducing debt at a level which will not
constrain strategy implementation
5. Information on Ineum
Background
Ineum is the largest independent national management consultancy practice in
France (excluding IT systems integrators and outsourcing practices)1. It was
created out of the consultancy practice of Deloitte France in 2003, due to
French regulatory changes that restricted the range of services an audit firm is
able to provide to its audit clients.
Since becoming independent, Ineum has developed a reputation in the French
market place for providing high quality consulting services. Ineum's
independence gives it a greater ability to service clients, compared with many
of its competitors, because it does not suffer from the actual or perceived
conflicts of interest associated with the large multidisciplinary firms that
provide consulting, auditing and other services.
Operations
Ineum provides, through its industry groups, a broad range of consulting
services relevant to specific industries like operational strategy, marketing
and sales, supply chain management, IT and programme management and non-industry
specific functional expertise in the financial management area. Its industry
groups provide relevant services to the financial, public, manufacturing,
consumer goods, energy and utilities, telecommunications and media,
transportation and middle-market sectors.
Services are primarily provided from Ineum's head office in Paris. In addition,
there are French offices in Lyon, Marseille and Nantes. In the past 12 months,
additional offices have been opened in Brussels and Luxembourg.
Ineum serves the vast majority of major French companies in the CAC 40,
including BNP Paribas, EDF, Schneider, Societe Generale, Veolia and Vivendi. The
company provides services primarily in France, Belgium and Luxembourg.
The size of the French market place for management consulting is estimated to be
Euro3.1 billion (2). Ineum is estimated to have a 3 per cent. French market
share (1)(2). Kennedy Information, Inc., a leading commentator on the consulting
marketplace, estimates that the French management consulting market will grow by
approximately 7.2 per cent. in 2007 (2) compared with a compound average growth
rate during the period 2004 to 2007 of 6.3 per cent. per annum (2). The industry
groupings account for approximately 75 per cent. of Ineum's total revenue. The
biggest industry group is the financial services industry sector. The other
industry groupings are the public sector, manufacturing, energy and utilities,
telecommunications/media, transportation and the middle market. The financial
management consultancy practice accounts for the other 25 per cent. of Ineum's
total revenues.
Management and employees
Jacques Manardo has been the non-executive chairman (President du Conseil de
Surveillance) of Ineum since 2003. Didier Taupin, who was appointed as President
of Ineum at the same time, is responsible for managing the company. He is
assisted by Miguel de Fontenay, the Vice Chairman of Ineum Consulting, who
joined Ineum in 2004 from Cap Gemini. Following completion, the management of
Ineum will be structured on the basis described above in paragraph 3.
The employees of the business who are also shareholders are referred to as
''partners''. Since 2003, the business has developed with the admission of new
partners through both lateral hires from other firms and internal promotions.
There are currently 42 partners who, together with other senior employees, in
aggregate own approximately 49.7 per cent. of the equity of Ineum. The remaining
equity is owned by Mr Manardo (as to approximately 2.1 per cent) and by 3i Funds
and Tecnet Participations (as to approximately 48.2 per cent.).
Ineum employs approximately 675 people.
6. Summary financial information on Ineum
Ineum had consolidated gross assets as at 31 May 2006 of Euro94.2 million (#64.3
million) and profits before tax for the year ended 31 May 2006 of Euro10.3 million
(#7.0 million) (as extracted from Ineum's audited IFRS accounts for the year
ended 31 May 2006).
The revenue, operating profit (before and after non-recurring items) and
operating profit margin (before non-recurring items) for the three years ended
31 May 2006 are summarised below.
Years ended 31 May
2004 2005 2006
Euro Euro Euro
'000 '000 '000
Revenue 81,130 86,425 105,039
Operating profit before non-recurring items 3,318 6,953 12,063
Operating profit after non-recurring items 3,155 7,641 11,017
Operating profit margin before non-recurring 4.1% 8.0% 11.5%
items
The Circular will contain audited historical financial information on Ineum for
the three years ended 31 May 2006.
7. Financial effects of the Acquisition
MCG proposes to finance the Acquisition from its existing cash resources, new
bank borrowing facilities and through the issue of the New Ordinary Shares to
the Ineum Partners and Mr Manardo.
The Board believes that the Acquisition will enhance earnings per share in the
year to 31 December 2007. This statement is not intended to constitute a profit
forecast and should not be interpreted to mean that the actual earnings of the
Enlarged Group following the Acquisition will necessarily match or exceed the
historic published earnings.
It is envisaged that one-off costs (excluding fees in relation to the
Acquisition) estimated to amount to Euro5.5 million (#3.8 million) in aggregate
associated with the integration of Ineum into the Group will be incurred in the
financial year ending 31 December 2006 and subsequent financial year.
8. Additional Director
Upon completion of the Acquisition, the Board has agreed, pursuant to the terms
of the Relationship
Agreement, that Jacques Manardo, the non-executive chairman of Ineum, will join
the Board as a non-executive Director.
Mr Manardo, aged 60, holds a masters degree in private law and is a qualified
accountant. He was formerly chairman and chief executive officer of Deloitte &
Touche France and Europe and a member of its worldwide executive committee. He
is chairman of GEM Group, a holding company which he founded in 2001 and which
consists of a number of start-up businesses with different service offerings. He
has served as a board member of the IMD School in Lausanne and of the World
Business Council for Sustainable Development in Geneva and has been a member of
the International Accounting Standards Committee strategy working party. He has
been a non-executive director of Fortis since 2004. He is decorated with the
Chevalier de la legion d'honneur. He currently serves as the non-executive
chairman of Ineum.
Mr Manardo has entered into a conditional letter of appointment with the Company
dated 25 July 2006. His appointment to the Board as a non-executive Director is
conditional upon completion of the Acquisition. The appointment will last until
either Mr Manardo resigns, is not re-appointed nor deemed reappointed following
retirement in accordance with the Company's Articles of Association or is
otherwise removed in accordance with the Act or the Company's Articles of
Association. The agreement provides for a fee per annum at a rate to be agreed
at the Company's December board meeting each year. The rate applicable for the
2006 financial year is #30,000. In addition, it has been agreed that he will be
paid a yearly retainer of Euro25,000 for additional advisory services to be
provided to the Group. In the light of Mr Manardo's previous duties with Ineum
he will not be considered to be an independent Director. As a non-independent
non-executive Director, Mr Manardo is also eligible to receive at the Board's
discretion additional fees for additional services to be provided to the Group.
Mr Manardo will stand for re-election as a non-executive Director at the next
annual general meeting of the Company.
In accordance with LR9.6.15G of the Listing Rules, the Company confirms that
there are no further matters to be reported under LR9.6.13R of the Listing
Rules.
9. Summary terms of the Acquisition
The principal agreements relating to the Acquisition are (i) the Acquisition
Agreement (ii) the Relationship Agreement and (iii) the Escrow Agreement.
Summaries of the key terms of these agreements are set out below.
Acquisition Agreement
Under the Acquisition Agreement, MCG has conditionally agreed to purchase all of
the outstanding share capital of Ineum from the Ineum Partners, Jacques Manardo,
the 3i Funds and Tecnet Participations in return for a total consideration of
Euro120 million (#81.9 million), which will be satisfied by the payment of Euro54.0
million (#36.9 million) in cash and the issue of 81,020,798 New Ordinary Shares
to the Ineum Partners and Mr Manardo on completion of the Acquisition.
Representations and warranties of a usual nature have been given by the Ineum
Partners.
Completion of the Acquisition Agreement is conditional upon, inter alia:
* the passing of resolutions necessary to approve the Acquisition and to
authorise the issue of the New Ordinary Shares at the Extraordinary General
Meeting; and
* the Escrow Agreement and the Relationship Agreement becoming
unconditional except insofar as any condition relates to the Acquisition
Agreement becoming unconditional.
Completion of the Acquisition will take place shortly after satisfaction of the
above conditions precedent, and is expected to occur on 1 September 2006.
The Ineum Partners and Mr Manardo will, immediately following completion,
together hold 81,020,798 Ordinary Shares representing 29.9 per cent. of the
Enlarged Share Capital of MCG. Such persons will be deemed to be persons acting
in concert for the purposes of the Takeover Code until the Panel determines
otherwise.
Relationship Agreement
Under the terms of the Relationship Agreement, which will be entered into prior
to completion of the Acquisition, MCG and the Ineum Partners will agree upon the
strategic direction of the Enlarged Group and to certain restrictions in respect
of the New Ordinary Shares.
Rights and obligations under the Relationship Agreement will be conditional
upon, inter alia, the Acquisition Agreement becoming wholly unconditional in all
respects (except for any condition relating to the Relationship Agreement
becoming unconditional).
a) Lock-up Undertakings
Each Ineum Partner will agree, subject to certain limited exceptions, not to
dispose of any New Ordinary Shares within four years of completion of the
Acquisition.
Subject to the provisions outlined below relating to claw back and the strategic
plan, (i) each Ineum Partner may dispose of up to 50 per cent. of his New
Ordinary Shares after the third anniversary of completion of the Acquisition and
(ii) after the fourth anniversary of completion of the Acquisition, all New
Ordinary Shares will be released from any restrictions on disposal.
b) Claw Back
In the event that an Ineum Partner ceases to be employed by Ineum or the MCG
Group (except if as a result of retirement, permanent disability or death),
certain of the New Ordinary Shares held by such Ineum Partner will be gifted
back by the relevant Ineum Partner to MCG on the basis of (i) 75 per cent. in
year one; (ii) 60 per cent. in year 2; (iii) 45 per cent. in year three; and
(iv) 30 per cent. in year 4.
In the event that an Ineum Partner ceases to be employed by Ineum or the MCG
Group as a result of personal performance issues or redundancy of the occupied
position, certain of the New Ordinary Shares held by such Ineum Partner will be
gifted back by the relevant Ineum Partner to MCG on the basis of (i) 50 per
cent. in year 1; (ii) 35 per cent. in year 2; and (iii) 20 per cent. in years 3
and 4.
Except where the requirement to gift back shares arises from a personal
performance issue, such gifting back of New Ordinary Shares will result in all
remaining obligations and liabilities of the relevant Ineum Partner in relation
to the Acquisition Agreement, the Relationship Agreement and the Escrow
Agreement terminating other than with respect to certain undertakings in the
Acquisition Agreement.
c) Strategic Plan
MCG will agree to use its reasonable endeavours for four years from completion
of the Acquisition to follow the strategy set out below in respect of the MCG
Group.
MCG will seek to expand with different types of consulting and professional
services to complement the existing divisions of Proudfoot Consulting
(operational improvement); Parson Consulting (financial management); Ineum
Consulting (industry sector led consulting). The Group does not intend to
diversify into outsourcing and other consulting businesses that might create a
conflict of interest or perceived conflict of interest with the existing MCG
businesses. MCG will seek to reflect the broad geographic balance of the world's
consulting spend. The transatlantic axis will be crucial with Europe and North
America being reasonably balanced and there is a commitment to grow in Asia
Pacific as that geography takes on greater world significance. MCG's objective
is to deliver shareholder value over the medium term by acquisition and organic
revenue and margin growth as a multidisciplinary consulting and professional
services group.
Under the Relationship Agreement, if after extensive consultations with the
Board, Mr Manardo determines (acting in good faith) that there has been a
material change in the strategy, the Ineum Partners are released from their
obligations under the Relationship Agreement and the New Ordinary Shares held
from time to time by the Ineum Partners will be voted as a single block by Mr
Taupin (or his replacement from time to time) on behalf of all Ineum Partners in
such manner as the Ineum Partners determine.
d) Succession to Mr Manardo
Mr Manardo will be appointed to the Board on completion of the Acquisition. If
Mr Manardo ceases to be a Director within four years from the date of completion
of the Acquisition, Mr Taupin (or his replacement from time to time) is entitled
to put forward a suitably qualified and experienced replacement candidate for
consideration. If such candidate is not appointed, a further candidate can be
put forward and if such further candidate is not appointed then Mr Taupin will
be put forward. If the Board fails to approve the appointment of any of these
candidates then the Escrow Agreement and the lock-up and claw back arrangements
in the Relationship Agreement will be unconditionally released and the New
Ordinary Shares held thereafter from time to time by the Ineum Partners will
unconditionally and irrevocably be voted at any general meeting of the MCG
shareholders on any resolution as a single block by Mr Taupin (or his
replacement from time to time) on behalf of all the Ineum Partners.
Escrow Agreement
The Escrow Agreement will be executed between the Ineum Partners, MCG and a
suitable escrow agent on or immediately before the date of completion of the
Acquisition. The Escrow Agreement will provide for an escrow agent to hold share
certificates and stock transfer forms relating to the New Ordinary Shares in
escrow and, in circumstances where MCG has a warranty claim under the
Acquisition Agreement or a right to claw back shares under the Relationship
Agreement, will sell certain of the New Ordinary Shares or release them to MCG.
Further details of the Acquisition Agreement, the Escrow Agreement and the
Relationship Agreement will be set out in the Circular.
The French works councils of each of Ineum and MCG have been appropriately
consulted and provided with information in relation to the Acquisition.
10. Employee retention
The Board recognises the importance of retaining key people in the business and
aligning their interests with those of the Shareholders generally. For that
reason, the consideration payable to the Ineum Partners is primarily by way of
New Ordinary Shares that cannot be realised until the third or fourth
anniversaries following completion of the Acquisition, as described above in
paragraph 9. In addition, there is a proposal for the adoption of a French
Sub-Plan to the Proudfoot PLC 1998 Executive Share Option Scheme to allow the
grant of options to French resident employees, as described below in paragraph
11.
11. Amendments to Existing Share Option Scheme
The following amendments are proposed to be made to the Proudfoot PLC 1998
Executive Share Option Scheme, subject to Shareholder approval at the
forthcoming EGM of the Company:
(a) An amendment to increase the headroom capacity under the
Proudfoot PLC 1998 Executive Share Option Scheme. The cash consideration for the
Acquisition has the effect of reducing proportionately the ability of MCG to
grant options under the Proudfoot PLC 1998 Executive Share Option Scheme to both
existing employees of the Group and Ineum employees, as the share capital from
which the headroom limits under the Scheme will not increase in size
proportionate to the size of business acquired. Rather than create separate
employee retention pools (as agreed by shareholders in previous transactions),
the Board is seeking Shareholders' approval to increase the capacity for
granting options to Group employees by an amount which approximately equates to
the cash component of the consideration payable for the Acquisition. In
aggregate, this will allow the granting of unfunded share options over
approximately 12.8 per cent. of the enlarged fully diluted share capital of the
Company.
(b) An amendment to allow MCG to satisfy the exercise of options
granted under the Proudfoot PLC 1998 Executive Share Option Scheme by issuing or
procuring the transfer of only that number of Ordinary Shares which has a value,
at the time of the exercise of the options, equal to the net gain resulting from
the exercise - that is, the amount by which the market value of the Ordinary
Shares over which the optionholder is exercising his or her options exceeds
the total exercise price payable for those Ordinary Shares. The aim of the
proposal is to reduce the need to issue new Ordinary Shares under the Proudfoot
PLC 1998 Executive Share Option Scheme, thereby reducing the dilutive effect of
the Scheme.
(c) The adoption of a French Sub-Plan to the Proudfoot PLC 1998
Executive Share Option Scheme to allow the grant of options to French resident
employees on modified terms that should enable both the employees and MCG to
obtain more beneficial tax treatment in respect of their options. The rules of
the French Sub-Plan would prevent the exercise of vested options at any time
when the Ineum Partners' and Mr Manardo's aggregate holding following exercise
would exceed 30 per cent. of the then ordinary share capital of the Company.
(d) Additional amendments to take into account developments in
law and practice since the adoption of the Proudfoot PLC 1998 Executive Share
Option Scheme, including in particular amendments to take into account new age
discrimination legislation.
The existing employee share ownership trust of MCG, the Proudfoot Employee Share
Ownership Trust, is an onshore employee share ownership trust. It is common
practice for employee share ownership trusts to be located in offshore
jurisdictions to prevent capital gains tax charges arising within the trust. The
Board are considering the tax implications further of having the existing trust
onshore and are considering whether it may be better to set up a new employee
share ownership trust offshore or transfer the residency of the Proudfoot
Employee Share Ownership Trust offshore. Accordingly the Board is also seeking
authority for the adoption of a new employee share ownership trust to be set up
offshore.
12. Details of banking facilities
The Company has entered into a new, secured, multi-currency committed term
facility for #30 million and a new revolving, secured, multi-currency, committed
credit facility for #20 million arranged by Barclays Bank Plc. The purpose of
the new term loan is to finance acquisitions made prior to 15 September 2006.
The purpose of the revolving credit facility is to provide working capital
facilities to the Enlarged Group.
Further details of the new debt facilities will be set out in the Circular.
13. MCG trading update on 12 May 2006
MCG released a trading update on 12 May 2006 which contained the following
statement:
''Revenue for the first four months of the year is in line with the Board's
expectations and is significantly ahead of the same period of 2005.
The Proudfoot Consulting business has made very good progress in all geographic
regions. The slow start to the year in Parson North America has continued as
Sarbanes Oxley related work has been completed and the transition to other
services continues. Our strategy of expanding the Parson offering and
geographies beyond the US has limited the impact of this softening in the US
market.
We anticipate that similar trading conditions will prevail for the remainder of
the first half and that accordingly group revenue for the half year will be
significantly ahead of the same period last year.''
14. The Extraordinary General Meeting
An Extraordinary General Meeting of MCG is expected to be held on 30 August 2006
for the purpose of considering and, if thought fit, passing the following
resolutions in connection with the proposals outlined above:
(a) the approval of the Acquisition;
(b) the approval of the increase in the authorised share capital of the
Company;
(c) the authorisation of the Directors to allot relevant securities subject
to the usual statutory limitations;
(d) the disapplication of the statutory pre-emption rights contained in
section 89 of the Act in relation to the allotment of equity securities for cash
subject to the usual statutory limitations;
(e) the approval of amendments to the rules of the Proudfoot PLC 1998
Executive Share Option Scheme and authorisation of the adoption of a new
employee share ownership trust; and
(f) the approval and adoption of the French Sub-Plan to the Proudfoot PLC
1998 Executive Share Option Scheme.
Details of the Extraordinary General Meeting will be set out in the Circular.
Further details in relation to the Acquisition (and other proposals) will be set
out in the Circular which is expected to be sent to Shareholders on or shortly
after 7 August 2006, together with a notice convening the Extraordinary General
Meeting.
Enquiries
Management Consulting Group PLC
Kevin Parry Chief Executive 020 7710 5000
Chris Povey Head of M&A
Mark Currie Finance Director
Rothschild (financial adviser and sponsor)
Sian Westerman 020 7280 5000
Dominic Epton
Hoare Govett Limited (corporate broker)
Neil Collingridge 020 7678 8000
John MacGowan
Maitland
Suzanne Bartch 020 7379 5151
Peter Ogden
N M Rothschild & Sons Limited, which is authorised and regulated in the United
Kingdom by the Financial Services Authority, is acting as financial adviser and
sponsor to MCG and no-one else in connection with the matters referred to herein
and will not be responsible to anyone other than MCG for providing the
protections afforded to clients of N M Rothschild & Sons Limited or for giving
advice in relation to such matters.
Hoare Govett Limited, which is authorised and regulated in the United Kingdom by
the Financial Services Authority, is acting as corporate broker to MCG and
no-one else in connection with the matters referred to herein and will not be
responsible to anyone other than MCG for providing the protections afforded to
clients of Hoare Govett Limited or for giving advice in relation to such
matters.
The contents of this announcement which have been prepared by and are the sole
responsibility of MCG have been approved by N M Rothschild & Sons Limited solely
for the purposes of section 21(2)(b) of the Financial Services and Markets Act
2000.
This announcement includes statements that are, or may be deemed to be,
''forward-looking statements''. These forward-looking statements can be
identified by the use of forward-looking terminology, including the terms
''believes'', ''estimates'', ''plans'', ''anticipates'', ''targets'', ''aims'',
''continues'', ''expects'', ''intends'', ''may'', ''will'', ''would'' or
''should'', or in each case, their negative or other variations or comparable
terminology. These forward-looking statements include all matters that are not
historical facts. They appear in a number of places throughout this announcement
and include statements regarding the Company's, or the Group's intentions,
beliefs or current expectations concerning, among other things, the Company's,
or the Group's results of operations, financial condition, liquidity, prospects,
growth, strategies and the industries in which the Company or the Group
operates. By their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances. A number of
factors could cause actual results and developments to differ materially from
those expressed or implied by the forward-looking statements including, without
limitation: conditions in the markets, market position of the Company or the
Group, earnings, financial position, cash flows, return on capital and operating
margins, anticipated investments and capital expenditures, changing business or
other market conditions and general economic conditions. These and other factors
could adversely affect the outcome and financial effects of the plans and events
described in this announcement. Forward-looking statements contained in this
announcement based on past trends or activities should not be taken as a
representation that such trends or activities will continue in the future.
Subject to any requirement of the UK Listing Authority or London Stock Exchange
or as a matter of law, neither MCG nor Rothschild undertakes any obligation to
update or revise any forward looking statements, whether as a result of new
information, future events or otherwise. Undue reliance should not be placed on
forward-looking statements, which speak only as of the date of this
announcement.
The New Ordinary Shares have not been and will not be registered for sale under
the United States Securities Act of 1933 (the "Securities Act").
This announcement shall not constitute an offer to sell or the solicitation of
an offer to buy the New Ordinary Shares, nor shall there be any sale of the New
Ordinary Shares in any state or other jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such state or jurisdiction. The New Ordinary
Shares are to be offered to shareholders of Ineum in transactions outside the
United States in reliance on Regulation S under the Securities Act. The New
Ordinary Shares may not be offered or sold in the United States except pursuant
to an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state securities laws.
DEFINITIONS
The following definitions apply throughout this announcement unless the context
requires otherwise:
''3i Funds'' 3i Europartners III and 3i Coinvest III, both being Fonds
Commun de Placement a Risques organised under French law
''Act'' or the Companies Act 1985 (as amended)
''Companies Act''
''Acquisition'' the proposed acquisition of the entire issued share capital of
Ineum
''Acquisition the conditional share purchase agreement dated 25 July 2006
Agreement'' between the Ineum Partners, Mr Manardo, the 3i Funds, Tecnet
Participations and MCG
''Board'' or the board of directors of the Company
''Directors''
''Closing Price'' the closing middle market quotation of an Existing Ordinary
Share as derived from the Daily Official List published by the
London Stock Exchange
''Company'' or Management Consulting Group PLC
''MCG''
''EBITDA'' earnings before interest, taxes, depreciation and amortisation
''Enlarged the Group as enlarged by the Acquisition
Group''
''Enlarged Share the issued ordinary share capital of the Company, as enlarged
Capital'' by the allotment and issue of the New Ordinary Shares
''Existing the 189,951,771 Ordinary Shares currently in issue
Ordinary Shares''
''Extraordinary the extraordinary general meeting of the Company expected to
General Meeting'' be held on 30 August 2006, notice of which will be set out in
or ''EGM'' the Circular
''Escrow the escrow agreement to be entered into by MCG, the Ineum
Agreement'' Partners and a suitable escrow agent on or immediately before
completion of the Acquisition
''Euro'' or ''Euro'' the lawful currency of the participating member states of the
European Union
''FSMA'' the Financial Services and Markets Act 2000, as amended
''Group'' or the Company and its subsidiary undertakings
''MCG Group''
''Ineum'' Ineum Conseil et Associes SA, a societe anonyme organised
under the laws of France
''Ineum the holders of the shares in Ineum immediately prior to
Partners'' completion of the Acquisition other than the 3i Funds, Tecnet
Participations and Mr Manardo
''Listing Rules'' the listing rules issued by the UK Listing Authority under
section 73A of FSMA
''London Stock London Stock Exchange plc
Exchange''
''New Ordinary the 81,020,798 new Ordinary Shares to be issued pursuant to
Shares'' the Acquisition
''Ordinary ordinary shares of 25 pence each in the capital of the Company
Shares''
''Panel'' the Panel on Takeovers and Mergers
''Proposed Jacques Manardo who is proposed to be appointed as an
Director'' additional non-executive Director of the Company on completion
of the Acquisition
''Relationship the conditional agreement to be entered into on or before
Agreement'' completion of the Acquisition between the Ineum Partners and
MCG relating, inter alia, to the lock-up arrangements and the
strategy of MCG following completion of the Acquisition
''Shareholders'' holders of Ordinary Shares
''Sterling'' or the lawful currency for the time being of England, Wales and
''#'' Scotland
''Takeover Code'' the Takeover Code of the Panel
''Tecnet Tecnet Participations, a societe unipersonnelle a
Participations'' responsabilite limitee organised under the laws of France
''UK Listing the Financial Services Authority in its capacity as the
Authority'' competent authority for the purposes of Part VI of FSMA
''United the United Kingdom of Great Britain and Northern Ireland
Kingdom'' or
''UK''
''United States'' the United States of America, its territories and possessions,
or ''US'' any state of the United States and the District of Columbia
Save where otherwise provided, the exchange rate used to convert amounts in this
document denominated in Euros into amounts denominated in UK pounds sterling is
as follows: Euro1.4655 to #1.
--------------------------
1 Source: ''Consulting Opportunities in France and Belgium: Key Data, Forecasts
& Trends'' published by Kennedy Information, Inc., 2006 (page 100).
2 Source: ''Consulting Opportunities in France and Belgium: Key Data, Forecasts
& Trends'' published by Kennedy Information, Inc., 2006 (page 51).
3 This statement is not intended to constitute a profit forecast and should not
be interpreted to mean that the actual earnings of the Enlarged Group following
the Acquisition will necessarily match or exceed the historic published
earnings.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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