Rec. Offer for Meconic - Pt 1

Johnson,Matthey PLC 21 June 2001 PART 1 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN Recommended Cash Offer by Schroder Salomon Smith Barney on behalf of Johnson Matthey plc to acquire Meconic plc Summary - The Boards of Johnson Matthey and Meconic announce that they have reached agreement on the terms of a recommended cash offer of 405 pence per ordinary share for the whole of the issued and to be issued share capital of Meconic valuing the whole of the issued share capital of Meconic at approximately £147.1 million. The Offer will include a Loan Note Alternative. - The Offer represents a premium of approximately 42 per cent. to the Closing Price of 285 pence per Meconic Share on 20 June 2001, the last business day prior to the date of this announcement. - The Meconic Directors, who have been so advised by Close Brothers, consider the terms of the Offer to be fair and reasonable and will unanimously recommend Meconic Shareholders to accept the Offer as they have irrevocably undertaken to do with respect to their own beneficial holdings. - For many years Johnson Matthey has operated a pharmaceutical materials business from a facility in West Deptford, New Jersey. This business is similar to that of Meconic in a number of ways including complementary product ranges, and a focus on high value, low volume products, particularly controlled substances. - Meconic also offers an attractive opportunity for the geographic expansion of Johnson Matthey's current pharmaceutical fine chemicals business into the United Kingdom and Europe. This broader base will provide opportunities to sell existing products in new markets and for the more effective deployment of research and development, manufacturing and marketing resources. - The Johnson Matthey Directors believe that the acquisition of Meconic will be earnings enhancing after goodwill amortisation during Johnson Matthey's first full financial year of ownership, commencing 1 April 2002*. Commenting on the Offer, Peter Savage, Chairman of Meconic, said: 'The board has every confidence in the Company's future and last year's results again demonstrated the strong earnings growth in Meconic's business. However, even with such growth, in the view of the board, it would probably take several years for Meconic's share price to match that currently represented by the Offer and the board has therefore concluded that the Offer represents fair value for Meconic shareholders.' Commenting on the Offer, Chris Clark, Chief Executive of Johnson Matthey, said: 'The combination of Meconic with our pharmaceutical materials business makes great commercial sense on a variety of levels. It will expand our product portfolio while extending our geographic reach and presenting broader market opportunities. The acquisition of Meconic is firmly in line with our strategy of developing our business both organically and by targeted acquisition.' Enquiries Johnson Matthey plc John Sheldrick 020 7269 8403 David Morgan 020 7269 8454 Schroder Salomon Smith Barney 020 7986 4000 (financial adviser to Johnson Matthey) James Steel Jan Skarbek Credit Suisse First Boston de Zoete & Bevan Limited 020 7888 8888 (brokers to Johnson Matthey) Chris Chambers Chris Sim Gavin Anderson 020 7457 2345 (PR Consultants to Johnson Matthey) Howard Lee Laura Hickman Meconic plc 07768 502 896 Peter Savage Close Brothers 020 7655 3100 (financial adviser to Meconic) Martin Gudgeon Mark Barrow *This statement should not be interpreted to mean that future earnings per share of Johnson Matthey following the acquisition of Meconic will be higher than historical earnings per share. This summary should be read in conjunction with the full text of the following announcement. Salomon Brothers International Limited (trading as 'Schroder Salomon Smith Barney') and Credit Suisse First Boston de Zoete & Bevan Limited ('CSFB'), which are regulated in the United Kingdom by The Securities and Futures Authority Limited, are acting exclusively for Johnson Matthey and no one else in connection with the Offer and will not be responsible to anyone other than Johnson Matthey for providing the protections afforded to its customers nor for providing advice in relation to the Offer. Salomon Smith Barney is a service mark of Salomon Smith Barney Inc. Schroder is a trademark of Schroders Holdings plc and is used under licence by Salomon Brothers International Limited. Close Brothers Corporate Finance Limited, which is regulated in the United Kingdom by The Securities and Futures Authority Limited, is acting exclusively for Meconic and no one else in connection with the Offer and will not be responsible to anyone other than Meconic for providing the protections afforded to its customers or for providing advice in relation to the Offer. The Offer will not be made, directly or indirectly, in or into or by the use of the mails or any means of instrumentality of interstate or foreign commerce of, or any facilities of a national securities exchange of, the USA, or in or into Canada, Australia or Japan. Accordingly, copies of this announcement are not being, and must not be, mailed or otherwise distributed or sent in or into or from the USA, Canada, Australia or Japan. The Loan Notes to be issued pursuant to the Loan Note Alternative have not been, and will not be, registered under the United States Securities Act of 1933 (as amended) or under any relevant securities laws of any state or other jurisdiction of the United States, nor have clearances been, nor will they be, obtained from the securities commission or similar authority of any province or territory of Canada and no prospectus has been or will be filed, or registration made, under any securities law of any province or territory of Canada, nor has a prospectus in relation to the Loan Notes been, nor will one be, lodged with or registered by the Australian Securities and Investments Commission nor have any steps been taken, nor will any steps be taken, to enable the Loan Notes to be offered in compliance with applicable securities laws of Japan. Accordingly, unless an exemption under such Act or securities laws is available, Loan Notes may not be offered, sold, re-sold or delivered, directly or indirectly, in, into or from the United States, Canada, Australia or Japan or any other jurisdiction in which an offer of Loan Notes would constitute a violation of relevant laws or require registration thereof, or to or for the account or benefit of any US Person or resident of Canada, Australia or Japan. NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN Recommended Cash Offer by Schroder Salomon Smith Barney on behalf of Johnson Matthey plc to acquire Meconic plc 1. Introduction The Boards of Johnson Matthey and Meconic announce the terms of a recommended cash offer, to be made by Schroder Salomon Smith Barney on behalf of Johnson Matthey, to acquire the whole of the issued and to be issued share capital of Meconic. 2. The Offer The Offer, which will be on the terms and subject to the conditions set out or referred to in Appendix I to this announcement and the further terms and conditions to be set out in the Offer Document and the Form of Acceptance, will be made on the basis set out below: for each Meconic Share 405 pence in cash The Offer values the entire existing issued ordinary share capital of Meconic at approximately £147.1 million. The Offer represents a premium of approximately 42 per cent. to the Closing Price of 285 pence per Meconic Share on 20 June 2001, the last business day prior to the date of this announcement. The Meconic Shares which are the subject of the Offer will be acquired under the Offer fully paid and free from liens, equities, charges, encumbrances, rights of pre-emption and other third party rights or interest of any nature whatsoever and together with all rights now or hereafter attaching thereto, including the right to receive and retain in full all dividends and other distributions declared, made or paid after the date of this announcement. Accordingly, as set out in Meconic's preliminary results announced today, subject to the Offer being declared unconditional in all respects, no final dividend will be declared or paid by Meconic. The Directors of Meconic, who have been so advised by Close Brothers, consider the terms of the Offer to be fair and reasonable and will unanimously recommend Meconic Shareholders to accept the Offer as they have irrevocably undertaken to do with respect to their own beneficial holdings. In providing advice to the Directors, Close Brothers has taken into account the commercial assessments of the Directors of Meconic. 3. The Loan Note Alternative Meconic Shareholders, other than certain overseas shareholders, who validly accept the Offer may elect to receive Loan Notes to be issued by Johnson Matthey instead of some or all of the cash consideration to which they will otherwise be entitled under the Offer. The Loan Note Alternative will be made available on the following basis: for every £1 of cash consideration £1 nominal of Loan Notes The issue of the Loan Notes will be conditional on the Offer becoming or being declared wholly unconditional and valid elections having been received by such time for at least £3 million in nominal value of Loan Notes. The Loan Notes will be issued credited as fully paid in amounts and integral multiples of £1 nominal value. Any fractional entitlements will be disregarded and not paid. The Loan Notes will be freely transferable. The Loan Notes will bear interest, payable in arrears, up to but excluding the date of payment (less any applicable tax) in semi-annual instalments on 15 April and 15 October in each year at a rate per annum calculated by Johnson Matthey as being equal to 0.5 per cent. below LIBOR for six month sterling deposits. The first interest payment will be made on 15 April 2002 in respect of the period from and including the first date of issue of the Loan Notes up to but excluding 15 April 2002. The Loan Notes will be redeemable in whole or in part at par (together with accrued interest (after deduction of tax)) at the option of the holder of the Loan Notes on 15 October 2002 and on any subsequent interest payment date. On any interest payment date falling on or after 15 October 2002, if 20 per cent. or less in nominal value of the Loan Notes issued or £3 million or less in nominal value of Loan Notes remains outstanding, Johnson Matthey shall have the right on giving to the remaining holders of Loan Notes not less than 30 days' prior notice in writing to redeem all (but not part only) of the outstanding Loan Notes by payment of the nominal amount thereof together with accrued interest (after deduction of tax) up to but excluding the date of redemption. Any Loan Notes not previously redeemed or purchased will be redeemed at their principal amount on 15 October 2006 together with accrued interest (after deduction of tax) up to but excluding the date of redemption. 4. Irrevocable undertakings Johnson Matthey has received irrevocable undertakings to accept the Offer from Directors of Meconic in respect of an aggregate of 206,000 Meconic Shares, representing approximately 0.57 per cent. of the current issued share capital of Meconic. In addition, Johnson Matthey has received irrevocable undertakings from Peter Savage, Ken Green and Sandy Macrae to use their best endeavours to procure the acceptance of the Offer in respect of an aggregate of 47,806 Meconic Shares in which certain of their connected persons hold an interest, representing approximately 0.13 per cent. of the current issued share capital of Meconic. Together the Meconic Shares subject to such irrevocable undertakings represent approximately 0.70 per cent. of the current issued share capital of Meconic. The irrevocable undertakings from the Directors of Meconic in respect of such shareholdings will be binding in the event of a competing offer being made for Meconic. 5. Reasons for the Offer For many years Johnson Matthey has operated a pharmaceutical materials business from a facility in West Deptford, New Jersey. This business is similar to that of Meconic in a number of ways including complementary product ranges, and a focus on high value, low volume products, particularly controlled substances. Meconic also offers an attractive opportunity for the geographic expansion of Johnson Matthey's current pharmaceutical fine chemicals business into the United Kingdom and Europe. This broader base will provide opportunities to sell existing products in new markets and for the more effective deployment of research and development, manufacturing and marketing resources. Furthermore, on 23 April 2001, Johnson Matthey announced the acquisition of Pharm-Eco Laboratories, a US-based operation that provides contract research, process development and small scale synthesis services to the pharmaceutical industry. This operation will enable Johnson Matthey to offer a wide range of services to customers of Meconic. The Johnson Matthey Directors believe that the acquisition of Meconic will be earnings enhancing after goodwill amortisation during Johnson Matthey's first full financial year of ownership, commencing 1 April 2002*. * This statement should not be interpreted to mean that future earnings per share of Johnson Matthey following the acquisition of Meconic will be higher than historical earnings per share. 6. Background to the recommendation of the Offer In early 2001, Meconic received approaches from a number of parties interested in making a recommended offer for the Company. These were at a level which prompted the Directors of Meconic to formally test the market for potential purchasers. Close Brothers was engaged, in March 2001, to run a process and establish the level of interest from a number of trade purchasers. The ensuing negotiations have resulted in the agreement of the terms of the Offer. The Directors of Meconic have reviewed the strategic options open to Meconic. The Company has been demonstrating strong earnings growth in the recent past and the Meconic Board has every confidence in the future, as the business is very well placed in a market with strong organic growth. However, it would probably take several years of such performance to create the value in Meconic's share price equivalent to the Offer. Therefore the Directors of Meconic have decided to recommend the Offer as they believe it represents fair value for Meconic Shareholders. 7. Conditions The Offer will be subject to, amongst other things, certain terms and conditions, as detailed in Appendix I to this announcement. 8. Information on the Meconic Group Meconic is the parent company of Macfarlan Smith - a long established manufacturer of active pharmaceutical ingredients and fine chemicals and a world leader in the production of alkaloid opiates and other controlled drugs. The Group, based in Edinburgh, was formed in August 1990 when the management acquired Macfarlan Smith from Glaxo. The Group's activities are divided into three broad areas: active pharmaceutical ingredients; specialty fine chemicals; and contract manufacture. The active pharmaceutical ingredients business is the world's leading supplier of opiates, a controlled drug. Opiates are active pharmaceutical ingredients based on the extraction of morphine (the key opiate building block) from opium poppies. Examples of opiates include codeine, dihydrocodeine, morphine, pholcodine, diamorphine, oxycodone and hydromorphone. Macfarlan Smith also produces other controlled drugs: of the twenty principal synthetic narcotics, Macfarlan Smith manufactures four. Macfarlan Smith also sells cocaine. Macfarlan Smith also produces other non-controlled drugs including apomorphine used as an emetic and in the control of Parkinson's Disease. The fine chemicals business produces aversives which are used to deter the ingestion of hazardous materials. Macfarlan Smith's largest non- pharmaceutical product is BitrexT, the brand name for a bitter tasting substance now sold in 41 countries. The group also manufactures intermediates from raw materials which are used to serve as starting materials for other pharmaceutical products. The group manufactures other active pharmaceutical ingredients produced on contract for third parties through its contract manufacturing business. Meconic today issued its preliminary results for the year ended 30 April 2001. Meconic reported earnings before interest, taxation, depreciation and amortisation of £13.3 million (2000: £11.0 million) and profit on ordinary activities before taxation of £9.8 million (2000: £8.1 million) for the year ended 30 April 2001. Shareholders' funds as at 30 April 2001 were £29.9 million (2000: £23.6 million) and net borrowings as at 30 April 2001 were £15.5 million. Subject to the Offer being declared unconditional in all respects no final dividend will be declared or paid. 9. Information on the Johnson Matthey Group Johnson Matthey is a speciality chemicals company focused on precious metals, catalysts and other fine chemicals. It is organised into three operating divisions: Catalysts & Chemicals, Precious Metals and Colours & Coatings. The Johnson Matthey Group's principal activities are: the manufacture of catalysts and pollution control systems, pharmaceutical compounds, process catalysts and speciality chemicals; the refining, fabrication and marketing of precious metals; and the manufacture of colours and coatings for the ceramic, glass, paint and plastics industries. Johnson Matthey has operations in 34 countries and employs around 6,600 people. Its products are sold across the world to a wide range of advanced technology industries. For the year ended 31 March 2001, the Johnson Matthey Group reported an operating profit from continuing operations of £175.0 million before exceptional items and goodwill amortisation (2000: £146.5 million) and a profit on ordinary activities before taxation, exceptional items and goodwill amortisation of £180.3 million (2000: £143.8 million). Shareholders' funds before equity minority interests as at 31 March 2001 were £851.0 million (31 March 2000: £755.4 million). 10. Directors and employees Johnson Matthey attaches great importance to the skills and experience of the management and employees of the Meconic Group, and believes that they will benefit from the wider opportunities in the enlarged Johnson Matthey Group. The Board of Johnson Matthey has given assurances to Meconic that the employment rights of the Meconic Group's employees, including pension entitlements, will be fully safeguarded. Ken Green has indicated his willingness to remain with the enlarged group. The non-executive Directors of Meconic have agreed to resign from the Board of Meconic as soon as the Offer becomes or is declared wholly unconditional. 11. Meconic Share Option Schemes The Offer will extend to any Meconic Shares which are unconditionally allotted or issued while the Offer remains open for acceptance (or such earlier period as Johnson Matthey may, subject to the City Code, decide), including any Meconic Shares which are allotted or issued as a result of the exercise of options granted under the Meconic Share Option Schemes. In the event that the Offer becomes or is declared unconditional in all respects, Johnson Matthey will write to participants in the Meconic Share Option Schemes, to inform them of the effect of the Offer on their rights under the Meconic Share Option Schemes and to set out appropriate proposals to be made in respect of their options. 12. Compulsory acquisition, de-listing and cancellation of trading If Johnson Matthey receives acceptances under the Offer in respect of, and/or otherwise acquires, an aggregate of 90 per cent. or more of the Meconic Shares to which the Offer relates, Johnson Matthey intends to exercise its rights pursuant to the provisions of sections 428 to 430F of the Act to compulsorily acquire the remaining Meconic Shares to which the Offer relates. Furthermore, once the Offer becomes or is declared unconditional in all respects, Johnson Matthey intends to procure the making of an application by Meconic to the UKLA for the cancellation of the listing of Meconic Shares on the Official List and to the London Stock Exchange for the cancellation of trading of Meconic Shares. It is anticipated that such cancellations will take effect no earlier than 20 business days after the date on which the Offer becomes or is declared unconditional in all respects. 13. Inducement fee Meconic has agreed to pay to Johnson Matthey the sum of £1,470,000 if prior to the Offer lapsing or being withdrawn the Board of Meconic recommends an offer by a third party which subsequently becomes or is declared wholly unconditional. 14. General The Offer Document will be posted to Meconic Shareholders and (for information only) to participants in the Meconic Share Option Schemes as soon as is practicable. The definitions of certain expressions used in this announcement are contained in Appendix II. The availability of the Offer to persons not resident in the UK may be affected by the laws of the relevant jurisdiction. Persons who are not resident in the UK should inform themselves about and observe any applicable laws. Save for the irrevocable undertakings summarised in paragraph 4 above, neither Johnson Matthey nor any person acting in concert with it owns or controls any Meconic Shares or any securities convertible or exchangeable into Meconic Shares or any rights to subscribe for or purchase, or options (including traded options) in respect of, or derivatives referenced to, any such shares ('Relevant Meconic Securities') nor does any such person have any arrangement in relation to Relevant Meconic Securities. For these purposes, 'arrangement' includes any indemnity or option arrangement, any agreement or understanding, formal or informal, of whatever nature, relating to Relevant Meconic Securities which may be an inducement to deal or refrain from dealing in such securities. Enquiries Johnson Matthey plc John Sheldrick 020 7269 8403 David Morgan 020 7269 8454 Schroder Salomon Smith Barney 020 7986 4000 (financial adviser to Johnson Matthey) James Steel Jan Skarbek Credit Suisse First Boston de Zoete & Bevan Limited 020 7888 8888 (brokers to Johnson Matthey) Chris Chambers Chris Sim Gavin Anderson 020 7457 2345 (PR Consultants to Johnson Matthey) Howard Lee Laura Hickman Meconic plc 07768 502 896 Peter Savage Close Brothers 020 7655 3100 (financial adviser to Meconic) Martin Gudgeon Mark Barrow Salomon Brothers International Limited (trading as 'Schroder Salomon Smith Barney') and Credit Suisse First Boston de Zoete & Bevan Limited ('CSFB'), which are regulated in the United Kingdom by The Securities and Futures Authority Limited, are acting exclusively for Johnson Matthey and no one else in connection with the Offer and will not be responsible to anyone other than Johnson Matthey for providing the protections afforded to its customers nor for providing advice in relation to the Offer. Salomon Smith Barney is a service mark of Salomon Smith Barney Inc. Schroder is a trademark of Schroders Holdings plc and is used under licence by Salomon Brothers International Limited. Close Brothers Corporate Finance Limited, which is regulated in the United Kingdom by The Securities and Futures Authority Limited, is acting exclusively for Meconic and no one else in connection with the Offer and will not be responsible to anyone other than Meconic for providing the protections afforded to its customers nor for providing advice in relation to the Offer. The Offer will not be made, directly or indirectly, in or into or by the use of the mails or any means or instrumentality of interstate or foreign commerce of, or any facilities of a national securities exchange of, the USA, or in or into Canada, Australia or Japan. Accordingly, copies of this announcement are not being, and must not be, mailed or otherwise distributed or sent in or into or from the USA, Canada, Australia or Japan and persons receiving this announcement (including custodians, nominees and trustees) must not distribute, or send it into or from the USA, Canada, Australia or Japan. Doing so may invalidate any proposed acceptance. The Loan Notes to be issued pursuant to the Loan Note Alternative have not been, and will not be, registered under the United States Securities Act 1933 (as amended) or under any relevant securities laws of any state or other jurisdiction of the United States, nor have clearances been, nor will they be, obtained from the securities commission or similar authority of any province or territory of Canada and no prospectus has been or will be filed, or registration made, under any securities law of any province or territory of Canada, nor has a prospectus in relation to the Loan Notes been, nor will one be, lodged with or registered by the Australian Securities and Investments Commission nor have any steps been taken, nor will any steps be taken, to enable the Loan Notes to be offered in compliance with applicable securities laws of Japan. Accordingly, unless an exemption under such Act or securities laws is available, Loan Notes may not be offered, sold, re-sold or delivered, directly or indirectly, in, into or from the United States, Canada, Australia or Japan or any other jurisdiction in which an offer of Loan Notes would constitute a violation of relevant laws or require registration thereof, or to or for the account or benefit of any US Person or resident of Canada, Australia or Japan. MORE TO FOLLOW

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