Rights Issue

RNS Number : 1444S

Marshalls PLC

13 May 2009

 



13 May 2009

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA, MALTA, NEW ZEALAND OR ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL.

Marshalls plc announces a fully underwritten Rights Issue to raise net proceeds of approximately £34 million

The Board of Marshalls today announces a fully underwritten 2 for 5 Rights Issue to raise proceeds of approximately £34.2 million, net of expenses, through the issue of 56,272,501 New Ordinary Shares. The Rights Issue is subject to approval by Shareholders at an Extraordinary General Meeting expected to be held on or around 29 May 2009. The Rights Issue has been fully underwritten by Citi and Numis.

Mike Davies, Chairman of Marshalls, said 'Against the background of an uncertain economic environment, the Board believes the Rights Issue will provide a more conservative and flexible capital structure by reducing the Group's financial indebtedness and providing increased headroom on its lending covenants. The Board further believes that the improved capital structure will create a stronger position from which to develop the Group so as to ensure that it is well placed to take advantage of the recovery in economic activity when it occurs.'

Highlights

• 2 for 5 Rights Issue of 56,272,501 New Ordinary Shares at a price of 65 pence per New Ordinary Share

• The fundraising will reduce the Group's financial indebtedness and provide a more conservative capital structure for the current environment as well as increased headroom on financial covenants under its facilities

• This will provide the Group with flexibility from which to take advantage of strategic and value-enhancing organic development opportunities and potential acquisition opportunities

• The improved capital structure will create a stronger position from which to develop the Group so as to ensure that it is well placed to take advantage of the recovery in economic activity when it occurs

Rothschild is acting as financial adviser and Joint Sponsor to the Company with respect to the Rights Issue. Citi is acting as Joint Sponsor and Joint Bookrunner to the Company with respect to the Rights Issue. Numis is acting as Joint Bookrunner to the Company with respect to the Rights Issue.

This summary should be read in conjunction with the full text of this Announcement.

  ENQUIRIES

Marshalls plc                                          Tel: [phone]

Graham Holden, Chief Executive

Ian Burrell, Finance Director

Rothschild                                               Tel: [phone]

John Deans

Richard Bailey

Stephen Griffiths

Citi                                                             Tel: [phone]

David James

Cyrus Shabi

Andrew Forrester

Numis                                                        Tel: [phone]

Heraclis Economides

Chris Wilkinson

Simon Blank

Brunswick Group LLP                             Tel: [phone]

Jon Coles

Kate Miller

General:

This Announcement is not for release, publication or distribution, directly or indirectly, in or into the United States, Australia, Canada, Japan, South Africa, Malta, New Zealand or any other jurisdiction into which the same would be unlawful.

This Announcement does not contain or constitute an offer of, or the solicitation of an offer to buy or subscribe for, securities to any person in Australia, Canada, Japan, South Africa, Malta, New Zealand or the United States or in any jurisdiction to whom or in which such offer or solicitation is unlawful. The securities referred to herein may not be offered or sold in the United States absent registration under the Securities Act or another exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Subject to certain exceptions, the securities referred to herein may not be offered or sold in Australia, Canada, Japan, South Africa, Malta or New Zealand or to, or for the account or benefit of, any national, resident or citizen of Australia, Canada, Japan, South Africa, Malta or New Zealand. The offer and sale of the securities referred to herein has not been and will not be registered under the Securities Act or under the applicable securities laws of Australia, Canada, Japan, South Africa, Malta or New Zealand. There will be no public offer of the securities in the United States. The availability of the Rights Issue to persons not resident in the United Kingdom may be affected by the laws of the relevant jurisdictions. Such persons should inform themselves about and observe any application requirements.

This Announcement does not constitute an offer to sell or issue or the solicitation of an offer to buy or acquire shares in the capital of the Company in the United States, Australia, Canada, Japan, South Africa, Malta, New Zealand or any jurisdiction where to do so might constitute a violation of local securities laws or regulations.

The Nil Paid Rights, the Fully Paid Rights, the New Ordinary Shares and the Provisional Allotment Letters have not been and will not be registered under the Securities Act or under the securities laws of any state or other jurisdiction of the United States or under any securities laws of the other Excluded Territories and may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, within the United States, except pursuant to an applicable exemption from, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States or within any of the other Excluded Territories. There will be no public offer of the Nil Paid Rights, the Fully Paid Rights, the New Ordinary Shares and the Provisional Allotment Letters in the United States.

The distribution of this Announcement and the offering of the Nil Paid Rights, the Fully Paid Rights or the New Ordinary Shares in jurisdictions other than the United Kingdom may be restricted by law. No action has been taken by the Company or any of Rothschild, Citi or Numis that would permit an offering of such rights or shares or possession or distribution of this Announcement or any other offering or publicity material relating to such shares in any jurisdiction where action for that purpose is required. Persons into whose possession this Announcement comes are required by the Company and each of Rothschild, Citi and Numis to inform themselves about, and to observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

This Announcement is for information only and does not constitute or form part of any offer or invitation to issue, acquire or dispose of any securities or investment advice in any jurisdiction. 

This Announcement is an advertisement and not a prospectus and investors should not subscribe for or purchase any New Ordinary Shares referred to in this Announcement in connection with Rights Issue except on the basis of information to be contained in the Prospectus expected to be published today by the Company in connection with the proposed Rights Issue. Copies of the Prospectus will be available from the Company's registered office.

This Announcement has been issued by and is the sole responsibility of the Company. No representation or warranty, express or implied is, or will be made as to, or in relation to, and no responsibility or liability is, or will be, accepted by any of Rothschild, Citi or Numis or by any of their affiliates or agents as to, or in relation to, the accuracy or completeness of this Announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefore is expressly disclaimed.

Rothschild, which is authorised and regulated by the Financial Services Authority in the United Kingdom, is acting exclusively for the Company as Joint Sponsor and financial adviser in connection with the Rights Issue and Admission and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Rights Issue or any other matters referred to in this Announcement. 

Citi, which is authorised and regulated by the Financial Services Authority in the United Kingdom, is acting exclusively for the Company as Joint Sponsor and Joint Bookrunner in connection with the Rights Issue and Admission and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Rights Issue or any other matters referred to in this Announcement.

Numis, which is authorised and regulated by the Financial Services Authority in the United Kingdom, is acting exclusively for the Company as Joint Bookrunner in connection with the Rights Issue and Admission and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Rights Issue or any other matters referred to in this Announcement.

This Announcement contains forward-looking statements which reflect the Group's or, as appropriate, the Directors' current views with respect to financial performance, business strategy, plans and objectives of management for future operations (including development plans relating to the Company's products and services). These statements include forward-looking statements both with respect to the Group and the sectors and industries in which the Group operates. Statements which include the words 'expects', 'intends', 'plans', 'believes', 'projects', 'anticipates', 'will', 'targets', 'aims', 'may', 'would', 'could', 'continue' and similar statements of a future or forward-looking nature identify forward-looking statements.

All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause the Group's actual results to differ materially from those indicated in these statements. Any forward looking statements in this Announcement reflect the Group's current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the Group's operations, results of operations, growth strategy and liquidity.

These forward-looking statements speak only as of the date of this Announcement. Subject to any obligations under the Prospectus Rules, the Disclosure and Transparency Rules or the Listing Rules and save as required by law, the Company undertakes no obligation to update publicly or to review any forward-looking statement, whether as a result of new information, future developments or otherwise. All subsequent written and oral forward-looking statements attributable to the Company or individuals acting for and on behalf of the Company are expressly qualified in their entirety by this paragraph. Prospective investors should specifically consider the factors identified in the Prospectus which could cause actual results to differ before making an investment decision.

Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser. Any indication in this Announcement of the price at which the Ordinary Shares of the Company have been bought or sold in the past cannot be relied upon as a guide to future performance. No statement in this Announcement is intended to be a profit forecast.

  Marshalls plc

Rights Issue to raise approximately £34 million (net of expenses)

Introduction

The Company today announces that it is proposing to raise approximately £34.2 million (net of expenses) by way of the Rights Issue. Under the Rights Issue, which is described further below, the New Ordinary Shares will be offered by way of rights on the basis of 2 New Ordinary Shares at 65 pence each for every 5 Existing Ordinary Shares held at the Record Date.

The Rights Issue Price of 65 pence per New Ordinary Share represents a 37.9 per cent discount to the theoretical ex-rights price (calculated by reference to the Closing Price of 122.0 pence per Existing Ordinary Share on 12 May 2009, the last Business Day prior to the announcement of the Rights Issue, adjusted for the 2008 Final Dividend which will not be paid on the New Ordinary Shares), and a 46.1 per cent discount to the Closing Price of 122.0 pence per Existing Ordinary Share on 12 May 2009, also adjusted for the 2008 Final Dividend. 

The purpose of this Announcement is to provide details of the Rights Issue and to explain why the Directors consider the Rights Issue and the Resolution to be proposed at the Extraordinary General Meeting to be in the best interests of the Company and Shareholders as a whole. A prospectus in connection with the Rights Issue is expected to be posted to Shareholders shortly and will be available on the Company's website, www.marshalls.co.uk.

The Rights Issue is conditional, inter alia, upon Shareholders approving the Resolution, as described further below. The notice of the Extraordinary General Meeting will be set out in the Prospectus.

Background to and reasons for the Rights Issue

As reported in the Group's preliminary results announced on 6 March 2009, the deterioration in the economic environment has meant that there has been a decline in sales during the second half of 2008 which has continued in 2009 and there remains some uncertainty around future demand. However, the Group continues to trade in line with its expectations and is focusing on managing short term operational risk and adapting the financial structure of the business for the medium term. 

The Group has already taken decisive actions on cash management and cost reductions to adapt the business for the current lower levels of activity whilst retaining the capability to respond quickly to additional demand in the medium term. These actions were set out in detail in the preliminary results announcement on 6 March 2009 and include:

• Conservation of cash through reduced capital expenditure, strict control of working capital and a rebased dividend;

• Reduction of cost base and improvements in plant utilisation;

• Continued investment in innovation to reduce its operating costs and extend its competitive advantage through new product development and service solutions; and

• Focus of sales effort where activity is more robust.

The Group renewed its bank facilities in August 2008 and has significant committed facilities in place which the Board believes are on attractive terms in the context of the current environment, having a good spread of medium term maturities with the majority of facilities not maturing until 2011 or later.

The Board remains confident of the Group's operational performance even in the current challenging market conditions. However, against the background of an uncertain economic environment, the Board believes that it is appropriate for the Group to raise approximately £34.2 million (net of expenses) to reduce the Group's financial indebtedness, which will provide a more conservative capital structure for the current environment and provide increased headroom on financial covenants under its facilities.

In addition, the increased headroom created by the new funds raised will provide the Group with flexibility from which to take advantage of strategic and value-enhancing organic development opportunities and potential acquisition opportunities. The improved capital structure will create a stronger position from which to develop the Group so as to ensure that it is well placed to take advantage of the recovery in economic activity when it occurs.

Principal terms of the Rights Issue

The Company is proposing to raise approximately £36.6 million (£34.2 million net of expenses) by way of a 2 for 5 Rights Issue of 56,272,501 New Ordinary Shares at a price of 65 pence per New Ordinary Share.

The Rights Issue has been fully underwritten by Citi and Numis, and is conditional, amongst other things, upon: 

• the passing, without amendment, of the Resolution at the Extraordinary General Meeting;

• the Company having applied to Euroclear for admission of the Nil Paid Rights and Fully Paid Rights to CREST as participating securities and no notification having been received from Euroclear on or before Admission that such admission has been or is to be refused;

• Admission becoming effective by not later than 8.00 a.m. on 1 June 2009 (or such later time and/or date as the parties to the Underwriting Agreement may agree, but such that the latest date for Admission is not later than 8 June 2009); and

• the Underwriting Agreement becoming unconditional in all respects save for the condition relating to Admission and not having been terminated in accordance with its terms.

A summary of the Underwriting Agreement will be set out in the Prospectus.

Use of proceeds

The Directors intend to use the net proceeds of the Rights Issue, amounting to approximately £34.2 million, to reduce the Group's financial indebtedness. This reduction in the Group's financial indebtedness and more conservative capital structure will provide increased headroom on financial covenants, and provide flexibility to develop the Group's medium term strategy.

Current trading and future prospects of Marshalls

Overall, Marshalls continues to trade in line with the Group's expectations against a backdrop of uncertain macro-economic conditions which continue to adversely affect the Group's markets.

As set out in the Group's Interim Management Statement, the Group's revenue for the four months ended 30 April 2009 was in line with its expectations at £103 million (2008: £135 million) from two less working days. Underlying daily sales revenue on a like for like basis, after adjusting for differences in the winter stocking arrangements by distributors, was down 19 per cent against a strong comparative period in 2008. 

The Public Sector and Commercial market, which represented 59 per cent of Group revenue in 2008, is more subdued following a period of robust activity and the lead indicators predict a decline during the first half of 2009 before levelling out during the second half of the year. In contrast, the Domestic market has recently performed more strongly than the Group's expectations with encouraging trading during the important Easter period.  The Group's survey of installer order books at the end of April 2009 showed that these were 7.1 weeks (2008: 8.2 weeks) up from 5.6 weeks at the end of February 2009.

The Group's borrowings show their normal seasonal working capital cycle increase and amount to £135.2 million at 30 April 2009, which is benefiting from the effective implementation of the decisions taken to conserve cash. The normal working capital profile is expected to show a reduction in the borrowings throughout the remainder of the calendar year.

The Group maintains a strong emphasis and priority on cash management and cost reduction. The Board believes that the Group's market leading position, the strength of the Marshalls brand, efficient manufacturing and sourcing, national distribution network and the decisive actions taken will maximise the Group's short term performance in an uncertain market without prejudicing its longer term prospects. 

The objective is to emerge from the current economic downturn in a stronger position and to retain the ability, by means of a resilient balance sheet and capital structure, to take advantage of those opportunities for sound growth including organic development and potential acquisition opportunities.

Dividends and dividend policy

The Board has announced its commitment to pursue a progressive dividend policy. The level of future dividend payments will take into account the Group's underlying earnings, cash flows, capital investment plans, distributable reserves and the need to maintain an appropriate level of dividend cover.

Extraordinary General Meeting

A notice convening the Extraordinary General Meeting of the Company to be held at Eversheds LLP, One Wood Street, London EC2V 7WS on 29 May 2009 at 10.00 a.m. is set out at the end of the Prospectus which is being sent to Shareholders today. The Extraordinary General Meeting is being convened for the purposes of considering and, if thought fit, passing the Resolution which is required to implement the Rights Issue.

Expected timetable of principal events

Each of the times and dates in the table below is indicative only and may be subject to change.

Record Date for entitlements under the Rights Issue	27 May 2009
Extraordinary General Meeting	10.00 a.m. on 29 May 2009
Despatch of Provisional Allotment Letter (to Qualifying non-CREST Shareholders only)	29 May 2009
Commencement of dealings in Nil Paid Rights on the London Stock Exchange	8.00 a.m. on 1 June 2009
Latest time and date for acceptance, payment in full and registration of renunciation of Provisional Allotment Letters	11.00 a.m. on 15 June 2009
Dealings in New Ordinary Shares, fully paid, commence on the London Stock Exchange	8.00 a.m. on 16 June 2009
Despatch of definitive share certificates for the New Ordinary Shares in certificated form	By 23 June 2009

About Marshalls

Marshalls manufactures and supplies landscape, driveway and garden products from a range of materials including concrete, natural stone, iron, steel, wood, glass and polyurethane, for Domestic and Public Sector and Commercial use. Within the Domestic market, the home improvement market is the largest user of the Group's products which range from paving and walling to greenhouses and garages. Public Sector and Commercial customers use Marshalls' products, which range from paving to street furniture, to transform landscapes including retail, industrial, civic and new build development as well as repair and maintenance projects.

In addition, Marshalls owns or has interests in 28 active quarries from which it supplies raw materials including aggregates and block stone for the production of paving and walling.

Marshalls' customers include the large builders' merchant groups, independent builders' merchants, garden centres, contractors and local authorities and domestic consumers. Products are distributed from a national network of manufacturing and service centres either to customers' depots or, at their request, direct to site.

  APPENDIX

DEFINITIONS

'2008 Final Dividend'	means the final dividend declared by the Board for the year ended 31 December 2008 of 1.45 pence per Ordinary Share which is recommended for payment on 3 July 2009 to holders of Existing Ordinary Shares on the register at the close of business on 5 June 2009 (and which will not be paid in respect of any New Ordinary Shares)
'Admission'	the admission of the New Ordinary Shares (nil paid or fully paid, as the case may require) to the Official List becoming effective, in accordance with the Listing Rules and the admission of the New Ordinary Shares (nil paid or fully paid, as the case may require) to trading on the London Stock Exchange's market for listed securities becoming effective in accordance with the Admission Standards
'Admission Standards'	the Admission and Disclosure Standards issued by the London Stock Exchange
'Announcement'	this announcement made by Marshalls regarding the Rights Issue
'Board' or 'Directors'	the board of directors of Marshalls
'Business Day'	any day other than a Saturday or Sunday or public holiday on which banks in London are open for normal business
'certificated' or 'in certificated form'	in relation to a share or other security, a share or other security which is not in uncertificated form (that is, not in CREST)
'Citi'	Citigroup Global Markets Limited when used in connection with the role of Joint Sponsor and Citigroup Global Markets U.K. Equity Limited when used in connection with the role of Joint Underwriter or Joint Bookrunner
'Closing Price'	the closing middle market quotation of an Ordinary Share as derived from the Daily Official List published by the London Stock Exchange
'Company' or 'Marshalls'	Marshalls plc
'CREST'	the computerised settlement system operated by Euroclear which facilitates the transfer of shares
'Daily Official List'	the Daily Official List of the London Stock Exchange
'Disclosure and Transparency Rules' or 'DTR's'	the disclosure and transparency rules issued by the FSA
'Euroclear'	Euroclear UK & Ireland Limited, the operator of CREST
'Excluded Territories'	the Commonwealth of Australia, its territories and possessions, Canada, Japan, New Zealand, Malta, the Republic of South Africa and the United States and any other jurisdiction where the extension or availability of the Rights Issue (or any transaction contemplated thereby and any activities carried out in connection therewith) would breach applicable law and 'Excluded Territory' means any one of them
'Existing Ordinary Shares'	the ordinary shares of 25 pence each in the capital of Marshalls in existence at the date of this Announcement
'Extraordinary General Meeting' or 'EGM'	the extraordinary general meeting of the Company to be convened pursuant to the notice to be set out in the Prospectus (including any adjournment thereof)
'FSA'	the Financial Services Authority
'FSMA'	the Financial Services and Markets Act 2000, as amended
'Fully Paid Rights'	rights to acquire New Ordinary Shares, fully paid
'Group'	the Company and its subsidiary undertakings
'Interim Management Statement'	the interim management statement dated 13 May 2009 containing the unaudited trading performance of the Group for the four months to 30 April 2009
'Joint Bookrunners'	Citi and Numis
'Joint Sponsors'	Rothschild and Citi, and 'Joint Sponsor' shall mean any of them
'Joint Underwriters'	Citi and Numis
'Listing Rules'	the listing rules issued by the FSA
'London Stock Exchange'	London Stock Exchange plc
'New Ordinary Shares'	the new ordinary shares of 25 pence each to be issued pursuant to the Rights Issue
'Nil Paid Rights'	New Ordinary Shares in nil paid form provisionally allotted to Shareholders (including Overseas Shareholders on the register at the Record Date) pursuant to the Rights Issue
'Numis'	Numis Securities Limited
'Official List'	the official list of the FSA
'Ordinary Shares'	ordinary shares of 25 pence each in the capital of the Company
'Overseas Shareholders'	holders of Ordinary Shares who are resident in, or citizens of, countries outside the United Kingdom and who have not supplied an address in the United Kingdom for the service of notices
'Prospectus' or 'Document'	the prospectus to be issued by Marshalls in connection with the Rights Issue and dated today
'Prospectus Rules'	the prospectus rules issued by the FSA
'Provisional Allotment Letter'	the renounceable provisional allotment letter despatched to Qualifying Shareholders (subject to certain exceptions) pursuant to the Rights Issue
'Qualifying Shareholder(s)'	holder(s) of Ordinary Shares on the register of members of the Company on the Record Date
'Record Date'	the close of business on 27 May 2009
'Resolution'	the special resolution to be proposed at the Extraordinary General Meeting as set out in the notice of Extraordinary General Meeting to be contained in the Prospectus
'Rights Issue'	the proposed issue by way of rights of New Ordinary Shares to Qualifying Shareholders as described in the Prospectus
'Rights Issue Price'	65 pence per New Ordinary Share
'Rothschild'	N M Rothschild & Sons Limited
'Securities Act'	the United States Securities Act of 1933, as amended
'Shareholders'	holders of Existing Ordinary Shares
'UKLA' or 'UK Listing Authority'	the FSA acting in its capacity as the competent authority for the purposes of Part VI of FSMA and in the exercise of its functions in respect of the admission to listing on the Official List otherwise than in accordance with Part VI of FSMA
'uncertificated' or 'in uncertificated form'	recorded on the relevant register of Ordinary Shares as being held in uncertificated form in CREST and title to which, by virtue of the CREST Regulations, may be transferred by means of CREST
'Underwriting Agreement'	the agreement dated 13 May 2009 between the Company, the Joint Underwriters and the Joint Sponsors relating to the Rights Issue and described in the Prospectus
'United Kingdom' or 'UK'	the United Kingdom of Great Britain and Northern Ireland
'United States' or 'US'	the United States of America, its territories and possessions and any state of the United States of America and the District of Columbia

 

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