Proposed Return of Capital to Shareholders

RNS Number : 8656D

Melrose Industries PLC

03 February 2015

 



3 February 2015

MELROSE INDUSTRIES PLC

("MELROSE" or the "COMPANY")

Proposed Return of Capital to Shareholders

Return of Capital highlights:

·     Proposed return of capital of 18.7 pence per share equal to £200 million

·     Shareholders have the choice as to how to receive the proceeds

·     13 for 14 Share Capital Consolidation

·     Melrose well positioned to deliver further shareholder value going forward

As indicated in its Interim Management Statement on 19 November 2014, and in accordance with Melrose's strategy, the Melrose Board announces its intention to return £200 million in cash to Shareholders using part of the net proceeds from the £365 million disposal of its Bridon business. This is equivalent to 18.7 pence per Existing Ordinary Share. The balance of the net proceeds has been used to pay down Melrose's borrowings.

Christopher Miller, Chairman of Melrose, stated:

"Realising value in our businesses and returning all or part of this value to shareholders is a fundamental part of the Melrose "buy, improve, sell" strategy. Having more than doubled our original equity investment in Bridon, I am delighted to be able to propose a further £200 million return of capital to our investors.

With this latest return, Melrose has created approximately £2.5 billion of total value for shareholders against net investment of approximately £170 million since our first acquisition in 2005. We look forward to creating further value in the future through ongoing improvement in our existing businesses and through carefully targeted acquisitions."  

Since making its first investment in 2005, Melrose has:

•      on the basis that the Return of Capital is implemented, created approximately £2,490 million of shareholder value with a total market capitalisation of £2,660 million against a net shareholder investment  of £170 million;

•      achieved an average annual return on equity investment of 23 per cent. and an increase in operating margins of 5 to 7 percentage points across the businesses Melrose has owned; and

•      provided a total shareholder return of 421 per cent., which compares to 104 per cent. for the FTSE 350 index for the same period.

Melrose will today post a circular (the "Circular") to Shareholders regarding the proposed Return of Capital by way of a redeemable share scheme, giving Shareholders a choice to receive their proceeds in the form of either income or capital. Associated with the Return of Capital, there will be a one-off ordinary Share Capital Consolidation in the ratio of 13 for 14. Cheques are expected to be despatched to Shareholders or CREST or bank accounts credited (as appropriate) on 16 March 2015 in respect of both the Income Option and Capital Option.

The Return of Capital and associated Share Capital Consolidation require the approval of Shareholders, which will be sought at a General Meeting to be held at the offices of Investec at 2 Gresham Street, London EC2V 7QP, at 11.00 a.m. on 20 February 2015.

Terms used in this announcement but which are otherwise undefined shall have the same meanings as set out in the Circular. This announcement and the summary of the proposed Return of Capital and associated Share Capital Consolidation should be read in conjunction with the Circular.

Details of the Return of Capital and associated Share Capital Consolidation

Under the Return of Capital and associated Share Capital Consolidation, Shareholders will receive:

·     One B Share or one C Share for every Existing Ordinary Share held on the B/C Share Record Date; and

·     13 New Ordinary Shares for every 14 Existing Ordinary Shares held on the Share Capital Consolidation Record Date.

Shareholders will have two alternatives in relation to their B/C Share Entitlement:

Alternative 1: Income Option

If Shareholders elect or are deemed to have elected for this option in respect of all or some of their B/C Share Entitlement, they will receive one C Share for each corresponding Existing Ordinary Share held by them at the B/C Share Record Date and a dividend of 18.7 pence per C Share (the "C Share Dividend") will be paid in respect of those C Share(s). It is expected that the C Share Dividend will generally be treated as dividend income for United Kingdom tax purposes. It is expected that the C Share Dividend will be paid to relevant Shareholders on 16 March 2015.

Shareholders who do not make a valid election, and all US Shareholders and other Restricted Shareholders (see below for further details) will automatically be deemed to have elected for the Income Option in respect of all of their B/C Share Entitlement.

Alternative 2: Capital Option

If Shareholders elect for this option in respect of all or some of their B/C Share Entitlement, they will receive one B Share for each corresponding Existing Ordinary Share held by them at the B/C Share Record Date. Those B Shares will be redeemed by Melrose on 2 March 2015 (or such other date as the directors may determine) for 18.7 pence per B Share, free of all dealing expenses and commissions. It is expected that the proceeds from this redemption will generally be treated as capital for United Kingdom tax purposes. It is expected that the redemption proceeds in relation to the Capital Option will be paid to relevant Shareholders on 16 March 2015.

Shareholders are not being given the option to receive their proceeds in the form of deferred capital in light of the proposed changes to legislation announced in the Autumn Statement 2014, whereby all returns to shareholders made through special purpose share schemes, such as this one, will be treated as dividends by HM Revenue & Customs with anticipated effect from 6 April 2015.

The Share Capital Consolidation

The Existing Ordinary Shares will be consolidated so that Shareholders will receive 13 New Ordinary Shares for every 14 Existing Ordinary Shares held on the Share Capital Consolidation Record Date. The effect of the Share Capital Consolidation will be to reduce the number of issued Ordinary Shares to reflect the return of 18.7 pence per Existing Ordinary Share to Shareholders. The aim of this is to ensure, so far as possible, the market price of an Ordinary Share remains approximately the same before and after the Return of Capital and to maintain comparability of historical and future per share data. The ratio used for the Share Capital Consolidation has been set by reference to the closing middle-market price of 266.80 pence per Existing Ordinary Share on 2 February 2015. Shareholders will continue to own approximately the same proportion of Melrose immediately after the Share Capital Consolidation as they did immediately before it.

It is expected that the New Ordinary Shares will be admitted to listing on the Official List and to trading on the main market for listed securities of the London Stock Exchange in the same way as the Existing Ordinary Shares on 23 February 2015 and will be equivalent in all material respects to the Existing Ordinary Shares, including their dividend, voting and other rights. None of the B Shares, the C Shares or the C Deferred Shares will be admitted to the Official List or to trading.

In order to ensure that no fractional amount of a New Ordinary Share arises upon the share capital consolidation becoming effective, 9 ordinary shares of 13/110 pence each have been allotted and issued to Investec Bank plc today at 266.80 pence per share, being the closing middle-market price on 2 February 2015. These ordinary shares are expected to be admitted to the Official List and trading on the London Stock Exchange at 8:00 a.m. on 10 February 2015 and are also subject to the share capital consolidation and will be entitled to participate in the Return of Capital.

US Shareholders and other Restricted Shareholders

The Capital Option (Alternative 2) is not being made available to US Shareholders and/or other Restricted Shareholders, and such US Shareholders and/or other Restricted Shareholders may not elect for the Capital Option (Alternative 2) and will be deemed to have elected for the Income Option (Alternative 1) in respect of ALL of their B/C Share Entitlement, and accordingly they will receive C Shares in respect of ALL of their B/C Share Entitlement and be entitled to be paid the C Share Dividend in respect of such C Shares.

You are a "US Shareholder" if you have a registered address in the United States or you are resident or located in the United States.

You are a "Restricted Shareholder" if you have a registered address in, or you are resident or located in, Australia, Canada, Japan, New Zealand, the Republic of South Africa, the United States, or any other territory where the invitation to participate in the proposed Return of Capital and any election for the Capital Option (Alternative 2) in respect of all or some of your B/C Share Entitlement would violate the laws of that jurisdiction or would require the registration of the B Shares and/or C Shares.

Expected timetable of principal events:

	2015
Latest time and date for receipt of Form of Proxy for General Meeting	11.00 a.m. on 18 February
General Meeting	11.00 a.m. on 20 February
Latest time and date for dealings in Existing Ordinary Shares	4.30 p.m. on 20 February
B/C Share Record Date for entitlement to B Shares and/or C Shares	5.00 p.m. on 20 February
Share Capital Consolidation Record Date	6.00 p.m. on 20 February
New Ordinary Shares admitted to the Official List and admitted to trading on the main market for listed securities of the London Stock Exchange	8.00 a.m. on 23 February
Latest time for receipt of Election Forms and TTE Instructions from CREST holders in relation to the Share Alternatives	4.30 p.m. on 27 February
B Shares and/or C Shares allotted and issued	2 March
Despatch of cheques or bank accounts credited (as appropriate) in respect of the Income Option (Alternative 1)	16 March
Despatch of cheques or CREST accounts credited (as appropriate) in respect of the Capital Option (Alternative 2)	16 March

Copies of the Circular may be physically inspected at the offices of Simpson Thacher & Bartlett LLP, CityPoint, One Ropemaker Street London EC2Y 9HU during usual business hours on any weekday (Saturdays, Sundays and public holidays excepted) from the date of this announcement up to and including the date of the General Meeting and at the registered office of the Company from the date of this announcement up to and including the date of the General Meeting and will also be available for inspection for at least 15 minutes before and during the General Meeting. A copy of the Circular will also be available on the Company's website, www.melroseplc.net, and will be submitted to the National Storage Mechanism, where it will be available for inspection at www.Morningstar.co.uk/uk/nsm.

None of the New Ordinary Shares, the B Shares, the C Shares or the C Deferred Shares have been or will be registered under the US Securities Act of 1933 as amended (the Securities Act) or the securities laws of any other US jurisdiction, and none of them may be offered or sold in the United States unless pursuant to an exemption from, or in a transaction not subject to the registration requirements of, the Securities Act.

The release, publication or distribution of this announcement in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which this announcement is released, published or distributed should inform themselves about and observe such restrictions.

This announcement does not constitute, or form part of, an offer to sell or the solicitation of an offer to subscribe for any securities, nor the solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issue or transfer of the securities referred to in this announcement in any jurisdiction in contravention of applicable law.

-ends-

Enquiries:

Montfort Communications
Financial PR
Charlotte McMullen	[phone]
Rothschild
Financial Adviser
Ravi Gupta / Yuri Shakhmin / Nathalie Ferretti	[phone]

Investec
Corporate Broker
Keith Anderson / Carlton Nelson	[phone]

 

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