Rejection of Lone Star Proposal - Clarifications

RNS Number : 7656C

Senior PLC

22 June 2021

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.

THIS IS AN ANNOUNCEMENT FALLING UNDER RULE 2.4 OF THE CITY CODE ON TAKEOVERS AND MERGERS (THE "CODE") AND DOES NOT CONSTITUTE AN ANNOUNCEMENT OF A FIRM INTENTION TO MAKE AN OFFER UNDER RULE 2.7 OF THE CODE. THERE CAN BE NO CERTAINTY THAT ANY OFFER WILL BE MADE.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

FOR IMMEDIATE RELEASE

22 June 2021

Rejection of the Lone Star Proposal - Clarifications

Senior plc ("the Company") notes its announcement released on 22 June 2021 concerning its Rejection of the Lone Star Proposal.  The Company further notes the following three clarifications:

-	there was a reference to pre IFRS 16 in Section 3 of the Announcement.  The reference should have been to post IFRS 16
-	the sub scale composites businesses disposed of under Senior's "Prune to Grow" strategy were in Wichita, U.S. and the U.K.
-	in Note 19 in the Appendix to the announcement, the net debt of £221m is as at the end of March 2021

An updated Announcement is set out below in its entirety.

Enquiries:

Senior plc
David Squires - Group Chief Executive Bindi Foyle - Group Finance Director	Tel: [phone]
Finsbury Glover Hering
Communications adviser to Senior James Murgatroyd / Richard Webster-Smith	Tel: [phone]

Rule 26.1 Disclosure

In accordance with Rule 26.1 of the Code, a copy of this announcement will be available at https://www.seniorplc.com/investors/rns-announcements.aspx , by no later than 12 noon (London time) on 23 June 2021.  The content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.

THIS IS AN ANNOUNCEMENT FALLING UNDER RULE 2.4 OF THE CITY CODE ON TAKEOVERS AND MERGERS (THE "CODE") AND DOES NOT CONSTITUTE AN ANNOUNCEMENT OF A FIRM INTENTION TO MAKE AN OFFER UNDER RULE 2.7 OF THE CODE. THERE CAN BE NO CERTAINTY THAT ANY OFFER WILL BE MADE.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

FOR IMMEDIATE RELEASE

22 June 2021

Senior plc

Rejection of Final Conditional Proposal from Lone Star

The Board of Senior plc ("Senior" or the "Company") confirms that on 21 June 2021 it received a final conditional proposal from LSF XI Investments, LLC, a company advised by Lone Star Global Acquisitions, Ltd ("Lone Star") in relation to a possible cash offer for Senior at 200 pence per Senior share (the "Final Conditional Proposal").  This Final Conditional Proposal remains subject to a number of pre-conditions, including completion of a detailed due diligence exercise on terms satisfactory to Lone Star and securing committed debt financing.

The Board of Senior has now received five conditional proposals from Lone Star.  On receipt of the first conditional proposal on 27 April 2021, the Board of Senior, together with its advisers, assessed the fundamental value of the Company taking into account the anticipated medium-term recovery in Senior's end-markets and the likely value created through the continued delivery of its strategy.  Having concluded its evaluation, on 28 April 2021 the Board rejected the first proposal from Lone Star, at 150 pence per Senior share.

Subsequently, Senior received three further conditional proposals.  Over this period, the Board of Senior, together with its advisers, conducted a thorough review to assess the fundamental value of Senior as well as the likely value to be created by the continued delivery of its strategy.  In addition, the Board evaluated the share price levels at which it believed its shareholders would consider a proposal to be attractive.  This valuation framework has continued to be tested and revised at every stage by the Board and its advisers, including taking into account shareholder feedback since the approach from Lone Star became public.  As a result of this process, the Board rejected each of the three subsequent proposals from Lone Star, on the same basis.

The Board met again on 21 June 2021 to consider the Final Conditional Proposal.  Following careful consideration, together with its advisers, the Board has unanimously rejected this fifth and final proposal, which represents only an 8% increase to Lone Star's previously rejected conditional proposal of 185 pence for Senior share, and continues to fundamentally undervalue Senior and its future prospects.

In their letter setting out the Final Conditional Proposal, Lone Star stated that their "plan is underpinned by our continued belief that with our experience and financial support, we can be a strong partner for the Company and can assist the management team in delivering on its strategic plan during the coming years of market recovery and in further developing the Company's business portfolio."  The Board believes it has adequate resources in order to deliver on its strategy.

The Board clearly understands its fiduciary responsibilities and, in that context, would be willing to engage with Lone Star, or other potential offerors, at a price which reflects Senior's fundamental value.  However, the Board notes that this latest conditional proposal has been declared final and is therefore not capable of being increased, unless there is an announcement of an offer or possible offer for Senior from a third-party offeror or potential offeror.  Given this, there is no basis for engagement with Lone Star at this time.  The Board is confident that continuing to focus on its strategy will deliver significantly more value to shareholders over the medium-term.

In the Board's assessment, the Final Conditional Proposal:

1	Is highly opportunistic, does not articulate a clear or a different strategy, and comes at a low point when core markets remain temporarily impacted by Covid-19 fall out
2	Does not reflect the anticipated end-market recovery across core Civil Aerospace, Land Vehicle and Power & Energy markets
3	Fails to recognise Senior's clear strategy to maximise shareholder value and grow the business by focusing on IP-rich fluid conveyance and thermal management technology
4	Still fundamentally undervalues Senior and its future prospects

Ian King, Chairman of Senior, said:

"We view this final conditional proposal as highly opportunistic given the timing and the relative share price weakness, coming at a point where our end-markets are showing signs of recovery.  Senior has been resilient through the pandemic and is well-positioned to emerge strongly as the recovery continues.  The proposal still fundamentally undervalues Senior.  The Board believes we have a clear strategy that will maximise value for shareholders over the medium-term and accordingly, the Board is not able to recommend a sale of the business at 200p per share."

1. The Final Conditional Proposal is highly opportunistic, does not articulate a clear or a different strategy, and comes at a low point when core markets remain temporarily impacted by Covid-19 fall out

Senior has been impacted by extraordinary events since early 2020, including the production stoppage of 737 MAX following its earlier grounding, the Coronavirus pandemic, and the significant decline in oil price.

As a result of these short-term headwinds, our profitability is temporarily well below historical levels and the 'perfect storm' of uncertainty has weighed heavily upon our share price, which we believe does not fully reflect the medium-term potential of the business.

The Group has been resilient through the pandemic and is well-positioned for the future. Senior has been proactive and delivered a strong cash performance in a period impacted by exogenous events.

Our restructuring programme, which was initiated in 2019 and further adapted through the course of 2020, is effective and delivering its expected benefits, having delivered cumulative savings of £36m to the end of 2020.  We are expecting these to increase to £45m by the end of 2021 and £50m annualised savings from 2022¹.

The decisive actions which have been taken to insulate the business in 2020, including headcount reduction and business closures, mean that we are now an even leaner and more efficient business.

The Group balance sheet remains robust.  We have maintained strong liquidity and stable finance arrangements and over the past year we have managed to reduce our net debt (pre IFRS 16 lease capitalisation) from £145.9m in Dec-19 to £80.4m in Dec-20 on a proforma basis².

We have continued to advance our "Prune to Grow" strategy, divesting or closing non-core or performance-challenged assets, and we remain a Group with intrinsically strong cash generation, with businesses capitalised and prepared for future recovery and growth.

2. The Final Conditional Proposal does not reflect the anticipated end-market recovery across our core Civil Aerospace, Land Vehicle and Power & Energy markets

Senior's end-markets in civil aerospace, defence, land vehicle and power & energy are all showing clear signs of recovery from historic lows and Senior remains confident about its prospects over the medium-term.

Senior's Aerospace division is well-positioned to benefit from the recovery in Aerospace markets:

·	Senior has a diversified product portfolio in the aerospace and defence sector, including attractive positions across the next generation single aisle aircraft platforms
·	Short-haul domestic travel is recovering first as vaccine rollout takes effect; evidence from China and the US makes clear that there is an appetite for travel
·	Air traffic recovery is underway as travel restrictions continue to ease globally and the vaccine rollout gathers pace.  IATA forecast world passengers flows to return to 2019 levels by the end of 2022, and to reach 105% of 2019 levels by 20233
·	Airbus and Boeing have both confirmed plans to ramp up single aisle production in the near-term for the 737MAX and the A320 platforms:
	-	Airbus confirmed an average A320 Family production rate of 45 aircraft per month in Q4 2021 and called on suppliers to prepare for a rate of 64 by 20234.
	-	Boeing announced they expect to increase production on the 737 MAX from the current low levels to 31 per month in early 2022 with further gradual increases to correspond with market demand5.
·	Defence markets remain robust and supported by US defence spending6

Recovery is also underway across our Flexonics end-markets:

·	There are clear signs that a recovery is underway in our land vehicle end-markets with independent market forecasts estimating a strong recovery in North American and European truck production during 2021-22
	-	ACT Research is forecasting a 43% increase in North American heavy-duty truck production in 2021, and further growth of 18% in 2022.  The North American medium-duty diesel truck market is also forecast to increase by 12% in 20217
	-	IHS Markit Inc. forecasts that European truck production will grow by 19% in 2021 and a further 7% in 20228
·	Oil price increases, coupled with recovering economies, are expected to support the return to growth in oil and gas markets from the end of 20219

3. The Final Conditional Proposal fails to recognise Senior's clear strategy to maximise shareholder value and grow the business by focusing on IP-rich fluid conveyance and thermal management technology

Senior has a focused and compelling strategy to maximise value for shareholders, and is confident of delivering its target return on capital employed of minimum 13.5%¹⁰ (post IFRS 16) over the medium-term through the following:

·	A strategic focus on IP-rich fluid conveyance and thermal management
·	Reaping the benefits from the restructuring programme
·	Executing on its portfolio optimisation strategy to maximise value creation
·	Driving its intrinsic strong cash generation

Through the pandemic Senior has maintained its focus on IP-rich technology and manufacturing, with a strategic focus on fluid conveyance and thermal management technology.  We have identified significant current and future opportunities for the Group in fluid conveyance and thermal management and this capability continues to be highly relevant as we transition towards a low carbon economy.

Senior's end-markets are evolving to reflect the global effort to achieve net zero carbon emissions.  Senior's technology and product roadmap is aligned to these trends with a product development strategy that is compatible with our focus on ESG.

Senior has continued its "Prune to Grow" strategy of portfolio optimisation by divesting, closing, or combining non-core or performance-challenged assets.  This has included:

·	the disposals of sub scale composites businesses in Wichita, U.S.11 and the U.K., Blois (France) and Brazil automotive businesses12, and our small precision machining business of Absolute in WA, U.S.;
·	the closures of our oil and gas machining Senior Flexonics Malaysia13, South Carolina assembly facility14, the closure of Bosman15 following transfer of production from the Netherlands to France;
·	combining businesses under strong leadership: Fluids Systems and Structures Divisions, Jet and Ketema Southern California Aerospace businesses, AMT and Damar Washington State Aerospace businesses, Ermeto and Calorstat French Aerospace businesses; and
·	strategic divestments such as the $74m raised from the successful sale of Aerospace Connecticut helicopter structures business16.

We also remain confident that our Aerostructures core market will recover, driving business performance improvement which will provide the Group with strategic optionality over the medium-term.

4. The Final Conditional Proposal still fundamentally undervalues Senior and its future prospects

We believe Lone Star's Final Conditional Proposal still fundamentally undervalues Senior at a time when external factors are currently resulting in an unrepresentative financial profile for Senior.

An analysis of precedent transactions for Fluid Systems & Thermal Management and Structures businesses highlights there is substantial embedded value within the Senior portfolio.  Recent Fluid Systems and Thermal Management businesses transactions have valued the businesses at a range of 2.3x - 4.7x Enterprise Value / LTM Revenue¹⁷, while recent transactions of Structures businesses have been valued between 0.9x - 2.5x Enterprise Value / LTM Revenue¹⁸.  This compares to Lone Star's Final Conditional Proposal representing an Enterprise Value / LTM Revenue ratio of 1.0x when applied to pre-Covid 2019 revenues, or 1.5x when applied to heavily impacted 2020 revenues¹⁹.

Conclusion

The Board believes that the Final Conditional Proposal is highly opportunistic and, after detailed consideration, has determined that it still fundamentally undervalues Senior and its future prospects.  Senior has a focused and compelling strategy to achieve growth and create value for shareholders over the medium term.  Furthermore, the Board remains confident that the Company's performance will continue to improve and accordingly, is not able to recommend a sale of the business at 200p per share.

Trading Update

Trading in the five months ended May 2021 has been ahead of management expectations. Group sales were 15% lower (on a constant currency basis) than the equivalent period in the prior year, part of which was pre-COVID.  Net debt (excluding capitalised leases of £74m) as at end of May 2021 was £101m, reflecting net cash proceeds received from Senior Aerospace Connecticut divestiture²⁰.

Our restructuring programme delivered cumulative savings of £36m to the end of 2020 and we are expecting these to increase to £45m by the end of 2021 and £50m annualised savings from 2022¹.

Looking ahead, our differentiated offering in fluid conveyance and thermal management products; our investment in low carbon and advanced manufacturing technology; our global footprint; our strong track record and commitment to the highest ESG standards and our positioning in attractive and diverse end markets means that the Board is confident we will make good progress as the recovery continues.

We intend to provide a post-close trading update on 9 July 2021.  Our interim results will be announced on 2 August 2021, at which time we will provide a full market and strategy update.  In addition, we intend to host a capital markets day in October 2021, the theme of which will be our fluid conveyance and thermal management strategy: further details will be provided in due course.

A presentation for analysts and investors will be made available on Senior's website at: https://www.seniorplc.com/investors/possible-offer.aspx  

Enquiries:

Senior plc
David Squires - Group Chief Executive Bindi Foyle - Group Finance Director	Tel: [phone]
Lazard
Financial adviser to Senior Richard Shaw / Louise Campbell / James Cliffe	Tel: [phone]
Credit Suisse
Joint corporate broker to Senior Antonia Rowan / David Watkins	Tel: [phone]
Jefferies
Joint corporate broker to Senior Paul Nicholls / David Genis	Tel: [phone]
Finsbury Glover Hering
Communications adviser to Senior James Murgatroyd / Richard Webster-Smith	Tel: [phone]

Important Notes

There can be no certainty either that an offer will be made nor as to the terms of any offer, if made.  A further announcement will be made when appropriate.

For the purposes of Rule 2.5(a) of the code, this announcement has been made by Senior without the prior agreement or approval of Lone Star.

In accordance with Rule 2.6(a) of the Code, Lone Star is required, by no later than 5.00 p.m. (London time) on 25 June 2021, to either announce a firm intention to make an offer for the Company in accordance with Rule 2.7 of the Code or announce that it does not intend to make an offer, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies.  This deadline can be extended with the consent of the Panel on Takeovers and Mergers in accordance with Rule 2.6(c) of the Code.

Disclaimer

Lazard & Co., Limited ("Lazard"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively as financial adviser to Senior and no one else in connection with the matters set out in this announcement and will not be responsible to anyone other than the Senior for providing the protections afforded to clients of Lazard & Co., Limited nor for providing advice in relation to the matters set out in this announcement.  Neither Lazard & Co., Limited nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Lazard &  Co., Limited in connection with this announcement, any statement contained herein or otherwise.

Credit Suisse International ("Credit Suisse"), which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting as joint corporate broker exclusively for Senior and for no one else in connection with the matters set out in this announcement, and will not be responsible to anyone other than Senior for providing the protections afforded to clients of Credit Suisse, nor for providing advice to any other person in relation to the content of this announcement or any other matter referenced herein.  Neither Credit Suisse nor any of its subsidiaries, branches or affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Credit Suisse in connection with this announcement, any statement contained herein or otherwise.

Jefferies International Limited ("Jefferies"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting for Senior and no one else in connection with the matters set out in this Announcement. In connection with such matters, Jefferies will not regard any other person as their client, and will not be responsible to any persons other than Senior  for providing the protections afforded to clients of Jefferies or for providing advice in relation to the contents of this announcement or any other matter referred to herein.  Neither Jefferies nor any of its subsidiaries, affiliates or branches owes or accepts any duty, liability or responsibility whatsoever (whether direct, indirect, consequential, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Jefferies in connection with this announcement, in any statement contained herein or otherwise.

Rule 26.1 Disclosure

In accordance with Rule 26.1 of the Code, a copy of this announcement will be available at https://www.seniorplc.com/investors/rns-announcements.aspx , by no later than 12 noon (London time) on 23 June 2021.  The content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.

Disclosure requirements of the Code

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified.  An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s).  An Opening Position Disclosure by a person to whom Rule 8.3(a) of the Code applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any securities exchange offeror is first identified.  Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror.  A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror, save to the extent that these details have previously been disclosed under Rule 8 of the Code.  A Dealing Disclosure by a person to whom Rule 8.3(b) of the Code applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3 of the Code.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4 of the Code).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk , including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified.  You should contact the Panel's Market Surveillance Unit on [phone] if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Forward-looking statements

This announcement contains statements about Senior that are or may be forward looking statements.  All statements other than statements of historical facts included in this announcement may be forward looking statements.  Without limitation, any statements preceded or followed by or that include the words "targets", "plans" "believes", "expects", "aims"," intends", "will", "may", "anticipates", "estimates", "projects" or words or terms of similar substance or the negative thereof, are forward looking statements. Forward looking statements include statements relating to future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects or discussions of strategy which involve risks and uncertainties.  Such forward looking statements involve risks and uncertainties that could significantly affect expected results and are based on certain key assumptions.  No assurance can be given that such future results will be achieved.  Actual events or results may differ materially as a result of risks and uncertainties facing Senior.  Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed or implied in such forward looking statements.  The forward looking statements contained in this announcement speak only as at the date of this announcement.  Except to the extent required by applicable law, Senior will not necessarily update any of them in light of new information or future events and undertakes no duty to do so.  By their nature, forward looking statements involve risk and uncertainty because they relate to events and depend on circumstances that shall occur in the future.  These events and circumstances include changes in the global, political, economic, business, competitive, market and regulatory forces, future exchange and interest rates, changes in tax rates, future business combinations or disposals, and any epidemic, pandemic or disease outbreak.  If any one or more of these risks or uncertainties materialises or if any one or more of the assumptions proves incorrect, actual results may differ materially from those expected, estimated or projected.  Such forward looking statements should therefore be construed in the light of such factors.

Appendix

Sources of Information and Bases of Calculation

Currency

Unless otherwise stated: (i) GBP or £ refers to pounds sterling, the lawful currency of the UK (and references to pence or p shall be construed accordingly); and (ii) USD or $ refers to US Dollars.

No Profit Forecast

References throughout this document to medium term ROCE are aspirational targets which should not be construed as a profit forecast under the Takeover Code or interpreted as such.

1  Senior company information, "2020 Full Year Results" presentation, 01 Mar 2021.

2  Senior company information, Jun 2021. 2020 net debt is stated pro forma for disposal of Senior Aerospace Connecticut, adjusting for £49m net proceeds.

3  IATA, "An almost full recovery of air travel in prospect", 26 May 2021.

4  Airbus "Airbus achieves new commercial aircraft delivery record in 2018", 09 Jan 2019; Airbus, "Airbus updates production rates in response to market environment", 21 Jan 2021; "Airbus provides suppliers with an update on production plans", 27 May 2021.

5  Boeing, "Statement from Boeing CEO Dennis Muilenburg: We Own Safety - 737 MAX Software, Production and Process Update", 05 Apr 2019; Boeing, "Boeing Reports First-Quarter Results", 28 Apr 2021.

6  US Department of Defense (DoD), "Fiscal Year 2022 Budget Request", 28 May 2021; US DoD, "National Defense Budget Estimates for FY2021", Apr 2020; US Office of Management and Budget, "Budget of the US Government Fiscal Year 2022", 28 May 2021.

7  ACT Research, "North America Commercial Vehicle Outlook", 10 Jun 2021.

8  IHS Markit, 10 Jun 2021.

9  McKinsey, "Global oil outlook to 2040", 26 Feb 2021.

10  Return on capital employed (ROCE) sourced from Senior company information, "Senior plc Annual Report & Accounts 2020", 08 Mar 2021. ROCE is the Group's adjusted operating profit divided by the average of the capital employed at the start and end of the period, capital employed being total equity plus net debt.

11  Composites businesses in Wichita, U.S. - "2017 Annual Results Release", 26 Feb 2018.

12  Blois (France) & Brazil automotive businesses and precision machining business of Absolute - "2019 Annual Results Release", 02 Mar 2020.

13  Senior Flexonics Malaysia - "2020 Annual Results Release", 08 Mar 2021.

14  South Carolina - 2019 Annual Results Release", 02 Mar 2020.

15  Bosman - "2020 Annual Results Release", 08 Mar 2021.

16  Senior Aerospace Connecticut - "Senior plc - Q1 Trading Update and Completion of Senior Aerospace Connecticut Divestment", 23 April 2021.

17  Precedent transactions in Fluid Systems & Thermal Management

Date	Acquirer / Target	EV / Sales (x)
Jan-20	Stanley Black & Decker / Consolidated Aerospace Manufacturing (CAM)	3.9x
Jul-19	Parker / Exotic Metals	3.8x
Oct-18	Smiths Group / United Flexible, Inc.	2.3x
Feb-18	AMETEK / FMH	4.7x
Nov-15	Senior plc / STEICO	2.4x
Dec-11	Leggett & Platt / Western Pneumatic Tube	3.3x
Average		3.4x

"Precedent Transactions" - Enterprise Value over Revenue multiples are based on publicly available information.  Please see sources below.

Fluid Systems & Thermal Management

·	Stanley Black & Decker / Consolidated Aerospace Manufacturing (CAM): 3.9x
	-	Enterprise Value: $1,460m (Source: Stanley Black & Decker Form 10-Q for the quarterly period ended March 28, 2020, page 13)
	-	Revenue: $375m (Source: Stanley Black & Decker Press Release "Stanley Black & Decker Reports Full Year And 4Q 2019 Results", published on January 29, 2020, page 5)
·	Parker Hannifin / Exotic Metals: 3.8x
	-	Enterprise Value: $1,725m (Source: Parker Hannifin Corp. announcement "Parker to Acquire Exotic Metals Forming Company in Strategic Transaction that Significantly Expands Aerospace Group Product Portfolio", released on July 29, 2019)
	-	Revenue: $450m (Source: Parker Hannifin Corp. announcement "Parker to Acquire Exotic Metals Forming Company in Strategic Transaction that Significantly Expands Aerospace Group Product Portfolio", released on July 29, 2019). Please note, this represents expected revenue
·	Smiths Group plc / United Flexible, Inc.: 2.3x
	-	Enterprise Value: $345m (Source: Smiths Group plc Interim Results for the half year ended 31 January 2019, published on Friday 22 March 2019, page 1)
	-	Revenue: $153m (Source: Smiths Group plc Interim Results for the half year ended 31 January 2019, published on Friday 22 March 2019, page 31)
·	AMETEK / FMH Aerospace: 4.7x
	-	Enterprise Value: $235m (Source: AMETEK announcement "AMETEK COMPLETES TWO ACQUISITIONS", released on February 1, 2018)
	-	Revenue: $50m (Source: AMETEK announcement "AMETEK COMPLETES TWO ACQUISITIONS", released on February 1, 2018)
·	Senior plc / STEICO: 2.4x
	-	Enterprise Value: $90m (Source: Senior plc press release "Trading Update & Acquisition", released on November 19, 2015)
	-	Revenue: $36.9m (Source: Senior plc press release "Trading Update & Acquisition", released on November 19, 2015)
·	Leggett & Platt / Western Pneumatic Tube: 3.3x
	-	Enterprise Value: $188m (Source: Leggett & Platt, Inc. press release "Leggett & Platt to Acquire Western Pneumatic Tube", released on December 20, 2011)
	-	Revenue: $57m (Source: Leggett & Platt, Inc. press release "Leggett & Platt Completes Acquisition of Western Pneumatic Tube", released on January 12, 2012)

18  Precedent transactions in Structures

Date	Acquirer / Target	EV / Sales (x)
Mar-21	PCX Aerostructures / Senior Aerospace Connecticut	1.7x
Oct-19	Spirit Aerosystems Holdings / Bombardier	1.2x
Apr-17	Shaanxi Ligeance Mineral Resources / Gardner Aerospace	2.5x
Feb-17	Sonaca Group / LMI Aerospace	1.2x
Jul-15	GKN / Fokker Technologies Group	0.9x
Average		1.5x

Structures

·	PCX Aerostructures / Senior Aerospace Connecticut: 1.7x
	-	Enterprise Value: $74m (Source: Senior plc RNS, released on March 5, 2021)
	-	Revenue: $43.1m (Source: Senior plc RNS, released on March 5, 2021)
·	Spirit AeroSystems / Bombardier (Select Structures assets): 1.2x
	-	Enterprise Value: $1,200m (Source: Bombardier announcement "Bombardier Confirms the Closing of the Aerostructures Business Transaction", released on October 20, 2020)
	-	Revenue: $1,000m (Source: Spirit AeroSystems announcement "Spirit AeroSystems to Acquire Select Assets Of Bombardier Aerostructures and Aftermarket Services Business", released on October 31, 2019)
·	Shaanxi Ligeance Mineral Resources / Gardner Aerospace Holdings: 2.5x
	-	Enterprise Value: £326m (Source: Better Capital PCC Limited RNS "Disposal of Gardner Aerospace Completion", released on June 12, 2017)
	-	Revenue: £132m (Source: Better Capital PCC Limited RNS "Disposal of Gardner Aerospace Completion", released on June 12, 2017)
·	Sonaca Group / LMI Aerospace: 1.2x
	-	Enterprise Value: Implied Enterprise Value calculated based on the following.  Total shares outstanding of 13,621,267 (Source: LMI 10-K for the year ended December 31, 2016) multiplied by the offer price of $14 per share (Source: LMI Aerospace announcement "LMI Aerospace and Sonaca Group Close on Sonaca's Acquisition of LMI", released on June 27, 2017).  This gives an implied market capitalisation of $191m.  Adding total current debt of $3m and total long-term debt of $237m, less total cash of $2m (Source: LMI 10-K for the year ended December 31, 2016) gives an implied Enterprise Value of $428m
	-	Revenue: $346m (Source: LMI 10-K for the year ended December 31, 2016)
·	GKN plc / Fokker Technologies Group: 0.9x
	-	Enterprise Value: €706m (Source: GKN plc announcement "GKN agrees to acquire Fokker Technologies for €706 million", released on July 28, 2015)
	-	Revenue: €758m (Source: GKN plc announcement "GKN agrees to acquire Fokker Technologies for €706 million", released on July 28, 2015)

19  "EV / Sales Implied Valuation" - Lone Star's implied Enterprise Value / Sales multiple, calculated based on the number of Senior shares outstanding, 419,418,082 (Source: Senior PLC "Statement re Possible Offer", released on May 28, 2021) multiplied by the Final Conditional Proposal price of 200p.  This equals an implied market capitalisation of £839m. Implied Enterprise Value of £1,017m is calculated by adding Senior total EV adjustment of £178m to the implied market capitalisation.  This implied Enterprise Value is then divided by both 2019 and 2020 divisional revenues, pro forma for disposals. Total EV adjustments include pro forma net financial debt of £95m (net debt of £221m, as at the end of March 2021, excluding lease liabilities of £76m and cash impact of Connecticut disposal of £49m), lease liabilities of £76m, other EV adjustments of £7m (comprising investments in joint ventures of £4m, pensions of £11m taxed at 21%, and expected litigation cash outflows of £2m (Sources: Senior plc Trading Update, released April 23, 2021 and Senior plc Annual Report 2020)).

20  Senior company information, Jun 2021.  The adoption of IFRS 16 does not impact the Group's lending covenants as these are currently based on frozen GAAP, hence figures quoted exclude the impact of IFRS 16 on net debt.

 

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