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Wednesday 19 April, 2017

Element Mat Tec Grp

RECOMMENDED CASH ACQUISITION of EXOVA GROUP PLC

RNS Number : 6852C
Element Materials Tech Group Ltd
19 April 2017
 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

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

19 April 2017

RECOMMENDED CASH ACQUISITION

of

EXOVA GROUP PLC

by

ELEMENT MATERIALS TECHNOLOGY GROUP LIMITED

to be effected
by means of a Scheme of Arrangement
under Part 26 of the Companies Act 2006

Summary

·         The boards of directors of Exova Group plc ("Exova") and Element Materials Technology Group Limited ("Element") are pleased to announce that they have reached agreement on the terms of a recommended cash acquisition of Exova by Element pursuant to which a wholly-owned indirect subsidiary of Element, Greenrock Bidco Limited ("Element Bidco"), will acquire the entire issued and to be issued ordinary share capital of Exova. The Acquisition will be implemented by way of a scheme of arrangement.

·         Scheme Shareholders will be paid a price of 240 pence per share in cash by Element Bidco. In addition, Scheme Shareholders who are on the register of members of Exova as at the close of business on 26 May 2017 will be entitled, conditional on approval by Exova Shareholders at the annual general meeting of Exova, to receive and retain a final dividend for the period to 31 December 2016 of 2.35 pence per Exova Share, which is expected to be paid on 9 June 2017. Therefore, with the intended dividend payment, Scheme Shareholders at the Scheme Record Time will be entitled to receive:

242.35 pence in cash per Exova Share (the "Cash Value")

The Cash Value of 242.35 pence in cash represents a premium of approximately:

·          26.0 per cent. to the volume weighted average Closing Price of approximately 192.37 pence per Exova Share for the twelve month period ended on 24 March 2017 (being the last Dealing Day prior to the start of the Offer Period);

·          18.9 per cent. to the volume weighted average Closing Price of approximately 203.87 pence per Exova Share for the six month period ended on 24 March 2017 (being the last Dealing Day prior to the start of the Offer Period); and

·          10.7 per cent. to the Closing Price per Exova Share of 218.88 pence on 24 March 2017 (being the last Dealing Day prior to the start of the Offer Period) .

·          The Cash Value implies an enterprise value multiple of approximately 16.0 times Exova's Adjusted EBITA and 12.5 times Exova's Adjusted EBITDA for the 12 months ended 31 December 2016.

·        The Cash Value values the entire issued and to be issued ordinary share capital of Exova at approximately £620.3 million on the basis of a fully diluted share capital of 256,009,630 Exova Shares, calculated on the basis described in paragraph 5 of Appendix II.

·          Element Bidco confirms that the offer price of 240 pence per share is final and will not be increased, except that Element Bidco reserves the right to increase the amount of the offer price if there is an announcement on or after the date of this announcement of an offer or a possible offer for Exova by a third party offeror or potential offeror.

·          The Exova Directors, who have been so advised by Goldman Sachs and Investec as to the financial terms of the Acquisition, consider the terms of the Acquisition to be fair and reasonable. In providing advice to the Exova Directors, Goldman Sachs and Investec have taken into account the commercial assessments of the Exova Directors. Investec is providing independent financial advice to the Exova Directors for the purposes of Rule 3 of the Code.

·          Element Bidco has received irrevocable undertakings to vote in favour of the Scheme at the Court Meeting and in favour of the General Meeting Resolutions in respect of a total of 138,938,011 Exova Shares, representing approximately 55.47 per cent. of the ordinary share capital of Exova in issue on 18 April 2017 (being the latest practicable date prior to this announcement).

·        Element is a leading global materials and product qualification testing provider with a strong focus on the aerospace, oil and gas and automotive end markets. Element is majority owned by BEV, the latest fund of Bridgepoint and was acquired by BEV in March 2016. Element Bidco is a wholly owned indirect subsidiary of Element, established for the purpose of making the Acquisition.

·          The cash consideration payable by Element Bidco under the Acquisition will be funded, in part, through equity commitments to subscribe for securities in Element and its indirect wholly owned subsidiary Element Midco, which will be underwritten by BEV. The remainder of the cash consideration payable under the Acquisition will be funded from the proceeds of a debt finance facility entered into by Element Bidco and other members of the Element Group which has been arranged and fully underwritten by HSBC, HSBC Securities (USA) Inc., Bank of America, N.A., Bank of America Merrill Lynch International Limited, ING Bank N.V. and Barclays Bank plc.

·          It is intended that the Acquisition will be implemented by means of a Court-sanctioned scheme of arrangement under Part 26 of the 2006 Act, further details of which are contained in the full text of this announcement. However, Element Bidco reserves the right, subject to the consent of the Panel and the terms of the Cooperation Agreement, to effect the Acquisition by way of a Takeover Offer.

·        The Acquisition will be subject to the satisfaction or waiver of the Conditions set out in Appendix I to this announcement and in the Scheme Document. The Scheme Document, containing further information about the Acquisition and notices of the Court Meeting and General Meeting, together with the Forms of Proxy, will be posted to Exova Shareholders within 28 days of the date of this announcement and, subject to satisfaction or waiver of the Conditions, it is expected that the Scheme will be effective during the third quarter of 2017.

 

Commenting on the Acquisition, Charles Noall, CEO of Element, said:

"We are very excited about the potential of combining these two great businesses to better serve our customers and support their growth. This transaction will create a truly global product and materials testing business, increasing Element's operational reach across key markets in U.S., Europe and Asia. The combined UK headquartered group will benefit from deep pools of technical talent, very significant testing capacity and a strong network of facilities to support our customers' global supply chains. We believe that this acquisition will facilitate greater flexibility to invest further in capacity and technology, driving further opportunities across the Combined Group."

Commenting on the Acquisition, Allister Langlands, Chairman of Exova, said:

"This represents a good outcome for shareholders and the combination of Exova and Element creates a global leader in the testing market. Since the IPO, the Exova management team have made significant progress driving organic growth across many of our businesses and developing an attractive acquisition strategy. The offer represents 16 times Exova's 2016 Adjusted EBITA and a premium of 26 per cent. to our average share price over the last 12 months. It follows a full and thorough process with interested parties and provides all Exova shareholders with liquidity and the ability to realise the value of the group's opportunities with certainty."

 

This summary should be read in conjunction with, and is subject to, the accompanying full text of this announcement which sets out further details of the Acquisition and which forms an integral part of this announcement (including Appendices). The Acquisition will be subject to Appendix I to this announcement, which contains the Conditions to, and certain further terms of, the Acquisition and to the full terms and conditions which will be set out in the Scheme Document. Appendix II contains further details of the sources of information and bases of calculations set out in this announcement. Appendix III contains further details of the irrevocable undertakings received by Element Bidco. Appendix IV contains a confirmation by the directors of Exova in the terms required by Rule 28.1(c)(i) of the Code for a statement made by Exova as part of its results announcement for the year ended 31 December 2016 which is confirmed in paragraph 10 of this announcement. Appendix V contains definitions of certain expressions used in this summary and in this announcement.

Enquiries:

 

Element Materials Technology Group Limited

 

Charles Noall

Jo Wetz

Tel: +44 (0) 20 3540 1825

Tel: +44 (0) 20 3540 1820

 

 

Bridgepoint Advisers Limited

 

James Murray

Tel: +44 (0) 20 7034 3555

 

 

 

BofA Merrill Lynch (joint financial adviser to Bridgepoint, Element and Element Bidco)

Tel: +44 (0) 20 7628 1000

Eamon Brabazon

Justin Anstee

Geoff Iles

Adam Tinsley

 

 

 

HSBC (joint financial adviser to Bridgepoint, Element and Element Bidco and corporate broker to the Acquisition)

Tel: +44 (0) 20 7991 8888

Omar Faruqui

Andrew Owens

Simon Alexander (corporate broking)

Greg Hely Hutchinson

 

 

 

Finsbury (public relations adviser to Bridgepoint, Element and Element Bidco)

Tel: +44 (0) 20 7251 3801

Jenny Davy

Charles O'Brien

 

 

 

Exova Group plc

 

Andrew Pickup, Corporate Affairs Director

Tel: +44 (0) 79 2024 3393

 

 

Goldman Sachs International (financial adviser and corporate broker to Exova)

Tel: +44 (0) 20 7774 1000

Anthony Gutman

Nick Harper

Jose Barreto

Alex Garner

Duncan Stewart (corporate broking)

 

 

 

Investec Bank plc (financial adviser and corporate broker to Exova)

Tel: +44 (0) 20 7597 5970

 

Keith Anderson

Chris Sim

Jonathan Wynn

 

 

 

Powerscourt Group (public relations adviser to Exova)

 

Peter Ogden

Andy Jones

Tel: +44 (0) 20 7549 0997

Tel: +44 (0) 20 7549 0747

 

Merrill Lynch International ("BofA Merrill Lynch"), which is authorised by the Prudential Regulation Authority and regulated by the FCA and the Prudential Regulation Authority in the United Kingdom, is acting for Bridgepoint, Element and Element Bidco and no one else in connection with the Acquisition and will not be responsible to anyone other than Bridgepoint, Element and Element Bidco for providing the protections afforded to clients of BofA Merrill Lynch, or for giving advice in connection with the Acquisition or any matter referred to herein.

HSBC Bank plc ("HSBC"), which is authorised by the Prudential Regulation Authority and regulated by the FCA and the Prudential Regulation Authority in the United Kingdom, is acting for Bridgepoint, Element and Element Bidco and no one else in connection with the Acquisition and will not be responsible to anyone other than Bridgepoint, Element and Element Bidco for providing the protections afforded to clients of HSBC, or for providing advice in connection with the Acquisition or any matter described in this announcement or any transaction or arrangement referred to herein.

Goldman Sachs International, which is authorised by the Prudential Regulation Authority and regulated by the FCA and the Prudential Regulation Authority in the United Kingdom, is acting exclusively for Exova and no one else in connection with the Acquisition and will not be responsible to anyone other than Exova for providing the protections afforded to clients of Goldman Sachs International or for providing advice in connection with the Acquisition or in relation to matters described in this announcement or any transaction or arrangement referred to herein.

Investec Bank plc, which is authorised by the Prudential Regulation Authority and regulated by the FCA and the Prudential Regulation Authority in the United Kingdom, is acting exclusively for Exova and no one else in connection with the Acquisition and will not be responsible to anyone other than Exova for providing the protections afforded to clients of Investec Bank plc or for providing advice in connection with the Acquisition or in relation to matters described in this announcement or any transaction or arrangement referred to herein.

This announcement is for information purposes only and is not intended to and does not constitute or form part of an offer to sell or otherwise dispose of or invitation to purchase or otherwise acquire any securities or 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. The Acquisition will be made solely through the Scheme Document and the accompanying Forms of Proxy, which will together contain the full terms and conditions of the Acquisition, including details of how to vote in respect of the Acquisition. Any vote in respect of the Scheme or other response in relation to the Acquisition should be made only on the basis of the information contained in the Scheme Document.

Overseas Shareholders and Notice to US Investors

The release, publication or distribution of this announcement in certain jurisdictions may be restricted by law. Persons who are not resident in the United Kingdom or who are subject to other jurisdictions should inform themselves of, and observe, any applicable requirements. In particular, the ability of persons who are not resident in the United Kingdom to vote their Exova Shares with respect to the Scheme at the Court Meeting, or to appoint another person as proxy to vote at the Court Meeting on their behalf, may be affected by the laws of the relevant jurisdictions in which they are located. Any failure to comply with the applicable restrictions may constitute a violation of the securities laws of any such jurisdiction. To the fullest extent permitted by applicable law, the companies and persons involved in the Acquisition disclaim any responsibility or liability for the violation of such restrictions by any person. This announcement has been prepared for the purposes of complying with English law and the Code and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws of jurisdictions outside of England.

The Acquisition relates to the shares of an English company and is proposed to be effected by means of a scheme of arrangement under the laws of England and Wales. Neither the proxy solicitation rules nor (unless implemented by means of a Takeover Offer) the tender offer rules under the US Securities Exchange Act of 1934, as amended, will apply to the Acquisition. Moreover, the Acquisition is subject to the disclosure requirements and practices applicable in the United Kingdom and under the City Code to schemes of arrangement, which differ from the disclosure requirements of the US proxy solicitation rules and tender offer rules. Financial information included in this announcement has been prepared, unless specifically stated otherwise, in accordance with accounting standards applicable in the UK and thus may not be comparable to the financial information of US companies or companies whose financial statements are prepared in accordance with generally accepted accounting principles in the US. If Element Bidco exercises its right to implement the Acquisition of the Exova Shares by way of a Takeover Offer, the Takeover Offer will be made in compliance with applicable US securities laws and regulations.

It may be difficult for US holders of Exova Shares to enforce their rights and claims arising out of the US federal securities laws, since Element Bidco and Exova are located in countries other than the United States, and some or all of their officers and directors may be residents of countries other than the United States. US holders of Exova Shares may not be able to sue a non-US company or its officers or directors in a non-US court for violations of the US securities laws. Further, it may be difficult to compel a non-US company and its affiliates to subject themselves to a US court's judgement.

Unless otherwise determined by Element Bidco or required by the Code, and permitted by applicable law and regulation, the Acquisition will not be made available, directly or indirectly, in, into or from a Restricted Jurisdiction where to do so would violate the laws in that jurisdiction and no person may vote in favour of the Scheme by any such use, means, instrumentality or form within a Restricted Jurisdiction or any other jurisdiction if to do so would constitute a violation of the laws of that jurisdiction. Accordingly, copies of this announcement and all documents relating to the Acquisition are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in, into or from a Restricted Jurisdiction where to do so would violate the laws in that jurisdiction, and persons receiving this announcement and all documents relating to the Acquisition (including custodians, nominees and trustees) must not mail or otherwise distribute or send them in, into or from such jurisdictions where to do so would violate the laws in that jurisdiction.

The availability of the Acquisition to Exova Shareholders who are not resident in the United Kingdom may be affected by the laws of the relevant jurisdictions in which they are resident. Persons who are not resident in the United Kingdom should inform themselves of, and observe, any applicable requirements.

Further details in relation to Overseas Shareholders will be contained in the Scheme Document.

Forward Looking Statements

This announcement, oral statements made regarding the Acquisition and other information published by Element Bidco and Exova contains statements that are or may be forward looking statements. Forward-looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections of the management of Element Bidco and Exova about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. The forward-looking statements contained in this announcement include statements relating to the expected effects of the Acquisition on Element Bidco and Exova, the expected timing and scope of the Acquisition and other statements other than historical facts. 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", "should", "could", "would", "may", "anticipates", "estimates", "synergy", "cost-saving", "projects", "goal", "strategy", "budget", "forecast" or "might" or, words or terms of similar substance or the negative thereof, are forward looking statements. Forward looking statements include statements relating to the following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; (ii) business and management strategies and the expansion and growth of Element Bidco's or Exova's operations and potential synergies resulting from the Acquisition; and (iii) the effects of government regulation on Element Bidco's or Exova's business.

These forward looking statements are not guarantees of future financial performance. Except as expressly provided in this announcement, they have not been reviewed by the auditors of Element Bidco or Exova or their respective financial advisers. Such forward looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Many factors could cause actual results to differ materially from those projected or implied in any forward looking statements. These factors include the satisfaction of the Conditions, as well as additional factors, such as: fluctuations in the capital markets; fluctuations in interest and exchange rates; increased regulation or regulatory scrutiny; the occurrence of unforeseen disasters or catastrophes; political or economic instability in principal markets; adverse outcomes in litigation; and general, local and global economic, political, business and market conditions. Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements. Such forward-looking statements should therefore be construed in the light of such factors. Neither Element Bidco nor Exova, nor any of their respective associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this announcement will actually occur. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward looking statements. All subsequent oral or written forward looking statements attributable to Element Bidco or Exova or any of their respective members, directors, officers or employees or any persons acting on their behalf are expressly qualified in their entirety by the cautionary statement above. Element Bidco and Exova disclaim any obligation to update or revise any forward looking or other statements contained herein other than in accordance with their legal and regulatory obligations.

Profit Forecast

Paragraph 10 of this announcement contains a statement which is a profit forecast for the purposes of Rule 28 of the Code. Appendix IV contains a confirmation by the directors of Exova in the terms required by Rule 28.1(c)(i) of the Code in relation to that statement.

Other than as described above, no statement in this announcement is intended as a profit forecast or estimate for any period and no statement in this announcement should be interpreted to mean that earnings or earnings per share for Exova, for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per share for Exova.

Dealing Disclosure Requirements

Under Rule 8.3(a) of the Code, any person who is interested in 1 per cent. or more of any class of relevant securities of an offeree company or of any paper 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 paper 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 paper offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) 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 paper offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a paper 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 per cent. or more of any class of relevant securities of the offeree company or of any paper offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any paper 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 paper offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) 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 paper offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

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).

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 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. If you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure, you should contact the Panel's Market Surveillance Unit on +44 (0) 20 7638 0129.

Information Relating to Exova Shareholders

Please be aware that addresses, electronic addresses and certain information provided by Exova Shareholders, persons with information rights and other relevant persons for the receipt of communications from Exova may be provided to Element Bidco during the offer period as requested under Section 4 of Appendix 4 of the Code to comply with Rule 2.11(c).

Publication on Website

A copy of this announcement will be available free of charge (subject to any applicable restrictions with respect to persons resident in Restricted Jurisdictions) on Exova's and Element's websites (www.exova.com and www.element.com respectively) by no later than 12 noon (London time) on 20 April 2017.

The contents of the websites referred to in this announcement are not incorporated into and do not form part of this announcement.

You may request a hard copy of this announcement by contacting Jo Wetz on +44 (0) 20 3540 1820. You may also request that all future documents, announcements and information to be sent to you in relation to the Acquisition should be in hard copy form. 

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

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

19 April 2017

RECOMMENDED CASH ACQUISITION

of

EXOVA GROUP PLC
by

ELEMENT MATERIALS TECHNOLOGY GROUP LIMITED
 

to be effected
by means of a Scheme of Arrangement
under Part 26 of the Companies Act 2006

1         Introduction

The boards of directors of Exova and Element are pleased to announce that they have reached agreement on the terms of a recommended cash acquisition of Exova by Element pursuant to which a wholly-owned subsidiary of Element, Greenrock Bidco, will acquire the entire issued and to be issued ordinary share capital of Exova. It is intended that the Acquisition be implemented by means of a Court-sanctioned scheme of arrangement under Part 26 of the 2006 Act.

2         The Acquisition

Under the terms of the Acquisition, which will be subject to the Conditions and further terms set out in Appendix I to this announcement and to be set out in the Scheme Document, Scheme Shareholders will be paid a price of 240 pence per share in cash by Element Bidco. In addition, Scheme Shareholders who are on the register of members of Exova as at the close of business on 26 May 2017 will still be entitled, conditional on approval by Exova Shareholders at the annual general meeting of Exova, to receive and retain a final dividend for the period to 31 December 2016 of 2.35 pence per Exova Share, which is expected to be paid on 9 June 2017. Therefore, with the intended dividend payment, Scheme Shareholders at the Scheme Record Time will be entitled to receive:

242.35 pence in cash per Scheme Share

The Cash Value of 242.35 pence in cash represents a premium of approximately:

·          26.0 per cent. to the volume weighted average Closing Price of approximately 192.37 pence per Exova Share for the twelve month period ended on 24 March 2017 (being the last Dealing Day prior to the start of the Offer Period);

·          18.9 per cent. to the volume weighted average Closing Price of approximately 203.87 pence per Exova Share for the six month period ended on 24 March 2017 (being the last Dealing Day prior to the start of the Offer Period); and

·          10.7 per cent. to the Closing Price per Exova Share of 218.88 pence on 24 March 2017 (being the last Dealing Day prior to the start of the Offer Period).

The Cash Value implies an enterprise value multiple of approximately 16.0 times Exova's Adjusted EBITA and 12.5 times Exova's Adjusted EBITDA for the 12 months ended 31 December 2016.

The Cash Value values the entire issued and to be issued ordinary share capital of Exova at approximately £620.3 million on the basis of a fully diluted share capital of 256,009,630 Exova Shares, assuming that all rights in respect of in-the-money options under the Exova Share Schemes are exercised on the basis explained in this announcement. This assumes that the shares under option or award under the Exova Share Schemes will not be eligible to receive the final dividend of 2.35 pence per Exova Share but will be taken into account for purposes of determining dividend equivalent rights under the Exova Group plc Long Term Incentive Plan.

Element Bidco confirms that the offer price of 240 pence per share is final and will not be increased, except that Element Bidco reserves the right to increase the amount of the offer price if there is an announcement on or after the date of this announcement of an offer or a possible offer for Exova by a third party offeror or potential offeror.

If, after the date of this announcement, any dividend and/or other distribution and/or other return of capital, other than the final dividend for the period to 31 December 2016 of 2.35 pence per Exova Share is announced, declared or paid in respect of Exova Shares, Element Bidco reserves the right to reduce the offer consideration by an amount up to the amount of such dividend and/or distribution and/or return of capital so announced, declared or paid.

3         Background to and reasons for the Acquisition

Bridgepoint acquired Element in March 2016, in conjunction with Element's management team. While it has a strong standalone critical mass and an attractive investment case, Element management and Bridgepoint have always considered that it also offers a strong platform for pursuing larger acquisitions in strategic testing sectors. Element believes that the Acquisition of Exova will allow the Combined Group to:

·     enhance its presence in the aerospace, oil and gas, transport and industrials laboratory based testing segments;

·     benefit from geographic and end market diversification, with Element's sector exposure broadened to include fire, health sciences and infrastructure, as well as calibration;

·     create a global platform of increased scale whose broader range of highly technical capabilities will allow the Combined Group to better address the challenges which face our customers; and

·     become the employer of choice for technical talent in the laboratory based testing market.

4         Recommendation

The Exova Directors, who have been so advised by Goldman Sachs and Investec as to the financial terms of the Acquisition, consider the terms of the Acquisition to be fair and reasonable. In providing advice to the Exova Directors, Goldman Sachs and Investec have taken into account the commercial assessments of the Exova Directors. Investec is providing independent financial advice to the Exova Directors for the purposes of Rule 3 of the Code.

Accordingly, the Exova Directors intend unanimously to recommend Exova Shareholders to vote in favour of the Scheme at the Court Meeting and the General Meeting Resolutions, as each Exova Director has irrevocably undertaken to do in respect of his own beneficial holdings of Exova Shares (further details of these irrevocable undertakings are contained in paragraph 6 below).

5         Background to and reasons for the Exova Directors' recommendation

Exova is a global testing, calibration and advisory services provider. Until 2008, Exova was the testing and inspection division of Bodycote plc. In 2008, Exova was acquired by Clayton, Dubilier & Rice Fund VII, LP and, following a period of significant growth and development, Exova was listed on the London Stock Exchange in 2014 (the "IPO").

Since the completion of its IPO, Exova has made meaningful strategic and financial progress as a standalone company. This progress has been characterised by strong organic growth across all its businesses (with the exception of its oil and gas business), substantial progress on its value accretive acquisition strategy with the completion of 14 acquisitions, and the successful implementation of a new market facing organisation structure.

However, during this period, the deterioration in the oil price, and the consequential reduction in investment and activity levels by customers in the oil and gas sector, has presented significant challenges. The deterioration in the oil and gas environment has had a negative impact on a number of companies, including Exova, for which the oil and gas industry is an end market. Exova has taken decisive action to mitigate the impact of this downturn and to re-balance the portfolio to the other end markets that it serves. In 2016, oil and gas represented approximately 9 per cent. of Group revenue compared with 18 per cent. at the time of the IPO. However, a combination of Exova's continuing exposure to the oil and gas sector and the relatively small free float in its shares, which has impacted trading liquidity, has weighed upon its share price.

Since the IPO, the Group's progress has been derived from organic growth complemented by an active acquisition strategy. Taking into account the continuing challenges in the oil and gas sector, the Exova Directors expect the Group to deliver modest organic growth at constant currency in 2017. Beyond the current financial year and in the event that the Group is successful in completing its current pipeline of anticipated acquisitions, the level of financial leverage within the Group may constrain its ability to finance further material acquisitions with borrowings.

CD&R has been a long term, supportive investor in Exova. Following the completion of the IPO, CD&R had intended to realise its full investment in Exova over time and return the proceeds to its investors in line with its typical approach to investments. CD&R has considered a number of options to realise its investment, including the sale of its shareholding in multiple placings in the public market over time. However, the limited liquidity in the trading of Exova's shares has restricted the opportunities for CD&R to undertake a sale of shares to public investors and, given the reasons set out above, there is continued uncertainty as to whether and when this could be achievable.

The Exova Directors believe that Exova's strategy and business model remain capable of delivering growth and sustained profitability going forward. However, for the reasons set out above and given the receipt of unsolicited interest from a number of parties, the Exova Directors decided to investigate whether a third party would make a proposal to shareholders to acquire Exova that would provide all Exova Shareholders with immediate and certain value which would reflect Exova's prospects as a standalone company.

In January 2017, the Exova Directors contacted a number of parties who had expressed an interest in Exova and provided them with access to limited due diligence information. Initial proposals were received and access was provided to selected interested parties to further due diligence information. Following media speculation, the Exova Directors announced on 26 March 2017 that they were in discussions with three interested parties. Although any further third parties that had an interest in making a proposal to acquire Exova had an opportunity to contact the Exova Directors, no further interest was received.

Following consideration of the detailed due diligence information by the three interested parties, the Exova Directors received a proposal from Element which represented the most attractive proposal. The Exova Directors considered the proposal and the terms of the Acquisition in relation to the value of Exova as a standalone company and believe the Acquisition recognises Exova's prospects and growth potential. The Exova Directors have carefully considered the terms of the Acquisition in the context of the dynamics of the global markets in which Exova operates, in particular the continued uncertainty in the oil and gas sector, as well as the competitive landscape for future acquisitions. In considering the terms of the Acquisition, the Exova Directors have taken into account a number of factors including that:

·     the Acquisition represents an opportunity for Exova Shareholders to realise their investment in Exova for cash at a fair and reasonable value;

·     the Cash Value, comprising an Acquisition price of 240 pence for each Exova Share and the proposed final dividend of 2.35 pence per Exova Share for the year ended 31 December 2016, implies an enterprise value multiple of approximately 16.0 times Exova's Adjusted EBITA and 12.5 times Exova's Adjusted EBITDA for the 12 months ended 31 December 2016;

·     the Cash Value represents a premium of approximately 26.0 per cent. to the volume weighted average Closing Price of 192 pence per Exova Share for the 12 month period ended 24 March 2017 (being the last Business Day prior to the start of the Offer Period);

·     the certainty of the Acquisition should be weighed against the inherent uncertainty of the delivery of future value that exists in the business;

·    the Acquisition delivers more value to Exova Shareholders than any other proposals received by Exova from interested parties following a thorough and extensive process; and

·   the Exova Directors recognise Exova's ownership structure and the irrevocable undertaking from Exova's majority shareholder, CD&R, representing approximately 54 per cent of the ordinary share capital of Exova, to vote in favour of the Acquisition.

Furthermore, the Exova Directors believe Exova's employees, customers and other stakeholders will benefit from the opportunities provided by a combination with Element given the global scale and diversification across sectors of the combined business to support its future growth and development.

Following careful consideration of the above factors, the Exova Directors intend unanimously to recommend the Acquisition to Exova Shareholders. The Exova Directors who hold or are beneficially entitled to Exova Shares have each irrevocably undertaken to vote in favour of the Scheme at the Court Meeting and in favour of the General Meeting Resolutions to be proposed at the Exova General Meeting in respect of all their Exova Shares, being in aggregate a total of 2,513,414 Exova Shares (representing approximately 1.00 per cent. of the ordinary share capital of Exova).

6         Irrevocable undertakings

Element Bidco has received irrevocable undertakings from each of the Exova Directors that holds Exova Shares to vote in favour of the Scheme at the Court Meeting and in favour of the General Meeting Resolutions, in respect of a total of 2,513,414 Exova Shares, representing approximately 1.00 per cent. of the ordinary share capital of Exova in issue on 18 April 2017 (being the latest practicable date prior to this announcement). The irrevocable undertakings given by the Exova Directors will remain in full force and effect if the Acquisition is effected by way of a Takeover Offer (provided such Takeover Offer is made on terms at least as favourable as the terms of the Scheme) and will cease to be binding if: (i) Element Bidco announces, with the consent of the Panel, that it does not intend to make or proceed with the Acquisition and no new, revised or replacement scheme of arrangement or takeover offer is announced by Element Bidco in accordance with Rule 2.7 of the Code at the same time; (ii) the Scheme or Takeover Offer lapses or is withdrawn (which, for the avoidance of doubt, in either case shall not include any suspension of the timetable applicable to the Scheme) and no new, revised or replacement scheme of arrangement or takeover offer by Element Bidco has been announced, in accordance with Rule 2.7 of the Code, in its place or is announced, in accordance with Rule 2.7 of the Code, within 10 Business Days of such lapsing or withdrawal; or (iii) any competing offer for the entire issued and to be issued share capital of Exova (other than that already held by Element Bidco or a subsidiary of Element Bidco or any person acting in concert with Element Bidco) is made which is declared wholly unconditional or, if proceeding by way of scheme of arrangement, becomes effective.

Element Bidco has also received irrevocable undertakings to vote in favour of the Scheme at the Court Meeting and the General Meeting Resolutions from each of (i) CD&R, in respect of a total of 135,045,958 Exova Shares and (ii) Anne Thorburn in respect of 1,378,639 Exova Shares, together representing approximately 54.46 per cent. of the ordinary share capital of Exova in issue on 18 April 2017 (being the latest practicable date prior to this announcement)

The irrevocable undertaking received from CD&R will remain in full force and effect if the Acquisition is effected by way of a Takeover Offer (provided such Takeover Offer is made on terms at least as favourable as the terms of the Scheme) and will cease to be binding if: (i) Element Bidco announces that it does not intend to make or proceed with the Acquisition; (ii) the Scheme or Takeover Offer lapses or is withdrawn and Element Bidco announces that it does not intend to make or proceed with the Acquisition; or (iii) the Scheme or Takeover Offer lapses or is withdrawn (which, for the avoidance of doubt, shall not include any suspension of the timetable applicable to the Scheme) and no new, revised or replacement scheme of arrangement or takeover offer has been announced by Element Bidco, in accordance with Rule 2.7 of the Code, in its place or is announced by Element Bidco, in accordance with Rule 2.7 of the Code, within 10 Business Days of such lapsing or withdrawal. The irrevocable undertaking received from Anne Thorburn has been provided on substantially similar terms to those given by the Exova Directors.

In aggregate, therefore, Element Bidco has received irrevocable undertakings in respect of a total of 138,938,011 Exova Shares, representing approximately 55.47 per cent. of the share capital of Exova in issue on 18 April 2017 (being the latest practicable date prior to this announcement).

Further details of the irrevocable undertakings are set out in Appendix III to this announcement.

Copies of the irrevocable undertakings will be on display on Exova's and Element's websites (www.exova.com and www.element.com respectively) from 12 noon on 20 April 2017 until the end of the Acquisition.

7         Information on Element and Element Bidco

Element

Element is a leading global materials and product qualification testing provider with a strong focus on the aerospace, oil and gas and automotive end markets. Element provides solutions to complex technical challenges facing its customers on a daily basis through employing and developing a highly technical work force and focusing on excellent operational delivery.

Element has a highly diverse customer base with over 25,000 customers across a global network of 61 laboratories strategically located across the US, Europe and China. Element has a strong track record of M&A with 13 acquisitions completed and fully integrated within the last five years.

Element is majority owned by BEV, the latest fund of Bridgepoint and was acquired by BEV in March 2016.

Element Bidco

Element Bidco is a wholly owned indirect subsidiary of Element, established for the purpose of making the Acquisition.

8         Information on Bridgepoint and BEV

Bridgepoint

Bridgepoint is a leading pan-European private equity firm which has current assets under management of over €12 billion and has a 30-year track record of investing in growth businesses. Independently owned and with a team including over 100 investment professionals, Bridgepoint has eight offices across Europe, as well as offices in New York and Shanghai.

Business services is a core sector for Bridgepoint, having completed over 40 investments in the last 20 years in the sector. Bridgepoint has invested significant capital in the global testing industry, across 5 transactions. Bridgepoint's track record in the testing space, and across the variety of end markets it covers, enables it to draw from a wide range of experience to complete transactions efficiently and provide strategic support to businesses throughout the period of ownership.

BEV

BEV is the latest Bridgepoint pan-European fund and held its final close in 2015 with total commitments of €4bn primarily raised from leading institutional investors globally. Since its inception BEV has committed over €2bn to a total of 11 assets.

9         Information on Exova

Exova is a leading provider of laboratory-based testing and related advisory services, operating 136 laboratories and offices in 33 countries worldwide. The Group focuses on providing customers with technically demanding, value-added testing for a broad range of advanced materials, components, products and systems to ensure compliance with safety, performance and quality standards imposed by customers, accreditation bodies and regulatory authorities. As at 18 April 2017, the Group had around 4,200 employees and served approximately 25,000 customers.

 

Exova manages its business through three divisions: i) Industries (35% of the Group's revenue in 2016), ii) Products (36% of the Group's revenue in 2016), iii) Infrastructure, Health and Environment (29% of the Group's revenue in 2016). The geographic split for Group's revenue in 2016 was Europe (52%), Americas (32%) and Rest of World (16%).

 

Industries

The Industries Division includes two sectors: Aerospace and Oil & Gas and Industrials.

 

Aerospace

The Group's Aerospace sector provides destructive and non-destructive testing to determine the physical and mechanical properties of materials used in airframes and engines. The sector also provides production-related testing of engine components and raw materials, aircraft structural materials and components, as well as research and development-related testing of engine and airframe raw materials to customers in the aerospace industry, including the key aircraft manufacturers and many of their supply chain partners.

 

Oil & Gas and Industrials

The Group's Oil & Gas and Industrials sector provides materials testing and advisory services to off-shore and on-shore oil and gas customers, who require qualification of materials and processes used in the construction of up-and mid-stream oil and gas infrastructure, such as pipelines, rigs and subsea systems, and testing of downstream refinery components. In addition, Exova provides a range of environmental testing and analysis services to oil and gas clients related to on-shore production and drilling waste. The sector also provides materials testing, advisory services and some non-destructive testing to a range of industrial segments, including the utilities, nuclear and rail sectors and steel forgers.

 

Products

The Products Division includes three sectors: Fire, Building Products & Certification; Transportation and Calibration.

 

Fire, Building Products & Certification

The Group's Fire, Building Products and Certification sector provides laboratory-based testing of large and small scale specimens of materials and products to establish their resistance to fire or reaction to fire. The sector also offers the mechanical, physical and acoustic testing of building products for durability and security, as well as fire engineering and fire consulting. Certification services assess fitness for purpose or compliance with standards and span management systems, chain of custody, personnel and products and structures for the built environment.

 

Transportation

The Group's Transportation sector provides routine and specialised materials testing and product qualification testing for automotive OEMs and suppliers. Services include vehicle refinement; component / system testing; instrumentation & data acquisition; vehicle structure testing; and road services simulation, with particular expertise in full vehicle testing. The sector also provides engine quality control testing via embedded operations at or near client sites.

 

Calibration

The Group's calibration sector provides accredited calibration and metrology services to a wide range of customers operating in industries such as energy, life sciences, telecoms, aerospace and defence. Services cover most instrument types and extend to life-cycle services for these devices including procurement support, on-site services, repairs, technical support, disposal, requirement analysis, sourcing, and instrument administration.

 

Infrastructure, Health and Environment

The Infrastructure, Health and Environment Division includes three sectors: Infrastructure, Health and Environment.

 

Infrastructure

The Group's Infratructure sector provides construction materials testing, safety performance and consultancy services, covering building materials, structures, sub-assemblies and components through a combination of permanent and purpose built temporary laboratories at client sites. A multidisciplinary laboratory system delivers physical and mechanical testing in parallel with environmental chemistry, microbiology, environmental field services and high-end metallurgical testing.

 

Health

The Group's health sciences sector delivers pharmaceutical testing services which include analytical development and validation, preformulation development, raw materials testing and regulated substances control and physical characterisation and stability studies. Exova's food testing capabilities include microbiology testing, nutritional composition and preservatives analysis.

 

Environment

The Group provides a wide range of environmental testing services, which include stack emissions testing; contaminated land testing and forensic analysis (including oil, gas, soil, water and waste); asbestos testing and air surveying; and occupational hygiene assessments and monitoring.

 

The expertise of the Group across each division is underpinned by its core technical disciplines, which comprise calibration; chemistry & microbiology; construction engineering and technology; corrosion & protection; fire, building products, and certification; metal technology; polymers & composites; and structures & systems.

 

In its annual results for the year ended 31 December 2016, Exova announced revenue of £328.6m, Adjusted EBITA of £50.3m, operating profit of £43.5m and a profit before tax of £36.6m. 

10       Exova current trading

As announced on 28 February 2017, the Exova board expects the Group to deliver modest organic revenue growth at constant currency in 2017. This will be driven by Exova's diversified exposure and good growth in most sectors, moderated by continuing pressure in oil & gas, and a lower point in the project cycle of Exova's engines testing business. Organic growth is expected to be weighted towards the second-half, partly as a result of more favourable like-for-like comparisons. Exova's acquisitions programme should continue to contribute to overall revenue growth. Exova expects that recent actions it has taken to reduce cost will offset general pressure on group margins in the current financial year.

 

Exova's medium-term revenue expectation remains mid-single digit organic growth, and continued expansion through acquisitions.

Appendix IV of this announcement contains a confirmation of the statements in this paragraph 10 by the directors of Exova in the terms required by Rule 28.1(c)(i) of the Code.

11        Management and employees

Element considers the principal rationale for Acquisition to be strategic in nature, particularly in relation to achieving scale and driving further geographic and sector diversification. From an employment perspective, as a global testing platform there is scope to become the 'employer of choice' for technical experts in the sector. Following the Acquisition, Element intends to remain fully committed to the development of operational and technical talent of the Combined Group.

Element has confirmed that, following completion of the Acquisition, the existing employment rights of, and pension obligations owed to, all Exova employees will be fully safeguarded.

Element has confirmed that all bonus-eligible employees will remain eligible to receive annual cash bonuses for the 2017 financial year in accordance with current contractual entitlements, policies or practices or substantially equivalent arrangements (including substantially similar performance metrics). In addition, should the employment of a member of Exova's executive committee be terminated on the grounds of redundancy (including resignation as a result of a place of work relocation of more than 50 miles), Element will procure that such employee shall be paid a cash bonus on termination equal to 100% of the personal objectives element of the total bonus opportunity and a pro-rated percentage of the financial/strategic objectives element, based on performance to the end of the month immediately preceding the Effective Date (pro rated for such employee's period of employment during the 2017 financial year). Element intends to enter into discussions with senior management of Exova in due course regarding their continuing involvement in the Combined Group. Element has agreed that if the employment of a member of Exova's executive committee is terminated on the grounds of redundancy (including where such Exova employee resigns in response to their place of work being relocated by more than 50 miles) within 12 months of the Effective Date, it will (subject to the relevant Exova employee agreeing to provide handover assistance) not require the Exova employee to serve their contractual notice period and shall arrange for the employee to receive a payment of lieu of notice in a single lump sum on the date of termination of employment. There are no other agreements or arrangements in place between Element and the senior management of Exova and, in particular, no discussions have taken place in relation to the terms of any management incentivisation arrangements. The non-executive directors of Exova have confirmed that they intend to resign upon completion of the Acquisition.

12       Exova Share Schemes

The Acquisition will affect participants in the Exova Share Schemes. In summary, Element Bidco and Exova have agreed that, in relation to the options and awards to acquire Exova Shares granted under the Exova Share Schemes, Element Bidco, in agreement with Exova, will make appropriate proposals to the holders of such options and awards in accordance with Rule 15 of the Code, and each grant of such options and awards shall be treated in accordance with the rules applicable to it. Further details of these arrangements will be communicated to participants in due course.

13       Financing of the Acquisition

The cash consideration payable in connection with the Acquisition is being financed by a combination of: (a) equity and shareholder debt which is fully underwritten by BEV; and (b) debt financing arranged and fully underwritten by HSBC, HSBC Securities (USA) Inc., Bank of America, N.A., Bank of America Merrill Lynch International Limited, ING Bank N.V. and Barclays Bank plc.

Equity Financing Arrangements

Pursuant to a subscription agreement entered into between (among others) Element, Element Bidco and BEV dated 18 April 2017 (the "Subscription Agreement"), BEV has entered into commitments to subscribe for securities in Element and its indirect wholly owned subsidiary Element Midco conditional upon the Acquisition completing. Each of Element, Element Midco and certain of their subsidiaries have given corresponding commitments to ensure that the cash proceeds of such commitments are provided to Element Bidco.

Pursuant to the terms of the Subscription Agreement Element Bidco has also undertaken (amongst other things) that: (a) it shall not waive and/or amend any term or condition relating to the Acquisition or treat any condition as satisfied; and (b) in the event that the Acquisition is implemented by way of Takeover Offer, it shall not reduce the acceptance threshold below 90 per cent., in each case except to the extent: (i) that BEV consents or directs; or (ii) such action is required by the Code, the Panel, the Court and/or any applicable law or regulation. Element Bidco has also agreed in the Subscription Agreement not to increase or decrease the amount, or make any amendment to the form of, the consideration offered for the Exova Shares and not to implement the Acquisition by way of Takeover Offer except to the extent that BEV consents or directs.

Debt Financing Arrangements

The debt financing for the Acquisition is to be provided under a new first lien credit agreement and a new second lien credit agreement (together the "Credit Agreements") to be entered into by, amongst others, Element Midco.

Under the terms of the Credit Agreements, Element Midco has agreed that it shall procure that, save as required by the Panel, the Court or any other applicable law, regulation or regulatory body or with the consent of the respective Administrative Agent (as defined in each of the Credit Agreements) Element Bidco will not amend, vary, waive or otherwise modify the terms and conditions of the Acquisition to the extent such amendment, variance, waiver or modification would be materially prejudicial to the interests of the lenders under the Credit Agreements, other than where such amendment would result in the price payable pursuant to the Acquisition increasing or decreasing by certain amounts specified therein.

Cash Confirmation

BofA Merrill Lynch and HSBC, joint financial advisers to Bridgepoint, Element and Element Bidco, are satisfied that sufficient cash resources are available to Element Bidco to enable it to satisfy in full the cash consideration payable to Exova Shareholders in connection with the Acquisition.

14       Offer-related Arrangements

Confidentiality Agreement

Exova and BEV (acting by its manager Bridgepoint) entered into a confidentiality agreement on 13 February 2017 (the "Confidentiality Agreement"), pursuant to which, amongst other things, BEV has undertaken, (i) to keep confidential information relating to the Acquisition and Exova; (ii) use such information only for the purposes of evaluating, negotiating, advising upon or implementing the Acquisition; and (iii) not to disclose such information unless permitted by the terms of the Confidentiality Agreement. The confidentiality obligations will remain in force for a period of 24 months from the date of the Confidentiality Agreement.

The Confidentiality Agreement also contains undertakings from BEV that for a period of 12 months, BEV or any of its group undertakings shall not, without the prior written consent of Exova, acquire or offer to acquire any interest in share or other securities of Exova (which undertaking ceases as at the date of this announcement) and that, for a period of 12 months, BEV shall not, without Exova's prior written consent, solicit certain employees, officers, suppliers or customers of Exova, subject to customary carve-outs.

Cooperation Agreement

Exova and Element Bidco entered into a cooperation agreement on 19 April 2017 with respect to the Acquisition (the "Cooperation Agreement"). Under the terms of the Cooperation Agreement, Exova and Element Bidco have agreed, among other things, that (in summary):

·      Exova and Element Bidco will cooperate with each other, and provide certain information to each other, in order to assist in obtaining clearance from competition and other regulatory bodies in order to satisfy the Conditions relating to such clearances;

·    Element Bidco will provide Exova with certain information and assistance in preparing the Scheme Document and implementing the Acquisition;

·     Element and Exova will agree to the implementation of certain matters relating to the treatment of options and awards under the Exova Shares Schemes and certain other employee related arrangements;

·     Exova and Element Bidco intend to implement the Acquisition by way of the Scheme, subject to the ability of Element Bidco, with the consent of the Panel, to proceed by way of a Takeover Offer;

·     Element Bidco will pay Exova a break payment of £6.203 million if: (i) on or prior to the Longstop Date, Element Bidco invokes any of the Regulatory Conditions so as to cause the Acquisition not to proceed, lapse or be withdrawn; (ii) a Rule 12 Event takes place on or prior to the Longstop Date; or (iii) any Regulatory Condition has not been satisfied or waived by Element Bidco by 11.59 p.m. on the date which is 14 days prior to the Longstop Date;

·      the Cooperation Agreement shall terminate (save in respect of certain surviving provisions) if: (i) Exova and Element Bidco so agree in writing; (ii) the Acquisition is, with the permission of the Panel, withdrawn or lapses in accordance with its terms prior to the Longstop Date (other than where (i) such lapse or withdrawal is as a result of the exercise of Element Bidco's right to effect a switch; or (ii) it is otherwise to be followed within ten Business Days by an announcement under Rule 2.7 of the Code made by Element Bidco or a person acting in concert with Bidco to implement the Acquisition by a different offer or scheme on substantially the same or improved terms); or (iii) the Effective Date has not occurred on or before the Longstop Date, unless otherwise agreed in writing between Element Bidco and Exova;

·     Element Bidco may terminate the Cooperation Agreement (save in respect of certain surviving provisions) if: (i) the Exova Directors withdraw or adversely modify their recommendation of the Acquisition; (ii) Exova announces it will not convene the Court Meeting or General Meeting or it intends not to post the Scheme Document or (if different) the document convening the General Meeting; or (iii) any Condition is not satisfied or waived or becomes incapable of satisfaction or waiver by the Longstop Date (in each case if invocation of each Condition is permitted by the Panel);

·    Element Bidco may also terminate the Cooperation Agreement (save in respect of certain surviving provisions) if a competing proposal is recommended by the Exova Directors or completes, becomes effective or is declared unconditional in all respects; and

·     either Element Bidco or Exova may terminate the Cooperation Agreement (save in respect of certain surviving provisions) if the requisite resolutions are not passed at either or both of the Court Meeting and the General Meeting.

15       Conditions

The Acquisition is subject to the Conditions and further terms set out in Appendix I to this announcement and to be set out in the Scheme Document including, amongst other things, the receipt of the relevant clearances from competition authorities in the United States, Sweden and Germany and certain notifications being made and applicable notification and/or waiting periods having expired in respect of ITAR and the Canadian Controlled Goods Regulations. In particular, it should be noted that the condition relating to United States competition clearance will not be satisfied if the Acquisition is the subject of a Second Request from the Antitrust Division of the United States Department of Justice or the United States Federal Trade Commission.

The Acquisition is also conditional upon the satisfaction of the formal conditions required to be satisfied in connection with the Scheme as set out in paragraph 2 of Appendix I to this announcement, which provide that the Acquisition is conditional on:

·          the approval of the Scheme by a majority in number of the Scheme Shareholders present and voting (and entitled to vote), representing not less than 75 per cent. in value of the Scheme Shares voted, either in person or by proxy, at the Court Meeting;

·          the approval of the General Meeting Resolutions by the Exova Shareholders by the requisite majorities at the General Meeting; and

·          the sanction of the Scheme by the Court (in either case, with or without modification but subject to any modification being on terms acceptable to Exova and Element Bidco) and the registration of the Sanction Court Order with the Registrar of Companies.

The Scheme shall lapse if:

(i)   the Court Meeting and the General Meeting are not held by the 22nd day after the expected date of such meetings as set out in the Scheme Document (or such later date as may be agreed between Element Bidco and Exova); or

(ii)  the Scheme does not become effective by 18 October 2017,

provided however that the deadlines for the timing of the Court Meeting and the General Meeting and the deadline for the Scheme to become effective may be extended by agreement between Element Bidco and Exova, with the consent of the Court or Panel if required.

The Acquisition will also lapse if the acquisition of Exova by Element Bidco is referred to the chair of the CMA for the constitution of a group under Schedule 4 to the Enterprise and Regulatory Reform Act 2013, or the European Commission either initiates proceedings under Article 6(1)(c) of the Council Regulation or makes a referral to a competent authority of the United Kingdom under Article 9(1) of the Council Regulation and there is then a reference to the chair of the Competition and Markets Authority for the constitution of a group under Schedule 4 to the Enterprise and Regulatory Reform Act 2013, before the date of the Court Meeting.

16       Structure of the Acquisition

It is intended that the Acquisition will be effected by means of a Court-sanctioned scheme of arrangement under Part 26 of the 2006 Act. The Scheme is an arrangement between Exova and the Scheme Shareholders and is subject to the approval of the Court.

The purpose of the Scheme is to provide for Element Bidco to become the holder of the entire issued and to be issued ordinary share capital of Exova. Scheme Shareholders will receive cash consideration on the basis set out in paragraph 2 of this announcement in consideration for the transfer of such Scheme Shares to Element Bidco.

The Scheme requires the approval of Scheme Shareholders at the Court Meeting. The resolution to approve the Scheme at the Court Meeting must be approved by a majority in number of the Scheme Shareholders present and voting (and entitled to vote), either in person or by proxy, representing not less than 75 per cent. in value of the Scheme Shares held by such Scheme Shareholders. Implementation of the Scheme will also require the passing of the special resolution to approve the Scheme (requiring approval by the requisite majority at the General Meeting).

Once the necessary approvals from Exova Shareholders have been obtained and the other Conditions have been satisfied or (where applicable) waived, the Scheme must be sanctioned (with or without modification), on terms agreed by Element Bidco and Exova. The Scheme will then become effective upon delivery of the Court Order(s) and the Statement of Capital as approved by the Court to the Registrar of Companies.

Upon the Scheme becoming effective:

·          it will be binding on all Scheme Shareholders, irrespective of whether or not they attended or voted at the Court Meeting or the General Meeting (and, if they attended, whether or not they voted in favour); and

·          share certificates in respect of Exova Shares will cease to be valid and entitlements to Exova Shares held within the CREST system will be cancelled.

Further details of the Scheme, including an indicative timetable for the Acquisition and notices of the Court Meeting and the General Meeting, will be set out in the Scheme Document, which will be despatched by Exova to Exova Shareholders and, for information only, to persons with information rights and to holders of options granted under the Exova Share Schemes, as soon as practicable and, in any event, within 28 days of the date of this announcement. Subject, amongst other things, to the satisfaction or waiver of the Conditions, it is expected that the Scheme will become effective in the third quarter of 2017.

If the Scheme does not become effective, it will lapse and the Acquisition will not proceed (unless the Panel otherwise consents). Element Bidco reserves the right, subject to Panel consent, to elect to implement the Acquisition by way of a Takeover Offer on terms more fully described in paragraph 19 below.

17       Disclosure of interests in Exova Shares

As at the close of business on 18 April 2017, being the last practicable date prior to the publication of this announcement, save for: (i) the disclosures in this paragraph 17; and (ii) the irrevocable undertakings referred to in paragraph 6 above, none of Element Bidco or any of its respective directors or any member of the Element Group or, so far as Element Bidco is aware, any person acting, or deemed to be acting, in concert with Element Bidco:

·          has an interest in, or right to subscribe for or has borrowed or lent any Exova Shares or any securities convertible or exchangeable into Exova Shares (including pursuant to any long exposure, whether conditional or absolute, to changes in the price of securities);

·          has the right to subscribe for or purchase the same or hold any options (including traded options) in respect of or has any right to acquire any Exova Shares or holds any derivatives referenced to Exova Shares;

·          has any short position in (whether conditional or absolute and whether in-the-money or otherwise), including any short position under a derivative, any agreement to sell or any delivery obligation or right to require another person to purchase or take delivery in relation to Exova Shares or derivatives referenced to Exova Shares; or

·        has procured an irrevocable commitment or letter of intent to vote in favour of the Acquisition in respect of Exova Shares or derivatives referenced to Exova Shares.

Furthermore, no arrangement exists with Element Bidco or Exova or any person acting in concert with Element Bidco or Exova in relation to Exova Shares. For these purposes, an "arrangement" includes any indemnity or option arrangement, any agreement or any understanding, formal or informal, of whatever nature, relating to Exova Shares which may be an inducement to deal or refrain from dealing in such securities.

18       Delisting and re-registration

It is intended that dealings in Exova Shares will be suspended at 5.00 p.m. London time on the Business Day prior to the Effective Date. It is further intended that an application will be made to the UK Listing Authority on the Effective Date for the cancellation of trading in Exova Shares on the London Stock Exchange's main market for listed securities and the UK Listing Authority will be requested to cancel the listing of Exova Shares on the Official List to take effect as of or shortly after the Effective Date.

On the Effective Date, share certificates in respect of Exova Shares will cease to be valid and should be destroyed. In addition, entitlements to Exova Shares held within the CREST system will be cancelled.

It is also intended that, following the Effective Date and after its shares are delisted, Exova will be re-registered as a private limited company pursuant to the relevant provisions of the 2006 Act.

19       General

Element Bidco reserves the right, subject to Panel consent, to elect to implement the Acquisition by way of a Takeover Offer as an alternative to the Scheme. In such event, the Acquisition will be implemented on substantially the same terms as those which would apply to the Scheme (subject to appropriate amendments) and, in particular, the acceptance condition applicable to the Acquisition shall be set at not more than 75 per cent. of the issued Exova Shares, or, where any of the circumstances set out in Note 2 of Section 8 of Appendix 7 of the Code applies, 90 per cent., of the Exova Shares to which the Takeover Offer relates (or such lesser percentage, being more than 50 per cent. of the Exova Shares to which the Takeover Offer relates) as Element Bidco may decide with, to the extent necessary, the consent of the Panel.

The Acquisition will be subject to the Conditions and other terms set out in Appendix I to this announcement and set out in the Scheme Document and the Forms of Proxy, when issued. The Scheme Document will include full details of the Scheme, together with notices of the Court Meeting and the General Meeting and the indicative timetable of the Acquisition.

The Acquisition will be governed by English law and will be subject to the jurisdiction of the courts of England and Wales and subject to the applicable requirements of the Code, the Panel, the London Stock Exchange and the FCA.

The bases and sources of certain financial information contained in this announcement are set out in Appendix II. Certain terms used in this announcement are defined in Appendix V.

20       Documents on display

Copies of the following documents will be made available on Exova's and Element's websites at www.exova.com and www.element.com respectively by no later than 12 noon (London time) on 20 April 2017 until the end of the Acquisition:

·    the irrevocable undertakings referred to in paragraph 6 above and summarised in Appendix III to this announcement;

·     the documentation relating to the financing of the Acquisition described in paragraph 13;

·     the Confidentiality Agreement referred to in paragraph 14 above; and

·     the Cooperation Agreement referred to in paragraph 14 above.

 

 

Enquiries:

 

Element Materials Technology Group Limited

 

Charles Noall

Jo Wetz

Tel: +44 (0) 20 3540 1825

Tel: +44 (0) 20 3540 1820

Bridgepoint Advisers Limited

 

James Murray

Tel: +44 (0) 20 7034 3555

 

 

 

BofA Merrill Lynch (joint financial adviser to Bridgepoint, Element and Element Bidco)

Tel: +44 (0) 20 7628 1000

Eamon Brabazon

Justin Anstee

Geoff Iles

Adam Tinsley

 

 

 

HSBC (joint financial adviser to Bridgepoint, Element and Element Bidco and corporate broker to the Acquisition)

Tel: +44 (0) 20 7991 8888

Omar Faruqui

Andrew Owens

Simon Alexander (corporate broking)

Greg Hely Hutchinson

 

 

 

Finsbury (public relations adviser to Bridgepoint, Element and Element Bidco)

Tel: +44 (0) 20 7251 3801

Jenny Davy

Charles O'Brien

 

 

 

Exova Group plc

 

Andrew Pickup, Corporate Affairs Director

Tel: +44 (0) 79 2024 3393

 

 

Goldman Sachs International (financial adviser and corporate broker to Exova)

Tel: +44 (0)20 7774 1000

Anthony Gutman

Nick Harper

Jose Barreto

Alex Garner

Duncan Stewart (corporate broking)

 

 

 

Investec Bank plc (financial adviser and corporate broker to Exova)

Tel: +44 (0) 20 7597 5970

 

Keith Anderson

Chris Sim

 

Jonathan Wynn

 

Powerscourt Group (public relations adviser to Exova)

 

Peter Ogden

Andy Jones

Tel: +44 (0) 20 7549 0997

Tel: +44 (0) 20 7549 0747

 

Merrill Lynch International ("BofA Merrill Lynch"), which is authorised by the Prudential Regulation Authority and regulated by the FCA and the Prudential Regulation Authority in the United Kingdom, is acting for Bridgepoint, Element and Element Bidco and no one else in connection with the Acquisition and will not be responsible to anyone other than Bridgepoint, Element and Element Bidco for providing the protections afforded to clients of BofA Merrill Lynch, or for giving advice in connection with the Acquisition or any matter referred to herein.

HSBC Bank plc ("HSBC"), which is authorised by the Prudential Regulation Authority and regulated by the FCA and the Prudential Regulation Authority in the United Kingdom, is acting for Bridgepoint, Element and Element Bidco and no one else in connection with the Acquisition and will not be responsible to anyone other than Bridgepoint, Element and Element Bidco for providing the protections afforded to clients of HSBC, or for providing advice in connection with the Acquisition or any matter described in this announcement or any transaction or arrangement referred to herein.

Goldman Sachs International, which is authorised by the Prudential Regulation Authority and regulated by the FCA and the Prudential Regulation Authority in the United Kingdom, is acting exclusively for Exova and no one else in connection with the Acquisition and will not be responsible to anyone other than Exova for providing the protections afforded to clients of Goldman Sachs International or for providing advice in connection with the Acquisition or in relation to matters described in this announcement or any transaction or arrangement referred to herein.

Investec Bank plc, which is authorised by the Prudential Regulation Authority and regulated by the FCA and the Prudential Regulation Authority in the United Kingdom, is acting exclusively for Exova and no one else in connection with the Acquisition and will not be responsible to anyone other than Exova for providing the protections afforded to clients of Investec Bank plc or for providing advice in connection with the Acquisition or in relation to matters described in this announcement or any transaction or arrangement referred to herein.

This announcement is for information purposes only and is not intended to and does not constitute or form part of an offer to sell or otherwise dispose of or invitation to purchase or otherwise acquire any securities or 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. The Acquisition will be made solely through the Scheme Document and the accompanying Forms of Proxy, which will together contain the full terms and conditions of the Acquisition, including details of how to vote in respect of the Acquisition. Any vote in respect of the Scheme or other response in relation to the Acquisition should be made only on the basis of the information contained in the Scheme Document.

Overseas Shareholders and Notice to US investors

The release, publication or distribution of this announcement in certain jurisdictions may be restricted by law. Persons who are not resident in the United Kingdom or who are subject to other jurisdictions should inform themselves of, and observe, any applicable requirements. In particular, the ability of persons who are not resident in the United Kingdom to vote their Exova Shares with respect to the Scheme at the Court Meeting, or to appoint another person as proxy to vote at the Court Meeting on their behalf, may be affected by the laws of the relevant jurisdictions in which they are located. Any failure to comply with the applicable restrictions may constitute a violation of the securities laws of any such jurisdiction. To the fullest extent permitted by applicable law, the companies and persons involved in the Acquisition disclaim any responsibility or liability for the violation of such restrictions by any person. This announcement has been prepared for the purposes of complying with English law and the Code and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws of jurisdictions outside of England.

The Acquisition relates to the shares of an English company and is proposed to be effected by means of a scheme of arrangement under the laws of England and Wales. Neither the proxy solicitation rules nor (unless implemented by means of a Takeover Offer) the tender offer rules under the US Securities Exchange Act of 1934, as amended, will apply to the Acquisition. Moreover, the Acquisition is subject to the disclosure requirements and practices applicable in the United Kingdom and under the City Code to schemes of arrangement, which differ from the disclosure requirements of the US proxy solicitation rules and tender offer rules. Financial information included in this announcement has been prepared, unless specifically stated otherwise, in accordance with accounting standards applicable in the UK and thus may not be comparable to the financial information of US companies or companies whose financial statements are prepared in accordance with generally accepted accounting principles in the US. If Element Bidco exercises its right to implement the Acquisition of the Exova Shares by way of a Takeover Offer, the Takeover Offer will be made in compliance with applicable US securities laws and regulations.

It may be difficult for US holders of Exova Shares to enforce their rights and claims arising out of the US federal securities laws, since Element Bidco and Exova are located in countries other than the United States, and some or all of their officers and directors may be residents of countries other than the United States. US holders of Exova Shares may not be able to sue a non-US company or its officers or directors in a non-US court for violations of the US securities laws. Further, it may be difficult to compel a non-US company and its affiliates to subject themselves to a US court's judgement.

Unless otherwise determined by Element Bidco or required by the Code, and permitted by applicable law and regulation, the Acquisition will not be made available, directly or indirectly, in, into or from a Restricted Jurisdiction where to do so would violate the laws in that jurisdiction and no person may vote in favour of the Scheme by any such use, means, instrumentality or form within a Restricted Jurisdiction or any other jurisdiction if to do so would constitute a violation of the laws of that jurisdiction. Accordingly, copies of this announcement and all documents relating to the Acquisition are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in, into or from a Restricted Jurisdiction where to do so would violate the laws in that jurisdiction, and persons receiving this announcement and all documents relating to the Acquisition (including custodians, nominees and trustees) must not mail or otherwise distribute or send them in, into or from such jurisdictions where to do so would violate the laws in that jurisdiction.

The availability of the Acquisition to Exova Shareholders who are not resident in the United Kingdom may be affected by the laws of the relevant jurisdictions in which they are resident. Persons who are not resident in the United Kingdom should inform themselves of, and observe, any applicable requirements.

Further details in relation to Overseas Shareholders will be contained in the Scheme Document.

Forward Looking Statements

This announcement, oral statements made regarding the Acquisition and other information published by Element Bidco and Exova contains statements that are or may be forward looking statements. Forward-looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections of the management of Element Bidco and Exova about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. The forward-looking statements contained in this announcement include statements relating to the expected effects of the Acquisition on Element Bidco and Exova, the expected timing and scope of the Acquisition and other statements other than historical facts. 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", "should", "could", "would", "may", "anticipates", "estimates", "synergy", "cost-saving", "projects", "goal", "strategy", "budget", "forecast" or "might" or, words or terms of similar substance or the negative thereof, are forward looking statements. Forward looking statements include statements relating to the following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; (ii) business and management strategies and the expansion and growth of Element Bidco's or Exova's operations and potential synergies resulting from the Acquisition; and (iii) the effects of government regulation on Element Bidco's or Exova's business.

These forward looking statements are not guarantees of future financial performance. Except as expressly provided in this announcement, they have not been reviewed by the auditors of Element Bidco or Exova or their respective financial advisers. Such forward looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Many factors could cause actual results to differ materially from those projected or implied in any forward looking statements. These factors include the satisfaction of the Conditions, as well as additional factors, such as: fluctuations in the capital markets; fluctuations in interest and exchange rates; increased regulation or regulatory scrutiny; the occurrence of unforeseen disasters or catastrophes; political or economic instability in principal markets; adverse outcomes in litigation; and general, local and global economic, political, business and market conditions. Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements. Such forward-looking statements should therefore be construed in the light of such factors. Neither Element Bidco nor Exova, nor any of their respective associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this announcement will actually occur. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward looking statements. All subsequent oral or written forward looking statements attributable to Element Bidco or Exova or any of their respective members, directors, officers or employees or any persons acting on their behalf are expressly qualified in their entirety by the cautionary statement above. Element Bidco and Exova disclaim any obligation to update or revise any forward looking or other statements contained herein other than in accordance with their legal and regulatory obligations.

Profit Forecast

Paragraph 10 of this announcement contains a statement which is a profit forecast for the purposes of Rule 28 of the Code. Appendix IV contains a confirmation by the directors of Exova in the terms required by Rule 28.1(c)(i) of the Code in relation to that statement.

Other than as described above, no statement in this announcement is intended as a profit forecast or estimate for any period and no statement in this announcement should be interpreted to mean that earnings or earnings per share for Exova, for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per share for Exova.

Dealing Disclosure Requirements

Under Rule 8.3(a) of the Code, any person who is interested in 1 per cent. or more of any class of relevant securities of an offeree company or of any paper 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 paper 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 paper offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) 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 paper offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a paper 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 per cent. or more of any class of relevant securities of the offeree company or of any paper offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any paper 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 paper offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) 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 paper offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

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).

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 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. If you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure, you should contact the Panel's Market Surveillance Unit on +44 (0) 20 7638 0129.

Information Relating to Exova Shareholders

Please be aware that addresses, electronic addresses and certain information provided by Exova Shareholders, persons with information rights and other relevant persons for the receipt of communications from Exova may be provided to Element Bidco during the offer period as requested under Section 4 of Appendix 4 of the Code to comply with Rule 2.11(c).

Publication on Website

A copy of this announcement will be available free of charge (subject to any applicable restrictions with respect to persons resident in Restricted Jurisdictions) on Exova's and Element's websites (www.exova.com and www.element.com respectively) by no later than 12 noon (London time) on 20 April 2017.

The contents of the websites referred to in this announcement are not incorporated into and do not form part of this announcement.

You may request a hard copy of this announcement by contacting Jo Wetz on +44 (0)20 3540 1820. You may also request that all future documents, announcements and information to be sent to you in relation to the Acquisition should be in hard copy form. 

 

APPENDIX I
CONDITIONS AND CERTAIN FURTHER TERMS OF THE ACQUISITION

A.            Conditions to the Scheme and Acquisition

1.            The Acquisition will be conditional upon the Scheme becoming unconditional and becoming effective, subject to the provisions of the Code, by no later than 18 October 2017 or such later date (if any) as Element Bidco and Exova may, with the consent of the Panel, agree and (if required) the Court may approve.

Scheme approval

2.             The Scheme will be conditional upon:

(a)           approval of the Scheme at the Court Meeting (or at any adjournment thereof, provided that the Court Meeting may not be adjourned beyond the 22nd day after the expected date of the Court Meeting to be set out in the Scheme Document in due course or such later date (if any) as Element Bidco and Exova may agree) by a majority in number of the Scheme Shareholders present and voting, either in person or by proxy, representing three-quarters or more in value of the Scheme Shares held by those Scheme Shareholders;

(b)           all resolutions in connection with or required to approve and implement the Scheme as set out in the notice of the General Meeting (including, without limitation, the Special Resolution) being duly passed by the requisite majority at the General Meeting (or at any adjournment thereof, provided that the General Meeting may not be adjourned beyond the 22nd day after the expected date of the General Meeting to be set out in the Scheme Document in due course or such later date (if any) as Element Bidco and Exova may agree); and

(c)           the sanction of the Scheme without modification or with modification on terms acceptable to Element Bidco and Exova, provided that the Scheme Court Hearing may not be adjourned beyond the 22nd day after the expected date of the Scheme Court Hearing to be set out in the Scheme Document in due course or such later date (if any) as Element Bidco and Exova may agree) and the delivery of an office copy of the Sanction Court Order to the Registrar of Companies.

In addition, Element Bidco and Exova have agreed that the Acquisition will be conditional upon the following Conditions and, accordingly, the necessary actions to make the Scheme effective will not be taken unless such conditions (as amended, if appropriate) have been satisfied or, where relevant, waived.

Regulatory clearances

United States

3.             The initial waiting period applicable to the Acquisition under the HSR Act shall have expired or been terminated within that initial waiting period without a request for additional information and documentary material pursuant to the HSR Act (a "Second Request") having been received from the Antitrust Division of the United States Department of Justice or the United States Federal Trade Commission.

4.            Insofar as the Acquisition is required to be notified to the DDTC pursuant to section 122.4(b) of ITAR, all necessary notifications and filings in relation thereto having been made and all applicable waiting or notification periods in relation thereto having expired, lapsed or been terminated or waived as appropriate in each case in respect of the Acquisition.

Sweden

5.             The occurrence of one of the following events:

(a)           the Swedish Competition Authority (Konkurrensverket) not commencing a special investigation pursuant to Chapter 4, Article 11 of the Swedish Competition Act (Konkurrenslag 2008:579), as amended, in relation to the Acquisition;

(b)       the Swedish Competition Authority having commenced a special investigation pursuant to Chapter 4, Article 11 of the Swedish Competition Act not requesting Patent and Market Court (Patent- och marknadsdomstolen) to prohibit or suspend the closing of the Acquisition pursuant to Chapter 4, Articles 13 and 17, respectively, of the Swedish Competition Act; or

(c)           The Patent and Market Court permitting the Acquisition to proceed unconditionally or upon conditions or obligations pursuant to Chapter 4, Article 2 of the Swedish Competition Act that are reasonably satisfactory to Element Bidco.

Germany

6.             The prohibition on closing contained in s.41(1) of the German Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschraenkungen) ("GWB") being lifted as a result of the German Federal Cartel Office (Bundeskartellamt):

(a)         after receipt of a complete notification (s.40(1) GWB), approving the Acquisition by informing Element Bidco in writing that the preconditions for prohibition in s.36(1) GWB are not met and that it therefore does not intend to initiate an in‑depth investigation of the Acquisition (Hauptpruefverfahren) under s.40(2) GWB;

(b)         failing to prohibit the Acquisition within the four month period provided for in s.40(2) sentence 2 GWB following the initiation of an in‑depth investigation (Hauptpruefverfahren);

(c)        failing to prohibit the Acquisition within any extended period to which Element Bidco has agreed pursuant to s.40(2) sentence 3 no 1 GWB following the initiation of an in‑depth investigation (Hauptpruefverfahren); or

(d)   approving the Acquisition pursuant to s.40(2) GWB following an in‑depth investigation (Hauptpruefverfahren) by informing Element Bidco in writing that the preconditions for prohibition in s.36(1) GWB are not met without attaching to its decision any conditions which are not reasonably satisfactory to Element Bidco.

Canada

7.           Insofar as the Acquisition is required to be notified to Public Works and Government Services Canada pursuant to subsection 9(2) of the Canadian Controlled Goods Regulations, all necessary notifications and filings in relation thereto having been made and all applicable waiting or notification periods in relation thereto having expired, lapsed or been terminated or waived as appropriate in each case in respect of the Acquisition.

General Third Party clearances

8.           All notifications to and filings with, Third Parties which are necessary in order to allow the Acquisition to close having been made, all appropriate waiting and other time periods (including any extensions of such waiting and other time periods) under any applicable legislation or regulation of any relevant jurisdiction having expired, lapsed or been terminated (as appropriate) and all statutory or regulatory obligations in any relevant jurisdiction having been complied with in each case in connection with the Scheme or Acquisition or the acquisition or proposed acquisition of any shares or other securities in, or control or management of, Exova or any other member of the Wider Exova Group by any member of the Wider Element Group or the carrying on by any member of the Wider Exova Group of its business.

9.          No Third Party whose consent or non-intervention is required in order to allow the Acquisition to close having intervened (as defined below) and there not continuing to be outstanding any statute, regulation or order of any Third Party in each case which is or is likely to be material in the context of the Wider Element Group or Wider Exova Group or the Acquisition which would or might reasonably be expected to:

(a)        make the Scheme or the Acquisition or, in each case, its implementation or the acquisition or proposed acquisition by Element Bidco or any member of the Wider Element Group of any shares or other securities in, or control or management of, Exova or any member of the Wider Exova Group void, illegal or unenforceable in any jurisdiction, or otherwise directly or indirectly materially restrain, prevent, prohibit, restrict or delay the same or impose additional material conditions or obligations with respect to the Scheme or the Acquisition or such acquisition, or otherwise materially impede, challenge or interfere with the Scheme or Acquisition or such acquisition, or require material amendment to the terms of the Scheme or Acquisition or the acquisition or proposed acquisition of any Exova Shares or the acquisition of control or management of Exova or the Wider Exova Group by Element Bidco or any member of the Element Group;

(b)        materially limit or delay, or impose any material limitations on, the ability of any member of the Wider Element Group or any member of the Wider Exova Group to acquire or to hold or to exercise effectively, directly or indirectly, all or any rights of ownership in respect of shares or other securities in, or to exercise voting or management control over, any member of the Wider Exova Group or any member of the Wider Element Group;

(c)           require, prevent or materially delay the divestiture or materially alter the terms envisaged for any proposed divestiture by any member of the Wider Element Group of any shares or other securities in Exova;

(d)           require, prevent or materially delay the divestiture or alter the terms envisaged for any proposed divestiture by any member of the Wider Element Group or by any member of the Wider Exova Group of all or any portion of their respective businesses, assets or properties or materially limit the ability of any of them to conduct any of their respective businesses or to own or control any of their respective assets or properties or any part thereof;

(e)           except pursuant to sections 974 to 991 of the 2006 Act, require any member of the Wider Element Group or of the Wider Exova Group to acquire, or to offer to acquire, any shares or other securities (or the equivalent) in any member, or repay any indebtedness of any member of either group owned by or owed to any third party;

(f)         materially limit the ability of any member of the Wider Element Group or of the Wider Exova Group to conduct or integrate or co-ordinate its business, or any part of it, with the businesses or any part of the businesses of any other member of the Wider Element Group or of the Wider Exova Group;

(g)           result in any member of the Wider Exova Group or the Wider Element Group ceasing to be able to carry on business under any name under which it presently does so; or

(h)           otherwise materially adversely affect any or all of the business, assets, profits, financial or trading position or prospects of any member of the Wider Exova Group or of the Wider Element Group,

and all applicable waiting and other time periods during which any Third Party whose consent is required in order to allow the Acquisition to close could intervene under the laws of any relevant jurisdiction having expired, lapsed or been terminated.

10.       All material Authorisations which are necessary in order to allow the Acquisition to close in any relevant jurisdiction for or in respect of the Scheme or Acquisition or the acquisition or proposed acquisition of any shares or other securities in, or control or management of, Exova or any other member of the Wider Exova Group by any member of the Wider Element Group or the carrying on by any member of the Wider Exova Group of its business having been obtained, in terms and in a form reasonably satisfactory to Element Bidco, from all appropriate Third Parties or from any persons or bodies with whom any member of the Wider Exova Group has entered into contractual arrangements in each case where the absence of such Authorisation necessary to allow the Acquisition to close would have a material adverse effect on the Exova Group taken as a whole and all such Authorisations remaining in full force and effect and there being no notice or intimation of any intention to revoke, suspend, restrict, modify or not to renew any of the same.

Certain matters arising as a result of any arrangement, agreement etc.

11.        Except as Fairly Disclosed, there being no provision of any arrangement, agreement, licence, permit, franchise or other instrument to which any member of the Wider Exova Group is a party, or by or to which any such member or any of its assets is or are or may be bound, entitled or subject or any circumstance, which, in each case as a consequence of the Scheme or Acquisition or the acquisition or proposed acquisition of any shares or other securities in, or control of, Exova or any other member of the Wider Exova Group by any member of the Wider Element Group or otherwise, could or might reasonably be expected to result in, (in any case to an extent which is or would be material in the context of the Wider Exova Group taken as a whole):

(a)       any monies borrowed by or any other indebtedness or liabilities (actual or contingent) of, or any grant available to, any member of the Wider Exova Group being or becoming repayable or capable of being declared repayable immediately or prior to its stated maturity date or repayment date or the ability of any member of the Wider Exova Group to borrow monies or incur any indebtedness being withdrawn or inhibited or becoming capable of being withdrawn or inhibited;

(b)           the creation or enforcement of any mortgage, charge or other security interest over the whole or any part of the business, property, assets or interests of any member of the Wider Exova Group or any such mortgage, charge or other security interest (wherever created, arising or having arisen) becoming enforceable;

(c)      any such arrangement, agreement, licence, permit, franchise or instrument, or the rights, liabilities, obligations, interests or business of any member of the Wider Exova Group thereunder, being, or becoming capable of being, terminated or adversely modified or affected or any adverse action being taken or any obligation or liability arising thereunder;

(d)           any asset or interest of any member of the Wider Exova Group being or falling to be disposed of or charged or ceasing to be available to any member of the Wider Exova Group or any right arising under which any such asset or interest could be required to be disposed of or charged or could cease to be available to any member of the Wider Exova Group otherwise than in the ordinary course of business;

(e)           any member of the Wider Exova Group ceasing to be able to carry on business under any name under which it presently does so;

(f)            the creation of liabilities (actual or contingent) by any member of the Wider Exova Group other than in the ordinary course of business;

(g)           the rights, liabilities, obligations or interests of any member of the Wider Exova Group under any such arrangement, agreement, licence, permit, franchise or other instrument or the interests or business of any such member in or with any other person, firm, company or body (or any arrangement or arrangements relating to any such interests or business) being terminated or adversely modified or affected; or

(h)           the financial or trading position or the value of any member of the Wider Exova Group being prejudiced or adversely affected,

and no event having occurred which, under any provision of any such arrangement, agreement, licence, permit or other instrument, would be reasonably likely to result in any of the events or circumstances which are referred to in paragraphs (a) to (h) of this Condition 11 in any case to an extent which is or would be material in the context of the Exova Group taken as a whole.

12.           Since 31 December 2016 and except as Fairly Disclosed, no member of the Wider Exova Group having:

(a)           issued or agreed to issue, or authorised the issue of, additional shares of any class, or securities convertible into or exchangeable for, or rights, warrants or options to subscribe for or acquire, any such shares or convertible securities or transferred or sold any shares out of treasury, other than as between Exova and wholly-owned subsidiaries of Exova other than any shares issued or shares transferred from treasury upon the exercise of any options granted, or vesting of any awards, under any of the Exova Share Schemes;

(b)        purchased or redeemed or repaid any of its own shares or other securities or reduced or made any other change to any part of its share capital to an extent which (other than in the case of Exova) is material in the context of the Exova Group taken as a whole;

(c)      recommended, declared, paid or made any dividend or other distribution whether payable in cash or otherwise or made any bonus issue (other than to Exova or a wholly-owned subsidiary of Exova);

(d)         except as between Exova and its wholly-owned subsidiaries or between such wholly-owned subsidiaries, made or authorised any change in its loan capital;

(e)         (other than any acquisition or disposal in the ordinary course of business or a transaction between Exova and a wholly-owned subsidiary of Exova or between such wholly-owned subsidiaries), merged with, demerged or acquired any body corporate, partnership or business or acquired or disposed of or transferred, mortgaged, charged or created any security interest over any assets or any right, title or interest in any assets (including shares in any undertaking and trade investments) or authorised the same (in each case to an extent which is material in the context of the Exova Group taken as a whole);

(f)          issued or authorised the issue of, or made any change in or to, any debentures or (except in the ordinary course of business or except as between Exova and its wholly-owned subsidiaries or between such wholly-owned subsidiaries) incurred or increased any indebtedness or liability (actual or contingent) which in any case is material in the context of the Exova Group taken as a whole;

(g)           entered into, varied, or authorised any agreement, transaction, arrangement or commitment (whether in respect of capital expenditure or otherwise) which:

(i)            is of a long term, onerous or unusual nature or magnitude or which is reasonably likely to involve an obligation of such nature or magnitude; or

(ii)           is reasonably likely to restrict the business of any member of the Wider Exova Group; or

(iii)          is other than in the ordinary course of business,

and which in any case is material in the context of the Exova Group taken as a whole;

(h)       entered into, implemented, effected or authorised any merger, demerger, reconstruction, amalgamation, scheme, commitment or other transaction or arrangement in respect of itself or another member of the Wider Exova Group otherwise than in the ordinary course of business which in any case is material in the context of the Exova Group taken as a whole;

(i)          entered into or varied the terms of, any contract, agreement or arrangement with any of the directors or senior executives of any member of the Wider Exova Group which is material in the context of the Wider Exova Group taken as a whole, save for salary increases, bonuses or variation of terms in the ordinary course;

(j)       taken any corporate action or had any legal proceedings instituted or threatened against it or petition presented or order made for its winding-up (voluntarily or otherwise), striking off, dissolution or reorganisation or for the appointment of a receiver, administrator (including the filing of an administration application, notice of intention to appoint an administrator or notice of appointment of an administrator), administrative receiver, trustee or similar officer of all or any material part of its assets and revenues or any analogous proceedings in any jurisdiction or appointed any analogous person in any jurisdiction which in any case is material in the context of the Exova Group taken as a whole;

(k)         been unable, or admitted in writing that it is unable, to pay its debts or having stopped or suspended (or threatened to stop or suspend) payment of its debts generally or proposed or entered into any composition or voluntary arrangement with its creditors (or any class of them) or the filing at court of documentation in order to obtain a moratorium prior to a voluntary arrangement or, by reason of actual or anticipated financial difficulties, commenced negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness, or ceased or threatened to cease carrying on all or a substantial part of its business in any case with a material adverse effect on the Exova Group taken as a whole;

(l)            waived or compromised any claim, otherwise than in the ordinary course of business, which is material in the context of the Exova Group taken as a whole;

(m)        made any alteration to its memorandum or articles of association which is material in the context of the Acquisition;

(n)           made or agreed or consented to:

(i)            any material change:

(A)          to the terms of the trust deeds constituting the pension scheme(s) established for its directors, employees or their dependants; or

(B)           the contributions payable to any such scheme(s) or to the benefits which accrue or to the pensions which are payable thereunder; or

(C)           the basis on which qualification for, or accrual or entitlement to such benefits or pensions are calculated or determined; or

(D)          the basis upon which the liabilities (including pensions) or such pension schemes are funded, valued or made,

in each case, which has an effect that is material in the context of the Exova Group taken as a whole, or

(ii)           any change to the trustees including the appointment of a trust corporation;

(o)           proposed, agreed to provide or modified the terms of any share option scheme, incentive scheme or other benefit relating to the employment or termination of employment of any person employed by the Wider Exova Group in a manner which is material in the context of the Exova Group taken as a whole; or

(p)           entered into any agreement, commitment or arrangement or passed any resolution or made any offer (which remains open for acceptance) or proposed or announced any intention with respect to any of the transactions, matters or events referred to in this Condition 12.

No adverse change, litigation or regulatory enquiry

13.           Since 31 December 2016 and except as Fairly Disclosed:

(a)           there having been no adverse change or deterioration in the business, assets, financial or trading positions or profit or prospects of any member of the Wider Exova Group which in any case is material in the context of the Exova Group taken as a whole;

(b)         no contingent or other liability of any member of the Wider Exova Group having arisen or become apparent or increased which in any case is material in the context of the Exova Group taken as a whole;

(c)           no litigation, arbitration proceedings, prosecution or other legal proceedings to which any member of the Wider Exova Group is or may become a party (whether as plaintiff, defendant or otherwise) having been threatened, announced, implemented or instituted by or against or remaining outstanding against or in respect of any member of the Wider Exova Group which is material in the context of the Exova Group taken as a whole; and

(d)           (other than as a result of the Acquisition) no enquiry or investigation by, or complaint or reference to, any Third Party having been threatened, announced, implemented, instituted by or against or remaining outstanding against or in respect of any member of the Wider Exova Group which in any case is material in the context of the Exova Group taken as a whole;

(e)           other than with the consent of Element Bidco, no action having been taken or proposed by any member of the Wider Exova Group, or having been approved by Exova Shareholders or consented to by the Panel, which falls or would fall within or under Rule 21.1 of the Code or which otherwise is or would be materially inconsistent with the implementation by Element Bidco of the Acquisition on the basis contemplated as at the date of this announcement; and

(f)            no member of the Wider Exova Group having conducted its business in breach of any applicable laws and regulations which in any case is material in the context of the Exova Group taken as a whole.

No discovery of certain matters

14.           Element Bidco not having discovered (other than as a result of it having been Fairly Disclosed):

(a)          that any financial or business or other information concerning the Wider Exova Group disclosed at any time by or on behalf of any member of the Wider Exova Group, whether publicly, to any member of the Wider Element Group or to any of their advisers or otherwise, is misleading or contains any misrepresentation of fact or omits to state a fact necessary to make any information contained therein not misleading and which was not subsequently corrected before the date of this announcement by disclosure either publicly or otherwise to Element Bidco or its professional advisers to an extent which in any case is material in the context of the Exova Group taken as a whole;

(b)           that any member of the Wider Exova Group is subject to any liability (actual or contingent) which is not disclosed in Exova's annual report and accounts for the financial year ended 31 December 2016 which has not been Fairly Disclosed and which in any case is material in the context of the Exova Group taken as a whole; or

(c)           any information which has not been Fairly Disclosed and which affects the import of any information disclosed at any time by or on behalf of any member of the Wider Exova Group to an extent which is material in the context of the Exova Group taken as a whole;

(d)         that any past or present member of the Wider Exova Group has not complied with any applicable legislation or regulations of any jurisdiction with regard to the use, treatment, handling, storage, transport, release, disposal, discharge, spillage, leak or emission of any waste or hazardous substance or any substance likely to impair the environment or harm human health, or otherwise relating to environmental matters or the health and safety of any person, or that there has otherwise been any such use, treatment, handling, storage, transport, release, disposal, discharge, spillage, leak or emission (whether or not this constituted a non-compliance by any person with any legislation or regulations and wherever the same may have taken place) which, in any case, would be likely to give rise to any liability (whether actual or contingent) or cost on the part of any member of the Wider Exova Group which in any case is material in the context of the Exova Group taken as a whole;

(e)              that there is, or is likely to be, any liability, whether actual or contingent, to make good, repair, reinstate or clean up any property now or previously owned, occupied or made use of by any past or present member of the Wider Exova Group or any other property or any controlled waters under any environmental legislation, regulation, notice, circular, order or other lawful requirement of any relevant authority or third party or otherwise which in any case is material in the context of the Exova Group taken as a whole; or

(f)               that circumstances exist whereby a person or class of persons would be likely to have a claim in respect of any product or process of manufacture or materials used therein now or previously manufactured, sold or carried out by any past or present member of the Wider Exova Group which is or would be material in the context of the Exova Group taken as a whole.

Anti-corruption, sanctions and criminal property

15.           Element Bidco not having discovered (other than as a result of it having been Fairly Disclosed) that:

(a)           (i) any past or present member, director, officer or employee of the Wider Exova Group is or has at any time engaged in any activity, practice or conduct which would constitute an offence under the Bribery Act 2010, the US Foreign Corrupt Practices Act of 1977 or any other anticorruption legislation applicable to the Wider Exova Group or (ii) any person that performs or has performed services for or on behalf of the Wider Exova Group is or has at any time engaged in any activity, practice or conduct in connection with the performance of such services which would constitute an offence under the Bribery Act 2010, the US Foreign Corrupt Practices Act of 1977 or any other applicable anti-corruption legislation;

(b)         any asset of any member of the Wider Exova Group constitutes criminal property as defined by section 340(3) of the Proceeds of Crime Act 2002 (but disregarding paragraph (b) of that definition);

(c)         any past or present member, director, officer or employee of the Exova Group, or any other person for whom any such person may be liable or responsible, has engaged in any business with, made any investments in, made any funds or assets available to or received any funds or assets from: (i) any government, entity or individual in respect of which US or European Union persons, or persons operating in those territories, are prohibited from engaging in activities or doing business, or from receiving or making available funds or economic resources, by US or European Union laws or regulations, including the economic sanctions administered by the United States Office of Foreign Assets Control, or HM Treasury & Customs; or (ii) any government, entity or individual targeted by any of the economic sanctions of the United Nations, the United States, the European Union or any of its member states;

(d)           a member of the Exova Group has engaged in any transaction which would cause Element Bidco to be in breach of any law or regulation upon its acquisition of Exova, including the economic sanctions of the United States Office of Foreign Assets Control, or HM Treasury & Customs, or any government, entity or individual targeted by any of the economic sanctions of the United Nations, the United States, the European Union or any of its member states; or

(e)           any member of the Wider Exova Group is ineligible to be awarded any contract or business under section 23 of the Public Contracts Regulations 2005 or any analogous legislation in any material jurisdiction in which the Wider Exova Group carries on business.

For the purpose of these Conditions:

(i)         "Third Party" means any central bank, government, government department or governmental, quasi-governmental, supranational, statutory, regulatory, environmental or investigative body, authority (including any national or supranational anti-trust or merger control authority), court, trade agency, association, institution or professional or environmental body or any other person or body whatsoever in any relevant jurisdiction, including, for the avoidance of doubt, the Panel;

(ii)      a Third Party shall be regarded as having "intervened" if it has decided to take, institute, implement or threaten any action, proceeding, suit, investigation, enquiry or reference or made, proposed or enacted any statute, regulation, decision or order or taken any measures or other steps or required any action to be taken or information to be provided or otherwise having done anything and "intervene" shall be construed accordingly; and

(iii)        "Authorisations" means authorisations, orders, grants, recognitions, determinations, certificates, confirmations, consents, licences, clearances, provisions and approvals, in each case, of a Third Party.

B.            Waiver and invocation of the Conditions

The Scheme will not become effective unless the Conditions have been fulfilled or (if capable of waiver) waived or, where appropriate, have been determined by Element Bidco to be or remain satisfied by no later than 18 October 2017 or such later date (if any) as Element Bidco and Exova may, with the consent of the Panel, agree and (if required) the Court may approve.

Subject to the requirements of the Panel, Element Bidco reserves the right in its sole discretion to waive, in whole or in part, all or any of Conditions in Part A above, except for Condition 2 (Scheme approval), which cannot be waived.

Element Bidco shall be under no obligation to waive (if capable of waiver), to determine to be or remain satisfied or to treat as fulfilled any of Conditions in Part A above by a date earlier than the latest date specified above for the fulfilment of that condition, notwithstanding that the other Conditions may at such earlier date have been waived or fulfilled and that there are, at such earlier date, no circumstances indicating that any Condition may not be capable of fulfilment.

Each of the Conditions shall be regarded as a separate Condition and shall not be limited by reference to any other Condition.

C.            Implementation by way of Takeover Offer

Element Bidco reserves the right to elect to implement the Acquisition by way of a Takeover Offer, subject to the Panel's consent and subject to the terms of the Co-operation Agreement. In such event, such Takeover Offer will be implemented on the same terms and conditions, so far as applicable, as those which would apply to the Scheme subject to appropriate amendments, including (without limitation) an acceptance condition set at not more than 75 per cent. of the issued Exova Shares, or, where any of the circumstances set out in Note 2 of Section 8 of Appendix 7 of the Code applies, 90 per cent. of the Exova Shares to which the Takeover Offer relates (or such other percentage, being more than 50 per cent. of the Exova Shares to which the Takeover Offer relates) as Element Bidco may decide (subject to the Panel's consent).

D.            Certain further terms of the Acquisition

Under Rule 13.5(a) of the Code, Element Bidco may not invoke a Condition to the Acquisition so as to cause the Acquisition not to proceed, to lapse or to be withdrawn unless the circumstances which give rise to the right to invoke the Condition are of material significance to Element Bidco in the context of the Acquisition. Conditions 2 and, if applicable, any acceptance condition if the Acquisition is implemented by means of a Takeover Offer, are not subject to this provision of the Code.

If the Panel requires Element Bidco to make an offer or offers for any Exova Shares under the provisions of Rule 9 of the Code, Element Bidco may make such alterations to the Conditions as are necessary to comply with the provisions of that Rule.

The Acquisition will lapse if the acquisition of Exova by Element Bidco is referred to the chair of the CMA for the constitution of a group under Schedule 4 to the Enterprise and Regulatory Reform Act 2013, or the European Commission either initiates proceedings under Article 6(1)(c) of the Council Regulation or makes a referral to a competent authority of the United Kingdom under Article 9(1) of the Council Regulation and there is then a reference to the chair of the CMA for the constitution of a group under Schedule 4 to the Enterprise and Regulatory Reform Act 2013, before the date of the Court Meeting.

Exova Shares will be acquired by Element Bidco fully paid and free from all liens, equitable interests, charges, encumbrances, rights of pre-emption and other third party rights of any nature whatsoever and together with all rights attaching to them as at the date of this announcement or subsequently attaching or accruing to them, including the right to receive and retain, in full, all dividends and other distributions (if any) declared, made, paid or payable, or any other return of capital made, on or after the date of this announcement, other than the final dividend of 2.35 pence (net) per Exova Share due to be paid on 9 June 2017 to Exova Shareholders on Exova's register of members on 26 May 2017 and conditional on approval by Exova Shareholders at a general meeting of Exova.

If, on or after the date of this announcement, any dividend and/or other distribution and/or other return of capital (other than the final dividend of 2.35 pence per Exova Share) is declared, made or paid or becomes payable in respect of the Exova Shares, Element Bidco reserves the right (without prejudice to any right of Element Bidco to invoke Condition 12(c) in Part A of this Appendix I), to reduce the consideration payable under the terms of the Acquisition for the Exova Shares by an amount up to the amount of such dividend and/or distribution and/or return of capital, in which case any reference in this announcement or in the Scheme Document to the consideration payable under the terms of the Acquisition will be deemed to be a reference to the consideration as so reduced. To the extent that any such dividend and/or distribution and/or other return of capital is declared, made or paid or is payable and it is: (i) transferred pursuant to the Acquisition on a basis which entitles Element Bidco to receive the dividend or distribution and to retain it; or (ii) cancelled, the consideration payable under the terms of the Acquisition will not be subject to change in accordance with this paragraph. Any exercise by Element Bidco of its rights referred to in this paragraph shall be the subject of an announcement and, for the avoidance of doubt, shall not be regarded as constituting any revision or variation of the Acquisition.

The Acquisition will be subject, inter alia, to the Conditions and certain further terms which are set out in this Appendix I and those terms which will be set out in the Scheme Document and such further terms as may be required to comply with the Listing Rules and the provisions of the Code.

The availability of the Acquisition to persons not resident in the United Kingdom may be affected by the laws of the relevant jurisdiction. Any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about and observe any applicable requirements. Further information in relation to Overseas Shareholders will be contained in the Scheme Document.

This announcement and any rights or liabilities arising hereunder, the Acquisition, the Scheme and any proxies will be governed by English law and be subject to the jurisdiction of the courts of England and Wales. The Scheme will be subject to the applicable requirements of the Code, the Panel, the London Stock Exchange and the FCA.

 

 

 APPENDIX II
SOURCES OF INFORMATION AND BASES OF CALCULATION

In this announcement, unless otherwise stated, or the context otherwise requires, the following bases and sources have been used:

1.   Financial information relating to Exova is extracted (without adjustment) from the audited consolidated financial statements for the Exova Group for the financial year ended 31 December 2016.

2.   The value of the Acquisition is calculated on the basis of the fully diluted number of Exova Shares (at the Cash Value) in issue referred to in paragraph 4.

3.   As at the Close of Business on 18 April 2017, being the last practicable date before the date of this announcement, Exova had in issue 250,490,374 Exova Shares. The International Securities Identification Number for Exova Shares is GB00BKY7HG11.

4.   The fully diluted share capital of Exova (being 256,009,630 Exova Shares) is calculated on the basis of 250,490,374 Exova Shares in issue on 18 April 2017, and in addition up to 5,519,256 further Exova Shares based on the maximum position under Scheme rules which may be issued on or after the Announcement Date following the exercise of options, or settled via alternative means, which have a price of 240.00 pence or less, or via the vesting of awards under the Exova Share Schemes on the basis explained in this announcement, although Exova has confirmed that no more than 4,357,982 Exova Shares will need to be issued under the relevant Exova Share Schemes.

5.   The Cash Value values the entire issued and to be issued ordinary share capital of Exova at approximately £620.3 million on the basis of a fully diluted share capital of 256,009,630 Exova Shares, assuming that all rights in respect of in-the-money options or vesting of awards under the Exova Share Schemes are exercised on the basis explained in paragraph 4 above. This assumes that the shares under option or award under the Exova Share Schemes will not be eligible to receive the final dividend of 2.35 pence per Exova Share but will be taken into account for purposes of determining dividend equivalent rights under the Exova Group plc Long Term Incentive Plan.

6.   Unless otherwise stated, all prices and closing prices for Exova Shares are closing middle market quotations derived from the Daily Official List.

7.   The reference to the implied enterprise value multiple is based on the value of Exova's fully diluted share capital (as calculated in note 4 above) in issue as at the Close of Business on 18 April 2017 assuming 242.35 pence per Exova Share and 240.00 pence on the further Exova Shares which may be issued on or after the Announcement Date plus Exova's adjusted net debt at 31 December 2016 which includes £149.4 million of net debt, £20.7 million of retirement benefit obligation, £8.7 million of non-controlling interests, £6.9 million of contingent consideration, £1.7 million of deferred consideration, less £3.6 million in cash proceeds from SOP awards (based on the maximum position under Scheme rules), and less £0.2 million investment in joint ventures all divided by Exova's Adjusted EBITA of £50.3 million and Exova's Adjusted EBITDA of £64.5 million respectively for the twelve month period to 31 December 2016.

APPENDIX III
IRREVOCABLE UNDERTAKINGS

 

The following holders or controllers of Exova Shares have given irrevocable undertakings to vote in favour of the Scheme at the Court Meeting and in favour of the General Meeting Resolutions:

 

EXOVA DIRECTORS

Name

Number of Exova Shares

% of Exova Shares in issue

Number of Exova Shares under Exova Share Schemes

Allister Langlands

190,909

0.07621

N/A

Ian El-Mokadem

2,050,000

0.81839

929,971

Philip Marshall

115,493

0.04611

519,508

Bill Spencer

113,636

0.04537

N/A

Helmut Eschwey

16,104

0.00643

N/A

Vanda Murray

4,545

0.00181

N/A

Andrew Simon

22,727

0.00907

N/A

TOTAL

2,513,414

1.00340

1,449,479

 

Element Bidco has received irrevocable undertakings from the Exova Directors in respect of their own beneficial holdings of Exova Shares, representing approximately 1.00340 per cent. of the existing issued share capital of Exova:

(a)        to cast (or procure the casting of) all voting rights attaching to such Exova Shares in favour of the Scheme at the Court Meeting and in favour of each of the General Meeting Resolutions; and

(b)       if the Acquisition is structured as a Takeover Offer, to accept or procure the acceptance of such Takeover Offer in respect of all such Exova Shares, provided such Takeover Offer is made on terms at least as favourable as the terms of the Scheme.

The irrevocable undertakings given by the Exova Directors will cease to be binding if:

(a)        Element Bidco announces, with the consent of the Panel, that it does not intend to make or proceed with the Acquisition and no new, revised or replacement Scheme or Takeover Offer is announced by Element Bidco in accordance with Rule 2.7 of the Code at the same time;

(b)        the Scheme or Takeover Offer lapses or is withdrawn (which, for the avoidance of doubt, in either case shall not include any suspension of the timetable applicable to the Scheme) and no new, revised or replacement scheme of arrangement or takeover offer by Element Bidco has been announced, in accordance with Rule 2.7 of the Code, in its place or is announced, in accordance with Rule 2.7 of the Code, within 10 Business Days of such lapsing or withdrawal; or

(c)        any competing offer for the entire issued and to be issued share capital of Exova (other than that already held by Element Bidco or a subsidiary of Element Bidco or any person acting in concert with Element Bidco) is declared wholly unconditional or, if proceeding by way of scheme of arrangement, becomes effective.

 

OTHER INVESTORS

Name

Number of Exova Shares

% of Exova Shares in issue

Number of Exova Shares under Exova Share Schemes

CD&R

135,045,958

53.91

N/A

Anne Thorburn

1,378,639

0.55

66,588

TOTAL

136,424,597

54.46

66,588

 

Element Bidco has received an irrevocable undertaking from CD&R in respect of 135,045,958 Exova Shares, in respect of which it is able to exercise discretionary and voting control, representing approximately 53.91 per cent. of the existing issued ordinary share capital of Exova:

 (a)       to cast (or procure the casting of) all voting rights attaching to such Exova Shares in favour of the Scheme at the Court Meeting and in favour of each of the General Meeting Resolutions; and

(b)       if the Acquisition is structured as a Takeover Offer, to accept or procure the acceptance of such Takeover Offer in respect of all such Exova Shares, provided such Takeover Offer is made on terms at least as favourable as the terms of the Scheme.

The irrevocable undertaking given by CD&R will cease to be binding if:

(a)        Element Bidco announces that it does not intend to make or proceed with the Acquisition;

(b)      the Scheme or Takeover Offer lapses of is withdrawn or Element Bidco announces that it does not make or proceed with the Acquisition; or

(c)       the Scheme or Takeover Offer lapses or is withdrawn (which, for the avoidance of doubt, shall not include any suspension of the timetable applicable to the Scheme) and no new, revised or replacement scheme of arrangement or takeover offer has been announced by Element Bidco, in accordance with Rule 2.7 of the Code, in its place or is announced, by Element Bidco in accordance with Rule 2.7 of the Code, within 10 Business Days of such lapsing or withdrawal.

Element Bidco has received an irrevocable undertaking from Anne Thorburn in respect of her beneficial holdings of Exova Shares, representing approximately 0.55 per cent. of the existing issued share capital of Exova. The irrevocable undertaking received from Anne Thorburn has been provided on substantially similar terms to those given by the Exova Directors, as described above.

 

APPENDIX IV

Confirmation by the Exova Directors

On 28 February 2017, Exova announced its results for the year ended 31 December 2016. As part of that announcement the following statement (the "Statement") regarding the outlook for the Exova was made:

 

"The Board expects modest organic revenue growth at constant currency in 2017. This will be driven by Exova's diversified exposure and good growth in most sectors, moderated by continuing pressure in oil & gas, and a lower point in the project cycle of our engines testing business. Organic growth is expected to be weighted towards the second-half, partly as a result of more favourable like-for-like comparisons. Our acquisitions programme should continue to contribute to overall revenue growth. We expect that recent actions we have taken to reduce cost will offset general pressure on group margins in the current financial year."

 

The Statement is again confirmed in paragraph 10 of this announcement.

 

The Statement was originally published before commencement of the offer period triggered by the announcement by Exova on 26 March 2017 of discussions with possible offerors which could lead to an offer being made for the entire issued and to be issued share capital of Exova. Accordingly, the requirements of Rule 28.1(c) of the City Code on Takeovers and Mergers apply in relation to the Statement.

 

The Exova Directors confirm that the Statement remains valid and confirm that the Statement has been properly compiled on the basis of the assumptions stated below and that the basis of accounting used is consistent with Exova's accounting policies.

 

Assumptions

 

The Statements were prepared on the basis of the following assumptions, any of which could turn out to be incorrect and therefore affect the validity of the Statements:

 

Factors within the influence and control of the Exova Directors

 

·     There is no material change in the operational strategy of Exova from the date of this announcement.

·     There will be no acquisitions or disposals beyond Exova's existing acquisition strategy which will have a material impact on Exova's results.

·     There are no material strategic investments over and above those currently planned.

 

Factors outside the influence or control of the Exova Directors

 

·     There will be no material macroeconomic change in the principal markets and regions in which Exova operates.

·     There will be no material adverse events which will have a significant impact on Exova's financial results.

·    There will be no changes in interest rates, bases of taxation, regulatory environment or legislation that have a material impact on Exova, including in relation to operations or accounting policies.

·     There will be no material changes in customer demand or the competitive environment in which Exova operates.

·     There will be no material changes in the competitive environment for acquisitions within the TIC sector that will impact Exova's ability to continue with it existing acquisition strategy.

·     There will be no business disruptions that materially affect Exova or its key customers.

·     There will be no significant and sustained weakening or strengthening of the pound sterling against the currencies of the major territories in which the Exova operates.

 

 

APPENDIX V
DEFINITIONS

The following definitions apply throughout this announcement unless the context requires otherwise.

"2006 Act"

the UK Companies Act 2006, as amended;

"Acquisition"

the direct or indirect acquisition by Element Bidco of the entire issued and to be issued ordinary share capital of Exova to be effected by means of the Scheme (or, subject to the consent of the Panel, a Takeover Offer) including, where the context so requires, any subsequent variation, revision, extension or renewal thereof;

"Adjusted EBITA"

operating profit from continuing operations before separately disclosed items;

"Adjusted EBITDA"

Adjusted EBITA before depreciation;

"Announcement Date"

19 April 2017;

"Annual Report"

the annual report and accounts of Exova for the year ended 31 December 2016;

"Authorisations"

has the meaning set out in Part A of Appendix I;

"BEV"

means the limited partnerships comprising the Bridgepoint Europe V Fund;

"BofA Merrill Lynch"

Merrill Lynch International;

"Bridgepoint"

means Bridgepoint Advisers Limited, its subsidiaries and subsidiary undertakings;

"Business Day"

a day (other than Saturdays, Sundays and public holidays) on which banks are open for business in London, United Kingdom;

"Canadian Controlled Goods Regulations"

means the Controlled Goods Regulations, SOR/2001-32, as amended from time to time, enacted pursuant to section 43 of the Defence Production Act (Canada);

"Cash Value"

has the meaning set out on page 1 of this announcement;

"CD&R"

TABASCO B.V., a company owned by Clayton, Dubilier & Rice Fund VII, LP;

"Close of Business"

6.00 p.m. of a relevant Business Day;

"Closing Price"

the middle market price of a Exova Share at the close of business on the day to which such price relates, as derived from the Daily Official List of the London Stock Exchange for that day or from Bloomberg in the case of average Closing Prices for certain periods to which such average relates to;

"CMA"

the Competition and Markets Authority of the United Kingdom;

"Code"

the City Code on Takeovers and Mergers;

"Combined Group"

the enlarged group following the Acquisition, comprising the Exova Group and the Element Group;

"Conditions"

the Conditions to the Acquisition, as set out in Appendix I of this announcement and to be set out in the Scheme Document;

"Confidentiality Agreement"

has the meaning set out in paragraph 14 (Offer-related Arrangements) of this announcement;

"Cooperation Agreement"

has the meaning set out in paragraph 14 (Offer-related Arrangements) of this announcement;

"Council Regulation"

Council Regulation (EC) 139/2004, as amended;

"Court"

the High Court of Justice in England and Wales;

"Court Meeting"

the meeting of Scheme Shareholders (and any adjournment thereof) to be convened pursuant to an order of the Court under Part 26 of the 2006 Act, notice of which will be set out in the Scheme Document, for the purposes of considering and, if thought fit, approving the Scheme (with or without amendment);

"Credit Agreements"

has the meaning set out in paragraph 13 (Financing of the Acquisition) of this announcement;

"CREST"

the relevant system (as defined in the Regulations) in respect of which Euroclear is the Operator (as defined in the Regulations);

"Daily Official List"

the daily official list of the London Stock Exchange;

"Dealing Day"

a day on which dealing in domestic securities may take place on, and with the authority of, the London Stock Exchange;

"Dealing Disclosure"

an announcement pursuant to Rule 8 of the Code containing details of dealings in interests in relevant securities of a party to an offer;

"DDTC"

means the United States Department of State, Directorate of Defence Trade Controls;

"Effective Date"

the date on which the Scheme becomes effective in accordance with its terms;

"Element"

Element Materials Technology Group Limited, a company incorporated in England and Wales;

"Element Bidco"

Greenrock Bidco Limited, a company incorporated in England and Wales;

"Element Group"

Element, its subsidiaries and subsidiary undertakings;

"Element Midco"

EMT Holdings Limited, a company incorporated in England and Wales;

"Excluded Shares"

any Exova Shares which are registered in the name of or beneficially owned by any member of the Element Group or its nominee(s), any Exova Shares held in treasury and any other Exova Shares which Element Bidco and Exova agree will not be subject to the Scheme;

"Exova"

Exova Group plc, a company incorporated in England and Wales;

"Exova Directors"

the directors of Exova as at the date of this announcement;

"Exova Group" or "Group"

Exova, its subsidiaries and subsidiary undertakings;

"Exova Shareholders"

holders of Exova Shares;

"Exova Shares"

ordinary shares of one penny each in the capital of Exova;

"Exova Share Schemes"

the Exova Group plc Long Term Incentive Plan and the Exova Group plc Share Option Plan, each as amended from time to time;

"Fairly Disclosed"

information which has been fairly disclosed by or on behalf of Exova: (i) in the annual report and accounts of the Exova Group for the year ended 31 December 2016; (ii) in this announcement; (iii) in any other public announcement by, or on behalf of, Exova in accordance with the Listing Rules, Disclosure Guidance and Transparency Rules of the FCA (as applicable) prior to the date of this announcement; (iv) in writing prior to the date of this announcement by or on behalf of Exova to Element Bidco (or its respective officers, employees, agents or advisers in their capacity as such); or (v) in the virtual data room operated by or on behalf of Exova in respect of the Acquisition prior to the date of this announcement;

"FCA"

the United Kingdom Financial Conduct Authority;

"Forms of Proxy"

the forms of proxy for use at each of the Court Meeting and the General Meeting, which shall accompany the Scheme Document;

"FSMA"

the UK Financial Services and Markets Act 2000, as amended;

"General Meeting"

the general meeting of Exova Shareholders (including any adjournment thereof) to be convened in connection with the Scheme, notice of which will be set out in the Scheme Document;

"General Meeting Resolutions"

the resolutions to be proposed at the General Meeting;

"Goldman Sachs"

Goldman Sachs International;

"GWB"

has the meaning set out in paragraph 6 of Part A of Appendix I;

"HSBC"

HSBC Bank plc;

"HSR Act"

the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended and the rules and regulations promulgated thereunder;

"Investec"

Investec Bank plc;

"ITAR"

the US International Traffic in Arms Regulations (22 Code of Federal Regulations 120-130);

"London Stock Exchange"

London Stock Exchange plc, a company incorporated in England and Wales;

"Longstop Date"

18 October 2017, or such later date as may be agreed in writing by Element Bidco and Exova (with the Panel's consent and as the Court may approve, if such approval(s) are required).

"Offer Document"

the offer document published by or on behalf of Element Bidco in connection with a Takeover Offer, including any revised offer document;

"Offer Period"

the period commencing on 27 March 2017 and ending on the earlier of the date on which the Scheme becomes effective and/or the date on which the Scheme lapses or is withdrawn (or such other date as the Panel may decide);

"Opening Position Disclosure"

an announcement containing details of interests or short position in, or rights to subscribe for, any relevant securities of a party to the offer if the person concerned has such a position;

"Overseas Shareholders"

Exova Shareholders with registered addresses outside the United Kingdom or who are not resident in the United Kingdom;

"Panel"

the Panel on Takeovers and Mergers;

"Registrar of Companies"

the Registrar of Companies in England and Wales;

"Regulations"

the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755), as amended from time to time;

"Regulatory Conditions"

the Conditions set out in paragraphs 3 to 10 of Part A of Appendix I (inclusive);

"Regulatory Information Service"

a service approved by the London Stock Exchange for the distribution to the public of announcements and included within the list maintained on the London Stock Exchange's website;

"Restricted Jurisdiction"

any jurisdiction where extension or acceptance of the proposed Acquisition would violate the law of that jurisdiction;

"Rule 12 Event"

for the constitution of a group under Schedule 4 to the Enterprise and Reform Act 2013 and the Acquisition lapsing as a result under Rule 12.1(b) of the Code; or (ii) a referral to the Chair of the CMA for the constitution of a group under Schedule 4 to the Enterprise and Reform Act 2013 and the Acquisition lapsing as a result under Rule 12.1(a) of the Code;

"Sanction Court Order"

the order of the Court sanctioning the Scheme;

"Scheme" or "Scheme of Arrangement"

the proposed scheme of arrangement under Part 26 of the 2006 Act between Exova and the Scheme Shareholders, the full terms of which will be set out in the Scheme Document with or subject to any modification, addition or condition which Element Bidco and Exova may agree and, if required, the Court may approve or impose;

"Scheme Court Hearing"

the hearing of the Court to sanction the Scheme;

"Scheme Document"

the document to be sent by Exova to Exova Shareholders, containing and setting out the Scheme, the notices convening the Court Meeting, the General Meeting and the further particulars required by Part 26 of the 2006 Act;

"Scheme Record Time"

the time and date specified in the Scheme Document, expected to be 6.00 p.m. on the business day immediately prior to the Effective Date;

"Scheme Shares"

the Exova Shares:

 

(a)        in issue at the date of the Scheme Document;

 

 

 

in each case other than any Excluded Shares;

"Scheme Shareholders"

the holders of Scheme Shares;

"Scheme Voting Record Time"

the date and time specified in the Scheme Document by reference to which entitlement to vote at the Court Meeting will be determined, expected to be 6.00 p.m. on the day which is 2 days before the Court Meeting or, if the Court Meeting is adjourned, 6.00 p.m. on the day which is 2 days before the date of such adjourned Court Meeting;

"Subscription Agreement"

has the meaning set out in paragraph 13 (Financing of the Acquisition) of this announcement;

"Substantial Interest"

in relation to an undertaking, a direct or indirect interest of 20 per cent. or more of the total voting rights conferred by the equity share capital (as defined in Section 548 of the 2006 Act) of such undertaking;

"Takeover Offer"

if (subject to the consent of the Panel), Element Bidco elects to effect the Acquisition by way of a takeover offer (as defined in Chapter 3 of Part 29 of the 2006 Act), the offer to be made by or on behalf of Element Bidco to acquire the issued and to be issued ordinary share capital of Exova on the terms and subject to the conditions to be set out in the related Offer Document;

"Third Party"

has the meaning set out in Part A of Appendix I;

"United Kingdom" or "UK"

the United Kingdom of Great Britain and Northern Ireland;

"UK Listing Authority"

the FCA acting in its capacity as the competent authority for listing under the Financial Services and Markets Act 2000;

"United States" or "US"

the United States of America, its territories and possessions, any State of the United States of America and the District of Columbia;

"Wider Element Group"

Element, its subsidiary undertakings, associated undertakings and any other undertakings in which that company and such undertakings (aggregating their interests) have a Substantial Interest; and

"Wider Exova Group"

Exova, its subsidiary undertakings, associated undertakings and any other undertakings in which that company and such undertakings (aggregating their interests) have a Substantial Interest.

 

For the purposes of this announcement, "subsidiary", "subsidiary undertaking", "parent undertaking", "undertaking" and "associated undertaking" have the respective meanings given thereto by the 2006 Act.

References to an enactment include references to that enactment as amended, replaced, consolidated or re-enacted by or under any other enactment before or after the date of this announcement. All references to time in this announcement are to London time unless otherwise stated.

References to the singular include the plural and vice versa.

"£" and "pence" means pounds and pence sterling, the lawful currency of the United Kingdom.

"US$" means United States dollars, the lawful currency of United States.

"€" and "Euro" means the lawful currency of the member states of the participating member states of the European Union which have adopted the single currency in accordance with the EC Treaty of Rome dated 25 March 1957 (as amended by the Maastricht Treaty dated 7 February 1992).

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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