Letter re Valmont Offer for Delta plc
19 March 2010
CRYSTAL AMBER FUND LIMITED
("Crystal Amber Fund" or the "Company")
Letter re. Valmont Group Pty Ltd offer for Delta plc
Crystal Amber Fund announces that it is going to request that the directors of
Delta plc send a copy of a letter from the directors of Crystal Amber Fund, the
text of which is set out below, to all shareholders of Delta plc as soon as
possible, at the Company's expense. In addition, the letter will be available
on the Company's website www.crystalamber.com.
" Dear fellow Delta plc shareholder,
Crystal Amber Fund Limited ("Crystal Amber") was a shareholder in Delta plc
("Delta") prior to the announcement on 4 March 2010 of the 185p per share
recommended offer from Valmont Group Pty. Ltd (`Valmont') ("the Offer"). We
invested in Delta because we regarded it as a well managed, profitable, cash
rich British engineering group. We currently hold 5,803,533 ordinary shares in
Delta, representing 3.77 per cent. of the issued share capital of Delta.
It is our intention not to accept the current offer of 185p ("the Offer
Price"), unless the Offer is declared or becomes wholly unconditional, on the
basis that, in our opinion, it undervalues the business and, as currently
constructed, is neither fair nor reasonable.
Delta shareholders will note that the offer document issued by Valmont dated 10
March ("the Offer Document") states at pages 7 and 12 that "the Offer Price has
been determined on the basis that no final dividend in respect of the ordinary
share capital of Delta will be paid by Delta in respect of the year ended 31
December 2009". Furthermore, both Valmont and the directors of Delta state in
the Offer Document (pages 7 and 12) that:
"The Offer Price represents a premium of approximately:
. 20.3 per cent. to the closing price of 153.8 pence for each Delta Share
on 3 March 2010, the latest practicable Business Day prior to the date of this
announcement;
. 24.7 per cent. to the average closing price of 148.4 pence for each Delta
Share for the month prior to and including 3 March 2010; and
. 27.3 per cent. to the average closing price of 145.3 pence for each
Delta Share for the three months prior to and including 3 March 2010."
Delta Shareholders will be aware that for the year ended 31 December 2008,
Delta declared dividends of an aggregate of 6.5p per share and the interim
dividend for the six months ended 30 June 2009, declared on 28 August 2009, of
2.4p per share was an increase of 26 per cent. over the interim dividend
declared for the six months ended 30 June 2008. Market consensus estimates were
that the final dividend for the year ended 31 December 2009 would be 4.8p,
resulting in a dividend of 7.2p per share for the full year (Source: Arden
Partners /Arbuthnot Securities).
We believe that, by basing the Offer Price on the cancellation of the final
dividend, the Offer Price includes an element of 4.8p that might otherwise have
formed the final dividend for the year ended 31 December 2009. Consequently,
the price that shareholders are being offered to cede control of Delta is
effectively 180.2p, which is only a premium of 17.2 per cent. to the closing
price of 153.8 pence for each Delta Share on 3 March 2010, the latest
practicable business day prior to the date of the announcement of the Offer.
In this context, we also note that the preliminary results for the year ended
31 December 2009, announced on 8 March 2010, delivered earnings per share for
the year ended 31 December 2009 of 20.2p, approximately 13.9 per cent. ahead of
broker consensus forecasts of 17.735p (Source: Arden Partners /Arbuthnot
Securities). In the post close trading update issued by Delta on 26 January
2010 the directors stated that "The Group's 2009 full year trading performance
was in line with the Board's expectations". We are unclear as to why the
Board's expectations were so materially different to those of the market and
wonder what effect this improved trading would have had on the Delta share
price if the broker consensus forecasts had reflected the improved trading.
We also note that since the Offer was announced on 4 March 2010, the share
price of Valmont ordinary shares has increased from $73.44 (at close of
business on 3 March 2010) to $83.32 (at close of business on 18 March 2010), an
increase of 13.4 per cent, which, in our opinion, strongly implies that the
market believes that Valmont is offering a low price for Delta and that Valmont
shareholders will be the beneficiaries of this proposed takeover. In the period
since the announcement of the Offer up until the close of business on 18 March
2010, the stock market capitalisation of Valmont has increased by in excess of
$259 million, or £173 million at an exchange rate of £1:$1.50. This compares
with the value of the Valmont Offer for the entire issued share capital of
Delta of £284.5 million, with Delta's consolidated net cash at 31 December 2009
being £146.9 million.
We believe that the Offer Price should be increased so that Delta's
shareholders are compensated properly for, in our opinion, the significant
value enhancement that Valmont shareholders seem set to receive if the Offer is
successful. We also consider it neither fair nor reasonable that Delta
shareholders have not been afforded the opportunity to participate in the
equity upside of the proposed combined businesses and believe that a share
alternative should be made available to Delta shareholders based on the Valmont
share price of $73.44 at the close of business on 3 March 2010, being the
latest practicable business day prior to the announcement of the Offer.
We consider that the Offer undervalues Delta and intend NOT to accept the
current offer by Valmont, unless the Offer is declared or becomes wholly
unconditional.
Yours sincerely,
William Collins
Chairman
Crystal Amber Fund Limited"
For further enquiries please contact:
Crystal Amber Advisers (UK) LLP - Investment adviser to Crystal Amber Fund
Richard Bernstein
Tel: 020 7491 0770
Merchant John East Securities Limited
David Worlidge/Bidhi Bhoma
Tel: 0207 628 2200
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