Proposed Tender Offer and Notice of GM
3 October 2016
Avingtrans plc
("Avingtrans" or the "Company")
Proposed Tender Offer and Notice of General Meeting
Further to the preliminary results announcement for the year ended 31 May 2016 published on 27 September 2016, Avingtrans, which designs, manufactures and supplies critical components, modules and associated services to the energy, medical and industrial sectors, is pleased to announce the terms of the proposed Tender Offer which will return up to approximately £28 million to shareholders.
Under the Tender Offer, each Shareholder is entitled to have up to 50% of his or her shareholding purchased at the Tender Price (200p per Share) with the potential to tender a greater number of Shares depending on the number of Shares tendered by other Shareholders. The Tender Price represents a premium of 4.2% to the closing mid-market price of 192p per Share on 30 September 2016, being the last practicable date prior to the publication of the Circular. The Tender Offer is being made available to all Shareholders who are on the Register at the close of business on 4 November 2016, with the exception of holders in certain overseas jurisdictions.
The Company requires the authority from Shareholders to purchase Shares under the Tender Offer and this is being sought at a General Meeting which is to be held at Shakespeare Martineau LLP, No 1 Colmore Square, Birmingham, B4 6AA at 11.30 a.m. on 8 November 2016. A circular which sets out the full details of the Tender Offer is expected to be posted to Shareholders as soon as practicable (the "Circular"). The Circular will also be available on the Company's website (http://www.avingtrans.plc.uk).
The Tender Offer is being made by Numis, the Company's corporate broker, as principal on the basis that all Shares that it buys under the Tender Offer will be purchased from it by the Company.
Further details of the Tender Offer are set out below.
Capitalised terms used, but not defined in this announcement shall have the same meaning as set out in the Circular.
Expected timetable of events
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Announcement of the Tender Offer and date of the Circular |
3 October 2016 |
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Tender Offer opens |
3 October 2016 |
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Closing Date - latest time and date for receipt of Tender Forms and settlement of TTE Instruction(s) |
1.00 p.m. on 4 November 2016 |
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Record Date for the Tender Offer |
close of business on 4 November 2016 |
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Latest time and date for receipt of Forms of Proxy for the General Meeting |
11.30 a.m. on 6 November 2016 |
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General Meeting |
11.30 a.m. on 8 November 2016 |
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Result of Tender Offer announced |
8 November 2016 |
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Completion of purchase of Shares under the Tender Offer |
18 November 2016 |
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Despatch of cheques for Tender Offer consideration in respect of certificated Shares sold under the Tender Offer and any balance |
21 November 2016 |
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CREST accounts credited with Tender Offer consideration and any unsold uncertificated Shares |
21 November 2016 |
Enquiries:
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Avingtrans plc Steve McQuillan, CEO Stephen King, CFO |
0115 949 9020 |
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Numis Securities Limited (Nominated Adviser and Joint Broker) Tom Ballard (Corporate Broking) Richard Thomas (Corporate Finance) |
020 7260 1000 |
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N+1 Singer (Joint Broker) Shaun Dobson Lauren Kettle |
020 7496 3000 |
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Newgate (Financial PR) Adam Lloyd Ed Treadwell |
020 7653 9850 |
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Further details of the Tender Offer
Introduction
The Tender Offer is being made available to all Shareholders who are on the Register at the close of business on 4 November 2016, with the exception of holders in certain overseas jurisdictions. Shareholders can decide whether they want to tender some or all of their Shares at a price of 200 pence per Share, representing a premium of 4.2 per cent to the closing mid-market price of 192 pence per Share on 30 September 2016, being the last practicable date prior to the publication of the Circular.
The Tender Offer is being made by Numis, the Company's corporate broker, as principal on the basis that all Shares that it buys under the Tender Offer will be purchased from it by the Company. The Company requires the authority from Shareholders to purchase any such Shares and this is being sought at the General Meeting to be held at Shakespeare Martineau LLP, No 1 Colmore Square, Birmingham, B4 6AA at 11.30 a.m. (or, if later, the conclusion of the annual general meeting of the Company to be held at 11.00 a.m. on 8 November 2016) on 8 November 2016. The Board is making no recommendation to Shareholders in relation to participation in the Tender Offer. However, Shareholders should note that the Directors who hold Shares intend to tender such amount that will ensure that their percentage holding in the Company's issued share capital is to a material extent maintained following the Tender Offer. The Board is unanimously recommending Shareholders to vote in favour of the Resolution to be proposed at the General Meeting, as the Directors intend to do in respect of their own beneficial holdings of Shares.
Further, Nigel Wray has expressed his intention to tender, as a minimum, such number of Shares that will ensure that his percentage holding in the Company's issued share capital is to a material extent maintained following the Tender Offer.
Background to the Tender Offer
On 4 May 2016, the Group announced the proposed disposal of its Aerospace Division ("Sigma Components") to Anthony Bidco Limited, a company controlled by funds managed by Silverfleet Capital Partners LLP, for an enterprise value of £65 million which, after adjustment for debt and working capital and associated transaction costs, resulted in the Company receiving proceeds of approximately £52 million (before escrow arrangements) (the "Disposal"). In that announcement, the Board set out that a substantial portion of those proceeds would be returned to Shareholders.
The Disposal was a consequence of a strategic review of the Group and its prospects during 2015. This review involved the Board and the Divisional Managing Directors, as well as external advisors. It resulted in four key concepts and outcomes:
1. The Company has a successful track record of growing businesses from start-up, developing them internationally, and crystallising value through their sale at an appropriate stage in their development, as demonstrated by the successful sale of JenaTec in 2012.
2. Following the successful conclusion of the acquisition of the Rolls-Royce pipe business in March 2016, the Board felt that it had achieved the majority of the targets which it had set for the Aerospace Division and it was the right stage in its development to consider a disposal of the business.
3. Subject to achieving an attractive valuation for the Aerospace Business, the Board believed that shareholder value would be maximised over the mid to long term by disposing of the Aerospace Division and returning part of the proceeds from the disposal to Shareholders, with the Company also reinvesting part of the proceeds into strengthening the Group's position in the Energy sector in particular and potentially other high value engineering sectors.
4. The Board believes that the successful contract win by the Energy and Medical business with Sellafield in May 2015 (of the initial tranche of 3M3 nuclear waste disposal containers) demonstrated the significant business opportunities available in this market, if the Group were able to put more resource into this sector.
Over the last few years, the Group grew the Aerospace Division to become an international leader in its chosen niche markets. This development was underpinned by a number of synergistic acquisitions, which enabled the Aerospace Division to build a strong brand and market position and to produce improved performance. Thus, the Group has realised significant value for Shareholders through the Disposal, at a considerable premium to the cost of the original component parts. The Disposal followed a concentrated sale process which produced a number of bids from a select group of relevant industry and financial suitors from the UK, Europe, the USA and Asia.
The Disposal completed on 27 May 2016 and immediately following completion the Company had net cash in excess of £47 million. The Disposal of the Aerospace Division represented the second major shareholder value enhancing transaction by the Group, following the disposal of JenaTec in 2012.
On 30 June 2016, the Company announced that it intended to return almost £28 million to Shareholders by way of a tender offer. The balance of the net proceeds of the Disposal are to be used to pursue the Group's new strategy of investing in the Energy and Medical markets served by its Metalcraft and Maloney Metalcraft businesses, and more specifically to strengthen Metalcraft's position in the nuclear sector and to pursue other related opportunities in the engineering sector. The Board believes that further consolidation strategies are foreseeable, both in markets where the Group has an existing footprint, and in other compatible high value engineering niches. This is a familiar blueprint, but it is capable of delivering significant returns, if well executed.
The Energy and Medical division has made steady progress in its recovery from the oil and gas sector downturn. During the financial year ended 31 May 2016, the Group sold the freehold of the Maloney Metalcraft building at Aldridge for £1.1 million, net of costs, limiting the Group's exposure to a continuingly depressed oil and gas market. Pre-production activities commenced on the £47 million, ten year contract with Sellafield, for the provision of 3M3 (three-metre-cubed) nuclear waste boxes, although there have been some changes to the phasing of the production start-up. Metalcraft is well-placed to be a key partner for Sellafield in this programme, over the next 30 years. The Group has also won two £3 million contracts with Bruker and Rapiscan, both of which marked important developments in the diversification of the Energy and Medical division and improved the prospects for the Chengdu and Buckingham units. In addition, on 29 September 2016, the Company announced that Metalcraft had signed a contract with Wuhan Zhongke Niujin Magnetic Resonance Technology Co. in Wuhan, China, which is estimated to be worth £9 million over ten years.
The Board believes that a focus on the exciting prospects in the Energy sector, as well as a secure existing platform in the Medical and Biomedical equipment markets, will provide Shareholders with the potential to achieve further value growth, in addition to the proceeds to be returned to Shareholders from the Disposal.
The Board believes that, for the reasons set out above it is appropriate to return approximately £28 million to Shareholders via the Tender Offer. The mechanism of a tender offer gives Shareholders the flexibility to either realise a return by allowing the Company to purchase a portion of their shares for cash, or to retain a potentially larger relative holding in the Company so that they might further benefit from any future capital growth.
The Board anticipates that following the Tender Offer, and assuming full take-up, the Company will have net cash of approximately £20 million. These funds will be used to bolster the Group's Energy and Medical division's organic growth prospects and to proactively seek new opportunities to build shareholder value through acquisitions.
This represents a continuation of the Group's proven "buy and build" in regulated engineering niche markets, where the Board can see potential consolidation opportunities, which can lead to significantly increased shareholder returns over the medium to long term. The Disposal and its precursor acquisitions clearly demonstrated the Group's ability to build strong brands and value from smaller constituent parts and its well-developed deal-making skills that ensure it does not overpay for assets. The Group also continues to invest in skills and has completed its investments in new IT systems, as part of an on-going journey towards world-class manufacturing capability.
The Tender Offer
The Tender Offer is being made by Numis to all Shareholders (other than certain Overseas Shareholders). Full details of the Tender Offer, including the terms and conditions on which it is being made, are set out in Part III of the Circular and, in relation to Shareholders holding Shares in certificated form, on the Tender Form to be sent to Shareholders who hold their Shares in certificated form.
The Tender Offer is conditional on the passing of the Resolution set out in the notice of General Meeting at the end of the Circular and the satisfaction of the other Conditions specified in Part III of the Circular.
The Tender Offer involves the following:
· The Tender Offer is being made to Shareholders (other than certain Overseas Shareholders) by Numis for the purchase of up to 14,000,000 Shares. Under the Tender Offer, each Shareholder is entitled to have up to 50 per cent of his or her shareholding purchased by Numis at the Tender Price (200 pence per Share) together with potentially further purchases depending on the number of Shares tendered by other Shareholders.
· The Tender Offer is being made at a premium of 4.2 per cent to the closing mid-market price on 30 September 2016.
· Shareholders (other than certain Overseas Shareholders) will be able to decide to tender none, some or all of their Shares within the overall limits of the Tender Offer.
· Tenders in excess of a Shareholders' Basic Entitlement will only be accepted to the extent that other Shareholders tender less than their Basic Entitlement or do not tender any Shares.
· All Shares validly tendered by any Shareholder up to their Basic Entitlement will be accepted in full.
· The Tender Form to be completed by Shareholders who hold their Shares in certificated form contains a box to enable those Shareholders who wish to tender their Basic Entitlement to do so (Box 2A). If you hold your Shares in certificated form and you tick this box, the Receiving Agent will calculate your Basic Entitlement on the Record Date. If you wish to tender a different number of Shares to your Basic Entitlement, insert such number of Shares in the alternate box provided on the Tender Form (Box 2B).
· Shareholders who hold their Shares in uncertificated form (i.e. in CREST) and who wish to tender their Basic Entitlement should send a TTE instruction through CREST to the member account set out in paragraph 3.3.1 of Part III of the Circular. The Receiving Agent will calculate your Basic Entitlement on the Record Date and return any excess Shares. If you wish to tender a different number of Shares to your Basic Entitlement, you should send a TTE Instruction through CREST to the same member account specifying such number of Shares that you wish to tender.
· If the total number of Shares validly tendered by all Shareholders equates to a number greater than 14,000,000 Shares, tenders will be accepted in the order set out below:
· all Shares validly tendered by any Shareholder up to their Basic Entitlement will be accepted in full; and
· all Shares validly tendered by Shareholders in excess of their Basic Entitlements will be satisfied at the discretion of the Board. The number of Shares to be purchased in the Tender Offer will not, in any event, exceed 14,000,000 Shares.
· All successfully tendered Shares purchased by Numis will be repurchased from Numis by the Company and will be immediately cancelled and will not rank for any future dividends. For the avoidance of doubt, Shares on the Register at 28 October 2016 will rank for the final dividend for the financial year ended 31 May 2016 which will be paid on 9 December 2016.
· Any rights of Shareholders who choose not to tender their Shares will be unaffected, however, the reduction in the Company's issued share capital may result in a reduction in the liquidity of the Shares in the secondary market.
Taxation
Shareholders who sell Shares pursuant to the Tender Offer should, subject to the potential application of Chapter 1 of Part 13 ITA 2007 (in respect of individual Shareholders) and Part 15 of CTA 2010 (in respect of corporate Shareholders), be treated as having sold their Shares in the normal way. Shareholders may, depending on their individual circumstances, incur a liability to taxation on capital gains. UK individual and corporate Shareholders should be aware that HMRC may seek to treat part or the whole of the disposal proceeds of their Shares as income under Chapter 1 of Part 13 ITA 2007 and Part 15 of CTA 2010 respectively. Further information on the UK taxation consequences of the Tender Offer is set out in Part IV of the Circular. Shareholders who are in any doubt as to their tax position or who are subject to tax in a jurisdiction other than the UK should consult an appropriate professional adviser.
Overseas Shareholders
Shareholders with registered or mailing addresses outside the UK, or who are citizens or nationals of, or resident in, a jurisdiction other than the UK, should read paragraph 9 of Part III of the Circular and the relevant provisions of the Tender Form. It is the responsibility of all Overseas Shareholders to satisfy themselves as to the observance of any legal requirements in their jurisdiction, including, without limitation, any relevant requirements in relation to the ability of such holders to complete and return a Tender Form.
Repurchase Agreement
Under the terms of the Repurchase Agreement, the Company will acquire, through an on-market purchase, all of the Exit Shares at an aggregate price equal to the amount paid by Numis for the Exit Shares. Further details of the Repurchase Agreement are set out in paragraph 2 of Part V of the Circular.
The Company will also be liable to pay Numis's fees, costs and expenses under the terms of Numis's engagement by the Company in connection with the Tender Offer.
General Meeting
Under CA 2006, the Company will require the authority from Shareholders to purchase Shares under the Tender Offer. A notice convening a General Meeting of the Company, which is to be held at Shakespeare Martineau LLP, No 1 Colmore Square, Birmingham, B4 6AA on 8 November 2016 at 11.30 a.m. (or, if later, the conclusion of the annual general meeting of the Company to be held at 11.00 a.m. on 8 November 2016), is set out at the end of the Circular. At this meeting, the Resolution will be proposed to authorise the Company to make the repurchase of Shares which is necessary to enable the Tender Offer to be implemented. The Resolution will be proposed as a special resolution requiring the approval of 75 per cent of the votes cast at the General Meeting.
Takeover Code
As a public company which has its registered office and place of management and control in the United Kingdom, the Company is subject to the Takeover Code. Under Rule 9 of the Takeover Code, any person who acquires an interest (as such term is defined in the Takeover Code) in shares which, taken together with the shares in which he and persons acting in concert with him are interested, carry 30 per cent or more of the voting rights in a company which is subject to the Takeover Code is normally required to make a general offer to all of the remaining shareholders to acquire their shares.
Similarly, when any person, together with persons acting in concert with him, is interested in shares which in aggregate carry not less than 30 per cent but does not hold shares carrying more than 50 per cent of the voting rights of such a company, a general offer will normally be required if any further interests in shares are acquired by any such person. Such an offer would have to be made in cash at a price not less than the highest price paid by him, or by any member of the group of persons acting in concert with him, for any interest in shares in the company during the 12 months prior to the announcement of the offer.
Under Rule 37.1 of the Takeover Code, when a company purchases its own voting shares, a resulting increase in the percentage of shares carrying voting rights in which a person or group of persons acting, or presumed to be acting, in concert is interested will be treated as an acquisition for the purpose of Rule 9. A shareholder not acting in concert with the directors will not normally incur an obligation to make a general offer under Rule 9 if, as a result of the purchase of its own shares by a company, he comes to exceed the percentage limits set out in Rule 9. However, this exception will not normally apply when a shareholder (or any relevant member of a group of persons acting in concert) not acting, or presumed to be acting, in concert with any one or more of the directors has acquired an interest in shares at a time when he had reason to believe that such a purchase of its own shares by the company would take place.
Numis will purchase, as principal, voting shares under the Tender Offer which could result in Numis acquiring an interest in Shares carrying 30 per cent or more of the voting rights of the Company. Promptly following such purchase, under the terms of the Repurchase Agreement, Numis will sell all the Exit Shares to the Company and the Company will buy and thereafter cancel all such Shares.
Accordingly, a waiver has been obtained from the Panel on Takeovers and Mergers in respect of the application of Rule 9 to the purchase by Numis of the voting shares under the Tender Offer.
Further, Nigel Wray has expressed his intention to tender, as a minimum, such number of Shares that will ensure that his percentage holding in the Company's issued share capital is to a material extent maintained following the Tender Offer.
Recommendation
The Board unanimously recommends Shareholders to vote in favour of the Resolution to be proposed at the General Meeting, as they intend to do in respect of their own aggregate direct beneficial holdings of 3,353,111 Shares, representing 11.9 per cent of the issued share capital of the Company as at 30 September 2016 (being the latest practicable date prior to the publication of the Circular).
The Directors can make no recommendations to Shareholders in relation to participation in the Tender Offer. However, Shareholders should note that the Directors who hold Shares intend to tender such amount that will ensure that their percentage holding in the Company's issued share capital is to a material extent maintained following the Tender Offer.
In each case acceptance by Numis of an application under the Tender Offer in excess of 50 per cent of the applicant's holding is subject to there being capacity to purchase those Shares in accordance with the terms of the Tender Offer.
Whether or not Shareholders decide to tender all or any of their Shares will depend on, among other things, their view of the Company's prospects and their own individual circumstances, including their tax position.
This information is provided by RNS
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