Disposal-McKechnie Aerospace
Melrose PLC
23 March 2007
Melrose PLC
FOR IMMEDIATE RELEASE 23 March 2007
Melrose PLC
Disposal of McKechnie Aerospace
Melrose PLC announces Disposal of McKechnie Aerospace to
JLL Partners for US$855.6 million
Melrose PLC ('Melrose' or the 'Company') announces that it has agreed to dispose
of its Aerospace OEM and Aerospace Aftermarket divisions (together 'McKechnie
Aerospace'), part of the acquired McKechnie Group, to a newly incorporated
company controlled by JLL Partners (the 'Buyer') for a total cash consideration
of US$850 million plus assumption of $5.6 million of indebtedness (the
'Disposal').
Highlights:
• The consideration of US$850 million, plus assumption of $5.6 million of
indebtedness (£436.5 million), reflects the high quality nature of the
business
• During Melrose's ownership the value of this business has increased by
nearly two and a half times from $362 million at acquisition to $855.6
million
• In the event that agreement is not reached with the Trustees of the
McKechnie UK Pension Scheme and the Pensions Regulator, Linread Limited (the
UK part of Aerospace OEM) will be retained by Melrose
• The Disposal is in accordance with Melrose's strategy of acquiring
businesses, improving them and then realising value for shareholders
• The Board expects to be able to return in the region of £200 million of
the net proceeds to shareholders following completion subject to provisos
set out in the paragraph headed "Use of Sale Proceeds"
• The Disposal is conditional, amongst other things, upon obtaining
anti-trust clearances in the United States and the approval of Melrose
shareholders at an extraordinary general meeting (the 'Extraordinary General
Meeting'). The Disposal is targeted for completion during April or May 2007.
Christopher Miller, Chairman of Melrose, stated,
'We are delighted to announce the disposal of McKechnie Aerospace. This
successful transaction demonstrates the achievement of the Melrose strategy of
seeking, creating and realising value for shareholders. We wish McKechnie
Aerospace well in the next exciting stage of its development with JLL. We are
now focused on the continued improvement in performance of our remaining
businesses and finding the next acquisition opportunity.'
Paul Levy, founder of JLL Partners, stated,
'Our investment in McKechnie Aerospace is based on our great confidence in the
business and its exceptional growth potential. We commend Melrose and the
business's management team on both the business they have built and the firm's
track record of superior performance. JLL is excited to partner with Tariq
Jesrai and his outstanding management team to continue building the business.'
This summary should be read in conjunction with the full text of the following
announcement.
A circular containing further details of the Disposal and setting out the notice
of the Extraordinary General Meeting will be sent to Melrose shareholders
shortly. Melrose is being advised by Rothschild.
Contacts:
M: Communications
Financial PR
Nick Fox +44 (0)20 7153 1530
James Hill
Rothschild
Financial Advisor and Sponsor
Ravi Gupta +44 (0)20 7280 5000
Rothschild, which is regulated and authorised in the United Kingdom by the
Financial Services Authority, is acting only for Melrose and no-one else in
connection with the Disposal and will not regard any other person as its client
or be responsible to any person other than Melrose for providing the protections
afforded to clients of Rothschild, or for providing advice in relation to the
Disposal or the contents of this announcement.
FOR IMMEDIATE RELEASE 23 March 2007
Melrose PLC
Disposal of McKechnie Aerospace
Melrose PLC agrees the sale of McKechnie Aerospace to JLL Partners for US$855.6
million
Melrose PLC ('Melrose' or the 'Company') announces that it has agreed to sell
its Aerospace OEM and Aerospace Aftermarket divisions (together 'McKechnie
Aerospace'), part of the acquired McKechnie Group, to a newly incorporated
company controlled by JLL Partners (the 'Buyer') for a total cash consideration
of US$850 million plus the assumption of $5.6 of million indebtedness (the
'Disposal').
Background to and reasons for the Disposal
Melrose was floated on 28 October 2003 with the stated strategy of acquiring
companies and businesses whose performance the Melrose Directors believe can be
improved to create shareholder value. In May 2005, Melrose announced the
acquisitions of the McKechnie and Dynacast businesses for £429 million.
Following the receipt of a number of approaches for McKechnie Aerospace and in
accordance with Melrose's stated strategic objectives of realising value for
shareholders at the appropriate moment, the Melrose board (the 'Board') decided
to seek offers for McKechnie Aerospace.
About JLL Partners
Founded in 1988, JLL Partners is a New York-based leading private equity
investment firm with $3.2 billion of capital under management. JLL's investment
philosophy is to partner with outstanding management teams and invest with them
in companies that they can continue to grow into market leaders. JLL has
invested in a variety of industries, with special focus on financial services,
building products and healthcare services and medical products. More information
on JLL can be found on their website, www.jllpartners.com.
Further Details of the Proposed Sale
A circular setting out the notice of the extraordinary general meeting (the
'Extraordinary General Meeting'), including the recommendation of the Board, as
advised by Rothschild, to vote in favour of the Disposal, will be sent to
Melrose shareholders as soon as practicable.
Under the terms of the share purchase agreement between Melrose and the Buyer
(the 'Share Purchase Agreement'), Melrose has conditionally agreed to dispose of
McKechnie Aerospace to the Buyer by way of the sale of the entire issued share
capitals of Linread Limited, Technical Airborne Components Limited, Technical
Airborne Components Sprl and Melrose US 3 LLC for a purchase price of US$850
million to be satisfied in cash. In the event that a satisfactory agreement
cannot be reached with the Trustees of the McKechnie UK Pension Scheme and the
Pensions Regulator then the sale of Linread Limited will not proceed and the
purchase price will be reduced by US$40 million ("the Linread Option") to US$810
million.
The Disposal is conditional upon, inter alia, (i) the passing at the
Extraordinary General Meeting of the resolution to approve the Disposal; (ii)
the applicable waiting period under the HSR Act having expired or been
terminated; and, (iii) relevant clearance having been received from the Pensions
Regulator, (if the Linread Option is not exercised). Completion of the Disposal
('Completion') is targeted during April or May 2007.
Melrose has agreed to pay the Buyer a break fee in the event that shareholders
do not vote in favour of the Disposal. The amount of the break fee has been set
at an amount equal to 1% of Melrose's market capitalisation as at the date of
the Share Purchase Agreement.
Both Melrose and the Buyer have given very limited representations and
warranties, all of which are customary in a transaction of this kind.
Use of Sale Proceeds
The Board believes that the Disposal, as well as Melrose's continuing cash-flow
profile, enables a significant return of capital to Melrose's shareholders. As a
result of the need for discussions with the Trustees of the McKechnie Pension
Scheme and the Pensions Regulator, the Linread Option, currency and
renegotiation of existing banking facilities it is not possible to indicate a
precise level for this at this time. However, the Board estimates that a return
of capital is likely to be in the region of £200 million which would be
equivalent to approximately 77 pence in cash per ordinary share in Melrose. The
capital return will be subject to approval of Shareholders at a separate
extraordinary general meeting (the "Extraordinary General Meeting for the Return
of Capital").
In addition to financing the return of capital it is the Board's intention that
the proceeds will be used to repay the Melrose group's existing bank facilities,
to make a contribution to the McKechnie UK Pension Scheme, to pay transaction
expenses and for other corporate purposes.
A circular will be sent to Shareholders shortly after Completion, convening the
Extraordinary General Meeting to approve the proposed Return of Capital.
Information on McKechnie Aerospace
McKechnie Aerospace comprises two McKechnie Group divisions: Aerospace OEM and
Aerospace Aftermarket.
Aerospace OEM is a global leading manufacturer of aerospace components,
assemblies and subsystems and is based in the US and Europe. The business
operates through three divisions: the Structures Group, the Electromechanical
Group and the Fasteners Group, which are summarised below.
The Structures Group is engaged in the design and manufacture of aerospace
components, assemblies and subsystems including latching systems, flight control
rods and engine bearing struts;
The Electromechanical Group is engaged in the design and manufacture of various
electromechanical components including flight control system actuators, landing
gear actuators and motors; and
The Fasteners Group is engaged in the design and manufacture of
maximum-strength, minimum-weight fasteners, studs, bolts, rivets and slot
bearings for critical applications. Linread Limited is a manufacturer of
fasteners for the aerospace business based in Redditch and Leicester.
Aerospace Aftermarket is a specialist aircraft battery distribution business
based primarily in the US and Europe.
In the year ended 31 December 2006, McKechnie Aerospace generated revenue and
headline operating profit* of £155.1 million and £33.6 million respectively. In
the year ended 31 December 2006 McKechnie Aerospace's headline EBITDA** was
£36.4 million. Total McKechnie Aerospace net assets and gross assets were £133.5
million and £246.0 million respectively as at 31 December 2006.
* before exceptional costs, exceptional income, US head office expenses not
assumed by buyer of £0.9 million and intangible asset amortisation other than
computer software
** before exceptional costs, exceptional income and US head office expenses not
assumed by buyer of £0.9 million
Contacts:
M: Communications
Financial PR
Nick Fox +44 (0)20 7153 1530
James Hill
Rothschild
Financial Advisor and Sponsor
Ravi Gupta +44 (0)20 7280 5000
Rothschild, which is regulated and authorised in the United Kingdom by the
Financial Services Authority, is acting only for Melrose and no-one else in
connection with the Disposal and will not regard any other person as its client
or be responsible to any person other than Melrose for providing the protections
afforded to clients of Rothschild, or for providing advice in relation to the
Disposal or the contents of this announcement.
This information is provided by RNS
The company news service from the London Stock Exchange
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