Offer for Novar PLC
Melrose PLC
11 November 2004
For immediate release
Not for release or publication in or into the United States, Canada, Japan or
Australia
Offers
by
Rothschild
on behalf of
Melrose PLC
for
Novar plc
11 November 2004
Summary
The Offers
• The Melrose Board announces the terms of offers for the entire issued
and to be issued ordinary and preference share capital of Novar. The Offers
will be made by Rothschild on behalf of Melrose.
• The Ordinary Offer will be one New Melrose Ordinary Share and 45 pence
in cash for each Novar Ordinary Share. The cash element of the Ordinary
Offer represents 36 per cent. of the closing price per Novar Ordinary Share
on 3 November 2004 (being the last business day prior to the commencement of
the Offer Period). There will be a Mix and Match Facility in respect of the
Ordinary Offer.
• In order to fund the cash element of the Ordinary Offer, Melrose has
successfully arranged an underwritten cash placing with leading
institutional investors to raise £232 million.
• On the basis of the Placing Price of 100 pence per New Melrose Ordinary
Share, the Ordinary Offer values the entire issued ordinary share capital of
Novar at approximately £625 million and each Novar Ordinary Share at 145
pence, representing a premium of approximately 17 per cent. to the closing
price of 123.75 pence per Novar Ordinary Share on 3 November 2004 (being the
last business day prior to the commencement of the Offer Period).
• The Preference Offer will be one New Melrose Preference Share for each
Novar Preference Share.
• Melrose's current intention is to maintain the aggregate Novar
Ordinary Share dividend for the financial year ended 31 December 2003 of £39
million for ordinary shareholders of the Enlarged Group.
Background and rationale
Melrose was floated on AIM 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. Melrose's management team
is drawn from the former team at Wassall. During their tenure at Wassall, nearly
£500 million of value was created for shareholders with a compound total
shareholder return of over 18 per cent. per annum over a 12 year period.
Conversely, Novar has delivered to its shareholders:
• Poor share price performance
• Poor management
• Poor strategy and value destructive acquisitions
• Poor and declining margins
Christopher Miller, the Chairman of Melrose, commented:
"We are very pleased with the enthusiastic support of major institutions for our
proposal. There is clearly serious appetite for this structure and this deal. We
look forward to discussing this proposal with Novar Shareholders. We believe we
are offering a better alternative, with 45 pence of cash now and the ability to
hold shares in a newly invigorated company with a proven team and excellent
prospects."
Enquiries:
M:Communications:
Nick Miles 020 7153 1535
Nick Fox 020 7153 1540
Tom Hampson 020 7153 1522
Rothschild:
Philip Swatman 020 7280 5000
Meyrick Cox 020 7280 5000
Ravi Gupta 020 7280 5000
Investec:
Keith Anderson 020 7597 5000
Rupert Krefting 020 7597 5000
This summary should be read in conjunction with the full text of the following
announcement. Appendix 4 to the following announcement contains definitions of
certain expressions used in this summary and the following announcement. The
bases and sources of certain information used in this announcement are set out
in Appendix 3.
The laws of the relevant jurisdictions may affect the availability of the Offers
to persons not resident in the United Kingdom. Persons who are not resident in
the United Kingdom, or who are subject to the laws of any jurisdiction other
than the United Kingdom, should inform themselves about, and observe, any
applicable requirements. Further details in relation to overseas shareholders
will be contained in the Offer Document.
Rothschild, which is authorised and regulated in the United Kingdom by the
Financial Services Authority, is acting only for Melrose and no-one else in
connection with the Offers and Admission 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, nor for giving advice in relation
to the Offers, Admission or the contents of this announcement.
Investec, which is authorised and regulated in the United Kingdom by the
Financial Services Authority, is acting only for Melrose and no-one else in
connection with the Offers and Admission 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 Investec or for giving advice in relation to
the Offers, Admission or the contents of this announcement.
This announcement does not constitute, or form part of, any offer for, or any
solicitation of any offer for, securities. Any acceptance or other response to
the Offers should be made only on the basis of information referred to in the
Offer Document which Melrose intends to despatch to Novar Shareholders and, for
information only, to holders of options under the Novar Employee Share Schemes.
Subject to the possible extension of the Offers into the United States referred
to below, the Offers will not be made, directly or indirectly, in or into or by
use of the mails of, or by any means or instrumentality (including, but not
limited to, facsimile, e-mail or other electronic transmission, telex or
telephone) of interstate or foreign commerce of, or of any facility of a
national, state or other securities exchange of, the United States, Canada,
Australia or Japan and the Offers will not be capable of acceptance by any such
use, means or instrumentality or otherwise from within the United States,
Canada, Australia or Japan. Accordingly, copies of this announcement, the
Admission Document, the Offer Document, the Circular or the Form(s) of
Acceptance, and any related documents are not being (unless determined otherwise
by Melrose in its sole discretion), and must not be, mailed or otherwise
distributed or sent in, into or from the United States, Canada, Australia or
Japan including to Novar Shareholders or participants in the Novar Employee
Share Schemes with registered addresses in the United States, Canada, Australia
or Japan or to persons whom Melrose, Rothschild or Investec know to be
custodians, trustees or nominees holding Novar Shares for persons with
registered addresses in the United States, Canada, Australia or Japan. Persons
receiving those documents (including, without limitation, custodians, nominees
and trustees) should not distribute, mail or send them in, into or from the
United States, Canada, Australia or Japan or use such mails or any such means,
instrumentality or facility for any purpose directly or indirectly in connection
with the Offers, and so doing may invalidate any purported acceptance of the
Offers. Subject to Melrose obtaining, on terms satisfactory to it, all
regulatory and other consents, authorisations, assurances, confirmations and/or
rulings which it considers necessary or desirable in connection therewith,
Melrose may elect at its absolute discretion to extend the Offers into the
United States at such time as the Offers are formally made by way of the Offer
Document.
This announcement is not an offer, or solicitation, of securities, or
solicitation of offers to purchase, the New Melrose Ordinary Shares or the New
Melrose Preference Shares in the United States, Canada, Australia or Japan.
Neither the New Melrose Ordinary Shares nor the New Melrose Preference Shares
have been, nor will they be, registered under the US Securities Act or under the
securities laws of any state, district or other jurisdiction of the United
States, or of Canada, Australia or Japan and no regulatory clearances in respect
of the New Melrose Ordinary Shares and New Melrose Preference Share have been,
or will be, applied for in any jurisdiction other than in the UK. Accordingly,
unless an exemption under the US Securities Act or other relevant securities
laws is applicable, the New Melrose Ordinary Shares and New Melrose Preference
Shares are not being, and may not be, offered, sold, resold, delivered or
distributed, directly or indirectly, in or into the United States, Canada,
Australia or Japan or to, or for the account or benefit of, any US Person or
person resident in Canada, Australia or Japan.
This document contains statements about members of the Novar Group and Melrose
that are or may be forward looking statements. All statements other than
statements of historical facts included in this document may be forward looking
statements. Any statements preceded or followed by or that include the words
"targets", "plans", "believes", "expects", "aims", "intends", "will", "may",
"anticipates" or similar expressions or the negative thereof are forward-looking
statements. Forward-looking statements include statements relating to the
following: (i) future capital expenditures, expenses, revenues, economic
performance, financial condition, dividend policy, losses and future prospects;
(ii) business and management strategies and the expansion and growth of Novar's
or Melrose's operations; and (iii) the effects of government regulation on
Novar's or Melrose's business.
These forward-looking statements involve known and unknown risk, uncertainties
and other factors which may cause the actual results, performance or
achievements of any such person, or industry results, to be materially different
from any results, performance or achievements expressed or implied by such
forward-looking statements. These forward-looking statements are based on
numerous assumptions regarding the present and future business strategies of
such person and the environment in which each will operate in the future. All
subsequent oral or written forward-looking statements attributable to Melrose or
any persons acting on its behalf are expressly qualified in their entirety by
the cautionary statement above. Except as required by law, neither Melrose nor
any other party intends to update these forward-looking statements, even though
the affairs of Melrose and Novar will change from time to time.
Any person who, alone or acting together with any other person(s) pursuant to an
agreement or understanding (whether formal or informal) to acquire or control
securities of Novar or Melrose, owns or controls, or becomes the owner or
controller, directly or indirectly, of one per cent. or more of any class of
securities of Novar or Melrose, is generally required under the provisions of
Rule 8 of the City Code to notify a Regulatory Information Service and the Panel
of every dealing in such securities during the Offer Period. Please consult your
financial adviser immediately if you believe this rule may be applicable to you.
Not for release, publication or distribution, in whole or in part, in or into
the United States of America, Canada, Australia or Japan
For immediate release
11 November 2004
Offers
by
Rothschild
on behalf of
Melrose PLC
for
Novar plc
11 November 2004
1. Introduction
Further to its announcement on 4 November 2004, the Melrose Board announces the
terms of its offers, to be made by Rothschild on behalf of Melrose, for the
entire issued and to be issued ordinary and preference share capital of Novar,
other than any such shares held, or which become held, in treasury by Novar.
The Ordinary Offer will be one New Melrose Ordinary Share and 45 pence in cash
for each Novar Ordinary Share. There will be a Mix and Match Facility in respect
of the Ordinary Offer. The Preference Offer will be one New Melrose Preference
Share for each Novar Preference Share.
The cash element of the Ordinary Offer represents 36 per cent. of the closing
price per Novar Ordinary Share on 3 November 2004 (being the last business day
prior to the commencement of the Offer Period).
Melrose's current intention is to maintain the aggregate Novar Ordinary Share
dividend for the financial year ended 31 December 2003 of £39 million for
ordinary shareholders of the Enlarged Group (as detailed in Appendix 2 to this
announcement).
Melrose will apply for admission of the Enlarged Share Capital of Melrose to the
Official List as soon as practicable following completion of the Offers.
2. The Offers
The Ordinary Offer
The Ordinary Offer, which will be on the terms and subject to the conditions set
out below and in Appendix 1 and to be set out in the Offer Document and in the
Blue Form of Acceptance, will be made on the following basis:
for each Novar Ordinary one New Melrose Ordinary Share and 45 pence in
Share cash
On the basis of the Placing Price of 100 pence per New Melrose Ordinary Share,
the Ordinary Offer values the entire issued ordinary share capital of Novar at
approximately £625 million and each Novar Ordinary Share at 145 pence,
representing a premium of 17 per cent. to the closing price of 123.75 pence per
Novar Ordinary Share on 3 November 2004 (the last business day prior to the
commencement of the Offer Period).
The Novar Ordinary Shares will be acquired by Melrose, pursuant to the Ordinary
Offer, fully paid and free from all liens, equities, charges, encumbrances,
rights of pre-emption and any other interests of any nature whatsoever and
together with all the rights now or hereafter attaching thereto, including
voting rights and the right to receive and retain in full all dividends and
other distributions (if any) declared, made or paid after the date of this
announcement.
The New Melrose Ordinary Shares will be issued credited as fully paid and will
rank pari passu in all respects with the Existing Melrose Ordinary Shares,
including the right to receive in full all dividends and other distributions (if
any) declared, made or paid after the date of this announcement.
The Ordinary Offer will be conditional upon, inter alia, approval of the
Resolution by Melrose Shareholders at the EGM and the admission of the Enlarged
Ordinary Share Capital to trading on AIM. Further information on the EGM is
provided in section 10 of this announcement.
The Preference Offer
The Preference Offer, which will be on the terms and subject to the conditions
set out below and in Appendix 1 and to be set out in the Offer Document and in
the Pink Form of Acceptance, will be made on the following basis:
for each Novar Preference Share one New Melrose Preference Share
The Novar Preference Shares will be acquired by Melrose, pursuant to the
Preference Offer, fully paid and free from all liens, equities, charges,
encumbrances, rights of pre-emption and any other interests of any nature
whatsoever and together with all the rights now or hereafter attaching thereto,
including voting rights and the right to receive and retain in full all
dividends and other distributions (if any) declared, made or paid after the date
of this announcement, save for the dividend payable in respect of Novar
Preference Shares on 1 December 2004 in respect of the period from 2 June 2004
to 1 December 2004 (inclusive).
The New Melrose Preference Shares will be issued credited as fully paid and will
carry substantially the same rights as those attached to the Novar Preference
Shares, save that they will not be convertible into Melrose Ordinary Shares. The
rights to be attached to the New Melrose Preference Shares will be set out in
the Offer Document and the Admission Document.
The Preference Offer will be conditional only upon the Ordinary Offer becoming
or being declared unconditional in all respects. Application will be made for
the New Melrose Preference Shares to be admitted to trading on AIM at the same
time as the New Melrose Ordinary Shares. Melrose will use its reasonable
endeavours to ensure that such admission becomes effective.
Melrose has secured committed debt facilities to finance, in accordance with
their terms, the redemption of the New Melrose Preference Shares and the Novar
Preference Shares (to the extent required), which are, or will be, due for
redemption in August 2005.
Furthermore, Melrose intends to procure that the Novar Preference Shares and the
Novar Ordinary Shares are delisted from the Official List following the Offers
becoming unconditional in all respects.
Melrose will apply for admission of the Enlarged Share Capital of Melrose to the
Official List as soon as practicable following completion of the Offers.
3. Mix and Match Facility relating to the Ordinary Offer
Novar Ordinary Shareholders (other than certain overseas shareholders) may
elect, under the terms of the Ordinary Offer, subject to availability, to vary
the proportions in which they receive New Melrose Ordinary Shares and cash
consideration under the Ordinary Offer in respect of their holdings of Novar
Ordinary Shares. However, the total number of New Melrose Ordinary Shares to be
issued and the maximum aggregate amount of cash to be paid under the Ordinary
Offer will not be varied as a result of elections made under the Mix and Match
Facility. Accordingly, satisfaction of elections made by Novar Ordinary
Shareholders under the Mix and Match Facility will depend on the extent to which
other Novar Ordinary Shareholders make offsetting elections. Satisfaction of
elections under the Mix and Match Facility will be effected on the basis of 100
pence (being an amount equal to the Placing Price) in cash for each New Melrose
Ordinary Share (and vice versa). To the extent that elections cannot be
satisfied in full, they will be scaled down on a pro rata basis.
As a result, Novar Ordinary Shareholders who make an election under the Mix and
Match Facility will not necessarily know the exact number of New Melrose
Ordinary Shares or the amount of cash they will receive until settlement of the
consideration under the Ordinary Offer.
Elections under the Mix and Match Facility will not affect the entitlements of
those Novar Ordinary Shareholders who do not make any such elections.
The Mix and Match Facility will remain open until the first closing date of the
Ordinary Offer. If the Ordinary Offer is not then unconditional as to
acceptances, Melrose may extend the Mix and Match Facility to a later date. If
the Mix and Match Facility has been closed, Melrose reserves the right to
reintroduce a Mix and Match Facility, subject to the rules of the City Code. The
Mix and Match Facility is conditional on the Ordinary Offer becoming or being
declared unconditional in all respects.
4. Financing the Offers
Equity
The cash consideration payable under the Ordinary Offer will be financed from
the proceeds of a cash placing with leading institutional investors of New
Melrose Ordinary Shares fully underwritten by Investec. Investec, as agent for
Melrose, has conditionally placed the Placing Shares with institutional
investors at the Placing Price. The Placing will raise approximately £232
million.
The Placing is conditional, amongst other things, upon the Ordinary Offer
becoming or being declared unconditional in all respects.
Under the terms of the Placing Agreement, Melrose is permitted to declare the
Ordinary Offer unconditional as to acceptances once it has received valid
acceptances of the Ordinary Offer representing over 50 per cent. of the voting
share capital of Novar. Melrose is not permitted to revise, or waive any other
condition of, the Offers without the consent of Investec.
Further details of the Placing will be set out in the Offer Document and the
Admission Document.
Debt
Debt facilities are not being used to finance the Offers. However, following
completion of the Offers, Melrose expects some or all of the current debt
facilities of Novar to become re-payable in full, as a result of the Offers. In
anticipation of this, Melrose has obtained committed facilities sufficient to
refinance Novar's existing debt facilities, including the future redemption of
the New Melrose Preference Shares and the Novar Preference Shares. In addition,
in the unlikely event that Novar Preference Shares are converted into Novar
Ordinary Shares, Melrose has arranged for a committed standby facility
sufficient to acquire any Novar Ordinary Shares arising from such conversion.
Under the terms of the committed debt facilities, Melrose is permitted to
declare the Ordinary Offer unconditional as to acceptances once it has received
valid acceptances of the Ordinary Offer representing over 50 per cent. of the
voting share capital of Novar.
Under the terms of the committed standby facility, Melrose is permitted to waive
any condition of the Ordinary Offer without the consent of the lender unless
such waiver is reasonably expected to have a material impact on the likelihood
of the facility being utilised or on the level of utilisation of the facility.
5. Background to and reasons for the Offers
Melrose was floated on AIM 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. Melrose's management team
is drawn from the former team at Wassall. During their tenure at Wassall, nearly
£500 million of value was created for shareholders with a compound total
shareholder return of over 18 per cent. per annum over a 12 year period.
The Melrose Board believes it can create substantial shareholder value for the
benefit of shareholders of the Enlarged Group. The Melrose management team has
demonstrated a successful track record of unlocking value in similar industrial
companies.
6. The need for a new management team at Novar
The facts speak for themselves...
Long term value destruction
• Over £1 billion of market capitalisation destroyed over the last ten
years
• A corresponding reduction of over 50 per cent. in the Novar Ordinary
Share price from 266 pence to 124 pence
• Negative Total Shareholder Returns: £100 invested in Novar ten years ago
would be worth £89 today...versus £209 if invested in the FTSE All Share
Continued operational underperformance: 5 year review
• EBITDA margin erosion from 17 per cent. to 11 per cent.
• Continuing group operating profit margin erosion from 13 per cent. to 7
per cent.
• Exceptional and restructuring charges of almost £300
million...approximately 50 per cent. of Novar's market capitalisation
Grossly overpaid for acquisitions that delivered unacceptable returns
• £762 million spent on acquisitions over the last 5 years...
• ...whilst profit for continuing operations has declined from £119
million to £106 million
...In summary, Novar has consistently delivered to its shareholders:
• Poor share price performance
• Poor management
• Poor strategy and value destructive acquisitions
• Poor and declining margins
New Novar management...or more of the same?
Melrose notes the sudden appointment of Stephen Howard with at best limited
consultation with Novar Shareholders. Stephen Howard has been a member of the
Novar Board since 2000 and was CEO at Cookson between 1 October 1997 and 19 July
2004. Under his leadership:
• The Cookson share price declined from 175 pence to 36 pence
• Despite spending over £670 million on acquisitions since 1998, the
operating profit for continuing operations declined from £188 million to £79
million
• The company launched a rescue rights issue
• Shareholders have not been paid a dividend since October 2001
A better alternative...
Melrose intends to*:
• Improve operating business performance
• Cease value destroying acquisitions
• Address the capital structure of the Security Printing Services division
of Novar
• Create, realise and return value to shareholders over time
7. Novar and its activities
Novar, a UK listed holding company, operates internationally in three different
businesses:
• Security Printing Services: this division operates a security printing
business which prints cheques and business forms in the United States. In
2003, this division achieved sales of £347 million and adjusted operating
profit of £62 million.
• Intelligent Building Systems: this division specialises in fire
detection, security alarm systems and cabling systems, with its main
operations in the UK and Germany. In 2003, this division achieved sales of
£604 million and adjusted operating profit of £36 million.
• Indalex Aluminum Solutions: this division manufactures and sells
aluminium extruded products principally in the North American market. In
2003, this division achieved sales of £480 million and adjusted operating
profit of £8 million.
Summary financial information of Novar is set out below:
Year ended 31 December 2001 2002 2003
-------------------------- ------- ------- -------
Turnover £1,482m £1,448m £1,431m
(Loss) / profit on ordinary activities after
taxation £(31)m £39m £(62)m
(Loss) / earnings per ordinary share (basic) (9.6)p 6.7p (17.9)p
Net assets £461m £443m £309m
8. Employees
In the event that the Offers become or are declared unconditional in all
respects, the existing employment rights of the employees of Novar will be fully
safeguarded.
* Further detail of Melrose's strategy is set out in paragraphs 16 and 17 of
Appendix 3 to this announcement.
The Melrose Directors have carefully considered the publicly available
information in relation to the Novar Pension Schemes, including the current
level of company contributions and the disclosed pension deficit. Melrose
believes that under its management, Novar will be better positioned to safeguard
the interests of the members of the Novar Pension Schemes and has structured its
Offers to ensure that they are not being financed by bank borrowings (other than
in the unlikely event of the conversion of the Novar Preference Shares). Further
details in relation to the Novar Pension Schemes are set out in paragraph 14 of
Appendix 3 to this document.
9. Novar Employee Share Schemes
The Ordinary Offer will extend to any Novar Ordinary Shares transferred or sold
from treasury or unconditionally allotted or issued prior to the date on which
the Ordinary Offer closes (or such earlier date as Melrose decides), including
Novar Ordinary Shares issued or transferred from treasury pursuant to the
options and awards granted under the Novar Employee Share Schemes.
Appropriate proposals will be made in due course to participants in the Novar
Employee Share Schemes.
10. Extraordinary General Meeting
In view of the size of the acquisition and in order to implement the Offers and
the Placing, it will be necessary for the shareholders of Melrose to approve:
the Offers, an increase in the share capital of Melrose, the creation of the New
Melrose Preference Shares, the amendment of the articles of association of
Melrose and the allotment of the New Melrose Ordinary Shares and the New Melrose
Preference Shares. Pre-emption rights will also need to be disapplied in respect
of the allotment of the Placing Shares. An Extraordinary General Meeting will be
convened for this purpose. The Circular convening the EGM will be sent to
Melrose Shareholders in due course.
11. Delisting of Novar Shares, re-registration and compulsory acquisition
After the Offers become or are declared unconditional in all respects, Melrose
intends to procure the making of an application by Novar to delist the Novar
Ordinary Shares and Novar Preference Shares from the Official List and the
cancellation of trading on the London Stock Exchange's market for listed
securities. It is anticipated that cancellation of listing and trading will take
effect no earlier than 20 business days after the Offers become unconditional in
all respects. Delisting would significantly reduce the liquidity and
marketability of any Novar Ordinary Shares and Novar Preference Shares not
assented to the Offers.
If Melrose receives acceptances under the Offers in respect of, and/or otherwise
acquires, 90 per cent. or more of the Novar Ordinary Shares to which the
Ordinary Offer relates and/or 90 per cent. or more of the Novar Preference
Shares to which the Preference Offer relates, Melrose intends to exercise its
rights pursuant to the provisions of sections 428 to 430F (inclusive) of the Act
to acquire compulsorily the remaining Novar Ordinary Shares and/or Novar
Preference Shares.
It is also proposed that, following the Offers becoming unconditional in all
respects, and after the Novar Ordinary Shares and Novar Preference Shares are
delisted, Novar will be re-registered as a private limited company under the
relevant provisions of the Act.
12. Listings, dealings and settlement
The Melrose Ordinary Shares are currently admitted to trading on AIM. The
successful completion of the Offers would be treated as a reverse takeover under
the AIM Rules. This requires both cancellation of Melrose's existing trading
facility on AIM and a new application to be made for the Enlarged Share Capital
to be admitted to trading on AIM. Cancellation of Melrose's existing trading
facility will not occur until the Ordinary Offer is declared unconditional in
all respects (save for any condition relating to Admission).
Simultaneously with the making of the Offers, application will be made to the
London Stock Exchange for the Enlarged Share Capital of Melrose to be admitted
to trading on AIM. It is expected that admission to trading will become
effective and that dealings will commence in the Enlarged Share Capital of
Melrose on the first dealing day following the day on which the Offers become or
are declared unconditional in all respects (save for any condition relating to
Admission). Certificates for New Melrose Ordinary Shares and/or New Melrose
Preference Shares to be issued to Novar Shareholders under the terms of the
Offers will be despatched, or the appropriate stock accounts in CREST of the
Novar Shareholders will be credited, no later than 14 days after the Offers
become or are declared unconditional in all respects or 14 days after receipt of
a valid acceptance of the Offers, whichever is the later.
Melrose will apply for admission of the Enlarged Share Capital of Melrose to the
Official List as soon as practicable following completion of the Offers.
13. General
The Offers will comply with the applicable rules and regulations of the London
Stock Exchange and the City Code. The Offers will be governed by English law and
will be subject to the conditions set out herein and in Appendix 1 and to be set
out in the Offer Document and the relevant Form of Acceptance. The Offer
Document, together with the Admission Document, giving financial and other
information in relation to Melrose will be sent to Novar Shareholders in due
course.
As at 10 November 2004 (the last business day prior to this announcement),
neither Melrose nor any of its directors, nor any person acting in concert with
it, owns or controls any Novar Shares or has any option to acquire any Novar
Shares or had entered into any derivative referenced to Novar Shares.
Enquiries:
M:Communications:
Nick Miles 020 7153 1535
Nick Fox 020 7153 1540
Tom Hampson 020 7153 1522
Rothschild:
Philip Swatman 020 7280 5000
Meyrick Cox 020 7280 5000
Ravi Gupta 020 7280 5000
Investec:
Keith Anderson 020 7597 5000
Rupert Krefting 020 7597 5000
The laws of the relevant jurisdictions may affect the availability of the Offers
to persons not resident in the United Kingdom. Persons who are not resident in
the United Kingdom, or who are subject to the laws of any jurisdiction other
than the United Kingdom, should inform themselves about, and observe, any
applicable requirements. Further details in relation to overseas shareholders
will be contained in the Offer Document.
Rothschild, which is authorised and regulated in the United Kingdom by the
Financial Services Authority, is acting only for Melrose and no-one else in
connection with the Offers and Admission 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, nor for giving advice in relation
to the Offers, Admission or the contents of this announcement.
Investec, which is authorised and regulated in the United Kingdom by the
Financial Services Authority, is acting only for Melrose and no-one else in
connection with the Offers and Admission 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 Investec or for giving advice in relation to
the Offers, Admission or the contents of this announcement.
This announcement does not constitute, or form part of, any offer for, or any
solicitation of any offer for, securities. Any acceptance or other response to
the Offers should be made only on the basis of information referred to in the
Offer Document which Melrose intends to despatch to Novar Shareholders and, for
information only, to holders of options under the Novar Employee Share Schemes.
Subject to the possible extension of the Offers into the United States referred
to below, the Offers will not be made, directly or indirectly, in or into or by
use of the mails of, or by any means or instrumentality (including, but not
limited to, facsimile, e-mail or other electronic transmission, telex or
telephone) of interstate or foreign commerce of, or of any facility of a
national, state or other securities exchange of, the United States, Canada,
Australia or Japan and the Offers will not be capable of acceptance by any such
use, means or instrumentality or otherwise from within the United States,
Canada, Australia or Japan. Accordingly, copies of this announcement, the
Admission Document, the Offer Document, the Circular or the Form(s) of
Acceptance, and any related documents are not being (unless determined otherwise
by Melrose in its sole discretion), and must not be, mailed or otherwise
distributed or sent in, into or from the United States, Canada, Australia or
Japan including to Novar Shareholders or participants in the Novar Employee
Share Schemes with registered addresses in the United States, Canada, Australia
or Japan or to persons whom Melrose, Rothschild or Investec know to be
custodians, trustees or nominees holding Novar Shares for persons with
registered addresses in the United States, Canada, Australia or Japan. Persons
receiving those documents (including, without limitation, custodians, nominees
and trustees) should not distribute, mail or send them in, into or from the
United States, Canada, Australia or Japan or use such mails or any such means,
instrumentality or facility for any purpose directly or indirectly in connection
with the Offers, and so doing may invalidate any purported acceptance of the
Offers. Subject to Melrose obtaining, on terms satisfactory to it, all
regulatory and other consents, authorisations, assurances, confirmations and/or
rulings which it considers necessary or desirable in connection therewith,
Melrose may elect at its absolute discretion to extend the Offers into the
United States at such time as the Offers are formally made by way of the Offer
Document.
This announcement is not an offer, or solicitation, of securities, or
solicitation of offers to purchase, the New Melrose Ordinary Shares or the New
Melrose Preference Shares in the United States, Canada, Australia or Japan.
Neither the New Melrose Ordinary Shares nor the New Melrose Preference Shares
have been, nor will they be, registered under the US Securities Act or under the
securities laws of any state, district or other jurisdiction of the United
States, or of Canada, Australia or Japan and no regulatory clearances in respect
of the New Melrose Ordinary Shares and New Melrose Preference Shares have been,
or will be, applied for in any jurisdiction other than the UK. Accordingly,
unless an exemption under the US Securities Act or other relevant securities
laws is applicable, the New Melrose Ordinary Shares and New Melrose Preference
Shares are not being, and may not be, offered, sold, resold, delivered or
distributed, directly or indirectly, in or into the United States, Canada,
Australia or Japan or to, or for the account or benefit of, any US Person or
person resident in Canada, Australia or Japan.
This document contains statements about members of the Novar Group and Melrose
that are or may be forward looking statements. All statements other than
statements of historical facts included in this document may be forward looking
statements. Any statements preceded or followed by or that include the words
"targets", "plans", "believes", "expects", "aims", "intends", "will", "may",
"anticipates" or similar expressions or the negative thereof are forward-looking
statements. Forward-looking statements include statements relating to the
following (i) future capital expenditures, expenses, revenues, economic
performance, financial condition, dividend policy, losses and future prospects;
(ii) business and management strategies and the expansion and growth of Novar's
or Melrose's operations; and (iii) the effects of government regulation on
Novar's or Melrose's business.
These forward-looking statements involve known and unknown risk, uncertainties
and other factors which may cause the actual results, performance or
achievements of any such person, or industry results, to be materially different
from any results, performance or achievements expressed or implied by such
forward-looking statements. These forward-looking statements are based on
numerous assumptions regarding the present and future business strategies of
such person and the environment in which each will operate in the future. All
subsequent oral or written forward-looking statements attributable to Melrose or
any persons acting on its behalf are expressly qualified in their entirety by
the cautionary statement above. Except as required by law, neither Melrose nor
any other party intends to update these forward-looking statements, even though
the affairs of Melrose and Novar will change from time to time.
Any person who, alone or acting together with any other person(s) pursuant to an
agreement or understanding (whether formal or informal) to acquire or control
securities of Novar or Melrose, owns or controls, or becomes the owner or
controller, directly or indirectly, of one per cent. or more of any class of
securities of Novar or Melrose, is generally required under the provisions of
Rule 8 of the City Code to notify a Regulatory Information Service and the Panel
of every dealing in such securities during the Offer Period. Please consult your
financial adviser immediately if you believe this rule may be applicable to you.
APPENDIX 1
CONDITIONS AND FURTHER TERMS OF THE OFFERS
The Offers, which will be made by Rothschild on behalf of Melrose, will comply
with the applicable rules and regulations of the London Stock Exchange and the
City Code, will be governed by English law and will be subject to the
jurisdiction of the courts of England. In addition, the Offers will be subject
to the terms and conditions set out in the Offer Document and related Forms of
Acceptance.
1. Conditions of the Ordinary Offer
The Ordinary Offer will be subject to the following conditions:
(a) valid acceptances of the Ordinary Offer being received (and not, where
permitted, withdrawn) by not later than 3.00 p.m. (London time) on the first
closing date of the Ordinary Offer (or such later time(s) and/or date(s)
as Melrose may, subject to the rules of the City Code or with the consent of
the Panel, decide) in respect of not less than 90 per cent. (or such lesser
percentage as Melrose may decide) in nominal value of the Novar Ordinary Shares
to which the Ordinary Offer relates, provided that this condition will not be
satisfied unless Melrose shall have acquired or agreed to acquire (whether
pursuant to the Ordinary Offer or otherwise) Novar Ordinary Shares carrying in
aggregate more than 50 per cent. of the voting rights then normally exercisable
at a general meeting of Novar, including for this purpose (except to the extent
otherwise agreed by the Panel) any such voting rights attaching to Novar
Ordinary Shares that are unconditionally allotted or issued before the date on
which the Ordinary Offer becomes or is declared unconditional as to acceptances
whether pursuant to the exercise of any outstanding subscription or conversion
rights or otherwise.
For the purposes of this condition:
(i) Novar Ordinary Shares which have been unconditionally allotted shall
be deemed to carry the voting rights they will carry upon issue;
(ii) Novar Ordinary Shares that cease to be held in treasury are Novar
Ordinary Shares to which the Ordinary Offer relates; and
(iii) the expression "Novar Ordinary Shares to which the Ordinary Offer relates"
shall be construed in accordance with sections 428 to 430F of the Act;
(b) the passing at the Extraordinary General Meeting of Melrose (or
at any adjournment of the meeting) of all resolutions as may be necessary or
desirable to approve, fund, effect or implement the Offers and the acquisition
of any shares in Novar, including the passing of the Resolution;
(c) the admission of the Enlarged Ordinary Share Capital to trading
on AIM becoming effective in accordance with the AIM Rules or (if Melrose so
determines and subject to the consent of the Panel) the London Stock Exchange
agreeing to admit such shares to trading on AIM subject only to: (i) the
allotment of such shares and/or (ii) the Ordinary Offer becoming or being
declared unconditional in all respects;
(d) no Third Party having decided to take, institute, implement or threaten
any action, proceeding, suit, investigation, enquiry or reference, or
having required any action to be taken or otherwise having done anything or
having enacted, made or proposed any statute, regulation, decision, order or
change to published practice and there not continuing to be outstanding any
statute, regulation, decision or order which would or might:
(i) make the Offers or their implementation or the acquisition or proposed
acquisition of any shares or other securities in, or control of, Novar by
Melrose void, illegal and/or unenforceable under the laws of any jurisdiction,
or otherwise directly or indirectly prohibit, or restrain, restrict, delay or
otherwise interfere with the implementation of, or impose additional conditions
or obligations with respect to, or otherwise challenge or require amendment of
the Offers or the acquisition of any such shares or securities by Melrose;
(ii) require, prevent or delay the divestiture or alter the terms envisaged for
such divestiture by Melrose or by any member of the Wider Novar Group of all
or any part of its businesses, assets or property or impose any limitation on
the ability of any of them to conduct their businesses (or any part thereof) or
to own any of their assets or properties (or any part thereof);
(iii) impose any limitation on, or result in a delay in, the ability of Melrose
directly or indirectly to acquire or hold or to exercise effectively all or
any rights of ownership in respect of shares or other securities in Novar or
on the ability of any member of the Wider Novar Group or Melrose directly or
indirectly to hold or exercise effectively any rights of ownership in respect
of shares or other securities (or the equivalent) in, or to exercise management
control over, any member of the Wider Novar Group;
(iv) require Melrose or the Wider Novar Group to acquire or offer to acquire
any shares, other securities (or the equivalent) or interest in any member of
the Wider Novar Group or any asset owned by any third party (other than in the
implementation of the Offers);
(v) require, prevent or delay a divestiture by Melrose of any shares or other
securities (or the equivalent) in Novar;
(vi) result in any member of the Wider Novar Group ceasing to be able to carry
on business under any name under which it presently does so;
(vii) impose any limitation on the ability of Melrose or any member of the
Wider Novar Group to integrate or co-ordinate all or any part of its business
with all or any part of the business of Melrose and/or the Wider Novar Group; or
(viii) otherwise affect the business, assets, profits or prospects of Melrose
or any member of the Wider Novar Group,
and all applicable waiting and other time periods during which any such
Third Party could decide to take, institute, implement or threaten any such
action, proceeding, suit, investigation, enquiry or reference or take any
other step under the laws of any jurisdiction in respect of the Offers or the
acquisition or proposed acquisition of any Novar Shares or otherwise intervene
having expired, lapsed, or been terminated;
(e) no undertakings or assurances being sought from Melrose or any member of
the Wider Novar Group by the Secretary of State for Trade and Industry or any
other third party, except on terms satisfactory to Melrose;
(f) all necessary or appropriate notifications, filings or applications
having been made in connection with the Offers and all necessary
waiting periods (including any extensions thereof) under any applicable
legislation or regulation of any jurisdiction having expired, lapsed or been
terminated (as appropriate) and all statutory and regulatory obligations in any
jurisdiction having been complied with and all Authorisations necessary or
appropriate in any jurisdiction for or in respect of the Offers and the
acquisition or the proposed acquisition of any shares or other securities in, or
control of, Novar by Melrose having been obtained in terms and in a form
satisfactory to Melrose from all appropriate Third Parties (including, without
limitation, any under the relevant provisions of the UK Enterprise Act 2002, the
Hart-Scott-Rodino Antitrust Improvements Act 1976, the Competition Act (Canada)
and the Spanish Law 16/1989) or (without prejudice to the generality of the
foregoing) from any person or bodies with whom Melrose or any member of the
Wider Novar Group has entered into contractual arrangements and all such
Authorisations necessary or appropriate to carry on the business of any member
of the Wider Novar Group in any jurisdiction having been obtained and all such
Authorisations remaining in full force and effect at the time at which the
Ordinary Offer becomes otherwise unconditional and there being no notice or
intimation of an intention to revoke, suspend, restrict, modify or not to renew
such Authorisations;
(g) except as fairly disclosed in the Annual Report and Accounts of Novar
or the Interim Results of Novar or as publicly announced to a Regulatory
Information Service by or on behalf of Novar prior to the date of this
announcement, there being no provision of any arrangement, agreement, licence,
permit, lease or other instrument to which any member of the Wider Novar Group
is a party or by or to which any such member or any of its assets is or may be
bound or be subject or any event or circumstance which, as a consequence of the
Offers or the acquisition or the proposed acquisition by Melrose of any shares
or other securities in Novar or because of a change in the control or management
of any member of the Wider Novar Group or otherwise, could or might reasonably
be expected to result in:
(i) any monies borrowed by, or any other indebtedness, actual or contingent,
of any member of the Wider Novar Group being or becoming repayable, or capable
of being declared repayable, immediately or prior to its or their stated
maturity date or repayment date, or the ability of any such member to
borrow monies or incur any indebtedness being withdrawn or inhibited
or being capable of becoming or being withdrawn or inhibited;
(ii) the rights, liabilities, obligations, interests or business of any member
of the Wider Novar Group or Melrose under any such arrangement, agreement,
licence, permit, lease or instrument or the interests or business of any member
of the Wider Novar Group or Melrose in or with any other firm or company or
body or person (or any agreement or arrangement relating to any such business
or interests) being terminated or adversely modified or affected or any onerous
obligation or liability arising or any adverse action being taken thereunder;
(iii) any member of the Wider Novar Group ceasing to be able to carry on
business under any name under which it presently does so;
(iv) any assets or interests of, or any asset the use of which is enjoyed by,
any member of the Wider Novar Group being or falling to be disposed of or
charged 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 Novar Group;
(v) the creation or enforcement of any mortgage, charge or other security
interest over the whole or any part of the business, property or assets of
any member of the Wider Novar Group;
(vi) the value of, or the financial or trading position or prospects of,
any member of the Wider Novar Group being prejudiced or adversely affected;
(vii) the creation of any liability (actual or contingent) by any member of
the Wider Novar Group; or
(viii) any liability of any member of the Wider Novar Group to make any
severance, termination, bonus or other payment to any of the directors
or other officers of any member of the Wider Novar Group;
(h) except as fairly disclosed in the Annual Report and Accounts of Novar or
the Interim Results of Novar or as publicly announced to a Regulatory
Information Service by or on behalf of Novar prior to the date of this
announcement, no member of the Wider Novar Group having, since 31 December 2003:
(i) issued or agreed to issue or authorised or proposed the issue of additional
shares of any class, or securities 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 or
agreed to transfer or sell or authorised or proposed the transfer or sale of
Novar Shares out of treasury (save, where relevant, as between Novar and
wholly-owned subsidiaries of Novar and save for the issue or transfer out of
treasury of Novar Shares on the exercise of options granted before the date of
this announcement in the ordinary course);
(ii) save for the dividend payable in respect of Novar Preference Shares on
1 December 2004 in respect of the period from 2 June 2004 to 1 December 2004
(inclusive), recommended, declared, paid or made or proposed to recommend,
declare, pay or make any bonus, dividend or other distribution (whether payable
in cash or otherwise) other than to Novar or one of its wholly-owned
subsidiaries;
(iii) merged with or demerged from or acquired any body corporate,
partnership or business or acquired or disposed of, or, other than in
the ordinary course of business, transferred, mortgaged or charged or created
any security interest over, any assets or any right, title or interest in any
asset (including shares and trade investments) or authorised, proposed or
announced any intention to do so;
(iv) made, authorised, proposed or announced an intention to propose any change
in its loan capital;
(v) issued, authorised or proposed the issue of any debentures or (save as
between Novar and its wholly-owned subsidiaries or between such wholly-owned
subsidiaries) incurred or increased any indebtedness or become subject to
any contingent liability;
(vi) entered into or varied or authorised, proposed or announced its
intention to enter into or vary any contract, transaction, arrangement or
commitment (whether in respect of capital expenditure or otherwise);
(vii) entered into or varied the terms of any service agreement with any
director or senior executive of the Wider Novar Group;
(viii) 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 employee of the Wider Novar Group;
(ix) made or agreed or consented to any significant change to the terms of
the trust deeds constituting the pension schemes established for its directors,
employees or their dependants or the benefits which accrue, or to
the pensions which are payable, thereunder, or to the basis on which
qualification for, or accrual or entitlement to, such benefits or pensions are
calculated or determined or to the basis on which the liabilities (including
pensions) of such pension schemes are funded or made, or agreed or consented to
any change to the trustees involving the appointment of a trust corporation;
(x) implemented, effected or authorised, proposed or announced its intention
to implement any composition, assignment, reconstruction, amalgamation,
commitment, scheme or other transaction or arrangement (other than the Offers);
(xi) purchased, redeemed or repaid or announced any proposal to purchase,
redeem or repay any of its own shares or other securities or reduced
or, save in respect of the matters mentioned in sub-paragraph (i) above, made
any other change to any part of its share capital;
(xii) waived or compromised any claim otherwise than in the ordinary course
of business;
(xiii) made any alteration to its memorandum or articles of association or
other incorporation documents;
(xiv) taken or proposed any steps, corporate action or had any legal
proceedings instituted or threatened against it in relation to the suspension
of payments, a moratorium of any indebtedness, its winding-up (voluntary
or otherwise), dissolution, reorganisation or for the appointment of
any administrator, receiver, manager, administrative receiver, trustee or
similar officer of all or any of its assets or revenues or any analogous
proceedings in any jurisdiction or appointed any analogous person in any
jurisdiction or had any such person appointed;
(xv) been unable, or admitted in writing that it is unable, to pay its debts
or commenced negotiations with one or more of its creditors with a view to
rescheduling or restructuring any of its indebtedness, or having stopped
or suspended (or threatened to stop or suspend) payment of its debts generally
or ceased or threatened to cease carrying on all or a substantial part of its
business; or
(xvi) entered into any contract, commitment, agreement or arrangement otherwise
than in the ordinary course of business or passed any resolution or made any
offer (which remains open for acceptance) with respect to or announced an
intention to, or to propose to, effect any of the transactions, matters or
events referred to in this condition;
(i) since 31 December 2003, and except as fairly disclosed in the
Annual Report and Accounts of Novar or the Interim Results of Novar or as
publicly announced to a Regulatory Information Service by or on behalf of Novar
prior to the date of this announcement:
(i) there having been no adverse change in the business, assets, financial
or trading position or profits or prospects or operational performance of
any member of the Wider Novar Group;
(ii) no litigation, arbitration proceedings, prosecution or other legal
proceedings having been threatened, announced or instituted by or against
or remaining outstanding against any member of the Wider Novar Group or
to which any member of the Wider Novar Group is or may become a party (whether
as claimant or defendant or otherwise) and no enquiry or investigation by, or
complaint or reference to, any Third Party against or in respect of any member
of the Wider Novar Group having been threatened, announced or instituted by or
against, or remaining outstanding in respect of, any member of the Wider Novar
Group;
(iii) no contingent or other liability having arisen or become known to
Melrose in respect of any member of the Wider Novar Group; and
(iv) no steps having been taken and no omissions having been made which
are likely to result in the withdrawal, cancellation, termination or
modification of any licence held by any member of the Wider Novar Group, which
is necessary for the proper carrying on of its business and the withdrawal,
cancellation, termination or modification of which is material and likely
adversely to affect the Novar Group taken as a whole;
(j) except as fairly disclosed in the Annual Report and Accounts of Novar or
the Interim Results of Novar or as publicly announced to a Regulatory
Information Service by or on behalf of Novar prior to the date of this
announcement, Melrose not having discovered:
(i) that any financial, business or other information concerning the
Wider Novar Group publicly disclosed or disclosed to Melrose at any time by
or on behalf of any member of the Wider Novar Group is misleading, contains
a misrepresentation of fact or omits to state a fact necessary to make that
information not misleading;
(ii) that any member of the Wider Novar Group is subject to any liability,
contingent or otherwise, which is not disclosed in the Annual Report and
Accounts of Novar or the Interim Results of Novar; or
(iii) any information which affects the import of any information disclosed to
Melrose at any time by or on behalf of any member of the Wider Novar Group; and
(k) Melrose not having discovered:
(i) that any past or present member of the Wider Novar Group has not complied
with all applicable legislation or regulations of any jurisdiction or any
Authorisations relating to the storage, carriage, disposal, discharge,
spillage, leak or emission of any waste or hazardous substance or any
substance likely to impair the environment (including property) or harm human
health or otherwise relating to environmental matters or the health and safety
of humans, which non-compliance would be likely to give rise to any liability
including any penalty for non-compliance (whether actual or contingent) on the
part of any member of the Wider Novar Group; or
(ii) that there has been a disposal, discharge, spillage, accumulation,
leak, emission, release or the migration, production, supply, treatment,
storage, transport or use of any waste or hazardous substance or any substance
likely to impair the environment (including any property) or harm human
health which (whether or not giving rise to non-compliance with any law or
regulation) would be likely to give rise to any liability (whether actual or
contingent) on the part of any member of the Wider Novar Group; or
(iii) that there is or is likely to be any liability (whether actual or
contingent) or requirement to make good, remediate, repair, re-instate or
clean up any property or asset now or previously owned, occupied or made use
of by any past or present member of the Wider Novar Group (or on its behalf), or
in which any such member may now or previously have had or be deemed to have had
an interest, under any environmental legislation, common law, regulation,
notice, circular, Authorisation, other legally binding requirement or order of
any Third Party or to contribute to the cost thereof or associated therewith or
indemnify any person in relation thereto; or
(iv) that circumstances exist (whether as a result of the making of the
Offers or otherwise)
(1) which would be likely to lead to any Third Party instituting; or
(2) whereby any member of the Wider Novar Group or any present or past
member of the Wider Novar Group would be likely to be required to institute,
an environmental audit or take any other steps which would in any such case be
likely to result in any liability (whether actual or contingent) to improve,
modify existing or install new plant, machinery or equipment or carry out
changes in the processes currently carried out or make good, remediate, repair,
re-instate or clean up any land or other asset now or previously owned, occupied
or made use of by any past or present member of the Wider Novar Group (or on its
behalf or for which a member of the Wider Novar Group would be responsible), or
in which any such member may now or previously have had or be deemed to have had
an interest; or
(v) that circumstances exist whereby a person or class of persons would be
likely to have any claim or claims 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 Novar Group which
claim or claims would be likely to affect any member of the Wider Novar Group.
Melrose reserves the right to waive in whole or in part all or any of conditions
(d) to (k) inclusive. Conditions (b) to (k) inclusive must be satisfied as at,
or waived (where possible) on or before, the 21st day after the later of the
first closing date of the Ordinary Offer and the date on which condition (a) is
fulfilled (or, in each case, such later date as the Panel may agree). Melrose
shall be under no obligation to waive, to determine to be or treat as fulfilled
any of conditions (d) to (k) inclusive by a date earlier than the date specified
above for the fulfilment thereof notwithstanding that the other conditions of
the Ordinary Offer may at such earlier date have been waived or fulfilled and
that there are at such earlier date no circumstances indicating that any of such
conditions may not be capable of fulfilment.
If Melrose is required by the Panel to make an offer for Novar Ordinary Shares
under the provisions of Rule 9 of the City Code, Melrose may make such
alterations to the terms and conditions of the Ordinary Offer as are necessary
to comply with the provisions of that Rule.
2. Conditions of the Preference Offer
The Preference Offer will be subject only to the Ordinary Offer becoming or
being declared unconditional in all respects.
3. Further Terms of the Offers
The Offers will lapse if they are referred to the UK Competition Commission
before the later of 3 p.m. (London time) on the first closing date of the Offers
and the date on which the Ordinary Offer becomes or is declared unconditional as
to acceptances. If the Offers so lapse, the Offers will cease to be capable of
further acceptance and persons accepting the Offers and Melrose will cease to be
bound by any Forms of Acceptance submitted on or before the time when the Offers
lapse.
APPENDIX 2
The following table, together with the accompanying notes, sets out an estimate
of the Enlarged Ordinary Share Capital and the pro forma dividend that would be
payable to Melrose Ordinary Shareholders of the Enlarged Group, based on the
aggregate ordinary dividend of £39 million paid by Novar for the year ended 31
December 2003:
Notes Shares
(million)
Share capital of the Enlarged Group
Existing Melrose Ordinary Shares 13.1
New Melrose Ordinary Shares to be issued pursuant
to the Placing (i) 232.0
New Melrose Ordinary Shares to be issued for Novar
Ordinary Shares (ii) 444.0
--------
Total issued Melrose Ordinary Shares in the
Enlarged Group 689.1
--------
Pro forma dividend per ordinary share for the Enlarged
Group
Aggregate cost of Novar's 2003 full year ordinary
dividend (iii) £39.1m
Total issued Melrose Ordinary Shares in Enlarged
Group 689.1
Pro forma dividend per Melrose Ordinary Share for the
Enlarged Group 5.7 pence
Notes:
(i) Based on the Placing Price of 100 pence per New Melrose Ordinary Share.
(ii) Assumes that New Melrose Ordinary Shares are issued on a one-for-one basis
for Novar Ordinary Shares under the terms of the Ordinary Offer. It is assumed
that no Novar Preference Shares are converted into Novar Ordinary Shares. The
calculation is as follows:
Shares
Notes (million)
Novar issued share capital
Novar Ordinary Shares currently in issue (iv) 431.4
Plus Executive Share Options with an exercise price
at or below 145 pence (v) 25.8
Plus Savings Related Share Options with an exercise
price at or below 145 pence (vi) 4.3
Less Novar Ordinary Shares held by Novar Employee
Trust in ESOP reserve (vii) (17.5)
--------
Total Novar Ordinary Shares outstanding 444.0
--------
(iii) As stated in the Annual Report and Accounts of Novar and comprising an
interim declared dividend of 2.90 pence (£11.9 million) and a final declared
dividend of 6.60 pence (£27.2 million)
(iv) As stated in the announcement issued by Novar on 5 November 2004 pursuant
to Rule 2.10 of the City Code
(v) Executive Share Options with an exercise price at or below 145 pence
calculated as follows:
Novar Executive Share Total Exercise price
Options (million) at or below 145
pence(million)
As at 31
December 2003 36.3 17.2
Plus those estimated to
have been issued from 31
December 2003 to date
(based on the number
granted in the year ended
31 December 2003)
(viii) (ix) 10.2 10.2
Less those estimated to
have been exercised from
31 December 2003 to date
(x) (1.7) (1.7)
-------- ----------
Total 44.9 25.8
-------- ----------
(vi) Savings Related Options with an exercise price at or below 145 pence
calculated as follows:
Novar Savings Related Share Total Exercise price
Options (million) at or below 145
pence(million)
As at 31
December 2003 4.3 4.3
Plus those issued from
31 December 2003
to date 0.0 0.0
-------- ----------
Total 4.3 4.3
-------- ----------
(vii) The ESOP reserve as at 31 December 2003 represented 20.7 million Novar
Ordinary Shares (as stated in the Annual Report and Accounts of Novar). However,
it is assumed that the 1.5 million Novar Ordinary Shares held by the Novar
Performance Partnership Plan Share Trust (in the ESOP reserve) cannot be used to
satisfy the Savings Related Options. Since 31 December 2003, the remaining 19.2
million Novar Ordinary Shares are calculated to have been reduced by the
exercise of 1.7 million options resulting in 17.5 million Novar Ordinary Shares
currently being held by the Novar Employee Trust.
(viii) Assumes that the number of Executive Share Options granted to persons
other than members of the Novar Board from 31 December 2003 to the date of this
announcement is the same as the number granted to such persons in the year ended
31 December 2003.
(ix) Assumes that all options have been granted at an exercise price of 132
pence, being the exercise price of Novar Executive Share Options granted to
management since 31 December 2003.
(x) Assumes that the number of Executive Share Options exercised from 31
December 2003 to the date of this announcement is the same as the number of
Novar Ordinary Shares transferred from the Novar Employee Trust
APPENDIX 3
SOURCES AND BASES
Save as otherwise stated, the following constitute the sources and bases of
certain information referred to in this announcement:
1. The financial information relating to Novar has been extracted from its
audited annual accounts for the relevant periods and the interim unaudited
financial statements for the relevant periods as published by Novar, all of
which are prepared in accordance with UK GAAP.
2. The value placed on the entire issued ordinary share capital of Novar by
the Ordinary Offer is based on (i) 431,364,766 Novar Ordinary Shares in
issue, such number being derived from the announcement issued by Novar on 5
November 2004 pursuant to Rule 2.10 of the City Code; and (ii) a value of 100
pence per New Melrose Ordinary Share, being the Placing Price.
3. Save as provided hereafter, all share prices quoted are closing prices,
taken from Datastream, which have been adjusted for subsequent capital
actions. Closing prices for a Novar Ordinary Share and a Melrose Ordinary Share
for 3 November 2004 have been derived from the Daily Official List
4. The reference to the compound shareholder return of over 18 per cent.
per annum over a 12 year period in respect of Wassall PLC refers to the
period from 16 September 1988 (being the date that members of the Melrose Board
were appointed to the board of Wassall PLC) to 14 April 2000 (being the date
that members of the Melrose Board resigned from the board of Wassall PLC) and is
based on the Total Return Index for Wassall, taken from Datastream, for these
dates.
5. The reference to over £1 billion of market capitalisation destroyed in
respect of Novar has been calculated using the difference between the market
capitalisation of Novar of £1,592 million on 3 November 1994 (based
on a closing price of 266.24 pence per Novar Ordinary Share and 598,000,000
Novar Ordinary Shares in issue at that date, such number being derived from
Datastream) and the market capitalisation of Novar of £534 million on 3 November
2004 (based on a closing price of 123.75 pence per Novar Ordinary Share and
431,364,766 Novar Ordinary Shares in issue at that date, such number being
derived from the announcement issued by Novar on 5 November 2004 pursuant to
Rule 2.10 of the City Code).
6. The reference to the reduction of over 50 per cent. in the Novar Ordinary
Share price is based on the difference between the closing price of 266.24
pence per Novar Ordinary Share on 3 November 1994 and the closing price
of 123.75 pence per Novar Ordinary Share on 3 November 2004.
7. The Total Shareholder Return on £100 invested in Novar is based on the
decrease in the Total Return Index, as taken from Datastream, for a Novar
Ordinary Share between 3 November 1994 (175.3) and 3 November 2004 (155.9),
representing a decrease of approximately 11 per cent. The difference in the
Total Return Index for the FTSE All Share index on 3 November 1994 (1,216.06)
and 3 November 2004 (2,541.85) represents an increase of 109 per cent.
8. The EBITDA margin erosion from 17 per cent. to 11 per cent. is calculated
from the figures disclosed in the Annual Report and Accounts of Novar:
EBITDA of £160 million on group continuing sales of £1,431 million (see page
12 of the Annual Report and Accounts of Novar) implies a margin of 11.2 per
cent. and, for 1999, EBITDA of £155 million on group continuing sales of £914
million (see page 12 of the Novar annual report and accounts for 2002) implies
a margin of 17.0 per cent.
9. The continuing group operating profit margin erosion from 13 per
cent. to 7 per cent. is based on the figures for group operating profit before
goodwill amortisation, exceptional items and restructuring costs, as disclosed
on page 46 of the Annual Report and Accounts of Novar. For 2003, continuing
operating profit of £106 million on continuing group sales of £1,431 implies a
margin of 7.4 per cent. For 1999, continuing operating profit of £119 million on
continuing group sales of £914 million implies a margin of 13.0 per cent.
10. Exceptional and restructuring charges of almost £300 million is based
on the aggregate exceptional and restructuring charges for the five year
period ended 31 December 2003 of £298.3 million, as disclosed on page 46 of the
Annual Report and Accounts of Novar.
11. The figure of £762 million spent by Novar on acquisitions over the last
five years is based on the aggregate cost of acquisitions for this period
as disclosed in Novar's accounts for the five year period ended 31 December
2003.
12. The reference to the decline in the Cookson share price is based on
the closing prices of 175.24 pence per Cookson Ordinary Share on 1 October
1997 and 36.25 pence per Cookson Ordinary Share on 19 July 2004.
13. The reference to over £670 million spent on acquisitions by Cookson
since 1998 is sourced from the aggregate cost of acquisitions taken from
the Cookson accounts for the years 1998 to 2003. The decrease in operating
profit for continuing operations (before goodwill amortisation) from £188
million to £79 million is sourced from the Cookson accounts for the years 1997
and 2003.
14. Melrose has considered the financial position of the pension
arrangements. As at 31 December 2003, an FRS17 deficit of £210.7 million in
respect of UK pension arrangements was disclosed in the notes to the Novar's
accounts. The financial assumptions disclosed were at the median of those
allowable under FRS17. The Interim Results of Novar show that the combined cash
funding of the pension arrangements across all territories will amount to £32
million during 2004. Based on the split of costs shown in the December 2003
accounts, it is estimated that approximately £20 million is in respect of the UK
arrangements. It would therefore appear that the assessed deficit for funding
purposes is likely to have been determined on more optimistic assumptions than
the FRS17 assessment, i.e. the deficit for funding purposes is likely to be
lower than the more conservative FRS17 assessment. In addition, it is likely
that the deficit is being spread over the long term (perhaps 12-15 years).
Although the trustees of the Novar UK pension schemes could have the power to
wind-up such schemes, the Melrose Board believes that, in the context of the
Offers, this is unlikely. KPMG People Services have reported on a number of
example scenarios. Details of these illustrative examples are set out below.
Accuracy of calculations - The analysis carried out has been based on
information in the Annual Report and Accounts of Novar and the Interim Results
of Novar only. All of the analysis has been carried out as at 1 October 2004. It
is not possible to carry out accurate analysis based on this information alone.
Illustrative figures have been produced on the following example assumptions:
• the split of liabilities in the UK arrangements is 25 per cent.: 75
per cent. between current pensioner and non-pensioner liabilities; and
• the average term to retirement of non-pensioner members of the UK
arrangements is 12 years.
The results of the analysis are sensitive to these assumptions. Analysis based
on alternative assumptions would produce different results. The starting point
of the analysis has been to illustrate what the FRS17 deficit in the UK
arrangements might be as at 1 October 2004. For the purpose of this
illustration, the example profile of liabilities as above was assumed, and
allowance was made for general market movements. In addition, assumptions at 1
October 2004 that would be appropriate for an FRS17 assessment given economic
conditions at that date were adopted.
Current financial position of the UK arrangements on ongoing funding bases - The
assumptions that are used to assess the ongoing funding position of the UK
arrangements are determined by the Scheme Actuary. There is a very wide range of
assumptions that could be adopted, and the assessed surplus or deficit in the
arrangements is very sensitive to the assumptions adopted. Examples of key
assumptions are:
• the assumed investment return that will be achieved pre-retirement;
• the assumed investment return that will be achieved post-retirement;
• the rate of future inflation;
• the rate at which salaries will increase in the future; and
• the longevity of members of the arrangements.
To illustrate this point by way of an example, the level of sensitivity to the
assumptions has been illustrated by considering the change in deficit that might
result from changing the pre-retirement discount rate for non-pensioners. Based
on the example profile of the UK arrangements shown above, it is estimated that
the FRS17 deficit might be of the order of £220 million at 1 October 2004 and
that for the following illustrative scenarios:
• this deficit might be approximately £154 million if the pre-retirement
discount rate were increased to gilts +2% pa; and
• this deficit might be approximately £110 million if the pre-retirement
discount rate were increased to gilts +3% pa.
The buyout debt - Analysis has been carried out to estimate the deficit in the
UK arrangements in the event that the arrangements are wound-up. The debt in
such circumstances is determined by the Scheme Actuary, based on what the
Actuary considers to be a reasonable estimate of the cost of securing all
benefits with an insurer. There is a high level of uncertainty regarding the
assumptions that would be adopted by the Scheme Actuary for this purpose.
Furthermore, the difference in the value of the debt on this basis and the
deficit as assessed on FRS17 is sensitive to the liability profile of the
Scheme. As set out above, this information has not been available in carrying
out the analysis. In order to illustrate the possible deficit by way of an
example, analysis has been carried out using the following assumptions:
• that the liability profile is as assumed in the previous funding
example above; and
• that the Scheme Actuary would adopt a real pre- and post-retirement
discount rate of 0.5 per cent. per annum.
Based on the above illustrative assumptions, it is estimated that the deficit in
the UK arrangements would be of the order of £550 million. Analysis based on
different assumptions to those set out above might produce significantly
different results.
15. The effects of the Novar strategy have been as follows:
In the Intelligent Building Systems division, Novar has enlarged the global
coverage through expensive acquisitions in both Security and Controls Systems
and Datacoms & Electrical Accessories, which compete against larger global
players. Novar has failed to improve operating performance and has incurred
continuous restructuring charges.
The Indalex Aluminum Solutions division has been built through expensive and
value destructive acquisitions. Despite incurring significant restructuring
costs since 2000, profitability has declined and the business underperformed a
key competitor over the last five years.
Security Printing Services operates in a long term declining market. This trend
has been partly countered by investments in shifting sales channels unit sales
towards the Internet and call centres, improving market share and reducing
overhead. The business has historically underperformed its two key competitors.
16. Melrose intends to improve the operating business performance of the Novar
businesses by, inter alia, focusing on improving margins, reducing overheads,
controlling investments and capital expenditure, managing brands and reviewing
product offering, customer base and outsourcing of components.
17. Melrose intends to address the optimal capital structure of the Security
Printing Services division of Novar by considering applying leverage on a
non-recourse basis.
APPENDIX 4
DEFINITIONS
The following definitions apply throughout this document unless the context
otherwise requires:
"Act" the Companies Act 1985, as amended
"Admission" the re-admission of the Existing Melrose Ordinary Shares
and the admission of the New Melrose Ordinary Shares and
the New Melrose Preference Shares to trading on AIM
becoming effective in accordance with the AIM Rules
"Admission the AIM admission document to be issued by Melrose in
Document" connection with Admission
"AIM" the Alternative Investment Market of the London Stock
Exchange
"AIM Rules" the rules applicable to companies whose shares are traded
on AIM published by the London Stock Exchange
"Annual Report and the annual report and audited accounts of Novar for the
Accounts of Novar" year ended 31 December 2003
"Authorisations" authorisations, orders, grants, recognitions,
confirmations, consents, licences, clearances,
certificates, permissions and approvals
"Blue Form of the blue Form of Acceptance, Authority and Election for use
Acceptance" by Novar Shareholders in connection with the Ordinary
Offer
"business day" any day on which banks are generally open in England and
Wales for the transaction of normal banking business other
than a Saturday or Sunday or public holiday
"certificated" or in relation to a share or other security, a share or other
"certificated security title to which is recorded in the relevant
form" register of the share or other security as being held in
certificated form (that is, not in CREST)
"Circular" the circular to be sent to Melrose Shareholders convening
the EGM
"City Code" or the City Code on Takeovers and Mergers
"Code"
"Cookson" Cookson Group plc
"Cookson Ordinary ordinary shares of 1 pence each in the capital of Cookson
Shares"
"CREST" the computerised settlement system to facilitate the
transfer of the title to shares in uncertificated form,
operated by CRESTCo Limited
"Daily Official the Daily Official List of the London Stock Exchange
List"
"EGM" or the extraordinary general meeting of Melrose to be convened
"Extraordinary to vote, inter alia, on the Resolution
General Meeting"
"Enlarged Group" Melrose and its subsidiaries, following successful
implementation of the Offers
"Enlarged Ordinary the issued ordinary share capital of Melrose as it will be
Share Capital" following the issue of the New Melrose Ordinary Shares
"Enlarged Share the issued ordinary and (if any) preference share capital
Capital" of Melrose as it will be following the issue of the New
Melrose Ordinary Shares and (if any) the New Melrose
Preference Shares
"Existing Melrose the existing Melrose Ordinary Shares
Ordinary Share(s)"
"Forms of the Blue Form of Acceptance and/or the Pink Form of
Acceptance" Acceptance, as the context requires
"Interim Results of the interim results of Novar for the six months ended 30
Novar" June 2004
"Investec" Investec Investment Banking, a division of Investec Bank
(UK) Limited
"London Stock the London Stock Exchange plc or its successor
Exchange"
"Melrose" Melrose PLC
"Melrose Board" or " the board of directors of Melrose
Melrose Directors"
"Melrose Ordinary ordinary shares of 0.1 pence each in the capital of Melrose
Shares"
"Melrose holders of Melrose Ordinary Shares
Shareholders"
"Mix and Match the right of Novar Ordinary Shareholders (other than
Facility" certain overseas shareholders) to elect, subject to
availability, to vary the proportions in which they receive
New Melrose Ordinary Shares and cash under the Ordinary
Offer
"New Melrose the new Melrose Ordinary Shares to be issued as
Ordinary Shares" consideration to Novar Shareholders pursuant to the
Ordinary Offer and/or the Placing Shares to be issued to
placees pursuant to the Placing
"New Melrose the new cumulative redeemable preference shares in the
Preference Shares" capital of Melrose to be issued as consideration to the
Novar Shareholders pursuant to the Preference Offer
"Novar" Novar plc
"Novar Board" the board of directors of Novar
"Novar Employee the Novar plc Performance Partnership Plan, the Novar plc
Share Schemes" Executive Share Option Scheme, the Novar plc 1996 Executive
Share Option Scheme, the Novar plc Savings Related Share
Option Scheme and the Novar plc 1999 Savings Related Share
Option Scheme
"Novar Group" Novar and its subsidiary undertakings and, where the
context permits, each of them
"Novar Ordinary the existing unconditionally allotted or issued and fully
Share(s)" paid ordinary shares of 277/9 pence each in the capital of
Novar and any further ordinary shares which are
unconditionally allotted or issued and fully paid before
the date on which the Ordinary Offer closes (or such
earlier date or dates, not being earlier than the date on
which the Ordinary Offer becomes or is declared
unconditional as to acceptances or, if later, the first
closing date of the Ordinary Offer, as Melrose, subject to
the Code, may decide) but excluding in both cases any such
shares held or which become held in treasury
"Novar Preference the existing issued and fully paid convertible cumulative
Shares" redeemable preference shares of 162/3 pence each in the
capital of Novar
"Novar Shareholder holders of Novar Shares
(s)"
"Novar Shares" Novar Ordinary Shares and/or Novar Preference Shares, as
the context requires
"Offers" the Ordinary Offer and/or the Preference Offer
"Offer Document" the document to be posted to Novar Shareholders and others
containing and setting out the terms and conditions of the
Offers
"Offer Period" the period commencing on (and including) 4 November 2004
and ending on whichever of the following dates shall be the
latest: (i) 3.00 p.m. on the first closing date of the
Offers; (ii) the date on which the Offers lapse; and (iii)
the date on which the Ordinary Offer becomes or is declared
unconditional as to acceptances
"Official List" the Official List of the UK Listing Authority
"Ordinary Offer" the offer to be made by Rothschild on behalf of Melrose to
acquire all the Novar Ordinary Shares on the terms and
subject to the conditions set out in the Offer Document and
the Blue Form of Acceptance including, where the context so
requires, any subsequent revision, variation, extension or
renewal of such offer and any election available in
connection with it
"Panel" the Panel on Takeovers and Mergers
"Pink Form of the pink Form of Acceptance and Authority for use by Novar
Acceptance" Shareholders in connection with the Preference Offer
"Placing" the placing by Investec of the Placing Shares at the
Placing Price on the terms of the Placing Agreement
"Placing the agreement dated 10 November 2004 entered into between
Agreement" Melrose and Investec in relation to the Placing
"Placing Price" 100 pence per Melrose Ordinary Share
"Placing Shares" 232 million New Melrose Ordinary Shares which are to be
issued pursuant to the Placing
"Preference Offer" the offer to be made by Rothschild on behalf of Melrose to
acquire all the Novar Preference Shares on the terms and
subject to the conditions set out in the Offer Document and
the Pink Form of Acceptance including, where the context so
requires, any subsequent revision, variation, extension or
renewal of such offer
"Regulations" the Uncertificated Securities Regulations 2001
"Regulatory any information service authorised from time to time by the
Information UK Listing Authority for the purpose of dissemination of
Service" regulatory announcements required by the Listing Rules of
the UK Listing Authority
"Resolution" the special resolution numbered 1 to be proposed at the EGM
(and set out in the notice of EGM to be contained in the
Circular) to approve the Offers, increase the share capital
of Melrose, create the New Melrose Preference Shares, amend
Melrose's articles of association, authorise the Melrose
Directors to allot the New Melrose Ordinary Shares and the
New Melrose Preference Shares and to dis-apply pre-emption
rights in relation to the allotment of the Placing Shares
"Rothschild" N M Rothschild & Sons Limited
"subsidiary", shall be construed in accordance with the Act (but for this
"subsidiary purpose ignoring paragraph 20(1)(b) of Schedule 4A of the
undertaking", Act)
"associated
undertaking" and
"undertaking"
"Third Party" any government or governmental, quasi- governmental,
supranational, statutory, regulatory, environmental,
administrative, fiscal or investigative body, court, trade
agency, association, institution or any other body or
person whatsoever in any jurisdiction
"UK" or "United United Kingdom of Great Britain and Northern Ireland
Kingdom"
"UK GAAP" generally accepted accounting principles in the United
Kingdom
"UK Listing the Financial Services Authority acting in its capacity as
Authority" or the competent authority for listing under Part VI of the
"UKLA" Financial Services and Markets Act 2000
"uncertificated" or a share or other security title to which is recorded in the
"in uncertificated relevant register of the share or security as being held in
form" uncertificated form, in CREST, and title to which, by
virtue of the Regulations may be transferred by means of
CREST
"United States" or the United States of America (including the states of the
"US" United States and the District of Columbia), its
possessions and territories and all areas subject to its
jurisdiction
"US Person" a US person as defined in Regulation S under the US
Securities Act
"US Securities the US Securities Act of 1933, as amended and the rules and
Act" regulations promulgated thereunder
"Wassall" Wassall PLC
"Wider Novar Novar and associated undertakings and any other body
Group" corporate, partnership, joint venture or person in which
Novar and such undertakings (aggregating their interests)
have an interest of more than 20 per cent. of the voting or
equity capital or the equivalent
All times referred to are London time unless otherwise stated.
This information is provided by RNS
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