Acquisition of First Active
Royal Bank of Scotland Group PLC
05 October 2003
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR
FROM AUSTRALIA, CANADA OR JAPAN
6 October 2003
THE ROYAL BANK OF SCOTLAND GROUP PLC
RECOMMENDED ACQUISITION FOR CASH OF FIRST ACTIVE PLC ('FIRST ACTIVE')
The boards of The Royal Bank of Scotland and First Active announce that they
have agreed the terms of a recommended acquisition for cash of First Active.
The combination of First Active and The Royal Bank of Scotland's subsidiary
Ulster Bank will create a highly effective challenger to the larger competitors
in the Irish banking market. First Active's strength in mortgages and savings
and investment products will complement Ulster Bank's broader range of banking
products for personal and business customers. In the Republic of Ireland, the
combined business will have approximately 800,000 personal and business
customers and a network of 173 branches. Across the Republic of Ireland and
Northern Ireland, there will be approximately 1.3 million personal and business
customers and 263 branches.
Both First Active and Ulster Bank will retain their own brands, branch networks
and distinctive customer propositions. Cost savings will be achieved by
combining funding, technology and processing activities and central functions.
Revenue benefits will be achieved by selling more mortgage and savings products
to Ulster Bank's customers, and a broader range of banking products to First
Active's customers.
This multi-brand distribution strategy, with shared manufacturing, is consistent
with the approach successfully implemented by The Royal Bank of Scotland in the
United Kingdom following the acquisition of NatWest.
Under the terms of the Acquisition, each First Active Share is valued at €6.20,
representing a premium of approximately 33.3 per cent. to the First Active
Closing Price on the last dealing day prior to the release of this announcement,
and the entire issued share capital of First Active is valued at approximately
€887 million.
The management of the combined business will be drawn from the management teams
of both First Active and Ulster Bank.
Commenting on the proposed acquisition, Fred Goodwin, Group Chief Executive of
The Royal Bank of Scotland, said:
'The combination of First Active and Ulster Bank will provide significant
impetus to The Royal Bank of Scotland's operations in the Irish financial
services market.
The management team of First Active, led by Cormac McCarthy, has been very
successful in growing First Active's business and improving its efficiency.
They will undoubtedly have key roles to play in taking the combined group
forward.
The combined business will focus on customer service, income growth and
efficiency. I believe that it is capable of becoming the best bank in Ireland
under each of these measures.'
Cormac McCarthy, Chief Executive of First Active, said:
'The cash offer of €6.20 per share from The Royal Bank of Scotland creates an
opportunity for shareholders to crystallise significant value on their
investment in First Active. This rewards our loyal base of individual
shareholders, many of whom hold less than 1,000 shares and comes in addition to
the €1.12 per share capital distribution to shareholders in June 2003.
The combination of First Active and Ulster Bank brought about by this
transaction will generate real opportunities for customers and staff as both
businesses move together to make a major impact on the Irish banking market.'
In addition, John Callaghan, Chairman of First Active, said:
'The board of First Active believes that this offer is in the best interests of
shareholders and is delighted to recommend it.'
This summary should be read in conjunction with the full text of the attached
announcement.
Enquiries:
THE ROYAL BANK OF SCOTLAND
Howard Moody (Press Enquiries) Telephone: +44 131 523 2056
Richard O'Connor (Investor Relations) Telephone: +44 20 7672 1758
MERRILL LYNCH Telephone: +44 20 7628 1000
Matthew Greenburgh
Henrietta Baldock
FIRST ACTIVE
Cormac McCarthy Telephone: +353 1 709 2301
Michael Torpey Telephone: +353 1 709 2223
JPMORGAN Telephone: +44 20 7742 4000
Terence Eccles
Alexander Justham
DAVY CORPORATE FINANCE Telephone: +353 1 679 6363
Hugh McCutcheon
Ivan Murphy
GIBNEY COMMUNICATIONS Telephone: +353 1 661 0402
(PR Advisers to First Active)
Ita Gibney
Jamie Kennedy
Merrill Lynch is acting for The Royal Bank of Scotland and no-one else in
connection with the Acquisition and will not be responsible to anyone other than
The Royal Bank of Scotland for providing the protections afforded to clients of
Merrill Lynch or for providing advice in relation to the Acquisition.
JPMorgan and Davy Corporate Finance are acting for First Active and no-one else
in connection with the Acquisition and will not be responsible to anyone other
than First Active for providing the protections afforded to clients of JPMorgan
and Davy Corporate Finance or for providing advice in relation to the
Acquisition.
The full text of the conditions and reference to certain further terms of the
Acquisition are set out in Appendix I and form part of this announcement.
The directors of The Royal Bank of Scotland accept responsibility for the
information contained in this announcement, other than that relating to First
Active, the First Active Group, the directors of First Active and members of
their immediate families, related trusts and persons connected with them. To
the best of the knowledge and belief of the directors of The Royal Bank of
Scotland (who have taken all reasonable care to ensure that such is the case),
the information contained in this announcement for which they accept
responsibility is in accordance with the facts and does not omit anything likely
to affect the import of such information.
The directors of First Active accept responsibility for the information
contained in this announcement relating to First Active, the First Active Group,
the directors of First Active and members of their immediate families, related
trusts and persons connected with them. To the best of the knowledge and belief
of the directors of First Active (who have taken all reasonable care to ensure
that such is the case), the information contained in this announcement for which
they accept responsibility is in accordance with the facts and does not omit
anything likely to affect the import of such information.
This announcement does not constitute an offer to sell or an invitation to
purchase or subscribe for any securities or the solicitation of any vote or
approval.
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR
FROM AUSTRALIA, CANADA OR JAPAN
6 October 2003
THE ROYAL BANK OF SCOTLAND GROUP PLC
RECOMMENDED ACQUISITION FOR CASH OF FIRST ACTIVE PLC ('FIRST ACTIVE')
1. Introduction
The boards of The Royal Bank of Scotland and First Active announce that they
have agreed the terms of a recommended acquisition for cash of First Active by
The Royal Bank of Scotland or, subject to Panel consent, a nominated subsidiary
of The Royal Bank of Scotland, by way of a scheme of arrangement under Section
201 of the Companies Act 1963 of Ireland.
2. The Acquisition
The Acquisition will be effected by way of a scheme of arrangement between First
Active and First Active Shareholders under Section 201 of the Act. Under the
Scheme (which is subject to the conditions and on the terms set out in Appendix
I to this announcement and to be set out in the Scheme Document) the First
Active Shares will be cancelled and the First Active Shareholders will receive,
on the following basis:
for each First Active Share €6.20 in cash
The cash consideration represents a premium of approximately 33.3 per cent. over
the Closing Price of a First Active Share of €4.65 on 3 October 2003, the last
dealing day prior to this announcement.
The acquisition price of €6.20 per First Active Share combined with the capital
distribution of €1.12 per First Active Share paid on 13 June 2003 represents a
premium of 156.2 per cent. over the price of a First Active Share of €2.86
(IR£2.25) at the time of its initial public offering in October 1998.
In addition, First Active Shareholders will retain the right to receive the
interim dividend of 6c per First Active Share which will be paid as planned on
24 October 2003.
The Acquisition values the entire issued share capital of First Active at
approximately €887 million.
The Scheme
The Scheme of Arrangement is an arrangement made between First Active and First
Active Shareholders under Section 201 of the Act, subject to the approval of the
High Court. Under the Scheme, each of the First Active Shares will be cancelled
pursuant to Sections 72 and 74 of the Act, new First Active shares will be
issued fully paid at par to The Royal Bank of Scotland and First Active will
become a wholly owned subsidiary of The Royal Bank of Scotland. In
consideration for the cancellation of their First Active Shares, First Active
Shareholders will receive a cash payment on the basis set out above.
To become effective, the Scheme of Arrangement requires, amongst other things,
the approval of a majority in number of First Active Shareholders at the Voting
Record Time, present and voting, either in person or by proxy, representing
three-fourths or more in value of the First Active Shares held by such holders,
at the Court Meeting.
In addition to the Court Meeting, an Extraordinary General Meeting of First
Active will be held for the purpose of considering and, if thought fit,
approving one or more resolutions relating to the implementation of the Scheme.
This meeting will be held directly after the Court Meeting.
Assuming the necessary approvals from the First Active Shareholders have been
obtained and all conditions have been satisfied or (where applicable) waived,
the Scheme will become effective upon delivery to the Registrar of a copy of the
Court Order of the High Court sanctioning the Scheme together with the minute
required by Section 75 of the Act and the registration of such order by him.
Upon the Scheme becoming effective, it will be binding on all First Active
Shareholders, irrespective of whether or not they attend or vote at the Court
Meeting or the Extraordinary General Meeting.
The interim dividend of 6c per First Active Share declared on 21 July 2003 for
the six months ended 30 June 2003 will be paid as planned on 24 October 2003 to
First Active Shareholders on the register at the close of business on 12
September 2003.
The cash consideration payable under the Scheme will be funded from The Royal
Bank of Scotland Group's existing cash resources.
The Conditions
The Acquisition is conditional on the Scheme becoming effective. The conditions
to the Acquisition and the Scheme are set out in full in Appendix I. The
implementation of the Scheme is conditional, amongst other things, upon:
• the Scheme becoming effective by not later than 31 March 2004 or such
later date as The Royal Bank of Scotland, First Active and the High Court
may agree, failing which the Scheme will lapse;
• the approval of a majority in number of First Active Shareholders at the
Voting Record Time, present and voting, either in person or by proxy
representing three-fourths or more in value of the First Active Shares held
by such holders, at the Court Meeting;
• the passing of such resolutions as are required to approve or implement
the Scheme at the Extraordinary General Meeting;
• the sanction of the Scheme and confirmation of the reduction of capital
involved therein by the High Court and the delivery of an office copy of the
Court Order and the minute required by Section 75 of the Act to the
Registrar and the registration of such Court Order by him; and
• the conditions which are not otherwise identified above being satisfied or
waived on or before the sanction of the Scheme by the High Court pursuant to
Section 201 of the Act.
3. Recommendation
The Independent Directors of First Active, who have been so advised by JPMorgan
and Davy Corporate Finance, financial advisers to First Active, consider the
terms of the Acquisition to be fair and reasonable. In providing such advice,
JPMorgan and Davy Corporate Finance have taken into account the commercial
assessments of the directors of First Active.
The Independent Directors of First Active believe that the terms of the
Acquisition are in the best interests of the First Active Shareholders as a
whole and intend unanimously to recommend that First Active Shareholders vote in
favour of the Acquisition at the Meetings, as they intend to do in respect of
their own beneficial holdings of, in aggregate, 371,432 First Active Shares,
which represent, in aggregate, approximately 0.3 per cent. of the existing
issued share capital of First Active.
Cormac McCarthy, First Active's Chief Executive, and Michael Torpey, First
Active's Finance Director, are being invited to join the board of Ulster Bank
Limited as executive directors following completion of the Acquisition. Because
of their interest in the outcome of the Acquisition, they have participated in
the deliberations of the board of First Active regarding the Acquisition but
have not taken part in the decision to recommend set out above.
4. Information on First Active
First Active is one of Ireland's leading financial institutions. First Active's
core business is the provision of mortgages and retail savings and investment
products in Ireland. It has a network of 51 branches, approximately 85,000
mortgage accounts and approximately 250,000 active deposit customers. First
Active's current management team has successfully implemented a wide ranging
cost rationalisation programme which has resulted in an improvement of the
business' underlying cost income ratio from 74.7 per cent. in June 2000 to 50.7
per cent. in June 2003.
First Active's strategic focus on providing innovative products to the Irish
market through its branch network saw it achieve record profits in 2002. For
the year ending 31 December 2002, First Active's profit on ordinary activities
before tax and non-operating exceptional items was €66.1 million (2001: €49.3
million). As at 30 June 2003, First Active reported net assets of €288.2
million.
First Active has approximately 145,000 shareholders, approximately 95 per cent.
of whom own less than 1,000 First Active Shares. Many of these individual
shareholders received free shares on the Company's flotation. First Active has
already delivered value to its shareholders including the distribution of €160.2
million (representing €1.12 per First Active Share) of capital to them earlier
this year.
5. Information on The Royal Bank of Scotland
The Royal Bank of Scotland is Europe's 2nd and the world's 5th largest banking
group by reference to market capitalisation as at 3 October 2003. The Royal
Bank of Scotland's main areas of operation are the United Kingdom, Europe and
the United States. In the Republic of Ireland and Northern Ireland, The Royal
Bank of Scotland's activities are conducted through Ulster Bank Limited, a
wholly owned subsidiary.
The Royal Bank of Scotland has one of the strongest portfolios of brands in the
financial services sector which includes The Royal Bank of Scotland, NatWest,
Direct Line, Churchill, Coutts, Tesco Personal Finance, Ulster Bank, Lombard,
and, in the United States, Citizens.
For the year ended 31 December 2002, The Royal Bank of Scotland reported total
income of GBP 16,815 million (€26,753 million) (2001: GBP 14,558 million
(€23,424 million)) and profit on ordinary activities before tax of GBP 4,763
million (€7,578 million) (2001: GBP 4,252 million (€6,841 million)). As at 30
June 2003, the equity shareholders' funds of The Royal Bank of Scotland were GBP
25,496 million (€36,638 million).
6. Background to and reasons for the Acquisition
The directors of The Royal Bank of Scotland believe that the combination of
First Active and The Royal Bank of Scotland's subsidiary Ulster Bank will create
a highly effective challenger to the larger competitors in the Irish banking
market. First Active's strength in mortgages and savings and investment
products will complement Ulster Bank's broader range of banking products for
personal and business customers. In the Republic of Ireland, the combined
business will have approximately 800,000 personal and business customers and a
network of 173 branches. Across the Republic of Ireland and Northern Ireland,
there will be approximately 1.3 million personal and business customers and 263
branches.
Both First Active and Ulster Bank will retain their own brands, branch networks
and distinctive customer propositions. Cost savings will be achieved by
combining funding, technology and processing activities and central functions.
Revenue benefits will be achieved by selling more mortgage and savings products
to Ulster Bank's customers, and a broader range of banking products to First
Active's customers.
This multi-brand distribution strategy, with shared manufacturing, is consistent
with the approach successfully implemented by The Royal Bank of Scotland in the
United Kingdom following the acquisition of NatWest.
7. Expense Reimbursement Letter
Subject to Panel consent, The Royal Bank of Scotland and First Active have
entered into an Expense Reimbursement Letter, pursuant to which First Active
agrees that upon the occurrence of certain events, it will pay specific,
quantifiable and reasonable third party costs and expenses incurred by The Royal
Bank of Scotland (up to a maximum of one per cent. of the value of the
Acquisition) in connection with the Acquisition.
JPMorgan and Davy Corporate Finance, financial advisers to the directors of
First Active, and the directors of First Active are of the opinion (and will
confirm this in writing to the Panel in accordance with Note 1 on Rule 21.2 of
the Takeover Rules) that the Expense Reimbursement Letter is in the best
interests of First Active Shareholders.
8. Management and employees
The management of the combined business will be drawn from the management teams
of both First Active and Ulster Bank. Four non-executive directors of First
Active will be invited to join the board of Ulster Bank Limited following
completion of the Acquisition and Cormac McCarthy, First Active's Chief
Executive, and Michael Torpey, First Active's Finance Director, will also be
invited to join this board as executive directors.
The Royal Bank of Scotland has given assurances to the directors of First Active
that the existing employment rights, including pension rights, of the employees
of First Active and its subsidiaries will be fully safeguarded.
9. First Active Share Option Schemes
Outstanding options under the First Active Share Option Schemes will be
exercisable as permitted by their existing terms and conditions. Appropriate
proposals will be made in due course to holders of options over First Active
Shares.
10. Scheme Document
The Scheme Document, containing further information relating to the
implementation of the Scheme, the full terms and conditions of the Scheme and
which will contain notices of the Court Meeting to be convened by direction of
the High Court and the separate Extraordinary General Meeting required to
approve the Scheme, will be posted as soon as reasonably practicable to First
Active Shareholders and, for information only, to holders of options under the
First Active Share Option Schemes.
The Scheme Document will also include details of the expected timetable for
implementation of the Scheme and will specify the actions to be taken by First
Active Shareholders. It is expected that the Acquisition will become effective
during the course of January 2004.
11. Disclosure of interests in First Active
Save for interests of The Royal Bank of Scotland Group in 87,703 First Active
Shares as at the close of business on 3 October 2003, being the latest
practicable day prior to the date of this announcement, The Royal Bank of
Scotland did not own or control any First Active Shares nor did it hold any
options to purchase any First Active Shares, nor did it have any arrangements in
relation to any First Active Shares, nor had it entered into any derivative
referenced to First Active Shares which remained outstanding. Arrangements
include an indemnity or option arrangement or an agreement or understanding,
whether formal or informal, of whatever nature relating to First Active Shares
which is or may be an inducement to one or more persons to deal or refrain from
dealing in such shares. In view of the requirement for confidentiality, The
Royal Bank of Scotland has not made any enquiries in this respect of certain
parties who may be deemed by the Panel to be acting in concert with The Royal
Bank of Scotland for the purposes of the Acquisition.
12. De-listing and cancellation of trading
If the Scheme is approved at the Court Meeting, a request will be made to the
Irish Stock Exchange and the London Stock Exchange to cancel the trading in
First Active Shares on their respective markets for listed securities, and to
the Irish Stock Exchange and the UK Listing Authority to cancel the listing of
First Active Shares on the Official List with effect from the close of business
on the business day immediately prior to the Effective Date. The last day of
dealings in First Active Shares on the Irish Stock Exchange and the London Stock
Exchange will be the last business day before the Effective Date.
13. Consideration
The consideration due under the terms of the Acquisition will be sent to First
Active Shareholders no later than 14 days following the date on which the Scheme
becomes effective.
14. General
This announcement does not constitute an offer or an invitation to offer to
purchase or subscribe for any securities. This announcement is being made
pursuant to Rule 2.5 of the Takeover Rules.
The Acquisition will be subject to the applicable requirements of the Takeover
Rules, the Irish Stock Exchange, the UK Listing Authority and the London Stock
Exchange.
Any person who is the holder of one per cent. or more of First Active Shares may
be required to make disclosures pursuant to Rule 8.3 of the Takeover Rules with
effect from 6 October 2003.
Merrill Lynch is acting for The Royal Bank of Scotland and no-one else in
connection with the Acquisition and will not be responsible to anyone other than
The Royal Bank of Scotland for providing the protections afforded to clients of
Merrill Lynch or for providing advice in relation to the Acquisition.
JPMorgan and Davy Corporate Finance are acting for First Active and no-one else
in connection with the Acquisition and will not be responsible to anyone other
than First Active for providing the protections afforded to clients of JPMorgan
and Davy Corporate Finance or for providing advice in relation to the
Acquisition.
The full text of the conditions and reference to certain further terms of the
Acquisition are set out in Appendix I and form part of this announcement and
will be set out in full in the Scheme Document. The basis and sources used in
this announcement are outlined in Appendix II. Appendix III contains
definitions of certain terms used in this announcement. The Scheme Document and
related Forms of Proxy will be despatched to First Active Shareholders and, for
information only, to First Active Optionholders, as soon as reasonably
practicable.
The directors of The Royal Bank of Scotland accept responsibility for the
information contained in this announcement, other than that relating to First
Active, the First Active Group, the directors of First Active and members of
their immediate families, related trusts and persons connected with them. To
the best of the knowledge and belief of the directors of The Royal Bank of
Scotland (who have taken all reasonable care to ensure that such is the case),
the information contained in this announcement for which they accept
responsibility is in accordance with the facts and does not omit anything likely
to affect the import of such information.
The directors of First Active accept responsibility for the information
contained in this announcement relating to First Active, the First Active Group,
the directors of First Active and members of their immediate families, related
trusts and persons connected with them. To the best of the knowledge and belief
of the directors of First Active (who have taken all reasonable care to ensure
that such is the case), the information contained in this announcement for which
they accept responsibility is in accordance with the facts and does not omit
anything likely to affect the import of such information.
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