6th Mar 2006 07:00
Lupus Capital PLC03 March 2006 Not for release, publication or distribution into the United States, Canada, Japan or Australia Lupus Capital plc ("Lupus" or "the Company") Proposed acquisition of Schlegel Placing of 299,339,334 New Ordinary Shares at 14 pence per New Ordinary Share Open Offer of up to 79,232,095 New Ordinary Shares at 14 pence per New Ordinary Share Admission of the Enlarged Share Capital to trading on AIM Summary • Lupus announces it has conditionally agreed to acquire the Schlegel building products business from UniPoly Holdings Limited and its subsidiary for approximately £84 million in cash payable on completion. • Schlegel is a leader in the manufacturing and marketing of door seals, selling its products worldwide. For the year ended 31 December 2005, Schlegel had sales of £69.3 million and generated profit before interest and tax of £10.0 million, after management services fees of £0.7 million. • The consideration will be funded partly through a Placing and Open Offer of 378,571,429 New Ordinary Shares at a price of 14 pence per share and partly through a new debt facility of up to £45 million to be provided by HSBC and HBOS. • Of the Ordinary New Shares being issued, 299,339,334 shares have been placed firm with institutional and certain other investors under the Placing and 79,232,095 shares will be offered to existing shareholders under the terms of the Open Offer on the basis of one share for every three held as at 1 March 2006. • The Acquisition is categorised as a reverse takeover for Lupus under the Listing Rules and as such requires the consent of Lupus shareholders to be sought at the EGM expected to be held on 29 March 2006 at 11:00 a.m.. • Lupus is applying for the cancellation of the listing of its Existing Ordinary Shares from the Official List on completion of the Acquisition and will simultaneously apply for the Enlarged Share Capital to be admitted to trading on AIM. • Lupus has today announced its preliminary results for the year ended 31 December 2005. • HSBC is acting as nominated adviser and broker to Lupus and is sole underwriter to the Placing and Open Offer. Commenting on the Acquisition, Greg Hutchings, Executive Chairman of Lupus,said: "We are very excited about the progress that we are making with the Company.Our results are good, backed up by strong cash generation and a progressivedividend policy. The acquisition of Schlegel, an international buildingproducts manufacturer, is yet another step in creating a successful growinginternational business in line with our strategy of developing Lupus Capitalplc." This summary should be read in conjunction with the full text of the followingannouncement and the prospectus and circular to Shareholders relating to theAcquisition, Placing and Open Offer and Admission to AIM, which will be postedto Shareholders shortly. Enquiries: Alan FrameEquity Development0207 405 777707850 944187 HSBC Bank plc:Rupert Faure Walker Nick DonaldManaging Director Head of UK Equity Capital Markets0207 992 2101 0207 992 2151 Further information on Lupus Capital plc is available on the company's website(www.lupuscapital.co.uk) Not for release, publication or distribution into the United States, Canada, Japan or Australia HSBC is acting exclusively for Lupus Capital plc and no one else in relation tothe Acquisition, Placing and Open Offer referred to in this announcement andwill not be responsible to anyone other than Lupus for providing the protectionsafforded to their clients or for providing advice in relation to theAcquisition, the Placing, the Open Offer or any other matter referred to in thisannouncement. No offer or invitation to acquire shares in Lupus Capital plc is being made byor in connection with this announcement. Any such offer will be made solely bymeans of the prospectus to be published by Lupus Capital plc in due course andany acquisition of ordinary shares should be made on the basis of theinformation contained in such prospectus. The Prospectus containing details of, inter alia, the Acquisition, the Placingand Open Offer and a notice of an Extraordinary General Meeting of the Company,to be held at the offices of Slaughter and May, One Bunhill Row, London EC1Y8YY, is expected to be posted to Qualifying Shareholders shortly, together withthe application forms and separate form of proxy for use at the ExtraordinaryGeneral Meeting. Copies of the Prospectus will also be available to the public,free of charge, from the offices of Slaughter and May, One Bunhill Row, LondonEC1Y 8YY and the registered office of the Company up until Admission. This announcement and the information contained herein are not an offer for saleof securities in or into the United States, Australia, Canada or Japan or in anyother jurisdiction. The ordinary shares, nor any rights to subscribe for suchordinary shares, have not been and are not being registered under the UnitedState Securities Act of 1933, as amended (the Securities Act) and may not beoffered or sold in the United States or to or for the account or benefit of USpersons (as such terms are defined in Regulation S under such Act) absentregistration under, or an exemption from registration under, or in a transactionnot subject to the requirements of, the Securities Act. There will be no publicoffer of securities in the United States. This announcement and the information contained herein does not constitute anoffer to sell, exchange or transfer any securities of Lupus Capital plc and isnot soliciting an offer to purchase, exchange or transfer such securities in anyjurisdiction where the offer, sale, exchange or transfer is not permitted or toany person or entity to whom it is unlawful to make that offer, sale, exchangeor transfer. This announcement contains "forward-looking statements" which include allstatements other than statements of historical facts, including, withoutlimitation, those regarding Lupus's financial position, business strategy, plansand objectives of management for future operations and any statements precededby, followed by or that include forward-looking terminology such as the words "targets", "believes", "estimates", "expects", "aims", "intends", "can", "may", "anticipates", "would", "should", "could" or similar expressions or the negativethereof. Such forward-looking statements involve known and unknown risks,uncertainties and other important factors beyond Lupus's control that couldcause the actual results, performance or achievements of Lupus to be materiallydifferent from future results, performance or achievements expressed or impliedby such forward-looking statements. Such forward-looking statements are based onnumerous assumptions regarding Lupus's present and future business strategiesand the environment in which Lupus will operate in the future. Theseforward-looking statements speak only as at the date of this announcement. Lupusexpressly disclaims any obligation or undertaking to disseminate any updates orrevisions in relation to any forward-looking statements contained herein toreflect any change in Lupus's expectations with regard thereto or any change inevents, conditions or circumstances on which any such statements are based saveas required by FSMA, the Prospectus Rules, Disclosure Rules and the ListingRules. As a result of these factors, the events described in the forward-lookingstatements in this announcement may not occur. Not for release, publication or distribution into the United States, Canada, Japan or Australia Lupus Capital plc ("Lupus" or "the Company") Proposed acquisition of Schlegel Placing of 299,339,334 New Ordinary Shares at 14 pence per New Ordinary Share Open Offer of up to 79,232,095 New Ordinary Shares at 14 pence per New Ordinary Share Admission of the Enlarged Share Capital to trading on AIM 1. Background and introduction: Lupus announces it has conditionally agreed to acquire, through its wholly ownedsubsidiaries Schlegel Acquisition Holdings Limited, Schlegel AcquisitionHoldings USA, Inc., Schlegel UK (2006) Limited and Schlegel Australia (2006) PtyLimited, the shares, assets and liabilities comprising the building productsbusiness of Schlegel from UniPoly Holdings Limited and Schlegel Limited (awholly owned subsidiary of UniPoly Holdings Limited) for approximately £84million in cash. The cash consideration payable in relation to the Acquisition will be fundedthrough a firm Placing of 299,339,334 New Ordinary Shares at a price of 14 penceper share, an Open Offer of 79,232,095 New Ordinary Shares at a price of 14pence per share and a New Debt Facility. 54,373,895 of the Open Offer Shareswill also be conditionally placed with institutional and other certaininvestors, subject to recall in respect of any of those Open Offer Shares beingacquired pursuant to the Open Offer. The Placing and the Open Offer will raise gross proceeds of approximately £53million and the Company will use the New Debt Facility and the proceeds of thePlacing and Open Offer (net of all expenses in relation to the transaction) tofinance the Acquisition. The Acquisition is categorised as a reverse takeover for Lupus under the ListingRules and as such requires the consent of the Existing Shareholders to be soughtat the EGM proposed to be held on 29 March 2006 at 11:00 a.m.. Lupus is applyingfor the cancellation of the listing of its Existing Ordinary Shares from theOfficial List on completion of the Acquisition and will simultaneously apply forthe Enlarged Share Capital to be listed on AIM. The Board believes that the listing of the Enlarged Group on AIM is in the bestinterests of Shareholders as a whole and allows Lupus to complete theacquisition of Schlegel. It will also enable Lupus to agree and executetransactions more quickly, should acquisition and development opportunitiesarise in the future. The Board remains committed to the highest standards ofcorporate governance. The Acquisition is conditional, inter alia, on the Resolutions being passed byLupus Shareholders at the EGM and Admission taking place. HSBC is acting as nominated adviser and broker to Lupus and is sole underwriterto the Placing and Open Offer. The Directors of Lupus believe that Schlegel is a profitable and cash generativebusiness with an international manufacturing capability that makes good marginsand operates in a sector that the Lupus management team know well. The Schlegelbrand is recognised throughout the industry and the business has substantialmarket shares in its key markets. Schlegel represents a very strong fit with Lupus's strategy of acquiring assetbased, positive cash flow companies operating in industrial manufacturing,processes or services. Lupus will look to use Schlegel as a platform for growthand will work with the Schlegel management to drive operational improvementsthrough the business, to pursue organic growth opportunities and to make add-onacquisitions where they will add value. Lupus expects that Schlegel will formthe foundations of a more substantial building products group. 2. Principal terms of the Acquisition On 3 March 2006, Schlegel Acquisition Holdings Limited, Schlegel AcquisitionHoldings USA, Inc., Schlegel UK (2006) Limited and Schlegel Australia (2006) PtyLimited (all wholly owned subsidiaries of Lupus) entered into the AcquisitionAgreement with UniPoly and Schlegel UK for the purchase of Schlegel. The consideration payable under the terms of the Acquisition is £84 million on adebt free/cash free basis. All existing third party debt is being repaid onacquisition and cash balances held in Schlegel as at 28 February 2006 will bepaid over to UniPoly at Completion. The amount of £84 million will be (i)increased by any net cash in the bank accounts of Schlegel as at 28 February2006; (ii) increased by interest for the period between 28 February 2006 andCompletion at 5 per cent. per annum; and (iii) decreased to the extent that thenet trading working capital of Schlegel as at 28 February 2006 is less than£14.8 million. The total consideration is not expected to exceed £86 million. The Acquisition Agreement is conditional upon (inter alia) the satisfaction ofthe following conditions: - the waiting period under any applicable antitrust regulations havingterminated or expired; - certain of the conditions relating to obtaining the financing tocomplete the Acquisition being satisfied (these include some of the conditionsrelating to the Placing, Open Offer and New Debt Facility); and - the release by the Vendors of their letters of credit specified in theAcquisition Agreement. The Acquisition is expected to complete at the same time as Admission, subjectto all the relevant conditions being satisfied. Further information on the terms and conditions of the Acquisition will becontained in the Prospectus and circular to be published and sent toshareholders shortly. 3. Information on Schlegel Schlegel is a leader in the manufacturing and marketing of door seals and soldover 500 million metres of window seals in the year ended 31 December 2005.Schlegel's core manufacturing competencies are continuously moulded urethanefoam, narrow fabric textiles, and extruded plastics. Schlegel is a leadingproducer of urethane foam (compression seals) and woven pile (sliding seals) forthe window and door market and sells its products in more than 75 countries fromseven manufacturing plants located around the world. Schlegel also manufactures related products such as cleaning brushes and staticcontrol devices for copiers and printers, specialty automotive products such assunroof seals and truck spray suppressants, tractor seat trim and sway barbushes. Schlegel currently has over 5,000 customers. For the year ended 31 December 2005, Schlegel had sales of £69.3 million andgenerated profit before tax of £3.8 million. Operating profit for the year ended31 December 2005 was £10.0 million and operating profit before managementservices fees of £0.7 million was £10.7 million. The value of the gross assetsof Schlegel as at 31 December 2005 was £39.9 million. 4. Information on Lupus Lupus is a holding company with a declared strategy: • to build shareholder value through the acquisition of industrial assets with the potential for development; • to apply the executive team's management skills and systems to improve profitability; and • to use a variety of funding mechanics and exit strategies to enhance shareholder value. Lupus owns one operating subsidiary, Gall Thomson, a supplier of marinebreakaway couplings. For the year ended 31 December 2005, Lupus had sales in the year of £7.479million (2004: £6.607 million) an increase of 13.2 per cent. Pre tax profitsbefore goodwill, the LESOT charge and exceptional items were up 6.8 per cent. at£3.176 million (2004: £2.974 million). Lupus also intends to declare anincreased final dividend of 0.278p per share (2004: 0.264p), an increase of 5.3per cent. Lupus has today announced its preliminary results for the year ended 31 December2005. 5. Historic financial information on Schlegel Financial information for Schlegel will be included in the Prospectus. AsSchlegel has only traded as a separate entity since 1 January 2005, it is onlypossible to produce historical financial information for Schlegel for the yearended 31 December 2005. Schlegel is the larger of the two divisions within the Schlegel Group, the otherbeing Schlegel EMI. The Schlegel Group has operations in various countriesaround the world. In most of these countries, only Schlegel or the Schlegel EMIbusiness operates. However, in the USA, the largest single country of operation,which accounts for approximately 45 per cent. of Schlegel sales, and in Belgium,which accounts for approximately 11 per cent. of Schlegel sales, the twodivisions have historically been operated as one combined unit with noseparation of manufacturing operations or financial reporting. Prior to 31 December 2004, Schlegel EMI and Schlegel operated as one combinedunit with each business sharing operating resources, premises, support services,staff and management. There was no separation of financial results beyond sales,and in particular the net assets and cashflows of the separate businesses werenot tracked, neither was there any allocation of the pool of overhead costs. Thebusinesses were, in effect, so closely entwined that their results are notreasonably separable to provide a true picture of the separate businesses priorto 31 December 2004. During 2004, work commenced to separate the two divisions operationally in theUSA and Belgium. From 31 December 2004, the two divisions were operated as standalone units with separate accounting records capable of independent audit.Following separation, the primary manufacturing process was retained bySchlegel, which now supplies Schlegel EMI on an arm's length basis. Bothbusinesses conduct secondary manufacturing and finishing processes, but theyhave distinct product lines and very little customer overlap. The manufacturing process is largely the same for both businesses and the rawmaterials employed are also largely the same. As outlined above, prior to 31December 2004, operations in the USA and Belgium were run as a single entitywith no differentiation in manufacturing process. Furthermore, in the USA andBelgium the workforce and management of the Schlegel Group operated as a singlepool with very few employees specific to one division or the other. As a result of the above, it is not possible to recreate separate historicalfinancial information for the separate businesses for any historic period priorto 31 December 2004. For this reason, the only financial information availablefor Schlegel as a separate entity is for the financial year ended 31 December2005. The Directors believe that, in spite of the limited financial informationavailable for Schlegel, the Transaction is in the best interests of Shareholdersas a whole. 6. Suspension in trading of Lupus's shares Further to the announcement made by Lupus on 3 February 2006, Lupus's shareswere suspended from trading with effect from 7.30 a.m. on 3 February 2006. Lupusbelieves that the Ordinary Shares will remain suspended until the cancellationof the listing of the Existing Ordinary Shares from the Official List oncompletion of the Acquisition, which is currently expected to occur on or about4 April 2006. 7. Details of the Placing and Open Offer Lupus is proposing to raise up to approximately £53 million in total pursuant tothe Placing and Open Offer. The Issue Price of 14 pence per New Ordinary Shareis equal to the closing middle market price for an Existing Ordinary Share of 14pence on 2 February 2006, the day prior to the suspension of trading of Lupus'sshares on 3 February 2006. Pursuant to the Placing Agreement, HSBC has conditionally placed the PlacingShares with institutional and certain other investors. The Placing and the OpenOffer have been underwritten by HSBC. The Open Offer provides Qualifying Holders with the opportunity to apply toacquire any number of Open Offer Shares at the Issue Price. Qualifying Holderswill be offered a minimum entitlement on the following basis: 1 Open Offer Share for every 3 Existing Ordinary Shares registered in their names at the close of business on the Record Date and so inproportion for any greater or lesser number of Existing Ordinary Shares thenheld. Entitlements to apply to acquire Open Offer Shares will be rounded down tothe nearest whole number. Fractions of New Ordinary Shares will be disregardedin the calculation of the Qualifying Holder's Basic Entitlement. The Excess Application Facility enables Qualifying Holders to apply to acquireany whole number of Open Offer Shares in excess of their Basic Entitlementwhich, in the case of Qualifying Non-CREST Holders, will be the number of OpenOffer Entitlements as shown on their Non-CREST Application Form or, in the caseof Qualifying CREST Holders, will be the number of Open Offer Entitlementsstanding to the credit of their stock account in CREST. Qualifying Holders withholdings of Existing Ordinary Shares in both certificated and uncertificatedform will be treated as having separate holdings for the purpose of calculatingtheir Basic Entitlements under the Open Offer. Excess applications may be scaled down in such manner as the Directorsdetermine, in their absolute discretion. It is intended that excess applicationswill be satisfied pro rata (or as nearly as practicable) to the relevantholder's Basic Entitlement. The aggregate number of New Ordinary Sharesavailable for acquisition under the Open Offer will not exceed 79,232,095. Application has been made for the Open Offer Entitlements for Qualifying CRESTHolders to be admitted to CREST. It is expected that the Open Offer Entitlementswill be admitted to CREST on 7 March 2006. Shareholders should note that the Open Offer is not a rights issue. QualifyingCREST Holders should note that, although the Open Offer Entitlements will beadmitted to CREST and be enabled for settlement, applications in respect ofentitlements under the Open Offer may only be made by the Qualifying Holderoriginally entitled or by a person entitled by virtue of a bona fide marketclaim raised by CRESTCo's Claims Processing Unit. Qualifying Non-CREST Holdersshould note that the Non-CREST Application Form is not a negotiable document andcannot be traded. Qualifying Holders should be aware that in the Open Offer,unlike in a rights issue, any Open Offer Shares not applied for will not be soldin the market or placed for the benefit of Qualifying Holders who do not applyunder the Open Offer. If the Resolutions are not passed, or the Acquisition is not completed, theExisting Ordinary Shares will remain listed on the Official List, the NewOrdinary Shares will not be issued under the Placing or the Open Offer and allmonies received by the receiving agent, Capita Registrars, will be returned tothe applicants (at the applicants' risk and without interest) as soon aspossible thereafter. Any Open Offer Entitlements admitted to CREST willthereafter be disabled. The New Ordinary Shares will, following allotment and issue, rank pari passu inall respects with Existing Ordinary Shares and will rank in full for alldividends and other distributions declared in respect of the ordinary sharecapital of Lupus. Further details on the Placing and Open Offer are provided in the Prospectus andcircular to be published and sent to shareholders shortly. 8. Expected timetable 2006 1 March Record Date for the Open Offer 6 March 7am Announcement of the Acquisition, Placing and Open Offer and Lincoln preliminary results Prospectus Published 7 March Open Offer Entitlements credited to stock accounts in CREST of Qualifying CREST Holders 20 March 3pm Recommended latest time for requesting withdrawal of Open Offer Entitlements from CREST 22 March 3pm Latest time for depositing Open Offer Entitlements into CREST 23 March 3pm Latest time and date for splitting of Non-CREST Application Forms (to satisfy bona fide market claims only) 27 March 11am Latest time and date for acceptance of the Open Offer and receipt of completed Non-CREST Application Forms and CREST Excess Application Forms and payment in full under the Open Offer or settlement of relevant CREST instruction 27 March 11am Latest time and date for receipt of Forms of Proxy 29 March 11am Extraordinary General Meeting 29 March Ex-dividend date for the special interim dividend and Lincoln final dividend 31 March Record date for the special interim dividend and Lincoln final dividend 4 April 8am Completion of the Acquisition 8am Cancellation of the listing of the Existing Ordinary Shares from trading on the Official List 8am Date of Admission and commencement of dealings on AIM 8am New Ordinary Shares credited to CREST stock accountsweek commencing 10 Despatch of definitive share certificates for New Ordinary Shares April Notes: (1) References to times in the above timetable are to London time (unlessotherwise stated). (2) The timing of the events in the above timetable following the ExtraordinaryGeneral Meeting and in the rest of this announcement is indicative only andconditional upon the approval of the Resolutions by Shareholders at theExtraordinary General Meeting. 9. Proposed Admission of the Enlarged Share Capital to AIM Lupus is currently listed on the Official List. The Acquisition is classified bythe Listing Rules as a reverse takeover and, accordingly, Lupus is applying forthe cancellation of the listing of its Existing Ordinary Shares from theOfficial List on completion of the Acquisition. As a condition to granting Lupusexclusivity, the Vendors required Lupus to commit to an announcement of theAcquisition immediately following completion of the 2005 year-end audit process,and to completion of the Acquisition as soon as possible thereafter. The Directors believe that it would not be possible to complete the Acquisitionand list the Enlarged Group on the Official List for the following reasons: • Admission to the Official List requires the compilation of a three year track record and, while Schlegel has existed and traded for a number of years, for the reasons set out in paragraph 5 of this announcement, it has not proved possible to recreate separate historical financial information for Schlegel for any historic period prior to 1 January 2005. • An application for admission to the Official List would require Schlegel and Lupus to prepare financial statements under IFRS. As a business owned by a private company, Schlegel currently prepares accounts under UK GAAP and no work has been undertaken by the Vendors or Schlegel to prepare Schlegel accounts under IFRS. For these reasons, the Directors consider that the Acquisition can only becompleted by re-listing the Enlarged Group on AIM following completion of theAcquisition. The London Stock Exchange has indicated to Lupus' advisers that the EnlargedGroup, which will prepare its consolidated financial statements for the yearending 31 December 2006 under UK GAAP, will be eligible for listing on AIM. The Board believes that the listing of the Enlarged Group on AIM is in the bestinterests of Shareholders as a whole and allows Lupus to complete theacquisition of Schlegel. It will also enable Lupus to agree and executetransactions more quickly, should acquisition and development opportunitiesarise in the future. The Board remains committed to the highest standards ofcorporate governance. Shareholders should note that, while an AIM listing is appropriate for theEnlarged Group at present, should the Enlarged Group's circumstances change inthe future and the Enlarged Group become eligible for listing on the OfficialList, Lupus may decide to apply for admission to the Official List. If the Resolutions are not passed, or the Acquisition is not completed, theExisting Ordinary Shares will remain on the Official List. Application will be made to the London Stock Exchange for the Enlarged ShareCapital to be admitted to trading on AIM. It is expected that Admission willbecome effective and dealings for normal settlement in the Enlarged ShareCapital will commence on 4 April 2006. 10. Financial effects of the transaction on Lupus The Acquisition will have a transforming impact on the financial position ofLupus. The Directors believe that, taking into account the impact of the Placingand Open Offer, the Acquisition will be earnings enhancing to the Enlarged Groupin 2006. This statement should not be interpreted to mean that future earningsof the Enlarged Group will necessarily match or exceed the Group's historicalpublished earnings. In addition to funding the Acquisition, the Placing and Open Offer has beenstructured in a way that is expected to have the effect of creatingdistributable reserves equal to the net proceeds of the Placing and Open Offerless the par value of the New Ordinary Shares issued by Lupus. This structure isdescribed in the following paragraph. Lupus and HSBC have agreed to subscribe for ordinary shares in Newco. HSBC willthen apply monies that they receive from Qualifying Shareholders applying toacquire New Ordinary Shares under the Placing and Open Offer, after deductingcommissions, to subscribe for redeemable preference shares in Newco. Lupus willallot and issue the New Ordinary Shares to those persons entitled thereto inconsideration of HSBC transferring its holding of redeemable preference sharesin Newco and its holding of ordinary shares in Newco to Lupus. Accordingly,instead of receiving cash as consideration for the issue of the New OrdinaryShares, at the conclusion of the Placing and Open Offer, Lupus will own theentire issued share capital of Newco whose only asset will be its cash reserves,which will represent an amount equivalent to the net proceeds of the Placing andOpen Offer. Lupus will be able to utilise this amount by redeeming theredeemable preference shares it holds in Newco and, during any interim periodprior to redemption, by procuring that Newco lends the amount to Lupus. Thestructure of the Placing and Open Offer is expected to have the effect ofcreating distributable reserves equal to the proceeds of the Placing and OpenOffer less the par value of the New Ordinary Shares issued by Lupus. It shouldbe possible for Lupus to declare dividends from the distributable reservescreated in the future, provided that Lupus has sufficient cash resources to fundsuch dividends, the distributable reserves have not otherwise been reduced, andthe Directors consider it appropriate to declare such dividends. An unaudited UK GAAP pro forma net assets statement showing the financialeffects of the Transaction on Lupus will be set out in the Prospectus andcircular to be published and sent to shareholders shortly. 11. Trends in current trading and prospects Schlegel In mainland Europe the new year has started promisingly. In the UK, there was aslight slowdown in the first months of 2006 for foam orders in the vinyl sector,which is expected to continue in the second quarter. North America opened withstrong copier shipments but urethane foam and woven pile have been slightlyslower to recover after Christmas and New Year. Schlegel expects the market for door and window seals to continue to expand in2006 and Schlegel's management believes that the business is well placed to takeadvantage of opportunities as they arise. Lupus Gall Thomson's trading in 2006 to date has been good and the business has ahealthy order book. Gall Thomson expects that there will be good prospects forthe offshore oil and gas market over the coming year. This is being driven bythe continuing expansion in the use of sub-sea production technologies, the moveinto deep water areas and the exploitation of marginal fields. KLAW has continued to extend its product range and has increased its marketingefforts to penetrate the industrial couplings market. 12. Directors, Employees and Key Personnel of the Enlarged Group Following completion of the Transaction, the senior management of Schlegel,under the leadership of the current CEO, Ian Pawson, will remain with Schlegel. The existing employment rights, including pension rights, of employees of bothLupus and Schlegel will be fully safeguarded. 13. Share Incentive Arrangements Lupus operates Share Incentive Arrangements through an employee benefit trust,the LESOT, and an enterprise management incentive scheme, the EMI Scheme. Thesearrangements are designed to provide incentives for eligible participants toachieve value for Shareholders. All full time employees of Lupus (includingexecutive Directors) are eligible to participate in the Share IncentiveArrangements. No further awards can currently be made under the Share Incentive Arrangementsuntil at least 30 days following the preliminary announcement of the results ofLupus for the year ending 31 December 2007. In light of the Acquisition and its timing, the Remuneration Committee wishes toinclude the Schlegel management team in the Group's existing Share IncentiveArrangements. The Remuneration Committee has recommended that, conditional onthe Acquisition being completed, the dates of the Third Period in thesubscription agreement between Lupus and LESOT and in the option agreementbetween Lupus and Greg Hutchings (subject to the written consent of GregHutchings) be amended to the period of the three financial years ending on 31December 2008, with the Trustees of the LESOT being permitted to subscribe forOrdinary Shares until 31 August 2009. All other aspects of the Share IncentiveArrangements will remain unchanged. These amendments to the Share IncentiveArrangements will be subject to approval by Shareholders and it is proposed thata resolution will be put forward accordingly at the AGM of Lupus, which isexpected to be held in May 2006. 14. Dividend policy Lupus intends to pay a special interim dividend of 0.114 pence per OrdinaryShare in respect of the quarter ending 31 March 2006 to Shareholders on theregister on 31 March 2006. This special interim dividend will be paid toShareholders on 21 April 2006. Lupus also announced today its intention to pay a final dividend for the yearended 31 December 2005 of 0.278p per Ordinary Share to Shareholders on theregister on 31 March 2006. This final dividend will be paid to Shareholdersfollowing the AGM of Lupus which is expected to be held in May 2006. Lupus expects, in the absence of unforeseen circumstances, to declare dividends(including the special interim dividend) for the financial year ending 31December 2006 totalling 0.455 pence. This is equivalent to a dividend yield of3.25 per cent. at the Issue Price. It is the intention of the Board to maintaina progressive dividend policy in the future. 15. Extraordinary General Meeting An Extraordinary General Meeting of the Company will be convened for 11:00 a.m.on 29 March 2006 at the offices of Slaughter and May, One Bunhill Row, LondonEC1Y 8YY for the purpose of considering and, if thought fit, passing theResolutions. 16. Directors intentions in respect of Open Offer Greg Hutchings owns 23,750,000 Existing Ordinary Shares in Lupus, representingapproximately 10.0 per cent. of Existing Ordinary Shares, and intends to applyto acquire his entire Open Offer Entitlement amounting to 7,916,666 Open OfferShares and costing £1,108,333 at the Issue Price. In order to increase his net shareholding in Lupus he intends to borrow themoney to purchase his Open Offer Entitlement with an expectation of repaying theloan on the disposal of some Ordinary Shares at a later date. The LESOT owns 47,539,257 Existing Ordinary Shares in Lupus and intends to applyto acquire its entire Open Offer Entitlement amounting to 15,846,419 Open OfferShares and costing £2,218,499 at the Issue Price. In order to increase its net shareholding in Lupus, the LESOT intends to borrowthe money to purchase its Open Offer Entitlement with an expectation of repayingthe loan on the disposal of some Ordinary Shares at a later date. Denis Mulhall owns 2,800,000 Existing Ordinary Shares in Lupus and intends toapply to acquire his entire Open Offer Entitlement of 933,333 New OrdinaryShares, as well as 866,667 Firm Placing Shares. In total, under that Placing andOpen Offer, he is subscribing for £252,000 at the Issue Price. Frederic Hoad owns 325,000 Existing Ordinary Shares in Lupus and intends toapply to acquire his entire Open Offer Entitlement of 108,333 New OrdinaryShares, as well as 100,000 Firm Placing Shares. In total, under that Placing andOpen Offer, he is subscribing for £29,167 at the Issue Price. Roland Tate owns 160,348 Existing Ordinary Shares in Lupus and intends to applyto acquire his entire Open Offer Entitlement of 53,449 New Ordinary Shares, aswell as 53,571 Firm Placing Shares. In total, under that Placing and Open Offer,he is subscribing for £14,983 at the Issue Price. 17. Recommendation The Board, which has been so advised by HSBC, consider that the Transaction isin the best interests of Lupus' Shareholders as a whole. In providing thisadvice, HSBC has taken into account the Directors' commercial assessment of theTransaction. Accordingly, the Board recommends that you vote in favour of theResolutions to be proposed at the EGM as the Directors intend to do in respectof their own beneficial shareholdings, amounting to 27,035,348 Ordinary Sharesrepresenting approximately 11.4 per cent. of the issued share capital of Lupus.In addition, the trustees of the LESOT have indicated that they intend to votein favour of the Resolutions in respect of their holding of 47,539,257 OrdinaryShares representing approximately 20.0 per cent. of the issued share capital ofLupus. 18. Documentation A Prospectus and circular to shareholders containing the full terms andconditions of the Acquisition and the Placing and Open Offer, together with therelevant Application Forms is expected to be published and despatched to Lupusshareholders shortly. The Prospectus and circular to shareholders will also contain notice of theExtraordinary General Meeting of Lupus convened for 29 March 2006 for thepurposes of considering the necessary resolutions to implement the Acquisition,Placing and Open Offer. Copies of the Prospectus will also be available to the public, free of charge,from the offices of Slaughter and May, at One Bunhill Row, London EC1Y 8YY, andthe registered office of the Company until Admission. Appendix 1: Definitions The following definitions are used throughout this announcement except where thecontext requires otherwise:"Acquisition" the acquisition by Lupus, through the Purchasing Subsidiaries, from the Vendors of the Transferred Assets and entire issued share capital of the Transferred Subsidiaries "Acquisition Agreement" the conditional agreement for the Acquisition dated 3 March 2006 between the Vendors and the Purchasing Subsidiaries "Admission" the admission of the Existing Ordinary Shares and the New Ordinary Shares to be issued on Completion to listing on AIM and to trading on the London Stock Exchange "AGM" annual general meeting "AIM" the Alternative Investment Market "Application Forms" the CREST Excess Application Form and the Non-CREST Application Form"Basic Entitlement" the basic pro rata entitlement of Qualifying Holders to acquire 1 Open Offer Share for every 3 Existing Ordinary Shares held on the Record Date "Business" the worldwide business conducted by Schlegel UK and the Transferred Subsidiaries, consisting of the research, development, manufacturing, marketing, assembly and sale of weatherstripping products, including foam-based compression seals and pile-based sliding seals for the global window and door market, and other engineered products based on continuously molded urethane foam, narrow fabric textiles and extruded plastics, including cleaning brushes, static control devices for copiers and printers, specialty automotive products (e.g. sunroof seals, truck spray suppressants and tractor seat trim), sandwich bag seals and aircraft components, hardware products including hinge mechanisms, window and door locking mechanisms and associated fittings and the furnishing of advisory and consulting services in connection therewith "Capita Registrars" a trading division of Capita IRG Plc "Companies Act" or "Act" the Companies Act 1985, as amended by the Companies Act 1989 "Completion" completion of the Acquisition and the Placing and Open Offer in accordance with the terms of the Placing Agreement and Acquisition Agreement "Conditional Placing Shares" the 54,373,895 New Ordinary Shares being placed subject to clawback in respect of any Open Offer Shares applied for pursuant to the Placing Agreement "CREST" the system for the paperless settlement of trades and the holding of uncertificated securities operated electronically by CRESTCo in accordance with the Uncertificated Securities Regulations 2001 (SI No. 2001/3755) "CRESTCo" CRESTCo Limited, the operator of CREST "CREST Excess Application Form" the excess CREST application form relating to excess applications for Open Offer Shares issued to Qualifying CREST Holders "EMI Scheme" the Lupus Capital PLC 2004 enterprise management incentive scheme "Enlarged Group" the Lupus Group as enlarged by Schlegel "Enlarged Share Capital" the issued ordinary share capital of Lupus immediately following completion of the Placing and the Open Offer including the Existing Ordinary Shares and the New Ordinary Shares"Excess Application Facility" the arrangement pursuant to which Qualifying Holders may apply for additional Open Offer Shares in excess of their Basic Entitlement in accordance with the terms and conditions of the Open Offer "Existing Ordinary Shares" the Ordinary Shares in issue as at the date of this announcement "Existing Shareholders" the holders of the Existing Ordinary Shares "Extraordinary General Meeting" the extraordinary general meeting expected to be held at 11:00 a.m. onor "EGM" 29 March 2006, notice of which is set out in the Prospectus "Firm Placing Shares" the 299,339,334 New Ordinary Shares being placed firm pursuant to the Placing Agreement "FSA" Financial Services Authority "FSMA" the Financial Services and Markets Act 2000 "Gall Thomson" Gall Thomson Environmental Limited, incorporated in England and Wales under the Act with registered number 2852924 "HSBC" HSBC Bank plc, a company incorporated in England and Wales under the Act with registered number 14259 "IFRS" International Financial Reporting Standards "Issue Price" 14 pence per New Ordinary Share "KLAW" KLAW Products Limited, a company incorporated in England and Wales under the Act with registered number 316007 "LESOT" the Lupus Employee Share Ownership Trust "Listing Rules" the Listing Rules of the FSA "London Stock Exchange" London Stock Exchange plc "Lupus" Lupus Capital plc, a company incorporated in England and Wales under the Act and domiciled in the UK with registered number 2806007 "Lupus Group" or "the Group" Lupus and its subsidiaries, or any one or more of them as the context requires "Newco" Lupus Capital (Jersey) Limited, a company incorporated under the laws of Jersey "New Debt Facility" an agreement dated 3 March 2006 for a term loan facility of £35,000,000 and a multicurrency revolving loan facility of £10,000,000 "New Ordinary Shares" the new ordinary shares of 0.5p each to be issued by Lupus pursuant to the Placing and Open Offer "Non-CREST Application Form" the application form relating to applications for Open Offer Shares issued to Qualifying Non-CREST Holders "Notice" the notice of the Extraordinary General Meeting of Lupus to be held for the purpose of considering and, if thought fit, passing the Resolutions "Official List" the Official List of the UK Listing Authority "Open Offer" the conditional invitation made to Qualifying Shareholders to apply to acquire the Open Offer Shares, as described in the Prospectus and in the Application Forms "Open Offer Entitlements" an entitlement to apply to acquire Open Offer Shares, allocated to a Qualifying Holder pursuant to the Open Offer "Open Offer Shares" up to 79,232,095 New Ordinary Shares being made available to Qualifying Shareholders under the Open Offer "Ordinary Shares" ordinary shares of 0.5p each in the capital of Lupus "Placing" the proposed placing of shares in Lupus described in further detail in the Prospectus "Placing Agreement" the conditional agreement between Lupus and HSBC dated 3 March 2006 in connection with the Placing and Open Offer, further details of which will be set out in the Prospectus "Placing Shares" the Firm Placing Shares and the Conditional Placing Shares "Prospectus" the prospectus, prepared in accordance with the Listing Rules and the Prospectus Rules, to be published and despatched to Shareholders shortly "Prospectus Rules" the Prospectus Rules of the Financial Services Authority "Purchasing Subsidiaries" Schlegel UK (2006) Limited, Schlegel Acquisition Holdings USA, Inc., Schlegel Australia (2006) Pty Limited and Schlegel Acquisition Holdings Limited, all wholly owned subsidiaries of Lupus "Qualifying Holders" or " Shareholders whose names appear on the register of members of Lupus onQualifying Shareholders" or " the Record DateQualifying CREST Holders" or "Qualifying Non-CREST Holders" "Record Date" 1 March 2006 "Registrars" Capita Registrars, the registrars of Lupus "Regulations" the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755) "Resolutions" the ordinary resolutions and special resolutions to be proposed at the EGM "Resolution 1" the ordinary resolution to be proposed at the EGM to approve the implementation by Lupus of the Acquisition as set out in the Notice "RNS" the Regulatory News Service of the London Stock Exchange "Schlegel" the Transferred Assets and entire issued share capital of the Transferred Subsidiaries "Schlegel Acquisition Holdings Schlegel Acquisition Holdings USA, Inc., a company incorporated underUSA, Inc." the laws of Delaware and a wholly owned subsidiary of Lupus "Schlegel Acquisition Holdings Schlegel Acquisition Holdings Limited a company incorporated in EnglandLimited" and Wales with registered number 5686572 "Schlegel Australia" Schlegel Pty, a company incorporated under the laws of Australia "Schlegel Australia (2006) Pty Schlegel Australia (2006) Pty Limited, a company incorporated under theLimited" laws of Australia "Schlegel Belgium" Schlegel BVBA, a company incorporated under the laws of Belgium "Schlegel EMI" the electromagnetic interferences business which is owned by UniPoly and which presently forms the Schlegel Group together with Schlegel "Schlegel Engineering" Schlegel UK Engineering Limited, a company incorporated in England and Wales "Schlegel Germany" Schlegel GmbH, a company incorporated under the laws of Germany "Schlegel Italy" Schlegel SRL, a company incorporated under the laws of Italy "Schlegel Spain" Schlegel Taliana SL, a company incorporated under the laws of Spain "Schlegel UK" Schlegel Limited, a company incorporated in England and Wales "Schlegel UK (2006) Limited" Schlegel UK (2006) Limited, a company incorporated in England and Wales with registered number 5686601 "Schlegel UK Subsidiaries" Schlegel Italy, Schlegel Spain, Schlegel (UK) Engineering Limited and Schlegel (UK) Limited, or any one or more of them as the context requires "Schlegel US" UniPoly Schlegel Holdings, Inc, a company incorporated under the laws of Delaware "Securities Act" the US Securities Act of 1933, as amended "Shareholders" the holders of Ordinary Shares in Lupus "Share Incentive Arrangements" the LESOT and the EMI Scheme (including the option agreement between Lupus and Greg Hutchings granted under the EMI Scheme) and the subscription agreement between the Trustees and Lupus "Shares" shares in the capital of Lupus "Suspension" the suspension of trading of the Ordinary Shares on the London Stock Exchange which took effect from 7.30 a.m. on 3 February 2006"Transaction" the Acquisition, Placing and Open Offer and the Resolutions "Transferred Assets" all of Schlegel UK's property and assets related to, or used, or held in connection with the Business as conducted by Schlegel UK on the date of completion of the Acquisition Agreement, real, personal or mixed, tangible and intangible, of every kind and description, wherever located "Transferred Subsidiaries" the UniPoly Subsidiaries and Schlegel UK Subsidiaries, or any one or more of them as the context requires "Trustee" Walbrook Trustees (Guernsey) Limited "UK" or "United Kingdom" the United Kingdom of Great Britain and Northern Ireland "UK GAAP" generally accepted accounting principles in the UK "UK Listing Authority" or "UKLA" the Financial Services Authority acting in its capacity as the competent authority for the purpose of Part VI of the Financial Services and Markets Act 2000 "Uncertified Share" or " a share or other security which is in an uncertificated formuncertificated share" "UniPoly" UniPoly Holdings Limited, a company incorporated in England and Wales "UniPoly Subsidiaries" Schlegel US, Schlegel Germany, Schlegel Belgium and Schlegel Australia, or any one or more of them as the context requires "US", "USA" or "United States" the United States of America, its territories and possessions, any state of the United States and the District of Columbia and all other areas subject to its jurisdiction "Vendors" UniPoly and Schlegel UK This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Tyman