29th Nov 2007 07:02
Low & Bonar PLC29 November 2007 FOR IMMEDIATE RELEASE 29 November 2007 Low & Bonar PLC Proposed Acquisition of MTX Group and trading update Low & Bonar, the specialist materials group, announces the proposed acquisitionof MTX Group at a valuation of €166.0 million (approximately £119.4 million) ona cash-free and debt-free basis. Acquisition highlights • MTX Group is a leading producer of technical coated fabrics withheadquarters in Huckelhoven, Germany. Its members are wholly-owned subsidiariesof Mehler AG, a part of KAP Beteiligungs-AG. It produces premium materials for avariety of uses including, inter alia, side curtains for the transport marketand fabrics for the architectural and print markets. • For the financial year ended 31 December 2006, MTX Group reportedconsolidated EBITDA of €18.4 million (approximately £12.5 million) and EBIT of€14.6 million (approximately £9.9 million) on revenue of €133.1 million(approximately £90.5 million). • The Acquisition represents another major step forward in pursuing Low &Bonar's growth strategy and is expected to reinforce the Company's position as amajor international producer of industrial technical textiles. The Company alsobelieves that consolidation opportunities within the technical coated fabricsmarket should offer further value creation potential. • MTX Group's product focus is complementary to Low & Bonar's technicaltextiles business and there are likely to be cross-selling opportunities in thebuilding and construction end-markets as a result of the Acquisition. • The Company also believes that it can improve certain aspects of MTX Group'sworking capital management, increase its weaving and coating productionefficiencies and enhance its innovation capabilities. • Furthermore, the Company believes that there are likely to be opportunitiesfor raw material cost savings and that the Acquisition would diversify furtherraw material purchases and reduce the seasonality of sales and profits for theEnlarged Group. • The Acquisition is expected to be funded by a combination of existing andnew financial resources. Low & Bonar currently has in place Existing DebtFacilities with in excess of £100 million of undrawn commitments and RBS andBayerische Landesbank have agreed to provide a New Debt Facility of €90 million(approximately £64.7 million). • The Board believes that the Acquisition will enhance the Company's earningsper Ordinary Share in the financial year ending 30 November 2008 (earnings perOrdinary Share stated before amortisation and non-recurring items)(1). Trading update prior to the preliminary announcement of full year results The Company has continued to make good progress throughout the year, driven byorganic growth and the successful integration of the acquisitions made during2006. The Board is pleased to report that trading for the financial year ending30 November 2007 is expected to be in line with its expectations. The Technical Textiles Division has seen the benefits of a first full yearcontribution from, and successful integration of, both Geo-Tipptex and Colbond,the acquisitions made during 2006. The Colbond acquisition was the largest madeby the Company in recent years and has performed ahead of expectations at thetime of acquisition, including a robust performance from the building andindustry segment despite the current difficulties in the US housing market. TheFabrics business has continued to perform well throughout the year through itscontinued focus on higher margin products. Specialist Yarns, for the second halfof the year, was well ahead of the same period last year. As anticipated, raw material prices, whilst remaining high, have been morestable than in recent years. The Company continues to expect that additionalcapacity amongst suppliers will bring a downward pressure to bear on rawmaterial prices in 2008. The Company also believes that the Floors Division has made good progress forthe year. There has been encouraging growth in the sales of branded products,such as Flotex and Tessera, offset by lower sales of lower margin third partysourced products. Overall the impact on margins and profits has been positive. The preliminary announcement of the results for the financial year ending 30November 2007 is expected to be made on 18 February 2008. Commenting on today's announcement, Paul Forman, Group Chief Executive of Low &Bonar said: "We are delighted to be announcing this transaction. MTX Group is an excellentopportunity to pursue our existing growth strategy following the successfulacquisition of Colbond last year. The acquisition of MTX Group will add newmarkets to our existing portfolio, providing exciting cross-sellingopportunities and we believe that this acquisition enhances further the Group'slong-term growth potential". Duncan Clegg, Chairman of Low & Bonar, added: "The acquisition of MTX Group represents a further step forward in our strategyof driving organic and acquisitive growth in our core markets. Low & Bonar isnow firmly established as a major competitor in the technical textiles industry,and we look forward to building on that position". Note: A conference call for analysts and investors will take place at 9:30 a.m.on Thursday 29 November 2007. A presentation to accompany the call will beavailable at: www.lowandbonar.com Dial in: +44 (0)1452 555 566 Access code: 25175303 ABN AMRO is acting as financial adviser and sponsor to Low & Bonar in relationto the Acquisition. This summary should be read in conjunction with the full text of thisannouncement. The appendix sets out the definitions of certain terms used in thisannouncement. A Circular to Shareholders relating to the Acquisition is expected to be postedtoday. The Circular gives further details of the Acquisition and contains anotice of a General Meeting of the Company to approve the Acquisition. Enquiries Paul Forman Low & Bonar PLC 020 7535 3180Kevin Higginson Tom Willett ABN AMRO Corporate Finance Limited 020 7678 8000Mark CrossleyGerd Weissenboeck David Trenchard Tulchan Communications Group Ltd 020 7353 4200 This announcement has been issued by, and is the sole responsibility of, Low &Bonar. This announcement is for information purposes only and shall not constitute anoffer, or form part of an offer, or the solicitation of any offer to acquire ordispose of any security in any jurisdiction in which such an offer orsolicitation or disposal is unlawful. The distribution of this announcement incertain jurisdictions may be restricted by law and therefore persons into whosepossession this announcement comes should inform themselves about and observeany such restrictions. Any failure to comply with these restrictions mayconstitute a violation of the securities laws of any such jurisdiction. ABN AMRO, which is authorised and regulated in the United Kingdom by theFinancial Services Authority, is acting exclusively for the Company in relationto the Acquisition and for no one else and will not be responsible to anyoneother than the Company for providing the protections afforded to its clients orfor providing advice in relation to the Acquisition, or any other matterreferred to in this announcement. Certain statements in this announcement are forward-looking statements. Theseforward-looking statements speak only as at the date of this announcement. Suchstatements are based on current expectations and beliefs and, by their nature,are subject to a number of known and unknown risks and uncertainties that couldcause actual results and performance to differ materially from any expectedfuture results or performance expressed or implied by the forward-lookingstatement. There are several factors which could cause actual results to differmaterially from those expressed or implied in the forward-looking statements.Among the factors that could cause actual results to differ materially fromthose described in the forward-looking statements are Low & Bonar's ability tocombine successfully the businesses of Low & Bonar and MTX Group and to realiseexpected synergies from that combination, changes in global, political,economic, business, competitive, market or regulatory forces, future exchangeand interest rates, changes in tax rates and future business combinations ordispositions. The information and opinions expressed in this announcement aresubject to change without notice and neither the Company nor ABN AMRO assumesany responsibility or obligation to update publicly or review any of theforward-looking statements contained herein, regardless of whether thosestatements are affected by the results of new information, future events orotherwise. No statement in this announcement is intended to be a profit forecast and nostatement in this announcement should be interpreted to mean that earnings perOrdinary Share for the current or future financial years would necessarily matchor exceed the historical published earnings per Ordinary Share. FOR IMMEDIATE RELEASE 29 November 2007 Low & Bonar PLC Proposed Acquisition of MTX Group Introduction The Board of Low & Bonar announces that the Company has entered into aconditional share purchase and transfer agreement for the acquisition for cashof MTX Group. The Acquisition is subject, inter alia, to Shareholders approvalat a General Meeting and, assuming such approval is obtained, is expected tocomplete in early January 2008. The Acquisition values MTX Group at €166.0 million (approximately £119.4million) on a cash-free and debt-free basis. On the basis of agreed estimates ofMTX Group's cash, debt, working capital and capital expenditure at Completion,the estimated purchase price to be paid in cash by the Group at Completion forthe entire issued share capital of MTX Group and certain sums owed by it to itsparent company is €162.8 million (equivalent to approximately £117.1 million),subject to certain post-completion adjustments. MTX Group is a leading producer of technical coated fabrics with over 60 yearsof experience in the production of PVC-coated materials and is integrated acrossthe requisite weaving and coating processes. The Acquisition represents anotherimportant strategic step for Low & Bonar in the development of its technicaltextiles activities. The Board believes that the Acquisition will enhance theCompany's earnings per Ordinary Share in the financial year ending 30 November2008 (earnings per Ordinary Share stated before amortisation and non-recurringitems)(1). Due to its size, the Acquisition is conditional upon, inter alia, the approvalof Shareholders at the General Meeting to be held on 17 December 2007. Subjectto receipt of a satisfactory waiver letter under the Existing Debt Facilities,the Acquisition will be funded from the Group's existing and new financialresources using available commitments under its Existing Debt Facilities as wellas under its New Debt Facility, which has been provided by RBS and BayerischeLandesbank, two of the Group's principal bankers. In the event that the waiveris not received, the Acquisition will instead be funded by the New Debt Facilityand a Backstop Facility between, inter alia, the Company as borrower and RBS asagent. Information on MTX Group MTX Group has its headquarters in Huckelhoven, Germany and its members arewholly- owned subsidiaries of Mehler AG, which is a part of KAP Beteiligungs-AG. MTX Group employs a team of over 600 people and is a leadingvertically-integrated technical coated fabrics producer. It operates across thekey processes in fabric production, from the weaving of technical base fabric toits specialist coating with PVC and other polymers. It is currently equipped tocoat fabrics at locations in Huckelhoven and Fulda in Germany and in Lomnice inthe Czech Republic and weaves the majority of the requisite base fabric at itstwo weaving mills in Lomnice and Fulda. The Company believes MTX Group to be a leading player in the significant marketsit serves. The Company believes that MTX Group holds a leading position in themarket segments for side curtains for the transport market and fabrics for thearchitectural and print markets. For the financial year ended 31 December 2006, MTX Group reported consolidatedEBITDA of €18.4 million (approximately £12.5 million), EBIT of €14.6 million(approximately £9.9 million) and profit before tax of €10.8 million(approximately £7.3 million) on revenue of €133.1 million (approximately £90.5million). As at 31 December 2006, MTX Group reported consolidated net assets of€11.4 million (approximately £7.7 million) and gross assets of €93.9 million(approximately £63.4 million). Reasons for the Acquisition The Company has articulated previously its strategy of focusing on both theindustrial technical textiles and the contract flooring markets. The Boardbelieves the Group can grow in these two markets organically and throughacquisition while maintaining strong margins. In line with the strategy of expansion through acquisition, the Company hasacquired the following: a 60 per cent. stake in Yihua Bonar, a company engagedin the manufacture of technical yarns and fabrics, in two transactions in July2004 and April 2006; ADFIL, a manufacturer of specialist polypropylene fibresfor use as an additive to concrete to provide strength and to enhance resistanceto surface cracking, in December 2004; Xirion, a Belgian based manufacturer ofsynthetic grass specialising in monofilament yarns, in August 2005; andGeo-Tipptex, a Hungarian company operating in the Eastern European geotextilesmarket, in February 2006. Most recently, the Company acquired Colbond, a producer of synthetic non-woventextiles (for flooring, automotive, and construction applications) andthree-dimensional polymeric mats and composites (for civil engineering, buildingand industrial applications), in July 2006. Colbond, when acquired, doubled theGroup's then technical textiles activities. The Company believes that the integration of Colbond and the financial benefitsto the Group have been ahead of plan. The business continues to developpositively, enhanced by its strong research and development capability which isbeing leveraged across other parts of the Group. Colbond's management hasengaged constructively with the rest of the Group and provides additionalresource to support the Group's organic growth aspirations. The Acquisition represents a major step forward in pursuing the Company's growthstrategy and is expected by the Board to reinforce its position as a majorinternational producer of industrial technical textiles and provide furthercritical mass to fund and improve innovation and differentiation capabilities.MTX Group operates in the coatings segment of the technical textiles industry,which the Board has prioritised for new entry as the Company believes thatsegment offers attractive opportunities for both organic and acquisitive growth. The Company will offer increased market access for MTX Group's products throughLow & Bonar's Chinese and North American sales infrastructure and MTX Group'ssales infrastructure will offer Low & Bonar access to new markets and a greaterpresence in Central Europe. In addition it is expected that consolidationopportunities within the technical coated fabrics market should offer furthervalue-creation potential. The Company also believes that it has a number ofopportunities to improve the performance of MTX Group. In particular, theCompany believes that it can improve certain aspects of MTX Group's workingcapital management, increase its weaving and coating production efficiencies andenhance its innovation capabilities. Furthermore, the Acquisition will diversifyfurther the Technical Textiles Division's raw material purchases of polymers andreduce the Enlarged Group's seasonality of sales and profits. The Company alsobelieves that there are likely to be opportunities for raw material costssavings in the Enlarged Group. Given the complementary product focus of Low &Bonar and MTX Group, the Company also believes there are likely to becross-selling opportunities in the building and construction end-markets of theEnlarged Group. Following Completion, MTX Group will become part of the Technical TextilesDivision under the leadership of Steve Good, Low & Bonar's Technical TextilesDivisional Managing Director. Norbert Verfaillie, who is currently the Company'sDirector of New Business, will lead an integration team and work closely withMTX Group's management team, all of whom are expected to remain with thebusiness following Completion and who will strengthen the overall managementcapability of Low & Bonar. This is the same post-merger integration andpersonnel approach which was successfully used in last year's acquisition ofColbond. Principal terms of the Acquisition The Board announces that certain wholly-owned subsidiaries of the Company, aspurchasers, and the Company, as guarantor of the purchasing entities, haveentered into a conditional share purchase and transfer agreement with the Sellerand the Seller's Guarantor in respect of the acquisition for cash of MTX Groupand certain sums owed by it to its parent company. Completion of the Acquisitionis conditional on (i) the approval of Shareholders at the General Meeting and(ii) merger / anti-trust clearances being granted from the German and Ukrainiancompetition authorities. Completion of the Acquisition is expected to take placein early January 2008. The Acquisition values MTX Group at €166.0 million (approximately £119.4million) on a cash-free and debt-free basis. On the basis of agreed estimates ofMTX Group's cash, debt, working capital and capital expenditure at Completion,the estimated purchase price to be paid in cash by the Group at Completion forthe entire issued share capital of MTX Group and certain sums owed by it to itsparent company is €162.8 million (equivalent to approximately £117.1 million),subject to certain post-completion adjustments. Pursuant to the terms of the Acquisition Agreement, the Seller has given certainrepresentations, warranties and indemnities in relation to title and its abilityto sell MTX Group. In addition, the Seller has given customary warrantiesregarding the business of MTX Group as well as certain indemnities concerningtax and environmental issues. The Seller has also given certain undertakings toensure that the business of MTX Group is conducted in the ordinary course in theperiod prior to Completion. In connection with the Acquisition, the Company and the Seller have alsonegotiated long-term lease agreements for the production facility at the Fuldasite. The Acquisition Agreement may be terminated by the Company or the Seller if therespective other party fails to fulfil its obligations under the AcquisitionAgreement at Completion. In such case, the defaulting party shall pay acontractual penalty of €1 million (without prejudice to any other claims theother party may have). Further, the Seller will be entitled to terminate theAcquisition Agreement if the Shareholders do not approve the Acquisition at theGeneral Meeting, in which case the Company shall pay a contractual penalty of€0.5 million. Financing of the Acquisition Low & Bonar currently has in place Existing Debt Facilities with in excess of£100 million of un-drawn commitments. In addition, RBS and Bayerische Landesbankhave agreed, subject to certain customary conditions precedent for a facility ofits type, including the passing of the resolution to approve the Acquisition atthe General Meeting and the Acquisition Agreement becoming unconditional(subject to payment of the purchase price), to provide additional facilities of€90 million (approximately £64.7 million) through the New Debt Facility tofurther assist with meeting the funding cost of the Acquisition and the on-goingneeds of the Enlarged Group. Subject to receipt of a satisfactory waiver letter from the banks providing theExisting Debt Facilities, the Acquisition will be funded through a combinationof existing and new financial resources by amounts drawn down under the ExistingDebt Facilities and the New Debt Facility. In the event that the waiver is notreceived, the Acquisition will instead be funded by the New Debt Facility and aBackstop Facility between, inter alia, the Company as borrower and RBS as agent. Current trading of the Group and prospects of the Enlarged Group The Group The Group has continued to make good progress throughout the year, driven byorganic growth and the successful integration of the acquisitions made during2006. The Board is pleased to report that trading for the financial year ending30 November 2007 is expected to be in line with its expectations. The Technical Textiles Division has seen the benefits of a first full yearcontribution from, and successful integration of, both Geo-Tipptex and Colbond,the acquisitions made during 2006. The Colbond acquisition was the largest madein recent years and has performed ahead of expectations at the time ofacquisition, including a robust performance from the building and industrysegment despite the current difficulties in the US housing market. The Fabricsbusiness has continued to perform well throughout the year through its continuedfocus on higher margin products. Specialist Yarns, for the second half of theyear, was well ahead of the same period last year. As anticipated, raw material prices, whilst remaining high, have been morestable than in recent years. The Company continues to expect that additionalcapacity amongst suppliers will bring a downward pressure to bear on rawmaterial prices from some point in 2008. The Company also believes that the Floors Division has made good progress forthe year. There has been encouraging growth in the sales of branded productssuch as Flotex and Tessera offset by lower sales of lower margin third partysourced products. Overall, the impact on margins and profits has been positive. The preliminary announcement of the results for the financial year ending 30November 2007 is expected to be made on 18 February 2008. The Enlarged Group The Board believes that, following completion of the Acquisition, the EnlargedGroup will be well placed for continued growth and will derive value fromoperational and scale benefits arising out of a combination of the twobusinesses. The Board has confidence in the financial and trading prospects ofthe Enlarged Group for the coming financial year. Financial effects of the Acquisition The Board believes that the Acquisition will enhance the Company's earnings perOrdinary Share in the financial year ending 30 November 2008 (earnings perOrdinary Share stated before amortisation and non-recurring items)(1). General Meeting A Circular containing further information relating to the Acquisition and thenotice convening a General Meeting, to be held on 17 December 2007, is expectedto be posted today to Shareholders. The purpose of the General Meeting is toseek Shareholders' approval of the resolution set out in the notice of theGeneral Meeting. If passed, the resolution will, inter alia, approve theAcquisition. Enquiries Paul Forman Low & Bonar PLC 020 7535 3180Kevin Higginson Tom Willett ABN AMRO Corporate Finance Limited 020 7678 8000Mark CrossleyGerd Weissenboeck David Trenchard Tulchan Communications Group Ltd 020 7353 4200 The appendix sets out the definitions of certain terms used in thisannouncement. This announcement has been issued by, and is the sole responsibility of, Low &Bonar. This announcement is for information purposes only and shall not constitute anoffer, or form part of an offer, or the solicitation of any offer to acquire ordispose of any security in any jurisdiction in which such an offer orsolicitation or disposal is unlawful. The distribution of this announcement incertain jurisdictions may be restricted by law and therefore persons into whosepossession this announcement comes should inform themselves about and observeany such restrictions. Any failure to comply with these restrictions mayconstitute a violation of the securities laws of any such jurisdiction. ABN AMRO, which is authorised and regulated in the United Kingdom by theFinancial Services Authority, is acting exclusively for the Company in relationto the Acquisition and for no one else and will not be responsible to anyoneother than the Company for providing the protections afforded to its clients orfor providing advice in relation to the Acquisition, or any other matterreferred to in this announcement. Certain statements in this announcement are forward-looking statements. Theseforward-looking statements speak only as at the date of this announcement. Suchstatements are based on current expectations and beliefs and, by their nature,are subject to a number of known and unknown risks and uncertainties that couldcause actual results and performance to differ materially from any expectedfuture results or performance expressed or implied by the forward-lookingstatement. There are several factors which could cause actual results to differmaterially from those expressed or implied in the forward-looking statements.Among the factors that could cause actual results to differ materially fromthose described in the forward-looking statements are Low & Bonar's ability tocombine successfully the businesses of Low & Bonar and MTX Group and to realiseexpected synergies from that combination, changes in global, political,economic, business, competitive, market or regulatory forces, future exchangeand interest rates, changes in tax rates and future business combinations ordispositions. The information and opinions expressed in this announcement aresubject to change without notice and neither the Company, nor ABN AMRO assumesany responsibility or obligation to update publicly or review any of theforward-looking statements contained herein, regardless of whether thosestatements are affected by the results of new information, future events orotherwise. No statement in this announcement is intended to be a profit forecast and nostatement in this announcement should be interpreted to mean that earnings perLow & Bonar Ordinary Share for the current or future financial years wouldnecessarily match or exceed the historical published earnings per Low & BonarOrdinary Share. Appendix - Definitions In this press release, the following expressions shall have the following meanings, unless the context otherwiserequires: "ABN AMRO" ABN AMRO Corporate Finance Limited of 250 Bishopsgate, London EC2M 4AA "Acquisition" the proposed acquisition of MTX Group, including the Shareholder Instruments "Acquisition Agreement" the share purchase and transfer agreement between the Purchasers, the Company, the Seller and the Seller's Guarantor, dated 29 November 2007, in relation to the Acquisition "ADFIL" LCM Construction Products Limited and subsidiary companies "Backstop Facility" the £170.5 million backstop facility to be made available to the Company pursuant to a facility agreement dated 28 November 2007 between, inter alia, the Company as borrower and RBS as agent "Bayerische Landesbank" Bayerische Landesbank, London Branch "Board" or "Directors" the directors of the Company "Circular" the circular to Shareholders expected to be issued by the Company today "Colbond" Colbond Investments B.V. and its subsidiary and associated companies "Company" or Low & Bonar PLC"Low & Bonar" "Completion" the completion of the Acquisition pursuant to the terms of the Acquisition Agreement "EBIT" earnings before interest, tax and non-recurring items "EBITDA" earnings before interest, tax, depreciation, amortisation and non-recurring items "Enlarged Group" the Group following Completion ''Existing Debt the existing £175.0 million credit facilities available to the Company pursuant to the ExistingFacilities" Debt Facilities Agreement "Existing Debt a £175.0 million credit facilities agreement dated 7 July 2006 , between the Company (asFacilities Agreement" borrower), Bonar Floors Limited, Bonar Yarns & Fabrics Limited and Bonar Tiles Limited (as original guarantors) and RBS, as amended "Financial Services the UK Financial Services AuthorityAuthority" "General Meeting" the general meeting of the Company, notice for which is contained in the Circular, convened for 11:30 a.m. on 17 December 2007 at the offices of ABN AMRO, 250 Bishopsgate, London EC2M 4AA and at any adjournment thereof at which the resolution to, inter alia, approve the Acquisition and related ancillary lease agreements will be proposed "Geo-Tipptex" Geo-Tipptex Kft. and its subsidiary Geo-Investment Ingatlankezelo Kft. "Group" the Company and its subsidiaries ''Mehler'' Mehler AG ''Mehler Texnologies comprises the following legal entities directly or indirectly owned by Mehler AG: MehlerGroup'' or "MTX Group" Texnologies GmbH, Mehler Texnologies s.r.o., Mehler Texnologies Ltd., Mehler Texnologies S.p.A, Mehler Texnologies s.a.r.l., Mehler Logistics GmbH, Mehler Texnologies Inc., Mehler Texnologies S.R.L., Mehler Texnologies Sp. z o.o., Mehler Texnologies Teknik Tekstil Ltd. Sti., Mehler Texnologies S.I.A. "New Debt Facility" the €90 million revolving credit facility to be made available to the Company pursuant to a facility agreement dated 28 November 2007 between, inter alia, the Company as borrower and RBS and Bayerische Landesbank as lenders "Ordinary Shares" ordinary shares of 25 pence each in the capital of the Company "Purchasers" Colbond Investments B.V., Colbond Inc. and Low & Bonar Technical Textiles (Germany) GmbH & Co. KG "RBS" The Royal Bank of Scotland plc "Seller" Mehler AG "Seller's Guarantor" KAP Beteiligungs-AG "Shareholder the entire issued share capital of MTX Group and certain shareholder sums due to the Seller fromInstruments" the members of MTX Group "Shareholders" the holders of Ordinary Shares "United Kingdom" the United Kingdom of Great Britain and Northern Irelandor "UK" "Xirion" Xirion N.V. "Yihua Bonar" Yihua Bonar Yarns & Fabrics Co. Ltd. Note: The following exchange rates have been used in this press release: - an average exchange rate for the year ended 31 December 2006 of €1.47: £1 for MTX Group's 2006 profit and loss numbers; - a spot exchange rate as at 31 December 2006 of €1.48: £1 for MTX Group's 2006 balance sheet numbers; and - a spot exchange rate of €1.39: £1 as at 27 November 2007 for all other information Endnotes: (1) This statement should not be interpreted to mean that the future earningsper Ordinary Share of the Company will necessarily match or exceed itshistorical published earnings per Ordinary Share. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
LWB.L