15th Nov 2005 12:45
Hampson Industries PLC15 November 2005 15 November 2005 NOT FOR RELEASE OR DISTRIBUTION IN OR INTO THE USA, CANADA, THE REPUBLIC OFIRELAND, AUSTRALIA OR JAPAN Hampson Industries PLC Proposed Acquisitions of Coast Composites, Inc. and Lamsco West, Inc. Proposed Placing of 161,904,760 new ordinary shares at 21 pence per share Share Consolidation Hampson Industries PLC ("Hampson"), the aerospace and precision engineeringgroup, today announces the proposed acquisitions of Coast Composites, Inc.("Coast") and of Lamsco West, Inc. ("Lamsco") for a total initial estimated cashconsideration of US$81.2 million (£46.7 million). Coast is the leading manufacturer in the USA of large, tight tolerance toolingsystems for composite structures used in aerospace, defence and satellitecommunications applications. Lamsco manufactures and supplies niche laminatedproducts to the aerospace and defence industries. Both Coast and Lamsco arelocated in California, USA. The estimated initial consideration for Coast isUS$56.0 million (£32.2 million) and the estimated initial consideration forLamsco is US$25.2 million (£14.5 million). Hampson also announces a placing of 161,904,760 new ordinary shares at a priceof 21 pence per share. The net proceeds of the Placing, which are expected toamount to approximately £32.5 million after related expenses, will be applied tofund, in part, the consideration payable on completion of the Acquisitions. Thebalance will be financed through a new £80.0 million revolving credit facility.The Placing has been fully underwritten by Arbuthnot Securities Limited("Arbuthnot"). In addition, it is proposed that, conditional upon the Placing being completed,the share capital of the Company be consolidated on the basis of one newordinary share of 25 pence for each and every five existing ordinary shares. The Proposals are subject to regulatory consents and the approval ofShareholders. Arbuthnot is acting as sponsor, underwriter and broker to Hampson. Highlights Acquisition of Coast •Coast is a manufacturer and supplier of precision tooling for large composite structures to the aerospace, defence and satellite communications markets •The acquisition offers Hampson greater exposure to the growing demand for composite materials in airframe fabrication Acquisition of Lamsco •Lamsco manufactures and supplies laminated sheet material and specialist shims to the aerospace and defence industries. Through its existing subsidiaries, Hampson is a supplier of similar products •The acquisition achieves a global leadership position for Hampson in this niche market, together with a broader, better-balanced customer base and increased exposure to the Boeing family of aircraft Proposed Placing €161,904,760 new ordinary shares at 21 pence per share, to raise approximately £32.5 million (net of related expenses) •Received strong institutional support •Fully underwritten by Arbuthnot •Strengthens the Group's balance sheet Hampson rationale •Building on last year's successful acquisition of Texstars Inc., the Acquisitions broaden the Group's customer, market sector and engineering technology base and bring access to new, high growth programmes, including, inter alia, the Boeing 787, F-35 Joint Strike Fighter, F/A-22 Raptor and a number of next generation Unmanned Aerial Vehicles ("UAVs") •The acquisition of Coast also deepens the Group's exposure to the progressively increasing trend towards the use of advanced composite materials in airframe manufacture •As well as enabling Hampson to benefit from increased exposure to the strong recovery in civil aerospace markets, the acquisition of Lamsco positions the Group as the largest supplier of laminated shims for aerospace applications, globally Kim Ward, Chief Executive of Hampson Industries PLC, commented: "These acquisitions transform Hampson's strategic presence in aerospace, notablyin laminates and high growth composites, which are increasingly replacing metalsin current and next generation aircraft manufacture. Coast and Lamsco complement last year's successful acquisition of Texstars,providing us with new capabilities and engineering technology, access to key newaerospace programmes and the ability to provide an existing niche business witha route to global leadership. This is an exciting period of growth for Hampson. Demand for turbo chargers isdriving growth in automotive, and recovery in civil aerospace markets isgathering strength. Today's strategic acquisitions strengthen our ability totake advantage of these opportunities." For further information please contact: Hampson Industries PLCKim Ward, Chief Executive +44 (0) 1384 472 941Howard Kimberley, Finance Director +44 (0) 1384 472 946 Arbuthnot +44 (0) 20 7012 2000Barry Saint, Director - Corporate FinanceNick Stephens, Director - Corporate BrokingGraham Swindells, Associate Director - Corporate Finance Financial Village +44 (0) 20 7872 5442Jonathan Gollins/Tim Draper Hampson Industries PLC The Board of Hampson is pleased to announce that it has conditionally agreedterms whereby Hampson US will acquire all of the issued shares in the commonstock of Coast and Lamsco for a total initial estimated cash consideration ofUS$81.2 million (£46.7 million) subject to adjustment as referred to below inthe section of this announcement headed "Background to, reasons for and summaryterms of the Acquisitions". The Acquisitions will be funded in part by the proceeds of the Placing (which isexpected to raise approximately £32.5 million net of related expenses) with theremainder of the consideration to be funded from new committed bankingfacilities which have been jointly arranged and underwritten by Bank of Scotlandand Lloyds TSB Bank plc Capital Markets for an initial amount of £80.0 million. The Acquisitions each constitute a class 1 transaction for the purposes of theListing Rules and, as such, require the prior approval of Shareholders. Information on Hampson Hampson is an international precision engineering and manufacturing groupserving the global aerospace, automotive and specialist engineering markets. Hampson's business is divided into two business segments, "Aerospace" and "Precision Engineering". Hampson's Aerospace operations are structured into three divisions: Aerospace Fabrications & Assemblies, Aerospace Machining andAerospace Transparencies, Composites & Plastics. Major customers include Airbus, BAE Systems, Boeing Corporation, Bombardier,Borg Warner Automotive, Eclipse Aviation, GKN Aerospace, Goodrich, Holset, Honeywell, IHI, Lockheed Martin, MTU Aero Engines, Rolls-Royce and Snecma. Following the major global downturn in commercial aerospace from 2001/02onwards, Hampson has focused on actions to improve its business and develop a growth strategy built around extending its position and capabilities in aerospace and also in the niche market for the manufacture of components forturbo chargers. For the year ended 31 March 2005, Hampson made operating profit before goodwillamortisation and exceptional items of £3.0 million (2004: £3.2 million) on turnover of £77.8 million (2004: £68.6 million). Information on Coast Located in California, USA, Coast is a manufacturer and supplier of precisiontooling for large composite parts to the commercial aerospace, defence andsatellite communications markets. The acquisition of Coast will enable the Groupto benefit from current favourable demand conditions for precision toolingsystems whilst at the same time magnifying its exposure to the important trendtowards the progressively increasing use of composite materials in airframemanufacture. For the year ended 30 June 2005, Coast made operating profit before goodwillimpairment, amortisation and group charges of US$6.7 million (2004: US$4.2 million) on turnover of US$32.4 million (2004: US$23.8 million). Information on Lamsco Located on the West Coast of the USA, Lamsco manufactures and supplies shims andlaminated sheet material to the aerospace and defence industries. Through itsexisting subsidiaries, Hampson is a supplier of similar products. Acquisition ofLamsco would result in achievement of a global leadership position in thisniche market, together with a broader, better-balanced customer base and theanticipated ability to realise certain economies of scale. For the year ended 31 December 2004, Lamsco made operating profit beforegoodwill impairment, amortisation and group charges of US$2.7 million (2003:US$2.1 million) on turnover of US$8.6 million (2003: US$7.8 million). Background to, reasons for and summary of terms of the Acquisitions Hampson's growth strategy seeks to capitalise on the benefits of organic growthfrom new aerospace programmes and continuing high demand for turbo charger components, blending these with selective external growth opportunities, carefully targeted to enhance Hampson's capabilities in niche, higher-growth sectors of its existing core markets. The acquisition of Texstars in December 2004, Hampson's first major acquisitionfor some years, brought new manufacturing capabilities in higher technologycomposite, transparent and plastic materials. This has enabled Hampson to accessnew customers, new aerospace and defence programmes and to complement itsexisting capabilities in aluminium airframe component manufacture. The Board hasbeen very pleased with the performance of Texstars during its period ofownership to date. The aerospace industry is experiencing a clear trend towards the substitution ofmetal components in airframe construction by lighter weight and technologicallymore advanced composite structures. This trend is being driven by the need toimprove aircraft performance and fuel efficiency, leading to reduced operatingcosts and improved profitability for the commercial airlines. The very latestaircraft designs exemplify this. The Boeing 787 "Dreamliner", with a plannedentry into service date of 2008, is estimated to have a 50 per cent. compositecontent. Similarly, the already-in-production Airbus A380 "Super-Jumbo", thelargest commercial airliner in the world, is estimated to have a compositecontent of in excess of 20 per cent. The proportion of composite material usedin the so-called "next generation" military aircraft, including the F-35 "JointStrike Fighter" and F/A-22 "Raptor" is estimated to be much higher still. With the acquisition of Texstars, Hampson is now positioned to start to benefitfrom this substitutional trend, albeit in modest scale. However, in view of itssignificant projected impact on the global aerospace industry, Hampson's Boardbelieves that it would be in the Group's best interests to increase its abilityto capitalise on the trend towards increased use of composites. Coast is a manufacturer of large, high-precision tools, primarily for themanufacture of composite aero structures. There is presently limited capacityfor the manufacture of tools for such applications above a certain size in theUS and the substitutional trend towards the use of more composite materials inairframe manufacture is likely to lead to increased demand for such tooling.This is expected to be driven by the demands of new programmes such as thosereferred to above and, in the medium-to-longer term, by likely replacements ofthe existing high volume single aisle aircraft families from both Boeing andAirbus. The acquisition of Coast will therefore enable Hampson to benefit fromcurrent favourable demand conditions for precision tooling systems while at thesame time magnifying its exposure to the more general trends towards increaseduse of composite materials in airframe manufacture. Lamsco is an established supplier of laminated shim stock and detailed parts,primarily to the large US airframe original equipment manufacturers (OEMs) andPrime Contractors. Following the recent sale of Lamsco's existing parentcompany, an opportunity has become available to Hampson to acquire Lamsco.Through its existing subsidiaries, Attewell Limited and Bolsan Company Inc.,Hampson is an existing supplier of similar products and is hence very familiarwith this segment of the aerospace market. Acquisition of Lamsco would result inachievement of a global leadership position, together with a broader,better-balanced customer base and the anticipated ability to realise certaineconomies of scale. Both Coast and Lamsco have been identified as well run, attractive businessesthat are strongly positioned in niche sectors of the Group's existing coremarkets, with significant further growth potential. The Board believes that theproposed Acquisitions would provide an excellent opportunity to furtherstrengthen the Group and accelerate the growth strategy that has been put inplace, building on the successful integration of Texstars. Under the terms of the Coast Acquisition Agreement, Hampson has agreed topurchase all of the issued shares of the common stock of Coast. The CoastAcquisition will be implemented by way of a merger of Coast Acquisitionco withand into Coast. Completion of the sale and purchase is expected to take placenot later than 22 December 2005. The initial consideration payable for Coast is US$56.0 million (£32.2 million),as well as the reimbursement of certain potential capital expenditure (if any),not exceeding US$0.15 million (£0.1 million). The initial consideration is alsosubject to an adjustment to take into account movements (if any) in CoastComposites Inc.'s working capital position for the period from 31 July 2005until the date of Coast Completion. The Coast Vendors are entitled to an earn-out equal to two times the amount bywhich Coast's EBITDA for the fiscal year ending 30 June 2006 exceeds US$7.6million (£4.4 million), subject to a cap of US$2.0 million (£1.2 million). Under the terms of the Lamsco Acquisition Agreement, Hampson has agreed topurchase all of the issued shares (including rights to acquire shares) of thecommon stock of Lamsco. The consideration payable for Lamsco is US$25.2 million (£14.5 million) less theaggregate of (i) transaction expenses incurred by Lamsco but unpaid at LamscoCompletion and (ii) an amount equal to Lamsco's indebtedness at LamscoCompletion excluding expenses accrued in the ordinary course of trading.Completion of the sale and purchase is expected to take place not later than 22December 2005. Current Trading and Prospects Investors were provided with an update on current trading in the AGM statementwhich was released on the London Stock Exchange's Regulatory News Service on 30August 2005. The Directors confirm that trading continues in line with theBoard's expectations for the year as a whole. Details of the Placing Hampson is proposing to raise £34.0 million (approximately £32.5 million net ofrelated expenses) pursuant to a firm placing of New Ordinary Shares. It isintended that such net proceeds will be used to partially satisfy the cashconsideration for the Acquisitions as well as the ongoing working capitalrequirements of the Group. Pursuant to the Placing Agreement, Arbuthnot hasagreed to use reasonable endeavours to procure placees or, failing which, tosubscribe itself for the New Ordinary Shares at the Issue Price. The Placing is conditional on the Placing Agreement having become unconditionaland not having been terminated in accordance with its terms prior to Admission.The Placing Agreement is conditional upon the passing of the Placing Resolutionsand at least one of the resolutions to be proposed at the EGM relating to theapproval of the Acquisitions. It is expected that Admission will becomeeffective and dealings in the New Ordinary Shares will commence on 16 December2005. The Placing is not conditional on either or both of the Acquisitions beingcompleted. In the unlikely event that one or both of the Acquisitions do notproceed, the net proceeds of the Placing will be placed on deposit on ashort-term basis and the Directors will consider whether to use the proceeds tofinance other carefully selected acquisitions approved by Shareholders and/orconsider the possibility of returning cash to Shareholders. Related Party Transactions Artemis and SVG have each agreed to subscribe for New Ordinary Shares pursuantto the Placing. Due to the size of each of their current shareholdings in theCompany and the number of New Ordinary Shares in respect of which they haveagreed to subscribe pursuant to the Placing, each of the Related Party Issues isclassified by the UK Listing Authority as a related party transaction and, assuch, requires the approval of Shareholders. New banking facilities The Company has entered into a new, secured, multi-currency committed revolvingcredit facility jointly arranged and fully underwritten by Bank of Scotland and Lloyds TSB Bank plc Capital Markets pursuant to a facility agreement dated 15 November 2005. The new revolving credit facility is for a term of five yearsand for an initial amount of £80.0 million, reducing to £72.5 million and £62.5 million on the third and fourth anniversaries, respectively. The purpose of the new revolving credit facility is to fund the balance of the considerationpayable for the Acquisitions and associated costs, to refinance borrowings underthe Company's existing banking facilities and to provide funding for general corporate purposes of the Group. Share Consolidation The Placing will result in an enlarged issued share capital. The Directorsbelieve that the current price at which the Company's shares are traded is abarrier to attracting new investors and the ability of the Company to makeacquisitions for shares should it wish to do so. The Directors also believe thatthe share consolidation proposed below should lead to a reduction in thebid-offer spread and an improvement in the liquidity of the Company's shares. Accordingly, the Directors are recommending to Shareholders that, conditionalupon the Placing being completed, the Enlarged Share Capital of the Company beconsolidated on the basis of one new ordinary share of 25 pence for each andevery five Existing Ordinary Shares and New Ordinary Shares. The ShareConsolidation is conditional upon Shareholder approval and the admission of theConsolidated Ordinary Shares to the Official List and to trading on the LondonStock Exchange's market for listed securities, which is expected to becomeeffective on 16 December 2005. Extraordinary General Meeting Each of the Acquisitions, due to its size relative to the Company, requires theapproval of Shareholders. As the Issue Price represents a discount of more than 10 per cent. to the middlemarket price of the Ordinary Shares the discount requires the approval ofShareholders. An extraordinary general meeting is expected to be convened for 15 December 2005at which resolutions will be proposed to approve (i) the share authoritiesnecessary to implement the Placing (ii) the issue of shares at a discount (iii)each of the Related Party Issues (iv) each of the Acquisitions and (v) the ShareConsolidation. A prospectus containing details of the Proposals and convening the EGM isexpected to be posted to Shareholders as soon as practicable. Arbuthnot, which is authorised and regulated in the United Kingdom by theFinancial Services Authority, is acting exclusively for Hampson Industries PLCand no one else in connection with the Placing. Arbuthnot will not beresponsible to persons other than Hampson Industries PLC for providing theprotections afforded to their customers or for providing advice in connectionwith the Placing or any other matters referred to in this announcement. This announcement does not constitute or form part of an offer or a solicitationof an offer to purchase or subscribe for, underwrite or otherwise acquire, anyrights, shares or other securities. These may only be made on the basis ofinformation that will be contained in the prospectus to be published inconnection with the proposals and any supplement thereto. The New Ordinary Shares have not been nor will they be registered under theUnited States Securities Act of 1933, as amended, or under the applicablesecurities laws of any state, province, district, territory or otherjurisdiction of the United States, Canada, Australia, Japan or the Republic ofIreland and no regulatory clearances in respect of the New Ordinary Shares havebeen or will be applied for in any such jurisdiction. The New Ordinary Sharesare not being, and may not be, offered, sold, taken up, renounced or delivered,directly or indirectly within or into the United States, Canada, Australia,Japan or the Republic of Ireland or their respective territories or possessions. APPENDIX I DEFINITIONS The following definitions apply throughout this announcement, unless the contextrequires otherwise: "Acquisitions" together, the Coast Acquisition and the Lamsco Acquisition "Admission" admission to listing together with admission to trading "Admission Standards" the Admission and Disclosure Standards issued by the London Stock Exchange "admission to listing" the admission of the New Ordinary Shares to the Official List becoming effective in accordance with the Listing Rules "admission to trading" the admission of the New Ordinary Shares to trading on the London Stock Exchange's market for listed securities becoming effective in accordance with the Admission Standards "Arbuthnot" Arbuthnot Securities Limited, a member of the London Stock Exchange and regulated by the FSA "Artemis" Artemis Investment Management Limited "Artemis Issue" the proposed issue to Artemis of 21,430,000 of the New Ordinary Shares at the Issue Price pursuant to the Placing "Bank of Scotland" The Governor and Company of the Bank of Scotland "Board" or "Directors" the board of directors of the Company "Coast" Coast Composites, Inc. "Coast Acquisition" the proposed acquisition of all of the issued shares (including rights to acquire shares) of the common stock of Coast "Coast Acquisitionco" Coast Composites Acquisition Corporation, a corporation newly incorporated by Hampson US for the purposes of undertaking the Coast Acquisition "Coast Acquisition the agreement and plan of merger relating to the Agreement" Coast Acquisition dated 14 November 2005 and entered into between (1) Coast (2) Coast Acquisitionco and (3) Hampson US "Coast Vendors" the holders of all of the issued shares of the common stock of Coast "Company" or "Hampson" Hampson Industries PLC "Consolidated Ordinary the ordinary shares of 25 pence each in the share Shares" capital of the Company resulting from the Share Consolidation "EBITDA" earnings before interest, taxes, depreciation and amortisation "Enlarged Share Capital" the issued share capital of the Company, as enlarged by the allotment and issue of the New Ordinary Shares "Existing Ordinary Shares" the 275,506,831 Ordinary Shares currently in issue "FSMA" the Financial Services and Markets Act 2000, as amended "FSA" Financial Services Authority "Group" or "Hampson Group" the Company and its subsidiary undertakings "Hampson US" Hampson Industries US, Inc. a wholly-owned subsidiary of Hampson "Issue Price" 21 pence per New Ordinary Share "Lamsco" Lamsco West, Inc. "Lamsco Acquisition" the proposed acquisition of all of the issued shares (including rights to acquire shares) of the common stock of Lamsco "Lamsco Acquisition the stock purchase agreement relating to the LamscoAgreement" Acquisition dated 14 November 2005 and entered into between (1) Lamsco (2) Compass Aerospace Corporation and (3) Hampson US "Lamsco Completion" completion of the Lamsco Acquisition "London Stock Exchange" London Stock Exchange plc "New Ordinary Shares" the 161,904,760 new Ordinary Shares to be issued pursuant to the Placing "Official List" the Official List of the UK Listing Authority "Ordinary Shares" ordinary shares of 5 pence each in the capital of the Company and, subject to the Share Consolidation having become effective, ordinary shares of 25 pence each in the capital of the Company "Placing" the firm placing by Arbuthnot of the New Ordinary Shares on the terms and conditions of the Placing Agreement "Placing Agreement" the conditional agreement dated 15 November 2005 between (1) the Company and (2) Arbuthnot relating to the Placing "Placing Resolutions" ordinary and special resolutions relating to the increase in the Company's authorised share capital, the grant of authorities to allot Ordinary Shares pursuant to the Placing, the issue of shares at a discount and the Related Party Issues "Proposals" together the Acquisitions, the Placing and the Share Consolidation "Related Party Issues" together, the Artemis Issue and the SVG Issue "Shareholders" holders of Ordinary Shares "Share Consolidation" the consolidation of the Existing Ordinary Shares and the New Ordinary Shares into Consolidated Ordinary Shares on the basis of one Consolidated Ordinary Share for every five Existing Ordinary Shares and New Ordinary Shares "SVG" SVG Capital "SVG Issue" the proposed issue to SVG of 21,430,000 of the New Ordinary Shares at the Issue Price pursuant to the Placing "Texstars" Texstars Inc. "UK Listing Authority" the FSA, in its capacity as the competent authority for the purposes of Part VI of FSMA The exchange rates used to convert amounts in this announcement denominated inUS dollars into amounts denominated in UK pounds sterling are as follows: •trading results of Coast for the year ended 30 June 2005 have been translated at the rate of £1 to US$1.9199, being the average daily exchange rate throughout the year ended 30 June 2005; •trading results of Lamsco for the year ended 31 December 2004 have been translated at the rate of £1 to US$1.7925, being the average daily exchange rate throughout the year ended 31 December 2004; •dollar balances in relation to the Coast Acquisition Agreement have been translated at the rate of £1 to US$1.7394, being the exchange rate at 11 November 2005, the last practicable date prior to the signing of the Coast Acquisition Agreement; and •dollar balances in relation to the Lamsco Acquisition Agreement have been translated at the rate of £1 to US$1.7394, being the exchange rate at 11 November 2005, the last practicable date prior to the signing of the Lamsco Acquisition Agreement. ENDS This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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