18th Jun 2009 07:00
GKN Announces £423 million Rights Issue
18 June 2009
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, NEW ZEALAND OR SOUTH AFRICA.
Proposed 6 for 5 Rights Issue of up to 846,623,629 New Ordinary Shares at 50 pence each to raise gross proceeds of approximately £423 million
The Board of GKN today announces a fully underwritten 6 for 5 Rights Issue to raise proceeds of approximately £423 million, before expenses, through the issue of up to 846,623,629 New Ordinary Shares. The Rights Issue is subject to approval by Shareholders at a General Meeting to be held on 6 July 2009.
Rationale for the proposed Rights Issue
Provides the Company with a robust capital structure which will bring the Group greater flexibility in current market conditions.
Reduces the Group's reliance on debt financing and thus avoids the associated significant costs and more onerous covenants which potentially would be incurred in refinancing its existing facilities.
Helps to accelerate the prospect of a return of the Company to investment grade status, thereby enhancing flexibility when considering its long-term financing strategy.
Allows GKN to take advantage of the opportunities for growth that the backdrop in its end markets continues to present.
Current trading
Management sales for the five months ended 31 May 2009 totalled £1,794 million, a 10 per cent decrease over the comparable period in 2008, including £584 million of benefit from currency translation and the Filton acquisition.
For the same period, the Group achieved a trading profit on a management basis of £1 million and a management loss before taxation of £25 million. However, the Group delivered a management profit before taxation of £8 million over the period from 1 March to 31 May.
Although considerable uncertainty remains in GKN's markets, the Group has made good progress in aligning its operations to current market conditions where:
Automotive production schedules in recent months have become more stable,
OffHighway markets are expected to remain weak through the summer, and
In Aerospace, the overall outlook remains positive for 2009.
The restructuring plans announced in February have been accelerated and the Group expects increasing benefits from these cost reduction actions through the balance of 2009.
Sir Kevin Smith, Chief Executive of GKN, said: "Over the last five years, we have established GKN as a leader in its markets. However, the global recession has had a significant impact on both our business and credit market conditions. The rights issue that we have announced today will strengthen our capital structure and give us the flexibility to take advantage of new opportunities for development and growth."
This summary should be read in conjunction with the full text of this announcement.
Enquiries:
GKN plc +44 (0) 207 463 2382
Guy Stainer +44 (0) 7739 778 187
Financial Dynamics +44 (0) 207 269 7113
Andrew Lorenz +44 (0) 7775 641 807
J.P. Morgan Cazenove: +44 (0) 207 588 2828
Laurence Hollingworth
Robert Constant
Nick Snee
UBS Investment Bank: +44 (0) 207 567 8000
Hew Glyn Davies
Christopher Smith
Kunal Gandhi
Gleacher Shacklock: +44 (0) 207 484 1150
Tim Shacklock
James Dawson
Analyst presentation
There will be an analyst and investor meeting commencing at 09:00 today at UBS Investment Bank, Ground Floor Presentation Suite, 1 Finsbury Avenue, London EC2M 2PP.
A live audiocast of the presentation will be available at www.gkn.com. Slides will be put onto the website approximately 15 minutes before the presentation is due to begin.
A live dial in facility will be available by telephoning one of the following numbers:
Standard International Dial In: +44 (0) 1452 55 55 66
Conf ID: 15585379
A replay of the conference call will be available for 14 days at the following numbers:
Standard International Number: +44 (0) 1452 55 00 00
UK Freecall Dial In: 0800 953 1533
Replay Access Number: 15585379#
Capitalised terms used in this announcement are defined in the Appendix to this announcement.
The full text of this announcement may be downloaded from www.gkn.com.
Disclaimer
This announcement does not constitute or form part of any offer or invitation to purchase, otherwise acquire, subscribe for, sell, otherwise dispose of or issue, or any solicitation of any offer to sell, otherwise dispose of, subscribe for, purchase, otherwise acquire or issue, any security.
Definitions
Financial information set out in this announcement, unless otherwise stated, is presented on a management basis which aggregates the sales and trading profit, as applicable, of subsidiaries and the Group's proportionate share of joint ventures. References to margins are to trading profit expressed as a percentage of sales. Management profit or loss before tax is Group profit or loss before tax adjusted to exclude restructuring and impairment charges, profit and losses on sale or closure of businesses, amortisation of non-operating intangible assets arising on business combinations, change in value of derivatives and other financial instruments and other net financing charges.
EBITDA is earnings of subsidiaries adjusted for the items above and excluding interest, tax, depreciation and amortisation. Finance Cost is the net interest payable of subsidiaries.
Comparisons on a constant currency basis are made by adjusting the prior period metric using the same exchange rates used in calculating the current period metric. Financial information in this announcement for periods other than full financial years is based on unaudited management accounts.
Proposed Rights Issue to raise approximately £423 million (gross)
Introduction
The Board of GKN today announces that it proposes to raise approximately £423 million (approximately £403 million net of expenses) through the Rights Issue at the Issue Price of 50 pence per New Ordinary Share. The Rights Issue will take place in conjunction with the Capital Reorganisation, which will involve each Existing Ordinary Share of 50 pence nominal value being sub-divided and converted into one New Ordinary Share of 10 pence nominal value and one Deferred Share of 40 pence nominal value on the first dealing day following the General Meeting.
The Rights Issue is fully underwritten by J.P. Morgan Securities, UBS Investment Bank, HSBC Bank and RBS Hoare Govett. J.P. Morgan Cazenove and UBS Investment Bank are acting as joint sponsors and joint bookrunners to the Rights Issue and Gleacher Shacklock, J.P. Morgan Cazenove and UBS Investment Bank are acting as joint financial advisers to GKN. HSBC Bank and RBS Hoare Govett are acting as co-managers to the Rights Issue.
Further details of the Rights Issue will be set out in the Circular which is expected to be sent to Shareholders later today and in the Prospectus which is also expected to be published later today. Both documents will also be made available on GKN's website at www.gkn.com.
Background to and reasons for the Rights Issue
GKN is a global company with market leading businesses in selected automotive, off-highway and aerospace end markets. The Group achieves world class manufacturing standards, delivering advanced technology and engineering capability to its customer base.
The Group has developed a number of market leadership positions:
Driveline is the global leader in the supply of constant velocity jointed (CVJ) products with an estimated market share in CVJs of over 40 per cent. in 2008. The recent development of a range of torque control products has also helped to position the business as a global market leader in automotive driveline;
the Aerospace business has leading market positions in the supply of aerostructures and aircraft transparencies together with strong market positions in the supply of aero-engine components and sub-systems. It is well positioned on key new and future growth platforms (including, in the civil market, the Boeing 787, the Airbus A380 and A350 XWB (Extra Wide Body) and, in the US defence market in particular, the Joint Strike Fighter (F-35) and the CH-53K helicopter);
the OffHighway business has a leading global position in the supply of power take-off shafts and wheels for the agricultural, construction, mining and industrial machinery markets; and
Powder Metallurgy is the world's largest supplier, by sales, of powder metal components and the largest supplier in North America of ferrous-based metal powder.
Over the last five years, GKN has made significant progress in improving the balance and performance of the Group by:
increasing Driveline and Powder Metallurgy sales in higher growth markets and lowering sales exposure to mature markets, while increasing management trading margins from 6.8 per cent. in 2004 to 7.3 per cent. in 2007;
moving a significant part of the Driveline production to emerging markets with higher growth potential such as China (through its joint venture with Hasco, a subsidiary of Shanghai Automotive Industry Corporation), India, Brazil and Mexico through a major restructuring programme undertaken from 2004 to 2007;
significantly increasing OffHighway management sales in the period from £312 million in 2004 to £553 million in 2008 by expanding its geographical base and diversifying its end markets and product mix; and
increasing sales in the Aerospace business from £569 million in 2004 to more than £1 billion in 2008 while improving its management trading margin from 6.7 per cent. to 10.5 per cent. during that period.
In September 2008, GKN reached agreement to acquire the wing component and sub-assembly operation located on the Airbus site at Filton, UK. The acquisition was completed in January 2009. As part of the acquisition, Airbus also awarded GKN ''life of programme'' contracts on all Airbus aircraft programmes for wing components and sub-assemblies in production at Filton at that time. At the same time as agreeing to acquire Filton, GKN signed contracts with Airbus for significant work packages to design and produce large scale composite structures for the wing of the new A350 XWB long haul airliner. The A350 composite wing structures contract, with expected revenues of around £1.1 billion over the programme life, further extends the Group's market position in primary composite wing structures.
In addition to these strategic initiatives, GKN has enhanced its product and technology base to benefit from developing trends for energy efficiency and improved product performance in its end markets:
in Automotive, the Group has successfully launched a new range of low-weight high-performance driveshafts, low-cost driveshafts for emerging markets, advanced electronic torque control products and hybrid applications;
in Aerospace, composite technology development has positioned the Group as a significant supplier of primary structures for large aircraft wings and composite applications for aero-engines, and the business produced the first applications of electric de-icing on the Boeing 787 wing and Joint Strike Fighter engine;
in Powder Metallurgy, new product applications have been developed for the latest generation transmissions and engines; and
in OffHighway, the Group has launched a number of niche product applications to help improve productivity of agricultural and construction equipment.
The Directors believe that GKN's products and technologies position the Group strongly for the future.
The actions and developments in the businesses described above have resulted in an improvement in the overall performance of the Group, with management trading margins for continuing operations having increased from 6.4 per cent. in 2004 to 7.5 per cent. in 2007. The Directors believe that, taken together, these actions position GKN well in its end markets as a premier supplier to the automotive, off-highway and aerospace markets.
Economic downturn in 4th Quarter 2008 and 1st Quarter 2009
The Group performed well in the first three quarters of 2008 despite significant increases in raw material and energy costs during that period, with sales and trading profit ahead of the comparable period in 2007. In this period sales and trading profit performance were particularly strong in the Aerospace and OffHighway businesses. In the fourth quarter of 2008, however, the global business environment changed dramatically. The Group's Automotive (in particular Driveline) and Powder Metallurgy businesses were severely affected by the rapid downturn in global automotive demand, with underlying management sales down by 26 per cent. from the comparable period in 2007, attributable to weakness in end market demand and exacerbated by destocking through the supply chain. This end market weakness continued into the first quarter of 2009 with underlying management sales in the Group's Automotive and Powder Metallurgy businesses down approximately 45 per cent. on the comparable period in 2008. Off-highway markets have also been severely affected, with weaker demand for construction, mining and agricultural equipment. Whilst the large civil aerospace market remained strong in the first quarter of 2009, the Directors expect to see a reduction in large civil jet production to reflect downturns in passenger and freight air traffic and weakness in the aircraft financing market.
The 2008 Restructuring Programme
In response to the economic downturn in its end markets, the Group has taken a number of rapid and decisive actions to reduce the cost base of the business and improve cash generation.
Almost 3,500 employees and temporary workers left the Group during 2008 including 2,800 in the final quarter of 2008. In February 2009 GKN outlined plans to reduce the workforce across all divisions by a further 2,400 people during 2009 and early 2010 and to close a number of facilities. As at 31 May 2009 approximately 2,700 people had left the Group since 31 December 2008 with a further 600 scheduled to leave, and eight plant closures were already underway. In addition, government-supported short-time working programmes have been introduced, principally in Europe and Japan, which are expected to be equivalent to the working hours of some 3,000 full time employees on average across the year.
Actions in respect of the 2008 Restructuring Programme outlined in the Group's preliminary results released in February 2009 and in the Group's interim management statement released in May 2009 identified an expected reduction in operating costs of approximately £190 million expressed at 2008 average exchange rates. This included £56 million relating to short-time working based savings which should unwind as markets recover. Associated cash costs were expected to be approximately £140 million and non-cash impairments approximately £150 million. Further actions implemented as a result of the fall in demand in OffHighway and higher than anticipated levels of short-time working in 2009 will potentially lead to a small increase in restructuring costs and some additional operating cost reductions. Action has also been taken to protect operating cash flow with reductions in the Group's capital investment (excluding investment in the A350 programme) and improvements targeted in working capital.
Financing and liquidity
GKN entered 2008 with a strong balance sheet and net debt of £506 million, with financing capacity available to support the Group's growth plans. During 2008 additional committed bank facilities of £275 million were put in place on attractive terms, £180 million of which became available to GKN in January 2009 on completion of the Filton acquisition.
However, in parallel with the dramatic change in the business environment in the fourth quarter of 2008, financial markets deteriorated further. For GKN, the effect on its balance sheet hedges of the rapid decline in the value of sterling against major foreign currencies, notably the US dollar, euro and Japanese yen, contributed to net debt rising to £708 million at 31 December 2008. On the same date, GKN also reported post-employment obligations (including pensions and other post-employment obligations) of £834 million on an accounting basis.
In light of the weaker business outlook for the Group, in early 2009 Standard & Poor's and Moody's lowered the credit ratings for the Group from investment grade status to BB+ (outlook negative) and Ba1 (outlook negative) respectively.
Of the total potential cash consideration payable for the Filton acquisition, the Group paid an initial £96 million to Airbus in January 2009. Deferred and contingent consideration of up to £36 million is payable over the next six years, and the Group plans to invest around £180 million (including approximately £40 million cash expenditure in 2009) in the A350 programme on design engineering and production equipment and facilities over the same period.
As at 31 May 2009, the Group's net debt had risen to £928 million as a result of funding the Filton acquisition and seasonal working capital movements, offset in part by cash conservation measures, including restructuring savings, taken by the Group. To finance this borrowing, GKN has in place £675 million of long-term fixed-rate funding in the form of unsecured bonds (with the first series maturing in May 2012), together with UK committed floating rate bank facilities with attractive interest rate margins totalling £625 million (£350 million maturing in July 2010 and the balance maturing in 2011 and 2013). The Group's only financial covenant, which is on the UK committed bank facilities, requires an EBITDA to Finance Cost ratio of at least 3.5 times. Looking ahead, the Group will be required to refinance, at least in part, certain elements of its funding, with the first being the £350 million committed facility in July 2010.
The Directors believe that, in the current market conditions, the Rights Issue will provide a more appropriate form of financing than one based solely on debt which would potentially result in significant additional costs for the Group and be accompanied by more restrictive covenants.
Opportunities from the current market environment
The Directors believe that there are significant commercial advantages to GKN in having a robust financial position in today's market conditions. The Directors expect GKN's end markets to experience significant structural change as a result of the current global recession. Changing customer preferences and a desire to speed up the introduction of new low carbon products are likely to create new opportunities for development and growth. The Directors believe that GKN's strategy over the last five years positions it well to benefit from these trends.
The Directors expect customers to gravitate increasingly to a reduced number of strongly financed, global and technology leading tier one suppliers in the automotive, off-highway and aerospace markets. The Group is already seeing such opportunities and believes it will be well placed to attract further new business that becomes available as a result of financial pressures on weaker industry participants and competitive pressures to accelerate the introduction of new technologies.
The Group remains committed to achieving its medium term trading margin targets of between 8 per cent. and 10 per cent. for Driveline and Powder Metallurgy, 7 per cent. to 10 per cent. in OffHighway and 10 per cent. or higher for the Aerospace division, giving an overall Group margin target of between 8 per cent. and 10 per cent.
Conclusion
In view of all these factors, the Directors believe the Group would greatly benefit from a strengthened balance sheet given the current economic and financial backdrop.
The Directors have therefore concluded that it is appropriate to strengthen the capital base of the Group through the Rights Issue to raise approximately £403 million (net of expenses). The Directors believe that there are clear benefits to the Group from the proposed fundraising. The Rights Issue will provide the Company with a robust capital structure which will bring the Group greater flexibility in current market conditions as well as reducing the Group's reliance on debt financing and avoiding the associated significant costs and restrictive covenants which may be incurred in refinancing its existing facilities. A strengthened balance sheet will also help to accelerate the prospect of a return by the Company to investment grade status, thereby enhancing flexibility when considering its long-term financing strategy. In addition, it should also allow GKN to take advantage of the opportunities for growth that the backdrop in its end markets is likely to present.
Use of proceeds
The Directors intend to use the net proceeds of the Rights Issue, amounting to approximately £403 million, to reduce the net financial indebtedness of the Group.
Current trading and prospects
Overview
While automotive and off-highway markets remain extremely challenging, GKN has continued to make good progress in aligning its operations to the current market environment. Aerospace continues to perform strongly.
Group management sales in the five months ended 31 May 2009 totalled £1,794 million, a 10 per cent. decrease over the comparable period in 2008. Currency translation and the Filton acquisition provided a combined benefit of £584 million. Excluding Filton, Group sales on a constant currency basis reduced by 32 per cent.
In the five months ended 31 May 2009, the Group achieved a trading profit on a management basis of £1 million and a management loss before taxation of £25 million. However, after a particularly difficult first two months of the year in the automotive sector, the Group delivered a small management profit before taxation of £8 million over the period from 1 March to 31 May.
Markets and performance
Automotive (including Powder Metallurgy)
Global light vehicle sales were down in the first four months of 2009 by 19 per cent. and production was down by 32 per cent. The mismatch between sales and production is largely accounted for by OEM inventory reduction programmes.
Although global production volumes are not yet available for May, the Directors expect them to be at similar levels to April, with the exception of North America, where Chrysler has implemented extensive plant shut downs and General Motors has reduced production.
GKN's Automotive sales in the five months ended 31 May 2009 were £963 million, down 43 per cent. on a constant currency basis compared to the equivalent period in 2008. Sales, at constant currency, in the first two months of 2009 were down 49 per cent., with March, April (although impacted by Easter) and May showing some improvement, being down in aggregate around 38 per cent. compared to the equivalent period in 2008.
Trading losses of £42 million were incurred in January and February. The aggregate trading loss across March, April and May was lower at £13 million, reflecting more stable production schedules and benefits continuing to accrue from restructuring.
OffHighway
Off-highway markets have also declined significantly during the first five months of 2009. GKN OffHighway's sales on a constant currency basis decreased by over 20 per cent. in the first quarter and 45 per cent. in aggregate in April and May, compared to the equivalent periods in 2008. In response, GKN has accelerated its restructuring activity. Overall, the division broke even at the trading profit level in the first five months of 2009 on sales of £194 million. See "Current trading" below.
Aerospace
The Aerospace business continues to perform in line with the Directors' expectations. GKN's strength in the defence markets, diversity of its commercial aircraft programme and benefits from the Filton acquisition, have all contributed to continued strong progress.
Aerospace sales for the five months to 31 May 2009 were £637 million with trading profit of £59 million. Excluding Filton and at constant currency sales increased by 5 per cent. compared to the equivalent period in 2008.
The Filton acquisition has performed well, contributing sales for the five months to 31 May 2009 of £140 million with operating margins (before fair value and currency adjustments) towards the higher end of the initial target range (5 per cent. to 7 per cent.) and with strong operating cash flow.
Outlook
Considerable uncertainty remains in GKN's markets. However, the Group has continued to make good progress in aligning its Automotive and OffHighway operations to current market conditions. Performance in Aerospace remains strong.
In the automotive sector, production schedules in recent months have been more stable. However, GKN's North American operations will be affected over the coming months by the production reductions at General Motors and Chrysler. The Directors believe that, as the year progresses and vehicle inventories continue to reduce, the gap between global sales and production levels should narrow.
Off-highway markets are expected to remain weak through the summer, with sales currently down in excess of 40 per cent. compared to 2008 levels.
Production schedules in the large commercial aircraft sector have continued to remain stable in the first half of 2009 and the Directors expect demand in the US defence market to remain solid through 2009.
Whilst some reductions in large commercial aircraft production volumes have been implemented by customers for the second half of 2009, the overall outlook in 2009 for GKN Aerospace remains positive.
The restructuring plans announced in February have been accelerated and the Directors expect increasing benefits from these cost reduction actions through the remainder of 2009.
Current trading
The following table sets out the Group's sales, share of joint venture sales, management sales and percentage change of management sales, by segment, for the five months ended 31 May 2009 and 2008. The information in the table is based on unaudited management accounts for the periods mentioned.
|
Five months ended 31 May |
|||||||
|
2009 |
2008 |
||||||
|
Sales |
Group's share of joint venture sales |
Management sales |
Sales |
Group's share of joint venture sales |
Management sales |
Percentage change in Management sales |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
||
|
Driveline |
667 |
68 |
735 |
946 |
63 |
1,009 |
(27) |
|
Other Automotive |
18 |
20 |
38 |
40 |
46 |
86 |
(56) |
|
Automotive |
685 |
88 |
773 |
986 |
109 |
1,095 |
(29) |
|
Powder Metallurgy |
190 |
- |
190 |
278 |
- |
278 |
(32) |
|
OffHighway |
193 |
1 |
194 |
231 |
1 |
232 |
(16) |
|
Aerospace |
637 |
- |
637 |
383 |
- |
383 |
66 |
|
Total |
1,705 |
89 |
1,794 |
1,878 |
110 |
1,988 |
(10) |
The following table sets out the Group's management trading profit, by segment, for the five months ended 31 May 2009. The information in the table is based on unaudited management accounts for the period mentioned.
|
Five months ended 31 May 2009 |
|
|
Management trading profit |
|
|
£m |
|
|
Driveline |
(37) |
|
Other Automotive |
(5) |
|
Automotive |
(42) |
|
Powder Metallurgy |
(13) |
|
OffHighway |
- |
|
Aerospace |
59 |
|
Corporate |
(3) |
|
Total |
1 |
Management trading profit for the five months to May includes the benefit of pension curtailments in Aerospace (£5 million) and other post-employment past service credits of £4 million (Driveline £3 million, Powder Metallurgy £1 million).
As at 31 May 2009 the Group's unaudited net assets amounted to £678 million compared with £928 million as at 31 December 2008, positions that reflected Group net debt of £928 million and £708 million respectively. The movement in net assets since the end of 2008 primarily reflects the impact of changes in foreign currency rates on the Group's overseas net investment arising predominantly in respect of US dollar, euro and Japanese yen denominated net investment.
Dividends and dividend policy
In view of the difficult trading environment, the Board concluded that it should not recommend the payment of a final dividend for 2008. The Board intends that GKN will resume dividend payments when markets stabilise, taking into account the Group's earnings, cash flow and balance sheet position.
Summary of the principal terms and conditions of the Rights Issue
Pursuant to the Rights Issue, the Company is proposing to offer up to 846,623,629 New Ordinary Shares by way of rights to Qualifying Shareholders at the Issue Price of 50 pence per New Ordinary Share payable in full on acceptance by no later than 11.00 a.m. on 21 July 2009.
The Issue Price represents a discount of approximately 39 per cent. to the theoretical ex-rights price based on the closing price of 119 pence per Existing Ordinary Share on 17 June 2009, the last dealing day prior to the announcement of the Rights Issue.
The Rights Issue will be made on the basis of:
6 New Ordinary Shares for every 5 Existing Ordinary Shares
held and registered in the name of each Qualifying Shareholder at the close of business on the Record Date and so in proportion for any other number of Existing Ordinary Shares then registered in the name of such Qualifying Shareholder.
Entitlements to New Ordinary Shares in connection with the Rights Issue will be rounded down to the nearest whole number and fractions of New Ordinary Shares will not be allotted to Qualifying Shareholders but will be aggregated and, if possible, sold in the market as soon as practicable after the commencement of dealings in the New Ordinary Shares, nil paid. The proceeds of such sales (after deduction of expenses) will be aggregated and will ultimately accrue for the benefit of the Company. Holdings of Existing Ordinary Shares in certificated and uncertificated form will be treated as separate holdings for the purpose of calculating entitlements under the Rights Issue.
The Rights Issue has been fully underwritten (on a several basis) by the Joint Underwriters pursuant to the Underwriting Agreement. The Rights Issue is conditional, amongst other things, upon:
the passing, without material amendment, of the Rights Issue Resolution at the General Meeting;
Admission becoming effective by not later than 8.00 a.m. on 7 July 2009 (or such later time and date as the Company and the Lead Banks may agree); and
the Underwriting Agreement having become unconditional in all respects (save for the condition relating to Admission) and not having been terminated in accordance with its terms.
The New Ordinary Shares will, when issued and fully paid pursuant to the Rights Issue, rank equally in all respects with the Existing Ordinary Shares, including the right to receive all dividends and other distributions made, paid or declared after the date of issue of the New Ordinary Shares and otherwise pari passu with the Existing Ordinary Shares.
A request will be made to the UK Listing Authority and to the London Stock Exchange to reflect, on the Official List and the London Stock Exchange's main market for listed securities respectively, the sub-division and conversion of the Existing Ordinary Shares into New Ordinary Shares and Deferred Shares pursuant to the Capital Reorganisation. Applications will be made to the UK Listing Authority and to the London Stock Exchange for the New Ordinary Shares to be admitted to the Official List and to trading on the London Stock Exchange's main market for listed securities respectively. It is expected that Admission will become effective on 7 July 2009 and that dealings in New Ordinary Shares, nil paid, will commence at 8.00 a.m. on that date.
The latest time and date for acceptance and payment in full under the Rights Issue is expected to be 11.00 a.m. on 21 July 2009.
The offer of Nil Paid Rights, Fully Paid Rights and New Ordinary Shares pursuant to the Rights Issue to persons resident or located in, or who are citizens of, or who have a registered address in a country other than the United Kingdom may be affected by the laws of the relevant jurisdiction.
Pursuant to the Rights Issue, New Ordinary Shares will be provisionally allotted to all Qualifying Shareholders on the register at the Record Date, including Overseas Shareholders. However, subject to certain exceptions, Provisional Allotment Letters will not be sent to Qualifying Shareholders with registered addresses in any Excluded Territory nor will the CREST stock account of Qualifying Shareholders with registered addresses in any Excluded Territory be credited.
Capital Reorganisation
To create a meaningful level of distributable reserves the nominal value of the New Ordinary Shares to be issued pursuant to the Rights Issue has to be considerably less than the nominal value of the Existing Ordinary Shares.
Therefore, in order to effect the Rights Issue and ensure that a sufficient level of distributable reserves is created, it is proposed that each of the issued Existing Ordinary Shares of 50 pence each be sub-divided and converted into one New Ordinary Share of 10 pence nominal value and one Deferred Share of 40 pence nominal value and that each of the authorised but unissued Existing Ordinary Shares of 50 pence be sub-divided into five New Ordinary Shares of 10 pence. The Capital Reorganisation requires certain approvals from Shareholders at the General Meeting. These approvals are each contained within the Rights Issue Resolution which is to be proposed at the General Meeting.
Each Shareholder's proportionate interest in the Company's issued ordinary share capital will remain unchanged as a result of the Capital Reorganisation. Aside from the change in nominal value, each New Ordinary Share will have the same rights (including voting and dividend rights and rights on a return of capital) as each Existing Ordinary Share has prior to the Capital Reorganisation. Certificates for Existing Ordinary Shares will remain valid for the same number of New Ordinary Shares arising on the Capital Reorganisation and no new certificates will be issued in respect of the New Ordinary Shares arising as a result of the Capital Reorganisation. New certificates in respect of New Ordinary Shares issued pursuant to the Rights Issue will be issued following conclusion of the Rights Issue.
The rights attaching to the Deferred Shares, which will not be listed and which will not be freely transferable, will render them effectively worthless and it is intended that they will be cancelled and an appropriate reserve created in due course. No share certificates will be issued in respect of the Deferred Shares.
The Capital Reorganisation will not affect the Company's or the Group's net assets.
General Meeting
Shareholders will be sent a Circular containing the General Meeting Notice. The General Meeting will be held on 6 July 2009 at 9.00 a.m. at the offices of UBS Investment Bank, 1 Finsbury Avenue, London EC2M 2PP. The General Meeting is being held for the purpose of considering and, if thought fit, passing the Resolutions. Pursuant to the Resolutions, (i) the Capital Reorganisation will be effected, (ii) the Directors will be granted authority to allot New Ordinary Shares and statutory pre-emption rights will be disapplied to the extent required in respect of the Rights Issue, (iii) the Articles will be amended to reflect the creation of the Deferred Shares, (iv) the implementation of the Rights Issue on the terms set out in the Circular, the Provisional Allotment Letter and the Prospectus will be approved, (v) the Directors will be granted suitable authorities for the future to allot Ordinary Shares and statutory pre-emption rights will be disapplied in respect of such authorities, and (vi) the Company will be granted suitable authority for the future to make market purchases of Ordinary Shares.
Shareholders should note that the Rights Issue is conditional on the Rights Issue Resolution being passed.
The Board considers that the Rights Issue and the Resolutions to be proposed at the General Meeting are in the best interests of the Company and its Shareholders as a whole. Accordingly, the Circular contains a unanimous recommendation from the Board that Shareholders vote in favour of the Resolutions to be put to the General Meeting as they intend to do, or procure, in respect of their own beneficial holdings, amounting to 895,997 Existing Ordinary Shares, representing approximately 0.13 per cent. of the voting rights in the Company as at 15 June 2009 (being the latest practicable date prior to the making of this announcement).
A form of proxy will be enclosed with the Circular. To be effective, the form of proxy must be completed and received by the Registrar at Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex BN99 6AW by 9.00 a.m. on 4 July 2009.
Summary expected timetable of principal events
|
Event |
2009 |
|
Announcement of the Rights Issue and Capital Reorganisation, |
7.00 a.m. on 18 June |
|
Prospectus published and Circular despatched |
18 June |
|
Record Date for entitlement under the Rights Issue |
close of business on 1 July |
|
General Meeting |
9.00 a.m. on 6 July |
|
Dealings in New Ordinary Shares, nil paid, commence on the London Stock Exchange |
8.00 a.m. on 7 July |
|
Existing Ordinary Shares marked "ex" by the London Stock Exchange |
8.00 a.m. on 7 July |
|
Nil Paid Rights credited to stock accounts in CREST |
8.00 a.m. on 7 July |
|
Nil Paid Rights and Fully Paid Rights enabled in CREST |
by 8.00 a.m. on 7 July |
|
Latest time and date for acceptance, payment in full and registration of renunciation of Provisional Allotment Letters |
11.00 a.m. on 21 July |
|
Dealings in New Ordinary Shares, fully paid, commence on the London Stock Exchange |
by 8.00 a.m. on 22 July |
Notes to editors
1. About GKN
GKN plc is a global engineering business serving mainly the automotive, industrial, off-highway and aerospace markets. As at 31 December 2008 it had operations in more than 30 countries, nearly 40,000 employees in subsidiaries and joint ventures and subsidiary sales of £4.4 billion.
2. Important notices
Each of Gleacher Shacklock, J.P. Morgan Cazenove, J.P. Morgan Securities, UBS Investment Bank, HSBC Bank and RBS Hoare Govett are acting exclusively for GKN and for no other person in connection with the Rights Issue and the Capital Reorganisation, and will not regard any other person (whether or not a recipient of this announcement) as a client in relation to the Rights Issue and the Capital Reorganisation and will not be responsible to anyone other than GKN for providing the protections afforded to their respective clients or for providing advice in relation to the Rights Issue, the Capital Reorganisation or any other matter referred to in this announcement.
Apart from the responsibilities and liabilities, if any, which may be imposed on J.P. Morgan Cazenove, J.P. Morgan Securities, UBS Investment Bank, HSBC Bank, RBS Hoare Govett or Gleacher Shacklock by FSMA, or the regulatory regime established thereunder, none of J.P. Morgan Cazenove, J.P. Morgan Securities, UBS Investment Bank, HSBC Bank, RBS Hoare Govett and Gleacher Shacklock accept any responsibility whatsoever and make no representation or warranty, express or implied, for the contents of this announcement including its accuracy, completeness or verification or for any other statement made or purported to be made by any of them, or on behalf of them, in connection with the Company, the Existing Ordinary Shares, the New Ordinary Shares, the Nil Paid Rights, Fully Paid Rights, the Deferred Shares, the Rights Issue and/or the Capital Reorganisation and nothing contained in this announcement is or shall be relied upon as a promise or representation in this respect, whether as to the past or future. Each of J.P. Morgan Cazenove, J.P. Morgan Securities, UBS Investment Bank, HSBC Bank, RBS Hoare Govett and Gleacher Shacklock accordingly disclaim, to the fullest extent permitted by applicable law, all and any liability whatsoever, whether arising in tort, contract or otherwise (save as referred to above) which any of them might otherwise have in respect of this announcement or any such statement.
No person has been authorised to give any information or to make any representations other than those contained in this announcement and, if given or made, such information or representations must not be relied on as having been authorised by GKN. Subject to the Listing Rules, the Prospectus Rules and the Disclosure and Transparency Rules, the issue of this announcement shall not, in any circumstances, create any implication that there has been no change in the affairs of GKN since the date of this announcement or that the information in it is correct as at any subsequent date.
This announcement is an advertisement and does not constitute a prospectus. Nothing in this announcement should be interpreted as a term or condition of the rights issue. Any decision to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of any Provisional Allotment Letter, Nil Paid Rights, Fully Paid Rights, and/or New Ordinary Shares must be made only on the basis of the information contained in and incorporated by reference into the Prospectus. Copies of the Prospectus, when published, will be made available from the Company's website at www.gkn.com and will be available for inspection at the UK Listing Authority's document viewing facility.
The information contained herein is restricted and is not for release, publication or distribution, directly or indirectly, in whole or in part, in or into the United States (including its territories and possessions, any state of the United States and the District of Columbia), Australia, Canada, Japan, New Zealand or South Africa or any other jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction. The securities referred to herein have not been and will not be registered under the securities laws of such jurisdictions and may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, within such jurisdictions except pursuant to an exemption from and in compliance with any applicable securities laws.
The distribution of this announcement, the Circular, the Prospectus and/or the Provisional Allotment Letters and/or the transfer or offering of the Nil Paid Rights, Fully Paid Rights or New Ordinary Shares into jurisdictions other than the United Kingdom is or may be restricted by law. Persons into whose possession this announcement or any such document comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.
This announcement and the information contained herein does not contain or constitute an offer for sale or the solicitation of an offer to purchase any securities in the United States. The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), or any other securities authority of any state in the United States, and may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered in the United States absent registration or pursuant to an exemption from, or in transactions not subject to, the registration requirements of the Securities Act. There will be no public offer of the securities referred to herein in the United States.
This announcement has been prepared for the purposes of complying with applicable law and regulation in the United Kingdom and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside of the United Kingdom.
No statement in this announcement is intended as a profit forecast or a profit estimate and no statement in this announcement should be interpreted to mean that earnings per share for the current or future financial years would necessarily match or exceed the historical published earnings per share.
Neither the content of the GKN website (or any other website) nor the content of any website accessible from hyperlinks on the GKN website (or any other website) is incorporated into, or forms part of, this announcement.
This announcement includes forward-looking statements which reflect the Group's or, as appropriate, the Directors' current views with respect to financial performance, business strategy, plans and objectives of management for future operations (including development plans relating to the Group's products and services). These statements include forward-looking statements both with respect to the Group and the sectors and industries in which the Group operates. Statements which include the words ''expects'', ''intends'', ''plans'', ''believes'', ''projects'', ''anticipates'', ''will'', ''targets'', ''aims'', ''may'', ''would'', ''could'', ''continue'' and similar statements of a future or forward-looking nature identify forward-looking statements for purposes of the US federal securities laws or otherwise.
All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause the Group's actual results to differ materially from those indicated in these statements. These factors include but are not limited to those described in the section of the Prospectus entitled ''Risk Factors'', which should be read in conjunction with the other cautionary statements that are included within the Prospectus. Any forward-looking statements in this announcement reflect the Group's or, as appropriate, the Directors' current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the Group's business, results of operations, growth strategy and liquidity.
Each forward-looking statement speaks only as of the date of this announcement. Subject to any obligations under the Prospectus Rules, the Disclosure and Transparency Rules and the Listing Rules and save as required by the FSA, the London Stock Exchange or applicable law and regulations, neither the Company nor the Directors undertakes any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. All subsequent written and oral forward-looking statements attributable to the Group or individuals acting on behalf of the Group are expressly qualified in their entirety by this paragraph. Shareholders and prospective investors should specifically consider the factors identified in this announcement which could cause actual results to differ before making an investment decision.
APPENDIX - DEFINITIONS
The following definitions apply throughout this announcement unless the context requires otherwise:
|
"2008 Restructuring Programme" |
the restructuring programme initiated by the Group in the final quarter of 2008 |
|
"Acceptance Date" |
the last date for acceptance and payment under the terms of the Rights Issue or such later date as the Company and the Joint Bookrunners may agree in writing and, in any event, such date shall be no later than 3 August 2009 |
|
"Admission" |
the admission to listing on the Official List of the New Ordinary Shares (nil paid or fully paid, as the case may require) becoming effective and the admission of such shares (nil paid or fully paid, as the case may require) to trading on the London Stock Exchange's main market for listed securities (in accordance with the Standards) becoming effective |
|
"Articles of Association" or "Articles" |
the articles of association of the Company |
|
"Banks" |
J.P. Morgan Cazenove, J.P. Morgan Securities, UBS, HSBC Bank and RBS Hoare Govett |
|
"Board" |
the board of directors of the Company |
|
"Capital Reorganisation" |
the reorganisation of the Existing Ordinary Shares to create the New Ordinary Shares and the Deferred Shares |
|
"certificated" or "in certificated form" |
in relation to a share or other security, a share or other security which is not in uncertificated form (that is, not in CREST) |
|
"Circular" |
the circular dated 18 June 2009 to be sent to Shareholders in connection with the General Meeting |
|
"CREST" |
the system for paperless settlement of trades in listed securities and the holding of uncertificated securities, of which Euroclear is the operator |
|
"Deferred Shares" |
the deferred shares of 40 pence each in the capital of the Company to be created by the Capital Reorganisation |
|
"Directors" |
the Executive Directors and the Non-Executive Directors |
|
"Euroclear" |
Euroclear UK & Ireland Limited |
|
"Excluded Territories" |
the Commonwealth of Australia, its territories and possessions, Canada, Japan, New Zealand, the Republic of South Africa and the United States, and "Excluded Territory" means any one of them |
|
"Existing Ordinary Shares" |
Ordinary Shares of 50 pence each in the capital of the Company |
|
"FSA" |
the Financial Services Authority of the United Kingdom |
|
"FSMA" |
Financial Services and Markets Act 2000 |
|
"Fully Paid Rights" |
rights to acquire the New Ordinary Shares fully paid |
|
"General Meeting" |
the general meeting of GKN to be held at 9.00 a.m. on 6 July 2009 and any adjournment of that meeting, notice of which is set out in the Circular |
|
"General Meeting Notice" |
the notice of the General Meeting set out in the Circular |
|
"GKN" or "Company" |
GKN plc |
|
"Gleacher Shacklock" |
Gleacher Shacklock LLP |
|
"Group" |
the Company and its subsidiaries and subsidiary undertakings, from time to time |
|
"HSBC Bank" |
HSBC Bank plc |
|
"Issue Price" |
50 pence per New Ordinary Share |
|
"Joint Bookrunners" |
J.P. Morgan Cazenove and UBS |
|
"Joint Sponsors" |
J.P. Morgan Cazenove and UBS |
|
"Joint Underwriters" |
J.P. Morgan Securities, UBS, HSBC Bank and RBS Hoare Govett |
|
"J.P. Morgan Cazenove" |
J.P. Morgan Cazenove Limited |
|
"J.P. Morgan Securities" |
J.P. Morgan Securities Ltd. |
|
"Lead Banks" |
J.P. Morgan Cazenove, J.P. Morgan Securities and UBS |
|
"Listing Rules" |
the rules and regulations made by the FSA under Part VI of FSMA |
|
"London Stock Exchange" |
London Stock Exchange plc |
|
"New Ordinary Shares" |
ordinary shares of 10 pence each in the capital of the Company to be issued by the Company pursuant to the Capital Reorganisation and/or the Rights Issue, as the context requires |
|
"Nil Paid Rights" |
New Ordinary Shares in nil paid form provisionally allotted to all Qualifying Shareholders pursuant to the Rights Issue |
|
"Non-CREST Shareholders" |
Shareholders whose Ordinary Shares are held in certificated form |
|
"Official List" |
the official list maintained by the UK Listing Authority pursuant to Part IV of FSMA |
|
"Ordinary Shares" |
New Ordinary Shares or Existing Ordinary Shares, as the context requires |
|
"Overseas Shareholders" |
Qualifying Shareholders who have registered addresses, or who are resident or located, outside the United Kingdom |
|
"Prospectus" |
the prospectus to be published by the Company on its website at www.gkn.com relating to the Rights Issue |
|
"Prospectus Rules" |
rules published by the FSA under section 73A FSMA |
|
"Provisional Allotment Letter(s)" |
the renounceable provisional allotment letter(s) relating to the Rights Issue, expected to be despatched on 6 July 2009 to Qualifying Non-CREST Shareholders (other than, subject to certain exceptions, Qualifying Non-CREST Shareholders with registered addresses in any of the Excluded Territories) |
|
"Qualifying CREST Shareholders" |
Qualifying Shareholders whose Existing Ordinary Shares on the register of members of GKN at the Record Date are in uncertificated form and held through CREST |
|
"Qualifying Non-CREST Shareholders" |
Qualifying Shareholders whose Existing Ordinary Shares on the register of members of GKN at the Record Date are in certificated form |
|
"Qualifying Shareholders" |
Shareholders (other than the Company) on the register of members of GKN at the Record Date |
|
"RBS Hoare Govett" |
RBS Hoare Govett Limited |
|
"Receiving Agent" or "Registrar" |
Equiniti Limited |
|
"Resolutions" |
the resolutions to be proposed at the General Meeting in connection with, amongst other things, the Capital Reorganisation and the Rights Issue, notice of which is set out in the Circular |
|
"Rights Issue" |
the proposed issue of the New Ordinary Shares to Qualifying Shareholders by way of rights on the terms and subject to the conditions set out in the Prospectus and, in the case of Qualifying Non-CREST Shareholders, the Provisional Allotment Letters |
|
"Rights Issue Resolution" |
the special resolution to be proposed as resolution 1 at the General Meeting, as set out in the General Meeting Notice |
|
"Shareholders" |
the holders of Ordinary Shares from time to time and "Shareholder" means any one of them |
|
"UBS" or "UBS Investment Bank" |
UBS Limited |
|
"UK" or "United Kingdom" |
the United Kingdom of Great Britain and Northern Ireland |
|
"UK Listing Authority" |
the FSA acting in its capacity as the competent authority for the purposes of Part IV of FSMA |
|
"uncertificated" or "in uncertificated form" |
in relation to a share or other security, a share or other security title to which is recorded on the relevant register of the share or security concerned as being held in uncertificated form in CREST and title to which, by virtue of the CREST Regulations, may be transferred by means of CREST |
|
"Underwriting Agreement" |
the underwriting and sponsors agreement dated 18 June 2009 between the Company and the Banks relating to the Rights Issue |
|
"US" or "United States" |
United States of America, its territories and possessions, any state of the United States and the District of Columbia |
Related Shares:
GKN PLC