15th Dec 2005 08:55
Spirent PLC15 December 2005 SPIRENT PLC ("the Company") PROPOSED DISPOSAL OF THE HELLERMANNTYTON DIVISION ("HellermannTyton") FOR £288.9 MILLION TRADING UPDATE London, UK - Thursday, 15 December 2005: Spirent plc (LSE: SPT; NYSE: SPM), aleading communications technology company, today announces that it has enteredinto an agreement for the sale of its Network Products group, theHellermannTyton division, to funds controlled by Doughty Hanson & Co Limited("Doughty Hanson"). Highlights • Agreement to dispose of HellermannTyton to Doughty Hanson for a consideration of approximately £288.9 million, at a cash free/debt free equivalent value. • Under the agreement Doughty Hanson assumes approximately £11.2 million of debt, the balance of £277.7 million is payable in cash on completion. • Disposal is consistent with Spirent's stated strategy of focusing on growing its Communications group, whilst maximising the value of its other businesses. • Spirent intends to use the proceeds to: -buy back up to £50.0 million of the Company's issued share capital through an on-market share repurchase programme; -support investment required to further Spirent's strategic objectives; and, in order to strengthen its financial position, proceeds will be used to: -repay Spirent's outstanding loan notes of £70.4 million ($124.8 million), together with the associated contractual make whole and swap break fees totalling approximately £9.8 million ($17.5 million); -make a special contribution into Spirent's UK final salary pension scheme of £47.0 million, being the most recent estimate of the deficit in accordance with IAS 19. • The disposal will result in near-term earnings dilution for Spirent but will strengthen its overall financial position. Trading update In relation to current trading, the continuing Group's overall performance is inline with expectations. Reduced losses in the Service Assurance division havemitigated some weakness in the Performance Analysis division, resulting fromthird quarter revenue being lower than had been previously forecast. Anders Gustafsson, Chief Executive, commented: "We are very pleased that we have agreed the sale of the Network Products groupfor £288.9 million. This strengthens our overall financial position and realisessignificant value, which will enable us to execute our strategy to invest in andgrow our communications activities. We continue to believe that the telecomstest and monitoring market offers good medium term growth prospects. "We are also pleased to announce that Spirent intends to return up to £50.0million of the proceeds to shareholders." Other information Completion of the disposal is conditional upon, inter alia, the approval ofshareholders, to be sought at an Extraordinary General Meeting to be convened on24 January 2006 and the fulfilment of certain anti-trust regulatory clearances.Completion is expected as soon as possible thereafter. Gleacher Shacklock LLP and JPMorgan Cazenove Limited are acting as FinancialAdvisers to the Company in relation to the disposal. A presentation for analysts will be held at 10.45 for 11.00am today at the offices of Smithfield, 10 Aldersgate Street, London, EC1. A webcast of the meeting will be available later today at www.spirent.com Photography is available from UPPA (Universal Pictorial Press & Agency) - www.uppa.co.uk or tel: 020 7421 6000 Enquiries Anders Gustafsson, Chief Executive Spirent plc +44 (0)1293 767676Eric Hutchinson, Finance Director Tim Shacklock Gleacher Shacklock LLP +44 (0)20 7484 1150Edward Cumming-Bruce Julian Cazalet JPMorgan Cazenove Ltd +44 (0)20 7588 2828Andrew Hodgkin Reg Hoare Smithfield +44 (0)20 7360 4900Katie Hunt About Spirent Spirent is a leading communications technology company focused on deliveringinnovative systems and services to meet the needs of customers worldwide. We area global provider of performance analysis and service assurance solutions thatenable the development and deployment of next-generation networking technologiessuch as broadband services, Internet telephony, 3G wireless and web applicationsand security testing. The Network Products business is a developer andmanufacturer of innovative solutions for fastening, identification, protectionand connectivity in electrical and communications networks marketed under theglobal brand HellermannTyton. The Systems group develops power control systemsfor specialist electrical vehicles in the mobility and industrial markets.Further information about Spirent plc can be found at www.spirent.com Spirent Ordinary shares are traded on the London Stock Exchange (ticker: SPT)and on the New York Stock Exchange (ticker: SPM; CUSIP number: 84856M209) in theform of American Depositary Shares (ADS), represented by American DepositaryReceipts, with one ADS representing four Ordinary shares. Spirent and the Spirent logo are trademarks or registered trademarks of Spirentplc. All other trademarks or registered trademarks mentioned herein are held bytheir respective companies. All rights reserved. This press release may contain forward-looking statements (as that term isdefined in the United States Private Securities Litigation Reform Act of 1995)based on current expectations or beliefs, as well as assumptions about futureevents. You can sometimes, but not always, identify these statements by the useof a date in the future or such words as "will", "anticipate", "estimate","expect", "project", "intend", "plan", "should", "may", "assume" and othersimilar words. By their nature, forward-looking statements are inherentlypredictive and speculative and involve risk and uncertainty because they relateto events and depend on circumstances that will occur in the future. You shouldnot place undue reliance on these forward-looking statements, which are not aguarantee of future performance and are subject to factors that could cause ouractual results to differ materially from those expressed or implied by thesestatements. Such factors include, but are not limited to: the extent to whichcustomers continue to invest in next-generation technology and deploy advancedIP-based services; our ability to successfully expand our customer base; ourability to continue to benefit from generally improving market conditions; theprevailing market conditions and pace of economic recovery; our ability toimprove efficiency, achieve the benefits of our cost reduction goals and adaptto economic changes and other changes in demand or market conditions; ourability to develop and commercialise new products and services, extend ourexisting capabilities in IP services and expand our product offeringinternationally; our ability to attract and retain qualified personnel; theeffects of competition on our business; fluctuations in exchange rates and heavyexposure to a weak US dollar; changes in the business, financial condition orprospects of one or more of our major customers; risks of doing businessinternationally; the financial burden of our pension fund deficit; risksrelating to the acquisition or sale of businesses and our subsequent ability tointegrate businesses; our reliance on proprietary technology; our exposure toliabilities for product defects; our reliance on third party manufacturers andsuppliers; and other risks described from time to time in Spirent plc'sSecurities and Exchange Commission periodic reports and filings. Gleacher Shacklock LLP and JPMorgan Cazenove Limited, who are authorised andregulated in the United Kingdom by the Financial Services Authority, are actingexclusively for Spirent plc. Gleacher Shacklock LLP and JPMorgan CazenoveLimited are not acting for any other person in relation to the disposal andGleacher Shacklock LLP and JPMorgan Cazenove Limited will not be responsible toany person other than Spirent plc for providing the protections afforded toclients of Gleacher Shacklock LLP and JPMorgan Cazenove Limited or for providingadvice in relation to the contents of this document or the disposal. Proposed disposal of the HellermannTyton Division Introduction On 19 September 2005, Spirent announced that it had started a formal processthat was expected to result in the sale of its Network Products group, theHellermannTyton Division. Today, Spirent announces that it has entered into anagreement with funds controlled by Doughty Hanson & Co Limited ("DoughtyHanson") for the sale of the HellermannTyton Division for a cash free/debt freeequivalent value of approximately £288.9 million. Under the disposal agreement,Doughty Hanson will assume approximately £11.2 million of debt, the balance of£277.7 million is payable in cash on completion. In view of the size of the disposal, it is conditional, among other things, onthe approval of shareholders, which will be sought at an EGM of the Company tobe convened on 24 January 2006 and the fulfilment of certain anti-trustregulatory clearances. Background to and reasons for the disposal Spirent is a leading communications technology company, focused on deliveringinnovative systems and services to meet the needs of customers worldwide. Itsoperations are currently organised into three operating groups: SpirentCommunications (comprising the Performance Analysis division and the ServiceAssurance division), the HellermannTyton Division and the Systems group. Spirent believes that now is a good time to realise value from its interest inthe HellermannTyton Division and strengthen its overall financial position. Thisdecision is consistent with Spirent's stated strategy of focusing on growingSpirent Communications whilst maximising the value of its other businesses. Theproposed disposal of the HellermannTyton Division will realise significant valueand enable the continuing Group to execute its strategy to focus onconsolidating and expanding its position as a market leader in the provision ofcommunications test and measurement solutions, whilst strengthening itsfinancial position. In the financial statements for Spirent for the year ended 31 December 2004,Spirent had total turnover of £475.0 million and operating profit beforegoodwill amortisation and exceptional items of £42.8 million. SpirentCommunications remains our largest business in terms of turnover, representing53 per cent of ongoing turnover in the year ended 31 December 2004 (52 per cent.in 2003). Information on the HellermannTyton Division The HellermannTyton Division develops and manufactures innovative solutions forfastening, identification, protection and connectivity in electrical andcommunications networks, marketed under the global brand "HellermannTyton". Itsproducts include a broad range of high-grade nylon ties, clips, channels andfixings for fastening cables and wires in a broad range of applications. It alsoproduces products with identification and security features. Its heatshrinkinsulation, convoluted tubing and cable covering products provide insulation andphysical protection for wires and cables. It also produces a range of productsused in the installation of local area and wide area communications networks. Ithas operations in 32 countries and serves a broad range of customers worldwide. The HellermannTyton Division includes a 49 per cent. interest in Tyton Companyof Japan, Limited ("TCJ"), an associate company which represents theHellermannTyton business in Japan. In 2004 the HellermannTyton Division had turnover of £187.8 million, operatingprofit before goodwill amortisation and exceptional items of £21.1 million andprofit before taxation of £22.9 million. At 31 December 2004 the HellermannTytonDivision had £147.8 million of total assets including the book value of itsinvestment in associates of £15.8 million. Terms of the disposal Spirent entered into a disposal agreement on 15 December 2005 for the sale ofthe HellermannTyton Division to Doughty Hanson for a cash free/debt freeequivalent value of approximately £288.9 million including assumed debt of £11.2million, the balance of £277.7 million is payable in cash on completion. Thisconsideration is subject to adjustments to be calculated by comparing theestimated net assets of the HellermannTyton Division as at 31 December 2005 tothe net assets of the HellermannTyton Division at completion on a pound forpound basis. The disposal agreement provides for Doughty Hanson to acquire the shares notowned by Spirent in TCJ for a price of JPY 5.3 billion (approximately £25.3million at current exchange rates). Under the terms of an option agreementbetween Spirent and the other shareholders in TCJ, Spirent has the right toacquire those shares for the purpose of the disposal for the same amount. Thenet proceeds of the disposal for Spirent (before any net asset adjustment) willnot be affected whether or not Doughty Hanson acquires those shares. Financial effects of the disposal and use of proceeds The disposal will enable Spirent management to focus on Spirent Communications,which we believe offers good prospects for growth both organically and byselective acquisitions. Whilst the disposal of the HellermannTyton Division will result in near-termearnings dilution for the continuing Group, it will however strengthen Spirent'sfinancial position. The proceeds of the disposal are intended to be used as follows: • to repay the outstanding loan notes of £70.4 million ($124.8 million) together with the amount which becomes due in the event of early repayment of £7.8 million ($13.9 million); • break fees in respect of interest rate swaps which have been taken out by Spirent in connection with the loan notes of £2.0 million ($3.6 million); • to make a special contribution of £47.0 million into the UK final salary pension scheme, being the Company's most recent estimate of the deficit in accordance with IAS 19; • the Board intends to return up to £50.0 million to shareholders through on-market share repurchases, further details of which are included below; and • the anticipated remaining proceeds of approximately £82.1 million will be available to meet the working capital needs of the continuing Group and fund additional investment in Spirent Communications to accelerate the growth of the business and the delivery of new and innovative solutions to market, thus reinforcing and expanding its market position. Current trading and prospects On 11 August 2005, the Spirent Group announced its unaudited results for thefirst half of 2005 in which it reported that all Spirent businesses hadincreased revenue and operating profit in the first half of 2005, with theexception of the Service Assurance division, which had reported a loss of £9.0million. Overall, Spirent anticipates that the operating profit of Spirent Communicationsas a whole for the full year will be in line with expectations, with reducedlosses in the Service Assurance division mitigating some weakness in thePerformance Analysis division. Spirent indicated in its interim results announcement that the market for thePerformance Analysis division was variable in terms of end customer demandprincipally in the broadband test activities. These conditions have continued,resulting in revenue for the third quarter being lower than had been previouslyforecast. As a consequence, the full year operating profit in this division islikely to be somewhat below expectations. The performance of the new unified platform for Ethernet testing, SpirentTestCenterTM, has been encouraging with a number of orders from strategicallyimportant and new customers having been secured in the second half year. Thedivision's wireless and position location test activities have also continued toexperience good growth. In the Service Assurance division, revenue for the second half year is projectedto be in line with expectations. However, the unaudited operating loss for thesecond half year is likely to be less than previously anticipated, being in theregion of £1 million, and substantially reduced from that reported for the firsthalf year. This reduced loss is a result of the benefits achieved fromrestructuring in the first half combined with further tight cost control. TheService Assurance division has also experienced improved profitability in thesecond half year compared with the first half due to increased software revenueat higher margins. Spirent continues to believe that the markets in which Spirent Communicationsoperates offer good growth prospects over the medium term. The Systems group is performing in line with expectations and continues to enjoysolid growth prospects. Proposed on-market share repurchases As set out above, Spirent has indicated that it intends to return up to £50million to its shareholders (which at the current share price represents 10.3per cent. of the issued Ordinary share capital of Spirent) through an on-marketshare repurchase programme. In order to implement this programme, there are anumber of steps that Spirent will need to take. These will include thefollowing: (a) Spirent currently has the approval from its shareholders to repurchaseon-market up to 5 per cent. of its issued Ordinary share capital. Spirentintends to seek further shareholders' approval, as is necessary, to implementthe programme at its AGM in 2006; (b) At an EGM on 26 October 2004, Spirent's shareholders approved a cancellationof the share premium account and the capital redemption reserve and on 24November 2004, the Chancery division of the High Court confirmed thatcancellation. Spirent gave certain undertakings to the High Court in connectionwith that cancellation. In order to implement an on-market share repurchaseprogramme, Spirent will need to have available distributable reserves and inorder for reserves to become available for distribution, Spirent will need todischarge certain obligations of these undertakings; and (c) A share repurchase is a type of transaction in respect of which it may beappropriate to seek clearance from the Pensions Regulator and Spirent willconsider whether this is appropriate in light of all circumstances at the time. - Ends- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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