19th Jul 2005 11:04
Low & Bonar PLC19 July 2005 19 July 2005 Low & Bonar PLC ("Low & Bonar") PROPOSED DISPOSAL OF BONAR PLASTICS Low & Bonar today announces the proposed disposal of Bonar Plastics (the"Disposal") and the terms of a proposed reduction of share capital andcancellation of share premium account (the "Capital Reorganisation"). HIGHLIGHTS • Proposed disposal of Bonar Plastics to Promens hf., a subsidiary of Atorka Group hf. ("Atorka"), for a consideration of £25.75 million in cash before transaction costs, subject to adjustments on completion. • For the year ended 30 November 2004, Bonar Plastics generated profit before interest and tax of £1.2 million on turnover of £59.2 million. • The proposed Disposal will result in an enhanced strategic focus and will enable the Low & Bonar Group to finance strategically appropriate acquisitions in the Floors and Yarns & Fabrics divisions. • Completion of the Disposal is subject to approval by shareholders at an extraordinary general meeting, which is expected to be held towards the end of August. • The Board has decided to seek shareholder approval for the cancellation of Low & Bonar's share premium account and a reduction in the nominal value of its authorised and issued ordinary share capital in order to seek to maintain Low & Bonar's current dividend policy. Commenting on the Disposal, Paul Forman, Group Chief Executive of Low & Bonarsaid: "The disposal of Bonar Plastics will allow us to focus on the higher marginFloors and Yarns & Fabrics divisions, both of which have seen good organicgrowth. The acquisition of Xirion announced last week is an important strategicstep for the Yarns & Fabrics division and the other two recent acquisitions inthis division are performing satisfactorily. The cash realised by the disposalannounced today will enable us to pursue further acquisitions as we continue todevelop the business." Commenting on the Disposal, Magnus Jonsson, Executive Chairman of Atorka, said: "We are pleased to welcome Bonar Plastics into the Atorka Group and we lookforward to working with the Bonar Plastics management and employees. I amconfident that the business will continue to progress under our ownership." Contacts: Low & Bonar PLC +44 (0) 20 7298 6820Paul Forman, Group Chief ExecutiveJon Kempster, Group Finance Director PricewaterhouseCoopers LLPDavid Armfield, Partner +44 (0) 121 232 2566Darren Bryant, Director +44 (0) 20 7804 4089 Tulchan CommunicationsDavid Trenchard +44 (0) 20 7353 4000 This announcement summarises the information contained in the circular toshareholders which will be posted as soon as practicable. PricewaterhouseCoopers LLP, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority for designated investment businessis acting exclusively for Low & Bonar PLC and for no one else in relation to theDisposal and will not be responsible to anyone other than Low & Bonar PLC forproviding the protections afforded to clients of PricewaterhouseCoopers LLP orfor giving advice in relation to the Disposal, or any other matter referred toin this announcement. Notes to editors Low & Bonar is an international group manufacturing and supplying a wide rangeof products in the Specialist Materials and Plastics markets. Bonar Plastics ispredominantly a rotational moulder of plastics, providing solutions to customersin the chemicals, automotive, environmental, point of sale and food processingmarkets. 19 July 2005 Low & Bonar PLC ("Low & Bonar" or the "Company") PROPOSED DISPOSAL OF BONAR PLASTICS PROPOSED CAPITAL REORGANISATION 1. Introduction The Directors of Low & Bonar are pleased to announce that Low & Bonar hasentered into a conditional agreement to sell Bonar Plastics to Promens hf. (the"Purchaser"), a subsidiary of Atorka, for a consideration of £25.75 million incash before transaction costs, subject to certain adjustments. In view of the size of the Disposal relative to the Low & Bonar Group, andbecause the Purchaser is a related party of the Company under the U.K. ListingRules as a result of the Atorka group's shareholding in the Company, theDisposal is conditional upon the approval of shareholders. This approval is tobe sought at an extraordinary general meeting of the Company ("EGM"), to be heldtowards the end of August this year. The Directors also announce the terms of a proposed Capital Reorganisation. 2. Background to and reasons for the Disposal The focus in Bonar Plastics has for some time been on improving operationalproductivity, cost control and financial discipline in the face of challengingmarket conditions. Whilst the strategy has led to improved results, the Boardhas decided to focus on the Floors and Yarns & Fabrics divisions where the Boardbelieves Low & Bonar can generate higher margins. As part of the implementationof this strategy, in 2004 the Yarns & Fabrics division acquired ADFIL and a 50.1per cent. stake in Yihua Bonar Yarns and Fabrics Co. Limited. Consistent with this strategy, Low & Bonar has also recently announced theacquisition of Xirion NV ("Xirion"), a monofilament grass yarn company. Xirionwill complement Low & Bonar's existing grass yarn activities and, on completionof the acquisition, will give Low & Bonar access to monofilament technology, animportant new technology that would otherwise have taken a number of years todevelop. It is expected to give Low & Bonar access to a fast growth segment ofthe market and increase Low & Bonar's access to the continental European market.The acquisition is subject to the approval of Xirion shareholders and isexpected to complete on 31 August 2005. In March 2005, the Board appointed PricewaterhouseCoopers LLP to review thestrategic options for Bonar Plastics. The Board subsequently received anapproach from Atorka expressing an interest in acquiring Bonar Plastics. Atorkaowns Saeplast hf., an Icelandic company that manufactures rotationally mouldedplastics, specialising in insulated tubs and floating devices for the food andmarine industries. Discussions with Atorka culminated in the transaction announced today. 3. Information on Bonar Plastics Bonar Plastics is predominantly a rotational moulder of plastics, providingsolutions to customers in the chemicals, automotive, environmental, point ofsale and food processing markets. For the year ended 30 November 2004, Bonar Plastics generated profit beforeinterest and tax of £1.2 million on turnover of £59.2 million. As at 30 November2004, Bonar Plastics had net assets of £25.2 million and gross assets of £60.2million. For the six months ended 31 May 2005, Bonar Plastics generated profitbefore interest and tax of £0.6 million on turnover of £32.3 million. As at 31May 2005, Bonar Plastics had net assets of £25.5 million and gross assets of£58.0 million. The Bonar Plastics businesses currently report to Steve Good, DivisionalManaging Director. Following completion, Mr Good will work with the Purchaserfor a transitional period of 3 months to assist in post merger integration.Bonar Plastics has an established operational team, which will remain with BonarPlastics following completion of the Disposal. 4. Principal terms of the Disposal On 19 July 2005, Low & Bonar entered into an agreement under which it has agreedto sell, or to procure the sale of, Bonar Plastics to the Purchaser. The purchase price for Bonar Plastics is £25.75 million, on a cash-freedebt-free basis, subject to certain adjustments to be made at completion. The Disposal, which is expected to be completed by early September 2005, isconditional on the approval of shareholders of Low & Bonar at an EGM. TheDisposal agreement will terminate automatically if this approval is not receivedon or before 30 September 2005. The Purchaser would also be entitled toterminate the Disposal agreement at any time before completion where any of thewarranties given by Low & Bonar under the agreement cease to be true to anextent that would have a material adverse effect on the business or assets ofBonar Plastics taken as a whole. 5. The Related Party Promens hf. is a subsidiary of Atorka, which is a strategic investment companylisted on the Icelandic Stock Exchange. As at 18 July 2005, Atorka and its subsidiary, AFL Fjarfestingarfelag hf., heldtogether 21,132,500 ordinary shares, representing 21.1 per cent. of Low &Bonar's issued share capital. Low & Bonar and Atorka have agreed that, until 31 August 2005, neither Atorkanor any of its group undertakings will acquire, directly or indirectly, anyshares in Low & Bonar without the consent of the Low & Bonar Board. Low & Bonarand Atorka have also agreed that until 1 July 2006, neither Atorka nor any ofits group undertakings will make a takeover offer, or become obliged as a resultof its actions to make a takeover offer, for Low & Bonar shares without theconsent of the Low & Bonar Board. These restrictions will cease to apply incertain circumstances. Atorka has confirmed previous assurances given to the Board that it remainssupportive of the Low & Bonar management team and that it regards itsshareholding in Low & Bonar as a long-term investment. 6. Financial effects of the Disposal The cash proceeds from the Disposal at completion, which will amount toapproximately £23.5 million net of transaction expenses and tax and before anyadjustments that may arise from the completion accounts mechanism, will beplaced on short term deposit and used, in part, to repay debt. The Disposal is expected to be earnings dilutive in the short term. However, theLow & Bonar Group is looking actively for strategic acquisitions in its Floorsand Yarns & Fabrics divisions, where the Board believes there are significantopportunities. 7. The Capital Reorganisation On completion of the Disposal, Low & Bonar will need to make a significantprovision against the investment in its subsidiary company, Bonar InternationalHoldings Ltd which through its wholly owned subsidiary, Bonar InternationalSARL, owns the majority of companies comprising the Bonar Plastics businessesthat are being sold. This provision against the investment in BonarInternational Holdings Ltd will create losses that will not be recovered throughthe ordinary course of business in a reasonable timescale. In addition, as disclosed in the notes to the Annual Report & Accounts for theyear ended 30 November 2004, the Low & Bonar Group has a pension funding deficitof £31.5 million, as calculated under the measurement rules of FinancialReporting Standard 17 ("FRS 17"). For accounting periods from 1 December 2005onwards, Low & Bonar will be required to prepare its consolidated financialstatements in accordance with International Financial Reporting Standards("IFRS"). Under IFRS, Low & Bonar will be obliged to account for pension costsin accordance with International Accounting Standard 19, which is similar in itsmeasurement criteria to FRS 17. Each of completion of the Disposal, or the adoption of IFRS with effect from 1December 2005, would eliminate Low & Bonar's distributable reserves and preventLow & Bonar from maintaining its current dividend policy in respect of itsordinary shares and continuing to pay dividends in accordance with the terms ofits preference shares. The Board believes that the current trading and prospects of the Low & BonarGroup following completion of the Disposal are consistent with maintaining Low &Bonar's ordinary share dividend policy and continuing to pay dividends to itspreference shareholders. Accordingly, the Board has decided to seek shareholderapproval for the cancellation of Low & Bonar's share premium account and areduction in the nominal value of its authorised and issued ordinary sharecapital from 50 pence per ordinary share to 25 pence per ordinary share,resulting in a reduction of capital of approximately £85 million (the "CapitalReorganisation"). Subject to shareholder approval at the EGM, the Company will apply to the Courtof Session in Scotland for confirmation of the Capital Reorganisation. The Courtmay require Low & Bonar to protect the interests of those creditors who do notconsent, for example, by giving an undertaking that it will treat the creditarising on the Capital Reorganisation as not distributable at least in part.Subject to the requirements of the Court in this regard, it is expected that theCapital Reorganisation would enable Low & Bonar to offset the deficit on itsprofit and loss account which would arise from the Disposal and/or the adoptionof IFRS. 8. Extraordinary General Meeting As described above, the Disposal and the Capital Reorganisation are bothconditional on the approval of Low & Bonar shareholders at the EGM. Notice ofthe EGM will be set out in the circular to shareholders which will be posted assoon as practicable. Contacts Low & Bonar PLC +44 (0) 20 7298 6820Paul Forman, Group Chief ExecutiveJon Kempster, Group Finance Director PricewaterhouseCoopers LLPDavid Armfield, Partner +44 (0) 121 232 2566Darren Bryant, Director +44 (0) 20 7804 4089 Tulchan CommunicationsDavid Trenchard +44 (0) 20 7353 4000 PricewaterhouseCoopers LLP, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority for designated investment businessis acting exclusively for Low & Bonar PLC and for no one else in relation to theDisposal and will not be responsible to anyone other than Low & Bonar PLC forproviding the protections afforded to clients of PricewaterhouseCoopers LLP orfor giving advice in relation to the Disposal, or any other matter referred toin this announcement. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
LWB.L