23rd Mar 2007 08:57
Melrose PLC23 March 2007 Melrose PLC FOR IMMEDIATE RELEASE 23 March 2007 Melrose PLC Disposal of McKechnie Aerospace Melrose PLC announces Disposal of McKechnie Aerospace to JLL Partners for US$855.6 million Melrose PLC ('Melrose' or the 'Company') announces that it has agreed to disposeof its Aerospace OEM and Aerospace Aftermarket divisions (together 'McKechnieAerospace'), part of the acquired McKechnie Group, to a newly incorporatedcompany controlled by JLL Partners (the 'Buyer') for a total cash considerationof US$850 million plus assumption of $5.6 million of indebtedness (the'Disposal'). Highlights: • The consideration of US$850 million, plus assumption of $5.6 million of indebtedness (£436.5 million), reflects the high quality nature of the business • During Melrose's ownership the value of this business has increased by nearly two and a half times from $362 million at acquisition to $855.6 million • In the event that agreement is not reached with the Trustees of the McKechnie UK Pension Scheme and the Pensions Regulator, Linread Limited (the UK part of Aerospace OEM) will be retained by Melrose • The Disposal is in accordance with Melrose's strategy of acquiring businesses, improving them and then realising value for shareholders • The Board expects to be able to return in the region of £200 million of the net proceeds to shareholders following completion subject to provisos set out in the paragraph headed "Use of Sale Proceeds" • The Disposal is conditional, amongst other things, upon obtaining anti-trust clearances in the United States and the approval of Melrose shareholders at an extraordinary general meeting (the 'Extraordinary General Meeting'). The Disposal is targeted for completion during April or May 2007. Christopher Miller, Chairman of Melrose, stated, 'We are delighted to announce the disposal of McKechnie Aerospace. Thissuccessful transaction demonstrates the achievement of the Melrose strategy ofseeking, creating and realising value for shareholders. We wish McKechnieAerospace well in the next exciting stage of its development with JLL. We arenow focused on the continued improvement in performance of our remainingbusinesses and finding the next acquisition opportunity.' Paul Levy, founder of JLL Partners, stated, 'Our investment in McKechnie Aerospace is based on our great confidence in thebusiness and its exceptional growth potential. We commend Melrose and thebusiness's management team on both the business they have built and the firm'strack record of superior performance. JLL is excited to partner with TariqJesrai and his outstanding management team to continue building the business.' This summary should be read in conjunction with the full text of the followingannouncement. A circular containing further details of the Disposal and setting out the noticeof the Extraordinary General Meeting will be sent to Melrose shareholdersshortly. Melrose is being advised by Rothschild. Contacts: M: CommunicationsFinancial PRNick Fox +44 (0)20 7153 1530James Hill RothschildFinancial Advisor and SponsorRavi Gupta +44 (0)20 7280 5000 Rothschild, which is regulated and authorised in the United Kingdom by theFinancial Services Authority, is acting only for Melrose and no-one else inconnection with the Disposal and will not regard any other person as its clientor be responsible to any person other than Melrose for providing the protectionsafforded to clients of Rothschild, or for providing advice in relation to theDisposal or the contents of this announcement. FOR IMMEDIATE RELEASE 23 March 2007 Melrose PLC Disposal of McKechnie Aerospace Melrose PLC agrees the sale of McKechnie Aerospace to JLL Partners for US$855.6 million Melrose PLC ('Melrose' or the 'Company') announces that it has agreed to sellits Aerospace OEM and Aerospace Aftermarket divisions (together 'McKechnieAerospace'), part of the acquired McKechnie Group, to a newly incorporatedcompany controlled by JLL Partners (the 'Buyer') for a total cash considerationof US$850 million plus the assumption of $5.6 of million indebtedness (the'Disposal'). Background to and reasons for the Disposal Melrose was floated on 28 October 2003 with the stated strategy of acquiringcompanies and businesses whose performance the Melrose Directors believe can beimproved to create shareholder value. In May 2005, Melrose announced theacquisitions of the McKechnie and Dynacast businesses for £429 million. Following the receipt of a number of approaches for McKechnie Aerospace and inaccordance with Melrose's stated strategic objectives of realising value forshareholders at the appropriate moment, the Melrose board (the 'Board') decidedto seek offers for McKechnie Aerospace. About JLL Partners Founded in 1988, JLL Partners is a New York-based leading private equityinvestment firm with $3.2 billion of capital under management. JLL's investmentphilosophy is to partner with outstanding management teams and invest with themin companies that they can continue to grow into market leaders. JLL hasinvested in a variety of industries, with special focus on financial services,building products and healthcare services and medical products. More informationon JLL can be found on their website, www.jllpartners.com. Further Details of the Proposed Sale A circular setting out the notice of the extraordinary general meeting (the'Extraordinary General Meeting'), including the recommendation of the Board, asadvised by Rothschild, to vote in favour of the Disposal, will be sent toMelrose shareholders as soon as practicable. Under the terms of the share purchase agreement between Melrose and the Buyer(the 'Share Purchase Agreement'), Melrose has conditionally agreed to dispose ofMcKechnie Aerospace to the Buyer by way of the sale of the entire issued sharecapitals of Linread Limited, Technical Airborne Components Limited, TechnicalAirborne Components Sprl and Melrose US 3 LLC for a purchase price of US$850million to be satisfied in cash. In the event that a satisfactory agreementcannot be reached with the Trustees of the McKechnie UK Pension Scheme and thePensions Regulator then the sale of Linread Limited will not proceed and thepurchase price will be reduced by US$40 million ("the Linread Option") to US$810million. The Disposal is conditional upon, inter alia, (i) the passing at theExtraordinary General Meeting of the resolution to approve the Disposal; (ii)the applicable waiting period under the HSR Act having expired or beenterminated; and, (iii) relevant clearance having been received from the PensionsRegulator, (if the Linread Option is not exercised). Completion of the Disposal('Completion') is targeted during April or May 2007. Melrose has agreed to pay the Buyer a break fee in the event that shareholdersdo not vote in favour of the Disposal. The amount of the break fee has been setat an amount equal to 1% of Melrose's market capitalisation as at the date ofthe Share Purchase Agreement. Both Melrose and the Buyer have given very limited representations andwarranties, all of which are customary in a transaction of this kind. Use of Sale Proceeds The Board believes that the Disposal, as well as Melrose's continuing cash-flowprofile, enables a significant return of capital to Melrose's shareholders. As aresult of the need for discussions with the Trustees of the McKechnie PensionScheme and the Pensions Regulator, the Linread Option, currency andrenegotiation of existing banking facilities it is not possible to indicate aprecise level for this at this time. However, the Board estimates that a returnof capital is likely to be in the region of £200 million which would beequivalent to approximately 77 pence in cash per ordinary share in Melrose. Thecapital return will be subject to approval of Shareholders at a separateextraordinary general meeting (the "Extraordinary General Meeting for the Returnof Capital"). In addition to financing the return of capital it is the Board's intention thatthe proceeds will be used to repay the Melrose group's existing bank facilities,to make a contribution to the McKechnie UK Pension Scheme, to pay transactionexpenses and for other corporate purposes. A circular will be sent to Shareholders shortly after Completion, convening theExtraordinary General Meeting to approve the proposed Return of Capital. Information on McKechnie Aerospace McKechnie Aerospace comprises two McKechnie Group divisions: Aerospace OEM andAerospace Aftermarket. Aerospace OEM is a global leading manufacturer of aerospace components,assemblies and subsystems and is based in the US and Europe. The businessoperates through three divisions: the Structures Group, the ElectromechanicalGroup and the Fasteners Group, which are summarised below. The Structures Group is engaged in the design and manufacture of aerospacecomponents, assemblies and subsystems including latching systems, flight controlrods and engine bearing struts; The Electromechanical Group is engaged in the design and manufacture of variouselectromechanical components including flight control system actuators, landinggear actuators and motors; and The Fasteners Group is engaged in the design and manufacture ofmaximum-strength, minimum-weight fasteners, studs, bolts, rivets and slotbearings for critical applications. Linread Limited is a manufacturer offasteners for the aerospace business based in Redditch and Leicester. Aerospace Aftermarket is a specialist aircraft battery distribution businessbased primarily in the US and Europe. In the year ended 31 December 2006, McKechnie Aerospace generated revenue andheadline operating profit* of £155.1 million and £33.6 million respectively. Inthe year ended 31 December 2006 McKechnie Aerospace's headline EBITDA** was£36.4 million. Total McKechnie Aerospace net assets and gross assets were £133.5million and £246.0 million respectively as at 31 December 2006. * before exceptional costs, exceptional income, US head office expenses notassumed by buyer of £0.9 million and intangible asset amortisation other thancomputer software ** before exceptional costs, exceptional income and US head office expenses notassumed by buyer of £0.9 million Contacts: M: CommunicationsFinancial PRNick Fox +44 (0)20 7153 1530James Hill RothschildFinancial Advisor and SponsorRavi Gupta +44 (0)20 7280 5000 Rothschild, which is regulated and authorised in the United Kingdom by theFinancial Services Authority, is acting only for Melrose and no-one else inconnection with the Disposal and will not regard any other person as its clientor be responsible to any person other than Melrose for providing the protectionsafforded to clients of Rothschild, or for providing advice in relation to theDisposal or the contents of this announcement. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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