28th Jul 2008 07:00
FOR IMMEDIATE RELEASE
28 July 2008
Low & Bonar PLC ("Low & Bonar" or the "Company")
Proposed Disposal of Bonar Floors
Low & Bonar, the specialist materials group, announces the proposed disposal of Bonar Floors, the Company's contract flooring business, to Forbo Holding AG at a valuation of £123.0 million on a cash-free and debt-free basis.
Highlights
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The Board believes that the price achieved for Bonar Floors represents good value for the Company and Shareholders.
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The Disposal focuses Low & Bonar exclusively on the fast-growing and high-margin technical textiles market in which the Company already enjoys a leading position.
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Following the Disposal, the Continuing Group will have increased funding capacity and management resource to pursue organic growth opportunities and strategic acquisitions in technical textiles.
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The Board is confident that the Disposal will help the Group to meet its long-term strategic objective of creating a leading global technical textiles business that will increase shareholder value.
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For the financial year ended 30 November 2007, Bonar Floors reported consolidated EBITDA of £13.9 million and EBIT of £11.7 million on revenue of £101.5 million.
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Following the payment of up to £8 million to the Company's Group Retirement Benefit Scheme, the net proceeds from the Disposal will be used to reduce the Group's borrowings.
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Commenting on today's announcement, Paul Forman, Group Chief Executive of Low & Bonar, said:
"We are proud to have grown Bonar Floors into one of the leading European players in contract flooring. It is not easy to let go of part of our heritage but the Forbo offer presented the right opportunity for us to exit the contract flooring business and pursue a long-term strategy focusing on the higher-growth technical textiles market. The disposal delivers good value to our shareholders. It also gives us the resources to focus exclusively on the significant opportunities - both organic and acquisitive - to grow our share of the fast-growing but highly fragmented market for technical textiles, building on the strong position we already enjoy. I believe that the synergistic combination between two of Europe's major flooring companies should deliver a higher growth business than either could achieve on a stand-alone basis."
Duncan Clegg, Chairman of Low & Bonar, added:
"The Board is pleased to have reached agreement on the disposal of Bonar Floors, which will significantly strengthen our balance sheet and help concentrate our efforts on the long-term strategic objective of creating a leading global technical textiles business."
Note: A presentation to analysts and investors will take place today 28 July 2008, at 9:30 a.m. at the offices of The Royal Bank of Scotland plc, 250 Bishopsgate, London EC2M 4AA. Any analysts or investors unable to attend in person can join the meeting by conference call, by dialling +44 (0)20 7162 0125 and quoting "Low & Bonar". A presentation to accompany the call will be available at: www.lowandbonar.com
ABN AMRO is acting as financial adviser and sponsor to Low & Bonar in relation to the Disposal.
This summary should be read in conjunction with the full text of this announcement.
The appendix sets out the definitions of certain terms used in this announcement.
The Disposal is conditional upon, inter alia, the approval of Low & Bonar's Shareholders. Accordingly, a Circular to Shareholders relating to the Disposal is expected to be posted shortly. The Circular will give further details of the Disposal and contain a notice of a General Meeting of the Company to approve the Disposal.
Enquiries
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Paul Forman Kevin Higginson
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Low & Bonar PLC |
+44 (0)20 7535 3180 |
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Tom Willett Mark Crossley Gerd Weissenboeck
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ABN AMRO Corporate Finance Limited |
+44 (0)20 7678 8000 |
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Rachel Hirst Andrew Jaques Ian Payne |
Hogarth Partnership |
+44 (0)20 7357 9477 |
This announcement has been issued by, and is the sole responsibility of, Low & Bonar.
This announcement is for information purposes only and shall not constitute an offer, or form part of an offer, or the solicitation of any offer to acquire or dispose of any security in any jurisdiction in which such an offer or solicitation or disposal is unlawful. The distribution of this announcement in certain jurisdictions may be restricted by law and therefore persons into whose possession this announcement 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.
ABN AMRO, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for the Company in relation to the Disposal and for no one else and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Disposal, or any other matter referred to in this announcement.
Certain statements in this announcement are forward-looking statements. These forward-looking statements speak only as at the date of this announcement. Such statements are based on current expectations and beliefs and, by their nature, are subject to a number of known and unknown risks and uncertainties that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statements. There are several factors which could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are delays in obtaining, or adverse conditions contained in, regulatory approvals, changes in economic conditions, competition and industry restructuring, changes in interest or tax rates, changes in energy market prices, changes in laws, regulations or regulatory policies, developments in legal or public policy doctrines, currency fluctuations, technological developments, operational issues, the failure to retain key management, or the availability, timing and success of future acquisition opportunities. The information and opinions expressed in this announcement are subject to change without notice and neither the Company nor ABN AMRO assumes any responsibility or obligation to update publicly or review any of the forward-looking statements contained herein, regardless of whether those statements are affected by the results of new information, future events or otherwise.
No statement in this announcement is intended to be a profit forecast and no statement in this announcement should be interpreted to mean that earnings per Ordinary Share for the current or future financial years would necessarily match or exceed the historical published earnings per Ordinary Share.
FOR IMMEDIATE RELEASE
28 July 2008
Low & Bonar PLC ("Low & Bonar" or the "Company")
Proposed Disposal of Bonar Floors
Introduction
The Board of Low & Bonar announces that the Company has entered into a conditional sale and purchase agreement with Forbo Holding AG ("Forbo" or the "Purchaser") to dispose of Bonar Floors, the Company's contract flooring business. The Disposal values Bonar Floors at £123.0 million on a cash-free and debt-free basis. The Board believes that this represents a good value for Bonar Floors and the Disposal will allow the Company to focus all its efforts on developing further the Continuing Group as a leading technical textiles player.
Due to its size, the Disposal is conditional upon, inter alia, the approval of Shareholders at a General Meeting to be held in mid-August 2008 and, assuming such approval is obtained, Completion is expected on or before 31 October 2008.
Background to and reasons for the Disposal
As Low & Bonar's Board has previously stated, it has regarded growth both organically and through acquisitions as an important part of its strategy for its current two divisions, technical textiles and contract flooring. With the acquisitions of MTX Group and Colbond, Low & Bonar's focus has increasingly moved towards being a specialist provider of technical textiles and in the six months to 31 May 2008 the Company's technical textiles division accounted for 73.8 per cent. of Group revenue and 78.5 per cent. of Group operating profit before amortisation and non-recurring items. While the Board believes both divisions to be strong businesses with opportunities to grow further, the Board also believes that the global technical textiles market, which is considerably larger and more fragmented than the contract flooring market, offers superior opportunities for growth and margin improvements. The Company is already in the process of reviewing a number of such opportunities to grow the Continuing Group both organically and through acquisitions.
The Estimated Purchase Price for Bonar Floors excluding the Spanish Business to be paid in cash is £131.9 million. The Board believes that the Disposal of Bonar Floors not only represents good value for the Company and Shareholders, but will also free up management resource and cash to invest in developing further the Group as a leading technical textiles business and reduce the Group's current debt levels. The Board is confident that the Disposal of Bonar Floors will help it to meet its long-term strategic objective of creating a leading global technical textiles business that will increase Shareholder value.
Information on Bonar Floors
Bonar Floors is a focused contract flooring business with a product portfolio in the textiles and resilient product segments. It is amongst the leading European players in its product categories and caters to customers in various sectors including healthcare, education, transport, hospitality, leisure, offices, public sector and retail. Being a contract flooring manufacturer, it has limited direct exposure to the consumer market.
The main contract flooring brands under Bonar Floors' ownership include Flotex (electrostatic flocked flooring), Tessera (tufted carpet tiles), Westbond (fusion-bonded carpet tiles), Chocflex (acoustic vinyl flooring), Coral (textile entrance matting) and Nuway (rigid entrance matting).
Bonar Floors currently employs some 760 people across its manufacturing and sales facilities in the UK, France, the Netherlands, Spain, Austria, the Czech Republic, Slovakia, Germany and China.
For the financial year ended 30 November 2007, Bonar Floors, including the Spanish Business, reported aggregated EBITDA of £13.9 million and EBIT of £11.7 million, in each case before non-recurring items, on revenue of £101.5 million. As at 30 November 2007, Bonar Floors had aggregated net assets of £36.1 million and gross assets of £96.1 million.
For the half year ended 31 May 2008, Bonar Floors, including the Spanish Business, reported aggregated EBITDA of £7.3 million and EBIT of £5.6 million, in each case before non-recurring items, on revenue of £55.9 million. As at 31 May 2008, Bonar Floors had aggregated net assets of £41.9 million and gross assets of £110.8 million. The half year figures include the acquisition of Westbond.
In January 2008, the Company acquired Westbond, a producer of fusion-bonded carpet tiles which is now included within Bonar Floors. The Westbond brand and product range are complementary to the existing Tessera carpet tile business, and are successful in the architect and design community both in the UK and continental Europe. For the year ended 30 April 2008, Westbond had revenues of £11.2 million, EBIT of £1.6 million and EBITDA of £1.7 million.
Information on the Purchaser(1)
The Purchaser, Forbo, is a Swiss listed company with a market capitalisation as at 25 July 2008 of approximately CHF1,303 million (approximately £633 million). It is a leading producer of flooring systems, adhesives and chemical bonds, as well as power transmission and conveyor belt solutions. Forbo employs some 6,000 people and has an international network of 31 production companies with distribution, and 42 sales organisations in a total of 34 countries. Forbo is headquartered in Baar in the canton of Zug, Switzerland.
Forbo has three divisions:
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Flooring Systems which produces environmentally friendly linoleum, high quality vinyls, needlefelt and parquetry used in commercial and residential buildings; |
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Bonding Systems which supplies industrial adhesives used in paper processing, shoe and textiles industries and automotive interior trims. It also produces ready made adhesives used in the construction industry and synthetic polymers; and |
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Movement Systems which provides power transmission belts, conveyor and processing belts, plastic modular belts and timing and flat belts. |
Forbo's EBITDA in 2007 was CHF221.9 million (approximately £92.4 million) on revenue of CHF2,004.0 million (approximately £834.4 million). For 2007, Forbo's Flooring Systems division had EBITDA of CHF122.0 million (approximately £50.8 million) on revenue of CHF864.7 million (approximately £360.0 million). Its Flooring Systems Division employs approximately 2,400 employees worldwide and operates eight production sites in Scotland, Sweden, the Netherlands, France, Switzerland and Russia.
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(1) |
The average CHF2.4016:£1 exchange rate for the year ended 31 December 2007 has been used to translate Forbo's historical financial information. The spot exchange rate of CHF2.0590:£1 as on 24 July 2008 has been used to translate Forbo's market capitalisation. |
Principal terms of the Disposal
Under the Disposal Agreement which was signed today, the Company has agreed to sell, or to procure the sale of, Bonar Floors to the Purchaser. The Disposal Agreement does not include the sale of the French Business, which may, following required employee consultation, be the subject of a separate French Disposal Agreement, however the Disposal is conditional on the entry into the French Disposal Agreement. The Disposal Agreement also contains certain provisions relating to the Spanish Business, such that the Spanish Business may or may not be included in the sale.
The Disposal values Bonar Floors at £123.0 million on a cash-free and debt-free basis. The Estimated Purchase Price for Bonar Floors (excluding the Spanish Business) to be paid by the Purchaser at Completion is £131.9 million. The Estimated Purchase Price takes into account current estimates of the cash, financial debt, working capital and intercompany non-trading debt position of Bonar Floors at Completion and is subject to certain post-Completion adjustments. Should the Spanish Business subsequently transfer to Forbo, there would be no effect on the cash-free and debt-free valuation for Bonar Floors of £123.0 million. However, given certain intercompany items, the Estimated Purchase Price would need to be adjusted by an estimated £0.3 million upwards.
The Disposal Agreement provides that Completion of the Disposal will take place upon fulfilment (or, where permitted, waiver) of the following conditions: (i) the approval of Shareholders at the General Meeting; (ii) German merger clearance; (iii) consultation, in accordance with Dutch law, with the Dutch works council of Bonar Floors N.V.; (iv) the Company and the Purchaser entering into a French Disposal Agreement; and (v) Pensions Regulator clearance not having been withdrawn. The Disposal Agreement provides that Completion will take place at the end of the month during which the remaining conditions are fulfilled (or, where permitted, waived) or at the end of the following month if the remaining conditions are fulfilled (or, where permitted, waived) with less than three days remaining in the month. Either the Company or Forbo may terminate the Disposal Agreement if Shareholder approval is not received or the other conditions are not fulfilled (or, where permitted, waived) on or before 31 October 2008.
Pursuant to the terms of the Disposal Agreement, the Company has given certain customary warranties regarding title, its ability to sell Bonar Floors and the business of Bonar Floors. The Company has also agreed to provide the Purchaser with certain indemnities, including for certain environmental liabilities, which are customary for a transaction of this nature. The Company has also given certain undertakings to ensure that the business of Bonar Floors is conducted in the ordinary course in the period prior to Completion.
The Company has agreed to pay the Purchaser a compensatory fee, in the event of failure by the Company to obtain a Shareholder resolution approving the Disposal and payable only where, in certain circumstances, following termination of the Disposal Agreement, the Company later sells Bonar Floors to another party or the Company is subject to a takeover. The compensatory fee amounts to the lesser of 1 per cent. of the Estimated Purchase Price (updated to reflect estimates three business days before Completion) and 1 per cent. of the Company's market capitalisation on the date on which the Circular, expected to be issued by the Company shortly, is approved by the United Kingdom Listing Authority.
Financial effects of the Disposal
The Estimated Purchase Price for Bonar Floors is £131.9 million. After taking into account estimated fees and transaction expenses of £4.5 million, net proceeds from the Disposal are estimated to be £127.4 million, subject to certain post-Completion adjustments.
The Company has agreed with the Trustee of the Low & Bonar Group Retirement Benefit Scheme (the "Scheme"), its principal UK defined benefit pension scheme, that, following Completion, Bonar Floors will pay £8 million or, if less, its "Liability Share" (as defined in the Employer Debt Regulations), into the Scheme (the "Pensions Funding"), in satisfaction of a statutory obligation of Bonar Floors to pay accelerated funding to the Scheme upon leaving the Group. The Company will meet this obligation on behalf of Bonar Floors from the proceeds of the Disposal. This is in addition to the £3 million which the Company is already scheduled to pay towards eliminating the Scheme's deficit in the year ending 30 November 2008. As part of its agreement with the Trustee, the Company will also provide the Guarantee in respect of the liabilities of its subsidiaries in relation to the Scheme.
Following the payment of the Pensions Funding, the balance of the consideration that is received from the Disposal will, after deduction of fees and expenses, be used to reduce borrowings. The Board is confident that the Disposal of Bonar Floors will enable it to invest in growing the Continuing Group according to the Company's stated strategic objectives. Whilst the Disposal is expected to be earnings dilutive in the short term, the Disposal will provide the Continuing Group with increased funding capacity to pursue organic growth opportunities and strategic acquisitions in the technical textiles segment, where the Board believes there are significant opportunities.
Information on the Continuing Group
Over the last several years, the Company's technical textiles business has grown rapidly. Management has successfully diversified its product and technology portfolio and enhanced sales channels and capabilities in research and development. Management has built an international business that it believes is characterised by a balanced portfolio of products servicing various niche sectors of growing markets. The Company has done this through acquisitions and joint ventures over the last few years of which the most important have been:
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the acquisition of Colbond, a producer of synthetic non-woven textiles (for flooring, automotive and construction applications) and three-dimensional polymeric mats and composites (for civil engineering, building and industrial applications) in July 2006; |
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the acquisition of MTX Group, a producer of technical coated fabrics that have a wide variety of uses, including side curtains for lorry trailers, advertising banners, tensioned roofs, awnings, marquees and tarpaulins, in January 2008; and most recently |
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the establishment in April 2008 of a joint venture company to manufacture artificial grass yarns and carpet backing yarns that will be based in Abu Dhabi. Through this initiative, the Continuing Group will be able to expand capacity in artificial grass yarn production to meet the expected high growth in demand for this product and will have ready access to new markets in the Gulf and Middle East region. |
Following the Disposal, the Continuing Group will focus on its technical textiles activities. It will continue to provide solutions for its customers through excellent innovation capability. The Board firmly believes that this and its continued focus on industrial rather than consumer markets will maximise cost and revenue synergies and increase operating margins across the Continuing Group.
Further information and General Meeting
A Circular to Shareholders relating to the Disposal, including the notice for the General Meeting, is expected to be posted shortly. The Circular will give further details of the Disposal and contain a notice of a General Meeting of the Company to approve the Disposal. The General Meeting of the Company is expected to be held in mid-August 2008.
Enquiries
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Paul Forman Kevin Higginson
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Low & Bonar PLC |
+44 (0)20 7535 3180 |
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Tom Willett Mark Crossley Gerd Weissenboeck
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ABN AMRO Corporate Finance Limited |
+44 (0)20 7678 8000 |
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Rachel Hirst Andrew Jaques Ian Payne |
Hogarth Partnership |
+44 (0)20 7357 9477 |
This announcement has been issued by, and is the sole responsibility of, Low & Bonar.
This announcement is for information purposes only and shall not constitute an offer, or form part of an offer, or the solicitation of any offer to acquire or dispose of any security in any jurisdiction in which such an offer or solicitation or disposal is unlawful. The distribution of this announcement in certain jurisdictions may be restricted by law and therefore persons into whose possession this announcement 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.
ABN AMRO, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for the Company in relation to the Disposal and for no one else and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Disposal, or any other matter referred to in this announcement.
Certain statements in this announcement are forward-looking statements. These forward-looking statements speak only as at the date of this announcement. Such statements are based on current expectations and beliefs and, by their nature, are subject to a number of known and unknown risks and uncertainties that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statements. There are several factors which could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are delays in obtaining, or adverse conditions contained in, regulatory approvals, changes in economic conditions, competition and industry restructuring, changes in interest or tax rates, changes in energy market prices, changes in laws, regulations or regulatory policies, developments in legal or public policy doctrines, currency fluctuations, technological developments, operational issues, the failure to retain key management, or the availability, timing and success of future acquisition opportunities. The information and opinions expressed in this announcement are subject to change without notice and neither the Company nor ABN AMRO assumes any responsibility or obligation to update publicly or review any of the forward-looking statements contained herein, regardless of whether those statements are affected by the results of new information, future events or otherwise.
No statement in this announcement is intended to be a profit forecast and no statement in this announcement should be interpreted to mean that earnings per Ordinary Share for the current or future financial years would necessarily match or exceed the historical published earnings per Ordinary Share.
Appendix - Definitions
In this press release, the following expressions shall have the following meanings, unless the context otherwise requires:
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"ABN AMRO" |
ABN AMRO Corporate Finance Limited of 250 Bishopsgate, London EC2M 4AA
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"Board" |
the directors of the Company
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"Bonar Floors" |
comprises the following legal entities directly or indirectly owned by Low & Bonar: Bonar Floors Ltd, Bonar Tiles Holdings Ltd, Bonar Floors s.r.o. (the Czech Republic), Bonar Floors s.r.o. (Slovakia), Bonar Floors (Ősterreich) GmbH, Bonar Floors GmbH, Bonar Floors N.V., Bonar Floors SAS, Westbond Limited, Bonar Floors Limited (Hong Kong), Bonar Tiles Ltd and, if the Company, Forbo and the Spanish Managers agree to the transfer of the Company's interest in the Spanish Business, Bonar Floors España S.L.
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"Circular" |
the circular to Shareholders expected to be issued by the Company shortly
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"Colbond" |
Low & Bonar Technical Textiles Holding B.V. and its subsidiary and associated companies
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"Company" or "Low & Bonar" |
Low & Bonar PLC
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"Completion" |
the completion of the Disposal pursuant to the terms of the Disposal Agreement and the French Disposal Agreement
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"Continuing Group" |
the Company and its subsidiary companies immediately following Completion
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"Disposal" |
the proposed disposal of Bonar Floors
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"Disposal Agreement" |
the sale and purchase agreement between the Purchaser and the Company, dated 28 July 2008, in relation to the Disposal
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"EBIT" |
earnings before interest, tax and non-recurring items
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"EBITDA" |
earnings before interest, tax, depreciation, amortisation and non-recurring items
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"Employer Debt Regulations" |
Occupational Pension Schemes (Employer Debt) Regulations 2005
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"Estimated Purchase Price" |
the estimated purchase price for Bonar Floors, excluding the Spanish Business, payable in cash at Completion taking into account current estimates of the cash, financial debt, working capital and intercompany non-trading debt positions at Completion and subject to certain post-Completion adjustments
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"Financial Services Authority" |
the Financial Services Authority in its capacity as the competent authority for the purposes of Part VI of the Financial Services and Markets Act 2000
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"Forbo" or the "Purchaser" |
Forbo Holding AG
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"French Business" |
Bonar Floors SAS
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"French Disposal Agreement" |
an agreement to sell the French Business, a form of which is appended to the Disposal Agreement, with any amendments agreed by the parties following consultation with the French works council
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"General Meeting" |
the general meeting of the Company, notice for which will be contained in the Circular, which is expected to be convened in mid-August 2008, and any adjournment thereof
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"Group" |
the Company and its subsidiary companies
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"Guarantee" |
means the guarantee to be provided by the Company to the Trustee at Completion in connection with the Scheme
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"Liability Share" |
as defined under the Employer Debt Regulations, an amount equal to the liability proportion of the total difference between the value of assets and the amount of liabilities of the Scheme
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"MTX Group" |
Mehler Texnologies Group
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"Ordinary Shares" |
ordinary shares of 25 pence each in the capital of the Company
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"Pensions Regulator" |
the UK Pensions Regulator established under section 1 of the Pensions Act 2004
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"Scheme" |
means the Low & Bonar Group Retirement Benefit Scheme, the occupational pension scheme established by a definitive trust deed and rules dated 29 September 1947, as amended from time to time
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"Shareholders" |
the holders of Ordinary Shares
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"Spanish Business" |
the business carried on by Bonar Floors España S.L. being the joint venture in which the Company holds a 51 per cent. interest
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"Trustee" |
Low & Bonar Pension Trustees Limited, the trustee of the Scheme
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"United Kingdom" or "UK" |
the United Kingdom of Great Britain and Northern Ireland
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"Westbond" |
Westbond Limited
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Related Shares:
LWB.L