19th Apr 2005 07:15
Fenner PLC19 April 2005 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART INTO THE UNITED STATES, CANADA, AUSTRALIA, JAPAN, THE REPUBLIC OF IRELAND OR SOUTH AFRICA FOR IMMEDIATE RELEASE FENNER PLC RECOMMENDED OFFER FOR WELLINGTON HOLDINGS PLC PLACING AND OPEN OFFER 19 April 2005 Summary The boards of Fenner PLC ("Fenner") and Wellington Holdings plc ("Wellington")are pleased to announce that they have reached agreement on the terms of arecommended offer for the entire issued and to be issued ordinary share capital ofWellington, to be made by Rothschild on behalf of Fenner. The Offer at 185 pence per Wellington Share values the existing issued and to be issued ordinary share capital of Wellington at approximately £44.6 million (based on the closing middle market price of 136 pence per Fenner Share on 18 April 2005*) or approximately £43.8 million based on the Full Cash Alternative. In addition the Offer and the Full Cash Alternative represents a premium of approximately 9.5 per cent and approximately 6.5 per cent respectively above the three month average closing middle market price of 169 pence per Wellington Share to 18 April 2005*. To provide funding for the cash consideration payable under the Offer, and toprovide funding for future growth and acquisition opportunities, Fenner isproposing to raise approximately £54.1 million (net of expenses) by way of aPlacing and Open Offer. Key highlights • The acquisition of the entire issued and to be issued share capital of Wellington for approximately £44.6 million, or approximately £43.8 million based on the Full Cash Alternative • An Offer of 123 pence in cash plus 0.456 New Fenner Shares valuing each Wellington Share at 185 pence. Alternatively, Wellington Shareholders may elect to receive a full cash alternative of 180 pence for each Wellington Share • A Placing and Open Offer, fully underwritten by Rothschild and Collins Stewart Limited ("Collins Stewart"), of 46,611,102 new Fenner Shares to raise approximately £54.1 million (net of expenses) • Wellington is a manufacturer and distributor of advanced polymer sealing solutions for demanding engineering and industrial applications. It has significant market shares in its key markets • For the year ended 31 December 2004, Wellington reported a profit before tax of £5.1 million on turnover of £33.9 million • The acquisition will significantly expand Fenner's Precision Polymers business • The Enlarged Group would be well positioned to benefit from potential growth in the energy market and recovery in industrial markets • The Enlarged Group would provide significant opportunities for Wellington's business and would offer the potential for technical synergies, cost savings and an attractive platform to acquire other international businesses. \* The latest practicable date prior to the publication of this announcement Commenting on the announcement today, Mark Abrahams, Chief Executive of Fenner,said "This is a very exciting opportunity for both companies. The acquisitionmaterially expands Fenner's successful precision polymers activities andWellington's operations should quickly benefit from our strong presence in manyof the markets it has targeted for growth. The fund raising and acquisition willhelp us grow our business overall and underpins our ability to pursue otherstrategic opportunities as they arise." Commenting on the announcement today, Brian Kent, Non-Executive Chairman ofWellington, said "Wellington will make real gains from this timely opportunity, with access towider geographical markets and support from a larger capital base. This dealbalances the short and long term interests of all stakeholders and supportstheir need for rising growth and success in future years." This summary should be read in conjunction with the full text of the attachedannouncement. Certain terms used in this summary are defined in Appendix III ofthe attached announcement. There will be an analysts' briefing at 9.30 a.m. at the offices of WeberShandwick Square Mile, Fox Court, 14 Gray's Inn Road, London, WC1X 8WS today. Fenner PLCMark Abrahams, Chief Executive Tel: 01482 626500Richard Perry, Group Finance Director N M Rothschild & Sons Limited(Financial Adviser and Sponsor to Fenner)James Fenwick / David Forbes / Stephen Moore Tel: 0113 200 1900 Collins Stewart Limited(Corporate Broker to Fenner)Chris Wells / Mark Connelly Tel: 0207 523 8350 Weber Shandwick Square MileNick Oborne Tel: 0207 067 0700 Wellington Holdings plcBrian Kent, Non-Executive Chairman Tel: 0208 941 3774 BDO Stoy Hayward Corporate Finance(Financial Adviser to Wellington)Michael Cobb / Philip Brady Tel: 0207 486 5888 This announcement has been approved for the purposes of Section 21 of theFinancial Services and Markets Act 2000 by N M Rothschild & Sons Limited. N M Rothschild & Sons Limited, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting exclusively for FennerPLC in connection with the Placing and Open Offer and Acquisition and no oneelse and will not be responsible to anyone other than Fenner PLC for providingthe protections afforded to clients of N M Rothschild & Sons Limited nor forproviding advice in relation to the Placing and Open Offer and Acquisition. Collins Stewart Limited, which is authorised and regulated in the United Kingdomby the Financial Services Authority, is acting exclusively for Fenner PLC inconnection with the Placing and Open Offer. Collins Stewart Limited is alsocorporate broker to Wellington Holdings plc. Collins Stewart Limited will not beresponsible to anyone other than Fenner PLC for providing the protectionsoffered to clients of Collins Stewart Limited nor for providing advice inrelation to the Offer and the Placing and Open Offer. BDO Stoy Hayward Corporate Finance, a division of BDO Stoy Hayward LLP,Chartered Accountants, which is authorised and regulated in the United Kingdomby the Financial Services Authority, is acting exclusively for WellingtonHoldings plc and no one else in connection with the Offer and will not beresponsible to anyone other than Wellington Holdings plc for providing theprotections afforded to customers of BDO Stoy Hayward Corporate Finance nor forproviding advice in relation to the Offer. Neither the Offer nor the Open Offer is being made, directly or indirectly, inor into, or by use of the mails, or by any means or instrumentality (including,without limitation, facsimile transmission, internet, email, telex or telephone)of interstate or foreign commerce, or of any facility of a national securitiesexchange, of the United States, Canada, Australia, Japan, the Republic ofIreland or South Africa and neither can, subject to certain exceptions, beaccepted by any such use, means instrumentality or facility or from within theUnited States, Canada, Australia, Japan, the Republic of Ireland or SouthAfrica. Neither the Offer nor the Open Offer constitutes an offer of securities forsale, or the solicitation of an offer to buy securities in the United States andthe new Fenner Shares to be issued pursuant to the Offer and the Open Offer havenot been and will not be registered under the Securities Act, or under the lawsof any state, district or other jurisdiction of the United States or of Canada,Australia, Japan, the Republic of Ireland or South Africa and no regulatoryclearances in respect of new Fenner Shares have been or will be, applied for inany jurisdiction. Accordingly, unless an exemption under the Securities Act orother relevant securities laws is applicable, the new Fenner Shares are notbeing, and may not be offered, sold, resold, delivered or distributed, directlyor indirectly, in or into the United States or Canada, Australia, Japan, theRepublic of Ireland or South Africa or to, or for the account or benefit of, anyUS person or person resident in Canada, Australia, Japan, the Republic ofIreland or South Africa. This announcement contains a number of forward-looking statements relating toFenner, Wellington and the Enlarged Group with respect to, among others, thefollowing: financial condition; results of operations; the business of theEnlarged Group; future benefits of the Acquisition; and management plans andobjectives. Fenner and Wellington consider any statements that are nothistorical facts as "forward-looking statements". They involve a number of risksand uncertainties that could cause actual results to differ materially fromthose suggested by the forward-looking statements. Important factors that couldcause actual results to differ materially from estimates or forecasts containedin the forward-looking statements include, among others, the followingpossibilities: future revenues are lower than expected; costs or difficultiesrelating to the integration of the businesses of Fenner and Wellington, or ofother future acquisitions, are greater than expected; expected cost savings fromthe transaction or from other future acquisitions are not fully realised orrealised within the expected time frame; competitive pressures in the industryincrease; general economic conditions or conditions affecting the relevantindustries, whether internationally or in the places where Fenner and Wellingtonconduct business are less favourable than expected, and/or conditions in thesecurities market are less favourable than expected. This announcement does not constitute an offer to sell or an invitation topurchase any securities or the solicitation of an offer to purchase anysecurities, pursuant to the Offer or otherwise. The Offer will be made solely bythe Offer Document and, in the case of Wellington Shares in certificated form,the Form of Acceptance accompanying the Offer Document, which will contain thefull terms and conditions of the Offer, including details of how the Offer maybe accepted. NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART INTO THE UNITED STATES, CANADA, AUSTRALIA, JAPAN, THE REPUBLIC OF IRELAND OR SOUTH AFRICA FOR IMMEDIATE RELEASE FENNER PLC RECOMMENDED OFFER FOR WELLINGTON HOLDINGS PLC PLACING AND OPEN OFFER 19 April 2005 Introduction The boards of Fenner and Wellington are pleased to announce that they havereached agreement on the terms of a recommended Offer, to be made on behalf ofFenner by Rothschild, to acquire the whole of the issued and to be issued sharecapital of Wellington. Wellington is a manufacturer and distributor of advancedpolymer sealing solutions for demanding engineering and industrial applications. Wellington Shareholders who accept the Offer will be entitled to receive 123pence in cash and 0.456 New Fenner Shares valuing each Wellington Share at 185 pence (with a Full Cash Alternative of 180 pence per Wellington Share). They will also be entitled to receive and retain the dividend of 4.6 pence per Wellington Share, which will be paid on 31 May 2005, subject to it being declared by Wellington in general meeting. The Offer values the existing issued and to be issued ordinary share capital ofWellington at approximately £44.6 million(1) In addition, the Offer and the Full Cash Alternative represents a premium(2) of approximately 9.5 per cent. and approximately 6.5 per cent. respectively above the three month average closing middle market price of 169 pence per Wellington Share to 18 April 2005, (being the latest practicable date prior to the publication of this announcement). To provide the funding of the cash consideration payable under the Offer, and toprovide funding for future growth and acquisition opportunities, Fenner isproposing to raise approximately £54.1 million (net of expenses of the Acquisitionand the Placing and Open Offer) by way of a Placing and Open Offer of 46,611,102 new FennerShares at 127 pence per share. The Placing and Open Offer (save in respect of theCommitted Shares) has been fully underwritten by Rothschild and Collins Stewartand is conditional on, inter alia, the approval of the Acquisition by FennerShareholders. Background to and reasons for the Offer Fenner's stated strategy is to grow its reinforced polymers operations, whichserve both the energy and industrial markets. In delivering this strategy, themajor focus of the Fenner Group has been to expand Fenner's Precision Polymerand Conveyor Belting operations, both of which have achieved leading positionsin the markets they serve. In particular, the Precision Polymers business hasdisplayed what the Fenner Board believes to be attractive characteristics. Theseinclude, inter alia, operating profit to sales ratios consistently in the highteens; returns which have demonstrated resistance to recent adverse cycles ofindustrial activity; and the potential for ongoing organic and acquisitivegrowth. Over the last three years, the return on sales of Fenner's PrecisionPolymers business has averaged approximately 17 per cent. In addition, EagleBelting and Indico have now been successfully and fully integrated into thebusiness following their acquisitions in August 2002 and February 2004respectively. (1) Based on the closing middle market price of 136 pence per existing Fenner Share on 18 April 2005, being the latest practicable date prior to the publication of this announcement. (2) Based on 123 pence in cash plus 0.456 New Fenner Shares for each Wellington Share and the Full Cash Alternative of 180 pence in cash for each Wellington Share. The proposed acquisition of Wellington presents an exciting opportunity for afurther and significant expansion of the Precision Polymers business. Wellingtonmanufactures and distributes seals serving industrial and energy marketsworldwide. It has significant market shares in specific sub-markets for theniche sectors on which it is focused. In addition, Wellington has produced anaverage return on sales over the last five years of over 13 per cent., reachingnearly 15 per cent. last year, which measures favourably against itscompetitors. The Fenner Directors believe that the Acquisition represents a significant stepforward for Fenner, which should create sustainable value for shareholders: • Wellington would provide Fenner with a polymer business with niche disciplines providing income streams which the Fenner Directors believe are sustainable and growing; • the markets served by Wellington share similar growth drivers to Fenner and the Enlarged Group would be well positioned to benefit from potential growth in the energy market and recovery in industrial markets; • the Enlarged Group would provide significant opportunities to grow the Wellington businesses quickly, including: - Wellington and Fenner have been exploring the possibility of establishing a joint venture in China, which would enable Wellington to exploit emerging opportunities for its products in the energy markets; - Fenner has existing sales operations in Eastern Europe and Russia, where Wellington has identified opportunities to grow; - Fenner has manufacturing and sales outlets in India, a market Wellington has identified as a growth opportunity; and - Fenner has complementary market knowledge in the USA, which should enable Wellington to grow faster • material processing knowledge shared between Fenner and Wellington offers the potential for technical synergies for the Enlarged Group; • the Enlarged Group should benefit from cost savings due to the elimination of duplicated costs and potential materials costs savings due to increased economies of scale; and • the Enlarged Group would offer an attractive platform to acquire other international businesses and provide opportunities to leverage the increased scale of the business. In addition, the Fenner Directors believe the acquisition of Wellington to be alow risk expansion opportunity for Fenner as the Wellington Group's sales arewell diversified geographically, which the Fenner Directors consider providesprotection against a downturn in any one territory. In addition, Wellingtonmanufactures seals using a variety of polymers where the specification ofmaterial is a vital element in product application. The range of materials,processes, quality of product and service focused on industrial and energymarkets used by Wellington creates product and brand differentiation in themarket. The Fenner Directors believe that the Acquisition, taking into account the fulleffects of the Placing and Open Offer, would be earnings enhancing in the firstfull year of ownership based on accounting policies currently in use beingapplied consistently.(3) Background to and reasons for recommending the Offer The Wellington Board has received a number of approaches for Wellington over thelast three years. Whilst several of these have led to early stage discussions,none, other than Fenner's, has resulted in a real opportunity to achieveenhancement of shareholder value and a sufficiently attractive valuation forWellington. Although Wellington's brands are strong in the market for precision seals fordemanding performance-critical applications, it is one of the smaller groups inthe wider engineering sector in which it operates and as such the WellingtonBoard has long recognised that some structural change would be inevitable toenable the business to compete more effectively worldwide. Against this background, the Wellington Board received a proposal from Fenner.The Wellington Board was of the view that this proposal was sufficientlycredible and attractive to enter into the formal discussions, which have now ledto the Offer. In considering whether the Offer is fair and reasonable to WellingtonShareholders, the Wellington Directors have considered: • that the Full Cash Alternative, together with the proposed final dividend, is in excess of the highest price at which a Wellington Share has publicly traded since it became solely focused on the seals market in 1999; • the immediate and certain benefits of the Offer against the potential future return from remaining a Wellington Shareholder; • that the Offer enables Wellington Shareholders to realise their investment generally free of any transaction costs; • the fact that Wellington will be part of a larger group, providing the opportunity for it to compete in markets in which it has limited resources at present; • that the Offer is well balanced between the long term interests of Wellington Shareholders, customers and Wellington employees worldwide; • that those Wellington Shareholders that wish to retain an investment in the engineering sector can elect to receive part of their consideration under the Offer in New Fenner Shares; and • that Wellington Shareholders will be entitled to receive and retain the final dividend of 4.6 pence per Wellington Share which was announced on 30 March 2005 and, subject to it being declared by Wellington in general meeting, will be paid on 31 May 2005 to Wellington Shareholders on the register on 22 April 2005. (3) This statement should not be interpreted to mean the future earnings per share of Fenner following the completion of the Acquisition and Placing and Open Offer would necessarily match or exceed the historical earnings per share of Fenner. For these purposes earnings per share is measured before goodwill amortisation and exceptional items. In addition, the Acquisition (and Placing and Open Offer) is expected to increase the net assets of the Enlarged Group. In summary, therefore, the Wellington Directors have concluded that the terms ofthe Offer are fair and reasonable and they unanimously recommend WellingtonShareholders to accept the Offer. Information on Fenner The principal activity of Fenner is the global manufacture and distribution ofconveyor belting and precision polymer products. Fenner is a world leader inreinforced polymer technology with operations in North America, Europe, SouthAfrica, India, China and Australia. In the year ended 31 August 2004, Fennerreported an operating profit before goodwill amortisation and exceptional itemsof £16.1 million on turnover of £260.6 million. This yielded a profit onordinary activities before taxation of £6.4 million. Net assets as at 31 August2004 were £64.5 million. Further, Fenner has reported today that, in the sixmonths ended 28 February 2005, Fenner generated an operating profit beforegoodwill amortisation and exceptional items of £6.6 million on turnover of£141.3 million. This yielded a profit on ordinary activities before taxation of£3.6 million. Net assets as at 28 February 2005 were £66.0 million. Further financial information on Fenner will be set out in the Offer Documentand Listing Particulars expected to be sent to Wellington Shareholders andFenner Shareholders today. Information on Wellington Wellington is a manufacturer and distributor of advanced polymer sealingsolutions for demanding engineering and industrial applications. The business is organised in two main business groups: • Fluid Power (through its Hallite and Hallite Dynamic businesses) produces sealing solutions for fluid power applications worldwide, focusing primarily on the mobile equipment, mining and automation markets. Hallite and Hallite Dynamic's manufacturing operations are based principally in Hampton, UK and Detroit, Michigan. • Process (through its CDI Polytek business) produces custom made seals for the process industries, oil, gas and downstream activities, as well as aerospace. CDI Polytek's manufacturing operations are based in Houston, Texas and Hampton, UK. Wellington has distribution and sales subsidiaries, some with rapid responsecapabilities, in the USA, Canada, UK, Germany, France, Italy and Australia. For the year ended 31 December 2004, Wellington reported an operating profitbefore goodwill amortisation and exceptional costs of £5.0 million on turnoverof £33.9 million. This yielded a profit before tax of £5.1 million. At 31 December 2004, Wellington reported net assets of £10.5 million and netborrowings of £2.6 million yielding a gearing of 24.8 per cent. Further financial information on Wellington will be set out in the OfferDocument and Listing Particulars expected to be sent to Wellington Shareholdersand Fenner Shareholders today. Other opportunities In addition to the potential acquisition of Wellington, Fenner intends to pursuea growth strategy for all its reinforced polymer businesses. The Fenner Board believes that there are a number of other businesses whichcould fit closely with the Fenner Group's strategy and which would increaseshareholder value. Fenner's Specialist Hose operations are experiencing buoyantmarket conditions with a return to growth of the truck, bus and off-road vehiclesegments and the change in emissions legislation in the EU, USA and Asia thathas necessitated engine redesigns. The Fenner Board intends to continue thetrend of recent expansion in this business, through either further organicinvestment or a bolt-on acquisition or possibly both. The Fenner Board also intends to expand Fenner's Industrial Drives business inEurope following the successful development of this business in North America.This may involve small European bolt-on acquisitions in related areas. The growth of the coal mining market has resulted in significant volumeincreases in conveyor belt demand. As a result of this opportunity and theFenner Directors' expectations of continued growth, Fenner's expansion plans inboth Asia and the Southern Hemisphere are expected to continue with furthersubstantial investment, possibly with further bolt-on acquisitions. The Fenner Board is in early discussions with a number of potential acquisitiontargets, but there is no certainty that any of these potential acquisitions willbe successfully concluded. Use of proceeds The proceeds of the Placing and Open Offer will be used principally to satisfythe cash consideration payable pursuant to the Offer and the estimated expensesof the Acquisition and the Placing and Open Offer of £5.1 million. The maximumcash consideration payable pursuant to the Acquisition will be approximately£43.8 million (assuming that every Wellington Shareholder accepts the Offer andevery Wellington Shareholder elects for the Full Cash Alternative). The minimumcash consideration payable pursuant to the Acquisition will be £34.5 million onthe basis that no Wellington Shareholder elects for the Full Cash Alternativeother than the Wellington Shareholders who have irrevocably undertaken to acceptthe Offer and have elected to receive the Full Cash Alternative. The Fenner Board believes that, whilst the Fenner Group can support its currentlevel of net debt, the Fenner Group would be better placed to make furtheracquisitions and to raise additional capital through the issue of new FennerShares. Despite the fact that it cannot be certain that further acquisitions maybe made, the Fenner Directors believe that Fenner should take this opportunityto raise additional capital in order to avoid returning to its shareholders morethan once in a short space of time. The improved balance sheet strength andscale of Fenner after the acquisition of Wellington together with the maximumnet proceeds of the Placing and Open Offer of approximately £19.6 million(assuming that every Wellington Shareholder accepts the Offer and no WellingtonShareholder elects for the Full Cash Alternative other than the WellingtonShareholders who have irrevocably undertaken to accept the Offer and haveelected to receive the Full Cash Alternative) or the minimum net proceeds ofapproximately £10.3 million (assuming that every Wellington Shareholder acceptsthe Offer and every Wellington Shareholder elects for the Full Cash Alternative)would enable the Fenner Group to actively pursue its acquisition strategy. Thesemaximum and minimum net proceeds are calculated after deducting the cashconsideration payable under the Acquisition and the estimated expenses of theAcquisition and the Placing and Open Offer. In addition, the issue of New Fenner Shares and Open Offer Shares will increasethe current market capitalisation of Fenner and broaden its institutionalshareholder base, which the Fenner Board believes should further improve theliquidity of Fenner Shares. The Offer The Offer will be made on and subject to the terms and conditions set out orreferred to in this announcement and Appendix I to this announcement and thefurther terms and conditions set out in the Offer Document expected to be postedto Wellington Shareholders today and, in the case of Wellington Shares held incertificated form, the Form of Acceptance. The Offer will be for all of the issued and to be issued Wellington Shares onthe following basis: 123 pence in cash for each Wellington Share plus 0.456 New Fenner Shares for each Wellington Share Based on the closing middle market price of 136 pence per Fenner Share, the Offertherefore values each Wellington Share at 185 pence and the existing issued and to be issued ordinary share capital of Wellington at £44.6 million.The New Fenner Shares will be issued credited as fully paid and will rank paripassu in all respects with the existing Fenner Shares and will be entitled toall dividends and other distributions declared, made or paid after the date ofthe Offer save for the Fenner interim dividend declared on 19 April 2005 inrespect of the six months ended 28 February 2005 of 1.975 pence per FennerShare, which will be paid on 5 September 2005 to Fenner Shareholders on theregister on 5 August 2005. After the Offer becomes or is declared unconditional in all respects, Fennerwill make appropriate proposals to participants in the Wellington Share OptionSchemes in respect of their options. Fractional entitlements to New Fenner Shares arising pursuant to the Offer willbe disregarded and will not be allotted. Full Cash Alternative As an alternative to receiving their consideration partly in cash and partly inNew Fenner Shares, which would otherwise be receivable under the Offer,Wellington Shareholders who validly accept the Offer may elect to receive all oftheir consideration in cash on the following basis: 180 pence in cash for each Wellington Share The Full Cash Alternative values the existing issued and to be issued sharecapital of Wellington at approximately £43.8 million. Certain overseas shareholders of Wellington will be deemed to have elected forthe Full Cash Alternative and will not be entitled to receive New Fenner Sharesunder the Offer. Undertakings to accept the Offer, option and letters of intent The shareholding Wellington Directors have given irrevocable undertakings toaccept the Offer in respect of their holdings (beneficial and non-beneficial) of181,251 Wellington Shares in aggregate (representing approximately 0.76 percent. of the existing issued share capital of Wellington) of which elections forthe Full Cash Alternative have been received in respect of 180,251 WellingtonShares. These undertakings will remain binding even if a higher competing offeris made for Wellington unless the Offer lapses or is withdrawn. First Britannia Mezzanine NV has given an irrevocable undertaking to accept theOffer and the Full Cash Alternative in respect of its holding of 6,917,778Wellington Shares (representing approximately 28.99 per cent. of the existingissued share capital of Wellington). This undertaking will remain binding evenif a higher competing offer is made for Wellington, unless the Offer lapses oris withdrawn. In addition to the irrevocable undertaking referred to above, First BritanniaMezzanine NV has granted Fenner a call option allowing Fenner to acquire6,917,778 Wellington Shares (representing approximately 28.99 per cent. of theexisting issued share capital of Wellington) at any time on or after the date ofthe posting of the Offer Document for a period of 60 days at a consideration of180 pence per Wellington Share payable in cash. In addition, irrevocable undertakings to accept the Offer have also beenreceived from certain other institutional shareholders in respect of 5,181,437Wellington Shares in aggregate (representing approximately 21.71 per cent. ofthe existing issued share capital of Wellington) of which elections for the FullCash Alternative have been received in respect of 865,000 Wellington Shares.These undertakings will cease to be binding if a third party announces a firmintention to make a competing offer for Wellington Shares, where the value ofthat offer (in the case of one such irrevocable undertaking) is not less than190 pence per Wellington Share, and (in the case of the remaining suchirrevocable undertakings), where the value of that offer is at least 10 percent. higher than the value of the Offer. Also Fenner has received non binding letters of intent to accept, or procure theacceptance of, the Offer from certain shareholders in respect of a total of3,150,628 Wellington Shares (representing in aggregate approximately 13.20 percent. of the existing issued share capital of Wellington). In summary, therefore, Fenner has received irrevocable undertakings and lettersof intent to accept the Offer in respect of 15,431,094 Wellington Shares inaggregate, representing approximately 64.67 per cent. of the existing issuedshare capital of Wellington. Inducement fees It has been agreed between Fenner and Wellington that Wellington will pay Fennera fee of £420,000 (including any amount in respect of value added tax, if any,payable thereon), if Wellington initiates enquiries or enters into discussionswith a third party with a view to a takeover offer in respect of Wellington,subject to certain exceptions, within two months of the Offer being made, or ifa director of Wellington withdraws his recommendation of the Offer and the Offersubsequently lapses or is withdrawn, or if a recommended competing offer forWellington is announced and the Offer subsequently lapses or is withdrawn. It has also been agreed between Fenner and Wellington that Fenner will payWellington a fee of £420,000 (including any amount in respect of value addedtax, if any, payable thereon) if any director of Fenner withdraws hisrecommendation to Fenner Shareholders to vote in favour of the resolutionapproving the making of the Offer and the Offer subsequently lapses or iswithdrawn, or if Fenner Shareholders do not pass the resolution necessary toapprove the Offer, which is to be proposed at the Extraordinary General Meeting. Principal terms of the Placing and Open Offer Fenner proposes to raise approximately £54.1 million (net of expenses of theAcquisition and the Placing and Open Offer) by the allotment and issue of46,611,102 Open Offer Shares at 127 pence per Open Offer Share pursuant to thePlacing and Open Offer. The Open Offer Shares (other than the Committed Shares)have been conditionally placed by Collins Stewart at the Issue Price withinstitutional and other investors subject to clawback (other than in relation tothe Firm Placed Shares) to satisfy valid applications made by Qualifying FennerShareholders under the Open Offer for such Open Offer Shares. Irrevocable undertakings have been received from certain of the Fenner Directorsto take up or procure to be taken up, in aggregate, entitlements to 35,436 OpenOffer Shares under the Open Offer and these Committed Shares are not thereforebeing placed under the Placing. The Fenner Directors have also irrevocablyundertaken not to take up the remainder of their entitlements to, in aggregate,349,352 Open Offer Shares and these entitlements have been placed firm withinstitutional and other investors and are not subject to clawback by QualifyingFenner Shareholders under the Open Offer. Rothschild and Collins Stewart have agreed, acting as agents for Fenner, toinvite Qualifying Fenner Shareholders to apply under the Open Offer for46,611,102 Open Offer Shares at the Issue Price on the basis of 3 Open OfferShares for every 7 existing Fenner Shares. Compulsory acquisition and delisting of Wellington Shares If Fenner receives acceptances under the Offer in respect of, and/or otherwiseacquires, 90 per cent. or more of the Wellington Shares to which the Offerrelates, Fenner intends to exercise its rights pursuant to the provisions ofsections 428 to 430F (inclusive) of the Companies Act to acquire compulsorilyany remaining Wellington Shares to which the Offer relates, not acquired oragreed to be acquired by Fenner pursuant to the Offer, on the same terms as theOffer. If the Offer becomes or is declared unconditional in all respects, Fennerintends to procure the making of an application by Wellington as soon as it isappropriate to do so to cancel the listing of Wellington Shares on the OfficialList and to cancel trading of the Wellington Shares on the London StockExchange's market for listed securities. It is anticipated that cancellation oflisting and trading will take effect no earlier than 20 business days after theOffer becomes or is declared unconditional in all respects. Such a cancellationwould significantly reduce the liquidity and marketability of any WellingtonShares not assented to the Offer. Wellington Share Option Schemes The Offer will extend to Wellington Shares which are unconditionally allotted orissued prior to the date on which the Offer closes (or such earlier date asFenner (in accordance with the Code) decides) as a result of the exercise ofoptions under the Wellington Share Option Schemes or otherwise. Disclosure of interests in Wellington Save for the 15,431,094 Wellington Shares in respect of which Fenner hasreceived irrevocable undertakings, a call option and letters of intent to acceptthe Offer, neither Fenner nor any of the Fenner Directors nor, so far as Fenneris aware, any person acting in concert with Fenner, owns or controls anyWellington Shares. Certain terms used in this announcement are defined in Appendix III to thisannouncement. For further information contact: Fenner PLCMark Abrahams, Chief Executive Tel: 01482 626500Richard Perry, Group Finance Director N M Rothschild & Sons Limited(Financial Adviser and Sponsor to Fenner)James Fenwick / David Forbes / Stephen Moore Tel: 0113 200 1900 Collins Stewart Limited(Corporate Broker to Fenner)Chris Wells / Mark Connelly Tel: 0207 523 8350 Weber Shandwick Square MileNick Oborne Tel: 0207 067 0700 Wellington Holdings plcBrian Kent, Non Executive Chairman Tel: 0208 941 3774 BDO Stoy Hayward Corporate Finance(Financial Adviser to Wellington)Michael Cobb / Philip Brady Tel: 0207 486 5888 This announcement has been approved for the purposes of Section 21 of theFinancial Services and Markets Act 2000 by N M Rothschild & Sons Limited. N M Rothschild & Sons Limited, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting exclusively for FennerPLC in connection with the Placing and Open Offer and Acquisition and no oneelse and will not be responsible to anyone other than Fenner PLC for providingthe protections afforded to clients of N M Rothschild & Sons Limited nor forproviding advice in relation to the Placing and Open Offer and Acquisition. Collins Stewart Limited, which is authorised and regulated in the United Kingdomby the Financial Services Authority, is acting exclusively for Fenner PLC inconnection with the Placing and Open Offer. Collins Stewart Limited is alsocorporate broker to Wellington Holdings plc. Collins Stewart Limited will not beresponsible to anyone other than Fenner PLC for providing the protectionsoffered to clients of Collins Stewart Limited nor for providing advice inrelation to the Offer and the Placing and Open Offer. BDO Stoy Hayward Corporate Finance, a division of BDO Stoy Hayward LLP,Chartered Accountants, which is authorised and regulated in the United Kingdomby the Financial Services Authority, is acting exclusively for WellingtonHoldings plc and no one else in connection with the Offer and will not beresponsible to anyone other than Wellington Holdings plc for providing theprotections afforded to customers of BDO Stoy Hayward Corporate Finance nor forproviding advice in relation to the Offer. Neither the Offer nor the Open Offer is being made, directly or indirectly, inor into, or by use of the mails, or by any means or instrumentality (including,without limitation, facsimile transmission, telex or telephone) of interstate orforeign commerce, or of any facility of a national securities exchange, of theUnited States, Canada, Australia, Japan, the Republic of Ireland or South Africaand neither can, subject to certain exceptions, be accepted by any such use,means instrumentality or facility or from within the United States, Canada,Australia, Japan, the Republic of Ireland or South Africa. Neither the Offer nor the Open Offer constitutes an offer of securities forsale, or the solicitation of an offer to buy securities in the United States andthe new Fenner Shares to be issued pursuant to the Offer and the Open Offer havenot been and will not be registered under the Securities Act , or under the lawsof any state, district or other jurisdiction of the United States or of Canada,Australia, Japan, the Republic of Ireland or South Africa and no regulatoryclearances in respect of new Fenner Shares have been or will be, applied for inany jurisdiction. Accordingly, unless an exemption under the Securities Act orother relevant securities laws is applicable, the new Fenner Shares are notbeing, and may not be offered, sold, resold, delivered or distributed, directlyor indirectly, in or into the United States or Canada, Australia, Japan, theRepublic of Ireland or South Africa or to, or for the account or benefit of, anyUS person or person resident in Canada, Australia, Japan, the Republic ofIreland or South Africa. This announcement contains a number of forward-looking statements relating toFenner, Wellington and the Enlarged Group with respect to, among others, thefollowing: financial condition; results of operations; the business of theEnlarged Group; future benefits of the Acquisition; and management plans andobjectives. Fenner and Wellington consider any statements that are nothistorical facts as "forward-looking statements". They involve a number of risksand uncertainties that could cause actual results to differ materially fromthose suggested by the forward-looking statements. Important factors that couldcause actual results to differ materially from estimates or forecasts containedin the forward-looking statements include, among others, the followingpossibilities: future revenues are lower than expected; costs or difficultiesrelating to the integration of the businesses of Fenner and Wellington, or ofother future acquisitions, are greater than expected; expected cost savings fromthe transaction or from other future acquisitions are not fully realised orrealised within the expected time frame; competitive pressures in the industryincrease; general economic conditions or conditions affecting the relevantindustries, whether internationally or in the places where Fenner and Wellingtonconduct business are less favourable than expected, and/or conditions in thesecurities market are less favourable than expected. This announcement does not constitute an offer to sell or an invitation topurchase any securities or the solicitation of an offer to purchase anysecurities, pursuant to the Offer or otherwise. The Offer will be made solely bythe Offer Document and, in the case of Wellington Shares in certificated form,the Form of Acceptance accompanying the Offer Document, which will contain thefull terms and conditions of the Offer, including details of how the Offer maybe accepted. Appendix I Conditions of the Offer The Offer, which will be made by Rothschild on behalf of Fenner, will complywith the rules and regulations of the Financial Services Authority, the LondonStock Exchange and the City Code on Takeovers and Mergers (the "Code"). The Offer is conditional upon: (a) valid acceptances of the Offer being received (and not, where permitted, withdrawn) by not later than 1.00 p.m. on 11 May 2005 (or such later times and/ or dates as Fenner may, subject to the rules of the Code or with the consent of the Panel, decide) in respect of not less than 90 per cent. (or such lesser percentage as Fenner may decide with the prior consent of Rothschild and Collins Stewart pursuant to the Placing and Open Offer Agreement) in nominal value of the Wellington Shares to which the Offer relates, provided that this condition will not be satisfied unless Fenner shall have acquired or agreed to acquire, whether pursuant to the Offer or otherwise, Wellington Shares carrying in aggregate more than 50 per cent. of the voting rights then normally exercisable at a general meeting of Wellington including, to the extent (if any) required by the Panel, any voting rights attaching to any Wellington Shares which are unconditionally allotted or issued before the Offer becomes or is declared unconditional as to acceptances pursuant to the exercise of any outstanding conversion or subscription rights or otherwise. For the purposes of this condition: (i) Wellington Shares which have been unconditionally allotted shall be deemed to carry the voting rights which they will carry upon being entered into the register of members of Wellington; and (ii) the expression "Wellington Share to which the Offer relates" shall be construed in accordance with sections 428 to 430F of the Companies Act; (b) the UK Listing Authority announcing its decision to admit the New Fenner Shares and the new Fenner Shares which are the subject of the Placing and Open Offer to the Official List and such admission becoming effective in accordance with the Listing Rules and the London Stock Exchange announcing its decision to admit all such Fenner Shares to trading and such admission becoming effective in accordance with the London Stock Exchange Admission and Disclosure Standards; (c) the passing at an extraordinary general meeting of Fenner (or at any adjournment of such a meeting) of such resolution or resolutions as may be necessary or desirable to approve, effect and implement or authorise the implementation of the Offer, the acquisition of Wellington Shares pursuant to the Offer or otherwise, the making of any offer, proposal or other arrangement to holders of options under the Wellington Share Option Schemes and any necessary increases of the authorised share capital of Fenner and allotment and issue of Fenner Shares; (d) no government or governmental, quasi-governmental, supranational, statutory, regulatory or investigative body, authority, court, trade agency, association or institution or professional or environmental body or any other similar person or body whatsoever in any relevant jurisdiction (each a "Relevant Authority") having decided to take, institute, implement or threaten any action, proceedings, suit, investigation, enquiry or reference or having required any action to be taken or information to be provided or otherwise having done anything or having made, proposed or enacted any statute, regulation, order or decision or having done anything which would or might reasonably be expected to: (i) make the Offer or its implementation, or the acquisition or the proposed acquisition by Fenner of any shares or other securities in, or control of, Wellington or any member of the Wider Wellington Group) void, illegal or unenforceable in any jurisdiction in a manner which is material in the context of the Wider Wellington Group taken as a whole, or otherwise directly or indirectly restrain, prohibit, restrict, prevent or delay the same or impose material additional conditions or financial or other obligations with respect thereto, or otherwise materially challenge or interfere therewith; (ii) require, prevent, restrict or delay the divestiture or alter the terms envisaged for any proposed divestiture by Fenner or any member of the Wider Fenner Group of any Wellington Shares or of any shares in a member of the Wider Wellington Group in a manner which is material in the context of the Wider Wellington Group taken as a whole; (iii)require, prevent, restrict or delay the divestiture or alter the terms envisaged for any proposed divestiture by any member of the Wider Fenner Group or by any member of the Wider Wellington Group of all or any portion of their respective businesses, interests, assets or property, or (to an extent which in each case is material in the context of the Offer or the Wider Wellington Group or the Wider Fenner Group in each case taken as a whole) impose any limit on the ability of any of them to conduct or operate their respective businesses (or any of them) or to operate, own or control any of their respective assets or properties or any part thereof; (iv) impose any material limitation on, or result in any material delay in, the ability of any member of the Wider Fenner Group or any member of the Wider Wellington Group to acquire, hold or exercise effectively, directly or indirectly, all or any rights of ownership of Wellington Shares or any shares or any other securities of Wellington or to exercise voting or management control over any member of the Wider Wellington Group or any member of the Wider Fenner Group; (v) require any member of the Wider Fenner Group and/or of the Wider Wellington Group to acquire or offer to acquire or repay any shares or other securities in and/or indebtedness of any member of the Wider Fenner Group or the Wider Wellington Group owed by or owed to any third party to an extent which in each case is material in the context of the Wider Fenner Group or the Wider Wellington Group in each case taken as a whole; (vi) impose any limitation on the ability of the members of the Wider Fenner Group and the Wider Wellington Group to integrate or co-ordinate their businesses, or any material part of them, with the other members of the Wider Wellington Group or of the Wider Fenner Group to an extent which is material in the context of the Wider Wellington Group or the Wider Fenner Group in each case taken as a whole; or (vii)otherwise adversely affect any or all of the businesses, assets, prospects, profits or financial or trading position of any member of the Wider Wellington Group or any member of the Wider Fenner Group to an extent which is material in the context of the Wider Fenner Group or the Wider Wellington Group in each case taken as a whole, and all applicable waiting and other time periods during which any Third Party could institute, implement or threaten any such action, proceedings, suit, investigation, enquiry or reference under the laws of any relevant jurisdiction, having expired, lapsed or been terminated; (e) all necessary filings and applications having been made and all necessary waiting and other time periods (including any extensions thereof) under any applicable legislation or regulations of any relevant jurisdiction having expired, lapsed or been terminated and all statutory or regulatory obligations in any relevant jurisdiction having been complied with in each case as may be necessary in connection with the Offer and its implementation or the acquisition or proposed acquisition by Fenner of any shares or other securities in, or control of, Wellington and all authorisations, orders, recognitions, grants, consents, clearances, confirmations, licences, certificates, permissions and approvals ("Authorisations") considered necessary or appropriate and material by Fenner for or in respect of the Offer or the acquisition or proposed acquisition by Fenner of any shares or other securities in, or control of, Wellington or the carrying on by any member of the Wider Wellington Group of its business or in relation to the affairs of any member of the Wider Wellington Group having been obtained in terms and in a form reasonably satisfactory to Fenner from all appropriate Relevant Authorities or persons with whom any member of the Wider Wellington Group has entered into contractual arrangements that are material in the context of the Wider Wellington Group taken as a whole and all such Authorisations remaining in full force and effect and all filings necessary for such purpose having been made and there being no notice or intimation of any intention to and no steps have been taken which would allow any Relevant Authority to revoke, suspend, restrict or amend or not renew the same at the time at which the Offer becomes or is declared wholly unconditional and there being no indication that the renewal costs of any Authorisation are material in the context of the Wider Wellington Group taken as a whole; (f) except as publicly announced by Wellington prior to the announcement of the Offer through a Regulatory Information Service or disclosed in writing by or on behalf of Wellington in connection with the Offer to Fenner prior to the announcement of the Offer, there being no provision of any arrangement, agreement, licence, permit, franchise or other instrument ("Relevant Instrument") to which any member of the Wider Wellington Group is a party or by or to which any such member or any of its respective assets is or are or may be bound, entitled or subject or any circumstance which, in consequence of the making or implementation of the Offer or the proposed acquisition of any shares or other securities in, or control of, Wellington by Fenner or because of a change in the control or management of Wellington or otherwise, could reasonably be expected to result in (in each case to an extent which is material in the context of the Wider Wellington Group taken as a whole): (i) any indebtedness or liabilities actual or contingent of, or any grant available to, any member of the Wider Wellington Group being or becoming repayable or capable of being declared repayable immediately or prior to its stated maturity date or the ability of any such member to borrow monies or incur any indebtedness being withdrawn or inhibited or capable of being withdrawn or inhibited; (ii) the creation or enforcement of any mortgage, charge or other security interest over the whole or any part of the business, property, assets or interests of any member of the Wider Wellington Group or any such security (whenever created, arising or having arisen) becoming enforceable; (iii)any Relevant Instrument or any right, liability, obligation, or interest of any member of the Wider Wellington Group under any Relevant Instrument (or any arrangement, agreement, licence or instrument relating to any such right, liability, obligation, interest or business) or the interests or business of any such member in or with any other person, firm, company or body being or becoming capable of being terminated or adversely modified or adversely affected or any adverse action being taken or any onerous obligation or liability arising thereunder; (iv) any asset, right (including without limitation intellectual property rights) or interest used or enjoyed by any member of the Wider Wellington Group being or falling to be disposed of (otherwise than in the ordinary course of business) or charged or ceasing to be available to any member of the Wider Wellington Group or any right arising under which any such asset or interest could be required to be disposed of or charged or will or could cease to be available to any member of the Wider Wellington Group; (v) any member of the Wider Wellington Group ceasing to be able to carry on business under any name under which it presently does so; (vi) any member of the Wider Fenner Group and/or of the Wider Wellington Group being required to acquire, or offer to acquire or repay any shares in and/or securities and/or indebtedness of any member of the Wider Wellington Group owned by any Third Party; (vii)any change in or effect on the ownership or use of any intellectual property rights owned or used by any member of the Wider Wellington Group; (viii)the value or financial or trading position or prospects of any member of the Wider Wellington Group being prejudiced or adversely affected; or (ix) the creation of any liability, actual or contingent, by any member of the Wider Wellington Group (other than in the ordinary course of business), and no event having occurred which, under any provision of any such Relevant Instrument, might reasonably be expected to result in any of the events referred to in this condition (f) to an extent which would be material in the context of the Wider Wellington Group taken as a whole; (g) since 31 December 2004 and except as disclosed in Wellington's annual report and accounts for the year ended 31 December 2004 or as disclosed by or on behalf of Wellington to Fenner in writing in connection with the Offer prior to the announcement of the Offer or as otherwise publicly announced by Wellington on or prior to the announcement of the Offer through an RIS, no member of the Wider Wellington Group having: (i) issued or agreed to issue or authorised or proposed the issue of additional shares or securities of any class, or securities convertible into or exchangeable for shares, or rights, warrants or options to subscribe for or acquire any such shares, securities or convertible securities (save for issues between Wellington and any of its wholly-owned subsidiaries or between such wholly-owned subsidiaries and save for options granted under the Wellington Share Option Schemes before 31 December 2004 or the issue of any Wellington Shares allotted upon the exercise of options granted before 31 December 2004 under the Wellington Share Option Schemes) or redeemed, purchased, repaid or reduced or proposed the redemption, purchase, repayment or reduction of any part of its share capital or any other securities; (ii) recommended, declared, made or paid or proposed to recommend, declare, make or pay any bonus, dividend or other distribution whether payable in cash or otherwise other than any distribution by any wholly-owned subsidiary of the Wellington Group and payment of the dividend of 4.6 pence per Wellington Share which was announced on 30 March 2005; (iii)save as between Wellington and its wholly-owned subsidiaries, effected, authorised, proposed or announced its intention to propose any change in its share or loan capital which in each case would be material in the context of the Wider Wellington Group taken as a whole; (iv) save as between Wellington and its wholly-owned subsidiaries, effected, authorised, proposed or announced its intention to propose: (aa) any merger, demerger, reconstruction, arrangement, amalgamation, commitment or scheme; or (bb) any acquisition or disposal, mortgage, charge or transfer of assets or shares (other than in the ordinary course of business) of any right, title orRelated Shares:
Fenner PLC