6th Mar 2007 07:06
Meggitt PLC06 March 2007 For Immediate Release 6 March 2007 NOT FOR DISTRIBUTION OR PUBLICATION, DIRECTLY OR INDIRECTLY IN OR INTO THEUNITED STATES, AUSTRALIA, CANADA, JAPAN OR SOUTH AFRICA. MEGGITT PLC PROPOSED ACQUISITION OF K&F INDUSTRIES HOLDINGS, INC. for US$1.8bn 1 FOR 2 RIGHTS ISSUE OF NEW SHARES AT 200 PENCE PER SHARE Meggitt Plc ("Meggitt" or "the Group"), the international aerospace, and defencegroup, is pleased to announce the proposed cash acquisition of K&F IndustriesHoldings, Inc. ("K&F Industries" or "K&F") for an enterprise value ofapproximately US$1.8 billion. K&F Industries is a leading integrated supplier oforiginal equipment and aftermarket parts and services for the global aerospaceand defence industry. K&F Industries has leading positions and itstechnologically sophisticated products include precision engineered andspecialised aviation equipment, including wheels, brakes, brake control systems,flexible bladder fuel tanks, helicopter interiors, ice guards and fuel sealants. K&F Industries generated adjusted operating profit from trading activities ofUS$146.4 million on turnover of US$424.1 million for the year ended 31 December2006. Rationale and Highlights of the Transaction include: K&F Industries represents an excellent strategic fit with the existing MeggittGroup: • The transaction enhances Meggitt's product range, complementary businesses and technologies and mirrors Meggitt's mix of original equipment and aftermarket sales. All this is expected to enhance greatly the opportunities for the Enlarged Group • The combination of Dunlop's stronger carbon brake technology will complement K&F Industries stronger steel brake technology, with the Enlarged Group benefiting from increased exposure to growing civil programme and increased exposure to aftermarket sales • Customers will benefit from the improved service levels, wider range of product, streamlined procurement, global aftermarket support and greater engineering resources • The Acquisition will be significantly earnings enhancing (before goodwill amortisation and exceptional items) in the first full financial year of ownership after including cost savings* • The Meggitt Directors estimate that annualised cost savings will amount to £16 million by 2009 • The Acquisition will be funded in part by a 1 for 2 rights issue at 200 pence per share to raise approximately £424 million (net of expenses). The balance of the Acquisition funding will be financed from a new debt facility. The Rights Issue has been fully underwritten by Rothschild and Merrill Lynch • The Acquisition is conditional upon, inter alia, shareholder approval by both Meggitt and K&F Industries, regulatory clearance and other customary conditions In a separate announcement, Meggitt today announced its preliminary results forthe year ended 31 December 2006, achieving an excellent trading performancesupported by strong cash flow. Commenting on the proposed Acquisition, Terry Twigger, Chief Executive ofMeggitt, said: "I am delighted to announce the acquisition of K&F today. We believe it willsignificantly strengthen Meggitt's existing position as a major internationalaerospace equipment provider given our combined operations' complementaryproduct and geographic markets. Customers will benefit from improved servicelevels, a wider range of product, streamlined procurement, global aftermarketsupport and access to greater engineering resources. We expect the acquisitionto create material synergies and be significantly earnings enhancing in thefirst full year of ownership." Meggitt has received financial advice in connection with the Acquisition fromRothschild and in connection with the Rights Issue from Rothschild and MerrillLynch. For further information please contact: Meggitt 020 7466 5000 (Today) Terry Twigger, Chief Executive 01202 597597 (Thereafter)Stephen Young, Group Finance DirectorPhilip Green, Group Corporate Affairs Director Rothschild 020 7280 5000Robert LeitaoRavi Gupta Merrill Lynch 020 7996 1000Simon FraserAndrew Fairclough Buchanan Communications 020 7466 5000Charles RylandJeremy Garcia A presentation to analysts will be held at Buchanan Communications,45 Moorfields, London EC2Y 9AE at 9 a.m. (London time) today to discuss theproposed Acquisition and the Preliminary Results. N M Rothschild & Sons Limited is acting exclusively for Meggitt and for no-oneelse in relation to the Acquisition and the Rights Issue, and will not beresponsible to any other person for providing the protections afforded toclients of N M Rothschild & Sons Limited nor for providing advice in connectionwith the Acquisition or the Rights Issue. Merrill Lynch International is acting exclusively for Meggitt and for no-oneelse in relation to the Rights Issue, and will not be responsible to any otherperson for providing the protections afforded to clients of Merrill LynchInternational nor for providing advice in connection with the Rights Issue. A combined circular to Shareholders relating to the Acquisition and prospectusrelating to the Rights Issue is expected to be published today and posted toShareholders. The Provisional Allotment Letters are expected to be despatched on27 March 2007. The Prospectus will give further details of the Acquisition andof the New Shares, the Nil Paid Rights and the Fully Paid Rights to be offeredpursuant to the Rights Issue, the business of Meggitt and K&F Industries, theindustry in which Meggitt and K&F Industries operate and an indication of thesize of the Enlarged Group. A copy of the Prospectus when published will be available from the registeredoffice of Meggitt at Atlantic House, Aviation Park West, BournemouthInternational Airport, Christchurch, Dorset BH23 6EW. The Prospectus will bealso available for inspection during usual business hours on any weekday(Saturdays, Sundays and Bank Holidays excepted) from the date of its publicationuntil Admission at the offices of Clifford Chance LLP, 10 Upper Bank Street,London E14 5JJ. This document is not a Prospectus but an advertisement and investors should notsubscribe for any Nil Paid Rights, Fully Paid Rights or New Ordinary Sharesreferred to in this announcement except on the basis of the informationcontained in the Prospectus. This announcement does not constitute an offer to sell or a solicitation of anoffer to buy New Shares or to take up entitlements to Nil Paid Rights in anyjurisdiction in which such offer or solicitation is unlawful. Neither thisannouncement, nor the Prospectus, nor the Provisional Allotment Letter will bedistributed in or into the United States, Australia, Canada, Japan or SouthAfrica. This document is issued by Meggitt PLC and approved solely for the purposes ofSection 21 pf the Financial Services and Markets Act 2000 by N M Rothschild &Sons Limited of New Court, St Swithin's Lane, London EC4P 4DU. The Nil Paid Rights, the Fully Paid Rights, the New Shares and the ProvisionalAllotment Letters have not been and will not be registered under the USSecurities Act of 1933 as amended (the "US Securities Act") or under anysecurities laws of any state or other jurisdiction of the United States and maynot be offered, sold, taken up, exercised, resold, renounced, transferred ordelivered, directly or indirectly, within the United States except pursuant toan applicable exemption from the registration requirements of the US SecuritiesAct and in compliance with any applicable securities laws of any state or otherjurisdiction of the United States. No public offering of the securities willtake place in the United States. The Nil Paid Rights, the Fully Paid Rights, the New Shares and the ProvisionalAllotment Letters have not been approved or disapproved by the US Securities andExchange Commission, any state's securities commission in the United States orany US regulatory authority, nor have any of the foregoing authorities passedupon or endorsed the merits of the offering of the Nil Paid Rights, the FullyPaid Rights, the New Shares and the Provisional Allotment Letters or theaccuracy or adequacy of this announcement. Any representation to the contrary isa criminal offence. The Nil Paid Rights, the Fully Paid Rights, the New Shares and the ProvisionalAllotment Letters have not been or will not be registered under the relevantlaws of any state, province or territory of Australia, Canada, Japan or SouthAfrica and may not be offered, sold, taken up, exercised, resold, renounced,transferred or delivered, directly or indirectly, within Australia, Canada,Japan or South Africa except pursuant to an applicable exemption. Neither the content of Meggitt PLC's website nor any website accessible byhyperlinks on Meggitt PLC's website is incorporated in, or forms part of, thisannouncement. The distribution of this announcement and/or the Prospectus and/or theProvisional Allotment Letters and/or the transfer of Nil Paid Rights, Fully PaidRights and/or New Shares into jurisdictions other than the United Kingdom may berestricted by law. Persons into whose possession this announcement comes shouldinform themselves about and observe any such restrictions. Any failure to complywith these restrictions may constitute a violation of the securities laws of anysuch jurisdiction. This announcement includes statements that are, or may be deemed to be,''forward-looking statements''. These forward-looking statements can beidentified by the use of forward-looking terminology, including the terms''believes'', ''estimates'', ''plans'', ''anticipates'', ''targets'', ''aims'',''continues'', ''expects'', ''intends'', ''hopes'', ''may'', ''will'',''would'', ''could'' or ''should'' or, in each case, their negative or othervariations or comparable terminology. These forward-looking statements includematters that are not facts. They appear in a number of places throughout thisannouncement and include statements regarding the Directors' intentions, beliefsor current expectations concerning, amongst other things, the Meggitt Group'sand/or the Enlarged Group's results of operations, financial condition,liquidity, prospects, growth, strategies and the industries in which the MeggittGroup and/or the Enlarged Group operates. By their nature, forward-lookingstatements involve risk and uncertainty because they relate to future events andcircumstances. A number of factors could cause actual results and developmentsto differ materially from those expressed or implied by the forward-lookingstatements including, without limitation: Meggitt's ability successfully tocombine the business of the Meggitt Group and K&F Industries and to realiseexpected synergies from that combination; conditions in the markets; the marketposition of the Meggitt Group and/or the Enlarged Group; earnings, financialposition, cash flows, return on capital and operating margins of the MeggittGroup and/or the Enlarged Group; anticipated investments and capitalexpenditures of the Meggitt Group and/or the Enlarged Group; changing businessor other market conditions; and general economic conditions. These and otherfactors could adversely affect the outcome and financial effects of the plansand events described herein. Forward-looking statements contained in thisannouncement based on past trends or activities should not be taken as arepresentation that such trends or activities will continue in the future.Subject to any requirement under the Listing Rules, Prospectus Rules or otherapplicable legislation or regulation, none of Meggitt plc, N M Rothschild & SonsLimited or Merrill Lynch International undertakes any obligation to update orrevise any forward-looking statements, whether as a result of new information,future events or otherwise. Undue reliance should not be placed onforward-looking statements, which speak only as of the date of thisannouncement. Proposed acquisition of K&F Industries Holdings Inc to be financed in part by the proceeds of a 1 for 2 Rights Issue at 200 pence per share Introduction Meggitt announces that its subsidiary, Meggitt-USA, Inc., has entered into aconditional agreement to acquire for cash the entire issued and to be issuedshare capital of K&F Industries for an enterprise value of approximatelyUS$1.8bn. K&F Industries is a leading provider of wheels and brakes to thecommercial, military and general aviation markets and a key supplier ofengineered fabrics to the US Department of Defence. The Meggitt Directorsbelieve that the Acquisition represents an excellent opportunity for Meggitt tostrengthen significantly its market position, benefit from an enhanced productrange, increase its customer base, generate efficiency savings and develop itsrevenue and profit base. Meggitt proposes to fund the Acquisition through a mixture of equity (by way ofthe Rights Issue) and debt (by way of the Facility Agreement). The Rights Issueof 218,187,729 New Shares at a price of 200 pence per share will raise grossproceeds of £436 million. The Rights Issue will be on the basis of 1 New Sharefor every 2 Existing Shares held on the Record Date. The Issue Price of 200pence per share represents a discount of approximately 38 per cent. to themarket closing price of 324.75 pence per Ordinary Share on 5 March 2007, beingthe last Business Day before the announcement of the Rights Issue. The RightsIssue has been fully underwritten by Merrill Lynch and Rothschild. In view of its size, the Acquisition is conditional, inter alia, on MeggittShareholder approval as required by the Listing Rules. Meggitt Shareholderapproval will also be sought for the necessary authorities to issue the NewShares pursuant to the Rights Issue. Accordingly, a resolution to approve theAcquisition and to seek such authorities will be proposed at an ExtraordinaryGeneral Meeting of the Company to be held on 27 March 2007 at 10.00 a.m. Adocument comprising a combined prospectus and circular will be published todayand posted to Shareholders. The notice convening the Extraordinary GeneralMeeting is set out at the end of the Prospectus. The Acquisition will not be completed unless the Rights Issue becomesunconditional. However, following Admission, the Rights Issue will proceedirrespective of whether or not the Acquisition is completed. Meggitt also announced today its Preliminary Results for the year ended 31December 2006 achieving an excellent trading performance supported by strongcash generation. Good demand in civil aerospace markets, continuing militarydemand and the further expansion of the business through acquisitions has helpedMeggitt realise another record year. Background to and reasons for the Acquisition The Board believes that the Acquisition represents an exciting opportunity forMeggitt to enhance significantly its position as a major international aerospaceequipment provider to the leading US and European aerospace groups. It will be asignificant further step in Meggitt's focus on its target sectors and will giveMeggitt access to valuable leading technology as well as new products andcustomers. In particular, its wheels and brakes business will complement DunlopAerospace Braking Systems, which Meggitt acquired in August 2004. K&F Industrieshas over 250 customers and has equipment on over 25,000 aircraft worldwide. Itis also the largest supplier of flexible bladder fuel tanks for the US military.K&F Industries represents a compelling strategic fit with the Meggitt, andshares a similar business model. In particular, both Meggitt and K&F Industries: • have significant sole source market positions in several of their chosen fields of operation; • develop highly engineered and leading products which operate reliably in harsh environments; • have common skills, products and/or customers across much of their businesses; • have a significant spares business generating a profitable stream of revenue for many years; and • have a mixture of sales generated from both the civil aerospace, defence and military sectors and split between original equipment and the aftermarket. In addition, the Meggitt Board believes that the following advantages willresult from the combination of K&F Industries and Meggitt: • the Enlarged Group will benefit from an enhanced product range which will enable Meggitt to improve its offering to a wider customer base; • K&F Industries has a number of complementary businesses and technologies, which will lead to efficiency savings and enhanced revenue opportunities for the Enlarged Group; and • the Acquisition will develop Meggitt's revenue and profit base and enhance its mix of sales between original equipment and aftermarket, and between military and civil programmes. Information on the Acquisition On 5 March 2007, Meggitt-USA, Inc. and Ferndown Acquisition Corp. (bothwholly-owned subsidiaries of Meggitt) entered into the Merger Agreement,pursuant to which Ferndown will merge with and into K&F Industries, with K&FIndustries continuing its existence as the surviving company. Upon completion ofthe Acquisition, K&F Industries will become a wholly-owned subsidiary ofMeggitt-USA. Ferndown has been incorporated in Delaware for the purposes ofimplementing the Acquisition. Under the terms of the Merger Agreement, K&F Industries stockholders will(subject to certain exceptions) be entitled to receive merger considerationequal to US$27 in cash for each share of K&F Industries common stock they holdimmediately prior to Completion. Meggitt will pay, in aggregate, approximatelyUS$1.1bn in cash for K&F Industries issued and to be issued share capital. The Acquisition is conditional on Meggitt Shareholder and K&F Industriesstockholder approval as well as any applicable competition, antitrust or otherregulatory approval having been obtained, including any waiting period under theHart-Scott-Rodino Act having been terminated or expired, and no other legalrestraint or prohibition existing which has the effect of preventing completionof the Acquisition. The K&F Industries' stockholders meeting is expected to take place no earlierthan 24 April 2007 which is after the date on which the Rights Issue is expectedto close. In order to approve the Acquisition, K&F Industries will require theholders of the majority of its outstanding shares to vote in favour at themeeting. By way of the Merger Agreement, K&F Industries has undertaken to filewith the SEC a preliminary proxy solicitation statement relating to the K&FIndustries' stockholders meeting as soon as practicable and in any event on orprior to 15 March 2007. K&F Industries has also undertaken to post the approvedproxy solicitation statement to its stockholders within two business days ofreceiving SEC clearance and to convene the relevant K&F Industries meetingwithin 30 days of posting the proxy solicitation statement. Concurrently withexecution of the Merger Agreement certain shareholders of K&F Industries haveagreed to vote their shares, or to cause third parties to vote their sharesrepresenting, in aggregate, approximately 51 per cent. in favour of adopting theMerger Agreement subject to reduction (not below 36 per cent.) if certainholders sell their shares before the K&F Industries stockholder meeting. Under the terms of the Merger Agreement, K&F Industries may seek out third partyacquisition proposals for a period commencing on the date of the MergerAgreement and ending two calendar days prior to the EGM. After the end of suchperiod, K&F Industries will cease soliciting third party acquisition proposals. K&F Industries has agreed to pay a termination fee of US$15 million toMeggitt-USA and reimburse Meggitt-USA its transaction expenses of up to US$35million if the Merger Agreement is terminated (in certain circumstances) and K&FIndustries enters into an agreement relating to a superior proposal, takescertain actions with respect to a third party acquisition proposal, or ifsubsequent to the termination of the Merger Agreement, K&F Industries entersinto an acquisition agreement within twelve months. In addition, K&F Industrieswill reimburse Meggitt-USA its transaction expenses of up to US$35 million ifits shareholders do not approve the Merger Agreement. Meggitt will pay theexpenses of K&F Industries up to US$10 million if the Meggitt Shareholders donot approve the Merger Agreement. In addition, Meggitt-USA will pay atermination fee to K&F Industries of £14.1 million if the Meggitt Board changesits recommendation of the Acquisition or the funds from the Rights Issue havenot been received by Meggitt prior to or on 27 April 2007, subject to certainexceptions. Summary Information on K&F Industries K&F Industries is an integrated supplier of original equipment and aftermarketparts and services for the global aerospace and defence industry. K&F Industriesdesigns and manufactures precision engineered and specialised aviationequipment, including primarily wheels, brakes, brake control systems, flexiblebladder fuel tanks, helicopter interiors, ice guards and fuel sealants. K&FIndustries' wheels and brakes are used by over 250 aftermarket customers across80 countries worldwide. It also has an extensive installed base of approximately25,000 aircraft worldwide on more than 100 different aircraft platforms andgenerated approximately 75 per cent. of sales from the aftermarket for the yearended 31 December 2006. In addition, it has a significant share of the USmilitary aircraft fuel tank market. Meggitt believes K&F Industries is well regarded for its product design and hastechnologically sophisticated products, such as advanced ''brake by wire''systems and precision engineered fabrics. These technological strengths offer K&F Industries' customers high quality products, which may enable them to lowertheir operating costs. K&F Industries has leading positions and approximately 75per cent. of its 2006 sales related to aircraft where it was the sole sourceprovider of the relevant parts. This leads to sustainable recurring sales to support the operational lives ofthe aircraft platforms using K&F Industries' products. K&F Industries has beenselected for significant military and commercial transportation programmesincluding the programme to supply fuel tanks to the US Air Force KC-135 (aerialrefuelling planes). This complements its position on other platforms, includingthe Gulfstream family, Tornado, F-16, Blackhawk and Saab family. K&F Industriesis well placed to take advantage of its expertise and technological know-how onfurther new platforms. K&F Industries is headquartered in New York, US and currently operates itsbusiness through two wholly-owned subsidiaries Aircraft Braking SystemsCorporation which designs and manufactures aircraft wheels, brakes and brakingsystems for commercial transportation, general aviation and military aircraftand Engineered Fabrics Corporation which provides both original equipment andreplacement components to a broad array of planes and helicopters. The Meggitt Directors believe that K&F Industries' profitability reflects thestrength of the high margins generated on replacement parts on platforms forwhich K&F Industries is the sole provider. Additionally, K&F Industries hascontinued to invest in engineering resources in order to develop newtechnological programmes. The Meggitt Directors believe this investment willplace the Enlarged Group in a strong position to take advantage of the civilaerospace and defence sector growth as it occurs. Financial effects of the Acquisition The Directors expect the Acquisition to enhance significantly Meggitt'sunderlying earnings per share (adjusted for the discount element of the RightsIssue) in the first full financial year post-Acquisition. This statement shouldnot be interpreted to mean that the future earnings per share of Meggitt willnecessarily match or exceed its historical published earnings per share. Principal Terms of the Rights Issue Meggitt proposes to offer 218,187,729 New Shares by way of rights to QualifyingShareholders at 200 pence per New Share, payable in full on acceptance by nolater than 11.00 a.m. on 17 April 2007. The Rights Issue is expected to raise£424 million (net of expenses). The Issue Price represents a discount ofapproximately 38 per cent. to the closing market price of 324.75 pence perOrdinary Share on 5 March 2007 (being the last Business Day before theannouncement of the Rights Issue). The Rights Issue will be made on the basis of: 1 New Share for every 2 Existing Shares held by Qualifying Shareholders at the close of business on the Record Date. Entitlements to New Shares will be rounded down to the nearest whole number andfractional entitlements will not be allotted to Shareholders but will beaggregated and sold in the market for the benefit of the Company. Holdings ofOrdinary Shares in certificated and uncertificated form will be treated asseparate holdings for the purpose of calculating entitlements under the RightsIssue. The Rights Issue has been fully underwritten by Merrill Lynch and Rothschild,pursuant to the Underwriting Agreement. The Rights Issue is expected to result in 218,187,729 New Shares being issued(representing approximately 50 per cent. of the existing issued share capital). The Rights Issue is conditional, inter alia, upon: (i) the Merger Agreement remaining capable of completion prior to Admission; (ii) the Resolution being passed at the Extraordinary General Meeting; (iii) the Underwriting Agreement having become unconditional in all respectssave for the condition relating to Admission; and (iv) Admission becoming effective by not later than 8.00 a.m. on 28 March 2007(or such later time and date as Rothschild, Merrill Lynch and Meggitt mayagree). The Rights Issue is not conditional upon completion of the Acquisition (althoughthe Underwriters obligations are conditional upon the Merger Agreement remainingcapable of completion until Admission) and that, subsequent to the Rights Issuebecoming wholly unconditional, the Acquisition could fail to complete. In theevent that the Acquisition is not completed, Meggitt will not use the proceedsof the Rights Issue for any other purpose and will seek to return the proceeds,after deduction of all transaction costs, to Shareholders in the most taxefficient manner possible for the Company. The New Shares, when issued and fully paid, will rank pari passu in all respectswith the existing issued Ordinary Shares including the right to receivedividends or distributions made, paid or declared after the date of thisdocument save for the 2006 final dividend of 6 pence per Ordinary Shareannounced today. Applications will be made to the UK Listing Authority and to the London StockExchange for the New Shares to be admitted to the Official List and to tradingon the London Stock Exchange. It is expected that Admission will occur and thatdealings in the New Shares (nil paid) will commence at 8.00 a.m. on 28 March2007. It is expected that the Provisional Allotment Letters will be despatched on 27March 2007, after the Extraordinary General Meeting. Financing structure The Acquisition and associated expenses will be funded from the net proceeds ofthe Rights Issue with the remainder financed by the Facility Agreement. The Facility Agreement was entered into on 6 March 2007 between, amongst others,the Company, Banc of America Securities Limited, Barclays Capital, theinvestment banking division of Barclays Bank PLC, BNP Paribas and Lloyds TSBBank PLC under which a revolving credit facility of US$1,420 million was madeavailable to finance, amongst other things, the Acquisition. The FacilityAgreement contains customary representations, warranties and covenants in favourof the lenders. Interest payable under the Facility is LIBOR plus the applicablemargin, which varies depending on Meggitt's ratio of net debt to EBITDA. Current trading and future prospects Results and current trends Today Meggitt announced its Preliminary Results for the year ended 31 December2006, with Meggitt achieving an excellent trading performance supported bystrong cash generation. Group revenue was up 9 per cent. to £670.3 million onthe comparable period in 2005, and underlying profit before tax was up 14 percent. to £132.7 million over the same period. Profit before tax was up 49 percent. to £130.0 million over the same period. Results were driven by continuedgrowth in Aerospace Equipment, where revenue increased by 9 per cent. to £356.6million, Sensing Systems revenue increased by 9 per cent to £218.9 million andDefence Systems revenue increased by 10 per cent. to £94.8 million. The Group is well balanced between civil and military markets and also betweenoriginal equipment sales and the aftermarket. In total, civil markets accountedfor 44 per cent. of Group revenue (2005: 43 per cent.) and military markets 39per cent. (2005: 40 per cent.). The aftermarket in aggregate (civil plusmilitary) accounted for 38 per cent. (2005: 39 per cent.). Net borrowings were £353.7 million (£314.3 million at 31 December 2005).Interest cover (underlying) was a very healthy 9.0 times (at 31 December 2005:9.1 times) and the Group had undrawn committed bank facilities of £110.4 millionat 31 December 2006. Since 31 December 2006, Meggitt has continued to trade inline with the Directors' expectations. Future strategy It has been another successful year for Meggitt, both in terms of growth andprofitability. Growth has been achieved organically and through the acquisitionsof Keith Products, Radatec and Firearms Training Systems (FATS). Going forward,Meggitt will focus on consolidating these recent acquisitions, and will alsostrive to enhance shareholder value by continuing its strategy of pursuingorganic growth supplemented by bolt-on acquisitions. The Meggitt Directors believe that the acquisition, and subsequent integrationof K&F Industries will create further opportunities for the Enlarged Group tocompete successfully in those areas of aerospace and defence which Meggitt istargeting, and that the improved product offering should enhance the financialand trading prospects of the Enlarged Group going forward. Accordingly, thefuture is viewed with confidence. In the event that the Rights Issue proceedsbut the Acquisition does not complete, the Directors confirm that they wouldstill view the Group's prospects with confidence. Dividend and Dividend Policy The Directors of Meggitt intend to continue with their progressive dividendpolicy which will take into account the discount element of the Rights Issue.Holders of New Shares issued pursuant to the Rights Issue will not be entitledto receive the 2006 final dividend of 6 pence per Ordinary Share announcedtoday. Extraordinary General Meeting A combined circular to Shareholders relating to the Acquisition and prospectusrelating to the Rights Issue is being published today and posted toshareholders. The Prospectus will give further details of the Acquisition andthe Rights Issue and will contain a notice of the Extraordinary General Meetingof the Company, expected to be held at the offices of Clifford Chance LLP, 10Upper Bank Street, London, E14 5JJ at 10.00 a.m. on 27 March 2007 to seekShareholders' approval of the Resolution, set out in the notice of theExtraordinary General Meeting. If passed, the Resolution will: (a) approve the Acquisition; and (b) increase Meggitt's authorised share capital from £32,000,000 to £44,250,000by the creation of 245,000,000 additional Ordinary Shares; and (c) increase the general authority to allot Ordinary Shares granted at Meggitt'sannual general meeting on 11 May 2006 to a level sufficient to enable theDirectors to allot Shares in connection with the Rights Issue and for Meggitt'spurposes generally. The Directors have no specific plans to allot Ordinary Shares pursuant to thisauthority other than in connection with the Rights Issue. However, the authoritygives the Directors flexibility to take advantage of business opportunities asthey may arise. The Directors would consult with Shareholders before using thegeneral authority for any other purpose. Executive Share Schemes and the Sharesave Scheme The Meggitt Directors intend to consider what adjustments, if any, it would beappropriate to make, as a result of the Rights Issue, to the number of sharessubject to options or awards granted under the Executive Share Schemes and theSharesave Scheme and to the exercise price of those options and awards. Any such adjustments shall be made in accordance with the rules of the relevantscheme. Where required by the rules of the relevant scheme, such adjustmentsshall be made with the written concurrence of the Company's auditors that, intheir opinion, the proposed adjustments are fair and reasonable. Where therelevant scheme is approved by the Inland Revenue, any such adjustments shall besubject to the prior approval of the H.M. Revenue & Customs. Overseas Shareholders New Shares will be provisionally allotted to all Shareholders, includingOverseas Shareholders. However, subject to certain exceptions, ProvisionalAllotment Letters will not be sent to Shareholders with registered addresses inthe United States or any Excluded Territory nor will the CREST stock account ofShareholders with registered addresses in the United States or any ExcludedTerritory be credited. Recommendation and Directors' intentions The Board considers the Acquisition to be in the best interests of the Companyand its Shareholders as a whole. The Board also considers the Rights Issue andall proposals in connection therewith that are to be considered in theResolution to be in the best interests of the Company and its Shareholders as awhole. The Board has received financial advice in connection with theAcquisition from Rothschild and in connection with the Rights Issue fromRothschild and Merrill Lynch. In providing their advice to the Board, Rothschildand Merrill Lynch have taken into account the Directors' commercial assessmentsof the Acquisition and the Rights Issue respectively. Accordingly, in the Prospectus to be sent to Shareholders, the Board willunanimously recommend that Shareholders vote in favour of the Resolutions to beproposed at the EGM as the Directors have irrevocably undertaken to do inrespect of their own beneficial holdings amounting to approximately 0.18 percent. of the total issued Ordinary Shares. Each of the Directors intends to take up in full his rights to subscribe for NewOrdinary Shares under the Rights Issue. Other It is anticipated that a Prospectus providing further details of the Acquisitionand Rights Issue and convening an extraordinary general meeting will bepublished today and posted to Meggitt Shareholders. Copies of the Prospectuswill be available from the Registered office of Meggitt at Atlantic House,Aviation Park West, Bournemouth International Airport, Christchurch, Dorset BH236EW. The Prospectus will also be available during usual business hours on anyweekday (Saturdays, Sundays and Bank Holidays excepted) from the date of itspublication until Admission at the offices of Clifford Chance LLP, 10 Upper BankStreet, London E14 5JJ. The expected timetable for the Rights Issue is set outin Appendix I. A presentation to analysts will be held at Buchanan Communications, 45Moorfields, London EC2Y 9AE at 9 a.m. (London time) today. Appendix I of this announcement sets out the expected timetable of principalevents. Appendix II of this announcement sets out the definition of terms usedin this announcement. Enquiries:Meggitt 020 7466 5000 (Today)Terry Twigger, Chief Executive 01202 597597 (Thereafter)Stephen Young, Group Finance DirectorPhilip Green, Group Corporate Affairs Director Rothschild 020 7280 5000Robert LeitaoRavi Gupta Merrill Lynch 020 7996 1000Simon FraserAndrew Fairclough Buchanan Communications 020 7466 5000Charles RylandJeremy Garcia A presentation to analysts will be held at Buchanan Communications, 45Moorfields, London EC2Y 9AE at 9 a.m. (London time) today to discuss theproposed Acquisition and the Preliminary Results. N M Rothschild & Sons Limited is acting exclusively for Meggitt and for no-oneelse in relation to the Acquisition and the Rights Issue, and will not beresponsible to any other person for providing the protections afforded toclients of N M Rothschild & Sons Limited nor for providing advice in connectionwith the Acquisition or the Rights Issue. Merrill Lynch International is acting exclusively for Meggitt and for no-oneelse in relation to the Rights Issue, and will not be responsible to any otherperson for providing the protections afforded to clients of Merrill LynchInternational nor for providing advice in connection with the Rights Issue. A combined circular to Shareholders relating to the Acquisition and prospectusrelating to the Rights Issue is expected to be published today and posted toShareholders. The Provisional Allotment Letters are expected to be despatched on27 March 2007. The Prospectus will give further details of the Acquisition andof the New Shares, the Nil Paid Rights and the Fully Paid Rights to be offeredpursuant to the Rights Issue, the business of Meggitt and K&F Industries, theindustry in which Meggitt and K&F Industries operate and an indication of thesize of the Enlarged Group. A copy of the Prospectus when published will be available from the registeredoffice of Meggitt at Atlantic House, Aviation Park West, BournemouthInternational Airport, Christchurch, Dorset BH23 6EW. The Prospectus will bealso available for inspection during usual business hours on any weekday(Saturdays, Sundays and Bank Holidays excepted) from the date of its publicationuntil Admission at the offices of Clifford Chance LLP, 10 Upper Bank Street,London E14 5JJ. This document is not a Prospectus but an advertisement and investors should notsubscribe for any Nil Paid Rights, Fully Paid Rights or New Ordinary Sharesreferred to in this announcement except on the basis of the informationcontained in the Prospectus. This announcement does not constitute an offer to sell or a solicitation of anoffer to buy New Shares or to take up entitlements to Nil Paid Rights in anyjurisdiction in which such offer or solicitation is unlawful. Neither thisannouncement, nor the Prospectus, nor the Provisional Allotment Letter will bedistributed in or into the United States, Australia, Canada, Japan or SouthAfrica. This document is issued by Meggitt PLC and approved solely for the purposes ofSection 21 pf the Financial Services and Markets Act 2000 by N M Rothschild &Sons Limited of New Court, St Swithin's Lane, London EC4P 4DU. The Nil Paid Rights, the Fully Paid Rights, the New Shares and the ProvisionalAllotment Letters have not been and will not be registered under the USSecurities Act of 1933 as amended (the "US Securities Act") or under anysecurities laws of any state or other jurisdiction of the United States and maynot be offered, sold, taken up, exercised, resold, renounced, transferred ordelivered, directly or indirectly, within the United States except pursuant toan applicable exemption from the registration requirements of the US SecuritiesAct and in compliance with any applicable securities laws of any state or otherjurisdiction of the United States. No public offering of the securities willtake place in the United States. The Nil Paid Rights, the Fully Paid Rights, the New Shares and the ProvisionalAllotment Letters have not been approved or disapproved by the US Securities andExchange Commission, any state's securities commission in the United States orany US regulatory authority, nor have any of the foregoing authorities passedupon or endorsed the merits of the offering of the Nil Paid Rights, the FullyPaid Rights, the New Shares and the Provisional Allotment Letters or theaccuracy or adequacy of this announcement. Any representation to the contrary isa criminal offence. The Nil Paid Rights, the Fully Paid Rights, the New Shares and the ProvisionalAllotment Letters have not been or will not be registered under the relevantlaws of any state, province or territory of Australia, Canada, Japan or SouthAfrica and may not be offered, sold, taken up, exercised, resold, renounced,transferred or delivered, directly or indirectly, within Australia, Canada,Japan or South Africa except pursuant to an applicable exemption. Neither the content of Meggitt PLC's website nor any website accessible byhyperlinks on Meggitt PLC's website is incorporated in, or forms part of, thisannouncement. The distribution of this announcement and/or the Prospectus and/or theProvisional Allotment Letters and/or the transfer of Nil Paid Rights, Fully PaidRights and/or New Shares into jurisdictions other than the United Kingdom may berestricted by law. Persons into whose possession this announcement comes shouldinform themselves about and observe any such restrictions. Any failure to complywith these restrictions may constitute a violation of the securities laws of anysuch jurisdiction. This announcement includes statements that are, or may be deemed to be,''forward-looking statements''. These forward-looking statements can beidentified by the use of forward-looking terminology, including the terms''believes'', ''estimates'', ''plans'', ''anticipates'', ''targets'', ''aims'',''continues'', ''expects'', ''intends'', ''hopes'', ''may'', ''will'',''would'', ''could'' or ''should'' or, in each case, their negative or othervariations or comparable terminology. These forward-looking statements includematters that are not facts. They appear in a number of places throughout thisannouncement and include statements regarding the Directors' intentions, beliefsor current expectations concerning, amongst other things, the Meggitt Group'sand/or the Enlarged Group's results of operations, financial condition,liquidity, prospects, growth, strategies and the industries in which the MeggittGroup and/or the Enlarged Group operates. By their nature, forward-lookingstatements involve risk and uncertainty because they relate to future events andcircumstances. A number of factors could cause actual results and developmentsto differ materially from those expressed or implied by the forward-lookingstatements including, without limitation: Meggitt's ability successfully tocombine the business of the Meggitt Group and K&F Industries and to realiseexpected synergies from that combination; conditions in the markets; the marketposition of the Meggitt Group and/or the Enlarged Group; earnings, financialposition, cash flows, return on capital and operating margins of the MeggittGroup and/or the Enlarged Group; anticipated investments and capitalexpenditures of the Meggitt Group and/or the Enlarged Group; changing businessor other market conditions; and general economic conditions. These and otherfactors could adversely affect the outcome and financial effects of the plansand events described herein. Forward-looking statements contained in thisannouncement based on past trends or activities should not be taken as arepresentation that such trends or activities will continue in the future.Subject to any requirement under the Listing Rules, Prospectus Rules or otherapplicable legislation or regulation, none of Meggitt PLC, N M Rothschild & SonsLimited or Merrill Lynch International undertakes any obligation to update orrevise any forward-looking statements, whether as a result of new information,future events or otherwise. Undue reliance should not be placed onforward-looking statements, which speak only as of the date of thisannouncement. Appendix I EXPECTED TIMETABLE OF PRINCIPAL EVENTS 2007 Record Date for entitlement under the Rights Issue close of business on 14 March Latest time and date for receipt of EGM Forms of Proxy 10.00 a.m. on 25 March Extraordinary General Meeting 10.00 a.m. on 27 March Despatch of Provisional Allotment Letters on 27 March Dealings in New Shares, nil paid, commence on the 8.00 a.m. on 28 MarchLondon Stock Exchange Existing Shares marked ''ex'' by the London Stock 8.00 a.m. on 28 MarchExchange Nil Paid Rights and Fully Paid Rights enabled in CREST by 8.00 a.m. on 28 March Recommended latest time for requesting withdrawal of 4.30 p.m. on 11 AprilNil Paid Rights and Fully Paid Rights from CREST (i.e.if your Nil Paid Rights and Fully Paid Rights are inCREST and you wish to convert them to certificatedform) Latest time for depositing renounced Provisional 3.00 p.m. on 12 AprilAllotment Letters, nil or fully paid, into CREST orfor dematerialising Nil Paid Rights or Fully PaidRights into a CREST stock account Latest time and date for splitting Provisional 3.00 p.m. on 13 AprilAllotment Letters, nil or fully paid Latest time and date for acceptance, payment in full 11.00 a.m. on 17 Apriland registration of renunciation of ProvisionalAllotment Letters Dealings in New Shares, fully paid, commence on the 8.00 a.m. on 18 AprilLondon by Stock Exchange New Shares credited to CREST stock accounts by 8.00 a.m. on 18 April Expected date of K&F Industries' Stockholder Meeting 24 April Despatch of definitive share certificates for the New by no later than 25 AprilShares in certificated form Note: 1. The times and dates set out in the expected timetable of principal eventsabove and mentioned throughout this document may be adjusted by Meggitt inconsultation with the Underwriters in which event details of the new times anddates will be notified to the UK Listing Authority, the London Stock Exchangeand, where appropriate, Qualifying Shareholders. 2. The expected date of the K&F Industries' Stockholders Meeting is subject toregulatory approval timetables including SEC review timetables with respect toproxy solicitation statements. 3. References to times in this document are to London times unless otherwisestated. Appendix II ''Acquisition'' the proposed acquisition by Meggitt-USA Inc, a wholly-owned subsidiary of Meggitt, of the entire issued and to be issued share capital of K&F Industries by way of merger pursuant to the Merger Agreement ''Act'' the Companies Act 1985 (as amended) ''Admission'' the admission of the New Shares, (nil paid and fully paid): (i) to the Official List; and (ii) to trading on the London Stock Exchange's main market for listed securities becoming effective in accordance with, respectively, the Listing Rules and the Admission and Disclosure Standards "Board" the board of directors of the Company ''Business Day'' a day (excluding Saturdays and Sundays or public holidays in England and Wales) on which banks generally are open for business in London for the transaction of normal banking business ''certificated'' or where a share or other security is not in''in certificated uncertificated formform'' ''Company'' or ' Meggitt PLC''Meggitt' ''Completion'' completion of the Acquisition under the Merger Agreement in accordance with its terms ''CREST'' the relevant system, as defined in the CREST Regulations (in respect of which CRESTCo is the operator as defined in the CREST Regulations) ''CRESTCo'' CRESTCo Limited, the operator of CREST''CREST Regulations'' the Uncertificated Securities Regulations 2001 (SIor ''Regulations'' 2001/ 3755), as amended ''Daily Official the daily record setting out the prices of allList'' trades in shares and other securities conducted on the London Stock Exchange ''Directors'' the directors of the Company ''EBITDA'' earnings before interest, tax, depreciation and amortisation ''Enlarged Group'' the Group as enlarged by the Acquisition ''Executive Share the approved Meggitt 1996 No. 1 Executive ShareSchemes'' Option Scheme, the unapproved Meggitt 1996 No. 2 Executive Share Option Scheme, the approved Meggitt Executive Share Option Scheme 2005, the unapproved Meggitt Equity Participation Scheme 1996 and the unapproved Meggitt Equity Participation Plan 2005 ''Excluded Australia, Canada, Japan and South AfricaTerritories'' andeach an ''ExcludedTerritory'' ''Existing Shares'' The existing Ordinary Shares in issue ''Extraordinary the extraordinary general meeting of the CompanyGeneral Meeting'' or to be held at 10.00 am on 27 March 2007''EGM'' ''Facility the facility agreement dated 6 March 2007 betweenAgreement'' Banc of America Securities Limited, Barclays Capital, BNP Paribas, Lloyds TSB Bank PLC and the Company ''Ferndown'' Ferndown Acquisition Corp. ''Financial Services the Financial Services Authority of the UnitedAuthority'' or Kingdom acting in its capacity as the competent''FSA'' authority for the purposes of Part IV of FSMA ''FSMA'' the Financial Services and Markets Act 2000, as amended ''Fully Paid Rights'' rights to acquire the New Shares, fully paid ''Hart-Scott-Rodino the Hart-Scott-Rodino Antitrust Improvements ActAct'' of 1976, as amended ''Issue Price'' 200 pence per New Share ''K&F Industries'' K&F Industries Holdings, Inc ''LIBOR'' London Interbank Offered Rate ''Listing Rules'' the Listing Rules made by the FSA under Part VI of FSMA ''London Stock London Stock Exchange plcExchange'' ''Meggitt Group'' or the Company and its subsidiaries and subsidiary''Group'' undertakings from time to time ''Meggitt a holder of Meggitt SharesShareholder'' or''Shareholder'' ''Meggitt Shares'' or ordinary shares of 5p each in the capital of the''Ordinary Shares'' Company ''Meggitt-USA'' Meggitt-USA Inc. ''Merger Agreement'' the merger agreement dated 5 March 2007 between Meggitt-USA, Ferndown and K&F Industries ''Merrill Lynch'' Merrill Lynch International ''New Shares'' the new Ordinary Shares to be allotted and issued pursuant to the Rights Issue ''Nil Paid Rights'' rights to acquire the New Shares, nil paid ''Official List'' the Official List of the FSA ''Overseas Qualifying Shareholders with registered addressesShareholders'' outside the United Kingdom or who are citizens or residents of countries outside the United Kingdom "Prospectus" the combined circular and prospectus to be published by the Company in respect of the Rights Issue and the Acquisition ''Prospectus Rules'' the Prospectus Rules published by the FSA under section 73A of FSMA''Provisional the renounceable provisional allotment letterAllotment Letter'' or expected to be sent to Qualifying Non-CREST''PAL'' Shareholders in respect of the New Shares to be provisionally allotted to them pursuant to the Rights Issue ''Qualifying CREST Qualifying Shareholders holding Meggitt Shares inShareholders'' uncertificated form ''Qualifying Qualifying Shareholders holding Meggitt Shares inNon-CREST certificated formShareholders'' 'Qualifying holders of Ordinary Shares on the register ofShareholders'' members of the Company at the Record Date with the exclusion (subject to certain limited exceptions) of Shareholders with a registered address in the United States or any Excluded Territory ''Record Date'' 14 March 2007 ''Resolution'' the ordinary resolution to be proposed at the Extraordinary General Meeting: (i) approving the Acquisition, (ii) increasing the authorised share capital of the Company and (iii) granting the Directors authority to allot relevant securities ''Rights Issue'' the proposed issue by way of rights of New Shares to Qualifying Shareholders on the basis described in the Prospectus and, in the case of Qualifying Non-CREST Shareholders, in the Provisional Allotment Letter ''Rothschild'' N M Rothschild & Sons Limited ''SEC'' or ''US the United States government agency having primarySecurities and responsibility for enforcing the federalExchange Commission'' securities laws and regulating the securities industry/stock market ''Sharesave Scheme'' the approved Meggitt 1998 Sharesave Scheme adopted by the Company ''stock account'' an account within a member account in CREST to which a holding of a particular share or other security in CREST is credited ''UK Listing the FSA in its capacity as the competent authorityAuthority'' or for the purposes of Part VI of FSMA and in the''UKLA'' exercise of its functions in respect of the admission to the Official List otherwise than in accordance with Part VI of FSMA ''uncertificated'' or recorded on the relevant register of the share or''in uncertificated security concerned as being held in uncertificatedform'' form in CREST and title to which, by virtue of the CREST Regulations, may be transferred by means of CREST ''Underwriters'' N M Rothschild & Sons Limited and Merrill Lynch International ''Underwriting the underwriting agreement dated 6 March 2007Agreement'' between the Company and the Underwriters, among others, relating to the Rights Issue ''United Kingdom'' or the United Kingdom of Great Britain and Northern''UK'' Ireland ''US'' or ''United the United States of America, its territories andStates'' possessions, any state of the United States and the District of Columbia ''US Exchange Act'' the United States Securities Exchange Act of 1934, as amended ''US Securities Act'' the United States Securities Act 1933, as amended -------------------------- * This statement should not be interpreted to mean that the future earnings pershare of Meggitt will necessarily match or exceed its historical publishedearnings per share. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
MGGT.L