4th Mar 2008 07:02
Lavendon Group PLC04 March 2008 Not for release, publication or distribution, in whole or in part, in, into, orfrom the United States, Australia, Canada or Japan or any other jurisdictionwhere to do so would constitute a violation of the relevant laws of suchjurisdiction. 4 March 2008 Lavendon Group plc Proposed Acquisition of the Platform Company Highlights • Lavendon Group plc ("Lavendon" or the "Group"), Europe's market leaderin the rental of powered access equipment, announces the proposed acquisition ofThe Platform Company, a supplier of powered access rental and equipment in theUK, for an aggregate consideration of £46.1 million payable in cash and NewOrdinary Shares. • The aggregate consideration comprises: • At Completion, £18.0 million in cash and the allotment of2,000,000 Initial Consideration Shares • On the first anniversary of Completion, £3.0 million in cash andthe allotment of 885,000 Deferred Consideration Shares* and on the secondanniversary of Completion, £2.5 million in cash and the allotment of 885,000Deferred Consideration Shares*. On the third anniversary of Completion, £4.1million in cash \* The Deferred Consideration Shares assume an issue price of 600p per share. Ifon the first or second anniversaries of Completion, the Market Value of Lavendonshares is below 600p per share, any shortfall in value in respect of this shareconsideration will be made up by an additional cash payment by Lavendon • Lavendon will also assume The Platform Company's estimated netdebt of £33.0 million on Completion • The Platform Company is a large supplier of powered access rentalequipment in the UK, with a fleet of approximately 4,000 units (average age: 4.5years), a network of 10 depots and a strong financial track record, withattractive profit margins • Revenue of £31.0 million, EBITDA of £12.3 million and EBIT of £7.5million for the year ended 31 March 2007. Since 31 March 2007, trading in ThePlatform Company has been strong • The proposed acquisition of The Platform Company will: • strengthen Lavendon's leading position in the UK powered accessrental market and increase the Group's UK revenue to an annualised run-rate ofover £150 million, with a fleet size of approximately 15,000 units • enable the Group to realise considerable economies of scale andoperational efficiencies from combining The Platform Company with NationwideAccess and rationalising the combined depot networks over time • provide an increased pool of assets available for redeployment tothe Middle East where market conditions continue to be buoyant • allow the Group to reduce its capital expenditure programme for2008 by up to £20 million due to the quality and revenue generationcharacteristics of the rental fleet being acquired • The Platform Company management team will remain with thebusiness and join the Lavendon Group • The Directors expect the Acquisition to be earnings enhancingfor the Enlarged Group, before exceptional costs associated with the Acquisition • Following the planned integration of The Platform Company, theBoard of Lavendon has estimated that a reduction in the overall cost base of theEnlarged Group of approximately £2.0 million will be achieved over time withrelated one-off unaudited costs of £2.0 million to be incurred during the courseof 2008 and 2009 • Cash consideration payable for the Acquisition is beingprovided by a combination of existing facilities and an increase in the Group'sexisting bank facilities to £180 million • The proposed acquisition of The Platform Company isconditional upon the approval of Shareholders, which will be sought at anExtraordinary Meeting of the Company. A circular containing details of theAcquisition and convening the Extraordinary General Meeting will be sent toShareholders shortly Commenting on the Acquisition, Kevin Appleton, Chief Executive, said: "This acquisition increases the scale of our UK operation and offersconsiderable scope for cost synergies. It will also provide an opportunity forthe Group to reduce its planned capital expenditure requirements for 2008, asthe acquisition will deliver significant additional fleet capacity." This summary should be read in conjunction with the full text of theannouncement. For further information please contact: Lavendon Group plcKevin Appleton, Chief Executive +44 (0)1455 558874 Alan Merrell, Group Finance Director Dresdner Kleinwort (Financial Adviser to Lavendon)James Rudd, Director +44 (0)20 7623 8000 Oriel Securities (Broker to Lavendon)Malcolm Strang +44 (0)20 7710 7600 Financial DynamicsJonathon Brill/Billy Clegg/Caroline Stewart +44 (0)20 7831 3113 Information on Lavendon Lavendon Group is the European leader in the rental of powered access equipment.The quality and diversity of the hire fleet, coupled with the professionalismand accessibility of the depot network, provides an exceptional product rangefor customers and underpins the key operating strategies of the Group. Poweredaccess equipment is designed to enable people to work safely, productively andcomfortably at height. It can be used in a comprehensive range of applications,both inside and outside buildings and structures. This announcement is for information purposes only and does not constitute anoffer or invitation to acquire or dispose of any securities or investment advicein any jurisdiction. This announcement contains a number of forward-looking statements relating toLavendon with respect to, amongst other things, the following: financialcondition; results of operations; economic conditions in which Lavendonoperates; the business of Lavendon; future benefits of the transaction; andmanagement plans and objectives. Lavendon considers any statements which arenot historical facts to be "forward-looking statements". They relate to eventsand trends which are subject to risks and uncertainties which could cause theactual results and financial position of Lavendon to differ materially from theinformation presented in the relevant forward-looking statement. When used inthis announcement, the words "estimate", "project", "intend", "aim","anticipate", "believe", "expect", "should" and similar expressions, as theyrelate to Lavendon or the management of Lavendon, are intended to identify suchforward-looking statements. Readers are cautioned not to place undue reliance onthese forward-looking statements which speak only as at the date of thisannouncement. Lavendon does not undertake to update publicly or to revise anyof the forward-looking statements, whether as a result of new information,future events or otherwise, save in respect of any requirement under applicablelaws and regulations. Dresdner Kleinwort Limited, which is authorised and regulated by the FinancialServices Authority, is acting for Lavendon Group plc and for no one else inconnection with the Acquisition and will not be responsible to anyone other thanLavendon Group plc for providing the protections afforded to clients of DresdnerKleinwort Limited or for affording advice in relation to the Acquisition or anymatters referred to in this announcement. Oriel Securities, which is authorised and regulated by the Financial ServicesAuthority, is acting for Lavendon Group plc and for no one else in connectionwith the Acquisition and will not be responsible to anyone other than LavendonGroup plc for providing the protections afforded to clients of Oriel Securitiesor for affording advice in relation to the Acquisition or any matters referredto in this announcement. Words and expressions used in this announcement shall have the same meaning asdefined in Appendix I to this announcement. Lavendon Group plc Proposed acquisition of The Platform Company 1. Introduction Lavendon today announces the proposed acquisition of The Platform Company, asupplier of powered access rental and equipment in the UK, for an aggregateconsideration of £46.1 million payable in cash and New Ordinary Shares. On Completion, Access Services will pay the Sellers £18.0 million in cash andprocure the allotment, conditionally on Admission, of 2,000,000 InitialConsideration Shares. On each of the first and second anniversaries ofCompletion, deferred consideration of £8.3 million (to be satisfied by thepayment of £3.0 million in cash and the allotment of 885,000 DeferredConsideration Shares) and £7.8 million (to be satisfied by the payment of £2.5million in cash and the allotment of 885,000 Deferred Consideration Shares)respectively will become due and payable. The Deferred Consideration Sharesassume an issue price of 600p per share. If on the first or secondanniversaries of Completion, the Market Value of Lavendon shares is below 600pper share, any shortfall in value in respect of this share consideration will bemade up by an additional cash payment by Lavendon. On the third anniversary ofCompletion, further deferred consideration of £4.1 million will become due andpayable in cash. Lavendon will also assume The Platform Company's estimated netdebt of £33.0 million on Completion. In view of its size, the Acquisition constitutes a Class 1 transaction for thepurposes of the Listing Rules. The Acquisition is therefore conditional, interalia, upon the approval of Shareholders, which will be sought at anExtraordinary General Meeting. A circular containing details of the Acquisitionand convening the Extraordinary General Meeting will be sent to Shareholdersshortly. 2. Background to and reasons for the Acquisition The UK represents the Group's most important geographic market, generating over56.9 per cent. and 59.6 per cent. of the Group's revenues and operating profitsin 2007 respectively. The Group's strategy for the UK market over the past twoyears has been to maintain a major national brand, Nationwide Access, focusedlargely on national accounts and major projects, and to develop a regionalnetwork of businesses through the acquisitions of Panther, Kestrel, AMP andHigher Platforms, concentrating on the local service and maintenance sectors.This strategy has enabled the Group to increase the utilisation of the combinedfleet through inter-company rehire processes and to focus capital expendituremore effectively on replacing under-performing rental units with equipment moresuited to current demand patterns. The combined effect of these actions has beento increase the Group's UK operating profits from £8.3 million in 2005 to £17.1million in 2007, with operating margins improving from 13.6 per cent. to 16.1per cent. Against this background, the proposed acquisition of The Platform Company, whichoperates a fleet of around 4,000 machines through a network of 10 depots acrossthe UK, represents an attractive opportunity for the Group to strengthen itsleading position in the UK powered access rental market. The acquisition of ThePlatform Company will increase the Group's UK revenue to an annualised run-rateof over £150 million, with a fleet size of approximately 15,000 units. By combining The Platform Company with Nationwide Access, the Group will be ableto realise considerable economies of scale and operational efficiencies overtime. In the short term, Nationwide Access and The Platform Company willcontinue to operate as separate businesses, each having access to the combinedUK rental fleet, thereby reducing the need to rehire fleet from external thirdparties when demand cannot be satisfied from their own fleets. Towards the endof 2008, the Group's ERP system will be implemented in The Platform Company andthe operating processes of Nationwide Access and The Platform Company aligned,to enable the integration of the businesses to take place in the first half of2009. The Directors believe that the rationalisation of the combined existingdepot networks and creation of larger scale depots will generate cost savingsand greater efficiencies for the Enlarged Group through increased sales focus,improved rental unit availability, greater transport flexibility andefficiencies and lower property, IT and administration costs. In addition, the Directors believe that the Acquisition will provide anincreased pool of assets available for redeployment to the Middle East wheremarket conditions continue to be buoyant and where there is significant scopefor the Group to increase its fleet to facilitate future growth in revenues.Such fleet redeployment will also introduce an element of flexibility into theUK fleet to manage fleet capacity, on certain models, to assist in aligningsupply with market demand. The senior management team of The Platform Company will remain in placefollowing the Acquisition. Both Grant Woodward and Lee Perry will continue to beemployed by The Platform Company as Managing Director and Sales Directorrespectively and they have, conditionally on Completion, entered into newservice agreements with Lavendon, the terms of which are comparable to employeesof the Lavendon Group at the same level of seniority and with similar expertise. 3. Information on The Platform Company The Platform Company is a large supplier of powered access rental equipment inthe UK, with a fleet of approximately 4,000 units (including 220 tele-handlersand fork-lift trucks), a network of 10 depots and approximately 235 employees.The business is headquartered in Slough, Berkshire. The business was established in February 2002 following a management buy-out ofthe powered access operations of Mitie Group plc, led by Grant Woodward and LeePerry, The Platform Company's two main shareholders. The business was expandedin 2004 following the acquisition of the trade and assets of the Meek Group plcout of administration. Since 2004, the business has expanded through continualinvestment in both its fleet and depot network. The average age of The Platform Company fleet is four and a half years whichcompares favourably with five years for the Group's current UK fleet. Financial performance A summary of the results of The Platform Company for the three years ended 31March 2007 is set out below. Year ended 31 March 2005 2006 2007 £'000 £'000 £'000Revenue 20,035 24,216 31,006EBITDA 7,457 9,565 12,323EBITDA margin % 37.2 39.5 39.7Operating profit 4,981 6,350 7,521Operating profit margin % 24.9 26.2 24.3Profit before tax 3,702 5,148 5,918Profit after tax 2,741 3,561 4,095Cash generated from operations 9,223 9,071 11,515Capital expenditure (6,156) (11,017) (21,439)Net debt 16,061 18,562 30,237Total assets 26,216 33,844 52,438Net assets 3,482 7,056 11,103 Over the past three years The Platform Company has shown strong revenue growthof approximately 25 per cent. per annum, with accompanying increases in EBITDAand operating profit. The Platform Company generated an EBITDA margin of almost40 per cent. for the year ended 31 March 2007. This compares favourably with theEBITDA margins generated by the Group of 31 per cent. and 34 per cent. asderived, without material adjustment, from the audited financial statements forthe two years ended 31 December 2007, respectively. To support the growth of thebusiness, considerable investment has been made in The Platform Company rentalfleet during this period. As a consequence, net debt levels have increased,although they are well supported by the operational cash flows of the business. Since 31 March 2007, trading in The Platform Company has been strong. 4. Principal terms of the Acquisition Access Services has made an offer to acquire the entire issued share capital ofThe Platform Company for an aggregate consideration of £46,120,000 payable incash and New Ordinary Shares. On Completion, Access Services will pay theSellers £18.0 million in cash and procure the allotment, conditionally onAdmission, of 2,000,000 Initial Consideration Shares. On each of the first andsecond anniversaries of Completion, deferred consideration of £8.3 million (tobe satisfied by the payment of £3.0 million in cash and the allotment of 885,000Deferred Consideration Shares) and £7.8 million (to be satisfied by the paymentof £2.5 million in cash and the allotment of 885,000 Deferred ConsiderationShares) respectively will become due and payable. On the third anniversary ofCompletion, further deferred consideration of £4.1 million will become due andpayable in cash. If on the first or second anniversaries of Completion the Market Value of anOrdinary Share is below 600 pence, any shortfall in value in respect of theDeferred Consideration Shares to be allotted to the Sellers at that time will bemade up by an additional cash payment by Lavendon. For example, if the MarketValue on the first or second anniversaries of Completion were 397 pence(Lavendon's share price as at close of business on 3 March 2008, being thelatest practicable date prior to the publication of this announcement), anadditional cash payment of £1.8 million would be payable by the Group on eachdate. The Acquisition is conditional, inter alia, upon: (i) valid acceptances of the Offer being received in respect of not lessthan 90 per cent. of each class of The Platform Company shares to which theOffer relates (or such lesser percentage as Access Services may decide); (ii) the passing of the Resolutions at the Lavendon EGM; (iii) there being no material breach of the Warranties or pre-completionconduct provisions in the Warranty Deed; and (iv) Grant Woodward and Lee Perry continuing to be employed by andcapable of managing The Platform Company business. Completion of the Acquisition is expected to take place on the business dayfollowing satisfaction of the conditions to the Offer as to acceptances andLavendon shareholder approval, providing all other conditions remain satisfiedor are waived (if capable of waiver) at that time. Application will be made for Admission in respect of the Initial ConsiderationShares which are to be allotted and issued on Completion. It is expected thatAdmission will become effective and dealings in the Initial Consideration Shareswill commence on the London Stock Exchange at 8.00 a.m. on 1 April 2008. TheInitial Consideration Shares will rank pari passu with the existing OrdinaryShares. The Group will on Completion assume the net indebtedness of The Platform Companywhich is estimated to be £33,000,000, after the sale of certain of The PlatformCompany's properties immediately prior to Completion for market value and a cashconsideration of £1.5 million. The cash consideration for The Platform Company payable on or immediately afterCompletion will be subject to a downward adjustment for each £1 that ThePlatform Company's net indebtedness exceeds £33,000,000 immediately prior toCompletion, and an upward adjustment for each £1 that The Platform Company's netindebtedness falls below £33,000,000 immediately prior to Completion. A furtherdownward adjustment will be made (not exceeding £4,000,000) in the event of anymaterial breach of the Warranties or pre-completion conduct provisions in theWarranty Deed of which Access Services becomes aware prior to Completion. On Completion of the Acquisition, Alan Merrell and Kevin Appleton will beappointed to the Boards of The Platform Company Group. The Warrantors have entered into a Warranty Deed containing, inter alia,restrictions in relation to the Initial Consideration Shares to be issued tothem on Completion and on the Deferred Consideration Shares issued to them onthe first anniversary of Completion which apply for a period of 24 months fromCompletion. Up to 25 per cent. of such shares may be sold in the period fallingbetween 6 and 12 months after allotment and a further 25 per cent. of suchshares may be sold in each of the periods falling between 12 and 18 months andbetween 18 months and 24 months after allotment, in each case together with anyunsold shares from the previous tranches. After a period of 24 months, anyremaining shares can be sold. A 12 month restriction will apply in respect ofDeferred Consideration Shares issued to the Warrantors on or after the secondanniversary of Completion, whereby 50 per cent. of such shares may be sold aftersix months following such allotment, with any remaining shares being releasedfrom restriction after 12 months. The usual exceptions in relation to acceptanceof general offers and acceptance of an offer by the Company to purchase its ownshares apply. Arrangements are in place to ensure that any sale of such sharesduring the lock-up period is effected in consultation with the Company with aview to facilitating an orderly market. Similar restrictions will be imposed onother significant The Platform Company shareholders when they accept the Offers. 5. Financial effects of the Acquisition The Directors expect the Acquisition to be earnings enhancing for the EnlargedGroup, before exceptional costs associated with the Acquisition. Following theplanned integration of The Platform Company, the Board of Lavendon has estimatedthat a reduction in the overall cost base of the Enlarged Group of approximately£2.0 million will be achieved over time with related one-off unaudited costs of£2.0 million to be incurred during the course of 2008 and 2009. The acquisition of The Platform Company will also allow the Group to review itscapital expenditure programme for 2008, and the Directors believe that areduction of up to £20 million can be made due to the quality and revenuegeneration characteristics of the rental fleet being acquired. A reduction inthe Group's capital expenditure plans of this scale, will effectively fund theinitial cash consideration payable at Completion. Nothing in this announcement should be interpreted to mean that the earnings ofthe Group for the current year or future years will necessarily match or exceedthe historic or published earnings of the Group. 6. Funding The cash consideration payable by the Group for the acquisition of The PlatformCompany is being provided by a combination of existing facilities and anincrease in the Group's existing bank facilities to £180 million. The increasedbank facilities would then comprise a term loan of £25 million, a revolvingcredit facility of £155 million and a £6.3 million bond facility. The term loanis repayable in quarterly installments between 31 March 2008 and 30 June 2009.The revolving credit facility is repayable on 30 June 2009. A margin of between 110 and 305 basis points over Libor or Euribor (asapplicable) is payable on the term and revolving credit facilities dependentupon the extent of the facility utilised and the level of interest cover of theEnlarged Group. There are a number of events of default in relation to the termand revolving facilities that are customary for facilities of this nature. 7. Listing, dealings and settlement of the New Ordinary Shares Application will be made for Admission in respect of the New Ordinary Shareswhen they fall due to be issued in accordance with the terms of the Offer. It isexpected that Admission will become effective and dealings in the InitialConsideration Shares are expected to commence on the London Stock Exchange at8.00 a.m. on 1 April 2008. The Initial Consideration Shares will rank pari passuwith the existing Ordinary Shares. Appendix I DEFINITIONS The following definitions apply throughout this announcement, unless the contextotherwise requires: "Access Services" Lavendon Access Services (UK) Limited. "Acquisition" the proposed acquisition of the entire issued share capital of The Platform Company (Holdings) Limited pursuant to the Acquisition Documents "Acquisition Documents" the Offer Document and the Warranty Deed "Admission" the admission of shares to the Official List and to trading on the London Stock Exchange market for listed securities "AMP" AMP Access Limited "the Bank" Bank of Scotland plc "Company" or "Lavendon" Lavendon Group plc "Completion" completion of the Acquisition in accordance with the Offer Document "CREST" the computerised settlement system operated by Euroclear UK & Ireland Limited which facilitates the transfer of shares "CREST regulations" the Uncertificated Securities Regulations 2001 (SI2001/3755) "Deferred Consideration Shares" the 885,000 new Ordinary Shares proposed to be issued pursuant to the Acquisition on each of the first and second anniversaries following Completion "Enlarged Group" the Company and its subsidiaries immediately following completion of the Acquisition "Enlarged Share Capital" the issued ordinary share capital of the Company immediately following the issue of the New Ordinary Shares "Extraordinary General the extraordinary general meeting of the Company Meeting" or "EGM" "Group" the Company and its subsidiaries as at the date of this announcement "Higher Platforms" Higher Platforms Group Limited "Initial Consideration Shares" the 2,000,000 new Ordinary Shares proposed to be issued pursuant to the Acquisition on Completion "Kestrel" Kestrel Powered Access Limited "Listing Rules" the listing rules issued by the Financial Services Authority "London Stock Exchange" London Stock Exchange plc "Market Value" the average closing offer price for an Ordinary Share as quoted on the London Stock Exchange's market for listed securities and as derived from the Official List during the preceding twenty days "New Ordinary Shares" the Initial Consideration Shares and the Deferred Consideration Shares "Offer(s)" the offers by Lavendon Access Services (UK) Limited to acquire the entire issued share capital of The Platform Company (Holdings) Limited on the terms of the Offer Document. "Offer Document" the offer document dated 4 March 2008 pursuant to which Lavendon Access Services (UK) Limited makes an offer to The Platform Company (Holdings) Limited's shareholders to acquire the entire issued share capital of The Platform Company (Holdings) Limited together with a form of acceptance "Official List" the official list of the FSA "Ordinary Shares" ordinary shares of £0.01 each in the capital of the Company "Panther" Panther Work Platforms Limited "Resolutions" the resolutions set out in the notice of EGM "Sellers" holders of The Platform Company (Holdings) Limited shares "Shareholders" holders of Ordinary Shares "Share Incentive Schemes" the Company's existing share incentive schemes "Sponsor" Dresdner Kleinwort Limited, which is authorised and regulated by the FSA "Uncertificated" or recorded on the relevant register of Ordinary Shares as being held in uncertificated form in CREST and title to which, by virtue of the CREST"In Uncertificated Form" Regulations, may be transferred by means of CREST "Targets" The Platform Company Group and any member of it "The Platform Company" The Platform Company (Holdings) Limited "The Platform Company Group" The Platform Company (Holdings) Limited, The Platform Company (UK) Limited and The Platform Company (Vehicle Mounts) Limited "Warranties" the warranties relating to The Platform Company Group and its business contained in Schedule 3 and part 4 of Schedule 4 of the Warranty Deed "Warrantors" those persons defined as "Warrantors" in the Warranty Deed. "Warranty Deed" the warranty deed dated 4 March 2008 and entered into between the Warrantors, Lavendon Access Services (UK) Limited and the Company in relation to the Acquisition This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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