19th Oct 2007 07:01
AGA Foodservice Group PLC19 October 2007 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 FOR IMMEDIATE RELEASE 19 October 2007 AGA FOODSERVICE GROUP PLC PROPOSED SALE OF AGA FOODSERVICE EQUIPMENT • Aga Foodservice Group plc ("Aga" or the "Company") announces that it has entered into a conditional agreement to sell Aga Foodservice Equipment ("AFE"), its commercial foodservice and bakery equipment business, to Ali SpA, the major Italian commercial foodservice equipment manufacturer, for a cash consideration, subject to adjustment, of £260 million (including assumption or repayment of net debt). • In the financial year ended 31 December 2006, AFE made an operating profit of £21.2 million on revenues of £250.3 million. • The Board of Aga (the "Board") intends to return to shareholders a significant proportion of the available net proceeds of the proposed sale. This return will be conditional on the consent of the trustees of the Aga Foodservice Group Pension Scheme (the "Pension Scheme") and the Pensions Regulator, a corporate reorganisation to create the necessary reserves and further shareholder approval. The Board intends that the return will be effected in the first quarter of 2008. • In relation to the sale of AFE, Aga has reached agreement with the trustees of the Pension Scheme in relation to the consequences which would otherwise arise under section 75 of the Pensions Act 1995. This agreement has been approved by the Pensions Regulator. Pursuant to this agreement, the Aga Group has agreed to pay £10 million into the Pension Scheme and to provide a guarantee of £22.5 million to support an undertaking to make up any deficit identified by the next two triennial actuarial valuations and/or to make a payment if there is a material deterioration in the covenant of the Company. • The Pension Scheme is well funded on an IAS19 basis. Aga is considering, in conjunction with the trustees of the Pension Scheme and the respective specialist pensions advisers, ways in which to accelerate the Pension Scheme becoming self sufficient with the objective of reducing risk and enhancing long-term shareholder value. • The sale of AFE will enable Aga to focus on growing the profitability of its consumer business, which has market-leading positions in premium kitchen appliances, underpinned by the Aga, Rangemaster and Marvel brands. The Board intends to focus on organic growth rather than acquisitions. • Following the achievement of this important strategic milestone, Victor Cocker has decided to stand down from the Board at Aga's next Annual General Meeting after seven years' service, including nearly four as Chairman. • The Board will continue to consider all options for maximising and delivering best value for shareholders. William McGrath, Chief Executive of Aga, commented: "It is pleasing to agree this sale at a good price to a group which is alreadydriving change in the foodservice equipment sector. We will now focus ondeveloping our consumer operations and on the best way of delivering value toshareholders." This summary should be read in conjunction with the full announcement which iscontained in the following pages. A circular containing further details of the proposed sale of AFE, includingnotice of an extraordinary general meeting and the Board's recommendation toshareholders to vote in favour of the sale, will be posted to Aga shareholdersas soon as possible. Contacts Aga Foodservice Group plcWilliam McGrath - Chief Executive 0121 711 6000Shaun Smith - Finance Director 0121 711 6000 Dresdner KleinwortRosalind Hedley-Miller 020 7623 8000Alex Reynolds 020 7623 8000 CitiChristopher Daniels 020 7986 7459Simon Alexander 020 7986 0963 BrunswickSimon Sporborg 020 7404 5959Charlotte Kenyon 020 7404 5959 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 toAga with respect to, amongst other things, the following: financial condition;results of operations; economic conditions in which Aga operates; the businessof Aga; future benefits of the transaction; and management plans and objectives.Aga considers any statements which are not historical facts to be"forward-looking statements". They relate to events and trends which are subjectto risks and uncertainties which could cause the actual results and financialposition of Aga to differ materially from the information presented in therelevant forward-looking statement. When used in this announcement, the words"estimate", "project", "intend", "aim", "anticipate", "believe", "expect","should" and similar expressions, as they relate to Aga or the management ofAga, are intended to identify such forward-looking statements. Readers arecautioned not to place undue reliance on these forward-looking statements whichspeak only as at the date of this announcement. Aga does not undertake to updatepublicly or to revise any of the forward-looking statements, whether as a resultof new information, future events or otherwise, save in respect of anyrequirement under applicable laws and regulations. Dresdner Kleinwort Limited ("Dresdner Kleinwort") and Citigroup Global MarketsLimited ("Citi"), which are authorised and regulated in the United Kingdom bythe Financial Services Authority, are acting for Aga Foodservice Group plc andfor no-one else in connection with the contents of this announcement and willnot be responsible to anyone other than Aga Foodservice Group plc for providingthe protections afforded to customers of Dresdner Kleinwort Limited and/orCitigroup Global Markets Limited or for providing advice in relation to thecontents of this announcement or any other matters referred to herein. FOR IMMEDIATE RELEASE 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 19 October 2007 AGA FOODSERVICE GROUP PLCPROPOSED SALE OF AGA FOODSERVICE EQUIPMENT Introduction Aga Foodservice Group plc ("Aga" or the "Company") announces that it has enteredinto a conditional agreement to sell Aga Foodservice Equipment ("AFE"), itscommercial foodservice and bakery equipment business, to Ali SpA, the majorItalian commercial foodservice equipment manufacturer, for a cash considerationof £260 million (including assumption or repayment of net debt) subject toadjustment for movements in net assets between 30 June 2007 and the date ofcompletion of the transaction. Completion of the transaction is conditional on the approval of Aga shareholdersand on the receipt of certain regulatory approvals and is targeted for the endof 2007. Aga has agreed to pay Ali SpA a break fee of one per cent. of the saleconsideration if shareholders do not approve the transaction. The Board of Aga (the "Board") intends that a significant proportion of theavailable net proceeds of the proposed sale will be returned to shareholders. Background to and reasons for the proposed sale Since 2001, when it sold its Pipe Systems businesses, Aga has grown its consumerand commercial foodservice equipment activities organically and by acquisition.Over this period, Aga has achieved a significant position in the foodserviceequipment sector, based on its strong product portfolio and the investmentswhich it has made in new and upgraded manufacturing facilities and itsdistribution network. Aga has also returned approximately £400 million toshareholders, in addition to ordinary dividends, over the same period. In order to drive the pace of change, Aga sought a more substantial corporatetransaction for its foodservice equipment division to create a market-leadinggroup with greater scale. To this end, it proposed a combination with theUS-focused, UK-listed foodservice equipment group, Enodis plc, in late 2006. Itdid not prove possible to agree a transaction with Enodis plc. The Boardremained committed to its analysis of the desirability of structural change inthe foodservice equipment sector and, on 6 July 2007, announced that it wasworking with its advisers to unlock the value of the foodservice equipmentbusinesses. Following that announcement, Aga undertook a process whereby it providedinformation to, and received proposals from, a number of parties, includingcompanies with a presence in the foodservice sector and financial sponsors. TheBoard has now reached agreement to sell AFE to Ali SpA, a private companyheadquartered in Milan, Italy. The Ali group's activities comprise the design,manufacture, marketing and servicing of commercial foodservice equipment and ithas 32 manufacturing sites located in 12 countries. The Ali group has annualrevenues of approximately €850 million. The Board believes that the price being paid by Ali SpA fairly reflects the highquality and prospects of AFE and also believes that the business will thrive aspart of the Ali group, which is a major group focused on the foodserviceequipment sector and which has been successful in its expansion in recent years. Aga Foodservice Equipment AFE has three segments: European Foodservice; European Bakery; and NorthAmerican Foodservice and Bakery. European Foodservice comprises: Falcon and Williams, which provide hot-side andcold-side commercial foodservice equipment; and Eloma, which is a German companyacquired by AFE in February 2006 and which supplies combi-ovens. European Bakery comprises: Bongard and Pavailler, which are France-basedsuppliers of bakery equipment to artisan bakers and supermarket chains; Mono,which is based in Wales and which supplies in-store bakery equipment; andMiller's, which is based in England and which specialises in contractmaintenance and cleaning of bakery and other foodservice equipment. North American Foodservice and Bakery comprises: Victory, which producesrefrigeration equipment and steaming ovens; Amana, which was acquired inSeptember 2006 and which supplies commercial microwave ovens and acceleratedcooking ovens; and Adamatic/Belshaw, which supply roll-lines for major breadproducers and doughnut-making equipment. In the financial year ended 31 December 2006, AFE made an operating profit of£21.2 million on revenues of £250.3 million. Net tangible assets and grossassets as at 31 December 2006 were £92.9 million and £211.3 millionrespectively. In the six months ended 30 June 2007, AFE made an operating profitof £8.9 million on revenues of £131.5 million. Management Subject to completion of the proposed sale of AFE, Stephen Rennie, who iscurrently Chief Operating Officer of Aga, will join the Ali group and willresign from the Aga Board. The Chairman of Aga, Victor Cocker, has also indicated that, following the saleof AFE, an important strategic milestone, he will stand down at the next AnnualGeneral Meeting of Aga after seven years' service, including nearly four asChairman. The Board is grateful to Victor Cocker and to Stephen Rennie and his senior teamat AFE, Iain Whyte, Tim Smith and Alain Peru, for their contribution to thedevelopment of the Aga Group in recent years. Pension Scheme As at 30 June 2007, the Pension Scheme had a surplus of £75.6 million on anIAS19 basis, based on assets of £767.6 million and liabilities of £692.0million. In relation to the sale of AFE, Aga has reached agreement with the trustees ofthe Pension Scheme in relation to the consequences which would otherwise ariseunder section 75 of the Pensions Act 1995 as a result of AFE ceasing to be aparticipating employer under the Pension Scheme. This agreement has beenapproved by the Pensions Regulator. The main terms of this agreement are that:the Aga Group will make a payment of £10 million to the Pension Scheme and theongoing funding rate will fall generally to 8.5 per cent. from 16.9 per cent.from 2008; and the Aga Group will provide a cash-collateralised guarantee to thePension Scheme of £22.5 million (in addition to the £10 million payment) whichwill support an undertaking by the Company to make up any deficit in the PensionScheme identified by the next two triennial actuarial valuations and/or to makea payment to the Pension Scheme if there is a material deterioration in thecovenant of the Company. Further, if, before completion of the proposed sale of AFE, a third partyacquires or, having made an announcement under rule 2.5 of the City Code onTakeovers and Mergers, makes a formal offer to acquire, more than 50 per cent.of the issued ordinary share capital of the Company, the Aga Group will providefor the £22.5 million (in addition to the £10 million payment) to be paid intothe Pension Scheme on completion of the sale of AFE. Use of proceeds of proposed sale of AFE The Board estimates that the net proceeds of the sale after costs will beapproximately £250 million. As described above, there will be payments andguarantees of £32.5 million in relation to the Pension Scheme. The existingborrowings of the Aga Group, which are approximately £80 million, will also berepaid out of the net proceeds of the sale. The Board intends to return to shareholders a significant proportion of theavailable net proceeds from the sale. Such a return will be conditional on theconsent of the trustees of the Pension Scheme and the Pensions Regulator, acorporate reorganisation to create the necessary reserves and furthershareholder approval. The amount of the return will also take into account thelevel of borrowing facilities available to the Aga Group following the return.The Board intends that the return will be effected in the first quarter of 2008. The effect of the sale of AFE on Aga's earnings per share in the year ending 31December 2008 is expected to be dilutive but this effect is expected to bemitigated by the intended return of cash to shareholders. This statement doesnot constitute a profit forecast and should not be interpreted to mean that theAga Group's earnings per share for the current or future financial years willnecessarily match or be greater than historical published earnings per share. The Board continues to consider all ways in which shareholder value can bemaximised. One aspect of this is consideration of ways to accelerate theachievement of self sufficiency by the Pension Scheme with the objective ofreducing risk and enhancing long-term shareholder value. The Board is workingwith the trustees of the Pension Scheme and the respective specialist pensionsadvisers to achieve this end. Any significant changes to the Pension Scheme'sfunding will be made after completion of the work currently underway and in thelight of discussions between Aga and a number of leading investment institutionswhich are putting forward proposals in relation to the long-term funding of thePension Scheme. Continuing Group The sale of AFE will enable Aga to focus on its consumer business, where it hasleading positions in premium kitchen appliances in the UK and Ireland. Aga's range of consumer brands is spearheaded by Aga, Rangemaster and Marvel andalso includes Divertimenti, Falcon, Fired Earth, Grange, Heartland, La Cornue,Rayburn and Waterford Stanley. These products are sold primarily in the UnitedKingdom, Ireland, France and North America and also in a further 47 countries. In the year to 31 December 2006, on a pro forma basis, the continuing Agagroup's revenues were £278.6 million, EBITDA was £34.9 million and operatingprofit was £26.5 million. Net operating assets as at 30 June 2007 were £155.5million. The Board aims to accelerate growth through: International growth - Aga will increase its investment in growing its premiumkitchens business internationally and expects that it will achieve stronggrowth, particularly in France and Ireland, with North America remaining a keytarget market. Increasing revenues from existing customers - Aga has a database of over 700,000customers and will focus not only on increasing spend on Agas and Rangemastersbut marketing the other strong brands through this identified customer base. Innovation - Over recent years, Aga has benefited from leading innovation andtechnology to drive product development and will continue to investsubstantially in these areas to drive growth in its key markets. Higher overall returns - Aga will make it a priority to achieve a substantialimprovement in the profitability of the Fired Earth and Grange businesses. The Board believes that the continuing Aga group will be able to deliver higherreturns than the overall group as currently constituted. Once the sale of AFEhas been completed, the management team will outline a detailed strategy withhigher operational targets for the continuing business. Current trading The Aga Group has continued to trade satisfactorily since the announcement ofthe interim results. There have been sound performances across the foodserviceoperations. AFE is implementing certain reorganisations in order to achievegreater efficiency in its bakery operations. Following the sale of AFE, thecontinuing business will have two segments led by the Aga and Rangemasterbrands. The level of sales of cast-iron cookers have been satisfactory.Rangemaster continues to perform particularly well and, in addition to a strongperformance in the UK, there has been good growth in export sales. Fired Earthhas progressed well in the second half to date. In the USA, sales of Marvel'spremium refrigeration equipment are likely to be affected by the slowdown inconsumer spending. Further details of the proposed sale A circular containing further details of the proposed sale of the AFE, includingnotice of an extraordinary general meeting to seek shareholders' approval forthe proposed sale and the Board's recommendation to shareholders to vote infavour of the resolution to approve the sale to be proposed at the extraordinarygeneral meeting, will be posted to shareholders as soon as possible. Contacts Aga Foodservice Group plcWilliam McGrath - Chief Executive 0121 711 6000Shaun Smith - Finance Director 0121 711 6000 Dresdner KleinwortRosalind Hedley-Miller 020 7623 8000Alex Reynolds 020 7623 8000 CitiChristopher Daniels 020 7986 7459Simon Alexander 020 7986 0963 BrunswickSimon Sporborg 020 7404 5959Charlotte Kenyon 020 7404 5959 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 toAga with respect to, amongst other things, the following: financial condition;results of operations; economic conditions in which Aga operates; the businessof Aga; future benefits of the transaction; and management plans and objectives.Aga considers any statements which are not historical facts to be"forward-looking statements". They relate to events and trends which are subjectto risks and uncertainties which could cause the actual results and financialposition of Aga to differ materially from the information presented in therelevant forward-looking statement. When used in this announcement, the words"estimate", "project", "intend", "aim", "anticipate", "believe", "expect","should" and similar expressions, as they relate to Aga or the management ofAga, are intended to identify such forward-looking statements. Readers arecautioned not to place undue reliance on these forward-looking statements whichspeak only as at the date of this announcement. Aga does not undertake to updatepublicly or to revise any of the forward-looking statements, whether as a resultof new information, future events or otherwise, save in respect of anyrequirement under applicable laws and regulations. Dresdner Kleinwort Limited ("Dresdner Kleinwort") and Citigroup Global MarketsLimited ("Citi"), which are authorised and regulated in the United Kingdom bythe Financial Services Authority, are acting for Aga Foodservice Group plc andfor no-one else in connection with the contents of this announcement and willnot be responsible to anyone other than Aga Foodservice Group plc for providingthe protections afforded to customers of Dresdner Kleinwort Limited and/orCitigroup Global Markets Limited or for providing advice in relation to thecontents of this announcement or any other matters referred to herein. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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