7th Apr 2008 12:23
J.C. Flowers & Co LLC07 April 2008 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE UNITED STATES,CANADA OR JAPAN 7 April 2008 J.C. Flowers & Co. LLC For Immediate Release Statement Re Friends Provident Plc J.C. Flowers & Co. LLC ("J.C. Flowers") notes the ongoing press speculationregarding its interest in Friends Provident plc ("Friends Provident") and wishesto confirm a number of facts in relation to the proposal it submitted to FriendsProvident on 27 March 2008. The Proposal J.C. Flowers confirms that it has submitted a proposal to acquire all of theoutstanding share capital of Friends Provident for 150p per share in cash (to beadjusted for any future dividends paid, including the final dividend proposed byFriends Provident in respect of 2007). This represents a premium of 25% to theclosing price of 120.1p(1) on 28 March 2008, the last trading day prior tospeculation that J.C. Flowers had submitted a proposal to Friends Provident. The proposed offer price represents a multiple of 1.1x Friends Provident'stangible embedded value (excluding goodwill attributable to F&C Asset Managementplc ("F&C")) of 135p as at 31 December 2007(2). J.C. Flowers also notes that F&C, which represents approximately 20p of the Friends Provident share price as at4 April 2008(3), is itself subject to speculation and is currently in an offerperiod. J.C. Flowers notes that a number of research analysts estimate that in theabsence of a possible offer by J.C. Flowers, the Friends Provident share pricewould be significantly below the level at which it traded on 28 March 2008. J.C. Flowers believes that the above proposal is attractive, offers compellingand certain cash value for shareholders and represents a sound basis forentering into discussions with Friends Provident. Background and Progress to Date J.C. Flowers has been studying Friends Provident for a considerable period oftime particularly following the termination of the proposed merger withResolution in October 2007. On 31 January 2008, Friends Provident announced theresults of its strategic review and Friends Provident's share price fell 11% to139p per share on the same day. Friends Provident's shares have subsequentlytraded as low as 113p on 17 March 2008. J.C. Flowers has carried out a significant volume of work in relation to apossible offer for Friends Provident. This work has involved extensive analysisof Friends Provident's publicly available information by J.C. Flowers and itsactuarial, accounting, tax, legal and financial advisers, in order to enableJ.C. Flowers to formulate its proposal. To progress further, J.C. Flowers has requested direct engagement with FriendsProvident and requires access to certain non-public information to carry outfocused due diligence, as is customary and appropriate in transactions in thelife insurance sector. J.C. Flowers is keen to begin this process and believesthat with Friends Provident's co-operation it can be accomplished expeditiously. Further details on the status of J.C. Flowers' financing, its regulatoryexperience, proposed governance arrangements and the conditions to the proposalare set out below. Financing J.C. Flowers intends to finance the cash purchase price with a conservativecombination of equity and debt. It is currently envisaged that the majority ofthe acquisition consideration will be funded with equity. The proposedfinancing structure is not highly leveraged and is designed to maintain anappropriate credit rating to enable Friends Provident to continue to operate asan open life and pensions business in the UK. J.C. Flowers has received lettersfrom the Royal Bank of Scotland plc, Morgan Stanley Senior Funding, Inc. andCitigroup Global Markets Limited indicating that, based on certain assumptionsand subject to certain conditions, they are highly confident of their ability tounderwrite the debt component of the acquisition consideration. The equity component will be provided from funds managed by J.C. Flowers andfrom other co-investors who are advised by J.C. Flowers. With available capitalfrom investors and co-investors in excess of $6 billion, J.C. Flowers is highlyconfident that it will fund the required equity component of this transactionfrom J.C. Flowers II L.P. and its co-investors. Regulatory & Governance J.C. Flowers is a private equity firm devoted entirely to investing in thefinancial services sector. It has invested over $9 billion globally. Over fiftypercent of J.C. Flowers' investments have been made in Europe. J.C. Flowers'investments have received approval from and are subject to the oversight ofnumerous regulators around the world, including the FSA (UK), the Japanese FSA,the DNB (Netherlands), the BaFin (Germany), the CAA (Luxembourg), the CFTC andvarious state insurance regulators in the US. J.C. Flowers has strongrelationships with all of these regulators and is highly experienced in workingconstructively within a regulated environment. A dialogue with the FSA asregards Friends Provident has been initiated. J.C. Flowers' significant investment in Pensions Insurance Corporation Holdings("PICH") provides J.C. Flowers with a detailed knowledge of the UK pensions andannuity market and the associated regulatory and governance considerations.J.C. Flowers also has a deep network of business relationships in the UK asevidenced by the strength of the board at PICH. As part of its focus on appropriate strategic and corporate governance, J.C.Flowers' advisory group in relation to Friends Provident consists of: Sir Martin Jacomb, who is a Non-Executive Chairman of Canary Wharf plc and Shareplc, Non-Executive Director of PICH and was formerly Chairman of Prudential plcand BZW and Deputy Chairman of Barclays plc; Sir Stephen Robson, who was formerly a Second Permanent Secretary at H.M.Treasury responsible for developments in the financial service sector. SirStephen is currently a Non-Executive Director of Royal Bank of Scotland Groupplc, JPMorgan Cazenove Holdings, Xstrata Plc, Partnerships UK plc and theFinancial Reporting Council; and Tom Fraser, who is Chief Executive of Private Estate Life, a Luxembourg-basedlife assurance company owned by a J.C. Flowers-managed fund, and was formerlyhead of UK operations at AMP and head of international business at CGNU plc. J.C. Flowers' intention is that the members of this advisory group would jointhe board of Friends Provident as non-executive directors (subject to formalagreements by each potential member and receipt of the necessary approvals whichmay be required). J.C. Flowers also hopes that certain existing FriendsProvident board members would wish to continue and help create a boardappropriate for a key life and pensions provider in the UK market. Conditions The proposal is subject to financing, due diligence, the recommendation by theboard of Friends Provident, completion of satisfactory finance, structure andother documentation and other approvals as required, including Panel consent.These pre-conditions to making an offer (other than Panel consent), whereapplicable, may be waived at the discretion of J.C. Flowers. J.C. Flowers iskeen to begin the due diligence process and would welcome the opportunity toenter into discussions with Friends Provident as soon as possible. J.C. Flowers acquired a 2.7 per cent. stake in Friends Provident over the periodof 22 November 2007 to 13 December 2007 at an average price of 155p per share,with the highest price paid being 165p per share. As a result of press speculation linking J.C. Flowers to Friends Provident, J.C.Flowers announced on 21 January 2008 that it was considering an acquisition ofFriends Provident, which resulted in Friends Provident being put into an offerperiod. As the offer period commenced less than three months after the sharepurchases, under Rule 6 of the Takeover Code, J.C. Flowers requires the consentof the Panel in order to implement any definitive offer for Friends Provident ata price below 165p. Under Note 1 of Rule 6, in considering whether to give suchconsent, factors which the Panel might take into account include changes in themarket price of Friends Provident's shares since J.C. Flowers' share purchasesand the attitude of Friends Provident's board. If the board of FriendsProvident recommend this proposal, J.C. Flowers will apply for this consent. This announcement does not amount to a firm intention to make an offer and therecan be no certainty that a formal offer will be made to Friends Provident'sshareholders, even if the pre-conditions to making an offer are satisfied orwaived. Enquiries: Madano Partnership (PR Adviser to J.C. Flowers)Charles Reynolds / Matthew Moth / Mark Way+44 207 593 4000 Morgan Stanley & Co. Limited ("Morgan Stanley") is acting as financial adviserto J.C. Flowers and no one else in connection with the proposal referred to inthis announcement (the "Proposal") and will not be responsible to any otherperson for providing the protections afforded to the clients of Morgan Stanleynor for providing advice in relation to the Proposal or any other matterreferred to in this announcement. Fox-Pitt Kelton Limited ("Fox-Pitt Kelton") is acting as financial adviser toJ.C. Flowers and no one else in connection with the Proposal and will not beresponsible to any other person for providing the protections afforded to theclients of Fox-Pitt Kelton nor for providing advice in relation to the Proposalor any other matter referred to in this announcement. Citigroup Global Markets Limited ("Citi") is acting as financial adviser to J.C.Flowers and no one else in connection with the Proposal and will not beresponsible to any other person for providing the protections afforded to theclients of Citi nor for providing advice in relation to the Proposal or anyother matter referred to in this announcement. Dealing Disclosure Requirements Under the provisions of Rule 8.3 of the Takeover Code (the "Code"), if anyperson is, or becomes, "interested" (directly or indirectly) in 1% or more ofany class of "relevant securities" of Friends Provident, all "dealings" in any"relevant securities" of that company (including by means of an option inrespect of, or a derivative referenced to, any such "relevant securities") mustbe publicly disclosed by no later than 3.30pm (London time) on the Londonbusiness day following the date of the relevant transaction. This requirement will continue until the date on which the offer becomes, or isdeclared, unconditional as to acceptances, lapses or is otherwise withdrawn oron which the "offer period" otherwise ends. If two or more persons act togetherpursuant to an agreement or understanding, whether formal or informal, toacquire an "interest" in "relevant securities" of Friends Provident, they willbe deemed to be a single person for the purpose of Rule 8.3. Under the provisions of Rule 8.1 of the Code, all "dealings" in "relevantsecurities" of Friends Provident by an offeror or Friends Provident, or by anyof their respective "associates", must be disclosed by no later than 12.00 noon(London time) on the London business day following the date of the relevanttransaction. A disclosure table, giving details of the companies in whose "relevantsecurities" "dealings" should be disclosed, and the number of such securities inissue, can be found on the Takeover Panel's website atwww.thetakeoverpanel.org.uk. "Interests in securities" arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the price ofsecurities. In particular, a person will be treated as having an "interest" byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative referenced to, securities. Terms in quotation marks are defined in the Code, which can also be found on thePanel's website. If you are in any doubts as to whether or not you are requiredto disclose a "dealing" under Rule 8, you should consult the Panel. Appendix I Sources and Bases of Information Save as otherwise stated, the following constitute the bases and sources ofcertain information referred to in this announcement: 1. Friends Provident's closing price on 28 March 2008 sourced from Bloomberg. 2. Tangible embedded value as of 31 December 2007 equivalent to £3,144m. Calculated as: • reported pro forma embedded value of £3,725m (page 1 of Friends Provident's2007 preliminary results); less • market value of Friends Provident's shareholding in F&C of £499m (page 35 of2007 preliminary results); plus • tangible book value of F&C of -£17m, comprising attributable net assets of£421m less goodwill of £344m, net value of investment management contracts of£93m and software of £1m (page 80 of 2007 preliminary results); less • Sesame and Partners goodwill of £36m and other acquired intangible assets of£29m (page 80 of 2007 preliminary results). Friends Provident had 2,323.0m shares in issue as at 31 December 2007 excludingtreasury shares (Friends Provident total voting rights announcement dated 31December 2007). 3. Friends Provident shareholding in F&C valued at £466m, equivalent to 20p per Friends Provident share, based on: • F&C closing share price on 4 April 2008 of 179.75p (Bloomberg); • Friends Provident shareholding in F&C of 259m shares (page 36 of FriendsProvident 2007 preliminary results); and • 2,323.3m Friends Provident shares in issue excluding treasury shares(Friends Provident Rule 2.10 announcement dated 31 March 2008). This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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