TIDMCOST TIDMMCHL
RNS Number : 4073Y
Costain Group PLC
22 December 2010
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN
PART, IN, INTO OR FROM THE UNITED STATES OF AMERICA OR ANY
JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS OF SUCH JURISDICTION. THIS IS AN ANNOUNCEMENT FALLING
UNDER RULE 2.4 OF THE TAKEOVER CODE (THE "CODE"). IT DOES NOT
REPRESENT A FIRM INTENTION TO MAKE AN OFFER UNDER RULE 2.5 OF THE
CODE. ACCORDINGLY, THERE CAN BE NO CERTAINTY THAT ANY OFFER WILL
ULTIMATELY BE MADE.
Costain Group PLC
("Costain" or the "Company")
Statement regarding approach to Mouchel Group plc
This is an announcement falling under Rule 2.4 of the Code. It
does not represent a firm intention to make an offer under Rule 2.5
of the Code. Accordingly, there can be no certainty that any offer
will ultimately be made.
The Board of Costain announces that it approached the Board of
Mouchel Group plc ("Mouchel") on 2 December 2010, with a view to
making a recommended all share offer for the entire issued and to
be issued share capital of Mouchel (the "Proposal").
The Proposal comprised 0.5135 new Costain ordinary shares for
each Mouchel ordinary share. Based on the closing price per Costain
share of 206p on 21 December 2010 (being the last business day
prior to the date of this announcement), the Proposal values each
Mouchel ordinary share at approximately 105.8p representing:
-- a premium of approximately 87.2 per cent. to the closing
Mouchel share price of 56.5p per share on 3 December 2010 (being
the last business day prior to Mouchel going into an offer
period);
-- a premium of approximately 44.9 per cent. to the closing
Mouchel share price of 73.0p per share on 21 December 2010 (being
the last business day prior to the date of this announcement);
and
-- a premium of approximately 29.5 per cent. to the average
closing Mouchel share price of approximately 81.7p per share for
the period since the announcement of Mouchel's preliminary results
on 28 October 2010.
Under the Proposal Mouchel's shareholders would receive
approximately 48.0 per cent of the enlarged issued share capital of
Costain.
The new Costain ordinary shares issued to Mouchel's shareholders
would rank pari passu with the existing Costain ordinary shares,
and the terms proposed assume that Mouchel's shareholders would be
entitled to receive any final dividend declared by Costain in
respect of the year ending 31 December 2010.
The making of any offer will be subject to a number of
pre-conditions, including the satisfactory completion of due
diligence and the recommendation of the Mouchel Board. Costain
reserves the right to waive any or all of such pre-conditions. In
addition, Costain reserves the right to make an offer at an
exchange ratio on less favourable terms in the event that (i) the
Board of Mouchel agrees and recommends any such change, (ii) a
third party announces a firm intention to make an offer for
Mouchel, or (iii) Mouchel announces, declares or pays a dividend or
any other distribution or other payments to its shareholders, in
which case there would be an equivalent pro rata reduction to the
exchange ratio. Further, Costain reserves the right to vary the
form and/or mix of consideration and/or introduce other forms of
consideration.
The Proposal has the strong support of Costain's key lending
banks.
The Proposal was rejected by the Board of Mouchel on 6 December
2010 and there are currently no discussions taking place between
Costain and Mouchel.
Benefits of the combination of Costain and Mouchel
The Board of Costain believes that Mouchel and Costain are
highly complementary businesses and that a combination would
provide significant benefits for both sets of shareholders. In
particular, a combination would:
-- create one of the UK's premier solutions providers, with
major capabilities across consulting, construction and care,
delivered through two respected brands;
-- meet the increasing demands of blue chip customers who are
consolidating their requirements into larger, longer term "bundled"
or multi-disciplinary contracts and thereby significantly increase
the addressable market for both businesses;
-- benefit from enhanced growth prospects through an enlarged
private and public sector customer base and a combined forward
order book of over GBP4 billion;
-- generate significant, realisable synergies; and
-- create significant value for both sets of shareholders
through earnings enhancement*, dividend income and the potential
for a re-rating of the combined business.
*This statement is not a profit forecast and should not be
interpreted to mean that the earnings of Costain for the current
year or future years will necessarily match or exceed the historic
or published earnings of Costain.
For Mouchel's shareholders, the Proposal would provide them with
a major stake in a well capitalised business, with a clear strategy
for future profitable growth.
Commenting on the Proposal, the Chairman of Costain, David
Allvey, said:
"The Board of Costain believes that there is a compelling
strategic rationale for combining Costain and Mouchel. In
particular, it would provide the enhanced critical mass required by
blue-chip customers who are increasingly moving to larger,
longer-term bundled or multi-disciplinary solutions.
"The Board also believes that bringing together two of the UK's
premium brands with major capabilities across consulting,
construction and care, resulting in an order book of over GBP4
billion, would also create significant value for both sets of
shareholders."
Background on Costain and Mouchel
Costain
Costain has significant and growing consultancy and maintenance
activities, alongside a leading construction and engineering
capability. At 30 June 2010, 14 per cent. of Costain's GBP2.5
billion order book was in operations and maintenance.
The Company continues to benefit from its 'Choosing Costain'
strategy of focussing on targeted blue chip customers in chosen
sectors whose major spending plans are underpinned by strategic
national needs, regulatory commitments or essential maintenance
requirements. The Company continues to develop its scale and
resources to meet successfully the increasingly complex delivery
programmes and outsourcing needs of major customers.
Over the next decade, the Board believes that those programmes
will be primarily in three growth markets:-
Infrastructure - particularly Highways, Rail and Airports
Environment - particularly Water and Waste
Energy & Process - particularly Nuclear, Power, and
Hydrocarbons & Chemicals
Therefore, Costain's strategy is both to build on the Company's
current strengths and to broaden and improve the quality of
earnings streams by accelerating the development of an integrated
business, providing front-end engineering consultancy, construction
and ongoing care and maintenance services.
As previously announced, it is expected that the Company's
growth aspirations and ambition for the business will be achieved
through a combination of organic growth and by suitable
acquisitions in line with strategy.
On 8 November 2010 the Board of Costain announced Costain's
interim management statement for the period from 1 July 2010 to 8
November 2010 stating that since 25 August 2010 the Company had
delivered a strong operational and financial performance in line
with the Board's expectations. Further, the Board of Costain stated
inter alia that since the half year, the Company had secured a
number of additional major contract awards and had a forward order
book of GBP2.4 billion. At 8 November 2010, Costain had a strong
cash position in excess of GBP100 million and no significant
borrowings.
On 29 October 2010, Costain paid an interim dividend of 3.00p
per ordinary share, an increase of 9 per cent. compared to the
interim dividend of 2.75p per ordinary share paid in 2009. The
total dividend in respect of the year ended 31 December 2009 was
8.25p per ordinary share.
Mouchel
Mouchel is a consulting and business services group working with
government agencies, local authorities, government-regulated
industries and the private-sector in similar sectors to
Costain.
On 6 November 2010 Mouchel published its interim management
statement for the period from 1 August 2010 to 6 November 2010 in
which the Board of Mouchel confirmed that its expectations for the
year to July 2011 remained unchanged and that, at the end of
November 2010, Mouchel's order book had been maintained at GBP1.8
billion and its pipeline of tenders and near term opportunities had
increased to GBP2.6 billion.
In addition, Mouchel announced inter alia that it had net bank
borrowings of GBP109 million at the end of November 2010 and
Mouchel's lenders had appointed Deloitte to carry out a limited
review to assist Mouchel's lenders' due diligence as part of the
re-financing of Mouchel's principal banking facilities.
A further announcement will be made as appropriate.
There will be a conference call for analysts and investors at
08.00 this morning. Please contact Adam Aljewicz on +44 20 7457
2020 (adam.aljewicz@collegehill.com) for the dial-in details.
Enquiries:
Costain Group PLC Tel: +44 1628 842
444
Andrew Wyllie, Chief Executive
Tony Bickerstaff, Finance Director
Graham Read, Communications Director
Investec Investment Banking (Financial Tel: +44 20 7597
adviser & broker to Costain) 5970
Charles Batten
James Rudd
David Anderson
College Hill (PR adviser to Costain) Tel: +44 20 7457
2020
Mark Garraway
Mike Davies
Adam Aljewicz
A copy of this announcement will shortly be available, free of
charge, on the Company's website at www.costain.com
Investec (which is authorised and regulated in the United
Kingdom by the Financial Services Authority) is acting exclusively
for Costain and for no one else in connection with the possible
offer and will not be responsible to anyone other than Costain for
providing the protections afforded to Investec clients nor for
providing advice in relation to the possible offer or any other
matters referred to in this announcement.
This announcement does not constitute an offer to purchase any
securities, or an offer to sell or the solicitation of an offer to
buy any securities, nor shall there be any offer to purchase or
sell securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful. No offering of securities
may be made in the United States except pursuant to registration
under the US Securities Act of 1933 or an exemption from
registration.
The release, distribution or publication of this announcement in
jurisdictions other than the UK may be restricted by law and
therefore any persons who are subject to the laws of any
jurisdiction other than the UK should inform themselves about and
observe any applicable requirements.
Unless otherwise determined by Costain, this announcement and
any proposed offer will not be made, directly or indirectly, in or
into any jurisdiction where to do so would violate the laws of that
jurisdiction (a "Restricted Jurisdiction") or the United States, or
by the use of any means or instrumentally (including, without
limitation, telex, facsimile transmission, telephone, internet or
other forms of electronic communication) of interstate or foreign
commerce, or of any facility of a national securities exchange of
any Restricted Jurisdiction or the United States. Unless so
determined by Costain, the proposed offer will not be capable of
acceptance by any such use, means or instrumentally or facility of
any Restricted Jurisdiction or the United States.
Copies of this announcement will not be, and must not be,
directly or indirectly, mailed or otherwise forwarded (including,
without limitation by telex, facsimile transmission, telephone,
internet or other forms of electronic communication), distributed
or sent in, into or from any Restricted Jurisdiction or the United
States.
Forward looking statements
This announcement contains statements about Costain and Mouchel
that are or may be forward looking statements. All statements other
than statements of historical facts included in this announcement
may be forward looking statements. Without limitation, any
statements preceded or followed by or that include the words
"targets", "plans" "believes", "expects", "aims", "intends",
"will", "may", "anticipates", "estimates", "projects" or words or
terms of similar substance or the negative thereof, are forward
looking statements. Forward looking statements include statements
relating to, among other things: Costain's expected growth markets
over the next decade and the expected benefits of the proposed
combination of Costain and Mouchel.
Such forward looking statements involve risks and uncertainties
that could significantly affect expected results and are based on
certain key assumptions. Many factors could cause actual results to
differ materially from those projected or implied in any forward
looking statements, including, among others, risks relating to the
successful combination of Mouchel with Costain; higher than
anticipated costs relating to the combination of Mouchel with
Costain; and facts relating to Mouchel that may impact the timing
or amount of benefit realised from the combination that are unknown
to Costain. Due to such uncertainties and risks, readers are
cautioned not to place undue reliance on such forward looking
statements, which speak only as of the date hereof. Costain
disclaims any obligation to update any forward looking or other
statements contained herein, except as required by applicable
law.
Rule 2.10 disclosure
In accordance with Rule 2.10 of the Code, Costain confirms that,
as at 22 December 2010, it has 63,486,932 ordinary shares of 50p
each in issue and admitted to trading on the London Stock Exchange
under the UK ISIN code GB00B64NSP76.
Disclosure requirements of the Code
Under Rule 8.3(a) of the Code, any person who is interested in
1% or more of any class of relevant securities of an offeree
company or of any paper offeror (being any offeror other than an
offeror in respect of which it has been announced that its offer
is, or is likely to be, solely in cash) must make an Opening
Position Disclosure following the commencement of the offer period
and, if later, following the announcement in which any paper
offeror is first identified. An Opening Position Disclosure must
contain details of the person's interests and short positions in,
and rights to subscribe for, any relevant securities of each of (i)
the offeree company and (ii) any paper offeror(s). An Opening
Position Disclosure by a person to whom Rule 8.3(a) applies must be
made by no later than 3.30 pm (London time) on the 10th business
day following the commencement of the offer period and, if
appropriate, by no later than 3.30 pm (London time) on the 10th
business day following the announcement in which any paper offeror
is first identified. Relevant persons who deal in the relevant
securities of the offeree company or of a paper offeror prior to
the deadline for making an Opening Position Disclosure must instead
make a Dealing Disclosure.
Under Rule 8.3(b) of the Code, any person who is, or becomes,
interested in 1% or more of any class of relevant securities of the
offeree company or of any paper offeror must make a Dealing
Disclosure if the person deals in any relevant securities of the
offeree company or of any paper offeror. A Dealing Disclosure must
contain details of the dealing concerned and of the person's
interests and short positions in, and rights to subscribe for, any
relevant securities of each of (i) the offeree company and (ii) any
paper offeror, save to the extent that these details have
previously been disclosed under Rule 8. A Dealing Disclosure by a
person to whom Rule 8.3(b) applies must be made by no later than
3.30 pm (London time) on the business day following the date of the
relevant dealing.
If two or more persons act together pursuant to an agreement or
understanding, whether formal or informal, to acquire or control an
interest in relevant securities of an offeree company or a paper
offeror they will be deemed to be a single person for the purpose
of Rule 8.3.
Opening Position Disclosures must also be made by the offeree
company and by any offeror and Dealing Disclosures must also be
made by the offeree company, by any offeror and by any persons
acting in concert with any of them (see Rules 8.1, 8.2 and
8.4).
Details of the offeree and offeror companies in respect of whose
relevant securities Opening Position Disclosures and Dealing
Disclosures must be made can be found in the Disclosure Table on
the Takeover Panel's website at www.thetakeoverpanel.org.uk,
including details of the number of relevant securities in issue,
when the offer period commenced and when any offeror was first
identified. If you are in any doubt as to whether you are required
to make an Opening Position Disclosure or a Dealing Disclosure, you
should contact the Panel's Market Surveillance Unit on +44 (0)20
7638 0129.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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