NOT
FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART,
DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO
DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR
REGULATIONS OF SUCH JURISDICTION
THIS ANNOUNCEMENT CONTAINS INSIDE
INFORMATION
FOR
IMMEDIATE RELEASE
29 January 2025
RECOMMENDED CASH AND SHARE
COMBINATION
OF
DOWLAIS GROUP PLC
("DOWLAIS")
WITH
AMERICAN AXLE & MANUFACTURING
HOLDINGS, INC. ("AAM")
Summary
·
The boards of AAM and Dowlais are
pleased to announce that they have reached agreement on the terms
of a recommended cash and share offer to be made by AAM for the
entire issued and to be issued ordinary share capital of Dowlais
(the "Combination").
·
The Combined Group will be a larger, diversified
global manufacturer well-positioned for long-term profitable
growth, value-enhancing investments and sustainable capital
returns. The boards of AAM and Dowlais believe the Combination will
generate significant value for both sets of shareholders. The
Combined Group will have the following characteristics:
· a leading,
innovative global driveline and metal forming supplier with
significant size and scale;
· an
increasingly propulsion-agnostic portfolio of products across a
broader range of automotive segments supporting internal combustion
engine, hybrid and electric powertrains;
· a diversified
customer base with expanded and balanced geographic
presence;
· the opportunity
to deliver significant cost synergies of $300 million across the
Combined Group;
· high margins,
with strong earnings accretion, cash flow and balance sheet;
and
· an
experienced and blended management and leadership team, with a
proven track record of restructuring, integration and operational
excellence.
The
Combination
·
Under the terms of the Combination, each Dowlais Shareholder
will be entitled to receive:
for each
Dowlais Share held:
|
0.0863 New AAM
Shares;
|
|
42 pence in
cash; and
|
|
up to 2.8
pence in the form of a final cash dividend to be paid (subject to
the approval of the Dowlais Board) prior to
Completion
|
·
Pursuant to the consideration payable in
connection with the Combination, each Dowlais Shareholder will be
entitled to receive the payment of a final cash dividend by Dowlais
of up to 2.8 pence for each Dowlais Share (the "FY24 Final Dividend") (to be paid
(subject to the approval of the Dowlais Board) in line with
Dowlais' ordinary course 2024 financial year dividend calendar)
without any reduction of the consideration payable under the terms
of the Combination.
·
The terms of the Combination represent a total implied value
of 85.2 pence per Dowlais Share, based on the Closing Price of
$5.82 for each AAM Share and £/US$ exchange rate of 1.2434 on 28
January 2025 (being the close of business on the last Business Day
before the date of this Announcement), and including the FY24 Final
Dividend.
·
Immediately following Completion, it is
expected that the Dowlais Shareholders will own approximately 49
per cent., and AAM Shareholders will own approximately 51 per
cent., of the issued and outstanding common stock of the Combined
Group, with Dowlais Shareholders benefiting from up-front cash
consideration and the opportunity to participate in the anticipated
future value accretion of the Combined Group.
·
The Combined Group will have an experienced and blended
management and leadership team. David C. Dauch will serve as the
Chairman and Chief Executive Officer of the Combined Group. In
addition, Roberto Fioroni (Chief Financial Officer, Dowlais), Helen
Redfern (Chief People, Sustainability and Communications Officer,
Dowlais), Markus Bannert (Chief Executive Officer, GKN Automotive),
and Jean-Marc Durbuis (Chief Executive Officer, GKN Powder
Metallurgy) will be invited to join existing AAM executives as part
of the senior executive management team of the Combined Group, in
roles to be confirmed. It is also expected that Simon Mackenzie
Smith (Chair, Dowlais) and Fiona MacAulay, who currently serve on
the Dowlais Board, will join the Board of AAM following completion
of the Combination.
·
The terms of the Combination (including the FY24 Final
Dividend) value the entire issued and to be issued ordinary share
capital of Dowlais at approximately £1.16 billion on a fully
diluted basis and represent a premium of approximately:
· 25 per cent.
to the Closing Price of 68 pence for each Dowlais Share as at the
close of business on 28 January 2025 (being the last Business Day
before the date of this Announcement);
· 45 per cent.
to the volume-weighted average price of 59 pence for each Dowlais
Share for the three-month period ended on 28 January 2025 (being
the last Business Day before the date of this Announcement);
and
· 46 per cent.
to the volume-weighted average price of 59 pence for each Dowlais
Share for the six-month period ended on 28 January 2025 (being the
last Business Day before the date of this Announcement).
·
The terms represent an implied enterprise value multiple of
approximately 4.1 times Dowlais' adjusted EBITDA for the 12-month
period ended 31 December 2023, and 3.0 times when including full
run rate cost synergies.
·
A Mix and Match Facility will also be made available to
Dowlais Shareholders in order to enable them to elect, subject to
off-setting elections, to vary the proportions in which they
receive cash and New AAM Shares in respect of their holdings in
Dowlais Shares. However, the total number of New AAM Shares to be
issued and the maximum aggregate amount of cash to be paid under
the terms of the Combination will not be varied as a result of
elections under the Mix and Match Facility.
·
The AAM Board believes the Combination will create
significant annual run rate cost synergies of $300 million,
expected to be substantially achieved by the end of the third year
after Completion.
·
AAM reserves the right to reduce the consideration payable in
respect of each Dowlais Share under the terms of the Combination to
the extent that the FY24 Final Dividend exceeds 2.8 pence per
Dowlais Share. If any dividend or other distribution is announced,
declared, made or paid, or becomes payable, in respect of Dowlais
Shares on or after the date of this Announcement and before the
Effective Date, other than the FY24 Final Dividend or any
repurchases of Dowlais Shares by Dowlais pursuant to the Buyback
Programme, AAM reserves the right to reduce the consideration
payable in respect of each Dowlais Share by the amount of all or
part of any such dividend or other distribution. If AAM exercises
this right or makes such a reduction in respect of a dividend,
other distribution or return of capital that has not been paid,
Dowlais Shareholders will be entitled to receive and retain that
dividend, other distribution or return of capital. From the date of
this Announcement until the Effective Date, AAM is not permitted to
announce, declare, make or pay any dividend, other distribution or
return of capital and, if AAM does not comply with this
restriction, Dowlais shall be entitled (at its sole discretion) to
declare and pay an equalising dividend to Dowlais Shareholders,
without any consequential reduction to the consideration. Further
details are set out in paragraph 13
(Dividends).
·
The Combination is expected to be effected by means of a
Court-sanctioned scheme of arrangement between Dowlais and Scheme
Shareholders under Part 26 of the Companies Act, although AAM
reserves the right to elect to implement the Combination by way of
a Takeover Offer, subject to the terms of the Co-operation
Agreement, and obtaining the consent of the Panel.
·
As a result of the announcement of the Combination, the
Dowlais Directors have taken the decision to terminate the Buyback
Programme previously announced, with immediate effect.
·
AAM and Dowlais have agreed certain arrangements whereby the
consideration per Dowlais Share may be increased should certain
shares in Dowlais be cancelled for nil consideration prior to the
Effective Date as set out in paragraph 21
(Melrose ESOT),
without increasing the total consideration payable by AAM pursuant
to the Combination.
Background to and reasons for the
Combination
·
AAM and Dowlais are leading global tier-one automotive
suppliers specialising in driveline and metal forming technologies
for internal combustion, electric and hybrid vehicles. The
combination of AAM and Dowlais will create a leading global
manufacturer with the scale, product portfolio, technology and
global diversification required to lead and innovate in a
transitioning business environment.
·
The AAM Directors believe that the Combined Group will
benefit from a more diversified business model across both
customers and geographies as well as the significant synergies
arising from the combination of AAM and Dowlais. This model will
feature a robust cash-generative financial profile, a strong
balance sheet, and a more competitive and margin enhancing position
than the standalone businesses, enabling continued innovation,
growth, and long-term value creation for shareholders as the
industry transitions to alternate propulsion
technologies.
·
The Combination will bring together two companies with highly
complementary customer bases, geographic footprints,
powertrain-agnostic product portfolios, and manufacturing
operations. It will benefit from a best-of-best management team and
the significant leadership depth present in both
organisations.
·
The Combination offers shareholders the opportunity to
participate in future value creation unlocked through the delivery
of these cost synergies.
Key features of the Combined Group:
·
Leading global driveline and
metal-forming supplier with significant size and scale
- AAM and Dowlais expect that the Combined
Group will benefit from greater scale and diversification, which
brings numerous benefits including: financial and operational
resilience, enabling the business to adapt to demand fluctuations
and macroeconomic events; strengthened relationships with customers
and other industry stakeholders; a competitive cost base driven by
economies of scale; pooled resources for R&D and investment,
including EV transition and new technologies; and increased agility
and flexibility in a dynamic, fast-moving industry.
·
Comprehensive
powertrain-agnostic product portfolio with leading technology
- The Combination will create an
industry-leading portfolio of products across a broad range of
automotive segments, supporting internal combustion engine (ICE),
hybrid and electric powertrains. The metal forming and powder
metallurgy product groups will provide both vertical integration
capabilities and further diversification beyond the auto industry.
The Combined Group will benefit from enhanced scale to fund
investments in future innovation in its powertrain-agnostic product
portfolio.
·
Diversified customer base
with expanded and balanced geographic presence -
The Combined Group will be a truly global supplier, serving a
wide range of vehicles with a well-diversified and complementary
customer base. Additionally, the Combined Group will benefit from a
more balanced regional presence. AAM's position in pickup trucks
and SUVs and Dowlais' position across multiple other vehicle
segments globally create an attractive business portfolio. The
combined businesses also have strong foundations to serve the large
and growing Chinese vehicle market, in particular with emerging
domestic Chinese OEMs that are positioned for global growth. As a
result, the Combined Group will be well-positioned to support and
profitably participate in the transition to alternate propulsion
technologies in all regions.
·
Compelling industrial logic
with ~$300 million of synergies - The
complementary nature of AAM's and Dowlais' businesses will enable
the creation of significant, annual run rate cost synergies of
approximately $300 million, expected to be substantially achieved
by the end of the third year after Completion. The AAM management
team has a proven acquisition track record, having successfully
integrated and delivered significant cost synergy value through the
acquisitions of Metaldyne Performance Group and Tekfor Group.
Additionally, the Dowlais management team has demonstrated a proven
track record of restructuring resulting in operational
improvements.
·
High margins, with strong
earnings accretion, cash flow and balance sheet -
The Combined Group's enhanced customer, geographic, and
product diversification supports a best-in-class financial profile
with clear opportunities for improved profitability. The
Combination results in an attractive financial profile within the
automotive supplier landscape, with revenue of approximately $12
billion and Adjusted EBITDA margins of approximately 14 per cent.
(inclusive of run rate synergies). Based on the terms of the
Combination, the Combined Group's day-one net leverage is expected
to be approximately 2.5 times (inclusive of full run rate
synergies). AAM's capital allocation policy will prioritise debt
repayment whilst supporting organic growth until net leverage is
below 2.5 times, at which point AAM intends to move to a more
balanced capital allocation policy.
Quantified
cost synergies
The AAM Directors, having reviewed and analysed
the potential cost synergies of the Combination, and considering
the factors they can influence, are highly confident in the
Combined Group's ability to realise approximately $300 million of
annual run rate cost synergies, expected to be substantially
achieved by the end of the third year following
Completion.
The quantified cost synergies, expected to
originate from the cost bases of AAM and Dowlais, are anticipated
to be realised primarily from:
·
SG&A
- approximately 30 per cent. across the following
sources:
o Eliminating
duplicate public company costs and other costs;
o Optimisation of
the combined workforce;
o Streamlining of
engineering, research, and development expenses; and
o Elimination of
duplicate business and technical offices.
·
Purchasing -
approximately 50 per cent. across the following
sources:
o Leveraging
enhanced economies of scale and spend to reduce supply
costs;
o Utilising
vertical integration capabilities to deliver insourcing
initiatives; and
o Achieving
global freight and logistical savings through increased scale,
utilisation and benefits from third-party logistics
suppliers.
·
Operations -
approximately 20 per cent. across the following
sources:
o Increasing
operating efficiencies through the implementation of a best-of-best
operating system; and
o Optimising the
combined global manufacturing footprint.
·
The AAM Directors expect that approximately 60 per cent. of
the annual run rate cost synergies will be realised by the end of
the second year following Completion, and the full run rate cost
savings are expected to be substantially achieved by the end of the
third year following Completion.
·
The AAM Directors expect that the one-off costs required to
deliver on the synergy plan are approximately equal to one year of
full run rate savings.
·
In addition, the AAM Directors expect an increase in
operating working capital of approximately $13 million required to
deliver identified run rate freight and logistics
synergies.
·
The synergy savings stated are net of anticipated
dis-synergies (expected to be approximately $22
million).
·
The expected synergies will accrue as a direct result of the
Combination and would not be achieved on a standalone
basis.
Information on AAM
·
As a leading global tier 1 automotive and mobility supplier,
AAM designs, engineers and manufactures driveline and metal forming
technologies to support electric, hybrid and internal combustion
vehicles. AAM's mission is to deliver efficient, powerful and
innovative solutions for its customers.
·
Headquartered in Detroit, Michigan, AAM has over 75
facilities in 16 countries across North America, Latin America,
Europe and Asia. AAM employs approximately 21,000 employees
globally. AAM is a Delaware corporation and AAM Shares are publicly
traded on the New York Stock Exchange (NYSE:AXL).
·
AAM has established a high-efficiency product portfolio that
is designed to improve axle efficiency and fuel economy through
innovative product design technologies. Its portfolio includes
high-efficiency axles, aluminium axles and all-wheel-drive
applications. AAM's metal forming segment represents the largest
automotive forging operation in the world, and provides engine,
transmission, driveline and safety-critical components for light,
commercial and industrial vehicles. Net sales for 2023 were
approximately $6.08 billion.
Information on
Dowlais
·
Dowlais is a specialist engineering group focused on the
automotive sector. Dowlais develops and delivers precisely
engineered solutions that are shaping the future of the automotive
industry through its two leading high-technology engineering
businesses: GKN Automotive and GKN Powder Metallurgy.
·
GKN Automotive: a global leader in the development and
production of sideshafts, propshafts, AWD systems and advanced
differentials and a trusted partner to over 90 per cent. of global
automotive OEMs. Its products drive the wheels of around half the
world's light vehicles, and it has been a pioneer in the
development of eDrive systems, remaining at the forefront of
electric vehicle powertrain technology.
·
GKN Powder Metallurgy: a global leader in the production of
sintered metal products for the automotive and industrial sectors
and a leading manufacturer of atomised metal powders. Its
world-class engineering expertise and sustainable technology
enables the design and production of parts with complex geometries,
higher densities and improved physical properties.
·
Dowlais is headquartered in the United Kingdom, and operates
across the Americas, Europe and Asia with over 70 manufacturing
facilities and seven global innovation centres. Dowlais employs
approximately 30,000 employees globally, including its joint
ventures. Dowlais Shares are publicly traded on the London Stock
Exchange (LSE: DWL).
Irrevocable undertakings
·
AAM has received irrevocable undertakings to vote in favour
(or procure a vote in favour) of the Scheme at the Court Meeting
and the Resolutions to be proposed at the General Meeting from
those Dowlais Directors who hold Dowlais Shares in respect of their
own beneficial shareholdings, totalling 3,864,429 Dowlais Shares
representing approximately 0.3 per cent. of the issued ordinary
share capital of Dowlais as at 28 January 2025, being the last
Business Day before the date of this Announcement.
·
Further details of these irrevocable undertakings are set out
in Appendix 3 to this Announcement.
Background to
and reasons for the recommendation
·
Dowlais is a specialist engineering group focused on the
automotive sector. Since its listing in April 2023, Dowlais has
made strong progress on its strategy to accelerate its transition
to a power-agnostic business model and has continued to deliver
operational and performance improvements despite a challenging
market environment.
·
The Dowlais Directors remain fully confident that Dowlais
will continue to execute successfully on its strategic priorities,
leaving it better positioned to navigate market volatility and
deliver sustainable, profitable growth and cash
generation.
·
While the Dowlais Directors did not solicit an offer for
Dowlais, the Dowlais Directors remain focused on maximising the
full value of Dowlais for the benefit of its shareholders by
considering all available options. In assessing the Combination,
the Dowlais Directors have focused on both the near-term and
long-term value that the Combination is expected to deliver to
Dowlais Shareholders as well as the implications for Dowlais'
stakeholders.
·
The Dowlais Directors believe that the Combination represents
an attractive opportunity to accelerate the realisation of
shareholder value through the establishment of a global, automotive
supplier with market-leading capabilities, better-positioned
together to navigate both the short-term challenges and long-term
market dynamics in the automotive sector.
·
In considering the terms of the Combination and determining
whether they reflected an appropriate valuation of Dowlais and its
future prospects, the Dowlais Directors have taken into account a
number of factors, including the premium and consideration mix, and
offering Dowlais Shareholders the opportunity to participate in the
anticipated value creation from the substantial synergies expected
to be delivered through the Combination and accrue to the
shareholders of the Combined Group.
Recommendation
·
The Dowlais Directors, who have been so advised by Barclays
and Rothschild & Co as to the financial terms of the
Combination, consider the terms of the Combination to be fair and
reasonable. In providing their advice to the Dowlais Directors,
Barclays and Rothschild & Co have taken into account the
commercial assessments of the Dowlais Directors. Barclays and
Rothschild & Co are providing independent financial advice to
the Dowlais Directors for the purposes of Rule 3 of the
Code.
·
Accordingly, the Dowlais Directors intend to recommend
unanimously that Scheme Shareholders vote in favour of the Scheme
at the Court Meeting and Dowlais Shareholders vote in favour of the
Resolutions to be proposed at the General Meeting (or in the event
that the Combination is implemented by way of a Takeover Offer,
that Dowlais Shareholders accept or procure acceptance of such
Takeover Offer) as the Dowlais Directors who hold Dowlais Shares
have irrevocably undertaken to do in respect of their entire
beneficial holdings of 3,864,429 Dowlais Shares, in aggregate,
representing approximately 0.3 per cent. of the issued ordinary
share capital of Dowlais as at 28 January 2025 (being the last
Business Day before the date of this Announcement). Further details
of these irrevocable undertakings are set out at Appendix 3 to this
Announcement.
·
AAM and Dowlais have agreed certain arrangements whereby the
consideration per Dowlais Share will be increased should certain
shares in Dowlais be cancelled for nil consideration prior to the
Effective Date as set out in paragraph 21 (Melrose ESOT), whilst maintaining the
total consideration payable by AAM pursuant to the Combination. For
the avoidance of doubt, as described in paragraph
21 (Melrose
ESOT), there can be no certainty that certain shares in
Dowlais will be cancelled for nil consideration prior to the
Effective Date with a resulting increase to the consideration per
Dowlais Share under the terms of the Combination as set out in
paragraph 21 (Melrose
ESOT), and the Dowlais Directors' intention to recommend as
set out above is based solely on the terms of the Combination as at
the date of this Announcement, and the financial advice received by
the Dowlais Directors has been given on that basis.
·
The AAM Directors have unanimously approved the Combination
and intend to recommend that AAM Shareholders vote in favour of the
amendment to AAM's certificate of incorporation to increase the
number of authorised AAM Shares and the issuance of the New AAM
Shares in connection with the Combination. J.P. Morgan has acted as
financial adviser to AAM in relation to the Combination.
Timetable and Conditions
·
The Combination is subject to, among other things: (i)
approval of the requisite majority of the Scheme Shareholders at
the Court Meeting and the Dowlais Shareholders at the General
Meeting; (ii) the sanction of the Scheme by the Court; (iii) the
receipt of certain antitrust and other regulatory approvals; (iv)
the amendment to AAM's certificate of incorporation to increase the
number of authorised AAM Shares duly approved by the affirmative
vote of the holders of a majority in voting power of the AAM Shares
entitled to vote thereon at the AAM Shareholder Meeting; (v) the
issuance of the New AAM Shares in connection with the Combination
being duly approved by the affirmative vote of the holders of a
majority in voting power present in person or by proxy at the AAM
Shareholder Meeting; and (vi) confirmation having been received by
AAM that the New AAM Shares have been approved for listing, subject
to official notice of issuance, on the New York Stock Exchange. The
Combination is also subject to the other terms and Conditions set
out in Appendix 1 to this Announcement, and to the full terms and
conditions to be set out in the Scheme Document, including the EU
Antitrust Condition, the U.S. Antitrust Condition, the China
Antitrust Condition, the Brazil Antitrust Condition and the Mexico
Antitrust Condition.
·
The Combination will be put to Scheme Shareholders at the
Court Meeting and the Dowlais Shareholders at the General Meeting.
In order to become Effective, the Scheme must be approved by a
majority in number of the Scheme Shareholders at the Court
Meeting, present and voting, either in
person or by proxy, representing at least 75 per cent. in value of
the Scheme Shares voted. In addition, a special resolution
implementing the Scheme must be passed by Dowlais Shareholders
representing at least 75 per cent. of votes cast at the General
Meeting (expected to be held immediately after the Court Meeting).
Following the Court Meeting, the Scheme must also be sanctioned by
the Court. Finally, a copy of the Court Order must be delivered to
the Registrar of Companies, upon which the Scheme will become
Effective. The Scheme must become Effective by no later than the
Long Stop Date.
·
The Scheme Document will include full details of the Scheme
(including the expected timetable for the Combination and how
Dowlais Shareholders can hold, access and trade their interests in
New AAM Shares), together with notices of the Court Meeting and the
General Meeting, the Forms of Proxy, the Forms of Election in
relation to the Mix and Match Facility and the expected timetable
for the Combination, and will specify the actions to be taken by
Dowlais Shareholders. The Scheme Document will be posted to Dowlais
Shareholders in May or June 2025. The extended period until
publication of such documentation in relation to the Combination
has been agreed with the Panel and Dowlais and is to allow the
Scheme Document to be published at or around the same time as the
mailing of the AAM Proxy Statement following publication of the
annual results of both AAM and Dowlais for the year ended 31
December 2024 and allowing for any SEC review period of the AAM
Proxy Statement (if required).
·
Shareholders' attention is drawn to the section
entitled "High-Level U.S. Federal Income Tax Consequences" in this
Announcement. The Scheme Document will contain details on the
potential application of section 304 of the U.S. Internal Revenue
Code (IRC), and the potential resulting U.S. withholding tax at a
rate of up to 30 per cent. to the cash consideration received
pursuant to the Combination, and will provide information for
Dowlais Shareholders on how to certify whether or not it meets the
requirements for exemption from U.S. Deemed Dividend Tax (and
therefore potentially not be subject to such withholding tax), as
described further below in the section entitled "High-Level U.S.
Federal Income Tax Consequences".
·
The Combination is expected to complete during 2025, subject
to the satisfaction (or, where permitted, waiver) of the Conditions
set out in Appendix 1 to this Announcement, including the EU
Antitrust Condition, the U.S. Antitrust Condition, the China
Antitrust Condition, the Brazil Antitrust Condition and the Mexico
Antitrust Condition.
·
Commenting on the Combination, David C. Dauch, Chairman and
Chief Executive Officer of AAM, said:
"This
announcement marks another key milestone in our continued long-term
strategic growth plan. We are excited to bring together these two
outstanding companies to create a leading driveline and
metal-forming supplier serving the global automotive industry as it
continues to evolve. The combination will create significant
immediate and long-term shareholder value while helping to power a
more sustainable future. Together with Dowlais, we will have the
powertrain-agnostic product portfolio, global reach, commitment to
innovation and financial strength to meet the needs of customers
and succeed in a dynamic market environment."
·
Commenting on the Combination, Simon Mackenzie Smith, Chair
of Dowlais, said:
"The Dowlais
board is unanimous in its view that the proposed combination with
AAM offers a compelling opportunity to unlock value for our
shareholders. The strategic rationale for the combination is clear:
together, we create a global leader with enhanced financial
strength, broader diversification and a market-leading product
portfolio that spans traditional and electrified powertrain
solutions. Importantly, our shareholders will benefit not only from
an immediate premium but also from the significant synergies that
this combination will deliver. Whilst the Dowlais board remain
confident in our stand-alone strategy, this transaction creates
significant shareholder value while ensuring that our outstanding
businesses continue to shape the future of
mobility."
·
Commenting on the Combination, Liam Butterworth, Chief
Executive Officer of Dowlais, said:
"Today's
announcement marks a significant opportunity to build on the
success of Dowlais Group. The combination of the two companies
accelerates the execution of our strategy by leveraging our
combined scale, resources, capabilities, and outstanding management
teams. Our product portfolios and technological expertise are
highly complementary, positioning us to better serve our customers
and exceed their expectations. This transaction also combines our
respective strengths in innovation, technology, and talent,
creating a solid foundation for delivering long-term value to our
shareholders. Our shared vision is to be a leading supplier of
power-agnostic products as the world transitions to electrified
mobility while maintaining operational excellence and driving
sustainable growth, improved margins, and stronger cash flow
generation. Together, we will unlock significant synergies,
accelerate innovation, and position the combined group for
long-term success in a dynamic industry. I am incredibly proud of
what our team has achieved and excited about the opportunities that
lie ahead for the combined group."
This summary
should be read in conjunction with, and is subject to, the full
text of this Announcement and its Appendices.
The conditions
to, and certain further terms of, the Combination are set out
in Appendix
1 to this Announcement. The
bases and sources for certain financial information contained in
this Announcement are set out in Appendix 2. Details of irrevocable undertakings received
by AAM are set out in Appendix 3. Appendix 4 contains details and bases of belief of
the AAM FY24 Profit Estimate. Appendix 5 contains details and bases of belief of
the Dowlais FY24 Profit Estimate. Appendix 6 contains details and bases of belief of
the anticipated quantified financial benefits of the
Combination together with the related
reports from AAM's reporting accountant, Deloitte, and AAM's
financial adviser, J.P. Morgan Cazenove as required under Rule
28.1(a) of the Code, and provides underlying information and bases
for the reporting accountant's and advisers' respective reports.
Each of Deloitte and J.P. Morgan has given and not withdrawn its
consent to the publication of its report in this Announcement in
the form and context in which it is
included. The
defined terms used in this Announcement are set out
in Appendix
7.
For the
purposes of Rule 28 of the Code, the Quantified Financial Benefits
Statement contained in this Announcement is the responsibility of
AAM and the AAM Directors.
AAM will hold
a conference call for analysts and investors at 8.00 a.m. (ET) on
Wednesday, January 29, 2025 with a dial-in facility available
on 1-877-883-0383 (toll free) or
1-412-902-6506 (international). The access code is
1760312.
Enquiries
AAM
|
|
|
|
Christopher M. Son, Vice President,
Marketing & Communications
|
+1 (313) 758-4814
|
|
|
J.P. Morgan
(Exclusive financial adviser to AAM)
|
|
|
David Walker / Ian
MacAllister
|
+1 (212) 270 6000
|
Robert Constant / Jonty Edwards
|
+44 (0) 203 493 8000
|
|
|
FGS Global (PR
adviser to AAM)
|
|
|
Jared Levy / Jim Barron
|
+1 212 687 8080
|
Charlie Chichester / Rory King
|
+44 20 7251 3801
|
|
|
Dowlais
|
|
|
|
Investors
|
|
Pier Falcione
|
+44 (0) 7974 974690
|
|
|
Barclays
(Financial adviser and corporate broker to
Dowlais)
Guy Bomford / Adrian Beidas / Neal West
(Corporate Broking)
|
+44 (0) 20 7623 2323
|
Rothschild
& Co (Financial adviser to Dowlais)
|
|
|
Ravi Gupta / Nathalie Ferretti
|
+44 (0) 20 7280 5000
|
Investec Bank
plc (Joint corporate broker to Dowlais)
Carlton Nelson / Christopher Baird
|
+44 (0) 20 7597 5970
|
Montfort
Communications (PR adviser to Dowlais)
|
|
|
Nick Miles / Neil Craven
|
+44 (0) 7739 701 634
+44 (0) 7876 475 419
|
Allen Overy Shearman Sterling LLP is acting as
legal adviser to AAM. Slaughter and May is acting as legal adviser
to Dowlais. Cravath, Swaine & Moore LLP is acting as U.S. legal
adviser to Dowlais.
The person responsible for arranging the
release of this Announcement on behalf of Dowlais is John
Nicholson, General Counsel & Company Secretary.
Important notices relating to financial
advisers
J.P. Morgan
Securities LLC, together with its affiliate J.P. Morgan Securities
plc (which conducts its UK investment banking business as J.P.
Morgan Cazenove and which is authorised in the United Kingdom by
the Prudential Regulation Authority and regulated in the United
Kingdom by the Prudential Regulation Authority and the Financial
Conduct Authority). J.P. Morgan is acting as financial adviser
exclusively for AAM and no one else in connection with the
Combination and will not regard any other person as its client in
relation to the Combination and will not be responsible to anyone
other than AAM for providing the protections afforded to clients of
J.P. Morgan or its affiliates, nor for providing advice in relation
to the Combination or any other matter or arrangement referred to
herein.
Barclays,
which is authorised by the Prudential Regulation Authority and
regulated in the United Kingdom by the Financial Conduct Authority
and the Prudential Regulation Authority, is acting exclusively for
Dowlais and no one else in connection with the Combination and will
not be responsible to anyone other than Dowlais for providing the
protections afforded to clients of Barclays nor for providing
advice in relation to the Combination or any other matter referred
to in this Announcement.
In accordance
with the Code, normal United Kingdom market practice and Rule
14e-5(b) of the Exchange Act, Barclays and its affiliates will
continue to act as exempt principal trader in Dowlais securities on
the London Stock Exchange. These purchases and activities by exempt
principal traders which are required to be made public in the
United Kingdom pursuant to the Code will be reported to a
Regulatory Information Service and will be available on the London
Stock Exchange website at www.londonstockexchange.com.
This information will also be
publicly disclosed in the United States to the extent that such
information is made public in the United Kingdom.
Rothschild
& Co, which is authorised and regulated in the UK by the
Financial Conduct Authority, is acting exclusively as financial
adviser to Dowlais and for no‑one else in connection with the
Combination and shall not be responsible to anyone other than
Dowlais for providing the protections afforded to clients of
Rothschild & Co, nor for providing advice in connection with
the Combination or any matter referred to herein. Neither
Rothschild & Co nor any of its affiliates (nor their respective
directors, officers, employees or agents) owes or accepts any duty,
liability or responsibility whatsoever (whether direct or indirect,
whether in contract, in tort, under statute or otherwise) to any
person who is not a client of Rothschild & Co in connection
with this Announcement, any statement contained herein, the
Combination or otherwise. No representation or warranty, express or
implied, is made by Rothschild & Co as to the contents of this
Announcement.
Investec,
which is authorised in the United Kingdom by the PRA and regulated
in the United Kingdom by the FCA and the PRA, is acting exclusively
for Dowlais and no one else in connection with the subject matter
of this Announcement and will not regard any other person as its
client in relation to the subject matter of this Announcement and
will not be responsible to anyone other than Dowlais for providing
the protections afforded to the clients of Investec, or for
providing advice in connection with the subject matter of this
Announcement or any other matters referred to herein. Neither
Investec nor any of its subsidiaries, branches or affiliates owes
or accepts any duty, liability or responsibility whatsoever
(whether direct or indirect, whether in contract, in tort, under
statute or otherwise) to any person who is not a client of Investec
in connection with the subject matter of this Announcement, any
statement contained herein or otherwise, and no representation,
express or implied, is made by Investec or any of its subsidiaries,
branches or affiliates, or purported to be made on behalf of
Investec or any of its subsidiaries, branches or affiliates, in
relation to the contents of this Announcement, including with
regard to the accuracy or completeness of the Announcement or the
verification of any other statements made or purported to be made
by or on behalf of Investec or any of its subsidiaries, branches or
affiliates in connection with the matters described in this
Announcement.
Further information
This
Announcement is for information purposes only and is not intended
to, and does not, constitute or form part of any offer or
invitation to purchase, otherwise acquire, subscribe for, sell or
otherwise dispose of, any securities or the solicitation of any
vote or approval in any jurisdiction pursuant to the Combination or
otherwise. In particular, this Announcement is not an offer of
securities for sale into the U.S. No offer of securities shall be
made in the U.S. absent registration under the U.S. Securities Act,
or pursuant to an exemption from, or in a transaction not subject
to, such registration requirements. The Combination will be made
solely through the Scheme Document (or, if the Combination is
implemented by way of a Takeover Offer, the Takeover Offer
documents), which, together with the accompanying Forms of Proxy
and Forms of Election in relation to the Mix and Match Facility,
which will contain the full terms and conditions of the
Combination, including details of how to vote in respect of the
Combination. Any decision in respect of the Combination should be
made only on the basis of the information in the Scheme Document
(or, if the Combination is implemented by way of a Takeover Offer,
the Takeover Offer documents).
Dowlais will
prepare the Scheme Document to be distributed to Dowlais
Shareholders. Dowlais and AAM urge Dowlais Shareholders to read the
Scheme Document (or any other document by which the Combination is
made) in full when it becomes available because it will contain
important information relating to the Combination, including
details of how to vote in respect of the Scheme.
The
statements contained in this Announcement are made as at the date
of this Announcement, unless some other time is specified in
relation to them, and publication of this Announcement shall not
give rise to any implication that there has been no change in the
facts set forth in this Announcement since such
date.
This
Announcement does not constitute a prospectus or
a prospectus
equivalent document.
This
Announcement has been prepared for the purpose of complying with
English law and the Code and the information disclosed may not be
the same as that which would have been disclosed if this
Announcement had been prepared in accordance with the laws of
jurisdictions outside England.
The Combination will be subject to the applicable requirements
of English law, the Code, the Panel, the London Stock Exchange and
the FCA.
Neither the SEC nor any U.S. state securities commission has
approved, disproved or passed judgment upon the fairness or the
merits of the Combination or determined if this Announcement is
adequate, accurate or complete. Any representation to the contrary
is a criminal offence in the U.S.
Overseas Shareholders
The release, publication or distribution of this Announcement
in jurisdictions other than the UK, and the availability of the
Combination to Dowlais Shareholders who are not resident in the UK,
may be restricted by law and therefore any persons who are not
resident in the UK or who are subject to the laws of any
jurisdiction other than the UK (including Restricted Jurisdictions)
should inform themselves about, and observe, any applicable legal
or regulatory requirements. In particular, the ability of persons
who are not resident in the UK or who are subject to the laws of
another jurisdiction to participate in the Combination or to vote
their Dowlais Shares in respect of the Scheme at the Court Meeting,
or to execute and deliver Forms of Proxy appointing another to vote
at the Court Meeting on their behalf, may be affected by the laws
of the relevant jurisdictions in which they are located or to which
they are subject. Any failure to comply with applicable legal or
regulatory requirements of any jurisdiction may constitute a
violation of securities laws in that jurisdiction. To the fullest
extent permitted by applicable law, the companies and persons
involved in the Combination disclaim any responsibility or
liability for the violation of such restrictions by any
person.
Unless otherwise determined by AAM or required by the Code,
and permitted by applicable law and regulation, the Combination
shall not be made available, directly or indirectly, in, into or
from a Restricted Jurisdiction where to do so would violate the
laws in that jurisdiction and no person may vote in favour of the
Combination by any such use, means, instrumentality or form within
a Restricted Jurisdiction or any other jurisdiction if to do so
would constitute a violation of the laws of that
jurisdiction.
Accordingly, copies of this Announcement and any formal
documentation relating to the Combination are not being, and must
not be, directly or indirectly, mailed or otherwise forwarded,
distributed or sent in or into or from any Restricted Jurisdiction
or any jurisdiction where to do so would constitute a violation of
the laws of such jurisdiction and persons receiving such documents
(including custodians, nominees and trustees) must not mail or
otherwise forward, distribute or send them in or into or from any
Restricted Jurisdiction. Doing so may render invalid any related
purported vote in respect of acceptance of the
Combination.
Further details in relation to Dowlais Shareholders in
overseas jurisdictions will be contained in the Scheme Document
(or, if the Combination is implemented by way of a Takeover Offer,
the Takeover Offer documents).
Additional information for U.S. investors in
Dowlais
The Combination relates to an offer for the shares of an
English company and is proposed to be implemented by means of a
scheme of arrangement provided for under English company law. The
Combination, implemented by way of a scheme of arrangement, is not
subject to the tender offer rules or the related proxy solicitation
rules under the U.S. Exchange Act. Accordingly, the Combination is
subject to the disclosure requirements and practices applicable to
a scheme of arrangement involving a target company in the UK listed
on the London Stock Exchange, which differ from the disclosure
requirements of the U.S. tender offer and related proxy
solicitation rules. If, in the future, AAM exercises its right to
elect to implement the Combination by way of a Takeover Offer and
determines to extend the Takeover Offer into the U.S., such
Takeover Offer will be made in compliance with applicable U.S. laws
and regulations.
The New AAM Shares to be issued pursuant to the Combination
have not been and will not be registered under the U.S. Securities
Act, and may not be offered or sold by AAM in the U.S. absent
registration or an applicable exemption from the registration
requirements of the U.S. Securities Act. The New AAM Shares to be
issued pursuant to the Combination will be issued pursuant to the
exemption from registration set forth in Section 3(a)(10) of the
U.S. Securities Act. If, in the future, AAM
exercises its right to elect to implement the Combination by way of
a Takeover Offer or otherwise determines to conduct the
Combination in a manner that is not
exempt from the registration requirements of the U.S. Securities
Act, it will file a registration statement with the SEC that will
contain a prospectus with respect to the issuance of New AAM
Shares. In this event, Dowlais Shareholders are urged to read these
documents and any other relevant documents filed with the SEC, as
well as any amendments or supplements to all such documents,
because they will contain important information, and such documents
will be available free of charge at the SEC's website
at www.sec.gov or by directing a request to
AAM's contact for enquiries identified above.
This Announcement contains, and the Scheme Document will
contain certain unaudited financial information relating to Dowlais
that has been prepared in accordance with UK-endorsed International
Financial Reporting Standards ("IFRS") and thus may not be
comparable to financial information of U.S. companies or companies
whose financial statements are prepared in accordance with U.S.
generally accepted accounting principles. U.S. generally accepted
accounting principles differ in certain significant respects from
IFRS.
Dowlais is incorporated under the laws of a non-U.S.
jurisdiction, some or all of Dowlais' officers and directors reside
outside the U.S., and some or all of Dowlais' assets are or may be
located in jurisdictions outside the U.S. Therefore, U.S. Dowlais
Shareholders (defined as Dowlais Shareholders who are U.S. persons
as defined in the U.S. Internal Revenue Code or "IRC") may have
difficulty effecting service of process within the U.S. upon those
persons or recovering against Dowlais or its officers or directors
on judgments of U.S. courts, including judgments based upon the
civil liability provisions of the U.S. federal securities laws.
Further, it may be difficult to compel a non-U.S. company and its
affiliates to subject themselves to a U.S. court's judgment. It may
not be possible to sue Dowlais or its officers or directors in a
non-U.S. court for violations of the U.S. securities
laws.
In
accordance with normal United Kingdom practice, AAM or its
nominees, or its brokers (acting as agents), may from time to time
make certain purchases of, or arrangements to purchase, shares or
other securities of Dowlais outside of the U.S., other than
pursuant to the Combination, until the date on which the
Combination and/or Scheme becomes effective, lapses or is otherwise
withdrawn. These purchases may occur either in the open market at
prevailing prices or in private transactions at negotiated prices.
Any such purchases by AAM will not be made at prices higher than
the price of the Combination provided in this Announcement unless
the price of the Combination is increased accordingly. Any
information about such purchases or arrangements to purchase shall
be disclosed as required in the UK, shall be reported to a
Regulatory Information Service and shall be available on the London
Stock Exchange website at
www.londonstockexchange.com.
High-Level U.S. Federal Income Tax
Consequences
The receipt of New AAM Shares
and cash by Dowlais Shareholders as consideration for the transfer
of Dowlais Shares pursuant to the Combination may be a taxable
transaction for U.S. federal income tax purposes and under
applicable U.S. state and local, as well as foreign and other, tax
laws. Such consequences, if any, are not generally described
herein.
For
certain Dowlais Shareholders, Section 304 of the
IRC
may apply to the Combination if the Dowlais Shareholders, in the
aggregate, own stock of AAM possessing 50 per cent. or more of the
total combined voting power or 50 per cent. or more of the total
combined value of all classes of stock of AAM immediately following
Completion, taking into account certain constructive ownership
rules under the IRC and, in the case of a Dowlais Shareholder who
also owns AAM common stock, taking into account any New AAM Shares
received by such Dowlais Shareholder as a result of the
Combination. If Section 304 of the IRC were to apply to the
Combination, the cash consideration received pursuant
to the Combination may be subject to U.S. federal income tax as a
deemed dividend ("U.S. Deemed Dividend Tax"). A Dowlais Shareholder
should only be subject to U.S. Deemed Dividend Tax if the Dowlais
Shareholder receives cash under the Combination and also owns AAM
Shares. Further, even if a Dowlais Shareholder also owns AAM
Shares, it should only be subject to U.S. Deemed Dividend Tax if
the Dowlais Shareholder owns (i) an equivalent or greater
percentage of AAM Shares than Dowlais
Shares at Completion, and (ii) its indirect ownership
interest in Dowlais is not therefore reduced as a result of the
Combination, taking into account certain constructive ownership
rules and the AAM Shares received as consideration in the
Combination.
For
U.S. Dowlais Shareholders, dividends are generally taxable as
ordinary income, subject to any reduced tax rates or deductions
provided under the IRC. U.S. Dowlais Shareholders who do not
actually or constructively own any AAM Shares immediately prior to
the Combination will recognise a capital gain or loss equal to the
difference between the amount of cash received and such U.S.
holder's tax basis in the portion of its Dowlais Shares that is
exchanged for such cash.
For
Non-U.S. Dowlais Shareholders, U.S. Deemed Dividend Tax will be
collected via a withholding tax at a 30 per cent. rate (or such
lower rate as may be specified by an applicable income tax treaty)
from the cash consideration received pursuant to the Combination.
To establish whether such withholding is required from the cash
consideration paid to each Non-U.S. Dowlais Shareholder, each
Non-U.S. Dowlais Shareholder must, if necessary, complete a
certificate, in the form to be provided in circumstances where it
is necessary, certifying whether or not it meets the requirements
for exemption from U.S. Deemed Dividend Tax.
The certification
process is not standardised, and depends upon information properly
flowing through the brokerage network. To the extent relevant, you
should consult your retail broker as to the procedures they employ;
it is possible that some brokers may be unfamiliar with this
process.
Failure by a Non-U.S. Dowlais
Shareholder to complete and return such certificate may result in
withholding tax at a rate of 30 per cent. (or such lower rate as
may be specified by an applicable income tax treaty) on the full
amount of the cash payable to such Non-U.S. Dowlais
Shareholder.
If
excess amounts are withheld from the cash consideration payable to
a Non-U.S. Dowlais Shareholder, the Non-U.S. Dowlais Shareholder
may obtain a refund of any such excess amounts by timely filing an
appropriate claim with the IRS.
Dowlais Shareholders that may be
concerned about the application of Section 304 of the IRC and the
potential treatment of the cash consideration as a deemed dividend
for U.S. federal income tax purposes should take this into account
when determining whether to make an election under the Mix and
Match Facility to receive different proportions of cash and New AAM
Shares in respect of their holdings in Dowlais Shares, which would
impact the amount of Dowlais Shares attributed to them after the
Combination.
The
receipt of consideration in exchange for Dowlais Shares pursuant to
the Combination may also be subject, under certain circumstances,
to FATCA or other backup withholding with respect to a Dowlais
Shareholder that does not satisfy certain rules with respect to its
identity under U.S. or other tax laws applicable to such Dowlais
Shareholder.
Each Dowlais Shareholder is
urged to consult with legal, tax and financial advisers in
connection with making a decision regarding the Combination,
including in light of the potential application of Section 304 of
the IRC to the Combination.
Forward-looking statements
This
Announcement (including information incorporated by reference in
this Announcement), oral statements made regarding the Combination,
and other information published by AAM and Dowlais contain
statements which are, or may be deemed to be, "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements are prospective in
nature and are not based on historical facts, but rather on
assumptions, expectations, valuations, targets, estimates,
forecasts and projections of AAM and Dowlais about future events,
and are therefore subject to risks and uncertainties which could
cause actual results, performance or events to differ materially
from those expressed or implied by the forward-looking statements.
The forward-looking statements contained in this Announcement
include statements relating to the expected effects of the
Combination on the AAM Group, the Dowlais Group and the Combined
Group, such as the statements about the expected profitable growth,
value-enhancing investments, sustainable capital returns and other
characteristics of the Combined Group, the expected timing and
scope of the Combination and other statements other than historical
facts. Often, but not always, forward-looking statements can be
identified by the use of forward-looking words such as "plans",
"expects", "budgets", "targets", "aims", "scheduled", "estimates",
"forecast", "intends", "anticipates", "seeks", "prospects",
"potential", "possible", "assume" or "believes", or variations of
such words and phrases or statements that certain actions, events
or results "may", "could", "should", "would", "might" or "will" be
taken, occur or be achieved. AAM and Dowlais give no assurance that
such expectations will prove to be correct. By their nature,
forward-looking statements involve risks (known and unknown) and
uncertainties (and other factors that are in many cases beyond the
control of AAM and/or Dowlais) because they relate to events and
depend on circumstances that may or may not occur in the
future.
There are a
number of factors that could affect the future operations of the
AAM Group, the Dowlais Group and/or the Combined Group and that
could cause actual results and developments to differ materially
from those expressed or implied by such forward-looking statements.
These factors include the satisfaction (or, where permitted,
waiver) of the Conditions, as well as additional factors, such as:
domestic and global business and economic conditions; the impact of
pandemics, asset prices; market‑related risks such as fluctuations
in interest rates and exchange rates, industry trends, competition,
changes in government and regulation, changes in the policies and
actions of governments and/or regulatory authorities (including
changes related to capital and tax), changes in political and
economic stability (including exposures to terrorist activities,
the UK's exit from the European Union, Eurozone instability,
disruption in business operations due to reorganisation activities,
interest rate, inflation, deflation and currency fluctuations), the
timing impact and other uncertainties of future or planned
acquisitions or disposals or offers, the inability of the Combined
Group to realise successfully any anticipated synergy benefits when
the Combination is implemented (including changes to the board
and/or employee composition of the Combined Group), the inability
of the AAM Group to integrate successfully the Dowlais Group's
operations and programmes when the Combination is implemented, the
Combined Group incurring and/or experiencing unanticipated costs
and/or delays (including IT system failures, cyber-crime, fraud and
pension scheme liabilities), or difficulties relating to the
Combination when the Combination is implemented. Other unknown or
unpredictable factors could affect future operations and/or cause
actual results to differ materially from those in the
forward-looking statements. Such forward-looking statements should
therefore be construed in the light of such factors. It is not
possible to foresee or identify all such factors.
Each
forward-looking statement speaks only as of the date of this
Announcement. Neither the AAM Group nor the Dowlais Group, nor any
of their respective associates or directors, officers or advisers,
provides any representation, warranty, assurance or guarantee that
the occurrence of the events expressed or implied in any
forward-looking statements in this Announcement will actually
occur. Forward-looking statements involve inherent risks and
uncertainties. All forward-looking statements contained in this
Announcement are expressly qualified in their entirety by the
cautionary statements contained or referred to in this section.
Readers are cautioned not to place undue reliance on these
forward-looking statements. Other than in accordance with their
legal or regulatory obligations (including, without limitation,
under the Code, the UK Market Abuse Regulation, the DTRs and
applicable U.S. securities laws), neither the AAM Group nor the
Dowlais Group is under or undertakes any obligation, and each of
the foregoing expressly disclaims any intention or obligation, to
update or revise any forward-looking statements, whether as a
result of new information, future events or
otherwise.
For a
discussion of important risk factors that could cause AAM's actual
results to differ materially from the expectations in the
forward-looking statements, see Part I, Item 1A. under the heading
"Risk Factors" in its Form 10-K for the fiscal year ended December
31, 2023 and Part II, Item 1A under the heading "Risk Factors" in
quarterly reports on Form 10-Q for the quarterly periods ended March 31, 2024, June 30, 2024 and
September 30, 2024 filed with the SEC which also contain additional
information regarding forward-looking statements with respect to
AAM.
Solicitation
This Announcement may be deemed to be
solicitation material in respect of the Combination, including the
issuance of the New AAM Shares in respect of the Combination. In
connection with the foregoing proposed issuance of the New AAM
Shares, AAM expects to file the AAM Proxy Statement. To the extent
the Combination is effected as a scheme of arrangement under
English law, the issuance of the New AAM Shares in connection with
the Combination would not be expected to require registration under
the U.S. Securities Act, pursuant to an exemption provided by
Section 3(a)(10) under the U.S. Securities Act. In the event that
AAM exercises its right to elect to implement the Combination by
way of a Takeover Offer or otherwise determines to conduct the
Combination in a manner that is not exempt from the registration
requirements of the U.S. Securities Act, AAM expects to file a
registration statement with the SEC containing a prospectus with
respect to the New AAM Shares that would be issued in the
Combination. Investors and shareholders are urged to read the AAM
Proxy Statement, the Scheme Document, and other relevant documents
filed or to be filed with the SEC or incorporated by reference in
the AAM Proxy Statement (if any) carefully when they become
available because they will contain important information about
AAM, the Combination and related matters. Investors and
shareholders will be able to obtain free copies of the AAM Proxy
Statement, the Scheme Document, and other documents filed by AAM
with the SEC at the SEC's website at www.sec.gov. In addition, investors and
shareholders will be able to obtain free copies of the AAM Proxy
Statement, the Scheme Document, and other documents filed by AAM
with the SEC at www.aam.com/investors.
Participants in the Solicitation
AAM and its directors, executive officers and
certain other members of management and employees will be
participants in the solicitation of proxies from AAM's Shareholders
in respect of the Combination, including the proposed issuance of
New AAM Shares. Information regarding AAM's directors and executive
officers is contained in the Annual Report on Form 10-K for the
fiscal year ended 31 December 2023 of AAM, which was filed with the
SEC on 16 February 2024, the definitive proxy statement on
Schedule 14A for the 2024 annual meeting of stockholders of AAM,
which was filed with the SEC on 21 March 2024 and the Current
Report on Form 8-K of AAM, which was filed with the SEC on May 2,
2024. Additional information regarding the identity of
participants, and their direct or indirect interests, by security
holdings or otherwise, will be set forth in the AAM Proxy Statement
relating to the Combination when it is filed with the SEC. To the
extent holdings of AAM's securities by its directors or executive
officers change from the amounts set forth in the AAM Proxy
Statement, such changes will be reflected on Initial Statements of
Beneficial Ownership on Form 3 or Statements of Change in Ownership
on Form 4 filed with the SEC. These documents may be obtained free
of charge from the SEC's website at www.sec.gov and AAM's website at www.aam.com/investors.
No profit forecasts or estimates
The AAM FY24
Profit Estimate is a profit estimate for the purposes of Rule 28 of
the Code. The AAM FY24 Profit Estimate, and the assumptions and
basis of preparation on which the AAM FY24 Profit Estimate is based
and the AAM Directors' confirmation, as required by Rule 28.1 of
the Code, are set out in Appendix 4 of this Announcement.
The Dowlais
FY24 Profit Estimate is a profit estimate for the purposes of Rule
28 of the Code. The Dowlais FY24 Profit Estimate, and the
assumptions and basis of preparation on which the Dowlais FY24
Profit Estimate is based and the Dowlais Directors' confirmation,
as required by Rule 28.1 of the Code, are set out in
Appendix 5
of this
Announcement.
Other than
the AAM FY24 Profit Estimate and the
Dowlais FY24 Profit Estimate, nothing in this Announcement
(including any statement of estimated cost savings or synergies) is
intended, or is to be construed, as a profit forecast or profit
estimate for any period or to be interpreted to mean that earnings
or earnings per share for AAM or Dowlais for the current or future
financial years, will necessarily match or exceed the historical
published earnings or earnings per share for AAM or Dowlais, as
appropriate.
Quantified Financial Benefits
Statement
Statements of
estimated costs savings and synergies relate to future actions and
circumstances which, by their nature, involve risks, uncertainties
and contingencies. As a result, the costs savings and synergies
referred to in the Quantified Financial Benefits Statement may not
be achieved, may be achieved later or sooner than estimated, or
those achieved could be materially different from those
estimated. No
statement in the Quantified Financial Benefits Statement, or this
Announcement generally, should be construed as a profit forecast or
interpreted to mean that the Combined Group's earnings in the first
full year following the Effective Date, or in any subsequent
period, would necessarily match or be greater than or be less than
those of AAM or Dowlais for the relevant preceding financial period
or any other period. For the purposes of Rule 28 of the Code, the
Quantified Financial Benefits Statement contained in this
Announcement is the responsibility of AAM and the AAM
Directors.
Disclosure
requirements of the Code
Under
Rule 8.3(a) of the Code, any person who is interested in 1 per
cent. or more of any class of relevant securities of an offeree
company or of any securities exchange 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
securities exchange 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 securities exchange 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 p.m. (London time)on the tenth business day (as
defined in the Code) following the commencement of the offer period
and, if appropriate, by no later than 3.30 p.m. (London time)
on the tenth business day (as defined in the Code) following the
Announcement in which any securities exchange offeror is first
identified. Relevant persons who deal in the relevant securities of
the offeree company or of a securities exchange 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 per cent. or more of any class of relevant
securities of the offeree company or of any securities exchange
offeror must make a Dealing Disclosure if the person deals in any
relevant securities of the offeree company or of any securities
exchange 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 securities exchange offeror(s), 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 p.m. (London time) on the business day (as defined
in the Code) 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
securities exchange 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
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. You should contact the
Panel's Market Surveillance Unit on +44 (0)20
7638 0129 if you are in any doubt as to whether you are required to
make an Opening Position Disclosure or a Dealing
Disclosure.
Electronic Communications
Please be
aware that addresses, electronic addresses and certain information
provided by Dowlais Shareholders, persons with information rights
and other relevant persons for the receipt of communications from
Dowlais may be provided to AAM during the Offer Period as required
under section 4 of Appendix 4 to the Code to comply with Rule
2.11(c) of the Code.
Publication on a website and availability of
hard copies
This
Announcement and the documents required to be published pursuant to
Rule 26 of the Code will be
available,
subject to certain restrictions relating to
persons resident in Restricted
Jurisdictions, on AAM's website at www.aam.com/investors/offer-for-Dowlais-Group-plc
and on Dowlais'
website at www.dowlais.com promptly and in any event by
no later than 12 noon (London time) on the business day (as
defined in the Code) following the date of this
Announcement. Neither the content of the websites
referred to in this Announcement nor the content of any website
accessible from hyperlinks in this Announcement is incorporated
into, or forms part of, this Announcement.
Dowlais Shareholders and persons with
information rights may, subject to applicable securities laws,
request a hard copy of this Announcement (and any information
incorporated into it by reference to another source), free of
charge, by contacting Dowlais' registrars, Equiniti, by: (i) submitting a request in writing to Equiniti at Aspect
House, Spencer Road, Lancing, West Sussex BN99 6DA, United Kingdom;
or (ii) contacting Equiniti between 8.30 a.m. and 5.30 p.m. (London
time), Monday to Friday (excluding English and Welsh public
holidays), on +44 (0) 371 384 2030 (please use the country code
when calling from outside the UK). A person so entitled may,
subject to applicable securities laws, also request that all future
documents, announcements and information to be sent in relation to
the Combination should be in hard copy form.
Rounding
Certain
figures included in this Announcement have been subjected to
rounding adjustments. Accordingly, figures shown for the same
category presented in different tables may vary slightly and
figures shown as totals in certain tables may not be an arithmetic
aggregation of the figures that precede them.
Rule 2.9 disclosure
In accordance
with Rule 2.9 of the Code, AAM confirms that as at the date of this
Announcement, it has in issue and admitted to trading on the on the
New York Stock Exchange
(NYSE:AXL) 117,581,028 shares of common stock of
$0.01 each (excluding common stock held in treasury). The
International Securities Identification Number (ISIN) of the common
stock is US0240611030.
In accordance
with Rule 2.9 of the Code, Dowlais confirms that as at the date of
this Announcement, it has in issue and admitted to trading on the
Main Market of the London Stock Exchange 1,344,524,115 ordinary
shares of 1 pence each (excluding ordinary shares held in
treasury). The International Securities Identification Number
(ISIN) of the ordinary shares is GB00BMWRZ071.
General
If you are in
any doubt about the contents of this Announcement or the action you
should take, you are recommended to seek your own independent
financial advice immediately from your stockbroker, bank manager,
solicitor, accountant or independent financial adviser duly
authorised under FSMA if you are resident in the United Kingdom or,
if not, from another appropriately authorised independent financial
adviser.
NOT
FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART,
DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO
DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR
REGULATIONS OF SUCH JURISDICTION
THIS ANNOUNCEMENT CONTAINS INSIDE
INFORMATION
FOR
IMMEDIATE RELEASE
29 January 2025
RECOMMENDED CASH AND SHARE
COMBINATION
OF
DOWLAIS GROUP PLC
("DOWLAIS")
WITH
AMERICAN AXLE & MANUFACTURING
HOLDINGS, INC. ("AAM")
1.
Introduction
The boards of AAM and Dowlais are pleased to
announce that they have reached agreement on the terms of a
recommended cash and share offer to be made by AAM for the entire
issued and to be issued ordinary share capital of Dowlais (the
"Combination"). It is
intended that the Combination will be implemented by way of a
Court-sanctioned scheme of arrangement under Part 26 of the
Companies Act.
2. The
Combination
Under the terms of the Combination, which will
be subject to the conditions set out below and in Appendix 1 to
this Announcement and to the full terms and conditions which will
be set out in the Scheme Document, each Dowlais Shareholder will be
entitled to receive:
for each
Dowlais Share held:
|
0.0863 New AAM
Shares;
|
|
42 pence in
cash; and
|
|
up to 2.8
pence in the form of a final cash dividend to be paid (subject to
the approval of the Dowlais Board) prior to
Completion
|
Pursuant to the consideration payable in
connection with the Combination, each Dowlais Shareholder will be
entitled to receive the payment of a final cash dividend by Dowlais
of up to 2.8 pence for each Dowlais Share (the "FY24 Final Dividend") to be paid
(subject to the approval of the Dowlais Board) in line with
Dowlais' ordinary course 2024 financial year dividend calendar
without any reduction of the consideration payable under the terms
of the Combination.
AAM reserves the right to reduce the
consideration payable in respect of each Dowlais Share under the
terms of the Combination to the extent that the FY24 Final Dividend
exceeds 2.8 pence per Dowlais Share. If any dividend or other
distribution is announced, declared, made or paid, or becomes
payable, in respect of Dowlais Shares on or after the date of this
Announcement and before the Effective Date, other than the FY24
Final Dividend or any repurchases of Dowlais Shares by Dowlais
pursuant to the Buyback Programme, AAM reserves the right to reduce
the consideration payable in respect of each Dowlais Share by the
amount of all or part of any such dividend or other distribution.
If AAM exercises this right or makes such a reduction in respect of
a dividend, other distribution or return of capital that has not
been paid, Dowlais Shareholders will be entitled to receive and
retain that dividend, other distribution or return of capital. From
the date of this Announcement until the Effective Date, AAM is not
permitted to announce, declare, make or pay any dividend, other
distribution or return of capital and, if AAM does not comply with
this restriction, Dowlais shall be entitled (at its sole
discretion) to declare and pay an equalising dividend to Dowlais
Shareholders, without any consequential reduction to the
consideration. Further details are set out in paragraph
13 (Dividends).
The terms of the Combination represent a total
implied value of 85.2 pence per Dowlais Share, based on the Closing
Price of $5.82 for each AAM Share and £/US$ exchange rate of 1.2434
on 28 January 2025 (being the close of business on the last
Business Day before the date of this Announcement), the terms of
the Combination (including the FY24 Final Dividend).
Immediately following Completion, it is
expected that the Dowlais Shareholders will own approximately 49
per cent., and AAM Shareholders will own approximately 51 per
cent., of the issued and outstanding capital stock of the Combined
Group, with Dowlais Shareholders benefiting from up-front cash
consideration and the opportunity to participate in the anticipated
future value accretion of the Combined Group.
David C. Dauch will serve as the Chairman and
Chief Executive Officer of the Combined Group. In addition, Roberto
Fioroni (Chief Financial Officer, Dowlais), Helen Redfern (Chief
People, Sustainability and Communications Officer, Dowlais), Markus
Bannert (Chief Executive Officer, GKN Automotive), and Jean-Marc
Durbuis (Chief Executive Officer, GKN Powder Metallurgy), will be
invited to join existing AAM executives as part of the senior
executive management team of the Combined Group. It is also
expected that Simon Mackenzie Smith (Chair, Dowlais) and Fiona
MacAulay, who currently serve on the Dowlais Board, will join the
Board of AAM following completion of the Combination.
The terms of the Combination (including the
FY24 Final Dividend) value the entire issued and to be issued
ordinary share capital of Dowlais at approximately £1.16 billion on
a fully diluted basis and represent a premium of
approximately:
· 25
per cent. to the Closing Price of 68 pence for each Dowlais Share
as at the close of business on 28 January 2025 (being the last
Business Day before the date of this Announcement);
· 45
per cent. to the volume-weighted average price of 59 pence for each
Dowlais Share for the three-month period ended on 28 January 2025
(being the last Business Day before the date of this Announcement);
and
· 46
per cent. to the volume-weighted average price of 59 pence for each
Dowlais Share for the six-month period ended on 28 January 2025
(being the last Business Day before the date of this
Announcement).
The terms represent an implied enterprise value
multiple of approximately 4.1 times Dowlais' adjusted EBITDA for
the 12-month period ended 31 December 2023, and 3.0 times when
including full run rate cost synergies.
A Mix and Match Facility will also be made
available to Dowlais Shareholders in order to enable them to elect,
subject to off-setting elections, to vary the proportions in which
they receive cash and New AAM Shares in respect of their holdings
in Dowlais Shares. However, the total number of New AAM Shares to
be issued and the maximum aggregate amount of cash to be paid under
the terms of the Combination will not be varied as a result of
elections under the Mix and Match Facility. Further details in
respect of the Mix and Match Facility are set out in
paragraph 5 (Mix and Match Facility) of this
Announcement.
The Combination is expected to be effected by
means of a Court-sanctioned scheme of arrangement between Dowlais
and Scheme Shareholders under Part 26 of the Companies Act,
although AAM reserves the right to elect to implement the
Combination by way of a Takeover Offer.
It is expected that the Scheme Document,
containing further information about the Combination
(including the expected timetable for the Combination and how
Dowlais Shareholders can hold, access and trade their interests in
New AAM Shares), together with notices of the Court
Meeting and General Meeting, the Forms of Proxy and the Forms of
Election in relation to the Mix and Match Facility will
be posted to Dowlais Shareholders in May or June 2025. The
extended period until publication of such documentation in relation
to the Combination has been agreed with the Panel and Dowlais and
is to allow the Scheme Document to be published at or around the
same time as the mailing of the AAM Proxy Statement following
publication of the annual results of both AAM and Dowlais for the
year ended 31 December 2024 and allowing for any SEC review period
of the AAM Proxy Statement (if required).
Shareholders' attention is drawn to the section
entitled "High-Level U.S. Federal Income Tax Consequences" in this
Announcement. The Scheme Document will contain details on the
potential application of section 304 of the U.S. Internal Revenue
Code (IRC), and the potential resulting U.S. withholding tax at a
rate of up to 30 per cent. to the cash consideration received
pursuant to the Combination, and will provide information for
Dowlais Shareholders on how to certify whether or not it meets the
requirements for exemption from U.S. Deemed Dividend Tax (and
therefore potentially not be subject to such withholding tax), as
described further below in the section entitled "High-Level U.S.
Federal Income Tax Consequences".
Subject to the satisfaction or, where
permitted, waiver of all relevant conditions, including the
Conditions, and certain further terms set out in
Appendix 1 to this Announcement and to be set out in the Scheme
Document, and subject to the approval and availability of the
Court, it is expected that the Scheme will become Effective in
2025.
The Combination will be subject to the
Conditions and certain further terms set out in Appendix 1 to this
Announcement, including, among other things: (i) the approval of
Scheme Shareholders at the Court Meeting and the passing of the
Resolutions relating to the Scheme by Dowlais Shareholders at the
General Meeting; (ii) the sanction of the Scheme by the Court;
(iii) the receipt of certain antitrust and other regulatory
approvals; (iv) the Scheme becoming Effective no later than the
Long Stop Date; (v) the amendment to AAM's certificate of
incorporation to increase the number of authorised AAM Shares and
the issuance of the New AAM Shares in connection with the
Combination being duly approved by the affirmative vote of the
holders of a majority in voting power of the AAM Shares entitled to
vote thereon at the AAM Shareholder Meeting; and (vi) confirmation
having been received by AAM that the New AAM Shares have been
approved for listing, subject to official notice of issuance, on
the New York Stock Exchange. In order to become Effective, the
Scheme must be approved by a majority in number representing not
less than 75 per cent. in value of the Scheme Shareholders (or the
relevant class or classes thereof, if applicable) in each case
present, entitled to vote and voting, either in person or by proxy,
at the Court Meeting and at any separate class meeting which may be
required by the Court or at any adjournment of such
meeting.
Dowlais Shares will be acquired by AAM fully
paid and free from all liens, equitable interests, charges,
encumbrances, rights of pre-emption and any other third party
rights or interests whatsoever and together with all rights
existing at the date of this Announcement or thereafter attaching
thereto, including (without limitation) the right to receive and
retain, in full, all dividends and other distributions (if any)
declared, made or paid or any other return of capital (whether by
way of reduction of share capital or share premium account or
otherwise) made on or after the date of this Announcement in
respect of Dowlais Shares, other than the FY24 Final Dividend or
any repurchases of Dowlais Shares by Dowlais pursuant to the
Buyback Programme.
As a result of the Combination, the Dowlais
Directors have taken the decision to terminate the Buyback
Programme previously announced.
AAM and Dowlais have agreed certain
arrangements whereby the consideration per Dowlais Share may be
increased should certain shares in Dowlais be cancelled for nil
consideration prior to the Effective Date as set out in
paragraph 21 (Melrose ESOT), without increasing the
total consideration payable by AAM pursuant to the
Combination.
3. Background
to and reasons for the Combination
AAM and Dowlais are leading global
tier-one automotive suppliers specialising in driveline and metal
forming technologies for internal combustion, electric and hybrid
vehicles. The combination of AAM and
Dowlais will create a leading global manufacturer with the scale,
product portfolio, technology and global diversification required
to lead and innovate in a transitioning business
environment.
The AAM Directors believe that the
Combined Group will benefit from a more diversified business model
across both customers and geographies as well as the significant
synergies arising from the combination of AAM and Dowlais. This
model will feature a robust cash-generative financial profile, a
strong balance sheet, and a more competitive and margin enhancing
position than the standalone businesses, enabling continued
innovation, growth, and long-term value creation for shareholders
as the industry transitions to alternate propulsion
technologies.
The Combination will bring together
two companies with highly complementary customer bases, geographic
footprints, powertrain-agnostic product portfolios, and
manufacturing operations. It will benefit from a best-of-best
management team and the significant leadership depth present in
both organisations.
The Combination offers shareholders
the opportunity to participate in future value creation unlocked
through the delivery of these cost synergies.
Key features of the Combined
Group:
·
Leading global driveline and
metal-forming supplier with significant size and scale
- AAM and Dowlais expect that the Combined
Group will benefit from greater scale and diversification, which
brings numerous benefits including: financial and operational
resilience, enabling the business to adapt to demand fluctuations
and macroeconomic events; strengthened relationships with customers
and other industry stakeholders; a competitive cost base driven by
economies of scale; pooled resources for R&D and investment,
including EV transition and new technologies; and increased agility
and flexibility in a dynamic, fast-moving industry.
·
Comprehensive powertrain-agnostic
product portfolio with leading technology - The
Combination will create an industry-leading portfolio of products
across a broad range of automotive segments, supporting internal
combustion engine (ICE), hybrid and electric powertrains. The metal
forming and powder metallurgy product groups will provide both
vertical integration capabilities and further diversification
beyond the auto industry. The Combined Group will benefit from
enhanced scale to fund investments in future innovation in its
powertrain-agnostic product portfolio.
·
Diversified customer base with
expanded and balanced geographic presence - The
Combined Group will be a truly global supplier, serving a wide
range of vehicles with a well-diversified and complementary
customer base. Additionally, the Combined Group will benefit from a
more balanced regional presence. AAM's position in pickup trucks
and SUVs and Dowlais' position across multiple other vehicle
segments globally create an attractive business portfolio. The
combined businesses also have strong foundations to serve the large
and growing Chinese vehicle market, in particular with emerging
domestic Chinese OEMs that are positioned for global growth. As a
result, the Combined Group will be well-positioned to support and
profitably participate in the transition to alternate propulsion
technologies in all regions.
·
Compelling industrial logic
with ~$300 million of synergies - The
complementary nature of AAM's and Dowlais' businesses will enable
the creation of significant, annual run rate cost synergies of
approximately $300 million, expected to be substantially achieved
by the end of the third year after Completion. The AAM management
team has a proven acquisition track record, having successfully
integrated and delivered significant cost synergy value through the
acquisitions of Metaldyne Performance Group and Tekfor Group.
Additionally, the Dowlais management team has demonstrated a proven
track record of restructuring resulting in operational
improvements.
·
High margins, with strong earnings
accretion, cash flow and balance sheet - The Combined
Group's enhanced customer, geographic, and product diversification
supports a best-in-class financial profile with clear opportunities
for improved profitability. The Combination results in an
attractive financial profile within the automotive supplier
landscape, with revenue of approximately $12 billion and Adjusted
EBITDA margins of approximately 14 per cent. (inclusive of run rate
synergies). Based on the terms of the Combination, the Combined
Group's day-one net leverage is expected to be approximately 2.5
times (inclusive of full run rate synergies). AAM's capital
allocation policy will prioritise debt repayment whilst supporting
organic growth until net leverage is below 2.5 times, at which
point AAM intends to move to a more balanced capital allocation
policy.
4.
Financial benefits of the
Combination
Quantified
cost synergies
The AAM Directors, having reviewed and analysed
the potential cost synergies of the Combination, and considering
the factors they can influence, are highly confident in the
Combined Group's ability to realise approximately $300 million of
annual run rate cost synergies, expected to be substantially
achieved by the end of the third year following
Completion.
The quantified cost synergies, expected to
originate from the cost bases of AAM and Dowlais, are anticipated
to be realised primarily from:
·
SG&A
- approximately 30 per cent. across the following
sources:
o Eliminating
duplicate public company costs and other costs;
o Optimisation of
the combined workforce;
o Streamlining of
engineering, research, and development expenses; and
o Elimination of
duplicate business and technical offices.
·
Purchasing -
approximately 50 per cent. across the following
sources:
o Leveraging
enhanced economies of scale and spend to reduce supply
costs;
o Utilising
vertical integration capabilities to deliver insourcing
initiatives; and
o Achieving
global freight and logistical savings through increased scale,
utilisation and benefits from third-party logistics
suppliers.
·
Operations
- approximately 20 per cent. across the following
sources:
o Increasing
operating efficiencies through the implementation of a best-of-best
operating system; and
o Optimising the
combined global manufacturing footprint.
The AAM Directors expect that approximately 60
per cent. of the annual run rate cost synergies will be realised by
the end of the second year following Completion, and the full run
rate cost savings are expected to be substantially achieved by the
end of the third year following Completion.
The AAM Directors expect that the one-off costs
required to deliver on the synergy plan are approximately equal to
one year of full run rate savings.
In addition, the AAM Directors expect an
increase in operating working capital of approximately $13 million
required to deliver identified run rate freight and logistics
synergies.
The synergy savings stated are net of
anticipated dis-synergies (expected to be approximately $22
million).
The expected synergies will accrue as a direct
result of the Combination and would not be achieved on a standalone
basis.
These statements of estimated cost savings and
synergies relate to future actions and circumstances which, by
their nature, involve risks, uncertainties and contingencies. As a
result, the cost savings and synergies referred to herein may not
be achieved, may be achieved later or sooner than estimated, or
those actually achieved could be materially different from those
estimated. For the purposes of Rule 28 of the Code, the statements
of estimated cost savings and synergies contained in this
Announcement are solely the responsibility of AAM and the AAM
Directors. Any statement of intention, belief or expectation for
the Combined Group following the Effective Date is also an
intention, belief or expectation of the AAM Directors and not of
the Dowlais Directors.
These statements are not intended as a profit
forecast or profit estimate for any period and should not be
interpreted as such. No part of these statements, or this
Announcement generally, should be construed or interpreted to mean
that the Combined Group's earnings in the first year following the
Effective Date, or in any subsequent period, would necessarily
match or be greater than or be less than those of AAM and/or
Dowlais for the relevant preceding financial period or any other
period.
Appendix 6 to this Announcement
includes a copy of these statements of anticipated cost savings and
synergies arising out of the Combination and provides underlying
information and bases of belief and calculation.
Appendix 6 to this Announcement
also includes reports from AAM's reporting accountant, Deloitte,
and its financial adviser, J.P. Morgan Cazenove, in connection with
the anticipated Quantified Financial Benefits Statement, as
required pursuant to Rule 28.1(a) of the Code, and provides
underlying information and bases for the reporting accountant's and
financial adviser's respective reports. J.P. Morgan Cazenove, as
financial adviser to AAM, has provided such a report for the
purposes of the Code stating that, in their opinion and subject to
the terms of the report, the Quantified Financial Benefits
Statement, for which the AAM Directors are responsible, has been
prepared with due care and consideration. Each of Deloitte and J.P.
Morgan Cazenove has given and not withdrawn its consent to the
publication of its report in this Announcement in the form and
context in which it is included.
5. Mix and
Match Facility
Dowlais Shareholders may elect, subject to
availability, to vary the proportions in which they receive cash
and New AAM Shares in respect of their holdings in Dowlais Shares.
However, the total number of New AAM Shares to be issued and the
maximum aggregate amount of cash to be paid under the terms of the
Combination will not be varied as a result of elections under the
Mix and Match Facility. Accordingly, satisfaction of elections made
by Dowlais Shareholders under the Mix and Match Facility will
depend on the extent to which other Dowlais Shareholders make
offsetting elections.
To the extent that elections cannot be
satisfied in full, they will be scaled down on a pro rata basis. As
a result, those Dowlais Shareholders who make an election under the
Mix and Match Facility will not necessarily know the exact number
of New AAM Shares or the amount of cash they will receive until
settlement of the consideration due to them under the terms of the
Combination. The Mix and Match Facility is conditional upon the
Combination becoming Effective.
Elections under the Mix and Match Facility will
not affect the entitlements of those Dowlais Shareholders who do
not make such elections.
Further details in relation to the Mix and
Match Facility will be contained in the Scheme Document.
6.
Recommendation
The Dowlais Directors, who have been so advised
by Barclays and Rothschild & Co as to the financial terms of
the Combination, consider the terms of the Combination to be fair
and reasonable. In providing their financial advice to the Dowlais
Directors, Barclays and Rothschild & Co have taken into account
the commercial assessments of the Dowlais Directors. Barclays and
Rothschild & Co are providing independent financial advice to
the Dowlais Directors for the purposes of Rule 3 of the
Code.
Accordingly, the Dowlais Directors intend to
recommend unanimously that Scheme Shareholders vote in favour of
the Scheme at the Court Meeting and Dowlais Shareholders vote in
favour of the Resolutions to be proposed at the General Meeting (or
in the event that the Combination is implemented by way of a
Takeover Offer, that Dowlais Shareholders accept or procure
acceptance of such Takeover Offer) (the "Intention to Recommend") as the Dowlais
Directors who hold Dowlais Shares have irrevocably undertaken to do
in respect of their entire beneficial holdings of 3,864,429 Dowlais
Shares, in aggregate, representing approximately 0.3 per cent. of
the issued ordinary share capital of Dowlais as at 28 January 2025
(being the last Business Day before the date of this Announcement).
Further details of these irrevocable undertakings are set out at
Appendix 3 to this Announcement.
For the avoidance of doubt, as described in
paragraph 21 (Melrose ESOT), there can be no
certainty that certain shares in Dowlais will be cancelled for nil
consideration prior to the Effective Date with a resulting increase
to the consideration per Dowlais Share under the terms of the
Combination as set out in paragraph 21
(Melrose ESOT), and the Intention to Recommend as set out
above is based solely on the terms of the Combination as at the
date of this Announcement, and the financial advice received by the
Dowlais Directors has been given on that basis.
The AAM Directors have unanimously approved the
Combination and intend to recommend that AAM Shareholders vote in
favour of the amendment to AAM's certificate of incorporation to
increase the number of authorised AAM Shares and the issuance of
the New AAM Shares in connection with the Combination. J.P. Morgan
has acted as financial adviser to AAM in relation to the
Combination.
7. Background
to and reasons for the recommendation
Dowlais is a specialist engineering group
focused on the automotive sector. Since its listing in April 2023,
Dowlais has made strong progress on its strategy to accelerate its
transition to a power-agnostic business model and has continued to
deliver operational and performance improvements despite a
challenging market environment.
The Dowlais Directors remain fully confident
that Dowlais will continue to execute successfully on its strategic
priorities, leaving it better positioned to navigate market
volatility and deliver sustainable, profitable growth and cash
generation.
While the Dowlais Directors did not solicit an
offer for Dowlais, the Dowlais Directors remain focused on
maximising the full value of the Dowlais for the benefit of its
shareholders by considering all available options. In contemplating
the merits of the Combination for shareholders, the Dowlais Board,
has considered carefully a number of factors including:
· a
compelling strategic rationale, creating a Combined Group with
enhanced scale, highly complementary product portfolio,
technological expertise, industrial footprint and global
diversification to compete in a dynamic and changing business
environment;
· the
opportunity for significant value creation from synergies resulting
from the consolidation of two leading businesses with market
leading capabilities;
· a
combined leadership team blending the best talent from both
businesses;
· a
highly complementary portfolio of driveline products - sideshafts,
propshafts, AWD systems, axles for ICE vehicles and EVs;
· a
sophisticated metal forming components capability - forging,
machining, casting and sintering, providing a perfect strategic fit
for Powder Metallurgy to drive external growth;
·
continued volatility in the automotive industry as the global
transition to electrified mobility varies by region leading to
continued uncertainty of industry volumes, customer mix and future
technology needs; and
· an
assessment of the value that could potentially be unlocked for the
benefit of Dowlais shareholders through a sale of Dowlais' GKN
Powder Metallurgy business, as evaluated through the strategic
review announced at the Half Year Results on 13 August
2024.
In assessing the Combination, the Dowlais
Directors have focused on both the near-term and long-term value
that the Combination is expected to deliver to Dowlais Shareholders
as well as the implications for Dowlais' stakeholders.
The Dowlais Directors believe that the
Combination represents an attractive opportunity to accelerate the
realisation of shareholder value through the establishment of a
global, diversified automotive supplier, better-positioned together
to navigate both the short-term challenges and long-term market
dynamics in the automotive sector.
The Dowlais Directors believe that the
Combination is based on a compelling strategic, industrial and
financial rationale, including:
·
combining two world-class businesses that are aligned
strategically, culturally and geographically, to create a global
automotive supplier, with the enhanced scale, and the product
portfolio, manufacturing footprint and technology required to
compete in a dynamic market environment;
·
building greater resilience through increased global scale
and product diversification;
·
creating the necessary financial strength to accelerate
investment in new products and technologies;
·
enhancing the opportunity to leverage combined knowhow to
better serve customers' needs and secure new business;
·
offering a highly complementary portfolio of products across
a broad range of automotive segments, supporting ICE, hybrid and
electric powertrains in multiple geographies with a diversified
customer base;
·
unlocking meaningful cost synergies for the Combined Group;
and
·
resulting in a Combined Group with a strong balance sheet
supported by a strong and attractive cash profile.
In considering the terms of the Combination and
determining whether they reflected an appropriate valuation of
Dowlais and its future prospects, the Dowlais Directors took into
account a number of factors, including:
·
that consideration in New AAM Shares provides Dowlais
Shareholders with the ability to remain fully invested in the
Combined Group through Dowlais Shareholders owning approximately 49
per cent of the Combined Group;
· the
terms of the Combination represent a total implied value of 85.2
pence per Dowlais share, based on the Closing Price of $5.82 for
each AAM Share and £/US$ exchange rate of 1.2434 on 28 January 2025
(being the close of business on the last Business Day before the
date of this Announcement); and
· the
opportunity for Dowlais Shareholders to participate in the
anticipated value creation from the substantial synergies which are
expected to be delivered through the Combination and accrue to the
shareholders of the Combined Group.
The Dowlais Directors believe that Dowlais has
a clear and compelling standalone strategy that would continue to
deliver shareholder value, however it is their belief that the
proposed Combination would accelerate shareholder value creation
through the combination of both the immediate premium and the
opportunity to continue to participate in the long term prospects
of the Combined Group.
In considering the Combination, the Dowlais
Directors have taken into account AAM's stated intentions for the
business and its employees as set out in paragraph
3 (Background
to and reasons for the Combination) and paragraph
12 (Strategic
plans and intentions with regard to management, employees, pensions
and places of business).
Following careful and thorough consideration of
the financial terms of the Combination, the strategic rationale and
the anticipated financial benefits of the Combination, including
the above factors, the Dowlais Directors intend to recommend
unanimously that Dowlais Shareholders vote, or procure voting, in
favour of the Scheme at the Court Meeting and the Resolutions to be
proposed at the Dowlais General Meeting.
8.
Information relating to AAM
As a leading global tier 1 automotive and
mobility supplier, AAM designs, engineers and manufactures
driveline and metal forming technologies to support electric,
hybrid and internal combustion vehicles. AAM's mission is to
deliver efficient, powerful and innovative solutions for its
customers.
Headquartered in Detroit, Michigan, AAM has
over 75 facilities in 16 countries across North America, Latin
America, Europe and Asia. AAM employs approximately 21,000
employees globally. AAM is a Delaware corporation and AAM Shares
are publicly traded on the New York Stock Exchange
(NYSE:AXL).
AAM has established a high-efficiency product
portfolio that is designed to improve axle efficiency and fuel
economy through innovative product design technologies. Its
portfolio includes high-efficiency axles, aluminium axles and
all-wheel-drive applications. AAM's metal forming segment
represents the largest automotive forging operation in the world,
and provides engine, transmission, driveline and safety-critical
components for light, commercial and industrial vehicles. Net sales
for 2023 were approximately $6.08 billion.
9. AAM
current trading and outlook
AAM updates its full year 2024 financial
estimates as follows:
AAM FY24
Profit Estimate
For full year 2024:
·
AAM is estimating sales in
the range of $6.10 - $6.15 billion.
·
AAM is estimating Adjusted
EBITDA in the range of $740 - $750 million.
·
AAM is estimating Adjusted
free cash flow in the range of $220 - $230
million.
The statements above in relation to Adjusted
EBITDA and Adjusted free cash flow (together, the "AAM FY24 Profit Estimate") constitute
profit estimates for the purposes of the Code.
The assumptions and basis of preparation on
which the AAM FY24 Profit Estimate is based and the confirmations
from the AAM Directors as required by Rule 28.1(c) of the Code are
set out in Appendix 4 to this
Announcement.
10.
Information relating to Dowlais
Dowlais is a specialist engineering group
focused on the automotive sector. Dowlais develops and delivers
precisely engineered solutions that are shaping the future of the
automotive industry through its two leading high-technology
engineering businesses: GKN Automotive and GKN Powder
Metallurgy.
·
GKN
Automotive: a global leader in the development
and production of sideshafts, propshafts, AWD systems and advanced
differentials and a trusted partner to over 90 per cent. of global
automotive OEMs. Its products drive the wheels of around
half the world's light vehicles, and it has been a pioneer
in the development of eDrive systems, remaining at the
forefront of electric vehicle powertrain technology.
·
GKN Powder
Metallurgy: a global leader in the production
of sintered metal products for the automotive and industrial
sectors and a world-class manufacturer of atomised metal powders.
Its world-class engineering expertise and sustainable technology
enables the design and production of parts with complex geometries,
higher densities and improved physical properties.
Dowlais is headquartered in the United Kingdom,
and operates across the Americas, Europe and Asia with over 70
manufacturing facilities and seven global innovation centres.
Dowlais employs approximately 30,000 employees globally, including
its joint ventures. Dowlais Shares are publicly traded on the
London Stock Exchange (LSE: DWL).
11. Dowlais
current trading
Overall performance for the year
ended 31 December 2024 was in line with management's expectations,
demonstrating Dowlais' resilience in navigating a market
environment that has continued to be volatile. Dowlais has executed
well on its strategic priorities, with a continued focus on
delivering operational efficiencies and commercial recoveries
amidst challenging market conditions. Please see further details on
the Dowlais FY24 Profit Estimate in Appendix 5
to this Announcement.
Dowlais plans to announce its full year results
on 5 March 2025.
12.
Strategic plans and intentions with regard to management,
employees, pensions and places of business
Board,
management team and employees of the Combined
Group
AAM recognises and greatly respects the
expertise and experience of Dowlais' management and employees.
Consequently, AAM places significant importance on the continued
contributions of Dowlais' employees to the success of the Combined
Group following completion of the Combination. AAM intends to
integrate the businesses and blend the management teams to ensure
that management experience and expertise is retained for the
benefit of the Combined Group as a whole.
David C. Dauch will serve as the Chairman and
Chief Executive Officer of the Combined Group. In addition, Roberto
Fioroni (Chief Financial Officer, Dowlais), Helen Redfern (Chief
People, Sustainability and Communications Officer, Dowlais), Markus
Bannert (Chief Executive Officer, GKN Automotive), and Jean-Marc
Durbuis (Chief Executive Officer, GKN Powder Metallurgy) will be
invited to join existing AAM executives as part of the senior
executive management team of the Combined Group, in roles to be
confirmed. In addition, there has been no discussion of
incentivisation arrangements for these or other members of Dowlais'
senior management team.
It is also expected that Simon Mackenzie Smith
(Chair, Dowlais) and Fiona MacAulay, who currently serve on the
Dowlais Board, will join the Board of AAM following completion of
the Combination.
At the same time, AAM intends to optimise the
structure of the Combined Group to achieve the anticipated benefits
of the Combination. Preliminary evaluations suggest that annual run
rate cost synergies of approximately $300 million are expected to
be substantially achieved by the end of the third full year
following completion of the Combination. These synergies would be
achieved through efficiencies across SG&A, procurement, and
operational efficiencies.
While no decisions have been taken, following
the synergy analysis AAM intends a headcount reduction potentially
up to approximately 2.5 per cent. of the total Combined Group
workforce. Any headcount reduction would emphasise the
best-in-class approach AAM intends to take and, therefore, the
impact as between employees of the AAM Group and Dowlais Group will
be determined as part of integration. This expected reduction
primarily involves: (i) duplicative corporate, head office,
administrative and senior management positions across AAM's and
Dowlais' respective businesses; and (ii) potential consolidation of
certain manufacturing and R&D facilities, as further referenced
below. Provisionally, AAM has identified approximately 500 roles
across the Combined Group (which is inclusive of the approximately
70 positions referred to below as a result of overlap within the
R&D functions) that appear to be duplicative, representing
approximately 1 per cent. of the combined workforce. Additionally,
with respect to potential facility consolidation and operating
improvements, AAM intends to make further headcount reductions
potentially up to an additional headcount reduction of
approximately 750 positions, representing approximately 1.5 per
cent. of the total combined workforce.
The finalisation and implementation of any
headcount reductions will be subject to comprehensive planning and
appropriate engagement with stakeholders, including any required
information and consultation processes with any affected employees
and any applicable employee representative bodies. Any affected
individuals will be treated in a manner consistent with AAM's and
Dowlais' high standards, culture and practices and in compliance
with all applicable laws. AAM intends to approach employee and
management integration with the aim of retaining and motivating the
best talent across the Combined Group to create a best-in-class
organisation.
As set out in the Cooperation Agreement, AAM
has agreed that there will be no material changes to the
remuneration or conditions of employment of Dowlais employees for a
period of 12 months following the Combination. However, AAM does
intend to review the alignment of the remuneration and
incentivisation arrangements between employees and management of
the Combined Group as part of its longer term integration planning.
This review will also cover other policies within the Combined
Group, with a view to potentially harmonising these arrangements
for employees and management across the Combined Group,
particularly those in equivalent positions, over time as is
appropriate and where possible. The finalisation and implementation
of any such harmonisation will be subject to comprehensive planning
and appropriate engagement with stakeholders, including any
required information and consultation processes with any affected
employees and applicable employee representative bodies.
AAM acknowledges the importance and value of
Dowlais' employee share-based incentive arrangements as further
detailed at paragraph 17 (Dowlais Share Plans). In due course,
participants in those arrangements will be contacted regarding the
effect of the Combination on their outstanding awards. Details of
the effect of the Combination on outstanding awards will also be
set out in the Scheme Document. Additionally, AAM intends,
following the completion of the Combination, to extend AAM's
share-based incentive arrangements to relevant Dowlais' employees
on a basis consistent with arrangements for equivalent employees of
AAM, considering their expected roles within the Combined
Group.
Headquarters,
headquarter functions, locations and fixed assets
The Combined Group will have its global
headquarters in Detroit, Michigan, U.S. Consequently, it is
anticipated that following completion of the Combination and a
subsequent orderly handover of activities as part of the wider
integration, Dowlais' current headquarters office in London, U.K.,
would be closed at the appropriate time, subject to appropriate
engagement with stakeholders, including any required information
and consultation processes with affected employees regarding
relocation or severance. In addition, the Combined Group will
continue to have business offices in each major region of the
world.
Following completion of the Combination, AAM
intends to evaluate the business, technical, and manufacturing
locations and fixed assets of both AAM and Dowlais to optimise the
performance of the Combined Group. In conducting such evaluation
AAM will look to maximise synergies whilst taking a best of both
approach. This evaluation is expected to result in the
rationalisation of certain sites currently operated by AAM and/or
Dowlais. To the extent any rationalisation results in a headcount
reduction, AAM intends to adopt a best-in-class approach to reflect
the functions and roles going forward at each location.
AAM has not been able to carry out in-person
site visits at Dowlais' manufacturing facilities, nor does it have
sufficiently detailed plant-level information relating to capacity,
utilisation, capabilities and available site space, and therefore
has been unable to make definitive plans with respect to specific
manufacturing locations. Preliminary analysis suggests that
optimising the Combined Group's existing footprint would, in
addition to the consolidation of R&D facilities mentioned
below, potentially involve the closure or combination of some
manufacturing facilities globally, although the specific number and
locations have not yet been identified. It is expected any
consolidation will be done on a business unit and regional basis.
All business location rationalisation will be implemented in
accordance with applicable law, be subject to comprehensive
planning and appropriate engagement with stakeholders, including
any required information and consultation processes with any
affected employees and applicable employee representative
bodies.
The headcount reduction resulting from the
foregoing consolidations is included in the 2.5 per cent. headcount
reduction referred to above.
Innovation,
research and development
AAM values the historic and ongoing investment
that Dowlais has made in its technology, as well as the
infrastructure and expertise within the Dowlais Group to maintain
and enhance its existing customer offerings. AAM is dedicated to
being at the forefront of development within the industry, and as
such believes that the Combined Group's research and development
(R&D) capability is integral to its strategy for long-term
sustainable growth and the success of the Combined Group. This
involves driving the pace of innovation by employing the best
talent and committing meaningful investments to create and expand
future opportunities. AAM's board and management believe that
combining AAM and Dowlais' R&D Dowlais' capabilities will
enable the development of innovative solutions to support internal
combustion engine (ICE), hybrid and electric
powertrains.
While AAM intends to retain Dowlais' R&D
capabilities, it is expected that, following completion of the
Combination, at an appropriate time Dowlais' existing facilities in
Auburn Hills, Michigan, which house R&D and other functions,
will be consolidated into AAM's advanced design and technical
centre which is adjacent to AAM's global headquarters in Detroit,
Michigan, and its facility in Rochester Hills, Michigan, both of
which are in close proximity to Auburn Hills. Such integration will
involve comprehensive planning and appropriate engagement with
employees and other stakeholders.
It is also expected that there will be a
headcount reduction of approximately 70 positions globally within
the R&D functions of the Combined Group because of overlapping
projects, activities and management teams as well as certain
operating efficiencies inclusive of any headcount reduction
resulting from consolidation of the R&D facilities in Michigan.
This expected headcount reduction is included within the 2.5 per
cent. referenced above. Consistent with AAM's intended approach to
headcount reductions across the Combined Group the headcount
reductions in R&D will be conducted with the aim of retaining
the best talent across the Combined Group.
Pensions
AAM does not intend to make any changes to the
agreed employer contributions into Dowlais' existing defined
benefit and defined contribution pension schemes. This includes
maintaining the current arrangements for funding Dowlais' defined
benefit pension schemes, the level of benefits for existing
members, and the admission of new members to these pension schemes
following the Effective Date.
AAM has entered into discussions with the
trustee of the Dowlais' U.K. pension schemes. The trustee has
confirmed that, based on the information provided by AAM thus far
and the representations made to date, it has no reason to believe
that the Combination would have a material adverse effect on the
employer covenant or likelihood of benefits being received.
Additionally, AAM has agreed to maintain an open dialogue with the
trustee in relation to any future changes that might affect the
covenant supporting Dowlais' U.K. pension schemes.
Other
items
As part of the Combination, any AAM Shares
issued to Dowlais Shareholders will be authorised for primary
listing on the New York Stock Exchange.
The Dowlais Shares are currently admitted to
the equity shares (commercial companies) category of the Official
List and to trading on the Main Market of the London Stock Exchange
and, as set out in paragraph 19
(Cancellation of admission
to listing and re-registration as a private company), before
the Effective Date, an application shall be made to the FCA and the
London Stock Exchange to cancel such admissions to listing and
trading, to take effect on the Business Day following the Effective
Date. Dowlais is also expected to be re-registered as a private
company on or after the Effective Date.
No statements in this paragraph
12 (Strategic
plans and intentions with regard to management, employees, pensions
and places of business) constitute "post-offer undertakings"
for the purposes of Rule 19.5 of the Code.
13.
Dividends
In addition to the consideration
payable in connection with the Combination, each Dowlais
Shareholder will be entitled to receive the payment of a final cash
dividend by Dowlais of up to 2.8 pence for each Dowlais Share (the
"FY24 Final Dividend") (to be
paid (subject to the approval of the Dowlais Board) as part of
Dowlais' ordinary course 2024 financial year dividend calendar)
without any reduction of the consideration payable under the terms
of the Combination.
AAM reserves the right to reduce the
consideration payable in respect of each Dowlais Share under the
terms of the Combination to the extent that the FY24 Final Dividend
exceeds 2.8 pence per Dowlais Share. If any dividend or other
distribution is announced, declared, made or paid, or becomes
payable, in respect of Dowlais Shares on or after the date of this
Announcement and before the Effective Date, other than the FY24
Final Dividend or any repurchases of Dowlais Shares by Dowlais
pursuant to the Buyback Programme, AAM reserves the right to reduce
the consideration payable in respect of each Dowlais Share by the
amount of all or part of any such dividend or other distribution.
If AAM exercises this right or makes such a reduction in respect of
a dividend, other distribution or return of capital that has not
been paid, Dowlais Shareholders will be entitled to receive and
retain that dividend, other distribution or return of
capital.
From the date of this Announcement until the
Effective Date, AAM is not permitted to announce, declare, make or
pay any dividend, other distribution or return of capital and, if
AAM does not comply with this restriction, Dowlais shall be
entitled (at its sole discretion) to declare and pay an equalising
dividend to Dowlais Shareholders, without any consequential
reduction to the consideration.
Further details on these
arrangements can be found in Clause 3 of the Co-operation Agreement
and will be set out in the Scheme Document.
14.
Irrevocable undertakings
AAM has received irrevocable undertakings to
vote in favour (or procure a vote in favour) of the Scheme at the
Court Meeting and the Resolutions to be proposed at the General
Meeting from those Dowlais Directors who hold Dowlais Shares in
respect of their own beneficial shareholdings, totalling 3,864,429
Dowlais Shares representing approximately 0.3 per cent. of the
issued ordinary share capital of Dowlais as at 28 January 2025,
being the last Business Day before the date of this
Announcement.
Further details of these irrevocable
undertakings are set out in Appendix 3 to this
Announcement.
15.
Financing of the Combination
Concurrently with this Announcement, AAM and
certain of its subsidiaries entered into (i) a Credit Agreement
(the "Backstop Credit
Agreement") with the lenders party thereto and JPMorgan
Chase Bank N.A., as administrative agent, (ii) a First Lien Bridge
Credit Agreement (the "First Lien
Bridge Credit Agreement") with the lenders party thereto and
JPMorgan Chase Bank N.A., as administrative agent and (iii) a
Second Lien Bridge Credit Agreement (the "Second Lien Bridge Credit Agreement"
and together with the First Lien Bridge Credit Agreement, the
"Bridge Credit Agreements")
with the lenders party thereto and JPMorgan Chase Bank N.A., as
administrative agent.
The Backstop Credit Agreement provides for term
loans in an aggregate principal amount of $1.98 billion and
revolving credit facilities in an aggregate amount of $1.25
billion. Proceeds of the commitments provided under the Backstop
Credit Agreement will be used, together with proceeds of the
commitments provided under the Bridge Credit Agreements, to finance
the Combination, including the cash consideration payable to Scheme
Shareholders and debt refinancing costs, and to refinance in full
the Existing Credit Agreement (as defined below). Subject to the
terms of the Backstop Credit Agreement, AAM expects to replace the
Backstop Credit Agreement before the closing of the Combination by
seeking to obtain the consent of its existing lenders to amend
AAM's existing syndicated term loans and revolving credit
facilities under AAM's credit agreement, dated as of March 11, 2022
(as amended from time to time, the "Existing Credit Agreement"), by and
among AAM, certain of its subsidiaries, the lenders party thereto
and JPMorgan Chase Bank, N.A., as administrative agent, to (i)
increase the maximum revolving credit facility amount by $425
million to $1.35 billion and (ii) add a new term loan facility
(which will be utilised, together, in part, with the existing
facilities thereunder, to finance the Combination) and to effect
certain other changes thereto in connection with the
Combination.
The First Lien Bridge Credit Agreement provides
for commitments of up to $843 million and the Second Lien Bridge
Credit Agreement provides for commitments of up to $500 million.
Proceeds from the commitments provided under the Bridge Credit
Agreements will be used to finance the Combination, including the
cash consideration payable to Scheme Shareholders and debt
refinancing costs. Subject to the conditions in the Bridge Credit
Agreements, AAM intends to reduce commitments or the borrowings
under the Bridge Credit Agreements by accessing the debt capital
markets prior to or following the closing of the Combination. Such
debt issuance would be subject to market and other conditions and
this Announcement does not constitute the offer or sale of any
securities in any jurisdiction.
J.P. Morgan Cazenove, as financial adviser to
AAM, is satisfied that sufficient resources are available to AAM to
satisfy in full the cash consideration payable to Scheme
Shareholders pursuant to the terms of the Combination.
Further information on the financing of the
Combination will be set out in the Scheme Document.
16.
Combination‑related arrangements
Confidentiality
Agreement
AAM and Dowlais entered into the Revised
Confidentiality Agreement on 14 January 2025 pursuant to which each
of AAM and Dowlais has undertaken to keep certain information
relating to the Combination and to the other party confidential and
not to disclose such information to third parties (except to
certain permitted parties) for the purposes of evaluating the
Combination unless required by law or regulation. The Revised
Confidentiality Agreement also contains: (i) reciprocal customary
non-solicit provisions from the date of the Revised Confidentiality
Agreement until 12 months after the earlier of the cessation of
discussions between AAM and Dowlais in relation to the Combination
and the termination or lapse of the Scheme (or, if the Combination
is implemented by way of a Takeover Offer, the Takeover Offer); and
(ii) customary standstill provisions applicable to AAM only for a
period of 12 months after the date of the Revised Confidentiality
Agreement, in each case subject to customary carve-outs. The
Revised Confidentiality Agreement amended an earlier
confidentiality agreement entered into between AAM and Dowlais on
29 October 2024, which was on the same terms as the Revised
Confidentiality Agreement, save for the reciprocal non-solicit
provisions applied for 12 months from 29 October 2024.
Clean Team
Agreement
Dowlais and AAM have entered into a Clean Team
Agreement dated 13 December 2024, which sets out, among other
things, how confidential information that is competitively
sensitive can be disclosed, used or shared between Dowlais' clean
team individuals and/or external advisers retained by Dowlais and
AAM's clean team individuals and/or external advisers retained by
AAM.
Joint Defense
Agreement
Dowlais, AAM and their respective external
legal counsels have entered into a Joint Defense Agreement dated 6
December 2024, the purpose of which is to ensure that the exchange
and/or disclosure of certain materials, in particular in relation
to the antitrust and regulatory workstreams, only takes place
between their respective external legal counsels and external
regulatory experts, and does not diminish in any way the
confidentiality of such materials and does not result in a waiver
of any privilege, right or immunity that might otherwise be
available.
Co-operation
Agreement
On the date of this Announcement, AAM and
Dowlais have entered into a Co-operation Agreement in relation to
the Combination pursuant to which, among other things:
· AAM
has agreed to use all reasonable endeavours to obtain the
regulatory conditions and authorisations as soon as reasonably
practicable following date of this Announcement and in any event in
sufficient time to enable the Effective Date to occur by the Long
Stop Date;
· AAM
and Dowlais have agreed to certain customary undertakings to
cooperate in relation to such regulatory clearances and
authorisations;
· AAM
has agreed to provide Dowlais with certain information for the
purposes of the Scheme Document and otherwise assist with the
preparation of the Scheme Document and Dowlais has agreed to
provide AAM with certain information for the purposes of the AAM
Proxy Statement; and
· AAM
has agreed to take certain steps to assist certain Dowlais
Shareholders in taking any required action as a result of the
potential application of US withholding tax under Section 304 of
the US Internal Revenue Code, including the provision of any
certifications which may be required to be made by Dowlais
Shareholders to certify whether or not it meets
the requirements for exemption from U.S. Deemed Dividend Tax
(and therefore potentially not be subject to such
withholding tax).
The Co-operation Agreement records the
intention of AAM and Dowlais to implement the Combination by way of
a Scheme, subject to AAM's right to switch to a Takeover Offer in
certain circumstances. AAM and Dowlais have agreed to certain
customary provisions if the Scheme should switch to an
Offer.
The Co-operation Agreement also contains
provisions that shall apply in respect of Dowlais Shareholders'
dividend entitlements (as summarised in paragraph
13 (Dividends) of this Announcement) and
directors' and officers' insurance, as well as the Dowlais Share
Plans, other incentive arrangements and other employee-related
matters (further details of which will be provided in the Scheme
Document). AAM has agreed that from the date of the Co-operation
Agreement until the Effective Date it shall not announce, declare,
make or pay any dividends to AAM Shareholders (as summarised in
paragraph 13 (Dividends) of this Announcement). In
addition, AAM has also committed, from the date of the Co-operation
Agreement until the earlier of receipt of the AAM Shareholder
approvals, not to solicit or engage in any discussions of
alternative proposals to the Combination (subject to certain
limited exceptions). The Co-operation Agreement provides that AAM
will pay a break fee to Dowlais in the following amounts and
circumstances (subject to certain exceptions and
exclusions):
· $50
million, in cash, if AAM's Board no longer recommends the
Combination or if AAM fails to hold the AAM Shareholders Meeting
prior to the Long Stop Date;
· $50
million, in cash, if AAM invokes the Conditions set out in
3 (Official
authorisations and regulatory clearances) and
6 (General
Third Party approvals) of Part A of Appendix 1 to this
Announcement or such Condition has not been satisfied or waived by
AAM by the Long Stop Date; or
· $14
million, in cash, if AAM Shareholders do not approve the
resolutions required to implement the Combination at the AAM
Shareholders Meeting and there has been no change in the AAM
Board's recommendation.
The Co-operation Agreement shall terminate in
certain customary circumstances, including but not limited
to:
· if
agreed in writing between AAM and Dowlais;
·
upon service of written notice by AAM to Dowlais if the
Dowlais Directors change their recommendation in respect of the
Combination;
·
upon service of written notice by either AAM or Dowlais to
the other if: (i) a competing offer becomes effective or is
declared or becomes unconditional; (ii) the Combination is
withdrawn, terminates or lapses in accordance with its terms; (iii)
prior to the Long Stop Date, any Condition has (with the consent of
the Panel) been invoked by AAM; (iv) the Scheme is not approved at
the Court Meeting, the Resolutions to be proposed at the General
Meeting are not passed or the Court refuses to sanction the Scheme;
(v) unless otherwise agreed by AAM and Dowlais in writing or
required by the Panel, the Effective Date has not occurred by the
Long Stop Date; or (vi) such resolution or resolutions as are
necessary to approve, effect and implement the Combination,
including to authorise the creation, allotment and issue of the New
AAM Shares, are not passed at the AAM Shareholder Meeting;
or
·
upon service of notice by Dowlais to AAM if: (i) AAM makes an
announcement prior to publication of the AAM Proxy Statement that
it will not convene the AAM Shareholder Meeting or it intends not
to file the AAM Proxy Statement with the SEC or transmit it to AAM
Shareholders; (ii) the AAM Proxy Statement does not include the AAM
Directors' recommendation; or (iii) the AAM Directors change their
recommendation in respect of the Combination; and
·
upon the Effective Date.
Pensions
Agreement
AAM, Dowlais and the trustees (the
"Trustees") of Dowlais' UK
defined benefit pension schemes (the "Pension Schemes") have entered into a
pensions agreement. In summary, AAM has agreed that, with effect
from and conditional on Completion: (i) it will consult with the
Trustees before changing the key terms of the material intercompany
balances of the main entities supporting the Pension Schemes'
employer covenant and before effecting any intra-group
reorganisation that would move material subsidiaries supporting the
Schemes' employer covenant to another part of the Combined Group;
(ii) it will share information with the Trustees at agreed regular
intervals regarding the Combined Group's financial performance and
business prospects, progress on delivering synergies and material
corporate events; and (iii) it supports the objective of the GKN
Group Pension Scheme No. 3 of achieving full funding on a low
dependency funding basis by the "relevant date" in accordance with
pensions legislation and will consider in good faith potential
courses of action to achieve that objective as part of the next
actuarial valuation. AAM has also provided confirmations about the
information shared with the Trustees in connection with the
Combination and the Trustees have confirmed that, based on the
information provided by AAM thus far and the representations made
to date, they consider that the Combination would not have a
materially detrimental effect on the Pension Schemes. The agreement
also contains customary confidentiality provisions subject to
certain standard exceptions.
17. Dowlais
Share Plans
Participants in the Dowlais Share Plans shall
be contacted regarding the effect of the Combination on their
rights under the Dowlais Share Plans and appropriate proposals will
be made to such participants in due course. Details of these
proposals will be set out in the Scheme Document.
Arrangements between AAM and Dowlais
management
Liam
Butterworth, Roberto Fioroni, John Nicholson and Helen
Redfern
In order to promote the retention of Liam
Butterworth and Roberto Fioroni, currently Chief Executive Officer
("CEO") and Chief Financial
Officer ("CFO") of Dowlais
respectively, through to the completion of the Combination, AAM has
agreed that it will make cash payments of 150 per cent. to the CEO
and 120 per cent. to the CFO of their base salary (the
"Executive Director Transaction
Awards"), as detailed in the Co-operation Agreement. The
Executive Director Transaction Awards will be paid, conditional on
completion of the Combination and Dowlais being delisted from the
London Stock Exchange: (i) 50 per cent. within 30 days of
Completion of the Combination; and (ii) 50 per cent. within 30 days
of the date that is six months after Completion of the Combination.
Payment of the Executive Director Transaction Awards is subject to
the CEO or CFO (as relevant) being employed by the Combined Group
and not under notice on the relevant payment date or having been
subject to, or received notice of, a Qualifying Termination (as
defined in the Co-operation Agreement) before the relevant payment
date. In the event of the CEO or CFO being subject to a Qualifying
Termination, the Transaction Award will be payable as soon as
practicable after termination of employment.
In order to promote the retention of John
Nicholson and Helen Redfern, currently General Counsel
("GC") and Chief People,
Sustainability and Communications Officer ("CPSCO") of Dowlais respectively,
through to the completion of the Combination, Dowlais will make
cash payments of 222 per cent. to the GC and 117 per cent. to the
CPSCO of their base salary (the "Retention Awards"). The Retention
Awards will be paid: (i) 50 per cent. within 30 days of Completion
of the Combination; and (ii) 50 per cent. within 30 days of the
date that is six months after Completion of the Combination.
Payment of the Retention Awards is subject to the GC or CPSCO (as
relevant) being employed by the Combined Group and not under notice
on the relevant payment date or having been subject to, or received
notice of, a Qualifying Termination (as defined in the Co-operation
Agreement) before the relevant payment date. In the event of the GC
or CPSCO being subject to a Qualifying Termination, the Retention
Award will be payable as soon as practicable after termination of
employment.
As required by, and solely for the purposes of,
Rule 16.2 of the Code, Barclays and Rothschild & Co have
reviewed the terms of the CEO Executive Director Transaction Award,
CFO Executive Director Transaction Award, the GC Retention Award
and the CPSCO Retention Award together with other information
deemed relevant and confirmed that, in their opinion, the Executive
Director Transaction Awards and the Retention Awards are fair and
reasonable. In providing their advice, Barclays and Rothschild
& Co, have taken into account the commercial assessments of the
Dowlais Directors. Barclays and Rothschild & Co are acting as
the independent financial advisers to Dowlais for the purposes of
Rule 3 of the Code.
18.
Structure of and conditions to the Combination
It is intended that the Combination will be
implemented by means of a Court-sanctioned scheme of arrangement
under Part 26 of the Companies Act, although AAM reserves the right
to elect to implement the Combination by means of a Takeover
Offer, subject to the terms of the Co-operation
Agreement, and obtaining the consent of the Panel. The
purpose of the Scheme is to provide for AAM to become the owner of
the entire issued and to be issued ordinary share capital of
Dowlais. The Scheme is an arrangement between Dowlais and the
Scheme Shareholders and is subject to the approval of the Court.
The procedure involves, among other things, an application by
Dowlais to the Court to sanction the Scheme, in consideration for
which Scheme Shareholders will receive cash on the basis described
in paragraph 2 (The Combination) of this Announcement.
On the Scheme becoming Effective: (i) it will
be binding on all Scheme Shareholders, irrespective of whether or
not they attended or voted at the Court Meeting and the General
Meeting (and, if they attended and voted, whether or not they voted
in favour); and (ii) share certificates in respect of Scheme Shares
will cease to be of value and should be destroyed and
entitlements to Scheme Shares held within the
CREST system will be cancelled. The New AAM Shares will be issued
by AAM and (subject to the applicability of any U.S. withholding
tax as described in this Announcement) the cash consideration
payable under the terms of the Combination will be despatched to
Scheme Shareholders by AAM no later than 14 days after the
Effective Date.
Any Dowlais Shares issued before the Scheme
Record Time will be subject to the terms of the Scheme. The
Resolutions to be proposed at the General Meeting will, among other
matters, provide that the Dowlais Articles be amended to
incorporate provisions requiring any Dowlais Shares issued after
the Scheme Record Time (other than to AAM or its nominee(s)) to be
automatically transferred to AAM on the same terms as the
Combination (other than terms as to timings and formalities). The
provisions of the Dowlais Articles (as amended) will avoid any
person (other than AAM or its nominee(s)) holding ordinary shares
in the capital of Dowlais after the Effective Date.
The Combination is subject to a number of
Conditions and certain further terms set out in
Appendix 1 to this Announcement and to the full
terms and conditions to be set out in the Scheme Document,
including, among other things:
· the
approval of the Scheme by a majority in number of the Scheme
Shareholders, representing not less than 75 per cent. in value of
the Scheme Shares held by those Scheme Shareholders, present and
voting, either in person or by proxy, at the Court
Meeting;
· the
passing of the Resolutions by the requisite majority of Dowlais
Shareholders at the General Meeting;
· the
Scheme being sanctioned by the Court (without modification, or with
modification on terms agreed by AAM and Dowlais) and a
copy of the Court Order being delivered to the Registrar of
Companies;
· the
receipt of certain regulatory and antitrust approvals
(including the EU Antitrust Condition, the U.S.
Antitrust Condition, the China Antitrust Condition, the Brazil
Antitrust Condition and the Mexico Antitrust
Condition);
· the
amendment to AAM's certificate of incorporation to increase the
number of authorised AAM Shares being duly approved by the
affirmative vote of the holders of a majority in voting power of
the AAM Shares entitled to vote thereon at the AAM Shareholder
Meeting and the issuance of the New AAM
Shares in connection with the Combination being duly approved by
the affirmative vote of the holders of a majority in voting power
present in person or by proxy at the AAM Shareholder
Meeting;
·
confirmation having been received by AAM that the New AAM
Shares have been approved for listing, subject to official notice
of issuance, on the New York Stock Exchange; and
· the
Scheme becoming Effective no later than the Long Stop
Date.
It is expected that the Scheme Document,
containing further information about the Combination
(including the expected timetable for the Combination and how
Dowlais Shareholders can hold, access and trade their interests in
New AAM Shares), together with notices of the Court
Meeting and General Meeting, the Forms of Proxy and the Forms of
Election in relation to the Mix and Match Facility, will
be posted to Dowlais Shareholders in May or June 2025. The
extended period until publication of such documentation in relation
to the Combination has been agreed with the Panel and Dowlais and
is to allow the Scheme Document to be published at or around the
same time as the mailing of the AAM Proxy Statement following
publication of the annual results of both AAM and Dowlais for the
year ended 31 December 2024 and allowing for any SEC review period
of the AAM Proxy Statement (if required). Subject to
the satisfaction or, where permitted, waiver of all relevant
conditions, including the Conditions, and certain
further terms set out in Appendix 1 to this Announcement and to be
set out in the Scheme Document, and subject to the approval and
availability of the Court, it is expected that the Scheme will
become Effective in 2025.
Shareholders' attention is drawn to
the section entitled "High-Level U.S. Federal Income Tax
Consequences" in this Announcement. The Scheme Document will
contain details on the potential application of section 304 of the
U.S. Internal Revenue Code (IRC), and the potential resulting U.S.
withholding tax at a rate of up to 30 per cent. to the cash
consideration received pursuant to the Combination, and will
provide information for Dowlais Shareholders on how to certify
whether or not it meets the requirements for exemption from U.S.
Deemed Dividend Tax (and therefore potentially not be subject to
such withholding tax), as described further below in the section
entitled "High-Level U.S. Federal Income Tax
Consequences".
The Scheme will be governed by
English law and will be subject to the jurisdiction of the Court.
The Scheme will be subject to the applicable requirements of the
Code, the Panel, the London Stock Exchange, the Court and the
FCA.
19.
Cancellation of admission to listing and re-registration as a
private company
It is intended that dealings in, and
registration of transfers of, Dowlais Shares will be suspended
shortly before the Effective Date at a time to be set out in the
Scheme Document. It is further intended that applications will be
made to the London Stock Exchange to
cancel trading in Dowlais Shares on the Main Market of the London
Stock Exchange, and to the FCA to cancel the listing of Dowlais
Shares on the Official List, in each case with effect from or
shortly following the Effective Date.
On the first Business Day after
the Effective Date, entitlements to Dowlais Shares held within the
CREST system will be cancelled, and share certificates in respect
of Dowlais Shares will cease to be valid.
It is also intended that, following the
Effective Date, Dowlais will be re-registered as a private limited
company.
In addition, the New AAM Shares will be
authorised for primary listing on the New York Stock Exchange
subject to official notice of issuance.
20.
Interests in Dowlais
Shares
As at close of business on 28 January 2025
(being the last Business Day before the date of this Announcement),
save for the irrevocable undertakings referred to in
paragraph 14 (Irrevocable undertakings) above,
neither AAM, nor any of the AAM Directors, nor any member of the
AAM Group, nor, so far as the AAM Directors are aware, any person
acting in concert with AAM for the purposes of the Combination,
had:
(A) any
interest in, or right to subscribe for, any relevant securities of
Dowlais;
(B) any
short position in (whether conditional or absolute and whether in
the money or otherwise), including any short position under a
derivative, any agreement to sell or any delivery obligation or
right to require another person to purchase or take delivery of,
any relevant securities of Dowlais;
(C)
procured an irrevocable commitment or letter of intent to accept
the terms of the Combination in respect of relevant securities of
Dowlais; or
(D)
borrowed or lent, or entered into any financial collateral
arrangements in respect of, any relevant securities of Dowlais;
or
(E) entered
into any Dealing Arrangement in respect of any relevant securities
of Dowlais.
In the interests of secrecy before this
Announcement, AAM has not made any enquiries in respect of the
matters referred to in this paragraph 20 of certain parties who may
be deemed by the Panel to be acting in concert with AAM for the
purposes of the Combination. Enquiries of such parties will be made
as soon as practicable following the date of this Announcement, and
AAM confirms that further disclosure in accordance with Rule 8.1(a)
and Note 2(a)(i) on Rule 8 of the Code will be made as soon as
possible and by no later than 12 noon (London time) on 12 February
2025.
21. Melrose
ESOT
Upon the demerger of Dowlais from Melrose
Industries PLC ("Melrose"),
27,865,471 Dowlais Shares (being 2.1 per cent. of the total issued
ordinary shares of Dowlais as at 28 January 2025 (being the last
Business Day before the date of this Announcement)), were placed in
the Melrose Employee Share Ownership Trust (the "Melrose ESOT") to satisfy options over
Dowlais Shares granted by Melrose to individuals (being certain
Melrose group employees and executive directors) ("MASP Options") under the Melrose
Automotive Share Plan (the "MASP"). The MASP and the Melrose ESOT
are operated independently from Dowlais and Dowlais has no
oversight of either of these, including over the terms of the MASP,
the number of outstanding MASP Options and the number of shares
that vest in accordance with the terms of the MASP. According to
the circular issued by Melrose in connection with the demerger,
dated 3 March 2023 (the "Melrose
Demerger Circular"), the MASP performance period runs up to
(but excluding) 31 May 2025 (the "MASP Crystallisation Date"). Based on
the disclosures made by Melrose in the Melrose Demerger Circular
and the value of the entire issued share capital of Dowlais implied
by the Combination as at 28 January 2025 (being the last Business
Day before the date of this Announcement), the options granted
under the MASP are not expected to vest or become exercisable in
accordance with their performance conditions. Based on the
disclosures made by Melrose in the Melrose Demerger Circular, upon
a change of control, scheme of arrangement or winding up of Dowlais
(a "Dowlais Trigger
Event"), the options under the MASP shall vest in full and
become immediately exercisable upon the date of, and immediately
prior to, the Dowlais Trigger Event. Although it is not explicit
from the disclosure in the Melrose Demerger Circular, based on such
disclosures the Dowlais Trigger Event could occur only upon such a
change of control or scheme of arrangement of Dowlais becoming
effective, rather than simply being announced and it is noted that
Completion is not expected to occur prior to the MASP
Crystallisation Date; however neither Dowlais nor AAM is aware of
the discretion (if any) exercisable under the terms of the MASP,
the potential for the MASP to be amended or the conditions for a
change of control, scheme of arrangement or winding up to
constitute a Dowlais Trigger Event and there can therefore be no
certainty as to the treatment of such awards as a result of the
Combination.
Melrose's disclosures in the Melrose Demerger
Circular state that, if, immediately after the MASP Crystallisation
Date, there remain Dowlais Shares held by the Melrose ESOT in
relation to which MASP Options have lapsed by operation of the
vesting provisions, then it is intended that the relevant Dowlais
Shares shall be transferred to Dowlais (or its nominee) and for
such Dowlais Shares to then be cancelled. Any amounts held by the
Melrose ESOT as a result of prior distributions received by the
Melrose ESOT in respect of such Dowlais Shares shall remain the
property of the Melrose ESOT. Dowlais is party to a tripartite
agreement entered into by Dowlais at the time of the demerger with
Melrose and Zedra Trust Company (Guernsey) Limited (acting as
trustee for the MASP) (the "Tripartite Agreement") pursuant to
which it has undertaken to cancel any Dowlais Shares upon receipt
from the trustee.
AAM has agreed that, to the extent that the
Dowlais Shares held by the Melrose ESOT are repurchased by Dowlais
for nil consideration pursuant to the Tripartite Agreement prior to
Completion (the "Cancelled
Shares"), AAM will increase the cash consideration and the
number of New AAM Shares payable in respect of each Dowlais Share
held pursuant to the Combination so as to allocate the cash
consideration and New AAM Shares which the Cancelled Shares would
have received on Completion to the Dowlais Shareholders based on
the fully diluted share capital of Dowlais at the time of such
cancellation, with cash consideration rounded to the nearest pence
and the number of New AAM Shares to four decimal places. So, for
example, if all of the 27,865,471 Dowlais Shares held by the
Melrose ESOT were to be cancelled and based on the fully diluted
share capital of Dowlais as at 28 January 2025 (being the last
Business Day before the date of this Announcement), the
consideration would be adjusted as follows such that Dowlais
Shareholders would be entitled to receive, for each Dowlais
Share:
· 43
pence in cash; and
·
0.0881 New AAM Shares.
There would be no change to the amount of the
FY24 Final Dividend a Dowlais Shareholder may receive.
For the purpose of this paragraph
21 and the above undertaking, the fully diluted
share capital of Dowlais at the time of a cancellation shall be
calculated on the basis of:
(a)
issued share capital of Dowlais at the time of such cancellation;
plus
(b)
all Dowlais Shares which may be issued on or after the date of such
cancellation on the vesting of awards under the Dowlais Share Plans
as at close of business of the day prior to such cancellation;
less
(c)
the number of Dowlais Shares held by the employee benefit trust
operated by Dowlais that can be used to satisfy the vesting of
awards under the Dowlais Share Plans as at close of business of the
day prior to such cancellation.
Neither Dowlais nor AAM have seen the terms of
the MASP and there can be no certainty that the MASP Options will
lapse or that the Dowlais Shares will be transferred to Dowlais if
a Dowlais Trigger Event has not completed by the MASP
Crystallisation Date. Neither Dowlais nor AAM is aware of the
discretion (if any) exercisable under the terms of the MASP, the
potential for the MASP to be amended or the conditions for a change
of control, scheme of arrangement or winding up of to constitute a
Dowlais Trigger Event.
The purpose of these arrangements is to ensure
that the total value of the consideration payable for the entire
issued and to be issued share capital of Dowlais remains the same
regardless of whether the MASP Options vest or lapse.
There can therefore be no certainty that any
such increase to the consideration payable per Dowlais Share under
the terms of the Combination will occur. As set out in paragraph 6
(Recommendation), the
Intention to Recommend (as defined in paragraph
6 (Recommendation)) is based solely on
the terms of the Combination as at the date of this Announcement,
and the financial advice received by the Dowlais Directors (as
described in paragraph 6 (Recommendation)) has been given on
that basis.
AAM will announce any increase to the
consideration payable per Dowlais Share under the terms of the
Combination under this paragraph 21 as
soon as is reasonably practicable upon the obligation to effect
such increase coming into effect. To the extent no such increase
has been made beforehand, AAM and/or Dowlais will also provide an
update on the latest position based on their understanding in
advance of the Court Meeting.
22.
Fractional entitlements
Fractions of New AAM Shares will not be
allotted to Dowlais Shareholders. Instead, all fractional shares
which a holder of Dowlais Shares would otherwise be entitled to
receive will be aggregated and calculations will be rounded down,
and such holder shall receive, in lieu of such fractional
entitlements, cash in an amount (rounded down to the nearest penny)
equal to such fractional amount multiplied by the last reported
sale price of AAM Shares on the New York Stock Exchange (as
reported in Bloomberg or, if not reported therein, in another
authoritative source selected by AAM) on the last Business Day
prior to the Effective Date.
23.
Overseas Shareholders
The availability of the Combination and the
distribution of this Announcement to Dowlais Shareholders who are
not resident in the United Kingdom may be affected by the laws of
the relevant jurisdiction in which they are located. Such persons
should inform themselves of, and observe, any applicable legal or
regulatory requirements of their jurisdiction. Dowlais Shareholders
who are in any doubt regarding such matters should consult an
appropriate independent professional adviser in the relevant
jurisdiction without delay.
This Announcement does not constitute an offer
for sale of any securities or an offer or an invitation to purchase
any securities. Dowlais Shareholders are advised to read carefully
the Scheme Document and related Forms of Proxy and Forms of
Election once these have been despatched.
24.
Documents available on website
Copies of the following documents will be
available promptly on AAM's and Dowlais' websites at
www.aam.com/investors/offer-for-Dowlais-Group-plc and www.dowlais.com,
respectively, subject to certain
restrictions relating to persons residing in
Restricted Jurisdictions until the end of the Offer Period:
(a)
this Announcement;
(b)
the irrevocable undertakings described in Appendix 3 to this
Announcement;
(c)
the Revised Confidentiality Agreement;
(d)
the Clean Team Agreement;
(e)
the Joint Defense Agreement;
(f)
the Co-operation Agreement;
(g)
the Pensions Agreement;
(h)
consent letters from each of Barclays, Rothschild & Co,
Investec, Deloitte and J.P. Morgan; and
(i) the
documents relating to the financing of the Combination.
Neither the content of the websites referred to
in this Announcement nor the content of any website
accessible from hyperlinks is incorporated into,
or forms part of, this Announcement.
25. Right
to proceed by way of a Takeover Offer
Subject to the terms of the Co-operation
Agreement, and obtaining the consent of the Panel, AAM reserves the
right to elect to implement the Combination by way of a Takeover
Offer as an alternative to the
Scheme.
In such event, such Takeover Offer will be
implemented on the same terms and conditions, so far as
applicable, as those which would apply to the
Scheme subject to appropriate amendments to reflect the change in
method of effecting the Combination, including (without limitation)
the inclusion of an acceptance condition set at 90 per cent. of
Dowlais Shares to which the Takeover Offer relates, (or such lesser
percentage as may be determined after consultation with the Panel
(if necessary)), being in any case more than 50 per cent. of the
voting rights normally exercisable at a general meeting of Dowlais,
including, for this purpose, any such voting rights attaching to
Dowlais Shares that are issued before the Takeover Offer becomes or
is declared unconditional (whether pursuant to the exercise of any
outstanding subscription or conversion rights or
otherwise).
26.
General
It is expected that the Scheme Document will be
posted to Dowlais Shareholders in May or June 2025. The extended
period until publication of the Scheme Document has been agreed
with the Panel and Dowlais and is to allow the Scheme Document to
be published at or around the same time as the mailing of the AAM
Proxy Statement following publication of the annual results of both
AAM and Dowlais for the year ended 31 December 2024 and allowing
for any SEC review period of the AAM Proxy Statement (if
required).
In deciding whether or not to vote or procure
votes to approve the Scheme at the Court Meeting or to vote or
procure votes in favour of the Resolutions relating to the Scheme
at the General Meeting in respect of their Dowlais Shares, Dowlais
Shareholders should rely on the information contained, and follow
the procedures described, in the Scheme Document.
Barclays and Rothschild & Co (as financial
advisers to Dowlais) and J.P. Morgan (as financial adviser to AAM)
have each given and not withdrawn their consent to the publication
of this Announcement with the inclusion in this Announcement of the
references to their names in the form and context in which they
appear.
The bases and sources for certain financial
information contained in this Announcement are set out in Appendix
2 to this Announcement. Details of undertakings received by AAM and
given by the Dowlais Directors are set out in Appendix 3. The
defined terms used in this Announcement are set out in
Appendix 7.
Enquiries
AAM
|
|
|
Christopher M. Son, Vice President,
Marketing & Communications
|
+1 (313) 758-4814
|
|
|
|
|
J.P. Morgan
(Exclusive financial adviser to AAM)
|
|
|
David Walker / Ian MacAllister
|
+1 (212) 270 6000
|
Robert Constant / Jonty Edwards
|
+44 (0) 203 493 8000
|
|
|
FGS Global (PR
adviser to AAM)
|
|
|
Jared Levy / Jim Barron
|
+1 212 687 8080
|
Charlie Chichester / Rory King
|
+44 20 7251 3801
|
|
|
Dowlais
|
|
Investors
|
|
Pier Falcione
|
+44 (0)7974 974690
|
|
|
Barclays
(Financial adviser and corporate broker to
Dowlais)
Guy Bomford / Adrian Beidas / Neal West
(Corporate Broking)
|
+44 (0) 20 7623 2323
|
Rothschild
& Co (Financial adviser to Dowlais)
|
|
|
Ravi Gupta / Nathalie Ferretti
|
+44 (0) 20 7280 5000
|
Investec Bank
plc (Joint corporate broker to Dowlais)
Carlton Nelson / Christopher Baird
|
+44 (0) 20 7597 5970
|
Montfort
Communications (PR adviser to Dowlais)
|
|
|
Nick Miles / Neil Craven
|
+44 (0) 7739 701 634
+44 (0) 7876 475 419
|
Allen Overy Shearman Sterling LLP is acting as
legal adviser to AAM. Slaughter and May is acting as legal adviser
to Dowlais. Cravath, Swaine & Moore LLP is acting as U.S. legal
adviser to Dowlais.
The person responsible for arranging the
release of this Announcement on behalf of Dowlais is John
Nicholson, General Counsel & Company Secretary.
Important notices relating to financial
advisers
J.P. Morgan
Securities LLC, together with its affiliate J.P. Morgan Securities
plc (which conducts its UK investment banking business as J.P.
Morgan Cazenove and which is authorised in the United Kingdom by
the Prudential Regulation Authority and regulated in the United
Kingdom by the Prudential Regulation Authority and the Financial
Conduct Authority). J.P. Morgan is acting as financial adviser
exclusively for AAM and no one else in connection with the
Combination and will not regard any other person as its client in
relation to the Combination and will not be responsible to anyone
other than AAM for providing the protections afforded to clients of
J.P. Morgan or its affiliates, nor for providing advice in relation
to the Combination or any other matter or arrangement referred to
herein.
Barclays,
which is authorised by the Prudential Regulation Authority and
regulated in the United Kingdom by the Financial Conduct Authority
and the Prudential Regulation Authority, is acting exclusively for
Dowlais and no one else in connection with the Combination and will
not be responsible to anyone other than Dowlais for providing the
protections afforded to clients of Barclays nor for providing
advice in relation to the Combination or any other matter referred
to in this Announcement.
In accordance
with the Code, normal United Kingdom market practice and Rule
14e-5(b) of the Exchange Act, Barclays and its affiliates will
continue to act as exempt principal trader in Dowlais securities on
the London Stock Exchange. These purchases and activities by exempt
principal traders which are required to be made public in the
United Kingdom pursuant to the Code will be reported to a
Regulatory Information Service and will be available on the London
Stock Exchange website at
www.londonstockexchange.com. This information will also be publicly
disclosed in the United States to the extent that such information
is made public in the United Kingdom.
Rothschild
& Co, which is authorised and regulated in the UK by the
Financial Conduct Authority, is acting exclusively for Dowlais and
for no‑one else in connection with the Combination and shall not be
responsible to anyone other than Dowlais for providing the
protections afforded to clients of Rothschild & Co, nor for
providing advice in connection with the Combination or any matter
referred to herein. Neither Rothschild & Co nor any of its
affiliates (nor their respective directors, officers, employees or
agents) owes or accepts any duty, liability or responsibility
whatsoever (whether direct or indirect, whether in contract, in
tort, under statute or otherwise) to any person who is not a client
of Rothschild & Co in connection with this Announcement, any
statement contained herein, the Combination or otherwise. No
representation or warranty, express or implied, is made by
Rothschild & Co as to the contents of this
Announcement.
Investec,
which is authorised in the United Kingdom by the PRA and regulated
in the United Kingdom by the FCA and the PRA, is acting exclusively
for Dowlais and no one else in connection with the subject matter
of this Announcement and will not regard any other person as its
client in relation to the subject matter of this Announcement and
will not be responsible to anyone other than Dowlais for providing
the protections afforded to the clients of Investec, or for
providing advice in connection with the subject matter of this
Announcement or any other matters referred to herein. Neither
Investec nor any of its subsidiaries, branches or affiliates owes
or accepts any duty, liability or responsibility whatsoever
(whether direct or indirect, whether in contract, in tort, under
statute or otherwise) to any person who is not a client of Investec
in connection with the subject matter of this Announcement, any
statement contained herein or otherwise, and no representation,
express or implied, is made by Investec or any of its subsidiaries,
branches or affiliates, or purported to be made on behalf of
Investec or any of its subsidiaries, branches or affiliates, in
relation to the contents of this Announcement, including with
regard to the accuracy or completeness of the Announcement or the
verification of any other statements made or purported to be made
by or on behalf of Investec or any of its subsidiaries, branches or
affiliates in connection with the matters described in this
Announcement.
Further information
This
Announcement is for information purposes only and is not intended
to, and does not, constitute or form part of any offer or
invitation to purchase, otherwise acquire, subscribe for, sell or
otherwise dispose of, any securities or the solicitation of any
vote or approval in any jurisdiction pursuant to the Combination or
otherwise. In particular, this Announcement is not an offer of
securities for sale into the U.S. No offer of securities shall be
made in the U.S. absent registration under the U.S. Securities Act,
or pursuant to an exemption from, or in a transaction not subject
to, such registration requirements. The Combination will be made
solely through the Scheme Document (or, if the Combination is
implemented by way of a Takeover Offer, the Takeover Offer
documents), which, together with the accompanying Forms of Proxy
and Forms of Election in relation to the Mix and Match Facility,
will contain the full terms and conditions of the Combination,
including details of how to vote in respect of the Combination. Any
decision in respect of the Combination should be made only on the
basis of the information in the Scheme Document (or, if the
Combination is implemented by way of a Takeover Offer, the Takeover
Offer document).
Dowlais will
prepare the Scheme Document to be distributed to Dowlais
Shareholders. Dowlais and AAM urge Dowlais Shareholders to read the
Scheme Document (or any other document by which the Combination is
made) in full when it becomes available because it will contain
important information relating to the Combination, including
details of how to vote in respect of the Scheme.
The
statements contained in this Announcement are made as at the date
of this Announcement, unless some other time is specified in
relation to them, and publication of this Announcement shall not
give rise to any implication that there has been no change in the
facts set forth in this Announcement since such
date.
This
Announcement does not constitute a prospectus or
a prospectus
equivalent document.
This
Announcement has been prepared for the purpose of complying with
English law and the Code and the information disclosed may not be
the same as that which would have been disclosed if this
Announcement had been prepared in accordance with the laws of
jurisdictions outside England.
The Combination will be subject to the applicable requirements
of English law, the Code, the Panel, the London Stock Exchange and
the FCA.
Neither the SEC nor any U.S. state securities commission
has approved, disproved or passed judgment upon the fairness or the
merits of the Combination or determined if this Announcement is
adequate, accurate or complete. Any representation to the contrary
is a criminal offence in the U.S.
Overseas Shareholders
The release, publication or distribution of this Announcement
in jurisdictions other than the UK, and the availability of the
Combination to Dowlais Shareholders who are not resident in the UK,
may be restricted by law and therefore any persons who are not
resident in the UK or who are subject to the laws of any
jurisdiction other than the UK (including Restricted Jurisdictions)
should inform themselves about, and observe, any applicable legal
or regulatory requirements. In particular, the ability of persons
who are not resident in the UK or who are subject to the laws of
another jurisdiction to participate in the Combination or to vote
their Dowlais Shares in respect of the Scheme at the Court Meeting,
or to execute and deliver Forms of Proxy appointing another to vote
at the Court Meeting on their behalf, may be affected by the laws
of the relevant jurisdictions in which they are located or to which
they are subject. Any failure to comply with applicable legal or
regulatory requirements of any jurisdiction may constitute a
violation of securities laws in that jurisdiction. To the fullest
extent permitted by applicable law, the companies and persons
involved in the Combination disclaim any responsibility or
liability for the violation of such restrictions by any
person.
Unless otherwise determined by AAM or required by the Code,
and permitted by applicable law and regulation, the Combination
shall not be made available, directly or indirectly, in, into or
from a Restricted Jurisdiction where to do so would violate the
laws in that jurisdiction and no person may vote in favour of the
Combination by any such use, means, instrumentality or form within
a Restricted Jurisdiction or any other jurisdiction if to do so
would constitute a violation of the laws of that
jurisdiction.
Accordingly, copies of this Announcement and any formal
documentation relating to the Combination are not being, and must
not be, directly or indirectly, mailed or otherwise forwarded,
distributed or sent in or into or from any Restricted Jurisdiction
or any jurisdiction where to do so would constitute a violation of
the laws of such jurisdiction and persons receiving such documents
(including custodians, nominees and trustees) must not mail or
otherwise forward, distribute or send them in or into or from any
Restricted Jurisdiction. Doing so may render invalid any related
purported vote in respect of acceptance of the
Combination.
Further details in relation to Dowlais Shareholders in
overseas jurisdictions will be contained in the Scheme Document(or,
if the Combination is implemented by way of a Takeover Offer, the
Takeover Offer documents).
Additional information for U.S. investors in
Dowlais
The Combination relates to an offer for the shares of an
English company and is proposed to be implemented by means of a
scheme of arrangement provided for under English company law. The
Combination, implemented by way of a scheme of arrangement, is not
subject to the tender offer rules or the related proxy solicitation
rules under the U.S. Exchange Act. Accordingly, the Combination is
subject to the disclosure requirements and practices applicable to
a scheme of arrangement involving a target company in the UK listed
on the London Stock Exchange, which differ from the disclosure
requirements of the U.S. tender offer and related proxy
solicitation rules. If, in the future, AAM exercises its right to
elect to implement the Combination by way of a Takeover Offer and
determines to extend the Takeover Offer into the U.S., such
Takeover Offer will be made in compliance with applicable U.S. laws
and regulations.
The New AAM Shares to be issued pursuant to the Combination
have not been and will not be registered under the U.S. Securities
Act, and may not be offered or sold by AAM in the U.S. absent
registration or an applicable exemption from the registration
requirements of the U.S. Securities Act. The New AAM Shares to be
issued pursuant to the Combination will be issued pursuant to the
exemption from registration set forth in Section 3(a)(10) of the
U.S. Securities Act. If, in the future, AAM
exercises its right to elect to implement the Combination by way of
a Takeover Offer or otherwise determines to conduct the
Combination in a manner that is not
exempt from the registration requirements of the U.S. Securities
Act, it will file a registration statement with the SEC that will
contain a prospectus with respect to the issuance of New AAM
Shares. In this event, Dowlais Shareholders are urged to read these
documents and any other relevant documents filed with the SEC, as
well as any amendments or supplements to all such documents,
because they will contain important information, and such documents
will be available free of charge at the SEC's website
at www.sec.gov or by directing a request to
AAM's contact for enquiries identified above.
This Announcement contains, and the Scheme Document will
contain certain unaudited financial information relating to Dowlais
that has been prepared in accordance with UK-endorsed International
Financial Reporting Standards ("IFRS") and thus may not be
comparable to financial information of U.S. companies or companies
whose financial statements are prepared in accordance with U.S.
generally accepted accounting principles. U.S. generally accepted
accounting principles differ in certain significant respects from
IFRS.
Dowlais is incorporated under the laws of a non-U.S.
jurisdiction, some or all of Dowlais' officers and directors reside
outside the U.S., and some or all of Dowlais' assets are or may be
located in jurisdictions outside the U.S. Therefore, U.S. Dowlais
Shareholders (defined as Dowlais Shareholders who are U.S. persons
as defined in the U.S. Internal Revenue Code or "IRC") may have
difficulty effecting service of process within the U.S. upon those
persons or recovering against Dowlais or its officers or directors
on judgments of U.S. courts, including judgments based upon the
civil liability provisions of the U.S. federal securities laws.
Further, it may be difficult to compel a non-U.S. company and its
affiliates to subject themselves to a U.S. court's judgment. It may
not be possible to sue Dowlais or its officers or directors in a
non-U.S. court for violations of the U.S. securities
laws.
In
accordance with normal United Kingdom practice, AAM or its
nominees, or its brokers (acting as agents), may from time to time
make certain purchases of, or arrangements to purchase, shares or
other securities of Dowlais outside of the U.S., other than
pursuant to the Combination, until the date on which the
Combination and/or Scheme becomes effective, lapses or is otherwise
withdrawn. These purchases may occur either in the open market at
prevailing prices or in private transactions at negotiated prices.
Any such purchases by AAM will not be made at prices higher than
the price of the Combination provided in this Announcement unless
the price of the Combination is increased accordingly. Any
information about such purchases or arrangements to purchase shall
be disclosed as required in the UK, shall be reported to a
Regulatory Information Service and shall be available on the London
Stock Exchange website at
www.londonstockexchange.com.
High-Level U.S. Federal Income Tax
Consequences
The receipt of New AAM Shares
and cash by Dowlais Shareholders as consideration for the transfer
of Dowlais Shares pursuant to the Combination may be a taxable
transaction for U.S. federal income tax purposes and under
applicable U.S. state and local, as well as foreign and other, tax
laws. Such consequences, if any, are not generally described
herein.
For
certain Dowlais Shareholders, Section 304 of the
IRC
may apply to the Combination if the Dowlais Shareholders, in the
aggregate, own stock of AAM possessing 50 per cent. or more of the
total combined voting power or 50 per cent. or more of the total
combined value of all classes of stock of AAM immediately following
Completion, taking into account certain constructive ownership
rules under the IRC and, in the case of a Dowlais Shareholder who
also owns AAM common stock, taking into account any New AAM Shares
received by such Dowlais Shareholder as a result of the
Combination. If Section 304 of the IRC were to apply to the
Combination, the cash consideration received pursuant
to the Combination may be subject to U.S. federal income tax as a
deemed dividend ("U.S. Deemed Dividend Tax"). A Dowlais Shareholder
should only be subject to U.S. Deemed Dividend Tax if the Dowlais
Shareholder receives cash under the Combination and also owns AAM
Shares. Further, even if a Dowlais Shareholder also owns AAM
Shares, it should only be subject to U.S. Deemed Dividend Tax if
the Dowlais Shareholder owns (i) an equivalent or greater
percentage of AAM Shares than Dowlais
Shares at Completion, and (ii) its indirect ownership
interest in Dowlais is not therefore reduced as a result of the
Combination, taking into account certain constructive ownership
rules and the AAM Shares received as consideration in the
Combination.
For
U.S. Dowlais Shareholders, dividends are generally taxable as
ordinary income, subject to any reduced tax rates or deductions
provided under the IRC. U.S. Dowlais Shareholders who do not
actually or constructively own any AAM Shares immediately prior to
the Combination will recognise a capital gain or loss equal to the
difference between the amount of cash received and such U.S.
holder's tax basis in the portion of its Dowlais Shares that is
exchanged for such cash.
For
Non-U.S. Dowlais Shareholders, U.S. Deemed Dividend Tax will be
collected via a withholding tax at a 30 per cent. rate (or such
lower rate as may be specified by an applicable income tax treaty)
from the cash consideration received pursuant to the Combination.
To establish whether such withholding is required from the cash
consideration paid to each Non-U.S. Dowlais Shareholder, each
Non-U.S. Dowlais Shareholder must, if necessary, complete a
certificate, in the form to be provided in circumstances where it
is necessary, certifying whether or not it meets the requirements
for exemption from U.S. Deemed Dividend Tax.
The certification
process is not standardised, and depends upon information properly
flowing through the brokerage network. To the extent relevant,
you should consult your retail broker as to the procedures they
employ; it is possible that some brokers may be unfamiliar with
this process.
Failure by a Non-U.S. Dowlais
Shareholder to complete and return such certificate may result in
withholding tax at a rate of 30 per cent. (or such lower rate as
may be specified by an applicable income tax treaty) on the full
amount of the cash payable to such Non-U.S. Dowlais
Shareholder.
If
excess amounts are withheld from the cash consideration payable to
a Non-U.S. Dowlais Shareholder, the Non-U.S. Dowlais Shareholder
may obtain a refund of any such excess amounts by timely filing an
appropriate claim with the IRS.
Dowlais Shareholders that may be
concerned about the application of Section 304 of the IRC and the
potential treatment of the cash consideration as a deemed dividend
for U.S. federal income tax purposes should take this into account
when determining whether to make an election under the Mix and
Match Facility to receive different proportions of cash and New AAM
Shares in respect of their holdings in Dowlais Shares, which would
impact the amount of Dowlais Shares attributed to them after the
Combination.
The
receipt of consideration in exchange for Dowlais Shares pursuant to
the Combination may also be subject, under certain circumstances,
to FATCA or other backup withholding with respect to a Dowlais
Shareholder that does not satisfy certain rules with respect to its
identity under U.S. or other tax laws applicable to such Dowlais
Shareholder.
Each Dowlais Shareholder is
urged to consult with legal, tax and financial advisers in
connection with making a decision regarding the Combination,
including in light of the potential application of Section 304 of
the IRC to the Combination.
Forward-looking statements
This
Announcement (including information incorporated by reference in
this Announcement), oral statements made regarding the Combination,
and other information published by AAM and Dowlais contain
statements which are, or may be deemed to be, "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements are prospective in
nature and are not based on historical facts, but rather on
assumptions, expectations, valuations, targets, estimates,
forecasts and projections of AAM and Dowlais about future events,
and are therefore subject to risks and uncertainties which could
cause actual results, performance or events to differ materially
from those expressed or implied by the forward-looking statements.
The forward-looking statements contained in this Announcement
include statements relating to the expected effects of the
Combination on the AAM Group, the Dowlais Group and the Combined
Group, such as the statements about the expected profitable growth,
value-enhancing investments, sustainable capital returns and other
characteristics of the Combined Group, the expected timing and
scope of the Combination and other statements other than historical
facts. Often, but not always, forward-looking statements can be
identified by the use of forward-looking words such as "plans",
"expects", "budgets", "targets", "aims", "scheduled", "estimates",
"forecast", "intends", "anticipates", "seeks", "prospects",
"potential", "possible", "assume" or "believes", or variations of
such words and phrases or statements that certain actions, events
or results "may", "could", "should", "would", "might" or "will" be
taken, occur or be achieved. AAM and Dowlais give no assurance that
such expectations will prove to be correct. By their nature,
forward-looking statements involve risks (known and unknown) and
uncertainties (and other factors that are in many cases beyond the
control of AAM and/or Dowlais) because they relate to events and
depend on circumstances that may or may not occur in the
future.
There are a
number of factors that could affect the future operations of the
AAM Group, the Dowlais Group and/or the Combined Group and that
could cause actual results and developments to differ materially
from those expressed or implied by such forward-looking statements.
These factors include the satisfaction (or, where permitted,
waiver) of the Conditions, as well as additional factors, such as:
domestic and global business and economic conditions; the impact of
pandemics, asset prices; market‑related risks such as fluctuations
in interest rates and exchange rates, industry trends, competition,
changes in government and regulation, changes in the policies and
actions of governments and/or regulatory authorities (including
changes related to capital and tax), changes in political and
economic stability (including exposures to terrorist activities,
the UK's exit from the European Union, Eurozone instability,
disruption in business operations due to reorganisation activities,
interest rate, inflation, deflation and currency fluctuations), the
timing impact and other uncertainties of future or planned
acquisitions or disposals or offers, the inability of the Combined
Group to realise successfully any anticipated synergy benefits when
the Combination is implemented (including changes to the board
and/or employee composition of the Combined Group), the inability
of the AAM Group to integrate successfully the Dowlais Group's
operations and programmes when the Combination is implemented, the
Combined Group incurring and/or experiencing unanticipated costs
and/or delays (including IT system failures, cyber-crime, fraud and
pension scheme liabilities), or difficulties relating to the
Combination when the Combination is implemented. Other unknown or
unpredictable factors could affect future operations and/or cause
actual results to differ materially from those in the
forward-looking statements. Such forward-looking statements should
therefore be construed in the light of such factors. It is not
possible to foresee or identify all such factors.
Each
forward-looking statement speaks only as of the date of this
Announcement. Neither the AAM Group nor the Dowlais Group, nor any
of their respective associates or directors, officers or advisers,
provides any representation, warranty, assurance or guarantee that
the occurrence of the events expressed or implied in any
forward-looking statements in this Announcement will actually
occur. Forward-looking statements involve inherent risks and
uncertainties. All forward-looking statements contained in this
Announcement are expressly qualified in their entirety by the
cautionary statements contained or referred to in this section.
Readers are cautioned not to place undue reliance on these
forward-looking statements. Other than in accordance with their
legal or regulatory obligations (including, without limitation,
under the Code, the UK Market Abuse Regulation, the DTRs and
applicable U.S. securities laws), neither the AAM Group nor the
Dowlais Group is under or undertakes any obligation, and each of
the foregoing expressly disclaims any intention or obligation, to
update or revise any forward-looking statements, whether as a
result of new information, future events or
otherwise.
For a
discussion of important risk factors that could cause AAM's actual
results to differ materially from the expectations in the
forward-looking statements, see Part I, Item 1A. under the heading
"Risk Factors" in its Form 10-K for the fiscal year ended December
31, 2023 and Part II, Item 1A under the heading "Risk Factors" in
quarterly reports on Form 10-Q for the quarterly periods ended March 31, 2024, June 30, 2024 and
September 30, 2024 filed with the SEC which also contain additional
information regarding forward-looking statements with respect to
AAM.
Solicitation
This Announcement may be deemed to be
solicitation material in respect of the Combination, including the
issuance of the New AAM Shares in respect of the Combination. In
connection with the foregoing proposed issuance of the New AAM
Shares, AAM expects to file the AAM Proxy Statement. To the extent
the Combination is effected as a scheme of arrangement under
English law, the issuance of the New AAM Shares in connection with
the Combination would not be expected to require registration under
the U.S. Securities Act, pursuant to an exemption provided by
Section 3(a)(10) under the U.S. Securities Act. In the event that
AAM exercises its right to elect to implement the Combination by
way of a Takeover Offer or otherwise determines to conduct the
Combination in a manner that is not exempt from the registration
requirements of the U.S. Securities Act, AAM expects to file a
registration statement with the SEC containing a prospectus with
respect to the New AAM Shares that would be issued in the
Combination. Investors and shareholders are urged to read the AAM
Proxy Statement, the Scheme Document, and other relevant documents
filed or to be filed with the SEC or incorporated by reference in
the AAM Proxy Statement (if any) carefully when they become
available because they will contain important information about
AAM, the Combination and related matters. Investors and
shareholders will be able to obtain free copies of the AAM Proxy
Statement, the Scheme Document, and other documents filed by AAM
with the SEC at the SEC's website at www.sec.gov. In addition, investors and
shareholders will be able to obtain free copies of the AAM Proxy
Statement, the Scheme Document, and other documents filed by AAM
with the SEC at www.aam.com/investors.
Participants in the Solicitation
AAM and its directors, executive officers and
certain other members of management and employees will be
participants in the solicitation of proxies from AAM's Shareholders
in respect of the Combination, including the proposed issuance of
New AAM Shares. Information regarding AAM's directors and executive
officers is contained in the Annual Report on Form 10-K for the
fiscal year ended 31 December 2023 of AAM, which was filed with the
SEC on 16 February 2024, the definitive proxy statement on
Schedule 14A for the 2024 annual meeting of stockholders of AAM,
which was filed with the SEC on 21 March 2024 and the Current
Report on Form 8-K of AAM, which was filed with the SEC on May 2,
2024. Additional information regarding the identity of
participants, and their direct or indirect interests, by security
holdings or otherwise, will be set forth in the AAM Proxy Statement
relating to the Combination when it is filed with the SEC. To the
extent holdings of AAM's securities by its directors or executive
officers change from the amounts set forth in the AAM Proxy
Statement, such changes will be reflected on Initial Statements of
Beneficial Ownership on Form 3 or Statements of Change in Ownership
on Form 4 filed with the SEC. These documents may be obtained free
of charge from the SEC's website at www.sec.gov and AAM's website
at www.aam.com/investors.
No profit forecasts or estimates
The AAM FY24
Profit Estimate is a profit estimate for the purposes of Rule 28 of
the Code. The AAM FY24 Profit Estimate is set out in
paragraph 9 of this Announcement, and the
assumptions and basis of preparation on which the AAM FY24 Profit
Estimate is based and the AAM Directors' confirmation, as required
by Rule 28.1 of the Code, are set out in Appendix 4 of this Announcement.
The Dowlais
FY24 Profit Estimate is a profit estimate for the purposes of Rule
28 of the Code. The Dowlais FY24 Profit Estimate is set out in of
this Announcement, and the assumptions and basis of preparation on
which the Dowlais FY24 Profit Estimate is based and the Dowlais
Directors' confirmation, as required by Rule 28.1 of the Code, are
set out in Appendix 5 of this Announcement.
Other than
the AAM FY24 Profit Estimate and Dowlais FY24 Profit Estimate,
nothing in this Announcement (including any statement of estimated
cost savings or synergies) is intended, or is to be construed, as a
profit forecast or profit estimate for any period or to be
interpreted to mean that earnings or earnings per share for AAM or
Dowlais for the current or future financial years, will necessarily
match or exceed the historical published earnings or earnings per
share for AAM or Dowlais, as appropriate.
Quantified Financial Benefits
Statement
Statements of
estimated cost savings and synergies relate to future actions and
circumstances which, by their nature, involve risks, uncertainties
and contingencies. As a result, the cost savings and synergies
referred to in the Quantified Financial Benefits Statement may not
be achieved, may be achieved later or sooner than estimated, or
those achieved could be materially different from those
estimated. No
statement in the Quantified Financial Benefits Statement, or this
Announcement generally, should be construed as a profit forecast or
interpreted to mean that the Combined Group's earnings in the first
full year following the Effective Date, or in any subsequent
period, would necessarily match or be greater than or be less than
those of AAM or Dowlais for the relevant preceding financial period
or any other period. For the purposes of Rule 28 of the Code, the
Quantified Financial Benefits Statement contained in this
Announcement is the responsibility of AAM and the AAM
Directors.
Disclosure
requirements of the Code
Under
Rule 8.3(a) of the Code, any person who is interested in 1 per
cent. or more of any class of relevant securities of an offeree
company or of any securities exchange 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
securities exchange 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 securities exchange 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 p.m. (London time) on the tenth business day (as
defined in the Code) following the commencement of the offer period
and, if appropriate, by no later than 3.30 p.m. (London time)
on the tenth business day (as defined in the Code) following the
Announcement in which any securities exchange offeror is first
identified. Relevant persons who deal in the relevant securities of
the offeree company or of a securities exchange 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 per cent. or more of any class of relevant
securities of the offeree company or of any securities exchange
offeror must make a Dealing Disclosure if the person deals in any
relevant securities of the offeree company or of any securities
exchange 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 securities exchange offeror(s), 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 p.m. (London time) on the business day (as defined
in the Code) 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
securities exchange 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
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. You should contact the
Panel's Market Surveillance Unit on +44 (0)20
7638 0129 if you are in any doubt as to whether you are required to
make an Opening Position Disclosure or a Dealing
Disclosure.
Electronic Communications
Please be
aware that addresses, electronic addresses and certain information
provided by Dowlais Shareholders, persons with information rights
and other relevant persons for the receipt of communications from
Dowlais may be provided to AAM during the Offer Period as required
under section 4 of Appendix 4 to the Code to comply with Rule
2.11(c) of the Code.
Publication on a website and availability of
hard copies
This Announcement and the documents required to
be published pursuant to Rule 26 of the Code will be
available, subject to certain
restrictions relating to persons resident in
Restricted Jurisdictions,
on AAM's website at www.aam.com/investors/offer-for-Dowlais-Group-plc
and on Dowlais' website at www.dowlais.com promptly and in any event by no later than 12 noon on the
business day (as defined in the Code) following the date of this
Announcement. Neither the content of the
websites referred to in this Announcement nor the content of any
website accessible from hyperlinks in this Announcement is
incorporated into, or forms part of, this Announcement.
Dowlais Shareholders and persons with
information rights may, subject to applicable securities laws,
request a hard copy of this Announcement (and any information
incorporated into it by reference to another source), free of
charge, by contacting Dowlais' registrars, Equiniti, by: (i) submitting a request in writing to Equiniti at Aspect
House, Spencer Road, Lancing, West Sussex BN99 6DA, United Kingdom;
or (ii) contacting Equiniti, between 8.30
a.m. and 5.30 p.m. (London time), Monday to Friday (excluding
English and Welsh public holidays) on +44 (0) 371 384 2030 (please
use the country code when calling from outside the
UK). A
person so entitled may, subject to applicable securities laws, also
request that all future documents, announcements and information to
be sent in relation to the Combination should be in hard copy
form.
Rounding
Certain
figures included in this Announcement have been subjected to
rounding adjustments. Accordingly, figures shown for the same
category presented in different tables may vary slightly and
figures shown as totals in certain tables may not be an arithmetic
aggregation of the figures that precede them.
Rule 2.9 disclosure
In accordance
with Rule 2.9 of the Code, AAM confirms that as at the date of this
Announcement, it has in issue and admitted to trading on the on the
New York Stock Exchange (NYSE:AXL) 117,581,028 shares of common
stock of $0.01 each (excluding common stock held in treasury). The
International Securities Identification Number (ISIN) of the common
stock is US0240611030.
In accordance
with Rule 2.9 of the Code, Dowlais confirms that as at the date of
this Announcement, it has in issue and admitted to trading on the
Main Market of the London Stock Exchange 1,344,524,115 ordinary
shares of 1 pence each (excluding ordinary shares held in
treasury). The International Securities Identification Number
(ISIN) of the ordinary shares is GB00BMWRZ071.
General
If you are in
any doubt about the contents of this Announcement or the action you
should take, you are recommended to seek your own independent
financial advice immediately from your stockbroker, bank manager,
solicitor, accountant or independent financial adviser duly
authorised under FSMA if you are resident in the United Kingdom or,
if not, from another appropriately authorised independent financial
adviser.
Appendix 1
CONDITIONS TO AND CERTAIN FURTHER TERMS OF THE
COMBINATION
The Combination will be subject to the terms
and conditions set out in this Appendix 1
and in the Scheme Document.
Part 1
1. Long Stop
Date
The Combination will be conditional on the
Scheme becoming unconditional and becoming Effective, subject to
the Code, by no later than 11.59 p.m. (London time) on the Long
Stop Date.
2. Scheme
approval
The Scheme will be subject to the following
conditions:
(a)
(i) its approval by
a majority in number representing not less than 75 per cent. in
value of the Scheme Shareholders who are on the register of members
of Dowlais at the Voting Record Time (or the relevant class or
classes thereof, if applicable), in each case present, entitled to
vote and voting, either in person or by proxy, at the Court Meeting
or at any separate class meeting which may be required by the Court
(as applicable) or at any adjournment of any such meeting;
and
(ii)
the Court Meeting and any separate class meeting which may be
required by the Court (or any adjournment of any such meeting)
being held on or before the 22nd day after the expected date of the
Court Meeting to be set out in the Scheme Document in due course
(or such later date (a) as AAM and Dowlais may agree or (b) (in a
competitive situation) as may be specified by AAM with the consent
of the Panel, and in each case that, if so required, the Court may
allow);
(b)
(i) the Resolutions
being duly passed by the requisite majority or majorities of
Dowlais Shareholders at the General Meeting (or any adjournment
thereof); and
(ii)
the General Meeting being held on or before the 22nd day after the
expected date of the General Meeting to be set out in the Scheme
Document in due course (or such later date (a) as AAM and Dowlais
may agree or (b) (in a competitive situation) as may be specified
by AAM with the consent of the Panel, and in each case that, if so
required, the Court may allow);
(c)
(i) the sanction of
the Scheme by the Court (without modification or with modification
on terms agreed by AAM and Dowlais) and delivery of a copy of the
Court Order to the Registrar of Companies in England and Wales;
and
(ii)
the Sanction Hearing being held on or before the 22nd day after the
expected date of the Sanction Hearing to be set out in the Scheme
Document in due course (or such later date (a) as AAM and Dowlais
may agree or (b) (in a competitive situation) as may be specified
by AAM with the consent of the Panel, and in each case that, if so
required, the Court may allow).
In addition, AAM and Dowlais have agreed that,
subject as stated in Part 2 below and to
the requirements of the Panel the Combination will be conditional
on the following Conditions and, accordingly, the necessary actions
to make the Scheme Effective will not be taken unless the following
Conditions (as amended if appropriate) have been satisfied or,
where relevant, waived:
3. Official
authorisations and regulatory clearances
Antitrust Approvals
EU
(a)
insofar as the Combination constitutes, or is deemed to constitute,
a concentration with a Community dimension within the scope of
Council Regulation (EC) 139/2004 (as amended) (the "EUMR"), one of the following having
occurred:
(i) the
European Commission (the "Commission") indicating that the
arrangement notified does not fall within the scope of the EUMR
pursuant to Article 6(1)(a) of the EUMR; or
(ii)
the Commission indicating that the concentration is compatible with
the internal market pursuant to Articles 6(1)(b), (including in
conjunction with Article 6(2)), 8(1) or 8(2) of the EUMR
unconditionally or on terms reasonably satisfactory to AAM, or
having been deemed to have done so pursuant to Article 10(6);
or
(iii) if
the Commission makes a referral in whole or in part under Article
4(4) or Article 9 of the EUMR, or is deemed to have made such a
reference, to a competent authority of one or more Member States
whose laws prohibit the parties from completing the Combination
before clearance is obtained under national merger control, such
clearance being obtained (or being deemed to be obtained) whether
unconditionally or on terms reasonably satisfactory to AAM from the
competent authority or authorities of the relevant Member State or
States (and the Commission as applicable, where such referral has
been made in part), or any relevant waiting periods having expired
(provided that if the Commission makes a referral of the whole of
the concentration under Article 4(4) or Article 9 of the EUMR to
the competent authority or authorities of one or more Member States
whose laws in each case do not prohibit the parties from completing
the Combination before clearance is obtained under national merger
control, this clause (iii) shall be deemed to be
satisfied),
(the "EU
Antitrust Condition");
United Kingdom
(b)
insofar as the Combination constitutes, or is deemed to constitute,
a relevant merger situation within the meaning of Part 3 of the
Enterprise Act 2002 (the "EA") one of the following having
occurred:
(i) following
submission of a CMA Briefing Paper to the Competition and Markets
Authority ("CMA") and with
respect to the Combination:
(A) the
CMA's position as most recently communicated to the parties being
that it has no further questions in respect of the Combination;
and
(B) as at
the date on which all other Conditions are satisfied or waived, the
CMA not having: (I) requested submission of a Merger Notice; or
(II) given notice to either party that it is commencing a Phase 1
Investigation; or (III) indicated that the statutory review period
in which the CMA has to decide whether to make a reference under
Section 34ZA of the EA has begun; or (IV) requested documents or
attendance by witnesses under Section 109 of the EA, which may
indicate it is considering commencing the aforementioned review
period in respect of the Combination; or
(ii)
where the CMA has commenced an investigation following the
submission of a CMA Briefing Paper or a Merger Notice, the CMA
either:
(A) having
confirmed on terms reasonably satisfactory to AAM that the
Combination or any matter arising therefrom or related thereto will
not be subject to a Phase 2 reference under the EA or on any other
statutory basis (a "Phase 2 CMA
Reference"), or the applicable time period for the CMA to
make a Phase 2 CMA Reference having expired without the CMA having
made such a Phase 2 CMA Reference; or
(B) in the
event that a Phase 2 CMA Reference is made in relation to the
Combination, the CMA either:
I.
concluding in a report published in accordance with Section 38 of
the EA that neither the Combination nor any matter arising from or
relating to the Combination nor any part of it has or is expected
to result in a substantial lessening of competition within any
market or markets in the United Kingdom for goods or services;
or
II. allowing
the Combination and any matter arising from or relating to the
Combination to proceed on terms reasonably satisfactory to
AAM,
(the "UK
Antitrust Condition");
United States
(c)
insofar as the Combination constitutes, or is deemed to
constitute, a notifiable acquisition under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and
regulations promulgated thereunder, and any successor to
such statute, rules, or regulations (the "HSR Act"), the waiting period
applicable to the consummation of the Combination under the HSR Act
having expired or terminated, and any voluntary
agreement between AAM and/or Dowlais and the U.S. Federal Trade
Commission or the U.S. Department of Justice pursuant to which AAM
and/or Dowlais has agreed not to consummate the Combination for any
period of time (such agreement being on terms reasonably
satisfactory to AAM) is no longer in effect (the
"U.S. Antitrust
Condition");
China
(d)
insofar as the Combination constitutes, or is deemed to constitute,
a notifiable concentration of undertakings within the meaning of
Article 25 of the Anti-Monopoly Law of the People's Republic of
China (as amended) and its implementing regulations (the
"PRC AML"), and following
notification of the Combination to the China's State Administration
for Market Regulation ("SAMR"), SAMR issuing a formal notice
approving the Combination (unconditionally or on terms reasonably
satisfactory to AAM) in order for AAM to consummate the Combination
(the "China Antitrust
Condition");
South
Korea
(e)
insofar as the Combination constitutes, or is deemed to constitute,
a notifiable acquisition under the Monopoly Regulation and
Fair Trade Act of the Republic of Korea ("MRFTA"), the Korea Fair Trade
Commission ("KFTC") having
either: issued an approval notification pursuant to the MRFTA that
the Combination does not violate Article 9 paragraph 1 (Restriction
on Business Combination) of the MRFTA (as applicable); or if the
KFTC issues an examiner's report, issued a decision approving the
Combination whether unconditionally or subject to conditions
reasonably satisfactory to AAM (the "Korea Antitrust Condition");
Mexico
(f)
insofar as the Combination constitutes, or is deemed to constitute
a notifiable acquisition under the Mexican Federal Economic
Competition Law, the parties having received unconditional approval
or approval on terms reasonably satisfactory to AAM from the
Mexican Federal Economic Competition Commission (Comisión Federal de Competencia
Económica) ("COFECE") or any authority that succeeds
it under the applicable Mexican Federal Economic Competition Law or
any other applicable law regulating competition that may be enacted
having expired (the "Mexico
Antitrust Condition");
Brazil
(g)
insofar as the Combination constitutes or is deemed to constitute a
notifiable acquisition under Law No. 12,529 of 2011, either of the
following having occurred:
(i) the
Brazilian Antitrust Governmental Authority (Conselho Administrativo de Defesa
Econômica)
("CADE's") General
Superintendence Office issuing a decision approving or clearing the
Combination without conditions or on terms reasonably satisfactory
to AAM and an additional mandatory fifteen day waiting period
following publication of the decision in the Federal Official
Gazette (Diário Oficial da
União) having lapsed with no related appeal by a third party
or request for further review by any of CADE's commissioners;
or
(ii)
in the event that any appeal is filed, further review is requested
by CADE's Tribunal or CADE's General Superintendence Office does
not clear the Combination without conditions and refers the
Combination to CADE's tribunal, the publication of the final
decision approving the Combination by CADE's tribunal with or
without any conditions, on terms reasonably satisfactory to AAM,
deemed unappealable at the administrative sphere, (the
"Brazil Antitrust
Condition");
Foreign Investment
Approvals
France
(h)
insofar as the Combination constitutes or is deemed to constitute a
notifiable acquisition under Articles L. 151-3 and followings and
Articles R. 151-1 and followings of the French Monetary and
Financial Code (Code monétaire et
financier) (the "French FDI
Law"), one of the following having occurred:
(i) an
expressed decision by the French Minister of the Economy or any
person belonging to the General Directorate of the Treasury
(Direction Générale du
Trésor) officially empowered to deliver decisions under
Article L. 151-3 of the French Monetary and Financial Code in his
name and behalf (the "French FDI
Authority") that the Combination does not fall within the
scope of the French FDI Law; or
(ii)
an expressed decision by the French FDI Authority, pursuant to
French FDI Law, that authorises the completion of the Combination
unconditionally or on terms reasonably satisfactory to
AAM,
(the "France
FDI Condition");
Germany
(i) insofar
as the Combination constitutes or is deemed to constitute a
notifiable acquisition by the German Federal Ministry for Economic
Affairs and Climate Action (Bundesministerium für Wirtschaft und
Klimaschutz - "BMWK"), one of the following having
occurred:
(i) the BMWK
issuing: (A) a clearance (Freigabe) pursuant to Section 58a para. 1
sentence 1 or sec. 61 of the German Foreign Trade and Payments
Ordinance (Außenwirtschaftsverordnung)
("AWV") without conditions
or on terms reasonably satisfactory to AAM, or (B) a certificate of
non-objection (Unbedenklichkeitsbescheinigung)
pursuant to Section 58 para. 1 sentence 1 AWV; or
(ii)
the BMWK having not issued a clearance, certificate of
non-objection or initiated a formal investigation for the
Combination within two months of receipt of an application for a
clearance or a certificate of non-objection; or within any
applicable extension period pursuant to Sec. 14a(1) No. 1 of the
German Foreign Trade and Payments Act (Außenwirtschaftsgesetz) ("AWG"); or
(iii) the
BMWK having not prohibited (untersagt) the Combination within the
periods specified in Section 14a AWG; or
(iv) the
BMWK declaring in writing that the Combination can be closed
without having obtained prior approval from the BMWK.
(the "Germany
FDI Condition");
EU Foreign Subsidies
Regulation
(j) insofar
as the Combination constitutes or is deemed to constitute a
notifiable acquisition under Regulation (EU) 2022/2560 of the
European Parliament and of the Council on foreign subsidies
distorting the internal market (the "EU FSR"), or the Commission requests
such notification under Article 21(5) of the EU FSR, any of the
following having occurred:
(i) the
Commission declaring that the Combination does not fall within the
scope of the EU FSR; or
(ii)
the Commission either declaring that there are insufficient
indications to initiate an in-depth investigation and closing a
preliminary review pursuant to Article 10(4) of the EU FSR or not
initiating an in-depth investigation within the relevant period
provided for in Article 24 of the EU FSR; or
(iii) the
Commission not adopting a decision specified in Article 25(3) of
the EU FSR within the time period specified in Article 25(4) of the
EU FSR, following an in-depth investigation; or
(iv)
following an in-depth investigation, the Commission either issuing
a no objection decision pursuant to Article 11(4) (in conjunction
with Article 25(3)(b)); or a decision on terms reasonably
satisfactory to AAM pursuant to Article 11(3) (in conjunction with
Article 25(3)(a) of the EU FSR).
(the "EU FSR
Condition");
4.
AAM Shareholder approval
(a)
the approval by the affirmative vote of the holders of a majority
in voting power of the AAM Shares entitled to vote thereon at the
AAM Shareholder Meeting of the amendment to AAM's certificate of
incorporation to increase the number of authorised AAM Shares;
and
(b)
the approval by the affirmative vote of the holders of a majority
in voting power present in person or by proxy at the AAM
Shareholder Meeting of the issuance of the New AAM Shares in
connection with the Combination;
5.
Listing on the New York Stock Exchange, effectiveness of
registration
(a)
confirmation having been received by AAM that the New AAM Shares to
be issued in connection with the Combination have been approved for
listing, subject to official notice of issuance, on the New York
Stock Exchange; and
(b)
in the event that the Combination is implemented by way of a
Takeover Offer, or otherwise absent an available exemption from the
registration requirements of the U.S. Securities Act, AAM's
registration statement having been declared effective by the SEC
and no stop order having been issued or proceedings for suspension
of the effectiveness of AAM's registration statement having been
initiated by the SEC and AAM having received all necessary U.S.
state securities law or blue sky authorisations;
6.
General Third Party approvals
(a)
the waiver (or non-exercise within any applicable time limits) by
any Relevant Authority or any other body or person whatsoever in
any jurisdiction (each a "Third
Party") of any termination right, right of pre-emption,
first refusal or similar right (which is material in the context of
the Wider Dowlais Group taken as a whole or in the context of the
Combination) arising as a result of or in connection with the
Combination including, without limitation, its implementation and
financing or the proposed direct or indirect Combination of any
shares or other securities in, or control or management of, Dowlais
by AAM or any member of the Wider AAM Group;
(b)
in addition to the competition law and regulatory approvals
referred to in Condition 3 (Official authorisations and regulatory
clearances) above, all necessary filings or applications
having been made in connection with the Combination and all
statutory or regulatory obligations in any jurisdiction having been
complied with in connection with the Combination or the Combination
by any member of the Wider AAM Group following consultation with
Dowlais of any shares or other securities in, or control of,
Dowlais and all authorisations, orders, grants, recognitions,
determinations, confirmations, consents, licences, clearances,
permissions, exemptions and approvals reasonably deemed necessary
or appropriate by AAM or any member of the Wider AAM Group for or
in respect of the Combination including without limitation, its
implementation and financing or the proposed direct or indirect
Combination of any shares or other securities in, or control of,
Dowlais or any member of the Wider Dowlais Group by any member of
the Wider AAM Group having been obtained in terms and in a form
reasonably satisfactory to AAM from all appropriate Third Parties
or persons with whom any member of the Wider Dowlais Group has
entered into contractual arrangements and all such authorisations,
orders, grants, recognitions, determinations, confirmations,
consents, licences, clearances, permissions, exemptions and
approvals deemed necessary or appropriate to carry on the business
of any member of the Wider Dowlais Group which are material in the
context of the AAM Group or the Dowlais Group as a whole or for or
in respect of the Combination, including (without limitation) its
implementation or financing remaining in full force and effect and
all filings necessary for such purpose having been made and there
being no notice or intimation of any intention to revoke or not to
renew any of the same at the time at which the Combination becomes
otherwise unconditional and all necessary statutory or regulatory
obligations in any jurisdiction having been complied with;
and
(c)
including in relation to the U.S. Antitrust Condition but other
than in relation to the other approvals referred to in
Condition 3 (Official authorisations and regulatory
clearances) above, no Third Party (including for the
avoidance of doubt the United States Federal Trade Commission or
the Antitrust Division of the United States Department of Justice
or any state Attorney General within the United States) having
given notice of a decision to take, institute, implement or
threaten any action, proceeding, suit, investigation, enquiry or
reference (and, in each case, not having withdrawn the same), or
having enacted, made or proposed any statute, regulation, decision
or order, or change to published practice or having taken any other
steps, and there not continuing to be outstanding any statute,
regulation, decision, injunction or order, which in each case would
reasonably be expected to:
(i) require,
prevent or materially delay the divestiture, or materially alter
the terms envisaged for any proposed divestiture by any member of
the Wider AAM Group or any member of the Wider Dowlais Group of all
or any portion of their respective businesses, assets or property
or impose any limitation on the ability of any of them to conduct
their respective businesses (or any of them) or to own, control or
manage any of their respective assets or properties or any part
thereof which, in any such case, is material in the context of the
Wider AAM Group or the Wider Dowlais Group in either case taken as
a whole;
(ii)
require, prevent or materially delay, or alter the terms envisaged
for, any proposed divestiture by any member of the Wider AAM Group
of any shares or other securities in Dowlais;
(iii)
impose any material limitation on, or result in a material delay
in, the ability of any member of the Wider AAM Group directly or
indirectly to acquire or to hold or to exercise effectively all or
any rights of ownership in respect of shares or loans or securities
convertible into shares or any other securities (or the equivalent)
in any member of the Wider Dowlais Group or the Wider AAM Group or
to exercise voting or management control over any such
member;
(iv) save
as Disclosed, materially adversely limit the ability of any member
of the Wider AAM Group or of the Wider Dowlais Group to conduct,
integrate or co-ordinate its business, or any part of it, with the
businesses or any part of the businesses of any member of the Wider
AAM Group or of the Wider Dowlais Group in a manner which is
materially adverse in the context of the Wider AAM Group or Wider
Dowlais Group, in either case taken as a whole;
(v)
otherwise materially adversely affect the business, assets, profits
or prospects of any member of the Wider AAM Group or of any member
of the Wider Dowlais Group to an extent which is material in the
context of the Wider AAM Group or the Wider Dowlais Group in either
case taken as a whole or in the context of the
Combination;
(vi) make
the Combination or its implementation by AAM or any member of the
Wider AAM Group of any shares or other securities in, or control
of, Dowlais void, illegal, and/or unenforceable under the laws of
any jurisdiction, or otherwise, directly or indirectly, restrain,
restrict, prohibit, materially delay or otherwise interfere with
the same, or impose material additional conditions or obligations
with respect thereto;
(vii) require
(save as envisaged by the Combination or sections 974 to 991
(inclusive) of the Companies Act) any member of the Wider AAM Group
or the Wider Dowlais Group to offer to acquire any shares or other
securities (or the equivalent) or interest in any member of the
Wider Dowlais Group or the Wider AAM Group owned by any Third
Party, in each case to an extent which is material in the context
of the Wider AAM Group or the Wider Dowlais Group in either case
taken as a whole or in the context of the Combination;
or
(viii) result in any
member of the Wider Dowlais Group ceasing to be able to carry on
business under any name under which it presently does so, to an
extent which is material in the context of the Wider Dowlais Group
taken as a whole,
and all applicable waiting and other time
periods (including any extensions thereof) during which any such
Third Party could institute, implement or threaten any action,
proceeding, suit, investigation, enquiry or reference or any other
step under the laws of any jurisdiction in respect of the
Combination or the Combination or proposed Combination of any
Dowlais Shares having expired, lapsed or been
terminated;
7. Certain
matters arising as a result of any arrangement, agreement
etc.
save as Disclosed, there being no provision of
any agreement, arrangement, licence, permit or other instrument to
which any member of the Wider Dowlais Group is a party or by or to
which any such member or any of its assets are or may be bound,
entitled or subject, or any circumstance which, in each case as a
consequence of the Combination of any shares or other securities
(or equivalent) in Dowlais or because of a change in the control or
management of Dowlais or otherwise, would reasonably be expected to
result in any of the following to an extent which is material and
adverse in the context of the Wider Dowlais Group taken as a whole
or in the context of the Combination:
(a)
any monies borrowed by or any other indebtedness or liabilities
(actual or contingent) of, or grant available to any such member,
being or becoming repayable or capable of being declared repayable
immediately or earlier than their or its stated maturity date or
repayment date or the ability of any such member to borrow monies
or incur any indebtedness being withdrawn or inhibited or being
capable of becoming or being withdrawn or inhibited;
(b)
any such agreement, arrangement, licence, permit or instrument or
the rights, liabilities, obligations or interests of any such
member thereunder being terminated or adversely modified or
affected or any onerous obligation or liability arising or any
adverse action being taken or arising thereunder;
(c)
any assets or interests of any such member being or failing to be
disposed of or charged or ceasing to be available to any such
member or any right arising under which any such asset or interest
would reasonably be expected to be required to be disposed of or
charged or could reasonably be expected to cease to be available to
any such member otherwise than in the ordinary course of
business;
(d)
save in the ordinary and usual course of business, the creation or
enforcement of any mortgage, charge or other security interest over
the whole or any part of the business, property, assets or interest
of any such member or any such mortgage, charge or other security
interest (whenever arising or having arisen) becoming
enforceable;
(e)
the rights, liabilities, obligations or interests of any such
member in, or the business of any such member with, any person,
firm, company or body (or any arrangement or arrangements relating
to any such interest or business) being terminated, adversely
modified or affected;
(f)
the value of any such member or its financial or trading position
or prospects being prejudiced or adversely affected;
(g)
any such member ceasing to be able to carry on business under any
name under which it presently does so;
(h)
the creation or acceleration of any liability, actual or
contingent, by any such member (including any material tax
liability or any obligation to obtain or acquire any material
authorisation, order, grant, recognition, determination,
confirmation, consent, licence, clearance, permission, exemption,
approval, notice, waiver, concession, agreement or exemption from
any Third Party or any person) other than trade creditors or other
liabilities incurred in the ordinary course of business or in
connection with the Combination; or
(i) any
requirement on any such member to acquire, subscribe, pay up or
repay any shares or other securities (or the
equivalent),
and no event having occurred which, under any
provision of any agreement, arrangement, licence, permit or other
instrument to which any member of the Wider Dowlais Group is a
party or by or to which any such member or any of its assets may be
bound, entitled or subject, would reasonably be expected to result
in any of the events or circumstances as are referred to in
paragraphs (a) to (i)
of this Condition 7, in each case
to an extent which is material and adverse in the context of the
Wider Dowlais Group taken as a whole;
8. Certain
events occurring since Last Accounts Date
save as Disclosed, no member of the Wider
Dowlais Group having, since the Last Accounts Date:
(a)
save as between Dowlais and wholly owned subsidiaries of Dowlais or
for Dowlais Shares issued under or pursuant to the exercise of
options and vesting of awards granted under the Dowlais Share Plans
in the ordinary course, issued or agreed to issue, authorised or
proposed the issue of additional shares of any class;
(b)
save as between Dowlais and wholly owned subsidiaries of Dowlais
for the grant of options and awards and other rights under the
Scheme Shares in the ordinary course, issued, or agreed to issue,
authorised or proposed the issue of securities convertible into
shares of any class or rights, warrants or options to subscribe
for, or acquire, any such shares or convertible
securities;
(c)
other than to another member of the Wider Dowlais Group, sold (or
agreed to transfer or sell) any shares held in treasury;
(d)
other than to another member of the Dowlais Group, prior to the
Effective Date, recommended, declared, paid or made or proposed to
recommend, declare, pay or make any bonus issue, dividend or other
distribution whether payable in cash or otherwise, other than the
FY24 Final Dividend or any repurchases of Dowlais Shares by Dowlais
pursuant to the Buyback Programme;
(e)
save for intra-Dowlais Group transactions, authorised, implemented
or announced any merger or demerger with any body corporate or
acquired or disposed of or transferred, mortgaged or charged or
created any security interest over any assets or any right, title
or interest in any asset (including shares and trade investments)
or authorised or proposed or announced any intention to propose any
merger, demerger, acquisition or disposal, transfer, mortgage,
charge or security interest, in each case, other than in the
ordinary course of business and, in each case, to the extent which
is material in the context of the Wider Dowlais Group taken as a
whole or in the context of the Combination;
(f)
save for intra-Dowlais Group transactions, made or authorised or
proposed or announced an intention to propose any material change
in its loan capital, to the extent which is material in the context
of the Wider Dowlais Group taken as a whole;
(g)
issued, authorised or proposed the issue of, or made any change in
or to, any debentures or (save for intra-Dowlais Group transactions
or save in the ordinary course of business), incurred or increased
any indebtedness or become subject to any liability (actual or
contingent) to an extent which, in each case, is material in the
context of the Wider Dowlais Group taken as a whole;
(h)
other than the FY24 Final Dividend or any repurchases of Dowlais
Shares by Dowlais pursuant to the Buyback Programme, purchased,
redeemed or repaid or announced any proposal to purchase, redeem or
repay any of its own shares or other securities or reduced or, save
in respect of the matters mentioned in paragraph
(a) or (b) of this
Condition 8 above, made any other change to any part of its share
capital, in each case, to the extent which is material in the
context of the Wider Dowlais Group taken as a whole or in the
context of the Combination;
(i) other
than pursuant to the Combination and except for intra-Dowlais Group
transactions, implemented, or authorised, proposed or announced its
intention to implement, any reconstruction, merger, demerger,
amalgamation, scheme, commitment or other transaction or
arrangement otherwise than in the ordinary course of business, in
each case to an extent which is material in the context of the
Wider Dowlais Group taken as a whole;
(j) been
unable or deemed unable, or admitted in writing that it is unable,
to pay its debts as they fall due or having stopped or suspended
(or threatened to stop or suspend) payment of its debts generally
or ceased or threatened to cease carrying on all or a substantial
part of its business;
(k)
(other than in respect of a member which is dormant and was solvent
at the relevant time) taken any corporate action or steps or had
any legal proceedings started or threatened against it in relation
to the suspension of payments, a moratorium of any indebtedness,
its winding-up (voluntary or otherwise), dissolution or
reorganisation or for the appointment of a receiver, administrative
receiver, administrator, manager, trustee or similar officer of all
or any of its assets or revenues or any analogous proceedings in
any jurisdiction or appointed any analogous person in any
jurisdiction or had any such person appointed, to the extent which
is material in the context of the Wider Dowlais Group taken as a
whole;
(l) commenced
negotiations with any of its creditors or taken any step with a
view to rescheduling or restructuring any of its indebtedness or
entered into a composition, compromise, assignment or arrangement
with any of its creditors whether by way of a voluntary
arrangement, scheme of arrangement, deed of compromise or
otherwise, to the extent to which is material in the context of the
Wider Dowlais Group taken as a whole;
(m) waived,
settled or compromised any claim (otherwise than in the ordinary
course of business), which is material in the context of the Wider
Dowlais Group taken as a whole or in the context of the
Combination;
(n)
entered into, varied or authorised any material agreement,
transaction, arrangement or commitment (whether in respect of
capital expenditure or otherwise) which:
(i) is of a
long-term, onerous or unusual nature or magnitude or which is
reasonably likely to involve an obligation of such nature or
magnitude (save in the ordinary course of business); or
(ii)
is likely to materially restrict the business of any member of the
Wider Dowlais Group other than of a nature and to an extent which
is normal in the context of the business concerned,
and, in either case, which is or would
reasonably be expected to be material and adverse in the context of
the Wider Dowlais Group taken as a whole or in the context of the
Combination;
(o)
entered into any contract, commitment, arrangement or agreement
otherwise than in the ordinary course of business or passed any
resolution or made any offer (which remains open for acceptance)
with respect to or announced any intention to, or proposed to,
effect any of the transactions, matters or events referred to in
this Condition 8;
(p)
made any material alteration to its constitutional
documents;
(q)
except in relation to changes made or agreed as a result of, or
arising from, law or changes to law, made or agreed or consented to
any change to:
(i) the terms
of the trust deeds constituting the pension scheme(s) established
by any member of the Wider Dowlais Group for its directors or
employees or their dependents;
(ii)
the contributions payable to any such scheme(s) or to the benefits
which accrue or to the pensions which are payable
thereunder;
(iii) the
basis on which qualification for, or accrual or entitlement to,
such benefits or pensions are calculated or determined;
or
(iv) the
basis upon which the liabilities (including pensions) of such
pension schemes are funded, valued or made,
in each case, which has an effect that is
material in the context of the Wider Dowlais Group taken as a whole
or in the context of the Combination;
(r)
proposed, agreed to provide or modified the terms of any of the
Dowlais Share Plans or other benefit constituting a material change
relating to the employment or termination of employment of a
material category of persons employed by the Wider Dowlais Group or
which constitutes a material change to the terms or conditions of
employment of any senior employee of the Wider Dowlais Group, save
as agreed by the Panel (if required) and by AAM;
(s)
other than with the consent of AAM, taken (or agreed or proposed to
take) any action which requires, or would require, the consent of
the Panel or the approval of Dowlais Shareholders in a general
meeting in accordance with, or as contemplated by, Rule 21.1 of the
Code; or
(t) save to
the extent arising as a result of any change in applicable law,
entered into or varied in a material way the terms of, any
contract, agreement or arrangement with any of the directors or
senior executives of any member of the Wider Dowlais Group (save
for salary increases, bonuses or variations of terms in the
ordinary course), other than as agreed by AAM and (if required) by
the Panel;
9. No adverse
change, litigation or regulatory enquiry
save as Disclosed, since the Last Accounts
Date:
(a)
no adverse change or deterioration having occurred in the business,
assets, financial or trading position or profits or prospects or
operational performance of any member of the Wider Dowlais Group
which, in any such case, is material in the context of the Wider
Dowlais Group taken as a whole or in the context of the Combination
and no circumstances have arisen which would or would reasonably be
expected to result in such adverse change or
deterioration;
(b)
no litigation, arbitration proceedings, prosecution or other legal
proceedings to which any member of the Wider Dowlais Group is or
may become a party (whether as a plaintiff, defendant or otherwise)
and no enquiry, review or investigation by, or complaint or
reference to, any Third Party or other investigative body against
or in respect of any member of the Wider Dowlais Group having been
instituted, announced, implemented or threatened by or against or
remaining outstanding in respect of any member of the Wider Dowlais
Group which in any such case which has had or would reasonably be
expected to have a material adverse effect on the Wider Dowlais
Group taken as a whole or in the context of the
Combination;
(c)
no contingent or other liability of any member of the Wider Dowlais
Group having arisen or become apparent to AAM or increased which
has had or would reasonably be expected to have a material adverse
effect on the Wider Dowlais Group, taken as a whole or in the
context of the Combination;
(d)
no enquiry or investigation by, or complaint or reference to, any
Third Party having been threatened, announced, implemented,
instituted by or remaining outstanding against or in respect of any
member by or the Wider Dowlais Group which in any case is material
in the context of the Wider Dowlais Group taken as a
whole;
(e)
no member of the Wider Dowlais Group having conducted its business
in breach of any applicable laws and regulations which in any case
is material in the context of the Wider Dowlais Group taken as a
whole or in the context of the Combination; and
(f)
no steps having been taken which are likely to result in the
withdrawal, cancellation, termination or materially adverse
modification of any licence or permit held by any member of the
Wider Dowlais Group which is necessary for the proper carrying on
of its business and the withdrawal, cancellation, termination or
materially adverse modification of which has had, or would
reasonably be expected to have, an adverse effect which is material
in the context of the Wider Dowlais Group taken as a whole or in
the context of the Combination;
10. No
discovery of certain matters
(a)
save as Disclosed, AAM not having discovered:
(i) that any
financial, business or other information concerning the Wider
Dowlais Group as contained in the information publicly disclosed at
any time by or on behalf of any member of the Wider Dowlais Group
is materially misleading, contains a material misrepresentation of
fact or omits to state a fact necessary to make that information
not materially misleading and which was not subsequently corrected
before the date of this Announcement by disclosure either publicly
or otherwise to AAM or its professional advisers, in each case, to
the extent which is material in the context of the Wider Dowlais
Group taken as a whole or in the context of the Combination;
or
(ii)
that any member of the Wider Dowlais Group or partnership, company
or other entity in which any member of the Wider Dowlais Group has
a significant economic interest and which is not a subsidiary
undertaking of Dowlais, is subject to any liability (actual or
contingent) which is not disclosed in the annual report and
accounts of Dowlais for the Last Accounts Date, in each case, to
the extent which is material in the context of the Wider Dowlais
Group taken as a whole or in the context of the
Combination;
(b)
save as Disclosed, AAM not having discovered that:
(i) any past
or present member of the Wider Dowlais Group has failed to comply
with any and/or all applicable legislation or regulation, of any
jurisdiction with regard to the use, treatment, handling, storage,
carriage, disposal, spillage, release, discharge, leak or emission
of any waste or hazardous substance or any substance likely to
impair the environment or harm human health or animal health or
otherwise relating to environmental matters or the health and
safety of humans, or that there has otherwise been any such use,
treatment, handling, storage, carriage, disposal, spillage,
release, discharge, leak or emission (whether or not the same
constituted a non-compliance by any person with any such
legislation or regulations, and wherever the same may have taken
place) any of which storage, carriage, disposal, spillage, release,
discharge, leak or emission would be likely to give rise to any
material liability (actual or contingent) or cost on the part of
any member of the Wider Dowlais Group and which is material in the
context of the Wider Dowlais Group taken as a whole or in the
context of the Combination;
(ii)
there is, or is likely to be, for any reason whatsoever, any
liability (actual or contingent) of any past or present member of
the Wider Dowlais Group to make good, remediate, repair, reinstate
or clean up any property or any controlled waters now or previously
owned, occupied, operated or made use of or controlled by any such
past or present member of the Wider Dowlais Group (or on its
behalf) or by any person for which a member of the Wider Dowlais
Group is or has been responsible, or in which any such member may
have or previously have had or be deemed to have had an interest,
under any environmental legislation, regulation, notice, circular
or order of any Third Party and which is material in the context of
the Wider Dowlais Group taken as a whole or in the context of the
Combination;
(iii)
circumstances exist (whether as a result of the making of the
Combination or otherwise) which would be reasonably likely to lead
to any Third Party instituting, or whereby any member of the Wider
AAM Group or any present or past member of the Wider Dowlais Group
would be likely to be required to institute, an environmental audit
or take any other steps which would in any such case be reasonably
likely to result in any liability (whether actual or contingent) to
improve, modify existing or install new plant, machinery or
equipment or carry out changes in the processes currently carried
out or make good, remediate, repair, re-instate or clean up any
land or other asset currently or previously owned, occupied or made
use of by any past or present member of the Wider Dowlais Group (or
on its behalf) or by any person for which a member of the Wider
Dowlais Group is or has been responsible, or in which any such
member may have or previously have had or be deemed to have had an
interest which is material in the context of the Wider Dowlais
Group taken as a whole or in the context of the Combination;
or
(iv)
circumstances exist whereby a person or class of persons would be
likely to have any claim or claims in respect of any product or
process of manufacture or materials used therein currently or
previously manufactured, sold or carried out by any past or present
member of the Wider Dowlais Group which claim or claims would be
likely, materially and adversely, to affect any member of the Wider
Dowlais Group and which is material in the context of the Wider
Dowlais Group taken as a whole or in the context of the
Combination; and
11.
Anti-corruption, economic sanctions, criminal property and money
laundering
save as Disclosed and save as is not material
in each case in the context of the Wider Dowlais Group taken as a
whole or in the context of the Combination, AAM not having
discovered that:
(a)
(i) any past or present member, director, officer or employee of
the Wider Dowlais Group is or has at any time engaged in any
activity, practice or conduct which would constitute an offence
under the Bribery Act 2010, the U.S. Foreign Corrupt Practices Act
of 1977 or any other applicable anti-corruption or anti-bribery
law, rule or regulation or any other applicable law, rule or
regulation concerning improper payments or kickbacks; or (ii) any
person that performs or has performed services for or on behalf of
the Wider Dowlais Group is or has at any time engaged in any
activity, practice or conduct in connection with the performance of
such services which would constitute an offence under the Bribery
Act 2010, the U.S. Foreign Corrupt Practices Act of 1977 or any
other applicable anti-corruption or anti-bribery law, rule or
regulation or any other applicable law, rule or regulation
concerning improper payments or kickbacks;
(b)
any asset of any member of the Wider Dowlais Group constitutes
criminal property as defined by section 340(3) of the Proceeds of
Crime Act 2002 (but disregarding paragraph (b) of that definition)
or proceeds of crime under any other applicable law, rule or
regulation concerning money laundering or proceeds of crime or any
member of the Wider Dowlais Group is found to have engaged in
activities constituting money laundering under any applicable law,
rule or regulation concerning money laundering;
(c)
any past or present member, director, officer or employee of the
Dowlais Group, or any other person for whom any such person may be
liable or responsible, is or has engaged in any conduct which would
violate applicable economic sanctions or dealt with, made any
investments in, made any funds or assets available to or received
any funds or assets from:
(i) any
government, entity or individual in respect of which U.S., UK or
European Union persons, or persons operating in those territories,
are prohibited from engaging in activities or doing business, or
from receiving or making available funds or economic resources, by
U.S., UK or European Union laws or regulations, including the
economic sanctions administered by the United States Office of
Foreign Assets Control, or HMRC; or
(ii)
any government, entity or individual targeted by any of the
economic sanctions of the United Nations, the U.S., the UK or the
European Union or any of its member states, except as may have been
licensed by the relevant authority;
(d)
any past or present member, director, officer or employee of the
Wider Dowlais Group, or any other person for whom any such person
may be liable or responsible:
(i) has
engaged in conduct which would violate any relevant anti-terrorism
laws, rules, or regulations, including but not limited to the U.S.
Anti-Terrorism Act;
(ii)
has engaged in conduct which would violate any relevant
anti-boycott law, rule or regulation or any applicable export
controls, including but not limited to the Export Administration
Regulations administered and enforced by the U.S. Department of
Commerce or the International Traffic in Arms Regulations
administered and enforced by the U.S. Department of
State;
(iii) has
engaged in conduct which would violate any relevant laws, rules, or
regulations concerning human rights, including but not limited to
any law, rule or regulation concerning false imprisonment, torture
or other cruel and unusual punishment, or child labour;
or
(iv) is
debarred or otherwise rendered ineligible to bid for or to perform
contracts for or with any Relevant Authority or found to have
violated any applicable law, rule or regulation concerning
government contracting or public procurement; or
(e)
any member of the Wider Dowlais Group is or has been engaged in any
transaction which would cause AAM to be in breach of any law or
regulation upon its Combination of Dowlais, including but not
limited to the economic sanctions of the United States Office of
Foreign Assets Control, or HMRC or any other Relevant
Authority.
Part 2
Waiver and invocation of the
Conditions
1. Subject to
the requirements of the Panel in accordance with the Code, AAM
reserves the right in its sole discretion to waive, in whole or in
part, all or any of the Conditions in Part 1
of this Appendix 1, except for
Conditions 1 (Long Stop
Date), 2(a)(i),
2(b)(i) and 2(c)(i)
(Scheme
approval), 4 (AAM Shareholder approval),
5(a) and 5(b)
(Listing on the New York
Stock Exchange, effectiveness of registration), which cannot be waived.
The deadlines in any of Conditions
2(a)(ii),
2(b)(ii) and
2(c)(ii) (Scheme approval) may be extended to
such later date as AAM may determine (with the Panel's consent and
approval of the Court, if such consent and/or approval is
required). If any of Conditions 1 (Long Stop Date),
2(a)(ii),
2(b)(ii) and
2(c)(ii) (Scheme approval) is not satisfied by
the relevant deadline specified in the relevant Condition, AAM
shall make an announcement by 8.00 a.m. (London time) on the
business day (as defined in the Code)
following such deadline confirming whether, subject to
paragraph 3 below, it has invoked the relevant Condition, waived
the relevant deadline or extended the relevant deadline.
2.
Conditions 2(a)(i),
2(b)(i) (Scheme approval) and
3 (Official
authorisations and regulatory clearances) to 11
(Anti-corruption, economic
sanctions, criminal property and money laundering)
(inclusive) must be fulfilled, determined by AAM to remain
fulfilled or (if capable of waiver) waived, by no later than 11.59
p.m. (London time) on the day before the Sanction Hearing. AAM
shall be under no obligation to waive (if capable of waiver), to
determine to be or remain satisfied or to treat as satisfied any of
Conditions 2(a)(i),
2(b)(i) (Scheme approval) or
3 (Official
authorisations and regulatory clearances) to 11
(Anti-corruption, economic
sanctions, criminal property and money laundering)
(inclusive) by a date or time earlier than the latest date and time
specified above for the fulfilment of the relevant Condition
notwithstanding that the other Conditions may at such earlier date
have been waived or fulfilled and that there are at such earlier
date no circumstances indicating that any of such Conditions may
not be capable of fulfilment.
3. Subject to
paragraph 4 below, under Rule 13.5(a) of the Code, AAM may only
invoke a Condition so as to cause the Combination not to proceed,
to lapse or to be withdrawn with the consent of the Panel. The
Panel will normally only give its consent if the circumstances
which give rise to the right to invoke the Condition are of
material significance to AAM in the context of the Combination.
This will be judged by reference to the facts of each case at the
time that the relevant circumstances arise.
4. Each of
Conditions 1 (Long Stop
Date), 2 (Scheme
approval), 4 (AAM Shareholder approval) and
5 (Listing on
the New York Stock Exchange, effectiveness of registration)
(and any Takeover Offer acceptance condition adopted on the basis
specified in Part 3 of this Appendix 1)
will not be subject to Rule 13.5(a) of the Code.
5. Any
Condition that is subject to Rule 13.5(a) of the Code may be waived
by AAM.
6. The
Combination will not become Effective unless the Conditions have
been fulfilled or (to the extent capable of waiver and permitted)
waived or, where appropriate, have been determined by AAM to be or
remain satisfied by no later than the Long Stop Date.
7. Each of
the Conditions shall be regarded as a separate Condition and shall
not be limited by reference to any other Condition.
Part 3
IMPLEMENTATION BY
WAY OF TAKEOVER OFFER
Subject to the terms of the Co-operation
Agreement and obtaining the consent of the Panel, AAM reserves the
right to elect to implement the Combination by way of a Takeover
Offer as an alternative to the Scheme. In such event, such Takeover
Offer will be implemented on the same terms and conditions, so far
as applicable, as those which would apply to the Scheme subject to
appropriate amendments to reflect the change in method of effecting
the Combination, including (without limitation) the inclusion of an
acceptance condition set at 90 per cent. of Dowlais Shares to which
the Takeover Offer relates, (or such lesser percentage as may be
determined after consultation with the Panel (if necessary)), being
in any case more than 50 per cent. of the voting rights normally
exercisable at a general meeting of Dowlais, including, for this
purpose, any such voting rights attaching to Dowlais
Shares that are issued before the Takeover Offer becomes or is
declared unconditional (whether pursuant to the exercise of any
outstanding subscription or conversion rights or
otherwise).
Part 4
CERTAIN FURTHER
TERMS OF THE COMBINATION
1. The
availability of the Combination to persons not resident in the UK
may be affected by the laws of the relevant jurisdiction. Persons
who are not resident in the UK should inform themselves about, and
observe, any applicable requirements. Dowlais Shareholders who are
in any doubt about such matters should consult an appropriate
independent professional adviser in the relevant jurisdiction
without delay and observe any applicable requirements. Further
details in relation to Overseas Shareholders will be contained in
the Scheme Document.
2. Dowlais
Shares will be acquired by AAM fully paid and free from all liens,
equitable interests, charges, encumbrances, rights of pre-emption
and any other third party rights or interests whatsoever and
together with all rights existing at the date of this Announcement
or thereafter attaching or accruing thereto, including (without
limitation) the right to receive and retain, in full, all dividends
and other distributions (if any) declared, made or paid or any
other return of capital (whether by way of reduction of share
capital, repurchase or redemption or otherwise) made on or after
the date of this Announcement in respect of Dowlais Shares, other
than the FY24 Final Dividend or any repurchases of Dowlais Shares
by Dowlais pursuant to the Buyback Programme.
3. Fractions
of New AAM Shares will not be allotted to Dowlais Shareholders.
Instead, all fractional shares which a holder of Dowlais Shares
would otherwise be entitled to receive will be aggregated and
calculations will be rounded down, and such holder shall receive,
in lieu of such fractional entitlements, cash in an amount (rounded
down to the nearest penny) equal to such fractional amount
multiplied by the last reported sale price of AAM Shares on the New
York Stock Exchange (as reported in Bloomberg or, if not reported
therein, in another authoritative source selected by AAM) on the
last Business Day prior to the Effective Date.
4. If any
dividend, other distribution or return of capital, other than the
FY24 Final Dividend or any repurchases of Dowlais Shares by Dowlais
pursuant to the Buyback Programme, is announced, declared, made,
payable or paid in respect of Dowlais Shares on or after the date
of this Announcement and before the Effective Date, AAM reserves
the right to reduce the cash element of the consideration payable
in respect of each Dowlais Share by the amount of all or part of
any such dividend, other distribution or return of capital, in
which case any reference in this Announcement to the consideration
payable under the terms of the Combination will be deemed to be a
reference to the consideration as so reduced. If AAM exercises this
right or makes such a reduction in respect of a dividend, other
distribution or return of capital, Dowlais Shareholders will be
entitled to receive and retain that dividend, other distribution or
return of capital. Any exercise by AAM of its rights referred to in
this paragraph 4 shall be the subject of
an announcement and, for the avoidance of doubt, shall not be
regarded as constituting any revision or variation of the
Combination.
5. This
Announcement and any rights or liabilities arising hereunder, the
Combination, the Scheme and the Forms of Proxy will be governed by
the laws of England and Wales and be subject to the jurisdiction of
the courts of England and Wales. The Combination will also be
subject to the Conditions and further terms set out in this
Announcement and to be set out in the Scheme Document and such
further terms as may be required to comply with the UK Listing
Rules and the provisions of the Code. The Combination and the
Scheme will comply with the applicable requirements of the FCA, the
London Stock Exchange and the Court, as well as with the Panel and
the Code. This Announcement does not constitute, or form part of,
an offer or invitation to purchase Dowlais Shares or any other
securities.
6. If AAM is
required by the Panel to make an offer for Dowlais Shares under a
mandatory offer for Dowlais under Rule 9 of the Code, AAM may make
such alterations to the above Conditions as are necessary to comply
with Rule 9 of the Code.
7. The New
AAM Shares will be validly issued, fully paid and non-assessable.
The New AAM Shares will be issued free from all liens, equitable
interests, charges, encumbrances, rights of pre-emption and any
other third party rights or interests whatsoever.
8. The
consideration payable for the Combination (including, for the
avoidance of doubt, the New AAM Shares and any cash) will be paid
or delivered subject to any deduction or withholding on account of
tax that is required by applicable law in any relevant
jurisdiction.
Appendix 2
SOURCES AND BASES OF INFORMATION
Unless otherwise stated in this
Announcement:
1. As at
close of business on 28 January 2025 (being the last Business Day
before the date of this Announcement) Dowlais had 1,344,524,115
ordinary shares in issue.
2. Dowlais
does not hold any shares in treasury.
3. Except for
the purpose of paragraph 21 and the
undertaking therein, any reference to the entire issued and to be
issued ordinary share capital of Dowlais is based on:
(a)
1,344,524,115 Dowlais Shares referred to in paragraph 1 above
(which includes 5,523,071 Dowlais Shares held by the employee
benefit trust operated by Dowlais that can be used to satisfy the
vesting of awards under the Dowlais Share Plans as at close of
business on 28 January 2025 (being the last Business Day before the
date of this Announcement)); and
(b)
19,021,961 Dowlais Shares which may be issued on or after the date
of this Announcement on the vesting of awards under the Dowlais
Share Plans.
4. The
implied enterprise value multiple for Dowlais of approximately 4.1
times adjusted EBITDA for the twelve-month period ending 31
December 2023 is calculated by reference to:
(a)
the implied value (excluding the FY2024 Final Dividend) of 82.4
pence per Dowlais Share multiplied by the issued and to be issued
ordinary share capital of Dowlais referenced in paragraph 3 above;
plus
(b)
the following balance sheet items taken as of 30 June 2024: net
financial debt excluding lease liabilities of £915 million, lease
liabilities of £142 million, non-controlling interests of £34
million, tax-adjusted pension liabilities of £338 million; together
divided by;
(c)
Dowlais' adjusted EBITDA of £618 million for the 12-month period
ending 31 December 2023.
5. The
volume-weighted average prices of a Dowlais Share are derived from
data provided by Bloomberg.
6. Pro-forma
revenue and adjusted EBITDA margin have been compiled on a
statutory basis and without adjustments for differences between US
GAAP and IFRS.
7. Unless
otherwise stated, all prices for Dowlais Shares have been derived
from data provided by Bloomberg and represent Closing Prices on the
relevant date(s).
8. Unless
otherwise stated:
(a)
the balance sheet information relating to Dowlais is extracted from
the first half 2024 results of Dowlais as at 30 June 2024;
and
(b)
the income statement financial information relating to Dowlais is
extracted from the Annual Report and Financial Statements of
Dowlais for the year ended 31 December 2023.
9. Certain
figures included in this Announcement have been subject to rounding
adjustments.
Appendix 3
DETAILS OF IRREVOCABLE UNDERTAKINGS
1. Dowlais
Directors
The following Dowlais Directors have given
irrevocable undertakings in respect of their own beneficial
holdings of Dowlais Shares (or those Dowlais Shares over which they
have control) to vote (or procure a vote) in favour of the
resolutions relating to the Combination at the Dowlais Meetings or,
in the event that the Transaction is implemented by way of a
Takeover Offer, to accept (or procure the acceptance of) such
Takeover Offer:
Name
|
Total Number of
Dowlais Shares
|
Percentage of issued ordinary share
capital (%)
|
Liam Butterworth
|
2,331,984
|
0.173%
|
Roberto Fioroni
|
1,153,116
|
0.086%
|
Simon Mackenzie Smith
|
163,392
|
0.012%
|
Celia Baxter
|
119,421
|
0.009%
|
Philip Harrison
|
60,119
|
0.004%
|
Shali Vasudeva
|
24,215
|
0.002%
|
Fiona MacAulay
|
12,182
|
0.001%
|
The obligations of the Dowlais Directors under
the irrevocable undertakings given by them shall lapse and cease to
have effect on and from the earlier of the following
occurrences:
(a)
AAM publicly announces, with the consent of the Panel, that it does
not intend to proceed with the Combination;
(b)
the Combination lapses, is withdrawn or otherwise terminates in
accordance with its terms;
(c)
the Scheme has not become Effective before 11.59 p.m. on the Long
Stop Date; or
(d)
if any competing offer for Dowlais is declared wholly unconditional
or becomes effective.
These irrevocable undertakings remain binding
in the event a competing offer is made for Dowlais. These
irrevocable undertakings also extend to any shares acquired by the
Dowlais Directors as a result of the vesting of awards under the
Dowlais Share Plans.
Appendix 4
AAM FY24 Profit Estimate
1. AAM FY24
Profit Estimate
For full year 2024:
·
AAM is estimating sales in
the range of $6.10 - $6.15 billion.
·
AAM is estimating Adjusted
EBITDA in the range of $740 - $750 million.
·
AAM is estimating Adjusted
free cash flow in the range of $220 - $230
million.
Supplementary data for GAAP
reconciliation:
Adjusted
EBITDA
·
AAM is estimating net
income in the range of $30 - $35 million.
·
AAM is estimating interest
expense in the range of $185 - $185 million.
·
AAM is estimating income
tax expense in the range of $25 - $30 million.
·
AAM is estimating
depreciation and amortization in the range of $470 - $470
million.
·
AAM is estimating full year
2024 EBITDA in the range of $710 - $720 million.
·
AAM is estimating
restructuring, acquisition, and other related costs (principally
impairment charge) in the range of $30 - $30
million.
·
AAM is estimating full year
2024 Adjusted EBITDA in the range of $740 - $750
million.
Adjusted Free
Cash Flow
·
AAM is estimating net cash
provided by operating activities in the range of $440 - $450
million.
·
AAM is estimating capital
expenditures net of proceeds from the sale of property, plant and
equipment and from government grants in the range of ($240) -
($240) million.
·
AAM is estimating full year
2024 free cash flow in the range of $200 - $210
million.
·
AAM is estimating cash
payments for restructuring and acquisition-related costs in the
range of $20 - $20 million.
·
AAM is estimating full year
2024 Adjusted free cash flow in the range of $220 - $230
million.
2.
Application of Rule 28 to AAM FY24 Profit Estimate
The statements above in relation to Adjusted
EBITDA and Adjusted free cash flow constitute profit estimates for
the purposes of the Code.
The Panel has granted AAM a dispensation from
the requirement to include reports from reporting accountants and
AAM's financial advisers in relation to the FY24 Profit Estimate on
the basis that:(i) the estimate is presented in a manner which is
consistent with AAM's ordinary course quarterly guidance; (ii)
Dowlais has agreed to the dispensation; and (iii) the directors of
AAM have provided the confirmations stated below.
3. AAM
Directors' confirmation
The AAM Directors confirm that, as at the date
of this Announcement, the AAM FY24 Profit Estimate is valid as at
the date of this announcement and has been properly compiled on the
basis of the assumptions stated below and that that the basis of
accounting used is consistent with AAM's accounting
policies.
4. Basis of
preparation
The AAM 2024 Profit Estimate is based on AAM's
unaudited management accounts for the year ended 31 December 2024.
The basis of accounting used for the AAM 2024 Profit Estimate is
consistent with the AAM's existing accounting policies, which: (i)
are in accordance with U.S. GAAP; (ii) were applied in the
preparation of the AAM's financial statements for the year ending
31 December 2023; and (iii) are expected to be applied in the
preparation of the AAM financial statements for the period up to 31
December 2025.
The AAM 2024 Profit Estimate has been prepared
on the basis referred to above and subject to the principal
assumptions set out below. The AAM 2024 Profit Estimate is
inherently uncertain and there can be no guarantee that any of the
factors referred to under "Principal Assumptions" below will not
occur and/or, if they do, their effect on AAM's results of
operations, financial condition, or financial performance, may be
material. The AAM 2024 Profit Estimate should therefore be read in
this context and construed accordingly.
5.
Principal assumptions
(a)
Factors outside the influence or control of the AAM
Directors:
(i)
there will be no material change to macroeconomic, political,
inflationary, regulatory or legal conditions in the markets or
regions in which AAM operates;
(ii)
there will be no material change in current US interest rates,
economic growth (GDP), inflation expectations or foreign exchange
rates compared with AAM's estimates;
(iii) there
will be no material change in accounting standards;
(iv) there
will be no material change in market conditions in relation to
customer demand or the competitive environment;
(v)
there will be no material litigation or regulatory investigations,
or material unexpected developments in any existing litigation or
regulatory investigation, in relation to any of AAM's operations,
products or services; and
(vi) there
will be no business disruptions that materially affect AAM, its
customers, operations, supply chain or labour supply, including
natural disasters, acts of terrorism, cyber-attack and/or
technological issues.
(b)
Factors within the influence or control of the AAM
Directors:
(i)
there will be no material acquisitions, disposals,
distribution partnerships, joint ventures or other commercial
agreements, other than those already assumed within the
forecast;
(ii)
there will be no material change in the existing operational
strategy of AAM;
(iii) there
will be no material changes in AAM's accounting policies and/or the
application thereof;
(iv)
there are no material strategic investments or capital
expenditure in addition to those already planned; and
(v)
there will be no material change in the management or control of
AAM.
Appendix 5
Dowlais FY24 Profit Estimate
1. Dowlais
FY24 Profit Estimate
On 13 August 2024, Dowlais announced its half
year results for the financial year ended 31 December 2024.
Included within these results was the following statement:
"Consequently, we expect a mid to
high single-digit adjusted revenue decline for 2024 and an adjusted
operating margin between 6.0% and 7.0% at constant currency, given
the benefits of commercial recoveries, restructuring savings and
performance initiatives" (the "Dowlais FY24 Profit Estimate").
The Dowlais FY24 Profit Estimate was reconfirmed in the
trading update released by Dowlais in November 2024.
The Dowlais FY24 Profit Estimate constitutes a
profit estimate for the purposes of Rule 28.1(c) of the
Code.
2. Dowlais
Directors' confirmation
The Dowlais Directors confirm that, as at the
date of this Announcement, the Dowlais FY24 Profit Estimate remains
valid and that it has been properly compiled on the basis of the
assumptions stated and that the basis of accounting used is
consistent with the accounting policies of the Dowlais Group, which
are in accordance with UK-endorsed International Financial
Reporting Standards ("IFRS").
Set out below is the basis of preparation of
the Dowlais FY24 Profit Estimate and the principal assumptions on
which it is based.
3. Basis of
preparation and principal assumptions
The Dowlais FY24 Profit Estimate is based on
the unaudited condensed interim financial statements of Dowlais for
the six months ended 30 June 2024. The basis of accounting used is
consistent with the accounting policies of Dowlais, which are in
accordance with IFRS and are those that Dowlais expects to apply in
preparing its Annual Report and Financial Statements for the
financial year ended 31 December 2024. Given that the period to
which the Dowlais FY24 Profit Estimate relates has been completed,
there are no other principal assumptions underpinning the Dowlais
FY24 Profit Estimate.
Appendix 6
Statement on Quantified Financial
Benefits
Part 1
Quantified Financial Benefits
Statement
This Announcement contains statements of
estimated cost synergies arising from the Combination (together,
the "Quantified Financial Benefits
Statement").
A copy of the Quantified Financial Benefits
Statement is set out below:
The AAM Directors, having reviewed and analysed
the potential cost synergies of the Combination, and considering
the factors they can influence, are highly confident in the
Combined Group's ability to realise approximately $300 million of
annual run rate cost synergies, expected to be substantially
achieved by the end of the third year following
Completion.
The quantified cost synergies, expected to
originate from the cost bases of AAM and Dowlais, are anticipated
to be realised primarily from:
·
SG&A
- approximately 30 per cent. across the following
sources:
o Eliminating
duplicate public company costs and other costs;
o Optimisation of
the combined workforce;
o Streamlining of
engineering, research, and development expenses; and
o Elimination of
duplicate business and technical offices.
·
Purchasing -
approximately 50 per cent. across the following
sources:
o Leveraging
enhanced economies of scale and spend across direct and indirect
material suppliers;
o Utilising
vertical integration capabilities to deliver insourcing
initiatives; and
o Achieving
global freight and logistical savings through increased scale,
utilisation and benefits from third-party logistics
suppliers.
·
Operations
- approximately 20 per cent. across the following
sources:
o Increasing
operating efficiencies through the implementation of a best-of-best
operating system; and
o Optimising the
combined global manufacturing footprint.
The AAM Directors expect that approximately 60
per cent. of the annual run rate cost synergies will be realised by
the end of the second year following Completion, and the full run
rate cost savings are expected to be substantially achieved by the
end of the third year following Completion.
The AAM Directors expect that the one-off costs
required to deliver on the synergy plan are approximately equal to
one year of full run rate savings.
In addition, the AAM Directors expect an
increase in operating working capital of approximately $13 million
required to deliver identified run rate freight and logistics
synergies.
The synergy savings stated are net of
anticipated dis-synergies (expected to be approximately $22
million).
The expected synergies will accrue as a direct
result of the Combination and would not be achieved on a standalone
basis.
These statements of estimated cost savings and
synergies relate to future actions and circumstances which, by
their nature, involve risks, uncertainties and contingencies. As a
result, the cost savings and synergies referred to herein may not
be achieved, may be achieved later or sooner than estimated, or
those actually achieved could be materially different from those
estimated. For the purposes of Rule 28 of the Code, the statements
of estimated cost savings and synergies contained in this
Announcement are solely the responsibility of AAM and the AAM
Directors. Any statement of intention, belief or expectation for
the Combined Group following the Effective Date is also an
intention, belief or expectation of the AAM Directors and not of
the Dowlais Directors.
These statements are not intended as a profit
forecast or profit estimate for any period and should not be
interpreted as such. No part of these statements, or this
Announcement generally, should be construed or interpreted to mean
that the Combined Group's earnings in the first year following the
Effective Date, or in any subsequent period, would necessarily
match or be greater than or be less than those of AAM and/or
Dowlais for the relevant preceding financial period or any other
period.
Appendix 6 to this Announcement
includes a copy of these statements of anticipated cost savings and
synergies arising out of the Combination and provides underlying
information and bases of belief and calculation.
Appendix 6 to this Announcement
also includes reports from AAM's reporting accountant, Deloitte,
and its financial adviser, J.P. Morgan Cazenove, in connection with
the anticipated Quantified Financial Benefits Statement, as
required pursuant to Rule 28.1(a) of the Code, and provides
underlying information and bases for the reporting accountant's and
financial adviser's respective reports. J.P. Morgan Cazenove, as
financial adviser to AAM, has provided such a report for the
purposes of the Code stating that, in their opinion and subject to
the terms of the report, the Quantified Financial Benefits
Statement, for which the AAM Directors are responsible, has been
prepared with due care and consideration. Each of Deloitte and J.P.
Morgan Cazenove has given and not withdrawn its consent to the
publication of its report in this Announcement in the form and
context in which it is included.
The AAM Board believes that the Combined Group
should be able to achieve the synergies set out in the Quantified
Financial Benefits Statement.
Further information on the bases of belief
supporting the Quantified Financial Benefits Statement, including
the principal assumptions and sources of information, is set out
below.
Basis of
calculation of the Quantified Financial Benefits
Statement
In preparing the Quantified
Financial Benefits Statement, AAM has relied on a combination of
publicly available information and information obtained through due
diligence. In such circumstances, AAM management has made estimates
and assumptions to aid its development of individual synergy
initiatives. The assessment and quantification of the potential
synergies have, in turn, been informed by AAM management's industry
experience and knowledge of the existing businesses, together with
consultation with Dowlais management.
The cost bases used as the basis for
the Quantified Financial Benefits Statement are a blend of AAM's
FY24 forecast financial results and Dowlais' FY24 forecast
financial results, supported where relevant by certain information
from AAM's and Dowlais' budgeted FY25 cost bases.
An exchange rate of £ to $1.30 has
been used in the compilation of the synergy initiatives.
Cost synergy assumptions were based
on (A) a mix (i) detailed, bottom-up evaluation of the benefits
resulting from elimination of duplicate activities or (ii) AAM's
and Dowlais' synergy attainment experience from other relevant
savings programs, (B) the benefits of combined scale economics and
(C) operational efficiencies arising from consolidation.
Where appropriate, assumptions were
used to estimate the costs of implementing the new structures,
systems and processes required to realise the synergies.
In general, the synergy assumptions
have been risk-adjusted.
In arriving at the Quantified
Financial Benefits Statement, the AAM Directors have made the
following assumptions, which are outside the influence of
AAM:
·
there will be no material change in underlying operations of
either business from the Combination;
·
there will be no material impact from divestments from
Dowlais existing businesses;
·
there will be no material change to macroeconomic, political,
inflationary, regulatory or legal conditions in the markets or
regions in which AAM and Dowlais operate;
·
there will be no material change in current foreign exchange
rates or interest rates;
·
there will be no material change in accounting standards;
and
·
there will be no change in tax legislation or tax rates or
other legislation in the United Kingdom, United States or other
countries that could materially impact the ability to achieve any
benefits.
In addition, the AAM Directors have made an assumption
within the influence of AAM that there will be no material
divestments made by AAM.
In addition, the AAM Directors have
assumed that the cost synergies are substantively within AAM's
control, albeit that certain elements are dependent in part on
negotiations with third parties.
Reports
As required by Rule 28.1(a) of the Code,
Deloitte, as reporting accountants to AAM, and J.P. Morgan
Cazenove, as financial adviser to AAM, have provided the reports
required under the Code.
Important
Notes
· The
statements of estimated synergies relate to future actions and
circumstances which, by their nature, involve risks, uncertainties
and contingencies. As a result, the synergies referred to may not
be achieved, or those achieved could be materially different from
those estimated.
· No
statement in the Quantified Financial Benefits Statement should be
construed as a profit forecast.
· Due
to the size of the combination and potential scale of the Combined
Group, there may be additional changes to the Combined Group's
operations. As a result, and given the fact that the changes relate
to the future, the resulting cost synergies may be materially
greater or less than those estimated.
· In
arriving at the estimate of synergies set out in this Announcement,
the AAM Board has assumed that there will be no significant impact
on the business of the Combined Group.