Flowtech Fluid. Regulatory News (FLO)

3 Jun 2008 15:01



NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN

Flomerics Group plc

('Flomerics' or 'the Group')

Chairman's response to Letter dated 30 May 2008 from Mentor Graphics Corporation ('Mentor')

The following letter is today being distributed to all Flomerics Group plc shareholders:

Board of Directors: Registered Office:

David W Mann (Non Executive Chairman) 81 Bridge Road

Gary C Carter (Chief Executive) Hampton Court

Keith Butcher (Finance Director) Surrey KT8 9HH

Thomas R Rowbotham (Non Executive Deputy Chairman)

Peter R Teague (Non Executive Director)

3 June 2008

Dear Flomerics Shareholder,

Do Not Be Misled - Response to Letter dated 30 May 2008 from Mentor Graphics Corporation 

I last wrote to you on 27 May 2008 to send you a copy of our defence document in which your Board set out its view as to why Mentor's Offer for your Flomerics Shares is inadequate. Subsequently, you will have received a letter from the Chairman and Chief Executive of Mentor dated 30 May 2008.

You should read and consider carefully your Board's response to the Mentor Letter (together with the defence document) before taking any action in relation to the Mentor Offer.

Mentor's Clarifying Statement 

We are pleased to see that Mentor has today, at the request of the Takeover Panel, issued an announcement clarifying the comments made in its letter in relation to Pricap, the sale of the shares it held and the position of Wolfgang Biedermann.

Pricap's decision to sell was made on the basis only of the publicly available historical information at the time of the sale in March and the price paid was equal to the book value (adjusted for exchange rate movements) at which Pricap held the shares when it acquired these shares in June 2006. Furthermore, Mentor has also confirmed that this decision to sell by Pricap was made without any knowledge of Wolfgang Biedermann, who was at the time, a director of Flomerics.

Flomerics' Current Trading and Valuation

The Mentor Letter describes your Board's views of the strength of Flomerics' current trading and of its valuation as "…superficially attractive…". Your Board strongly disagrees with that view.

As is set out in our defence document:

Flomerics' Adjusted Revenues for the first quarter in 2008 show an increase of approximately 42% (as reported in the Chairman's Letter of the defence document); and 

our Adjusted Profits for that period show an improvement of approximately £1.1 million;

as against the first quarter of 2007. 

These figures represent actual, tangible results and have been properly reported on by BDO Stoy Hayward LLP and Jefferies International Limited in accordance with the procedures required by The City Code on Takeovers and Mergers. Mentor did not have this information when making its Offer.

The defence document (page 3) also shows how the Mentor Offer undervalues your shares relative to a number of comparable transactions in the industry in which Flomerics operates.

Other Interested Parties

Other interested parties are in continuing discussions with your Board, notwithstanding that those parties are aware both of the level of Mentor's Offer and of its shareholding in Flomerics. Whilst there is no certainty that an alternate offer will be forthcoming, your Board continues to regard these discussions as supportive of its view that the Mentor Offer materially undervalues your investment in Flomerics. 

Other

There have been no material changes prior to the date of this document in the information set out in Flomerics' defence document dated 27 May 2008 including, in particular, in relation to details relating to the material contracts, the interests and dealings, the arrangements in relation to dealings and to the Flomerics Directors' service contracts referred to in paragraphs 4, 5 and 6 of Appendix 2 to that document. 

Further, the Flomerics Directors, whose names are set out above, confirm that the estimates of Adjusted Revenue and Adjusted Profit reported on in that document remain valid for the purposes of the Mentor Offer and that BDO Stoy Hayward LLP and Jefferies International Limited (who reported thereon) have indicated that they have no objection to their reports continuing to apply.

YOUR BOARD, WHICH HAS BEEN SO ADVISED BY JEFFERIES INTERNATIONAL, CONTINUES TO RECOMMEND THAT YOU TAKE NO FURTHER ACTION IN RELATION TO THE MENTOR OFFER. IT MATERIALLY UNDERVALUES YOUR FLOMERICS SHARES AND, ACCORDINGLY, YOU SHOULD NOT ACCEPT THE MENTOR OFFER OR SELL YOUR SHARES IN THE MARKET.

Yours faithfully 

David Mann,

Chairman

Enquiries: 

Flomerics Shares in Issue

Pursuant to Rule 2.10 of the City Code, Flomerics confirms that it has 22,935,250 ordinary shares of one penny each in issue and admitted to trading on the Alternative Investment Market of the London Stock Exchange (ISIN GB0003436192).

Dealing Disclosure Requirements

Under the provisions of Rule 8.3 of the Takeover Code (the 'Code'), if any person is, or becomes, 'interested' (directly or indirectly) in 1% or more of any class of 'relevant securities' of Flomerics, all 'dealings' in any 'relevant securities' of that company (including by means of an option in respect of, or a derivative referenced to, any such 'relevant securities') must be publicly disclosed by no later than 3.30 pm (London time) on the London business day following the date of the relevant transaction. This requirement will continue until the date on which the offer becomes, or is declared, unconditional as to acceptances, lapses or is otherwise withdrawn or on which the 'offer period' otherwise ends. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire an 'interest' in 'relevant securities' of Flomerics, they will be deemed to be a single person for the purpose of Rule 8.3.

Under the provisions of Rule 8.1 of the Code, all 'dealings' in 'relevant securities' of Flomerics by a potential offeror or by Flomerics, or by any of their respective 'associates', must be disclosed by no later than 12.00 noon (London time) on the London business day following the date of the relevant transaction.

A disclosure table, giving details of the companies in whose 'relevant securities' 'dealings' should be disclosed, and the number of such securities in issue, can be found on the Takeover Panel's website at www.thetakeoverpanel.org.uk.

'Interests in securities' arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in the price of securities. In particular, a person will be treated as having an 'interest' by virtue of the ownership or control of securities, or by virtue of any option in respect of, or derivative referenced to, securities.

Terms in quotation marks are defined in the Code, which can also be found on the Panel's website. If you are in any doubt as to whether or not you are required to disclose a 'dealing' under Rule 8, you should consult the Panel.

Other

Jefferies International Limited, which is authorised and regulated in the UK by The Financial Services Authority, is acting exclusively for Flomerics and no one else in connection with the Mentor Offer and, accordingly, will not be responsible to anyone other than Flomerics for providing the protections afforded to customers of Jefferies International Limited or for providing advice in relation to the Mentor Offer or in relation to the contents of this document or any transaction or arrangement or other matter referred to herein.

The Flomerics Directors, whose names are set out above, accept responsibility for the information contained in this document. To the best of the knowledge and belief of the Flomerics Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information.

If you are in any doubt as to the action you should take in connection with the Mentor Offer, you are recommended to seek your own independent financial advice immediately from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser duly authorised under the Financial Services and Markets Act 2000, if you are in the United Kingdom, or, if not, from another appropriately authorised independent financial adviser.