Pz Cussons Regulatory News (PZC)

2 Jun 2005 07:01

PZ CUSSONS PLC02 June 2005 2 June 2005 PZ Cussons Plc Proposed enfranchisement of the 'A' (Non-Voting) Ordinary Shares, Compensatory Bonus Issue to Ordinary Shareholders and cancellation and repayment of both classes of Preference Shares 1. Introduction The Board of PZ Cussons Plc announces proposals to simplify the capitalstructure of the Company involving the enfranchisement of the 'A' (Non-Voting)Ordinary Shares ("the Enfranchisement Proposals") and the cancellation andrepayment of both classes of Preference Shares ("Preference Shares Proposal"). The effect of the Enfranchisement Proposals is to convert the 'A' (Non-Voting)Ordinary Shares into Ordinary Shares with full voting rights. In compensationfor the dilution of their voting rights on the conversion of 'A' (Non-Voting)Ordinary Shares into Ordinary Shares, it is proposed that existing OrdinaryShareholders should receive additional Ordinary Shares through a CompensatoryBonus Issue of 1 New Ordinary Share for every 10 Ordinary Shares held ("NewOrdinary Shares"). The Enfranchisement Proposals require the consent of the 'A'(Non-Voting) Ordinary Shareholders in a Separate Class Meeting and the approvalof the Ordinary Shareholders at an Extraordinary General Meeting. A circular will be sent to all Shareholders shortly giving further informationon the proposals and convening the necessary Extraordinary General Meeting andSeparate Class Meetings for the proposals to be implemented. 2. The Enfranchisement Proposals (a) Background to and reasons for the Enfranchisement Proposals For some time, the Board has been assessing the appropriateness of the Company'scapital structure, in particular, against the backdrop of the Group's strategyfor growing the business. The Board concluded, in the first instance, that thetwo classes of Preference Shares, being the 71/2 per cent. Cumulative PreferenceShares of £1 each and the 10 per cent. Cumulative Preference Shares of £1 each,now represent relatively small, inflexible and expensive forms of capital andtherefore should be cancelled and repaid. The Board also concluded that it is appropriate to take steps to enfranchise the'A' (Non-Voting) Ordinary Shares. The two tier ordinary share structure has existed since 1969, when it was notuncommon for companies with significant family interests to have a class ofordinary share capital with preferential voting rights. At present, the rightswhich attach to the 'A' (Non-Voting) Ordinary Shares are identical to thoseattaching to the Ordinary Shares except that 'A' (Non-Voting) OrdinaryShareholders are not entitled to vote at general meetings of the Company. The Board considers that the enfranchisement of the 'A' (Non-Voting) OrdinaryShares is desirable for the following reasons: (a) the Directors wish to ensure that the Company has a capital structurewhich is simple and has maximum flexibility; (b) the 'A' (Non-Voting) Ordinary Shares have, historically, been verythinly traded and, in recent years, have become close to being removed from theFTSE UK Index series under their liquidity rules; (c) the Board is aware that some institutional investors have a policy ofnot investing in companies with non-voting ordinary shares; accordingly, theconsolidation of the equity shares into a single class through theEnfranchisement is expected to increase the range of potential investors in theCompany which, the Directors believe, should enhance the marketability andliquidity of the Company's shares; (d) the 'A' (Non-Voting) Ordinary Shares represent approximately 47 percent. of the total issued ordinary share capital of the Company; the 'A'(Non-Voting) Ordinary Shareholders are, however, unable to influence andparticipate in the Company's decision-making despite sharing the same risks andrewards as the Ordinary Shareholders; and (e) by having a single class of Ordinary Shares, the share based incentiveschemes offered to employees of the Group will be simplified. (b) Compensatory Bonus Issue To compensate Ordinary Shareholders for the dilution of their voting rightsthrough the 'A' (Non-Voting) Ordinary Shares being converted into OrdinaryShares, it is proposed that holders of existing Ordinary Shares should receiveNew Ordinary Shares by way of a bonus issue on the following basis: 1 New Ordinary Share for every 10 Ordinary Shares held on the record date The Compensatory Bonus Issue will result in the issue of approximately 2.1million New Ordinary Shares, representing approximately 4.9 per cent. of theenlarged issued ordinary share capital of the Company. The expected record datefor the Compensatory Bonus Issue is expected to be the close of business on 28June 2005. The Directors are announcing today that, in the absence of unforeseencircumstances, they intend to recommend a final dividend of 26.6p per share forthe period ended 31 May 2005. The New Ordinary Shares will rank pari passu with the existing Ordinary Sharesincluding the right to receive the recommended final dividend of 26.6p. In considering an appropriate level for the Compensatory Bonus Issue to holdersof Ordinary Shares, the Directors have considered a number of factors including: (a) the percentage that the existing Ordinary Shares represent of the total current issued ordinary share capital; (b) the extent of the additional value the market has historically placed on the Ordinary Shares by virtue of their voting rights. Over the last two years, the average premium attaching to the Ordinary Shares is 13.8 per cent. with the high being 26.8 per cent. and the low 2.9 per cent.. Over the last twelve months, the average premium is 15.3 per cent. with the high being 26.8 per cent. and the low 2.9 per cent.. As at the close of business on 1 June 2005, the last business day prior to this announcement, the premium was 20.5 per cent.; (c) the effect which the Compensatory Bonus Issue will have in diluting the earnings and dividend entitlement of the 'A' (Non-Voting) Ordinary Shareholders; and (d) the fact that the New Ordinary Shares will rank for the recommended final dividend for the period ended 31 May 2005. The Directors believe that the Compensatory Bonus Issue will not have anymaterial effect on the financial position of the 'A' (Non-Voting) OrdinaryShareholders and that, in the future, the dividend paid per share is unlikely tobe affected. Usually, no UK tax charge will arise in respect of a bonus issue. However,special rules apply where a bonus issue is preceded or followed by a repaymentor redemption of share capital. In these circumstances the bonus issue istreated as giving rise to a distribution for tax purposes. The Company has inthe past made market purchases of its owns shares and, accordingly, thesespecial rules apply. Thus, an Ordinary Shareholder receiving New Ordinary Sharespursuant to the Compensatory Bonus Issue will be treated for tax purposes asreceiving a distribution equal to the nominal value of 10p per New OrdinaryShares so received. (c) Further details regarding the Enfranchisement Proposals Implementation of the Enfranchisement Proposals will result in all of the 'A'(Non-Voting) Ordinary Shares being re-designated as Ordinary Shares which willrank pari passu in all respects with existing Ordinary Shares, including theright to receive the recommended final dividend, but they will not rank for theCompensatory Bonus Issue. Application will be made to the UKLA and the London Stock Exchange for thecurrent listing of the 'A' (Non-Voting) Ordinary Shares to be carried over tothose shares after their re-designation as Ordinary Shares and for the NewOrdinary Shares arising under the Compensatory Bonus Issue to be admitted to theOfficial List and to trading on the London Stock Exchange's market for listedsecurities (together "Admission"). (d) Evaluation of the Enfranchisement Proposals For the reasons mentioned above, the Board believes that the EnfranchisementProposals, if adopted, are in the interests of both the Ordinary Shareholdersand the 'A' (Non-Voting) Ordinary Shareholders, will provide benefits for thefuture development of the Company and will provide a basis on which to improveshareholder value in the long term. JPMorgan Cazenove Limited has evaluated the Enfranchisement Proposals from thepoint of view of the 'A' (Non-Voting) Ordinary Shareholders as a class and hasconfirmed to the Company that, in its opinion, the terms are fair and reasonableinsofar as they affect the 'A' (Non-Voting) Ordinary Shareholders. NM Rothschild & Sons Limited has evaluated the Enfranchisement Proposals fromthe point of view of the Ordinary Shareholders as a class and has confirmed tothe Company that, in its opinion, the terms are fair and reasonable and provideOrdinary Shareholders with an appropriate level of compensation for theEnfranchisement. 3. The Concert Party Following discussions with the Panel, it has been deemed that, for the purposesof the Code, a group of Shareholders are acting in concert as defined in theCode. These Shareholders collectively control 70.7 per cent. of the existingOrdinary Shares and 42.6 per cent. of the existing 'A' (Non-Voting) OrdinaryShares in issue. Assuming implementation of the Enfranchisement Proposals, theywill control 58.0 per cent. of the enlarged issued ordinary share capital. The members of the Concert Party comprise members of the Zochonis family (beingdescendants of the founder of the Company) together with various family andrelated trusts, the Executive Directors of the Company, the trustees of theCompany's pension schemes and the trustee of the Paterson Zochonis EmployeeTrust. In addition, a group of approximately 100 Shareholders, being certainmembers of the wider Zochonis family and their associates and certain currentand former employees and former directors of the Company and its subsidiariesand their associates, normally notify and consult with the Chairman or anotherDirector of the Company before dealing in any Ordinary Shares or 'A'(Non-Voting) Ordinary Shares. Members of this group have, in the past, alsoacted in accordance with the views expressed by members of the Concert Party.The Panel has therefore deemed that the members of this group are acting inconcert with the Concert Party. Further details of the members of the Concert Party, together with theirrespective shareholdings as they are currently and as they will be followingimplementation of the Enfranchisement Proposals, will be provided in thecircular to be sent to shareholders. 4. Current trading and future prospects Overall, the underlying performance of the Group for the full year just ended isexpected to be broadly in line with that indicated by the Board at the interimstage. The challenging conditions that we reported in the first six months of the yearhave continued into the second half with, in particular, the weak US dollar andhigh oil prices impacting all our businesses globally. During the second half: •Nigeria has performed strongly with improved sales and margins; •Asia has continued to experience pressure on sales growth; •in Europe, the UK has suffered a difficult few months reflecting poor consumer demand; Greece has experienced continued pressure on margins and, in Eastern Europe, Poland has performed largely as forecast and Russian exit costs have been in line with expectations; and •the investment portfolio has risen strongly and some gains have been realised. We also indicated in the interim report that considerable action is being takento continue with our growth strategy and our margin improvement programme.Further progress has been made including: •the milk factory in Nigeria is now in production; •our Chinese subsidiary has been sold; •the new soap bar factory project in Thailand is on target; and •the restructuring of our Eastern European business is progressing satisfactorily. Whilst the pressures of certain raw materials costs and currency weakness willcontinue this year, your Board believes that the Group is well placed to achieveits objectives of continuing growth in the business and has the balance sheetstrength to sustain this growth. In the absence of unforeseen circumstances, the Directors intend to recommend afinal dividend of 26.6p per share for the period ended 31 May 2005. The finaldividend together with the interim dividend of 8.65p per share will amount to35.25p per share, an increase of 10.2 per cent. compared to the total dividendpaid per share for the period ended 31 May 2004. 5. Cancellation and repayment of the Preference Shares The Board is proposing that each Preference Share should be cancelled in returnfor a payment of £1.43 per 71/2 per cent. Cumulative Preference Share and £1.91per 10 per cent. Cumulative Preference Share, together in each case withdividends accrued to the repayment date. The total amount payable for therepayment of the Preference Shares, before taking into account any accrueddividend, is £14.7 million being £1.1million for the 71/2 per cent. CumulativePreference Shares and £13.6 million for the 10 per cent. Cumulative PreferenceShares. The amount payable for the repayment of each 71/2 per cent. CumulativePreference Share and 10 per cent. Cumulative Preference Share is made up of therepayment of their par value of £1 per share and a premium of 43 pence and 91pence respectively. In each case the premium is designed to compensatePreference Shareholders for the loss of income they will experience from thecancellation and repayment of their Preference Shares based upon interest ratescurrently prevailing in the UK. 6. Shareholder Meetings The Enfranchisement Proposals and the Preference Shares Proposal are dependentupon: •Ordinary Shareholders passing the resolutions relating to the Enfranchisement Proposals and Ordinary Shareholders and Preference Shareholders passing the resolutions relating to the cancellation and repayment of the Preference Shares at an Extraordinary General Meeting; •Ordinary Shareholders passing the necessary resolutions to approve the Preference Shares Proposals at a separate class meeting of the Ordinary Shareholders; •'A' (Non-Voting) Ordinary Shareholders passing the necessary resolution to approve the Enfranchisement Proposals and the Preference Shares Proposals at a separate class meeting of the 'A' (Non-Voting) Ordinary Shareholders; and •Preference Shareholders passing the necessary resolutions to approve the Preference Shares Proposals at separate class meetings of the Preference Shareholders. The cancellation and repayment of the Preference Shares is conditional uponconfirmation by the Court. The Enfranchisement Proposals are conditional on Admission but not conditionalon the Preference Shares Proposals. 7. Other Information JPMorgan Cazenove Limited is acting as financial adviser to the Company and hasseparately provided an opinion to the Company on the terms of theEnfranchisement Proposals insofar as they affect the 'A' (Non-Voting) OrdinaryShareholders. NM Rothschild & Sons Limited has provided an opinion to theCompany on the terms of the Enfranchisement Proposals insofar as they affect theOrdinary Shareholders. Contacts Graham Calder, PZ Cussons 0161 491 8000 Malcolm Moir, JPMorgan Cazenove 020 7588 2828Dermot McKechnie, JPMorgan Cazenove 020 7588 2828 Richard Bailey, NM Rothschild & Sons Ltd 0161 827 3800Greg Cant, NM Rothschild & Sons Terry Garrett, Weber Shandwick Square Mile 020 7067 0736John Moriarty, Weber Shandwick Square Mile This information is provided by RNS The company news service from the London Stock Exchange