Trifast Regulatory News (TRI)

20 Sep 2005 07:04

Trifast PLC20 September 2005 Date: Tuesday, 20 September 2005 NOT FOR RELEASE OR DISTRIBUTION IN OR INTO THE USA, CANADA, THE REPUBLIC OF IRELAND, AUSTRALIA OR JAPAN Trifast plc Proposed acquisition of Serco Ryan Limited and Placing and Open OfferHighlights Acquisition of Serco Ryan Trifast intends to acquire Serco Ryan Limited, a UK-based fastener distributor with a turnover of £41 million and complementary customer base Maximum aggregate consideration for the Acquisition of £18 million of which: • £16 million to be satisfied by payment in cash on completion of the Acquisition, funded through a combination of debt and the net proceeds of the Placing and Open Offer • Up to £2 million to be satisfied by the issue of Trifast shares to the Vendor, deferred for 12 months Acquisition expected to be significantly earnings enhancing for Trifast in first full year of ownership(1) It is proposed that Steve Auld, Managing Director of Serco Ryan, will be appointed to the Board of Directors of Trifast on completion of the Acquisition Fundraising Proposed Placing and Open Offer to raise net proceeds of approximately £6.75 million Issue price of 67 pence per share, representing a discount of 4.3 per cent. to yesterday's market closing price Fully underwritten by Arden Partners Limited Jim Barker, Trifast's Chief Executive commented:"The Acquisition represents an excellent strategic fit for Trifast. Serco Ryan'sbusiness is complementary to Trifast's with limited overlap. Its well balancedcustomer mix will consolidate our market position as well as adding new sectorssuch as railway, boat building and construction-related business to the Group." "With Serco Ryan, we have the opportunity to enhance margins, to increaseutilisation of our Asian manufacturing base and to capitalise on the experienceof the combined workforce to develop further both in the UK and overseas." This summary should be read in conjunction with the full text of the followingannouncement. Certain terms used in this summary are defined in the Appendix ofthe attached announcement. Enquiries:Trifast plc Citigate Dewe RogersonJim Barker, Chief Executive Fiona TooleyStuart Lawson, Group Finance Director Tel: +44(0)1825 747200Tel: +44 (0)1825 747200 Mobile: +44 (0)7785 703523Web-site: www.trifast.com N M Rothschild & Sons Limited Ravi Gupta Tel: +44 (0)20 7280 5000 Arden Partners Limited Richard Day Tel: +44 (0)20 7398 1632 (1) This statement does not constitute a profit forecast nor should it be interpreted to mean that the future earnings per Ordinary Share of the Group following completion of the Acquisition will necessarily match or exceed historical earnings per Ordinary Share. This announcement has been approved for the purposes of Section 21 of theFinancial Services and Markets Act 2000 by N M Rothschild & Sons Limited. N M Rothschild & Sons Limited, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting exclusively for Trifastplc in connection with the Acquisition and is neither advising nor treating as aclient any other person and will not be responsible to anyone other than Trifastplc for providing the protections afforded to clients of N M Rothschild & SonsLimited nor for providing advice in relation to the Acquisition. Arden Partners Limited, which is authorised and regulated in the United Kingdomby the Financial Services Authority, is acting exclusively for Trifast plc inconnection with the Placing and Open Offer. Arden Partners Limited will not beresponsible to anyone other than Trifast plc for providing the protectionsoffered to clients of Arden Partners Limited nor for providing advice inrelation to the Placing and Open Offer. Neither the Placing nor the Open Offer is being made, directly or indirectly, inor into, or by use of the mails, or by any means or instrumentality (including,without limitation, facsimile transmission, internet, email, telex or telephone)of interstate or foreign commerce, or of any facility of a national securitiesexchange, of the United States, Canada, Australia, Japan or the Republic ofIreland and neither can be accepted by any such use, means instrumentality orfacility or from within the United States, Canada, Australia, Japan or theRepublic of Ireland. Neither the Placing nor the Open Offer constitutes an offer of securities forsale, or the solicitation of an offer to buy securities in the United States andthe new Ordinary Shares to be issued pursuant to the Placing and the Open Offerhave not been and will not be registered under the United States Securities Actof 1933, or under the laws of any state, district or other jurisdiction of theUnited States or of Canada, Australia, Japan or the Republic of Ireland and noregulatory clearances in respect of new Ordinary Shares have been or will be,applied for in any jurisdiction. Accordingly, unless an exemption under the USSecurities Act of 1933 or other relevant securities laws is applicable, the newOrdinary Shares are not being, and may not be offered, sold, resold, deliveredor distributed, directly or indirectly, in or into the United States or Canada,Australia, Japan or the Republic of Ireland or to, or for the account or benefitof, any US person or person resident in Canada, Australia, Japan or the Republicof Ireland. NOT FOR RELEASE OR DISTRIBUTION IN OR INTO THE USA, CANADA, THE REPUBLIC OF IRELAND, AUSTRALIA OR JAPAN Trifast plc Proposed acquisition of Serco Ryan Limited and Placing and Open Offer 1. IntroductionThe Directors of Trifast are pleased to announce that the Company hasconditionally agreed to acquire the entire issued share capital of Serco Ryan. The maximum aggregate consideration payable by the Company for the Acquisitionis £18 million (subject to adjustment to provide for a normalised workingcapital position at completion). £16 million of the consideration will besatisfied by payment in cash on completion of the Acquisition. The cashconsideration is to be funded in part by the proceeds of the Placing and OpenOffer (which is expected to raise approximately £6.75 million net of expenses ofthe Placing and Open Offer, the Acquisition and Admission) with the remainder ofthe cash consideration to be funded from a supplemental bank facility to be madeavailable to the Company by HSBC Bank plc. The balance of the consideration ofup to £2 million is deferred and is to serve as a retention against whichwarranty and indemnity claims will be off-set (if proven or settled) under theterms of the Acquisition Agreement. This element of the consideration is to besatisfied by the issue to the Vendor of new Ordinary Shares on the firstanniversary of completion of the Acquisition. 2. Background to and reasons for the AcquisitionTrifast is a global manufacturer and distributor of industrial fastenings and isa leading supplier of "Vendor Managed Inventory" solutions. Having completed its restructuring programme, Trifast is now focused onexpanding its business both organically and by acquisition. One of Trifast'score competencies is the supply of industrial fasteners and small components tothe telecommunications and electronics industries. Whilst Trifast's market sharein the UK has increased, much of this market has been subject to relocation tolower cost economies. Consequently, the Directors recognise that growingTrifast's share of the UK market is a key challenge facing the business. TheDirectors believe that the Acquisition represents an excellent strategic fit forTrifast as Serco Ryan operates in complementary parts of the fastenermarketplace, with significant contribution to sales from the railway and boatbuilding industries, the general industrial market and the building industry,which the Directors consider to be stable industries in the UK and which areunlikely to relocate overseas. In addition, the Directors believe that Serco Ryan has a strong management team,which the Directors believe will enhance the ability of Trifast not only toexpand in the UK, but also to capitalise on the experience of the combinedworkforce to expand abroad, in particular into the areas of the fastenermarketplace not previously addressed by Trifast. It is proposed that Steve Auld,the current Managing Director of Serco Ryan, be appointed to the Board ofDirectors of Trifast as an Executive Director immediately post completion of theAcquisition. There is some overlap in the branch networks of Trifast and Serco Ryan, whichthe Directors believe provides consolidation opportunities. The Directorsbelieve that there are further opportunities for enhancing margins through thecombination of the two companies' purchasing power, the reduction of totalstockholdings and increased utilisation of Trifast's existing Far Eastmanufacturing base. The Directors expect the Acquisition to be significantly earnings enhancing forthe Group in the first full year of ownership. This statement does notconstitute a profit forecast nor should it be interpreted to mean that thefuture earnings per Ordinary Share of the Group following completion of theAcquisition will necessarily match or exceed historical earnings per OrdinaryShare. 3. Information on Serco RyanSerco Ryan's principal activity is the distribution of fasteners into the UKindustrial market, operating from 8 locations with a central warehouse locatednear Kidderminster. In the Directors' opinion, Serco Ryan has a well balancedcustomer mix, with the railway and boat building industries, the domesticappliances sector, the general industrial market and the building industry asits main sectors. Approximately 70 per cent. of distribution turnover is derivedfrom fasteners, and the balance from a wide range of industrial consumables. Serco Ryan's core business has undergone significant restructuring since early2004, when its management focused on reducing its overhead structure andcreating an efficient hub and branch structure and a dedicated call centre. The selected financial information set out below has been extracted, withoutmaterial adjustment, from the audited accounts of Serco Ryan for the three yearsended 30 April 2005. Year ended 30 April 2003 2004 2005 £'000 £'000 £'000Turnover 35,812 41,740 41,347Gross profit 12,126 13,710 12,774Operating profit (adjusted)(1) 1,070 2,167 2,339Operating profit (reported) 813 1,831 982 (1) Before goodwill (2003: nil, 2004: nil, 2005: nil), exceptional charges (2003: £275k, 2004: £351k, 2005: £1,380k) and profit on disposal of fixed assets (2003: £18k, 2004: £15k, 2005: £23k) As at 30 April 2005, the gross assets of Serco Ryan were approximately £19.6million. 4. Current trading and prospects for the Group post-AcquisitionTrifast announced its preliminary results for the year to 31 March 2005 on 22June 2005. They showed a strong year of trading with a healthy increase inprofits and earnings per share over the previous year. The first halfperformance in particular was very encouraging in terms of sales and margins,however, the second half was weaker due to challenging global markets, some costdown pressures and increases in raw material and energy prices. This trend hascontinued into the current financial year and areas of the market are moredifficult than the comparable period in the prior year. However, although it isstill early in the year, given the new opportunities that are beginning tosurface, the Board expects a stronger performance in the second half and remainsconfident of the Group's performance for the year as a whole. Serco Ryan's year-to-date performance is in line with budget. The Directorsbelieve that the announcement of London's winning Olympic bid bodes well forSerco Ryan, as the expansion of the London Underground and improvements ininfrastructure are both areas in which Serco Ryan has significant customers. 5. Financial information on TrifastThe selected financial information set out below has been extracted, withoutmaterial adjustment, from the audited consolidated financial statements ofTrifast for the three years ended 31 March 2005. Year ended 31 March 2003 2004 2005 £'000 £'000 £'000Turnover 103,631 102,353 103,823Gross profit 25,613 24,787 27,007Operating profit (adjusted)(1) 4,403 5,026 6,149Operating profit (reported) 2,790 3,430 5,463Profit attributable to Shareholders 1,408 1,626 3,759Earnings per Ordinary Share (adjusted)(2) 3.94p 4.06p 5.76pEarnings per Ordinary Share (basic) 1.96p 2.26p 5.23p Total assets 73,533 67,409 67,235Net current assets 22,177 23,156 25,301Net debt (10,503) (8,542) (5,605)Shareholders' funds 34,492 34,293 36,481 (1) Before goodwill (2003: £742k, 2004: £709k, 2005: £686k), exceptional charges (2003: £871k, 2004: £887k, 2005: nil) and profit on disposal of fixed assets (2003: nil, 2004: £376k, 2005: £384k) (2) Before goodwill amortisation, exceptional charges, tax effects of exceptional charges and based on a diluted average number of shares 6. Details of the Placing and Open OfferThe Placing and Open Offer will raise approximately £6.75 million (net ofexpenses of the Placing and Open Offer, the Acquisition and Admission). ArdenPartners Limited has agreed to procure subscribers for the Placing and OpenOffer Shares (other than those the subject of valid acceptances from QualifyingShareholders pursuant to the Open Offer), failing which Arden Partners Limitedwill subscribe for such Placing and Open Offer Shares itself. Trifast hasarranged for Arden Partners Limited, as its agent, to invite applications fromQualifying Shareholders (other than certain overseas Shareholders) to acquire upto 4,792,797 of the Placing and Open Offer Shares at the Issue Price under theOpen Offer. Qualifying Shareholders may apply for Placing and Open Offer Shareson the basis of: 1 Placing and Open Offer Share for every 15 Existing Ordinary Shares and so in proportion for any other number of Existing Ordinary Shares so held.The Placing and Open Offer Shares will, when issued and fully paid, rank in fullfor all dividends and distributions thereafter declared, made or paid, save thatthey will not carry any entitlement to the dividend declared by the Company inrespect of the financial year ended 31 March 2005, and otherwise rank pari passuin all respects with the Existing Ordinary Shares. 7. Extraordinary General MeetingA circular will be sent to Shareholders shortly setting out details of theExtraordinary General Meeting to approve the Acquisition. Certain terms used in this announcement are defined in the Appendix. This announcement has been approved for the purposes of Section 21 of theFinancial Services and Markets Act 2000 by N M Rothschild & Sons Limited. N M Rothschild & Sons Limited, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting exclusively for Trifastplc in connection with the Acquisition and is neither advising nor treating as aclient any other person and will not be responsible to anyone other than Trifastplc for providing the protections afforded to clients of N M Rothschild & SonsLimited nor for providing advice in relation to the Acquisition. Arden Partners Limited, which is authorised and regulated in the United Kingdomby the Financial Services Authority, is acting exclusively for Trifast plc inconnection with the Placing and Open Offer. Arden Partners Limited will not beresponsible to anyone other than Trifast plc for providing the protectionsoffered to clients of Arden Partners Limited nor for providing advice inrelation to the Placing and Open Offer. Neither the Placing nor the Open Offer is being made, directly or indirectly, inor into, or by use of the mails, or by any means or instrumentality (including,without limitation, facsimile transmission, internet, email, telex or telephone)of interstate or foreign commerce, or of any facility of a national securitiesexchange, of the United States, Canada, Australia, Japan or the Republic ofIreland and neither can be accepted by any such use, means instrumentality orfacility or from within the United States, Canada, Australia, Japan or theRepublic of Ireland. Neither the Placing nor the Open Offer constitutes an offer of securities forsale, or the solicitation of an offer to buy securities in the United States andthe new Ordinary Shares to be issued pursuant to the Placing and the Open Offerhave not been and will not be registered under the United States Securities Actof 1933, or under the laws of any state, district or other jurisdiction of theUnited States or of Canada, Australia, Japan or the Republic of Ireland and noregulatory clearances in respect of new Ordinary Shares have been or will be,applied for in any jurisdiction. Accordingly, unless an exemption under the USSecurities Act of 1933 or other relevant securities laws is applicable, the newOrdinary Shares are not being, and may not be offered, sold, resold, deliveredor distributed, directly or indirectly, in or into the United States or Canada,Australia, Japan or the Republic of Ireland or to, or for the account or benefitof, any US person or person resident in Canada, Australia, Japan or the Republicof Ireland. APPENDIX DefinitionsThe following definitions apply throughout this announcement unless the contextrequires otherwise: "Acquisition" the proposed acquisition of the entire ordinary share capital of Serco Ryan Limited "Acquisition the conditional agreement dated 19 September 2005 between theAgreement" Company and the Vendor which sets out the terms for the Acquisition "Board" or the board of directors of the Company, together with the"Directors" Proposed Director "Existing the existing Ordinary Shares in issue at the Record DateOrdinaryShares" "Group" Trifast and each of its subsidiaries (within the meaning of the Act) "Issue Price" 67 pence per Placing and Open Offer Share "Ordinary ordinary shares of 5 pence each in the capital of TrifastShares" "Open Offer" the conditional invitation by Arden Partners Limited as agent on behalf of the Company to Qualifying Shareholders inviting them to subscribe for their allocation of the Placing and Open Offer Shares "Placing" the conditional placing by Arden Partners Limited (on behalf of the Company) of the Placing and Open Offer Shares at the Issue Price, subject to the right of Qualifying Shareholders to apply for such shares pursuant to the Open Offer "Placing and the 11,940,298 new Ordinary Shares to be allotted and issued byOpen Offer the Company pursuant to the Placing and Open OfferShares" "Proposed Steve Auld who is proposed to be appointed as an ExecutiveDirector" Director of the Company on completion of the Acquisition "Qualifying Shareholders on the register of members of the Company at theShareholders" Record Date (other than certain overseas Shareholders) "Record Date" close of business on 16 September 2005 "Shareholders" holders of Ordinary Shares "Serco Ryan" Serco Ryan Limited "Trifast" or Trifast plc"Company" "Vendor" Lilleshall Limited This information is provided by RNS The company news service from the London Stock Exchange