[For immediate announcement]
15 November (Stuttgart: A0Z24E - news) 2005
NOT FOR RELEASE OR DISTRIBUTION IN OR INTO THE USA, CANADA, THE REPUBLIC OF IRELAND, AUSTRALIA OR JAPAN
Hampson Industries PLC
Proposed Acquisitions of Coast Composites, Inc. and Lamsco West, Inc.
Proposed Placing of 161, 904,760 new ordinary shares at 21 pence per share
Share Consolidation
Hampson Industries PLC ("Hampson"), the aerospace and precision engineering group, today announces the proposed acquisitions of Coast Composites, Inc. ("Coast") and of Lamsco West, Inc. ("Lamsco") for a total initial estimated cash consideration of US$81.2 million (£46.7 million).
Coast is the leading manufacturer in the USA of large, tight tolerance tooling systems for composite structures used in aerospace, defence and satellite communications applications. Lamsco manufactures and supplies niche laminated products to the aerospace and defence industries. Both Coast and Lamsco are located in California, USA. The estimated initial consideration for Coast is US$56.0 million (£32.2 million) and the estimated initial consideration for Lamsco is US$25.2 million (£14.5 million).
Hampson also announces a placing of 161,904,760 new ordinary shares at a price of 21 pence per share. The net proceeds of the Placing, which are expected to amount to approximately £32.5 million after related expenses, will be applied to fund, in part, the consideration payable on completion of the Acquisitions. The balance will be financed through a new £80.0 million revolving credit facility. The Placing has been fully underwritten by Arbuthnot Securities Limited ("Arbuthnot").
In addition, it is proposed that, conditional upon the Placing being completed, the share capital of the Company be consolidated on the basis of one new ordinary share of 25 pence for each and every five existing ordinary shares.
The Proposals are subject to regulatory consents and the approval of Shareholders.
Arbuthnot is acting as sponsor, underwriter and broker to Hampson.
Highlights
Acquisition of Coast
· Coast is a manufacturer and supplier of precision tooling for large composite structures to the aerospace, defence and satellite communications markets.
· The acquisition offers Hampson greater exposure to the growing demand for composite materials in airframe fabrication business.
Acquisition of Lamsco
· Lamsco manufactures and supplies laminated sheet material and specialist shims to the aerospace and defence industries. Through its existing subsidiaries, Hampson is a supplier of similar products.
· The acquisition achieves a global leadership position for Hampson in this market niche, together with a broader, better-balanced customer base and increased exposure to the Boeing (NYSE: BA - news) family of aircraft.
Proposed Placing
· 161,904,760 new ordinary shares at 21 pence per share, to raise approximately £32.5million (net of related expenses).
· Received strong institutional support.
· Fully underwritten by Arbuthnot.
· Strengthens the Group's balance sheet.
Hampson rationale
· Building on last year's successful acquisition of Texstars Inc., the Acquisitions broaden the Group's customer, market sector and engineering technology base and bring access to new, high growth programmes, including, inter alia, the Boeing 787, F-35 Joint Strike Fighter, F/A-22 Raptor and a number of next generation Unmanned Aerial Vehicles ("UAVs").
· The acquisition of Coast also deepens the Group's exposure to the progressively increasing trend towards the use of advanced composite materials in airframe manufacture.
· As well as enabling Hampson to benefit from increased exposure to the strong recovery in civil aerospace markets, the acquisition of Lamsco positions the Group as the largest supplier of laminated shims for aerospace applications, globally.
Kim Ward, Chief Executive of Hampson Industries PLC, commented:
"These acquisitions transform Hampson's strategic presence in aerospace, notably in laminates and high growth composites, which are increasingly replacing metals in current and next generation aircraft manufacture.
Coast and Lamsco complement last year's successful acquisition of Texstars, providing us with new capabilities and engineering technology, access to key new aerospace programmes and the ability to provide an existing niche business with a route to global leadership.
This is an exciting period of growth for Hampson. Demand for turbo chargers is driving growth in automotive, and recovery in civil aerospace markets is gathering strength. Today's strategic acquisitions strengthen our ability to take advantage of these opportunities."
For further information please contact:
Hampson Industries PLC
Kim Ward, Chief Executive +44 (0) 1384 472941
Howard Kimberley, Finance Director +44 (0) 1384 472946
Arbuthnot +44 (0) 20 7012 2000
Barry Saint, Director - Corporate Finance
Nick Stephens, Director - Corporate Broking
Graham Swindells, Associate Director - Corporate Finance
Financial Village
Jonathan Gollins/Tim Draper +44 (0) 20 7872 5442
Hampson Industries PLC
The Board of Hampson is pleased to announce that it has conditionally agreed terms whereby Hampson US will acquire all of the issued shares in the common stock of Coast and Lamsco for a total initial estimated cash consideration of US$81.2 million (£46.7 million) subject to adjustment as referred to below in the section headed "Background to, reasons for and summary terms of the Acquisitions".
The Acquisitions will be funded in part by the proceeds of the Placing (which is expected to raise approximately £32.5 million net of related expenses) with the remainder of the consideration to be funded from new committed banking facilities which have been jointly arranged and underwritten by Bank of Scotland and Lloyds TSB Bank plc Capital Markets for an initial amount of £80.0 million.
The Acquisitions each constitute a class 1 transaction for the purposes of the Listing Rules and, as such, require the prior approval of Shareholders.
Information on Hampson
Hampson is an international precision engineering and manufacturing group serving the global aerospace,
automotive and specialist engineering markets. Hampson's business is divided into two business segments,
"Aerospace" and "Precision Engineering". Hampson's Aerospace operations are structured into three
divisions: Aerospace Fabrications ∓ Assemblies, Aerospace Machining and Aerospace Transparencies,
Composites ∓ Plastics.
Major customers include Airbus (Paris: NL0000235190 - news) , BAE Systems (LSE: BA.L - news) , Boeing Corporation, Bombardier, Borg Warner (NYSE: BWA - news)
Automotive, Eclipse Aviation, GKN Aerospace, Goodrich (Xetra: 851203 - news) , Holset, Honeywell, IHI (Xetra: 854347 - news) , Lockheed Martin (Dusseldorf: 351011.DU - news) , MTU Aero Engines (Xetra: A0D9PT - news) , Rolls-Royce and Snecma.
Following the major global downturn in commercial aerospace from 2001/02 onwards, Hampson has
focused on actions to improve its business and develop a growth strategy built around extending its
position and capabilities in aerospace and also in the niche market for the manufacture of components for
turbo chargers.
For the year ended 31 March 2005, Hampson made operating profit before goodwill amortisation and
exceptional items of £3.0 million (2004: £3.2 million) on turnover of £77.8 million (2004: £68.6 million).
Information on Coast
Located in California, USA, Coast is a manufacturer and supplier of precision tooling for large composite parts to the commercial aerospace, defence and satellite communications markets. The acquisition of Coast will enable the Group to benefit from current favourable demand conditions for precision tooling systems whilst at the same time magnifying its exposure to the important trend towards the progressively increasing use of composite materials in airframe manufacture.
For the year ended 30 June 2005, Coast made operating profit before goodwill impairment, amortisation and group charges of US$6.7 million (2004: US$4.2 million) on turnover of US$32.4 million (2004: US$23.8 million).
Information on Lamsco
Located on the West Coast of the USA, Lamsco manufactures and supplies shims and laminated sheet material to the aerospace and defence industries. Through its existing subsidiaries, Hampson is a supplier of similar products. Acquisition of Lamsco would result in achievement of a global leadership position in this market niche, together with a broader, better-balanced customer base and the anticipated ability to realise certain economies of scale.
For the year ended 31 December 2004, Lamsco made operating profit before goodwill impairment, amortisation and group charges of US$2.7 million (2003: US$2.1 million) on turnover of US$8.6 million (2003: US$7.8 million).
Background to, reasons for and summary of terms of the Acquisitions
Hampson's growth strategy seeks to capitalise on the benefits of organic growth from new aerospace
programmes and continuing high demand for turbo charger components, blending these with selective
external growth opportunities, carefully targeted to enhance Hampson's capabilities in niche, higher-growth sectors of its existing core markets.
The acquisition of Texstars in December 2004, Hampson's first major acquisition for some years, brought new manufacturing capabilities in higher technology composite, transparent and plastic materials. This has enabled Hampson to access new customers, new aerospace and defence programmes and to complement its existing capabilities in aluminium airframe component manufacture. The Board has been very pleased with the performance of Texstars during its period of ownership to date.
The aerospace industry is experiencing a clear trend towards the substitution of metal components in airframe construction by lighter weight and technologically more advanced composite structures. This trend is being driven by the need to improve aircraft performance and fuel efficiency, leading to reduced operating costs and improved profitability for the commercial airlines. The very latest aircraft designs exemplify this. The Boeing 787 "Dreamliner", with a planned entry into service date of 2008, is estimated to have a 50 per cent. composite content. Similarly, the already-in-production Airbus A380 "Super-Jumbo (Athens: BELA.AT - news) ", the largest commercial airliner in the world, is estimated to have a composite content of in excess of 20 per cent. The proportion of composite material used in the so-called "next generation" military aircraft, including the F-35 "Joint Strike Fighter" and F/A-22 "Raptor" is estimated to be much higher still.
With the acquisition of Texstars, Hampson is now positioned to start to benefit from this substitutional trend, albeit in modest scale. However, in view of its significant projected impact on the global aerospace industry, Hampson's Board believes that it would be in the Group's best interests to increase its ability to capitalise on the trend towards increased use of composites.
Coast is a manufacturer of large, high-precision tools, primarily for the manufacture of composite aero structures. There is presently limited capacity for the manufacture of tools for such applications above a certain size in the US and the substitutional trend towards the use of more composite materials in airframe manufacture is likely to lead to increased demand for such tooling. This is expected to be driven by the demands of new programmes such as those referred to above and, in the medium-to-longer term, by likely replacements of the existing high volume single aisle aircraft families from both Boeing and Airbus. The acquisition of Coast will therefore enable Hampson to benefit from current favourable demand conditions for precision tooling systems while at the same time magnifying its exposure to the more general trends towards increased use of composite materials in airframe manufacture.
Lamsco is an established supplier of laminated shim stock and detailed parts, primarily to the large US airframe original equipment manufacturers (OEMs) and Prime Contractors. Following the recent sale of Lamsco's existing parent company, an opportunity has become available to Hampson to acquire Lamsco. Through its existing subsidiaries, Attewell Limited and Bolsan Company Inc., Hampson is an existing supplier of similar products and is hence very familiar with this segment of the aerospace market. Acquisition of Lamsco would result in achievement of a global leadership position, together with a broader, better-balanced customer base and the anticipated ability to realise certain economies of scale.
Both Coast and Lamsco have been identified as well run, attractive businesses that are strongly positioned in niche sectors of the Group's existing core markets, with significant further growth potential. The Board believes that the proposed Acquisitions would provide an excellent opportunity to further strengthen the Group and accelerate the growth strategy that has been put in place, building on the successful integration of Texstars.
Under the terms of the Coast Acquisition Agreement, Hampson has agreed to purchase all of the issued shares of the common stock of Coast. The Coast Acquisition will be implemented by way of a merger of Coast Acquisitionco with and into Coast. Completion of the sale and purchase is expected to take place not later than 22 December 2005.
The initial consideration payable for Coast is US$56.0 million (£32.2 million), as well as the reimbursement of certain potential capital expenditure (if any), not exceeding US$0.15 million (£0.1 million). The initial consideration is also subject to an adjustment to take into account movements (if any) in Coast Composites Inc.'s working capital position for the period from 31 July 2005 until the date of Coast Completion.
The Coast Vendors are entitled to an earn-out equal to two times the amount by which Coast's EBITDA for the fiscal year ending 30 June 2006 exceeds US$7.638 million (£4.391 million), subject to a cap of US$2.0 million (£1.2 million).
Under the terms of the Lamsco Acquisition Agreement, Hampson has agreed to purchase all of the issued shares (including rights to acquire shares) of the common stock of Lamsco.
The consideration payable for Lamsco is US$25.2 million (£14.5 million) less the aggregate of (i) transaction expenses incurred by Lamsco but unpaid at Lamsco Completion and (ii) an amount equal to Lamsco's indebtedness at Lamsco Completion excluding expenses accrued in the ordinary course of trading. Completion of the sale and purchase is expected to take place not later than 22 December 2005.
Current Trading and Prospects
Investors were provided with an update on current trading in the AGM statement which was released on the London Stock Exchange (LSE: LSE.L - news) 's Regulatory News Service on 30 August 2005. The Directors confirm that trading continues in line with the Board's expectations for the year as a whole.
Details of the Placing
Hampson is proposing to raise £34.0 million (approximately £32.5 million net of related expenses) pursuant to a firm placing of new shares. It is intended that such net proceeds will be used to partially satisfy the cash consideration for the Acquisitions as well as the ongoing working capital requirements of the Group. Pursuant to the Placing Agreement, Arbuthnot has agreed to use reasonable endeavours to procure placees or, failing which, to subscribe itself for the New Ordinary Shares at the Issue Price.
The Placing is conditional on the Placing Agreement having become unconditional and not having been terminated in accordance with its terms prior to Admission. The Placing Agreement is conditional upon the passing of the Placing Resolutions and at least one of the resolutions to be proposed at the EGM relating to the approval of the Acquisitions. It is expected that Admission will become effective and dealings in the New Ordinary Shares will commence on 16 December 2005.
The Placing is not conditional on either or both of the Acquisitions being completed. In the unlikely event that one or both of the Acquisitions do not proceed, the net proceeds of the Placing will be placed on deposit on a short-term basis and the Directors will consider whether to use the proceeds to finance other carefully selected acquisitions approved by Shareholders and/or consider the possibility of returning cash to Shareholders.
Related Party Transactions
Artemis and SVG have each agreed to subscribe for New Ordinary Shares pursuant to the Placing. Due to the size of each of their current shareholdings in the Company and the number of New Ordinary Shares in respect of which they have agreed to subscribe pursuant to the Placing, each of the Related Party Issues is classified by the UK Listing Authority as a related party transaction and, as such, requires the approval of Shareholders.
New banking facilities
The Company has entered into a new, secured, multi-currency committed revolving credit facility jointly
arranged and fully underwritten by Bank of Scotland and Lloyds TSB Bank plc Capital Markets pursuant
to a facility agreement dated 15 November 2005. The new revolving credit facility is for a term of five years and for an initial amount of £80.0 million, reducing to £72.5 million and £62.5 million on the third and fourth anniversaries, respectively. The purpose of the new revolving credit facility is to fund the balance of the consideration payable for the Acquisitions and associated costs, to refinance borrowings under the Company's existing banking facilities and to provide funding for general corporate purposes of the Group.
Share Consolidation
The Placing will result in an enlarged issued share capital. The Directors believe that the current price at which the Company's shares are traded is a barrier to attracting new investors and the ability of the Company to make acquisitions for shares should it wish to do so. The Directors also believe that the share consolidation proposed below should lead to a reduction in the bid-offer spread and an improvement in the liquidity of the Company's shares.
Accordingly, the Directors are recommending to Shareholders that, conditional upon the Placing being completed, the Enlarged Share Capital of the Company be consolidated on the basis of one new ordinary share of 25 pence for each and every five Existing Ordinary Shares and New Ordinary Shares. The Share Consolidation is conditional upon Shareholder approval and the admission of the Consolidated Ordinary Shares to the Official List and to trading on the London Stock Exchange's market for listed securities, which is expected to become effective on 16 December 2005.
Extraordinary General Meeting
Each of the Acquisitions, due to its size relative to the Company, requires the approval of Shareholders.
As the Issue Price represents a discount of more than 10 per cent. to the middle market price of the Ordinary Shares the discount requires the approval of Shareholders.
An extraordinary general meeting is expected to be convened for 15 December 2005 at which resolutions will be proposed to approve (i) the share authorities necessary to implement the Placing (ii) the issue of shares at a discount (iii) each of the Related Party Issues (iv) each of the Acquisitions and (v) the Share Consolidation.
A prospectus containing details of the Proposals and convening the EGM is expected to be posted to Shareholders today.
Arbuthnot, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Hampson Industries PLC and no one else in connection with the Placing. Arbuthnot will not be responsible to persons other than Hampson Industries PLC for providing the protections afforded to their customers or for providing advice in connection with the Placing or any other matters referred to in this announcement.
This announcement does not constitute or form part of an offer or a solicitation of an offer to purchase or subscribe for, underwrite or otherwise acquire, any rights, shares or other securities. These may only be made on the basis of information that will be contained in the prospectus to be published in connection with the proposals and any supplement thereto.
The New Ordinary Shares have not been nor will they be registered under the United States Securities Act of 1933, as amended, or under the applicable securities laws of any state, province, district, territory or other jurisdiction of the United States, Canada, Australia, Japan (EUREX: FMJP.EX - news) or the Republic of Ireland (Xetra: A0Q8L3 - news) and no regulatory clearances in respect of the New Ordinary Shares have been or will be applied for in any such jurisdiction. The New Ordinary Shares are not being, and may not be, offered, sold, taken up, renounced or delivered, directly or indirectly within or into the United States, Canada, Australia, Japan or the Republic of Ireland or their respective territories or possessions.
APPENDIX I
DEFINITIONS
The following definitions apply throughout this announcement, unless the context requires otherwise:
"Acquisitions" together, the Coast Acquisition and the Lamsco Acquisition
"Admission" admission to listing together with admission to trading
"Admission Standards" the Admission and Disclosure Standards issued by the London Stock Exchange
"admission to listing" the admission of the New Ordinary Shares to the Official List becoming effective in accordance with the Listing Rules
"admission to trading" the admission of the New Ordinary Shares to trading on the London Stock Exchange's market for listed securities becoming effective in accordance with the Admission Standards
"Arbuthnot" Arbuthnot Securities Limited, a member of the London Stock Exchange and regulated by the FSA
"Artemis" Artemis Investment Management Limited
"Artemis Issue" the proposed issue to Artemis of 21,430,000 of the New Ordinary Shares at the Issue Price pursuant to the Placing
"Bank of Scotland" The Governor and Company of the Bank of Scotland
"Board" or "Directors" the board of directors of the Company
"Coast" Coast Composites, Inc.
"Coast Acquisition" the proposed acquisition of all of the issued shares (including rights to acquire shares) of the common stock of Coast
"Coast Acquisitionco" Coast Composites Acquisition Corporation, a corporation newly incorporated by Hampson US for the purposes of undertaking the Coast Acquisition
"Coast Acquisition the agreement and plan of merger relating to the Coast Acquisition
Agreement" dated 14 November 2005 and entered into between (1) Coast (2) Coast Acquisitionco and (3) Hampson US
"Coast Vendors" the holders of all of the issued shares of the common stock of Coast
"Company" or "Hampson" Hampson Industries PLC
"Consolidated Ordinary the ordinary shares of 25 pence each in the share capital of the
Shares" Company resulting from the Share Consolidation
"EBITDA" earnings before interest, taxes, depreciation and amortisation
"Enlarged Share Capital" the issued share capital of the Company, as enlarged by the allotment
and issue of the New Ordinary Shares
"Existing Ordinary Shares" the 275,506,831 Ordinary Shares currently in issue
"FSMA" the Financial Services and Markets Act 2000, as amended
"FSA" Financial Services Authority
"Group" or "Hampson Group" the Company and its subsidiary undertakings
"Hampson US" Hampson Industries US, Inc. a wholly-owned subsidiary of Hampson
"Issue Price" 21 pence per New Ordinary Share
"Lamsco" Lamsco West, Inc.
"Lamsco Acquisition" the proposed acquisition of all of the issued shares (including rights to
acquire shares) of the common stock of Lamsco
"Lamsco Acquisition the stock purchase agreement relating to the Lamsco Acquisition
Agreement" dated 14 November 2005 and entered into between (1) Lamsco
(2) Compass Aerospace Corporation and (3) Hampson US
"Lamsco Completion" completion of the Lamsco Acquisition
"London Stock Exchange" London Stock Exchange plc
"New Ordinary Shares" the 161,904,760 new Ordinary Shares to be issued pursuant to the Placing
"Official List" the Official List of the UK Listing Authority
"Ordinary Shares" ordinary shares of 5 pence each in the capital of the Company and,
subject to the Share Consolidation having become effective, ordinary
shares of 25 pence each in the capital of the Company
"Placing" the firm placing by Arbuthnot of the New Ordinary Shares on the terms
and conditions of the Placing Agreement
"Placing Agreement" the conditional agreement dated 15 November 2005 between (1) the
Company and (2) Arbuthnot relating to the Placing
"Placing Resolutions" ordinary and special resolutions relating to the increase in the Company's authorised share capital, the grant of authorities to allot Ordinary Shares pursuant to the Placing, the issue of shares at a discount and the Related Party Issues
"Proposals" together the Acquisitions, the Placing and the Share Consolidation
"Related Party Issues" together, the Artemis Issue and the SVG Issue
"Shareholders" holders of Ordinary Shares
"Share Consolidation" the consolidation of the Existing Ordinary Shares and the New Ordinary Shares into Consolidated Ordinary Shares on the basis of one
Consolidated Ordinary Share for every five Existing Ordinary Shares and New Ordinary Shares
"SVG" SVG Capital (Other OTC: SVGCF.PK - news)
"SVG Issue" the proposed issue to SVG of 21,430,000 of the New Ordinary Shares at the Issue Price pursuant to the Placing
"Texstars" Texstars Inc.
"UK Listing Authority" the FSA, in its capacity as the competent authority for the purposes of
Part VI of FSMA
The exchange rates used to convert amounts in this announcement denominated in US dollars into amounts denominated in UK pounds sterling are as follows:
§ trading results of Coast for the year ended 30 June 2005 have been translated at the rate of £1 to US$1.9199, being the average daily exchange rate throughout the year ended 30 June 2005;
§ trading results of Lamsco for the year ended 31 December 2004 have been translated at the rate of £1 to US$1.7925, being the average daily exchange rate throughout the year ended 31 December 2004;
§ dollar balances in relation to the Coast Acquisition Agreement have been translated at the rate of £1 to US$1.7394, being the exchange rate at 11 November 2005, the last practicable date prior to the signing of the Coast Acquisition Agreement; and
§ dollar balances in relation to the Lamsco Acquisition Agreement have been translated at the rate of £1 to US$1.7394, being the exchange rate at 11 November 2005, the last practicable date prior to the signing of the Lamsco Acquisition Agreement.
ENDS
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