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Ecommended offer to acquire the outstanding shares in Clough Limited at A$1.46 per share and withdrawal of cautionar
MURRAY & ROBERTS HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1948/029826/06
JSE Share Code: MUR
ADR Code: MURZY
ISIN: ZAE000073441
("Murray & Roberts" or "Group")
RECOMMENDED OFFER TO ACQUIRE THE OUTSTANDING SHARES IN CLOUGH LIMITED AT A$1.46 PER SHARE AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Shareholders are referred to the announcement released on the Stock
Exchange News Service (SENS) of JSE Limited (JSE) on Tuesday, 30 July
2013, in which Murray & Roberts announced a proposal to acquire all of the
ordinary shares in Clough Limited (Clough) that Murray & Roberts does not
already own at A$1.46 cash per share (Consideration). The Consideration is
expected to consist of a cash payment of A$1.32 (Capital Payment) paid by
Murray & Roberts and a proposed dividend of A$0.14 per share paid by Clough
(Clough Dividend), (collectively, the Proposed Acquisition).
Murray & Roberts has successfully completed its confirmatory due
diligence and is pleased to announce that Murray & Roberts and Clough have
today entered into a binding Scheme Implementation Agreement (SIA) to give
effect to the Proposed Acquisition. The SIA outlines the process and terms
under which Murray & Roberts will make an offer to acquire the remaining
38.4% of shares outstanding in Clough by way of a Scheme of Arrangement
(Scheme) under the Australian Corporations Act 2001 (Cth) (Corporations
Act). The Scheme supersedes the terms of the Proposed Acquisition announced
on Tuesday, 30 July 2013.
The independent directors of Clough will unanimously recommend that
Clough shareholders vote in favour of the Scheme, in the absence of a
superior proposal, and subject to an independent expert (Independent
Expert) expressing an opinion that the Scheme is in the best interests of
the Clough shareholders, excluding Murray & Roberts and its associate
companies (Clough Minority Shareholders).
Each independent director of Clough will also vote any Clough shares
they own or control in favour of the Scheme, subject to the Independent
Expert expressing an opinion that the Scheme is in the best interests of
Clough Minority Shareholders, and no superior proposal emerging.
2. THE PROPOSED ACQUISITION
2.1. Proposed Acquisition structure
Under the Scheme, Murray & Roberts is to acquire the 38.4% of Clough
shares that it does not already own through its wholly-owned subsidiary
Murray & Roberts Pty Ltd (Murray & Roberts Aus). If the Scheme is
implemented, Clough will become a wholly-owned subsidiary of the Group.
2.2. Scheme Implementation Agreement
Under the terms of the SIA, Clough must propose and implement the
Scheme in accordance with Part 5.1 of the Corporations Act, assisted by
Murray & Roberts and Murray & Roberts Aus, subject to the terms and
conditions of the SIA, a copy of which is available on the
Murray & Roberts website, hosted at www.murrob.com (under the tab headed
Clough Acquisition Portal). The Scheme will be approved if the Scheme
resolution is passed by:
at least 75% of the number of votes cast by Clough Minority
Shareholders; and
a majority in number (more than 50%) of Clough Minority Shareholders
who are present and voting on the Scheme resolution.
A detailed list of conditions precedent to the Proposed Acquisition and
the Scheme (Conditions Precedent) is set out in Schedule 1 of the SIA.
2.3. Scheme Booklet
Clough expects to post a booklet to Clough Minority Shareholders in
mid-October 2013, containing full details of the Scheme (Scheme Booklet).
The Scheme Booklet will include, amongst other things, the reasons for the
Clough independent directors unanimous recommendation, and a copy of the
Independent Experts Report.
2.4. Independent Expert
Clough has appointed Grant Samuel & Associates (Grant Samuel) to
provide an Independent Experts Report in accordance with the Corporations
Act, and policies and practices of the Australian Securities and Investments
Commission.
2.5. Proposed Acquisition consideration
The Consideration payable to Clough Minority Shareholders upon the
successful implementation of the Scheme is A$1.46 cash per share. The
Consideration is expected to include the Capital Payment of A$1.32 paid by
Murray & Roberts Aus, and the Clough Dividend of A$0.14 per share paid by
Clough - see footnote to this announcement. The Clough Dividend will be paid
to eligible Clough shareholders as at the relevant record date anticipated
to be early December 2013.
2.6. Proposed Acquisition funding
The Consideration is approximately A$461.4 million (including the
transaction costs associated with the Proposed Acquisition and the cost to
acquire outstanding Clough options and performance rights), which is
equivalent to approximately ZAR4,309 million at the
ZAR/A$ exchange rate as at the close of business on 27 August 2013,
structured as follows:
A$393.5 million (ZAR3,675 million) in cash paid by Murray & Roberts to
Clough Minority Shareholders;
A$41.7 million (ZAR389 million) dividend paid by Clough to Clough
Minority Shareholders;
A$15.6 million (ZAR146 million) in cash paid by Clough to cancel
outstanding Clough options and performance rights held by Clough management
and employees; and
A$10.6 million (ZAR99 million) paid by Murray & Roberts for estimated
Proposed Acquisition transaction costs, (excluding VAT).
Murray & Roberts intends to fund the approximate A$404.1 million
(ZAR3,774 million) through a combination of Clough Dividend proceeds, cash
on Cloughs balance sheet, and modest acquisition financing as follows:
A$184.4 million (ZAR1,722 million) from a loan provided to
Murray & Roberts Aus, funded from Cloughs existing cash reserves (Clough
Loan). The Clough Loan will require 50% or greater Clough minority
shareholder approval which will be sought at the same time as approval for
the Scheme, and will also be inter-conditional with the implementation of
the Scheme;
A$152.6 million (ZAR1,378 million) bank debt provided by existing
lenders under bilateral facility letters, which will be governed by an
amended and restated common terms agreement to be entered into by
Murray & Roberts Limited (as borrower), Murray & Roberts Aus
(as co-borrower), and Murray & Roberts and certain of its subsidiaries
(as guarantors); and
A$67.1 million (ZAR627 million) received by Murray & Roberts Limited
from the Clough Dividend.
Immediately following implementation of the Scheme, Murray & Roberts
consolidated pro forma gross debt is expected to increase by approximately
ZAR1,378 million. However, after utilising Clough cash to part finance the
Proposed Acquisition and redeploying funds expected to be received in the
second quarter of the 2014 financial year from recent asset divestments
(prior to implementation of the Proposed Acquisition), Murray & Roberts
consolidated pro forma debt position will remain largely unaffected by the
Proposed Acquisition.
3. RATIONALE FOR THE PROPOSED ACQUISITION
Murray & Roberts considers the Proposed Acquisition to be consistent
with the Groups long term growth strategy, and the next step towards the
Groups strategic objectives. Clough has been part of Murray & Roberts for
more than 10 years, and the potential benefits of fully owning Clough have
been recognised by senior management for some time. The Proposed Acquisition
has a number of key benefits for the Group:
Secures control of 100% of Cloughs operations, assets, cash flow and
strategic direction, creating a wholly-owned international diversified
engineering and construction business.
In recent years, Clough has become an increasingly more relevant part of
the Murray & Roberts business. However, due to Murray & Roberts ownership
being limited to 61.6%, it has had limited access to the cashflows Clough
has been generating.
For the financial year ended 30 June 2013, Clough generated
A$293 million (ZAR2,652 million) of cash, (including from the sale of its
shareholding in Forge Group Limited). During this period Murray & Roberts
only received A$12.4 million (ZAR112.2 million) in dividends which related
to the previous financial year earnings. Murray & Roberts will receive
A$67.1 million (ZAR627 million) in relation to the 2013 financial year
earnings, subject to implementation of the Scheme and declaration of the
Clough Dividend. The Proposed Acquisition will allow Murray & Roberts to
have 100% access to Cloughs cashflows in the future.
As at 30 June 2013, Clough had A$441 million (ZAR3,984 million) cash on
hand. Some of Cloughs surplus cash is proposed to be used to fund the
Proposed Acquisition.
Increases Murray & Roberts exposure to one of its target market
sectors, namely
oil & gas, which is considered to offer attractive growth potential.
Murray & Roberts views the global energy sector, in particular oil & gas
and power, to have a strong medium- to long-term growth outlook.
In addition to ongoing growth opportunities in Cloughs existing
geographic markets,
Murray & Roberts sees significant potential to leverage Cloughs expertise
to pursue opportunities in and around Africas rapidly emerging oil & gas
markets, for both existing and new clients.
Clough has an order book of A$2.3 billion, (ZAR20.6 billion), equivalent
to 1.4 times financial year 2013 revenue of A$1,635 million,
(ZAR14,800 million), representing 45% of Murray & Roberts consolidated pro
forma order book as at 30 June 2013.
Further growth is anticipated to result from Clough repositioning itself
across the oil & gas sector lifecycle in part aided by its recent
acquisition of e2o Pty Limited, and the launch of its international
commissioning and asset support business, CloughCoens.
Simplifies the corporate and operating structure of the consolidated
group, consistent with Murray & Roberts Recovery & Growth strategy.
Following the implementation of the Scheme and the completion of the
recently announced disposal of the Construction Products Africa
manufacturing businesses (excluding Hall Longmore), Murray & Roberts will
have four operating platforms, all comprising wholly-owned subsidiaries:
- two regional platforms (Construction Africa and Middle East, and
Engineering Africa); and
- two international platforms (Construction Global Underground Mining,
and Construction Australasia Oil & Gas and Minerals).
The new structure is expected to facilitate Murray & Roberts being a
more efficient and focussed business.
Expected to be immediately profit per share accretive.
On a financial year 2013 pro-forma basis the Proposed Acquisition is
26% accretive to Murray & Roberts pro forma profit per share.
Murray & Roberts will maintain a net cash position. Consolidated pro
forma debt will remain largely unaffected by the Proposed Acquisition after
utilising Clough cash to part finance the Proposed Acquisition and
redeploying funds to be received from recent asset divestments in the second
quarter of the 2014 financial year, as set out in section 2.6.
Low execution risk given Murray & Roberts existing understanding of the
business which has been established over more than a decade.
Murray & Roberts currently owns 61.6% of Clough after first acquiring a
shareholding in 2003. Clough became a subsidiary of Murray & Roberts and
was consolidated with effect from 1 July 2007, and Murray & Roberts
currently has three representatives on the Clough board of directors.
Murray & Roberts does not intend to make any changes to the operations
or senior management of Clough. Consequently, there is likely to be minimal
disruption, if any, to either business and the full benefits of the Proposed
Acquisition can be realised by
Murray & Roberts.
4. CONDITIONS PRECEDENT, EFFECTIVE DATE AND CATEGORISATION
4.1. Conditions Precedent
Shareholders are referred to Schedule 1 of the SIA for full disclosure
of the Conditions Precedent.
The Proposed Acquisition is subject to the fulfilment of a number of
Conditions Precedent including, amongst others:
Regulatory approval, including the Australian Foreign Investment Review
Board, the South African Reserve Bank, and any relevant governmental agency;
Grant Samuel as the Independent Expert concluding that the Scheme is in
the best interests of Clough Minority Shareholders (and the Independent
Expert not changing that opinion or otherwise withdrawing its report);
Shareholder approval, including:
- by Clough shareholders (excluding Murray & Roberts) of the Scheme,
and the provision of financial assistance and benefits by Clough to
Murray & Roberts Aus and its related entities, including under the Clough
Loan, by the requisite majorities;
- by Murray & Roberts shareholders of the Proposed Acquisition.
The Federal Court of Australia approving the Scheme;
No independent director of Clough withdrawing or modifying his/her
recommendation or voting intention;
No Clough Prescribed Events and/ or Material Adverse Change (each as
defined in the SIA) occurring; and
The representations and warranties of each of Clough and
Murray & Roberts being materially true and correct.
4.2. Effective date
The indicative key dates of the Proposed Acquisition and the Scheme,
as agreed between Murray & Roberts and Clough (see Schedule 2 of the SIA),
are set out in Section 6 of this announcement. It is anticipated that the
Scheme will be implemented during mid December 2013.
4.3. Categorisation
The Proposed Acquisition classifies as a Category 1 transaction for
Murray & Roberts under the Listings Requirements of the JSE. The required
circular (Circular), including the Notice of General Meeting, will be
posted to shareholders in due course.
5. PRO FORMA FINANCIAL EFFECTS
The table that follows sets out the pro forma financial effects of the
Proposed Acquisition on the latest published audited results of
Murray & Roberts for the year ended 30 June 2013. The pro forma financial
effects have been prepared in a manner consistent in all respects with
International Financial Reporting Standards (IFRS), and with the
accounting policies adopted by Murray & Roberts as at 30 June 2013, and in
terms of the Revised SAICA Guide on Pro Forma Financial Information and the
Listings Requirements of the JSE.
The board of directors of Murray & Roberts (the Board) is responsible
for the compilation, contents, accuracy and presentation of the pro forma
financial effects, and for the financial information from which it has been
prepared.
The pro forma financial effects have been prepared for illustrative
purposes only, and because of their nature may not fairly present
Murray & Roberts financial position, changes in equity, results of
operations or cash flows.
Per Murray & Roberts
share (cents) Before the Pro forma
Proposed Proposed
Acquisition After the % change
30 June 2013 Acquisition from
(1) (2) (1) to (2)
Profit per share (cents)
Diluted 245 309 26
Basic 247 311 26
Profit per share from continuing operations (cents)
Diluted 183 249 36
Basic 185 251 36
Headline profit per share (cents)
Diluted 186 216 16
Basic 188 218 16
Headline profit per share from continuing operations (cents)
Diluted 132 164 24
Basic 134 165 23
Net asset value
per share (ZAR) 16 10 (38)
Tangible net asset
value per share (ZAR) 13 7 (46)
Number of shares in
issue ('000) 444,736 444,736
Weighted average
number of shares
used for basic
per share calculation
('000) 406,875 406,875
Weighted average
number of shares
used for diluted
per share calculation
('000) 410,688 410,688
Notes:
1. The Before the Proposed Acquisition 30 June 2013 financial
information has been extracted, with the exception of net tangible asset
value per share without adjustment, from the Groups published audited
annual results for the year ended 30 June 2013.
2. The Pro forma After the Proposed Acquisition financial information
comprises the Before the Proposed Acquisition 30 June 2013 financial
information adjusted for the following principal assumptions:
2.1 The purchase price of the non-controlling interests of Clough is
ZAR4,167 million, representing 298 million shares at a purchase price of
ZAR13.19 per share. This is at a premium of 30.9% to Cloughs market share
price at 31 July 2013. The purchase price includes once-off transaction
costs of ZAR96 million and share option costs of
ZAR141 million;
2.2 The purchase price is assumed to be funded through cash equivalents
of ZAR2,413 million, bridging facilities of ZAR1,378 million, and a dividend
declared directly to Cloughs non-controlling interests of ZAR376 million;
2.3 The increase in short term interest bearing debt will result in an
increase in the interest expense of ZAR74 million, assuming an interest rate
of 5,4%. In addition there will be a loss of interest income of
ZAR112 million on the cash and cash equivalents applied in the transaction,
assuming an interest rate of 4%. The interest adjustments will be subject to
taxation at a rate of 30%. The impact will have a continuing effect on the
results of the Group;
2.4 The share option costs of ZAR141 million comprise of the unamortised
value of the options (ZAR59 million), which is expensed to the statement of
financial performance and a settlement premium paid (ZAR82 million) on the
options which is debited directly against equity. There is no tax deduction
on the share options expense;
2.5 The non-controlling interests have been reduced by the amount
attributable to Clough, due to the acquisition of the non-controlling
interests from 1 July 2012;
2.6 The non-controlling interest effect of the profit on the sale of
Forge, recognised in Cloughs financial results, was excluded in determining
the headline profit adjustment; and
2.7 Due to the existing majority interest by the Group in Clough, the
transaction is a common control transaction and in accordance with IFRS the
difference of ZAR2,557 million between the purchase price of
ZAR4,167 million and the non-controlling interests of ZAR1,610 million is
recognised to equity as follows: ZAR59 million through statement of
financial performance and the balance of ZAR2,498 million directly to
equity.
3. The impact of the Proposed Acquisition on the Groups net asset value
and net tangible asset value at 30 June 2013, is a decrease of ZAR6 for both
net asset value and net tangible asset value per share, on the assumption
that the Proposed Acquisition is effective on 30 June 2013.
4. The profit per share, profit per share from continuing operations,
headline profit per share and headline profit per share from continuing
operations in thePro forma After the Proposed Acquisition column is based
on the assumption that the Proposed Acquisition is effective
1 July 2012.
6. INDICATIVE TIMETABLE
The dates and times set out below are indicative only and subject to change:
Event 2013
Posting of the circular to
Murray & Roberts shareholders Early October
First Scheme court hearing* Early October
Posting of Scheme Booklet to
Clough shareholders* Mid October
General meeting of
Murray & Roberts shareholders Early November
General meeting and Scheme
meeting of Clough shareholders* Mid November
Second Scheme court hearing* Late November
Payment of Clough Dividend* Early December
Scheme implementation date and
payment of Consideration* Mid December
* Applicable to Clough shareholders only
7. INFORMATION PORTAL
For ease of access, an information portal relating to the Proposed
Acquisition has been created on the Murray & Roberts website, hosted at
www.murrob.com under the tab headed Clough Acquisition Portal where all
information relevant to the Proposed Acquisition will be maintained. All
information relevant to the Scheme is expected to be made available on the
Company Announcements Platform of ASX Limited hosted at www.asx.com.au.
8. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are further advised that as the pro forma financial
effects of the Proposed Acquisition have now been published, shareholders
need not continue to exercise caution when dealing in Murray & Roberts securities.
Footnote:
If Clough reasonably believes that the Commissioner of Taxation of the
Australian Taxation Office will make a determination which would have the
effect of the Clough Dividend not being fully franked or would cancel or
deny any imputation benefit that would otherwise be provided in connection
with the Clough Dividend, then Clough and Murray & Roberts will consult in
good faith to determine the extent to which Clough can pay a fully franked
dividend.
If the Clough Dividend is reduced from $0.14 per share, Murray & Roberts has
agreed to increase the Capital Payment so that the total consideration paid
to Clough Minority Shareholders under the Scheme (in the form of the Capital
Payment and the Clough Dividend) is $1.46 cash per share.
Bedfordview
28 August 2013
Enquiries
For further information on Murray & Roberts, please visit the website at
www.murrob.com
Lead JSE sponsor:
Macquarie First South Capital Proprietary Limited
Exclusive financial adviser:
Macquarie First South Capital Proprietary Limited / Macquarie Capital (Australia)
Limited
Independent reporting accountants and auditors:
Deloitte & Touche
Legal counsel:
Webber Wentzel / Corrs Chambers Westgarth
JSE sponsor:
Deutsche Securities (SA) Proprietary Limited
Date: 29/08/2013 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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