GBP 300 M DEAL - RPC Group PLC RPC Offer for British Polythene Industries PLC
RECOMMENDED CASH AND SHARE OFFER
FOR
BRITISH POLYTHENE INDUSTRIES PLC
BY
RPC GROUP PLC
to be effected
by way of a Scheme of Arrangement
under Part 26 of the Companies Act 2006
Summary
· The boards of RPC Group Plc ("RPC") and British Polythene Industries PLC ("BPI") are pleased to announce that they have reached agreement on the terms of a recommended cash and share offer to be made by RPC for the entire issued and to be issued ordinary share capital of BPI (the "Offer"). It is intended that the Offer will be implemented by way of a Court-sanctioned scheme of arrangement under Part 26 of the Companies Act.
· Under the terms of the Offer, each BPI Shareholder will be entitled to receive:
for each BPI Share: 470 pence in cash
and
0.60141 of a NewRPC Share
The Offer values BPI at approximately 940 pence per BPI Share based on the average Closing Price of approximately 781.5 pence per RPC Share for the one month period ended 8 June 2016 (being the last Business Day prior to this Announcement), used to determine the exchange ratio.
The Offer:
- values the entire issued and to be issued ordinary share capital of BPI at approximately £261 million on a fully diluted basis
- represents a premium of approximately 30 per cent. to the Closing Price of 725.0 pence per BPI Share on 8 June 2016
- represents a premium of approximately 31 per cent. to the average Closing Price of approximately 718.6 pence per BPI Share for the one month period ended 8 June 2016
· Based on the Closing Price of 815.5 pence per RPC Share on 8 June 2016, the Offer represents a value of approximately 960.4 pence per BPI Share and a premium of approximately 32 per cent. to the Closing Price of 725.0 pence per BPI Share on 8 June 2016.
· RPC recommended a dividend of 12.3 pence per RPC Share on 2 June 2016 for the financial year ended 31 March 2016. Subject to RPC Shareholder approval, the RPC Dividend is anticipated to be paid on 2 September 2016 to holders of RPC Shares on the RPC share register as at the applicable record date, which is expected to be 12 August 2016. The RPC Shares are trading 'cum' the RPC Dividend as at the date of this Announcement. In the event that the RPC Dividend is approved by RPC Shareholders and the Offer is not declared Effective (or where it has been declared Effective and the former BPI Shareholders subject to the Scheme have not been registered in the RPC share register as the holders of the relevant New RPC Shares) by the RPC Dividend record date, which is expected to be 12 August 2016, the number of New RPC Shares payable per BPI Share under the Offer will be increased to 0.61102 of a New RPC Share to give BPI Shareholders the benefit of the RPC Dividend.
· BPI is a leading polythene films producer in Europe which supplies approximately 275,000 tonnes per annum for a wide range of markets including agriculture and horticulture, industrial and consumer products, food and related packaging and recycled products. BPI is also one of the largest recyclers of waste polythene film in Europe, having developed recycling techniques for processing a diverse range of scrap materials ranging from packaging waste to post-use agricultural waste. BPI's highly-focused businesses provide high quality, innovative polythene products developed for specific markets and applications, delivered to meet the individual requirements of its customers.
· The acquisition of BPI is strategically compelling for RPC. It provides:
- An excellent fit with Vision 2020 - selective consolidation in Europe
- A unique strategic opportunity to acquire an established flexibles platform in the European polythene films market with strong market positions
- An entry into an adjacent polymer consuming market and increasing the range of polymer conversion technologies within the RPC Group, in line with other global players
- An opportunity to pursue a parallel buy-and-build strategy in flexibles alongside RPC's existing strategy in rigids
- An enhancement of the Group's longer term overall polymer purchasing position
- An enlarged platform to generate cost, purchasing and efficiency savings
The Acquisition also meets RPC's strict acquisition criteria.
· The acquisition of BPI is expected to be accretive to RPC's earnings per share within the first full financial year and materially accretive to earnings per share within the second full financial year (reflecting full realisation of the pre-tax synergies) following the Offer becoming Effective. Based on BPI's financial year ended 31 December 2015, the ROCE on the Acquisition (reflecting full realisation of synergies) is expected to be ahead of RPC's WACC.
· The RPC Directors, having reviewed and analysed the potential benefits of the Offer, based on their experience of operating in the sector and taking into account the factors the RPC Group can influence, believe that the Combined Group will be able to achieve ongoing pre-tax cost synergies of £10 million per annum (before integration costs), fully realisable within the first two full financial years following the Offer becoming Effective.
· Following the Offer becoming Effective, BPI Shareholders will hold New RPC Shares representing approximately 5 per cent. of the enlarged RPC share capital (after taking account of the New RPC Shares and the Placing Shares to be issued pursuant to the Placing).
· The BPI Directors, who have been so advised by Investec as to the financial terms of the Offer, consider the terms of the Offer to be fair and reasonable. In providing advice to the BPI Directors, Investec has taken into account the commercial assessments of the BPI Directors.
· The BPI Directors believe that the Offer represents an opportunity for BPI Shareholders to realise value for their investment at an attractive premium to the range of prices at which BPI Shares have traded in recent years and provides BPI Shareholders with the opportunity to participate in the future development of the Combined Group through the RPC Share component of the Offer Consideration.
· Accordingly, the BPI Directors intend to recommend unanimously that BPI Shareholders vote or procure votes in favour of the Scheme at the Court Meeting and the Resolutions to be proposed at the General Meeting (or if RPC exercises its right to implement the Offer by way of a Takeover Offer, to accept or procure the acceptance of such Takeover Offer), as all the BPI Directors who hold BPI Shares (in a personal capacity or otherwise) have irrevocably undertaken to do so in respect of their own beneficial holdings of 1,489,553 BPI Shares (representing, in aggregate, approximately 5.43 per cent. of the BPI Shares in issue on 8 June 2016, being the last Business Day prior to this Announcement).
· RPC has also received an irrevocable undertaking to vote or procure votes in favour of the Scheme at the Court Meeting and the Resolutions to be proposed at the General Meeting (or, if RPC exercises its right to implement the Offer by way of a Takeover Offer, to accept such offer) from Hargreave Hale Limited in respect of 1,600,000 BPI Shares (representing approximately 5.83 per cent. of the BPI Shares in issue on 8 June 2016, being the last Business Day prior to this Announcement).
· As at the date of this announcement RPC has also received a non-binding letter of intent from Schroder Investment Management Limited to vote in favour of the Scheme at the Court Meeting and the Resolutions to be proposed at the General Meeting in respect of 2,603,341 BPI Shares, representing approximately 9.49 per cent. of the existing issued share capital of BPI.
· Therefore, as at the date of this Announcement, RPC has received irrevocable undertakings and a letter of intent with respect to a total of 5,692,894 BPI Shares (representing, in aggregate, approximately 20.75 per cent. of the BPI Shares in issue on 8 June 2016, being the last Business Day prior to this Announcement). Full details of the irrevocable undertakings and the letter of intent received by RPC are set out in Appendix III to this Announcement.
· The cash consideration payable under the terms of the Offer will be part funded through a fully underwritten equity placing announced separately today to raise approximately £90 million (before expenses), with the balance funded through RPC's existing banking facilities. The Placing will be managed and is underwritten by the Joint Bookrunners. Pro forma leverage as at 31 March 2016 will be approximately 2.1 times the Combined Group's net debt / EBITDA following the Offer becoming Effective.
· If any dividend or other distribution is authorised, declared, made or paid in respect of the BPI Shares on or after the date of this Announcement and prior to the Effective Date, RPC reserves the right to reduce the Offer Consideration by the amount of all or part of any such dividend or other distribution.
· It is intended that the Offer be implemented by way of a Court-sanctioned scheme of arrangement under Part 26 of the Companies Act (or, if RPC elects and with the consent of the Takeover Panel, a Takeover Offer). The purpose of the Scheme is to provide for RPC to become the owner of the whole of the issued and to be issued ordinary share capital of BPI. The Scheme will be put to BPI Shareholders at the Court Meeting and at the General Meeting. In order to become effective, the Scheme must be approved by a majority in number of the BPI Shareholders voting at the Court Meeting, either in person or by proxy, and representing at least 75 per cent. in value of the BPI Shares voted. The Scheme must also be approved by BPI Shareholders at the General Meeting through the passing of the Resolutions by BPI Shareholders representing at least 75 per cent. in value of the BPI Shares voted either in person or by proxy.
· The Offer will be conditional upon, amongst other things, regulatory clearance being received from the European Commission. The Offer is further subject to the Conditions and further terms set out in Appendix I to this Announcement and to be set out in the Scheme Document.
· Further details of the Offer will be contained in the Scheme Document which is intended to be posted to BPI Shareholders, and, for information only, to participants in the BPI Share Schemes and persons with information rights in BPI, along with the notices of the Court Meeting and the General Meeting and the Forms of Proxy, within 28 days of the date of this Announcement, unless RPC and BPI otherwise agree, and the Takeover Panel consents, to a later date. Subject to the Conditions and certain further terms set out in Appendix I to this Announcement, the Offer is expected to become Effective by mid-August 2016. The Scheme Document will contain an expected timetable for the Offer process.
Commenting on the Offer, Cameron McLatchie, Chairman of BPI, said:
"The last five years have seen consistent improvements in BPI's performance and prospects, but not all of this progress has been reflected in the price or rating of BPI's shares. RPC has recognised the value inherent in our business and prospects by making an offer at an attractive premium to the share price. BPI's business should benefit from the ability of a larger group to expand its footprint in Europe and beyond. Shareholders will benefit from enhanced liquidity for their investment, and employees will have access to the opportunities available in a larger group. The BPI board is therefore unanimously recommending acceptance of the Offer."
Commenting on the Offer, Pim Vervaat, Chief Executive Officer of RPC, said:
"With today's announcement, RPC is taking another important step in delivering its Vision 2020 strategy.
The proposed Offer for BPI represents a compelling strategic opportunity for RPC to enter the European polythene films market through an established platform. BPI has a strong product portfolio with attractive market positions in its core markets in Europe.
The combination will further broaden RPC's range of polymer conversion technologies in line with global peers, establish a new growth platform with a strong cost synergy potential whilst enhancing the Group's overall polymer buying capability.
I believe the combination of RPC and BPI is an excellent strategic fit and look forward to growing the enlarged platform to continue generating value for our customers and our shareholders."
This summary should be read in conjunction with, and is subject to, the full text of this Announcement and its Appendices. In particular, the Offer is subject to the Conditions and further terms set out in Appendix I. Appendix II contains details of sources and bases of certain information contained in this Announcement. Appendix III contains certain details relating to the irrevocable undertakings referred to in this Announcement. Appendix IV contains details of and bases of calculation of anticipated merger benefits of the Acquisition and of the related reports from RPC's reporting accountant, KPMG, and its financial adviser, Rothschild. Appendix V contains definitions of certain terms used in this Announcement.
For the purposes of Rule 28 of the Takeover Code, the Quantified Financial Benefits Statement contained in this Announcement is the responsibility of RPC and the RPC Directors. Each of KPMG and Rothschild have given and not withdrawn their consent for the publication of their reports in this Announcement in the form and context in which they are included.
RPC will host an analyst and investor presentation at 9 a.m. today at the offices of FTI Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD.