GBP 800 M DEAL - Datwyler Holding Inc (DAE) - Offer for Premier Farnell plc
14 June 2016
RECOMMENDED CASH OFFER
for
Premier Farnell plc ("Premier Farnell")
by
Datwyler Technical Components UK Limited ("Bidco")
a wholly owned subsidiary of
Dätwyler Holding AG ("Datwyler")
to be effected by means of a scheme of arrangement under
Part 26 of the Companies Act 2006
Summary
· The Boards of Premier Farnell and Datwyler are pleased to announce that they have reached agreement on the terms of a recommended offer for the entire issued and to be issued share capital of Premier Farnell by Bidco, a wholly owned subsidiary of Datwyler.
· Under the terms of the Transaction, each Premier Farnell Shareholder will be entitled to receive:
For each Premier Farnell Share: 165 pence in cash (the "Cash Consideration")
· In addition, Premier Farnell Shareholders on the register on 27 May 2016 will remain entitled to receive the proposed final dividend in respect of the financial year ended 31 January 2016 of3.6 pence per Premier Farnell Share in cash, which is payable by Premier Farnell on 23 June 2016 (the "2015/16 Final Dividend").[1]
· The Transaction values the entire issued and to be issued share capital of Premier Farnell at approximately £615 million and represents a premium of approximately 51 per cent. to the Closing Price of 109.3 pence per Premier Farnell Share on 13 June 2016, being the last Business Day before the date of this Announcement.
· The Cash Consideration implies an enterprise value[2] of £792 million.
· Datwyler believes the combination of Datwyler and Premier Farnell represents a strong strategic fit and is highly attractive. Both companies share very similar strategic values and are highly complementary in terms of product range (for example, in respect of the Electronic Design Engineering and Maintenance, Repair, Operations sectors), distribution channels and geographic footprint. The Transaction creates a leading high-service electronic components distributor in Europe and the combined platform will enable the Combined Group to realise significant economies of scale compared to Datwyler's standalone strategy, particularly in the context of a large addressable and fragmented high-service electronic components sector worth approximately CHF30-40 billion, in which the top five distributors have a sector share of little over 15 per cent.[3]. Complemented by efficiency gains from an overlapping cost base, increased capillarity and acceleration of ongoing restructuring efforts on both sides, the Combined Group is also expected to deliver enhanced margins through a low cost structure going forward.
· The Combined Group will operate a global Technical Components division with approximately 4,900 employees, over one million products stocked in warehouses and is expected to generate revenue of approximately CHF1.8 billion (with an adjusted EBIT-margin of 5.4 per cent. before synergies). The total revenue of the Combined Group based on adjusted 2015 figures is approximately CHF2.5 billion (with an adjusted EBIT-margin of 9 per cent. before synergies)[4]. Datwyler's Sealing Solutions division will continue to operate separately with approximately 5,100 employees and revenue of approximately CHF0.7 billion. The Combined Group will target revenues from its Technical Components division of over CHF2 billion (with an EBIT-margin target of over 10 per cent.) and will target total revenue of over CHF 3 billion (with an EBIT margin target of over 12 per cent.) by 2020.
· The enhanced scale and complementary offering brought about by a combination of the two businesses is expected to generate revenue synergies from cross-selling and line-fill effects, as well as utilising the strength of the Combined Group's procurement position. The Combined Group will target total EBITDA run-rate synergies per annum of CHF50-70 million by the end of 2019, comprising gross profit synergies of CHF25-35 million and cost synergies of CHF25-35 million. Additional depreciation of investments leads to an EBIT run-rate synergies target of CHF40-60 million by the end of 2019.
· The Transaction is expected to be EPS accretive immediately from completion, even before considering further positive effects from any synergies realised. In addition, the Combined Group is expected to have a solid capital structure with a net debt to EBITDA ratio of below 2.5x, with further de-leveraging in the years following completion.
· The Combined Group is expected to incur one-off implementation costs of CHF40 million in aggregate phased in over two years following the completion of the Transaction. In order to realise fully the expected run-rate EBITDA synergies, the Combined Group expects to incur over the same period additional capital expenditure of approximately CHF80 million.
· The combination will also result in a number of benefits to customers including a wider variety of products, shorter lead times, greater ability to provide technical support and further improved reliability.
· The Premier Farnell Directors, who have been advised by Lazard, consider the financial terms of the Transaction to be fair and reasonable. In providing its advice, Lazard has taken into account the commercial assessments of the Premier Farnell Directors.
· Accordingly, the Premier Farnell Directors intend to recommend unanimously that Premier Farnell Shareholders vote in favour of the resolutions relating to the Transaction at the Meetings (or in the event that the Transaction is implemented by way of an Offer, to accept or procure acceptance of such offer), as the Premier Farnell Directors with beneficial holdings have irrevocably undertaken to do, or procure to be done in respect of their own beneficial holdings of 240,403 Premier Farnell Shares representing, in aggregate, approximately 0.1 per cent. of the share capital of Premier Farnell in issue at close of business on 13 June 2016 (being the last Business Day before the date of this Announcement).
· Datwyler has received irrevocable undertakings and/or non-binding statements of intent to vote in favour of the resolutions relating to the Transaction at the Meetings (or in the event that the Transaction is implemented by way of an Offer, to accept or procure acceptance of such Offer) from GO Investment Partners, J O Hambro and Majedie (as applicable) in respect of, in aggregate, 68,540,661 Premier Farnell Shares, representing approximately 18.4 per cent. of the share capital of Premier Farnell in issue, in each case at close of business on 13 June 2016 (being the last Business Day before the date of this Announcement). The terms of these undertakings and statements of intent are summarised in paragraph 12 and Appendix 2 of this Announcement
· It is intended that the Transaction will be effected by means of a court-sanctioned scheme of arrangement under Part 26 of the Companies Act 2006.
· The Transaction is subject to the satisfaction or waiver of the Conditions, and to the further terms that are set out in Appendix 1 to this Announcement and will be set out in the Scheme Document. The Conditions include the approval of the Scheme by Premier Farnell Shareholders and the Court, the receipt of anti-trust consents in Austria, Germany, Poland and the U.S., and other customary conditions.
· The Scheme Document, which will contain further information about the Transaction, including the Scheme, is expected to be published as soon as practicable and, in any event, within 28 days of the date of this Announcement (unless Premier Farnell and Datwyler otherwise agree, and the Panel consents, to a later date). The Scheme Document will also contain notices of the Court Meeting and the Premier Farnell General Meeting and the expected timetable of the Transaction, and will specify the action to be taken by Scheme Shareholders.
· Commenting on today's Announcement, Ulrich Graf, the Chairman of Datwyler said:
"Premier Farnell and Datwyler both have long and successful histories in high-service distribution for electronic components. By combining forces, we significantly increase our competitiveness and extend our product range, facilitating a one-stop shopping experience for our wide range of customers from a multitude of industries. With our system critical service we have a distinct differentiator and create value for all stakeholders - customers, suppliers, employees and shareholders."
Commenting on today's Announcement, Valerie Gooding, the Chairman of Premier Farnell said:
"The Premier Farnell Directors believe that this offer recognises the quality of our business and its future prospects, and provides our shareholders with immediate and significant value in cash for their shares.
The Transaction represents a compelling strategic proposition, underpinned by complementarity in terms of product range, distribution channels and geographic exposure. Premier Farnell faces an increasingly competitive market and the ongoing need for further restructuring of the business. We believe that Premier Farnell will be better positioned to address these changes and challenges with the benefit of the increased scale afforded by a combination with Datwyler. We also believe that Premier Farnell's customers will enjoy an enhanced breadth of products and a greater range of distribution points into the market due to the combination of the two companies."