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[October 2007]
Cookson Tables Offer for Foseco
The boards of Cookson Group plc and Foseco plc have announced that they have reached agreement on the terms of a recommended cash offer by Cookson for the entire issued and to be issued share capital of Foseco. It is intended that the acquisition will be implemented by way of a court approved scheme of arrangement under section 425 of the Companies Act.
Under the terms of the acquisition Foseco shareholders will receive 295 pence in cash for each Foseco share. Foseco shareholders will remain entitled to receive the interim dividend of 1.73 pence per Foseco share announced on 13 September 2007 and payable on 21 November 2007 to Foseco shareholders on the register on 19 October 2007.
The acquisition values the entire issued and to be issued share capital of Foseco at approximately £497 million and represents a premium of approximately 31% to the average closing middle market price of 224.5 pence per share on 1 October 2007, being the last business day prior to the announcement by Foseco that it was in discussions with Cookson regarding a potential offer for the company; and 39% to the average closing middle market price of 211.6 pence per share for the three month period prior to the same date.
Cookson said it believed that the acquisition had a clear and compelling industrial and financial rationale, with significant benefits for its shareholders and other stakeholders. Foseco has a strong record of growth in revenue, profitability and cash generation. Its principal Foundry division has a leading market position and its Steel division is complementary to Cookson’s business. End markets for both divisions are strong and are expected to continue with ‘GDP plus’ revenue growth over the medium-term, added Cookson.
The acquisition is expected to deliver significant annual cost synergies of approximately £18 million in the second twelve month period after completion through the elimination of overhead duplications (general and administrative, including head office) and increased purchasing efficiencies. Additional revenue synergies are anticipated through Cookson cross-selling its foundry products through Foseco and Foseco cross-selling its steel products through Cookson.
The acquisition is also expected to achieve a return on invested capital in excess of Cookson’s weighted average cost of capital in the second twelve month period after completion. In addition, the transaction is expected to have a neutral impact on Cookson’s headline earnings per share in financial year 2008 and significantly enhance headline earnings per share thereafter.
Commenting on the acquisition, Robert Beeston, Chairman of Cookson, said: “As a leading supplier of consumable products for use in the foundry and steelmaking industries, Foseco is highly complementary to our Ceramics division’s activities. The combination of these businesses provides opportunities to enhance the growth of both while providing our customers in foundry and steel production markets with an excellent range of value-added products and services.
“The integration of the two businesses will generate significant synergies through the ability to cross-sell each business’ products and services, elimination of duplicate overhead costs and increased purchasing efficiencies. Hence we expect attractive returns and earnings per share enhancement from this transaction.”
Danny Rosenkranz, Chairman of Foseco, said: “Foseco has come a long way since flotation in 2005, delivering strong revenue and earnings growth ahead of that promised at that time. Our Foundry business has performed exceptionally well and our Steel division is close to establishing a sustainable platform from which to grow.
“This potential has been recognised in Cookson's offer for Foseco. Cookson's offer represents fair value for Foseco shareholders, giving them an opportunity to realise an excellent return following this period of strong performance.”
ENDS