BMI Group S.àr.l.
Braas Monier Building Group S.A.: Publication of Reasoned Opinion in response to Standard Industries’ Offer Document published 14 October 2016; publication of Q3 2016 trading update; announcement of revised dividend policy
DGAP-News: Braas Monier Building Group S.A. / Key word(s): Offer Publication of Reasoned Opinion in response to Standard Industries’ Offer Document published 14 October 2016; publication of Q3 2016 trading update; announcement of revised dividend policy The Board of Braas Monier continues to reject Standard Industries’ offer of EUR 25 per share Luxembourg, 28 October 2016. The Board of Directors of Braas Monier (the “Board”) today publishes its Reasoned Opinion (the “Reasoned Opinion”) in response to Standard Industries’ Offer Document published 14 October 2016 (the “Offer Document”). After careful review of the Offer Document the Board is of the opinion that Standard Industries’ offer is inadequate from a financial perspective. The Board therefore advises the shareholders of Braas Monier to reject Standard Industries’ offer. The Board bases its recommendation on the following key considerations. 1. No premium for control – Standard Industries’ takeover offer of EUR 25 per share is at a discount to the current market price of above EUR 26 – The takeover offer is also at a discount to independent analysts’ consensus trading target share price of EUR 26-27 – The average customary control premia paid for European companies over the last 20 years has been 36% – EUR 25 per share does not provide shareholders with a customary premium in exchange for control – The Board also notes that EUR 25 is the price per share which 40 North (Standard Industries’ affiliate) paid in June 2016 for its non-controlling 29.1% shareholding in Braas Monier – The actions of Monier Holdings, which has been seeking to exit for some time, do not validate any offer price 2. Unrecognised value for synergies – Standard Industries has indicated its intention to combine Braas Monier with Icopal – The Board believes that EUR 30-40 m would be a reasonable estimate of the amount of annual synergies which would arise from a combination of Icopal and Braas Monier. This estimate is supported by an analysis undertaken by a leading international management consultancy firm – EUR 30-40 m equates to less than 2% of Braas Monier’s and Icopal’s combined revenues and is in line with the level of synergies announced with other combinations of building materials manufacturers – The EUR 30-40 m synergies would arise both from revenue gains principally from cross-selling, and cost savings from areas such as duplicate corporate and regional functions, procurement, logistics and the removal of public company costs – EUR 25 per share cash offer would deprive Braas Monier shareholders of any benefits arising from synergies 3. Discount to most recent comparable transaction – The 2016 acquisition of Icopal by Standard Industries’ subsidiary, GAF Corporation, is the most comparable recent transaction in the sector – Standard Industries paid a multiple of 10.6x EBITDA for Icopal – Braas Monier has superior financial metrics compared to Icopal. Braas Monier’s EBITDA margins are substantially higher than Icopal and Braas Monier generates c.2.5x the annual operating cashflow of Icopal, however the Offer by Standard Industries represents only 4. Unrecognised value in German pension schemes – Braas Monier’s pension liabilities relate almost exclusively to German pension schemes which are (a) unfunded (with no legal funding obligation) and (b) closed to new entrants – Since 2011 the Braas Monier pension liabilities have increased by almost EUR 200 m due principally to changes in discount rate assumptions. During this period the cash outflows under these pension schemes have remained stable at around EUR 15 m per annum, an amount which is not expected to increase materially in future years – The after tax pension liability under these pension schemes at 30 September 2016 was – This contrasts with the c.8% equity free cashflow yield which Braas Monier currently generates at the current share price – Jefferies (the independent equity analyst) estimates that this mismatch could add a further 5. Significant future shareholder value as an independent company – Braas Monier has successfully implemented a strategy of significant rationalisation and restructuring, resulting in a strong improvement in earnings and cashflows and a significant reduction of net debt – These material improvements in Braas Monier’s financial position have enabled it to implement a successful strategy of organic and inorganic growth; to undertake a refinancing which will improve annual cashflow by around EUR 12 m, of which around EUR 6 m has been realized during Q3 2016; and to implement a progressive dividend policy – Braas Monier is strongly positioned financially and operationally to benefit from any recovery in its European markets. Braas Monier offers: – A sector leading equity free cashflow yield of c.8% – High cash generation with material further deleveraging expected in the medium term – High operational leverage, which the Board believes will generate improved earnings and even greater cashflows in any European recovery – Strong pricing power and sector leading sustainable EBITDA margins – A high quality platform for growth which is well positioned in all its key markets and with a strong geographic footprint – A successful ongoing M&A strategy with a well-developed pipeline of future opportunities Braas Monier’s financial adviser Rothschild has provided a fairness opinion concluding that the offer consideration is inadequate from a financial point of view. UBS has also provided a fairness opinion concluding that the offer consideration is inadequate from a financial point of view. Further the Board notes a lack of clarity on certain matters in relation to Standard Industries’ offer including: – The Offer Document provides no firm commitment in respect of employees; – The Offer Document provides no details on future intentions in relation to matters including: strategy; use of assets; delisting; future of the business; and Board composition; and The full text of the Reasoned Opinion is available on the Braas Monier website under the following link: www.offer.braas-monier.com It is expressly noted that the Reasoned Opinion alone is binding. The information provided in this press release is not to be understood as an explanation or supplement to the statements in the Reasoned Opinion. Publication of Q3 2016 trading update Change of Dividend Policy and Dividend for 2016 Accordingly the Board of Directors has today decided to adjust Braas Monier’s progressive dividend policy and link it more directly to the Company’s adjusted free cash flow which the Board of Directors deems to be more appropriate for a well-balanced capital allocation. Therefore the Board of Directors has adopted a dividend policy with a total annual dividend payout ratio in the range of 30% – 50% of Braas Monier’s adjusted free cash flow. Adjusted free cash flow is defined as net cash from operating and investing activities excluding growth capital expenditure (such as M&A) and significant one-off items incurred in the relevant period. Braas Monier retains its commitment to a net debt / Operating EBITDA ratio of no greater than 2.0x. As a consequence of the Company’s current operating and financial position and future prospects, the Board of Directors will propose to shareholders a total dividend of EUR 0.70 per ordinary share in respect of the financial year ending 31 December 2016 at the Annual General Meeting to be held on 10 May 2017. Investor and Analyst presentation on Friday 28 October 2016 at 11am CET Enquiries: Braas Monier: Achim Schreck Rothschild: John Deans Scott Harris: Alice Squires CNC Communications: Harald Kinzler
2016-10-28 Dissemination of a Corporate News, transmitted by DGAP – a service of EQS Group AG. |
Language: | English | |
Company: | Braas Monier Building Group S.A. | |
4, rue Lou Hemmer | ||
1748 Senningerberg | ||
Grand Duchy of Luxembourg | ||
Internet: | www.braas-monier.com | |
ISIN: | LU1075065190 | |
WKN: | BMSA01 | |
Indices: | SDAX | |
Listed: | Regulated Market in Frankfurt (Prime Standard); Regulated Unofficial Market in Berlin, Dusseldorf, Munich, Stuttgart, Tradegate Exchange | |
End of News | DGAP News Service |