STRICTLY PRIVATE AND CONFIDENTIAL
19 APRIL 2017
GREENROCK BIDCO LIMITED
ELEMENT MATERIALS TECHNOLOGY GROUP LIMITED
EXOVA GROUP PLC
COOPERATION AGREEMENT
65 Fleet Street
London EC4Y 1HS
CONTENTS
CLAUSE
PAGE
1.
Definitions and interpretation ...................................................................................... 1
2.
Publication of the Announcement and the terms of the Acquisition ........................... 7
3.
Regulatory clearances.................................................................................................. 7
4.
Scheme Document ..................................................................................................... 11
5.
Implementation of the Acquisition ............................................................................ 11
6.
Switching to a Takeover Offer .................................................................................. 12
7.
Final Dividend ........................................................................................................... 13
8.
Exova Share Schemes ............................................................................................... 13
9.
Directors’ and officers’ insurance ............................................................................. 13
10.
Break Payment .......................................................................................................... 14
11.
Guarantee .................................................................................................................. 15
12.
Termination ............................................................................................................... 16
13.
Takeover Code .......................................................................................................... 17
14.
Representations and warranties ................................................................................. 18
15.
Costs .......................................................................................................................... 18
16.
Entire agreement........................................................................................................ 18
17.
Assignment ................................................................................................................ 19
18.
Notices ....................................................................................................................... 19
19.
Language ................................................................................................................... 20
20.
Waivers, rights and remedies .................................................................................... 20
21.
No partnership ........................................................................................................... 20
22.
Further assurances ..................................................................................................... 20
23.
Counterparts .............................................................................................................. 20
24.
Variations .................................................................................................................. 20
25.
Invalidity ................................................................................................................... 21
26.
Third party enforcement rights .................................................................................. 21
27.
Governing law and jurisdiction ................................................................................. 21
Schedule 1 Form of Announcement ....................................................................................... 24
Schedule 2 Exova Employees and Share Schemes ................................................................ 25
1.
Provisions of general application .............................................................................. 25
2.
Safeguarding employee rights ................................................................................... 25
3.
Annual Bonus ............................................................................................................ 25
4.
Exova Group plc Share Option Plan (SOP) .............................................................. 26
5.
Exova Group plc Long Term Incentive Plan (LTIP) ................................................. 26
6.
Severance Arrangements ........................................................................................... 27
-i-
THIS AGREEMENT is made on 19 April 2017
BETWEEN:
(1)
GREENROCK BIDCO LIMITED, a private limited company registered in
England and Wales with registered number 10702697, whose registered office is at 5
Fleet Place, London, England, EC4M 7RD (Offeror);
(2)
ELEMENT MATERIALS TECHNOLOGY GROUP LIMITED, a private limited
company registered in England and Wales with registered number 09915743, whose
registered office is at 5 Fleet Place, London, England, EC4M 7RD (Guarantor); and
(3)
EXOVA GROUP PLC, a public limited company registered in England and Wales
with registered number 08907086, whose registered office is at 6 Coronet Way
Centenary Park, Eccles, Salford, Manchester, M50 1RE (Exova),
(each a party and together the parties).
WHEREAS:
(A)
Offeror proposes to announce immediately following execution of this Agreement a
firm intention to make a recommended offer for the entire issued and to be issued
share capital of Exova pursuant to Rule 2.7 of the Code.
(B)
The Acquisition will be made on the terms and subject to the conditions set out in the
Announcement and this Agreement.
(C)
The parties intend that the Acquisition will be implemented by way of the Scheme,
although Offeror reserves the right, subject to the terms of this Agreement and the
Announcement, to implement the Acquisition by way of a Takeover Offer.
(D)
The parties are entering into this Agreement to set out certain obligations and
commitments in relation to the implementation of the Acquisition (whether by way of
the Scheme or a Takeover Offer).
IT IS AGREED as follows:
1.
Definitions and interpretation
1.1
In this Agreement (including the recitals but excluding Schedule 1), the following
terms shall have the meanings set out below. Terms and expressions used in
Schedule 1 shall have the meanings given to them in Schedule 1.
Acceptance Condition means the acceptance condition to any Takeover Offer;
Acquisition means the direct or indirect acquisition of the shares of Exova by Offeror
(other than any Exova Shares already held by the Offeror Group), to be effected by
way of: (i) the Scheme; or (ii) the Takeover Offer (as the case may be);
Acquisition Document means (i) if the Scheme is (or is to be) implemented, the
Scheme Document; or (ii) if the Takeover Offer is (or is to be) implemented, the
Offer Document;
Announcement means the announcement detailing the terms and conditions of the
Acquisition to be made pursuant to Rule 2.7 of the Code, in substantially the form set
out in Schedule 1;
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Break Payment has the meaning given in clause 10.1;
Break Payment Event has the meaning given in clause 10.1;
Business Day means a day other than a Saturday or Sunday or public holiday in
England and Wales on which banks in London are open for general commercial
business;
Clearances means any approvals, consents, clearances (including any purchaser
approval or equivalent requirement of a Relevant Authority in relation to any
applicable Remedy in order to allow the Acquisition to close), permissions,
confirmations, comfort letters and waivers that are required to be obtained, all filings
that are required to be made and waiting periods that may need to have expired, from
or under any of the Laws, regulations or practices applied by any Relevant Authority
(or under any agreements or arrangements to which any Relevant Authority is a
party), in each case that are necessary to satisfy one or more of the Regulatory
Conditions or in order to allow the Acquisition to close;
Code means the City Code on Takeovers and Mergers, as issued from time to time by
or on behalf of the Panel;
Companies Act means the Companies Act 2006;
Competing Proposal means:
(a)
an offer (including a partial, exchange or tender offer), merger, acquisition,
dual-listed structure, scheme of arrangement, reverse takeover, whitewash
transaction and/or business combination (or the announcement of a firm
intention to do the same), the purpose of which is to acquire, directly or
indirectly, 30 per cent. or more of the issued or to be issued ordinary share
capital of Exova (when aggregated with the shares already held by the
acquirer and any person acting or deemed to be acting in concert with the
acquirer) or any arrangement or series of arrangements which results in any
party acquiring, consolidating or increasing ‘control’ (as defined in the Code)
of Exova;
(b)
the acquisition or disposal, directly or indirectly, of all or a significant
proportion (being 30 per cent. or more) of the business, assets and/or
undertakings of the Exova Group calculated by reference to any of its
revenue, profits or value taken as a whole;
(c)
a demerger, any material reorganisation and/or liquidation involving all or a
significant portion (being 30 per cent. or more) of the Exova Group
calculated by reference to any of its revenue, profits or value taken as a
whole; or
(d)
any other transaction which would be alternative to, or inconsistent with, or
would be reasonably likely materially to preclude, impede or delay or
otherwise prejudice the implementation of the Acquisition (including, for the
avoidance of doubt, any transaction or arrangement which would constitute a
Class 1 transaction for the purposes of the Listing Rules undertaken by a
member of the Exova Group),
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in each case which is not effected by Offeror (or a person acting in concert with
Offeror) or at Offeror’s direction, whether implemented in a single transaction or a
series of transactions and whether conditional or otherwise;
Conditions means:
(a)
for so long as the Acquisition is being implemented by means of the Scheme,
the conditions to the implementation of the Acquisition (including the
Scheme) as set out in Appendix I to the Announcement and to be set out in
the Acquisition Document; and
(b)
for so long as the Acquisition is being implemented by means of a Takeover
Offer, the conditions referred to in (a) above, as amended by replacing the
Scheme Condition with the Acceptance Condition,
and Condition shall be construed accordingly;
Confidentiality Agreement means the confidentiality agreement between Offeror and
Exova in relation to the Acquisition dated 13 February 2017;
Costs means losses, damages, costs (including reasonable legal costs) and expenses
(including Taxation), in each case of any nature whatsoever;
Court means the High Court of Justice in England and Wales;
Court Hearing means the hearing by the Court of the petition to sanction the Scheme
and to grant the Court Order;
Court Hearing Date means the date upon which the Court Hearing is held;
Court Meeting means the meeting(s) of the Scheme Shareholders to be convened by
order of the Court pursuant to section 896 of the Companies Act, notice of which will
be set out in the Scheme Document, for the purpose of approving the Scheme,
including any adjournment thereof;
Court Order means the order(s) of the Court sanctioning the Scheme under
section 899 of the Companies Act;
Exova Board means the board of directors of Exova from time to time;
Exova Board Recommendation means a unanimous and unqualified recommendation
from the Exova Directors to Exova Shareholders in respect of the Acquisition: (i) to
vote in favour of the Exova Resolutions; or (ii) if Offeror elects to proceed with the
Takeover Offer in accordance with the terms of this Agreement, to accept the
Takeover Offer;
Exova Directors means the directors of Exova from time to time;
Exova General Meeting means the general meeting of Exova to be convened in
connection with the Scheme, notice of which will be set out in the Scheme Document,
including any adjournment thereof;
Exova Group means Exova and its subsidiary undertakings and member of the
Exova Group shall be construed accordingly;
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Exova Resolutions means such shareholder resolutions of Exova as are necessary to
approve, implement and effect the Scheme and the Acquisition and changes to
Exova’s articles of association;
Exova Share Schemes means the Exova Group plc Long Term Incentive Plan and
Exova Group plc Share Option Plan, each as amended from time to time;
Exova Shareholder Meetings means the Court Meeting and the Exova General
Meeting;
Exova Shareholders means the holders of Exova Shares from time to time;
Exova Shares means the ordinary shares in the capital of Exova from time to time;
Effective Date means:
(a)
the date on which the Scheme becomes effective in accordance with its terms;
or
(b)
if Offeror elects to implement the Acquisition by means of a Takeover Offer,
the date that the Takeover Offer becomes or is declared unconditional in all
respects;
Final Dividend means the proposed final dividend for the year ended 31 December
2016 of 2.35p per Exova Share;
Group means, in relation to any person, that person and any bodies corporate which
are subsidiaries or subsidiary undertakings of that person;
Law means any applicable statute, law, rule, regulation, ordinance, code, order,
judgment, injunction, writ, decree, directive, policy, guideline, interpretation or rule
of common law issued, administered or enforced by any Relevant Authority, or any
judicial or administrative interpretation thereof;
Listing Rules means the rules and regulations made by the Financial Conduct
Authority in its capacity as the UK Listing Authority under the Financial Services and
Markets Act 2000, and contained in the UK Listing Authority’s publication of the
same name;
London Stock Exchange means London Stock Exchange plc;
Longstop Date means 18 October 2017 or such later date as may be agreed in writing
by Offeror and Exova (with the Panel’s consent and as the Court may approve (if
such consents(s) or approval(s) is/are required));
LTIP has the meaning given in Schedule 2;
Offer Document means, if (following the date of this Agreement) Offeror elects to
implement the Acquisition by way of the Takeover Offer in accordance with
clause 6.1, the document to be sent to (among others) Exova Shareholders setting out,
among other things, the full terms and conditions of the Takeover Offer;
Offeror Board means the board of directors of Offeror from time to time;
Offeror Directors means the directors of Offeror from time to time;
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Offeror Group means the Offeror and its subsidiary undertakings and member of the
Offeror Group shall be construed accordingly;
Panel means the UK Panel on Takeovers and Mergers;
Regulatory Conditions means the conditions set out in paragraphs 3 to 10 (inclusive)
of Part A of Appendix I to the Announcement (so far as the relevant Third Party
under that Condition is a Relevant Authority);
Regulatory Information Service means any information service authorised from time
to time by the Financial Conduct Authority for the purpose of disseminating
regulatory announcements;
Relevant Authority means any central bank, ministry, governmental,
quasi-governmental, supranational (including the European Union), statutory,
regulatory or investigative body, authority or tribunal (including any national or
supranational anti-trust, competition or merger control authority, any sectoral
ministry or regulator and foreign investment review body), national, state, municipal
or local government (including any subdivision, court, tribunal, administrative agency
or commission or other authority thereof), any entity owned or controlled by them,
any private body exercising any regulatory, taxing, importing or other authority, trade
agency, association, institution or professional or environmental body in any
jurisdiction;
Remedies means any conditions, measures, commitments, undertakings, remedies
(including disposals, whether before or following completion of the Acquisition, and
any pre-divesture reorganisations by a party) or assurance (financial or otherwise)
offered or required in connection with the obtaining of any Clearances and Remedy
shall be construed accordingly;
Remuneration Committee has the meaning given in Schedule 2;
Rule 12 Event means (i) proceedings initiated by the European Commission under
Article 6(1)(c) of Council Regulation (EC) No. 139/2004 (the Regulation) or a
referral to a competent authority of the United Kingdom under Article 9(1) of the
Regulation followed by a reference to the Chair of the Competition and Markets
Authority for the constitution of a group under Schedule 4 to the Enterprise and
Reform Act 2013 and the Acquisition lapsing as a result under Rule 12.1(b) of the
Code; or (ii) a referral to the Chair of the Competition and Markets Authority for the
constitution of a group under Schedule 4 to the Enterprise and Reform Act 2013 and
the Acquisition lapsing as a result under Rule 12.1(a) of the Code;
Scheme means the scheme of arrangement proposed to be made under Part 26 of the
Companies Act between Exova and the Scheme Shareholders, with or subject to any
modification, addition or condition approved or imposed by the Court and agreed to
by Exova and Offeror;
Scheme Document means the document to be sent to (among others) Exova
Shareholders containing and setting out, among other things, the full terms and
conditions of the Scheme and containing the notices convening the Court Meeting
and the Exova General Meeting;
Scheme Condition means the Condition referred to in paragraph 2 of Part A of
Appendix I to the Announcement;
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Scheme Shareholders means the holders of Scheme Shares;
Scheme Shares has the meaning given in the Announcement;
SOP has the meaning given in Schedule 2;
Switch has the meaning given in clause 6.1;
Takeover Offer means a takeover offer (within the meaning of section 974 of the
Companies Act) to be made by or on behalf of Offeror to acquire the entire issued and
to be issued share capital of Exova on the terms and conditions to be set out in the
Offer Document;
Tax Authority means any taxing or other authority (whether within or outside the
United Kingdom) competent to impose any tax, or assess or collect any tax;
UK or United Kingdom means the United Kingdom of Great Britain and Northern
Ireland;
VAT means value added tax and any similar sales or turnover tax;
Working Hours means 9.30 a.m. to 5.30 p.m. in the relevant location on a Business
Day; and
1.2
In this Agreement, unless the context otherwise requires:
(a)
the expressions subsidiary and subsidiary undertaking have the meanings
given in the Companies Act;
(b)
the expressions acting in concert and concert parties shall be construed in
accordance with the Code;
(c)
interest in shares or securities shall be construed in accordance with the
Code;
(d)
a reference to an enactment or statutory provision shall include a reference to
any subordinate legislation made under the relevant enactment or statutory
provision and is a reference to that enactment, statutory provision or
subordinate legislation as from time to time amended, consolidated, modified,
re-enacted or replaced;
(e)
references to a person include any individual, an individual’s executors or
administrators, a partnership, a firm, a body corporate (wherever
incorporated), an unincorporated association, government, state or agency of
a state, local or municipal authority or government body, a joint venture,
association, works council or employee representative body (in any case,
whether or not having separate legal personality);
(f)
references to a recital, paragraph, clause or Schedule (other than a schedule to
a statutory provision) shall refer to those of this Agreement unless stated
otherwise;
(g)
headings do not affect the interpretation of this Agreement, the singular shall
include the plural and vice versa, and references to one gender include all
genders;
(h)
references to time are to London time;
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(i)
any reference to a day (including within the phrase Business Day) shall mean
a period of 24 hours running from midnight to midnight;
(j)
references to any English legal term for any action, remedy, method of
judicial proceeding, legal document, legal status, court, official or any legal
concept or thing shall, in respect of any jurisdiction other than England, be
construed as references to the term or concept which most nearly corresponds
to it in that jurisdiction;
(k)
references to £, GBP, pounds sterling, Sterling, pence and p are references to
the lawful currency from time to time of the United Kingdom;
(l)
any phrase introduced by the terms including, include, in particular or any
similar expression shall be construed as illustrative and shall not limit the
sense of the words preceding those terms;
(m)
a reference to any other document referred to in this Agreement is a reference
to that other document as amended, varied or supplemented at any time; and
(n)
references to this Agreement include this Agreement as amended or
supplemented in accordance with its terms.
1.3
The Schedules form part of this Agreement and shall have the same force and effect
as if set out in the body of this Agreement and any reference to this Agreement shall
include the Schedules.
2.
Publication of the Announcement and the terms of the Acquisition
2.1
The obligations of the parties under this Agreement, other than this clause 2.1 and
clauses 13 to 21 (inclusive) and 23 to 27 (inclusive), shall be conditional on the
release of the Announcement via a Regulatory Information Service at or before
5:00 p.m. on the date of this Agreement or such later time and date as Offeror and
Exova may agree (and, where required by the Code, the Panel may approve). This
clause 2.1 and clauses 13 to 21 (inclusive) and 23 to 27 (inclusive) shall take effect on
and from execution of this Agreement.
2.2
The terms of the Acquisition shall be as set out in the Rule 2.7 Announcement,
together with such other terms as may be agreed by the Offeror and Exova in writing
(save in the case of an improvement to the terms of the Acquisition, which will be at
the absolute discretion of Offeror) and, where required by the Code, approved by the
Panel. The terms of the Acquisition at the date of publication of the Acquisition
Document shall be set out in the Acquisition Document.
3.
Regulatory clearances
3.1
Offeror and Exova acting jointly, and taking due account of their relative legal
obligations with respect to the relevant Clearances, shall determine the strategy for
obtaining the Clearances, including contacting and corresponding with the Relevant
Authorities in relation to such Clearances (including submitting and preparing all
necessary filings, notifications and submissions).
3.2
Notwithstanding clause 3.1 above but subject always to (and without prejudice to)
Offeror’s obligations under clause 3.3 below, Offeror shall be solely responsible for
determining the strategy for (i) the timing and sequencing regarding the discussion,
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offer or agreement of any Remedies (if any are required) with Relevant Authorities;
and (ii) the determination of any Remedies (if any are required) discussed with,
offered to or agreed with Relevant Authorities.
3.3
The Offeror shall:
(a)
use its reasonable endeavours to secure the Clearances in relation to the
Condition set out in paragraph 3 of Part A of Appendix I to the
Announcement as soon as is reasonably practicable after the date of this
Agreement. For the avoidance of doubt, nothing in this Agreement shall
oblige Offeror to offer any Remedies to, agree any Remedies with, or
otherwise make any commitments to any Relevant Authority in connection
with securing the Clearances in relation to the Condition set out in paragraph
3 of Part A of Appendix I to the Announcement; and
(b)
take all steps necessary to secure the Clearances (other than in relation to the
Condition set out in paragraph 3 of Part A of Appendix I to the
Announcement) required to enable the Acquisition to close as soon as is
reasonably practicable after the date of this Agreement (which shall include
offering and giving remedies at the first stage of the review process of any
Relevant Authority that has the power to accept such remedies at that stage),
and, in any event, by the Longstop Date. For the avoidance of doubt this
obligation shall include taking all steps necessary to avoid the occurrence of
any Rule 12 Event,
provided that Exova may elect to waive (in whole or in part) the obligation under this
clause 3.3 in its sole discretion.
3.4
Offeror shall be responsible for the payment of all filing fees required in connection
with the Clearances.
3.5
Offeror and Exova shall:
(a)
(b)
provide each other, in a timely manner, such information and assistance as
may be reasonably required for:
(i)
Offeror and Exova to agree (such agreement to take due account of
their relative legal obligations with respect to the relevant Clearance,
and not to be unreasonably withheld) in which jurisdictions any
merger control, regulatory or other filing, notification or submission
with a Relevant Authority may be necessary for the purposes of
obtaining the Clearances;
(ii)
Offeror and/or Exova (as applicable) to make any filings,
notifications or submissions to the Relevant Authorities as may be
necessary in connection with the obtaining of the Clearances, taking
into account all applicable waiting periods; and
(iii)
the identification, structuring and preparation of any Remedies; and
ensure that all information necessary:
(i)
for the making of (or responding to any requests for further
information consequent upon) any such filings, notifications,
submissions (including draft versions); and
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(ii)
the identification, structuring and preparation of any Remedies,
(and that is in the possession of, or reasonably obtainable by, such party) is
supplied accurately and as promptly as reasonably practicable.
3.6
3.7
For the purposes of clauses 3.1 and 3.2:
(a)
Offeror and Exova shall each take reasonable steps to obtain relevant
information from third parties (including through the exercise of contractual
rights), it being acknowledged that a party shall not be in breach of this
clause or clauses 3.1 or 3.2 as a consequence of any inaccuracies in any
information originating from a third party (being a person other than a
member, officer, employee or adviser of the Exova Group or the Offeror
Group (as applicable));
(b)
Offeror and Exova acknowledge that in certain circumstances disclosure by
one party to the other may nonetheless be prevented by obligations of
confidentiality owed to third parties or by Law; and
(c)
the provision of information shall be subject to clause 3.10.
Subject to clause 3.6(b) and 3.10 and without prejudice to the generality of clauses
3.1 and 3.2, and except to the extent that to do so is prohibited by Law:
(a)
Offeror, or Exova and Offeror jointly, or Exova, as may be required, will,
subject to receiving the necessary information and assistance from the other
parties as contemplated by this Agreement, submit a filing, notification or
submission (as required) to each Relevant Authority as soon as is reasonably
practicable after the signing of this Agreement and in any event within any
applicable mandatory time periods where it is necessary to do so to obtain the
Clearances;
(b)
Offeror and Exova shall each provide such cooperation as is reasonably
required by the other in connection with the preparation of all such filings,
notifications or submissions (as required) referred to in clause 3.7(a) and in
relation to the preparation of any other submissions, material correspondence
or material communications to any Relevant Authority in connection with the
Clearances;
(c)
Offeror and Exova shall each provide, or procure the provision of, draft
copies of all filings, submissions, material correspondence and material
communications (including, in the case of non-written communications,
reasonably detailed summaries of material non-written communications)
intended to be sent or communicated to any Relevant Authority in relation to
obtaining any Clearances to the other party and its legal advisers at such time
as will allow the receiving party a reasonable opportunity to provide
comments on such filings, submissions, correspondence and communications
before they are submitted, sent or made and Offeror and Exova shall each
provide the other with copies of all such filings, submissions, material
correspondence and material communications in the form finally submitted or
sent (including, in the case of non-written communications, reasonably
detailed summaries of material non-written communications);
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(d)
Offeror and Exova shall each have regard in good faith to comments made in
a timely manner by the other on draft copies of filings, submissions, material
correspondence and material communications provided pursuant to clause
3.7(c);
(e)
Offeror and Exova shall each notify the other, and provide the other with
copies (including, in the case of non-written communications, reasonably
detailed summaries of material non-written communications), in a timely
manner of any material correspondence or material communication from any
Relevant Authority in relation to obtaining any Clearance;
(f)
Offeror and Exova shall each keep the other reasonably informed as to the
progress of any notification submitted pursuant to clause 3.7(a) and shall
reasonably consider requests by the other party or its advisers: (i) to attend all
meetings or material calls with any Relevant Authority or other persons or
bodies (unless prohibited by the Relevant Authority, Law or other person or
body) relating to obtaining any Clearance; and (ii) to make reasonable oral
submissions at such meetings or calls (provided that such oral submissions
have been discussed in advance); and
(g)
where reasonably requested by Offeror or Exova, and insofar as permitted by
the Relevant Authority, the other party shall make available appropriate
representatives for meetings and calls with any Relevant Authority in
connection with the obtaining of any Clearances.
3.8
Offeror and Exova each undertake to keep each other informed as soon as is
reasonably practicable of: (a) developments which are material or reasonably likely to
be material to the obtaining of a Clearance; and (b) the satisfaction of the Regulatory
Conditions.
3.9
Offeror and Exova each undertakes not to withdraw a filing, submission or
notification made to any Relevant Authority pursuant to clause 3.7(a) without the
prior written consent of the other party, such consent not to be unreasonably withheld
or delayed.
3.10
If a provision of this Agreement obliges a party to disclose any information to another
party:
(a)
which the disclosing party reasonably considers to be competitively sensitive;
(b)
which the disclosing party is prohibited from disclosing by Law or the terms
of an existing contract; or
(c)
where such disclosure would result in the loss of privilege that subsists in
relation to such information (including legal professional privilege),
the disclosing party shall disclose the relevant information to the other party: (i) as the
disclosing party and the other party may agree, for example through the use of a clean
team arrangement, or similar; or (ii) where disclosure in a manner contemplated by
clause 3.7 would reasonably be expected to have a material adverse effect on the
disclosing party’s legitimate business interest, directly to a Relevant Authority (and in
such circumstances, the disclosing party shall provide to the other party a nonconfidential version of such information and provide to the other party's competition
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advisers on an outside counsel basis the full text of such information as provided to
the Relevant Authority).
3.11
To the extent that Exova provides Offeror with any information, assistance and/or
access to Exova’s senior management for the purposes of preparing for and
monitoring the integration of the businesses of the Offeror Group and the Exova
Group after the Effective Date (which Exova is under no obligation to provide), any
competitively sensitive information shall be provided on an outside counsel basis only
(or as otherwise agreed in writing between Offeror and Exova, for example through
the use of a clean team arrangement, or similar).
3.12
Offeror undertakes to Exova that until the Regulatory Conditions are satisfied it shall
not, and will procure that no other member of the Offeror Group shall, enter into an
agreement for, or consummate, any acquisition or other transaction which would, or
would be reasonably likely to, have the effect of preventing or materially delaying
satisfaction of the Regulatory Conditions.
3.13
Notwithstanding any other provision of this Agreement to the contrary, nothing
contained in this Agreement shall require a party or any of its concert parties to take,
or cause to be taken, any action with respect to the divestiture of any assets, properties
or businesses of the Exova Group, or any combination thereof, that is not conditional
on completion of the Acquisition, except as otherwise agreed by Offeror and Exova.
4.
Scheme Document
4.1
Subject to clause 3.10, Offeror agrees:
(a)
promptly to provide Exova all such information about itself, its directors and
the Offeror Group as may reasonably be requested and which is required by
Exova (having regard to the Code and other Law) for inclusion in the Scheme
Document (including any information required under the Code or other Law);
(b)
promptly to provide Exova with all such other assistance and access as may
reasonably be required in connection with the preparation of the Scheme
Document and any other document required under the Code or by other Law
to be published in connection with the Scheme, including access to, and
ensuring the provision of reasonable assistance by, Offeror’s relevant
professional advisers; and
(c)
to procure that the Offeror Directors accept responsibility, in the terms
required by the Code, for all the information in the Scheme Document and
any other document required under the Code or by other Law to be published
in connection with the Scheme relating to themselves (and members of their
immediate families, related trusts and persons connected with them), the
Offeror Group, the financing of the Acquisition, information on Offeror’s
future plans for the Exova Group, its management and employees, any
statements of opinion, belief or expectation of the Offeror Directors in
relation to the Acquisition or the enlarged group of Offeror following the
Effective Date and any other information in the Scheme Document for which
an offeror is required to accept responsibility under the Code.
5.
Implementation of the Acquisition
5.1
Where the Acquisition is being implemented by way of the Scheme:
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(a)
Offeror undertakes that, by no later than 11.59p.m. on the Business Day
immediately preceding the Court Hearing, it shall deliver a notice in writing
to Exova either:
(i)
confirming the satisfaction or waiver of all Conditions (other than the
Scheme Condition); or
(ii)
confirming its intention to invoke a Condition (if permitted by the
Panel) and providing reasonable details of the event which has
occurred, or circumstances which have arisen, which Offeror
reasonably considers entitle it to invoke the Condition and why
Offeror considers such event or circumstance to be sufficiently
material for the Panel to permit it to invoke such Condition;
(b)
where Offeror confirms the satisfaction or waiver of all Conditions (other
than the Scheme Condition) in accordance with clause 5.1(a)(i), Offeror
agrees that Exova shall be permitted to take the necessary steps to procure
that the Court Hearing is duly held as soon as reasonably practicable
thereafter (having regard to the proposed timetable agreed between Offeror
and Exova and included in the Scheme Document or in any subsequent
agreed announcement regarding the implementation of the Acquisition); and
(c)
Offeror shall instruct counsel to appear on its behalf at the Court Hearing and
undertake to the Court to be bound by the terms of the Scheme in so far as it
relates to Offeror.
5.2
If the Offeror Board becomes aware of any fact, matter or circumstance that the
Offeror Board reasonably considers would entitle it to invoke (and the Panel would
permit it to so invoke) any of the Conditions, Offeror shall (subject to Law) inform
Exova providing reasonable details as soon as is reasonably practicable.
6.
Switching to a Takeover Offer
6.1
The parties currently intend that the Acquisition will be implemented by way of
Scheme. However, Offeror shall be entitled, with the consent of the Panel, to
implement the Acquisition by way of the Takeover Offer rather than the Scheme
(such election being a Switch).
6.2
In the event of any Switch, unless otherwise agreed with Exova or required by the
Panel:
(a)
the Acceptance Condition shall be set at not more than seventy five (75) per
cent. of the issued share capital of Exova, or, where any of the circumstances
set out in Note 2 of Section 8 of Appendix 7 of the Code applies, ninety (90)
per cent. of the Exova Shares to which the Takeover Offer relates (or such
lesser percentage, being more than fifty (50) per cent of the Exova Shares to
which the Takeover Offer relates) as Offeror may decide with, to the extent
necessary, the consent of the Panel;
(b)
Offeror shall not take any action which would cause the Takeover Offer not
to proceed, to lapse or to be withdrawn, in each case for non-fulfilment of the
Acceptance Condition, prior to the 60th day after publication of the Offer
Document and Offeror shall ensure that the Takeover Offer remains open for
acceptances until such time;
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6.3
7.
(c)
Offeror shall ensure that the only conditions to the Takeover Offer shall be
the Conditions; and
(d)
Offeror shall keep Exova informed, on a confidential basis on the next
Business Day following receipt of a written request from Exova, of the
number of Exova Shareholders that have validly returned their acceptance or
withdrawal forms or incorrectly completed their acceptance or withdrawal
forms, the identity of such shareholders and the number of Exova Shares to
which such forms relate.
In the event of any Switch:
(a)
the parties agree that all provisions of this Agreement other than the
provisions of clause 4, shall continue to apply save as set out in this clause
6.3; and
(b)
the parties agree that all provisions of this Agreement relating to the Scheme
and its implementation shall apply to the Takeover Offer or its
implementation mutatis mutandis.
Final Dividend
Each of the parties agrees that the Exova Shareholders will be entitled to receive the
Final Dividend (to the extent declared by the Exova Shareholders) on the terms set
out in the Announcement and that the declaration, payment or receipt of the Final
Dividend shall not affect or reduce the consideration in respect of the Acquisition.
8.
Exova Share Schemes
The parties agree that the provisions of Schedule 2 (Exova Share Schemes) with
respect to certain matters relating to employees and the Exova Share Schemes shall be
implemented in accordance with that Schedule.
9.
Directors’ and officers’ insurance
9.1
If and to the extent such obligations are permitted by Law, for six years after the
Effective Date, Offeror shall (so far as it is able) procure that the members of the
Exova Group honour and fulfil their respective obligations (if any) existing as at the
date of this Agreement to indemnify their respective directors and officers and to
advance expenses, in each case with respect to matters existing or occurring at or
prior to the Effective Date.
9.2
Offeror acknowledges that Exova may purchase directors’ and officers’ liability
insurance cover for both current and former directors and officers of the Exova
Group, including directors and officers who retire or whose employment is terminated
as a result of the Acquisition, for acts and omissions up to and including the Effective
Date, in the form of runoff cover for a period of six years following the Effective
Date. Such insurance cover shall be with reputable insurers and provide cover, in
terms of amount and breadth, substantially equivalent to that provided under the
Exova Group’s directors’ and officers’ liability insurance as at the date of this
Agreement.
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10.
Break Payment
10.1
Offeror undertakes to pay to Exova the sum of £6.203 million (the Break Payment)
by way of compensation for any loss or damage suffered by Exova if the
Announcement is released in accordance with clause 2.1 and after such
Announcement any of the following events (each a Break Payment Event) occurs:
(a)
(b)
10.2
on or prior to the Longstop Date:
(i)
Offeror invokes (and is permitted by the Panel to invoke) any
Regulatory Condition so as to cause the Acquisition not to proceed,
lapse or be withdrawn; or
(ii)
a Rule 12 Event takes place; or
any Regulatory Condition has not been satisfied or waived by Offeror by
11.59 p.m. on the date which is 14 days prior to the Longstop Date.
No Break Payment shall be payable if:
(a)
(b)
at the time the relevant Break Payment Event occurs, this Agreement has
already been terminated pursuant to clause 12, unless:
(i)
this Agreement has terminated pursuant to clause 12.1(c) as a result
of a Regulatory Condition not having been satisfied or waived or
becoming incapable of satisfaction or waiver; or
(ii)
this Agreement has terminated pursuant to clause 12.1(g) and the
Scheme (or the Takeover Offer as the case may be) has:
(A)
lapsed as a result of a Rule 12 Event; or
(B)
been withdrawn or lapsed as a result of a Regulatory
Condition being: (A) invoked by Offeror; (B) becoming
incapable of satisfaction by the Longstop Date and Offeror
stating that it will not be waived; or (C) not being capable of
being waived and becoming incapable of satisfaction by the
Longstop Date; or
the Break Payment Event was caused by Exova's failure to comply with any
of its obligations under clause 3.
10.3
Offeror shall pay the Break Payment by no later than ten (10) Business Days after the
date of the Break Payment Event which causes it to become payable pursuant to
clause 10.1.
10.4
All sums payable under this clause 10 shall be paid in the form of an electronic funds
transfer for same day value to such bank account as may be notified by Exova in
writing to Offeror and shall be paid in full free from any deduction or withholding
whatsoever (save only as may be required by Law) and without regard to any lien,
right of set-off, counterclaim or otherwise.
10.5
The parties anticipate, and shall use all reasonable endeavours to secure, that the
Break Payment is not and will not be treated as consideration for a taxable supply for
VAT purposes. If, however, the Break Payment is determined by any Tax Authority
to be in whole or part consideration for a taxable supply then:
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(a)
if and to the extent that such VAT is not recoverable by the Offeror or
Guarantor (as applicable) by repayment or credit, no additional amount shall
be paid in respect of VAT and the Break Payment shall be VAT inclusive;
and/or
(b)
if and to the extent that such VAT is recoverable and actually recovered (the
Offeror or Guarantor (as the case may be) using all reasonable endeavours to
so recover) by the Offeror or Guarantor (as applicable) by repayment or
credit, the amount of the Break Payment shall be increased to take account of
such recoverable VAT, such that the total amount of the Break Payment paid
to Exova (including the amount in respect of VAT), less the amount of such
repayment or credit, is equal to the amount that the Break Payment would
have been in the absence of such VAT.
10.6
Such adjusting payment as may be required by the Offeror or Guarantor (as
applicable) to give effect to clause 10.5 above shall be made five Business Days after
the date on which the determination by the relevant Tax Authority has been
communicated by Exova to the Offeror or Guarantor (as applicable) (together with
such evidence of it as is reasonable in the circumstances to provide, and together with
the provision by Exova of a valid VAT invoice) or, if later, five Business Days after
the VAT is recovered by the Offeror or Guarantor (as applicable).
10.7
In clauses 10.5 and 10.6, references to the Offeror, Guarantor and Exova include,
where applicable, references to the representative member of any group of which such
entity is a member for VAT purposes.
10.8
In the event that the Break Payment becomes payable and is paid in accordance with
this clause 10 and this Agreement terminates, then, except with respect to fraud,
Exova’s right to receive and retain the Break Payment (plus any additional amounts
under clause 10.5) shall be the sole and exclusive remedy of Exova against Offeror
and the Guarantor for any and all losses and damages suffered in connection with this
Agreement and the transactions contemplated by this Agreement. In no event shall
Offeror or the Guarantor be required to pay the Break Payment more than once or pay
between them more than one Break Payment.
11.
Guarantee
11.1
Guarantor irrevocably and unconditionally guarantees to Exova the due and punctual
performance and observance by Offeror of all its obligations under this Agreement
(the Guarantee).
11.2
The Guarantee is to be a continuing security which shall remain in full force and
effect until the obligations of Offeror under this Agreement have been fulfilled or
shall have expired in accordance with the terms of this Agreement and the Guarantee
is to be, in addition, and without prejudice to, and shall not merge with, any other
right, remedy, guarantee or security which Exova may now or hereafter hold in
respect of all or any of the obligations of Offeror under this Agreement.
11.3
The liability of Guarantor under the Guarantee shall not be affected, impaired or
discharged by reason of any act, omission, matter or thing which, but for this
provision, might operate to release or otherwise exonerate Offeror from its obligations
including, without limitation:
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(a)
any amendment, variation or modification to, or replacement of this
Agreement;
(b)
the taking, variation, compromise, renewal, release, refusal or neglect to
perfect or enforce any rights, remedies or securities against Offeror or any
other person;
(c)
any time or indulgence or waiver given to, or composition made with, Offeror
or any other person; or
(d)
Offeror becoming insolvent, going into receivership or liquidation or having
an administrator appointed.
11.4
The Guarantee shall constitute primary obligations of Guarantor and Exova shall not
be obliged to make any demand on Offeror or any other person before enforcing its
rights against Guarantor under the Guarantee.
11.5
If at any time any one or more of the provisions of the Guarantee is or becomes
invalid, illegal or unenforceable in any respect under any Law, the validity, legality or
enforceability of the remaining provisions hereof shall not be in any way affected if
impaired thereby.
12.
Termination
12.1
Subject to clauses 12.2 and 12.3, this Agreement shall terminate and all obligations of
the parties under this Agreement shall cease, as follows:
(a)
if agreed in writing between the parties;
(b)
upon service of written notice by Offeror to Exova, if one or more of the
following occurs:
(c)
(i)
the Scheme Document (or Offer Document, as the case may be) and
(if different) the document convening the Exova General Meeting
does not include the Exova Board Recommendation, or Exova makes
an announcement prior to the publication of such document(s) that:
(A) the Exova Directors no longer intend to make such
recommendation or intend adversely to modify or qualify such
recommendation; (B) it will not convene the Court Meeting or the
Exova General Meeting; or (C) it intends not to post the Scheme
Document or (if different) the document convening the Exova
General Meeting; or
(ii)
the Exova Directors withdraw, adversely modify or adversely qualify
the Exova Board Recommendation;
upon service of written notice by Offeror to Exova prior to the Longstop Date
stating that either:
(i)
any Condition which has not been waived is (or has become)
incapable of satisfaction by the Longstop Date and, notwithstanding
that Offeror has the right to waive such Condition, Offeror will not
do so; or
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(ii)
any Condition which is incapable of waiver is (or has become)
incapable of satisfaction by the Longstop Date,
in each case in circumstances where the invocation of the relevant Condition
(or confirmation that the Condition is incapable of satisfaction, as
appropriate) is permitted by the Panel;
(d)
upon service of written notice by Offeror to Exova, if a Competing Proposal:
(i) is recommended by the Exova Board; or (ii) completes, becomes effective
or is declared or becomes unconditional in all respects;
(e)
upon service of written notice by either of Offeror or Exova to the other if: (i)
the Exova Resolutions are not passed at either or both the Court Meeting or
the Exova General Meeting;
(f)
if the Acquisition is, with the permission of the Panel, withdrawn or lapses in
accordance with its terms prior to the Longstop Date (other than where: (i)
such lapse or withdrawal is as a result of the exercise of Offeror’s right to
effect a Switch; or (ii) it is otherwise to be followed within ten (10) Business
Days by an announcement under Rule 2.7 of the Code made by Offeror or a
person acting in concert with Offeror to implement the Acquisition by a
different offer or scheme on substantially the same or improved terms); or
(g)
unless otherwise agreed by the parties in writing, if the Effective Date has not
occurred on or before the Longstop Date.
12.2
Termination of this Agreement shall be without prejudice to the rights of the parties
which have arisen prior to termination, including any claim in respect of a breach of
this Agreement.
12.3
The following provisions shall survive termination of this Agreement: clauses 15 to
21 (inclusive), 23 to 27 (inclusive), this clause 12 and all related provisions of clause
1 (Definitions and Interpretation).
13.
Takeover Code
13.1
Nothing in this Agreement shall in any way limit the parties’ obligations under the
Code, and any uncontested rulings of the Panel as to the application of the Code in
conflict with the terms of this Agreement shall take precedence over such terms of
this Agreement.
13.2
The parties agree that, if the Panel determines that any provision of this Agreement
that requires Exova to take or not to take any action, whether as a direct obligation or
as a condition to any other person’s obligation (however expressed), is not permitted
by Rule 21.2 of the Code, that provision shall have no effect and shall be disregarded.
13.3
Without prejudice to the representations and warranties given by the parties pursuant
to clause 14, nothing in this Agreement shall be taken to restrict the directors of any
member of the Offeror Group or the Exova Group from complying with Law, orders
of court or regulations, including the Code, the Listing Rules and the rules and
regulations of the Panel and the UK Listing Authority.
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14.
Representations and warranties
14.1
Each party represents and warrants to the other parties on the date of this Agreement
that:
(a)
it has the requisite power and authority to enter into and perform its
obligations under this Agreement;
(b)
this Agreement constitutes its binding obligations in accordance with its
terms; and
(c)
the execution and delivery of, and performance of its obligations under, this
Agreement will not:
(i)
result in any breach of any provision of its constitutional documents;
(ii)
result in a breach of, or constitute a default under, any instrument
which is material in the context of the Acquisition to which it is a
party or by which it is bound; or
(iii)
result in a breach of any order, judgment, or decree of any court or
governmental agency to which it is a party or by which it is bound.
14.2
Offeror represents and warrants to Exova that as at the date of this Agreement no
Offeror shareholder resolution is required to implement the Acquisition.
14.3
No party shall have any claim against any other parties pursuant to clause 14.1 or 14.2
for misrepresentation or breach of warranty after the Effective Date (without
prejudice to any liability for fraudulent misrepresentation or fraudulent misstatement).
15.
Costs
Except as otherwise provided in this Agreement, each party shall pay its own Costs
incurred in connection with negotiating, preparing and completing this Agreement or
otherwise in connection with the Acquisition.
16.
Entire agreement
16.1
Without prejudice to the terms of the Announcement or the Acquisition Document,
this Agreement and the Confidentiality Agreement together set out the entire
agreement between the parties relating to the Acquisition and supersede any previous
draft, agreement, arrangement or understanding, whether in writing or not, relating to
the Acquisition.
16.2
Except in the case of fraud or fraudulent misrepresentation, each party acknowledges
that in entering into this Agreement it is not relying upon any pre-contractual
statement that is not set out in this Agreement or the Confidentiality Agreement.
16.3
Except in the case of fraud or fraudulent misrepresentation, no party shall have any
right of action against any other party to this Agreement arising out of or in
connection with any pre-contractual statement except to the extent that it is repeated
in this Agreement or the Confidentiality Agreement.
16.4
For the purposes of this clause, pre-contractual statement means any draft,
agreement, undertaking, representation, warranty, promise, assurance or arrangement
of any nature whatsoever, whether or not in writing, relating to the subject matter of
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this Agreement or the Confidentiality Agreement made or given by any person at any
time prior to the entry into of this Agreement.
17.
Assignment
Unless the parties specifically agree in writing, no person shall assign, transfer,
charge or otherwise deal with all or any of its rights under this Agreement nor grant,
declare, create or dispose of any right or interest in it.
18.
Notices
18.1
Any notice to be given by one party to the other parties in connection with this
Agreement shall be delivered by hand, e-mail, registered post or courier using an
internationally recognised courier company.
18.2
A notice shall be effective upon receipt and shall be deemed to have been received (i)
at the time of delivery, if delivered by hand, registered post or courier or (ii) at the
time of transmission if delivered by e-mail. Where delivery occurs outside Working
Hours, notice shall be deemed to have been received at the start of Working Hours on
the next following Business Day.
18.3
The addresses and e-mail addresses of the parties for the purpose of clause 18.1 are:
Offeror
Address:
10 Lower Grosvenor Place
London SW1W 0EN
E-mail:
[email protected]
For the attention of:
Jo Wetz
With a copy (which shall not constitute notice) to:
Address:
Travers Smith LLP
10 Snow Hill
London EC1A 2AL
E-mail:
[email protected]
For the attention of:
Spencer Summerfield
Exova
Address:
6 Coronet Way Centenary Park
Eccles, Salford
Manchester, M50 1RE
E-mail:
[email protected]
For the attention of:
Neil MacLennan
With a copy (which shall not constitute notice) to:
Address:
Freshfields Bruckhaus Deringer LLP
65 Fleet Street
London EC4Y 1HS
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E-mail:
[email protected]
For the attention of:
Christopher Mort
18.4
Each party shall notify the other parties in writing of any change to its details in
clause 18.3 from time to time.
19.
Language
Each notice or other communication under or in connection with this Agreement shall
be in English.
20.
Waivers, rights and remedies
20.1
The rights and remedies provided for in this Agreement are cumulative and not
exclusive of any other rights or remedies, whether provided by Law or otherwise.
20.2
No failure to exercise, or delay in exercising, any right under this Agreement or
provided by Law shall affect that right or operate as a waiver of the right. The single
or partial exercise of any right under this Agreement or provided by Law shall not
preclude any further exercise of it.
20.3
Without prejudice to any other rights or remedies that the other parties may have,
each party acknowledges and agrees that damages may not be an adequate remedy for
any breach by it of this Agreement and that accordingly the other parties may be
entitled, without proof of special damages, to the remedies of injunction, specific
performance or other equitable relief for any threatened or actual breach of this
Agreement by any party and no proof of special damages shall be necessary for the
enforcement by any party of the rights under this Agreement.
21.
No partnership
No provision of this Agreement creates a partnership between the parties or makes a
party the agent of the other parties for any purpose. A party has no authority or power
to bind, to contract in the name of, or to create a liability for the other parties in any
way or for any purpose.
22.
Further assurances
Each party shall (and shall procure that members of its Group shall and shall use
reasonable endeavours to procure that any necessary third party shall) execute such
documents and do such acts and things as the requesting party may reasonably require
for the purpose of giving the full benefit of this Agreement to the requesting party.
23.
Counterparts
This Agreement may be executed in any number of counterparts, and by each party
on separate counterparts. Each counterpart is an original, but all counterparts shall
together constitute one and the same instrument. Delivery of a counterpart of this
Agreement by e-mail attachment or telecopy shall be an effective mode of delivery.
24.
Variations
24.1
No variation of this Agreement shall be valid unless it is in writing and duly executed
by or on behalf of all of the parties to it.
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24.2
If this Agreement is varied:
(a)
the variation shall not constitute a general waiver of any provisions of this
Agreement;
(b)
the variation shall not affect any rights, obligations or liabilities under this
Agreement that have already accrued up to the date of variation; and
(c)
the rights and obligations of the parties under this Agreement shall remain in
force, except as, and only to the extent that, they are varied.
25.
Invalidity
25.1
Each of the provisions of this Agreement is severable.
25.2
If and to the extent that any provision of this Agreement:
(a)
is held to be, or becomes, invalid or unenforceable under the Law of any
jurisdiction; but
(b)
would be valid, binding and enforceable if some part of the provision were
deleted or amended,
then the provision shall apply with the minimum modifications necessary to make it
valid, binding and enforceable and neither the validity or enforceability of the
remaining provisions of this Agreement, nor the validity or enforceability of that
provision under the Law of any other jurisdiction, shall in any way be affected or
impaired as a result of this clause 25.2.
26.
Third party enforcement rights
26.1
Each of the persons to whom clause 9.1, clause 9.2 and/or Schedule 2 applies may
under the Contracts (Rights of Third Parties) Act 1999 enforce the terms of clause
9.1, clause 9.2 and/or Schedule 2 (as applicable). This right is subject to: (i) the rights
of the parties to rescind or vary this Agreement without the consent of any other
person and; (ii) the other terms and conditions of this Agreement.
26.2
Except as set out in clause 26.1, a person who is not a party to this Agreement shall
have no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any of
its terms.
27.
Governing law and jurisdiction
27.1
This Agreement and any non-contractual obligations arising out of or in connection
with this Agreement shall be governed by, and interpreted in accordance with,
English law.
27.2
The English courts shall have exclusive jurisdiction in relation to all disputes
(including claims for set-off and counterclaims) arising out of or in connection with
this Agreement, including disputes arising out of or in connection with: (i) the
creation, validity, effect, interpretation, performance or non-performance of, or the
legal relationships established by, this Agreement; and (ii) any non-contractual
obligations arising out of or in connection with this Agreement. For these purposes
each party irrevocably submits to the jurisdiction of the English courts and waives
any objection to the exercise of such jurisdiction.
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Schedule 1
Form of Announcement
-24-
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO
OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION
OF THE RELEVANT LAWS OF SUCH JURISDICTION
19 April 2017
RECOMMENDED CASH ACQUISITION
of
EXOVA GROUP PLC
by
ELEMENT MATERIALS TECHNOLOGY GROUP LIMITED
to be effected
by means of a Scheme of Arrangement
under Part 26 of the Companies Act 2006
Summary
•
The boards of directors of Exova Group plc (“Exova”) and Element Materials Technology Group
Limited (“Element”) are pleased to announce that they have reached agreement on the terms of a
recommended cash acquisition of Exova by Element pursuant to which a wholly-owned indirect
subsidiary of Element, Greenrock Bidco Limited (“Element Bidco”), will acquire the entire issued
and to be issued ordinary share capital of Exova. The Acquisition will be implemented by way of a
scheme of arrangement.
•
Scheme Shareholders will be paid a price of 240 pence per share in cash by Element Bidco. In
addition, Scheme Shareholders who are on the register of members of Exova as at the close of
business on 26 May 2017 will be entitled, conditional on approval by Exova Shareholders at the
annual general meeting of Exova, to receive and retain a final dividend for the period to 31
December 2016 of 2.35 pence per Exova Share, which is expected to be paid on 9 June 2017.
Therefore, with the intended dividend payment, Scheme Shareholders at the Scheme Record Time
will be entitled to receive:
242.35 pence in cash per Exova Share (the "Cash Value")
The Cash Value of 242.35 pence in cash represents a premium of approximately:
•
26.0 per cent. to the volume weighted average Closing Price of approximately 192.37
pence per Exova Share for the twelve month period ended on 24 March 2017 (being the
last Dealing Day prior to the start of the Offer Period);
•
18.9 per cent. to the volume weighted average Closing Price of approximately 203.87
pence per Exova Share for the six month period ended on 24 March 2017 (being the last
Dealing Day prior to the start of the Offer Period); and
•
10.7 per cent. to the Closing Price per Exova Share of 218.88 pence on 24 March 2017
(being the last Dealing Day prior to the start of the Offer Period) .
•
The Cash Value implies an enterprise value multiple of approximately 16.0 times Exova’s Adjusted
EBITA and 12.5 times Exova’s Adjusted EBITDA for the 12 months ended 31 December 2016.
•
The Cash Value values the entire issued and to be issued ordinary share capital of Exova at
approximately £620.3 million on the basis of a fully diluted share capital of 256,009,630 Exova
Shares, calculated on the basis described in paragraph 5 of Appendix II.
•
Element Bidco confirms that the offer price of 240 pence per share is final and will not be
increased, except that Element Bidco reserves the right to increase the amount of the offer price if
there is an announcement on or after the date of this announcement of an offer or a possible offer
for Exova by a third party offeror or potential offeror.
LON44685690/5 162843-0006
•
The Exova Directors, who have been so advised by Goldman Sachs and Investec as to the financial
terms of the Acquisition, consider the terms of the Acquisition to be fair and reasonable. In
providing advice to the Exova Directors, Goldman Sachs and Investec have taken into account the
commercial assessments of the Exova Directors. Investec is providing independent financial
advice to the Exova Directors for the purposes of Rule 3 of the Code.
•
Element Bidco has received irrevocable undertakings to vote in favour of the Scheme at the Court
Meeting and in favour of the General Meeting Resolutions in respect of a total of 138,938,011
Exova Shares, representing approximately 55.47 per cent. of the ordinary share capital of Exova in
issue on 18 April 2017 (being the latest practicable date prior to this announcement).
•
Element is a leading global materials and product qualification testing provider with a strong focus
on the aerospace, oil and gas and automotive end markets. Element is majority owned by BEV, the
latest fund of Bridgepoint and was acquired by BEV in March 2016. Element Bidco is a wholly
owned indirect subsidiary of Element, established for the purpose of making the Acquisition.
•
The cash consideration payable by Element Bidco under the Acquisition will be funded, in part,
through equity commitments to subscribe for securities in Element and its indirect wholly owned
subsidiary Element Midco, which will be underwritten by BEV. The remainder of the cash
consideration payable under the Acquisition will be funded from the proceeds of a debt finance
facility entered into by Element Bidco and other members of the Element Group which has been
arranged and fully underwritten by HSBC, HSBC Securities (USA) Inc., Bank of America, N.A.,
Bank of America Merrill Lynch International Limited, ING Bank N.V. and Barclays Bank plc.
•
It is intended that the Acquisition will be implemented by means of a Court-sanctioned scheme of
arrangement under Part 26 of the 2006 Act, further details of which are contained in the full text of
this announcement. However, Element Bidco reserves the right, subject to the consent of the Panel
and the terms of the Cooperation Agreement, to effect the Acquisition by way of a Takeover Offer.
•
The Acquisition will be subject to the satisfaction or waiver of the Conditions set out in Appendix I
to this announcement and in the Scheme Document. The Scheme Document, containing further
information about the Acquisition and notices of the Court Meeting and General Meeting, together
with the Forms of Proxy, will be posted to Exova Shareholders within 28 days of the date of this
announcement and, subject to satisfaction or waiver of the Conditions, it is expected that the
Scheme will be effective during the third quarter of 2017.
Commenting on the Acquisition, Charles Noall, CEO of Element, said:
“We are very excited about the potential of combining these two great businesses to better serve our
customers and support their growth. This transaction will create a truly global product and materials
testing business, increasing Element’s operational reach across key markets in U.S., Europe and Asia. The
combined UK headquartered group will benefit from deep pools of technical talent, very significant testing
capacity and a strong network of facilities to support our customers’ global supply chains. We believe that
this acquisition will facilitate greater flexibility to invest further in capacity and technology, driving further
opportunities across the Combined Group.”
Commenting on the Acquisition, Allister Langlands, Chairman of Exova, said:
“This represents a good outcome for shareholders and the combination of Exova and Element creates a
global leader in the testing market. Since the IPO, the Exova management team have made significant
progress driving organic growth across many of our businesses and developing an attractive acquisition
strategy. The offer represents 16 times Exova’s 2016 Adjusted EBITA and a premium of 26 per cent. to our
average share price over the last 12 months. It follows a full and thorough process with interested parties
and provides all Exova shareholders with liquidity and the ability to realise the value of the group’s
opportunities with certainty.”
This summary should be read in conjunction with, and is subject to, the accompanying full text of this
announcement which sets out further details of the Acquisition and which forms an integral part of this
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announcement (including Appendices). The Acquisition will be subject to Appendix I to this
announcement, which contains the Conditions to, and certain further terms of, the Acquisition and to
the full terms and conditions which will be set out in the Scheme Document. Appendix II contains
further details of the sources of information and bases of calculations set out in this announcement.
Appendix III contains further details of the irrevocable undertakings received by Element Bidco.
Appendix IV contains a confirmation by the directors of Exova in the terms required by Rule 28.1(c)(i)
of the Code for a statement made by Exova as part of its results announcement for the year ended 31
December 2016 which is confirmed in paragraph 10 of this announcement. Appendix V contains
definitions of certain expressions used in this summary and in this announcement.
Enquiries:
Element Materials Technology Group Limited
Charles Noall
Jo Wetz
Tel: +44 (0) 20 3540 1825
Tel: +44 (0) 20 3540 1820
Bridgepoint Advisers Limited
James Murray
Tel: +44 (0) 20 7034 3555
BofA Merrill Lynch (joint financial adviser to Bridgepoint,
Element and Element Bidco)
Tel: +44 (0) 20 7628 1000
Eamon Brabazon
Justin Anstee
Geoff Iles
Adam Tinsley
HSBC (joint financial adviser to Bridgepoint, Element and
Element Bidco and corporate broker to the Acquisition)
Tel: +44 (0) 20 7991 8888
Omar Faruqui
Andrew Owens
Simon Alexander (corporate broking)
Greg Hely Hutchinson
Finsbury (public relations adviser to Bridgepoint, Element and
Element Bidco)
Tel: +44 (0) 20 7251 3801
Jenny Davy
Charles O'Brien
Exova Group plc
Andrew Pickup, Corporate Affairs Director
Tel: +44 (0) 79 2024 3393
Goldman Sachs International (financial adviser and corporate
broker to Exova)
Tel: +44 (0) 20 7774 1000
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Anthony Gutman
Nick Harper
Jose Barreto
Alex Garner
Duncan Stewart (corporate broking)
Investec Bank plc (financial adviser and corporate broker to
Exova)
Tel: +44 (0) 20 7597 5970
Keith Anderson
Chris Sim
Jonathan Wynn
Powerscourt Group (public relations adviser to Exova)
Peter Ogden
Andy Jones
Tel: +44 (0) 20 7549 0997
Tel: +44 (0) 20 7549 0747
Merrill Lynch International (“BofA Merrill Lynch”), which is authorised by the Prudential Regulation
Authority and regulated by the FCA and the Prudential Regulation Authority in the United Kingdom, is
acting for Bridgepoint, Element and Element Bidco and no one else in connection with the Acquisition and
will not be responsible to anyone other than Bridgepoint, Element and Element Bidco for providing the
protections afforded to clients of BofA Merrill Lynch, or for giving advice in connection with the
Acquisition or any matter referred to herein.
HSBC Bank plc (“HSBC”), which is authorised by the Prudential Regulation Authority and regulated by
the FCA and the Prudential Regulation Authority in the United Kingdom, is acting for Bridgepoint,
Element and Element Bidco and no one else in connection with the Acquisition and will not be responsible
to anyone other than Bridgepoint, Element and Element Bidco for providing the protections afforded to
clients of HSBC, or for providing advice in connection with the Acquisition or any matter described in this
announcement or any transaction or arrangement referred to herein.
Goldman Sachs International, which is authorised by the Prudential Regulation Authority and regulated
by the FCA and the Prudential Regulation Authority in the United Kingdom, is acting exclusively for
Exova and no one else in connection with the Acquisition and will not be responsible to anyone other than
Exova for providing the protections afforded to clients of Goldman Sachs International or for providing
advice in connection with the Acquisition or in relation to matters described in this announcement or any
transaction or arrangement referred to herein.
Investec Bank plc, which is authorised by the Prudential Regulation Authority and regulated by the FCA
and the Prudential Regulation Authority in the United Kingdom, is acting exclusively for Exova and no one
else in connection with the Acquisition and will not be responsible to anyone other than Exova for
providing the protections afforded to clients of Investec Bank plc or for providing advice in connection
with the Acquisition or in relation to matters described in this announcement or any transaction or
arrangement referred to herein.
This announcement is for information purposes only and is not intended to and does not constitute or form
part of an offer to sell or otherwise dispose of or invitation to purchase or otherwise acquire any securities
or the solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issue or transfer
of the securities referred to in this announcement in any jurisdiction in contravention of applicable law.
The Acquisition will be made solely through the Scheme Document and the accompanying Forms of Proxy,
which will together contain the full terms and conditions of the Acquisition, including details of how to
vote in respect of the Acquisition. Any vote in respect of the Scheme or other response in relation to the
Acquisition should be made only on the basis of the information contained in the Scheme Document.
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Overseas Shareholders and Notice to US Investors
The release, publication or distribution of this announcement in certain jurisdictions may be restricted by
law. Persons who are not resident in the United Kingdom or who are subject to other jurisdictions should
inform themselves of, and observe, any applicable requirements. In particular, the ability of persons who
are not resident in the United Kingdom to vote their Exova Shares with respect to the Scheme at the Court
Meeting, or to appoint another person as proxy to vote at the Court Meeting on their behalf, may be
affected by the laws of the relevant jurisdictions in which they are located. Any failure to comply with the
applicable restrictions may constitute a violation of the securities laws of any such jurisdiction. To the
fullest extent permitted by applicable law, the companies and persons involved in the Acquisition disclaim
any responsibility or liability for the violation of such restrictions by any person. This announcement has
been prepared for the purposes of complying with English law and the Code and the information disclosed
may not be the same as that which would have been disclosed if this announcement had been prepared in
accordance with the laws of jurisdictions outside of England.
The Acquisition relates to the shares of an English company and is proposed to be effected by means of a
scheme of arrangement under the laws of England and Wales. Neither the proxy solicitation rules nor
(unless implemented by means of a Takeover Offer) the tender offer rules under the US Securities
Exchange Act of 1934, as amended, will apply to the Acquisition. Moreover, the Acquisition is subject to
the disclosure requirements and practices applicable in the United Kingdom and under the City Code to
schemes of arrangement, which differ from the disclosure requirements of the US proxy solicitation rules
and tender offer rules. Financial information included in this announcement has been prepared, unless
specifically stated otherwise, in accordance with accounting standards applicable in the UK and thus may
not be comparable to the financial information of US companies or companies whose financial statements
are prepared in accordance with generally accepted accounting principles in the US. If Element Bidco
exercises its right to implement the Acquisition of the Exova Shares by way of a Takeover Offer, the
Takeover Offer will be made in compliance with applicable US securities laws and regulations.
It may be difficult for US holders of Exova Shares to enforce their rights and claims arising out of the US
federal securities laws, since Element Bidco and Exova are located in countries other than the United
States, and some or all of their officers and directors may be residents of countries other than the United
States. US holders of Exova Shares may not be able to sue a non-US company or its officers or directors in
a non-US court for violations of the US securities laws. Further, it may be difficult to compel a non-US
company and its affiliates to subject themselves to a US court’s judgement.
Unless otherwise determined by Element Bidco or required by the Code, and permitted by applicable law
and regulation, the Acquisition will not be made available, directly or indirectly, in, into or from a
Restricted Jurisdiction where to do so would violate the laws in that jurisdiction and no person may vote in
favour of the Scheme by any such use, means, instrumentality or form within a Restricted Jurisdiction or
any other jurisdiction if to do so would constitute a violation of the laws of that jurisdiction. Accordingly,
copies of this announcement and all documents relating to the Acquisition are not being, and must not be,
directly or indirectly, mailed or otherwise forwarded, distributed or sent in, into or from a Restricted
Jurisdiction where to do so would violate the laws in that jurisdiction, and persons receiving this
announcement and all documents relating to the Acquisition (including custodians, nominees and trustees)
must not mail or otherwise distribute or send them in, into or from such jurisdictions where to do so would
violate the laws in that jurisdiction.
The availability of the Acquisition to Exova Shareholders who are not resident in the United Kingdom may
be affected by the laws of the relevant jurisdictions in which they are resident. Persons who are not
resident in the United Kingdom should inform themselves of, and observe, any applicable requirements.
Further details in relation to Overseas Shareholders will be contained in the Scheme Document.
Forward Looking Statements
This announcement, oral statements made regarding the Acquisition and other information published by
Element Bidco and Exova contains statements that are or may be forward looking statements. Forwardlooking statements are prospective in nature and are not based on historical facts, but rather on current
expectations and projections of the management of Element Bidco and Exova about future events, and are
therefore subject to risks and uncertainties which could cause actual results to differ materially from the
future results expressed or implied by the forward-looking statements. The forward-looking statements
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LON44685690/5 162843-0006
contained in this announcement include statements relating to the expected effects of the Acquisition on
Element Bidco and Exova, the expected timing and scope of the Acquisition and other statements other
than historical facts. All statements other than statements of historical facts included in this announcement
may be forward looking statements. Without limitation, any statements preceded or followed by or that
include the words “targets”, “plans”, “believes”, “expects”, “aims”, “intends”, “will”, “should”,
“could”, “would”, “may”, “anticipates”, “estimates”, “synergy”, “cost-saving”, “projects”, “goal”,
“strategy”, “budget”, “forecast” or “might” or, words or terms of similar substance or the negative
thereof, are forward looking statements. Forward looking statements include statements relating to the
following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance,
indebtedness, financial condition, dividend policy, losses and future prospects; (ii) business and
management strategies and the expansion and growth of Element Bidco’s or Exova’s operations and
potential synergies resulting from the Acquisition; and (iii) the effects of government regulation on Element
Bidco’s or Exova’s business.
These forward looking statements are not guarantees of future financial performance. Except as expressly
provided in this announcement, they have not been reviewed by the auditors of Element Bidco or Exova or
their respective financial advisers. Such forward looking statements involve known and unknown risks and
uncertainties that could significantly affect expected results and are based on certain key assumptions.
Many factors could cause actual results to differ materially from those projected or implied in any forward
looking statements. These factors include the satisfaction of the Conditions, as well as additional factors,
such as: fluctuations in the capital markets; fluctuations in interest and exchange rates; increased
regulation or regulatory scrutiny; the occurrence of unforeseen disasters or catastrophes; political or
economic instability in principal markets; adverse outcomes in litigation; and general, local and global
economic, political, business and market conditions. Other unknown or unpredictable factors could cause
actual results to differ materially from those in the forward-looking statements. Such forward-looking
statements should therefore be construed in the light of such factors. Neither Element Bidco nor Exova, nor
any of their respective associates or directors, officers or advisers, provides any representation, assurance
or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in
this announcement will actually occur. Due to such uncertainties and risks, readers are cautioned not to
place undue reliance on such forward looking statements. All subsequent oral or written forward looking
statements attributable to Element Bidco or Exova or any of their respective members, directors, officers
or employees or any persons acting on their behalf are expressly qualified in their entirety by the
cautionary statement above. Element Bidco and Exova disclaim any obligation to update or revise any
forward looking or other statements contained herein other than in accordance with their legal and
regulatory obligations.
Profit Forecast
Paragraph 10 of this announcement contains a statement which is a profit forecast for the purposes of Rule
28 of the Code. Appendix IV contains a confirmation by the directors of Exova in the terms required by
Rule 28.1(c)(i) of the Code in relation to that statement.
Other than as described above, no statement in this announcement is intended as a profit forecast or
estimate for any period and no statement in this announcement should be interpreted to mean that earnings
or earnings per share for Exova, for the current or future financial years would necessarily match or
exceed the historical published earnings or earnings per share for Exova.
Dealing Disclosure Requirements
Under Rule 8.3(a) of the Code, any person who is interested in 1 per cent. or more of any class of relevant
securities of an offeree company or of any paper offeror (being any offeror other than an offeror in respect
of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening
Position Disclosure following the commencement of the offer period and, if later, following the
announcement in which any paper offeror is first identified. An Opening Position Disclosure must contain
details of the person’s interests and short positions in, and rights to subscribe for, any relevant securities of
each of (i) the offeree company and (ii) any paper offeror(s). An Opening Position Disclosure by a person
to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business
day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London
time) on the 10th business day following the announcement in which any paper offeror is first identified.
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Relevant persons who deal in the relevant securities of the offeree company or of a paper offeror prior to
the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.
Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1 per cent. or more of any
class of relevant securities of the offeree company or of any paper offeror must make a Dealing Disclosure
if the person deals in any relevant securities of the offeree company or of any paper offeror. A Dealing
Disclosure must contain details of the dealing concerned and of the person’s interests and short positions
in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper
offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing
Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time)
on the business day following the date of the relevant dealing.
If two or more persons act together pursuant to an agreement or understanding, whether formal or
informal, to acquire or control an interest in relevant securities of an offeree company or a paper offeror,
they will be deemed to be a single person for the purpose of Rule 8.3.
Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing
Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert
with any of them (see Rules 8.1, 8.2 and 8.4).
Details of the offeree and offeror companies in respect of whose relevant securities Opening Position
Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Panel’s
website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue,
when the offer period commenced and when any offeror was first identified. If you are in any doubt as to
whether you are required to make an Opening Position Disclosure or a Dealing Disclosure, you should
contact the Panel’s Market Surveillance Unit on +44 (0) 20 7638 0129.
Information Relating to Exova Shareholders
Please be aware that addresses, electronic addresses and certain information provided by Exova
Shareholders, persons with information rights and other relevant persons for the receipt of
communications from Exova may be provided to Element Bidco during the offer period as requested under
Section 4 of Appendix 4 of the Code to comply with Rule 2.11(c).
Publication on Website
A copy of this announcement will be available free of charge (subject to any applicable restrictions with
respect to persons resident in Restricted Jurisdictions) on Exova’s and Element’s websites (www.exova.com
and www.element.com respectively) by no later than 12 noon (London time) on 20 April 2017.
The contents of the websites referred to in this announcement are not incorporated into and do not form
part of this announcement.
You may request a hard copy of this announcement by contacting Jo Wetz on +44 (0) 20 3540 1820. You
may also request that all future documents, announcements and information to be sent to you in relation to
the Acquisition should be in hard copy form.
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THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO
OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION
OF THE RELEVANT LAWS OF SUCH JURISDICTION
19 April 2017
RECOMMENDED CASH ACQUISITION
of
EXOVA GROUP PLC
by
ELEMENT MATERIALS TECHNOLOGY GROUP LIMITED
to be effected
by means of a Scheme of Arrangement
under Part 26 of the Companies Act 2006
1
Introduction
The boards of directors of Exova and Element are pleased to announce that they have reached
agreement on the terms of a recommended cash acquisition of Exova by Element pursuant to
which a wholly-owned subsidiary of Element, Greenrock Bidco, will acquire the entire issued and
to be issued ordinary share capital of Exova. It is intended that the Acquisition be implemented by
means of a Court-sanctioned scheme of arrangement under Part 26 of the 2006 Act.
2
The Acquisition
Under the terms of the Acquisition, which will be subject to the Conditions and further terms set
out in Appendix I to this announcement and to be set out in the Scheme Document, Scheme
Shareholders will be paid a price of 240 pence per share in cash by Element Bidco. In addition,
Scheme Shareholders who are on the register of members of Exova as at the close of business on
26 May 2017 will still be entitled, conditional on approval by Exova Shareholders at the annual
general meeting of Exova, to receive and retain a final dividend for the period to 31 December
2016 of 2.35 pence per Exova Share, which is expected to be paid on 9 June 2017. Therefore, with
the intended dividend payment, Scheme Shareholders at the Scheme Record Time will be entitled
to receive:
242.35 pence in cash per Scheme Share
The Cash Value of 242.35 pence in cash represents a premium of approximately:
•
26.0 per cent. to the volume weighted average Closing Price of approximately 192.37
pence per Exova Share for the twelve month period ended on 24 March 2017 (being the
last Dealing Day prior to the start of the Offer Period);
•
18.9 per cent. to the volume weighted average Closing Price of approximately 203.87
pence per Exova Share for the six month period ended on 24 March 2017 (being the last
Dealing Day prior to the start of the Offer Period); and
•
10.7 per cent. to the Closing Price per Exova Share of 218.88 pence on 24 March 2017
(being the last Dealing Day prior to the start of the Offer Period).
The Cash Value implies an enterprise value multiple of approximately 16.0 times Exova’s Adjusted
EBITA and 12.5 times Exova’s Adjusted EBITDA for the 12 months ended 31 December 2016.
The Cash Value values the entire issued and to be issued ordinary share capital of Exova at
approximately £620.3 million on the basis of a fully diluted share capital of 256,009,630 Exova
Shares, assuming that all rights in respect of in-the-money options under the Exova Share Schemes
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LON44685690/5 162843-0006
are exercised on the basis explained in this announcement. This assumes that the shares under
option or award under the Exova Share Schemes will not be eligible to receive the final dividend
of 2.35 pence per Exova Share but will be taken into account for purposes of determining dividend
equivalent rights under the Exova Group plc Long Term Incentive Plan.
Element Bidco confirms that the offer price of 240 pence per share is final and will not be
increased, except that Element Bidco reserves the right to increase the amount of the offer price if
there is an announcement on or after the date of this announcement of an offer or a possible offer
for Exova by a third party offeror or potential offeror.
If, after the date of this announcement, any dividend and/or other distribution and/or other return of
capital, other than the final dividend for the period to 31 December 2016 of 2.35 pence per Exova
Share is announced, declared or paid in respect of Exova Shares, Element Bidco reserves the right
to reduce the offer consideration by an amount up to the amount of such dividend and/or
distribution and/or return of capital so announced, declared or paid.
3
Background to and reasons for the Acquisition
Bridgepoint acquired Element in March 2016, in conjunction with Element’s management team.
While it has a strong standalone critical mass and an attractive investment case, Element
management and Bridgepoint have always considered that it also offers a strong platform for
pursuing larger acquisitions in strategic testing sectors. Element believes that the Acquisition of
Exova will allow the Combined Group to:
4
•
enhance its presence in the aerospace, oil and gas, transport and industrials laboratory
based testing segments;
•
benefit from geographic and end market diversification, with Element’s sector exposure
broadened to include fire, health sciences and infrastructure, as well as calibration;
•
create a global platform of increased scale whose broader range of highly technical
capabilities will allow the Combined Group to better address the challenges which face
our customers; and
•
become the employer of choice for technical talent in the laboratory based testing market.
Recommendation
The Exova Directors, who have been so advised by Goldman Sachs and Investec as to the financial
terms of the Acquisition, consider the terms of the Acquisition to be fair and reasonable. In
providing advice to the Exova Directors, Goldman Sachs and Investec have taken into account the
commercial assessments of the Exova Directors. Investec is providing independent financial
advice to the Exova Directors for the purposes of Rule 3 of the Code.
Accordingly, the Exova Directors intend unanimously to recommend Exova Shareholders to vote
in favour of the Scheme at the Court Meeting and the General Meeting Resolutions, as each Exova
Director has irrevocably undertaken to do in respect of his own beneficial holdings of Exova
Shares (further details of these irrevocable undertakings are contained in paragraph 6 below).
5
Background to and reasons for the Exova Directors’ recommendation
Exova is a global testing, calibration and advisory services provider. Until 2008, Exova was the
testing and inspection division of Bodycote plc. In 2008, Exova was acquired by Clayton, Dubilier
& Rice Fund VII, LP and, following a period of significant growth and development, Exova was
listed on the London Stock Exchange in 2014 (the “IPO”).
Since the completion of its IPO, Exova has made meaningful strategic and financial progress as a
standalone company. This progress has been characterised by strong organic growth across all its
businesses (with the exception of its oil and gas business), substantial progress on its value
accretive acquisition strategy with the completion of 14 acquisitions, and the successful
implementation of a new market facing organisation structure.
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LON44685690/5 162843-0006
However, during this period, the deterioration in the oil price, and the consequential reduction in
investment and activity levels by customers in the oil and gas sector, has presented significant
challenges. The deterioration in the oil and gas environment has had a negative impact on a
number of companies, including Exova, for which the oil and gas industry is an end market. Exova
has taken decisive action to mitigate the impact of this downturn and to re-balance the portfolio to
the other end markets that it serves. In 2016, oil and gas represented approximately 9 per cent. of
Group revenue compared with 18 per cent. at the time of the IPO. However, a combination of
Exova’s continuing exposure to the oil and gas sector and the relatively small free float in its
shares, which has impacted trading liquidity, has weighed upon its share price.
Since the IPO, the Group’s progress has been derived from organic growth complemented by an
active acquisition strategy. Taking into account the continuing challenges in the oil and gas sector,
the Exova Directors expect the Group to deliver modest organic growth at constant currency in
2017. Beyond the current financial year and in the event that the Group is successful in completing
its current pipeline of anticipated acquisitions, the level of financial leverage within the Group may
constrain its ability to finance further material acquisitions with borrowings.
CD&R has been a long term, supportive investor in Exova. Following the completion of the IPO,
CD&R had intended to realise its full investment in Exova over time and return the proceeds to its
investors in line with its typical approach to investments. CD&R has considered a number of
options to realise its investment, including the sale of its shareholding in multiple placings in the
public market over time. However, the limited liquidity in the trading of Exova’s shares has
restricted the opportunities for CD&R to undertake a sale of shares to public investors and, given
the reasons set out above, there is continued uncertainty as to whether and when this could be
achievable.
The Exova Directors believe that Exova’s strategy and business model remain capable of
delivering growth and sustained profitability going forward. However, for the reasons set out
above and given the receipt of unsolicited interest from a number of parties, the Exova Directors
decided to investigate whether a third party would make a proposal to shareholders to acquire
Exova that would provide all Exova Shareholders with immediate and certain value which would
reflect Exova’s prospects as a standalone company.
In January 2017, the Exova Directors contacted a number of parties who had expressed an interest
in Exova and provided them with access to limited due diligence information. Initial proposals
were received and access was provided to selected interested parties to further due diligence
information. Following media speculation, the Exova Directors announced on 26 March 2017 that
they were in discussions with three interested parties. Although any further third parties that had an
interest in making a proposal to acquire Exova had an opportunity to contact the Exova Directors,
no further interest was received.
Following consideration of the detailed due diligence information by the three interested parties,
the Exova Directors received a proposal from Element which represented the most attractive
proposal. The Exova Directors considered the proposal and the terms of the Acquisition in relation
to the value of Exova as a standalone company and believe the Acquisition recognises Exova’s
prospects and growth potential. The Exova Directors have carefully considered the terms of the
Acquisition in the context of the dynamics of the global markets in which Exova operates, in
particular the continued uncertainty in the oil and gas sector, as well as the competitive landscape
for future acquisitions. In considering the terms of the Acquisition, the Exova Directors have taken
into account a number of factors including that:
•
the Acquisition represents an opportunity for Exova Shareholders to realise their
investment in Exova for cash at a fair and reasonable value;
•
the Cash Value, comprising an Acquisition price of 240 pence for each Exova Share and
the proposed final dividend of 2.35 pence per Exova Share for the year ended 31
December 2016, implies an enterprise value multiple of approximately 16.0 times Exova’s
Adjusted EBITA and 12.5 times Exova’s Adjusted EBITDA for the 12 months ended 31
December 2016;
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•
the Cash Value represents a premium of approximately 26.0 per cent. to the volume
weighted average Closing Price of 192 pence per Exova Share for the 12 month period
ended 24 March 2017 (being the last Business Day prior to the start of the Offer Period);
•
the certainty of the Acquisition should be weighed against the inherent uncertainty of the
delivery of future value that exists in the business;
•
the Acquisition delivers more value to Exova Shareholders than any other proposals
received by Exova from interested parties following a thorough and extensive process; and
•
the Exova Directors recognise Exova’s ownership structure and the irrevocable
undertaking from Exova’s majority shareholder, CD&R, representing approximately 54
per cent of the ordinary share capital of Exova, to vote in favour of the Acquisition.
Furthermore, the Exova Directors believe Exova’s employees, customers and other stakeholders
will benefit from the opportunities provided by a combination with Element given the global scale
and diversification across sectors of the combined business to support its future growth and
development.
Following careful consideration of the above factors, the Exova Directors intend unanimously to
recommend the Acquisition to Exova Shareholders. The Exova Directors who hold or are
beneficially entitled to Exova Shares have each irrevocably undertaken to vote in favour of the
Scheme at the Court Meeting and in favour of the General Meeting Resolutions to be proposed at
the Exova General Meeting in respect of all their Exova Shares, being in aggregate a total of
2,513,414 Exova Shares (representing approximately 1.00 per cent. of the ordinary share capital of
Exova).
6
Irrevocable undertakings
Element Bidco has received irrevocable undertakings from each of the Exova Directors that holds
Exova Shares to vote in favour of the Scheme at the Court Meeting and in favour of the General
Meeting Resolutions, in respect of a total of 2,513,414 Exova Shares, representing approximately
1.00 per cent. of the ordinary share capital of Exova in issue on 18 April 2017 (being the latest
practicable date prior to this announcement). The irrevocable undertakings given by the Exova
Directors will remain in full force and effect if the Acquisition is effected by way of a Takeover
Offer (provided such Takeover Offer is made on terms at least as favourable as the terms of the
Scheme) and will cease to be binding if: (i) Element Bidco announces, with the consent of the
Panel, that it does not intend to make or proceed with the Acquisition and no new, revised or
replacement scheme of arrangement or takeover offer is announced by Element Bidco in
accordance with Rule 2.7 of the Code at the same time; (ii) the Scheme or Takeover Offer lapses or
is withdrawn (which, for the avoidance of doubt, in either case shall not include any suspension of
the timetable applicable to the Scheme) and no new, revised or replacement scheme of
arrangement or takeover offer by Element Bidco has been announced, in accordance with Rule 2.7
of the Code, in its place or is announced, in accordance with Rule 2.7 of the Code, within 10
Business Days of such lapsing or withdrawal; or (iii) any competing offer for the entire issued and
to be issued share capital of Exova (other than that already held by Element Bidco or a subsidiary
of Element Bidco or any person acting in concert with Element Bidco) is made which is declared
wholly unconditional or, if proceeding by way of scheme of arrangement, becomes effective.
Element Bidco has also received irrevocable undertakings to vote in favour of the Scheme at the
Court Meeting and the General Meeting Resolutions from each of (i) CD&R, in respect of a total
of 135,045,958 Exova Shares and (ii) Anne Thorburn in respect of 1,378,639 Exova Shares,
together representing approximately 54.46 per cent. of the ordinary share capital of Exova in issue
on 18 April 2017 (being the latest practicable date prior to this announcement)
The irrevocable undertaking received from CD&R will remain in full force and effect if the
Acquisition is effected by way of a Takeover Offer (provided such Takeover Offer is made on
terms at least as favourable as the terms of the Scheme) and will cease to be binding if: (i) Element
Bidco announces that it does not intend to make or proceed with the Acquisition; (ii) the Scheme
or Takeover Offer lapses or is withdrawn and Element Bidco announces that it does not intend to
11
LON44685690/5 162843-0006
make or proceed with the Acquisition; or (iii) the Scheme or Takeover Offer lapses or is withdrawn
(which, for the avoidance of doubt, shall not include any suspension of the timetable applicable to
the Scheme) and no new, revised or replacement scheme of arrangement or takeover offer has been
announced by Element Bidco, in accordance with Rule 2.7 of the Code, in its place or is
announced by Element Bidco, in accordance with Rule 2.7 of the Code, within 10 Business Days
of such lapsing or withdrawal. The irrevocable undertaking received from Anne Thorburn has been
provided on substantially similar terms to those given by the Exova Directors.
In aggregate, therefore, Element Bidco has received irrevocable undertakings in respect of a total
of 138,938,011 Exova Shares, representing approximately 55.47 per cent. of the share capital of
Exova in issue on 18 April 2017 (being the latest practicable date prior to this announcement).
Further details of the irrevocable undertakings are set out in Appendix III to this announcement.
Copies of the irrevocable undertakings will be on display on Exova's and Element's websites
(www.exova.com and www.element.com respectively) from 12 noon on 20 April 2017 until the
end of the Acquisition.
7
Information on Element and Element Bidco
Element
Element is a leading global materials and product qualification testing provider with a strong focus
on the aerospace, oil and gas and automotive end markets. Element provides solutions to complex
technical challenges facing its customers on a daily basis through employing and developing a
highly technical work force and focusing on excellent operational delivery.
Element has a highly diverse customer base with over 25,000 customers across a global network of
61 laboratories strategically located across the US, Europe and China. Element has a strong track
record of M&A with 13 acquisitions completed and fully integrated within the last five years.
Element is majority owned by BEV, the latest fund of Bridgepoint and was acquired by BEV in
March 2016.
Element Bidco
Element Bidco is a wholly owned indirect subsidiary of Element, established for the purpose of
making the Acquisition.
8
Information on Bridgepoint and BEV
Bridgepoint
Bridgepoint is a leading pan-European private equity firm which has current assets under
management of over €12 billion and has a 30-year track record of investing in growth businesses.
Independently owned and with a team including over 100 investment professionals, Bridgepoint
has eight offices across Europe, as well as offices in New York and Shanghai.
Business services is a core sector for Bridgepoint, having completed over 40 investments in the
last 20 years in the sector. Bridgepoint has invested significant capital in the global testing
industry, across 5 transactions. Bridgepoint’s track record in the testing space, and across the
variety of end markets it covers, enables it to draw from a wide range of experience to complete
transactions efficiently and provide strategic support to businesses throughout the period of
ownership.
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LON44685690/5 162843-0006
BEV
BEV is the latest Bridgepoint pan-European fund and held its final close in 2015 with total
commitments of €4bn primarily raised from leading institutional investors globally. Since its
inception BEV has committed over €2bn to a total of 11 assets.
9
Information on Exova
Exova is a leading provider of laboratory-based testing and related advisory services, operating
136 laboratories and offices in 33 countries worldwide. The Group focuses on providing customers
with technically demanding, value-added testing for a broad range of advanced materials,
components, products and systems to ensure compliance with safety, performance and quality
standards imposed by customers, accreditation bodies and regulatory authorities. As at 18 April
2017, the Group had around 4,200 employees and served approximately 25,000 customers.
Exova manages its business through three divisions: i) Industries (35% of the Group’s revenue in
2016), ii) Products (36% of the Group’s revenue in 2016), iii) Infrastructure, Health and
Environment (29% of the Group’s revenue in 2016). The geographic split for Group’s revenue in
2016 was Europe (52%), Americas (32%) and Rest of World (16%).
Industries
The Industries Division includes two sectors: Aerospace and Oil & Gas and Industrials.
Aerospace
The Group’s Aerospace sector provides destructive and non-destructive testing to determine the
physical and mechanical properties of materials used in airframes and engines. The sector also
provides production-related testing of engine components and raw materials, aircraft structural
materials and components, as well as research and development-related testing of engine and
airframe raw materials to customers in the aerospace industry, including the key aircraft
manufacturers and many of their supply chain partners.
Oil & Gas and Industrials
The Group’s Oil & Gas and Industrials sector provides materials testing and advisory services to
off-shore and on-shore oil and gas customers, who require qualification of materials and processes
used in the construction of up-and mid-stream oil and gas infrastructure, such as pipelines, rigs
and subsea systems, and testing of downstream refinery components. In addition, Exova provides
a range of environmental testing and analysis services to oil and gas clients related to on-shore
production and drilling waste. The sector also provides materials testing, advisory services and
some non-destructive testing to a range of industrial segments, including the utilities, nuclear and
rail sectors and steel forgers.
Products
The Products Division includes three sectors: Fire, Building Products & Certification;
Transportation and Calibration.
Fire, Building Products & Certification
The Group’s Fire, Building Products and Certification sector provides laboratory-based testing of
large and small scale specimens of materials and products to establish their resistance to fire or
reaction to fire. The sector also offers the mechanical, physical and acoustic testing of building
products for durability and security, as well as fire engineering and fire consulting. Certification
services assess fitness for purpose or compliance with standards and span management systems,
chain of custody, personnel and products and structures for the built environment.
Transportation
The Group’s Transportation sector provides routine and specialised materials testing and product
qualification testing for automotive OEMs and suppliers. Services include vehicle refinement;
component / system testing; instrumentation & data acquisition; vehicle structure testing; and road
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services simulation, with particular expertise in full vehicle testing. The sector also provides
engine quality control testing via embedded operations at or near client sites.
Calibration
The Group’s calibration sector provides accredited calibration and metrology services to a wide
range of customers operating in industries such as energy, life sciences, telecoms, aerospace and
defence. Services cover most instrument types and extend to life-cycle services for these devices
including procurement support, on-site services, repairs, technical support, disposal, requirement
analysis, sourcing, and instrument administration.
Infrastructure, Health and Environment
The Infrastructure, Health and Environment Division includes three sectors: Infrastructure, Health
and Environment.
Infrastructure
The Group’s Infratructure sector provides construction materials testing, safety performance and
consultancy services, covering building materials, structures, sub-assemblies and components
through a combination of permanent and purpose built temporary laboratories at client sites. A
multidisciplinary laboratory system delivers physical and mechanical testing in parallel with
environmental chemistry, microbiology, environmental field services and high-end metallurgical
testing.
Health
The Group’s health sciences sector delivers pharmaceutical testing services which include
analytical development and validation, preformulation development, raw materials testing and
regulated substances control and physical characterisation and stability studies. Exova’s food
testing capabilities include microbiology testing, nutritional composition and preservatives
analysis.
Environment
The Group provides a wide range of environmental testing services, which include stack emissions
testing; contaminated land testing and forensic analysis (including oil, gas, soil, water and waste);
asbestos testing and air surveying; and occupational hygiene assessments and monitoring.
The expertise of the Group across each division is underpinned by its core technical disciplines,
which comprise calibration; chemistry & microbiology; construction engineering and technology;
corrosion & protection; fire, building products, and certification; metal technology; polymers &
composites; and structures & systems.
In its annual results for the year ended 31 December 2016, Exova announced revenue of £328.6m,
Adjusted EBITA of £50.3m, operating profit of £43.5m and a profit before tax of £36.6m.
10
Exova current trading
As announced on 28 February 2017, the Exova board expects the Group to deliver modest organic
revenue growth at constant currency in 2017. This will be driven by Exova’s diversified exposure
and good growth in most sectors, moderated by continuing pressure in oil & gas, and a lower point
in the project cycle of Exova’s engines testing business. Organic growth is expected to be weighted
towards the second-half, partly as a result of more favourable like-for-like comparisons. Exova’s
acquisitions programme should continue to contribute to overall revenue growth. Exova expects
that recent actions it has taken to reduce cost will offset general pressure on group margins in the
current financial year.
Exova’s medium-term revenue expectation remains mid-single digit organic growth, and continued
expansion through acquisitions.
Appendix IV of this announcement contains a confirmation of the statements in this paragraph 10
by the directors of Exova in the terms required by Rule 28.1(c)(i) of the Code.
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11
Management and employees
Element considers the principal rationale for Acquisition to be strategic in nature, particularly in
relation to achieving scale and driving further geographic and sector diversification. From an
employment perspective, as a global testing platform there is scope to become the ‘employer of
choice’ for technical experts in the sector. Following the Acquisition, Element intends to remain
fully committed to the development of operational and technical talent of the Combined Group.
Element has confirmed that, following completion of the Acquisition, the existing employment
rights of, and pension obligations owed to, all Exova employees will be fully safeguarded.
Element has confirmed that all bonus-eligible employees will remain eligible to receive annual
cash bonuses for the 2017 financial year in accordance with current contractual entitlements,
policies or practices or substantially equivalent arrangements (including substantially similar
performance metrics). In addition, should the employment of a member of Exova's executive
committee be terminated on the grounds of redundancy (including resignation as a result of a place
of work relocation of more than 50 miles), Element will procure that such employee shall be paid a
cash bonus on termination equal to 100% of the personal objectives element of the total bonus
opportunity and a pro-rated percentage of the financial/strategic objectives element, based on
performance to the end of the month immediately preceding the Effective Date (pro rated for such
employee's period of employment during the 2017 financial year). Element intends to enter into
discussions with senior management of Exova in due course regarding their continuing
involvement in the Combined Group. Element has agreed that if the employment of a member of
Exova’s executive committee is terminated on the grounds of redundancy (including where such
Exova employee resigns in response to their place of work being relocated by more than 50 miles)
within 12 months of the Effective Date, it will (subject to the relevant Exova employee agreeing to
provide handover assistance) not require the Exova employee to serve their contractual notice
period and shall arrange for the employee to receive a payment of lieu of notice in a single lump
sum on the date of termination of employment. There are no other agreements or arrangements in
place between Element and the senior management of Exova and, in particular, no discussions
have taken place in relation to the terms of any management incentivisation arrangements. The
non-executive directors of Exova have confirmed that they intend to resign upon completion of the
Acquisition.
12
Exova Share Schemes
The Acquisition will affect participants in the Exova Share Schemes. In summary, Element Bidco
and Exova have agreed that, in relation to the options and awards to acquire Exova Shares granted
under the Exova Share Schemes, Element Bidco, in agreement with Exova, will make appropriate
proposals to the holders of such options and awards in accordance with Rule 15 of the Code, and
each grant of such options and awards shall be treated in accordance with the rules applicable to it.
Further details of these arrangements will be communicated to participants in due course.
13
Financing of the Acquisition
The cash consideration payable in connection with the Acquisition is being financed by a
combination of: (a) equity and shareholder debt which is fully underwritten by BEV; and (b) debt
financing arranged and fully underwritten by HSBC, HSBC Securities (USA) Inc., Bank of
America, N.A., Bank of America Merrill Lynch International Limited, ING Bank N.V. and
Barclays Bank plc.
Equity Financing Arrangements
Pursuant to a subscription agreement entered into between (among others) Element, Element Bidco
and BEV dated 18 April 2017 (the “Subscription Agreement”), BEV has entered into
commitments to subscribe for securities in Element and its indirect wholly owned subsidiary
Element Midco conditional upon the Acquisition completing. Each of Element, Element Midco
and certain of their subsidiaries have given corresponding commitments to ensure that the cash
proceeds of such commitments are provided to Element Bidco.
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Pursuant to the terms of the Subscription Agreement Element Bidco has also undertaken (amongst
other things) that: (a) it shall not waive and/or amend any term or condition relating to the
Acquisition or treat any condition as satisfied; and (b) in the event that the Acquisition is
implemented by way of Takeover Offer, it shall not reduce the acceptance threshold below 90 per
cent., in each case except to the extent: (i) that BEV consents or directs; or (ii) such action is
required by the Code, the Panel, the Court and/or any applicable law or regulation. Element Bidco
has also agreed in the Subscription Agreement not to increase or decrease the amount, or make any
amendment to the form of, the consideration offered for the Exova Shares and not to implement
the Acquisition by way of Takeover Offer except to the extent that BEV consents or directs.
Debt Financing Arrangements
The debt financing for the Acquisition is to be provided under a new first lien credit agreement and
a new second lien credit agreement (together the "Credit Agreements") to be entered into by,
amongst others, Element Midco.
Under the terms of the Credit Agreements, Element Midco has agreed that it shall procure that,
save as required by the Panel, the Court or any other applicable law, regulation or regulatory body
or with the consent of the respective Administrative Agent (as defined in each of the Credit
Agreements) Element Bidco will not amend, vary, waive or otherwise modify the terms and
conditions of the Acquisition to the extent such amendment, variance, waiver or modification
would be materially prejudicial to the interests of the lenders under the Credit Agreements, other
than where such amendment would result in the price payable pursuant to the Acquisition
increasing or decreasing by certain amounts specified therein.
Cash Confirmation
BofA Merrill Lynch and HSBC, joint financial advisers to Bridgepoint, Element and Element
Bidco, are satisfied that sufficient cash resources are available to Element Bidco to enable it to
satisfy in full the cash consideration payable to Exova Shareholders in connection with the
Acquisition.
14
Offer-related Arrangements
Confidentiality Agreement
Exova and BEV (acting by its manager Bridgepoint) entered into a confidentiality agreement on 13
February 2017 (the “Confidentiality Agreement”), pursuant to which, amongst other things, BEV
has undertaken, (i) to keep confidential information relating to the Acquisition and Exova; (ii) use
such information only for the purposes of evaluating, negotiating, advising upon or implementing
the Acquisition; and (iii) not to disclose such information unless permitted by the terms of the
Confidentiality Agreement. The confidentiality obligations will remain in force for a period of 24
months from the date of the Confidentiality Agreement.
The Confidentiality Agreement also contains undertakings from BEV that for a period of 12
months, BEV or any of its group undertakings shall not, without the prior written consent of
Exova, acquire or offer to acquire any interest in share or other securities of Exova (which
undertaking ceases as at the date of this announcement) and that, for a period of 12 months, BEV
shall not, without Exova’s prior written consent, solicit certain employees, officers, suppliers or
customers of Exova, subject to customary carve-outs.
Cooperation Agreement
Exova and Element Bidco entered into a cooperation agreement on 19 April 2017 with respect to
the Acquisition (the “Cooperation Agreement”). Under the terms of the Cooperation Agreement,
Exova and Element Bidco have agreed, among other things, that (in summary):
•
Exova and Element Bidco will cooperate with each other, and provide certain information to
each other, in order to assist in obtaining clearance from competition and other regulatory
bodies in order to satisfy the Conditions relating to such clearances;
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15
•
Element Bidco will provide Exova with certain information and assistance in preparing the
Scheme Document and implementing the Acquisition;
•
Element and Exova will agree to the implementation of certain matters relating to the
treatment of options and awards under the Exova Shares Schemes and certain other employee
related arrangements;
•
Exova and Element Bidco intend to implement the Acquisition by way of the Scheme, subject
to the ability of Element Bidco, with the consent of the Panel, to proceed by way of a
Takeover Offer;
•
Element Bidco will pay Exova a break payment of £6.203 million if: (i) on or prior to the
Longstop Date, Element Bidco invokes any of the Regulatory Conditions so as to cause the
Acquisition not to proceed, lapse or be withdrawn; (ii) a Rule 12 Event takes place on or
prior to the Longstop Date; or (iii) any Regulatory Condition has not been satisfied or waived
by Element Bidco by 11.59 p.m. on the date which is 14 days prior to the Longstop Date;
•
the Cooperation Agreement shall terminate (save in respect of certain surviving provisions)
if: (i) Exova and Element Bidco so agree in writing; (ii) the Acquisition is, with the
permission of the Panel, withdrawn or lapses in accordance with its terms prior to the
Longstop Date (other than where (i) such lapse or withdrawal is as a result of the exercise of
Element Bidco’s right to effect a switch; or (ii) it is otherwise to be followed within ten
Business Days by an announcement under Rule 2.7 of the Code made by Element Bidco or a
person acting in concert with Bidco to implement the Acquisition by a different offer or
scheme on substantially the same or improved terms); or (iii) the Effective Date has not
occurred on or before the Longstop Date, unless otherwise agreed in writing between
Element Bidco and Exova;
•
Element Bidco may terminate the Cooperation Agreement (save in respect of certain
surviving provisions) if: (i) the Exova Directors withdraw or adversely modify their
recommendation of the Acquisition; (ii) Exova announces it will not convene the Court
Meeting or General Meeting or it intends not to post the Scheme Document or (if different)
the document convening the General Meeting; or (iii) any Condition is not satisfied or
waived or becomes incapable of satisfaction or waiver by the Longstop Date (in each case if
invocation of each Condition is permitted by the Panel);
•
Element Bidco may also terminate the Cooperation Agreement (save in respect of certain
surviving provisions) if a competing proposal is recommended by the Exova Directors or
completes, becomes effective or is declared unconditional in all respects; and
•
either Element Bidco or Exova may terminate the Cooperation Agreement (save in respect of
certain surviving provisions) if the requisite resolutions are not passed at either or both of the
Court Meeting and the General Meeting.
Conditions
The Acquisition is subject to the Conditions and further terms set out in Appendix I to this
announcement and to be set out in the Scheme Document including, amongst other things, the
receipt of the relevant clearances from competition authorities in the United States, Sweden and
Germany and certain notifications being made and applicable notification and/or waiting periods
having expired in respect of ITAR and the Canadian Controlled Goods Regulations. In particular, it
should be noted that the condition relating to United States competition clearance will not be
satisfied if the Acquisition is the subject of a Second Request from the Antitrust Division of the
United States Department of Justice or the United States Federal Trade Commission.
The Acquisition is also conditional upon the satisfaction of the formal conditions required to be
satisfied in connection with the Scheme as set out in paragraph 2 of Appendix I to this
announcement, which provide that the Acquisition is conditional on:
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LON44685690/5 162843-0006
•
the approval of the Scheme by a majority in number of the Scheme Shareholders present
and voting (and entitled to vote), representing not less than 75 per cent. in value of the
Scheme Shares voted, either in person or by proxy, at the Court Meeting;
•
the approval of the General Meeting Resolutions by the Exova Shareholders by the
requisite majorities at the General Meeting; and
•
the sanction of the Scheme by the Court (in either case, with or without modification but
subject to any modification being on terms acceptable to Exova and Element Bidco) and
the registration of the Sanction Court Order with the Registrar of Companies.
The Scheme shall lapse if:
(i)
the Court Meeting and the General Meeting are not held by the 22nd day after the expected
date of such meetings as set out in the Scheme Document (or such later date as may be
agreed between Element Bidco and Exova); or
(ii)
the Scheme does not become effective by 18 October 2017,
provided however that the deadlines for the timing of the Court Meeting and the General Meeting
and the deadline for the Scheme to become effective may be extended by agreement between
Element Bidco and Exova, with the consent of the Court or Panel if required.
The Acquisition will also lapse if the acquisition of Exova by Element Bidco is referred to the
chair of the CMA for the constitution of a group under Schedule 4 to the Enterprise and Regulatory
Reform Act 2013, or the European Commission either initiates proceedings under Article 6(1)(c)
of the Council Regulation or makes a referral to a competent authority of the United Kingdom
under Article 9(1) of the Council Regulation and there is then a reference to the chair of the
Competition and Markets Authority for the constitution of a group under Schedule 4 to the
Enterprise and Regulatory Reform Act 2013, before the date of the Court Meeting.
16
Structure of the Acquisition
It is intended that the Acquisition will be effected by means of a Court-sanctioned scheme of
arrangement under Part 26 of the 2006 Act. The Scheme is an arrangement between Exova and the
Scheme Shareholders and is subject to the approval of the Court.
The purpose of the Scheme is to provide for Element Bidco to become the holder of the entire
issued and to be issued ordinary share capital of Exova. Scheme Shareholders will receive cash
consideration on the basis set out in paragraph 2 of this announcement in consideration for the
transfer of such Scheme Shares to Element Bidco.
The Scheme requires the approval of Scheme Shareholders at the Court Meeting. The resolution to
approve the Scheme at the Court Meeting must be approved by a majority in number of the
Scheme Shareholders present and voting (and entitled to vote), either in person or by proxy,
representing not less than 75 per cent. in value of the Scheme Shares held by such Scheme
Shareholders. Implementation of the Scheme will also require the passing of the special resolution
to approve the Scheme (requiring approval by the requisite majority at the General Meeting).
Once the necessary approvals from Exova Shareholders have been obtained and the other
Conditions have been satisfied or (where applicable) waived, the Scheme must be sanctioned (with
or without modification), on terms agreed by Element Bidco and Exova. The Scheme will then
become effective upon delivery of the Court Order(s) and the Statement of Capital as approved by
the Court to the Registrar of Companies.
Upon the Scheme becoming effective:
•
it will be binding on all Scheme Shareholders, irrespective of whether or not they attended
or voted at the Court Meeting or the General Meeting (and, if they attended, whether or not
they voted in favour); and
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LON44685690/5 162843-0006
•
share certificates in respect of Exova Shares will cease to be valid and entitlements to
Exova Shares held within the CREST system will be cancelled.
Further details of the Scheme, including an indicative timetable for the Acquisition and notices of
the Court Meeting and the General Meeting, will be set out in the Scheme Document, which will
be despatched by Exova to Exova Shareholders and, for information only, to persons with
information rights and to holders of options granted under the Exova Share Schemes, as soon as
practicable and, in any event, within 28 days of the date of this announcement. Subject, amongst
other things, to the satisfaction or waiver of the Conditions, it is expected that the Scheme will
become effective in the third quarter of 2017.
If the Scheme does not become effective, it will lapse and the Acquisition will not proceed (unless
the Panel otherwise consents). Element Bidco reserves the right, subject to Panel consent, to elect
to implement the Acquisition by way of a Takeover Offer on terms more fully described in
paragraph 19 below.
17
Disclosure of interests in Exova Shares
As at the close of business on 18 April 2017, being the last practicable date prior to the publication
of this announcement, save for: (i) the disclosures in this paragraph 17; and (ii) the irrevocable
undertakings referred to in paragraph 6 above, none of Element Bidco or any of its respective
directors or any member of the Element Group or, so far as Element Bidco is aware, any person
acting, or deemed to be acting, in concert with Element Bidco:
•
has an interest in, or right to subscribe for or has borrowed or lent any Exova Shares or any
securities convertible or exchangeable into Exova Shares (including pursuant to any long
exposure, whether conditional or absolute, to changes in the price of securities);
•
has the right to subscribe for or purchase the same or hold any options (including traded
options) in respect of or has any right to acquire any Exova Shares or holds any derivatives
referenced to Exova Shares;
•
has any short position in (whether conditional or absolute and whether in-the-money or
otherwise), including any short position under a derivative, any agreement to sell or any
delivery obligation or right to require another person to purchase or take delivery in
relation to Exova Shares or derivatives referenced to Exova Shares; or
•
has procured an irrevocable commitment or letter of intent to vote in favour of the
Acquisition in respect of Exova Shares or derivatives referenced to Exova Shares.
Furthermore, no arrangement exists with Element Bidco or Exova or any person acting in concert
with Element Bidco or Exova in relation to Exova Shares. For these purposes, an “arrangement”
includes any indemnity or option arrangement, any agreement or any understanding, formal or
informal, of whatever nature, relating to Exova Shares which may be an inducement to deal or
refrain from dealing in such securities.
18
Delisting and re-registration
It is intended that dealings in Exova Shares will be suspended at 5.00 p.m. London time on the
Business Day prior to the Effective Date. It is further intended that an application will be made to
the UK Listing Authority on the Effective Date for the cancellation of trading in Exova Shares on
the London Stock Exchange’s main market for listed securities and the UK Listing Authority will
be requested to cancel the listing of Exova Shares on the Official List to take effect as of or shortly
after the Effective Date.
On the Effective Date, share certificates in respect of Exova Shares will cease to be valid and
should be destroyed. In addition, entitlements to Exova Shares held within the CREST system will
be cancelled.
It is also intended that, following the Effective Date and after its shares are delisted, Exova will be
re-registered as a private limited company pursuant to the relevant provisions of the 2006 Act.
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19
General
Element Bidco reserves the right, subject to Panel consent, to elect to implement the Acquisition
by way of a Takeover Offer as an alternative to the Scheme. In such event, the Acquisition will be
implemented on substantially the same terms as those which would apply to the Scheme (subject to
appropriate amendments) and, in particular, the acceptance condition applicable to the Acquisition
shall be set at not more than 75 per cent. of the issued Exova Shares, or, where any of the
circumstances set out in Note 2 of Section 8 of Appendix 7 of the Code applies, 90 per cent., of the
Exova Shares to which the Takeover Offer relates (or such lesser percentage, being more than 50
per cent. of the Exova Shares to which the Takeover Offer relates) as Element Bidco may decide
with, to the extent necessary, the consent of the Panel.
The Acquisition will be subject to the Conditions and other terms set out in Appendix I to this
announcement and set out in the Scheme Document and the Forms of Proxy, when issued. The
Scheme Document will include full details of the Scheme, together with notices of the Court
Meeting and the General Meeting and the indicative timetable of the Acquisition.
The Acquisition will be governed by English law and will be subject to the jurisdiction of the
courts of England and Wales and subject to the applicable requirements of the Code, the Panel, the
London Stock Exchange and the FCA.
The bases and sources of certain financial information contained in this announcement are set out
in Appendix II. Certain terms used in this announcement are defined in Appendix V.
20
Documents on display
Copies of the following documents will be made available on Exova’s and Element’s websites at
www.exova.com and www.element.com respectively by no later than 12 noon (London time) on
20 April 2017 until the end of the Acquisition:
•
the irrevocable undertakings referred to in paragraph 6 above and summarised in Appendix III
to this announcement;
•
the documentation relating to the financing of the Acquisition described in paragraph 13;
•
the Confidentiality Agreement referred to in paragraph 14 above; and
•
the Cooperation Agreement referred to in paragraph 14 above.
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Enquiries:
Element Materials Technology Group Limited
Charles Noall
Tel: +44 (0) 20 3540 1825
Tel: +44 (0) 20 3540 1820
Jo Wetz
Bridgepoint Advisers Limited
James Murray
Tel: +44 (0) 20 7034 3555
BofA Merrill Lynch (joint financial adviser to Bridgepoint,
Element and Element Bidco)
Tel: +44 (0) 20 7628 1000
Eamon Brabazon
Justin Anstee
Geoff Iles
Adam Tinsley
HSBC (joint financial adviser to Bridgepoint, Element and
Element Bidco and corporate broker to the Acquisition)
Tel: +44 (0) 20 7991 8888
Omar Faruqui
Andrew Owens
Simon Alexander (corporate broking)
Greg Hely Hutchinson
Finsbury (public relations adviser to Bridgepoint, Element and
Element Bidco)
Tel: +44 (0) 20 7251 3801
Jenny Davy
Charles O'Brien
Exova Group plc
Andrew Pickup, Corporate Affairs Director
Tel: +44 (0) 79 2024 3393
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LON44685690/5 162843-0006
Goldman Sachs International (financial adviser and corporate
broker to Exova)
Tel: +44 (0)20 7774 1000
Anthony Gutman
Nick Harper
Jose Barreto
Alex Garner
Duncan Stewart (corporate broking)
Investec Bank plc (financial adviser and corporate broker to
Exova)
Tel: +44 (0) 20 7597 5970
Keith Anderson
Chris Sim
Jonathan Wynn
Powerscourt Group (public relations adviser to Exova)
Peter Ogden
Andy Jones
Tel: +44 (0) 20 7549 0997
Tel: +44 (0) 20 7549 0747
Merrill Lynch International (“BofA Merrill Lynch”), which is authorised by the Prudential Regulation
Authority and regulated by the FCA and the Prudential Regulation Authority in the United Kingdom, is
acting for Bridgepoint, Element and Element Bidco and no one else in connection with the Acquisition and
will not be responsible to anyone other than Bridgepoint, Element and Element Bidco for providing the
protections afforded to clients of BofA Merrill Lynch, or for giving advice in connection with the
Acquisition or any matter referred to herein.
HSBC Bank plc (“HSBC”), which is authorised by the Prudential Regulation Authority and regulated by
the FCA and the Prudential Regulation Authority in the United Kingdom, is acting for Bridgepoint,
Element and Element Bidco and no one else in connection with the Acquisition and will not be responsible
to anyone other than Bridgepoint, Element and Element Bidco for providing the protections afforded to
clients of HSBC, or for providing advice in connection with the Acquisition or any matter described in this
announcement or any transaction or arrangement referred to herein.
Goldman Sachs International, which is authorised by the Prudential Regulation Authority and regulated
by the FCA and the Prudential Regulation Authority in the United Kingdom, is acting exclusively for
Exova and no one else in connection with the Acquisition and will not be responsible to anyone other than
Exova for providing the protections afforded to clients of Goldman Sachs International or for providing
advice in connection with the Acquisition or in relation to matters described in this announcement or any
transaction or arrangement referred to herein.
Investec Bank plc, which is authorised by the Prudential Regulation Authority and regulated by the FCA
and the Prudential Regulation Authority in the United Kingdom, is acting exclusively for Exova and no one
else in connection with the Acquisition and will not be responsible to anyone other than Exova for
providing the protections afforded to clients of Investec Bank plc or for providing advice in connection with
the Acquisition or in relation to matters described in this announcement or any transaction or arrangement
referred to herein.
This announcement is for information purposes only and is not intended to and does not constitute or form
part of an offer to sell or otherwise dispose of or invitation to purchase or otherwise acquire any securities
or the solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issue or transfer
of the securities referred to in this announcement in any jurisdiction in contravention of applicable law.
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LON44685690/5 162843-0006
The Acquisition will be made solely through the Scheme Document and the accompanying Forms of Proxy,
which will together contain the full terms and conditions of the Acquisition, including details of how to
vote in respect of the Acquisition. Any vote in respect of the Scheme or other response in relation to the
Acquisition should be made only on the basis of the information contained in the Scheme Document.
Overseas Shareholders and Notice to US investors
The release, publication or distribution of this announcement in certain jurisdictions may be restricted by
law. Persons who are not resident in the United Kingdom or who are subject to other jurisdictions should
inform themselves of, and observe, any applicable requirements. In particular, the ability of persons who
are not resident in the United Kingdom to vote their Exova Shares with respect to the Scheme at the Court
Meeting, or to appoint another person as proxy to vote at the Court Meeting on their behalf, may be
affected by the laws of the relevant jurisdictions in which they are located. Any failure to comply with the
applicable restrictions may constitute a violation of the securities laws of any such jurisdiction. To the
fullest extent permitted by applicable law, the companies and persons involved in the Acquisition disclaim
any responsibility or liability for the violation of such restrictions by any person. This announcement has
been prepared for the purposes of complying with English law and the Code and the information disclosed
may not be the same as that which would have been disclosed if this announcement had been prepared in
accordance with the laws of jurisdictions outside of England.
The Acquisition relates to the shares of an English company and is proposed to be effected by means of a
scheme of arrangement under the laws of England and Wales. Neither the proxy solicitation rules nor
(unless implemented by means of a Takeover Offer) the tender offer rules under the US Securities
Exchange Act of 1934, as amended, will apply to the Acquisition. Moreover, the Acquisition is subject to
the disclosure requirements and practices applicable in the United Kingdom and under the City Code to
schemes of arrangement, which differ from the disclosure requirements of the US proxy solicitation rules
and tender offer rules. Financial information included in this announcement has been prepared, unless
specifically stated otherwise, in accordance with accounting standards applicable in the UK and thus may
not be comparable to the financial information of US companies or companies whose financial statements
are prepared in accordance with generally accepted accounting principles in the US. If Element Bidco
exercises its right to implement the Acquisition of the Exova Shares by way of a Takeover Offer, the
Takeover Offer will be made in compliance with applicable US securities laws and regulations.
It may be difficult for US holders of Exova Shares to enforce their rights and claims arising out of the US
federal securities laws, since Element Bidco and Exova are located in countries other than the United
States, and some or all of their officers and directors may be residents of countries other than the United
States. US holders of Exova Shares may not be able to sue a non-US company or its officers or directors in
a non-US court for violations of the US securities laws. Further, it may be difficult to compel a non-US
company and its affiliates to subject themselves to a US court’s judgement.
Unless otherwise determined by Element Bidco or required by the Code, and permitted by applicable law
and regulation, the Acquisition will not be made available, directly or indirectly, in, into or from a
Restricted Jurisdiction where to do so would violate the laws in that jurisdiction and no person may vote in
favour of the Scheme by any such use, means, instrumentality or form within a Restricted Jurisdiction or
any other jurisdiction if to do so would constitute a violation of the laws of that jurisdiction. Accordingly,
copies of this announcement and all documents relating to the Acquisition are not being, and must not be,
directly or indirectly, mailed or otherwise forwarded, distributed or sent in, into or from a Restricted
Jurisdiction where to do so would violate the laws in that jurisdiction, and persons receiving this
announcement and all documents relating to the Acquisition (including custodians, nominees and trustees)
must not mail or otherwise distribute or send them in, into or from such jurisdictions where to do so would
violate the laws in that jurisdiction.
The availability of the Acquisition to Exova Shareholders who are not resident in the United Kingdom may
be affected by the laws of the relevant jurisdictions in which they are resident. Persons who are not
resident in the United Kingdom should inform themselves of, and observe, any applicable requirements.
Further details in relation to Overseas Shareholders will be contained in the Scheme Document.
Forward Looking Statements
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This announcement, oral statements made regarding the Acquisition and other information published by
Element Bidco and Exova contains statements that are or may be forward looking statements. Forwardlooking statements are prospective in nature and are not based on historical facts, but rather on current
expectations and projections of the management of Element Bidco and Exova about future events, and are
therefore subject to risks and uncertainties which could cause actual results to differ materially from the
future results expressed or implied by the forward-looking statements. The forward-looking statements
contained in this announcement include statements relating to the expected effects of the Acquisition on
Element Bidco and Exova, the expected timing and scope of the Acquisition and other statements other
than historical facts. All statements other than statements of historical facts included in this announcement
may be forward looking statements. Without limitation, any statements preceded or followed by or that
include the words “targets”, “plans”, “believes”, “expects”, “aims”, “intends”, “will”, “should”,
“could”, “would”, “may”, “anticipates”, “estimates”, “synergy”, “cost-saving”, “projects”, “goal”,
“strategy”, “budget”, “forecast” or “might” or, words or terms of similar substance or the negative
thereof, are forward looking statements. Forward looking statements include statements relating to the
following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance,
indebtedness, financial condition, dividend policy, losses and future prospects; (ii) business and
management strategies and the expansion and growth of Element Bidco’s or Exova’s operations and
potential synergies resulting from the Acquisition; and (iii) the effects of government regulation on Element
Bidco’s or Exova’s business.
These forward looking statements are not guarantees of future financial performance. Except as expressly
provided in this announcement, they have not been reviewed by the auditors of Element Bidco or Exova or
their respective financial advisers. Such forward looking statements involve known and unknown risks and
uncertainties that could significantly affect expected results and are based on certain key assumptions.
Many factors could cause actual results to differ materially from those projected or implied in any forward
looking statements. These factors include the satisfaction of the Conditions, as well as additional factors,
such as: fluctuations in the capital markets; fluctuations in interest and exchange rates; increased
regulation or regulatory scrutiny; the occurrence of unforeseen disasters or catastrophes; political or
economic instability in principal markets; adverse outcomes in litigation; and general, local and global
economic, political, business and market conditions. Other unknown or unpredictable factors could cause
actual results to differ materially from those in the forward-looking statements. Such forward-looking
statements should therefore be construed in the light of such factors. Neither Element Bidco nor Exova, nor
any of their respective associates or directors, officers or advisers, provides any representation, assurance
or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in
this announcement will actually occur. Due to such uncertainties and risks, readers are cautioned not to
place undue reliance on such forward looking statements. All subsequent oral or written forward looking
statements attributable to Element Bidco or Exova or any of their respective members, directors, officers
or employees or any persons acting on their behalf are expressly qualified in their entirety by the
cautionary statement above. Element Bidco and Exova disclaim any obligation to update or revise any
forward looking or other statements contained herein other than in accordance with their legal and
regulatory obligations.
Profit Forecast
Paragraph 10 of this announcement contains a statement which is a profit forecast for the purposes of Rule
28 of the Code. Appendix IV contains a confirmation by the directors of Exova in the terms required by
Rule 28.1(c)(i) of the Code in relation to that statement.
Other than as described above, no statement in this announcement is intended as a profit forecast or
estimate for any period and no statement in this announcement should be interpreted to mean that earnings
or earnings per share for Exova, for the current or future financial years would necessarily match or
exceed the historical published earnings or earnings per share for Exova.
Dealing Disclosure Requirements
Under Rule 8.3(a) of the Code, any person who is interested in 1 per cent. or more of any class of relevant
securities of an offeree company or of any paper offeror (being any offeror other than an offeror in respect
of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening
Position Disclosure following the commencement of the offer period and, if later, following the
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LON44685690/5 162843-0006
announcement in which any paper offeror is first identified. An Opening Position Disclosure must contain
details of the person’s interests and short positions in, and rights to subscribe for, any relevant securities of
each of (i) the offeree company and (ii) any paper offeror(s). An Opening Position Disclosure by a person
to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business
day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London
time) on the 10th business day following the announcement in which any paper offeror is first identified.
Relevant persons who deal in the relevant securities of the offeree company or of a paper offeror prior to
the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.
Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1 per cent. or more of any
class of relevant securities of the offeree company or of any paper offeror must make a Dealing Disclosure
if the person deals in any relevant securities of the offeree company or of any paper offeror. A Dealing
Disclosure must contain details of the dealing concerned and of the person’s interests and short positions
in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper
offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing
Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time)
on the business day following the date of the relevant dealing.
If two or more persons act together pursuant to an agreement or understanding, whether formal or
informal, to acquire or control an interest in relevant securities of an offeree company or a paper offeror,
they will be deemed to be a single person for the purpose of Rule 8.3.
Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing
Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert
with any of them (see Rules 8.1, 8.2 and 8.4).
Details of the offeree and offeror companies in respect of whose relevant securities Opening Position
Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Panel’s
website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue,
when the offer period commenced and when any offeror was first identified. If you are in any doubt as to
whether you are required to make an Opening Position Disclosure or a Dealing Disclosure, you should
contact the Panel’s Market Surveillance Unit on +44 (0) 20 7638 0129.
Information Relating to Exova Shareholders
Please be aware that addresses, electronic addresses and certain information provided by Exova
Shareholders, persons with information rights and other relevant persons for the receipt of
communications from Exova may be provided to Element Bidco during the offer period as requested under
Section 4 of Appendix 4 of the Code to comply with Rule 2.11(c).
Publication on Website
A copy of this announcement will be available free of charge (subject to any applicable restrictions with
respect to persons resident in Restricted Jurisdictions) on Exova’s and Element’s websites (www.exova.com
and www.element.com respectively) by no later than 12 noon (London time) on 20 April 2017.
The contents of the websites referred to in this announcement are not incorporated into and do not form
part of this announcement.
You may request a hard copy of this announcement by contacting Jo Wetz on +44 (0)20 3540 1820. You
may also request that all future documents, announcements and information to be sent to you in relation to
the Acquisition should be in hard copy form.
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APPENDIX I
CONDITIONS AND CERTAIN FURTHER TERMS OF THE ACQUISITION
A.
Conditions to the Scheme and Acquisition
1.
The Acquisition will be conditional upon the Scheme becoming unconditional and becoming
effective, subject to the provisions of the Code, by no later than 18 October 2017 or such later
date (if any) as Element Bidco and Exova may, with the consent of the Panel, agree and (if
required) the Court may approve.
Scheme approval
2.
The Scheme will be conditional upon:
(a)
approval of the Scheme at the Court Meeting (or at any adjournment thereof,
provided that the Court Meeting may not be adjourned beyond the 22nd day after the
expected date of the Court Meeting to be set out in the Scheme Document in due
course or such later date (if any) as Element Bidco and Exova may agree) by a
majority in number of the Scheme Shareholders present and voting, either in person
or by proxy, representing three-quarters or more in value of the Scheme Shares held
by those Scheme Shareholders;
(b)
all resolutions in connection with or required to approve and implement the Scheme
as set out in the notice of the General Meeting (including, without limitation, the
Special Resolution) being duly passed by the requisite majority at the General
Meeting (or at any adjournment thereof, provided that the General Meeting may not
be adjourned beyond the 22nd day after the expected date of the General Meeting to
be set out in the Scheme Document in due course or such later date (if any) as
Element Bidco and Exova may agree); and
(c)
the sanction of the Scheme without modification or with modification on terms
acceptable to Element Bidco and Exova, provided that the Scheme Court Hearing
may not be adjourned beyond the 22nd day after the expected date of the Scheme
Court Hearing to be set out in the Scheme Document in due course or such later date
(if any) as Element Bidco and Exova may agree) and the delivery of an office copy of
the Sanction Court Order to the Registrar of Companies.
In addition, Element Bidco and Exova have agreed that the Acquisition will be conditional
upon the following Conditions and, accordingly, the necessary actions to make the Scheme
effective will not be taken unless such conditions (as amended, if appropriate) have been
satisfied or, where relevant, waived.
Regulatory clearances
United States
3.
The initial waiting period applicable to the Acquisition under the HSR Act shall have expired
or been terminated within that initial waiting period without a request for additional
information and documentary material pursuant to the HSR Act (a “Second Request”) having
been received from the Antitrust Division of the United States Department of Justice or the
United States Federal Trade Commission.
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4.
Insofar as the Acquisition is required to be notified to the DDTC pursuant to section 122.4(b)
of ITAR, all necessary notifications and filings in relation thereto having been made and all
applicable waiting or notification periods in relation thereto having expired, lapsed or been
terminated or waived as appropriate in each case in respect of the Acquisition.
Sweden
5.
The occurrence of one of the following events:
(a)
the Swedish Competition Authority (Konkurrensverket) not commencing a special
investigation pursuant to Chapter 4, Article 11 of the Swedish Competition Act
(Konkurrenslag 2008:579), as amended, in relation to the Acquisition;
(b)
the Swedish Competition Authority having commenced a special investigation
pursuant to Chapter 4, Article 11 of the Swedish Competition Act not requesting
Patent and Market Court (Patent- och marknadsdomstolen) to prohibit or suspend the
closing of the Acquisition pursuant to Chapter 4, Articles 13 and 17, respectively, of
the Swedish Competition Act; or
(c)
The Patent and Market Court permitting the Acquisition to proceed unconditionally
or upon conditions or obligations pursuant to Chapter 4, Article 2 of the Swedish
Competition Act that are reasonably satisfactory to Element Bidco.
Germany
6.
The prohibition on closing contained in s.41(1) of the German Act against Restraints of
Competition (Gesetz gegen Wettbewerbsbeschraenkungen) (“GWB”) being lifted as a result
of the German Federal Cartel Office (Bundeskartellamt):
(a)
after receipt of a complete notification (s.40(1) GWB), approving the Acquisition by
informing Element Bidco in writing that the preconditions for prohibition in s.36(1)
GWB are not met and that it therefore does not intend to initiate an in-depth
investigation of the Acquisition (Hauptpruefverfahren) under s.40(2) GWB;
(b)
failing to prohibit the Acquisition within the four month period provided for in
s.40(2) sentence 2 GWB following the initiation of an in-depth investigation
(Hauptpruefverfahren);
(c)
failing to prohibit the Acquisition within any extended period to which Element
Bidco has agreed pursuant to s.40(2) sentence 3 no 1 GWB following the initiation of
an in-depth investigation (Hauptpruefverfahren); or
(d)
approving the Acquisition pursuant to s.40(2) GWB following an in-depth
investigation (Hauptpruefverfahren) by informing Element Bidco in writing that the
preconditions for prohibition in s.36(1) GWB are not met without attaching to its
decision any conditions which are not reasonably satisfactory to Element Bidco.
Canada
7.
Insofar as the Acquisition is required to be notified to Public Works and Government Services
Canada pursuant to subsection 9(2) of the Canadian Controlled Goods Regulations, all
necessary notifications and filings in relation thereto having been made and all applicable
waiting or notification periods in relation thereto having expired, lapsed or been terminated or
waived as appropriate in each case in respect of the Acquisition.
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General Third Party clearances
8.
All notifications to and filings with, Third Parties which are necessary in order to allow the
Acquisition to close having been made, all appropriate waiting and other time periods
(including any extensions of such waiting and other time periods) under any applicable
legislation or regulation of any relevant jurisdiction having expired, lapsed or been terminated
(as appropriate) and all statutory or regulatory obligations in any relevant jurisdiction having
been complied with in each case in connection with the Scheme or Acquisition or the
acquisition or proposed acquisition of any shares or other securities in, or control or
management of, Exova or any other member of the Wider Exova Group by any member of
the Wider Element Group or the carrying on by any member of the Wider Exova Group of its
business.
9.
No Third Party whose consent or non-intervention is required in order to allow the
Acquisition to close having intervened (as defined below) and there not continuing to be
outstanding any statute, regulation or order of any Third Party in each case which is or is
likely to be material in the context of the Wider Element Group or Wider Exova Group or the
Acquisition which would or might reasonably be expected to:
(a)
make the Scheme or the Acquisition or, in each case, its implementation or the
acquisition or proposed acquisition by Element Bidco or any member of the Wider
Element Group of any shares or other securities in, or control or management of,
Exova or any member of the Wider Exova Group void, illegal or unenforceable in
any jurisdiction, or otherwise directly or indirectly materially restrain, prevent,
prohibit, restrict or delay the same or impose additional material conditions or
obligations with respect to the Scheme or the Acquisition or such acquisition, or
otherwise materially impede, challenge or interfere with the Scheme or Acquisition or
such acquisition, or require material amendment to the terms of the Scheme or
Acquisition or the acquisition or proposed acquisition of any Exova Shares or the
acquisition of control or management of Exova or the Wider Exova Group by
Element Bidco or any member of the Element Group;
(b)
materially limit or delay, or impose any material limitations on, the ability of any
member of the Wider Element Group or any member of the Wider Exova Group to
acquire or to hold or to exercise effectively, directly or indirectly, all or any rights of
ownership in respect of shares or other securities in, or to exercise voting or
management control over, any member of the Wider Exova Group or any member of
the Wider Element Group;
(c)
require, prevent or materially delay the divestiture or materially alter the terms
envisaged for any proposed divestiture by any member of the Wider Element Group
of any shares or other securities in Exova;
(d)
require, prevent or materially delay the divestiture or alter the terms envisaged for any
proposed divestiture by any member of the Wider Element Group or by any member
of the Wider Exova Group of all or any portion of their respective businesses, assets
or properties or materially limit the ability of any of them to conduct any of their
respective businesses or to own or control any of their respective assets or properties
or any part thereof;
(e)
except pursuant to sections 974 to 991 of the 2006 Act, require any member of the
Wider Element Group or of the Wider Exova Group to acquire, or to offer to acquire,
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any shares or other securities (or the equivalent) in any member, or repay any
indebtedness of any member of either group owned by or owed to any third party;
(f)
materially limit the ability of any member of the Wider Element Group or of the
Wider Exova Group to conduct or integrate or co-ordinate its business, or any part of
it, with the businesses or any part of the businesses of any other member of the Wider
Element Group or of the Wider Exova Group;
(g)
result in any member of the Wider Exova Group or the Wider Element Group ceasing
to be able to carry on business under any name under which it presently does so; or
(h)
otherwise materially adversely affect any or all of the business, assets, profits,
financial or trading position or prospects of any member of the Wider Exova Group
or of the Wider Element Group,
and all applicable waiting and other time periods during which any Third Party whose consent
is required in order to allow the Acquisition to close could intervene under the laws of any
relevant jurisdiction having expired, lapsed or been terminated.
10.
All material Authorisations which are necessary in order to allow the Acquisition to close in
any relevant jurisdiction for or in respect of the Scheme or Acquisition or the acquisition or
proposed acquisition of any shares or other securities in, or control or management of, Exova
or any other member of the Wider Exova Group by any member of the Wider Element Group
or the carrying on by any member of the Wider Exova Group of its business having been
obtained, in terms and in a form reasonably satisfactory to Element Bidco, from all
appropriate Third Parties or from any persons or bodies with whom any member of the Wider
Exova Group has entered into contractual arrangements in each case where the absence of
such Authorisation necessary to allow the Acquisition to close would have a material adverse
effect on the Exova Group taken as a whole and all such Authorisations remaining in full
force and effect and there being no notice or intimation of any intention to revoke, suspend,
restrict, modify or not to renew any of the same.
Certain matters arising as a result of any arrangement, agreement etc.
11.
Except as Fairly Disclosed, there being no provision of any arrangement, agreement, licence,
permit, franchise or other instrument to which any member of the Wider Exova Group is a
party, or by or to which any such member or any of its assets is or are or may be bound,
entitled or subject or any circumstance, which, in each case as a consequence of the Scheme
or Acquisition or the acquisition or proposed acquisition of any shares or other securities in,
or control of, Exova or any other member of the Wider Exova Group by any member of the
Wider Element Group or otherwise, could or might reasonably be expected to result in, (in
any case to an extent which is or would be material in the context of the Wider Exova Group
taken as a whole):
(a)
any monies borrowed by or any other indebtedness or liabilities (actual or contingent)
of, or any grant available to, any member of the Wider Exova Group being or
becoming repayable or capable of being declared repayable immediately or prior to
its stated maturity date or repayment date or the ability of any member of the Wider
Exova Group to borrow monies or incur any indebtedness being withdrawn or
inhibited or becoming capable of being withdrawn or inhibited;
(b)
the creation or enforcement of any mortgage, charge or other security interest over the
whole or any part of the business, property, assets or interests of any member of the
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Wider Exova Group or any such mortgage, charge or other security interest (wherever
created, arising or having arisen) becoming enforceable;
(c)
any such arrangement, agreement, licence, permit, franchise or instrument, or the
rights, liabilities, obligations, interests or business of any member of the Wider Exova
Group thereunder, being, or becoming capable of being, terminated or adversely
modified or affected or any adverse action being taken or any obligation or liability
arising thereunder;
(d)
any asset or interest of any member of the Wider Exova Group being or falling to be
disposed of or charged or ceasing to be available to any member of the Wider Exova
Group or any right arising under which any such asset or interest could be required to
be disposed of or charged or could cease to be available to any member of the Wider
Exova Group otherwise than in the ordinary course of business;
(e)
any member of the Wider Exova Group ceasing to be able to carry on business under
any name under which it presently does so;
(f)
the creation of liabilities (actual or contingent) by any member of the Wider Exova
Group other than in the ordinary course of business;
(g)
the rights, liabilities, obligations or interests of any member of the Wider Exova
Group under any such arrangement, agreement, licence, permit, franchise or other
instrument or the interests or business of any such member in or with any other
person, firm, company or body (or any arrangement or arrangements relating to any
such interests or business) being terminated or adversely modified or affected; or
(h)
the financial or trading position or the value of any member of the Wider Exova
Group being prejudiced or adversely affected,
and no event having occurred which, under any provision of any such arrangement,
agreement, licence, permit or other instrument, would be reasonably likely to result in any of
the events or circumstances which are referred to in paragraphs (a) to (h) of this Condition 11
in any case to an extent which is or would be material in the context of the Exova Group
taken as a whole.
12.
Since 31 December 2016 and except as Fairly Disclosed, no member of the Wider Exova
Group having:
(a)
issued or agreed to issue, or authorised the issue of, additional shares of any class, or
securities convertible into or exchangeable for, or rights, warrants or options to
subscribe for or acquire, any such shares or convertible securities or transferred or
sold any shares out of treasury, other than as between Exova and wholly-owned
subsidiaries of Exova other than any shares issued or shares transferred from treasury
upon the exercise of any options granted, or vesting of any awards, under any of the
Exova Share Schemes;
(b)
purchased or redeemed or repaid any of its own shares or other securities or reduced
or made any other change to any part of its share capital to an extent which (other
than in the case of Exova) is material in the context of the Exova Group taken as a
whole;
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(c)
recommended, declared, paid or made any dividend or other distribution whether
payable in cash or otherwise or made any bonus issue (other than to Exova or a
wholly-owned subsidiary of Exova);
(d)
except as between Exova and its wholly-owned subsidiaries or between such whollyowned subsidiaries, made or authorised any change in its loan capital;
(e)
(other than any acquisition or disposal in the ordinary course of business or a
transaction between Exova and a wholly-owned subsidiary of Exova or between such
wholly-owned subsidiaries), merged with, demerged or acquired any body corporate,
partnership or business or acquired or disposed of or transferred, mortgaged, charged
or created any security interest over any assets or any right, title or interest in any
assets (including shares in any undertaking and trade investments) or authorised the
same (in each case to an extent which is material in the context of the Exova Group
taken as a whole);
(f)
issued or authorised the issue of, or made any change in or to, any debentures or
(except in the ordinary course of business or except as between Exova and its whollyowned subsidiaries or between such wholly-owned subsidiaries) incurred or increased
any indebtedness or liability (actual or contingent) which in any case is material in the
context of the Exova Group taken as a whole;
(g)
entered into, varied, or authorised any agreement, transaction, arrangement or
commitment (whether in respect of capital expenditure or otherwise) which:
(i)
is of a long term, onerous or unusual nature or magnitude or which is
reasonably likely to involve an obligation of such nature or magnitude; or
(ii)
is reasonably likely to restrict the business of any member of the Wider
Exova Group; or
(iii)
is other than in the ordinary course of business,
and which in any case is material in the context of the Exova Group taken as a whole;
(h)
entered into, implemented, effected or authorised any merger, demerger,
reconstruction, amalgamation, scheme, commitment or other transaction or
arrangement in respect of itself or another member of the Wider Exova Group
otherwise than in the ordinary course of business which in any case is material in the
context of the Exova Group taken as a whole;
(i)
entered into or varied the terms of, any contract, agreement or arrangement with any
of the directors or senior executives of any member of the Wider Exova Group which
is material in the context of the Wider Exova Group taken as a whole, save for salary
increases, bonuses or variation of terms in the ordinary course;
(j)
taken any corporate action or had any legal proceedings instituted or threatened
against it or petition presented or order made for its winding-up (voluntarily or
otherwise), striking off, dissolution or reorganisation or for the appointment of a
receiver, administrator (including the filing of an administration application, notice of
intention to appoint an administrator or notice of appointment of an administrator),
administrative receiver, trustee or similar officer of all or any material part of its
assets and revenues or any analogous proceedings in any jurisdiction or appointed any
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LON44685690/5 162843-0006
analogous person in any jurisdiction which in any case is material in the context of
the Exova Group taken as a whole;
(k)
been unable, or admitted in writing that it is unable, to pay its debts or having stopped
or suspended (or threatened to stop or suspend) payment of its debts generally or
proposed or entered into any composition or voluntary arrangement with its creditors
(or any class of them) or the filing at court of documentation in order to obtain a
moratorium prior to a voluntary arrangement or, by reason of actual or anticipated
financial difficulties, commenced negotiations with one or more of its creditors with a
view to rescheduling any of its indebtedness, or ceased or threatened to cease carrying
on all or a substantial part of its business in any case with a material adverse effect on
the Exova Group taken as a whole;
(l)
waived or compromised any claim, otherwise than in the ordinary course of business,
which is material in the context of the Exova Group taken as a whole;
(m)
made any alteration to its memorandum or articles of association which is material in
the context of the Acquisition;
(n)
made or agreed or consented to:
(i)
any material change:
(A)
to the terms of the trust deeds constituting the pension scheme(s)
established for its directors, employees or their dependants; or
(B)
the contributions payable to any such scheme(s) or to the benefits
which accrue or to the pensions which are payable thereunder; or
(C)
the basis on which qualification for, or accrual or entitlement to such
benefits or pensions are calculated or determined; or
(D)
the basis upon which the liabilities (including pensions) or such
pension schemes are funded, valued or made,
in each case, which has an effect that is material in the context of the Exova
Group taken as a whole, or
(ii)
any change to the trustees including the appointment of a trust corporation;
(o)
proposed, agreed to provide or modified the terms of any share option scheme,
incentive scheme or other benefit relating to the employment or termination of
employment of any person employed by the Wider Exova Group in a manner which
is material in the context of the Exova Group taken as a whole; or
(p)
entered into any agreement, commitment or arrangement or passed any resolution or
made any offer (which remains open for acceptance) or proposed or announced any
intention with respect to any of the transactions, matters or events referred to in this
Condition 12.
No adverse change, litigation or regulatory enquiry
13.
Since 31 December 2016 and except as Fairly Disclosed:
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LON44685690/5 162843-0006
(a)
there having been no adverse change or deterioration in the business, assets, financial
or trading positions or profit or prospects of any member of the Wider Exova Group
which in any case is material in the context of the Exova Group taken as a whole;
(b)
no contingent or other liability of any member of the Wider Exova Group having
arisen or become apparent or increased which in any case is material in the context of
the Exova Group taken as a whole;
(c)
no litigation, arbitration proceedings, prosecution or other legal proceedings to which
any member of the Wider Exova Group is or may become a party (whether as
plaintiff, defendant or otherwise) having been threatened, announced, implemented or
instituted by or against or remaining outstanding against or in respect of any member
of the Wider Exova Group which is material in the context of the Exova Group taken
as a whole; and
(d)
(other than as a result of the Acquisition) no enquiry or investigation by, or complaint
or reference to, any Third Party having been threatened, announced, implemented,
instituted by or against or remaining outstanding against or in respect of any member
of the Wider Exova Group which in any case is material in the context of the Exova
Group taken as a whole;
(e)
other than with the consent of Element Bidco, no action having been taken or
proposed by any member of the Wider Exova Group, or having been approved by
Exova Shareholders or consented to by the Panel, which falls or would fall within or
under Rule 21.1 of the Code or which otherwise is or would be materially
inconsistent with the implementation by Element Bidco of the Acquisition on the
basis contemplated as at the date of this announcement; and
(f)
no member of the Wider Exova Group having conducted its business in breach of any
applicable laws and regulations which in any case is material in the context of the
Exova Group taken as a whole.
No discovery of certain matters
14.
Element Bidco not having discovered (other than as a result of it having been Fairly
Disclosed):
(a)
that any financial or business or other information concerning the Wider Exova
Group disclosed at any time by or on behalf of any member of the Wider Exova
Group, whether publicly, to any member of the Wider Element Group or to any of
their advisers or otherwise, is misleading or contains any misrepresentation of fact or
omits to state a fact necessary to make any information contained therein not
misleading and which was not subsequently corrected before the date of this
announcement by disclosure either publicly or otherwise to Element Bidco or its
professional advisers to an extent which in any case is material in the context of the
Exova Group taken as a whole;
(b)
that any member of the Wider Exova Group is subject to any liability (actual or
contingent) which is not disclosed in Exova’s annual report and accounts for the
financial year ended 31 December 2016 which has not been Fairly Disclosed and
which in any case is material in the context of the Exova Group taken as a whole; or
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LON44685690/5 162843-0006
(c)
any information which has not been Fairly Disclosed and which affects the import of
any information disclosed at any time by or on behalf of any member of the Wider
Exova Group to an extent which is material in the context of the Exova Group taken
as a whole;
(d)
that any past or present member of the Wider Exova Group has not complied with
any applicable legislation or regulations of any jurisdiction with regard to the use,
treatment, handling, storage, transport, release, disposal, discharge, spillage, leak or
emission of any waste or hazardous substance or any substance likely to impair the
environment or harm human health, or otherwise relating to environmental matters or
the health and safety of any person, or that there has otherwise been any such use,
treatment, handling, storage, transport, release, disposal, discharge, spillage, leak or
emission (whether or not this constituted a non-compliance by any person with any
legislation or regulations and wherever the same may have taken place) which, in any
case, would be likely to give rise to any liability (whether actual or contingent) or cost
on the part of any member of the Wider Exova Group which in any case is material in
the context of the Exova Group taken as a whole;
(e)
that there is, or is likely to be, any liability, whether actual or contingent, to make
good, repair, reinstate or clean up any property now or previously owned, occupied or
made use of by any past or present member of the Wider Exova Group or any other
property or any controlled waters under any environmental legislation, regulation,
notice, circular, order or other lawful requirement of any relevant authority or third
party or otherwise which in any case is material in the context of the Exova Group
taken as a whole; or
(f)
that circumstances exist whereby a person or class of persons would be likely to have
a claim in respect of any product or process of manufacture or materials used therein
now or previously manufactured, sold or carried out by any past or present member of
the Wider Exova Group which is or would be material in the context of the Exova
Group taken as a whole.
Anti-corruption, sanctions and criminal property
15.
Element Bidco not having discovered (other than as a result of it having been Fairly
Disclosed) that:
(a)
(i) any past or present member, director, officer or employee of the Wider Exova
Group is or has at any time engaged in any activity, practice or conduct which would
constitute an offence under the Bribery Act 2010, the US Foreign Corrupt Practices
Act of 1977 or any other anti‑corruption legislation applicable to the Wider Exova
Group or (ii) any person that performs or has performed services for or on behalf of
the Wider Exova Group is or has at any time engaged in any activity, practice or
conduct in connection with the performance of such services which would constitute
an offence under the Bribery Act 2010, the US Foreign Corrupt Practices Act of 1977
or any other applicable anti-corruption legislation;
(b)
any asset of any member of the Wider Exova Group constitutes criminal property as
defined by section 340(3) of the Proceeds of Crime Act 2002 (but disregarding
paragraph (b) of that definition);
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LON44685690/5 162843-0006
(c)
any past or present member, director, officer or employee of the Exova Group, or any
other person for whom any such person may be liable or responsible, has engaged in
any business with, made any investments in, made any funds or assets available to or
received any funds or assets from: (i) any government, entity or individual in respect
of which US or European Union persons, or persons operating in those territories, are
prohibited from engaging in activities or doing business, or from receiving or making
available funds or economic resources, by US or European Union laws or regulations,
including the economic sanctions administered by the United States Office of Foreign
Assets Control, or HM Treasury & Customs; or (ii) any government, entity or
individual targeted by any of the economic sanctions of the United Nations, the
United States, the European Union or any of its member states;
(d)
a member of the Exova Group has engaged in any transaction which would cause
Element Bidco to be in breach of any law or regulation upon its acquisition of Exova,
including the economic sanctions of the United States Office of Foreign Assets
Control, or HM Treasury & Customs, or any government, entity or individual
targeted by any of the economic sanctions of the United Nations, the United States,
the European Union or any of its member states; or
(e)
any member of the Wider Exova Group is ineligible to be awarded any contract or
business under section 23 of the Public Contracts Regulations 2005 or any analogous
legislation in any material jurisdiction in which the Wider Exova Group carries on
business.
For the purpose of these Conditions:
B.
(i)
“Third Party” means any central bank, government, government department
or governmental, quasi-governmental, supranational, statutory, regulatory,
environmental or investigative body, authority (including any national or
supranational anti-trust or merger control authority), court, trade agency,
association, institution or professional or environmental body or any other
person or body whatsoever in any relevant jurisdiction, including, for the
avoidance of doubt, the Panel;
(ii)
a Third Party shall be regarded as having “intervened” if it has decided to
take, institute, implement or threaten any action, proceeding, suit,
investigation, enquiry or reference or made, proposed or enacted any statute,
regulation, decision or order or taken any measures or other steps or required
any action to be taken or information to be provided or otherwise having
done anything and “intervene” shall be construed accordingly; and
(iii)
“Authorisations” means authorisations, orders, grants, recognitions,
determinations, certificates, confirmations, consents, licences, clearances,
provisions and approvals, in each case, of a Third Party.
Waiver and invocation of the Conditions
The Scheme will not become effective unless the Conditions have been fulfilled or (if capable
of waiver) waived or, where appropriate, have been determined by Element Bidco to be or
remain satisfied by no later than 18 October 2017 or such later date (if any) as Element Bidco
and Exova may, with the consent of the Panel, agree and (if required) the Court may approve.
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LON44685690/5 162843-0006
Subject to the requirements of the Panel, Element Bidco reserves the right in its sole
discretion to waive, in whole or in part, all or any of Conditions in Part A above, except for
Condition 2 (Scheme approval), which cannot be waived.
Element Bidco shall be under no obligation to waive (if capable of waiver), to determine to be
or remain satisfied or to treat as fulfilled any of Conditions in Part A above by a date earlier
than the latest date specified above for the fulfilment of that condition, notwithstanding that
the other Conditions may at such earlier date have been waived or fulfilled and that there are,
at such earlier date, no circumstances indicating that any Condition may not be capable of
fulfilment.
Each of the Conditions shall be regarded as a separate Condition and shall not be limited by
reference to any other Condition.
C.
Implementation by way of Takeover Offer
Element Bidco reserves the right to elect to implement the Acquisition by way of a Takeover
Offer, subject to the Panel’s consent and subject to the terms of the Co-operation Agreement.
In such event, such Takeover Offer will be implemented on the same terms and conditions, so
far as applicable, as those which would apply to the Scheme subject to appropriate
amendments, including (without limitation) an acceptance condition set at not more than 75
per cent. of the issued Exova Shares, or, where any of the circumstances set out in Note 2 of
Section 8 of Appendix 7 of the Code applies, 90 per cent. of the Exova Shares to which the
Takeover Offer relates (or such other percentage, being more than 50 per cent. of the Exova
Shares to which the Takeover Offer relates) as Element Bidco may decide (subject to the
Panel’s consent).
D.
Certain further terms of the Acquisition
Under Rule 13.5(a) of the Code, Element Bidco may not invoke a Condition to the
Acquisition so as to cause the Acquisition not to proceed, to lapse or to be withdrawn unless
the circumstances which give rise to the right to invoke the Condition are of material
significance to Element Bidco in the context of the Acquisition. Conditions 2 and, if
applicable, any acceptance condition if the Acquisition is implemented by means of a
Takeover Offer, are not subject to this provision of the Code.
If the Panel requires Element Bidco to make an offer or offers for any Exova Shares under the
provisions of Rule 9 of the Code, Element Bidco may make such alterations to the Conditions
as are necessary to comply with the provisions of that Rule.
The Acquisition will lapse if the acquisition of Exova by Element Bidco is referred to the
chair of the CMA for the constitution of a group under Schedule 4 to the Enterprise and
Regulatory Reform Act 2013, or the European Commission either initiates proceedings under
Article 6(1)(c) of the Council Regulation or makes a referral to a competent authority of the
United Kingdom under Article 9(1) of the Council Regulation and there is then a reference to
the chair of the CMA for the constitution of a group under Schedule 4 to the Enterprise and
Regulatory Reform Act 2013, before the date of the Court Meeting.
Exova Shares will be acquired by Element Bidco fully paid and free from all liens, equitable
interests, charges, encumbrances, rights of pre-emption and other third party rights of any
nature whatsoever and together with all rights attaching to them as at the date of this
announcement or subsequently attaching or accruing to them, including the right to receive
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LON44685690/5 162843-0006
and retain, in full, all dividends and other distributions (if any) declared, made, paid or
payable, or any other return of capital made, on or after the date of this announcement, other
than the final dividend of 2.35 pence (net) per Exova Share due to be paid on 9 June 2017 to
Exova Shareholders on Exova’s register of members on 26 May 2017 and conditional on
approval by Exova Shareholders at a general meeting of Exova.
If, on or after the date of this announcement, any dividend and/or other distribution and/or
other return of capital (other than the final dividend of 2.35 pence per Exova Share) is
declared, made or paid or becomes payable in respect of the Exova Shares, Element Bidco
reserves the right (without prejudice to any right of Element Bidco to invoke Condition 12(c)
in Part A of this Appendix I), to reduce the consideration payable under the terms of the
Acquisition for the Exova Shares by an amount up to the amount of such dividend and/or
distribution and/or return of capital, in which case any reference in this announcement or in
the Scheme Document to the consideration payable under the terms of the Acquisition will be
deemed to be a reference to the consideration as so reduced. To the extent that any such
dividend and/or distribution and/or other return of capital is declared, made or paid or is
payable and it is: (i) transferred pursuant to the Acquisition on a basis which entitles Element
Bidco to receive the dividend or distribution and to retain it; or (ii) cancelled, the
consideration payable under the terms of the Acquisition will not be subject to change in
accordance with this paragraph. Any exercise by Element Bidco of its rights referred to in this
paragraph shall be the subject of an announcement and, for the avoidance of doubt, shall not
be regarded as constituting any revision or variation of the Acquisition.
The Acquisition will be subject, inter alia, to the Conditions and certain further terms which
are set out in this Appendix I and those terms which will be set out in the Scheme Document
and such further terms as may be required to comply with the Listing Rules and the
provisions of the Code.
The availability of the Acquisition to persons not resident in the United Kingdom may be
affected by the laws of the relevant jurisdiction. Any persons who are subject to the laws of
any jurisdiction other than the United Kingdom should inform themselves about and observe
any applicable requirements. Further information in relation to Overseas Shareholders will be
contained in the Scheme Document.
This announcement and any rights or liabilities arising hereunder, the Acquisition, the
Scheme and any proxies will be governed by English law and be subject to the jurisdiction of
the courts of England and Wales. The Scheme will be subject to the applicable requirements
of the Code, the Panel, the London Stock Exchange and the FCA.
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APPENDIX II
SOURCES OF INFORMATION AND BASES OF CALCULATION
In this announcement, unless otherwise stated, or the context otherwise requires, the following bases and
sources have been used:
1. Financial information relating to Exova is extracted (without adjustment) from the audited
consolidated financial statements for the Exova Group for the financial year ended 31 December 2016.
2. The value of the Acquisition is calculated on the basis of the fully diluted number of Exova Shares (at
the Cash Value) in issue referred to in paragraph 4.
3. As at the Close of Business on 18 April 2017, being the last practicable date before the date of this
announcement, Exova had in issue 250,490,374 Exova Shares. The International Securities
Identification Number for Exova Shares is GB00BKY7HG11.
4. The fully diluted share capital of Exova (being 256,009,630 Exova Shares) is calculated on the basis of
250,490,374 Exova Shares in issue on 18 April 2017, and in addition up to 5,519,256 further Exova
Shares based on the maximum position under Scheme rules which may be issued on or after the
Announcement Date following the exercise of options, or settled via alternative means, which have a
price of 240.00 pence or less, or via the vesting of awards under the Exova Share Schemes on the basis
explained in this announcement, although Exova has confirmed that no more than 4,357,982 Exova
Shares will need to be issued under the relevant Exova Share Schemes.
5. The Cash Value values the entire issued and to be issued ordinary share capital of Exova at
approximately £620.3 million on the basis of a fully diluted share capital of 256,009,630 Exova
Shares, assuming that all rights in respect of in-the-money options or vesting of awards under the
Exova Share Schemes are exercised on the basis explained in paragraph 4 above. This assumes that the
shares under option or award under the Exova Share Schemes will not be eligible to receive the final
dividend of 2.35 pence per Exova Share but will be taken into account for purposes of determining
dividend equivalent rights under the Exova Group plc Long Term Incentive Plan.
6. Unless otherwise stated, all prices and closing prices for Exova Shares are closing middle market
quotations derived from the Daily Official List.
7. The reference to the implied enterprise value multiple is based on the value of Exova’s fully diluted
share capital (as calculated in note 4 above) in issue as at the Close of Business on 18 April 2017
assuming 242.35 pence per Exova Share and 240.00 pence on the further Exova Shares which may be
issued on or after the Announcement Date plus Exova’s adjusted net debt at 31 December 2016 which
includes £149.4 million of net debt, £20.7 million of retirement benefit obligation, £8.7 million of noncontrolling interests, £6.9 million of contingent consideration, £1.7 million of deferred consideration,
less £3.6 million in cash proceeds from SOP awards (based on the maximum position under Scheme
rules), and less £0.2 million investment in joint ventures all divided by Exova’s Adjusted EBITA of
£50.3 million and Exova’s Adjusted EBITDA of £64.5 million respectively for the twelve month
period to 31 December 2016.
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APPENDIX III
IRREVOCABLE UNDERTAKINGS
The following holders or controllers of Exova Shares have given irrevocable undertakings to vote in favour
of the Scheme at the Court Meeting and in favour of the General Meeting Resolutions:
EXOVA DIRECTORS
Number of Exova
Shares
% of Exova Shares
in issue
Number of Exova
Shares under Exova
Share Schemes
190,909
0.07621
N/A
2,050,000
0.81839
929,971
Philip Marshall
115,493
0.04611
519,508
Bill Spencer
113,636
0.04537
N/A
16,104
0.00643
N/A
Vanda Murray
4,545
0.00181
N/A
Andrew Simon
22,727
0.00907
N/A
2,513,414
1.00340
1,449,479
Name
Allister Langlands
Ian El-Mokadem
Helmut Eschwey
TOTAL
Element Bidco has received irrevocable undertakings from the Exova Directors in respect of their own
beneficial holdings of Exova Shares, representing approximately 1.00340 per cent. of the existing issued
share capital of Exova:
(a)
to cast (or procure the casting of) all voting rights attaching to such Exova Shares in favour of the
Scheme at the Court Meeting and in favour of each of the General Meeting Resolutions; and
(b)
if the Acquisition is structured as a Takeover Offer, to accept or procure the acceptance of such
Takeover Offer in respect of all such Exova Shares, provided such Takeover Offer is made on
terms at least as favourable as the terms of the Scheme.
The irrevocable undertakings given by the Exova Directors will cease to be binding if:
(a)
Element Bidco announces, with the consent of the Panel, that it does not intend to make or
proceed with the Acquisition and no new, revised or replacement Scheme or Takeover Offer is
announced by Element Bidco in accordance with Rule 2.7 of the Code at the same time;
(b)
the Scheme or Takeover Offer lapses or is withdrawn (which, for the avoidance of doubt, in either
case shall not include any suspension of the timetable applicable to the Scheme) and no new,
revised or replacement scheme of arrangement or takeover offer by Element Bidco has been
announced, in accordance with Rule 2.7 of the Code, in its place or is announced, in accordance
with Rule 2.7 of the Code, within 10 Business Days of such lapsing or withdrawal; or
(c)
any competing offer for the entire issued and to be issued share capital of Exova (other than that
already held by Element Bidco or a subsidiary of Element Bidco or any person acting in concert
with Element Bidco) is declared wholly unconditional or, if proceeding by way of scheme of
arrangement, becomes effective.
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LON44685690/5 162843-0006
OTHER INVESTORS
Name
CD&R
Anne Thorburn
TOTAL
Number of Exova
Shares
% of Exova Shares in
issue
Number of Exova
Shares under Exova
Share Schemes
135,045,958
53.91
N/A
1,378,639
0.55
66,588
136,424,597
54.46
66,588
Element Bidco has received an irrevocable undertaking from CD&R in respect of 135,045,958 Exova
Shares, in respect of which it is able to exercise discretionary and voting control, representing
approximately 53.91 per cent. of the existing issued ordinary share capital of Exova:
(a)
to cast (or procure the casting of) all voting rights attaching to such Exova Shares in favour of the
Scheme at the Court Meeting and in favour of each of the General Meeting Resolutions; and
(b)
if the Acquisition is structured as a Takeover Offer, to accept or procure the acceptance of such
Takeover Offer in respect of all such Exova Shares, provided such Takeover Offer is made on
terms at least as favourable as the terms of the Scheme.
The irrevocable undertaking given by CD&R will cease to be binding if:
(a)
Element Bidco announces that it does not intend to make or proceed with the Acquisition;
(b)
the Scheme or Takeover Offer lapses of is withdrawn or Element Bidco announces that it does not
make or proceed with the Acquisition; or
(c)
the Scheme or Takeover Offer lapses or is withdrawn (which, for the avoidance of doubt, shall not
include any suspension of the timetable applicable to the Scheme) and no new, revised or
replacement scheme of arrangement or takeover offer has been announced by Element Bidco, in
accordance with Rule 2.7 of the Code, in its place or is announced, by Element Bidco in
accordance with Rule 2.7 of the Code, within 10 Business Days of such lapsing or withdrawal.
Element Bidco has received an irrevocable undertaking from Anne Thorburn in respect of her beneficial
holdings of Exova Shares, representing approximately 0.55 per cent. of the existing issued share capital of
Exova. The irrevocable undertaking received from Anne Thorburn has been provided on substantially
similar terms to those given by the Exova Directors, as described above.
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APPENDIX IV
Confirmation by the Exova Directors
On 28 February 2017, Exova announced its results for the year ended 31 December 2016. As part of that
announcement the following statement (the “Statement”) regarding the outlook for the Exova was made:
“The Board expects modest organic revenue growth at constant currency in 2017. This will be driven by
Exova’s diversified exposure and good growth in most sectors, moderated by continuing pressure in oil &
gas, and a lower point in the project cycle of our engines testing business. Organic growth is expected to be
weighted towards the second-half, partly as a result of more favourable like-for-like comparisons. Our
acquisitions programme should continue to contribute to overall revenue growth. We expect that recent
actions we have taken to reduce cost will offset general pressure on group margins in the current financial
year.”
The Statement is again confirmed in paragraph 10 of this announcement.
The Statement was originally published before commencement of the offer period triggered by the
announcement by Exova on 26 March 2017 of discussions with possible offerors which could lead to an
offer being made for the entire issued and to be issued share capital of Exova. Accordingly, the
requirements of Rule 28.1(c) of the City Code on Takeovers and Mergers apply in relation to the
Statement.
The Exova Directors confirm that the Statement remains valid and confirm that the Statement has been
properly compiled on the basis of the assumptions stated below and that the basis of accounting used is
consistent with Exova’s accounting policies.
Assumptions
The Statements were prepared on the basis of the following assumptions, any of which could turn out to be
incorrect and therefore affect the validity of the Statements:
Factors within the influence and control of the Exova Directors
•
•
•
There is no material change in the operational strategy of Exova from the date of this announcement.
There will be no acquisitions or disposals beyond Exova’s existing acquisition strategy which will
have a material impact on Exova’s results.
There are no material strategic investments over and above those currently planned.
Factors outside the influence or control of the Exova Directors
•
•
•
•
•
•
•
There will be no material macroeconomic change in the principal markets and regions in which Exova
operates.
There will be no material adverse events which will have a significant impact on Exova's financial
results.
There will be no changes in interest rates, bases of taxation, regulatory environment or legislation that
have a material impact on Exova, including in relation to operations or accounting policies.
There will be no material changes in customer demand or the competitive environment in which
Exova operates.
There will be no material changes in the competitive environment for acquisitions within the TIC
sector that will impact Exova’s ability to continue with it existing acquisition strategy.
There will be no business disruptions that materially affect Exova or its key customers.
There will be no significant and sustained weakening or strengthening of the pound sterling against the
currencies of the major territories in which the Exova operates.
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APPENDIX V
DEFINITIONS
The following definitions apply throughout this announcement unless the context requires otherwise.
“2006 Act”
the UK Companies Act 2006, as amended;
“Acquisition”
the direct or indirect acquisition by Element Bidco of the entire issued and to be
issued ordinary share capital of Exova to be effected by means of the Scheme (or,
subject to the consent of the Panel, a Takeover Offer) including, where the context so
requires, any subsequent variation, revision, extension or renewal thereof;
“Adjusted
EBITA”
operating profit from continuing operations before separately disclosed items;
“Adjusted
EBITDA”
Adjusted EBITA before depreciation;
“Announcement
Date”
19 April 2017;
“Annual
Report”
the annual report and accounts of Exova for the year ended 31 December 2016;
“Authorisations”
has the meaning set out in Part A of Appendix I;
“BEV”
means the limited partnerships comprising the Bridgepoint Europe V Fund;
“BofA Merrill
Lynch”
Merrill Lynch International;
“Bridgepoint”
means Bridgepoint Advisers Limited, its subsidiaries and subsidiary undertakings;
“Business Day”
a day (other than Saturdays, Sundays and public holidays) on which banks are open
for business in London, United Kingdom;
“Canadian
Controlled
Goods
Regulations”
means the Controlled Goods Regulations, SOR/2001-32, as amended from time to
time, enacted pursuant to section 43 of the Defence Production Act (Canada);
“Cash Value”
has the meaning set out on page 1 of this announcement;
“CD&R”
TABASCO B.V., a company owned by Clayton, Dubilier & Rice Fund VII, LP;
“Close of
Business”
6.00 p.m. of a relevant Business Day;
“Closing Price”
the middle market price of a Exova Share at the close of business on the day to which
such price relates, as derived from the Daily Official List of the London Stock
Exchange for that day or from Bloomberg in the case of average Closing Prices for
certain periods to which such average relates to;
“CMA”
the Competition and Markets Authority of the United Kingdom;
“Code”
the City Code on Takeovers and Mergers;
“Combined
Group”
the enlarged group following the Acquisition, comprising the Exova Group and the
Element Group;
“Conditions”
the Conditions to the Acquisition, as set out in Appendix I of this announcement and
to be set out in the Scheme Document;
“Confidentiality
Agreement”
has the meaning set out in paragraph 14 (Offer-related Arrangements) of this
announcement;
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LON44685690/5 162843-0006
“Cooperation
Agreement”
has the meaning set out in paragraph 14 (Offer-related Arrangements) of this
announcement;
“Council
Regulation”
Council Regulation (EC) 139/2004, as amended;
“Court”
the High Court of Justice in England and Wales;
“Court Meeting”
the meeting of Scheme Shareholders (and any adjournment thereof) to be convened
pursuant to an order of the Court under Part 26 of the 2006 Act, notice of which will
be set out in the Scheme Document, for the purposes of considering and, if thought fit,
approving the Scheme (with or without amendment);
“Credit
Agreements”
has the meaning set out in paragraph 13 (Financing of the Acquisition) of this
announcement;
“CREST”
the relevant system (as defined in the Regulations) in respect of which Euroclear is
the Operator (as defined in the Regulations);
“Daily Official
List”
the daily official list of the London Stock Exchange;
“Dealing Day”
a day on which dealing in domestic securities may take place on, and with the
authority of, the London Stock Exchange;
“Dealing
Disclosure”
an announcement pursuant to Rule 8 of the Code containing details of dealings in
interests in relevant securities of a party to an offer;
“DDTC”
means the United States Department of State, Directorate of Defence Trade Controls;
“Effective Date”
the date on which the Scheme becomes effective in accordance with its terms;
“Element”
Element Materials Technology Group Limited, a company incorporated in England
and Wales;
“Element Bidco”
Greenrock Bidco Limited, a company incorporated in England and Wales;
“Element
Group”
Element, its subsidiaries and subsidiary undertakings;
"Element
Midco"
EMT Holdings Limited, a company incorporated in England and Wales;
“Excluded
Shares”
any Exova Shares which are registered in the name of or beneficially owned by any
member of the Element Group or its nominee(s), any Exova Shares held in treasury
and any other Exova Shares which Element Bidco and Exova agree will not be subject
to the Scheme;
“Exova”
Exova Group plc, a company incorporated in England and Wales;
“Exova
Directors”
the directors of Exova as at the date of this announcement;
“Exova Group”
or “Group”
Exova, its subsidiaries and subsidiary undertakings;
“Exova
Shareholders”
holders of Exova Shares;
“Exova Shares”
ordinary shares of one penny each in the capital of Exova;
“Exova Share
Schemes”
the Exova Group plc Long Term Incentive Plan and the Exova Group plc Share
Option Plan, each as amended from time to time;
“Fairly
Disclosed”
information which has been fairly disclosed by or on behalf of Exova: (i) in the
annual report and accounts of the Exova Group for the year ended 31 December 2016;
(ii) in this announcement; (iii) in any other public announcement by, or on behalf of,
Exova in accordance with the Listing Rules, Disclosure Guidance and Transparency
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LON44685690/5 162843-0006
Rules of the FCA (as applicable) prior to the date of this announcement; (iv) in
writing prior to the date of this announcement by or on behalf of Exova to Element
Bidco (or its respective officers, employees, agents or advisers in their capacity as
such); or (v) in the virtual data room operated by or on behalf of Exova in respect of
the Acquisition prior to the date of this announcement;
“FCA”
the United Kingdom Financial Conduct Authority;
“Forms of
Proxy”
the forms of proxy for use at each of the Court Meeting and the General Meeting,
which shall accompany the Scheme Document;
“FSMA”
the UK Financial Services and Markets Act 2000, as amended;
“General
Meeting”
the general meeting of Exova Shareholders (including any adjournment thereof) to be
convened in connection with the Scheme, notice of which will be set out in the
Scheme Document;
“General
Meeting
Resolutions”
the resolutions to be proposed at the General Meeting;
“Goldman
Sachs”
Goldman Sachs International;
“GWB”
has the meaning set out in paragraph 6 of Part A of Appendix I;
“HSBC”
HSBC Bank plc;
“HSR Act”
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended and the rules
and regulations promulgated thereunder;
“Investec”
Investec Bank plc;
“ITAR”
the US International Traffic in Arms Regulations (22 Code of Federal Regulations
120-130);
“London Stock
Exchange”
London Stock Exchange plc, a company incorporated in England and Wales;
“Longstop Date”
18 October 2017, or such later date as may be agreed in writing by Element Bidco and
Exova (with the Panel’s consent and as the Court may approve, if such approval(s) are
required).
“Offer
Document”
the offer document published by or on behalf of Element Bidco in connection with a
Takeover Offer, including any revised offer document;
"Offer Period"
the period commencing on 27 March 2017 and ending on the earlier of the date on
which the Scheme becomes effective and/or the date on which the Scheme lapses or is
withdrawn (or such other date as the Panel may decide);
“Opening
Position
Disclosure”
an announcement containing details of interests or short position in, or rights to
subscribe for, any relevant securities of a party to the offer if the person concerned has
such a position;
“Overseas
Shareholders”
Exova Shareholders with registered addresses outside the United Kingdom or who are
not resident in the United Kingdom;
“Panel”
the Panel on Takeovers and Mergers;
“Registrar of
Companies”
the Registrar of Companies in England and Wales;
“Regulations”
the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755), as amended from
time to time;
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LON44685690/5 162843-0006
“Regulatory
Conditions”
the Conditions set out in paragraphs 3 to 10 of Part A of Appendix I (inclusive);
“Regulatory
Information
Service”
a service approved by the London Stock Exchange for the distribution to the public of
announcements and included within the list maintained on the London Stock
Exchange’s website;
“Restricted
Jurisdiction”
any jurisdiction where extension or acceptance of the proposed Acquisition would
violate the law of that jurisdiction;
“Rule 12 Event”
for the constitution of a group under Schedule 4 to the Enterprise and Reform Act
2013 and the Acquisition lapsing as a result under Rule 12.1(b) of the Code; or (ii) a
referral to the Chair of the CMA for the constitution of a group under Schedule 4 to
the Enterprise and Reform Act 2013 and the Acquisition lapsing as a result under Rule
12.1(a) of the Code;
“Sanction Court
Order”
the order of the Court sanctioning the Scheme;
“Scheme” or
“Scheme of
Arrangement”
the proposed scheme of arrangement under Part 26 of the 2006 Act between Exova
and the Scheme Shareholders, the full terms of which will be set out in the Scheme
Document with or subject to any modification, addition or condition which Element
Bidco and Exova may agree and, if required, the Court may approve or impose;
“Scheme Court
Hearing”
the hearing of the Court to sanction the Scheme;
“Scheme
Document”
the document to be sent by Exova to Exova Shareholders, containing and setting out
the Scheme, the notices convening the Court Meeting, the General Meeting and the
further particulars required by Part 26 of the 2006 Act;
“Scheme Record
Time”
the time and date specified in the Scheme Document, expected to be 6.00 p.m. on the
business day immediately prior to the Effective Date;
“Scheme
Shares”
the Exova Shares:
(a)
in issue at the date of the Scheme Document;
(b)
if any, issued after the date of the Scheme Document and before the Scheme
Voting Record Time; and
(c)
if any, issued at or after the Scheme Voting Record Time and before the
Scheme Record Time in respect of which the original or any subsequent
holders thereof are, or shall have agreed in writing to be, bound by the
Scheme,
in each case other than any Excluded Shares;
“Scheme
Shareholders”
the holders of Scheme Shares;
“Scheme Voting
Record Time”
the date and time specified in the Scheme Document by reference to which
entitlement to vote at the Court Meeting will be determined, expected to be 6.00 p.m.
on the day which is 2 days before the Court Meeting or, if the Court Meeting is
adjourned, 6.00 p.m. on the day which is 2 days before the date of such adjourned
Court Meeting;
“Subscription
Agreement”
has the meaning set out in paragraph 13 (Financing of the Acquisition) of this
announcement;
“Substantial
Interest”
in relation to an undertaking, a direct or indirect interest of 20 per cent. or more of the
total voting rights conferred by the equity share capital (as defined in Section 548 of
the 2006 Act) of such undertaking;
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LON44685690/5 162843-0006
“Takeover
Offer”
if (subject to the consent of the Panel), Element Bidco elects to effect the Acquisition
by way of a takeover offer (as defined in Chapter 3 of Part 29 of the 2006 Act), the
offer to be made by or on behalf of Element Bidco to acquire the issued and to be
issued ordinary share capital of Exova on the terms and subject to the conditions to be
set out in the related Offer Document;
“Third Party”
has the meaning set out in Part A of Appendix I;
“United
Kingdom” or
“UK”
the United Kingdom of Great Britain and Northern Ireland;
“UK Listing
Authority”
the FCA acting in its capacity as the competent authority for listing under the
Financial Services and Markets Act 2000;
“United States”
or “US”
the United States of America, its territories and possessions, any State of the United
States of America and the District of Columbia;
“Wider Element
Group”
Element, its subsidiary undertakings, associated undertakings and any other
undertakings in which that company and such undertakings (aggregating their
interests) have a Substantial Interest; and
“Wider
Group”
Exova, its subsidiary undertakings, associated undertakings and any other
undertakings in which that company and such undertakings (aggregating their
interests) have a Substantial Interest.
Exova
For the purposes of this announcement, “subsidiary”, “subsidiary undertaking”, “parent undertaking”,
“undertaking” and “associated undertaking” have the respective meanings given thereto by the 2006
Act.
References to an enactment include references to that enactment as amended, replaced, consolidated or reenacted by or under any other enactment before or after the date of this announcement. All references to
time in this announcement are to London time unless otherwise stated.
References to the singular include the plural and vice versa.
“£” and "pence" means pounds and pence sterling, the lawful currency of the United Kingdom.
“US$” means United States dollars, the lawful currency of United States.
“€” and “Euro” means the lawful currency of the member states of the participating member states of the
European Union which have adopted the single currency in accordance with the EC Treaty of Rome dated
25 March 1957 (as amended by the Maastricht Treaty dated 7 February 1992).
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LON44685690/5 162843-0006
Schedule 2
Exova Employees and Share Schemes
1.
Provisions of general application
1.1
Exova and Offeror agree that the following arrangements will, where appropriate
subject to the Acquisition becoming effective in all respects, be implemented with
respect to Exova’s existing incentive arrangements.
1.2
Exova and Offeror agree that:
(a)
participants in the Exova Share Schemes shall be able, in accordance with
and to the extent permitted under the provisions of the relevant Exova Share
Schemes, and pursuant to the provisions of this Schedule 2, to exercise their
options or realise their vested awards and receive the same consideration in
respect of the Exova Shares that they acquire or receive under such options or
awards as is offered to Exova Shareholders under the Scheme (or, as the case
may be, the Offer); and
(b)
Exova and Offeror agree that shareholder approval will be sought for an
amendment to the articles of association of Exova so that any Exova Shares
issued after the record time for the Scheme pursuant to the exercise of options
or vesting of awards under the Exova Share Schemes will be compulsorily
acquired by Offeror and/or its nominee on the same terms as were available
to other Exova Shareholders under the Scheme. The amended articles of
association of Exova shall allow the participant acquiring the Exova Shares to
transfer them to a spouse or civil partner prior to such compulsory
acquisition.
1.3
Exova and the Offeror shall co-operate with each other to prepare, in a form to be
agreed between Exova and the Offeror, communications to each of the participants in
the Exova Share Schemes to enable Offeror to satisfy its obligations under Rule 15 of
the Code, and to send, or arrange for the sending of such communications (or series
of communications, as the case may be) to participants at the appropriate time(s)
(such times to be agreed between the parties, having regard to the Code).
2.
Safeguarding employee rights
2.1
Offeror confirms that the existing employment rights of, and pensions obligations
owed to, all Exova employees will be fully safeguarded.
3.
Annual Bonus
3.1
Offeror acknowledges that bonus eligible Exova Group employees will remain
eligible to receive annual cash bonuses in respect of the 2017 financial year in
accordance with either:
(a)
their employment contracts and/or Exova policies and practices calculated by
reference to the performance metrics already announced to Exova employees
for the current financial year; or
(b)
unless paragraph 3.2 below applies, under a new bonus scheme using
adjusted performance metrics provided always that such bonus scheme and
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performance metrics that are substantially equivalent to those provided for
under the Exova annual bonus scheme for the 2017 financial year.
3.2
Offeror agrees to procure that if the service contract of a bonus eligible Exova Group
executive committee member is terminated on or after the Effective Date but prior to
the normal bonus payment date in 2018:
(a)
by reason of redundancy; or
(b)
as a result of such employee’s resignation in response to his/her place of
work being relocated by more than 50 miles,
(in each case other than where the employee is dismissed for misconduct) such Exova
Group executive committee member shall (notwithstanding any Exova or Offeror
bonus policies or practices to the contrary (as applicable)), be paid a cash bonus on
the date on which employment is terminated representing:
(i)
100 per cent. of the personal objectives element of his/her total bonus
opportunity; plus
(ii)
such percentage of the financial/strategic objectives element of
his/her total bonus opportunity as results following measurement of
the applicable Exova performance metrics, pro-rated to the period of
time elapsed between 1 January 2017 and the date of termination of
employment. The measurement of the applicable Exova performance
metrics for 2017 (pro rated for the shorter measurement period) will
be tested for the period between 1 January 2017 and the end of the
month immediately preceding the Effective Date.
4.
Exova Group plc Share Option Plan (SOP)
4.1
Subject to paragraph 5.2, Offeror acknowledges that the extent to which options
outstanding under the SOP become exercisable is to be determined by the Exova
remuneration committee (the Remuneration Committee) in accordance with the rules
of the SOP. Without prejudice to the generality of the foregoing, Offeror recognises
the Remuneration Committee’s power to exercise any discretions granted to the
Remuneration Committee under the SOP rules in respect of outstanding options as it
sees fit, subject always to the SOP rules.
5.
Exova Group plc Long Term Incentive Plan (LTIP)
5.1
Subject to paragraph 5.2, Offeror acknowledges that the extent to which awards
outstanding under the LTIP (including, without limitation, the sign-on award granted
to Exova’s Chief Financial Officer) become exercisable is to be determined by the
Remuneration Committee in accordance with the rules of the LTIP. Without
prejudice to the generality of the foregoing, Offeror recognises the Remuneration
Committee’s power to exercise any discretions granted to the Remuneration
Committee under the LTIP rules in respect of outstanding awards (including, without
limitation in relation to the sign-on award granted to Exova’s Chief Financial Officer)
as it sees fit, subject always to the LTIP rules. Offeror further acknowledges that
Exova may take such steps as it considers appropriate to arrange for the payment of
the nominal value of any Shares to be issued in connection with the vesting of any
awards under the LTIP.
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5.2
Exova confirms that, in aggregate, the maximum number of Exova Shares that may
be issued pursuant to outstanding awards under the SOP and/or LTIP will not exceed
4,357,982.
6.
Severance Arrangements
6.1
Subject to paragraph 6.2, Offeror agrees that, notwithstanding any contractual power
to do otherwise pursuant to the relevant Exova employee’s service contract, if within
twelve (12) months of the Effective Date (i) the employment of any Exova Group
executive committee member is terminated by reason of redundancy; or (ii) any
Exova Group executive committee member resigns in response to his/her place of
work being relocated by more than 50 miles (in each case other than where the
employee is dismissed for misconduct), provided that the Exova Group executive
committee member agrees to be available and is reasonably available in accordance
with paragraph 6.3, Offeror shall:
(a)
not require such Exova employee to serve any period of his/her contractual
notice; and
(b)
in respect of any severance payment or payment representing such Exova
employee’s entitlement to notice, pay (or procure that Exova pays) such
payments in a single lump sum on the termination date. For the avoidance of
doubt, the payment shall not be reduced by reason of the accelerated receipt
or to take account of any mitigation which may apply to the Exova employee.
6.2
For the avoidance of doubt, nothing in this paragraph 6 shall affect any post termination
restrictive covenants or other post termination obligations to which any Exova Group
executive committee member is subject pursuant to their contracts of employment,
which restrictions and obligations shall continue to apply in full force and effect.
6.3
Any Exova Group executive committee member to which paragraph 6.1 applies shall
be required, subject to provision of reasonable advance notice by Offeror, to make
themselves available without charge:
(a)
in the case of Exova’s Chief Executive Officer, for up to 18 full business
days during the period commencing on the date on which his employment is
terminated and ending on such date as is three calendar months thereafter and
for up to two full business days during the immediately following three
calendar months;
(b)
in the case of Exova’s Chief Financial Officer, for up to 15 full business days
during the period commencing on the date on which his employment is
terminated and ending on such date as is three calendar months thereafter and
for up to five full business days during the immediately following three
calendar months;
(c)
in the case of any other Exova Group executive committee member, for up to
20 full business days during the period commencing on the date on which
their employment is terminated and ending on such date as is three calendar
months thereafter,
in each case to provide such support as may be reasonably required by the Offeror,
including being available to carry out a handover of their duties, answer ad hoc
queries and perform such ad hoc services commensurate with their former executive
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role as Offeror may reasonably require. Such Exova Group executive committee
member shall make themselves available (at Offeror’s discretion) at the Edinburgh
head office of Exova Group or the London offices of Offeror or Exova at no
additional costs to Offeror save for the repayment of any travel expenses reasonably
incurred in accordance with the relevant policies and practices of the Exova Group.
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