TIDMMNZS
RNS Number : 0347K
Menzies(John) PLC
16 September 2016
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS
RESTRICTED AND NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN
WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED
STATES, AUSTRALIA, CANADA, JAPAN OR SOUTH AFRICA OR ANY OTHER
JURISDICTION IN WHICH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE
UNLAWFUL.
THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND DOES NOT CONSTITUTE A
PROSPECTUS OR PROSPECTUS EQUIVALENT DOCUMENT. NOTHING HEREIN SHALL
CONSTITUTE AN OFFERING OF NEW ORDINARY SHARES. NOTHING IN THIS
ANNOUNCEMENT SHOULD BE INTERPRETED AS A TERM OR CONDITION OF THE
RIGHTS ISSUE. ANY DECISION TO PURCHASE, SUBSCRIBE FOR, OTHERWISE
ACQUIRE, SELL OR OTHERWISE DISPOSE OF ANY NIL PAID RIGHTS, FULLY
PAID RIGHTS OR NEW ORDINARY SHARES MUST BE MADE ONLY ON THE BASIS
OF THE INFORMATION CONTAINED IN AND INCORPORATED BY REFERENCE INTO
THE PROSPECTUS EXPECTED TO BE PUBLISHED TODAY IN CONNECTION WITH
THE PROPOSED ACQUISITION AND RIGHTS ISSUE. COPIES OF THE PROSPECTUS
WILL, FOLLOWING PUBLICATION, BE AVAILABLE FROM THE REGISTERED
OFFICE OF JOHN MENZIES PLC AND ON ITS WEBSITE
WWW.JOHNMENZIESPLC.COM.
PLEASE SEE THE IMPORTANT NOTICE AT THE OF THIS ANNOUNCEMENT.
16 September 2016
John Menzies plc ("Menzies" or the "Group")
Proposed $202m Acquisition of ASIG to significantly enhance the
scale and service offering of Menzies Aviation
Fully underwritten GBP75m equity rights issue
-- Proposed acquisition of ASIG Holdings Ltd and ASIG Holdings
Corp (together, "ASIG") for $202 million from BBA Aviation plc
("BBA Aviation") (the "Acquisition")
-- A strategically and financially compelling transaction for Menzies
-- Transformational acquisition for Menzies Aviation,
strengthening its position as a leading player in the global
aviation services market
-- Enlarged growth platform in attractive markets
-- Significant synergy potential
-- Adds new scalable product line to the Menzies Aviation
portfolio - fuelling capability will create a comprehensive service
provider in key markets
-- Expected to be materially earnings enhancing for Menzies in the first full year
-- Return on invested capital expected to exceed weighted average cost of capital in 2017
-- Acquisition funded through GBP75 million fully underwritten
equity rights issue and new debt package comprising a $250 million
term loan and a GBP150 million RCF, which will also replace
existing indebtedness of the Group
Dr Dermot Smurfit, Chairman of Menzies, said:
"This is a transformational deal for Menzies and will
significantly increase Menzies Aviation's footprint globally while
also adding fuelling to our operations. The transaction will create
one of the largest aviation services businesses in the world,
doubling the size of our North American operations, while
strengthening Menzies Aviation's service offering at major
international gateways such as London Heathrow, San Francisco,
Denver and Los Angeles. The Board is confident of realising
significant cost synergies following the Acquisition and it is
expected to deliver material enhancement in underlying earnings per
share in its first full financial year of ownership."
Summary
Menzies, the logistics and support specialist providing services
to the international airline sector and the UK print media, travel
and parcel markets, announces the proposed acquisition of ASIG, an
aviation services provider and a leading independent fuelling
services provider, for an enterprise value of $202 million
(approximately GBP153.0 million at the current exchange rate of
$1.3202:GBP1) from ASIG's owner BBA Aviation.
ASIG is one of the largest independent providers of commercial
airline services in the world. Headquartered in Orlando, Florida,
it currently has operations in 88 locations across seven countries
and is one of the market leaders for into plane ("ITP") fuelling
and fuel farm management ("FFM") services in North America and the
UK, where it also has ground handling operations in high-traffic
airports as well as small and medium sized airports. For the year
ended 31 December 2015, ASIG achieved revenues of $415.8 million
(GBP272.0 million).
The Acquisition will be funded through a mixture of equity (by
way of a fully underwritten rights issue (the "Rights Issue")) and
debt. The Rights Issue at a price of 343 pence per share will raise
gross proceeds of approximately GBP75.2 million. The Rights Issue
will be on the basis of 5 New Ordinary Share for every 14 Existing
Ordinary Shares held on the Record Date. The balance will be funded
through drawings on a new Acquisition Facilities Agreement
comprising a $250 million term loan and GBP150 million RCF, which
will also be used to (i) refinance existing financial indebtedness
of the Group and following completion, the Enlarged Group and (ii)
in relation to the revolving credit facility only, the general
corporate purposes of the Group and, following completion, the
Enlarged Group.
Highlights of the Acquisition
The Board believes that the strategic rationale for the
Acquisition is compelling and in strong alignment with Menzies'
stated strategic priorities for Menzies Aviation, representing an
excellent opportunity to accelerate Menzies' strategy for growth in
the aviation sector.
-- The combination of ASIG and Menzies Aviation will create one
of the largest aviation services businesses globally, substantially
enhancing the Group's network, doubling the size of Menzies
Aviation's existing North American operations and adding
significant scale at major international gateways. ASIG currently
operates at eight of the ten busiest United States airports, four
of the five busiest Canadian airports, and eight of the ten busiest
UK airports. In particular, the Acquisition will strengthen the
Menzies Aviation service offering at major intercontinental
gateways such as London Heathrow, San Francisco, Denver and Los
Angeles.
-- The Acquisition will enhance the Menzies Aviation product
offering, principally through entry into the fuelling services
market. ASIG is a leader in ITP fuelling and FFM in the United
States and UK, bringing significant revenue streams which are both
predictable and scalable. In addition, ASIG's business gives
greater scale and diversification to Menzies Aviation's
complementary services such as equipment maintenance and
de-icing.
-- The Acquisition will deepen Menzies Aviation's position with
key customers, including Delta Airlines, United Airlines and IAG,
through provision of more services in more locations, allowing
existing customer relationships to be leveraged further to
accelerate growth.
-- ASIG achieved revenue of $415.8 million (GBP272.0 million)
and underlying EBITDA (excluding BBA Aviation central cost
allocations) of $27.7 million (GBP18.1 million) for the year ended
31 December 2015. Menzies estimates that the cost to replace these
central functions will be approximately GBP5.5 million per annum
($7.3 million at current exchange rate).
-- Furthermore, the Acquisition is anticipated to deliver
pre-tax cost synergies of approximately GBP10.5 million in the
financial year ending 31 December 2018, with one-off integration
costs of the Acquisition expected to be approximately GBP14.3
million.
-- The Acquisition is expected by the Board to deliver material
enhancement in underlying earnings per share for Menzies for the
financial year ending 31 December 2017.
The Acquisition constitutes a Class 1 transaction under the
Listing Rules as a result of the size of ASIG relative to Menzies.
The Acquisition is therefore conditional upon the approval of
Shareholders. In addition, completion of the Acquisition is
conditional upon obtaining certain regulatory clearances such as by
the CMA. The End Date of Completion per the Acquisition Agreement
is 31 May 2017.
A combined Class 1 circular and prospectus (the "Prospectus")
containing further details of the Acquisition and the Rights Issue
and containing the notice convening the General Meeting (to be held
at 11.00 am on 11 October 2016 at the offices of DLA Piper Scotland
LLP, Collins House, Rutland Square, Edinburgh, EH1 2AA) will be
sent to Menzies' Shareholders (other than, subject to certain
exceptions, to those with registered addresses in the United States
or the Excluded Territories) as soon as practicable.
Numis Securities is acting as Financial Adviser in connection
with the Acquisition and Sponsor, Joint Bookrunner and Joint Broker
in connection with the Rights Issue and Acquisition. Shore Capital
is acting as Joint Bookrunner and Joint Broker in connection with
the Rights Issue.
This preceding summary should be read in conjunction with the
full text of the following announcement and its appendices,
together with the Prospectus which is expected to be published
today.
Indicative abridged timetable
Publication of Prospectus 16 September 2016
Latest time and date for receipt 11.00 a.m. on 7 October
of Forms of Proxy 2016
Record Date for entitlements close of business
under the Rights Issue on 10 October 2016
General Meeting 11.00 a.m. on 11
October 2016
Dealings in New Ordinary Shares, 8.00 a.m. on 12 October
nil paid, commence on the 2016
London Stock Exchange
Latest time and date for acceptance 11.00 a.m. on 26
in CREST and payment in full October 2016
and registration of renounced
Provisional Allotment Letters
Expected date of announcement 27 October 2016
of results of the Rights Issue
Dealings in the New Ordinary 8.00 a.m. on 27 October
Shares to commence on the 2016
London Stock Exchange fully
paid
For further information please contact:
+44 (0) 131
John Menzies plc 459 8018
Giles Wilson, CFO, John Menzies plc
Forsyth Black, MD, Menzies Aviation
John Geddes, Group Company Secretary
and Head of Corporate Affairs
Numis Securities (Financial Adviser,
Sponsor, Joint Bookrunner and Joint +44 (0) 20
Broker to Menzies) 7260 1000
Stuart Skinner
Christopher Wilkinson
Stuart Ord
Shore Capital (Joint Bookrunner and +44 (0) 20
Joint Broker to Menzies) 7408 4090
Bidhi Bhoma
Toby Gibbs
+44 (0) 20
FTI Consulting 3727 1000
Jonathon Brill
George Parker
Further information in relation to the Acquisition and Rights
Issue
1. INTRODUCTION
Menzies announces that it has reached agreement on the terms of
the proposed acquisition of ASIG from ASIG's ultimate owner BBA
Aviation for a cash consideration of $202.0 million (approximately
GBP153.0 million), conditional on Shareholders' approval.
ASIG is one of the largest independent providers of commercial
airline services in the world. Headquartered in Orlando, Florida,
it currently has operations in 88 locations across seven countries
and is one of the market leaders for ITP fuelling and FFM services
in North America and the United Kingdom, where it also has ground
handling operations in high-traffic airports as well as in small
and medium sized airports. ASIG currently operates as a standalone
division of BBA Aviation.
Menzies proposes to finance the Proposed Acquisition through a
combination of (a) the proceeds of a Rights Issue to raise a sum of
GBP73.3 million, net of estimated expenses, and (b) the balance
from new bank facilities following the repayment of existing bank
facilities. Under the Rights Issue, 21,922,403 New Ordinary Shares
at a price of 343 pence per New Ordinary Share will be issued,
which represents a 42.1 per cent. discount to the closing middle
market price per Ordinary Share on 15 September 2016, the latest
practicable date prior to publication of this document and a
discount of 34.8 per cent. to the theoretical ex-rights price on
the same basis.
The Acquisition constitutes a Class 1 transaction under the
Listing Rules as a result of the size of ASIG relative to Menzies.
The Acquisition is therefore conditional upon the approval of
Shareholders. Accordingly, a General Meeting has been convened for
11.00am on 11 October 2016 at the offices of DLA Piper Scotland
LLP, Collins House, Rutland Square, Edinburgh, EH1 2AA for
Shareholders to consider, and if thought fit, pass the necessary
resolutions to approve the Acquisition and the Rights Issue.
2. BACKGROUND TO AND REASONS FOR THE ACQUISITION AND THE RIGHTS
ISSUE
2.1 Summary Information on Menzies
Menzies is one of Scotland's largest companies, having been
established in 1833 as a bookseller, stationer and printseller. The
Company is a logistics and support specialist with two operating
divisions, Menzies Aviation, the parent company of which is Menzies
Aviation plc, and Menzies Distribution, the parent company of which
is Menzies Distribution Limited, operating in distinct but related
B2B sectors where success depends on providing an efficient, high
quality, time-critical service to customers and partners.
Menzies Aviation is a leading global provider of passenger, ramp
and cargo services, operating from 149 airports in 32 countries and
is supported by a team of approximately 23,000 people. Menzies
Aviation serves over 500 customers and handled approximately 1.2
million flights and 1.7 million tonnes of cargo in 2015. Key
customers include easyJet, Cathay Pacific, IAG, Alaska Airlines,
Qantas Group, Delta Air Lines, United Airlines, Etihad and
Singapore Airlines. It also owns AMI, the world's only trade-only
global airfreight and express wholesaler.
Menzies Distribution is a leading provider of added value
distribution and marketing services to the newspaper and magazine
supply chain in the UK (with approximately 45.0 per cent. of the
newspaper and magazine wholesale distribution market in the UK by
volume). The division employs approximately 3,500 people at 43
sites throughout the UK and handles approximately 4.3 million
newspapers and 1.4 million magazines (covering some 3,000 magazine
titles) each day, with deliveries to around 25,000 customers.
The Company was admitted to trading on the London Stock Exchange
in 1962 and at that time consisted of retail and logistics
businesses. The main retail activities were divested during the
1990s and the first steps into the aviation services market were
also taken at this time. In 2000, the Group acquired Ogden Ground
Services, an international aviation services business which
transformed Menzies Aviation from a UK-focused cargo handler to a
comprehensive-service, international aviation services business.
Since then a drive to expand the Menzies Aviation services business
has continued and subsequent growth has come through further
acquisitions and organic growth.
2.2 Menzies' Strategy
In 2015, Menzies launched its strategy to optimise returns on
existing investments whilst opening pathways to new growth. Both of
Menzies Aviation and Menzies Distribution are well-placed to take
advantage of market opportunities.
Whilst the landscapes of the UK print media and parcel markets
have altered in recent years, Menzies Distribution is well-placed
to take advantage of the opportunities afforded from working in
both sectors.
Its current operational and IT networks, alongside its property
and vehicle asset base, give Menzies Distribution substantial
presence and capacity to grow in daylight hours. By offering
neutral consolidation solutions to existing territories, it can
increase its asset utilisation and provide a compelling proposition
to parcel carrier networks. This new strategic direction is still
at an early stage of implementation but does offer access to
growing markets. Menzies Distribution also intends to use this
neutral consolidation offering to build customer relationships in
new territories.
Menzies Aviation is a leader in the global aviation services
market with a strong reputation for both services and safety. The
Group intends to take advantage of and promote these credentials to
win contracts at existing and new airports and to strengthen
existing customer relationships. Menzies Aviation concentrates on
airlines and airports where location and product line density can
be achieved to ensure it delivers sustainable margins to
Shareholders.
The Board will also seek to expand the Group acquisitively,
where the market dynamics are strong and acquisitions are
earnings-enhancing. The Board is currently considering a pipeline
of minor acquisitions that present further growth investment
opportunities. The strategic priorities for Menzies Aviation are as
follows:
-- Focus on Key Customers (Customer Ethos) - Menzies Aviation
focusses on key customers in order to nurture and deepen the
relationships, while understanding their needs and outlook in as
much detail as possible. This focus allows Menzies Aviation to
design and deliver services tailored to deliver value to its
customers. By consistently and innovatively supporting customers'
success, Menzies Aviation will enhance the value and lifespan of
these partnerships.
-- Expand Emerging Markets (Emerging Opportunities) - Menzies
Aviation invests both time and expertise in those regions which
promise to yield rapid air traffic expansion over the coming
decades, such as Africa, the Middle East and Asia, so that it is
best placed to benefit from this positive expansion trend.
-- Re-focus Geographical Investment (Optimised Investment) - The
Board takes a disciplined approach to assessing the impacts of the
Group's spending, prioritising those markets with the highest
growth potential and drawing its resources away from areas which do
not perform strongly.
-- Accelerate Complementary Services (Diversified Offer) - The
Group has dedicated resources within Menzies Aviation used to
develop new ancillary service offerings and their roll-out at key
locations across its global network. It is through this programme
that the Board aims to deepen customer relationships and improve
overall margins at these locations.
-- Pursue Hubs and Bases (Growth Agenda) - The Board believes
that the outsourcing of ground handling duties at dense,
strategically important locations by major airlines presents one of
the biggest opportunities to grow Menzies Aviation's earnings and
to channel its investments appropriately.
The Acquisition is strongly aligned to the strategy for Menzies
Aviation, meeting all of the five strategic priorities discussed
above. The strategy will not change following Completion and will
therefore apply to the Enlarged Group.
The Board, led by the Chairman, intends to review the structure
of the Group with a view to maximising shareholder value. This will
include looking at whether the Group's two operating divisions are
best placed to prosper while they are part of one group of
companies. The situation is complex, particularly with regard to
the Group's pension schemes. The Board has already engaged with
specialist advisers and the pension trustees to progress with the
structuring of the pension scheme in such a way as to give the
Board the maximum amount of flexibility in the future. The Board
expects this work to take up to twelve months and it will update
Shareholders when appropriate.
2.3 Reasons for the Acquisition
The Board believes that the strategic rationale for the
Acquisition is compelling and in strong alignment with all of
Menzies' stated strategic priorities for Menzies Aviation. The
combination of Menzies Aviation and ASIG will create a
comprehensive airline service provider covering key elements of
airline services at airports and the Enlarged Group will be a
strong strategically placed player in the majority of the markets
in which it will operate.
The principal strategic and financial benefits of the
Acquisition include:
Enlarged Platform with Significant Scale in North America and at
major international gateways
The combination of ASIG and Menzies Aviation will create one of
the largest aviation services businesses globally. It will
substantially enhance the Group's network, doubling the size of
Menzies Aviation's existing North American operations and adding
significant scale at major international gateways. ASIG currently
operates at eight of the ten busiest United States airports, four
of the five busiest Canadian airports, and eight of the ten busiest
UK airports. In particular, the Acquisition will strengthen the
Menzies Aviation service offering at major international gateways
such as London Heathrow, San Francisco, Denver and Los Angeles.
Enlarged Product Offering
ASIG is a leader in ITP fuelling and FFM in the United States
and the UK and is recognised as a strong brand in these markets.
Its fuelling operations are of a significant size with predictable
and scalable revenue streams. In addition, ASIG's business gives
greater scale and diversification to Menzies Aviation's
complementary services, such as equipment maintenance and de-icing,
increasing the density and diversity of the Enlarged Group's
offering at new and existing stations. Based on the turnover of
Menzies Aviation and ASIG for the financial year ended 31 December
2015, the Board expects that ITP fuelling will contribute 12.0 per
cent. to the Menzies Aviation business going forward.
By adding the product lines incumbent within ASIG, Menzies is
able to offer more services to airlines at those airports where the
Enlarged Group will operate. This is particularly relevant to
ground handling activities, which can be added to existing ITP only
stations operated by ASIG. This offering, together with Menzies'
reputation for safe and secure operations, could be compelling to
both existing and potential airline customers.
Deepening Customer Relationships
The Acquisition would deepen Menzies Aviation's position with
key customers, including Delta Air Lines, United Airlines and IAG,
through provision of more services in more locations. The Enlarged
Group's comprehensive service offering will be used to leverage
existing customer relationships and accelerate growth by also
building new customer relationships with oil companies, such as
Shell, Air BP and Exxon.
Expansion Opportunities
Following the integration of ASIG, there are a number of further
expansion opportunities that the Board intends to explore,
including:
-- a focus on gaining market share in ITP fuelling and FFM as
pure fuelling companies in the United States have retrenched, and
outside the United States continue to retrench, to refineries,
which will allow Menzies Aviation to grow ahead of the wider
airport services market;
-- the roll-out of ASIG fuelling services to Menzies Aviation
locations across the network where ASIG does not currently operate
so as to gain market share through organic expansion;
-- further bolt-on acquisition opportunities, including to expand ASIG's geographic reach; and
-- entry into attractive new geographical markets in which ASIG
already operates, including Thailand, Guam and Puerto Rico.
Delivery of Shareholder Value
The opportunity to rationalise the operations and duplicate cost
bases of Menzies Aviation and ASIG will enable the Group to deliver
significant cost synergies (see paragraph 4.1 below for more
detail).
After taking into account the forecasted synergy benefits and
based (amongst other things) on current economic assumptions, the
Board expects the Acquisition to deliver material enhancement in
underlying earnings per share for Menzies for the financial year
ending 31 December 2017, the first full financial year following
Completion.
2.4 Financial Effects of the Acquisition
The Board has carefully reviewed the expected business and
prospects of the Enlarged Group, as well as the expected synergy
benefits and the associated costs of achieving them. The
Acquisition meets Menzies' criteria for acquisitions and, after
taking into account the forecast synergy benefits, and based on
inter alia current economic assumptions, the Acquisition is
expected by the Board to deliver material enhancement in underlying
earnings per share for Menzies for the financial year ending 31
December 2017, the first full financial year following Completion.
Based on the foregoing, the Board expects the leverage ratio for
the Enlarged Group to be reduced to below 2.0 times net
debt/underlying EBITDA within 18 months of Completion of the
Acquisition.
After taking account of the net present value of the tax
benefits, the Acquisition is expected to deliver a Return on
Invested Capital in excess of Menzies' weighted-average cost of
capital in the first full financial year following Completion
(ending 31 December 2017).
3. SUMMARY INFORMATION ABOUT ASIG
ASIG is an aviation services provider and a leading independent
fuelling services provider, providing ground, fuel and airport
facility services to airlines, airports, oil companies and industry
partners in the commercial aviation sector. It delivers
comprehensive service solutions including ITP fuelling, FFM, ground
handling, aircraft technical support services, facilities equipment
maintenance and de-icing at 88 airports across seven countries in
North America, Central America, Europe and Asia (with a presence in
seven of the top ten global airports by 2014 flight activity). ASIG
is currently ultimately owned by BBA Aviation, and is run as a
standalone division with its president reporting to the ASIG
president of Flight Support and being part of the ASIG Flight
Support management team reporting directly to the BBA Aviation
board.
ASIG was established in 1947 and is headquartered in Orlando,
Florida with an experienced management team and in depth expertise
across many disciplines. The business directly employs over 8,000
people globally, servicing over 600 customers (with longstanding
relationships with the largest of those), including American
Airlines, IAG, Delta Air Lines, Shell and United Airlines. In 2015,
ASIG fuelled over 4.0 million flights, transporting and pumping
more than 10.0 billion gallons of fuel whilst its ground handling
operations serviced over 100,000 flights and events (including
cleaning events).
The results for ASIG for the three years ended 31 December 2015
were as follows:
Financial year ended
31 December (audited)
---------------------------
2015 2014 2013
$m $m $m
-------- -------- -------
Revenue 415.8 451.9 402.6
Operating profit (excluding
BBA Aviation central cost
allocations and joint ventures
and associates) 13.3 18.7 18.8
Operating (loss)/profit after
joint ventures and associates (6.8) 0.5 4.9
(Loss)/profit before taxation (7.9) 0.5 6.1
Gross assets 369.2 380.6 342.6
ASIG's revenue for the financial year ended 31 December 2015
decreased by 8.0 per cent. to $415.8 million (2014: $451.9
million). This revenue decline reflected net contract losses,
principally the losses of the ground handling contract at Terminal
One, John F. Kennedy International Airport, New York and a hotel to
airport baggage handling contract with Disney Magical Express,
Orlando. The operating profit impact of the net contract losses was
$15.8 million in the financial year ended 31 December 2015. In the
financial year ended 31 December 2014, ASIG's revenue increased by
12.2 per cent. to $451.9 million (2013: $402.6 million) reflecting
the impact of the start-up of operations at London Heathrow's newly
opened Terminal 2 and the acquisition of Skytanking USA, Inc. in
the United States. Operating performance in 2014 was adversely
impacted by start-up and operational costs associated with the new
operations at London Heathrow and increased cost allocations from
the parent group, partly offset by the contribution from the
Skytanking USA, Inc. acquisition. By geographic region, the United
States accounted for 64.0 per cent. of ASIG's total revenue, and
the UK 26.9 per cent..
In order to understand the ongoing trading of the operation of
ASIG, the following table reconciles underlying operating profit
adding back BBA Aviation central cost allocations to calculate
underlying operating profit before BBA Aviation central cost
allocations then adjusting for depreciation, and software
amortisation to show acquired underlying EBITDA before BBA Aviation
central cost allocations. The information is presented for each of
the financial years ended 31 December:
Financial year ended
31 December (audited)
---------------------------
2015 2014 2013
$m $m $m
--------- ------- -------
Operating (loss)/profit after
joint ventures and associates (6.8) 0.5 4.9
Add back: Contract amortisation 2.4 1.8 2.0
Non-underlying items 0.3 2.1 5.3
--------- ------- -------
Underlying operating profit (4.1) 4.4 12.2
Add back: BBA Aviation central
cost allocations 20.3 19.3 14.7
--------- ------- -------
Underlying operating profit
before BBA Aviation central
cost allocations 16.2 23.7 26.9
Depreciation 11.4 13.0 11.5
Computer software amortisation 0.1 0.3 0.5
--------- ------- -------
Underlying EBITDA before
BBA Aviation central cost
allocations 27.7 37.0 38.9
--------- ------- -------
ASIG was recharged selling, general and administrative expenses
from BBA Aviation for certain shared services of $20.3 million
(including $3.8 million exceptional costs), $19.3 million and $14.7
million for the years ended 31 December 2015, 2014 and 2013,
respectively, through central cost allocations. Historically, the
centralised functions have included executive senior management,
finance, accounting, internal audit, shared services, information
technology, tax, treasury, legal, human resources and payroll,
regulatory, health safety and environment, insurance, facilities,
and strategy and development. Menzies understands from BBA Aviation
that these recharges reasonably reflect the utilisation of services
provided and benefits received, however, these amounts are not
necessarily representative of the amounts that would have been
incurred had ASIG operated during this period as a separate entity,
nor are they necessarily representative of the amounts expected to
be incurred to provide these functions to ASIG in future. As set
out in paragraph 4.1 below, the Board estimates that the cost to
Menzies of providing these services to ASIG following completion of
the Acquisition will be GBP5.5 million per annum ($7.3
million).
On this basis, the consideration for the Acquisition represents
a multiple of 2015 underlying EBITDA before BBA Aviation central
cost allocations of 9.9x after taking account of the estimated
costs for corporate functions of $7.3 million (GBP5.5 million)
described in paragraph 4.1 below falling to 5.9x after taking
account of the estimated $13.9 million (GBP10.5 million) of annual
cost synergies described in paragraph 4.1 below, and 5.4x after
deduction from the headline consideration of the estimated $15.7
million net present value of the tax benefit described in paragraph
4.2 below.
4. SYNERGIES AND INTEGRATION OF ASIG
4.1 Cost Synergies
The Board believes that, based on its assessment of the
operating expenses of the ASIG business and how it plans to
integrate ASIG into Menzies Aviation, the Acquisition presents
opportunities for significant cost synergies, with the Enlarged
Group expected to achieve aggregate net annual pre-tax cost
synergies of approximately GBP5.0 million by the financial year
ending 31 December 2018, comprising gross cost synergies of GBP10.5
million and additional ongoing costs of GBP5.5 million. These
estimated synergies are contingent on the completion of the
Acquisition and could not be achieved by Menzies independently. The
estimated synergies reflect both the beneficial elements and
relevant costs.
The Board believes cost synergies of approximately GBP10.5
million (equivalent to approximately $13.9 million) can be achieved
by utilising the combined Menzies and ASIG resources across the
Enlarged Group more effectively, principally by removing certain
duplicated costs where there is operational overlap at common hubs
and in the overheads of the Enlarged Group and also through
standardising systems, processes and adopting best practices. The
Board has identified the following potential recurring synergistic
benefits:
-- Removing operational duplication, particularly at sites where
Menzies and ASIG both currently provide ground handling services,
which is presently expected to save some GBP6.3 million in the
financial year ending 31 December 2018. These savings would include
direct labour and operating costs; and
-- Combining regional support functions and overheads (including
shared services), which it is anticipated could achieve savings in
the order of GBP4.2 million in the financial year ending 31
December 2018.
The Board has identified certain corporate functions, for
example HR and IT, that will need to be expanded to replace
corporate services that ASIG currently receives from its parent
company. Currently, it is envisaged that these functions will cost
an estimated GBP5.5 million (approximately $7.3 million at current
exchange rates) in the financial year ending 31 December 2017 and
will partially offset the beneficial elements above.
The Board also expects that the integration process and the
realisation of these cost synergies will result in one-off
exceptional costs of approximately GBP14.3 million, which is
planned primarily to be incurred in the financial year ending 31
December 2017. This total comprises an estimated GBP5.8 million of
costs to achieve the targeted cost synergies and GBP8.5 million of
costs to undertake the integration process.
Furthermore, the Board expects there to be further opportunities
for operational synergies in the future. The Board is currently of
the view that the integration of ASIG can be achieved without
significant disruption to the Enlarged Group.
4.2 Tax Treatment
Following Completion of the Acquisition, the Buyers will acquire
the ordinary shares of ASIG UK, a company organised under the laws
of England and Wales and the shares of common stock of ASIG US, a
Delaware corporation.
In relation to the acquisition of the common stock of ASIG US,
the intention is that a joint election will be made by Menzies
Aviation Inc. and BBA Aviation USA. Inc under section 338(h)(10)
Internal Revenue Code (U.S.). The effect of this election, from a
U.S. federal income tax perspective, should be that the vendor is
deemed to sell, and the purchaser to acquire, the assets of the
ASIG US sub-group. The purchase price given for the shares of ASIG
US plus the liabilities assumed within that sub-group will be
apportioned over the assets acquired, including intangible assets
and goodwill. It is expected that a proportion of this amount will
be allocated to goodwill, which for U.S. federal income tax
purposes can be amortised over a fifteen year period. As a result,
the Board expects to be able to deduct approximately $5.8 million
per year from the Enlarged Group's earnings for tax purposes in the
United States. The Board has been advised that this tax treatment
is uncontroversial and available under longstanding U.S. tax
legislation, and believes that the net present value of this tax
benefit is approximately $15.7 million, assuming an 8.0 per cent.
post-tax discount rate.
4.3 Integration Plan
The Board has developed a plan for the integration of ASIG into
Menzies Aviation based on their experience of successfully
integrating acquired businesses into the Group and successful site
consolidations at airports on the ontake of new customers. The
integration plan also sets out steps proposed to be taken in order
to establish adequate financial position and prospects procedures
to ensure compliance with the Listing Rules and the Disclosure
Guidance by the Enlarged Group following Completion, which is
further supported by work undertaken by external advisors. In order
to provide clarity of leadership and to provide significant focus
to ensure that the deal benefits are realised, the Board
established a steering committee with responsibility for the
implementation of the integration plan, led by Philip Harnden, a
senior Menzies Aviation manager located in the United States. The
integration plan sets target deadlines for the achieving of certain
milestones, ranging from executing certain urgent actions
identified by the Board within 100 days of Completion to full
integration within 12 months of Completion.
5. PRINCIPAL TERMS OF THE ACQUISITION
In order to implement the Acquisition, the Buyers have entered
into the Acquisition Agreement. A more detailed summary of the key
terms of the Acquisition Agreement is set out in Part XI of the
Prospectus.
Under the terms of the Acquisition Agreement, and subject to the
conditions thereunder being satisfied, Menzies has conditionally
agreed to acquire ASIG UK and ASIG US for a cash consideration of
$202.0 million (GBP153.0 million) (subject to certain
adjustments).
Completion of the Acquisition is conditional on, inter alia, (i)
the Acquisition Resolution being passed at the General Meeting;
(ii) the receipt by Menzies of the proceeds of the Rights Issue;
and (iii) obtaining certain regulatory clearances such as from the
CMA.
The End Date of Completion pursuant to the Acquisition Agreement
is 31 May 2017.
The Group will further enter into a transitional services
agreement with the Sellers for the provision of certain
transitional services (such as human resources, IT and finance)
(the "Transitional Services Agreement"). In addition, the Enlarged
Group will also provide facilities-related services to the Sellers
and their affiliates after Completion pursuant to the facilities
services agreements which will be entered into between Menzies and
the Sellers (the "Facilities Services Agreement"). Entry into the
Transitional Services Agreement and the Facilities Services
Agreement is a condition to Completion and the respective heads of
terms for these agreements will form part of the Acquisition
Agreement.
6. FINANCING THE ACQUISITION
It is intended that the entire proceeds of the Rights Issue and
a required proportion of the new acquisition debt facilities will
be used towards funding the Proposed Acquisition and associated
fees, costs and expenses, as well as refinancing the Group's
existing bank facilities. The Proposed Acquisition, associated
costs, fees and expenses and refinancing of the Group's existing
bank facilities will be funded through:
a. GBP75.2 million from the proceeds of the Rights Issue;
and
b. $250.0 million term loan and a required proportion of a
GBP150.0 million revolving credit facility pursuant to the terms of
the Acquisition Facilities Agreement, of which amounts will be
drawn to: (i) finance the Acquisition and associated costs; (ii)
refinance existing financial indebtedness of the Group and,
following Completion, the Enlarged Group; and (iii) in relation to
the revolving credit facility part of this Acquisition Facilities
Agreement only, to use for the general corporate purposes of the
Group and, following Completion, the Enlarged Group.
The Acquisition Facilities Agreement is conditional on inter
alia: (i) the Rights Issue raising a minimum amount of GBP75.0
million; and (ii) the Acquisition Agreement having been signed and
having become unconditional.
7. CURRENT TRADING AND PROSPECTS
7.1 Menzies
The Group's turnover for the six months ended 30 June 2016 was
GBP1,002.2 million (six months ended 30 June 2015: GBP1,001.4
million). Underlying profit before tax rose to GBP18.1 million (six
months ended 30 June 2015: GBP17.0 million) as a result of the
favourable foreign exchange rates and an improvement in
profitability in the Aviation division. The increase in underlying
profit before tax had a consequential impact on underlying earnings
per share which rose 8.5 per cent. to 20.4 pence (six months ended
30 June 2015: 18.8 pence). Profit before tax was GBP3.0 million
(six months ended 30 June 2015: GBP5.8 million), with the reduction
reflecting the impact of GBP10.0 million of exceptional costs (six
months ended 30 June 2015: GBP6.2 million).
On a constant currency basis, the Group's turnover was down 0.6
per cent. to GBP995.3 million (six months ended 30 June 2015:
GBP1,001.4 million) with underlying operating profit GBP0.2 million
higher at GBP20.4 million (six months ended 30 June 2015: GBP20.2
million).
Menzies Aviation is performing well and continues to make
progress in the formation of a joint venture in Oman with
operations aimed to start later in 2016.
Menzies Distribution has benefitted from an increased volume of
football related sticker sales but continues to work to mitigate
volume declines and increased costs relating to the new UK national
living wage legislation. Parcels and trucking operations are
gaining traction with opportunities to further utilise vehicle and
property assets during daylight hours.
Martinair, a subsidiary of KLM/Air France, continues to reduce
its freighter volumes that pass through the Amsterdam airport where
it is a key customer to Menzies Aviation. This resulted in a
non-cash cost of GBP7.2 million relating to the impairment of
assets in the six months ended 30 June 2016. The Board expects that
the reductions in freighter volumes will increase further in 2017
and this will therefore continue to impact the returns of Menzies
Aviation at Amsterdam Airport. The Board is considering its options
on mitigating this loss of earnings.
7.2 ASIG
On an underlying basis, ASIG continued to deliver good
operational improvement in the six months ended June 2016, with
profit increasing as a result of the continuing operational
improvements - new business wins, successful new contract and new
location start-up cost savings and the benefit of the Panama
acquisition - offset by adverse de-icing activity in an unusually
warm first quarter in North America. The profit improvement also
benefitted from a suspension of depreciation during quarter two,
the required accounting treatment whilst the asset is held for
sale.
8. STRUCTURE OF THE RIGHTS ISSUE
The Rights Issue has been structured in a way that is expected
to have the effect of providing Menzies with the ability to realise
distributable reserves approximately equal to the proceeds of the
Rights Issue less the nominal value of the New Ordinary Shares
issued by Menzies.
Menzies and Numis have agreed to subscribe for ordinary shares
in Project Athena (Jersey) Limited ("JerseyCo"). Numis will apply
the proceeds of the Rights Issue received from Qualifying
Shareholders and renouncees and from acquirers of New Ordinary
Shares not taken up by Qualifying Shareholders and renouncees under
the Rights Issue (less any premium above the Issue Price) to
subscribe for redeemable preference shares in JerseyCo.
Menzies will allot and issue the New Ordinary Shares to those
persons entitled thereto in consideration for Numis transferring
its holdings of ordinary shares and redeemable preference shares in
JerseyCo to Menzies. Accordingly, instead of receiving cash
consideration for the issue of the New Ordinary Shares, Menzies
will (following completion of the Rights Issue) own the entire
issued share capital of JerseyCo, whose only asset will be the cash
reserves representing an amount equal to the net proceeds of the
Rights Issue. Menzies should be able to access those funds by
redeeming the redeemable preference shares it holds in JerseyCo or,
alternatively, during any interim period prior to redemption, by
procuring that JerseyCo lends the amount to Menzies. The ability to
realise distributable reserves in Menzies will facilitate servicing
distributions to Shareholders made by Menzies in future.
Accordingly, by taking up New Ordinary Shares under the Rights
Issue and submitting a valid payment in respect thereof, a
Qualifying Shareholder or the person taking up the Rights under the
Rights Issue instructs the Receiving Agent (i) to the extent of a
successful application under the Rights Issue, to apply such
payment on behalf of Numis solely to subscribe for redeemable
preference shares in JerseyCo and (ii) to the extent of an
unsuccessful application under the Rights Issue, to return the
relevant payment without interest to the applicant. Further details
of the documents relating to this structure are set out in
paragraph 17 of Part XII of the Prospectus.
9. PRINCIPAL TERMS OF THE RIGHTS ISSUE
Pursuant to the Rights Issue, the Company is proposing to offer
21,922,403 New Ordinary Shares to Qualifying Shareholders. The
offer is to be made at 343 pence per New Ordinary Share, payable in
full on acceptance by no later than 11.00am on 26 October 2016. The
Rights Issue is expected to raise approximately GBP73.3 million,
net of expenses. The Issue Price represents a 42.1 per cent.
discount to the closing middle market price per Ordinary Share on
15 September 2016, the latest practicable date prior to publication
of this document and a discount of 34.8 per cent. to the
theoretical ex-rights price on the same basis.
The Rights Issue will be made on the basis of
5 New Ordinary Shares at 343 pence per New Ordinary Share for
every 14 Existing Ordinary Shares
held by Qualifying Shareholders at the close of business on the
Record Date.
Entitlements to New Ordinary Shares will be rounded down to the
nearest whole number and fractional entitlements will not be
allotted to Shareholders but will be aggregated and issued into the
market for the benefit of the Company. Holdings of Ordinary Shares
in certificated and uncertificated form will be treated as separate
holdings for the purpose of calculating entitlements under the
Rights Issue.
The Rights Issue is fully underwritten by the Banks pursuant to
the Underwriting Agreement. The principal terms of the Underwriting
Agreement are summarised in Part XII of the Prospectus.
The Rights Issue will result in 21,922,403 New Ordinary Shares
being issued (representing approximately 35.7 per cent. of the
existing issued share capital and 26.3 per cent. of the enlarged
issued share capital immediately following completion of the Rights
Issue, assuming that no options under the Menzies Share Schemes are
exercised between the date of this document and Admission becoming
effective).
The Rights Issue is conditional, inter alia, upon:
-- the Underwriting Agreement having become unconditional in all
respects save for the condition relating to Admission;
-- save for the Acquisition Agreement terminating or becoming
incapable of completing due to the non-satisfaction of the
condition therein relating to the approval of the Proposed
Acquisition by Shareholders, the Acquisition Agreement having been
entered into and not having been varied, modified, supplemented in
any respect (other than in accordance with the terms of the
Acquisition Agreement) which is in the good faith opinion of either
Bank material in the context of the Rights Issue, the Acquisition
and/or Admission, or terminated and not having lapsed;
-- the Acquisition Facilities Agreement being entered into by
the parties thereto and having, and continuing to have, full force
and effect and not having been varied, modified, supplemented in
any respect which is in good faith opinion of either Bank material
in the context of the Rights Issue, the Acquisition and/or
Admission or having been terminated or having lapsed;
-- Admission becoming effective by not later than 8.00am on 12
October 2016 (or such later time and date as the Banks and the
Company may agree, not being later than 8.00 am on 17 October
2016); and
-- the passing of the Rights Issue Resolution.
In addition, general resolutions authorising the allotment of
Ordinary Shares and the waiver of pre-emption rights in respect of
Menzies' share capital as enlarged by the Rights Issue are proposed
to Shareholders for approval at the General Meeting. These
authorities, if passed, would give the Board authority to allot
shares in the Company on a non-pre-emptive basis for general
corporate purposes following the Rights Issue. The Investment
Management Association's Share Capital Management Guidelines
permit, and regard as routine, an authority to allot up to
two-thirds of a company's existing issued share capital. They also
provide that any amount in excess of one-third of a company's
issued share capital should only be applied to fully pre-emptive
rights issue. Resolution 3 therefore will allow the Board to allot
Ordinary Shares in the Company in accordance with these guidelines
after the Rights Issue on the basis of the enlarged share capital
following completion of the Rights Issue. In addition, Resolution 5
will, if passed, give the Board power, pursuant to the authority to
allot granted under Resolution 3, to allot Ordinary Shares or sell
treasury shares for cash on a non-pre-emptive basis without first
offering them to Shareholders of the Company in proportion to their
existing shareholdings in limited circumstances. This power will
permit the Board to allot equity securities: (a) in relation to a
pre-emptive rights issue only, up to a maximum nominal amount
representing approximately two-thirds of the enlarged ordinary
share capital following completion of the Rights Issue; and (b) in
any other case, up to a maximum nominal value representing
approximately 5.0 per cent. of the enlarged ordinary share capital
following completion of the Rights Issue otherwise than in
connection with an offer to Shareholders of the Company. The Board
has no current intention of exercising these powers and these
authorities, if granted, will last until the conclusion of Menzies'
next annual general meeting in 2017 or, if earlier, 30 June
2017.
The Rights Issue is not conditional on Completion. If the Rights
Issue were to proceed but Completion does not take place (including
because Shareholders approve the Rights Issue but not the
Acquisition), the Board's current intention is that the net
proceeds of the Rights Issue will be used to explore alternative
acquisition opportunities, for general corporate purposes
(including to manage the Group's debt and cash position on a short
term basis), or otherwise be returned to Shareholders as soon as
reasonably practicable. Such a return could carry costs for certain
Shareholders and will have costs for the Company.
The New Ordinary Shares, when issued and fully paid, will rank
pari passu in all respects with the Existing Ordinary Shares,
including the right to receive dividends or distributions made,
paid or declared after the date of issue of the New Ordinary Shares
other than in respect of the interim dividend declared on 16 August
2016 for the six months ended 30 June 2016 of 5.4 pence per
Ordinary Share (the "Interim Dividend"), payable only to those
Shareholders registered as holders of Ordinary Shares, fully paid,
on 7 October 2016. Application will be made to the FCA and to the
London Stock Exchange for the New Ordinary Shares to be admitted to
the premium listing segment of the Official List and to trading on
the London Stock Exchange's main market for listed securities,
respectively. It is expected that Admission will become effective
and that dealings on the London Stock Exchange in the New Ordinary
Shares (nil paid) will commence at 8.00am on 12 October 2016.
10. CHAIRMAN'S AWARD
Whilst Dr Dermot Smurfit, the Chairman newly appointed on 25
July 2016, does not currently hold any Ordinary Shares, he intends
to purchase such number of Nil Paid Rights in ordinary market
trading and subsequently take up his resulting rights to New
Ordinary Shares from such Nil Paid Rights so that he will own such
number of Ordinary Shares as represent an aggregate value of up to
GBP2.0 million. In addition, the Company's Remuneration Committee
has determined that it would be appropriate for part of the
Chairman's fee arrangement for his services to be a cash fee to be
satisfied by way of issue of Ordinary Shares in the Company. The
Remuneration Committee believes that this arrangement would align
the Chairman's interests with those of the Company. Such
arrangement would be an exception to the Company's existing
remuneration policy and therefore requires the prior approval of
the Shareholders by ordinary resolution. It is proposed that the
Company shall be permitted to award the Chairman up to 20,000
Ordinary Shares for his services in the first year of his
appointment. The Remuneration Committee intends that the number of
Ordinary Shares to be awarded shall be determined on the basis of
such number of Ordinary Shares as amount to an aggregate value of
GBP100,000 on the basis of the volume weighted average price of an
Ordinary Share over the five Business Days following 27 October
2016, being the date of commencement of dealings in the New
Ordinary Shares, fully paid. Such number of Ordinary Shares shall
be awarded to the Chairman on or around 3 November 2016 following
such determination. The Remuneration Committee has also resolved
that the Chairman shall be awarded that same number of Ordinary
Shares on the second and third anniversaries of the initial award,
provided that he has continued in office up to those dates. The
awards of Ordinary Shares to the Chairman shall have no performance
criteria. The awards are not pensionable. The Board does not
believe that the awards would compromise the Chairman's
independence.
11. FINANCIAL ADVICE
The Board has received financial advice from Numis in relation
to the Acquisition. In providing advice to the Board, Numis have
relied upon the Board's commercial assessment of the
Acquisition.
12. RECOMMATION AND VOTING INTENTIONS
The Board is fully supportive of the Rights Issue and the
Acquisition. Each of the members of the Board who holds Ordinary
Shares either intends, to the extent that he or she is able, to
take up in full his or her rights to subscribe for New Ordinary
Shares under the Rights Issue or to sell a sufficient number of
their Nil Paid Rights during the nil paid trading period to meet
the costs of taking up the balance of his or her entitlement to New
Ordinary Shares.
The Board believes the Acquisition and the Resolutions to be in
the best interests of Menzies and Shareholders as a whole and,
accordingly, unanimously recommends that the Shareholders vote in
favour of the Resolutions, as the members of the Board each intend
to do in respect of their own legal and beneficial holdings,
amounting to 1,761,384 Ordinary Shares (representing approximately
2.9 per cent. of the Company's existing issued share capital as at
15 September 2016, being the last practicable date prior to the
date of this document).
APPIX - DEFINITIONS
"Acquisition" means the acquisition of ASIG UK and ASIG US by
the Buyers, pursuant to the Acquisition Agreement;
"Acquisition Agreement" means the stock purchase agreement
amongst the Buyers and the Sellers dated 16 September 2016, in
relation to the Acquisition of ASIG UK and ASIG US and as further
described in Part XI of the Prospectus;
"Admission" means the admission of the New Ordinary Shares, nil
paid, to:
a) the premium listing segment of the Official List; and
b) trading on the London Stock Exchange's main market for listed securities;
"AMI" means Air Menzies International;
"Articles" or "Articles of Association" means the memorandum and
the articles of association of the Company which are described in
paragraph 5 of Part XII of the Prospectus;
"ASIG" means ASIG UK and ASIG US taken together;
"ASIG UK" means ASIG Holdings Ltd;
"ASIG US" means ASIG Holdings Corp;
"BBA Aviation" means BBA Aviation plc;
"Banks" means Numis Securities and Shore Capital;
"Buyers" means each of Menzies Aviation and Menzies US;
"Chairman" means the chairman of the Company;
"CMA" means Competition and Markets Authority;
"Company" or "Menzies" means John Menzies plc, a public limited
company incorporated under the laws of Scotland with registered
number SCO34970;
"Completion" means the closing of the Acquisition pursuant to
the Acquisition Agreement;
"CREST" means the relevant system (as defined in the CREST
Regulations) for the paperless
settlement of trades in listed securities in the United Kingdom,
of which Euroclear is the operator (as
defined in the CREST Regulations);
"CREST Regulations" means the Uncertificated Securities
Regulations 2001 (SI 2001/3755);
"Disclosure Guidance" means the Disclosure Guidance and
Transparency Rules of the Financial
Conduct Authority as amended from time to time;
"End Date" means the end date as defined in the Acquisition
Agreement, being 31 May 2017;
"Enlarged Group" means the Group following the Acquisition;
"Euroclear" means Euroclear & Ireland Limited;
"Existing Ordinary Shares" means the Ordinary Shares in issue
immediately preceding the issue of the New Ordinary Shares;
"Facilities Services Agreement" means one or more facilities
services agreements, as described in
paragraph 17.4 of Part XII of the Prospectus;
"Financial Conduct Authority" or "FCA" means the UK Financial
Conduct Authority acting in its capacity as the competent authority
for the purposes of Part VI of the FSMA;
"Form of Proxy" means the form of proxy enclosed with this
document for use in connection with the General Meeting;
"FSMA" means the Financial Services and Markets Act 2000, as
amended;
"General Meeting" means the general meeting of the Company to be
held at the offices of DLA Piper Scotland LLP, Collins House,
Rutland Square, Edinburgh, EH1 2AA at 11.00 am on 11 October 2016,
notice of which is set out in the Prospectus;
"Group" means the Company and its subsidiary undertakings and,
where the context requires, its associated undertakings from time
to time;
"Interim Dividend" means the interim dividend of 5.4 pence
declared by the Board on 16 August 2016 for the six months ended 30
June 2016 to be paid on 18 November 2016 to the Shareholders who
are on the Company's register on 7 October 2016;
"Issue Price" means 343 pence per New Ordinary Share;
"JerseyCo" means Project Athena (Jersey) Limited;
"Listing Rules" means the listing rules of the Financial Conduct
Authority;
"London Stock Exchange" means the London Stock Exchange plc;
"Menzies Aviation" means the operating division of the Company
delivering passengers, ramp and cargo services to airline
operators, with parent company Menzies Aviation plc, a public
limited company incorporated under the laws of England and Wales
with registered number 02961404;
"Menzies Distribution" means the operating division of the
Company delivering distribution and marketing services to the
newspaper and magazine supply chain in the United Kingdom, with
parent company Menzies Distribution Limited, a private limited
company incorporated under the laws of England and Wales with
registered number 01430241;
"Menzies Share Schemes" means the schemes or plans described in
paragraph 11 of Part XII of the Prospectus;
"Menzies U.S." means Menzies Aviation Inc., a Delaware
Corporation;
"New Ordinary Shares" means the 21,922,403 new Ordinary Shares
which the Company will allot and issue pursuant to the Rights
Issue;
"Nil Paid Rights" means the rights to acquire New Ordinary
Shares, nil paid;
"Numis Securities" means Numis Securities Limited;
"Ordinary Shares" means the ordinary shares of 25 pence each in
the capital of the Company having the rights set out in the
Articles, as described in paragraph 5 of Part XII of the
Prospectus;
"Overseas Shareholders" means the Qualifying Shareholders with
registered addresses in, or who are citizens, residents or
nationals of, jurisdictions outside of the United Kingdom;
"Prospectus" means the prospectus and class 1 circular issued by
the Company in respect of the Rights Issue, together with any
supplements or amendments thereto;
"Provisional Allotment Letter" means the provisional allotment
letter to be issued to Qualifying Non-CREST Shareholders (other
than certain Overseas Shareholders);
"Qualifying Non-CREST Shareholders" means the Qualifying
Shareholders holding Ordinary Shares in certificated form;
"Qualifying Shareholders" means the Shareholders on the register
of members of the Company at the Record Date;
"Receiving Agent" means Computershare Investor Services PLC;
"Record Date" means close of business on 10 October 2016;
"Resolutions" means the resolutions to be proposed at the
General Meeting in connection with the Proposed Acquisition and the
Rights Issue, notice of which is set out in the Prospectus;
"Return on Invested Capital" is calculated as underlying
operating profit divided by invested capital.
Invested capital represents the purchase consideration,
transaction costs associated with the
Acquisition, one-off exceptional costs for integration and
realisation of cost synergies less the net
present value of the tax benefit under section 338(h)(10)
Internal Revenue Code (U.S.);
"Rights Issue" means the offer by way of rights to Qualifying
Shareholders to subscribe for New Ordinary Shares, on the terms and
conditions set out in this document and, in the case of Qualifying
Non-CREST Shareholders only, the Provisional Allotment Letter;
"Rights Issue Resolution" means the ordinary resolution to be
proposed at the General Meeting (and set out as resolution 2 in the
Notice of General Meeting) to approve the allotment of the Rights
Issue Shares;
"Sellers" means U.S. Seller and UK Seller;
"Shareholders" means the holders of Ordinary Shares;
"Shore Capital" means Shore Capital Stockbrokers Limited;
"Transitional Services Agreement" means one or more transitional
services agreements, as described in paragraph 17.3 of Part XII of
the Prospectus;
"UK" or "United Kingdom" means the United Kingdom of Great
Britain and Northern Ireland;
"UK Seller" means BBA Holdings Limited, a limited company
incorporated under the law of
England and Wales with registered number 00546693;
"uncertificated" or "in uncertificated form" means recorded on
the register of members as being held in uncertificated form in
CREST and title to which, by virtue of the CREST Regulations, may
be
transferred by means of CREST;
"Underwriting Agreement" means the underwriting agreement
described in paragraph 17.1 of Part XII of the Prospectus;
"United States" or "U.S." means the United States of America,
its territories and possessions, any state of the United States and
the District of Columbia;
"U.S. Seller" means BBA Aviation USA Inc., a Delaware
Corporation.
"$", "US$", "U.S. dollars" or "dollars" means the lawful
currency of the United States; and
"GBP", "sterling", "pounds sterling" or "GBP" means the lawful
currency of the United Kingdom.
GLOSSARY
B2B business to business
FFM fuel farm management
Ground handling services above-wing services and below-wing services
ITP fuelling into plane fuelling
IMPORTANT NOTICE
The contents of this announcement have been prepared and issued
by, and are the sole responsibility of, the Company.
This announcement is not a prospectus but an advertisement and
investors should not acquire any Nil Paid Rights, Fully Paid Rights
or New Ordinary Shares referred to in this announcement except on
the basis of the information contained in the Prospectus. The
information contained in this announcement is for background
purposes only and does not purport to be full or complete. No
reliance may be placed for any purpose on the information contained
in this announcement or its accuracy or completeness. This
announcement cannot be relied upon for any investment contract or
decision. The information in this announcement is subject to
change.
A copy of the Prospectus when published will be available from
the registered office of John Menzies and on John Menzies' website
at www.johnmenziesplc.com provided that the Prospectus will not,
subject to certain exceptions, be available (whether through the
website or otherwise) to John Menzies' Shareholders in the Excluded
Territories.
Neither the content of John Menzies' website nor any website
accessible by hyperlinks on John Menzies' website is incorporated
in, or forms part of, this announcement. The Prospectus will give
further details of the New Ordinary Shares, the Nil Paid Rights and
the Fully Paid Rights being offered pursuant to the Rights
Issue.
This announcement is for information purposes only and is not
intended to and does not constitute or form part of any offer or
invitation to purchase or subscribe for, or any solicitation to
purchase or subscribe for, Nil Paid Rights, Fully Paid Rights or
New Ordinary Shares or to take up any entitlements to Nil Paid
Rights in any jurisdiction in which such an offer or solicitation
is unlawful. The information contained in this announcement is not
for release, publication or distribution to persons in any of the
Excluded Territories and should not be distributed, forwarded to or
transmitted in or into any jurisdiction where to do so might
constitute a violation of local securities laws or regulations.
This announcement does not constitute, or form part of, an offer
to sell or the solicitation of an offer to purchase or subscribe
for any Company securities in in the United States or in any other
Excluded Territory. The Provisional Allotment Letters, the Nil Paid
Rights, the Fully Paid Rights and the New Ordinary Shares have not
been and will not be registered under the US Securities Act of
1933, as amended (the "Securities Act") or under any securities
laws of any state or other jurisdiction of the United States, and
may not be offered, sold, taken up, exercised, resold, renounced,
or otherwise transferred, directly or indirectly, in or into the
United States except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act and in compliance with any applicable securities
laws of any state or other jurisdiction of the United States.
There will be no public offering of the Provisional Allotment
Letters, the Nil Paid Rights, the Fully Paid Rights or the New
Ordinary Shares in the United States or in any other Excluded
Territory.
The distribution of this announcement into jurisdictions other
than the United Kingdom may be restricted by law, and, therefore,
persons into whose possession this announcement comes should inform
themselves about and observe any such restrictions. Any failure to
comply with any such restrictions may constitute a violation of the
securities laws of such jurisdiction. In particular, subject to
certain exceptions, this announcement, the Prospectus and the
Provisional Allotment Letter should not be distributed, forwarded
to or transmitted in any of the Excluded Territories.
This announcement does not constitute a recommendation
concerning the Rights Issue. The price and value of securities can
go down as well as up. Past performance is not a guide to future
performance. The contents of this announcement are not to be
construed as legal, business, financial or tax advice. Each
Shareholder or prospective investor should consult his, her or its
own legal adviser, business adviser, financial adviser or tax
adviser for legal, financial, business or tax advice.
Numis Securities Limited ("Numis") and Shore Capital
Stockbrokers Limited ("Shore Capital", and together with Numis, the
"Banks") are each authorised and regulated by the FCA in the United
Kingdom, are each acting solely for the Company in relation to the
Rights Issue and nobody else (whether or not a recipient of this
document) as a client in relation to the Proposed Acquisition, the
Rights Issue and Admission and will not be responsible to anyone
other than the Company for providing the protections afforded to
their respective clients nor for providing advice in relation to
the Proposed Acquisition, the Rights Issue and Admission or any
other matter referred to in this document.
Apart from the responsibilities and liabilities, if any, which
may be imposed upon the Banks by the FSMA or the regulatory regime
established thereunder, None of the Banks accept any responsibility
whatsoever or make any representation or warranty, express or
implied, concerning the contents of this document, including its
accuracy, completeness or verification, or concerning any other
statement made or purported to be made by it, or on its behalf, in
connection with the Company, the Nil Paid Rights, the Fully Paid
Rights, the New Ordinary Shares, the Provisional Allotment Letters,
the Rights Issue or the Proposed Acquisition, and nothing in this
document is, or shall be relied upon as, a promise or
representation in the respect, whether as to the past or future.
The Banks accordingly disclaim, to the fullest extent permitted by
law, all and any responsibility and liability whether arising in
tort, contract or otherwise which they might otherwise have in
respect of this document or any such statement.
The Banks may, in accordance with applicable laws and
regulations, engage in transactions in relation to the Provisional
Allotment Letters, the Nil Paid Rights, the Fully Paid Rights, the
New Ordinary Shares and/or related instruments for their own
account for the purpose of hedging their underwriting exposure or
otherwise. Except as required by applicable laws or regulations,
the Banks do not propose to make any public disclosure in relation
to such transactions.
The date of Admission may be influenced by factors such as
market conditions. There is no guarantee that the Rights Issue and
Admission will occur and you not should base your financial
decisions on the Company's intentions in relation to the Rights
Issue and Admission at this stage. Acquiring investments to which
this announcement relates may expose an investor to a significant
risk of losing the entire amount invested. The value of shares can
decrease as well as increase. This announcement does not constitute
a recommendation concerning the Rights Issue. Persons considering
investment in such investments should consult an authorised person
specialising in advising on such investments.
Certain figures in this announcement, including financial
information, have been subject to rounding adjustments.
Accordingly, in certain instances, the sum or percentage change of
the numbers contained in this announcement may not conform exactly
with the total figure given.
Notice to investors in Switzerland
The Nil Paid Rights, the Fully Paid Rights and the New Ordinary
Shares may not be publicly offered in Switzerland and will not be
listed on the SIX Swiss Exchange ("SIX") or on any other stock
exchange or regulated trading facility in Switzerland. This
prospectus has been prepared without regard to the disclosure
standards for issuance prospectuses under art. 652a of the Swiss
Code of Obligations or the disclosure standards for listing
prospectuses under art. 27 ff. of the SIX Listing Rules or the
listing rules of any other stock exchange or regulated trading
facility in Switzerland. Neither this document nor any other
offering or marketing material relating to the Nil Paid Rights, the
Fully Paid Rights and the New Ordinary Shares or the Rights Issue
may be publicly distributed or otherwise made publicly available in
Switzerland. Neither this document nor any other offering or
marketing material relating to the Rights Issue, the Company, the
Nil Paid Rights, the Fully Paid Rights and the New Ordinary Shares
have been or will be filed with or approved by any Swiss regulatory
authority. In particular, this document will not be filed with, and
the offer of Nil Paid Rights, Fully Paid Rights and New Ordinary
Shares will not be supervised by, the Swiss Financial Market
Supervisory Authority FINMA, and the offer of Nil Paid Rights,
Fully Paid Rights and New Ordinary Shares has not been, and will
not be, authorised under the Swiss Federal Act on Collective
Investment Schemes ("CISA"). The investor protection afforded to
acquirers of interest in collective investment schemes under CISA
does not extend to acquirers of Nil Paid Rights, Fully Paid Rights
and New Ordinary Shares.
Cayman Islands Selling Restriction
Menzies does not intend to establish a place of business or
otherwise intend to conduct business in the Cayman Islands.
Accordingly, Menzies should not be subject to the supervision of
any Cayman Islands authority.
Notice to investors in the British Virgin Islands
This prospectus has not been, and will not be, registered with
the Financial Services Commission of the British Virgin Islands. No
registered prospectus has been or will be prepared in respect of
the Nil Paid Rights, the Fully Paid Rights and the New Ordinary
Shares for the purposes of the Securities and Investment Business
Act, 2010 ("SIBA") or the Public Issuers Code of the British Virgin
Islands. The Nil Paid Rights, the Fully Paid Rights and the New
Ordinary Shares may be offered to persons located in the British
Virgin Islands who are "qualified investors" for the purposes of
SIBA. Qualified investors include (i) certain entities which are
regulated by the Financial Services Commission in the
British Virgin Islands, including banks, insurance companies,
licensees under SIBA and public, professional and private mutual
funds; (ii) a company, any securities of which are listed on a
recognised exchange; and (iii) persons defined as "professional
investors" under SIBA, which is any person (a) whose ordinary
business involves, whether for that person's own account or the
account of others, the acquisition or disposal of property of the
same kind as the property, or a substantial part
of the property of the Company; or (b) who has signed a
declaration that he, whether individually or jointly with his
spouse, has net worth in excess of $1.0 million and that he
consents to being treated as a professional investor.
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACQAKADPPBKKQCD
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September 16, 2016 02:00 ET (06:00 GMT)
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