24 Jun 2008
THIS ANNOUNCEMENT (AND THE INFORMATION
CONTAINED HEREIN) IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION,
DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA OR
AUSTRALIA.
Chemring Group PLC ("Chemring", the "Company" or
the "Group")
Acquisition of Martin Electronics, Inc. for USD70
million
Vendor Placing and Cash Placing of 2.67 million
new ordinary shares in Chemring at 2250 pence per share to raise a
total of GBP60 million
Introduction
The Board of Chemring announces that it has conditionally agreed
to acquire the entire stock capital of Martin Electronics, Inc.
("MEl"), a specialist manufacturer of ammunition, fuzes, signalling
and other pyrotechnically activated devices for use in the defence
sector, based in Florida, USA, for a consideration of USD70.0
million (GBP35.5 million). The consideration is being funded by way
of a vendor placing of 1,555,555 new ordinary shares in Chemring
("Vendor Placing") at 2250 pence per share (the "Placing Price") to
raise approximately GBP 35.0 million.
In addition, the Board also announces that it is retrospectively
funding the USD40.0 million (GBP20 million) acquisition of Scot,
Inc, ("Scot") from SMS Industries, Inc., announced on 27 May 2008,
by way of a placing for cash ("Cash Placing") of 1,111,112 new
ordinary shares, also at the Placing Price, to raise approximately
GBP25.0 million. This placing will cover both the acquisition price
of Scot and an additional amount to cover transaction expenses.
Acquisition of MEl and the Placings
MEl was founded in 1954, and operates from its headquarters and
production facilities near Perry, Florida, USA. MEl manufactures a
range of close combat products including training grenade fuzes,
pyrotechnics and specialist 40mm ammunition. Its customers include
the US military, prime contractors and overseas governments.
In the year ended 31 December 2007, MEl reported an audited
profit before tax and annual non-recurring costs (relating to
shareholder expenses and insurance of USD1.0 million) of USD4.2
million (2006: USD1.9 million) on turnover of USD25.3 million
(2006: USD19.0 million). In the last twelve months to 30 April
2008, MEl's unaudited profit before tax and annual non-recurring
costs (relating to shareholder expenses and insurance of USD1.0
million) was USD5.9 million on turnover of USD30.1 million .The
order book at 30 April 2008 was USD60 million, up 72% since 31
December 2007. The gross assets of MEl at 31 December 2007 were
USD17.4 million (2006: USD12.0 million).
MEl will position Chemring strongly within key niches in the US
munitions components market, increasing the Group's capabilities by
providing a platform from which to develop niche prime contract
opportunities in the USA. The acquisition is in line with
Chemring's strategy of building its presence in the US energetics
field, acting as a consolidator in these markets. The acquisition
provides Chemring with an additional centre of excellence in the
USA, broadening its expertise and service offering within a sector
well understood by the Company.
The consideration for the acquisition of MEl is USD70.0 million
(GBP35.5million), which will be paid to the vendors in cash on
completion. The consideration is being funded by a vendor placing
of new ordinary shares, raising approximately GBP35 million before
expenses. The sale and purchase agreement (the "Acquisition
Agreement") is conditional, upon, inter alia, the expiry of the
thirty day waiting period imposed by the Hart-Scott-Rodino and
Exon-Florio provisions, and the acquisition is expected to complete
on 25 July 2008 or shortly thereafter. The Acquisition Agreement is
not conditional on the completion of the Vendor Placing. In the
event that the Vendor Placing does not complete, the acquisition
will be funded out of the Company's cash resources and existing
bank facilities.
Retrospective funding of Scot and Cash
Placing
The total consideration for the acquisition of Scot, announced
on 27 May 2008, of USD40.0 million (GBP20 million) is being
retrospectively funded by a cash placing of GBP25 million, with the
excess raised covering an additional GBP4.6 million of expenses.
Scot is a leading manufacturer of cartridge-actuated and
propellant-actuated devices (CAD/PADs) used in aircraft emergency
systems, missiles and space launch vehicles. The company also
designs and manufactures actuators, valves and sequencers,
separation nuts and bolts, and aircraft weapon ejector systems.
Impact of acquisitions
Chemring expects that the acquisition of both MEl and Scot will
be earnings enhancing (excluding the impact of the amortisation of
acquired intangible assets), and that the full financial benefits
of the acquisitions will be felt in the Company's financial year
ending 31 October 2009. This statement is not a profits forecast
and should not be taken to mean that profits in any period will be
greater than those in any previous period.
Placings
The Vendor Placing and the Cash Placing have been fully
underwritten by Investec Bank (UK) Limited ("Investec") pursuant to
the terms of an agreement entered into by Chemring and Investec
(the "Placing Agreement").
Application has been made for the Cash Placing shares and the
Vendor Placing shares to be admitted to the Official List of the UK
Listing Authority and to the London Stock Exchange's Main Market
("Admission"). The Cash Placing is expected to complete on 27 June
2008 and is conditional, inter alia, on Admission of the Cash
Placing shares which is expected to take place on that day (when
CREST accounts will be credited). The Vendor Placing is expected to
complete on 25 July 2008 and is conditional, inter alia, on the
completion of the MEl acquisition and Admission of the Vendor
Placing shares which is expected to take place on that day (when
CREST accounts will be credited). On Admission, both the Cash
Placing shares and the Vendor Placing shares will rank pari passu
in all respects with the existing ordinary shares in Chemring.
Dr David Price, Chief Executive of Chemring, commented:
"The acquisition of the two companies will substantially
increase Chemring's US energetics presence, creating a substantial
platform from which to address the USD1.9 billion US market for
pyrotechnics and munitions components."
Enquiries:
| Ken Scobie |
Chairman, Chemring Group PLC |
01489881880 |
| Dr David Price |
Chief Executive, Chemring Group PLC |
01489881880 |
| Paul Rayner |
Finance Director, Chemring Group PLC |
01489881880 |
| Keith Anderson |
Investec |
020 7597 5970 |
| Michael Ansell |
Investec |
020 7597 5970 |
| Rupert Pittman |
Cardew Group |
020 7930 0777 |
The information contained in this announcement does not
constitute an offer to sell or the solicitation of an offer to buy,
nor shall there be any sale of, the securities referred to herein
in any jurisdiction in which such offer, solicitation or sale would
be unlawful absent registration, exemption from registration or
qualification under the securities laws of such jurisdiction.
This announcement is not an offer of securities for sale in the
United States. Securities may not be offered or sold in the United
States absent registration under the US Securities Act of 1933, as
amended (the "US Securities Act"), or an exemption therefrom.
Chemring has not and does not intend to register any securities
under the US Securities Act, and does not intend to offer any
securities to the public in the United States. No money, securities
or other consideration from any person inside the United States is
being solicited and, if sent in response to the information
contained in these written materials, will not be accepted.
Investec Investment Banking, a division of Investec Bank (UK)
Limited, which is authorised and regulated by the Financial
Services Authority and is a member of the London Stock Exchange, is
acting exclusively for Chemring in connection with the Vendor
Placing and Cash Placing and is not acting for any other person
other than Chemring and will not be responsible to any person other
than Chemring for providing the protections afforded to its
customers or for providing advice on the transactions or
arrangements referred to in this announcement.
Nothing in this announcement should be construed as a profit
forecast or be interpreted to mean that the future earnings per
share or profits of Chemring will necessarily be greater than the
historic published earnings per share.