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Recommended Cash Offer for Foseco plc by Cookson

Published on 2007-10-16. Author : SpecialChem

The boards of Cookson Group plc ("Cookson") and Foseco plc ("Foseco") are pleased to announce that they have reached agreement on the terms of a recommended cash offer by Cookson for the entire issued and to be issued share capital of Foseco (the "Acquisition"). The directors of Foseco, who have been so advised by Greenhill, consider the terms of the Acquisition to be fair and reasonable. In providing its advice, Greenhill has taken into account the commercial assessments of the directors of Foseco. Accordingly, the directors of Foseco intend unanimously to recommend Foseco Shareholders to vote in favour of the Scheme and the resolutions at the Court Meeting and the EGM, as those directors who are holders of Foseco Shares have irrevocably undertaken to do in respect of their own beneficial shareholdings.

Cookson believes that the Acquisition has a clear and compelling industrial and financial rationale, with significant benefits for its shareholders and other stakeholders. Foseco has a leading market position in its principal Foundry division, a Steel division which is complementary to Cookson's business and an established infrastructure with operations in all key geographies. Foseco's high quality employees and well-regarded operational management have built a strong record of growth in revenue, profitability and cash generation. In addition, the endmarkets for both divisions are strong and are expected to continue with "GDP plus" revenue growth over the medium-term. Foseco is highly complementary to Cookson's existing Ceramics division with both businesses supplying products and services into the foundry and steel-making industries. The combination of these businesses will enhance Cookson's product and service offering in both of these markets, thus providing its customers in foundry and steel markets with an excellent range of higher value-added products and services.

The integration of the two businesses should generate cost synergies of approximately £9 million in the first twelve month period post completion of the Acquisition rising to an ongoing annual rate of approximately £18 million thereafter through the elimination of overhead duplications (general and administrative, including head office) and increased purchasing efficiencies. Cash costs of approximately £15 million are expected to be incurred to realise these synergies with these costs being incurred in the first twelve month period post completion. In addition, revenue synergies are anticipated through the cross-selling of Cookson's foundry products through Foseco's sales network and vice versa for Foseco's steel products. Cookson expects the Acquisition to generate a return on invested capital ("ROIC") in excess of its weighted average cost of capital ("WACC") in the second twelve month period after completion of the Acquisition. In addition, Cookson expects the Acquisition to have a neutral impact on Cookson's headline earnings per share in financial year 2008 and significantly enhance Cookson's headline earnings per share thereafter.

Cookson's blended tax rate after the completion of the Acquisition is expected to be approximately 30.5 per cent. in 2008 and 30.0 per cent. in 2009. The funding of the Acquisition should ensure that post completion Cookson will remain in a strong credit position. At completion, net debt to pro forma EBITDA is expected to be approximately 2.5 times, reducing to less than 2.0 times by the end of 2009.

About Cookson

Cookson is a leading materials science company operating on a worldwide basis in the Ceramics, Electronics and Precious Metals markets. The Ceramics division is a leading supplier of advanced flow control refractory products and systems to the global steel industry and a leading supplier of specialist ceramics products for the glass, solar and foundry industries. It is also the regional leader in the US, the UK and Australia in the supply and installation of monolithic refractory linings. The Electronics division is a leading supplier of advanced surface treatment and plating chemicals and assembly materials to the electronics, industrial and automotive markets. The Precious Metals division is a leading supplier of fabricated precious metals (primarily gold, silver and platinum) to the jewellery industry in the US, the UK, France and Spain. For the year ended 31 December 2006, Cookson reported profit before taxation of £113.5 million on revenue of £1,661 million and had total assets as at 31 December 2006 of £1,310 million. For the six months ended 30 June 2007, Cookson reported profit before taxation of £67.6 million on revenue of £786 million and had total assets as at 30 June 2007 of £1,293 million. Cookson is a FTSE 250 company, headquartered in London and listed on the London Stock Exchange. As at 10 October 2007, Cookson had a market capitalisation of approximately £1,591 million.

About Foseco

Foseco is a leading supplier of consumable products for use in the foundry and steel-making industries. Foseco has a highly trained sales and service network in 32 countries and operates 29 production facilities in 17 countries. Foseco has major facilities in Germany, the US, the UK, Brazil, China, India, South Korea and Japan. Foseco serves the foundry and the steel-making industries through two operating divisions: Foseco Foundry and Foseco Steel. Foseco Foundry accounts for approximately 80 per cent. of Foseco's revenue and supplies consumable products, together with technical services and support, to thefoundry industry worldwide. For the year ended 31 December 2006, Foseco Foundry generated revenue of £327 million. Foseco Steel provides value-added, high-performance consumables and services to the steel-making industry, principally in Europe and North America. For the year ended 31 December 2006, Foseco Steel generated revenue of £82 million. For the year ended 31 December 2006, Foseco reported profit before taxation of £40.4 million on revenue of £409 million and had total assets as at 31 December 2006 of £255 million. For the six months ended 30 June 2007, Foseco reported profit before taxation of £21.9 million on revenue of £215 million and had total assets as at 30 June 2007 of £255 million.

Forward-looking statements

This announcement includes "forward-looking statements" concerning Foseco and Cookson. These statements are based on the current expectations of the management of Foseco and Cookson and are naturally subject to uncertainty and changes in circumstances. Forward-looking statements include, without limitation, statements typically containing words such as "intends", "expects", "anticipates", "targets", "estimates" and words of similar import. By their nature, forwardlooking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Neither Foseco nor Cookson undertake any obligation to update publicly or revise forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.

Source: Cookson Group plc


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