Peab AB makes a public offer to shareholders and convertible holders in Peab Industri AB
The Extra General Meeting in Peab AB (publ) (”Peab”) has today decided to make a public offer to shareholders and convertible holders in Peab Industri AB (publ) (”Peab Industri”) to transfer all the shares and convertibles in Peab Industri to Peab (”Offer”). The Class B shares in Peab and Peab Industri are listed on OMX Nordic Exchange Stockholm AB (”OMX”), Mid Cap. The Class A shares in each company are unlisted, as are the convertibles in Peab Industri.
Summary
· Peab offers three (3) newly issued Class A shares in Peab for two (2) Class A shares in Peab Industri and three (3) newly issued Class B shares in Peab for two (2) Class B shares in Peab Industri.
· The Offer entails a bid premium of around 25 percent based on the final price paid for each company’s Class B share on 14 October 2008. The Offer entails a bid premium of around 22 percent based on the average final price paid for each company’s Class B share during the last10 trading days before 15 October 2008.[1] The Offer entails a bid premium of around 1 percent based on the final price paid for each company’s Class B share on 7 November 2008 as well as a bid premium of around 3 percent based on the average final prices paid for each company’s Class B share during the last10 trading days before 10 November 2008.
· Peab offers SEK 66.15 in cash for each convertible issued by Peab Industri, which corresponds to a nominal amount that includes accrued interest on the convertible.
· Shareholders corresponding to approximately 71 percent of the votes and around 42 percent of the capital in Peab Industri have committed to accept the Offer.[2]
· The subscription period will be from 13 November to 3 December 2008.
Background and motive
Peab was founded in 1959 by brothers Erik and Mats Paulsson. Peab is now a leading Nordic company in construction and civil engineering with a turnover of around SEK 34 billion and some 12,000 employees. The Group operates primarily in Sweden but to a certain extent in Norway and Finland as well. Peab operates nationwide in Sweden, with offices from Kiruna in the north to Trelleborg in the south. In Norway business is concentrated to the Oslo area and in Finland to the Helsingfors area.
In the autumn of 2006 Peab’s Board of Directors announced its intention to distribute subsidiary Peab Industri to the shareholders in Peab and list it on OMX. At the time the companies had combined turnover of SEK 30 billion. The distribution allowed the operations in the two parts of Peab to concentrate construction and civil engineering to Peab and related services to Peab Industri.
The decision to distribute Peab Industri, which was made in the market situation at that time where demand was on the rise in all of Peab’s operations, created the ability to specialise each company while maintaining close cooperation between the companies.
Today Peab Industri is one of the leading Nordic suppliers in the industry and it has strategically important assets for the construction and civil engineering industry with a turnover of SEK 8 billion and some 2,400 employees. Opera Peab Industri’s business is divided into three complementary business areas– Machines, Products and Services – all of them are focused on the construction and civil engineering market.
Having been able to operate in two separate companies during the recent boom economy has contributed to strong growth for both Peab Industri and Peab and their combined annual turnover is around SEK 40 billion.
Due to the downfall in the economy Peab believes it will be strategically important in the future to have close access to machine and raw material supplies. Merging with Peab Industri provides Peab with a better way to optimize industrialisation in the building process while rationalising the purchasing organisation. This is particularly important in larger infrastructure projects, which are expected to become increasingly significant in coming years.
A merger between Peab and Peab Industri boosts the Group’s financial strength since the two companies’ financial resources will be coordinated. This will, for instance, raise the equity/debt ratio and create conditions for improved cash-flow in the new group compared to the current Peab. The merger will also generate certain synergies in the central administration and only one listing on OMX will be required.
At the moment Peab does not see the need for restructuring that would lead to reductions in the number of employees, major changes in employment terms or employment in Peab Industri’s workplaces. In the current market situation Peab believes a merger will strengthen both companies’ competitive capacity and improve their ability to increase market shares in the markets where the companies are active.
After the merger Peab Industri will continue to operate with the same marketing strength and under its own strong brands deliver good quality in every aspect to the construction and civil engineering industry. Peab Industri, which has a number of customers outside Peab, will continue to meet all their customers’ needs with the same high level of service at competitive prices.
All in all, the merger makes for an industrially stronger company to face short and long term challenges.
The Offer in detail
Peab offers three (3) newly issued Class A shares in Peab for two (2) Class A shares in Peab Industri and three (3) newly issued Class B shares in Peab for two (2) Class B shares in Peab Industri.
Peab Industri has two outstanding convertible programs, (i) Peab Industri Convertibles 2007/2012 I and (ii) Peab Industri Convertibles 2007/2012 II. All the convertibles in the convertible program Peab Industri Convertibles 2007/2012 II are held by Peab. Peab offers SEK 66.15 in cash for each convertible issued by Peab Industri, which corresponds to a nominal amount that includes accrued interest on the convertible.
The Offer entails a bid premium of around 25 percent based on the final price paid for each company’s Class B share on 14 October 2008. The Offer entails a bid premium of around 22 percent based on the average final price paid for each company’s Class B share during the last10 trading days before 15 October 2008.[3] The Offer entails a bid premium of around 1 percent based on the final price paid for each company’s Class B share on 7 November 2008 as well as a bid premium of around 3 percent based on the average final price paid for each company’s Class B share during the last10 trading days before 10 November 2008.
Based on the final price paid for Class B shares in Peab 7 November 2008 the bid value according to the Offer will be approximately SEK 2,773 million.[4]
Peab has decided on a new issue of, at the most, 127,881,822 shares, of which, at the most, 14,708,553 Class A shares and, at the most, 113,173,269 Class B shares as settlement for the Offer.
The Offer can be accepted for a shareholder’s entire holding of Peab Industri even if the number of shares is less than or not dividable by two. One share in Peab of the same class will be received for an excess share in Peab Industri as well as a cash sum in Swedish crowns corresponding to the sales price in Swedish crowns for half a share in Peab. Further information on this matter will be available in the offer document.
Peab does not hold any shares in Peab Industri but does hold convertibles for a nominal SEK 198 million issued by Peab Industri in the convertible program Peab Industri Convertibles 2007/2012 II.
Brokerage commissions shall not be charged.
The part of the payment in the Offer that is a cash reimbursement shall be financed from Peab’s available funds and existing credit.
Commitment by the major shareholders in Peab Industri
The major shareholders in Peab Industri – Mats Paulsson with family and companies, Erik Paulsson with family and companies, Fredrik Paulsson with family and companies, Svante Paulsson with family and companies, Sara Karlsson with family and companies, Karl-Axel Granlund with companies, Stefan Paulsson’s estate – corresponding to 71 percent of the votes and 42 percent of the capital have committed to accepting the Offer.
Terms of the Offer
Follow through of the Offer is conditioned by:
1. The Offer is accepted to such an extent that Peab becomes the owner of more than 90 percent of the total number of shares and votes in Peab Industri;
2. that Peab receives all requisite permission from authorities and such, including the competitive authorities, for the Offer and acquisition of Peab Industri within a period of time and on terms acceptable by Peab; and
3. that neither the Offer nor the acquisition of Peab Industri is wholly or partially stopped or substantially obstructed by legislation or other regulations, court decisions, decisions by authorities or equivalent circumstances, which arise or can be expected, which are not under Peab’s control and which Peab could not have feasibly foreseen at the time the Offer was made public.
Peab reserves the right to withdraw the Offer if it becomes clear that any of the above terms are not met or cannot be met. However, regarding terms 2 and 3 the Offer shall only be withdrawn if the terms are not met to such an extent that they have material importance on Peab’s acquisition of shares in Peab Industri. Peab reserves the right to wholly or partially relinquish on or more of the above terms, including the term that the Offer must be accepted by more than 90 percent.
Financial effects for Peab
Pro forma financial information for the new Group is presented in Appendix 1 and in summary below. The information is based on SEK 22.40 per share, which was the final price paid for Class B shares in Peab 7 November 2008.
A merger according to the Offer will result in strengthening Peab financially. Peab’s equity/debt ratio will increase from 21.6 percent to 27.2 percent. The debt/equity ratio will increase from 0,6x to 0,7x and net debt will increase from SEK 702 million to SEK 3,350 million. Peab’s return on equity calculated on a rolling twelve month schedule will decrease from 31.0 percent to 26.2 percent. Earnings per share will decrease from SEK 3.1 per share to SEK 2.4 per share for the period January to June 2008. Equity per share will increase from SEK 21.5 per share to SEK 21.7 per share.
Based on the final price paid for Class B shares in Peab 7 November 2008 the bid value according to the Offer amounts to approximately SEK 2,773 million, which exceeds recorded equity in Peab Industri by approximately SEK 1,723 million.[5] In the final acquisition analysis this value will be based on the actual market price and allocated to assets and liabilities in the Group balance sheet.
Further descriptions of Peab and Peab Industri can be found, in addition to the coming offer document, on Peab’s and Peab Industri’s website www.peab.se and www.peabindustri.se.
Preliminary time schedule
Offer document made public 10 November 2008
First acceptance day of the Offer 13 November 2008
Last acceptance day of the Offer 3 December 2008
Settlement reporting 16 December 2008
Peab reserves the right to extend the acceptance period, as well as delay settlement reporting.
Supplementary prospectus
On 17 November 2008, in other words during the subscription period, Peab and Peab Industri will release interim reports for the period January –September 2008. For this reason Peab intends to apply for approval and registration at the Swedish Financial Supervisory Authority of a so called supplementary prospectus, which will be published on Peab’s (www.peab.se), Swedbank’s (www.swedbank.se/prospekt) and the Swedish Financial Supervisory Authority’s (www.fi.se) websites. In addition to the interim reports the supplementary prospectus will also contain an account of Peab’s capitalisation and net debt/equity ratio per 30 September 2008.
Compulsory purchase and unlisting
As soon as possible after Peab has acquired shares representing more than 90 percent of the shares in Peab Industri, Peab intends to request a compulsory purchase of the rest of the shares in Peab Industri according to the Companies Act. In connection with this Peab intends to initiate the unlisting of Peab Industri on OMX, under the condition that this can be done according to Swedish laws and regulations. The shareholders that choose not to accept the Offer, and who remain as shareholders in Peab Industri, should note that after a possible unlisting there will be no functioning market for trading in Peab Industri shares.
Decision on the Offer
All the members of Peab’s Board (with the exception of two worker representatives) hold shares or convertibles issued by Peab Industri. As a result of the members’ interests in Peab Industri there has not been a board in Peab that could prepare and decide on the Offer. For this reason the decision to make the Offer was made by Peab’s Extra General Meeting according to a proposal by Peab’s principle shareholders.
Participation in the Offer
Mats Paulsson, Fredrik Paulsson and Sara Karlsson, all members of the board in Peab Industri, have participated in the Offer by proposing to Peab’s Extra General Meeting to decide to make the Offer. These persons have also, through their individual (direct and indirect) substantial shareholdings in Peab Industri participated in the Offer by voting for the proposal on the Offer at Peab’s Extra General Meeting.
Applicable laws and disputes
Swedish law is applicable on the Offer, in particular the Act Concerning Public Takeover Bids in the Stock Exchange (2006:451). OMX’s rules concerning public takeover bids on the stock exchange (”Takeover rules”) and the Securities Council’s statements concerning the interpretation and application of Takeover rules (including their statements concerning the Industry and Commerce Stock Exchange Committee’s rules on public offers for the acquisition of shares) are also applicable on the Offer. According to the Act Concerning Public Takeover Bids in the Stock Excahnge Peab has undertaken to OMX to comply with the above mentioned statements and accept any sanctions OMX may impose for any infringement of the Takeover rules. A corresponding undertaking has been made to the shareholders of Peab Industri.
Any disputes concerning, or arising in connection with, the Offer shall be exclusively settled in Swedish court. Stockholm’s district court shall be the first instance.
The Offer will not be made, directly or indirectly, by mail or any other means of communication (by this is understood fax, e-mail, telex, telephone and Internet) in or to The United States of America, Australia, Canada, Japan or South Africa or in/to any other country where making the Offer requires other measures than those prescribed by Swedish law. The Offer cannot be accepted in any way or through any means of communication from the above named countries. As a result no offer documents, subscription forms or other documentation concerning the Offer will be sent or provided in or to The United States of America, Australia, Canada, Japan or South Africa and may not be distributed in such a manner. Peab will not provide any settlement according to the Offer to The United States of America, Australia, Canada, Japan or South Africa.
Advisors
Catella Corporate Finance and Swedbank Corporate Finance are the financial advisors and Advokatfirman Glimstedt is the legal advisor in connection with the Offer.
Förslöv 10 November 2008
Peab AB (publ)
Board of Directors
For additional information please contact:
Mats Paulsson, CEO Peab, +46 431-891 35
Mats Leifland, CFO Peab, +46 733-37 10 06
Gösta Sjöström, CIO Peab, +46 733-37 10 10
This information is such that Peab AB is obliged to publish in accordance with Swedish law regarding the securities market and/or the Financial Instruments Trading Act or has itself chosen to publish. The information was submitted for publication at 11:00 a.m. on 10 November 2008.
Previous press releases from Peab are available at www.peab.com
Peab is one of the leading construction and civil engineering companies in the Nordic countries with approximately 12 000 employees and a net sale exceeding SEK 30 billion. The Group’s subsidiaries have strategically located offices in Sweden, Norway and Finland. The share is listed on the OMX Nordic Exchange, Stockholm.
The registered office of the Group is at Förslöv, Skåne in south of Sweden.
Gösta Sjöström Peab AB Chief Information Officer
Information Phone office +46 431 89126
gosta.sjostrom@peab.se Mobile phone +46 733 371010
INCOME STATEMENT JANUARY-JUNE 2008 -
NEW GROUP
Peab Peab Proforma
Industri
Mkr Jan-Jun Jan-Jun Adjustment Jan-Jun
2008 2008 2008
Continuing
operations
Net sales 16 833 3 839 -1 393 1) 19 279
Operating -16 166 -3 499 1 393 1) -18 272
expenses
Results from 3 1 -1 2) 3
shares in
joint
ventures
Results from 29 29
sold shares
in joint
ventures
Results from 3 3
sold shares
in Group
companies
Operating 702 341 -1 1 042
profit
Net -2 -71 1 3) -72
financial
items
Profit 700 270 0 970
before tax
Tax -181 -76 -257
Profit for 519 194 0 713
the period
Attributable
to:
Parent 519 193 1 713
company
shareholders
Minority 0 1 -1 0
interests
519 194 0 713
1) Sales between Peab and Peab Industri which amounted to SEK 1,393 million has been eliminated.
2) Share in profits from joint venture shares in companies where Peab Industri is a majority owner by SEK 1 million.
3) Reversal of financial expenses concerning market valuation of the option part of Peab's holding of convertibles in Peab Industri by SEK 1 million.
BALANCE SHEET
30 JUNE 2008
- NEW GROUP
Peab Peab Proforma
Industri
MSEK 30 June 30 June Adjustment 30 June
2008 2008 2008
Assets
Intangible 527 348 1 723 1) 2 598
fixed assets
Tangible 731 3 078 3 809
fixed assets
Interest- 360 1 -181 2) 180
bearing long-
term
receivables
Other 936 81 -24 2) 993
financial
assets
Deferred tax 231 231
receivables
Total fixed 2 785 3 508 1 518 7 811
assets
Project and 3 009 3 009
development
properties
Inventories 117 372 489
Interest- 464 5 469
bearing
current
receivables
Other current 9 470 1 875 -519 3) 10 826
receivables
Current 201 201
investments
Liquid funds 560 173 -396 4) 337
Total current 13 821 2 425 -915 15 331
assets
Total assets 16 606 5 933 603 23 142
Equity
Equity 3 574 1 046 1 668 1)4)5)6) 6 288
attributable
to parent
company
shareholders
Minority 6 4 -1 7) 9
interests
Total equity 3 580 1 050 1 667 6 297
Liabilities
Interest- 1 763 2 209 -545 2)4) 3 427
bearing long-
term
liabilities
Other long- 111 117 228
term
liabilities
Deferred tax 8 258 266
liabilities
Total long- 1 882 2 584 -545 3 921
term
liabilities
Interest- 524 586 1 110
bearing
current
liabilities
Other current 10 620 1 713 -519 3) 11 814
liabilities
Total current 11 144 2 299 -519 12 924
liabilities
Total 13 026 4 883 -1 064 16 845
liabilities
Total equity 16 606 5 933 603 23 142
and liabilities
1) The total bid value of the shares amounts to SEK 2,773 million, assuming issuing 123,782,922 new shares at the issue price
of SEK 22.40, exceeding equity in Peab Industri, totalling SEK 1,050 per 30 June 2008, by SEK 1,723. In this proforma report
this entire value has been classified as goodwill and depreciation has not been calculated. The value will be adjusted and
reclassified in connection with the final acquisition analysis.
2) Elimination of convertible promissory notes issued by Peab Industri and signed by Peab. These are valued differently in
the two companies depending on accounting rules.
3) Elimination of internal operating receivables and operating liabilities of SEK 519 million.
4) Acquisition of personal convertibles.
5) Elimination of the equity part of issued convertible promissory notes from Peab Industri of SEK 14 million from equity.
6) Reversal of ackumulated financial income from the market valuation of the option part of Peab's holding of convertibles in Peab Industri
of SEK 5 million from equity.
7) Share of results in Peab from joint ventures shares in companies where Peab Industri is a majority owner by SEK 1 million.
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[1] On15 October 2008 Peab announced that the holders of Peab representing some 71 percent of all the votes in Peab decided that Peab’s Board should resolve an Extra General Meeting for the purpose of making a public offer to shareholders and convertible holders in Peab Industri. Since share prices in Peab and Peab Industri were affected by this announcement the final price paid on 14 October 2008 and the average final price paid for each company’s shares during the last 10 trading days before 15 October 2008 make up the relevant basis for the calculation of the premium that should be reported herein.
[2] For further details see ”Commitment from major shareholders in Peab Industri”.
[3] On15 October 2008 Peab announced that the holders of Peab representing some 71 percent of all the votes in Peab decided that Peab’s Board should resolve an Extra General Meeting for the purpose of making a public offer to shareholders and convertible holders in Peab Industri. Since share prices in Peab and Peab Industri were affected by this announcement the final price paid on 14 October 2008 and the average final prices paid for each company’s shares during the last 10 trading days before 15 October 2008 make up the relevant basis for the calculation of the premium that should be reported herein.
[4] The calculated bid value does not include the 2,732,600 shares bought back by Peab Industri, corresponding to SEK 91.3 million and the value of the offer to convertible holders of around SEK 595 million.
[5] The calculated bid value does not include the 2,732,600 shares bought back by Peab Industri, corresponding to SEK 91.3 million and the value of the offer to convertible holders of around SEK 595 million.