AMEC - General - UK, Morgan Sindall Buys Two Businesses from AMEC Plc
Date: 05 Jun 2007
Divestment of Property Developments and Building and Civil Engineering businesses
* Morgan Sindall to acquire two of AMEC's four Built Environment businesses: Property Developments and Building and Civil Engineering
* Morgan Sindall to pay a £55 million premium to aggregate net assets as at 30 April 2007, resulting in an expected total net cash consideration of approximately £26 million
* Divestment delivered ahead of schedule and in line with AMEC's overall expectations
* Divestment of AMEC's remaining Built Environment businesses in Building and Facilities Services and PPP progressing well
AMEC Chief Executive, Samir Brikho, said:
"This transaction is an excellent outcome for AMEC shareholders and an important milestone in delivering the strategy we presented in December 2006. Morgan Sindall not only provides a strategic fit for these businesses, but also a good new home, and strong prospects for their future. We wish them well.
Once our divestment programme is complete we will then move ahead with our strategy to further build AMEC's position as the leading provider of consultancy, engineering and project management services to clients in energy and industrial process markets."
A conference call for analysts and investors will be held today at 09.30am
Delivery On Strategy
On 13 December 2006, AMEC announced its new vision, to be a leading supplier of high value consultancy, engineering and project management services to defined market segments within the world's energy and industrial process industries.
Consistent with this vision, AMEC initiated a process to divest itself of the four non-core businesses that make up the Built Environment division, together with various specialist businesses, as quickly as possible during 2007, consistent with optimising value.
Today AMEC has delivered on a significant part of this strategy, announcing the divestment of two of the four Built Environment businesses: the Property Developments business, AMEC Developments Ltd ("ADL"), and the Building and Civil Engineering business, Design and Project Services ("DPS").
This follows the successful divestment of four specialist businesses; AMEC SPIE Capag, AMEC's interest in AMEC SPIE Rail Systems Ltd, Buchan Concrete Solutions and AMEC Dynamic Structures, announced earlier this year.
The divestment process for the remaining two Built Environment businesses, Building and Facilities Services and the PPP business, is progressing well. As previously announced, first round bids have been received for each of these businesses. The first round has been encouraging and the second stage of the process is now well advanced.
Today's transaction has no affect on AMEC's provisions relating to a small number of completed contracts, where disputes remain, that were provided for in the group's 2006 financial statements.
The Transaction
AMEC and Morgan Sindall plc ("Morgan Sindall") today announce that they have agreed terms for the sale of ADL and DPS.
Morgan Sindall will acquire the entire share capital of ADL, a PPP concession* and the assets and business of DPS, including all current and future contracts. As is normal in such transactions, AMEC will retain responsibility for long tail obligations on completed contracts.
Aggregate capital employed for these entities as at 31 December 2006 was £(54) million. As at 30 April 2007 aggregate net liabilities, including net cash of about £8 million to be sold, are expected to be £29 million. The transaction represents a premium of £55 million to the aggregate net assets as at 30 April 2007, resulting in a total net cash consideration which is expected to be approximately £26 million. The transaction requires certain consents and waivers, which if not forthcoming, may result in an adjustment to the total consideration. Proceeds from the transaction will be held on deposit.
In view of the size of the transaction, it is conditional on the approval of Morgan Sindall shareholders, which will be sought at an Extraordinary General Meeting that is expected to take place in July. Completion is expected shortly thereafter.
The Morgan Sindall board will unanimously recommend that its shareholders vote in favour of the transaction. AMEC has received irrevocable intentions to vote in favour of the transaction from the Morgan Sindall Directors and a former Director who together represent 18 per cent of Morgan Sindall's issued share capital.
* The Inland Revenue Newcastle Estate PPP concession that is managed by ADL
ADL
This business offers services from land assembly, remediation and planning through to financing and project management, and has particular expertise in mixed-use urban regeneration projects. Property Developments participates in two important strategic partnerships, with English Cities Fund, to regenerate inner city locations and ISIS Waterside Regeneration, to redevelop British Waterways' large portfolio of non-operational sites across the UK canal network. The business generates profit from the development and sale of property assets and is not a long-term investor in completed buildings. Joint Managing Directors of the business are Matt Crompton and Nigel Franklin and the Finance Director is David Hoyle.
DPS
This business offers integrated design, project management and construction services and is focused on key UK market sectors such as education, healthcare, defence, manufacturing and transport, which offer sound growth prospects together with the right balance of risk and reward. Managing Director of the business is John Moss; Commercial Director, Martin Broome and the Finance Director is Warren Underwood.
In the year ended 31 December 2006, these businesses had, in aggregate, over 2,800 employees, and generated revenues of £758 million and losses of £14 million before interest, tax and intangible amortisation but after exceptional items** of £15 million. Gross assets at 31 December 2006 were £233 million.
** excluding contracts retained by AMEC
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