NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION
FOR IMMEDIATE RELEASE
2 December 2016
M.P. Evans Group PLC ("M.P. Evans" or "the Company")
Rejection of revised final unsolicited offer from Kuala Lumpur Kepong Berhad ("KLK")
The Board of M.P.Evans notes the announcement made yesterday by KLK in response to the Company's Response Document dated 25 November. In that announcement, certain assertions were made by KLK which the Board believes were misplaced. The Board would hereby like to clarify several points for shareholders.
1. KLK has listed a number of plantation transactions in Indonesia. These transactions have little or no relevance to the valuation of M.P. Evans for the following reasons:
The transactions listed by KLK (the "Transactions") are much less relevant to the valuation of M.P.Evans than those selected by the Independent Valuer for the following reasons:
(i) some of the Transactions are between connected parties and so cannot be relied upon to represent an arm's length transaction;
(ii) others of the Transactions relate to estates with extremely low fresh fruit bunch yields compared with those achieved on the M.P.Evans estates;
(iii) some of the Transactions relate to estates with significantly poorer agronomic conditions to those for M.P.Evans, including extensive peat areas, preventing environmental certification of the estate or sale of their crop to any certified buyer;
(iv) the estates sold as part of some of the Transactions were at a very early stage in their development, some having no palm-oil mills, low levels of planting, or low levels of mature hectarage; and
(v) whilst the Transactions identified resulted in a range of values per hectare, the Independent Valuer likewise provided a range for the M.P.Evans estates - from $12,200 for Simpang Kiri to $21,500 for the Group's flagship Kalimantan project, with integrated mill, composting and biogas facilities. The Board notes the Independent Valuer's range of appropriate comparable transaction multiples of $15,000-20,000/hectare and believes this is a much more appropriate valuation range for the value of the M.P.Evans estates taken as a whole.
2. Whilst KLK now acknowledges a value of $46 million for the Group's Malaysian property assets comprising Bertam Estate and the Group's shareholding in Bertam Properties (compared with US$16 million in its offer document), it still fails to recognise the up-to-date valuation attributed to the Group's Malaysian property by the Independent Valuer, a firm of Malaysian chartered surveyors and Malaysian real-estate specialists
In assessing current market value, the Independent Valuer has given regard to a number of recent transactions for similar properties in similar locations to those of M.P.Evans' assets. The Board of M.P.Evans considers the outputs of this approach to be relevant and appropriate, not least because Bertam Properties itself has been selling property at similar price levels per square foot to those transactions referenced by the Independent Valuer. It is not planned in the near term to dispose of the Group's Malaysian property portfolio, as the ongoing development, and sale, of residential and retail units on the Bertam Properties project continues to be profitable and impact favourably on the value of the remaining land as well as the adjoining 68-hectare Bertam Estate. The Board believes that this measured approach to realisation will achieve a greater eventual cash realisation from the Malaysian property assets than an immediate outright sale. In the meantime, Bertam Properties continues to sell property and to pay full dividends from its profits. These have amounted to more than US$11 million over the last five years.
3. KLK continues to attribute no value to M.P.Evans' smallholder co-operative schemes
The smallholder co-operative schemes associated with M.P.Evans' estates generate significant and sustainable cash flow for the Company. KLK points out that, once loans advanced to co-operatives have been repaid, they may sell their produce to any company and may choose to be managed by any plantation operator. Whilst this is technically true, smallholder co-operative loans are long term arrangements which run for a significant number of years, and furthermore, M.P.Evans manages these estates on behalf of the smallholder schemes to the same standards as its own estates, which are best in class. As a result, this leads to more fruit sales for the co-operative scheme estates and higher revenue for the scheme participants. To take account of any additional risks relating to smallholder areas, the Independent Valuer has applied a higher discount rate in the independent valuation of these arrangements than was applied to the revenues generated from the M.P.Evans' own estates. The Board has every reason to believe that M.P.Evans will continue to manage these estates, and generate valuable cash flow for the Company in so doing, for the foreseeable future. The fact that KLK's Offer entirely ignores the value of these schemes to the Company denies clear value to M.P.Evans' shareholders.
4. KLK claims that the Board's proposal to increase the 2016 dividend by 71% as compared to 2015 is "too little, too late"
This very substantial increase in the dividend is part of the natural progression of the development of the Company and the Board's delivery of its previously stated strategy, but has only recently become financially prudent. Receipt of the proceeds of US$80 million from the sale of the Group's interest in its cattle business four months ago has provided the Group with the resources to combine increasing cash returns to shareholders via increased dividends with continuing progress in the Group's extensive planting programme. The Board expects these cash returns to be combined with a strong increase in the value of the Company's assets in the coming years as the Group's estates continue to mature and, as a consequence, deliver higher revenue.
The KLK Offer very substantially undervalues M.P. Evans' Shares: the Independent Valuer's valuation implies a value 46% higher than the KLK Offer. The Board urges Shareholders to reject the Offer. To reject the Offer, Shareholders should take no action. The Board also reminds Shareholders that, within one day of the Offer being announced, holders of more than 40% of the Company's Shares had publicly stated their intention to reject the Offer. These shareholders are obliged to make public announcements if they no longer hold these intentions and the Board notes that no such announcements have been made to date.
Rothschild is acting as the independent financial adviser to M.P.Evans for the purposes of Rule 3 of the City Code. In providing advice to the Board, Rothschild has taken into account the Board's commercial assessments.
Enquiries:
M.P. Evans Group PLC
Telephone: +44 1892 516333
Peter Hadsley-Chaplin, Chairman
Tristan Price, Chief Executive
Rothschild (Financial Adviser)
Telephone: +44 207 280 5000
Stuart Vincent
Sam Critchlow
Peel Hunt (NOMAD and Broker)
Telephone: +44 207 418 8900
Dan Webster
Adrian Trimmings
Hudson Sandler
Telephone: +44 207 796 4133
Charlie Jack
Bertie Berger
Capitalised terms used but not defined in this announcement shall have the meanings given to them in the Response Document.
Responsibility
The Directors accept responsibility for the information contained in this document (including any expressions of opinion), except that the only responsibility accepted by them in respect of the information contained in this document relating to KLK, which has been compiled from published sources, is to ensure that such information has been correctly and fairly reproduced and presented. To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document for which they accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information.
Notice concerning financial adviser and nominated adviser
N M Rothschild & Sons Limited ("Rothschild"), which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting exclusively as financial adviser to M.P. Evans and no one else in connection with the subject matter of this announcement and will not be responsible to anyone other than M.P. Evans for providing the protections offered to its clients or for providing advice in connection with the subject matter of this announcement or any other matters referred to in this announcement.
Peel Hunt LLP ("Peel Hunt"), which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting exclusively as nominated adviser to M.P. Evans and no one else in connection with the subject matter of this announcement and will not be responsible to anyone other than M.P. Evans for providing the protections offered to its clients or for providing advice in connection with the subject matter of this announcement or any other matters referred to in this announcement.
Disclosure requirements of the Takeover Code (the "Code")
Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.
Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.
If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.
Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).
Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.
Overseas shareholders
The release, distribution or publication of this announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about and observe any applicable requirements.
Publication on website
A copy of this announcement will be made available at www.mpevans.co.uk in accordance with Rule 26 of the Code. The content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.