REG - RHI Magnesita N.V. - Response to partial offer
27/06/2023 09:00
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RNS Number : 0362E RHI Magnesita N.V. 27 June 2023
RHI Magnesita N.V.
RESPONSE TO PARTIAL OFFER
IMPORTANT INFORMATION
This Response Statement has been published by the unitary board of directors
(the "Board") of RHI Magnesita N.V. ("RHI Magnesita" or the "Company") as
required pursuant to article 20 and Annex G of the Netherlands Decree on
Public Takeover bids for the sole purpose of providing information to its
shareholders on the voluntary partial cash offer made by Ignite Luxembourg
Holdings S.à r.l. (the "Offeror"), to holders of ordinary shares in the
capital of the Company (excluding shares held in treasury) (the "Shares") to
purchase 14,086,156 Shares (the "Offer Shares") (representing 29.9 per cent.
of the Issued and Outstanding Share Capital of the Company) at an offer price
of GBP 28.50 per Share (the "Offer"). The Offeror is a wholly-owned subsidiary
of a number of limited partnerships which are indirectly managed by Rhône
Holdings VI L.L.C. ("Rhône").
In addition to the terms defined elsewhere in this Response Statement, any
capitalised terms in this Response Statement shall have the meaning attributed
to them in the Appendix (Definitions) of this Response Statement.
This document does not constitute or form part of an offer to buy or sell, or
a solicitation of an offer to buy or sell, any securities to any person in any
jurisdiction, nor a solicitation of any vote, consent or approval.
Shareholders of the Company should form their own view on the merits of the
Offer and make their own decision. This document is not for release,
publication or distribution in, into, or from Australia, Canada, Hong Kong,
Japan, New Zealand, South Africa or the United States (including its
territories and possessions) or any other jurisdiction where such release,
publication or distribution may result in a significant risk of civil,
regulatory or criminal exposure if information concerning the Offer is sent or
made available to persons in those jurisdictions (the "Restricted
Jurisdictions") and therefore persons into whose possession this document
comes should inform themselves about, and observe, any such restrictions.
Failure to comply with any such restrictions may constitute a violation of the
securities laws of any Restricted Jurisdiction. If you are in any doubt about
the contents of this document or the action you should take, you should seek
your own legal, tax and/or financial advice immediately from your stockbroker,
bank manager, attorney, accountant or other independent financial adviser or
from an appropriately authorised independent legal and/or financial adviser
under the laws of your own jurisdiction. This document may contain quotes and
excerpts from certain previously published third party materials.
If you have sold, or otherwise transferred your shares, please send this
document as soon as possible to the purchaser or transferee, or to the
stockbroker, bank or other agent through whom the sale of transfer was
effected. However, this document must not be forwarded or transmitted to any
Restricted Person or into any Restricted Jurisdiction. If you have sold or
otherwise transferred only a part of your shares, you should retain this
document and consult your stockbroker, bank or other agent through whom the
sale or transfer was effected.
The Board accepts responsibility for the information contained in this
Response Statement, provided that the only responsibility that is accepted for
information concerning the Offeror, Rhône (including the affiliates owned
and/or controlled by it) and the Offer is the assurance that such information
is properly reported and reproduced from the Offer Document. This document
includes statements made as at the date of this Response Statement, unless
some other time is specified in relation to them, and publication of this
document shall not give rise to any implication that there has been no change
in the facts set out in this document since such date. RHI Magnesita disclaims
and does not undertake any obligation to publicly update or revise any
statement in this document to reflect events or circumstances after the date
of this document, whether as a result of new information, future events or
otherwise, except as may be required by applicable securities laws or by any
appropriate regulatory authority. Nothing in this document is intended to be a
forecast, projection or estimate of the future financial performance of RHI
Magnesita and no statement in this document should be interpreted to mean that
the performance for the current or future financial periods will necessarily
be greater than those for the relevant preceding financial period.
Certain figures included in this document have been subjected to rounding
adjustments. Accordingly, figures shown in the same category presented in
different tables may vary slightly and figures shown as totals in certain
tables may not be an arithmetic aggregation of the figures that precede them.
Copies of this Response Statement are available at
https://ir.rhimagnesita.com/shareholder-information/partial-cash-offer/.
This Response Statement includes certain "forward-looking" statements,
including statements about the expected timing and completion of the Offer.
Forward-looking statements involve known or unknown risk and uncertainty
because these statements relate to events and depend on circumstances that
occur in the future. Generally, words such as may, should, aim, will, expect,
intend, estimate, anticipate, believe, plan, seek, continue or similar
expressions identify forward-looking statements. The Company believes the
expectations reflected in such forward-looking statements are based on
reasonable assumptions. Nevertheless, no assurance can be given that such
statements will be fulfilled or prove to be correct, and no representations
are made as to the future accuracy and completeness of such statements. Any
such forward-looking statements must be considered with the fact that actual
events or results may vary materially from such forward-looking statements due
to, among other things, political, financial, economic, commercial or legal
changes in the markets and environments in which RHI Magnesita does business,
to competitive developments or risks inherent to the Company's business plans
and to uncertainties, risk and volatility in financial markets and other
factors affecting RHI Magnesita.
Shareholders are reminded that under Dutch law the Board owes fiduciary duties
to the Company and through the Company to all of its stakeholders and not only
to Shareholders. Decisions that the boards may have to take pursuant to their
fiduciary duties may adversely affect Shareholder value.
This document summarises certain provisions of the Offer Document. However,
reading this document is not a substitute for reading the Offer Document in
full and Shareholders should read the Offer Document carefully in its entirety
before deciding whether to take any action in respect of the Offer.
This Response Statement is governed by the laws of the Netherlands. The
District Court of Amsterdam (Rechtbank Amsterdam) and its appellate courts
shall have exclusive jurisdiction to settle any disputes which might arise out
of or in connection with this Response Statement. Accordingly, any legal
action or proceedings arising out of or in connection with this Response
Statement may be brought exclusively in such courts. The Offer, as well as the
agreements entered into between the Offeror and the Shareholders as a result
of the Offer, shall be governed by and construed in accordance with the laws
of England and Wales. Any dispute regarding the Offer, or which arises in
connection therewith, shall be exclusively settled by the courts of England
and Wales.
RHI MAGNESITA N.V.
(registered in the Netherlands with company number 68991665)
RESPONSE TO THE PARTIAL CASH OFFER
by
Ignite Luxembourg Holdings S.à r.l.
for
14,086,156 shares, representing 29.9 per cent. of the Issued and Outstanding
Share Capital
of the Company
Shareholders should carefully read the whole of this document (including any
information incorporated into this document by reference to another source).
In particular, your attention is drawn to the letter from the Non-Executive
Chairman which is set out below.
The Company is a public limited liability company incorporated under Dutch
law, with its registered seat in Arnhem, the Netherlands. Therefore, the UK
City Code on Takeovers and Mergers does not apply to the Offer and the Offer
is not subject to the jurisdiction of, or being regulated by, the UK Panel on
Takeovers and Mergers, and only section 27c of the Austrian Takeover Act
("ATA") is relevant to the Company. As the Offer is a voluntary public partial
offer, pursuant to section 27c para 1 ATA, section 27c para 2 ATA does not
apply to it and the Offer is not subject to the jurisdiction of, or being
regulated by, the Austrian Takeover Commission. The shares in the Company, in
the form of dematerialised depositary interests representing entitlements in
the shares, are admitted to trading on the London Stock Exchange and the
Vienna Stock Exchange (Wiener Börse).
Barclays Bank PLC, acting through its Investment Bank ("Barclays"), which is
authorised by the PRA and regulated in the United Kingdom by the FCA and the
PRA, is acting exclusively for RHI Magnesita and no one else in connection
with the Offer and will not be responsible to any person other than RHI
Magnesita for providing the protections afforded to the clients of Barclays
nor for providing advice in relation to the Offer or any other matters
referred to in this document.
Peel Hunt, which is authorised and regulated in the United Kingdom by the FCA,
is acting exclusively as financial adviser and corporate broker to RHI
Magnesita and for no one else in connection with the matters referred to in
this document and will not be responsible to any person other than RHI
Magnesita for providing the protections afforded to clients of Peel Hunt, nor
for providing advice in relation to the matters referred to herein. Neither
Peel Hunt nor any of its affiliates owes or accepts any duty, liability or
responsibility whatsoever (whether direct or indirect, whether in contract, in
tort, under statute or otherwise) to any person who is not a client of Peel
Hunt in connection with the matters referred to in this document, or
otherwise.
The date of publication of this document is 27 June 2023. All references to
time in this document are references to Central European Time unless otherwise
stated.
Letter from the Non-Executive Chairman of RHI Magnesita N.V.
(registered in the Netherlands with registered number 68991665)
Registered office Kranichberggasse 6, 1120 Vienna, Austria
Directors:
Herbert Cordt (Non-Executive Chairman) Janice "Jann" Brown (Non-Executive Director)
John Ramsay (Non-Executive Deputy Chairman, Senior Independent Director) Karl Sevelda (Non-Executive Director)
Stefan Borgas (Chief Executive Officer) Marie-Hélène Ametsreiter (Non-Executive Director)
Ian Botha (Chief Financial Officer) Wolfgang Ruttenstorfer (Non-Executive Director)
Janet Ashdown (Non-Executive Director) Karin Garcia (Employee Representative Director)
David Schlaff (Non-Executive Director) Martin Kowatsch (Employee Representative Director)
Stanislaus Prinz zu Sayn-Wittgenstein-Berleburg (Non-Executive Director) Michael Schwarz (Employee Representative Director)
27 June 2023
Dear Shareholder
Response of the Board to the Partial Cash Offer by Ignite Luxembourg Holdings S.à r.l. for 14,086,156 Shares, representing 29.9 per cent. of the Issued and Outstanding Share Capital of the Company
Terms of the Offer
On 30 May 2023, the Offeror announced its intention to make a voluntary
partial cash offer to acquire 9,403,539 Shares, representing 20 per cent. of
the Issued and Outstanding Share Capital of the Company (excluding treasury
shares) at a price of GBP 28.50 for each Share (the "Offer Price"). The
Offeror is a wholly-owned subsidiary of a number of limited partnerships which
are indirectly managed by Rhône. The Offer does not relate to the acquisition
of Shares held by the Company in treasury.
The Offer Document was published on 19 June 2023 detailing the Offeror's
voluntary partial cash offer, and increasing the number of Shares the Offeror
is seeking to acquire to up to 14,086,156 Shares (corresponding to 29.9% of
the entire Issued and Outstanding Share Capital of the Company). The Offer
Document states that the Offer Price will not be reduced in respect of the
dividend of EUR 1.10 per Share declared by the Company on 24 May 2023 for the
financial year ended 31 December 2022 (the "Declared Dividend"). The record
date for the Declared Dividend was 9 June 2023 and the Declared Dividend is
due to be paid by the Company on 6 July 2023. Should the Company, prior to the
settlement of the Offer, announce, declare, make, pay or distribute dividends
or any other distribution or transfer or return of value to its Shareholders
other than the Declared Dividend, the Offeror has reserved the right to make
an equivalent deduction to the consideration payable for the Shares in the
Offer.
The Offer Price values RHI Magnesita's Issued and Outstanding Share Capital as
at the date of this Response Statement at approximately GBP 1,340.0 million,
or EUR 1,561.2 million at the Response Document Exchange Rate.
In case the total amount of Tendered Shares together with any Shares (the
"Additional Shares") acquired by or on behalf of the Offeror outside of the
Offer exceeds the amount of Offer Shares (i.e. 14,086,156, representing 29.9
per cent. of the Issued and Outstanding Share Capital as at the date of the
Offer Document), all duly submitted acceptances will be scaled down pro rata
to such number of Shares as shall not exceed the amount of Offer Shares less
the Additional Shares. The total amount of Shares acquired by the Offeror
under the Offer, together with any Additional Shares, shall not exceed 29.9
per cent. of the Company's Issued and Outstanding Share Capital.
The acceptance period commenced on 19 June 2023 and is expected to expire at
1:00pm London time on 10 July 2023. Acceptances of the Offer are irrevocable
and cannot be withdrawn (including, without limitation, in the case of a
Competing Offer or if the Offer is revised in accordance with the Offer
Document or extended).
The Offeror has stated that, if the Offer is successful, the Offeror will seek
appropriate representation in the board of directors of the Company. However,
this is not a condition to completion of the Offer. No relationship agreement
or any other governance arrangement has been agreed between the Offeror and
the Company.
The Offer is conditional upon the conditions set out in section 4 of the Offer
Document, including the receipt of approvals (or confirmation they do not have
jurisdiction) from competition authorities in Austria, Germany, India and
Mexico and the foreign investment authorities in Austria, France, Germany,
Italy, Spain and the United Kingdom and such other competition or foreign
investment authorities with respect to which the Offeror determines that the
consent, approval, clearance, confirmation or licence thereof is required or
advisable for the formation and funding of the Offeror or any other
acquisition vehicle, or completion of the Offer under applicable competition
or foreign investment laws (the "Competition and FDI Approvals"). If such
conditions are not satisfied, or waived by the Offeror, the Offer may be
withdrawn.
The Company's current trading and financial position
As the Company announced on 15 June 2023, the momentum of improving
profitability and margins delivered in Q1 2023 continued in April and May, as
refractory pricing was largely maintained against a background of reducing
costs.
Refractory sales volumes in the five months ended 31 May 2023 (the "Period")
excluding M&A were 7.0 per cent. lower year on year, in line with overall
market demand. Steel, cement and glass demand outside of India remains soft
due to a slowdown in construction activity, with some glass project
postponements now evident. Demand in the non-ferrous metals segment continues
to be resilient. As anticipated, due to the subdued demand backdrop and
reducing input costs, the Group is beginning to experience sales price
deflation in a number of its markets which is expected to continue, and
possibly accelerate, through the remainder of the year.
Refractory EBITA margin contribution for the Period, which excludes vertical
integration benefits, was better than expected, supported by cost deflation
in April and May, as the cost of freight and purchased raw material reduced,
partially offset by weaker fixed cost absorption due to lower production
volumes.
The continued lower pricing environment for magnesite-based raw materials
means that the Group's vertical integration EBITA margin contribution remains
subdued and in line with the 1.8 per cent. of Group margin delivered in the
second half of 2022.
As a result, the overall adjusted EBITA margin for the Period was 12.1 per
cent. (2022: 11.6 per cent.), delivering unaudited adjusted EBITA of EUR 174
million (2022: EUR 155 million).
Net debt to EBITDA remains at a similar level to the 2.1x reported at 31 March
2023, including a 12 month historic contribution from businesses acquired
during the period.
Absolute net debt at 31 May 2023 was largely unchanged from 31 December 2022,
supported by strong operating cashflow. The Group continues to retain
significant liquidity of EUR 1.2 billion.
Net working capital (before consolidation of M&A) was down slightly from
its 31 December 2022 level, as reductions in inventory and accounts receivable
were largely offset by lower accounts payable. The Group continues to
prioritise security of supply for its customers in order to support recent
market share gains.
Total capital expenditure in the five months to 31 May 2023 was EUR 42
million, out of overall guidance of EUR 200 million for 2023, with spending
weighted towards the second half.
M&A increased net debt by EUR 268 million in the first five months of the
year, which was partially offset by the Qualified Institutional Placement
("QIP") by RHI Magnesita India Ltd, which raised approximately EUR 101 million
in April 2023. The QIP is to be followed by an equity investment of EUR 22
million by the Group in RHI Magnesita India Ltd via a preferential issue,
which is expected to complete in June 2023. In the second half of the year,
the previously announced acquisition of the European, Indian, and US-based
operations of Seven Refractories for cash consideration of EUR 95 million is
expected to be completed.
The outlook for the Group's key end markets, and consequently customer
volumes, remains uncertain, with the order book currently suggesting only a
moderate volume increase in H2, if at all, resulting in ongoing
under-absorption of fixed costs. Pricing pressure is expected to continue and
possibly accelerate through the remainder of the year.
Supported by the stronger than expected performance in the first five months
of the year, the Board now expects a modest outperformance on its earlier 2023
EBITA and EBITA margin guidance.
Leverage, measured as a ratio of net debt to EBITDA, is expected to remain
above 2.0x as the Group further executes on its M&A pipeline.
The Board's financial assessment of the Offer
The Board has reviewed a number of different reference points and applied a
number of different valuation methodologies to underpin its financial
assessment on the Offer (each of which is considered further below),
including, amongst other things:
(i) historical share price analysis;
(ii) equity research analyst price targets;
(iii) discounted cash flow analysis; and
(iv) selected comparable company analysis.
The Board did not attribute any particular weight to any single analysis or
factor considered by it but rather made qualitative judgments as to the
significance and relevance of each analysis and factor relative to all other
analyses and factors performed and considered by it and in the context of the
circumstances of the Offer.
(i) Historical share price analysis
The Board analysed the historical trading prices of the Company's shares
between 26 May 2018 and 26 May 2023, being the last Trading Day prior to the
announcement of the Offer. During this period, the Company's average closing
share price was GBP 33.70. The Board notes that the Offer Price of GBP 28.50
is below this five-year average share price (representing a 15.4 per cent.
discount).
The Board notes that the Offer Price represents a premium of approximately
24.0 per cent. and 20.5 per cent. to the volume-weighted average trading
prices of GBP 22.99 and GBP 23.65 during the last three months and six months
prior to the announcement of the Offer.
(ii) Equity research analyst price targets
The Board also reviewed the price targets for the Company's shares published
by seven equity research analysts as at 26 May 2023. The Offer Price is lower
than the average target price of GBP 30.73 (representing a 7.3 per cent.
discount) and the majority of equity research analysts (five out of seven)
published a price target for the Company above the Offer Price.
(iii) Discounted cash flow analysis
In order to assess the fundamental, intrinsic value of the Company's shares,
the Board performed a discounted cash flow analysis by calculating the present
value of the Company's projected future cash flows based on Management's
projections in their business plan and certain assumptions on the weighted
cost of capital and perpetual growth rate. The discounted cash flow analysis
produced a range of prices that were higher than the Offer Price.
As part of the Board's view on the fundamental value of the Offer, the Board
has taken into account the future prospects of the business and delivery on
its own strategy. The Board believes that the expectations reflected in the
discounted cash flow analysis are based on reasonable assumptions.
Nevertheless, no assurance can be given and no representations are made as to
the accuracy and completeness of such analysis. Any forward-looking analysis
must be considered with the fact that actual events or results may vary
materially from such forward-looking statements due to, among other things,
risks in executing the strategy, political, financial, economic, commercial or
legal changes in the markets and environments in which RHI Magnesita does
business, to competitive developments or risks inherent to the Company's
business plans and to uncertainties, risk and volatility in financial markets
and other factors affecting RHI Magnesita.
(iv) Selected comparable company analysis
The Board analysed the historical and current trading multiples (including,
amongst other things, the current enterprise value compared to the estimated
projected earnings before interest, tax and amortisation for the year ending
31 December 2023) of the Company as well as selected comparable listed
companies and applied them to Management's projections to calculate a range of
implied prices for the Company's shares, all of which were higher than the
Offer Price.
The Board, having been so advised by Barclays and Peel Hunt on the financial
terms of the offer, is of the view that the Offer undervalues the Company. In
providing their financial advice to the Board, Barclays and Peel Hunt have
taken into account the commercial assessments of the Board.
However, the Board recognises that the premium may be attractive to individual
Shareholders who should form their own view independently with respect to the
value of the Offer, taking into account their own individual investment
considerations, their investment time horizons and the liquidity that may be
provided by the Offer.
Regulatory status of the Offer
The Offer is not subject to the jurisdiction of, or being regulated by, the UK
Panel on Takeovers and Mergers, the Austrian Takeover Commission or the
Netherlands Decree on Public Takeover bids (save pursuant to article 20 and
Annex G of the Netherlands Authority for the Financial Markets). As a result,
the protections that are afforded to offeree company shareholders in relation
to offers regulated by those authorities are not applicable to the Offer. If
the Offeror were to make a general offer or mandatory offer for the Company in
the future, such an offer would be regulated by the ATA.
Implications for control of the Company
The current free float (as defined in the Appendix) of the Company amounts to
approximately 55.5 per cent., and approximately 11.8 per cent. of the
Company's share capital is held by two institutional investment organisations.
If the Offer is successful, the Offeror will hold at least 20 per cent. of the
Company and, depending on which Shareholders tender their shares into the
Offer, the free float could decrease to approximately 35.5 per cent. If the
Offeror were to acquire 29.9 per cent. of the Company's shares, the free float
could further decrease to approximately 25.6 per cent.
As a consequence of this, the level of control that the Shareholders who form
part of the free float currently have will be reduced, and they may have
limited ability to influence the affairs of the Company by exercise of their
voting rights. The Offeror and the Company's largest Shareholders may be able
to exercise majority control over the Company on any individual matter. The
Offer Document states that, if the Offer is successful, the Offeror will seek
to achieve appropriate representation in the Board. The Board has not made any
determination at this stage as to whether the Offeror will be granted any
representation on the Board.
If the Offer is successful, it will be challenging for any potential bidder to
successfully complete a full takeover of the Company in circumstances where
the free float is between 36 per cent. and 26 per cent. and the existing major
shareholders do not support the takeover offer, which means that minority
shareholders are unlikely to have the opportunity to realise a control premium
for their investment.
The reduction in the free float of the Company could also potentially
translate into lower liquidity levels and reduction in daily trading volumes,
which in turn could make it more difficult for new shareholders to invest in
the Company and/or existing Shareholders to realise their investments in the
Company. However, Shareholders should also take into account that, as is
discussed further below, daily trading volumes in the Company's shares are
already relatively low (average daily trading volume in the Company's shares
for the three months ended 26 May 2023 was 47,198 shares which equates to
approximately 0.1 per cent. of the total number of the Issued Share Capital),
and the Offer therefore represents a significant liquidity opportunity for
Shareholders who are seeking to monetise their investment in the Company.
The Offeror has noted in the Offer Document that if the Offer is successful
there is a risk that the Company may no longer meet the eligibility
requirements for inclusion in the FTSE 250 Index.
Features of the Offer and associated factors
In addition to the above, the Board would like to draw Shareholders' attention
to the following when considering whether to accept the Offer:
1. Premium over pre-announcement and recent share price
performance - The Offer Price is at a c.39.0 per cent. premium to the closing
price of the Company's shares of GBP 20.50 on 26 May, the last Trading Day
prior to the announcement of the Offer. Similarly, in comparison to the volume
weighted average share price for the last one, three, six and 12 months prior
to the announcement of the Offer, the premium implied by the Offer amounts to
30.4 per cent., 24.0 per cent., 20.5 per cent. and 34.6 per cent.
respectively. Shareholders who accept the Offer may be able to realise their
investment in the Company at a premium to the pre-announcement share price and
recent share price performance.
2. Liquidity event for Shareholders - The average daily trading
volume in the Company's shares for the three months ended 26 May 2023 is
47,198 shares. The number of Offer Shares equates to the aggregate trading
volumes over a period of approximately 298 days. As such, the Offer represents
a significant liquidity opportunity for Shareholders who are seeking to
monetise their investment in the Company. This is especially relevant for
Shareholders with larger shareholdings as any exit would need to be executed
over an extended period of time, alongside the possibility of negative impact
on the share price.
3. Rhône has an established track record of investment in and
supporting the strategy of the Company - Rhône had been a long-term investor
in Magnesita Refratários S.A. ("Magnesita") (since its acquisition of LWB
Refractories in 2007, which became part of the Magnesita group in 2008) and
exited its investment in 2018 following the formation of the RHI Magnesita
group of companies in 2017. During its tenure as a shareholder, Rhône was
supportive of the management of Magnesita and its overall strategy. It
understands the operations and key stakeholders of the business and, as the
holder of a strategic minority stake, Rhône will have the opportunity to
contribute its industry expertise and work alongside Management to deliver the
next chapter of growth and value creation for the Company and its
shareholders. Rhône has confirmed to the Board that it is supportive of the
strategy to provide total heat management solutions with raw material backward
integration and to grow through consolidation in the refractory industry with
a focus on technology and sustainability leadership.
4. Benefits of organic and inorganic growth initiatives not
fully realised and reflected in current share price - The Company has
relatively higher levels of financial leverage today compared to historical
levels and comparable listed companies. This is the result of the structural
build-up of inventories to better serve customers and both organic and
inorganic growth initiatives through greater investment in the business and
M&A activity. The benefits of these investments and acquisitions
(including synergies) have yet to be fully realised, and the Board believes
that these are not fully reflected in the current share price. Shareholders
who accept the Offer may not benefit fully from the delivery of these benefits
beyond the value of the Offer premium.
5. No certainty as to when the Offer will complete - The Offer
Document states that the acceptance period of the Offer is expected to expire
at 1:00pm London Time on 10 July 2023 and that, subject to the conditions
precedent being satisfied (or waived by the Offeror) by no later than 30
September 2023, settlement is expected to begin by no later than 13 October
2023. However, the Offeror has reserved the right to extend the acceptance
period for the Offer to no later than the date falling one week after the
Competition and FDI Approvals are satisfied (or waived by the Offeror). The
Offer is not subject to any longstop date mechanism. Accordingly, there can be
no certainty as to when the Offer will complete and Shareholders who do accept
the Offer will have to wait until completion of the Offer until they receive
the consideration due under the Offer (and during that time, as discussed
further in paragraph 10 below, Shareholders who have accepted the Offer will
not have the right to withdraw their acceptances under any circumstances).
Should the Company, prior to the settlement of the Offer, announce, declare,
make, pay or distribute dividends or any other distribution or transfer or
return of value to its shareholders other than the Declared Dividend, the
Offeror has reserved the right to make an equivalent deduction to the
consideration payable for the Shares in the Offer.
6. Offer conditional on the Offeror acquiring 20 per cent. -
The Offer is conditional on the Offeror receiving valid acceptances to such an
extent that the Offeror will become the owner of Shares representing at least
20 per cent. of the Issued and Outstanding Share Capital of the Company. In
the event that the Offeror does not receive sufficient acceptances, it will
have the right to invoke the condition and withdraw the Offer.
7. The Offer is subject to a number of other significant
conditions - The Offer is conditional on the conditions referred to in the
Offer Document. In addition to the acceptance condition (see paragraph 6
above), the Offer is conditional on, amongst other things:
7.1 competition authorities in Austria, Germany, India and Mexico and the
foreign investment authorities in Austria, France, Germany, Italy, Spain and
the United Kingdom and any other competition or foreign investment authorities
which the Offeror has determined are required or advisable for the formation
and funding of the Offeror or any other acquisition vehicle, or completion of
the Offer, having given their approval to the transaction or having confirmed
that the transaction does not fall within the jurisdiction of the relevant
authority;
7.2 general conditions that, amongst other things, there has
been no material adverse effect on the Group or the business since the
Accounts Date and no member of the Group having purchased or redeemed any of
its own securities, reduced its share capital or transferred or sold Shares
out of treasury;
7.3 general conditions that, since the Announcement Date, there
has been no material adverse change in the financial markets or conditions in
Austria, the United Kingdom, the Netherlands or internationally; outbreak or
escalation of hostilities or suspension or material limitations of trading on
the London Stock Exchange or the Vienna Stock Exchange (Wiener Börse) or any
over-the-counter market;
7.4 no decrease as at the close of trading of more than 10 per
cent.:
(a) in the market price for the Shares on the London Stock
Exchange or in the general level of market prices for equity securities in the
FTSE 250 Index (measured from the close of trading on 26 May 2023); or
(b) in the market price for the Shares on the Vienna Stock
Exchange or in the general level of market prices for equity securities in the
ATX Prime Index, measured from the close of trading on 29 May 2023,
in each case, which subsists compared to the relevant closing price for the
Shares or general level of market prices for equity securities in the FTSE 250
Index or ATX Prime Index (as applicable) on three consecutive trading days;
7.5 no third party, such as a governmental entity or employee
representative body, having taken or having given notice to take any action
which would or might reasonably be expected to prohibit or hinder or delay the
Offer.
Shareholders should note that there can be no certainty that the conditions
will be satisfied or waived. Therefore, even if they accept the Offer, there
is no certainty that they will receive any cash consideration.
8. Ability of the Offeror to scale down acceptances - The
Offeror is not obliged to accept any Tendered Shares to the extent that it
would result in the Offeror holding more than the total number of Offer
Shares. Therefore, if acceptance by the Offeror of all Shares validly tendered
would result in the Offeror holding more Shares than the number of Offer
Shares, the total number of Tendered Shares will be scaled down pro rata (with
the effect that the total number of Shares held by the Offeror upon declaring
the Offer unconditional shall be equal to the number of Offer Shares).
9. Ability of the Offeror to acquire Shares outside of the
Offer - The Offeror is not restricted under the Offer Document from acquiring
additional Shares outside the Offer and, as a consequence of the Offer not
being subject to the pricing provisions of the ATA, there are no restrictions
on the minimum price that the Offeror must pay to Shareholders for Shares
acquired outside of the Offer, nor any requirement to increase the Offer Price
if Shares are purchased outside the Offer for a price above the Offer Price.
The Offer Document contains a statement that the Offeror did not hold any
securities in the Company as at the date of the Offer Document and that none
of the Offeror's management, any entities controlled by the Offeror, any
entities that control the Offeror or any of their affiliated persons hold
securities in the Company.
10. Acceptance of the Offer will be irrevocable, including in
the event of a Revised Offer - The Offer Document states that any acceptances
of the Offer will be irrevocable. Shareholders should note therefore that, if
they accept the Offer during the acceptance period, they will be unable to
sell their Tendered Shares or accept another offer in respect of their
Tendered Shares, including a higher Competing Offer, if one were to be made.
The Offeror has reserved the right to revise the Offer as may be necessary
or desirable to give effect to any purported acceptance of the Offer and
Shareholders who have accepted the Offer prior to the date of any revision
will be bound by such revision, provided that it represents, as determined by
the Offeror, an improvement (or no diminution) in the value of the Offer
compared with the consideration or terms previously offered or in the overall
value received and/or retained by a Shareholder (under the Offer or
otherwise).
11. The Offer is not available to all Shareholders - The Offer
Document states that the communication of the Offer Document, and any other
documents or materials relating to the Offer, is only being made to (i)
persons who are outside the United Kingdom; (ii) investment professionals (as
defined in Article 19(5) of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005 (the "Financial Promotion Order")) or (iii)
high net worth entities and other persons to whom it may lawfully be
communicated, falling with Article 49(2)(a) to (d) of the Financial Promotion
Order (all such persons together being referred to as "relevant persons"). Any
investment activity to which the Offer Document relates will only be available
to, and will only be engaged in, with relevant persons. Any person who is not
a relevant person cannot act or rely on the Offer Document or any of its
contents. In order to be eligible to view the Offer Document or make a
decision with respect to the Offer, Shareholders must be outside the
Restricted Jurisdictions and must not be a Restricted Person.
12. Jurisdiction for disputes - any dispute regarding the Offer, or
which arises in connection therewith, shall be exclusively settled by the
courts of England and Wales, provided that under the Offer Document, the
Offeror and the Receiving Agent (as defined in the Offer Document) have
reserved the right to, and may in their absolute discretion, bring proceedings
in the courts of any other country which may have jurisdiction.
13. As at the date of this Response Statement, the Shareholders
in the Company, who are defined as Insiders within the definition of 'free
float' in the Appendix, have not publicly stated their views on the Offer.
Conclusion
The Board, having been so advised by Barclays and Peel Hunt on the financial
terms of the offer, is of the view that the Offer undervalues the Company. In
providing their financial advice to the Board, Barclays and Peel Hunt have
taken into account the commercial assessments of the Board.
The Board believes that the benefits of organic and inorganic growth
initiatives have not yet been fully realised or reflected in the share price.
In addition, the Board notes that the Offer Price is lower than the average
target price of equity research analysts of GBP 30.73 (representing a 7.3 per
cent. discount) and the majority of equity research analysts (five out of
seven) published a price target for the Company above the Offer Price.
The Offer is also subject to a number of significant conditions and there can
be no certainty as to whether and, if it does, when the Offer will complete.
Shareholders who accept the Offer will be unable to trade their Shares until
the Offer is withdrawn or completes.
However, the Board notes that the Offer represents a premium over the
pre-announcement share price and provides the possibility of a significant
liquidity opportunity for Shareholders who are looking to monetise their
investment given that the number of Offer Shares equates to the aggregate
trading volumes over a period of approximately 298 days.
Taking into account the considerations set out above, the Board advises
Shareholders to decide whether nor not to tender their Shares depending on
their own individual investment considerations and their own individual
circumstances.
The Board's views on the effect of the implementation of the Offer on the Company's interests, employees and locations
In addition to the matters set out above, article 20 and Annex G of the
Netherlands Decree on Public Takeover bids requires the Board to give their
views on certain matters, including the effect of the Offer on employment, the
employment conditions and the locations of RHI Magnesita's places of business.
In fulfilling these obligations under article 20 and Annex G of the
Netherlands Decree on Public Takeover bids, the Board can only comment on the
details provided in the Offer Announcement and the Offer Document.
The Board does not expect the Offer to have any negative impact on employment,
employment conditions and the locations of RHI Magnesita's places of business.
As mentioned above (see paragraph 3), Rhône was a long-term investor in
Magnesita in the past and during its tenure as a shareholder, Rhône was
supportive of Magnesita's management and their overall strategy.
Yours faithfully
Herbert Cordt
Non-Executive Chairman
RHI Magnesita N.V.
Additional Information
1 DIRECTORS AND INFORMATION ON THE Company
1.1 The directors of RHI Magnesita and their respective
positions are:
Herbert Cordt (Non-Executive Chairman) Janice "Jann" Brown (Non-Executive Director)
John Ramsay (Non-Executive Deputy Chairman, Senior Independent Director) Karl Sevelda (Non-Executive Director)
Stefan Borgas (Chief Executive Officer) Marie-Hélène Ametsreiter (Non-Executive Director)
Ian Botha (Chief Financial Officer) Wolfgang Ruttenstorfer (Non-Executive Director)
Janet Ashdown (Non-Executive Director) Karin Garcia (Employee Representative Director)
David Schlaff (Non-Executive Director) Martin Kowatsch (Employee Representative Director)
Stanislaus Prinz zu Sayn-Wittgenstein-Berleburg (Non-Executive Director) Michael Schwarz (Employee Representative Director)
1.2 RHI Magnesita is registered in the Netherlands with
registered number 68991665.
1.3 RHI Magnesita maintains a premium listing on the Official
list of the London Stock Exchange (symbol: RHI Magnesita) and is a constituent
of the FTSE 250 index, with a secondary listing on the prime segment of the
Vienna Stock Exchange (Wiener Börse).
1.4 The registered office of RHI Magnesita is Kranichberggasse
6, 1120 Vienna, Austria.
1.5 The relevant business address of each of the Directors is
Kranichberggasse 6, 1120 Vienna, Austria.
2 INFORMATION ON SHARES HELD BY THE MEMBERS OF THE BOARD
Set out below are overviews of all transactions and agreements concluded in
relation to securities of RHI Magnesita by the members of the Board, their
spouses and/or registered partners, their minors and any legal entities in
which they and/or these persons have control, in the year prior to the public
statement announcing the Offer (i.e. 30 May 2022 up to 30 May 2023).
Name Type of transaction Date Number of securities Price per share
Stefan Borgas Award of the LTIP 2023 06-Mar-23 76,929 options £26.24
Stefan Borgas Exercise of the LTIP 2020 options 30-May-23 50,042 ordinary shares £20.50
Ian Botha Award of the LTIP 2023 06-Mar-23 33,728 options £26.24
Ian Botha Exercise of the LTIP 2020 options 30-May-23 21,947 ordinary shares £20.50
Ian Botha Vesting of 2019 Conditional Award 28-Nov-22 18,676 ordinary shares £22.50
John Ramsay Purchase 04-Nov-22 2,760 ordinary shares £19.65
PCA of Stanislaus Prinz zu Sayn-Wittgenstein-Berleburg, Elisabeth Prinzessin Off market gift 06-Nov-22 1,071,722 ordinary shares Nil
zu Sayn-Wittgenstein-Berleburg
3 FINANCIAL INFORMATION
The information in accordance with Annex G paragraph 2 of the Netherlands
Decree on Public Takeover bids is contained in the adopted and approved annual
report of RHI Magnesita for the financial year 2022 as well as the
announcement of RHI Magnesita's trading update as published on 15 June 2023
(copies can be obtained from ir.rhimagnesita.com/). The trading update
published on 15 June 2023 is incorporated by reference in this Response
Statement.
Appendix
Definitions
The following definitions apply throughout this document unless the context
requires otherwise:
"Accounts Date" 31 December 2022.
"Additional Shares" has the meaning given in the section titled "Terms of the Offer" above.
"Announcement Date" 30 May 2023.
"Board" means the unitary board of directors of the Company.
"Competing Offer" means a public offer for all or any number of the Shares of the Company
announced or launched by a third party on or after the publication of the
Offer Document on 19 June 2023.
"Competition and FDI Approvals" has the meaning given in the section titled "Letter from the Non-Executive
Chairman of RHI Magnesita N.V." above.
"Declared Dividend" means the dividend of EUR 1.10 per Share declared by the Company on 24 May
2023 for the financial year ended 31 December 2022.
"Directors" means the directors of the Company from time to time.
"EBITA" means earnings before interest, taxes, and amortisation.
"FCA" means the Financial Conduct Authority in its capacity as the competent
authority for the purposes of Part VI of the Financial Services and Markets
Act 2000.
"free float" means the shares of the Company that are not restricted and are available to
the public for trading in the secondary market (see table below for reference)
Shareholder type Number of shares Total % of issued and outstanding capital
Insiders (including MSP Stiftung, Chestnut, FEWI, Silver*) 20,473,276 43.46%
Directors** 473,128 1.00%
Free float 26,164,486 55.54%
Total issued and outstanding capital 47,110,890 100.00%
Sources: AFM
*Insider holdings include MSP Stiftung and wholly owned subsidiaries,
Chestnut Beteiligungsgesellschaft, Silver Beteiligungsgesellschaft and FEWI
Beteiligungsgesellschaft.
**Includes PCAs of directors, unless these are included in the insider
holdings.
In providing the table of shareholdings above, the Company has included the
number of shares registered at the AFM on 26 June 2023, or, where the Company
has been made aware of more up-to-date information through a direct
notification by the shareholder, it has used this information. These stated
interests may differ from the current interests of the relevant shareholders
as these interests are based on the number of shares owned at the time of the
notification and are not adjusted for any purchases or sales since that date.
The total % of issued share capital in the table is calculated excluding
treasury shares held by the Company
"Group" means the Company and its subsidiaries.
"Issued and Outstanding Share Capital" means at any time, the Issued Share Capital less the Treasury Shares.
"Issued Share Capital" means, at any time, the issued share capital of the Company.
"Magnesita" means Magnesita Refratários S.A., a corporation incorporated under the laws
of Brazil having its registered office at Praça Louis Ensch, 240, Cidade
Industrial, Contagem, Minas Gerais, 32210-902, BR.
"Management" means senior management of the Group.
"Offer" means the voluntary partial cash offer made by the Offeror to Shareholders to
purchase 14,086,156 Shares on the terms and subject to the conditions set out
in the Offer Document at an offer price of GBP 28.50 per Share.
"Offer Announcement" means the announcement by the Offeror dated 30 May 2023 relating to the Offer.
"Offer Document" means the offer document published by the Offeror dated 19 June 2023
containing the full terms and conditions of the Offer.
"Offer Price" means GBP 28.50 per Share.
"Offer Shares" means 14,086,156 Shares.
"Offeror" means Ignite Luxembourg Holdings S.à r.l.
"Period" means the five months ended 31 May 2023.
"PRA" means the Prudential Regulation Authority.
"QIP" means Qualified Institutional Placement.
"relevant persons" has the meaning given in paragraph 11 above.
"Response Document Exchange Rate" means the exchange rate of EUR 1:GBP 0.85831 as at 16:00 London time on 26
June 2023, being the last Trading Day prior to the date of the Response
Statement, as derived from data provided by Bloomberg.
"Response Statement" means this announcement.
"Restricted Jurisdiction" has the meaning given in the section titled "Important Information" above.
"Restricted Person" any person in, or acting for the account or benefit of persons in, any
Restricted Jurisdiction (but only to the extent that such person is acting for
the account or benefit of persons in any Restricted Jurisdiction); or (b) any
person other than a relevant person.
"RHI Magnesita" or the "Company" means RHI Magnesita N.V., a company registered in the Netherlands with
registered number 68991665 with its registered office at Kranichberggasse 6,
1120 Vienna, Austria.
"Rhône" means Rhône Holdings VI L.L.C.
"Share" or "Shares" means the existing unconditionally allotted or issued and fully paid (or
credited as fully paid) ordinary shares of EUR 1.00 each in the capital of the
Company and any further such shares which are unconditionally allotted or
issued and fully paid (or credited as fully paid) before the Offer closes but
excluding any such shares held or which become held in treasury.
"Shareholders" means the holders of Shares and/or dematerialised depositary interests
representing entitlements in the Shares.
"Tendered Shares" means Shares which have been validly tendered in accordance with the Offer
Document.
"Trading Day" means a day on which the London Stock Exchange is open for the trading of
shares.
"Treasury Shares" means, at any time, Shares held by the Company in treasury.
"United Kingdom" or "UK" means the United Kingdom of Great Britain and Northern Ireland.
"United States" or "US" means the United States of America, its territories and possessions, any state
of the United States of America, the District of Columbia and all other areas
subject to its jurisdiction and any political sub-division thereof.
"Group"
means the Company and its subsidiaries.
"Issued and Outstanding Share Capital"
means at any time, the Issued Share Capital less the Treasury Shares.
"Issued Share Capital"
means, at any time, the issued share capital of the Company.
"Magnesita"
means Magnesita Refratários S.A., a corporation incorporated under the laws
of Brazil having its registered office at Praça Louis Ensch, 240, Cidade
Industrial, Contagem, Minas Gerais, 32210-902, BR.
"Management"
means senior management of the Group.
"Offer"
means the voluntary partial cash offer made by the Offeror to Shareholders to
purchase 14,086,156 Shares on the terms and subject to the conditions set out
in the Offer Document at an offer price of GBP 28.50 per Share.
"Offer Announcement"
means the announcement by the Offeror dated 30 May 2023 relating to the Offer.
"Offer Document"
means the offer document published by the Offeror dated 19 June 2023
containing the full terms and conditions of the Offer.
"Offer Price"
means GBP 28.50 per Share.
"Offer Shares"
means 14,086,156 Shares.
"Offeror"
means Ignite Luxembourg Holdings S.à r.l.
"Period"
means the five months ended 31 May 2023.
"PRA"
means the Prudential Regulation Authority.
"QIP"
means Qualified Institutional Placement.
"relevant persons"
has the meaning given in paragraph 11 above.
"Response Document Exchange Rate"
means the exchange rate of EUR 1:GBP 0.85831 as at 16:00 London time on 26
June 2023, being the last Trading Day prior to the date of the Response
Statement, as derived from data provided by Bloomberg.
"Response Statement"
means this announcement.
"Restricted Jurisdiction"
has the meaning given in the section titled "Important Information" above.
"Restricted Person"
any person in, or acting for the account or benefit of persons in, any
Restricted Jurisdiction (but only to the extent that such person is acting for
the account or benefit of persons in any Restricted Jurisdiction); or (b) any
person other than a relevant person.
"RHI Magnesita" or the "Company"
means RHI Magnesita N.V., a company registered in the Netherlands with
registered number 68991665 with its registered office at Kranichberggasse 6,
1120 Vienna, Austria.
"Rhône"
means Rhône Holdings VI L.L.C.
"Share" or "Shares"
means the existing unconditionally allotted or issued and fully paid (or
credited as fully paid) ordinary shares of EUR 1.00 each in the capital of the
Company and any further such shares which are unconditionally allotted or
issued and fully paid (or credited as fully paid) before the Offer closes but
excluding any such shares held or which become held in treasury.
"Shareholders"
means the holders of Shares and/or dematerialised depositary interests
representing entitlements in the Shares.
"Tendered Shares"
means Shares which have been validly tendered in accordance with the Offer
Document.
"Trading Day"
means a day on which the London Stock Exchange is open for the trading of
shares.
"Treasury Shares"
means, at any time, Shares held by the Company in treasury.
"United Kingdom" or "UK"
means the United Kingdom of Great Britain and Northern Ireland.
"United States" or "US"
means the United States of America, its territories and possessions, any state
of the United States of America, the District of Columbia and all other areas
subject to its jurisdiction and any political sub-division thereof.
In this document:
All references to "pounds", "UK Pound Sterling", "GBP", "pounds Sterling",
"Sterling", "£", "pence", "penny" and "p" are to the lawful currency of the
United Kingdom.
All references to "euros", "EUR" and "€" are to the lawful currency of the
member states of the European Union that adopted the single currency in
accordance with the Treaty of Rome establishing the European Community (as
amended)
All references to statutory provision or law or to any other order or
regulation shall be construed as a reference to that provision, law, order or
regulation as extended, modified, replaced or re-enacted from time to time
and all statutory instruments, regulations and orders from time to time made
thereunder or deriving validity therefrom.
Words importing the singular shall include the plural and vice versa, and
words importing the masculine gender shall include the feminine or neutral
gender.
For further enquiries, please contact:
Chris Bucknall, Head of Investor Relations
Tel +43 699 1870 6490
E‐mail: chris.bucknall@rhimagnesita.com
(mailto:chris.bucknall@rhimagnesita.com)
For media enquiries:
Hudson Sandler
Tel +44 020 7796 4133
E-mail: rhimagnesita@hudsonsandler.com (mailto:rhimagnesita@hudsonsandler.com)
About RHI Magnesita
RHI Magnesita is the leading global supplier of high-grade refractory
products, systems and solutions which are critical for high-temperature
processes exceeding 1,200°C in a wide range of industries, including steel,
cement, non-ferrous metals and glass. With a vertically integrated value
chain, from raw materials to refractory products and full performance-based
solutions, RHI Magnesita serves customers around the world, with around 13,500
employees in 33 main production sites and more than 70 sales offices. RHI
Magnesita intends to leverage its leadership in terms of revenue, scale,
product portfolio and diversified geographic presence to target strategically
those countries and regions benefitting from more dynamic economic growth
prospects.
The Group maintains a premium listing on the Official list of the London Stock
Exchange (symbol: RHIM) and is a constituent of the FTSE 250 index, with a
secondary listing on the prime segment of the Vienna Stock Exchange (Wiener
Börse). For more information please visit: www.rhimagnesita.com
(http://www.rhimagnesita.com)
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (596/2014/EU).
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