New UK-listed holding company
28/08/2008
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Charter plc to introduce a new Jersey incorporated, UK-listed holding company
Charter plc (“Charter”) today announces proposals to change its corporate structure. Under these proposals, shareholders in Charter will exchange their shareholdings for equivalent shareholdings in a new holding company to be called Charter International plc (“Charter International”), which is incorporated in Jersey with its head office and tax residence in the Republic of Ireland and which will be listed in the United Kingdom (the “Proposals”).
Charter owns (through a number of intermediate holding companies) two engineering businesses, the ESAB business focused on welding, cutting and automation (“ESAB”) and the Howden business focused on air and gas handling (“Howden”). Both ESAB and Howden are established world leaders supplying performance critical components to end-users.
The Proposals will be implemented by way of a scheme of arrangement pursuant to sections 895 to 899 of the UK Companies Act 2006 (the “Scheme”).
Background to and reasons for the Proposals
The implementation of the Scheme reflects the nature of Charter’s two businesses, ESAB and Howden, which are both multi-national concerns, with significant operations in continental Europe, North and South America, Asia and elsewhere. Since 1 January 2005, ESAB and Howden have in aggregate invested more than £100 million in capital expenditure outside the United Kingdom, including significant investments in China, Central Europe and South America. Over the same period, ESAB and Howden have also made a number of important acquisitions of businesses outside the United Kingdom, including increased shareholdings in the South American welding and cutting businesses and ESAB India and the acquisition of Romar Positioning Equipment (a business headquartered in Singapore).
ESAB and Howden have significantly rationalised or closed their United Kingdom facilities, and the proportion of total sales which is represented by customers located in the United Kingdom has fallen and is now estimated to be less than 5 per cent. Furthermore, over this period, ESAB and Howden’s operational management teams have been increasingly located outside the United Kingdom.
Given the geographic profile of the businesses, the Board has been giving detailed consideration to the corporate structure which would best support the long term growth of Charter and its subsidiaries (the “Charter Group”) and the creation of additional value for its shareholders.
The Board believes that the implementation of the Scheme, with the ultimate parent company being based outside the United Kingdom, will provide a suitable platform on which to develop and expand Charter’s businesses internationally and will lead to a lower overall tax rate and lower tax compliance costs than would be achievable if the ultimate parent company of the Charter Group were to remain in the United Kingdom.
The use of a Jersey incorporated, Republic of Ireland headquartered and tax resident entity as the new holding company of the Charter Group has been proposed as the Board believes this structure offers the best choice of jurisdictions to realise the benefits of the Scheme. The Board believes that there are a number of factors which make the Republic of Ireland the most appropriate location: its less complex taxation system which does not seek to impose tax on the unremitted profits of subsidiary companies in other jurisdictions; its business infrastructure; the availability and cost of accommodation and professional and support staff; its location and time zone; and the use of the English language.
The Board expects that the benefits of the Scheme, which it believes will be increasingly experienced from 2010 onwards, will enhance the Charter Group’s earnings per share.
The Board and head office of the new holding company will be located in Dublin.
Corporate governance and compliance with the City Code on Takeovers and Mergers (the “City Code”)
Charter International will adopt corporate governance and investor protection measures appropriate to a company of its standing and equivalent to those adopted by Charter.
As it is registered in Jersey, Charter International will be subject to the City Code.
Listing
Charter International will have its only listing on the London Stock Exchange. It is expected that, upon listing, Charter International will become part of the FTSE’s UK Index Series.
Summary of the Proposals
If the Scheme is approved, it will result in holders of Charter ordinary shares becoming holders of Charter International ordinary shares and in Charter becoming a wholly owned subsidiary of Charter International.
The Proposals will be implemented through the Scheme, under the terms of which Charter ordinary shareholders at the record time of the Scheme will receive, in exchange for their Charter ordinary shares, Charter International ordinary shares on the following basis:
| for every one Charter ordinary share | one Charter International ordinary share |
Upon the implementation of the Scheme, a Charter International ordinary shareholder will effectively have the same proportionate interest in the profits, net assets and dividends of the Charter Group as he currently has as a Charter ordinary shareholder.
Charter International reduction of capital
Charter International intends to make an application to the Royal Court of Jersey to implement a reduction of capital (the “Reduction of Capital”).
Upon the Reduction of Capital becoming effective, all amounts standing to the credit of Charter International’s share premium account will be re-characterised as a distributable reserve. This is a legal and accounting adjustment and will not of itself have any direct impact on the market value of the Charter International ordinary shares. The purpose of this is to create a distributable reserve that will be available to be distributed as dividends, at the discretion of the Charter International directors, to Charter International ordinary shareholders from time to time or for any other lawful purpose to which such reserve may be applied.
Income access share arrangements
Charter International intends to put into place, after completion of the Scheme and subject to the passing of a board resolution, income access share arrangements. If implemented, and to the extent that they are operated, these arrangements will mean that Charter International ordinary shareholders are able to choose whether to receive dividends from a company resident for tax purposes in the Republic of Ireland or to receive their dividends under the income access share arrangements from a company resident for tax purposes in the United Kingdom (i.e. a UK member of the Charter Group).
Conditions
The implementation of the Scheme is conditional upon approval of the Scheme by Charter shareholders at a shareholder meeting to be convened at the direction of the High Court (the “Court Meeting”). The approval required at the Court Meeting is a majority in number of Charter shareholders present and voting (whether in person or by proxy) representing not less than 75 per cent in value of those Charter shareholders who vote at the meeting.
The Scheme will also require separate approval by not less than 75 per cent of all Charter shareholders who vote (whether in person or by proxy) at a general meeting of Charter (the “General Meeting”).
In addition, the Scheme will be conditional (inter alia) on the sanction of the Scheme by the High Court of Justice in England and Wales.
The Reduction of Capital by Charter International will require approval at a subsequent hearing of the Royal Court of Jersey.
Circular and prospectus
A circular setting out full details of the Proposals will be sent to Charter shareholders on or around 8 September 2008 (the “Circular”). A prospectus in relation to Charter International will also be published and filed with the Financial Services Authority on or around 8 September 2008 (the “Prospectus”).
The Circular will be available on the Charter website at www.charterplc.com and it is envisaged that the Prospectus will be available on the Charter International website (further details to be announced).
Expected timetable of principal events
| 8 September 2008 | Post Circular to Charter ordinary shareholders and publish Prospectus |
| 29 September 2008 10:00 a.m. | Latest time for receipt by the registrars of blue forms of proxy from Charter ordinary shareholders for the Court Meeting |
| 29 September 2008 10:15 a.m. | Latest time for receipt by the registrars of white forms of proxy from Charter ordinary shareholders for the General Meeting |
| 29 September 2008 6:00 p.m | Voting record time for the Court Meeting and the General Meeting |
| 1 October 2008 10:00 a.m. | Court Meeting |
| 1 October 2008 10:15 a.m. | General Meeting |
| 21 October 2008 | Court Hearing of claim form to sanction the Scheme |
| 21 October 2008 | Last day of dealings in Charter ordinary shares |
| 21 October 2008 6:00 p.m. | Scheme record time |
| 22 October 2008 | Scheme effective date |
| 22 October 2008 7:00 a.m. | Delisting of Charter ordinary shares, admission and listing of Charter International ordinary shares and commencement of dealings in Charter International ordinary shares on the London Stock Exchange’s main market for listed securities |
| 22 October 2008 | Credit of Charter International ordinary shares in uncertificated form to CREST accounts |
| Within 10 days of the Effective Date | Despatch of share certificates in respect of Charter International ordinary shares in certificated form |
| 6 November 2008 | Jersey court hearing to sanction the Reduction of Capital |
| 7 November 2008 | Reduction of Capital becomes effective |
All references to time in this document are to London time unless otherwise stated. The dates given are based on the Charter directors’ expectations and are subject to change.
Commenting on the proposals, Michael Foster, Chief Executive of Charter, said:
“The proposals reflect the nature of Charter’s two businesses, ESAB and Howden, which are both multi-national concerns, with significant operations in continental Europe, North and South America and Asia, whilst the proportion of total sales which is represented by customers located in the United Kingdom has fallen and is now estimated to be less than 5 per cent. Furthermore, over this period, ESAB and Howden’s operational management teams have been increasingly located outside the United Kingdom.
We believe that the implementation of these proposals, with the ultimate parent company being based outside the United Kingdom, will provide a suitable platform on which to develop and expand Charter’s businesses internationally and will lead to a lower overall tax rate and lower tax compliance costs than would be achievable if the ultimate parent company of the Charter Group were to remain in the United Kingdom.
We expect that the benefits of these proposals, which we believe will be increasingly experienced from 2010 onwards, will enhance the Charter Group’s earnings per share.”
Contact
Andrew Fenwick; Pamela Small, Brunswick +44 (0) 20 7404 5959
Michael Foster, Chief Executive; Robert Careless, Finance Director +44 (0) 20 7404 5959
Internet users will be able to view this announcement, together with other information
about Charter plc at the company’s web site
www.charterplc.com
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