Aegis Group plc and Mitchell Communication Group have entered into a Merger Implementation Agreement (“MIA”) under which it is proposed that Aegis will acquire all of the issued capital in Mitchell for approximately A$363 million (based on the cash consideration of A$1.20 per Mitchell share and including options and performance rights). Mitchell shareholders may elect to receive their consideration in cash, or Aegis shares, or a combination of both. This equates to a total of approximately £207 million, as per the A$:£ exchange rate on 28 July 2010 of A$1.75:£1. In addition, in the event the transaction is approved, Mitchell shareholders will receive the benefit of a fully franked Mitchell dividend in respect of the year ended 30 June 2010 of A$0.05 per share. The Mitchell Board has also resolved to suspend the Mitchell Dividend Reinvestment Plan.
The acquisition will be implemented by way of a Scheme of Arrangement (“Scheme”) under which Mitchell shareholders can elect to receive either A$1.20 cash per Mitchell share, or Aegis shares, or a combination of the two. The scrip component of the offer will be based on the ratio of 40 Aegis shares for every 67 Mitchell shares held, with a cap on the overall quantum of Aegis scrip to be offered of up to 9.9% of Aegis’ share capital. Full details of the cash and scrip election mechanism will be set out in the Explanatory Memorandum for the Scheme, scheduled for distribution in September.
The offer represents a premium of:
– 15.4% to the last closing price of Mitchell shares prior to this announcement on 28 July 2010;
– 30.7% to the three-month Volume Weighted Average Price (“VWAP”) of Mitchell up to the close of trade on 28 July 2010; and
– 33.8% to the six-month VWAP of Mitchell up to the close of trade on 28 July 2010.
Aegis Group plc is one of the world’s leading marketing communications groups, operating in 82 countries around the world, and in the year to 31 December 2009 made underlying operating profit of £170.3 million on revenue of £1.35 billion. Mitchell is Australia’s largest marketing communications group and in the year to 30 June 2009 reported profit before tax of A$27.4 million on revenue of A$225.2 million. As at 31 December 2009 Mitchell had gross assets of A$508.3 million.
The Board of Directors of Mitchell unanimously recommends shareholders accept and vote in favour of the Scheme, in the absence of a superior proposal and subject to an Independent Expert concluding that the Scheme is in the best interests of Mitchell shareholders. Harold Mitchell, founder and Executive Chairman of Mitchell, and his immediate family (together being 40% shareholders in Mitchell) along with each of the other Directors of Mitchell, intend to vote or cause to be voted all of their direct and indirect interests in Mitchell in favour of the Scheme, in the absence of a superior proposal and subject to an Independent Expert concluding that the Scheme is in the best interests of Mitchell shareholders.
If the Scheme is implemented, Mr Mitchell, being a 30% shareholder, intends to take his consideration in Aegis shares, becoming a significant shareholder in Aegis. He has further undertaken not to dispose of 85% of the shares he receives in relation to this transaction for a period of 24 months after the date that they are issued to him. Mr Mitchell also intends to lead the combined Aegis Media Pacific business as Chairman.
Aegis has reached agreement with Mr. Mitchell under which Aegis has an option to acquire from him 19.9% of the issued share capital of Mitchell – part of his 30% shareholding – for Aegis shares, at the same ratio as proposed to be offered under the Scheme. Any Aegis shares issued under the option agreement will form part of the Aegis shares otherwise available under the Scheme. Details of this agreement will be disclosed in a substantial holder notice to be lodged by Aegis with ASX.
Jerry Buhlmann, Aegis Group Chief Executive Officer, said:
“We are pleased to announce that we have reached agreement to buy Mitchell, which is a hugely successful company with a strong track record of profitable growth driven by its market-leading positions in both traditional and digital media.
“Mitchell is the leading marketing communications group in Australia, the eighth largest ad spend market in the world, and this acquisition is a further step in transforming Aegis’ operations in the Asia-Pacific region. Our businesses are a strong strategic and cultural fit. Combining Mitchell with our existing business in Australia will create a formidable business for the benefit of all our clients and position us for continued strong growth in the most dynamic region in the world.
“The proposed acquisition will be earnings accretive for Aegis and will enhance the return on invested capital in the first full year post combination.”
Harold Mitchell, Mitchell Communication Group Executive Chairman, said:
“I am delighted that we have reached agreement with Aegis over a deal which I believe is in the best interests of our people, our clients and our shareholders.
“Aegis is the best placed of the global agency groups for the convergent future, with a strong focus on digital and media. We are convinced they have enormous growth ahead of them and having Mitchell as part of their global network will be an important part of achieving that. That is why I intend to become a significant shareholder in Aegis if the transaction is approved.”
Details of the Agreement
Under the Scheme, Mitchell shareholders will receive total consideration of A$1.20 cash for each Mitchell share held, or 40 Aegis shares for every 67 Mitchell shares held, or a combination of both. In addition, subject to approval of the transaction, Mitchell shareholders will receive the benefit of a fully franked Mitchell dividend in respect of the year ended 30 June 2010 of A$0.05 per share. Mitchell will announce further details of the timing of dividend payments with the announcement of its full year financial results for the year to 30 June 2010.
Mitchell shareholders can elect to receive either cash, or Aegis shares, or a combination of the two. The scrip component of the offer will be based on the ratio of 40 Aegis shares for every 67 Mitchell shares held, with a cap on the overall quantum of Aegis scrip to be offered (whether under the Scheme or under the option agreement with Harold Mitchell) of up to 9.9% of Aegis share capital. Full details of the cash and scrip election mechanism will be set out in the Explanatory Memorandum for the Scheme.
The transaction is subject to a number of conditions, including court approval and Mitchell shareholder approval. The key terms and conditions of the Merger Implementation Agreement are summarised later in this announcement.
The cash component of the acquisition will be funded by Aegis from internal resources.
An Explanatory Memorandum with full details of the transaction, including an Independent Expert’s Report, is expected to be dispatched to Mitchell shareholders in September 2010. The shareholder meeting to approve the Scheme is expected to be held in October 2010. A more detailed timetable for the approval and implementation of the transaction will be announced in due course.
Aegis was advised by Greenhill, Slaughter and May and Freehills. Mitchell was advised by ANZ Mergers and Acquisitions and Mallesons Stephen Jaques.
UK, London
You must be logged in to post a comment.