ASX Statement & Media Release

Transcription

1 ASX Statement & Media Release 14 September 2015 UNSOLICITED PROPORTIONAL TAKEOVER OFFER Cardno Limited (ASX: CDD) ( the Company ) refers to the announcement by Crescent Capital Investments Pty Limited that it intends to make an unsolicited proportional off-market takeover offer for the Company [copy enclosed]. Shareholders are advised to take no action in relation to the takeover offer or any document received from Crescent Capital Investments Pty Limited until they receive the Directors formal recommendation. The Directors will keep shareholders fully informed of further developments and will provide a formal recommendation on the takeover offer in ample time for shareholders to make an informed decision. ENDS Contact: Graham Yerbury, Chief Financial Officer, Cardno ( ) About Cardno: Cardno is an ASX200 professional infrastructure and environmental services company, with specialist expertise in the development and improvement of physical and social infrastructure for communities around the world. Cardno s team includes leading professionals who plan, design, manage and deliver sustainable projects and community programs. Cardno is an international company, listed on the Australian Securities Exchange [ASX: CDD]. Page 1 of 1

2 Crescent Capital Investments Pty Limited ACN September 2015 CRESCENT ANNOUNCES INTENTION TO MAKE A $3.15 CASH PER SHARE PROPORTIONAL OFFER FOR CARDNO Crescent Capital Investments Pty Limited (Crescent), a substantial shareholder in Cardno Limited (Cardno), today announced that it intends to make a proportional off-market offer to acquire 1 out of every 2 shares held by Cardno shareholders (other than Crescent) for $3.15 per share (Offer). The offer price represents a 26.0% premium over the closing price of $2.50 per Cardno share on 11 September 2015, the last trading day prior to the announcement of the Offer. Cardno shareholders who accept the Offer will therefore receive cash consideration of $3.15 per share in respect of 50.0% of their Cardno shares and can either sell their other shares on market or retain their shares. Crescent and its associates currently have voting power in 19.62% of Cardno shares. 1 If 100% of the non-crescent shareholders choose to accept this proportional offer, Crescent s ownership of Cardno shares will increase up to a maximum of approximately 58.91% for a total cash consideration of approximately $215 million. This Offer is fully equity funded by Crescent advised funds. Crescent is an entity owned and controlled by Crescent Capital Partners V, a leading Australian private equity fund. Commenting on today s Offer, Crescent Capital Partners Managing Partner, Michael Alscher, said: Our offer provides the opportunity for shareholders in Cardno to sell half of their shareholding at a significant premium to recent trading levels. Our offer enables shareholders to realise substantial value for part of their holding in a company that has experienced a material decline in earnings and resultant shareholder returns over the last three years, and which has an uncertain outlook. Crescent Capital Partners has a proven track record in improving business performance and is willing to actively work with and support a renewed Cardno board and management team globally. Our focus will be on ensuring the board actively drives the strategic direction of the company, instils strong management discipline and accountability across Cardno s business and oversees the appropriate management of capital to deliver profitable growth, and create value. We recognise the importance of employees in services companies like Cardno, and have structured our offer as a proportional bid rather than full takeover to take this into account. We wish to build on the owner mindset of Cardno s employee shareholders and encourage these employee shareholders to retain their shares, be active owners and, alongside Crescent, help drive Cardno s future performance. Our offer provides certainty and liquidity for shareholders, whilst also providing shareholders the opportunity to benefit from our commitment to build the business over time for all Cardno stakeholders. 1 This voting power includes the votes attaching to those shares held by a custodian for FSS Trustee Corporation as trustee for the First State Superannuation Scheme, an Associate of Crescent.

3 Why the Offer is compelling for Cardno shareholders Crescent considers that the Offer is compelling for Cardno shareholders. The offer price represents a substantial premium to recent trading levels: a 26.0% premium over the closing price of $2.50 per Cardno Share on 11 September 2015, the last trading day prior to the announcement of the Offer; a 31.1% premium over the 5 day volume weighted average price of $2.40 per Cardno share up to and including 11 September 2015; a 23.9% premium over the volume weighted average price of $2.54 per Cardno share post FY15 results, being the period from and including 19 August 2015, the day after Cardno s 2015 full year results announcement, up to and including 11 September 2015; and a 33.5% premium over the closing price of $2.36 per Cardno share on 21 May 2015, the last trading day prior to Cardno s Response to Press Speculation related to Crescent s acquisition of its initial interest of approximately 10% in Cardno. The Offer, in addition to the substantial premium, provides shareholders with certain value for half of their Cardno shares. Crescent considers this important especially given the recent performance of Cardno and the issues facing it. Since 1 July 2012 there has been: a significant reduction in shareholder value. On 1 July 2012, Cardno was trading at $7.56 per share. Currently the 5 day VWAP of Cardno (prior to the announcement of this Offer) was $2.40 per Cardno share. Adjusting for dividends over this period, Cardno shareholders have suffered a negative 59% return. 2 In contrast, the S&P/ASX 200 Industrials Accumulation Index has increased by 65% over this same period; negative EPS growth for each financial year since 2012, recording a rate of negative earnings growth of 21% per annum over the 3 years to June 2015, totalling a more than halving in EPS, even after excluding the impact of the write off of $224 million of primarily intangibles in FY15; 3 and instability in senior management with the departure of the two Chief Executive Officers since the start of 2014, a five month period without a permanent CEO in and the recent resignation of the company s Chief Financial Officer. 5 Furthermore, Cardno has increasingly low levels of headroom with respect to its lender covenant leverage ratio and this may require Cardno to review its capital structure and financial risk management if the current trends in earnings, net debt and/or foreign exchange rates continue. 2 Total shareholder return calculated as the compound total return between two dates, including capital gains and dividend income (adjusted for special cash dividends). Dividends are assumed to be reinvested on the ex-dividend date (excluding special cash dividends). 3 EPS represents decline from Cardno s Basic EPS of cents per Cardno Share in FY12 to Cardno s NOPAT Basic EPS of cents per Cardno Share in FY15 after normalising for cents per Cardno Share of tax effected impairment losses (as sourced from Cardno s annual reports and half yearly reports). 4 Cardno announced the retirement of Mr Andrew Buckley on 6 January 2014, effective 1 March 2014, and the resignation of Mr Michael Renshaw on 12 January 2015, effective immediately. Mr Richard Wankmuller commenced as Chief Executive Officer on 29 June Cardno announced the resignation of Mr Graham Yerbury on 29 July 2015, effective 23 October 2015.

4 Crescent s intentions Crescent s overall intention, subject to obtaining a sufficiently large shareholding as a result of acceptances of this Offer or otherwise in accordance with the law, is to drive long term value creation for Cardno shareholders. In particular, it is Crescent s intention to drive a process of board change and renewal, and to see the board take an engaged and active role in driving the strategic and operational performance of the business to rebuild shareholder value. Given the current level of financial performance and debt levels, it would be Crescent s intention to lobby the board to either reduce or suspend dividends for the foreseeable future. This would allow a focus on reinvesting in the business and paying down debt, with surplus cash being used for onmarket share buy-backs to drive EPS growth if the Cardno Share price is below the board s view of value. Crescent s view is that focusing on maintaining a high dividend payout ratio, which may become increasingly unfranked due to the increasing share of offshore earnings, is not in the long term best interests of shareholders, especially in light of current performance and Cardno s capital structure and earnings profile. We see the rebuilding of Cardno as a 3 to 5 year project which may require significant investment in the next 12 to 24 months. This may involve earnings declines during this period as additional investment is made to drive the integration of business units and prepare the business for longer term growth. Offer conditions The conditions of Crescent s proposed Offer are set in full in the Bidder s Statement. In summary the conditions are that, before the end of the offer period: no prescribed occurrences: no prescribed occurrences occur; no regulatory actions: no regulatory action occurs which has, or which may, materially adversely impact the Offer; no material adverse change: no material adverse change occurs in respect of Cardno (taken as a whole); no material capital expenditure, acquisitions or disposals: no material capital expenditure, acquisitions or disposal is committed to by Cardno other than as previously announced; no new or amended financing: no new financing arrangements are entered into, or the terms of existing financing arrangements are amended, in respect of an amount equal to or above $50 million; market fall: the S&P/ASX 200 Index does not close below 4,564 for 2 consecutive trading days during the offer period; and no merger implementation deed: Cardno does not enter into a merger implementation deed or other agreement pursuant to which a party other than Crescent would acquire an interest in 20% or more Cardno shares. Funding This Offer is fully equity funded by Crescent advised funds.

5 Timetable and next steps Crescent has lodged its Bidder s Statement with ASIC and sent it to Cardno today, and intends to despatch the relevant Offer documentation to Cardno shareholders as soon as possible, which is intended to be during the week commencing 28 September Further information will be contained in the Bidder s Statement to be provided shortly. Advisers Credit Suisse Emerging Companies is acting as financial adviser to Crescent and Gilbert + Tobin is acting as legal adviser. Media contact David Symons Cato Counsel +61 (0) / +61 (0) david@catocounsel.com.au Sue Cato Cato Counsel +61 (0) / +61 (0) cato@catocounsel.com.au

6 Annexure A Information on Crescent and Crescent Capital Partners Crescent Capital Investments Pty Limited is a substantial shareholder in Cardno Limited, holding 29,526,217 Cardno shares. Along with its associates, Crescent has voting power in Cardno of 19.62%. Crescent is an entity owned and controlled by Crescent Capital Partners V, a private equity fund managed by Crescent Capital Partners Management Pty Limited (Crescent Capital Partners). Crescent Capital Partners, founded in 2000 and based in Sydney, is a leading Australian private equity investment manager which has raised over $1.5 billion in committed funds over its funds. Crescent Capital Partners has invested in 30 companies and made over 100 follow on acquisitions for portfolio companies across a broad range of industries in Australia and New Zealand. Investors in the funds managed and advised by Crescent Capital Partners are made up of domestic and international superannuation and pension funds, endowments and charities. Crescent Capital Partners, as the manager of the relevant Crescent investment vehicles, takes an active role in the businesses in which its funds invest, supporting the senior management teams with the resources and relationships available to Crescent Capital Partners. Crescent Capital Partners team members have been drawn from strategy consulting and/or operating roles in businesses. They apply a highly institutionalised, analytical and team based approach to problem solving. Crescent Capital Partners team advises its investee companies on strategic decision-making and corporate governance issues and assists with bolt-on acquisitions, market access, operational improvement and expansion strategies. Crescent Capital Partners is a privately held company. Information on Crescent Capital Partners is available at