Pre-Annual General Meeting Information • Nov 5, 2021
Pre-Annual General Meeting Information
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Recticel NV Bourgetlaan 42 1130 Brussels (Haren), Belgium RLP Brussels 0405.666.668 (the Company)
Information document for shareholders relating to the proposed sale of the Engineered Foams business and the convocation of a special general meeting of shareholders pursuant to article 7:152 BCCA on 6 December 2021 at 10 am CET, at Van Der Valk Hotel Brussels Airport, Culliganlaan 4, 1831 Machelen, Belgium
A French and a Dutch translation of this information document are available on the Company's website.
This information document is dated 5 November 2021
This document provides additional information to the shareholders relating to the proposed sale purchase agreement to be entered into between the Company and Carpenter Co. or any of its affiliates pursuant to which the Company will sell its Engineered Foams business to Carpenter Co. or any of its affiliates (the Proposed Transaction) and the convocation of a special general meeting of shareholders of the Company (the GM or General Meeting) to approve the Proposed Transaction in accordance with article 7:152 BCCA.
| 1. | Description of the Proposed Transaction3 | ||
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| 1.1 | Proposed sale of the Engineered Foams business3 | ||
| 1.2 | Strategy and rationale of the Proposed Transaction4 | ||
| 1.3 | Indicative main terms of the Proposed Transaction5 | ||
| 2. | Rationale of the Proposed Transaction10 | ||
| 2.1 | Compelling valuation of the Proposed Transaction10 | ||
| 2.2 | Proposed Transaction will create superior value for shareholders vs. Greiner's | ||
| offer of EUR 13.5 per share14 | |||
| 3. | Approval of the Proposed Transaction 18 |
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| 3.1 | Special shareholders' meeting 18 |
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| 3.2 | Expected timetable of principal events19 | ||
| 3.3 | Convocation of the Special Shareholders Meeting 20 |
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| 4. | Contact details and link to relevant information 24 |
This information document does not constitute or form part of any offer or invitation to purchase, otherwise acquire, subscribe for, sell, otherwise dispose of or issue, or any solicitation of any offer to sell, otherwise dispose of, issue, purchase, otherwise acquire or subscribe for, any security of the Company. This document does not purport to give legal, tax or financial advice. Nothing herein should be taken as constituting investment advice.
Certain statements contained in this information document that are not historical facts are "forward-looking statements". Such statements are based on the Company's beliefs and projections and on information currently available to the Company. These forwardlooking statements are subject to a number of risks and uncertainties, many of which are beyond the Company's control and all of which are based on the Company's current beliefs and expectations about future events. Forward-looking statements are typically identified by the use of forward-looking terminology such as "believes", "expects", "may", "will", "could", "should", "intends", "estimates", "plans", "assumes", "anticipates", "goal", "target" or "aim" or the negative thereof or other variations thereof or comparable terminology, or by discussions of strategy that involve risks and uncertainties. Forward-looking statements involve inherent risks and uncertainties and speak only of the date they are made. The Company undertakes no duty to and will not necessarily update any of the forward-looking statements in light of new information or future events.
Certain information and market data available referred to in this document has come from third party sources, including broker reports and press articles, and have not been reviewed by the Company for accuracy or completeness and are subject to change without notice.
On 11 October 2021, the Company announced it has received a binding offer from Carpenter Co. for its Engineered Foams business for a cash consideration based on an Enterprise Value1 of EUR 656 million on a cash and debt free basis (representing about EUR 11.65 per Recticel share on a fully diluted basis).
The equity price2 (including the corresponding price per Recticel share on a fully diluted basis) will be based on this enterprise value adjusted for actual net financial debt3 and working capital position at completion of the Proposed Transaction.
The Proposed Transaction is subject to shareholder approval and to customary conditions including regulatory approval and confirmatory due diligence. Carpenter's binding offer is not subject to any financing condition. The outcome of the confirmatory due diligence is expected to be known before the General Meeting.
The business proposed to be transferred is the entire Engineered Foams business segment, which produces a comprehensive range of foams and systems, spanning industrial, automotive, and comfort applications and which includes the Nordic foam activities for bedding applications. The Company will have to implement the following carve-out operations prior to completion of the Proposed Transaction:
It is expected that prior to completion of the Proposed Transaction, the sold entities will enter into temporary service agreements, IP license agreements and any other agreements that may be required in the context of the Proposed Transaction (at terms and conditions currently applied within the Company's group, and for a duration to be agreed upon) with the Company to allow the Engineered Foams business to operate on a standalone basis.
All employees working for the Engineering Foams division, blue or white collars, will transfer to Carpenter. Likewise, all employees working the Bedding division will transfer to the upcoming acquirer of the Bedding division. Taking into account the staffing requirements of the remaining company and its main assets, ie. the
1 Enterprise value or firm value of a company/business is an economic measure reflecting the intrinsic value of a business. It is a sum of claims by all claimants: creditors and shareholders.
2 Equity value is the value of a company/business available to owners or shareholders. It is calculated as the enterprise value plus all cash and cash equivalents, short and long-term investments, and less all short-term debt, long-term debt, debt like items (e.g. under-funded pensions, net working capital adjustments) and minority interests.
3 Net financial debt shall include, but shall not be limited to: (i) borrowed money (whether or not contingent), including without limitation, any loans including any prepayment penalties for early repayment), credit facilities and advance, reimbursement obligations relating to a letter of credit or any similar instrument or pursuant to any note, bonds, debentures or any similar instrument; any obligations under and any amounts due (including (a) interests or (b) any prepayment penalties for early exercise of the option to purchase) of leases required to be accounted for as capital leases under IFRS; (ii) any guarantee or counter-indemnity obligation in respect of a guarantee, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution, unless such counter-indemnity is an obligation arising pursuant to an issued letter of credit which has not yet been drawn; any lease liabilities (including (a) interests or (b) any prepayment penalties for early exercise of the option to purchase) accounted for as capital leases under IFRS; (iii) any factoring facilities, or receivables sold or discounted on a recourse basis; (iv) any liability with respect to under- or unfunded pension obligations; (v) any accrued but unpaid vacation/holiday pay; (vi) any amounts due under legal judgments; (vii) any non-ordinary course liabilities; (viii) any deferred purchase price of any property or services of which the business is liable, contingently or otherwise; (ix) any under- or unfunded provisions for environmental liabilities; (x) any interest rate or currency swap transactions, collars, caps, hedging and other derivatives or similar arrangements; (xi) any net corporate income tax position; and (xii) any other net financial debt-like obligations which parties reasonably agree upon in good faith as being part of financial debt so as to fairly reflect the equity price.
Insulation division and the two Automotive participations in Proseat (25%) and Ascorium (49%), there will be no need for a collective dismissal plan.
The main terms and conditions of the Proposed Transaction are set out under Section 1.3 Indicative main terms of the Proposed Transaction below.
Subject to approval of the Resolutions by the GM, the closing of the Proposed Transaction is expected to take place the second quarter of 2022.
Carpenter Co., headquartered in the US (Richmond, Virginia), is one of the world's largest producers of foam products with more than 4,000 employees and over 50 locations in North America and Europe. Founded in 1948 and privately owned since, Carpenter is active in the US, Canada, the UK, Belgium, France, Germany and Sweden. Carpenter achieves approximately USD 2 billion (or approx. EUR 1.7 billion) in annual sales.
Combining Recticel's Engineered Foams business with Carpenter's Foams business will create one of the leading vertically integrated manufacturer of polyurethane foams and specialty polymer products. Recticel's Engineered Foams business will considerably strengthen Carpenter's European division, while complementing its North America division and providing a foothold in Asia.
Following the unsolicited offer by Greiner in May 2021, the Board of Directors concluded that the unsolicited offer was not in the interest of shareholders and other stakeholders, and significantly undervalued the Company (see also the Board of Directors' Response Memorandum dated 28 October 2021 available on the Company's website). Bois Sauvage (represented by Frédéric Van Gansberghe) and Compagnie du Bois Sauvage Services SA (represented by Benoît Deckers) have abstained from voting on the Response Memorandum. Their position is reflected in section 4.7. of the Response Memorandum.
The prospectus regarding the conditional voluntary takeover offer is available on the following websites: www.bnpparibasfortis.be/sparenenbeleggen (in Dutch) and www.bnpparibasfortis.be/epargneretplacer (in French) and on the website of the offeror (https://www.greiner.com/en/press/newsroom/).
Subsequently, the Board of Directors initiated a complete review of its strategic alternatives taking into account the interest of all stakeholders. After due consideration of these alternatives, the Board of Directors came to the conclusion that a better strategic project and superior value can be created by pursuing a strategy to separate its businesses and to dispose Engineered Foams.
Bois Sauvage (represented by Frédéric Van Gansberghe) and Compagnie du Bois Sauvage Services SA (represented by Benoît Deckers) have voted against the Proposed Transaction. References in this document to the position of the Board of Directors of the Company refer to the position of the Board of Directors deciding by majority (not unanimity).
The cash consideration of Carpenter's offer for the Engineered Foams business is based on an enterprise value of EUR 656 million. The offer is made on a cash and debt free basis and assumes a normal working capital and the business is able to continue its operations in going concern on a standalone basis.
The implied value of the Insulation business in Greiner's offer amounts to only EUR 411 million based on EBITDA 2022E trading comparables valuation methodology for respective business segments as per page 60 of the Prospectus, which is significantly below the average broker consensus valuation of EUR 699 million as of 02 November 2021. It substantially undervalues the Company's Insulation business; the difference between both amounts to EUR 288 million, which represents a difference of ca EUR 5.0 per share on a fully diluted basis.
For more information on the valuation of the Engineered Business in the context of the Proposed Transaction reference is made to Section 2.1 Compelling valuation of the Proposed Transaction below.
As communicated in the 11 October 2021 Recticel press release, the Board of Directors will review at a later stage options for the use of proceeds from the sale of the Engineered Foams business, including a potential partial distribution to shareholders in a tax effective way (capital reduction, repurchase of own shares).
The Board of Directors, having duly considered the strategic, economic, financial and social aspects of the Proposed Transaction, believes that the Proposed Transaction presents a unique opportunity for the Recticel shareholders. The Board of Directors has therefore determined, after taking into account the interests of all stakeholders, to recommend the Proposed Transaction to the shareholders for approval at the forthcoming General Meeting.
The agenda of the General Meeting and further information on the voting formalities are set out under Section 3 Approval of the Proposed Transaction below.
The Board of Directors fully supports the offer made by Carpenter and encourages all shareholders to vote in favour of the Resolution described in this information document.
The affirmative vote of a simple majority of votes cast at the General Meeting is required to pass the Resolutions to approve the Proposed Transaction.
The expected main terms of the share purchase agreement to be entered into between the Company and Carpenter in the context of the Proposed Transaction are set out below.
The indicative provisions set out below remain subject to further negotiations with Carpenter.
The entry into the share purchase agreement by Carpenter is subject to the completion of a satisfactory confirmatory due diligence and finalisation of the contractual documents based on the indicative terms set out below.
| # | TOPIC | |
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| GENERAL | ||
| (1) | Parties | Recticel NV (directly or through procurement by Recticel NV of relevant Recticel group subsidiary(ies)) as seller(s) (Seller), it being understood that Recticel NV will guarantee the obligations of the relevant Recticel group subsidiaries, as the case may be. Carpenter or any entity of the Carpenter group (the Purchaser), it being understood that Carpenter will guarantee the obligations (including, but not limited to, the payment of the Purchase Price) of such acquiring Carpenter group subsidiary. |
| (2) | Sale and Purchase | The Seller will sell and the Purchaser will buy all shares in the relevant Recticel group companies (the Target Companies), which will own all assets and liabilities of and operate the Engineered Foams Business following various carve-out operations to be implemented by the Seller in consultation with the Purchaser, prior to completion of the Proposed Transaction. |
| # | TOPIC | ||||
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| (3) | Transaction scope and Carve-out |
The business being transferred to the Purchaser pursuant to the Proposed Transaction is the entire "Engineered Foams" business segment, which produces a comprehensive range of foams and systems, spanning industrial, automotive, and comfort applications and which includes the Nordic foam activities for bedding applications (the Engineered Foams Business). |
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| | The Seller will implement the following carve-out operations prior to completion of the Proposed Transaction (the Carve-Out): |
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| at the level of Recticel NV/SA: carve-out of relevant foam activities (including the production units in Wetteren, R&D activities, IT, and other support services); |
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| at the level of Recticel Ltd (UK): demerger of Recticel Ltd. whereby the relevant foam activities (including the production units in Alfreton Midlands and Corby) will be allocated into a separate legal entity (to be incorporated); and |
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| the dedicated sales team and distribution activity held by Recticel B.V. (NL). |
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| | Further to the Carve-Out: (i) the Target Companies will own all assets and liabilities of and operate the Engineered Foams Business as currently operated, (ii) the Target Companies will not own any assets and liabilities of other divisions of the Seller's Group and (iii) prior to completion of the Proposed Transaction, the Target Companies will enter into temporary service agreements, IP license agreements and any other agreements that may be required in the context of the Proposed Transaction (at terms and conditions currently applied within the Seller's Group, and for a duration to be agreed upon) with the Seller to allow the Target Companies to operate on a stand-alone basis. |
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| (4) | Purchase price | | An enterprise value (on cash and debt liabilities free basis and assuming normal working capital) of EUR 656 million (the EV). |
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| | The Price will be payable in cash on completion, subject to adjustments for actual net financial debt4 position and |
4 Net financial debt shall include, but shall not be limited to: (i) borrowed money (whether or not contingent), including without limitation, any loans including any prepayment penalties for early repayment), credit facilities and advance, reimbursement obligations relating to a letter of credit or any similar instrument or pursuant to any note, bonds, debentures or any similar instrument; any obligations under and any amounts due (including (a) interests or (b) any prepayment penalties for early exercise of the option to purchase) of leases required to be accounted for as capital leases under IFRS; (ii) any guarantee or counter-indemnity obligation in respect of a guarantee, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution, unless such counter-indemnity is an obligation arising pursuant to an issued letter of credit which has not yet been drawn; any lease liabilities (including (a) interests or (b) any prepayment penalties for early exercise of the option to purchase) accounted for as capital leases under IFRS; (iii) any factoring facilities, or receivables sold or discounted on a recourse basis; (iv) any liability with respect to under- or unfunded
| # | TOPIC | |
|---|---|---|
| working capital position at completion of which part is blocked to (i) secure the payment of any downward adjustments of the Price and (ii) the Seller's escrow and similar obligations under the share purchase agreement and its exhibits (if no W&I insurance is entered into). Customary provisions in relation to (i) establishment of |
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| completion accounts and (ii) definitions of net financial debt, cash and cash equivalent items included. |
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| CONDITIONS PRECEDENT | ||
| (5) | Condition Precedent |
Completion of the Carve-Out; |
| No change of event occurring that results in, or is reasonably likely to result in (in such case as confirmed by an independent expert), a loss (including loss of net asset value) or liability of the Target Companies taken as a whole, with an impact on the consolidated EV exceeding EUR 25,000,000 (a Material Adverse Change), provided however that any adverse effect resulting from or arising of the announcement of the entering into of the SPA including any such effects on employees, customers, vendors, suppliers, distributors, partners, lenders, contractors or other third parties shall not constitute a Material Adverse Change; and |
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| The Purchaser obtaining all required regulatory approvals needed in connection with the Proposed Transaction, it being understood that with respect to the obtaining of the merger control approval by the competent authorities in the European Union, the US or any other relevant jurisdiction, the Purchaser shall (i) not be obliged to close the Proposed Transaction in the absence of all required regulatory approvals and (ii) accept all conditions, obligations or other requirements imposed by any competent authority with a view to remove any impediments, restrictions, or conditions that may affect or delay the Proposed Transaction to the extent these measures do not have, or can reasonably be expected not to have, a negative adverse effect on the EV in excess of EUR 25,000,000, and provided that the Purchaser shall have the right to defend itself against and appeal any such action, order or decision in its discretion. |
pension obligations; (v) any accrued but unpaid vacation/holiday pay; (vi) any amounts due under legal judgments; (vii) any non-ordinary course liabilities; (viii) any deferred purchase price of any property or services of which the business is liable, contingently or otherwise; (ix) any under- or unfunded provisions for environmental liabilities; (x) any interest rate or currency swap transactions, collars, caps, hedging and other derivatives or similar arrangements; (xi) any net corporate income tax position; and (xii) any other net financial debt-like obligations which parties reasonably agree upon in good faith as being part of financial debt so as to fairly reflect the equity price.
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| (6) | Fundamental warranties |
Seller to provide customary fundamental warranties (relating to capacity to sign and consummate the documentation, due incorporation and organisation, etc.) |
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| Purchaser to provide customary fundamental warranties (relating to capacity to sign and consummate the documentation, due incorporation and organisation, availability of funds to pay the price at closing, etc.). |
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| (7) | Business warranties |
Seller to provide customary business warranties (relating to corporate structure, accounts and financials (in particular regarding the carve out accounts), assets, compliance with laws, litigation, tax, IP/IT, real estate, employment, environmental etc.). |
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| (8) | Limitations on liability |
Financial limitations for claims under the SPA (other than Fundamental Warranties or other material adverse findings or information missing in the due diligence): |
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| Cap equals 15% of the EV; |
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| De minimis equals 0.1% of EV; |
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| basket equals 1% of EV; |
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| Time limitations for all claims under the SPA: |
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| Fundamental warranties: 5 years after completion; |
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| Environmental and permitting warranties: 5 years after completion; |
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| Business warranties (other than Tax, Environmental and Permits): 24 months; |
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| Tax warranties: statute of limitations; |
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| The Parties shall consult in good faith on the possibility of warranty and indemnity insurance to cover the liabilities under the representations & warranties (the W&I Insurance) (it being understood that neither the Purchaser nor the Seller can be held to accept such W&I Insurance). The SPA will be amended accordingly if W&I Insurance is entered into. |
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| (9) Escr |
Escrow account or third party bank guarantee |
2.5% of the Price up to the date of final determination of the Price to cover post-closing adjustments for actual net financial debt position and working capital position; and |
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| 7.5% of the Price for 24 months to cover any obligations under the warranties and indemnities under the share purchase agreement. |
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| MISCELLANEOUS | ||
| (10) | Protective covenants |
Customary non-compete and non-solicitation covenants of Recticel and its affiliates for a period of 3 years following the closing date in line with market practice, relating to the Business in the territory where the Business is active according to applicable regulations. |
| (11) | Governing law and Jurisdiction |
Belgian law / CEPANI (arbitral tribunal composed of three arbitrators – location: Brussels – English as the language of proceedings). |
| (12) | Lump sum indemnification |
In the event the Seller's General Meeting approves the Proposed Transaction (including this cost cover provision), but that the Seller subsequently does not enter into the SPA (other than for reason of material breach by the Purchaser of the offer letter that cannot reasonably be remedied without material adverse effect on the Proposed Transaction), the Seller will promptly pay a lump-sum indemnification in the fixed amount of EUR 25,000,000, without prejudice to the Purchaser's right to claim additional damages if it can establish than it has incurred a prejudice exceeding the above amount. |
In the view of the Board of Directors of Recticel, Carpenter's offer value of EUR 656 million (on a cash and debt free basis) for the Engineered Foams segment is compelling and allows to extract significant further value upside for Recticel shareholders by the creation of an independent Insulation unit.
(a) Separation of businesses as best strategy to create superior value for shareholders
Following the unsolicited offer by Greiner in May 2021, Recticel's Board of Directors concluded that Greiner's offer was not in the interest of shareholders and other stakeholders, and significantly undervalued the Company.
Recticel's Board of Directors initiated a complete review of its strategic alternatives taking into account the interest of all stakeholders. After due consideration of these alternatives, the Board of Directors came to the conclusion that a better strategic project and superior value can be created by pursuing a strategy to separate its businesses and dispose Engineered Foams in addition to the Bedding divestment process which Recticel already announced on 26 February 2021. Both divestments will allow Recticel to become a pure play Insulation company with a simplified corporate structure, and allow the Company to focus on the segment that is anticipated to witness the strongest growth trajectory in the medium term out of all 3 business segments, and which has full potential to rerate to the level of insulation peers. For reference, as per FactSet dated 20 October 2021, the median FV/EBITDA 22E of insulation trading peers (Kingspan and Rockwool) is 16.0x.
The strategy to separate the businesses and sell the Engineered Foam segment to Carpenter (as announced on 11 October 2021) was well received by brokers as illustrated by the following quotes:
'After this transaction [of the sale of the Engineered Foams business] and post-Bedding divestment, Recticel will be a cash rich pure player active only in Insulation. This is a unit where volumes are anticipated to grow strongly, demand driven (Green Deal), and margins as well.' (Degroof Petercam, 12 October 2021)
The positive reaction of brokers to the Proposed Transaction has also been reflected in the target price: the median target price has increased from EUR 18.2 per share as of 11 October 2021 (i.e. before the announcement of intended sale of Engineered Foams segment to Carpenter) to EUR 19.0 per share as of 02 November 2021 (i.e. post the announcement of intended sale of Engineered Foams segment to Carpenter). EUR 19.0 per share denotes a premium of 40.7% to Greiner's offer price of EUR 13.5 per share.
| Pre-announcement of intended sale of REF to Carpenter | Date | EUR per share |
|---|---|---|
| Berenberg | 27-Apr-21 | 19.00 |
| ING | 7-Jun-21 | 20.00 |
| Degroof Petercam | 26-Aug-21 | 18.20 |
| KBC Securities | 9-Sep-21 | 16.00 |
| Kepler Cheuvreux | 10-Sep-21 | 16.20 |
| Median as of 11 October 2021 | 18.20 | |
| Average as of 11 October 2021 | 17.88 | |
| Post-announcement of intended sale of REF to Carpenter | Date | EUR per share |
| Berenberg | 27-Apr-21 | 19.00 |
| ING | 12-Oct-21 | 22.00 |
| Degroof Petercam | 12-Oct-21 | 20.70 |
| KBC Securities | 12-Oct-21 | 18.00 |
| Kepler Cheuvreux | 02-Nov-21 | 19.00 |
| Median as of 02 November 2021 | 19.00 | |
| Average as of 02 November 2021 | 19.74 | |
| % increase vs pre-announcement median consensus target price | 4.4% | |
| % increase vs Greiner offer price of EUR 13.5 per share (based on median consensus target price) | 40.7% |
Pre-announcement of the Proposed Transaction, the median value assigned by brokers in their SoTP to the Engineered Foams segment amounted to EUR 675 million (as of 11 October 2021), which compares to the EUR 656 million offer received from Carpenter (i.e 2.8% discount to median broker consensus).
| Engineered Foams SoTP valuation | |||||
|---|---|---|---|---|---|
| EURmm | Date | Metric | Multiples | EBITDA | Valuation |
| Degroof Petercam | 21-May-21 | 2022 | 8.5x | 85 | 718 |
| ING | 07-Jun-21 | 2022 | 7.3x | 91 | 664 |
| KBC Securities | 9-Sep-21 | 2022 | 7.5x | 84 | 632 |
| Kepler Cheuvreux | 10-Sep-21 | 2022 | 7.3x | 94 | 686 |
| Current median consensus (as of 11 October 2021) | 7.4x | 88 | 675 |
Brokers also view the offer price of EUR 656 million from Carpenter as correct as illustrated by the following selected quotes:
'The cash offer for Engineered Foams is based on an Enterprise Value of € 656m on a cash and debt free basis, which is about 4% above our € 632m estimate for Engineered Foams (7.5x EV/adj. EBITDA22e). The offer price values Engineered Foams at approximately 7.8x our EBITDA22e forecast (of € 84.3m) or 7.6x based on consensus forecasts (of € 86.5m). This multiple compares to the 7.2x EV/EBITDA multiple that Recticel paid for FoamPartner (multiple on the pre-COVID 2019 EBITDA) and to the 9.5x EV/EBITDA divestment multiple Recticel received from Greiner for its Eurofoam stake. We view this price as correct, but not generous, given the synergies potential that Carpenter would undoubtedly extract from this deal.' (KBC Securities, 12 October 2021)
'The deal values the Engineered foam segment at a multiple of 2022 EV/sales of c. 1x and 7.7x EV/EBITDA. Even though the deal values the EF segment somewhat lower than consensus, it does make it the better deal available, considering the timeframe of the Greiner bid (starts on 14 October 2021) and the c. EUR1,050m offered for the whole group by Greiner. The deal clearly makes the SOP value of Engineered foam tangible. Note that if this deal goes through, it will also reduce the complexity of the group.' (Kepler Cheuvreux, 12 October 2021)
Transaction comparables methodology indicates a valuation of EUR 671 million and EUR 623 million by applying a transaction multiple of 9.1x on 2019 and 2020 actual pro-forma adjusted EBITDA of EUR 74 million and EUR 69 million respectively. The offer price of EUR 656 million is in line with transaction comparables valuation methodology (2.2% discount to 2019A transaction comparable valuation and 5.4% premium to 2020A transaction comparable valuation).
In the Response Memorandum, the same transaction multiple of 9.1x is applied (vs multiple of 7.2x applied by Greiner in its Prospectus on page 64) on 2022E EBITDA of EUR 84 million in line with Greiner estimates for 2022E EBITDA based on broker consensus as of 11 May 2021 (as per page 64 of the Prospectus) leading to valuation of EUR 760 million (as per page 18 of the Response Memorandum) for Engineered Foams business segment (as compared to EUR 609 million referenced by Greiner).
| Engineered Foams transaction comparables valuation (EUR million) | |||||
|---|---|---|---|---|---|
| Announcement date | Target | Acquiror | x LTM EBITDA | ||
| Apr-20 | Eurofoam | Greiner | 9.5x | ||
| Mar-21 | FoamPatner | Recticel | 8.6x | ||
| Average/Median 9.1x |
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| Engineered Foams 2019A EBITDA (pro forma adjusted) 74 |
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| Engineered Foams firm value (based on 2019A proforma adj EBITDA) 671 |
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| Engineered Foams 2020A EBITDA (pro forma adjusted) 69 |
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| Engineered Foams firm value (based on 2020A proforma adj EBITDA) 623 |
| Announcement date | Target | Acquiror | x LTM EBITDA |
|---|---|---|---|
| Apr-20 | Eurofoam | Greiner | 9.5x |
| Mar-21 | FoamPatner | Recticel | 8.6x |
| Average/Median | 9.1x | ||
| Engineered Foams 2022E EBITDA (as per Greiner's Prospectus) | 84 | ||
| Engineered Foams firm value (based on 2020A proforma adj EBITDA) | 760 |
| (EUR million) | FY19A | FY20A |
|---|---|---|
| Reported EBITDA | 54 | 27 |
| Nordics non branded bedding | 5 | 5 |
| FoamPartner | 23 | 25 |
| Flexfoam JVs | (20) | 0 |
| Pro-forma adjusted Engineered Foams EBITDA | 74 | 69 |
|---|---|---|
| Other non-recurring adjustments | 8 | 10 |
| Others | 3 | 6 |
| IFRS 16 | 2 | 2 |
| Conzetta Mgmt fees | 3 | 2 |
| Restructuring and non-recurring | 3 | 1 |
The computation of the pro-forma adjusted EBITDA for 2019 and 2020 is shown in the table above and the main adjustments made to the reported EBITDA are summarized below:
In the view of the Board of Directors, peers5 referenced by Greiner in the Prospectus on page 57 for trading comparables valuation methodology for REF are not relevant peers (as outlined on page 15 of the Response Memorandum). The Board of Directors believes a more appropriate set of peers would include Sheela Foams (trading at 24x 2022E EBITDA) and ZoteFoams (trading at 10x 2022E EBITDA). However, the Board of Directors believe that even these 2 peers are not the most accurate set of comparables for Engineered Foams business as Sheela Foams is primarily focused on India (c. 80% of revenues), with very limited exposure to Europe and ZoteFoams is a small-cap company (EUR 210 million market capitalization as of 20 October 2021) with limited trading volumes and research coverage and focuses on different end markets than Recticel, i.e. packaging, sports, leisure and footwear. Hence the Board believes that there are no pure-play comparable companies with overlapping sector focus and end-market exposure as Engineered Foams and as a result trading comparables valuation methodology is not deemed relevant for the Engineered Foams division. This view is shared by brokers, with for example both KBC Securities and Kepler Cheuvreux stating that there are no quoted peers6 . The EUR 656 million valuation compares to the trading valuation of EUR 622 million as referenced by Greiner in the Prospectus on page 60.
As mentioned in the Response Memorandum on pages 16 and 17, based on average broker based SoTP consensus valuation for Engineered Foams business segment, the average valuation for the segment was EUR 686 million as of 05 October 2021 and EUR 658 million as of 15 October 2021. The offer price of EUR 656 million from Carpenter is line with these broker views and represents a discount of 4.4% and 0.3% respectively.
5 Peers referenced by Greiner in the Prospectus: BASF, Covestro, Dow and Hunstman
6 As per KBC Securities broker note dated 12 October 2021 and Kepler Cheuvreux broker note dated 03 June 2021
In the view of the Board of Directors, Carpenter's proposed offer value of EUR 656 million (on a cash and debt free basis) for Engineered Foams segment will allow for the creation of superior value for Recticel shareholders; well above Greiner's offer price of EUR13.5 per share which undervalues the Company.
The offer price of Greiner of EUR13.5 per share, implies a valuation of EUR 657 million (as referenced in Greiner's press release dated 13 October 2021) for Engineered Foams based on 2022E trading comparables valuation methodology for respective business segments as per page 60 of the Prospectus (further details are mentioned in table below). The computation is summarized in the table below and based on:
| Greiner offer price analysis as per Prospectus filed(EUR million) | |
|---|---|
| Greiner offer price (EUR per share) | 13.50 |
| Diluted number of shares outstanding (million) | 56.32 |
| Equity value | 760 |
| Equity value to firm value adjustments | 298 |
| Firm value | 1,058 |
| Bedding firm value | 104 |
| Insulation firm value | 411 |
| Corporate costs | (114) |
| Implied Engineered Foam valuation | 657 |
In the opinion of the Board of Directors, superior value can be realised by pursuing its strategy of separating the three businesses, which is estimated to result in a value per share of EUR19.4 per share, or a premium of 44% to Greiner's offer price. The estimated value is summarized in the table below.
| Recticel's SoTP valuation (EUR million) | |
|---|---|
| Engineered Foams | 656 |
| Bedding | 104 |
| Insulation | 699 |
| Corporate cost valuation (post -restructuring) | (51) |
| Total firm value | 1,409 |
| Less: Firm value to equity value adjustments | (316) |
| Equity value | 1,093 |
|---|---|
| Diluted number of shares outstanding (million) | 56.3 |
| Implied value per share (EUR per share) | 19.4 |
| vs Greiner offer price (EUR per share) | 13.5 |
| % premium / (discount) | 44% |
The analysis is based on the following assumptions:
| Insulation segment broker based SoTP valuation (as of 11 Oct 2021) - pre announcement of intended sale of REF to Carpenter | |||||
|---|---|---|---|---|---|
| EUR million | Date | Metric | Multiples | EBITDA | Valuation |
| Degroof Petercam | 21-May-21 | 2022 | 14.0x | 49 | 681 |
| ING | 25-Aug-21 | 2022 | 14.0x | 43 | 602 |
| KBC Securities | 9-Sep-21 | 2022 | 12.0x | N/A | N/A |
| Kepler Cheuvreux | 10-Sep-21 | 2022 | 12.0x | 50 | 600 |
| Current average consensus (as of 11 Oct 2021) | 13.0x | 47 | 628 | ||
| Current median consensus (as of 11 Oct 2021) | 13.0x | 49 | 602 |
Note: KBC Securities do not disclose REF segmental estimates but only mention multiple applied in SoTP valuation
| Insulation segment broker based SoTP valuation (as of 02 Nov 2021) - post announcement of intended sale of REF to Carpenter | |||||
|---|---|---|---|---|---|
| EUR million | Date | Metric | Multiples | EBITDA | Valuation |
| Degroof Petercam | 12-Oct-21 | 2022 | 13.8x | 56 | 778 |
| KBC Securities | 12-Oct-21 | 2022 | 13.0x | 51 | 659 |
| ING | 18-Oct-21 | 2022 | 14.0x | 46 | 650 |
| Kepler Cheuvreux | 02-Nov-21 | 2022 | 12.2x | 58 | 710 |
| Current average consensus (as of 02 Nov 2021) | 13.3x | 53 | 699 | ||
| Current median consensus (as of 02 Nov 2021) | 13.5x | 53 | 685 |
The EUR 699 million attributed to Insulation segment contrasts sharply with the EUR 411 million value assigned to Insulation by Greiner. Greiner substantially undervalues the
segment; the difference would amount to EUR 288 million or EUR 5.1 per share based on 56.3 million diluted number of outstanding shares in line with Greiner's Prospectus
The table below provides the sensitivities on the implied value per share in function of the valuation for Insulation, Bedding and corporate costs and illustrates that even at conservative valuation levels significant value upside can be realised versus the Greiner offer of EUR 13.5 per share.
| Sensitivity analysis on implied value per share (EUR per share) | ||||||
|---|---|---|---|---|---|---|
| Bedding firm value (EUR million) | ||||||
| 19.41 | 100 | 110 | 120 | 130 | 140 | |
| 600 | 17.6 | 17.8 | 17.9 | 18.1 | 18.3 | |
| 650 | 18.5 | 18.6 | 18.8 | 19.0 | 19.2 | |
| value (EUR million) Insulation firm |
700 | 19.4 | 19.5 | 19.7 | 19.9 | 20.1 |
| 750 | 20.2 | 20.4 | 20.6 | 20.8 | 20.9 | |
| 800 | 21.1 | 21.3 | 21.5 | 21.7 | 21.8 |
| Sensitivity analysis on implied value per share (EUR per share) | ||||||
|---|---|---|---|---|---|---|
| Corporate costs valuation (EUR million) | ||||||
| 19.41 | (70) | (60) | (50) | (40) | (30) | |
| Insulation firm value |
600 | 17.3 | 17.5 | 17.7 | 17.8 | 18.0 |
| million) (EUR |
650 | 18.2 | 18.4 | 18.5 | 18.7 | 18.9 |
| 700 | 19.1 | 19.3 | 19.4 | 19.6 | 19.8 |
| 750 | 20.0 | 20.1 | 20.3 | 20.5 | 20.7 |
|---|---|---|---|---|---|
| 800 | 20.9 | 21.0 | 21.2 | 21.4 | 21.6 |
In conclusion, the Board of Directors are convinced that the sale of Engineered Foams segment to Carpenter will allow Recticel to create superior value for its shareholders (vs. the Greiner offer price of EUR 13.5 per share), as evidenced by the above analysis and the broker average target price of EUR 19.74 per share (as per 02 November 2021).
In accordance with article 7:152 BCCA, from the date the Company received the notification from the FSMA that it has been notified of a public takeover bid for its securities and until the closing of the bid, only the general meeting may take decisions or execute transactions that would result in a significant change in the composition of the Company's assets or liabilities.
Pursuant to article 7:152 BCCA, the Board of Directors therefore submits the Proposed Transaction to the approval of the shareholders at the GM.
The General Meeting has been convened to consider and, if thought fit, to approve the following resolutions: (i) approval of the proposed sale of the Engineered Foams business by the Company to Carpenter Co. (or any of its subsidiaries) for a cash consideration based on an enterprise value of EUR 656 million on a cash and debt free basis, whereby the equity price will be determined on the basis of the actual net financial debt position and working capital position at completion of the transaction and (ii) the grant of the power to the board of directors to negotiate, agree and execute the share purchase agreement and any other related transaction agreements, determine the final equity purchase price based on the net financial debt and the working capital position and any other terms and conditions for the sale, and to sign any further documents and perform any further acts that are required for the proper implementation of the Proposed Transaction, including the carveout of the Engineered Foams business (the Resolutions).
Each of the members of the Board of Directors supports the Proposed Transaction, except for Bois Sauvage (represented by Frédéric Van Gansberghe) and Compagnie du Bois Sauvage Services SA (represented by Benoît Deckers) who have voted against the Proposed Transaction. In this context, reference is made to the agreement of Compagnie du Bois Sauvage SA and Greiner to sell its entire 27.03% stake in Recticel at a price of EUR 13.50 per share and Greiner's intention to launch a voluntary conditional takeover offer at the same price. Greiner has indicated that the acquisition of Compagnie du Bois Sauvage's stake in the Company is definitive with the sole exception that Greiner may terminate the agreement in case certain defensive measures would be approved by the shareholders' meeting of the Company.
The Board of Directors considers the Proposed Transaction to be in the best interests of the Company, its shareholders and other stakeholders, and therefore asks that shareholders vote in favour of the Resolutions.
The entry into of a final share purchase agreement is conditional on receiving the approval for the Resolutions.
Shareholders are advised to read the whole information document before making any decision.
| Event | Date (time) |
|---|---|
| Convocation special shareholders' meeting | 5 November 2021 |
| Registration date | 22 November 2021 |
| Deadline for notification attendance, and receipt of proxy and written votes by correspondence |
30 November 2021 |
| Deadline for online votes by correspondance | 5 December 2021 |
| Special shareholders' meeting (in person or online with electronic voting) |
6 December 2021 |
| Execution of the share purchase agreement | Shortly after the special shareholders' meeting |
The Board of Directors kindly invites the shareholders to participate to the special general meeting of the Company at Van Der Valk Hotel Brussels Airport, Culliganlaan 4, 1831 Machelen, Belgium on 6 December 2021 at 10 am CET.
In light of the Covid-19-pandemic, the following will apply:
The Company will only be able to grant access to the premises of the general meeting to shareholders, proxy holders and other persons to the extent public are permitted by the competent authorities on the moment of the general meeting. As a result, there is a risk that participation in person to the general meeting may not be possible.
It is possible that travelling to the place of the Company's registered offices to attend the general meeting is subject to special conditions or restrictions, particularly for shareholders not located in the region of the place of the general meeting. Shareholders are requested to research and comply with any such conditions or restrictions.
In any event, the following general safety precautions will apply to the premises of the general meeting:
Shareholders are encouraged to make maximum use of the shareholder options to remotely participate and vote.
The special general meeting can deliberate and resolve with a simple majority. There is no quorum requirement for the special general meeting.
Proposed resolution: The shareholders approve the proposed sale of the Engineered Foams business by the Company to Carpenter Co. (or any of its subsidiaries) for a cash consideration based on an enterprise value of EUR 656 million on a cash and debt free basis, whereby the equity price will be determined on the basis of the actual net financial debt position and working capital position at completion of the transaction.
Proposed resolution: The shareholders grant the power to the board of directors to negotiate, agree and execute the share purchase agreement and any other related transaction agreements, determine the final equity purchase price based on the net financial debt and the working capital position and any other terms and conditions for the sale, and to sign any further documents and perform any further acts that are required for the implementation of the proposed sale, including the carve-out of the Engineered Foams business.
In order to attend the general meeting or to be represented and exercise voting rights, every shareholder must fulfil the two conditions set out below:
Shareholders must be registered as shareholders on 22 November 2021 at midnight (Belgian time) (Registration Date), either by entry in the register of nominative shares of the Company, or by entry on the accounts of a recognized accountholder or a clearing institution.
Shareholders must, before or at the latest on 30 November 2021, notify their intention to participate in the general meeting:
Holders of dematerialized shares who have not registered via the Lumi platform must attach a certificate to the notification, delivered by the recognized account holder or clearing institution, evidencing the number of dematerialized shares registered in the name of the shareholder on its accounts on the Registration Date, which such shareholder has indicated that it wants to participate with at the general meeting.
The holders of subscription rights, who may attend the general meeting with an advisory vote, pursuant to Article 7:135 of the BCCA, are requested to comply with the formalities of registration and prior notification referred to above.
Only those being registered as shareholders on the Registration Date shall have the right to attend and vote at the general meeting.
The shareholder who fulfilled the admission requirements can participate in the general meeting as follows: (i) personally, (ii) online, (iii) by proxy (written or electronic) or (iv) by letter. Shareholders can notify their intention in this respect on the Lumi platform.
Each shareholder has the right to participate to the general meeting in person.
To allow an efficient registration process, the shareholders or their proxy holders who personally attend the general meeting in person are requested to register by 9.30 am CET at the latest (half an hour before the start of the general meeting). The natural persons attending the general meeting in their capacity as shareholder, proxy holder or representative of a legal entity may be requested to provide evidence of their identity. In addition, the representatives of legal persons must provide the documents that determine their status as legal representative or proxy holder.
Shareholders who to participate digitally will have the possibility to vote electronically during the general meeting. More information on this can be found on the Lumi platform, using the link www.lumiagm.com.
Each shareholder can be represented by a proxy holder at the general meeting. The shareholder who wishes to be represented by proxy must deliver a power of attorney in written or electronic form on 30 November 2021 at the latest, as set out below:
The appointment of a proxy holder must be made in accordance with the applicable rules of Belgian law, including the rules on conflicts of interest. In addition, the shareholders must meet the admission requirements as described above.
Each shareholder further has the right to cast its votes in advance by letter or electronically, as set out below:
In addition, the shareholders must meet the admission requirements as described above.
Pursuant to Article 30 of the Company's articles of association, one or more shareholders, who together hold at least 3% of the share capital, may add items to be discussed to the agenda of the general meeting and submit motions for resolutions with regard to the items on or to be placed on the agenda. The Company must receive such requests, together with the evidence of the required participation, no later than 14 November 2021. In the case at hand, an additional agenda shall be published latest on 21 November 2021.
Pursuant to Article 33 of the Company's articles of association, shareholders who have fulfilled the aforementioned conditions to access, may ask written questions to the directors regarding items on the agenda. The shareholders will have the possibility to ask written questions in advance. These questions must be entered in the application available for this purpose on the Lumi platform, via the link www.lumiagm.com, or must reach [email protected] no later than 30 November 2021.
In order to physically attend, or to be represented at, the general meeting, holders of shares, convertible bonds or subscription rights, as well as authorised agents, must present proof of their identity (identity card or passport) and representatives of legal entities must, in addition, provide proof of their powers of representation (relevant company documents). The Company must receive this proof, at the latest, on the day of the general meeting.
All documents related to the general meeting, including an information document about the envisaged sale of the Engineered Foams division, are made available on the Company's website (www.recticel.com) and are also available at the Company's registered office.
The notification and all other notices or correspondence to the Company must be for the attention of Mr Dirk Verbruggen, General Counsel & General Secretary, as follows:
| Dedicated Recticel EGM website : | www.recticel.com/sgm-yourvotecounts |
|---|---|
| FAQ: | www.recticel-sgm yourvotecounts.azurewebsites.net/en/faq.htm |
| Contact : | Michel De Smedt |
| Communication and Investor Relations Manager | |
| Bourgetlaan 42 Avenue du Bourget |
|
| 1130 Brussels | |
| Tel: +32 2 775 18 09 | |
| Email: [email protected] |
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