PCH accepts Cape's revised $247m takeover offer

UK-based industrial services company Cape plc looks set to complete its third WA-focused takeover in as many months after scaffolding and form-work supplier PCH Group Ltd accepted a sweetened $247 million offer.

Cape lifted its offer price by 10 cents to $1.40 per share, which was enough to win the unanimous backing of PCH's board.

The backing from PCH followed an independent report by KPMG Corporate Finance, which concluded that PCH's control value was $1.34 to $1.49 per share and that the revised offer was fair and reasonable.

PCH's board of directors, including managing director Jamie Cullen, intend to resign once Cape gains control of the Malaga-based company.

However Cape chief executive Martin May said he expected the rest of PCH's management team to remain with the company.

Cape's purchase of PCH follows recent deals to buy Perth company Total Corrosion Control for $85 million and Melbourne company Concept Hire (which owns Perth's Blackadder Scaffolding Services) for $101 million.

Mr May said the three busineses would be integrated over time, under the Cape name.

The full text of a joint company announcement is pasted below

Cape PLC (AIM:CIU), the international provider of essential support services to the energy sector and PCH Group Limited (PCH) today announced that they have agreed the terms under which Cape will increase its cash offer to $1.40 per share ("the Revised Offer Price") for all of the outstanding shares in PCH (ASX:PCG) and extend its Offer until 5.00pm Perth time on 29 November 2007 ("the Revised Offer").

PCH shareholders will remain entitled to retain the benefit of the 1 cent per share unfranked final dividend declared by PCH in August, the record date for which is 31 October 2007.

The Revised Offer, which is being funded by debt, values the ordinary shares of PCH at approximately A$ 247 million (£110million) and is being made by Cape Australia Investments Pty Limited, a wholly owned subsidiary of Cape.

The Board of PCH unanimously recommends that PCH shareholders accept Cape's Revised Offer and will be accepting Cape's Revised Offer in respect of all PCH Shares that they own or control in both cases in the absence of a superior proposal.

PCH has agreed that it will waive the standstill agreement between the two parties which previously prohibited Cape from acquiring any PCH Shares, if Cape is entitled to more than 50% of PCH Shares and Cape declares its Offer unconditional in all other respects or if any potential counter bidder discloses a substantial shareholding.

Martin May, CEO of Cape said "We welcome the unanimous recommendation of the PCH Board and believe that the Revised Offer Price represents an attractive price for PCH shareholders. The combination of Cape and PCH, together with Cape's other recent acquisition in the Australian market, TCC and also with Concept Hire (for which a recommended offer was announced on 11 September), will create a business with scale within our Far East/Pacific Rim region and a strong position in the buoyant Australian market. This acquisition also increases Cape's presence and abilities within its Middle East/Gulf and CIS/Caspian regions".

Bill Ryan, Chairman of PCH, said "The Board of PCH believes that Cape's Revised Offer recognises the value of PCH. The Board appointed KPMG Corporate Finance to prepare an independent expert's report and KPMG has determined that PCH's control value is $1.34 to $1.49 per share and that the Revised Offer is fair and reasonable.

As such, the Board is giving its unanimous recommendation to the Revised Offer and each Board member intends to accept the Revised Offer in respect of all PCH shares held".

PCH and Cape have entered into an agreement where it has been agreed that PCH and its advisers will not solicit any proposals from other parties and will immediately cease any discussions with other parties. PCH has also agreed to pay a break fee of $2.54 million equivalent to 1% of the equity value of PCH under the Revised Offer in
the event that any director of PCH changes their recommendation or if a superior proposal is made for PCH which gains more than 50% of PCH or board control. Key terms of this agreement are summarised in Annexure A.

Cape and PCH intend to lodge a Second Supplementary Bidder's Statement and a Target's Statement respectively, as soon as possible. PCH's Target's Statement will contain the Independent Expert's Report and will set out the reasons for the PCH Board's unanimous recommendation of Cape's Revised Offer. Cape will extend its Revised Offer for PCH by two weeks to 5.00pm Perth time on 29 November 2007 in order that PCH shareholders have time to consider these Statements and PCH's unanimous board recommendation.

Revised Offer details

The $1.40 per share offer is for all of PCH's ordinary shares, and remains subject to all the conditions of the original Offer contained in the Bidder's Statement.

A Second Supplementary Bidder's Statement will be lodged with the Australian Securities and Investments Commission shortly. It is expected that PCH will lodge its Target's Statement next week.

Cape is being advised by Caliburn Partnership. PCH is being advised by Gresham.