On 15 September 2016, Standard Industries Inc. (“Standard Industries”), a private US corporation, announced its intention to launch a takeover offer for Braas Monier Building Group S.A. (“Braas Monier”) for a cash consideration of EUR 25 per share (the “Offer”).
The Offer is unsolicited and your Board will recommend you REJECT it.
The purpose of this letter is to provide shareholders with important background to the Standard Industries approach; to respond to certain comments made by Standard Industries; and set out four clear financial reasons why the Board recommends you should REJECT the Offer.
On 29 June 2016, 40 North Management LLC (“40 North”), an affiliate of Standard Industries, acquired 29.1% of Braas Monier.
David Millstone and David Winter (“Messrs Millstone and Winter”) the Co-Chief Executive Officers of Standard Industries are also the Co-Chief Investment Officers of 40 North. Standard Industries and 40 North are affiliated companies.
The Braas Monier articles of association entitle any shareholder owning 25% or more of the Company’s share capital to propose three board members. Accordingly, since June 2016 your Board has sought to agree a Relationship Agreement with Messrs Millstone and Winter to ensure compliance with corporate governance best practice and put in place appropriate procedures to address any potential conflicts of interest which may arise between Standard Industries’ position as a competitor and the duties of directors to act in the interests of all stakeholders.
On 13 September 2016 your Chairman, Pierre-Marie De Leener, and Independent Director, Francis Carpenter, met Messrs Millstone and Winter in London, expecting to finalise the proposed Relationship Agreement. However, and without prior notice, Messrs Millstone and Winter outlined the intention of Standard Industries to publicly launch a takeover offer at EUR 25 per share on the following Monday, 19 September and asked that the Board negotiate a Business Combination Agreement and provide a Board recommendation within the following five days.
On 14 September 2016 the Board, after consultation with its financial and legal advisers, announced that if an offer was made at EUR25 it would recommend that Shareholders REJECT it.
Monier Holdings SCA (“Monier Holdings”) and 40 North relationship
It is important that Braas Monier shareholders understand the background to and nature of Monier Holdings and 40 North who are the only shareholders who are publicly supporting the Standard Industries offer.
Monier Holdings is the company through which three private equity and hedge funds Apollo, TowerBrook and York (together with certain other investors) own their shareholdings in Braas Monier. Monier Holdings became the 100% equity owner of Braas Monier in 2009.
Investors of a similar nature to Monier Holdings are generally not natural long-term shareholders in publicly-listed companies. At the IPO in June 2014, Monier Holdings sold 52% of its shareholding in Braas Monier at EUR 24 per share. It subsequently sold 8% in October 2015, when the average market price was EUR 23 per share. In June 2016 Monier Holdings sold 29.1% of Braas Monier to 40 North for an undisclosed price. These share sales have resulted in Monier Holdings now owning only 10.8% of Braas Monier. It is clear Monier Holdings has been seeking to exit from Braas Monier for some time and they have now disposed of almost 90% of their shares in the company. For Standard Industries to claim that the willingness of an already exiting shareholder to provide an irrevocable undertaking at EUR 25 per share somehow validates the value of its offer is simply not credible.
40 North is an affiliate of Standard Industries. Messrs Millstone and Winter are Co-Chief Investment Officers of 40 North and Co-Chief Executive Officers of Standard Industries. By transferring its 29.1% Braas Monier shareholding, 40 North is simply supporting a company with which it has common control and common interests. The action of 40 North provides no credible guidance on an appropriate takeover value for Braas Monier.
Four reasons to REJECT the Offer
Recommendation to REJECT the Offer
The Board continues unanimously to reject the offer of EUR 25 per share because it contains no premium for control; it does not reflect the value of the significant synergies which would accrue to Standard Industries by Braas Monier being part of the same group as Icopal; it is at a significant discount to the EBITDA multiple paid by Standard Industries for Icopal; and overall significantly undervalues the company and its future prospects.
The Board is focused on maximizing the value and position of all stakeholders over time. To the extent that the Board receives a takeover or merger proposal which offers fair and appropriate value, such a proposal would receive full consideration.
However, the Board will not recommend the acceptance of an offer at EUR 25 per share and will further detail its recommendation not to accept this offer in its statement pursuant to section 27 (1) of the German Securities Acquisition and Takeover Act (WpÜG). Such statement will be released following review of the offer document, which is not yet available and will only be published by Standard Industries following clearance by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht).
In the meantime, Shareholders are asked to continue their support of the Board and await further developments.
The Board of Braas Monier is being advised by Rothschild in relation to this matter. Scott Harris is advising the Board in relation to shareholder engagement.
Pierre-Marie De Leener