Marsella Holdings S.à r.l.
Standard Industries: Letter to the Shareholders of Braas Monier Building Group S.A.
DGAP-News: Marsella Holdings S.à r.l. / Key word(s): Offer/Statement September 25, 2016 Dear Braas Monier Building Group S.A. Shareholder, Standard Industries and its advisors have reviewed the press release published by Braas Monier Building Group S.A. (“Braas Monier” or the “Company”) on September 23, 2016 entitled “Letter to our Shareholders / Four Clear Reasons to Reject the Unsolicited Offer from Standard Industries” (the “Letter”). First and foremost, we continue to believe that the combination of Standard Industries and Braas Monier benefits all stakeholders, creating a global leader in the roofing and waterproofing business better able to meet customers’ evolving preferences and increasingly complex needs, while providing increased stability, diversification and scale for Braas Monier. Unfortunately, however, Braas Monier’s Letter contains a number of misleading statements and outright falsehoods that we feel obligated to correct. In summary, our Offer: 1) provides an attractive premium to the unaffected common stock price before our Offer was disclosed 2) is at a premium to our recently completed Icopal transaction referenced by the Company 3) is not driven by cost cutting or synergies given the complementary nature of the two businesses. Quite the contrary, the strategy is one of investment in the business and growing together 4) is validated by 40% of non-related, sophisticated institutional shareholders 5) fairly reflects the current opportunities and uncertainties the Company faces 1) Attractive Premium to Unaffected Price Braas Monier’s statement that the Offer Price reflects no premium is both inaccurate and misleading. The implied premium of our Offer equates to: – A 15% premium over the unaffected common stock price the day prior to Braas Monier’s decision to disclose the Offer Price – A 16.5% premium over the 30-day volume-weighted average price (VWAP) for the period prior to Braas Monier’s decision to disclose the Offer Price On the day prior to Braas Monier’s decision to disclose the Offer Price of EUR 25.00 (“Offer Price”), its common stock closed at EUR 21.74. 2) Offer at Premium to Icopal Multiple Braas Monier argues that the most relevant precedent transaction is Standard’s acquisition of privately held Icopal: “The 2016 acquisition of Icopal by the Standard Industries subsidiary, GAF Corporation While we certainly agree that Icopal is the most relevant precedent transaction, the Company’s assertion that the EBITDA multiple paid for Icopal was 10.5x is simply false. The last twelve months (LTM) EBITDA multiple paid for Icopal by Standard was 8.4x, a meaningful discount to the 9.0x multiple we have offered for Braas Monier. The Icopal transaction was a private, negotiated transaction with a sophisticated global institutional investor. Finally, we would note, Braas Monier’s most relevant peer Wienerberger currently trades at 7.8x 2016E EBITDA. The following table reflects the precedent transaction EBITDA multiple paid for Icopal and compares it to the implied multiple of the Offer Price and the multiple of Braas Monier’s closest peer, Wienerberger. Offer for Braas Monier: 9.0x 3) The Strategic Rationale for the Offer is Growing Together and Investing in the Business, not Synergies or Cost Cuts This transaction is not driven by synergies or cost cutting, but rather by the enhanced opportunities to grow together and continue to invest in the business. The Company makes reference to an analysis conducted by an “outside consultant” that reflects a synergy assumption of EUR 30 – EUR 40 million. Braas Monier’s synergy estimate arising from the transaction approximately equates to an astonishing 21-28% of Standard’s European SG&A and R&D cash costs. We have been very clear that the focus of this transaction is not job cuts or synergies as Braas Monier suggests, and their synergy assumption is neither reasonable nor achievable. We would further note: – Standard and Braas Monier are not competitors – Braas Monier sells concrete and clay roof tiles for pitched roofs and we sell bitumen roof sheeting for the flat roofing market – The roofing business is a very local business and the skill set to sell different products requires two separate sales forces, exactly as we go to market in North America – The two companies’ products are made in different plants, with different raw materials and different manufacturing processes 4) Offer Validated by 40% of Non-Related Shareholders The Company discusses at length the fact that 40 North and Standard are related: a fact which Standard has made abundantly clear. None of this discussion obscures the simple truth that Braas Monier’s largest shareholder, Monier Holdings, which includes Apollo, Towerbrook and York and other global financial institutions, agreed to sell its entire position at Standard’s offer of EUR 25 per common stock. The various sellers of Monier Holdings are some of the most highly sophisticated shareholders in the world, who have been represented on Braas Monier’s Board, have known the Company intimately for many years, and were under no compulsion to sell. 5) The Combined Company will be in a Stronger Position to Overcome the Headwinds Braas Monier Faces on a Standalone Basis We note that the Letter enumerates a number of initiatives the Company has undertaken over the last couple of years to create value. While we appreciate such rationalization and restructuring measures, all of which are historical in nature, these previous efforts were completely factored into the unaffected common stock price. That being said, the Letter neglects to mention a number of uncertainties currently facing Braas Monier, including both market and company specific challenges. As an example, Braas Monier recently revised its like-for-like growth revisions downward from 2-3% to 1% for 2016: “Compared to the beginning of the year, overall volume growth expectations are dampened by uncertainties following the UK referendum, a weak development of the Italian market as well as a slower stabilisation in Malaysia and further strong declines in China. Those effects are expected to be only partially offset by a better market development in Germany, Poland and South-Eastern Europe in particular. Based on these assumptions, Braas Monier expects like-for-like revenues to increase by around 1%” – Braas Monier Q2 report We have tremendous respect for Braas Monier: its business, brands and, most importantly, its management and employees. The market uncertainty that the Company faces persists, however, and is further complicated by its sole focus on pitched roofing in Europe. By combining with Standard Industries, the Company will benefit from geographic, product and end-market diversification, and through our increased scale and commitment to investment in the business and its people, will create more opportunities for all stakeholders. Regards, David Winter David Millstone cc: Mr. Pierre-Marie De Leener
2016-09-26 Dissemination of a Corporate News, transmitted by DGAP – a service of EQS Group AG. |