Response to CIMIC Takeover Offer Investor & Analyst Briefing

Transcription

1 Response to CIMIC Takeover Offer Investor & Analyst Briefing Monday, 7 November

2 Agenda 1. Summary of CIMIC takeover offer 2. UGL Board recommendation 3. Timetable & Next Steps 4. Ichthys Projects Update 5. Refinancing Update 6. Outlook 7. Q&A 2

3 CIMIC unsolicited takeover offer 3

4 Summary of CIMIC s unsolicited takeover offer CIMIC S Unsolicited Takeover Offer On 10 October 2016, CIMIC 1 announced it had acquired a 13.84% shareholding in UGL and intended to make an offer to buy all the shares in UGL that it does not already own On 25 October 2016, CIMIC sent its offer document to UGL Shareholders, containing the terms of the Offer and other information relevant to shareholders Value of the Offer $3.15 per UGL share in cash Timing The Offer closes at 7:00pm (AEDT) 25 November 2016, unless it is extended or withdrawn by CIMIC Terms and Conditions The Offer is final and cannot be increased during the Offer Period in the absence of a competing proposal It is also unconditional other than in respect of a prescribed occurrences condition Prescribed occurrences such as certain changes to the share capital, insolvency or if UGL divested a substantial part of the business Funding The Offer will be funded using CIMIC s available funds or existing debt facilities 1 CIMIC Group Limited through a wholly owned subsidiary CIMIC Group Investments No. 2 Pty Limited 4

5 UGL Board recommendation In the Majority Directors view, the decision as to whether or not to accept the Offer is finely balanced and depends on the circumstances of each individual UGL shareholder After careful consideration of the Offer, the Majority Directors recommend that UGL Shareholders ACCEPT the Offer in the absence of a superior proposal Mr. Robert Kaye SC, a Non-Executive Director, recommends that you reject the Offer as he believes that the Offer Price may not reflect the full underlying value of UGL The reasons why you should ACCEPT the Offer are set out below, and outlined in UGL s Target s Statement, which your Directors encourage you to read in detail 1 The Independent Expert has concluded that the Offer is fair and reasonable, in the absence of a superior offer 2 The Offer represents an attractive premium to historic trading prices 3 The Offer represents an attractive acquisition multiple 4 The Offer provides UGL Shareholders with certainty of receiving $3.15 per UGL Share in cash, which must be weighed against the risks associated with remaining a shareholder 5 No superior proposal has emerged and CIMIC s Offer is final in the absence of a competing proposal 6 7 The trading price of UGL Shares may fall immediately following the close of the Offer in the absence of the Offer or a superior proposal Should CIMIC acquire a controlling ownership stake, there could be a number of potentially adverse consequences for nonaccepting UGL shareholders 5

6 1 The Independent Expert has concluded that the Offer is fair and reasonable, in the absence of a superior offer UGL engaged Grant Samuel to prepare an Independent Expert s Report to assess the merits of the Offer Independent Expert s UGL Valuation Range Grant Samuel has assessed that the value of UGL on a 100% controlling interest basis ranges from $3.11 to $3.94 per UGL Share As the Offer price of $3.15 falls within the Independent Expert s range the Independent Expert has concluded that the Offer is fair and reasonable, in the absence of a superior offer 6

7 2 The Offer represents an attractive premium to historic trading prices The Offer represents a premium to the undisturbed UGL Share price¹ and the VWAP since announcement of the potential for an additional Ichthys provision of 47.2% and 37.7%, respectively Premia are in excess of the ~20-35%² levels typically observed in takeovers Implied Offer Premium vs Australian Average Takeover Premium Average takeover premia: 20% to 35% 1 Undisturbed UGL closing share price of $2.14 as at 7 October See Section of the Independent Expert s Report 7

8 3 The Offer represents an attractive acquisition multiple Implied Offer multiple of 8.5x FY2016 EBITDA¹ is above the median historical EBITDA multiple realised in comparable transactions 1 Infrastructure Services: 6.1x; Engineering Services: 5.6x; Other Services: 4.6x On a FY2017 basis, the implied Offer multiple of 8.3x FY2017 EBIT 1 is also above the median forecast EBITA multiple realised in comparable transactions 1 Infrastructure Services: 7.7x; Engineering Services: 7.8x; Other Services: 6.0x Offer Enterprise Value / Historical EBITDA vs Comparable Transactions 1 As set out on page 8 in the Target s Statement 8

9 4 Offer provides UGL Shareholders with certainty of receiving $3.15 per Share in cash which must be weighed against the risks associated with remaining a shareholder Implications of remaining a UGL Shareholder Base business turnaround is well advanced The Board believes the Ichthys provision is adequate as at 31 October 2016 However, UGL debt levels (expect to be approx. $174-$214 million net debt as at 30 June 2017) are higher than industry peers, making UGL more susceptible to unforeseen events which may negatively impact the base business or Ichthys Certainty of the Offer Offer is $3.15 per UGL Share in cash If you accept and the Offer becomes or is declared unconditional, CIMIC will pay you by the later of: 7 business days after the date of receipt of your valid acceptance; and 7 business date after the Offer becomes or is declared unconditional To the extent these events extend beyond UGL s available headroom, UGL may need to seek alternative funding sources The Independent Expert noted Shareholders with a low risk appetite will find the certainty of $3.15 cash per UGL Share attractive. 9

10 5 No superior proposal has emerged and CIMIC s Offer is final in the absence of a competing proposal Possibility a superior proposal from a third party emerges before the end of the Offer Period Would be announced to the ASX and carefully considered by the Board However, no superior offer had been made as at the date of the Target s Statement Given the Offer is final, CIMIC cannot increase the Offer Price above $3.15 in the absence of a competing proposal 10

11 Share Price 6 The trading price of UGL Shares may fall in the absence of the Offer or a superior proposal UGL share price increased +48.6% following the Offer announcement from undisturbed closing price¹ Since the Offer announcement, UGL Shares have traded in a range between $3.16 and $3.26² In the absence of the Offer and if no superior proposal emerges, the UGL share price may fall below CIMIC s Offer Price immediately following the close of the Offer Share Price Reaction to CIMIC Offer Oct % 1.20 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 UGL Offer Price ¹ Undisturbed UGL closing share price of $2.14 as at 7 October 2016 ² Intraday low on 10 October 2016 and intraday high on 12 October

12 7 Should CIMIC acquire a controlling ownership stake there could be a number of potentially adverse consequences for non-accepting UGL shareholders CIMIC currently has 13.84% relevant interest. Should it acquire a controlling stake there could be a number of potentially adverse consequences for non-accepting UGL shareholders including: UGL may need to renegotiate its bank facilities or potentially explore financing alternatives (including a potential equity raising) Change of control provisions may be triggered in a number of material contracts (representing ~$1.0 billion, or 38% of FY2017 operating revenue) Additional provisions regarding termination of convenience increases total contracts at risk to ~$1.4 billion, or 53%, of FY2017 operating revenue Liquidity of UGL Shares may fall Potential for removal from certain market indices due to limited free float / liquidity, depending on the number of shares acquired by CIMIC May lead to a change in Board composition and management and UGL may not be able to execute its current business plan and turnaround strategy May lead to a change in current business mix and possible divestment of certain assets May lead to changes to the existing capital structure, dividend and capital management policies, including a potential equity raising 12

13 Mr Robert Kaye SC s reasons to reject the offer Mr Robert Kaye SC recommends that UGL Shareholders REJECT the Offer Mr Kaye SC is of the view that the Offer Price may not reflect the full underlying value of UGL Shares The reasons why Mr Kaye believes you should reject the Offer are set out below, and outlined in UGL s Target s Statement, which your Directors encourage you to read in detail 1 The Offer of $3.15 per UGL share is only marginally above the lowest end of the Independent Expert s valuation range of $3.11 to $3.94 per UGL Share 2 UGL has a strong base business and is well advanced in its turnaround 3 The timing of the Offer is opportunistic given UGL s current exposure to the Ichthys Projects 4 The Offer may not reflect the full strategic value of UGL to CIMIC 13

14 Process Timetable After careful consideration of the Offer the Majority Directors recommend that UGL Shareholders ACCEPT the Offer in the absence of a superior proposal Timetable 7 November UGL Target Statement released on ASX 9 November UGL Target Statement dispatched to shareholders 25 November closing date for the Offer (unless CIMIC withdraws or extends) Next Steps Shareholders who do not wish to accept the offer should do nothing Shareholders who wish to accept the offer should refer to the Bidder s Statement Acceptances must be received before the end of the Offer Period More Information The Board of UGL will keep you updated on any significant developments If you have any questions, call the official UGL shareholder information line: Within Australia: Outside Australia:

15 Ross Taylor 15

16 Ichthys projects CCPP Project SMP Project 16

17 31 October June 2016 Ichthys SMP project SMP Project Status Construction 60% complete Commercial settlement on claims up to 31 May 2016 achieved Productivity and program tracking to forecast cost to complete Delays and disruption continue which is being managed in line with our contract 1. Including $35m in incentive payments which are conditional upon achieving agreed milestones All values referred to in the diagrams reflect 100% of the project and UGL s interest is 50% of these values. They do not include the UGL specific management oversight costs. Diagrams are for illustrative purposes only and are not to scale. 17

18 31 October June 2016 Ichthys CCPP project CCPP Project Status UGL and CH2M JV scope 79% complete First key milestone ready for gas achieved Likely completion now estimated at October 2018 (from January 2018) based on key client deliverables Cost at completion has been reforecast on this basis We will look for genuine settlement negotiations over coming months or enter into formal dispute processes All values referred to in the diagrams reflect 100% of the project and UGL s interest is 50% of these values. They do not include the UGL specific management oversight costs. Diagrams are for illustrative purposes only and are not to scale. 18

19 Overall financial position Provision of $375 million raised across both projects remains unchanged Fully attributable to the CCPP project Includes UGL management costs required to effectively oversee the projects Aggregate provision reflects: Forecast total project costs to complete based on ongoing impact of delay and disruption Current approved revenue and $37.5m (UGL share) unapproved variations on SMP Further settlement of claims provides future potential upside or contingency against forecast cost increases Estimated future cash flows associated with $375m provision Does not allow for further project delays and cost increases which may have to be funded by the JV partners before potential recovery through claims Actual Forecast Total FY15 FY16 1H17 2H17 1H18 2H18 1H19 (9) (183) (103) (82) 15 (12) (1) (375) 19

20 Refinancing Update A Syndicated Facility Agreement has been executed on 4 November 2016 for the following new financing arrangements Further to this, UGL is in the final stages of agreeing extensions to a range of bilateral bank guarantee, overdraft and other transactional facilities with an aggregate value of $65m Financial close on the refinance is expected to occur after 28 November

21 Base business positioned for strong growth in FY17 FY17 Stage 3: Strong top and bottom line growth Description Base business revenue growth of ~$300m due to contracts secured in transport infrastructure and asset maintenance Ichthys projects expected to generate revenue of $360 million Significant progress on Ichthys projects with construction phase largely complete Further EBIT margin improvement in base business ~4% due to revenue growth and improved profitability EBIT split 35% / 65% between first and second half FY18 + beyond Stage 4: Consistent Growth Testing and commissioning phases of Ichthys projects Sustainable enterprise and industry leader Continue to seek opportunities for growth and value enhancement 21

22 Q&A 22

23 IMPORTANT NOTICE This presentation and any oral presentation accompanying it: is not an offer, invitation, inducement or recommendation to purchase or subscribe for any securities in UGL Limited ( UGL ) or to retain any securities currently held; is for information purposes only, is in summary form and does not purport to be complete; is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor, potential investor or any other person. Such persons should consider seeking independent financial advice depending on their specific investment objectives, financial situation or needs when deciding if an investment is appropriate or varying any investment; may contain forward looking statements. Any forward looking statements are not guarantees of future performance. Any forward looking statements have been prepared on the basis of a number of assumptions which may prove to be incorrect or involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of UGL, which may cause actual results, performance or achievements to differ materially from those expressed or implied in such statements. There can be no assurance that actual outcomes will not differ materially from these statements. Any forward looking statement reflects views held only as of the date of this presentation. Subject to any continuing obligations under applicable law or any relevant stock exchange listing rules, UGL does not undertake any obligation to publicly update or revise any of the forward looking statements or any change in events, conditions or circumstances on which any such statement is based. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation and any oral presentation accompanying it. To the maximum extent permitted by law, UGL and its related bodies corporate, and their respective directors, officers, employees, agents and advisers, disclaim and exclude all liability (including, without limitation, any liability arising from fault or negligence) for any loss, damage, claim, demand, cost and expense of whatever nature arising in any way out of or in connection with this presentation and any oral presentation accompanying it, including any error or omission therefrom, or otherwise arising in connection with any reliance by any person on any part of this presentation and any oral presentation accompanying it. Presented and delivered by UGL Copyright 2016 All rights reserved 23