DGAP-News: Braas Monier Building Group S.A.: Response to Standard Industries' Letter dated 25 September 2016

Braas Monier Building Group S.A.: Response to Standard Industries' Letter dated 25 September 2016

DGAP-News: Braas Monier Building Group S.A. / Schlagwort(e): Stellungnahme

Braas Monier Building Group S.A.: Response to Standard Industries' Letter

dated 25 September 2016

28.09.2016 / 08:00

Für den Inhalt der Mitteilung ist der Emittent verantwortlich.

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Response to Standard Industries' Letter dated 25 September 2016

Standard Industries' 25 September 2016 letter questioned the validity of

certain information included in Braas Monier's 23 September 2016 letter.

The Board of Directors of Braas Monier (the "Board") believes it is

necessary and in the interests of shareholders to rectify any suggestion

that they may have been misled.

1. No premium for control

- The Standard Industries takeover offer of EUR 25 per share is at a

discount to the current market price of EUR 26

- The takeover offer is also at a discount to independent analysts'

consensus trading target share price of EUR 26

- The average customary control premia paid for European companies over

the last 20 years has been 36%

- EUR 25 per share does not provide shareholders with a customary premium

in exchange for control

- The Board also notes that EUR 25 is the price per share which 40 North

(Standard Industries' affiliate) paid in June 2016 for its non-

controlling 29.1% shareholding in Braas Monier

- The actions of Monier Holdings, which has been seeking to exit for some

time, do not validate any offer price

The Board is therefore correct to state that the offer of EUR 25 per share

contains no customary premium in exchange for control.

2. No value for synergies

- Standard Industries has indicated its intention to combine Braas Monier

with Icopal

- The Board believes that EUR 30-40 m would be a reasonable estimate of

the amount of annual synergies which would arise from a combination of

Icopal and Braas Monier. This estimate is supported by an analysis

undertaken by a leading international management consultancy firm

- EUR 30-40 m equates to less than 2% of Braas Monier's and Icopal's

combined revenues and is in line with the level of synergies announced

with other combinations of building materials manufacturers

- The EUR 30-40 m synergies would arise both from revenue gains

principally from cross-selling, and cost savings from areas such as

duplicate corporate and regional functions, procurement, logistics and

the removal of public company costs

The Board is therefore correct to state that the offer of EUR 25 per share

would deprive Braas Monier shareholders from any benefit arising from

synergies.

3. Discount to most recent comparable transaction

- The 10.5x historic EV/EBITDA multiple paid by Standard Industries for

Icopal referred to in the Board's 23 September 2016 letter is based on

public data including GAF's own public announcement and Icopal's IFRS

2015 Annual Report. The sources and bases of this calculation were

fully disclosed in the 23 September 2016 letter

- In contrast, Standard Industries has not disclosed details of its

alternative calculation, without which it is not possible to assess

whether Standard Industries' analysis has been undertaken on an

appropriately comparable basis

- Braas Monier has superior financial metrics compared to Icopal. Braas

Monier's EBITDA margins are substantially higher than Icopal and Braas

Monier generates c.2.5x the annual operating cash flow of Icopal

- Braas Monier has no requirement to fund its pension schemes. This

contributes to Braas Monier's sector leading equity free cash flow

yield of c.8%

- Reference by Standard Industries to a trading multiple for Wienerberger

is an incorrect comparison when assessing an appropriate takeover

multiple

The Board is therefore correct to state that the offer of EUR 25 per share

is at a discount to the most recent comparable transaction.

4. Unrecognised value in German pension schemes

- Braas Monier's pension liabilities relate almost exclusively to German

pension schemes which are (a) unfunded (with no legal funding

obligation) and (b) closed to new entrants

- Over the last 5 years the Braas Monier pension liabilities have

increased by around EUR 177 m due principally to changes in discount

rate assumptions. During this period the cash outflows under these

pension schemes have remained stable at around EUR 15 m per annum, an

amount which is not expected to increase materially in future years

- The after tax pension liability under these pension schemes at 30 June

2016 was EUR 370 m. This accounting liability is derived in accordance

with IFRS and assumes that this sum would be invested in high quality

corporate bonds (or similar risk assets) generating investment returns

of 1% per annum

- This contrasts with the c.8% equity free cash flow yield which Braas

Monier currently generates at the current share price of EUR 26

- Jefferies, the independent equity analyst, estimates that this mismatch

could add a further

EUR 2-3 per share of value to an acquirer which takes a long term view

of the value of these pension liabilities

5. Significant future shareholder value as an independent company

- Braas Monier has successfully implemented a strategy of significant

rationalisation and restructuring, resulting in a strong improvement in

earnings and cash flows and a significant reduction of net debt

- These material improvements in Braas Monier's financial position have

enabled it to implement a successful strategy of organic and inorganic

growth; to undertake a refinancing which will improve annual cash flow

by around EUR 12 m; and to implement a progressive dividend policy

- Braas Monier is strongly positioned financially and operationally to

benefit from any recovery in its European markets. Braas Monier offers:

- A sector leading equity free cash flow yield of c.8%

- High cash generation with material further de-leveraging expected

in the medium term

- High operational leverage, which the Board believes will generate

improved earnings and even greater cash flows in any European

recovery

- Strong pricing power and sector leading sustainable EBITDA margins

- A high quality platform for growth which is well positioned in all

its key markets and with a strong geographic footprint

- A successful ongoing M&A strategy with a well-developed pipeline of

future opportunities

The Board is therefore correct to state that Braas Monier is in a strong

position to generate significant future shareholder value as an independent

company.

In November 2016 Braas Monier will update the market on its current trading

and outlook.

Recommendation to REJECT the Offer

The Board therefore continues unanimously to recommend that shareholders

reject the takeover 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 maximising 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.

The Board will not recommend the acceptance of a takeover 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.

Contact:

Braas Monier: Achim Schreck

Director Group Communications / Investor Relations

Tel: +49 6171 61 2859

Rothschild: John Deans Scott Harris: Alice Squires

Tel: +44 (0) 20 7280 5000 Tel: +44 (0) 207 653 0030

Forward-Looking Statement

This document contains forward-looking statements relating to the business,

financial performance and results of Braas Monier Building Group S.A. (the

'Company') and/or the industry in which the Company operates. The words

'anticipate', 'assume', 'believe', 'estimate', 'expect', 'foresee',

'intend', 'may', 'plan', 'project', 'should' and similar expressions are

used to identify forward-looking statements. Forward-looking statements are

statements that are not historical facts; they include statements about the

Company's beliefs and expectations and the assumptions underlying them.

These statements are based on plans, estimates and projections as they are

currently available to the management of the Company. Forward-looking

statements therefore speak only as of the date they are made, and the

Company undertakes no obligation to update any of them in light of new

information or future events. By their very nature, forward-looking

statements involve risks and uncertainties. These statements are based on

the Company's management's current expectations and are subject to a number

of factors and uncertainties that could cause actual results to differ

materially from those described in the forward-looking statements. Actual

results may differ from those set forth in the forward-looking statements

as a result of various factors (including, but not limited to, future

global economic conditions, changed market conditions affecting the

building materials industry, intense competition in the markets in which we

operate and costs of compliance with applicable laws, regulations and

standards, diverse political, legal, economic and other conditions

affecting our markets, and other factors beyond our control). This document

is intended to provide a general overview of the Company's business and

does not purport to deal with all aspects and details regarding the

Company. Neither the Company nor any of its directors, officers, employees

or advisors nor any other person shall have any liability whatsoever for

any errors or omissions or any loss howsoever arising, directly or

indirectly, from any use of this information or its contents or otherwise

arising in connection therewith. This document speaks as of its date and

the material contained in this presentation reflects current legislation

and the business and financial affairs of the Company which are subject to

change and audit.

Appendix 1

Sources and Bases

1. General

Unless otherwise stated, the financial and other information relating to

Braas Monier is derived from Braas Monier's annual report and accounts for

the year ended 31 December 2015.

Bases of calculations and sources of information are provided below in the

order in which the relevant information appears in this document;

accordingly, where any such information is repeated in this document, the

underlying bases and sources are not.

2. Specific references

a) The current trading price is based on the closing trading price of Braas

Monier of EUR 26 on Tuesday 27 September 2016

b) The analysts' consensus trading target share price of EUR26 is based on

the average of the latest trading target prices of Berenberg, Exane BNP

Paribas, HSBC, Jefferies, JP Morgan, MainFirst and UBS

c) The reference to customary control premia is based on data from M&A

Monitor and includes European public deals over the last 20 years

(excluding partial, minority and squeeze-out offers)

d) The reference to a reasonable estimate of expected annual synergies of

EUR 30-40 m arising from a merger of Icopal and Braas Monier is based on an

analysis undertaken by a leading international management consultancy firm

and the considered views of the Board

e) The reference to EUR 30-40 m equating to less than 2% of Braas Monier's

and Icopal's combined revenues is based on:

i) Braas Monier revenue of EUR 1,257 m (per the Braas Monier Annual Report

2015); plus

ii) Icopal revenue of EUR 974 m (per the Icopal Holding a/s Annual Report

2015)

f) The 10.5x EV/EBITDA multiple paid by GAF Corporation (a subsidiary of

Standard Industries) for its acquisition of Icopal is based on:

i) the enterprise value on acquisition of "approximately EUR 1 bn" stated

on

the GAF Corporation press release dated 25 January 2016 (www.gaf.com/

about_gaf/press_room/press_releases/782565376); and

ii) the EUR 95 m EBITDA provided in the last available historic financial

reports of Icopal prior to completion of the transaction, being an

operating profit of EUR 59 m plus depreciation, amortisation and impairment

losses of EUR36m (per the Icopal Holding a/s Annual Report 2015)

g) Reference to Braas Monier's EBITDA margins being substantially higher

than Icopal's is based on:

i) Braas Monier FY15 EBITDA margin of 16.8% (per the Braas Monier Annual

Report 2015); and

ii) Icopal's FY15 EBITDA margin of 9.8% (per the Icopal Holding a/s Annual

Report 2015)

h) Reference to Braas Monier generating c.2.5x more operating cash flow

annually than Icopal is based on:

i) Braas Monier FY15 operating cash flow of EUR122m (per the Braas Monier

Annual Report 2015); and

ii) Icopal's FY15 operating cash flow of EUR49m (per the Icopal Holding a/s

Annual Report 2015)

i) Reference to the c.8% equity free cash flow yield is based on the

closing

share price of EUR 26 on 27 September 2016 and LTM cash flow as follows:

i) June 2016 LTM cash flow of EUR72m (per the Braas Monier Interim

Financial

Report Q2 / H1 2016 presentation); plus

ii) EUR 12 m improvement to annual cash flows in respect of the refinancing

(reflecting annualised cash interest savings of in excess of EUR 10 m plus

interest rate swap savings of EUR 2 m) (per the Braas Monier Interim

Financial Report Q2 / H1 2016 presentation)

j) Reference to the EUR 177 m increase in the Braas Monier pension

liabilities since 2011 is calculated as the latest published pension

liability of EUR 433 m (as set out below), compared with the pension

liability of EUR 255 m in 2011 as per the Braas Monier IPO Prospectus 2014

k) The after tax pension liability of EUR 370 m is calculated as:

i) Latest published pension liability of EUR 433 m (as per the Braas Monier

Q2 2016 Interim Financial Report); less

ii) Latest published pension deferred tax asset of EUR 63 m (as per the

Braas Monier Q2 2016 Interim Financial Report)

l) Reference to the cash outflow under the pension schemes of EUR 15 m per

annum are as per the Braas Monier Annual Report 2015

m) Reference to Jefferies' estimates are as per the Jefferies note titled

"Braas Monier, EUR 25 Offer Undervalues Shares in Our View" dated 25

September 2016

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Sprache: Deutsch

Unternehmen: Braas Monier Building Group S.A.

4, rue Lou Hemmer

1748 Senningerberg

Großherzogtum Luxemburg

Internet: www.braas-monier.com

ISIN: LU1075065190

WKN: BMSA01

Indizes: SDAX

Börsen: Regulierter Markt in Frankfurt (Prime Standard);

Freiverkehr in Berlin, Düsseldorf, München, Stuttgart,

Tradegate Exchange

Ende der Mitteilung DGAP News-Service

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506397 28.09.2016