The details of metallurgical engineering company MDM Engineering’s merger with global engineering and construction company Foster Wheeler will be announced at an extraordinary general meeting (EGM), which is expected to be held early next month.

Subject to the approval of the merger by MDM shareholders and timely satisfaction of the conditions precedent, MDM expects the transaction to be completed in late August, as previously announced by the company in March.

It is intended that, immediately following the implementation of the merger, MDM’s listing on the Aim market of the London Stock Exchange will be cancelled. The company has announced that details of the timetable for the cancellation will be advised in due course.

The outlined conditions precedent include MDM shareholder approval of the merger at the EGM and the security of required regulatory approvals – including clearances from the South African Competition Authority and the Tanzanian Fair Competition Commission. Further, no material adverse changes or certain prescribed events, as defined in the merger integration advisory (MIA), can occur in relation to MDM’s business.

The recommended takeover offer from Foster Wheeler was offered at £1.70 cash for an MDM share. Foster Wheeler will acquire all of the ordinary shares and options in issue in a cash transaction of about £65.3-million. The cash offer represents an attractive premium to recent share price trading levels and provides realisation of value for MDM shareholders.

Shareholders representing 42.4% of the issued ordinary shares of MDM have executed agreements under which they have agreed to vote in favour of the offer. The offer is subject to MDM shareholder approval and other conditions, including competition approval.

These shareholders have exec- uted voting deeds, and have agreed to vote in favour of any resolution submitted to MDM shareholders for their approval in connection with the merger, provided that the MIA has not been terminated in accordance with its terms, includ- ing in the event of a superior proposal.

MDM announced in March that it had entered into an MIA with Foster Wheeler, under which Foster Wheeler’s British Virgin Islands (BVI) subsidiary, Foster Wheeler M&M, will acquire all of the ordinary shares in MDM, subject to MDM shareholder approval and other conditions.

Under the terms of the mer- ger, MDM shareholders will be offered £1.70 cash for each MDM share they hold. The offer price of £1.70 represents a premium of 14.5% to MDM’s March 12 closing price of £1.485, a premium of 17.4% to the 30-day volume-weighted average price (VWAP) prior to March 12 of £1.45, and a premium of 17.3% to the 90-day VWAP prior to March 12 of £1.45.

Each of the directors of the MDM board recommended to the MDM shareholders that, in the absence of a superior proposal, which has been defined in the MIA, they vote in favour of the merger.

Each of the MDM directors, who are also shareholders in MDM, have voted in favour of the merger in respect of their own MDM shares pursuant to their respective voting deeds.

The MIA also contains customary deal protection mechanisms, including ‘no shop’ and ‘no talk’ provisions, a matching right for Foster Wheeler in the event of a competitive proposal, and a mutual break fee, payable in certain circumstances, of 1% of the aggregate of the total consideration offered by Foster Wheeler to implement the merger.

The MIA also contains customary restrictions on the conduct of MDM’s business prior to implementation of the merger, which will take effect when a certificate of the merger is issued by the BVI Registrar of Companies, following the filing of the Articles of Merger with the Registrar.

Foster Wheeler will also make an offer to acquire all outstanding options held over the shares of MDM. The MDM options shall be cancelled on implementation of the merger and each option holder will be paid cash consideration for their MDM options.

As announced on February 13, Foster Wheeler entered into a definitive agreement with global engineering group Amec concerning a possible business combination of Foster Wheeler and Amec. Foster Wheeler has informed Amec of the transaction and does not expect the transaction between Foster Wheeler and MDM to affect the timing of completion of the business combination of Foster Wheeler and Amec.

Commenting on the transaction, MDM chairperson Bill Nairn said: “The MDM board views the offer from Foster Wheeler as providing MDM shareholders with the certainty of 100% cash at a significant premium to MDM’s prevailing share price. Foster Wheeler is a pre-eminent global engineering company and we believe that this offer endorses the quality of the MDM business and its prospects in Africa.”

MDM CEO Martin Smith added that the merger with Foster Wheeler provides an “unparalleled opportunity” for MDM’s continued growth through the ability to leverage Foster Wheeler’s global network of engineering specialists, systems and procedures, and significant balance sheet strength.

“We see the merger as providing MDM’s employees and clients with enhanced opportunities for ongoing development and growth, as well as an excellent opportunity for shareholders to crystallise value at a significant premium,” says Smith.

Foster Wheeler CEO Kent Masters notes, “MDM Engineering is a strong fit for Foster Wheeler’s minerals and metals strategy to enhance global capability and capacity”

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