Recommended Cash Offer
by
UBS Investment Bank and JPMorgan
on behalf of the Offeror
a wholly-owned subsidiary of
United Technologies Corporation
and (in the United States) by the Offeror
for
Chubb plc
1. Introduction
The boards of Chubb and UTC are pleased to announce that they have agreed the
terms of a recommended cash offer for Chubb. The Offer to acquire the entire
issued and to be issued share capital of Chubb not already owned by the UTC
Group will be made outside the US by UBS and JPMorgan on behalf of the Offeror,
a wholly-owned subsidiary of UTC, and in the US by the Offeror.
2. The Offer
The Offer, which will be subject to the conditions and further terms set out in
Appendix I and those to be set out in the Offer Document and the Form of
Acceptance, will be made on the following basis:
For each Chubb Share 75 pence in cash
The Offer values the entire issued share capital of Chubb at approximately £622
million. In addition, Chubb Shareholders will receive a special interim
dividend of 1 pence per Chubb Share after the Offer becomes or is declared
wholly unconditional.
The Offer Price represents a premium of approximately 13 per cent. over the
closing middle market price of 66.25 pence for each Chubb Share on 15 April
2003, being the last business day prior to the announcement by Chubb that it had
received an approach which might or might not lead to a formal offer for Chubb
(but before Chubb's trading statement made on 22 April 2003).
Chubb Shares will be acquired by or on behalf of the Offeror pursuant to the
Offer fully paid and ranking pari passu with all other Chubb Shares and free
from all liens, charges, equitable interests, encumbrances, rights of
pre-emption and any other third party rights of any nature whatsoever and
together with all rights now or hereafter attaching to such shares including,
without limitation, the right to receive in full all dividends (other than the
special interim dividend of 1 pence described above) and other distributions (if
any) declared, paid or made on or after the date of this announcement.
Chubb Shareholders will receive the special interim dividend of 1 pence subject
to the Offer becoming or being declared unconditional in all respects. It is
expected to be paid within 14 days of the Offer becoming or being declared
unconditional in all respects to Chubb Shareholders on the register at the close
of business on the date on which the Offer becomes or is declared wholly
unconditional.
3. Background to and reasons for recommending the Offer
Chubb has built a worldwide portfolio of attractive security and fire protection
businesses. The Group has recently introduced new management at both group and
divisional level and has identified a series of actions to capitalise on the
long-term potential of its business portfolio. Management's strategy to develop
the full potential of each of the business units within the Chubb portfolio
includes growing recurring revenue through a focus on profitable customers and
reducing attrition. Efficiency gains are being sought through the
standardisation of product ranges and processes and the reduction of those costs
that do not drive customer loyalty. Chubb is also developing a technology
infrastructure to support customer management and operational processes. Chubb
management believes this is the right strategy to deliver results over the
medium to long term.
Despite the Chubb Board's confidence in its long-term strategy, the ability of
the Chubb Group to realise the value of these plans swiftly has been constrained
by particularly difficult economic conditions and the financial resources
available to the Chubb Group. The Chubb Directors believe that participating in
a larger group such as UTC will enable it more rapidly to meet its business
objectives.
Against a background of difficult economic conditions reflected in lower share
prices both generally and specifically in the security sector, the Chubb Board
believes that the Offer represents an opportunity for shareholders to
crystallise the value of their investment at a premium to the likely market
value of the business based on its current trading performance.
Accordingly, the Chubb Directors, who have been so advised by Rothschild,
consider the terms of the Offer to be fair and reasonable and intend unanimously
to recommend that Chubb Shareholders accept the Offer, and have irrevocably
undertaken to do so (or procure to be done) in respect of their own beneficial
holdings. The Chubb Directors have also received financial advice from
Citigroup in connection with the Offer. In providing advice to the Chubb
Directors, Rothschild and Citigroup have each taken into account the commercial
assessments of the Chubb Directors.
4. Irrevocable undertakings
The Offeror has received irrevocable undertakings to accept (or procure the
acceptance of) the Offer from those Chubb Directors who own Chubb Shares in
respect of their entire beneficial shareholdings. These irrevocable
undertakings are binding and are given in respect of 101,538 Chubb Shares,
representing in aggregate approximately 0.01 per cent. of the existing issued
share capital of Chubb. Such undertakings will cease to be binding if the Offer
Document is not posted within 28 days of this announcement (or such later date
as the Offeror determines with the consent of the Panel) or if the Offer lapses
or is withdrawn.
5. Background to and reasons for the Offer
The acquisition of Chubb would strategically expand UTC's commercial business
portfolio. Chubb's key strengths include:
• Near 200-year history and worldwide brand name recognition as a
leading security and fire services provider
• Global presence with over one million customers in 21 countries
• A diversified service offering with revenues from electronic security,
fire protection and security personnel services
• Market leading positions in the UK, Australia, France, Hong Kong and
Canada
With the acquisition, UTC intends to build upon Chubb's strengths by
capitalising on UTC's existing commercial relationships, its ability to develop
technology, its fiscal and operational management practices, and its strong
financial position. In particular, Chubb will provide UTC with:
• A platform for growth in the relatively fragmented security services
and fire protection industry
• The opportunity to expand in the North American security and fire
protection market leveraging Chubb's brand name and experience
• An enhanced sales mix from commercial customers and significant
recurring revenue
• Additional growth opportunities with attractive returns as the
security services and fire protection industry is projected to grow faster than
global GDP
The transaction is expected to be earnings accretive to UTC.
6. Information on the UTC Group and the Offeror
UTC provides high-technology products and services to the building systems and
aerospace industries throughout the world. UTC's industry-leading businesses
are Otis, Carrier, Pratt & Whitney, Hamilton Sundstrand, Sikorsky and UTC Power.
UTC's revenues for the year ended 31 December 2002 were $28.2 billion.
Commercial businesses, Carrier and Otis, generated 57 per cent. of total segment
revenues, and international revenues contributed 56 per cent. of UTC's total
revenue. UTC is listed on the New York Stock Exchange (UTX), is a member of the
Dow Jones Industrial Average, and was ranked in the 2002 Fortune-50.
The Offeror, a wholly-owned subsidiary of UTC incorporated in England, has been
formed for the purposes of making the Offer. To date, the Offeror has engaged
in no activities other than those incidental to its organisation and the making
of the Offer.
7. Information on Chubb
Chubb is a leading worldwide fire and security services provider, differentiated
from its international competitors by the breadth of its security services
offering and its ability to integrate these services for the benefit of its
customers. These services include electronic access control, intrusion
detection, closed-circuit television ('CCTV'), fire detection and suppressionsystems, alarm monitoring, emergency response and security personnel services.
Security applications have been provided under the Chubb brand since 1818. In
November 2000, Chubb became an independent company listed on the London Stock
Exchange.
Chubb has over 48,000 employees and over one million customers around the world,
with leading positions in the UK, Australia, France, Hong Kong and Canada.
Chubb operates on a regional basis with the following portfolio of services:
• Electronic Security provides intrusion detection and alarm systems and
services; access control systems and services; CCTV systems and services; and
monitoring services for intrusion alarms and CCTV. Chubb's activities are
concentrated on security systems solutions, sourcing most of its components from
third-party suppliers. In 2002, the reported turnover from Electronic Security
was £758 million (US$1,251 million).
• Security Personnel provides guarding services; patrol, response and
key-holding services; cash in transit services in selective 'cash-culture'
regions; and security personnel services for major events. In 2002, the
reported turnover from Security Personnel was £434 million (US$716 million).
• Fire Protection provides and services fire detection and fire
suppression systems. This includes the provision and servicing of fire
extinguishers and related equipment; servicing of fire and emergency exit lights
and evacuation doors; provision of smoke detection alarm systems and services
and provision of large fire risk protection services. Fire protection also
provides advisory, training and consultancy services with respect to
understanding the health and safety and workplace regulations on fire and
security systems. It provides businesses with assistance in maintaining
mandatory fire systems service records; design and supply of suppression systems
and large fire risk assessment. In 2002, the reported turnover from Fire
Protection was £255 million (US$421 million).
• Onity is a manufacturer of electronic lock solutions for hotels as
well as other sectors such as education, corporate, government and marine. In
addition to locks, Onity provides a range of related products including
electronic in-room safes and CCTV systems. In 2002, Onity's reported turnover
was £55 million (US$91 million).
For the year ended 31 December 2002, Chubb reported turnover of £1,502 million
(US$2,478 million) and pre-exceptional and pre-amortisation operating profit of
£143 million (US$236 million). Adjusted earnings per Chubb share were 9.0 pence
(14.9 cents). As at 31 December 2002, Chubb had net assets of £338 million
(US$558 million) and net debt of £473 million (US$779 million). As at 30 April
2003, Chubb had unaudited net debt of £566 million (US$934 million).
In 2002, Chubb reported turnover of £430 million (US$709 million) in the United
Kingdom, Ireland and Southern Africa, £419 million (US$691 million) in
Australasia, £364 million (US$601 million) in Continental Europe, £145 million
(US$239 million) in Asia and £88 million (US$145 million) in the Americas.
8. Chubb current trading
In Chubb's trading statement of 22 April 2003, it stated that whilst management
had expected a tough start to the year, trading conditions were more difficult
and persistent than it had anticipated. In particular, Chubb had experienced a
further deterioration in Asia and Onity, the US based hotel locks business.
Trading since 22 April 2003 has demonstrated a continuation of these tough
conditions. Sales in Australasia have continued to be broadly flat compared
with the prior year. Trading conditions in Asia have continued to deteriorate.
Sales in the UK, Ireland and South Africa have been broadly flat compared with
the prior year. Sales in Continental Europe and the Americas have continued to
show growth over the prior year. Onity continued to be loss-making and is being
reorganised.
Management continues to take actions to improve the underlying performance of
the Chubb Group and to realise the long-term potential of the Group's portfolio
of businesses.
9. Chubb Share Schemes
The Offer will extend to any Chubb Shares which are unconditionally allotted or
issued pursuant to the exercise of existing options under the Chubb Share
Schemes while the Offer remains open for acceptance (or such earlier time or
date as UTC or the Offeror may, subject to the rules of the Code, decide). UTC
will write to holders of options and awards under the Chubb Share Schemes in due
course.
10. Management and employees
UTC views the management and employees of the Chubb Group as critical to the
success of the overall group.
Upon the Offer becoming or being declared unconditional in all respects, the
rights, including pension rights, of all employees and management of the Chubb
Group will be fully safeguarded.
11. Inducement fee
As an inducement to UTC to make the Offer, Chubb and UTC have entered into an
agreement under which Chubb has agreed to pay UTC a fee of £6.2 million in the
event that:
(a) the Chubb Directors withdraw or adversely modify their recommendation
of the Offer (other than by reason of a failure by UTC to comply with its
obligations under the Code) and thereafter the Offer is not made (with the
consent of the Panel), lapses or is withdrawn; or
(b) any person (other than the Offeror or any person acting in concert
with it) publicly announces an intention to make a competing offer (whether or
not subject to pre-conditions) for the entire ordinary share capital of Chubb
and the transaction referred to in such announcement (or any other transaction
referred to in any other such announcement) subsequently becomes or is declared
unconditional in all respects or is completed.
12. Compulsory acquisition, de-listing and cancellation of trading
If the Offer becomes or is declared unconditional in all respects and sufficient
acceptances are received, it is UTC's intention:
(a) to apply the provisions of sections 428 to 430F of the Companies Act
(inclusive) to acquire compulsorily any remaining Chubb Shares to which the
Offer relates on the same terms as the Offer; and
(b) to procure that Chubb applies to the UK Listing Authority for
cancellation of the listing of the Chubb Shares on the Official List and to the
London Stock Exchange for the cancellation of trading of Chubb Shares on the
London Stock Exchange's market for listed securities.
It is anticipated that the cancellation of Chubb's listing and admission to
trading will take effect no earlier than the expiry of 20 business days after
the date on which the Offer becomes or is declared unconditional in all
respects. Delisting would significantly reduce the liquidity and marketability
of any Chubb Shares not assented to the Offer.
13. Overseas shareholders
The availability of the Offer to Chubb Shareholders who are not resident in and
citizens of the United Kingdom or the United States may be affected by the laws
of the relevant jurisdiction. Such persons should inform themselves about and
observe any applicable legal or regulatory requirements of their jurisdictions.
Further details in relation to overseas shareholders will be contained in the
Offer Document.
The Offer will be made for the securities of a non-US company. The Offer will
be made in accordance with the requirements of the City Code and will be subject
to disclosure and other procedural requirements that are different from those
under US law.
Unless otherwise determined by UTC, the Offer will not be made, directly or
indirectly, in or into Australia, Canada, Japan or any jurisdiction where to do
so would constitute a breach of securities laws in that jurisdiction and the
Offer will not be capable of acceptance from or within Australia, Canada, Japan
or any such other jurisdiction. Accordingly, copies of this announcement are
not being, and must not be, directly or indirectly, mailed or otherwise
forwarded, distributed or sent in, into or from Australia, Canada, Japan or any
jurisdiction where to do so would constitute a breach of securities laws in that
jurisdiction, and persons receiving this announcement (including custodians,
nominees and trustees) must not mail or otherwise distribute or send it in, into
or from such jurisdictions as doing so may invalidate any purported acceptance
of the Offer.
Notwithstanding the foregoing, UTC retains the right to permit the Offer to be
accepted and any sale of securities pursuant to the Offer to be completed if, in
its sole discretion, it is satisfied that the transaction in question can be
undertaken in compliance with applicable law and regulation.
14. Disclosure of interests in Chubb
UTC owns, through GB Parkview Investments, LLC, 500,000 Chubb Shares,
representing approximately 0.06 per cent. of the existing share capital of
Chubb. Other than this, neither UTC, nor any Director of UTC or, so far as UTC
is aware, any party acting in concert with UTC, owns or controls any Chubb
Shares or any securities convertible or exchangeable into, or any rights to
subscribe for or purchase the same, or holds any options to acquire Chubb Shares
or has entered into any derivative referenced to Chubb Shares ('Relevant ChubbSecurities') which remains outstanding, nor does any such person have any
arrangement in relation to Relevant Chubb Securities. For these purposes, '
arrangement' includes any indemnity or option arrangement, any agreement or
understanding, formal or informal, of whatever nature, relating to Relevant
Chubb Securities which may be an inducement to deal or refrain from dealing in
such securities. In the interests of secrecy prior to this announcement, UTC has
not made any enquiries in this respect of certain parties who may be presumed by
the Panel to be acting in concert with UTC for the purposes of the Offer.
15. General
The formal Offer Document and the Form of Acceptance setting out the full terms
and conditions of the Offer will be posted to Chubb Shareholders as soon as
practicable, other than to Chubb Shareholders with addresses in Australia,
Canada or Japan. In deciding whether or not to accept the Offer in respect of
their Chubb Shares, Chubb Shareholders should rely on the information contained
in, and procedures described in, the Offer Document and Form of Acceptance.
The conditions to and certain further terms of the Offer are set out in Appendix
I to this announcement. Appendix II to this announcement contains definitions
of certain expressions used in this announcement.
General Enquiries
United Technologies Corporation Peter Murphy +1 860 728 7977
Paul Jackson +1 860 728 7912
UBS Investment Bank Emma Goodrick 020 7567 8000
Leanne Gordon-Kagan 020 7567 8000
JPMorgan Mark Breuer 020 7777 2000
Edward Banks 020 7777 2000
Chubb Jonathan Findler 020 7766 4800
Juliet Burland 020 7766 4800
Rothschild Philip Swatman 020 7280 5000
Crispin Wright 020 7280 5000
Stuart Vincent 020 7280 5000
Citigroup Philip Robert-Tissot 020 7986 4000
Ed Matthews (broking) 020 7986 4000
CSFB Tom Reid (broking) 020 7888 8888
Stuart Field (broking) 020 7888 8888
Finsbury Morgan Bone 020 7251 3801