Disposal
For immediate release 4 June 2007
PROPOSED DISPOSAL OF SLOUGH ESTATES USA FOR US$2.9 BILLION (£1.5 BILLION), £250
MILLION SPECIAL DIVIDEND AND SHARE CONSOLIDATION
SEGRO plc ("SEGRO"), the leading provider of Flexible Business Space in Europe,
today announces the proposed disposal of Slough Estates USA Inc. ("Slough
Estates USA"), its life sciences real estate business in the USA, to Health
Care Property Investors, Inc. ("HCP"). This follows SEGRO's strategic review of
Slough Estates USA announced in November 2006.
Ian Coull, Chief Executive of SEGRO, said:
"SEGRO has a well established platform upon which to grow its core Flexible
Business Space model, both in the UK and in Continental Europe, where we see
excellent opportunities to apply our skills and to achieve attractive total
returns. This disposal allows us to focus on these opportunities in Europe,
while enabling our Shareholders to benefit significantly from the value we
created in Slough Estates USA's highly specialised property business. SEGRO has
built a successful business in the "biotech" market, but one which is
materially different from, and has no synergy with, our activities in Europe.
We believe Slough Estates USA will thrive under its new owners, who are
themselves well established in the US healthcare property market."
Highlights:
* Disposal of Slough Estates USA to HCP for gross consideration of US$2.9
billion (£1.5 billion), following a highly competitive auction process. The
gross consideration is subject to certain balance sheet adjustments,
calculated in accordance with the provisions of the Share Purchase
Agreement. After deduction of £583 million of estimated debt to be
transferred with the business, anticipated taxation of approximately £297
million and estimated costs of £25 million, the net cash proceeds
receivable by SEGRO are approximately US$1.1 billion (approximately £574
million).
* The sale of Slough Estates USA is the culmination of the strategic
repositioning of the Group which began in 2004 and which will create a very
focused business model. SEGRO is a specialised investor and developer of
Flexible Business Space in Europe. The complete exit from life sciences
real estate in the US will enable SEGRO to concentrate its resources on
building upon this core strategic position.
* Following Completion, SEGRO intends to return approximately £250 million
(equivalent to 53 pence per Existing Ordinary Share) to Shareholders by
means of a Special Dividend. The remaining proceeds of approximately £324
million will be used to temporarily reduce the Continuing Group's net
indebtedness prior to being re-invested to fund the Continuing Group's
growth plans in Continental Europe and the UK.
* SEGRO considered alternative transaction structures to monetise its
investment in Slough Estates USA but concluded that a straightforward cash
disposal was in the best interests of Shareholders.
* The gross cash consideration of US$2.9 billion effectively represents a
premium of 26 per cent over the IFRS book value of the property assets as
at 31 December 2006 and a surplus of 44% over the net assets of Slough
Estates USA at that date.
* The Special Dividend will be accompanied by a consolidation of SEGRO's
ordinary share capital - facilitating comparability of earnings and net
asset values per share and share prices before and after the payment of the
Special Dividend.
* If SEGRO's 2006 financial results were retrospectively adjusted to reflect
the effects of the Disposal, the payment of the Special Dividend and the
Share Consolidation, then the pro-forma impacts on the 2006 financial
results would have included:
Financial statements Pro-forma for sale of
31 December 2006 Slough Estates USA as
at
31 December 2006
Total assets (£m) 6,390 5,478
NAV per share (p) 718 761
Adjusted diluted NAV per share (p) 775 776
Gross property rental income (£m) 305 229
Adjusted diluted earnings per 25.1 24.0
share (p)
* SEGRO has a substantial potential development pipeline in the UK and
Continental Europe which, as at 31 December 2006, had a potential future
expenditure on existing land holdings amounting to almost £1.6 billion.
Following aggregate expenditure of over £500 million on European
acquisitions in 2005 and 2006, SEGRO plans further growth though the
acquisition of property portfolios and development sites where we believe
attractive returns can be achieved - particularly in Continental Europe.
* The Disposal is conditional, amongst other things, upon obtaining the
approval of Shareholders at the Extraordinary General Meeting.
* The Disposal is expected to complete during the third quarter of 2007, with
payment of the Special Dividend being made as soon as practicable after
Completion.
Further financial information on Slough Estates USA and pro-forma financial
information on SEGRO's continuing business post the Disposal, the resultant
payment of the Special Dividend and the Share Consolidation can be found in
Appendix I.
This summary should be read in conjunction with the full text of this
announcement.
A circular containing further details of the Disposal, Special Dividend and
Share Consolidation and containing detailed information on these proposals and
setting out the notice of the Extraordinary General Meeting will be sent to
Shareholders as soon as practicable.
A conference call for analysts and investors will be held today at 09:00 London
time. At that time a powerpoint presentation will also be available in the
Analysts Presentations section on the investor relations pages of the SEGRO
website: www.segro.com. The conference call phone numbers are:
UK: +44 (0) 20 8611 0051 US: 18664327175
SEGRO Tel: +44 1753 21 3335 Michael Waring
UBS Investment Bank Tel: +44 20 7567 8000 Tim Guest
Tara King
Maitland Tel: +44 20 7379 5151 Colin Browne
Merrill Lynch Tel: +44 20 7628 1000 Simon Fraser
Andrew Osborne
Basic SEGRO Facts as at 31 December 2006 (including Slough Estates USA). SEGRO
is the leading provider of Flexible Business Space in Europe. Headquartered in
the UK, SEGRO is listed on the London Stock Exchange and on Euronext in Paris.
The company is a UK Real Estate Investment Trust ("REIT") with operations in
eleven countries, serving a diversified customer base of over 1,760 customers
operating in a wide range of sectors, representing both small and large
businesses, from start ups to global corporations. With investment property
assets of £5.0 billion (£6.0 billion including trading properties and
development assets) and approximately 4 million sq m of business space, SEGRO
has an annual gross rental income in excess of £300 million.
This announcement is for information purposes only and does not constitute an
offer or invitation to acquire or dispose of any securities or investment
advice in any jurisdiction.
UBS Investment Bank is acting as financialadviserand joint brokerto SEGRO, and
no one else in connection with the Disposal, Special
DividendandShareConsolidation and will not be responsible to anyone other than
SEGROfor providing the protections afforded to the clients of UBS Investment
Bank nor for providing advice in relation to the Disposal, Special
Dividend,Share Consolidation or any other matter referred to herein.
Merrill Lynch International are joint brokers to SEGRO and in this capacity
they also provided financial advice on the proposals announced today.
Overseas Shareholders should inform themselves about and observe any applicable
legal or regulatory requirements. If youare in any doubt about yourposition,
youshould consult yourprofessional advisor in the relevant territory.
ADDITIONAL INFORMATION RE PROPOSED DISPOSAL OF SLOUGH ESTATESUSA FOR US$2.9
BILLION(£1.5 BILLION)AND £250MILLION SPECIAL DIVIDEND AND SHARE CONSOLIDATION
Introduction
SEGRO plc ("SEGRO"), the leading provider of Flexible Business Space in Europe,
today announces the proposed disposal of Slough Estates USA Inc. ("Slough
Estates USA"), its life sciences real estate business in the USA, to Health
Care Property Investors, Inc. ("HCP") for gross cash proceeds before repayment
of debt and the assumption of indebtedness of US$2.9 billion (equivalent to
approximately £1.5 billion).
Following the payment of anticipated taxation and other costs associated with
the Disposal and the repayment of certain of Slough Estates USA's indebtedness,
the net proceeds, which will be subject to certain balance sheet adjustments,
calculated in accordance with the provisions of the Share Purchase Agreement,
will be approximately US$1.1 billion (approximately £574 million). It is
intended that Completion of the Disposal will be followed as soon as
practicable by a return to Shareholders of approximately £250 million
(equivalent to 53 pence per Existing Ordinary Share) by means of the Special
Dividend. The remaining proceeds of approximately £324 million will be used to
temporarily reduce the Continuing Group's net indebtedness prior to being
re-invested to fund the Continuing Group's growth plans in Continental Europe
and the UK. As stated in our recent annual report, SEGRO has a substantial
development programme in Europe, with potential future expenditure on existing
land holdings amounting to almost £1.6 billion (including £556 million on
schemes under construction as at 31 December 2006 or expected to start in
2007). In addition, having spent over £500 million on European acquisitions
during 2005 and 2006, SEGRO intends to seek further growth though the
acquisition of property portfolios, particularly in Continental Europe, where
it believes attractive returns can be achieved.
Due to its size, the Disposal is conditional, amongst other things, upon
obtaining the approval of Shareholders at the Extraordinary General Meeting.
Background to and reasons for the Disposal
In November 2006, SEGRO announced that, consistent with its previously stated
strategy of focusing on the provision of Flexible Business Space in the UK and
in Continental Europe, it was exploring the strategic options for its US
business. It was announced that the process involved consideration of a range
of possible options, including an immediate or phased divestment and also joint
venturing or merging Slough Estates USA's business with a third party.
In assessing these options, the Board evaluated what it considered to be all
relevant considerations including the current and potential future value of the
business as well as the tax implications of the various options. It was decided
that this disposal of Slough Estates USA delivered immediate and certain
benefits, which other options did not.
SEGRO conducted a highly competitive auction process and has concluded that the
Disposal is in the best interests of Shareholders. SEGRO considered other
transaction structures, including options which might have reduced or deferred
the tax costs associated with an immediate exit, but all of these involved
maintaining a material presence in the US for a minimum of another five years
in a non-SEGRO controlled vehicle. This would have required Shareholders to
take at least a five year view of the state of US real estate markets, with no
certainty that a reduced tax bill could be secured and no ability to control
the strategic direction or operations of Slough Estates USA during that period.
The gross cash consideration of US$2.9 billion effectively represents a premium
of 26 per cent over the IFRS book value of the property assets as at 31
December 2006 and a surplus of 44% over the net assets of Slough Estates USA at
that date.
The Disposal is consistent with SEGRO's strategy to focus on the UK and
Continental Europe and follows a series of successful and well timed disposals
of non-core assets which began in 2004. This has enabled SEGRO to focus on its
core offering of flexible business space in its key markets. SEGRO's US
business is a specialist activity focused on the life sciences market and has
little or no synergy with SEGRO's European business.
Following Completion, SEGRO intends to continue to build on the progress it
achieved in 2006 in implementing its strategy across Europe.
In the UK, SEGRO has been concentrating on reshaping its portfolio to produce
stronger returns. SEGRO has acquired estates or assembled critical masses of
properties in areas that enables customers to expand their businesses within
SEGRO's holdings. SEGRO disposed of underperforming or non-conforming assets
where there was limited opportunity to add value - with £173 million of
disposals in 2006. SEGRO aggressively pursues and delivers redevelopments that
allow the effective replacement of older buildings and the recycling of the
portfolio whilst retaining key holdings. SEGRO works closely with its customers
to provide a level of service that compares positively with other landlords.
Opportunities in Continental Europe continue to offer attractive yields, low
borrowing costs and good prospects for growth - both by acquisition and
development. Employing fundamentally the same model as in the UK, the strategy
continues to be to identify the areas with the best growth potential in each
country and then to assemble a critical mass or "cluster" of properties in
these locations. SEGRO has already secured such a critical mass in the northern
sector of Paris, France, and also in the Düsseldorf region, of Germany, where
SEGRO is now believed to be a leading provider of modern and flexible light
industrial, office and logistics space. SEGRO is also already well established
in the vicinity of Brussels airport in Belgium. During 2006, SEGRO made some
major and successful inroads into Central European locations providing a
platform for future growth in that region and also established an excellent
land bank near Schiphol, Amsterdam. As its strategy evolves, SEGRO will seek to
acquire and develop industrial and logistics space, as well as land for
development, in the growth zones of key markets across Continental Europe.
As an example of its growing track record of successful corporate partnering
transactions with major corporations, SEGRO has recently completed an
acquisition and leaseback agreement with Antalis. This agreement included
properties in two new important target countries, Italy and Spain, and provides
SEGRO with a platform in key locations, including the potential to make further
strategic acquisitions.
In the UK, SEGRO intends to continue with its programme of active asset
management and recycling, designed to create value for Shareholders; while in
Continental Europe, SEGRO sees excellent opportunities to build further on the
strong platform it has created over the last few years, including in Central
Europe.
With its strategy and structure firmly in place, SEGRO's focus and the success
of its growth plans are expected to be enhanced by the Disposal.
Description of the Special Dividend and Share Consolidation
The Special Dividend will return approximately £250 million (equivalent to 53
pence per Existing Ordinary Share) to Shareholders and is conditional on a
number of matters including Completion, Shareholders approving the Share
Consolidation at the EGM and the Share Consolidation subsequently taking place.
Payment of the Special Dividend is not itself subject to Shareholder approval.
SEGRO proposes to implement the Share Consolidation in conjunction with the
payment of the Special Dividend. The effect of the Share Consolidation will be
to reduce the number of Existing Ordinary Shares in issue by approximately 8
per cent, with the result that Shareholders will receive 12 New Ordinary Shares
for every 13 Existing Ordinary Shares held on the Record Date and so in
proportion for any other number of Existing Ordinary Shares then held. Although
following the Share Consolidation each Shareholder will hold fewer shares than
before, his or her shareholding as a proportion of the total number of shares
in issue, and therefore his or her ownership in SEGRO will be the same both
before and immediately after the Share Consolidation, subject to adjustments to
reflect fractional entitlements.
The Share Consolidation will, amongst other things, allow comparability of
earnings per share and share prices before and after payment of the Special
Dividend.
Principal terms of the Disposal
Under the terms of the Share Purchase Agreement, the Company has agreed to sell
all of the Group's shares in Slough Estates USA to HCP. The Share Purchase
Agreement contains representations, warranties, covenants and indemnities given
by the Company to HCP and from HCP to the Company which are customary for a
transaction of this nature.
The Disposal is conditional, amongst other things, upon obtaining the approval
of the Shareholders at the Extraordinary General Meeting. Either party to the
Share Purchase Agreement may terminate it if this approval is not received or
if certain of the other conditions to Completion set out in the Share Purchase
Agreement are not satisfied or waived on or before 30 September 2007. The Share
Purchase Agreement is not conditional upon the approval of HCP's shareholders.
As part of the Share Purchase Agreement, the Company has agreed to pay HCP the
following termination fees :
a. a termination fee of up to US$5 million in respect of HCP's transaction
expenses if the Share Purchase Agreement is terminated because Shareholder
approval is not obtained at the EGM; or
b. a termination fee of US $65 million (less any amounts previously paid for
transaction expenses as described in paragraph (a) above) if the Share
Purchase Agreement is terminated in the following circumstances:
i. due to the failure to obtain Shareholder approval at the EGM and the
Company is in material breach of its obligations under the Share
Purchase Agreement to generally refrain from soliciting or engaging in
discussions with other parties regarding a sale of Slough Estates USA;
ii. the Board withdraws or adversely modifies its recommendation of the
Disposal, recommends an alternative proposal to acquire Slough Estates
USA or fails to publicly reaffirm its support for the Disposal at HCP's
request;
iii. the Company fails to call or hold the EGM; or
iv. an alternative proposal to acquire Slough Estates USA is made after the
Share Purchase Agreement is entered into but before the EGM, which
remains outstanding at the time of the EGM and the Share Purchase
Agreement is terminated by HCP due to:
1. the Company's material breach of the Share Purchase Agreement;
2. the failure to obtain Shareholder approval at the EGM; or
3. the Disposal not being completed by September 30, 2007,
and within twelve months after such termination, the Company enters
into an alternative transaction to sell Slough Estates USA.
In addition, under the Share Purchase Agreement, HCP has agreed to pay the
Company a fee of US$65 million if the Share Purchase Agreement is terminated by
the Company in the following circumstances:
a. HCP has materially breached the Share Purchase Agreement; or
b. the Disposal not being completed by September 30, 2007,
and HCP breaches its obligations to effect the Completion despite the
satisfaction of all conditions.
Information on Slough Estates USA
Slough Estates USA is a leading investor, developer and manager of life
sciences real estate in the US (serving 61 customers and comprised of 83
properties including £0.9 billion of property and 171 hectares of land as at 31
December 2006). Slough Estates USA has operated in the US since 1973 and
entered the life sciences real estate sector in the early-1990s. Slough Estates
USA is primarily engaged in the development, ownership, management, acquisition
and disposal of life sciences real estate in two of the largest life sciences
clusters in the US - the San Francisco Bay Area and San Diego County. Slough
Estates USA is the developer of what is believed to be one of the largest
corporate life sciences campuses in California, Pfizer Global Research and
Development Center (771,890 sq ft) in the Torrey Pines Science Center, San
Diego.
Slough Estates USA pioneered the concept of developing real estate for life
sciences companies in the business park format to facilitate company expansion
on single sites. In addition to the development of life sciences projects from
the ground-up, Slough Estates USA also specialises in the selective
redevelopment of sites as well as the conversion of office, research and
development and industrial space to laboratory uses.
Although Slough Estates USA has only ten direct employees (four in senior
management positions), the "virtual organisation", consisting of critical real
estate services companies (project managers, general contractors, brokerage
entities, architects, lawyers, property managers and environmental firms) in
established relationships with Slough Estates USA, employs indirectly about 500
people who are dedicated to the execution of the company's strategy.
The people holding key positions in Slough Estates USA and their principal
functions are as follows:
Person Position
Marshall D Lees President/CEO
Randall Rohner CFO/Executive Vice President
Jon Bergschneider Vice President Development
Samantha Mukundu Ramamoorthy Chief Accountant
For the year ended 31 December 2006, Slough Estates USA generated net property
rental income of £58.4 million, operating profit of £198.1 million and profit
before tax of £182.5 million. As at 31 December 2006, Slough Estates USA had
net assets of £400.4 million and gross assets of £1,175.5 million.
Information on HCP
HCP is a US self-administered real estate investment trust ("REIT") that
invests directly or through joint ventures in healthcare facilities and is the
USA's largest REIT focusing exclusively on properties serving the healthcare
industry. Established in 1985, HCP is a publicly traded company (NYSE:HCP).
As of 31 March 2007, HCP's portfolio of properties, excluding assets held for
sale but including investments through joint ventures and mortgage loans,
included 730 properties and consisted of 331 senior housing facilities, 264
medical office buildings, 39 hospitals, 67 skilled nursing facilities and 29
other healthcare facilities.
Approvals and consents
The Disposal and Share Consolidation will, amongst other things, be subject to
the approval of Shareholders at the Extraordinary General Meeting. The Circular
setting out the notice of the Extraordinary General Meeting, including the
SEGRO directors' recommendation to vote in favour of the Disposal and the Share
Consolidation, is expected to be sent to Shareholders as soon as practicable.
Application will be made to the UK Listing Authority for the New Ordinary
Shares to be admitted to the Official List and to the London Stock Exchange for
the New Ordinary Shares to be admitted to trading on its market for listed
securities. SEGRO will also apply for the New Ordinary Shares to be admitted to
CREST with effect from listing.
Application will also be made to Euronext Paris S.A for the New Ordinary Share
to be admitted on the Eurolist of Euronext Paris S.A. In respect of the New
Ordinary Shares admitted on the Eurolist of Euronext Paris S.A., SEGRO will
apply for the New Ordinary Shares to be admitted to Euroclear France with
effect from listing.
The Disposal is expected to be completed in the third quarter of 2007 and the
payment of the Special Dividend and the Share Consolidation are expected to
take place as soon as practicable after Completion.
APPENDIX I - FINANCIAL INFORMATION ON SLOUGH ESTATESUSA AND PRO-FORMA FINANCIAL
INFORMATION FOR SEGROPOST DISPOSAL
FINANCIAL INFORMATION ON SLOUGH ESTATES USA
1. Basis of preparation
The following financial information relating to Slough Estates USA has been
extracted without material adjustment from the consolidation schedules which
support the audited financial statements of SEGRO for the years ended 31
December 2006, 31 December 2005 and 31 December 2004.
The financial information contained in paragraphs 2 and 3 of this Appendix I
does not constitute statutory accounts for any company within the meaning of
section 240 of the Act. The statutory accounts for SEGRO in respect of the
years ended 31 December 2006, 31 December 2005 and 31 December 2004
respectively have been delivered to the Registrar of Companies for England and
Wales. The auditors' reports in respect of the statutory accounts for the years
ended 31 December 2006, 31 December 2005 and 31 December 2004 respectively were
unqualified and did not contain statements under section 237(2) or (3) of the
Act. PricewaterhouseCoopers LLP was the auditor of SEGRO in respect of the
years ended 31 December 2006, 31 December 2005 and 31 December 2004
respectively.
From 1 January 2005, SEGRO has been required under European legislation to
prepare its consolidated financial information under IFRS. The financial
information on Slough Estates USA for the years ended 31 December 2006, 31
December 2005 and 31 December 2004 has been prepared under IFRS using the
accounting policies set out in SEGRO's annual report and accounts for the year
ended 31 December 2006.
The financial information on SEGRO under UK GAAP for the year ended 31 December
2004 has been prepared using the accounting policies set out in SEGRO's annual
report and accounts for the year ended 31 December 2004.
2. Summary income statements of Slough Estates USA
IFRS IFRS IFRS UK GAAP
Year ended Year ended Year ended Year ended
31 Dec 2006 31 Dec 2005 31 Dec 2004 31 Dec 2004
£m £m £m £m
Gross property rental 76.2 97.2 69.3 61.6
income
Property operating (17.8) (14.4) (12.2) (11.6)
expenses
Net property rental income 58.4 82.8 57.1 50.0
Profit on sale of trading 0.2 16.1 0.3 0.3
properties
Share of profits from 3.6 5.4 5.8 3.5
joint ventures and
associates after tax
Net income from Gas (2.1) (3.3) (3.1)
Administration expenses (3.6) (3.0) (2.5) (2.4)
Property gains 139.5 103.3 86.0 52.2
Gain on disposal of joint 7.8
ventures
Gain on disposal of Gas 99.7 4.4 4.2
assets
Operating profit 198.1 310.0 147.8 104.7
Finance income 2.9 2.9 0.6 0.6
Finance costs (18.5) (19.1) (25.3) (25.9)
Profit before tax 182.5 293.8 123.1 79.4
Reconciliations to group financial statements
Profits from activities
which are excluded from
the proposed sale:
Venture capital investment 3.5 1.5 3.0 2.9
income
Results of Slough Estates 4.9 4.9
Canada
Per segmental disclosure 186.0 295.3 131.0 87.2
of published financial
statements
3. Balance Sheet of Slough Estates USA
IFRS
31 Dec 2006
£m
Non-current assets
Investment properties 925.7
Development and owner occupied properties 161.4
Plant and equipment 0.2
Investments in joint ventures and associates 21.5
1,108.8
Current assets
Trade and other receivables 57.9
Cash and cash equivalents 5.3
Current tax assets 3.5
66.7
Total assets 1,175.5
Liabilities
Non-current liabilities
Borrowings 496.8
Deferred tax provision 220.6
Provisions for liabilities and charges 2.3
Trade and other payables 3.2
722.9
Current liabilities
Borrowings 34.7
Trade and other payables 17.5
52.2
Total liabilities 775.1
Net assets 400.4
Reconciliation to the Group's financial statements
Assets disclosed within segmental disclosure note, which
are excluded from the proposed sale:
Slough Estates Canada 4.1
Venture capital investments 24.3
Net assets per segmental disclosure 428.8
UNAUDITED PRO-FORMAFINANCIAL INFORMATION
Set out below are unaudited pro-forma statements of net assets and profit
before tax of the Continuing Group illustrating the effect of the Disposal and
the resultant payment of the Special Dividend.
The unaudited pro-forma statement of net assets is based on the audited
consolidated balance sheet of SEGRO as at 31 December 2006. The unaudited
pro-forma profit before tax is based on the audited adjusted income and expense
statement for the year ended 31 December 2006. The unaudited pro-forma
statements have been prepared to illustrate how the Disposal might have
affected the net assets and profit before tax of the Group had it been effected
as at 31 December 2006 and 1 January 2006 respectively. The unaudited pro-forma
statements are for illustrative purposes only and, because of their nature, the
unaudited pro-forma statements address a hypothetical situation and do not
therefore represent the Continuing Group's actual financial position or
results. The unaudited pro-forma statements have been prepared on the basis set
out in the notes below.
PRO-FORMASTATEMENT OF NET ASSETS
Pro-formaadjustments
The Disposal Disposal Effect Continuing
Group of Slough adjustments of Group
31 Estates (Notes 3 to Special pro-forma
December USA 5) Dividend 31 December
2006 31 £m (Note 6) 2006
(Note 1) December £m £m
£m 2006
(Note 2)
£m
Assets
Non-current assets
Goodwill 0.7 - 0.7
Investment properties 5,090.0 (925.7) 4,164.3
Development and owner 469.7 (161.4) 308.3
occupied properties
Plant and equipment 48.1 (0.2) 47.9
Investments in joint 84.5 (21.5) 63.0
ventures and associates
Finance lease receivables 10.6 - 10.6
Available-for-sale 44.1 - 44.1
investments
5,747.7 (1,108.8) 4,638.9
Current assets
Trading properties 232.3 - 232.3
Trade and other 185.7 (57.9) 127.8
receivables
Cash and cash equivalents 161.4 (5.3) 513.3 (250.0) 419.4
Current tax assets 5.1 (3.5) 1.6
Non-current assets 56.6 - 56.6
classified as held for
sale
Finance leases receivables 0.2 - 0.2
Inventories 1.0 - 1.0
642.3 (66.7) 513.3 (250.0) 838.9
Total assets 6,390.0 (1,175.5) 513.3 (250.0) 5,477.8
Liabilities
Non-current liabilities
Borrowings 2,307.2 (496.8) (76.2) 1,734.2
Deferred tax provision 298.5 (220.6) 77.9
Provisions for liabilities 17.7 (2.3) 15.4
and charges
Trade and other payables 31.7 (3.2) 28.5
2,655.1 (722.9) (76.2) 1,856.0
Current liabilities
Borrowings 77.6 (34.7) 15.3 58.2
Tax liabilities 82.5 - 82.5
Trade and other payables 192.4 (17.5) 174.9
352.5 (52.2) 15.3 315.6
Total liabilities 3,007.6 (775.1) (60.9) 2,171.6
Net assets 3,382.4 (400.4) 574.2 (250.0) 3,306.2
Net assets per share - 718 761
basic
- diluted 716 760
Adjusted net assets per 777 778
share - basic
- diluted 775 776
Notes
1. The net assets of SEGRO as at 31 December 2006 have been extracted without
material adjustment from the audited Financial Statements of the SEGRO Group
for the period then ended.
2. The net assets of Slough Estates USA as at 31 December 2006 have been
extracted without material adjustment from the financial information on Slough
Estates USA set out above.
3. The adjustments comprise:
a) an adjustment to cash of £513.3 million, being the estimated net proceeds of
£574.2 million (after deduction of estimated tax payable of £297 million and
estimated costs of £25 million), plus repayment of intercompany debt of £15.3
million, less the repayment of UK based US$ debt of £76.2 million;
b) an adjustment to non-current borrowings, being the repayment of UK based US$
debt of £76.2 million;
c) an adjustment to current borrowings, being the repayment of intercompany
debt of £15.3 million.
4. All sale adjustments relating to amounts denominated in US$ have been
translated at a rate of US$1.96 to £1, being the rate ruling at close of
business on 31 December 2006.
5. No account has been taken of the trading results or transactions of the
Continuing Group or Slough Estates USA for the period since 31 December 2006.
6. This adjustment shows the effect of the £250 million Special Dividend to be
paid to Shareholders following Completion.
7. The 2006 basic and diluted net assets per share are based on net assets of £
3,372.7 million, after taking account of minority interests, and the number of
shares in issue of 469.8 million basic and 470.9 million diluted. The 2006
adjusted basic and diluted net assets per share is calculated on net assets of
£3,648.8 million after having added back deferred tax relating to investment
properties of £276.1 million.
The 2006 Continuing Group pro-forma basic and diluted net assets per share is
based on net assets of £3,301.7 million after taking account of minority
interests. The number of shares in issue, used for the Continuing Group
pro-forma basic and diluted net asset per share calculation amount to 433.7
million and 434.7 million respectively after deducting 36 million shares for
the impact of the Share Consolidation.
The Continuing Group pro-forma adjusted basic and diluted net assets per share
is calculated on net assets of £3,373.6 million after having added back
deferred tax relating to investment properties of £71.9 million.
PRO-FORMA STATEMENT OF PROFIT BEFORE TAX
Pro-formaadjustments
Group Disposal Benefit Effect of Continuing
2006 of Slough of Special 2006
Estates proceeds Dividend pro-forma
Income & USA at assuming assuming Group
Expense beginning receipt paid at Income &
of 2006 at beginning Expense
£m beginning of year
£m of the (Note 2) £m
year
(Note 1) £m
£m
Revenue 384.1 (76.4) 307.7
Gross property rental 304.8 (76.2) 228.6
income
Property operating expenses (57.6) 17.8 (39.8)
Net property rental income 247.2 (58.4) 188.8
Profit on sale of trading 6.1 (0.2) 5.9
properties
Share of profits from 7.0 (1.5) 5.5
property joint ventures and
associates after tax
Net income from utilities 2.1 2.1
and gas
Other investment income 8.5 8.5
Administration expenses (28.9) 3.6 (25.3)
Operating profit 242.0 (56.5) 185.5
Finance income 31.1 (2.9) 31.6 (13.8) 46.0
Finance costs (130.4) 18.4 (112.0)
Profit before tax and EPRA 142.7 (41.0) 31.6 (13.8) 119.5
items
Reconciliation to Group income statement
Property gains 537.0 (139.5) 397.5
Valuation gains less tax of 6.3 (2.1) 4.2
joint ventures
Fair value of derivatives 4.1 0.1 4.2
Profit before tax per 690.1 (182.5) 31.6 (13.8) 525.4
financial statements
Adjusted basic earnings per 25.1p 23.9p
share
Adjusted diluted earnings 25.1p 24.0p
per share
Notes
1. The benefit from the proceeds of the sale of £31.6 million is calculated by
applying an interest rate of 5.5 per cent to net proceeds of £574.2 million for
a full year.
2. The £13.8 million effect of the Special Dividend is calculated by applying
5.5 per cent to £250 million for a full year.
3. The 2006 adjusted basic and diluted earnings per share are based on adjusted
earnings of £113.9 million and £118.0 million respectively, and average shares
in issue of 454.2 million and 469.6 million respectively. The 2006 pro-forma
adjusted basic and adjusted diluted earnings per share take into account the
after tax impact of the elimination of profits from the US operations (£26.0
million) and the after tax impact of the notional interest attributable to the
sale proceeds (£22.1 million) and the special dividend (£9.7 million). The
average number of shares in issue is also adjusted in the pro-forma, for the
share consolidation, reducing the average number of shares in issue in both the
basic and diluted calculations by 35 million and 36 million respectively.
APPENDIX II - DEFINITIONS
In this announcement the following terms have the following meanings unless the
context otherwise requires:
"Act" means the Companies Act 1985, as amended from time to time;
"Billion" means a thousand million;
"Board" means the board of directors of the Company from time to time;
"Company"or means SEGRO plc, a public limited liability company
"SEGRO" incorporated and registered in England and Wales under number
00167591, whose registered office is at 234 Bath Road, Slough,
SL1 4EE;
"Completion" means Completion of the Disposal pursuant to the terms of the
Share Purchase Agreement;
"Completion means the date on which Completion occurs;
Date"
"Continuing means the Group as it will exist following Completion;
Group"
"Directors" means the directors of the Company from time to time;
"Disposal" means the proposed sale of Slough Estates USA and its
subsidiaries on the terms and subject to the conditions set out
in the Share Purchase Agreement;
"Existing means the issued ordinary shares of 25 pence each in the
Ordinary capital of the Company and "Existing Ordinary Share" shall be
Shares" construed accordingly;
"Extraordinary means the extraordinary general meeting of the Company to be
General held for SEGRO shareholders to vote on the Disposal and the
Meeting"or Share Consolidation, notice of which will be set out in the
"EGM" Circular;
"FSMA" means the Financial Services and Markets Act 2000, as amended
from time to time;
"Group" means the Company, its subsidiaries and subsidiary
undertakings;
"HCP" means Health Care Property Investors Inc.;
"IFRS" means International Financial Reporting Standards as adopted by
the European Union;
"Listing means the rules and regulations made by the UK Listing
Rules" Authority pursuant to Section 74 of FSMA as amended from time
to time;
"London Stock means the London Stock Exchange PLC;
Exchange"
"Merrill Lynch means Merrill Lynch International, whose registered address is
International" 2 King Edward Street, London EC1A 1HQ;
"New Ordinary means the new ordinary shares in the capital of the Company
Shares" resulting from the Share Consolidation and "New Ordinary Share"
shall be construed accordingly;
"Official means the Official List of the UK Listing Authority;
List"
"Record Date" means the date on which the Shareholders are required to be on
the Register in order to be entitled to the Special Dividend;
"Register" means the register of members of the Company;
"Share means the proposed consolidation to be effected by
Consolidation" consolidating every 13 Existing Ordinary Share or 13 authorised
but unissued ordinary shares respectively into 12 New Ordinary
Shares;
"Share means the agreement dated 3 June 2007 between SEGRO and HCP
Purchase relating to the sale of the shares indirectly owned bySEGRO plc
Agreement" in Slough Estates USA;
"Shareholders" means the holders of Existing Ordinary Shares and, following
the Share Consolidation, the holders of New Ordinary Shares;
"Special means the proposedspecial interim dividend toShareholders;
Dividend"
"subsidiary" has the meaning ascribed to it in the Act;
"subsidiary has the meaning ascribed to it in the Act;
undertaking"
"UBS means UBS Limited, whose registered address is 1 Finsbury
Investment Avenue, London EC2M 2PP;
Bank"
"UK GAAP" means UK Generally Accepted Accounting Practice;
"UK Listing means the Financial Services Authority acting in its capacity
Authority" as the competent authority for the purposes of Part VI of the
FSMA and in the exercise of its functions in respect of the
admission to the Official List otherwise than in accordance
with Part IV of the FSMA;
"United the United Kingdom of Great Britain and Northern Ireland;
Kingdom"or
"UK"
"United the United States of America, its territories and possessions,
States", any state of the United States of America and the District of
"USA"or "US" Columbia; and
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