Rights Issue

RNS Number : 4329M

Cookson Group PLC

29 January 2009

 



29 January 2009

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR SOUTH AFRICA

This announcement shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale or purchase of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.  The availability of the Rights Issue to persons not resident in the United Kingdom may be affected by the laws of the relevant jurisdictions. Such persons should inform themselves about and observe any applicable requirements. 

Cookson Group plc announces an underwritten Rights Issue to raise net proceeds of 
approximately £240 million 

The Board of Cookson today announces a fully underwritten 12 for 1 Rights Issue to raise proceeds of approximately £240 million, net of expenses, through the issue of 2,551,293,144 New Shares. The Rights Issue has been fully underwritten by J.P. Morgan Securities and Merrill Lynch International.  

Highlights

Rights Issue 

Rights Issue to raise approximately £240 million, net of expenses, through the issue of 2,551,293,144 New Shares, in order to:

• provide a more suitable capital structure for the current environment; and

• enhance covenant and longer-term liquidity headroom under current debt facilities.

Background

• Cookson's profile has been transformed since 2003, through disposals, increased focus on higher technology products, cost reduction, and migration of manufacturing base to emerging markets.

• Acquisition of Foseco, financed by debt and equity, announced in October 2007 as next stage of Cookson's strategic development. 

• Rapid and significant softening in Cookson's end-markets since late September 2008.

• Cookson expects a recovery in global steel production, to which over 40 per cent. of Group trading profit is linked, later in 2009.

• Cookson benefits from attractive debt financing terms put in place at time of the Foseco acquisition, with, as at 31 December 2008, £794 million of committed bank facilities with remaining average maturity of 3.2 years.

Management response to market conditions

• Phase 1: Initiatives implemented since September 2008 to reduce employment costs with anticipated savings of £17 million per annum from early 2009. 

• Phase 2: Six plant closures and further headcount reductions initiated last week, expected to result in savings of £23 million per annum from mid 2009.

• Total headcount reduction from both phases of approximately 1,250.

• Focus on cash generation measures and reduced levels of capital expenditure.

• Suspension of dividend payments until such time as Group's end-markets have recovered sufficiently.

Headline profit estimate, current trading and prospects:

• Profit estimate for the year ended 31 December 2008*: 

	2008	2007 As reported	Change
Revenue	Not less than £2,175m	£1,620m	34%
Trading profit*	Not less than £213m	£170m	25%
Return on sales*	Not less than 9.8%	10.5%	(0.7) pts
EBITDA*	Not less than £260m	£204m	27%
Headline profit before tax*	Not less than £174m	£150m	16%
Headline earnings per share*	Not less than 58.0p	54.4p	7%
Net debt*	Approximately £732m	£51m	Up £681m

*    For all definitions refer to 'Current Trading and Prospects' section of the attached full announcement

• Weakening of end-markets noted in November's Interim Management Statement has continued.

• Integration of Foseco progressing well, with integration benefits of £24 million per annum now expected to be realised by 2010, versus initial target of £18 million per annum. 

• Trading conditions in Q1 2009 expected to be no better than Q4 2008 and then to improve slowly through Q2 2009 as de-stocking in end-markets comes to an end.  

• Further improvement in trading expected in H2 2009, reflecting:

• normal trading seasonality; and
• anticipated recovery in global steel production also supported by impact on infrastructure demand from recently announced government fiscal stimulus packages in the EU, US and China.  

Nick Salmon, Chief Executive of Cookson, said: 

'Cookson has been fundamentally transformed since 2003. Last year's acquisition of Foseco had, and continues to have, clear and compelling strategic logic and its integration is going very well with the benefits now expected to be greater than we first indicated. 

'Our markets have been hard hit in recent months, most notably in global steel production which has seen an unprecedented downturn. However, we expect some recovery later this year and we firmly believe that our markets continue to have attractive long-term growth characteristics.  

'In response we have been taking prompt and decisive action internally to reduce both cost and debt. Alongside these measures, we believe that an equity fundraising at this early stage creates a suitable capital structure from which the Company can move forward from a position of greater strength and flexibility in the current environment.' 

 Cookson Group plc

Underwritten Rights Issue to raise approximately £240 million (net)

Introduction

The Board of Cookson today announces a fully underwritten rights issue to raise proceeds of approximately £240 million, net of expenses. The issue is being made on the basis of 12 New Shares for every 1 existing share at an issue price of 10 pence per Ordinary Share. This represents a discount of approximately 36.6 per cent. to the theoretical ex-rights price based on the closing middle-market price of 85 pence per Ordinary Share on 28 January 2009, being the last business day before this announcement. 

A prospectus in connection with the Rights Issue is expected to be published today which will contain the expected timetable for the Rights Issue. Cookson will seek approval from its shareholders in respect of the Rights Issue at an Extraordinary General Meeting to be held on 17 February 2009. The Rights Issue has been fully underwritten by J.P. Morgan Securities and Merrill Lynch International.

The Directors are fully supportive of the Rights Issue and intend to take up their rights in full. 

Background to and reasons for the Rights Issue 

Since 2003, Cookson has successfully transformed its profile, disposing of 14 non-core, underperforming businesses including Laminates and Speedline and increasing its focus on higher-technology consumable product areas. The Group has also significantly transitioned its manufacturing base, restructuring its US and Western European operations to migrate production to Asia, Mexico and Eastern Europe. Between 2003 and 2007, the number of Group employees in NAFTA and Europe fell by 11 per cent. and 18 per cent. respectively, while the number of Group employees in Asia rose by 73 per cent.

In October 2007, Cookson announced the next stage of its strategic development with the acquisition of Foseco. The combination of Cookson's Ceramics division and Foseco created a global leader in the supply of consumable ceramics used in the production of steel, foundry castings and photovoltaic (solar) cells. The integration of Foseco is progressing well, with integration benefits to be realised by 2010 now expected to be £24 million per annum, against a target of £18 million per annum at the time of announcing the acquisition. Cookson's Electronics division is a global leader in the supply of high-technology solder products and electro-plating chemicals used in a broad range of electronic and other applications.

The Directors believe that the Group is now well positioned in end-markets with strong, long-term growth prospects.

However, since late September 2008, there has been a rapid and significant softening in Cookson's end-markets. Global steel volumes fell approximately 14 per cent. in October, 20 per cent. in November and 24 per cent. in December 2008 compared with 2007 figures (based on the World Steel Association's published statistics). Many steel mills announced prolonged shutdowns in the fourth quarter of 2008 which have continued into 2009. In late November and early December, many automotive and consumer electronics manufacturers announced extended seasonal shutdowns. In response to current market conditions, management has already taken, and is continuing to take, prompt and decisive action to further reduce the Group's cost base and improve cash generation in order to help maintain profitability and reduce debt. Details of these actions are set out below under 'Management response to market conditions'. Over 40 per cent. of total Group trading profit is linked to global steel production. Cookson expects a recovery in steel production later in 2009. This recovery is expected to be driven by (i) the completion of the current industry de-stocking phase given already low inventory levels; and (ii) increasing demand from steel-intensive infrastructure spending as part of economic stimulus packages recently announced in the US, the EU and China.

The Foseco acquisition was financed by a combination of equity and debt and Cookson benefits from the attractive terms of the debt financing put in place at that time which as at 31 December 2008 comprised £794 million of committed bank facilities with a remaining average maturity of 3.2 years. There are, however, a number of financial covenants attached to these and Cookson's other committed debt facilities. The most relevant of these in current market conditions is a requirement to maintain a maximum ratio of net debt to previous 12 months' headline EBITDA (i.e. profit from operations before exceptional items, interest, tax, depreciation and amortisation) of 3.0 times at 30 June and 31 December of each year. For the year ended 31 December 2008, it is estimated that this ratio was not more than 2.6 times. However, should the weakening in the Group's end-markets continue, the Directors believe Cookson may be unable to maintain sufficient headroom under this covenant going forward. In the current economic environment, the Directors are of the opinion that the cost of amending this covenant structure would be expensive in terms of the likely upfront fees and increased margin that would be required by Cookson's lending banks. Furthermore, although Cookson has no significant debt maturities in 2009, the Directors believe that an equity raising would also provide the Group with greater financial flexibility to address debt maturities beyond the next 12 months. This will be particularly important should the weakening in the Group's end-markets and liquidity constraints in the debt markets continue.

Against this background, the Directors believe that it is appropriate for the Company to raise approximately £240 million of new equity capital (net of expenses) at this early stage to create a suitable capital structure which provides greater resilience and financial flexibility in the current environment. In addition, the Directors believe that the associated reduction in financial indebtedness will provide appropriate headroom under the covenant levels in its attractive existing bank facilities as well as creating a stronger position from which to develop future strategic options.

The Directors expect that the Rights Issue will make a positive contribution to total earnings in the year to 31 December 2009 as a result of lower interest payments arising from lower average levels of financial indebtedness. However, the Directors expect that the increased number of shares in issue following the Rights Issue will have a negative effect on Cookson's earnings per share for the same period.

Use of proceeds

The Directors intend to use the net proceeds of the Rights Issue, amounting to approximately £240 million, to reduce the Group's financial indebtedness. The Directors believe that this reduction in financial indebtedness will not only provide appropriate headroom under the covenant levels in its existing attractive bank facilities but will also create a stronger position from which to develop future strategic options.

Current trading and prospects

Performance in the fourth quarter of 2008

On 11 November 2008, the Group issued its Interim Management Statement which noted that, in the weeks preceding the statement, it had started to see clear evidence of the global financial turmoil impacting its end-markets. These downturn trends have continued as customers in many of the key end-markets, in particular the steel production, electronics and automotive industries, announced production cut-backs and extended year-end shut-downs of their manufacturing facilities as they de-stocked in the face of reducing demand levels and worsening prospects going into 2009.

Fourth quarter trading for the three months ended 31 December 2008 was, as expected, weak across all of the Group's divisions. The return on sales margin in the fourth quarter is estimated to have been not less than 6.8 per cent.

Headline profit estimate for 2008

Estimated results for the Group for the full year 2008 (at reported exchange rates and including Foseco results only from acquisition) are as follows:

	2008	2007	Change versus 2007
		As reported7	At reported exchange rates	At constant exchange rates
Revenue	Not less than £2,175m	£1,620m	34%	21%
Trading profit¹	Not less than £213m	£170m	25%	10%
Return on sales²	Not less than 9.8%	10.5%	(0.7) pts	(1.0) pts
EBITDA3	Not less than £260m	£204m	27%
Headline profit before tax 4	Not less than £174m	£150m	16%
Headline earnings per share5	Not less than 58.0p	54.4p	7%
Net debt6	Approximately £732m	£51m	Up £681m

1    Trading profit is calculated as the profit from operations before restructuring and integration costs, inventory fair value adjustments, profit/(loss) relating to disposals of non-current assets, amortisation or impairment of intangible assets and curtailment gains/(losses) relating to employee benefits

2    Return on sales is calculated as trading profit divided by revenue

3    EBITDA is calculated as the total of trading profit before depreciation charges

4    Headline profit before tax is calculated as the net total of trading profit, the Group's share of post-tax profit from joint ventures and total net finance costs associated with ordinary activities

5    Headline EPS is calculated as the net total of trading profit, the Group's share of post-tax profit of joint ventures, total net finance costs, and income tax costs associated with ordinary activities less profit attributable to minority interests, divided by the weighted average number of Ordinary Shares in issue during the year. Headline EPS excludes restructuring and integration costs, inventory fair value adjustments, profit/(loss) relating to disposals of non-current assets, amortisation or impairment of intangible assets, curtailment gains/(losses) relating to employee benefits, exceptional finance and tax costs, net profit/(loss) on disposal of continuing operations and the impact of discontinued operations

6    Net debt comprises the net total of current and non-current loans and borrowings and cash and short-term deposits

7    Continuing operations only

Ceramics

The main end-market for the Ceramics division is global steel production, which represents over 50 per cent. of the division's revenue (being 100 per cent. of the revenue from the Steel Flow Control product line and approximately 70 per cent. of the revenue from the Linings product line). Over the first nine months of 2008, global steel production was up 5 per cent. on the corresponding period in the prior year. In the last quarter of 2008, a number of the larger steel producers including ArcelorMittal and Severstal announced their intention to cut back production in the fourth quarter of 2008 in response to market conditions and to reduce inventories in the face of falling demand. During October and November 2008 the number and scale of production cut-backs continued to increase and, as a result, global steel production (as reported by the World Steel Association) was 19 per cent. lower in the fourth quarter of 2008 than for the corresponding period in 2007. Compared to the corresponding month in 2007, global steel production in the months of October, November and December 2008 was lower by 14 per cent., 20 per cent. and 24 per cent. respectively. Production cutbacks have continued into 2009.

The foundry casting market represents some one-third of the division's revenue. Foundry castings are used in a wide variety of engineered products and it is estimated by management that approximately 25 per cent. of the revenue from the division's Foundry product line relates to the production of castings for the automotive sector (being cars and light trucks). Underlying revenue for the Foundry product line in the fourth quarter was down approximately 10 per cent. compared with the same period last year.

The principal product in the division's Fused Silica product line is Solar Crucibles™, which are used in the production of photovoltaic ('solar') cells. Revenue growth in the fourth quarter of 2008 for the Fused Silica product line was flat compared to the corresponding period in 2007.

Overall, underlying revenue for the Ceramics businesses in the fourth quarter of 2008 was 14 per cent. lower than the preceding quarter and 11 per cent. lower than the corresponding quarter in 2007. The return on sales margin in the fourth quarter is estimated to have been not less than 9.6 per cent.

Electronics

The Electronics division's revenue by end-market is estimated by management to be approximately as follows:

• 46 per cent. consumer electronics (including automotive electronic systems);

• 17 per cent. other electronics (including medical and military);

• 19 per cent. automotive (including corrosion protection and decorative coatings); and

• 18 per cent. industrial applications (including solder, plating and corrosion protection chemicals).

All these end-markets have seen a marked 'de-stocking' slowdown in the fourth quarter of 2008, exacerbated by weakening end-user demand for consumer electronics and motor vehicles. As a result, the division's revenue in the fourth quarter of 2008 (at constant exchange rates and at constant metal prices) was 20 per cent. lower than the preceding quarter and 27 per cent. lower than the corresponding quarter in 2007. The return on sales margin in the fourth quarter is estimated to have been not less than 4.1 per cent.

Precious Metals

Retail jewellery end-markets remain weak in both the US and Europe, the impact of which has been partly offset by increased precious metal reclaim activity in Europe and strong demand from the US Mint for gold coin blanks. As expected, the division has remained profitable, both in the fourth quarter of 2008 and for the year as a whole.

The Precious Metals division is experiencing weak end-markets and, as a result, the calculations used for impairment testing purposes are expected to show that the carrying value of the goodwill relating to the Precious Metal division of £40 million is not supportable. As a result, it is anticipated that £40 million of goodwill (out of total goodwill for the Group of £771 million as at 30 June 2008) will be written off, as a non-cash exceptional charge, in the full year 2008 results.

Currency

While the Group has little transactional exposure to movements in exchange rates, its reported results are impacted by the translation of non-UK results into sterling. Approximately 29 per cent. of the Group's trading profit is currently earned in euros, approximately 14 per cent. in Chinese renminbi and approximately 11 per cent. in US dollars. Compared to full year 2007, sterling has weakened significantly against most major currencies, particularly in the second half of the year, and this has had the effect of increasing reported trading profit for 2008 by around £25 million (14 per cent.). If exchange rates had been at 31 December 2008 spot rates throughout 2008, then estimated trading profit reported for 2008 would have been higher by around £40 million (20 per cent.).

Conversely, this weakening of sterling has had an adverse impact on the Group's level of reported net debt through the translation impact on non-sterling denominated debt. Since 1 July 2008, currency translation has increased net debt by £85 million. In late October/early November, the Group swapped all of its US dollar and euro denominated debt into sterling to largely eliminate exposure to any further weakening of sterling. Since this time, the majority of the Group's net debt has been sterling denominated.

Financial position

Net debt at 31 December 2008 is estimated to be approximately £732 million. Net debt was negatively impacted by the currency translation impact noted above but benefited from the US$24 million proceeds from the sale of the Ceramic division's Hi-Tech filters business, which completed on 23 December 2008.

The Group has three principal borrowing facilities which together total just over £1 billion, namely the 1997 and 2000 US Private Placement Loan Notes and the £794 million syndicated bank facility. The maturity of these facilities as at 31 December 2008 is given below:

Committed Debt Facilities - Maturity Profile

	US Private Placement Loan notes (£m)	Syndicated bank facility (£m)	Total Committed Facilities (£m)
2009:
November ($40m)*	27		27
Subtotal	27	0	27
2010:
May ($135m)*	93		93
October (£75m)		75	75
October (Euro37.5m)*		36	36
Subtotal	93	111	204
2011:
October (£75m)		75	75
October (Euro37.5m)*		36	36
Subtotal	0	111	111
2012:
May ($190m)*	130		130
October (£500m)		500	500
October (Euro75m)*		72	72
Subtotal	130	572	702
Total	250	794	1,044

* Translated at £1/US$1.46 and £1/Euro 1.04

The table illustrates that the principal amount of the maturities of the two facilities is not until 2012.

There are a number of financial covenants attached to these facilities, the most relevant of which in the current market conditions is expected to be the requirement to maintain a maximum ratio of net debt to the previous twelve months' headline EBITDA (i.e. excluding exceptional items such as restructuring and integration costs) of 3.0 times at 30 June and 31 December of each year. For the year ended 31 December 2008, it is estimated that this ratio was not more than 2.6 times. The other covenants (interest cover and the US Private Placement gearing covenant) are not expected to be of concern ahead of the above net debt to EBITDA covenant.

The net liability in respect of pension funds and other post-retirement obligations as at 31 December 2008 is expected to be at a similar level to the liability as at 31 December 2007 which stood at £96 million.

Outlook and prospects

Cookson's divisions predominately supply consumable products, on short lead times, to the global steel, foundry, electronics and precious metals industries. As such the Group's expectations of future trading are based upon the Directors' assessment of end-market conditions and these conditions are subject to greater uncertainty than usual in the current economic climate. In light of the marked downturn in the last quarter of 2008, management's planning assumptions for 2009 are for conditions in the first quarter of 2009 to be no better than the fourth quarter of 2008 and then to improve slowly through the second quarter of 2009 as the de-stocking in end-markets comes to an end. Further improvements in trading are expected in the second half of the year, albeit still to a level well below the underlying trading experienced in the first half of 2008, reflecting the Group's normal trading seasonality, notably for the Electronics and Precious Metals divisions, and also supported by the anticipated beneficial impact on infrastructure demand (and, notably, its impact on the demand for steel and foundry castings) of the various fiscal stimulus packages recently announced by governments around the world.

The management actions being taken, as set out below in 'Management response to market conditions', are designed to address a range of assumed end-market conditions between a base case and a downside scenario. Management's base case conservatively assumes global steel production in the first half of 2009 will be over 20 per cent. below the first half of 2008 and 10 per cent. lower than 2008 for the year as a whole, with a similar pattern for the foundry castings market. For the consumer electronics market, management's base case assumes first half year demand is 12 per cent. below the corresponding period in 2008 and 9 per cent. lower for the year as a whole.

Management's downside scenario envisages an economic environment in the full year 2009 in which global steel production is 20 per cent. lower than 2008 and the foundry castings market and the consumer electronics market are both 15 per cent. lower than 2008.

Actual trading performance in 2009 will be dependent upon the depth and duration of the global economic downturn. Despite the difficult current trading conditions, the Group's performance in 2009 will benefit from:

• anticipated cost savings of £30 million arising from the actions described in 'Management response to market conditions' below;

• the full year contribution from Foseco (versus only nine months in 2008); and

• the realisation of further Foseco related integration synergies, anticipated to be £12 million in 2009.

The reported results will also benefit from significant currency translation gains if sterling remains at current levels relative to other major currencies.

The Directors believe that, for the longer term, the Group is well positioned with a portfolio containing businesses supplying high-technology consumable products and related technical services, with leading positions in markets with sound long-term prospects.

Management response to market conditions

In response to the unprecedented and rapid weakening in the Group's end-markets which impacted fourth quarter trading in 2008 and prospects for 2009, the Directors have taken prompt and decisive action both to reduce the operating cost base of the Group and to improve cash generation, with the aim of reducing financial indebtedness.

Since September 2008, Cookson has implemented a first phase of employment cost savings which are anticipated to result in annualised savings of £17 million per annum from early 2009 onwards. These initiatives include the restructuring of the Group's workforce, reducing temporary and full-time employee headcount combined by over 550, and implementing an extensive salary freeze for the first half of 2009. In addition, Cookson has, until further notice, eliminated overtime and premium shifts within its manufacturing facilities.

A second phase of restructuring initiatives is also underway to address management's current view of the potential range of end-market conditions between the base case and downside scenario described in 'Outlook and prospects' above. Last week, Cookson initiated the process to permanently close six Ceramics manufacturing facilities, one in each of the UK, Mexico, Belgium and Germany, and two in the US. Formal employee consultation procedures are now underway and it is intended that the closures will be substantially completed by the end June 2009. This, together with staff reductions in overhead positions, will result in a further total headcount reduction of over 700 of the Group's employees. This second phase of cost reductions is expected to result in annualised savings of £23 million from mid 2009. A renegotiation of existing raw material contracts is also in progress, the savings from which have not yet been quantified. Of the total annualised savings of £40 million arising from both phases, £30 million is anticipated to be realised in 2009 and an incremental £10 million in 2010. In addition, the process of integrating the acquired Foseco businesses, which started in 2008, continues with incremental synergy savings of £12 million anticipated in 2009.

Restructuring and integration costs of £12 million were incurred in the first half of 2008, of which £6 million related to the integration of Foseco and £6 million to other cost saving initiatives in the Group. As a result of management's actions in response to the recent deterioration in market conditions, additional restructuring and integration costs totalling £28 million are anticipated to have been incurred in the second half of 2008, of which £21 million are cash-related. Of the total of £28 million, an estimated £10 million relates to the further integration of Foseco, approximately £7 million to asset write-downs in respect of the announcement of the six intended facility closures noted above, and approximately £11 million to other cost saving initiatives. In the first half of 2009, the second phase of cost reductions noted above is anticipated to result in restructuring and integration costs of around £28 million being incurred, all of which are cash-related.

Cookson is also implementing a new Group-wide incentive programme to focus on cash generation and the reduction of the Group's financial indebtedness. All capacity expansion related capital expenditure projects have been postponed, pending clear signs of recovery in the Group's end-markets. Working capital reductions as a result of the forecast slowdown in trading activity over the period are expected. In addition, the build up of working capital in the Ceramics division in the second half of 2008, driven by concerns over raw material shortages caused by the Beijing Olympics and the prevailing high commodity prices at the time, is expected to continue to unwind during the first half of 2009.

Management continues to monitor trading and developments in the Group's end-markets and is currently preparing a programme of further cost savings, including potential further facility closures to be implemented, if required, during 2009.

Dividends and dividend policy

The Board has recently reviewed Cookson's near-term dividend policy in response to the ongoing global financial crisis and challenging trading conditions. As a consequence no final dividend for the 2008 financial year will be recommended to Shareholders in March 2009 and dividend payments will be suspended until such time as the Group's end-markets have recovered sufficiently. The cash cost of dividend payments in 2008 was £31 million. The decision as to whether to declare an interim dividend in respect of the 2009 financial year will be made in August 2009 and will be based on the Group's trading and financial position and the global economic outlook at that time.

Expected timetable of principal events

Each of the times and dates in the table below is indicative only and may be subject to change. 

Extraordinary General Meeting	11.00 a.m. on 17 February 2009
Despatch of Provisional Allotment Letters (to Qualifying non-CREST Shareholders only)	17 February 2009
Dealings in New Shares, nil paid, commence on the London Stock Exchange	8.00 a.m. on 18 February 2009
Latest time and date for acceptance, payment in full and registration of renunciation of Provisional Allotment Letters	11:00 a.m. on 4 March 2009
Dealings in new Shares, fully paid, commence on the London Stock Exchange	8:00 a.m. on 5 March 2009
Despatch of definitive share certificates for the New Shares in certificated form	By 12 March 2009

General Notes:

1    The ability to participate in the Rights Issue is subject to certain restrictions relating to Shareholders with registered addresses outside the UK, details of which are set out in the Prospectus

2    The times and dates set out in the expected timetables of principal events above and mentioned throughout this announcement may be adjusted by Cookson (in consultation with the Managers), in which event details of the new times and dates will be notified to the UK Listing Authority, the London Stock Exchange and, where appropriate, Qualifying Shareholders

3    Different deadlines and procedures for applications may apply in certain cases. For example, if you hold your Existing Shares through a CREST member or other nominee, that person may set an earlier date for application and payment than the dates noted above

4    References to times in this announcement are to London times unless otherwise stated

5    The times and dates set out above are based on the assumption that the FSA Proposed Change to the Listing Rules reducing the Rights Issue subscription period has become effective by the date of the Extraordinary General Meeting. If this is not the case, Qualifying Shareholders will be notified of a new extended timetable applicable to the Rights Issue through the publication of a supplementary prospectus

Extraordinary General Meeting

Completion of the Rights Issue is subject to a number of conditions, including Shareholders' approval being obtained at the Extraordinary General Meeting. 

LTIP Resolution

In addition, a further resolution will be proposed at the Extraordinary General Meeting to amend the operation of Cookson's Long-Term Incentive Plan ('LTIP') as the Remuneration Committee is concerned that the LTIP is not currently achieving its objectives of retaining and incentivising the Group's most senior executives. In the past three years, the Executive Directors have invested almost all of their annual cash bonuses in Bonus Investment Shares. In return for Bonus Investment Shares, an executive receives a matching award of Ordinary shares ('Matching Share Award') of 225 per cent. of the value of Ordinary Shares that the executive would have acquired had he invested his bonus on a pre-tax basis. Matching Share Awards are subject to stretching performance conditions including three year total shareholder return and headline earnings per share growth.

The Remuneration Committee's proposed amendments will incentivise and retain senior executives (including Executive Directors) who are invited to participate in the Matching Share Award element of the LTIP by allowing New Shares purchased by these executives under the Rights Issue to qualify for a Matching Share Award under the LTIP. These New Shares purchased by senior executives using any annual cash bonuses would count as Investment Shares under the LTIP and qualify for a Matching Share Award, but subject to the limit below. The Executive Directors would be required to retain all of their Existing Shares for a period of 36 months after the Rights Issue in order for a Matching Share Award based on New Shares to be able to vest.

The total annual maximum value of Investment Shares (however sourced) that can qualify for a Matching Share Award for the awards to be made in 2009 will be 100 per cent. of an executive's salary.

The Rights Issue is not conditional on the passing of the LTIP Resolution.

Documentation

The Rights Issue will be on the terms and subject to the conditions set out in the Prospectus, which is expected to be published today. The Prospectus will be available, free of charge, at Cookson's registered office, 165 Fleet Street, London EC4A 2AE, and on its website www.cooksongroup.co.uk.

ANALYST PRESENTATION 

A meeting for analysts will be hosted by Nick Salmon, Cookson Group Chief Executive. The details of the meeting are as follows: 

Venue : The Lincoln Centre, 18 Lincoln's Inn Fields, London, WC2A 3ED. 

Date & Time : 29 January 2009 at 09.00 a.m. - 10.00 a.m. (London time). Registration will commence at 8.30 a.m. (London time). 

If you are unable to attend the meeting in person, you can listen via a live webcast available at www.cooksongroup.co.uk. 

ENQUIRIES 

Cookson Group plc                                                      Tel: [phone]

Nick Salmon, Chief Executive

Mike Butterworth, Group Finance Director

Anna Hartropp, Investor Relations Manager

JPMorgan Cazenove (Joint Bookrunner)                Tel: [phone]

Edmund Byers

Patrick Magee

Jonathan Wilcox

Merrill Lynch (Joint Bookrunner)                              Tel: [phone]

Simon Gorringe

Oli Greaves

Rupert Hume-Kendall

Lazard (Financial Adviser)                                         Tel: [phone]

Peter Kiernan

Richard Shaw

Media enquiries:

Hogarth Partnership Ltd                                            Tel: [phone]

John Olsen

Anthony Arthur

About Cookson 

Cookson Group plc is a leading materials science company operating on a worldwide basis in Ceramics, Electronics and Precious Metals markets.  

Trading under the Vesuvius and Foseco brand names, the Ceramics division is the world leader in the supply of advanced consumable products and systems to the global steel and foundry industries and a leading supplier of speciality products to the glass and solar industries.

The Electronics division is a world leading supplier of advanced surface treatment and plating chemicals and assembly materials to the electronics, automotive and construction markets.  

The Precious Metals division is a leading supplier of fabricated precious metals (primarily gold, silver and platinum) to the jewellery industry in the US, the UK, France and Spain. Products include alloy materials, semi-finished jewellery components and finished jewellery. 

Forward Looking Statements

This announcement contains certain forward-looking statements which may include reference to one or more of the following: the Group's financial condition, results of operations, cash flows, dividends, financing plans, business strategies, operating efficiencies or synergies, budgets, capital and other expenditures, competitive positions, growth opportunities for existing products, plans and objectives of management and other matters. Statements in this announcement that are not historical facts are hereby identified as 'forward-looking statements'. Such forward-looking statements, including, without limitation, those relating to future business prospects, revenue, working capital, liquidity, capital needs, interest costs and income, in each case relating to Cookson, wherever they occur in this announcement, are necessarily based on assumptions reflecting the views of Cookson and involve a number of known and unknown risks, uncertainties and other factors that could cause actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements. Such forward-looking statements should, therefore, be considered in light of various important factors. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include without limitation: economic and business cycles, the terms and conditions of Cookson's financing arrangements, foreign currency rate fluctuations, competition in Cookson's principal markets, acquisitions or disposals of businesses or assets and trends in Cookson's principal industries. 

These forward-looking statements speak only as at the date of this announcement. Except as required by the FSA, the London Stock Exchange, the Part VI Rules or applicable law, Cookson does not have any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, further events or otherwise.

Except as required by the FSA, the London Stock Exchange, the Part VI Rules or applicable law, Cookson expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Cookson expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. 

In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this announcement might not occur. 

This announcement is not a prospectus. A prospectus relating to the Rights Issue is expected to be published today. Investors should only rely on the information contained in the Prospectus and any documents incorporated therein by reference. 

A copy of the Prospectus will be available from the registered office of Cookson at 165 Fleet Street, London EC4A 2AE. The Prospectus will also be available for inspection during usual business hours on any weekday (Saturdays, Sundays and Bank Holidays are excepted) from the date of its publication until Admission at the offices of Linklaters, One Silk Street, London EC2Y 8HQ. 

This announcement shall not constitute an offer to buy, sell, issue, or subscribe for, or the solicitation of an offer to buy, sell or issue, or subscribe for any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. 

This announcement has been issued by and is the sole responsibility of Cookson. No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by JPMorgan Cazenove, J.P.Morgan Securities, Merrill Lynch International or Lazard or by any of their respective affiliates or agents as to or in relation to, the accuracy or completeness of this announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any responsibility or liability therefor whether arising in tort, contract or otherwise is expressly disclaimed. 

The distribution or transmission of this announcement and offering of the New Shares pursuant to the Rights Issue to persons located or resident in, or who are citizens of, or who have a registered address other than, the United Kingdom may be affected by the laws of the relevant jurisdictions. It is the responsibility of any such person (including, without limitation, nominees and trustees) wishing to apply for New Shares under the Rights Issue to satisfy himself or herself as to the full observance of the laws of any relevant territory in connection therewith, including obtaining any governmental or other consents that may be required, observing any other formalities required to be observed in such territory and paying any issue, transfer or other taxes due in such territory. Any failure to comply with such laws may constitute a violation of the securities laws of any such jurisdiction. 

The Rights Issue will not be made, directly or indirectly, in Australia, Canada, Japan, the United States or South Africa (the 'Restricted Jurisdictions') unless by means of lawful prior registration or qualification under the applicable laws of the Restricted Jurisdiction, or under an exemption from such requirements. Accordingly, copies of this announcement, including the appendices, are not being, and must not be, mailed or otherwise distributed or sent in, into or from any Restricted Jurisdiction into which the same would be unlawful. Persons receiving this announcement (including, without limitation, custodians, nominees and trustees) must not distribute, mail or send it in, into or from any Restricted Jurisdiction, and so doing may render any purported acceptance of the Rights Issue invalid. 

These materials are not for distribution, directly or indirectly, in or into the United States (including its territories and dependencies, any State of the United States and the District of Columbia), Australia,  Canada,  Japan or South Africa. These materials do not constitute or form a part of any offer or solicitation to purchase or subscribe for securities in the United States. The New Shares have not been, and will not be, registered under the Securities Act.

The Securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act. There will be no public offer of the Securities in the United States.

The New Shares to be issued pursuant to the Rights Issue have not been, and will not be, admitted to trading on any stock exchange other than the London Stock Exchange. 

Neither the content of Cookson's website nor any website accessible by hyperlinks on Cookson's website is incorporated in, or forms part of, this announcement. 

JPMorgan Cazenove, J.P.Morgan Securities, Merrill Lynch International and Lazard are acting for Cookson and no one else in connection with the Rights Issue and will not regard any other person as a client in relation to the Rights Issue and will not be responsible to anyone other than Cookson for providing the protections afforded to their respective clients or for providing advice in relation to the Rights Issue or any matters referred to in this announcement. 

APPENDIX 

DEFINITIONS 

Admission	the admission of the New Shares (nil paid and fully paid) to the Official List becoming effective in accordance with the Listing Rules and the admission of such shares (nil paid and fully paid) to trading on the London Stock Exchange's market for listed securities becoming effective in accordance with the Admission and Disclosure Standards.
Admission and Disclosure Standards	the 'Admission and Disclosure Standards' of the London Stock Exchange containing, among other things, the admission requirements to be observed by companies seeking admission to trading on the London Stock Exchange's main market for listed securities.
Board	the board of Directors of Cookson.
business day	a day (excluding Saturdays and Sundays and public holidays in England and Wales) on which banks generally are open in London for the transaction of normal business.
Company or Cookson	Cookson Group plc, a company incorporated under the laws of England and Wales (registered under no. 251977), with its registered office at 165 Fleet Street, London EC4A 2AE.
Cookson Group or the Group	the Company and each of its subsidiaries and subsidiary undertakings from time to time.
CREST	the relevant system, as defined in the CREST Regulations (in respect of which Euroclear UK is the operator as defined in the CREST Regulations).
CREST Regulations or Regulations	the Uncertificated Securities Regulations 2001 (SI 2001 No. 01/378), as amended.
Directors	the Executive Directors and Non-Executive Directors
EBITDA	earnings before interest, tax, depreciation and amortisation.
EPS	earnings per share.
EU	the European Union.
Euroclear UK	Euroclear UK & Ireland Limited, the operator of CREST.
Excluded Territories and each an Excluded Territory	Australia, Canada, Japan and South Africa.
Executive Directors	the executive directors of Cookson.
Existing Shares	the Ordinary Shares in issue as at the date of this document.
Extraordinary General Meeting	the extraordinary general meeting of Cookson to be held at 11:00 a.m. on 17 February 2009.
Financial Adviser	Lazard.
Financial Services Authority or FSA	the Financial Services Authority of the United Kingdom.
Foseco	Foseco plc (subsequently, Foseco Limited), a company registered in England and Wales with registered number 05413927.
FSMA	the Financial Services and Markets Act 2000, as amended.
Joint Bookrunners	JPMorgan Cazenove and Merrill Lynch.
JPMorgan Cazenove	JPMorgan Cazenove Limited, 20 Moorgate, London EC2R 6DA acting as Joint Sponsor and Joint Bookrunner.
J.P.Morgan Securities	J.P.Morgan Securities Ltd., 125 London Wall, London EC2Y 5AJ acting as Joint Underwriter.
Lazard	Lazard & Co., Limited, 50 Stratton Street, London W1J 8LL acting as Financial Adviser.
Listing Rules	the Listing Rules made by the FSA under Part VI of the FSMA.
London Stock Exchange	London Stock Exchange plc.
Managers	the Joint Bookrunners and J.P.Morgan Securities.
Merrill Lynch or Merrill Lynch International	Merrill Lynch International of Merrill Lynch Financial Centre, 2 King Edward Street, London EC1A 1HQ acting as Joint Sponsor, Joint Bookrunner and Joint Underwriter.
NAFTA	North American Free Trade Area.
New Shares	Ordinary Shares to be allotted and issued pursuant to the Rights Issue.
Non-CREST Shareholder	a Shareholder who does not hold their Ordinary Shares in CREST.
Non-executive Directors	the non-executive directors of Cookson.
Official List	the Official List of the FSA pursuant to Part VI of the FSMA.
Ordinary Shares or Shares	the ordinary shares of 10 pence each in the share capital of the Company (including, if the context requires, the New Shares).
Part VI Rules	the rules made by the FSA in accordance with the FSMA.
pounds sterling or £	the lawful currency of the United Kingdom.
Provisional Allotment Letter or PAL	the renounceable provisional allotment letter expected to be sent to Qualifying Non-CREST Shareholders in respect of the New Shares to be provisionally allotted to them pursuant to the Rights Issue.
Qualifying Non-CREST Shareholders	Qualifying Shareholders holding Ordinary Shares in certificated form.
Qualifying Shareholders	holders of Ordinary Shares on the register of members of the Company at the Record Date, with the exclusion (subject to exceptions) of persons with a registered address or located or resident in the United States or an Excluded Territory.
Record Date	close of business on 13 February 2009.
Rights Issue	the proposed issue by way of rights of New Shares to Qualifying Shareholders on the basis described in the Prospectus and, in the case of Qualifying Non-CREST Shareholders, in the Provisional Allotment Letter.
Securities Act	the United States Securities Act 1933, as amended.
Shareholder or Cookson Shareholder	a holder of Ordinary Shares.
subsidiary undertaking	as defined in section 258 of the Companies Act.
UK	the United Kingdom of Great Britain and Northern Ireland.
UK Listing Authority or UKLA	the FSA in its capacity 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 VI of the FSMA.
United States or US	the United States of America, its territories and possessions, any state of the United States and the District of Columbia.

 

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