Garmin makes cash offer for Raymarine Shares

by MarineBusiness-World.com on 29 Apr 2010 US Based Garmin has announced a cash offer to acquire all Raymarine Shares at a price of 15 pence per Raymarine Share, subject to regulatory clearances and other terms and conditions.

The history of the offer has been charted in the media. In June 2009, Raymarine made contact with Garmin to solicit its interest in making a proposal to acquire Raymarine or its business, after making public that the company was exploring the possibility of a sale of its business.

Garmin and Raymarine then apparently engaged in discussions relating to a transaction under which Garmin would acquire Raymarine's business but talks were discontinued in December 2009 and Raymarine announced that it was no longer in discussions with Garmin.

However Garmin confirms it wrote to the Board of Raymarine on 1 April 2010 indicating that it was prepared to contemplate making an offer to Raymarine Shareholders.

Subsequently Garmin wrote to the Board of Raymarine seeking a recommendation for its proposed offer of 15 pence per Raymarine Share, which is announced today, and confirming its expectation that, having undertaken extensive analysis of the potential impact of the Acquisition on the markets in which Garmin and Raymarine both participate, it can secure the necessary merger control approvals to allow its offer to proceed.

In a statement today from Garmin was the following 'The Board of Garmin therefore considers that its proposed 15 pence per Raymarine Share offer should be highly attractive to Raymarine Shareholders.

'Garmin looks forward to working with the Raymarine board in relation to the implementation of the Offer and its recommendation to Raymarine Shareholders.

'The offer represents a 436 per cent. premium to the average share price of 2.8 pence per Raymarine Share in the three-month period ending on the day prior to the announcement of a possible offer for Raymarine on 11 March 2010, a 366 per cent premium to the share price of 3.22 pence per Raymarine Share on the day prior to the announcement of a possible offer for Raymarine on 11 March 2010.

'A 275 per cent premium to the possible amount of approximately 4 pence per Raymarine Share that would be available for return to Raymarine Shareholders under the non-offer proposal referred to in Raymarine’s announcement dated 21 April 2010

'A 152 per cent premium to the share price of 5.95 pence per Raymarine Share as at the close of business on 27 April 2010, the closing price on the day prior to the date of this announcement.

Garmin further explained that a totla price of approximately GBP12.5 million would be payable by Garmin to Raymarine Shareholders, assuming that no Raymarine Shares are issued between the date of this Announcement and the closing date of the Offer.

Some history - Raymarine was floated on the London Stock Exchange in December 2004 at a price of 152 pence per share.

The Raymarine share price peaked in April 2007 at a price of 490 pence per share.

Following the decline in world financial markets in 2008, demand for marine electronic products of the type manufactured by Raymarine, Garmin and other market participants fell significantly. Raymarine is focused exclusively on this market and entered this downturn with a significant level of debt.

In early October 2008, Raymarine announced the departure of its CEO and that its Board was in the process of an executive search for a new chief executive, although no new appointment has yet been made and Raymarine’s chairman continues to act as its chief executive.

Later in October 2008, Raymarine announced that it had seen a rapid deterioration in the markets it served.

In its Interim Management Statement released on 20 April 2009, the Board of Raymarine announced that the Raymarine Group was expected to make a loss before taxation for the year to 31 December 2009 and that it was entering discussions with its banking group in order to seek an extension of its facilities with appropriate covenants.

On 12 June 2009, Raymarine announced that it was considering its options including the possible sale of the company. In its Interim Management Statement released on 19 November 2009, Raymarine indicated that it was unable to comply with certain financial covenants within its banking facilities and, as such, was reliant on continuing covenant waivers from its banking syndicate.

On 28 August 2009, Raymarine released its Half Yearly Report for the six months ended 30 June 2009. For this period, Raymarine reported revenue of GBP63.5 million, EBIT of GBP1.4 million and a net loss attributable to shareholders of GBP32,000. As at 30 June 2009, Raymarine had net assets of GBP25.1 million and net debt of GBP87.7 million.

On 19 November 2009, Raymarine released an Interim Management Statement covering the period to 18 November 2009. For the ten-month period to 30 October 2009, Raymarine stated that it had revenues of GBP88.9 million, an absolute decline of 22.9 per cent compared with the same period in 2008. As at 30 October 2009, Raymarine had net debt of GBP91.6 million although Raymarine also noted that an additional facility of GBP15 million had been agreed with its banking syndicate in order to meet Raymarine's funding requirements.

On 18 December 2009, Raymarine announced that it was no longer in discussions with Garmin but was entering into exclusive discussions with a single party over the possible sale of the business and assets of Raymarine and that it was not anticipated that there would be any value remaining for Raymarine Shareholders.

Raymarine Shares are traded on the main market of the London Stock Exchange. Raymarine has yet to publish its accounts for the financial year ended 31 December 2009.

For the financial year ended 31 December 2008, Raymarine reported revenue of GBP134.9 million, EBIT of GBP20.0 million and net profit attributable to shareholders of GBP8.7 million and, as at 31 December 2008, Raymarine had net assets of GBP21.6 million and net debt of GBP93.5 million. In the year ended 31 December 2008, Raymarine reported an average number of 556 employees.

On 18 March 2010, Raymarine announced that it had extended the term of its banking facilities to 30 September 2010. However, Raymarine also noted that it is still unable to comply with the financial covenants under these facilities and that it remains reliant on continuing covenant waivers from its banking syndicate.