Proposed Acquisition of Morrison

Proposed Acquisition of Morrison


Greg Fitzgerald – Chief Executive Frank Nelson – Finance DirectorAndy Sturgess – Managing Director Construction DivisionKen Gillespie – Managing Director Construction Services (Morrison)


This document and the information contained in it is provided on a confidential basis. The information in this document may constitute price sensitive information and recipients should be aware of the relevant obligations and restrictions under Part V of the Criminal Justice Act 1993 (“CJA”) and on market abuse within the meaning of Part VIII of the Financial Services and Markets Act 2000 (“FSMA”). Recipients of this document should not deal in any securities issued by Galliford Try plc (the “Company”) or encourage another person to do so in circumstances which would contravene the CJA or amount to market abuse under the FSMA.This document is being supplied to you solely for your information and may not be copied, reproduced, distributed, disclosed or published, in whole or in part, to any other person for any purpose whatsoever at any time without the prior written consent of PricewaterhouseCoopers LLP and KBC Peel Hunt Ltd (together the “Advisers”).No responsibility is accepted and no representation, undertaking or warranty, express or implied, is made or given by or on behalf of the Company or the Advisers or any of their subsidiaries or subsidiary undertakings, or their respective directors, members, officers, employees, agents or advisers as to the accuracy, reliability or completeness of the information or opinions contained in this document or any written or oral communication supplied, disclosed or made available to any person in connection with this document or as to the reasonableness of any assumptions on which any of the same is based or the use of any of the same. Accordingly, no liability is accepted by such persons and they will not be liable for any direct, indirect or consequential loss (including without limitation loss of profit) or damage suffered by any person resulting from the use of the information contained in this document, or for any opinions expressed by any such person, or any errors, omissions or misstatements made by any of them. Nothing in this notice excludes any remedy in respect of fraud or fraudulent misrepresentation.In addition none of the above persons should be treated as being under any obligation to update or correct any inaccuracy contained in this document (or omission from it) or be otherwise liable to you or any other person in respect of any such information. This document contains forward-looking statements which involve risks and uncertainties and actual results and developments may differ materially from those expressed or implied by these statements depending on a variety of factors. In addition, this document contains historical information relating to share prices and the yield on shares as well as other historical information. It should be noted that past performance cannot be relied on as a guide for future performance.This document and the information contained in it do not comprise a prospectus or constitute or form part of any offer of, or invitation or inducement to buy, sell or apply or subscribe for, securities nor shall it or any part of it form the basis of or be relied on in connection with any contract, arrangement or commitment whatsoever. Persons who intend to acquire shares or other commitments in the Company in the proposed placing and open offer (the “Fundraising”) are reminded that any such acquisition may only be made solely on the basis of the information contained in the prospectus published by the Company relating to the Fundraising and its proposed acquisition of the Medway Construction Division (the “Acquisition”) which may be different from the information contained in this document.The shares to be issued have not been nor will be registered under the United States Securities Act of 1933 (the “Securities Act”), or under the securities law of any state of the United States, or under the relevant securities laws of Australia, Canada or Japan. This document is not an offer of ordinary shares in the Company for sale into the United States. The distribution of this document in jurisdictions other than the United Kingdom may be restricted by law and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of laws of any such other jurisdiction.This document has not been approved for the purposes of section 21 of FSMA. This document is not intended to be distributed in the United Kingdom other than to persons having professional experience in matters relating to investments for the purpose of Article 19 of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (the “FPO”) and high net worth companies, unincorporated associations etc for the purpose of Article 49(2)(a) to (d) of the FPO. This document is only being made available to such persons. If you do not have professional experience in matters relating to investments or are not a high net worth entity you should not read or use this document and you should return it as soon as possible to either of the Advisers. PricewaterhouseCoopers LLP, which is authorised and regulated in the United Kingdom by the Financial Services Authority for designated investment business, is acting exclusively for the Company and for no one else in relation to the Acquisition and the Fundraising and will not be responsible to anyone other than the Company for providing the protections afforded to clients of PricewaterhouseCoopers LLP or for giving advice in relation to the Acquisition and the Fundraising, or any other matter referred to in this document.KBC Peel Hunt Ltd, which is regulated in the United Kingdom by the Financial Services Authority, is acting as corporate broker to the Company in relation to the Fundraising and is not acting for any other person and will not be responsible to any other person for providing the protections afforded to customers of KBC Peel Hunt nor for advising them on any matter in relation to the Fundraising. The Advisers retain the right to request the return or destruction of this document at any time.This notice is to be interpreted and construed in accordance with English law and any claims or disputes arising out of, or in connection with, this notice shall be subject to the exclusive jurisdiction of the English courts.By accepting this document you agree to be bound by the foregoing restrictions.

Important Notice


Acquisition Rationale

• Excellent strategic fit

• Morrison will complement existing construction operation

• Operates in the same core markets with significant presence in

infrastructure

• Services a different client base

• Operates in different geographic regions

• Considerable proportion of turnover from public and regulated

markets

• Enlarged group will be able to compete for larger, higher margin

projects



Morrison Construction Services

• UK based construction business

• Focus on infrastructure projects, public and utilities sector

• Founded in 1948

• 1400 employees across 10 offices

• New Management

• Turnaround situation


Turnover £’m EBIT £’m

• Year End March 04 344 (11.6)

• Year End March 05 336 1.3

• Change in business mix has beneficial impact on margins


• Long Established

• Based in Edinburgh

• Purchasing two Investments plus people

– DHE Portsmouth project

– Highland Schools project

• Good forward pipeline

Morrison PFI Business



Geographic Footprint

Water Frameworks

Divisional

Offices

Infrastructure

Business Stream Ab

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Building

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(MB

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Principal Offices

Subsidiary Offices

Scotland England Wales



• In discussions for over 18 months

• Detailed negotiations commenced December 05

• Conditional agreement to acquire Morrison from Avon

• Total consideration of £41.7m

– Construction £38.5m

– Investments £3.2m

• Deferred payment of £6.6m

– Contract payments and Highland Schools

• Valuation on debt free basis

• No past pension fund liabilities


Summary of Transaction


Financial Effects & Synergies

• Annual cost savings anticipated to be c. £2m per annum

• One off cost of delivering savings of £1.8m

• Restructuring of regional offices

• Improved supply chain management

• Savings in combining business support functions

• Additional cross selling opportunities

• Earnings enhancing in medium term



• Morrison will form part of Galliford Try’s enlarged construction

division

• Ken Gillespie, MD of Morrison, will join Galliford Try Board

• Construction division split into Building and Infrastructure

divisions

• Andy Sturgess will run Building / Ken Gillespie will run

Infrastructure

• Frank Nelson will run the enlarged Investments business

Integration Plan



Financing

• Placing and Open Offer to raise gross proceeds of £50m

• £40m firm placing

• £10m Open Offer fully to existing shareholders

• Placing and open offer fully underwritten by KBC Peel Hunt



Use of Proceeds

• Proceeds will be used to:

– Fund the cash consideration payable for the acquisition of

Morrison

– Provide additional equity funding to the Group following

acquisition of Chartdale

– Strengthened financial covenant for enlarged group



• Excellent strategic fit

• Enables Galliford Try to compete for larger, higher margin projects

• Complements existing operation

• Strengthens management team

• Earnings enhancing in the medium term

• Financed through Placing and Open Offer

Summary



Expected Timetable


• End of institutional marketing, pricing and allocation 1 March

• Announcement and dispatch/return of placing letters 2 March

• Posting of open offer document/acquisition circular to shareholders 7 March

• Close of open offer 28 March (11.00 am)

• Placees notified of final allocation and announcement of open offer result 28 March (pm)

• EGM and cash due from non-DVP payers 30 March

• Admission, settlement of new shares, cash due from DVP payers 31 March

• Certificates issued (where applicable) 7 April

* All dates subject to change

Documents

Proposed Acquisition of Morrison