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FLSmidth Company Announcements

FLSmidth & Co. and Potagua FLS sign agreement on recommended tax-exempt share exchange offer

Message to the Copenhagen Stock Exchange, No. 06-2006

FLSmidth & Co. A/S submits to the shareholders in Potagua FLS A/S a share exchange offer. In addition, the Board of Directors of FLSmidth & Co. A/S will submit a proposal at the General Meeting to merge the Company's two share classes. This proposal is expected to improve the liquidity of the share and hence the pricing of it. In the same context, FLSmidth & Co. A/S expects to carry out a share buy-back programme to support the market price in the period after the share exchange offer.
In 2001, Potagua announced that in the longer term it did not wish to continue as operational owner of FLSmidth & Co. (Stock Exchange announcement 09-2001). Since Potagua FLS announced in September 2005 that after the demerger (Stock Exchange announcement 04-2005) the Company wished to dispose of its controlling interest in FLSmidth & Co., tentative enquiries have been made to explore the various options.
These efforts have today culminated in an agreement between FLSmidth & Co. and Potagua FLS on a tax-exempt exchange of the Potagua FLS shares with shares in FLSmidth & Co. This means that Potagua FLS will become a subsidiary of FLSmidth & Co.
In practical terms, the share exchange will take place by FLSmidth & Co. submitting a share exchange offer to the shareholders in Potagua FLS. This is expected to take place within 14 days. FLSmidth & Co. will offer to buy the shares in Potagua FLS, each Potagua FLS shareholder receiving 1.2122 new FLSmidth & Co. shares for each Potagua FLS share tendered.
In this way, FLSmidth & Co. will offer to acquire Potagua FLS for the same number of shares as that currently held by Potagua FLS in FLSmidth & Co. This is reflected in the skewed exchange ratio, since Potagua FLS today has a total of 19,965,000 issued shares, whilst Potagua FLS now holds 24,201,669 FLSmidth & Co. shares.
Potagua FLS shareholders will be offered the same number of FLSmidth & Co. shares regardless of whether they exchange A or B shares in Potagua FLS.
The dividend received by Potagua FLS from FLSmidth & Co. following the Annual General Meeting on Friday 7 April 2006 will be distributed after deduction of costs to the shareholders of Potagua FLS before the exchange of shares takes place.
Buy-back of own shares will support the market price
When the exchange of shares has taken place, FLSmidth & Co. expects to carry out a buy back own shares. This will be effected within the existing authorisation up to a maximum of 10 per cent of the share capital (1.8 per cent being exercised today) and will take place to support the market price of the FLSmidth & Co. share during the period after the share exchange offer, if this becomes necessary.
One share class to strengthen liquidity and pricing
The FLSmidth & Co. Board of Directors will also submit a proposal to merge the Company's A and B shares into one share class on a 1:1 basis provided the share exchange offer is implemented. This proposal will be submitted at the Company's General Meeting on 7 April.
Combining the trade in FLSmidth & Co. shares and in Potagua FLS shares into one common share class will significantly increase liquidity in the FLSmidth & Co. share. The Board of Directors expects that such a merger will be positively reflected in the pricing of the share, to the benefit of all shareholders in the Company.
At the time when the tendering Potagua FLS shareholders receives the FLSmidth & Co. shares, the merger of the two share classes will have taken place and the share exchange offer  implemented.
Winding up Potagua FLS
After the share exchange, FLSmidth & Co. expects to wind up Potagua FLS and as part of this process to conduct a compulsory redemption of any remaining minority interests in Potagua FLS who did not accept the redemption offer. A compulsory redemption, however, is conditional upon acceptance by more than 90 per cent of the share capital and of the total voting rights. 
After the acquisition of Potagua FLS, FLSmidth & Co. intends to cancel the former's holding of FLSmidth & Co. shares and to submit an application to delist Potagua FLS from the Copenhagen Stock Exchange.
It is emphasised that the permission granted for tax-exempt share exchange offer does not include any compulsory redemption in cash, distribution, or liquidation/merger surplus from the possible winding up of Potagua FLS. Shareholders who wish to exchange their shares are therefore encouraged to accept the share exchange offer and not await a compulsory redemption, distribution or winding up of Potagua FLS.
The share exchange offer is subject to a few conditions which are all expected to be fulfilled. These include acceptance by Potagua FLS shareholders representing at least two thirds of the votes and of the share capital.
It should be noted in this context that Potagua FLS's Board of Directors recommends that the shareholders accept the offer from FLSmidth & Co. and that FLSmidth & Co.'s second-largest shareholder, ATP, has expressed its support of the solution.
It is also a condition that the necessary proposals to implement both the share exchange offer and the merger of the two share classes are adopted at the FLSmidth & Co. Annual General Meeting on 7 April this year just as it is a condition that the tax authorities have confirmed that the merger of FLSmidth & Co.'s A- and B-shares will not create a tax liability in respect of the surrender of shares. FLSmidth & Co. has applied for and expects to obtain such confirmation.
An important milestone
FLSmidth & Co. Board Chairman, Mr Jørgen Worning, comments the agreement as follows:
"Since 2002, we have been making very comprehensive changes in the Group. This process has meant a significant transformation of the way in which the Company is operated, and a number of major disposals of activities and business areas have taken place.
For sure, this has been no easy task, and throughout the process a major effort has been made not to lose strategic focus. On Friday 10 March at the close of the Stock Exchange, the share was quoted at 228 whilst at the end of 2002 is was priced at 55 - an increase of 314 per cent reflecting the fact that market capitalisation has risen from nearly 3 billion in 2002 to more than 12 billion Danish kroner today.
We therefore consider the mission completed so that FLSmidth & Co. is again a well-run business with a bright future ahead of it.
Naturally, there remains scope for improvement, as stated in the Annual Report recently presented, but there is no doubt in my mind that we now have a solid platform for the profitable growth which is envisaged in the Company strategy and is being  actively pursued.
The fact that we are able to announce today that also the ownership question can be settled in accordance with the plan outlined by Aktieselskabet Potagua in 2001, is another very important milestone for all those involved in the process.
The Board of Directors of FLSmidth & Co. therefore also takes pleasure in welcoming the shareholders in Potagua FLS as new direct investors in the Company.
I am convinced that they will bring with them their continued support to FLSmidth & Co. A/S."

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Please direct any questions regarding this announcement to Board Chairman Jørgen Worning, telephone +45 36 18 18 00.
Yours faithfully
Torben Seemann Hansen
Corporate Public Relations

Please note that a joint press and analysts meeting will be held today Monday 13 March at 13.00 hours at FLSmidth & Co.'s address, Vigerslev Allé 77, DK- 2500 Valby.
At the meeting Board Chairman Jørgen Worning and Board Chairman Jens Münter, Potagua FLS, will be present to subsequently answer questions.