|
|
Enron Mail |
By now, most of you are aware that Enron will be acquiring London-based MG=
=20 Plc, one of the world=01,s leading metals marketers. In connection with ou= r=20 on-going activities relating to MG Plc, I thought it would be helpful to=20 provide you with a brief overview of on our future new metals business, to= =20 further explain the reasons underlying the acquisition and to update you on= =20 the integration team=01,s accomplishments to date. What is MG Plc? MG Plc is a leading, independent international metals trading business, whi= ch=20 provides a variety of services to the global metals industry. The business= =20 dates back to 1881 when it was the German Metallgesellschaft Group and was= =20 active in trading metals from its head office in Frankfurt. Today, MG is o= ne=20 of the world=01,s top non-ferrous metals brokers and market makers, the wor= ld=01,s=20 leading independent copper merchant and a leading merchant of many other=20 non-ferrous metals. MG is comprised of two core areas of expertise, the Financial Services and= =20 Merchanting Divisions. The Financial Services Division was formed in 1970 = to=20 provide market-making and trading services to the MG=01,s physical metals= =20 trading business through futures trading as a member of the London Metal=20 Exchange and, at a later date, as a member of COMEX in New York. In the la= te=20 1980s, as a result of London=01,s growing leading role in the metals indust= ry,=20 MG established a merchant trading office in London. In 1986, MG developed= =20 its warehousing division with the acquisition of Henry Bath. In 1999, the= =20 Merchanting and Financial Services Divisions, including warehousing, were= =20 combined into a single company, which was floated on the London Stock=20 Exchange. Currently, MG=01,s core trading offices are located in London an= d New=20 York with warehouse operations in Liverpool, Humberside, Rotterdam, New=20 Orleans, New Haven, and Singapore. It has merchanting offices in Lima,=20 Santiago, Los Angeles, Chicago, Stockholm, Cologne, Hamburg, Frankfurt, New= =20 Delhi, Shanghai, Beijing, Hong Kong, Seoul, Tokyo and Melbourne. What does the Merchanting Division do? The Merchanting Division is the world=01,s leading independent copper merch= ant,=20 one of the top three independent merchants of copper concentrates and nicke= l=20 and one of the leading European merchants of recycled non-ferrous metals. T= he=20 division also trades in other non-ferrous metals on the London Metals=20 Exchange (LME), including lead, tin, zinc, aluminium and brass. The Merchanting Division engages in the following main activities: ? Merchanting of Non-ferrous Metals =01) MG trades as a principal with prod= ucers=20 and consumers, buying and selling non-ferrous metals and concentrates=20 (particularly copper, aluminium and nickel), exchanging qualities and=20 locations and lending and borrowing metals. ? Global Stockholding =01) MG holds stocks of non-ferrous metals at warehou= ses=20 around the world. ? Merchanting of Recycled Metal =01) MG trades as a principal with supplier= s and=20 consumers of non-ferrous metal for recycling. ? Terminal Market Operations =01) MG participates in the LME and COMEX usin= g=20 hedging, arbitrage and position management to support its merchanting=20 activity. What does the Financial Services Division do? The Financial Services Division is one of the leading LME members and, base= d=20 on the volume of LME metals stored, is one of the leading LME metals=20 warehousing businesses. The Financial Services Division engages in the following main activities: ? Brokerage Activities =01) MG executes orders as a broker for clients in L= ME=20 and COMEX contracts. ? Market-Making =01) MG is a market-maker for both futures and options cont= racts=20 and COMEX and OTC contracts. ? Warehousing =01) MG stores metals and other goods in eleven locations in= =20 Europe, the United States and Asia. MG has also begun to prepare to trade non-ferrous metals using the internet= =20 as its platform. On 10th February, MG announced the formation of a joint= =20 venture with Internet Capital Group, Inc. and Safeguard International Fund,= =20 L.P. to develop an internet marketplace for trading non-ferrous metals. The= =20 joint venture, called EMETRA, intends to establish a world-wide=20 business-to-business, e-commerce trading platform for the non-ferrous metal= s=20 markets, including physical trading and the trading of futures and options= =20 contracts. Why is Enron acquiring MG? Enron is committed to expanding its position as a global leader in wholesal= e=20 markets. By expanding into new wholesale markets, such as non-ferrous metal= s,=20 Enron expects to leverage its wholesale expertise and will be able to offer= =20 customers new products and solutions to address their business needs which= =20 link different commodities and inputs. MG will provide Enron with a number of important benefits. At the same tim= e,=20 Enron expects that MG will significantly benefit from its association with= =20 Enron. Some of the benefits we envisage include: ? The opportunity to combine Enron=01,s core competencies in trading, finan= ce=20 and origination with MG=01,s global position in trading non-ferrous metals. ? The ability for both Enron and MG to access new clients, particularly in= =20 the United States and Europe. ? The ability to cross-market both existing products and new products such = as=20 bundled products that offer combined metals and power outsourcing. ? The ability to leverage the opportunities available to MG by increasing i= ts=20 financial strength and the resources available to it. ? The chance to overlay the EnronOnline business-model on the metals indust= ry=20 to increase liquidity and contract market share. What remains to be done? Merging the business operations of two entities, even highly motivated=20 companies such as Enron and MG, has been and will continue to be a formidab= le=20 and daunting exercise. Having a shared vision facilitates rapid integratio= n,=20 but there are many complicated and complex tasks that remain. During the= =20 conditional offer period, Enron and MG are taking steps to prepare for a=20 seamless and non-disruptive integration of our respective operations. =20 Ideally, when Enron=01,s offer to buy all MG shares becomes unconditional (= 15=20 July 2000 is the current target date), the two can hit the ground with thei= r=20 feet running. In the short term, a number of things must be accomplished to facilitate th= at=20 smooth transition. Most importantly, in order to ensure that the deal goes= =20 forward, Enron and MG will work to remove the remaining conditions to Enron= =01,s=20 offer, including obtaining the shareholder approvals from all shareholders = as=20 well as obtaining relevant regulatory consents. A number of other steps must be taken, however, during the first phase of o= ur=20 integration timetable to ensure that everything stays on track. Integratio= n=20 activities will focus on four primary aspects of our operations: commercial= =20 matters, financial matters, middle and back office issues; and, most=20 importantly, on the employees of both organisations. Some of the most=20 important goals relating to each of these areas are: Commercial ? Developing physical metal contracts suitable for listing on EnronOnline a= nd=20 installing necessary communication and technology links to facilitate data= =20 transfers and information flows between MG and Enron. ? Preparing a joint venture management plan for MG's interest in EMETRA tha= t=20 is consistent with Enron=01,s goal of listing physical metal contracts on= =20 EnronOnline. ? Identifying opportunities to - combine Enron's core competencies in trading, finance, and origination wi= th=20 MG's global position in trading non-ferrous metals; - leverage MG=01,s position by increasing its financial strength and resour= ces=20 available to it; - cross-market both existing and new products to Enron and MG customers,=20 particularly in the US and Europe; and - grow MG's metal trading franchise. Financial ? Obtaining waivers from MG's banks in respect of change of control in loan= =20 or other agreements. ? Preparing plans to integrate cash management functions and putting in pla= ce=20 funding arrangements for August 2000 onwards. ? Preparing plans to arrange large-scale inventory securitisation to reduce= =20 balance sheet debt before year-end. Middle and Back Office ? Preparing financial information necessary to understand and maximise=20 integration benefits including, pro-forma consolidated financial statements= ;=20 profit and loss budgets for the third and fourth quarters of 2000; and=20 integration budgets. ? Determining the feasibility of integrating accounting systems (AS400, SAP= ). ? Assessing MG's core trading and risk profiles and developing plans to=20 incorporate risk profiles in MG's metals books into Enron systems. =20 ? Evaluating IT systems and infra-structure at all MG office + warehouse=20 locations and preparing budgets and programmes to provide MG staff with=20 access to Enron IT systems and applications. People ? Preparing a programme to co-locate MG's London staff (145) at Enron House= =20 over the weekend of 16/17 September. ? Developing plans to harmonize compensation, benefits, and employment=20 policies and practices; developing plans for staff reporting relationships. ? Communicating plans and status of activities at all levels of Enron's and= =20 MG's organizations. ? Arranging introductions between Enron and MG staff and providing=20 opportunities for information exchanges. Where do we go from here? I believe that Enron=01,s acquisition of MG is an exciting opportunity for = us=20 all. While a number of steps remain to be taken, we have already=20 successfully begun the integration of Enron and MG. By remaining=20 enthusiastic and committed to this process, I expect that this transition= =20 will proceed smoothly and with a minimum of difficulty. Summary of MG Offices/Staff Worldwide Location=09Employee =09Headcount=09Location=09Employee =09=09=09Headcount Brazil Canada Chicago Chile Edinburgh Frankfurt Germany Hamburg Hong Kong Houston K?ln Lima Liverpool London Los Angeles, CA Missouri=091 =094 =096 =091 =091 =0928 =091 =0939 =091 =092 =091 =091 =0938 =09152 =0918 =093=09Moscow =09=09NY =09=09Peru =09=09Rotterdam =09=09Shanghai =09=09Singapore =09=09South Africa =09=09Spain =09=09Stockholm =09=09Tokyo =09=09HENRY BATH CAMBERLEY =09=09HENRY BATH EDINBURGH =09=09HENRY BATH LONDON =09=09HENRY BATH MANCHESTER =09=09HENRY BATH AVONMOUTH =09=09LIVERPOOL =01) HB & SON=091 =09=09=0946 =09=09=091 =09=09=0929 =09=09=091 =09=09=097 =09=09=091 =09=09=091 =09=09=092 =09=09=098 =09=09=092 =09=09=091 =09=09=0910 =09=09=092 =09=09=094 =09=09=0918 For further information or queries regarding MG, please contact Eric Gadd. Direct no: +44 20 7783 6595 Fax no: +44 20 7783 8314
|