Programmed Maintenance Services : Board unanimously recommends acquisition proposal from PERSOL

ASX Release

14 July 2017

T (08) 9216 2100

F (08) 9216 2186

www.programmed.com.au

Programmed Maintenance Services Ltd

ACN 054 742 264

• Programmed Maintenance Services Limited (Programmed or the Company) (ASX.PRG) has entered into a Scheme Implementation Deed with PERSOL HOLDINGS CO., LTD (PERSOL) under which PERSOL proposes to acquire 100% of the issued share capital of Programmed for a cash price of

  $3.02 (Offer Price) per share (Proposal) by way of a scheme of arrangement (Scheme).

• The Proposal represents a:

  • 68% premium to the last closing price of Programmed shares on 13 July 2017 of $1.80;

  • 64% premium to the 1-month VWAP of Programmed shares of $1.84;2 and

  • 69% premium to the 3-month VWAP of Programmed shares of $1.79.2

• Under the Proposal, Programmed may declare and pay a fully-franked special dividend on or shortly before the implementation date of the Scheme. The proposed quantum of the special dividend will be advised to Programmed shareholders in due course. The cash consideration of $3.02 cash per share will be reduced by the amount of any such special dividend.

• No impact on Programmed's operations, customers and employees.

• Programmed Directors unanimously recommend the Scheme, in the absence of a superior proposal and subject to an Independent Expert's Report concluding and continuing to conclude that the Scheme is in the best interests of Programmed shareholders.

  Commentary

  Programmed Chairman, Mr Bruce Brook, said: "The Programmed Board has unanimously concluded that the 100% cash proposal from PERSOL represents compelling value for Programmed's shares and provides an attractive opportunity for Programmed shareholders to realise this value.

  "We consider that the Offer Price of $3.02 per share fairly reflects the considerable value PERSOL places on our strategic plan, the capability of Programmed people to deliver it, and our strong market positions. PERSOL has made it clear that it intends to work with the Programmed management team to support and invest in delivering Programmed's current growth strategy. We are pleased that our Managing Director / CEO, Chris Sutherland and other senior management have committed to continue with the business, and customers can be assured it will be business as usual if shareholders support the Scheme and it is ultimately implemented. The Programmed Board believes that PERSOL will be a well-capitalised, supportive owner of Programmed if the Scheme proceeds."

  1 In the absence of a superior proposal and provided that an Independent Expert concludes and continues to conclude that the Scheme is in the best interests of Programmed shareholders.

  2 Volume weighted average price based on cumulative trading volume and value up to and including 13 July 2017.

  Programmed Board unanimously recommends the Scheme

  The Board of Programmed unanimously recommends that Programmed shareholders vote in favour of the Scheme, in the absence of a superior proposal and subject to the Independent Expert concluding (and continuing to conclude) that the Scheme is in the best interests of Programmed shareholders. Each Director of Programmed intends to vote all the Programmed shares that he or she holds or controls in favour of the Scheme, subject to those same qualifications.

  The Programmed Board highlights the following positive features of the proposal:

• Offer Price premium: the Offer Price of $3.02 per share represents attractive premiums of:

  • 68% to the last closing price of Programmed shares on 13 July 2017 of $1.80;

  • 64% to the 1-month VWAP of Programmed shares of $1.84;3 and

  • 69% to the 3-month VWAP of Programmed shares of $1.79.3

• Attractive acquisition multiple: the Offer Price of $3.02 represents an enterprise value of $992 million, implying a FY17 EV / EBITDA4 multiple of 10.3x.

• Certainty of value: the 100% cash consideration provides Programmed shareholders with certainty of value and the opportunity to realise in full their investment for cash.
• Limited conditionality: the Scheme is not subject to financing or due diligence conditions, and the other conditions to the Scheme are customary for a transaction such as this.
• No impact on operations, customers and employees: no impact on Programmed's existing operations and customers. Programmed employees will continue to operate in the present structure.
• Future growth opportunity: Platform established for future growth of maintenance / facility management operations into Asia.

PERSOL Group is one of the largest staffing companies in Japan with 32,000 employees and operations throughout Asia Pacific. The group provides a range of services including temporary staffing, permanent placements, recruitment, IT outsourcing and design development.

PERSOL was founded by Yoshiko Shinohara, who was on holiday in Sydney working for a marketing company when she saw a business providing temporary staff. Recognising this was a new business model in the Japanese market, she started the business Temp Staff in her one-bedroom Tokyo apartment in 1973; this was the forerunner of PERSOL Group today. Ms. Shinohara is now recognised as one of the top business women in the world, has received awards such as "The Top 50 Women in World Business (Financial Times, 2011)" and "Asia's 50 Power Businesswomen (Forbes, 2012)", and remains a significant shareholder in the company.

The company today is listed on the Tokyo Stock Exchange (TSE 1:2181), with a market capitalisation of

¥492 billion5 (A$5.7 billion6). For the year ended 31 March 2017, it reported revenue of ¥592 billion (A$6.8 billion6) and NPAT of ¥18 billion (A$205 million6). At March 2017, it had net cash of ¥44 billion (A$504 million6).

3 Volume weighted average price based on cumulative trading volume and value up to and including 13 July 2017.

4 FY17 EBITDA before non trading items of $96.5 million. 5 PERSOL closing share price of ¥2,105 on 12 July 2017. 6 JPY/AUD exchange rate of 86.8755 as at 12 July 2017.

Programmed managing director and CEO Mr Chris Sutherland said: "Currently, PERSOL operates across Asia Pacific and we are proud that it has now chosen Programmed as its platform for growth in the Australia and New Zealand markets. We look forward to continuing to implement our current business plan with a very strong, global and supportive shareholder.

"We also look forward to supporting Asia Pacific wide staffing solutions and the opportunity to extend our maintenance / facility management business into Asia at some time in the future.

"It is important to emphasise that Programmed will remain an Australian company operating across Australia and New Zealand, employing thousands of Australians and New Zealanders, with its headquarters in Perth, Western Australia. Our commitment to the core behaviours that define the Programmed culture will not change, which are personal safety leadership, care and empathy, and good old-fashioned customer service."

The implementation of the Scheme is subject to a number of customary conditions, including the approval of Programmed shareholders, the Federal Court of Australia and FIRB; there being no material adverse change or prescribed occurrence; and an Independent Expert's Report concluding that the Scheme is in the best interest of shareholders (and not changing or withdrawing that conclusion).

The Scheme Implementation Deed (SID) contains customary exclusivity provisions (with suitable fiduciary carve-outs, where appropriate), as well as providing for certain notification and matching rights in favour of PERSOL. It also details circumstances under which a reimbursement fee of 1% of the aggregate implied equity value of Programmed under the Proposal may be payable by either of Programmed or PERSOL, depending on the circumstances. Full details of the conditions to the Scheme and other agreed terms are set out in the SID, a copy of which is attached to this announcement.

Suspension of Dividend Reinvestment Plan

Pursuant to the SID, PERSOL and Programmed have agreed that Programmed's Dividend Reinvestment Plan (DRP) will be suspended in respect of the FY17 Final Dividend of 3.5 cents (announced on 24 May 2017).

Accordingly, Programmed notifies shareholders of that suspension, effective immediately and until further notice, in accordance with the rules of the DRP. This means that no Programmed shareholders will be issued new Programmed shares under the DRP, regardless of if, or when, they have elected to participate in the DRP. A revised Appendix 3A.1 (Notification of Dividend / Distribution) will also be lodged with ASX today.

To avoid any doubt, the DRP will also not operate in respect of any special dividend payable in connection with the Proposal.

Payment of the FY17 Final Dividend of 3.5 cents will not be impacted by the Proposal, and will be paid in cash as scheduled (on 31 July 2017).

Performance rights

Under the SID, Programmed is required to ensure (insofar as is permissible and practicable) that all Programmed performance rights on issue vest prior to the applicable record dates under the Proposal. As such, the Programmed Board has determined that, in accordance with and as permitted by the terms of Programmed's Long Term Incentive Plan and Managing Director's Long Term Incentive Plan (MDLTIP), and subject to receiving any confirmations or waivers that are required from ASX, it will exercise its discretion to accelerate the vesting of all outstanding Programmed performance rights such that the resulting shares will be capable of participating in the Scheme process.

For completeness, Programmed notes the upcoming 2017 AGM, at which Programmed shareholders will consider, among other things, a resolution relating to the grant of certain 2017 Programmed performance rights to the Managing Director under the MDLTIP. This resolution is not impacted by the Proposal and the Board's approach to dealing with performance rights (as set out above in this announcement), will also apply to these additional performance rights if shareholders approve their grant at the AGM. If shareholders wish to reconsider their proxy directions in light of the Proposal (and the consequence of this on the vesting of the 2017 performance rights proposed to be granted to the Managing Director) they should contact Programmed's share registry, Computershare, for a replacement proxy form and further assistance.

Programmed shareholders do not need to take any action at the present time.

The Scheme Booklet containing information relating to the Scheme, the Independent Expert's Report (opining on whether the Scheme is in the best interests of Programmed shareholders), the reasons for the Directors' recommendation, and details of the Scheme Meeting is expected to be mailed to Programmed shareholders in early September 2017.

An indicative timetable of key dates in relation to the Scheme is set out in the SID; however, this remains subject to change and Programmed will continue to keep shareholders updated as the Scheme process unfolds.

At this stage, it is expected that Programmed shareholders will have the opportunity to vote on the Scheme at a Scheme Meeting to be held in early October 2017.Subject to the conditions of the Scheme being satisfied, the Scheme is expected to be implemented on or around the middle of October 2017.

These dates are indicative and subject to change.

Macquarie Capital (Australia) Limited and Ashurst are advising Programmed.

For further information, please contact:

General / Investor Enquiries Chris Sutherland

Managing Director Telephone: +61 8 9216 2123

Media Enquiries: Ashley Rambukwella,

Financial & Corporate Relations Telephone: +61 407 231 282

Programmed is a leading provider of staffing, maintenance and facility management services. The company employs directly more than 20,000 people across a broad range of government and private sector businesses. Services are provided to more than 10,000 customers, often under long-term contracts, and are delivered through over 100 branches throughout Australia and New Zealand. Programmed's business model is built around its ability to recruit, deploy, manage and maintain a large directly employed workforce of professional, skilled and semi-skilled staff with a wide range of capabilities.