update on acquisition and integration of mg plc by now , most of you are aware that enron will be acquiring london - based mg
plc , one of the world  , s leading metals marketers . in connection with our
on - going activities relating to mg plc , i thought it would be helpful to
provide you with a brief overview of on our future new metals business , to
further explain the reasons underlying the acquisition and to update you on
the integration team  , s accomplishments to date .
what is mg plc ?
mg plc is a leading , independent international metals trading business , which
provides a variety of services to the global metals industry . the business
dates back to 1881 when it was the german metallgesellschaft group and was
active in trading metals from its head office in frankfurt . today , mg is one
of the world  , s top non - ferrous metals brokers and market makers , the world  , s
leading independent copper merchant and a leading merchant of many other
non - ferrous metals .
mg is comprised of two core areas of expertise , the financial services and
merchanting divisions . the financial services division was formed in 1970 to
provide market - making and trading services to the mg  , s physical metals
trading business through futures trading as a member of the london metal
exchange and , at a later date , as a member of comex in new york . in the late
1980 s , as a result of london  , s growing leading role in the metals industry ,
mg established a merchant trading office in london . in 1986 , mg developed
its warehousing division with the acquisition of henry bath . in 1999 , the
merchanting and financial services divisions , including warehousing , were
combined into a single company , which was floated on the london stock
exchange . currently , mg  , s core trading offices are located in london and new
york with warehouse operations in liverpool , humberside , rotterdam , new
orleans , new haven , and singapore . it has merchanting offices in lima ,
santiago , los angeles , chicago , stockholm , cologne , hamburg , frankfurt , new
delhi , shanghai , beijing , hong kong , seoul , tokyo and melbourne .
what does the merchanting division do ?
the merchanting division is the world  , s leading independent copper merchant ,
one of the top three independent merchants of copper concentrates and nickel
and one of the leading european merchants of recycled non - ferrous metals . the
division also trades in other non - ferrous metals on the london metals
exchange ( lme ) , including lead , tin , zinc , aluminium and brass .
the merchanting division engages in the following main activities :
? merchanting of non - ferrous metals  ) mg trades as a principal with producers
and consumers , buying and selling non - ferrous metals and concentrates
( particularly copper , aluminium and nickel ) , exchanging qualities and
locations and lending and borrowing metals .
? global stockholding  ) mg holds stocks of non - ferrous metals at warehouses
around the world .
? merchanting of recycled metal  ) mg trades as a principal with suppliers and
consumers of non - ferrous metal for recycling .
? terminal market operations  ) mg participates in the lme and comex using
hedging , arbitrage and position management to support its merchanting
activity .
what does the financial services division do ?
the financial services division is one of the leading lme members and , based
on the volume of lme metals stored , is one of the leading lme metals
warehousing businesses .
the financial services division engages in the following main activities :
? brokerage activities  ) mg executes orders as a broker for clients in lme
and comex contracts .
? market - making  ) mg is a market - maker for both futures and options contracts
and comex and otc contracts .
? warehousing  ) mg stores metals and other goods in eleven locations in
europe , the united states and asia .
mg has also begun to prepare to trade non - ferrous metals using the internet
as its platform . on 10 th february , mg announced the formation of a joint
venture with internet capital group , inc . and safeguard international fund ,
l . p . to develop an internet marketplace for trading non - ferrous metals . the
joint venture , called emetra , intends to establish a world - wide
business - to - business , e - commerce trading platform for the non - ferrous metals
markets , including physical trading and the trading of futures and options
contracts .
why is enron acquiring mg ?
enron is committed to expanding its position as a global leader in wholesale
markets . by expanding into new wholesale markets , such as non - ferrous metals ,
enron expects to leverage its wholesale expertise and will be able to offer
customers new products and solutions to address their business needs which
link different commodities and inputs .
mg will provide enron with a number of important benefits . at the same time ,
enron expects that mg will significantly benefit from its association with
enron . some of the benefits we envisage include :
? the opportunity to combine enron  , s core competencies in trading , finance
and origination with mg  , s global position in trading non - ferrous metals .
? the ability for both enron and mg to access new clients , particularly in
the united states and europe .
? the ability to cross - market both existing products and new products such as
bundled products that offer combined metals and power outsourcing .
? the ability to leverage the opportunities available to mg by increasing its
financial strength and the resources available to it .
? the chance to overlay the enrononline business - model on the metals industry
to increase liquidity and contract market share .
what remains to be done ?
merging the business operations of two entities , even highly motivated
companies such as enron and mg , has been and will continue to be a formidable
and daunting exercise . having a shared vision facilitates rapid integration ,
but there are many complicated and complex tasks that remain . during the
conditional offer period , enron and mg are taking steps to prepare for a
seamless and non - disruptive integration of our respective operations .
ideally , when enron  , s offer to buy all mg shares becomes unconditional ( 15
july 2000 is the current target date ) , the two can hit the ground with their
feet running .
in the short term , a number of things must be accomplished to facilitate that
smooth transition . most importantly , in order to ensure that the deal goes
forward , enron and mg will work to remove the remaining conditions to enron  , s
offer , including obtaining the shareholder approvals from all shareholders as
well as obtaining relevant regulatory consents .
a number of other steps must be taken , however , during the first phase of our
integration timetable to ensure that everything stays on track . integration
activities will focus on four primary aspects of our operations : commercial
matters , financial matters , middle and back office issues ; and , most
importantly , on the employees of both organisations . some of the most
important goals relating to each of these areas are :
commercial
? developing physical metal contracts suitable for listing on enrononline and
installing necessary communication and technology links to facilitate data
transfers and information flows between mg and enron .
? preparing a joint venture management plan for mg ' s interest in emetra that
is consistent with enron  , s goal of listing physical metal contracts on
enrononline .
? identifying opportunities to
- combine enron ' s core competencies in trading , finance , and origination with
mg ' s global position in trading non - ferrous metals ;
- leverage mg  , s position by increasing its financial strength and resources
available to it ;
- cross - market both existing and new products to enron and mg customers ,
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
or other agreements .
? preparing plans to integrate cash management functions and putting in place
funding arrangements for august 2000 onwards .
? preparing plans to arrange large - scale inventory securitisation to reduce
balance sheet debt before year - end .
middle and back office
? preparing financial information necessary to understand and maximise
integration benefits including , pro - forma consolidated financial statements ;
profit and loss budgets for the third and fourth quarters of 2000 ; and
integration budgets .
? determining the feasibility of integrating accounting systems ( as 400 , sap ) .
? assessing mg ' s core trading and risk profiles and developing plans to
incorporate risk profiles in mg ' s metals books into enron systems .
? evaluating it systems and infra - structure at all mg office + warehouse
locations and preparing budgets and programmes to provide mg staff with
access to enron it systems and applications .
people
? preparing a programme to co - locate mg ' s london staff ( 145 ) at enron house
over the weekend of 16 / 17 september .
? developing plans to harmonize compensation , benefits , and employment
policies and practices ; developing plans for staff reporting relationships .
? communicating plans and status of activities at all levels of enron ' s and
mg ' s organizations .
? arranging introductions between enron and mg staff and providing
opportunities for information exchanges .
where do we go from here ?
i believe that enron  , s acquisition of mg is an exciting opportunity for us
all . while a number of steps remain to be taken , we have already
successfully begun the integration of enron and mg . by remaining
enthusiastic and committed to this process , i expect that this transition
will proceed smoothly and with a minimum of difficulty .
summary of mg offices / staff worldwide
location employee
headcount location employee
headcount
brazil
canada
chicago
chile
edinburgh
frankfurt
germany
hamburg
hong kong
houston
k ? ln
lima
liverpool
london
los angeles , ca
missouri 1
4
6
1
1
28
1
39
1
2
1
1
38
152
18
3 moscow
ny
peru
rotterdam
shanghai
singapore
south africa
spain
stockholm
tokyo
henry bath camberley
henry bath edinburgh
henry bath london
henry bath manchester
henry bath avonmouth
liverpool  ) hb & son 1
46
1
29
1
7
1
1
2
8
2
1
10
2
4
18
for further information or queries regarding mg , please contact eric gadd .
direct no : + 44 20 7783 6595
fax no : + 44 20 7783 8314
update on acquisition and integration of mg plc
by now , most of you are aware that enron will be acquiring london - based mg
plc , one of the world  , s leading metals marketers . in connection with our
on - going activities relating to mg plc , i thought it would be helpful to
provide you with a brief overview of on our future new metals business , to
further explain the reasons underlying the acquisition and to update you on
the integration team  , s accomplishments to date .
what is mg plc ?
mg plc is a leading , independent international metals trading business , which
provides a variety of services to the global metals industry . the business
dates back to 1881 when it was the german metallgesellschaft group and was
active in trading metals from its head office in frankfurt . today , mg is one
of the world  , s top non - ferrous metals brokers and market makers , the world  , s
leading independent copper merchant and a leading merchant of many other
non - ferrous metals .
mg is comprised of two core areas of expertise , the financial services and
merchanting divisions . the financial services division was formed in 1970 to
provide market - making and trading services to the mg  , s physical metals
trading business through futures trading as a member of the london metal
exchange and , at a later date , as a member of comex in new york . in the late
1980 s , as a result of london  , s growing leading role in the metals industry ,
mg established a merchant trading office in london . in 1986 , mg developed
its warehousing division with the acquisition of henry bath . in 1999 , the
merchanting and financial services divisions , including warehousing , were
combined into a single company , which was floated on the london stock
exchange . currently , mg  , s core trading offices are located in london and new
york with warehouse operations in liverpool , humberside , rotterdam , new
orleans , new haven , and singapore . it has merchanting offices in lima ,
santiago , los angeles , chicago , stockholm , cologne , hamburg , frankfurt , new
delhi , shanghai , beijing , hong kong , seoul , tokyo and melbourne .
what does the merchanting division do ?
the merchanting division is the world  , s leading independent copper merchant ,
one of the top three independent merchants of copper concentrates and nickel
and one of the leading european merchants of recycled non - ferrous metals . the
division also trades in other non - ferrous metals on the london metals
exchange ( lme ) , including lead , tin , zinc , aluminium and brass .
the merchanting division engages in the following main activities :
? merchanting of non - ferrous metals  ) mg trades as a principal with producers
and consumers , buying and selling non - ferrous metals and concentrates
( particularly copper , aluminium and nickel ) , exchanging qualities and
locations and lending and borrowing metals .
? global stockholding  ) mg holds stocks of non - ferrous metals at warehouses
around the world .
? merchanting of recycled metal  ) mg trades as a principal with suppliers and
consumers of non - ferrous metal for recycling .
? terminal market operations  ) mg participates in the lme and comex using
hedging , arbitrage and position management to support its merchanting
activity .
what does the financial services division do ?
the financial services division is one of the leading lme members and , based
on the volume of lme metals stored , is one of the leading lme metals
warehousing businesses .
the financial services division engages in the following main activities :
? brokerage activities  ) mg executes orders as a broker for clients in lme
and comex contracts .
? market - making  ) mg is a market - maker for both futures and options contracts
and comex and otc contracts .
? warehousing  ) mg stores metals and other goods in eleven locations in
europe , the united states and asia .
mg has also begun to prepare to trade non - ferrous metals using the internet
as its platform . on 10 th february , mg announced the formation of a joint
venture with internet capital group , inc . and safeguard international fund ,
l . p . to develop an internet marketplace for trading non - ferrous metals . the
joint venture , called emetra , intends to establish a world - wide
business - to - business , e - commerce trading platform for the non - ferrous metals
markets , including physical trading and the trading of futures and options
contracts .
why is enron acquiring mg ?
enron is committed to expanding its position as a global leader in wholesale
markets . by expanding into new wholesale markets , such as non - ferrous metals ,
enron expects to leverage its wholesale expertise and will be able to offer
customers new products and solutions to address their business needs which
link different commodities and inputs .
mg will provide enron with a number of important benefits . at the same time ,
enron expects that mg will significantly benefit from its association with
enron . some of the benefits we envisage include :
? the opportunity to combine enron  , s core competencies in trading , finance
and origination with mg  , s global position in trading non - ferrous metals .
? the ability for both enron and mg to access new clients , particularly in
the united states and europe .
? the ability to cross - market both existing products and new products such as
bundled products that offer combined metals and power outsourcing .
? the ability to leverage the opportunities available to mg by increasing its
financial strength and the resources available to it .
? the chance to overlay the enrononline business - model on the metals industry
to increase liquidity and contract market share .
what remains to be done ?
merging the business operations of two entities , even highly motivated
companies such as enron and mg , has been and will continue to be a formidable
and daunting exercise . having a shared vision facilitates rapid integration ,
but there are many complicated and complex tasks that remain . during the
conditional offer period , enron and mg are taking steps to prepare for a
seamless and non - disruptive integration of our respective operations .
ideally , when enron  , s offer to buy all mg shares becomes unconditional ( 15
july 2000 is the current target date ) , the two can hit the ground with their
feet running .
in the short term , a number of things must be accomplished to facilitate that
smooth transition . most importantly , in order to ensure that the deal goes
forward , enron and mg will work to remove the remaining conditions to enron  , s
offer , including obtaining the shareholder approvals from all shareholders as
well as obtaining relevant regulatory consents .
a number of other steps must be taken , however , during the first phase of our
integration timetable to ensure that everything stays on track . integration
activities will focus on four primary aspects of our operations : commercial
matters , financial matters , middle and back office issues ; and , most
importantly , on the employees of both organisations . some of the most
important goals relating to each of these areas are :
commercial
? developing physical metal contracts suitable for listing on enrononline and
installing necessary communication and technology links to facilitate data
transfers and information flows between mg and enron .
? preparing a joint venture management plan for mg ' s interest in emetra that
is consistent with enron  , s goal of listing physical metal contracts on
enrononline .
? identifying opportunities to
- combine enron ' s core competencies in trading , finance , and origination with
mg ' s global position in trading non - ferrous metals ;
- leverage mg  , s position by increasing its financial strength and resources
available to it ;
- cross - market both existing and new products to enron and mg customers ,
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
or other agreements .
? preparing plans to integrate cash management functions and putting in place
funding arrangements for august 2000 onwards .
? preparing plans to arrange large - scale inventory securitisation to reduce
balance sheet debt before year - end .
middle and back office
? preparing financial information necessary to understand and maximise
integration benefits including , pro - forma consolidated financial statements ;
profit and loss budgets for the third and fourth quarters of 2000 ; and
integration budgets .
? determining the feasibility of integrating accounting systems ( as 400 , sap ) .
? assessing mg ' s core trading and risk profiles and developing plans to
incorporate risk profiles in mg ' s metals books into enron systems .
? evaluating it systems and infra - structure at all mg office + warehouse
locations and preparing budgets and programmes to provide mg staff with
access to enron it systems and applications .
people
? preparing a programme to co - locate mg ' s london staff ( 145 ) at enron house
over the weekend of 16 / 17 september .
? developing plans to harmonize compensation , benefits , and employment
policies and practices ; developing plans for staff reporting relationships .
? communicating plans and status of activities at all levels of enron ' s and
mg ' s organizations .
? arranging introductions between enron and mg staff and providing
opportunities for information exchanges .
where do we go from here ?
i believe that enron  , s acquisition of mg is an exciting opportunity for us
all . while a number of steps remain to be taken , we have already
successfully begun the integration of enron and mg . by remaining
enthusiastic and committed to this process , i expect that this transition
will proceed smoothly and with a minimum of difficulty .
summary of mg offices / staff worldwide
location employee
headcount location employee
headcount
brazil
canada
chicago
chile
edinburgh
frankfurt
germany
hamburg
hong kong
houston
k ? ln
lima
liverpool
london
los angeles , ca
missouri 1
4
6
1
1
28
1
39
1
2
1
1
38
152
18
3 moscow
ny
peru
rotterdam
shanghai
singapore
south africa
spain
stockholm
tokyo
henry bath camberley
henry bath edinburgh
henry bath london
henry bath manchester
henry bath avonmouth
liverpool  ) hb & son 1
46
1
29
1
7
1
1
2
8
2
1
10
2
4
18
for further information or queries regarding mg , please contact eric gadd .
direct no : + 44 20 7783 6595
fax no : + 44 20 7783 8314