TIDMAVS
RNS Number : 2833W
Avesco Group PLC
23 December 2013
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART
IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A
VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT
JURISDICTION
23 December 2013
AVESCO GROUP PLC
("AVESCO" OR THE "COMPANY")
PROPOSED RETURN OF CASH TO AVESCO SHAREHOLDERS OF 110 PENCE PER
ORDINARY SHARE BY MEANS OF A B/C SHARE SCHEME
and
APPROVAL OF A BUY-BACK OF CERTAIN ORDINARY SHARES
Summary
Further to the Company's announcement today of its preliminary
results for the year ended 30 September 2013 (the "Preliminary
Results"), the Company is pleased to announce further details of
its proposed return of 110 pence per share (approximately GBP30.6
million) in cash to its shareholders and LTIP award-holders (the
"Return of Cash").
The Company also announces today that it has entered into a
share purchase agreement (the "Buy-back Agreement") with Taya
Communications Ltd. ("Taya") to acquire, conditional upon approval
by Avesco shareholders, 7,584,724 Ordinary Shares in the capital of
the Company by way of an off-market share purchase (the "Share
Buy-back").
A circular to Avesco shareholders in relation to the Return of
Cash and the Share Buyback (the "Circular"), which includes a
notice convening a general meeting of the Company to approve the
Return of Cash and the Share Buyback, will be posted to Avesco
shareholders on or around Friday, 27 December 2013.
Return of Cash
As Avesco shareholders may by now be aware, from previous
announcements made by the Company, in December 2006 the Avesco
Group sold its interest (the "Disposal") in Complete Communications
Corporation Limited ("Complete"). Under the terms of the sale and
purchase agreement relating to the Disposal, the Group retained the
right to receive certain further deferred consideration arising
from the outcome of litigation in the US brought by Celador
International Ltd. ("Celador") against the Walt Disney Company and
others over the US profits from the TV show 'Who Wants To Be A
Millionaire?'.
This litigation has been protracted and has extended over many
years since the Disposal. On 7 March 2013, the Ninth Circuit Court
of Appeals issued its order returning the case to the trial court,
an act which had the legal effect of making the judgment (which had
previously been decided in Celador's favour) collectible by
Celador. Celador was awarded US$319 million in damages and
pre-judgment interest. Under the terms of the agreement relating to
the Disposal, the Group's entitlement to deferred consideration
calculated by reference to this award amounted to GBP45.7 million
(net of estimated tax liabilities and indemnities) (the "Disney
Funds").
The Disney Funds represent a significant capital profit from the
Disposal and, in light of the expected cash requirements of the
Avesco Group and other funds available to the Avesco Group, the
Directors consider that very little of these further proceeds from
the Disposal need to be retained in the business.
Under the arrangements being proposed, the Directors are seeking
approval to return approximately GBP30.6 million of the Disney
Funds to Avesco shareholders and LTIP award-holders pursuant to the
Return of Cash.
As announced on 9 September 2013, the Board of Directors of
Avesco (the "Board") intends to complete the Return of Cash to
Avesco shareholders through a B/C Share Scheme (the "B/C Share
Scheme"). While the Company is returning further capital proceeds
to Avesco shareholders, it is assumed that certain Avesco
shareholders may wish to receive their entitlement under the Return
of Cash as an income dividend rather than a capital receipt.
Furthermore, the amount of the Return of Cash exceeds the amount of
the Company's total share premium reserve. Accordingly, the B/C
Share Scheme enables Avesco shareholders, subject to applicable
overseas restrictions, to elect to receive their cash proceeds
under the Return of Cash as either income or capital or any
combination of the two.
Under the B/C Share Scheme, for every one ordinary share of 10
pence each in the capital of the Company (an "Ordinary Share") held
at 5.00 p.m. on 23 January 2014 (the "Record Date"), 110 pence will
be returned to Avesco shareholders through the bonus issue to them
of either one B Share (which will be redeemed by the Company for
110 pence in cash) (the "Capital Option") or one C Share (on which
a dividend of 110 pence will be payable) (the "Income Option").
The key elements of the proposed Return of Cash and the B/C
Share Scheme are as follows:
-- As referred to above, Avesco shareholders (other than
overseas Avesco shareholders resident, or with registered
addresses, in certain restricted territories) can elect to receive
their cash proceeds under the Return of Cash as either income or
capital or any combination of the two.
-- Due to the limit on the amount of share premium that is
available for capitalisation on the Company's balance sheet, Avesco
shareholders who do not make valid elections and overseas Avesco
shareholders resident, or with registered addresses, in certain
restricted territories will be deemed to have elected for the
Income Option in respect of ALL of their entitlements under the B/C
Share Scheme.
-- Avesco shareholders who elect for the Capital Option will
receive one B Share for each Ordinary Share held at the Record
Date. It is expected that each B Share will be redeemed by the
Company for 110 pence. B Shares will be cancelled upon redemption.
The cash received under the Capital Option should be taxed almost
exclusively as capital for UK individual Avesco shareholders.
-- The Return of Cash is conditional upon Shareholder approval,
which will be sought at a general meeting of the Company to be held
at 11.00 a.m. on 22 January 2014. The resolution to approve the
Return of Cash (the "Return of Cash Resolution") is a special
resolution and will be passed if at least 75 per cent. of the votes
cast by Avesco Shareholders are in favour.
-- The latest time and date for receipt of Avesco shareholders'
forms of proxy and CREST proxy instructions is 11.00 a.m. on 20
January 2014.
-- The Record Date for the entitlement to B Shares and/or C
Shares is 5.00 p.m. on 23 January 2014.
-- The latest time and date for receipt of Avesco shareholders'
elections under the B/C Share Scheme is 1.00 p.m. on 23 January
2014.
-- Cheques are expected to be despatched to Avesco shareholders
and CREST accounts are expected to be credited on or around 31
January 2014.
An expected timetable of principal events is set out in full at
the end of this announcement.
The Board believes that the B/C Share Scheme represents a
flexible and efficient way to effect the Return of Cash and that it
treats all Avesco shareholders equally, relative to the size of
their existing shareholdings in the Company. It is the Directors'
intention that the Return of Cash will be separate from, and will
not impact on, the Company's normal income dividend payment
pattern.
Share Buy-back
Avesco shareholders may also be aware that Taya is the
beneficial owner of 7,784,878 Ordinary Shares (representing 29.9
per cent. of the Company's issued share capital, excluding shares
held in treasury) and has two representatives on the Board, Mr
Amiram Giniger and Ms Carmit Hoomash.
The Company and Taya have entered into the Buy-back Agreement
pursuant to which, subject to the approval of the Independent
Shareholders (being all Avesco shareholders, with the exception of
Taya), the Company will purchase 7,584,724 Ordinary Shares (the
"Buy-back Shares") from Taya at a price of 124.185 pence per
Buy-back Share.
The price payable per Buy-back Share represents a five per cent.
premium over the average closing mid-market price per Ordinary
Share for the forty-five business day period ending on 17 December
2013 (the last practicable date before the date of the Buy-back
Agreement), less the amount of 110 pence (being the cash
entitlement payable per Buy-back Share under the Return of
Cash).
Immediately after completion of the Share Buy-back, Taya will
hold 200,154 Ordinary Shares (representing 1.09 per cent. of the
Company's issued share capital as reduced by the Share
Buy-back).
As Taya currently holds more than ten per cent of the Company's
issued share capital, Taya is considered to be a "substantial
shareholder" of the Company for the purposes of the AIM Rules. This
means that the Share Buyback is to be treated as a "related party
transaction" under the AIM Rules.
The Independent Directors (being Richard Murray, John Christmas,
Graham Andrews and David Crump) believe that the Share Buy-back is
in the interests of the Independent Shareholders as:
-- The completion of the Share Buy-Back is expected to be
earnings-enhancing, post on-going funding costs. After the
completion of the Share Buy-Back, the value of the net assets per
Ordinary Share will increase proportionately.
-- The total voting rights of Independent Shareholders
(excluding the interests of the Directors) will increase to 66 per
cent. from 47 per cent. and, in this context, the Independent
Directors believe that the removal of a significant shareholder
will remove a possible disincentive to other institutional
investors considering an investment in the Company.
-- In recent years the Company has been reporting its financial
results on a quarterly basis to enable Taya to comply with Taya's
own reporting obligations on the Tel Aviv Stock Exchange. After
completion of the Share Buy-Back, the Company will be able to
revert to producing its financial results on a biannual basis which
will remove a management and administrative burden.
-- It is estimated that the Company will save approximately
GBP0.2 million per year in quarterly audit review fees, director's
fees and related expenses.
-- The reduction in the issued share capital will result in a
29.2 per cent. reduction in the amount of cash being paid out in
dividends by the Company and will, therefore, provide further
support to the Company's intention to maintain its progressive
dividend policy.
Following completion of the Share Buy-Back, the Company will be
able to continue to pursue its strategy of developing the Group's
core businesses to provide cash generation and dividend growth for
Avesco shareholders. Future gearing levels are expected to be in
line with or better than gearing before the Disney Funds were
received. The Independent Directors believe such gearing will not
present any constraints on the operation or development of the
business and will ultimately represent a more efficient capital
structure of the Group in the future.
Conditional on (and with effect from) completion of the Share
Buy-back, Mr Giniger and Ms Hoomash will each resign from the Board
and, in addition, Taya has undertaken, for a period of 30 months
from the date of completion of the Buy-back Agreement, it shall not
directly or indirectly acquire any additional interest in the
Company's securities nor make or cause to be made any offer for the
Company's securities (the "Standstill Agreement"). The undertakings
in the Standstill Agreement are subject to certain limited
exceptions, including in the event that a third party acquires 30
per cent. of the total voting rights of the Company or makes a firm
offer to acquire over 50 per cent. of the total voting rights of
the Company, Richard Murray ceases to be a "substantial
shareholder" of the Company for the purposes of the AIM Rules or
the Company provides its consent.
On completion of the Share Buy-Back and following the
resignation of Mr Giniger and Ms Hoomash as directors of the
Company, it is the Board's intention to recruit a new non-executive
director as soon as practicable.
The Buy-back Agreement (and therefore the Share Buy-back) is
conditional on Independent Shareholder approval. The resolution to
approve the Share Buy-back (the "Buy-back Resolution") is an
ordinary resolution of the Independent Shareholders and will be
passed if at least 50 per cent. of the votes cast by the
Independent Shareholders are in favour.
The Buy-back Resolution authorises the Company to effect the
Share Buy-back in accordance with the terms of the Buy-back
Agreement. The authority conferred by the Buy-back Resolution will
expire on 31 March 2014.
Financial impact of the Return of Cash and the Share
Buy-back
As reported in the Preliminary Results, the Avesco Group had a
net cash balance of GBP22.3 million as at 30 September 2013.
Subject to the approval of Avesco shareholders, the payments to
Avesco shareholders under the B/C Share Scheme and the payments to
LTIP award-holders will together amount to GBP30.6 million
(including any deferred elements referred to below) whilst payment
in respect of the Share Buy-back will amount to GBP9.4 million.
After allowing for costs of the transactions amounting to GBP0.4
million, the Group will be left with net debt of GBP18.1 million on
a pro forma basis which would represent a net debt to historic
EBITDA ratio of 0.97, compared to a banking covenant requirement
going forward that it not exceed 1.50 on a rolling twelve-month
basis.
In order to spread the impact of these payments, which would
otherwise all fall to be paid within a short period of time,
Richard Murray has , subject to completion of the Buy-back
Agreement, agreed to defer the majority of his entitlement under
the Return of Cash, being approximately GBP3.4 million until no
later than 30 June 2014 with the balance (GBP2 million) to be paid
on or before 30 September 2014.
The Independent Directors believe that, after making the
payments under the Return of Cash and the Share Buy-back, the
Group's resulting net debt of GBP18.1 million on a pro forma basis
is at a prudent level in terms of preserving the Avesco Group's
operational flexibility going forward, particularly when compared
to total debt facilities of GBP46.5 million as at 30 September
2013, and leaves gearing at levels similar to those maintained by
the Group prior to receipt of the Disney Funds. It will also enable
the Avesco Group to meet the costs of the on-going restructuring
activities at CT Germany and Presteigne Charter, whilst preserving
the Avesco Group's progressive dividend policy.
Looking towards 2014, the Avesco Group anticipates an increase
in demand for its services with a number of major "even year"
sporting events to look forward to, including the Winter Olympics
in Russia, the Commonwealth Games in Scotland and the FIFA World
Cup in Brazil.
Recommendation
The Board unanimously recommends that Avesco shareholders vote
in favour of the Return of Cash Resolution at the General Meeting,
as all the Directors intend to do in respect of their own direct
and indirect beneficial holdings (and, in the case of Mr Amiram
Giniger, those ordinary Shares held by Taya (a company which is
controlled by Mr Giniger)) which amount in aggregate, to 13,646,996
Ordinary Shares, representing approximately 52.6 per cent. of the
total voting rights of the Company.
The Independent Directors consider, having consulted with
finnCap Ltd (the Company's nominated adviser), that the terms of
the Share Buy-back are fair and reasonable insofar as Avesco
shareholders are concerned.
The Independent Directors unanimously recommend that the
Independent Shareholders vote in favour of the Buy-back Resolution
at the General Meeting, as all the Independent Directors intend to
do in respect of their own direct and indirect beneficial holdings
which amount in aggregate, to 5,862,118 Ordinary Shares,
representing approximately 22.6 per cent. of the total voting
rights of the Company.
Mr Giniger and Ms Carmit Hoomash are not counted amongst the
Independent Directors due to their respective connections to Taya.
Mr Giniger and Ms Hoomash have, therefore, not participated in the
Independent Directors' deliberations concerning the Share Buy-back
nor can they make any recommendation to the Independent
Shareholders in respect of voting on the Buy-back Resolution.
Circular
As explained above, a Circular setting out full details of:
-- the Return of Cash and the B/C Share Scheme;
-- the action to be taken by Avesco shareholders in connection
with the Return of Cash and the B/C Share Scheme;
-- the Share Buy-back; and
-- why the Directors consider the Return of Cash and the B/C
Share Scheme and the Share Buy-back to be in the best interests of
Avesco shareholders as a whole,
will be despatched to Avesco shareholders on or around 27
December 2013. The Circular will also be available at the Company's
website at http://www.avesco.com/.
For further information please contact:
Avesco Group plc
Richard Murray, Chairman
John Christmas, Group Finance
Director 01293 583400
finnCap
Julian Blunt/Ed Frisby, Corporate
Finance
Brian Patient/Victoria Bates,
Corporate Broking 020 7220 0500
Important information
Unless otherwise stated, references to time contained in this
announcement are to London time.
This announcement is for informational purposes only and does
not constitute an invitation to participate in the B/C Share Scheme
in or from any jurisdiction in or from which, or to or from whom,
it is unlawful to make such offer under applicable securities laws
or otherwise.
No application has been, or will be, made to any investment
exchange or trading platform for listing or admission to trading of
the B Shares, C Shares or Deferred Shares to be issued under the
B/C Share Scheme.
None of the B Shares, C Shares or Deferred Shares have been or
will be registered under the United States Securities Act of 1933
(as amended) (the "US Securities Act") or the state securities laws
of the United States and none of them may be offered or sold in the
United States unless pursuant to a transaction that has been
registered under the US Securities Act and the relevant state
securities laws or a transaction that is not subject to the
registration requirements of the US Securities Act and the state
securities laws, either due to an exemption therefrom or otherwise.
There will be no public offering of securities in the United
States.
Expected timetable of principal events
Event Expected time/date
2013
Date of posting of the Circular 27 December
2014
Latest time and date for receipt of 11.00 a.m. on 20 January
Forms of Proxy and CREST Proxy Instructions
for the General Meeting
General Meeting 11.00 a.m. on 22 January
Election Deadline: latest time and 1.00 p.m. on 23 January
date for receipt of Forms of Election
from certificated Avesco shareholders
or TTE Instructions from CREST holders
in relation to the Return of Cash
Record Date for determining entitlement 5.00 p.m. on 23 January
to B Shares and/or C Shares
B Shares and C Shares issued 24 January
Redemption of B Shares issued pursuant 24 January
to the Capital Option
C Share Dividend becomes payable on 24 January
C Shares issued pursuant to the Income
Option and these C Shares automatically
reclassify as Deferred Shares
Despatch of cheques, payment by BACS On or around 31 January
to mandated UK Sterling bank accounts
or, if held in CREST, CREST accounts
credited in respect of proceeds under
the Income Option
Despatch of cheques or, if held in On or around 31 January
CREST, CREST accounts credited in respect
of proceeds under the Capital Option
Expected date of completion of the 5 February
Share Buy-back
Notes:
(1) The above dates are indicative only. If any of the above
times and/or dates change, the Company will notify the revised
times and/or dates to Shareholders by an announcement through a
Regulatory Information Service.
(2) All references are to London time unless otherwise stated
(3) Events in the above timetable which follow the General
Meeting are conditional on one or other of the Resolutions being
passed at the General Meeting
This information is provided by RNS
The company news service from the London Stock Exchange
END
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