RNS Number:3252Q
Felix Group PLC
18 March 2008
18 March 2008
Felix Group plc ("Felix" or the "Company")
Proposed Related Party Acquisition of Crawshaw Group Limited ("Crawshaw")
Issue of 10,666,667 Subscription Shares at 37.5 pence per share to raise £4
million
Capital Reorganisation and Capital Reduction
Admission of the Enlarged Issued Share Capital to trading on AIM
Change of name to Crawshaw Group plc
Approval of waiver of Rule 9 of the Takeover Code
Change of Nominated Adviser and Broker
The board of Felix today announces that it has conditionally agreed to acquire
Crawshaw, the ultimate holding company of the Crawshaw Butchers Limited
("Crawshaw Butchers"), through the issue of 31,200,000 Consideration Shares in
Felix.
In conjunction with the Acquisition, Gartmore and Schroders, two existing
institutional Shareholders of the Company, have agreed to subscribe for an
aggregate of 10,666,667 New Ordinary Shares at 37.5p per New Ordinary Share
(equivalent to 0.75p per Ordinary Share), raising in aggregate £4.0 million
(before expenses).
The Company will change its name to Crawshaw Group plc.
Crawshaw's business comprises a chain of meat focussed retail stores operating
from fourteen retail outlets and two processing and distribution centres in
Yorkshire, Lincolnshire and Humberside.
Crawshaw's success has been achieved by selling a range of good quality fresh
meat, cooked meat and "deli" products at competitive prices from a variety of
retail outlets.
The Proposed Directors believe that Crawshaw has significant potential to
increase the number of retail outlets using its current business model.
The Independent Directors believe that Crawshaw represents an attractive
acquisition target that meets the criteria set out in the Company's investing
strategy which was agreed by shareholders on 14 January 2008.
The Acquisition will be treated as a reverse takeover under the AIM Rules. Upon
completion of the Acquisition and the Subscription, the Existing Ordinary Share
Capital will represent approximately 10.3 per cent of the Enlarged Issued Share
Capital.
The Board also announces the appointment of Investec as Nominated Adviser and
Broker to the Company with immediate effect.
Richard Rose, Chairman, said:
"The Board of Felix Group has determined that this deal is a good outcome for
Felix shareholders. Crawshaw is an excellent business, with a good business
model which provides a robust platform for future growth."
For further information contact:
Tulchan Communications 0207 353 4200
Susanna Voyle/Celia Gordon Shute
Investec Investment Banking 0207 597 5970
James Grace/Martin Smith
This summary should be read in conjunction with the full text of the Admission
Document which is expected to be posted to Shareholders today. The Acquisition
will be subject to certain conditions including approval of Shareholders at a
General Meeting which is expected to be convened for this purpose on 10 April
2008. Notice of this meeting is set out in the Admission Document. Certain
definitions and terms used in this Announcement are set out at the end of this
announcement.
Investec, which is authorised and regulated by the Financial Services Authority
in the United Kingdom, is acting exclusively as Nominated Adviser and Broker to
Felix in connection with Admission and the Acquisition and is not acting for any
other person and will not be responsible to any other person for providing the
protections afforded to customers of Investec or for advising on the transaction
and arrangements proposed in the Admission Document.
This announcement does not constitute, or form part of, an offer or invitation
to purchase or subscribe for any securities in any jurisdiction. The Admission
Document is expected to be published by the Company on the date of this
announcement and any acquisition of New Ordinary Shares in the Company should be
made only by reference to such Admission Document.
This announcement contains statements about Felix and the Enlarged Group that
are or may be forward-looking statements. All statements other than statements
of historical facts included in this announcement may be forward-looking
statements. Any statements preceded or followed by or that include the words
"targets", "plans", "believes", "expects", "aims", "intends", "will", "may",
"anticipates" or similar expressions or the negative thereof are forward-looking
statements. Forward-looking statements include statements relating to the
following: (i) future capital expenditures, expenses, revenues, economic
performance, financial condition, dividend policy, losses and future prospects;
(ii) business and management strategies and the expansion and growth of Felix
and/or the Enlarged Group; and (iii) the effects of government regulation on
Felix's and/or the Enlarged Group's business. These forward-looking statements
involve known and unknown risk, uncertainties and other factors which may cause
the actual results, performance or achievements of any such entity, or industry
results, to be materially different from any results, performance or
achievements expressed or implied by such forward-looking statements. These
forward-looking statements are based on numerous assumptions regarding the
present and future business strategies of such entity and the environment in
which each will operate in the future. Except as required by law, neither Felix
nor Investec nor any other party intends to update these forward-looking
statements, even though the affairs of Felix and/or the Enlarged Group may
change from time to time.
Felix Group plc
Proposed Related Party Acquisition of Crawshaw
Issue of 10,666,667 Subscription Shares at 37.5 pence per share to raise £4
million
Capital Reorganisation and Capital Reduction
Admission of the Enlarged Issued Share Capital to trading on AIM
Change of name to Crawshaw Group plc
Approval of waiver of Rule 9 of the Takeover Code
Change of Nominated Adviser and Broker
The Board of Felix announces that the Company has conditionally agreed to
acquire the entire issued share capital of Crawshaw for a consideration of £11.7
million. Crawshaw is the holding company of Crawshaw Butchers which operates a
chain of meat focussed retail food stores in Yorkshire, Lincolnshire and
Humberside.
The consideration payable by Felix under the terms of the Acquisition will be
satisfied in full by the issue, credited as fully paid, of 31,200,000
Consideration Shares which will represent, after the Subscription described
below, approximately 66.8 per cent. of the Enlarged Issued Share Capital.
By virtue of its size, the Acquisition will constitute a reverse takeover under
the AIM Rules for Companies and, as such, requires the approval of Shareholders.
Furthermore, various vendors of Crawshaw, who are deemed to be acting in concert
with each other, will following Admission between them be interested in
approximately 38.9 per cent. of the Enlarged Issued Share Capital. The Takeover
Panel has agreed, however, to waive the obligation to make a general offer that
would arise on the part of the Concert Party Members, either collectively or
individually, as a result of the Acquisition, subject to the relevant Resolution
being passed on a poll by the Independent Shareholders.
Richard Rose, Executive Chairman of Felix, is also Chairman of Crawshaw and
therefore the Acquisition is classified as a related party transaction under the
AIM Rules for Companies. In addition, for the same reason, the Acquisition will
require the approval of Shareholders pursuant to section 190 of the 2006 Act.
The Board has also today announced that, in conjunction with the Acquisition,
Gartmore and Schroders, two existing institutional Shareholders of the Company,
have agreed to subscribe for an aggregate of 10,666,667 New Ordinary Shares at
37.5p per New Ordinary Share (equivalent to 0.75p per Existing Ordinary Share),
raising in aggregate £4.0 million (before expenses).
The Company is also implementing a Capital Reorganisation whereby each Existing
Ordinary Share of 1p each will be divided into one Deferred Share (with no share
rights) of 0.9p and one ordinary share (with all the share rights) of 0.1p. The
new ordinary shares of 0.1p thereby created will then be consolidated on the
basis of 1 New Ordinary Share of 5p for every 50 new ordinary shares of 0.1p
each, and such shares will be issued pursuant to the Acquisition and the
Subscription.
Application will be made for the Enlarged Issued Share Capital to be admitted to
trading on AIM which it is anticipated will occur on 11 April 2008. At that
point the Acquisition will complete and Lynda Sherratt, Michael Masters and Alan
Uren will stand down from the Board and Kevin Boyd, Andrew Richardson and Colin
Crawshaw will join the Board. The Company will also change its name to Crawshaw
Group plc. In anticipation of the Acquisition, Felix has changed its accounting
reference date to 31 January to conform with that of Crawshaw.
The resolutions necessary to implement the Proposals will be proposed at the
General Meeting of the Company which is expected to be held on 10 April 2008.
The Company has received irrevocable undertakings from Shareholders who hold in
aggregate 172,198,541 Existing Ordinary Shares (representing 71.5 per cent. of
the Existing Issued Share Capital of the Company) to the effect that they will
vote in favour of the Resolutions.
Information on Felix
In February 2004, the Company (which at that time was a cash shell with the name
Chestnut Prospects Plc) acquired the entire issued share capital of Felix
Corporation and changed its name to Felix Group plc.
The business of Felix was established in June 2001 and had developed a sales
promotion format with data collection capacity through a direct consumer
interactive medium called "Everyone's a Winner" which, by utilising retailers'
advertising and sales promotion budgets, enabled participants to be allocated a
non-cash prize guaranteed to have a retail value of at least twice the cost of
participating. The concept was delivered through a number of channels and
ultimately via digital kiosks.
Between February 2004 and July 2007, approximately £17.2 million was raised by
equity fundraisings which was used to fund further research and development to
diversify and develop Felix's product offering. The resulting product was the
MAX BOX, a range of kiosks offering various functionalities including digital
and media products such as mobile "top-ups", music downloads, digital photo
printing and ATM facilities in addition to the original concept, "Everyone's a
Winner".
On 30 November 2007, following disappointing results from Felix's trials with
high street multiple retailers, the termination of a trading relationship with a
US partner and an aborted acquisition, the Board announced it had commissioned
independent consultants to conduct a detailed review of the viability of Felix's
business model. That review concluded that the business model was not viable and
therefore the Board determined it would no longer fund its trading subsidiary,
Felix Corporation. On 12 December 2007, it was announced that Felix Corporation
had entered administration and that David Costley-Wood and Brian Green of KPMG
LLP had been appointed joint administrators. On 18 January 2008, it was
announced that Felix Corporation, acting through its administrators, had sold
its assets to Cobco 868 Limited, a company controlled by Mr. Andrew Egan, the
ex-chief executive of the Company whose employment with the Company was
terminated on 14 December 2007.
Under the AIM Rules for Companies where a company whose shares are traded on AIM
divests itself of all or substantially all of its trading business activities it
will be treated as an "investing company". Such a company must then state its
investment strategy going forwards and implement such strategy, to the
satisfaction of the London Stock Exchange, within 12 months of shareholders
approving the investing strategy.
By virtue of the fact that Felix Corporation had been placed into
administration, the London Stock Exchange confirmed that the Company had
effectively divested itself of its trading business and should therefore be
treated as an investing company. Accordingly, on 20 December 2007 the Company
wrote to Shareholders with details of its proposed investing strategy.
Specifically, it would seek to acquire a trading business displaying one or more
of the following characteristics: currently and historically profitable, cash
generative and capable of organic growth or growth by acquisition. This
investing strategy was approved by Shareholders at a general meeting held on 14
January 2008.
After consulting with major Shareholders of the Company, the Independent
Directors have determined that Crawshaw meets the criteria set out in its
investing strategy. With support from major Shareholders in the Company, the
Vendors, who had intended that Crawshaw should ultimately be taken public in its
own right, have agreed to sell Crawshaw to the Company with the expectation that
this will assist in the acceleration of their business plans for Crawshaw.
Information on Crawshaw
Background and history
Crawshaw is the holding company for a privately owned group whose business
comprises a chain of meat focussed retail food stores operating from fourteen
retail outlets and two processing and distribution centres. The retail outlets
are situated through Yorkshire, Lincolnshire and Humberside and the distribution
centres are in Grimsby and Rotherham.
Crawshaw was founded in 1989 by Colin Crawshaw and since that time has grown to
its current size through selected acquisitions, new store openings and the
continuous management and upgrading of its outlets.
A major refurbishment of a key outlet in 2001 enabled the product range to be
expanded both in respect of its fresh meat offering and the ability to sell hot
food and sandwiches for the first time. The new format and the increase in the
product range proved to be successful and since the refurbishment of the first
outlet a further two existing outlets have been refurbished and five new outlets
have been opened (two through organic expansion and three through acquisition).
In April 2007, having identified Crawshaw as having potential for rapid organic
growth, the Crawshaw Investors (including Richard Rose) acquired a majority
shareholding in Crawshaw from Colin Crawshaw, Kevin Boyd, Martin Wilson and
Russell Davies. The April 2007 transaction placed an enterprise value of £9.2
million on Crawshaw and valued the share capital of Crawshaw at £2.0 million.
Prior to April 2007 the internal systems and controls of Crawshaw, as is not
uncommon with privately run concerns, left room for improvement. As a result the
accounts of Crawshaw Butchers for the year ended 31 January 2006 were qualified
to the extent that it was not possible to obtain sufficient evidence to verify
cash sales. Since April 2007, the Board of Crawshaw has invested in
re-organising the business and improving Crawshaw's internal systems and
controls and its operational standards and processes. Examples of such
re-organisation and investment include the recruitment of Andrew Richardson as
finance director, the implementation of new accounting software, the adoption of
a performance related bonus scheme for staff and the formalisation of various
health and safety processes which includes retaining the services of a health
and safety consultant. In addition, the board of Crawshaw has refined its
organic growth plans and has identified a number of new sites, the first of
which is expected to open shortly. The shareholders of Crawshaw have undertaken
to retain £9.7 million of the Consideration Shares which they receive for an
agreed period as detailed below.
Product offering
Crawshaw's success has been achieved by selling a range of good quality fresh
meat, cooked meat and "deli" products at competitive prices from a variety of
retail outlets. All but two of the outlets trade under the "Crawshaw" brand. In
addition, Crawshaw also makes some non-retail sales to wholesalers and catering
suppliers and provides some packing services. Crawshaw's retail outlets sell a
range of products including:
* pre-packed meats - pre-packaged fresh meats sold in value packs;
* served over the counter meats - unpackaged fresh meat that is purchased by the
customer over the counter and is sold by weight;
* hot cooked meats - hot meats prepared at the outlet, for example BBQ chickens;
* delicatessen - pies and cooked cold meats;
* sandwiches; and
* pre-cooked take away products.
The Proposed Directors believe that this diverse product offering helps
differentiate Crawshaw from traditional butchers businesses.
Distribution and retail premises
Stock is delivered to Crawshaw's processing and distribution facilities at
Grimsby and Rotherham where, as appropriate, it is processed, stored, packaged
and then despatched to the retail outlets via Crawshaw's own fleet of vehicles.
In the year ended 31 January 2008, the majority of products supplied to
Crawshaw's outlets by both value and volume passed through these distribution
facilities.
The Proposed Directors believe that this vertical integration of in-house
processing and distribution facilities gives Crawshaw a commercial advantage
over competitors.
The in-house distribution facility also enables quality control to be monitored
closely and allows purchases to be made from a variety of different sources.
Crawshaw has no formal supply contracts and is therefore able to be flexible and
opportunistic when making purchasing decisions.
The retail outlets, which are typically of between 1,000 and 2,000 square feet,
are primarily located in high streets, shopping malls or permanent covered
markets. All of Crawshaw's high street and shopping mall outlets have been
refitted over the past five years. Independent research conducted into the
Crawshaw business has revealed that the outlets have each developed a loyal
customer base which has a positive perception of Crawshaw and its staff.
Staff
The senior executive management of the Crawshaw business comprises: Kevin Boyd
(managing director), Colin Crawshaw (buying director), Andrew Richardson
(finance director), Russell Davies (regional director) and Martin Wilson
(regional director). On completion of the Acquisition Kevin Boyd, Colin Crawshaw
and Andrew Richardson will join the Board.
As at 31 January 2008, Crawshaw employed in total 183 staff, 155 at the retail
outlets with the rest divided between directors, management and administrative
staff (12) and warehouse staff (16). According to market research conducted by
Pragma Consulting Limited, Crawshaw is perceived by its customers to have
friendly, well trained and helpful staff.
Financial performance
The table below summarises the financial results of Crawshaw for each of the
financial years ended 31 January 2006, 2007 and 2008 together with the value of
its net assets at each of those dates. The financial results for the year ended
31 January 2008 reflect the results of Crawshaw Butchers for the period from 1
February 2007 to 16 April 2007 combined with the consolidated results of
Crawshaw (including Crawshaw Butchers) for the period from 16 April 2007 to 31
January 2008.
Year ended 31 January 2006 2007 2008
£m £m £m
Turnover 14.2 14.3 14.6
EBITDA (before one-off costs ) 1.9 2.1 1.6
Profit before income tax 1.7 2.0 0.6
Net assets 3.4 4.7 0.6
The Proposed Directors believe that, since the acquisition of Crawshaw Butchers
by Crawshaw in April 2007, additional recurring cost has been incurred by
Crawshaw in order to ensure that systems and processes are sufficiently robust
to allow the Enlarged Group to commence the proposed roll out of additional
outlets.
Key strengths
The Proposed Directors believe the key strengths of Crawshaw to be as follows:
* purchasing - the flexible manner in which Crawshaw sources, processes and
distributes stock gives it a competitive advantage;
* vertical integration - Crawshaw operates its own processing, warehousing and
distribution facilities which enable it to react rapidly to demand and reduce
supply chain costs;
* value for money - Crawshaw is able to pass on a proportion of the cost
advantages from its purchasing strategy and its vertical integration to its
customers;
* product range and quality - Crawshaw's offering of fresh meat, value
pre-packed products, BBQ chicken, hot and cold delicatessen products and
sandwiches are more diverse than traditional butchers. Customer feedback praises
the quality of Crawshaw's product offering;
* location of outlets - the outlets themselves are well located in high streets,
shopping malls and covered permanent markets;
* customer service - Crawshaw benefits from low staff turnover and high staff
morale which contribute to an enhanced shopping experience for customers;
* ability to react to changing market conditions - Crawshaw has been
opportunistic both in terms of varying its product offering and its purchasing
strategy; and
* tight control of expenditure by management - Crawshaw has been able to tightly
control its overhead cost base.
Strategy for Growth
The Independent Directors believe that Crawshaw represents an attractive
acquisition target that meets the criteria set out in the Company's investing
strategy.
The Independent Directors also believe that the existing business of Crawshaw is
profitable, cash generative and well managed. Additionally, the Proposed
Directors believe that although the existing outlets are mature in terms of
their growth profile, Crawshaw has significant potential to increase the number
of retail outlets using its current business model. Research carried out
demonstrates that the catchment area of each Crawshaw outlet is relatively small
and CACI Limited, which specialises in retail demographic modeling, has
identified 40 potential sites within Crawshaw's existing geographical area of
operation which could support a Crawshaw outlet. Furthermore, the Proposed
Directors estimate that the existing processing and distribution centres at
Grimsby and Rotherham could cater for double the number of existing Crawshaw
outlets that they currently support.
The Proposed Directors currently intend to roll out the Crawshaw business model
by opening new Crawshaw outlets in high street and mall locations, initially
within Crawshaw's existing geographic area of operation. CACI Limited has also
identified approximately 360 further potential locations for new stores
nationally. It is the Proposed Directors' intention to expand the Crawshaw
business from its current geographical footprint at an appropriate time, once
the roll out referred to above has reached a suitable stage.
Market and Competitors
Meat is an integral part of the UK diet, consistently accounting for nearly a
quarter of total household expenditure on food, according to National
Statistics. The Proposed Directors believe that in 2005 consumers spent
approximately £13.7 billion on meat and meat products in the UK - more than on
any other category of food except for fruit and vegetables.
Given the high levels of penetration of meat and meat products in the UK, the
total market is expected to grow at least in line with inflation to 2010 with
added-value products being partly responsible for this growth. The Proposed
Directors believe that the main threat to the industry's growth prospects is the
possibility of a serious outbreak of disease such as avian flu, foot-and-mouth
or other disease.
The leading supermarket chains dominate the sale of fresh and frozen meat,
accounting for around 82 per cent. of sales in 2007. The Proposed Directors
believe that there are 7,500 retail butchers and 600 specialist-catering
butchers in Britain today. Sales through retail butchers have declined between
2004 and 2006 by approximately 7 per cent..
Crawshaw's key competitors include the leading supermarket chains and local
independent butchers. Other competitors include market stalls, farm shops and
internet retailers.
Principal Terms of the Acquisition
Under the terms of the Acquisition Agreement the Company has conditionally
agreed to purchase the entire issued share capital of Crawshaw for a
consideration of £11.7 million to be satisfied by the issue to the Vendors,
credited as fully paid, of 31,200,000 Consideration Shares, which will represent
approximately 66.8 per cent. of the Enlarged Issued Share Capital.
In connection with the Acquisition, the holders of £3,002,690 nominal of Loan
Notes that had been issued by Crawshaw (and which would under their terms have
become repayable on Completion) have agreed to re-schedule their payment terms
(and waive all interest accrued to the date of Completion) such that 25 per
cent. of the principal amount of the Loan Notes are repaid on 1 August 2008, 25
per cent. on 1 February 2009 with the balance of 50 per cent. being repaid on 30
June 2009. Interest is payable quarterly on the outstanding principal amount of
the Loan Notes. All repayments of the principal amount of the Loan Notes due to
the holders of the Loan Notes are subject to the Enlarged Group having
sufficient working capital for its requirements after the relevant payment has
been made.
Completion of the Acquisition is conditional, inter alia, upon the passing of
Resolutions and Admission of the entire issued share capital of the Company
(including the Consideration Shares and the Subscription
Shares) occurring on or before 30 April 2008.
Bank Facilities
As at 18 March 2008; Felix does not possess any loan facilities and at 31
January 2008 had a cash balance of £2.6 million; the Crawshaw Group had a term
loan of £3.0 million, a property term loan of £840,000 and a cash balance of
£0.5 million at 31 January 2008. Following Admission, the Enlarged Group will
repay the term loan of £3.0 million but retain the property term loan facility
of £840,000. Felix is in the process of concluding an arrangement with a bank
for the provision of a revolving credit facility and a property term loan
facility. At such time as these facilities are provided to the Enlarged Group
and drawn down then the existing Crawshaw property term loan will be repaid.
The Board
With effect from Admission: Kevin Boyd, Andrew Richardson and Colin Crawshaw
will become Managing Director, Finance Director and Buying Director respectively
of the Enlarged Group. Lynda Sherratt, Michael
Masters and Alan Uren will step down from the Board. Richard Rose will remain as
Executive Chairman of the Company and Philip Kanas will remain as a
non-executive director of the Company. It is the intention of the Proposed
Directors to appoint an additional Independent Non-Executive Director as soon as
is practicable following Admission.
Current Trading and Prospects
Felix
Felix is a holding company and following its only trading subsidiary, Felix
Corporation, being put into administration, has no trade or business. At 31
January 2008, Felix had net assets of £1.867 million which comprise mainly cash
balances (net of creditors and provisions), which represents approximately 38.8
pence per New Ordinary Share.
On 11 December 2007, the directors of Felix Corporation, the trading subsidiary
of the Company, appointed David Costley-Wood and Brian Green of KPMG LLP to act
as joint administrators of Felix Corporation (the "Joint Administrators"). On 11
January 2008, certain of the business and assets of Felix Corporation were sold
to Cobco 868 Limited, a company controlled by Mr. Andrew Egan, the ex-chief
executive of Felix whose employment with the Company was terminated on 14
December 2007. This sale included the assignment of one of the leasehold
premises owned by Felix Corporation, subject to the landlord's consent to assign
being obtained on or before 11 April 2008.
The second leasehold premises owned by Felix Corporation was assigned on 29
February 2008 and the Company has been released from all guarantee obligations
under the original lease.
The Joint Administrators' proposals were approved by creditors at a creditors'
meeting held on 18 February 2008. The Board has been informed by the Joint
Adminstrators that the balance recoverable by Felix is likely to be
approximately £100,000 and that this amount will be paid over to the Company
within one year.
Crawshaw
Crawshaw is trading in accordance with the Proposed Directors' expectations.
The Enlarged Group
The Proposed Directors believe that the combination of Felix and Crawshaw will
enable Crawshaw to better develop its strategy for growth by using the cash
within Felix to help fund a roll-out of new Crawshaw stores. The Proposed
Directors view the prospects of the Enlarged Group with confidence.
City Code on Takeovers and Mergers
The Proposals give rise to certain considerations under the Takeover Code. Brief
details of the Takeover Panel, the Takeover Code and the protections they afford
are described below.
The Takeover Code is issued and administered by the Takeover Panel. The Takeover
Code applies to all takeover and merger transactions, however effected, where
the offeree company is, inter alia, a listed or unlisted public company with its
place of central management and control in the United Kingdom. The Company is
such a company and its shareholders are entitled to the protection afforded by
the Takeover
Code.
Under Rule 9 of the Takeover Code, any person who acquires an interest (as
defined in the Takeover Code) in shares which, taken together with shares in
which he is already interested and in which persons acting in
concert with him are interested, carry 30 per cent. or more of the voting rights
of a company which is subject to the Takeover Code is normally required to make
a general offer to all the remaining shareholders to acquire their shares.
Similarly, when any person, together with persons acting in concert with him, is
interested in shares which in the aggregate carry not less than 30 per cent. of
the voting rights of the company but does not hold shares carrying more than 50
per cent. of such voting rights, a general offer will normally
be required if any further interests are acquired by any such person.
An offer under Rule 9 must be made in cash and at the highest price paid by the
person required to make the offer, or any person acting in concert with him, for
any interest in shares of the company of that class during the 12 months prior
to the announcement of the offer.
For the purposes of the Takeover Code, a concert party arises where persons
acting in concert pursuant to an agreement or understanding (whether formal or
informal) actively co-operate to obtain or consolidate control of a company or
to frustrate the successful outcome of an offer for a company. Control for the
purposes of the Takeover Code is defined as an interest, or interests, in shares
carrying in aggregate 30 per cent. or more of the voting rights of a company,
irrespective of whether such interest or interests give de facto control.
The Concert Party Members are the individual vendors of Crawshaw who are
involved in the business of Crawshaw as directors and/or employees, being
Richard Rose, Colin Crawshaw, Kevin Boyd, Andrew Richardson, Russell Davies,
Martin Wilson and John Kelly. The Concert Party Members have agreed with the
Company that they are acting in Concert for the purposes of the Takeover Code.
Investec, acting as the Rule 3 adviser, and the Takeover Panel have agreed with
this approach.
Upon Admission, the Concert Party will hold, in aggregate, 18,169,453 New
Ordinary Shares representing approximately 38.92 per cent. of the Enlarged
Issued Share Capital, which takes into account the sale by Richard Rose of the
Sale Shares.
In addition, certain Concert Party Members have, conditional upon Admission,
been granted options over an aggregate of 866,666 New Ordinary Shares. If all
the Concert Party Options were exercised in full, the Concert Party could hold
up to approximately 39.37 per cent. of the then enlarged issued share capital.
The Takeover Panel has agreed, however, to waive the obligation to make a
general offer that would otherwise arise on the part of the Concert Party as a
result of the issue of the Consideration Shares to the Concert Party and the
exercise of the Concert Party Options, subject to the approval of Independent
Shareholders. Accordingly, Resolution 3 is being proposed at the General Meeting
and will be taken on a poll. To be passed, Resolution 3 will require a simple
majority of votes cast by Independent Shareholders.
On Admission, the Concert Party Members will between them be interested in
shares carrying 30 per cent. or more of the Company's voting share capital but
will not hold shares carrying more than 50 per cent. of such voting rights and
(for so long as the Concert Party continues to be treated as acting in concert)
any further increase in that aggregate interest in shares, other than through
the exercise of Concert Party Options, will be subject to the provisions of Rule
9 of the Takeover Code.
Details of the Subscription
The Company is raising £4 million through the issue to Schroders and Gartmore of
in aggregate 10,666,667 Subscription Shares at 37.5p per Subscription Share
(equivalent to 0.75p per Existing Ordinary Share) pursuant to the terms of the
Subscription Agreements. Completion of the Subscription is conditional, inter
alia, upon the passing of the Resolutions and Admission occurring on or before
30 April 2008.
The gross proceeds of the Subscription, together with the Company's existing
cash resources, will be used to pay the costs of the Proposals incurred by the
Company, to repay the existing term loan of Crawshaw, to fund the working
capital needs of the Enlarged Group and its growth strategy following Admission.
The Subscription is being carried out by the Company. Investec is not acting as
a subscription agent or otherwise in relation to the Subscription, which is not
underwritten.
In addition, Schroders and Gartmore have entered into separate contractual
arrangements with Richard Rose whereby on Admission they will purchase from him
5,333,333 Sale Shares at the Subscription Price of 37.5p per New Ordinary Share
(equivalent to 0.75p per Existing Ordinary Share).
The Subscription Shares will, on Admission, rank pari passu in all respects with
the New Ordinary Shares (including the Consideration Shares) including the right
to receive all dividends and other distributions thereafter declared, made or
paid.
Capital Reorganisation
The Board believes that it is in the best interests of Shareholders to undertake
the Capital Reorganisation detailed below, which the Directors and Proposed
Directors consider will make the number of ordinary shares in issue more
manageable and the share price more attractive to potential investors and
accordingly the Company proposes to implement the Capital Reorganisation. Save
for the dilution which will result from the issue of the Consideration Shares
and the Subscription Shares, the interests of existing Shareholders (both in
terms of their economic interest and voting rights) will not otherwise be
materially diluted by the implementation of the Capital Reorganisation.
At present the authorised share capital of the Company is £5,000,000 consisting
of 500,000,000 ordinary shares of 1p each of which 240,676,350 Existing Ordinary
Shares are in issue.
In order to implement the Capital Reorganisation a resolution to the following
effect will be proposed at the General Meeting:
- each Existing Ordinary Share of 1p will be divided into one deferred share of
0.9p and one new ordinary share of 0.1p;
- the new ordinary shares of 0.1p each will be consolidated on the basis of one
New Ordinary Share of 5p for every 50 new ordinary shares of 0.1p; and
- every five authorised but un-issued Existing Ordinary Shares of 1p will be
consolidated and re-designated into one New Ordinary Share of 5p.
On implementation of the Capital Reorganisation the holders of the Existing
Issued Share Capital will own 4,813,527 New Ordinary Shares which will represent
approximately 10.3 per cent. of the Enlarged Issued Share Capital.
At the General Meeting, a Resolution will also be passed to the effect that the
deferred share capital of the Company created by the Capital Reorganisation and
the share premium account of the Company (as enlarged by the issue of New
Ordinary Shares pursuant to the Acquisition and the Subscription) be cancelled
subject, in each case, to confirmation by the Court. Should the Court confirm
such cancellation this will create a reserve that will be available to offset
the current deficit of approximately £16.5 million on the profit and loss
account of the Company.
To be effective, the cancellation of the Deferred Shares element of the Capital
Reduction must be confirmed by the High Court and the subsequent Court order
registered with the Registrar of Companies. It is anticipated that before
issuing the requisite order the Court will require the Company to give certain
undertakings for the protection of its creditors. The Company expects to offer
such undertakings as the Court may require. It is anticipated that the Company
will undertake that, so long as there are relevant creditors, it will transfer
(i) any excess of the sum arising on the cancellation of the Deferred Shares
over the amount of the accumulated deficit on the profit and loss account of the
Company as at 31 January 2008; and (ii) any profit arising on any revaluation or
disposal of the Company's existing fixed assets (including any receipt of any
dividend from existing distributable profits of any of its subsidiaries) to a
special reserve which will be distributable only in limited circumstances.
Subject to the passing of Resolution 7 and the necessary Court order being
obtained and so registered, the cancellation of the Deferred Shares element of
the Capital Reduction could become effective within 6 weeks of the date of the
Court application having been made (although it is not possible to say with
certainty when the confirmation of the Court would be obtained).
To be effective, the cancellation of the amount standing to the credit of the
Company's share premium account element of the Capital Reduction must also be
confirmed by the High Court. Once that confirmation has been obtained, and the
relevant court order is registered by the Registrar of Companies, subject to the
undertaking referred to above, the new special reserve created by the
cancellation will enable the deficit of approximately £16.5 million as at 31
January 2008 to be eliminated.
Dealing Restrictions
The Vendors have each undertaken to the Company and Investec not to dispose of
any New Ordinary Shares held by them for a period of one year from the date of
Admission and not to dispose of any New Ordinary Shares in the second year
following Admission without Investec's prior written consent, in each case
subject to certain exceptions. These arrangements have been made in respect of
an aggregate 25,866,667 New Ordinary Shares representing approximately 55.4 per
cent. of the Enlarged Issued Share Capital. The Company and Investec have agreed
that if, following Admission, there is sufficient demand from institutional and
other investors identified by Investec at a price acceptable to the Vendors then
they may dispose of New Ordinary Shares held by them to investors identified by
Investec, however they are under no obligation to do so.
Dividend Policy
The Proposed Directors' current intention is to maximise Shareholder value by
retaining the Enlarged Group's earnings in the foreseeable future to finance
growth and expansion. It is however the Proposed
Directors' intention to pay dividends when the Enlarged Group has funds surplus
to its expansion requirements and it is prudent to do so.
Change of Name
To reflect the fact that following Admission the business of the Enlarged Group
will be that of Crawshaw, a resolution will be proposed at the General Meeting
to the effect that the name of the Company be changed to "Crawshaw Group plc".
Nominated Adviser and Broker
On 18 March 2008, Investec were appointment the nominated adviser and broker to
the Company.
Irrevocable Undertakings
The Company has received irrevocable undertakings from Shareholders who hold in
aggregate 172,198,541 Existing Ordinary Shares (representing approximately 71.5
per cent. of the Existing Issued Share Capital) to vote in favour of the
Resolutions to be proposed at the General Meeting. These undertakings include
those given by Schroders (in respect of their holding of 64,675,616 Existing
Ordinary Shares) and Gartmore (in respect of their holding of 33,288,331
Existing Ordinary Shares). Further details of the irrevocable undertakings to
vote are set out in paragraph 8.1.7 of Part 6 of this document.
Admission, Settlement and Dealings
Application will be made to the London Stock Exchange for all of the New
Ordinary Shares to be admitted to trading on AIM. It is expected that Admission
will take place, and that dealings on AIM in the Enlarged Issued Share Capital
will commence, on 11 April 2008.
The New Ordinary Shares will be capable of being held and settled through CREST.
CREST is a paperless settlement system which enables securities to be evidenced
other than by certificate and transferred other than by written instrument. The
New Articles will permit the holding and transfer of shares under CREST. CREST
is a voluntary system and Shareholders who wish to retain share certificates
will be able to do so.
The definitions set out below have the following meanings, unless the context
requires otherwise.
"Acquisition" the proposed acquisition by Felix of the entire issued
share capital of Crawshaw pursuant to the Acquisition
Agreement
"Acquisition the share purchase agreement dated 18 March 2008 made
Agreement" between Felix and the Vendors pursuant to which,
conditionally, inter alia, upon the passing of the
Resolutions and Admission, Felix has agreed to acquire the
entire issued share capital of Crawshaw
"Admission" the re-admission of the Enlarged Issued Share Capital to
trading on AIM becoming effective in accordance with the
AIM Rules for Companies
"Admission the conditional agreement dated 18 March 2008 made between
Agreement" the Company and the Proposed Directors and Investec
relating to the Admission
"AIM" the AIM market operated by the London Stock Exchange
"AIM Rules for the rules for companies whose securities are admitted to
Companies" trading on AIM as published by the London Stock Exchange
from time to time
"AIM Rules for the rules setting out the eligibility, ongoing obligations
Nominated Advisers" and certain disciplinary matters in relation to nominated
advisers as published by the London Stock Exchange from
time to time
"Board" the board of Directors of the Company from time to time
"Capita Registrars" a trading name of Capita Registrars Limited
"Capital the reorganisation of the share capital of the Company by
Reorganisation" the splitting of each issued Existing Ordinary Share into
one ordinary share of 0.1p and one Deferred Share and the
consolidation of the new ordinary shares of 0.1p arising
therefrom on a fifty for one basis into New Ordinary Shares
"Capital Reduction" the cancellation of all of the Deferred Shares arising on
the Capital Reorganisation and the cancellation of the
amount standing to the credit of the share premium account
of the Company (as enlarged by the issue of the
Consideration Shares and the Subscription Shares) subject,
inter alia, to the approval of the High Court
"certificated" or in relation to a share or other security, a share or other
"uncertificated security title to which is recorded in the relevant
form" register of the share or other security as being held in
certificated form (that is, not in CREST)
"Completion" completion of the Acquisition Agreement in accordance with
its terms
"Concert Party" together Richard Rose, John Kelly, Colin Crawshaw, Kevin
Boyd, Andrew Richardson, Russell Davies and Martin Wilson
(each a "Concert Party Member")
"Concert Party the 866,666 options over New Ordinary Shares which have
Options" been granted, conditional upon Admission to certain Concert
Party Members
"Consideration the 31,200,000 New Ordinary Shares to be issued to the
Shares" Vendors as consideration under the terms of the Acquisition
Agreement
"Crawshaw" Crawshaw, the holding company of Crawshaw Butchers or, as
the context may require, the business of the Crawshaw Group
"Crawshaw Butchers" Crawshaw Butchers Limited, the wholly owned trading
subsidiary of Crawshaw
"Crawshaw Group" Crawshaw and its subsidiary, Crawshaw Butchers
"Crawshaw Investors" Richard Rose, Unicorn Asset Management Limited, John Kelly,
Sagemoss Holdings Limited, Simon Stephenson and Tom Spencer
"CREST" the relevant system (as defined in the CREST Regulations)
for paperless settlement of share transfers and the holding
of shares in uncertificated form which is administered by
Euroclear
"CREST Regulations" the Uncertificated Securities Regulations 2001 (SI 2001 No.
3755) as amended
"Current Articles" the articles of association of the Company in force as at
the date here of
"Deferred Shares" the deferred shares of 0.9p each in the capital of the
Company to be created pursuant to the Capital
Reorganisation
"Directors" the board of directors of the Company
"EBITDA" earnings before interest, taxes, depreciation and
amortisation
"EMI Scheme" the enterprise management incentive scheme adopted by the
Company on 14 July 2006
"Enlarged Group" Felix and its subsidiary undertakings, including the
Crawshaw Group, following Completion
"Existing Issued the issued share capital of the Company as at the date of
Share Capital" this document
"Enlarged Issued the enlarged issued share capital of the Company on
Share Capital" Admission (including the Subscription Shares and the
Consideration Shares)
"Euroclear" Euroclear UK & Ireland Limited, the operator (as defined in
the CREST Regulations) of CREST
"Existing Group" Felix and its subsidiaries, Felix Corporation and Chestnut
Prospects Limited
"Existing Ordinary the ordinary shares of 1p each in the capital of the
Shares" Company in issue at the date of this document
"Felix" or the Felix Group plc, a company incorporated and registered in
"Company" England and Wales with registered number 4755803
"Felix Corporation" Felix Corporation Limited (in administration), a wholly
owned subsidiary of the Company
"Form of Proxy" the form of proxy for use by Shareholders in connection
with the General Meeting
"FSA" the Financial Services Authority
"FSMA" the Financial Services and Markets Act 2000
"Gartmore" Gartmore Investment Limited, including funds managed by
them
"General Meeting" the general meeting of Felix convened for 11 a.m. on 10
April 2008
"IFRS" the International Financial Reporting standards as issued
by the Board of International Standards Committee from time
to time
"Independent Michael Masters, Philip Kanas, Lynda Sherratt and Alan Uren
Directors"
"Independent those Shareholders other than the Concert Party members
Shareholders"
"Investec" Investec Investment Banking, a division of Investec Bank
(UK) Limited
"Loan Notes" the 5 per cent. £3,002,690 nominal value loan notes issued
by Crawshaw pursuant to the terms of loan note instruments
dated 16 April 2007
"London Stock London Stock Exchange plc
Exchange"
"New Articles" the new articles of association proposed to be adopted by
the Company at the General Meeting
"New Ordinary the ordinary shares of 5p each in the capital of the
Shares" Company to be created pursuant to the Capital
Reorganisation and to be issued pursuant to the
Subscription and the Acquisition
"Official List" the Official List of the UK Listing Authority
"Optionholders" the holders of options over Existing Ordinary Shares
"Proposals" the Acquisition, the Capital Reorganisation and Capital
Reduction, the change of name of the Company to Crawshaw
Group plc, the Subscription, the Rule 9 Waiver, the
adoption of the New Articles, the adoption of the SAYE Plan
and the amendments to the EMI Scheme
"Proposed Directors" the directors of Felix immediately following Admission
"Prospectus Rules" the prospectus rules published by the FSA
"Registrars" Capita Registrars
"Related Party" Richard Rose, Executive Chairman of Felix and Chairman of
Crawshaw
"Resolutions" the resolutions to be proposed at the General Meeting and
set out in the notice of General Meeting
"Rule 9 Waiver" the waiver of the obligation to make a general offer under
Rule9 of the Takeover Code, conditional on the passing of
Resolution3 at the General Meeting, which would otherwise
arise on the Concert Party Members
"Sale Shares" the 5,333,333 New Ordinary Shares to be sold by Richard
Rose to Gartmore and Schroders
"SAYE Plan" the savings related share option plan to be adopted by the
Company as part of the Proposals
"Schroders" Schroder Investment Management Limited, including funds
managed by them
"Share Option together the EMI Scheme, the SAYE Plan and the Unapproved
Schemes" Scheme a holder of Existing Ordinary Shares
"Shareholder" or a holder of Existing Ordinary Shares
"Ordinary
Shareholder"
"Subscription" the subscription of the Subscription Shares by Schroders
and Gartmore at the Subscription Price on the terms set out
in the Subscription Agreements
"Subscription the individual subscription agreements each dated 18 March
Agreements" 2008 made between Felix and each of Gartmore and Schroders
pursuant to which, conditionally, inter alia, upon the
passing of the Resolutions and Admission, Gartmore and
Schroders have agreed to subscribe for the Subscription
Shares at the Subscription Price
"Subscription Price" 37.5 pence per Subscription Share
"Subscription the 10,666,667 New Ordinary Shares to be subscribed under
Shares" the terms of the Subscription shall have the respective
meanings ascribed to them by the 1985 Act
"subsidiary" and shall have the respective meanings ascribed to them by the
"subsidiary 1985 Act
undertaking"
"Takeover Code" the City Code on Takeovers and Mergers
"Takeover Panel" the Panel on Takeovers and Mergers
"UK" or "United the United Kingdom of Great Britain and Northern Ireland
Kingdom"
"UK GAAP" United Kingdom Generally Accepted Accounting Principles
"UK Listing a division of the FSA acting as the competent authority for
Authority" the purposes of Part VI of FSMA
"Unapproved Scheme" the unapproved executive share scheme adopted by the
Company on 14 July 2006 a share or other security title to
which it is recorded on the relevant register of the share
or security concerned as being held in uncertificated form
in CREST, and title to which may be transferred by means of
CREST
"Uncertificated" or a share or other security title to which it is recorded on
"in uncertificated the relevant register of the share or security concerned as
form" being held in uncertificated form in CREST, and title to
which may be transferred by means of CREST
"Vendors" together Richard Rose, Colin Crawshaw, Kevin Boyd, Russell
Davies, Martin Wilson, John Kelly, Tom Spencer, Simon
Stephenson, Andrew Richardson, Sagemoss Holdings Limited
and Unicorn Asset Management Limited
"1985 Act" the Companies Act 1985 (as amended)
"2006 Act" the Companies Act 2006
This information is provided by RNS
The company news service from the London Stock Exchange
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