RNS Number:0301J
Stonesthrow Media Limited
21 March 2003
FOR IMMEDIATE RELEASE 21 March 2003
RECOMMENDED CASH OFFER
BY BEAUMONT CORNISH LIMITED ("BEAUMONT CORNISH ")
ON BEHALF OF STONESTHROW MEDIA LIMITED ("STM")
TO ACQUIRE
CHANNELFLY PLC ("CHANNELFLY")
This announcement is not for release, publication or distribution in whole or in
part, in or into the United States, Canada, Australia, Japan or Ireland.
Introduction
The board of STM and the Independent Director of Channelfly announce that they
have agreed terms for a recommended cash offer to be made by Beaumont Cornish on
behalf of STM for the entire issued share capital of Channelfly.
STM is a vehicle established for the sole purpose of providing the necessary
funds to effect the management buy out of Channelfly, and to ensure working
capital for the ongoing business.
As James Wyllie is the only Director of Channelfly who is not participating in
the management buy out he, as the Independent Director, has considered the Offer
for the purposes of recommending to the Channelfly Shareholders whether or not
to accept the Offer. The Independent Director, having been so advised by Grant
Thornton Corporate Finance, considers the terms of the Offer to be fair and
reasonable and recommends that Channelfly Shareholders accept the Offer. In
providing advice to the Independent Director, Grant Thornton Corporate Finance
has taken into account the commercial assessments of the Independent Director.
STM has received from certain Channelfly Shareholders undertakings to accept the
Offer, in respect of 27,687,059 Channelfly Shares, representing approximately
57.7 per cent. of the existing Channelfly Shares. Further details of the
Committed Shareholders of Channelfly and these undertakings, including details
of the circumstances in which they cease to be binding, are set out in Appendix
2 to this announcement.
The Offer
On behalf of STM, Beaumont Cornish will offer to acquire, on the terms and
subject to the conditions set out in Appendix 1 of this announcement and the
formal offer document to be sent to Channelfly Shareholders and the Form of
Acceptance the whole of the issued and to be issued share capital of Channelfly
on the following basis:
for each Channelfly Share 2.175 pence in cash
The Offer will value the whole of the issued share capital of Channelfly at
approximately #1,044,089 and represents a premium of 24.29 per cent. over the
Closing Price of 1.75 pence per Channelfly Share on 20 March 2003, being the
last business day prior to the announcement of the Offer.
The Offer will extend to all Channelfly Shares unconditionally allotted or
issued on the date on which the Offer is made and to any further Channelfly
Shares unconditionally allotted or issued while the Offer remains open for
acceptance (or by such earlier date as STM may, subject to the City Code,
decide).
The Channelfly Shares will be acquired by STM fully paid and free from all
liens, equities, charges, encumbrances, pre-emption rights and other third party
interests of whatever nature and together with all rights now or hereafter
attaching to them, including the right to receive and retain all dividends and
other distributions (if any) declared, made or paid after the date of the
announcement of the Offer.
The Share Alternative
It is a requirement of STM that certain members of Channelfly's management
should commit to receive new STM Shares in lieu of the cash consideration to
which they will otherwise be entitled under the Offer. In order to comply with
the provisions of the City Code which requires that all shareholders should be
treated alike, STM will be making this Share Alternative available to all
Channelfly Shareholders, irrespective of whether this is likely to be attractive
to them.
Pursuant to the Share Alternative, Channelfly Shareholders (other than certain
Overseas Shareholders including those resident in the United States) who validly
accept the Offer may (subject to the terms to be set out in the formal offer
document to be sent to Channelfly Shareholders) elect to receive STM Shares in
exchange for their Channelfly Shares instead of all of the cash consideration to
which they would otherwise be entitled under the Offer on the following basis:
for each Channelfly Share 0.02175 STM Shares
The Share Alternative may only be accepted in respect of each Channelfly
Shareholder's entire holding.
The STM Shares issued under the Share Alternative will be issued credited as
fully paid and entitlements to STM Shares will be rounded down to the nearest
share and the balance will be satisfied in cash.
The STM Shares issued under the Share Alternative will rank for dividends and
other distributions declared made or paid pari passu with all other STM Shares
in issue.
STM Shares are not and will not be transferable, except in accordance with the
articles of association of STM.
As detailed in Appendix 2 to this announcement, the Committed Channelfly
Shareholders have given undertakings to elect to take up 602,185 STM Shares
under the Share Alternative. If no other Channelfly Shareholders elect for the
Share Alternative, the Committed Channelfly Shareholders will own approximately
50 per cent. of the STM Shares in issue following completion of the Offer. If
all other Channelfly Shareholders elect for the Share Alternative in full, the
Committed Channelfly Shareholders will own approximately 36.6 per cent. of the
STM Shares in issue following completion of the Offer.
An estimate of the value of the STM Shares will be provided in the formal offer
document to be sent to Channelfly Shareholders. The price which STM investors
have paid for each STM Share now in issue is #1 being the par value of such
shares.
Before electing for the Share Alternative, Channelfly Shareholders are advised
to consider the following factors:
i. STM is a newly formed, unlisted company which currently has no market in its
shares and, consequently, the STM Shares may be difficult to sell;
ii. STM has no plans to pursue a public quotation or dealing facility for the
STM Shares on a recognised investment exchange or other market;
iii. STM will not be subject to the disclosure and corporate governance
requirements of AIM or any recognised investment exchange;
iv. STM has articles of association which contain no minority protection rights
(other than statutory rights);
v. The STM Shares will be subject to pre-emption rights on transfer and to "drag
along/tag along" rights; and
vi. although the Share Alternative enables Channelfly Shareholders to
participate indirectly in the future of Channelfly as a private company,
there is no certainty in respect of future distributions on, or realisations
of any investment in STM.
Any shareholder considering electing for the Share Alternative should note that
the Independent Director, having been so advised by Grant Thornton Corporate
Finance, is making no recommendation to Channelfly Shareholders in respect of
the Share Alternative.
The Share Alternative will be conditional on the Offer becoming or being
declared unconditional in all respects.
Background to and reasons for the Offer
Over the past three years, Channelfly has followed a strategy of building an
integrated group of businesses focussed on the independent music sector in the
UK. The Group has had some success in achieving this aim; however the Group
continues to face deteriorating market conditions in the music industry as well
as a decline in media spending by advertisers.
For the year ended 31 July 2002, Channelfly reported a retained loss on ordinary
activities before and after taxation of #(5,040,000). The financial statements
for the period noted a "fundamental uncertainty" in respect of the application
of the "going concern basis" and made reference to the need to raise additional
working capital. The board of STM understands that Channelfly has not been able
to secure any such funding from sources other than as proposed by STM.
It is in this environment that the board of STM believe that they can bring both
management and financial expertise to assist the Group. In addition, the
directors of STM have stated that on the basis that the Offer becomes or is
declared unconditional in all respects, STM would be able to provide funding of
up to #300,000 to support the Group's working capital and other requirements.
The directors of STM believe that the Channelfly Share price has not adequately
reflected the underlying potential of Channelfly's assets and this, coupled with
Channelfly's cash constraints and funding requirements has resulted in the board
of Channelfly reconsidering how best to achieve its strategy of delivering
shareholder returns. In common with a number of other listed companies, the
conclusion reached by the board was that Channelfly Shareholders' interests
would be best served by securing an attractive cash bid for Channelfly.
The STM Directors believe that, as a private company, Channelfly will be able to
develop its business utilising debt funding without the costs, obligations and
constraints of listed company status. Following the Offer becoming or being
declared unconditional in all respects, STM intends to build upon the progress
made to date by Channelfly.
The Offer therefore represents an opportunity for Channelfly Shareholders to
realise cash for their Channelfly Shares.
Information on Channelfly
Channelfly is a multi-media music group focussed primarily on a youth audience.
The company was founded in April 1999 and raised #3.2 million in November 1999
when it floated on AIM. The Group has, in the period since that date, acquired
and developed a number of complementary businesses in the UK music market.
The business strategy of Channelfly has been to bring together under one roof
the key elements required to launch new bands in the independent ("indie") music
sector. These elements being: access to audience; management; promotion; and
media exposure. In each of these areas Channelfly has developed stand-alone
business units capable of serving bands in which the Group has an economic
interest as well as being able to service the music industry at large.
The directors of STM believe that a new business model is emerging. The digital
age means that merely representing artists in relation to their recordings is
unlikely to bring commercial success. Involvement in all areas of activity, with
the opportunity to generate multiple revenue streams is essential. Channelfly
represents an integrated approach at the grass-roots of the music business.
Information on STM
STM is a newly incorporated private limited company incorporated on 30 August
2002 and registered in England and Wales with registered number 4522388.
STM was formed for the purpose of making the Offer and has raised #940,000.
Apart from entering into the arrangements necessary to raise this finance and
regulate the relationship between existing STM shareholders and to enable STM to
make the Offer, STM has not traded since its incorporation. The directors of STM
are Adam Driscoll, Philip Murphy, Charles McIntyre and Alistair Mackenzie.
Adam Driscoll began his career in business publishing and in 1994 led the
management buy-out of A4 Publications Limited, a Midlands-based trade press
publisher, from Storm Group Plc. He became Chief Executive of A4 Publications
(which specialises in reporting developments in the intellectual property/
licensing markets) and built it into one of the most successful in its field. A4
Publications was floated on OFEX in July 1997. In May 1999, he co-founded
Channelfly and floated it on the AIM stock market in November 1999.
Adam Driscoll resigned as A4's Chief Executive in October 1999, becoming a
non-executive chairman, in order to concentrate his time on the development of
Channelfly.
In addition to his role as Chief Executive of Channelfly, Adam Driscoll is the
Deputy Chairman of Campus Media plc, a specialist student media and marketing
business.
Philip Murphy qualified as a solicitor with Wragge & Co in 1992. In 1996 he left
to become legal director of Entertainment Online Limited, a computer games
related online entertainment company. From May 1998 until March 1999 he was
commercial director and company secretary of Midland Software Limited, a
supplier of human resources software. Philip co-founded Channelfly with Adam
Driscoll in May 1999, and, as Group Managing Director, is responsible for the
day-to-day running of the Group's operations and finance function.
Charles McIntyre began his career in the publishing industry before joining the
investment banking arm of Apax Partners in 1991. Over the following years,
Charles helped build Apax Partners media franchise with such transactions as the
high profile buy-out of Virgin Radio, a national commercial radio station in the
UK, by Chris Evans.
In 1999, along with other senior management of the firm, Charles participated in
the buy-out of the investment banking division under the new name of Altium
Capital.
Alistair Mackenzie was formerly the finance director of Jazz FM plc, the radio
and music business that was sold to the Guardian Media Group in July 2002. He
was instrumental in overseeing the extension of the company's revenue from
traditional radio advertising income to new areas including compact disk sales,
music events, corporate entertainment and on-line media.
Parties who have founded STM are a number of private individuals, including
Charles McIntyre details of whom are set out above and Richard Thompson, details
of whom are set out below.
Richard Thompson has been a director, investor and shareholder in a number of
companies involved in a range of sectors including media and leisure. He was
Chairman of Queens Park Rangers, a director of Leeds Sporting plc, the owner of
Leeds United FC, a director of Civilian Content Plc, an AIM listed company
dealing in film production and distribution and most recently has been a
shareholder of Macintosh Limited and Riverhawk Investments Limited.
STM holds no Channelfly Shares. However, the directors of STM are acting, and
the other parties set out in Appendix 2 to this announcement may be considered
to be acting, for the purposes of the City Code in concert with STM and those
who hold Channelfly Shares are Committed Channelfly Shareholders, details of
whom are included in Appendix 2 to this announcement.
Further information on STM will be set out in the formal offer document to be
sent to Channelfly Shareholders.
Compulsory acquisition and de-listing
Subject to the Offer becoming or being declared unconditional in all respects,
and if sufficient acceptances of the Offer are received and/or Channelfly Shares
are otherwise acquired, STM intends to apply the provisions of sections 428 to
430F of the Companies Act to acquire compulsorily any outstanding Channelfly
Shares. STM also intends to procure that Channelfly applies to the London Stock
Exchange for the cancellation of trading of Channelfly Shares from the
Alternative Investment Market.
Financing of the Offer
Full acceptance of the Offer (assuming valid elections for the Share Alternative
from only the Committed Channelfly Shareholders) would require a cash payment of
approximately #441,896 by STM, which will be funded out of resources raised by
STM by way of subscription for new STM Shares and the issue of STM loan notes.
Beaumont Cornish is satisfied that the necessary financial resources are
available to STM to satisfy full acceptance of the Offer.
Undertakings to accept the Offers
As set out in Appendix 2 to this announcement STM has received undertakings to
accept the Offer from the Committed Channelfly Shareholders, who together hold
27,687,059 Channelfly Shares, representing approximately 57.7 per cent. of the
existing issued ordinary share capital of Channelfly, of which approximately
24.7 per cent. is held by Management.
Pursuant to these undertakings, the Committed Channelfly Shareholders have
undertaken to elect under the Share Alternative to receive STM Shares to such an
extent that they will thereby receive, in aggregate, 602,185 STM Shares
representing approximately 50 per cent. of the total issued share capital of STM
as enlarged by the issue of such shares.
These undertakings will continue to be binding in the event of any competing
offer for Channelfly.
Management & Employees
The Independent Director has agreed to resign from the board of Channelfly if
the Offer becomes or is declared unconditional in all respects.
The board of STM has given assurances to the Independent Director that,
following the Offer becoming or being declared unconditional in all respects,
the existing employment rights, including pension rights, of the employees of
the Channelfly Group will be fully safeguarded.
Management will continue to be remunerated through their existing service
contracts with Channelfly.
The Channelfly Share Option Scheme
The Offer will extend to any Channelfly Shares unconditionally allotted or
issued pursuant to the exercise of options granted under the Channelfly share
option scheme. If the Offer becomes or is declared unconditional in all
respects, appropriate proposals will be made to Channelfly option holders.
Offer Document
The formal offer document will be despatched to Channelfly Shareholders shortly.
Enquiries:
Beaumont Cornish Limited Roland Cornish 020 7628 3396
for Stonesthrow Media Limited Felicity Geidt
Grant Thornton Corporate Finance Philip Secrett 0870 991 2578
for Channelfly
Appendix 3 contains definitions of certain terms used in this announcement.
Appendix 4 contains the basis of calculation and sources of information.
The Offer will be made on the terms and subject, inter alia, to the conditions
which are set out in Appendix 1 and to be set out in the formal offer document
and the Form of Acceptance to be sent to Channelfly Shareholders and such
further terms as may be required to comply with the provisions of the City Code.
The availability of the Offer to persons not resident in the UK may be affected
by the laws of the relevant jurisdiction. Persons who are not resident in the UK
should inform themselves about and observe any applicable requirements before
taking any action in relation to the Offer.
This announcement does not constitute an offer or invitation to purchase any
securities. The Offer will not be made directly or indirectly, in or into, or by
use of the mails of, or by any other means or instrumentality (including,
without limitation, facsimile transmission or telephone) of interstate or
foreign commerce of, or any facilities of a national securities exchange of the
United States, Canada, Australia, Japan or Ireland and will not be capable of
acceptance by any such use, means instrumentality or facilities or within the
United States, Canada, Australia, Japan or Ireland. Accordingly, copies of this
announcement are not being, and must not be, mailed or otherwise distributed or
sent in or into or from the United States, Canada, Australia, Japan or Ireland.
The STM Directors accept responsibility for the information contained in this
announcement other than the information relating to the recommendation of the
Offer by the Independent Director and that relating to the Channelfly Group, the
directors of Channelfly and members of their immediate families and persons
connected with them. Subject as aforesaid, to the best of the knowledge and
belief of the STM Directors (who have taken all reasonable care to ensure that
such is the case), the information contained in this announcement for which they
are responsible is in accordance with the facts and does not omit anything
likely to affect the import of such information.
The Channelfly Directors accept responsibility for the information contained in
this announcement relating to the Channelfly Group, the directors of Channelfly
and members of their immediate families and persons connected with them other
than that relating to the recommendation of the Offer by the Independent
Director. To the best of the knowledge and belief of the Channelfly Directors
(who have taken all reasonable care to ensure that such is the case), the
information contained in this announcement for which they are responsible is in
accordance with the facts and does not omit anything likely to affect the import
of such information.
The Independent Director, being James Wyllie, accepts responsibility for the
information contained in this announcement relating to the recommendation of the
Offer by the Independent Director. To the best of the knowledge and belief of
the Independent Director (who has taken all reasonable care to ensure that such
is the case), the information contained in this announcement for which he is
responsible is in accordance with the facts and does not omit anything likely to
affect the import of such information.
Beaumont Cornish Limited, which is regulated by the Financial Services
Authority, is acting exclusively for STM and no one else in connection with the
Offer and will not be responsible to anyone other than STM for providing the
protections afforded to customers of Beaumont Cornish Limited for providing
advice in relation to the Offer. This announcement has been approved for the
purposes of Section 21 of the Financial Services and Markets Act 2000 by
Beaumont Cornish Limited of Georgian House, 63 Coleman Street, London EC2R 5BB.
Grant Thornton Corporate Finance, which is regulated by the Financial Services
Authority, is acting exclusively for Channelfly and no one else in connection
with the Offer and will not be responsible to anyone other than Channelfly for
providing the protections afforded to customers of Grant Thornton Corporate
Finance for providing advice in relation to the Offer.
Appendix 1
Conditions of the Offer
1. Conditions
The Offer will be subject to the following conditions:
(a) valid acceptances of the Offer being received (and not, where
permitted, withdrawn) by 3.00 p.m. on the first closing date of the
Offer (or such later time(s) and/or date(s) as STM may, with the consent
of the Panel or in accordance with the rules of the City Code decide) in
respect of not less than 75 per cent in nominal value (or such lesser
percentage as STM may decide) of Channelfly Shares to which the Offer
relates, provided that this condition will not be satisfied unless STM
shall have acquired, or agreed to acquire, whether pursuant to the Offer
or otherwise, Channelfly Shares carrying in aggregate more than 75 per
cent of the voting rights normally exercisable at general meetings of
Channelfly, including for this purpose (except to the extent otherwise
agreed with the Panel) any such voting rights attaching to any
Channelfly Shares that are unconditionally allotted or issued before the
Offer becomes or is declared unconditional as to acceptances and whether
pursuant to the exercise of any outstanding subscription or conversion
rights or options or otherwise and for the purposes of this condition:
(A) the expression "Channelfly Shares to which the Offer
relates" shall be construed in accordance with sections
428 to 430F of the Act;
(B) Channelfly Shares which have been unconditionally
allotted shall be deemed to carry the voting rights
which they will carry upon issue.
(b) No government or governmental, quasi-governmental authority (whether
supranational, national, regional, local or otherwise) or statutory or
regulatory body or investigative body or other authority (including any
anti-trust or merger control authority), court, trade, agency,
professional association, institution or environmental body or (without
prejudice to the generality of all the foregoing) any other similar
person or body in any relevant jurisdiction (each a "Relevant
Authority") having decided to take, institute or threaten any action,
proceeding, suit, investigation, enquiry or reference or made, proposed
or enacted any statute, regulation, order or decision or taken any other
steps which would or might:
(i) make the Offer or its implementation, or the proposed
acquisition of any Channelfly Shares by STM, void, illegal or
unenforceable under the laws of any relevant jurisdiction or
otherwise, directly or indirectly materially restrain, prohibit,
restrict or delay the Offer, its implementation or such proposed
acquisition by STM, or impose additional conditions or
obligations with respect thereto, or otherwise materially
challenge or adversely interfere therewith;
(ii) result in a material delay in the ability of STM or render
STM unable to acquire all or some of the Channelfly Shares or
other securities in Channelfly or require, prevent or delay a
divestiture by STM of any such shares or securities to an extent
which is material in the context of STM or any member of the
Channelfly Group as a whole;
(iii) require, prevent or delay the divestiture by STM or by
Channelfly or any of its subsidiaries or subsidiary undertakings
or any joint venture, partnership, firm or company in which any
of them has a substantial interest (together the "Channelfly
Group") of all or any material portion of their respective
businesses, assets or properties or impose any material
limitation on the ability of any of them to conduct all or any
material portion of their respective businesses and to own all
or any material portion of their respective assets or
properties;
(iv) impose any material limitation on the ability of STM or any
member of the Channelfly Group to acquire, or hold or to
exercise effectively, directly or indirectly, any rights of
ownership in respect of shares or other securities (or the
equivalent) in any member of the Channelfly Group or to exercise
management control over Channelfly or any other member of the
Channelfly Group to an extent which is material in the context
of STM or any member of the Channelfly Group as a whole;
(v) otherwise adversely affect the business, assets, or profits
of the Channelfly Group, taken as a whole to an extent that is
material in the context of the Channelfly Group taken as a
whole;
(vi) require any member of STM or the Channelfly Group to
acquire or offer to acquire any Channelfly Shares or other
securities (or the equivalent) in any member of the Channelfly
Group owned by any third party to an extent which is material in
the context of STM or any member of the Channelfly Group as a
whole;
(vii) result in STM having to dispose of any shares or other
securities (or the equivalent) in any member of the Channelfly
Group;
and all applicable waiting and other time periods during which any such
Relevant Authority could decide to take, institute or threaten any such
action, proceeding, suit, investigation, enquiry or reference or
otherwise intervene having expired, lapsed or been terminated;
(c) all necessary filings and applications in connection with the Offer
or its implementation having been made, all appropriate waiting periods
(including any extensions thereof) in respect of the Offer or its
implementations under any applicable legislation or regulations of any
relevant jurisdiction having expired, lapsed or been terminated and all
authorisations, orders, recognitions, grants, consents, licences,
confirmations, clearances, permissions and approvals ("Authorisations")
which in the reasonable opinion of STM are necessary or reasonably
considered appropriate for or in respect of the Offer and the proposed
acquisition of any Channelfly Shares or other securities in, or control
of, Channelfly by STM or which are necessary for any member of the
Channelfly Group to carry on its business having been obtained in terms
and in a form satisfactory to STM (acting reasonably) from all
appropriate Relevant Authorities or other bodies with whom the
Channelfly Group has entered into contractual arrangements and all such
Authorisations remaining in full force and effect at the time at which
the Offer becomes otherwise unconditional and no intimation or notice of
an intention to revoke or not to renew any of the same having been
received.
(d) save as publicly announced by Channelfly (by delivery of an
announcement to a Regulatory Information Service) or save as disclosed
in writing by or on behalf of Channelfly to STM or its advisers prior to
21 March 2003, there being no provision of any arrangement, agreement,
authorisation, lease, licence, consent, permit, franchise, or other
instrument to which any member of the wider Channelfly Group is a party
or by or to which any such member or any of its assets may be bound,
entitled or be subject, and of which STM is not aware on the date the
Offer is made and which, in each case, in consequence of the Offer, the
proposed acquisition of any Channelfly Shares or control of Channelfly
by STM will result in:
i. any monies borrowed by, or any other indebtedness or liabilities (actual or
contingent) of any member of Channelfly being or becoming repayable or
capable of being declared repayable immediately or prior to their stated
maturity or the ability of such member to borrow monies or incur any
indebtedness being withdrawn or inhibited;
ii. the creation of any mortgage, charge or other security interest over the
whole or any part of the business, property or assets of any member of
Channelfly or any such security (whenever arising or having arisen) becoming
enforceable or being enforced;
iii. any such arrangement, agreement, authorisation, lease, licence, consent,
permit, franchise or instrument being terminated or adversely modified,
adversely affected, amended or varied or any adverse action being taken or
arising or any onerous obligation or liability arising thereunder;
iv. any assets or interests of any member of Channelfly being disposed of or
charged or any right arising under which any such asset or interest could be
required to be disposed of or charged other than in the ordinary course of
business;
v. the interests of any member of Channelfly in any firm or body, or any
arrangements relating to such interests, being terminated, adversely
modified, affected, amended or varied;
vi. the business of any member of Channelfly with any firm, body or person, or
any arrangements relating to such business, being terminated, adversely
modified, affected, amended or varied;
vii. any member of Channelfly ceasing to be able to carry on business under any
name under which it presently does so;
viii. the financial or trading position or prospects of any member of the wider
Channelfly Group being prejudiced or adversely affected
and in any such case the result being material and adverse in the
context of the wider Channelfly Group taken as a whole;
(e) since 31 July 2002 save as disclosed in the audited report and
accounts of Channelfly for the year ended 31 July 2002 (the "Channelfly
Accounts") or otherwise publicly announced by Channelfly (by delivery of
an announcement to a Regulatory Information Service) or disclosed in
writing by or on behalf of Channelfly to STM or its advisers prior to 21
March 2003), no member of the wider Channelfly Group having:
i. issued or agreed to issue or authorised or proposed the issue of additional
shares of any class, securities convertible into any such shares or rights,
warrants, or options to subscribe for or acquire, any such shares or
convertible securities;
ii. recommended, declared, paid, made or proposed to recommend, declare, pay or
make any bonus, dividend or other distribution otherwise than intra-group;
iii. authorised or proposed or announced its intention to propose any merger or
demerger or acquisition or disposal of assets, save in the ordinary course
of business or intra-group in each case to an extent which is material in
the context of the wider Channelfly Group;
iv. issued or authorised or proposed the issue of any debentures or, save in the
ordinary course of business, incurred or increased any indebtedness or
become subject to any contingent liability, in any such case, which is
material in the context of the wider Channelfly Group taken as a whole;
v. purchased, redeemed or repaid or announced any proposal to purchase, redeem
or repay any of its own shares or other securities or redeemed or reduced or
made any other change to any part of its share capital, in any such case, to
an extent which is material in the context of the wider Channelfly Group;
vi. disposed of or transferred, mortgaged or encumbered otherwise than in the
ordinary course of its business any asset or any right, title or interest in
any asset which, in any such case, is material in the context of the wider
Channelfly Group taken as a whole;
vii. entered into any contract, commitment or arrangement (otherwise than in the
ordinary course of business and whether in respect of capital expenditure or
otherwise) which is of a long-term or unusual nature or which involves or
could reasonably be expected to involve an obligation of a nature and
magnitude which, in any such case, is material in the context of the wider
Channelfly Group taken as a whole or which is otherwise than in the ordinary
course of business;
viii. entered into or varied, or authorised, proposed or announced its intention
to enter into or vary any contract, reconstruction, amalgamation,
commitment, transaction or arrangement or waived or compromised any claim
otherwise than in the ordinary course of business which, in any such case,
is material in the context of the wider Channelfly Group taken as a whole;
ix. entered into any agreement, contract, commitment or arrangement which
consents to or results in the restriction of the scope of the business of
any member of the wider Channelfly Group which, in any case, is material in
the context of the wider Channelfly Group taken as a whole or which is
otherwise than in the ordinary course of business;
x. entered into or varied in any material respect the terms of any services or
consultancy with any of the directors of the Channelfly Group;
xi. taken any corporate action or had any legal proceedings started or
threatened against it for its winding up (whether voluntary or otherwise),
dissolution or reorganisation or for the appointment of a receiver,
administrator, administrative receiver, trustee or similar officer of all or
any substantial part of its assets and revenues or had any such person
appointed;
xii. waived or compromised any claim otherwise than in the ordinary course of
business which, in any such case, is material in the context of the wider
Channelfly Group taken as a whole;
xiii. made or authorised or proposed or announced an intention to propose any
change in its loan capital;
xiv. made any material alteration to its memorandum or articles of association
or other incorporation documents;
xv. entered into or made an offer (which remains open for acceptance) to enter
into an agreement or commitment or passed any resolution or announced or
made any legally binding proposal with respect to any of the transactions or
events referred to in this paragraph (e); or
xvi. been unable, or admitted in writing that it is unable, to pay its debts
generally or having stopped or suspended (or threatened to stop or suspend)
payment of its debts generally or ceased or threatened to cease carrying on
all or a material part of its business,
except, in any such case, with the prior written consent of STM;
(f) since 31 July 2002 (save as disclosed in the Channelfly Accounts or
otherwise publicly announced by Channelfly (by delivery of an
announcement to a Regulatory Information Service) or disclosed in
writing by or on behalf of Channelfly to STM or its advisers prior to 21
March 2003):
i. there having been no adverse change or deterioration in the business,
financial or trading position or profits or prospects of the wider
Channelfly Group, in each case which is material in the context of the
Channelfly Group taken as a whole;
ii. there having been no material litigation, arbitration proceedings,
prosecution, investigation or other legal proceedings to which any member of
the wider Channelfly Group is a party (whether as claimant or respondent or
otherwise) which is material in the context of the wider Channelfly Group
taken as a whole and no such proceeding having been threatened by or against
or remaining outstanding in respect of the wider Channelfly Group;
iii. no contingent or other liability having arisen which might reasonably be
likely materially and adversely to affect the wider Channelfly Group;
iv. no investigation by any Relevant Authority against or in respect of any
member of the wider Channelfly Group having been threatened, announced or
instituted or remaining outstanding by, against, or in respect of any member
of the wider Channelfly Group;
(g) STM not having discovered (save as publicly announced by Channelfly
(by delivery of an announcement to a Regulatory Information Service) or
disclosed in writing by or on behalf of Channelfly to STM or its
advisers prior to 21 March 2003) that:
i. the financial or business or other information concerning the wider
Channelfly Group as contained in the information publicly disclosed at any
time by any member of the wider Channelfly Group either contains a
misrepresentation of fact or omits to state a fact necessary to make the
information contained therein not misleading which misrepresentation or
omission is material in the context of the wider Channelfly Group taken as a
whole;
ii. any member of the wider Channelfly Group is subject to any liability
incurred otherwise than in the ordinary course of business, contingent or
otherwise, which is not disclosed in the Channelfly Accounts which is
material in the context of the wider Channelfly Group taken as a whole;
iii. any past or present member of the wider Channelfly Group has not complied
with all applicable legislation or regulations of any jurisdiction with
regard to the disposal, discharge, spillage, leakage or emission of any
waste or hazardous or harmful substance or any substance likely to impair
the environment or harm human health or environmental matters which
non-compliance would be likely to give rise to any liability (whether actual
or contingent) on the part of any member of the wider Channelfly Group which
is material in the context of the wider Channelfly Group taken as a whole;
or
iv. there is or will be any liability (whether actual or contingent) to make
good, repair, reinstate or clean up any property now or previously owned,
occupied or made use of by any past or present member of the wider
Channelfly Group under any environmental legislation, regulation, notice,
circular or order of any government, quasi-government, governmental, state
or local government, supranational, statutory or regulatory body, court,
agency, association or any other person or body in any jurisdiction which is
material in the context of the wider Channelfly Group taken as a whole.
For the purpose of these conditions:
a. "wider Channelfly Group" means Channelfly, its subsidiaries, subsidiary
undertakings and associated undertakings and any other body corporate,
partnership, joint venture or person in which Channelfly and such
undertakings (aggregating their interests) have an interest in 20 per cent
or more of the voting or equity capital (or the equivalent);
b. "subsidiary", "subsidiary undertaking", "associated undertaking" and
"undertaking" shall be construed in accordance with the Act (but for this
purpose ignoring paragraph 20(l)(b) of Schedule 4A of the Act).
STM reserves the right to waive, in whole or in part, all or any of conditions
(b) to (g) inclusive. Conditions (b) to (g) inclusive must be satisfied as at,
or waived (where possible) on or before midnight on the 21st day after the later
of the first closing date of the Offer and the date on which condition (a) is
fulfilled (or in each case such later date as the Panel may agree) failing which
the Offer will lapse. STM shall be under no obligation to waive or treat as
satisfied any of conditions (b) to (g) inclusive by a date earlier than the
latest date specified above for the satisfaction thereof, notwithstanding that
the other conditions of the Offer may at such earlier date have been waived or
fulfilled and that there are at such earlier date no circumstances indicating
that any such condition may not be capable of fulfillment.
If STM is required by the Panel to make an offer for Channelfly Shares under the
provisions of Rule 9 of the City Code STM may make such alteration to the above
conditions, including condition (a) above, as are necessary to comply with the
provisions of that rule.
Certain further terms of the Offer
Except with the consent of the Panel, the Offer will lapse unless Conditions (b)
to (g) are fulfilled, or if capable of waiver, waived or, where appropriate,
have been determined by STM in its opinion to be or to remain satisfied by
midnight on whichever is the later of the date which is 21 days after first
closing date of the Offer and the date on which condition (a) is satisfied.
If the Offer lapses, the Offer will cease to be capable of further acceptance
and STM, Beaumont Cornish and holders of Channelfly shares shall thereupon cease
to be bound by prior acceptances. STM shall be under no obligation to waive or
treat as fulfilled or satisfied any of the conditions (b) to (g) by a date
earlier than the latest date specified above for the fulfilment or satisfaction
thereof notwithstanding that the other conditions of the Offer may at such
earlier date have been waived or fulfilled or satisfied and that there are at
such earlier date no circumstances indicating that any such conditions may not
be capable of fulfilment or satisfaction.
Appendix 2
Irrevocable Undertakings
The following are the Committed Channelfly Shareholders. They have signed
irrevocable undertakings to accept, or to procure the acceptance of, the Offer
and elect for the Share Alternative in respect of the following Channelfly
Shares:
Name Number of Channelfly Shares % of issued share
capital
Philip Murphy 1,633,433 3.4
Adam Driscoll 9,094,957 18.9
Rosalind Driscoll 4,028,319 8.4
Jeremy Ledlin 1,206,345 2.5
Be Rozzo 1,114,037 2.3
Galleon Holdings plc 466,667 1.0
Laser Quest (Stourbridge) Limited 1,133,332 2.4
Holly Driscoll 30,769 0.1
Margaret Field 12,625 -
Stephen Budd 772,058 1.6
James Wyllie 76,667 0.2
Paul Craig 275,735 0.6
Paul Clarke 17,284 -
Nick Moore 1,114,037 2.3
Nick Dryden 500,000 1.0
Lemasco Nominees (White Spark) 1,100,000 2.3
White Spark Ltd 1,004,420 2.1
Lemasco Nominees 900,000 1.9
Morgan Nominees Limited 1,095,580 2.3
(Nominee for White Spark)
Saffron Hickman 35,711 0.1
Graham Silk 1,076,923 2.2
Sanctuary Records Group Limited 666,667 1.4
Keith Williams 331,493 0.7
TOTAL 27,687,059 57.7
======== ====
The Irrevocable Undertakings will under their terms lapse if:
i) the formal offer document is not posted to shareholders of
Channelfly within 28 days (or such longer period as the Panel may
agree, being not more than six weeks) after the date of the
announcement of the Offer; or
i. the Offer lapses or is withdrawn.
APPENDIX 3
Definitions
The following definitions apply throughout this document, unless the context
requires otherwise:
"Act" or "the Companies Act" the Companies Act 1985, as amended
"AIM" the Alternative Investment Market of the London Stock
Exchange
"Australia" the Commonwealth of Australia, its states, territories and
possessions
"Beaumont Cornish" Beaumont Cornish Limited, regulated by the Financial
Services Authority
"Board" or "Directors" the board of directors of Channelfly
"business day" a day (other than a Saturday, Sunday or public holiday) on
which banks are generally open for business in the City of
London
"Channelfly" Channelfly plc
"Channelfly Group" or "Group" Channelfly and its subsidiaries and subsidiary
undertakings, as those respective terms are defined in the
Act
"Channelfly Shareholders" or "Shareholders" holders of Channelfly Shares
"Channelfly Shares" or "Shares" the ordinary shares of 1p each in Channelfly and any
further ordinary shares in the capital of Channelfly which
are unconditionally allotted or issued before the Offer
closes
"City Code" the City Code on Takeovers and Mergers
"Closing Price" the middle-market price of a Channelfly Share at the close
of business on the day to which such price relates,
derived from the London Stock Exchange Daily Official List
for that day
"Committed Channelfly Shareholders" the persons listed in Appendix 2 of this announcement
"Form of Acceptance" The form of acceptance and authority relating to the Offer
accompanying the Offer Document
"Independent Director" James Wyllie being a director of Channelfly who is
independent in relation to the Offer, which for the
avoidance of doubt does not include Philip Murphy, Adam
Driscoll, Jeremy Ledlin and Stephen Budd, none of whom
have taken part in the consideration by the board of
Channelfly of the terms of the Offer
"Japan" Japan, its possessions and territories and all areas
subject to its jurisdiction and any political sub-division
thereof
London Stock Exchange London Stock Exchange plc
"Management" Adam Driscoll and Philip Murphy
"Offer" the recommended cash offer to be made by Beaumont Cornish
on behalf of STM to acquire the entire issued and to be
issued ordinary share capital of Channelfly not already
owned by STM on the terms and conditions set out in this
announcement and, where the context admits, any subsequent
revision, variation, extension or renewal thereof
"Overseas Shareholders" Channelfly Shareholders resident in or national or
citizens of, jurisdictions outside the UK or who are
nominees of, or custodians, trustees or guardians for,
citizens or nationals of such other jurisdictions
"Panel" the Panel on Takeovers and Mergers
"Regulatory Information Service" any of the services set out in Schedule 12 of the Listing
Rules published by the Financial Services Authority
"Share Alternative" the right of Channelfly Shareholders who accept the Offer
to elect to receive as the Offer consideration STM Shares
instead of cash in respect of their entire holdings of
Channelfly Shares
"STM" Stonesthrow Media Limited of 5 Deansway, Worcester WR1 2JG
"STM Shares" ordinary shares of #1 each in the capital of STM
"UK" United Kingdom
United States or US the United States of America, its territories and
possessions, any State of the United States of America and
the District of Colombia and all other areas subject to
its jurisdiction
Appendix 4
Basis of Calculation and Sources of Information
Unless otherwise stated, financial information concerning Channelfly has been
derived from the published annual report and accounts and the interim results of
Channelfly for the relevant periods.
The value of the Offer is based on 48,004,114 Shares in issue based on the
Channelfly share register as at 19 March 2003.
The closing prices of Shares are derived from the AIM Appendix to the Daily
Official List of the London Stock Exchange for the relevant date.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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