TIDMJPLH
RNS Number : 6117F
Japan Leisure Hotels Ltd
28 April 2011
28 April 2011
Japan Leisure Hotels Limited
("JPLH" or the "Company")
Proposed Disposal
Proposed Cancellation of Admission to Trading on AIM
SUMMARY
-- Proposed disposal of all of the Company's trading
subsidiaries to Sanglier Pte (the "Buyer").
-- Total consideration, before expenses, of Yen 1.42 billion
(approximately GBP10.4 million).
-- Net proceeds to be returned to shareholders as soon as
practicable.
-- All proposals subject to approval by shareholders at an
Extraordinary General Meeting.
Alan Clifton, Chairman of Japan Leisure Hotels, commented:
"We have made every effort to achieve our aim of creating
sufficient scale in the Japanese leisure hotel industry to become a
market leader. Unfortunately this has not proved possible, despite
many avenues having been explored. The Company is therefore not
fulfilling the full potential envisaged at the time of its
admission to AIM.
"The Board has considerable misgivings about the price to be
paid for the trading subsidiaries, especially in view of its
underlying value as a going concern. However, DKR Oasis has agreed
this transaction and, given their control over 87.57% of the
Company, the required resolutions will almost certainly be
passed.
"Finally, I would like to pay tribute to New Perspective, whose
team has worked tirelessly as the Company's Asset Manager in
implementing the business plan. It is disappointing that their
efforts have not been rewarded in the way we would have
anticipated, but they deserve credit for running the hotels very
professionally in the face of some very challenging trading
conditions."
Enquiries:
Japan Leisure Hotels Limited
Janine Lewis, Non-Executive Director 01481 737600
Shore Capital and Corporate Limited
(NOMAD to the Company)
Dru Danford
Stephane Auton 020 7408 4090
Pelham Bell Pottinger 020 7861 3112 or 07802 442
Archie Berens 486
Japan Leisure Hotels Limited
("JPLH" or the "Company")
Proposed Disposal
Proposed Cancellation of Admission to Trading on AIM
Background
On 20 December 2010, the Company announced that DKR Oasis had
informed the Board that it wished to exit its investment in the
Company and was taking active steps to achieve this end. As noted
in that announcement, there are a number of ways such an exit could
be structured including an offer being made for the Company's
shares or the sale of the Company's assets.
Since the date of that announcement, DKR Oasis has had
discussions with over 20 potential buyers regarding the sale of the
Company's shares or assets. The Company has co-operated with this
process by enabling potential interested parties to conduct due
diligence into the Company's assets with the intention of
maximising proceeds to Shareholders.
The Company has also considered other possible transaction
structures which might deliver value to Shareholders such as
seeking bank finance secured over the Company's assets to enable a
buy-back of the share capital held by DKR Oasis, or a placing of
the share capital held by DKR Oasis on AIM. However, discussions
which have been held in relation to such transaction structures
have not, in the Board's opinion, suggested that any of such
alternative transaction structures would prove successful.
Recently, DKR Oasis informed the Board that it had reached
agreement in principal with the Buyer on a proposal for the
acquisition of the JLH Subsidiaries. Clearly this Disposal could
not take place without the cooperation of the Company. Whilst the
Board has considerable misgivings about the proposed Disposal given
that the consideration being offered is significantly lower than
the value of the Bonita Hotels on a going concern basis, as
referenced in the Company's Interim Results for the 6 months ended
30 June 2010 announced on 28 September 2010, it is mindful of the
fact that DKR Oasis has control over 87.57% of the Ordinary Shares
and is in a position, should it choose, to change the Board and
cause the Company to enter into the Disposal anyway. Given this
situation, the Board considers it would be in Shareholders' best
interests to work cooperatively with DKR Oasis to enable the
Disposal to take place in an orderly fashion rather than incur the
substantial costs which would result if the Board engaged in a
drawn-out process of resisting DKR Oasis. Such a process would only
delay the inevitable and incur advisory and other costs which would
simply reduce the amount available to be distributed to
Shareholders
Finally, the Board is mindful of the fact that the Company has
not reached the desired scale and so is not fulfilling the full
potential envisaged when it was admitted to AIM. As Shareholders
are aware, the AIM admission proceeded notwithstanding the low
amount of money raised at the time of the initial public offering
since, in the Board's view, the substantial amount of work carried
out meant that the Company could obtain the admission of its shares
to AIM and when market sentiment improved, implement a secondary
offering to expand its business. Unfortunately, this has not proved
possible.
Details of the Disposal
Pursuant to the Sale Agreement between the Company, DKR Oasis
and the Buyer, the Buyer has agreed to acquire all of the issued
shares of the JLH Subsidiaries for a cash consideration of 1.42
billion Yen (approximately GBP10.4 million), with 50 million Yen
having been paid to the Company as a cash deposit upon signing of
the Sale Agreement and the balance to be satisfied in cash upon
Completion. As at 30 June 2010, the net asset value of JLH was 5.0
billion Yen and the EBITDA attributable to the six hotels the
subject of the sale amounted to 122.0 million Yen for the six
months ended 30 June 2010 (12 months ended 31 December 2009 was
332.6 million Yen). The Directors will use the net proceeds raised
from the Disposal to return cash to Shareholders and it is expected
that the minimum payment will be approximately 22 pence per
share.
In conjunction with the SPA, the Company, DKR Oasis, the Buyer
and the Beneficiary have also entered into the Warranty Deed,
pursuant to which the Company and DRK Oasis have provided certain
warranties in favour of the Company and DKR Oasis in connection
with the Disposal.
The Beneficiary has entered into sale agreements with the TK
Owners pursuant to which the Beneficiary will acquire all of the
issued shares of the TK Operators from the TK Owners.
As part of the arrangements for the Disposal, the Asset Manager
and the Hotel Operator have also agreed to terminate the asset
management agreements and the hotel operating agreements that they
have respectively entered into with each of the TK Operators
regarding the management and operation of the Bonita Hotels,
effective upon completion of the Disposal. Bonita Services LLP, the
company that employs the staff who work in the Hotels, will
terminate the employment of all employees effective upon completion
of the Disposal, and cooperate with the Buyer to assist the Buyer
to rehire all such employees. DKR Oasis has agreed to meet the
costs of such termination of agreements in order to facilitate the
Disposal.
In this way, full ownership of the Bonita Hotels and the
business of operating them will be transferred to the Buyer upon
completion of the Disposal.
Under the terms of the Sale Agreement and pursuant to the AIM
Rules, the Disposal is conditional, inter alia, upon the approval
of Shareholders at the EGM. DKR Oasis has entered into an
irrevocable undertaking under the Sale Agreement to vote in favour
of the resolution to approve the Disposal, and accordingly it is
extremely unlikely that this condition will not be satisfied.
Prospects
It is disappointing for everyone that the opportunity outlined
in the Admission Document three years ago remains unexploited in
the Japanese leisure hotel industry. Notwithstanding the challenges
of the Japanese economy, changes in regulation, a global financial
crisis, earthquake and tsunami the portfolio of Bonita Hotels has
continued to generate good cash flows and the Asset Manager has
continued to develop the business plan on a consistent and
thoughtful basis.
In looking to the future of the Bonita Hotels it has to be taken
in the context of the market and as we have consistently noted, in
a market of 25,000 hotels 90% of owners have 5 or fewer hotels. The
group of Bonita Hotels comprises only 6 hotels so in the current
configuration is far from a market leader. In this environment the
aim of the business plan had been to expand and drive efficiencies
of scale, but with a lack of capital it is not possible to pursue
this strategy. Without the ability to expand it becomes necessary
to review the strategy and it becomes evident with a modicum of
analysis that the current business is not large enough to support
the central overheads.
Proposed Cancellation of Admission to Trading on AIM
Upon completion of the Disposal, the entire business of owning
and operating the Bonita Hotels will be transferred from the
Company to the Buyer and the Beneficiary. The JLH Subsidiaries
which invested in the Bonita Hotels, are currently the only assets
of the Company, and accordingly the Disposal will effectively
result in a fundamental change of business for the Company as it
will no longer have any investments in Japanese leisure hotels,
ancillary businesses directly related to the operation of leisure
hotels or securities secured on Japanese leisure hotels. The
Directors will therefore be seeking Shareholder approval at an
Extraordinary General Meeting for the cancellation of admission of
the Ordinary Shares to trading on AIM, the winding up of the
company and the return of capital to shareholders. A circular
containing a notice of an Extraordinary General Meeting will be
posted to shareholders as soon as practicable.
DEFINITIONS
The following definitions apply throughout this announcement
unless the context requires otherwise.
"AIM Rules" the rules for AIM companies and their nominated
advisers issued by the London Stock Exchange
"AIM" AIM, a market of the London Stock Exchange
"Asset Manager" New Perspective YK, a Japanese company which
provides asset management services to the
TK Operators
"Beneficiary" AM1 Co., Ltd
"Bonita Hotels" the hotels owned by the TK Operators in
Isawa, Komaki, Matsusaka, Sendai, Yamagata
and Yokkaichi, Japan
"Buyer" Sanglier Pte. Ltd.
"Completion" completion of the Disposal pursuant to the
Sale Agreement
"Directors" or "Board" the directors of JLH whose names are set
out on page 4 of this document
"Disposal" the proposed disposal of all of the issued
and outstanding shares of the JLH Subsidiaries
to the Buyer as described in this document
"DKR Oasis" Chestnut Fund Ltd and Japan Resorts and
Leisure Limited.
"Extraordinary General the extraordinary general meeting of the
Meeting" or "EGM" Company to be convened
"Form of Proxy" the form of proxy for use at the EGM, enclosed
with this document
"Group" the Company and its subsidiaries
"Hotel Operator" Bonita Services LLP, a Japanese company
which provides hotel operation services
to the TK Operators
"Japan Leisure Hotels", Japan Leisure Hotels Limited, a Guernsey
"JLH" or the "Company" incorporated company with registered number
47899
"JLH Subsidiaries" JLH1 and JLH2
"JLH1" JLH1 Limited, a Guernsey incorporated company
with registered number 47918
"JLH2" JLH2 Limited, a Guernsey incorporated company
with registered number 47919
"London Stock Exchange" London Stock Exchange plc
"Notice" the Notice of the Extraordinary General
Meeting as set out herein
"Official List" the Official List of the UK Listing Authority
"Ordinary Shares" the ordinary shares of 1 pence each in the
capital of the Company
"Pounds" or "GBP" the lawful currency of the United Kingdom
"TK Operators" First Dormitory Yugen Kaisha, Yugen Kaisha
KN Planning, Yugen Kaisha Chubu Kasseika
and BLT Godo Kaisha, Japanese companies
which have received capital contributions
from the JLH Subsidiaries in order to acquire
the Bonita Hotels
"TK Owners" Bonita Holdings LLC and Bonita Holdings
Ltd, the shareholders of the TK Operators
"Sale Agreement" the agreement between the Company, DKR Oasis,
and the Buyer and the Beneficiary relating
to the disposal of the JLH Subsidiaries
and the TK Operators
"Shareholders" holders of Ordinary Shares
"UK Listing Authority" the Financial Services Authority in its
capacity as the competent authority for
the purposes of Part VI of the Financial
Services and Market Act 2000
"UK" the United Kingdom of Great Britain and
Northern Ireland
"Warranty Deed" the warranty deed between the Company, DKR
Oasis, the Buyer and the Beneficiary relating
to the disposal of the JLH Subsidiaries
and the TK Operators
"Yen" or "Yen" the lawful currency of Japan
This information is provided by RNS
The company news service from the London Stock Exchange
END
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