RNS Number:4749B
MKM Group PLC
03 August 2007
MKM.L
MKM Group plc
Acquisition of Leisure World Pty Limited
Placing of 6,666,667 new Ordinary Shares at 7.5p per share
Approval of waiver of the obligation to make a mandatory offer under Rule 9 of
the City Code on Takeovers and Mergers
Admission of the Enlarged Share Capital to trading on AIM
Notice of Extraordinary General Meeting
KEY POINTS
* Proposed acquisition of Leisure World Pty Limited, the Australian-based
sales promotion company, and its subsidiaries (together the ''Leapfrog
Group").
* Total consideration of up to #6.95m, the initial consideration to be
satisfied by #1.95m in cash and 20m Consideration Shares. Up to #5m of
Deferred Consideration may be payable in shares and/or cash, subject to
future financial performance.
* The Acquisition constitutes a reverse takeover, given the relative size
of the Leapfrog Group in relation to the MKM Group.
* The proceeds of a placing to raise #0.5m (before expenses) will be used
to contribute towards the funding of the cash element of the consideration
payable, the costs of the Proposals and to provide additional working
capital for the Enlarged Group.
* The Acquisition is in line with the Board's objective to expand the
Group through acquisitions in the marketing services sector. The Leapfrog
Group operates in the same sector as MKM Concepts and the Directors believe
that the merger of the two businesses will create opportunities to achieve
critical mass and build a global business.
* Established in 1997 and based in Sydney, Australia, the Leapfrog Group
provides sales promotion programmes to major branded companies in
Australasia and the Asia Pacific region. The business provides longer term
reward and loyalty consumer programmes together with short tactical
consumer campaigns, based on leisure and lifestyle incentives.
* Clients include Lufthansa, ANZ, Great Building Society, Procter &
Gamble, Nestle and Coca Cola.
* The Leapfrog Group has an active and proven strategy of international
expansion, having successfully established a sales operation in Auckland,
New Zealand in 2005. There is a significant opportunity to continue this
expansion model into new geographic territories.
* For the seven months to 31 January 2007, the Leapfrog Group generated
revenues on continuing operations of AUS$4.9m and an operating profit of
AUS$1.8m.
* Co-founders of the Leapfrog Group Brian Smillie and Richard Tenser are
expected to join the Board of the MKM Group as International Managing
Director and International Development Director respectively.
* Shareholder approval of the acquisition of the Leapfrog Group is to be
sought at an EGM, to be held at 10.00 a.m. on 29 August 2007.
Chairman, Andrew Johnson, said,
"We believe this is an excellent match. The Leapfrog Group is a highly
complementary business to our own and has a proven reputation.
This exciting opportunity represents a major advancement in our plans to develop
the Group. The Leapfrog Group adds critical mass to our sales promotion
activities, more than doubling the existing business. It also opens the way for
significant international expansion.
We believe that the logic of our growth strategy remains compelling and we view
the outlook for the Group very positively."
Enquiries:
MKM Group Plc T: 0161 877 1112
Andrew Johnson, Executive Chairman
Matthew Toynton, Finance Director
WH Ireland Limited T: 0161 832 2174
David Youngman
Biddicks T: 020 7448 1000
Katie Tzouliadis/ Sophie Lane
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Date of publication of Circular 3 August 2007
Extraordinary General Meeting 10.00 a.m. on 29 August 2007
Re-admission of the Existing Ordinary Shares and
admission and commencement of dealings in the New
Ordinary Shares on AIM 30 August 2007
ADMISSION AND PLACING STATISTICS
Number of Existing Ordinary Shares 43,744,545
Number of Consideration Shares 20,000,000
Number of Ordinary Shares being issued pursuant to
the Placing 6,666,667
Placing Price 7.5p
Gross proceeds of the Placing #500,000.03
Number of Ordinary Shares in issue following Admission 70,411,212
Percentage of the Enlarged Share Capital following
Admission represented by:
* the Consideration Shares 28.40%
* the Placing Shares 9.47%
Market capitalisation of MKM Group at the Placing
Price following Admission #5.28m
Introduction
The Company has today announced that it has conditionally agreed, subject, inter
alia, to Existing Shareholder approval at the EGM, to acquire the entire issued
share capital of Leisure World and its subsidiaries (together the ''Leapfrog
Group''). The initial consideration for the Acquisition is to be satisfied by a
cash payment of #1.95 million (as adjusted in accordance with the Acquisition
Agreement) and the issue of the Consideration Shares. In addition, Deferred
Consideration may be payable to the Vendors, in Deferred Consideration Shares
and/or cash, subject to the achievement of agreed conditions relating to the
future financial performance of the Leapfrog Group.
The Company also today announced that it proposes to raise approximately
#500,000, before expenses, by means of a placing of 6,666,667 new Ordinary
Shares at the Placing Price. The proceeds of the Placing, together with the
Vendor Loan and the Group's existing cash resources, will be used to fund the
cash element of the Consideration, the costs of the Proposals and to provide
additional working capital for the Enlarged Group.
By reason of the size and relative values of Leisure World in relation to MKM,
the Acquisition will constitute a reverse takeover under the AIM Rules and will,
therefore, require the approval of Existing Shareholders at the EGM. To complete
the Acquisition and implement the Placing it will also be necessary to give the
Directors the required powers and authorities to issue and allot the New
Ordinary Shares, the Deferred Consideration Shares and the Unapproved Options to
be granted to the Vendors. If the Acquisition is approved, the admission of
Existing Ordinary Shares to trading on AIM will be cancelled and the Company
will be obliged to apply for re-admission of the Existing Ordinary Shares and
admission of the New Ordinary Shares to trading on AIM.
Due to the proposed holdings and potential holdings of Ordinary Shares by the
Vendors, the Company is also proposing to seek a waiver of certain obligations
that would otherwise be placed on the Vendors by Rule 9 of the Takeover Code
(''Rule 9''). Accordingly, Existing Shareholders will be asked at the EGM to
consent to the waiver.
An Admission Document is being sent to shareholders providing details of the
Proposals, to explain why the Board considers the Proposals to be in the best
interests of the Company and its Shareholders, to seek approval for the
Proposals at the Extraordinary General Meeting and to recommend that Existing
Shareholders vote in favour of the Resolutions which are necessary to approve
and implement the Proposals.
The Company has also today issued a preliminary announcement of MKM's audited
results for the year ended 31 March 2007.
Background to the Proposals
Following appointment of the new management team to the Group, the Board has
been considering opportunities to expand the Group through carefully selected
acquisitions in the marketing services sector. The Directors have identified the
Leapfrog Group as companies that could offer benefits to the Group. The Leapfrog
Group has its head office in Sydney, Australia and operates in the same sector
as MKM Concepts, the Group's principal operating subsidiary. The Directors and
the Proposed Directors believe that the acquisition of the Leapfrog Group by MKM
will create opportunities to achieve critical mass and build a global business.
Information on the Group
History
The Group's business was founded in 1989 when Mark Koch established MKM Concepts
with the objective of developing innovative travel and leisure sales promotion
programmes. In 1994, a travel agency was established by MKM Holdings, the parent
company of the group as it was then constituted, in order to manage the
redemption of travel-related sales promotions.
By 1999 this group had achieved an annual turnover of #2.5 million with pre-tax
profits of approximately #400,000 and a staff of 40. In 1999, MKM Holdings was
acquired by Air Miles, a subsidiary of British Airways plc. Mark Koch joined
AirMiles and continued to lead the MKM business.
In 2002, and following the events of 11 September 2001, Air Miles decided to
refocus their business and sell non-core activities. Mark Koch formed the
Company in 2002 as the corporate vehicle to enable him, together with his
brother Victor Koch, to buy back MKM Holdings from Air Miles. The business
continued to grow and in the year ended 31 March 2004 recorded turnover of #6.5
million and profit on ordinary activities before taxation of #665,989. The
Company was admitted to trading on AIM in June 2004.
In early 2005, the Group encountered serious problems with the fulfilment of a
cruise promotion being run on behalf of Express Newspapers. These problems
resulted in the Group suffering severe adverse publicity and incurring
considerable costs. In September 2005, the Company raised #1.378 million (before
expenses) through a placing and open offer in order to restore the Group to
financial stability.
During the last two years, a number of steps have been taken to strengthen the
management of the Group. In September 2005 following completion of the placing
referred to above, David Mond joined the Board as a Non-executive Director. In
October 2005, Andrew Johnson joined the Board as Non-executive Chairman,
becoming full time Executive Chairman in December 2005. In May 2006, Michael
Squires was appointed as a Non-executive Director and in June 2006 Matthew
Toynton was appointed Group Finance Director.
The restructuring of the Group was completed during the financial year ended 31
March 2006, the Group having returned to profitability during the second half of
that year. In the year ended 31 March 2007, the Group recorded profit on
ordinary activities before taxation of #456,000.
The Group's principal trading subsidiary is MKM Concepts. The fulfilment of
travel promotions run by MKM Concepts is managed by its wholly-owned subsidiary,
Concepts for Travel Limited, a travel agency and tour operator.
Products and services
MKM Concepts designs, develops and delivers sales promotion programmes for large
blue chip clients to help them acquire, develop and retain customers. Its
business falls into two main categories: long term partnership and loyalty
programmes designed to support clients seeking to reward their customers for
their loyalty; and shorter term promotional programmes to help clients achieve
objectives such as the launch of a new product. In the year ended 31 March 2007,
the turnover and operating profit attributable to partnership and loyalty
programmes was #2,163,000 and #289,000 respectively. In the same period, the
turnover and operating profit attributable to promotional programmes was
#1,725,000 and #167,000 respectively. MKM Concepts specialises in delivering
programmes based around travel, leisure and lifestyle promotions utilising a
product range that includes holiday and flight vouchers, experience days, pamper
treats and restaurant and hotel offers.
MKM Concepts' clients are primarily major branded companies with significant
marketing budgets, particularly in the financial services and fast moving
consumer goods sectors. In the partnership and loyalty area, MKM Concepts
maintains long-term contractual relationships with clients. MKM Concepts
supports the ''Premier'' and ''Plus'' account banking activities of HSBC Bank
plc and the ''firstdirectory'' account for First Direct. MKM Concepts also runs
tactical programmes for fast moving consumer goods companies such as Procter &
Gamble. These short term programmes are contracted for on a campaign by campaign
basis.
In order to develop these programmes, MKM Concepts draws upon its database of
independent and major branded partners who are interested in participating in
sales promotions activity as an alternative sales channel, providing them with
access to new customers. MKM Concepts seeks to match the marketing objectives of
its clients and partners, to their mutual benefit and to the benefit of
consumers. The matching of client and partner consumer profiles and brand values
is a key element of the solution development process.
MKM Concepts has a number of established products that it can incorporate into
client solutions. These include: Yippee!, a range of ''aspirational
experiences'' supplied by third parties; Hidden Retreats, a range of exclusive
holidays; and Pamper Treats, a range of indulgence treats such as spa days. MKM
Concepts maintains websites for each of these products that enhance the consumer
experience and minimise the cost of fulfilment.
Partners
MKM Concepts maintains a database of both independent and major branded partners
in the travel and leisure sectors who wish to participate in appropriate sales
promotions as a mechanism for winning new customers. MKM Concepts seeks to build
close relationships with major partners in order to gain a clear understanding
of their strategic objectives and the type of consumers they wish to target. The
partnership team includes an outbound telemarketing capability focused on
recruiting small independent businesses such as hotels and restaurants as well
as fitness instructors who wish to participate in promotional programmes. The
maintenance of a strong database of partners allows the Group to respond
quickly to clients' requirements.
Sales and marketing
MKM Concepts seeks to build long term relationships with clients by developing
new solutions to meet their strategic and tactical marketing objectives. It
maintains a database of the key marketing and purchasing personnel of all the
major target clients and uses this database to maintain regular contact. The
sales and project management teams design and deliver solutions tailored to each
client's requirements, drawing on a number of established products.
Operations and information technology
MKM is based in Timperley, South Manchester and operates from leasehold offices.
MKM employs 38 people. MKM operates an in-house travel agency business, contact
centre and fulfilment operation. A project management team sources print and
other promotional requirements and ensures that the service level agreements
entered into with clients are met.
As well as designing programmes, MKM Concepts delivers programmes utilising
MKM's in-house contact centre, travel agency and fulfilment resources. During
the last 18 months considerable focus has been placed on improving operational
delivery and quality control. In 2006, MKM Concepts initiated a programme to
achieve ISO 9001, the international reference standard for business-to-business
quality management, and received accreditation in April 2007.
Over the last 12 months, MKM Concepts has invested in the development of a
web-based database programme that allows consumers to find relevant offers more
easily and provides clients with management data on campaign results. This
product was launched under the StARS brand name in the first quarter of 2007 and
has been well received by clients.
Markets and competition
MKM Concepts operates in the direct marketing services sector and can compete
with a broad range of competitors depending upon the nature of a client's
requirements. Within the sub-sector of travel and leisure sales promotions MKM
is one of the larger companies and differentiates itself from the smaller
competitors by being able to provide comprehensive solutions to clients
supported by an in-house travel agency, call centre and fulfilment operations.
The Directors believe that the StARS technology and MKM Concepts' delivery
resources differentiate MKM from many of its competitors.
Information on the Leapfrog Group
Introduction
The Leapfrog Group specialises in the development and delivery of sales
promotion and loyalty programmes using travel, leisure and lifestyle-based
products.
History
The Leapfrog Group was founded by Richard Tenser and Brian Smillie in 1997. The
first company to be established was Aussie Breaks Pty Limited (''Aussie
Breaks''), offering sales promotion products to corporate clients based on a
concept offering free hotel accommodation in accordance with promotional
conditions.
By the year ended 30 June 2000, Aussie Breaks had become an established business
with sales of AUS $610,000 and the management team had established a good
understanding of the comparatively undeveloped Australian sales promotion
market, recognising that there was an opportunity to broaden the product range
and import product concepts from the UK and overseas.
In 2000, the Leisure Rewards brand was established to develop incentive
programmes for a number of companies, including Greater Building Society Limited
(the ''Greater Building Society''). The Greater Building Society continues to
run this programme with the Leapfrog Group. In 2002, Leisure World was
established as a holding company for the Leapfrog Group.
In 2003, Leisure World acquired an interest in Spree Holidays Pty Ltd (''Spree
Holidays''), the travel operator from whom Leisure World had been sourcing
travel rewards. Having acquired the outstanding interest in Spree Holidays in
2004, the Leapfrog Group sought to strengthen its travel capabilities by
developing a specialist travel business. As a result of this strategy, the
Leapfrog Group won a major travel contract from Virgin Blue Airlines,
Australia's second largest domestic airline, to establish and operate Virgin
Blue's holiday programme.
In 2004, in order to accelerate the development of the sales promotion business,
Leisure World formed a joint venture company with TLC Marketing plc, a UK based
sales promotion business. In 2005, offices were opened in Melbourne and New
Zealand. The Leapfrog Group further strengthened its loyalty product offer by
acquiring a licence from The Logic Group Enterprises Limited, a UK company, to
use SLAM (System for Loyalty Administration and Management) loyalty software in
Australia and New Zealand. During 2006 and 2007 the Leapfrog Group refocused its
management resource on the development of the sales promotion and loyalty
business. In March 2007, LeisureWorld acquired the interest of TLC Marketing plc
in Leapfrog Promotion & Incentive Solutions Pty Limited and now owns the entire
issued share capital of this company. In April 2007, the Leapfrog Group disposed
of its consumer travel business, but continues to provide travel services to
customers of its sales promotions and loyalty businesses. In addition, the
Leapfrog Group underwent the Reorganisation, further details of which are set
out in the Admission Document.
Product and services
The Leapfrog Group is organised into two divisions - Leapfrog Loyalty and Reward
Solutions and Leapfrog Promotions and Incentives Solutions.
The Loyalty and Reward Solutions Division runs long term reward programmes for
corporate clients based on a points system which enables customers of such
clients to qualify for rewards. The Leapfrog Group provides a broad range of
services such as programme design, reward management, database and website
management and hosting, and help desk and account management. The division
focuses on business-to-business programmes and also supports a number of
financial services companies.
In the seven months ended 31 January 2007, the loyalty and rewards division
recorded turnover of AUS $2,417,000 (year ended 30 June 2006 AUS $3,278,000) and
an operating loss of AUS $130,000 (year ended 30 June 2006, operating profit of
AUS $179,000).
The Promotions and Incentives Solutions Division provides corporate clients with
a range of promotions and incentives that can be made available to customers who
buy goods or services from the client in accordance with the terms of the
promotional offer. The promotions and incentives typically consist of leisure
and lifestyle offers that match the target customer profile of the client and
are designed to achieve particular client objectives such as increased sales,
lead generation, rewarding loyal customers or incentivising staff. The division
focuses on ensuring that all campaigns are delivered effectively and provides a
full range of support services such as a customer service centre, on-line
vouchers, direct mail and website and database management.
In the seven months ended 31 January 2007, the promotions and incentives
division recorded turnover of AUS $2,446,000 (year ended 30 June 2006 AUS
$1,140,000) and operating profit of AUS $1,437,000 (year ended 30 June 2006 AUS
$385,000).
Product development
The initial focus of the Leapfrog Group was on taking proven product concepts
from the UK and developing them for the Australian and New Zealand markets. The
Leapfrog Group's internal design, creative and marketing teams package these
products into solutions designed to meet individual client needs. In recent
years, as the business has grown, the Leapfrog Group has placed greater emphasis
on product development in line with market and consumer trends.
Clients
The clients of the Leapfrog Group are generally major branded companies with
significant marketing budgets. The Loyalty and Reward Solutions Division has a
number of contracts that it has operated for more than four years.
Business-to-business clients include Braun Electrical Appliances and Srixon. It
also supports promotions for the home loan activities of the Greater Building
Society, Wide Bay Capricorn and ANZ in New Zealand. The Leapfrog Group has
established an operation to facilitate the redemption of points which Lufthansa
has issued to customers in Australia and has options to offer similar fulfilment
programmes in New Zealand, China, India, Singapore, Malaysia and Dubai.
The Promotions and Incentives Solutions Division runs tactical campaigns for
fast moving consumer goods companies such as Procter & Gamble, as well as
consumer durables companies such as Hewlett Packard and Mitsubishi Electric.
These campaigns are contracted for on a campaign by campaign basis.
Partners
The products and services provided by the Leapfrog Group to customers as part of
a promotion or loyalty programme are supplied by partners. The Leapfrog Group
therefore maintains a database of both independent and major branded partners
who wish to participate in appropriate sales promotions as a mechanism for
winning new customers via alternative sales channels. The Leapfrog Group's aim
is to build close relationships with major partners in order to gain a clear
understanding of their strategic objectives and the type of consumers they wish
to target. The management team is responsible for maintaining relationships with
partners and includes an outbound telemarketing capability focused on recruiting
small independent businesses such as hotels and restaurants as well as fitness
instructors who wish to participate in promotional programmes.
Sales and marketing
The Leapfrog Group is a sales and marketing led business and maintains a
database of key marketing and purchasing personnel at each of its major target
clients. The Leapfrog Group maintains a direct sales force of 10 personnel
engaged in outbound calling and visiting clients.
Operations and information technology
The Leapfrog Group has its head office in Sydney, Australia with other offices
in Brisbane and Melbourne, Australia and in Auckland, New Zealand. The Leapfrog
Group has over 50 employees. The Leapfrog Group has placed considerable emphasis
on delivering an excellent service to customers taking up the promotional offers
it runs on behalf of its clients. The partnership sourcing team ensures good
geographic coverage and maintains a concierge service that customers can access.
The in-house call centre team takes bookings for holiday and flight promotions.
The Leapfrog Group has developed an in-house IT capability and develops and
maintains all its own websites and databases using the dot.net platform from
Microsoft.
Markets and competition
The Leapfrog Group operates in the direct marketing services sector and can
compete with a broad range of competitors depending upon the nature of the
client's requirements. Within the sub sector of travel and leisure sales
promotions, the Directors and the Proposed Directors believe that the Leapfrog
Group is the market leader in Australasia providing turnkey solutions to clients
supported by in-house travel agency, call centre and fulfilment operations.
Financial information
(a) The following audited financial information has been extracted without
material adjustment from the accountants report on Leisure World set out in the
Admission Document. Investors should not rely solely on this summarised
information.
Year ended 30 June 7months 7months
ended ended
31 January 31 January
2004 2005 2006 2006 2007
AUS$'000 AUS$'000 AUS$'000 AUS$'000 AUS$'000
(Unaudited)
Group revenue -
continuing
operations 6,881 5,817 4,418 2,838 4,863
Cost of sales (4,933) (3,671) (2,040) (1,897) (1,659)
-------------------------------------------------------
Gross profit 1,948 2,146 2,378 941 3,204
Administrative
expenses (2,396) (2,321) (1,814) (1,163) (1,897)
-------------------------------------------------------
Operating (loss)/
profit
Group operations (448) (175) 564 (222) 1,307
Share of results of
joint ventures (24) 44 (26) 112 480
-------------------------------------------------------
Operating profit/
(loss) -continuing
operations (472) (131) 538 (110) 1,787
Investment revenue 35 26 71 9 38
Finance costs (19) (11) (14) (3) (19)
-------------------------------------------------------
(Loss)/profit
before taxation (456) (116) 595 (104) 1,806
Taxation (124) (43) (160) 54 (467)
-------------------------------------------------------
(Loss)/profit from
continuing
operations (580) (159) 435 (50) 1,339
Profit/(loss) from
discontinued
operations 357 (186) (698) 168 (2,138)
-------------------------------------------------------
Loss attributable
to equity holders
of the parent
company (223) (345) (263) 118 (799)
=======================================================
(b) The table below, which has been prepared for illustrative purposes only,
presents the historical results of the Leapfrog Group and of TLC Promotions &
Incentives Pty Limited and Leapfrog Group Australia Pty Limited (the ''Joint
Venture Undertakings'') (now acquired by Leisure World) as they would appear if
the Joint Venture Undertakings had been 100 per cent. owned by Leisure World
throughout the period. This table does not include the cost of acquisition of
the Joint Venture Undertakings.
Year ended 30 June 7months 7months
ended ended
31 January 31 January
2004 2005 2006 2006 2007
AUS$'000 AUS$'000 AUS$'000 AUS$'000 AUS$'000
(Unaudited)
Revenue
Group revenue -
continuing
operations 6,881 5,817 4,418 2,838 4,863
Revenue of Joint
Venture
Undertakings* - 1,936 4,952 2,234 3,498
-------------------------------------------------------
6,881 7,753 9,370 5,072 8,361
-------------------------------------------------------
Operating (loss)/
profit
Group operations -
continuing
operations (448) (175) 564 (222) 1,307
Operating (loss)/
profit of Joint
Venture
Undertakings* (70) 59 (76) 314 1,374
-------------------------------------------------------
(518) (116) 488 92 2,681
=======================================================
* includes 100 per cent. of the revenue and operating profit of the Joint
Venture Undertakings
The net asset value of the Leapfrog Group as at 31 January 2007 was AUS$
(2,862,000).
Rationale for the Acquisition
The Directors and Proposed Directors believe that by combining the business of
the Group and the Leapfrog Group by way of the Acquisition, the Enlarged Group
should be able to take advantage of the following three areas of opportunity.
Opportunity to build a global business
The Leapfrog Group has demonstrated that there is an opportunity to open
greenfield sales operations in under-exploited markets and to transfer product
concepts and expertise across markets. In 2005, the Leapfrog Group entered the
New Zealand market with a business development manager operating from a serviced
office in Auckland. In the following year, the Leapfrog Group opened its own
office and expanded the sales team to two. A third business development manager
was recruited in 2007 as sales continued to grow. The Enlarged Group will
continue the development of the Australian and New Zealand markets and seek to
expand into new geographic territories using this established model.
The Directors and Proposed Directors believe that there is an opportunity to
develop global client relationships with the major international brands.
As the Enlarged Group develops, the Directors and the Proposed Directors intend
that it will share product development costs and transfer successful campaigns
across national markets.
Opportunity to achieve critical mass
The Directors and Proposed Directors believe that the Acquisition will enable
the Enlarged Group to strengthen its business model as well as its general
management, finance, information technology and operational management
capabilities and, in addition, to benefit through the realisation of economies
of scale. The increased scale of the business will reduce the Enlarged Group's
dependence on any single client.
Opportunity to consolidate delivery capabilities
Both the Leapfrog Group and MKM Concepts have built up strong relationships with
partners that the Enlarged Group will be able to exploit on a broader basis. For
example, MKM Concepts has contractual relationships with hotel and tour operator
groups that the Leapfrog Group will be able to exploit and vice versa.
The Leapfrog Group has stronger IT management capabilities that it will be able
to share with MKM Concepts, thus improving MKM Concepts' ability to develop
solutions for clients and reduce its dependence on third party contractors.
Strategy
The Directors and the Proposed Directors believe that it will be possible to
seize the opportunities outlined above because the two companies share similar
market positions and cultures. They have similar market positions with regard to
the services they offer and the types of clients with which they work. MKM
Concepts and the Leapfrog Group also operate compatible management structures
and systems.
The Directors and Proposed Directors intend to adopt a clear, integrated
strategy, focused on two divisions: the Loyalty and Rewards Division building
long term strategic, contracted, client relationships; and the Promotions and
Incentives Division providing clients with flexible and innovative promotional
activities. The relationships generated by the Promotions and Incentives
Division will be used as opportunities to build longer term more strategic
relationships.
The Directors and Proposed Directors will place considerable emphasis on aiming
to achieve strong organic growth, building client relationships with global
brands, introducing innovative products in line with consumer trends and
entering new geographic markets in Europe and Asia Pacific, following the model
adopted by the Leapfrog Group in New Zealand.
The Directors and Proposed Directors will also seek to exploit the increased
scale of the business by sharing services such as IT and finance, developing
excellent delivery capability through the adoption of robust and common IT
platforms, and building rigorous shared financial and risk management processes.
They intend to exploit IT and product innovation in the solutions they design
for clients and are determined to employ the best people in the industry.
The Enlarged Group will also continue to investigate further acquisition
opportunities in the broader marketing services sector.
Inducement Fee
As part of the negotiations between the Company and the Vendors, the Company has
agreed to enter into an inducement fee arrangement. The inducement fee will be
paid to the Vendors in the circumstances set out in this paragraph to cover the
reasonable costs and expenses of the Vendors, up to a maximum amount equal to 1
per cent. of the value of the Company on the date that the offer to purchase
Leisure World is withdrawn (inclusive of VAT, if any). The inducement fee is
payable by the Company in the event that the offer to acquire the entire issued
share capital of Leisure World is withdrawn by the Company, and there has not at
that time been any material change made by the Vendors in the terms of the offer
which they are willing to accept and/or enter into and no material matter has
arisen in the due diligence process which would affect the Company's valuation
of Leisure World.
Directors and Proposed Directors
The executive and non-executive Directors are:
Andrew Johnson (aged 53), Executive Chairman
Andrew Johnson was appointed chairman of MKM in October 2005. His recent focus
has been on heading up market and customer-focused organisations and exploiting
the opportunities created by new communication and database technologies.
Between 1998 and 2005 Andrew was chief executive and one of the founder
shareholders of the Dataforce Group Limited, a supplier of integrated outsourced
customer relationship management solutions. Following his studies at Leeds
University and the London School of Economics, Andrew spent the early part of
his career with ICI plc in sales and marketing roles, following which he
attained an MBA with distinction from INSEAD.
Mark Koch (aged 50), Chief Executive
Mark's experience covers 20 years within the industry. As a major shareholder of
Free Room UK Ltd in 1982 he was one of the first people to exploit the free
hotel room concept. Free Room UK Ltd grew rapidly and, in 1987, Mark led the
sale of the business to Norfolk House Plc. In 1989, Mark founded MKM launching a
range of innovative products in the area of leisure, travel and lifestyle
promotions. In 1999, MKM Holdings was acquired by Air Miles, a subsidiary of
British Airways Plc. In 2002, Mark led the buyout of MKM Holdings from Air Miles
and the subsequent flotation of the Group on AIM in 2004.
Victor Koch (aged 47), Executive Director
Victor Koch joined MKM Concepts as a director in 1994 and has been responsible
for leading the sales team, product and service development, identifying new
markets and managing the PR and marketing of the Group. Victor's previous
experience involved developing new products and penetrating new markets
particularly in Europe for textile and clothing businesses.
David Mond (aged 61), Non-executive Director
David Mond was appointed as a non-executive director in September 2005. He is
the senior partner of Manchester based chartered accountants, Hodgsons. David
qualified as a chartered accountant in 1971 and, after a period in audit,
specialised in corporate recovery and insolvency. David now focuses on corporate
finance, investment and insolvency activities. David is also a director of
ClearDebt Group plc and Strategic Retail plc, both AIM quoted companies.
Michael Squires (aged 55), Non-executive Director
Michael Squires was appointed as a non-executive director in May 2006. He spent
the first 10 years of his career in sales and marketing roles. In 1985 Michael
joined the executive search industry and in 1990 was appointed the managing
partner of the London office of Tasa International Limited. In 1995, Michael
became chief executive of Tasa International Limited and led the merger of the
business with TMP Worldwide, Inc. Michael subsequently became chief executive
officer of TMP Executive Search based in New York. In 2004, Michael was
appointed chairman of the European Study Group Limited. Michael also chairs The
Solon Partnership Limited, a specialist business coaching and mentoring
consultancy.
Matthew Toynton (aged 34), Group Finance Director
Matthew Toynton was appointed Group Finance Director in June 2006. Matthew
joined the Group from Procter & Gamble Inc. where he worked for 11 years. In his
most recent role as Finance Associate Director, he had financial responsibility
for their European beauty care operations which included brands such as Clairol
and Wella. Prior to his career in industry, Matthew attended Keble College,
Oxford, where he studied Chemistry. Matthew is an associate of the Chartered
Institute of Management Accountants (CIMA).
The Proposed Directors are:
Brian Smillie (aged 53), proposed International Managing Director
Brian Smillie is executive chairman and, together with Richard Tenser, a founder
of the Leapfrog Group. Brian started a career in retailing with Fine Fare Plc
progressing to the position of Operations Director with Amos Hintons. Brian then
held senior positions within the manufacturing and service industries. His broad
experience led him to work extensively with the UK government - The Ministry for
Overseas Development. In 1984 Brian joined Richard Tenser at Town and Country
Car Rental Limited (''Town and Country'') which they sold to Henleys Plc in
1987. In 1997 Brian and Richard established Aussie Breaks Pty Limited laying the
foundations for the establishment of the Leapfrog Group.
Richard Tenser (aged 51), proposed International Development Director
Richard Tenser is chief executive officer and, together with Brian Smillie, is
one of the founders of the Leapfrog Group. He commenced his career in business
working for Budget Rent a Car. He then left to establish Town and Country. After
selling Town and Country, Richard moved his family to Sydney. Richard then
undertook a consulting role with the Lofthus Group of Companies, which
specialised in loyalty, point of sale and incentive programmes. In 1997,
together with Brian Smillie, Richard identified the potential for an Australian
based reward programme known as FlexiBreaks. This foundation laid the groundwork
for the range of products and brands available today under the Leapfrog Group
umbrella.
Details of the Proposed Directors' service contracts are as follows:-
Brian Smillie's service agreement, which is conditional on Admission, is fixed
for a term expiring on the later of 30 June 2008 and the payment of the Deferred
Consideration to Brian Smillie in accordance with the provisions of the
Acquisition Agreement (if any). The service agreement may be terminated by
either party serving at least 12 months' written notice on the other to expire
on or after the initial term. The service contains provisions for early
termination in the event, inter alia, of a breach of a material term of the
service agreement by the director and, where such breach is capable of remedy,
the director fails to remedy the breach within 30 days of notice provided by the
Board or where the director ceases to be a director of the Company for any
reason. The basic annual salary payable to Brian Smillie is AUS $250,000 per
annum to be reviewed annually (without any obligation to increase the same). In
addition, Brian Smillie is entitled to certain benefits and, in certain
circumstances, to receive a bonus. The service agreement contains restrictive
covenants for periods of 6 and 12 months following termination of his
employment.
Richard Tenser's service agreement, which is conditional on Admission, is fixed
for a term expiring on the later of 30 June 2008 and the payment of the Deferred
Consideration to Richard Tenser in accordance with the provisions of the
Acquisition Agreement (if any). The service agreement may be terminated by
either party serving at least 6 months' written notice on the other to expire on
or after the initial term. This service agreement contains provisions for early
termination in the event, inter alia, of a breach of a material term of the
service agreement by the director and, where such breach is capable of remedy,
the director fails to remedy the breach within 30 days of notice provided by the
Board or where the director ceases to be a director of the Company for any
reason. The basic annual salary payable to Richard Tenser is AUS $200,000 per
annum to be reviewed annually (without any obligation to increase the same). In
addition, Richard Tenser is entitled to certain benefits and, in certain
circumstances, to receive a bonus. The service agreement contains restrictive
covenants for periods of 6 and 12 months following termination of his
employment.
Current trading and prospects of the Enlarged Group
MKM
Audited financial information on MKM for the period ended 31 March 2007 is
included in the circular. Profit before tax for this period was #456,000. MKM's
profit before tax for the first quarter of the current financial year was in
line with budget although, as expected, lower than in the same period last year,
principally due to the loss of the loyalty contract referred to in the Company's
interim results for the six months ended 30 September 2006.
LeisureWorld
The Directors and the Proposed Directors believe that Leisure World's trading
performance since 30 January 2007 has been in line with expectations and
significantly ahead of the same period in the previous year.
Enlarged Group
The Directors and Proposed Directors believe that there are opportunities to
exploit synergies within the Enlarged Group and to benefit from economies of
scale. The Directors and Proposed Directors believe that the Acquisition
presents an opportunity to develop a global marketing business and that the
prospects of the Enlarged Group are encouraging.
Dividend policy
The Directors' immediate intention is to reinvest surplus funds in the further
development of the Enlarged Group. However, the Directors and the Proposed
Directors intend to commence the payment of dividends when it is commercially
prudent to do so, subject to the availability of distributable reserves.
Details of the Placing
The Company is proposing to raise approximately #500,000 (before expenses) by
the issue of the Placing Shares at the Placing Price pursuant to the Placing.
The Placing Shares will represent approximately 9.47 per cent. of the Enlarged
Share Capital.
The Placing is not underwritten. The Placing Shares will, when issued, rank pari
passu in all respects with the Existing Ordinary Shares and the Consideration
Shares, including the right to receive all dividends and other distributions
thereafter declared, made or paid in respect of the Ordinary Shares.
The Placing is conditional on, inter alia, the satisfaction of the following
conditions on or before 8.00 a.m. on 30 August 2007 or such later time and date
(being not later than 5.00 p.m. on 12 September 2007) as WH Ireland and the
Company may agree:
(a) the passing of the Resolutions at the EGM;
(b) the completion of the Acquisition;
(c) WH Ireland not having exercised its rights in certain circumstances to
terminate the Placing Agreement prior to Admission; and
(d) Admission having occurred.
Monies received from placees in respect of the Placing Shares will be held in
accordance with the terms of the placing letters issued to such placees by WH
Ireland until such time as the Placing Agreement becomes unconditional in all
respects. If the Placing Agreement does not become unconditional in all respects
by 8.00 a.m. on 30 August 2007, or such later date as the Company or WH Ireland
may agree, being no later than 12 September 2007, monies received from placees
will be returned to placees at the relevant placee's sole risk without interest.
Following Admission, share certificates representing the Ordinary Shares to be
issued pursuant to the Placing are expected to be despatched by post to placees
who do not wish to receive shares in uncertificated form, by no later than 6
September 2007, at the relevant placee's sole risk. No temporary documents of
title will be issued in connection with the Placing. Pending the despatch of
definitive share certificates, instruments of transfer will be certified against
the register of members of the Company.
The CREST accounts of placees who have duly elected to receive their Ordinary
Shares in uncertificated form are expected to be credited to the designated
CREST account on 30 August 2007.
Admission to AIM and dealings
Application will be made to the London Stock Exchange for the Existing Ordinary
Shares and the New Ordinary Shares to be re-admitted and admitted, respectively,
to trading on AIM. It is expected that Admission will become effective and
dealings, for normal settlement, will commence on 30 August 2007.
If the Resolutions are not passed or the Acquisition is not completed, the
Existing Ordinary Shares will continue to be traded on AIM.
The Takeover Code
The issue of the Consideration Shares and the Deferred Consideration Shares to
the Vendors pursuant to the provisions of the Acquisition Agreement gives rise
to certain considerations under the Takeover Code.
Under Rule 9, any person who acquires an interest 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 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 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 during twelve months prior to announcement
of the offer.
On Admission, the Concert Party will be interested in 20 million Ordinary
Shares, in aggregate, representing approximately 28.40 per cent. of the Enlarged
Share Capital. In addition, under the Acquisition Agreement, Deferred
Consideration of a value up to #5 million may also be payable, subject to the
achievement by the Leapfrog Group of certain profit targets, such Deferred
Consideration to be satisfied by either the allotment and issue of Deferred
Consideration Shares or a mixture of cash and the allotment and issue of
Deferred Consideration Shares to the Concert Party subject to a maximum payment
of #5 million. By way of an example, if the issue price is 10p, the maximum
number of Deferred Consideration Shares that would be issued is 50 million. The
earliest opportunity for the issue and allotment of Deferred Consideration
Shares is 30 June 2008. On Admission, the Concert Party will also be granted, in
aggregate, options over 2,500,000 Ordinary Shares (''Option Shares'') pursuant
to the Unapproved Option Scheme.
Following the issue of Deferred Consideration Shares under the above example and
the issue of the Option Shares, the Concert Party would be interested in
72,500,000 Ordinary Shares, in aggregate, representing approximately 58.99 per
cent. of the then enlarged issued share capital (assuming no other issues of
Ordinary Shares before that time).
The table below shows the interest of the Concert Party assuming that the
Proposals are implemented and the Deferred Consideration Shares are all issued
at 10p:
Maximum
Maximum percentage of
percentage of Maximum the issued
Maximum the issued number of share
number of share Ordinary capital of
Ordinary capital of Shares the Company
Shares the Company following the following the
Initial Percentage following the following the issue of the issue of the
Consideration of issue of the issue of the Deferred Deferred
Shares issued Enlarged Deferred Deferred Consideration Consideration
on Share Consideration Consideration Shares and the Shares and the
Admission Capital Shares Shares Option Shares* Option Shares*
Richard Tenser 9,000,000 12.78 31,500,000 26.16 32,625,000 26.55
Brian Smillie 11,000,000 15.62 38,500,000 31.97 39,875,000 32.44
------------------------------------------------------------------------------------
20,000,000 28.40 70,000,000 58.13 72,500,000 58.99
====================================================================================
*Assuming exercise of the options granted to the Concert Party in full.
The maximum number of Deferred Consideration Shares that may be issued to the
Concert Party members is dependent upon the price of the Ordinary Shares. Any
decrease in the price of the Ordinary Shares would increase the number of
Deferred Consideration Shares to which the Vendors would be entitled. If the
price of the Ordinary Shares was to decrease, the maximum percentage
shareholding of the Concert Party would increase.
Under the terms of the Acquisition Agreement #1,000,000 of the Deferred
Consideration will be satisfied by the issue of Ordinary Shares at 10p per share
and up to #4,000,000 (at the Company's discretion) by cash or by the issue of
Ordinary Shares issued at the average mid market quotation of such shares for
the 30 business days up to and including 30 June 2008. The table below shows the
interest of the Concert Party assuming that the Proposals are implemented and
#1,000,000 of Deferred Consideration Shares are issued at 10p per share and
#4,000,000 of Deferred Consideration Shares are issued at 5p per share.
Maximum
percentage of
Maximum Maximum the issued
percentage of number of share capital
Maximum the issued Ordinary of the
number of share capital Shares Company
Ordinary of the following the following the
Shares Company issue of the issue of the
Percentage following the following the Deferred Deferred
Initial of issue of the issue of the Consideration Consideration
Consideration Enlarged Deferred Deferred Shares and Shares and
Shares issued Share Consideration Consideration the Option the Option
on Admission Capital Shares Shares Shares* Shares*
Richard Tenser 9,000,000 12.78 49,500,000 30.85 50,625,000 31.08
Brian Smillie 11,000,000 15.62 60,500,000 37.72 61,875,000 37.98
-------------------------------------------------------------------------------
20,000,000 28.40 110,000,000 68.57 112,500,000 69.06
===============================================================================
*Assuming exercise of the options granted to the Concert Party in full
Under the terms of the Acquisition Agreement #1,000,000 of the Deferred
Consideration will be satisfied by the issue of Ordinary Shares at 10p per share
and up to #4,000,000 (at the Company's discretion) by cash or by the issue of
Ordinary shares issued at the average mid market quotation of such shares for
the 30 business days up to and including 30 June 2008. The table below shows the
interest of the Concert Party assuming that the Proposals are implemented and
#1,000,000 of Deferred Consideration Shares are issued at 10p and #4,000,000 of
Deferred Consideration Shares are issue at 0.5p per share, being the par value
of the Ordinary Shares and the minimum issue price for Deferred Consideration
Shares.
Maximum
percentage of
Maximum Maximum the issued
percentage of number of share capital
Maximum the issued Ordinary of the
number of share capital Shares Company
Ordinary of the following the following the
Shares Company issue of the issue of the
Percentage following the following the Deferred Deferred
Initial of issue of the issue of the Consideration Consideration
Consideration Enlarged Deferred Deferred Shares and Shares and
Shares issued Share Consideration Consideration the Option the Option
on Admission Capital Shares Shares Shares* Shares*
Richard Tenser 9,000,000 12.78 373,500,000 42.42 374,625,000 42.43
Brian Smillie 11,000,000 15.62 456,500,000 51.85 457,875,000 51.86
------------------------------------------------------------------------------
20,000,000 28.40 830,000,000 94.27 832,500,000 94.29
==============================================================================
*Assuming exercise of the options granted to the Concert Party in full
The Panel has agreed, subject to Resolution 2 being passed on a poll by
independent shareholders at the Extraordinary General Meeting, to waive the
obligation on the Concert Party, under Rule 9, to make a general offer for the
entire issued share capital of the Company which would otherwise arise on
completion of the Proposals and the issue of the Deferred Consideration Shares.
Accordingly, independent shareholders' approval for the waiver of the
obligations under Rule 9 is sought in Resolution 2.
Shareholders should be aware that, following completion of the Acquisition
(including the issue of the Deferred Consideration Shares and the Option
Shares), the members of the Concert Party may between them hold more than 50 per
cent. of the Company's voting share capital and for so long as they continue to
be treated as acting in concert may accordingly increase their aggregate
interest in shares without incurring any obligation under Rule 9 to make a
general offer, although individual members of the Concert Party will not be able
to increase their percentage interest in shares through or between a Rule 9
threshold without Panel consent.
The Concert Party
The Concert Party consists of the Vendors, who, for the purposes of the Takeover
Code, are deemed to be acting in concert by virtue of the fact that they are
both shareholders of Leisure World which is being acquired by the Company.
Intentions of the Concert Party
Following completion of the Proposals, Brian Smillie and Richard Tenser will be
appointed International Managing Director of the Company and International
Development Director of the Company, respectively.
Save for these appointments, there will be no change to the management or other
employees of the Group or any change to the existing conditions of employment of
the Enlarged Group's employees or to the locations of the Enlarged Group's
places of business. No member of the Concert Party is intending to redeploy any
of the fixed assets of the Company.
Extraordinary General Meeting
The Acquisition is classed as a reverse takeover for the purpose of the AIM
Rules and is therefore conditional upon the approval of Existing Shareholders at
the EGM. An Extraordinary General Meeting will be held at 10.00 a.m. on 29
August 2007 at the offices of Halliwells LLP, St James's Court, Brown Street,
Manchester M2 2JF for the purpose of considering and, if thought fit, passing
the Resolutions. The Resolutions will, if passed:
(a) approve the Acquisition on the terms set out in the Acquisition
Agreement;
(b) approve the waiver granted by the Panel of any requirement which
would otherwise arise for the Concert Party to make a general
offer pursuant to Rule 9 to the other shareholders of the Company
as a result of the issue and allotment to the Concert Party of
the Consideration Shares and the Deferred Consideration Shares;
(c) increase the authorised share capital of the Company from
#300,000 to #900,000 by the creation of 120,000,000 new Ordinary
Shares. This represents an increase of 200 per cent. over the
previous authorised share capital of the Company. The principal
reason for such increase is to enable the Directors to issue the
Consideration Shares, the Placing Shares and the Deferred
Consideration Shares and to leave an appropriate margin of
authorised but unissued share capital following the Placing and
the Acquisition;
(d) authorise the directors of the Company generally and
unconditionally to exercise all the powers of the Company to
allot relevant securities pursuant to section 80 of the Act up to
an aggregate nominal amount of #597,500.
In aggregate, this authority represents approximately 173 per
cent. of the issued share capital of the Company. If passed, this
authority will expire on the earlier of 15 months from the date
of the passing of the resolution and the conclusion of the next
annual general meeting of the Company. Other than the issue of
the Consideration Shares, the Deferred Consideration Shares and
the Placing Shares, the Directors have no present intention of
issuing any authorised but unissued share capital of the Company
(except any shares issued pursuant to the Existing Schemes); and
(e) disapply the provisions of section 89 of the Act and in so doing
empower the directors of the Company pursuant to section 95 (1)
of the Act to allot equity securities for cash pursuant to the
authority referred to in paragraph (d) above as if section 89(1)
of the Act did not apply to any such allotment save that the
power will be limited to:
(i) the allotment of equity securities pursuant to a rights issue or
similar offer to shareholders of the Company where the interests
of all shareholders of the Company are proportionate or as nearly
proportionate as practical to the numbers of Ordinary Shares held
by them;
(ii) the allotment of equity securities pursuant to the Placing;
(iii) the allotment of equity securities pursuant to the Acquisition;
(iv) the allotment of equity securities pursuant to the Unapproved
Options granted to the Vendors; and
(v) the allotment (otherwise than pursuant to paragraphs (i) to (iv)
above (inclusive)) for cash of equity securities up to an
aggregate nominal amount of #61,500.
If given, this power will expire at the earlier of 15 months from the date of
the passing of the resolution and the conclusion of the next annual general
meeting of the Company. The Resolution relates to the allotment of the
Consideration Shares together with the Deferred Consideration Shares. For the
purposes of the Deferred Consideration Shares an issue price of 10p has been
assumed. As set out in the circular, the number of Deferred Consideration Shares
is dependent upon the price of the Ordinary Shares and therefore the Company may
require a further authority at a later date.
If the Resolutions are duly passed, the authorised share capital of the Company
will be #900,000 divided into 180,000,000 Ordinary Shares. The Board will be
authorised to allot the Consideration Shares, Deferred Consideration Shares (up
to a maximum of 90,000,000 Ordinary Shares), the Placing Shares and the Ordinary
Shares pursuant to the Unapproved Options granted to the Vendors.
In accordance with the requirements of the Panel, Resolution 2 will be taken on
a poll by independent shareholders at the EGM.
Irrevocable undertakings to approve the Proposals
The Board has received irrevocable undertakings to vote in favour of the
Resolutions from those Shareholders whose names are set out in the circular and
who, in aggregate, hold 22,627,273 Ordinary Shares, which represents
approximately 51.73 per cent. of the Existing Ordinary Shares.
Copies of the Admission Document are available to the public from the Company's
website at www.mkmgroupplc.com.
DEFINITIONS
The following definitions apply throughout this document, unless the context
otherwise requires:
''Acquisition'' the proposed acquisition by the
Company of the entire issued share
capital of Leisure World pursuant
to the Acquisition Agreement
''Acquisition Agreement'' the conditional agreement dated 2
2007 between (1) the Vendors and
(2) the Company relating to the
Acquisition, which is conditional,
inter alia, on the passing of the
Resolutions at the EGM, further
details of which are set out in the
Admission Document
''Act'' the Companies Act 1985 (as amended)
''Admission'' the re-admission of the Existing
Ordinary Shares and the admission
of the New Ordinary Shares to
trading on AIM becoming effective
in accordance with Rule 6 of the
AIM Rules
"Admission Document" the Admission Document issued by
the Company and dated the same date
as this announcement
''AIM'' a market operated by the London
Stock Exchange
''AIM Rules'' the AIM Rules for Companies
governing the admission to and
operation of AIM published by the
London Stock Exchange from time to
time
''Air Miles'' Air Miles Travel Promotions
Limited, a company registered in
England and Wales with company
number 2260073
"Articles" the articles of association of the
Company as amended from time to
time
''the Board'' or ''the Directors'' the directors of the Company, as at
the date of this announcement,
whose names are set out above
"BS Loan" an unsecured loan of up to #385,000
to be made to the Company by Brian
Smillie, further details of which
are set out in the Admission
Document
''Company'' or ''MKM'' MKM Group plc, a company registered
in England and Wales with company
number 4364235
''Completion'' completion of the Acquisition on
the terms set out in the
Acquisition Agreement
''Concert Party'' the Vendors
''Consideration'' #1,950,000 (as adjusted in
accordance with the details set out
in the Admission Document) and the
issue of the Consideration Shares
to be paid and issued,
respectively, to the Vendors in
accordance with the Acquisition
Agreement
''Consideration Shares'' the 20 million new Ordinary Shares
to be issued on Completion in
accordance with the provisions of
the Acquisition Agreement,
conditional upon the passing of the
Resolutions, all of which will be
created in accordance with the Acts
and will have the rights and be
subject to the restrictions
contained in the Articles
''CREST'' the relevant system (as defined in
the CREST Regulations) to
facilitate the transfer of title to
the shares in uncertificated form
in respect of which Euroclear UK &
Ireland Limited (formerly CREST Co
Limited) is the Operator (as
defined in the CREST Regulations)
''Deferred Consideration'' deferred consideration payable to
the Vendors subject to certain
conditions being met in accordance
with the terms of the Acquisition
Agreement
''Deferred Consideration Shares'' the new Ordinary Shares to be
issued in respect of the Deferred
Consideration pursuant to the
Acquisition Agreement, further
details of which are set out in the
Admission Document
''EGM'' or ''Extraordinary the extraordinary general meeting
of the Company, convened for 10.00
General Meeting'' a.m. on 29 August 2007, and any
adjournment thereof, notice of
which is set out in the Admission
Document
''Enlarged Group'' the Company and its subsidiaries
and subsidiary undertakings
following Completion
''Enlarged Share Capital'' the issued ordinary share capital
of the Company immediately
following Admission including the
New Ordinary Shares
''Existing Shareholder'' a holder of Existing Ordinary
Shares
''Existing Ordinary Shares'' the 43,744,545 Ordinary Shares in
issue as at the date of this
announcement
"MKM Group" or the ''Group'' the Company and its subsidiaries
and subsidiary undertakings at the
date of this announcement
''Leapfrog Group'' Leisure World and its subsidiaries
and subsidiary undertakings at
Completion
''Leisure World'' Leisure World Pty Limited, a
company registered in Australia
with company number 092970566
''London Stock Exchange'' London Stock Exchange plc
''MKM Concepts'' MKM Concepts Limited, a company
registered in England & Wales with
company number 2389644
''MKM Holdings'' MKM Holdings Limited, a company
registered in England and Wales
with company number 2841252
''New Ordinary Shares'' the Placing Shares and the
Consideration Shares
''Ordinary Shares'' ordinary shares of 0.5p each in the
capital of the Company, all of
which have been created in
accordance with the Act and will
have the rights and be subject to
the restrictions contained in the
Articles
''Panel'' the Panel on Takeovers and Mergers
''Placing'' the conditional placing by WH
Ireland of the Placing Shares at
the Placing Price, pursuant to the
provisions of Placing Agreement
''Placing Agreement'' the conditional agreement dated 3
2007 between (1) the Company (2) WH
Ireland and (3) the Directors and
the Proposed Directors relating to
the Placing, details of which are
set out in the Admission Document
''Placing Price'' 7.5p per Placing Share
''Placing Shares'' the 6,666,667 new Ordinary Shares
to be issued pursuant to the
Placing, conditional upon the
passing of the Resolutions, all of
which will be created in accordance
with the Acts and will have the
rights and be subject to the
restrictions contained in the
Articles
''Proposals'' the Acquisition, the Placing and
Admission
''Proposed Directors'' the Vendors
''Reorganisation'' the restructuring of the business
and assets of certain Leapfrog
Group and connected companies, as
defined in the Admission Document
''Resolutions'' the resolutions set out in the
notice of EGM set out in the
Admission Document
"RT Loan" an unsecured loan of up to #315,000
to be made to the Company by
Richard Tenser, further details of
which are set out in the Admission
Document
''Shareholders'' holders of Ordinary Shares from
time to time
''Takeover Code'' the City Code on Takeovers and
Mergers
''UK'' the United Kingdom of Great Britain
and Northern Ireland
''Unapproved Options'' options over Ordinary Shares
granted pursuant to the Unapproved
Option Scheme
''Unapproved Option Scheme'' the MKM Group plc unapproved share
option scheme, further details of
which are set out in the circular
''Vendors'' Richard Tenser and Brian Smillie
being the legal and beneficial
owners of the entire issued share
capital of Leisure World at the
date of this announcement
"Vendor Loan" the BS Loan and the RT Loan
''WH Ireland'' WH Ireland Limited, a company
registered in England and Wales
with company number 2002044
This information is provided by RNS
The company news service from the London Stock Exchange
END
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