TIDMPACC
RNS Number : 0934O
Prime Active Capital PLC
01 August 2014
Prime Active Capital plc
("PAC" or the "Company")
Disposal of U.S. Assets for $10 million (EUR7.46 million)
PAC announces it has conditionally agreed to enter into an Asset
Purchase Agreement to sell 50 of the 56 Verizon Wireless authorised
retailer stores co-owned and operated by its subsidiaries Express
Business Service and Cellular Center (the "Disposal"). The
purchaser is ABC Phones of North Carolina, Inc. ("ABC Phones"),
trading as A Wireless which operates as a retailer of Verizon
Wireless products and services with 250 stores. The sale will
comprise the business, assets and liabilities of 50 stores for an
aggregate consideration of $10 million (EUR7.46million) (the
"Consideration").
Express Business Service and Cellular Center are subsidiaries of
PAC Telemedia, which in turn is a subsidiary of PAC (together the
"Group"). Express Business Service and Cellular Center co-own and
operate 56 Verizon Wireless authorised retailer stores in the
states of Alabama, Georgia, Ohio and Pennsylvania (the "Business").
The Business comprises substantially the entire business of the
Group. PAC Telemedia proposes to enter into the Asset Purchase
Agreement in connection with the proposed sale to ABC Phones of 50
of the 56 stores operated by Express Business Service and Cellular
Center. Following the completion of the Disposal, the remaining six
Verizon Wireless authorised retailer stores will close and the
Group will cease trading activity in the US. The 50 Stores subject
to the Disposal had a loss before tax of EUR180,000 and net assets
of EUR4.9 million for the 12 months ended 31 December 2013.
The Disposal constitutes a disposal resulting in a fundamental
change in business pursuant to Rule 15 of the AIM Rules and the ESM
Rules and requires the approval of Shareholders. Contingent on the
approval of the Disposal by Shareholders, the Company will become
an investing company pursuant to the AIM Rules and the ESM Rules.
The Company will also seek Shareholder approval for its investing
policy. A circular, containing further details of the Disposal and
the investing policy (the "Circular") is expected to be posted to
Shareholders shortly and will also be available on the Company's
website www.pacplc.ie.
Defined terms used in the Announcement are as used in the
Circular.
An Extraordinary General meeting of PAC to approve the Disposal
and the investing policy will be held at the offices of Arthur Cox,
Earlsfort Centre, Earlsfort Terrace, Dublin 2, Ireland on 22 August
2014, immediately after the Extraordinary General Meeting scheduled
to follow the Annual General Meeting notified to Shareholders in
the circular dated 25 July 2014.
Summary of the proposals:
-- PAC to dispose of materially all of the Company's business
for a total consideration of $10 million
-- The net proceeds of the Disposal will be used to repay the
GBP1 million loan from Mosaic Print Management Limited (the "Mosaic
Loan Facility") and discharge the Group's other liabilities
-- Following the discharge of such liabilities, it is expected
that the PAC Group will retain approximately EUR1.6 million cash,
and have no other assets and no debt
-- PAC will become an investing company under the AIM Rules and the ESM Rules
-- Investing policy will have an initial focus on the
technology, media or entertainment sector
Commenting on the Disposal, Dermot Martin, Executive Chairman
said:
"The Executive Management Team has worked hard to achieve the
Disposal as part of a competitive sale process. We believe the
Disposal is the most favourable outcome for our shareholders at
this time."
Background to and reasons for the Disposal
In May 2013, PAC took a GBP1 million loan from Mosaic Print
Management Limited and two directors of Mosaic, Anthony Gill and
Stephen Smith, joined the Board of PAC. Mr. Gill is also the
largest Shareholder in PAC. The Mosaic Loan Facility provided the
working capital necessary to increase inventory which subsequently
led to increased sales. Since then, PAC has generated enough cash
to meet all of the interest payments related to this loan and also
pay down other interest and non-interest bearing loan notes.
It has been previously noted that the repayment of the Mosaic
Loan Facility would be dependent on the trading performance of the
PAC Group, the availability of other facilities or the support of
Shareholders. Whilst trading conditions improved in the aftermath
of the availability of the Mosaic Loan Facility, this improvement
was not sustained throughout the period due in the main to the
change in Verizon Wireless' upgrade policy as detailed in the
Chairman's Statement on the 2013 Annual Report released on 27 June
2014. On 12 June 2014, PAC announced that it had reached agreement
with Mosaic on an extension of the Mosaic Loan Facility until 31
August 2014 allowing PAC time to consider its options in relation
to the repayment of the Mosaic Loan Facility, including the sale of
all or part of the Group's stores.
PAC has been engaged with a number of parties with respect to a
disposal of part or all of its stores, with the intention of
applying the proceeds of any such disposal to the repayment in full
of the Mosaic Loan Facility as well as a further potential
distribution to Shareholders.
After conducting negotiations with a number of parties, the
Board has negotiated the sale of substantially the entire business
of the Group to ABC Phones.
Details of the Disposal
The Disposal represents a fundamental change of business for the
purposes of Rule 15 of the AIM Rules and the ESM Rules.
Accordingly, the Disposal is conditional, inter alia, on
Shareholder approval being obtained at an Extraordinary General
Meeting.
If approved, the Disposal will be effected in accordance with
the terms of the Asset Purchase Agreement. Under the Asset Purchase
Agreement, the assets of Express Business Service and Cellular
Center will transfer to ABC Phones on completion and in
consideration for the payment by ABC Phones of $10 million (EUR7.46
million). The assets comprise substantially all of their business
and assets, including: the leases to the Stores and the equipment
and other assets located at the Stores; all assets used in
connection with the Business, whether or not also used in
connection with any other business of the Group; the business and
all customers and goodwill associated with the Business; all
intellectual property used in connection with the Business, whether
or not also used in connection with any other business of the
Group; and all documents, books and records (in any media) related
to the assets of Express Business Service and Cellular Center or to
the conduct of the Business, except not including the Excluded
Assets.
$8,700,000 of the consideration will be paid on completion, with
the balance of $1,300,000 of the consideration to be held in escrow
for a twelve month period following the closing date for the
purposes of covering warranty and indemnity claims. The target date
for completion of the Disposal is 25 August 2014 (the "Target
Closing Date"). If closing has not occurred by the Target Closing
Date ABC Phones are required to pay PAC $2 million of the
Consideration on 25 August 2014 with the remainder payable by a
final deadline of 31 October 2014. The Disposal is subject to ABC
Phones procuring sufficient finance facilities to meet the
Consideration and as such there can be no guarantee that the
Disposal will complete by 25 August 2014 or at all. A separate
escrow arrangement will be put in place at completion in respect of
any landlord consents relating to the Stores not obtained by that
time, assuming this date is prior to 15 March 2015. These amounts
will be released from escrow at such time as each landlord consent
is obtained and do not affect the total Consideration payable by
ABC Phones to PAC.
Assets of Express Business Service and Cellular Center which
will not be transferred by the Asset Purchase Agreement include:
cash; inventory; such leases and equipment in leased Stores that
ABC Phones in its sole discretion determines at or before closing
it will not purchase; and the Excluded Assets. It is expected that
inventory will be sold separately to ABC Phones pursuant to the
transaction prior to completion. The remaining business of Express
Business Centre and Cellular Centre will be wound down in the
months following completion of the Disposal by the Company.
ABC Phones will assume certain specified liabilities of Express
Business Service and Cellular Center, including all obligations
under the target business' leases arising from the completion date
(including rent) and all liabilities (including those accrued
before completion) relating to the target business' handset
membership programme. All other liabilities of the target business,
including fax, customer claims and pre-completion accrued rent,
will remain liabilities of Express Business Service and Cellular
Center (and therefore of the Group).
Investing Company and Investing Policy
The net proceeds of the Disposal will be used to repay the
Mosaic Loan Facility, close the remainder of the Group's U.S.
stores, and discharge the Group's other liabilities. Following the
discharge of such liabilities, it is expected that the Group will
retain approximately EUR1.6 million cash ($1.3 million of which
will be held in escrow), and have no other assets and no debt. At
this point the Board intends to consider its options for maximising
Shareholder value including the making of further investments or a
distribution to Shareholders (although any such distribution would
only take place following the expiry of the limitation period of
the warranties under the Asset Purchase Agreement).
Following Completion, under Rule 15 of the AIM Rules and the ESM
Rules the Company will become an investing company with no material
trading activities. The Board is therefore seeking Shareholder
approval for the investing policy set out below to examine
potential opportunities.
The Board believes it is in Shareholders' interests to examine
possible investment opportunities, whilst the process of satisfying
residual liabilities continues and the warranty claim period
arising from the Asset Purchase Agreement elapses.
The Company's investing policy is to invest in and/or acquire
companies active in the technology, media or entertainment sector.
The Directors intend to focus primarily on the UK and Ireland where
the Directors believe that there are suitable opportunities,
although other countries may also be considered to the extent that
the Board considers that value opportunities exist and attractive
returns can be achieved.
In selecting investment opportunities, the Board will focus on
businesses that are available at attractive valuations and hold
opportunities to unlock embedded value over the medium term. The
Board will seek to invest in businesses where it may influence the
business at a board level. The ability to work alongside a strong
management team to maximise returns through revenue growth will be
something the Board will focus upon.
These criteria are not intended to be exhaustive; however PAC
may make an investment which does not fulfil all the investment
criteria if the Directors believe that it is in the interests of
Shareholders as a whole to proceed with such an investment. Any
acquisition by PAC will be put to Shareholders for their approval
pursuant to AIM Rule 14 at the appropriate time.
It may be considered appropriate to take an equity interest in
any proposed business, which may range from a minority position to
100 per cent. ownership. Any investment is likely to be made into
an unquoted company and structured as a direct acquisition. As
PAC's financial resources are likely to be invested in just one
investment, this acquisition is also likely to be deemed to be a
reverse takeover pursuant to Rule 14 of the AIM Rules and the ESM
Rules. PAC does not currently intend to fund any investment with
debt or other borrowings, but may do so if appropriate.
The Company's primary objective is that of achieving for
Shareholders, over time, both capital growth and income through
increasing profitability coupled with dividend payments on a
sustainable basis. The Directors believe that the collective
business experience in the areas of acquisitions and corporate and
financial management of both the Directors and of the Company's
advisers and Shareholders will assist the Company in the
identification and evaluation of suitable opportunities.
Subject to the approval of the investing policy by the
Shareholders at the Extraordinary General Meeting, the Company will
be required to make an acquisition or acquisitions which constitute
a reverse takeover under the AIM Rules and the ESM Rules or
otherwise implement its investing policy within 12 months of the
Extraordinary General Meeting, failing which the Ordinary Shares
would then be suspended from trading on AIM and ESM.
The PAC Group will maintain the net proceeds of the Disposal
(excluding those used for the purposes of discharging the PAC
Group's liabilities) during the 12 month time period during which
warranty claims under the Asset Purchase Agreement may be made.
At the end of the 12 month period if no investments have been
made, the Directors would then propose to convene a general meeting
of the Shareholders to consider whether to continue seeking
investment opportunities or to wind up the PAC Group and distribute
any surplus cash back to Shareholders.
Recommendation
The Directors consider the Disposal and the passing of the
Resolutions proposed at the EGM to be in the best interests of PAC
and its Shareholders as a whole and, accordingly unanimously
recommend that you vote in favour of the Resolutions as they intend
to do in respect of their aggregate shareholdings of 4,910,100
Ordinary Shares representing approximately 21.6 per cent. of the
issued share capital of PAC.
For further information contact:
Nominated Adviser / ESM
Adviser
Prime Active Capital plc Davy Corporate Finance
Dermot Martin, Executive Anthony Farrell / Eugenee
Chairman Mulhern
+353 1 295 9895 + 353 1 679 6363
This information is provided by RNS
The company news service from the London Stock Exchange
END
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