TIDMROE
RNS Number : 7766W
Roeford Properties PLC
25 November 2010
ROEFORD PROPERTIES PLC
("the Company" or "Roeford")
Proposed Transfer of Residential Housebuilding Team
Change of Name
and
Notice of General Meeting
1 Introduction
A Circular was yesterday despatched to shareholders containing
details of the proposed transfer ("Transfer") from Mar City
Developments Limited ("Mar City) to Mar City Homes Limited ("MCH"),
a recently incorporated wholly owned subsidiary of Roeford, of a
team of approximately 23 people ("the Residential Housebuilding
Team") pursant to the terms of a Business Cooperation Agreement.
The consideration for the Transfer is dependent upon the profits
before tax generated by the Residential Housebuilding Team over the
two years ending 31 December 2012.
The maximum consideration payable is GBP800,000. Any
consideration payable will be satisfied by the issue of new
Ordinary Shares at a price of 0.45 pence per share, being the
average closing middle-market price for the five business days
prior to 24 November 2010 (being the date of the Circular).
Therefore, the maximum number of Consideration Shares that could be
issued is 177,777,777, representing approximately 47.7 per cent. of
the issued Ordinary Share capital as enlarged by the Consideration
Shares (and assuming no further issue of Ordinary Shares). Mar City
is wholly owned by Maggie Ryan (Chairman of Roeford and her
husband). Therefore assuming no other new shares are issued and on
the basis that they do not acquire any further Ordinary Shares in
the meantime, the issue of the maximum number of Consideration
Shares would increase the combined percentage interest in the
Ordinary Shares of Maggie Ryan and her husband from 79.5 per cent.
to 89.3 per cent..
All of the Directors of Roeford have interests in Mar City.
Maggie Ryan is a director and she and her husband own all of the
shares in Mar City. Mark Grady is also a director of Mar City
whilst Mick Donovan is an employee. Due to their respective
interests in Mar City, the Transfer is classified as a related
party transaction under the AIM Rules. In addition, because the
maximum consideration payable is in excess of GBP100,000, the
Transfer constitutes a substantial property transaction under
section 190 of the Companies Act 2006 and therefore is subject to
the approval of Shareholders in a general meeting to be held on 17
December 2010. Due to the lack of independent directors, the Board
has instructed WH Ireland, as the Company's nominated adviser, to
consider the merits of the Transfer and to advise the Board
accordingly.
MCH has also entered into the Managed Services Agreement with
Mar City whereby, following Completion, Mar City will provide
certain facilities and services to MCH to enable it to deploy and
manage the Residential Housebuilding Team.
The Board is proposing to change the name of the Company to Mar
City plc.
2 Background to and reasons for the Transfer
Over 25 years, Mar City has established a track record for
delivering a broad range of property developments including for
educational, healthcare, commercial and residential use in both the
public and private sectors. In recent years Mar City has
successfully focused primarily on its residential house building
activities and in particular on high quality, sustainable
developments. The Board considers that Mar City is now an
established housebuilder in the UK market.
Mar City and the Roeford Board now both believe, for reasons
explained further below, that the residential housebuilding
business will have better prospects in a publicly quoted vehicle
such as the Company and Mar City wishes to focus its strategy
instead on the other areas of its business.
The Transfer will provide the Company with the opportunity to
acquire a skilled and experienced team of people responsible for
developing this profitable line of business for Mar City.
3. Future prospects
As part of the Business Cooperation Agreement, it is anticipated
that following completion on 31 December, members of the
Residential Housebuilding Team, having been transferred to MCH,
will be made available to Mar City in order for Mar City to fulfil
its existing contractual obligations. These are expected to have
been fulfilled by March 2012 These services will be provided for a
fee based on the cost to MCH of employing the Residential Housing
Team plus a margin. The exact fee will vary in the future depending
on the exact nature of projects undertaken but it is intended to be
on arm's length terms.
The Board considers that considerable capacity has been taken
out of the house building sector in recent years as a result of the
recent economic downturn. As the economic climate improves the
Board believes that the Group will be well placed to benefit from
an upturn in new housing developments, the requirement for which
remains undiminished in the Board's view, particularly in the
affordable social housing sector.
The Board is confident that further project development
opportunities can be secured over the coming months without the
requirement for an equity fundraising. These projects may be
undertaken directly by the Group or by way of joint ventures. Other
partners to the joint ventures could include local authorities,
Registered Social Landlords and owners of development land such as
Mar City itself.
As the Company will from Completion be actively trading and in
view of the on-going relationship with Mar City, it is the
intention of the Board to seek to appoint at least one independent
non-executive director over the next few months.
4. Change of name
The Board considers that the Mar City brand is well-known and
highly regarded and that there will therefore be significant
commercial advantage to the Company in being able to use the Mar
City name. Therefore, if Shareholders approve the Transfer, a
resolution will be put to the General Meeting to change the
Company's name to
Mar City plc
Under the Companies Act 2006 and the Company's Articles of
Association, a change of name requires the passing of a special
resolution of shareholders at the general meeting.
If the necessary resolution is approved, the change of name will
be effective once Companies House has issued a new certificate of
incorporation on change of name. This is expected to occur on or
around 17 December 2010, being the day of the GM. The tradable
instrument display mnemonic ("TIDM") of the Company is expected to
change to MAR effective from 7.00 a.m. on 22 December 2011.
5. Principal terms of the Business Cooperation Agreement
Under the Business Cooperation Agreement, Mar City has agreed,
subject to the passing of Resolution 1 at the General Meeting to
transfer all of the employees comprising the Residential
Housebuilding Team to MCH and MCH has agreed to assume all of the
future liabilities of such employees. The transfer of the employees
will be governed by TUPE, with the effect that MCH will, from
Completion, be legally obligated to pay salaries and maintain all
other terms of employment of the Residential Housebuilding Team.
MCH will provide the Residential Housebuilding Team to Mar City
following Completion to enable Mar City to fulfil its existing
obligations on residential housebuilding projects. These
obligations are expected to be fulfilled by March 2012. MCH will
charge a fee for this will enable MCH to discharge the costs of
employment.
As part of the arrangements, Mar City has undertaken (unless MCH
agrees otherwise) not to solicit any members of the Residential
Housebuilding Team from the Group nor to compete with it in
relation to the residential housebuilding business for a period of
three years from Completion. Mar City has also given certain
warranties to MCH.
In consideration of the undertakings and obligations of Mar
City, the Company has agreed to pay consideration based on a
multiple of 2.5 times the pre-tax profit of MCH during the two
years ending 31 December 2012 and subject to a maximum
consideration of GBP800,000. This consideration will be satisfied
by the issue and allotment to Mar City of the relative number of
Consideration Shares, credited as fully paid, at a price of 0.45
pence per share.
6. Principal terms of the Managed Services Agreement
Under this agreement, Mar City has agreed to provide, with
effect from Completion, certain facilities and services to MCH.
These will include the provision of premises for the Residential
Housebuilding Team together with office equipment, IT and telecoms
support and payroll support to enable the Group to operate the new
residential housebuilding business until it is in a position itself
to provide such facilities. In consideration for providing such
facilities and services, MCH will pay Mar City a fee based on the
cost of supply to Mar City plus a margin at market rates.
Initially, the fee will be GBP44,000 per month, payable monthly.
The Managed Services Agreement can be terminated by either party on
not less than six months' prior notice.
7. Circular
Copies of the Circular have been posted to shareholders and are
available to the public, free of charge, at the Company's
registered office and at the offices of WH Ireland at 4 Colston
Avenue, Bristol BS1 4ST during usual business hours on any weekday
(Saturdays, Sundays and public holidays excepted) for one month
from the date of this document. This document is also available on
the Company's website, www.roefordproperties.co.uk.
8. Recommendation
WH Ireland, having consulted with the Board, has advised the
Board that it considers the terms of the Business Cooperation
Agreement and the Managed Services Agreement to be fair and
reasonable insofar as Shareholders are concerned and that the
passing of Resolutions to implement the Business Cooperation
Agreement and the change of name are in the best interests of
shareholders and the Company as a whole.
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