TIDMTOYE
RNS Number : 9131L
Toye & Co PLC
09 July 2014
TOYE & COMPANY PLC
(AIM: TOYE)
9 July 2014
Independent Director's Letter to Shareholders
Bryan Toye Limited ("BTL") has today published its Offer
Document setting out its mandatory Rule 9 cash offer for Toye &
Company Plc ("Toye" or the "Company"). The Offer Document contains
a letter from the Independent Directors which states that they are
unable to recommend acceptance of the Offer because they believe it
falls short of a price that would fully represent a fair value for
the Company.
The full Independent Director's letter has been set out below.
The Definitions which apply in the Offer Document have been used in
this announcement.
Contacts:
Toye & Company plc www.toye.com
Neil Haynes +44 (0) 20 7242 0471
WH Ireland Limited www.wh-ireland.co.uk
Mike Coe, Ed Allsopp +44 (0) 117 945 3470
Mandatory cash offer by Bryan Toye Limited to acquire
the whole of the issued share capital of Toye & Co. plc
not already owned by Bryan Toye Limited and the Toye Family
Trust
1. Introduction
Bryan Toye Limited ("BTL") is making a Rule 9 mandatory cash
offer for the remaining shares of Toye not already owned by BTL and
the Concert Party. BTL is a special purpose limited liability
company wholly controlled by Bryan Toye and has been incorporated
specifically to make the Offer.
Bryan Toye and Fiona Toye are connected persons of the offeror
and are therefore not considered Independent Directors in relation
to the Offer. The Independent Directors, being the directors of
Toye other than Bryan Toye and Fiona Toye, have sought independent
advice from WH Ireland in relation to the Offer under Rule 3.1 of
the Code.
The principal purpose of this letter is to set out the views of
the Independent Directors having been advised by WH Ireland.
2. The Offer
Under the terms of the Offer, which is unconditional, Toye
Shareholders are entitled to receive:
for each Remaining Toye Share: 35 pence in cash
The Offer values the entire issued capital of Toye at, in
aggregate, approximately GBP786,800.
The price of 35 pence in cash for each Toye Share represents a
discount of 30 per cent. over the Closing Price of 50 pence per
Toye Share on 12 June 2014, being the last business day prior to
the commencement of the Offer Period.
3. Information relating to Toye
The original Toye business began its life as a family concern in
1684. In July 1968 the Company was listed on the London Stock
Exchange and in 2003 the Company moved from there to AIM.
Toye was incorporated on 14 June 1924. The Company is registered
in England and operates in one principal area of activity, that of
marketing, selling, supply chain management and distribution,
manufacturing as appropriate and procurement of identity products.
This comprises the manufacturing and sale of civil and military
regalia, including the weaving of ribbons and narrow fabrics, ties
and neckwear, flags, leisure wear, trophies, awards, medals,
badges, cufflinks, buttons, jewellery, gold and silverware,
cutlery, glassware, watches and clocks, commemorative issues and
limited editions.
4. Current trading and prospects of Toye
In May 2014, the Company announced its audited results for the
year ended 31 December 2013. Toye reported turnover of GBP6,467,000
(2012: GBP8,937,000) and a profit before and after taxation of
GBP942,000 (2012: GBP454,000). The key contributor to the results
was the profit on disposal of the Great Queen Street property. The
profit recognised for accounting purposes on this transaction was
GBP1,603,000. Earnings per share for the year therefore increased
from 20.19p in 2012 to 41.91p. As at 31 December 2013, total assets
were GBP5,944,000 (2012: GBP4,234,000) with net assets of
GBP2,620,000 (2012: GBP1,678,000).
On 9 July 2014 the Company made the following announcement in
relation to the property at 19-21 Great Queen Street Property:
Variation Agreement re: 19-21 Great Queen Street
"Toye & Co plc ("Toye" or "the Company"), the manufacturer
of military and masonic regalia, medals, badges and related
textiles, announces that it has successfully negotiated a variation
to the disposal agreement in relation to the Company's property at
19-21 Great Queen Street (the "Property") entered into with
Stability Investments Limited (the "Developer") and approved by
Shareholders in February 2013.
Under the terms of the variation the completion date for the
sale of the Property has been extended from 28 July 2014 to 30
January 2015. In addition the loan facility agreement agreed with
the Developer has been increased from GBP2.5m to GBP2.75m. The
balance of this loan facility not drawn down is GBP0.75m which will
now be drawn down on 28 July 2014. Finally the clause in the
original agreement that would, having satisfied certain criteria,
see the basic sale price of the Property increase by GBP0.5m has
been extended to 19 December 2014.
There has therefore been no change to the overall consideration
to be received in respect of the Property and no further interest
will be payable on the loan from 28 July 2014.
The Company intends to use the balance of the loan facility to
fund additional capital expenditure requirements and the working
capital needs of the business."
As at 31 December 2013 the Company had net cash of GBP432,000.
As at 30 June 2014 the cash balance was GBP70,000, which includes
GBP209,000 in respect of a customer prepayment on an order still to
be satisfied. As a consequence of the Variation Agreement outlined
above the Company's cash balances are expected to be supplemented
by GBP750,000.
From this GBP750,000, accrued interest on the Loan Facility of
GBP131,000 for the period ending 28 July 2014 will need to be
settled. Therefore the additional proceeds to be received in
relation to the sale of the Property are GBP619,000.
On the basis of the assumptions above, the Independent Directors
consider the Company's proforma cash position as at 28 July 2014
will be:
GBP'000
Cash position as at 30 June 2014 70
Less: prepayment (209)
Add: further proceeds from sale
of the Property 750
Less: accrued interest on Loan
Facility (131)
--------
Proforma cash as at 28 July 2014 480
--------
This is equivalent to approximately 21 pence per share.
In addition to the cash position outlined above, subject to
certain conditions being met which include planning permission for
residential development, the Company may be entitled to a further
GBP500,000 cash consideration and a share of any ultimate
development profit relating to the Property. The Independent
Directors consider that it is still uncertain as to whether the
conditions that would trigger any additional consideration will be
met.
Toye Shareholders should also note that the Toye Board has also
recently approved a capital expenditure budget of GBP500,000 over
the next five years. Of this sum, GBP300,000 is expected to be
incurred in the next 12 months principally on a new ERP system,
computers and a new die sinking machine. The balance of GBP200,000
is anticipated to be incurred over the following four years. The
Independent Directors consider this expenditure to be a necessary
and appropriate use of the Company's cash resources.
5. Management, employees and locations
The Independent Directors have given due consideration to BTL's
stated intentions, set out in paragraph 7 and 8 of Part I of this
document, for the management, employees and locations of Toye when
deciding whether to recommend acceptance of the Offer. The
Independent Directors note that BTL is not expecting to make any
material changes to the management, employees and locations of the
Toye business save that BTL intends to remove all of the current
Toye Directors apart from those who are Toye family members. The
Independent Directors believe Toye Shareholders should carefully
consider the potential impact of this when deciding what action to
take in respect of the Offer.
6. View of the Independent Directors on the Offer
Bryan Toye and Fiona Toye are deemed not to be Independent
Directors of the Company, because they are acting in concert with
the offeror, Bryan Toye Limited. BTL is controlled by Bryan Toye
and his Concert Party which includes Fiona Toye.
Accordingly, the Independent Directors, have taken independent
advice from WH Ireland on the Offer on behalf of Toye Shareholders
in accordance with Rule 3.1 of the Code.
The Offer Price represents:
-- a 30 per cent. discount to the closing price of 50 pence on
12 June 2014 being the last business day prior to the commencement
of the Offer Period;
-- a 23 per cent. discount to the average share price over the
last six months prior to the commencement of the Offer Period;
and
-- a 70 per cent. discount to the audited net asset value per share as at 31 December 2013;
Many loyal and long standing Toye Shareholders will share our
view that the Offer Price undervalues the Company, and therefore
the Independent Directors are not recommending that Toye
Shareholders accept the Offer. The Independent Directors believe it
is unlikely that any offers will be forthcoming because the Concert
Party controls over 50 per cent. of the shares and has received
irrevocable commitments in respect of a further 14.30 per
cent..
There are however, certain practical realities that should be
considered by all Toye Shareholders in deciding the course of
action that is appropriate for them:
-- BTL and the Concert Party, has a controlling interest in the
Company, of at least 53.38 per cent.
-- In addition to the 53.38 per cent. holding, BTL has secured
irrevocable commitments from other shareholders (not being part of
the Concert Party) to accept the Offer in relation to 321,547
shares representing 14.30 per cent. of the Company. Therefore BTL
holds shares and has received irrevocable commitments in respect of
67.68 per cent. of the Company's issued share capital.
-- Toye Shareholders should further be aware that BTL has stated
its intention that, should it achieve sufficient acceptances from
Toye Shareholders, it will procure the cancellation of the
admission of Toye Shares to trading on AIM.
-- Even if BTL does not reach 75 per cent. as a result of this
Offer, as its interest in Toye is greater than 50 per cent., there
will be nothing to prevent BTL, notwithstanding its current
intention, requisitioning a general meeting of the Company at any
time with the purpose of seeking Shareholder's approval for
cancelling the admission to the trading on AIM of Toye Shares. Such
a resolution would require a vote in favour by 75 per cent. of the
votes cast by Toye Shareholders and BTL would be able to vote its
interest at that general meeting. Notwithstanding BTL's holding
being below 75 per cent., the resolution may still be passed if
insufficient shareholders do not vote against the proposal at the
meeting.
-- If the Company's admission to trading on AIM is cancelled,
BTL intends to procure that Toye will be re-registered as a private
company under the relevant provisions of the Companies Act
2006.
-- If a resolution to cancel the Company's AIM admission is
defeated, BTL would be at liberty to convene another general
meeting at any time, and in the interim would be able, following
the expiry of a six month period following the closing of the
Offer, if it wished, to acquire further shares in the market at any
price in order to increase its interest in the Company.
-- If the Company's AIM admission is cancelled and the Company
re-registered as a private limited company, Toye Shareholders will
(without establishment of an alternative trading facility) find it
difficult to sell their shares, and opportunities for realising
their shareholding in the future will be uncertain. Toye
Shareholders may therefore feel that the certainty of the Offer
Price is preferable to the uncertainty of a minority shareholding
in an unquoted company, even with the possibility of a greater
return to shareholders over a longer period.
-- The Offer represents an immediate opportunity for Toye
Shareholders to exit for cash free of dealing costs, albeit at a
discount of 30 per cent. to the Closing Price of 50 pence per Toye
Share on 12 June 2014 (being the last Business Day prior to the
commencement of the Offer Period).
Toye Shareholders should carefully consider the information set
out above in making a decision as to whether to accept the Offer.
If Toye Shareholders are in any doubt about the action they wish to
take in respect of the Offer they should consult an independent
financial adviser without delay.
7. Compulsory acquisition, cancellation of AIM admission and re-registration
Your attention is drawn to paragraph 13 of the letter from BTL,
set out in Part I of this document, in relation to its intentions
with regard to the compulsory acquisition and cancellation of
admission to trading on AIM of the Toye Shares and the
re-registration of Toye as a private limited company, subject to
sufficient shares being acquired.
8. United Kingdom taxation
Your attention is drawn to the section headed "United Kingdom
taxation" in paragraph 9 of the letter from BTL in Part I of this
document. If you are in any doubt about your own tax position or
you are subject to taxation in any jurisdiction other than the
United Kingdom, you should consult an independent financial adviser
immediately.
9. Action to be taken to accept the Offer
Your decision as to whether to accept the Offer will depend upon
your individual circumstances. If you are in any doubt as to what
action you should take, you should seek your own independent
financial advice.
If you do not wish to accept the Offer you do not need to take
any action.
If you wish to accept the Offer, the procedure for acceptance of
the Offer is set out in paragraph 11 of the letter from BTL set out
in Part I of this document and, if you hold your shares in
certificated form, in the Form of Acceptance.
10. Independent Director's recommendation and intention
The Independent Directors, having been so advised by WH Ireland,
do not regard the Offer Price to be fair and reasonable and
therefore do NOT recommend that the Toye Shareholders accept the
Offer. The Independent Directors are unable to recommend acceptance
of the Offer because they believe it falls short of a price that
would fully represent a fair value for the Company. However, having
been so advised by WH Ireland the Independent Directors recognise
that given the likely cancellation of the admission to trading on
AIM of the Toye Shares and the subsequent re-registration of the
Company as a private limited company and the other practical
considerations set out in paragraph 6 above and in the absence of
any better alternative, Toye Shareholders may choose to take
advantage of the Offer. In providing its advice, WH Ireland has
taken into account the Independent Directors commercial
assessments.
Save for David Hartley, none of the Independent Directors hold
any shares in Toye. Mr Hartley concurs with the view of the
Independent Directors that the Offer falls short of a fair value
for the Company. Nevertheless, for the reasons set out in paragraph
6 above, and specifically because:
i) BTL and the Concert Party has a controlling interest in the
Company of at least 53.38 per cent.; and
ii) he believes the cancellation of trading of the Company's
shares is therefore almost inevitable because BTL has secured
irrevocable commitments in respect of 14.30 per cent.,
Mr Hartley has chosen to accept the Offer and has signed an
irrevocable commitment to accept the Offer in respect of 232,327
Toye Shares (10.33 per cent. of the issued share capital) out of
the 252,327 Toye Shares held by him and those deemed to be acting
in concert.
Yours faithfully
The Independent Directors
End.
WH Ireland Limited which is regulated in the United Kingdom by
The Financial Conduct Authority is acting for the Company in
relation to the matters described in this announcement and is not
advising any other person, and accordingly will not be responsible
to anyone other than the Company for providing the protections
afforded to customers of WH Ireland or for providing advice in
relation to the matters described in this announcement.
The independent directors of Toye, being the directors other
than Bryan Toye and Fiona Toye accept responsibility for the
information contained in this announcement. To the best of their
knowledge and belief (having taken all reasonable care to ensure
that such is the case), the information contained in this
announcement for which they are responsible is in accordance with
the facts and does not omit anything likely to affect the import of
such information.
FURTHER INFORMATION
Please be aware that addresses, electronic addresses and certain
other information provided by Toye Shareholders, persons with
information rights and other relevant persons for the receipt of
communications from Toye may be provided to Bryan Toye Limited
during the Offer Period as required under Section 4 of Appendix 4
of the Code.
If you are in any doubt about the action you should take, you
are recommended to seek your own personal financial advice
immediately from your stockbroker, bank manager, solicitor,
accountant or independent financial adviser authorised under the
Financial Services and Market Act 2000 (as amended) if you are
resident in the United Kingdom or, if not, from another
appropriately authorised independent financial adviser.
Copies of this announcement will be available free of charge on
Toye's website at www.toye.comby no later than noon (London time)
on the day following this announcement. For the avoidance of doubt,
the contents of this websites are not incorporated into and do not
form part of this announcement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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