Disposal
October 01 2009 - 8:30AM
UK Regulatory
TIDMVERI TIDMBCP
RNS Number : 0695A
Veris PLC
01 October 2009
VERIS plc
DISPOSAL OF property Management and Facilities management divisions
1 October 2009
Veris plc ("Veris", the "Group" or the "Company") announces that is has agreed
to sell its Property Management and Facilities Management Business (the "PMFM
Business") to Aramark Ireland Limited and Aramark Investment Limited (the
"Purchasers" or "Aramark") for a Consideration of approximately EUR50.8 million in
cash which is equivalent to 55c per share after repayment of debt and other
costs and based on the assumptions detailed below.
The Disposal constitutes a "substantial transaction" under Rule 12 of the AIM
Rules and the IEX Rules and also a "disposal resulting in a fundamental change
of business" under Rule 15 of the AIM Rules and IEX Rules. Accordingly,
completion of the Disposal is conditional, inter alia, on approval by
Shareholders at a general meeting of the Company to be convened in due course.
Background to and Reasons for the Disposal
On 2 March 2009, Veris announced that following the receipt of a number of
unsolicited approaches from unconnected 3rd parties investigating the
possibility of purchasing the PMFM Business and the Moving & Storage Division it
had decided to conduct a strategic review of these businesses. Veris also stated
at that time that the purpose of the strategic review was to ensure that Veris
pursues a strategy which maximises shareholder value over the medium term.
On 3 March 2009, Veris announced that it had agreed to dispose of its moving and
storage division to Capstar Limited for a cash consideration of EUR74,304.The
Moving & Storage Division incurred operating losses in excess of EUR1.2 million
for the year ended 31 December 2008. It was clear that these losses would not
abate over the foreseeable future without significant investment in a
restructuring programme. In light of this the Board decided to dispose of the
Moving & Storage Division thereby allowing the Company to focus on the PMFM
Business.
In a trading update issued on 5 March 2009 and in the results announcement for
the year ended 31 December 2008 issued on 23 June 2009, the Company stated that
the strategic review would include investigating the possibility of a disposal
of the PMFM Business on price and terms acceptable to the Board.
On 15 July 2009, the Company announced an update on the strategic review process
and announced certain senior management changes stating that the strategic
review incorporated a full review of the cost structure of the Group and
considered the necessity for certain head office costs in an environment where
the Group is focusing solely on its PMFM Business which has a stand alone
management team.
On 30 July 2009, Veris announced that it had noted recent press comment
regarding a possible offer for the PMFM Business pursuant to the previously
announced strategic review and confirmed that it had granted access to an
unconnected 3rd party to carry out due diligence with a view to making a formal
offer to purchase the PMFM Business.
The Directors appointed Livingstone Partners as professional advisors to assist
in a detailed exercise to proactively market the PMFM Business to a number of
prospective trade and financial buyers and have responded positively to a number
of unsolicited approaches. The purpose of this exercise was to ascertain the
price and conditions attaching to a possible sale of the business. The
Purchasers offered the most attractive terms in the opinion of the Directors.
Following a period of exclusivity to carry out detailed due diligence and
negotiate the Sale and Purchase Agreement, the Board determined that a sale of
the PMFM Business is in the best interests of Shareholders as a whole for the
following reasons:
* The headline cash price represents an attractive valuation for the PMFM Business
* Net of repayment of debt and after providing for costs and expenses associated
with the transaction, shareholders should expect to receive in aggregate 55
cents per Ordinary Share which represents:
* A premium of 96.4 percent. to the share price on 1 March 2009 (being the last
trading day immediately prior to the announcement of the strategic review)
* A premium of 89.7 percent. to the share price on 30 September 2009 (being the
last trading day immediately prior to announcement of the proposed transaction)
* A premium of 114.6 percent. to the share price over the 6 month period prior to
the announcement of the proposed transaction
* A premium of 59.2 percent. to the share price over the 12 month period prior to
the announcement of the proposed transaction
* The proposed Disposal provides an opportunity for Shareholders to realise their
investment for cash at a time when investor interest in and support for smaller
quoted companies has declined and at a time of continued volatility across
global equity markets
* It was the stated intention of the Company at the time of admission to AIM and
IEX to grow by acquisition which, given the debt markets and the level of
gearing currently in the Group, is not a viable option at this time. Growth will
only be achieved organically which is harder for smaller players in the current
economic climate.
* Larger customers and customers procuring multi-year contracts are increasingly
focusing on supplier balance sheet strength.
* Trading in the Company's shares has been relatively illiquid over the last 12
months.
Taking all of the above factors into consideration, the Board believes that this
transaction is sufficiently attractive to put before Shareholders at an
extraordinary general meeting.
Information on the PMFM Business and its financial performance
The Group has two main operating businesses, Property Management and Facilities
Management:
Facilities Management ("FM")
The FM business is the larger of the two divisions within Veris, contributing
88% of the revenues, and consists of the original Vector business and the FM
activities of IEM (both based in Dublin, Ireland), and Orange (based in
Hampshire, England). Veris works closely with its FM clients to meet their
specific requirements.
Property Management ("PM")
The PM division accounts for 12% of Veris revenues. Over the last three years
the core Irish Estates property management business has been enhanced by the
acquisitions of Glenrye Property Services and Premier Management Company in
2006, giving Veris the capability to provide an integrated PM offering. With a
presence across Ireland, the focus of the PM division is the protection and
enhancement of the value of its customers' assets, working with a wide and
comprehensive landlord and tenant base to deliver on client expectations.
The division's basic services are broken down into four main categories:
* Commercial Services
* Retail Services
* Residential Services
* Advisory & Strategic Services
The following table shows the financial performance of the PMFM Division:
+----------------------+-----------------+------------------+----------------+
| | 6 months ended | 12 months ended | 12 months |
| | 30 June 2009 | 31 December 2008 | ended |
| | (unaudited) | (audited) | 31 December |
| | EUR'm | EUR'm | 2007 |
| | | | (audited) |
| | | | EUR'm |
+----------------------+-----------------+------------------+----------------+
| Revenue | 30.5 | 74.4 | 51.0 |
+----------------------+-----------------+------------------+----------------+
| Divisional operating | 3.6 | 11.6 | 8.5 |
| profit | | | |
+----------------------+-----------------+------------------+----------------+
| | | | |
+----------------------+-----------------+------------------+----------------+
In the financial year ended 31 December 2008, revenue in the FM business
increased by 51% from EUR42m to EUR63.5m which reflected the full year impact of the
Orange acquisition and a change in the accounting treatment of a significant
contract. Divisional operating profit for the FM business increased by 26% from
EUR5.9m to EUR7.5m. Revenue increased by 8% due to organic growth in 2008. Operating
profit increased by 6% due to organic growth in 2008.
In the financial year ended 31 December 2008, revenue in the PM business
increased by 21.1% from EUR9.0m to EUR10.9m and divisional operating profit
increased by 57.7% from EUR2.6m to EUR4.1m.
Information on the Purchasers
Aramark operates in 22 countries around the world, which together represent
about 70 percent of the world's gross domestic product (GDP). Aramark's largest
operations outside of the United States include Japan, the United Kingdom,
Canada, Germany, Chile, Spain and Ireland. If Aramark included the sales of its
Japanese joint venture of $1.2 billion, Aramark's total sales for its
international business would be $3.5 billion, or 25% of total sales.
Aramark's Irish operations, branded Aramark & Campbell Catering, is a leader in
professional services, providing award winning food services and facilities
management to the Healthcare, Education, Business & Industry and Government
sectors throughout the island of Ireland. Headquartered in Dublin with Regional
offices in Limerick, Cork and Belfast, the company has more than 4,100 employees
serving a quarter million people daily in more than 400 locations throughout
Ireland.
Summary of the Sale and Purchase Agreement ("SPA")
Pursuant to the SPA the Purchasers have agreed to purchase the PMFM Business for
an aggregate amount equal to EUR50.8 million plus the parties' estimate of the net
cash of the PMFM Business at Completion. The Consideration is to be adjusted
post completion for any amounts by which the net cash at Completion is less or
greater than the parties' estimated net cash, as determined by the agreed
completion accounts. The Consideration will also be adjusted if the agreed
working capital at completion is greater or less than the 6 month average
working capital balance up to and including Completion.
In the event that the Conditions are not satisfied by 31 December
2009, Completion is likely not to occur. The Conditions include the approval of
the Irish Competition Authority, approval by the requisite majority of
Shareholders of the Resolutions and no material adverse change in the PMFM
Business.
Pursuant to the SPA the Company has given certain warranties regarding the PMFM
Business to the Purchasers. The Company's maximum liability under these
warranties is EUR5 million, except for breaches of warranty relating to the
Company's title to the shares in the Companies carrying on the PMFM Business
which shall be limited to an amount equal to the Consideration. Claims for
breach of the warranties must be made prior to the end of the Second Warranty
Period except in respect of title warranties which must be made by 31 December
2009. The Company's liability under the warranties reduces to EUR3.5 million for
claims made after the end of the Initial Warranty Period and prior to the end of
the Second Warranty Period. An initial amount equal to EUR5 million will be
retained on Completion in a retention account to satisfy warranty claims. The
Company has granted security over the retention account in favour of the
Purchasers in respect of claims made under the warranties. The Purchasers will
pay interest to the Company (in addition to the interest accrued on the account)
on amounts released from the retention account for the Company's benefit.
The Company has agreed to pay to the Purchasers a break fee of EUR1.25 million
which is only payable in the event that the disposal resolution is not passed by
the requisite majority of Shareholders and the Company or substantially all of
the PMFM Business is sold to a third party within 6 months of the earlier of the
date of the extraordinary general meeting and the date that the SPA is
terminated.
The Company, Niall McFadden and Martin McMahon have agreed to various non
compete and non solicitation covenants which in the case of the Company and
Martin McMahon shall last for 2 years from Completion and in the case of Niall
McFadden last for 6 months from Completion.
The Company, Niall McFadden and Martin McMahon have agreed not to solicit an
alternative purchaser of the PMFM Business and, subject to fiduciary and other
legal obligations, not to commence negotiations with or supply information to
any such purchaser, in each case until the SPA is terminated.
Future Strategy of the Group following the Proposed Disposal
Following Completion, the Group will not have any revenue generating operating
businesses. The Board has determined that it is in the best interests of
shareholders as a whole to return the net proceeds of the proposed Disposal
(after repaying the Anglo Irish Bank facility and covering professional and
closure costs) to Shareholders as efficiently and expediently as possible.
Consideration and Use of Proceeds
As outlined above, the PMFM Business is being sold for a cash consideration of
EUR50.8 million of which EUR5 million will be retained by the Company to cover the
maximum level of warranty claims.
The following table calculates the expected net cash disbursements to
Shareholders:
+----------------------------------------+--------------+------------+
| Description | Total | Per Share |
+----------------------------------------+--------------+------------+
| | EUR'000 | EUR |
+----------------------------------------+--------------+------------+
| Headline Consideration | 50,800 | 1.89 |
+----------------------------------------+--------------+------------+
| Less: Repayment of Anglo Irish Bank | (30,978) | (1.15) |
| debt facilities | | |
+----------------------------------------+--------------+------------+
| Professional fees and expenses | (2,087) | (0.08) |
+----------------------------------------+--------------+------------+
| Closure costs and taxation | (3,192) | (0.12) |
+----------------------------------------+--------------+------------+
| Add: Cash inflow from exercise of | 200 | 0.01 |
| options | | |
+----------------------------------------+--------------+------------+
| | | |
+----------------------------------------+--------------+------------+
| Expected net consideration due to | 14,743 | 0.55 |
| shareholders | | |
+----------------------------------------+--------------+------------+
THE EXPECTED NET CONSIDERATION DUE TO SHAREHOLDERS IS BASED ON THE ASSUMPTIONS
SET OUT BELOW. THE ACTUAL CONSIDERATION MAY BE LOWER OR HIGHER IF ANY OF THESE
ASSUMPTIONS CHANGE.
1) Total number of shares in issue as at the date of the transaction is
25,819,712. Total number of "in the money" share options as at the date of the
transaction is 1,000,000. The "per share" calculation above is based on the
assumption that all the "in the money" share options are exercised prior to the
record date and accordingly rank for payment. Therefore, it is assumed that the
total number of shares in issue at the record date is 26,819,712
2) The proposed disposal completes on the terms as described above
3) There will be a EUR for EUR payment to Veris if the working capital position is
more than the 6 month average up to and including the Completion date or a EUR for
EUR payment by Veris if the working capital position is less than the 6 month
average up to and including the Completion date.
4) Discount for time value of money and offsetting interest on the warranty
escrow account are not reflected
5) Amounts due to Anglo Irish Bank include estimated interest to the anticipated
repayment date
6) Professional fees and expenses include corporate finance, legal, accounting
and tax fees in relation to the transaction and an estimate for the subsequent
period to liquidation
7) Closure costs and taxation relate to payments for the termination of leases,
legal settlements and corporation tax
8) No movement in the sterling / euro exchange rate from the date of this
announcement to repayment of sterling loan facility with Anglo Irish Bank
Timing of payment to Shareholders
The Company has given certain warranties regarding the PMFM Business to the
Purchasers as described above. Accordingly, it is anticipated that distributions
to shareholders will be made as follows:
+----------------------------------------+--------------+------------+
| | Total | Per Share |
+----------------------------------------+--------------+------------+
| | EUR'000 | EUR |
+----------------------------------------+--------------+------------+
| First distribution - January 2010 | 9,400 | 0.35 |
+----------------------------------------+--------------+------------+
| Final distribution - June 2010 | 5,400 | 0.20 |
+----------------------------------------+--------------+------------+
| | | |
+----------------------------------------+--------------+------------+
| Total | 14,800 | 0.55 |
+----------------------------------------+--------------+------------+
Proposed Cancellation of Trading of the Ordinary Shares on AIM and IEX
The Company will effectively be a cash shell following Completion as it will
have disposed of its operating business. The Board believes that it will be
appropriate at that juncture to cancel the trading of the Ordinary Shares on AIM
and IEX. Further information will be set out in the circular to shareholders
which will be sent in due course.
Proposed Board Changes
Following Completion it is expected that Bernard Farrell will resign as a
director. Martin McMahon's employment will transfer with the PMFM Business but
he will remain as a Non-Executive Director along with Niall McFadden, Anthony
Garry and Brian Beausang. Director's fees are estimated to be less than EUR50,000
between Completion and appointment of a liquidator to facilitate the
distributions to shareholders in a tax efficient manner.
Recommendation
The Directors, having consulted with Davy, the Company's nominated adviser and
IEX adviser, consider the terms of the Proposed Disposal to be fair and
reasonable as far as the Shareholders are concerned. In providing such advice,
Davy has taken into account the Directors' commercial consideration in respect
of the proposed disposal.
A circular to shareholders containing notice of an extraordinary general meeting
and further details of the transaction is expected to be posted to shareholders
shortly.
For further information please contact
+------------------------------+------------+---------------------------+
| Veris plc | | |
+------------------------------+------------+---------------------------+
| Niall McFadden, Executive | Tel: | + 44 203 170 5770 |
| Chairman | | |
+------------------------------+------------+---------------------------+
+------------------------------+------------+---------------------------+
| Davy Corporate Finance | | |
+------------------------------+------------+---------------------------+
| Des Carville, Director | Tel: | + 353 1 679 6363 |
+------------------------------+------------+---------------------------+
| JJ Cahill | | |
+------------------------------+------------+---------------------------+
+------------------------------+------------+---------------------------+
| Q4 Public Relations | | |
+------------------------------+------------+---------------------------+
| Gerry O'Sullivan | Mobile: | + 353 87 259 7644 |
+------------------------------+------------+---------------------------+
| Nuala Buttner | Mobile: | + 353 85 174 4275 |
+------------------------------+------------+---------------------------+
The following definitions and terms apply throughout the above announcement
unless otherwise stated or the context requires otherwise:
+------------------------------------------------------------------------------------+
| "AIM" the market of that name operated by the London Stock |
| Exchange Plc; |
| "AIM Rules" the rules published by the London Stock Exchange plc |
| governing, inter alia, admission to AIM and the |
| continuing obligations of companies admitted to AIM |
| and their nominated advisers, as amended from time to |
| time; |
| |
| "Board" the board of Directors of the Company as constituted |
| from time to time; |
| "Completion" completion of the Sale and Purchase Agreement in |
| accordance with its terms; |
| |
| "Conditions" the matters upon which Completion is expressed to be |
| conditional, including approval from the Irish |
| Competition Authority and the passing of the |
| Resolutions; |
| |
| "Consideration" the full amount of the consideration received by the |
| Company under the Sale and Purchase Agreement; |
| "Directors" Anthony Garry, Bernard Farrell, Brian Beausang, Martin |
| McMahon and Niall McFadden, being the board of |
| directors of the Company as at the date hereof; |
| |
| "Disposal" the disposal of the PMFM Business in accordance with |
| the terms of the Sale and Purchase Agreement; |
| |
| "IEX" the market of that name operated by the Irish Stock |
| Exchange Limited; |
| "IEX Rules" the rules published by the Irish Stock Exchange |
| Limited governing, inter alia, admission to IEX and |
| the continuing obligations of companies admitted to |
| IEX and their IEX advisers, as amended from time to |
| time; |
| |
| "Initial Warranty Period" the period of 90 days from Completion; |
| |
| "Moving and Storage the former moving and storage division of the Company |
| Division" which is comprised of Bond Business Support Limited |
| and all of its subsidiaries (Nat Ross Limited, Oman |
| Transport Limited, A.G. Doree (Ireland) Limited and |
| McConnell Removals Limited) and Hire A Crate Limited; |
| |
| "Purchasers" or "Aramark" Aramark Ireland Limited and Aramark Investments |
| Limited; |
| "PMFM Business" the Property Management and Facilities Management |
| divisions of the Company which is comprised of Irish |
| Estates Management Ltd, Vector Workplace & Facility |
| Management Ltd, Orange Group, Glenrye Property |
| Services, Premier Management Company (Dublin) Ltd and |
| VEector Services Limited; Spokesoft Technologies |
| Limited and Irish Estates Facilities Management |
| Limited ; |
| "Resolutions" the resolutions of the shareholders of the Company |
| which will be set out in the circular to shareholders; |
| |
| "Second Warranty Period" the period commencing 91 days from Completion and |
| ending 180 days from Completion; and |
| |
| "Sale and Purchase the conditional sale and purchase agreement between |
| Agreement" the Company, the Purchasers and others. |
| |
+------------------------------------------------------------------------------------+
1 October 2009
This information is provided by RNS
The company news service from the London Stock Exchange
END
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