Acquisition
Prime People PLC
09 December 2005
For 7am release 9 December 2005
Prime People plc
Proposed acquisition of Macdonald & Company Group Limited
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
1 for 10 Share Capital Consolidation
Notice of Extraordinary General Meeting
Prime People plc ('the Company'), today announces that it has conditionally
agreed to acquire the entire issued share capital of Macdonald & Company Group
Limited ('Macdonald'), an independent professional recruitment consultancy
focused on the commercial property industry.
Key points:
- The maximum aggregate consideration for the acquisition is £10.52
million. This will comprise an initial consideration of £9.52 million to be
satisfied by the issue of 7,155,593 New Ordinary Shares at a price of 84.13
pence per share and £3.5 million in cash together with up to a further £1
million by way of deferred consideration of up to 1,188,637 New Ordinary Shares
at a price of 84.13 pence per share;
- The market capitalisation of the Enlarged Group on Admission (based on
the issue price of the New Ordinary Shares of 84.13p) will be approximately
£9.12 million. Following completion of the Proposals, other than the issue of
the Deferred Consideration Shares, the Vendors will hold approximately 66 per
cent. of the Enlarged Share Capital of the Company;
- Macdonald is the only recruitment consultancy to be approved by the
Royal Institution of Chartered Surveyors ('RICS'), the principal professional
body representing property professionals worldwide;
- Macdonald has an experienced management team with a strong record of
delivering growth;
- For the year ended 31 March 2005, Macdonald reported a 40 per cent.
increase in turnover at £11.7 million (2004: £8.4 million) and profit before tax
up 44 per cent. at £1.16 million (2004: £0.80 million);
- For the six months ended 30 September 2005, Macdonald reported turnover
of £7.4 million and profit before tax of £0.78 million. In the seven months
ended 31 October 2005, turnover was 34 per cent above the comparable period in
2004;
- The deferred consideration will be payable in full if the operating
profit of Macdonald for the year ending 31 March 2006 is not less than £1.95
million;
- The existing Macdonald Directors, Robert Macdonald, Executive Chairman;
Peter Moore, Managing Director; and John Lewis, non-executive Director, will
join the Board of Prime People in the same roles.
- Christopher Heayberd, the current Finance Director of Prime People,
will continue in his present role and Simon Murphy, currently Chief Executive of
Prime People, will become a non-executive Director. Peter Hearn, currently
Chairman of Prime People and David Coubrough, currently a non-executive of Prime
People will resign from the Board;
- Irrevocable undertakings to vote in favour of the Resolutions have been
obtained from shareholders, including Prime People directors, in respect of
18,752,833 Ordinary Shares in aggregate (representing 50.89 per cent. of the
Existing Ordinary Shares);
- The acquisition of Macdonald is classified as a reverse takeover under
the AIM Rules by virtue of its size and is conditional, inter alia, on the
approval of Prime People shareholders which is being sought at an Extraordinary
General Meeting at 11.00 a.m. on the 3 January 2006;
- The Company is seeking Shareholder approval at the Extraordinary
General Meeting for a waiver of the obligation under Rule 9 of the City Code
which would otherwise require the members of the concert party (comprising the
Vendors) to offer to acquire those New Ordinary Shares that they do not own;
- Proposed consolidation of every 10 existing issued Ordinary Shares into
one New Ordinary Share;
- It is expected that Admission of the New Ordinary Shares will become
effective and that dealings in the Enlarged Share Capital will commence on AIM
on 4 January 2006;
Commenting on the acquisition, Peter Moore, Managing Director of Macdonald and
proposed Managing Director of the Enlarged Group said:
'This transaction marks an exciting next step in the Macdonald story. Macdonald
has a great growth record and is undoubtedly a leader in the property
recruitment sector. However, I believe we are a long way from fulfilling our
full potential as a business. Admision to AIM will significantly increase the
profile of the business and will open up a range of new options to help us
maintain the growth of the business.'
Simon Murphy, Chief Executive of Prime People said:
'I am delighted that we have been able to deliver on our stated acquisition
strategy so quickly. Macdonald meets the criteria we set out in our strategy - a
high quality service business with a strong management team, a good record of
profits and earnings growth and the potential for further organic and
acquisitive growth. I look forward to working with the new team in delivering
long term enhanced shareholder value.'
This summary should be read in conjunction with the full text of the
announcement.
-Ends-
For further information:
Prime People 0207 831 5297
Simon Murphy / Chris Heayberd
Macdonald
Robert Macdonald 0207 318 5874
Peter Moore 0207 318 5873
WH Ireland 0161 832 6644
David Youngman / Robin Gwyn
Hogarth Partnership 0207 357 9477
James Longfield / Georgina Briscoe
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Date of publication of the admission document 9 December 2005
Last time and date for receipt of forms of proxy for the EGM 1 January 2006
Extraordinary General Meeting 3 January 2006
Completion date of the Acquisition 4 January 2006
Admission effective and dealings in Enlarged Share Capital 4 January 2006
expected to commence on AIM
Expected date for posting of share certificates for the New 11 January 2006
Ordinary Shares
ACQUISITION AND SHARE STATISTICS
Pre Share Post Share
Capital Capital
Consolidation Consolidation
Mid market price per Ordinary Share on 7
December 2005 being the most recent practicable
date prior to the publication of the Admission
document 6.25p
Number of Existing Ordinary Shares 36,846,692
Number of Ordinary Shares to be issued to
enable the Share Capital Consolidation to take
place 8
Issue price per New Ordinary Share 84.13p
Number of Consideration Shares being issued
under the Acquisition 7,155,593
Number of New Ordinary Shares in issue on
Admission 10,840,263
Market capitalisation of the Company at the
Issue Price on Admission £9.12m
Maximum number of Deferred Consideration Shares
to be issued under the Acquisition 1,188,637
Maximum percentage of the Enlarged Share
Capital held by the •endors the issue of the
Consideration Shares 66.01%
Percentage of the issued share capital held by
the •endors following the issue of the Deferred
Consideration Shares (assuming the Deferred
Consideration Shares are issued in full) 69.37%
9 December 2005
PRIME PEOPLE plc
Proposed acquisition of Macdonald & Company Group Limited
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
1 for 10 Share Capital Consolidation
Notice of Extraordinary General Meeting
Introduction
The Board of Prime People announced today that the Company had agreed
conditionally to acquire the entire issued share capital of Macdonald, an
independent professional recruitment consultancy to the property industry. The
consideration is up to £10.52 million to be satisfied by the issue of 7,155,593
New Ordinary Shares at a price of 84.13 pence per share and £3.5 million in cash
together with up to 1,188,637 further New Ordinary Shares by way of deferred
consideration at a price of 84.13 pence per share.
The Consideration Shares will represent up to approximately 66.0 per cent. of
the Enlarged Share Capital. Existing shareholders of Prime People will together
hold approximately 34.0 per cent. of the Enlarged Share Capital. Assuming all
the Deferred Consideration Shares are issued, the Consideration Shares and the
Deferred Consideration Shares will represent approximately 69.37 per cent. of
the then issued share capital of the Company (assuming no further shares have
been issued). In view of the size of Macdonald relative to the Company, the
Acquisition will constitute a reverse takeover of Prime People under the AIM
Rules and will require the prior approval of Shareholders at the Extraordinary
General Meeting, notice of which is set out at the end of the Admission
document.
Additionally, because the members of the Concert Party (comprising the Vendors)
will collectively own more than 30 per cent. of the Enlarged Share Capital as a
result of the Acquisition, the Company is seeking a waiver of the obligation
under Rule 9 of the City Code which would otherwise require the members of the
Concert Party to offer to acquire those New Ordinary Shares that they do not
own. A proposal seeking Shareholder approval for such a waiver is, therefore,
included in the notice of Extraordinary General Meeting set out at the end of
the Admission document. Completion of the Acquisition is conditional, inter
alia, on the admission of the Consideration Shares to trading on AIM (subject
only to allotment).
If the Resolutions are duly passed at the EGM, and the other conditions set out
in the Acquisition Agreement are met, trading of the Existing Ordinary Shares on
AIM will be discontinued and the Enlarged Share Capital will be admitted to
trading on AIM. Dealings on AIM in the Enlarged Share Capital are expected to
commence on 4 January 2006. If the Acquisition is not completed, dealings in the
Existing Ordinary Shares on AIM will continue.
Background to and reasons for the Proposals
Since May 2005 the Board, with the support of the major shareholders of the
Company, has significantly increased its efforts to develop the Company through
the identification of an appropriate acquisition in the support service or
industrial sectors. The key characteristics of the target were that it should
have strong management and be trading profitably and that it should have the
potential to create long term shareholder value as measured by growth in
earnings per share and cashflow, with the growth being achieved organically and
via complementary acquisitions if appropriate.
The Board believes that Macdonald, with its market position, its reputation as a
professional recruitment consultancy to the property sector, its experienced
management and its financial performance to date, provides an excellent
opportunity to satisfy these criteria and to achieve these objectives.
Information on Macdonald
Introduction
Macdonald is an independent recruitment consultancy operating within the
property sector in the recruitment of chartered surveyors and professionals for
the property, facilities, construction and related sectors.
Macdonald was incorporated in 1998 and has two trading subsidiaries, Macdonald
Property and Macdonald Freelance as well as three dormant subsidiaries.
Activities
Macdonald Property focuses on the recruitment of full time employees for the
property industry, undertaking two types of assignments: file search assignments
and executive search and selection assignments. The fees for both types of
assignment are usually calculated as a percentage of the projected total
remuneration of the candidate in the first year of employment.
Recognising growing demand for temporary and contract recruitment, Macdonald has
established teams focused on the introduction of contract professional and
support staff who are available for both short and long term contracts. This
activity is carried on through Macdonald Freelance. Macdonald Freelance charges
fees representing the cost of paying the temporary staff, together with a
margin.
Macdonald operates from leasehold offices in Dover Street, London and central
Manchester.
Specialist sectors
The business of Macdonald has, and continues to develop, specialist teams of
consultants focusing on particular roles and clients. This approach seeks to
ensure that the client's needs can be more effectively serviced by recommending
the most suitable recruitment technique and identifying and attracting the most
appropriate candidates.
Consultants work within the following specialist sector teams:
- general practice, including investment, development, management,
agency, property finance and rural practice;
- planning, including town and country planning, transport planning,
landscape planning, environmental, urban design and regeneration;
- technical, including quantity surveying, building surveying, project
management and professional construction staff;
- business support, including accountants, finance staff, secretaries,
data entry and receptionists; and
- facilities management, including health and safety, and environmental.
Clients and candidates
Macdonald has a wide variety of clients including consultancies, financial
institutions, investment funds, property companies and developers. Macdonald
also recruits for a number of professional bodies as well as central and local
government and other government agencies.
Macdonald is the only recruitment consultancy to be approved by the Royal
Institution of Chartered Surveyors (''RICS''), the leading professional body
representing property professionals worldwide. RICS has almost 110,000 members
of which 85,000 are based in the United Kingdom. Initiatives undertaken include
the annual RICS and Macdonald salary and benefits survey guide to remuneration
levels in the property sector.
The large number of people associated with the British Institute of Facilities
Management (approximately 9,600 members) and the Royal Town Planning Institute
(approximately 8,100 members) also provides Macdonald with an extensive pool of
potential candidates.
Macdonald has developed a substantial database of approximately 56,500
candidates. Macdonald aims to meet the majority of the recruitment needs of its
clients in terms of both function and seniority through database search,
advertised selection and executive search. Macdonald currently has around 2,260
positions that it is seeking to fill for clients. Salaries for these positions
are in the range of £25,000 to £150,000 per year.
International
Whilst the majority of Macdonald's revenue is generated in the UK, the
international business of Macdonald is becoming increasingly active in certain
geographical markets, in particular where there is an opportunity to service
existing clients. Macdonald intends to open an office in Dubai in January 2006
and is investigating the benefit of establishing operations in Hong Kong. Both
of these markets are currently being serviced from the UK.
Management and employees
The directors of Macdonald believe that the key determinant to achieving growth
within the business is attracting and retaining trained and experienced
consultants to win business and identify and place candidates. The average
number of people employed by Macdonald (excluding temporary contractors) in the
three years and six months ended 30 September 2005 is set out below:
Year ended 31 March Six months
ended 30
September
2003 2004 2005 2005
Permanent consultants 29 27 35 43
Freelance consultants 5 9 12 12
Support staff and
management 14 14 15 16
-------- -------- ------- --------
48 50 62 71
-------- -------- ------- --------
The directors of Macdonald believe that Macdonald's staff turnover is lower than
the industry average and that its levels of staff retention contribute to the
continuing development of its business. Key structural features and initiatives
to attract and retain employees include:
- the remuneration structure, which includes a high level of commission
attainable by higher performers;
- share ownership and the granting of options to employees;
- a commitment to the communication of goals and information to staff
through conferences and the dissemination of management information; and
- the career opportunities provided by the growth in the business and
open and objective criteria for promotion through Macdonald's grading structure.
Summarised financial information
The following financial information on Macdonald has been extracted without
material adjustment from the historical financial information on Macdonald for
the three years ended 31 March 2005 and the six months ended 30 September 2005
as set out in Part III (B) of the Admission document. This key financial
information should be read in conjunction with the full text of the Admission
document and investors should not rely solely on this summarised information.
Year ended 31 March Six months
ended 30
September
2003 2004 2005 2005
£000s £000s £000s £000s
Turnover 6,562 8,382 11,692 7,429
Gross Profit (Net Fee
Income) 3,713 4,213 5,867 3,618
Operating Profit 231 804 1,164 783
Profit on ordinary
activities before tax 224 802 1,157 778
Net asset value 512 802 1,127 1,103
Strategy
Macdonald intends to continue to develop current revenue lines by expanding
those teams where demand from clients suggests this is appropriate. A particular
focus is expected to be placed on facilities management, health and safety and
regional opportunities within the UK. It is also planned to develop new teams to
focus on property finance, architecture and senior construction professionals.
Macdonald has undertaken research to identify international opportunities and
plans to commit resources to exploiting those in the Middle East in early 2006
and in the Far East and Australia thereafter.
Where Macdonald is able to identify acquisition targets of an appropriate size
and operational fit it aims to pursue these, particularly those acquisitions
which may provide access to additional areas of specialism within the property
recruitment sector. Whilst the focus of Macdonald is on the property recruitment
sector, the Continuing Directors believe that in due course it may be
appropriate to apply the model to certain other sectors.
Information on Prime People
Following the disposal of its then principal business, Portfolio International
Limited, a hotel and leisure industry recruitment company, in August 2004, the
principal operating business of Prime People is Harper Craven Associates Limited
which provides management training. In addition Prime People has a 44.66 per
cent. shareholding in Cameron Kennedy Resources Limited which is a financial
recruitment company. Since May 2005 the main focus of the Board has been the
identification and analysis of acquisition opportunities. Financial information
on Prime People is set out in Part IV and Part V of the Admission document.
Principal terms and conditions of the Acquisition
The Vendors and the Company have entered into the Acquisition Agreement,
pursuant to which the Company will acquire from the Vendors the entire issued
share capital of Macdonald. The aggregate consideration payable by the Company
to the Vendors pursuant to the Acquisition Agreement will be £10.52 million and
will be payable as follows:
(a) as to £9.52 million on Completion, payable as to £3.5 million in cash and as
to £6.02 million by the issue and allotment to the Vendors, credited as fully
paid, of the Consideration Shares (at a price of 84.13 pence per share); and
(b) up to £1.0 million by the issue and allotment to the Vendors, credited as
fully paid, of the Deferred Consideration Shares following the announcement of
the results of the Enlarged Group for the period ending 31 March 2006. The
Vendors will be entitled to receive £5.00 of further consideration for every £1
that the operating profit of Macdonald and its subsidiaries for the year ending
31 March 2006 exceeds £1.70 million up to a maximum further consideration of
£1.85 million and £2.50 of further consideration for every £1 that such
operating profit is greater than £1.85 million up to a maximum further
consideration of £1.95 million. Such further consideration will be satisfied by
the issue to the Vendors of such number of Deferred Consideration Shares as has
an aggregate value calculated at the Issue Price equal to the further
consideration.
The £3.5 million cash consideration is to be provided from the existing cash
resources of Prime People and an acquisition facility provided by Barclays Bank
plc. The Consideration Shares and the Deferred Consideration Shares will, when
issued, rank pari passu with the New Ordinary Shares already in issue including,
without limitation, the right to receive all dividends and distributions
declared, made or paid on the New Ordinary Shares by reference to record dates
after the dates of issue of the Consideration Shares and the Deferred
Consideration Shares.
The Acquisition is conditional upon (inter alia):
(a) the Panel granting a waiver of the obligation which would otherwise fall on
the Vendors to make a general offer under Rule 9 of the City Code; and
(b) the shareholders of the Company passing the Resolutions set out in the
Notice of EGM other than Resolution 2.
The Acquisition Agreement contains a long-stop date following which the
agreement shall terminate should the conditions to completion not be satisfied
or waived prior to 31 January 2006.
The Acquisition Agreement contains certain non-competition and other restrictive
covenants given by the Proposed Directors.
Upon completion of the Acquisition, each of the Proposed Directors will be
appointed as directors of the Company. The service contracts of Robert Macdonald
and Peter Moore with Macdonald are being amended to provide for them to become
directors of the Company and for John Lewis to enter into a non-executive
appointment letter with the Company. Further details are set out in paragraph 6
of Part VII of the Admission document.
Further details of the Acquisition Agreement are set out in paragraph 12 of Part
VII of the Admission document.
Directors, Proposed Directors and employees
Directors
The Board currently comprises the following directors in respect of whom brief
biographies are set out below:
Peter Hearn (aged 52) Non-executive Chairman
Peter Hearn was appointed to the board in June 1992 and on 16May 2005 became
Non-executive Chairman. He qualified as a chartered accountant with Coopers &
Lybrand after graduating from Cambridge in 1974. He then worked in a range of
industries before founding the PSD Group plc in 1991, which he floated on the
London Stock Exchange in 1997, and of which he is now non-executive chairman.
Simon Murphy (aged 41) Chief Executive
Simon Murphy was appointed Chief Executive of the Company on 16 May 2005. He
qualified as a chartered accountant with Coopers & Lybrand. He was, until April
2005, a managing director within the global investment banking division of HSBC.
Christopher Heayberd (aged 53) Finance Director
Christopher Heayberd is a chartered accountant who returned to the Board in June
2000 having spent 4 years as a finance director of PSD Group plc. He has
considerable experience as a finance director of both public and private
companies.
David Coubrough (aged 49)Non-executive Director
David Coubrough was appointed a Non-executive Director on 30 April 2003,
following his resignation as Chief Executive of Prime People. He is an executive
director of the Bespoke Hotel Company Limited and a non executive director of
four other private companies.
It is proposed that Peter Hearn and David Coubrough will resign from the Board
on completion of the Acquisition and that, at the same time, Simon Murphy will
step down as Chief Executive and assume a Non executive role.
Proposed Directors
The Proposed Directors are:
Robert J G Macdonald (aged 57) proposed Executive Chairman
Robert has held senior positions within the recruitment industry since 1973 when
he founded Reuter Simkin Limited, a recruitment business that grew to become a
market leader in both legal and property recruitment. After the sale of Reuter
Simkin Limited in 1989, he subsequently acquired shares in and was chairman of,
two other recruitment companies. Macdonald commenced trading in 1994 from within
the legal recruitment business and was separately incorporated in 1996 when
certain key members of the staff acquired equity stakes.
Peter H Moore (aged 36) proposed Managing Director
From 1992 to 1995 Peter Moore worked with Strutt & Parker, qualifying as a
chartered surveyor in December 1994. He joined Macdonald in November 1995 and
was appointed Managing Director in 1996. As Managing Director of Macdonald,
Peter has responsibility for its day-to-day operations. He specialises in
advising upon topics such as staff retention issues, merger and acquisition,
human resource policy and remuneration benchmarking. He is also responsible for
the industry's benchmark salary and benefits survey undertaken annually in
conjunction with the Royal Institution of Chartered Surveyors.
John HJ Lewis OBE (aged 65) proposed Non-executive Director
John Lewis is a solicitor and a consultant to Messrs. Eversheds LLP. Previously
he served as a partner in Lewis Lewis and Co which merged with Jaques and Co.
Jaques and Lewis then merged with Eversheds. He is also currently a director of
G R Holdings Plc and various other non-competing private companies. He has
served as chairman of Cliveden Plc and Principal Hotels Plc and as deputy
chairman of John D Wood & Co Plc, retiring in each case when the company was
sold.
Employees
The Continuing Directors do not intend to make any material amendment to the
employment of the Enlarged Group's current employees.
Current trading and prospects of the Enlarged Group
Prime People
The current trading of Prime People is in line with the expectations of the
Directors.
Macdonald
The current trading of Macdonald is in line with the expectations of the
directors. Turnover in the first seven months of the current financial year is
approximately 35 per cent. ahead of the comparable period of the previous year.
Enlarged Group
The Continuing Directors intend to continue to develop the strategy of
profitable growth of the Enlarged Group by expanding market share in its
existing core markets whilst continuing to enter new but related markets such as
architecture.
Dividend policy
Whilst the Enlarged Group will primarily seek to achieve capital growth for
shareholders, the Continuing Directors also believe it is appropriate to adopt a
progressive dividend policy. The policy will have regard to the capital and
strategic requirements of the Enlarged Group and its capital structure. The
Continuing Directors anticipate declaring a dividend for the period ending 31
March 2006.
Proposed change of accounting reference date
The Continuing Directors intend to change the accounting reference date of the
Company to 31 March in line with that of Macdonald. The first set of audited
financial statements for the Enlarged Group will therefore be for the 15 months
ending on 31 March 2006.
City Code on Takeovers and Mergers
The terms of the Acquisition give rise to certain considerations under the City
Code. Brief details of the Panel, the City Code and the protections they afford
are described below.
The City Code has not, and does not seek to have, the force of law. It has,
however, been acknowledged by both government and other regulatory authorities
that those who seek to take advantage of the facilities of the securities
markets in the United Kingdom should conduct themselves in matters relating to
takeovers in accordance with best business standards and so according to the
City Code.
The City Code is issued and administered by the Panel. The City Code applies to
all takeover and merger transactions, however effected, where the offeree
company is, inter alia, a listed or unlisted public company resident in the
United Kingdom (and to certain categories of private limited companies). The
Company is such a company and its Shareholders are entitled to the protection
afforded by the City Code.
Under Rule 9 of the City Code, a person who acquires, whether by a series of
transactions over a period of time or not, shares which (taken together with
shares held or acquired by persons acting in concert with him) carry 30 per
cent. or more of the voting rights of a company which is subject to the City
Code is normally required to make a general offer in cash to all other
shareholders of that company to acquire the balance of the shares not held by
such a person (or group of persons acting in concert).
In addition, Rule 9 provides that where any person, together with persons acting
in concert with him, holds shares in a company which is subject to the City Code
carrying not less than 30 per cent. but not more than 50 per cent. of that
company's voting rights and such person, or any person acting in concert with
him, acquires additional shares which increase his percentage of the voting
rights in that company, such person is normally required, in the same way, to
make a general offer to all shareholders.
An offer under Rule 9 must be in cash and at the highest price paid within the
preceding 12 months for any shares in the company by the person required to make
the offer or any person acting in concert with him.
The Vendors are together deemed to be acting in concert for the purposes of the
City Code.
After completion of the Acquisition, and assuming the full Deferred
Consideration Shares are issued, the Concert Party's interest will represent, in
aggregate approximately 69.37 per cent. of the voting rights attaching to the
Company's issued ordinary share capital.
The table below shows the interest of the Concert Party assuming that the
Proposals are implemented.
Name Maximum number Maximum Maximum number Maximum
of New Ordinary percentage of of New Ordinary pecentage of
Shares Enlarged Share Shares the issued
following the Capital following the share capitalof
issue of the following the implementation the Company
Consideration issue of the of the following the
Shares(1) Consideration Proposals(5) implementation
Shares(1) of the
Proposals(5)
Robert
Macdonald 2,126,832 19.62 2,480,127 20.62
Peter Moore(2) 2,452,946 22.63 2,899,906 24.09
John Lewis 12,096 0.11 14,105 0.12
John Lewis and
MC Trust
Limited 293,126 2.70 329,320 2.74
Robert
Macdonald and
Peter Moore
(jointly) 439,429 4.05 512,424 4.26
Oliver
Wright(3) 439,429 4.05 512,424 4.26
Other members
of the Concrt
Party(4) 1,391,735 12.85 1,597,924 13.28
--------- --------- --------- ----------
7,155,593 66.01 8,344,230 69.37
--------- --------- --------- ----------
(1) Assuming 100 per cent. exercise of vested Macdonald Share Options. All
outstanding options are to vest immediately prior to Completion.
(2) Pursuant to agreements dated 8 December 2005, Peter Moore has agreed,
immediately prior to Completion, to sell 1,302 Macdonald B Shares to each
of (1) John Lewis and MC Trustees Limited (2) Jeanne Moore and (3) Gordon
and Patricia Squires. The table above assumes that the sale of these shares
has been completed.
(3) Oliver Wright joined the business of Macdonald in September 1994. He was
appointed a director of Macdonald on 1 October 2002 and resigned as an
employee and director in April 2005 to undertake property development work
and to prepare for a role in his family's business.
(4) The other members of the Concert Party comprise 22 employees of Macdonald
and three relatives of Peter Moore, none of whom will own 3 per cent. or
more of the Enlarged Share Capital.
(5) Assuming full issue of the Deferred Consideration Shares.
There is no agreement, arrangement or undertaking whereby the beneficial
ownership of any of the New Ordinary Shares proposed to be allotted to the
members of the Concert Party pursuant to the Acquisition Agreement will be
transferred to any other person.
The Panel has agreed, subject to the passing of Resolution 7 at the EGM on a
poll, to waive the obligation of the Concert Party to make a general offer under
Rule 9 that would otherwise arise as a result of the Proposals.
Shareholders should be aware that, following the Acquisition, the members of the
Concert Party will together hold more than 50 per cent. of the voting rights
attaching to the Company's issued share capital. Accordingly, the Concert Party,
for so long as the members of the Concert Party continue to be treated as acting
in concert, may be able to increase its aggregate shareholding without incurring
any further obligation under Rule 9 to make a general offer. However, individual
members of the Concert Party will not be able to increase their percentage
shareholdings through a Rule 9 threshold without Panel consent.
No member of the Concert Party holds any shares in the Company at the date of
the Admission document and none of them has dealt for value in any shares in the
Company during the 12 months prior to the date of the Admission document.
Save for the service agreements and non-executive letters of appointment, the
changes to Christopher Heayberd's service contract and the termination payment
to David Coubrough, the Acquisition Agreement and agreements summarised in
paragraphs 6, 12 and 13 respectively of Part VII of the Admission document,
there are no agreements, arrangements or understandings (including compensation
arrangements) between any member of the Concert Party and any of the Directors,
Proposed Directors, shareholders or recent shareholders of the Company connected
with or dependent upon the Acquisition.
Lock-in Agreements
The Vendors (other than Oliver Wright) have agreed in the Acquisition Agreement
not to sell the Consideration Shares or Deferred Consideration Shares until the
announcement of the results of the Enlarged Group for the year ending 31 March
2007 unless otherwise agreed in writing by the Company acting by the
Non-executive Directors and WH Ireland. Pursuant to a lock-in agreement dated 9
December 2005 between Oliver Wright (1), Prime People (2) and WH Ireland (3),
Oliver Wright has agreed to certain orderly market selling arrangements, further
details of which are set out in Paragraph 13 of Part VII of the Admission
document.
Admission to AIM and dealings in the Enlarged Share Capital
Application will be made by the Company for the New Ordinary Shares to be
admitted to AIM on completion of the Proposals. Subject to completion of the
Proposals, trading in the Enlarged Share Capital is expected to commence on 4
January 2006.
If the Acquisition is not approved and Resolution 7 is not passed at the EGM,
the Existing Ordinary Shares will continue to be traded on AIM, the
Consideration Shares and the Deferred Consideration Shares will not be issued or
admitted to AIM, the Share Capital Consolidation will not take place, the
Proposed Directors will not be appointed to the Board and the Board will remain
as currently constituted.
Proposed share consolidation
Subject to the approval of shareholders at the EGM, the Directors propose to
simplify the Company's capital structure by the consolidation of every 10 issued
Ordinary Shares into one New Ordinary Share. This will reduce the total number
of shares in issue and is expected to produce a more appropriate trading range
for the Company's share price. The number of Ordinary Shares in issue is not
divisible by 10 and, immediately prior to the Share Capital Consolidation, it
will be necessary for the Company to issue eight further Ordinary Shares to
bring the total number of Ordinary Shares in issue to 36,846,700 so as to enable
the Share Capital Consolidation to be implemented. For administrative purposes
only, these eight shares will be issued to SH Company Secretaries Limited, a
company owned by the Company's solicitors and which currently holds no shares in
the Company. On the Share Capital Consolidation, SH Company Secretaries Limited
will become entitled to a fraction of a 10p share as a result of these eight
shares and this fractional element will be dealt with as set out below.
On the Share Capital consolidation, where the number of Existing Ordinary Shares
held by a shareholder is not divisible by 10, that shareholder would become
entitled to a fraction of a 10p share. In order to deal with fractional
entitlements in the simplest possible way, it is proposed that all fractions of
shares resulting from the consolidation will be aggregated and sub-divided and
the resulting New Ordinary Shares sold in the market at the best price
reasonably obtainable. For administrative convenience, as the proceeds of such
sales to which any shareholder is entitled are expected to be less than £3.00
such proceeds will be applied for the benefit of the Company instead of being
sent to the shareholder.
Extraordinary General Meeting
You will find set out at the end of the Admission document a notice convening
the Extraordinary General Meeting of the Company to be held at 11.00 a.m. on 3
January 2006 at the offices of Stephenson Harwood, One St. Paul's Churchyard,
London EC4M 8SH, to consider Resolutions:
(a) to give effect to the Share Capital Consolidation;
(b) to amend the articles of association of Prime People in order to extend the
scope of the directors' indemnity provisions and in order to clarify the right
of shareholders to hold shares in uncertificated form;
(c) to approve the Acquisition;
(d) to increase the authorised share capital of Prime People in order to create
sufficient shares to, inter alia, permit the issue of shares in accordance with
the terms of the Acquisition;
(e) to grant authority to the board of directors of the Company to allot
unissued shares up to a maximum aggregate nominal amount of £1,230,000;
(f) to dis-apply statutory pre-emption rights to permit the issue of shares for
cash up to a maximum aggregate nominal amount of £54,200, representing 542,000
New Ordinary Shares, being approximately 5 per cent. Of the Enlarged Share
Capital, to persons other than existing Shareholders of the Company as if free
of any right of pre-emption;
(g) to waive the obligation that would otherwise exist on the Concert Party to
make a mandatory offer for the entire issued share capital of Prime People
pursuant to Rule 9 of the City Code; and
(h) to appoint the Proposed Directors as stated in the Notice of EGM.
In accordance with the requirements of the Panel, Resolution 7 will be taken by
Independent Shareholders on a poll.
Intentions of Directors, major Shareholders and connected persons
The following irrevocable undertakings to vote in favour of the Resolutions have
been given by Mrs. M. Lee, City of London PR Group plc, J.W. Greenhalgh, Simon
Murphy, Christopher Heayberd and Mrs. David Coubrough in respect of all the
Ordinary Shares held by them amounting to 18,752,833 Ordinary Shares in
aggregate (representing 50.89 per cent. of the Existing Ordinary Shares):
Number of Percentage of
Existing Existing
Ordinary Shares Ordinary Shares
Mrs M. Lee 8,999,633 24.42
City of London
Group plc 4,294,553 11.65
Simon Murphy 2,300,000 6.24
Christopher
Heayberd 1,992,384 5.41
J.W.
Greenhalgh 1,116,263 3.03
Mrs David
Coubrough 50,000 0.14
--------- ---------
18,752,833* 50.89
--------- ---------
* 1,875,283 New Ordinary Shares following the Share Capital Consolidation.
Recommendation of the Directors
The Directors, who have been so advised by WH Ireland, consider the terms of the
Proposals to be fair and reasonable and in the best interests of the Company and
Shareholders as a whole. In providing advice to the Board, WH Ireland has taken
into account the Directors' commercial assessments. Accordingly, the Directors
unanimously recommend Shareholders to vote in favour of the Resolutions as they
themselves (and the Shareholders connected with them) have irrevocably
undertaken so to do in respect of an aggregate of 4,342,384 Ordinary Shares,
representing 11.79 per cent. of the Existing Ordinary Shares.
Directors' and Proposed Directors' service arrangements
1 The Proposed Directors entered into service agreements with Macdonald Property
on 1 April 2005, details of which are set out below:
(a) The contract between Robert Macdonald and Macdonald Property provides for
Robert Macdonald to act as the part time executive chairman and director of the
board of Macdonald Property at a salary of £86,250 per annum. The contract has
no fixed term and is terminable by 12 months' notice in writing from either
party. Under the contract Robert Macdonald is entitled to 18 working days' paid
holiday per annum, medical insurance and critical illness insurance. He is
subject to certain covenants for a period of 6 months following termination of
his employment including: non-compete and non-solicitation. He is also subject
to a confidentiality undertaking. He is entitled to participate in the company's
discretionary bonus scheme. Any bonus payment is at the absolute discretion of
the company and subject to the approval of the Remuneration Committee.
(b) Macdonald Property has entered into a service agreement with Peter Moore on
terms identical to those set out in paragraph (a) above save that Peter Moore
was appointed as managing director at a salary of £138,000 per annum, is
entitled to 30 working days paid holiday per annum and works full time. He is
entitled to participate in the company's discretionary bonus scheme. Any bonus
payment is at the absolute discretion of the company and subject to the approval
of the Remuneration Committee.
(c) The contract between John Lewis and Macdonald Property provides for John
Lewis to act as a non executive director of Macdonald Property with a directors'
fee of £5,000 per annum and a service fee of £18,000 per annum payable to
Blakeney Holdings Limited. The contract is for a minimum two year fixed term and
is terminable by 12 months' written notice from either Blakeney Holdings Limited
or Macdonald. Mr. Lewis has covenanted not to introduce business to any other
person or entity with which any company in the Macdonald Group deals during this
service agreement. He is also subject to a confidentiality undertaking. Blakeney
Holdings Limited is also a party to the service agreement and may substitute or
replace Mr. Lewis as the provider of services.
2. It is proposed that Robert Macdonald and Peter Moore enter into new service
agreements with Prime People on completion of the Acquisition, on substantially
the same terms as those set out in paragraphs (a) and (b) above save that their
new agreemenets will not contain any provisions regarding bonuses. John Lewis is
to enter into a non-executive director appointment letter with Prime People on
Completion. Under the non-executive appointment letter, he will be appointed for
an initial term of one year from Completion and paid a fee of £15,000 per annum.
The appointment may be terminated earlier by either party on three months'
notice. The new service agreements and appointments letter will replace those
listed in paragraphs (a), (b) and (c) above in their entirety.
3. The contract dated 18 May 2005 between Christopher Heayberd and Prime People
provides for Christopher Heayberd to act as Finance Director of Prime People at
a salary of £85,000 per annum. The contract has no fixed term and is terminable
by 6 months' notice in writing from either party. Under the contract Christopher
Heayberd is entitled to 30 working days holiday per annum and medical insurance.
He is subject to the following covenants for a period of 6 months following
termination of his employment: non-compete and non-solicitation of Prime People
employees or clients. He is also subject to a confidentiality undertaking.
Conditional upon completion, Christopher Heayberd's service contract is to be
amended to increase his notice period to 12 months and to increase his salary to
£100,000 per annum, to be reviewed by the Company on 1 April 2006 and annually
thereafter.
4. The contract dated 16 May 2005 between Simon Murphy and Prime People provides
for Simon Murphy to act as Chief Executive of Prime People at a salary of
£100,000 per annum. The contract has no fixed term and is terminable by six
months' notice in writing from either party. Under the contract Simon Murphy is
entitled to 30 working days holiday per annum and medical insurance. He is
subject to the following covenants: noncompete and non-solicitation of Prime
People employees or clients. He is also subject to a confidentiality
undertaking.
Simon Murphy is to step down as Chief Executive on completion of the Acquisition
but will remain as a director in a non-executive capacity. He will receive
normal salary and benefits up to that date. He will receive his contractual
entitlement of £50,000 less tax and employees' National Insurance as payment in
lieu of notice.
On Completion Simon Murphy will enter into a non-executive director appointment
letter under which he will be appointed for an initial term of one year from
Completion and paid a fee of £15,000 per annum. The appointment may be
terminated earlier by either party on three months' notice.
Simon Murphy entered into an amended share option agreement confirming that the
exercise price per share of the share options held by him be adjusted to 5.75p
in exchange for a discretionary bonus scheme being implemented. The Company has
agreed to a payment of £90,934. He will agree not to exercise the share options
prior to 17 May 2007 notwithstanding that the share options will become
exercisable on the change of control of the Company on completion of the
Acquisition. He has acknowledged that the one for ten share consolidation of the
Company will result in the total number of ordinary shares subject to his share
options being reduced to 184,233 and the exercise price of his share options
increasing to 57.5p per share.
5. Each of the agreements referred to above, other than pre-existing service
agreements referred to in paragraphs 1 (a) to (c), 3 and 4, is, and the changes
to Christopher Heayberd's contract are, conditional on Admission.
6. Save as set out above, there are no existing or proposed service contracts
between any Directors or Proposed Directors and the Company or any subsidiary of
the Company and there are no such service contracts which have been entered into
or amended within six months of the date of this document or which contain any
provision for compensation payable for early termination of the contract or
contain any commission or profit sharing arrangements.
DEFINITIONS
The following words and expressions shall have the following meanings in the
Admission document, unless the context otherwise requires:
''Acquisition'' the proposed acquisition by the Company of the entire issued
share capital of Macdonald pursuant to the Acquisition
Agreement
''Acquisition the agreement dated 9 December 2005 between the Vendors (1)
Agreement'' and the Company (2) pursuant to which the Company has agreed
conditionally to acquire the entire issued share capital of
Macdonald, further details of which are set out in paragraph
12 of Part VII of the Admission document
''Act'' the Companies Act 1985, as amended
''Acting in shall have the meaning ascribed thereto in the City Code
concert''
''Admission'' the admission of the New Ordinary Shares (including the
Consideration Shares) to trading on AIM becoming effective
in accordance with the AIM Rules
''AIM'' the market of that name operated by the London Stock
Exchange
''AIM Rules'' the rules published by the London Stock Exchange applicable
to AIM
''Articles'' or the Company's articles of association from time to time
''Articles of
Association''
''Board'' the board of directors of the Company
''City Code'' the City Code on Takeovers and Mergers
''Combined Code'' the Principles of Good Governance and the Code of Best
Practice, as set out in an appendix to the Listing Rules
''Company'' or Prime People plc
''Prime People''
''Completion'' Completion of the Acquisition in accordance with its terms
''Concert Party'' the Vendors
''Consideration'' up to £10.52 million, to be satisfied by the issue of the
Consideration Shares and the Deferred Consideration Shares
(at a price of 84.13 pence per share) and the payment of an
aggregate amount of £3.5 million in cash to the Vendors
pursuant to the Acquisition Agreement.
''Consideration the 7,155,593 New Ordinary Shares to be issued to the
Shares'' Vendors on completion of the Acquisition, credited as fully
paid, pursuant to the Acquisition Agreement, at the Issue
Price
''Continuing the Proposed Directors, Simon Murphy and Christopher
Directors'' Heayberd
''Control'' shall have the meaning ascribed thereto in the City Code
''CREST'' the computerised settlement system to facilitate the
transfer of title of shares in uncertificated form, operated
by CRESTCo Limited
''CREST Member'' a person who has been admitted by CRESTCo Limited as a
system member (as defined in the Regulations)
''CREST a person who is, in relation to CREST, a system participant
Participant'' (as defined in the Regulations)
''Deferred up to 1,188,637 New Ordinary Shares to be issued and
Consideration allotted to the Vendors as part of the Consideration subject
Shares'' to the achievement by Macdonald, Macdonald Property and
Macdonald Freelance, of certain levels of operating profit
for the year ending 31 March 2006
''Directors'' the current directors of the Company, whose names appear on
page 3 of the Admission document
''EGM'' or the extraordinary general meeting of the Company to be held
''Extraordinary at the offices of Stephenson Harwood, on 3 January 2006,
General Meeting'' notice of which is set out at the end of the Admission
document
''Enlarged Prime People and Macdonald and their subsidiaries together
Group'' after completion of the Acquisition
''Enlarged Share the entire issued ordinary share capital of Prime People
Capital'' upon Admission as enlarged by the issue of the Consideration
Shares
''Excluded Australia, Canada, Japan, the Republic of Ireland, the
Territories'' Republic of South Africa and their respective territories or
possessions
''Existing Ordinary 36,846,692 Ordinary Shares in issue at the date of this
Shares'' document
''Form of Proxy'' the form of proxy for use at the EGM which accompanies the
Admission document
''Independent those shareholders of Prime People considered to be
Shareholders'' independent for the purposes of approving the waiver to make
a mandatory offer under Rule 9 of the City Code
''Issue Price'' 84.13p per New Ordinary Share
''Listing Rules'' the listing rules (as amended from time to time) made by the
UK Listing Authority
''London Stock London Stock Exchange plc
Exchange''
''Macdonald'' Macdonald & Company Group Limited, a company incorporated in
England and Wales under company number 03670901
''Macdonald Robert Macdonald, Peter Moore and John Lewis
Directors''
''Macdonald Macdonald & Company Freelance Limited, a wholly owned
Freelance'' subsidiary of Macdonald Property
''Macdonald Macdonald & Company Property Limited, a wholly owned
Property'' subsidiary of Macdonald
''Macdonald ordinary A and B shares of 1p each in the share capital of
Shares'' Macdonald
''Macdonald Share EMI options over 4,100 ordinary A shares of 1p each in the
Options'' share capital of Macdonald granted by Macdonald to certain
of its employees, each with a vesting date of 30 September
2006
''New Ordinary Ordinary Shares of 10p each in the capital of the Company
Shares'' following the Share Capital Consolidation
''Notice of EGM'' the notice of Extraordinary General Meeting which is set out
at the end of the Admission document
''Official List'' the Official List of the UKLA
''Ordinary ordinary shares of 1p each in the capital of the Company
Shares''
''Panel'' the Panel on Takeover and Mergers of the United Kingdom
''Prime People EMI the EMI employee share option scheme adopted by Prime
Scheme'' People, details of which are set out in paragraphs 5.2 and 8
of Part VII
''Prime People the Company and its subsidiaries
Group''
''Proposals'' the Acquisition, the Waiver, the Share Capital Consolidation
and Admission, as described in the Admission document
''Proposed Robert Macdonald, Peter Moore and John Lewis
Directors''
''Regulations'' the Uncertificated Securities Regulations 2001
''Resolutions'' the resolutions set out in the Notice of EGM and reference
to a ''Resolution'' shall be the relevant resolution set out
in the Notice of EGM
''Share Capital the consolidation of every 10 Ordinary Shares into 1 New
Consolidation'' Ordinary Share
''Shareholders'' or holders of Ordinary Shares
''Members''
''UK'' or ''United the United Kingdom of Great Britain and Northern Ireland
Kingdom''
''UKLA'' or ''UK the United Kingdom Listing Authority of the Financial
Listing Services Authority, acting in its capacity as the competent
Authority'' authority for the purposes of Part VI of the Financial
Services and Markets Act 2000
''United States'' the United States of America, its territories and
possessions, any state of the United States of America and
the District of Columbia
''Vendors'' the shareholders of Macdonald and the holders of Macdonald
Share Options, as listed in paragraph 9.4 of Part VII of the
Admission document
''Voting rights'' means all voting rights attributable to the share capital of
the Company which are currently exercisable at a general
meeting
''Waiver'' the waiver to be granted, subject to the passing of
Resolution 7 on a poll of Independent Shareholders at the
EGM, by the Panel of the obligation of the Concert Party (or
any member thereof) which would otherwise arise under Rule 9
of the City Code upon Completion to make a mandatory cash
offer for the New Ordinary Shares not already owned by the
Concert Party (or the relevant member thereof) on or after
Admission, as further described in Part I of the Admission
document
''WH Ireland'' WH Ireland Limited
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