Placing and Acquisition

RNS Number : 1258J

NewRiver Retail Limited

27 June 2011

 



Not for distribution, directly or indirectly, in whole or in part in or into the United States, Canada, Australia, Japan, the Republic of Ireland or South Africa or to US persons

NewRiver Retail Limited

("NewRiver" or the "Company")

Proposed Placing, Conditional Acquisition Constituting a Reverse Takeover

and

Temporary Suspension of Trading in Shares

Highlights

·      Proposed equity fund raising of approximately £40 million (net of expenses) at 252 pence per share

·      Acquisition of four freehold shopping centre assets for approximately £68 million

o  Net lettable area of 502,500 square feet

o  122 tenancies providing good income diversification

o  Approximately 60% of income let to food and value retailers

o  Low occupational costs resulting in sustainable rents

o  Total annual footfall of 19 million

o  Low vacancy rate of 3.3%

o  94% of the rental income is let to multiple retailers

o  Net initial yield of 8.0%

o  Earnings per share and dividends per share enhancing in the first full financial year post acquisition

o  Key retail tenants include: The Co-operative, Poundland, TK Maxx and Boots

·      Due to the size of the acquisition, trading in NewRiver shares is temporarily suspended until posting of an admission document

The Board of NewRiver (AIM: NRR), the UK REIT specialising in value-creating retail property investment and active asset management, is pleased to announce that the NewRiver group has entered into acquisition agreements to acquire a portfolio of four freehold shopping centre assets from Zurich Assurance Limited for approximately £68 million (the "Acquisition") and proposes to raise approximately £40 million (net of expenses) by way of a placing of 16,865,000 ordinary shares at 252 pence per share to fund part of the cost of the Acquisition and the continuing growth of the Company's business.

Due to the size of the transaction, the Acquisition constitutes a reverse takeover under Rule 14 of the AIM Rules for Companies and a substantial transaction pursuant to the Listing Rules of the Channel Island Stock Exchange.  Accordingly, at the request of the Company, trading in NewRiver shares has been temporarily suspended. Trading is expected to resume when the Company publishes an admission document in respect of the proposed enlarged NewRiver group, including details of the Acquisition.  The admission document will be published as soon as possible.

The Acquisition is conditional on, inter alia, NewRiver's shareholders approving the transaction by ordinary resolution as a reverse takeover, in accordance with the AIM Rules for Companies and the completion of the Placing.

The Placing and Acquisition are conditional on, inter alia, the approval of NewRiver's shareholders and completion of a new bank facility to be used to partly fund the Acquisition.

An update on the timing of the events described in this announcement will be provided on the day of posting of the admission document.

David Lockhart, Chief Executive Officer, said:

"We are delighted to announce the conditional acquisition of this major portfolio of shopping centres for a total consideration of £68 million which represents an attractive net initial yield of 8.0%. The acquisition is another transformational transaction for NewRiver, in line with the Company's investment strategy of targeting food anchored and value-led retail centres with stable income profiles and low occupational costs. The transaction will be accretive from the first full financial year following the purchase.

"The Company has already identified a number of significant opportunities to apply its active asset management and risk-controlled development skills which will enhance value. We are also very pleased to announce the proposed equity fund raising at this time. The support we have received from new and existing investors in challenging markets has been very encouraging.

"Following this acquisition, NewRiver will have acquired approximately £220 million of retail assets since it joined AIM in September 2009, demonstrating NewRiver's continuing ability to source attractive deals that complement the Company's disciplined and well researched investment strategy."

For further information, please contact:

NewRiver Retail Limited David Lockhart/Mark Davies	Tel: [phone]
Pelham Bell Pottinger David Rydell/Rosanne Perry	Tel: [phone]
Cenkos Securities Ian Soanes/Max Hartley	Tel: [phone]
Kinmont John O'Malley/Mat Thackery	Tel: [phone]

Acquisition and Placing

The Board of NewRiver is pleased to announce that the Company has, through wholly-owned subsidiaries, entered into acquisition agreements with Zurich Assurance Limited ("Zurich") for the purposes of acquiring a portfolio of four freehold shopping centre assets from Zurich (the "Four Retail Properties") for a total consideration of approximately £68 million in cash (the "Acquisition").

The Board also announces that the Company is proposing to raise approximately £40 million (net of expenses) by the issue of 16,865,000 ordinary shares of no par value ("Placing Shares") at a placing price of 252 pence per share (the "Placing"). The Acquisition will be funded in part by a bank facility with the balance being provided from the net proceeds of the Placing. The Company is currently in advanced stage negotiations for the provision of a bank facility of up to 65% of property cost.   The balance of the net proceeds of the Placing will be used to fund the continuing growth of the Company's business.

Due to the size of the transaction, the Acquisition constitutes a reverse takeover under Rule 14 of the AIM Rules for Companies and a substantial transaction under the Listing Rules published by the Channel Islands Stock Exchange.  Accordingly, at the request of the Company, trading in NewRiver shares has been temporarily suspended. Trading is expected to resume when the Company publishes an admission document in respect of the proposed enlarged NewRiver group, including details of the Acquisition.  The Company will publish this admission document as soon as possible.

The Acquisition is conditional on, inter alia, NewRiver's shareholders approving the transaction by ordinary resolution as a reverse takeover, in accordance with the AIM Rules for Companies and the completion of the Placing.

The Placing is conditional on, inter alia, NewRiver's shareholders approving the Acquisition as a reverse takeover and disapplying by special resolution the pre-emption rights contained in the Company's articles of incorporation, and on an appropriate new bank facility becoming available for drawdown.

An extraordinary general meeting (the "Extraordinary General Meeting") will be held to propose to shareholders the resolutions required to complete the Placing and the Acquisition.

Background to and reasons for the Proposals

The Directors believe that the acquisition of the Four Retail Properties represents an attractive opportunity for the Company to acquire assets in accordance with its investment policy.  The Acquisition will further diversify the Company's income streams and asset base and will provide a range of attractive asset management and risk-controlled development opportunities for the Company to increase the capital value of the assets.  The Four Retail Properties are being purchased at a net initial yield of 8.0% and the Directors believe they will be earnings per share and dividends per share enhancing for shareholders from the first full financial year post Acquisition.

The implementation of the proposals will further increase the size of NewRiver allowing the Company to take advantage of the operational leverage which currently exists within the business.

Further information regarding Four Retail Properties is set out below. The Placing is being proposed in order to raise the funding which, together with the bank funding, is required to complete the Acquisition and to continue to grow the Company's business.

Information on the Four Retail Properties

The Four Retail Properties are four freehold shopping centre assets located in Carmarthen, Paisley, Skegness and Wisbech.

Merlin's Walk, Carmarthen

Merlin's Walk opened in 1998 and comprises 103,300 square feet of sales and ancillary accommodation in 24 retail units. The centre is arranged in an open street format with ground floor retail and first floor ancillary accommodation. It is located next to the Carmarthen bus station and adjacent to a 350 space car park and a large Wilkinsons store. The anchor tenants for the center are TK Maxx, Poundland, Argos and Store21.

The Piazza Shopping Centre, Paisley

The Piazza Shopping Centre, Paisley was developed in 1968 with an extension in 1975. The Centre, which is situated in a prime location, underwent a major refurbishment in the 1990s. It provides a covered single level shopping centre extending to 252,000 sq ft of retail and offices in 40 units together with a 366 space multi-storey car park.

The centre is well located next to the train station and the town's principal bus station. The Centre dominates the Paisley retail offer and is anchored by The Co-operative, New Look, Peacocks and Poundland.

The Hildreds Shopping Centre, Skegness

The Hildreds Shopping Centre in Skegness is a fully covered 55,000 square feet centre that opened in 1988. The Centre comprises 30 stores including Evans, Burtons, H.Samuel, WH Smith, Claire's Accessories and Wilkinsons. The Centre, which is the town's only managed centre, is anchored by The Co-operative and Home Bargains and contains 320 car parking spaces.  Skegness benefits from a significant tourist industry.

The Horsefair, Wisbech

The Horsefair Shopping Centre has 26 retail units comprising 92,000 square feet of sales and ancillary accommodation. The Centre was opened in 1989 and built in a single storey open street format, with car parking for nearly 400 cars and the bus station immediately adjacent. The centre is Wisbech's only managed centre and is anchored by the Co-operative with key tenants including Boots, Poundland, Superdrug, New Look, Argos and The Co-op.

Development Opportunities

In addition to the Four Retail Properties, the NewRiver group has a substantial pipeline of risk-controlled development opportunities from which it expects to deliver significant value.  It has a total of seven projects at various stages of development from concept to planning consent which it expects to develop solely for its own account or through NewRiver Retail Investments.  These projects are expected to comprise a total of 480,000 square feet and the NewRiver group is targeting a development surplus in excess of £30 million.  The NewRiver group's ability to achieve development gains is subject to, among other things, the grant of planning approvals, obtaining pre-lets from tenants and its ability to obtain funding for these development projects.

Principal Terms of the Acquisition

On 10 June, 2011, NewRiver, through wholly-owned subsidiaries, entered into the acquisition agreements with Zurich to acquire the Four Retail Properties, subject to the conditions set out below.

The purchase price for the Four Retail Properties is approximately £68 million in aggregate. The Acquisition will be funded in part by a bank facility with the balance being provided from the net proceeds of the Placing.

A deposit of £75,000 in respect of each property has been paid by the NewRiver group. This amounts to an aggregate deposit of £300,000 across the Four Retail Properties, which is not refundable, and will be retained by Zurich should the relevant contract be terminated by NewRiver's failure to satisfy the conditions.

Completion of the acquisition of the Four Retail Properties is conditional upon the following conditions having been satisfied or waived by the relevant NewRiver subsidiary by 5 August 2011:

•      the placing agreement with Cenkos Securities plc remaining in full force and effect, having become unconditional;

•      the passing of the resolutions to be proposed at the Extraordinary General Meeting; and

•      Admission of the Company's enlarged share capital to trading on AIM ("Admission") occurring and the subscription monies for the Placing Shares having been received and the required amount paid to the vendor.

Assuming that the resolutions are passed at the Extraordinary General Meeting, and Admission occurs, it is anticipated that the acquisition of the Four Retail Properties will complete shortly thereafter.

The acquisition of the Four Retail Properties is consistent with NewRiver's investment strategy of targeting food and value retailers occupying large space rental units and providing attractive, annual, cash-on-equity returns and with stable income profiles, low occupational costs and opportunities to add value through asset management and risk controlled development.

The Placing

The Directors are proposing to raise additional capital for the Company by way of a placing of the Placing Shares with institutional and other investors to raise approximately £40 million (net of expenses).

The Placing is conditional on, inter alia, an appropriate new bank facility becoming available for drawdown and on NewRiver's shareholders approving, at the Extraordinary General Meeting, resolutions to approve, among other things, the Acquisition (by ordinary resolution) as a reverse takeover and the disapplication (by special resolution) of the pre-emption rights contained in the Company's articles of incorporation.

The Placing Shares will, following Admission, rank in full for all dividends and pari passu in all other respects with the Company's existing ordinary shares and will have the right to receive all dividends and distributions declared or made in respect of the issued ordinary share capital of the Company after Admission. The Placing Shares will not carry an entitlement to the final dividend for the year ended 31 March 2011 of 4.5p per share to be paid on 20 July 2011.

Mark Davies, a Director of the Company, has committed to subscribe for 4,000 Placing Shares, at the Placing Price, pursuant to the Placing.  Following the Placing, Mark Davies will have an interest in 10,000 ordinary shares, representing approximately 0.03%, of the then issued share capital of the Company.

Application will be made to the London Stock Exchange and to the Daily Official List of the Channel Islands Stock Exchange, LBG ("CISX") for the Company's enlarged share capital to be admitted to trading on AIM and CISX. 

An update on the timing of the events described in this announcement will be provided on the day of posting of the admission document.

Kinmont Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for NewRiver and for no-one else in connection with the matters contained in this announcement and will not be responsible to any person other than NewRiver for providing the protections afforded to clients of Kinmont, nor for providing advice in relation to the matters contained in this announcement.

Cenkos Securities plc, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for NewRiver as Nominated Adviser and Broker and for no-one else in connection with the matters contained in this announcement and will not be responsible to any person other than NewRiver for providing the protections afforded to clients of Cenkos Securities, nor for providing advice in relation to the matters contained in this announcement.

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