Potential Acquisition

RNS Number : 4128K

Wynnstay Group PLC

30 July 2013

 



AIM:WYN

Wynnstay Group plc

("Wynnstay" or the "Group" or the "Company")

Potential Acquisition

Wynnstay, the agricultural supplies and specialist retail group, is pleased to announce that it has entered into a conditional agreement (the "Acquisition Agreement") with Carmarthen and Pumsaint Farmers Limited, which supplies agricultural inputs from seven stores in South West Wales (the "Society"), to purchase all of the Society's business and assets except for its freehold properties (the "Target Assets"). The initial consideration for the Target Assets will be £4.6 million to be paid in cash on completion, with a further two cash payments to be made one month and two months after completion, dependent on the collection by the Company of certain accounts receivables, which are currently estimated to be approximately £2.6m.  The total estimated consideration of £7.2 million reflects the anticipated book value of the Target Assets, which will be subject to final confirmation, and £1 million for the goodwill of the business.

In order for the Society to sell the Target Assets, the Society is required to convert from its current status as an industrial & provident society into a private limited company (the "Newco") (the "Conversion"). The acquisition of the Target Assets (the "Acquisition") is therefore conditional on, inter alia, the Conversion being approved by the ordinary members of the Society. Should the members of the Society approve the Conversion, Wynnstay expects that the Acquisition will complete at the end of September. 

Should the Acquisition reach completion, Wynnstay will assess the cash resources available to it to fund the consideration, and the directors of the Company, may, if it is deemed appropriate in the circumstances and in the best interests of the Company, decide to undertake an equity fundraising to fund all or part of the required consideration.

Target Assets

The Society has traded since 1903 and supplies inputs to the agricultural industry. It is based in South West Wales, where it trades from seven stores at Cardigan, Carmarthen, Crosshands, Haverfordwest, Llandeilo, Llandovery and St Clears. For the year ended 30 September 2012, the Society generated revenues of £23.9 million and a loss before tax of £366,000, excluding an exceptional charge of £502,000. Assuming a normalised level of on-going accounts payables relating to the acquired business, the Company expects total capital employed within the acquired business after completion to amount to approximately £4.8 million inclusive of the goodwill.

Pursuant to the Acquisition Agreement, Wynnstay will acquire the Target Assets which exclude: the freehold properties (at Carmarthen, Crosshands, Haverfordwest, Llandeilo, Llandovery and St Clears); the liabilities to the Society's creditors and the liability to its final salary pension scheme. Following completion of the Acquisition, the Newco will retain the freehold properties and grant leases over them to Wynnstay. It will remain liable to pay its creditors and for the liability to the final salary pension scheme.

Rationale for the Acquisition

Wynnstay operates a network of 32 Country Stores located across Wales, the Welsh Border Counties and beyond, with the majority sited in mid and north Wales. The stores cater principally for farmers but also provide products for the wider rural community. Stores supply an extensive range of goods including animal healthcare products, animal nutrition products, clothing, hardware, gardening and sporting products.

The acquisition of the Target Assets would represent a highly complementary addition to Wynnstay's existing stores network, increasing the Group's presence in South West Wales where it is under represented, and enabling it to extend its products and services to a new farmer and rural dweller customer base. There are also synergies of supply with the Group's feed plant at Carmarthen, which manufactures compound and blended feed products.   

As Wynnstay expands its Country Stores network, it is able to benefit from greater economies of scale, which helps the Group to maintain competitive pricing for products and services. The expansion of Wynnstay's locations around its Carmarthen feed manufacturing plant also bring efficiency benefits for both farming customers and the Company. 

Conditions to the Acquisition

The Acquisition is conditional on, inter alia, the members of the Society approving the Conversion by passing a special resolution at a special general meeting of the Society to be held on 21 August 2013 ("First Meeting")  and passing an ordinary resolution at a second special general meeting of the Society to be held on 11 September 2013 ("Second Meeting"). In order to pass the special resolution at the First Meeting, more than half of the total ordinary members of the Society who are entitled to vote, are required to register a  vote and the resolution must be approved by at least three quarters of those who actually vote (either  in person or by proxy). In order to pass the ordinary resolution at the Second Meeting, a majority of those who vote (either in person or by proxy) must vote in favour of the resolution. Given the high voting threshold for the Conversion, in particular at the First Meeting, there can be no certainty that the Acquisition will be completed.

The Company will make further announcements in relation to the outcomes of the First and Second Meetings and the expected completion date for the Acquisition in due course.

Ken Greetham, Chief Executive of Wynnstay, said,

"The acquisition of the business and assets of Carmarthen and Pumsaint Farmers Limited would be highly complementary, adding seven stores in South West Wales where there is real scope to increase Wynnstay's presence.  As we expand our Country Stores network, which currently stands at 32 outlets, we are able to benefit from economies of scale.  This in turn helps to ensure that we can provide our customers with competitively priced products.  In addition, with our feed mill based at Carmarthen, we can supply local farmers quickly and efficiently.

If successfully completed, the acquisition would mark a positive step for the consolidation within the UK agricultural sector.  I look forward to updating the market further on the progress of these talks."        

Enquiries:

Wynnstay Group plc	Ken Greetham, Chief Executive Paul Roberts, Finance Director	T: 01691 828512
Biddicks	Katie Tzouliadis / Alex Shilov	T: 020 3178 6378
Shore Capital (Nomad)	Stephane Auton / Patrick Castle	T: 020 7408 4090

 

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