Orchard Furniture PLC
16 July 2001
PART 1
16 July 2001
Orchard Furniture plc
Orchard Furniture plc ('Orchard' or 'the Company') to Acquire World Sport
Group Limited and Parallel Media Group International Limited for £65.7 million
(the 'Acquisition')
Highlights
* Orchard Furniture to acquire World Sport Group and Parallel Media Group
International for £65.7 million
* Change of name to World Sport Group plc to reflect new business focus
* Raising £13.54 million through Placing and Open Offer on the Alternative
Investment Market
* Admission to Trading on the Alternative Investment Market
Orchard Furniture plc announces terms have been agreed to acquire The World
Sport Group Limited ('WSG') and Parallel Media Group International Limited
('PMI'), two international sports marketing, media and management companies,
for £65.7 million. The Acquisition, which constitutes a reverse take-over,
would result in a name change to World Sport Group plc.
Investec Henderson Crosthwaite is appointed as the Company's Nominated Adviser
and Broker.
The proposed transaction is structured as the purchase of World Sport Group
(Jersey) Limited ('Newco') for a consideration of approximately £65.7 million,
to be satisfied by the issue of Consideration Shares, 5,268,531 of which will
be placed at 153p per share pursuant to a vendor placing. Newco was formed in
July 2001 to acquire WSG and PMI. In conjunction with the Acquisition, it is
proposed that the Company implements a capital reorganisation pursuant to
which there will be a consolidation of Existing Shares such that, for every
200 Existing Shares they hold, Shareholders will be issued with 1 Ordinary
Share.
The Company proposes to raise approximately £13.54 million (gross) by way of a
Placing and an Open Offer, of which £8.06 million (gross) will be paid to the
Principal Vendors under the Acquisition Agreement. The remaining £3.58 million
(net of expenses) will be used to contribute to the ongoing working capital
requirements of the Enlarged Group. The Placing and Open Offer has been fully
underwritten by Investec.
The merging of 'WSG' and 'PMI' to form World Sport Group plc will create a
leading international sports media, marketing and management company with long
term ownership of several key professional sports rights in the growing Asian
marketplace. Content and the control of media rights are the key drivers in
the sports rights sector and the Enlarged Group has established a strong base
of sports assets. In addition, the Enlarged Group has established close
contacts and relationships with a number of multinational corporations which
provide sponsorship and advertising.
The Enlarged Group will hold the commercial rights for a number of sports in
the Asian marketplace, namely; the Asian PGA Tour, the Asia and Oceania
Football Confederations and the Asian Basketball Confederation.
Other sports properties include the commercial and broadcasting rights to the
ICC's international cricket tournaments (held jointly with News Corporation to
2007) and which include the 2003 and 2007 World Cups. The Enlarged Group also
has commercial partnerships with the Italian Rugby Federation, the Ladies
European Tour, the Tour de Las Americas and the PGA Tour of Australasia.
The Enlarged Group will be the provider of weekend executive sports
programming for the CNBC channels in Asia and Europe.
The Company will be led by a team of senior, respected, industry figures.
David Ciclitira and Seamus O'Brien will become Chairman and Chief Executive
respectively.
Richard Armstrong, Director of Orchard Furniture plc, commented:
'I believe this transaction is great news for our shareholders. We have been
looking for some time for the right acquisition opportunity for Orchard. This
will deliver a business with great potential, run by an experienced and proven
management team. I am looking forward to an exciting future for the business
and shareholders alike.'
David Ciclitira, Proposed Chairman of the renamed World Sport Group,
commented:
'These two businesses hold a powerful position in the rapidly growing
Asian-focused sports market, supported both by the growth in broadcasting
networks in the area and by growing government investment in the region.
'Parallel and World Sport Group have been working together for some years now
and together provide an excellent strategic fit in terms of assets, management
and geographical spread. This merger and the reverse into a cash shell will
provide funds, plus potential access to further capital, which will allow us
to grow the enlarged business and give us opportunities for further
exploitation of our integrated media sales business.'
Seamus O'Brien, Proposed Chief Executive of the renamed World Sport Group,
commented:
'We have been looking for the right opportunity to build the business together
with our various sporting partners. This reverse into Orchard and the merger
with PMI will provide us with an enhanced platform to develop our asset base
and grow the international business in this emerging sector.'
For further information, please contact:
Orchard Furniture plc/ Fiske plc Richard Armstrong 020 7448 4700
Investec Henderson Crosthwaite Jagjit Mundi 020 7597 5970
Bell Pottinger Jonathon Brill 020 7427 7209
Wendy Timmons 020 7427 7211
Acquisition of World Sport Group (Jersey) Limited
and change of name to World Sport Group plc
Placing and Open Offer of 8,847,772 New Ordinary Shares at 153p per share
Capital reorganisation
Admission to trading on the Alternative Investment Market
Appointment of Investec Henderson Crosthwaite as
Nominated Adviser and Broker
Introduction
On 22 June 2001, it was announced that Orchard had entered into negotiations
to acquire The World Sport Group Limited ('WSG') and Parallel Media Group
International Limited ('PMI'), both of which are international sports
marketing, media and management companies. The Board is now pleased to
announce that these negotiations have been successfully concluded and that the
terms of the Acquisition have been agreed. The proposed transaction is
structured as the purchase of Newco for a consideration of approximately £65.7
million, to be satisfied by the issue of the Consideration Shares, 5,268,531
of which will be placed at 153p per share pursuant to a vendor placing. Newco
was formed in July 2001 to acquire WSG and PMI. In conjunction with the
Acquisition, it is proposed that the Company implement a capital
reorganisation pursuant to which there will be a consolidation of Existing
Shares such that, for every 200 Existing Shares they hold, Shareholders will
be issued with 1 Ordinary Share.
The Company proposes to raise approximately £13.54 million (approximately £
11.64 million net of expenses) by way of a Placing and Open Offer, of which £
8.06 million gross will be paid to the Principal Vendors under the Acquisition
Agreement. The remaining £3.58 million (net of expenses) will initially be
placed on deposit and will be used to contribute to the ongoing working
capital requirements of the Enlarged Group. The Placing and Open Offer has
been fully underwritten by Investec. The Placing Shares will represent
approximately 15.44 per cent. of the issued ordinary share capital of the
Enlarged Group on Admission, and will rank pari passu in all respects with the
Ordinary Shares.
Immediately following the Proposals (and assuming full take up under the Open
Offer), existing Shareholders of Orchard will hold, in aggregate,
approximately 24.76 per cent. of the Enlarged Group.
In view of Newco's size in relation to Orchard, the Acquisition (which
constitutes a reverse takeover) requires the approval of Shareholders, and an
Extraordinary General Meeting of the Company is being convened for this
purpose on 10 August 2001. Shareholders will also be asked, amongst other
things, to approve the change of name of the Company from Orchard Furniture
plc to World Sport Group plc and to grant the appropriate authorities required
to effect the Placing and Open Offer. If the Resolutions are passed by
Shareholders, it is expected that Admission will take place and that trading
in the Ordinary Shares and the New Ordinary Shares will commence on 15 August
2001. On the basis of this announcement, the London Stock Exchange has agreed
to lift the suspension on trading in the Existing Shares put in place on 22
June 2001. Accordingly, trading will recommence in the existing shares
tomorrow, 17 July 2001.
BACKGROUND TO THE PROPOSALS
In late Spring 1999, the then board of Orchard considered that the
re-financing completed in January 1999 had failed to stabilise Orchard's
finances and that its bankers were not prepared to provide further support. As
a result, the then board considered that there was no option but to sell the
trading assets of the Company. These were duly disposed of in June 1999 and
the Company's subsidiaries were put into liquidation. The cash raised from the
disposals was used to repay bank borrowings which had been secured against
those assets, as well as other indebtedness. This left the Company with no
assets, no income and substantial liabilities to creditors.
In December 1999, proposals were put to Shareholders and creditors to agree a
Company Voluntary Arrangement and these were duly approved at a meeting of the
Company's creditors and its shareholders on 10 January 2000. The CVA provided
the mechanism to enable the Company to satisfy its historic liabilities and,
following approval of the CVA, the Company was able to raise £1.1 million of
new equity capital and to be readmitted to AIM as a shell company. Since that
time it has been the stated objective of Orchard's management to identify
suitable investments or acquisitions with a view to enhancing shareholder
value. To facilitate the funding of any such potential investments or
acquisitions, Orchard subsequently raised an additional £14.3 million before
expenses by way of placings and an open offer, taking its cash balances to in
excess of £15 million. The supervisor appointed to administer the CVA has, in
accordance with Rule 1.29 of the Insolvency Rules 1986, notified the Company's
creditors and its shareholders that the CVA has been fully implemented.
The Board has considered a number of possible acquisitions over the last 18
months. On 22 June 2001, the Board announced that it had entered into
negotiations with the boards of WSG and PMI regarding the acquisition of those
companies and their subsidiaries. The terms of the Acquisition have now been
agreed and the Board believes that the Group as enlarged by the Acquisition
offers attractive prospects for Shareholders. The Board believes that the
considerable sports rights acquired by the WSG Group, the extensive experience
the PMI Group has in the marketing and distribution of sports programming, the
potential synergies between the two businesses and the experience of the
Proposed Directors provide a substantial base from which to develop a
successful business.
Background Information on WSG
The WSG Group is an international sports marketing, media and management
organisation which was originally established in 1992 to develop the
commercial rights for Asian football. WSG's principal activity is to acquire
commercial and media rights to sports events from their regional governing
bodies. These rights are then sold to corporations in the form of sponsorship
and marketing programmes as well as to media broadcasters in the television,
radio, internet and publishing sectors. Revenues are generated from television
sales, sponsorship and event management. WSG is currently active in cricket,
football, golf, basketball and snooker.
Since commencing operations in Asia, WSG has established an international
asset base and has extended its activities into the Oceania region, Europe and
the Americas. WSG employs over 200 people and stages more than 50 events in 25
countries per year. The international businesses of WSG are currently
organised on a regional basis by sport and/or activity.
Asia:
Football: WSG originally acquired the commercial and media rights to
Asian Football in 1993 for a four year period from the Asian Football
Confederation ('AFC'), the regional governing body for football in Asia.
Subsequently it has successfully negotiated to acquire these rights for two
further four-year terms covering 1997-2001 and 2001-2005. It also has a fixed
option to acquire them for a further four years from 2005-2009 in addition to
the matching rights from 2009-2013. These rights generate the most significant
proportion of WSG's revenues.
Golf: WSG co-developed the concept of an Asian professional golfers'
tour in the 1990s. It now has a long-term contract with the Asian PGA Tour
which runs to 2025, and gives WSG the right to exploit all commercial and
media rights to golf events sanctioned by the Asian PGA. The Tour has
attracted participation from a range of prominent corporate sponsors including
Alcatel, Caltex, Carlsberg, Omega, and Volvo. The Proposed Board expects Asian
golf to be a source of significant revenue in the future.
Basketball: In 1994, WSG signed a four-year contract with the Asian
Basketball Association ('ABC') to develop a marketing programme for basketball
in the region, giving WSG the commercial rights to all events sanctioned by
the ABC. Basketball has contributed less revenue to WSG than either of
football or golf. The Proposed Board believes, however, that it has growth
potential through its appeal to the youth demographic and its popularity in
China.
Cricket: WSG entered into a joint venture with an Indian sports and
marketing company, Nimbus Communications, to manage and distribute cricket
rights in India, Sri Lanka and other parts of East Asia. This joint venture
also manages the WSG Group's cricket business globally.
All television production and sales activities in Asia are centralised through
Asia Sport Television Limited ('ASTV'), a subsidiary of WSG. ASTV earns
commission from the sale of television rights from other WSG subsidiaries and
earns revenue from the production and sale of magazine style sports
programmes.
Oceania:
WSG has entered into arrangements whereby it manages the commercial and media
rights to the Oceania Football Confederation and the commercial aspects of the
PGA Tour of Australasia. It is the sales and marketing representative for the
Australian Olympic Committee, the PGA Tour of Australasia, Swimming Australia
and a number of other sporting associations in Australia, and provides public
relations and marketing services to a number of companies and sports bodies in
Australia.
Europe:
In Europe, the WSG Group manages events on behalf of the World Professional
Billiards and Snooker Association and manages the commercial and media rights
to the Ladies European Professional Golfers' Association Tour. WSG also stages
Football Expo, a football trade show endorsed by FIFA.
ICC Cricket: WSG, together with News Corporation, owns the commercial and
media rights to ICC sanctioned cricket events for the next seven years. The
minimum guarantee for the acquisition of these rights was $550 million, which
was underwritten by News Corporation. The ICC tournaments within the contract,
for the next seven years, include the ICC Cricket World Cups in South Africa
(2003) and the West Indies (2007), the ICC Knockout tournaments (in 2000,
2002, 2004 and 2006), the ICC Trophy tournaments (in 2001 and 2005) and the
ICC Youth World Cups (in 2002, 2004 and 2006). The business is run through a
joint-venture vehicle co-owned by News Corporation, WSG and Nimbus
Communications.
The Americas:
The WSG Group also runs an operation in the Americas where it has invested in
the Tour de las Americas, the South America regional professional golfers'
tour.
The Proposed Board believes the competitive strengths of WSG include:
* A strong base of sports rights assets, principally focused on the
growing Asian market, but exploitable on a global basis
* An experienced management team
* Strong existing relationships with sports bodies, television broadcast
companies and large multinational companies that purchase broadcast rights
and sponsorship packages.
Financial Record of WSG
Set out below is a summary of the financial record of WSG for the three
financial years ended 31 December 2000.
Year ended 31 Year ended 31 Year ended 31
December 1998 December 1999 December 2000
$'000 $'000 $'000
Turnover 33,795 32,548 40,402
Operating (loss)/ (891) 419 (999)
profit
Loss before (1,712) (929) (5,267)
taxation
Net liabilities (9,383) (10,344) (15,508)
The table above illustrates that, over the last three years, WSG has incurred
losses. This was principally as a result of the reinvestment of its profits
arising from the football and television businesses into expanding its
international operations outside the Asian region and developing an office
infrastructure to support this. In expanding its international operations, WSG
has entered into new business relationships, primarily in the form of joint
venture companies with sports bodies including the PGA Tour of Australasia in
1998, the Ladies European Tour in 1999 and the Tour de las Americas in 2000.
These companies have historically not been profitable in their early
operations.
The loss before taxation in the financial year ended 31 December 2000 also
includes WSG's share of losses from its internet start-up, Sportal Asia, and
its new ICC cricket venture, Global Cricket Corporation ('GCC'), the equity
joint venture partnership with News Corporation and Nimbus Communications.
WSG's share of losses from these two ventures makes up the majority of the
share of losses of associates, being approximately US$3.2 million. For GCC
this loss primarily related to the ICC Knockout tournament which took place in
Kenya almost immediately after signature of the ICC master rights contract,
giving GCC little time to on sell the broadcast and sponsorship rights. In
addition the 2000 operating loss includes a one-off charge of US$1.6 million
in relation to the settlement of a dispute with a broadcaster prior to the
issue of this announcement.
The WSG directors believe that WSG's portfolio of assets is maturing. As a
result, the financial statements set out above do not reflect the WSG
directors' expectations of the company's potential.
Background Information on PMI
The PMI Group is an international sports media, marketing and management
company founded in 1987. The current principal activity of the PMI Group is
the supply of CNBC Sports branded programming on the CNBC business news
channels in Europe and Asia (the 'CNBC Channels') through its subsidiary
Parallel Television. In addition, the PMI Group is, or has been, involved in
promotion, marketing, management and/or programme supply in relation to sports
events including golf, tennis, sailing, skiing, rugby and equestrian and motor
sports.
Television Programme Supply:
Parallel Television is the provider of the CNBC Sports strand of executive
sports programming (i.e. golf, tennis, sailing, skiing) to the operators of
the CNBC Channels in Asia and Europe, and supplies 12 hours of executive
sports programming (primarily featuring professional golf) for broadcast on
the two channels each weekend. Parallel Television's revenues are generated by
the sale of advertising and sponsorship opportunities in connection with the
supplied programming. Over the past two years the company has raised
advertising and sponsorship revenues from a range of corporations, including
Carlsberg, Credit Suisse, FedEx, Jaguar, MasterCard, Rolex and Volkswagen.
Parallel Television currently has programme content arrangements for the
acquisition of live, as-live, delayed or highlights coverage of events with
the US PGA Tour, the PGA European Tour, the Asian PGA Tour, the PGA Tour of
Australasia, the Augusta National and the ATP Senior Tennis Tour.
Events:
The PMI Group has entered into arrangements with the various PGA golf tours to
promote specific events, and it remains PMl's strategic objective to build
marketing and promotional alliances with the 6 professional golf tours that
make up the International Federation of PGA Tours. Revenues from such
arrangements are generated by the sale of on-the-ground sponsorship
opportunities at the events (including hospitality, signage and other such
rights) as well as from the sale of broadcast rights to such events to various
television companies worldwide.
The PMI Group is the exclusive worldwide commercial agent of the Italian Rugby
Federation whereby PMI is responsible for the development and implementation
of a sponsorship and marketing programme for the Italian national rugby team
and has recently established an office in Rome to expand its operations in
Italy. The PMI Group also has a commercial presence in British Formula Three
racing.
PMI has recently consolidated and expanded its sales team by establishing an
international sponsorship and sales house headed by Robert Bland (formerly
sales director at News Corporation's STAR TV), the proposed Sales and
Marketing Director for the Enlarged Group.
The Proposed Board believes the competitive strengths of PMI include:
* Significant distribution opportunities through its programme supply
arrangements, offering television exposure to sports bodies and event
organisers
* An experienced management team
* 15 year record in event management, sponsorship and media sales, with a
strong focus on executive sports.
Financial Record of PMI
Set out below is a summary of the financial record of PMI for the three
financial years ended 31 December 2000.
Year ended 31 Year ended 31 Year ended 31
December December December
1998 1999 2000
£'000 £'000 £'000
Turnover 6,299 7,732 4,744
Operating loss before
exceptional item
(2,286) (3,178) (1,179)
Exceptional item - (1,201) (2,765)
Loss before taxation
(1,486) (3,984) (3,577)
Net assets 14,971 10,971 7,375
The table above illustrates the losses before taxation incurred by PMI for the
three years ended 31 December 2000. For the year ended 31 December 1998,
restructuring costs relating to Nomura's investment and the Parallel
Television set-up costs impacted on PMI's result. For the year ended 31
December 1999, the loss of £3.9 million includes an exceptional item of £1.2
million, of which £1.05 million was an uncollectable debt due from an
internet-based advertiser. For the year ended 31 December 2000, the reduction
in turnover reflected the fact that the business of PMI changed from event
management to the promotion of events managed by third parties, principally
WSG. As a result, event profits rather than the share of total event
sponsorship revenue and costs were recorded in the accounts. Furthermore, the
£3.5 million loss included an exceptional item of approximately £2.8 million,
which represents a provision against the value of shares held in Sportal
International Limited. The value of these shares was considered to be
negligible and provision was therefore made to write them down to zero.
The PMI directors refocused the business in December 1998 to concentrate
principally on the supply of sports programming, advertising and sponsorship
sales. They have been building the business since that time and believe that
the past performance does not reflect the potential of the current business.
Terms of the Acquisition
Pursuant to the WSG Acquisition Agreement and the PMI Acquisition Agreement,
the holders of the WSG Ordinary Shares and PMI Ordinary Shares have
respectively agreed to sell such shares in exchange for Newco Ordinary Shares
(such shares to be held by nominees of the above holders). In addition, the
holders of the WSG Ordinary Shares and PMI Ordinary Shares have, pursuant to
the Acquisition Agreement, each agreed to sell or procure the sale of the
Newco Ordinary Shares as so acquired to the Company in exchange for
Consideration Shares.
The acquisition of Newco by the Company is for a consideration of
approximately £65.7 million which shall be satisfied by issuing to the Vendors
37,682,361 Consideration Shares and by allotting 5,268,531 Consideration
Shares to persons nominated by Investec pursuant to the Firm Placing, with the
gross proceeds of £8.06 million payable to the Principal Vendors. In addition,
536,887 of these Consideration Shares otherwise to be issued to Park House
will be allotted and issued to certain key employees of the WSG Group as
nominated by Park House.
Park House, Walbrook, and Luna Trading have agreed in the Acquisition
Agreement, that if any one of them wishes to sell all or any of its
Consideration Shares, it will first offer to sell such shares to the others.
If terms of sale have been agreed between the proposed seller and a third
party, the rights of pre-emption will allow the other parties above the
opportunity to match those terms and acquire such shares. The Company is not
subject to any obligations in connection with these pre-emption arrangements.
Reasons for the Acquisition
The Board has been looking for an acquisition that would provide an
opportunity for Shareholders to achieve enhancement to the value of their
investment in Orchard. The Directors believe that the acquisition of Newco
provides such an opportunity. Since 1993, the WSG Group has successfully
acquired, managed and sold the commercial and media rights for a number of
premier sports events in Asia relating to football, golf and basketball. In
addition, WSG, together with News Corporation, has acquired from the
International Cricket Council ('ICC') the global rights to the ICC's cricket
events for the next six years, including the rights to the 2003 and 2007 ICC
Cricket World Cups. The WSG Group has extensive expertise in event management
and television programming and has been broadening its focus into other
international markets. PMI has extensive knowledge of the sports broadcasting
market (through its supply of CNBC Sports branded programming on the CNBC
business news channels in Europe and Asia) and the marketing and distribution
of sports programming. PMI has also developed strong sponsorship and
advertising relationships with multinational companies over a number of years.
The Board believes that the strategic fit between WSG and PMI will be a
critical element in the success of the Enlarged Group. The joined entity will
combine extensive sports rights on the one hand with strong distribution and
sales capabilities on the other. As independent entities, WSG and PMI have
worked together on a number of events over the last two years and the
potential synergies between the respective businesses has prompted the two
companies to work towards a merger for the past 12 months. The Board believes
it will be able to enhance the profitability of WSG and PMI through leveraging
their respective strengths within the Enlarged Group.
The Board believes that the most compelling rationale for the Acquisition lies
in the Enlarged Group's exposure to the dynamic sports rights sector,
particularly in the growing Asian sports market.
The Proposed Directors believe that admission to AIM will provide the Enlarged
Group with greater visibility and enhanced brand recognition. In addition, the
Proposed Directors believe that the creation of a strengthened balance sheet
provided by the cash resources of Orchard will enhance the Enlarged Group's
ability to negotiate long-term contracts with major international sports
bodies and corporate sponsors.
It is expected that an AIM quotation will also provide the Enlarged Group with
potential access to further capital through the issue of shares, and provide
the means to make acquisitions, should suitable opportunities arise.
Finally, the Proposed Directors believe that an AIM quotation will allow the
Enlarged Group to more easily attract and retain additional personnel of the
quality it requires to fulfil its strategic ambitions.
The Proposed Board & SERVICE CONTRACTS OF THE PROPOSED DIRECTORS
The Board currently comprises Arthur Lawson-Cruttenden, Richard Armstrong and
Mark Wilsher. Arthur Lawson-Cruttenden and Mark Wilsher have agreed to resign
as Directors conditional on Admission. Following Admission, the Board will
comprise:
- David Ciclitira (aged 44) (Executive Chairman)
David founded PMG in 1987 the forerunner to PMI, (to which PMG transferred its
business in 1997) and is currently the Chairman of PMI. Prior to this, he
founded Satellite Television Plc (later renamed Sky Channel) ('Sky') in 1982.
In 1983 he was responsible for the sale of the majority of Sky to News Corp
and subsequently remained with Sky as its Deputy Managing Director until 1986
when he left to set up PMI. David is a qualified barrister at law.
- Seamus O'Brien (aged 37) (Chief Executive)
In 1992 Seamus founded the company that evolved into WSG and he is currently
its Chairman and Chief Executive. Prior to this he worked for many years at
CSI (now Octagon CSI), a television sports rights broker, where he was the
board director responsible for the global television sales strategy of a
number of their leading sports properties. These included the FA Premier
League and Serie A football. Seamus also managed the relationships with sports
governing bodies such as major rugby union and cricket boards. Having moved to
Hong Kong to set up CSI's Asian operations he then formed AML to take
advantage of an opportunity to work with the Asian Football Confederation. He
teamed up with Tony Morgan in late 1993 and the business was restructured to
become WSG in 1995.
- Tony Morgan (aged 44) (Finance Director)
Tony is a qualified Chartered Accountant, having worked for 10 years at Price
Waterhouse in London and Hong Kong where he was the manager responsible for
work on a number of major corporate acquisitions. Thereafter he started his
own corporate finance business in Hong Kong which he closed down in 1993 in
order to devote his time exclusively to WSG. He is now WSG's Managing
Director, responsible for corporate strategy and the day to day management of
the business.
- Robert Bland (aged 53) (Sales and Marketing Director)
Robert is currently the Managing Director of PMI with responsibility for
advertising sales and strategy. Prior to this, he was Managing Director of
TV10 BV Netherlands, a Fox Entertainment channel, and was Director of Sales at
STAR TV, both News Corp companies. Robert founded Eurosales, the sales
representation company for Eurosport, in 1990.
- Ian Frykberg (aged 55) (Non-executive Director)
Ian is a former Head of Sports for the Nine Network in Australia and Head of
News & Sport for British Sky Broadcasting in London. He has negotiated some of
the largest television sports rights contracts outside of the US, including
SANZAR (rugby), the ICC Cricket World Cups, Premier League (football), the
Rugby Football Union (rugby) and the Australian Football League (Australian
rules football). Ian is currently Managing Director of International Sports
Television Pty Ltd and Senior Vice-President in charge of sports and events,
for Sky Global Holdings, Inc.
- Jonathan Crisp (aged 53) (Non-executive Director)
Jonathan has many years' experience in the sport and leisure sector. In 1973
he established Marketing Solutions Limited (MSL), a marketing and
communications consultancy. He remained the Chairman and principal shareholder
throughout the development of the business, until its ultimate sale in 1985.
MSL's client base included the Professional Footballers' Association, Ipswich
Town and Leeds United Football Clubs. He subsequently formed Licensing
Solutions and Dragon Inns and Taverns, both chains of themed pubs and
restaurants. Jonathan is currently a director of the PGA Tour of Australasia.
- Ronald Littleboy (aged 50) (Non-executive Director)
Ron is a senior banker with Nomura, having started as a research analyst. He
has specialised in the media and leisure sectors for the last 26 years and has
advised numerous companies in these sectors on strategy, and mergers and
acquisitions. He has also advised Nomura's principal finance group on
investments in the UK. For the avoidance of doubt, Ron will be acting as a
Proposed Director in his personal capacity and not as a representative of
Nomura.
- Richard Armstrong (aged 53) (Non-executive Director)
Richard has many years' experience in the City both as a research analyst and
corporate broker. He is currently an associate of Fiske plc, where he
specialises in raising money for smaller public companies. He orchestrated the
refinancing of Orchard and has had prime responsibility for identifying and
implementing its acquisition strategy.
The Proposed Directors have been appointed on the following terms:
(i) On Admission Richard Armstrong shall enter into a new letter of
appointment as a non-executive director of the Company for an annual fee of £
20,000. The appointment will be for an initial period of one year and
thereafter until terminated by 3 months' prior written notice from either
party.
(ii) Elysian Group Plc has entered into a consultancy agreement with the
Company, conditional upon Admission, to provide David Ciclitira's services to
the Company to act as Executive Chairman. Under the agreement, the Company
pays Elysian Group Plc a consultancy fee of £240,000 per annum, plus
additional service related fees to be determined by the Board's remuneration
committee. The agreement also contains covenants restricting David Ciclitira
from being involved in a competing business, dealing with customers and
prospective customers and employing or soliciting key persons following
termination of the agreement. The agreement is terminable on 12 months'
written notice by either party, such notice not to expire before 31 December
2002. Elysian Group Plc and David Ciclitira warrant that David Ciclitira's
previous consultancy agreements with PMI or PMI Group will terminate on the
date on which this new consultancy agreement comes into effect.
(iii) Seamus O'Brien has entered into a service contract with the Company,
conditional upon Admission, which provides for him to act as Group Chief
Executive of the Company. The remuneration payable comprises a basic salary of
£200,000, and a performance related bonus to be determined by the Board's
remuneration committee. The Company also makes pension contributions, and
agrees to provide private medical insurance, permanent health insurance and
such other insurance benefits as the Board's remuneration committee may
decide, the total cost of such benefits not to exceed 20 per cent. of the
annual basic salary. In addition, the contract contains covenants restricting
Seamus O'Brien from being involved in a competing business, dealing with
customers and prospective customers and employing or soliciting key persons
following termination of the agreement. The contract is terminable on 12
months' written notice by either party, such notice to expire before 31
December 2002. Seamus O'Brien warrants that any previous employment or
consultancy agreement with WSG or WSG Group will terminate prior to Admission.
(iv) Tony Morgan has entered into a service contract with the Company,
conditional upon Admission, which provides for him to act as Group Finance
Director of the Company. Otherwise the contract is on materially the same
terms as Seamus O'Brien's contract. Tony Morgan warrants that any previous
employment or consultancy agreements with WSG or WSG Group will terminate
prior to Admission.
(v) Robert Bland entered into a service contract with the Company, conditional
upon Admission which provides for him to act as Group Sales and Marketing
Director of the Company, or in such other role as the Company may require.
Otherwise the contract is on materially the same terms as Seamus O'Brien's
contract. Robert Bland warrants that any previous employment or consultancy
agreement with PMI or PMI Group will terminate prior to Admission.
(vi) On 16 July the Board resolved to appoint Ronald Littleboy as a
non-executive director of the Company for an annual fee of £25,000 conditional
upon Admission. The appointment is for an initial period of one year and
thereafter until terminated by 3 months prior written notice from either
party.
(vii) On 16 July the Board resolved to appoint Ian Frykberg as a non-executive
director of the Company for an annual fee of £25,000 conditional upon
Admission. The appointment is for an initial period of one year and thereafter
until terminated by 3 months prior written notice from either party.
(viii) On 16 July the Board resolved to appoint Jonathan Crisp as a
non-executive director of the Company for an annual fee of £20,000 conditional
upon Admission. The appointment is for an initial period of one year and
thereafter until terminated by 3 months prior written notice from either
party.
Strategy and organisation of the Enlarged Group
The Proposed Directors intend that the Enlarged Group will become a leading
international sports marketing company. In order to achieve this, the Proposed
Directors will seek to draw upon the Enlarged Group's combined management
expertise, existing reputation and strong sports body and multinational
corporate relationships to further develop and expand its portfolio of
sporting properties.
The Proposed Directors intend that the Enlarged Group will be organised into
business units headed by the executive directors of the Proposed Board:
* David Ciclitira will oversee business development and future
acquisitions, seeking commercial opportunities arising either from the
Enlarged Group's existing relationships or from new business.
* Seamus O'Brien will be responsible for the Enlarged Group's trading
operations whilst at the same time looking to strengthen its relationships
with sports bodies.
* Robert Bland will integrate the sales teams to enable the Enlarged Group
to have a fully integrated media, sales and marketing platform that can
provide a 'one-stop shop' for clients.
* Tony Morgan will manage the integration of the Enlarged Group's
infrastructure with particular focus upon operational efficiencies and
associated cost benefits arising therefrom.
Capital reorganisation
At the date of this announcement the Company has in issue 2,147,544,645
Existing Shares and 25,295,753 Deferred Shares. The Board has decided to
propose a consolidation of the Existing Shares on the basis of one Ordinary
Share for every 200 Existing Shares with effect from Admission. The proposed
consolidation is conditional upon Shareholders' approval being obtained at the
EGM. In accordance with the Company's articles of association, fractional
entitlements of shares remaining on the consolidation will be aggregated and
sold for the benefit of the Company as it is uneconomic to send large numbers
of cheques for very small amounts to Shareholders. Shareholders will also be
asked to amend the Memorandum (to ensure that its objects, inter alia, reflect
the businesses of the companies being acquired pursuant to the Acquisition)
and to adopt the New Articles (to reflect, inter alia, changes to current law
and practice for public companies).
The Deferred Shares (which have no rights as to dividend, limited rights on a
return of capital and no rights to vote at or attend general meetings of the
Company) are in the process of being redeemed by the Company for an aggregate
price of 1 penny for cancellation in accordance with the Company's articles of
association.
The amendment of the Memorandum and the adoption of the New Articles will take
effect, subject to Shareholder approval at the EGM, at the time of the EGM.
The Reorganisation will take effect, subject amongst other things to
Shareholder approval at the EGM, upon Admission.
The Company has notified the Warrantholder of the Reorganisation as it
constitutes an adjustment event under the terms of the Warrant Instrument. The
Company's Reporting Accountants, BDO Stoy Hayward, have certified that in
respect of every Warrant to subscribe for 200 Existing Shares, the
Warrantholder shall, following adjustment, have a warrant to subscribe for 1
Ordinary Share at a subscription price of £8.00.
Change of accounting reference date
The Company will report its results for the twelve months to 30 June 2001.
Following completion of the Proposals, it is proposed to change the Company's
accounting reference date to 31 December, the current accounting reference
date of WSG and PMI. The first accounting period in respect of which audited
accounts will be produced for the Enlarged Group will be for the period ending
31 December 2001.
Details of the Placing and Open Offer
General
The Company is proposing to raise approximately £13.54 million (approximately
£11.64 million net of expenses) through the Placing and Open Offer, which have
been fully underwritten by Investec.
The Placing Shares will represent, in aggregate, approximately 15.44 per cent.
of the enlarged issued ordinary share capital on Admission. The Placing Shares
will be issued credited as fully paid and will rank in full for all dividends
and distributions declared, paid or made on the Ordinary Shares after their
issue and otherwise pari passu in all respects with the Ordinary Shares
arising on the consolidation of the Existing Shares.
The Placing and Open Offer are conditional, inter alia, upon:
(a) the passing of the Resolutions;
(b) the Acquisition Agreement becoming unconditional subject only to
Admission, and not having been terminated prior to Admission;
(c) the Placing Agreement becoming unconditional and not having been
terminated in accordance with its terms; and
(d) Admission.
The Firm Placing
5,268,531 Consideration Shares (representing approximately 59.55 per cent. of
the Placing Shares) have been placed firm by Investec Henderson Crosthwaite at
the Issue Price. In addition, Richard Armstrong, who holds 82,715,334 Existing
Shares, representing approximately 3.85 per cent. of the Company's existing
issued ordinary share capital, has undertaken to the Company and Investec not
to take up his entitlement under the Open Offer in respect of 137,858 Open
Offer Shares. This entitlement has also been placed firm. The Firm Placed
Shares are not subject to clawback under the Open Offer. The Company shall
procure that Investec Henderson Crosthwaite shall account to the Principal
Vendors for approximately £8.06 million of the proceeds of the Firm Placing
(less commission and expenses) pursuant to the terms of the Acquisition
Agreement and the Company shall retain the balance, being approximately £5.48
million (approximately £3.58 million net of expenses). The Principal Vendors
are NSA, Luna Trading and Nomura. Details of the Principal Vendors'
shareholdings in the Enlarged Group after the Placing are given below:
Gross funds received pursuant to the On % of Enlarged
Placing Admission Group
NSA £4.96m - -
Luna £1.10m 902,238 1.58
Trading
Nomura £2.00m 2,773,375 4.84
Luna Trading is wholly owned by a discretionary trust, The Tokyo Settlement,
of which David Ciclitira is a potential beneficiary.
Application has been made for the Ordinary Shares and New Ordinary Shares to
be admitted to trading on AIM.
The Open Offer
Investec Henderson Crosthwaite, as agent for the Company, has agreed to
conditionally place the Open Offer Shares at the Issue Price subject to
clawback (save in the case of those Open Offer Shares in respect of which
irrevocable undertakings not to take up entitlements have been received) to
satisfy valid applications by Qualifying Shareholders pursuant to the Open
Offer.
Qualifying Shareholders are invited by Investec Henderson Crosthwaite, as
agent for the Company, to subscribe under the Open Offer for the Open Offer
Shares at the Issue Price and free of expenses, on the basis of
1 Open Offer Share for every 600 Existing Shares
held on the Record Date and so in proportion for any greater or smaller number
of Existing Shares then held. The amount due in respect of each application
for Open Offer Shares is payable in full on application. Entitlements to Open
Offer Shares will be rounded down to the nearest whole share. Fractional
entitlements will not be allotted and will be aggregated and placed for the
benefit of the Company. Qualifying Shareholders may apply for any number of
Open Offer Shares at the Issue Price. However, in the event that an
application is received from any Qualifying Shareholder for Open Offer Shares
in excess of his entitlement, it may be scaled down in such manner as the
Directors shall, in their absolute discretion, determine. Excess allocations
will only be possible to the extent that other Qualifying Shareholders do not
apply for their full entitlement under the Open Offer. Any Open Offer Shares
not taken up under the Open Offer will be subscribed for pursuant to the terms
of the Placing. The Open Offer will close at 3.00 p.m. on 8 August 2001.
Lock-up arrangements
The Proposed Directors, Walbrook, Park House and Luna Trading have entered
into lock-up arrangements in respect of all of their respective shareholdings
in the Enlarged Group which, immediately following Admission, will represent
approximately 49.67 per cent. of the total number of Ordinary Shares in issue.
For the avoidance of doubt, this does not include the Placing Shares.
Subject to the Model Code (where relevant) and applicable law, the lock-up
arrangements prevent any sale or disposal of New Ordinary Shares by the
Proposed Directors, Walbrook, Park House and Luna Trading without the prior
consent of Investec Henderson Crosthwaite or other such nominated broker of
the Company from time to time, except in certain limited circumstances
(including in the event of a general offer made to shareholders, in which
circumstances they will be entitled to accept such an offer or give
irrevocable undertakings to accept such an offer), for the first 12 months
after Admission, after which time a maximum of one half of each such
shareholder's holding of New Ordinary Shares may be sold during the second 12
months after Admission. The remainder of each such shareholder's holding may
be sold 24 months after Admission. The lock-up arrangements are contained
within the Placing Agreement and in separate undertakings.
In addition, Nomura and News Cayman Holdings Limited have also undertaken not
to sell any of their shareholdings, except in limited circumstances (including
in the event of a general offer made to shareholders, in which circumstances
they will be entitled to accept such an offer or give irrevocable undertakings
to accept such an offer), without the prior consent of Investec Henderson
Crosthwaite for a period of 6 and 12 months following Admission respectively.
Management incentivisation and share option schemes
Subject to Shareholder approval at the EGM, the Enlarged Group intends to
establish the New Share Option Scheme. The Directors and the Proposed
Directors believe that this will enable the Enlarged Group to motivate and
retain key personnel and to provide continuing incentives to contribute to the
Enlarged Group's success.
Change of name
To reflect the change in the Company's business following Completion, a
special resolution is being proposed at the EGM to change the name of the
Company to World Sport Group plc following Admission.
Dividend Policy
It is expected that any cash generated by the Enlarged Group's operations in
the short to medium term will be devoted to funding the Enlarged Group's
planned expansion. Accordingly, the Directors and the Proposed Directors do
not expect that the Enlarged Group will declare a dividend in the early years
of its development. The Proposed Board will continue to review the
appropriateness of its dividend policy as the Enlarged Group develops.
Current trading and prospects
WSG
In the first five months of the year WSG has been performing in line with its
directors' expectations. In Asia, AML is working through the last six months
of a four yearly cycle to June 2001 for which revenues were pre-contracted
under long term contracts. There is interest in sponsoring the forthcoming
four yearly cycle which commences in July as the August/September FIFA World
Cup 2002 Qualifying reaches its climax. WSG owns the commercial and broadcast
rights to the Asian leg of the play off between one of the European Group
runners-up and the Asian third placed team for a place in the finals.
Four-year television contracts have already been secured for the Middle East,
Thailand, Korea and Japan. Agreement has also been reached with a number of
multi-national corporations to support the next marketing programme and WSG is
in the process of finalising the contractual arrangements with these entities.
The Davidoff (Asian PGA) Tour has staged a number of successful tournaments in
keeping with the Tour Schedule issued at the beginning of the year. Back to
back victories for Vijay Singh in the Carlsberg Malaysian Open and the Caltex
Singapore Masters in events that were joint sanctioned with Europe gave the
Tour a positive start. The PGA Tour of Australasia had another successful
season that culminated in February with the ANZ Tour Championship, a
tournament that is owned and managed by PGA Tour Enterprises Pty Ltd. The
number of tournaments and the level of prize money on the Ladies European Tour
continue to increase. Good television ratings were achieved by the Embassy
World Snooker Championship staged at the Crucible Theatre in Sheffield for
which WSG provided exclusive event management services. There has been
considerable media and other interest in the Wales bid to stage the 2009 Ryder
Cup. WSG Europe has been providing consulting services to the bid and the
committee's final decision on venue is expected in September.
The directors of WSG believe that the trading prospects for the remainder of
the year are promising.
PMI
Parallel Television's operating results for the first five months of the year
have been in line with PMI's projections. The sales division within the PMI
Group has made progress in contracting advertising sales and sponsorship
revenues for Parallel Television in Asia and Europe. Booked to date airtime
sales are in excess of 50 per cent. of the annual airtime sales budget. Sales
in the first quarter of 2001 were up significantly from the same period in
2000. In Asia, Parallel Television achieved its first two week sell out period
during the Carlsberg Malaysian Open and the Caltex Singapore Masters live
programming in February 2001. These two events, which are co-promoted with the
WSG Group, have ensured a promising start with event properties. In
conjunction with the BBC's coverage in the UK, Parallel Television has agreed
to acquire live pan-European broadcasting rights to the Scottish Women's PGA
Championship. Discussions are at a contract stage for the title sponsorship of
this year's Hong Kong Open, due to be held in December 2001. Parallel
Television is currently negotiating licence extensions for 2002 onwards.
Negotiations continue towards the creation of a new golf channel in Germany,
which is anticipated to be in a start-up phase by the year end and fully
operational by 2002.
The directors of PMI believe that the trading prospects for the remainder of
the year are promising.
The City Code
The Panel has determined that, pursuant to the terms of the Acquisition
Agreements, certain of the vendors of WSG and PMI are acting in concert with
respect to their acquisition of Ordinary Shares in the Company (the 'WCP' and
the 'PCP' respectively).
Following Admission, the WCP will hold more than 30 per cent. but less than 50
per cent. of the Company's issued Ordinary Share capital. The Company has
sought agreement from the Panel that, subject to shareholder approval at the
EGM, it will waive the obligation under Rule 9 of the City Code, which would
otherwise require the WCP to make a general offer for the issued share capital
of the Company. Following Admission, none of the members of WCP will be able
to acquire any Ordinary Shares without triggering a Rule 9 obligation, unless
the Panel otherwise consents.
Following Admission, the PCP will hold less than 30 per cent. of the Company's
issued Ordinary Share Capital. Accordingly, Rule 9 is not triggered by this
concert party and no waiver or shareholders' resolution is required in respect
of it. Following Admission, certain members of the PCP will be able to
increase their own shareholdings in the Company without incurring a Rule 9
obligation providing that the aggregate shareholding of the PCP does not
exceed 29.9 per cent. of the Company's enlarged share capital.
Under the terms of the Acquisition Agreement, Park House, Walbrook and Luna
Trading have granted to each other a right of pre-emption over their
respective shareholdings in the Enlarged Group and are deemed to be acting in
concert under the Rules of the City Code (the 'PECP'). The Company has sought
agreement from the Panel that, subject to shareholder approval at the EGM, it
will waive the obligation under Rule 9 of any member of the PECP to make a
general offer for the issued share capital of the Company. Following
Admission, the PECP will hold more than 30 per cent. but less than 50 per
cent. of the Company's issued Ordinary Share capital, and accordingly its
members will not be able to acquire further Ordinary Shares without triggering
a Rule 9 obligation unless the Panel otherwise consents.
APPOINTMENT OF NOMINATED ADVISER AND BROKER
The directors of the Company are pleased to announce that the Company's
nominated adviser and broker has changed to Investec Henderson Crosthwaite,
with immediate effect.
Extraordinary General Meeting
An extraordinary general meeting has been convened at the offices of Investec
Henderson Crosthwaite, 2 Gresham Street, London EC2V 7QP at 10.00 am on 10
August 2001 at which resolutions will be proposed to:
- approve the Acquisition;
- waive the requirement on the Concert Parties to make a general offer under
the City Code;
- consolidate every 200 of the Existing Shares in issue of 0.1 pence each into
one Ordinary Share of 20 pence;
- authorise an increase in the authorised share capital of the Company;
- authorise the Directors and Proposed Directors, specifically and
unconditionally, to allot the New Ordinary Shares and any relevant securities
pursuant to section 80 of the Act up to an aggregate nominal amount of £
13,123,883.60 such authority to expire fifteen months from the date of the
resolution or, if earlier, at the conclusion of the Annual General Meeting of
the Company to be held in 2002;
- disapply the provisions of section 89 of the Act to empower the directors of
the Company to allot unissued shares for cash otherwise than pro-rata to
existing shareholders pursuant to the authority referred to in the paragraph
above; provided that such power is limited to (i) allotments in connection
with the Placing and Open Offer and (ii) save in connection with the above, an
aggregate nominal amount of £572,678.40 (representing approximately 5 per
cent. of the enlarged issued share capital of the Company);
- change the name of the Company to World Sport Group plc;
- adopt the New Articles;
- amend the Memorandum; and
- adopt the New Share Option Scheme.
PROSPECTUS
A prospectus and an AIM admission document setting out details of the
Acquisition, Placing and Open Offer, the Reorganisation, the New Articles, the
Memorandum and the New Share Option Scheme is expected to be posted to
Shareholders today.
The Application Form which will accompany the Prospectus is personal to the
holder (s) named therein and may not be assigned, split or transferred,
(except to satisfy bona fide market claims pursuant to the rules of the London
Stock Exchange), represents a right for Qualifying Shareholders to subscibe
for Open Offer Shares subject to the terms of the Open Offer. The application
form is not a negotiable document or a document of title and cannot be traded.
TIMETABLE OF PRINCIPAL EVENTS
Record Date for the Open Offer 9 July 2001
Dealings re-commence in Existing Shares 8.00am on 17 July 2001
Latest time and date for splitting Application Forms
(to satisfy bona fide market claims only) 3.00pm on 6 August 2001
Latest time and date for receipt of Forms
of Proxy for the EGM 10.00am on 8 August 2001
Latest time and date for receipt of completed Application
Forms and payment in full under the Open Offer 3.00pm on 8 August 2001
Extraordinary General Meeting 10.00am on 10 August 2001
Record Date for the Capital Reorganisation 14 August 2001
Dealings to commence in the Ordinary
Shares and the New Ordinary Shares 8.00am on 15 August 2001
CREST accounts credited for the New Ordinary
Shares in uncertificated form 15 August 2001
Despatch of definitive share certificates for
the Ordinary Shares and the New Ordinary Shares
in certificated form 22 August 2001
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