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Hamleys PLC (HVTB)

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Wednesday 11 September, 2002

Hamleys PLC

Acquisition


HAMLEYS PLC ('Hamleys' or the 'Company')

11 SEPTEMBER 2002

PLACING AND ACQUISITION

HIGHLIGHTS

  * Hamleys has acquired four stores trading as The English Teddy Bear Company
    ('ETBC'), including stocks, store staff, the brand name and website
   
  * Hamleys also announces the proposed placing of 2.1 million new Ordinary
    Shares at a price of 165.5p per share to raise approximately £3.32 million,
    net of estimated expenses
   
  * As well as funding the acquisition the money raised by the placing will be
    applied to reduce Hamleys' indebtedness
   
  * This is a significant step in the development of the Hamleys strategy to
    identify growth opportunities for the Company, following its successful
    restructuring
   
  * Complementary business line with discrete customer base
   
  * Potential to enhance performance of existing stores
   
  * Significant expansion potential
   
  * Opportunity to sell ETBC products via direct channels and overseas
   
Simon Burke, Chairman of Hamleys commented:

'We believe that the acquisition of the English Teddy Bear Company is an
excellent addition to Hamleys and the Bear Factory. It offers us a great
opportunity to leverage our significant expertise in soft toys and accessories
in a complementary and well-branded business.

Hamleys is well placed to develop significant value in The English Teddy Bear
Company business by means of improving trading performance and a carefully
targeted expansion. '

For further information, please contact:-

Hamleys plc

Simon Burk e -(020) 7479 7316

Teather & Greenwood Limited

David Galan (020) 7426 7707

Brunswick

Rebecca Blackwood

Melissa McVeigh

Carolyn Esse r (020) 7404 5959

The Board of Hamleys plc is pleased to announce details of the acquisition by
the Company of four stores which trade under the name The English Teddy Bear
Company (the 'Acquisition') and a proposed placing of 2,100,615 new Ordinary
Shares at a price of 165.5p per share (the 'Placing Price') to raise
approximately £3.32 million, net of estimated expenses (the 'Placing').

Background to and reasons for the Acquisition

An important part of the Company's strategy has been to develop growth
opportunities for the Company in adjacent business areas, allowing the Company
to leverage its existing assets and skills. One of the particular areas of
expertise within Hamleys is the soft toy market and this has been successfully
deployed in the launch and development of Bear Factory.

Pursuant to the Acquisition, the Company has today acquired four stores which
trade under the name The English Teddy Bear Company ('ETBC') for £710,000,
which, apart from certain agreed retentions was paid in cash on completion out
of the Company's existing cash resources to the liquidator of Avonhire Limited,
the former owner of ETBC.

The English Teddy Bear Company was established in 1991. It specialises in
selling a range of teddy bears, accessories and themed clothing, mainly
T-shirts and sweat shirts. The bears range from exclusive English handmade
collectors' items to inexpensive gifts. The clothing is designed exclusively
for ETBC. The customer base includes a significant proportion of visitors and
store locations reflect this, being in Regent Street, Piccadilly (London), Bath
and Cambridge.

Although ETBC has experienced financial difficulty in recent times, we believe
that this resulted from management issues and specifically from certain store
openings which were subsequently closed and with hindsight were unfortunately
timed and located. The brand is well known and there is significant trading
goodwill at the locations we have acquired.

The Acquisition comprises the four stores and the related staff and stock and
the ETBC name, website and customer database. Based on unaudited management
accounts provided to the Company, the turnover for the four stores for the two
years ended 31 August 2001 and 2002 was £1.999 million and £1.593 million
respectively and the contribution was £531,000 and £223,000 respectively. The
net assets acquired are estimated at £100,000.

The Directors see the Acquisition as giving the Company the opportunity to move
into a business closely related to its existing activities in Hamleys and Bear
Factory. The Directors believe there is significant expansion potential, both
in stores and through direct channels, though the Directors do not see this as
being on the same scale as Bear Factory. There is also scope to improve the
performance of the four existing stores.

The Placing

The Company is proposing to raise £3.48 million gross, approximately £3.32
million net of estimated expenses, by way of the issue of 2,100,615 new
Ordinary Shares at the Placing Price, representing 9.99 per cent. of the
existing issued ordinary share capital of the Company. The Placing Price
represents a discount of approximately 4.89 per cent. to the closing mid-market
price of the Ordinary Shares on 9 September 2002. The Directors believe that
the Placing Price is appropriate for the Placing, taking into account current
market conditions and the number of new Ordinary Shares to be issued pursuant
to the Placing.

Pursuant to a placing agreement dated 11 September 2002 between Teather &
Greenwood and the Company ('the Placing Agreement'), Teather & Greenwood has
agreed to use its reasonable endeavours to procure placees for 2,100,615 new
Ordinary Shares at the Placing Price. The Placing Agreement is conditional on,
inter alia, the passing of the resolution to be proposed at the Extraordinary
General Meeting referred to below and admission of the new Ordinary Shares to
be issued pursuant to the Placing to the Official List of the UK Listing
Authority and to trading on the London Stock Exchange's market for listed
securities. The Placing is not underwritten.

The Placing is not a rights issue or open offer and new Ordinary Shares will
not be offered generally to shareholders, whether on a pre-emptive basis or
otherwise. The Directors believe that the considerable additional cost and
delay to which a rights issue or an open offer would give rise would not be in
the best interests of the Company in the circumstances, given the relative size
of the Placing.

Use of proceeds

Part of the funds raised by the Placing will be used by the Company to pay for
the acquisition and the refurbishing of the existing ETBC stores and the
opening of new ETBC stores in the future.

As at 30 March 2002 the borrowings of the Company and its subsidiary
undertakings (the 'Group') stood at £10.4 million. Gearing was 666% due to the
low level of shareholder funds. The Board stated in the Financial Review
contained in the Annual Report and Accounts for 2002 that it planned in future
years to reduce the level of the Group's indebtedness. The remaining funds
raised by the Placing will be used to accelerate this process and to reduce
considerably the level of the Group's gearing.

Current trading

In the AGM statement made on 24 July 2002 the Chairman stated that like for
like sales for the Hamleys brand in the 17 weeks to 20 July 2002 were 10 per
cent. above last year. In the period since this statement like for like sales
have continued at a similar level above last year. The Board is encouraged by
this strong sales performance and is optimistic regarding the outlook for the
full year.

The new Ordinary Shares

Application will be made for the new Ordinary Shares to be admitted to the
Official List of the UK Listing Authority and to trading on the London Stock
Exchange's market for listed securities. It is expected that dealings will
commence in the new Ordinary Shares on 7 October 2002. The new Ordinary Shares
to be issued pursuant to the Placing will, when issued, rank pari passu with
the existing Ordinary Shares including the right to receive all dividends or
other distributions hereafter declared, made or paid in respect of the ordinary
share capital of the Company. The new Ordinary Shares will initially be issued
in uncertificated form through the CREST system.

Extraordinary General Meeting

The proposal to issue the new Ordinary Shares pursuant to the Placing requires
the approval of shareholders. An Extraordinary General Meeting of the Company
('EGM') is to be held at 2 Foubert's Place, London W1F 7PA at 10.30 am on 4
October 2002 at which a special resolution will be proposed to disapply
statutory pre-emption rights, contained in section 89(1) of the Companies Act
1985, for the purposes of the Placing.

A circular to shareholders convening the EGM and setting out details of the
Acquisition and Placing will be posted later today. A copy of the circular to
shareholders dated 11 September 2002 will be submitted to the UK Listing
Authority, and will shortly be available for inspection at the UK Listing
Authority's Document Viewing Facility, which is situated at:

Financial Services Authority
25 The North Colonnade
Canary Wharf
London
E14 5HS

Tel. no. (0)20 7676 1000


                                                                                                                                                                                                     

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