RNS Number : 8446J
Fayrewood PLC
10 December 2008
Fayrewood Plc
10 December 2008
NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, IN OR INTO ANY JURISDICTION WHERE IT IS UNLAWFUL TO DO SO.
10 December 2008
For immediate release
RECOMMENDED OFFER BY LETCHWORTH INVESTMENTS LIMITED FOR FAYREWOOD PLC
Summary
� The board of Letchworth Investments Limited (*Letchworth") and the Independent Directors of Fayrewood plc ("Fayrewood" or the
"Company") are pleased to announce that they have reached agreement on the terms of a recommended offer by Letchworth to acquire the entire
issued share capital of Fayrewood. The Transaction is to be effected by means of a scheme of arrangement under Part 26 of the Companies Act
2006.
� Under the terms of Transaction, the Cash Offer will be made on the following basis:
for each Fayrewood Share 126 pence in cash;
The Cash Offer values the entire existing issued ordinary share capital of Fayrewood at approximately �29.30 million.
� Fayrewood Shareholders will also be entitled to elect, in respect of some or all of their Fayrewood Shares, to receive 98 pence in cash
and one Letchworth Ordinary Share for each Fayrewood Share instead of the cash to which they would otherwise be entitled under the Cash
Offer.
� Letchworth has been established for the sole purpose of the Transaction. Following implementation of the Scheme, the Letchworth
Ordinary Shares will be held by those Fayrewood Shareholders who have elected to receive the Part Share Alternative.
� The Scheme will be put to Fayrewood Shareholders at the Court Meeting and at the General Meeting. Both meetings are expected to be held
on 5 January 2009. In order to become effective, the Scheme must be approved by a majority in number of the Fayrewood Shareholders present
and voting at the Court Meeting, either in person or by proxy, representing not less than three fourths in value of the Fayrewood Shares
that are voted at the Court Meeting. In addition, a special resolution implementing the Scheme must be passed by Fayrewood Shareholders
representing 75 per cent. of the votes cast at the General Meeting.
� The Independent Directors, who have been so advised by KBC Peel Hunt, consider the terms of the Transaction to be fair and reasonable.
In providing advice to the Independent Directors, KBC Peel Hunt has taken into account their commercial assessments.
Accordingly, the Independent Directors unanimously recommend that Fayrewood Shareholders vote in favour of the Resolutions.
� The Independent Directors make no recommendation on whether or not to accept the Cash
Offer or elect for the Part Share Alternative. Fayrewood Shareholders are strongly advised to seek their own independent advice and to
consider, inter alia, paragraph 6 below headed *Background to and reasons for the recommendation of the Transaction* and the risk factors
set out in paragraph 3.3 below, before electing for the Part Share Alternative.
� Irrevocable undertakings to vote in favour of the Scheme and the resolutions at the Court Meeting and the General Meeting have been
secured from the Directors amounting to, in aggregate, 4,143,205 Fayrewood Shares. In addition, irrevocable undertakings have been received
from North Atlantic Value, Stefan Link, Richmond Nominees Limited and Simon Wharmby aggregating to 7,880,153 Fayrewood Shares. The
irrevocable undertakings from the Directors are binding in all circumstances. The irrevocable undertakings from North Atlantic Value, Stefan
Link, Richmond Nominees Limited and Simon Wharmby will only lapse if an Independent Competing Offer is made for the entire issued share
capital of Fayrewood.
In aggregate, therefore, Fayrewood has received undertakings to vote in favour of the Resolutions in respect of 12,023,358 Fayrewood Shares,
representing approximately 51.70 per cent. of the total issued share capital of Fayrewood.
� Furthermore, each of the Directors, Stefan Link, Richmond Nominees Limited and Simon Wharmby have given irrevocable undertakings to
elect for the Part Share Alternative in respect their aggregate holding of 5,217,494 Fayrewood Shares. In addition North Atlantic Value has
undertaken to elect for the Part Share Alternative in respect of 3,500,000 of its Fayrewood Shares. In aggregate therefore, Fayrewood has
received elections for the Part Share Alternative in respect of 8,717,494 Fayrewood Shares representing 37.48 per cent of the total issued
Fayrewood share capital.
� It is expected that the Scheme Document will be posted to Fayrewood Shareholders on 12 December 2008 and that the Scheme will become
effective on 11 February 2009, subject to the satisfaction of the Conditions.
Commenting on the Transaction, David Kleeman, Chairman of Letchworth, said:
"Computer distribution was once one of the most exciting parts of the Stock Market. That has long passed. Acknowledging this change, the
Board took the hard decision two and a half years ago to make available to Fayrewood Shareholders as much value in the Company as possible.
Today's announcement marks the last substantial step in that strategy.
I believe the Transaction represents a fair offer to all Fayrewood Shareholders. It enables them either to obtain a full cash exit now
or, via the Part Share Alternative, to receive some cash now but also to fully participate in the future economic fortunes of Fayrewood."
Commenting on the Transaction, Richard Templeton, Chairman of the Independent Board, said:
"This is the best offer for Fayrewood we have received and has been structured in such a way as to achieve our stated objective of
delivering the maximum amount of cash back to Fayrewood Shareholders in the most timely and cost effective manner that is practical at this
point in time. The Part Share Alternative allows Fayrewood Shareholders to receive some cash now and through the Letchworth Ordinary Shares,
to receive their full entitlement to any additional cash that may be released in the future from the Remaining Assets."
Enquiries:
Letchworth Investments
David Kleeman Tel: +44 (0)20 7430 9329
Fayrewood
Richard Templeton Tel: +44 (0)1398 331 215/07785 731130
KBC Peel Hunt Limited (Financial Adviser to Fayrewood)
Oliver Scott Tel: +44 (0)20 7418 8900
Richard Kauffer
Daniel Harris
Buchanan Communications (PR Adviser to Fayrewood)
Tim Anderson Tel: +44 (0)20 7466 5000
Lisa Baderoon
This summary should be read in conjunction with the full text of this announcement.
The Transaction will be subject to the conditions set out in Appendix I to this announcement and the full conditions and further terms
which will be set out in the Scheme Document expected to be issued on 12 December 2008.
Appendix II contains the Guidance Letter from KBC Peel Hunt to the Letchworth Director.
Appendix III contains the sources and bases of information used in this announcement.
Appendix IV contains the definitions of certain expressions used in this announcement.
KBC Peel Hunt, which is authorised and regulated in the United Kingdom for the conduct of investment business by the Financial Services
Authority, is acting exclusively for Fayrewood (and for Letchworth solely in connection with the Guidance Letter) and no one else in
connection with the matters described in this announcement and will not be responsible to anyone other than Fayrewood (or as appropriate,
Letchworth) for providing the protections afforded to clients of KBC Peel Hunt nor for providing advice in relation to the matters described
in this announcement.
This announcement is not intended to, and does not constitute or form any part of, an offer or invitation to sell or subscribe for or
purchase any securities or solicitation of any vote or approval in any jurisdiction pursuant to the Transaction or otherwise. The
Transaction will be made through the Scheme Document, which will contain the full terms and conditions of the Transaction (including details
of how to vote in respect of the Transaction). Any acceptance of or other response to the Transaction should be made only on the basis of
the information contained in the Scheme Document. Fayrewood Shareholders are advised to read the Scheme Document carefully, once it has been
dispatched.
Notice to Overseas Persons
The availability of the Transaction to Fayrewood Shareholders who are not resident in the United Kingdom may be affected by the laws of
relevant jurisdictions. Fayrewood Shareholders who are not resident in the United Kingdom will need to inform themselves about and observe
any applicable requirements.
The Transaction will be subject to the applicable rules and regulations of the London Stock Exchange and the City Code.
This communication shall not constitute an offer to sell or the solicitation of an offer to buy securities, or the solicitation of any
vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of such jurisdiction.
Dealing Disclosure Requirements
Under the provisions of Rule 8.3 of the City Code, if any person is, or becomes, "interested" (directly or indirectly) in 1 per cent. or
more of any class of "relevant securities" of Letchworth or of Fayrewood, all "dealings" in any "relevant securities" of that company
(including by means of an option in respect of, or a derivative referenced to, any such "relevant securities") must be publicly disclosed by
no later than 3.30 p.m. (London time) on the Business Day following the date of the relevant transaction. This requirement will continue
until the date on which the Scheme becomes effective, the Transaction lapses or is otherwise withdrawn or on which the "offer period"
otherwise ends. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire an
"interest" in "relevant securities" of Letchworth or Fayrewood, they will be deemed to be a single person for the purpose of Rule 8.3.
Under the provisions of Rule 8.1 of the City Code, all "dealings" in "relevant securities" of Letchworth or of Fayrewood by Letchworth
or Fayrewood, or by any of their respective "associates", must be disclosed by no later than 12.00 noon (London time) on the Business Day
following the date of the relevant transaction.
A disclosure table, giving details of the companies in whose "relevant securities" "dealings" should be disclosed, and the number of
such securities in issue, can be found on the Panel's website at www.thetakeoverpanel.org.uk.
"Interests in securities" arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in
price of securities. In particular, a person will be treated as having an "interest" by virtue of the ownership or control of securities, or
by virtue of any option in respect of, or derivative referenced to, securities.
Terms in quotation marks are defined in the City Code, which can also be found on the Panel's website. If you are in any doubt as to
whether or not you are required to disclose a "dealing" under Rule 8, you should consult the Panel.
Forward Looking Statements
Certain statements in this announcement regarding the proposed Transaction between Letchworth and Fayrewood, the expected timetable for
completing the Transaction, future financial and operating results, benefits and synergies of the transaction, future opportunities for the
combined company and products and any other statements regarding Fayrewood's or Letchworth's future expectations, beliefs, goals or
prospects constitute forward-looking statements. When used in this announcement, the words "believe", "anticipate", "should", "intend",
"plan", "will", "expects", "estimates", "projects", "positioned", "strategy", and similar expressions or statements that are not historical
facts, in each case as they relate to Letchworth and Fayrewood, the board of directors of either such company or the proposed transaction,
are intended to identify those expressions or statements as forward-looking statements. By their nature, forward looking statements involve
risk and uncertainty and the factors described in the context of such forward looking statements in this announcement could cause actual results and developments to differ materially from those
expressed in or implied by such forward looking statements.
NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION IN OR INTO ANY JURISDICTION WHERE IT IS UNLAWFUL TO DO SO.
10 December 2008
RECOMMENDED OFFER BY LETCHWORTH INVESTMENTS LIMITED FOR FAYREWOOD PLC
1. Introduction
The board of Letchworth and the Independent Board are pleased to announce that they have today reached agreement on the terms of a
recommended offer by Letchworth to acquire the entire issued share capital of Fayrewood.
The Cash Offer of 126 pence per Fayrewood Share in cash values the existing issued share capital of Fayrewood at approximately �29.30
million. In addition to the Cash Offer, the Transaction also includes the Part Share Alternative for Fayrewood Shareholders who wish to
retain an indirect equity interest in Fayrewood. Shareholders who make no election for the Part Share Alternative will receive the Cash
Consideration under the Cash Offer.
The Transaction is to be effected by means of a scheme of arrangement under Part 26 of the 2006 Act involving a reduction of capital,
cancellation of share premium account and cancellation of capital redemption reserve under section 135 of the 1985 Act. The Scheme
incorporates a capital reduction in order to create new distributable reserves and enable Fayrewood to pay dividends to Letchworth. The
Scheme requires the approval of the Scheme Shareholders at the Court Meeting and the sanction of the Court. The reduction of capital forming
part of the Scheme requires the passing of the Special Resolution by Fayrewood Shareholders and the subsequent confirmation of the Court.
2. Summary of the Transaction
It is intended that the Transaction will be implemented by way of the Scheme, the full details of which are set out in the Scheme
Document. The purpose of the Scheme is to enable Letchworth to acquire the entire issued share capital of Fayrewood. Under the terms of the
Scheme, the Scheme Shares will be cancelled and, upon the Scheme becoming effective, Scheme Shareholders will receive:
for each Scheme Share 126 pence in cash
The Cash Offer values the whole of the existing issued ordinary share capital of Fayrewood at approximately �29.30 million.
3. The Part Share Alternative
3.1 Terms
Under the Part Share Alternative, Fayrewood Shareholders may elect, in respect of some or all of their Fayrewood Shares, to receive a
combination of cash and Letchworth Ordinary Shares instead of the cash consideration to which they would otherwise be entitled in respect of
such Fayrewood Shares under the terms of the Cash Offer on the following basis:
for each Scheme Share 98 pence in cash and
one Letchworth Ordinary Share
Fayrewood Shareholders who do not elect for the Part Share Alternative will be deemed to have accepted the Cash Offer.
3.2 Valuation
KBC Peel Hunt has provided to the Letchworth Director an estimate of the value of a Letchworth Ordinary Share (the "Best Estimate").
As at 9 December 2008, based on the Assumptions and the various matters set out in the estimate so provided, the information KBC Peel
Hunt have reviewed and the financial analysis they have undertaken, the Best Estimate of the value of one Letchworth Ordinary Share is 28
pence.
The Best Estimate is based on theoretical valuation techniques and is sensitive to changes in assumptions about, amongst other factors:
(i) the relative take up of the Cash Offer and the Part Share Alternative;
(ii) the discount rate applied to any distribution of the Remaining Assets;
(iii) the level of any Claims estimated and successfully made under the SPAs or otherwise against the Group;
(iv) the timing of any distribution of the Remaining Assets;
(v) the Sterling/Euro exchange rate;
(vi) the expected operating costs of the Group; and
(vii) interest income of the Group.
The Best Estimate does not represent the actual value of a Letchworth Ordinary Share and a number of assumptions have been made. If the
Assumptions prove too optimistic, it is possible that the actual value of a Letchworth Ordinary Share will be less than the Best Estimate
and if the liabilities arising from Claims exceed the amount of the Remaining Assets, the value of a Letchworth Ordinary Share would be
�Nil. Similarly, if the Assumptions prove too pessimistic the actual value of a Letchworth Ordinary Share may exceed the Best Estimate. The
theoretical maximum value of a Letchworth Ordinary Share is approximately 99 pence, calculated by reference to the Remaining Assets divided
by the number of Letchworth Ordinary Shares that would be issued based on the Take Up Assumption.
Further details of the information reviewed, assumptions relied upon and the methodologies employed in order to arrive at the Best
Estimate are set out in the Guidance Letter.
The Guidance Letter containing the Best Estimate set out in Appendix II of this announcement has been provided solely for the use and
benefit of the Letchworth Director. The Guidance Letter is not a formal valuation and should not be relied upon as such by any party and KBC
Peel Hunt expressly disclaims any liability to any third party with respect to the contents. KBC Peel Hunt will not be responsible to anyone
other than Letchworth for providing the protections afforded to clients of KBC Peel Hunt in connection with the Guidance Letter.
KBC Peel Hunt expresses no opinion or recommendation to any person as to whether or not they should accept the Cash Offer or elect for
the Part Share Alternative. However, the Independent Directors, who have been so advised by KBC Peel Hunt, consider the terms of the
Transaction to be fair and reasonable. In providing advice to the Independent Directors, KBC Peel Hunt has taken into account their
commercial assessments.
Fayrewood Shareholders are strongly recommended to take their own independent financial advice in considering whether or not to elect
for the Part Share Alternative.
3.3 Risk Factors
The attention of Fayrewood Shareholders who may be considering electing for the Part Share Alternative is drawn to certain risk factors
and other investment considerations relevant to such an election as follows:
* Whilst the board of Letchworth will, where appropriate, vigorously defend all Claims and the Independent Board has taken a prudent
approach to their estimation of liabilities from Claims, it is not known what other liabilities the Group will incur in the future either
through Claims arising from the SPAs or otherwise. As referred to in the Guidance Letter set out in Appendix II of this announcement, the
amount of the liabilities arising from Claims is a key element in assessing the likely cash available for distribution to Letchworth
Ordinary Shareholders and therefore the value of a Letchworth Ordinary Share.
* A number of assumptions have been made in determining the Best Estimate as set out in the Guidance Letter, which may not prove to
be correct. Consequently, there can be no guarantee that the Best Estimate will eventually be realised, and if liabilities arising from
Claims exceed the amount of the Remaining Assets, Letchworth Ordinary Shareholders will receive no payment at all for their shares.
* Any increase in the actual take up of the Part Share Alternative compared to the Take Up Assumption may reduce the potential value
of a Letchworth Ordinary Share.
* Any changes in the Euro/Sterling exchange rate will impact upon the Sterling value of the Remaining Assets. The Group currently
has EUR8.5 million held in Euro deposits. To the extent that this is insufficient to discharge liabilities under the UMD, BM or BV SPAs, any
weakening of Sterling against the Euro will effectively further increase the Company's liabilities denominated in Sterling and reduce the
amount of the Remaining Assets. Further, any strengthening of Sterling against the Euro will negatively impact the value of the balance of
any Euro denominated deposits which may be returned to the Company.
* The dates and manner of any distribution of the Remaining Assets by Letchworth is currently uncertain and depends upon a number of
factors including: the outcomes of the Claims and the timing thereof, any Unknown Claims or other liabilities which may arise and the costs
of defending any Claims or other liabilities of the Company or Letchworth.
* Letchworth is an unlisted company. Although Letchworth is considering applying for Letchworth Ordinary Shares to be traded on
Sharemark, the trading facility designed for infrequently traded securities operated by The Share Centre Limited, Sharemark is not a
recognised investment exchange. There are no plans to seek a public quotation on any recognised investment exchange or other market for the
Letchworth Ordinary Shares. Consequently, Letchworth Ordinary Shares may be difficult to sell and the price of a Letchworth Ordinary Share
obtainable through Sharemark may not necessarily reflect either its underlying value or the price obtainable were it traded on a recognised
investment exchange.
* Letchworth will not be subject to the disclosure, corporate governance and shareholder protection requirements of any recognised
investment exchange.
3.4 Securities law restrictions
The availability of the Part Share Alternative to persons who are not resident in the United Kingdom may be affected by the laws of the
relevant jurisdictions in which they are located. Persons who are not resident in the United Kingdom should inform themselves of, and
observe, any applicable requirements. Any failure to comply with such applicable requirements may constitute a violation of the securities
laws of any such jurisdictions. Under the terms of the Scheme, Letchworth has the right to deem a Scheme Shareholder not to have made an
election under the Part Share Alternative in respect of such Scheme Shares as the Scheme Shareholder has purported to make such an election
where Letchworth believes that the receipt of Letchworth Ordinary Shares by that Scheme Shareholder may infringe applicable legal or
regulatory requirements or require Fayrewood or Letchworth to comply with any regulatory or other obligations which they consider to be
unduly onerous or with which they are unable to comply.
Letchworth Ordinary Shares have not been and will not be registered under the US Securities Act or under the securities laws of any
state in the United States and may not be offered or sold directly or indirectly in or into the United States unless registered under the US
Securities Act or issued pursuant to an exemption therefrom. Accordingly, notwithstanding the Part Share Alternative, all Fayrewood
Shareholders who are US Persons shall receive cash only, and there shall be no issue of Letchworth Ordinary Shares to such Shareholders. Any
US Holder who elects for the Part Share Alternative will be deemed not to have so elected and shall be paid the Cash Consideration to which
he is entitled under the Cash Offer in respect of his Fayrewood Shares.
3.5 Rights attaching to the Letchworth Ordinary Shares
Letchworth's share capital is divided into two classes of shares, Letchworth Founder Shares of �1 each and Letchworth Ordinary Shares of
0.1p each. At the date of this announcement there are 100 Letchworth Founder Shares in issue and no Letchworth Ordinary Shares. Upon the
Scheme becoming effective, Letchworth Ordinary Shares will be issued, the number of which will be determined by elections made under the
Part Share Alternative.
Upon the issue of the Letchworth Ordinary Shares, the Letchworth Founder Shares will be converted into Letchworth Deferred Shares with
no voting rights and effectively no economic interest in Letchworth or its assets.
All Letchworth Ordinary Shares will be held by those electing for the Part Share Alternative. In addition to the normal voting rights
attaching to ordinary shares, the Letchworth Articles provide that in respect of certain matters, Letchworth will not be permitted to
transact that business without the consent of the holders of a majority of the Letchworth Ordinary Shares. This is to ensure that, unless
consent is otherwise given, the activities of Letchworth and its subsidiaries will be confined to the acquisition of Fayrewood in accordance
with the proposed Scheme and thereafter the orderly realisation of the assets of Fayrewood.
These matters are specifically as follows:
(i) the grant of any option or other right to subscribe for shares, and any alteration, increase, reduction, sub-division or
consolidation of the authorised or issued capital of Letchworth or of any of its subsidiaries, or any variation of the rights attached to
any of the shares for the time being in the capital of Letchworth or of any of its subsidiaries;
(ii) the disposal by Letchworth of any of its subsidiaries or any substantial part thereof or the disposal of any share in the
capital of any subsidiary of Letchworth;
(iii) the acquisition of any interest in any share in the capital of any company by Letchworth or any of its subsidiaries;
(iv) the acquisition or the commencement of any trade or business or the making of any investment by Letchworth or any of its
subsidiaries other than, in the case of Letchworth, the acquisition of Fayrewood and the realisation of its assets and/or otherwise
restricting, terminating, avoiding or procuring the release or reducing the duration of any liabilities, obligations, restrictions or
undertakings under or arising from the SPAs;
(v) Letchworth or any of its subsidiaries agreeing to incur any expense or liability (other than costs and expenses that reasonably
arise from or are in connection with the acquisition of Fayrewood and the realisation of its assets and/or otherwise restricting,
terminating, avoiding or procuring the release or reducing the duration of any liabilities, obligations, restrictions or undertakings under
or arising from the SPAs) exceeding, in any financial year the aggregate of the income of Letchworth and its subsidiaries for that year and
the sum of �300,000;
(vi) the application by way of capitalisation of any sum in or towards paying up any share or loan capital of Letchworth;
(vii) any alteration of the restrictions on the powers of the directors of Letchworth and its subsidiaries to borrow give guarantees
or create charges;
(viii) the winding up of Letchworth; and
(ix) the redemption of any of Letchworth*s shares or the entering into of a contract by Letchworth to purchase any of its shares.
The Letchworth Articles provide that it may be voluntarily wound up by way of an ordinary resolution of shareholders of Letchworth.
3.6 Sharemark
Letchworth is considering making an application for the Letchworth Ordinary Shares to be admitted to trading on Sharemark, the trading
facility for infrequently traded shares operated by The Share Centre Limited which is a member of the London Stock Exchange and is
authorised and regulated by the Financial Services Authority. Although a private limited company, Letchworth Ordinary Shares are tradeable
through Sharemark. This will provide the Letchworth Ordinary Shareholders a facility for the sale of their shares which would be otherwise
more difficult to achieve.
There are minimal admission criteria for admission to Sharemark as well as limited ongoing disclosure and corporate governance
requirements.
The Sharemark system operates through an auction process whereby buyers and sellers input their orders through a stockbroker. On a
periodic basis the auction takes place where buyers and sellers orders are matched and prices determined in accordance with supply and
demand. There are no market makers and, subject to Letchworth agreeing the appropriate auction frequency on Sharemark, shares can be dealt
on a daily, weekly, monthly or quarterly basis.
It is emphasised that Sharemark is not a recognised investment exchange, recognised clearing house or regulated market within the
meaning of the Markets in Financial Instruments Directive, but is a Multilateral Trading Facility for shares in small companies which are
ineligible for (or do not wish to) to meet the regulatory demands of a stock market quote on AIM or the Official List. Notwithstanding
admission to Sharemark, there is no guarantee of any liquidity in shares traded on Sharemark and therefore that Letchworth Ordinary Shares
may be sold when a Letchworth shareholder wishes to do so or at all. Furthermore there is no guarantee that the price set is reflective of
the underlying value or the price that could be obtained for a share if the Letchworth Ordinary Shares were admitted to a recognised
investment exchange. No application will be made for admission of the Letchworth Ordinary Shares to trading on a recognised investment
exchange.
It is emphasised that whilst the Letchworth Director is considering an application to Sharemark, it is not guaranteed that such
application will be made and/or admission will necessarily be granted.
4. Information on Fayrewood
In 2005 the Board embarked on a strategy of disposing of the Group's various business assets as it believed that such a strategy would
maximise shareholder value. This strategy culminated in the sales of ISI and SLS which was approved by Shareholders on 24 July 2008.
As a result of the various Disposals it has made, Fayrewood now holds substantial cash balances but has potential liabilities under the
SPAs. Further, under the terms of the UMD and ISI SPAs, Fayrewood has committed to retain approximately �6.22 million, based on the Exchange
Rate, in segregated deposit arrangements as security in order to meet potential liabilities arising from claims made or that may be made
against the Group under the SPAs or otherwise.
Details of the deposit arrangements and ongoing potential liabilities arising from warranty and indemnity claims as well as details of
all potential and actual claims that the Company has been notified of in respect of each SPA are as set out below:
(A) UMD SPA
Pursuant to the UMD SPA the Group sold the entire issued share capital of its subsidiary UMD to the UMD Purchaser on 22 December 2006.
Under the terms of the UMD SPA, Fayrewood agreed to guarantee any potential liabilities arising from Warranty claims made by the UMD
Purchasers. The maximum liability for any warranty claims, other than tax, made by the UMD Purchasers is EUR8 million. The final date for
the UMD Purchasers to make any claims, other than relating to tax, against the Group is 23 December 2010. There is no cap and no time limit
on any claims that can be brought by the UMD purchasers in relation to tax. However, the Independent Directors have been advised that under
current regulations Spanish tax authorities may only investigate a company's affairs for a period of four years following the relevant tax
payment date and therefore the Company should know whether any claims are likely in relation to tax by 25 July 2011.
Fayrewood has given a guarantee in relation to any Warranty claims made under the UMD SPA. This is supported by a EUR6 million guarantee
by Barclays Bank Plc which is in turn supported by a EUR6 million deposit made by Fayrewood with Barclays Bank plc. All interest accruing on
this deposit is for the benefit of Fayrewood. The guarantee, and therefore the deposit, will be released on 30 September 2011, subject to
deduction of any amounts successfully claimed by the UMD Purchasers on or before that date, save that if any claims are outstanding at that
date the guarantee will continue, and therefore the deposit will remain, for a further period of up to 12 months.
In relation to the UMD SPA, the following claims have been made against the Company by the UMD Purchasers:
(a) claims in respect of a number of small matters were notified to the Company on 17 July 2008 by the UMD Purchasers, totalling
EUR267,592.91. The Company responded to the claims that (i) notification had not been received in accordance with the requirements of the
sale agreement and was therefore invalid and (ii) asking for details of the matters comprised within the claims. No reply has yet been
received by the Company.
(b) a claim in respect of tax in the sum of EUR88,996.07 has been notified by the UMD Purchasers but no further action has been
taken. The Independent Directors believe that the subject matter of the claim was dealt with in the formalities of completion of the UMD SPA
and that no further claim is allowed.
(B) BM SPA
Pursuant to the BM SPA, the Company sold the entire issued share capital of BM to the BM Purchasers on 21 December 2007. Under the terms
of the BM SPA, the final date for the BM Purchasers to bring any Warranty claims against Fayrewood, other than those in relation to tax, is
31 December 2009 and any claims relating to tax were to have been brought within three months of the end of the relevant statutory tax
limitation period.
Under the terms of this agreement, Fayrewood undertook for so long as there remained any liability under the BM SPA not to reduce its
shareholders' funds below EUR12 million without the consent of the BM Purchaser (the "Shareholders' Funds Covenant").
However, by a variation agreement between the parties dated 8 December 2008, in consideration of the provision of warranty and indemnity
insurance in respect of Unknown Claims in connection with the BM SPA purchased for the benefit of the BM Purchaser by the Company, the BM
Purchaser has agreed to (a) release the Company from the Shareholders' Funds Covenant, and (b) reduce the Company's liability under the
warranties, the tax warranties and the tax covenant (but not express indemnities) to nil (other than in respect of claims arising from
specified circumstances and certain matters specifically excluded from the cover under the insurance polices. In addition, the BM Purchaser
agreed that to the extent that any residual liabilities of Fayrewood related to tax that such claims must be brought no later than 31 March
2011). The Company also agreed to place in a separate account the sum of EUR2.2 million until the matters specified below have been
resolved.
No Claim has been received to date by Fayrewood in respect of Warranties under the BM SPA. However, Fayrewood has been notified by the
BM Purchasers of the following circumstances which may give rise to Claims and which are excluded from the above insurance cover:
(a) following a routine tax audit in respect of the 2003 to 2005 period, the French tax authorities have indicated that certain tax
reliefs which should have been claimed over the life of an asset were claimed as a single deductible sum in year one. There is a potential
liability of up to EUR100,000 relating to interest in respect of this timing difference. The Independent Directors are currently reviewing
the potential strength of any potential Claim;
(b) the BM SPA provides that the Company will indemnify the BM Purchasers in respect of, first, certain aged stock which was held
by Banque Magnetique on the date of the BM SPA and which had not been disposed of by 31 March 2009, and, second, any shortfall between the
net amounts owing by or to be recovered from a certain supplier as at 30 September 2007 and the amount actually recovered by 31 March 2009.
Fayrewood has been informed by the BM Purchasers that their review as at 31 October 2008 disclosed that there will be no liability in
respect of these matters although the BM Purchaser reserves their rights pending their final review. On this basis, the Independent
Directors do not believe there is a likelihood of any claims in this regard;
(c) a claim has been made against BM by an agent of a former supplier in respect of sums alleged to be payable by BM in respect of
stock alleged to have been supplied to BM. BM is defending the consequent legal action for approximately EUR1.8 million brought by the
liquidator of the agent of the former supplier in respect of such sums and consequential losses. On a preliminary investigation of the
substance of this issue, the Independent Directors have taken the view that the allegations do not form the basis of a liability; and
(d) there is an unresolved discrepancy in a factoring account of BM of EUR82,000. At present, the Independent Directors have
insufficient information from the notification by the BM Purchasers regarding the matter to form a view of the potential liability.
(C) ISI SPA
Pursuant to the ISI SPA, the Company sold the entire issued share capital of ISI and SLS to the ISI Purchaser on 25 July 2008.
Fayrewood's maximum liability under the ISI SPA is �2 million. As well as standard warranties and a tax covenant, the ISI SPA contained
provisions for the protection of the ISI Purchaser in relation to the value of stock at completion, collectability of debtors within 150
days of the completion date and the amount of trade creditors at completion (the "Stock and Debtor Protection Provisions"). The final date
for the ISI Purchaser to bring any claims against Fayrewood, other than in relation to tax, is 25 July 2009 and the final date for any
claims relating to tax is 31 March 2015. Of the purchase consideration, �1 million has been placed into an escrow account in order to meet
any claims under the ISI SPA as required under the ISI SPA. Of this amount, �500,000 (less the amount of any settled or outstanding claims)
will be released to the Company following six months from the completion date, with the balance (less the amount of any settled or outstanding claims) to be released to the Company on the anniversary of
completion.
The Company has been notified that there were uncollected debtors in the region of �4 million as at the date 120 days after the ISI SPA
completion date. The Independent Directors believe that the ISI Purchaser will make a claim against the Company under the Stock and Debtor
Protection Provisions.
(D) BV SPA
Pursuant to the BV SPA Fayrewood Holdings Limited sold Fayrewood (Overseas Holdings) B.V. to Bft Nederland B .V. on 16 May 2007.
Warranties and indemnities were given in the BV SPA by Fayrewood and Fayrewood Holdings Limited in relation to Fayrewood (Overseas Holdings)
B .V. There is no time limit on claims under the BV SPA. No amounts are to be retained under the BV SPA.
As at the date of this announcement, other than as set out above, no Claims under the SPAs have been made or are pending or threatened
against Fayrewood and Fayrewood has not been notified of, and the Independent Directors are not aware of, any other such Claims against
Fayrewood. However the Independent Directors intend to make proper provision both for those Claims made and circumstances of which have been
notified or of which they are otherwise aware and a further prudent reserve for any Unknown Claims and for cost and expenses in
investigating and defending any Claims.
As a result of the above Disposals, the Company had cash of �36.6 million, based on the Exchange Rate, as at 1 December 2008. Of this
amount, a total of �6.22 million, based on the Exchange Rate, is to be retained as follows:
(a) the Company has contractually committed to retaining EUR6 million in the deposit account referred to in paragraph (A) above;
and
(b) �1 million is retained in the retention account referred to in paragraph (C) above.
The Independent Directors also intend to undertake to the Court in connection with the Capital Reduction that the Company will retain
and not distribute on completion an additional sum of approximately �2.91 million, based on the Exchange Rate, (which includes the EUR2.2
million referred to in paragraph 4(B) above) for the protection of creditors, as described in more detail below in paragraph 12 of this
announcement.
As a result, this means that a total of approximately �9.13 million, based on the Exchange Rate, being the Non- distributable Assets,
will be retained by the Company in connection with the Claims referred to above. The Independent Directors consider that this amount
represents an appropriate and prudent amount to be retained by the Company in connection with the Claims known to or anticipated by them at
the date of this announcement.
In addition, the Independent Directors are required to retain an amount of approximately �1.30 million in order to meet the estimated
costs of the Transaction, the costs of the insurance policy in relation to the BM SPA and ongoing operating costs of the Group to the extent
that income receipts from the Remaining Assets are insufficient to meet such costs.
5. Current trading and Prospects
Fayrewood announced its interim results for the 6 months to 30 June 2008 on 29 September 2008 which included a pro forma statement of
net assets, for illustrative purposes only, to show the effect of the disposals of ISI and SLS, which occurred since the last period end, as
if this transaction had taken place as at 30 June 2008. A copy of the Company's interim results are included in the Scheme Document.
Since 25 July 2008, being the completion date for the disposals of ISI and SLS, save for small monthly fees from consultancy services
charged to Prime Properties Developments Limited, Fayrewood has had no trading activities and its income has been bank interest.
The Independent Directors estimate that the cash balances of the Company on 1 December 2008 were �36.6 million, based on the Exchange
Rate. Confirmation of the Company's cash balances has been provided by Ernst & Young LLP and is set out in the Scheme Document.
On 8 December 2008, the Company arranged insurance cover for the benefit of the BM Purchaser in respect of certain potential BM claims,
that have not been notified, details of which are set out in paragraph 4 above.
6. Background to and reasons for the recommendation of the Transaction
The circular to Shareholders dated 4 July 2008 described the proposed strategy of the Company, being to explore methods of returning the
maximum amount of capital to Shareholders.
The Board has, in the course of the year, committed substantial resource and time in investigating the best method of implementing this
strategy including discussions with third parties about an offer for some or all of the Company's share capital, a further tender offer, a
reverse takeover, various capital reorganisation options resulting in the issue and redemption of new classes of share capital. None of
these approaches satisfactorily achieved the objectives of the Board's strategy referred to above.
In considering the merits of the Transaction, the Independent Directors have considered the following:
* the value, feasibility and timing issues of other possible transactions;
* it gives Fayrewood Shareholders the ability to either accept the Cash Offer or elect for the Part Share Alternative depending on their
short and medium term liquidity requirements and their overall investment objectives;
* it allows Fayrewood Shareholders the possibility of a full exit from their Fayrewood Shares; and
* it provides Fayrewood Shareholders the opportunity to dispose of their Fayrewood Shares free of dealing costs.
The Independent Directors unanimously recommend that Fayrewood Shareholders vote in favour of the Resolutions. However, they make no
recommendation as to whether to accept the Cash Offer or to elect for the Part Share Alternative. The decision of Fayrewood Shareholders in
this regard will depend on their short and medium term liquidity requirements and on their overall investment objectives. In considering the
merits of each, Fayrewood Shareholders should take into account the following:
The Cash Offer offers Fayrewood Shareholders:
* the immediate and certain benefits of cash compared to the alternative of being exposed to the risks of Claims which could
substantially diminish, or even eliminate, the Remaining Assets;
* a combination of (i) their pro rata entitlement to the Initial Distribution Cash Assets, based upon the Take Up Assumption, which is
equivalent to 116 pence per Fayrewood Share and (ii) their pro rata entitlement to the best estimate of the value of the Remaining Assets
based on the Assumptions, representing the balance of 10 pence. As such it represents a premium of 9.09 per cent. to the Initial
Distribution Cash Assets;
* a premium of 6.33 per cent. to the Closing Price of 118.5 pence on 9 December 2008, being the last Business Day prior to the date of
this announcement;
* a premium of 9.57 per cent. to the Fayrewood share price of 115 pence per share on 3 July 2008, the last Business Day prior to the
commencement of the Offer Period; and
* a premium of 7.78 per cent. to the average of Closing Price for the one month period prior to 9 December 2008, being the last Business
Day prior to the date of this announcement.
However, Fayrewood Shareholders should note that by accepting the Cash Offer they will have no future equity participation in Fayrewood.
To the extent that the actual value of a Letchworth Ordinary Share exceeds the Best Estimate, Fayrewood Shareholders who accept the Cash
Offer will forego any right to participate in this upside. The theoretical maximum value of a Letchworth Ordinary Share is approximately 99
pence, calculated by reference to the Remaining Assets divided by the number of Letchworth Ordinary Shares that would be issued based on the
Take Up Assumption.
The Part Share Alternative offers Fayrewood Shareholders the ability to retain an equity interest in Fayrewood and a cash amount of 98
pence per Fayrewood Share. The Part Share Alternative represents:
* a cash component which is a discount of 22.22 per cent. to the Cash Offer; plus
* a Letchworth Ordinary Share.
Those Fayrewood Shareholders who elect for the Part Share Alternative will be acquiring shares in an unlisted entity, the value of which
is uncertain given the range of factors which will influence the proportion of the Remaining Assets which could ultimately be distributed to
holders of Letchworth Shares.
The Best Estimate of a Letchworth Ordinary Share is 28 pence. However, if the Assumptions prove too optimistic, it is possible that the
actual value of a Letchworth Ordinary Share will be less than the Best Estimate and if the liabilities arising from Claims exceed the amount
of the Remaining Assets, the value of a Letchworth Ordinary Share would be �Nil. Similarly, if the Assumptions prove too pessimistic the
actual value of a Letchworth Ordinary Share may exceed the Best Estimate. The theoretical maximum value of a Letchworth Ordinary Share is
approximately 99 pence, calculated by reference to the Remaining Assets divided by the number of Letchworth Ordinary Shares that would be
issued based on the Take Up Assumption.
Fayrewood Shareholders are recommended to consider carefully, in light of the own short and medium term liquidity requirements and
investment objectives, whether they wish to elect for the Part Share Alternative and are strongly advised to seek their own independent
advice and to consider, inter alia, the risk factors set out in paragraph 3.3 of this announcement before making any such election.
Having considered the advantages and disadvantages of accepting the Cash Offer versus electing for the Part Share Alternative, and
having also taken into consideration their own liquidity requirements and investment objectives, the Independent Directors have all
undertaken to elect for the Part Share Alternative. In making this decision, they recognise that the actual value of a Letchworth Ordinary
Share may be more or less than the Best Estimate and in extreme cases, could be worth between �Nil and 99 pence.
7. Recommendation of the Transaction
The Independent Directors, who have been so advised by KBC Peel Hunt, consider the terms of the Transaction to be fair and reasonable.
In providing advice to the Independent Directors, KBC Peel Hunt has taken into account their commercial assessments.
Accordingly, the Independent Directors unanimously recommend that Fayrewood Shareholders vote in favour of the Resolutions, as they
intend to do in respect of their own beneficial holdings amounting to, in aggregate, 3,314,524 Fayrewood Shares, representing 14.25 per
cent. of Fayrewood's existing issued share capital.
8. Reasons for the Transaction and Strategy of Letchworth
As a result of the Disposals, the Company had, as at 1 December 2008, total cash assets of approximately �36.6 million (based on the
Exchange Rate) (from which the costs of obtaining the BM insurance and costs of the Transaction will need to be deducted). It has been
decided at this stage not to fully distribute those cash assets by way of members' voluntary liquidation because
(a) EUR8.2 million of cash is subject to the deposit arrangement described in paragraph 4(A) and (B) above;
(b) �1 million of cash is subject to the retention arrangements described in paragraph 4(B) above; and
(c) the Company has various potential liabilities under the SPAs and the likely returns in the event of a members voluntary
liquidation would, in the view of the Independent Directors, be both reduced and delayed due to the costs and time associated with such an
arrangement and the fact that management of any Claims would be under the control of a third party that had less knowledge of and less
ability to defend any such Claims.
Letchworth was formed in order to offer Fayrewood Shareholders the ability to obtain a full cash exit for their Fayrewood shareholding
whilst also offering those Fayrewood Shareholders that elect for the Part Share Alternative the opportunity to receive some cash now, but
also to participate in the ongoing risks and rewards associated with the Remaining Assets and potential Claims.
David Kleeman believes that given his knowledge and experience of the matters and circumstances surrounding the Claims, the Company
under the control of Letchworth, would be better placed to deal with the Claims and minimise any liabilities in respect thereof than it
would be under the control of an unrelated third party.
Letchworth intends to realise the maximum cash return to Letchworth Ordinary Shareholders as soon as practicable. In order to achieve
this, the Group intends, where appropriate, to vigorously defend any claims made against it under the SPAs or otherwise and to the extent
possible reduce the duration of the warranty and indemnity liabilities in order that the Non-distributable Assets can be released earlier
than is currently required under the SPAs. Whilst Letchworth is optimistic that the Group under the control of Letchworth will be able to
minimise any liabilities arising under the SPAs or any other potential liabilities that the Group may suffer in relation to any other
matters, they also consider that it will be able to defend such claims more effectively as a private company.
In addition, the Independent Directors and the Letchworth Director believe that as a small quoted company with no operating activities,
there is little merit in maintaining Fayrewood's public market listing and that Fayrewood's cost base could be significantly reduced by
becoming a private company.
Letchworth intends to keep costs of operating the Group to a minimum. However, given the uncertainty of future interest rates, and
therefore interest income receivable from Fayrewood's cash held on deposit, it is assumed that such income will be insufficient to meet
ongoing operating costs of the Group. Therefore, the Group has set aside an additional sum which the Independent Directors consider is
sufficient to meet any such additional cash requirements of the Group prior to the return of cash to Letchworth Ordinary Shareholders.
9. Information relating to Letchworth
Letchworth was incorporated in England and Wales on 6 November 2008 with registered number 6742553. The registered office of Letchworth
is 5th Floor Carmelite 50 Victoria Embankment London EC4Y 0LS. The authorised share capital of Letchworth is �23,358 divided into 100
Letchworth Founder Shares and 23,258,000 Letchworth Ordinary Shares. The total number of Letchworth shares in issue as at the date of this
announcement is 100 Letchworth Founder Shares. At the date of this announcement there are no Letchworth Ordinary Shares in issue and since
it is not known what the take up by Fayrewood Shareholders of the Part Share Alternative will be, it is not known what the total Letchworth
Ordinary Shares will be until the Effective Date.
Letchworth was formed in order to offer Fayrewood Shareholders the ability to realise their investment in Fayrewood Shares at a premium
to the prevailing market price whilst also offering Shareholders the opportunity to choose to participate in the ongoing risks and rewards
associated with the cash assets held for distribution and potential warranty and liability claims.
Immediately following the Effective Date, Simon Wharmby, Sir Tim Chessells and Richard Templeton will join David Kleeman on the board of
Letchworth.
The Letchworth Director will draw no salary from Letchworth and the fees of the remaining Directors of Fayrewood will be significantly
reduced from 1 January 2009 from which date David Kleeman's service company will be paid an annual fee of �60,000 (reduced from �100,000 per
annum) and Richard Templeton and Sir Tim Chessells will each be paid �15,000 per annum (reduced in each case from �25,000 per annum).
Following implementation of the Scheme, the Letchworth Founder Shares will be converted into Letchworth Deferred Shares and the
Letchworth Ordinary Shares will be owned by the Fayrewood Directors, North Atlantic Value, Stefan Link, Richmond Nominees Limited and Simon
Wharmby (each of whom having irrevocably undertaken to elect for the Part Share Alternative in respect of part or all of their Fayrewood
Shares) and, subject to valid elections being made, those other Fayrewood Shareholders who elect for the Part Share Alternative.
As referred to above, Letchworth is considering applying for the admission of the Letchworth Ordinary Shares to trading on Sharemark.
Following Completion, Letchworth's strategy is to maximise the return of assets to Letchworth Ordinary Shareholders, further details of
which are set out in paragraph 8 above.
Further information on the Letchworth Articles and the rights attached to the Letchworth Shares are set out in paragraph 3.5 of this
announcement.
10. Irrevocable undertakings to accept the Transaction
In aggregate, Letchworth has received undertakings to vote in favour of the Resolutions from Fayrewood Shareholders in respect of
12,023,358 Fayrewood Shares representing approximately 51.70 per cent. of the existing issued share capital of Fayrewood. Of this,
Letchworth has received undertakings from Fayrewood Shareholders to elect for the Part Share Alternative in respect of 8,717,494 Fayrewood
Shares representing approximately 37.48 per cent. of the existing issued share capital of Fayrewood.
Details of these undertakings are as follows:
Each of the Directors has given irrevocable undertakings to Letchworth in respect of their entire holdings of Fayrewood Shares,
amounting to in aggregate 4,143,205 Fayrewood Shares, representing in aggregate approximately 17.81 per cent. of Fayrewood's existing issued
share capital, to vote in favour of the Resolutions. These irrevocable undertakings are binding in all the circumstances.
In addition, Letchworth has received irrevocable undertakings to vote in favour of the Resolutions from North Atlantic Value, Stefan
Link, Richmond Nominees Limited and Simon Wharmby amounting in aggregate to 7,880,153 Fayrewood Shares representing approximately 33.88 per
cent. of the existing issued share capital of Fayrewood.
The irrevocable undertakings given by North Atlantic Value, Stefan Link, Richmond Nominees Limited and Simon Wharmby will lapse, inter
alia, if: (i) the Scheme terminates, lapses or is withdrawn; or (ii) a person other than Letchworth (or any person acting in concert with
it) announces an offer for Fayrewood pursuant to Rule 2.5 of the City Code at a price per Fayrewood Share representing an improvement, in
financial terms, as at the date of such Rule 2.5 announcement, of at least 10 per cent. to the price per Fayrewood Share available pursuant
to the Transaction.
The following table sets out the Directors who have provided irrevocable undertakings to vote in favour of the Scheme, the number of
Fayrewood Shares that these Directors held at the date of this announcement and in what proportions they have accepted the Cash Offer or
elected for the Part Share Alternative.
Shareholder Shares held subject % of total votes to Election for Part Election for Cash
to irrevocable be cast at the Share Alternative Offer
undertakings in Meetings
respect of the
Resolutions
Mario Legorburu 3,268,020 14.05 3,268,020 Nil
David Kleeman 828,681 3.56 828,681 Nil
Keith Negal 30,245 0.13 30,245 Nil
Richard Templeton 9,000 0.04 9,000 Nil
Sir Tim Chessells 7,259 0.03 7,259 Nil
TOTAL 4,143,205 17.81 4,143,205 Nil
The following table sets out the other Fayrewood Shareholders who have provided irrevocable undertakings to vote in favour of the
Scheme, the number of Fayrewood Shares that these other Shareholders held at the date of this announcement and in what proportions they have
accepted the Cash Offer or elected for the Part Share Alternative.
Shareholder Shares held subject % of total votes to Election for Part Election for Cash
to the irrevocable be cast at the Share Alternative Offer
undertakings in Meetings
respect of the
Resolutions
North Atlantic Value Fund LLP 6,805,864 29.26 3,500,000 3,305,864
Stefan Link 474,289 2.04 474,289 Nil
Richmond Nominees Limited 400,000 1.72 400,000 Nil
Simon Wharmby 200,000 0.86 200,000 Nil
TOTAL 7,880,153 33.88 4,574,289 3,305,864
11. Directors Management and Employees
Save for the Directors, the Company has no employees.
On 31 December 2008, Mario Legorburu and Keith Negal will step down from the Board of the Company as a result of which the Board of
Fayrewood will comprise David Kleeman, Sir Tim Chessells and Richard Templeton.
Following the Scheme becoming effective, Simon Wharmby, Sir Tim Chessells and Richard Templeton will join David Kleeman on the Board of
Letchworth. The Letchworth Director and the subsequently appointed directors will draw no salary from Letchworth.
Simon Wharmby has been an institutional and corporate stockbroker for some 35 years with Sheppards, Charles Stanley and Corporate
Synergy and currently at Strand Partners. He co-authored a North Sea Oil & Energy review for some 20 years prior to concentration on a
broader range of new AIM issues. He is a member of the Securities Institute and a former LSE member.
Save as disclosed in this announcement, the effect of the Scheme on the interests of the Fayrewood Directors will not differ from its
effect on the interests of any other Fayrewood Shareholder.
12. Structure of the Transaction
(a) Introduction
The Transaction will be effected by means of a scheme of arrangement between Fayrewood and the Scheme Shareholders under Part 26 of the
2006 Act involving a reduction of capital and cancellations of share premium account and capital redemption reserve under section 135 of the
1985 Act. The terms of the Scheme are set out in full in the Scheme Document. The purpose of the Scheme is to provide for Letchworth to
become the owner of the entire issued and to be issued share capital of Fayrewood. This is to be achieved by the cancellation of the Scheme
Shares held by Scheme Shareholders and the application of the reserve arising from such cancellation in paying up in full the number of New
Fayrewood Shares which have an aggregate nominal value equal to the aggregate nominal value of the Scheme Shares cancelled, and issuing the
same to Letchworth. Holders of Scheme Shares will then receive cash on the basis set out in paragraph 2 above or cash and Letchworth
Ordinary Shares on the basis set out in paragraph 3 above.
The Cash Offer and the cash element of the Part Share Alternative will be financed out of the cash currently held by Fayrewood. As part of
the Scheme, the Company will undertake a capital reduction under section 135 of the 1985 Act, pursuant to which Fayrewood's share premium
account, capital redemption reserve and part of its issued share capital will be cancelled (the "Capital Reduction") for the purposes of
creating additional distributable reserves to enable Fayrewood to declare and pay upon the Scheme becoming effective a dividend to
Letchworth equal to the amount of cash required to satisfy the cash consideration payable to Scheme Shareholders under the Scheme.
For the Scheme (including the Capital Reduction) to become effective, a Special Resolution implementing the Scheme must be passed by
Fayrewood Shareholders at the General Meeting and the Scheme must be approved by a majority in number of those Scheme Shareholders present
and voting either in person or by proxy at the Court Meeting representing 75 per cent. or more in value of all Scheme Shares held by such
Scheme Shareholders.
The Scheme also requires the sanction of the Court, as well as satisfaction or waiver of the other Conditions set out in Appendix II of
this announcement. The Scheme will become effective in accordance with its terms on delivery of an office copy of the Court Order to the
Registrar of Companies. The Reductions of Capital involved in the Scheme requires the approval of the Special Resolution at the General
Meeting and the subsequent confirmation of the Court. The Reductions of Capital will take effect on the registration of the Court Order by
the Registrar of Companies. Upon the Scheme becoming effective, it will be binding on all Fayrewood Shareholders, irrespective of whether or
not, being entitled to do so, they attended or voted at the Court Meeting or the General Meeting.
If the Scheme becomes effective, New Fayrewood Shares will be issued to Letchworth fully paid and free from all liens, equitable
interests, charges, encumbrances and other third party rights of any nature whatsoever and together with all rights attaching to them,
including the right to receive and retain all dividends and distributions (if any) declared, made or payable after the Effective Date.
Fayrewood will not declare, make or pay any dividends or distributions prior to the Effective Date.
On the Effective Date, share certificates in respect of Fayrewood Shares will cease to be valid and should be destroyed. In addition, on
the Effective Date, entitlements to Fayrewood Shares held within the CREST system will be cancelled.
(b) The Meetings
Before the Court's approval can be sought to sanction the Scheme, the Scheme will require approval by the holders of Scheme Shares at
the Court Meeting and the passing of the Special Resolution by Fayrewood Shareholders at the General Meeting to approve the Reductions of
Capital and other related issues.
The Court Meeting
The Court Meeting, which has been convened for 10.00 a.m. on 5 January 2009, is being held at the direction of the Court to seek the
approval of Scheme Shareholders for the Scheme (with or without modification).
At the Court Meeting, voting will be by way of a poll and each Scheme Shareholder present in person or by proxy will be entitled to one
vote for each Scheme Share held. The approval required at the Court Meeting is a majority in number of those Scheme Shareholders present and
voting, either in person or by proxy, representing 75 per cent. or more in value of all Scheme Shares held by such Scheme Shareholders.
The General Meeting
The General Meeting has been convened for 10.15 a.m. on 5 January 2009 (or as soon thereafter as the Court Meeting has been concluded or
adjourned), to consider and, if thought fit, pass a special resolution (which requires votes in favour representing at least 75 per cent. of
the votes cast) to approve:
(A) the giving of authority to the Directors to take all such action as they may consider necessary or appropriate for carrying the
Scheme into effect;
(B) the cancellation of the share premium account of the Company, the capital redemption reserve of the Company and �1,104,713.01
paid up on the ordinary share capital of the Company;
(C) the reclassification of the Company*s share capital into X Shares and Y Shares;
(D) the reduction of the Company*s share capital equal to the nominal value of the Scheme Shares which are to be cancelled pursuant
to the Scheme and the subsequent issue of New Fayrewood Shares to Letchworth (or their nominee(s)) in accordance with the Scheme;
(E) the giving of authority to the Directors pursuant to section 80 of the 1985 Act to allot securities in the Company; and
(F) the declaration and payment of a dividend to the holder of the New Fayrewood Shares.
(c) The Capital Reduction
For the purposes of creating additional distributable reserves to enable Fayrewood to declare and pay upon the Scheme becoming effective
a dividend to Letchworth equal to the amount of cash required to satisfy the cash consideration payable to Scheme Shareholders under the
Scheme, the Scheme includes the Capital Reduction. Pursuant to the Capital Reduction, the Company's share premium account, capital
redemption reserve and part of its issued share capital will be cancelled.
In order to obtain the Court's confirmation of the Capital Reduction, the Company will need to demonstrate to the satisfaction of the
Court that none of its creditors (other than those who have consented to it) will be prejudiced by the Capital Reduction.
For these purposes, potential liabilities in connection with warranties and indemnities given in the SPAs must be considered. There are
set out at paragraph 4 of this announcement details of possible claims against the Company under the SPAs. In order to demonstrate to the
Court that such potential creditors will not be prejudiced, the Company proposes to undertake to the Court to retain and not distribute the
sum of approximately �2.91 million, based on the Exchange Rate, which is the sum the Independent Directors consider to be a prudent amount
to be retained in connection with such potential liabilities, until the earlier of the date upon which the Company can terminate all its
obligations in accordance with their terms and the dates on which the Company's potential liabilities under each SPA expire.
(d) Share Capital Reorganisation
The Scheme will include a reorganisation of the share capital of Fayrewood whereby, in accordance with the terms of the Scheme, each
Fayrewood Share will be reclassified as either an X Share or a Y Share as detailed in Scheme Document.
As a result of the share capital reorganisation the X Shares will carry the right to receive Cash Consideration under the Cash Offer and
the Y Shares will carry the right to receive the Reduced Cash Consideration and Letchworth Ordinary Shares under the Part Share
Alternative.
Following the reclassification of the Scheme Shares, and upon the reduction of capital, the X Shares and the Y Shares will be cancelled.
Fayrewood Shareholders will then be entitled to receive Cash Consideration under the Cash Offer and/or Reduced Cash Consideration and
Letchworth Ordinary Shares in accordance with their holdings of respectively, X Shares and Y Shares immediately prior to such cancellation.
No temporary documents of title will be issued in respect of the X Shares or the Y Shares.
(e) Conditions to the Transaction
The Conditions to the Transaction are set out in full in Appendix 1 of this announcement. In summary, the implementation of the
Transaction is conditional upon:
(i) the Scheme becoming effective by not later than 31 March 2009 or such later date as may be agreed in writing by Fayrewood
and Letchworth (and, if appropriate, as the Court may approve) failing which the Scheme will lapse;
(ii) approval of the Scheme by a majority in number of the Scheme Shareholders representing 75 per cent. or more in value of the
Scheme Shares entitled to be present and voting, either in person or by proxy, at the Court Meeting, or at any adjournment thereof;
(iii) the Special Resolution being duly passed by the requisite majority at the General Meeting or at any adjournment thereof; and
(iv) the sanction of the Scheme with or without modification, on terms acceptable to Fayrewood and Letchworth, and the subsequent
confirmation of the Reductions of Capital therein and the delivery of an office copy of the Court Order and the minute of such reductions
attached thereto and being delivered for registration to the Registrar of Companies by Fayrewood and being registered by the Registrar of
Companies.
The Transaction is also conditional upon the other Conditions set out in Appendix I of this announcement, which are not otherwise
summarised in paragraphs (i) to (iv), being satisfied or waived.
(f) Sanction of the Scheme by the Court
Under the Companies Acts, the Scheme requires the sanction of the Court and the Reductions of Capital require the confirmation of the
Court. The Court Hearing is expected to be held on 10 February 2009. Letchworth has confirmed that it will be represented by counsel at the
Court Hearing so as to consent to the Scheme and to undertake to the Court to be bound thereby.
The Scheme will become effective in accordance with its terms on delivery of an office copy of the Court Order to the Registrar of
Companies and the registration by him of the Court Order.
If the Scheme becomes effective, it will be binding on all Fayrewood Shareholders irrespective of whether or not, being entitled to do
so, they attended or voted in favour of the Scheme at the Court Meeting or in favour of the Special Resolution at the General Meeting. If
the Scheme does not become effective by 31 March 2009 (or such later date (if any) as Letchworth and Fayrewood may agree and, if
appropriate, the Court may approve) the Scheme will not become effective and the Scheme will not proceed.
13. Financing of the Transaction
The Cash Offer and the cash element of the Part Share Alternative will be financed out of the cash currently held by Fayrewood.
As part of the proposed Scheme, the Company will undertake the Capital Reduction, pursuant to which Fayrewood's share premium account,
capital redemption reserve and part of its issued share capital will be cancelled for the purposes of creating additional distributable
reserves to enable Fayrewood to declare and pay upon the Scheme becoming effective a dividend to Letchworth equal to the amount of cash
required to satisfy the cash consideration payable to Scheme Shareholders under the Scheme.
The Scheme includes the declaration of a dividend in the sum of up to �26.86 million payable to Letchworth upon the Scheme becoming
effective.
Taking into account the above, KBC Peel Hunt is therefore satisfied that the necessary financial resources are available to Letchworth
to enable it to satisfy the cash amounts to be paid to Shareholders on Completion under the Cash Offer and Part Share Alternative of the
Transaction.
14. Suspension and Cancellation of Admission to Trading of Fayrewood Shares
Application will be made to the London Stock Exchange for Fayrewood Shares to be suspended from trading on AIM with effect from 7.00
a.m. on the date of the Court Hearing. If the Scheme becomes effective based on the expected timetable set out in the Scheme Document, the
last day of dealings in Fayrewood Shares on the London Stock Exchange is expected to be 9 February 2009 (being the dealing day immediately
prior to the Court Hearing Date). The cancellation of admission to trading on AIM of the Fayrewood Shares is expected to be effective from
7.00 a.m. on 12 February 2009.
It is expected that, after cancellation of admission to trading on AIM of the Fayrewood Shares, Fayrewood will be re-registered as a
private company.
15. Interests in Fayrewood Shares
Save for David Kleeman's holdings of Fayrewood Shares neither Letchworth nor the Letchworth Director nor, so far as the Letchworth
Director is aware, any person acting in concert with Letchworth for the purposes of the Transaction, owns or controls or holds any option to
purchase, or has any arrangement in relation to Fayrewood Shares or securities convertible or exchangeable into Fayrewood Shares or options
(including traded options) in respect of, or has entered into any derivative referenced to, any such shares. For these purposes,
"arrangement" includes any indemnity or option arrangement, any agreement or understanding, formal or informal, of whatever nature, relating
to Fayrewood Shares which may be an inducement to deal or refrain from dealing in such shares.
16. Implementation Agreement
On 9 December 2008 Letchworth and Fayrewood entered into the Implementation Agreement, which sets out the arrangements for the
implementation of the Scheme and governs the relationship of the parties in relation to the acquisition of Fayrewood by Letchworth until the
Scheme becomes effective.
Amongst other things, the parties have agreed in the Implementation Agreement:
(a) to procure that their respective Boards will use all reasonable endeavours to implement the Scheme and the other matters to be
considered at the Court Meeting and the General Meeting;
(b) to have due regard to, and to take due account of, all reasonable requests from the other in relation to such matters;
(c) that the parties will cooperate with a view to obtaining and complying with all statutory or regulatory approvals, consents
and/or waivers and any regulatory clearances or approvals necessary or desirable in connection with the Scheme; and
(d) that neither party will make any announcement without the prior written consent of the other (save as required by law or
regulatory body).
Implementation of the Scheme is subject to the Conditions being satisfied prior to 31 March 2009. Pending satisfaction of the
Conditions, Fayrewood has agreed (among other things):
(a) to carry on business in the same manner as prior to the date of the Implementation Agreement; and
(b) not to pay any dividend, not to alter the authorised or issued share capital or (save as contemplated by the Scheme) amend the
memorandum and articles of association of Fayrewood or any member of the Fayrewood Group.
The Implementation Agreement provides that Fayrewood will be entitled to withdraw from the Scheme in the event of a higher competing
offer being made. The Implementation Agreement will terminate with immediate effect if any required Shareholder approval is not obtained,
the Conditions become incapable of being satisfied or are not satisfied or waived, the Scheme has not become effective by 31 March 2009 or
if the Scheme lapses or is withdrawn.
17. Inducement Fee
Fayrewood has agreed to pay to Letchworth an inducement fee, equal to the amount of all professional costs and expenses properly
incurred by Letchworth in connection with the Transaction subject to a maximum amount of �50,000 (inclusive of any VAT which is not
recoverable by the Company), if the Scheme does not become unconditional and effective.
The inducement fee shall not be payable if Letchworth withdraws the Transaction in writing (other than as a result of (i) the
Independent Directors withdrawing their recommendation of the Transaction; or (ii) a competing offer being announced after the date of this
announcement and becoming unconditional; or (iii) the Board failing to take all necessary steps to implement the Scheme).
18. Overseas Shareholders
The availability of the Transaction and the Scheme to persons resident in, or citizens of, jurisdictions outside the United Kingdom may
be affected by the laws of the relevant jurisdictions. Persons who are not resident in the United Kingdom should inform themselves about and
observe any applicable requirements. It is the responsibility of each of the Overseas Shareholders to satisfy themselves as to the full
observance of the laws of the relevant jurisdiction in connection therewith, including the obtaining of any governmental exchange control or
other consents which may be required or compliance with other necessary formalities which are required to be observed and the payment of any
issue, transfer or other taxes due in such jurisdiction.
This announcement has been prepared for the purposes of complying with English law and the City Code and the information disclosed may
be different from that which would have been disclosed if this announcement had been prepared in accordance with the laws of jurisdictions
outside England.
The availability of the Part Share Alternative to persons who are not resident in the United Kingdom may be affected by the laws of the
relevant jurisdictions in which they are located. Persons who are not resident in the United Kingdom should inform themselves of, and
observe, any applicable requirements. Any failure to comply with such applicable requirements may constitute a violation of the securities
laws of any such jurisdictions. Under the terms of the Scheme, Letchworth has the right to deem a Scheme Shareholder not to have made an
election under the Part Share Alternative in respect of such Scheme Shares as the Scheme Shareholder has purported to make such an election
where Letchworth believes that the receipt of Letchworth Ordinary Shares by that Scheme Shareholder may infringe applicable legal or
regulatory requirements or require Fayrewood or Letchworth to comply with any regulatory or other obligations which they consider to be
unduly onerous or with which they are unable to comply.
Letchworth Ordinary Shares have not been and will not be registered under the US Securities Act or under the securities laws of any
state in the United States and may not be offered or sold directly or indirectly in or into the United States unless registered under the US
Securities Act or issued pursuant to an exemption therefrom. Accordingly, notwithstanding the Part Share Alternative, all Fayrewood
Shareholders who are US Persons shall receive cash, and there shall be no issue of Letchworth Ordinary Shares to such Shareholders. Any US
Holder who elects for the Part Share Alternative will be deemed not to have so elected and shall be paid the cash consideration to which he
is entitled under the Cash Offer in respect of his Fayrewood Shares.
19. General
The Scheme Document and proxy forms for the Meetings, will be sent to Fayrewood Shareholders in due course.
Enquiries:
Letchworth Investments
David Kleeman Tel: +44(0)20 7430 9329
Fayrewood
Richard Templeton Tel: +44 (0)1398 331 215/07785 731130
KBC Peel Hunt Limited (Financial Adviser to Fayrewood)
Oliver Scott Tel: +44 (0)20 7418 8900
Richard Kauffer
Daniel Harris
Buchanan Communications (PR Adviser to Fayrewood)
Tim Anderson Tel: +44 (0)20 7466 5000
Lisa Baderoon
The Transaction will be subject to the conditions set out in Appendix I to this announcement and the full conditions and further terms
which will be set out in the Scheme Document expected to be issued in due course.
Appendix II contains the Guidance Letter from KBC Peel Hunt
Appendix III contains the sources and bases of information used in this announcement.
Appendix IV contains the definitions of certain expressions used in this announcement.
KBC Peel Hunt, which is authorised and regulated in the United Kingdom for the conduct of investment business by the Financial Services
Authority, is acting exclusively for Fayrewood and no one else in connection with the matters described in this announcement and will not be
responsible to anyone other than Fayrewood for providing the protections afforded to clients of KBC Peel Hunt nor for providing advice in
relation to the matters described in this announcement.
Further Information on the Transaction
The availability of the offer in connection with the Transaction to Fayrewood Shareholders who are not resident in the United Kingdom
may be affected by the laws of relevant jurisdictions. Fayrewood Shareholders who are not resident in the United Kingdom will need to inform
themselves about and observe any applicable requirements.
The Transaction will be subject to the applicable rules and regulations of the London Stock Exchange plc and the City Code.
This communication shall not constitute an offer to sell or the solicitation of an offer to buy securities, or the solicitation of any
vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of such jurisdiction.
City Code
Under the provisions of Rule 8.3 of the City Code, if any person is, or becomes, "interested" (directly or indirectly) in 1 per cent. or
more of any class of "relevant securities" of Letchworth or of Fayrewood, all "dealings" in any "relevant securities" of that company
(including by means of an option in respect of, or a derivative referenced to, any such "relevant securities") must be publicly disclosed by
no later than 3.30 p.m. (London time) on the Business Day following the date of the relevant transaction. This requirement will continue
until the date on which the Scheme becomes effective, the Transaction lapses or is otherwise withdrawn or on which the "offer period"
otherwise ends. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire an
"interest" in "relevant securities" of Letchworth or Fayrewood, they will be deemed to be a single person for the purpose of Rule 8.3. Under
the provisions of Rule 8.1 of the City Code, all "dealings" in "relevant securities" of Letchworth or of Fayrewood by Letchworth or Fayrewood, or by any of their respective "associates", must be
disclosed by no later than 12.00 noon (London time) on the Business Day following the date of the relevant transaction. A disclosure table,
giving details of the companies in whose "relevant securities" "dealings" should be disclosed, and the number of such securities in issue,
can be found on the Panel's website at www.thetakeoverpanel.org.uk. "Interests in securities" arise, in summary, when a person has long
economic exposure, whether conditional or absolute, to changes in price of securities. In particular, a person will be treated as having an
"interest" by virtue of the ownership or control of securities, or by virtue of any option in respect of, or derivative referenced to,
securities. Terms in quotation marks are defined in the City Code, which can also be found on the Panel's website. If you are in any doubt
as to whether or not you are required to disclose a "dealing" under Rule 8, you should consult the Panel.
Forward Looking Statements
Certain statements in this announcement regarding the proposed transaction between Letchworth and Fayrewood, the expected timetable for
completing the transaction, future financial and operating results, benefits and synergies of the transaction, future opportunities for the
combined company and products and any other statements regarding Fayrewood's or Letchworth's future expectations, beliefs, goals or
prospects constitute forward-looking statements. When used in this announcement, the words "believe", "anticipate", "should", "intend",
"plan", "will", "expects", "estimates", "projects", "positioned", "strategy", and similar expressions or statements that are not historical
facts, in each case as they relate to Letchworth and Fayrewood, the board of directors of either such company or the proposed transaction,
are intended to identify those expressions or statements as forward-looking statements. By their nature, forward looking statements involve
risk and uncertainty and the factors described in the context of such forward looking statements in this announcement could cause actual results and developments to differ materially from those
expressed in or implied by such forward looking statements.
Appendix I
Conditions and Further Terms of the Transaction
1. The Transaction will be conditional upon the Scheme becoming unconditional and effective, subject to the City Code, by not
later than 31 March 2009 or such later date as Letchworth, Fayrewood and (if required) the Court may agree in writing.
Subject to the requirements of the Panel, implementation of the Scheme will be conditional upon the following matters and accordingly
the necessary action to make the Scheme effective will not be taken unless the following conditions are satisfied or waived by Letchworth at
or prior to the Court Hearing Date:
(a) approval by a majority in number of the Independent Scheme Shareholders representing three fourths or more in value of the
Independent Scheme Shares, present and voting, either in person or by proxy, at the Court Meeting or at any adjournment of that meeting;
(b) the resolution required to implement the Scheme and other matters set out in the notice of General Meeting, being passed at the
General Meeting or at any adjournment of that meeting; and
(c) the sanction of the Scheme with or without modification, on terms acceptable to Fayrewood and Letchworth and the confirmation
of the Reductions of Capital by the Court, and the delivery of an office copy of the Court Order to the Registrar of Companies by Fayrewood
and such order and the minute of reduction approved by the Court attached to it being registered by the Registrar of Companies.
2. Fayrewood and Letchworth have agreed that, subject as stated in paragraph 4 below, the Transaction is also conditional upon the
following matters in this paragraph 2 and, accordingly, the necessary action to make the Scheme effective will not be taken unless the
following conditions are satisfied or waived, as referred to below at or prior to the Scheme being sanctioned by the Court and the Scheme
becoming effective (and in this paragraph 2 references to any matter or thing material and adverse (or any similar such phrase) shall be
material if it (i) is of such an amount that the Directors believe that such amount when aggregated with the Claims described in paragraph 4
of this announcement renders the amount of the Non-distributable Assets insufficient for the purposes of ensuring that creditors are not
prejudiced by the Capital Reduction and as a result the ability of Fayrewood to declare and pay to Letchworth a dividend sufficient to allow
Letchworth to satisfy the cash consideration payable under the Scheme is impaired, or (b) impairs in any way the ability of the Company to distribute sufficient funds to Letchworth to enable Letchworth
to satisfy the cash payable under the Scheme):
(a) save as disclosed in the announcement of its interim results for the six months ended 30 June 2008 or Fayrewood*s report and
accounts for the year ended 31 December 2007, or as publicly announced by Fayrewood by the delivery of an announcement to a Regulatory
Information Service prior to 10 December 2008, or as fairly disclosed in writing by Fayrewood to Letchworth prior to 10 December 2008, or as
known or ought reasonably to be known to David Kleeman at or prior to 10 December 2008, or otherwise which occurs as a result of a matter or
act of any member of the Fayrewood Group which occurs with the acquiescence of David Kleeman (such public announcements, disclosures,
information or acts or matters being referred to in these terms and conditions as being *revealed*), there being no provision of any
agreement, authorisation, arrangement, franchise, consent, lease, licence, permit or other instrument to which any member of the Fayrewood
Group is a party or by or to which any such member or any of its assets is or may be bound, entitled or subject, which as a result of the Transaction or because of a change in the control or management of
any member of the Fayrewood Group or
otherwise, is or is reasonably likely to result (in any case to an extent which is materially adverse in the context of the Fayrewood Group
taken as a whole) in:
(i) any indebtedness, actual or contingent, of any such member being or becoming repayable or capable of being declared
repayable immediately or earlier than its stated maturity date;
(ii) any such agreement, authorisation, arrangement, franchise, consent, licence, permit or instrument or the rights, liabilities,
obligations or interests of any such member thereunder being or becoming capable of being terminated or adversely modified or affected or
any onerous obligation arising or any materially adverse action being taken or arising or any obligation or liability arising thereunder;
(iii) the rights, liabilities, obligations or interests of any such member in or with any other person, firm, company or body (or
any arrangements or agreements relating to such rights, liabilities, obligations, interests or business) being terminated, modified or
adversely affected;
(iv) any material assets or interests of, or any asset the use of which is enjoyed by, any such member being or falling to be
disposed of or charged or ceasing to be available to any such member or any right arising under which any such asset or interest could be
required to be disposed of or charged or could cease to be available to any such member otherwise than in the ordinary course of business;
(v) the creation of any mortgage, charge or other security interest over the whole or any part of the property or assets of any
such member or any such mortgage, charge or security (whenever created, arising or having arisen) becoming enforceable or being enforced;
(vi) the value or the financial position of any member of the Fayrewood Group being materially prejudiced or adversely affected;
(vii) any liability of any member of the Fayrewood Group to make any severance, termination, bonus or other payment of any of its
officers or other senior executives; or
(viii) any such member ceasing to be able to carry on business under any name under which it presently does, and no event having
occurred which, under any provision of any such agreement, authorisation, arrangement, franchise, consent, lease, licence, permit or other
instrument to which any member of the Fayrewood Group is a party or by or to which any such member or any of its assets is or may be bound,
entitled or subject, might reasonably be expected to result in any of the events referred to in this condition (a) to an extent which is
material in the context of the Fayrewood Group taken as a whole;
(b) no government, government department or governmental, quasi-governmental, supranational, statutory, regulatory, environmental,
administrative or investigative body or authority (including, without limitation, any national anti-trust or merger control authority),
court, trade agency, professional body, association, institution or any other body or person whatsoever in any jurisdiction (each a *Third
Party* and all collectively *Third Parties*) having instituted, implemented or threatened (in writing and addressed to a member of the
Fayrewood Group), or having decided to institute, implement or threaten (in writing and addressed to a member of the Fayrewood Group), any
action, proceeding, suit, investigation, enquiry or reference or having made, proposed or enacted any statute, regulation, order or decision
or taken any steps which is reasonably likely to, as the case may be:
(i) make the Transaction or its implementation or the change of control of Fayrewood void, illegal and/or unenforceable under the
laws of any relevant jurisdiction, or otherwise,
directly or indirectly, restrain, restrict, prohibit, challenge, frustrate, delay or interfere with the same, or impose additional material
conditions or obligations with respect thereto, or otherwise require material amendment to the terms of the Transaction (including, without
limitation, taking any steps which would result in Letchworth being required to dispose of all or some of its Fayrewood Shares or restrict
the ability of Letchworth to exercise voting rights in respect of some or all of such Fayrewood Shares);
(ii) require the divestiture by Letchworth or by any member of the Fayrewood Group of all or any material portion of their
respective assets or properties or impose any limitation on the ability of any of them to own any of their respective assets or property (or
any part thereof) to an extent which is material to Letchworth or in the context of the Fayrewood Group taken as a whole, respectively;
(iii) impose any limitation on, or result in a delay in, the ability of Letchworth or any member of the Fayrewood Group directly or
indirectly to acquire or hold or exercise effectively, directly or indirectly, all or any rights of ownership in respect of shares or other
securities (or the equivalent) in any member of the Fayrewood Group or to exercise management control over any such member;
(iv) otherwise adversely affect any or all of the assets, profits, financial position or prospects of any member of the Fayrewood
Group to an extent which is material in the context of the Fayrewood Group taken as a whole;
(v) save pursuant to the Transaction, require Letchworth or any member of the Fayrewood Group to offer to acquire any shares or
other securities (or the equivalent) in any member of the Fayrewood Group owned by any Third Party;
and all applicable waiting and other time periods during which any such Third Party could decide to take, institute, implement or threaten
any action, proceeding, suit, investigation, enquiry or reference under the laws of any relevant jurisdiction or enact any such statute,
regulation, order or decision or take any steps having expired, lapsed or been terminated;
(c) all material authorisations, orders, recognitions, grants, determinations, consents, licences, confirmations, clearances,
certificates, permissions and approvals (each an *Authorisation*) which are necessary or considered appropriate by Letchworth (Letchworth
acting reasonably in considering whether any such Authorisation is appropriate) in any relevant jurisdiction for or in respect of the
Transaction (including, without limitation, its implementation) having been obtained, in terms and in a form reasonably satisfactory to
Letchworth for all appropriate Third Parties or from any persons or bodies with whom any member of the Fayrewood Group has entered into
contractual arrangements, in each case where the absence of such Authorisation from such a person might have a material adverse effect on
the Fayrewood Group taken as a whole and all such Authorisations remaining in full force and effect and there being no notice or intimation
of any intention to revoke, withdraw, withhold, suspend, restrict, modify, amend or not to renew any of the same in any case to an extent which is materially adverse in the context of the Fayrewood Group
taken as a whole;
(d) save as revealed, no member of the Fayrewood Group having since 1 October 2008:
(i) (save as between Fayrewood and wholly-owned subsidiaries of Fayrewood, or for options granted, or on the exercise of rights to
subscribe for Fayrewood Shares pursuant to the exercise of options granted or the exercise of rights under the Fayrewood Share Option
Schemes on or prior to the date hereof or for the issue of any Fayrewood Shares pursuant to the Scheme), issued, agreed to issue, authorised
or proposed the issue or grant of additional shares of any class, or securities convertible into, or rights, warrants or options to
subscribe for, or acquire, any such shares or convertible securities or redeemed, purchased or reduced or announced any proposal to redeem,
purchase or reduce any part of its share capital;
(ii) recommended, declared, paid or made or proposed to recommend, declare, pay or make any bonus, dividend or other distribution
whether payable in cash or otherwise other than to Fayrewood or wholly-owned subsidiaries of Fayrewood;
(iii) (save for transactions between Fayrewood and wholly-owned subsidiaries of Fayrewood) merged with or demerged any body
corporate or acquired or disposed of or transferred, mortgaged or charged or created any security interest over any assets or any rights,
title or interest in any asset (including shares and trade investments), or authorised or proposed or announced any intention to propose any
merger, demerger, acquisition, disposal, transfer, mortgage, charge or the creation of any security interest over the same (other than in
the ordinary course of business);
(iv) (save as between Fayrewood and wholly-owned subsidiaries of Fayrewood) made, authorised or proposed, or announced an intention
to propose, any change in its share or loan capital including the purchase or redemption of any of its own shares;
(v) issued, authorised or proposed the issue of or made any change in or to any debentures or incurred or increased any
indebtedness or become subject to a liability (actual or contingent) which in any case is outside the ordinary course of business and
material in the context of the Fayrewood Group taken as a whole;
(vi) save in connection with the Transaction, entered into, implemented, effected, varied, authorised or proposed or announced its
intention to enter into or vary any contract, reconstruction, amalgamation, scheme, commitment, merger, demerger or other similar
transaction or arrangement, in each case otherwise than in the ordinary course of business, which in any case is material in the context of
the Fayrewood Group taken as a whole;
(vii) terminated or varied the terms of any agreement or arrangement between any member of the Fayrewood Group and any other person
in a manner which is reasonably likely to have a material adverse effect on the financial position of the Fayrewood Group taken as a whole;
(viii) proposed, agreed to provide or modified the terms of any share option scheme;
(ix) entered into or changed the terms of any contract, agreement or arrangement with any director or senior executives of any
member of the Fayrewood Group which is material in the context of the whole of the Fayrewood Group taken as a whole;
(x) taken or proposed any corporate action or had any legal proceedings instituted or threatened against it in writing or petition
presented or order made for its winding-up (voluntarily or otherwise), dissolution or reorganisation or for the appointment of a receiver,
trustee, administrator, administrative receiver or similar officer of all or any material part of its assets and revenues or any analogous
or equivalent steps or proceedings in or under the laws of any jurisdiction having occurred or there having been appointed any analogous
person in any jurisdiction which in any case is material in the context of the Fayrewood Group taken as a whole;
(xi) been unable, or admitted in writing that it is unable, to pay its debts generally or commenced negotiations with one or more of
its creditors with a view to rescheduling or restructuring any of its indebtedness or having stopped or suspended (or threatened to stop or
suspend) payment of its debts generally or ceased or threatened to cease carrying on all or a substantial part of its business in any case
which is or would be material in the context of the Fayrewood Group taken as a whole;
(xii) made any material alteration to its memorandum or articles of association or other incorporation documents (other than pursuant
to the Scheme); made or agreed or consented to any significant change to the terms of the trust deeds constituting pension schemes
established for its directors and/or employees or their dependents or to the benefits which accrue or to the pensions which are payable
thereunder or to the basis on which qualification for or accrual or entitlement to such benefits or pensions are calculated or determined,
or to the basis upon which the liabilities (including pensions) of such pension schemes are funded or made, or agreed or consented to any
change to the trustees involving the appointment of a corporation which would be material in the context of the Fayrewood Group taken as a
whole;
(xiii) entered into any agreement, commitment or arrangement or passed any resolution or made any offer (which remains open for
acceptance) to enter into any agreement, commitment or arrangement or proposed or announced any intention with respect to any of the
transactions, matters or events referred to in this condition (d);
(e) save as revealed:
(i) no adverse change or deterioration having occurred in the assets, financial position or profits or prospects of any member
of the Fayrewood Group which is material in the context of the Fayrewood Group taken as a whole;
(ii) no claim being made, and no circumstance having arisen which is likely to lead to a claim being made, under the insurance of
any member of the Fayrewood Group which is or might have a material adverse effect on the taken as a whole;
(iii) no claim having been made or threatened and no litigation, arbitration proceedings, prosecution or other legal or regulatory
proceedings or investigation having been instituted, announced, implemented or threatened in writing by or against or remaining outstanding
against any member of the Fayrewood Group or to which any member of the Fayrewood Group is or is likely to become a party (whether as
plaintiff, defendant or otherwise) which has or might have a material adverse effect on the Fayrewood Group taken as a whole;
(iv) no contingent or other liability of any member of the Fayrewood Group having arisen or become apparent or increased which in
any such case is or might reasonably be expected materially or adversely to affect any member of the Fayrewood Group which in any such case
is or might be material and adverse in the context of the Fayrewood Group taken as a whole;
(v) (other than as a result of the Transaction) no enquiry or investigation by, or complaint or reference to, any Third Party
having been threatened in writing, announced, implemented, instituted by or against or remaining outstanding against or in respect of any
member of the Fayrewood Group which in any such case is or might be material and adverse in the context of the Fayrewood Group taken as a
whole;
(f) except as revealed or fairly disclosed in writing by Fayrewood to Letchworth in each case prior
to the date of the Announcement and to the extent material in any case in the context of the Fayrewood Group taken as a whole:
(i) any past or present member of the Fayrewood Group has not received any notice from a Third Party to the effect that it has not
complied with all applicable legislation or regulations of any applicable jurisdiction, all obligations in permits with regard to, and all
contractual provisions relating to, the protection of the environment including relating to the storage, carriage, disposal, discharge,
spillage or leak of waste or disposal or emission of any hazardous substance or any substance likely to impair the environment or harm human
health which non-compliance would be likely to give rise to any material liability or cost (whether actual or contingent) on the part of any
member of the Fayrewood Group or Letchworth;
(ii) any past or present member of the Fayrewood Group has not received any notice from a Third Party that there is or is likely to be
any obligation or liability (whether actual or contingent) to make good, repair, reinstate or clean up any property now or previously owned,
occupied, operated or made use of or controlled by any past or present member of the Fayrewood Group under any environmental legislation,
regulation, notice or circular or under any Third Party in any jurisdiction and which is material in the context of the Fayrewood Group
taken as a whole.
3. Fayrewood and Letchworth have agreed that, subject as stated in paragraph 4 below, the Transaction is also conditional upon
the Conditions in paragraph 2 above being satisfied at or waived prior to the time the office copy of the Court Order is delivered to the
Registrar of Companies and, accordingly, the office copy of the Court Order will not be delivered to the Registrar of Companies and the
Scheme will not become effective unless such Conditions are satisfied or waived at such time.
4. Other terms of the Transaction
Subject to the requirements of the Panel, Letchworth reserves the right to waive, in whole or in part, all or any of the above conditions
except condition 1.
Subject to the requirements of the Panel, the Transaction will lapse and the Scheme will not become effective unless the conditions set out
above are fulfilled or satisfied or (if capable of waiver) waived by Letchworth or, where appropriate, have been determined by Letchworth in
its reasonable opinion to be or to remain satisfied by the Court Hearing Date or such date as Fayrewood and Letchworth may agree and the
Court may approve.
Each of conditions 2 (a) to (f) shall be regarded as a separate condition and shall not be limited by reference to any other condition.
If Letchworth is required by the Panel to make an offer for Fayrewood Shares under the provisions of Rule 9 of the Code, Letchworth may make
such alterations to the conditions as are necessary to comply with the provisions of that Rule, including (without limitation) an acceptance
condition of more than 50 per cent. of the Fayrewood Shares to which the Takeover Offer relates.
The Transaction and the Scheme will be governed by English law. The City Code applies to the Transaction.
Appendix II
Guidance Letter
The Director
Letchworth Investments Limited
5th Floor Carmelite
50 Victoria Embankment
London
EC4Y 0LS
9 December 2008
Recommended offer by Letchworth Investments Ltd for Fayrewood plc
Dear Sir,
You have requested our opinion as to our best estimate of the value of a Letchworth Ordinary Share (the "Best Estimate") in connection
with the Transaction.
Capitalised terms used in this letter will, unless otherwise stated, have the same meaning given to them in the announcement to be made
by Fayrewood on 10 December 2008 in relation to the Scheme ("the Announcement").
Under the terms of the Transaction:
(a) the Cash Offer will be made on the basis that Fayrewood Shareholders will receive 126 pence in cash for each Fayrewood Share
held by them, which values the entire issued share capital of Fayrewood at �29.30 million; and
(b) Fayrewood Shareholders will be entitled to elect, in respect of some or all of their Fayrewood Shares, to receive 98 pence in
cash and one Letchworth Ordinary Share for each Fayrewood Share instead of the cash to which they would otherwise be entitled under the Cash
Offer.
Our Best Estimate is dependent, inter alia, upon the take up of the Part Share Alternative by Fayrewood Shareholders. In determining our
Best Estimate, we have assumed that all Fayrewood Shareholders will opt for the Cash Offer other than those who have irrevocably undertaken
to elect for the Part Share Alternative as set out above representing approximately 37.48 per cent. of the total issued share capital of the
Company.
Our Best Estimate as at 9 December 2008, is also based upon the estimated net present value of the expected Remaining Assets available
for distribution on the Subsequent Distribution Dates. In determining these amounts, KBC Peel Hunt has made a number of assumptions
including (but not limited to):
* the likely liabilities arising from the Known Claims. The Boards of Letchworth and Fayrewood have confirmed that all Claims will be
vigorously defended where they consider it appropriate and in the best interests of Letchworth Ordinary Shareholders, to maximise their
return;
* liabilities arising from Unknown Claims which are made following the date of this letter;
* legal and other costs relating to responding to, handling, contesting and settling any claims;
* the expected financial position of the Group on the Effective Date and thereafter including income from, and operating and other
costs of, the Group until the Subsequent Distribution Dates;
* the Subsequent Distribution Dates;
* the valuation techniques used to determine the net present value of the Remaining Assets. In assessing this present value, KBC Peel
Hunt has used a discounted cash flow model. The discount rate, which reflects the time value of money and risks associated with the
distribution of the Remaining Assets, applied to such model has a significant effect on the present value of the Remaining Assets;
* the Euro/Sterling exchange rate which relate to liabilities payable in respect of the UMD, BV and BM Warranties;
* no account has been taken of the dealing costs a holder of Letchworth Ordinary Shares might incur and it has been assumed that there
is no dealing spread (the difference between a buying and selling price quoted by a market maker); and
* we have not taken account of the effects of any taxation exemptions, allowances or relief's available for the purposes of income,
capital gains, inheritance or any other applicable tax, duty or levy.
In arriving at our Best Estimate, we have, among other things:
(i) reviewed certain publicly available financial statements and financial information relating to Fayrewood;
(ii) reviewed certain information provided by the Independent Directors relating to the strength of Known Claims and the
likelihood of Unknown Claims arising, including correspondence, notices and other documentation relating to the management of claims in
relation to the SPAs;
(iii) discussed and reviewed certain financial projections provided by the Independent Directors and other Fayrewood employees
concerning the anticipated financial position, prospects and cash flows of the Group;
(iv) held discussions with David Kleeman, the Independent Directors of Fayrewood and Fayrewood consultants regarding the likely
outcome and risks associated with each of the Known Claims;
(v) held discussions with David Kleeman about the ongoing costs associated with the running and operation of Letchworth; and
(vi) considered any other appropriate information.
The Best Estimate does not represent the actual value of a Letchworth Ordinary Share and a number of assumptions have been made in
producing it.
We have relied on, and assumed, without independent verification, the accuracy and completeness of the information reviewed by us for
the purposes of this opinion.
It has been assumed that, save for any liabilities associated with the Transaction, Letchworth has no material assets or liabilities. As
a result we have not made any independent valuation or appraisal of the business, operational or financial condition, including the assets
and liabilities of Letchworth, nor have we sought or been provided with any such valuation or appraisal. Furthermore, we have commissioned
no independent legal investigation of, and we have received no independent legal advice in relation to, the strength of Known Claims,
likelihood of Unknown Claims or otherwise. Accordingly, we make no representation or warranty, express or implied, in this regard. The Best
Estimate is necessarily based on financial, economic, market and other conditions in effect, and the information made available to us, as at
9 December 2008 (being the date of this letter and the latest practicable date prior to the release of the Announcement).
On the basis of and subject to the foregoing, if a Letchworth Ordinary Share had been in issue as at 9 December 2008 (being the date of
this letter and the last practicable business day prior to the publication of the Announcement), our Best Estimate would have been
approximately 28 pence.
If the Assumptions prove too optimistic, it is possible that the actual value of a Letchworth Ordinary Share will be less than the Best
Estimate and if the liabilities arising from Claims exceed the amount of the Remaining Assets, the value of a Letchworth Ordinary Share
would be �Nil. Similarly, if the Assumptions prove too pessimistic the actual value of a Letchworth Ordinary Share may exceed the Best
Estimate. The maximum theoretical value of a Letchworth Ordinary Share is approximately 99 pence, calculated by reference to the Remaining
Assets divided by the number of Letchworth Ordinary Shares that would be issued based on the Take Up Assumption.
The Best Estimate, as contained in this letter, is not a formal valuation and should not be relied upon as such by any party and KBC
Peel Hunt expressly disclaims any liability to any third party with respect to the contents of this letter. KBC Peel Hunt will not be
responsible to anyone other than Letchworth for providing the protections afforded to clients of KBC Peel Hunt, in connection with this
Guidance Letter.
In providing the Best Estimate, KBC Peel Hunt expresses no opinion or recommendation to any person as to whether or not they should make
any election for the Part Share Alternative. However, the Independent Directors, who have been so advised by KBC Peel Hunt, consider the
terms of the Transaction to be fair and reasonable. In providing advice to the Independent Directors, KBC Peel Hunt has taken into account
their commercial assessments.
Yours faithfully
Oliver Scott
Director of Corporate Finance
For and on behalf of KBC Peel Hunt Ltd
Appendix III
Bases of Calculation and Sources of Information
1. The value placed by the cash element of the Transaction on the existing issued share capital, and other statements made by
reference to the existing share capital, of Fayrewood are based on 23,257,116 according to Rule 26 disclosure Fayrewood Shares in issue,
being the number of shares in issue publicly stated by Fayrewood on 17 October 2008.
2. Unless otherwise stated, the financial information and other information on Fayrewood included in this announcement has been
extracted or derived, without material adjustment, from the audited consolidated financial statements or unaudited interim statements, for
Fayrewood for the relevant financial periods.
3. Unless otherwise stated, all historic share prices quoted for Fayrewood Shares have been sourced from the Daily Official List
and represent closing middle market prices for Fayrewood Shares on the relevant dates.
Appendix IV
Definitions
The following definitions apply throughout this announcement unless the context otherwise requires:
1985 Act means the Companies Act 1985, as amended
2006 Act means the Companies Act 2006
Assumptions the assumptions underlying the determination of the Best
Estimate as set out in the Guidance Letter
Best Estimate the best estimate of the value of a Letchworth Ordinary Share as
referred to in the Guidance Letter
BM Banque Magnetique SAS, a wholly owned subsidiary of the Company
immediately prior to completion of the BM SPA
BM Purchasers Gem Logistics Limited and Gem Distribution Limited
BM SPA the sale and purchase agreements entered into between Fayrewood
and the BM Purchasers on 9 November 2007 relating to the sale of
BM, a wholly owned subsidiary of Fayrewood
Board or Fayrewood Board the Directors of Fayrewood as at the date of this announcement
Business Day a day, other than a Saturday, Sunday or public holiday, on which
banks are open for business in the City of London
BM SPA the sale and purchase agreements entered into between Fayrewood
and the BM Purchasers on 9 November 2007 relating to the sale of
Banque Magnetique SA, a wholly owned subsidiary of Fayrewood
BV SPA the sale and purchase agreements entered into between Fayrewood
and Bft Nederland B.V. on 16 May 2007 relating to the sale of
Fayrewood (Overseas Holdings) BV, a wholly owned subsidiary of
Fayrewood
Capital Reduction the cancellation of share premium account, cancellation of
capital redemption reserve and the reduction of the share
capital of the Company under section 135 of the 1985 Act as
provided for in paragraph 12 of this announcement
Capita Registrars a trading name of Capita Registrars Limited
Cash Consideration the cash consideration due to a Fayrewood Shareholder under the
Cash Offer in connection with the cancellation of his Scheme
Shares pursuant to the Scheme
Cash Offer that part of the Transaction that constitutes an offer by
Letchworth for Fayrewood Shares which is solely in cash
certificated form or in in relation to a share, not in uncertificated form in CREST
certificated form
City Code the City Code on Takeovers and Mergers
Claims claims made against the Group in connection with the Warranties
and otherwise
Closing Price middle market closing price of a Fayrewood Share as derived from
the Daily Official List
Companies Acts together the 1985 Act and the 2006 Act
Completion completion of the payment of cash consideration due
to Fayrewood Shareholders in accordance with the Scheme
Completion Date the date of Completion
Conditions the conditions of the Transaction set out in Appendix 1 of this
announcement
Court the High Court of Justice in England and Wales
Court Hearing the hearing by the Court of the application to confirm the
Reductions of Capital and sanction the Scheme and to grant the
Court Order
Court Hearing Date the date of commencement of the Court Hearing
Court Meeting the meeting of the Scheme Shareholders to be convened by order
of the Court pursuant to Part 26 of the 2006 Act to consider
and, if thought fit, approve the Scheme including any
adjournment hearing
Court Order the order of the Court confirming the Reductions of Capital
under section 137 of the 1985 Act and sanctioning the Scheme
under Part 26 of the 2006 Act
CREST the system for the paperless settlement of trades in securities
and the holding of uncertificated securities operated by CRESTCo
in accordance with the Uncertificated Securities Regulations
2001 (SI2001 No. 3755)
CRESTCo Euroclear Limited
Daily Official List the daily official list of the London Stock Exchange
Directors or Fayrewood the directors of Fayrewood and Director means any of them
Directors
Disposals the sale of the various subsidiary companies of the Company
pursuant to the SPAs
Effective Date the day on which the Scheme becomes effective in accordance with
the terms of the Scheme
Exchange Rate is �1 = EUR1.15 (and vice versa)
Financial Services Authority the Financial Services Authority of the UK in its capacity as
or FSA the competent authority for the purposes of Part VI of FSMA and
in the exercise of its functions in respect of admission to the
Official List otherwise than in accordance with Part VI of FSMA
Fayrewood or the Company Fayrewood plc a company incorporated in England and Wales with
registered number 03057247
Fayrewood Articles the articles of association of Fayrewood from time to time
Fayrewood Shares ordinary shares of 5 pence each in the capital of Fayrewood
Fayrewood Shareholders or the holders of Fayrewood Shares
Shareholders
FSMA the Financial Services and Markets Act 2000 (as amended)
General Meeting the extraordinary general meeting of the Fayrewood Shareholders
to be held in connection with the Scheme, notice of which is set
out in the Scheme Document
Group or Fayrewood Group Fayrewood and its subsidiaries, and, following the Effective
Date, shall include Letchworth
Guidance Letter the letter from KBC Peel Hunt to the Letchworth Director set out
in Appendix II of this announcement and in the Scheme Document
HMRC HM Revenue & Customs
IFRS International Financial Reporting Standards as adopted by the
European Union
Implementation Agreement the implementation agreement made between Fayrewood and
Letchworth dated 9 December 2008 relating to, amongst other
things, the implementation of the Transaction and the Scheme
Independent Board or Directors each of Sir Tim Chessells, Richard Templeton, Keith Negal and
Mario Legorburu each of whom is a non-executive Director of
Fayrewood not having a conflict of interest in relation to the
Transaction
Independent Competing Offer an offer made by or on behalf of a third party for the entire
issued ordinary share capital of Fayrewood at a price per
Fayrewood Share which exceeds the amount of the Cash Offer by
ten per cent. or more
Inducement Fee Agreement the inducement fee agreement entered into between Fayrewood and
Letchworth on 18 November 2008
Initial Distribution Cash the total gross cash assets of the Company available for
Assets distribution by the Company as at 1 December 2008, (being the
total gross cash assets of the Company less the Remaining
Assets)
ISI Interface Solutions International Limited, being a wholly owned
subsidiary of Fayrewood immediately prior to completion of the
ISI SPA
ISI Purchasers Specialist Computer Holdings Plc and Prime Properties
Developments Limited
ISI SPA the sale and purchase agreement entered into between (1) the
Company and (2) the ISI Purchasers on 3 July 2008 for the sale
of ISI and SLS;
KBC Peel Hunt KBC Peel Hunt Ltd
Known Claims all claims notified to Fayrewood under the SPAs or those that
the Directors of Fayrewood anticipate are likely to be made
Letchworth Letchworth Investments Limited, a company incorporated in
England and Wales with registered number 6742553
Letchworth Articles the articles of association of Letchworth
Letchworth Director David Kleeman and following the Effective Date any director or
directors of Letchworth from time to time
Letchworth Founder Shares 100 Founder shares of �1 each in the share capital of Letchworth
Letchworth Ordinary Shares ordinary shares of 0.1 pence each in the capital of Letchworth
Letchworth Deferred Shares deferred shares of �1 each in the share capital of Letchworth
ordinary upon the conversion of the Letchworth Founder Shares
London Stock Exchange London Stock Exchange plc
Meetings the Court Meeting and the General Meeting and Meeting means
either of them
New Fayrewood Shares the new ordinary shares of 5 pence each in the capital of
Fayrewood to be issued and credited as fully paid pursuant to
the Scheme
Non-distributable Assets cash assets of the Company which are the subject of retention
obligations under the SPAs and to undertakings to the Court in
connection with the Capital Reduction
North Atlantic Value North Atlantic Value LLP
Notice of Court Meeting means the notice of court meeting set out in the Scheme Document
Notice of General Meeting the notice of General Meeting set out in the Scheme Document
Offer Period the date commencing on 4 July 2008 and ending on the Effective
Date
Overseas Shareholders Fayrewood Shareholders whose registered addresses are outside
the UK or who are citizens or residents of countries other than
the UK
Panel The Panel on Takeovers and Mergers
Part Share Alternative the facility provided under the Transaction whereby a Fayrewood
Shareholder may elect, in respect of some or all of their
Fayrewood Shares, to receive 98 pence in cash per Fayrewood
Share plus one Letchworth Ordinary Share, together in lieu of
the cash consideration to which he would otherwise be entitled
under the terms of the Cash Offer
Pounds or � or sterling UK pounds sterling, the lawful currency of the UK
Recognised investment exchange an investment exchange recognised by the FSA
Reduced Cash Consideration the cash consideration payable by Letchworth for the
cancellation of Scheme Shares where the holder of the Scheme
Shares has elected for the Part Share Alternative
Reductions of Capital the Capital Reduction and the reduction of the share capital of
Fayrewood associated with the cancellation and extinguishing of
the Scheme Shares provided for in clause 3 of the Scheme under
section 135 of the 1985 Act
Registrar of Companies the Registrar of Companies in England and Wales
Regulatory Information Service any of the services set out in schedule 12 of the Listing Rules
Remaining Assets the assets to be retained by the Company at Completion being the
Non-distributable Assets and the sum to be retained in respect
of operating costs as described in paragraph 4 of this
announcement
Resolutions the resolutions to be proposed at the Meetings to give effect to
the Scheme
Scheme Document the document proposed to be despatched by Fayrewood to Fayrewood
Shareholders containing the terms and conditions of the
Transaction, an explanatory statement in relation to the Scheme
and certain information about Fayrewood and Letchworth and
containing the Scheme and notices of the Meetings
Scheme or Scheme Arrangement the scheme of arrangement proposed to be made under Part 26 of
the 2006 Act between Fayrewood and the holders of Scheme Shares
as set out in the Scheme Document, with or subject to any
modification, addition or condition approved or imposed by the
Court and agreed to by Fayrewood and Letchworth and
incorporating a reduction of capital under section 135 of the
1985 Act
Scheme Shareholders the holders of Scheme Shares
Scheme Shares means:
(i) the Fayrewood Shares in issue at the date of this
announcement;
(ii) any Fayrewood Shares issued after the date of this
announcement and before the Voting Record Time; and
(iii) any Fayrewood Shares issued at or after the Voting Record
Time but on or before the Scheme record time (expected to be
at 6:00pm on 9 February 2009) in respect of which the original
or any subsequent holders thereof are, or shall have agreed in
writing to be, bound by the Scheme, save in each case any
Fayrewood Share(s) registered in the name of Letchworth
Share Capital Reclassification the reclassification of the Fayrewood Shares into X Shares and Y
Shares as provided for in clause 2 of the Scheme
Special Resolution means the special resolution set out in the Notice of General
Meeting to be proposed at the General Meeting to approve,
amongst other things, the Scheme
SLS Systems Loan Services Limited, being a wholly owned subsidiary
of Fayrewood immediately prior to completion of the ISI SPA
SPAs the BM, BV, UMD and ISI SPAs
Stock and Debtor Provisions has the meaning given in paragraph 4(C) of this announcement
Subsequent Distribution Dates the dates on which Letchworth makes further cash distributions
from the Remaining Assets
Subsidiary and subsidiary have the meanings given by the 2006 Act
undertaking
Take Up Assumption the assumption made for the purposes of the Estimate of Value
that Fayrewood Shareholders will elect for the Part Share
Alternative in respect of such number of Fayrewood Shares as
shall equal 37.48 per cent. of the total issued share capital of
Fayrewood
Transaction the offer to be made by Letchworth to acquire the entire issued
ordinary share capital of Fayrewood by way of the Cash Offer and
the Part Share Alternative
UMD UMD S.A.U., a wholly owned subsidiary of Fayrewood immediately
prior to completion of the UMD SPA
UMD Purchasers Yedraint, S.L.U. and Esprinet, SpA
UMD SPA the sale and purchase agreement entered into between Fayrewood
(Overseas Holdings) BV and the UMD Purchasers on 17 October 2006
relating to the sale of UMD SAU
Uncertificated or in in relation to a share, recorded on the relevant register as
uncertificated form being held in uncertificated form in CREST and title to which
may be transferred by means of CREST
United Kingdom or UK means the United Kingdom of Great Britain and Northern Ireland
Unknown Claims claims made against the Group in connection with the SPAs and
otherwise which may in the future be made but are currently
unknown by Fayrewood
US Exchange Act persons resident in the United States shall be determined as
provided in Rule 12g5-1 of the US Exchange Act, except that
securities held on record by a broker, dealer, bank or nominee
for any of them for the accounts of customers resident in the
United States shall be counted as held in the United States by
the number of separate accounts for which the securities are
held the United States Securities Exchange Act of 1934, as
amended, and rules and regulations thereunder
US Holder a holder of the applicable security including a US Person who is
resident in the United States, where securities held on record
by
US Person a US Person as defined in Rule 902(k) under Regulation S of the
US Securities Act, including, but not limited to, any natural
person in the United States
US Securities Act the United States Securities Act of 1933, as amended, and rules
and regulations thereunder
Voting Record Time 6.00 p.m. on the day which is two days before the date of the
Court Meeting or, if such Court Meeting is adjourned,6.00 p.m.
on the day which is two days before the day of such adjourned
meeting
Warranty(ies) warranties given in the SPAs (and includes, where relevant, any
indemnities and, in the case of the ISI SPA, the Stock and
Debtor Protection Provisions)
This information is provided by RNS
The company news service from the London Stock Exchange
END
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