RNS Number:3326N
Mentmore PLC
09 July 2003
EMBARGOED UNTIL 7.00am, 9 July 2003
9 July 2003
(Not for release, publication or distribution in or into the United States,
Canada Australia or Japan)
Mentmore plc ("Mentmore")
Proposed Disposal of the Serviced Space Division ("SBS") and Capital
Reorganisation
HIGHLIGHTS
* Mentmore has conditionally agreed to sell its Serviced Business Space
division to Ashtenne Holdings plc for #189.0 million less Debt.
* In line with its strategy stated in December 2002, the Disposal will leave
Mentmore focused on its personal storage and records management operations,
two valuable businesses with good prospects for long-term growth.
* The net cash proceeds of the Disposal will be used to reduce debt and
support growth of the personal storage and records management businesses.
* Mentmore announces a Capital Reorganisation to eliminate a deficit on
distributable reserves which arises as a consequence of the disposal
enabling the Group to resume dividend payments and return cash to
shareholders when appropriate.
Commenting on the Disposal and the Capital Reorganisation, Martin Nye, Chief
Executive of Mentmore, said:
"I am delighted to be able to announce the successful disposal of Serviced
Business Space division today. We have undertaken a comprehensive sale process
and the transaction announced today optimises value for Mentmore shareholders.
After the disposal, we will have two strong businesses with a leading market
position in the growing UK personal storage market, and in Iron Mountain Europe,
a European leader in Records Management.
"We will improve the operational performance of personal storage, taking
advantage of attractive growth opportunities and continue to support the
successful growth of IME, while ensuring that the value of our shareholding is
fully recognised. Once approved, the capital reorganisation will enable us to
implement our intention of resuming dividend payments and returning cash to
shareholders when appropriate."
An analyst presentation on Mentmore's disposal of SBS and the preliminary
results for the year ended 30 April 2003 will be held at 9:00 a.m. on 9 July at
the offices of Buchanan Communications Limited, 107 Cheapside, London EC2V 6DN.
This summary should be read in conjunction with the full text of the following
announcement.
Press enquiries:
Mentmore plc
Nick Smith, Chairman 020 8946 3159
Martin Nye, Chief Executive
Clive Drysdale, Finance Director
Bridgewell Limited
Greg Aldridge 020 7003 3102
ABN AMRO Corporate Finance Limited
Phillip Rose 020 7678 8000
Manny Chohhan
Hoare Govett Limited
Alexander Garton 020 7678 8000
Buchanan Communications
Charles Ryland 020 7466 5000
Catherine Miles
Bridgewell Limited, which is regulated in the United Kingdom by The Financial
Services Authority, is acting for Mentmore and no one else in connection with
the Disposal and will not be responsible to anyone other than Mentmore for
providing protections afforded to clients of Bridgewell Limited or for providing
advice in relation to the Disposal.
ABN AMRO Corporate Finance Limited, which is regulated in the United Kingdom by
The Financial Services Authority, is acting for Mentmore and no one else in
connection with the Disposal and will not be responsible to anyone other than
Mentmore for providing protections afforded to clients of ABN AMRO Corporate
Finance Limited or for providing advice in relation to the Disposal.
9 July 2003
(Not for release, publication or distribution in or into the United States,
Canada Australia or Japan)
Proposed Disposal of Mentmore's SBS division and Capital Reorganisation
1. Introduction
Following the announcement on 3 December 2002 that the Group planned to
focus on its personal storage and records management operations, your Board
is pleased to announce that it has conditionally agreed to sell its SBS
division to Ashtenne Holdings plc for #189.0 million less Debt. Proceeds
from the Disposal will be used to reduce Group borrowings, enabling it to
support growth within the Group's personal storage and records management
divisions, whilst affording the Group the flexibility to optimise its
capital structure in due course.
Your Board also today announces the Group's results for the year ended 30
April 2003.
There is a provision for impairment and exceptional costs arising on the
Disposal of #61.7 million as a result of the impairment of goodwill arising
on the acquisition of Birkby plc in 1999. The Company had a deficit on its
distributable reserves of #28.5 million at 30 April 2003. Your Board
therefore today also announces a Capital Reorganisation, which, subject to
the approval of Shareholders and confirmation by the High Court, will
eliminate this deficit, enabling dividend payments to be made and a return
of capital to Shareholders when appropriate. The Capital Reorganisation
will be put to Shareholders at the AGM, which will take place on 20 August
2003.
In view of its size relative to the market valuation of Mentmore, the
Disposal is conditional, inter alia, on approval by Shareholders. A notice
convening an Extraordinary General Meeting to seek Shareholder approval for
the Disposal will be sent to Shareholders today. The Disposal is also
conditional on approval by the shareholders of Ashtenne.
2. Background to and reasons for the Disposal
On 3 December 2002, Mentmore announced that it intended to dispose of SBS
following a full review of the Group's strategic options. This review noted
that, notwithstanding significant investment in SBS over a number of years,
returns would not meet those originally anticipated. The review concluded
that the Group should focus on its personal storage and records management
operations; these offer stronger market positions and higher future returns
than SBS. The Board therefore decided to take advantage of beneficial
market conditions for industrial properties of the type comprising SBS by
disposing of the division. A comprehensive sale process has been conducted
and the Directors believe that the transaction announced today optimises
value for Shareholders.
3. Information on the Continuing Group
The Continuing Group will comprise spaces personal storage, a strong brand
with a leading market position in the growing UK personal storage market
and Iron Mountain Europe ("IME"), a European leader in records
management.
In personal storage, the Group has 46 centres in the UK and 7 centres in
Paris providing self-managed storage units for over 16,000 customers. It is
one of the leading providers of personal storage space in Europe. The
personal storage division accounted in aggregate for revenues of #26.0
million and operating profit before goodwill amortisation and exceptional
items of #8.0 million in the year ended 30 April 2003 and had operational
net assets of #119.9 million as at 30 April 2003.
Records management is conducted through IME, a joint venture in which
Mentmore owns 49.9%. The joint venture partner is Iron Mountain
Incorporated, the world's leading records management company. IME operates
in the UK and a number of countries in continental Europe and is one of the
largest providers of records management services in Europe. The Group's
share of the operating profit before goodwill amortisation and exceptional
items of IME in the year ended 30 April 2003 was #5.6 million.
The following table shows the performance of the two divisions of the
Continuing Group since 2000.
Year to 30 April 2000 2001 2002 2003
#m #m #m #m
________________________________________________________________________________
Personal storage
Turnover 10.6 16.3 20.9 26.0
Operating profit 5.1 7.2 7.6 8.0
Records Management
Operating profit 2.4 2.0 3.5 5.6
________________________________________________________________________________
Notes
Operating profit figures are stated before goodwill amortisation and
exceptional items
Records management figures are Mentmore's shares of the operating profit
from its 49.9 per cent. holding in the joint venture
The Group today reported turnover of #82.1 million and total operating
profit before goodwill and exceptional items of #31.1 million, of which 68%
and 56% respectively were represented by SBS. The Disposal will
substantially reduce the size of the Group's operations but the directors
believe that it should lead to a faster growing business. In addition, the
reduction of debt made possible through the use of the proceeds of the
Disposal will reduce the Group's interest charges and gearing.
4. Information on the Disposal
The SBS division comprises Birkby and In Shops and each of their respective
subsidiaries provides industrial, office and retail accommodation to a wide
range of business customers, but is primarily focused on serving the needs
of small and medium sized enterprises.
Birkby comprises the Imex and Argo business units and provides industrial
space, workshops, offices and ancillary services to approximately 3,500
customers. The combined Imex and Argo portfolio comprises 167 properties,
mostly in Scotland, the North of England and the Midlands, with an
aggregate area of approximately 6.7 million square feet. Argo is a
sub-division of the above portfolio comprising 16 sites, offering manned
office and light industrial space on a nationwide basis with a greater
provision of services.
In Shops manages 58 sites, primarily indoor markets. Sites range from
15,000 to 40,000 square feet in size resulting in a total portfolio size of
approximately 1.4 million square feet.
The SBS division accounted in aggregate for revenues in the year ended 30
April 2003 of #56.1 million (2002: #53.6 million) and operating profit
before goodwill amortisation and exceptional items of #17.5 million (2002:
#18.2 million) and had total operational net assets of #197.0 million as at
30 April 2003 (2002: #248.7 million). The financial information contained
within the accountants' report has been adjusted for the allocation of head
office costs and certain properties which are to be retained by the Group.
The assets that are the subject of the Disposal accounted for revenues in
the year ended 30 April 2003 of #53.8 million (2002: 52.6 million) and
operating profit before amortisation of goodwill and exceptional items of
#17.3 million (2002: #16.2 million) and had total net assets of #168.5
million as at 30 April 2003 (2002: #155.0 million).
5. Information on the Purchaser
Ashtenne is a property investment, development and management business. It
is listed on the London Stock Exchange with a market capitalisation of
approximately #190 million. As at 31 December 2002, Ashtenne owned or held
in partnerships properties with a value of approximately #580 million.
Ashtenne's property portfolio comprises predominantly industrial estates
but also includes substantial holdings of land, residential, office and
retail property.
Ashtenne's business strategy is divided into two areas. The first is
industrial property fund management and partnerships which aims to provide
Ashtenne with cashflow from its share of net rental income, management fees
and performance fees. Ashtenne's remaining capital is invested directly in
properties, typically mixed use, which are more complex acquisitions and
opportunistic property investments.
6. Principal terms and conditions of the Disposal
The Disposal is conditional upon the approval of shareholders of both
Mentmore and Ashtenne. In addition, it has been agreed that if either
company does not obtain approval from its own shareholders it will pay the
other party a cash contribution of #2 million towards costs.
The consideration is #189.0 million less Debt which is estimated at #6.5
million. Immediately upon Completion, the consideration (other than the
Additional Consideration) is payable, with the exception of #0.5 million
of the estimated Debt. This #0.5 million will become payable on agreement
between Mentmore and Ashtenne of a Completion Statement, such statement to
be agreed within thirty days of Completion.
The Additional Consideration will be payable when the property at
Brunswick Park, Sefton Street, Liverpool ("the Brunswick Property"),
currently owned by Imex, is sold after exchange of the Disposal Agreement.
The Additional Consideration will be a sum equal to the sale price of the
Brunswick Property, less the costs of sale. The Brunswick Property
currently has a book value of #1.8 million, which is the amount included
in the gross consideration of #189.0 million. It is anticipated that its
value on a sale will be in excess of that amount. The consideration of
#189.0 million includes the Additional Consideration.
7. Financial effects of the Disposal
After allowing for estimated transaction expenses of #6.1 million, the
Company will receive net cash proceeds from the Disposal of approximately
#176.4 million. The book value of the net assets of SBS which are the
subject of the Disposal was #168.5 million as at 30 April 2003 but this
figure excludes goodwill of #64.2 million arising from the acquisition of
Birkby in 1999.
The Disposal is expected to result in a loss before taxation to the Group
of approximately #61.7 million. The Disposal will also result in a loss to
the Company and this results in a deficit in the Company's distributable
reserves of #28.5 million as at 30 April 2003. The Company will not be
able to pay dividends while this deficit persists. Measures to address
this are set out below.
8. Use of Proceeds
The net cash proceeds of the Disposal will immediately be used to reduce
the Company's debt.
In addition, amended banking arrangements have been negotiated for the
Continuing Group which will support the general working capital
requirements and growth within the Continuing Group. This may involve
proceeds being used to fund organic growth and if the Directors consider
such investments appropriate, acquisitions within the personal storage and
records management sectors.
Your Board intends to optimise the Group's capital structure, including an
intention to return cash to Shareholders when appropriate.
9. Capital Reorganisation and authority to purchase own shares
As a result of the loss on the Disposal referred to above, there is a
deficit in the Company's distributable reserves of #28.5 million as at 30
April 2003. The Company will have no distributable reserves available to
it unless and until the steps outlined below are taken to eliminate the
accumulated deficit on its profit and loss reserves.
As at 30 April 2003, the amount credited to the Company's share premium
account stood at #130.4 million. The Companies Act 1985 imposes
limitations on the use of a Company's capital reserves (including its
share premium account) which prevent them from being distributed to
shareholders. The Company may however, with the approval of its
Shareholders in general meeting and the confirmation of the High Court,
reduce its share premium account, use the reserve so created to eliminate
the accumulated deficit on the profit and loss account in its balance
sheet and create a distributable reserve.
The Company proposes to seek the approval of Shareholders and the
confirmation of the High Court to reduce its share premium account by #100
million. The distributable reserve thereby created will be used by the
Company to eliminate the deficit on its profit and loss account of #28.5
million and will also leave the Company with net distributable reserves of
#71.5 million. These distributable reserves will allow the Company to
resume paying dividends if the Capital Reorganisation is approved by
Shareholders and by the High Court. It would be the Board's intention to
resume dividend payments and to pay a one-off special interim dividend of
0.89 pence per share in lieu of this year's final dividend as soon as is
reasonably practicable after the requisite approvals for the Capital
Reorganisation are obtained. This special dividend, taken together with
the interim dividend of 0.425 pence per share paid in April, represents an
increase of 5% on the total dividend paid last year.
In seeking the High Court's confirmation, the Company will be required to
give such undertakings as the High Court may require for the protection of
the Company's creditors. These undertakings may include the depositing of
monies in a blocked account or the giving of guarantees in relation to any
creditors that do not consent to the proposed reduction of the Company's
share premium account.
At its 2003 Annual General Meeting, the Company also intends to seek
authority from Shareholders for the authority to purchase up to 10.0% of
its own ordinary Shares, for subsequent cancellation. The Directors will
only use this authority if, in the light of market conditions prevailing
at the time, they believe that the effect of any purchase would be to
enhance earnings per share and be in the interests of Shareholders as a
whole.
10. Current Trading and Prospects of the Continuing Group
All of our businesses have made an encouraging start to the new financial
year and are trading in line with our plans. Investments in management and
processes are being made but we are not anticipating a return on this
investment until later in the financial year. The directors are confident
of the long-term prospects and outlook for the Continuing Group in the
current financial year and are encouraged by the prospects of the markets
served by our two continuing operations.
As previously announced, IME is participating in the sale process of the
records management business of Hays plc.
11. Strategy of the Continuing Group
With the completion of the sale of SBS, Mentmore is focused on two
valuable businesses with good growth prospects for long term growth. The
Directors believe that they have a clear strategy for the Continuing
Group, the highlights of which are as follows:
* to improve the operational performance of personal storage before
further investments are made to take advantage of the attractive growth
opportunities;
* to continue to support the successful growth of IME whilst ensuring
that the value of the Group's 49.9% shareholding in IME is fully
recognised;
* to optimise the Group's capital structure, including an intention to
return cash to Shareholders when appropriate;
* to resume the payment of dividends as soon as possible, including
making a special one-off interim dividend in lieu of the 2003 final
dividend; and
* to review the Group's cost structure further when the level of
corporate activity diminishes to ensure we have the appropriate
overheads for the restructured group.
With this framework in place, the Board is confident that the Continuing
Group can develop the business to deliver value for Shareholders.
12. Extraordinary General Meeting
The Disposal will require approval by Shareholders. This will be sought at
an Extraordinary General Meeting of the Company, which will be held at
10:00 a.m. on 31 July 2003.
13. Annual General Meeting
The Capital Reorganisation and the authority to purchase shares for
cancellation as set out in paragraph 9 above, will also require approval
by Shareholders, which will be sought at the Annual General Meeting. Other
resolutions of a routine nature will also be put to the AGM, including the
receiving and adoption of the directors' report and audited financial
statements, the re-appointment of RSM Robson Rhodes LLP as auditors and
the re-appointment of certain of the Directors who retire by rotation.
The Directors will also seek authority under Section 80 of the Companies
Act 1985 to allot shares up to an aggregate nominal value of #910,542,
being five per cent. of the issued share capital of Mentmore as at 8 July
2003 in the event that they consider it appropriate to do so. The
authority will be in substitution for all previous authorities which
accordingly will be revoked. The authority sought will expire at the
conclusion of the next annual general meeting.
The Directors will also seek authority from Shareholders to allot shares
for cash otherwise than on a pre-emptive basis. The Directors recommend
that pre-emption rights should not apply to an issue for cash of shares of
an aggregate nominal value of up to #910,542, which is equivalent to 5 per
cent. of Mentmore's issued share capital as at 8 July 2003. The authority
sought shall expire on the conclusion of the next annual general meeting
or within 15 months of the date of passing this resolution, whichever
shall be earlier.
The AGM will be held at 11:00 a.m. on 20 August 2003.
14. Recommendation
The Board, which has been so advised by Bridgewell and ABN AMRO, considers
the Disposal and the Capital Reorganisation to be in the best interests of
the Company and its Shareholders as a whole. In providing advice to the
Directors, Bridgewell and ABN AMRO have taken into account the Directors'
commercial assessments of the Disposal.
Accordingly, the Directors unanimously recommend Shareholders to vote in
favour of the Resolution to be proposed at the Extraordinary General
Meeting and to vote in favour of the resolutions to be proposed at the
Annual General Meeting. The Directors intend to vote in favour of the
Resolutions in respect of their own beneficial interests amounting in
aggregate to 1,492,259 Shares, representing approximately 0.82 per cent.
of the Shares currently in issue.
- ENDS -
DEFINITIONS
The following definitions apply within this announcement unless the context
otherwise requires:
"ABN AMRO" ABN AMRO Corporate Finance Limited
"Additional Such sum as may be payable as additional consideration for the
Consideration" SBS division in accordance with the Disposal Agreement in
respect of the sale of a property at Brunswick Park, Sefton
Street, Liverpool
"Annual General the annual general meeting of Mentmore, notice of which is set
Meeting" or out at the end of this document, or any adjournment thereof
"AGM"
"Argo" Argo Group Limited
"Ashtenne" Ashtenne Holdings plc
"Birkby" Birkby Limited
"Board" or the board of directors of Mentmore
"Directors"
"Bridgewell" Bridgewell Limited
"Capital the proposed transfer by the Company of #100,000,000 from the
Reorganisation" Company's share premium account to a newly created
distributable reserve
"Completion" Completion of the Disposal pursuant to the Disposal
Agreement
"Completion Statement of debt of the SBS division at Completion
Statement"
"Continuing Mentmore and its subsidiary and joint venture undertakings
Group" following the Disposal
"Debt" in respect of the SBS division, the aggregate amount of all
bank loans and overdrafts and any amounts due from the SBS
division to the Continuing Group, the agreed sum of #400,000
in respect of corporation tax for the period from 1 May 2003
to Completion and the agreed sum of #4,400,000 in respect of
customer deposits, less the aggregate of all cash at bank and
any amounts due from the Continuing Group to the SBS
division
"Disposal" the proposed disposal of the SBS division in accordance with
the terms of the Disposal Agreement
"Disposal the conditional agreement dated 8 July 2003 between Mentmore
Agreement" (1), Zipmodes (2) and Ashtenne (3) relating to the Disposal
"Extraordinary the Extraordinary General Meeting of Mentmore or any
General Meeting" adjournment thereof
or "EGM"
"Imex" Imex Spaces Limited
"In Shops" In Shops Limited
"Mentmore" or Mentmore plc and/or its subsidiary undertakings and joint
"Company" venture undertakings, as the context may require
"Mentmore Group" Mentmore and its subsidiary undertakings
or "Group"
"Resolution" The ordinary resolution to approve the Disposal
"SBS" or "SBS the serviced business space operations of Mentmore comprising
division" the businesses of Birkby, In Shops and each of their
respective subsidiaries
"Shares" or Ordinary shares of 10p each in the share capital of Mentmore
"Mentmore
Shares"
"Shareholder" or a holder of Shares
"Shareholders"
"UK" or "United the United Kingdom of Great Britain and Northern Ireland
Kingdom"
"US" or "United the United States of America, its territories and possessions,
States" any state of the United States of America and the District of
Columbia
"Zipmodes" or Zipmodes Limited, a subsidiary of Ashtenne
"Purchaser"
This information is provided by RNS
The company news service from the London Stock Exchange
END
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