Somic PLC - Proposed Disposal, etc
March 15 1999 - 10:04AM
UK Regulatory
RNS No 0940q
SOMIC PLC
15th March 1999
Somic plc (the "Company")
to be renamed
Tarpan plc
Proposed Disposal of the whole of the business and assets of the Company
Proposed change of name
Introduction
The Non-executive Directors of the Company have received a proposal from the
Executive Directors under which Harlspun Limited, a company owned by the
Executive Directors and others, would acquire the whole of the business and
assets (other than book debts) of the Company and will also assume all of its
liabilities.
The consideration will be #850,000 in cash payable on completion and a further
sum in cash payable two months after completion equal to the amount (if any)
by which the Company's book debts realised during that two month period fall
short of #850,000. If the amount realised exceeds #850,000 the Company will
pay the excess to Harlspun. Following the Disposal, the Company's assets will
therefore comprise #1.7 million in cash (less the expenses of the Proposals,
estimated by the Directors to be approximately #100,000) with no debt.
Due to its size, the Disposal is conditional upon the approval of
Shareholders. In addition, since Harlspun is partly owned by the Executive
Directors, the Disposal is also a related party transaction as defined by the
Listing Rules and is for that reason also conditional upon the approval of
Shareholders.
Subject to Shareholder approval of the Disposal, it is also proposed to change
the name of the Company to Tarpan plc.
Details of the Proposals are included in a circular (the "Circular") which is
being sent to Shareholders today.
A notice of the Extraordinary General Meeting to be held on 7 April 1999, at
which the necessary resolution will be proposed to approve the Proposals, is
also being sent to Shareholders today.
Information on the Group
The Company manufactures cords, twines, braids, woven fabrics and yarns which
it exports worldwide for both industrial and domestic purposes. A separate
plastics coating division offers a complete facility for the processing of
customers' fabrics with PVC and acrylic emulsion.
The Company has one active subsidiary undertaking, Mason Fabrics Limited,
which is engaged in the sale of textile and related products. The Company
also has a 12.5 per cent. interest in the ordinary share capital of W Lusty &
Sons Limited, which is engaged in the manufacture and distribution of
furniture.
The Company owns its own manufacturing premises at Alliance Works, off New
Hall Lane, Preston. It also owns certain residential investment properties in
Stefano Road, Preston, adjoining the manufacturing site.
In the year ended 31 March 1998, the Group made consolidated pre-tax profits
of #293,515 on turnover of #5,968,036. At 31 March 1998 the Group had
consolidated net assets of #2,317,756.
Terms of the Disposal
Under the Agreement, the Company will dispose of its entire business and
trade, including all its assets (other than book debts) and liabilities, to
Harlspun. The consideration will be #850,000 in cash payable on completion
which, together with the value of the book debts which are guaranteed by
Harlspun to realise not less than #850,000 represents a total of 80 pence per
share. Harlspun assumes responsibility for the existing net overdraft of the
Group (which, as at 12 March 1999 (being the latest practicable date) stands
at #269,307), trade creditors, taxation and all other liabilities of the
Company. The assets and liabilities are principally:
- manufacturing premises at Alliance Works, Preston;
- plant and machinery;
- stock and debtors;
- creditors;
- shares held in Mason Fabrics Limited and W Lusty & Sons Limited; and
- investment properties in Stefano Road, adjacent to Alliance Works.
The allocation of the consideration to the various assets and liabilities to
be sold is specified in the Agreement. The manufacturing premises will be
transferred at their existing use value and the residential investment
properties will be transferred at their open market value, as set out in the
valuation report in Part III of the Circular. Plant, machinery and stock will
be transferred at their book values.
The consideration represents a discount to the aggregate value of the assets
to be sold, after taking account of the assumed liabilities. The discount
reflects the fact that the whole of the business and assets of the Company
(other than book debts) are being sold in their entirety, rather than in a
piecemeal fashion, thereby reducing management time and other associated costs
involved in disposing of the assets in their constituent parts. The Company
will also receive a benefit in the form of immediate cash consideration.
Under the Agreement, Harlspun will indemnify the Company against any
litigation or other contingent liabilities materialising after completion
which relate to facts or circumstances arising prior to completion.
The employment of all the Company's staff (including the Executive Directors,
but excluding the Non-executive Directors) will transfer to Harlspun on
existing terms of employment. Harlspun will also assume responsibility for
the defined benefit staff pension scheme, including pensions in payment, and
for the Directors' defined contribution pension scheme.
Reasons for the Disposal
The Executive Directors believe that because of the size and specialist nature
of its main business (paper spinning and weaving) there are limited
possibilities for organic growth. This, they believe, makes the business more
suited to being private than remaining part of a quoted public company.
Trading conditions have been difficult for some time for manufacturing
companies due to a combination of increasing raw material prices and lower
margins, caused in part by the strength of sterling relative to the currencies
of those European countries to which Somic exports its products. At the same
time, stock market sentiment towards smaller quoted companies has been
relatively poor recently.
Furthermore, the Executive Directors are conscious of their responsibilities
to outside shareholders. As a private company their shareholder
responsibility will be principally to themselves and they believe that in
difficult trading conditions which the manufacturing industry experiences from
time to time, being relieved of their responsibility to outside shareholders
will increase their management flexibility and will thereby benefit the
business.
The Non-executive Directors believe that the Disposal offers an opportunity to
eliminate the Company's current exposure to volatility of earnings and wish to
seek worthwhile opportunities. They intend to use the proceeds of the
Disposal to fund the research of, investigation into and acquisition of
companies in growth industries which require additional funding and for whom a
Stock Exchange listing is an essential prerequisite of their growth strategy.
The Non-executive Directors have substantial experience and expertise to offer
such companies.
On completion, which, subject to the approval of Shareholders at the
Extraordinary General Meeting, will take place on 7 April 1999, Jonathan Marsh
and John Thornley will resign as Directors, Richard Blackburn will resign as
chairman and managing director but will remain as a non-executive Director and
Neville Buch will become Chairman.
Following implementation of the Proposals, the Company will have no employees
or full time executive directors. However, each of the Non-executive
Directors intends to research and investigate acquisition opportunities.
Change of name
The name Somic plc is inextricably linked with the existing manufacturing and
selling activities at Alliance Works in Preston. Harlspun and the Executive
Directors wish to continue to use this name; the Non-executive Directors also
believe it is appropriate for the Company to have a new name. Accordingly, it
is proposed to change the name of the Company to Tarpan plc. The change of
name is subject to the approval of Shareholders at the Extraordinary General
Meeting.
In addition, if the Proposals are approved at the Extraordinary General
Meeting, the Non-executive Directors intend to change the registered office of
the Company to 7th Floor, 39 St James's Street, London SW1A 1JD, which is more
suitably located for the Company's purposes for the foreseeable future.
Prospects
Following the Disposal, the Company will have approximately #1.6 million
available for acquisition opportunities. Until the Company acquires a
business the cash will be invested in gilt-edged stock or the money markets
with a view to generating sufficient investment income to cover the Company's
overheads.
Any classifiable transaction (as defined in the Listing Rules) will require
shareholder approval and any acquisition will constitute a reverse takeover
which will lead to the temporary suspension of the Ordinary Shares.
Accordingly, any proposed acquisition will itself need to be suitable for
admission to the Official List in order that the Ordinary Shares are re-
admitted to the Official List.
Dividend policy
The Non-executive Directors intend to pay dividends only when it becomes
commercially prudent to do so and subject to the availability of distributable
reserves. They do not currently intend to pay a final dividend in respect of
the year ending 31 March 1999.
Extraordinary General Meeting
The Extraordinary General Meeting will be held at the offices of Peel, Hunt &
Company Limited, on the fifth floor of 62 Threadneedle Street, London EC2R 8HP
at 10.00 a.m. on 7 April 1999.
Further information:
Richard Blackburn Somic plc 01772 790000
Neville Buch Somic plc 0171 243 4390
END
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