RNS Number:4366U
Watermark Group PLC
20 January 2004
For Immediate Release
NOT FOR RELEASE OR DISTRIBUTION IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA,
JAPAN OR THE REPUBLIC OF IRELAND
Watermark Group plc ("Watermark" or "the Company")
Acquisition of Air Fayre Limited ("Air Fayre") and
Placing and Open Offer of 12,937,766 New Ordinary Shares at 155p per share
Watermark Group plc, the provider of support services to the international
travel industry, announces the proposed acquisition of Air Fayre and a Placing
and Open Offer to raise approximately #18.7 million net of expenses.
Key Points:
* Watermark has conditionally offered to acquire the entire issued share
capital of Air Fayre for a total initial consideration of #17.3 million
payable as to not less than approximately #17.1 million in cash and by the
issue of up to 139,230 Ordinary Shares at the Issue Price at Completion.
* A further earnout based deferred consideration of up to #8.5 million may
become due dependent upon the future performance of Air Fayre. Further
additional payments over and above maximum earnout hurdles may become
payable in certain circumstances.
* Air Fayre's core business is the provision of food catering services to
the airline industry. Rather than focus its operations around airport-based
kitchen facilities, Air Fayre's business model is to source high quality
food products externally at competitive prices which are then distributed
from Air Fayre's logistics facilities. In addition, Air Fayre provides
lounge catering and equipment and logistics control.
* Watermark is seeking to raise approximately #18.7 million net of expenses
by way of a Placing and an Open Offer of 12,937,766 New Ordinary Shares at
155p per New Ordinary Share to fund the Acquisition and to reduce borrowing.
* Reasons for the Acquisition
- Catering is a significant area of expenditure on products and
services within an airline cabin.
- The Directors believe that it will enhance the Group's service
offering to its airline clients, giving the opportunity to win new
business by virtue of the complementary range of products and
services which the Group could then provide.
- The combination of Watermark's current warehousing and logistics
operations together with those of Air Fayre will provide significant
savings for airlines and the opportunity to generate new business
through competitive pricing.
John Caulcutt, Chief Executive of Watermark, commented "Since September 11th
2001, Watermark has concentrated on finding ways in which it can lower
operational costs for airlines. Our vision has been to build a total cabin
management outsourcing programme for products and services 'above the wing' and
over the last three years, we have successfully acquired and integrated a number
of complementary businesses. With the acquisition of Air Fayre we will
substantially achieve our aim.
It gives us the opportunity not only to cross sell to our existing clients, in
what is one of the largest areas of expenditure in an airline cabin, but also to
win new business through competitive pricing as we can make savings by combining
warehousing and logistics operations."
Maurice Ostro, Managing Director of Air Fayre said, "This opens up very exciting
opportunities with Watermark's extensive client base. It also gives Air Fayre
the ability to strengthen its existing relationships with Air Fayre's valued
clients by offering them further cost savings through Watermark's range of
services."
For further information please contact:
John Caulcutt / Crispin Quail Niall Devins John West/ Rosie Brown
Watermark Group plc Numis Securities Ltd Tavistock Communications
Tel: 01489 897800 Tel: 020 7776 1500 Tel: 020 7920 3150
John Caulcutt mobile:
07767 493394
info@watermarkplc.co.uk rbrown@tavistock.co.uk
Numis Securities Limited, which is regulated by the Financial Services
Authority, is acting as sponsor, financial adviser and broker solely to
Watermark Group PLC in connection with the Placing and the Open Offer and will
not be responsible to anyone other than Watermark Group PLC for providing the
protections afforded to customers of Numis Securities Limited, or for providing
advice in relation to the Placing and the Open Offer.
Watermark Group plc ("Watermark")
Acquisition of Air Fayre Limited ("Air Fayre") and
Placing and Open Offer of 12,937,766 New Ordinary Shares at 155p per share
Introduction
Watermark Group plc, the provider of support services to the international
travel industry, announces that it has made a conditional offer to acquire the
entire issued share capital of Air Fayre for a total initial consideration of
#17.3 million to be satisfied as to not less than approximately #17.1 million in
cash and by the issue of up to 139,230 Ordinary Shares at the Issue Price at
Completion. In addition to the initial consideration of #17.3 million, a
further earnout based consideration of up to #8.5 million (to be satisfied by a
mixture of cash and Ordinary Shares) may become due dependent upon the future
performance of Air Fayre. The Company's offer has been accepted by the Vendors
(other than Air Fayre SIP) who have undertaken to procure that the Air Fayre SIP
sell its shares in Air Fayre to the Company. Further additional payments in
respect of profits over and above maximum earnout hurdles may become payable in
certain circumstances. Further details are set out below under the heading "
Consideration for the Acquisition".
In order to fund the Acquisition and reduce the borrowings of the Enlarged
Group, the Company is seeking to raise approximately #20.05 million
(approximately #18.7 million net of expenses) by way of a Placing and an Open
Offer of 12,937,766 New Ordinary Shares at 155p per New Ordinary Share. The New
Ordinary Shares have been placed conditionally with institutional investors
(including certain existing Shareholders). Of these, 6,468,883 New Ordinary
Shares have been placed firm and the remaining 6,468,883 New Ordinary Shares are
subject to clawback to satisfy valid applications by Qualifying Shareholders
under the Open Offer. The Placing and the Open Offer have been fully
underwritten by Numis Securities Limited ("Numis") and are conditional inter
alia on Admission.
Notwithstanding the foregoing, the obligations of Numis under the Placing
Agreement (including for the avoidance of doubt its underwriting obligations)
are conditional upon the Company completing certain security arrangements under
the Company's banking facilities by 23 January 2004 (or such later date as Numis
may agree) (the "Banking Condition"). The Prospectus will not be despatched to
Shareholders until the Banking Condition is satisfied.
Due to the size of Air Fayre relative to the Company and because Mr Ostro is a
director of Watermark, a related party and a potential beneficiary of one of two
family trusts which own the controlling shareholders in Air Fayre, the Proposals
are conditional inter alia on Shareholder approval.
Information on Watermark
Watermark, together with its subsidiaries, is a support services group
specialising in the airline and travel sectors. It principally provides a range
of passenger care, comfort items and cabin management services to long haul
airlines around the world. The Company, which was established in 1985, floated
on OFEX in October 1995, was admitted to trading on AIM in June 1996 and was
admitted to the Official List of the London Stock Exchange in July 1998.
The Group operates internationally and has offices in the UK, Hong Kong and the
US as well as an office facility in China and sales operations in Russia,
Germany and Holland. The Company has grown both organically and through
acquisition over the years and has achieved an average annual compound growth
rate of 30 per cent in operating profitability in the 10 year period to 31
December 2002, the date of its last published audited accounts.
Previous acquisitions by the Group represented its first steps in providing a "
total cabin management programme", encompassing both goods and services, to the
airline industry. Through this "total cabin management programme" the Group
envisages being able to offer a wide range of products and services for use
within aircraft, apart from staff and services necessary to enable aircraft to
fly (such as fuel supply and mechanical support).
Information on Air Fayre
Air Fayre was established by Mr Ostro in October 1998 and commenced operating at
Heathrow Airport in May 1999. Mr Ostro identified an opportunity to provide
airline clients with an improved logistics service, in particular reducing the
dependency on airport based food production. Air Fayre now operates from its
bases in Heathrow and Birmingham and provides services to a growing number of
airline clients.
Air Fayre's core business area is the provision of food catering services to the
airline industry. Traditionally, airline caterers have focused their operations
around airport-based kitchen facilities and the preparation of meals there. Air
Fayre's business model is to source high quality food products externally. By
sourcing product from suppliers with a lower cost base, which is then
distributed from Air Fayre's logistics facilities, Air Fayre can offer a greater
selection of meals.
Air Fayre has grown into a company which, in addition to its core catering
offering, provides lounge catering and equipment and logistics control. Air
Fayre's facilities can also provide sufficient space for storage of equipment
and other products as well as acting as a distribution hub. Since its formation
in October 1998, Air Fayre has received industry recognition, winning the Cost
Sector Catering Award for the Best Airline Caterer of the Year in 2000 as well
as a Mercury Award in 2000 and Onboard Service Award in 2002.
Approximately 73 per cent (based upon unaudited management accounts of Air Fayre
for the 10 month period to 31 October 2003) of Air Fayre's turnover derives from
its contract with British Midland Airways Limited to provide catering services
to all its Heathrow flights, excluding long haul flights.
For the ten months ended 31 October 2003, Air Fayre's estimated turnover
(unaudited) was approximately of #20.46 million (year ended 31 December 2002:
#16.29 million) and its estimated profit before tax (unaudited) was
approximately #2.22 million (year ended 31 December 2002: #1.06 million).
Estimated profit after tax for the 10 months ended 31 October 2003 (unaudited)
was approximately #1.55 million (year ended 31 December 2002: #0.38 million
after an exceptional charge of #1.2 million). The estimated net assets
(unaudited) of Air Fayre as at 31 October 2003 amounted to approximately #2.4
million.
Background to and reasons for the Acquisition
The Board has a well established track record of acquiring and successfully
integrating complementary businesses. It has identified those types of
businesses providing further products and services falling within the "total
cabin management programme" which it wishes to have within its portfolio whether
through acquisition, joint venture or some other arrangement.
Catering is a highly significant area of expenditure on products and services
within an airline cabin, and therefore is regarded by Watermark as a key service
area.
The Directors believe that the acquisition of Air Fayre, a UK airline caterer,
would greatly enhance the Group's service offering to its airline clients, with
the opportunity to win new business by virtue of the complementary range of
products and services which the Group could then provide.
The Directors consider that the combination of the Group's current warehousing
and logistics operations together with those of Air Fayre will provide
significant savings for airlines and the potential opportunity to generate new
business through competitive pricing.
The Acquisition
The Company has offered, pursuant to the Acquisition Agreement, to acquire the
whole of the issued and to be issued share capital of Air Fayre. This offer has
been accepted by the Vendors (other than the Air Fayre SIP) who have undertaken
to procure that the Air Fayre SIP sells its shares in Air Fayre under the
compulsory acquisition provision in Air Fayre's articles of association at
Completion. Completion of the Acquisition, which is conditional upon, amongst
other things, the Resolutions being passed, the Banking Condition being
satisfied and the Placing Agreement becoming unconditional, is expected to occur
by 23 February 2004. However, if the Resolutions are not passed and the other
conditions are not satisfied or waived, then Completion will not occur and the
Acquisition Agreement will lapse. In addition, if the Resolutions are not
passed the Placing and the Open Offer will not proceed.
The price to be paid by the Company for the whole of the issued and to be issued
share capital of Air Fayre is as summarised below. Pursuant to the Acquisition
Agreement, the Vendors have given certain undertakings not to compete with the
business of Air Fayre during the three year period following Completion. In
addition, the Warrantors have granted certain warranties to the Company pursuant
to the Acquisition Agreement.
Consideration for the Acquisition
At Completion, an initial consideration valued at #17.3 million will be due by
the Company to the Vendors, which will be satisfied at the Vendors' option by
the payment of cash or by the allotment of Ordinary Shares at the Issue Price.
The Initial Vendors have already elected to receive cash equating to
approximately #17.1 million. The Air Fayre SIP will elect the form of its
initial consideration prior to Completion on receipt of instructions from the
beneficiaries of the Air Fayre SIP and in the absence of express instruction,
those beneficiaries will have such initial consideration satisfied by the issue
of 139,230 Ordinary Shares at the Issue Price. In exchange, the Vendors will
transfer to the Company the entire issued share capital of Air Fayre.
Following Completion, certain deferred consideration may also become due to the
Vendors depending on the level of growth in the after-tax profits of Air Fayre
in respect of each of the four financial years ending on 31 December in 2004,
2005, 2006 and 2007. The maximum value of the deferred consideration due to the
Vendors in respect of each of those financial years is #1,062,500, which will be
satisfied at the Vendors' option either by the payment of cash or the allotment
of Ordinary Shares at the midmarket price of an Ordinary Share at the close of
business on the day preceding the day on which the deferred consideration is
due. Therefore, the aggregate maximum value of this deferred consideration is
#4.25 million. For any of this deferred consideration to become due from the
Company to the Vendors, the after-tax profits of Air Fayre in respect of the
financial year in question must exceed the after-tax profits of Air Fayre in
respect of the financial year ended 31 December 2003 by a compound annual rate
of at least 25 per cent (in which case, 50 per cent of the value of the deferred
consideration (being #531,250) becomes due in respect of that financial year by
the Company to the Vendors). For the maximum value of deferred consideration in
respect of a financial year to become due by the Company to the Vendors, the
after-tax profits of Air Fayre in respect of the financial year in question must
exceed the after-tax profits of Air Fayre in respect of the financial year ended
31 December 2003 by a compound annual rate of at least 30 per cent. A sliding
scale operates to determine the amount of deferred consideration due by the
Company to the Vendors where the compound annual increase in after-tax profits
of Air Fayre in respect of a relevant financial year falls between 25 and 30 per
cent. As is noted above, the deferred consideration may be taken at the
election of the Vendors as cash or the equivalent value of Ordinary Shares
issued at the middle market price of Ordinary Shares at the close of business on
the date that the cash alternative becomes due and payable. The Initial Vendors
have already elected to take cash accounting for approximately 98.75 per cent of
the deferred consideration.
In addition to the deferred consideration referred to above, the Company may
also be required pursuant to the Acquisition Agreement to allot and issue to the
Vendors certain Ordinary Shares as deferred share consideration. Whether or not
this deferred share consideration comprising Ordinary Shares will become due by
the Company also depends on the level of growth in the after-tax profits of Air
Fayre in respect of each of the four financial years ending on 31 December in
2004, 2005, 2006 and 2007. The maximum number of Ordinary Shares that the
Company may become due to issue in respect of the deferred share consideration
in respect of each of those financial years is 685,484 (being an aggregate
maximum in respect of all four of those financial years of 2,741,936 Ordinary
Shares). For any of this deferred share consideration to become due by the
Company to the Vendors, the after-tax profits of Air Fayre in respect of the
financial year in question must exceed the after-tax profits of Air Fayre in
respect of the financial year ended 31 December 2003 by a compound annual rate
of at least 20 per cent (in which case 50 per cent of the deferred share
consideration (being 342,742 Ordinary Shares) in respect of that financial year
will be due by the Company to the Vendors). For the maximum deferred share
consideration in respect of a financial year to become due by the Company to the
Vendors, the after-tax profits of Air Fayre in respect of the financial year in
question must exceed the after-tax profits of Air Fayre in respect of the
financial year ended 31 December 2003 by a compound annual rate of at least 25
per cent. A sliding scale operates to determine the amount of deferred share
consideration due by the Company to the Vendors where the compound annual
increase in after-tax profits of Air Fayre in respect of a relevant financial
year falls between 20 and 25 per cent.
The Acquisition Agreement also provides that the maximum deferred consideration
and deferred share consideration will become payable and due for issue (as the
case may be) in the event that: (i) the maximum deferred consideration is due in
respect of each of the three financial years of Air Fayre ending on 31 December
in 2004, 2005 and 2006; (ii) Watermark procures the removal without just cause
from the board of Air Fayre of any of the directors appointed to the board of
Air Fayre by the Vendors pursuant to the Acquisition Agreement; (iii) Watermark
procures the termination without just cause of a service agreement with Air
Fayre of any of the directors appointed to the board of Air Fayre by the Vendors
pursuant to the Acquisition Agreement; (iv) any insolvency event occurs to the
Company or Air Fayre is obliged to settle any obligations of any member of the
Group pursuant to the terms of any document which forms part of the Group's
banking arrangements; or (v) a general offer is made for the whole of the issued
share capital of Watermark which becomes unconditional in all respects.
The Acquisition Agreement also provides that if the aggregate of the after-tax
profits of Air Fayre in respect of: (i) the financial years of Air Fayre ending
on 31 December 2004 and 2005; (ii) the financial years of Air Fayre ending on 31
December 2006 and 2007; or (iii) the four financial years of Air Fayre ending on
31 December in 2004, 2005, 2006 and 2007 exceeds the after-tax profits of Air
Fayre in respect of the financial year ended 31 December 2003 by certain
compound annual percentage rates, then the deferred consideration and deferred
share consideration referred to above will become payable and due (as the case
may be) by the Company to the Vendors provided that in relation to the aggregate
referred to in sub-paragraph (iii) the after-tax profit for 2007 itself exceeds
either the after-tax profit for 2006 or the 2003 net profit by an annual
compound growth rate of 20 per cent.
In addition to the deferred consideration and deferred share considerations
referred to above, certain additional consideration may become due by the
Company to the Vendors in the event that the after-tax profits of Air Fayre in
respect of any of the financial years ending on 31 December in 2004, 2005, 2006
and 2007 exceed the after-tax profits of Air Fayre in respect of the financial
year ended 31 December 2003 by a compound annual rate of more than 30 per cent
("Super Profit"). The Vendors may elect to apply Super Profit in either of the
following two ways. Firstly, the Vendors may elect to receive Ordinary Shares
with an aggregate market price equal to 50 per cent of the Super Profit.
Secondly, the Vendors may elect to add the amount of the Super Profit to the
after-tax profits of Air Fayre in respect of a previous or subsequent financial
year thereby increasing the deferred consideration and deferred share
consideration due to the Vendors pursuant to the provisions of the Acquisition
Agreement summarised above.
Subject to satisfaction of the Banking Condition, the maximum cash element of
approximately #4.25 million of the deferred consideration is underpinned by a
bank guarantee of the same amount.
Watermark's current trading
The airline industry encountered difficult trading conditions in 2003. The first
6 months were particularly difficult with passenger numbers being affected by
the SARS virus and the war in Iraq.
Although international passenger numbers for the second half of 2003 improved,
the second-half recovery was slower than anticipated.
Overall, international passenger numbers for the full year 2003 are expected to
be approximately 4 per cent* below 2002 levels. As a result of the slower than
anticipated second half recovery in 2003, Watermark's full year internal revenue
expectation is likely to be affected by a similar proportion.
Watermark's profitability for the full year 2003 will however be positively
impacted by the realisation of an exceptional gain of #234,000 on the partial
disposal of its investment in Flightstore Group plc. In the event that the
Acquisition successfully completes, 2003 profits will be further bolstered by
the recognition of a modest contribution arising from the consolidation of Air
Fayre's results.
The Board anticipates that the Acquisition will considerably strengthen the
trading prospects and financial potential of the Enlarged Group. The Directors
believe the Enlarged Group will be well positioned to provide a total outsourced
cabin management programme to its airline clients and to cross-sell Air Fayre's
service offering to existing Watermark clients. The Directors further believe
that the Enlarged Group's strengthened market position, coupled with forecast
growth in international passenger numbers of 7 to 8 per cent in 2004* should
result in a year of growth for the Enlarged Group.
*Source: IATA (International Air Transport Association)
Details of the Placing and Open Offer
Watermark is proposing to raise approximately #20.05 million (approximately
#18.7 million net of expenses) via the Placing and the Open Offer. These monies
will be used to fund the initial cash consideration of up to #17.3 million
payable in respect of the Acquisition and to reduce bank borrowings by up to
approximately #1.6 million.
Under the Placing and the Open Offer, the Company is proposing to issue
12,937,766 New Ordinary Shares at 155p per share. The New Ordinary Shares have
conditionally been placed with institutional investors (including certain
existing Shareholders). Of these, 6,468,883 New Ordinary Shares have been placed
firm and 6,468,883 New Ordinary Shares are subject to clawback to satisfy valid
acceptances by Qualifying Shareholders under the Open Offer. The Placing has
been fully underwritten by Numis.
Notwithstanding the foregoing, the obligations of Numis (including for the
avoidance of doubt its underwriting obligations) under the Placing Agreement are
conditional upon the satisfaction of the Banking Condition by 23 January 2004
(or such later time as Numis may agree). The Prospectus will not be dispatched
until the Banking Condition has been satisfied.
The Open Offer provides Qualifying Shareholders with the opportunity to apply
for Offer Shares at the Issue Price on the following basis:
52 Offer Shares for every 100 Existing Ordinary Shares
registered in their name on the Record Date. Entitlements to apply for Offer
Shares will be rounded down to the nearest whole number. Fractions of Offer
Shares will be disregarded in the calculation of Qualifying Shareholders'
entitlements and will be aggregated and taken up under the Placing for the
benefit of the Company.
The New Ordinary Shares will rank pari passu in all respects with the Existing
Ordinary Shares.
Other than in connection with the Open Offer, none of the New Ordinary Shares is
being marketed or are available in whole or in part to the public.
In addition to the Banking Condition, the Placing and the Open Offer are
conditional inter alia on:
(i) the passing of the Resolutions;
(ii) the Placing Agreement becoming unconditional and not having
been terminated in accordance with its terms and Admission becoming effective by
no later than 8.30 a.m. on 18 February 2004 (or such later time and/or date,
being no later than 8.30 a.m. on 3 March 2004, as the Company and Numis may
agree); and
(iii) the Acquisition Agreement becoming unconditional in all
respects other than as to any conditions relating to Admission and the Placing
Agreement.
Application will be made for the New Ordinary Shares to be admitted to the
Official List of the UK Listing Authority and to trading on the London Stock
Exchange's market for listed securities, subject to satisfaction of the Banking
Condition. Admission is expected to occur on 18 February 2004, when dealings in
the New Ordinary Shares are expected to begin.
Directors' intentions under the Open Offer
John Caulcutt has undertaken to subscribe for 32,258 New Ordinary Shares under
the Open Offer, out of his maximum entitlement of 2,417,985 New Ordinary Shares.
Mr Caulcutt has irrevocably undertaken not to take up his entitlement in
respect of the remaining 2,385,727 New Ordinary Shares to which he would have
been entitled under the Open Offer.
Each of Crispin Quail, Paul Evans, George Brooksbank, William Skerrett, Mark
Scott and John A-G Calthorpe have irrevocably undertaken not to take up their
respective entitlements under the Open Offer. Taken together, the irrevocable
undertakings given by the Directors represent in aggregate 3,924,960 Offer
Shares and those shares have been placed firm with placees under the Placing.
Maurice Ostro and Nick Scott (the finance director of Air Fayre Limited) have
undertaken conditionally to subscribe for 65,000 and 129,000 New Ordinary Shares
respectively under the Placing. These subscriptions constitute related party
transactions and will require shareholder approval at the EGM. Nick Scott is a
related party by virtue of his directorship of Media on the Move Limited, a
subsidiary of the Company.
The Directors have entered into lock-in arrangements with the Company and Numis
whereby they have each agreed (subject to certain exceptions) not to dispose of
(and to use their respective reasonable endeavours to procure that no person
connected to each such person will dispose of) any interest in Ordinary Shares
for a period of 12 months from Admission and thereafter for a further period of
six months they have agreed not to dispose of any such shares other than through
Numis or the Company's brokers from time to time.
Share options
The remuneration committee of the Board intends to offer options of up to
585,000 Ordinary Shares to Directors and senior management after the
announcement of the Acquisition.
New EMI Scheme
Watermark has indicated that it intends, subject to shareholder approval at the
EGM, to establish the EMI Scheme inter alia to grant options to those employees
of Air Fayre who will surrender their existing EMI options granted to them by
Air Fayre. If these EMI options are granted by Watermark following the
surrender by those employees of Air Fayre of the EMI options granted by Air
Fayre on the exercise of such new options, Radiance Services Limited, being one
of the Vendors shall transfer to the employees exercising such options Ordinary
Shares from the Ordinary Shares received by such Vendor as deferred share
consideration under the Acquisition Agreement.
Risk factors
Existing business of Air Fayre
There is no guarantee that the existing clients of Air Fayre will continue to be
clients of Air Fayre and/or the Enlarged Group (or continue to transact the same
level of business) following completion of the Acquisition. The loss of certain
key clients (or a significant number of clients) of Air Fayre could materially
adversely affect the business, financial condition, results or future operations
of the Enlarged Group.
In particular, the revenues from the contract between Air Fayre and British
Midland Airways Limited account for approximately 73 per cent of Air Fayre's
turnover (based upon unaudited management accounts of Air Fayre for the 10 month
period to 31 October 2003) and will form a significant portion of the turnover
of the Enlarged Group following completion of the Acquisition. The contract is
terminable in certain circumstances including a material breach of its terms by
Air Fayre and certain other circumstances outside Air Fayre's control. The
termination of the contract (or a significant reduction of the level business
transacted thereunder) would materially adversely affect the business, financial
condition, results or operations of the Enlarged Group.
Prospectus and EGM
A prospectus containing further details of the Acquisition, the Placing and the
Open Offer and notice convening an EGM will be sent to Shareholders shortly,
subject to satisfaction of the Banking Condition. The EGM is expected to be
held at Watermark's head office at Belmore Park, Upham, Hampshire SO32 1HQ at
11.00 a.m. on 16 February 2004.
Recommendation
The Board, excluding Mr Ostro (in relation to the Acquisition) for the reasons
set out below, having been so advised by Numis considers the Acquisition is fair
and reasonable so far as the shareholders are concerned. Your Board believes
that the Placing, the Open Offer and the Acquisition and the actions authorised
by the passing of the Resolutions are in the best interests of the Company and
its shareholders as a whole. In giving such advice, Numis has taken into
account the independent Directors' commercial assessment of the Proposals.
Accordingly, the Directors (other than Mr Ostro in relation to the Resolution
seeking approval of the Acquisition) unanimously recommend Shareholders to vote
in favour of the Resolutions as they intend to do in respect of their own
beneficial holdings which together amount to 7,548,000 Ordinary Shares,
representing approximately 30.34 per cent of the existing issued share capital
of the Company.
Mr Ostro, who is a Director of Watermark, is deemed to be a related party to the
Acquisition by virtue of his being a potential beneficiary of trusts which hold
the controlling interest in Air Fayre and as a director of Air Fayre. He has
not therefore taken part in the decision to recommend the Acquisition to
Shareholders. Mr Ostro does not have any beneficial interest in the ordinary
share capital of the Company and accordingly will not be voting in favour of the
Resolution approving the Acquisition to be proposed at the EGM and has
undertaken to take all reasonable steps to ensure that his associates will
abstain from voting on such resolution.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Record Date for entitlement under the Open Offer 19 January 2004
Application Forms despatched to Qualifying Shareholders 23 January 2004
Latest time and date for splitting of Application Forms 3 p.m. on 11 February 2004
(to satisfy bona fide market claims only)
Latest time and date for acceptance and payment in full 3.00 p.m. on 13 February 2004
under the Open Offer
Latest time and date for receipt of Forms of Proxy 11.00 a.m. on 14 February 2004
Extraordinary General Meeting 11.00 a.m. on 16 February 2004
Dealings commence in the New Ordinary Shares 18 February 2004
Relevant CREST accounts to be credited 18 February 2004
Completion of the Acquisition by or on 23 February 2004
Date of despatch of definitive share certificates by 24 February 2004
for the New Ordinary Shares
DEFINITIONS
The following definitions apply throughout this announcement unless otherwise
stated or the context otherwise requires:
"Acquisition" the proposed acquisition by the Company of the entire issued
share capital of Air Fayre Limited
"Acquisition Agreement" the conditional agreement relating to the Acquisition dated 20
January 2004 made between the Initial Vendors and the Company
"Admission" admission of the New Ordinary Shares to the Official List and to
trading on the London Stock Exchange's market for listed
securities becoming effective in accordance with, respectively,
the Listing Rules and the Admission and the Disclosure Standards
of the London Stock Exchange
"Application Form" the application form for use in connection with the Open Offer
which, in the case of Qualifying Shareholders, will accompany
the Prospectus
"Air Fayre SIP" Air Fayre all-employee share incentive plan trust
"Completion" completion of the Acquisition, which is due to take place by or
on 23 February 2004
"Directors" the directors of the Company as at the date of this announcement
"EMI Scheme" The EMI scheme of the Company proposed to be implemented
following Completion
"Enlarged Group" together the Group and Air Fayre, following Completion
"Existing Ordinary Shares" The 24,880,321 Ordinary Shares in issue as at the date of this
announcement
"Extraordinary General Meeting" or "EGM" the extraordinary general meeting of the Company expected to be
held at the Company's head office at Belmore Park, Upham,
Hampshire, SO32 1HQ at 11 a.m. on 16 February 2004, or any
adjournment thereof
"Group" the Company and its subsidiaries and associated undertakings as
at the date of this announcement (or any of them, as the context
requires)
"Issue Price" 155p per New Ordinary Share
"Initial Vendors" the Fayre Share Foundation, Max Ostro Children's Trust, Max
Ostro Grandchildren's Trust, Violette Management Limited and
Radiance Services Limited
"Listing Rules" the Listing Rules of the UKLA
"London Stock Exchange" London Stock Exchange plc
"New Ordinary Shares" the 12,937,766 new Ordinary Shares which are to be issued
pursuant to the Placing and Open Offer
"Numis" Numis Securities Limited
"Offer Shares" the 6,468,883 New Ordinary Shares which are being made available
to Qualifying Shareholders under the Open Offer
"Open Offer" the proposed open offer by Numis, on behalf of the Company, of
the Offer Shares to Qualifying Shareholders
"Ordinary Shares" ordinary shares of 1p each in the capital of the Company
"Overseas Shareholders" those shareholders to whom the Open Offer may not be made
outside the UK because they are prohibited from taking up the
Open Offer
"Placing" the conditional placing by Numis, on behalf of the Company, of
New Ordinary Shares at the Issue Price pursuant to the Placing
Agreement
"Placing Agreement" the conditional agreement dated 20 January 2004 between the
Company and Numis pursuant to which Numis has agreed to effect
the Placing
"Proposals" the Placing and Open Offer and Acquisition
"Prospectus" the circular comprising a prospectus proposed to be issued by
the Company in connection with the Proposals
"Qualifying Shareholders" holders of Ordinary Shares on the Record Date other than
Overseas Shareholders
"Record Date" close of business on 19 January 2004
"Resolutions" the resolutions to be proposed at the Extraordinary General
Meeting
"Shareholder" a holder of Ordinary Shares
"UKLA" or "UK Listing Authority" the Financial Services Authority acting in its capacity as the
competent authority for the purposes of Part VI of the Financial
Services and Markets Act 2000
"Vendors" the Initial Vendors and the Air Fayre SIP
"Warrantors" Violette Management Limited and Radiance Services Limited
(companies incorporated in the British Virgin Islands)
Numis Securities Limited, which is regulated by the Financial Services
Authority, is acting as sponsor, financial adviser and broker solely to
Watermark Group PLC in connection with the Placing and the Open Offer and will
not be responsible to anyone other than Watermark Group PLC for providing the
protections afforded to customers of Numis Securities Limited, or for providing
advice in relation to the Placing and the Open Offer.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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