C.H. Bailey Plc Regulatory News (BLEY)

8 Mar 2006 07:02

Bailey(C.H.) PLC08 March 2006 Proposed capital reorganisation Introduction The Independent Directors of C.H.Bailey, Plc ("C.H. Bailey" or the "Company")announce proposals for the reorganisation of the share capital of the Company(the "Restructuring Proposals"). C.H. Bailey currently has in issue two different classes of ordinary shares,being the Ordinary Shares of 10 pence each and the "B" Ordinary Shares of 10pence each. Both classes of shares have been admitted to trading on AIM. In theevent of any vote by poll at any general meeting of the Company, the "B"Ordinary Shares have 100 votes per share, whilst the Ordinary Shares have onevote per share. The voting rights are therefore currently concentrated among thesmall group of Shareholders holding the "B" Ordinary Shares, despite the factthat they hold less than 10% of the Company's issued share capital. The Independent Directors consider that it is in the best interests of theCompany's long term development as a public quoted company to trade with oneclass of shares carrying the same votes. The Restructuring Proposals will, ifapproved by Shareholders, result in the conversion of both classes of sharesinto a single class of New Ordinary Shares with equal voting rights. TheRestructuring Proposals will also reduce the number of Shareholders, achievingcost savings for the Company whilst at the same time returning value, free fromtransaction costs, to holders of small numbers of Shares. The Company is today publishing a circular giving further information on theRestructuring Proposals, explaining why the Independent Directors arerecommending Shareholders to vote in favour of the Restructuring Proposals andconvening the necessary meetings at which shareholder approval will be sought toenable the Restructuring Proposals to be implemented. Background to and reasons for the Restructuring Proposals C.H. Bailey currently has in issue 44,409,696 Ordinary Shares and 3,894,444 "B"Ordinary Shares. The directors have, for some time now, been considering whetherto reorganise the existing capital into a single class of shares. They haveconcluded that reorganisation of the share capital, involving an equalisation ofthe voting rights of the Ordinary Shares and the "B" Ordinary Shares, isimportant and desirable for the following reasons: • A single class of Shares carrying equal voting rights should improve the liquidity and marketability of the Shares; • Ordinary shares which carry unequal voting rights are now very rare in public companies. In the future, the Company may wish to attract institutional investors and the directors have been advised that such investors find such share structures unattractive; • A simplified share structure will provide increased market transparency and help create a stronger platform for future development; • The restructuring will provide holders of small numbers of Shares with the opportunity to receive a cash sum for their Shares without their having to incur the disproportionate dealing and administration costs relating to a sale. A reduction in the large Shareholder base and the creation of a single class of Shares will also reduce the Company's servicing costs; • The restructuring may reduce the volatility of the Company's share price. Under the existing structure, small trades can cause disproportionately large price fluctuations. The Restructuring Proposals The proposals are that: • Ordinary Shares will be consolidated into Consolidated Shares and Deferred Shares on the basis that every 1,250 Ordinary Shares become one Consolidated Share and 1,125 Deferred Shares; • "B" Ordinary Shares will be consolidated into Consolidated Shares on the basis that every 125 "B" Ordinary Shares become one Consolidated Share; • All of the resulting Consolidated Shares will be subdivided into New Ordinary Shares (the "Subdivision") at the rate of 125 New Ordinary Shares for each Consolidated Share, each New Ordinary Share having one vote. To arrive at the differing conversion ratios for the Ordinary Shares and the "B"Ordinary Shares, the Independent Directors have taken a number of factors intoconsideration. It is customary to examine the premium that the market hashistorically placed on the enhanced voting rights of the "B" Ordinary Shares andthe Independent Directors have given particular consideration to the averagelevel of this premium in the period since the Company's admission to AIM inAugust 2004. The Independent Directors are further proposing that the restructuring becarried out in such a way as to reduce the number of Shareholders. The Companycurrently has just over 4,800 Shareholders. The Independent Directors believethat many Shareholders with small holdings may have considered selling theirShares but have decided not to do so in the light of disproportionate dealingand administration costs relating to such a sale. They also believe that it isnot in the Company's best interests to continue to bear the costs of servicingsuch a large Shareholder base. It is proposed, therefore, that the minimum threshold for entitlement to receiveConsolidated Shares should be 1,250 Ordinary Shares or 125 "B" Ordinary Shares.As a consequence, if a Shareholder holds less than 1,250 Ordinary Shares or lessthan 125 "B" Ordinary Shares at the Record Date, he or she will not receive anyConsolidated Shares but will be entitled to a fractional entitlement to aConsolidated Share which will be aggregated with other such fractionalentitlements and sold on his or her behalf. To ensure that the fractionalentitlements to Consolidated Shares are sold and that the sale costs are kept aslow as possible, the Company will itself purchase those fractional entitlements.This will return value, free from transaction costs, to smaller Shareholders andwill benefit the Company by reducing the costs of servicing a large shareholderbase. The Consolidated Shares so repurchased will be subdivided into NewOrdinary Shares and held in treasury. Where the Subdivision results in a Shareholder being entitled to a fraction of aNew Ordinary Share, such fractional entitlement will be aggregated with othersuch fractional entitlements and sold by the Company on the Shareholder'sbehalf. With a view to ensuring the sale of all such fractional entitlements,the Company itself will purchase the New Ordinary Shares arising from suchfractional entitlements and will hold the New Ordinary Shares in treasury. The price at which fractional entitlements to Consolidated Shares and NewOrdinary Shares are repurchased by the Company will be calculated by referenceto the market capitalisation of the Company at the close of business on 3 March2006, this being the latest practicable date prior to the posting of theCircular setting out the Restructuring Proposals. This equates to £163.32 foreach Consolidated Share and £1.31 for each New Ordinary Share. Where aShareholder is entitled to an amount which is less than £3, then the amount willnot be distributed but will be retained for the benefit of the Company. Application will be made to the London Stock Exchange for the New OrdinaryShares to be admitted to trading on the Alternative Investment Market. Noapplication will be made for the Deferred Shares to be admitted to trading. Deferred Shares The creation of the Deferred Shares arises from the Ordinary Shares beingconsolidated into Consolidated Shares at a lower ratio than the "B" OrdinaryShares, and the requirement under the Companies Act to maintain the nominalvalue of the Company's called up share capital. The Deferred Shares willeffectively have no value, they will not be admitted to trading on AIM and theCompany will buy them back for a nominal consideration and cancel them. Share capital following implementation of the Restructuring Proposals If the Restructuring Proposals are approved, the issued share of the Companywill, following their implementation and the repurchase and cancellation of theDeferred Shares, comprise approximately 8,335,400 New Ordinary Shares, of whichapproximately 142,650 New Ordinary Shares will be held in treasury. Related party Mrs S A Bailey currently holds 45.6% of the issued Ordinary Shares and 79.6% ofthe issued "B" Ordinary Shares. Mrs S A Bailey is a director of the Company anda Shareholder of more than 10% of the issued share capital of both classes. Forthe purposes of these Restructuring Proposals, she is deemed to be a relatedparty and consequently interested in them. Mrs Bailey will therefore not makeany recommendation to Shareholders in relation to the Restructuring Proposals,which have been considered and are being recommended by the other Directors (the"Independent Directors"). Current trading and future prospects On 22 December 2005, the Group announced its interim results for the six monthsended 30 September 2005. In the period since 30 September 2005 the Group hascontinued to trade in accordance with expectations as outlined in the interimannouncement. As announced in the interim statement, the Group continues to progress theproposed office complex development in Dar es Salaam, Tanzania, and is currentlyin the process of negotiating local bank finance for the development. Asannounced by the Company in a further statement on 27 February 2006, thefinanciers require security over the Group's Oyster Bay Hotel, and haverequested a professional valuation of the property. This has now been completed,and indicates a value for the hotel of US$4.5m (£2.6m at current rates ofexchange). As at 31 March 2005 the valuation of the Tanzanian investment wasreported in the Company's accounts as £1,245,000. Shareholder Meetings The Restructuring Proposals must be approved by an Extraordinary General Meetingof the Company and by the Shareholders of each class of Shares in separateGeneral Meetings. The resolutions proposed at each meeting require the supportof not less than 75% of the persons attending in person or by proxy and entitledto vote at each meeting. In order to effect the Restructuring Proposals, certain changes will be neededto the Articles of Association of the Company to: • give the Directors more flexibility to deal with fractional entitlements; • permit the creation of the New Ordinary Shares; and • delete all references to two classes of Shares and to the specific rights attached to the Ordinary Shares and the "B" Ordinary Shares. Resolutions to effect these changes will be proposed at the ExtraordinaryGeneral Meeting. Expected timetable of principal events 31 March 2006 • Record date. Extraordinary General Meeting and Class Meetings of Ordinary and "B" Ordinary shareholders. Last day for dealings in existing Ordinary Shares and "B" Ordinary Shares 3 April 2006 . New Ordinary Shares commence trading on AIM. Note: words and expressions as defined in the circular to Shareholders shall,unless the context requires otherwise, have the same meaning in thisannouncement. Further information: Charles BaileyChairman, C.H. Bailey, PlcTel: 01633 262961 Richard DayArden Partners LimitedTel: 020 7398 1632 This information is provided by RNS The company news service from the London Stock Exchange