Coats Regulatory News (COA)

1 Feb 2008 07:01

GPG (UK) Holdings PLC01 February 2008 Not for release, publication or distribution, in whole or in part, in, into or from the US, Canada or Australia or any jurisdiction where to do so would constitute a violation of the laws of such jurisdiction. 1 February 2008 Cash Offer By Strand Partners Limited on behalf of GPG Acquisitions No. 5 Limited (a wholly owned subsidiary of Guinness Peat Group plc) for the entire issued and to be issued ordinary share capital of NEWBURY RACECOURSE PLC Further re: Increased Offer On 31 January 2008 a document relating to the Increased Offer for the issued andto be issued Ordinary Share capital of Newbury Racecourse was posted to NewburyRacecourse Shareholders. The text of the letter from the Chairman of GPG Acquisitions contained in thedocument is set out below: "Dear Fellow Shareholder, Background Having for 13 years been a supportive shareholder in Newbury Racecourse, it waswith considerable regret that GPG in late October last year found itself at animpasse with the Newbury Board over the economics of its proposed propertyredevelopment with David Wilson Homes Limited ("DWH"). This came about becausethe Newbury Board was unable to confirm that the mooted land sale would deliverminimum net inflows, in today's monetary terms, of at least £7 per Share, or£21.3 million in aggregate. As a result GPG requested that the proposed transaction be put to Shareholdersfor their approval, but was informed by the Newbury Board that due toconfidentiality commitments it was barred from publicly supplying Shareholderswith financial details of the proposed contract with DWH! GPG then approachedthe Company with a view to making a recommended offer. This approach was subjectto two main conditions, namely the suspension, while offer talks progressed, ofnegotiations with DWH and satisfactory due diligence. Talks broke down when theNewbury Board indicated it was not in a position to agree to the former. In consequence, GPG felt obliged to make the Original Offer to protect itsinvestment. In doing so GPG's objective has been to gain control of thebusiness, in order to maximise the value of the racecourse and surplus land.Since then the Newbury Board has sought spuriously to question GPG's strategyfor racing at Newbury Racecourse. In this regard, Shareholders should takereassurance from the fact that GPG has put on record its firm commitment to thefuture operation of the racecourse, the essential difference to the currentsituation being that GPG will seek to make the business profitable. On 22January, GPG posted the Increased Offer and declared that it was final. I now write to summarise the reasons why the Increased Offer price of £11.50 incash per Share is attractive to Shareholders. Uncertainties of the DWH Contract The Newbury Board is apparently gloriously unaware of the recent slow-down inthe UK residential property market and appears to be determined to enter intothe DWH Contract with gay abandon as soon as the offer timetable has run itscourse. It is absolutely crucial to Shareholders' consideration of the Increased Offerthat they recognise not only that receipts by the Company under the DWH Contractare conditional on "satisfactory planning consents", but also that they would besubstantially determined by the level of house prices achieved. In this respectShareholders should note that the Newbury Board has, in its circulars toShareholders, chosen to focus on an Illustrative Net Asset estimate of theCompany which assumes that projected revenues from the development project wouldbe some 5 per cent. higher than those projected by DWH itself. Even assumingShareholders took the view that such planning permission would be obtained, theonly receipts they can place any certainty on are the minimum payments which,under the DWH Contract, are only required to be made over 9.5 years from thedate of sale of the surplus land, i.e. perhaps as late as 2018! In this scenarioNewbury Racecourse's position under the joint venture would amount to littlemore than having an unsecured, non interest-bearing, deposit with DWH for thatsum. The Newbury Board's proposals would put DWH in control of Shareholders' destiny,leaving the Company exposed over a 10 year period to the risks of a significantproperty downturn. The Mysterious £12 million in Expenditure As late as 26 July 2007 the Newbury Board reiterated in a press release that theproposed redevelopment project had an estimated cost of £45 million. In its first two Defence Documents the Newbury Board indicated that DWH was expected to invest £31 million in infrastructure, servicing and enabling works fundamental for the redevelopment project. Further, it disclosed £2 million for additional Company investment in racecourse enhancements, an amount it in one case deducted from its net asset estimates. However, it did NOT see fit until its Third Defence Document to disclose to Shareholders that the Independent Directors, presumably between the announcement of GPG's Original Offer and the posting of the First Defence Document, had identified £12 million of savings across "infrastructure, enabling and enhancement works". It seems extraordinary that, until GPG's Increased Offer Document, the Newbury Board did not see this as a material fact of which Shareholders ought to be informed. While GPG welcomes any such savings, without which the net returns to NewburyRacecourse would be materially lower, it is concerned that savings identified insuch haste could just as quickly unravel. Furthermore, GPG notes that theNewbury Board has conspicuously chosen not to comment on the two areas ofCompany expenditure, highlighted in the Increased Offer Document, each of whichhas the potential to depress significantly the net returns to Shareholders - (i) were the DWH Contract to proceed, it is highly probable that it wouldcrystallize the payment of multi-million pound consultancy fees - none of thesehave been accounted for and, as such, it is unclear what the Company's share ofsuch fees would be, and, in particular, their impact on overall project returns;and (ii) there is ample scope for the Newbury Board subsequently to decide to expendon discretionary racecourse enhancement funds in excess of the £2 millionalready disclosed. Shareholders should note that no commitment has been given inthis regard. Shareholders should ask themselves why the Newbury Board has neglected tocomment on these two value-impacting elements of the missing expenditure. The Conspicuous Lack of Commitment from the Newbury Board? As stated above, the Original Offer was made against the background of theNewbury Board's inability to confirm that the DWH deal would produce minimum netreturns, in today's monetary terms, of £7 per Share. The Third Defence Document contains the rather limp statements that (i) theIndependent Directors intend to return surplus cash from the proposeddevelopment to Shareholders, and that (ii) net cash inflows from the DWHContract are estimated to be worth £9.37 per Share. That figure is an integralcomponent of the Newbury Board's Illustrative Net Assets figure of £13.27 perShare. It is very telling that, notwithstanding the Newbury Board's voluminousrhetoric, it is unwilling to provide any firm commitment to return capital toShareholders. Even more pertinent, the Newbury Board's claims that GPG's Increased Offersignificantly undervalues the Company must similarly be judged against itsselection of the most optimistic estimate of the receipts from the DWH Contractand its failure to provide Shareholders with any assurances regarding associatedracecourse expenditure. GPG is Offering to Purchase Shares on Market at £11.50 per Share The Increased Offer is final and is in excess of Newbury Racecourse's estimatednet assets per Share of £11.45 based on the Company's own valuation of itssurplus land assuming planning permission were obtained, but after deducting itsdisclosed estimate for additional investment in racecourse enhancements. Furthermore the Increased Offer represents a premium of 16.8 per cent. to theNewbury Racecourse Share price of £9.85 on the last Business Day before theOriginal Offer was announced, since when the FTSE All-Share Index has fallen by8.6 per cent. The Increased Offer also provides Shareholders with the alternative of acceptingthe Offer for part of their shareholding - thereby assisting GPG to gain controlof the business with a view to maximising the value of the racecourse andsurplus land for the benefit of all remaining Shareholders. As a furtheralternative, GPG will purchase Shares on market (that is, unconditionally) withthe aim of increasing its shareholding from 25.2 per cent. to 29.9 per cent.prior to the end of the Increased Offer. Depressed Newbury Racecourse Share price? Shareholders, including GPG, are thus confronted with a deal (the DWH Contract)which, even assuming Shareholders only required a return of 6 per cent. perannum would in a significant property downturn give rise to a pro-forma netasset value of a mere £10.37 per Share. If Shareholders were looking for a lessmeagre return than 6 per cent. per annum, this would reduce commensurately.Moreover, in the event that the Newbury Board either were obliged to or chose toexpend funds on unaccounted-for additional consultancy fees or racecourseenhancements the value would fall still further. That is why GPG is seriously concerned that, were the DWH Contract to be enteredinto, a substantial reduction in the Newbury Racecourse Share price, and themarket value of each Shareholders' (including GPG's) interests, would be theresult. In order to avert such an undesirable outcome, GPG intends, should its IncreasedOffer not become unconditional, to require the Newbury Board to hold anExtraordinary General Meeting at which it would propose that the DWH Contractnot be implemented without prior sanction of Shareholders, and that the NewburyBoard be reconfigured so it more properly reflects a suitable level ofproprietorial involvement. Newbury Racecourse Shareholders (including GPG) are at the crossroads Left to its own devices the current Newbury Board is committed to implementingits ill-conceived redevelopment plans, which GPG considers will be significantlydetrimental to Shareholder value. GPG's Increased Offer provides Shareholderswith a real and certain alternative. Given the dubious economics of the DWH deal, and the obvious uncertaintiesregarding the disbursement by the Newbury Board of the gross proceeds, GPGremains convinced that the entering into of the DWH Contract would lead to acalamitous reduction in the Newbury Racecourse Share price. Bearing this inmind, and notwithstanding the Newbury Board's repeated promises of "jamtomorrow", GPG submits that the certainty of its Increased Offer of £11.50 incash per Share represents a compelling opportunity for Shareholders. Action to be taken to accept the Increased Offer The procedure for acceptance of the Increased Offer is set out on pages 16-18 ofthe Increased Offer Document sent to Shareholders on 22 January 2008. Yours sincerely,Blake NixonChairmanGPG Acquisitions No. 5 Limited" Enquiries: GPG Acquisitions No. 5 Limited Tel: (020) 7484 3370Blake Nixon, Director Strand Partners Limited Tel: (020) 7409 3494Simon Raggett Citigate Dewe Rogerson Tel: (020) 7638 9571Kevin Smith Strand Partners Limited, which is authorised and regulated in the United Kingdomby the Financial Services Authority, is acting exclusively for GPG Acquisitionsand no one else in connection with the Increased Offer and will not beresponsible to anyone other than GPG Acquisitions for providing the protectionsafforded to customers of Strand Partners, or for providing advice in relation tothe Increased Offer or in relation to the contents of this announcement or anytransaction or arrangement referred to herein. The availability of the Increased Offer to persons not resident in and citizensof the United Kingdom may be affected by laws of the relevant jurisdictions inwhich they are citizens or in which they are resident. Such OverseasShareholders should inform themselves about, and observe, any applicable legalor regulatory requirements of any such relevant jurisdiction. Further details inrelation to Overseas Shareholders are contained in the Original Offer Document.If you remain in any doubt, you should consult your professional adviser in therelevant jurisdiction without delay. In particular, the Increased Offer is not being made, directly or indirectly,in, into or from or by the use of the mails of or any means or instrumentality(including, without limitation, by means of facsimile transmission, telex,telephone, internet or other forms of electronic communication) of interstate orforeign commerce of, or by any facility of a national, state or other securitiesexchange of, the United States, or in, into or from Canada or Australia or anyother jurisdiction if to do so would constitute a violation of the relevant lawsof such jurisdiction, and the Increased Offer will not be capable of acceptanceby any such use, means, instrumentality or facility from or within the UnitedStates, Canada or Australia or any other jurisdiction where to do so wouldconstitute a breach of any relevant securities laws of that jurisdiction.Accordingly, copies of this announcement, the Original Offer Document and theIncreased Offer Document are not being, and must not be, mailed or otherwisedistributed or sent in or into or from the United States, Canada or Australia. This announcement does not constitute, or form part of, an offer to sell orpurchase or an invitation to purchase or subscribe for any securities or thesolicitation of an offer to sell, purchase or subscribe for any securities,pursuant to the Increased Offer or otherwise. The Increased Offer is being madesolely by way of the Increased Offer document and the related New Form ofAcceptance, which contain the full terms and conditions of the Increased Offer. This information is provided by RNS The company news service from the London Stock Exchange