Coats Regulatory News (COA)

23 Jan 2008 12:06

Guinness Peat Group PLC23 January 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 22 January 2008 the document setting out the terms of an Increased Offer forthe issued and to be issued Ordinary Share capital of Newbury Racecourse wasposted to Newbury Racecourse Shareholders. 1. Letter from the Chairman of Acquisitions The text of the letter from the Chairman of GPG Acquisitions contained in theIncreased Offer document is set out below: "Dear Shareholder Introduction Since GPG announced its Original Offer, Shareholders have received two circularsfrom the Company containing the response from the Newbury Board and, inparticular, a plethora of figures in respect of the Company and its assets. Iwrite to provide clarification for fellow Shareholders in respect of the mostfundamental of these figures and to reiterate the reasons why, for at least partof their holding, they should accept GPG's premium offer, which was todayincreased to £11.50 per Share. Background The Newbury Board is poised to enter into a contract under which the Company,notwithstanding its paucity of relevant management experience, will be lockedinto a development partnership with David Wilson Homes Limited (''DWH'') lastingfor some 10 years. GPG believes the proposed project would prove disastrous forshareholder value. It was in consequence that GPG indicated to the Newbury Boardit could not support the project unless it could meet the criterion ofgenerating a minimum return, in today's monetary terms, of at least £7 per Share(approximately £21.31 million in aggregate). The Newbury Board has been unableto confirm that such a minimum net inflow would be achieved. In light of this,GPG felt obliged to act to protect its investment by making the Original Offer. Realistic Net Asset Value In the Second Defence Document, dated 15 January 2008, the Newbury Board claimedthat the Original Offer of £11.00 per Share significantly undervalued theCompany. In making this claim it selectively chose, from among some five basesdescribed therein, the two most favourable scenarios to derive potential netasset figures for Newbury Racecourse, in both cases assuming planning consentwould be forthcoming and making favourable assumptions regarding taxation onproceeds of the sale of the surplus land. Shareholders should be aware that theassumptions of gaining planning consent and favourable taxation treatment areboth inherently speculative. Taking a less rose-tinted view on planning by usingthe current market value of Newbury Racecourse's surplus land, and making a morerealistic adjustment for the Company's existing tax position, produces a netasset value of £10.55 per Newbury Racecourse Share, a discount of some 9.0 percent. discount to the Increased Offer price. The Perils for Shareholders of the DWH Contract Of more significance though, the Newbury Board has indicated that it will enterinto the DWH contract as soon as the offer timetable has run its course. Giventhis, the Newbury Board's highlighted net asset value of £12.84 per Share, whichis based on a straightforward disposal of the surplus land having first obtainedplanning permission, is in any event an invalid comparator. The Second DefenceDocument, in connection with the putative DWH contract, points to ''IllustrativeNet Assets of £13.27 per Share''. This figure is also based on quite some numberof optimistically chosen assumptions. The most fundamental is that the valuationis ''subject to satisfactory planning consent''. Moreover, even assumingplanning permission is obtained, if house sales under the development are lowerthan forecast in the Company's projections (or costs are higher) the payments tobe made by DWH will be less valuable. Of critical importance, Shareholders need to take heed of the fact that, werethere to be a significant downturn in the property market, such as is beingforecast by a number of commentators, DWH would only be obliged to make theminimum payments due under the contract by no later than 9.5 years from the dateof sale of the surplus land. In this scenario Newbury Racecourse's positionunder the joint venture would amount to little more than having an unsecured,non interest-bearing, deposit with DWH for that sum. Even using the Company'sown optimistic assumptions, in particular that planning permission was obtainedand that Shareholders required a return on such funds of no more than 6 percent. per annum, the Company's total net asset value if there were such aproperty downturn would only amount to £10.37 per Share. The Newbury Board's proposals would put DWH in control of Shareholders' destiny,leaving the Company exposed to significant downside risks over a 10 year period. ''Missing Expenditure'' Even this, however, would only be the thin end of the wedge. The Newbury Boardhas stated that its full development project has an estimated cost of £45million whereas only some £33 million of expenditure is accounted for in theSecond Defence Document. Whilst a certain portion of the remaining £12 millionmay be in respect of racecourse infrastructure which the Newbury Boardconceivably might decide to defer, it is highly probable that this figure wouldinclude a substantial level of fees and costs, in respect of the DWH project,which would be payable in any event but would generate no ongoing value forShareholders. Shareholders should ask themselves why the Newbury Board hasneglected to mention this £12 million of missing expenditure. Is it any wonder that, notwithstanding its optimistic pronouncements regardingnet asset value, the Newbury Board has, nonetheless, been unable to confirm thatthe DWH project would generate returns of at least £7 per Share? The upshot of all this is GPG's conclusion that, were the DWH contract to beentered into, a substantial reduction in the Newbury share price would be theresult. Further detail regarding these important issues is contained in thesection entitled ''Further Analysis'' (set out in the Increased Offer document). Increased Offer GPG has today increased its Offer to £11.50 per Share. The Increased Offer isfinal and is in excess of Newbury Racecourse's estimated net assets per Share of£11.45 based on the Company's own valuation of its surplus land assumingplanning permission were obtained, but after deducting its disclosed estimate of£2 million, or £0.66 per Share, for additional investment in racecourseenhancements. The Increased Offer represents a premium of 16.8 per cent. to the NewburyRacecourse Share price of £9.85 on the last day before the Original Offer wasannounced, since when the FTSE All-Share Index has fallen by 12.8 per cent.. Conclusion As we have stated previously, Newbury Racecourse is at the crossroads.Shareholders have to weigh the certainty of £11.50 in cash per Share under theIncreased Offer against the risk of retaining their Shares with no guaranteethat the Newbury Board will not enter into the DWH contract, in which case,despite the Newbury Board's promises of ''jam tomorrow'', the Company's netassets could turn out to be no more than £10.37 per Share, before any account istaken of the £12 million in missing expenditure. Furthermore, given the very lowrate of return implied by this figure, it is GPG's view that Newbury RacecourseShares would trade at a substantial discount to this level. 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. Given the dubious economics of the DWH deal, our fellow Shareholders arestrongly urged to support the Increased Offer and prevent the Newbury Board fromshortchanging us all. Action to be taken to accept the Increased Offer The procedure for acceptance of the Increased Offer is set out on pages 16 to 18of this document and in the accompanying New Form of Acceptance. Yours sincerely Blake NixonChairmanGPG Acquisitions No. 5 Limited" 2. Further information On 14 November 2007 the terms of the Original Offer, to be made by StrandPartners on behalf of GPG Acquisitions, were announced for the entire issued andto be issued share capital of Newbury Racecourse. The Original Offer Documentwas posted to Shareholders on 7 December 2007. As at 1.00 p.m. on 28 December 2007, being the first closing date of theOriginal Offer, valid acceptances of the Original Offer had been received inrespect of a total of 124,019 Newbury Racecourse Shares, representingapproximately 4.07 per cent. of the issued share capital of Newbury Racecourse. On 2 January 2008 the Original Offer was extended so as to remain open foracceptances until 1.00 p.m. on 14 January 2008. The Original Offer was furtherextended on 15 January 2008 so as to remain open for acceptances until 1.00 p.m.on 21 January 2008. On 14 January 2008 the acceptance condition of the OriginalOffer was lowered from 75 per cent. to more than 50 per cent.. As at 1.00 p.m. on 21 January 2008, being the third closing date of the Offer,valid acceptances of the Original Offer had been received in respect of a totalof 191,969 Newbury Racecourse Shares, representing approximately 6.30 per cent.of the issued share capital of Newbury Racecourse. 3. GPG's shareholding in Newbury Racecourse Following the purchase on 22 January 2008 of 8,300 Newbury Racecourse Shares,GPG holds 637,318 Newbury Racecourse Shares, representing approximately 20.93per cent. of the Company's issued share capital. Other than the NewburyRacecourse Shares acquired on 22 January 2008, neither GPG nor any person actingor deemed to be acting in concert with GPG has acquired or agreed to acquiredany Newbury Racecourse Shares or rights over Newbury Racecourse Shares since thecommencement of the Offer Period. 4. The Increased Offer The Increased Offer is being made on the following basis: for each Newbury Racecourse Share £11.50 in cash The Increased Offer price exceeds the highest Closing Price of NewburyRacecourse Shares since dealings in the Company's ordinary shares commenced onthe PLUS market in 1995 and represents: • a premium of approximately 16.75 per cent. to the Closing Price of £9.85 per Newbury Racecourse Share on 13 November 2007, being the last Business Day prior to the announcement of the Original Offer; and • premium of approximately 11.11 per cent. to the Closing Price of £10.35 per Newbury Racecourse Share on 21 January 2008, being the last practicable Business Day prior to the date of the Increased Offer Document. The Increased Offer values the existing issued ordinary share capital of NewburyRacecourse at approximately £35 million. The Increased Offer is final and, underthe rules of the City Code, cannot be increased or amended, except that GPGAcquisitions reserves the right to increase or otherwise amend the IncreasedOffer in the event that a competing offer for the Company is made by any otherperson. The Newbury Racecourse Shares to which the Increased Offer relates will beacquired by GPG Acquisitions fully paid, or credited as fully paid, and freefrom all liens, equitable interests, mortgages, charges, encumbrances, rights ofpre-emption and other third party rights or interests of any nature whatsoeverand together with all rights now or hereafter attaching to them, including allvoting rights and the right to receive and retain all dividends and otherdistributions (if any) declared, made or paid on or after the date of theIncreased Offer document. The Increased Offer extends to any Newbury RacecourseShares in issue or unconditionally allotted and fully paid (or credited as fullypaid) on the date of the Increased Offer document and to any further NewburyRacecourse Shares unconditionally allotted or issued fully paid (or credited asfully paid) while the Increased Offer remains open for acceptance (or by suchearlier date as GPG Acquisitions may, subject to the city Code or with theconsent of the Panel, determine). The Increased Offer is conditional on valid acceptances having been received inrespect of such number of Newbury Racecourse Shares which, together with theNewbury Racecourse Shares held by GPG, carry 50 per cent. or more of the votingrights normally exercisable at general meetings of Newbury Racecourse. Newbury Racecourse Shareholders should note that the Increased Offer is alsoconditional on no agreement, arrangement or commitment, or amendment to anyexisting agreement, having been entered into for the sale or development of anymaterial real estate asset owned by any member of the Newbury Racecourse Group.See the paragraph entitled ''Background to, and reasons for, the Offer'' in theletter from the Chairman of GPG Acquisitions in Part I of the Original Offer Documentfor more information on the reasons behind this condition. Save for the revised offer price and the revised acceptance condition, theIncreased Offer is being made on the same terms and subject to the sameconditions as set out in the Original Offer Document and the Increased Offerdocument, as appropriate. 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