CTEA.L Regulatory News (CTEA)

4 Aug 2006 15:49

Milestone Group PLC04 August 2006 For Immediate Release 4 August 2006 Milestone Group PLC PROPOSED DISPOSALS AIM-listed Milestone Group PLC ("Milestone" or "the Company") today announcesthe proposed disposal of its publishing division for a cash consideration ofover £1m. Details of the proposed transactions are set out in a circular toShareholders which is being posted today. Milestone Chief Executive, Andy Craig, said: "Following a comprehensive review of strategy, the Board is pleased to recommendto Shareholders the acceptance of an offer for its loss-making publishingdivision. Milestone is proud to have developed local publishing brands that arewell respected by their readers and advertisers. Whilst the Board continues tobelieve in the concept of cross media cooperation in local markets, itrecognises that the current advertising climate is proving challenging to anumber of much larger media groups than Milestone. "Following completion of the proposed disposals, the Company will be a listedvehicle with significant cash reserves and an ongoing television division, whichnow operates with a very low overhead. Overall, the Board believes that therecommended disposals reflect a fair price for the group's local publishingassets in the current climate and protect the interests of Shareholders andstaff across the group. The Board intends to consult widely with Shareholders onhow best to continue to maximise shareholder value from the newly streamlinedgroup's cash and other assets." Proposed sale of the entire issued share capital of Courier Newspapers (Oxford)Limited and Basingstoke Observer Limited (together the "Disposals") The Company Board has agreed terms, subject to contract, due diligence and theapproval of Shareholders, for the disposal of the entire issued share capitalsof Courier Newspapers (Oxford) Limited ("CNL") and Basingstoke Observer Limited("BOL") to Letterbronze Limited ("Letterbronze"). The aggregate consideration isapproximately £1,025,000 (the "Consideration"), approximately £775,000 of whichis payable in cash upon completion of the disposal of CNL and £250,000 oncompletion of the sale of BOL. The Disposals will be inter-conditional and it isintended that the Disposals are completed simultaneously on 21 August 2006 or assoon as possible thereafter ("Completion"). As at 2 August 2006, the closing mid market price of the Company's shares was4.38p, capitalising the Company at approximately £1,210,000. In view of theConsideration relative to the market capitalisation of the Company, theDisposals require the prior approval of Shareholders under the AIM Rules at anExtraordinary General Meeting (the "EGM"), notice of which is set out at the endof the circular which is being posted to Shareholders today. Certain Shareholders and Directors have irrevocably undertaken to vote in favourof the resolution to be proposed at the EGM (the "Resolution") in respect of anaggregate of 10,411,841 ordinary shares (representing approximately 37.7 percent. of the issued share capital of the Company). Reasons for the Disposals and use of proceeds In its interim results statement released 30 June 2006, the Board announced thata number of parties had indicated strong interest "in acquiring some or all ofthe group's assets" and stated that it hoped to be "in a position to report backto shareholders in the near future." The Board has consistently stated, since June 2005, that it will maintain acontinuous review of strategy with a view to exploring all opportunities tomaximise shareholder value. In recent months, Milestone has disposed of itscontrolling interests in four radio stations (only one of which was whollyowned), successfully achieving an aggregate consideration of approximately£2,300,000. Milestone has continued to operate its wholly-owned publishing and televisiondivisions. However, the Board believes that the current advertising climate hasmade it challenging for a small publisher of free newspapers to operateindependently of long term financial support. The group's publishing divisionhas underperformed management expectations and has seen revenues decline over anumber of years. The Directors believe that additional investment is likely tobe required to significantly develop the assets, expand the operation and movethe business to profitability. Through CNL and BOL, the Board is pleased to have been able to develop stronglocal publishing brands that have attracted a wide range of interest from anumber of companies. From its Abingdon base, CNL publishes: •Courier Journal series and Oxford City Journal, Oxfordshire - newspapers distributed via a mixture of door-to-door delivery and through dispensers in local outlets with a total weekly print run of approx. 77,000 •Auto Weekly, Oxfordshire - a motors supplement distributed as part of the Courier Journal series with a weekly print run of approx. 77,000 •Property Weekly series, Oxfordshire and West Berkshire - a property paper distributed via a mixture of door-to-door delivery and through dispensers in local outlets with a total weekly print run of approx. 75,000, together with an associated website •Oxfordshire Living, a monthly magazine for Oxfordshire, as well as occasional special or contract publications such as Good Restaurant Guide, Breakout and West Berkshire News From its Basingstoke base, BOL publishes: •Basingstoke Observer, North Hampshire - a newspaper distributed via dispensers in local outlets with a total weekly print run of approx. 25,000 The sale of CNL and BOL will complete the strategic review of Milestone's publishing division which, in the twelve months ended 30 September 2005, made consolidated losses of £0.9 million on sales of £2.9 million as set out below: •CNL made an operating loss of £762,000 on turnover of £2,332,000 (2004: loss of £147,000 on turnover of £2,998,000). In the unaudited management accounts for the nine months ended 30 June 2006, CNL made a loss of £379,000 on turnover of £1,497,000 •BOL made an operating loss of £152,000 on turnover of £600,000 (2004: loss of £103,000 on turnover of £768,000). In the unaudited management accounts for the nine months ended 30 June 2006, BOL made a loss of £115,000 on turnover of £340,000 Having considered a range of options, the Board believes it is in the bestinterests of Shareholders for Milestone to realise the value of the group's twopublishing companies, disposing of the companies to Letterbronze which is theparty that has most clearly expressed a commitment to complete rapidly on theproposed transactions. It is intended that Completion will take place as soon as possible after the EGMon 21 August 2006. However, if, for whatever reason, it appears that there maybe any delay in completion of the Disposals, the Board reserves its right todiscuss with third parties disposals upon similar terms to those that have beenoffered by Letterbronze. The sale of CNL will represent a non-cash loss of approximately £950,000 to the Company in respect of a write down of unamortised goodwill. The sale of BOL will represent a non-cash loss of approximately £230,000 to the Company in respect of a write down of unamortised goodwill. Following Completion, Milestone's sole operating business will be its wholly-owned television division, with two channels operating under the "SIX TV" brand in Oxford and Southampton. The proceeds from the Disposals will be used, in part, to meet the costs ofrestructuring the Company following Completion and for general working capitalpurposes. However, it is the intention of the Directors that a significantproportion of the proceeds will be retained, either to be returned toShareholders or to be re-invested in developing new businesses. The Board isconsidering and will be discussing with its shareholders and nominated adviser,Arden Partners PLC, the ongoing strategy of the Company, including the best useof these funds, in line with its duty to consider all options to maximiseshareholder value. This will be done under the chairmanship of John Sanderson,the Company's non-executive chairman and independent director. The Disposals - principal terms The principal terms for the proposed Disposals are as follows: Under the proposed terms of the first share purchase agreement Tri MediaPublishing Limited ("TMP"), a wholly owned subsidiary of the Company, will sellthe entire issued share capital of CNL for £775,000 payable on Completion. Theagreement will be conditional upon the Company waiving any outstanding loans dueto it or any related group companies. Under the proposed terms of the second share purchase agreement TMP will sellthe entire issued share capital of BOL for £250,000 payable on Completion. Theagreement will be conditional upon the Company waiving any outstanding loans dueto it or any related group companies. The consideration in each case is subject to an adjustment (upwards ordownwards) based on the net asset value of the relevant company upon Completion.The Disposals will be inter-conditional and each share purchase agreement will,inter alia, be conditional upon the passing of the Resolution. In each casecertain warranties will be given by TMP and the Company to Letterbronze. Themaximum aggregate liability of TMP and the Company (which in each case includesclaims in respect of tax) will be capped at the value of the considerationactually paid by Letterbronze under the relevant share purchase agreement. Undereach of the share purchase agreements, certain of the obligations of TMP will beguaranteed by the Company. Under the proposed terms of each share purchase agreement various restrictivecovenants will be given by the Company and TMP in favour of Letterbronze. The Company will make an announcement as soon as possible after share purchaseagreements in respect of the Disposals are signed. Extraordinary General Meeting The EGM has been convened for 9.00 a.m. on 21 August 2006 at the offices ofLawrence Graham LLP, 190 Strand, London WC2R 1JN at which the Resolution will beproposed to approve the Disposals in accordance with Rule 15 of the AIM Rules. Recommendation The Directors have recommended that Shareholders vote in favour of theResolution to be proposed at the EGM. For further information Milestone Tel: 01235 547 800Andy Craig/Daniel Cass Arden Partners Tel: 0207 398 1632Richard Day Buchanan Communications Tel: 0207 466 5000Bobby Morse/ Suzanne Brocks This information is provided by RNS The company news service from the London Stock Exchange