CTEA.L Regulatory News (CTEA)

1 Feb 2006 07:01

Milestone Group PLC01 February 2006 For Immediate Release 1 February 2006 Milestone Group PLC PROPOSED DISPOSALS NEW CHAIRMAN FUNDING ARRANGEMENT Milestone Group PLC ("Milestone" or "the Company"), the AIM listed media group,announces the proposed disposal of its three non-wholly owned radio assets andthe appointment of a new Non-Executive Chairman. The Company proposes to dispose of its 54 per cent. beneficial interest inKestrel FM Limited ("Kestrel FM") and assignment of related shareholder loans;its 55 per cent. beneficial interest in West Berkshire Radio Limited ("Kick FM")and assignment of related shareholder loans; and its 52 per cent. beneficialinterest in Rugby Broadcasting Company Limited ("Rugby FM"). The Company expectsto receive gross proceeds for the sale of its controlling shareholdings,shareholder loans and net assets in these radio stations of approximately £2million. The sales are subject to the approval of Shareholders in the Company at anExtraordinary General Meeting to be held on 17 February 2006 ("the EGM"). Fulldetails of the proposed transactions are set out in a circular to Shareholderswhich is being posted today. Additionally, Milestone is pleased to announce the appointment of John Sandersonto the Board as Non-Executive Chairman with immediate effect. John Sanderson is widely recognised as a leading strategy consultant advisingboth listed and private media businesses in their developmental stages, havingbegun his career as a leisure and media sector analyst. John currently runs the media merger and acquisition specialist, M&C VenturesLimited, as well as the consultancy, JFWS Limited, whose past and presentclients include Sporting Index, channel five, The Football League, UnitedBusiness Media, The Race Course Association, Close Brothers,PriceWaterhouseCoopers, Boosey & Hawkes, Endemol UK, Vulcan Ventures, The Milland Brunswick Group. John is currently the Non-Executive Chairman of ABN Holdings Limited - operatorof the African Broadcast Network television service; Eicom plc - the AIM listedscience and technology TV producer; Music Copyright Solutions plc - the AIMlisted music copyright management service provider; and Somethin' Else SoundDirections Limited - the UK's leading independent radio producer. John replaces former Milestone Chairman, Julian Blackwell, who resigns from theCompany with immediate effect in order to concentrate on his other businessinterests. The Company also announces that it has entered into loan arrangements withManchester Securities Corporation, being a connected company of ElliottInternational LP and Elliott Associates LP ("Elliott"), substantial shareholdersin the Company. The funding of £200,000 has been structured by way of an issue of loan notes ofthe Company to Manchester Securities Corporation and is secured by way of ageneral debenture and guarantee entered into by the Company and two of itssubsidiaries, Jazztech Limited and the Milestone Radio Company Limited.The notes bear interest at 15 per cent. per annum and are repayable (subject toa repayment fee of 5 per cent. of the value of the notes) out of the proceeds ofany disposal by the Milestone group of any group company and accordingly it isanticipated that such notes will be repaid on completion of the proposeddisposals of Kick FM and Kestrel FM immediately following the EGM. The Directors (other than Mark Levine who, as the Elliott appointee to theBoard, is deemed to be connected to the loan note holder) believe that thesearrangements have been made at arms' length and on normal commercial terms and,having consulted with the Company's nomad Arden Partners Limited, consider thatthe terms of this financing are fair and reasonable so far as Shareholders areconcerned. Commenting on the appointment and proposed disposals, Milestone Chief Executive,Andy Craig, said: "Kick FM, Kestrel FM and Rugby FM are all radio stations which Milestone hasoperated for some time and, whilst successful and popular amongst theiraudiences, their continued operation by the Company has taken up considerablemanagement resource. This proposed reorganisation will enable the Company tofocus on exploiting the more significant growth potential identified within itswholly owned local media assets. "Your Board, under its new Chairman, will be discussing with its shareholdersand advisers the ongoing strategy of the Company, in line with its duty toexplore all opportunities to maximise shareholder value. The Board is verypleased to welcome to the Company someone of John Sanderson's vast experience inthe development of entrepreneurial media businesses and look forward to workingunder his guidance. "On behalf of the Board, I would like to thank our departing Chairman, JulianBlackwell, for his work and for his ongoing support for the Company." John Sanderson added: "I am excited about joining Milestone as a time when local publishing, localradio and local television are all converging through new digital applications. "I am looking forward to working with management to explore the most appropriateopportunities to ensure Shareholders benefit from the popular local brands whichMilestone has established. I look forward to meeting Shareholders at theExtraordinary General Meeting and assure you of my commitment to your interestsas your new Chairman." Proposed sale of interests in Kestrel FM, Kick FM (the "Kick/Kestrel Disposals")and Rugby FM (the "Rugby Disposal") The Company has conditionally agreed to sell the 54 per cent. beneficialinterest which it holds in Kestrel FM and the 55 per cent. beneficial interestwhich it holds in Kick FM, to Provincial Broadcasting Companies Limited("Provincial") which is a wholly owned subsidiary of Tindle Radio HoldingsLimited. The aggregate consideration is approximately £1.084 million (the"Consideration"), approximately £1.024 million of which is payable in cash uponcompletion of the Kick/Kestrel Disposals ("Completion") with a further £60,000of deferred consideration payable on 30 September 2006. In addition, Provincialhas agreed to pay the Company and other group companies approximately £278,000in respect of the assignment of outstanding loans due to them from Kestrel FMand Kick FM. The Company is also finalising terms for the sale of its 52 per cent. beneficialinterest which it holds in Rugby Broadcasting Company Limited ("Rugby FM") to CNGroup Limited ("CN Group") for a consideration of approximately £645,000 subjectto the completion of satisfactory due diligence, payable in cash upon completion(the "Rugby Consideration"). As at 30 January 2006 (being the latest practicable date prior to publication)the closing mid market price of a Milestone Ordinary Share was 2.63p,capitalising the Company at approximately £0.7 million. In view of theConsideration and the associated assignments of outstanding loans and the RugbyConsideration relative to the market capitalisation of the Company, both theKick/Kestrel Disposals and the Rugby Disposal require the prior approval ofShareholders under the AIM Rules at the EGM. Certain Shareholders and the Directors have irrevocably undertaken to vote infavour of the resolutions to be proposed at the EGM (the "Resolutions") inrespect of an aggregate of 12,134,539 Ordinary Shares (representingapproximately 44 per cent. of the issued share capital of the Company). Reasons for the disposals In June 2005, the Company announced a comprehensive review of ongoing strategy,which was to rationalise its portfolio of operating assets and pursue allavenues to increase shareholder value. This quickly led to the sale ofMilestone's minority investment in Reading Broadcasting Company Limited inAugust 2005. Kick FM, Kestrel FM and Rugby FM all operate in relatively small towns withtotal adult populations under 100,000 (based on official Ofcom Measured CoverageAreas, or total adult populations under 150,000 based on RAJAR Total SurveyAreas). The headline operating results for the companies are summarised below. •In the unaudited management accounts for the year ended 30 September 2005, Kick FM made a loss of £118,712 on turnover of £343,499 (2004: loss of £93,743 on turnover of £427,576). •In the unaudited management accounts for the year ended 30 September 2005, Kestrel FM made a loss of £10,385 on turnover of £514,924 (2004: profit of £81,348 on turnover of £605,855). •In the unaudited management accounts for the year ended 30 September 2005, Rugby FM made a profit of £6,033 on sales of £466,213 (2004: loss of £47,234 on sales of £431,621). Provincial are existing minority shareholders in Kick FM and Kestrel FM.Milestone has agreed to enter into a continuing services agreement withProvincial, whereby Milestone will continue to provide programme management andaccounting services to both Kick FM and Kestrel FM for a period of at least 2months following Completion. In addition, Milestone and Provincial have enteredinto a further agreement whereby both Kestrel FM and Basingstoke ObserverLimited, the Milestone-owned local newspaper for North Hampshire, will continueto cooperate on joint-promotions and advertising for a period of 12 monthsfollowing Completion. The Directors consider that the sale of Milestone's non-wholly-owned radioassets in Berkshire, Hampshire and Warwickshire will enable management to focuson realising the significant growth potential within the Company's wholly ownedlocal media assets, primarily concentrated within the county of Oxfordshire.Following Completion, the Company will continue to 100 per cent. own its twopublishing companies; Courier Newspapers (Oxford) Limited and BasingstokeObserver Limited; and the two broadcasting companies; Passion Radio (Oxford)Limited and Oxford Broadcasting Limited (trading as SIX TV). Although the Directors expect the Rugby Disposal to proceed upon the termsoffered, if the Company is not successful in finalising terms for the sale ofRugby FM to CN Group, who are existing minority shareholders in Rugby FM, itintends to offer its shares to third parties on similar terms. The Directors intend that the proceeds from the Kick/Kestrel Disposals and theRugby Disposal will initially be used to reduce Company debt and for generalworking capital purposes. However, the Directors will be discussing withshareholders and advisers the ongoing strategy of the Company, including thebest use of these funds, in line with the duty to consider all options tomaximise shareholder value. The Kick/Kestrel Disposals Under the terms of a share purchase agreement dated 1 February 2006 entered intobetween Milestone Pictures Limited ("Milestone Pictures") (1) The MilestoneRadio Company Limited ("Milestone Radio") (2) (which are both wholly ownedsubsidiaries of the Company), the Company (3) and Provincial (4), MilestonePictures and Milestone Radio have conditionally agreed to sell the aggregate 54per cent. interest which they hold in Kestrel FM for approximately £594,000 (the"Kestrel Share Purchase Agreement"). In addition the Company and related groupcompanies have agreed to assign the outstanding loans due to them inconsideration for the payment by Provincial of £110,000. Under the terms of a second share purchase agreement dated 1 February 2006entered into between Milestone Radio (1) Newbury Community Radio (Investment)Limited (a wholly owned subsidiary of the Company) ("Newbury") (2) the Company(3) and Provincial (4), Milestone Radio and Newbury have conditionally agreed tosell the aggregate 55 per cent. interest which they hold in Kick FM forapproximately £490,000 (the "Kick Share Purchase Agreement"). In addition theCompany and related group companies have agreed to assign the outstanding loansdue to them in consideration for the payment by Provincial of approximately£168,000. Under the terms of the Kestrel Share Purchase Agreement and the Kick SharePurchase Agreement (together the "Kick/Kestrel Share Purchase Agreements")approximately £564,000 and £460,000 respectively of the Consideration is payablein cash upon Completion. A further £30,000 of deferred consideration is payablein respect of each of the Kick/Kestrel Disposals on 30 September 2006. Theconsideration in each case is subject to an adjustment (upwards or downwards)based on the net asset value of the relevant company upon Completion. The Kick/Kestrel Share Purchase Agreements are inter-conditional and in additionare conditional upon, inter alia, the passing of Resolution 1. In each casecertain warranties are being given by the Company and the relevant selling groupcompanies to Provincial. The maximum aggregate liability of the relevant sellinggroup companies (which in each case includes claims in respect of tax) is cappedat the value of the consideration actually paid by Provincial under the relevantShare Purchase Agreement. Under each of the Kick/Kestrel Share PurchaseAgreements, certain of the obligations of the relevant selling group companyunder such agreement have been guaranteed by the Company. Provincial has the right to terminate the relevant Kick/Kestrel Share PurchaseAgreement prior to completion if the relevant selling group company is inmaterial breach of any of the warranties or any other material term of therelevant Kick/Kestrel Share Purchase Agreement. Under the terms of each of the Kick/Kestrel Share Purchase Agreements variousrestrictive covenants have been given by the Company and the relevant sellinggroup companies in favour of Provincial. The Rugby Disposal Under the proposed sale, Milestone Pictures and Milestone Radio will dispose oftheir shareholdings in Rugby Broadcasting Company Limited (comprising inaggregate 208,052 ordinary shares in Rugby FM and representing 52 per cent. ofthe issued share capital of Rugby FM) for £644,961.20 to CN Group. Thisrepresents a price of £3.10 a share and the offer is conditional, inter alia,upon CN Group carrying out satisfactory due diligence and upon the acceptance ofthese terms by all other existing shareholders in Rugby FM. The Company andMilestone Radio will give certain warranties to CN Group and their maximumaggregate liability is capped at the value of the Rugby Consideration. The saleis not inter-conditional to the completion of the Kick/Kestrel Share PurchaseAgreements and it is intended that it will be completed as soon as possibleafter the EGM and in any event by 24 February 2006. The EGM The EGM has been convened for 9 a.m. on 17 February 2006 at the offices ofLawrence Graham LLP, 190 Strand, London WC2R 1JN at which the Resolutions willbe proposed to approve the Kick/Kestrel Disposals and the Rugby Disposal inaccordance with Rule 15 of the AIM Rules. The Resolutions will be proposed asordinary resolutions. Recommendation The Directors consider that the disposals are the best interests of the Companyand its Shareholders as a whole and accordingly recommend that Shareholders votein favour of the Resolutions to be proposed at the EGM, as they have irrevocablyundertaken to do so in respect of the Ordinary Shares in which they arebeneficially interested. For further information: Milestone Group Tel: 01235 547 800Andy Craig/Daniel Cass Arden Partners Tel: 0207 398 1632Richard Day Buchanan Communications Tel: 0207 466 5000Bobby Morse/Suzanne Brocks REGULATORY INFORMATION This announcement contains certain information required to be disclosed inrespect of Mr Sanderson's appointment in accordance with Schedule Two paragraph(g) of the AIM Rules: Full Name: John Frederick Waley Sanderson Occupation: Management Consultant Date of Birth: 10 September 1954 Current Shareholding in the Company: 0 Current Directorships:ART VPS LtdAudio Network plcButler and Tanner LtdCartezia LtdEcho Publishing LtdJFWS LtdLocation Network LtdMerlin Board LtdNetherton Family LtdPilotlightPlain English Group LtdScreen Digest LtdWhetstone Group LtdWorkaide Ltd Current Directorships (Non-Executive Chairman):ABN Holdings LtdEicom plcMusic Copyright Solutions plcSomethin' Else Sound Directions Ltd Past Directorships (in the previous 5 years):Bubble Group LtdEast India Company LtdFlippa.com Ltd (in liquidation)Gamingking plcHydra Associates LtdHydra Associates Financial ServicesHydrama Media LtdMA Media Partners LtdMission Today Ltd (in liquidation)Muzantiks LtdPersonal News NetworkPlanetRecruit LtdSanderson Family NomineesSRU LtdThe Business Information Zone Ltdthe hotgroup plcXtempus Ltd John Sanderson has confirmed that there are no other disclosures requiredpursuant to Schedule Two paragraph (g) of the AIM Rules. This information is provided by RNS The company news service from the London Stock Exchange