DNK.L Regulatory News (DNK)

9 Apr 2008 07:01

Danka Business Systems PLC09 April 2008 For Immediate Release 9 April 2008 Danka Business Systems PLC ("Danka" or the "Company") Proposed Divestiture of Danka's U.S. Business Operations to Konica Minolta and Members Voluntary Liquidation Danka Business Systems PLC (Danka; OTCBB: DANKY; LSE:DNK.L), a leading supplierof office imaging equipment and support services in the United States, todayannounced it has signed a definitive agreement with Konica Minolta BusinessSolutions U.S.A., Inc. ("Konica Minolta"), a leading provider of advancedimaging and networking technologies from the desktop to the print shop, enablingKonica Minolta to acquire Danka's wholly-owned U.S. subsidiary, Danka OfficeImaging Company ("DOIC"), through which the Danka group conducts its businessoperations. Under the terms of the agreement, the total purchase price is expected to beapproximately U.S. $240 million. The closing of the transaction ("Completion")is expected to take place by June 30, 2008. It is subject to a number ofregulatory and other closing conditions, in both the United States and theUnited Kingdom, including approval of the transaction by Danka's shareholders. "In addition to continuing support for the entire Danka customer base with acomplete range of products and service capabilities," said A.D. Frazier,Chairman and Chief Executive Officer of Danka, "I am pleased to say the neworganization will also provide the added benefit of direct access to KonicaMinolta's world-class technology, distinctive product offerings and financialstrength. Customer relationships will grow ever stronger as a result." Upon consummation of the transaction, DOIC will become a wholly-owned subsidiaryof Konica Minolta and will maintain its current offices in St. Petersburg,Florida and elsewhere. Konica Minolta will supplement the product mix,including network-ready multifunctional products (print, copy, fax and scan allin one system), and network printers in DOIC markets beginning in mid-2008.DOIC will continue servicing its customers with its highly trained sales andservice teams. Frazier credits Danka employees for accomplishing a remarkable competitivetransformation. "They redefined the manner in which document workflow solutionsare managed and serviced in small-to-medium sized enterprises and in theextremely competitive high volume production print marketplace. Their success,achieved against a backdrop of having to overcome the company's dauntingcorporate legacy issues, translates to new relevancy and value for the Dankaapproach." Frazier added, "Nevertheless, the costs associated with trying to remain anindependent player in an extremely competitive industry are imposing. Thistransaction represents by far the best outcome for Danka's organization andstaff. It preserves the DOIC organization, allowing us to serve our loyalcustomers, while addressing the holding company's burdensome financialobligations. We are confident that Konica Minolta's stated desire to invest in,and grow, the DOIC's business will be rewarded in the customer marketplace." The acquisition by Konica Minolta is designed to build and expand upon thefoundation established by DOIC. "Konica Minolta's acquisition of DOIC willfurther enhance our leadership in the color and high volume production printmarkets while complementing our overall growth strategy with our independentdealers and branch network," said Jun Haraguchi, President and CEO of KonicaMinolta Business Solutions U.S.A., Inc. "We're excited about the prospects thatthis strategic acquisition will create, and believe the combined strength of thenew organization will be beneficial to our customers, the DOIC customer base andthe DOIC employee family." The sale transaction (the "Disposal"), because of its size, is a class 1transaction under the Listing Rules of the United Kingdom Listing Authority andis therefore conditional, among other things, upon the approval of Dankashareholders. This approval is to be sought at an extraordinary general meetingof Danka shareholders (the "EGM"), the details of which will be set out in acircular (the "Circular") and a proxy statement (the "Proxy Statement"), each ofwhich will be posted to Danka shareholders as soon as possible. In addition, the Board of Danka proposes placing the Company into membersvoluntary liquidation (the "Liquidation") upon Completion, in which event thelisting of the Company's ordinary shares on the Official List of the LondonStock Exchange (the "Official List") will be cancelled. Under the terms of Danka's existing Articles of Association (the "Articles"),the holders of Danka's ordinary shares would not be entitled to receive anyportion of the amount which is expected to be available for distribution to theholding company's shareholders in the voluntary liquidation. However, the Boardis seeking to implement arrangements which would result in the holders ofDanka's ordinary shares receiving the cash sum of U.S. $0.025 per ordinary sharein the voluntary liquidation. Further details of these proposed arrangementswill be provided to the company's shareholders as soon as possible. The voting thresholds which need to be reached in order to obtain the requisiteshareholder approvals of the Disposal and the Liquidation are summarised in theparagraph headed "Conditions" below. The relevant provisions of the existing Articles require the entirety of thisamount to be paid to the holders of the 6.50% senior convertible participatingshares of U.S. $1.00 each in the capital of the Company (the "ParticipatingShares"), leaving no amount available for distribution to the holders of thecompany's ordinary shares. However, the Board is seeking to implementarrangements which would result in the holders of the company's ordinary sharesreceiving the cash sum of U.S. $0.025 per ordinary share in the Liquidation. Cypress Merchant Banking Partners II L.P. and certain of its affiliates, whichcollectively hold approximately 338,569 Participating Shares, which confer theright to exercise approximately 29 percent of the voting rights exercisable atgeneral meetings of the Company, have undertaken to vote in favour of theDisposal, the Liquidation and related proposals (the "Proposals"). Following Completion, A.D. Frazier will resign as Chairman and Chief ExecutiveOfficer of Danka, and the other members of the Danka Board will resign theirpositions as directors of the Company. The appointment of the proposedliquidators of the Company (the "Liquidators") will become effective immediatelyupon approval of the resolutions relating to the Liquidation at the EGM. Atthat point, the powers of the directors of the Company will cease and theLiquidators will assume responsibility for the liquidation of the Company. Full details of the Proposals, including the Disposal and the Liquidation, anddetails of the time and location of the EGM, will be set out in the Circular andthe Proxy Statement. Background to and Reasons for the Disposal and the Liquidation The disposal of the U.S. operations to Konica Minolta will result in the sale ofthe Danka group's remaining operating businesses. The Board believes that theLiquidation will enable the net cash in the Company, following Completion, therepayment of the sums outstanding under the Company's credit facilities providedby General Electric Capital Corporation ("GECC"), and after taking into accountall other known actual and contingent liabilities and the costs and expenses ofthe Liquidation, to be returned to Danka shareholders in the most cost effectivemanner. Accordingly, having reviewed the business and financial condition and prospectsof the Danka group, the Board has concluded that the Proposals are in the bestinterests of Danka shareholders as a whole. Assuming that the requisite shareholder approvals for the Proposals are obtainedand satisfaction or waiver of the other conditions to Completion, theLiquidation will commence immediately following the EGM. Principal Terms and Conditions of the Disposal The Disposal will be effected by way of the sale of the entire issued sharecapital of DOIC, which is the entity through which the group conducts itsbusiness operations, to Konica Minolta. Under the terms of the sale agreement (the "Stock Purchase Agreement"), KonicaMinolta will pay Danka, on Completion, the sum of U.S. $240 million in cash,subject to upwards or downward net worth adjustments to a maximum of U.S. $10million. U.S. $25 million of the cash consideration to be paid by Konica Minolta atCompletion will be held in escrow for a period of four years followingCompletion to satisfy any claims which may be made under the Stock PurchaseAgreement. The amount of cash held in escrow is subject to reduction each yearfollowing Completion, with certain amounts not required to satisfy claims underthe Stock Purchase Agreement being returned to the Company on each anniversaryof Completion. Break Fee Subject to obtaining the requisite shareholder approval under the Listing Rulesof the United Kingdom Listing Authority (the "Listing Rules"), Danka has agreedto pay Konica Minolta a fee of U.S. $5 million in the event that the StockPurchase Agreement is terminated as a result of Completion not having occurredby 8 August 2008 or shareholder approval of the Proposals not having beenobtained and in any such case the Company's Board has withdrawn or modified, orproposed to withdraw of modify, in a manner adverse to Konica Minolta, itsrecommendation of the Proposals, or taken any action or made any statement inconnection with the EGM inconsistent with its recommendation of the Proposals,or approved or recommended or publicly proposed to approve or recommend, orfailed to recommend against, a competing proposal. In the event that shareholder approval of the fee referred to above is notobtained in accordance with the requirements of the Listing Rules in thecircumstances referred to above, the Company has agreed to pay Konica Minolta anamount equal to one percent of the market capitalisation of Danka calculated inaccordance with the applicable provisions of the Listing Rules. Use of Proceeds The net cash proceeds from the Disposal will be used to discharge the Group'sapproximately U.S. $152 million of indebtedness under the existing creditfacilities provided by GECC. After depositing the U.S. $25 million in escrow, asdescribed above, the remaining sum, together with the Company's other cashresources, will be used to discharge other actual and contingent liabilities ofthe Group and the costs and expenses of the Liquidation, with the resulting cashbalance, together with any remaining escrow proceeds, to be returned toshareholders through the Liquidation. Liquidation If shareholders approve the Proposals, the Liquidators, after paying orproviding for all known actual and contingent liabilities of the Company and thecosts and expenses of the Liquidation, will distribute the Company's remainingcash, including the net proceeds of the Disposal, to shareholders. The Directors, having discussed the matter with the Liquidators, expect that, inaggregate, an amount of approximately U.S. $55 million will be available fordistribution to shareholders in the Liquidation. Net funds returning to owners of the Participating Shares are expected to totalless than the 20 percent of the U.S. $372 million in accrued payments currentlyowed to them. Further details of these proposed arrangements will be provided to the company'sshareholders as soon as possible. Cancellation of Listing It is expected that the listing of the company's ordinary shares will besuspended on the day of the EGM, which will be at least 20 business daysfollowing the posting of the Circular and the Proxy Statement. Subject to the approval of all of the resolutions relating to the holdingcompany's Liquidation, application will be made to cancel the listing of theordinary shares on the Official List. Conditions The Disposal is conditional on shareholder approval being obtained at the EGM.The resolution to approve the Disposal will require the approval of a simplemajority of the votes cast in person or by proxy at the EGM by holders ofordinary shares and Participating Shares voting as a single class. In addition,the Disposal is conditional on shareholder approval of the Liquidation beingduly obtained. The Disposal is also conditional on the satisfaction or waiver of certain othercustomary closing conditions. The Liquidation is conditional upon shareholder approval, which will be soughtat the EGM. The resolution to approve the holding company's Liquidation will bea special resolution, which means that it will require approval of not less than75 percent of the votes cast in person or by proxy at the EGM by holders ofordinary shares and Participating Shares voting as a single class. In addition,the resolution to approve the holding company's Liquidation will not have effectunless shareholder approval of the Disposal is duly obtained and the otherconditions to Completion are duly satisfied or waived. Cypress Merchant Banking Partners II L.P., Cypress Merchant Banking Partners IIC.V. and 55th Street Partners II L.P., which collectively hold approximately338,569 Participating Shares which confer the right to exercise approximately 29percent of the voting rights exercisable at general meetings of the Company,have undertaken to vote in favour of the Proposals. Danka has retained the services of Houlihan Lokey Howard & Zukin Capital, Inc.and Skadden, Arps, Slate, Meagher & Flom LLP to advise in the transaction. About Danka Through its operating subsidiary DOIC, Danka delivers value to clients by usingits expert technical and professional services to implement effective documentinformation solutions. As one of the largest independent providers ofenterprise imaging systems and services, Danka enables choice, convenience, andcontinuity. Danka's vision is to empower customers to benefit fully from theconvergence of image and document technologies in a connected environment and,in turn, strengthen its client relationships and expand its strategic value.For more information, visit www.danka.com. In the year ended 31 March 2007, Danka generated revenues of approximately U.S.$450.2 million, a net loss of approximately U.S. $13 million, and its grossassets were approximately U.S. $417 million. About Konica Minolta Business Solutions U.S.A. Konica Minolta Business Solutions U.S.A., Inc. (www.kmbs.konicaminolta.us), aleader in advanced imaging and networking technologies for the desktop to theprint shop, brings together unparalleled advances in security, print quality andnetwork integration via its award-winning line of bizhub(TM) multifunctionproducts (MFPs); bizhub PRO(TM) production printing systems; magicolor(R)desktop color laser printers and all-in-ones; and pagepro(TM) monochrome desktoplaser printers and all-in-ones. Konica Minolta also offers advanced softwaresolutions, wide-format printers, microform digital imaging systems, and scanningsystems for specialized applications. Headquartered in Ramsey, New Jersey,Konica Minolta delivers expert professional services and client support throughan extensive network of direct sales offices, authorized dealers, resellers anddistribution partners in the United States, Canada, Mexico, Central America andSouth America. Enquiries Danka: Edward Quibell, Chief Financial Officer, (727) 622-2760 Weber Shandwick Financial (London)James White/Laura Vaughn, 020 7067 0700 Evolution Securities Limited (London)(Sponsor to Danka Business Systems PLC)Stuart Andrews / Bobbie Hilliam, 020 7071 4300 Evolution Securities Limited ("Evolution Securities"), which is authorised inthe United Kingdom by the Financial Services Authority, is acting as Sponsor toDanka Business Systems PLC and no one else in connection with the Proposals andwill not be responsible to anyone other than the Company for providing theprotections afforded to customers of Evolution Securities, or for advising anyother person in connection with the Proposals. This announcement is not intended to and does not constitute, or form any partof, an offer to sell or an invitation to purchase any securities or thesolicitation of any vote or approval in any jurisdiction pursuant to thetransactions referred to herein or otherwise. Persons who are not resident inthe United Kingdom, or who are subject to the laws of any jurisdiction otherthan the United Kingdom, should inform themselves about, and observe anyapplicable legal and regulatory requirements. This information is provided by RNS The company news service from the London Stock Exchange