FRM.L Regulatory News (FRM)

29 May 2007 07:30

Formation Group PLC29 May 2007 29 May 2007 FRM.L FORMATION GROUP PLC ("Formation" or "the Company") Proposed acquisition of Columbia Design & Build Limited, Proposed waiver of obligations under Rule 9 of the City Code, Admission of the Enlarged Issued Share Capital to AIM, Proposed adoption of the Long Term Incentive Plan and New Share Option Scheme and Notice of an Extraordinary General Meeting KEY POINTS * Proposed acquisition of Columbia Design & Build Limited ("Columbia"), a property development management company ("the Acquisition") * The Acquisition is in line with the Board's strategy of creating a Property Division and developing its bespoke property investment and wealth management activities. In particular, it significantly enhances the Group's ability to offer existing and new clients attractive investment opportunities in the property sector * Total consideration of approximately £19.4m, to be satisfied by approximately 70.6 million Consideration Shares, representing 35.8% of the Enlarged Issued Share Capital * The Acquisition constitutes a reverse takeover, given the fundamental change in Formation's business and voting control * Based in London and established in 1998, Columbia manages the development of residential and commercial properties * Columbia is wholly owned by Streetwise Limited, a company ultimately controlled for the benefit of members of the Concert Party * Columbia's potential new contracts include: i) Clancy Quay, Dublin - with an estimated construction value of £74m with future phases potentially taking this to £160m; ii) 1 Commercial Street/111-120 Whitechapel High Street, London E1 (above the entrance to Aldgate East underground station), with an estimated construction value of £60.15m and 36 month build programme; and iii) 52-58 Commercial Road, London - with an estimated construction value of £23m and construction period of 32 months. * Columbia generated revenues of £26.2m, £27.5m and £14.8m respectively for the years to 29 September 2004, 2005, 2006 * Independent Shareholder approval of the acquisition of Columbia is to be sought at an EGM, to be held at 12 noon on 21 June 2007 at DLA Piper LLP, 101 Barbirolli Square, Manchester, M2 2DL * The suspension of Formation's shares will be lifted and dealing in the shares will re-commence on AIM today * In a separate announcement issued today, Formation has announced that it has entered into a subscription agreement with David Kennedy under which it has conditionally agreed to issue 8,823,529 new ordinary shares in Formation to David Kennedy or his nominee. Formation intend to use the monies raised to assist in its subscription in Columbia Formation Group (Ireland) Limited ("CFGIL"), the holding company for two major developments in the Republic of Ireland; Clancy Quay, Dublin and Davitt Road, Dublin The directors of Formation, including Richard Noel O'Carroll as a proposeddirector of the Company, having consulted with Formation's Nominated Adviser, WHIreland Limited, consider the terms of the transaction are fair and reasonableinsofar as Formation's shareholders are concerned. Neil Rodford, Chief Executive of Formation, commented: "I am delighted to announce the proposed acquisition of Columbia Design & BuildLimited. This acquisition moves us forward in the development of the Group and in ourobjective to establish a property division. On completion of the Acquisition ourability to provide bespoke investment products in the property arena will bematerially enhanced. We will then seek to offer these products to existing andpotential customers through our established Wealth Management and ProfessionalServices Division. Columbia will enable the Group to generate earnings at three levels; commissionson the raising of equity, project management charges for the creation,evaluation and implementation of each project, and finally, success based feesat completion. Columbia's potential new contracts are attractive and we view the prospects forthe enlarged Group very positively." Enquiries: Formation Group PLC Neil Rodford, Chief Executive Tel: 01625 539832 Biddicks Katie Tzouliadis Tel: 020 7448 1000 WH Ireland Limited David Youngman Tel: 0161 832 2174 Katy Mitchell EXPECTED TIMETABLE OF PRINCIPAL EVENTS Publication of the Admission Document 29 May 2007 Latest time and date for receipt of the Form of Proxy 12noon on 19 June 2007 Extraordinary General Meeting 12noon on 21 June 2007 Completion of the Acquisition* 21 June 2007 Admission effective and dealings in the Enlarged Issued Share 8 am on 22 JuneCapital recommences on AIM* 2007 Despatch of definitive share certificates in respect of the 4 July 2007Consideration Shares to be held in certificated form* * assuming all Resolutions are passed at the EGM ADMISSION STATISTICS Number of Existing Ordinary Shares 126,361,196 Number of Consideration Shares to be issued 70,588,235 Number of shares agreed to be allotted to David Kennedypursuant to the Subscription Agreement 8,823,529 Enlarged Issued Share Capital* 196,949,431 Consideration Shares as a percentage of the Enlarged IssuedShare Capital* 35.8% Market Capitalisation immediately following Admission** £54.2 million * excluding shares conditionally allotted to David Kennedy** assuming a price per share of 27.5p Introduction Formation is pleased to announce that it has agreed, subject, inter alia, toShareholder approval, to acquire the entire issued share capital of ColumbiaDesign & Build Limited, a property development management business, for anaggregate consideration of £19,411,765 to be satisfied on Completion by theissue and allotment of the Consideration Shares. Given the fundamental change in Formation's business and voting control, theAcquisition constitutes a reverse take-over in accordance with the AIM Rules andis therefore conditional, inter alia, on the approval of Shareholders which isto be sought at an Extraordinary General Meeting. An application will be made to AIM, for the Existing Ordinary Shares and theConsideration Shares to be readmitted and admitted respectively to trading onAIM. At the Extraordinary General Meeting, the Company will also be seeking (i) theapproval of the Shareholders to the adoption of the Long Term Incentive Plan andthe New Option Scheme and (ii) the approval of Independent Shareholders to awaiver of the obligation on the Concert Party to make a mandatory cash offer forthe Company pursuant to Rule 9 (on the basis that, as a result of the issue ofthe Consideration Shares, the Concert Party will hold over 30% of the EnlargedIssued Share Capital). Background to, and reasons for, the Acquisition Since the Group's disposal of its sports marketing division in October 2006,Formation's strategy has been to focus on its wealth management and professionalservices division, which currently provide a range of services targeted at highnet worth clients, many of whom are professional athletes. The Board iscommitted to adding new revenue streams that are complementary to the currentoperation. Presently, the majority of the business carried out by the wealth management andprofessional services division of Formation is transactional or brokerage based,and revenue is generated by initial and recurrent commissions. The Boardbelieves there is an opportunity to increase revenue by adding complementaryservices as well as creating bespoke investment opportunities to offer to itsexisting high net worth clients and other institutions and investors. TheDirectors believe that tailored products will provide the Group with thepotential to create new revenue opportunities such as the generation of furthercommissions and project management fees as well as the possibility of profitshare arrangements (payable to the Group) that are linked to the performance ofthese investments. Formation has already advised on one in-house bespoke property investment, TheWhitechapel Property Fund Limited, which was listed on the Channel Islands StockExchange on 1 March 2007. Formation was the investment adviser to this fund,which was created to provide an opportunity for the Group's high net worthclients to invest in a property development in London. Historically, Formation has not had the required expertise or resources withinthe property sector to be able to create appropriate investment opportunitiesitself. It relies on outsourcing to specialists in order to evaluate andimplement any project. The Board believes that, in order to assess and developfuture opportunities effectively in this area, Formation needs to acquire theappropriate infrastructure and experienced personnel with the ability to sourceand evaluate appropriate investment opportunities. Columbia Design & Build Limited In order to address the deficiencies in the Group's current skill set, referredto above, Columbia has been identified by the Board as an acquisition target.Columbia is a property development management business which was created in 1998to manage the development of properties owned by companies controlled for thebenefit of the Concert Party. The senior management team of Columbia arequalified in a range of disciplines including quantity surveying, constructionand civil engineering and construction management and many of them have beeninvolved in the property sector for significant parts of their career. Inaddition, Columbia has developed numerous contacts at both sub-contractor andarchitect levels, which it regularly relies upon. Historically, Columbia has project managed two or three large developments (withconstruction values each in excess of £20 million) and three smaller projects(with construction values between £3 million to £20 million each) each year. Allclient companies to date have been companies which are ultimately controlled forthe benefit of the Concert Party. The Board believes that Columbia will provide the Group with the ability tosource, evaluate, design and develop bespoke property projects. The Directorsalso believe that, with the assistance of Columbia, the Group will be able tooffer existing and future clients of the Group an opportunity to invest (at anearly stage) in the development projects both identified and managed by Columbiathrough bespoke investment products developed by Formation. The Board is encouraged to complete the Acquisition on the basis that Columbiahas a number of potential new contracts. The Board believes that if thesepotential contracts are signed, they will underpin the future earningscapability of Columbia for the foreseeable future. Acquisition of Columbia Design & Build Limited Information on Columbia Background Columbia was incorporated in 1998 and operates from offices in Hackney, London.It is wholly owned by Streetwise Limited, a company controlled for the benefitof the Concert Party. The company employs around 16 members of staff and managesresidential or mixed use property development projects on behalf of its clients,all of which are currently companies which are owned, or controlled, by theConcert Party. Activities Columbia oversees all stages of the development process. Potential target sitesare identified by the client companies of Columbia by way of various contactswithin the industry. Evaluation Following identification of a potential site, Columbia briefly evaluates theviability of a proposed development. If Columbia considers that the proposeddevelopment has potential, and a client communicates interest, Columbia willprepare a full evaluation. These full evaluations typically involve site visits and seek to establish thelikelihood of obtaining planning permission, suggest likely development costs,review site conditions such as flood risks and contamination, and assess thecondition of any retained structures on the site. If a client wishes to proceed with the proposed development, Columbia will enterinto a contract with that client to manage the construction process, ultimatelyproviding a ready to occupy building complete, with all required warranties,permissions and regulatory approvals in place. Design Columbia may design the property development through Columbia Architects. If itdoes not use this division, Columbia will oversee the appointment of a firm ofarchitects to prepare the design brief and implement the design programme forthe development. Columbia also oversees the appointment of consultants to carry out any initialviability studies and implement quality assurance schemes. It puts in placedefects insurance and product guarantees. Project Management The role of project manager typically involves establishing reporting andauthorisation procedures to ensure the client, the consultant team, thecontractors and works contractors communicate effectively. Having designed a timetable with the consultants, Columbia would typicallyprepare and present budgets and cost studies to the client, monitor cash flowforecasts, and prepares the final accounts. It also typically carries outregular reporting to present any budgetary variations and cost implications ofany extensions or disruption to the construction schedule. Columbia will usually carry out any negotiations with the local authorities tosecure the necessary planning permissions and any other statutory approvals thatmay be required (unless they have been acquired in advance). It will establishwith the client the selection procedure for the appointment of workscontractors, prepare the tender documents, conduct the tender process, establishwarranties and guarantees and supervise the appointed contractors. At the end of the process, it will also usually assist the client in obtainingthe statutory licences necessary for the occupation and use of the property,conduct operational tests, arrange final inspection and prepare a health andsafety file. Projects In any one year Columbia will typically be working on one to three largeprojects (each with a construction value of £20 million or over) and typicallythree further projects ranging in construction value from £3 million to £20million. Projects generally take 12 months to four years to complete with larger(£30 million plus) projects possibly taking up to seven years to deliverdepending on phasing, sales and the client's funding arrangements. Geographically Columbia currently operates in London, Bristol and Dublin (Ireland) but has, in the past, project managed builds in Leeds, Harrogate andHastings. Recent projects delivered in accordance with their clients' specificationsinclude: (i) Edith Cavell, Enfield Road, London N1 Columbia was instructed by Brie Limited (a company ultimately controlled by theConcert Party) to manage the conversion of the former Hackney Borough CouncilDepartment of Education Headquarters. The site had already been sourced by theclient, but Columbia was required to design and build 28 affordable homes,whilst also converting and adding to an existing Victorian school to create 77new apartments and houses, a B1 Unit and associated car parking. The design wasprepared by Columbia Architects and implemented by Columbia. The total construction value of the project was £15.7 million. The project isdue to complete on 4 June 2007. (ii) 6-24 Southgate Road, London N1 Columbia was instructed by Seawind Properties Limited (a company ultimatelycontrolled by the Concert Party) to manage the redevelopment of an existingbuilding, which the client had already acquired, to create 121 residentialapartments, 19 Live/Work Units, 25,000 sq ft of B1 Units, a gymnasium and a twostorey basement car park. The scheme was designed by Columbia Architects. The total construction value of the project was £21 million. The time taken tocomplete the project construction work was approximately 25 months. (iii) Victoria Wharf, Palmers Road, London E2 Columbia was instructed by Hallfield Real Estate Limited and Chianti HoldingsLimited (both companies ultimately controlled by the Concert Party) to managethe development of a canal-side redundant factory (which already had the benefitof planning permission) to create 30 Live/Work Units, 57 apartments, 10 B1Units, and a large A3 Unit with associated covered car parking. A separatetimber framed block incorporating 12 Affordable Housing units was constructed ona former garage on the opposite side of Palmers Road. The scheme was designed byColumbia Architects. The total construction value of the project was £16 million. The time taken tocomplete the project construction work was approximately 27 months. (iv) IBIS Hotel, Commercial Street, London E1 Columbia was instructed by Mangrove Securities Limited (a company ultimatelycontrolled by the Concert Party) to manage the construction of a 358 bedroomhotel over a basement car park beside Aldgate East underground station. The sitewas empty, but had been purchased by the client with the benefit of planningpermission. The scheme was designed by an external architect. The total construction value of the project was £16.5 million. The time taken tocomplete the project construction work was approximately 24 months. (v) West Street & Waterloo Road, Bristol BS2 Columbia was instructed by Lindstrom Investment Limited (a company ultimatelycontrolled by the Concert Party) to manage the conversion of existing listedbuildings to create 85 apartments, an A3 unit, a large retail unit andassociated car parking. The scheme was designed by an external architect. The total construction value of the project was £7.5 million. The time taken tocomplete the project construction work was approximately 18 months. Staffing Columbia employs approximately 16 members of staff but does not employ trade ormanual operatives. Structural engineering, mechanical engineering, electricalengineering, geotechnical and other specialist engineering services are usuallyhired by Columbia on a project by project basis. By contracting out thesespecialist requirements, consultants can be retained to meet the specificrequirements of each individual project, with the appropriate staff andexpertise available to meet the needs of that development. Financially thismethod of procurement is considered to be the most advantageous for Columbia. Current and Potential Projects Columbia has several potential new contracts. The new contracts are subject tofinalisation of legal and commercial terms. Brief details are set out below: (i) 52-58 Commercial Road, London Columbia has been instructed by Rocquefort Properties Limited (a companyultimately controlled by the Concert Party) by way of letter of intent to managea development of 165,765 sq ft in Tower Hamlets, London consisting of: * 136 residential units of which 38 are for Affordable Housing;* 6 purpose-built premises for a mix of residential and business use;* approximately 18,000 sq ft of office and a commercial gymnasium;* approximately 3,000 sq ft of retail/restaurant space; and* 33 car parking spaces on the rear of the ground floor and basement. The site already has planning permission. The works, which have already started, involve the demolition of a lateVictorian warehouse, the excavation of a basement car park and the constructionof one 13 storey tower and one 17 storey tower with two smaller (five and sixstorey) concrete framed blocks on two smaller adjoining sites to the side andrear of main site. The construction value of the project is circa £23 millionwith an anticipated construction period of 32 months. Columbia is providing all architectural services in relation to thisdevelopment. The final contract between Columbia and Rocquefort Properties Limited has yet tobe signed but it is anticipated it will be signed in the near future. (ii) 1 Commercial Street/111-120 Whitechapel High Street, London E1 Julius Properties Limited (a company ultimately controlled by the Concert Party)propose to employ the project management services of Columbia on theconstruction of a 21 floor building above the entrance to Aldgate Eastunderground station. The site has planning permission for a mixed use schemecomprising: * 217 apartments of which 20 are Affordable Units;* 94,745 sq ft net lettable office space;* 11,453 sq ft net lettable retail space; and* car parking spaces and plant space in the basement. The construction value of this scheme is £60.15 million with a 36 month buildprogramme. Planned works involve the construction of a 21 floor concrete framed'super' structure. There is provision to leave the office space in shell form orto have it completed to a tenant's specification. The scheme is to be designed by an external architect. The project is still subject to bank funding. A bank is currently undertakingdue diligence on the site and if such funding is granted it is expected that thecontract between Julius Properties Limited and Columbia for this project will besigned in the near future. (iii) Clancy Quay, Dublin It is proposed Columbia be appointed by Clancy Quay Properties Limited to managethe development of a 14.5 acre site beside Heuston Station in Dublin's citycentre. The site (formerly a listed army barracks) has the benefit of recentplanning permission for a mixed use scheme and was recently valued at€135million. The redevelopment, which commenced on 26 April 2007 will beconstructed on a phased basis, incorporates approximately 300 waterfrontapartment blocks (in the first phase of the development), basement car parking,several retained listed stone structures providing residential and retailaccommodation and office and hotel space. It has already achieved substantialpre-sales for the first phase of the development. All professional consultants for the project, including architects, are based inIreland and the construction works will be undertaken using an established Irishcontractor. Phase one of the scheme has an estimated construction value of £74million with future phases (if necessary approvals are obtained) potentiallytaking this sum to £160 million. This project is still subject to approval by the bank providing the majority ofthe funding. It is anticipated that this approval and consequently the executionof the contract between Columbia and Clancy Quay Properties Limited will occurin the near future. (iv) Davitt Road, Dublin It is proposed Columbia be appointed by Davitt Road Limited to manage thedevelopment of a site at Davitt Road, Dublin. This development is at an earlystage and the site does not currently have the benefit of planning permission(but it is proposed such planning permission be sought in due course). The siteat Davitt Road was recently valued at €35 million. Summarised financial information Columbia's typical revenue model works on a cost plus basis and historically ithas charged a low margin on each project. Traditionally, Columbia has made asmall profit. Going forward, Columbia will charge its clients a fixed fee set at anappropriate commercial rate in relation to industry benchmarks. By operating afixed fee model, the risk on a development is significantly reduced and, oncecontracted, the visibility of earnings for Columbia increases. The following financial information on Columbia has been extracted withoutmaterial adjustment from the historical information on Columbia for the pastthree years. Year ended 29 September 2006 2005 2004 £'000 £'000 £'000Turnover 14,845 27,501 26,157Gross profit 334 414 574Operating profit 145 145 196 Information on the Group The Group's current operations have been combined into one division consistingof: Professional Services Division Representation Proactive Sports Management is a representation agency providing managementservices and career advice to professional athletes and celebrities,predominantly from the football sector. Based in Wilmslow, Proactive SportsManagement operates primarily within the UK and European football markets,employing approximately 18 people whilst Proactive Sports Management USA Inc.based in Washington, services clients from North American territories andemploys approximately four people. Both Proactive Sports Management and Proactive Sports Management USA Inc.provide a range of athlete and talent management services to athletes andentertainers. Primarily, these companies work on behalf of clients to negotiateand renegotiate playing contracts with football clubs. In addition, thesecompanies provide ancillary services (to assist with relocation and off-fieldmatters like travel, accommodation, transport and other concierge services). Aswell as providing advice on subjects such as endorsements and licensing, imagerights and intellectual property protection, these companies also negotiatecommercial contracts with corporate sponsors, publishers and the media on behalfof clients. Between them, Proactive Sports Management and Proactive Sports Management USAInc represent circa 107 football players throughout the world, of whom 81 haveplayed for their country at international level. Clients are contracted for twoyears as The Football Association regulations stipulate that representationagreements can only be signed for a maximum of two years. Proactive SportsManagement and Proactive Sports Management USA Inc together completedapproximately 60 transfers or contract renewals during the financial year ended31 August 2006. Turnover for these two companies, in the financial year ended 31 August 2006 was£3,131,000 with an operating profit of £995,000. Wealth Management Operating from offices in Nottingham and employing approximately 26 people,Kingsbridge is an independent financial adviser offering financial planning,insurance protection and management advice to athletes, entertainers and otherhigh net worth individuals. Serving predominantly professional footballers and coaches based in the UK,Kingsbridge provides advice in all areas of wealth management including taxplanning, insurance protection, investment portfolio construction and assetallocation, and mortgage and banking. Given the specialised nature of its clientbase, Kingsbridge's solutions are often bespoke and tailored to meet eachindividual client's needs, unlike a more traditional independent financialadviser which might offer "off-the-shelf" products. Kingsbridge currently acts for circa 600 clients including approximately 15% ofall Premier League players and is the preferred supplier to the ProfessionalCricketers' Association and the League Manager's Association. In July 2006, Kingsbridge established a joint venture vehicle with CBG Groupplc, a company admitted to AIM providing general insurance, personal insuranceand risk management. The joint venture company is called CBG Sports Limited("CBG Sports") and it currently services the insurance needs of Kingsbridge'sclient base by providing products that are tailored to suit individual needs andfinancial and personal circumstances. CBG Sports offers general insuranceproducts but also provides career protection products, such as personal injuryinsurance in the event of a career ending injury, which are vital to sportsprofessionals. As an intermediary Kingsbridge receives commissions from the various providerswhose products it sells to its clients. Commissions will vary depending on theproduct sector and provider but are typically between 1% and 10% of thetransaction value. In line with FSA regulation and recommendations, Kingsbridgeis in the process of moving towards a fee based remuneration model where it willtake control of a client's assets, charging an annual management fee to managethose assets. Corporate Finance Based in Wilmslow, Capital Sports Solutions was acquired by the Group in March2005. The company, which employs one person, is a specialist broker, providingbespoke financial products to sporting organisations and clubs particularlywithin the European football market. Capital Sports Solutions assists clubs to maximise their cash flow by arrangingloans secured against a club's future income from existing commercial contracts.Clubs can use this form of lending to manage cash flows against a number ofdifferent income streams including transfer fees, sponsorship income, broadcastincome and season ticket revenues. The facility is secured on these futureincome streams rather than on the club's balance sheet providing an efficientway for clubs to manage cash flow. Capital Sports Solution's fees are contingent on completion and typically amountto 1% of the gross amount advanced. It has successfully completed eleventransactions since joining the Group in March 2005. Turnover for the last financial year for the wealth management and professionalservices division, which comprises both Kingsbridge and Capital Sports Solutionswas £3,635,000 with an operating profit of £543,000. Property Division Bespoke property investments - Whitechapel As previously mentioned, Formation has recently acted as investment adviser on abespoke property investment fund, The Whitechapel Property Fund Limited.Whitechapel was created independently and provided an opportunity for theGroup's high net worth clients to invest in a development at 52-58 CommercialRoad, London with an estimated total development cost (including the cost ofland acquisition) of £41.7 million. Money raised by Whitechapel was loaned to Rocquefort Properties Limited, thedeveloper, to part fund the development at Commercial Road (which Columbia is tobe contracted to manage) with bank funding providing the balance of requireddevelopment funds. The investment opportunity provided by Whitechapel was by wayof the issue of junior unsecured loan notes with a fixed compounded return. Of the total proceeds of the loan note issue, an introducer fee of £500,000 waspaid to Formation. Additionally, Formation has agreed to underwrite the issue ofthese Loan Notes, to a maximum liability of £4 million. In return for providingthis underwriting facility, Formation will also be entitled to a 40% share ofany residual profits of Rocquefort Properties Limited derived from thedevelopment at Commercial Road. Group direct investments - Columbia Formation Group (Ireland) Limited As announced earlier today, the Company has agreed to issue and allot theSubscription Shares to David Anthony Kennedy immediately prior to thecompletion, in accordance with its terms, of the Subscription Agreement. It isintended that money raised from the issue of the Subscription Shares to DavidAnthony Kennedy be used by Formation to assist it to complete its subscriptionof shares in CFGIL pursuant to the Subscription Agreement. Current trading and future prospects Current trading of the Group The Board considers that current trading of the Group is in line withexpectations and it remains confident of the Group's prospects for the remainderof the year. Prospects for the Enlarged Group The Directors intend to develop the strategy of profitable growth of theEnlarged Group by expanding its market share in its existing core markets whilstcontinuing to add complementary companies as and when the appropriateopportunities arise. The Group's existing operations have been combined into onedivision and a new property division established. As referred to earlier, all of Columbia's existing property development projectsare being undertaken for companies that are owned or controlled by the ConcertParty of whom David Anthony Kennedy is a member. David Anthony Kennedy has beena property developer for over 20 years and has overseen property developmentsand building projects throughout the UK and Ireland during this time. The Board recognises that Columbia's ability to generate profit depends onColumbia's ongoing relationship with David Anthony Kennedy, certain othermembers of the Concert Party and the companies that are owned or controlled bythe Concert Party. The Group currently has little existing in-house resource fordeveloping property related sales and marketing leads and the Board alsorecognises that Columbia will need to develop its sales and marketing skills setif it is to market its services to new clients. Proposed Director The Proposed Director is: Richard Noel O'Carroll M.R.I.C.S (Aged 47) Property Director Richard Noel O'Carroll is managing director of Columbia, having joined thebusiness in 1986 as chief surveyor. He is a member of the Royal Institution ofChartered Surveyors. Noel has a professional practice and contractingbackground, both in the UK and overseas, in civil engineering and generalconstruction. Mr O'Carroll does not hold any shares in Formation directly, but he is a nameddiscretionary beneficiary of the Imperial Trust (a trust established in Guernseyof which Balchan acts as trustee) which is the beneficial holder of 4,723,750Existing Ordinary Shares amounting to 3.74% of the total issued share capital ofthe Company. Mr O'Carroll is currently a director of the following companies: * Columbia* Columbia Estates Limited* Columbia Rentals Limited* Columbia House Properties (No.1) Limited* Columbia House Properties (No.3) Limited* Columbia Architectural Design Limited* Frontlaunch Limited* Wordmatch Trading Limited* Albion Yard (Estates) Limited* Florence Properties Limited* Florence Investments Properties Limited* Florence Developments (1) Limited* Florence Developments (2) Limited* Florence Commercial Developments Limited In addition, Mr O'Carroll was a director of the following companies, in theprevious five years : * Springmatch Limited* Columbia House Properties (No.7) Limited* Columbia House Properties (No.2) Limited Mr O'Carroll entered into a service agreement with Columbia dated 25 May 2007.Under the agreement Mr O'Carroll is employed in the capacity of ManagingDirector of Columbia. The agreement is terminable on six months' notice byeither party. He is entitled to a basic salary of £135,285 per annum and toparticipate in an annual discretionary performance related bonus scheme on suchterms as are decided by the board of Columbia from time to time. Under theservice agreement, Mr O'Carroll is also entitled to receive a contribution of£21,000 per annum from Columbia to his personal pension scheme, Mr O'Carroll issubject to six month post-termination restrictive covenants. Mr O'Carroll will also be appointed a director of Formation, with effect fromAdmission. Principal terms and conditions of the Acquisition Pursuant to the terms of the Acquisition Agreement, Formation has agreed subjectto, inter alia, approval by Shareholders to acquire from the Columbia Vendor,the entire issued share capital of Columbia. Upon completion of suchAcquisition, the consideration payable by Formation to the Columbia Vendor willbe £19,411,765 and will satisfied by the issue and allotment of theConsideration Shares. The City Code The terms of the Acquisition give rise to certain considerations under the CityCode. The City Code is issued and administered by the Panel. The Company issubject to the City Code and therefore its Shareholders are currently entitledto the protections afforded by the City Code. Under Rule 9, a person (or group persons acting in concert) who acquires,whether by a series of transactions over a period of time or not, an interest inshares which (taken together with shares in which persons acting in concert withthem are interested) carry 30% or more of the voting rights of a company whichis subject to the City Code, is normally required to make a general offer incash to all other shareholders of that company to acquire the balance of theshares not held by such a person (or group of persons acting in concert). In addition, Rule 9 provides that where any person is interested in shares in acompany which is subject to the City Code and which in aggregate carry not lessthan 30% but not more than 50% of that company's voting rights, and such person,or any person acting in concert with them, acquires an interest in any othershares which increases the percentage of the shares carrying voting rights inthat company in which they are interested, such person is normally required, inthe same way, to make a general offer to all shareholders. An offer under Rule 9 must be in cash and at the highest price paid within thepreceding 12 months for any shares in the company by the person required to makethe offer or any person acting in concert with them. After completion of the Acquisition, but before completion of the SubscriptionAgreement, the Concert Party's interest in shares carrying voting rights in theCompany will represent, in aggregate, 51.38% of the voting rights attaching tothe Enlarged Issued Share Capital. The Panel has agreed, subject to the passing of Resolution 2 on a poll at theEGM, to waive the obligation of the members of the Concert Party to make ageneral offer under Rule 9 that would otherwise arise as a result of theProposals. Shareholders should be aware that, following the Acquisition, the members of theConcert Party will together hold more than 50% of the voting rights attaching tothe Company's issued share capital. Accordingly, the Concert Party (for so longas they are treated as acting in concert) may be able to increase theiraggregate shareholding without incurring any further obligation under Rule 9 tomake a general offer. However, individual members of the Concert Party will notbe able to increase their percentage shareholdings through a Rule 9 thresholdwithout Panel consent. Concert Party The table below sets out the Concert Party's current percentage holdings andexpected percentage holdings on Completion, assuming that the Acquisition iscompleted: Percentage of Percentage of Percentage of the Existing the Enlarged the Enlarged Ordinary Share Issued Share Issued Share Capital Capital Capital following issue of the Subscription SharesDavid KennedyFamily 23.93% 51.19% 53.29%Matthew Kennedy 0.01% 0.01% 0.01%PhilamenaKennedy 0.19% 0.12% 0.11%Thomas Kennedy 0.06% 0.04% 0.04%Patrick Kennedy 0.02% 0.02% 0.01% Total 24.21% 51.38% 53.46% Changes to Board Composition It is with regret that the Board has to announce the resignation of LaurieTurnbull as a non-executive director of the Company with immediate effect. TheBoard has accepted the resignation, which was due to the volume of othercommitments that Laurie Turnbull has in the public and private arena, and wouldlike to take this opportunity to thank Laurie Turnbull for his contributionduring his time on the Board. The resignation of Laurie Turnbull has presented the Nominations Committee ofthe Company with an opportunity to re-address the composition of the Board. TheNominations Committee is pleased to announce that Michael Kennedy (formerly anExecutive Director) has accepted, with immediate effect, the role ofnon-executive director of the Company. In addition to the appointment of Michael Kennedy as a non-executive director,the Company has entered into a nominations agreement with Balchan (in itscapacity as trustee of the David Kennedy Family Trust) pursuant to which Balchanhas the right, whilst the Concert Party holds more than 50% of the EnlargedIssued Share Capital of the Company, to appoint up to two non-executivedirectors to the Board. Further details of this agreement are set out inparagraph 11.1.8 of Part VI of the Admission document. To date no nominationsfor the appointment of any non executive directors have been received by Balchanand Balchan have further agreed not to exercise the right to appoint anon-executive director for a period of six months from Admission. Admission, Dealings and Settlement Application will be made to the London Stock Exchange for the Existing OrdinaryShares and the Consideration Shares to be admitted to trading on AIM. It isexpected that Admission will become effective and dealings, for normalsettlement, will commence on 22 June 2007. The Directors are arranging with CrestCo Limited for the Existing OrdinaryShares and the Consideration Shares to be eligible for settlement through CRESTfrom Admission. Accordingly, settlement of transactions in the Ordinary Sharesfollowing Admission may take place within CREST if the relevant shareholder sowishes. Settlement of transactions in the Ordinary Shares through CREST isvoluntary and Shareholders who wish to receive and retain certificates will beable to do so. Extraordinary General Meeting The Acquisition constitutes a reverse take-over for the purpose of the AIM Rulesand is therefore conditional, inter alia, upon the approval of the IndependentShareholders. The Extraordinary General Meeting has been convened for 12 pm on21 June to be held at DLA Piper UK LLP, 101 Barbirolli Square, Manchester, M23DL. It has been convened for the purpose of considering and if thought fitapproving the Resolutions to: (i) approve the Acquisition for the purposes of Rule 14 of the AIM Rules (ordinary resolution);(ii) approve the waiver of the obligation by the Concert Party to make a general offer under Rule 9 as described above (ordinary resolution, to be taken on a poll);(iii) increase the authorised share capital of the Company (ordinary resolution);(iv) grant the directors of the Company authority to allot the Consideration Shares and the Subscription Shares pursuant to section 80 of the Act in connection with the Acquisition and the Subscription Agreement and generally to allot a further 41,187,065 Ordinary Shares (ordinary resolution);(v) disapply statutory pre-emption rights upon the issue of the Consideration Shares, the Subscription Shares and further Ordinary Shares for cash up to an aggregate nominal value of £126,361.20 (special resolution);(vi) approve, inter alia, the rules of, and the adoption by the Company of, the New Option Scheme (special resolution);(vii) approve, inter alia, the rules of, and the adoption by the Company of, the Formation Group PLC Long Term Incentive Plan (special resolution); and(viii) approve certain amendments to the articles of association of the Company. The members of the Concert Party will not be voting at the EGM as they are notindependent for the purposes of the Proposals (special resolution). Copies of the Admission Document are available to the public, free of charge, atthe offices of WH Ireland, 11 St James's Square, Manchester, M2 6WH duringnormal business hours on any weekday (Saturdays, Sundays and public holidaysexcepted) from the date. DEFINITIONS The following definitions apply throughout this announcement, unless the contextotherwise requires: "A3 Unit" restaurants and cafes where the primary purpose is the sale and consumption of food and light refreshment "Acquisition" the proposed acquisition by the Company of the entire issued share capital of Columbia pursuant to the Acquisition Agreement "Acquisition the conditional agreement dated 25 May 2007 in respect of theAgreement" sale and purchase of the entire issued share capital of Columbia between (1) Streetwise Limited, (2) the Company and (3) David Anthony Kennedy, details of which are set out in the Circular "Admission" the admission of the Enlarged Issued Share Capital to trading on AIM becoming effective in accordance with Rule 6 of the AIM Rules"Admission the Admission Document produced by Formation and dated the sameDocument" day as this announcement "Affordable housing of an adequate standard which is cheaper than that whichHousing" is generally available in the local housing market. This can comprise a combination of subsidised rented housing, subsidised low cost home ownership including shared ownership, and in some market situations cheap housing for sale "AIM" a market operated by the London Stock Exchange "AIM Rules" the AIM Rules for Companies, governing the admission to and operation of AIM, published by the London Stock Exchange as amended from time to time "B1 Unit" business premises for purposes such as office space and light industrial use "the Board" or the directors of the Company at the date of this document and"the whose names are set out in this documentDirectors" "City Code" The City Code on Takeovers and Mergers "Capital Capital Sports Solutions Limited, a company incorporated inSports England and Wales with registered number 2515971Solutions" "CFGIL" Columbia Formation Group (Ireland) Limited, a company incorporated in the Republic of Ireland with registered number 434071 "Columbia" Columbia Design & Build Limited, a company incorporated in England and Wales with registered number 3536763 "Columbia Columbia Architectural Design Limited, a company incorporated inArchitects" England and Wales with registered number 3301377, the assets of which now form an in-house division of Columbia "Consideration 70,588,235 Ordinary Shares to be issued as the considerationShares" under the terms of the Acquisition Agreement "Columbia Streetwise Limited, a company incorporated in the British VirginVendor" Islands with registered number 208431 "Completion" completion of the Acquisition which is expected to occur on or around 21 June 2007 "Concert means David Kennedy, the David Kennedy Family and associatedParty" trusts, family and companies as set out above and in the Admission Document "CREST" the relevant system (as defined in the CREST Regulations) in respect of which CRESTCo Limited is the Operator (as defined in the CREST Regulations) in accordance with which securities may be held and transferred in uncertificated form "CREST the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755)Regulations" (as amended) "David Kennedy David Anthony Kennedy and his immediate family comprisingFamily" Patricia Kennedy, David Anthony Kennedy junior, Patrick Thomas Kennedy and Paul Gerrard Matthew Kennedy "EGM" or the extraordinary general meeting of the Company, convened for 12"Extraordinary noon on 21 June 2007GeneralMeeting" "Enlarged the Group including, following Admission, ColumbiaGroup" "Enlarged the Existing Ordinary Shares and the Consideration Shares inIssued Share issue immediately following completion of the ProposalsCapital" "Existing the 126,361,196 Ordinary Shares in issue at the date of thisOrdinary documentShares" "Formation" or Formation Group PLC, a company incorporated in England and Walesthe "Company" with registered number 4145632 "FSA" the Financial Services Authority "FSMA" the Financial Services and Markets Act 2000 (as amended) "Group" the Company and its subsidiaries and subsidiary undertakings as at the date of this document"Independent Shareholders who are not members of the Concert PartyShareholders" "London Stock London Stock Exchange plcExchange" "Long Term the proposed long term incentive plan of the CompanyIncentivePlan" or"LTIP" "Kingsbridge" Kingsbridge Asset Management Limited, a company incorporated in England and Wales with registered number 4803209 "New Option the proposed Unapproved Option Scheme of the CompanyScheme" "Ordinary ordinary shares of 1p each in the capital of the Company, all ofShares" which have been created in accordance with the Act"Panel" the Panel on Takeovers and Mergers "Proactive Proactive Sports Management Limited, a company incorporated inSports England and Wales with registered number 2962751Management" "Proposals" the Acquisition, Admission and the adoption of the New Unapproved Scheme and the Long Term Incentive Plan"Proposed Richard Noel O'Carroll, the proposed director of the Company toDirector" be appointed with effect from Admission more details of whom are set out in the Admission Document "Remuneration the remuneration committee of the BoardCommittee" "Resolutions" the resolutions to be proposed at the EGM "Rule 9" Rule 9 of the City Code "Shareholder" a holder of Existing Ordinary Shares "Subscription the subscription agreement made between (1) the Kennedy FamilyAgreement" Trust, (2) Formation and (3) CFGIL "Subscription 8,823,529 Ordinary Shares conditionally allotted to DavidShares" Kennedy, pending execution of the Subscription Agreement "UK" the United Kingdom of Great Britain and Northern Ireland "UKLA" the United Kingdom Listing Authority, being the FSA acting in its capacity as the competent authority for the purposes of Part VI of FSMA "US" or the United States of America, its territories and possessions,"United any state of the United States and the District of ColumbiaStates" "WH Ireland" WH Ireland Limited "Whitechapel" The Whitechapel Property Fund Limited, a company incorporated in Jersey with registered number 46205 Note: In this document, the symbols '£' and 'p' refer to pounds and pencesterling, respectively. This information is provided by RNS The company news service from the London Stock Exchange