Hermes Pac. Regulatory News (HPAC)

29 Jan 2008 07:30

India Outsourcing Services PLC29 January 2008 Embargoed 07.30 29 January 2008 INDIA OUTSOURCING SERVICES PLC ("India Outsourcing" or "the Company") Proposed acquisition of the Mela Group Proposed change of name to Indian Restaurants Group plc Award-winning chef Kuldeep Singh to join the Board Notice of General Meeting India Outsourcing Services plc (AIM: IOS) is pleased to announce that on 28thJanuary 2008 it conditionally agreed to acquire the London-based Mela Group ofthree Indian restaurants and a catering business ("Acquisition") for aConsideration of £1,998,999 to be satisfied by £100,000 in cash and by the issueof up to 7,201,365 new ordinary shares at 26.37p per share ("ConsiderationShares"), some of which are conditional on the achievement of certain targets ("Deferred Consideration Shares"). The Initial Consideration Shares willrepresent 27.53 per cent of the Enlarged Share Capital, and the ConsiderationShares in total will represent up to 43.17 per cent of the further enlargedshare capital assuming the issue of the Deferred Consideration Shares. As at 25 January 2008, (being the date on which the Ordinary Shares weresuspended from trading on AIM) the closing mid market price of an ExistingOrdinary Share was 20.5p. At this price the Mela Group is valued atapproximately £1.48 million and India Outsourcing at approximately £1.94million. Highlights • Acquisition, via a reverse takeover, of Mela Group - a profitablechain comprising London's Mela, Chowki and 3 Monkeys Indian restaurants and anoutside catering business - for an initial consideration of £1,049,500 and amaximum consideration of £1,998,999 • Change of name from India Outsourcing Services plc to IndianRestaurants Group plc, with a strategy to roll out a chain of Indian restaurantsthroughout the UK offering authentic Indian food of a high and consistentquality • Chef Kuldeep Singh, a proposed Director, is a founder of the MelaGroup, which has won numerous awards including the Tio Pepe ITV LondonRestaurant Award 2004 • The UK Indian restaurant sector has a market size of more than £3billion but no national branded provider, creating the opportunity to create theUK's first nationwide chain through opening new outlets and acquiring andre-branding existing outlets • General Meeting to be held on 25 February 2008 for shareholders toconsider the proposals Amit Pau, Chief Executive of India Outsourcing, said: "The Mela Group, with itshighly acclaimed restaurants which offer an outstanding opportunity to roll outthe first UK chain of branded Indian restaurants under the Mela and Chowkibrands. Given the large but fragmented Indian restaurant market in the UK webelieve we are particularly well placed to replicate the success seen in pizza,pasta and tapas chains." For further information: India Outsourcing Services plc Tel: 020 7297 0012Amit Pau, Chief Executive WH Ireland Limited Tel: 0121 265 6330Tim Cofman-Nicoresti / Katy Birkin Buchanan Communications Tel: 020 7466 5000Mark Court Proposed acquisition of the Mela Group Approval of waiver of obligations under Rule 9 of the City Code on Takeovers and Mergers Increase of share capital Proposed change of name to Indian Restaurants Group Plc Increase in borrowing powers Notice of General Meeting Admission to trading on AIM of Enlarged Share Capital India Outsourcing is pleased to announce that on 28 January 2008 itconditionally agreed to acquire the Mela Group. The Consideration for theAcquisition will be £1,998,999, to be satisfied by £100,000 in cash and theissue of the Consideration Shares (valued at 26.37p per share) conditional,inter alia, on Admission and in the case of the Deferred Consideration Shares,also conditional on the achievement of certain targets. In conjunction with theAcquisition, India Outsourcing proposes to increase its share capital, changeits name to Indian Restaurants Group Plc and increase its borrowing powers. As at 25 January 2008, (being the date on which the Ordinary Shares weresuspended from trading on AIM) the closing mid market price of an ExistingOrdinary Share was 20.5p. At this price the Mela Group is valued atapproximately £1.48 million and India Outsourcing at approximately £1.94million. Application will be made for the Enlarged Share Capital to be admittedto trading on AIM subject to the passing of the Resolutions. The Initial Consideration Shares will represent 27.53 per cent. of the EnlargedShare Capital and the Consideration Shares in total will represent 43.17 percent. of the further enlarged share capital assuming the issue of the DeferredConsideration Shares. In view of the size of the Mela Group relative to theCompany, the Acquisition will constitute a reverse takeover of India Outsourcingunder the AIM Rules and therefore requires the prior approval of Shareholders. Additionally, because the members of the Concert Party (comprising the Vendors)may own more than 30 per cent. of the aggregate of the Enlarged Share Capitaland Deferred Consideration Shares as a result of the Acquisition, the Company isseeking a waiver under Rule 9 of the City Code. In the absence of the Waiver,the City Code would otherwise require the members of the Concert Party to offerto acquire those Ordinary Shares that they do not own. A proposal seekingShareholder approval for the Waiver is, therefore, included in the notice of theGeneral Meeting posted to Shareholders on 28 January 2008. Business and investment strategy The Company has no ongoing trade, subsidiaries or investments. Investment strategy India Outsourcing was admitted to trading on AIM on 6 December 2004 with theintention of capitalising on acquisition and investment opportunities within theBusiness Process Outsourcing ("BPO") sector in India. The Company also stated atthat time that it may also evaluate opportunities in the BPO sector in otherEuropean and Asian countries. The overall strategy was to create value byacquiring or investing in a small number of businesses within that sector. Thefunds raised at this time were applied in carrying out due diligence onprospective target businesses and to cover the Company's initial working capitalneeds. It was also stated at the time of admission that a number of potentialtargets had been identified although there was no guarantee that anynegotiations would lead to the completion of an investment. The Company subsequently posted to Shareholders, an admission document dated 9February 2006, detailing a placing to raise £3 million (before expenses) inorder to improve the credibility of the Company with vendors of potentialtargets, to broaden its institutional base and to provide increased workingcapital. At the same time, the Company's ordinary shares were consolidated. Atthe extraordinary general meeting held on 6 March 2006 and the annual generalmeeting held on 23 May 2007, Shareholders approved, inter alia, that the Companyshould continue in existence with its stated strategy. The Board have actively pursued a number of investment opportunities in the BPOsector in India and conducted high levels of due diligence on a smaller numberof opportunities. For a variety of reasons including increased transaction costsand differences in valuation expectations, the Company has to date been unableto complete a transaction in India. New acquisition After consultation with a number of key Shareholders, the Board has widened itssearch to review other businesses and sectors which the Directors believe mayyield an exciting opportunity for the Company with one of the main aims being toincrease shareholder value. As a result of their review the Directors intend to create a chain ofrestaurants providing authentic, home style Indian food on a consistent basisacross the Enlarged Group. The Enlarged Group will initially target (i) the midmarket, (ii) sporting and event catering and (iii) lunchtime takeaway. In the 12 to 15 month period following Admission, the Enlarged Group intends toembark upon a realistic roll out programme subject to market conditions and siteavailability. The Directors believe that the combination of the Mela Group's business and theCompany's existing cash resources and its access to the equity market, has thepotential for delivering positive returns to shareholders in the medium term.The Directors believe that this strategy will create shareholder value and thatthe Acquisition satisfies the Company's investment criteria as the Mela Groupoffers it: - a management team with a track record of developing new businesses - an ability to generate revenue streams - an existing platform from which further growth can be developed The Directors believe that the key features of the Indian restaurant sector arethat: - it is well established with a market size in excess of £3 billion; - it is an extremely fragmented market with over 9,800 restaurants in the UK; and - there is no current UK national branded provider and therefore there is an opportunity to consolidate in this niche with the UK's first nationwide chain. Under the Proposals and as a result of the Acquisition, the Concert Party hasconfirmed that the Enlarged Group will engage in the provision of authentic,fresh, high quality and consistent Indian food through the Mela Group's currentoutlets, Chowki, Mela and 3 Monkeys, which the Directors and Proposed Directorsintend to continue and develop both by opening new outlets and by acquiring andre-branding existing restaurants. The Company has minimal fixed assets and there is no current intention by themembers of the Concert Party to redeploy these fixed assets after Completion. Directors and Proposed Directors Directors The Board currently comprises three Directors as follows: Haresh Damodar Kanabar (aged 49, Non-executive Chairman and Finance Director,British) Haresh Kanabar qualified as a certified accountant in 1986. Following a numberof finance positions with Fisons plc, Reed International Plc and Texas HomecareLimited he became finance director of F E Barber Limited, a subsidiary ofHillsdown Holdings Limited in 1994. In 1997 he was appointed group financedirector of Whitchurch Group Plc, which he left in May 1998 to become financedirector of TMV Finance Limited. In December 1999 he left to join Corvus CapitalInc. as chief executive. Haresh is non-executive chairman of Silentpoint Plc and India Star Energy Plc, anon-executive director of Aurum Mining Plc, Gasol Plc and Venteco Plc and chiefexecutive of Blue Star Capital plc. Haresh is responsible for overseeing the finance function of the Company andwill continue to undertake this role following Admission until there is arequirement for a full time finance director. Haresh joined the Board on 13 October 2004. Amit Narshibhai Pau MBA (aged 40, Chief Executive, British) Amit Pau has held several directorships and executive positions in globalcommunications service providers over the past 10 years including Vodafone GroupPlc, Global TeleSystems Group Inc. and AT&T Inc. Amit worked for Vodafone from2000 to 2004. His executive responsibilities covered general management with aspecific focus on strategy, marketing, product management and sales. He was alsothe managing director of Vodafone Multi-Media Limited and a non-executivedirector of Vodafone Spain and Radamec Group plc. Amit was also responsible forleading Vodafone's Fortune 500 client business unit. From 1999 to 2000, Amitworked at Global TeleSystems Inc. as the President for e-Business services. Amitwas responsible for product management marketing and channel development. Amitworked at AT&T Inc. from 1992 to 1999 as part of the EMEA business developmentteam and was responsible for product management within the global business tobusiness internet division. Amit represented AT&T Inc. for their internationaljoint ventures programme and held the position of vice-chairman of a jointventure in Israel. Amit joined the Board on 12 November 2004. Nigel Alexander Spencer Robertson (aged 45, Non-executive Director, British) Nigel Robertson is currently a non-executive director of Asia Capital Plc and anexecutive director of Blue Star Capital plc. Nigel is the former chief executiveof scoot.com plc, formerly Freepages Group plc, of which he was the founder.Nigel was a founder shareholder of As Seen On Screen (which became ASOS plc) andACS Plc (which became Aerobox plc). Nigel joined the Board on 13 October 2004. Proposed Directors On Admission the following will be appointed as directors of the Enlarged Group: Kuldeep Singh (aged 42, proposed Executive Chef Director, Indian) Kuldeep has trained in some of India's leading hotels including the Viz HotelMeru Palace and completed specialist training with the Taj Group of hotels.Kuldeep worked for the Taj Group from 1989 to 1994. In 1994 Kuldeep becameexecutive chef at Essex Banquet and Restaurants and Essex Outdoor CateringService in India. Kuldeep has been a permanent UK resident since 1996 where hejoined Soho Spice, a London based restaurant, as executive chef. In 1998,Kuldeep became executive chef and consultant at the Pukka Bar for Regents InnsPlc and as executive chef of Raisechance Limited in the Red Fort Hotel, London. Kuldeep is one of the founders of the Mela Group which has won numerous awardsand nominations including the Tio Pepe ITV London Restaurant Award 2004. Kuldeepis a shareholder in a number of other restaurants including Soho Spice andDilli. Kuldeep has overall responsibility for the concept, design, menu contentand all aspects of staff recruitment and training at the Mela Group. Ashraf Rahman (aged 51, proposed Business Development Director, British) Since 1974 Ashraf has managed and owned a number of Indian restaurants. He is afounder of the Mela Group and is responsible for strategy, planning,administration and logistics. Current trading and future prospects Historic results are set out in the accountants' report on India Outsourcing forthe 13 months ended 30 September 2005, the year ended 30 September 2006 and thesix months ended 31 March 2007 in the admission document. India Outsourcing has no subsidiaries or investments. India Outsourcing has beenseeking an appropriate acquisition target in line with its investment strategy,whilst minimising operating expenses and in the six months to 31 March 2007reported a loss of approximately £128,000. Future prospects The Directors and the Proposed Directors believe that the Indian restaurantsector offers the opportunity for significant organic growth through thedevelopment of a branded chain of restaurants offering authentic cuisine cookedto a high standard. In addition, the Directors and the Proposed Directorsbelieve that there are consolidation opportunities within the Indian restaurantsector and envisage that the Enlarged Group may be acquisitive in the future. The City Code on Takeovers and Mergers The City Code is issued and administered by the Panel and applies to alltakeover and merger transactions, however effected, where the offeree company isa public company, whether quoted or unquoted, incorporated and resident in theUnited Kingdom, the Channel Islands or the Isle of Man. The City Code applies tothe Company and its Shareholders are accordingly entitled to the protectionsafforded by the City Code. The City Code is designed principally to ensure fair and equal treatment ofshareholders in relation to takeovers. The City Code also provides an orderlyframework within which takeovers are conducted and, additionally, is designed topromote, in conjunction with other regulatory regimes, the integrity of thefinancial markets. The Panel is an independent body whose main functions are toissue and administer the City Code and to supervise and regulate takeovers andother matters to which the City Code applies in accordance with the rules setout in it. The Panel has been designated as the supervisory authority to carryout certain regulatory functions in relation to takeovers pursuant to theDirective on Takeover Bids (2004/25/EC) (the "Directive"). On 6 April 2007 part28 of the 2006 Act came into force. Until then, a takeover of an AIM companyfell outside the scope of the statutory regime applicable to takeovers subjectto the Directive and the Panel operated for AIM transactions on a non statutorybasis. Pursuant to part 28 of the 2006 Act the Panel is now given full statutoryauthority in respect of all offers and other transactions concerning AIMcompanies incorporated and resident in the United Kingdom, the Channel Islandsand the Isle of Man. Rule 9 of the City Code normally requires any person or group of persons actingin concert who acquires an interest in shares which, taken together withinterests in shares already held, carry 30 per cent. or more of the votingrights of a company, to offer to acquire the balance of the equity share capitalin cash at the highest price paid by that person or any person acting in concertwith him in the previous 12 months. Rule 9 of the City Code also normallyrequires any person who, together with any person or persons acting in concertwith him, is interested in shares carrying between 30 per cent. and 50 per cent.of a company's voting rights and who acquires an interest in additional shareswhich carry voting rights, to acquire the balance of the equity share capital incash at the highest price paid by that person or any person acting in concertwith him in the previous 12 months. The Vendors are classed as a concert party(as defined in the City Code) due to their interests in the Mela Group, a groupof private companies. The Panel has agreed, subject to the passing of Resolution 2 at the GM byShareholders on a poll, to waive the obligation on the Concert Party to make ageneral offer that would otherwise arise as a result of the Acquisition underRule 9 of the City Code. The expected interests of the Concert Party in the share capital of IndiaOutsourcing upon Admission and following the issue of the Deferred ConsiderationShares are summarised below. Other than shown below, no member of the ConcertParty holds interests, shares or options in India Outsourcing: Concert Party Number of Ordinary % of Enlarged Number of Ordinary % of furthermember Shares held upon Share Capital on Shares held assuming enlarged share Admission Admission issue of Deferred capital assuming Consideration Shares issue of Deferred and no exercise of Consideration options Shares and no exercise of optionsKuldeep Singh 1,446,720 11.06 2,893,439 17.35Ashraf Rahman 1,071,293 8.19 2,142,586 12.84Dinesh Mody 1,082,670 8.28 2,165,340 12.98Total 3,600,683 27.53 7,201,365 43.17 Immediately following the implementation of the Proposals, the members of theConcert Party will own approximately 27.53 per cent. of the Company's issuedordinary share capital. Assuming the issue of the Deferred Consideration Shares,the interests of the members of the Concert Party and therefore the maximumcontrolling position of the Concert Party will increase to 43.17 per cent. ofthe Company's then issued ordinary share capital. The members of the Concert Party do not hold any options over Ordinary Shares.Amit Pau, Daniel Stewart plc and W.H. Ireland Limited will, on Admission, hold847,916, 222,222, and 261,597 options over Ordinary Shares, respectively. If allof these options were exercised, this would have a dilutive effect on themaximum controlling position of the Concert Party which would be reduced from43.17 per cent. to 39.98 per cent. For the avoidance of doubt, the Waiver applies only in respect of increases inthe interests of Ordinary Shares of the Concert Party and members of the ConcertParty resulting solely from the issue to them of the Consideration Shares. Ifany member acquires Ordinary Shares which increase the aggregate interest inOrdinary Shares of such member to 30 per cent. or more of the issued sharecapital of the Company, or increases such member of the Concert Party's interestin Ordinary Shares to between 30 per cent. and 50 per cent., other than pursuantto the issue to it of the Consideration Shares, then Rule 9 would apply and suchmember or the Concert Party would be obliged to make an offer for the entireissued share capital of the Company not held by them. In addition, should the options detailed above be exercised in full thusreducing the maximum controlling position of the Concert Party to 39.98 percent., the Concert Party would not be able to acquire further interests inOrdinary Shares without triggering Rule 9. Significant shareholders The Vendors have, in aggregate, interests in shares representing 100 per cent.of the Mela Group's equity and, following Admission and assuming issue of theDeferred Consideration Shares, will have an aggregate interest representing43.17 per cent. of the further enlarged share capital. They have all enteredinto a controlling shareholders agreement with the Company and with W.H. Irelandpursuant to the terms of which they have given certain undertakings to theCompany and to W.H. Ireland concerning the use of the Ordinary Shares controlled(directly or indirectly) by them. Directors' and Proposed Directors' interests and orderly market deed Immediately following Admission, the Directors and the Proposed Directors willbe interested in, in aggregate, 4,295,791 Ordinary Shares, representingapproximately 32.84 per cent. of the Enlarged Share Capital. The Vendors have agreed not to dispose of or transfer any interests in OrdinaryShares within a period of 12 months following Admission (the "Lock-in Period"),save in certain specific circumstances and have agreed to orderly marketarrangements in respect of their shareholdings for a further period of 12months. Principal terms of the Acquisition The Mela Group comprises: 1. Chandan Limited (trading as the Mela Restaurant). This company is owned by the Vendors. 2 Rice & Spice Limited (trading as Chowki). This company is a wholly owned subsidiary of Chandan. 3. Param Consultancy Limited (trading as 3 Monkeys). This company is owned as to 33.3% by Kuldeep Singh and 66.6% by Chandan. On 28 January 2008, the Company entered into the Acquisition Agreement with theVendors to acquire the Mela Group. The Consideration will be £1,998,999, to besatisfied by £100,000 in cash and the issue of 3,600,683 Initial ConsiderationShares together with 3,600,682 Deferred Consideration Shares (which may beissued conditional upon turnover and profit before tax of the Mela Group for theyear ending 31 March 2009 being not less than £2.5 million and £120,000,respectively). Each Consideration Share is valued at 26.37p per share,conditional, inter alia, on Admission. The Initial Consideration Shares will represent 27.53 per cent. of the EnlargedShare Capital and will, when issued, rank pari passu in all respects with theother Ordinary Shares then in issue, including all rights to all dividends andother distributions declared, made or paid following Admission. There is no arrangement in place relating to the Acquisition where the paymentof interest, repayment or security for any liability (contingent or otherwise),is dependent to any significant extent on the business of the Company. TheAcquisition Agreement is conditional, inter alia, on (i) the passing of theResolutions and (ii) Admission. The Vendors have given an indemnity that the net liabilities of the Mela Groupat Completion will not exceed £280,000. Change of name The name of the Company will be changed to Indian Restaurants Group Plc,conditional upon both the passing of Resolution 5 by the Shareholders andcompletion of the Acquisition. Dividend Policy Initially the Enlarged Group Board anticipates that any earnings will beretained by the Enlarged Group for the development and growth of the business. The declaration and payment by the Enlarged Group of dividends will be dependentupon the Enlarged Group's financial condition, future prospects and otherfactors deemed to be relevant at the time. This will take into account both therequirements of the business and the expectations of the Shareholders. Currentlythe Company has a deficit on its profit and loss account and it is the intentionof the Enlarged Group Board in due course to seek court approval to write offthe share premium reserve against this deficit. General Meeting A notice convening the General Meeting to be held at 2.00p.m. on 25 February2008 at the offices of W.H. Ireland, 5th Floor, 85-89 Colmore Row, Birmingham B32BB is set out in the Admission Document circulated to Shareholders on 28January 2008. At the General Meeting, the Resolutions will be proposed toapprove the Acquisition, approve the Waiver, approve the increase in sharecapital, approve the change of name, approve the increase in borrowing powers,authorise the Directors to allot up to 22,462,962 new Ordinary Shares (includingthe Consideration Shares) and disapply pre-emption rights over 15,261,597Ordinary Shares. As the Acquisition constitutes a reverse takeover under the AIM Rules,Shareholder approval is required under the AIM Rules. The Acquisition Agreementis conditional, inter alia, upon the passing of the Resolutions and therefore ifthey are not approved by the Shareholders, the Acquisition will not becompleted. Shareholder approval is required (by poll) to approve the Waiver by the Panel ofthe obligations on the Concert Party to make a general cash offer for the wholeof the Company's issued share capital pursuant to Rule 9 of the City Code. As aresult of the issue to the Concert Party of the Consideration Shares pursuant tothe Acquisition, the Concert Party would own in aggregate 43.17 per cent. of thefurther enlarged share capital which would trigger Rule 9 of the City Code. Irrevocable undertakings The Company has received irrevocable undertakings from Blue Star Capital plc andAmit Pau to vote in favour of the Resolutions in respect of, in aggregate1,777,778 Ordinary Shares representing approximately 18.75 per cent. of theExisting Ordinary Shares. Recommendation of the Directors The Directors, who have been so advised by W.H. Ireland, consider that the termsof the Proposals and the Waiver are fair and reasonable and in the bestinterests of the Company and Shareholders as a whole. In providing advice to theDirectors, W.H. Ireland has relied upon the Directors' commercial assessments.Accordingly, the Directors unanimously recommend Shareholders to vote in favourof the Resolutions as they have irrevocably undertaken to do so in respect oftheir own shareholdings, amounting in aggregate to 1,777,778 Ordinary Shares,representing 18.75 per cent. of the Existing Ordinary Shares. INFORMATION ON THE MELA GROUP Introduction The Mela Group comprises three Indian restaurants, and an outside cateringbusiness branded as Mela Roma/Mela Events. The three restaurants are: - Chowki, located in Denman Street adjacent to Piccadilly Circus, in London's West End, owned by Rice & Spice (a wholly owned subsidiary of Chandan); - Mela Restaurant, located on Shaftesbury Avenue, London, owned by Chandan (owned as to 33.3% each by each of the Vendors); and - 3 Monkeys, located in Herne Hill, London, owned by Param (owned as to 33.3% by Kuldeep Singh and 66.6% by Chandan). The Market In 1960 there were 500 Indian restaurants in the UK and with the introduction ofthe tandoor oven in 1964 (which was imported into India from the Middle Eastafter World War II) numbers grew to 1,200 outlets by 1970. The influx ofBangladeshi immigrants into the UK in the 1970's further fuelled the growth andby the 1980's the number of restaurants had increased to 3,000 and again to8,000 by 2000. It is estimated that some 85 per cent. of Indian restaurants inthe UK are run by people of Bangladeshi origin. In June 2006, the Guild ofBangladeshi Restaurateurs estimated that there were 9,800 restaurants in the UKwith trade worth around £3.2 billion. Ethnic food has a deeply rooted popularity with the British consumer and aftereating out in pub restaurants, Chinese food is the most popular choice andIndian food comes a close fourth after fish and chips. Indian food in Britainhas often been adapted to the British palate, with the majority of offeringsbeing anglicised versions of authentic dishes and readily available in everyeating out venue. The spread of ethnic food within the UK has been aided significantly by theimmigration of ethnic minorities and therefore the size of the ethnic populationwithin the UK has a bearing on the spread of ethnic cuisine. The majority ofethnic restaurants still rely on ethnic staff to cook, prepare and serve thefood. This in part is why it has remained a sector characterised by a largenumber of independent and family owned businesses. One of the main difficultiesfacing the industry as a whole is the shortage of skilled staff. New immigrationlaws are now making it difficult to recruit chefs with the necessary culinaryand cultural skills to deliver the authentic restaurant experience and whereasimmigrant workers were happy to come to the UK to work in restaurants, theBritish born Asian community has shown a greater reluctance to do so. The ethnic sector is benefiting from an active eating out market but arguably isnot taking advantage of the opportunity that this represents. There are pocketsof the ethnic market which are highly dynamic, innovative and forward looking,but the majority of the sector remains much as it always has done. The EnlargedGroup Board intend to exploit this opportunity with their offering. The EnlargedGroup Board believe that change and innovation is essential for survival withinan extremely competitive eating out market. Although ethnic food in itself isfundamentally different from other choices there is little or no differentiationbetween operators. Currently enjoyment of ethnic food is much more orientated towards youngerconsumers. Visiting ethnic restaurants drops sharply amongst the retired andover 65 age group. However, although today's current older generation may notenjoy ethnic food to the extent of younger consumers this is unlikely tocontinue to be the case, especially as ethnic operators diversify intoincreasingly sophisticated and authentic dishes that offer more than just fieryspices and anglicised flavours. In addition, levels of personal disposable income are a major influence on theeating out market since it is essentially a discretionary spend with higherlevels of disposable income driving more frequent dining out occasions. On thewhole, ethnic restaurants are relatively low cost and perhaps more resilient tosmall fluctuations in economic prosperity than more premium dining options. Thestrength of the takeaway market in this sector is even better placed to takeadvantage of changing financial circumstances since it benefits from consumerstrading down from eating out during less prosperous periods. The takeaway sectorhas also become much more of a convenience and therefore essential part of abusy lifestyle. The Mintel Report - Ethnic Restaurants and Takeaways, Leisure Intelligence, June2006, forecasts that unless there is a widespread initiative to evolve withmodern dining habits the Indian sector is likely to suffer some erosion fromother casual dining opportunities. The distinctive nature of its cuisineprovides a certain level of protection with consumers readily featuring it aspart of their portfolio of options. However as the market becomes morecompetitive, those outlets that remain the same as they always have been maysuffer. There are examples of outlets evolving and developing their offer butthese are currently in the minority. There is considerable scope for a moredynamic approach. There is much evidence in their research that even thecurrently loyal regular users feel that improvements could be made in menus andother areas in order to improve the overall experience. Generally speaking thedirection of improvements will be focused on improving the quality of both theingredients used and dishes produced. The Enlarged Group Board believe that Chowki and Mela are well positioned toexploit these changes in the market by the development of a national chainoffering consistently prepared fresh authentic Indian food in a casualenvironment. The opportunity The Indian restaurant sector has historically been characterised by a largenumber of independently owned family businesses with brands being absent. TheEnlarged Group Board believe that the Mela Group has a current establishedplatform on which to build an expandable business and has the following keystrengths which enable it to target the more dynamic and rapidly growing aspectof the Indian restaurant market: - fresh, authentic, high quality, consistent Indian food; - an existing management team with experience in developing new businesses; and - a changing menu, focusing on regional dishes with clearly stated ingredients and brief regional information. The Directors and Proposed Directors believe that the Enlarged Group's quotationon AIM will enhance its ability to acquire potential target sites going forward. The business of the Mela Group (i) Chowki Chowki is an award winning restaurant, winning the Tio Pepe ITV LondonRestaurant Award in 2004. Chowki's target market are those in the 25 to 45 yearold age group who visit on a regular basis and want an informal diningexperience. Chowki achieves an average weekly turnover of just over £20,000serving a weekly average of approximately 1,270 covers focusing on the homecooking style of different regions of the Indian sub-continent. Cuisine Chowki has a changing monthly menu featuring three regions from the Indiasubcontinent in order to offer a re-creation of traditional Indian food and toencourage repeat custom. In re-creating the variety and authenticity of recipes, Chowki's chefs aretrained to follow traditional home cooking methods. For example, only seasonalvegetables are used, meat is generally served on the bone to enhance taste, andspices are bought whole, not readyground or mixed, so as to ensure the qualityis pure and to preserve the unique colour, aroma, flavour and taste of the dish.The menu has been developed by Kuldeep Singh, proposed Executive Chef Directorwith input from Ashraf Rahman, proposed Business Development Director. Style Chowki is located in Denman Street, adjacent to Piccadilly, London and is fullylicensed restaurant on two levels, open seven days a week, from midday untileleven thirty. With a fast turn around Chowki can achieve up to three sittings anight. In keeping with the innovative menu, the style of the Chowki restaurantis contemporary, intended to appeal to the younger market. The interior isdesigned to replicate a more modern version of the sociable and convivialenvironment in which an Indian family enjoys a meal at home. Each table canaccommodate six or more people which both increases capacity and makes Chowki anattractive venue for groups. The fast turnaround and location makes Chowki wellsuited for pre-and-post theatre meals. The food is served in crockery that is based on the 'thali' which is a typicalIndian food bowl with several compartments for different components of the meal.It differs from the traditional Indian dish in that it is not made of metal butof white bone china to emphasise the colour of the food. It is also split intotwo plates to accommodate a multicourse meal as opposed to a single course whichis more customary in India. Pricing The combination of restaurant capacity, a relatively quick customer turnaroundand a menu that focuses on a small number of freshly prepared meals, allows themenu to be competitively priced. Set three course meals have recently beenpriced at £10.95. Starters are priced in the range of £3.95 to £4.25, withvegetarian options at a lower price. Main courses range from £10.95 to £11.95,with vegetarian main courses generally at £7.95 and £8.85. Overall, a full mealincluding a beverage usually costs less than £20.00 per person. Employees Chowki currently has 25 employees. Awards/Critics There have been numerous favourable reviews carried out on Chowki. Chowki wasranked in the top 50 Indian restaurants in London by Time Out magazine dated 2February 2005. (ii) Mela and 3 Monkeys Mela is located in the West End and 3 Monkeys is located in Herne Hill, inSouth-East London. 3 Monkeys serves a similar menu to Mela. Post Admission, the3 Monkeys restaurant will be rebranded under the Mela brand. Mela and 3 Monkeysachieve an average weekly turnover of £23,500 and £10,000, serving a weeklyaverage of approximately 1,107 covers and 255 covers, respectively. The 3Monkeys takings include takeaway revenue. Cuisine Mela and 3 Monkeys offer freshly prepared, Indian food cooked in an authenticIndian style. They both have a menu which is wider than that offered by Chowkiwith dishes drawn from a greater number of regions in the Indian sub-continent.Mela offers a 'create-it-yourself' lunch menu where guests can choose, forexample, what kind of flour they wish to be used in cooking their dish, and assuch both are open for all-day dining. Both restaurants host a theatre kitchenwhere the food is cooked in front of guests. Style Mela and 3 Monkeys have a modern, urban design, however, the tables generallyseat smaller groups of people much like a traditional restaurant and as opposedto having 'chowki' style tables and seating. Pricing The average price of a meal at Mela is £20 to £25 per head. Employees Mela currently has 26 employees and 3 Monkeys has 21 employees. Awards/Critics There have been a number of reviews carried out on Mela by restaurant criticswho commented upon the exceptional value and high quality of the food served atMela. As with Chowki, Mela is an award winning restaurant winning the Moet &Chandon/Carlton TV "Best Indian Restaurant of the Year" in 2001. Competition The Enlarged Group Board do not believe that any competitor in the UK hasachieved national dominance in the market for Indian cuisine in a comparablerestaurant format to that of Mela or Chowki. More generally, competition tendsto be defined by specific location e.g. other restaurants in the immediatevicinity. The Chowki and Mela formats have already demonstrated an ability totrade in locations where there are other restaurants offering a range ofcuisines. The Enlarged Group Board intend to build on the success of this formatby establishing further outlets where competition may be as intense. Mela Events The Mela Group also provides events catering. The Enlarged Group Board intend todevelop and expand this operation to target the Indian wedding market andoutdoor events more generally. Growth Strategy The Directors and Proposed Directors intend to identify locations which offergood commercial opportunities. In the 12 to 15 month period following Admission,the Enlarged Group intends to embark upon a realistic roll out programme subject to market conditions and siteavailability. Current trading and prospects Turnover in November and December 2007 for the Mela Group was 3 per cent. downon the equivalent period for 2006 with a stronger performance in Mela Eventsoffsetting a 10 per cent. decline in restaurant takings. The Directors and Proposed Directors believe that the current fragmented marketpresents significant opportunities for organic growth and acquisition. Shareholders The Vendors and their potential interests in the Enlarged Share Capital, andfollowing issue of the Deferred Consideration Shares, are set out below: Shareholder Number of % of Number of Ordinary % of further Shares held assuming enlarged share Ordinary Enlarged issue of Deferred capital assuming Consideration Shares issue of Deferred Shares held on Share and no exercise of Consideration options Shares and no Admission Capital on exercise of options Admission Kuldeep Singh 1,446,720 11.06 2,893,439 17.35Ashraf Rahman 1,071,293 8.19 2,142,586 12.84Dinesh Mody 1,082,670 8.28 2,165,340 12.98Total 3,600,683 27.53 7,201,365 43.17 The members of the Concert Party do not hold any options over Ordinary Shares.Amit Pau, Daniel Stewart plc and W.H. Ireland will, on Admission, hold 847,916,222,222, and 261,597 options over Ordinary Shares, respectively. If all of theseoptions were exercised, this would have a dilutive effect on the maximumcontrolling position of the Concert Party which would be reduced from 43.17 percent. to 39.98 per cent. EXPECTED TIMETABLE OF PRINCIPAL EVENTS Admission Document publication date 28 January 2008Latest time and date for receipt of completed Forms of Proxy 2.00 p.m. on 23 February 2008General Meeting 2.00 p.m. on 25 February 2008Completion date of the Acquisition 26 February 2008Admission effective and expected commencement of dealings in the Enlarged Share Capital 26 February 2008Despatch of definitive share certificates in respect of the Initial Consideration Shares 11 March 2008(where applicable) ACQUISITION STATISTICS Number of Existing Ordinary Shares in issue prior to the Acquisition 9,479,167 Number of Initial Consideration Shares being issued pursuant to the Acquisition Agreement 3,600,683 Number of Ordinary Shares in issue immediately following Admission 13,079,850 Number of Deferred Consideration Shares capable of being issued pursuant to the Acquisition 3,600,682Agreement Number of Ordinary Shares subject to options following Admission 1,331,735 Percentage of the Enlarged Share Capital held by members of the Concert Party following 27.53%completion of the Proposals Percentage of the further enlarged share capital held by members of the Concert Party 43.17%following completion of the Proposals and assuming the issue of the Deferred ConsiderationShares Mid market price of an Existing Ordinary Share on 25 January 2008 (being the latest 20.5ppracticable date prior to publication of this document and the date on which the OrdinaryShares were suspended from trading on AIM) Estimated costs of the Proposals £0.275 million Market capitalisation of the Enlarged Group on Admission at 20.5p £2.68 million This information is provided by RNS The company news service from the London Stock Exchange