INC.L Regulatory News (INC)

16 Mar 2007 07:02

Avanti Screenmedia Group PLC16 March 2007 16 March 2007 Avanti Screenmedia Group plc ("Avanti Screenmedia") Demerger of satellite networks business and admission to trading on AIM of Avanti Communications Group plc ("Avanti Communications") Further to the announcement of 13 December 2006, Avanti Screenmedia Group plc(AIM:ASG.L), the UK satellite media and telecommunications business, todayannounces further details of the Demerger of its satellite networks business byway of a dividend in specie. Following the Demerger, the Continuing Group will comprise the existingscreenmedia business and the Avanti Screenmedia Shares will continue to trade onAIM. The satellite networks business will be demerged to a new entity, AvantiCommunications Group plc, and an application will be made for AvantiCommunications Shares to be admitted to trading on AIM with effect fromcompletion of the Demerger. The Demerger is conditional, inter alia, on the approval of Avanti Screenmediashareholders at the Extraordinary General Meeting to be held at 10.00 a.m. on 10April 2007 at the offices of the Company at 74 Rivington Street, London EC2A3AY. Admission is expected to become effective and dealings in the AvantiCommunications shares are expected to commence at 8.00 a.m. on 16 April 2007. Key points: • Allows both Avanti Screenmedia and Avanti Communications to pursue independent strategies free from the constraints of each other's management and funding requirements • Provides greater clarity for investors • 1 Avanti Communications Share for each Avanti Screenmedia Share held at the Demerger Record Date • Avanti Screenmedia announced today its interim results for the six months ended 31 December 2006 Commenting on the Demerger, David Williams, the proposed Chief Executive ofAvanti Communications Group plc, said: "The Demerger of the satellite networks business from Avanti Screenmedia willenable the management teams of the two businesses to focus properly on theirobjectives. Within Avanti Communications, we are now focused on pre-sellingHYLAS capacity, for which we believe there is strong demand." Stuart Chambers, the proposed Managing Director of Avanti Screenmedia Group plc,said: "Avanti Screenmedia has demonstrated to its retail clients this year that itsservices generate sustainable increases in like-for-like sales. The Demergermakes it easier for the management team to focus on pressing home this advantagewith a broader base of potential clients." Enquiries Avanti Screenmedia Group plc 020 7749 1600David Williams, Chief Executive Hoare Govett 020 7678 8000Justin JonesHugo FisherSean Wegerhoff Smithfield 020 7360 4900John KielyWill Swan This announcement, which has been prepared by and is the sole responsibility ofAvanti Screenmedia, has been issued by Avanti Screenmedia. This announcement hasbeen approved by Hoare Govett Limited ("Hoare Govett"), 250 Bishopsgate, LondonEC2M 4AA, solely for the purposes of section 21 of the Financial Services andMarkets Act 2000. Hoare Govett is acting for Avanti Screenmedia and no one else in connection withthe Demerger and for Avanti Communications and no one else in connection withthe Admission and will not be responsible to any other person for providing theprotections afforded to clients of Hoare Govett nor for providing advice inrelation to the Demerger or Admission. This document includes statements that are, or are deemed to be, "forwardlooking-statements". These forward-looking statements can be identified by theuse of forward-looking terminology, including the terms "believes", "estimates","plans", "anticipates", "targets", "aims", "continues", "projects", "assumes","expects", "intends", "may", "will", "would", or "should", or in each case,their negative or other variations or comparable terminology. Theseforward-looking statements include all matters that are not historical facts.They appear in a number of places throughout this announcement and includestatements regarding Avanti Communications' or Avanti Sreenmedia's intentions,beliefs or current expectations concerning, among other things, AvantiCommunications' and Avanti Screenmedia's result of operations, financialcondition, liquidity, prospects, growth, strategies and sectors in which AvantiCommunications or Avanti Screenmedia operates. By their nature, forward-lookingstatements involve risk and uncertainty because they relate to future events andcircumstances. A number of factors could cause actual results and developmentsto differ materially from those expressed or implied by the forward-lookingstatements, including without limitation conditions in the markets, marketposition of Avanti Communications or Avanti Screenmedia, earnings, financialposition, cash flows, return on capital, anticipated investments and capitalexpenditures, changing business or other market conditions and general economicconditions. These and other factors could adversely affect the outcome andfinancial effects of the plans and events described herein. Forward-lookingstatements contained in this announcement based on past trends or activitiesshould not be taken as a representation that such trends or activities willcontinue in the future. This announcement does not comprise an admission document or circular relatingto Avanti Communications or Avanti Screenmedia (respectively) and does notconstitute an offer or invitation to purchase or subscribe for any securities ofAvanti Screenmedia or Avanti Communications and should not be relied on inconnection with any decision to purchase or subscribe for any such securities orin relation to a decision to vote in favour of or against the Demerger. Thisannouncement does not constitute a recommendation regarding the securities ofAvanti Screenmedia or Avanti Communications. Additional material informationwill be included in the Admission Document and Circular and informationcontained in this announcement may change. The distribution of this announcement in certain jurisdictions may be restrictedby law, and persons into whose possession this announcement comes should informthemselves about, and observe, any such restrictions. Any failure to comply withthese restrictions may constitute a violation of the laws of any suchjurisdiction. The financial information concerning Avanti Screenmedia and AvantiCommunications in this announcement does not amount to statutory accounts withinthe meaning of section 240 of the Companies Act 1985. Appendix I sets out the expected timetable of events of the Demerger Appendix II sets out the definitions used in this announcement Avanti Screenmedia Group plc ("Avanti Screenmedia") Demerger of satellite networks business and admission to trading on AIM of Avanti Communications Group plc ("Avanti Communications") Introduction Further to the announcement on 13 December 2006, Avanti Screenmedia Group plc(AIM:ASG.L), the UK satellite media and telecommunications business, todayannounces further details of the Demerger of its satellite networks business byway of a dividend in specie. Following the Demerger, the Continuing Group will comprise the existingscreenmedia business and the Avanti Screenmedia Shares will continue to trade onAIM. The satellite networks business will be demerged to a new entity, AvantiCommunications Group plc, and an application will be made for AvantiCommunications Shares to be admitted to trading on AIM with effect fromcompletion of the Demerger. The Demerger is conditional, inter alia, on the approval of Avanti Screenmediashareholders which is being sought at the Extraordinary General Meeting to beheld at 10.00 a.m. on 10 April 2007 at the offices of the Company at 74Rivington Street, London EC2A 3AY. Subject to this approval and the otherconditions of the Demerger, Admission is expected to become effective anddealings in the Avanti Communications Shares are expected to commence at 8.00a.m. on 16 April 2007. Background to and reasons for the Demerger The Board has recognised that the different activities, cash flow profiles andscale of the screenmedia and satellite services businesses are such that eachbusiness requires focused and specialised management. The Board expects the Demerger and subsequent admission to trading on AIM willenable the new Avanti Communications board and management team to focus solelyon the provision of satellite services and the launch of the HYLAS satellite.The Directors believe that the Demerger will provide greater clarity forinvestors. The Communications Group The Communications Group currently provides satellite telecommunicationsservices in Europe using leased satellite capacity. The Communications Grouphas authorisation to use 3.6GHz of spectrum of Ku and Ka band at the orbital position 33.5oW. In December 2008, it expects to take delivery for launch ofits own satellite, HYLAS. HYLAS uses unique technologies to provide highlyflexible and cost effective satellite capacity. As satellite spectrum is a finite resource and market demand is high, the Directors expect these factorswill provide significant advantages in their efforts to build a large andvaluable business. The Communications Group intends to sell wholesale HYLAS capacity totelecommunication and media network operators in Europe. This strategic plan hastwo distinct phases: (a) The first phase, which will continue during the construction phase of HYLAS,is the provision of its services via leased satellite capacity and ownedinfrastructure. In addition, it has a product suite which currently providesservices to approximately 1,500 customers and it intends to grow this businessaggressively following the launch of HYLAS. (b) The second phase is the provision of its services via HYLAS and thereforethe Communications Group intends to build a large base of customers which it canmigrate onto HYLAS. Furthermore, the strategy will be expanded to focus onselling wholesale bandwidth and managed services using its DVB-RCS hubs toresellers and service providers. The Board believes that, given the supply and demand characteristics of themarket, the Communications Group is likely to experience growing customer demandand can envisage the need for launches of additional satellites in the future. The Screenmedia Group Avanti Screenmedia is a market leader in the UK for the provision of screenmediaservices to the leisure and retail sectors. It builds satellite or terrestrialcontent distribution and screen networks, creates channel strategies, makesbespoke video content and sells media space. Customers typically use AvantiScreenmedia's services to entertain their customers, build their brands,promote products and sell advertising at or close to the point of sale. Avanti Screemendia's strategic plan rests on its intentions to: •build on recent experience and evidence of generating uplift in like-for-like sales for its retail customers; •improve margins since the Board of the Continuing Group believes that the success of the product has now been demonstrated to the market; and •exploit the recent completion of the development of Genie 3, an advanced audio visual system for the pub market. Interim results for the six months ended 31 December 2006 Avanti Screenmedia Group plc today announced its interim results for the sixmonths ended 31 December 2006. These results contain financial informationrelating to both the Communications Group and the Screenmedia Group. Board structures Following the Demerger, Avanti Screenmedia and Avanti Communications will beseparate companies whose shares are admitted to trading on AIM. The boards ofthe two companies following the Demerger will be as follows: Avanti Screenmedia Avanti Communications Non-executive Chairman Mick Desmond John BrackenburyManaging Director/Chief Executive Stuart Chambers David WilliamsTechnical Director - David BestwickFinance Director Gary Truman To be appointedNon-executive Director John Brackenbury Mick DesmondNon-executive Director Richard Vos Richard VosNon-executive Director Roland Fisher Alan FosterNon-executive Director - William Wyatt Avanti Communications has conducted a search and is at an advanced stage inidentifying and negotiating terms with a potential finance director candidateand is hopeful of an appointment soon. The Demerger Agreement and Admission To facilitate the Demerger, a new holding company, Avanti Communications Groupplc, has been incorporated. The Demerger will be effected by Avanti Screenmediadeclaring a special dividend, equal to the book value of its shareholding inAvanti Communications Infrastructure Limited ("ACIL") on Demerger, which will besatisfied, in specie, by Avanti Screenmedia transferring to AvantiCommunications the whole of the issued share capital of ACIL in consideration ofthe allotment and issue by Avanti Communications of the Demerger Shares,credited as fully paid, to Qualifying Shareholders. On completion of the Demerger, Qualifying Shareholders will receive: 1 Avanti Communications Share for each Avanti Screenmedia Share held at the Demerger Record Date. Application has been made for the Avanti Communications Shares to be admitted totrading on AIM. Immediately after the completion of the Demerger, Shareholderswill own the same percentage of Avanti Communications Shares in issue as theycurrently own of Avanti Screenmedia Shares. The Demerger is conditional, inter alia, upon Shareholders approving theresolution to approve the Demerger at the EGM. Following the Demerger, Avanti Communications will be the holding company ofACIL, Avanti Space Limited, Avanti Communications Limited and Avanti BroadbandLimited. The Avanti Screenmedia Group will consist of Avanti Screenmedia and itssubsidiaries comprising Avanti Screenmedia Limited, Freelance Media Limited, FatCat Kit Limited, Screen Network Limited, Profound Recruitment Limited, ConnectTelevision Limited and Active Media Capital Limited, together with three otherdormant companies. Nominated adviser and broker Following the Demerger, it is the intention of the Company to appoint a newnominated adviser and broker to act for the Continuing Group. With effect fromthe completion of the Demerger, Hoare Govett will be appointed the nominatedadviser and broker to Avanti Communications. Share option schemes The Communications Group The directors of Avanti Communications believe that the success of theCommunications Group will depend to a significant degree on the futureperformance of the management team. The directors of Avanti Communciations alsorecognise the importance of ensuring that all employees are well motivated andidentify closely with the success of the Communications Group. Accordingly, Avanti Communications will establish share option schemes which itbelieves will give it sufficient flexibility to provide equity based incentivesfor its employees and directors. At any time the number of shares over whichoptions may be granted under the share option schemes will not exceed 12.5 percent. of the Avanti Communications issued share capital. As the share optionspreviously granted by Avanti Screenmedia to employees of the CommunicationsGroup (as employees of Avanti Screenmedia Group plc) will mostly lapse on theDemerger, Avanti Communications intends to grant replacement options under theshare option schemes shortly after the Demerger has become effective. The board of Avanti Communications intends in due course to make available 12.5per cent. of the share capital of Avanti Communications to an employee benefittrust, in order to satisfy the requirement for options granted under theschemes. The remuneration committee will also consider the adoption of a longterm incentive plan for the benefit of directors and senior managers, in theexpectation that any awards thereunder will be satisfied from the employeebenefit trust. The Screenmedia Group Subject to the approval by the Shareholders at the EGM, the Directors areproposing to vary the rules of the Unapproved Scheme of Avanti Screenmedia. Aresolution to this effect is included in the Notice of EGM. The existing rulesof the Unapproved Scheme do not contain a provision which would enable earlyexercise of the options under the circumstances contemplated by the Demerger,and the remuneration committee of the Board has concluded that this was anoversight when the rules were drafted. In the event that there is a takeover ofAvanti Screenmedia, or in the event that the Demerger was effected by a schemeof arrangement under the Companies Act, the holders of options under the schemewould be entitled to exercise any existing options and participate in theproposals. The Demerger is structured as a dividend in specie, which does notrequire Avanti Screenmedia to undertake such a scheme of arrangement, and theremuneration committee of the Board believes that it would be appropriate forthe Board to have discretion to enable certain option holders under theUnapproved Scheme to be able to exercise their options on the occurrence of theDemerger. Accordingly, a resolution will be proposed at the EGM, the effect ofwhich would be to enable the remuneration committee of the Board to consent (atits sole and absolute discretion) for certain option holders to exercise theiroptions, should they so wish, prior to the Demerger Record Date: in this eventthey would be entitled to receive Demerger Shares. Current trading and prospects The Company announced today its interim results for the six months ended 31December 2006. The Chairman's statement contained in these results included thefollowing comments: "Outlook The Screenmedia business now has the position it needs in the retail sector toflourish. Our retail pipeline is strong and shows that Screenmedia is, albeitlater than hoped for, beginning to achieve its objectives in the retail sectorand we expect significant contract wins in the future. In Communications, we are finding early demand for HYLAS capacity is strong andthe launch of our network services products into the market has been wellreceived. We believe the value of our strategic assets created will bedemonstrated as the team builds the order book of revenue. We remain excited about the future prospects of both Screenmedia andCommunications, and look forward to communicating more clearly the merits of theindividual businesses after completion of the demerger." The Board remains confident of the future prospects of both the Continuing Groupand the Communications Group. Dividend policy The Communications Group The declaration and payment by the Communications Group of any future dividendson the Ordinary Shares and the amount will depend on the results of theCommunications Group's operations, its financial condition, cash requirements,future prospects, profits available for distribution and other factors deemed tobe relevant at the time. However, in view of the Communication Group's earlystage of development, the directors of Avanti Communications do not envisagethat the Communications Group will pay dividends until after the launch of HYLASand intend to re-invest surplus funds in the development of the CommunicationsGroup's business. The Screenmedia Group The Company intends to enhance shareholder value by the reinvestment of surplusfunds. The Directors do not envisage that the Company will pay dividends in theimmediate future. Appendix IExpected timetable of events of the Demerger Circular posted to Qualifying Shareholders (by first class 16 March 2007post) Latest time and date for receipt of Forms of Proxy 10.00 a.m. 8 April 2007 EGM 10.00 a.m. 10 April 2007 Latest time and date for lodging transfer of Avanti 6.00 p.m. 11 April 2007Screenmedia Shares held in registered form in order to be registered by the Demerger Record Date Latest time and date for lodging transfer of Avanti 6.00 p.m. 13 April 2007Screenmedia Shares held in CREST in order to be qualify for the Demerger Demerger Record Date 6.00 p.m. on 15 April 2007 Completion of the Demerger and Admission 16 April 2007 Admission and dealings in Avanti Communications Shares to 8.00 a.m. on 16 April 2007commence on AIM CREST members accounts credited with Avanti Communications 16 April 2007Shares Where applicable, despatch of certificates for Avanti by 18 April 2007Communications Shares All references to time in this document are to London times unless otherwisestated. Appendix IIDefinitions The following definitions apply throughout this announcement, unless the contextrequires otherwise: "ACIL" Avanti Communications Infrastructure Limited, incorporated in England and Wales, a subsidiary of the Company which, on completion of the Demerger, will be a subsidiary of Avanti Communications and a member of Avanti Communications Group; "Act" the Companies Act 1985, (as amended) and/or the Companies Act 2006 (to the extent the same is in force); "Admission" admission of the Avanti Communications Shares to trading on AIM becoming effective in accordance with Rule 6 of the AIM Rules; "Admission the admission document dated 16 March 2007 to be published byDocument" Avanti Communications in connection with admission of all the Avanti Communications Shares in issue immediately following the Demerger (including the Demerger Shares) to trading on AIM; "AIM" AIM, a market operated by the London Stock Exchange; "Avanti Avanti Communications Group plc, a company incorporated inCommunications" England and Wales which will, following the Demerger, be the holding company of the Communications Group; "Avanti ordinary shares of 1p each in the share capital of AvantiCommunications Communications;Shares" "Avanti Avanti Screenmedia and its subsidiary companies, up to theScreenmedia date of the Demerger;Group" "Avanti ordinary shares of 1p each in the capital of the Company;ScreenmediaShares" "Board" or directors of the Company;"Directors" "Communications ACIL, Avanti Broadband Limited, Avanti Space Limited andGroup" Avanti Communications Limited, which will, following the Demerger, be subsidiary undertakings of Avanti Communications; "Company" or Avanti Screenmedia Group plc, a company incorporated in"Avanti England and Wales with registered number 05114024;Screenmedia" "Continuing Avanti Screenmedia and its subsidiary companies followingGroup" completion of the Demerger, which, for the avoidance of doubt, will exclude the Communications Group; "CREST" the relevant system as defined in the CREST Regulations for paperless settlement of share transfers and holding shares in uncertificated form; "Demerger" the Demerger of the Communications Group from Avanti Screenmedia Group on the terms of the Demerger Agreement; "Demerger the conditional agreement to be entered into by AvantiAgreement" Screenmedia and Avanti Communications relating to the Demerger; "Demerger Record the close of business on 15 April 2007, being the time byDate" reference to which holders of Avanti Screenmedia Shares whose names are on the register of members of Avanti Screenmedia at such time will qualify (subject to the Demerger Agreement becoming unconditional) for Demerger Shares; "Demerger the Avanti Communications Shares to be allotted and issued byShares" Avanti Communications to Qualifying Shareholders pursuant to the Demerger; "Extraordinary the extraordinary general meeting of Avanti ScreenmediaGeneral Meeting" convened for 10.00 a.m. on 10 April 2007, or any adjournmentor "EGM" thereof; "Form of Proxy" the form of proxy for use in connection with the EGM; "Group" Avanti Screenmedia and its subsidiary undertakings prior to the Demerger becoming effective; "Hoare Govett" Hoare Govett Limited; "HYLAS" the satellite that the Communications Group has commissioned and is currently under construction; "London Stock London Stock Exchange plc;Exchange" "Qualifying Shareholders on the register of members of the Company at theShareholders" Demerger Record Date; "Qualifying the Avanti Screenmedia Shares in issue at the Demerger RecordShares" Date (being the existing issued Avanti Screenmedia Shares and any further such shares as are unconditionally allotted or issued and fully paid before the Demerger Record Date); "Resolutions" the ordinary resolutions to approve the Demerger and to amend the rules of the Unapproved Scheme to be proposed at the EGM; "Share Option the EMI Scheme and the Unapproved Scheme;Schemes" "Shareholders" holders of existing Avanti Screenmedia Shares; "UK" or "United the United Kingdom of Great Britain and Northern Ireland;Kingdom" and "Unapproved the Unapproved Executive Share Option Scheme of the CompanyScheme" adopted on 31 May 2004. 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