Last checked at 28 May 2010 13:33
For Immediate Release
28 May 2010
MWB GROUP HOLDINGS PLC ("MWB" or the "Company")
PROPOSED DISPOSAL OF THE GROUP'S ENTIRE SHAREHOLDING IN LIBERTY PLC
MWB today announces that it has received 51.47 per cent. irrevocable undertakings to vote in favour of the resolution to approve the proposed sale of the Group's entire 68.3 per cent. shareholding in Liberty for a total price equivalent to £28.7 million in cash.
MWB acquired its investment in Liberty Plc (the "Liberty Shareholding") in July 2000, since when the Liberty Shares have been admitted to trading on AIM. The Liberty Shareholding represents 68.3 per cent. of the issued share capital of Liberty and as such Liberty is a subsidiary of MWB. In July 2009, the Liberty Board announced that it was undertaking a review with the aim of identifying ways in which the Liberty business could be developed and expanded. As a result of this review, the Liberty Board, in conjunction with its financial advisers, considered a number of different strategies that were proposed to Liberty.
On 19 May 2010, the Liberty Board and BlueGem Gamma Limited ("BGL") announced that they had agreed the terms of a recommended offer to be made by BGL consisting of 141.8 pence in cash for each Liberty Ordinary Share (the "Offer Price") valuing the issued ordinary share capital at £32.0 million, together with payment of the Special Dividend of 44.2 pence for each Liberty Ordinary Share amounting to £10.0 million, which in total equate to the Aggregate Price of £42.0 million payable to Liberty Shareholders.
As the Disposal is of sufficient size to that of MWB to constitute a Class 1 transaction under the Listing Rules, it requires the prior approval of shareholders. A circular to shareholders of MWB containing details of the Disposal ("Circular") has been published and is expected to be posted to shareholders today. A General Meeting to approve the Disposal is expected to be held at 11.00 a.m. on 21 June 2010.
Highlights
·; Aggregate Offer Price of £42.0 million equivalent to £28.7 million in cash to MWB
·; Irrevocable undertakings from MWB Shareholders to vote in favour of Disposal totalling 51.47% already received
Shareholders may be aware of recent announcements and press comment concerning a possible offer for the Liberty Ordinary Shares from Pyrrho, a shareholder in MWB. The Board can confirm that, despite the impression that certain Shareholders may have gained, no formal offer for the Liberty Ordinary Shares has been made by Pyrrho.
The Company has received irrevocable undertakings to vote in favour of the ordinary resolution to be put to shareholders of the Company at the General Meeting to approve the Disposal, from shareholders holding 51.47% of the Company's issued share capital. The Directors have given irrevocable undertakings amounting to 15.8% of the Company's issued share capital (such amount being included in the 51.47% total above). These irrevocable undertakings exceed the majority of 50 per cent. required to pass the Resolution.
The Disposal will enable the Group to realise the inherent value in the Liberty Shareholding in cash and so to continue the Group's strategy of realising the value of the Group's businesses through sales in connection with the Group's Cash Distribution Programme.
The Circular relating to the Disposal has been approved by the UK Listing Authority and will shortly be available for inspection at their Document Viewing Facility, situated at The Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS. The Circular will also be available at the registered office of the Company and at the offices of Dechert LLP, 160 Queen Victoria Street, London EC4V 4QQ during normal business hours on any weekday (Saturdays, Sundays and public holidays excepted) from the date of the publication of the Circular until the General Meeting. The circular will also be available on the Company's website, www.mwb.co.uk
Terms used in this announcement but not defined shall have the same meanings given to them in the Circular.
For further information, please contact:
| MWB Group Holdings Plc Richard Balfour-Lynn, Chief Executive Jag Singh, Finance Director
| +44 (0) 20 7706 2121 |
| Panmure Gordon (Financial Adviser and Broker) Hugh Morgan Adam Pollock
| +44 (0) 20 7459 3600 |
| Baron Phillips Associates (Financial PR Adviser) Baron Phillips | +44 (0) 20 7920 3161 |
This announcement has been issued by, and is the sole responsibility of, the Company. No representation or warranty, express or implied, is made or given by, or on behalf of, the Company or Panmure Gordon (UK) Limited ("Panmure Gordon") or any of their affiliates, parent undertakings, subsidiary undertakings or subsidiaries of their parent undertakings or any of their respective directors, officers, employees or advisers or any other person as to the accuracy or completeness or fairness of the information or opinions contained in this announcement and no responsibility or liability is accepted by any of them for any such information or opinions or for any errors or omissions.
Panmure Gordon, which is authorised and regulated by the Financial Services Authority, is acting exclusively for the Company and for no one else in connection with the Disposal and is not advising any other person and accordingly will not be responsible to anyone other than the Company for providing the protections afforded to the customers of Panmure Gordon or for providing advice in relation to the contents of this announcement or any transaction, arrangement or other matter described in this announcement.
The distribution of this announcement into jurisdictions other than the United Kingdom may be restricted by law. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.
The information in this announcement may not be forwarded or distributed to any other person and may not be reproduced in any manner whatsoever. Any forwarding, distribution, reproduction, or disclosure of this information in whole or in part is unauthorised. Failure to comply with this directive may result in a violation of applicable laws of relevant jurisdictions.
This announcement contains a number of forward looking statements relating to MWB and Liberty with respect to, amongst others, the following: financial conditions; results of operations; economic conditions in which MWB and Liberty operates; the businesses of MWB and Liberty; future benefits of the Disposal; and management plans and objectives. The Company considers any statements that are not historical facts as "forward looking statements". They relate to events and trends that are subject to risks, uncertainties and assumptions that could cause the actual results and financial position of MWB and Liberty to differ materially from the information presented in the relevant forward looking statement. When used in this announcement the words "estimate", "project", "intend", "aim", "anticipate", "believe", "expect", "should", and similar expressions, as they relate to MWB and Liberty or the management of either of them, are intended to identify such forward looking statements. Readers are cautioned not to place undue reliance on these forward looking statements which speak only as at the date of this announcement. Neither the Company nor any member of the Group including Liberty undertakes any obligation to update publicly or revise any of the forward looking statements, whether as a result of new information, future events or otherwise, save in respect of any requirement under applicable laws and regulations, the Listing Rules, the Prospectus Rules, and the Disclosure and Transparency Rules.
MWB GROUP HOLDINGS PLC
PROPOSED DISPOSAL OF THE GROUP'S ENTIRE SHAREHOLDING IN LIBERTY PLC
1. Introduction
On 12 March 2010, Liberty, MWB's 68.3 per cent. owned subsidiary, announced that it had received approaches which may or may not lead to an offer being made for Liberty. On 7 May 2010, BlueGem Capital Partners LLP, on behalf of BlueGem L.P., issued an announcement under the Code that it was in discussions with the Liberty Board about the possibility of making an offer for the Liberty Ordinary Shares at the Aggregate Price.
Shareholders may be aware of recent announcements and press comment concerning a possible offer for the Liberty Ordinary Shares from Pyrrho, a shareholder in MWB. The Board can confirm that, despite the impression that certain Shareholders may have gained, no formal offer for the Liberty Ordinary Shares has been made by Pyrrho. Furthermore, in light of the irrevocable undertakings obtained by BlueGem L.P., and in the absence of the Offer lapsing, the Board does not consider there is any realistic prospect of any formal offer for the Liberty Ordinary Shares being made successfully by Pyrrho or any other third party. Further details of the approach by Pyrrho and the reasons for the unanimous rejection of that approach by the Liberty Board and the Board are included in paragraph 2 below entitled "Background to the Disposal".
On 19 May 2010, the Liberty Board and BGL announced that they had agreed the terms of a recommended cash offer to be made by BGL for the Liberty Ordinary Shares at the Offer Price, together with payment of the Special Dividend, which in total equate to the Aggregate Price. The Offer is being made by BGL in accordance with the Code. As part of the negotiations which led to BGL announcing the Offer, the MWB Parties have given the Irrevocable Undertakings to BGL to accept the Offer in relation to the Liberty Shareholding. The Irrevocable Undertakings were given by the MWB Parties subject to approval of the Disposal by Shareholders.
The Disposal is of sufficient size relative to that of the Group to constitute a Class 1 transaction for MWB under the Listing Rules, and therefore requires the prior approval of Shareholders.
The aggregate price receivable by MWB in respect of the Offer (including MWB's proportion of the Special Dividend, amounting to £6.8 million payable in conjunction with the Offer) will amount to a total cash receipt by MWB as a result of the Offer of £28.7 million.
2. Background to the Disposal
MWB has held the Liberty Shareholding since July 2000 and since then the Liberty Shares have been admitted to trading on AIM. At the time of acquisition by MWB of the Liberty Shareholding, stock market conditions were considerably more favourable to small companies than is currently the case. Throughout the period from MWB's acquisition of the Liberty Shareholding, Liberty has continued to be loss making and substantially cash flow negative, requiring MWB management involvement and direction. In order to part fund Liberty's losses and capital requirements, MWB also provided the Inter Group Debt to Liberty, which amounted to £14.7 million immediately prior to its repayment on 11 May 2010.
In February 2009, Liberty launched its Renaissance of Liberty after substantial financial and management investment provided by MWB. This was the next step in establishing Liberty as a popular and avant-garde British luxury brand. The Renaissance continues to be successful, and in the year ended 31 December 2009 Liberty revenues grew by 20 per cent. compared with 2008, resulting in a positive EBITDA (after brand expenditure and reorganisation costs) of £0.1 million for the year ended 31 December 2009 and a reduced post-tax loss after depreciation and interest for Liberty of £5.15 million. The success of the Renaissance has continued in 2010 and in the four months ended 30 April 2010, Liberty's total revenue increased by 40 per cent. over the same period in 2009, as referred to in the MWB interim management statement issued on 12 May 2010.
In July 2009, the Liberty Board announced that it was undertaking a review with the aim of identifying ways in which the Liberty business could be developed and expanded. As a result of this review, the Liberty Board, in conjunction with its financial advisers, considered a number of different strategies that were proposed to Liberty. On 12 March 2010, the Liberty Board announced that it had received approaches which may or may not lead to an offer for Liberty.
Discussions with BlueGem Capital Partners LLP, on behalf of BlueGem L.P. (the holding entity of BGL), about the possibility of an offer for the Liberty Ordinary Shares commenced in February 2010, and since then BlueGem L.P. has undertaken over four months of extensive due diligence on Liberty.
On 15 March 2010, the Liberty Board announced that it had agreed terms to sell the Tudor Building to the Tudor Building Purchaser for a sale price of £41.5 million in cash. Shareholders approved the Tudor Building Sale at a general meeting of the Company which was held on 10 May 2010 and completion of the Tudor Building Sale took place on 11 May 2010. The sale price of £41.5 million, less a retention of £0.3 million by the Tudor Building Purchaser, represents a surplus, before expenses, of £10.95 million or 36 per cent. over the book value of the Tudor Building of £30.25 million at 31 December 2009. Since completion of the Tudor Building Sale, Liberty has continued, and will continue, to occupy and carry on its retail operations at the Tudor Building pursuant to the Liberty Lease, at an initial annual rent of £2.1 million, with five-yearly fixed upward rent reviews.
On 6 May 2010, Pyrrho made a proposal to the Liberty Board about a possible offer for Liberty at an offer price of 185 pence per Liberty Ordinary Share (including a special dividend). Pyrrho's proposal was fully considered that day by both the Liberty Board and the Board, both of which boards subsequently resolved to proceed with the proposed offer by BlueGem L.P., the holding entity of BGL. BlueGem L.P.'s proposed offer was the highest of the two possible offers; BlueGem L.P. had already undertaken over four months of extensive due diligence on Liberty and therefore its proposal was fully researched; and BlueGem L.P. had committed to declare its offer unconditional if acceptances in respect of not less than 86.27 per cent. of Liberty Ordinary Shares were received. As irrevocable undertakings to accept the offer proposed by BlueGem L.P. had already been obtained or promised in respect of 86.27 per cent. of the Liberty Ordinary Shares, this gave the Liberty Board and the Board a high degree of certainty that the offer proposed by BlueGem L.P. would succeed. In addition, if the Liberty Board had not agreed to proceed with the offer proposed by BlueGem L.P., that offer would have been withdrawn by BlueGem L.P. and Liberty would have become liable to pay an inducement fee of £0.3 million pursuant to the inducement fee agreement entered into between Liberty and BlueGem Capital Partners LLP. The offer proposed by BGL had the approval of the trustees of the Liberty Pension Scheme which was required owing to the deficit in the Liberty Pension Scheme and agreement had been reached with the trustees for a special contribution to be made by Liberty to the Liberty Pension Scheme.
On 7 May 2010, BlueGem Capital Partners LLP, on behalf of BlueGem L.P., issued an announcement under the Code that it was in discussions with the Liberty Board about the possibility of making an offer for the Liberty Ordinary Shares at the Aggregate Price.
On 14 May 2010, Pyrrho issued an announcement under the Code that it wished to make an offer for the share capital of Liberty at a higher price than that announced by BlueGem L.P. on 7 May 2010 However, by this stage irrevocable undertakings to accept the offer proposed by BGL had already been obtained, as referred to above, and the Liberty Board and the Board continue to believe that the offer made by BGL is in the best interests of Liberty Shareholders and Shareholders respectively.
On 19 May 2010, the Liberty Board and BGL announced under the Code a recommended cash offer to be made by BGL for the Liberty Ordinary Shares, being the Offer.
As a small quoted company on AIM, Liberty has suffered from share illiquidity and limited institutional interest in its shares. The Liberty Board has worked hard to restructure Liberty and revive its fortunes within the confines of the public arena. It also now considers that Liberty's long term strategy has better prospects of being delivered as a private company with a backer with a strong retail focus, and one which would be willing to commit the substantial sums of capital required to take Liberty to the next stage of its development. The Liberty Board considers that BGL possesses these characteristics.
The Board believes that it is now in Shareholders' best interests to dispose of the Liberty Shareholding at what the Directors believe, in conjunction with receipt of the Group's proportionate share of the Special Dividend, is an attractive price.
Since implementation of the Cash Distribution Programme in May 2002, the Board's strategy has been to mature and enhance the value of the Group's businesses. Upon the businesses reaching maturity, the strategy has been to realise their value through sales and, after repayment of debt, to return realised cash or cash equivalents to Shareholders. These broad strategic aims remain in place today.
The Disposal will enable the Group to realise the inherent value in the Liberty Shareholding in cash and so to continue the Group's strategy of realising the value of the Group's businesses through sales in connection with the Cash Distribution Programme.
3. Principal terms and conditions of the Disposal
The Offer is being made in accordance with the Code on terms and conditions which are customary for offers made under the Code. The Aggregate Price will be paid in cash. In accordance with the terms of the Code, BGL's financial adviser, has confirmed that it is satisfied that the necessary financial resources are available to BGL to satisfy acceptance of the Offer in full. The Offer has been made in conjunction with the Special Dividend which the Liberty Board has resolved to be paid to Liberty Shareholders within seven days after the Offer becomes or is declared unconditional in all respects.
BlueGem L.P. has undertaken to provide agreed funding to ensure that Liberty has the necessary cash available to it to pay the Special Dividend.
Together with the Special Dividend, the Offer would result in total receipts by Liberty Shareholders of £42.0 million (being the Aggregate Price). Of this amount, the Offer Price is 141.8 pence per Liberty Ordinary Share and the Special Dividend resolved by the Liberty Board to be paid in conjunction with the Offer is 44.2 pence per Liberty Ordinary Share.
The consideration has been structured in this way to give Liberty Shareholders the benefit of the surplus cash in Liberty resulting from the Tudor Building Sale, as more fully described in the Tudor Building Circular.
In addition, the holders of options over Liberty Ordinary Shares have agreed to surrender all of their options over an aggregate of 1,930,000 Liberty Ordinary Shares in return for a gross cash payment equal to 21.8 pence per Liberty Ordinary Share (or £0.4 million in total) from BGL and an additional amount equal to 44.2 pence per Liberty Ordinary Share (or £0.9 million in total) from Liberty. These arrangements put the option holders in the position they would have been in had they exercised their options and participated in the Offer as a Liberty Shareholder. Payments under these agreements are conditional upon the Offer being declared unconditional in all respects.
In the Tudor Building Circular, MWB stated that following completion of the Tudor Building Sale, Liberty intended to pay a special dividend. The amount which could be paid as a dividend in the event that the Offer does not complete would need to reflect the ongoing cash requirements and growth plans of Liberty as an independent business and so would be likely to be materially less than the Special Dividend which will be paid in conjunction with the Offer if the Offer is completed.
The Liberty Board, which has received advice from Liberty's financial adviser, Cavendish Corporate Finance LLP, considers the terms of the Offer, taking into account the Special Dividend, to be fair and reasonable. On this basis, the Liberty Board has unanimously recommended that Liberty Shareholders accept the Offer.
The aggregate amount receivable by Liberty Shareholders pursuant to the Offer, including the Special Dividend payable by Liberty to Liberty Shareholders, represents a multiple of 26.9 times Liberty's Pro Forma EBITDA.
The Aggregate Price represents a discount of 32.4 per cent. to the closing middle market quotation for a Liberty Ordinary Share of 275 pence on 11 March 2010, being the last practicable date before Liberty Board made the announcement that it had received approaches which may or may not lead to an offer being made for Liberty on 12 March 2010. The Aggregate Price represents a discount of 39.5 per cent. to the closing middle market quotation for a Liberty Ordinary Share of 307.5 pence on 6 May 2010, being the last practicable date before the announcement made by the Liberty Board that BlueGem Capital Partners LLP, on behalf of BlueGem L.P., was in discussions with the Liberty Board about the possibility of making an offer for the ordinary share capital of Liberty. The Aggregate Price represents a discount of 16.4 per cent. to the closing middle market quotation for a Liberty Ordinary Share of 222.5 pence on 18 May 2010, being the last practicable date before the announcement of the Offer.
The Liberty Ordinary Shares have, for a number of years, been highly illiquid on AIM, with very limited trading volumes. In the opinion of the Board, and after receiving appropriate financial advice, the underlying economic value of Liberty is lower than the quoted price of the Liberty Ordinary Shares. Consequently, a sale of any substantial number of Liberty Ordinary Shares on the market would not, in the opinion of the Board, realise a value per share that was materially higher than the Aggregate Price.
The Offer is subject to valid acceptances of the Offer in respect of not less than 86.27 per cent. (or such lesser percentage as BGL may decide) of the Liberty Shares to which it relates being received (and not, where permitted, withdrawn) by no later than 1.00 p.m. on 22 June 2010 (or such later time(s) and/or date(s) as BGL may, subject to the rules of the Code, or with the consent of the Panel, decide).
BGL is a newly formed company wholly owned by BlueGem L.P., a private equity fund formed at the end of 2006. BlueGem L.P. has received capital commitments of over €200 million from investors, of which approximately 40 per cent. has been invested at the date of this announcement. BlueGem L.P. makes private equity investments in mid-market companies, mainly in the UK and Italy, and its team has considerable experience in making investments in the retail sector.
4. Composition, receipt and use of proceeds derived from the Tudor Building Sale and the Disposal
As referred to in the Tudor Building Circular, out of the proceeds of the Tudor Building Sale of £41.5 million and, after the retention by the Tudor Building Purchaser of £0.3 million pursuant to the Tudor Building Sale Agreement, Liberty has discharged the amounts set out in (i) and (ii) below and will discharge the amounts set out in (iii) and (iv) below:-
(i) repayment of the Liberty Bank Debt of £14.0 million;
(ii) repayment of the Inter Group Debt of £14.7 million;
(iii) the costs of the Tudor Building Sale incurred by Liberty estimated at £0.7 million; and
(iv) the payment of accrued dividends to holders of preference shares in Liberty of £0.2 million.
Thereafter, it is estimated by the Liberty Board that there will be £11.6 million of surplus cash proceeds out of the proceeds of the Tudor Building Sale that will be available in Liberty for the benefit of Liberty Shareholders.
The Tudor Building Circular also referred to discussions with the trustees of the Liberty Pension Scheme, concerning a possible contribution to the Pension Scheme out of the proceeds of the Tudor Building Sale, to reduce the deficit in the Liberty Pension Scheme. Since the date of the Tudor Building Circular, Liberty has concluded these discussions, and as a result a contribution of £2.0 million has been agreed to be made by Liberty to the Liberty Pension Scheme out of the proceeds of the Tudor Building Sale to reduce the deficit in the Pension Scheme. This payment is due to be made on or before 31 May 2010.
Thereafter, and after adjusting for certain working capital items in the ordinary course as agreed between Liberty and BGL, the net surplus cash proceeds available in Liberty as a result of the Tudor Building Sale total £10.5 million.
Under the terms of the Offer, MWB will receive 141.8 pence for each Liberty Ordinary Share held by MWB, and accordingly MWB will receive £21.9 million for the Liberty Shareholding at Completion. The Liberty Board has also resolved to pay the Special Dividend totalling £10.0 million to Liberty Shareholders, which reflects the level of distributable reserves available within Liberty after completion of the Tudor Building Sale and costs incurred by Liberty in relation to the Offer of £2.1 million. The Group has a 68.3 per cent. interest in Liberty and accordingly £6.8 million of the Special Dividend would be receivable by MWB.
Taking into account the proceeds receivable by MWB from the Offer and the Special Dividend referred to above, and repayment of the Inter Group Debt, and after deducting costs of £0.7 million incurred by MWB in undertaking the Disposal, MWB will receive £42.7 million on Completion. These proceeds are proposed by the Board to be used by MWB as follows:-
(i) the repayment of £21.0 million of the MWB Bank Debt, which is secured in part on the Liberty Shareholding (and which will not be available to be redrawn), which at the date of this announcement totals £53.0 million and which is expected to remain unchanged at Completion;
(ii) the retention of £21.2 million in cash or the use of such amount for the repayment of part of the revolving element of the MWB Bank Debt after the repayment referred to in (i) above, thereby reducing overall net debt of the Group, but preserving the flexibility of the Group to redraw these funds, if required, for further expansion or for general working capital of the Group; and
(iii) the purchase of £0.5 million of the Loan Stock, thereby reducing the principal amount of Loan Stock outstanding from £22.5 million to £22.0 million.
Group Net Debt at 31 December 2009 totalled £362.8 million as included in the 2009 Group Financial Statements. Subsequent to the Disposal, pro forma Group net debt would amount to £289.7 million. This comprises net debt at 31 December 2009 in the 2009 Group Financial Statements adjusted for the major transactions undertaken by the Group since 31 December 2009, being receipt by the Group of the net proceeds from the Placing of £23.0 million, receipt by the Group (including Liberty) of the net proceeds from the Tudor Building Sale of £40.1 million and receipt by the Continuing Group from the disposal of the Liberty Shareholding net of costs, of £26.5 million, less the cash within Liberty divested as a result of the Disposal of £16.5 million. Pro forma net assets calculated on the same basis would increase from £176.2 million as set out in the 2009 Group Financial Statements, to £202.8 million.
Pro forma gearing calculated by reference to the pro forma net debt of £289.7 million referred to above and pro forma net assets of £202.8 million referred to above, would amount to 143 per cent., in comparison to 206 per cent. at 31 December 2009.
Under the Cash Distribution Programme, the Board's strategy has been to use the proceeds from sales of Group assets initially in the repayment of debt and thereafter to return surplus realised cash or cash equivalents to Shareholders. Awards under the Incentive Scheme may be made only once Gross Cash Returns to Shareholders following completion of the Placing in January 2010 exceed £49.2 million, being 30 pence per Unit (which was the issue price per Unit under the Placing). No Gross Cash Returns to Shareholders have yet been made since the revised rules of the Incentive Scheme were approved by Shareholders in January 2010. In order to enhance Shareholders' interests in the Group, in the same way that the Board used the net proceeds from the Placing and the repayment of the Inter Group Debt following the Tudor Building Sale to repay Group net debt, the Board proposes to use all the net proceeds receivable from the Disposal to repay Group net debt in the manner referred to above. Accordingly, distributions to Shareholders in accordance with the Cash Distribution Programme are not proposed to take place at this stage as a result of these transactions and therefore no payment would be due to participants in the Incentive Scheme. The Board considers that the Group will be significantly strengthened from a financial perspective as a result of these transactions, thus improving the future returns expected to be achievable by Shareholders under the Cash Distribution Programme.
5. Current operations of Liberty
Liberty, which was established by the Liberty family in 1875, is a retail emporium whose business is principally located in the West End of London. Liberty retails fashion, beauty and home collections from five floors of the Tudor Building and operates a wholesale business through Liberty Art Fabrics. The core of the Liberty strategy is the creation of a global luxury brand across four distinct business activities, each based on a common heritage and shared support functions.
The principal activity of Liberty is the operation of the Liberty flagship store on Great Marlborough Street, which has in recent years undergone a period of significant financial investment, culminating in completion of the 'Renaissance of Liberty' which was launched in February 2009. The Liberty flagship store carries menswear, womenswear, shoes, jewellery, accessories and home interiors amongst other categories. The store also carries collections by renowned designers and is positioned at the upper end of the luxury market. With the refurbished Liberty flagship store having opened in February 2009, Operating Revenue from the store and transactional website increased in 2009 to £37.3 million, an increase of 18 per cent. over the revenue of £31.5 million in 2008, and Liberty recorded positive EBITDA during this period. Given the current economic climate, the Liberty Board considers this to be a strong performance and a good barometer with which to measure the prospects going forward. In the year ended 31 December 2009, the Liberty flagship store and the transactional website contributed 63 per cent. to Liberty's total revenues.
In July 2008, Liberty launched its transactional website, which has developed rapidly since then. The Liberty Board considers that the response to Liberty's products indicates that there is significant potential for this part of its business.
Liberty Art Fabrics supplies fashion and design fabrics and prints to global fashion brands and designers, such as Nike, Balmain and Junya Watanabe. In the year ended 31 December 2009, the Liberty Art Fabrics business contributed 36 per cent. of Liberty's total revenues.
Liberty of London, Liberty's in-house studio, develops fashion accessories for men and women which are sold in Liberty's three core areas of operation referred to above. In the year ended 31 December 2009, the Liberty of London business contributed 1 per cent. of Liberty's total revenues.
Revenue increased by 40 per cent. during the four months ended 30 April 2010, compared to the same period in 2009, driven by growth across the key areas of Liberty's business, namely fabrics division, the flagship store and the internet business. Revenue for the four months ended 30 April 2010 totalled £26.0 million, an increase from £18.5 million in the comparative four months to 30 April 2009.
6. Financial effects of the Disposal on the Group
Consolidated statement of financial condition
On the assumption that the Disposal completes as planned, Liberty will cease to be a member of the Group with effect from Completion. As a result, Liberty's assets and liabilities will no longer feature in the consolidated statement of financial position of the Group from Completion.
At 31 December 2009, the consolidated statement of financial position of the Group contained total assets attributable to Liberty of £73.7 million, total liabilities attributable to Liberty of £36.2 million and resultant net assets attributable to Liberty of £37.5 million. Capital expenditure incurred by Liberty during the year ended 31 December 2009 totalled £2.8 million and depreciation during the same period totalled £2.3 million.
On the assumption that the Disposal completes as planned, not only will the above items no longer feature in the consolidated statement of financial position of the Group, but net indebtedness will be reduced as a result of the net proceeds receivable by the Group from the Disposal.
The Disposal is expected to realise a surplus attributable to Shareholders of £4.0 million over the book value of the Liberty Shareholding of £28.8 million included in the 2009 Group Financial Statements.
Consolidated income statement
On the assumption that the Disposal completes as planned, Liberty will cease to be a member of the Group with effect from Completion. As a result, Liberty's trading and operating results will no longer feature in the consolidated income statement of the Group from Completion.
For the year ended 31 December 2009, the results of Liberty included in the 2009 Group Financial Statements amounted to revenue of £60.8 million, EBITDA of £0.1 million, negative earnings before interest and taxation of £2.7 million and a pre-tax loss of £3.4 million.
On the assumption that the Disposal completes as planned, not only will the above items no longer feature in the consolidated income statement of the Group, but net finance costs would decrease to reflect the reduction in net indebtedness arising from the net proceeds received by the Group from the Disposal.
Equity Attributable to Shareholders
As a result of the Placing and the Tudor Building Sale, referred to in the Prospectus and the Tudor Building Circular respectively, net assets of the Group increased from £176.2 million at 31 December 2009 to £210.7 million. As a result of these two transactions, Equity Attributable to Shareholders increased from £104.5 million to £135.9 million, while Equity Attributable to Shareholders in pence per Unit reduced from 144 pence to 83 pence per Unit, principally reflecting the dilution arising from the Placing.
Following receipt by the Group of the net proceeds from the Disposal, and after elimination of the Liberty assets and liabilities that are included in the 2009 Group Financial Statements, Equity Attributable to Shareholders will increase as a result of the Disposal from £135.9 million to £139.9 million.
This increase in Equity Attributable to Shareholders of £4.0 million amounts to an additional 2 pence per Unit attributable to Shareholders. This will be in addition to the Equity Attributable to Shareholders at 31st December 2009 after the Placing and the Tudor Building Sale referred to above of 83 pence per Unit. As a result, pro forma Equity Attributable to Shareholders after completion of the Disposal amounts to 85 pence per Unit. This shows the effect of the increased net assets available to the Group as a result of the Disposal by reference to the consolidated statement of financial position of the Company at 31 December 2009, after reflecting the effects of the Placing and the Tudor Building Sale on the net assets of the Group in the manner referred to above.
Pro forma impact on MWB's audited net profit for the year ended 31 December 2009
The impact on the audited Group loss after tax for the year ended 31 December 2009 on the basis that this was prepared as if the Placing, the Tudor Building Sale and the Disposal had taken effect on 1 January 2009 would have been as follows:-
1. Net finance costs would decrease to reflect the reduction of debt arising from the net proceeds of the Placing, the Tudor Building Sale and the Disposal;
2. The results of Liberty included in the 2009 Group Financial Statements, being revenue of £60.8 million, EBITDA of £0.1 million, negative earnings before interest and taxation of £2.7. million and a pre-tax loss of £3.4 million would have been excluded from the results of the Group;
3. Rental costs in Liberty would increase by £2.1 million to reflect the sale of the Liberty Tudor Building;
4. Depreciation charged at Liberty would decrease by £2.3 million to reflect the Tudor Building Sale; and
5. The above four adjustments relating to the Placing, the Tudor Building Sale and the Disposal would have the effect of reducing the taxation charge for the year by £0.7 million.
7. 2009 Results and current trading
Detailed commentary on the Group's current trading and prospects is included in the 2009 Group Financial Statements which were posted to Shareholders on 6 May 2010.
Equity Attributable to Shareholders reduced from £125.9 million or 174p per share at 31 December 2008, to £104.5 million or 144p per share at 31 December 2009, principally reflecting retained losses for the year and the effective portion of changes in fair value of cash flow hedges. After taking account of the Placing that was completed in January 2010, Equity Attributable to Shareholders at 31 December 2009 totalled £129.1 million, or 79p per share, reflecting the issue price of the New Units of 30p per Unit. The Group's property values stabilised during the year ended 31 December 2009, resulting in a reduction in values during the year of only £2.1 million, in comparison to a reduction of £79.2 million during the year ended 31 December 2008.
The Malmaison and Hotel du Vin trading results were steady during the year ended 31 December 2009 despite challenging market conditions, producing EBITDA of £26.4 million, in comparison to £25.9 million in the previous year. Liberty produced record levels of revenue of £60.8 million, being 20 per cent. higher than those for the year ended 31 December 2008. At Business Exchange, EBITDA declined 46 per cent. to £9.8 million, reflecting lower returns at centres acquired from the MLS group while they are brought up to Group standards, and aggressive pricing from the conventional property market.
Overall, the loss before tax of the Group increased to £15.4 million from £9.9 million during the year ended 31 December 2008, reflecting the above factors and high interest costs. The latter have been reduced going forward as a result of the proceeds received from the Placing announced by the Company in December 2009 and completion of the Tudor Building Sale, and would be reduced further on completion of the Disposal.
On 12 May 2010, the Company issued its interim management statement covering the period from 1 January 2010 to 12 May 2010, extracts of which are summarised below.
Trading at Malmaison and Hotel du Vin performed in line with expectations in the three months ended 31 March 2010, achieving its budgeted EBITDA despite revenues in January 2010 being severely affected by the adverse weather conditions across the country. While revenue generation remained challenging, Malmaison and Hotel du Vin delivered year on year rate growth which, combined with strong cost control, delivered the budgeted profit for the three months ended 31 March 2010. The start of the second quarter of 2010 was adversely affected by the unprecedented standstill in air travel throughout the UK and much of Northern Europe. However, the outlook for the remainder of the quarter remains positive. The average room rate for Hotel du Vin during April 2010 was £112, compared to £111 for the year ended 31 December 2009, while Malmaison's average room rate was £101 in April 2010, an increase from £99 for the year ended 31 December 2009.
Business Exchange continued to see signs of recovery in terms of rate stability and occupancy growth. Over the four months ended 30 April 2010, demand from the corporate market improved, especially in the City where occupancy remains strong. The management at Business Exchange has continued to focus on cost control and driving yield where possible as well as capitalising on revenue opportunities in the market. Although demand during the four months ended 30 April 2010 remained broadly constant, Business Exchange's revenue conversion levels improved, resulting in the volume of deals increasing, albeit for smaller workstation requirements. As a result, occupancy at Business Exchange's leased centres remained firm at similar levels to the occupancy level of 82 per cent. For the year ended 31 December 2009. Revenue per available workstation and revenue per occupied workstation improved slightly from £6,180 and £7,545 respectively at 31 December 2009.
At Liberty, revenue increased by 40 per cent. during the four months ended 30 April 2010, compared to the same period in 2009, driven by growth across the key areas of Liberty's business, namely fabrics division, the flagship store and the internet business. Revenue for the four months ended 30 April 2010 totalled £26.0 million, an increase from £18.5 million in the comparative four months to 30 April 2009.
Since the Company issued its interim management statement on 12 May 2010, revenue generation in Malmaison and Hotel duVin has been 4 per cent. lower than in the same period in 2009. However, continued strong cost control by management has ensured that operating profit has been slightly higher than that achieved in the same period in 2009. After increased financing costs, this has resulted in a slightly increased loss before tax in Malmaison and Hotel du Vin for the period. In Business Exchange, the market has remained challenging, and management has concentrated on maintaining occupancy, although this has had some adverse effect on average rate achieved. At the operating profit and pre-tax line, the results are lower in Business Exchange than for the same period last year. This is due to the additional costs arising from the integration of centres acquired from the MLS group of companies during 2009 and the opening of new centres in Knightsbridge and Paddington, all of which were referred to in the 2009 Group Financial Statements. At Liberty, the increase in revenue generation in comparison to the same period in 2009, has continued.
8. General Meeting
The Disposal is conditional upon Shareholders' approval being obtained at the General Meeting to be held at the offices of Dechert LLP, 160 Queen Victoria Street, London EC4V 4QQ at 11.00 a.m. on 21 June 2010 at which the Resolution will be proposed to approve the Disposal.
To approve the Disposal, a majority of not less than 50 per cent. of those voting in person or by proxy must vote in favour of the Resolution (unless a poll is demanded, in which case, a majority of not less than 50 per cent. of the votes cast in person or by proxy must be in favour of the Resolution).
9. Irrevocable undertakings
The Directors and persons connected with them have given irrevocable undertakings to the Company and BGL to vote in favour of the Resolution to be proposed at the General Meeting (and to procure that such action is taken by the relevant registered holders) in respect of their beneficial holdings totalling 25,880,014 Units, representing 15.78 per cent. of the existing Units at the date of this announcement.
In addition, certain other Shareholders have given irrevocable undertakings to the Company and BGL to vote in favour of the Resolution to be proposed at the General Meeting (and to procure that such action is taken by the relevant registered holders) in respect of their beneficial holdings totaling 58,542,992 Units, representing 35.69 per cent. of the existing Units at the date of this announcement.
In total, therefore, the Company and BGL have received irrevocable undertakings to vote in favour of the Resolution to be proposed at the General Meeting in respect of beneficial holdings totaling 84,423,006 Units, representing 51.47 per cent of the existing Units at the date of this announcement. The total amount of beneficial holdings to which these irrevocable undertakings relate exceeds the majority of not less than 50 per cent. of those voting in person or by proxy (or if a poll is demanded a majority of not less than 50 per cent. of the votes cast in person or by proxy) required to pass the Resolution.
10. Recommendation
The Board considers that the Disposal is in the best interests of the Company and the Shareholders as a whole. The Board has received financial advice from Panmure Gordon on the Disposal. In giving its financial advice to the Board, Panmure Gordon has relied on the Board's commercial assessment of the Disposal.
Accordingly, the Board recommends that Shareholders vote in favour of the Resolution to be proposed at the General Meeting, as the Directors intend to do in respect of their own holdings totalling 25,880,014 Units, representing 15.78 per cent. of the existing Units.
Appendix
Senior Management of Liberty
The senior management of Liberty consists of the following persons:
| Name | Age | Job title
|
| Geoffroy de La Bourdonnaye | 53 | Chief Executive of Liberty |
| Paul Harris | 40 | Finance Director of Liberty |
Geoffroy de La Bourdonnaye, MBA INSEAD, BA EM Lyons and HEC Montreal
Geoffroy de La Bourdonnaye joined Liberty in July 2007 from LVMH where he had served four years as President of the Christian Lacroix house. Before joining LVMH, Geoffroy held general management, retail and marketing positions at l'Oreal, PepsiCo and The Walt Disney Company. In his 13 years at Disney, he was successively in charge of the Consumer Products division for Europe and of the 60 stores and supply chain operations of Disneyland Resort Paris. Geoffroy is a board member of the Research Centre for Fashion at Central St Martins College of Arts and Design in London and he also teaches at IFM, the Paris-based fashion management school.
Paul Harris, BA (Hons), ACMA
Paul Harris was appointed Finance Director of Liberty in April 2008, having been its Financial Controller since joining Liberty in July 2006. Paul has spent most of the past eleven years working in the retail sector. This included five years with Selfridges & Co where he was part of the team that oversaw the opening of both the Manchester and Birmingham city centre stores and two years as a retail financial analyst at Selfridges' Trafford Centre. Before joining Liberty, he was finance manager for Kurt Geiger where he was responsible for group budgeting as well as chairing the capital committee which assessed and recommended capital investment projects.