Last checked at 17 Dec 2009 07:00
MWB Group Holdings Plc ("MWB")
17 December 2009
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION DIRECTLY OR INDIRECTLY IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, JAPAN OR SOUTH AFRICA.
This announcement is not an offer of securities for sale in the United States. The securities discussed herein have not been and will not be registered under the US Securities Act of 1933, as amended (the "US Securities Act") and may not be offered or sold in the United States absent registration or an exemption from registration under the US Securities Act. No public offering of the securities discussed herein is being made in the United States and the information contained herein does not constitute an offering of securities for sale in the United States, Canada, Australia, Japan or South Africa.
MWB Group Holdings Plc
PROPOSED PLACING TO RAISE £27.5 MILLION
The Board of Directors of MWB Group Holdings Plc ("MWB" or the "Company") today announces an issue of equity by way of a Placing to raise £27.5 million (approximately £24.9 million net of expenses) through the issue of 91,666,667 New Units at an Issue Price of 30 pence per New Unit.
Overview
Placing to raise £27.5 million in gross proceeds
Variation and extension to certain banking facilities agreed
No debt maturity before December 2011
Company to purchase for cancellation £7.5 million of Loan Stock
Amendment of Loan Stock gearing covenant subject to approval at Loan Stock Meeting
Summary of the Placing
91,666,667 New Units at 30 pence per Unit to raise £27.5 million in gross proceeds
Issue price of 30 pence per New Unit represents a discount of 32.6 per cent. to the closing price of 44.5 pence per Unit on 16 December 2009
The Directors believe that increasing Shareholders' funds in this manner will enable the Company to emerge from the economic downturn in a significantly strengthened position
Panmure Gordon is acting as sponsor, financial adviser and broker to the Company with respect to the Placing. The Placing is fully underwritten by Panmure Gordon and is subject to the approval of MWB's shareholders.
A prospectus containing details of the Placing is expected to be posted to shareholders today and will be available on the Company's website, www.mwb.co.uk. A General Meeting to approve the Placing is expected to be held at 11.00 a.m. on 11 January 2010.
Richard Balfour-Lynn, Chief Executive of MWB, commented:
"The raising of equity will provide the Group with a more appropriate capital structure and provide financial flexibility in the current environment. In the longer term, it will enable the Group to capitalise on the long-term growth drivers in its markets."
For further information, please contact:
| MWB Group Holdings Plc Richard Balfour-Lynn, Chief Executive Andrew Blurton, Joint Finance Director Jag Singh, Joint Finance Director | +44 (0) 20 7706 2121 |
| Panmure Gordon (Sponsor, 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, MWB Group Holdings Plc (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 in the UK by the FSA, is acting exclusively for MWB and no one else in connection with the Placing and will not regard any other person (whether or not a recipient of this announcement) as their respective client in relation to the Placing and will not be responsible to anyone other than MWB for providing the protections afforded to their respective clients or for providing advice in connection with the Placing or any other matter referred to in this announcement.
IMPORTANT NOTICE:
This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any New Units, nor shall it (or any part of it), or the fact of its distribution, form the basis of, or be relied on in connection with or act as any inducement to enter into, any contract or commitment whatsoever with respect to the proposed Placing or otherwise. This announcement is not a prospectus and investors should not subscribe for or purchase any New Units referred to in this announcement except on the basis of information in the prospectus expected to be published today. Copies of the prospectus will, following publication, be available from the offices of Dechert LLP, 160 Queen Victoria Street, London, EC4V 4QQ.
The distribution of this announcement in certain jurisdictions may be restricted by law and such distribution could result in violation of the laws of such jurisdictions. In particular, this announcement is not for distribution in the United States, Australia, Canada, Japan or South Africa.
The information in this press release 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 unauthorized. Failure to comply with this directive may result in a violation of the Securities Act or the applicable laws of other jurisdictions.
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS:
This announcement contains certain forward-looking statements which may include reference to one or more of the following: the Group's financial condition, results of operations, cash flows, dividends, financing plans, business strategies, operating efficiencies or synergies, budgets, capital and other expenditures, competitive positions, growth opportunities for existing products, plans and objectives of management and other matters. Statements in this announcement that are not historical facts are hereby identified as "forward-looking statements". Such forward-looking statements, including, without limitation, those relating to future business prospects, revenue, liquidity, capital needs, interest costs and income, in each case relating to MWB, wherever they occur in this announcement, are necessarily based on assumptions reflecting the views of MWB and involve a number of known and unknown risks, uncertainties and other factors that could cause actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements. Such forward-looking statements should, therefore, be considered in light of various important factors. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, without limitation: economic and business cycles, the terms and conditions of MWB's financing arrangements, foreign currency rate fluctuations, competition in MWB's principal markets, acquisitions or disposals of businesses or assets and trends in MWB's principal industries.
These forward-looking statements speak only as at the date of this announcement. Except as required by the Listing Rules, the Disclosure and Transparency Rules, the Prospectus Rules and any law, MWB does not have any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, further events or otherwise. Except as required by the Listing Rules, the Disclosure and Transparency Rules, the Prospectus Rules and any law, MWB expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in MWB's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this announcement might not occur.
Appendix I contains an expected timetable of principal events.
Appendix II contains the definitions of certain terms used in this announcement.
This summary should be read in conjunction with the full text of the following announcement.
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION DIRECTLY OR INDIRECTLY IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, JAPAN OR SOUTH AFRICA.
MWB Group Holdings Plc
PROPOSED PLACING TO RAISE £27.5 MILLION
1. Introduction
The Board of Directors of MWB announced today that MWB proposes to raise £27.5 million (before expenses) through the issue of 91,666,667 New Units at an Issue Price of 30 pence per New Unit by means of the Placing. Each New Unit consists of an Ordinary Share and 20 B Shares and is identical to each Existing Unit.
Placing and Loan Stock Proposals
The Directors believe that all three of the Group's businesses, namely Malmaison & Hotel du Vin, Business Exchange and Liberty, have the foundations in place to deliver increased value to Shareholders going forward. However, the businesses have not been immune to the impact of the severe economic recession in the UK which has led to a more challenging trading environment for the Group's businesses. In spite of management action to save costs, generate cash and reduce net debt, the impact of the credit crunch on trading and property values during the resulting severe economic recession in the UK has meant that the funds available to be drawn by the Group under its financing facilities, the Group's available resources and the level of headroom under certain of the financial covenants within the Group's debt sources, have all fallen during the last 18 months. Accordingly, in the absence of the Placing, the Directors believe that there is a material risk that the Group will breach one of the gearing covenants in the Loan Stock Trust Deed at the testing date of 30 June 2010. Furthermore, there is a risk, albeit more remote, that, if the Placing does not proceed, the Group may also have a funding shortfall by May 2010. Therefore, the Board is proposing to raise £27.5 million (before expenses) through the Placing.
The Executive Directors and persons connected with them (including the Trustee of the 2009 EBT) have each undertaken to subscribe as Placees for a total of 18,066,666 New Units under the Placing at the Issue Price, making a total subscription of £5.42 million under the Placing. The Board considers this demonstrates their strong commitment to the financial security of the Group.
In advance of the Placing, BoS has agreed to extend the maturity date of the Liberty banking facility from its previous term date of 30 September 2010 to 31 December 2011, in exchange for an increased margin and arrangement fee. As a result, the earliest maturity date of the Group's financing facilities is now 31 December 2011. Despite the increased cost, the Board strongly believes it is in the Group's long term interest to implement this improvement and given the current level of illiquidity in the financial markets, it is pleased to have achieved this for the benefit of Shareholders.
The Board also proposes to make amendments to the Loan Stock Trust Deed and for the Company to purchase for cancellation £7.5 million of Loan Stock. Conditional on approval by Shareholders of the Placing Resolutions and successful completion of the Placing:
over 75 per cent. of Loan Stock holders (and therefore a sufficient majority to bind all Loan Stock holders) have irrevocably agreed to vote in favour at the Loan Stock Meeting of amending one of the gearing covenants in the Loan Stock Trust Deed, by increasing the permitted level of Group borrowings from four times Shareholders' funds (excluding the consolidated balance sheet value attributable to intangible assets and goodwill) to five times Shareholders' funds (including the consolidated balance sheet value attributable to intangible assets and goodwill); and
the Company has entered into the Loan Stock Purchase Agreements with the Audley Investors, pursuant to which the Audley Investors have agreed to subscribe, as part of the Placing, in aggregate £7.5 million for a total of 25 million New Units at the Issue Price. The Company has agreed to purchase for cancellation a total of £7.5 million of Loan Stock currently held by the Audley Investors.
The Placing Proposals and the Loan Stock Proposals are conditional upon, amongst other things, the passing of the Placing Resolutions at the General Meeting, the Loan Stock Amendments being approved by Loan Stock holders at the Loan Stock Meeting, the Placing Agreement becoming unconditional in all respects, and Admission.
The amendment to the Group's banking facility described above has been made and the Loan Stock Proposals are being made with a view to increasing the financial flexibility of the Group.
Strategic Proposals
In addition, the Board is proposing the following Strategic Proposals, each of which is discussed in further detail below:
a revision to the Cash Distribution Programme with effect from 1 January 2010 by the extension of the target date by which realisation of the Group's assets should be completed to 31 December 2016, although the Board still expects to realise value for Shareholders when economic conditions permit such realisations to occur;
termination of the arrangements pursuant to which the Group's central head office functions are outsourced to ServCo;
revisions to the 2002 Incentive Scheme to align the interests of the executive management team with Shareholders in accordance with the revised strategy; and
termination of the 2002 Bonus Plan without payment of compensation to any parties.
The revisions to the 2002 Incentive Scheme are conditional on Shareholder approval which is being sought at the General Meeting. None of the Strategic Proposals are conditional on each other or on implementation of the Placing or on the Loan Stock Proposals.
2. Overview of operating businesses
Malmaison and Hotel du Vin is an award winning hotel business which is 82.5 per cent. owned by MWB. The business has expanded in recent years, growing from 17 branded hotels at the end of 2006 to 26 branded hotels at the date of this announcement. Revenues grew from £79.1 million for the year ended 31 December 2006 to £107.6 million for the year ended 31 December 2008, whilst Operating EBITDA increased from £23.4 million to £26.5 million over the same period. Whilst the business, in common with the rest of the sector, has been impacted by the recent economic downturn, the Board considers that overall the performance has been one of resilience, which underpins its confidence in the prospects for this business. During this time, management has continued to focus on managing occupancy levels. Occupancy for the six months ended 30 June 2009 was 77 per cent., down only three per cent. from the level for the six months ended 30 June 2008. Revenue for the six months ended 30 June 2009 of £52.5 million was broadly similar to the revenue in the equivalent period in 2008, although Operating EBITDA was lower at £10.4 million (2008: £12.2 million). In light of this performance and, given the quality of the asset portfolio as well as the experience of Malmaison and Hotel du Vin's well respected management team, the Directors believe the business is well placed to prosper further from any upturn in the economy and to drive value for the Group going forward.
Business Exchange, a 71.5 per cent. owned subsidiary of MWB, has grown into one of the UK industry leaders in the serviced office market, with a particularly strong position in the London market. The business has increased centre numbers from 55 at the end of 2006 to 73 centres at the date of this announcement. Between the years ended 31 December 2006 and 31 December 2008, annual revenues grew by 44 per cent. from £82.3 million to £118.5 million and EBITDA increased by 94 per cent. to £18.1 million. Like Malmaison and Hotel duVin, trading conditions have been more difficult since mid-2008 but against this challenging backdrop, Business Exchange has performed with resilience. Revenues for the six months ended 30 June 2009 fell by only 4 per cent. to £57.4 million against the equivalent period in 2008 and EBITDA was £8.6 million (six months ended 30 June 2008: £11.3 million). Occupancy levels remained robust at 85 per cent. at 30 June 2009 (30 June 2008: 92 per cent.). The Directors believe that this resilience is due to a combination of a number of factors, including Business Exchange's high customer service levels, a valued product and service mix, and a management team and ethos which focuses on driving return on capital. Given its position in London, a market which the board of Business Exchange believes will be one of the first in the UK to benefit in an economic upturn, the Directors believe Business Exchange has significant potential to drive Shareholder value going forward.
Liberty is a 68.3 per cent. owned subsidiary of MWB. The Liberty business, which operates the Liberty flagship store in London, has had a new management team in place since 2007. With the new look Liberty flagship store having opened in February 2009, Operating Revenues increased in the first half of 2009 to £25.6 million, an increase of 17 per cent. on the first half of 2008, and Liberty recorded positive EBITDA during this period. Given the economic backdrop, the board of Liberty considers this to be a strong performance and a good barometer with which to measure the prospects going forward. The board of Liberty is also currently undertaking a strategic review of the Liberty business with a view to identifying ways in which it can be further developed and expanded and increasing the value of that business to its shareholders.
3. Background to and reasons for the Placing
The period from 2004 to the start of 2008 was generally a strong trading period for the Group as a whole. Significant progress was made in enhancing and maturing the Group's hotel and serviced office businesses, whilst at Liberty the Renaissance plan to transform the loss making subsidiary and its on-line business were both initiated. During this period, the Group also made many successful disposals of property assets and trading businesses, generating proceeds in excess of £635 million and contributing to a cash return of over £80 million to Shareholders. The Directors believe that all three of the Group's current businesses have the foundations in place to deliver increased value to Shareholders going forward. These foundations are underpinned by attractive long term growth drivers, sound products and service, competitive positioning, brand goodwill and management experience and quality.
However, with the worsening economic climate in the UK, the trading environment started to become more challenging for the Group during the second half of 2008, although the Group still increased revenues from £252 million for the year ended 31 December 2007 to £278 million for the year ended 31 December 2008. Whilst the Directors consider that the operating businesses have performed with resilience in spite of the recent turmoil in the economy and financial markets, the recession has had a negative impact on MWB and its three operating businesses. The impact has been mitigated to a certain degree by prompt actions taken by management across the Group to realign the operating cost base of the Group's businesses. Total cost savings by MWB and its three operating businesses net of associated costs, arising from initiatives implemented in 2008 and 2009, are expected to total £7.5 million for the year ending 31 December 2009. A series of further measures have recently been implemented, which are expected to deliver annualised cost savings, net of associated costs, of £9.8 million during the year ending 31 December 2010. In particular, the number of Executive Directors is to be reduced from four to three with effect from the date of Admission and each of the remaining Executive Directors has reduced his salary by 60 per cent., and each of the Non-Executive Directors has agreed to reduce his fees, with effect from 1 January 2010, with a resultant saving of £0.8 million per annum to the Group.
The Board has always sought to make efficient use of the Group's balance sheet, making appropriate use of leverage to drive returns for Shareholders. Group net debt at 30 June 2009 was £366.5 million and, in common with financing facilities generally available in the market, the Group's financing agreements contain financial covenants. In spite of management actions to save costs, generate cash and reduce net debt, the impact of the credit crunch on trading and property values during the resulting severe economic recession in the UK has meant that the funds available to be drawn by the Group under its financing facilities, the Group's available resources and the level of headroom under certain of the financial covenants within the Group's debt sources, have all fallen during the last 18 months.
Accordingly, in the absence of a successful Placing, the Directors believe that there is a material risk that the Group will breach one of the gearing covenants in the Loan Stock Trust Deed at the testing date of 30 June 2010. Also, there is a risk, albeit more remote, that if the Placing does not proceed, the Group may have a funding shortfall by May 2010. In the event that any covenant in the Loan Stock Trust Deed or in any of the Group's banking facilities is breached, the Group would also be in breach of its other banking and borrowing facilities as a result of cross-default provisions in those facilities.
The gearing covenant referred to above stipulates that the Group's borrowings must not exceed four times Shareholders' funds (excluding the consolidated balance sheet value attributable to intangible assets and goodwill). At the most recent testing date of 30 June 2009, Group borrowings were 3.2 times Shareholders' funds (excluding the consolidated balance sheet value attributable to intangible assets and goodwill), giving headroom of £18.4 million (or 1 7 per cent.) in Shareholders' funds. The gearing covenants contained in the Loan Stock Trust Deed and the Group's banking facilities have been impacted by reductions in value of the Group's properties over the course of the 18 months ended 30 June 2009, with gross reductions totalling £89.6 million. KPMG Audit Plc are the auditors of the Company and audited the 2008 Financial Statements. Their report in respect of the 2008 Financial Statements was unqualified but contained an emphasis of matter reference to this gearing covenant in the Loan Stock Trust Deed, which was fully complied with at the date of KPMG Audit Plc's report.
Accordingly the Board has taken firm action to provide the Group with a sounder financial base. In advance of the Placing, BoS has agreed to extend the maturity date of the Liberty banking facility from its previous term date of 30 September 2010 to 31 December 2011, in exchange for an increased margin and arrangement fee. As a result, the earliest maturity date of the Group's financing facilities is now December 2011. Despite the increased cost, the Board strongly believes it is in the Group's long term interest to implement this improvement and given the current level of illiquidity in the financial markets, it is pleased to have achieved this for the benefit of Shareholders.
The Board also proposes to make amendments to the Loan Stock Trust Deed and purchase for cancellation £7.5 million of Loan Stock. Conditional on the successful completion of the Placing:
over 75 per cent. of Loan Stock holders (and therefore a sufficient majority to bind all Loan Stock holders) have irrevocably agreed to vote in favour at the Loan Stock Meeting of amending the gearing covenant in the Loan Stock Trust Deed referred to above by increasing the permitted level of Group borrowings from four times Shareholders' funds (excluding the consolidated balance sheet value attributable to intangible assets and goodwill) to five times Shareholders' funds (including the consolidated balance sheet value attributable to intangible assets and goodwill); and
the Company has entered into the Loan Stock Purchase Agreements with the Audley Investors, pursuant to which the Audley Investors have agreed to subscribe as part of the Placing, in aggregate £7.5 million for a total of 25 million New Units at the Issue Price. The Company has agreed to purchase for cancellation a total of £7.5 million of Loan Stock currently held by the Audley Investors.
The amendment to the Group's banking facility described above has been made and the Loan Stock Proposals are being made with a view to increasing the financial flexibility of the Group, easing the operational constraints placed on the Group's businesses by the current financial structure and allowing the operating businesses to pursue opportunities for value enhancement.
Accordingly, the Board has concluded that it is in the best interests of the Group and its Shareholders as a whole at this time to raise £27.5 million (before expenses) of new equity capital to create a stronger capital structure and to provide greater resilience and a measure of flexibility for the Group in the current environment.
In setting the Issue Price, the Directors have considered the price at which the New Units need to be offered to ensure the success of the Placing and to raise significant equity compared to the current market capitalisation of the Company. The Directors consider that the Issue Price and the discount to the current market price of the Existing Units are appropriate.
4. Use of proceeds
The primary purpose of the Placing is to provide the Group with a more stable financial structure by increasing the level of equity in the Company. £7.5 million of the total net proceeds will be used by the Company to purchase for cancellation £7.5 million of the Loan Stock currently held by the Audley Investors together with accrued interest from 1 January 2010 to Admission, with the Audley Investors subscribing for 25 million New Units in the Placing at the Issue Price. The balance of £17.4 million of the net proceeds will be used to reduce amounts drawn on the Group's banking facilities and to repay the £4.0 million intra-group loan from Business Exchange Centres referred to in paragraph 8 of this announcement.. The amount repaid under the Group's banking facilities will be available for redraw prior to expiry of their term in December 2011. Looking forward, this amount will be used to facilitate implementation of the Group's business plan without restricting the ability of the Group's businesses to expand as a result of the Group's current financial structure.
In addition, this reduction in net indebtedness of the Group will enable the Loan Stock Amendments to be implemented, assist the Group to remain within its financial covenants contained in its debt facilities, and improve its ability to renew debt facilities on more favourable terms in the future than would otherwise be the case.
The Directors believe that increasing Shareholders' funds in this manner will also enable the Group to emerge from the economic downturn in a significantly strengthened position.
5. Cash Distribution Programme
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 related debt, to return realised cash or cash equivalents to Shareholders. Since May 2002, over £635 million of property and business sales proceeds have been generated, related bank debt has been repaid and £80.4 million in cash has been returned to Shareholders. These broad strategic aims remain in place today in relation to the Group's three businesses of Malmaison and Hotel du Vin, Business Exchange and Liberty.
When the term of the Board's business plan was updated in April 2008 the Board envisaged that, subject to favourable market conditions, the Group's remaining assets could be sold or otherwise realised by 31 December 2010.
The Board has concluded that the Company should still pursue a policy of maturing and enhancing the values of the Group's three underlying businesses with a view to realising their value through disposal when commercially advantageous to the Group and in the best interests of Shareholders. This policy will still involve the Group, consequent upon sale of the operational businesses, repaying debt and returning surplus proceeds to Shareholders. However, the Board considers that in the current adverse economic environment it is not in Shareholders' best interests to retain a short term target date of 31 December 2010 by which such realisations are to be completed. The Board considers that Shareholders' best interests would therefore be served by maintaining the realisation strategy as an ongoing programme, with the Directors continuing to exercise their informed judgment as to the optimal timing for future asset or business disposals, but with the firm intention of a maximum long stop date of 31 December 2016. Accordingly, the Cash Distribution Programme will be revised with effect from 1 January 2010 to remove from the programme the date of 31 December 2010 and to replace it with 31 December 2016 by which date the Company is to realise the value of the Group's assets through sales and, after repayment of debt, to return realised cash or cash equivalents to Shareholders. The Board does, however, still envisage realising the value of the Group's businesses within the period ending 31 December 2016 when economic conditions in the UK favour such realisations and, after repayment of Group debt, returning net proceeds to Shareholders.
6. MWB head office arrangements
The Board has conducted a thorough review of all central overhead costs. As a result, head office costs have been reduced by terminating certain existing head office arrangements and restructuring certain departments within the Group. This is planned to save the Group a total of £3.0 million for the year ending 31 December 2010.
As part of its review of central overheads, the Board considers that, in light of the increasing maturity of the Group's three underlying businesses, which are all separately managed on a day to day basis, the number of Executive Directors should be reduced from four to three. In particular, the Board considers that it is no longer necessary for the Company to have Joint Finance Directors. Accordingly, Andrew Blurton has agreed to leave the Company with effect from the date of Admission, although he has agreed to make his services available as a consultant to the Group for a fee of approximately £100,000 from the date of Admission until 30 April 2010. This will enable a full handover of his responsibilities to Jagtar Singh the remaining Finance Director.
Mr Blurton has been Finance Director of the Company and its predecessor listed holding companies for over 19 years and, amongst many other responsibilities, he has been responsible for the production and delivery of all the Company's financial statements and circulars issued to its Shareholders, for the financial and tax management across the entire Group and for its liaison with its institutional and other Shareholders. He has served the Group with a high level of commitment throughout this time and as a result has produced significant value for Shareholders. The Company has agreed to pay an aggregate amount of £0.35 million as compensation for Mr Blurton's loss of office, including actual and prospective rights Mr Blurton has under his incentive arrangements, and in settlement and discharge of all claims or rights of action Mr Blurton may have arising from the termination of his employment. Further, the Company will submit a letter of wishes to the Trustee of the 2009 EBT requesting that £1.3 million of the assets to be held by the Trustee of the 2009 EBT are held for the benefit of, inter alia, Andrew Blurton and certain of his relatives and dependents.The payments to be made by the Company referred to in this paragraph 6 are considered by the Board to be fair and reasonable by reference to the contractual arrangements that have existed for many years between the Company and Mr Blurton.
The three remaining Executive Directors of the Company have each agreed to reduce their salaries and salary related payments by 60 per cent. from £300,000 per annum to £125,000 per annum with effect from 1 January 2010. This will also reflect that, although they continue to spend significant time on the affairs of the Company in keeping with its needs, their involvement in the day to day management of the underlying businesses has reduced. The Executive Directors, as evidenced by their existing large shareholdings in the Company and by their substantial new investment into the Company as part of the Placing, remain committed to maximising Shareholder value through the Cash Distribution Programme. Each of the Non-Executive Directors has also agreed to reduce their fees. Together, these reductions will make a total saving to the Group of £0.8 million per annum. All of these reductions will take place with effect from 1 January 2010. The Board will continue to keep the central overhead costs being incurred under review, with a view to achieving further cost reductions.
The head office arrangements of the Group currently reflect the structure put in place in May 2002 when the Group's central head office functions were outsourced to ServCo Limited Partnership (and, since April 2009, to ServCo) for an annual and reducing fee payable by MWB, which currently amounts to £2.4 million per annum. The Services Agreement, entered into in May 2002, governs the services provided by ServCo to the Group and the fees payable by MWB. This structure was put in place to facilitate realisation of the Group's assets within a relatively short timeframe whilst still retaining the management team to undertake such realisations. ServCo employs and pays all the central head office staff of the Company (excluding the Directors who are contracted directly to the Group) and incurs certain agreed operating costs.
As the original reasoning for the Services Agreement has now changed, the Board has concluded that it is now no longer desirable for MWB to outsource its central head office functions. In turn, this will ensure that the Group has the central resource in terms of management to complete the Cash Distribution Programme in the manner considered appropriate by the Directors.
Accordingly, on 17 December 2009, the Company entered into the Services Termination Agreement with ServCo, pursuant to which MWB and ServCo agreed, for no consideration, to terminate the Services Agreement with effect from 1 January 2010, save for continuation of the existing undertakings in the Services Agreement for MWB to fund ServCo for the costs (if any) that may arise from the previous operation of the 2002 Bonus Plan (which will be terminated on termination of the Services Agreement); and ServCo to provide to MWB the existing head office premises for no consideration other than MWB discharging the rent and property related costs that arise from the lease of such head office held by ServCo in the same manner as at present. The employees of ServCo will by operation of law transfer their employment to the Group. The Group will therefore become liable directly for any payments to such employees on any future termination of their contracts of employment in respect of statutory redundancy payments or otherwise (none of which are anticipated by the Directors at the date of this announcement). MWB will also become liable for the head office operational costs, rather than MWB being liable for such costs via the annual fee payable to ServCo which will cease to be payable. Accordingly there should be neither additional income or expense incurred, nor increased assets or liabilities of the Group, as a result of implementation of the Services Termination Agreement, other than possible contingent liabilities of the Group for the payment of any future employment termination costs, none of which are anticipated by the Directors at the date of this announcement, and noting that the cost savings resulting from the review of central overhead costs, which will be for the benefit of the Group, would have resulted in a reduced fee payable by the Group of a similar amount under the Services Agreement had it not been terminated.
7. Incentive arrangements
2002 Incentive Scheme
The Board proposes to amend the rules of the 2002 Incentive Scheme, subject to the approval of Shareholders at the General Meeting. Given the existence of the 2002 Incentive Scheme and the Board's wish to continue to incentivise management to complete the Cash Distribution Programme, the Board through its Remuneration Committee considers that the proposed arrangements embodied in the Revised Incentive Scheme and summarised below are reasonable. In reaching this conclusion, the Remuneration Committee has received advice from Hewitt New Bridge Street, who are specialist advisers on executive compensation.
Pursuant to a deed of appointment between the Company, the Trustee of the LTIP and the Trustee of the 2009 EBT, the 2009 EBT has been constituted. In addition, subject to the passing of the Revised Incentive Scheme Resolution a sub-fund of the 2009 EBT will be established to be known as the MWB Group Employee Share Scheme for the purpose of encouraging or facilitating the holding of shares in the Company by or for the benefit of, inter alia, employees or former employees of the Group and their spouses and minor children. The establishment of the MWB Group Employee Share Scheme is proposed to be approved by Shareholders at the General Meeting and is included as part of the Revised Incentive Scheme Resolution.
Awards under the Revised Incentive Scheme may be made in respect of a fixed number of notional Units which will, at the discretion of the Trustee of the 2009 EBT, potentially entitle each participant to receive assets with a value per notional Unit equal to the Gross Cash Returns to Shareholders made in respect of that number of Units, but only to the extent that Gross Cash Returns to Shareholders following Admission exceed 30 pence per Unit (being equal to the Issue Price). As value will only be available for distribution to participants once this threshold has been exceeded, participants will have an award which in economic terms is similar to a shadow share option with an exercise price of 30 pence per share (being the Issue Price).
To the extent that any amount is made available to participants in the Revised Incentive Scheme, such amount will, at the discretion of the Trustee of the 2009 EBT, be available for distribution as soon as reasonably practicable after relevant Gross Cash Returns to Shareholders are made.
Assets will be distributed under the Revised Incentive Scheme in the form of cash other than:
in the event of a demerger of any of the Company's businesses, in which case shares in that business may be distributed; or
if any of the following three events occur, in which case Units may, subject to Shareholder approval being obtained at the relevant time, be distributed;
if Shareholder approval to terminate the Cash Distribution Programme was received at any time on or before the target date (which is to be revised to 31 December 2016); or
if by the target date the realisation of the Group's assets and businesses has not been achieved under the Cash Distribution Programme; or
on a takeover of the Company by a third party.
Save as otherwise described in the Prospectus, awards may not be made over more than 16.4 million notional Units (representing the equivalent of 10 per cent. of the Enlarged Issued Share Capital) without the prior approval of Shareholders. Effectively therefore participants can, subject to the discretion of the Trustee of the 2009 EBT, receive assets with a value of 10 per cent. of any Gross Cash Returns to Shareholders following Admission in excess of 30 pence per share (being the Issue Price).
The objectives behind the amendments to the 2002 Incentive Scheme are:
to reduce the amount payable to participants as compared to the 2002 Incentive Scheme in its current form;
to maintain the alignment of the Company's incentive arrangements with its business strategy of carrying out the Cash Distribution Programme; and
to provide greater certainty to participants as to the value which might be made available to them.
The Revised Incentive Scheme will also operate beyond the current expiry date of 31 December 2010 to reflect the change to the target date by which the realisation of the Group's assets and businesses should be achieved under the Cash Distribution Programme. The Revised Incentive Scheme will, therefore, operate until 31 December 2016 (or such other later date by which such realisation must be achieved).
As noted above, the total amount that may be receivable by participants under the Revised Incentive Scheme will be less than the maximum aggregate amount that could have been receivable under the 2002 Incentive Scheme. In addition, the amount per Unit that must be returned to Shareholders before the participants can receive any benefit has increased from 18 pence per Unit (the original hurdle of 80 pence per Unit in the 2002 Incentive Scheme, adjusted for Gross Cash Returns to Shareholders to the date of this announcement and the increased capital raised) to 30 pence per Unit (being equal to the Issue Price).
The following table illustrates the potential returns under the existing terms of the 2002 Incentive Scheme, compared to the reduced potential returns under the Revised Incentive Scheme:
| Future Gross Cash Returns to Shareholders | Aggregate maximum payments under the 2002 Incentive Scheme | Aggregate maximum payments under theRevised Incentive Scheme |
| £25.0m | £0.0m | £0.0m |
| £50.0m | £1.3m | £0.0m |
| £75.0m | £3.7m | £2.1m |
| £100.0m | £6.3m | £4.6m |
| £150.0m | £12.7m | £9.6m |
| £200.0m | £20.2m | £14.6m |
The Remuneration Committee proposes to grant awards under the Revised Incentive Scheme to the Executive Directors immediately following the Placing as follows:
| Executive Director | Percentage of notional Units that may be awarded | Number of notional Units to be awarded |
| Richard Balfour-Lynn | 35.8% | 5,872,565 |
| Jagtar Singh | 25.8% | 4,232,184 |
| Michael Bibring | 18.4% | 3,018,301 |
| 80.0% | 13,123,050 |
Following implementation of the Services Termination Agreement, the Remuneration Committee, in consultation with the Executive Directors, may make awards to other employees.
The Board proposes, subject to prior Shareholder approval, that the revised terms of the 2002 Incentive Scheme be adopted.
2002 Bonus Plan
The Board also proposes that the 2002 Bonus Plan is terminated with effect from 1 January 2010. Employees transferring to the Group under the Services Termination Agreement may instead participate in the Revised Incentive Scheme as proposed to be adopted by the Company.
Bonus Agreement
At the time of the restructuring of the Group's incentive arrangements in May 2002, MWB Property entered into a bonus agreement with Andrew Blurton replacing Mr Blurton's previous option entitlement over 1,104,396 ordinary shares in MWB Property. The bonus agreement provided for a cash bonus to be payable to Mr Blurton when distributions are made under the Cash Distribution Programme to Shareholders, as if he were the holder of 1,104,396 Units, but only to the extent that such distributions are in excess of the various exercise prices of the shares under option whose average price was 88p per share. To date, distributions by MWB Property and the Company to Shareholders have amounted to the equivalent of 73p per Unit, and no payments have yet been made to Mr Blurton under his bonus agreement although payments have accrued. As referred to above, Mr Blurton has agreed that, as the Company no longer requires two Finance Directors, he will resign his position as Joint Finance Director with effect from the date of Admission. The termination of employment of Mr Blurton does not, however, terminate his rights, including accrued rights, to receive bonuses under the bonus agreement. The Company and Mr Blurton have agreed that, as part of the arrangements for the termination of his employment, Mr Blurton will surrender his rights under his bonus agreement with effect from the date of Admission, as well as his rights under the 2002 Incentive Scheme. The Company and Mr Blurton have agreed that, as compensation for loss of office, including actual and prospective rights Mr Blurton has under his incentive arrangements, and in settlement and discharge of all claims or rights of action Mr Blurton may have arising from the termination of his employment the Company will pay £0.35 million and the Company will submit a letter of wishes to the Trustee of the 2009 EBT requesting that £1.3 million of the assets to be held by the Trustee of the 2009 EBT are held for the benefit of, inter alia, Andrew Blurton and certain of his relatives and dependents. These take into account, inter alia, the distributions made by the Company to date, the effect of the Placing and the current value of the Group's operating businesses. This consideration is the same as that referred to in paragraph 6 and the Bonus Agreement will be cancelled on satisfaction of this consideration by the Company.
Subsidiary incentive arrangements
Separate incentive arrangements are in place in order to incentivise the executive directors and senior executives in each of the Group's three businesses, namely Malmaison and Hotel du Vin, Business Exchange and Liberty. None of these incentives are available to the Executive Directors or to proposed participants under the Revised Incentive Scheme. These incentives are based on gross cash returns receivable by shareholders of the relevant subsidiaries. The Board has reviewed these arrangements and concluded that they remain a suitable and important incentive to the management teams concerned. Details of these were included in the Group remuneration policies section of the 2008 Financial Statements. However, certain amendments are proposed to be made to these arrangements by those subsidiaries by the adoption of new incentive schemes on broadly similar terms but which introduce a measured reduction to target levels of gross cash returns, amend the timing of potential payments and broaden the number of participants. These proposals are expected to be considered by shareholders of the subsidiaries concerned during the first quarter of 2010 and to be summarised in the Group's financial statements for the year ending 31 December 2009 that are expected to be announced in March 2010.
8. 2009 Half-Yearly Financial Report and current trading and prospects
On 27 August 2009, the Company announced its results for the six months ended 30 June 2009. Group revenue for the period had been maintained at £135.7 million compared with £134.1 million for the six months ended 30 June 2008, and EBITDA was £16.6 million compared to £15.1 million for the six months ended 30 June 2008. Pre-tax losses were at a similar level to 2008 at £5.1 million compared with £5.4 million in the six months ended June 2008, while the loss per share improved 8 per cent. to 9.0p from 9.8p due to the share buy-backs during 2008.
The Group's freehold, long leasehold and short leasehold property portfolio, inclusive of fixtures and fittings, included in the Group's balance sheet on the basis of Adopted IFRS at 30 June 2009 and reflecting a valuation by DTZ at that date, was £552.3 million. This represented a gross deficit of £10.3 million, confirming a significant slowdown in rate of the Group's property value diminution, in part reflecting the strong performance of the Malmaison and Hotel du Vin hotels. As a result, and after net debt of £366.5 million, Equity Attributable to Shareholders at 30 June 2009 was £108.8 million or 150p per share, compared with £125.9 million or 174p per share at 31 December 2008.
On 6 November 2009, the Company issued its interim management statement covering the period from 1 July 2009 to 5 November 2009, certain extracts from which are summarised below. During July and August 2009, demand at Malmaison and Hotel du Vin has been broadly consistent with the first half of 2009. Since the start of September there has been a strengthening of the business across the two brands with an improvement in room rates and customer spend on food and beverage against the same period last year. Occupancy remains strong throughout the business at 79 per cent. for the first nine months of 2009, in comparison to 80 per cent. for the same period last year. The average room rate for Hotel du Vin during September 2009 was £112 compared to £109 for the six months ended 30 June 2009, while the Malmaison average room rate was £102 in September 2009, up from £100 for the six months ended 30 June 2009. Prospects for the remainder of the year are encouraging as demand continues to improve and forward bookings are stronger in comparison to the first half of the year. Trading in Malmaison and Hotel du Vin is also benefiting from last year's four new hotel openings as they further establish themselves in their respective markets. Business Exchange has continued to consolidate its position in London. It has also recently signed a new OMA on a 20,200 sq ft centre in Victoria, London. Its newest centre, operating under the City Executive Centre brand, will provide a further 234 workstations when it opens later this month. Enquiry levels at Business Exchange in the third quarter remain encouraging despite the tough economic climate. Management continues to maintain a grip on costs and focus attention on its client acquisition and retention strategies. Occupancy at 30 September 2009 was above 80 per cent. compared to 85 per cent. at 30 June 2009, REVPAW was £7,295 (30 June 2009: £8,055) and REVPOW was £8,965 (30 June 2009: £9,490). At Liberty, sales in July 2009 were strong. Trading at the flagship store during the second half of August was weaker than in the same period last year. However, revenue has been stronger in September this year in comparison to last year following the launch of the Hermès pop-up store in the scarf hall. Overall, Liberty continues to perform ahead of last year following the strong trading recorded in the six months ended 30 June 2009.
For the period between 6 November 2009 and the date of this announcement, the Board considers that the Group's operating businesses have performed well and in line with the management's expectations. In summary, the Group's loss before tax for the period since 30 June 2009, whilst below the level produced during the equivalent prior year period, is consistent with that achieved for the equivalent period during the first half of this year.
On 17 December 2009, Business Exchange Centres, a wholly owned subsidiary of Business Exchange which is a 71 .5 per cent. owned subsidiary of the Company, and the Company entered into an agreement pursuant to which Business Exchange Centres made a loan to the Company of £4.0 million in consideration, inter alia, for the Company procuring the benefit of group relief from the Group for the reduction of tax liabilities of the Business Exchange group of companies over the next three years. Under the terms of the agreement, Business Exchange Centres may require the Company to repay the loan together with an additional sum of £0.1 million, or the Company may elect to repay the loan together with an additional sum of £0.1 25 million, in each case at any time during the financial year ending 31 December 2010. In addition, Business Exchange Centres may require the Company to repay the loan together with an additional sum of £1.0 million in the event that there is an unremedied default by the Company under the agreement or the Company is the subject of certain insolvency events. Notwithstanding such repayment provisions, it is the intention of the Company to repay the loan of £4.0 million together with the additional sum of £0.125 million to Business Exchange Centres as soon as practicable following Admission.
9. Dividend policy
The Board is continuing to implement the Cash Distribution Programme which envisages realising the value of the Group's assets, and after repayment of Group debt, returning surplus proceeds to Shareholders. The Board anticipates that such returns would be in the form of special dividends, tender offers, share buy-backs, demergers or other value distribution programmes. In the interim, the Board does not consider it appropriate to adopt an annual dividend policy as it believes it is in the best interests of Shareholders to maintain a position whereby it can review and consider the general business needs of the Group and therefore whether dividend payments should be made on a year by year basis.
10. Principal terms and conditions of the Placing
MWB is proposing to raise £27.5 million (before expenses) through the issue of 91,666,667 New Units pursuant to the Placing.
The Issue Price of 30 pence per New Unit represents a discount of 14.5 pence (32.6 per cent.) to the closing price of 44.5 pence per Unit on 16 December 2009 (being the last trading day prior to announcement of the Placing). The Directors believe that this price is in the best interests of the Company and Shareholders as a whole to achieve the purposes of the Placing.
The Executive Directors and persons connected with them (including the Trustee of the 2009 EBT) have undertaken to subscribe £5.42 million as Placees for a total of 18,066,666 Units under the Placing at the Issue Price.
The Trustee of the 2009 EBT (which is connected to the Executive Directors) has undertaken, subject to the passing of the Revised Incentive Scheme Resolution, to subscribe as a placee for a total of 3,333,333 New Units. In the event that the Revised Incentive Scheme Resolution is passed, the Company will contribute £1 million to the Trustee of the 2009 EBT to enable it to purchase 3,333,333 New Units in the Placing at the Issue Price. The Trustee of the 2009 EBT will hold such New Units in the sub-fund of the 2009 EBT to be known as the MWB Group Employee Share Scheme of which Andrew Blurton and his wife and minor children are intended to become discretionary beneficiaries. In the event that the Revised Incentive Scheme Resolution is not passed, the Trustee of the 2009 EBT will not subscribe for such New Units and Andrew Blurton, who has undertaken to the Company and Panmure Gordon to subscribe as a placee himself for 3,333,333 New Units in such event, will do so instead.
Pyrrho, which currently owns 10,407,862 Units (14.38 per cent. of the Existing Units) has undertaken to subscribe £5.75 million as a Placee for 19,166,666 Units at the Issue Price.
The Audley Investors have undertaken to subscribe £7.5 million in aggregate as Placee for 25,000,000 Units at the Issue Price. The Company has agreed to use £7.5 million from the proceeds of the Placing to purchase for cancellation £7.5 million of Loan Stock currently held by the Audley Investors, together with accrued interest from 1 January 2010 to Admission.
The Placing is fully underwritten by Panmure Gordon pursuant to the Placing Agreement.
The Placing is conditional, inter alia, upon:
(a) the passing, without amendment, of the Placing Resolutions;
(b) the Loan Stock Amendments being approved by Loan Stock holders at the Loan Stock Meeting;
(c) the Placing Agreement having become unconditional in all respects (save for the condition relating to Admission) and not having been terminated in accordance with its terms; and
(d) Admission taking place by no later than 8.00 a.m. on 31 January 2010 (or such later time and date as the Company and Panmure Gordon may agree).
Application will be made to the UKLA for the New Units to be admitted to the Official List and to the London Stock Exchange for the New Units to be admitted to trading on the London Stock Exchange's main market for listed securities. It is expected that Admission will become effective on 12 January 2010 and that dealings for normal settlement in the New Units will commence at 8.00 a.m. on the same day.
The New Units, when issued and fully paid, will be identical to, and rank in full with, the Existing Units for all dividends or other distributions declared, made or paid after Admission, and will rank pari passu in all other respects with the Existing Units at the date of issue of the New Units.
11. Loan Stock
At the annual general meeting of the Company held on 18 June 2009, the Group's borrowing powers under the Articles were increased from four to five times Shareholders' funds. It is proposed that one of the gearing covenants contained in the Loan Stock Trust Deed be amended in a corresponding manner by increasing the permitted level of Group borrowings from four times Shareholders' funds (excluding the consolidated balance sheet value attributable to intangible assets and goodwill) to five times Shareholders' funds (including the consolidated balance sheet value attributable to intangible assets and goodwill), by means of the Loan Stock Amendments. The Board does not currently intend to increase the actual level of borrowings of the Group as a result of the Loan Stock Amendments.
It is also proposed pursuant to the Loan Stock Amendments that the maximum price at which the Company may purchase Loan Stock by private treaty pursuant to the Loan Stock Trust Deed will be amended from a price (inclusive of interest) not exceeding 115 per cent. of the middle market quotation of the Loan Stock on the dealing day before the relevant purchase, to the higher of the nominal value of the Loan Stock together with accrued interest and 115 per cent. of the middle market quotation of the Loan Stock on the dealing day before the relevant purchase. It is also proposed, pursuant to the Loan Stock Amendments, that the reference to the Cash Distribution Programme in the Loan Stock Trust Deed shall be changed to the Cash Distribution Programme, as described in paragraph 5, that will operate from 1 January 2010.
Implementation of the Loan Stock Amendments is conditional upon Admission taking place by 31 January 2010. Other than the proposed amendments to the Loan Stock described in this paragraph 11, no changes to the Loan Stock Trust Deed are proposed or envisaged by the Board.
On 17 December 2009, the Company entered into the Loan Stock Purchase Agreements with the Audley Investors, pursuant to which the Audley Investors agreed to subscribe pursuant to the Placing, in aggregate £7.5 million for a total of 25 million New Units at the Issue Price of 30 pence per Unit. The Company has agreed to purchase for cancellation a total of £7.5 million of Loan Stock currently held by the Audley Investors. Subject to completion of the Loan Stock Amendments, the price payable for this Loan Stock will be the nominal value of the Loan Stock to be purchased together with payment of the accrued interest on the Loan Stock at the date of Admission. On the basis of the closing middle market quotation of the Loan Stock of 95.0 pence per £1 nominal of Loan Stock on the dealing day immediately prior to the date of this announcement, the purchase price for nominal value together with accrued interest on such Loan Stock on such day would be 110.0 per cent. of such closing middle market quotation of the Loan Stock. Completion of the subscription of New Units by the Audley Investors and the purchase of the Loan Stock held by the Audley Investors pursuant to the Loan Stock Purchase Agreements is conditional on the passing of the extraordinary resolution of Loan Stock Holders at the Loan Stock Meeting to approve the Loan Stock Amendments, and on Admission taking place by 31 January 2010. As a result of the purchase by the Company and cancellation of the Loan Stock currently held by the Audley Investors in this manner, interest costs will decrease by £0.7 million per annum and the Company's taxation charge will be adjusted to reflect the tax effect of the reduction in interest costs.
The Company is convening the Loan Stock Meeting for 11.30 a.m. on 11 January 2010 at which an extraordinary resolution of Loan Stock holders (requiring a majority consisting of not less than 75 per cent. of Loan Stock holders voting on a show of hands or, if a poll is demanded, by a majority consisting of not less than 75 per cent. of the votes given on a poll) will be proposed, to implement the Loan Stock Amendments. A notice convening the Loan Stock Meeting and a further explanation of the Loan Stock Amendments is contained in a circular which has today been sent to Loan Stock holders.
The Audley Investors, Richard Balfour-Lynn, Andrew Blurton and certain other Loan Stock holders have signed irrevocable undertakings to vote in favour of the resolution to be proposed at the Loan Stock Meeting in respect of a total of £23.6 million of the Loan Stock, representing approximately 78.8 per cent. of the Loan Stock in issue at the date of this announcement.
12. 1997 Concert Party and its holdings
The Executive Directors (other than Andrew Blurton) together with John Harrison and Joseph Shashou (who were until 1 July 2005 directors of MWB Property), who all acquired ordinary shares in MWB Property at the time of the merger in 1997 of Marylebone Warwick Balfour Group Plc with Ex-Lands Properties Plc (which following such merger changed its name to Marylebone Warwick Balfour Group Plc), Andrew Blurton, William Broadbent, a senior executive of the Group, the Trustee of the LTIP and the Trustee of the 2009 EBT, are deemed by the Panel for the purposes of the Code to be acting in concert in relation to the Company and are referred to in this announcement as the "1997 Concert Party".
Under rule 9 of the Code, any person who acquires an interest (as such term is defined in the Code) in Units which, taken together with the Units in which he and persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights in the Company would normally be required to make a general offer to all of the remaining Shareholders to acquire their Units. Similarly, when any person, together with persons acting in concert with him, is interested in Units which in aggregate carry not less than 30 per cent. but does not hold Units carrying more than 50 per cent. of the voting rights of the Company, a general offer will normally be required if any further interests in Units are acquired by any such person. Such an offer would have to be made in cash at a price not less than the highest price paid by him, or by any member of the group of persons acting in concert with him, for any interest in Units during the 12 months prior to the announcement of the offer.
At 16 December 2009, the members of the 1997 Concert Party beneficially held a total of 21,573,957 Units, representing 29.81 per cent. of the Existing Units in issue at that date.
Effect of implementation of the Placing on the 1997 Concert Party
If members of the 1997 Concert Party take up the 33,399,998 New Units they have undertaken to take up under the Placing, the 1997 Concert Party would hold a total of 54,973,955 Units and such Units would represent approximately 33.51 per cent. of the Enlarged Issued Share Capital.
In the above circumstances, unless the Panel otherwise agrees to waive the requirement for members of the 1997 Concert Party, individually or collectively, to make a general offer for the Company to all Shareholders as a result of the increase in the aggregate percentage holding of Units held by the 1997 Concert Party, the 1997 Concert Party would be required to make a general offer under rule 9 of the Code.
Subject to the Whitewash Resolution being passed on a poll by Independent Shareholders, the Panel has agreed to waive the requirement for members of the 1997 Concert Party, individually or collectively, to make a general offer to all Shareholders as a result of the increase in aggregate percentage holding of Units held by the 1997 Concert Party in circumstances where, following the subscription of Units under the Placing, there is an increase in the aggregate percentage holding of Units held by the 1997 Concert Party.
Ability of the 1997 Concert Party to purchase further Units
Following subscriptions by the 1997 Concert Party pursuant to the Placing in the manner referred to above, to the extent that the 1997 Concert Party will between them be interested in more than 30 per cent. but not more than 50 per cent. of the Company's voting share capital, for so long as they continue to be treated as acting in concert, any further increase in that aggregate shareholding will be subject to the provisions of rule 9 of the Code in the manner referred to above.
13. Effect of the Placing on Shareholders
In structuring the Placing, the Directors have had regard to a number of factors, including current market conditions, the market price of the Company's Units, and certainty of fundraising. After considering all these factors, the Directors have concluded that the Placing is the most suitable form of equity fundraising option available to the Company and is in the best interests of Shareholders. The Directors believe that the placing of the New Units with the Placees is an important endorsement by the Placees of MWB and its management team, while providing certainty of funds to the Company.
In the uncertain economic climate and financial environment that exists at the date of this announcement,, the Directors consider it important that the funds proposed to be raised under the fundraising are received with certainty and in a manner that may not jeopardise the future price of Units of the Company. If a pre-emptive offer to Shareholders were undertaken, it might result in a larger number of Units not being subscribed by Shareholders and therefore being subscribed by underwriters. In such a scenario, and if such Units were sold in the market by the underwriters or sub-underwriters, it could reduce the prevailing price of Units. The Directors have therefore concluded that it is advantageous for the Company and its Shareholders to raise the funds by means of the Placing. This is notwithstanding that this will result in Shareholders (other than certain Shareholders who are also Placees) incurring dilution in their interests in MWB as a result of the Placing in the manner referred to below.
Following issue of the New Units to be allotted pursuant to the Placing, Shareholders (other than those Shareholders subscribing for New Units pursuant to the Placing) will suffer dilution of approximately 55.9 per cent. in their interests in the Company.
New Units issued through the Placing will represent 126.7 per cent. of the Existing Units in issue at the date of this announcement. Upon completion of the Placing, the New Units will represent approximately 55.9 per cent., and the Existing Units will represent approximately 44.1 per cent., of the Company's Enlarged Issued Share Capital. The Placing Resolutions must be passed at the General Meeting in order for the Placing to proceed.
14. Related party transactions
Pyrrho and/or its associates, which currently holds 10,407,862 Units, representing 14.38 per cent. of the Existing Units in issue at the date of this announcement, has undertaken to subscribe as a Placee for a total of 19,166,666 New Units under the Placing at the Issue Price. The aggregate subscription price for such New Units will be £5.75 million. Based on this undertaking, the issue of 19,166,666 New Units to Pyrrho and/or its associates under the Placing is treated as a related party transaction pursuant to the Listing Rules and requires prior Shareholder approval, which is being sought pursuant to Resolution 6 at the General Meeting. Pyrrho, as a related party in relation to Resolution 6, has undertaken not to vote on that Resolution at the General Meeting, and has undertaken to take all reasonable steps to ensure that its associates do not vote on Resolution 6.
The Executive Directors and certain of their associates (including the Trustee of the 2009 EBT) have undertaken to subscribe as Placees for a total of 18,066,666 New Units under the Placing at the Issue Price. These subscriptions have been made by Richard Balfour-Lynn and/or his associates in respect of 8,900,000 New Units; Andrew Blurton and/or his associates (including, for these purposes, the Trustee of the 2009 EBT following Admission and subject to the passing of the Revised Incentive Scheme Resolution) or himself personally in respect of 3,333,333 New Units; Jagtar Singh and/or his associates in respect of 2,500,000 New Units; and Michael Bibring and/or his associates in respect of 3,333,333 New Units. In addition, Richard Aspland-Robinson, a director of certain subsidiaries of MWB including Business Exchange and/or his associates has undertaken to subscribe as a Placee for a total of 666,666 New Units under the Placing at the Issue Price. The subscriptions described in this paragraph are related party transactions for the purposes of the Listing Rules. However, these subscriptions (other than the subscription by Richard Balfour-Lynn and/or his associates in respect of 8,900,000 New Units) are subject to modified requirements for smaller related party transactions pursuant to the Listing Rules and therefore they do not require the approval of Shareholders.
Based on these undertakings, the issue of 8,900,000 New Units to Richard Balfour-Lynn and/or his associates pursuant to the Placing requires prior Shareholder approval in accordance with the Listing Rules because Richard Balfour-Lynn is treated for the purposes of chapter 11 of the Listing Rules as a related party and because of the size of the transaction. Such Shareholder approval is being sought pursuant to Resolution 7 at the General Meeting. Richard Balfour-Lynn has undertaken not to vote on that Resolution at the General Meeting, and has undertaken to take all reasonable steps to ensure that his associates do not vote on Resolution 7.
John Harrison, a director of certain subsidiaries of MWB including Liberty, and/or his associates has undertaken to subscribe as a Placee for a total of 6,233,332 New Units under the Placing at the Issue Price. Based on this undertaking, the issue of 6,233,332 New Units to John Harrison and/or his associates pursuant to the Placing requires prior Shareholder approval in accordance with the Listing Rules because John Harrison, as a director of certain subsidiaries of MWB, is treated for the purposes of chapter 11 of the Listing Rules as a related party and because of the size of the transaction. Such Shareholder approval is being sought pursuant to Resolution 8 at the General Meeting. John Harrison has undertaken not to vote on that Resolution at the General Meeting, and has undertaken to take all reasonable steps to ensure that his associates do not vote on Resolution 8.
Joseph Shashou, a director of certain subsidiaries of MWB, and/or his associates has undertaken to subscribe as a Placee for a total of 8,000,000 New Units under the Placing at the Issue Price. Based on this undertaking, the issue of 8,000,000 New Units to Joseph Shashou and/or his associates pursuant to the Placing requires prior Shareholder approval in accordance with the Listing Rules because Joseph Shashou, as a director of certain subsidiaries of MWB, is treated for the purposes of chapter 11 of the Listing Rules as a related party and because of the size of the transaction. Such Shareholder approval is being sought pursuant to Resolution 9 at the General Meeting. Joseph Shashou has undertaken not to vote on that Resolution at the General Meeting, and has undertaken to take all reasonable steps to ensure that his associates do not vote on Resolution 9.
Details of other existing related party transactions which are material to MWB that have been entered into during the period from 1 January 2006 to the date of this announcement are set out in the Prospectus.
15. Proposals to be voted on at the General Meeting
The following resolutions will be proposed at the General Meeting of the Company, which will be held at the offices of Dechert LLP, 160 Queen Victoria Street, London EC4V 4QQ at 11.00 a.m. on 11 January 2010.
Placing Resolutions
The Placing Resolutions are conditional on each other. The Placing and Loan Stock Proposals can only be implemented if all of the Placing Resolutions are passed. The Placing Resolutions are not conditional on the passing of the Revised Incentive Scheme Resolution referred to below.
Resolution 1
The first Resolution, which is proposed as an ordinary resolution as required by the Articles, seeks an increase to the Company's authorised share capital from £371,000 to £800,000 by the creation of 143,000,000 Ordinary Shares and 2,860,000,000 B Shares comprising 143,000,000 additional Units (representing an increase of approximately 133.6 per cent. over the existing authorised share capital). The purpose of this Resolution is to enable MWB to allot sufficient New Units under the Placing and for MWB to retain sufficient authorised but unissued share capital for its purposes generally.
Resolution 2
Subject to the passing of the first Resolution and such Resolution becoming unconditional, the second Resolution, which is also proposed as an ordinary resolution as required by section 551 of the 2006 Act, seeks authority to enable the Directors to allot Units up to an aggregate nominal amount of £183,333.34 (representing 91,666,670 Units, comprising 91,666,670 Ordinary Shares and 1,833,333,400 B Shares) for the purposes of the Placing and otherwise to allot up to an aggregate nominal amount of £109,000 (representing 54,500,000 Units, comprising 54,500,000 Ordinary Shares and 1,090,000,000 B Shares) being slightly less than one third of the Enlarged Issued Share Capital otherwise. In aggregate, this represents approximately 202.0 per cent. of Existing Units at the date of this announcement. The Directors currently have no specific plans to allot shares in the Company other than in connection with the Placing.
Resolution 3
Subject to the passing of Resolutions 1 and 2 and such Resolutions becoming unconditional, the third Resolution, which is proposed as a special resolution as required by section 570 of the 2006 Act, seeks a new authority to disapply statutory pre-emption rights in relation to the allotment of equity securities for the purposes of the Placing. If approved, this Resolution will authorise the Directors to allot equity securities for cash in connection with a rights issue, open offer or other pre-emptive offer, or in connection with the Placing to allot up to a maximum aggregate nominal amount of £183,333.34 (representing 91,666,670 Units) in connection with the Placing, and otherwise to allot equity securities for cash up to an aggregate nominal amount of £16,403 (representing 8,201,500 Units). This maximum amount of £16,403 represents approximately 11.33 per cent. of Existing Units and slightly less than 5.0 per cent. of the Enlarged Issued Share Capital. The New Units to be allotted under the Placing will be allotted at a price of 30 pence per Unit.
Resolution 4
Subject to the passing of Resolutions 1 to 3 and such Resolutions becoming unconditional, the fourth Resolution, which is proposed as an ordinary resolution as required by the Listing Rules, seeks approval for the issue of the New Units on the terms set out in the Prospectus for cash at a price of 30 pence per New Unit (which represents a discount of 32.6 per cent. to the closing middle market price of the Existing Units on the last dealing day before the announcement of the terms of the Placing of 44.5 pence). The purpose of this Resolution is to approve the terms of the Placing at the Issue Price, which represents a discount of greater than 10 per cent. to the closing middle market price of the Existing Units, such approval being required under the Listing Rules.
Resolution 5 (the Whitewash Resolution)
Subject to the passing of Resolutions 1 to 4 and such Resolutions becoming unconditional, the Whitewash Resolution which is proposed as an ordinary resolution as required by the Panel, seeks the approval of Independent Shareholders on a poll (referred to as a "whitewash" under the Code) of a waiver granted by the Panel of any obligation which might otherwise fall on the 1997 Concert Party to make a general offer pursuant to rule 9 of the Code as a result of any increase in its aggregate percentage shareholding in the Company in connection with the implementation of the Placing. Further details relating to the 1997 Concert Party are set out in paragraph 12 of this announcement.
Resolution 6
Subject to the passing of Resolutions 1 to 5 and such Resolutions becoming unconditional, the sixth Resolution, which is proposed as an ordinary resolution as required by the Listing Rules, seeks approval for the issue of 19,166,666 New Units to Pyrrho pursuant to the Placing. Pyrrho currently holds 10,407,862 Units, representing 14.38 per cent. of the Existing Units at the date of this announcement, and is treated as a related party under chapter 11 of the Listing Rules. A resolution to approve the issue of New Units to Pyrrho pursuant to the Placing is therefore required because this is a related party transaction that requires Shareholder approval for the purposes of chapter 11 of the Listing Rules.
Resolution 7
Subject to the passing of Resolutions 1 to 6 and such Resolutions becoming unconditional, the seventh Resolution, which is proposed as an ordinary resolution as required by the Listing Rules, seeks approval for the issue by the Company of 8,900,000 New Units to Richard Balfour-Lynn and/or his associates, pursuant to the Placing. Richard Balfour-Lynn is an Executive Director and is treated as a related party for the purpose of chapter 11 of the Listing Rules. A resolution to approve the issue of New Units to Richard Balfour-Lynn pursuant to the Placing is therefore required because this is a related party transaction that requires Shareholder approval for the purposes of chapter 11 of the Listing Rules.
Resolution 8
Subject to the passing of Resolutions 1 to 7 and such Resolutions becoming unconditional, the eighth LR13.3.2 Resolution, which is proposed as an ordinary resolution as required by the Listing Rules, seeks LR13.6.1(3) approval for the issue by the Company of 6,233,332 New Units to John Harrison and/or his associates, pursuant to the Placing. John Harrison is a director of certain subsidiaries of MWB, including Liberty, and is treated as a related party for the purpose of chapter 11 of the Listing Rules. A resolution to approve the issue of New Units to John Harrison pursuant to the Placing is therefore required because this is a related party transaction that requires Shareholder approval for the purposes of chapter 11 of the Listing Rules.
Resolution 9
Subject to the passing of Resolutions 1 to 8 and such Resolutions becoming unconditional, the ninth LR13.3.2 Resolution, which is proposed as an ordinary resolution as required by the Listing Rules, seeks LR13.6.1(3) approval for the issue by the Company of 8,000,000 New Units to Joseph Shashou and/or his associates, pursuant to the Placing. Joseph Shashou is a director of certain subsidiaries of MWB and is treated as a related party for the purpose of chapter 11 of the Listing Rules. A resolution to approve the issue of New Units to Joseph Shashou pursuant to the Placing is therefore required because this is a related party transaction for the purposes of chapter 11 of the Listing Rules.
Revised Incentive Scheme Resolution
The Revised Incentive Scheme Resolution is not conditional on the passing of any of the other Resolutions. If the Revised Incentive Scheme Resolution is not passed, the existing terms of the 2002 Incentive Scheme will remain in place.
Resolution 10
The tenth and final Resolution is an ordinary resolution, as required by the Listing Rules, to approve the revisions to the 2002 Incentive Scheme and the establishment of the MWB Group Employee Share Scheme as a sub-fund of the 2009 EBT. This is referred to further in paragraph 7 entitled "Incentive arrangements" and details of the proposed principal revised terms of the 2002 Incentive Scheme are contained in the Prospectus.
16. Directors' participation in the Placing
The Executive Directors and persons connected with them (including the Trustee of the 2009 EBT) have undertaken to subscribe as Placees for a total of 18,066,666 Units under the Placing at the Issue Price.
Based on these undertakings, following completion of the Placing, the Directors and persons connected with them (including the Trustee of the 2009 EBT) will beneficially own, in aggregate, 29,907,477 Units, representing approximately 18.23 per cent. of the Enlarged Issued Share Capital.
17. Irrevocable undertakings to vote in favour of the Resolutions
The Directors and persons connected with them have given irrevocable undertakings to the Company to vote in favour of Resolutions 1 to 4 (inclusive), 6, 8, 9 and 10 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 11,840,811 Units, representing 16.36 per cent. of the Existing Units at the date of this announcement.
David Marshall, the Independent Director who is also an Independent Shareholder, and the only Director holding Units eligible to vote in favour of the Whitewash Resolution at the General Meeting, and persons connected with him, have given irrevocable undertakings to the Company to vote in favour of the Whitewash Resolution (which is Resolution 5) at the General Meeting (and to procure that such action is taken by the relevant registered holders) in respect of his beneficial holding totalling 2,000,000 Units, representing 2.76 per cent. of the Existing Units at the date of this announcement.
The Directors and persons connected with them (other than Richard Balfour-Lynn and his associates) have given irrevocable undertakings to the Company to vote in favour of Resolution 7 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 4,307,156 Units, representing 5.95 per cent. of the Existing Units at the date of this announcement.
Pyrrho and persons connected with it has given irrevocable undertakings to the Company to vote in favour of the Resolutions (other than Resolution 6 as it is interested in its outcome) at the General Meeting (and to procure that such action is taken by the relevant registered holders) in respect of 10,407,862 Existing Units, representing approximately 14.38 per cent. of the Existing Units at the date of this announcement.
John Harrison and persons connected with him have given an irrevocable undertaking to the Company to vote in favour of the Resolutions (other than Resolutions 5 and 8 as he is interested in their outcome) at the General Meeting (and to procure that such action is taken by the relevant registered holders) in respect of his beneficial holdings totalling 4,366,999 Units, representing 6.03 per cent. of the Existing Units at the date of this announcement.
Joseph Shashou and persons connected with him have given an irrevocable undertaking to the Company to vote in favour of the Resolutions (other than Resolutions 5 and 9 as he is interested in their outcome) at the General Meeting (and to procure that such action is taken by the relevant registered holders) in respect of his beneficial holdings totalling 6,116,402 Units, representing 8.45 per cent. of the Existing Units at the date of this announcement.
William Broadbent, a member of the 1997 Concert Party, and persons connected with him have given an irrevocable undertaking to the Company to vote in favour of the Resolutions (other than Resolutions 5 as he is interested in its outcome) at the General Meeting (and to procure that such action is taken by the relevant registered holders) in respect of his beneficial holdings totalling 483,739 Units, representing 0.67 per cent. of the Existing Units at the date of this announcement.
18. Importance of vote
If the Placing Resolutions are not approved at the General Meeting, or if any of the conditions to the Placing Agreement are not satisfied or waived, or Admission does not take place, the Company will be unable to complete the Placing and, consequently, the Loan Stock Proposals will not be implemented. As explained above under the paragraph entitled "Background to and reasons for the Placing", the Directors believe there is a material risk that, if the Placing does not proceed, the Group will breach one of the gearing covenants in the Loan Stock Trust Deed at the testing date of 30 June 2010. Also, there is a risk, albeit more remote, that if the Placing does not proceed, the Group may have a funding shortfall by May 2010. The gearing covenant referred to above stipulates that the Group's borrowings must not exceed four times Shareholders' funds (excluding the consolidated balance sheet value attributable to intangible assets and goodwill). At the most recent testing date of 30 June 2009, Group borrowings were 3.2 times Shareholders' funds (excluding the consolidated balance sheet value attributable to intangible assets and goodwill), giving headroom of £18.4 million (or 17 per cent.) in Shareholders' funds. The gearing covenants contained in the Loan Stock Trust Deed and the Group's banking facilities have been impacted by reductions in the Group's property values over the course of the 18 months ended 30 June 2009, with gross reductions totalling £89.6 million.
The Directors cannot quantify the extent of any potential breach or funding shortfall under the Group's banking and borrowing facilities as this would be dependent on the trading performance of the Group over the next 12 months, the valuations of the Group's property portfolio to be undertaken by Group's property valuers, DTZ, at 31 December 2009 and 30 June 2010 and the level of borrowings at that date.
In the event that the Placing is not completed, the Directors would immediately pursue appropriate remedial courses of action, such as disposing of assets, seeking alternative sources of financing or renegotiating further the terms of existing sources of debt finance.
If the Placing is not completed, the Directors would be likely to seek immediately to negotiate amendments to the Loan Stock Trust Deed and further amendments to the relevant banking facility agreements. The Directors are confident that such amendments could be capable of being achieved, but consider that the cost would be materially more expensive to the Group in terms of fees and margin compared with the Group's existing arrangements and that any such amendments may also not be on terms which are commercially acceptable to the Group. The Directors also expect that this would most likely result in the imposition of more onerous obligations on the Group than those that currently apply under the Loan Stock Trust Deed and the Group's existing debt facilities, which would be disadvantageous to Shareholders.
In such circumstances, in addition to attempting to secure appropriate revised arrangements with its lenders or under the Loan Stock Trust Deed, the Directors would need to consider simultaneously taking immediate alternative steps, such as disposing of assets or stakes in the Group's businesses. The Directors are reasonably confident that the Group would be able to implement a sale of assets and that consent of the relevant lender under the Group's loan facilities to any disposals of encumbered assets would be granted. However, the Directors are not confident that any sale price offered in the current adverse economic and financial environment would deliver good value to Shareholders.
If the Group were to seek alternative equity financing from other sources, given the current economic and financial environment, the Directors are not confident that the Group would be able to obtain the necessary proceeds in the required time frame on terms that are any more favourable than those of the Placing.
In the event that these remedial actions were unsuccessful and if an event of default occurred under any of the agreements with the Group's debt providers as discussed above which could also cause default under the cross-default provisions in the Group's other borrowing or banking facilities, the Loan Stock Trustee and/or lending banks, as appropriate, would be entitled to take steps to enforce their rights which could ultimately result in the commencement of insolvency proceedings against the Company or other relevant members of the Group.
Accordingly, the Directors consider that it is very important that Shareholders vote in favour of the Placing Resolutions in order that the Placing can proceed.
19. Recommendation
The Board considers that the Proposals and the Resolutions are in the best interests of the Company and the Shareholders as a whole and accordingly recommends that Shareholders vote in favour of the Resolutions. The Board, having been so advised by Panmure Gordon, considers that the Primary Resolutions are fair and reasonable and in the best interests of the Company and the Shareholders as a whole. In providing advice to the Board on the Primary Resolutions, Panmure Gordon has taken into account the Directors' commercial assessments.
In addition, the Board, which has been so advised by Panmure Gordon, considers that the Related Party Transactions are fair and reasonable and in the best interests of the Company and the Shareholders as a whole. As Richard Balfour-Lynn is a related party of the Company for the purposes of the Listing Rules, he did not take part in the Board's consideration of Resolution 7. In providing advice to the Board on the Related Party Transactions, Panmure Gordon has taken into account the Directors' commercial assessments of the Related Party Transactions.
The Independent Directors, who have been so advised by Panmure Gordon, consider the proposal to approve the waiver under rule 9 of the Code and the Whitewash Resolution (which is Resolution 5) to be fair and reasonable and in the best interests of the Company and the Independent Shareholders as a whole and accordingly unanimously recommend that Independent Shareholders vote in favour of the Whitewash Resolution. As the Executive Directors are members of the 1997 Concert Party, they did not take part in the Board's consideration of the Whitewash Resolution. In providing advice to the Independent Directors in respect of the proposed waiver under rule 9 of the Code, Panmure Gordon has taken into account the Independent Directors' commercial assessments. The members of the 1997 Concert Party are considered to be interested in the outcome of Resolution 5 and accordingly they have undertaken not to vote on this resolution, which will be conducted by means of a poll of Independent Shareholders.
The Board (other than Richard Balfour-Lynn in the case of Resolution 7) intends to vote in favour of all of the Resolutions (other than the Whitewash Resolution for the reason referred to above) at the General Meeting in respect of the Directors' own holdings totalling 11,840,811 Units, representing 16.36 per cent. of the Existing Units. David Marshall, the Independent Director who is also an Independent Shareholder intends to vote in favour of the Whitewash Resolution in respect of his own holding of 2,000,000 Units, representing 2.76 per cent. of the Existing Units.
Richard Balfour-Lynn, who holds 7,533,655 Units (representing 10.41 per cent. of the Existing Units), will not, and has undertaken to take all reasonable steps to ensure that his associates (within the meaning set out in the Listing Rules) will not, participate in the vote in respect of Resolution 7 at the General Meeting.
John Harrison, who holds 4,366,999 Units (representing 6.03 per cent. of the Existing Units), will not, and has undertaken to take all reasonable steps to ensure that his associates (within the meaning set out in the Listing Rules) will not, participate in the vote in respect of Resolution 8 at the General Meeting.
Joseph Shashou, who holds 6,116,402 Units (representing 8.45 per cent. of the Existing Units), will not, and has undertaken to take all reasonable steps to ensure that his associates (within the meaning set out in the Listing Rules) will not, participate in the vote in respect of Resolution 9 at the General Meeting.
20. Prospectus and General Meeting
The prospectus containing details of the Placing is expected to be posted to Shareholders shortly. For the purposes of effecting the Placing Resolutions will be proposed at a General Meeting, which is to be held at the offices of Dechert LLP, 160 Queen Victoria Street, London, EC4V 4QQ at 11.00 a.m. on 11 January 2010.
Appendix I
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
| Event | Time/date |
| Announcement and publication of Prospectus | 17 December 2009 |
| Latest time and date for receipt of Forms of Proxy for use at the General Meeting | 11.00 a.m. on 9 January 2010 |
| General Meeting | 11.00 a.m. on 11 January 2010 |
| Loan Stock Meeting | 11.30 a.m. on 11 January 2010 |
| Admission and commencement of dealings in the New Units | 8.00 a.m. on 12 January 2010 |
| New Units in uncertificated form expected to be credited to accounts in CREST | 12 January 2010 |
| Despatch of definitive certificates for the New Units in certificated form | by 18 January 2010 |
Notes to above timetable:
References to times in this announcement are to London time.
The times and dates set out in the expected timetable of principal events above and mentioned throughout this announcement may be adjusted by MWB, in which event details of the new times and dates will be notified to the UK Listing Authority and the London Stock Exchange.
Appendix II
DEFINITIONS AND GLOSSARY
The following definitions apply throughout this announcement, unless the context otherwise requires:
| "1985 Act" | the Companies Act 1 985, as amended from time to time |
| "1997 Concert Party" | R.G. Balfour-Lynn, A.F. Blurton, J. Singh, M.A. Bibring, W. Broadbent, J.W. Harrison, J.S. Shashou, (and persons associated with any of them) the Trustee of the LTIP and the Trustee of the 2009 EBT, all of whom are deemed by the Panel for the purposes of the Code to be acting in concert |
| "2002 Bonus Plan" | the MWB Management bonus plan which provides cash based incentives (payable to MWB Management by MWB under the Services Agreement) to certain employees of MWB Management (other than the Executive Directors) who were employees of MWB Property in May 2002 and which plan was adopted by MWB Management in May 2002 and which will terminate with effect from 1 January 2010 (being the date at which the Services Termination Agreement becomes effective) |
| "2002 Incentive Scheme" | the long term incentive scheme provided to employees, including the Executive Directors, of MWB Management, approved at an extraordinary general meeting of MWB Property held on 24 May 2002 (as amended and approved by MWB Independent Shareholders at meetings of MWB Property held on 4 March 2004 and 22 May 2007 and novated by MWB Property to MWB with effect from completion of the Scheme, with MWB assuming the rights and liabilities of MWB Property pursuant to such incentive scheme), the rules of which will be amended, subject to the Revised Incentive Scheme Resolution being passed and becoming unconditional |
| "2006 Act" | the Companies Act 2006, as amended from time to time |
| "2008 Financial Statements" | the consolidated audited financial statements of MWB for the year ended 31 December 2008 |
| "2009 EBT" | the 2009 MWB Group Employee Benefit Trust, which is intended, subject to the passing at the Revised Incentive Scheme Resolution, is to be established primarily for the purposes of the Revised Incentive Scheme and pursuant to which (subject also to the passing of the Revised Incentive Scheme Resolution) it is intended that the MWB Group Employee Share Scheme will be created as an employee share scheme of the Group |
| "2009 Half-Yearly Financial Report" | the half-yearly financial report of MWB for the six months ended 30 June 2009 announced on 27 August 2009 |
| "Admission" | admission of the New Units (i) to the Official List and (ii) to trading on the London Stock Exchange's main market for listed securities becoming effective in accordance, respectively, with LR 3.2.7G of the Listing Rules and paragraph 2.1 of the Admission and Disclosure Standards |
| "Admission and Disclosure Standards" | the requirements contained in the publication "Admission and Disclosure Standards" issued by the London Stock Exchange containing, inter alia, the admission requirements to be observed by companies seeking admission to trading on the London Stock Exchange's main market for listed securities |
| "Adopted IFRS" | International Financial Reporting Standards as adopted by the EU which are required to be applied in the consolidated financial statements of listed companies, and which were first so adopted by MWB Property in the preparation of its financial statements for the eighteen months ended 31 December 2006 |
| "AIM" | the AIM market of the London Stock Exchange |
| "Articles" | the articles of association of the Company, summary details of which are set out in the Prospectus |
| "Audit Committee" | the audit committee established by the Board |
| "Audley Investors" | Audley Capital Development Limited and Audley Investments Portfolio Limited, both companies incorporated in the British Virgin Islands |
| "BoS" | the Bank of Scotland (now Bank of Scotland Plc) |
| "B Shares" | the B ordinary shares of 0.01 p each in the capital of the Company |
| "business centres" or "serviced offices" | commercial premises used by occupiers on flexible terms, for periods of one month to five years with occupiers typically charged for the full service accommodation including but not limited to information technology, telephony and telecoms infrastructure, heating, air conditioning, electricity, facilities management and security systems |
| "Business Day" | any day (excluding Saturdays and Sundays) on which banks are open in London for normal banking business |
| "Business Exchange" | MWB Business Exchange Plc, of which MWB Group owns an interest of approximately 71.5 per cent, whose ordinary shares are admitted to trading on AIM, and including, where the context requires, its wholly owned subsidiaries |
| "Business Exchange Centres" | MWB Business Exchange Centres Limited, a wholly owned subsidiary of Business Exchange |
| "Cash Distribution Programme" | the programme as approved by MWB Independent Shareholders at an extraordinary general meeting of MWB Property held on 24 May 2002, as extended on 17 February 2004, 17 April 2007 and 10 April 2008, pursuant to which MWB Property and, following implementation of the Scheme, MWB, proposes to realise all or substantially all of its assets in cash or cash equivalents in order to make Gross Cash Returns to Shareholders and which is to be extended as described in this announcement |
| "certificated" or "certificated form" | evidenced by a physical form of certificate |
| "Code" | the City Code on Takeovers and Mergers |
| "Combined Code" | the UK Combined Code on Corporate Governance |
| "Companies Acts" | the 1985 Act and the 2006 Act, including any orders, regulations or other subordinate legislation passed under such acts, from time to time in force as they apply to the Company |
| "Conflicts Committee" | the conflicts committee established by the Board |
| "CREST" | the relevant system, as defined in the CREST Regulations, and the holding of shares in uncertificated form in respect of which Euroclear is the operator (as defined in the CREST Regulations) |
| "CREST Manual" | the rules governing the operation of CREST, consisting of the CREST Reference Manual, CREST International Manual, CREST Central Counterparty Service Manual, CREST Rules, Registrars Service Standards, Settlement Discipline Rules, CCSS Operations Manual, Daily Timetable, CREST Application Procedure and CREST Glossary of Terms (all as defined in the CREST Glossary of Terms promulgated by Euroclear on 15 July 1996 and as amended from time to time |
| "CREST member" | a person who has been admitted to Euroclear as a system-member (as defined in the CREST Regulations) |
| "CREST participant" | a person who is, in relation to CREST, a systemߛ participant (as defined in the CREST Regulations) |
| "CREST Regulations" or "Regulations" | the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755), as amended |
| "CREST sponsor" | a CREST participant admitted to CREST as a CREST sponsor |
| "CREST sponsored member" | a CREST member admitted to CREST as a sponsored member |
| "Daily Official List" | the daily record setting out the prices of all trades in shares and other securities conducted on the London Stock Exchange |
| "Directors" or the "Board" | the current directors of the Company whose names are set out in the Prospectus |
| "Disclosure and Transparency Rules" | the disclosure and transparency rules of the UK Listing Authority made in accordance with section 73(A) of FSMA, as amended from time to time |
| "DTZ" or the "Valuer" | DTZ Debenham Tie Leung Limited |
| "EBITDA" | earnings before interest, tax, depreciation and amortisation |
| "EEA" | the European Economic Area |
| "Enlarged Issued Share Capital" | the issued ordinary share capital of the Company immediately following completion of the Placing |
| "Equity Attributable to Shareholders" | the net assets of the Group attributable to Shareholders, or, prior to 3 April 2008, attributable to shareholders of MWB Property, as disclosed by the consolidated Group financial statements from time to time |
| "EU" | European Union |
| "Euroclear" | Euroclear UK & Ireland Limited, the operator of CREST |
| "Excluded Territory" or "Excluded Territories" | Australia, Canada, Japan and South Africa |
| "Executive Directors" | any or all of Richard Balfour-Lynn, Andrew Blurton, Jagtar Singh and Michael Bibring and from the date of Admission Richard Balfour-Lynn, Jagtar Singh and Michael Bibring |
| "Existing Units" | the Units in issue at the date of this announcement |
| February 2004 Circular" | the circular dated 17 February 2004 from MWB Property to, amongst others, its shareholders at that time relating to proposed amendments to the 2002 Incentive Scheme which were approved at an extraordinary general meeting of shareholders of MWB Property held on 4 March 2004 |
| "FSA" | the Financial Services Authority of the United Kingdom |
| "FSMA" | the Financial Services and Markets Act 2000, as amended from time to time |
| "General Meeting" | the general meeting of the Company convened for 11 .00 a.m. on 11 January 2010, including any adjournment thereof |
| "Gross Cash Returns to Shareholders" | the aggregate gross distributions to Shareholders by the Company in the form of cash or readily realisable assets adjusted by adding back any corporation tax payable by the Company on any disposals, and including the aggregate gross cash or cash equivalent paid to shareholders by a third party on a takeover of the Company |
| "Group" or "MWB Group" | before 3 April 2008, MWB Property and its subsidiaries, and from that date onwards, the Company and its subsidiaries including MWB Property |
| "HMRC" | Her Majesty's Revenue and Customs and, where relevant, any predecessor body which carried out part of its functions and references to any approval by HMRC shall, where appropriate, include approval by an officer of Her Majesty's Revenue and Customs |
| "Hotel du Vin" | Hotel du Vin Limited and its subsidiaries, a wholly owned subsidiary of Malmaison and forming part of the Malmaison operating business of the Group since October 2004 |
| "IAS" | International Accounting Standards |
| "IASB" | International Accounting Standards Board |
| "Independent Directors" | Eric Sanderson, Robert Burrow and David Marshall |
| "Independent Shareholders" | Shareholders other than members of the 1 997 Concert Party |
| "Interested Directors" | Richard Balfour- Lynn, Jagtar Singh and Michael Bibring, being all the Executive Directors other than Andrew Blurton and being those Executive Directors who have the outside interests referred to in the Prospectus |
| "Issue Price" | 30 pence per New Unit |
| "Liberty" | Liberty Plc, MWB's 68.3 per cent. owned subsidiary whose ordinary shares are admitted to trading on AIM, and including, where the context requires, its wholly owned subsidiaries |
| "Liberty Pension Scheme" | the Liberty Retail Plc defined benefit pension scheme |
| "licence fee" | the fee payable for occupation of serviced office space in a Business Exchange centre which is usually inclusive of rates, service charges, building management, building insurance (but excluding client contents), lighting, heating, cleaning, security and the use of reception and related facilities |
| "Listing Rules" | the rules and regulations made by the FSA under Part VI of FSMA, as amended from time to time |
| "Loan Stock" | the £30 million Unsecured Loan Stock 2009/2012 with an interest rate of 9.75 per cent, constituted by the Loan Stock Trust Deed |
| "Loan Stock Amendments" | the proposed amendments to the Loan Stock Trust Deed in the manner described in this announcement |
| "Loan Stock Meeting" | the extraordinary meeting of holders of Loan Stock convened for 11.30 a.m. on 11 January 2010, including any adjournment thereof |
| "Loan Stock Proposals" | the Loan Stock Amendments and the implementation of the Loan Stock Purchase Agreements, both as described in this announcement |
| "Loan Stock Purchase Agreements" | the agreements dated 17 December 2009 between MWB and the Audley Investors pursuant to which MWB has agreed to purchase for cancellation at nominal value (excluding accrued interest) £7.5 million of the Loan Stock conditional on Admission taking place by 31 January 2010 |
| "Loan Stock Trust Deed" | the trust deed dated 28 June 2005 made between (1) MWB Property and (2) the Loan Stock Trustee constituting the Loan Stock and which, on 11 April 2008, was novated to MWB (with MWB assuming all the rights and liabilities of MWB Property in respect of such Loan Stock |
| "Loan Stock Trustee" | Capita Trust Company Limited of 7th Floor, Phoenix House, 18 King William Street, London EC4N 7HE |
| "London Stock Exchange" | London Stock Exchange Plc |
| "LTIP" | the Marylebone Warwick Balfour Group Employee Trust through which Units are held for use in incentive schemes to be provided to employees of the Group and ServCo |
| "Malmaison" | MWB Malmaison Holdings Ltd, in which MWB Hotel Holdings Limited, a wholly owned subsidiary of MWB, holds an interest of 82.5 per cent. |
| "Malmaison and Hotel du Vin" | the Malmaison and Hotel du Vin operating businesses in which the Group has an 82.5 per cent. interest |
| "MWB" or "Company" | MWB Group Holdings Plc |
| "MWB Group Employee Share Scheme" | the employee share scheme of the Group intended, subject to the passing of the Revised Incentive Scheme Resolution, to be established on a sub-fund of the 2009 EBT |
| "MWB Independent Shareholders" | the shareholders of MWB Property who were authorised to vote at meetings of shareholders of MWB Property which excluded those shareholders of MWB Property who could obtain benefit under the resolutions being considered at those meetings of shareholders of MWB Property |
| "MWB Management" | Marylebone Warwick Balfour Management Limited, a company wholly owned by ServCo and which, at the date of this announcement, employs the majority of the head office staff of MWB |
| "MWB Property" | MWB Property Limited, formerly named Marylebone Warwick Balfour Group Plc (company number 3125437), previously the holding company of the Group and a wholly owned subsidiary of the Company with effect from 3 April 2008 |
| "New Units" | the 91,666,667 new Units to be issued by the Company pursuant to the Placing and a "New Unit" means one of them |
| "Non-Executive Directors" | any or all of Eric Sanderson, Robert Burrow and David Marshall |
| "Official List" | the Official List of the FSA pursuant to Part VI of FSMA |
| "OMA" or "Operating and Management Agreement" | an operating and management agreement with a landlord or tenant of a property under which the Business Exchange group operates or manages a serviced office and shares the operating risk of running such serviced office with the landlord or tenant of the property concerned |
| "Operating EBITDA" | EBITDA excluding pre-operating costs, and one-off costs on aborted transactions, exceptional gains and losses, brand expenditure, reorganisation costs and one-off gains or losses on disposals of property, plant and equipment |
| "Operating Revenue" | revenue generated by Liberty in its retail, wholesale, onߛline and Liberty of London operations excluding rental and other sundry income, as disclosed in the annual financial statements and half-yearly financial reports of Liberty |
| "Ordinary Shares" | the ordinary shares of 0.1 p each in the capital of the Company |
| "Panel" | The Panel on Takeovers and Mergers |
| "Panmure Gordon" | Panmure Gordon (UK) Limited, Moorgate Hall, 155 Moorgate, London EC2M 6XB, acting as sponsor, financial adviser, broker and underwriter to the Company |
| "participant ID" | the identification code or membership number used in CREST to identify a particular CREST member or other CREST participant |
| "Placees" | any persons who have agreed or shall agree to subscribe for the New Units pursuant to the Placing |
| "Placing" | the placing of the New Units with the Placees at the Issue Price |
| "Placing Agreement" | the placing agreement dated 17 December 2009 between MWB and Panmure Gordon, further details of which are set out in the Prospectus |
| "Placing Resolutions" | Resolutions 1 to 9 to be proposed at the General Meeting |
| "Primary Resolutions" | Resolutions 1 to 4 to be proposed at the General Meeting |
| "Proposals" | the Placing, the Loan Stock Proposals and the Strategic Proposals, all as described in this announcement |
| "Prospectus Rules" | the prospectus rules of the UK Listing Authority made in accordance with section 73A of FSMA, as amended from time to time |
| "Pyrrho" | Pyrrho Investment Limited, whose holding of Units is registered in the name of Vidacos Nominees Limited |
| "Reduction of Capital" | the reduction of authorised share capital of the Company under section 135 of the 1 985 Act to £371,000 divided into 50,000 redeemable shares of £1 each, 107,000,000 Ordinary Shares and 2,140,000,000 B Shares which became effective on 9 April 2008 |
| "Regulated Market" | a market which is regulated for the purposes of the Markets in Financial Instruments Directive 2004/39/EC, which is operated by the London Stock Exchange as a market for listed securities and is the market on which the Loan Stock is admitted to trading |
| "Regulation S" | Regulation S under the US Securities Act |
| "Regulatory Information Service" | one of the regulatory information services authorised by the UK Listing Authority to receive, process and disseminate regulatory information in respect of listed companies |
| "Related Party Transaction" | each of: (a) the issue of New Units to Pyrrho and/or its associates under the Placing; (b) the issue of New Units to Richard Balfour-Lynn and/or his associates under the Placing; (c) the issue of New Units to John Harrison and/or his associates under the Placing; and (d) the issue of New Units to Joseph Shashou and/or his associates under the Placing |
| "Remuneration Committee" | the remuneration committee established by the Board, comprising the Non-Executive Directors |
| "Resolutions" | the ordinary and special resolutions to be proposed at the General Meeting and set out in the notice of the General Meeting set out in Part IX of the Prospectus |
| "Revised Incentive Scheme" | the 2002 Incentive Scheme the rules of which are proposed to be revised in accordance with the changes summarised in the Prospectus, which revisions are conditional on the passing of Resolution 10 at the General Meeting |
| "Revised Incentive Scheme Resolution" | Resolution 10 to be proposed at the General Meeting |
| "REVPAW" or "revenue per available workstation" | licence fees and services income receivable on an annual basis, divided by the number of available workstations which is a key performance indicator used to assess revenue performance across available space in the Business Exchange Group |
| "REVPOW" or "revenue per occupied workstation" | licence fees and services income receivable on an annual basis, divided by the number of occupied workstations which is a key performance indicator used to assess revenue levels achieved on occupied space in the Business Exchange Group |
| "RICS" | The Royal Institution of Chartered Surveyors |
| "Scheme" | the scheme of arrangement pursuant to section 425 of the Act as set out in more detail in the circular sent to shareholders of MWB Property dated 7 February 2008 that was approved by shareholders of MWB Property at an extraordinary general meeting of MWB Property on 4 March 2008 and which became effective on 3 April 2008 |
| "ServCo" | ServCo Services UK Limited (company number 6570325), including where the context requires its subsidiaries, a company controlled by the Executive Directors together with John Harrison, Joseph Shashou and Richard Aspland-Robinson (and which acquired in April 2009 the business of ServCo Limited Partnership (formerly known as Asset and Property Services Limited Partnership), a partnership established in 2002 under the laws of England and Wales (registered number LP008066) which was ultimately controlled by the same persons) and which, at the date of this announcement, employs (through its ownership of MWB Management) the majority of the Group head office staff (excluding those of Malmaison, Hotel du Vin, Business Exchange and Liberty) |
| "Services Agreement" | the services agreement entered into between MWB Property and ServCo Limited Partnership on 27 March 2002 and approved at an extraordinary general meeting of MWB Property held on 24 May 2002 in relation to the provision of administrative and head office outsourced services by ServCo Limited Partnership to the Group; and as (i) novated by MWB Property to the Company on 11 April 2008 (with MWB assuming all rights and liabilities of MWB Property in respect of such services agreement) and (ii) novated by ServCo Limited Partnership to ServCo in April 2009 (with ServCo assuming all rights and liabilities of ServCo Limited Partnership in respect of such services agreement) which agreement will terminate with effect from 1 January 2010 |
| "Services Termination Agreement" | the agreement entered into between MWB and ServCo on 17 December 2009, pursuant to which MWB and ServCo have agreed, to terminate for no consideration, the Services Agreement with effect from 1 January 2010 |
| "Shareholders" | holders of Units, or prior to April 2008, holders of ordinary shares in MWB Property |
| "SMEs" | small and medium-sized enterprises with, typically, a turnover of less than £1 million per annum and/or staff of fewer than 50 |
| "stock account" | an account within a member account in CREST to which a holding of a particular share or other security in CREST is credited |
| "Strategic Proposals" | the revisions to the Cash Distribution Programme, the revisions to the 2002 Incentive Scheme, the termination of the 2002 Bonus Plan and the termination of the Services Agreement, all as described in this announcement |
| "Subsidiary" | a company which is both under the control of the Company and is a subsidiary of the Company (within the meaning of section 1159 of the 2006 Act) |
| "Trustee of the 2009 EBT" | Ogier Employee Benefit Trustee Limited in its capacity as trustee of the 2009 EBT |
| "Trustee of the LTIP" | Ogier Employee Benefit Trustee Limited in its capacity as trustee of the LTIP |
| "Tudor Building" | the freehold mock Tudor building and the Muji building, Great Marlborough Street, London W1 owned by Liberty |
| "UK Listing Authority" or "UKLA" | the FSA in its capacity as the competent authority for the purposes of Part VI of FSMA |
| "Unit" | a unit, comprising one Ordinary Share and 20 B Shares in the capital of the Company, such Ordinary Share and B Shares being transferable only in the form of a Unit and not separately and "Units" shall be construed accordingly |
| "United Kingdom" or "UK" | the United Kingdom of Great Britain and Northern Ireland |
| "United States" or "US" | the United States of America, its territories and possessions, any state of the United States of America and the District of Columbia |
| "US Person" | a natural person resident in the US, a corporation or a partnership organised or incorporated under the laws of the US, any estate of which any executor or administrator is a "US person" within the meaning of rule 902(k) under the US Securities Act, any trust of which any trustee is a "US person" within the meaning of rule 902(k) of the US Securities Act, or any other person, entity, trust or estate included within the definition of "US person" in rule 902(k) under the US Securities Act or determined to be resident in the US for the purposes of the US Investment Company Act of 1940, as amended |
| "US Securities Act" | the US Securities Act of 1933, as amended |
| "US Securities and Exchange Commission" | the US government agency having primary responsibility for enforcing the federal securities laws and regulating the securities industry/stock market |
| "Whitewash Resolution" | Resolution 5 to be proposed at the General Meeting in relation to the approval by Independent Shareholders on a poll of a waiver of any obligation which might otherwise fall on the 1997 Concert Party to make a general offer pursuant to rule 9 of the Code granted to the 1 997 Concert Party by the Panel in connection with the implementation of the Placing |
All references to "pounds", "pounds sterling", "Sterling", "£", "pence" and "p" are to the lawful currency of the UK, all references to "Euro" or "€" are to the lawful currency of the member states of the European Union who adopted the Euro in Stage Three of the Treaty establishing Economic and Monetary Union on 1 January 1999, all references to "Yen" are to the lawful currency of Japan and all references to "US Dollars" are to the lawful currency of the United States.
All references in this announcement to times are, unless the context otherwise appears, references to the time in London, UK.
All references in this announcement to times are, unless the context otherwise appears, references to the time in London, UK.