Last checked at 12 Nov 2008 08:34
12 November 2008
NETWORK DATA HOLDINGS PLC
("Network Data" or the "Company")
Acquisition of Mortgage Broking Services Limited, Issue of Redeemable Convertible Preference Shares &
Notice of Extraordinary General Meeting
The Board of Network Data is pleased to announce that the Company has today entered into an agreement ("Agreement") with the Manchester Building Society ("MBS") to acquire the entire issued share capital of Mortgage Broking Services Limited ("MBSL") and Networks Limited for a consideration of £2.215 million, to be satisfied by the issue of Redeemable Convertible Preference Shares (the "Acquisition").
In addition a further £250,000 of Redeemable Convertible Preference Shares are to be subscribed for by MBS in cash.
The Company also gives notice that an extraordinary general meeting ("EGM") of the Company will be held at Botleys Mansion on 9 December 2008 at 10.30am. Shareholders will be asked to consider the proposed Special Resolutions:
Notice of the EGM, together with full details of the Special Resolutions to be proposed at the meeting, has been posted to shareholders.
Commenting on the Acquisition, Richard Griffiths, Chief Executive of Network Data said:
"We are delighted to have completed the largest merger of two mortgage networks since the inception of FSA regulation of the mortgage market four years ago in October 2004. Consolidation of the networks market is long overdue, and we expect the trend to accelerate with many of the smaller networks struggling in the current weak market conditions. As the largest mortgage network we intend to play our part in this process and take advantage of the cost saving opportunities. We are pleased to welcome the Manchester Building Society as a significant shareholder in Network Data Holdings."
Full details of the notice of the EGM, containing details of the resolutions, and instructions to shareholders has today been posted to shareholders and is available on the Company's website, www.network-data.co.uk.
Enquiries:
Richard Griffiths
Chief Executive, Network Data Holdings plc
Tel: 01932 875 728
John Riddell
Noble & Company Limited
Tel: 020 7763 2200
Information on Mortgage Broking Services
MBSL is an FSA regulated mortgage network. As at 5 November 2008 it had 191 appointed representative firms authorised for mortgage and insurance activities. MBSL is wholly owned by the Manchester Building Society.
MBSL's turnover for the year ended 31 December 2007 was £3.945 million (2006: £4.123 million) generating a gross margin of £0.647 million (2006: £0.672 million). Its audited loss before tax for the year was £0.349 million (2006: loss of £0.158 million). The audited net assets as at 31 December 2007 were £0.135 million.
Since 31 December 2007 MBSL been expanded by entering into agreements with Cotswold Mortgage Services Limited ("CMSL") for the transfer to MBSL of CMSL's network of appointed representatives. In the half year to 30 June 2008, MBSL had unaudited turnover of £2,299 million generating a gross margin of £0.401 million and unaudited losses before tax of £0.071 million. The unaudited net assets as at 30 June 2008 were £0.651 million.
Reasons for the Acquisition
The business of MBSL is similar to that of Network Data Ltd, a wholly owned subsidiary of the Company, which also operates as a FSA regulated mortgage network.
There are a number of duplicated administrative functions such as accounts, marketing, training & competence and compliance. As such, the Board of Network Data expects the Acquisition will lead to substantial cost savings by removal of these duplicated functions.
Terms of the Acquisition
In consideration for the issue to MBS at their par value of £1 per share of 2,215,000 Redeemable Convertible Preference Shares by Network Data, MBS will sell to the Company the entire issued share capital of MBSL and the non trading company Networks Limited and will in addition on completion of the Acquisition subscribe for an additional 250,000 Redeemable Convertible Preference Shares in cash. The Redeemable Convertible Preference Shares may be subject to cancellation on a £1 for £1 basis to meet warranty claims against Manchester Building Society.
Manchester Building Society will be entitled thereafter whilst it continues to hold such Shares (or the Ordinary Shares into which they may convert so long as such Ordinary Shares comprise not less than 7.5% of the issued Ordinary Shares of the Company) to appoint one director to the board of the Company. MBS will not be entitled to sell or dispose of such Redeemable Convertible Preference Shares at any time prior to conversion, nor to dispose of any Ordinary Shares into which the Redeemable Convertible Preference Shares convert for a period of six months after conversion, unless otherwise provided under the terms of the Agreement.
Terms of the Redeemable Convertible Preference Shares
The Redeemable Convertible Preference Shares:
will not be quoted and will not carry voting rights;
will entitle the holder to an 8% cumulative annual preference dividend (and 3% above base rate interest on any late dividend payments);
will not be transferable (other than as a result of the liquidation of the holder);
May be converted in full into Ordinary Shares or redeemed in full by the Company at the option of the holder (or, in the absence of an election by the holder, at the option of the Company) in five equal instalments on each of 31 December 2011, 30 June 2012, 31 December 2012, 30 June 2013, and 31 December 2013. The redemption/conversion price of the Convertible Preference Shares shall be the average mid-market price of the quoted Ordinary Shares of the Company over the 30 days preceding the redemption/conversion instalment, subject to a maximum conversion price of £0.64 per share and a minimum of £0.40 per share.;
will otherwise rank pari passu with the Ordinary Shares of the Company.
The maximum total number of Ordinary Shares into which the Redeemable Convertible Preference Shares may convert is 6,162,500 representing 21.8% of the existing issued ordinary share capital and 17.90% of the fully diluted ordinary share capital of Network Data.
New Articles
The New Articles include the following material changes to the Articles:
Provision for the Redeemable Convertible Preference Shares, including their conversion or redemption (as the case may be) and the preferred dividend to be paid on them.
Updates necessary due to the recent coming into effect of certain parts of the Companies Act 2006 (including in respect of extraordinary resolutions, written resolutions, proxies, and minimum age limits for directors)
Sale of Botleys Mansion
Following the closure of two subsidiary companies of NDH, namely Homeowners Mortgages Ltd and Hipstar Ltd, and the general reduction in head office staff levels in line with the weak mortgage market throughout 2008, the group has surplus office space.
The Company's rented office premises, Chilsey House, in Chertsey, which has six years remaining on the lease but which can be terminated by the Company on 28 September 2008 upon six months' prior notice, is largely vacant and can accommodate the remaining head office staff at Botleys Mansion. Accordingly the Company has decided to seek an acquiror for Botleys Mansion.
On 24 October 2008 the Company announced that it had accepted an offer for Botleys Mansion of £5 million. The offer is subject to a number of conditions, and accordingly may or may not lead to the sale of the building.
Current trading and future prospects
On 26 September 2008, the unaudited interim results of the Company for the six months ended 30 June 2008 were announced. At this time, Network Data had over £4.3m of borrowing, which will be eliminated if the sale of the property goes ahead. The Company is in constructive negotiations with its bank in terms of resetting its banking facilities in order to take into account the increased scale of the business following the acquisition of MBSL.
Current trading conditions remain challenging, although we are encouraged by the latest action of the Bank of England to reduce the bank rate and the Government's wish to see mortgage lending volumes improve from the very low levels in 2007.
Irrevocable undertakings
Richard Griffiths and Prudence Griffiths have irrevocably undertaken to vote in favour of the Resolutions in respect of their entire holdings of Ordinary Shares, which total 22,237,130 Ordinary Shares, representing just over 78 per cent. of the issued ordinary share capital of the Company. This level of acceptance is sufficient for the passing of the Resolutions.
Extraordinary General Meeting
The extraordinary general meeting at which the vote to adopt the New Articles, to increase the Company's authorised share capital, and to authorise the directors to allot the Redeemable Convertible Preference Shares will be held at Botleys Mansion,
A circular containing detail of the EGM, the resolutions and the transaction has been posted to shareholders today.