MPH.L Regulatory News (MPH)

14 Feb 2007 07:01

Marchpole Holdings PLC14 February 2007 MARCHPOLE HOLDINGS PLC ("Marchpole", "the Group" or "the Company") Acquisition of major shoe importer and wholesaler Greenmark Ltd ("Greenmark") The Board of Marchpole Holdings plc (LSE: MPH), the fast growing fashion brandmanagement group, is pleased to announce that the Company has conditionallyagreed to acquire 100% of the issued share capital of Greenmark Limited.Greenmark is a major importer and wholesaler of ladies footwear. The Acquisition will be financed through Marchpole's existing cash resources andthe issue of loan notes to the Vendor. Highlights - Greenmark was founded in 1987 and designs, wholesales and distributes ladies footwear. Its customers include leading UK retailers with multiple outlets. - The Board believes that the Acquisition will further the profit and growth potential of Marchpole. - The Acquisition will broaden the Group's customer base and will enable Marchpole to sell a wider range of footwear to its existing customer base. - The Acquisition will also bring to the Group a number of additional employees who, the Board believes, will contribute to the ongoing success of Marchpole. - Jonathan Manning, sales director of Greenmark, will continue to remain at the helm of Greenmark ensuring continuity to existing customers of Greenmark. In addition, with Marchpole's expertise in sourcing and distribution, the business will look to develop other markets. The other existing directors of Greenmark, James Rooley and Carole Manning, have expressed their willingness to continue as advisors during the handover period. - The Acquisition, because of its size in relation to the Group, is a Class 1 transaction for Marchpole under the Listing Rules and is therefore conditional, inter alia, on the approval of Marchpole Shareholders. An extraordinary general meeting is to be held at 19-20 Berners Street, London W1T 3LW for the purpose of approving the Acquisition. A notice convening the EGM will be set out at the end of a Circular to be sent to Shareholders shortly. Michael Morris, Executive Deputy Chairman of Marchpole, commented: "We are delighted with the acquisition of Greenmark and believe that it is anexcellent strategic fit given the similarities between the two companies'business models. It will broaden our customer base and will further the profitand growth potential of the Group delivering enhanced returns to our shareholders. The Acquisition is another significant step towards the evolutionof the Company into an international fashion brand management group with acollection of globally recognised fashion labels. It will also provide us with agreat opportunity to further enhance Marchpole's potential in the branded globalfootwear market. The Board is committed to an acquisitive as well as organic growth strategy andwe believe that the Company is even better placed to maximise further licensingand acquisition opportunities." For further information, please contact: Marchpole Holding plc 020 7908 7777Michael Morris, Executive Deputy ChairmanJohn Harrison, Finance Director Deloitte Corporate Finance 020 7936 3000Jonathan HintonDarren BoocockPatricia Coates Bell Pottinger Corporate & Financial 020 7861 3232David RydellEmma KentAmy Rajendran This summary should be read in conjunction with the full text of thisannouncement. Deloitte Corporate Finance is acting as Sponsor to Marchpole and for no-one elsein connection with the Acquisition and will not regard any other person as itsclient nor be responsible to anyone other than Marchpole for providing theprotections afforded to clients of Deloitte Corporate Finance nor for providingadvice in relation to the Acquisition or any matter referred to herein. DeloitteCorporate Finance is a division of Deloitte & Touche LLP, which is authorisedand regulated by the Financial Services Authority in respect of regulatedactivities. If you require advice in relation to this press release you shouldcontact your stockbroker, bank manager, solicitor, accountant or otherindependent financial adviser authorised under the Financial Services andMarkets Act 2000. The Directors accept responsibility for the information contained in thisannouncement. To the best of the knowledge and belief of the Directors (who havetaken all reasonable care to ensure that such is the case) the informationcontained in this announcement is in accordance with the facts and does not omitanything likely to affect the import of such information. This press release does not constitute, or form part of the Acquisition or anyinvitation to sell or issue, or any solicitation of any offer to purchase orsubscribe for, any shares in the Company nor shall this press release or anypart 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 orcommitment whatsoever with respect to the Acquisition or otherwise. MARCHPOLE HOLDINGS PLC PROPOSED ACQUISTION OF GREENMARK LIMITED 1. Introduction Marchpole is pleased to announce that it has entered into a conditionalagreement to acquire the entire issued share capital of Greenmark for a totalconsideration of £3 million. Greenmark provides shoe design and wholesaleservices to UK based retailers. The Consideration payable will be adjusted, in cash, to reflect additionalpayments from, or to, Marchpole in relation to a profit based target and a netcurrent asset based target as described in paragraph 5 below. There is noupwards or downwards cap on the additional or reduced consideration due underthe profit or net current asset based adjustments. On the basis of the information available at the date of the document theDirectors do not anticipate an adjustment to Consideration in respect of theprofit based target. Any upward adjustment to Consideration in relation to thenet current asset based target will be matched by an equal amount of cashsubsequently realised from the assets and will have no net impact on the cash orindebtedness position of Marchpole. The cash consideration of £1 million payable on Completion is being financedfrom Marchpole's available cash resources. The Acquisition, because of its size in relation to the Group, is a Class 1transaction for Marchpole under the Listing Rules and is therefore conditional,inter alia, on the approval of Marchpole Shareholders. An extraordinary generalmeeting is to be held at 19-20 Berners Street, London W1T 3LW for the purpose ofapproving the Acquisition. A notice convening the EGM will be set out at the endof a Circular to be sent to Shareholders shortly. 2. Background to and reasons for the Acquisition The Board believes that the proposed Acquisition will further the profit andgrowth potential of the Group. In the year ended 31 December 2005, in accordancewith International Financial Reporting Standards, Greenmark's turnover was £24.1million and profit before tax was £3.2 million. The Board believes that Greenmark's business model is similar to that ofMarchpole. Both businesses design and distribute shoes, and in the case ofMarchpole clothing apparel, utilising third parties to manufacture the products.The Acquisition will broaden the Group's customer base and will enable the Groupto sell a wider range of footwear to its existing customer base. The Acquisition will also bring to the Group a number of additional employeeswho, the Board believes, will contribute to the ongoing success of the Group.Jonathan Manning, a director of Greenmark, will continue to lead Greenmark asChief Operating Officer of Greenmark. Jonathan will enter into a new servicecontract. Other key personnel within the design, marketing and other operationalteams, all of whom have a good understanding of the fashion footwear industry,include Mark Newell (Logistics Manager), Emma Sandles (Technical Assistant),Jenny Brown (Development Manager), Julia Lundsten (Senior Designer) and EllenTozer (Designer). 3. Information on Marchpole Marchpole is a multi-national brand management group that designs, produces andsells clothing and accessories for eight international fashion labels. The Groupemploys approximately 130 staff worldwide and operates in the UK, France, Italy,Hong Kong and the US. Its brands include Boateng, Emmanuel Ungaro, Ungaro Homme,Jean-Charles de Castelbajac ("JCC"), Jean-Charles de Castelbajac/Rossignol,Jean-Charles de Castelbajac/Okaidi, Homebody and Homemummy. Marchpole operates an integrated approach to brand management, taking a brandfrom concept to design studio to the customer interface. It does not own anymanufacturing facilities. The Group has grown considerably in the past 3 years,to today's multi-national business that manages its brands across a multitude ofclothing lines and accessories. As set out in Marchpole's audited financial statements the Group's consolidatedannual turnover, for the year ended 31 March 2006, was £38.4 million (2005:£31.5 million) and profit before tax was £4.9 million (2005: £4.9 million). Asat 31 March 2006, the gross assets of the Group were £33.2 million and the netassets of the Group were £10.2 million. On 15 November 2006 Marchpole announced its unaudited interim results for thesix month period ended 30 September 2006. In those interim results, Marchpolereported consolidated turnover of £38.6 million (2005: £14.9 million),consolidated profit before taxation of £4.0 million (2005: £1.0 million) andearnings per share of 10.2 pence (2005: restated 2.3 pence, restated for 1 for 5share consolidation). As at 30 September 2006, the gross assets of the Groupwere £41.6 million and the net assets of the Group were £11.6 million. 4. Information on Greenmark Greenmark provides shoe design and wholesale services to UK based retailers.Goods which are designed either by Greenmark or its customers are produced bythird party suppliers in Brazil. For the year ended 31 December 2005, in accordance with International FinancialReporting Standards, Greenmark's annual turnover was £24.1 million (2004: £23.9million) and profit before tax was £3.2 million (2004: £2.5 million). As at 31December 2005, the gross assets of Greenmark were £8.7 million and net assets ofGreenmark were £7.2 million. Greenmark entered into an agreement for the repurchase of a proportion of itsown shares prior to Marchpole entering into the Sale and Purchase Agreement withthe Vendor. As a consequence of this agreement the net assets of Greenmark werereduced by £8.8 million. Further details of the share buyback will be set out inthe Circular. 5. Principal terms of the Acquisition Marchpole has conditionally agreed to purchase the entire issued share capitalof Greenmark. The Consideration payable to the Vendor under the terms of theconditional agreement is £3 million. The Consideration will be adjusted toreflect the net current assets of Greenmark as at 26 January 2007 and may befurther adjusted to reflect the Adjusted Profit of Greenmark for the year ended31 December 2006. The £3 million payable on Completion will be satisfied by the payment of £1million in cash at Completion, the issue at Completion of £1 million ofunsecured bank guaranteed loan notes repayable on the second anniversary ofCompletion and the issue at Completion of an unsecured £1 million convertibleloan note which will be converted into New Ordinary Shares on the secondanniversary of Completion. The cash consideration is to be funded fromMarchpole's available cash resources. The consideration payable will be adjusted upwards to the extent that theAdjusted Profit of Greenmark for the year ended 31 December 2006 is in excess of£2.7 million and will be adjusted downwards to the extent that the AdjustedProfit of Greenmark for the year ended 31 December 2006 is less than £2.3million. The adjustment to Consideration, which will be made in cash, will be£1.20 for every £1.00 of Adjusted Profit above or below the agreed figure. Additional cash consideration will also be payable for the amount by which theAdjusted Net Current Assets of Greenmark as at 26 January 2007, beforecompletion of the share buyback referred to above, exceed £8.8 million. The cashconsideration payable will be reduced for the amount by which the Adjusted NetCurrent Assets of Greenmark as at 26 January 2007, before completion of theshare buyback, are below £8.8 million. Marchpole has entered into an unsecured loan agreement with Greenmark underwhich Greenmark may borrow up to £300,000 from Marchpole for working capitalpurposes. The loan agreement will bear interest at 1 per cent. above the baserate of HSBC Bank from time to time. Following the conversion of the Convertible Loan Note, Marchpole will apply forthe New Ordinary Shares to be admitted to the Official List. The New OrdinaryShares will, when issued, be registered in the name of the Vendor and will rankpari passu in all respects with the Ordinary Shares in issue on the secondanniversary of Completion including the right to receive all dividendsthereafter declared, made or paid on the issued share capital of the Company. The New Ordinary Shares will be issued to the Vendor pursuant to the terms ofthe Convertible Loan Note and the Sale and Purchase Agreement and will not bemarketed in whole or in part to the public in conjunction with the Acquisition. The Vendor will be required to hold the New Ordinary Shares for a period of notless than 12 months from the date of issue. The Acquisition is conditional, inter alia, on the approval of Shareholderswhich is sought at the EGM and there being no material adverse change to thebusiness of Greenmark before Completion. 6. Financial effects of the Acquisition Following the Acquisition, Greenmark will become a subsidiary undertaking ofMarchpole, as a result of which the assets and liabilities of Greenmark will beconsolidated into the financial statements of the Group. The illustrative consolidated net assets of Marchpole as at 30 September 2006 ona pro forma basis and adjusted to reflect the Acquisition as if Completion hadoccurred at that date would have been £11.6 million. The £1 million cash consideration payable under the Acquisition is beingfinanced from available cash resources. The Directors believe that the Acquisition will have a positive impact on theearnings of the Group. 7. Current trading and prospects In its unaudited interim results for the six months ended 30 September 2006,Marchpole announced consolidated turnover and consolidated profit before taxconsiderably ahead of the same period in the previous year. In the six monthsended 30 September 2006 the Group continued its evolution from a single brand,single country business into a diversified multi-brand and internationalbusiness in line with its stated strategy. In this period Marchpole securedadditional licence and distribution agreements for both JCC and Emanuel Ungaro,and also acquired the luxury brand Homebody. As previously announced, Yves Saint Laurent has decided not to renew licensingagreements or to grant new ones. This meant that the relationship between YvesSaint Laurent and Marchpole, which had been in existence for more than 30 years,was terminated at the end of 2006. The Board considers that Moda America LLC, acquired in March 2006, has now beenfully integrated into the Marchpole business model. The Board believes that thisstrategic acquisition provided an opportunity to grow the business in the UnitedStates market and further build on the relationship with Emanuel Ungaro. The Marchpole Group business continues to progress well and the Board considersthat it is well placed to capitalise on further licensing and acquisitionopportunities. 8. Extraordinary General Meeting An Extraordinary General Meeting will be held at 19-20 Berners Street, LondonW1T 3LW. The Resolution to be proposed at the EGM will, if passed, approve theAcquisition. 9. Irrevocable Undertakings The Directors will enter into irrevocable undertakings to vote in favour of theAcquisition subject to the Sale and Purchase Agreement conditions. 10. Recommendations The Board, which has received financial advice from Deloitte Corporate Finance,considers the Acquisition to be in the best interest of Marchpole and of theShareholders as a whole. In providing its advice, Deloitte Corporate Finance hastaken into account the Directors' commercial assessments of the Acquisition. 11. General A copy of the Circular in respect of the Acquisition and containing notice ofthe EGM is expected to be posted to shareholders shortly. For further information, please contact: Marchpole Holding plc 020 7908 7777Michael Morris, Executive Deputy ChairmanJohn Harrison, Finance Director Deloitte Corporate Finance 020 7936 3000Jonathan HintonDarren BoocockPatricia Coates Bell Pottinger Corporate & Financial 020 7861 3232David RydellEmma KentAmy Rajendran Deloitte Corporate Finance is acting as Sponsor to Marchpole and for no-one elsein connection with the Acquisition and will not regard any other person as itsclient nor be responsible to anyone other than Marchpole for providing theprotections afforded to clients of Deloitte Corporate Finance nor for providingadvice in relation to the Acquisition or any matter referred to herein. DeloitteCorporate Finance is a division of Deloitte & Touche LLP, which is authorisedand regulated by the Financial Services Authority in respect of regulatedactivities. If you require advice in relation to this press release you shouldcontact your stockbroker, bank manager, solicitor, accountant or otherindependent financial adviser authorised under the Financial Services andMarkets Act 2000. The Directors accept responsibility for the information contained in thisannouncement. To the best of the knowledge and belief of the Directors (who havetaken all reasonable care to ensure that such is the case) the informationcontained in this announcement is in accordance with the facts and does not omitanything likely to affect the import of such information. This press release does not constitute, or form part of the Acquisition or anyinvitation to sell or issue, or any solicitation of any offer to purchase orsubscribe for, any shares in the Company nor shall this press release or anypart 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 orcommitment whatsoever with respect to the Acquisition or otherwise. DEFINITIONS The following definitions apply throughout this announcement unless the contextrequires otherwise: "Acquisition" the proposed acquisition by Marchpole of Greenmark under the terms of the Sale and Purchase Agreement "Adjusted Net The net current assets less long term liabilities ofCurrent Assets" Greenmark, as defined in the Sale and Purchase Agreement "Adjusted Profit" the pre-tax profits (as defined in the Sale and Purchase Agreement) of Greenmark for the year ended 31 December 2006 "Circular" document detailing further the terms of the Acquisition to be sent to Shareholders shortly "Completion" completion of the Acquisition pursuant to the Sale and Purchase Agreement "Consideration" the consideration of £3 million payable by Marchpole to the Vendor for the entire issued share capital of Greenmark, being cash consideration of £1 million (subject to certain adjustments as set out in the Sale and Purchase Agreement), the Loan Note and the Convertible Loan Note "Convertible Loan the £1 million loan note convertible into New OrdinaryNote" Shares on the date of the second anniversary of Completion "Deloitte Corporate a division of Deloitte & Touche LLP of Stonecutter Court, 1Finance" Stonecutter Street, London EC4A 4TR "Directors" or the directors of the Company (Christopher Phillips, Michael"Board" Morris, John Harrison, Raymond Harris, Ronald Stirling and Harvey Shulman) "Extraordinary the extraordinary general meeting of the CompanyGeneral Meeting" or"EGM" "Greenmark" Greenmark Limited, a private limited company, incorporated and registered in England (registered number 02180310) "Listing Rules" the listing rules made by the UKLA under the Financial Services and Markets Act 2000 "Loan Note" the unsecured bank guaranteed £1 million loan note to be issued to the Vendor as part of the Consideration under the Sale and Purchase Agreement repayable on the date of the second anniversary of Completion "Marchpole" or the Marchpole Holdings plc, a public limited company,"Company" incorporated and registered in England (registered number 3328638) "Marchpole Group" Marchpole and its subsidiary undertakingsor the "Group" "New Ordinary the new Ordinary Shares to be issued to the Vendor as partShares" of the Consideration for the Acquisition "Official List" the list maintained by the Financial Services Authority in accordance with section 74 (1) of the Financial Services and Markets Act 2000 "Ordinary Shares" ordinary shares of 5 pence each in the capital of theor "Marchpole CompanyShares" "Resolution" the resolution set out in the notice of the EGM. A notice convening the EGM will be set out at the end of the Circular to be sent to Shareholders shortly "Sale and Purchase the conditional agreement between (1) the Vendor (2) MrsAgreement" Deborah Carole Manning (3) Mr James Rooley and (4) Marchpole in respect, inter alia, of the Acquisition, a summary of which is set out in the Circular. "Shareholders" the existing shareholders of Marchpole "UK" or "United the United Kingdom of Great Britain and Northern IrelandKingdom" "UKLA" the Financial Services Authority acting in its capacity as the competent authority for the purposes of Part VI of the Financial Services and Markets Act 2000 "Vendor" Jonathan Harley Manning This information is provided by RNS The company news service from the London Stock Exchange