25 Sep 2017 08:49
25 September 2017
MBL Group PLC
Strategy update
Further to the announcement made on 21 September 2017 the content of the letter sent to shareholders is set out below:
"Dear Shareholder
MBL Group plc (the "Company")
I write to update you on progress and on the views of your board of directors of the Company (the "Board") in connection with the Company's strategy.
Background
As you are aware, following the completion of the strategic review at the end of last year, Peter Palframan and I were given a clear mandate to seek buyers for the Company's two trading businesses (the "Trading Businesses") with the aim of maximising value for shareholders.
The Board has therefore spent this year diligently conducting a formal sales process and dealing with the issues relating to shareholders and former management of the Company and the Trading Businesses.
Sales process update
The Board, having run an extremely professional sale process, attracting a number of high quality trade cash buyers for both Trading Businesses, are saddened by recent events which have frustrated the sales process. The preferred trade cash buyers for each Trading Business were aiming to complete by the end of August 2017 with limited warranties requested from the Company in relation to the sales and cash being payable on completion of each transaction. Successful sales to such buyers would have resulted in a significant increase in shareholder value, with cash being returned to shareholders in a relatively short timescale.
However, the sale process has been frustrated by a combination of a former director and shareholder being involved in the setting up of a business which competes directly with The Garden and Home Trading Company Limited ("GTHC") and that individual and certain other shareholders refusing to commit to unconditional non-compete covenants in favour of the preferred buyer of the Group's other Trading Business, Windsong International Limited ("Windsong"). Such refusal has led to the preferred cash buyer for Windsong withdrawing from the sale process. Equally, with regard to the sale of GHTC, when they became aware of the competing business the trade cash buyers either withdrew from the sale process or significantly reduced the price they are willing to pay, thereby diminishing the value that can be delivered for the Company's shareholders.
This left the Board with an offer for GHTC from a group of shareholders which, effectively, provided no cash on completion and a lower price than certain trade buyers had previously offered. When set against the backdrop of being unable to dispose of Windsong this offer is not attractive and the Board does not believe that it will deliver maximum value for shareholders and is not a transaction that it can recommend.
In summary, the Board's efforts at achieving a sale to preferred trade buyers have been frustrated, and the Board is not in a position to accept any of the remaining bids.
New proposals
Considering the Board's mandate to achieve maximum shareholder value, the Board now considers that new leadership is required to reinvigorate the Trading Businesses and drive value through operating them successfully for the foreseeable future. The Board will therefore seek to appoint a new Chief Executive Officer (the "New CEO") and new non-executive directors (together with the New CEO the "New Board").
Accordingly, it is intended that Peter Palframan will resign from the Board with effect from the appointment of the New CEO, and that I will resign as soon as reasonably practicable once the New Board is in place.
Trading update
The Trading Businesses remain profitable and cash generative and the Board believes a dedicated Chief Executive Officer will inherit an excellent opportunity to create future value for all shareholders.
Requisitioned meetings
As shareholders are aware, resolutions will be considered at shareholder meetings to be held on 28 September 2017 which will, if passed, prevent the Board from increasing the remuneration of future directors of the Company absent shareholder authority acting by Ordinary Resolution (the "Requisitioned Resolutions"). If the Requisitioned Resolutions are passed, the appointment of each member of the New Board will therefore effectively be made subject to shareholder approval at general meetings, which is likely to be a deterrent in attracting potential New Board members.
The Board further considers such a process to be an unnecessary waste of time and Company resources (particularly since under the Company's Articles of Association all directors appointed by the Board must offer themselves for re-election at the first Annual General Meeting following their appointment). In light of the foregoing, as well as other reasons previously given, the Board unanimously recommends that shareholders VOTE AGAINST the Requisitioned Resolutions.
Please be assured that the Board will continue to strive to achieve maximum value for shareholders pending the appointment of the New Board and is still open to meeting with any potential cash buyers of each Trading Business.
Replacement pages for audited accounts
The Board thanks Lisa Clarke for bringing to its attention certain drafting errors which appeared in the notes to the audited annual report and financial statements of the Company for the year ended 31 March 2017, circulated to shareholders on 5 September 2017 (the "2017 Accounts"). Whilst such errors have no consequences from an audit perspective, please find enclosed two replacement pages which should be used by shareholders in substitution for pages 26 and 37 of the 2017 Accounts. The 2017 Accounts which appear on the Company's website have been updated accordingly.
Shareholder statement
Further to the announcement published on 5 September 2017 by the Company, please find enclosed a shareholder statement made on behalf of Keith Staton (the "KS Statement") in connection with the resolution to be considered at the requisitioned general meeting of the Company to be held on 28 September 2017. The Company is required to circulate the KS Statement to shareholders under section 315 of the Companies Act 2006.
Yours faithfully
Tim Jackson-Smith
Chairman"
ENDS
For further information, please contact:
MBL Group plc Tel: 01772 440440
Tim Jackson-Smith
SPARK Advisory Partners Limited Tel: 0113 370 8970
(NOMAD)
Sean Wyndham-Quin
Mark Brady