NPT.L Regulatory News (NPT)

8 Nov 2006 07:02

Stream Group PLC08 November 2006 Date: 8th November 2006 On behalf of: Stream Group plc ("Stream" or "the Company") Embargoed until: 0700hrs Stream Group plc • New direction for Company focusing on interactive gaming and gambling under UK gaming licence • Change of Company name to NetPlay TV plc • Proposed sale of Stream Live Services Limited to existing management • Acquisition of Vegas247 Limited and Vegas247 Broadcasting Limited • Proposed Board changes - Gordon Robson, Chairman and CEO, and Michael Spencer, Group Managing Director to step down. Proposed appointment of Martin Higginson as Chairman and CEO • Notice of Extraordinary General Meeting The Board of Stream Group plc (AIM: SEA), which currently operates in a numberof interactive media areas including fixed-line psychic services, mobilebanking, and mobile gaming, today announced proposals to instigate a change ofdirection for the Group and to re-focus the Company's efforts into an area whichthe Directors believe offers more immediate potential and presents a newopportunity for the creation of additional shareholder value. The decisionfollowed an approach by Martin Higginson, former CEO and founder of MonstermobGroup plc. KEY INFORMATION This summary should be read in conjunction with the full text of thisannouncement. • Stream Group plc has conducted a comprehensive review of the business, the opportunities available to it and the prospects for the Group as a whole following an approach by Martin Higginson. • The Board concluded there is a need for a change of direction and has decided to concentrate its future efforts on interactive gaming and gambling in the United Kingdom. This will encompass interactive TV, online gaming, and as technology improves, mobile gaming and gambling. The Company will operate exclusively under a UK gaming licence offering a converged gambling solution to UK residents. The Board believes this gives the Company a clear direction and focus. • The Group's future strategy will not include a fixed line psychic services business and as a result this business is to be sold. In addition, the Company will further review its options for the mobile banking business, MChex Limited, a loss making business acquired in January 2005. • The Company has today entered into a conditional agreement to dispose of the entire issued share capital of Stream Live Services Limited (the psychic services business), together with that company's trading business and associated assets and liabilities to SLS (Holdings) Limited, a company managed by Messrs Gordon Robson and Michael Spencer, both of whom are directors of Stream Group plc. This agreement is conditional upon approval by the Company's shareholders at the EGM. The maximum possible consideration is £3 million and the minimum is £2 million payable in cash, further details of which are set out below. • Following the disposal, Messrs. Gordon Robson and Michael Spencer will resign from the Board of the Company. Neither Mr Robson nor Mr Spencer will receive any compensation for loss of office, their employments being terminated on 1 December 2006. Mr Martin Higginson has been invited by the Board to accept the position of Chairman and Chief Executive, conditional upon the approval of the disposal at the EGM. Mr Patrick Greene will continue in the position of Finance Director and the two non executive directors will also remain in office. • As part of the revised strategy, the Company has today entered into a conditional agreement to acquire the whole of the issued share capitals of Vegas247 Limited and Vegas247 Broadcasting Limited, companies operating an interactive gaming television channel on satellite and cable TV. The business operates solely in the UK under a UK gaming and gambling licence. This agreement is conditional upon the aforementioned disposal receiving shareholder approval at the EGM. The consideration consists of £1 million in cash, payable on completion, together with 7.25 million ordinary shares of 5p each in Stream Group plc plus an amount equivalent to the net assets of Vegas247 Limited and Vegas247 Broadcasting Limited up to a maximum amount of £200,000. • In light of the change of direction for the Group it has been decided to change the name under which the Group will operate to 'NetPlay TV plc' and a resolution to change the name of the Company will be proposed at the EGM. • Martin Higginson, through his investment vehicle, Hindley Investments Limited, currently owns 1.8 million shares in Stream Group plc and has taken an option over 5 million shares owned by Reef Investments Limited representing 28% of its total shareholding and 1 million shares owned by Michael Spencer representing 25% of his total shareholding. It is Mr Higginson's intention to acquire these shares at an agreed price of 20p subject to the aforementioned disposal receiving shareholder approval at the EGM. • As Gordon Robson and Michael Spencer are both Directors of Stream, the transaction is classified as a related party transaction under the AIM Rules. An Extraordinary General Meeting of Stream Group plc will be held at 10.00am on Friday 1 December 2006 to seek shareholders' approval. The Independent Directors recommend shareholders to vote in favour of theResolutions to be proposed at the EGM. Mr Higginson, through his investmentvehicle, Hindley Investments Limited, has given an irrevocable undertaking tovote in favour of the Resolutions in respect of his beneficial holding,amounting to 1.8 million Ordinary Shares, representing approximately 3% of theCompany's issued Ordinary Share capital. In addition, Schroder InvestmentManagement Limited has given an undertaking to vote in favour of the Resolutionsin respect of its holding of approximately 6.5 million Ordinary sharesrepresenting approximately 11% of the Company's issued Ordinary Share capital. • Commenting on the announcement, Gordon Robson, Chairman and Chief Executive of Stream Group plc, said: "I believe our decision to refocus the direction of the Group is in the bestinterests of all our shareholders and with Reef Investments Limited retaining asignificant stake in the Company, my family and I will have a continuinginterest in the Company going forward. Investment into the growing UK gamingmarket will I believe reap substantial rewards. The changes in gaminglegislation proposed for September 2007 will allow companies such as Stream toflourish. Investment today in this sector has to be a tremendous opportunityand I believe Martin Higginson is uniquely positioned to deliver this newstrategy. Martin's expertise and vision combined with a focused management teampresents a significant opportunity for the creation of additional shareholdervalue." Martin Higginson, proposed Chairman and Chief Executive of Stream Group plc,added: "Gordon and Mike have built up a great business and I am delighted to be takingup the reins at the start of a new era. The opportunity to reposition Streamand develop it to become a key player in the UK gaming industry is one that Irelish. This sector is on the verge of explosive growth and I believe therepositioned Stream business can take full advantage of this opportunity. Theacquisition of Vegas 247 will bring strong and well developed interactive TVgaming skills to the team. Combining these with the Company's internet andmobile skills will, I believe, produce a unique business in this sector able tooffer a fully converged gaming solution to UK residents. The disposal ofnon-core business assets is the right thing for the business as we move forward,allowing us to focus fully on the opportunities that lie ahead and as a resultoffer increased shareholder value. I am confident that Stream will be able tocommand a key position in the UK gaming industry." David Wainwright, Chief Executive of Vegas 247 Limited and Vegas 247Broadcasting Limited, added: "I am delighted to be joining Martin and the Stream team at this exciting time.Since inception, the Vegas247 business has grown rapidly and I am confidentthat, as part of the Stream Group, we will see this growth continue at an evenfaster rate. There are additional interactive TV programmes we wish to launchand as part of the Stream Group we will be able to accelerate our plans, notonly offering new programming on TV but also on the internet and mobile too." Enquiries to: Stream Group plcGordon Robson via RedleafMartin Higginson via Redleaf Redleaf Communications Tel: 020 7822 0200Emma Kane/Ian Haworth/Sanna Lehtinen Mob: 07876 338339 ek@redleafpr.comPublication quality photographs are available Introduction Over the past few months it has become clear to the Board of Stream Group plcthat a strategic review of the operating businesses was necessary. Following anapproach by Martin Higginson, former CEO of Monstermob Group plc, the Boardundertook a comprehensive review of the business, the opportunities available toit, and the prospects for the Group as a whole. Today the Group operates in a number of interactive media areas, includingfixed-line psychic services, mobile banking, and mobile gambling. As a result of the review and having consulted with Mr Higginson, the Board hasdecided to concentrate its future efforts on gaming and gambling in the UnitedKingdom. This will encompass interactive TV, online gaming and as technologyimproves, mobile gaming and gambling. The business will operate under a UKgaming license offering a converged solution via TV, internet and mobile to UKresidents. It has been decided that the Group's future strategy will notinclude a fixed-line psychic services business and as a result this business isto be sold. We will further review our options for the mobile banking business(MChex Limited). The Board believes this revised strategy gives the Company a clear direction andfocus, which is considered to offer greater potential whilst presenting a newopportunity for the creation of additional shareholder value. The Company has today entered into a conditional sale and purchase agreement todispose of the entire issued share capital of Stream Live Services Limited,together with that company's trading business and associated assets andliabilities to SLS (Holdings) Limited, a company managed by Messrs. GordonRobson and Michael Spencer, both of whom are directors of Stream Group plc. As the transaction is with related parties, it is necessary for the Board to askshareholders to approve the terms of the agreement. Further details of thedisposal and the terms of the sale and purchase agreement are set out belowunder the heading "Principal Terms of the Disposal". Following the disposal, Messrs. Gordon Robson, Chairman and Chief Executive, andMichael Spencer, Group Managing Director, will resign from the Board of theCompany. Mr Martin Higginson has been invited by the Board to accept theposition of Chairman and Chief Executive, conditional upon the approval of thedisposal at the EGM. Mr Patrick Greene will continue in the position of FinanceDirector and the Non-executive directors, Mr Graham Stevens and Mr NeilMontefiore, will also remain in office. The Board has agreed to undertake a comprehensive review of the mobile bankingbusiness, MChex Limited, a loss-making business acquired in January 2005. The review of the mobile banking business, the disposal of the fixed-linebusiness and the aforementioned Board changes pave the way for theimplementation of the revised strategy. As the next step, the Company has todayentered into a conditional sale and purchase agreement to acquire the whole ofthe issued share capital of Vegas247 Limited together with that of Vegas247Broadcasting Limited, a company operating an interactive gambling televisionchannel on satellite and cable TV. This business operates solely in the UKunder a UK gaming and gambling licence. This agreement is conditional upon theabove disposal receiving shareholder approval at the EGM. Further details ofthe acquisition and the terms of the sale and purchase agreement are set outbelow under the heading "Principal Terms of the Acquisition". Further details of the future strategy of the Group are set out below under theheading "Future Strategy". Principal Terms of the Disposal Under the terms of the Disposal Agreement, the Company has agreed to dispose ofthe entire issued share capital of Stream Live Services Limited (the psychicservices business) along with its trading business and associated assets andliabilities to SLS (Holdings) Limited, a company managed by Gordon Robson andMichael Spencer, both of whom are directors of Stream Group plc, for a maximumpossible consideration of £3 million to be satisfied by the payment of £1.5million in cash on completion, up to a further £0.5 million payable in cash anddependent upon the retention of a material contract and a minimum of £0.5million up to a maximum of £1 million payable in cash upon the achievement ofspecific turnover targets in the years to 31 December 2007 and 2008. Theminimum possible consideration is £2 million. The deferred considerationpayments are secured by personal guarantees from Messrs. Robson and Spencer. The Disposal Agreement is conditional on the passing of the Resolution. The Company has given no warranties or restrictive covenants in the DisposalAgreement in relation to Stream Live Services Limited. As a condition of this transaction neither Mr Robson nor Mr Spencer will receiveany compensation for loss of office which if payable could, in aggregate, haveamounted to approximately £400,000. The Company will enter into a Transition Services Agreement with SLS (Holdings)Limited under which the Company and SLS (Holdings) Limited will provide servicesto each other. This agreement will terminate three months after completion ofthe Disposal. Financial Performance The financial performance of the companies being disposed of, for the two yearsended 31 December 2004 and 2005 and the six months ended 30 June 2006 was asfollows: Stream Live Services Limited Unaudited Six Audited Year Audited Year months to 30 ended 31 ended 31 and June 2006 December 2005 December 2004 Talk Telecom Limited (Combined) £000 £000 £000 Turnover 3,095 6,004 6,337Operating profit 306 513 386Profit after taxation 220 359 271 The net assets of Stream Live Services Limited and Talk Telecom Limited at 30June 2006 were £2,331,000 and £82,000 respectively. Since that date, dividendstotalling £0.4 million have been paid to Stream Group plc and it is proposed topay further dividends of £1.6 million prior to completion. Reasons for the Disposal It is the view of the Independent Directors of the Board that, given the newstrategy being adopted, the fixed-line psychic services business of the Group,carried on by Stream Live Services Limited and its subsidiary Talk TelecomLimited, is no longer central to the longer term objectives of the Group. Thisbusiness has seen little progress over the last two years and is experiencingincreased competition and pressure on its margins. It is considered to be abusiness which faces risks from increased regulation and the adverse publicityassociated with 'call to TV' programming. The proceeds of the disposal will supplement the cash resources of the businessand will help to fund future acquisitions. The Disposal is also integral to the revised strategy, further details of whichare given below under the heading "Future Strategy". Future Strategy It is the view of the Board that there is a need for a change in the directionof the Group and a re-focussing of our efforts into an area which, in theBoard's opinion, offers greater potential whilst presenting a new opportunityfor the creation of additional shareholder value. Our belief in gaming as a potential business led us to explore the currentroutes to market and the Board believes that the immediate prospects for gamingin the United Kingdom lie in interactive TV, online gaming and, as technologyimproves, mobile gaming and gambling. These media will therefore be at thecentre of our strategy to develop Stream into a key participant in the UK gamingindustry. Through the acquisition of Vegas247 Limited and Vegas247 Broadcasting Limited,the company should be well positioned to take advantage of the convergence incustomer needs. It will deliver gaming and gambling services in a number ofdifferent formats including Interactive TV, Internet and ultimately mobile thusgiving the user a comprehensive, easy to use gaming experience. Today Vegas247 operates an interactive gambling TV channel (SKY channel 847)focusing on roulette. This service is operated under a UK betting licence,allowing the company to film the actual spinning of a real roulette wheel. (Thecompany's competitors operate a computer generated image). The Company will invest marketing expertise in expanding the number of customersas well as introducing new interactive gaming formats running across TV,internet and mobile devices. Mr Martin Higginson has been invited by the Board to accept the position ofChairman and Chief Executive upon the resignation of Messrs. Robson and Spencerand the approval of the Disposal at the EGM. The appointment is conditionalupon the passing of the Resolutions at the EGM and will not take effect beforethe EGM. The Board believes Martin Higginson will bring a great deal ofknowledge and expertise to the business. He has extensive mobile knowledge andis recognised as one of the leading authorities in the mobile entertainmentindustry. Mr Higginson was the founder and former CEO of Monstermob Group plc.Prior to forming Monstermob he was Business Development Director of Thus plc,responsible for Demon Internet and their Interactive PRS division. He joinedThus plc following the sale of his business, Megafone Limited, an interactivepremium rate gaming business to Scottish Power plc in 1995. Mr Higginson, through his investment vehicle, Hindley Investments Limited,currently owns 1.8 million shares in Stream Group plc and has taken an optionover 5 million shares owned by Reef Investments Limited representing 28% of itstotal shareholding and 1 million shares owned by Michael Spencer representing25% of his total shareholding. It is Mr Higginson's intention to acquire theseshares at an agreed price of 20p subject to the approval of the Disposal at theEGM. Principal Terms of the Acquisition Under the terms of the Acquisition Agreement, the Company has agreed to acquirethe whole of the issued share capitals of Vegas247 Limited and Vegas247Broadcasting Limited along with their trading businesses and associated tradingassets and liabilities for a consideration payable on completion consisting of£1 million in cash together with either 7.25 million ordinary shares of 5p eachin Stream Group plc or, in the event that the 30 day average middle market pricefor the Ordinary Shares of 5p each in Stream Group plc is 9p or less, or 36p ormore, an unsecured convertible loan note to the value of £1 million plus anamount equivalent to the net assets of Vegas247 Limited and Vegas247Broadcasting Limited up to a maximum amount of £200,000. The convertible loannote will accrue interest at the Barclays Bank plc base rate plus 1% and isrepayable by the Company after 12 months of issue. The loan note is convertibleat the date of repayment with the consent of the Company into Ordinary Shares ofthe Company at a value equal to the average middle market price of the Company'sShares over the 10 day period prior to the date which is the first business daybefore the date of conversion. The Acquisition is conditional upon the passingof the Resolution and completion of the Disposal. Financial Performance The unaudited financial performance of the companies being acquired, for the sixmonths ended 30 November 2005 and for the ten months ended 30 September 2006,was as follows: Vegas247 Limited Unaudited Ten Unaudited Six months to 30 months and September 2006 to 30 NovemberVegas247 Broadcasting Limited (Combined) 2005 £000 £000 Turnover 1,076 305Operating profit 59 1Profit after taxation 47 1 The net assets of Vegas247 Limited at 30 November 2005 were £4,000 and the netliabilities of Vegas247 Broadcasting Limited were £3,000. Extraordinary General Meeting An Extraordinary General Meeting ("EGM") of the Company will be held at theoffices of Stream Group plc's Solicitors, Fox Williams LLP (Ten Dominion Street,London, EC2M 2EE) on Friday, 1 December 2006 at 10 a.m. The meeting will beheld to approve an ordinary resolution for the sale and purchase agreement forthe disposal of the share capital of Stream Live Services Limited to SLS(Holdings) Limited, a company managed by Messrs Gordon Robson and MichaelSpencer. Recommendation As Gordon Robson and Michael Spencer are both Directors of Stream, thetransaction is classified as a related party transaction under the AIM Rules.The Directors of Stream, other than Gordon Robson and Michael Spencer, havingconsulted with the Company's nominated adviser, KBC Peel Hunt Ltd, consider theterms of the Disposal to be fair and reasonable in so far as Stream'sshareholders are concerned. The Independent Directors recommend shareholders to vote in favour of theResolutions to be proposed at the EGM. Mr Higginson, through his investmentvehicle, Hindley Investments Limited, has given an irrevocable undertaking tovote in favour of the Resolution in respect of his beneficial holding, amountingto 1.8 million Ordinary Shares, representing approximately 3% of the Company'sissued Ordinary Share capital. In addition, Schroder Investment ManagementLimited has given an undertaking to vote in favour of the Resolutions in respectof its holding of approximately 6.5 million Ordinary shares representingapproximately 11% of the Company's issued Ordinary Share capital. This information is provided by RNS The company news service from the London Stock Exchange