Primorus Inv. Regulatory News (PRIM)

CSS Stellar plc

("CSS" or the "Company")

Cessation of Motorsports client business

Introduction

CSS Stellar plc, the entertainment and sports management company, today announces that it has entered into arrangements with GP Sports Holdings Limited ("GPSH"), a company wholly-owned by Julian Jakobi, the Company's Executive Chairman, and Adrian Sussmann, a consultant to the Company, whereby the Company will cease to undertake its Motorsports client business (the "Arrangements"). As part of the Arrangements, the Company has agreed to terminate Julian Jakobi's consultancy and/or executive arrangements and to waive the non-compete clause and the 12 months notice period. Julian Jakobi will become the Company's non-executive Chairman. Adrian Sussmann will have no ongoing role with the Company.

Financial information on the Motorsports client business 

The revenues of the Motorsports business consists mainly of commissions earned through client representation. The following table summarises the revenues and operating results of the Motorsports business for the periods stated:-

Ongoing interest in the Motorsports client business

Under the Arrangements, GPSH will provide receivables collection services for a fee of 40% of the amount collected by it or the Company in respect of Motorsports client contracts for the period 1 October 2010 to 31 December 2010. The total due was approximately £580,000, of which approximately £180,000 remains to be collected. GPSH will also provide receivables collection services for the 2011 and 2012 invoices relating to the remaining Motorsports client contract for a fee of 70% and 67% respectively of the amounts collected in respect thereof (in 2010, £95,000 was invoiced in respect of that contract). In 2012, the Company will receive payments from GPSH equal to 110% of its share of the net amount collected in respect of that remaining contract's invoices in 2011 less its share of the net amount (if any) collected in respect of that remaining contract's invoices in 2012. In addition, GPSH will receive 10% of the net amounts received by the Company in respect of any settlements of the dispute that its US golf associated company has with one of its former clients.

The Company will also have a 20% carried economic interest in GPSH which will entitle it to a cash payment based on what the Company would have received if it had had a 20% shareholding in GPSH. The cash payment may be called for by the Company or triggered by GPSH (in either case, "triggered") at any time up to three years from the date of the Arrangements. If the cash payment is triggered following a sale of GPSH, the payment to be received by the Company would be 20% of the net sale proceeds; otherwise the payment would be an amount equal to 20% of the assumed fair value of GPSH at the date it is triggered (based on 3.5 times the pre-tax profits of GPSH for the financial year in which it is triggered or, for a cash payment triggered after the first full financial year of GPSH, ending prior to the date the payment is triggered). If GPSH triggers the cash payment and there is a sale of GPSH's business or a change of control of GPSH prior to the end of the third anniversary of the Arrangements being entered into, the Company would receive a further payment equal to 20% of the sale proceeds less any payments previously made to the Company on the cash payment being triggered.

Rationale for and impact of the cessation

The Motorsports client business is built entirely around the client representation agreements, all of which are due to expire on 31 December 2010 with the exception of an agreement with Allan McNish which is due to expire on 31 December 2011. The costs associated with servicing these agreements, the fact that there is no certainty of any renewals, together with the unrelated public company costs, has led the Board to conclude that the continuation of the Motorsports client business is no longer viable nor in shareholders' interest within a public company.

In the year ended 31 December 2009, the principal activities of the CSS Group comprised its motorsports and golf businesses. On 30 September 2010, the CSS Group disposed of its European golf business. The effect of the cessation of the Motorsports client business is that the Company will no longer have any meaningful trading activities, no ongoing liabilities in respect of these businesses and a substantially reduced overhead. Its business interests will comprise a 30% interest in Hambric Sports Management LLC and a 20% carried economic interest in GPSH. The Company has budgeted for a cost base of £85,000 for 2011. Taking into account the amounts expected to be received under the Arrangements together with the expected US golf settlements, the Board considers that the Company's resulting cash balances make it well-placed to pursue its proposed Investing Policy.

Proposed adoption of an Investing Policy

Under the Arrangements, the Company will have effectively ceased to own, control or conduct any of its existing trading business and as a result will be deemed an investing company for the purposes of the AIM Rules for Companies. Pursuant to Rule 15 of the AIM Rules for Companies, the Company will despatch in due course a circular to shareholders of the Company convening a general meeting of the Company (the "Circular") to adopt an Investing Policy. 

Related party transaction

Julian Jakobi, by virtue of being a director and substantial shareholder of the Company, is deemed a related party for the purposes of the Arrangements. The directors, other than Mr Jakobi who has taken no part in the Board's consideration of the Arrangements, consider, having consulted with Northland Capital Partners Limited, the Company's Nominated Adviser, that the Arrangements are fair and reasonable so far as the shareholders of the Company are concerned.

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