PRP.L Regulatory News (PRP)

9 Dec 2005 07:01

Prime People PLC09 December 2005 For 7am release 9 December 2005 Prime People plc Proposed acquisition of Macdonald & Company Group Limited Approval of waiver of the obligation to make a mandatory offer under Rule 9 of the City Code on Takeovers and Mergers Admission of the Enlarged Share Capital to trading on AIM 1 for 10 Share Capital Consolidation Notice of Extraordinary General Meeting Prime People plc ("the Company"), today announces that it has conditionallyagreed to acquire the entire issued share capital of Macdonald & Company GroupLimited ("Macdonald"), an independent professional recruitment consultancyfocused on the commercial property industry. Key points: - The maximum aggregate consideration for the acquisition is £10.52million. This will comprise an initial consideration of £9.52 million to besatisfied by the issue of 7,155,593 New Ordinary Shares at a price of 84.13pence per share and £3.5 million in cash together with up to a further £1million by way of deferred consideration of up to 1,188,637 New Ordinary Sharesat a price of 84.13 pence per share; - The market capitalisation of the Enlarged Group on Admission (based onthe issue price of the New Ordinary Shares of 84.13p) will be approximately£9.12 million. Following completion of the Proposals, other than the issue ofthe Deferred Consideration Shares, the Vendors will hold approximately 66 percent. of the Enlarged Share Capital of the Company; - Macdonald is the only recruitment consultancy to be approved by theRoyal Institution of Chartered Surveyors ("RICS"), the principal professionalbody representing property professionals worldwide; - Macdonald has an experienced management team with a strong record ofdelivering growth; - For the year ended 31 March 2005, Macdonald reported a 40 per cent.increase in turnover at £11.7 million (2004: £8.4 million) and profit before taxup 44 per cent. at £1.16 million (2004: £0.80 million); - For the six months ended 30 September 2005, Macdonald reported turnoverof £7.4 million and profit before tax of £0.78 million. In the seven monthsended 31 October 2005, turnover was 34 per cent above the comparable period in2004; - The deferred consideration will be payable in full if the operatingprofit of Macdonald for the year ending 31 March 2006 is not less than £1.95million; - The existing Macdonald Directors, Robert Macdonald, Executive Chairman;Peter Moore, Managing Director; and John Lewis, non-executive Director, willjoin the Board of Prime People in the same roles. - Christopher Heayberd, the current Finance Director of Prime People,will continue in his present role and Simon Murphy, currently Chief Executive ofPrime People, will become a non-executive Director. Peter Hearn, currentlyChairman of Prime People and David Coubrough, currently a non-executive of PrimePeople will resign from the Board; - Irrevocable undertakings to vote in favour of the Resolutions have beenobtained from shareholders, including Prime People directors, in respect of18,752,833 Ordinary Shares in aggregate (representing 50.89 per cent. of theExisting Ordinary Shares); - The acquisition of Macdonald is classified as a reverse takeover underthe AIM Rules by virtue of its size and is conditional, inter alia, on theapproval of Prime People shareholders which is being sought at an ExtraordinaryGeneral Meeting at 11.00 a.m. on the 3 January 2006; - The Company is seeking Shareholder approval at the ExtraordinaryGeneral Meeting for a waiver of the obligation under Rule 9 of the City Codewhich would otherwise require the members of the concert party (comprising theVendors) to offer to acquire those New Ordinary Shares that they do not own; - Proposed consolidation of every 10 existing issued Ordinary Shares intoone New Ordinary Share; - It is expected that Admission of the New Ordinary Shares will becomeeffective and that dealings in the Enlarged Share Capital will commence on AIMon 4 January 2006; Commenting on the acquisition, Peter Moore, Managing Director of Macdonald andproposed Managing Director of the Enlarged Group said: "This transaction marks an exciting next step in the Macdonald story. Macdonaldhas a great growth record and is undoubtedly a leader in the propertyrecruitment sector. However, I believe we are a long way from fulfilling ourfull potential as a business. Admision to AIM will significantly increase theprofile of the business and will open up a range of new options to help usmaintain the growth of the business." Simon Murphy, Chief Executive of Prime People said: "I am delighted that we have been able to deliver on our stated acquisitionstrategy so quickly. Macdonald meets the criteria we set out in our strategy - ahigh quality service business with a strong management team, a good record ofprofits and earnings growth and the potential for further organic andacquisitive growth. I look forward to working with the new team in deliveringlong term enhanced shareholder value." This summary should be read in conjunction with the full text of theannouncement. -Ends- For further information: Prime People 0207 831 5297Simon Murphy / Chris Heayberd MacdonaldRobert Macdonald 0207 318 5874Peter Moore 0207 318 5873 WH Ireland 0161 832 6644David Youngman / Robin Gwyn Hogarth Partnership 0207 357 9477James Longfield / Georgina Briscoe EXPECTED TIMETABLE OF PRINCIPAL EVENTS Date of publication of the admission document 9 December 2005 Last time and date for receipt of forms of proxy for the EGM 1 January 2006 Extraordinary General Meeting 3 January 2006 Completion date of the Acquisition 4 January 2006 Admission effective and dealings in Enlarged Share Capital 4 January 2006expected to commence on AIM Expected date for posting of share certificates for the New 11 January 2006Ordinary Shares ACQUISITION AND SHARE STATISTICS Pre Share Post Share Capital Capital Consolidation Consolidation Mid market price per Ordinary Share on 7December 2005 being the most recent practicabledate prior to the publication of the Admission document 6.25p Number of Existing Ordinary Shares 36,846,692 Number of Ordinary Shares to be issued toenable the Share Capital Consolidation to take place 8 Issue price per New Ordinary Share 84.13p Number of Consideration Shares being issuedunder the Acquisition 7,155,593 Number of New Ordinary Shares in issue on Admission 10,840,263 Market capitalisation of the Company at theIssue Price on Admission £9.12m Maximum number of Deferred Consideration Sharesto be issued under the Acquisition 1,188,637 Maximum percentage of the Enlarged ShareCapital held by the •endors the issue of the Consideration Shares 66.01% Percentage of the issued share capital held bythe •endors following the issue of the DeferredConsideration Shares (assuming the Deferred Consideration Shares are issued in full) 69.37% 9 December 2005 PRIME PEOPLE plc Proposed acquisition of Macdonald & Company Group Limited Approval of waiver of the obligation to make a mandatory offer under Rule 9 of the City Code on Takeovers and Mergers Admission of the Enlarged Share Capital to trading on AIM 1 for 10 Share Capital Consolidation Notice of Extraordinary General Meeting Introduction The Board of Prime People announced today that the Company had agreedconditionally to acquire the entire issued share capital of Macdonald, anindependent professional recruitment consultancy to the property industry. Theconsideration is up to £10.52 million to be satisfied by the issue of 7,155,593New Ordinary Shares at a price of 84.13 pence per share and £3.5 million in cashtogether with up to 1,188,637 further New Ordinary Shares by way of deferredconsideration at a price of 84.13 pence per share. The Consideration Shares will represent up to approximately 66.0 per cent. ofthe Enlarged Share Capital. Existing shareholders of Prime People will togetherhold approximately 34.0 per cent. of the Enlarged Share Capital. Assuming allthe Deferred Consideration Shares are issued, the Consideration Shares and theDeferred Consideration Shares will represent approximately 69.37 per cent. ofthe then issued share capital of the Company (assuming no further shares havebeen issued). In view of the size of Macdonald relative to the Company, theAcquisition will constitute a reverse takeover of Prime People under the AIMRules and will require the prior approval of Shareholders at the ExtraordinaryGeneral Meeting, notice of which is set out at the end of the Admissiondocument. Additionally, because the members of the Concert Party (comprising the Vendors)will collectively own more than 30 per cent. of the Enlarged Share Capital as aresult of the Acquisition, the Company is seeking a waiver of the obligationunder Rule 9 of the City Code which would otherwise require the members of theConcert Party to offer to acquire those New Ordinary Shares that they do notown. A proposal seeking Shareholder approval for such a waiver is, therefore,included in the notice of Extraordinary General Meeting set out at the end ofthe Admission document. Completion of the Acquisition is conditional, interalia, on the admission of the Consideration Shares to trading on AIM (subjectonly to allotment). If the Resolutions are duly passed at the EGM, and the other conditions set outin the Acquisition Agreement are met, trading of the Existing Ordinary Shares onAIM will be discontinued and the Enlarged Share Capital will be admitted totrading on AIM. Dealings on AIM in the Enlarged Share Capital are expected tocommence on 4 January 2006. If the Acquisition is not completed, dealings in theExisting Ordinary Shares on AIM will continue. Background to and reasons for the Proposals Since May 2005 the Board, with the support of the major shareholders of theCompany, has significantly increased its efforts to develop the Company throughthe identification of an appropriate acquisition in the support service orindustrial sectors. The key characteristics of the target were that it shouldhave strong management and be trading profitably and that it should have thepotential to create long term shareholder value as measured by growth inearnings per share and cashflow, with the growth being achieved organically andvia complementary acquisitions if appropriate. The Board believes that Macdonald, with its market position, its reputation as aprofessional recruitment consultancy to the property sector, its experiencedmanagement and its financial performance to date, provides an excellentopportunity to satisfy these criteria and to achieve these objectives. Information on Macdonald IntroductionMacdonald is an independent recruitment consultancy operating within theproperty sector in the recruitment of chartered surveyors and professionals forthe property, facilities, construction and related sectors. Macdonald was incorporated in 1998 and has two trading subsidiaries, MacdonaldProperty and Macdonald Freelance as well as three dormant subsidiaries. ActivitiesMacdonald Property focuses on the recruitment of full time employees for theproperty industry, undertaking two types of assignments: file search assignmentsand executive search and selection assignments. The fees for both types ofassignment are usually calculated as a percentage of the projected totalremuneration of the candidate in the first year of employment. Recognising growing demand for temporary and contract recruitment, Macdonald hasestablished teams focused on the introduction of contract professional andsupport staff who are available for both short and long term contracts. Thisactivity is carried on through Macdonald Freelance. Macdonald Freelance chargesfees representing the cost of paying the temporary staff, together with amargin. Macdonald operates from leasehold offices in Dover Street, London and centralManchester. Specialist sectorsThe business of Macdonald has, and continues to develop, specialist teams ofconsultants focusing on particular roles and clients. This approach seeks toensure that the client's needs can be more effectively serviced by recommendingthe most suitable recruitment technique and identifying and attracting the mostappropriate candidates. Consultants work within the following specialist sector teams: - general practice, including investment, development, management,agency, property finance and rural practice; - planning, including town and country planning, transport planning,landscape planning, environmental, urban design and regeneration; - technical, including quantity surveying, building surveying, projectmanagement and professional construction staff; - business support, including accountants, finance staff, secretaries,data entry and receptionists; and - facilities management, including health and safety, and environmental. Clients and candidatesMacdonald has a wide variety of clients including consultancies, financialinstitutions, investment funds, property companies and developers. Macdonaldalso recruits for a number of professional bodies as well as central and localgovernment and other government agencies. Macdonald is the only recruitment consultancy to be approved by the RoyalInstitution of Chartered Surveyors (''RICS''), the leading professional bodyrepresenting property professionals worldwide. RICS has almost 110,000 membersof which 85,000 are based in the United Kingdom. Initiatives undertaken includethe annual RICS and Macdonald salary and benefits survey guide to remunerationlevels in the property sector. The large number of people associated with the British Institute of FacilitiesManagement (approximately 9,600 members) and the Royal Town Planning Institute(approximately 8,100 members) also provides Macdonald with an extensive pool ofpotential candidates. Macdonald has developed a substantial database of approximately 56,500candidates. Macdonald aims to meet the majority of the recruitment needs of itsclients in terms of both function and seniority through database search,advertised selection and executive search. Macdonald currently has around 2,260positions that it is seeking to fill for clients. Salaries for these positionsare in the range of £25,000 to £150,000 per year. InternationalWhilst the majority of Macdonald's revenue is generated in the UK, theinternational business of Macdonald is becoming increasingly active in certaingeographical markets, in particular where there is an opportunity to serviceexisting clients. Macdonald intends to open an office in Dubai in January 2006and is investigating the benefit of establishing operations in Hong Kong. Bothof these markets are currently being serviced from the UK. Management and employeesThe directors of Macdonald believe that the key determinant to achieving growthwithin the business is attracting and retaining trained and experiencedconsultants to win business and identify and place candidates. The averagenumber of people employed by Macdonald (excluding temporary contractors) in thethree years and six months ended 30 September 2005 is set out below: Year ended 31 March Six months ended 30 September 2003 2004 2005 2005Permanent consultants 29 27 35 43Freelance consultants 5 9 12 12Support staff andmanagement 14 14 15 16 -------- -------- ------- -------- 48 50 62 71 -------- -------- ------- -------- The directors of Macdonald believe that Macdonald's staff turnover is lower thanthe industry average and that its levels of staff retention contribute to thecontinuing development of its business. Key structural features and initiativesto attract and retain employees include: - the remuneration structure, which includes a high level of commissionattainable by higher performers; - share ownership and the granting of options to employees; - a commitment to the communication of goals and information to staffthrough conferences and the dissemination of management information; and - the career opportunities provided by the growth in the business andopen and objective criteria for promotion through Macdonald's grading structure. Summarised financial informationThe following financial information on Macdonald has been extracted withoutmaterial adjustment from the historical financial information on Macdonald forthe three years ended 31 March 2005 and the six months ended 30 September 2005as set out in Part III (B) of the Admission document. This key financialinformation should be read in conjunction with the full text of the Admissiondocument and investors should not rely solely on this summarised information. Year ended 31 March Six months ended 30 September 2003 2004 2005 2005 £000s £000s £000s £000sTurnover 6,562 8,382 11,692 7,429Gross Profit (Net FeeIncome) 3,713 4,213 5,867 3,618Operating Profit 231 804 1,164 783Profit on ordinaryactivities before tax 224 802 1,157 778Net asset value 512 802 1,127 1,103 StrategyMacdonald intends to continue to develop current revenue lines by expandingthose teams where demand from clients suggests this is appropriate. A particularfocus is expected to be placed on facilities management, health and safety andregional opportunities within the UK. It is also planned to develop new teams tofocus on property finance, architecture and senior construction professionals. Macdonald has undertaken research to identify international opportunities andplans to commit resources to exploiting those in the Middle East in early 2006and in the Far East and Australia thereafter. Where Macdonald is able to identify acquisition targets of an appropriate sizeand operational fit it aims to pursue these, particularly those acquisitionswhich may provide access to additional areas of specialism within the propertyrecruitment sector. Whilst the focus of Macdonald is on the property recruitmentsector, the Continuing Directors believe that in due course it may beappropriate to apply the model to certain other sectors. Information on Prime People Following the disposal of its then principal business, Portfolio InternationalLimited, a hotel and leisure industry recruitment company, in August 2004, theprincipal operating business of Prime People is Harper Craven Associates Limitedwhich provides management training. In addition Prime People has a 44.66 percent. shareholding in Cameron Kennedy Resources Limited which is a financialrecruitment company. Since May 2005 the main focus of the Board has been theidentification and analysis of acquisition opportunities. Financial informationon Prime People is set out in Part IV and Part V of the Admission document. Principal terms and conditions of the Acquisition The Vendors and the Company have entered into the Acquisition Agreement,pursuant to which the Company will acquire from the Vendors the entire issuedshare capital of Macdonald. The aggregate consideration payable by the Companyto the Vendors pursuant to the Acquisition Agreement will be £10.52 million andwill be payable as follows: (a) as to £9.52 million on Completion, payable as to £3.5 million in cash and asto £6.02 million by the issue and allotment to the Vendors, credited as fullypaid, of the Consideration Shares (at a price of 84.13 pence per share); and (b) up to £1.0 million by the issue and allotment to the Vendors, credited asfully paid, of the Deferred Consideration Shares following the announcement ofthe results of the Enlarged Group for the period ending 31 March 2006. TheVendors will be entitled to receive £5.00 of further consideration for every £1that the operating profit of Macdonald and its subsidiaries for the year ending31 March 2006 exceeds £1.70 million up to a maximum further consideration of£1.85 million and £2.50 of further consideration for every £1 that suchoperating profit is greater than £1.85 million up to a maximum furtherconsideration of £1.95 million. Such further consideration will be satisfied bythe issue to the Vendors of such number of Deferred Consideration Shares as hasan aggregate value calculated at the Issue Price equal to the furtherconsideration. The £3.5 million cash consideration is to be provided from the existing cashresources of Prime People and an acquisition facility provided by Barclays Bankplc. The Consideration Shares and the Deferred Consideration Shares will, whenissued, rank pari passu with the New Ordinary Shares already in issue including,without limitation, the right to receive all dividends and distributionsdeclared, made or paid on the New Ordinary Shares by reference to record datesafter the dates of issue of the Consideration Shares and the DeferredConsideration Shares. The Acquisition is conditional upon (inter alia): (a) the Panel granting a waiver of the obligation which would otherwise fall onthe Vendors to make a general offer under Rule 9 of the City Code; and (b) the shareholders of the Company passing the Resolutions set out in theNotice of EGM other than Resolution 2. The Acquisition Agreement contains a long-stop date following which theagreement shall terminate should the conditions to completion not be satisfiedor waived prior to 31 January 2006.The Acquisition Agreement contains certain non-competition and other restrictivecovenants given by the Proposed Directors. Upon completion of the Acquisition, each of the Proposed Directors will beappointed as directors of the Company. The service contracts of Robert Macdonaldand Peter Moore with Macdonald are being amended to provide for them to becomedirectors of the Company and for John Lewis to enter into a non-executiveappointment letter with the Company. Further details are set out in paragraph 6of Part VII of the Admission document. Further details of the Acquisition Agreement are set out in paragraph 12 of PartVII of the Admission document. Directors, Proposed Directors and employees DirectorsThe Board currently comprises the following directors in respect of whom briefbiographies are set out below: Peter Hearn (aged 52) Non-executive ChairmanPeter Hearn was appointed to the board in June 1992 and on 16May 2005 becameNon-executive Chairman. He qualified as a chartered accountant with Coopers &Lybrand after graduating from Cambridge in 1974. He then worked in a range ofindustries before founding the PSD Group plc in 1991, which he floated on theLondon Stock Exchange in 1997, and of which he is now non-executive chairman. Simon Murphy (aged 41) Chief ExecutiveSimon Murphy was appointed Chief Executive of the Company on 16 May 2005. Hequalified as a chartered accountant with Coopers & Lybrand. He was, until April2005, a managing director within the global investment banking division of HSBC. Christopher Heayberd (aged 53) Finance DirectorChristopher Heayberd is a chartered accountant who returned to the Board in June2000 having spent 4 years as a finance director of PSD Group plc. He hasconsiderable experience as a finance director of both public and privatecompanies. David Coubrough (aged 49)Non-executive DirectorDavid Coubrough was appointed a Non-executive Director on 30 April 2003,following his resignation as Chief Executive of Prime People. He is an executivedirector of the Bespoke Hotel Company Limited and a non executive director offour other private companies. It is proposed that Peter Hearn and David Coubrough will resign from the Boardon completion of the Acquisition and that, at the same time, Simon Murphy willstep down as Chief Executive and assume a Non executive role. Proposed DirectorsThe Proposed Directors are: Robert J G Macdonald (aged 57) proposed Executive ChairmanRobert has held senior positions within the recruitment industry since 1973 whenhe founded Reuter Simkin Limited, a recruitment business that grew to become amarket leader in both legal and property recruitment. After the sale of ReuterSimkin Limited in 1989, he subsequently acquired shares in and was chairman of,two other recruitment companies. Macdonald commenced trading in 1994 from withinthe legal recruitment business and was separately incorporated in 1996 whencertain key members of the staff acquired equity stakes. Peter H Moore (aged 36) proposed Managing DirectorFrom 1992 to 1995 Peter Moore worked with Strutt & Parker, qualifying as achartered surveyor in December 1994. He joined Macdonald in November 1995 andwas appointed Managing Director in 1996. As Managing Director of Macdonald,Peter has responsibility for its day-to-day operations. He specialises inadvising upon topics such as staff retention issues, merger and acquisition,human resource policy and remuneration benchmarking. He is also responsible forthe industry's benchmark salary and benefits survey undertaken annually inconjunction with the Royal Institution of Chartered Surveyors. John HJ Lewis OBE (aged 65) proposed Non-executive DirectorJohn Lewis is a solicitor and a consultant to Messrs. Eversheds LLP. Previouslyhe served as a partner in Lewis Lewis and Co which merged with Jaques and Co.Jaques and Lewis then merged with Eversheds. He is also currently a director ofG R Holdings Plc and various other non-competing private companies. He hasserved as chairman of Cliveden Plc and Principal Hotels Plc and as deputychairman of John D Wood & Co Plc, retiring in each case when the company wassold. EmployeesThe Continuing Directors do not intend to make any material amendment to theemployment of the Enlarged Group's current employees. Current trading and prospects of the Enlarged Group Prime PeopleThe current trading of Prime People is in line with the expectations of theDirectors. MacdonaldThe current trading of Macdonald is in line with the expectations of thedirectors. Turnover in the first seven months of the current financial year isapproximately 35 per cent. ahead of the comparable period of the previous year. Enlarged GroupThe Continuing Directors intend to continue to develop the strategy ofprofitable growth of the Enlarged Group by expanding market share in itsexisting core markets whilst continuing to enter new but related markets such asarchitecture. Dividend policy Whilst the Enlarged Group will primarily seek to achieve capital growth forshareholders, the Continuing Directors also believe it is appropriate to adopt aprogressive dividend policy. The policy will have regard to the capital andstrategic requirements of the Enlarged Group and its capital structure. TheContinuing Directors anticipate declaring a dividend for the period ending 31March 2006. Proposed change of accounting reference date The Continuing Directors intend to change the accounting reference date of theCompany to 31 March in line with that of Macdonald. The first set of auditedfinancial statements for the Enlarged Group will therefore be for the 15 monthsending on 31 March 2006. City Code on Takeovers and Mergers The terms of the Acquisition give rise to certain considerations under the CityCode. Brief details of the Panel, the City Code and the protections they affordare described below. The City Code has not, and does not seek to have, the force of law. It has,however, been acknowledged by both government and other regulatory authoritiesthat those who seek to take advantage of the facilities of the securitiesmarkets in the United Kingdom should conduct themselves in matters relating totakeovers in accordance with best business standards and so according to theCity Code. The City Code is issued and administered by the Panel. The City Code applies toall takeover and merger transactions, however effected, where the offereecompany is, inter alia, a listed or unlisted public company resident in theUnited Kingdom (and to certain categories of private limited companies). TheCompany is such a company and its Shareholders are entitled to the protectionafforded by the City Code. Under Rule 9 of the City Code, a person who acquires, whether by a series oftransactions over a period of time or not, shares which (taken together withshares held or acquired by persons acting in concert with him) carry 30 percent. or more of the voting rights of a company which is subject to the CityCode is normally required to make a general offer in cash to all othershareholders of that company to acquire the balance of the shares not held bysuch a person (or group of persons acting in concert). In addition, Rule 9 provides that where any person, together with persons actingin concert with him, holds shares in a company which is subject to the City Codecarrying not less than 30 per cent. but not more than 50 per cent. of thatcompany's voting rights and such person, or any person acting in concert withhim, acquires additional shares which increase his percentage of the votingrights in that company, such person is normally required, in the same way, tomake a general offer to all shareholders. An offer under Rule 9 must be in cash and at the highest price paid within thepreceding 12 months for any shares in the company by the person required to makethe offer or any person acting in concert with him. The Vendors are together deemed to be acting in concert for the purposes of theCity Code. After completion of the Acquisition, and assuming the full DeferredConsideration Shares are issued, the Concert Party's interest will represent, inaggregate approximately 69.37 per cent. of the voting rights attaching to theCompany's issued ordinary share capital. The table below shows the interest of the Concert Party assuming that theProposals are implemented. Name Maximum number Maximum Maximum number Maximum of New Ordinary percentage of of New Ordinary pecentage of Shares Enlarged Share Shares the issued following the Capital following the share capitalof issue of the following the implementation the Company Consideration issue of the of the following the Shares(1) Consideration Proposals(5) implementation Shares(1) of the Proposals(5)RobertMacdonald 2,126,832 19.62 2,480,127 20.62Peter Moore(2) 2,452,946 22.63 2,899,906 24.09John Lewis 12,096 0.11 14,105 0.12John Lewis andMC TrustLimited 293,126 2.70 329,320 2.74RobertMacdonald andPeter Moore(jointly) 439,429 4.05 512,424 4.26OliverWright(3) 439,429 4.05 512,424 4.26Other membersof the ConcrtParty(4) 1,391,735 12.85 1,597,924 13.28 --------- --------- --------- ---------- 7,155,593 66.01 8,344,230 69.37 --------- --------- --------- ---------- (1) Assuming 100 per cent. exercise of vested Macdonald Share Options. All outstanding options are to vest immediately prior to Completion.(2) Pursuant to agreements dated 8 December 2005, Peter Moore has agreed, immediately prior to Completion, to sell 1,302 Macdonald B Shares to each of (1) John Lewis and MC Trustees Limited (2) Jeanne Moore and (3) Gordon and Patricia Squires. The table above assumes that the sale of these shares has been completed.(3) Oliver Wright joined the business of Macdonald in September 1994. He was appointed a director of Macdonald on 1 October 2002 and resigned as an employee and director in April 2005 to undertake property development work and to prepare for a role in his family's business.(4) The other members of the Concert Party comprise 22 employees of Macdonald and three relatives of Peter Moore, none of whom will own 3 per cent. or more of the Enlarged Share Capital.(5) Assuming full issue of the Deferred Consideration Shares. There is no agreement, arrangement or undertaking whereby the beneficialownership of any of the New Ordinary Shares proposed to be allotted to themembers of the Concert Party pursuant to the Acquisition Agreement will betransferred to any other person. The Panel has agreed, subject to the passing of Resolution 7 at the EGM on apoll, to waive the obligation of the Concert Party to make a general offer underRule 9 that would otherwise arise as a result of the Proposals. Shareholders should be aware that, following the Acquisition, the members of theConcert Party will together hold more than 50 per cent. of the voting rightsattaching to the Company's issued share capital. Accordingly, the Concert Party,for so long as the members of the Concert Party continue to be treated as actingin concert, may be able to increase its aggregate shareholding without incurringany further obligation under Rule 9 to make a general offer. However, individualmembers of the Concert Party will not be able to increase their percentageshareholdings through a Rule 9 threshold without Panel consent. No member of the Concert Party holds any shares in the Company at the date ofthe Admission document and none of them has dealt for value in any shares in theCompany during the 12 months prior to the date of the Admission document. Save for the service agreements and non-executive letters of appointment, thechanges to Christopher Heayberd's service contract and the termination paymentto David Coubrough, the Acquisition Agreement and agreements summarised inparagraphs 6, 12 and 13 respectively of Part VII of the Admission document,there are no agreements, arrangements or understandings (including compensationarrangements) between any member of the Concert Party and any of the Directors,Proposed Directors, shareholders or recent shareholders of the Company connectedwith or dependent upon the Acquisition. Lock-in Agreements The Vendors (other than Oliver Wright) have agreed in the Acquisition Agreementnot to sell the Consideration Shares or Deferred Consideration Shares until theannouncement of the results of the Enlarged Group for the year ending 31 March2007 unless otherwise agreed in writing by the Company acting by theNon-executive Directors and WH Ireland. Pursuant to a lock-in agreement dated 9December 2005 between Oliver Wright (1), Prime People (2) and WH Ireland (3),Oliver Wright has agreed to certain orderly market selling arrangements, furtherdetails of which are set out in Paragraph 13 of Part VII of the Admissiondocument. Admission to AIM and dealings in the Enlarged Share Capital Application will be made by the Company for the New Ordinary Shares to beadmitted to AIM on completion of the Proposals. Subject to completion of theProposals, trading in the Enlarged Share Capital is expected to commence on 4January 2006. If the Acquisition is not approved and Resolution 7 is not passed at the EGM,the Existing Ordinary Shares will continue to be traded on AIM, theConsideration Shares and the Deferred Consideration Shares will not be issued oradmitted to AIM, the Share Capital Consolidation will not take place, theProposed Directors will not be appointed to the Board and the Board will remainas currently constituted. Proposed share consolidation Subject to the approval of shareholders at the EGM, the Directors propose tosimplify the Company's capital structure by the consolidation of every 10 issuedOrdinary Shares into one New Ordinary Share. This will reduce the total numberof shares in issue and is expected to produce a more appropriate trading rangefor the Company's share price. The number of Ordinary Shares in issue is notdivisible by 10 and, immediately prior to the Share Capital Consolidation, itwill be necessary for the Company to issue eight further Ordinary Shares tobring the total number of Ordinary Shares in issue to 36,846,700 so as to enablethe Share Capital Consolidation to be implemented. For administrative purposesonly, these eight shares will be issued to SH Company Secretaries Limited, acompany owned by the Company's solicitors and which currently holds no shares inthe Company. On the Share Capital Consolidation, SH Company Secretaries Limitedwill become entitled to a fraction of a 10p share as a result of these eightshares and this fractional element will be dealt with as set out below. On the Share Capital consolidation, where the number of Existing Ordinary Sharesheld by a shareholder is not divisible by 10, that shareholder would becomeentitled to a fraction of a 10p share. In order to deal with fractionalentitlements in the simplest possible way, it is proposed that all fractions ofshares resulting from the consolidation will be aggregated and sub-divided andthe resulting New Ordinary Shares sold in the market at the best pricereasonably obtainable. For administrative convenience, as the proceeds of suchsales to which any shareholder is entitled are expected to be less than £3.00such proceeds will be applied for the benefit of the Company instead of beingsent to the shareholder. Extraordinary General Meeting You will find set out at the end of the Admission document a notice conveningthe Extraordinary General Meeting of the Company to be held at 11.00 a.m. on 3January 2006 at the offices of Stephenson Harwood, One St. Paul's Churchyard,London EC4M 8SH, to consider Resolutions: (a) to give effect to the Share Capital Consolidation; (b) to amend the articles of association of Prime People in order to extend thescope of the directors' indemnity provisions and in order to clarify the rightof shareholders to hold shares in uncertificated form; (c) to approve the Acquisition; (d) to increase the authorised share capital of Prime People in order to createsufficient shares to, inter alia, permit the issue of shares in accordance withthe terms of the Acquisition; (e) to grant authority to the board of directors of the Company to allotunissued shares up to a maximum aggregate nominal amount of £1,230,000; (f) to dis-apply statutory pre-emption rights to permit the issue of shares forcash up to a maximum aggregate nominal amount of £54,200, representing 542,000New Ordinary Shares, being approximately 5 per cent. Of the Enlarged ShareCapital, to persons other than existing Shareholders of the Company as if freeof any right of pre-emption; (g) to waive the obligation that would otherwise exist on the Concert Party tomake a mandatory offer for the entire issued share capital of Prime Peoplepursuant to Rule 9 of the City Code; and (h) to appoint the Proposed Directors as stated in the Notice of EGM. In accordance with the requirements of the Panel, Resolution 7 will be taken byIndependent Shareholders on a poll. Intentions of Directors, major Shareholders and connected persons The following irrevocable undertakings to vote in favour of the Resolutions havebeen given by Mrs. M. Lee, City of London PR Group plc, J.W. Greenhalgh, SimonMurphy, Christopher Heayberd and Mrs. David Coubrough in respect of all theOrdinary Shares held by them amounting to 18,752,833 Ordinary Shares inaggregate (representing 50.89 per cent. of the Existing Ordinary Shares): Number of Percentage of Existing Existing Ordinary Shares Ordinary Shares Mrs M. Lee 8,999,633 24.42City of LondonGroup plc 4,294,553 11.65Simon Murphy 2,300,000 6.24ChristopherHeayberd 1,992,384 5.41J.W.Greenhalgh 1,116,263 3.03Mrs DavidCoubrough 50,000 0.14 --------- --------- 18,752,833* 50.89 --------- --------- * 1,875,283 New Ordinary Shares following the Share Capital Consolidation. Recommendation of the Directors The Directors, who have been so advised by WH Ireland, consider the terms of theProposals to be fair and reasonable and in the best interests of the Company andShareholders as a whole. In providing advice to the Board, WH Ireland has takeninto account the Directors' commercial assessments. Accordingly, the Directorsunanimously recommend Shareholders to vote in favour of the Resolutions as theythemselves (and the Shareholders connected with them) have irrevocablyundertaken so to do in respect of an aggregate of 4,342,384 Ordinary Shares,representing 11.79 per cent. of the Existing Ordinary Shares. Directors' and Proposed Directors' service arrangements 1 The Proposed Directors entered into service agreements with Macdonald Propertyon 1 April 2005, details of which are set out below: (a) The contract between Robert Macdonald and Macdonald Property provides forRobert Macdonald to act as the part time executive chairman and director of theboard of Macdonald Property at a salary of £86,250 per annum. The contract hasno fixed term and is terminable by 12 months' notice in writing from eitherparty. Under the contract Robert Macdonald is entitled to 18 working days' paidholiday per annum, medical insurance and critical illness insurance. He issubject to certain covenants for a period of 6 months following termination ofhis employment including: non-compete and non-solicitation. He is also subjectto a confidentiality undertaking. He is entitled to participate in the company'sdiscretionary bonus scheme. Any bonus payment is at the absolute discretion ofthe company and subject to the approval of the Remuneration Committee. (b) Macdonald Property has entered into a service agreement with Peter Moore onterms identical to those set out in paragraph (a) above save that Peter Moorewas appointed as managing director at a salary of £138,000 per annum, isentitled to 30 working days paid holiday per annum and works full time. He isentitled to participate in the company's discretionary bonus scheme. Any bonuspayment is at the absolute discretion of the company and subject to the approvalof the Remuneration Committee. (c) The contract between John Lewis and Macdonald Property provides for JohnLewis to act as a non executive director of Macdonald Property with a directors'fee of £5,000 per annum and a service fee of £18,000 per annum payable toBlakeney Holdings Limited. The contract is for a minimum two year fixed term andis terminable by 12 months' written notice from either Blakeney Holdings Limitedor Macdonald. Mr. Lewis has covenanted not to introduce business to any otherperson or entity with which any company in the Macdonald Group deals during thisservice agreement. He is also subject to a confidentiality undertaking. BlakeneyHoldings Limited is also a party to the service agreement and may substitute orreplace Mr. Lewis as the provider of services. 2. It is proposed that Robert Macdonald and Peter Moore enter into new serviceagreements with Prime People on completion of the Acquisition, on substantiallythe same terms as those set out in paragraphs (a) and (b) above save that theirnew agreemenets will not contain any provisions regarding bonuses. John Lewis isto enter into a non-executive director appointment letter with Prime People onCompletion. Under the non-executive appointment letter, he will be appointed foran initial term of one year from Completion and paid a fee of £15,000 per annum.The appointment may be terminated earlier by either party on three months'notice. The new service agreements and appointments letter will replace thoselisted in paragraphs (a), (b) and (c) above in their entirety. 3. The contract dated 18 May 2005 between Christopher Heayberd and Prime Peopleprovides for Christopher Heayberd to act as Finance Director of Prime People ata salary of £85,000 per annum. The contract has no fixed term and is terminableby 6 months' notice in writing from either party. Under the contract ChristopherHeayberd is entitled to 30 working days holiday per annum and medical insurance.He is subject to the following covenants for a period of 6 months followingtermination of his employment: non-compete and non-solicitation of Prime Peopleemployees or clients. He is also subject to a confidentiality undertaking.Conditional upon completion, Christopher Heayberd's service contract is to beamended to increase his notice period to 12 months and to increase his salary to£100,000 per annum, to be reviewed by the Company on 1 April 2006 and annuallythereafter. 4. The contract dated 16 May 2005 between Simon Murphy and Prime People providesfor Simon Murphy to act as Chief Executive of Prime People at a salary of£100,000 per annum. The contract has no fixed term and is terminable by sixmonths' notice in writing from either party. Under the contract Simon Murphy isentitled to 30 working days holiday per annum and medical insurance. He issubject to the following covenants: noncompete and non-solicitation of PrimePeople employees or clients. He is also subject to a confidentialityundertaking. Simon Murphy is to step down as Chief Executive on completion of the Acquisitionbut will remain as a director in a non-executive capacity. He will receivenormal salary and benefits up to that date. He will receive his contractualentitlement of £50,000 less tax and employees' National Insurance as payment inlieu of notice. On Completion Simon Murphy will enter into a non-executive director appointmentletter under which he will be appointed for an initial term of one year fromCompletion and paid a fee of £15,000 per annum. The appointment may beterminated earlier by either party on three months' notice. Simon Murphy entered into an amended share option agreement confirming that theexercise price per share of the share options held by him be adjusted to 5.75pin exchange for a discretionary bonus scheme being implemented. The Company hasagreed to a payment of £90,934. He will agree not to exercise the share optionsprior to 17 May 2007 notwithstanding that the share options will becomeexercisable on the change of control of the Company on completion of theAcquisition. He has acknowledged that the one for ten share consolidation of theCompany will result in the total number of ordinary shares subject to his shareoptions being reduced to 184,233 and the exercise price of his share optionsincreasing to 57.5p per share. 5. Each of the agreements referred to above, other than pre-existing serviceagreements referred to in paragraphs 1 (a) to (c), 3 and 4, is, and the changesto Christopher Heayberd's contract are, conditional on Admission. 6. Save as set out above, there are no existing or proposed service contractsbetween any Directors or Proposed Directors and the Company or any subsidiary ofthe Company and there are no such service contracts which have been entered intoor amended within six months of the date of this document or which contain anyprovision for compensation payable for early termination of the contract orcontain any commission or profit sharing arrangements. DEFINITIONS The following words and expressions shall have the following meanings in theAdmission document, unless the context otherwise requires: ''Acquisition'' the proposed acquisition by the Company of the entire issued share capital of Macdonald pursuant to the Acquisition Agreement ''Acquisition the agreement dated 9 December 2005 between the Vendors (1)Agreement'' and the Company (2) pursuant to which the Company has agreed conditionally to acquire the entire issued share capital of Macdonald, further details of which are set out in paragraph 12 of Part VII of the Admission document ''Act'' the Companies Act 1985, as amended ''Acting in shall have the meaning ascribed thereto in the City Codeconcert'' ''Admission'' the admission of the New Ordinary Shares (including the Consideration Shares) to trading on AIM becoming effective in accordance with the AIM Rules ''AIM'' the market of that name operated by the London Stock Exchange ''AIM Rules'' the rules published by the London Stock Exchange applicable to AIM ''Articles'' or the Company's articles of association from time to time''Articles ofAssociation'' ''Board'' the board of directors of the Company ''City Code'' the City Code on Takeovers and Mergers ''Combined Code'' the Principles of Good Governance and the Code of Best Practice, as set out in an appendix to the Listing Rules ''Company'' or Prime People plc''Prime People'' ''Completion'' Completion of the Acquisition in accordance with its terms ''Concert Party'' the Vendors ''Consideration'' up to £10.52 million, to be satisfied by the issue of the Consideration Shares and the Deferred Consideration Shares (at a price of 84.13 pence per share) and the payment of an aggregate amount of £3.5 million in cash to the Vendors pursuant to the Acquisition Agreement. ''Consideration the 7,155,593 New Ordinary Shares to be issued to theShares'' Vendors on completion of the Acquisition, credited as fully paid, pursuant to the Acquisition Agreement, at the Issue Price ''Continuing the Proposed Directors, Simon Murphy and ChristopherDirectors'' Heayberd ''Control'' shall have the meaning ascribed thereto in the City Code ''CREST'' the computerised settlement system to facilitate the transfer of title of shares in uncertificated form, operated by CRESTCo Limited ''CREST Member'' a person who has been admitted by CRESTCo Limited as a system member (as defined in the Regulations) ''CREST a person who is, in relation to CREST, a system participantParticipant'' (as defined in the Regulations) ''Deferred up to 1,188,637 New Ordinary Shares to be issued andConsideration allotted to the Vendors as part of the Consideration subjectShares'' to the achievement by Macdonald, Macdonald Property and Macdonald Freelance, of certain levels of operating profit for the year ending 31 March 2006 ''Directors'' the current directors of the Company, whose names appear on page 3 of the Admission document ''EGM'' or the extraordinary general meeting of the Company to be held''Extraordinary at the offices of Stephenson Harwood, on 3 January 2006,General Meeting'' notice of which is set out at the end of the Admission document ''Enlarged Prime People and Macdonald and their subsidiaries togetherGroup'' after completion of the Acquisition ''Enlarged Share the entire issued ordinary share capital of Prime PeopleCapital'' upon Admission as enlarged by the issue of the Consideration Shares ''Excluded Australia, Canada, Japan, the Republic of Ireland, theTerritories'' Republic of South Africa and their respective territories or possessions ''Existing Ordinary 36,846,692 Ordinary Shares in issue at the date of thisShares'' document ''Form of Proxy'' the form of proxy for use at the EGM which accompanies the Admission document ''Independent those shareholders of Prime People considered to beShareholders'' independent for the purposes of approving the waiver to make a mandatory offer under Rule 9 of the City Code ''Issue Price'' 84.13p per New Ordinary Share ''Listing Rules'' the listing rules (as amended from time to time) made by the UK Listing Authority ''London Stock London Stock Exchange plcExchange'' ''Macdonald'' Macdonald & Company Group Limited, a company incorporated in England and Wales under company number 03670901 ''Macdonald Robert Macdonald, Peter Moore and John LewisDirectors'' ''Macdonald Macdonald & Company Freelance Limited, a wholly ownedFreelance'' subsidiary of Macdonald Property ''Macdonald Macdonald & Company Property Limited, a wholly ownedProperty'' subsidiary of Macdonald ''Macdonald ordinary A and B shares of 1p each in the share capital ofShares'' Macdonald ''Macdonald Share EMI options over 4,100 ordinary A shares of 1p each in theOptions'' share capital of Macdonald granted by Macdonald to certain of its employees, each with a vesting date of 30 September 2006 ''New Ordinary Ordinary Shares of 10p each in the capital of the CompanyShares'' following the Share Capital Consolidation ''Notice of EGM'' the notice of Extraordinary General Meeting which is set out at the end of the Admission document ''Official List'' the Official List of the UKLA ''Ordinary ordinary shares of 1p each in the capital of the CompanyShares'' ''Panel'' the Panel on Takeover and Mergers of the United Kingdom ''Prime People EMI the EMI employee share option scheme adopted by PrimeScheme'' People, details of which are set out in paragraphs 5.2 and 8 of Part VII ''Prime People the Company and its subsidiariesGroup'' ''Proposals'' the Acquisition, the Waiver, the Share Capital Consolidation and Admission, as described in the Admission document ''Proposed Robert Macdonald, Peter Moore and John LewisDirectors'' ''Regulations'' the Uncertificated Securities Regulations 2001 ''Resolutions'' the resolutions set out in the Notice of EGM and reference to a ''Resolution'' shall be the relevant resolution set out in the Notice of EGM ''Share Capital the consolidation of every 10 Ordinary Shares into 1 NewConsolidation'' Ordinary Share ''Shareholders'' or holders of Ordinary Shares''Members'' ''UK'' or ''United the United Kingdom of Great Britain and Northern IrelandKingdom'' ''UKLA'' or ''UK the United Kingdom Listing Authority of the FinancialListing Services Authority, acting in its capacity as the competentAuthority'' authority for the purposes of Part VI of the Financial Services and Markets Act 2000 ''United States'' the United States of America, its territories and possessions, any state of the United States of America and the District of Columbia ''Vendors'' the shareholders of Macdonald and the holders of Macdonald Share Options, as listed in paragraph 9.4 of Part VII of the Admission document ''Voting rights'' means all voting rights attributable to the share capital of the Company which are currently exercisable at a general meeting ''Waiver'' the waiver to be granted, subject to the passing of Resolution 7 on a poll of Independent Shareholders at the EGM, by the Panel of the obligation of the Concert Party (or any member thereof) which would otherwise arise under Rule 9 of the City Code upon Completion to make a mandatory cash offer for the New Ordinary Shares not already owned by the Concert Party (or the relevant member thereof) on or after Admission, as further described in Part I of the Admission document ''WH Ireland'' WH Ireland Limited This information is provided by RNS The company news service from the London Stock Exchange