PWS.L Regulatory News (PWS)

13 Sep 2006 07:04

Pinewood Shepperton plc13 September 2006 13th September 2006 PROJECT BALTRAY: STRICTLY PRIVATE AND CONFIDENTIAL Pinewood Shepperton plc enters Joint Venture Partnership with Morley Fund Management to further develop Shepperton Studio Pinewood Shepperton plc ("the Company") announces that it has entered into ajoint venture with Morley Fund Management Limited on behalf of Aviva plc LifeFunds ("Morley"). The 50:50 joint venture, to be called Shepperton StudioProperty Partnership ("SSPP"), has acquired the 999 year leasehold interest ofShepperton Studios with a view to further developing this studio in line withthe planning consents achieved by the Company since its flotation. Morley has paid to the Company for its 50% stake in SSPP, £10.5 million in cashplus funding to SSPP a long-term loan of £20 million (non-recourse to theCompany), of which 50% will be consolidated by Pinewood Shepperton plc,resulting in net consideration of £20.5 million. Pinewood Shepperton will matchMorley's £10.5 million equity contribution to the JV, in respect of its 50%share. The cash proceeds of this transaction (£30.5 million before transaction costsand additional debt assumed) will be used to reduce gearing in the Company, andto restructure the Company's borrowings to allow further development of thebusiness. SSPP will undertake the development of facilities at Shepperton Studios asoutlined by the Company to investors at the time of the IPO. Within the terms ofthe partnership agreement, Morley intends to commit funding totalling 75% of thetotal project costs, for the 61,000 sq ft redevelopment of I Block and the42,000 sq ft John Mills Building as well as funding 75% of further stages of thedevelopment plan, considered on a case-by-case basis. The construction works forI Block and John Mills Building are set to commence in late 2006 and 2007respectively. After payments set out below, SSPP profits will be split 50:50between the Company and Morley. SSPP will allocate the assets it owns at Shepperton Studios into 'productionproperties' and 'tenanted properties'. The Company will retain an underlease ofShepperton Studios for an initial period of 20 years. The production propertieswhich comprise the stage and related facilities are reserved at a basic rent of£1.3 million per annum index linked. Additional rents include 10% of EBITDA ofShepperton Studios excluding audio post production. SSPP will receive the incomefrom 'tenanted' properties (which are properties let on a short-term basis totenants). SSPP will pay Morley interest on its loans at a rate of no less than6.5%. SSPP has entered into a long-term asset management contract with theCompany to continue in its role as manager of Shepperton Studios and will payMorley a fee to act as fund manager. David Wight, Group Head of Property at theCompany, will devote a significant proportion of his time to SSPP. The joint venture partnership may be extended to include other mediadevelopments and includes a right of first refusal in respect of PinewoodStudios. As part of the joint venture arrangements the Company has given acustomary tax indemnity to SSPP and certain limited undertakings not to actcontrary to the interests of SSPP. The 50% of the Shepperton Studio gross assets being disposed of, at book value,were £18.2 million as at 31 December 2005 and 50% of the revenues were£7.4million. The profits attributable to the assets are not separable as, sincedescribed above, the operating business conducted on the site is being retainedby Pinewood Shepperton plc. Commenting on the announcement Ivan Dunleavy, CEO, Pinewood Shepperton plc,said: "This is a highly attractive structure for both the Company and itsshareholders. It provides us with significant new development funding for theShepperton Studio and reduces development risk and our gearing from the outset.This new partnership will accelerate the pace of the development process at theGroup. "I am delighted that we are working alongside such a proven financial investorin property as Morley in this joint venture to deliver future growth for theGroup. Their decision to join the joint venture on these terms confirms thegrowth potential that are offered by our unique and valuable assets." Commenting on the announcement, Richard Jones, Head of Property Life Funds forthe Morley Property Fund, said: "This innovative partnership represents an exciting opportunity for Morley toinvest in a renowned studio site with a well developed plan to add to its focusas one of Europe's leading media hubs. It comprises both a secure base returnand exposure to the development and future success of the studio." Shepperton Studios started film production in 1932. It was purchased andintegrated into the larger Pinewood Studios group in February 2001. The studiosprovide extensive facilities for big-budget films and numerous smaller films.Pinewood Shepperton also provides facilities to over 250 film, television andmedia-related businesses across the Pinewood and Shepperton Studios. An investor presentation is available from 12pm at the Company's website:www.pinewoodgroup.com Enquiries: Tom Buchanan Brunswick Group LLP 020 7404 5959James Olley This information is provided by RNS The company news service from the London Stock Exchange