R4E.L Regulatory News (R4E)

30 Nov 2006 07:02

First Artist Corporation PLC30 November 2006 30 November 2006 First Artist Corporation PLC Acquisition of Dewynters Plc, placing, changes to capital board change, new share incentive scheme and alteration of Articles of Association The Board of First Artist Corporation plc is delighted to announce theacquisition of Dewynters Plc and other proposals, the combined effect of whichthe Board believes will transform the First Artist Group and enhance itsprospects. The other Proposals include, a Capital Reduction, a ShareConsolidation and Placing of New Ordinary Shares for cash, the establishment ofa savings related share option scheme and an alteration to the Articles ofAssociation. Key points: • Dewynters is the UK entertainment and theatre industry's leading marketing services agency with subsidiary operations in the USA. • The Group's strategy has been to acquire businesses with strong organic growth prospects which can be enhanced by cross selling opportunities. • All First Artist's recently acquired companies have improved their performance since joining the Group. • The Placing raises £1 million (gross) and increased facilities from AIB combine to finance the purchase consideration and provide working capital. • A Capital Reduction which will permit dividends to be paid out of future profits • The share capital is to be consolidated by the issue of one New Ordinary Share for every 10 Existing Ordinary Shares • The proposals combine to transform the scale and diversity of the Enlarged Group's income streams, while paving the way for further cross selling opportunities to enhance profitability. Jon Smith, Chief Executive of First Artist said: "We have a clear strategy to transform First Artist with synergisticacquisitions supported by strong organic growth. Dewynters is an icon in theentertainment and theatre industry representing many of the current hit West Endmusicals and plays. It owns a successful media signage business in London and aflourishing merchandising operation in New York and Las Vegas. This acquisitionis a quantum leap for the First Artist Group. The many cross sellingopportunities with other Group companies will continue to create value forshareholders whilst the Dewynter's acquisition itself will help transform FirstArtist into an international media and entertainment organisation, retaining apotent delivery of entertainment, sport, wealth and event management." Anthony Pye-Jeary, Managing Director of Dewynters said: "I am delighted to have found a partner who will help secure our future asleaders of our industry and enable us to continue growing for many years tocome." Enquiries:First Artist Corporation PLCJon Smith Chief ExecutiveRichard Hughes Group Managing Director Tel: +44 (0) 20 8900 1818 Dawnay, Day Corporate Finance LtdGerald RaingoldDavid Floyd Tel: +44 (0) 20 7509 4570 Hudson Sandler LtdMichael SandlerNick Lyon Tel: +44 (0) 20 7796 4133 Dewynters PlcAnthony Pye-Jeary Tel: +44 (0) 20 73210488 First Artist Corporation PLC Acquisition of Dewynters Plc placing, changes to capital board change, new share incentive scheme and alteration of Articles of Association The Board of First Artist Corporation plc is delighted to announce theacquisition of Dewynters Plc and other proposals, the combined effect of whichthe Board believes will transform the First Artist Group and enhance itsprospects. The other Proposals include a Capital Reduction, a ShareConsolidation and Placing of New Ordinary Shares for cash, the establishment ofa savings related share option scheme, and an alteration to the Articles ofAssociation. The Proposals are subject to shareholders' approval and anExtraordinary General Meeting is being convened for 22 December 2006.Expressions in this announcement have the meanings set out in the Appendix. Dewynters is larger than the First Artist Group in certain respects, resultingin the Acquisition being classified as a reverse takeover under the AIM Rules.This results in a requirement for an Admission Document, containing details ofthe Enlarged Group, to be published and for a new application to be made toLondon Stock Exchange plc for the admission of the Company's shares to tradingon AIM. Dawnay Day is acting as Nominated Adviser in relation to the re-admission toAIM. Arbuthnot will continue as the Company's broker. Background and strategy The Board's strategy for the First Artist Group is to expand the range ofcomplementary business services it offers, both organically and by acquisition. Having acquired Team Sports Management, AGB Financial Management Limited(subsequently renamed Optimal Wealth Management Limited) and The Finishing Touch(Corporate Events) Limited during 2005, when it also launched First ArtistEntertainment, the scale and profitability of its operations improved. Theacquisitions continued with the announcement in July 2006 of the purchase ofProactive Scandinavia A/S and NCI. Management Limited, followed in August 2006with the acquisition of Sponsorship Consulting Limited. The purchase of the these compatible businesses increases the range of servicesthe Group offers to its clients and/or gives rise to cross sellingopportunities. An example of the latter is the ability to offer Dewynters eventmanagement and new show launch parties services for its theatre clients. Change of accounting reference date The Company has changed its accounting reference date to 31 August and hasprepared statutory accounts for the 10 months ended 31 August 2006. Current trading and prospects The Group's results for the 10 month period to 31 August 2006 are beingannounced today. Current trading across the group remains strong with opportunities for crossreferral and selling having increased following the three acquisitions in theSummer of 2006. In particular opportunities exist for growth in Optimal through its jointventure arrangement with financial audit group HW Fishers. Sport should alsobenefit from increased activity in the Italian football market following on fromlast year's slow trading and the UK should benefit from increased funding intothe football clubs as a result of the increased TV rights monies due to bereceived in August 2007. The Acquisition of Dewynters Dewynters is the UK entertainment and theatre industry's leading marketingservices agency with subsidiary operations in the USA. The acquisition ofDewynters gives rise to a range of opportunities to provide the existing Group'sservices to Dewynters' clients and vice versa. Dewynters was incorporated in 1924. It was a limited company until 1998 when itre-registered as a public limited company (plc). As a general agency, Dewynterswas founded over a century ago. It was one of the first advertising agencies inLondon and had offices above the Adelphi Hotel on the Strand and handled suchaccounts as Schweppes and P&O Shipping Line. Today the principal activity of Dewynters is that of a creatively ledadvertising agency to the entertainment and theatre industry. The servicesprovided by the Group are media planning and buying, marketing, design, front ofhouse display, tourism, sales promotion, new media, print buying, souvenirprogrammes, brochures and merchandise. Dewynters, based in London's Leicester Square, is a full service media andmarketing provider to a range of theatre, tourism, arts and culture clients inthe UK. Dewynters' customers are principally in the London theatre business. Keylong term relationships and customers include productions for CameronMackintosh's "Les Miserables" and "Mary Poppins"; Andrew Lloyd Webber's "Evita"and "The Sound of Music"; Bill Kenwright's "Blood Brothers" and "Cabaret"; andDisney's "The Lion King" as well as other major successes "Mamma Mia!", "Spamalot", "Wicked", "The Phantom of the Opera", "Chicago", "We Will Rock You"and "Frost/Nixon". Dewynters' first major success was the global branding of the musical "Cats"which became one of the longest running shows in musical theatre history. The Group operates in the USA through its offices based in New York. Thebusiness offers publishing, theatre and wholesale merchandising services forshows based in Broadway and Las Vegas. Historically the business has tended to work for clients of shows which havemoved across from London's West End, including "Chicago", "Les Miserables" and "Phantom of the Opera", which is currently showing in Las Vegas, but increasinglythe business now acts for shows which will be moving in the other direction,such as "The Color Purple" The Directors and owners of Dewynters are Messrs Robert De Wynter and AnthonyPye-Jeary. Mr. De Wynter is not closely involved in the day to day running ofthe business. Mr Pye-Jeary has close contacts within the theatre andentertainment industry and plays a key role in establishing and developingcustomer relationships and will be retained as Managing Director on acquisition. The Company has agreed to acquire the whole of the issued share capital ofDewynters for up to £15.5 million (subject to adjustment by reference to its netasset value as at 31 October 2006). The initial consideration is £9 million incash and 100,000 New Ordinary Shares. If the operating profit before impairmentof goodwill exceeds certain thresholds on each of the three anniversaries of thecompletion balance sheet date the following applies: Profit Threshold Deferred Consideration Year 1 £1.35m - £1.49m £1 for every £1 of profit over £1.5m £2 for every £1 of profitYear 2 £1.45m - £1.64m £1 for every £1 of profit over £1.65m £2 for every £1 of profitYear 3 £1.55m - £1.79m £1 for every £1 of profit over £1.8m £2 for every £1 of profit In addition to the above, the A Shareholder (Mr Anthony Pye-Jeary), will receive1 New Share for every £10 of deferred cash consideration he receives. The annual deferred cash payments, in respect to any one year, are limited to£1.5 million with any excess cash consideration due being carried forward to theensuing year and then continuing to roll over subject to the maximum annualpayment of £1.5 million. The acquisition agreement, which is conditional on the passing of the relevantresolutions at the Extraordinary General Meeting, and the Admission of theconsideration Shares to AIM contains warranties and indemnities in favour of theCompany and non competition covenants by the vendors. The Capital Reduction If no action is taken, the Company would only be able to pay dividends or effectpurchases of its own shares once the deficit on its profit and loss account hasbeen eliminated by the future generation of profits. The Board thereforeproposes a reduction of capital whereby the deficit on the Company's accumulatedprofit and loss account is eliminated by setting it off against the sharepremium account. The Capital Reduction relates to the share premium and reserves of First ArtistCorporation Plc as shown in the Company's accounts (not the consolidated Groupaccounts). The Capital Reduction requires the approval of Shareholders at the ExtraordinaryGeneral Meeting and is conditional upon the Court making an order confirming thereduction. Accordingly, as soon as practicable after the passing of theresolutions to be proposed at the Extraordinary General Meeting, the Companywill apply to the Court for an order confirming the reduction. The Court willbe concerned to protect the interests of creditors in relation to the CapitalReduction and the Company will give such undertakings to the Court as it may beadvised are appropriate in that regard. Such undertakings may require allcreditors of the Company, as at the date the Capital Reduction becomeseffective, to have either given their consent to the Capital Reduction or tohave been paid before any dividend is paid or shares repurchased. Thosecreditors which the Company does not expect to repay prior to the CapitalReduction taking effect have already given their consent to the CapitalReduction. The Capital Reduction will become effective once the order of the Courtconfirming the reduction is registered with the Registrar of Companies.Although it is not possible to say precisely when the Capital Reduction willbecome effective, it is hoped that it will be early 2007. Consolidation of share capital In the six months prior to the date of this circular, the price of the ExistingOrdinary Shares has been in the range 5 5/8p to 9 5/8p and the bid andoffer prices at close of business on 22 November 2006 were 5 3/4p and 6 3/4prespectively. With the share price at this level, a movement of 1/8prepresents a change of up to 2% of its value, making it difficult for the marketto adjust the price by small amounts. The low share price also makes itdifficult for a narrow spread between the bid and offer prices to be quoted.The board therefore proposes to consolidate its share capital by issuing one NewOrdinary Share to replace every ten Existing Ordinary Shares. The nominal value of each Existing Ordinary Share is 0.25p and each New OrdinaryShare will have a nominal value of 2.5p. Fractions of New Ordinary Shares willnot be allotted. The record date for the share consolidation is expected to be 27 December 2006.The CREST accounts of Shareholders who hold their Existing Ordinary Shares inelectronic form will be credited with one New Ordinary Share for every tenExisting Ordinary Shares held on 28 December 2006. Certificates or ExistingOrdinary Shares will become invalid following the passing of the relevantresolution at the Extraordinary General Meeting. Certificates for New OrdinaryShares are expected to be despatched by 4 January 2007. During the interimperiod, transfers will be certified against the register. The Placing The Board has announced details of the Placing to raise gross proceeds of £1million to contribute to the costs of the Acquisition, provide additionalworking capital for the Enlarged Group and strengthen its balance sheet. NewOrdinary Shares at the Placing Price of 62.5p per New Ordinary Share isequivalent to a price of 6.25p per Existing Ordinary Share, which is a discountof 2% to the closing middle market price of 6.38p per Existing Ordinary Share on28 November 2006 when the Placing Price was determined. The Placing Shares, which have been placed by Dawnay Day, will represent theequivalent of approximately 12.3 per cent. of the enlarged issued share capitalof the Company following the completion of the Acquisition and Placing. The Placing is conditional, inter alia, upon Admission becoming effective by notlater than 8.00 a.m. on 28 December 2006 (or such later time and/or day, notbeing later than 5.00 p.m. on 31 January 2007 as the Company and Dawnay Dayagree). The New Ordinary Shares subject to the Placing will, when issued and fully paid,rank pari passu in all respects with the other New Ordinary Shares. Applicationwill be made to the London Stock Exchange for the admission of the New OrdinaryShares to trading on AIM. It is expected that Admission will become effectiveand dealings will commence in the New Ordinary Shares on 28 December 2006. Placing statistics Placing Price per New Ordinary Share 62.5 p Number of Existing Ordinary Shares in issue prior to the Placing 113,258,762 Equivalent number of New Ordinary Shares following the Consolidation 11,325,876 Number of New Placing Shares 1,600,000 Number of Consideration Shares 100,000 Number of Ordinary Shares in issue immediately following Admission 13,025,876 Percentage of enlarged issued ordinary share capital subject to the Placing 12.3% Gross proceeds of the Placing £1,000,000 Market capitalisation at the Placing Price immediately following Admission £8.14m The Directors have committed to subscribe for 108,800 Placing Shares Board Change Vincenzo Morabito who continues to make a significant contribution to the Group,is stepping down as a Group Board Director to become Group Head of Football,concentrating his talents and efforts on co-ordinating the development of andcommunications between our three main football offices and associated agentsworldwide. Vincenzo will join the Executive Management Board, which consists of theDirectors of each divisional group company. This Board has directresponsibility to promote cross referral opportunities, ensure the quality ofinternal communications and promote group management responsibilities. Establishment of a Savings Related Share Option Scheme The Board considers that, with the expansion of the business, it is now anappropriate time to introduce a HMRC-approved Savings Related Share OptionScheme. This is a tax-advantaged share option scheme which will enableemployees to participate in the growth of the Company. Shareholder approval isrequired for the establishment of the scheme. The following is a summary of theprincipal terms of the First Artist Corporation PLC Savings Related Share OptionScheme 2006 (the "SAYE Scheme" or "the Scheme"). An option may not be granted more than ten years after shareholder approval ofthe Scheme. Options are not transferable, except on death and are notpensionable. The Scheme may operate over new issue shares, treasury shares or sharespurchased in the market. In any ten calendar-year period, the total number ofunissued Shares which may be placed under option under the SAYE Scheme, whenaggregated with Shares already issued or to be issued pursuant to the SAYEScheme and any other employee share scheme adopted by the Company within thepreceding 10 years, shall not exceed 10% of the issued capital of the Company atthe time of the proposed grant of option. Shares subject to options which havelapsed, or been released or cancelled, are excluded when calculating this limit. The shareholder resolution to approve the Scheme will allow the Board, withoutfurther shareholder approval, to establish further plans for overseasterritories, any such plan to be similar to the Scheme, but modified to takeaccount of local tax, exchange control or securities laws, provided that anyShares made available under such further plans are treated as counting againstthe limits on individual and overall participation in the Scheme. First Artist Share Option Schemes The Capital Reduction does not affect options granted under the First ArtistShare Option Schemes but the numbers of shares subject to share options will beadjusted to reflect the Share Consolidation. At present options to acquire theequivalent of 835,148 New Ordinary Shares have been granted. This represents7.4 per cent of the present issued share capital and would amount to 6.4 percent of the issued share capital as enlarged by the issue of New Ordinary Sharespursuant to the Acquisition and the Placing. Increase in issued share capital and powers of allotment Resolutions will be proposed at the Extraordinary General Meeting to increasethe authorised share capital to £625,000 divided into 25,000,000 New OrdinaryShares of 2.5p each. This will result in the Company having authorised andissued share capital after the Placing and the Acquisition as follows Authorised Issued and fully paid Nominal Number of New Nominal Number of New Value Ordinary Shares Value Ordinary Shares £ £ At present 375,000 15,000,000 283,147 11,325,876Proposed increase 250,000 10,000,000Consideration Shares 2,500 100,000Placing Shares 1,600,000Following Admission 625,000 25,000,000 325,647 13,025,876 Resolutions will also be proposed to grant the Board general powers of allotmentin respect of all the authorised but unissued shares and to waive pre-emptionrights in respect of the issue for cash of up to 8,850,000 New Ordinary Sharesof which 7,200 New Ordinary Shares (representing approximately 55% of theenlarged issued share capital) have not been allocated to any specific purpose.This is intended to enable the Board to raise funds if suitable opportunitiesarise. Authority to purchase and cancel Shares The Board is seeking Shareholders' authority for the Company to purchase in themarket and cancel up to 15% of the Company's New Ordinary Shares in issuefollowing the implementation of the Proposals. Any such further purchases willbe made out of future distributable profits generated subsequent to the CapitalReduction becoming effective. The Board has no present intention to buy in and cancel any New Ordinary Sharesand will only do so if it becomes possible on terms which the Board believes tobe in the best interests of shareholders. Any purchase of New Ordinary Shares in the market will be at the prevailingprice at the relevant time or at a small premium. The maximum price will be 105per cent of the average of the middle market quotations for a New Share asderived from the AIM appendix to the Daily Official List of the London StockExchange for the five business days prior to the purchase. The authority to purchase shares will expire 15 months from the date of theExtraordinary General Meeting (or, if earlier, the conclusion of the 2007 annualgeneral meeting of the Company). Recommendation The Directors, who have been so advised by Dawnay Day, consider Proposals to befair and reasonable and in the best interests of First Artist shareholders as awhole. Accordingly, the Directors unanimously recommend shareholders to vote infavour of the resolutions to be proposed at the Extraordinary General Meeting,as they intend to do in respect of their own beneficial holdings of 20,729,399Existing Ordinary Shares, representing approximately 18.4% per cent of the totalvotes capable of being cast at the Extraordinary General Meeting. In giving advice to the Company, Dawnay Day has had regard to the Directors'commercial assessment of the Proposals. The directors of First Artist accept responsibility for the informationcontained in this document. To the best of the knowledge and belief of thedirectors of First Artist (who have taken all reasonable care to ensure thatsuch is the case), the information contained in this document for which they areresponsible is in accordance with the facts and does not omit anything likely toaffect the import of such information. Dawnay Day, which is authorised and regulated by the Financial ServicesAuthority, is acting for First Artist in relation to the proposals described inthis document and is not advising any other person in relation to them. DawnayDay will not be responsible to any person other than First Artist for providingthe protections afforded to its customers or advising any such person on theproposals. Dawnay Day has given and has not withdrawn its written consent to the issue ofthis document with the inclusion of references to its name in the form andcontext in which they appear. This announcement does not constitute an offer or invitation to subscribe forsecurities. Future dates and times stated in this announcement are expected dates and timesonly and may be subject to change, in which case an appropriate announcementwill be made via a Regulatory Information Service. Appendix Definitions When used in this announcement, the following expressions have the followingmeanings: "Acquisition" the proposed acquisition of Dewynters PLC "Act" the Companies Act 1985 (as amended) "Board" or "Directors" the board of directors of First Artist "Court" the High Court of Justice of England and Wales "Capital Reduction" the proposed reduction by the Company of its capital as described in this announcement "Existing Ordinary Shares" the ordinary shares of 0.25p each in the capital of the Company prior to the EGM "Dawnay Day" Dawnay, Day Corporate Finance Limited, financial adviser to First Artist "Extraordinary General Meeting" the extraordinary general meeting of the Company convened for "EGM" to approve the Proposals "First Artist" or "the Company" First Artist Corporation plc "First Artist Group" or "Group" First Artist together with its subsidiary undertakings "First Artist Share Option the First Artist approved executive shareSchemes" option scheme and the First Artist unapproved executive share option scheme "HMRC" Her Majesty's Revenue & Customs "London Stock Exchange" London Stock Exchange plc "New Ordinary Shares" the ordinary shares of 2.5p each in the capital of the Company following the Share Consolidation "Proposals" the Acquisition and the proposed reduction of capital, share consolidation, increase in authorised share capital, granting of powers of allotment, waiver of per-emption rights and powers to buy in and cancel New Ordinary Shares "Share Consolidation" the proposed consolidation of the issued share capital of the Company whereby one New Share is issued in substitution for every ten Existing Ordinary Shares "Shares" Ordinary shares in the Capital of the Company "Shareholders" the holders of Shares This information is provided by RNS The company news service from the London Stock Exchange