SPO.L Regulatory News (SPO)

7 Nov 2007 07:02

Sportech PLC07 November 2007 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS IN THAT JURISDICTION SPORTECH PLC ("Sportech" or the "Company") Proposed Placing and Open Offer to raise £41.4 million Acquisition of Vernons Football Pools Business for £51 million One for Ten Consolidation of Existing Ordinary Shares The Board of Sportech PLC announces that the Company has conditionally agreed toacquire the Vernons football pools business from Ladbrokes plc for a totalconsideration of £51 million. The consideration will be satisfied by the paymentof £45 million in cash on Completion with the balance paid in two amounts of £3million on each of the first and second anniversaries of Completion. The Company is proposing a Placing and Open Offer of New Ordinary Shares toraise approximately £41.4 million gross of expenses to part fund theAcquisition. The balance of the purchase price is to be met through new bankingfacilities provided by Bank Of Scotland ("BoS"). Highlights • Ownership of Vernons will enable Sportech to control all three majorfootball pools brands in the UK - representing approximately 99% of the totalfootball pools market. The Acquisition was cleared by the Competition Commissionin October 2007 • The Acquisition will create a significantly increased customer poolwith a combined base of over 700,000 weekly players • The Acquisition also provides enhanced distribution opportunitiesthrough a distribution agreement with Ladbrokes plc which will see movement intoretail channels and a physical marketing and transactional presence in a minimumof 1,750 Ladbrokes licensed betting offices • Acquisition fits with the Company's existing strategy of regeneratingthe football pools through a major re-brand and re-launch in 2008 • Acquisition is expected to deliver synergies from reduced costs andincreased revenues - expected to be earnings enhancing in 2009 • Total cash consideration for the Acquisition is £51 million,representing 9x Vernons 2006 operating profit, of which £6 million is deferred • A one for ten share consolidation is being proposed, so that for everyten existing Ordinary Shares of 5 pence each holder will hold one 50 penceOrdinary Share. The Open Offer takes place on a post consolidation basis • The consideration will be funded through a Placing and Open Offer of41,445,189 New Ordinary Shares at an Issue Price of 100 pence per share to raiseapproximately £41.4 million gross of expenses. Except for the shares to be takenup by Newby Manor Limited, the Placing is fully underwritten by Investec • An irrevocable undertaking has been received from Newby Manor Limitedto take up Open Offer entitlements for, in aggregate, 11,846,284 Open OfferShares, representing approximately 28.6 per cent of the New Issue • In addition, Directors have indicated that they will take up a total of100,000 shares under the Open Offer • The balance of the consideration will be provided by BoS as part ofrenewed bank facilities of in aggregate up to £124 million • The Placing and Open Offer together with increased new bank facilitieswill provide additional working capital for the Company to invest in theEnlarged Group • The Acquisition, the Placing and Open Offer and the proposed new bankfacilities are subject to Shareholders' approval at an Extraordinary GeneralMeeting ("EGM") scheduled for 10.00am on 30 November 2007 • The Company has also entered into an agreement with the FA PremierLeague, the Football League, the Scottish Premier League, the Scottish FootballLeague and Football DataCo for marketing and data rights • Investec is acting as Financial Adviser, Underwriter, Sponsor and JointBroker to the Company. Arbuthnot is acting as Joint Broker A circular will shortly be posted to Shareholders comprising a Prospectuscontaining details of the Placing and Open Offer and notice of an EGM of theCompany (the "Circular"). Copies of the Circular have been submitted to the UK Listing Authority and willshortly be available for inspection at the UK Listing Authority's DocumentViewing Facility, which is situated at: The Financial Services Authority 25 The North Colonnade Canary Wharf London E14 5HS Ian Penrose, Chief Executive of Sportech PLC, commented: "The Acquisition of Vernons, our number one strategic target, and associatedfund raising together with the agreement for distribution of pool games throughLadbrokes' retail estate represents another major step forward for our strategyof repositioning Sportech that commenced two years ago. This is part of acontinuing strategy of change that will widen the franchise of the pools andassociated sports-related gaming products to new players across all age ranges,utilising the raft of direct, retail and digital routes to market that areavailable today. "The agreement announced today with the English and Scottish professionalfootball leagues is testament to the unique position that pool betting enjoyswithin the sport of football. "The enlarged Sportech group will offer an enhanced combination of two of theworld's favourite pastimes - football and gaming. This is a further significantstep towards Sportech becoming a larger, broad-based sports, leisure andfootball gaming business with international reach." - ends - For further information please contact: Sportech PLC Ian Penrose, Chief Executive 0151 288 3561 Steve Cunliffe, Finance Director 0151 288 3561 Investec James Grace / Patrick Robb 0207 597 5180 Arbuthnot Neil Kirton / Nick Marsh 0207 012 2000 Bell Pottinger Corporate & Financial David Rydell / Emma Kent / Rosanne Perry 0207 861 3232 This summary should be read in conjunction with the full text of thisannouncement. This announcement does not constitute, or form any part of, an offer or aninvitation to purchase any securities. Civil liability attaches to the Company and the Directors who are responsiblefor the contents of this summary, including any translation of this summary, butonly if this summary is misleading, inaccurate or inconsistent when readtogether with the other parts of this document. Where any claim relating toinformation contained in this document is brought before a court, the plaintiffinvestor might, under the national legislation of the EEA States, have to bearthe costs of translating this document before any legal proceedings areinitiated. This announcement does not constitute an offer of, or the solicitation of anyoffer to buy, any Ordinary Shares to any person in any jurisdiction to whom orin which such offer or solicitation is unlawful. The distribution of thisannouncement in certain jurisdictions may be restricted by law and thereforepersons into whose possession this announcement comes should inform themselvesabout and observe any such restrictions. Any failure to comply with theserestrictions may constitute a violation of the securities laws of suchjurisdiction. Investec Investment Banking, a division of Investec Bank (UK) Limited, which isregulated in the United Kingdom by the Financial Services Authority, is actingexclusively for the Company as sponsor, joint broker and underwriter and for noone else in relation to the matters described in this announcement and will notbe responsible to anyone other than the Company for providing the protectionsafforded to customers of Investec Investment Banking or for providing advice inrelation to the subject matter or contents of this announcement. SPORTECH PLC ("Sportech" or the "Company") Proposed Placing and Open Offer to raise £41.4 million Acquisition of Vernons Football Pools Business for £51 million One for Ten Consolidation of Existing Ordinary Shares PART I 1. Introduction The Company announced on 7 March 2007 that it had entered into exclusivenegotiations with Ladbrokes for the Acquisition of Vernons. On 3 May 2007 theOffice of Fair Trading announced that it had decided to refer the proposedAcquisition to the Competition Commission under the provisions of the EnterpriseAct 2002. The Competition Commission issued its preliminary findings on 31August 2007, concluding that the Acquisition was not expected to result in asubstantial lessening of competition, and this conclusion was confirmed in thefinal Competition Commission report issued on 11 October 2007. Since theannouncement of the Competition Commission's preliminary findings, the Companyhas been in negotiations with Ladbrokes to agree the final terms for theAcquisition of Vernons. The Company today announces that an agreement has beenentered into with Ladbrokes for the Acquisition of Vernons for a total price of£51 million, payable as to £45 million in cash on Completion with the remaining£6 million to be paid in two instalments of £3 million each, payable on thefirst and second anniversaries of Completion. Due to the size of the Acquisition in relation to the Group, it constitutes aClass 1 transaction under the Listing Rules and, accordingly, the Company isrequired to obtain the prior approval of Shareholders in a general meetingbefore completing the Acquisition, for which purpose the Company proposes toconvene an EGM to be held on 30 November 2007. The Acquisition is conditional,inter alia, upon such approval being obtained. In order to provide finance for the Acquisition, the Company is proposing toraise approximately £41.4 million (before expenses), subject, inter alia, toShareholders' approval, through the issue of the New Ordinary Shares by means ofthe Placing and Open Offer. Newby Manor Limited has agreed to subscribe for the11,846,284 New Ordinary Shares to which it is entitled under the Open Offer,representing approximately 28.6 per cent. of the New Issue. The balance of theNew Issue has been underwritten by Investec. The Company has received an irrevocable undertaking from BoS not to take up anyof the 11,779,786 New Ordinary Shares to which it is entitled under the OpenOffer, representing approximately 28.4 per cent. of the New Issue. These NewOrdinary Shares, being the Firm Placed Shares, have been placed firm by Investecon behalf of the Company at the Issue Price with institutional investors. Inaddition, certain of the Directors have indicated that they intend to take up atotal of 100,000 New Ordinary Shares under the Open Offer. Qualifying Shareholders are being offered the right to subscribe for NewOrdinary Shares at the Issue Price in accordance with the terms of the OpenOffer. The Issue Price, when adjusted to take account of the Consolidation,represents a discount of approximately 2.4 per cent to the middle marketquotation for the Existing Ordinary Shares of 10.25 pence, as derived from TheDaily Official List of the London Stock Exchange on 6 November 2007. It is intended that the proceeds of the New Issue of approximately £39.4 million(net of expenses of the New Issue) will be used to finance the Acquisition. Thebalance of the consideration for the Acquisition is to be provided by BoSpursuant to the £110 million New Facility Agreement. The New Working CapitalFacility Agreement with BoS will provide an additional £14 million of financefor the working capital requirements of the Enlarged Group. Both the NewFacility Agreement and the New Working Capital Facility Agreement will besecured over the property, assets and undertaking of all companies within theEnlarged Group (limited in the case of non-UK companies to security over theshares of such company and any subsidiary of such company) and the provision ofguarantees by them. As BoS is a substantial shareholder of the Company, the NewBoS Funding Arrangements will constitute a related party transaction for thepurposes of Chapter 11 of the Listing Rules and will require Shareholders'approval at the EGM. The Company is also taking the opportunity presented by the EGM to put forwardproposals for a consolidation of the Company's Shares and the adoption of a newshare incentive scheme, the PSP. 2. Vernons Vernons began offering football pools in 1925. Today, it provides football poolsand lottery and other games to its customers via the post, telephone and theinternet. Vernons has approximately 230,000 weekly customers and remains thesecond largest football pools business in the UK behind Sportech's LittlewoodsPools. The customers are predominantly UK based and are served from Vernons'head office in Liverpool. Vernons was purchased by Ladbrokes in 1989 and its product base is very similarto that of Sportech, being focused primarily on the football pools, whilstoffering various other games, including fixed odds betting on the Irish Lottery.Ladbrokes is one of the world's leading bookmakers with over 2,500 licensedbetting shops in the UK, Jersey, Ireland and Belgium, telephone betting viathree call centres and e-gaming operations offering a range of betting andgaming services. For the year ended 31 December 2006, Vernons reported gross win revenue of £18.6million (2005: £19.6 million) and operating profit of £5.7 million (2005: £5.9million). The historical profit and loss accounts and balance sheets detailedbelow represent a combined account for the Vernons business: Year endedProfit and loss accounts 31 December 31 December 31 December 2006 2005 2004 £m £m £mGross win revenue 18.6 19.6 20.1Cost of sales (5.6) (6.4) (7.0) Gross profit 13.0 13.2 13.1Distribution costs - - -Administrative expenses (7.3) (7.3) (7.3) Operating profit 5.7 5.9 5.8 As atBalance sheets 31 December 31 December 31 December 2006 2005 2004 £m £m £mASSETSNon Current AssetsOther intangible assets 0.1 0.1 0.1Property, plant and equipment 0.3 0.4 0.2 0.4 0.5 0.3 Current AssetsInventories 0.1 0.1 0.2Trade and other receivables 0.7 0.7 0.7Cash and cash equivalents 0.5 0.5 1.4 1.3 1.3 2.3 LIABILITIESCurrent LiabilitiesTrade and other payables (8.4) (8.9) (9.8) (8.4) (8.9) (9.8) Net Current Assets (7.1) (7.6) (7.5) Non Current LiabilitiesDeferred tax liabilities (0.3) (0.1) (0.3) NET ASSETS (7.0) (7.2) (7.5) Invested Capital (7.0) (7.2) (7.5) The above financial information has been prepared for each of the three yearsended 31 December 2006 by combining the financial information of Vernons Games,Vernons Trustees and Vernons Financial Services with the trade and assets ofVernons Pools, excluding certain income and expenses relating to assets whichare not included in the Acquisition. 3. Reasons for the Acquisition and the New Issue Sportech's core football pools business, Littlewoods Pools, dates back to 1923.With high brand awareness, national media exposure and a loyal customer base,Littlewoods enjoyed many years of operating the UK's largest pool betting gameon the UK's most popular sport. Since the introduction of the National Lotteryin November 1994, football pools has experienced a significant reduction in thenumber of people playing the game. Littlewoods lost over 90 per cent of itscustomers in the period from November 1994 to December 2005. However, thefootball pools remains a highly popular game with almost 730,000 weekly players. Following the appointment of a new management team and Board of directors,commencing with the appointment of Ian Penrose as Chief Executive in October2005, the Company commenced a strategic review. Following this review, theCompany has focussed its activities on regenerating its football pools businessand developing related products and disposed of its loss-making betting businessand terminated its loss-making ITV contract. The Acquisition will combineLittlewoods Pools and Zetters Pools with the pools business of Vernons. OnCompletion, Sportech will own all three major football pools operations in theUK, representing approximately 99 per cent. of the total football pools market,and add Vernons' approximately 230,000 weekly pools customers to Sportech'sapproximately 500,000 weekly pools customers as at 30 June 2007. The Directors believe that the Acquisiton, once Vernons is fully integrated withSportech's existing operations, will create a bigger pool of customers, largerjackpots and more winners. Significant operational synergies are expected to berealised in the area of shared overheads and direct costs. The Directors alsobelieve that the Enlarged Group will have opportunities to increase revenuethrough focused marketing and cross-selling. The agreement which is to be entered into with Ladbrokes on Completion of theAcquisition will provide marketing and distribution of the Enlarged Group'sprincipal football pools products through Ladbrokes' licensed betting offices inthe UK. The Acquisition will also provide an opportunity for the rebranding of theEnlarged Group's operations. As part of the acquisition of Littlewoods Leisurein September 2000, Sportech received a royalty-free licence to use theLittlewoods name for a period of 10 years ending in September 2010. Sportechintends to launch a new branding and marketing strategy under the single brand,"The New Football Pools". Following the Acquisition, the Directors intend to make a number of changes tothe way that the Enlarged Group operates, including: • merging the operations of Littlewoods and Vernons into the Company's existing site, including the merging of IT systems and possible outsourcing of services, all planned for the first three quarters of 2008. These changes are expected to realise substantial savings in overheads and direct costs. The Directors believe that such savings could amount to approximately £2.5 million per annum and that the full benefit of these savings will be available in 2009. The restructuring costs associated with achieving these savings in direct costs and overheads are expected to amount to approximately £1.5 million and to be incurred in the year ending 31 December 2008; and • launching a number of new "pari mutuel" products in 2008 reflecting the strong community involvement in the game of football and the interest of fans in the game. These games will be targeted at the younger adult market, and will be based around predictions of the results of major football matches in the UK and Europe. The costs of launching these new products, including initial promotional and advertising expenditure and support, and of the re-branding exercise are expected to amount to approximately £2.8 million and will be incurred in 2008. The Directors believe that the effect of the Acquisition, taken together withthe costs referred to above, will be to reduce earnings per share in 2008 and,dependent on the successful implementation of the changes referred to above, toincrease earnings per share in 2009. 4. Principal terms of the Acquisition The Acquisition Agreement was executed on 7 November 2007 between (1) VernonsPools Limited, (2) Vernons Group Limited, (3) Ladbrokes Betting and GamingLimited, (4) Littlewoods Promotions Limited and (5) the Company under the termsof which Littlewoods Promotions has agreed, subject to the fulfilment of certainconditions, to acquire Vernons. The consideration payable by Littlewoods Promotions is £51 million, which is tobe satisfied by the payment of £45 million in cash on Completion and as to thebalance in cash in two amounts of £3 million on each of the first and secondanniversaries of Completion. Payment of the Deferred Consideration will beguaranteed by BoS in accordance with a guarantee issued pursuant to the NewFacility Agreement. Under the Acquisition Agreement, the Company will acquireall the assets and rights of the sellers in relation to the Vernons business,including all Vernons business and customer contracts, various IP rights anddomain names, goodwill, equipment, records and stock. Excluded from these assetsis the call centre operated on behalf of Ladbrokes by Vernons Pools and thedebts owing to Vernons Pools. Littlewoods Promotions has also agreed to enterinto a sublease with Vernons Pools of the Vernons Property for a maximum term of18 months. The Acquisition Agreement is subject inter alia, to the following conditions: (i) the passing of Resolutions 1, 2 and 3 at the EGM; (ii) the grant of landlord's consent for the proposed sub-lease of the Vernons Property; (iii) Admission; and (iv) entry into of the New BoS Funding Arrangements. If any of these conditions is not fulfilled by 31 December 2007 (or such laterdate as the parties may agree), the Acquisition Agreement will terminate andnone of the parties will have any further rights or obligations under it. Vernons Pools has given various undertakings, indemnities, warranties andcovenants in the Acquisition Agreement. Vernons Pools has also given restrictivecovenants that neither it nor any of its holding companies, subsidiaries andfellow subsidiaries will compete with the Vernons business for a specifiedperiod post-Completion. On Completion, Littlewoods Promotions will enter into a distribution agreementwith Ladbrokes for the distribution of the enlarged group's football poolsproducts through Ladbrokes' licensed betting offices, which will give theenlarged group a physical marketing and transactional presence in a minimum of1,750 licensed betting offices in the UK. 5. Interim results, current trading and prospects The Company announced its interim results for the 6 months ended 30 June 2007 on11 September 2007. Since that date, the Company has continued to trade in linewith the Directors' expectations. At the end of September 2007, the Company implemented a number of productenhancements and price adjustments. In line with the Company's expectations,average stakes have increased by 19 per cent to approximately £2.15 per customerper week, offset by a one-off loss of customers of 6 per cent. The Company and Littlewoods Promotions have also entered into an agreement withthe English and Scottish professional football leagues and Football DataCo formarketing and data rights. This agreement enables Littlewoods Promotions tostrengthen its relationship with football by becoming an Official Licensee ofthe FA Premier League and the Football League, and an Official Partner of theScottish Premier League and the Scottish Football League. The agreement providesfor a series of additional marketing, branding and data rights, which theDirectors expect to assist in the development of the Enlarged Group's businessin the UK and internationally. The agreement also provides for Littlewoods Promotions and each of the Leaguesto use their best endeavours to conclude a Memorandum of Understanding to setout the procedure for distributing certain of the contributions whichLittlewoods Promotions presently makes to the Foundation for Sport and the Artsto charities within the Leagues' "Football Good Causes Framework". The Directorsbelieve that this arrangement will enhance the Company's connection withfootball and its various interest groups. 6. Consolidation A share consolidation is proposed. The Board believes that this will, inter alia, reduce the bid/offer spread in the Ordinary Shares and that fluctuations in the price of the Ordinary Shares will be more easily absorbed. The Company'smiddle market share price, as at the close of business on 6 November 2007, beingthe latest practicable date before publication of the Circular posted to allShareholders on 7 November 2007, was 10.25 pence, with a bid/offer spread of 10pence - 10.5 pence. Subject to Resolution 2 being passed by Shareholders at the EGM, the issued andauthorised but unissued Existing Ordinary Shares of 5 pence each in the sharecapital of the Company will be consolidated into 50 pence Ordinary Shares sothat holders of Existing Ordinary Shares of 5 pence each will then hold one 50pence Ordinary Share for every ten Existing Ordinary Shares of 5 pence eachpreviously held. The Placing and Open Offer will take place on apost-Consolidation basis. The effect of the Consolidation will be to reduce the total number of OrdinaryShares in issue without affecting the rights of Shareholders or (except asregards the impact of the sale of fractional entitlements) the proportion of theCompany's total issued share capital held by any Shareholder. In the absence ofany other factors affecting the Company's share price, the Consolidation is notexpected to affect the Company's market capitalisation. Dealings in 50 pence Ordinary Shares are expected to commence on 3 December2007. The Company will arrange for new share certificates to reflect the Consolidationto be issued to those Shareholders who hold their Existing Ordinary Shares incertificated form within 14 days of Admission, after which time the existingcertificates in respect of such Existing Ordinary Shares shall cease to be validfor all purposes. Options held under the Share Option Schemes and any awards granted under theproposed Performance Share Plan on the day of the EGM will be adjusted toreflect the effect of the Consolidation by decreasing the number of OrdinaryShares under option or award and increasing any exercise price in respect ofeach grant, as appropriate. The adjustment will be determined by the Board andapproved by the Company's auditors (and HMRC where necessary). Such shareoptions and awards will also be adjusted to reflect any dilutive effect of theOpen Offer. The share price targets applying to existing options held under theShare Option Schemes will also be adjusted as a result of the consolidation andOpen Offer in the same way as noted above for the exercise price for suchoptions. 7. Principal terms of the Placing and Open Offer The Company is proposing to raise approximately £41.4 million (before expenses),subject, inter alia, to Shareholders' approval, through the issue of the NewOrdinary Shares by means of the Placing and Open Offer. Save in respect of theSubscription Shares, the New Issue is fully underwritten by Investec. The Company has received an irrevocable undertaking from Newby Manor Limited tosubscribe for all the New Ordinary Shares to which it is entitled under the OpenOffer, being 11,846,284 New Ordinary Shares representing approximately 28.6 percent of the New Issue and 11.8 per cent. of the Enlarged Issued Share Capital. The Company has also received an irrevocable undertaking from BoS not to take upany of the 11,779,786 New Ordinary Shares to which it is entitled under the OpenOffer, representing approximately 28.4 per cent. of the New Issue and 11.7 percent. of the Enlarged Issued Share Capital. These New Ordinary Shares, being theFirm Placed Shares, have been placed firm by Investec on behalf of the Companyat the Issue Price with institutional investors. Qualifying Shareholders are being offered the right to subscribe for NewOrdinary Shares at the Issue Price in accordance with the terms of the OpenOffer. The Issue Price, when adjusted to take account of the Consolidation, representsa discount of approximately 2.4 per cent. to the middle market quotation for theExisting Ordinary Shares of 10.25 pence, as derived from the Daily Official Listof the London Stock Exchange on 6 November 2007. New Ordinary Shares will be offered to Qualifying Shareholders in the OpenOffer, subject to the terms and conditions to be set out in the Circular to beposted to Shareholders, on the following basis: 7 Open Offer Shares for every 10 Ordinary Shares of 50 pence each registered in the names of Qualifying Shareholders on the Record Date, and so inproportion for any other number of Existing Ordinary Shares then registered.Entitlements of Qualifying Shareholders will be rounded down to the nearestwhole number of Open Offer Shares. Any resulting fractional entitlements ofQualifying Shareholders arising under the Open Offer will not be allocatedpursuant to the Open Offer, but will be aggregated and sold by Investec for thebenefit of the Company or taken up under the Placing Agreement. The New Ordinary Shares, when issued, will be fully paid and will rank paripassu in all respects with the 50 pence Ordinary Shares created by and in issuefollowing the Consolidation, including the right to receive all dividends andother distributions declared, made or paid on or after, or by reference to arecord date on or after, the date of their issue. The Placing and the Open Offer are conditional on the Placing Agreement becomingunconditional in all respects and not being terminated prior to Admission. ThePlacing Agreement is itself conditional on, inter alia: • the passing of Resolutions 1, 2 and 3 at the EGM; • the Acquisition Agreement becoming unconditional save for Admission; • the New Facility Agreement becoming unconditional in all respects (save as regards any condition relating to the Placing Agreement and the Acquisition Agreement becoming unconditional); • All the subscription monies due from Newby Manor Limited being received; and • Admission occurring not later than 3 December 2007 or such later time and/or date as the Company and Investec may agree being no later than 8.00 a.m. on 10 December 2007 Under the terms of the Placing Agreement, Investec has the right to terminateits obligations under the Placing Agreement in the event of, inter alia, any ofthe warranties contained therein being untrue, inaccurate or misleading, or abreach by the Company of its obligations in the Placing Agreement. 8. Principal Terms of the New Facility Agreement and the New Working CapitalFacility Agreement The New Facility Agreement and the New Working Capital Facility Agreement willprovide total facilities of up to £124 million to Sportech, and in the case ofthe New Working Capital Facility Agreement, to the Enlarged Group. The NewFacility Agreement may be drawn upon by Sportech for the purposes of onlendingsums drawn to Littlewoods Promotions for the purposes of funding part of theconsideration payable for the Acquisition and related costs and expenses and forcertain other purposes agreed with the lenders thereunder. The New FacilityAgreement also includes provision for BoS to issue a guarantee in respect of theDeferred Consideration. The New Facility Agreement and the New Working Capital Facility Agreement imposevarious obligations on Sportech, including compliance with financial covenants.Prior to Completion, each of Sportech's non dormant subsidiaries will haveacceded to the New Facility Agreement as guarantors (and thereby will guaranteesums payable by Sportech and its subsidiaries under the New Facility Agreement,the New Working Capital Facility Agreement and other related documents) andSportech and each of its non dormant subsidiaries will also provide fullsecurity over their property, assets and undertaking to secure their obligations(in the case of subsidiaries not incorporated in the United Kingdom, suchsecurity will be limited to security over the shares in such subsidiaries andthe shares held by such subsidiary in other subsidiaries). Within three BusinessDays of Completion, each of Vernons Games, Vernons Trustee Company and VernonsFinancial Services will be required to accede to the New Facility Agreement andthe New Working Capital Facility Agreement as guarantors and provide fullsecurity over their assets. The New Working Capital Facility Agreement provides uncommitted working capitalfacilities to Sportech and its non dormant subsidiaries. Initially, the facilityis limited to £8 million but it increases to £14 million to enable the DeferredConsideration to be paid except to the extent that a drawing is made by Sportechunder the New Facility Agreement to fund the Deferred Consideration. The New Facility Agreement and the New Working Capital Facility Agreement wereexecuted on 7 November 2007 and are unconditional in all respects save forAdmission, Shareholders' approval of the New BoS Funding Arrangements, thePlacing and the Open Offer and the Acquisition, the fulfilment of certainconditions precedent relating to the guarantees and security to be provided bycertain of Sportech's subsidiaries, the Company being able to repeat certainrepresentations and warranties and there being no breach of certain events ofdefault on Admission. The interest rate applicable to the facilities advancedunder the New Facility Agreement will be LIBOR plus a margin of between 1.375per cent and 3 per cent per annum plus mandatory costs. The New FacilityAgreement contains normal representations and warranties, general and financialcovenants and events of default. The New Working Capital Facility Agreementprovides for an interest rate of 1.25 per cent. above BoS's base rate from timeto time. If the Acquisition does not proceed, the facilities provided by the New FacilityAgreement and the New Working Capital Facility Agreement will not be availableto the Group. In this event the Group will continue to use the Existing FacilityAgreement with BoS. As BoS is a substantial shareholder of the Company, the giving of securitypursuant to the New BoS Funding Arrangements will constitute a related partytransaction for the purposes of Chapter 11 of the Listing Rules and will requireShareholders' approval at the EGM. 9. Dividend Policy Subject to the Enlarged Group trading in line with their expectations, theDirectors intend to consider the payment of a dividend in respect of theCompany's 2009 financial year. 10. Amendment of Articles of Association In order to effect the Consolidation as described above, the Company isproposing to alter its Articles of Association so as to provide that, in respectof any Shareholders who would become entitled to fractions of a share on anyconsolidation, the Directors may sell the shares represented by the aggregatedfractions to any person (including the Company) on behalf of those Shareholders.The Directors must obtain the best price reasonably obtainable for the sharesand distribute the net proceeds of sale pro rata amongst the relevantShareholders, except that amounts of £2 or less will be retained by the Company. 11. Extraordinary General Meeting In order to effect the Proposals, it is necessary to obtain Shareholders'approval of the Resolutions. Accordingly, it is expected that an EGM will beconvened for 10.00 a.m. on 30 November 2007 at the offices of Kirkpatrick &Lockhart Preston Gates Ellis LLP, 110 Cannon Street, London, EC4N 6AR. TheResolutions proposed are as follows: Resolution 1 This Resolution, which will be proposed as an ordinary resolution, seeksapproval for the Acquisition on the terms of the Acquisition Agreement. This isnecessary because the Acquisition is a Class 1 transaction for the Company underChapter 10 of the Listing Rules and as such requires the prior approval ofShareholders for its Completion. Resolution 2 This Resolution will be proposed as a composite special resolution, and will, ifpassed: (a) increase the Company's authorised share capital and authorise the Directors (b) disapply Shareholders' statutory pre-emption rights in relation to the Placing and Open Offer and certain future allotments of equity securities (c) approve the terms of the Placing and Open Offer; (d) alter the Company's Articles of Association to enable the Consolidation to proceed as described above; and (e) effect the consolidation of every ten of the Company's issued and authorised but unissued 5 pence Ordinary Shares into one 50 pence Ordinary Share. Resolution 3 This Resolution, which will be proposed as an ordinary resolution, seeksapproval for the entering into of the New BoS Funding Arrangements by the Groupand the enlarged group. This is necessary because the grant of security pursuantto the New BoS Funding Arrangements constitutes a related party transaction forthe purposes of Chapter 11 of the Listing Rules and as such requires the priorapproval of Shareholders. Resolution 4 This Resolution, which will be proposed as an ordinary resolution, seeksapproval of the rules of the Company's proposed new Performance Share Plan(details of which will be contained in the Circular) and authorises theDirectors (i) to make such modifications to the PSP as they consider appropriateand (ii) establish overseas plans based on the PSP. Other than in relation to the issue of the New Ordinary Shares pursuant to thePlacing and Open Offer, the Directors have no present intention of issuing anyequity securities pursuant to the disapplication of pre-emption rights referredto above. 12. Major Shareholders' and Directors' intentions regarding the Open Offer In relation to the New Issue, the following irrevocable undertakings have beenreceived: Newby Manor Limited has given an irrevocable undertaking, dated 5 November 2007,to take up all the New Ordinary Shares to which it is entitled under the OpenOffer, amounting in aggregate to 11,846,284 New Ordinary Shares representingapproximately 28.6 per cent of the total number of New Ordinary Shares. NewbyManor Limited has also undertaken to vote in favour of all the Resolutions atthe EGM. BoS has given an irrevocable undertaking, dated 7 November 2007, not to take upany of the New Ordinary Shares to which it is entitled under the Open Offer,amounting in aggregate to 11,779,786 New Ordinary Shares and representingapproximately 28.4 per cent. of the total number of New Ordinary Shares andapproximately 11.7 per cent. of the Enlarged Issued Share Capital. These NewOrdinary Shares have been placed firm by Investec on behalf of the Company atthe Issue Price with institutional investors. BoS has also undertaken to vote infavour of all the Resolutions at the EGM other than Resolution 3. Because of itsinterest in the subject matter of Resolution 3, BoS has irrevocably undertakento abstain from voting on Resolution 3 and to take reasonable steps to ensurethat its associates will abstain from voting on Resolution 3 at the EGM. BoS has undertaken to the Company and Investec not to sell or otherwise disposeof any of its Ordinary Shares for a period of twelve months following Admission.This undertaking will not prevent BoS from disposing of any shares: (a) In the event that Newby Manor Limited sells or otherwise disposes of Ordinary Shares representing in excess of 5 per cent of the Enlarged Issued Share Capital during the twelve months following Admission or there is a recommended offer for the Company; (b) Representing up to 84,141,331 Existing Ordinary Shares at a price of 10 pence per Existing Ordinary Share to satisfy surplus demand for Existing Ordinary Shares on 7 November 2007; and (c) Upon notification from Investec (in its capacity as broker to the Company) that it has received interest from a third party to acquire Ordinary Shares of the Company for which there is an insufficient number of Ordinary Shares of the Company offered for disposal on the Main Market at that time. However BoS has confirmed that it is not its present intention to accept any such offer which may be made for its shares if it has sold the shares referred to in (b) above, so that it will continue to hold the balance of its Existing Ordinary Shares remaining after such sale until the first anniversary of Admission. Two of the Directors, Ian Penrose and John Barnes, intend to take up from theirOpen Offer Entitlements 75,000 New Ordinary Shares (at a cost of £75,000 at theIssue Price) and 25,000 New Ordinary Shares (at a cost of £25,000 at the IssuePrice) respectively. Ian Penrose has agreed to sell 15,000 of these New OrdinaryShares to Steve Cunliffe and 25,000 of these New Ordinary Shares to Jon Holmes,all at the Issue Price. PART II EXPECTED TIMETABLE OF PRINCIPAL EVENTS Record Date for entitlement under the Open Offer Close of business on 5 November 2007 Existing Ordinary Shares marked "ex" entitlement to Open Offer 7 November 2007 Open Offer Entitlements credited to Stock Accounts in CREST of Qualifying CREST Shareholders8 November 2007 Recommended latest time for requesting withdrawal of Open Offer Entitlements from CREST 4.30 p.m. on 22 November 2007 Latest time for depositing Open Offer Entitlements into CREST 3.00 p.m. on 26 November 2007 Latest time for splitting of Application Forms(to satisfy bona fide market claims) 3.00 p.m. on 27 November 2007 Latest time and date for receipt of Forms of Proxy 10.00 a.m. on 29 November 2007 Latest time and date for receipt of Application Forms and payment in full under the Open Offer 11.00 a.m. on 29 November 2007 Extraordinary General Meeting 10.00am on 30 November 2007 Consolidation Record Date 5.00pm on 30 November 2007 Admission and commencement of dealings in New Ordinary Shares 03 December 2007 CREST members' accounts credited 03 December 2007 Despatch of definitive share certificates for New Ordinary Shares in certificated form (where applicable)By 10 December 2007 Despatch of cheques in respect of fractional entitlement under the Consolidation 10 December 2007 Despatch of share certificates in respect of 50 pence Ordinary Shares arising on the Consolidation By 17 December 2007 The dates set out in the expected timetable of principal events above andmentioned throughout this announcement may be adjusted by Sportech, in whichevent details of the new dates will be notified to the UK Listing Authority andthe London Stock Exchange and, where appropriate, to Shareholders. DEFINITIONS The following definitions apply throughout this document, unless the contextotherwise requires: "Acquisition" the proposed acquisition by the Company of Vernons, pursuant to the AcquisitionAgreement "Acquisition Agreement" the conditional agreement between (1) Vernons Pools Limited, (2) Vernons GroupLimited, (3) Ladbrokes Betting and Gaming Limited, (4) Littlewoods PromotionsLimited and (5) the Company, relating to the Acquisition "Admission" admission of the 50 pence Ordinary Shares to the Official List becomingeffective in accordance with the Listing Rules and admission to trading on theLondon Stock Exchange's market for listed securities becoming effective inaccordance with the London Stock Exchange's Admission and Disclosure Standards "Application Form" the application form accompanying this document by which Qualifying Shareholdersmay apply for Open Offer Shares under the Open Offer "Arbuthnot" Arbuthnot Securities Limited, a private limited company registered in Englandand Wales under company number 00762818 and authorised and regulated by the FSA(no. 114265) and a member of the LSE "Articles" or "Articles of Association" the articles of association of the Company "Audit Committee" the audit committee of the Directors "Bet Direct" the telephone and internet betting business carried on by Littlewoods Promotionsand sold by the Company in July 2006 "Board" or "Directors" the directors of the Company as at the date of this document "BoS" Bank of Scotland plc, having its registered office at The Mound, Edinburgh EH11YZ "Business Day" a day (other than Saturday or Sunday or a bank holiday) on which banks aregenerally open for normal banking business in the City of London "Company" or "Sportech" Sportech PLC, a public limited company registered in Scotland under companynumber SC069140 "Completion" completion of the Acquisition Agreement "Consolidation" the proposed consolidation of the 5p Ordinary Shares into 50 pence OrdinaryShares "Consolidation Record Date" the date of the EGM "CREST" the system for the paperless settlement of trades in securities and the holdingof uncertificated securities in accordance with the CREST Regulations "CREST Regulations" the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755), as amendedfrom time to time "Deferred Consideration" the deferred consideration to be paid under the terms of the AcquisitionAgreement in two amounts each of £3 million on the first and secondanniversaries of the date of Completion "EEA State" a state which is a contracting party to the agreement on the European EconomicArea signed at Oporto on 2 May 1992 as it has effect for the time being as atthe date of this prospectus, being: Austria, Belgium, Cyprus, the CzechRepublic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland,Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, TheNetherlands, Norway, Poland, Portugal, The Slovak Republic, Slovenia, Spain,Sweden and the United Kingdom "e-gaming" gambling conducted via the internet or through other remote means "Enlarged Group" the Group as enlarged by the proposed Acquisition "Enlarged Issued Share Capital" the issued ordinary share capital of Sportech immediately following the issue ofthe New Ordinary Shares "Existing Ordinary Shares" the 592,074,138 5 pence Ordinary Shares in issue at the date of this document "Extraordinary General Meeting" or "EGM" the extraordinary general meeting of the Company expected to be held at 10.00a.m. on 30 November 2007 at the offices of Kirkpatrick & Lockhart Preston GatesEllis LLP at 110 Cannon Street, London EC4N 6AR "Firm Placed Shares" the 11,779,786 New Ordinary Shares conditionally placed by Investec withinstitutional and certain other investors which are not subject to any clawbackto satisfy valid applications from Qualifying Shareholders under the Open Offer "Football Gaming" Littlewoods Pools, Zetters Pools and the Company's Spot the Ball, Premier 10,Treble Chance, Littlewoods Lotto 3 and Littlewoods Lotto 4 products "FSA" the Financial Services Authority "FSMA" the Financial Services and Market Act 2000, as amended "Guarantors" means Sportech and Littlewoods Gaming as the date hereof and such other nondormant subsidiaries of Sportech as accede to the New Facility Agreement beforeand, in the case of Vernons Games, Vernons Trustee Company and Vernons FinancialServices, after Completion "Group" the Company and its subsidiaries at the date of this document "HMRC" Her Majesty's Revenue & Customs "Investec" Investec Bank (UK) Limited, a private limited company registered in England andWales under company number 00489604, acting through its division InvestecInvestment Banking "Issue Price" 100 pence per New Ordinary Share "Ladbrokes" Ladbrokes PLC, a public limited company registered in England and Wales undercompany number 0566221 "LIBOR" London Interbank Offered Rate "Listing Rules" the listing rules made by the UK Listing Authority for the purposes of Part VIof the FSMA "Littlewoods Gaming" Littlewoods Gaming Limited, a wholly owned subsidiary of Sportech, a privatelimited company registered in England and Wales under company number 04118085 "Littlewoods Leisure" the betting and gaming division of Littlewoods Organisation acquired by theCompany in September 2000 "Littlewoods Lotteries" Littlewoods Lotteries Limited, a private limited company registered in Englandand Wales under company number 02884057 "Littlewoods Organisation" Littlewoods Limited, a private limited company registered in England and Walesunder company number 00262152, the name of which was The LittlewoodsOrganisation plc until 21 September 2000 and which re-registered as a privatelimited company on 1 November 2002 "Littlewoods Pools" the football pool business carried on by Littlewoods Promotions "Littlewoods Promotions" Littlewoods Promotions Limited, a wholly owned subsidiary of Sportech, a privatelimited company registered in England and Wales under company number 00545018 "London Stock Exchange" or "LSE" London Stock Exchange plc "New BoS Funding Arrangements" means the New Facility Agreement, the New Working Capital Facility Agreement andall guarantees and security provided or to be provided by the Group or theEnlarged Group to secure obligations thereunder "New Facility Agreement" means the conditional facilities agreement dated 7 November 2007 between, interalia, BoS (in various capacities) and Sportech setting out the terms pursuant towhich the term loan and guarantee facilities (totalling £116 million) referredto therein will be made available to Sportech, such agreement including aguarantee from the Guarantors of sums due under the New BoS Funding Arrangementsand certain other documents "New Issue" the issue of New Ordinary Shares to be made pursuant to the Placing and OpenOffer "New Ordinary Shares" the 41,445,189 new 50 pence Ordinary Shares to be issued pursuant to the Placingand Open Offer "New Working Capital Facility Agreement" means the conditional agreement constituted by the acceptance by Sportech andcertain of its subsidiaries of a letter from BoS dated 7 November 2007 settingout the terms pursuant to which BoS will provide up to £14 million of workingcapital facilities to borrowers thereunder and to which Vernons Games, VernonsTrustee Company and Vernons Financial Services will accede after Completion "Official List" the Official List of the UK Listing Authority "Open Offer" the conditional offer made by Investec, as agent for the Company, invitingQualifying Shareholders to subscribe for the Open Offer Shares at the IssuePrice "Open Offer Entitlements" entitlements allocated to Qualifying Shareholders to subscribe for Open OfferShares under the Open Offer "Open Offer Shares" the New Ordinary Shares available to Qualifying Shareholders under the OpenOffer "Ordinary Shares" 5 pence Ordinary Shares and 50 pence Ordinary Shares "5 pence Ordinary Shares" ordinary shares of 5 pence each in the capital of the Company at the date ofthis document "50 pence Ordinary Shares" ordinary shares of 50 pence each in the capital of the Company following theConsolidation "Overseas Shareholders" holders of Ordinary Shares with registered addresses outside the United Kingdomor who are citizens of, incorporated in, registered in, or otherwise residentin, countries outside the United Kingdom "Placing" the conditional placing of the Firm Placed Shares and Open Offer Shares byInvestec as agent for the Company pursuant to the Placing Agreement subject(other than in respect of the Firm Placed Shares) to recall to satisfy validapplications under the Open Offer, as described in this document "Placing Agreement" the agreement dated 7 November 2007 between Sportech and Investec relating tothe Placing and Open Offer "Proposals" the Acquisition, the Consolidation, the adoption of the Performance Share Plan,the amendment of the Articles, the Placing and the Open Offer and the New BoSFunding Arrangements "PSP" or "Performance Share Plan" The Sportech Performance Share Plan "Qualifying CREST Shareholders" Qualifying Shareholders whose Existing Ordinary Shares on the Company's registerof members on the Record Date are held in uncertificated form in CREST "Qualifying Shareholders" holders of 5 pence Ordinary Shares on the register of members of the Company onthe Record Date, excluding certain Overseas Shareholders "Record Date" the close of business on 5 November 2007 "Remuneration Committee" the remuneration committee of the Directors "Resolutions" the resolutions numbered 1 to 4 set out in the notice of Extraordinary GeneralMeeting "Shareholder" a holder of Ordinary Shares "Share Option Schemes" the share option schemes entered into by the Company on 4 September 2000, inboth HMRC approved and unapproved form "Stock Account" an account within a member account in CREST to which a holding of a particularshare or other security in CREST is credited "Subscription" the subscription for 11,846,284 New Ordinary Shares by Newby Manor Limited,which has agreed to take up such shares under the terms of the Open Offer by wayof an irrevocable undertaking dated 5 November 2007 "Subscription Shares" the 11,846,284 Open Offer Shares which Newby Manor Limited has undertaken totake up in the Open Offer under the Subscription "UK" or "United Kingdom" the United Kingdom of Great Britain and Northern Ireland, its territories anddependencies "UK Listing Authority" or "UKLA" the FSA acting in its capacity as the competent authority for the purposes ofPart VI of the FSMA "Vernons" the pools business of Vernons Pools and its related assets, the shares ofVernons Games Limited, Vernons Trustee Company Limited and Vernons FinancialServices Limited "Vernons Pools" Vernons Pools Limited, a private limited company registered in England and Walesunder company number 00935350 "Vernons Games" Vernons Games Limited, a private limited company registered in England and Walesunder company number 01714462 "Vernons Trustee Company" Vernons Trustee Company Limited, a private limited company registered inScotland under company number SC121262 "Vernons Financial Services" Vernons Financial Services Limited, a private limited company registered inEngland and Wales under company number 02122895 "Working Capital Facility Agreement" the facility letter from BoS addressed to Sportech (and various of itssubsidiaries) dated 10 August 2000 under the terms of which BoS agreed toprovide working capital facilities to Sportech and various of its subsidiaries(as amended, varied and supplemented from time to time) "Zetters Pools" the football pools business acquired by Littlewoods Promotionsfrom Zetters International Pools Limited in August 2002 and carried on sincethen by Littlewoods Promotions This summary should be read in conjunction with the full text of thisannouncement. This announcement does not constitute, or form any part of, an offer or aninvitation to purchase any securities. Civil liability attaches to the Company and the Directors who are responsiblefor the contents of this summary, including any translation of this summary, butonly if this summary is misleading, inaccurate or inconsistent when readtogether with the other parts of this document. Where any claim relating toinformation contained in this document is brought before a court, the plaintiffinvestor might, under the national legislation of the EEA States, have to bearthe costs of translating this document before any legal proceedings areinitiated. This announcement does not constitute an offer of, or the solicitation of anyoffer to buy, any Ordinary Shares to any person in any jurisdiction to whom orin which such offer or solicitation is unlawful. The distribution of thisannouncement in certain jurisdictions may be restricted by law and thereforepersons into whose possession this announcement comes should inform themselvesabout and observe any such restrictions. Any failure to comply with theserestrictions may constitute a violation of the securities laws of suchjurisdiction. Investec Investment Banking, a division of Investec Bank (UK) Limited, which isregulated in the United Kingdom by the Financial Services Authority, is actingexclusively for the Company as sponsor, joint broker and underwriter and for noone else in relation to the matters described in this announcement and will notbe responsible to anyone other than the Company for providing the protectionsafforded to customers of Investec Investment Banking or for providing advice inrelation to the subject matter or contents of this announcement. For further information please contact: Sportech PLC Ian Penrose, Chief Executive 0151 288 3561 Steve Cunliffe, Finance Director 0151 288 3561 Investec James Grace / Patrick Robb 0207 597 5180 Arbuthnot Neil Kirton / Nick Marsh 0207 012 2000 Bell Pottinger Corporate & Financial David Rydell / Emma Kent / Rosanne Perry 0207 861 3232 This information is provided by RNS The company news service from the London Stock Exchange