STOB.L Regulatory News (STOB)

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF THAT JURISDICTION

6 March 2014 

STOBART GROUP LIMITED

('Stobart' or 'the Company')

Proposed Partial Realisation of the Group's Transport and Distribution Division

Increased focus on Infrastructure and Support Services

The Board of Stobart Group Limited announces a partial realisation of its Transport and Distribution Division. Going forward the Group will focus on exploiting the potential of its Infrastructure and Support Services Divisions. The Transaction will position the Group to repay substantially all of its debt, accelerate the growth of the Continuing Group and buy back a proportion of its shares.

· Stobart Group proposes to realise 51% of Eddie Stobart Logistics, the holding company of the parts of the Transport and Distribution Division being sold. The Transaction values the business being sold at approximately £280.8 million comprising

· £195.6 million in cash*

· £44.1 million in shares (giving the Group 49% of the purchasing company with 51% owned by funds managed by DBAY)

· approximately £41.1 million in debt and debt-like items assumed by the purchaser

· Stobart Group proposes to retain, from the Transport and Distribution Division

· the Eddie Stobart Brand through a licence agreement

· the biomass transport operations (8% of the vehicle fleet) to integrate into its Stobart Biomass fuel supply business

· the majority of the freehold properties used by the Transport and Distribution Division

· Eddie Stobart Logistics generated EBIT of £25.6 million on revenue of £475.7 million in the year ended 28 February 2013

· Following the Transaction Stobart will be an Infrastructure and Support Services group operating in the Energy, Air and Rail markets

· Energy - the Transaction allows Stobart Group to invest up to £55 million in the growing biomass sector via Stobart Green Energy by investment in existing and new green energy plants delivering

· attractive returns on equity investment

· long-term profitable supply contracts for our Stobart Biomass fuel supply businesses

· Air - at London Southend Airport and Carlisle Lake District Airport the Group is focussed on passenger growth

· capitalising on demand for regional airport capacity in London and the South East and the UK as a whole

· promoting London Southend Airport as Europe's fastest growing airport

· securing new airline operators serving London and the South East

· using Aer Arann to provide new, untapped routes, bringing passengers to London and the South East from the UK and Europe

· Rail - our Civil Engineering business continues to focus on third party rail contracts and will support Stobart Green Energy with its green energy plant investment plans

· The cash proceeds of the Disposal will be used to

· provide funding of up to £55 million for the Group's proposed investment in Stobart Green Energy

· fund a share buyback of up to £35 million of the Company's ordinary shares over the coming twelve months

· repay the Group's £100 million loan from M&G, leaving the Group with minimal net debt

· The Transaction represents another stage of delivering on our strategy of realising the value of our more mature assets at the right time

· William Stobart will leave the Group Board and lead Eddie Stobart Logistics as CEO, driving growth in the business as a private company

· The plans we have established with DBAY, William Stobart and his management team should maximise value for Shareholders through our 49% stake over the coming four years

· With minimal net debt and plans to continue to realise our property portfolio, the Group is well-positioned to build sustainable returns from its growth businesses and maintain its dividend policy

* Up to £10.0 million of the cash consideration may be deferred via the issue of a loan note

Andrew Tinkler, CEO of Stobart said:

"This is a further stage in delivering our strategy of creating and realising value for our Shareholders. Moving forward, we are focussed on capitalising on the opportunities in our Infrastructure and Support Services Divisions, enhanced by investment in Stobart Green Energy."

William Stobart commented:

"I really welcome this investment from DBAY and look forward to heading up the new partnership as CEO. DBAY have a strong track record of working with existing management teams within businesses, as they will do with us, to help drive growth. We already have an extremely loyal customer base who we look forward to continuing to work with. It is an exciting time for us to grow this business and I am looking forward to this next stage and the opportunities that it will bring for our employees and customers."

Iain Ferguson, Chairman of Stobart said:

"This transaction represents an important step in the realisation of value for Shareholders. We have found a strong partner to take Eddie Stobart Logistics to the next stage of its development, increasing the scope of the powerful 'Eddie Stobart' brand and allowing the Group to focus on its Infrastructure and Support Services Divisions. These proposals allow us to repay debt, make a return of capital to shareholders, stimulate the growth of our Biomass business and bring the Group's businesses together in a coherent, medium-term value creation plan."

ENQUIRIES:

Important notices

The release, publication or distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about, and observe, any applicable requirements. This announcement has been prepared for the purposes of complying with the Listing Rules and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside of England.

Forward-looking statements

This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will", or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this announcement and include, but are not limited to, statements regarding Stobart's intentions, beliefs or current expectations concerning, among other things, the Group's results of operations, financial position, prospects, growth, strategies and the industry in which it operates. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements are not guarantees of future performance and the actual results of the Group's operations, financial position and liquidity, and the development of the markets and the industry in which the Group operates, may differ materially from those described in, or suggested by, the forward-looking statements contained in this announcement. In addition, even if the results of operations, financial position and the development of the markets and the industry in which the Group operates are consistent with the forward-looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods. A number of factors could cause results and developments to differ materially from those expressed or implied by the forward-looking statements including, without limitation, general economic and business conditions, industry trends, competition, changes in regulation, currency fluctuations, changes in its business strategy, political and economic uncertainty and other factors.

Forward-looking statements may, and often do, differ materially from actual results. Any forward-looking statements in this announcement speak only as of their respective dates, reflect the Group's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Group's operations, results of operations and growth strategy. Subject to the requirements of the Financial Conduct Authority, the London Stock Exchange, the Listing Rules and Disclosure and Transparency Rules (and/or any regulatory requirements) or applicable law, the Group explicitly disclaims any obligation or undertaking publicly to release the result of any revisions to any forward-looking statements in this announcement that may occur due to any change in the Company's expectations or to reflect events or circumstances after the date of this announcement.

Other

No statement in this announcement is intended as a profit forecast or profit estimate and no statement in this announcement should be interpreted to mean that the earnings per share of the Group for the current or future financial periods will necessarily match or exceed the historical or published earnings per share of the Group.

Certain figures in this announcement have been subject to rounding adjustments.

Cenkos Securities, which is authorised and regulated by the FCA, is acting exclusively for the Company in connection with the proposed Transaction and not for any other person and will not regard any other person (whether or not a recipient of this document) as a client in relation to the proposed Transaction and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the proposed Transaction or any transaction, arrangement or other matter referred to in this document.

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF THAT JURISDICTION

6 March 2014 

STOBART GROUP LIMITED

('Stobart' or 'the Company')

Proposed Partial Disposal of the Group's Transport and Distribution Division

Increased focus on Infrastructure and Support Services

1. Introduction

The Board of Stobart Group Limited announces that it has reached conditional agreement with DBAY to dispose of a controlling interest in the Group's Transport and Distribution Division. The Transaction is structured as a sale of 100% of Eddie Stobart Logistics, the holding company for the business being sold, for total consideration of £280.8 million, comprising:

· £195.6 million in cash;

· £44.1 million in shares in New ESL, the acquiring company; and

· approximately £41.1 million in liabilities assumed by the purchaser.

The share consideration will leave the Group with an interest of 49% of the share capital of the acquiring company with 51% owned by funds managed by DBAY. Up to £10.0 million of the cash consideration may be deferred via the issue of a loan note.

Going forward the Group will focus on exploiting the potential of its Infrastructure and Support Services Divisions. The Transaction will position the Group to repay substantially all of its debt, accelerate the growth of the Continuing Group and make a return of capital to Shareholders.

The Board considers that the proposed Transaction represents an important step in the delivery of our strategy of creating and realising value for our Shareholders. The Disposal will generate significant cash proceeds at an attractive valuation. It will enable the management team to focus on the Group's Infrastructure and Support Services Divisions where the Board sees considerable potential for value creation and it will leave the Group with a significant interest in a privately-owned Eddie Stobart Logistics business.

The Group will retain the biomass transport operation of the Transport and Distribution Division, comprising approximately 8% of the vehicle fleet, which will be integrated with the Stobart Biomass fuel supply business.

The Group will retain legal ownership of the 'Eddie Stobart' brand, which will be used by New ESL under a licence arrangement, giving the Group control of its valuable trade mark portfolio. The Group will also retain a number of the freehold property assets of Eddie Stobart Logistics.

The Board has also announced its intention to invest a proportion of the proceeds in waste wood and anaerobic digestion electricity generating plants via a newly-formed business, Stobart Green Energy. The Board hopes to accelerate the development of this market, bringing not only a strong investment return but also a return on the additional volumes of biomass fuel supplied to these plants by Stobart Biomass.

The proceeds of the proposed Transaction will be used to:

· provide funding of up to £55 million for the Group's proposed investment in Stobart Green Energy;

· fund a share buyback of up to £35 million of the Company's ordinary shares, to take place over twelve months; and

· repay the Group's £100 million loan from M&G, leaving the Group with minimal net debt.

William Stobart, who leads Eddie Stobart Logistics and is a key contributor to its success, will focus exclusively on Eddie Stobart Logistics following Completion. He will be CEO of Eddie Stobart Logistics and he proposes to make a substantial long-term investment alongside DBAY and the Group. Accordingly he has, today, resigned from the Board of Stobart.

Due to its size, the proposed Disposal constitutes a class 1 transaction for the Company under the Listing Rules and therefore is conditional on Shareholder approval at a General Meeting. Further details on the principal terms of the proposed Transaction will be included in a circular which will be posted to Shareholders as soon as possible. 

2. Background to and reasons for the proposed Transaction

The Group's Transport and Distribution Division, which operates under the 'Eddie Stobart' brand, is one of the UK's leading logistics businesses. It has grown significantly both by acquisition and organically since the Group's listing in September 2007. It is now a multi-modal logistics services provider operating across a range of markets.

The Transport and Distribution Division has provided a platform for the Group's development of its Biomass, Air and Estates businesses. The Group's Estates function, which manages the properties occupied by the Group and its investment properties, grew significantly with the acquisition of Moneypenny Limited in February 2012. The acquisitions of Stobart Biomass Products in two tranches in 2010 and 2011 respectively and London Southend Airport in 2008 marked the beginning of the development of Stobart Biomass and Stobart Air, which the Group expects to become substantial, valuable businesses.

The core focus of the Board and senior management team is the identification and exploitation of opportunities to create value for Shareholders, leveraging its expertise in logistics, real estate and related markets. In 2013, at the midpoint of its four year strategic plan the Board's focus shifted from investment across the Group to the continued development of Stobart Air and Stobart Biomass and the realisation of other assets which have reached maturity and where the potential to create further value within the Group was more limited. Since October 2012, the Group has generated £85 million from property sales and repaid or agreed to repay £69 million of debt, of which approximately £49 million has been repaid since 31 August 2013.

The Directors consider that Eddie Stobart Logistics has reached a point in its development where new expertise and impetus is required in order to continue its growth and their view is that the proposed Transaction is the best way of achieving this.

The Board believes that under the right conditions the strength and reputation of the 'Eddie Stobart' brand and business will support significant growth. The Board considers that the expertise and capital required to achieve this growth will be more readily available following the proposed Transaction and that the risk profile associated with the growth plans will be better managed in an unlisted business. The proposed Transaction will introduce experienced investors and senior managers with a record of creating value in the transport and distribution sector and provide the business with the financial and management resource to increase the value of the 49% of the New ESL business that the Group will hold following the proposed Transaction.

The Board has undertaken a rigorous review of options available to the Group to maximise the value of Eddie Stobart Logistics. 'Eddie Stobart' is a nationally recognised and respected brand and it was officially recognised as a Business Superbrand by the British Superbrands Organisation in 2013 and was placed first overall in the Supply Chain Distribution and Freight Services Category. The business has proven its resilience through the UK's economic recession and benefits from longstanding relationships with its key customers. The Board believes that these attributes provide the business with a platform for further growth. However, the Directors also consider that taking Eddie Stobart Logistics to the next stage of its development will require additional capital and investment in the infrastructure of the business and its management team. They consider that the investments required and the associated risk are better undertaken as a private business with the benefit of investment from industry specialists and the involvement of proven logistics industry personnel who will be able to take a longer-term approach to value creation with reduced publicity.

The Board has maintained a dialogue with DBAY since its involvement with TDG, the UK contract logistics company which members of the DBAY team invested in and operated from 2008 to 2011, and has been in discussions for some time regarding the possibility of a transaction involving Eddie Stobart Logistics. The Directors have reviewed a range of strategic options, including an outright sale of the business, and elected to develop a structure with DBAY under which the Group will:

· achieve a partial realisation and a significant cash payment at an attractive valuation, enabling the Group to repay substantially all of its existing debt, buy back a proportion of the Ordinary Shares and fund attractive investment opportunities without recourse to Shareholders;

· retain a significant on-going interest in the Eddie Stobart Logistics business;

· retain the biomass transport operations of the Group's Transport and Distribution Division, maintaining the competitive advantage of the Stobart Biomass fuel supply business;

· retain a number of the freehold properties previously owned within the Transport and Distribution Division including the properties at Lillyhall, Normanton, Chelford, Widnes and Runcorn;

· focus its management resource on its growth businesses; and

· retain legal ownership of the 'Eddie Stobart' brand.

The proposed Transaction is expected to provide Eddie Stobart Logistics with:

· additional, highly qualified senior personnel;

· access to new business opportunities and additional capital for growth; and

· a more flexible ownership environment, allowing a longer-term view of value creation,

all of which will benefit the Group when there is an exit from the investment in New ESL or when New ESL starts to pay dividends.

The Stobart Group's biomass transport business will not be included in the sale to New ESL and will be retained by the Group and integrated into Stobart Biomass, the Group's green energy fuel supply business. Retention of the biomass transport business will allow the Group to continue to control all aspects of the supply of biomass fuel. The Board considers that this, in addition to the Group's on-going association with Eddie Stobart Logistics, will secure the position of Stobart Biomass as a highly credible fuel supplier. This division will supply biomass material to existing and new plants and is set to grow considerably over the next two to three years, delivering biomass material on long-term contracts, typically in excess of 10 years.

The Board considers the Group's brand portfolio to be a valuable asset capable of supporting a larger business and retention of the ownership of the 'Eddie Stobart' brand, under licence to New ESL, allows the Group to control the use of all of its intellectual property to manage the growth of the portfolio of Stobart branded businesses. The licence agreement also offers the Group the prospect of achieving additional value from the 'Eddie Stobart' brand in the future.

3. Key terms of the Disposal

The Disposal is being made pursuant to the Disposal Agreement. Under the Disposal Agreement SHL, a wholly-owned subsidiary of the Company, has agreed to sell the entire issued share capital of Eddie Stobart Logistics to New ESL for consideration of £195.6 million (of which up to £10.0 million may be paid in Loan Notes and the remainder will be paid in cash on completion) and the allotment to SHL of shares in New ESL (the holding company for the Eddie Stobart Logistics group following Completion) and Finco (a special purpose financing company) representing 49% of each of New ESL's and Finco's enlarged issued share capital. The consideration is to be satisfied in full on Completion and is subject to potential customary adjustments pursuant to a locked box exercise.

The terms of the Disposal value the retained equity interest at £44.1 million. Accordingly, the proposed Transaction values the share capital of Eddie Stobart Logistics at £239.7 million, corresponding to approximately £280.8 million on a debt-free basis, after accounting for Eddie Stobart Logistics working capital facilities and other debt-like items totalling £41.1 million. At Completion, New ESL will have senior bank debt of £160.0 million.

The Disposal Agreement contains certain warranties and indemnities on the part of SHL, which are customary for a transaction of this nature. The Company has also agreed to guarantee SHL's obligations pursuant to the Disposal Agreement. Completion is conditional, inter alia, on the passing of the Resolution at the General Meeting.

Eddie Stobart Logistics will continue to operate under the 'Eddie Stobart' brand subject to the terms of the Licence Agreement.

William Stobart, who heads the Eddie Stobart Logistics business, will become CEO of New ESL and will make a significant commitment both as an employee and shareholder of New ESL. In accordance with the requirements of the financial investors in New ESL, William is proposing to make an investment of £5.0 million to acquire a stake of approximately 6% in the share capital of New ESL. In order to fund this investment, William is proposing to dispose of a proportion of his shareholding in the Group.

In order to focus all of his time on his role with New ESL, William Stobart has, today, resigned from the Board. There will be no other changes to the Board as a result of the proposed Transaction.

4. Information on DBAY

DBAY Advisors Limited (DBAY) is a regulated investment manager with registered address at Derby House, 64 Athol Street, Isle of Man IM1 1JD. DBAY is a private limited company incorporated in the Isle of Man and is licensed by the Isle of Man Financial Supervision Commission.

DBAY is a European asset management firm and investment adviser that manages capital on behalf of institutional investors, foundations and family offices. DBAY takes a proactive approach for the funds it manages to enhance value and support companies in which it makes long-term investments. In particular, DBAY aims to develop clear growth opportunities for the funds it manages with an emphasis on creating long-term value by working alongside management teams.

Members of the DBAY team have a record of building businesses and creating value in the logistics sector. Members of the DBAY team participated in the acquisition of TDG, one of Europe's largest logistics services providers, enhancing its new business development function and delivering strong new business wins.

5. Stobart Green Energy

a) Information on the proposed investments

Stobart Green Energy is a new investment business which intends to work in the renewable energy market in partnership with leading investors, operators and advisers to the sector to build on the foundation created by the Group's existing biomass fuel supply business. The biomass electricity generation market is highly specialised. Biomass energy plants promise attractive returns but require the coordination and close cooperation of financiers, plant manufacturers and engineers, fuel suppliers and specialist advisers to develop them. Stobart Group has established close relationships with the key participants in the market and, as a respected, reliable supplier of biomass fuel, has become a key service provider. Stobart Biomass has been taking an increasingly proactive approach to the execution of biomass plant projects in order to secure long- term supply arrangements. In the course of this work, Stobart Biomass has been offered attractive opportunities to invest in the equity of biomass plants.

The Board has taken the decision to capitalise on these opportunities and use up to £55 million of the proceeds of the Disposal to develop or acquire a diversified portfolio of low risk waste infrastructure assets, ideally in partnership with other sector-specialist finance providers and advisers.

Stobart Green Energy intends to invest in energy assets powered by waste wood and other waste products and waste services directly associated with those sectors, such as waste processing sites. It will manage the risks associated with development and operation of the plants by appointing experts at each stage. Risks during the construction phase of new plants will be managed partly by the deployment of the Group's own Infrastructure and Civil Engineering business. The Board believes that the long-term nature of the projects allows matching contracts to be entered into with reputable, financially stable counterparties, ensuring secure and predictable construction, operation and maintenance of the plants, delivery of feedstock and power off-take.

The Board expects Stobart Green Energy to invest in plants at a range of stages of development, some operational, others at the planning stage, and expects the returns on investment to vary according to, among other factors, the maturity of the project. The plants will typically have a life of between 20 and 40 years from commissioning and the financial plans for the plants on which returns expectations are based generally assume a conservative, 20 year life. The investments are expected to generate returns in the form of dividends once they are in profitable operation and interest throughout the life of the plant, depending on the capital structure of the project. The Board believes that once the portfolio is mature and generating electricity, it should provide Stobart Green Energy with strong cash returns and give the Group the option of continuing to hold the investments or restructuring or refinancing the portfolio to release value.

b) Information on the Regulatory Environment for Biomass Power

The DECC currently supports the large-scale generation of biomass electricity and combined heat and power (''CHP'') through the Renewables Obligation (''RO'').

The RO came into effect in 2002 in England and Wales and Scotland followed by Northern Ireland in 2005. It places an obligation on UK electricity suppliers to source an increasing proportion of the electricity they supply from renewable sources.

ROCs are certificates issued to operators of accredited renewable generating stations for the eligible renewable electricity they generate. ROCs are ultimately used by power suppliers to demonstrate that they have met their obligation. Operators who have too few ROCs can acquire them from other parties at a negotiated price.

Surplus ROCs not sold in this manner are contributed to a fund and suppliers who do not present sufficient ROCs to meet their obligation must compensate for the shortfall by paying into the fund at a pre-determined buy-out price which is increased annually at RPI. The administration cost of the scheme is recovered from the fund and the remainder is distributed back to suppliers in proportion to the number of ROCs they contributed. The ROC selling price at 24 April 2013 was £43.99/MWh (www.e-roc.co.uk) and the Industrial Peak Electricity Price around this time was £49.87/MWh (APX Group.com). A supplier's revenue is the sum of the value of the underlying supply and any associated ROCs.

Under the RO regime, biomass power projects accredited before 31 March 2016 will receive 1.5 ROCs per MWh and if they are accredited between 1 April 2016 and 31 March 2017 they will receive 1.4 ROCs per MWh. Developers are therefore keen to take advantage of the higher number of ROCs available for biomass projects which are operational and accredited before 31 March 2016.

From 2027 DECC will fix the price of the ROC for the remaining ten years of the RO at its long- term value and buy the ROCs directly from the generators, which will reduce volatility in the final years of the scheme. The long-term value of a ROC is the buyout price plus 10%

From 1 April 2017, 'Feed-In-Tariffs' ('Contracts-for-Difference') will replace the RO regime and in late June 2013 renewable energy strike prices were revealed for the new mechanism and they were subsequently updated in December 2013. The strike price will effectively provide a guaranteed return to generators for all eligible electricity generation. The strike price will operate against a reference wholesale market price - if the reference price is lower than the strike price, the generator will be paid the difference between the two prices. By providing a fixed strike price, the government is seeking to ensure that generators receive a predictable, inflation-linked payment for electricity generation, thereby removing uncertainty arising from wholesale price volatility.

Support for CHP plants is currently provided through an uplift to the number of ROCs awarded (0.5 ROCs per MWh) however this regime closes to new entrants on 31 March 2015. From 1 April 2015 entrants will have a choice between ROCs and the Renewable Heat Incentive (''RHI'') with the current level for biomass heat at £10/MWth.

6. Information on the Continuing Group

The proposed Transaction will increase the Group's focus on its Energy and Air operations. Moving forward the Group will be organised into two divisions, Infrastructure and Support Services, operating in Air, Energy and Rail markets and managing investments:

a) Group

Stobart Group provides the operating businesses with senior management support along with a range of legal, HR, insurance, claims management and other support services. Following completion of the proposed Transaction the Group will continue to provide certain of those support services to New ESL under a transitional services agreement.

b) Air

Following the investment at London Southend Airport, Stobart Air is now well positioned to grow annual passenger numbers from 1.1 million per annum currently, and with the terminal extension completed in February 2014, LSA has capacity to handle over five million passengers per annum. With capacity at peak times severely constrained at other London airports, management focus is now on attracting additional airline operators looking to serve London and the South East, thereby enabling the Group to take advantage of the extra terminal capacity to ensure that Stobart Air can meet its targets for growth in passenger numbers. LSA has recently been voted the UK's best airport for customer satisfaction by 'Which?'.

c) Energy

Stobart Biomass is the UK's leading supplier of biomass material, currently supplying in excess of one million tons to the market. As new biomass plants are developed through Stobart Green Energy, described above, the Board expects the growth to create demand for an additional biomass fuel. Stobart Biomass will continue to supply fuel to the market as a whole and the Board expects that further supply opportunities will also arise as other new plants come on stream outside of the Stobart Green Energy.

d) Rail

The Group's Civil Engineering business will continue to focus on external work, in particular rail-related projects, but also offer project management and support to Stobart Green Energy on new build opportunities, ensuring deliverability and valued engineering. This business also operates and manages the railway station at London Southend Airport.

e) Investments

The Group will retain all of its freehold property assets following the proposed Transaction, save for three properties in Autologic Holdings and an Eddie Stobart Logistics transport site in Stoke, and will own a total of 22 properties (including one held in a joint venture) comprising 13 investment properties, 5 development properties and 4 operational properties (including the airport properties). The Group will continue its current asset management initiatives with a view to maximising and realising the value from the investment properties over the next 2-3 years. The development properties include the final remaining apartment at the Group's prestigious residential development at 37 Soho Square, which is currently being marketed, and four brownfield development sites, including Widnes. Planning permission has been obtained for the construction of 1.4m sqft of warehousing and a biomass energy plant at the Widnes site, and a number of opportunities are currently being pursued for the other development sites.

The Group's investments also include its shareholding in New ESL, Aer Arann and Propius Holdings. These are all non-controlling positions but in each case Stobart Group management will continue to play an active role in the development of the business, leveraging the synergy with other Stobart Group businesses where possible.

Aer Arann, in which the Group has a 45% shareholding, trades as Aer Lingus Regional under a ten year franchise agreement. This enables the Group to capitalise on the London to North America route via Dublin and is expected to help Stobart Air to drive volume into LSA.

Propius Holdings is the aircraft leasing company, 33% owned by the Group, that owns and leases aircraft which are used by Aer Arann.

7. Information on Eddie Stobart

Eddie Stobart Logistics is the holding company for the Group's Transport and Distribution Division (excluding the biomass transport operations), which operates under the 'Eddie Stobart' brand. Eddie Stobart Logistics, the Group's Transport and Distribution division, employs around 5,000 people and operates some 2,300 vehicles, 3,200 trailers and over five million square feet of warehousing from more than 50 sites across the UK and Europe. The business is a UK front runner in the multimodal logistics and warehousing market.

In the year ended 28 February 2013, Eddie Stobart Logistics generated profits before tax of £23.5 million (2012: £20.6 million) on turnover of £475.7 million (2012: £438.0 million). These amounts exclude the results of the biomass transport business, which is being retained by the Group, which contributed £20.8 million (2012: £20.3 million) to turnover and £2.6 million (2012: £2.9 million) to profits before tax.

8. Effects of the proposed Transaction

The Directors consider the proposed Transaction to be consistent with the Group's stated objective of realising value in mature assets in order to focus the Group's resources on adding value in its growth businesses.

The proposed Transaction will lead to a shift in the financial profile of the Group from mature earnings and cash generation to growth. The partial realisation of Eddie Stobart Logistics and the reduction in gearing as a result of the anticipated repayment of the loan from M&G is expected to lead to a reduction in short-term earnings per share from the figure that would otherwise have been achieved. This effect is expected to reverse once the investments proposed to be made by Stobart Green Energy reach maturity. The Disposal is expected to lead to an increase in net assets as the proceeds of the Disposal exceed the net assets of the business being sold.

The more focused and simplified structure of the Group following completion of the proposed Transaction will enable the Continuing Group to reorganise its management structure and simplify Group functions leading to overhead savings that would not be available in the absence of the proposed Transaction. In addition, certain personnel, marketing and other costs currently borne by the Group will, following Completion, be met by New ESL. In aggregate the Board expects to achieve overhead reductions running at approximately £2.0 million per annum by February 2015 from a pre-interest budget of approximately £7.0 million. The Board estimates the cost of achieving these annual savings to be less than £1.0 million, the vast majority of which will be incurred in the first financial year following Completion.

9. The Group's relationship with New ESL

As the 49% shareholder in New ESL (the holding company for the Eddie Stobart Logistics group following Completion) and Finco (a special purpose financing company), the Board expects the Group to remain actively involved in the governance and development of 'Eddie Stobart' following Completion. However, the other investor will own 51% of the share capital of New ESL and Finco and will, in particular, be able to control the major decisions of the board of New ESL. The relationship between the parties is governed by the articles of New ESL and the New ESL Shareholders' Agreement (together with the articles of Finco). Finco will carry out no other business and the operations of the New Stobart Group will be directed by the New ESL board.

10. Current trading and future prospects of Stobart Group

On 17 January 2014, the Group released its Interim Management Statement. Since that date the Group has continued to trade in line with management expectations and, subject to trading in the final weeks of the year and year end property valuations, the Board expects to report trading results broadly in line with last year.

11. Share buyback

The Company is seeking Shareholder approval to empower the Company to buy back Ordinary Shares. The authority under Resolution 2 is limited to the purchase of up to 10% of the Ordinary Shares in issue at the Latest Practicable Date. Based on the Company's issued share capital as at the Latest Practicable Date, the maximum number of Ordinary Shares that may be purchased under the authority will be 35.4 million Ordinary Shares.

The Directors will use the authority to purchase Ordinary Shares only after careful consideration (taking into account market conditions, other investment opportunities, appropriate gearing levels and the overall financial position of the Company). Further, the Directors only intend to use the authority to purchase Ordinary Shares if they believe that to do so will have a positive effect on earnings per Ordinary Share and will be in the best interests of the Shareholders generally.

Any buy-back of Ordinary Shares would be by market purchases through the London Stock Exchange.

The minimum price (exclusive of expenses) which may be paid for an Ordinary Share shall be 10p. The maximum price (exclusive of expenses) which may be paid for an Ordinary Share shall be not more than the higher of:

(i) 5% above the average of the middle-market quotations for the Ordinary Shares as derived from the Official List of the London Stock Exchange plc for the five business days before the purchase is made; and

(ii) the higher of the price or the last independent trade, and the highest independent bid at the time of the purchase for the Ordinary Shares.

If Resolution 2 is approved by the Shareholders, and the Directors exercise the authority conferred by Resolution 2, they may consider holding those shares as treasury shares with a view to possible re-issue at a later date. This would give the Company the ability to re-issue treasury shares quickly and cost effectively and would provide the Company with additional flexibility in the management of its capital base. Alternatively, the Company may cancel such Ordinary Shares.

The authority will expire on the conclusion of the next annual general meeting of the Company or, if earlier, twelve months from the passing of Resolution 2.

As at the Latest Practicable Date, there were options over 32.5 million Ordinary Shares, which represents 9.2% of the Company's issued share capital. If the authority to purchase the Ordinary Shares were to be exercised in full, these options would, assuming no further Ordinary Shares are issued, represent 10.2% of the issued share capital of the Company.

Invesco is currently interested in an aggregate of 127,041,765 Ordinary Shares, representing 35.9% of the issued share capital of the Company. If the Company were to re-purchase from persons other than Invesco all Ordinary Shares for which it is seeking authority, Invesco's interest in shares would (assuming no other allotment of Ordinary Shares) increased to 39.8% of the issued share capital of the Company by virtue of such actions.

Under Rule 37 of the Takeover Code, when a company purchases its own voting shares, any resulting increase in the percentage of shares carrying voting rights in which a person or group of persons acting in concert is interested will be treated as an acquisition for the purpose of Rule 9 (although a Shareholder who is neither a Director nor acting in concert with a Director will not normally incur an obligation to make a general offer to all Shareholders). The Board intends, as share purchases are made, to give Shareholders, including significant Shareholders and Directors, the opportunity to sell Ordinary Shares pursuant to the share buyback authority to avoid forcing them into a higher percentage shareholding position. 

The Panel has confirmed to the Company that the exemption set out in Note 1 of Rule 37.1 of the Takeover Code will apply to the proposed share buy-back on the basis Invesco had not appointed a director to the Board and so any buy-back of Ordinary Shares pursuant to the authority set out in resolution 2 will not incur an obligation on Invesco to make a mandatory offer under Rule 9 of the Takeover Code.

12. Dividend Policy

Stobart intends, subject to the availability of cash, to pay a substantial part of the Group's earnings as dividends and to grow earnings and dividends over time. If there is a short-term reduction in earnings and/or cash flow per share, the Board's preference would be to maintain the dividend at its recent level and fund the payment from the proceeds of asset disposals until cover is reinstated.

13. General Meeting

As the proposed transaction is a class 1 transaction under the Listing Rules completion of the proposed Transaction requires the approval of Shareholders voting in favour of Resolution 1 at the General Meeting. Arrangements in relation to the General Meeting will be contained in the Circular and notified upon publication of the Circular. The following resolutions will be proposed:

Resolution 1 - An ordinary resolution to approve the proposed Disposal.

Resolution 2 - A special resolution to authorise the Company to buy back up to 35.4 million Ordinary Shares, being approximately 10% of the Company's issued share capital at the Latest Practicable Date. Resolution 1, being an ordinary resolution, will require a simple majority of those voting in person or by proxy (whether on a show of hands or on a poll) in favour of such Resolution. Resolution 2, being a special resolution, will require approval by not less than 75% of those voting in person or by proxy (on a show of hands or on a poll) in favour of such Resolution. Resolution 2 is conditional upon Resolution 1 being passed.

14. Irrevocable Undertakings and Letters of Intent

Irrevocable undertakings to vote in favour of the proposed Disposal have been obtained from Iain Ferguson, Andrew Tinkler, Benjamin Whawell, Michael Kayser, Paul Orchard-Lisle and Allan Jenkinson, in respect of all of their Ordinary Shares which, in aggregate, amount to 14.3% of the Company's issued share capital at the Latest Practicable Date. William Stobart is not able to vote on the Resolution 1 in view of his proposed shareholding in New ESL.

Additionally, a letter of intent to vote in favour of the proposed Disposal has been obtained from Invesco in respect of all of their voting rights on Ordinary Shares which, in aggregate, amount to 35.9% of the Company's issued share capital at the Latest Practicable Date. Irrevocable undertakings and letters of intent to vote in favour of the proposed Disposal have, in total, therefore been received in respect of 50.1% of the Company's issued share capital.

15. Recommendation

The Board, which has received advice from Cenkos Securities, considers the proposed Transaction and the passing of the Resolutions to be in the best interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends that the Shareholders vote in favour of the Resolutions as they intend to do in respect of their beneficial holdings, amounting, in aggregate, to 32,795,022 Ordinary Shares, representing 9.3% of the issued share capital of the Company at the Latest Practicable Date. In providing their advice to the Board, Cenkos Securities have taken into account the commercial assessment of the Board in relation to the proposed Disposal and the buy-back of Ordinary Shares.

DEFINITIONS

The following definitions apply to words and phrases used in this announcement except where the context requires otherwise: