Stvg Regulatory News (STVG)

31 Aug 2007 07:01

SMG PLC31 August 2007 SMG PLC FOR IMMEDIATE RELEASE 31 August 2007 PROPOSED DISPOSAL OF PRIMESIGHT TO GMT COMMUNICATIONS PARTNERS FOR UP TO £62.0 MILLION Highlights • Proposed sale of Primesight Limited ("Primesight") to GMT Communications Partners ("GMT"), a leading and long established provider of private equity for mid-market European buyouts in the media and telecoms sectors, for a total consideration of up to £62.0 million: - Total consideration made up of: • £52.0 million payable in cash on Completion; and • a loan note of £5.0 million, payable at the earlier of five years from Completion or an exit of the business by GMT; and • a further loan note payable on a pro rata basis of up to £5.0 million, contingent upon Primesight achieving agreed target profits for the financial year ending 31 December 2007, also payable at the earlier of five years from Completion or an exit of the business by GMT - £1.4 million of the cash proceeds to be placed in a retention account for use by GMT in relation to certain planning consents currently being sought by Primesight, offset by a £0.8 million payment to SMG at Completion in respect of expected surplus working capital in Primesight - Valuation achieved represents a clear uplift on indicative offers received prior to suspension of the Primesight disposal process in April - Proceeds to be used to reduce Group indebtedness - Disposal subject to shareholder approval at an extraordinary general meeting to be convened in due course • Irrevocable undertakings to vote in favour of the Disposal have been received from the Board and Hanover Investors Management LLP, which together account for approximately 12.9 per cent. of the voting rights attaching to the ordinary share capital of SMG • In connection with the Disposal and the associated repayment of some of its debt, SMG is in discussions with its banks regarding appropriate debt facilities for the Continuing Group • SMG confirms that its television and cinema advertising divisions and Virgin Radio continue to trade in line with the Board's expectations for the current financial year. A further update on current trading will be included in SMG's interim results for the six months ended 30 June 2007 to be announced on 18 September 2007 Commenting on the proposed disposal, Rob Woodward, Chief Executive of SMG, said: "This is a good price for the business and clearly ahead of where we were in theprevious sale process. This is a strong example of the new Board delivering onits promises. The proceeds of the sale will strengthen SMG's balance sheet whilefreeing the management team to concentrate on the turnaround of the televisionbusiness and the disposal of our other non core businesses." Enquiries: SMG PLC 020 7882 1199Rob Woodward, Group Chief ExecutiveGeorge Watt, Group Finance DirectorDebbie Johnston, Head of Communications Hawkpoint Partners Limited 020 7665 4500Simon GlucksteinEmily Ashwell Hoare Govett Limited 020 7678 8000Sara HaleHarry Nicholas Brunswick Group LLP 020 7404 5959James HoganSimon SporborgAsh Spiegelberg Equus Group (for GMT) 020 7223 1100Piers HooperJames Sumpster This summary should be read in conjunction with the full text of the followingannouncement. Hawkpoint Partners Limited, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting exclusively for SMG andfor no one else in relation to the Disposal and is not advising any other personand accordingly will not be responsible to anyone other than SMG for providingthe protections afforded to the customers of Hawkpoint Partners Limited or forproviding advice in relation to the Disposal. SMG PLC FOR IMMEDIATE RELEASE 31 August 2007 PROPOSED DISPOSAL OF PRIMESIGHT TO GMT COMMUNICATIONS PARTNERS FOR UP TO £62.0 MILLION Introduction SMG PLC ("SMG") today announces that it has conditionally agreed to sell itsoutdoor advertising operations, comprising Primesight Limited ("Primesight") andits subsidiaries, for a total consideration of up to £62.0 million, subject tothe terms and conditions of the Disposal Agreement, to GMT CommunicationsPartners ("GMT"), a leading and long established provider of private equity formid-market European buyouts in the media and telecoms sectors. The Disposal isconditional upon approval by SMG Shareholders and a circular containing a noticeconvening an extraordinary general meeting, at which a resolution to approve theDisposal will be proposed, will be sent to Shareholders in due course. Background to and reasons for the Disposal SMG's Board firmly believes that the SMG Group's future lies in its televisionbusiness. The disposal of non-core assets, including Primesight, will result ina television business focussed on being the broadcaster of choice in Scotland. The Board has previously outlined that the immediate objective is to reduce debtthrough the sale of its non-core assets. Having reviewed the SMG Group'sbusinesses, the Board believes that, while Primesight is an excellentadvertising business, it is no longer core to the Group. The disposal of Primesight had, in April 2007, been suspended as the Board wasof the view that prices being offered at that time were too low. The Board hasbeen able since then to demonstrate the inherent quality in the Primesightbusiness to prospective bidders and this has resulted in a higher totalvaluation. The disposal of Primesight will enable SMG both to reduce debt and to focusfurther on its television business. Information on Primesight Primesight owns and markets a portfolio of outdoor media products across the UK.Primesight's products include small and large format advertising display panelson major roads and display panels at locations such as cinemas, health clubs andretail outlets and on the Glasgow underground network. Primesight owns approximately 13,500 smaller format "six sheet" outdooradvertising panels across the UK and a further 132 large format "backlight"panels principally in the London area. In its audited accounts for the year ended 31 December 2006, SMG reportedsegmental information for Primesight with revenues of £23.3 million and EBITA(earnings before interest, tax and amortisation of intangible assets) of£4.5 million. As extracted from the consolidation schedules which support theconsolidated audited financial statements of SMG for the year ended 31 December2006, at 31 December 2006, Primesight had gross assets and net assets of £61.7million and £40.5 million respectively. Information on GMT GMT is Europe's leading and longest established provider of private equity formid-market European buyouts in the media and telecoms sectors, with a 15-yeartrack record of making successful investments and realisations. GMT wasestablished in 1992, under the name Baring Communications Equity Limited, asEurope's first media and telecoms dedicated private equity firm. Over the past 15 years, GMT has invested in 26 companies in 18 countries andcompleted over 100 transactions, exclusively in European media/communications,with a gross enterprise value of €3.2 billion. Recent GMT deals include: • July 2007: acquisition of Melita Cable, the leading provider of television, broadband and telephony services in Malta, from Nasdaq listed Liberty Global and the Gasan Group of Companies • May 2007: acquisition of Springer's construction information division, through Docu Group, a GMT portfolio company • April 2007: sale of Invitel, Hungary's second largest fixed line telecoms operator, to HTCC for €470 million • July 2006: acquisition of Suomen Asiakastieto Oy, the leading business and credit information company in Finland Selected past and current GMT investments include YBR Group (European yellowpages publisher), Redext (the fourth largest Spanish outdoor advertisingoperator) and Equipamientos Urbanos ('EUSA', the Spanish outdoor advertisingcompany). Principal terms of the Disposal Under the terms of the Disposal Agreement, which was signed on 30 August 2007,SMG has conditionally agreed to sell Primesight to GMT. The consideration forthe Disposal shall, subject to adjustments as described below, be: • £52.0 million payable in cash on Completion; and • £5.0 million of deferred consideration in the form of loan notes in the Purchaser's group bearing an annual coupon of 2.5 per cent. to be issued to SMG on Completion and redeemable by SMG at the earlier of a future sale of Primesight by GMT or the date five years after the date of Completion; and • up to a further £5.0 million of additional deferred consideration payable on a pro rata basis in the form of loan notes in the Purchaser's group bearing an annual coupon of 2.5 per cent. to be issued to SMG contingent upon Primesight achieving agreed target profits for the financial year ending 31 December 2007 and redeemable by SMG at the earlier of a future sale of Primesight by GMT or the date five years after the date of Completion. £1.4 million of the cash proceeds will be placed in a retention account for useby GMT in relation to certain costs associated with obtaining planning consentsfor specific Primesight advertising sites, offset by a £0.8 million payment toSMG at Completion in respect of expected surplus working capital in Primesight.Following Completion, the consideration shall be adjusted on a pound-for-poundbasis by the amount, if any, by which the actual working capital of Primesight,at the date of Completion, is more or less than an agreed position. Completion of the Disposal is conditional upon approval by SMG Shareholders anda circular containing a notice convening an extraordinary general meeting, atwhich a resolution to approve the Disposal will be proposed, will be sent toShareholders in due course. Irrevocable undertakings to vote in favour of the Disposal have been receivedfrom the Board and from Hanover Investors Management LLP, which together accountfor approximately 12.9 per cent. of the voting rights attaching to the ordinaryshare capital of SMG. The current senior management team at Primesight, including Naren Patel,Primesight's Chief Executive, will be remaining with the business followingcompletion of the Disposal. Financial effects of the Disposal and use of disposal proceeds The estimated net proceeds of £47.5 million (after completion adjustments,transaction-related costs and taxation) will lead to a pro forma movement in netassets of £3.0 million to £48.5 million and a pro forma reduction in net debt asat 31 December 2006 from £157.3 million to £109.8 million. The effect of theDisposal on the SMG Group profit and loss account for the year ending 31December 2007 should be to generate an exceptional profit on disposal ofapproximately £3.0 million. The disposal proceeds will be used to reduce the Group's indebtedness and SMG iscurrently in discussions with its banks regarding appropriate debt facilitiesfor the Continuing Group Current trends in trading and prospects SMG announced its results for the year ended 31 December 2006 on 12 April 2007,reporting turnover on continuing operations of £147.3 million (2005: £159.4million), operating profit before exceptional items of £18.1 million (2005:£29.0 million) and pre-tax profit before exceptional items of £9.7 million(2005: £17.8 million). On 27 June 2007, the Board announced the conclusions of its 100 day businessreview and noted that: "The detailed analysis has confirmed the new management team's initialimpressions that the previous growth initiatives and in particular the New Mediastrategy was not delivering. Specifically the contribution from E-Commerce willbe £3.0 million lower than expected; ITV sponsorship and interactive revenueweakness will result in a decrease of £1.6 million to profit before tax; andProduction Commissions have been impacted by £0.9 million due to some newcommissions not materialising as anticipated. The shortfall will be largely offset by an additional £1.0 million of costsavings and a positive IFRS 5 impact on profit before tax of £3.5 million due tonon depreciation of assets held for sale. Virgin Radio, Primesight and Pearl &Dean are performing in line with Board expectations and the Board is confidentof achieving our revised performance targets in 2007." Following a weaker performance over the summer months as the six sheet markethas slowed, the Board now expects Primesight's operating performance to bemoderately below its expectations. However, the Board remains confident thatthe Group's other divisions are on track to achieve their revised targets asoutlined on 27 June 2007 for the current financial year. A further update on current trading will be included in SMG's interim resultsfor the six months ended 30 June 2007 to be announced on 18 September 2007. Enquiries: SMG PLC 020 7882 1199Rob Woodward, Group Chief ExecutiveGeorge Watt, Group Finance DirectorDebbie Johnston, Head of Communications Hawkpoint Partners Limited 020 7665 4500Simon GlucksteinEmily Ashwell Hoare Govett Limited 020 7678 8000Sara HaleHarry Nicholas Brunswick Group LLP 020 7404 5959James HoganSimon SporborgAsh Spiegelberg Equus Group (for GMT) 020 7223 1100Piers HooperJames Sumpster Hawkpoint Partners Limited, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting exclusively for SMG andfor no one else in relation to the Disposal and is not advising any other personand accordingly will not be responsible to anyone other than SMG for providingthe protections afforded to the customers of Hawkpoint Partners Limited or forproviding advice in relation to the Disposal. DEFINITIONS The following definitions apply throughout this announcement unless the contextrequires otherwise: Board or The board of directors of SMG.Directors Completion The completion of the sale of Primesight in accordance with the terms and conditions of the Disposal Agreement. Continuing The SMG Group after the Disposal becomes effective.Group Disposal The proposed sale of the entire issued share capital of Primesight to the Purchaser. Disposal The agreement between SMG and the Purchaser relating to theAgreement Disposal. GMT or GMT Communications Partners.Purchaser Group or SMG SMG and its group undertakings.Group Hawkpoint Hawkpoint Partners Limited. Pearl and Dean Pearl & Dean Limited, a company registered in England with registered number 05978466. pounds sterling The lawful currency of the United Kingdom for the time being.or £ Primesight or Primesight Limited, the outdoor advertising company indirectlyBusiness owned and operated by SMG, registered in England with registered number 01847728. SMG or the SMG PLC, a company registered in Scotland with registered numberCompany SC203873, or, where the context requires, SMG and its group undertakings. SMG Shareholder A holder of SMG Shares.or Shareholder SMG Shares or The ordinary shares of two and a half pence each in the capitalShares of SMG. Subsidiaries Subsidiaries, as interpreted in section 736(1) of the Act.UK or United The United Kingdom of Great Britain and Northern Ireland.Kingdom Virgin Radio Virgin Radio Limited, a company registered in England with registered number 02674136. This information is provided by RNS The company news service from the London Stock Exchange