Tissue Regenix Group Regulatory News (TRX)

20 Jun 2007 07:01

Torex Retail PLC20 June 2007 20 June 2007 Torex Retail Sale of Torex Retail's operating subsidiaries to Cerberus European Investments, LLC for £204.4 million Appointment of administrators for the PLC Holding Company Torex Retail PLC (In administration) (the "Holding Company") announces that ithas sold all of its operating subsidiaries (the "Torex business") to affiliatedpurchasers of Cerberus European Investments, LLC ("Cerberus"). • Total consideration of £204.4 million. • Draft accounts for the Torex Retail group ("the Group") for the year ended 31 December 2006 report revenues of £246.2 million and operating profit of £4.2 million against previous market expectations of £48 million. Exceptional costs during the year amounted to £195.8 million, resulting in a loss before tax of £(191.6) million. • In the four months to 30 April 2007, the Group management accounts reported an operating loss of £(12.7) million before exceptional items. • Based on draft unaudited accounts for the Group, the transaction represents a multiple of 27x 2006 pre-exceptional EBITDA. • Appointment of Richard Heis and Mick McLoughlin of KPMG LLP as joint administrators (the "Administrators") of the Holding Company. • Senior debt plus deferred and transactional related liabilities at completion amount to some £212 million in total. As a result, it is not anticipated that the Holding Company's unsecured creditors or shareholders will receive any proceeds from the administration of the Holding Company. Steve Marshall, Chairman of the Holding Company, commented: "The sale of the business was the only viable option available to the board andit was achieved despite breathtaking corporate governance and financial issuesat PLC level, the scale and extent of which neither I nor my board colleagueshave seen in corporate life. "Against this background, huge efforts have been made to extract as much valueas possible from this uniquely challenging situation. This will be of littlecomfort to Torex Retail's shareholders, or to the holding company's unsecuredcreditors, to whom no value will accrue given the numerous issues bearing downon the Company. "The consideration is insufficient to fully repay the sums due in respect of theHolding Company's secured bank loans which include the additional £35m the Boardnegotiated in order to provide time to conduct an orderly sale process. "However, the sale of all of Torex's operating subsidiaries to a substantial newowner is excellent news for customers, suppliers and, not least, more than 2,500employees. With its future secured, the Torex businesses can now be properlyintegrated, developed and taken forward." Mike Greenough, Chairman and Chief Executive Officer of Cerberus' acquisitionvehicle for the Torex business said: "The acquisition and recapitialisation by Cerberus will deliver stability andsecurity for Torex Retail's customers, suppliers and employees. Cerberus bringsto Torex not only financial support, but also access to operational expertise tohelp Torex reach its long-term strategic goals. The restructured Torex Retailwill be ideally placed to build on its position as a leading independentprovider of leading edge retail technology solutions to many of the world'sprincipal retailers." Enquiries: College Hill Tel: 020 7457 2020 Mark Garraway Carl Franklin Evolution Securities Limited Tel: 020 7071 4300 Tim Worlledge Jeremy Ellis Deloitte & Touche, LLP Tel: 020 7936 3000 Gerry Loftus David Stark Jefferies International Limited Tel: 020 7968 8000 Charles Cameron Sarah McNicholas KPMG, LLP Tel: 020 7311 1000 Richard Heis Richard Griffiths Cerberus Media Peter Duda Tel: +1 212 445 8213 JJ Rissi Tel: +1 212 445 8224 Lazard & Co., Limited Tel: 020 7187 2000 (Financial Adviser to Cerberus) Richard Stables Cyrus Kapadia Notes to Editors: Cerberus European Investments, LLC is the European arm of Cerberus CapitalManagement, L.P. Established in 1992, Cerberus is one of the world's leadingprivate investment firms with approximately $25 billion under management infunds and accounts. Through its team of more than 275 investment and operationsprofessionals, Cerberus specializes in providing both financial resources andoperational expertise to help transform undervalued companies into industryleaders for long-term success and value creation. Cerberus is headquartered inNew York City, with affiliate and/or advisory offices in Atlanta, Chicago, LosAngeles, London, Baarn, Frankfurt, Tokyo, Osaka and Taipei. More information onCerberus can be found at www.cerberuscapital.com. 20 June 2007 Torex Retail Sale of Torex Retail's operating subsidiaries to Cerberus European Investments, LLC for £204.4 million Appointment of administrators for the PLC Holding Company Torex Retail PLC (In Administration) (the "Holding Company") today announcesthat it has sold all of its operating subsidiaries (the "Torex business") toaffiliated purchasers of Cerberus European Investments, LLC for a totalconsideration of £204.4 million. The draft consolidated unaudited financialstatements for the Torex Retail PLC group (the "Group") for the year ended 31December 2006 report revenues of £246.2 million and operating profit of £4.2million. Exceptional costs during the year amounted to £195.8 million, includingsome £157.7 million of goodwill impairment and amortisation on acquisitions.Based on these draft statements, the transaction value represents a multiple of27x 2006 pre-exceptional EBITDA. The Holding Company also announces that Richard Heis and Mick McLoughlin of KPMGLLP have been appointed as joint administrators (the "Administrators") of theHolding Company, but not in respect of any of the Torex operating subsidiarieswhich are immediately transferred to an acquisition vehicle owned by Cerberus.Senior debt plus deferred and transactional related liabilities at completionamount to some £212 million in total. As a result, it is not anticipated thatthe unsecured creditors or shareholders of the Holding Company will receive anyproceeds from its administration. The sale is expected to secure the future of the Torex business which currentlyemploys in excess of 2,500 staff. It follows a highly competitive auctionprocess initiated and carried out by the Company's Board and M&A advisers.Cerberus European Investments, LLC ("Cerberus") is the European arm of CerberusCapital Management, L.P., which was established in 1992. Headquartered in NewYork, Cerberus Capital Management, L.P., is one of the world's leading privateinvestment firms with $25 billion under management in funds and accounts. Background to and reasons for the sale of the Torex business On 26 January, trading in the Ordinary Shares of Torex on AIM was suspendedpending clarification of the Holding Company's financial position. Since thenthere have been a number of important developments affecting the Group of whichthe most significant have been as follows: (i) On 30 January 2007, the Serious Fraud Office ("SFO") announced that, together with the City of London Police, it had commenced an investigation into the affairs of the Holding Company. Linklaters LLP were appointed as legal advisers to the Holding Company to assist the Board. The SFO investigation is continuing and no comment on these matters is therefore possible; (ii) On 31 January 2007, the Board appointed Deloitte & Touche LLP ("Deloitte") to advise the Holding Company in relation to the work to be performed to clarify the underlying financial condition of the Torex business; (iii) It became apparent that the Group was facing a significant cash flow crisis. In mid February, bridge financing of £15 million (and the deferral of interest due) was sought and obtained from the Holding Company's existing secured lending banks; (iv) Investigations undertaken by the Holding Company and the work conducted by BDO Stoy Hayward LLP ("BDO") have identified a number of accounting irregularities, which have delayed the audit of the annual accounts for the year ended 31 December 2006; and (v) As a result of these issues, and the ensuing adverse press commentary, there has been, and continues to be, a direct detrimental impact on customer, supplier and employee confidence and on current trading. Indeed, the Group sustained an operating loss of £(12.7) million before exceptional items in the four month period to 30 April 2007. To address the unprecedented issues confronting the Group, a Committee of theBoard (the "Committee"), comprising the three new directors - Steve Marshall(Chairman), Keith Taylor (Acting Chief Executive) and Mike Grant(Non-Executive), together with Marcus Leek (Finance Director) was formed. Itsimmediate priority was to stabilise the Torex business, improve its immediatecash flow and forecasting, secure the continued support of the Group's securedlending banks and develop a strategy to safeguard the interests of creditors andshareholders. The Committee, assisted by Deloitte, identified a need for substantial furtherfunding to meet the Group's secured loan payment obligations and otherliabilities while also integrating the many acquisitions made by the Groupduring the preceding three years. The Committee developed a new business planwhich showed that the Group would require additional funding of approximately£70 million in order to develop the medium term commercial prospects and toplace the Group on a secure financial footing. Efforts to raise equity In light of these developments, the Committee, in conjunction with the HoldingCompany's Nominated Adviser, Evolution Securities Limited ("Evolution"),embarked on a process to try to raise further equity from certain existing largeshareholders (representing in excess of 30 per cent of its shareholder base).This process included holding discussions with such shareholders about whetherthey would be prepared to invest additional equity funds in the Holding Company,for instance, by way of a rights issue, equity placing or new convertibleinstruments. Whilst certain institutions expressed interest in supporting the Company andsubscribing for new equity, it was clear to Evolution and the Committee thatthere was no realistic prospect of raising the requisite level of fundingthrough this process. The status of the 2006 accounts, the emergence ofaccounting and other irregularities and the uncertainty as to whether customercontracts put on hold could be reactivated, together with the impact of the SFOinvestigation, were key issues influencing investor sentiment. The sale process The Committee considered that an urgent alternative approach was required toaddress the Holding Company's pressing financial needs. In the light ofsignificant unsolicited interest received from a range of potential financialand trade buyers, the sale of the business, as a whole or on a piecemeal basis,appeared to be the only viable option. On 30 March 2007, the Holding Company announced the appointment of JefferiesInternational Limited ("Jefferies") to assist the Holding Company with astrategic review of its options, including a potential sale of the business.Having assessed the capabilities of several investment banks, Jefferies wasselected on account of its reputation as an adviser to medium-sized technologycompanies and its experience and reputation within the technology and privateequity community both in the US and Europe. During April and May 2007, the Holding Company's board met with its seniorlenders and requested a further £20 million of bridge finance, making a total of£35 million and a further interest roll-up of £7.6 million. Given the ongoinglosses being suffered by the Group and the reluctance of customers to enter intonew contracts, it was anticipated that the new bridging finance would enable theHolding Company to continue to trade through to early June and support a sale ofthe business. Since the appointment of Jefferies, the Holding Company has followed a strategydesigned to maximise the price a purchaser would pay for the Torex businesswhile at the same time ensuring speed and certainty of outcome. The sale processalso allowed for any existing shareholder, bondholder or new investor to comeforward with proposals to substantially refinance the Holding Company. On 30 April 2007, Jefferies received ten initial proposals to acquire orrefinance the Torex business from which the Committee subsequently invited sevenparties to proceed with a more thorough review and due diligence of thebusiness. The majority of these initial proposals suggested that there would bea full return to all creditors and also some return of value to the shareholdersof the Holding Company. The initial proposals indicated that there was areasonable prospect of being able to deliver the sale through an offer for theentire Group. Throughout May, the seven possible purchasers were grantedsignificant access to the Holding Company, the divisional management teams andfinancial, operational and legal information on the Torex business. Finalproposals were requested by 31 May 2007. Three of the parties that had been admitted to further due diligence declined tosubmit a final proposal. The value reflected in the four remaining finalproposals received was significantly lower than any values indicated previouslyby those parties, primarily because of the substantial downward adjustments toprofits in the 2006 accounts identified by the auditors and the Holding Company,assisted by Deloitte, as well as the continued monthly deterioration in trading.The draft annual accounts showed an operating profit before exceptional costs ofjust £4.2 million. In the four months to 30 April 2007, the Group managementaccounts reported an operating loss of £(12.7) million before exceptional itemsand trading performance continued to deteriorate during May. The monetary value represented in all four of the final proposals was on oraround the level of the senior debt and hence did not provide any value to theHolding Company's unsecured creditors or shareholders. The Holding Companyfinally entered into detailed negotiations with two bidders, culminating in thetransaction with Cerberus. The Company's financial position and current trading The Company's investigations and the audit process conducted by BDO in relationto the year ended 31 December 2006 identified a significant number of accountingand other irregularities. These irregularities have delayed the finalisation ofthe 2006 audit. Audited accounts for the Holding Company will no longer be required. However,based on the work performed to date by the Holding Company and BDO, the draftconsolidated unaudited accounts for the year ended 31 December 2006 show thefollowing: 2006 (£m) 2005 (£m)* Revenues 246.2 167.4Operating Profit 4.2 27.9Exceptional Items (195.8) (35.7)EBIT (191.6) (7.8) * Before the effect of prior-year adjustments The £195.8 million of exceptional items comprise of approximately £157.7 millionof goodwill impairment and amortisation on acquisitions and some £13.6 millionof restructuring costs. The balance is made up of a number of additional costsincluding costs associated with share-based payments and losses on the sale ofoperations and fixed assets. In the four months to 30 April 2007, the Group's management accounts showreported revenues of £65.4 million and an operating loss of (£12.7) millionbefore exceptional items. Since the suspension of trading in its shares, the Holding Company has beenprovided with additional financing of £35 million by its secured lending banks.This additional funding has enabled the Holding Company to continue to trade andhas supported an orderly and competitive process to sell its operatingbusinesses. As at 15 June 2007, the Holding Company had total seniorindebtedness of some £202 million. Board Composition The two former non-executive directors, Geoffrey Forster and David Hallett,resigned from the Board on 26 February 2007. Michael Carrell resigned on 6 March2007. Chris Moore, the former Chairman, resigned on 21 March 2007. NeilMitchell, the Holding Company's former Chief Executive Officer, resigned on 31May 2007 following the termination of his employment. There have also been a number of additions to the Board working alongside MarcusLeek, the Holding Company's Finance Director. Keith Taylor was appointed to theBoard as Acting Chief Executive Officer 7 February 2007. Steve Marshall wasappointed as Chairman on 14 February 2007. Mike Grant was appointed as anon-executive Director on 6 March 2007 to replace Iain Lynam who was appointedon 7 February 2007. Keith Taylor has been Chief Executive Officer since 1 June2007. Marcus Leek will be transferring with the Torex business and will be resigninghis directorship of the Holding Company. All other directors will remain on theboard of the Holding Company but are expected to step down in due course. Appointment of Administrator Final proposals were reviewed by the Board on 1 June from four potentialpurchasers. Each of the proposals was at a price which either did not exceed thecurrent level of the senior debt or barely exceeded it. It was, therefore,apparent that any transaction involving the sale of the Group or its operatingsubsidiaries would need to take place in an insolvency context and following theappointment of an administrator. Accordingly, Messrs Richard Heis and MickMcLoughlin of KPMG LLP have been appointed at the Board's request. Future of the Holding Company The Company has now sold the majority of its assets and it has ceased to trade.Its remaining subsidiary, Torex Retail (Jersey) Limited, will be appointing aliquidator in due course. 20 June 2007 Enquiries: College Hill Tel: 020 7457 2020 Mark Garraway Carl Franklin Evolution Securities Limited Tel: 020 7071 4300 Tim Worlledge Jeremy Ellis Deloitte & Touche, LLP Tel: 020 7936 3000 Gerry Loftus David Stark Jefferies International Limited Tel: 020 7968 8000 Charles Cameron Sarah McNicholas KPMG, LLP Tel: 020 7311 1000 Richard Heis Richard Griffiths Cerberus Media Peter Duda Tel: +1 212 445 8213 JJ Rissi Tel: +1 212 445 8224 Lazard & Co., Limited Tel: 020 7187 2000 (Financial Adviser to Cerberus) Richard Stables Cyrus Kapadia Notes to Editors: Cerberus European Investments, LLC is the European arm of Cerberus CapitalManagement, L.P. Established in 1992, Cerberus is one of the world's leadingprivate investment firms with approximately $25 billion under management infunds and accounts. Through its team of more than 275 investment and operationsprofessionals, Cerberus specializes in providing both financial resources andoperational expertise to help transform undervalued companies into industryleaders for long-term success and value creation. Cerberus is headquartered inNew York City, with affiliate and/or advisory offices in Atlanta, Chicago, LosAngeles, London, Baarn, Frankfurt, Tokyo, Osaka and Taipei. More information onCerberus can be found at www.cerberuscapital.com. END This information is provided by RNS The company news service from the London Stock Exchange