Top Ten Holdings Plc News Announcement
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Top Ten Holdings PLC - Acquisition
RNS Number:1490W
Top Ten Holdings PLC
23 December 2005
TOP TEN HOLDINGS PLC
Acquisition of Apollo Bingo
Top Ten Holdings plc ('Top Ten' or the 'Group'), the third largest UK bingo
operator is pleased to announce that it has agreed to acquire the entire share
capital of Apollo Bingo Limited ('Apollo') for a consideration of £11.1 million
Highlights:
* Top Ten to acquire Apollo for £11.1 million in cash
* Consideration funded via a placing and bank debt
* Placing of 3,864,550 New Ordinary Shares to raise gross funds of up to
£3.28 million of which £624,750 is being subscribed by Directors and
officers of the Group
* Acquisition will be earnings enhancing in first year
* Apollo consists of three freehold clubs, with complimentary geographic fit in
* Rhyl
* Blackpool
* Caernarfon
* The Enlarged Group will have almost 3 million admissions per year
* Number of Top Ten clubs will increase to a total of 41, of which 23 are
freehold properties
* Proposed share consolidation of 20 Existing Ordinary Shares for 1 New
Ordinary Share
* Top Ten remains well placed for further acquisitions in a fragmented
market which includes having an undrawn bank facility with National
Westminster Bank Plc of approximately £14 million
23 December 2005
Commenting on the acquisition Sir Aubrey Brocklebank, Chairman, said,
'The acquisition of Apollo represents another step in achieving a larger group
from which our highly experienced management team will maximise the
opportunities to achieve increased cash flows and profits. We remain well placed
to grow further and will continue to seek suitable opportunities'
For Further Information:
Top Ten Holdings plc 01727 850793
Sir Aubrey Brocklebank, Chairman Mobile:07973744828
Graham Kerr, Chief Executive Mobile:07715580207
College Hill 020 7457 2020
Alex Walters Mobile: 07771713608
Matthew Smallwood Mobile: 07831379122
Introduction
The Board of Top Ten announces that it has entered into a conditional agreement
to acquire the entire issued share capital of Apollo.
The Board is also pleased to announce that, subject inter alia to the approval
of Shareholders, the Company proposes to raise approximately £3.26 million by
way of a Placing of 3,864,550 New Ordinary Shares at a price of 85 pence per New
Ordinary Share. Certain of the Directors and officers of the Group and their
connected persons have committed to participate in the Placing in respect of a
total of 735,000 New Ordinary Shares.
An Extraordinary General Meeting has been convened for 19 January 2006, at which
Shareholders will be asked to consider, and if thought fit, to approve the
Resolutions to implement the Placing and to enable the Acquisition to be
completed. In addition the Resolutions will implement the Share Consolidation,
grant to the Directors authority to allot further New Ordinary Shares and
approve the adoption of the New Articles. All of the Directors together with
Anstruther Properties Limited and Allen Walsh have irrevocably undertaken to
vote in favour of the Resolutions in respect of their entire shareholdings,
which total 268,050,000 Ordinary Shares representing 62.5 per cent. of the
issued share capital of the Company.
Background and reasons for the Acquisition
The Company was admitted to AIM (through a reverse takeover) in 2002 with the
intention of growing by acquisition. The Directors believed that the bingo
industry was fragmented and that an opportunity existed to consolidate the
market. Since 2002, the Group has grown from 11 bingo clubs to 38 bingo clubs
which, with completion of the Acquisition, will be increased to 41 bingo clubs.
The Acquisition is in line with the Board's strategy of making earnings
enhancing acquisitions.
Information on Apollo
Apollo operates three bingo clubs in Blackpool, Rhyl and Caernarfon. The clubs
are freehold properties with in aggregate over 300,000 admissions per annum. In
addition Apollo has the benefit of an agreement for lease in respect of a new
bingo club which is to be built in Worksop.
Financial information on Apollo
The following summarised financial information on Apollo has been extracted from
both audited financial statements and from management accounts. The results
represented for the 52 weeks to 27 March 2004 and the 52 weeks to 26 March 2005
have been extracted from the audited financial statements of Apollo. The results
for the 30 weeks to 22 October 2005 have been extracted from the unaudited
management accounts of Apollo.
30 weeks to 52 weeks to 52 weeks to
22 October 26 March 27 March
2005 2005 2004
£'000 £'000 £'000
Turnover 1,927 3,257 2,890
Gross profit 1,671 2,794 2,561
EBITDA 1 952 1,541 1,342
Profit before taxation 816 1,108 771
1 Excluding head-office costs
The gross assets of Apollo as at 22 October 2005 were £6,627,000.
Principal terms of the acquisition of Apollo
Under the terms of the Acquisition Agreement, Top Ten has conditionally agreed
to acquire the entire issued share capital of Apollo for a cash consideration of
£11,100,000, of which £100,000 was paid by way of deposit on the signing of the
Acquisition Agreement with the sum of £11,000,000 being payable on Completion,
of which £100,000 will be paid into a joint retention account.
Under the terms of the Acquisition Agreement the existing bank indebtedness of
Apollo will be repaid by Apollo on or prior to Completion. Following Completion
there will be a determination of the value of the net current assets of Apollo
on Completion according to the terms of the Acquisition Agreement. Provided that
there is a nil or positive balance of net current assets, the sum of £100,000
paid into the joint retention account will be released to the Vendor and in
addition there will be paid to the Vendor, by way of additional consideration, a
sum equal to the positive amount of such balance. If Apollo has negative net
current assets at Completion, payment of a sum equal to the net current
liabilities will be made by the Vendor to the Company by way of deduction from
the joint retention account. If the net current liabilities on Completion are
greater than £100,000 then in addition to the sum of £100,000 to be paid to the
Company from the joint retention account, the Vendor will pay to the Company, a
sum equal to the amount by which the net current liabilities on Completion
exceed £100,000.
Following the grant of detailed planning permission, further consideration of
£286,880 is payable to the Vendor in cash upon practical completion under the
agreement for lease in respect of Apollo's proposed new bingo club in Worksop.
At the time such payment is due Apollo (which will be a subsidiary of Top Ten)
is due to receive a significant contribution to the fit-out costs of such
premises from the developer.
The Acquisition Agreement is conditional upon inter alia:
(a) the Resolutions being duly passed without material amendment;
(b) the Placing Agreement not being terminated and becoming unconditional in all
respects in accordance with its terms (save for any condition relating to the
Acquisition Agreement becoming unconditional or Admission); and
(c) an amount of £7,900,000 being unconditionally available for drawdown under
the Company's new facility described in further detail below.
The Acquisition Agreement contains certain warranties and indemnities given by
the Vendor for which the maximum aggregate liability for breach is limited to
£11,100,000. A claim against the Vendor under the warranties (save for the
warranties relating to tax) may only be brought if it exceeds £100,000 and the
warranties may only be enforced by the Company on or before 1 month following
the publication of the preliminary results of the Company for the financial
period ended 25 March 2007 (with an ultimate long stop date of 25 October 2007)
in the case of the general warranties and prior to the seventh anniversary of
Completion in the case of the warranties relating to tax.
The Vendor has also agreed on Completion to enter into a tax deed containing a
covenant to indemnify the Company against pre-completion tax liabilities of
Apollo, which may only be enforced by the Company prior to the seventh
anniversary of Completion. The Company has a right to terminate the Acquisition
Agreement in the event that warranty breaches or breaches of the tax deed (had
it been entered into on the date of the Acquisition Agreement) or any other
provision of the Acquisition Agreement are discovered before completion of the
Acquisition Agreement which would have a material adverse effect on the business
of Apollo, being of an amount of £250,000 or more.
The Acquisition Agreement contains restrictive covenants from the Vendor, not
to, inter alia, compete with the business of the Company for a period of 2 years
from Completion and not to solicit any employees of Apollo for a period of 18
months from Completion.
Current trading and prospects
As mentioned at the time of our interim results, the Walkers Clubs have been
integrated successfully. Trading in the first half of the year was satisfactory
and activity across the Group continues in line with management's expectations.
Further acquisitions
As previously stated, the Board is actively pursuing a policy of growth through
acquisition. The acquisition of the Walkers Clubs has enabled the Board to
develop its management team such that we believe that we can consolidate a much
greater number of clubs without any significant increase in numbers of
management. We are aware of a number of opportunities some of which, after
careful consideration and due diligence, we hope to be able to acquire in due
course.
New bank facility
On 22 December 2005, the Company entered into a £42.5 million conditional
facility with The National Westminster Bank Plc ('the Facility') for funding
consisting of:
(i) £33.5 million term loan (being refinancing of existing term debt
together with finance for the purposes of the Acquisition leaving an undrawn
balance available for further acquisitions, on agreed terms); and
(ii) £9.0 million revolving credit facility (being finance for working
capital and acquisition).
The interest rate payable under the Facility is 1.5% above LIBOR in respect of
any drawing under (i) above (other than any drawing for further acquisition
where the margin is 1.75%); and 2.125% under (ii) above.
The Facility is to be secured by debentures and guarantees from all companies in
the Enlarged Group together with any other companies which are subsequently
acquired with legal charges over any real property within the Enlarged Group or
subsequently acquired real property. In addition the Group has assigned the
benefit of keyman policies which it holds on certain of the Directors as
security.
The Facility also includes an arrangement fee of £195,000 payable on Completion
together with other fees payable on drawdown of further acquisition finance from
the term loan element of the Facility as well as non utilisation and commitment
fees. In addition the Company has given certain representations, warranties and
covenants to The National Westminster Bank Plc in respect of its constitution,
business and related matters together with standard market practice indemnities.
On Completion, the undrawn amount under the Facility for further growth will be
approximately £14 million
Details of the Placing
The Company is proposing to raise £3,100,000 million (net of expenses and
commission), by way of a placing of 3,864,550 New Ordinary Shares at 85 pence
per New Ordinary Share. Charles Stanley, as agent for the Company, has agreed to
use its reasonable endeavours to procure subscribers for the Placing Shares. The
Placing Shares represent 15.3 per cent. of the issued share capital of the
Company as enlarged by the Placing. The Placing has not been underwritten.
Under the terms of the Placing, Sir Aubrey Brocklebank, has agreed to subscribe
for 35,000 Placing Shares, Anstruther Properties Limited (a private limited
company registered in England and Wales in which both Alan Weston and Norman
Weston are interested) has agreed to subscribe for 600,000 Placing Shares,
Graham Kerr has agreed to subscribe for 50,000 Placing Shares and Richard Simons
has agreed to subscribe for 10,000 Placing Shares. In addition Allen Walsh, one
of the directors of the Company's subsidiary Top Ten Bingo Limited, has agreed
to subscribe for 40,000 Placing Shares.
The net proceeds of the Placing will be used by the Company, together with the
new bank facility described above, to fund the initial consideration payable
pursuant to the Acquisition Agreement and the costs of the Acquisition and the
Placing.
The Board, having been advised by Charles Stanley, consider that it is in the
best interests of the Company and Shareholders as a whole for the funds to be
raised by the Placing. If the Company had made an offer, by way of a rights
issue or open offer, to allow existing shareholders to subscribe for any of the
Placing Shares, this would have necessitated the publication of a prospectus at
significant additional cost, imposition on management time and a delay which
might have put the Acquisition in jeopardy.
The obligations of Charles Stanley under the Placing Agreement are conditional,
inter alia, upon the passing of the Resolutions and Admission occurring on or
before 20 January 2006 or such later date as may be agreed between the Company
and Charles Stanley. The Placing Agreement also contains certain warranties and
indemnities given by the Company in favour of Charles Stanley as to certain
matters relating to the Company and its business. The obligations of Charles
Stanley under the Placing Agreement may be terminated in certain circumstances
if there occurs either a material breach of any of the warranties or an adverse
change in the national or international, financial, economic, market or
political conditions and/or in the financial position or prospects of the
Company or if the Acquisition Agreement has not completed in accordance with its
terms. Such rights exist in the event that such circumstances arise prior to
Admission.
The Company has agreed to pay all costs charges and expenses connected with the
Placing and Admission, including all fees and expenses payable in connection
with admission of the
Placing Shares to trading on AIM, expenses of the registrars, printing and
advertising expenses, postage and all legal, accounting and other professional
fees and expenses and all related VAT. The Placing Agreement provides for the
Company to pay Charles Stanley a fee of £35,000 plus VAT where applicable
together with a commission equal to 4 per cent. of the aggregate of the Placing
Price of such number of the Placing Shares as are subscribed for pursuant to the
Placing (excluding those of the Placing Shares subscribed by Sir Aubrey
Brocklebank, Anstruther Properties Limited, Allen Walsh, Graham Kerr and Richard
Simons).
Application will be made to the London Stock Exchange for the Placing Shares to
be admitted to trading on AIM. It is expected that Admission will become
effective and that trading in the Placing Shares will commence on AIM on 20
January 2006.
The Placing Shares will, when issued and fully paid, rank pari passu in all
respects with the issued New Ordinary Shares, including the right to receive any
dividend or other distribution declared, made or paid after the date of their
unconditional allotment.
It is expected that the Placing Shares will be delivered in CREST on 20 January
2006 and that (where appropriate) share certificates for the Placing Shares to
be held in certificated form will be despatched by 10 February 2006. The Placing
Shares will be in registered form and no temporary documents of title will be
issued.
Proposed Share Consolidation
The Board believes that a higher share price will, inter alia, lead to a
narrowing of the market spread between the quoted bid and offer price, in
percentage terms, which will in turn make the shares more attractive to
institutional and other investors. Accordingly, the Board has decided to
consolidate the Company's issued and unissued ordinary share capital. It is
proposed, subject to Shareholder approval at the EGM, to consolidate every 20
Ordinary Shares of 1p each into one New Ordinary Share of 20p.
Consequently, the approval of Shareholders is sought by the proposal of
Resolution number 2 at the EGM for a consolidation of the issued and unissued
Ordinary Shares of 1p each, such that all Shareholders will receive one New
Ordinary Share of 20p for every 20 Ordinary Shares of 1p. The record date for
the Share Consolidation will be close of business on 19 January 2006. Subject to
the passing of Resolution 2 at the EGM, fractions of New Ordinary Shares
resulting from the Share Consolidation will not be issued to Shareholders. The
Board may decide that any fractions shall be consolidated into New Ordinary
Shares which the Board may sell at the best price that can be reasonably
obtained.
Based on the shareholdings at the date of this document and the current share
price of an Ordinary Share, it is not expected that any fractional entitlements
will be above £3 and so it is not expected that any distribution will be made to
Shareholders in relation to fractional entitlements.
Except in relation to fractional entitlements, the proportion of each
Shareholder's interest in the Company will remain the same, and except for the
increase in nominal value, the New Ordinary Shares will be identical in all
respects to the Ordinary Shares. The New Ordinary Shares will rank pari passu in
respect of dividends.
Share certificates in respect of the Placing Shares will reflect the Share
Consolidation. Share certificates for Ordinary Shares will remain valid pending
the issue of new share certificates in respect of the New Ordinary Shares, which
it is anticipated will be despatched by 10 February 2006. Upon receipt of new
share certificates, certificates in respect of the Existing Ordinary Shares will
become invalid and should be destroyed. CREST accounts will be credited with
the New Ordinary Shares on 20 January 2006.
Increase in Authorised Share Capital
It is also proposed that the authorised share capital of the Company be
increased by £2,000,000 by the creation of 10,000,000 New Ordinary Shares.
Authority for such increase will be sought at the EGM.
Articles of Association
Since the adoption of the Articles, there have been certain developments in
legislation relating to the use of electronic communications, treasury shares
and CREST. In addition, certain investor bodies require that the articles of
association of listed companies are reviewed regularly to ensure that they
remain in keeping with modern business practice. It is proposed that the New
Articles, which reflect such legal developments, be adopted and the adoption of
the New Articles is proposed at the Extraordinary General Meeting.
Irrevocable undertakings
The Company has received an irrevocable undertaking to vote in favour of the
Resolutions from Anstruther Properties Limited, which has a beneficial interest
in respect of 180,000,000 Ordinary Shares representing approximately 41.9 per
cent. of the Existing Ordinary Shares.
The Company has also received an irrevocable undertaking to vote in favour of
the Resolutions from Allen Walsh, who has a beneficial interest in respect of
2,321,800 Ordinary Shares representing approximately 0.5 per cent. of the
Existing Ordinary Shares.
In addition Bruce Roberts, Graham Kerr, Richard Simons and Sir Aubrey
Brocklebank have also undertaken to vote in favour of the Resolutions in respect
of our aggregate holdings of 85,728,200 Ordinary Shares representing
approximately 20 per cent. of the Existing Ordinary Shares.
Therefore in aggregate irrevocable undertakings to vote in favour of the
Resolutions have been received in respect of 268,050,000 Ordinary Shares
representing approximately 62.5 per cent. of the Existing Ordinary Shares.
Circular to Shareholders
A circular containing further details of the acquisition of Apollo and the other
proposals outlined above, accompanied by the Notice of Extraordinary General
Meeting convened for 19 January 2006, will today be posted to shareholders.
Definitions
'Acquisition' the acquisition by the Company of Apollo pursuant to the terms of
the Acquisition Agreement
'Acquisition Agreement' the conditional agreement dated 22 December 2005 between the
Vendor and the Company whereby the Company has agreed,
conditional, inter alia, on completion of the Placing and
Admission, to acquire the entire issued share capital of Apollo
from the Vendor, further details of which are set out in this
document
'Admission' the admission of the Placing Shares to trading on AIM and such
admission becoming effective in accordance with the AIM Rules
'AIM' AIM, a market operated by the London Stock Exchange
'AIM Rules' the rules governing the admission to, and operation of, AIM
contained in the document entitled the 'AIM Rules' published by
the London Stock Exchange
'Apollo' Apollo Bingo Limited
'Articles' the articles of association of the Company as at the date of this
document
'Charles Stanley' Charles Stanley & Co. Limited
'Company' or 'Top Ten' Top Ten Holdings PLC
'Completion' completion of the Acquisition Agreement in accordance with its
terms
'CREST' the relevant system (as defined in the Regulations) in respect of
which CRESTCo Limited is the Operator (as defined in the
Regulations)
'Directors' or the 'Board' the directors of the Company
'EGM' or 'Extraordinary General Meeting the Extraordinary General Meeting of the
Company convened for
' 11.00 a.m. on 19 January 2006 by the Notice of EGM and any
adjournment thereof
'Enlarged Group' the Group as enlarged by the Acquisition
'Existing Ordinary Shares' the Ordinary Shares in issue at the date of this document, which
are to be consolidated pursuant to the Share Consolidation
'Group' the Company and its subsidiary undertakings
'London Stock Exchange' London Stock Exchange plc
'New Articles' the articles of association of the Company proposed to be adopted
by the Company
'New Ordinary Shares' the ordinary shares of 20 pence each in the capital of the
Company whether arising from the Share Consolidation or to be
issued pursuant to the Placing
'Ordinary Shares' ordinary shares of 1p each in the share capital of the Company
'Placing' the conditional placing of the Placing Shares with institutional
and other investors pursuant to the terms of the Placing
Agreement and as described in this document
'Placing Agreement' the agreement dated 22 December 2005 between the Company and
Charles Stanley in connection with the Placing details of which
are set out in this document
'Placing Shares' the 3,864,550 New Ordinary Shares which have been conditionally
subscribed in accordance with the terms of the Placing Agreement
'Resolutions' the resolutions set out in the Notice of EGM
'Share Consolidation' the proposed consolidation of the issued and unissued ordinary
share capital of the Company, summarised in this document
'Shareholders' holders of Ordinary Shares
'Vendor' Anita Gregg
'Walkers Clubs' the 13 bingo clubs acquired by the Company pursuant to its
acquisition of Westvale Leisure Ltd in June 2005
This information is provided by RNS
The company news service from the London Stock Exchange
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