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RNS Number : 3125Y
Fayrewood
PLC
Fayrewood Plc
('Fayrewood' or the 'Company')
Disposal of Interface Solutions International Limited ('Interface') and System Loans Services Limited ('SLS')
Confirmation of investing strategy
Notice of Extraordinary General Meeting
Fayrewood (AIM: FWY) the computer distributor, announces the proposed disposal of its wholly owned subsidiaries, Interface and SLS, the last remaining trading subsidiaries, to Prime Properties Development Limited ('PPD'), a wholly owned subsidiary of Specialist Computer Holdings Limited ('SCH'), for an aggregate cash consideration of approximately £2 million (the 'Disposal')
Key Financials
· The aggregate cash consideration to be paid to Fayrewood is approximately £1,976,000 spread as follows over the 12 months following the completion of the Disposal:
o £976,000 on completion;
o £500,000 6 months after completion, subject to potential warranty claims; and
o £500,000 12 month after completion, subject to potential warranty claims.
Reasons for Disposal
· During 2005 the Board agreed that the aggregate net worth of the businesses of Fayrewood and its subsidiaries (the 'Group') significantly exceeded Fayrewood's then market capitalisation.
· To enable this value to be obtained for the holders of issued ordinary shares of 5 pence each in the capital of the Company ('Ordinary Shares') ('Shareholders') the Board's strategy was to commence a disposal programme of the key parts of the Group, including ComputerLinks AG, UMD SA and Banque Magnetique SA.
o These disposals allowed Fayrewood to return approximately £35m cash to Shareholders and to reduce the Group's indebtedness by approximately £30 million.
· The Board is unanimously in favour of the Disposal as it represents:
o the final stage of the Board's strategy of breaking up the Group and selling component parts in order to maximise Shareholder value; and
o an essential step in being able to return cash to Shareholders in a tax efficient, timely and cost effective manner.
Board
· The Board will remain in its current form apart from Keith Negal, currently Chief Operating Officer, who will move to a non-executive capacity.
EGM Details : To Approve the Disposal and Investing Strategy
· The Disposal will result in there being a fundamental change of Fayrewood's business under the AIM rules and therefore Shareholder approval is required.
· Shareholder approval is also required of the Board's proposed investing strategy for the Company going forward, details of which are set out below in the section headed 'Investing Strategy'.
· Fayrewood has received irrevocable undertakings to vote in favour of both the resolutions to be proposed from the Directors and a major Shareholder equating to approximately 44.5% of the Ordinary Share capital.
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The extraordinary general meeting of the Company
will be held at the offices of Buchanan Communications, 45 Moorfields,
London EC2Y 9AE at
Commenting on the proposed disposal, David Kleeman, Non-Executive Chairman said:
'Fayrewood floated in July 1996. Altogether, over the following few years as a listed company, it raised a little in excess of £34 million by the issue of shares, of which less than £10 million was used for working capital purposes and the balance was used to pay vendors during our active acquisition period. On the other side of the equation, we have received in excess of £82.5 million from the sale of our businesses since 2005. In addition, approximately £30 million of bank debt was assumed by the purchasers of those businesses.
'I believe we have demonstrated an ability to bring value to shareholders, a large part of which is due to the very judicious deal-making skills of both our former and current management team when the underlying businesses were bought. As important, was the decision to take action two years ago when we realised that the increasingly testing market conditions Europe-wide and Fayrewood's market rating were not conducive to remaining as a quoted entity, particularly as investors were demonstrating a limited appetite to fund a long-term acquisition strategy. Accordingly the Board of Fayrewood unanimously recommend approving the disposal.'
Enquiries:
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David Kleeman, Non-Executive Chairman |
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Fayrewood plc |
020 7430 9329 |
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Oliver Scott / Deon Veldtman |
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KBC Peel Hunt |
020 7418 8900 |
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Tim Anderson / Lisa Baderoon |
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Buchanan Communications |
020 7466 5000 |
Disposal of Interface and SLS
Confirmation of investing strategy
Notice of EGM
Introduction
Fayrewood announces the proposed disposal of its wholly owned subsidiaries Interface and SLS to PPD, a wholly owned subsidiary of SCH, for an aggregate cash consideration of approximately £2 million. Further details of the Disposal are set out below.
A circular containing information of the proposed Disposal is being posted today to Shareholders (the 'Circular'). Interface and SLS are Fayrewood's last remaining trading subsidiaries and their sale represents the final stage of the Board's strategy of breaking up the Group and selling the component parts in order to maximise Shareholder value. The Disposal will result in there being a fundamental change in Fayrewood's business under the AIM Rules and therefore requires Shareholder approval. The Circular contains a notice convening the EGM at which a resolution will be proposed seeking Shareholder approval of the Disposal; the notice of EGM also includes a resolution seeking Shareholder approval of the Board's proposed investing strategy for the Company going forward, details of which are set out below in the section headed 'Investing Strategy' (together the 'Resolutions').
The Board believes that the sale of Interface and SLS is an essential step in being able to return cash to Shareholders in a tax efficient manner and intend to vote in favour of the Resolutions to be proposed at the EGM.
Irrevocable undertakings to vote in favour of the Resolutions to be proposed at the EGM have been received in respect of 10,349,069 Ordinary Shares, representing 44.5 per cent. of the Company's issued share capital.
Background to the Disposal
During the course of 2005, the Board formed the view that the
aggregate net worth of the Group's businesses significantly exceeded the
Group's then market capitalisation. To enable that difference
in value to be obtained for Shareholders, the Board embarked on a strategy of
selling the component parts of the Group. This strategy commenced with the
disposal of part of Fayrewood's stake in ComputerLinks AG, by then a fully listed company in
In December 2007, Fayrewood completed the sale of the Paris-based Banque Magnetique SA, following which the Group's only remaining trading businesses were Interface and SLS. Since December 2007, the Board has had discussions with a limited number of purchasers that had a serious interest in acquiring Interface and SLS and the offer received from PPD represented best value for Shareholders.
The Board believes that the sale of Interface and SLS is an essential step in being able to return cash to Shareholders in a tax efficient manner.
Information on Interface and SLS
Interface is a distributor of computer servers and storage
equipment, personal computers and laptops. Interface employs approximately 130
people, of which the majority are based at its head
office near
SLS was established in order to manage
the loan of IBM 'X-series' servers and other products on behalf of IBM to
potential customers during product trials and commenced trading
in September 2007. SLS operates out of
Interface's offices in
The financial information in relation to Interface, as set out
below, has been extracted from the company's audited annual financial
statements for the three years ended
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Year-ended 31 December |
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2007 |
2006 |
2005 |
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£'000 |
Audited |
Audited |
Audited |
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Income statement |
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Turnover |
129,895 |
122,521 |
112,472 |
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Gross profit |
9,988 |
9,089 |
7,181 |
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Profit/(loss) before taxation |
(571) |
839 |
(190) |
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Balance sheet |
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Net assets |
2,316 |
2,888 |
2,048 |
The financial information in relation to SLS,
as set out below, has been extracted from the company's audited financial
statements for the period ended
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4 months ended |
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£'000 |
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Unaudited |
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Income statement |
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Turnover |
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180 |
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Gross profit |
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49 |
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Loss before taxation |
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(58) |
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Balance sheet |
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Net assets |
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(58) |
Terms of Disposal
Under the terms of the sale and purchase agreement entered into between (1) the Company, (2) PPD and (3) SCH on 3 July 2008 for the sale of Interface and SLS (the 'SPA'), Fayrewood has agreed to sell, subject to Shareholder approval, the entire issued share capital of Interface and SLS to PPD for a cash consideration of £1,976,000. SCH have provided a full guarantee of PPD's obligations under the SPA and Fayrewood has given warranties and a tax covenant appropriate to a transaction of this type.
At completion, £1,000,000 of the purchase price will be paid into a retention account to be applied in discharging any liability under any warranty claims and will be held jointly by the solicitors acting for PPD and for Fayrewood. After 6 months, the sum of £500,000 (less any amounts deducted for claims under the warranties) will be released to Fayrewood. On the first anniversary of completion, the balance left in the retention account will be released to Fayrewood.
Completion is due to take place as soon as reasonably practicable after Shareholders have approved the Disposal.
Effect on Fayrewood
Following the Disposal, Fayrewood's
only trading activity will be the provision of consultancy services to PPD under a six month contract at a rate of £4,000 per
month. The Board estimates, after taking into consideration professional
fees and other transaction expenses of approximately £450,000, the net proceeds
in relation to the Disposal will be approximately £1,526,000 - which is
approximately £732,000 lower than the combined net assets of Interface and SLS of £2,258,000 as at
The Group's net assets were £36,428,000 as per its audited balance
sheet at
Investing Strategy
Following the Disposal, the Company will have no significant trading business and therefore under the AIM rules it must seek the consent of Shareholders for the investment strategy.
The Board proposes to adopt the following investing strategy: to explore methods of returning the maximum amount of capital to Shareholders in the most tax efficient, timely and cost effective manner that is practical. Such methods include a wide range of transactions including an offer for some or all of the Company's share capital, a further tender offer, or a reverse takeover (as defined by the AIM Rules).
Although the Company will not actively seek any acquisition or
investment opportunities going forward, it may consider active investments in
distribution businesses in
The members of the Board and its management team are made up of experienced individuals with diverse backgrounds covering company turnarounds, finance, investment banking and fund management with experience in corporate transactions over a variety of sectors. The Directors will be guided by their experiences in their respective fields of expertise and management skills in implementing the investing strategy.
If Shareholder approval in respect of the investing strategy is obtained at the EGM and the Company does not complete a reverse takeover during the twelve months following the EGM, trading in Fayrewood's Ordinary Shares on AIM will be suspended by London Stock Exchange plc. In such an event the Company would remain suspended for six months, after which its listing on AIM would be cancelled. However, the Directors intend to be able to return cash to Shareholders in some form prior to this date.
Board changes
Following completion of the Disposal, the Board will remain in its current form apart from Keith Negal, currently Chief Operating Officer, who will move to a non-executive capacity
Irrevocable undertakings
Fayrewood has received irrevocable undertakings from certain Shareholders (including all of the Directors) to vote in favour of the Resolutions in respect of, in aggregate, 10,349,069 Ordinary Shares representing in aggregate approximately 44.5 per cent. of the issued ordinary share capital of the Company, as follows:
Number of
Shareholder
Ordinary Shares
Directors
David Kleeman 828,681
Sir Tim Chessells 7,259
Mario Legorburu 3,268,020
Keith Negal 30,245
Richard Templeton 9,000
Other Shareholders
This information is provided by RNS
The company news service from the
London Stock Exchange
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For further information
please contact: |
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David Kleeman, Non-Executive Chairman |
020
7430 9329 |
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Fayrewood
plc |
0870
3515802 |
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Oliver Scott |
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KBC Peel Hunt |
020 7418 8900 |
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Tim Anderson / Lisa Baderoon |
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Buchanan Communications |
020 7466 5000 |
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NOTE TO EDITORS: Fayrewood plc Fayrewood is a market leading distributor of globally
sourced computer related products with businesses in France and the UK. |