23rd Jun 2005 07:17
Berkeley Group Holdings (The) PLC23 June 2005 The Berkeley Group Holdings plc The Berkeley Group Holdings plc ("Berkeley") announces the disposal of TheCrosby Group plc ("Crosby"). Introduction The Board of Berkeley announces that it has entered into an agreement with LendLease Corporation Limited ("Lend Lease") for the sale of Crosby for £235.7million. In addition Berkeley will be repaid £15 million, in respect of workingcapital provided to Crosby since 30 April 2005. Berkeley Group Managing Director Tony Pidgley said: "I am delighted to announce this transaction which allows Berkeley to focus onits core market in London and the South East, and gives Berkeley greaterfinancial flexibility for the future. It is down to Geoff Hutchinson and hisManagement Team to take Crosby forward with Lend Lease and I wish him and Crosbyevery success in the future. This transaction moves forward the strategyBerkeley announced at the time of last year's Scheme of Arrangement. Thebusiness becomes more focused and gives the Berkeley Group greater flexibilityin the balance between the generation of cashflow to secure the Return toShareholders and maximizing the value of the resultant ongoing business." Background to the TransactionFollowing the strategic review reported on 26 June 2003 the board of Berkeleydecided to concentrate on increasingly complex mixed-use urban regenerationprojects in London and Southern England. The management of Crosby proposedmaximising the value of the assets within Crosby and incentivising them byacquiring a shareholding in Crosby. At this time Crosby was a wholly ownedsubsidiary of Berkeley. On 27 August 2003, Berkeley entered into an agreement whereby the CrosbyManagers, led by Geoff Hutchinson, subscribed for newly issued shares in Crosby("Crosby B Shares") for a consideration of £500,000, funded by a loan fromBerkeley (together "the Crosby transaction"). Following this subscription the share capital of Crosby comprised Crosby AShares, held by Berkeley, and Crosby B Shares, held by the Crosby Managers.Berkeley retained control of Crosby through its holding of Crosby A Shares andcontinued to consolidate Crosby as a subsidiary. Under the terms of the CrosbyTransaction, Crosby had to make agreed milestone payments to Berkeley every sixmonths and generate in aggregate £450 million of operating cashflow within sevenyears of the date of the subscription. It was agreed that if these two criteria are met, the Crosby B shares arebroadly entitled to 50.01% of the economic and voting rights of Crosby. Inaddition, Berkeley would retain voting control of Crosby until the gross assetsand net assets of Crosby fall below £75 million and £50 million, respectively,at which point voting control of Crosby passes to the Crosby Managers and Crosbyceases to be consolidated by Berkeley. The sale of Crosby B Shares to Lend Lease is outside the control of Berkeley andhas been the subject of separate negotiation between the Crosby Managers andLend Lease. Upon receipt of the consideration for the sale of their Crosby BShares to Lend Lease for £10 million, the Crosby Managers will repay to Berkeleythe £500,000 loan mentioned above. As part of the Disposal, Berkeley and theCrosby Managers will enter into a Termination Deed, pursuant to which thearrangements put in place at the time of the Crosby Transaction will beterminated. On 25 June 2004, the Berkeley Group announced the next stage of its strategy toincrease the focus of the business while delivering enhanced shareholder value.On 24 August 2004, it announced proposals to seek to return up to £12 perexisting ordinary share to shareholders (the "Return") by January 2011. TheReturn is to be effected by means of the redemption of four tranches of BShares. The 2004 tranche of £5 per unit was redeemed on 3 December 2004. A fulldescription of the mechanics and payment of the Return including a descriptionof the rights attaching to the B Shares and the timing of further redemptionswas set out in a circular sent to Shareholders dated 24 August 2004. Terms of the Transaction The disposal is unconditional and is due to complete on the 8th July 2005. Theconsideration comprises in aggregate £235.7 million in respect of the Crosby Ashares held by Berkeley including the repayment of the inter-companyindebtedness owed to Berkeley by Crosby at 30th April 2005. In addition,Berkeley will be repaid £15 million in respect of working capital provided toCrosby since 30th April 2005. Under the agreement Berkeley has entered into normal warranties and indemnities.In addition, it has entered into various covenants including an undertakingrestricting the number of developments it can undertake in Birmingham, Leeds andManchester. Berkeley has been advised by UBS Investment Bank. Reasons for the Disposal and use of Proceeds The Disposal accelerates the return from Crosby and leaves Berkeley with a morefocused development portfolio based around its core markets in London and theSouth-East of England. It also gives Berkeley increased financial flexibilitywhich will allow Berkeley to take advantage of land opportunities in its coremarkets as they arise. Berkeley proposes to repay the £100 million currently drawn under its existingrevolving facility. The remaining proceeds will be invested in Berkeley's coremarkets in London and the South-East of England. Information on Crosby Crosby is a leading urban regenerator and residential property developer thatoperates out of three regional offices which are located in Birmingham,Manchester and Leeds. Crosby also benefits from a number of joint venturerelationships. At 31 October 2004, Crosby had 4,488 plots under its control. The major sites Crosby is developing are Redbank, Manchester; Clarence Dock,Leeds; Southside, Navigation Street, Essex Street and John Bright Street inBirmingham; Gosforth in Newcastle; and St James in Cheltenham. Its largest jointventure sites are Hungate in York and Smithfield in Manchester. Crosby reported turnover of £229.8 million with an operating profit of £26.7million and profit before tax of £18.8 million for the year ended 30 April 2004.For the six months ended 31 October 2004, Crosby reported turnover of £122.9million, an operating profit of £18.4 million and profit before tax of £14.1million. These results include Crosby's share of its joint ventures. Crosby'scapital employed (net assets excluding cash and inter-company funding), was£190.7 million as at 31 October 2004. Berkeley Annual Results Berkeley will report its preliminary results for the year ended 30 April 2005 on24 June 2005. For further information please contact: The Berkeley Group Holdings plc Cardew Group A W Pidgley Tim RobertsonR C Perrins 01932 868555 0207 930 0777 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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