14th Jan 2008 08:00
Guinness Peat Group PLC14 January 2008 Not for release, publication or distribution, in whole or in part, in, into or from the US, Canada or Australia or any jurisdiction where to do so would constitute a violation of the laws of such jurisdiction. GPG Acquisitions No. 5 Limited (a wholly owned subsidiary of Guinness Peat Group plc) FURTHER RE: CASH OFFER FOR NEWBURY RACECOURSE PLC 14 January 2008 Set out below is the extracted text of the letter from Blake Nixon, the Chairmanof GPG Acquisitions, which was posted to Newbury Racecourse Shareholders on 11January 2007: "Dear Shareholder Introduction GPG's formal Offer Document was posted to Shareholders on 7 December 2007.Following an extension announced on 31 December 2007 the Offer remains open toacceptances until 14 January 2008. This letter expands on the reasons for ourmaking of the Offer and why you should accept for all or at least part of yourholding. Background to the Offer GPG's 13 year involvement in Newbury Racecourse has been predicated on the twokey elements of the Company's business, namely the operation of its prestigiousracecourse and its large holding of property surplus to racecourse requirements. In July 2006, the Newbury Board announced a strategy to spend £45 milliontransforming the Company into a leisure, hospitality, entertainment and eventsbusiness, financed by the sale of its surplus land to the north of theracecourse. GPG was initially, in principle, receptive to the divestment ofsurplus property and, also, the concept of further investment in the racecourseto improve returns. However, subsequent to this, as the Newbury Board's development proposal hasevolved, GPG has come to have a number of fundamental concerns regarding it: thecritical one being whether - as currently contemplated - it would provebeneficial to shareholder value. In consequence, GPG indicated to the NewburyBoard that it could not support the project unless it could meet the criterionof generating cash inflows to the Company, net of tax and necessary expenditure(in particular in respect of essential racing infrastructure), equivalent, intoday's monetary terms, to at least £7 per Share (approximately £21.31 millionin aggregate). The Newbury Board has been unable to confirm that such a minimumnet inflow would be achieved. Furthermore, the Newbury Board's ill-considered plans, amongst other things, arelikely to involve Newbury Racecourse, notwithstanding its paucity of relevantmanagement experience, being locked into a development partnership for some 10years. It is the unsatisfactory nature of the final development proposal that hasobliged GPG to make the Offer. Unsatisfactory Project Returns Rather than a straightforward divestment of the Company's surplus land, theNewbury Board intends to enter into a development partnership with a propertydeveloper. Under the terms of the proposed contract Newbury Racecourse would beentitled to minimum gross cash receipts of £44.5 million over the life of theproject. The timing of these payments is uncertain and is likely to depend uponfuture home sales by the partnership. Based on conservative assumptions GPGestimates these payments have a minimum value, in today's monetary terms, of£29.86 million (or £0.60 million per acre, given the proposed sale of some 50acres). By way of comparison, a transaction highly relevant to that being proposed bythe Newbury Board was the 2002 sale of a smaller plot of land. In that instanceNewbury Racecourse sold 8.56 acres of surplus land, to the south of theracecourse, for £8.7 million, equivalent to £1.02 million per acre. The buyerwas responsible for obtaining planning permission and settlement was made withinseven months of receiving planning permission. Newbury Racecourse Surplus Land Sales August 2002 - South of Racecourse---------------------------------Sale proceeds £8.70mLand area (acres) 8.56Average price £1.02m per acre Proposed 2008 - North of Racecourse-----------------------------------Estimated present value of sale proceeds £29.86mLand area (acres) 49.42Average price £0.60m per acre Although GPG freely acknowledges the two land deals are not entirely comparable,it is striking that the price of £1.02 million per acre achieved back in 2002 is70 per cent. greater than the estimated minimum present value of £0.60 millionper acre that would be achieved from the Newbury Board's proposed sale ofsurplus land. This disparity is even starker if allowance is made for the 56.41%increase since 2002 in average residential land prices in the South West ofEngland. While GPG does not have access to information sufficient to undertake an assetvaluation of the Company's land which would meet the formal requirements of theCity Code, it is apparent that the estimated proceeds, in today's monetaryterms, of the Newbury Board's proposed property partnership will be a merefraction of the price achieved for the land disposed of in 2002. Equally as crucial as the underwhelming gross receipts, the cash received byNewbury Racecourse will be further diminished by necessary expenditure (inparticular in respect of essential racing infrastructure), payment of taxation,and payment to Network Rail, which granted the Company the right to build abridge over its tracks, of an undisclosed proportion of Newbury Racecourse'ssale proceeds. The net result is that the Newbury Board has been unable to confirm that theproject would meet GPG's minimum criterion of net cash inflows of £21.31million, equivalent to a mere £0.43 million per acre. GPG's Premium Offer In a glaring omission, the Newbury Board in its document to Shareholders of 18December 2007 completely neglected to address the most fundamental issue forShareholders - the ongoing valuation of the Company. Furthermore, it also failedto provide any indication of when the Newbury Board expects the racecourse toreturn to profitability. The Offer Price of £11 per share, or £33.49 million in aggregate, represents agenerous price for Newbury Racecourse. Given the Newbury Board's inability toconfirm a minimum return of £7 per Share, or £21.31 million, from the proposedsale of surplus land, GPG's Offer implicitly values the residual racingoperations, net of debt and other liabilities of £13.33 million , at in excessof £4 per Share, or £12.18 million. This is broadly equivalent to the Company'sentire consolidated shareholders funds, as at 30 June 2007, of £12.14 million.This is a very full price in light of the fact that the racecourse has notgenerated an operating profit (before exceptional items) for four years. GPG Offer for Newbury Racecouse PLC £ per share £m Offer price 11.00 33.49 Target value of surplus land* 7.00 21.31Implied minimum valuation of racecourse operations** 4.00 12.18 ----- -----Total 11.00 33.49 * See prior discussion of criterion put to the Newbury Board by GPG** Net of debt and other liabilities of £13.33m as at 30 June 2007 The Offer is being made at a demonstrably premium price and exceeds the highestClosing Price of Newbury Racecourse Shares since dealings commenced on the PLUSmarket in 1995. As at 28 December 2007, 7.66 per cent. of Newbury RacecourseShareholders had accepted the Offer in respect of part or all of theirrespective holdings, representing 4.07 per cent. of the Company's issued sharecapital. GPG continues to believe that its Offer, which provides the certainty of cash ata premium to both the Company's proposed surplus land disposal and it's racingoperations, merits serious and immediate consideration by Shareholders. TheOffer also provides Shareholders with a further alternative: to accept the Offerfor part of their shareholding - thereby assisting GPG to gain control of thebusiness with a view to maximising the value of the racecourse and surplus landfor the benefit of all remaining Shareholders. Lowering of acceptance condition GPG has today lowered the level of acceptances required pursuant to the Offerfrom 75 per cent. to over 50 per cent. (when taken together with Shares acquiredor agreed to be acquired by GPG and its concert parties). All other terms and conditions remain unchanged. Action to be taken to accept the Offer The procedure for acceptance of the Offer is set out on pages 12 to 15 of theOffer Document sent to Shareholders on 7 December 2007 and in the accompanyingForm of Acceptance. Yours sincerely Blake NixonChairman GPG Acquisitions No. 5 Limited" ENQUIRIES GPG Acquisitions No. 5 Limited Tel: (020) 7484 3370Blake Nixon, Director Strand Partners Limited Tel: (020) 7409 3494Simon Raggett Citigate Dewe Rogerson Tel: (020) 7638 9571Kevin Smith OTHER INFORMATION Terms defined in the document posted to Shareholders on 7 December 2007containing the formal Offer for Newbury Racecourse have the same meaning in thisannouncement. Copies of the Offer Document, the further circular and the Form of Acceptanceremain available (during normal business hours) from Strand Partners at 26 MountRow, London W1K 3SQ and from the offices of Computershare Investor Services PLC,The Pavilions, Bridgwater Road, Bristol BS99 7NH throughout the period duringwhich the Offer remains open for acceptance. Strand Partners, which is authorised and regulated in the United Kingdom by theFinancial Services Authority, is acting exclusively for GPG Acquisitions and noone else in connection with the Offer and Strand Partners will not regard anyother person as a client in relation to the Offer and will not be responsible toanyone other than GPG Acquisitions for providing the protections affordedexclusively to its clients or for providing advice in relation to the Offer, thecontents of this announcement or any transaction or arrangement referred toherein. The availability of the Offer to persons not resident in and citizens of theUnited Kingdom may be affected by laws of the relevant jurisdictions in whichthey are citizens or in which they are resident. Such Overseas Shareholdersshould inform themselves about, and observe, any applicable legal or regulatoryrequirements of any such relevant jurisdiction. In particular, the Offer is notbeing made, directly or indirectly, in, into or from or by the use of the mailsof or any means or instrumentality (including, without limitation, by means offacsimile transmission, telex, telephone, internet or other forms of electroniccommunication) of interstate or foreign commerce of, or by any facility of anational, state or other securities exchange of, the United States, or in, intoor from Canada or Australia or any other jurisdiction if to do so wouldconstitute a violation of the relevant laws of such jurisdiction, and the Offerwill not be capable of acceptance by any such use, means, instrumentality orfacility from or within the United States, Canada or Australia or any otherjurisdiction where to do so would constitute a breach of any relevant securitieslaws of that jurisdiction. Accordingly, copies of this announcement and theOffer Document are not being, and must not be, mailed or otherwise distributedor sent in or into or from the United States, Canada or Australia. This announcement does not constitute, or form part of, an offer to sell orpurchase or an invitation to purchase or subscribe for any securities or thesolicitation of an offer to sell, purchase or subscribe for any securities,pursuant to the Offer or otherwise. The Offer will be made solely by way of theOffer Document and the related Form of Acceptance, contain the full terms andconditions of the Offer. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Coats