20th Nov 2009 15:52
Journey Group plc
Announcement of joint venture
Journey Group plc (the "Company" or "Journey") is pleased to announce that Air Fayre Limited ("Air Fayre"), its wholly-owned subsidiary, has entered into a joint venture with Alpha Flight UK Limited ("Alpha UK") to merge their respective in-flight catering operations serving the international airline industry at London's Heathrow airport. Alpha UK is part of Autogrill S.p.A., one of the world's largest providers of food & beverage and retail services for travellers.
The new business, known as Alpha-Airfayre Limited ("AAL"), will serve 18 international airlines with approximately 30,000 meals per day from the two existing operating units contributed by the parties. AAL will have an estimated annual turnover of £73 million. In the short term both operations will remain largely unchanged. A leadership team drawn from both parties has been appointed to direct and manage the joint operations. All other activities currently undertaken by both parties, including Journey's Los Angeles operations, are outside of the scope of this agreement.
Alpha UK holds an interest of 51% in AAL. Air Fayre holds an interest of 49% in AAL together with an option to acquire a further 1% interest from Alpha UK such that, if exercised, both parties would hold an interest of 50%. The option is exercisable, for a consideration based on earnings before interest depreciation and taxation and the net debt of AAL at that date, with effect from 1 January 2011 if Air Fayre reasonably believes that its business interests are not adequately served through a minority shareholding. Both parties have equal board representation, although in the event of a deadlock an Alpha UK appointee will have a casting vote. There is an extensive schedule of reserved matters relating to the conduct and management of AAL requiring the agreement of both parties.
For the year ended 31 December 2008, Air Fayre's turnover amounted to £33.6 million, upon which it incurred an operating loss before exceptional items of £2.9 million and after exceptional items of £3.6 million. For the same period the turnover of Alpha UK relating to its Heathrow in-flight catering activities amounted to £28.3 million. Under the terms of the joint venture, both parties have contributed their trading activities and certain operating assets comprising fixed assets and working capital items subject to certain restrictions and limitations. Air Fayre has contributed net assets to AAL amounting £1.5 million, including an intercompany liability of £5.0 million payable to the Company. This liability was settled in cash on completion resulting in a cash inflow to Journey. These funds will be applied for working capital purposes and will enable Journey to operate with a reduced banking facility. Alpha UK has contributed net assets to AAL amounting to £3.1 million.
The terms of the joint venture provide that except under certain circumstances neither party may dispose of their interest in AAL prior to 31 December 2010 and also provide for pre-emption arrangements from that date.
The terms of the joint venture provide for call and put options arrangements that are exercisable during the 30 day period commencing 31 March 2013. Under these arrangements, Alpha UK may call on Air Fayre to acquire its holding in AAL and Air Fayre may put on Alpha UK to dispose of its holding in AAL. In each case the consideration will be calculated with reference to earnings before interest depreciation and taxation for the year ending 31 December 2012 and the net debt of AAL at that date.
The joint venture agreement also includes terms under which, if during the years ending 31 December 2010 and 31 December 2011, Alpha UK determines that it is in the best interests of the joint venture to enter into an agreement with a third party doing business or seeking to do business at London's Heathrow airport, Air Fayre and Alpha UK will seek to agree terms for proceeding with the new opportunity. In the event that agreement cannot be reached, Air Fayre will be obliged to transfer its interest in the joint venture to Alpha UK for an agreed consideration less any amount owing by the Company or its subsidiaries to Alpha UK or Alpha-Airfayre Limited.
The Company also announces that it has been agreed with the Company's bankers, Barclays Bank plc, that the amount available under the Company's multi-option facility be further reduced from £4,750,000 to £3,750,000 and that additional facility fees would become payable. With the benefit of greater certainty provided by the joint venture, the Company is actively taking steps to secure new bank facilities on more attractive terms.
Stephen Yapp, Executive Chairman of Journey Group plc said:
"We are delighted to be able to announce this merger as it will bring together the best aspects of two individual and unique businesses. The combined operations at London Heathrow airport will provide our customers with even more choice and expertise whilst at the same time continuing to deliver exceptionally high standards of service, for which both companies are well known. For our employees we will be able to offer variety, career progression and the opportunity to be part of a larger organisation."
Ken Adamson, Managing Director of Alpha Flight Services, UK said:
"The Joint Venture at Heathrow airport with Air Fayre forms a key and exciting part of Alpha's overall UK and Ireland strategy, which is all about focusing on what is important to our customers. At London Heathrow, our customers want highly cost effective logistics operations combined with the experience and capability to both serve their often complex requirements, and consistently produce the finest authentic cuisine. The complementary strengths of Alpha Flight and Air Fayre promise to deliver a unique and exciting proposition for both our current and new customers."
For further information please contact:
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Journey Group plc |
Tel: +44 (0) 20 8606 2000 |
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Stephen Yapp, Chairman |
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Carl Fry, Interim Chief Financial Officer |
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KBC Peel Hunt Ltd (Nominated Adviser & Broker) |
Tel: +44 (0) 20 7418 8900 |
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David Anderson |
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Daniel Harris |
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