7th Dec 2007 09:00
Guinness Peat Group PLC07 December 2007 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. Cash Offer By Strand Partners Limited on behalf of GPG Acquisitions No. 5 Limited (a wholly owned subsidiary of Guinness Peat Group plc) for the entire issued and to be issued ordinary share capital of NEWBURY RACECOURSE PLC 7 December 2007 GPG Acquisitions No. 5 Limited ("GPG Acquisitions") announces that, followingthe announcement on 14 November 2007 of its all cash offer of £11 per NewburyRacecourse Share (the "Offer") for the entire issued and to be issued ordinaryshare capital of Newbury Racecourse, Strand Partners Limited acting on GPGAcquisition's behalf has today posted an Offer Document formally making theOffer to the Newbury Racecourse Shareholders (the "Offer Document"). The following is the text of the letter (the "Chairman's Letter") incorporatedin the Offer Document that has been sent to holders of ordinary shares of 10peach in Newbury Racecourse ("Newbury Racecourse Shares") today together with theOffer Document and the form of acceptance relating to the Offer (the "Form ofAcceptance"). "7 December 2007 Dear Shareholder Cash offer by Strand Partners Limited on behalf of GPG Acquisitions No. 5Limited for the entire issued and to be issued ordinary share capital of NewburyRacecourse PLC Introduction On 14 November 2007, Strand Partners announced a formal cash offer on our behalffor your Newbury Racecourse Shares. This letter sets out the background to andreasons for the Offer and explains why the GPG Acquisitions Board and thedirectors of GPG plc believe that you should accept the Offer. The Offer The Offer, which is being made on the terms and subject to the conditions setout in the accompanying letter from Strand Partners and in Appendix I to thisdocument, is made on the following basis: for each Newbury Racecourse Share £11 in cash The Offer Price exceeds the highest Closing Price of Newbury Racecourse Sharessince dealings commenced on the PLUS market in 1995 and represents a premium ofapproximately 11.68 per cent. to the Closing Price of £9.85 per NewburyRacecourse Share on 13 November, being the last Business Day prior to theannouncement of the Offer. The Offer values the whole of Newbury Racecourse's existing issued share capitalat approximately £33.49 million. Background to and reasons for the Offer GPG is Newbury Racecourse's largest shareholder, holding approximately 20.66 percent. of the Company's issued share capital and, since its initial investmentsome thirteen years ago, has been supportive of the Company. Over this period,GPG has played a substantial role in the raising of capital by NewburyRacecourse. NEWBURY RACECOURSE'S SPECULATIVE NEW STRATEGY In July 2006, the Newbury Board announced a strategy to transform the Companyinto a leisure, hospitality, entertainment and events business. A requirementwas outlined for some £45m in expenditure on infrastructure and facilities atNewbury Racecourse, including a bridge across the adjacent railway line, and therelocation of many existing buildings as well as the golf course. Integral tothese plans was the release of the Company's substantial surplus land forresidential development. GPG has a number of fundamental concerns about the proposed new strategy for theCompany, and no faith that - as currently contemplated - it would provebeneficial to shareholder value. In consequence, GPG indicated to the NewburyBoard that it could not support the mooted land sale, together with theassociated heavy capital expenditure, unless the project could meet thecriterion of generating cash inflows to the Company, net of tax and necessaryexpenditure (in particular in respect of essential racing infrastructure),equivalent, in today's monetary terms, to at least £7 per share (approximately£21.31 million in aggregate). Given nearly 50 acres of land would be sold, thisminimum criterion is not regarded by GPG as particularly onerous. Nevertheless,the Newbury Board has been unable to confirm that such a minimum net inflowwould be achieved. The redevelopment project, allied to the Company's continuing loss makingperformance (as set out in the table below), has caused Newbury Racecourse torun up net debt of approximately £4.91 million as at 31 December 2006. Newbury Racecourse: Key financial indicators 2003 2004 2005 2006 £m £m £m £mTurnover 5.889 5.610 6.001 5.759Operating profit/(loss) before exceptional (0.951) (0.297) (0.284) (1.043)itemsDebt at year end, net of cash 0.127 1.71 2.81 4.91 Newbury Racecourse's operational record provides Shareholders with scant comfortas to the Newbury Board's ability to execute successfully a fundamental shift inthe Company's strategy. Indeed, it is GPG's strong belief that the business issuffering from an insufficiently proprietorial approach. Furthermore, it is increasingly likely that, despite GPG's concerns having beenraised with the Company, the Newbury Board will imminently be in a position toenter into binding development contracts to implement its ill-considered plans.These plans, amongst other things, are likely to involve Newbury Racecourse,notwithstanding its paucity of relevant management experience, being locked intothe new development partnership for some 10 years. In spite of its contentiousnature, the Newbury Board was unwilling to submit the proposed partnership forapproval by Shareholders. In light of this, GPG has been obliged to act toprotect its investment by making the Offer. For the reasons set out above, Shareholders should note that the Offer isconditional on no agreement, arrangement or commitment, or amendment to anyexisting agreement, having been entered into for the sale or development of anymaterial real estate asset owned by any member of the Newbury Racecourse Group.GPG Acquisitions considers that any such action would be of materialsignificance to it in the context of the Offer. GPG'S POST-ACQUISITION STRATEGY Our involvement in Newbury Racecourse has been predicated on the two keyelements of the Company's business: the operation of its prestigious racecourseand its large holding of property surplus to racecourse requirements. GPGregards the successful development of each as essential to a satisfactoryoutcome for Shareholders. Following the Offer becoming or being declared unconditional in all respects,GPG will appoint to the Newbury Board nominees sufficient in number to comprisea majority. The reconstituted Newbury Board will immediately thereafter conducta comprehensive strategic review of the Company. Ensuring the appropriate approach is adopted for Newbury Racecourse's surplusproperty is the crucial factor behind the making of the Offer. Moreover, GPG isstrongly committed to the future operation of the racecourse. It will considerall options to return the racecourse to profitability including bringing inexternal expertise, whether by way of direct management involvement or via jointventure. BENEFITS OF THE OFFER Given the chronically poor operating performance of the Company, its weakenedfinancial position and what GPG considers to be the inherently speculativenature of the strategy the current Newbury Board proposes to commit Shareholdersto for the long term, GPG believes that Newbury is at a crossroads. The Offervalue of approximately £33.49 million provides Shareholders with an alternativeto the Newbury Board's new strategy: to accept a premium cash offer for theirNewbury Racecourse Shares. The Offer of £11 per Newbury Racecourse Share represents a generous price forNewbury Racecourse. In this regard, the Offer value of approximately £33.49million equates to a premium of 176% to the published consolidated shareholders'funds of the Company as at 30 June 2007. As Newbury Racecourse has not achievedan operating profit for a number of years, Shareholders should note that theusual earnings comparison cannot be drawn. Substantial premium to consolidated shareholders' funds Offer Price per Newbury Racecourse Share £11.00Number of Newbury Racecourse Shares in issue 3,044,333Offer value £33,487,663Consolidated shareholders' funds as 30 June 2007 £12,144,000 Offer premium to consolidated shareholders' funds 176% The Offer Price exceeds the highest Closing Price of Newbury Racecourse Sharessince dealings commenced on the PLUS market in 1995 and represents a premium ofapproximately 11.68 per cent. to the Closing Price of £9.85 per NewburyRacecourse Share on 13 November, being the last Business Day prior to theannouncement of the Offer. In view of the circumstances of the Offer, GPG does not expect to receive aformal recommendation from the Newbury Board. Notwithstanding this, GPG stronglybelieves the Offer, which provides the certainty of cash at a premium price,merits serious and immediate consideration by Shareholders. The Offer alsoprovides Shareholders with a further alternative: to accept the Offer for partof their shareholding - thereby assisting GPG to gain control of the business,with a view to maximising the value of the racecourse and surplus land for thebenefit of all remaining Shareholders. In light of the foregoing, we have no hesitation in strongly commending ourpremium Offer to Shareholders. Yours sincerely Blake Nixon Chairman GPG Acquisitions No. 5 Limited" Copies of the Offer Document and the Form of Acceptance are available (duringnormal business hours) from Strand Partners at 26 Mount Row, London W1K 3SQ andfrom the offices of Computershare Investor Services PLC, The Pavilions,Bridgwater Road, Bristol BS99 7NH throughout the period during which the Offerremains open for acceptance. ENQUIRIES GPG Acquisitions No. 5 Limited Tel: (020) 7484 3370Blake Nixon, Director Strand Partners Limited Tel: (020) 7409 3494Simon Raggett OTHER INFORMATION This announcement should be read in conjunction with the full text of theaccompanying Offer Document and Form of Acceptance. Appendix III of the OfferDocument contains sources and bases for certain information contained in thisannouncement and the Offer Document. Terms defined in the Offer Document havethe same meaning in this announcement. 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 which they are citizens or in which they are resident. Such Overseas Shareholders should inform themselves about, and observe, any applicable legal or regulatory requirements of any such relevant jurisdiction. In particular, the Offer is not being made, directly or indirectly, in, into or from or by the use of the mails of or any means or instrumentality (including, without limitation, by means of facsimile 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 announcement, including information included or incorporated by referencein this announcement, may contain "forward-looking statements" concerningNewbury Racecourse, GPG Acquisitions or GPG plc. Generally, the words"anticipate", "believe", "continue", "estimate", "expect", "forecast", "intend","may", "plan", "project", "should" and "will" or similar expressions identifyforward-looking statements. Such statements reflect the relevant company'scurrent views with respect to future events and are subject to risks anduncertainties that could cause the actual results to differ materially fromthose expressed in the forward-looking statements. Many of these risks anduncertainties relate to factors that are beyond the relevant company's abilitiesto control or estimate precisely, such as changes in general economic andbusiness conditions, changes in currency exchange rates and interest rates, lackof acceptance of new exchange rates and interest rates, introduction ofcompeting products or services, lack of acceptance of new products or services,changes in business strategy and the behaviour of other market participants andtherefore undue reliance should not be placed on such statements. No partyintends to, nor assumes any obligation to, update these forward-lookingstatements, except as required pursuant to applicable law. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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