Placing and Open Offer

14th May 2009 07:04



THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES, CANADA, JAPAN, AUSTRALIA, NEW ZEALAND OR SOUTH AFRICA OR TO US PERSONS. THIS ANNOUNCEMENT IS NOT AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES. THE SECURITIES DISCUSSED HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE US SECURITIES ACT OF 1933, AS AMENDED (THE "US SECURITIES ACT") AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION OR AN EXEMPTION FROM REGISTRATION UNDER THE US SECURITIES ACT. NO PUBLIC OFFERING OF THE SECURITIES DISCUSSED HEREIN IS BEING MADE IN THE UNITED STATES AND THE INFORMATION CONTAINED HEREIN DOES NOT CONSTITUTE AN OFFERING OF SECURITIES FOR SALE IN THE UNITED STATES, CANADA, AUSTRALIA, JAPAN, NEW ZEALAND OR SOUTH AFRICA.

14 May 2009

St. Modwen Properties PLC ("St. Modwen" or "the Company")

FIRM PLACING AND PLACING AND OPEN OFFER, NOTICE OF EXTRAORDINARY GENERAL MEETING AND AMENDED BANKING AGREEMENTS

St. Modwen today announces a share issue to raise gross proceeds of £107.4 million (approximately £102.1 million net of expenses) through the issue of 79,586,977 New Ordinary Shares by way of a  Firm Placing and Placing and Open Offer at a price of 135 pence per New Ordinary Share. The Issue Price represents a discount of 38.4 per cent. to the Closing Price of 219.25 pence per Share on 13 May 2009 (being the last Business Day prior to this announcement).

St. Modwen will shortly be publishing a Prospectus in connection with the Firm Placing and Placing and Open Offer and will convene an Extraordinary General Meeting to approve certain matters necessary to implement the proposed fundraising.

In addition, the Company today announces that it has entered into amendment agreements with its lenders for the purpose of varying the terms of its banking facilities. 

Summary

The Group has entered into amendment agreements with its lending banks to amend its Key Facility Agreements, the majority of these agreements having effect from 13 May 2009 and the remainder from 14 May 2009 in order to provide the Group with appropriate banking covenant headroom.

Fundraising with gross proceeds of £107.4 million (approximately £102.1 million net of expenses) by way of a Firm Placing and Placing and Open Offer.

The funds raised will be used to reduce borrowings under the Group's existing banking facilities (which will remain available to be re-drawn):

Current trading and prospects

As at 30 November 2008, the Group's share of investment properties was valued at £949 million.  These properties have been revalued as at 30 April 2009 at £862 million, representing a further reduction in the carrying values of the Group's share of investment properties of £85 million (comprising negative market movements of £110 million offset by mitigation of £25 million and ignoring portfolio movements). 

Since 30 November 2008, the Group has continued to make good progress, with over £90 million of revenue secured either from sales of existing stock or from contracts for new buildings, including: 

 

The Directors have recently been encouraged by an increase in market activity for residential land and, although it remains to be seen whether this will be sustained, are cautiously optimistic about the medium term outlook for this market.

Details of the Firm Placing and Placing and Open Offer

Under the Firm Placing and Placing and Open Offer, St. Modwen intends to issue 79,586,977 New Ordinary Shares, comprising:

19,200,000 Firm Placed Shares (representing gross proceeds of £25.9 million), pursuant to the Firm Placing; and

60,386,977 Open Offer Shares (representing gross proceeds of £81.5 million) to be made available to Qualifying Shareholders pursuant to the Open Offer. 

The Issue Price is 135 pence per New Ordinary Share.

Under the Open Offer, Qualifying Shareholders have a Basic Entitlement of 1 Open Offer Share for every 2 Existing Shares registered in their name on the Record Date and are also being offered the opportunity to subscribe for shares in addition to their Basic Entitlement under the Excess Application Facility.

The Clarke and Leavesley Family Shareholders, who together hold 50,339,260 Shares representing 41.7 per cent. of the Company's current issued share capital, have irrevocably undertaken to take up 35.7 per cent. of their Basic Entitlement and not to take up their remaining Basic Entitlement and not to take up any Open Offer Shares under the Excess Application Facility. Accordingly, 16,173,333 Open Offer Shares, in relation to which no applications will be made by the Clarke and Leavesley Family Shareholders, will be issued to certain placees and will not be subject to clawback under the Open Offer.

Each of the Directors (other than Ian Menzies-Gow, who does not hold any Shares, Anthony Glossop and Simon Clarke) has undertaken to apply in full for their respective Basic Entitlements under the Open Offer. Anthony Glossop has irrevocably undertaken to apply for 21.7 per cent. of his Basic Entitlement in respect of 185,185 Open Offer Shares. Simon Clarke has irrevocably undertaken to apply for 31.6 per cent. of his Basic Entitlement in respect of 1,111,111 Open Offer Shares.

Other than in respect of the 8,996,295 Open Offer Shares which the Clarke and Leavesley Family Shareholders have irrevocably undertaken to take up, the Firm Placing and Placing and Open Offer are being underwritten by J.P. Morgan Cazenove and Numis subject to and in accordance with the terms of the Placing Agreement.

If the Resolution is passed and the other conditions to the Firm Placing and Placing and Open Offer are satisfied, it is expected that dealings in the New Ordinary Shares will commence at 8.00 a.m. on 9 June 2009.

Bill Oliver, Chief Executive of St. Modwen, said:

"The favourable terms on which we have secured our revised covenants demonstrate a strong level of support of the Company from our banks. This, together with the equity issue - which enables us to reduce our outstanding debt, lower our gearing and increase our financial flexibility - creates more headroom for us to take advantage of the current marketplace by acquiring well priced assets and developing our long term schemes where there is current market opportunity."

14 May 2009

CONFERENCE CALL: The St. Modwen Properties PLC management team will be hosting a conference call for analysts at 9.00 a.m today (14 May 2009). Dial in details are as follows:

UK: 0800 694 2354 - International dial in: +44 (0)1452 586358 - Conference code: 158145#

ENQUIRIES: 

St. Modwen Properties PLC	0121 222 9400
Bill Oliver, Chief Executive	www.stmodwen.co.uk
Tim Haywood, Finance Director
Charlotte McCarthy, PR Manager
College Hill	020 7457 2020
Gareth David
J.P. Morgan Cazenove	020 7588 2828
Robert Fowlds
Shona Graham Paul Hewlett
Numis	020 7260 1000
Heraclis Economides
Simon Blank

J.P. Morgan Cazenove, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as joint sponsor, joint bookrunner and joint broker exclusively to the Company and for no one else in connection with the Firm Placing and Placing and Open Offer and Admission and will not be responsible to anyone other than the Company  for providing the protections afforded to its customers or for providing advice in relation to the Firm Placing and Placing and Open Offer, Admission or any other arrangements referred to herein.

Numis Securities Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as joint sponsor, joint bookrunner and joint broker exclusively to the Company and for no one else in connection with the Firm Placing and Placing and Open Offer and Admission and will not be responsible to anyone other than the Company for providing the protections afforded to its customers or for providing advice in relation to the Firm Placing and Placing and Open Offer and Admission or any other arrangements referred to herein.

This announcement has been issued by, and is the sole responsibility of, St. Modwen Properties PLC. Apart from the responsibilities and liabilities, if any, which may be imposed by the FSMA, neither of J.P. Morgan Cazenove nor Numis nor any of their affiliates, parent undertakings, subsidiary undertakings or subsidiaries of their parent undertakings or any of their respective directors, officers, employees or advisers or any other person accepts any responsibility whatsoever and makes no representation or warranty, express or implied, for or in respect of the contents of this announcement or as to the accuracy or completeness or fairness of the information or opinions contained in this announcement and, without prejudice to the generality of the foregoing, no responsibility or liability is accepted by any of them for any such information or opinions or for any errors or omissions.

Cautionary note regarding forward-looking statements

Some of the information in this announcement may contain forward-looking statements which reflect the Group's or, as appropriate, the Directors' current views with respect to financial performance, business strategy, plans and objectives of management for future operations (including development plans relating to the Group's products and services). These statements include forward-looking statements both with respect to the Group and the sectors and industries in which the Group operates. Statements which include the words "expects", "intends", "plans", "believes", "projects", "anticipates", "will", "targets", "aims", "may", "would", "could", "continue" and similar statements of a future or forward-looking nature identify forward-looking statements. All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause the Group's actual results to differ materially from those indicated in these statements. Any forward-looking statements in this document reflect the Group's current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the Group's business, results of operations, financial conditions, growth strategy and liquidity. 

Important notice:

This announcement is an advertisement. It is not a prospectus and investors should not subscribe for or purchase any shares referred to in this announcement except on the basis of information contained in the Prospectus which is to be published in due course. The Prospectus, when published, will be made available on St. Modwen's website and will be available for inspection at the UK Listing Authority's announcement viewing facility.

This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to acquire any New Ordinary Shares, nor shall it (or any part of it), or the fact of its distribution, form the basis of, or be relied on in connection with or act as any inducement to enter into, any contract or commitment whatsoever with respect to the proposed Firm Placing and Placing and Open Offer or otherwise. 

The distribution of this announcement in certain jurisdictions may be restricted by law and such distribution could result in violation of the laws of such jurisdictions. In particular, this announcement is not for distribution in the United States, Canada, Japan, Australia, New Zealand or South Africa.

The information in this announcement may not be forwarded or distributed to any other person and may not be reproduced in any manner whatsoever. Any forwarding, distribution, reproduction or disclosure of this information in whole or in part is unauthorised. Failure to comply with this directive may result in a violation of the Securities Act or the applicable laws of other jurisdictions.

Any person receiving this announcement is advised to exercise caution in relation to the Firm Placing and Placing and Open Offer. If in any doubt about any of the contents of this announcement, independent professional advice should be obtained. 

This summary should be read in conjunction with the full text of the announcement.

  FIRM PLACING AND PLACING AND OPEN OFFER, NOTICE OF EXTRAORDINARY GENERAL MEETING AND AMENDED BANKING AGREEMENTS

Introduction

On 14 May 2009, the Company announced a share issue to raise gross proceeds of £107.4 million (£102.1 million net of expenses) by the issue of 79,586,977 New Ordinary Shares through the Firm Placing and Placing and Open Offer at 135 pence per New Ordinary Share. 19,200,000 New Ordinary Shares will be issued through the Firm Placing and 60,386,977 New Ordinary Shares will be issued through the Placing and Open Offer. 

The Issue Price represents a discount of 38.4 per cent. to the Closing Price of 219.25 pence per Share on 13 May 2009 (being the last Business Day prior to the announcement of the Firm Placing and Placing and Open Offer). This discount has been set based on the Directors' assessment of market conditions following discussions with a number of institutional investors and has been decided upon in order to obtain the level of funds required by the Company under the Firm Placing and Placing and Open Offer. Given that the Issue Price represents a discount of greater than 10 per cent. to the Closing Price of the Shares on 13 May 2009, the Company is required, under the Listing Rules, to seek the approval of its Shareholders for the issue of the New Ordinary Shares at the Issue Price. Accordingly, the Extraordinary General Meeting will consider, amongst other things, approving this matter.

The Clarke and Leavesley Family Shareholders, who together hold 50,339,260 Shares representing 41.7 per cent. of the Company's current issued share capital, have irrevocably undertaken to take up 35.7 per cent. of their Basic Entitlement in respect of 8,996,295 Open Offer Shares. Further, they have irrevocably undertaken not to take up their remaining Basic Entitlement of 16,173,333 Open Offer Shares and not to take up any Open Offer Shares under the Excess Application Facility. Accordingly, 16,173,333 Open Offer Shares (being those in relation to which no applications will be made by the Clarke and Leavesley Family Shareholders) will be issued to certain placees procured by J.P. Morgan Cazenove and Numis at the Issue Price and will not be subject to clawback.

Other than in respect of the 8,996,295 Open Offer Shares which the Clarke and Leavesley Family Shareholders have irrevocably undertaken to take up, the Firm Placing and Placing and Open Offer are being underwritten by J.P. Morgan Cazenove and Numis subject to and in accordance with the terms of the Placing Agreement.

The Firm Placing and Placing and Open Offer are conditional on the passing of the Resolution to be proposed at the Extraordinary General Meeting to be held at 10:00 a.m on 8 June 2009 at The Innovation Centre, 1 Devon Way, Longbridge Technology Park, Birmingham, B31 2TS.

Market overview

The market conditions in which St. Modwen is currently operating are challenging. The recent collapse, or extreme weakness, of a large number of international financial institutions has led to a shortage of both capital liquidity and confidence throughout the global economy. As a consequence of the financial crisis, the commercial and residential property markets in which the Group operates have been negatively affected in the following ways:

a scarcity of funds for property investors as distressed banks seek to rebuild their balance sheets by withdrawing credit lines and minimising new lending; 

a decline of purchasers of residential land; and 

a diminished appetite among potential commercial property occupiers to commit to new space.

This has resulted in a sharp decline in the volume of property transactions, with the UK housing market experiencing historically low levels. This pressure has reduced the prices and profit margins available for those sales that can be completed. As a consequence, despite the recent fall in the cost of debt, investment property valuation yields have significantly increased as carrying values have reduced, widening the risk premium on commercial property.

The Directors believe that as confidence and liquidity in the banking system is re-established, the general economic outlook for potential house buyers and commercial property occupiers will become more stable and that the Group's principal markets will recover. Although the Directors believe that these markets will remain challenging, at least in the short-term, this environment represents an opportunity to acquire assets and continue to develop long-term schemes in line with the Group's strategy of adding long-term value to the Hopper. The Hopper comprises the Group's landbank of future development opportunities. It currently consists of over 5,000 developable acres and 18 town centre schemes.

Current trading and prospects

As indicated in the Company's annual financial results announcement for the year ended 30 November 2008 published on 27 February 2009, the deteriorating economic environment and the decline in levels of activity in the Group's property markets have had an adverse impact on the Group's trading, financial position and short-term prospects.

Despite these conditions, the Company delivered a trading profit of £8.2 million for the year ended 30 November 2008. The Group's business model is based on core rental and other income covering the running costs of the Group (property outgoings, overheads and interest), so that even when development profits are reduced, the Group is still able to satisfy these commitments. 

Furthermore, the Group's marshalling of projects through the complex and lengthy planning and development process and its redevelopment and asset management activities enabled the Group to add approximately £64.8 million of value to its investment property portfolio during the financial year ended 30 November 2008. This helped to mitigate the worst effects of the adverse yield movements brought about by deteriorating market conditions. However, as these adverse movements amounted to approximately £129.4 million, the Group recorded a net £64.6 million reduction in the carrying value of its investment properties.

As at 30 November 2008, the Group's share of investment properties were valued at £949 million. These properties have been revalued as at 30 April 2009 at £862 million, representing a further reduction in the carrying values of the Group's share of investment properties of £85 million (comprising negative market movements of £110 million offset by mitigation of £25 million and ignoring portfolio movements). This reduction is part of a 28 per cent. decline in value due to market movements experienced by the Group since its peak in May 2007. The weighted average equivalent yield of its portfolio has increased by 145 basis points since 30 November 2008 to 9.3 per cent. The carrying value of the Group's employment land has also been further reduced (to a range between £100,000 to £400,000 per acre) and its residential land is now carried at an average of £200,000 per acre (excluding 100 acres in North West London, which is carried at £1.7 million per acre).

In the financial year ended 30 November 2008, the Group also suffered another significant, market-related charge of £18.3 million to reflect the reducing value of its interest rate hedges (£240 million of on-balance sheet debt fixed for five years at an average interest rate of 4.99 per cent.). This was a non-cash item.

Recognising the impact on the Group's business of declining markets, the Group took early and decisive action during the financial year ended 30 November 2008 by curtailing its development programme by reducing speculative activity to which it was not already committed; increasing the emphasis on asset management and marshalling; and reducing its headcount by 46 to bring resources into line with current activity levels. These actions will reduce costs by approximately £3 million per annum.

As a result, the Group reported a loss after tax for the financial year ended 30 November 2008 of £50.7 million, and a reduction in net assets of 14 per cent. to £402.2 million (333 pence per Share).

Since 30 November 2008, the Group has continued to make good progress, with over £90 million of revenue secured either from sales of existing stock or from contracts for new buildings. These included the investment sale of a Tesco foodstore at Catford Shopping Centre, Lewisham for £9.1 million (net initial yield 6.9 per cent.) and a part sale of the Company's Thurleigh site in Bedfordshire for £5.3 million (net initial yield of 8.5 per cent.), both of these sales being at above 30 November 2008 book value. Additionally, the Group entered into a £35 million development agreement to build the new Warwickshire College in Rugby. Furthermore, the Group's asset management activities have generated an additional £3.2 million of annual rental income (net of vacations and tenant failures) from new lettings and pre-lets for buildings under construction (including an 80,000 sq ft call centre for Vodafone in Stoke-on-Trent).

The Directors have recently been encouraged by an increase in market activity for residential land and, although it remains to be seen whether this will be sustained, are cautiously optimistic about the medium term outlook for this market.

Strategy in the current market

The Group's strategy is to add value to the properties that it controls. The Group's aim is that no property should be acquired or retained unless it is believed that significant value can be added to that property over a five to 15 year horizon by using the Group's asset management, refurbishment or redevelopment expertise.

In a declining market, such as the one that the Group is currently facing, the challenge is even greater. The Group's strategy seeks to meet this challenge through an emphasis on value creation, cost control and local market knowledge. Through a network of regional offices, supported by a strong central construction management team, the Group creates a broadly-based programme of activity, extracting from the Hopper (containing all of the land the Group controls, whether through direct ownership, joint ventures, development or options) those projects for which there is a current market opportunity. The key to the Group's strategy remains the continuing acquisition of well located opportunities to "top-up" the Hopper.

In the current economic downturn, where bank and investor liquidity is limited and the market for residential land is at an historic low, the Group has adapted its activities to suit the changing conditions. The Group has therefore scaled-back speculative schemes whilst continuing to marshal sites for development on the back of pre-let or pre-sold opportunities. The Group has also continued to dispose of those mature assets to which it can add no further significant value, realising £146 million in the financial year ended 30 November 2008. Excluding the Group's joint venture companies, the Group's capital expenditure commitments to November 2010 are c.£58 million (part funded by pre-sales and construction contracts of c.£30 million). The Group's joint venture companies' capital expenditure commitments to November 2010 are c.£61 million (part funded by pre-sales and construction contracts of c.£27 million).

The Group's immediate focus is on reducing debt and gearing levels and the Directors expect that the Group's net debt will be gradually reduced during 2009. As further described in the paragraphs headed "Background to and reasons for the Firm Placing and Placing and Open Offer and use of proceeds" and "Banking facilities and financial covenants" of this announcement, the Company has been working with its lending banks to vary certain of the financial covenants set out in the Key Facility Agreements. 

Notwithstanding the immediate focus on cash generation, the Group continues to seek, and to find, long-term opportunities for the Hopper. The selection of the Group by BP in November 2008 for the acquisition of a further 2,500 acres (of which 750 acres are developable) is a good example of this. The Directors believe that the acquisition will be self-financing, will entail a 20-year development horizon and will enable the Group to utilise fully its brownfield land remediation expertise.

In addition, the Company has been selected by Devon County Council as a joint venture partner for the £210 million regeneration of Exeter's Skypark. Outline planning has been granted for this 20 year project which will transform this 107 acre site into 1.4 million sq ft of office and industrial/manufacturing space. More recently, the Company has entered into a development agreement with Taunton Deane Borough Council in relation to the £270 million Firepool regeneration scheme in Taunton. The Firepool scheme comprises 16.5 acres of brownfield land on which the Company will develop 500,000 sq ft of office space and more than 400 homes, supported by leisure and retail accommodation.

Looking ahead, the Directors remain confident that despite the current weakness in the market the Group's strategy is valid in the long-term. The Directors believe that the Group will continue to build on its reputation as the UK's leading regeneration specialist, continue to add value across the geographically and sectorally diversified Hopper through its network of regional offices, and continue to work in partnership with communities and local authorities to bring innovative regeneration to those areas which need it most. In doing all this, the Directors believe that the Group will return to the longstanding historical trend of providing sector-leading returns to shareholders.

Background to and reasons for the Firm Placing and Placing and Open Offer and use of proceeds

Current trading conditions have negatively affected the Group and the lack of property market transactions has restricted the ability of the Company to recycle capital from sales into new developments and acquisitions. At the start of the downturn, the Group was committed to a number of large development schemes resulting in high levels of debt. Long-term borrowings stood at approximately £419.4 million at 30 November 2007, rising to £433.8 million at 30 November 2008.

Whilst the Group is continuing to operate within its banking covenants, these covenants represented a constraint on the business in two ways:

profits needed to cover 1.5x interest costs at a time when the Group's markets were effectively closed and disposals at attractive prices could not be secured with confidence or at all; and

a minimum level of £350 million of net assets needed to be maintained at a time when asset valuations continued to decline and the Group's mitigation of this was hampered by the lack of any valuation uplift for residential planning permissions.

Consequently, the Company has been working with its lending banks to provide the Group with appropriate headroom throughout the terms of the Key Facility Agreements and the Company announced on 14 May 2009 that it had entered into the Amendment Agreements for the purposes of varying the terms of a number of its banking facilities. Details of the Amendment Agreements which the Company entered into with its lending banks are set out in the paragraph headed "Banking facilities and financial covenants" of this announcement. Other than as set out in the paragraphs headed "Banking facilities and financial covenants" and "Implications of the Resolution not being passed" of this announcement, the terms of the Amendment Agreements are not conditional upon the Resolution being passed and/or Admission.

As a result of the Amendment Agreements, the Directors believe that the Group will continue to operate, for at least the next 12 months, within its banking covenants. However, operating within these covenants may still have a number of negative consequences for the Group including:

the sale of quality assets at unattractive prices into a market where only a very limited number of (cash) buyers exist;

the rejection or deferral of viable development schemes until a buyer can be found;

the inability to progress enabling construction and remediation on long-term schemes (such as Longbridge or Llanwern) until markets re-open, thereby delaying the Group's recovery;

the inability to benefit from the increasing availability of attractively priced acquisition opportunities;

the loss of opportunities to secure new joint ventures or development agreements due to a perception of the Group's financial weakness; and

the suspension of dividends for the duration of the downturn.

The Firm Placing and Placing and Open Offer will raise net proceeds of approximately £102.1 million, which the Company will use to reduce borrowings under the Group's existing banking facilities (which will remain available to be re-drawn). This will reduce the need for asset sales at unattractive prices which could otherwise be required in order for the Group to operate within its banking covenants. In addition the Group believes that the additional headroom generated by the Net Proceeds will put it in a stronger position to acquire well-priced assets for the Hopper and to initiate enabling construction or remediation on long-term schemes. 

Banking facilities and financial covenants

The majority of the Group's bank debt is provided through bilateral revolving credit facilities, which provide the Group with the flexibility to draw and repay loans, and to sell and acquire assets as opportunities arise. At 30 November 2008, the Group's banking facilities were £619 million (2007: £569 million), with no material maturities before 2011 and with a weighted average maturity of four years (2007: five years). As at 30 November 2008, net debt was £422 million (2007: £402 million), giving the Group a gearing of 105 per cent. (2007: 86 per cent.) and committed but undrawn headroom of £185 million. Including joint ventures, total banking facilities were £871 million (2007: £815 million), net debt was £625 million (2007: £580 million) and gearing was 118 per cent. (2007: 105 per cent.).

On 13 May 2009, the Group entered into amendment agreements with its lending banks for the purposes of amending the Key Facility Agreements (the "Amendment Agreements") with the majority of these agreements having effect from 13 May 2009 and the remainder from 14 May 2009. Pursuant to the Amendment Agreements, each of the Key Facility Agreements contain the following covenants:

the Group's minimum net assets must be greater than £250 million;

gearing is 175 per cent.; and

the interest cover ratio is x1.25.

Additionally, pursuant to the Amendment Agreements, amendments were made to the Group's loan to value covenants and certain of the repayment dates under the Key Facility Agreements. Further, pursuant to the Amendment Agreements, the Group reduced voluntarily its committed banking facilities by £100 million, following which its total banking facilities are £519 million.

The Company believes that the Amendment Agreements will provide the Group with appropriate banking covenant headroom throughout the terms of the Key Facility Agreements, as amended by the Amendment Agreements. On the basis that the Resolution is passed and that Admission occurs, the arrangement fees payable to the lenders and related advisory fees are expected to be approximately £1.9 million. The weighted average margins and non-utilisation costs attaching to the Key Facility Agreements, as amended, will be 199 basis points and 96 basis points respectively. The paragraph headed "Implications of the Resolution not being passed" in this announcement sets out details of the additional fees and interest that would be payable and the change that would be made to a repayment date under one of the Key Facility Agreements, as amended, in the event that the Resolution is not passed or Admission does not occur.

Dividend policy

The table below shows the total dividends paid per Share for each of the financial years ended 30 November 2006, 2007 and 2008.

	2008	2007	2006
Total dividend per Share (pence)	3.9	11.7	10.2

An interim dividend of 3.9 pence per Share was paid in August 2008. However, as announced on 27 February 2009, as part of the Group's cash management strategy, no final dividend was paid for the year ended 30 November 2008. The Directors believe that the funds are currently better used in the operations of the business, until market conditions are clearer and more positive, at which point the Company's intention, subject to compliance with the Statutes, is to resume a progressive dividend policy.

  Details of the Firm Placing and Placing and Open Offer

i. Structure

The Directors have given a great deal of thought as to how to structure the proposed fundraising and have concluded that the Firm Placing and Placing and Open Offer are the most suitable options available to the Company and its Shareholders.

19,200,000 New Ordinary Shares will be issued through the Firm Placing and 60,386,977 New Ordinary Shares will be issued through the Placing and Open Offer at 135 pence per New Ordinary Share (to raise gross proceeds of £107.4 million). The Issue Price represents a discount of 38.4 per cent. to the Closing Price of 219.25 pence per Share on 13 May 2009 (being the last Business Day prior to the announcement of the Firm Placing and Placing and Open Offer). Other than in respect of the 8,996,295 Open Offer Shares which the Clarke and Leavesley Family Shareholders have irrevocably undertaken to take up, the Firm Placing and Placing and Open Offer are being underwritten by J.P. Morgan Cazenove and Numis subject to and in accordance with the terms of the Placing Agreement.

ii. Firm Placing

The Firm Placees required the Firm Placing in order to give them certainty as to the size of their shareholding following the fundraising. The Firm Placees have agreed to subscribe for 19,200,000 New Ordinary Shares at the Issue Price (representing gross proceeds of £25.9 million). The Firm Placed Shares are not subject to clawback and are not part of the Placing and Open Offer.

iii. Placing and Open Offer

The Directors recognise the importance of pre-emption rights to Shareholders and consequently 60,386,977 of the New Ordinary Shares proposed to be issued by the Company are being offered to Existing Shareholders by way of the Open Offer. The Open Offer provides an opportunity for all Qualifying Shareholders to participate in the fundraising by both subscribing for their respective Basic Entitlements and by subscribing for Excess Shares under the Excess Application Facility, subject to availability. Under the Placing and Open Offer, the Company intends to issue New Ordinary Shares at the Issue Price (representing gross proceeds of £81.5 million).

The Clarke and Leavesley Family Shareholders, who together hold 50,339,260 Shares representing 41.7 per cent. of the Company's current issued share capital, have irrevocably undertaken to take up 35.7 per cent. of their Basic Entitlement in respect of 8,996,295 Open Offer Shares. Further, they have irrevocably undertaken not to take up their remaining Basic Entitlement of 16,173,333 Open Offer Shares and not to take up any Open Offer Shares under the Excess Application Facility. Accordingly, 16,173,333 Open Offer Shares (being those in relation to which no applications will be made by the Clarke and Leavesley Family Shareholders) will be issued to certain placees procured by J.P. Morgan Cazenove and Numis at the Issue Price and will not be subject to clawback under the Open Offer.

Additionally, each of the Directors (other than Ian Menzies-Gow, who does not hold any Existing Shares, Anthony Glossop and Simon Clarke) have undertaken to apply in full for their respective Basic Entitlements under the Open Offer. Anthony Glossop has irrevocably undertaken to apply for 21.7 per cent. of his Basic Entitlement in respect of 185,185 Open Offer Shares. Simon Clarke has irrevocably undertaken to apply for 31.6 per cent. of his Basic Entitlement in respect of 1,111,111 Open Offer Shares.

The Conditional Placees have agreed to subscribe for the Conditional Placed Shares pursuant to the Placing.

iv. Allocations under the Placing and Open Offer

In the event that valid acceptances are not received in respect of any of the Open Offer Shares under the Open Offer, unallocated Open Offer Shares may be allotted to Qualifying Shareholders to meet any valid applications under the Excess Application Facility and, to the extent that there remain any unallocated Open Offer Shares, they will be placed under the Placing. 

The Open Offer Shares which the Clarke and Leavesley Family Shareholders have irrevocably undertaken not to take up have been placed with certain institutional investors procured by J.P. Morgan Cazenove and Numis pursuant to the Placing, and will not be subject to clawback under the Open Offer.

v. Basic Entitlements

Qualifying Shareholders are being given the opportunity, on and subject to the terms and conditions of the Open Offer, to apply for any number of Open Offer Shares (subject to the limit on the number of Excess Shares that can be applied for using the Excess Application Facility) at the Issue Price. Qualifying Shareholders have a Basic Entitlement of:

1 Open Offer Share for every 2 Existing Shares

registered in the name of the relevant Qualifying Shareholder on the Record Date.

Basic Entitlements under the Open Offer will be rounded down to the nearest whole number and any fractional entitlements to Open Offer Shares will be disregarded in calculating Basic Entitlements and will be aggregated and made available to Qualifying Shareholders under the Excess Application Facility. Accordingly, Qualifying Shareholders with fewer than 2 Existing Shares will not receive a Basic Entitlement but may apply for Excess Shares pursuant to the Excess Application Facility.

The aggregate number of Open Offer Shares available for subscription pursuant to the Open Offer will not exceed 60,386,977 New Ordinary Shares.

vi. Excess Application Facility

Subject to availability, the Excess Application Facility enables Qualifying Shareholders to apply for any whole number of Excess Shares in excess of their Basic Entitlement up to a maximum number of Excess Shares equal to 0.2 times the number of Shares registered in their name as at the Record Date. Qualifying Non-CREST Shareholders who wish to apply to subscribe for more than their Basic Entitlement should complete the relevant sections on the Non-CREST Application Form. Qualifying CREST Shareholders will have Excess CREST Open Offer Entitlements credited to their stock account in CREST and should refer to the Prospectus and the Non-CREST Application Form for information on how to apply for Excess Shares pursuant to the Excess Application Facility.

Excess applications may be allocated in such manner as the Directors determine, in their absolute discretion, and no assurance can be given that applications by Qualifying Shareholders under the Excess Application Facility will be met in full or in part or at all.

vii. Conditionality

The Firm Placing and Placing and Open Offer are conditional upon the following:

the passing of the Resolution to be proposed at the Extraordinary General Meeting to be held on 8 June 2009;

Admission of the New Ordinary Shares becoming effective by not later than 8.00 a.m. on 9 June 2009; and

the Placing Agreement becoming unconditional in all respects.

If the Resolution is not passed or Admission does not take place at 8.00 a.m. on 9 June 2009 (or such later time and/or date as the Company may determine, not being later than 8.00 a.m. on 13 July 2009), the Firm Placing and Placing and Open Offer will lapse, any Basic Entitlements and Excess CREST Open Offer Entitlements admitted to CREST will, after that time and date be disabled and application monies under the Open Offer will be refunded to the applicants, by cheque (at the applicant's risk) in the case of Qualifying Non-CREST Shareholders and by way of a CREST payment in the case of Qualifying CREST Shareholders, without interest, as soon as practicable thereafter.

viii. Application for Admission

Application will be made to the UK Listing Authority for the New Ordinary Shares to be listed on the Official List and to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on the London Stock Exchange's main market for listed securities. Subject to, among other things, the Resolution being passed, it is expected that Admission will become effective at 9 June 2009 and that dealings for normal settlement in the New Ordinary Shares will commence at 8.00 a.m. on the same day. No temporary documents of title will be issued.

The New Ordinary Shares to be issued pursuant to the Firm Placing and Placing and Open Offer will, following Admission, rank pari passu in all respects with the Shares in issue at the date of the Prospectus and will carry the right to receive all dividends and distributions declared, made or paid on or in respect of the Shares after Admission.

In connection with the applications for Admission and the Firm Placing and Placing and Open Offer, the Company has entered into the Placing Agreement with J.P. Morgan Cazenove and Numis.

ix. Important notice

Shareholders should note that the Open Offer is not a rights issue. Qualifying Shareholders should be aware that in the Open Offer, unlike with a rights issue, any Open Offer Shares not applied for by Qualifying Shareholders under their Basic Entitlements will not be sold in the market on behalf of, or placed for the benefit of, Qualifying Shareholders who do not apply under the Open Offer, but may be allotted to Qualifying Shareholders to meet any valid applications under the Excess Application Facility or will be placed under the Placing and that the net proceeds will be retained for the benefit of the Company.

Effect of the Firm Placing and Placing and Open Offer

Upon completion of the Firm Placing and Placing and Open Offer, the New Ordinary Shares will represent 39.7 per cent. of the Enlarged Issued Share Capital. New Ordinary Shares issued through the Firm Placing will represent 9.6 per cent. of the Enlarged Issued Share Capital and New Ordinary Shares issued through the Placing and Open Offer will represent 30.1 per cent. of the Enlarged Issued Share Capital. The New Ordinary Shares will be issued pursuant to authorities to be sought at the Extraordinary General Meeting. Following the issue of the New Ordinary Shares pursuant to the Firm Placing and Placing and Open Offer, a Qualifying Shareholder who does not take up any of his Basic Entitlement (and does not take up any Excess Shares under the Excess Application Facility) will suffer a dilution of 39.7 per cent. to his economic interests in the Company. If a Qualifying Shareholder subscribes for his Basic Entitlement in full he will suffer a dilution of 9.6 per cent. to his economic interests in the Company.

The Firm Placing and Placing and Open Offer will result in an increase in cash and other short-term funds of £102.1 million with a corresponding increase in net assets of £102.1 million. 

Extraordinary General Meeting

For the purpose of effecting the Firm Placing and Placing and Open Offer, the Resolution will be proposed at the Extraordinary General Meeting. Shareholders should read the full text of the Resolution contained in the notice of Extraordinary General Meeting as set out in the Prospectus.

Implications of the Resolution not being passed

If the Resolution is not passed at the Extraordinary General Meeting or if Admission does not take place, the Company will not receive the Net Proceeds.

Consequently, although the Directors believe that the Company will remain within its banking covenants, as amended by the Amendment Agreements, for at least the next 12 months, operating within these covenants may have a number of negative consequences for the Group as described in the paragraph headed "Banking facilities and financial covenants" in this announcement.

In the event that the Resolution is not passed or Admission does not occur, the repayment date under the RBS Revolving Advance Facility would be brought forward from November 2011 to March 2011. Additionally, the arrangement fees payable to the lenders and related advisory fees would increase from approximately £1.9 million to £2.3 million and the weighted average margin charged on these facilities would increase from 199 basis points to 302 basis points which, together with increased non-utilisation costs (from 96 basis points to 148 basis points), would represent an additional annual cost to the Group of approximately £4.4 million. However, none of the other terms of the Amendment Agreements are conditional upon these events occurring and accordingly will continue to apply to the Group.

EXPECTED TIMETABLE OF EVENTS

Each of the times and dates set out below and mentioned in this announcement and the Prospectus may be adjusted by the Company, in which event details of the new times and dates will be notified to the FSA, the London Stock Exchange and, where appropriate, Qualifying Shareholders. References to a time of day are to London time.

Record Date for entitlement to participate in the Open Offer	close of business on 12 May 2009
Announcement of the Firm Placing and Placing and Open Offer, publication of the Prospectus and posting of the Prospectus, Form of Proxy and the Non-CREST Application Form	14 May 2009
Ex-entitlement date for the Open Offer	8.00 a.m. on 14 May 2009
Basic Entitlements and Excess CREST Open Offer Entitlements credited to CREST stock accounts of Qualifying CREST Shareholders	8.00 a.m on 15 May 2009
Recommended latest time for requesting withdrawal of Basic Entitlements and Excess CREST Open Offer Entitlements from CREST	4.30  p.m on 1 June 2009
Latest time for depositing Basic Entitlements and Excess CREST Open Offer Entitlements into CREST	3.00 p.m on 2 June 2009
Latest time and date for splitting Non-CREST Application Forms (to satisfy bona fide market claims only)	3.00 p.m on 3 June 2009
Latest time for receipt of completed Non-CREST Application Forms and payment in full under the Open Offer or settlement of relevant CREST instructions (as appropriate)	11.00 a.m on 5 June 2009
Latest time for receipt of Forms of Proxy	10.00 a.m on 6 June 2009
Extraordinary General Meeting	10.00 a.m on 8 June 2009
Admission of, and commencement of dealings in, the New Ordinary Shares	By 8.00 a.m on 9 June 2009
New Ordinary Shares in uncertificated form expected to be credited to CREST accounts of the Company's Shareholders	By 8.00 a.m on 9 June 2009

Expected date of despatch of definitive share certificates for New Ordinary 

Shares in certificated form  Within 7 days of Admission

If you have any questions on the procedure for acceptance and payment, you should contact the Registrar on the shareholder helpline on 0871 384 2002 or, if calling from overseas, +44 121 415 0257 between 8.30 a.m. and 5.30 p.m. on any Business Day (calls to this number are charged at eight pence per minute from a BT landline, other telephone provider costs may vary). Please note that the Registrar cannot provide financial advice on the merits of the Firm Placing and Placing and Open Offer or as to whether or not you should take up your entitlement.

  

Definitions

The following definitions apply throughout this announcement, unless the context requires otherwise:

"Admission"	admission to listing of the New Ordinary Shares on the Official List and admission to trading of the New Ordinary Shares on the main market of the London Stock Exchange and a reference to Admission becoming "effective" is to be construed in accordance with the Listing Rules or the Standards (as applicable)
"Amendment Agreements"	has the meaning given in the paragraph entitled "Banking facilities and financial covenants" in this announcement
"Barclays Trentham Facility"	a term loan facility of up to £18,975,000 between Trentham Leisure Limited as borrower and Barclays Bank PLC as lender
"Barclays VSM Revolving Loan Facility"	a revolving loan facility of up to £100,000,000 between VSM Estates Limited as borrower and Barclays Bank PLC as lender
"Basic Entitlement"	the pro rata entitlement of Qualifying Shareholders to subscribe for 1 Open Offer Share for every 2 Existing Shares registered in their name as at the Record Date
"Barclays £40 million Revolving Facility"	a revolving loan facility up to £40,000,000 between the Company as borrower and Barclays Bank PLC as lender
"Board"	the board of directors of the Company
"BoI Revolving Credit Facility"	a revolving credit facility of up to £50,000,000 between the Company as borrower and The Governor and the Company of the Bank of Ireland as lender
"BoS Revolving Credit Facility"	a revolving credit facility of up to £70,000,000 between the Company as borrower and the Bank of Scotland as lender
"Business Day"	any day on which banks are generally open in England and Wales for the transaction of business, other than a Saturday or Sunday or a public holiday
"certificated form" or "in certificated form"	Shares not in uncertificated form
"Clarke and Leavesley Family Shareholders"	certain members of the Clarke and Leavesley families and trusts who together hold 41.7 per cent. of the entire issued share capital of St. Modwen as at the date the Prospectus
"Closing Price"	the closing middle market quotation as derived from the Daily Official List of the London Stock Exchange on a particular day

  

"Company" or "St. Modwen"	St. Modwen Properties PLC, a company registered in England and Wales with registered number 00349201
"Conditional Placed Shares"	the 35,217,349 Open Offer Shares to be allotted and issued by the Company under the Placing subject to clawback to satisfy valid applications by Qualifying Shareholders under the Open Offer, pursuant to the Placing Agreement
"Conditional Placees"	any persons who have agreed to subscribe for Conditional Placed Shares
"CREST"	the relevant system (as defined in the CREST Regulations) operated by Euroclear in accordance with which securities may be held or transferred in uncertificated form
"CREST Regulations"	the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755), as amended
"Directors"	the directors of the Company, whose names are set out on page 24 of the Prospectus and "Director" shall mean any one of them
"Euroclear"	Euroclear UK & Ireland Limited, a company registered in England and Wales with registered number 2878738, the operator of CREST
"Excess Application Facility"	the arrangement pursuant to which Qualifying Shareholders may apply for additional Open Offer Shares in excess of their Basic Entitlement (up to a maximum number of Open Offer Shares equal to 0.2 times the number of Existing Shares registered in their name as at the Record Date) in accordance with the terms and conditions of the Open Offer
"Excess CREST Open Offer Entitlement"	in respect of each Qualifying CREST Shareholder, the entitlement (in addition to their Basic Entitlement) to apply for Existing Shares up to 0.2 times the number of Existing Shares registered in their name as at the Record Date, credited to their stock account in CREST, pursuant to the Excess Application Facility
"Excess Shares"	Open Offer Shares which are not taken up by Qualifying Shareholders pursuant to their Basic Entitlement and are offered to Qualifying Shareholders under the Excess Application Facility
"Existing Shares"	Shares in issue as at the Record Date
"Extraordinary General Meeting"	the extraordinary general meeting of the Company to be held at The Innovation Centre, 1 Devon Way, Longbridge Technology Park, Birmingham, B31 2TS at 10:00 a.m on 8 June 2009
"Firm Placed Shares"	the 19,200,000 New Ordinary Shares to be allotted and issued by the Company under the Firm Placing

  

"Firm Placees"	any persons who have agreed to subscribe for Firm Placed Shares
"Firm Placing"	the conditional placing by J.P. Morgan Cazenove and Numis of the Firm Placed Shares with the Firm Placees pursuant to the Placing Agreement
"Form of Proxy"	the form of proxy for use at the Extraordinary General Meeting which is enclosed within the Prospectus
"FSA"	the Financial Services Authority
"FSMA"	Financial Services and Markets Act 2000, as amended
"gearing"	the level of the Group's bank borrowing (excluding finance leases) expressed as a percentage of net assets
"Group"	the Company and its subsidiaries, subsidiary undertakings and joint venture companies as described in paragraph 3 of Part IX (Additional information) of the Prospectus and "member of the Group" shall be construed accordingly
"Hopper"	the Group's landbank of future development opportunities
"HSBC Revolving Term Loan Facility"	a revolving term loan facility of up to £75,000,000 between the Company and St. Modwen Ventures Limited (and certain other subsidiaries) as borrowers and HSBC Bank PLC as lender
"Issue Price"	135 pence per New Ordinary Share
"J.P. Morgan Cazenove"	J.P. Morgan Cazenove Limited
"Key Facility Agreements"	the Barclays Trentham Facility, the Barclays £40 million Revolving Facility, the Barclays VSM Revolving Loan Facility, the BoI Revolving Credit Facility, the BoS Revolving Credit Facility, the HSBC Revolving Term Loan Facility, the Lloyds £50 million Revolving Loan Facility, the Lloyds £70 million Revolving Loan Facility and the RBS Revolving Advance Facility
"Listing Rules"	the listing rules and regulations made by the FSA under s73A of FSMA, as amended from time to time
"Lloyds £50 million Revolving Loan Facility"	a revolving loan facility linked to LIBOR of up to £50,000,000 between the Company as borrower and Lloyds TSB Bank PLC as lender
"Lloyds £70 million Revolving Loan Facility"	a revolving loan facility of up to £70,000,000 between the Company as borrower and Lloyds TSB Bank PLC as lender
"London Stock Exchange"	London Stock Exchange PLC
"marshalling"	the process of progressing projects through planning and development

  

"Net Proceeds"	approximately £102.1 million, being the net proceeds from the issue of the New Ordinary Shares under the Firm Placing and the Placing and Open Offer
"New Ordinary Shares"	new Shares proposed to be issued by the Company pursuant to the Firm Placing and/or the Placing and Open Offer (as the context requires)
"Non-CREST Application Form"	the application form for use by Qualifying Non-CREST Shareholders relating to applications for Open Offer Shares
"Numis"	Numis Securities Limited
"Official List"	the Official List of the UK Listing Authority
"Open Offer"	the invitation by the Company to Qualifying Shareholders to apply to subscribe for Open Offer Shares on the terms and conditions set out in the Prospectus and, in the case of Qualifying Non-CREST Shareholders, in the Non-CREST Application Form
"Open Offer Entitlement"	an entitlement to apply to subscribe for Open Offer Shares allocated to a Qualifying Shareholder under the Open Offer
"Open Offer Shares"	the 60,386,977 New Ordinary Shares to be offered to Qualifying Shareholders under the Open Offer
"Placing"	the placing by J.P. Morgan Cazenove and Numis of the Open Offer Shares pursuant to the Placing Agreement
"Placing Agreement"	the conditional agreement dated 14 May 2009 between (1) the Company (2) J.P. Morgan Cazenove and (3) Numis
"Prospectus"	the prospectus to be published by the Company comprising a prospectus under the prospectus rules made by the FSA relating to the Company for the purposes of the Firm Placing and Placing and Open Offer and Admission
"Qualifying CREST Shareholders"	Qualifying Shareholders whose Shares on the register of members of the Company on the Record Date are in uncertificated form
"Qualifying Non-CREST Shareholders"	Qualifying Shareholders whose Shares on the register of members of the Company on the Record Date are in certificated form
"Qualifying Shareholders"	holders of Shares on the Company's register of members on the Record Date (but excluding, subject to certain exceptions, any holder who has a registered address in a Restricted Jurisdiction)
"RBS Revolving Advance Facility"	a revolving credit facility of up to £100,000,000 between the Company as borrower and The Royal Bank of Scotland PLC (acting as agent for National Westminster Bank PLC) as lender

  

"Record Date"	the close of business on 12 May 2009
"Registrar"	Equiniti Limited of Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA
"Resolution"	the resolution set out in the notice of Extraordinary General Meeting at the end of the Prospectus
"Restricted Jurisdiction"	each of Australia, Canada, Japan, New Zealand, South Africa and the United States
"Securities Act"	the United States Securities Act of 1933, as amended
"Shareholders"	holders of Shares, each individually being a "Shareholder"
"Shares"	ordinary shares of 10 pence each in the capital of the Company
"Standards"	the "Admission and Disclosure Standards" of the London Stock Exchange
"Statutes"	the Companies Act 1985, the Companies Act 2006 and every other statute (and any subordinate legislation, order or regulations made under any of them) concerning companies and affecting the Company, in each case, as they are for the time being in force
"stock account"	an account within a member account in CREST to which a holding of a particular share or other security in CREST is credited
"UK" or "United Kingdom"	the United Kingdom of Great Britain and Northern Ireland
"UK Listing Authority"	the FSA acting in its capacity as competent authority pursuant to the purposes of Part VI of FSMA
"uncertificated" or "in uncertificated form"	Shares recorded on the register as being held in uncertificated form in CREST, entitlement which may be transferred by means of CREST
"United States" or "US"	the United States of America, its territories and possessions, any State of the United States and the District of Columbia

In this announcement all references to times and dates are in reference to those observed in London, UK.

In this announcement the symbols "£" and "p" refer to pounds and pence sterling respectively.

ENDIOEGUUBCAUPBUAC

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