8th Mar 2005 07:03
Bakkavor Group hf (The)08 March 2005 Not for release, publication or distribution in or into the United States,Canada, Australia or Japan IMMEDIATE RELEASE 8 March 2005 RECOMMENDED PROPOSALS for the acquisition of GEEST PLC BY BAKKAVOR INVEST LIMITED to be effected by a means of a Scheme of Arrangement under section 425 of the Companies Act 1985Summary Bakkavor Invest to acquire Geest for 655 pence per Share in cash. Geest Shareholders to receive special dividend of 7 pence per Share. The Proposals are recommended by the board of Geest and value the existing issuedshare capital of Geest at £485 million including the special dividend. Acquisition to be effected by means of a Scheme of Arrangement, subject to Courtand shareholder approval. Scheme expected to become effective on 13 May 2005. Commenting on the Proposals, Executive Chairman of Bakkavor, Agust Gudmundsson,said: "Our stated ambition has always been to grow our business organically andthrough strategic acquisitions whilst maintaining our entrepreneurial ethos. Adding Geest to the Bakkavor portfolio will enable us to exploit our combinedstrengths through first, the partnerships we have with our customers and second,by focusing on continuous improvement in our quality of service and evolvinginnovative premium product offering. Geest has developed its position within the freshly prepared food market anddemonstrated steady growth. Together we believe we have the strength to open upnew opportunities in existing and new markets both in the UK and overseas. Welook forward to working with Geest." Chief Executive Officer of Geest, Gareth Voyle, said: "We believe that Bakkavor's proposal represents good value for our shareholdersand we are recommending it. The food retailing market has changed dramaticallyin the last two years and, whilst Geest is well positioned, there is no doubtthat price competition will continue to dominate the day-to-day grocery trade.Upon completion, this deal will bring together two of the best fresh foodplayers in our industry. This is an excellent outcome for all futurestakeholders, particularly our employees and, of course, our valued customers." Chairman of Geest, Sir John Banham, said: "Geest and its management have created excellent value for its shareholderssince the sale of the banana business nine years ago. From 1996 to 2004, Geesthas achieved a Total Shareholder Return (TSR) performance that is in the top 15per cent of the FTSE All Share Index. With the offer price that we arerecommending today, the enterprise value of the Company will have increased bymore than six times since the sale of the banana business. We welcome the cashoffer at this level from Bakkavor - a company that is intent on developingfurther in the fresh prepared foods sector and one which shares similar valuesand goals to us." The Proposals The boards of Bakkavor and Geest announce that they have reached agreement on the terms of the recommended Proposals under which Bakkavor Invest will acquirethe issued and to be issued share capital of Geest. The Proposals are to beeffected by way of a Court sanctioned Scheme of Arrangement under section 425of the Companies Act and a related Capital Reduction. Bakkavor Invest is an indirect wholly owned subsidiary of Bakkavor, a companylisted on the Icelandic Stock Exchange. Under the terms of the Proposals, (i) Geest Shareholders (other than BakkavorInvest in respect of its Geest Shares as detailed below)will receive 655 pencein cash and (ii) Geest Shareholders on the record at the Dividend Record Timewill receive a special dividend of 7 pence for each Geest Share, valuing theexisting issued share capital of Geest at £485 million and £492 million on afully diluted basis. The consideration of 655 pence in cash for each Geest Share payable under theProposals and the special dividend of 7 pence for each Geest Share representsa premium of: - 10.3 per cent to the closing price of Geest Shares on 8 December 2004 being the last Business Day prior to the commencement of the Offer Period; and - 29.0 per cent to the closing price of Geest Shares on 27 May 2004, being the last Business Day prior to the announcement of the acquisition by Bakkavor Invest of a 10 per cent stake in Geest. Bakkavor Invest currently holds 14,934,483 Geest Shares, representing approximately20.4 per cent of the existing issued share capital of Geest. Recommendation and irrevocable undertakings The Geest Directors, who have been so advised by Citigroup, consider the termsof the Proposals to be fair and reasonable. In providing their advice, Citigrouphave taken into account the Geest Directors' commercial assessments. The Geest Directors unanimously recommend that Geest Shareholders vote in favourof the Proposals. The Executive Directors (together with certain members of theirimmediate families and connected persons (within the meaning of Section 346 of theCompanies Act)) have irrevocably undertaken to vote in favour of the Proposals inrespect of 331,916 Geest Shares in aggregate, representing approximately 0.45 percent of the existing issued share capital of Geest and 0.57 per cent of the GeestShares entitled to vote at the Court Meeting and at the Extraordinary GeneralMeeting assuming that no further Geest Shares are issued prior to the Voting RecordTime. These irrevocable undertakings continue to be binding in the event of acompeting offer for Geest. Future plans for the Group Bakkavor believes the prospects for all business areas within Geest are strongand complementary to Bakkavor's position as a key supplier of fresh preparedfoods to the major retailers. The management of Bakkavor sees significant benefitsfrom bringing the two companies together. Following the Scheme becoming effective,the combined business will have greater scale to be able to grow with its keycustomers in the product sectors in which it is present. Bakkavor intends tomaintain Geest's overall operating structure and seek opportunities for expansionwhilst looking for operational synergies between the two businesses. Such synergiesare expected from a number of areas including economy of scale benefits, shareddevelopment, cross-selling opportunities and logistical synergies. Financing Bakkavor Invest's funding obligations under the Proposals are being financed througha mixture of external senior debt and an equity contribution from Bakkavor London. The external senior debt facilities are being arranged by Barclays Capital (theinvestment banking division of Barclays Bank PLC) and fully underwritten byBarclays Bank PLC. The equity contribution from Bakkavor London is being funded by means ofinter-company loan from Bakkavor which in turn is being funded from cash reservesin Bakkavor and a bridging facility provided by Kaupthing to Bakkavor. Future process The Proposals will be put to Geest Shareholders at the Court Meeting and at anExtraordinary General Meeting. In order to become effective, the Scheme must beapproved by a majority in number representing 75 per cent in value of the GeestShares that are voted at the Court Meeting. In addition, a Special Resolutionimplementing the Scheme and sanctioning the related Capital Reduction must bepassed by Geest Shareholders representing 75 per cent of the votes cast at the EGM. As a result of its interest in the Proposals, the Bakkavor Shareholder is precludedfrom voting at the Court Meeting and will not attend or vote at the EGM.The Bakkavor Shareholder will, however, undertake to the Court to be bound bythe Scheme. It is expected that the Scheme Document will be posted on 23 March 2005 and thatthe Court Meeting and the EGM to approve the Scheme, sanction the Capital Reductionand deal with certain other related matters will be held on 20 April 2005. It is expected that the Scheme will become effective on or around 13 May 2005,subject to the satisfaction or waiver of all of the conditions set out inAppendix I to this announcement. It is expected that the consideration will be posted to Geest Shareholders by27 May 2005, subject to the Scheme becoming effective. This summary should be read in conjunction with the full text of the followingannouncement. Appendix I to this announcement contains a summary of the Conditions and certainfurther terms of the Proposals. Appendix II to this announcement contains details of the bases and sources ofinformation from which the financial calculations used in this announcement havebeen derived. Appendix III to this announcement contains definitions of certain terms used inthis announcement. Kaupthing Limited is acting as the financial adviser to Bakkavor Invest andBakkavor in connection with the Proposals. Citigroup is acting as financial adviser and broker to Geest in connection withthe Proposals. JPMorgan Cazenove is acting as broker to Geest in connection with the Proposals. Press enquiries Bakkavor InvestAgust Gudmundsson - Group Chairman Tel: +44 (0) 20 8728 5100Lydur Gudmundsson - Chief Executive Officer Kaupthing Limited Tel: +44 (0) 20 7529 5222(Financial adviser to Bakkavor Invest andBakkavor)Helgi BergsAdam Shaw Citigate - Dewe Rogerson Today - Tel: +44 (0) 20 8728 5100(Public relations adviser to Bakkavor Invest Thereafter - Tel: +44 (0) 121 455 8370and Bakkavor) Fiona Tooley Mob: +44 (0) 7785 703523 Geest Tel: +44 (0) 1775 761 111Gareth Voyle - Chief Executive OfficerMark Pullen - Group Finance DirectorPaula Cooper - Group Communications Manager Citigroup Global Markets Limited Tel: +44 (0) 20 7986 4000(Financial adviser and broker to Geest)Ian HartSimon AlexanderRashmi Sinha JPMorgan Cazenove Tel: +44 (0) 20 7588 2828(Broker to Geest)David Clasen Financial Dynamics Tel: +44 (0) 20 7831 3113(Public relations adviser to Geest)Tim Spratt Kaupthing Limited, a subsidiary of Kaupthing, which is regulated by theFinancial Services Authority for the conduct of designated investment businessin the United Kingdom, is acting for Bakkavor Invest and Bakkavor in connectionwith the Proposals and will not be responsible to anyone other than BakkavorInvest and Bakkavor for providing the protections afforded to clients ofKaupthing Bank nor for providing advice in relation to the Proposals or anymatter referred to in this announcement. Citigroup is acting for Geest and no one else in relation to the Proposals andwill not be responsible to anyone other than Geest for providing the protectionsafforded to clients of Citigroup nor for providing advice in relation to the Proposals, the content of this announcement or any other matter referred to herein. JPMorgan Cazenove Limited, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting exclusively for Geest andno one else in connection with the Proposals and will not be responsible toanyone other than Geest for providing the protections afforded to customers orfor providing advice in relation to the Proposals or in relation to the contentsof this document or any transaction, arrangement or other matter referred toherein. This announcement is not an offer to sell or an invitation to purchase anysecurities or the solicitation of any vote or approval in any jurisdiction.Geest Shareholders are advised to read carefully the formal documentation inrelation to the Proposals once it has been dispatched. The distribution of this announcement in jurisdictions other than the UK may berestricted by law and therefore any persons who are subject to the laws of anyjurisdiction other than the UK should inform themselves about, and observe, anyapplicable requirements. This announcement has been prepared for the purpose ofcomplying with English law and the City Code and the information disclosed maynot be the same as that which would have been disclosed if this announcement hadbeen prepared in accordance with the laws of jurisdictions outside the UK. The Proposals will not be made, directly or indirectly, in, into or from or bythe use of mail or any means or instrumentality (including, without limitation,telephone, facsimile or other forms of electronic transmission) of interstate orforeign commerce of, or any facility of a national, state or other securitiesexchange of the United States, Canada, Australia or Japan. Accordingly, neitherthis announcement nor the Scheme Document or accompanying documents (or any copythereof) is being, and must not be, mailed or otherwise forwarded, distributedor sent in, into or from the United States, Canada, Australia or Japan. AllShareholders or other persons (including nominees, trustees and custodians) whowould otherwise intend to, or may have a contractual or legal obligation to,forward this announcement or the Scheme Document and accompanying documents toany jurisdiction outside the United Kingdom should refrain from doing so andseek appropriate professional advice before taking any action. The Loan Notes to be issued pursuant to the Loan Note Alternative have not been,and will not be, registered under the Securities Act or under any relevantsecurities laws of any states or other jurisdiction of the United States, norhave the relevant clearances been, nor will they be, obtained from thesecurities law of any province or territory of Canada, nor has a prospectus inrelation to the Loan Notes been, nor will one be, lodged with or registered bythe Australian Securities and Investments Commission nor have any steps beentaken, nor will any steps be taken, to enable the Loan Notes to be offered incompliance with applicable securities law of Japan. Accordingly, unless anexception under the Securities Act or such securities laws is available, theLoan Note Alternative is not being made available in, and the Loan Notes may notbe offered, sold, resold or delivered, directly or indirectly, in, into or from,the United States, Canada, Australia or Japan, or any other jurisdiction inwhich an offer of Loan Notes would constitute a violation of relevant laws orrequire registration thereof, or to or for the account or benefit of any USPerson or resident of Canada, Australia or Japan. The Directors of Bakkavor and Bakkavor Invest accept responsibility for theinformation contained in this announcement, other than that relating to Geest,the Geest Group, the Directors of Geest and members of their immediate families,related trusts and persons connected with them (within the meaning of Section346 of the Companies Act) and information relating to the recommendation ofvoting in favour of the Proposals and the recommendation itself. To the best ofthe knowledge and belief of the Directors of Bakkavor and Bakkavor Invest (whohave taken all reasonable care to ensure that such is the case), the informationcontained in this announcement for which they are responsible is in accordancewith the facts and does not omit anything likely to affect the import of suchinformation. The Directors of Geest accept responsibility for the information contained inthis announcement relating to Geest, the Geest Group, the Directors of Geest andmembers of their immediate families, related trusts and persons connected withthem (within the meaning of Section 346 of the Companies Act) and informationrelating to the recommendation of voting in favour of the Proposals and therecommendation itself. To the best of the knowledge and belief of the Directorsof Geest (who have taken all reasonable care to ensure that such is the case),the information contained in this announcement for which they are responsible isin accordance with the facts and does not omit anything likely to affect theimport of such information. Not for release, publication or distribution in or into the United States,Canada, Australia or Japan For immediate release RECOMMENDED PROPOSALS for the acquisition of GEEST PLC BY BAKKAVOR INVEST LIMITED to be effected by a means of a Scheme of Arrangement under section 425 of the Companies Act 1985 1. IntroductionThe boards of Bakkavor and Geest announce that they have reached agreement onthe terms of recommended Proposals under which Bakkavor Invest will acquire theissued and to be issued share capital of Geest. Bakkavor Invest is an indirect wholly owned subsidiary of Bakkavor and wasincorporated in March 2004 for the purposes of acquiring a strategic stake inGeest. Bakkavor is an integrated food manufacturing company specialising inchilled convenience food which is quoted on the Icelandic Stock Exchange. 2. The ProposalsIt is intended that the Acquisition is to be implemented by way of a Courtsanctioned Scheme of Arrangement under section 425 of the Companies Act. Underthe terms of the Scheme, which will be subject to the conditions set out belowand in Appendix I to this announcement and subject to the further terms andconditions to be set out in the Scheme Document, Geest Shareholders (other thanBakkavor Invest in respect of its Geest Shares as detailed below) will receive: for each Geest Share 655 pence in cash Geest Shareholders on the register of members of Geest at the Dividend RecordTime (expected to be 6.00 pm on 12 May 2005) will be entitled, subject to theScheme becoming effective, to receive from Geest a special dividend of 7 penceper Geest Share. It is expected that the special dividend will be paid on 27 May2005. The consideration of 655 pence in cash for each Geest Share payable under theProposals together with the special dividend of 7 pence per Geest Sharerepresents a premium of: - 10.3 per cent to the closing price of Geest Shares on 8 December 2004 being the last Business Day prior to the commencement of the Offer Period; and - 29.0 per cent to the closing price of Geest Shares on 27 May 2004, being the last Business Day prior to the announcement of the acquisition by Bakkavor Invest of a 10 per cent stake in Geest. The Proposals (including the special dividend) value the entire issued sharecapital of Geest at approximately £485 million and £492 million on a fullydiluted basis. The Bakkavor Shareholder currently holds 15,037,561 Geest Shares, representingapproximately 20.5 per cent of the existing issued share capital of Geest. As a result of the Bakkavor Shareholder's interest in the Proposals, it isprecluded from voting at the Court Meeting and will not attend or vote at theExtraordinary General Meeting. The Bakkavor Shareholder will, however, undertaketo the Court to be bound by the Scheme. 3. Loan Note Alternative Holders of Scheme Shares (other than certain Overseas Persons) will be able toelect, as an alternative to all or part of the cash consideration to which theywould otherwise be entitled under the Scheme, to receive Loan Notes to be issuedby Bakkavor Invest on the following basis: for each £1 of consideration £1 nominal of Loan Note The Loan Notes will be unsecured, will be guaranteed as to payment of principalonly by Barclays Bank PLC and will be issued, credited as fully paid, in amountsand integral multiples of £1 nominal value. Each Geest Shareholder's aggregateentitlement to Loan Notes will be rounded down to the nearest pound and thebalance of consideration due under the Loan Note Alternative will be disregardedand not paid in cash. The Loan Notes will bear interest payable every six months in arrears, at a rateequivalent to LIBOR less 0.75 per cent (the "Interest Rate"). Interest on theLoan Notes will be payable on 30 June and 31 December in each year (or, if not aBusiness Day, on the first Business Day thereafter). The first interest paymentwill fall due on 31 December 2005 and will be in respect of the period from (andincluding) the date of issue of the relevant Loan Note to (and including) 31December 2005 at the Interest Rate. If valid elections for the Loan Note Alternative have not been received inrespect of at least £1 million in nominal value by 2 May 2005, no Loan Noteswill be issued (unless the board of directors of Bakkavor Invest determinesotherwise), in which event all holders of Scheme Shares who have elected forLoan Notes will receive cash in accordance with the terms of the Scheme. If atany point in time through the life of the Loan Notes the principal amountoutstanding to holders of Loan Notes is less than either £1 million or 10 percent of the total principal amount of the Loan Notes issued, Bakkavor Investwill be entitled to redeem compulsorily all or some of the outstanding LoanNotes. The maximum nominal amount of Loan Notes that may be issued under the Loan NoteAlternative is £50 million. If valid elections are received for more than £50million nominal of Loan Notes, then such elections will be scaled down on a prorata basis and the balance of the consideration will be satisfied in cash. The Loan Notes will be redeemable, in whole or in part, at the option of theholders on 31 December 2005 and thereafter on any interest payment date fallingprior to 31 December 2009 (or, if not a Business Day, on the first Business Daythereafter). Unless previously redeemed or purchased, the Loan Notes will beredeemed on 31 December 2009 (or, if not a Business Day, on the first BusinessDay thereafter). The Loan Note Alternative is conditional on the Scheme becoming effective.Holders of Scheme Shares (other than certain Overseas Persons) may elect for theLoan Note Alternative until 2 May 2005. The Loan Notes will not be listed on anystock exchange. The Loan Note Alternative will not be offered in Australia,Canada, Japan or the United States or in any other jurisdiction where it wouldbe unlawful to do so. The Loan Notes will be governed by English law. Further information on the Loan Notes will be set out in the Scheme Document. 4. Recommendation and irrevocable undertakings The Geest Directors, who have been so advised by Citigroup, consider the termsof the Proposals to be fair and reasonable. In providing their advice, Citigrouphas taken into account the Geest Directors' commercial assessments. The Geest Directors unanimously recommend that Geest Shareholders vote in favourof the Proposals. The Executive Directors (together with certain members oftheir immediate families and connected persons (within the meaning of Section346 of the Companies Act)) have irrevocably undertaken to vote in favour of theProposals in respect of 331,916 Geest Shares in aggregate, representingapproximately 0.45 per cent of the existing issued share capital of Geest and,0.57 per cent of the Geest Shares entitled to vote at the Court Meeting and atthe Extraordinary General Meeting assuming that no further Geest Shares areissued prior to the Voting Record Time. These irrevocable undertakings continueto be binding in the event of a competing offer for Geest. 5.Background to and reasons for recommendation of the Proposals Geest is focused solely on the supply and marketing of fresh prepared foods andproduce. Its largest business, UK fresh prepared foods, accounts for threequarters of turnover and, in recent years, this part of the market hasconsistently grown faster than any other major sector of the food market. Within UK fresh prepared foods, Geest has targeted the strongest growth sectors(for example, premium and healthy products). Geest is usually either marketleader in the product sectors in which it operates (achieving lowest cost statusin some areas), or has created sustainable niche positions. As such, Geest hasbeen able to achieve attractive sales growth and create considerable value forits shareholders and customers. The majority of Geest's customers are food retailers and Geest supplies over2,000 products under well-known, household names. Geest's pursuit of industrybest practice in food safety, service, quality, value and innovation has helpedto build strong and lasting partnerships with food retailers. Over the years,Geest has developed an important understanding of how to manage both itscustomers' strategic demands as well as the needs of consumers. Over the last two years, the food sector in the UK has undergone significantchange. During 2003, market conditions became significantly more difficult withthe beginning of a period of sustained price deflation coupled with an elementof input cost inflation. In early 2004, there was a strategic shift in the foodretail market, including the consolidation of two of the larger retailers.Trading conditions throughout 2004 remained difficult, as competition betweenfood retailers focused on price to an unprecedented degree and pressure on theirsuppliers' margins intensified. In response, Geest has undertaken a successful programme to focus on efficiencyimprovements, whilst maintaining sales growth. Improvements in purchasing andproductivity, coupled with greater capital efficiency and commercialoptimisation, generated savings of £24 million in 2004. However, as expected,these were offset by selling price reductions and input cost inflation. Overall,Geest has been successful in its plan to hold margins in its UK fresh preparedfoods business in 2004. In addition to these savings, Geest streamlined itsoverhead structure with a 10 per cent reduction in managerial jobs going into2005, took a measured approach to its investment and focused strongly on cashgeneration. In 2004, Geest reported its intention to pursue opportunities in fresh preparedfoods through new distribution channels, complementary to its core customerbase. The most notable of these initiatives was Geest's acquisition of AngliaCrown in September 2004, giving the Company direct access to the hospital freshprepared meals market. There is clear, continuing growth in consumer demand for fresh prepared foods.However, whilst the level of market growth in this sector remains well ahead ofthe general food market, there is now a discrepancy between volume and valuesuch that, in 2004, fresh prepared foods in the UK grew by 8 per cent by volumebut 6 per cent by value. Looking forward, the retail trading environment islikely to remain very challenging with high levels of retail price competitionexpected to continue. On 28 May 2004, Bakkavor Invest acquired a stake in Geest of 10.27 per centstating that it viewed Geest as a sound long term strategic investment with astrong management team and a clear track record of steady growth. At this time,Bakkavor declared that it had no intention in making an offer for the Companyand was bound to this statement for six months by Rule 2.8 of the City Code.Bakkavor Invest raised its shareholding to 20.03 per cent on 17 June 2004. On 21 December 2004, the Board of Geest announced that Bakkavor had put forwardan indicative offer of 655 pence per Geest Share in cash plus a special dividendof 7 pence per Share and that the Board had agreed to allow Bakkavor to carryout due diligence on the Company. Following a period of due diligence, Bakkavor Invest has now confirmed itsintention to make an offer to acquire the Company at 655 pence per Geest Shareplus a special dividend of 7 pence per Share. This consideration represents apremium of approximately: - 10.3 per cent to the closing price of Geest Shares on 8 December 2004 being the last Business Day prior to the commencement of the Offer Period; and - 29.0 per cent to the closing price of Geest Shares on 27 May 2004, being the last Business Day prior to the announcement of the acquisition by Bakkavor Invest of a 10 per cent stake in Geest. As a fellow player in the UK fresh prepared foods market, Bakkavor understandsthe market economics, the quality and prospects of the Geest business andmanagement, its strong market positions and its long term growth prospects. TheDirectors believe that these factors have been reflected in the proposedconsideration and, in light of this, the Directors are recommending thatShareholders vote in favour of the Proposals. 6. Holdings The Bakkavor Shareholder currently holds 15,037,561 Geest Shares, representingapproximately 20.5 per cent of the existing issued share capital of Geest. As aresult of its interest in the Proposals, the Bakkavor Shareholder is precludedfrom voting at the Court Meeting and has undertaken not to vote at theExtraordinary General Meeting. The Geest Shares held by the Bakkavor Shareholderwill not therefore count towards the majorities required at the Court Meetingand the Extraordinary General Meeting to approve the Scheme. The BakkavorShareholder will, however, undertake to the Court to be bound by the Scheme. 7. Inducement Fee and Framework AgreementAs part of the negotiations relating to the Proposals, Geest has entered into aninducement fee arrangement. The inducement fee, which amounts to £1.57 million,is payable by Geest if: (a) before the Scheme Document is posted or prior to the lapse or withdrawal of the Proposals, an Independent Inconsistent Transaction for Geest is announced which: (i) is recommended by the Geest Directors; or (ii) subsequently becomes or is declared unconditional in all respects or completes (as relevant); or (b) before the Scheme Document is posted or prior to the lapse or withdrawal of the Proposals the Geest Directors withdraw or alter their recommendation of the Proposals; or (c) Geest takes any action which prevents a Condition to the Proposals from being fulfilled in a material way and which is a breach of Rule 21.1 of the City Code. Bakkavor Invest and Geest have entered into a Framework Agreement, which governstheir relationship during the period until the Scheme becomes effective or theProposals lapse. Among other things, the parties have agreed to cooperate withregard to the process to implement the Scheme and Geest has agreed to procurethat, subject to the sanction of the Scheme by the Court, Geest's remunerationcommittee shall approve awards under the LTIP in respect of 280,371 Shares. 8. Management and employees The directors of Bakkavor Invest have given assurances to Geest that, followingthe Scheme becoming effective, the existing employment rights of all theemployees of Geest will be fully safeguarded. Bakkavor has proposed that Gareth Voyle retains the position of Chief ExecutiveOfficer of Geest which role would be extended to include the current operatingsubsidiaries of Bakkavor with effect from completion of the Scheme. Gareth Voyleintends to accept such extended role which would be subject to new servicearrangements. Such arrangements would involve an increase in Gareth Voyle'ssalary to £500,000 per annum (from £345,000 per annum) but Gareth Voyle wouldforgo the ability to participate in Geest's short term bonus arrangements whichcurrently offer him a maximum payout of 75 per cent of salary per year. Bakkavor has not taken any decision in relation to the future involvement in theCompany's business of the other Executive Directors following the Schemebecoming effective. As at the date of this announcement, none of the ExecutiveDirectors had served notice on the Company or indicated their intention to do soas a consequence of the Scheme. Once the Scheme becomes effective, Bakkavorintends to hold discussions with all the members of the senior management of theCompany regarding their future involvement. Bakkavor intends to put in place "Long Term Bonus" arrangements. Although theterms of any such scheme(s) have not been finalised, the maximum participationof the Executive Directors in any such scheme(s) will not exceed an aggregate of45 per cent of the total payouts under such scheme(s). The amounts prospectivelypayable over the life of any such scheme(s) will not exceed the amountsprospectively payable over the same period under the current Geest LTIP andGeest COIP schemes, if these schemes had continued post-completion. Anynegotiation on this aspect of the senior managers' package, including for GarethVoyle and the other Executive Directors, will be concluded post completion ofthe Scheme. Bakkavor has also agreed to establish a scheme involving initial incentivepayments which will not extend beyond participants in the Geest LTIP. Theaggregate amounts payable will not exceed £2 million. The allocation of amountswill be decided post completion of the Scheme and may involve allocations to theExecutive Directors which will not exceed an aggregate of 45 per cent of thetotal. 9. Pensions Bakkavor Invest has confirmed that it has no plans to alter the nature orbenefits of the Geest Pension Scheme which it believes are important inrecruiting, retaining and rewarding the commitment of Geest employees. TheTrustees have agreed to maintain the current status of the Pension Schemefollowing the Scheme becoming effective. 10. Information on Geest, preliminary results highlights and current trading In a separate announcement made today, Geest has reported its preliminaryresults for the fifty two weeks ended 1 January 2005. This announcement isavailable from the Geest website www.geest.co.uk or from Geest on request.Highlights from this announcement are presented below: a) Information on Geest Geest PLC was formed in 1986 to be the holding company of the Geest Group. Geestcompanies have been trading in the UK since 1935. Geest prepares and marketsfresh prepared foods and markets fresh produce. The Geest Group comprises around30 business units and operates over 30 manufacturing facilities. The majority ofGeest's sites are in the UK with overseas sites in Belgium, France, Spain andSouth Africa. Geest employs over 10,500 people. b) Preliminary results highlights Underlying Group sales* grew by 5 per cent in 2004, whilst reported sales(adjusted for 53 weeks) declined by 2 per cent to £830.6 million (2003: £851.1million), due to the change in the accounting treatment of produce sales to anagency basis and to the loss of sales following the fire at Geest's Tilbrookplant. Underlying Group operating profit** (before goodwill amortisation andexceptional costs) decreased by 4 per cent to £39.3 million (2003 restated £41.0million). Reported total operating profit was up 20 per cent to £36.6 million(2003 restated £30.4 million). In Geest's main business, UK fresh preparedfoods, net margin was held at the same level as 2003. Geest's improvement programme was more successful than had been anticipated atthe beginning of 2004 and generated savings of £24 million, which offset thepressures the Company faced throughout 2004 and will continue to face in 2005. * Underlying sales are sales adjusted for the change in accounting treatment of Geest's produce sales to an agency basis (following change in trading agreement with our customer), the fire at Tilbrook and an extra week of sales in 2003 ** Underlying operating profit is profit before the additional costs for FRS 17 over and above the long term funding costs of pensions c) Current trading Looking forward, there is clear continued growth in consumer demand for Geest'sproducts. In its largest business stream, UK fresh prepared foods, currentmarket growth rates are 6 per cent and continue to remain well ahead of thegeneral food market. Geest gained additional retail business at the end of 2004,amounting to some £30 million of annualised sales, which should benefit saleslevels throughout 2005. Since the period end, Geest has announced its intention to acquire the trade andmoveable assets of the prepared leafy salads business of G's Marketing Ltd. Only around 2 per cent of Geest's prepared products contained an ingredient, thesubject of the Sudan 1 national product recall in February 2005. The cost islikely to be relatively low and should be recovered from its suppliers. Geest expects high levels of retail price competition to continue and the foodretail environment to remain challenging. However, it will continue to generatesavings from its improvement programme, which should stand it in good stead tomanage pressure on margins. Geest remains confident of the opportunity for further growth, supported by itsleading market positions, its focus on fresh prepared foods and produce and itswell-invested and modern production base. 11. Information on Bakkavor and financing Bakkavor Invest is being financed through external senior debt finance and anequity contribution from Bakkavor London. The external senior debt has beenarranged by Barclays Capital (the investment banking division of Barclays BankPLC) and fully underwritten by Barclays Bank PLC. The equity contribution fromBakkavor London is being funded by means of inter-company loan from Bakkavorwhich in turn is being funded from cash reserves in Bakkavor and a bridgingfacility provided by Kaupthing to Bakkavor. Kaupthing Limited, financial adviser to Bakkavor Invest, has confirmed that itis satisfied that sufficient resources are available to Bakkavor Invest tosatisfy the full cash consideration payable to Geest Shareholders (other thanBakkavor Invest, in respect of its Geest Shares) under the terms of theProposals. (a) Bakkavor Invest Bakkavor Invest is a limited company incorporated in England & Wales and is anindirect wholly owned subsidiary of Bakkavor and a direct wholly ownedsubsidiary of Bakkavor London. Bakkavor Invest was, until 24 December 2004,registered with the name Bakkavor SPV Limited. Bakkavor Invest is the immediateholding company of Bakkavor Birmingham and Katsouris Fresh Foods. The futureplans for the Bakkavor Group should the Scheme become effective are describedbelow. (b) Debt financingTo finance the balance of the consideration due under the Proposals not met outof the cash resources made available through Bakkavor London mentioned above, torefinance existing debt of Bakkavor Invest, to refinance existing debt of Geest,provide working capital for Geest after completion of the acquisition and paycertain fees and expenses associated with the Proposals, Bakkavor Invest alsohas in place £500 million of senior debt facilities. Under agreements for the provision of these debt facilities, Bakkavor Invest hasagreed, save as may be required by the Panel, not to waive or amend any materialterm or Condition to the Scheme without prior written consent of the lender forthe debt facility agreement. (c) Further information on the Bakkavor Group Bakkavor is a company based in Reykjavik, Iceland, and listed on the IcelandicStock Exchange with a market capitalisation of ISK 45,265 million (£392 million)as at 7 March 2005, the day prior to this announcement. Bakkavor is anintegrated food manufacturing company specialising in chilled convenience food.It employs 2,300 staff through four factories in the UK, one in Birmingham andthree in London. For the financial year ending 31 December 2004, the BakkavorGroup achieved sales of £150 million and pre tax profits of £17.1 million. Bakkavor's largest single shareholder is Bakkabraedur SARL, a private Luxembourgcompany wholly owned by Meidur EHF, a private Icelandic company. Meidur EHF isowned as to (i) 59.1 per cent by Bakkabraedur Holdings SARL, a privateLuxembourg company; (ii) 19.2 per cent by Kaupthing, an Icelandic quoted bank;and (iii) 21.7 per cent by a number of Icelandic savings banks. Bakkabraedur Holdings SARL is wholly owned by Agust Gudmundsson and LydurGudmundsson, respectively Executive Chairman and Chief Executive Officer ofBakkavor. Agust and Lydur Gudmundsson founded Bakkavor in 1986 and floated it onthe Icelandic Stock Exchange in May 2000. Bakkavor has two principal tradingsubsidiaries, Bakkavor Birmingham and Katsouris Fresh Foods which are ownedthrough Bakkavor London and Bakkavor Invest. Katsouris Fresh Foods was acquired by Bakkavor in 2001 as a result of whichvarious members of the Katsouris family received shares in Bakkavor by way ofconsideration. The Katsouris family currently holds shares representing 17 percent of Bakkavor's share capital. Kaupthing also holds £12.2 million nominal of convertible bonds which areconvertible into 20.1 per cent of Bakkavor's equity. Kaupthing is an IcelandicBank quoted on the Icelandic Stock Exchange with operations throughout theNordic region and in the UK. Kaupthing is the parent company of KaupthingLimited. Lifeyrissjodur Verslunarmanna, an Icelandic pension fund, owns 5.8 per cent ofthe equity in Bakkavor. 12. Future plans for the Geest Group Bakkavor believes the prospects for all business areas within Geest are strongand complementary to Bakkavor's position as a key supplier of fresh preparedfoods to the major retailers. The management of Bakkavor sees significantbenefits from bringing the two companies together. Following the Scheme becomingeffective, the combined business will have greater scale to be able to grow withits key customers in the product sectors in which it is present. Bakkavorintends to maintain Geest's overall operating structure and seek opportunitiesfor expansion whilst looking for operational synergies between the twobusinesses. Such synergies are expected from a number of areas including economyof scale benefits, shared development, cross-selling opportunities andlogistical synergies. 13.Scheme of Arrangement The Proposals will be effected by means of a Scheme of Arrangement between Geestand the Scheme Shareholders under section 425 of the Companies Act. TheAcquisition by Bakkavor Invest of the whole of the issued and to be issued sharecapital of Geest is to be achieved by the cancellation of the Scheme Shares heldby Scheme Shareholders, other than those Scheme Shares acquired under the LoanNote Alternative which will be transferred to Bakkavor Invest, and theapplication of the reserve arising from such cancellation in paying up in full anumber of New Geest Shares (which is equal to the number of Scheme Sharescancelled) and issuing the same to Bakkavor Invest and/or its nominees inconsideration for which Scheme Shareholders will receive consideration on thebasis set out in the introduction and in Section 2 of this announcement. It is expected that the Scheme Document will be posted on 23 March 2005 and thatthe Scheme will become effective on 13 May 2005, subject to the satisfaction orwaiver of all the Conditions set out in Appendix I to this announcement. The Scheme is subject to the Conditions and certain further terms referred to inAppendix I to this announcement. In particular, the Scheme requires the approvalof Geest Shareholders (other than the Bakkavor Shareholder) by the passing of aresolution at the Court Meeting on 20 April 2005. The resolution must beapproved by a majority in number of the Geest Shareholders present and voting,either in person or by proxy, representing not less than 75 per cent in value ofthe Geest Shares held by such Geest Shareholders. The Bakkavor Shareholder willnot be entitled to vote at the Court Meeting to approve the Scheme. Geest holds2,310,000 Shares in treasury which it is not entitled to vote at the CourtMeeting. Implementation of the Scheme, which must occur by 30 June 2005, will alsorequire the passing of the Special Resolution, requiring the approval of GeestShareholders representing at least 75 per cent of the votes cast at theExtraordinary General Meeting, which will be held immediately after the CourtMeeting. The Bakkavor Shareholder will not vote on the Special Resolution. Geestholds 2,310,000 Shares in treasury which it is not entitled to vote at the EGM. Following the Meetings, the Scheme and the related reduction of Geest's sharecapital must be sanctioned and confirmed by the Court and will only becomeeffective on delivery to and registration by the Registrar of Companies of: (i) a copy of the Scheme Court Order sanctioning the Scheme; and (ii) a copy of the Reduction Court Order. Upon the Scheme becoming effective, it will be binding on all SchemeShareholders (and on the Bakkavor Shareholder), irrespective of whether or notthey attended or voted at the Court Meeting or the Extraordinary GeneralMeeting. Bakkavor Invest intends that, following the Scheme becoming effective, it willprocure that Geest applies to the London Stock Exchange for the Geest Shares tocease trading, and to the UK Listing Authority to remove the Geest Shares fromthe Official List. It is intended that, following the Scheme becoming effective, Geest will also bere-registered as a private company. Further details of the Scheme will be contained in the Scheme Document. Expected timetable of principal events: EventPosting of Scheme Document 23 March 2005 (1) Court Meeting 20 April 2005 (1) Extraordinary General Meeting 20 April 2005 (1) Court hearing to sanction the Scheme (if approved by the 10 May 2005 (2)Geest Shareholders) Dividend Record Time 6.00pm on 12 May 2005 (2) Court hearing to confirm the Capital Reduction (if sanctioned 13 May 2005 (2)by the Geest Shareholders) Effective Date of the Scheme (if sanction and confirmation of 13 May 2005 (2)the Court is received) Latest date for consideration to be posted to shareholders 27 May 2005 (2)(if Scheme becomes effective) (1) These dates are indicative only. (2) These dates are indicative only and will depend, amongst other things, on the dates upon which the Court actually sanctions the Scheme and/or confirms the associated reduction of capital. A more detailed timetable will be included within the Scheme Document. 14. Disclosure of interests in Geest As at the close of business on 7 March 2005, being the last practicable dateprior to this announcement, the following persons acting in concert withBakkavor Invest owned or controlled the following Geest Shares or options overGeest Shares granted under the Geest Share Schemes: Name Number of Geest shares Kaupthing Bank Luxembourg SA 18,280 Kaupthing Bank hf 84,798 Save as disclosed in this announcement, neither Bakkavor Invest nor, so far asBakkavor Invest is aware, any person acting in concert with Bakkavor Invest ownsor controls any Geest Shares or options to purchase Geest Shares or derivativesreferenced to any such shares. 15. Geest Share Schemes Appropriate proposals will be made to members of the Geest Share Schemes in duecourse. Details of these proposals will be set out in the Scheme Document and inseparate letters to be sent to members of the Geest Share Schemes. 16. GeneralThe availability of the Proposals to persons not resident in the UK may beaffected by the laws of the relevant jurisdiction. Any persons who are subjectto the laws of any jurisdiction other than the UK should inform themselves aboutand observe any applicable requirements. Press enquiries Bakkavor InvestAgust Gudmundsson - Group Chairman Tel: +44 (0) 20 8728 5100Lydur Gudmundsson - Chief Executive Officer Kaupthing Limited Tel: +44 (0) 20 7529 5222(Financial adviser to Bakkavor Invest andBakkavor)Helgi BergsAdam Shaw Citigate - Dewe Rogerson Today - Tel: +44 (0) 20 8728 5100(Public relations adviser to Bakkavor Invest Thereafter - Tel: +44 (0) 121 455 8370and Bakkavor) Fiona Tooley Mob: +44 (0) 7785 703523 Geest Tel: +44 (0) 1775 761 111Gareth Voyle - Chief Executive OfficerMark Pullen - Group Finance DirectorPaula Cooper - Group Communications Manager Citigroup Global Markets Limited Tel: +44 (0) 20 7986 4000(Financial adviser and broker to Geest)Ian HartSimon AlexanderRashmi Sinha JPMorgan Cazenove Tel: +44 (0) 20 7588 2828(Broker to Geest)David Clasen Financial Dynamics Tel: +44 (0) 20 7831 3113(Public relations adviser to Geest)Tim Spratt Kaupthing Limited, a subsidiary of Kaupthing, which is regulated by theFinancial Services Authority for the conduct of designated investment businessin the United Kingdom, is acting for Bakkavor Invest and Bakkavor in connectionwith the Proposals and will not be responsible to anyone other than BakkavorInvest and Bakkavor for providing the protections afforded to clients ofKaupthing nor for providing advice in relation to the Proposals or any matterreferred to in this announcement. Citigroup is acting for Geest and no one else in relation to the Proposals andwill not be responsible to anyone other than Geest for providing the protectionsafforded to clients of Citigroup nor for providing advice in relation to the Proposals, the content of this announcement or any other matter referred to herein. JPMorgan Cazenove Limited, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting exclusively for Geest andno one else in connection with the Proposals and will not be responsible toanyone other than Geest for providing the protections afforded to customers orfor providing advice in relation to the Proposals or in relation to the contentsof this document or any transaction, arrangement or other matter referred toherein. This announcement is not an offer to sell or an invitation to purchase anysecurities or the solicitation of any vote or approval in any jurisdiction.Geest Shareholders are advised to read carefully the formal documentation inrelation to the Proposals, the contents of this announcement or any other matterreferred to herein. Appendix I to this announcement contains a summary of the conditions and certainfurther terms of the Proposals. Appendix II to this announcement contains details of the bases and sources ofthe financial information set out in this announcement. Appendix III to this announcement contains definitions of certain expressionsused in this announcement. The distribution of this announcement in jurisdictions other than the UK may berestricted by law and therefore any persons who are subject to the laws of anyjurisdiction other than the UK should inform themselves about, and observe anyapplicable requirements. This announcement has been prepared for the purpose ofcomplying with English law and the City Code and the information disclosed maynot be the same as that which would have been disclosed if this announcement hadbeen prepared in accordance with the laws of jurisdictions outside the UK. The Proposals will not be made, directly or indirectly, in, into or from or bythe use of mail or any means or instrumentality (including, without limitation,telephone, facsimile or other forms of electronic transmission) of interstate orforeign commerce of, or any facility of a national, state or other securitiesexchange of the United States, Canada, Australia or Japan. Accordingly, neitherthis announcement nor the Scheme Document or accompanying documents (or any copythereof) is being, and must not be, mailed or otherwise forwarded, distributedor sent in, into or from the United States, Canada, Australia or Japan. AllShareholders or other persons (including nominees, trustees and custodians) whowould otherwise intend to, or may have a contractual or legal obligation to,forward this announcement or the Scheme Document and accompanying documents toany jurisdiction outside the United Kingdom should refrain from doing so andseek appropriate professional advice before taking any action. The Loan Notes to be issued pursuant to the Loan Note Alternative have not been,and will not be, registered under the Securities Act or under any relevantsecurities laws of any states or other jurisdiction of the United States, norhave the relevant clearances been, nor will they be, obtained from thesecurities law of any province or territory of Canada, nor has a prospectus inrelation to the Loan Notes been, nor will one be, lodged with or registered bythe Australian Securities and Investments Commission nor have any steps beentaken, nor will any steps be taken, to enable the Loan Notes to be offered incompliance with applicable securities law of Japan. Accordingly, unless anexception under the Securities Act or such securities and the laws is available,the Loan Note Alternative is not being made available in, and the Loan Notes maynot be offered, sold, resold or delivered, directly or indirectly, in, into orfrom, the United States, Canada, Australia or Japan, or any other jurisdictionin which an offer of Loan Notes would constitute a violation of relevant laws orrequire registration thereof, or to or for the account or benefit of any USPerson or resident of Canada, Australia or Japan. The directors of Bakkavor and Bakkavor Invest accept responsibility for theinformation contained in this announcement, other than that relating to Geest,the Geest Group, the Directors of Geest and members of their immediate families,related trusts and persons connected with them (within the meaning of Section346 of the Companies Act) and information relating to the recommendation ofvoting in favour of the Proposals and the recommendation itself. To the best ofthe knowledge and belief of the directors of Bakkavor and Bakkavor Invest (whohave taken all reasonable care to ensure that such is the case), the informationcontained in this announcement for which they are responsible is in accordancewith the facts and does not omit anything likely to affect the import of suchinformation. The Directors of Geest accept responsibility for the information contained inthis announcement relating to Geest, the Geest Group, the Directors of Geest andmembers of their immediate families, related trusts and persons connected withthem (within the meaning of Section 346 of the Companies Act) and informationrelating to the recommendation of voting in favour of the Proposals and therecommendation itself. To the best of the knowledge and belief of the Directorsof Geest (who have taken all reasonable care to ensure that such is the case),the information contained in this announcement for which they are responsible isin accordance with the facts and does not omit anything likely to affect theimport of such information. Appendix I: Conditions to the implementation of the Proposals 1. The Proposals will be conditional upon the Scheme becoming unconditional and becoming effective by not later than 30 June 2005 or such later date (if any) as Geest and Bakkavor Invest may agree and (if required) the Court shall approve. 2. The Scheme will be conditional upon: (a) approval of the Scheme by a majority in number representing 75 per cent or more in value of Geest Shareholders (other than the Bakkavor Shareholder) present and voting, either in person or by proxy, at the Court Meeting or at any adjournment of that meeting; (b) the resolution(s) in connection with or required to approve and implement the Scheme being duly passed by the requisite majority at the Extraordinary General Meeting or at any adjournment of that meeting; and (c) the sanction of the Scheme and the confirmation of the Capital Reduction involved therein by the Court (in either case, with or without modifications on terms acceptable to Geest and Bakkavor Invest) and the delivery of an office copy of the Court Order and the minute of such reduction attached thereto to the Registrar of Companies in England and Wales and the registration, in relation to the Capital Reduction, of such Court Order by him. 3. Geest and Bakkavor Invest have agreed that, subject as stated in paragraph 4 below, the Proposals will be conditional upon the following matters and, accordingly, the necessary actions to make the Proposals effective will not be taken unless such Conditions (as amended if appropriate) have been satisfied or waived: (a) it being established, in terms satisfactory to Bakkavor Invest, that the Office of Fair Trading does not intend to refer the Proposals or any matter arising from the Proposals to the Competition Commission for investigation, provided that, if a request to the European Commission is made by the competent authorities of one or more Member States under Article 22(1) of the Regulation and is accepted by the European Commission, then this sub-paragraph shall be satisfied, if and only if: (i) it is established, in terms satisfactory to Bakkavor Invest, that it is not the intention of the European Commission to initiate proceedings under Article 6(1)(c) of the Regulation; and (ii) to the extent that the competent authorities of the United Kingdom retain jurisdiction over any aspect of the Proposals, it is established, in terms satisfactory to Bakkavor Invest, that the Proposals or any matter arising from the Proposals will not be referred to the Competition Commission; (b) no government or governmental, quasi-governmental, supranational, statutory or regulatory body or association, institution or agency (including any trade agency) or any court or other body (including any professional or environmental body) or person in any relevant jurisdiction (each a Relevant Authority) having decided to take, instituted or threatened any action, proceeding, suit, investigation, enquiry or reference or enacted, made or proposed and there not continuing to be outstanding any statute, regulation, order or decision that would or might be reasonably expected to: (i) make the Proposals or their implementation or the acquisition of any shares in, or control of, Geest by Bakkavor Invest void, unenforceable or illegal under the laws of any relevant jurisdiction or directly or indirectly prohibit or otherwise materially restrict, prevent or delay or interfere with the implementation of, or impose additional materially adverse conditions or obligations with respect to, or otherwise challenge or interfere with the Proposals or the acquisition of any shares in, or control of, Geest by Bakkavor Invest; (ii) impose any limitation on, or result in any delay in, the ability of any member of the Wider Bakkavor Group to acquire or hold or to exercise effectively, directly or indirectly, all or any rights of ownership of shares or other securities (or the equivalent) in, or to exercise voting or managementRelated Shares:
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