16th May 2005 07:01
Stanley Leisure PLC16 May 2005 FOR IMMEDIATE RELEASE 16 May 2005 STANLEY LEISURE plc SALE OF RETAIL BOOKMAKING OPERATIONS Stanley Leisure agrees the sale of its retail bookmaking operations to William Hill for £504 million Stanley Leisure plc ("Stanley") announces that it has today agreed to sell itsretail bookmaking operations ("Retail Bookmaking") to William Hill PLC ("WilliamHill") for cash consideration of £504 million (the "Transaction"). • Sale price for Retail Bookmaking represents a multiple of 13.5 times EBITDA for the year ended 2 May 2004 • Completion of the Transaction expected in June 2005 • Review of appropriate capital structure in light of capital expenditure requirements and potential investment opportunities expected to lead to a substantial return of funds to shareholders • Following the passing of the Gambling Act 2005, excellent growth prospects for Stanley's gaming business based on: the increase in the number of gaming machines allowed in casinos; the lifting of the 24-hour membership rule; and the relaxation of the restrictions on casino advertising Bob Wiper, Chief Executive of Stanley, commented: "We are delighted to announcethe sale of our retail betting operations on terms which unlock substantialvalue for our shareholders. In particular, we believe that the price, whichreflects the significant synergies available to William Hill, is a veryattractive one. Going forward, we shall be focusing on our market-leadinggaming assets where we see a number of opportunities for organic growth andvalue-enhancing investment." This summary should be read in conjunction with the full text of the followingannouncement. A conference call for analysts and investors will be held today at 11.00am (UKtime). Please contact Bernadette Ocampo at gcg Hudson Sandler on 020 7796 4133or email [email protected] to obtain the conference call details. Contacts: Stanley Leisure plc 020 7796 4133 on 16 May 2005 and 0151 237 6000 thereafterBob Wiper - Chief Executive Officer Colin Child - Finance Director JPMorgan Cazenove 020 7588 2828 Duncan Hunter Edward Banks David Clasen gcg Hudson Sandler 020 7796 4133 Michael Sandler Noemie de Andia JPMorgan Cazenove Limited ("JPMorgan Cazenove"), which is authorised andregulated in the United Kingdom by the Financial Services Authority, is actingfor Stanley and no one else in connection with the matters referred to in thisannouncement and will not be responsible to any person other than Stanley forproviding the protections afforded to clients of JPMorgan Cazenove, or forproviding advice in relation to these matters. 16 May 2005 STANLEY LEISURE plc SALE OF RETAIL BOOKMAKING OPERATIONS Stanley Leisure agrees the sale of its retail bookmaking operations to William Hill for £504 million Stanley Leisure plc ("Stanley") announces that it has today agreed to sell itsretail bookmaking operations ("Retail Bookmaking") to William Hill PLC ("WilliamHill") for cash consideration of £504 million (the "Transaction"). STANLEY'S RETAIL BOOKMAKING OPERATIONS Retail Bookmaking operates licensed betting offices ("LBOs") throughout GreatBritain, Northern Ireland, the Republic of Ireland, Jersey and the Isle of Man,trading under the StanleyBet and Stanley Racing brands. The estate comprises624 LBOs, making Stanley the UK's fourth largest LBO operator. Retail Bookmaking's turnover for the six months ended 31 October 2004 was £797.7million and EBITDA for the same period was £17.1 million. As at 31 October2004, Retail Bookmaking had net assets of £247.2 million. For the twelve months ended 2 May 2004, Retail Bookmaking's turnover was£1,365.7 million and EBITDA was £37.3 million. The operations subject to the Transaction comprise Stanley's retail bettingassets in Great Britain, Northern Ireland, the Republic of Ireland, Jersey andthe Isle of Man. Stanley's International, internet and telebetting operationsare not included in the Transaction and the Board has begun a strategic reviewof these businesses. BACKGROUND TO AND REASONS FOR THE PROPOSED TRANSACTION Stanley Leisure was founded in 1958 and floated on the London Stock Exchange in1986. At the time of the flotation, the Company owned 117 LBOs. Since then, aswell as continuing to expand organically, Stanley has significantly expanded itsestate through acquisitions. Over the last year, the estate has, on a net basis, remained unchanged at 624LBOs and the Board has formed the view that future opportunities for additionalconsolidation on terms that would be attractive to Stanley's shareholders arelimited. Accordingly, Stanley has more recently focused on growing its retail bookmakingoperations organically by expanding the products on offer, refurbishing andrelocating existing shops and extending shop opening hours and through theroll-out of fixed odds betting terminals ("FOBTs"). Stanley's FOBT roll-out isnow substantially complete, with a total of 1,364 FOBTs deployed throughout itsestate. In this context, and in the light of William Hill's continuing interest, theBoard has taken the decision to crystallise the value inherent in RetailBookmaking by means of the sale announced today. The Board believes the agreed price, which represents a multiple of 13.5 timesEBITDA for the year ended 2 May 2004, is an attractive one which fully valuesRetail Bookmaking. PRINCIPAL TERMS OF THE PROPOSED TRANSACTION Under the terms of the share purchase agreement (the "Agreement") dated 16 May2005 between William Hill Organization Limited (the "Buyer"), Stanley andStanley Overseas Holdings Limited, the Buyer has conditionally agreed to acquirethe entire issued share capital of various companies that comprise RetailBookmaking. The total consideration payable to Stanley on completion will be£504 million on a cash free and debt free basis, subject to an adjustment toreflect the working capital of Retail Bookmaking at completion, which isexpected to be a small negative position. The Buyer is assuming the UK competition risk in relation to the Transaction.The Agreement is conditional on shareholder approval by both Stanley and WilliamHill shareholders. Completion of the Transaction is expected in June 2005. Inthe event that either party's shareholder approval is not obtained by 17 June2005, such party shall be required to pay to the other an amount of £9.2million. Under the terms of the Agreement, Stanley has given warranties and indemnitiesin respect of certain financial, property, licensing, pensions, employee,taxation and other matters, subject to agreed limitations on liability. Stanleyhas also agreed to various undertakings in relation to the carrying on of theRetail Bookmaking business prior to completion of the Transaction. To allow the Buyer a period of time to undertake the UK competition clearanceprocedures and to effect the integration of Retail Bookmaking into the WilliamHill group following competition approval, Stanley and the Buyer have enteredinto transitional services and licence agreements. These agreements requireStanley to provide Retail Bookmaking with various services and the right to usecertain brand names for an interim period after completion of the Transaction.The William Hill group will also be required to provide certain services toStanley. Stanley's costs associated with the Transaction, comprising taxes payable andprofessional fees, are expected to amount to approximately £12 million inaggregate. IRREVOCABLE UNDERTAKINGS Irrevocable undertakings to vote in favour of the Transaction at theextraordinary general meeting to be called to approve the Transaction (the "EGM") have been given by Stanley's Chairman Lord Steinberg and by Genting inrespect of their beneficial holdings of 10.8 per cent. and 20.1 per cent. ofStanley's issued share capital respectively. The irrevocable undertaking provided by Genting will cease to be binding if thedirectors of Stanley withdraw their recommendation in support of the Transactionor if a higher offer is received by Stanley for Retail Bookmaking or if anyperson (other than Genting) announces an intention to make an offer for theentire issued share capital of Stanley which is not subject to a pre-conditionother than the pre-condition that the resolution to approve the Transaction atthe EGM is not passed by Stanley's shareholders. RETURN OF CAPITAL TO STANLEY SHAREHOLDERS It is the Board's practice to ensure that Stanley maintains an efficient Groupbalance sheet. Accordingly, the Board has initiated a review of the appropriatecapital structure for the Group following the Transaction in the light of itsexpected capital expenditure requirements and potential investmentopportunities. Subject to the outcome of this review, the Board expects to makea substantial return of capital to shareholders. The Group's existing bankingfacilities are being amended to allow for such a return and a furtherannouncement will be made immediately following completion of the Transaction. Prior to any such return of capital, the net proceeds from the Transaction willbe used to repay existing indebtedness with the balance placed on deposit. CURRENT TRADING On 5 January 2005, Stanley announced that it expected Group profits for the yearended 1 May 2005 to be broadly in line with the previous financial year. Since then, the Group's London and provincial casinos, including Star City, havecontinued to perform in line with the revised expectations. Some of the unpaidgaming debts incurred earlier in the year have now been collected and the Groupremains confident of collecting materially all of them in due course. However, unfavourable horseracing and football results have continued throughoutthe second half of the Group's financial year. Whilst machine income hascontinued to grow, this has not been sufficient to offset the effect of thesesporting results and consequently the board now expects profits for the Group asa whole to be marginally below the previous year. PROSPECTS FOR THE CONTINUING GROUP Following the disposal of Retail Bookmaking, the Board will focus on Stanley'sGaming Division. Stanley is the UK's largest casino operator with 41 casinosand the Board believes that this business has excellent growth prospects. Inparticular, in light of the Gambling Act 2005, the Board expects significantgrowth to arise from the increase in the number of gaming machines allowed incasinos, the lifting of the 24-hour membership rule and the relaxation of therestrictions on casino advertising. Furthermore, Stanley is in a strongposition to develop a significant number of the 17 additional casinos envisagedby the Gambling Act. Contacts: Stanley Leisure plc 020 7796 4133 on 16 May 2005 and 0151 237 6000 thereafterBob Wiper - Chief Executive Officer Colin Child - Finance Director JPMorgan Cazenove 020 7588 2828 Duncan Hunter Edward Banks David Clasen gcg Hudson Sandler 020 7796 4133 Michael Sandler Noemie de Andia JPMorgan Cazenove Limited, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting for Stanley and no oneelse in connection with the matters referred to in this announcement and willnot be responsible to any person other than Stanley for providing theprotections afforded to clients of JPMorgan Cazenove, or for providing advice inrelation to these matters. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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