31st Mar 2006 17:20
VTR PLC31 March 2006 For Immediate Release 31 March 2006 Strategic Investment by Prime Focus Limited Summary of the announcement • The Company today announced that, subject inter alia to the approval of Shareholders, it proposes to raise £4.2 million by way of a Placing of 12,062,990 New Ordinary Shares at a price of 35 pence per New Ordinary Share • The Company also proposes to issue 1,428,571 New Ordinary Shares in exchange for the transfer of certain assets to the Company • Prime Focus Limited ("PFL"), one of India's largest integrated end-to-end post production and visual effects services houses, has conditionally subscribed for the Placing Shares • An Extraordinary General Meeting has been convened for 24 April 2006, at which Shareholders will be asked to consider, and if thought fit, to approve the Resolutions in order to implement, inter alia, the Placing • In the Board's opinion the investment by PFL, and their addition as a major new shareholder in the Company, should better position the Group to take advantage of opportunities that exist in new and international markets • In addition, the Board believes there is the potential for synergies to arise from the relationship with PFL, particularly in relation to PFL's technological skills, that will benefit the Group in the medium term • Following the completion of the Placing, Mr Namit Malhotra will be appointed to the Board as non-executive chairman and Philip Lovegrove will resign from the Board upon the passing of Resolutions at the EGM. In addition, Mr Naresh Malhotra, Mr Chandir Gidwani and Mr Rivkaran Chadha will be appointed to the Board as non-executive Directors Commenting on the proposed investment by PFL Paul Tracey, Managing Director ofVTR plc, said, "The proposed investment by PFL in VTR plc provides the company, its employeesand shareholders with the potential to benefit from the increasing globalisationof the industry sectors within which we operate. Having identified the need fora strategic partner to compete effectively in our markets, I am delighted thatPFL share our vision and desire to build a valuable and exciting business overthe coming years." Namit Malhotra of PFL further commented, "We are very excited at the prospect of working with VTR to develop a globalbrand and expand the service offerings into new and potentially lucrativemarkets. The combination of our scale, technology and cost effective operationsand VTR's expertise and international reputation should provide us with anopportunity to build a highly attractive business". For further information please call Lawrence Dore / Nick Bishop Paul Tracey Philip Davies / Anthony NoakesMantra PR VTR Plc Charles Stanley Securities020 79077800 Tel: 020 7437 0026 Tel: 020 7953 2000 Introduction The Company today announced that, subject inter alia to the approval ofShareholders, it proposes to raise £4.2 million by way of a Placing of12,062,990 New Ordinary Shares at a price of 35 pence per New Ordinary Share. Inaddition, the Company proposes to issue 1,428,571 New Ordinary Shares inexchange for the transfer of certain assets to the Company as described below.Prime Focus Limited ("PFL"), one of India's largest integrated end-to-end postproduction and visual effects services houses, has conditionally subscribed forthe Placing Shares. An Extraordinary General Meeting has been convened for 24 April 2006, at whichShareholders will be asked to consider, and if thought fit, to approve theResolutions in order to implement, inter alia, the Placing. Background to and reasons for the Transaction As Shareholders are aware, the trading conditions facing the Group in recentyears have proved to be particularly challenging and 2005 proved to be noexception. As reported in our trading updates in the latter half of last yearthe Group experienced a severe downturn in trading which started in April 2005and continued throughout the second half, affecting all parts of the business.The reasons for this are largely driven by the increasingly competitiveenvironment, recessions in some of our key markets and a general pressure onrates which adversely impacted on the Group's profitability. As detailed in the preliminary results for the year ended 31 August 2005,announced on 4 November 2005, the Board has taken the corrective action inre-aligning the Group to enable it to respond to a marketplace which has changedin terms of activity and economic dynamics over the last five years. The Boardhas taken a series of operational measures to increase the Group'scompetitiveness including the re-shaping of both the Company and management ofits subsidiaries, reducing costs and reorganising the Group's operatingcompanies into more clearly defined entities. Strategically, the Board hasreviewed the markets in which VTR operates and identified several opportunitiesto grow both domestically and internationally. The advent of new media, theproliferation of media and the increasing requirement for assets to be digitisedand managed are all driving growth across the industry and provide VTR withseveral areas to exploit. Additionally the Board has identified that in orderfor VTR to be able to pursue these opportunities, significant investment isrequired and that an appropriate way to achieve this would be to find aninternational partner to invest in VTR and help its development. As a result of this requirement the Board approached PFL who have a statedstrategy of overseas expansion, particularly into the London market, and whohave previously expressed an interest in making a strategic investment in theCompany. In the Board's opinion the investment by PFL, and their addition as amajor new shareholder in the Company, should better position the Group to takeadvantage of the opportunities outlined above. In addition, the Board believes there is the potential for synergies to arisefrom the relationship with PFL, particularly in relation to PFL's technologicalskills, that will benefit the Group in the medium term. Details of the Placing and use of proceeds The Company has entered into an agreement with PFL whereby PFL shall subscribefor such number of ordinary shares in VTR, being 13,491,561 shares as shall givePFL 55.0 per cent. of the enlarged capital of VTR. The subscription price shall be satisfied as to 35 pence per share in cash for12,062,990 shares and as to the remainder, by the transfer of certain assets tothe Company (including arranging and paying for delivery of those assets to theCompany's premises) for 1,428,571 shares in the Company. These assets comprise(i) a Discreet Lustre digital intermediate system colour grading Master Stationand (ii) a Northlight pin-registered film scanner for Digital Intermediate. Areport, pursuant to s.103 of the Companies Act, has been prepared by Baker Tillywhich supports the issue of 1,428,571 shares in the Company in exchange for theabove assets. The net proceeds of the Placing will be used by the Company to provide workingcapital, to reduce gearing and will be available to fund growth into the newareas set out above. The Board, having been advised by Charles Stanley, consider that it is in thebest interests of the Company and Shareholders as a whole for the funds to beraised by the Placing. If the Company had made an offer, by way of a rightsissue or open offer, to allow existing shareholders to subscribe for any of thePlacing Shares, this would have necessitated the publication of a prospectus atsignificant additional cost, imposition on management time and a delay which mayhave put the Placing in jeopardy. Subject to the approval of the Resolutions, application will be made to theLondon Stock Exchange for the Placing Shares to be admitted to trading on AIM.It is expected that Admission will become effective and that trading in thePlacing Shares will commence on AIM on 2 May 2006. The Placing Shares will, when issued and fully paid, rank pari passu in allrespects with the New Ordinary Shares, including the right to receive anydividend or other distribution declared, made or paid after the date of theirunconditional allotment. Current Trading and Prospects The difficult trading conditions which the company reported on 4 November 2005have persisted. Whilst the measures initiated by the Board, including a materialreduction in staff costs and control on capital expenditure have put the Companyon a firmer financial footing the Company has continued to be loss making.Following a period of reasonable trading in the first four months of thefinancial year to December 2005, in January 2006 there was a significantreduction in income resulting in increased losses for the month. There has beenno upturn in income for the month of February. The Board remains confident ofthe underlying quality of its businesses. Strategy Over the past five years the post production industry in the UK has altered as aresult of globalisation, and the influx of new mediums of delivery, mostsignificantly the internet, and new standards (high-definition) have takeneffect. Whilst revenues and prices from traditional post-production remainunder pressure the Board have identified several areas of business whichpotentially offer prospects to grow and deliver increased returns toshareholders. To date the Group has been unable to take full advantage of theseopportunities. The investment by PFL will, in the Board's opinion, allowdevelopments in the following areas: Film VTR already has digital cinema facilities. To date it has lacked the scale andinvestment to win a high volume of national and international film projects,especially in the area of visual effects. PFL currently works on approximately60 major film releases per year in the fast-growing Asian and Indian filmmarkets, and has already made headway into the international film market. Thecombination of VTR and PFL will potentially open up new business opportunitiesto VTR. Digital asset management We are seeing an increasing requirement from our clients for sophisticateddigital asset management solutions. The scope of these services ranges fromcontent management for archives through to brand asset management formultinationals. VTR already has a presence in this market, through TMR Digital,but has lacked the scale to compete in what is increasingly a globalmarketplace. PFL's infrastructure and its access to the Indian software marketwill help the growth of VTR's digital asset management business. New market sectors New market sectors are developing with the divergence of use of technology byconsumers. Consequently, demands for services tailored to produce output fordevices such as mobile phones is growing at a fast pace. However, the lowmargins available, to date, have made it difficult for VTR to operateprofitably. With PFL's ability to deliver solutions at reduced costs, coupledwith VTR's industry knowledge, the Board is optimistic that new revenue streamscan be opened. Global The UK post-production industry has, with a few exceptions, remained arelatively domestic industry. Through PFL's existing operations and partners,VTR will acquire international access, allowing it to serve customers on aglobal, 24/7 basis. PFL's intention is to expand its presence internationallywith openings already planned in Los Angeles, USA and Dubai in the near future.This will create an international network when combined with VTR's offices inLondon. Financial investment PFL's investment will reduce VTR's gearing, providing free cashflow to invest ingrowth areas of the business. In addition, the provision of equipment, as partof the investment, will enable the Group to expand its digital cinemaoperations. The Takeover Code Under Rule 9 of the Takeover Code, any person who acquires shares which, takentogether with shares already held by him or shares held or acquired by anyperson acting in concert with him (the "concert party group"), carry 30 percent. or more of the voting rights of a company which is subject to the TakeoverCode is normally required to make a general offer to all the remainingshareholders to acquire their shares. Similarly, when any person or persons acting in concert already hold more than30 per cent., but not more than 50 per cent., of the voting rights of suchcompany, a general offer will normally be required if any further sharesincreasing their percentage of the voting rights are acquired. Any offer under Rule 9 must be in cash and at the highest price paid within thepreceding 12 months for any shares in the company by the person required to makethe offer or any person acting in concert with him. PFL will hold 55.0 per cent. of the Enlarged Issued Share Capital following thecompletion of the Transaction. The Takeover Panel has agreed, subject to the approval of Shareholders, to waivethe requirement, which would otherwise arise as a result of the Transaction, fora general offer to be made to all Shareholders under Rule 9 of the TakeoverCode. Accordingly Resolution 1 is being proposed at the EGM and will be taken ona poll of Shareholders. Following the EGM, PFL will hold more than 50 per cent. of the Company's votingshare capital and may accordingly increase its shareholding without incurringany further obligation under Rule 9 to make a general offer. Intentions of PFL In the event that the Resolutions are passed at the EGM, Philip Lovegrove hasadvised the Board that he will be resigning from the Board. Following the completion of the Placing, Mr Namit Malhotra will be appointed tothe Board as non-executive chairman. In addition, Mr Naresh Malhotra, Mr ChandirGidwani and Mr Rivkaran Chadha will be appointed to the Board as non-executiveDirectors. PFL has confirmed its intention that the business of the Company will be allowedto continue in substantially the same manner as at present, with no majorchanges. PFL has also confirmed that the existing employment rights, includingpension rights of all employees of the Group, will be maintained. Extraordinary General Meeting An Extraordinary General Meeting of the Company is to be held at 37 Dean Street,London, W1D 4PT at 10 am. on 24 April 2006. A circular containing furtherdetails of the Proposals and the notice of the EGM is being posted toShareholders today. Irrevocable undertakings The Company has received irrevocable undertakings to vote in favour of theResolutions from Mr & Mrs Mark H. Dixon who have a beneficial interest inrespect of 1,986,800 Ordinary Shares, Peter Cundill & Associates (Bermuda) Ltdwho has a beneficial interest in respect of 1,100,000 Ordinary Shares, and Mr PStone who has a beneficial interest in respect of 476,999 Ordinary Shares. All of the Directors have irrevocably undertaken to vote in favour of theResolutions in respect of their entire holdings of Ordinary Shares, which total410,034 Ordinary Shares representing approximately 3.71 per cent. of theExisting Shares. Therefore in aggregate irrevocable undertakings to vote in favour of theResolutions have been received in respect of 3,973,833 Ordinary Sharesrepresenting approximately 36.0 per cent. of the Existing Shares. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
PFO.L