ATLS Atlas Est.

 

TIDMATLS 
 
RNS Number : 1266M 
Atlas Estates Ltd 
18 May 2010 
 

Not for release, publication or distribution in whole or in part into ANY 
JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF 
SUCH JURISDICTION 
 
18 May 2010 
 
 
                             Atlas Estates Limited 
 
    Posting of a circular to shareholders containing the Board's response to 
                    the offer by Fragiolig Holdings Limited 
 
 
The board of directors (the "Board" or "Directors") of Atlas Estates Limited 
("the Company"), is pleased to announce the publication of a circular (the 
"Circular") to the Company's shareholders ("Shareholders") containing the 
Board's response to the offer (the "Offer") by Fragiolig Holdings Limited for 
the entire issued, and to be issued, ordinary share capital of the Company as 
announced on 16 April 2010. 
 
The Offer was declared unconditional in all respects on 12 May 2010, on which 
day Fragiolig announced that, together with parties acting in concert with it, 
Fragiolig held or had received acceptances in respect of approximately 56 per 
cent. of the Ordinary Shares in issue. 
 
The Offer 
 
The Offer is being made on the following basis: 
 
for each Ordinary Share: GBP0.90 or 3.98 Zloty, in cash. 
 
The Offer values the Company's entire issued ordinary share capital at 
approximately GBP42.17 million and represents a substantial discount to the 
latest published NAV per Share of EUR2.94 (as stated in the unaudited quarterly 
results for the three months to 31 March 2010). 
 
The Offer Price represents a slight discount of approximately 2.8 per cent. to 
the closing price of GBP0.925 per Ordinary Share on 17 May 2010 (being the 
latest practicable date prior to the publication of the Circular) and a premium 
of approximately 11 per cent. to the closing price of GBP0.81 per Ordinary Share 
on 13 April 2010 (being the last dealing day prior to the announcement by the 
Company that it had received an approach in connection with a potential takeover 
offer) and a premium of approximately 41 per cent. to the three month 
volume-weighted average price of Ordinary Shares, as at 16 April 2010 (being the 
date which Fragiolig announced the terms of the Offer). 
 
Full terms of the Offer, together with the procedures for acceptance, are set 
out in detail in the Offer Document, a copy of which has been sent by Fragiolig 
to Shareholders and is available at http://www.fragiolig.com. 
 
Background to and reasons for recommending the Offer 
 
It was a difficult business environment for the CEE in 2009, as a direct 
consequence of the global economic and banking crisis. The majority of the 
economies in the region were in recession and reported decreases in gross 
domestic product. As a result there have been large reductions in asset 
valuations and instability in CEE currencies. 
 
The CEE continues to suffer from the reduction in credit and a difficult local 
and international banking environment. However the Group has been able to 
finance some of its development projects and is generating some cash flow from 
the sale of completed apartments and the asset valuations contained in the 2009 
Audited Accounts have been prepared on the basis that it would continue to do 
so. If the Group had access to additional financial resources, it would have 
proceeded to develop more of its portfolio. 
 
While in recent months there have been reported improvements in sales demand in 
Warsaw, the challenging development environment coincided with a difficult 
market in which to sell development land throughout the CEE as a whole, as 
evidenced by the delayed completion of the sale of the Slovakian properties 
initially announced on 3 November 2009 and which has still not completed, due 
primarily to the purchaser's difficulty in obtaining the relevant consents from 
loan providers. The result is that some of the Group's assets can neither be 
developed nor sold on attractive terms at present, or in the foreseeable future. 
 
AMC has been in regular communication with the Group's bankers since the onset 
of the credit crisis and has negotiated waivers for a series of covenant 
breaches, in some cases by consenting to cross collateralisation agreements and 
has agreed revised terms and repayment dates. 
 
Against this background your Board is very conscious of the risks facing the 
Group and its reliance on the continuing support of its lenders. Accordingly 
your Board believes that it may be a considerable time before any dividends can 
be paid to Shareholders. 
 
In summary, the Group has a development portfolio with potential, but is 
currently limited in its financial ability to exploit it, with some attractive 
investment assets such as the Warsaw Hilton and a considerable debt burden. Net 
debt was EUR245.5 million as at 31 March 2010. 
 
The Offer therefore provides Shareholders an opportunity to exit their 
investment in the Company, free of dealing costs, at a price of GBP0.90 (or 3.98 
Zloty) per Ordinary Share in cash, such price reflecting the price at which a 
major Shareholder was willing to sell its holdings in the Company to Fragiolig 
and the price now required to be extended to all other Shareholders. 
 
The Board regards the Offer Price as being fair in the context of the risks 
facing the Group, despite the fact that it is at a considerable discount to the 
underlying NAV per Share as stated in the 2009 Audited Accounts and the more 
recent results to 31 March 2010. The difficulties experienced in completing the 
sale of the Slovakian portfolio support the Board's belief that it would not be 
practicable to sell the portfolio to realise the book value of the Group's net 
assets in the short term. 
 
The Board also recognises that certain Shareholders who, acknowledging the risks 
involved (including the possibility of it becoming more difficult to sell 
Ordinary Shares in the future,particularly if the Company does not maintain its 
listing on either AIM and/or the WSE) may share the Board's view regarding the 
potentially greater value of the Group in the longer term and choose to retain 
their Ordinary Shares. For this reason, the Chairman, who is the only 
Shareholder on the Board, does not intend to accept the Offer. 
 
Current trading 
 
On 17 May 2010, the Company announced its results for the three months ended 31 
March 2010. The results were generally encouraging as the Group has reported a 
profit after tax of EUR7.1 million (31 March 2009: loss after tax of EUR17.4 
million) and an increase in basic NAV of 14 per cent. from EUR113.2 million as at 
31 December 2009 to EUR129.1 million as at 31 March 2010 (31 March 2009: EUR138.6 
million). An independent valuation of the entire property portfolio is carried 
out on a semi-annual basis by independent valuation experts. Independent 
valuations may also be performed when a new property is acquired. The most 
recent valuation was performed at 31 December 2009 by independent real estate 
advisors, King Sturge. There has been no revaluation of the portfolio as at 31 
March 2010 and the increase in the reported NAV has primarily arisen from 
exchange rate movements. 
 
The Polish economy, which is the major market of operation for the Group 
(comprising 75 per cent. of the Group's portfolio) has proven to be more 
resilient than other economies in the CEE region with positive growth of 1.7 per 
cent. for 2009. In this environment, the Company has achieved significant 
progress with developments in Warsaw and is realising value from cash in-flows 
as apartments are sold. 
 
Although for 2010 and beyond there have been forecasts of stabilisation and 
recovery for certain markets in the CEE, the timing and extent of recovery is 
uncertain and depends upon how the financial crisis in the global markets 
resolves itself. The Board continues to believe that potential remains for the 
economies of the CEE to revert in time to achieve growth rates outperforming 
those of most Western economies. 
 
Recommendation 
 
The Directors continue to believe in the long-term prospects of the Company, 
which could be rewarding as and when the CEE property markets and credit 
environments improve. However, having evaluated the various factors relevant to 
the Offer and considered the inherent uncertainties and associated risks in the 
near future of the Company, the Directors consider the Offer Price to be fair. 
 
Accordingly, the Directors, who have been so advised by Fairfax, consider the 
terms of the Offer to be fair and reasonable and the Directors unanimously 
recommend that Shareholders accept the Offer. In providing advice to the Board, 
Fairfax has taken the Directors' commercial assessments into account. In 
arriving at their recommendation, the Directors have also considered the likely 
effect of the implementation of the Offer on the business of the Company, 
employees and locations of the Group. 
 
The Board also recognises that certain Shareholders who, acknowledging the risks 
involved (as set out in detail in the Circular) may share the Board's view 
regarding the potentially greater value of the Group in the longer term and 
choose to retain their Ordinary Shares. Reflecting this view, the Chairman, who 
holds 14,785 Ordinary Shares (representing 0.03 per cent. of the Company's 
current issued share capital), and is the only Director who holds Ordinary 
Shares, does not intend to accept the Offer in respect of his shareholding. In 
making his decision, the Chairman has fully considered the inherent 
uncertainties and associated risks and recognises that the liquidity of his 
shareholding may be negatively affected, particularly if the Company does not 
maintain its listing on either AIM and/or the WSE and is willing to accept such 
risks in relation to his personal investment. 
 
The Circular is being posted today to Shareholders and shall be available on the 
Company's website http://www.atlasestates.com. 
 
 
Enquiries 
 
Fairfax I.S. PLC, Nominated adviser and independent financial adviser to the 
Company. 
 
David Floyd       Tel: 020 7598 4045 
Rachel Rees 
 
All capitalised terms used in this announcement, but not otherwise defined, 
shall have the same meaning as those contained in the circular sent by Atlas 
Estates Limited to its Shareholders dated 18 May 2010. 
 
The Directors of Atlas Estates Limited accept responsibility for the information 
contained in this document, except that the only responsibility accepted by them 
in respect of information contained in this document relating to Fragiolig, and 
parties acting in concert with it, which has been compiled from published 
sources, is to ensure that such information has been correctly and fairly 
reproduced and presented.  Subject to the aforesaid, to the best of the 
knowledge and belief of the Directors (who have taken all reasonable care to 
ensure that such is the case), the information for which they accept 
responsibility is in accordance with the facts and does not omit anything likely 
to affect the import of such information. 
 
Fairfax is acting exclusively for the Company and no-one else in connection with 
the matters referred to herein and will not be responsible to anyone else for 
providing the protections afforded to customers of Fairfax or for advising any 
other person on the contents of this document or any matter referred to herein. 
No representation or warranty, express or implied, is made by Fairfax as to any 
part of this document. 
 
Dealing Disclosure Requirements 
 
Under Rule 8.3(a) of the City Code on Takeovers and Mergers (the "Code"), any 
person who is interested in 1% or more of any class of relevant securities of an 
offeree company or of any paper offeror (being any offeror other than an offeror 
in respect of which it has been announced that its offer is, or is likely to be, 
solely in cash) must make an Opening Position Disclosure following the 
commencement of the offer period and, if later, following the announcement in 
which any paper offeror is first identified. An Opening Position Disclosure must 
contain details of the person's interests and short positions in, and rights to 
subscribe for, any relevant securities of each of (i) the offeree company and 
(ii) any paper offeror(s). An Opening Position Disclosure by a person to whom 
Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 
10th business day following the commencement of the offer period and, if 
appropriate, by no later than 3.30 pm (London time) on the 10th business day 
following the announcement in which any paper offeror is first identified. 
Relevant persons who deal in the relevant securities of the offeree company or 
of a paper offeror prior to the deadline for making an Opening Position 
Disclosure must instead make a Dealing Disclosure. 
 
Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% 
or more of any class of relevant securities of the offeree company or of any 
paper offeror must make a Dealing Disclosure if the person deals in any relevant 
securities of the offeree company or of any paper offeror. A Dealing Disclosure 
must contain details of the dealing concerned and of the person's interests and 
short positions in, and rights to subscribe for, any relevant securities of each 
of (i) the offeree company and (ii) any paper offeror, save to the extent that 
these details have previously been disclosed under Rule 8. A Dealing Disclosure 
by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm 
(London time) on the business day following the date of the relevant dealing. 
 
If two or more persons act together pursuant to an agreement or understanding, 
whether formal or informal, to acquire or control an interest in relevant 
securities of an offeree company or a paper offeror, they will be deemed to be a 
single person for the purpose of Rule 8.3. 
 
Opening Position Disclosures must also be made by the offeree company and by any 
offeror and Dealing Disclosures must also be made by the offeree company, by any 
offeror and by any persons acting in concert with any of them (see Rules 8.1, 
8.2 and 8.4). 
 
Details of the offeree and offeror companies in respect of whose relevant 
securities Opening Position Disclosures and Dealing Disclosures must be made can 
be found in the Disclosure Table on the Takeover Panel's website at 
www.thetakeoverpanel.org.uk, including details of the number of relevant 
securities in issue, when the offer period commenced and when any offeror was 
first identified. If you are in any doubt as to whether you are required to make 
an Opening Position Disclosure or a Dealing Disclosure, you should contact the 
Panel's Market Surveillance Unit on +44 (0)20 7638 0129. 
 
Publication on Website 
 
A copy of this announcement will be published on the Company's website, being 
http://www.atlasestates.com 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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