RNS No 1959k
SCOTTISH HIGHLAND HOTELS PLC
18 August 1999
PART 1
This announcement is not for release, publication or distribution
in or into the United States, the Republic of Ireland, Canada,
Australia or Japan.
RECOMMENDED CASH OFFER ON BEHALF OF PARAMOUNT HOTELS
INVESTMENTS LIMITED FOR SCOTTISH HIGHLAND HOTELS plc
Summary
* The board of Paramount Hotels Investments Limited ("Paramount
Hotels Investments") and the Directors of Scottish Highland
Hotels plc ("Scottish Highland") announce the terms of a
recommended cash offer, to be made by Apax Partners & Co. Capital
Limited on behalf of Paramount Hotels Investments, to acquire the
entire issued and to be issued share capital of Scottish
Highland. The formal Offer Document will be despatched as soon as
practicable.
* The Offer will be 130p in cash for each Scottish Highland Share
which values Scottish Highland's existing issued share capital at
approximately #38 million. In addition, Scottish Highland
Shareholders on the register at the close of business on 13
August 1999, will be entitled to receive and retain the interim
dividend of 1.4p (net) per Scottish Highland Share in respect of
the current financial year. Scottish Highland has announced a
payment date of 6 September 1999.
* The Offer price of 130p per Scottish Highland Share represents a
premium of approximately 51 per cent. to the Closing Price of 86p
per Scottish Highland Share on 22 June 1999 (the last dealing day
prior to the date on which Scottish Highland announced that
preliminary discussions were taking place with a third party
which may or may not lead to an offer being made for Scottish
Highland).
* Paramount Hotels Investments has commitments to accept the Offer
in respect of, in aggregate, l9.02 per cent. of the issued share
capital of Scottish Highland.
* Paramount Hotels Investments is a newly incorporated company and
is a wholly owned subsidiary of Paramount Hotels. The Paramount
Hotels Group is majority owned by the Alchemy Investment Plan.
* On behalf of the Directors of Scottish Highland, Hamish Grossart,
non-executive chairman of Scottish Highland, said:
"We are pleased to have secured an offer which represents good
value for shareholders. When complete, the offer will see
Scottish Highland become part of a larger but entrepreneurial
group with similar operating philosophies allowing good
opportunities for management and staff and offering customers
access to a wider UK network of hotels.''
* Commenting on the Offer, Martin Bolland of Alchemy Partners said:
"We believe that the Offer will enable the Scottish Highland
Group hotels to benefit from the financial, management and
marketing resources of being part of a larger hotel group."
* Michael Purtill, Managing Director of Paramount Hotels Group,
commented:
"We are pleased to have completed negotiations with Scottish
Highland to enable us to make the Offer. We believe that
Scottish Highland's portfolio of hotels and their management
style will compliment our own portfolio and management in a way
that will allow the new merged group to prosper and to access new
opportunities"
The above summary must be read in conjunction with the full text of the
following announcement.
Press enquires
For further information, please contact:
Alchemy Partners
Martin Bolland 0171 240 9596
Paramount Hotels Group Limited
Michael Purtill 0113 238 0033
Ian Goulding
Apax Partners
Richard Hughes 0161 831 9133
Scottish Highland
Hamish Grossart 0468 025209
Alasdair Cameron 0141 331 6620
Bell Lawrie
Elizabeth Kennedy 0141 221 7733
Apax Partners, which is regulated by The Securities and Futures
Authority Limited, is acting for Paramount Hotels and Paramount
Hotels Investments and no one else in connection with the Offer
and will not be responsible to anyone other than Paramount Hotels
and Paramount Hotels Investments for providing the protections
afforded to customers of Apax Partners nor for giving advice in
relation to the Offer.
Bell Lawrie, which is regulated by The Securities and Futures
Authority Limited, is acting for Scottish Highland and no one else
in connection with the Offer and will not be responsible to anyone
other than Scottish Highland for providing the protections
afforded to customers of Bell Lawrie or for giving advice in
relation to the Offer.
The Offer will not be made, directly or indirectly, in, into or
from the United States, or by use of the United States mails, or
by any means or instrumentality of United States interstate or
foreign commerce, or any facility of a United States national
securities exchange nor is it being made, in, into or from Canada,
Australia or Japan. Accordingly, copies of this document are not
being and must not be mailed, forwarded, sent, transmitted or
otherwise distributed in, into or from the United States, Canada,
Australia or Japan and persons receiving this document (including,
without limitation, custodians, nominees and trustees) must not
distribute, forward, mail, transmit or send it in, into or from
the United States, Canada, Australia or Japan. All Scottish
Highland Shareholders (including, without limitation, nominees,
trustees or custodians) who would, or otherwise intend to, forward
this document to any jurisdiction outside the UK or to overseas
persons should seek appropriate advice before taking any action.
RECOMMENDED CASH OFFER ON BEHALF OF PARAMOUNT HOTELS
INVESTMENTS LIMITED FOR SCOTTISH HIGHLAND HOTELS plc
1. INTRODUCTION
The boards of Paramount Hotels Investments and Scottish Highland
announce that agreement has been reached on the terms of a
recommended cash offer for the whole of the issued and to be issued
share capital of Scottish Highland.
The Offer values the existing issued share capital of Scottish
Highland at approximately #38 million and each Scottish Highland
Share at 130p. The Offer represents a premium of approximately 51
per cent. to the Closing Price of 86p per Scottish Highland Share on
22 June 1999 (the last dealing day prior to the date on which
Scottish Highland announced that preliminary discussions were taking
place with a third party which may or may not lead to an offer being
made for Scottish Highland).
Paramount Hotels Investments is a newly incorporated company and is
a wholly owned subsidiary of Paramount Hotels. The Paramount Hotels
Group is majority owned by the Alchemy Investment Plan.
2. THE RECOMMENDED OFFER
On behalf of Paramount Hotels Investments, Apax Partners will offer
to acquire, on the terms and subject to the conditions set out or
referred to below and in Appendix I and the further terms to be set
out in the Offer Document and in the Form of Acceptance, all of the
Scottish Highland Shares on the following basis:
for each Scottish Highland Share 130p in cash
Scottish Highland Shareholders on the register at the close of
business on 13 August 1999 will be entitled to receive and retain
the interim dividend of 1.4p (net) per Scottish Highland Share in
respect of the current financial year. Scottish Highland has
announced a payment date of 6 September 1999.
Under the Offer, Scottish Highland Shares will be acquired fully
paid and free from all liens, equities, charges, encumbrances,
rights of pre-emption and other third party rights or interests of
any nature whatsoever and together with all rights now or hereafter
attaching thereto, including the right to receive and retain all
dividends and other distributions declared, made or paid on or after
17 August 1999, save as provided above.
The Offer extends to any Scottish Highland Shares unconditionally
allotted or issued prior to the time the Offer closes (or such
earlier time as is mentioned in the definition of Scottish Highland
Shares in Appendix II) as a result of the exercise of options
granted under the Scottish Highland Share Option Schemes or
otherwise.
3. UNDERTAKINGS TO ACCEPT THE OFFER
Paramount Hotels Investments has received from the Directors and
from or on behalf of certain associated persons of the Directors
irrevocable undertakings to accept the Offer in respect of their
holdings of 1,997,880 Scottish Highland Shares in aggregate
(representing approximately 6.84 per cent. of the existing issued
share capital of Scottish Highland). These undertakings will remain
binding even in the event of a higher competing offer being made for
Scottish Highland Shares unless the Offer lapses or is withdrawn.
In addition, irrevocable undertakings to accept the Offer have been
received from Dunedin Enterprise Investment Trust plc in respect of
3,560,000 Scottish Highland Shares in aggregate (representing
approximately l2.18 per cent. of the existing issued share capital
of Scottish Highland). This undertaking will cease to be binding in
the event that a third party announces a firm intention to make a
cash offer for Scottish Highland Shares by 28 August 1999 (the
making of which offer is not, or has ceased to be, subject to any
pre-condition), where the value of that competing offer is not less
than 140p per share unless Paramount Hotels Investments announces a
revised offer, with a consideration per share at least equal to such
competing offer, within seven days of such competing offer being
made (of if later, the time at which the making of the third party
offer ceases to be subject to any pre-condition).
Accordingly, Paramount Hotels Investments has commitments to accept
the Offer in respect of, in aggregate, approximately l9.02 per cent.
of the issued share capital of Scottish Highland.
4. FINANCIAL EFFECTS OF ACCEPTANCE
On the bases and assumptions set out in the notes below, for
illustrative purposes only and assuming the Offer becomes or is
declared unconditional in all respects, the following table shows
the financial effects of acceptance of the Offer on capital value
and income for a holder of one Scottish Highland Share:
(i) Capital Value
Notes (p)
Cash consideration 130
Market value of one Scottish Highland Share (i) 86
_____
Increase in capital value 44
_____
Representing an increase of 51%
Income
Gross income from re-investment of (ii) 7.52
consideration
Gross dividend income on one Scottish (iii) 5.00
Highland Share
_____
Increase in income 2.52
_____
Representing an increase of 50%
Notes:-
(i) The market value of one Scottish Highland Share is based on the
Closing Price of 86p per Scottish Highland Share on 22 June
1999, the last dealing day prior to the date on which Scottish
Highland announced that preliminary discussions were taking
place with a third party which may or may not lead to an offer
being made for Scottish Highland.
(ii) The cash consideration is assumed to be re-invested so as
to yield interest at a rate of 5.79 per cent. per annum, being
the gross redemption yield for the FTSE Actuaries 5 year Gilts
Index as published in the Financial Times on 17 August 1999
(the latest practicable date prior to the publication of this
document).
(iii)The gross dividend income from a Scottish Highland Share
is based on the total dividend of 4p (net) per Scottish
Highland Share paid in respect of the year ended 31 October
1998, together with the associated tax credit of 20/80ths of
the amount payable.
(iv) Save as referred to in note (iii) above, no account has
been taken of any liability to taxation.
5. INFORMATION ON THE SCOTTISH HIGHLAND GROUP
The Scottish Highland Group is a Scottish based hotel group with
five hotels located in Scotland and two in Northern England. The
hotels, five of which are four star and two of which are three star,
have a total of 635 bedrooms. All the hotels have conference
facilities and all but one have leisure clubs.
For the year ended 31 October 1998, Scottish Highland reported a
profit on ordinary activities before taxation and exceptional items
of #4.5 million (1997: #3.5 million) and basic earnings per share
excluding exceptional items of 13.4p (1997: 12.1p) on turnover of
#21.8 million (1997: #17.7 million). As at 31 October 1998,
consolidated net assets were #32.4 million (1997: #30.4 million).
In the six months ended 30 April 1999, Scottish Highland reported a
profit on ordinary activities before taxation of #1.1 million (1998:
#1.4 million) and basic earnings per share of 3.4p (1998: 4.0p) on
turnover of #9.3 million (1998: #10.1 million). As at 30 April 1999,
consolidated net assets were #33.0 million (1998: #31.2 million).
In Scottish Highland's Interim Statement for the six months to 30
April 1999 published on 25 June 1999 it was stated that:
"Market demand in Northern England and Scotland weakened at the end
of last year, but has recently shown encouraging signs of recovery.
Lower interest rates are likely to stimulate consumer and business
purchasing as the year progresses, and this is borne out by our
current trading returns and forward bookings, both of which are
showing an improving trend.
The second half will also benefit from the recent development
capital expenditure and initial trading from the bedroom extension
at Stirling Highland and the new leisure club at Hellaby Hall is
most encouraging. The board therefore looks to the traditionally
busier second half with greater confidence and considers that there
are currently good prospects for the recent trading improvement
continuing into next year".
6. INFORMATION ON THE PARAMOUNT HOTELS GROUP
Paramount Hotels Investments is a newly incorporated company and a
wholly owned subsidiary of Paramount Hotels. The board of directors
of Paramount Hotels Investments comprises, Michael Purtill, Ian
Goulding and Martin Bolland who are respectively managing director,
Finance director and a non-executive director of Paramount Hotels.
The Alchemy Investment Plan currently controls 87.5 per cent. and
Michael Purtill, Ian Goulding and the other senior management of
Paramount Hotels currently hold 12.5 per cent. of the issued
ordinary share capital of Paramount Hotels. In addition, the Alchemy
Investment Plan holds #16.1 million in nominal amount of 9.75 per
cent. secured subordinated loan stock in Paramount Holdings (a
subsidiary of Paramount Hotels), issued at par. In June 1998 the
Alchemy Investment Plan invested #27.2 million into Paramount
Holdings, which in conjunction with bank financing was used to
finance the #77 million acquisition of Paramount Hotels Limited,
which owned a group of five hotels, and simultaneously three
additional hotels. All eight hotels are four and five star
provincial UK hotels. In March 1999 Paramount Hotels acquired a
further hotel in Brighton.
Following these transactions, the Paramount Hotels Group now owns
nine provincial UK hotels targeted at the UK national conference and
leisure markets. Its head office is in Leeds.
Paramount Hotels Investments has entered into a credit agreement
with NatWest, Barclays and DNIB (the "Banks") pursuant to which the
Banks have agreed to make available a bridge facility of #18,000,000
to be applied towards the acquisition of Scottish Highland Shares
and costs associated with the acquisition of Scottish Highland
Shares and a term loan facility of #43,000,000 to be applied in
connection with the acquisition of Scottish Highland and towards
associated costs and capital expenditure. The Credit Agreement also
provides for a working capital facility of #1,000,000.
Paramount Hotels and Paramount Hotels Investments have also entered
into a subscription agreement with Alchemy Partners (Guernsey) and
Michael Purtill whereby, conditional upon (i) the Offer becoming or
being unconditional in all respects and (ii) the passing of certain
resolutions by shareholders of Paramount Hotels, Michael Purtill has
subscribed #49,999.82 for 25,773 ordinary shares of 1p each in
Paramount Hotels and Alchemy Partners (Guernsey) has subscribed a
maximum initial amount of #3,011,246.66 for 1,552,189 'A' ordinary
shares of 1p each in Paramount Hotels and #2,558,575 nominal amount
of 9.75 per cent. discounted subordinated secured loan stock issued
at par by Paramount Hotels Investments. The subscription agreement
also provides for the existing ordinary shareholders in Paramount
Hotels to have the opportunity to subscribe pro rata for ordinary
shares, failing which Alchemy Partners (Guernsey) will subscribe for
further 'A' ordinary shares in the amounts not taken up by ordinary
shareholders. Following the initial subscriptions (and assuming no
take up of shares by existing ordinary shareholders of Paramount
Hotels) the Alchemy Investment Plan will control 88.86 per cent. and
Michael Purtill and the other senior management will control 11.14
per cent. in aggregate of the issued ordinary share capital of
Paramount Hotels.
7. INFORMATION ON ALCHEMY PARTNERS
Alchemy Partners is a venture capital investment advisory business
established on 20 January 1997 which advises Alchemy Partners
(Guernsey).
Alchemy Partners (Guernsey) is a registered Guernsey company which
manages the Alchemy Investment Plan and carries out investments
based on recommendations put forward by Alchemy Partners. Alchemy
Partners (Guernsey) considers any recommendations and is solely
responsible for the final decision to invest.
Investors in the Alchemy Investment Plan include major banking
institutions and pension funds. The Alchemy Investment Plan
comprises 44 limited partnerships, each committed to investing
between #600,000 and #30 million per annum totalling in aggregate
more than #240 million per annum. In addition, it includes
investments from the individual partners of Alchemy Partners.
The Alchemy Investment Plan has invested or committed to invest in
aggregate approximately #358 million. In March 1999 the Alchemy
Investment Plan invested #25.42 million into Mildghosts Limited,
which in conjunction with bank financing was used to finance the
#43.9 million recommended offer for Goldsmiths Group PLC. In April
1999 the Alchemy Investment Plan invested #6.32 million into
Novaside Limited, which in conjunction with bank financing was used
to finance the #22.38 million recommended offer for Avonside Group
PLC.
No investments made on behalf of the Alchemy Investment Plan prior
to the Offer have any known connection with Scottish Highland and
none of the directors of Alchemy Partners (Guernsey) has any prior
interest in Scottish Highland.
8. ARRANGEMENTS WITH THE DIRECTORS OF SCOTTISH HIGHLAND
Alasdair Cameron, Paul Murray-Smith and Franco Galgani will continue
to be employed under their current service contracts with Scottish
Highland, as amended by letters of amendment dated 9 August 1999.
The letters of amendment provide that, in the event that the Offer
becomes unconditional Alasdair Cameron, Paul Murray-Smith and Franco
Galgani will continue to be employed for a period of 30 days from
the Offer becoming or being declared unconditional in all respects.
At the end of this period, their service contracts will be
terminated and, they will receive payments of compensation in
accordance with the terms of their respective service contracts.
Hamish Grossart, Tudor Davies and Brian Simmers will leave the board
of Scottish Highland following the Offer becoming or being declared
unconditional in all respects and will receive payments of
compensation in accordance with their respective terms of
engagement.
9. REASONS FOR THE OFFER
The board of Paramount Hotels Investments believes that full
acceptance of the Offer will:
* enable Scottish Highland Shareholders to realise their
investment in Scottish Highland without incurring dealing
charges at a price per share which is at a premium of
approximately 51 per cent. to the Closing Price of a Scottish
Highland Share on 22 June 1999;
* allow the Scottish Highland Group hotels to be integrated with
the Paramount Hotels Group and benefit from further investment
which will be provided for refurbishment and development of the
hotels; and
* enable the Scottish Highland Group hotels to benefit from the
financial, management and marketing resources of being part of
a larger hotel group.
10. MANAGEMENT AND EMPLOYEES
Subject to the arrangements with the Directors referred to in
paragraph 8 above, the board of Paramount Hotels Investments has
given assurances to the board of Scottish Highland that the existing
employment rights, including pension rights, of the employees of the
Scottish Highland Group will be fully safeguarded.
11. SCOTTISH HIGHLAND SHARE OPTION SCHEMES
The Offer extends to any Scottish Highland Shares which are
unconditionally allotted or issued while the Offer remains open for
acceptance (or before such earlier time as Paramount Hotels
Investments may, subject to the City Code, decide, not being earlier
than the date on which the Offer becomes or is declared
unconditional as to acceptances or, if later, 8 September 1999
including any so issued or allotted as a result of the exercise of
options granted under the Scottish Highland Share Option Schemes.
Paramount Hotels Investments will make appropriate proposals to
holders of options granted under the Scottish Highland Share Option
Schemes in due course, to the extent that options have not been
exercised once the Offer becomes or is declared unconditional in all
respects.
12. DE-LISTING
Upon the Offer becoming or being declared unconditional in all
respects, Paramount Hotels Investments will apply for cancellation
of the listing on the Official List of the London Stock Exchange of
the Scottish Highland Shares with effect from 20 business days from
such date. Paramount Hotels Investments intends to re-register
Scottish Highland as a private company as soon as appropriate to do
so under the relevant provisions of the Act.
13. THE DIRECTORS' RECOMMENDATION
The Directors, who have been so advised by Bell Lawrie, consider the
terms of the Offer to be fair and reasonable. In providing advice to
the Directors, Bell Lawrie has taken into account the commercial
assessment of the Directors. Accordingly, the Directors unanimously
recommend all Scottish Highland Shareholders to accept the Offer, as
they have undertaken to do in respect of holdings amounting, in
aggregate, to 1,997,880 Scottish Highland Shares, representing
approximately 6.84 per cent. of the existing issued share capital of
Scottish Highland.
14. PAYMENT OF BREAK FEE
On 1 July 1999, Scottish Highland entered into an agreement with a
potential offeror (not being Paramount Hotels Investments) pursuant
to which Scottish Highland agreed to pay #150,000 in certain
circumstances including the withdrawal by the board of Scottish
Highland of its intention to recommend an offer (on specified terms)
to be made by that other potential offeror prior to the announcement
of any such offer. This sum is now payable to that potential offeror
in terms of the agreement. The board of Scottish Highland
considered the agreement with the other potential offeror was in the
best interests of the Scottish Highland Shareholders.
15. GENERAL
The formal Offer Document, setting out the details of the Offer, and
the Form of Acceptance will be despatched by Apax Partners on behalf
of Paramount Hotels Investments as soon as practicable.
The Offer will be on the terms and will be subject to the conditions
which are set out or referred to in Appendix I hereto and in
addition those terms which will be set out in the formal Offer
Document and the Form of Acceptance in respect thereof and such
further terms as may be required to comply with the rules and
regulations of the London Stock Exchange and the provisions of the
City Code.
Save as disclosed in this announcement, neither Paramount Hotels
Investments nor so far as Paramount Hotels Investments is aware any
person acting in concert with Paramount Hotels
Investments owns or controls any Scottish Highland Shares or has any
option to purchase any Scottish Highland Shares or holds any
derivatives referenced to Scottish Highland Shares or has any
arrangement in respect of any Scottish Highland Shares (where
"arrangement" includes any indemnity or option arrangement and any
agreement or understanding, formal or informal, of whatever nature
which may be an inducement to deal or refrain from dealing).
The availability of the Offer to persons not resident in the United
Kingdom may be affected by the laws of the relevant jurisdiction in
which they are resident. Persons who are not resident in the United
Kingdom should inform themselves about, and observe, any applicable
requirements.
The Offer will not be made, directly or indirectly, in, into or from
the United States, or by use of the United States mails, or by any
means or instrumentality of United States interstate or foreign
commerce, or any facility of a United States national securities
exchange nor is it being made, in, into or from Canada, Australia or
Japan. Accordingly, copies of this document are not being and must
not be mailed, forwarded, sent, transmitted or otherwise distributed
in, into or from the United States, Canada, Australia or Japan and
persons receiving this document (including, without limitation,
custodians, nominees and trustees) must not distribute, forward,
mail, transmit or send it in, into or from the United States,
Canada, Australia or Japan. All Scottish Highland Shareholders
(including, without limitation, nominees, trustees or custodians)
who would, or otherwise intend to, forward this document to any
jurisdiction outside the UK or to overseas persons should seek
appropriate advice before taking any action.
Appendix II contains the definitions of terms used in this
announcement.
This announcement does not constitute an offer or invitation to
acquire any securities.
Press enquires
For further information, please contact:
Alchemy Partners
Martin Bolland 0171 240 9596
Paramount Hotels Group Limited
Michael Purtill 0113 238 0033
Ian Goulding
Apax Partners
Richard Hughes 0161 831 9133
Scottish Highland
Hamish Grossart 0468 025209
Alasdair Cameron 0141 331 6620
Bell Lawrie
Elizabeth Kennedy 0141 221 7733
Apax Partners, which is regulated by The Securities and Futures
Authority Limited, is acting for Paramount Hotels and Paramount
Hotels Investments and no one else in connection with the Offer and
will not be responsible to anyone other than Paramount Hotels and
Paramount Hotels Investments for providing the protections afforded
to customers of Apax Partners nor for giving advice in relation to
the Offer.
Bell Lawrie, which is regulated by The Securities and Futures
Authority Limited, is acting for Scottish Highland and no one else
in connection with the Offer and will not be responsible to anyone
other than Scottish Highland for providing the protections afforded
to customers of Bell Lawrie or for giving advice in relation to the
Offer.
MORE TO FOLLOW
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