RNS Number:2012O
Chrysalis Group PLC
31 July 2003
FOR IMMEDIATE RELEASE 31 July 2003
Chrysalis Group PLC
Proposed disposal of Chrysalis's television division
Highlights
* Disposal of Chrysalis's television division ("Chrysalis Television") to
newly formed companies backed by Bridgepoint Capital and an MBI team led by
Steve Morrison (formerly Chief Executive, Granada plc), Jules Burns
(formerly Managing Director of Operations, Granada plc) and David Liddiment
(formerly ITV Director of Channels)
* Chrysalis will receive an initial cash payment of #45.0 million on
completion, together with further deferred cash payments of up to #5.8
million. Such deferred payments will be paid as to #1.8 million following
the final determination of Completion Accounts, #3.0 million 18 months after
Completion with the remaining #1.0 million in equal instalments 30 and 36
months after Completion. The final payment of #0.5 million is conditional
on the renewal of the 'Ultimate Force' commission within 12 months of
Completion. Of the total of #50.8 million cash receivable by the Group,
#7.5 million represents the settlement of intra-group debt with the
remaining #43.3 million deemed to be consideration. Chrysalis Television
will retain #2.5 million of net tangible assets for the benefit of the
purchaser on Completion.
* The Disposal will result in an exceptional profit on disposal in excess of
#13.0 million
* The Board today declares a Special Dividend of 5.0 pence per share,
subject to completion of the Disposal, totalling #8.4 million to be funded
out of the net cash proceeds of the Disposal
* Following the Disposal, Chrysalis will be a more focused music and media
group, with a strengthened balance sheet and be better placed to maximise
the opportunities which may arise from the new Communications Act
* Chrysalis Radio continues to outperform the industry average in respect of
revenue growth, delivering revenue growth of 15.0 per cent. for the first 10
months of the current financial year and 13.2 per cent. on a like-for-like
basis (ex-LBC / Galaxy 101). The two newly acquired LBC stations continue
to perform in line with expectations
* The Disposal is conditional, inter alia, upon the approval of
Shareholders, which is sought at an Extraordinary General Meeting to be held
on 21 August 2003
* The Directors of Chrysalis have given irrevocable undertakings to vote in
favour of the Disposal, in respect of their own beneficial holdings
representing approximately 27.8 per cent. of the existing ordinary share
capital of Chrysalis
Commenting on the Disposal, Richard Huntingford, Group Chief Executive of
Chrysalis, said:
"This is a good transaction for all stakeholders. For shareholders we are both
receiving a full price for Chrysalis Television and making a further important
step to becoming a more focused media group, capitalising on our leading
positions in music publishing and radio. For the highly talented staff of
Chrysalis Television, they become the principal building block of a new
television business with significant global ambitions."
Commenting on the Disposal, Chris Wright, Chairman of Chrysalis, said:
"This transaction puts the Group in an excellent position to benefit from any
opportunities which may arise from the regulatory changes introduced by the new
Communications Act."
There will be a conference call for analysts at 3.30pm today.
Enquiries
Chrysalis Group PLC
Richard Huntingford, Group Chief Executive 020 7470 1057 / 07802 793 444
Harriet Finney, Corporate Communications Director 020 7465 6272 / 07811 370 957
Dresdner Kleinwort Wasserstein
Charles Batten, Managing Director 020 7623 8000
Buchanan Communications
Mark Edwards 020 7466 5000
Bobbie Swanson
Dresdner Kleinwort Wasserstein, which is authorised and regulated by the
Financial Services Authority, is acting for Chrysalis Group PLC and no-one else
in connection with the contents of this announcement and will not be responsible
to anyone other than Chrysalis Group PLC for providing the protections afforded
to customers of Dresdner Kleinwort Wasserstein, or for affording advice in
relation to the contents of this announcement or any matter referred to herein.
Dresdner Kleinwort Wasserstein has given and has not withdrawn its consent to
the issue of this announcement with the inclusion of the references to its name
in the form and context in which it is included.
31 July 2003
Chrysalis Group PLC
PROPOSED DISPOSAL OF CHRYSALIS'S TELEVISION DIVISION
Introduction
On 25 April 2003 and further on 13 June 2003, the Board of Chrysalis announced
that it had entered into exclusive discussions in respect of a potential
disposal of its television division ("Chrysalis Television"). Today, the Board
announces that it has reached agreement to sell Chrysalis Television for cash
payments totalling #50.8 million of which #7.5 million represents the settlement
of intra-group debt. The proposed special purpose vehicles for acquiring
Chrysalis Television are new companies set up for the purposes of the relevant
acquisitions and are backed by Bridgepoint Capital and an MBI team led by Steve
Morrison (formerly Chief Executive, Granada plc), Jules Burns (formerly Managing
Director of Operations, Granada plc) and David Liddiment (formerly ITV Director
of Channels).
Chrysalis will receive an initial cash payment of #45.0 million on completion,
together with further deferred cash payments of up to #5.8 million. Such
deferred payments will be paid as to #1.8 million following the final
determination of Completion Accounts, #3.0 million 18 months after Completion
with the remaining #1.0 million in equal instalments 30 and 36 months after
Completion. The final payment of #0.5 million is conditional on the renewal of
the 'Ultimate Force' commission within 12 months of Completion. Of the total of
#50.8 million cash receivable by the Group #7.5 million represents the
settlement of intra-group debt with the remaining #43.3 million deemed to be
consideration. Chrysalis Television will retain #2.5 million of net tangible
assets for the benefit of the purchaser on Completion.
The Board believes that it is appropriate to return a proportion of the cash
proceeds of the Disposal to Shareholders. Accordingly, the Board is declaring a
Special Dividend of 5.0 pence per share, totalling #8.4 million, to be funded
out of the cash consideration payable on Completion.
In view of the size of the Disposal relative to the size of the Group, the
Disposal is conditional, inter alia, upon the approval of Shareholders, which
will be sought at an Extraordinary General Meeting of the Company to be held at
The Chrysalis Building, Bramley Road, London W10 6SP on 21 August 2003 at 11.00
a.m.
Background to and reasons for the Disposal
With its roots in the music business, Chrysalis has successfully built, through
both acquisition and organic development, a group with significant scale in each
of its chosen media sectors: music publishing and distribution, radio
broadcasting, television production and book publishing. The Group has focused
on markets where the Board believes the opportunity exists to create competitive
advantage through the development of original content and to exploit strong
growth prospects.
Recently, the Board has taken steps to achieve greater focus for the Group and,
as stated in the Annual Report for 2002, it continuously reviews the development
and prospects of its main businesses with a view to maximising value for
Shareholders. In addition, if the Board believes a business would generate
greater value for the Group if it were independent or managed within another
company, then the Board would consider plans to realise that value.
In May 2002, with a view to improving its operating performance, the Board
instigated a restructuring of Chrysalis Television, with Richard Huntingford,
Group Chief Executive, assuming overall reporting responsibility. The success of
this restructuring has been evident in the financial performance of this
division in the six months to 28 February 2003, which showed a doubling of
operating profits over the same period last year.
In April 2003, Bridgepoint Capital approached the Board with an indicative offer
for Chrysalis Television. After careful consideration and a detailed review of
the division's growth prospects, the Board concluded that the indicative offer
was attractive and reflected the inherent value of Chrysalis Television. In
addition, the Board believes that the Continuing Group would benefit from a more
focused corporate structure, with a stronger balance sheet and would, therefore,
be better positioned to maximise opportunities which may arise from the new
Communications Act, due to come into force in December 2003.
Information on Chrysalis Television
Chrysalis Television is one of the leading independent TV production groups in
the UK with offices in The Netherlands and New Zealand, and employs some 264
people worldwide. Chrysalis Television develops, produces and distributes high
quality, peak-time entertainment programmes with the aim of developing long-term
value and worldwide appeal.
The division's drama company, Bentley, has enjoyed considerable success with '
Midsomer Murders', the sixth series of which was ranked in the top fifty shows
of 2002 by viewing figures. Chrysalis Television has sold 'Midsomer Murders' to
over 150 countries, with ITV commissioning series seven and eight for production
this year and next respectively. Bentley has also had success with 'Ultimate
Force', a second series of which has recently been aired on ITV.
Cactus, the division's entertainment company, continues to develop with 'Richard
and Judy', whose high profile guest list has attracted audiences of more than 2
million viewers. Channel Four has recently confirmed that it wishes to
re-commission the show to at least the end of 2004.
Chrysalis TV, the Group's sport and factual entertainment company, has continued
to enjoy success with 'Formula One' and 'World Rally' coverage, winning BAFTA
and RTS nominations, and '5th Gear', the third series of which is currently in
production.
The division has overseas production companies, with IdtV in The Netherlands and
South Pacific Pictures, based in New Zealand. South Pacific Pictures is best
known in the UK for its long running drama series 'Shortland Street' and is now
gaining critical acclaim for its feature film 'Whale Rider'.
A summary of the financial performance of Chrysalis Television is given in the
table below.
Years ended
#m 31 August 2002 31 August 2001 31 August 2000
Turnover 88.9 61.7 57.4
EBITDA 5.2 3.5 1.5
EBITA 4.3 3.0 1.0
Operating profit 3.6 2.5 0.5
As disclosed in the Group's unaudited interim results for the six months to 28
February 2003, Chrysalis Television generated an operating profit of #2.8
million (H1 2001: #1.2 million) on turnover of #41.2 million (H1 2001: #39.5
million). As at 28 February 2003, Chrysalis Television had net debt of #7.8
million (including inter-group debt) and net assets of #1.5 million (#22.2
million after recycling #20.7 million of goodwill previously written off to
reserves).
Summary of principal terms and conditions of the Sale and Purchase Agreement
The Sale and Purchase Agreement was entered into on 31 July 2003. Pursuant to
this Agreement, De Facto 1064 Limited has agreed to acquire Chrysalis Television
(other than the IdtV Group) and a Dutch special purpose vehicle, yet to be
established, has agreed to acquire the IdtV Group. Chrysalis will receive an
initial cash payment of #45.0 million on completion together with further
deferred cash payments of up to #5.8 million. Such deferred payments will be
paid as to #1.8 million following the final determination of Completion
Accounts, #3.0 million 18 months after Completion with the remaining #1.0
million in equal instalments 30 and 36 months after Completion. The final
payment of #0.5 million is conditional on the renewal of the 'Ultimate Force'
commission within 12 months of Completion. Of the total of #50.8 million cash
receivable by the Group, #7.5 million represents the settlement of intra-group
debt with the remaining #43.3 million deemed to be consideration. The deferred
sums will become interest bearing on the first anniversary of Completion and be
secured by way of a debenture, creating a second charge over the assets of
Chrysalis Television. Chrysalis Television will retain #2.5 million of net
tangible assets for the benefit of the purchaser on Completion.
Completion of the Sale and Purchase Agreement is subject to certain conditions,
including the prior approval of the Netherlands Competition Authority, which is
expected to be received prior to the date of the Extraordinary General Meeting.
In view of the size of the Disposal relative to the size of the Group,
Completion is also conditional upon the approval by Shareholders of an ordinary
resolution at the Extraordinary General Meeting on 21 August 2003.
Use of proceeds and the financial effects of the Disposal
The Transaction will give rise to a profit on disposal in excess of #13.0
million (after costs, expensing #20.7 million of recycled goodwill previously
eliminated against reserves and the capitalisation and write off of #5.0 million
of intra-group debt not being repaid). The net cash receiveable will be used,
in part, to pay the Special Dividend, discussed below, with the remaining
proceeds used to reduce the net indebtedness of the Group. The Group had net
debt of #59.8 million as at 28 February 2003 as reported in the Group's interim
results.
The Directors consider that the value to the Chrysalis Group justifies the
consideration received from the Disposal.
In the event of a termination of the Sale and Purchase Agreement for fundamental
breach prior to Completion, the Group may be required, in certain circumstances,
to pay certain amounts to De Facto 1064 Limited.
Special Dividend
The Board today declares a Special Dividend of 5.0 pence per ordinary share,
totalling #8.4 million, payable from the proceeds of the Disposal. Subject to
completion of the Disposal, the Special Dividend will be paid on 15 September
2003 to Shareholders on the Register of Members at 29 August 2003.
Current trading and prospects
The Chrysalis Group announced its interim results for the six months ended 28
February 2003 on 6 May 2003, reporting turnover of #125.5 million (H1 2002:
#113.7 million), operating profit of #5.3 million (H1 2002: #3.3 million) and
profit before tax and exceptional items of #2.8 million (H1 2002: #1.4 million).
The post tax profit of #8.0 million (H1 2002: #0.7 million) included #6.3
million of exceptional profits (H1 2002: #0.7 million exceptional loss).
Chrysalis Radio continues to outperform the industry average in terms of revenue
growth and has delivered 15.0 per cent. growth for the first 10 months of the
2003 financial year, which compares very favourably to an estimated industry
growth which the Directors believe to be in the region of 1.0 per cent.
Chrysalis Radio revenues, ex-LBC/Galaxy 101, grew at 13.2 per cent. over the
same period. In addition to this strong revenue performance, the results of
Quarter 1 2003 Rajar survey, announced on 8 May 2003, showed solid growth over
the previous 12 months in the number of listeners tuning into the division's
Heart and Galaxy music networks. In the important London market, Heart 106.2
overtook Capital 95.8, by market share, for the first time in the 25-44 age
demographic. The two newly acquired LBC stations continue to perform in line
with the Board's expectations, with the recently restated Rajar figures for the
stations showing a near doubling of listening hours on the all-important FM
frequency. Quarter 2 2003 audience figures were released earlier today and are
the subject of a separate announcement. The Board remains confident that the
full year results for Chrysalis Radio will show another year of strong revenue
growth.
Chrysalis Music continues to perform in line with the Board's expectations, with
all areas of the division performing to budget for the full year.
In May 2003, the Board announced a restructuring of Chrysalis Books. While the
restructuring has begun to deliver operational benefits, the process has
identified further non-recurring items which the Board believes prudently should
be reflected in this year's accounts and which, consequently, will prevent a
return to profitability for Chrysalis Books in the current financial year. The
Board is confident, however, that under its new management and operational
structure, the division will deliver improved levels of profitability in 2004.
Chrysalis Television has delivered a strong performance in the financial year to
date, indicating that the division will be ahead of management expectations for
the year. Midsomer Murders has been the key driver of the strong financial
performance with additional revenue from further repeats. The operating results
of the division will only be included in the consolidated financial statements
for approximately 11 months of the 2003 financial year.
Overall, the trading performance from the Group's radio, music and television
businesses in the second half of the financial year has largely offset the
disappointing position at Chrysalis Books.
Future Strategy
The Disposal will be a further step towards Chrysalis becoming a more focused
music and media group. The Group's investment of the past five years in music
publishing rights has secured the Group's position as the leading UK independent
music publisher. Despite the difficulties faced by the music majors, the Board
believes Chrysalis Music will be able to increase levels of profitability and
grow the underlying value of the music publishing catalogue.
Chrysalis Radio continues to be recognised as one of the best performers in the
industry on the basis of revenue growth. The Board believes that the Radio
division's major market, brand-led strategy will deliver further significant
organic growth over the next few years as it continues towards its goal of
market leadership in its broadcast areas. In addition, the Board believes the
division's strong management track record, both in terms of acquisition and
organic development, puts Chrysalis Radio in an excellent position to capitalise
on any opportunities arising from the regulatory changes introduced by the new
Communications Act.
Irrevocable undertakings
The Directors of Chrysalis have given irrevocable undertakings to vote in favour
of the Disposal, in respect of their own beneficial holdings representing,
approximately 27.8 per cent. of the existing ordinary share capital of
Chrysalis.
Further information
A circular to Shareholders providing further information on the Disposal and
containing a notice of the Extraordinary General Meeting to be held at The
Chrysalis Building, Bramley Road, London W10 6SP on 21 August 2003 will be
posted to shareholders shortly.
Enquiries
Chrysalis Group PLC
Richard Huntingford, Chief Executive 020 7470 1057 / 07802 793 444
Harriet Finney, Corporate Communications Director 020 7465 6272 / 07811 370 957
Dresdner Kleinwort Wasserstein
Charles Batten, Managing Director 020 7623 8000
Buchanan Communications
Mark Edwards 020 7466 5000
Bobbie Swanson
Dresdner Kleinwort Wasserstein, which is authorised and regulated by the
Financial Services Authority, is acting for Chrysalis Group PLC and no-one else
in connection with the contents of this announcement and will not be responsible
to anyone other than Chrysalis Group PLC for providing the protections afforded
to customers of Dresdner Kleinwort Wasserstein, or for affording advice in
relation to the contents of this announcement or any matter referred to herein.
Dresdner Kleinwort Wasserstein has given and has not withdrawn its consent to
the issue of this announcement with the inclusion of the references to its name
in the form and context in which it is included.
APPENDIX
The following principal definitions apply throughout this announcement unless
the context requires otherwise:
"Chrysalis Television" or " the television division of Chrysalis the subject of the Disposal more
Television Division" particularly comprising the Television Companies, the IdtV Group and the
SPP Group
"Chrysalis" or "Group" Chrysalis Group plc
"Completion" completion of the Sale and Purchase Agreement in accordance with its terms
"Completion Accounts" the unaudited balance sheet as at 30 June 2003 and profit and loss account
for the period from 31 August 2002 to 30 June 2003 (including a statement
of net assets) of Chrysalis Television to be prepared following Completion
"Continuing Group" Chrysalis and its subsidiary undertakings, excluding Chrysalis Television
"Directors" or "Board" the directors of Chrysalis or a duly authorised committee thereof
"Disposal" the proposed disposal of Chrysalis's Television Division in accordance
with and on the terms and conditions of the Sale and Purchase Agreement
"Dresdner Kleinwort Wasserstein" Dresdner Kleinwort Wasserstein Limited
"EBITDA" earnings before deductions of interest, tax, depreciation, amortisation
and exceptional items
"EBITA" earnings before deductions of interest, tax, amortisation and exceptional
items
"Extraordinary General Meeting" the extraordinary general meeting of the Company which has been convened
for 11.00 a.m. on 21 August 2003, notice of which is set out at the end of
this document
"IdtV Group" Chrysalis IDTV Media Group B.V.
Maatschap Sealord, a partnership
LUCID Productions VOF, a partnership
D&D Felderhof VOF, a partnership
Morton Hill B.V.
MMM Productions B.V.
De Tweeling B.V.
IDTV Portugal
Iman IDTV SL
IDTV Belgium B.V.BA
IDTV international B.V.
IdtV Holding B.V.
idtV Producties B.V.
TVTV Producties B.V.
IdtV Film & Video Productions B.V.
Martsell Communicatie Projecten B.V.
idtV Dits
idtV Theater B.V.
idtV Fiction B.V.
idtV Cultuur B.V.
idtV Agency B.V.
idtV Projects B.V.
idtV Quote B.V.
idtV Film B.V.
IdtV Film Projects B.V.
IDTV (UK) Limited
Redforest B.V.
IDTV Cumulus B.V.
"Shareholders" holders of Chrysalis Shares
"Special Dividend" the 5.0p special dividend payable, conditional on the completion of the
Disposal, to shareholders on the register at 29 August 2003
"SPP Group" or "South Pacific Sandalwood Holdings Limited
Pictures" South Pacific Pictures Investments Limited
Sequel Productions Limited
South Pacific Pictures Limited
South Pacific Pictures Serials Limited
South Pacific Pictures Productions Limited
South Pacific Pictures Pty Limited
"Television Companies" or " Chrysalis Television Limited
Television Business"
Chrysalis Television Midlands Limited
Bentley Productions Limited
Cactus TV Limited
Chrysalis Television International Limited
Chrysalis TV and Film (Overseas) Limited
Red Rooster Television Limited
Max Headroom Limited
Tandem Television Limited
Watchmaker Productions Limited
Lucky Dog Limited
Assembly Film & Television Limited
Chrysalis Sports Inc
Sandalwood Holdings Limited
"United Kingdom" or "UK" the United Kingdom of Great Britain and Northern Ireland
This information is provided by RNS
The company news service from the London Stock Exchange
END
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