Update on disposal & cancellation of AIM quotation (1835D)

TIDMWEST

RNS Number : 1835D

Western & Oriental plc

18 March 2011

18 March 2011

Western & Oriental plc

("Western & Oriental" or the "Company" or the "Group")

Update on the disposal of the brands and certain assets of the travel division and Cancellation of the Company's Ordinary Shares to trading on AIM

The Board of Western & Oriental, the luxury and specialist travel group, today wishes to provide an update in relation to the strategic objectives of the Company and proposed cancellation of the Company's Ordinary Shares to trading on AIM (the "Cancellation").

Update on the disposal of the brands and certain assets of the travel division ("the Travel Business")

Following the previous announcements made on 26 January 2011 and 1 February 2011 in relation to the proposed disposal of the Company's Travel Business and the strategic future of the group, the Board is pleased to announce that the discussions in relation to the sale of the Travel Business continue to progress well with Furze International Limited which is owned by the Kumar Family Trust of which Raj Kumar, a Director of the Company, is a beneficiary ("the Purchaser"). Shareholder approval for this disposal will be sought at a General Meeting.

Following the announcement on 1 February 2011, the terms of the offer, which are acceptable to the Board, have now been amended to reflect the following conditions:

1. Total consideration of GBP1.5m. The consideration will be effected by the deemed repayment of the GBP800,000 loan, which Mr Kumar has provided to the Company, as announced on 21 December 2010, and the balance of GBP700,000 to be satisfied by the assumption by the Purchaser of Travel Business trade liabilities of GBP700,000. If the proposed transaction does not gain sufficient shareholder support, the Company will need to repay the GBP800,000 loan in cash or convert it into shares in the Company or a combination of the two;

2. The Purchaser will acquire all the brands and certain assets of the Travel Business, specifically the forward order book as at 1 March 2011. The net customer monies relating to those forward orders currently stands at GBP4,600,000;

3. The Purchaser will take over the lease of all properties operated by the Travel Business but not the existing lease of the Group's head office, Welby House in Victoria. The Company intends to put in place a service agreement in relation to the space and services provided to the Travel Business in Welby House that will take over approximately 50 per cent of the overhead cost. Total savings from reduced lease obligations of approximately GBP200,000 per annum are expected.

Western & Oriental's Travel Business reported a loss from continuing operations of GBP6.1m on revenues of GBP32.9m for the year ended 30 September 2010 (GBP940,000 profits on revenues of GBP32.1m for the year ended 30 September 2009).

As previously announced, the Board intends to seek shareholder approval for the disposal of the Travel Business (the "Disposal"). The Disposal will require approval by shareholders representing at least half the votes cast in general meeting and it is intended that a resolution to approve the Disposal will be proposed at the General Meeting.

In view of the delay in finalising the disposal of the Travel Business, the Board has agreed with Mr Raj Kumar that the shareholder loan of GBP800,000 provided by him to the group will be extended to a date no later than 30 June 2011. Mr Kumar will be granted a debenture over the shares of Western & Oriental Travel Limited and Regent Holidays (U.K.) Limited for agreeing to this extension and the terms of the Disposal.

Mr Kumar is deemed to be a related party for the purposes of AIM rule 13 in relation to the changes to the agreement now being made and the Disposal. The Company's directors, with the exception of Mr Kumar, who is involved in the transactions as a related party, consider, having consulted with the Company's nominated adviser, that the terms of the transactions are fair and reasonable insofar as its shareholders are concerned.

Current Trading

Following completion of the Disposal, the Company will continue to own its events division which is currently trading in line with management expectations. The division generated profit from continuing operations, before central costs, of approximately GBP700,000 on revenues of GBP13.8m for the year ended 30 September 2010 and GBP1.98m profits from continuing operations, before central costs, on revenues of GBP21.37m for the year ended 30 September 2009.

Corporate costs incurred so far and the loss generated by the travel division for the year to date will result in the Company showing a loss for the current financial year but once the full benefits of the Cancellation and the Disposal have borne fruit, the Board believes that the Company can return to profitability.

Cancellation of the Company's Ordinary Shares to trading on AIM

As a key part of the Board's attempts to reduce corporate costs, the Board is also announcing today its intention to seek shareholder approval for the cancellation the Company's Ordinary Shares to trading on AIM. Cancellation of the Company's Ordinary Shares to trading on AIM requires approval by shareholders representing at least three-quarters of votes cast in general meeting, and it is intended that a special resolution to approve the Cancellation will be proposed at the General Meeting.

In reaching its decision to seek the cancellation, the Board has considered the following matters:

- The ongoing costs of the AIM listing have a negative impact on the Company's profits and can no longer be justified in relation to the Company's size and market capitalisation. If the Company's shares cease to be quoted on AIM, the Board expects to make savings in excess of GBP200k annually. The Board believes that these funds can be better deployed as additional working capital in the business.

- A disproportionate amount of senior management time has previously been devoted to meeting quoted company requirements. Following the cancellation, management time will be focussed wholly on making the business more profitable.

- There is very little liquidity in the Company's shares having a considerable negative effect on the perceived market value of the group.

- The current market capitalisation creates an artificially low starting point for discussions with any potential buyer of the business, and would not help to realise appropriate value in relation to the future sale of any of the group's businesses.

- The AIM quotation of its shares offers the Company no benefit in the trading of its individual businesses.

- The Company intends to pursue a strategy of profitability rather than growth going forward.

For the reasons set out above and following conversations with certain institutional shareholders, the Board has concluded that it is in the best interests of the Company to proceed with the Cancellation as soon as practicable.

The Board recognises that cancelling the Company's AIM quotation could make it more difficult for shareholders to trade in the Company's shares. Therefore the Company intends to put in place a facility whereby the Company Secretary will seek to assist shareholders to trade in the Company's shares with other shareholders. The Company will continue to communicate with shareholders through the Company's website.

An explanatory circular ("the Circular") setting out the details of the Disposal and Cancellation is expected to be sent to shareholders on 22 March 2011, giving Notice of the General Meeting at which the Resolutions will be put before shareholders. The General Meeting is expected to take place on 7 April 2011.

Indicative Timetable

2011

22 March: Circular and Notice of General Meeting to be sent to all shareholders.

7 April: General Meeting.

15 April: Cancellation of the Company's Ordinary Shares to trading on AIM effective (assuming the Resolution is passed by shareholders).

A further announcement will be made on the day the Circular is posted to shareholders confirming the exact dates.

Enquiries:

 
 Western & Oriental plc 
 Pavlos Savvides, Chairman    [phone] 
 
 Collins Stewart 
 Adrian Hadden                [phone] 
 
 

About Western & Oriental plc

Western & Oriental is a specialist luxury travel group with a number of established high quality brands. The company was admitted to trading on AIM under the ticker symbol WEST in March 2006. The Group acts as a tour operator, travel agent and conference and incentive organisers, offering a premium service for tailor-made and specialist packaged holiday programmes to destinations worldwide.

For more information on Western & Oriental and its individual luxury travel brand websites, go to www.westernorientalplc.com.

This information is provided by RNS

The company news service from the London Stock Exchange

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