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RNS Number:7915P Montpellier Group PLC 16 September 2003 MONTPELLIER GROUP PLC ("Montpellier" or the "Company") Disposal of Investment Division Montpellier is pleased to announce that it has today entered into an arrangement with Browallia International BV ("BBV") and Browallia Discount Company Limited ("Browallia"), its principal shareholders, regarding the terms on which, subject to the approval of its shareholders, the business and asset of the Investment Division of Montpellier will be transferred to Browallia and BBV will offer to sell 20 million ordinary shares in Montpellier back to Montpellier. The consideration for the transaction consists of #4,081,000 of cash and Loan Notes and #8,000,000 which will be set off against the consideration becoming due from Montpellier to BBV for the sale and purchase of 20 million ordinary shares in Montpellier at 40 pence per share. Following completion of the purchase these shares will be cancelled. Background to and reasons for the transaction Montpellier has operated three distinct businesses, comprising its mainstream Construction Division, carried out principally under the YJL name; its Property Division, carried out principally under the Cheltenham Land name, and its Investment Division conducted through Union Investment Management Limited ("UIM"). The principal reasons for the transaction are: * while the Investment Division has been successfully established as a profit centre, the Board considers the inherent risks and unpredictable nature of the returns from its investments are incompatible with the Company's objective to deliver consistent and sustainable growth in earnings and profits to its shareholders; * further, the Board believes that the diversity of Montpellier's business activities has constrained its ability, as an AIM-listed company, to develop a broader following within the investment community; * the reduction in Browallia's shareholding from approximately 51 per cent. to approximately 34 per cent. should, in the Board's view, assist in broadening the Company's shareholder base. It is therefore Montpellier's intention to retain and focus on its core construction and property businesses, which should enable investors to make a more accurate assessment of the Company's revenues and prospects. Following Completion, Montpellier will continue to develop its construction business operating throughout the UK, together with its property interests in the UK and North America. It is the Board's intention to focus on growing the construction business organically while carefully pursuing targeted acquisitions of specialised construction opportunities. The Property business will continue to generate cash for the business through realisation of its existing assets and exploitation of other opportunities. Principal terms of the proposed transaction 1. The asset to be transferred to Browallia at Completion will be the entire issued share capital of The Union Discount Company of London Limited ("UDC"), a non-trading intermediate holding company incorporated in 2002. On Completion UDC will hold all the issued shares of Union Investment Management Limited ("UIM") which was acquired by Montpellier from Union Limited in March 2002 and which is the company through which Montpellier has conducted its investment and corporate finance business. On Completion UDC will hold the following assets: * Investments + *Associated company investments o *Jarvis Porter Group PLC o *Walker Greenbank PLC + *Current asset investments o *Cathay International International Holdings Limited o *Lonrho Africa Plc o *Yorkshire Group plc o *Quadnetics Group plc o *Interregnum plc o *Cundhill International Company Limited * all the issued shares of Tobull Limited, which in turn owns all the issued shares of Bullough Limited (formerly Bullough plc) in consequence of a recommended offer which was declared wholly unconditional on 18 June 2003. * shares in companies and the benefit of loans which together comprise Montpellier's interest in a property development in Belgium, acquired by Montpellier when it acquired UIM in 2002. 2. On Completion Montpellier will * transfer to Browallia the right to carry on corporate finance business under the name "Union". The four employees of UIM and UDC and engaged in corporate finance work will also transfer to Browallia. * enter into a new lease of the fifth floor of 39 Cornhill for a period of 10 years at a rent of #32.50 per square foot with an upwards only rent review after five years and the right for either Montpellier or Browallia to terminate the lease after 18months; and * grant to Browallia an option to acquire the freehold of 39 Cornhill at a price equivalent to Montpellier's book value at the date of exercise of the option. The option will be for a period of 15 months from the date of Completion. 3. The total consideration for the transaction is #12,081,000, equivalent to Montpellier's aggregate book cost of the assets to be transferred and will be satisfied as to #8,000,000 by set off against the consideration becoming payable by Montpellier for the purchase of 20 million ordinary Montpellier shares currently owned by BBV at a price of 40 pence per share; and as to the balance of #4,081,000 by the payment of #2 million in cash and delivery to Montpellier of Loan Notes totalling #2,081,000 ("the Loan Notes"), on Completion. #1,746,000 of the Loan Notes is repayable by Browallia within six months of Completion and will in the meantime carry interest at the annual rate of 6 per cent; the balance of #335,000 is repayable within five years of Completion. The effect of the cancellation of the 20 million ordinary shares should be to significantly enhance value for shareholders, on an historic, proforma basis through increasing net assets per share and earnings per share. The cash proceeds will further strengthen Montpellier's balance sheet and the disposal of the Investment Division will significantly reduce central overheads. Following Completion, Browallia will retain 20 million ordinary shares in Montpellier, amounting to approximately 34 per cent. of the reduced issued share capital. Current trading In its interim results for the six months to 31 March 2003 announced on 30 May 2003, the Company reported steady progress in each of its three Divisions. The profit before tax for the period was #3.4 million (2002: #2.6 million). Earnings per share were 4.3p (2002: 3.9p) and net assets per share as at 31 March 2003 were 47.6p (2002: 42p). Trading in the second half of the year has continued to be in line with management's expectations. In keeping with the strategy referred to above, Montpellier has, since 13 August 2003, realised its entire shareholding in Cape Plc ("Cape") and no longer has any interest in that company. Montpellier had previously owned approximately 29.9 per cent. of Cape and realised a substantial profit on sale over its costs of acquiring the Cape shares, the proceeds of which will be used to provide additional working capital for the Company's core construction and property businesses. The transaction is conditional on the approval of Montpellier's shareholders in accordance with the requirements of Section 320 of the Companies Act. This is in view of the interest of Peter Gyllenhammar, Montpellier's Deputy Chairman, in the issued share capital of Forvaltnings AB Browallia, the holding company of Browallia; and in accordance with section 164 of the Companies Act which requires the off-market purchase by a company of its own shares to be approved by its shareholders on a special resolution. Recommendation Montpellier's directors (other than Mr Gyllenhammar who, as an interested party, has taken no part in the directors' considering of the proposed transaction) have confirmed their opinion, after consultation with Montpellier's nominated advisor, Rowan Dartington, that the proposed transaction is fair and reasonable and in the best interests of shareholders as a whole. The directors (other than Mr Gyllenhammar) recommend that shareholders vote in favour of the resolutions, as they intend to do in respect of their own shareholdings. 16 September 2003 Enquiries: Montpellier Group plc Tel: 020 7522 3200 Paul Sellars, Group Managing Director Rowan Dartington & Co. Limited Tel: 0117 933 0020 John Wakefield, director College Hill Tel: 020 7457 2020 Matthew Gregorowski Mark Garraway This information is provided by RNS The company news service from the London Stock Exchange END DISVELFFXKBBBBQ
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