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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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Coffee Republic | LSE:CFE | London | Ordinary Share | GB00B3DDNZ25 |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 22.00 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
RNS Number : 2503I Coffee Republic PLC 17 November 2008 17 November 2008 Coffee Republic Plc ("Coffee Republic" or the "Company") Approval for waiver of obligation under Rule 9 of the City Code on Takeovers and Mergers Placing of up to 2,666,667 New Ordinary Shares at 30p per share to enable Debt Compromise Irrevocable subscriptions already received for over 2,000,000 New Ordinary Shares representing over £600,000 Peter Breach (Chairman), Steven Bartlett (Vice-Chairman) and James Muirhead (Finance Director) all participating in Placing either directly or through related parties Trading Update Change of Nominated Adviser and Broker and Notice of Extraordinary General Meeting Coffee Republic announces that it has negotiated a significant restructure of the Company's finances which, provided the necessary resolutions are approved at the forthcoming EGM, will benefit the Company substantially and place the business on a sound financial footing. Chairman and CEO Peter Breach said: "Our portfolio of UK and International franchise outlets is growing consistently, as are the associated revenues. With the additional benefit of the restructure, I look forward to the future with confidence." Steven Bartlett, Vice Chairman commented: "The Company can now move forward firmly and decisively. I would like to thank our loyal shareholders for their continued support and belief in the brand." James Muirhead, Finance Director said "The debt compromise with Barclays offers the Company a significant opportunity to eliminate its debt position on commercially attractive terms and move towards a cash flow positive and self-funding position." The Company has agreed to a debt compromise arrangement with Barclays (the "Debt Compromise"). In order to fund the payment required to be made to Barclays under the terms of the Debt Compromise, and to raise further working capital, the Company intends to complete a placing of up to 2,666,667 New Ordinary Shares at a price of £0.30 per New Ordinary Share. In order to conclude the Placing and the Debt Compromise, it is necessary to seek an extension to the existing shareholder authorities obtained at the recent annual general meeting to enable the Directors, amongst other matters, to allot New Ordinary Shares for cash on a non pre-emptive basis pursuant to the Placing and the Warrant Agreement. The Directors consider the Proposals to be in the best interests of the Company and the Shareholders as a whole. In addition, the Independent Shareholders will be asked to waive an obligation on the Concert Party which will arise under Rule 9 of the City Code as a result of their subscription for New Ordinary Shares pursuant to the Placing, and/or the grant of options pursuant to the Proposed Option Awards. A circular has been sent to Shareholders seeking their approval of the Proposals. The Circular contains a notice convening an Extraordinary General Meeting of the Company to approve the Proposals, to be held on 1 December 2008. BACKGROUND TO AND REASONS FOR THE DEBT COMPROMISE AND PLACING Agreement has been reached in relation to the compromise of the existing debt owed by the Company to Barclays under certain existing facilities. In outline, Barclays has agreed to release the Debt in exchange for a single compromise payment and the issue to Barclays of warrants over 250,000 Ordinary Shares at an exercise price of £0.50 per Ordinary Share. Whilst the detailed terms of the Debt Compromise are commercially sensitive, it is the unanimous view of the Directors that the terms of the Debt Compromise represent an extremely favourable deal for the Company and its Shareholders. The Directors believe that the Debt Compromise will enable Coffee Republic to bring into balance its current cash flow position and place the Company on a sound footing for future growth. Additional working capital is required in the short term, and accordingly the Company proposes to raise additional funds to those required to satisfy the Debt Compromise. Adequate irrevocable acceptances have been received to enable the Debt Compromise to proceed and to provide additional working capital, subject to approval of the relevant resolutions at the EGM. The Board anticipates further irrevocable acceptances from investors in the coming days. CURRENT TRADING AND PROSPECTS Total Coffee Republic outlets have now reached 200 and cumulative like-for-like network sales since the beginning of the financial year (excluding those bars recently returned to Company ownership) are up 0.6 per cent., which is an improvement since the time of last month's AGM statement. Total network sales are now running at 30 per cent greater than at this time last year. For the six months ended 28 September 2008, weekly franchise and concession income has covered head office costs. Before the calendar year end the Company is expecting 10 more UK and international outlets to open. The Company's debt position has constrained the extent to which the Company has been able to fund investment from its own cash resources for a number of years. The Debt Compromise with Barclays offers the Company a significant opportunity to eliminate this debt on commercially attractive terms and move towards a cash flow positive and self-funding position. Shareholders should note that, although funds have been committed, if the relevant resolutions are not passed at the EGM to allow the Placing to occur, the Debt Compromise cannot be completed, in which case the future prospects for the Company would be uncertain. TABLE SHOWING GROWTH OF BARS AND OTHER OUTLETS As at 25 March 2007 As at 30 March 2008 As at 28 August 2008 As of 5 November 2008 Company Operated Bars 16 7 16 19 Franchise Operated Bars 25 53 53 53 Co-branded CR locations/*CR 2 109 114 114 Served Here* Total CR locations in the UK 43 169 183 186 International Bars - 5 9 14 Total CR Locations Worldwide 43 174 192 200 Regional Development 6 10 4 3 Franchises International Master 2 10 12 12 Franchises THE PLACING It is a condition to the Debt Compromise that Barclays receives the compromise payment referred to above on 2 December 2008. Given the prevailing economic conditions, the Directors believe that this deadline can only be met, and the Placing carried out on terms favourable to the Company, if members of senior management participate in the Placing to demonstrate their commitment to, and support of, the Company. Accordingly, the Company has received irrevocable commitments from Surthurst Limited (a company related to Peter Breach) and a related party of Steven Bartlett to subscribe for 1,000,000 New Ordinary Shares in aggregate at the Placing Price of £0.30 per New Ordinary Share, conditional upon (i) the passing of the Resolutions other than resolution 5; (ii) investors (including certain Directors and Concert Party members) entering into irrevocable undertakings in substantially similar form to subscribe for New Ordinary Shares for an aggregate subscription amount of not less than £500,000; and (iii) admission of the New Ordinary Shares to be subscribed by them to trading on AIM occurring no later than 2 December 2008. The Directors anticipate receipt of further irrevocable undertakings from potential placees on substantially the same terms, provided that the maximum amount to be subscribed pursuant to the Placing shall not exceed £800,000. Irrevocable undertakings on equivalent terms to those signed by the Committed Investors have been received in respect of further New Ordinary Shares having an aggregate subscription price of £326,500 (including an irrevocable undertaking from James Muirhead, the finance director of the Company, in relation to New Ordinary Shares having a subscription price of £10,000). Accordingly the relevant condition referred to in the paragraph above has been satisfied on the basis that commitments have been received in respect of New Ordinary Shares having an aggregate subscription price of £626,500. The Placing Price represents a premium of 1.66 per cent. to the middle market quotation on 14 November 2008, being the last practicable date prior to the posting of the Circular. Settlement and dealings Application will be made to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on AIM. It is expected that such Admission will occur on 2 December 2008. The New Ordinary Shares will, when issued, rank pari passu in all respects with the Existing Shares including the right to receive dividends and other distributions declared following Admission. Participation by Concert Party in the Placing For the purposes of the City Code, Surthurst Limited, Peter Breach, his sons Harry and Alex Breach, and Steven Bartlett (together with their respective related parties) are deemed to be a concert party with regard to their interests in the issued share capital of Coffee Republic. The Concert Party currently holds 27.39 per cent. of the entire issued capital of the Company. Under Rule 9 of the City Code, any person who acquires an interest (as such term is defined in the City Code) in shares which, taken together with the shares in which he and persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights in a company that is subject to the City Code is normally required to make a general offer to all of the remaining shareholders to acquire their shares. Similarly, when any person, together with any persons acting in concert with him, is interested in shares which in aggregate carry not less than 30 per cent. but does not hold shares carrying more than 50 per cent. of the voting rights of such a company, a general offer will normally be required if any further interests in shares are acquired by such a person. Such an offer would have to be made in cash at a price not less than the highest price paid by him, or by any member of the group of persons acting in concert with him, for any interest in shares in the Company during the 12 months prior to the announcement of the offer. As explained in more detail below, the Independent Shareholders are being asked to waive this requirement in order to permit the Placing to proceed and to secure the Debt Compromise, which will be of significant benefit to Coffee Republic. PROPOSED OPTION AWARDS As indicated in the Chairman's Statement for the year ended 30 March 2008, Peter Breach and Steven Bartlett have to date not received any compensation by way of salary since their appointment as Directors in October 2006, given the financial condition of the Company. At a meeting of the remuneration committee of the Company held on 24 September 2008, the committee determined that an appropriate award under the Company's share scheme adopted at the recent annual general meeting (or equivalent arrangements in respect of Steven Bartlett to reflect his non-employee status) should be made to each of Peter Breach and Steven Bartlett. Whilst the details of the share option awards have yet to be finalised and no award has currently been made, the committee has determined that the maximum number of Ordinary Shares over which options may be granted to each of Peter Breach and Steven Bartlett shall not exceed 191,667 (which prior to the Placing, would have ensured that the Concert Party's aggregate shareholding following the grant of the options was less than 30 per cent. of the entire issued share capital of the Company). As any grant of options pursuant to the Proposed Option Awards following Completion, or their subsequent exercise, may otherwise trigger a requirement for the Concert Party to make a mandatory offer pursuant to Rule 9 of the City Code (as explained above), the Independent Shareholders are also being asked to waive this requirement to enable option grants under the Proposed Option Awards to be made. If the Placing Whitewash Resolution is not passed, there will be no further requirement to pass the Option Whitewash Resolution (on the basis that the Concert Party's aggregate shareholding will not exceed 30 per cent. of the entire issued share capital of the Company even if the Proposed Option Awards were granted in full) and accordingly it will lapse. Whether or not the Option Whitewash Resolution is passed, separate authorities will be sought at the EGM in respect of the issue of options to Steven Bartlett pursuant to the Proposed Option Awards (it being intended that, as an employee of the Company, any options granted to Peter Breach and shares issued thereunder will not constitute "relevant securities" or "equity securities" for the purposes of sections 80 and 89 of the Act, respectively). It is currently intended that grant of options pursuant to the Proposed Option Awards will be made in December 2008, following publication of the Company's interim results for the six months ended 28 September 2008, at the then prevailing share price. The options will be subject to a two to three year vesting period, such vesting to be subject to suitable performance based criteria based on share price performance over the relevant period. Any grant of options pursuant to the Proposed Option Awards, will be subject to the approval of the remuneration committee of the Company. WAIVER OF THE OBLIGATION TO MAKE A MANDATORY OFFER UNDER RULE 9 OF THE CITY CODE IN RELATION TO THE PLACING AND THE PROPOSED OPTION AWARDS The Panel has agreed, subject to the Placing Whitewash Resolution being passed on a poll by the Independent Shareholders at the EGM, to waive the requirement under Rule 9 of the City Code for the Concert Party, collectively and/or individually, to make a mandatory offer for the Ordinary Shares not already owned by it or persons connected with it as would otherwise arise on the subscription for 1,000,000 New Ordinary Shares by the Committed Investors, as members of the Concert Party, pursuant to the Placing. The Panel has agreed, subject to the Option Whitewash Resolution being passed on a poll by the Independent Shareholders at the EGM, to waive the requirement under Rule 9 of the City Code for the Concert Party, collectively and/or individually, to make a mandatory offer for the Ordinary Shares not already owned by it or persons connected with it as would otherwise arise on the grant to each of Peter Breach and Steven Bartlett, as members of the Concert Party, of options over not more than 191,667 New Ordinary Shares pursuant to the Proposed Option Awards, and their exercise from time to time. POTENTIAL VOTING RIGHTS OF THE CONCERT PARTY Maximum holding in the event that only the Placing is sanctioned by the Independent Shareholders If the Placing Whitewash Resolution is passed at the EGM, but the Option Whitewash Resolution is not, on the assumption that: (a) 1,666,667 New Ordinary Shares (being the minimum number of New Ordinary Shares to be issued pursuant to the Placing) are issued pursuant to the Placing, of which 1,000,000 New Ordinary Shares are subscribed by the Committed Investors at a price of £0.30 per New Ordinary Share; and (b) there are no other changes to the issued share capital during the period, the voting rights attributable to the Ordinary Shares held by the Concert Party would constitute 31.91 per cent. of all the voting rights in the Company. Following completion of the Placing the members of the Concert Party will between them be interested in Ordinary Shares carrying 30 per cent. or more of the Company's voting rights, but will not hold Ordinary Shares carrying more than 50 per cent. of such voting rights and, for as long as they continue to be treated as acting in concert for the purposes of the City Code, any further increase in that aggregate interest in Ordinary Shares will be subject to the provisions of Rule 9 of the City Code. Maximum holding in the event that both the Placing and the Proposed Option Awards are sanctioned by the Independent Shareholders If both Whitewash Resolutions are passed at the EGM, on the assumption that: (a) 1,666,667 New Ordinary Shares (being the minimum number of New Ordinary Shares to be issued pursuant to the Placing) are issued pursuant to the Placing, of which 1,000,000 New Ordinary Shares are subscribed by the Committed Investors at a price of £0.30 per New Ordinary Share; (b) the Proposed Option Awards are granted and exercised in full; and (c) there are no other changes to the issued share capital during the period, the voting rights attributable to the Ordinary Shares held by the Concert Party would constitute 33.99 per cent. of all the voting rights in the Company. Following completion of the Placing and on the basis that the Proposed Option Awards are granted and exercised in full, the members of the Concert Party will between them be interested in Ordinary Shares carrying 30 per cent. or more of the Company's voting rights, but will not hold Ordinary Shares carrying more than 50 per cent. of such voting rights and, for as long as they continue to be treated as acting in concert for the purposes of the City Code, any further increase in that aggregate interest in Ordinary Shares will be subject to the provisions of Rule 9 of the City Code. INTENTIONS OF THE CONCERT PARTY The Concert Party is not intending to seek any changes to the Board and has confirmed that it would be its intention that, following any increase in its proportionate shareholding as a result of the participation by the Committed Investors in the Placing and/or on the exercise of any options granted under the Proposed Option Awards, the business of the Company would be continued in substantially the same manner as at present, with no major changes. With this in mind, there will be no repercussions on employment or the location of the Company's places of business and no redeployment of the Company's fixed assets. The Concert Party is also not intending to prejudice the existing employment rights, including pension rights, of any of the employees or management of the Group nor to procure any material change in the conditions of employment of any such employees or management. EXTRAORDINARY GENERAL MEETING The Circular contains a notice convening an Extraordinary General Meeting of the Company to be held on 1 December 2008 at the offices of Osborne Clarke at 1 London Wall, London EC2Y 5EB at 11.00 a.m., at which the Resolutions will be proposed for the purposes of implementing the Proposals. Resolution 1, which will be proposed as an ordinary resolution, is to increase the authorised share capital of the Company by the creation of 6,666,667 Ordinary Shares. Resolution 2, which will be proposed as an ordinary resolution and which is subject to the passing of Resolution 1, is to authorise the Directors to allot relevant securities as follows: (a) up to 2,666,667 New Ordinary Shares having an aggregate nominal value of £160,000.02 in connection with the Placing; (b) warrants over 250,000 New Ordinary Shares having an aggregate nominal value of £15,000 in connection with the Warrant Agreement; and (c) options over up to 191,667 New Ordinary Shares having an aggregate nominal value of £11,500.02 in connection with the Proposed Option Award to Steven Bartlett, and otherwise relevant securities up to £239,545 in nominal value (representing 3,992,416 Ordinary Shares and one third of the issued share capital assuming the authorities set out in sub-paragraphs (a), (b) and (c) above are fully utilised) provided that such authority shall expire at the conclusion of the next annual general meeting of the Company except that the Company may at any time before such expiry make an offer or agreement which would or might require relevant securities to be allotted after such expiry and the directors may allot relevant securities in pursuance of such an offer or agreement as if this authority had not expired. Resolution 3, which will be proposed as a special resolution and which is subject to the passing of Resolution 2, disapplies Shareholders' statutory pre-emption rights in relation to further rights issues and the issue of equity securities pursuant to the Placing, the Warrant Agreement and the grant of options pursuant to the Proposed Option Award to Steven Bartlett on the basis set out above, and grants further authority to allot equity securities for cash on a non-pre-emptive basis up to an aggregate nominal amount of £72,589 (representing 1,209,816 Ordinary Shares and 10 per cent. of the issued share capital of the Company assuming the preceding authorities are utilised in full) provided that such authority shall expire at the conclusion of the next annual general meeting of the Company except that the Company may before the expiry of this power make an offer or agreement which would or might require equity securities to be allotted after such expiry and the directors may allot equity securities in pursuance of such an offer or agreement as if this power had not expired. Resolution 4 seeks the approval of the Independent Shareholders to the waiver granted by the Panel in connection with the Placing as set out above. Resolution 5, which is conditional on the passing of Resolution 4, seeks the approval of the Independent Shareholders to the waiver granted by the Panel in connection with the Proposed Option Awards as set out above. RECOMMENDATION IN RESPECT OF THE SHARE AUTHORITY RESOLUTIONS The Directors consider the Proposals to be in the best interests of the Company and its Shareholders as a whole and accordingly unanimously recommend Shareholders to vote in favour of the Share Authority Resolutions to be proposed at the EGM as they have irrevocably undertaken to do in respect of their beneficial holdings amounting, in aggregate, to 2,618,058 Existing Shares, representing approximately 25.1 per cent. of the existing issued share capital of the Company. INDEPENDENT RECOMMENDATION IN RESPECT OF THE PROPOSALS The Independent Directors, who have been so advised by Teathers, consider that the Proposals are in the best interests of the Company and the Independent Shareholders as a whole. Nicholas Jeffrey has irrevocably undertaken to vote in favour of the Whitewash Resolutions in respect of his own beneficial holdings amounting to 13,475 Existing Shares, representing approximately 0.13 per cent. of the existing issued share capital of the Company. In providing advice to the Independent Directors, Teathers has taken into account the Independent Directors' commercial assessments. Voting on the Whitewash Resolutions will be by means of a poll of Independent Shareholders. The Concert Party will not vote on the Whitewash Resolutions at the EGM. CHANGE OF NOMINATED ADVISER AND BROKER Coffee Republic confirms that, in accordance with AIM Rule 17, the Company's nominated adviser and broker is Teathers, a division of Straumur-Burdaras Investment Bank hf., of Berkeley Square House, Third Floor, Berkeley Square, London W1J 6BU. For further information: Coffee Republic Plc:Peter Breach, Chairman and Chief 020 7033 0600 Executive Officer James Muirhead, Finance Director 020 7033 0639 Teathers: Jeff Keating / Simon Brown 020 7426 9000 The following definitions apply throughout this announcement unless the context otherwiserequires: "Act" the Companies Act 1985 (as amended) "Admission" admission of the New Ordinary Sharesto be issued pursuant to the Placingto trading on AIM becoming effective in accordance with Rule 6 of the AIM Rules "AIM" the AIM Market operated by the London Stock Exchange "AIM Rules" the AIM rules for companies published by the London Stock Exchange from time to time "Associate" has the meaning set out in paragraph (1) of the definition of associate in the City Code "certificated form" or "in an Ordinary Share certificated form" recorded on a company's share register as being held in certificated form (namely, not in CREST) "Barclays" Barclays Bank plc "Circular" the circular posted to Shareholders in relation to the Proposals "City Code" the City Code on Takeovers and Mergers "Committed Investors" means certain Concert Party members who have signed Irrevocable Undertakings in connection with the Placing "Company" or "Coffee Republic" Coffee Republic plc "Completion" completion of the Placing in accordance with its terms "Concert Party" Surthurst Limited, Peter Breach, Harry and Alex Breach, Steven Bartlett and their related parties "Debt" the debt currently owed by the Company to Barclays under certain of its existing facilities "Debt Compromise" the conditional compromise of the Debt "Directors" or "Board" the directors of the Companyor any duly authorised committee thereof "EGM" or "Extraordinary the extraordinary General Meeting" general meeting of the Company to be heldat the offices of Osborne Clarke, 1 London Wall,London EC2Y 5EBat 11.00 a.m.on Monday 1 December 2008 "EGM Notice" or "Notice of the notice convening Extraordinary General Meeting" the EGM "Existing Shares" the Ordinary Shares in issue at the date of this announcement, all of which are admitted to trading on AIM "Form of Proxy" the form of proxy for use in connection with the EGM which accompanies the Circular "Group" the Company, its subsidiaries and its subsidiary undertakings "Independent Directors" James Muirhead and Nicholas Jeffrey "Independent Shareholders" the Shareholders other than the Concert Party "Irrevocable Undertakings" the conditional irrevocable undertakings received by the Company from the Committed Investors in connection with the Placing "London Stock Exchange" London Stock Exchange plc "New Ordinary Shares" new Ordinary Shares to be issued pursuant to the Share Authority Resolutions "Option Whitewash Resolution" the ordinary resolution of the Independent Shareholders concerning the waiver of obligations under Rule 9 of the City Code to be proposed at the EGM in connection with the grant of options pursuant to the Proposed Option Awards and set out in the EGM Notice as resolution numbered 5 "Ordinary Shares" ordinary shares of £0.06 each in the capital of the Company "Panel" the Panel on Takeovers and Mergers "Placing" the conditional placing of up to 2,666,667 New Ordinary Shares "Placing Price" £0.30 per New Ordinary Share "Placing Whitewash Resolution" the ordinary resolution of the Independent Shareholders concerning the waiver of obligations under Rule 9 of the City Code to be proposed at the EGM in connection with the issue of New Ordinary Shares to certain members of the Concert Party pursuant to the Placing and set out in the EGM Notice as resolution numbered 4 "Proposals" the Debt Compromise, the Placing, the Proposed Option Awards, and the related Waivers "Proposed Option Awards" the proposed awards of options over a maximum of 383,334 New Ordinary Shares to Steven Bartlett and Peter Breach "Resolutions" the resolutions set out in the EGM Notice "Share Authority Resolutions" the resolutions to increase the authorised share capital of the Company and granting the Directors authority to allot New Ordinary Shares to be proposed at the EGM and set out in the EGM Notice as resolutions numbered 1, 2 and 3 "Shareholders" holders of Ordinary Shares "Teathers" Teathers, a division ofStraumur-Burdaras Investment Bank hf, the Company's nominated adviser and broker "UK" the United Kingdom of Great Britain and Northern Ireland "uncertificated" or "in an Ordinary Share uncertificated form" recorded on a company's share register as being held in uncertificated form in CREST and title to which, by virtue of the Uncertificated Securities Regulations 2001, may be transferred by means of CREST "Waivers" means the waivers granted by the Panel (subject to the passing of the Whitewash Resolutions) in respect of the obligation of the Concert Party to make a mandatory offer under Rule 9 of the City Code in connection with the Placing and the Proposed Option Awards "Warrant Agreement" the warrant agreement proposed to be entered into on completion of the Debt Compromise between the Company (1) and Barclays (2) granting Barclays the right to subscribe for up to 250,000 Ordinary Shares at an exercise price of £0.50 per Ordinary Share "Whitewash Resolutions" the Option Whitewash Resolution and the Placing Whitewash Resolution This information is provided by RNS The company news service from the London Stock Exchange END STRIFFSILVLRLIT
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