Offer for TGI Plc - Part 1

RNS Number:6924O
TC Group
14 December 2001

PART 1


TGI plc

14 December 2001


Not for release, publication, or distribution in or into the United States,
Canada, Australia or Japan


                Recommended cash offer by Hoare Govett Limited

                                 on behalf of

                           TC Group A/S for TGI plc


  Summary


  * The TGI Directors and the TC Group Directors announce today that they
    have reached agreement on the terms of a recommended cash offer, to be
    made by Hoare Govett, on behalf of TC Group for the entire issued and to
    be issued share capital of TGI.


  * TC Group is a privately owned Danish company involved in the design,
    manufacture and sale of digital signal processing equipment and of digital
    audio software and hardware products.


  * The Offer:


        is 68.5 pence in cash per TGI Share, which values the existing issued
        share capital of TGI at approximately #14.8 million;


        represents a premium of approximately 34.3 per cent over the Closing
        Price of 51.0 pence for a TGI Share on 13 December 2001, being the
        last dealing day prior to the announcement of the Offer by TC Group;


        includes a loan note alternative in respect of all, or part, of the
        cash consideration due; and


        is unanimously recommended by the TGI Directors.



  * TC Group has irrevocable undertakings to accept the Offer in respect of
    a total of 8,318,955 TGI Shares, representing approximately 38.41 per cent
    of the current issued share capital of TGI.


  * The TGI Directors, who have been so advised by Bridgewell, consider the
    terms of the Offer to be fair and reasonable. In providing its advice,
    Bridgewell has taken into account the commercial assessments of the TGI
    Directors. Accordingly, the TGI Directors unanimously recommend TGI
    Shareholders to accept the Offer, as they have undertaken to do so in
    respect of their own shareholdings, which amount to 333,942 TGI Shares,
    representing approximately 1.54 per cent of the existing issued share
    capital of TGI.


  * TGI is also announcing today its interim results for the six months
    ended 30 September 2001. TGI Group's turnover and operating profit from
    continuing operations amounted to approximately #22.3m million (2000: 
    #22.5 million) and #1.2 million (#1.4 million), respectively. Profit on
    ordinary activities before taxation amounted to approximately #0.9 million
    (#1.3 million), which resulted in, basic earnings per share of 3.0 pence
    (4.6 pence). Net assets at 30 September 2001 amounted to approximately 
    #12.3 million (#11.8 million).


Commenting on the Offer, Michael Windsor, Chairman of TGI, said: "The Board of
TGI believes that the Offer from TC Group represents a fair price for the
business and enables shareholders to crystallise the value of their
investment."


This summary should be read in conjunction with the full text of the following
announcement.

Enquiries:

TC Group A/S                                                    00 45 8742 7000
Anders Fauerskov                                                Chief Executive


Hoare Govett Limited                                              020 7678 8000
Chris Fielding                                      Director, Corporate Finance
Will Shaw                                           Director, Corporate Broking

TGI plc                                                           023 9249 2555
Nigel Hamilton                                                  Chief Executive
Peter Russell                                                  Finance Director

Bridgewell Corporate Finance Limited                              020 7626 3322
Greg Aldridge
Paul Shackleton




The Offer is not being made, directly or indirectly, in or into, or by the use
of mails or any means or instrumentality (including, without limitation,
telephonically or electronically) of interstate or foreign commerce of, or any
facilities of a national securities exchange of, the United States, Canada,
Australia or Japan and the Offer is not capable of acceptance by any such use,
means, instrumentality, or facilities from or within, the United States,
Canada, Australia or Japan. Accordingly, copies of this announcement are not
being, and must not be, directly or indirectly, mailed or otherwise forwarded,
distributed or sent in, into or from the United States, Canada, Australia or
Japan and persons receiving this announcement and any related document
(including nominees, trustees or custodians) must not mail or otherwise
forward, distribute or send it in, into, or from the United States, Canada,
Australia or Japan. Doing so may render invalid any purported acceptance of
the Offer. The availability of the Offer to persons who are not resident in
the United Kingdom may be affected by the laws of the relevant jurisdictions.
Persons who are not resident in the United Kingdom should inform themselves
about and observe any applicable requirements.

The Loan Notes have not been, nor will they be, registered under the
Securities Act or under the securities laws of any state of the United States;
the relevant clearances have not been, nor will they be, obtained from the
securities commission of any province or territory of Canada; no prospectus
has been lodged with, or registered by, the Australian Securities and
Investments Commission or the Japanese Ministry of Finance; and the Loan Notes
have not been, nor will they be, registered under or offered in compliance
with applicable securities laws of any state, province, territory or
jurisdiction of Canada, Australia or Japan. Accordingly, the Loan Notes may
not (unless an exemption under relevant securities laws is applicable) be
offered, sold, resold or delivered, directly or indirectly, in or into the
United States, Canada, Australia or Japan or any other jurisdiction if to do
so would constitute a violation of the relevant laws of, or require
registration thereof in, such jurisdiction or to, or for the account or
benefit of, any United States, Canadian, Australian or Japanese person.


Hoare Govett, which is regulated in the United Kingdom by the Financial
Services Authority, is acting exclusively for TC Group and no one else in
connection with the Offer and will not be responsible to anyone other than TC
Group for providing the protections afforded to clients of Hoare Govett or for
giving advice in relation to the Offer.


Bridgewell, which is regulated in the United Kingdom by the Financial Services
Authority, is acting exclusively for TGI and no one else in connection with
the Offer and will not be responsible to anyone other than TGI for providing
the protections afforded to clients of Bridgewell or for giving advice in
relation to the Offer.

This announcement does not constitute an offer or an invitation to purchase
any securities.


For immediate release.


14 December 2001


Not for release, publication, or distribution in or into the United States,
Canada, Australia or Japan


                Recommended cash offer by Hoare Govett Limited

                                 on behalf of

                           TC Group A/S for TGI plc


 1. Introduction


    The TGI Directors and the TC Group Directors announce today that they have
    reached agreement on the terms of a recommended cash offer, to be made by
    Hoare Govett, on behalf of TC Group for the entire issued and to be issued
    share capital of TGI. TC Group is a privately owned Danish company whose
    business is the design, manufacture and sale of digital signal processing
    equipment and digital audio software and hardware products.


    The purpose of this announcement is to explain the background to the
    Offer, the reasons why the Directors of TGI consider the terms of the
    Offer to be fair and reasonable and why they unanimously recommend TGI
    Shareholders to accept the Offer.


    Appendix II contains the definitions used in this announcement.


 2. The Offer


    The formal Offer, which is subject to the conditions and further terms of
    the Offer set out in Appendix I and to be set out in the Offer Document,
    will be made on the following basis:


    for each TGI Share                       68.5 pence in cash


    In addition, there is a Loan Note Alternative available to TGI
    Shareholders (other than certain overseas TGI Shareholders) who accept the
    Offer, as described in paragraph 11 below.


    The Offer values the existing issued share capital of TGI at approximately
    #14.8 million. The Offer represents a premium of approximately 34.3 per
    cent over the Closing Price of 51.0 pence for a TGI Share on 13 December
    2001, being the last dealing day prior to the announcement of the Offer by
    TC Group.


    TGI Shares will be acquired by TC Group fully paid and free from all
    liens, charges, equitable interests, encumbrances, rights of pre-emption
    and other third party rights or interests of any nature whatsoever and
    together with all rights attaching to them from the date of the
    announcement of the Offer including, without limitation, the right to
    receive and retain any dividends and other distributions, announced,
    declared, made or payable after the date of this announcement.


 3. Undertakings to accept the Offer


    Each of the TGI Directors and certain of their connected persons have
    irrevocably undertaken to accept the Offer in respect of their respective
    holdings of TGI Shares as follows:

    Name           Number of TGI Shares  Percentage of current issued share     
                                                         capital
    W M Windsor           50,000                           0.23%
    N P Hamilton          21,496                           0.10%
    P Russell            212,596                           0.98%
    P F Crawford          49,850                           0.23%
    I B Hamilton          73,775                           0.34%
    S Russell            295,000                           1.36%
    C A Windsor           50,000                           0.23%


    These undertakings, which continue to be binding even in the event of a
    higher competing offer for TGI being announced and cannot be withdrawn
    other than in the event of the Offer lapsing, or being withdrawn, are
    given in respect of, in aggregate, 752,717 TGI Shares, representing
    approximately 3.48 per cent of the current issued share capital of TGI.


    TC Group has also received irrevocable undertakings to accept the Offer
    from Mr and Mrs N Crocker in respect of, in aggregate, 854,450 TGI Shares,
    representing approximately 3.95 per cent of the current issued share
    capital of TGI. These undertakings will also continue to be binding even
    in the event of a higher competing offer for TGI being announced and
    cannot be withdrawn other than in the event of the Offer lapsing or being
    withdrawn.


    TC Group has also received irrevocable undertakings to accept the Offer
    from the following institutional and other shareholders in respect of, in
    aggregate, 6,711,788 TGI Shares, representing approximately 30.99 per cent
    of the current issued share capital of TGI:

    Name                           Number of TGI     Percentage of current      
                                       Shares        issued share capital

    Schroder Investment              1,949,032                  9.00%
    Management Limited
    Investec Fund Managers             666,471                  3.08%
    Limited
    Britannic Investment Managers    1,039,795                  4.80%
    N E McDowell and Mrs J             611,298                  2.82%
    McDowell
    R S McDowell                     1,222,596                  5.65%
    P J McDowell                     1,222,596                  5.65%


    These undertakings will cease to be binding, in certain circumstances, in
    the event of the announcement of a competing offer for TGI, which
    represents an improvement in excess of 5.0 per cent over the value of the
    Offer.


    TC Group therefore has irrevocable undertakings to accept the Offer in
    respect of a total of 8,318,955 TGI Shares, representing approximately
    38.41 per cent of the current issued share capital of TGI.


 4. Background to, and reasons for recommending, the Offer


    The principal activities of the TGI Group are the design, manufacture and
    distribution of a wide range of high quality loudspeakers and professional
    audio equipment under the Tannoy, Martin Audio and Lab Gruppen brands. The
    TGI Group also manufactures original equipment speakers for the automotive
    industry. Its principal operations are located in England, Scotland and
    Sweden with distribution operations in North America and the Netherlands.


    Over the past two years the Board of TGI has taken a number of strategic
    steps to maximise shareholder value. This process has seen TGI
    concentrating on the professional audio and consumer hi-fi markets. In
    July 2000, TGI acquired Lab Gruppen AB, a specialist designer and
    manufacturer of digital audio amplifiers, and in March 2001 TGI disposed
    of Tannoy Audix Systems Limited, which manufactured and distributed public
    address announcement systems.


    In the year ended 31 March 2001, the TGI Group's turnover and operating
    profit from continuing operations amounted to approximately #44.5 million
    (2000: #46.8 million) and #2.1 million (#2.5 million), respectively.
    Profit on ordinary activities before taxation fell to approximately #0.1
    million (#2.4 million), largely as a result of the loss on disposal of a
    former activity. Net assets at 31 March 2001 amounted to approximately 
    #11.6 million.


    In the six months ended 30 September 2001, TGI Group's turnover and
    operating profit from continuing operations amounted to approximately 
    #22.3 million (2000: #22.5 million) and #1.2 million (#1.4 million),
    respectively. Profit on ordinary activities before taxation amounted to
    approximately #0.9 million (#1.3 million), which resulted in basic
    earnings per share of 3.0 pence (4.6 pence). Net assets at 30 September
    2001 amounted to approximately #12.3 million (#11.8 million). The
    announcement of these results, which was also released today, states that
    TGI's sales from continuing operations were level with the previous period
    but below anticipated levels reflecting more difficult trading conditions,
    particularly in international markets, and disruption caused by a change
    of distribution partner in Europe. It concludes, however, that while the
    world market environment has become more challenging in recent months,
    opportunities for further growth from new products and new distribution
    arrangements continue to exist in each of TGI's businesses. The Directors
    of TGI believe that a satisfactory performance will be achieved for the
    year as a whole.


    The TGI Directors believe that, while TGI could continue to remain
    independent given its strong brands and consistent underlying trading, it
    does face a number of strategic issues, not least of which is its relative
    size in both absolute and in stock market terms.


    Over recent years, there has been a marked lack of interest by investors
    in small companies such as TGI. The Board of TGI believes that the market
    price of a TGI Share over recent months has not reflected the true worth
    of TGI and that this situation is unlikely to change in the foreseeable
    future. Recent world events have compounded this issue for all small
    listed companies such as TGI.


    The Board of TGI therefore believes that the Offer by TC Group is fair and
    reasonable given current market uncertainties. It offers TGI Shareholders
    an opportunity to crystallise their investment in TGI for cash at a
    premium of 34.3 per cent to the Closing Price of a TGI Share on 13
    December 2001. As a result, the Board of TGI is recommending TGI
    Shareholders to accept the Offer.


 5. Information on TC Group


    TC Group, a private Danish company, was incorporated in 1998 as the
    holding company of TC Electronic A/S which itself had been incorporated in
    1989. TC Group is owned as to approximately 32 per cent each by Gert
    Frederiksen, who was the initial chairman of TC Electronic A/S and is now
    a non-executive director of TC Group, Kim Rishoj Pedersen, a non-executive
    director of TC Group who is responsible for research and development, and
    Anders Fauerskov, the chief executive of TC Group. The balance of its
    equity is owned by its employees, either directly or as beneficiaries
    under a stock ownership programme.


    TC Group is involved in the design, manufacture and sale of digital signal
    processing equipment and of digital audio software and hardware products.
    As a result of its continuously expanding library of algorithms, the
    mathematics underlying digital signal processing, TC Group is a leading
    provider of digital signal processing equipment to professional production
    and audio businesses around the world.


    TC Group has recently completed the development of a number of significant
    new digital sound technologies, which it is now seeking to introduce into
    the marketplace. This includes, the TC Group Directors believe, the first
    high quality solution integrating digital sound processing and Class D
    (digital) amplification into speakers, generating a wide range of
    advantages including improved sound quality, proprietary speaker linking
    and remote controllability.


    In the year ended 30 June 2001, TC Group made profit before taxation of
    approximately DKr 17.6 million (#1.5 million) (2000: DKr 21.5 million 
    (#1.8 million)) on turnover of approximately DKr 209.3 million (#17.4
    million) (2000: DKr 171.2 million (#14.2 million)). Net assets at 30 June
    2001 amounted to approximately DKr 91.0 million (#7.6 million).


    Since 1 July 2001, TC Group has traded in line with management's
    expectations and the TC Group Directors are confident that the year ending
    30 June 2002 will represent a further year of progress.


 6. Recommendation


    The TGI Directors, who have been so advised by Bridgewell, consider the
    terms of the Offer to be fair and reasonable. In providing its advice,
    Bridgewell has taken into account the commercial assessments of the TGI
    Directors. Accordingly, the TGI Directors unanimously recommend TGI
    Shareholders to accept the Offer, as they have undertaken to do so in
    respect of their own shareholdings, which amount to 333,942 TGI Shares,
    representing approximately 1.54 per cent of the existing issued share
    capital of TGI.


 7. Financing of the Offer


    Full acceptance of the Offer by TGI Shareholders (assuming the exercise in
    full of all outstanding options under the TGI Share Option Schemes which
    are, or as a result of the Offer become, exercisable, and in respect of
    which the exercise price is less than 68.5 pence per TGI Share) would
    result in a maximum cash consideration payable by TC Group of
    approximately #15.0 million.


    The Offer will be financed entirely through banking facilities, which have
    been provided by Jyske Bank A/S, a leading Danish commercial bank.


 8. Inducement fee arrangement


    TGI has entered into an agreement to pay TC Group an inducement fee of 
    #125,000 (exclusive of VAT) in the event that:


    (a)     before the lapsing or withdrawal of the Offer, a third party
            unconnected with TC Group announces a competing offer for TGI; or


    (b)     the TGI Directors withdraw or alter their recommendation of the
            Offer or approve or consent to the announcement of, or recommend, an
            offer made by a third party unconnected with TC Group.


 9. Directors and employees


    The Board of TC Group has confirmed to the Board of TGI that, following
    the Offer becoming or being declared unconditional in all respects, the
    existing rights, including pension rights, of all employees of the TGI
    Group will be fully safeguarded.


    The TGI Directors have agreed to resign from the Board of TGI upon the
    Offer becoming or being declared unconditional in all respects. Details of
    certain arrangements between TGI and the TGI Directors regarding the
    termination of their engagements and in connection with the Offer
    (including payments to be made to the TGI Directors) are set out in the
    Offer Document.


10. TGI Share Option Schemes


    The Offer extends to any TGI Shares which are unconditionally allotted or
    issued fully paid (or credited as fully paid) as a result of the exercise
    of options under the TGI Share Option Schemes prior to the date on which
    the Offer closes (or such earlier date as TC Group, subject to the City
    Code, may determine). Following the Offer becoming or being declared
    unconditional in all respects, appropriate proposals will be made to
    participants in the TGI Share Option Schemes who hold options exercisable
    at exercise prices of below 68.5 pence per TGI Share.




11. The Loan Note Alternative


    As an alternative to receiving any or all of the cash consideration which
    would otherwise be receivable under the Offer, accepting TGI Shareholders
    (other than certain overseas shareholders) who validly accept the Offer
    may elect to receive Loan Notes to be issued by TC Group on the following
    basis:


    for every #1 of cash consideration             #1 nominal of Loan Notes
    under the Offer


    The Loan Notes will be unsecured, but will be guaranteed as to principal
    by Barclays Bank PLC, and will be issued, credited as fully paid, in
    amounts and integral multiples of #1 in nominal value; all fractional
    entitlements will be disregarded and not paid in cash or any other form.
    The Loan Notes will bear interest (from the date of issue to the relevant
    holder of Loan Notes) in arrears at a rate of 1.5 per cent per annum below
    six month LIBOR. Interest on the Loan Notes will be payable on 30 June and
    31 December in each year (or if not a business day in any year on the
    first business day thereafter), commencing 30 June 2002. The whole, or any
    part (in integral amounts of #100) of a holder's holding of Loan Notes
    will be redeemable at par (together with accrued interest) at the option
    of the holder on any Interest Payment Date after the date falling six
    months after the date of issue of the Loan Notes to such holder upon such
    holder giving at least 30 days' written notice of redemption. Unless
    previously redeemed or purchased, the Loan Notes will be redeemed on 30
    April 2005 (or, if not a business day, on the first business day
    thereafter). The Loan Notes will, subject to certain conditions, be
    transferable but no application is intended to be made for the Loan Notes
    to be admitted to the Official List or dealt in on any stock exchange. The
    Loan Notes have not been, and will not be, registered under the Securities
    Act and should not be offered, sold, resold, delivered or distributed,
    directly or indirectly, in or into the United States, or to or for the
    account or benefit of any US person except pursuant to an exemption from,
    or in a transaction not subject to, the requirements of the Securities Act
    or the relevant securities laws of any state of the United States. The
    Loan Notes may not be offered, sold or delivered, directly or indirectly,
    in or into Canada, Australia or Japan.


    Hoare Govett has advised that, based on market conditions on 13 December
    2001 (the latest practicable date prior to the publication of this
    document), in its opinion, if the Loan Notes had then been in issue, the
    value of the Loan Notes would have been approximately 95.0 pence per #1 in
    nominal value of Loan Notes.


    The Loan Note Alternative is conditional on the Offer becoming or being
    declared unconditional in all respects. No Loan Notes will be issued
    unless, by the time the Offer becomes or is declared wholly unconditional,
    valid elections have been received for at least #0.5 million in nominal
    value of Loan Notes. If insufficient elections are received, TGI
    Shareholders who validly elect for the Loan Note Alternative will instead
    receive cash in accordance with the terms of the Offer.


    Further details of the Loan Notes will be set out in the Offer Document.


12. Compulsory acquisition and application for de-listing


    Subject to the Offer becoming or being declared unconditional in all        
    respects, if sufficient acceptances are received under the Offer, TC Group  
    intends to use the procedures set out in sections 428 to 430F of the        
    Companies Act to compulsorily acquire any outstanding TGI Shares to which   
    the Offer relates and to procure that TGI applies to the UK Listing         
    Authority for cancellation of the listing of the TGI Shares on the Official 
    List and to the London Stock Exchange for admission to trading of TGI Shares
    to be cancelled. It is anticipated that the cancellation of TGI's listing   
    and admission will take effect no earlier than the later of (i) the expiry  
    of any period during which TGI Optionholders may elect to accept proposals  
    made by TC Group in respect of subsisting options granted under the TGI     
    Share Option Schemes or (ii) the expiry of 20 business days after the Offer 
    becomes or is declared unconditional in all respects. An announcement will  
    be made following (i) the Offer becoming or being declared unconditional in 
    all respects; or (ii) the commencement of the compulsory acquisition        
    procedures under sections 428 to 430F of the Companies Act in respect of the
    TGI Shares, stating the anticipated time and date, not earlier than 20      
    business days after such announcement, when the listing of the TGI Shares on
    the Official List and their admission to trading on the London Stock        
    Exchange market for listed securities will be cancelled.


    Enquiries:

    TC Group A/S                                                00 45 8742 7000
    Anders Fauerskov                                            Chief Executive


    Hoare Govett Limited                                          020 7678 8000
    Chris Fielding                                          Director, Corporate 
    Finance
    Will Shaw                                       Director, Corporate Broking

    TGI plc                                                       023 9249 2555
    Nigel Hamilton                                              Chief Executive
    Peter Russell                                              Finance Director

    Bridgewell Corporate Finance Limited                          020 7626 3322
    Greg Aldridge
    Paul Shackleton


    The Offer is not being made, directly or indirectly, in or into, or by the  
    use of mails or any means or instrumentality (including, without limitation,
    telephonically or electronically) of interstate or foreign commerce of, or  
    any facilities of a national securities exchange of, the United States,     
    Canada, Australia or Japan and the Offer is not capable of acceptance by any
    such use, means, instrumentality, or facilities from or within, the United  
    States, Canada, Australia or Japan. Accordingly, copies of this announcement
    are not being, and must not be, directly or indirectly, mailed or otherwise 
    forwarded, distributed or sent in, into or from the United States, Canada,  
    Australia or Japan and persons receiving this announcement and any related  
    document (including nominees, trustees or custodians) must not mail or      
    otherwise forward, distribute or send it in, into, or from the United       
    States, Canada, Australia or Japan. Doing so may render invalid any         
    purported acceptance of the Offer. The availability of the Offer to persons 
    who are not resident in the United Kingdom may be affected by the laws of   
    the relevant jurisdictions. Persons who are not resident in the United      
    Kingdom should inform themselves about and observe any applicable           
    requirements.


    The Loan Notes have not been, nor will they be, registered under the
    Securities Act or under the securities laws of any state of the United      
    States; the relevant clearances have not been, nor will they be, obtained   
    from the securities commission of any province or territory of Canada; no   
    prospectus has been lodged with, or registered by, the Australian Securities
    and Investments Commission or the Japanese Ministry of Finance; and the Loan
    Notes have not been, nor will they be, registered under or offered in       
    compliance with applicable securities laws of any state, province, territory
    or jurisdiction of Canada, Australia or Japan. Accordingly, the Loan Notes  
    may not (unless an exemption under relevant securities laws is applicable)  
    be offered, sold, resold or delivered, directly or indirectly, in or into   
    the United States, Canada, Australia or Japan or any other jurisdiction if  
    to do so would constitute a violation of the relevant laws of, or require
    registration thereof in, such jurisdiction or to, or for the account or
    benefit of, any United States, Canadian, Australian or Japanese person.

    Hoare Govett, which is regulated in the United Kingdom by the Financial
    Services Authority, is acting exclusively for TC Group and no one else in
    connection with the Offer and will not be responsible to anyone other than  
    TC Group for providing the protections afforded to clients of Hoare Govett  
    or for giving advice in relation to the Offer.


    Bridgewell, which is regulated in the United Kingdom by the Financial       
    Services Authority, is acting exclusively for TGI and no one else in        
    connection with the Offer and will not be responsible to anyone other than  
    TGI for providing the protections afforded to clients of Bridgewell or for  
    giving advice in relation to the Offer.


    This announcement alone does not constitute an offer or an invitation to
    purchase any securities. Any acceptance or other response to the Offer      
    should be made only on the basis of the information to be contained in the  
    Offer Document that will be despatched to TGI Shareholders today.

MORE TO FOLLOW




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