Acquisition

 

TIDMWNS 
 
RNS Number : 4578S 
Wensum Company PLC 
19 May 2009 
 

19 May 2009 
 
 
The Wensum Company plc 
("Wensum" or the "Company") 
 
 
Planned Acquisition Completed 
 
 
Further to the Company's announcement on 6 April 2009, Wensum today announces 
that it has completed the acquisition of A&D Holdings Ltd ("Allen & Douglas"), a 
UK-based corporatewear supplier, from LA Group Ltd ("LA Group"), a South 
African-owned investment company with extensive interests in clothing 
distribution. 
 
 
The acquisition 
Allen & Douglas, a direct competitor of Wensum, specialises in the supply of 
corporatewear to the UK travel and transport sector.  It made a loss before tax 
of GBP0.4 million on turnover of GBP8.2 million in the year ended 28 February 
2008 and is estimated to have made an increased loss on reduced turnover of 
approximately GBP5.4 million in the year ended 28 February 2009 following the 
loss of some major contracts. 
 
 
Despite its recent record, however, Allen & Douglas retains an attractive 
customer franchise. Management intends to consolidate its trade into the Wensum 
structure, adopting the same approach as it has adopted within the enlarged 
Wensum since the acquisition of Crown East Group Limited in December 2008. 
Management anticipates that this process will realise additional annual overhead 
savings of at least GBP1.0 million; it also believes that the integration of 
Allen & Douglas into the enlarged Wensum will create further opportunities for 
sales development and margin improvement. 
 
 
Consideration for Allen & Douglas has taken the following form: 2,600,000 new 
ordinary shares in Wensum (the "Consideration Shares") issued to LA Group 
(representing 11.7% of Wensum's enlarged issued share capital); plus a 
GBP500,000 convertible 5% unsecured loan note (the "Loan Note") redeemable in 
March 2011.LA Group has indicated that it intends to be a long term investor in 
Wensum and has undertaken not to dispose of any of its shareholding for a 
minimum of 12 months.  It has also entered an agreement which provides for 
orderly marketing arrangements to apply in the event that it wishes to dispose 
of any of its holding of Consideration Shares in the following 12 months. 
Application will be made for the new Wensum ordinary shares issued pursuant to 
the acquisition to be admitted to trading on AIM and this is expected to become 
effective on 26 May 2009. 
 
 
The Loan Note and Preference Shares 
Wensum has agreed to table resolutions at its forthcoming AGM which if passed 
will authorise the creation and issue of 2,000,000 convertible 5% preference 
shares of 5p each (the "Preference Shares"). Subject to these resolutions being 
approved, the acquisition terms provide for the Loan Note to be redeemed and the 
Preference Shares to be issued to LA Group at a price of 25p per Preference 
Share.  The Preference Shares will be convertible into Wensum ordinary shares 
(at any time after 1 April 2010 at the holder's discretion) on a one-for-one 
basis. 
 
 
The total number of new Wensum ordinary shares to be issued under the 
acquisition terms, assuming full conversion of the Preference Shares and 
including the Consideration Shares, would represent 19.0% of Wensum's enlarged 
share capital. 
 
 
The Board of Wensum, Faithful Group Limited and New Fortress Finance Holdings 
Limited (holding in aggregate 69.5% of Wensum's current issued share capital) 
have given irrevocable undertakings to vote in favour of the relevant 
resolutions in relation to the creation and issue of the Preference Shares at 
the AGM. The acquisition of Allen & Douglas itself is not subject to shareholder 
approval. 
 
 
Wensum welcomes the support of LA Group as a long term investor in Wensum and 
has agreed to appoint to its Board a director to be nominated by LA Group. 
 
 
Based on Wensum's share price of 15.5p per share at the close of business 
yesterday and the face value of the Loan Note, the value of the consideration 
for Allen & Douglas amounts to GBP903,000. The book value of the net assets 
acquired by Wensum (on a debt-free/cash-free basis) under the terms of the 
transaction is expected to be approximately GBP2.75 million - equivalent to 
approximately 60p per new Wensum ordinary share to be issued to LA Group, 
assuming full conversion of the Loan Note. 
 
 
The Board of Wensum, with the support of its UK bankers, expects that the 
trading assets of Allen & Douglas will underpin additional banking facilities 
which will improve Wensum's short-term liquidity. 
 
 
The audited annual accounts of Wensum for the period ended 31 December 2008 will 
need to include an assessment of the effect of the acquisition of Allen & 
Douglas. Preparation of this assessment, coupled with the operational impact of 
the acquisition, will delay publication of these accounts until the end of June 
2009. 
 
 
Commenting on the acquisition of Allen & Douglas, Stuart Lyons, chairman of 
Wensum, said: 
 
 
"This transaction continues Wensum's strategy of building greater critical mass 
in the corporatewear sector and reducing its cost base as a percentage of 
revenues. It also introduces a significant new investor with a commitment to 
assist the board in driving profitable growth in the interests of all 
shareholders.  The all-paper consideration valued at GBP0.9 million is expected 
to deliver additional annual sales of some GBP5 million from a contracting 
overhead base and net assets of some GBP2.75 million." 
 
 
 
 
 
 
Enquiries: 
 
+--------------------------------------------+---------------------------+ 
| Wensum                                     | 07860 318440              | 
| Stephen Dorrell, Deputy Chairman           |                           | 
+--------------------------------------------+---------------------------+ 
|                                            |                           | 
+--------------------------------------------+---------------------------+ 
| Smith & Williamson Corporate Finance       | 020 7131 4000             | 
| (Nominated Adviser and Broker)             |                           | 
| Azhic Basirov                              |                           | 
| David Jones                                |                           | 
| Barrie Newton                              |                           | 
+--------------------------------------------+---------------------------+ 
 
 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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