TIDMBMC
RNS Number : 7439Z
Birmingham City PLC
28 September 2009
Birmingham City plc ("Birmingham City" or the "Company")
Posting of circular advising Birmingham City shareholders to accept Grandtop's
offer
The Directors of Birmingham City have today posted a circular (the "Circular")
to shareholders recommending that they accept the offer of GBP1.00 per ordinary
share by Grandtop International Holdings Limited (the "Offer"). The text of a
letter from the Chairman to shareholders setting out in detail why the Directors
of Birmingham City recommend that shareholders should accept the Offer is set
out below.
Enquiries:
+------------------------------------+------------------------------------+
| Shore Capital and Corporate | 020 7408 4090 |
| Limited | |
| Graham Shore | |
| Stephane Auton | |
+------------------------------------+------------------------------------+
Unless otherwise defined, terms used in this announcement have the defined
meaning given to them in the Circular. The Circular is available for inspection
during normal business hours on any weekday at the offices of HBJ Gateley
Wareing LLP, 2 Fleet Place Holborn Viaduct, London, EC4M 7RF during the Offer
Period and is also available for download from the Company's AIM website:
http://bcfc.aimcompliance.com.
RECOMMENDED CASH OFFER FOR BIRMINGHAM CITY BY GRANDTOP
1. Introduction
On 21 August 2009, Grandtop announced the terms of a cash offer by Grandtop to
acquire the entire issued and to be issued ordinary share capital of
Birmingham City.
The purpose of this letter is to explain the background to, and the terms of,
the Offer and the reasons why the Birmingham City Directors, who have been so
advised by Shore Capital (as independent financial adviser for the purposes of
Rule 3 under the Takeover Code), consider the terms of the Offer to be fair and
reasonable. In providing advice to the Birmingham City Directors, Shore Capital
has taken account of the Birmingham City Directors' commercial assessments. The
Birmingham City Directors unanimously recommend that all Birmingham City
Shareholders accept the Offer.
Full details of the Offer, including its terms and conditions, are contained in
the Offer Document which was posted to Birmingham City Shareholders by Grandtop
on 15 September 2009.
2. Terms of the Offer
The Offer is for the entire issued and to be issued ordinary share capital of
Birmingham City, other than Birmingham City Shares already owned by Grandtop, on
the following basis:
100 pence in cash for each Birmingham City Share
The Offer values the entire issued ordinary share capital of Birmingham City at
approximately GBP81.51 million and represents a premium of approximately 55 per
cent. to the Closing Price of 64.5 pence per Birmingham City Share on 20 August
2009, being the last Business Day prior to the Offer Announcement, a premium of
approximately 150 per cent. to the Closing Price of 40 pence per Birmingham City
Share on 11 August 2009, being the last Business Day prior to the commencement
of the Offer Period and a premium of approximately 240 per cent. over the
average Closing Price for the 6 month period prior to the Offer Announcement of
29.4 pence per Birmingham City Share.
Birmingham City Preference Shareholders should note that Grandtop has not made
an offer for the Birmingham City Preference Shares and is not obliged to do so
under the Takeover Code.
3. Background to and reasons for recommending the Offer
On 12 August 2009, Birmingham City announced that it had received an approach
from Grandtop which might lead to an offer for the entire issued share capital
of Birmingham City. Following this approach, Grandtop announced the Offer for
the entire issued and to be issued share capital of Birmingham City on 21 August
2009. Grandtop's Offer Document was posted to Birmingham City Shareholders on 15
September 2009.
Birmingham City was previously approached by Grandtop in June 2007. This
approach led to certain Birmingham City Directors selling to Grandtop, in
aggregate, 24,375,975 Birmingham City Shares, representing 29.9 per cent. of the
existing issued share capital of Birmingham City. The Birmingham City Directors
and Grandtop continued discussions with a view to Grandtop making an offer for
the remainder of the existing issued share capital of Birmingham City. However,
such discussions did not culminate in an offer, and on 20 December 2007,
Birmingham City announced that it had terminated discussions with Grandtop as
the Birmingham City Directors were no longer confident that Grandtop was able to
make an offer for Birmingham City at that time.
Grandtop has now managed to obtain the necessary financing to proceed with an
offer and this has been formally confirmed by Grandtop's financial advisers in
the Offer Document. It should be noted though that the Offer is still
conditional on approval by Grandtop Shareholders.
The Board of Birmingham City believes that the Offer represents a fair price for
Birmingham City Shares at this time. Further, the Board believes that Grandtop,
through its connections in the People's Republic of China, is well positioned to
increase the global fan base of Birmingham City FC as well as enhancing its
brand awareness. We are also reassured by Grandtop's intention to retain Alex
McLeish as first team manager. These factors, combined with the intention to
invest in strengthening the squad and the Club's infrastructure, should place
the Club in a strong position going forward.
4. Current trading and prospects
Interim results
In Birmingham City's interim results for the six months ended 28 February 2009
(the last period for which Birmingham City has published financial information),
released on 22 May 2009, Birmingham City made the following statement:
"Managing Director's Review
· Turnover for the 6 months, GBP15.6m (GBP32.6m in 2008 H1)
· Operating loss GBP4.0m (GBP7.8m profit in 2008 H1)
The figures being reported on in the six months cover the first half of the
season (entirely in the Championship) and show turnover considerably lower at
GBP15.6m (2008 H1: GBP32.6m). The 2008 figures cover the same period in the
Premier League. Operating loss before interest and taxation of GBP4.0m compared
to a profit in 2008 of GBP7.8m. Wage costs fell by GBP3.0m and there was a gain
on the sale of player registrations, GBP0.9m compared to GBP1.65m in the
previous year. The full year results will include the remainder of the season in
the Championship and the first month in the Premier League.
We estimate that promotion will mean additional revenues of around GBP30m from
the Premier League, together with a positive effect on attendances and increases
in most revenue streams. We must use the opportunity that Premier League
membership provides to maximise our commercial revenues, recognising that we
will need to spend more on the playing squad.
Promotion to the Premier League at the first attempt justifies the Board's
confidence in the football management team and the challenge is now to manage
supporter expectations in playing at this higher level while being aware of the
risks involved in over-stretching the Club financially. During the close season
major works are being undertaken on the Stadium with the installation of
under-soil heating, a new pitch complete with pitch perimeter track, erection of
a new electronic scoreboard and information screen, refurbishment of the Main
Stand and Superstore and a new tannoy announcement system. Further work on the
Training Ground at Wast Hills is also taking place with an upgrade of the
pitches and a new reception area being built.
The Academy has had a successful season with three young players signing their
first professional contracts. In total 12 players from the Academy have
represented their country. Players coming through from the Academy into the
first team are the future lifeblood of the Club.
We look forward to competing in what is now universally recognised as the
leading league in world football during season 2009/2010 and beyond."
Short term loans
Birmingham City has made the following statements regarding short term loans
from certain Birmingham City Directors.
9 June 2009:
"Birmingham City Football Club (the "Club") has agreed short term, unsecured,
working capital loans from two of its directors, David Sullivan and David Gold,
to fund its stadium refurbishment and player purchase programmes.
Under the terms of these loans, Roldvale Ltd Employee Benefit Trust (in which
David Sullivan is interested) and David Gold, will each lend GBP1m to the Club,
repayable on or before 1st September 2009. The loans will bear an interest rate
of 0.5 per cent. per month. There will be no facility fee payable.
As required by Rule 13 of the AIM Rules for Companies, the Company's directors
(other than the directors interested in the loans) consider, having consulted
with the Company's nominated adviser Shore Capital and Corporate Limited, that
the terms of the loans are fair and reasonable in so far as its shareholders are
concerned."
26 June 2009:
"Further to the announcement made on 9 June 2009, Birmingham City Football Club
(the "Club") has agreed additional short term, unsecured, working capital loans
from three of its directors, David Sullivan, David Gold and Ralph Gold, to fund
its stadium refurbishment and player purchase programmes.
Under the terms of these loans, Roldvale Ltd Employee Benefit Trust (in which
David Sullivan is interested) will lend GBP1.5m, and David Gold and Ralph Gold
will each lend GBP750,000 to the Club, repayable on or before 1st September
2009. The loans will bear an interest rate of 0.5 per cent. per month. There
will be no facility fee payable.
As required by Rule 13 of the AIM Rules for Companies, the Company's directors
(other than the directors interested in the loans) consider, having consulted
with the Company's nominated adviser Shore Capital and Corporate Limited, that
the terms of the loans are fair and reasonable in so far as its shareholders are
concerned."
10 August 2009:
"The Company is pleased to announce that Birmingham City Football Club has now
repaid in full the short term, unsecured, working capital loans (the "Short Term
Loans") from three of its directors, David Sullivan, David Gold and Ralph Gold.
The Short Term Loans, which were previously announced on 9 June 2009 and 26 June
2009, amounted to GBP5m in total and were intended to fund the stadium
refurbishment and player purchase programmes."
5. Management and employees
Grandtop has assured the Board that it intends to continue to run
Birmingham City as a football business, with operations remaining at the current
locations. Grandtop has also indicated that it does not have any immediate plans
to dispose of, or otherwise change the use of, any assets within the
Birmingham City portfolio, although it would consider any potential
opportunities if and when they arise.
Grandtop has indicated that it will work with the executive management team of
Birmingham City and expects existing members of senior management to continue to
be involved in the ongoing business of Birmingham City. Following the Offer
becoming or being declared wholly unconditional, David Sullivan has agreed to
resign from the Board of Birmingham City. In addition, the employment of Karren
Brady, Roger Bannister and Ralph Gold will also terminate upon the Offer
becoming or being declared wholly unconditional. David Gold has indicated that
he is willing, subject to agreeing the terms with Grandtop, to remain on the
Board and continue in the role of Chairman of the Club. Michael Wiseman is also
expected to remain a director of the Company.
Grandtop has given assurance to the Board of Birmingham City that, on the Offer
becoming or being declared wholly unconditional, the existing employment rights
of all management and employees of Birmingham City, including pension rights,
will be fully safeguarded.
The Board of Birmingham City, in its discussions with Grandtop, has no reason to
believe that Grandtop's intentions would prejudice its employees and is
comforted that Grandtop has no current plans to alter existing arrangements with
employees.
6. Irrevocable undertakings
Certain Birmingham City Directors, being David Sullivan, David Gold and Ralph
Gold, and persons connected with them have given Grandtop irrevocable
undertakings to accept, or to procure the acceptance of, the Offer in respect of
their entire beneficial holdings of, in aggregate, 40,757,026 Birmingham City
Shares, representing approximately 50.0 per cent. of the existing issued share
capital of Birmingham City. These undertakings will cease to be binding only if
the Offer lapses or is withdrawn and will remain binding in the event that a
higher competing offer is made for Birmingham City.
On 23 September 2009, Grandtop announced that as at 1.00pm on 22 September 2009
Grandtop had received valid acceptances in respect of 42,211,337 Birmingham City
Shares representing approximately 51.8 per cent. of the current issued ordinary
share capital of Birmingham City and approximately 73.9 per cent. of the
Birmingham City Shares to which the Offer relates. Grandtop is, and was before
the start of the Offer Period, already the registered and beneficial owner of
24,375,975 Birmingham City Shares, representing approximately 29.9 per cent. of
Birmingham City's issued ordinary share capital. Accordingly, as at 1.00pm on 22
September 2009 Grandtop owned or had received valid acceptances of the Offer in
respect of a total of 66,587,312 Birmingham City Shares representing in
aggregate approximately 81.7 per cent. of the current issued ordinary share
capital of Birmingham City. As a result, the Offer is now unconditional as to
acceptances. However, the Offer is still subject to the Offer conditions set out
in the Offer Document and is still conditional on approval by Grandtop
Shareholders.
7. Escrow Agreement
Birmingham City announced on 20 August 2009 that it had entered into an escrow
agreement with Grandtop. Under this agreement, Grandtop put down a deposit of
GBP3 million (the "Deposit") with a view to making an offer for the entire
issued ordinary share capital of Birmingham City (other than the shares in
Birmingham City already held by Grandtop. The Deposit was a surety for
Grandtop's ability and intention to make an Offer, without which Birmingham City
was unable to commit resources to considering an Offer.
If the Offer is declared unconditional in all respects, then the Deposit will be
transferred to a receiving agent to be used as part of the payment to accepting
shareholders under the Offer. However, if the Offer is not declared
unconditional in all respects by 30 October 2009, then the Deposit will be
released to Birmingham City unless certain conditions are not met. Certain of
those conditions were related to the giving of the Irrevocables and are
therefore no longer relevant now that the Irrevocables have been given. However,
if any of the following occur, then the Deposit will not be released to
Birmingham City:
1. any of the Irrevocable Givers breaches the terms of any of the Irrevocables
once executed or has indicated his intention to be so in breach; or
2. any of the Birmingham City Directors or any adviser to Birmingham City
indicates publicly that the Board will not or may not unanimously recommend
acceptance by Birmingham City Shareholders of the Offer.
8. Recommendation
The Birmingham City Directors, who have been so advised by Shore Capital,
consider that the terms of the Offer are fair and reasonable. In providing
advice to the Birmingham City Directors, Shore Capital has taken into account
the Birmingham City Directors' commercial assessments.
Accordingly, the Birmingham City Directors unanimously recommend that
Birmingham City Shareholders accept the Offer as they have done in respect of
their entire respective beneficial holdings of Birmingham City Shares, amounting
in aggregate to 40,777,026 Birmingham City Shares, representing approximately
50.0 per cent. of the existing issued share capital of Birmingham City.
FORWARD-LOOKING STATEMENTS
This document, including information included or incorporated by reference in
this document, may include certain "forward-looking statements". These
statements are based on the current expectations of the Birmingham City
Directors and are naturally subject to uncertainty and changes in circumstances.
The forward-looking statements contained herein may include statements about the
expected effects on the Company of the Offer, the expected timing and scope of
the Offer, strategic options and all other statements in this document, other
than historical facts. Without limitation, any statements preceded or followed
by or that include the words "targets", "plans" "believes", "expects", "aims",
"intends", "will", "may", "should", "could", "would", "can", "continue",
"opportunity", "anticipates", "estimates", "projects" or words or terms of
similar substance or the negative thereof, are forward-looking statements.
Forward-looking statements involve risk and uncertainties that could cause
actual results to differ materially from those expressed in the forward-looking
statements. Many of these risks and uncertainties relate to factors that are
beyond the Company's abilities to control or estimate precisely, such as: (i)
future capital expenditures, expenses, revenues, earnings, synergies, economic
performance, indebtedness, financial condition, dividend policy, losses and
future prospects; (ii) business and management strategies and the expansion and
growth of the Company's operations and potential synergies resulting from the
Offer; and (iii) the effects of government regulation on the Company's business.
There are a number of factors that could cause actual results and developments
to differ materially from those expressed or implied by such forward-looking
statements. These factors include, but are not limited to, the satisfaction of
the conditions to the Offer, changes in economic conditions, changes in the
level of capital investment, success of business and operating initiatives and
restructuring objectives, changes in consumer habits and preferences,
competitive product and pricing pressures, customers' strategies and stability,
changes in the regulatory environment, fluctuations in interest and exchange
rates, the outcome of litigation, government actions and natural phenomena such
as floods, earthquakes and hurricanes. Other unknown or unpredictable factors
could cause actual results to differ materially from those in the
forward-looking statements. The Company does not assume any obligation nor does
it intend to update publicly or revise forward-looking statements, whether as a
result of new information, future events or otherwise, except to the extent
legally required.
DEALING DISCLOSURE REQUIREMENTS
Under the provisions of Rule 8.3 of the Takeover Code, if any person is, or
becomes 'interested' (directly or indirectly) in 1% or more of any class of
'relevant securities' of the Company, all 'dealings' in any 'relevant
securities' of that company (including by means of an option in respect of, or a
derivative referenced to, any such 'relevant securities') must be publicly
disclosed by no later than 3.30pm (London time) on the London business day
following the date of the relevant transaction. This requirement will continue
until the date on which the offer becomes, or is declared, unconditional as to
acceptances, lapses or is otherwise withdrawn or on which the 'offer period'
otherwise ends. If two or more persons act together pursuant to an agreement or
understanding, whether formal or informal, to acquire an 'interest' in 'relevant
securities' of the Company, they will be deemed to be a single person for the
purpose of Rule 8.3.
Under the provisions of Rule 8.1 of the Takover Code, all 'dealings' in
'relevant securities' of the Company by Grandtop or the Company, or by any of
their respective 'associates', must be disclosed by no later than 12.00 noon
(London time) on the London business day following the date of the relevant
transaction.
A disclosure table, giving details of the companies in whose 'relevant
securities' 'dealings' should be disclosed, and the number of such securities in
issue, can be found on the Takeover Panel's (the "Panel") website at
http://www.thetakeoverpanel.org.uk/.
'Interests in securities' arise, in summary, when a person has long economic
exposure, whether conditional or absolute, to changes in the price of
securities. In particular, a person will be treated as having an 'interest' by
virtue of the ownership or control of securities, or by virtue of any option in
respect of, or derivative referenced to, securities.
Terms in quotation marks are defined in the Takeover Code, which can also be
found on the Panel's website. If you are in any doubt as to whether or not you
are required to disclose a 'dealing' under Rule 8, you should consult the Panel.
If you are in any doubt as to the application of Rule 8 to you, please contact
an independent financial adviser authorised under the Financial Services and
Markets Act 2000, consult the Panel's website at www.thetakeoverpanel.org.uk or
contact the Panel on telephone number +44 20 7638 0129; fax +44 20 7236 7013.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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