CPC City Pub Group Plc (the)

RNS Number:5977A
Capcon Holdings PLC
29 March 2006



Capcon Holdings PLC
29 March 2006


                                   


                                   Capcon Holdings plc

                      ("Capcon" or the "Company" or the "Group")
                        Extraordinary General Meeting statement

At the Extraordinary General Meeting of the Company, which took place earlier
today, Resolutions 1 was blocked and therefore Resolutions 2 to 4 were not
proposed and Resolution 5 was also not proposed as previously announced.  As a
result, Kenneth Paul Dulieu, Paul Francis Jackson and Robin George Boyle,
Directors of the Company and a shareholder of the Company have agreed to
subscribe for a total of the total #675,000 (nominal) 10% Redeemable Guaranteed
Secured Loan Stock 2006 (the "Loan Stock"). Of this amount, #375,000 will be
subscribed for immediately in the following amounts:

Kenneth Paul Dulieu    #150,000

Paul Francis Jackson   #150,000

Robin George Boyle      #25,000

Donald Ian Jefferson    #50,000

and the balance, of #300,000, is to be subscribed for as to #150,000 each by
Kenneth Paul Dulieu and Paul Francis Jackson upon demand being made by the
Company at any time on or before 31 May 2008 save that if there exists an event
of default at that time then such subscriptions will not be made.

Each holding of the Loan Stock is to be redeemed in cash at par (together with
all unpaid accruals of interest) on 30 June 2008. The Loan Stock will entitle
the Stockholders to receive interest at a rate of 10.00 per cent. per annum,
such interest accruing on a day to day basis. Interest accruing from the date of
issue of any Loan Stock will ordinarily be payable three monthly in arrears
within 14 days of the end of each 3 month period.

Cliff Cavender considers, having consulted with the Company's Nominated Adviser,
that the terms of the transaction are fair and reasonable insofar as its
shareholders are concerned.



At the meeting the Chairman made the following opening statement:

"The purpose of putting the various resolutions to be considered at this meeting
was to ensure the financial viability of our business going forward.
Resolutions 1-4 relate to the loan stock which was recommended by your Board.
Resolution 5 was only ever meant as a fall back and was proposed to ensure
funding in the event that the loan stock proposal was not approved by this
meeting.

You might have noticed that on 24 March 2006 we announced that, in view of the
comments and actions of the Christie Group, we would not propose resolution 5.

The board is resolute in its determination to keep the Group together, as a sell
off of the largest proportion of their business could result in the remaining
operations of the group not being viable.  All resolutions were drafted with a
view that our two core businesses of Audit & Stocktaking and Investigatory would
continue to work in tandem and harmony.  This would mean that operational
management would remain fully intact and would continue to work across both
divisions to ensure client retention, confidentiality and maximize cross-selling
opportunities.  Cross referral has been an important part of our business
strategy for over twenty years and is key to certain contracts being retained.
By keeping our business intact as opposed to selling off the largest part
achieves a reasonable economy of scale in respect of H.Q and plc costs as well
as providing a platform for future growth.

I should point out that both our core divisions of Audit & Stocktaking and
Investigatory are historically and currently profitable at operational level as
well as cash generative.

You will be aware that Christie Group plc has made an offer for the Audit &
Stocktaking division of Capcon Holdings plc at a price that is #300,000 more
than the management proposal under resolution 5 on terms which they considered
are equivalent to the management's proposal.  As previously stated, the Board
does not intend to recommend resolution 5.  However, the Board wishes to make it
clear that the Christie offer cannot be considered as being comparable, as it is
Capcon Holdings main competitor and if such a sale were to go ahead it would
seriously put at risk the remainder of our Group.   Not only would certain
contracts be compromised or lost but any sell off would substantially reduce our
ability for cross referrals and profit enhancement.  In addition, we could not
allow a competitor's management to operate across the remainder of our plc
without compromising the continuance of confidential trading relationships.
Therefore we question as to how Christies can acquire Audit & Stocktaking and
Commercial Investigations business without a major conflict of interest, fall
out of clients, competition authority investigation and possible interference
and risk to the employment of many of our personnel.

In Christie's proposal they state that due to their areas of operation within
the hospitality sector there will be numerous opportunities for cross referrals.
  To the best of my knowledge over the last twenty years Christies have not
referred one case to Capcon Holdings plc or its fore runner, namely Capitol
Group plc.  Therefore, the Board is sceptical as to how any significant volume
of business can or will be generated in this fashion to replace the current
actual and proven steady income stream.

Since Christies interest became common knowledge we have afforded them the
opportunity to meet with the Board at a mutually convenient time.  They have
taken the rather unusual and hostile step of approaching our bankers direct
requesting that they acquire from our bank the Company debt.  Our bank
immediately informed the Company of this highly unusual approach and the fact
that the offer was rejected.  This has been followed by direct approaches to our
institutional shareholders.  Christies have subsequently acquired nearly 15% of
your company.

In view of the unusual and confrontational style adopted by Christies, our main
competitor in Audit & Stocktaking, we cannot see how their management style and
expertise is complimentary to Capcon Holdings plc going forward.

In summary, your Board and their advisors are of the view that the Christies
offer cannot ever be seen as comparable in the manner proposed as it is not in
the interests of shareholders in Capcon Holdings plc, not in the interests of
our management and employees and not in the interests of our clients.  For these
reasons we cannot, as it stands, recommend their offer.

We remain available to meet with Christies or other third parties whereby we
work to build the Group and maximise shareholder value........................
.....

.............................. The consequence of the blocking of the directors'
proposals for re-financing the company at this time is that the Company remains
in the position outlined in the circular letter of 3 March in that, without
funds being made available to the Company immediately, it is unlikely that the
Group will be able to meet its financial obligations as and when they fall due.
This is not a position that the directors consider tenable.  In these
circumstances, immediately following this meeting the directors propose to
complete arrangements for making funds available to the Company by way of loan.
The loan terms will be substantially similar to those proposed for the
convertible redeemable guaranteed secured loan stock that was proposed to be
constituted by resolutions 1 to 4 except that the loan will not be convertible
into shares in the Company.  It is essential that this funding is made available
to the Company at this time and your board is determined to ensure the future of
the Company and the implementation of its strategy from this time.

Our main strategy now is to build our two core divisions, both organically and
through bolt-on acquisitions, that complement the services we offer.

Our aim is to continue to eat into Venners (Christie's) market share in the
niche stocktaking area of the hospitality sector with a view to taking over the
No1 position from our current No2 position. We will continue to strengthen our
investigatory resources to capitalize on the higher margin but lumpy business.
We are pleased that the Christie development has highlighted the underlying
strength of our business which we believe is still substantially undervalued. As
we continue to build our business we will strive to attract a broader
institutional client base and to assist us in the process you will have noticed
that we have recently appointed Robin Boyle to the Board as a non-executive
director. We believe that his expertise in dealing with small cap companies will
assist us in generating more interest in our stock.

It is the Boards' intention to maintain Capcon Holdings' admission to AIM and to
support the financial restructure whereby it can move forward from a position of
strength to capitalize on the skill base across the Group."


Capcon Holdings plc

Ken Dulieu

Tel: 0870 067 5050

Insinger de Beaufort

Louis Castro

Tel: 020 7190 7000

Graham Herring

Threadneedle Communications

020 7936 9600


                      This information is provided by RNS
            The company news service from the London Stock Exchange
END

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