RNS Number:5107U
Hartford Group PLC
22 November 2000
HARTFORD GROUP PLC
Hartford Group ('Hartford'), an operator of restaurants
in London, including the Pharmacy Bar & Restaurant at
Notting Hill and Montana in Fulham, announces the terms
of a proposed re-financing to raise #4.06m gross, capital
reorganisation and Board changes
KEY POINTS
* Open offer of up to 70,951,819 new ordinary shares
of 1p each at 5p per share fully underwritten by
Prestbury Investment Holdings Ltd ('PIHL')
* Proposed appointment of Stephen Thomas, Chief
Executive of Luminar Plc, as non-executive Chairman
and of Sheila McKenzie, formerly Managing Director
of Slug & Lettuce plc, as Chief Executive
* Subscription for 10,000,000 new Ordinary Shares of
1p at 5p per share by Stephen Thomas, and related
family trust, and for 200,000 new Ordinary Shares at
5p per share by Sheila McKenzie
* Resignation from the Board of Nigel Wray (currently
non-executive Chairman), Kevin Finch (Chief
Executive), Nick Leslau and Matthew Freud (non-
executive Directors)
* New Board will aim to secure stability of Hartford,
review its existing operations and, in the medium
term, seek to invest in start-up or development
opportunities in the hospitality and leisure sector
Commenting on the proposals, Nigel Wray, Chairman of
Hartford, states:
'Stephen Thomas and Sheila McKenzie are two experienced
and talented operators, dedicated to turning the Group
around and taking it forward into new associated
investment areas.'
ENQUIRIES:
Altium Capital Ltd. (advisers to Hartford)0161 831 9133
Phil Adams
College Hill 020 7457 2020
Gareth David email:gareth.david@collegehill.com
Justine Warren email:justine.warren@collegehill.com
HARTFORD GROUP PLC
The following represents extracts from a letter from Nigel
Wray, Chairman, included in a prospectus to be sent today
to Shareholders in Hartford Group PLC ('the Prospectus').
Open Offer of up to 70,951,819 new Ordinary Shares of 1p
each at 5p per share Subscription for 10,200,000 new
Ordinary Shares of 1p at 5p per share
Proposed Share Capital Reorganisation.
Introduction
Your Board has today announced both an Open Offer and
Subscription to raise approximately #4.06 million before
expenses. The Open Offer is being fully underwritten by
Prestbury Investments Holdings Limited ('PIHL'), a
company 98.5 per cent. owned by Nick Leslau and myself.
In connection with these proposals, your Board has today
also announced a proposed Capital Reorganisation.
I am delighted to announce that Stephen Thomas, currently
a non-executive director, has agreed to become non-
executive Chairman and Sheila McKenzie has agreed to
become Chief Executive following the passing of the
Resolutions at the Extraordinary General Meeting on 15
December 2000 and completion of the Open Offer and
Subscription, at which time Nick Leslau, Matthew Freud,
Kevin Finch and I will step down from the Board.
Your Board believes that the proposed board changes and
fundraising, represents the best available option for
Shareholders as a whole.
Fundraising
As previously announced in the interim results on 3
November 2000, the Group has traded disappointingly and
has received financial support from certain directors in
the form of personal guarantees for a bank facility of
#500,000. Following an urgent review, your Board has
instigated major changes to produce cost savings, both at
trading sites and at head office.
The Board has decided to proceed with the Open Offer and
Subscription because without additional financial
resources, the Company would be unable to pay creditors
as they fall due or to repay its bank facility which
expires in January 2001.
In addition, a further short term bridging loan facility
of up to #500,000 has been made available by myself, Nick
Leslau and Stephen Thomas which it is intended will be
repaid, to the extent drawn upon, from the proceeds of
the fundraising.
Open Offer
The Company is proposing to raise #3.55 million
(approximately #3.1 million net of expenses) by offering
70,951,819 Open Offer Shares to Qualifying Shareholders
at 5p per share, a discount of 20 per cent. to the
closing mid-market price of 6.25p on 21 November 2000 in
addition to the #0.5 million Subscription outlined below.
Subscription
Stephen Thomas and a related family trust has agreed to
subscribe a total of #500,000 for 10,000,000 new Ordinary
Shares at a price of 5p per share. In addition, Sheila
McKenzie has agreed to subscribe #10,000 for 200,000 new
Ordinary Shares at a price of 5p per share. These
subscriptions are conditional on Shareholder approval at
the EGM, further information on which is set out below.
Proposed Directors
Stephen Thomas (non-executive Chairman), aged 47, is
Chief Executive of Luminar Plc ('Luminar'). Stephen is
a leading leisure industry operator, with over 30 years'
experience.
He founded Luminar in 1987, and floated the company in
1996 when it operated 14 Chicago Rock Cafes and 18
discotheques and achieved a market capitalisation of #30
million. Since then, he has developed the business into
one of the UK's leading leisure groups, which has
achieved FTSE 250 status through both organic growth and
acquisitions.
Stephen recently led Luminar's #467 million acquisition
of Northern Leisure and the enlarged group operates over
200 clubs, bars and restaurants. Luminar currently has a
market capitalisation in excess of #500 million and
reported profit before taxation of #13.2 million (1999:
#4.3 million), for the 26 weeks ending 27August 2000, on
turnover up 162 per cent. to #77.2 million (1999: #29.5
million).
He is also a non-executive Director of Coffee Republic
Plc.
Sheila McKenzie (Chief Executive), aged 42, has 15 years'
experience in the leisure sector, most recently as
Managing Director of The Slug and Lettuce Group plc.
Sheila is a leading developer and operator of upmarket,
high street bar concepts. Prior to joining The Slug and
Lettuce, she was a founder and Managing Director of the
Pitcher & Piano chain.
At The Slug and Lettuce, Sheila pioneered the female
friendly, congenial offering which established the Slug
and Lettuce concept as one of the strongest pub retail
formulas on the high street. Her style-led approach to
brand development enabled the concept to evolve in
response to changing leisure lifestyles, ensuring its
continuing vitality and appeal to its target market.
The Slug and Lettuce was acquired earlier this year by
SFI Group plc for #27.7 million. At the time of the
takeover, The Slug and Lettuce comprised 34 bars, had
over 600 staff and reported a profit before tax in the
year ended 31 May 2000 of #2.23 million on turnover of
#29.3 million.
Board
The proposed board will, I believe, comprise two
experienced and talented operators in Stephen Thomas and
Sheila McKenzie, who are dedicated to turning the Group
around. There is currently no finance director, however a
financial controller is in place who reports to the
Board. It is however, envisaged that the appointment of a
finance director will be considered in due course, along
with the appointment of further executive and non-
executive directors.
Sheila McKenzie has been retained to work two days per
week and will deal with issues arising outside those two
days as appropriate.
As mentioned above, myself, Nick Leslau, Matthew Freud
and Kevin Finch will step down from the Board upon
admission. Kevin Finch will continue to make his services
available as a consultant for a fixed term of one year.
Strategy and Use of Proceeds
In the short term, the Proposed Directors' primary
objective is to secure the stability of the Group by
paying back, as it falls due, the bank facility secured
by personal guarantees given by certain directors and
reducing the level of liabilities. Following the
appointment of Stephen Thomas and Sheila McKenzie, Sheila
will undertake an immediate review of the Group's
operations. She will determine which assets are non-core
and identify opportunities to refocus operations or to
develop unutilised sites.
In the medium term it is intended that, using Stephen
Thomas's and Sheila McKenzie's extensive experience, your
Company will seek to invest in start-up or development
opportunities in the hospitality and leisure sector.
Background
Hartford currently operates six restaurants comprising
The Pharmacy Bar and Restaurant ('Pharmacy') in Notting
Hill, Montana in Fulham, Dakota in Notting Hill, Canyon
in Richmond, Idaho in Highgate and Utah in Wimbledon. It
also operates Outpatients, a delicatessen in Notting
Hill.
In September 1999, Hartford completed its merger with
Montana. It was our intention to expand the Montana
concept of a fine dining experience in affluent
neighbourhoods. Regrettably, this strategy has not been
successful.
The two most recently opened restaurants, Idaho and Utah,
have continued to perform below expectations and we are
considering our options with respect to these sites.
Montana, Dakota and Canyon are trading profitably,
although, as announced on 3 July 2000, all of our sites
with outside dining suffered from the poor spring and
early summer weather.
Pharmacy improved its profitability during the period on
lower turnover. A re-design of the bar area is planned
for August 2001. The intended acquisition and development
of a further Pharmacy site in the West End of London has
been halted. Outpatients, which was opened in September
1999, continues to trade satisfactorily.
Congress, Loughton and Ascot are not in operation,
however they will be included in Sheila McKenzie's
strategic review mentioned above.
Current Trading and Prospects
The results of Hartford for the 36 week period from 3
January 2000 to 10 September 2000, were a loss before tax
of #2,073,000 on turnover of #5,075,000. The challenging
trading environment, experienced by the industry as a
whole and in the fine dining sector in particular,
continues. Levels of trading are behind those of last
year and as announced on 27 October 2000, the Group will
be loss making in the year to 31 December 2000.
Significant cost cutting measures have been taken over
the recent months to reduce Group overheads. Looking
ahead, December and the Christmas season is a
traditionally busy period.
Capital Reorganisation
The nominal value of each Existing Ordinary Share is
12.5p. The price at which the Open Offer is proceeding is
5p representing a discount to the current nominal value.
The Act prohibits the issue of shares at a price below
their nominal value. As part of the arrangements for the
Open Offer, it is therefore proposed to sub-divide each
Existing Ordinary Share of 12.5p into one new Ordinary
Share of 1p and one Deferred Share of 11.5p. Shareholders
should note that the number of Existing Ordinary Shares
held by them on the Reorganisation Record Date will equal
the number of new Ordinary Shares they receive upon
completion of the Capital Reorganisation.
Each new Ordinary Share will have the same rights
(including voting and dividend rights and rights on a
return of capital) as an Existing Ordinary Share. On
completion of the Proposals, Shareholders whose Existing
Ordinary Shares are held in certificated form will be
sent new certificates for their holdings of new Ordinary
Shares arising on the Capital Reorganisation and for any
New Ordinary Shares subscribed in the Open Offer. At that
time and following receipt by Shareholders of their
new certificates, the existing certificates will be of no
further use and may be destroyed.
The rights attaching to the Deferred Shares, which will
not be admitted to trading on AIM or any other recognised
investment exchange, will render them effectively
valueless. No certificates will be issued in respect of
Deferred Shares. It is intended that the Deferred Shares
will be repurchased by the Company for a nominal amount
in due course. Further details of the rights attached to
the Deferred Shares are set out in paragraph 5.3 of Part
5 of the Prospectus.
Terms of the Open Offer
The Company is proposing to raise #3.55 million
(approximately #3.1 million net of expenses) by the issue
of 70,951,819 Open Offer Shares.
Under the Open Offer, Qualifying Shareholders will be
given the opportunity to subscribe for the Open Offer
Shares at the Issue Price free from expenses, pro rata to
their existing shareholdings, on the basis of:
3 Open Offer Shares for every 2 Existing Ordinary Shares
held on the Record Date and so in proportion for any
equal, greater or lesser number of Existing Ordinary
Shares then held. Fractional entitlements will be taken
up by PIHL under the terms of the Underwriting. The
maximum entitlement of each Qualifying Shareholder is
indicated on the Application Form accompanying this
document. The Open Offer has been fully underwritten by
PIHL. PIHL will receive no underwriting commission but
its professional fees relating to the Underwriting of
#25,000 will be borne by Hartford.
Nick Leslau and I have agreed not to take up our
respective entitlements on the basis that our company,
PIHL, will acquire such entitlements pursuant to the
Underwriting. In addition, Matthew Freud has irrevocably
undertaken to take up his entitlement in full and Kevin
Finch has irrevocably undertaken to take up 1,000,000
Open Offer Shares. In the event that all other
Shareholders take up the Open Offer in full PIHL's
holding would be 15,488,891 new Ordinary Shares
representing approximately 11.8 per cent. of the enlarged
issued ordinary share capital of the Company. In the
event that all other shareholders do not take up the Open
Offer, PIHL's maximum holding would be 65,440,499 new
Ordinary Shares representing just under 50.0 per cent. of
the enlarged issued ordinary share capital of the Company
ignoring the McKenzie Option and the Thomas Option.
PIHL, the Directors, the Proposed Directors and Altium
Capital have entered into commitments not to dispose of
their shareholdings, save in certain specified
circumstances for a period of 12 months from completion
of the Proposals.
The Open Offer Shares will rank pari passu in all
respects with the new Ordinary Shares in issue on
completion of the Open Offer.
The Open Offer is not a rights issue and Open Offer
Shares not applied for under the Open Offer will not be
sold in the market for the benefit of Qualifying
Shareholders who do not apply under the Open Offer.
The latest time and date for receipt by Northern
Registrars Limited of Application Forms and payment in
full under the Open Offer is 3.00 pm on 14 December 2000.
Subject to the Open Offer becoming unconditional, Altium
Capital has agreed to subscribe for 2,500,000 new
Ordinary Shares at the Issue Price in satisfaction of its
fees (excluding VAT) relating to the Open Offer.
Share Option Schemes
The purpose of the New Option Plan outlined below is to
attract and motivate key executives.
Hartford is therefore seeking the approval of
Shareholders at the EGM to the adoption of the New Option
Plan. Up to 30,000,000 representing 22.9 per cent. of the
enlarged issued ordinary share capital of the Company may
be placed from time to time under option under the New
Option Plan. During the period of one year from the
adoption of the New Option Plan, options may be issued
with an option exercise price of 5p.
Following the passing of Resolution 2 at the EGM and
completion of the Open Offer and Subscription, it is
proposed to grant an option under the New Option Plan to
Sheila McKenzie to subscribe for 1,750,000 Ordinary
Shares at an option exercise price of 5p per Ordinary
Share. The option will, save as provided in paragraph
9.1(k) of Part 5 of the Prospectus, be exercisable at any
time during the period commencing on the third
anniversary of the date of grant and expiring on the
fifth anniversary of the date of grant. Further details
of this option are set out in paragraph 9.1(k) of Part 5
of the Prospectus.
It is also proposed to grant an option under the New
Option Plan to Stephen Thomas to subscribe for 10,000,000
million Ordinary Shares at an option exercise price of 5p
per Ordinary Share. The option will be in three equal
tranches and will, save as provided in paragraph 9.1(l)
of Part 5 of the Prospectus, be exercisable at any time
prior to the fifth anniversary of the date of grant
subject as provided below. The first tranche may be
exercised if the Company's share price averages at least
15p over the three months immediately preceding the date
of exercise. The second tranche may be exercised if the
Company's share price averages at least 25p over the
three months immediately preceding the date of exercise.
The third tranche may be exercised if the Company's share
price averages at least 35p over the three months
immediately preceding the date of exercise. Further
details of this option are set out in paragraph 9.1(l) of
Part 5 of the Prospectus.
Under the New Option Plan, the exercise of options will
normally be conditional upon the achievement of a
specified performance target determined by the
remuneration committee when options are granted. The
proposed terms of the New Option Plan are summarised in
paragraph 9.1 of Part 5 of the Prospectus.
In circumstances where share options are granted under
share option schemes at an option price which is at a
discount to the fair value of shares at the time of the
grant, a charge is made to the Company's profit and loss
account in respect of the cost of those share options.
The cost of the share options represents the difference
between the fair value of the shares and the option price
at the date of granting the option, adjusted to reflect
the probability of performance criteria being met, and is
recognised over the period to which the performance
criteria relate.
The options held by Nick Leslau, Matthew Freud, Kevin
Finch and myself, details of which are set out in
paragraph 7.1 of Part 5 of the Prospectus, will lapse
upon completion of the Proposals pursuant to the
termination arrangements referred to in paragraph 8 of
Part 5 of the Prospectus.
Subject to obtaining such approval, no further options
will be granted under the Existing Share Option Schemes
(summaries of which appear in paragraphs 9.2 and 9.3 of
Part 5 of the Prospectus).
The Concert Party and the City Code
Each of myself, Nick Leslau, Matthew Freud, Stephen
Thomas, Sheila McKenzie and PIHL (a company controlled by
myself and Nick Leslau) are, or may be deemed for the
purposes of the City Code, to be acting in concert in
relation to the Company.
Under Rule 9 of the City Code, where a person or a group
of persons acting in concert acquires shares in a company
which is subject to the City Code, and such shares, when
taken together with any shares already held, would result
in that concert party's shares carrying 30 per cent. or
more of the voting rights of that company, such concert
party is normally required by the City Code to make a
general offer to all the other shareholders of the
company for the remaining shares that the concert party
does not already own.
Set out below is the total number of Ordinary Shares
which will be held by members of the Concert Party
following the implementation of the Proposals and which
could be acquired by them under the New Option Plan
together in each case with the percentage of the
Company's voting rights which will then be represented by
that holding:
Following completion of the proposals
Number of Open Offer
existing Shares
Ordinary Existing (Notes 1 Sub-
Name Shares Percentage and 2) scription
Nigel Wray 3,243,786 6.9 - -
Nick Leslau 3,243,786 6.9 - -
Matthew Freud 3,007,547 6.4 4,511,320 -
Stephen Thomas - - - 10,000,000
Sheila McKenzie - - - 200,000
PIHL - - 65,440,499 -
Total 9,495,119 20.2 69,951,819 10,200,000
Continued:
% of enlarged
Shares under Total share capital
Name option (Note 3)
Nigel Wray - 3,243,786 2.3
Nick Leslau - 3,243,786 2.3
Matthew Freud - 7,518,867 5.3
Stephen Thomas 10,000,000 20,000,000 14.0
Sheila McKenzie 1,750,000 1,950,000 1.4
PIHL - 65,440,499 45.9
Total 11,750,000 101,396,938 71.2
Notes:
1. Based upon the 3 for 2 Open Offer.
2. Based upon the assumption that pursuant to its
underwriting commitment, PIHL is required to
subscribe for all Open Offer Shares except for the
full entitlement of Matthew Freud and the
entitlement as to 1,000,000 Open Offer Shares of
Kevin Finch.
3. Based upon the assumption that the options held by
Sheila McKenzie and Stephen Thomas are exercised.
The Panel on Takeovers and Mergers has agreed, subject to
the approval of the independent Shareholders voting on a
poll in general meeting ('the Whitewash'), to waive the
obligation for the Concert Party or any member of it, to
make a general offer for the Ordinary Shares not owned by
them under Rule 9 of the City Code as a result of the
implementation of the Proposals, including the
Underwriting by PIHL and any exercise of the options to
be granted to Stephen Thomas and Sheila McKenzie.
Shareholders should note that, ignoring share options,
following implementation of the Proposals, the Concert
Party may control over 50 per cent. of the voting rights
of the Company while PIHL may alone control just under 50
per cent. In this event PIHL may not acquire additional
Ordinary Shares without an obligation to make an offer
for the Ordinary Shares not owned by it. Other members of
the Concert Party would each be free to acquire Ordinary
Shares without an obligation to make any offer for the
Ordinary Shares not owned by them except that no such
individual may acquire 30 per cent. or more of the voting
rights of the Company without triggering an obligation
for that individual to make a general offer for the
Ordinary Shares not owned by it under Rule 9 of the City
Code.
Also, as the Concert Party together may control over 50
per cent. of the voting rights of the Company following
implementation of the Proposals, the members of the
Concert Party may be able to exert a very significant
degree of control over the future conduct of the Company.
Broker
Upon completion of the Proposals, Altium Capital, the
Company's nominated advisor will also become the
Company's nominated broker in succession to SG
Securities, who are standing down.
Dividend Policy
It is the intention of the Proposed Directors to re-
invest any future profits and any surplus cash into the
business in the immediate future in order to generate
profitability and cash flow. It is therefore
inappropriate to give an indication of the likely level
of any future dividends.
Dealing Arrangements
Application will be made for the New Ordinary Shares to
be admitted to trading on AIM. It is expected that
trading in the New Ordinary Shares, including the Open
Offer Shares, will commence on 18 December 2000. Copies
of this document will be available to the public free of
charge from Altium Capital Limited at 30 St. James's
Square, London SW1Y 4AL until the date 14 days from the
date of Admission.
Recommendations
Kevin Finch is the only Director who is not a member of
the Concert Party and accordingly has been the only
Director involved in considering whether or not to
recommend Resolution number 1 to Shareholders. He, having
been so advised by Altium Capital, considers the
Whitewash to be fair and reasonable so far as the
Shareholders as a whole are concerned. In providing this
advice, Altium Capital has taken into account Kevin
Finch's commercial assessment. Accordingly, Kevin Finch
recommends that you vote in favour of Resolution number 1
at the Extraordinary General Meeting as he intends to do
in respect of his own beneficial holding of 4,505,022
Existing Ordinary Shares, representing approximately 9.5
per cent. of the Company's existing issued share capital.
Your Directors (excluding Stephen Thomas to the extent
the Proposals relate to the Subscription and excluding
Nick Leslau and myself to the extent the Proposals relate
to the Underwriting), who have been so advised by Altium
Capital, consider that the terms of the Proposals (to the
extent they do not relate to the Whitewash) to be fair
and reasonable so far as Shareholders as a whole are
concerned. In providing advice to the Directors, Altium
Capital has taken into account the Directors' commercial
assessments. Accordingly, your Directors (excluding
Stephen Thomas, Nick Leslau and myself) unanimously
recommend you to vote in favour of Resolution number 2 to
be proposed at the Extraordinary General Meeting. All the
Directors intend to vote in favour of Resolution number 2
in respect of their own beneficial holdings totalling
14,000,141 Existing Ordinary Shares, representing
approximately 29.6 per cent. of the Company's existing
issued share capital.
NIGEL WRAY
Chairman
Timetable
The prospectus outlining the Proposals will be posted
today. Listed below is a timetable of principal events:
Record Date for the Open
Offer 13 November 2000
Application Forms despatched 22 November 2000
Latest time and date for
splitting Application
forms(to satisfy bona
fide market claims only) 3:00pm on 12 December 2000
Latest time and date for
receipt of Forms
of Proxy 10:00am on 13 December 2000
Latest time and date for
receipt of Application Forms
in respect of the Open Offer
and payment in full 3:00pm on 14 December 2000
Extraordinary General
Meeting 10:00am on 15 December 2000
Reorganisation record Date 5:00pm on 15 December 2000
Dealings expected to
commence in the
New Ordinary Shares 18 December 2000
CREST accounts to be credited
in respect of the New Ordinary Shares 18 December 2000
Despatch of the share certificates in
respect of the New Ordinary
Shares by not later than 4 January 2001
Application forms are personal to the shareholders and
may not be transferred except to satisfy bona fide
transfers or market claims.
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