RNS No 2628p
HARTFORD GROUP PLC
1st September 1998
Hartford Group PLC
Proposed acquisition of Bluelodge Limited
Proposed disposal of existing leisurewear business
Proposed reclassification of shares and reduction of capital
HIGHLIGHTS
. Proposed acquisition of Bluelodge, which trades as the Pharmacy
Bar and Restaurant, for an initial consideration of #3.6
million via an issue of 644,625,000 new ordinary shares with
additional consideration being payable based on the pre-tax
profit of Bluelodge for the accounting year ending 13 June 1999
of up to a further #3.6 million to be satisfied by the issue of
up to a maximum of 644,625,000 new Ordinary Shares.
. Enlarged Group to focus on leisure and food related activities
with Matthew Freud as Chief Executive.
. Proposed disposal of the Group's existing business DCI, for a
payment totalling #750,000.
Commenting on the announcement, Matthew Freud, Chairman of Bluelodge
said:
"We have ambitious expansion plans for the company through
the organic development of the Pharmacy concept and other
created restaurant business. Our aim is to establish
Hartford as a leading branded restaurant group".
Commenting on the acquisition, Michael Edelson, Chairman of Hartford
Group PLC said:
"I am delighted to have concluded this deal with the Pharmacy
which enables us to take advantage of the many opportunities
available in the restaurant sector. It also brings on board
the unique talent of Matthew Freud, whose creative vision
will greatly benefit Hartford".
Enquiries
Matthew Freud 0171 291 6400
Bluelodge Limited
Michael Edelson 0161 273 1088
Hartford Group PLC
Richard Hughes 0161 831 9133
Apax Partners & Co. Capital Limited
Hartford Group PLC
("The Company")
Proposed acquisition of Bluelodge Limited
Proposed disposal of DCI
Proposed reclassification of shares and reduction of capital
It was announced today that the Company has conditionally agreed to
acquire the entire issued share capital of Bluelodge for an initial
consideration of #3.6 million to be satisfied by the issue of
644,625,000 new Ordinary Shares at approximately 0.56p per share with
additional consideration being payable based on the pre-tax profit of
Bluelodge for the accounting year ending 13 June 1999 of up to a
further #3.6 million to be satisfied by the issue of a further
644,625,000 new Ordinary Shares. The Company also announced today the
proposed disposal of DCI to a company established for this sole
purpose and controlled by Mr J H Lyons and Mr J M Edelson for a total
cash payment of #750,000 and a proposed reclassification of Ordinary
Shares and a reduction of capital. Subject to and following
confirmation of the Reduction by the High Court and conditional upon
the Acquisition, a holder of Ordinary Shares at the date of the
Extraordinary General Meeting will receive a cash payment of
approximately 0.33p by way of cancellation and repayment of the three
Deferred Shares to be held by each Shareholder arising from the
reclassification of an Ordinary Share into one new Ordinary Share and
three Deferred Shares.
The Acquisition is classified as a reverse takeover for the purposes
of the AIM Rules, and for that reason dealings in the existing
Ordinary Shares were suspended, at your Board's request, on 17 July
1998 at a mid-market price of 2.75p.
An Extraordinary General Meeting of the Company is being convened at
which Shareholders will be asked to consider and pass the resolutions
necessary to approve the Acquisition, the Disposal and the Reduction
and to implement them.
In view of the size of Bluelodge in relation to the existing business
of the Group, the Acquisition is conditional upon the approval of
shareholders at the Extraordinary General Meeting. The Disposal is to
a newly incorporated company which is owned by Mr J H Lyons and Mr J M
Edelson. The Disposal is a related party transaction for the purposes
of the AIM Rules, and is therefore conditional upon the approval of
shareholders at the EGM. Application has been made to the London Stock
Exchange for the admission of the new Ordinary Shares to trading on to
the Alternative Investment Market of the London Stock Exchange.
Dealings are expected to commence in the new Ordinary Shares on 28
September 1998.
The Acquisition and the Disposal are conditional, inter alia, on
Admission.
The Proposed Directors consider that, following the implementation of
the Acquisition and the Disposal and having regard to the respective
values placed on DCI and Bluelodge, approximately #473,000 will be
surplus to the immediate capital needs of the Enlarged Group. It is
proposed to return this surplus capital by way of the Reduction.
Subject to and following confirmation of the Reduction by the High
Court and conditional upon the Acquisition, a holder of Ordinary
Shares at the date of the EGM will receive a cash payment of
approximately 0.33p by way of cancellation and repayment of the three
Deferred Shares to be held by each Shareholder arising from the
reclassification of an Ordinary Share into one new Ordinary Share of
0.25 pence and three Deferred Shares of 0.25 pence each.
Shareholders are invited to approve the Acquisition, the Disposal and
the Reduction and the resolutions necessary to implement them. If
either the Acquisition or the Disposal does not gain the approval of
Shareholders at the EGM, neither the Acquisition nor the Disposal will
be implemented. In these circumstances none of the other resolutions
proposed at the EGM, including the authority for the Reduction, would
take effect as they are all inter-conditional.
BACKGROUND TO AND REASONS FOR THE ACQUISITION AND DISPOSAL
Since the admission to trading of the Ordinary Shares on AIM earlier
this year, your Board has evaluated a number of proposals from
companies wanting to make use of Hartford's AIM listing and
shareholder base. After due and careful investigation and
consideration, your Board believes that the Acquisition and the
Disposal represent the best opportunity for Shareholders. Pharmacy Bar
and Restaurant is a restaurant business which has traded since January
1998. Your Board believes the executive management team of Matthew
Freud and Jonathan Kennedy has a track record which should facilitate
the expansion of the Company. They have advised on over 100 restaurant
launches worldwide.
As it is the intention of the Proposed Directors to focus on the
restaurant sector, a key element in reaching agreement for the
acquisition of Bluelodge was the disposal of the existing business,
namely DCI, at the same time as the new board appointments. In order
to keep within the tight timeframe and to maintain confidentiality, Mr
Michael Connolly invited management to prepare a cash offer for DCI.
Following negotiations, an agreement was reached, subject to
shareholder approval, for the disposal of DCI to Highset Limited, a
company established for this sole purpose and owned by Mr J H Lyons
and Mr J M Edelson.
The business of David Conrad (International) Limited has gone through
some change this year following the termination of the Gola licence
agreement on 31 December 1997 which has had an adverse impact on both
turnover and profitability. This has been taken into account during
the negotiations for the disposal of DCI.
INFORMATION ON BLUELODGE
Bluelodge trades as the Pharmacy Bar and Restaurant from 146/150 and
154/154a Notting Hill Gate, London.
Bluelodge was incorporated on 24 June 1998 by Matthew Freud and
Jonathan Kennedy. Bluelodge's corporate strategy is to develop highly
profitable restaurant formats using the extensive knowledge of its
current owners and resources from various levels of food retailing.
The Pharmacy Bar and Restaurant opened in January 1998 and is
Bluelodge's first operation. Sites are under consideration for further
landmark restaurants.
Bluelodge's executive management team includes Matthew Freud (Chief
Executive Officer), Jonathan Kennedy (Chief Operating Officer) and
Simon Scott (Finance Director).
Bluelodge has created a team of experienced senior managers to play a
key role in the development of the parent company's operations. Brief
biographies of the key personnel are set out below:
Liam Carson (Age 42), Group Operations Manager, who previously ran
Momo and the Groucho Club and has had many years experience in
launching and running successful restaurants.
Ruth Mayer (Age 31), General Manager, was previously manager of
London's Nobu restaurant.
Charles Pullan (Age 30), Assistant Manager and was previously manager
of the River Cafe.
The ability of the proposed Board to establish new restaurant brand
names provides the Company with many opportunities to expand into
merchandising and associated derivative products. A range of goods is
currently in development for future retail expansion.
The board of Bluelodge is satisfied with the first twenty-four weeks
of trading. The period-to date loss before tax of #76,000 represents a
solid start to the business, which is now trading profitably.
The board's policy was to launch the restaurant with no direct
marketing expenditure. The restaurant was initially operated
significantly below its capacity in order to provide premium service
levels and to establish efficient operating systems. The board is now
pleased to report that the restaurant capacity has materially
increased whilst payroll costs have been reduced without a detrimental
effect on service levels.
PRINCIPAL TERMS OF THE ACQUISITION
Hartford will acquire Bluelodge for an initial consideration of #3.6
million to be satisfied by the issue of 644,625,000 new Ordinary
Shares credited as fully paid. Additional consideration will be
payable based on the pre-tax profit of Bluelodge for the accounting
year ending 13 June 1999 exceeding #200,000. For each #1 by which the
pre-tax profit of Bluelodge exceeds #200,000, additional consideration
of #12 will become payable. The additional consideration will be
satisfied by the issue of up to a maximum of 644,625,000 new Ordinary
Shares credited as fully paid.
INFORMATION ON THE DISPOSAL
David Conrad (International) Limited designs, sources, promotes and
distributes a large range of leather garments to mail order companies
in the United Kingdom and leading high street multiple retailers in
the United Kingdom and Europe.
Hartford Leisure operates a small scale corporate hospitality
business.
In the year ended 31 December 1997, David Conrad (International)
Limited achieved a profit after tax of #214,677 (1996: #216,916) on
turnover of #8,474,734 (1996: #6,238,267) and had a net asset value of
#360,843 (1996: #246,166).
It is the Proposed Directors' strategy to focus on the restaurant
market and as a result your Directors have entered into an agreement
for the sale of DCI, conditional on Shareholders approval, to Highset
Limited. When the Acquisition Agreement becomes unconditional Highset
Limited will acquire DCI for a total payment of #750,000.
CAPITAL REORGANISATION AND DETAILS OF REDUCTION
Each existing Ordinary Share will be converted into one new Ordinary
Share and three Deferred Shares.
As at 30 June 1998, and based on unaudited management accounts, the
Group had net assets of #1,543,000. Having regard to the immediate
working capital needs of the Enlarged Group and in order for the net
assets of the Group to reflect the valuation of Bluelodge and the
number of new Ordinary Shares proposed to be issued, it is proposed to
reduce the issued share capital of the Company to the extent of
#1,074,375 by cancelling all of the new Deferred Shares created by the
reclassification of shares.
Subject to the Acquisition being approved and completed and,
conditional upon the passing of the resolution to reduce the share
capital of the Company, application will be made to the High Court to
confirm the Reduction. Your Board has taken advice of counsel
regarding the proposed reduction and whilst, as in any reduction of
capital, it is subject to the overriding discretion of the court, your
Board has reasonable grounds to believe that the Reduction will become
effective.
It is not proposed that the Deferred Shares should be admitted to
trading on AIM. Accordingly, you are advised to retain your Deferred
Shares in order to receive the relevant cash payment of 0.11p per
Deferred Share from the proposed reduction of capital, should Court
approval be obtained.
Your Board has taken advice as to the best method of reflecting the
respective values of Bluelodge and the net asset value of the Company.
After discussions with the Vendors and bearing in mind the legal
restraints placed upon any realistic alternative proposals, your Board
considers the Reduction to be the most practicable course of action to
take.
PROPOSED BOARD
The Board of the Enlarged Group will consist of three executive
directors and three non-executive directors. Brief biographies of the
Proposed Directors are set out below:
Michael Edelson (Non-Executive Chairman), aged 54, is currently a non-
executive director of Prestbury Group PLC, North West FM Limited and
London & City Credit Corporation Ltd. He has been on the Board of The
Manchester United Football Club plc since 1982 and is Executive
Chairman of Hartford Group PLC. Prior to its acquisition of Edenhawk
Limited in December 1997, Michael was the founder and executive
chairman of Prestbury Group PLC. He was also a non-executive director
of Soccer Investments plc prior to its acquisition of Leicester City
Football Club plc and Managing Director of Conrad plc until its
reverse takeover of Sheffield United Football Club Limited in 1996. He
is also Executive Chairman of Wilmslow Group PLC, a company floated on
AIM in July 1998.
Matthew Freud (Chief Executive) aged 34, began his career in public
relations at RCA Records at the age of eighteen. He subsequently
started his own consultancy in 1985, Matthew Freud Associates, and in
1990 founded Freud Communications to specialise in the entertainment
industry/consumer brands and restaurant marketing. This is now the
third largest consumer agency in the UK and previous and current
clients include the Hard Rock Cafe, The Big Breakfast, Planet
Hollywood, Pepsi Cola, Volkswagen, BT, Mars, BSkyB, Pizza Hut, Chris
Evans, Geri Halliwell, Brooke Shields, Sylvester Stallone, Hugh Grant,
Arnold Schwarzenegger, Special Olympics, Department of Health,
Department of Trade and Industry, Comic Relief, Channel 4, PolyGram
Filmed Entertainment, Warner Bros, ICM and The William Morris Agency.
Freud Communications' Events Division have created Premieres for,
amongst others, the following films: Armageddon, Batman & Robin, Bean,
Scream 1 & 2, 101 Dalmatians, Interview with a Vampire, Conspiracy
Theory, Fairytale, Titanic, Star Wars, Romeo & Juliet, Four Weddings &
A Funeral and Pulp Fiction. Freud Communications was acquired by
Abbott Mead Vickers plc in 1995 for a consideration of #10 million.
In 1997 Matthew was invited by Peter Mandelson to serve alongside Sam
Chisholm and Michael Grade on the Executive Committee of the New
Milennium Experience Company. He is also co-owner of Quo Vadis in
Soho.
Jonathan Kennedy (Executive Director), aged 31, joined Freud
Communications in 1990 as a board director to head up the company's
restaurant and events division. He has represented acclaimed chefs
such as Marco Pierre White and Gualtiero Marchesi in addition to
restaurant groups such as Cafe Rouge and Chez Gerard and is a co-owner
of Quo Vadis.
Simon Scott (Finance Director), aged 32, became a Chartered Accountant
in 1991 in London with Coopers & Lybrand and has worked as finance
director of several food companies within the Hillsdown Holdings PLC
group.
Nicholas Leslau, (Non-Executive Director), aged 38. He joined the
Burford Group in 1983 and became Joint Managing Director in 1985 and
Chief Executive in 1988. He has sat on several public company boards,
and is a non-executive director of Chorion plc and Nottingham Forest
plc. He is also Chairman and Chief Executive of Prestbury Group PLC.
Nigel Wray (Non-Executive Director), aged 50, is executive Chairman of
Burford Holdings plc and Carlisle Group plc. He is a non-executive
director of Singer & Friedlander Group plc, Nottingham Forest plc,
Chorion plc, Skyepharma PLC, Grantchester Holdings plc, Columbus Group
plc and of several other listed and private companies.
DIRECTORS
The remaining Directors of Hartford, Mr J Lyons and Mr M Connolly,
will resign on completion.
DIVIDEND POLICY
The Directors and the Proposed Directors do not expect to declare a
dividend on the new Ordinary Shares in respect of the period ending 31
December 1998. No dividend will be payable to holders of the Deferred
Shares in any event.
The Proposed Directors propose to pay a dividend on the new Ordinary
Shares as soon as it is prudent to do so.
CONCERT PARTY SHAREHOLDINGS
The relevant holdings of the members of the Concert Party, as at
today's date and following the implementation of the Acquisition and
based upon the assumption that the maximum additional consideration
for Bluelodge is paid, are as follows:
Following
implementation
of the Acquisition
Existing % of Number of % of
number of issued new issued Number of
Ordinary share Ordinary share Deferred
Shares capita1 Shares capital Shares
Matthew Freud - - 373,882,500 26.10 -
Jonathan Kennedy - - 257,850,000 18.00 -
Damien Hirst - - 257,850,000 18.00 -
Mike Rundell - - 12,892,500 0.90 -
Nigel Wray 5,000,000(1) 3.5 198,387,500 13.85 15,000,000(2)
Nicholas Leslau 5,000,000(1) 3.5 198,387,500 13.85 15,000,000(2)
(1) These holdings were acquired via a subscription prior to the
flotation of Hartford in March 1998.
(2) Deferred Shares confer no voting rights on the holders.
Damien Hirst, aged 34, was educated at Goldsmiths College, and first
achieved success as the curator of "Frieze", an exhibition of his own
and fellow contemporary British artists' work. He is a director of
Science Limited, which manages his art and exhibitions. Damien was
brought in as the creative consultant to Bluelodge Limited and
conceived the "Pharmacy" concept.
This announcement which is being made by Apax Partners, which is
regulated by the Securities and Futures Authority Limited, does not
constitute an offer or an invitation to purchase any securities.
Apax Partners is acting for Hartford and no one else in connection
with the Proposals and will not be responsible to anyone other than
Hartford for providing the protections afforded to customers of Apax
Partners nor for providing advice in relation to the Acquisition
Disposal and the Reduction.
This announcement has been approved by Apax Partners & Co. Capital
Limited which is regulated by the Securities and Futures Authority
Limited solely for the purposes of Section 57 of the Financial
Services Act 1986.
END
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