Statement re EGM Circular
23 Mai 2006 - 9:00AM
UK Regulatory
Lennox Holdings PLC
Notice of requisitioned Extraordinary General Meeting
Unanimous recommendation of the Board to vote against
all the resolutions proposed by Peter Voller
Further to the announcement of 3 May 2006, Lennox Holdings PLC ("Lennox" or the
"Company") has today posted a circular to Shareholders a summary of which is as
below;
On 2 May 2006 the Board of Lennox received a notice from Mr Peter Voller
requisitioning an extraordinary general meeting to consider resolutions for the
removal as Directors of Ray Greenwood, managing director, and two individuals
who are in fact not Directors; the appointment of four new directors; and the
appointment of new joint auditors.
Under company law Lennox is obliged to put these resolutions to an
Extraordinary General Meeting. Formal notice of that meeting is set out in a
circular posted to shareholders today.
The Requisition gives no details of the reasons behind this move or the
strategy which Mr Voller proposes for the future conduct of the business. For
the reasons set out below, Lennox strongly advises all Shareholders to vote
against all the Peter Voller Resolutions.
Irrevocable undertakings to vote against all the Peter Voller Resolutions have
been received from Shareholders holding some 48.5 per cent of the ordinary
share capital of the Company.
Background
The core business of Lennox is European Supplies, which was established in 1992
and floated on AIM through a reverse takeover by Lennox in December 2004.
Lennox paid approximately Euro13.4 million (in a mixture of Lennox Shares and
cash) for the business of European Supplies. Of the vendors Peter Voller and
his connected party, directly and indirectly were the greatest beneficiaries.
In July 2005, Peter Voller, despite being the largest Lennox shareholder and
chief executive, failed to be re-elected to the Board at the AGM. In October
2005, the Company became aware of a possible material warranty claim relating
to the acquisition of European Supplies. This led the Board to request a
suspension in trading in the Company's shares.
Following an extensive internal investigation, the Directors have identified an
amount of approximately Euro1.7 million (excluding penalties and interest), which
relates to a cumulative under-declaration of Spanish corporation tax in the
European Supplies businesses spread over several years prior to the acquisition
by Lennox of those businesses.
The under-declaration was not disclosed to Lennox at the time of acquisition.
It is the opinion of the Directors, after taking legal advice, that this
represented a prima facie breach of the warranties given by the vendors under
the terms of the Sale and Purchase Agreement.
The Directors are now seeking to pursue appropriate legal redress for these non
disclosures and letters before action have now been sent to all relevant
vendors, including Peter Voller
The Company has also sought forfeit of certain tranches of shares held,
directly or indirectly, by Peter Voller which the Directors believe were not
validly issued.
The European Supplies vendors have irrevocably but conditionally agreed to
surrender a proportion of the Lennox Shares they received when Lennox acquired
European Supplies. The aggregate number of shares to be so surrendered is
2,500,000 and represents some 9.4 per cent of the Company's current issued
share capital.
To date Peter Voller has not surrendered any shares. Mr Voller has applied,
inter alia, to the court to prevent the Company cancelling the shares in
dispute. The trial is scheduled for late June 2006.
By proposing the resolutions set in out in the Requisition, Peter Voller is now
attempting to remove the Director who has led the pursuit of him through the
courts and to swamp the Board with his own nominees. The Directors question how
robust these nominees will be in pursuing Mr Voller for redress.
Financial position of the business
Investigating the warranty claim has placed a significant burden on the
Company's management team and its other resources. This has had adverse effects
on practically all aspects of the business, including sales and gross margins,
credit control and cash flow. As a consequence both sales and profitability
have suffered, leading the Company to a position where it was in urgent need of
additional working capital as well as funds to meet the under-declared Spanish
tax liability.
Rescue Funding of �2.94 million has been raised, of which approximately �1.0
million has already been subscribed for and �1.94 million is conditional upon
Shareholder approval at a forthcoming EGM, which will be convened once the
audited results for the year to 31 December 2005 are available. The Rescue
Funding is expected to provide sufficient working capital for the Company to
continue trading and it is anticipated that the EGM to consider the funding
will take place in July 2006.
The Rescue Funding comprises new Lennox Shares and secured convertible
redeemable loan notes. The Rescue Funding is to be provided in part by certain
existing institutional shareholders who have backed the current management
team.
Strategy
The fundamental strategy of the business has not changed. The present
management team is looking to build on the two platforms of the business, the
ex-patriate/tourist market and the Spanish domestic market.
With the investigation of the warranty claim now largely complete the
management team is seeking to focus on operational matters and rebuild
shareholder value.
Management has already significantly strengthened the Company's financial and
reporting systems, opened a warehouse in Mallorca and introduced a new range of
own label products, early indications of which are encouraging. The Company's
relationships with its major trading partners are strong and unprofitable
business relationships are being discontinued.
This has all been achieved against a backdrop of severe financial constraints
and managerial uncertainty.
The Directors believe Lennox has an attractive future pursuing the same
commercial objectives as in recent years, but on a much more controlled and
professional basis, led by an experienced and credible management team. This
team has the support of a significant number of shareholders, trade suppliers
and customers.
Management team
Current directors
Lennox currently has two directors, Ray Greenwood and Nigel Barton.
Ray Greenwood, Managing Director, has over 30 years of experience in the food
industry and has extensive business connections throughout the European food
sector. In 1983 he founded Riverside Holdings, a sizeable private company
supplying frozen poultry products to wholesale customers across Europe. He is
resident in Spain and became a Director of Lennox in July 2005.
Nigel Barton has been a Non-Executive Director since June 2005. He has a
background in commercial property and was formerly Logistics Director of the
Company.
Proposed Directors
Subject to the approval of the Rescue Funding at a forthcoming EGM, Nigel Terry
and Rolf Silver have agreed to become directors of Lennox. Both have been
instrumental in securing the Rescue Funding, and with Ray Greenwood, form the
heart of the current management team.
Nigel Terry has over 30 years business experience within the food industry and
of the procurement distribution and sales process industries, including Brakes
Food Service and Fisher Foods Limited. He is currently on the boards of the
Harpenden Building Society, Pinguin Foods NV and Universal Salvage Limited. Mr
Terry has been assisting the Company since October 2005 and has agreed to
become Executive Chairman.
Rolf Silver, ACCA, has been an accountant in private practice in for over ten
years. He has worked as a financial consultant for the last eight years for
companies such as Computerland PLC and Experian Group Limited. Mr Silver, who
is based in Spain, has been working as financial controller of the Company
since July 2005 and has agreed to become Finance Director.
David Franks and Bruce Galliford
In his Requisition, Peter Voller has sought the removal as Directors of David
Franks and Bruce Galliford. David Franks, one of the founders of the European
Supplies businesses, resigned as a Director on 24 April 2006. Bruce Galliford
has never been a Director, but was previously Company Secretary.
The Peter Voller Directors
So far as the Directors are aware none of the four directors nominated by Peter
Voller has any directly relevant Iberian retail experience.
One of the proposed directors, Geoffrey Hoodless, was a founder of Hoodless
Brennan and Partners PLC, a UK stockbroking business. The Directors are aware
that whilst he was the Senior Executive Officer of the company it was fined �
150,000 for breaches of the rules of the Securities and Futures Authority and
the FCA rules.
Of the other proposed directors, the Company has not been given details of
their experience, reputations or the likely contributions they may make to
Lennox. However, of great concern is the degree to which they would be
independent of Peter Voller in the running of the business and the pursuit of
him through the courts.
Auditor appointment
It is normal commercial practice for the incumbent management team to identify
the audit firm or firms they believe are best suited for the work concerned and
to have their selection and audit fees confirmed by shareholders at the annual
general meeting.
The Company's auditors from the date of flotation were AGN Shipleys who
resigned with effect from 24 January 2006. It was announced on 27 January 2006
that AGN Shipleys resigned in light of the breach of warranty claim detailed
above which they considered may give rise to a perception that their
independence and objectivity was compromised. It should be noted that AGN
Santorra y Planas SL, whom Peter Voller is seeking to have appointed as joint
auditors of the Company, is a member of the same international accounting
association as AGN Shipleys which was responsible for the review of European
Supplies' tax position at the time of the flotation.
The Board has instructed Barber & Co to carry out the audit of Lennox for the
year ended 31 December 2005. Formal appointment of auditors, on an ongoing
basis, will be subject to Shareholder approval at the next annual general
meeting of the Company.
The Directors have no reason to doubt the competence or integrity of the either
of the firms proposed by Peter Voller to act as joint auditors. However, it
does not consider it appropriate that an individual whom the Company is
pursuing through the courts for redress should have his nominees take over as
auditors whilst the courts have yet to decide on the merits of the case and, if
appropriate, the level of damages.
The Peter Voller Resolutions
The Peter Voller Resolutions are set out in full in the circular posted to
shareholders today.
Recommendation
The Board unanimously recommends Shareholders to vote against the Peter Voller
Resolutions, as it does not believe they are in the best interests of the
Company and Shareholders taken as a whole. The Board considers the resolutions
submitted by Peter Voller appear to be motivated by personal interest and are
little more than an attempt to frustrate the continued pursuit of Peter Voller
by your Company through the courts.
The current management team has sought to rescue the Company from the
circumstances it found following the departure of Peter Voller from the Board
in July 2005 and subsequent events.
The present management team has won the backing of sufficient investors to
permit the Company to continue to trade. A number of these same investors were
not and are not prepared to back Peter Voller.
Irrevocable Commitments
Irrevocable commitments have been received to vote against all the Peter Voller
Resolutions from Shareholders beneficially owning 12,924,607 shares,
representing 48.5 per cent of the issued ordinary share capital.
The EGM is to be held at the offices of JM Finn & Co., Salisbury House, London
Wall, London EC2M 5TA at 11am on Friday 16 June 2006.
The definitions used in the above announcement are given in the Appendix below.
23 May 2006
Enquiries:
Nexus Financial Ltd 020 7451 7068
Nicholas Nelson nicholas.nelson@nexusgroup.co.uk
Appendix - Definitions
"AGM" the Annual General Meeting of the Company held on 19
July
2005 and adjourned to 20 July 2005
"AIM" The Alternative Investment Market operated by the London
Stock Exchange plc
"AIM Rules" The rules published by the London Stock Exchange
relating to
AIM
"Board" or "Directors" the directors of the Company
"EGM" the extraordinary general meeting of the Company to be
held at
the offices of JM Finn & Co, at 11am on Friday 16 June
2006 to
consider the Peter Voller Resolutions
"European Supplies" European Supplies Group, comprising European Supplies
S.L.,
Mediterranean Supplies S.L. and Millenio Foods S.L.,
"FSA" the Financial Services Authority
"Group" Lennox and its subsidiaries
"Lennox" or "the Lennox Holdings PLC
Company"
"Lennox Shares" or ordinary shares of 10p each in the capital of the
Company
"Ordinary Shares"
"Peter Voller the directors proposed in the Peter Voller Resolutions,
Directors" namely
Geoffrey Hoodless, Adrian Ashurst, Andrew Card and Ian
Affleck
"Peter Voller the resolutions submitted by Peter Voller and set out in
Resolutions"
the circular posted to shareholders today
"Requisition" the notice of 2 May 2006, issued by Peter Voller
requisitioning an
extraordinary general meeting to consider the Peter
Voller
Resolutions
"Rescue Funding" �2.94 million comprising Ordinary Shares and convertible
redeemable secured loan stock announced on 24 April 2006
of
which �1.94 million remains subject to Shareholder
approval
"Sale and Purchase the agreements dated 4 November 2004, under which Lennox
Agreements" acquired the businesses of European Supplies
"Shareholder" a holder of ordinary shares of 10p each in the capital
of the
Company
.
END
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