TIDMSHDP
RNS Number : 5794Q
WB Bidco plc
05 August 2010
Not for release, publication or distribution, in whole or in part, directly or
indirectly, in, into or from any jurisdiction where to do so would constitute a
violation of the relevant laws of such jurisdiction.
FOR IMMEDIATE RELEASE
5 August 2010
Recommended proposals for the acquisition by
WB BIDCO PLC ("Bidco")
of
SHED MEDIA PLC ("Shed")
to be effected by means of a scheme of arrangement under Part 26 of the
Companies Act
· The Bidco Directors and the Independent Directors are pleased to
announce that they have reached agreement on the terms of a recommended
acquisition by Bidco, a newly incorporated public company formed at the
direction of Warner Bros. and the Senior Management Team, of all of the issued
and to be issued share capital of Shed.
· It is intended that the Proposals will be effected by way of a
court-sanctioned scheme of arrangement between Shed and the Scheme Shareholders
under Part 26 of the Companies Act and a capital reduction under section 641 of
the Companies Act. The Scheme Circular will be posted to Shed Shareholders as
soon as reasonably practicable following the date of this announcement and, in
any event, within 28 days of the date of this announcement, unless otherwise
agreed with the Panel.
· Under the terms of the Proposals, Scheme Shareholders will receive
115 pence in cash for each Shed Share they hold.
· The Proposals value the existing issued ordinary share capital of
Shed at approximately GBP99.9 million, which represents a premium of
approximately:
o 37.7 per cent. to the Closing Price per Shed Share of 83.5 pence on 4 August
2010 (being the last Business Day prior to the date of this announcement);
o 47.4 per cent. to the Closing Price per Shed Share of 78.0 pence on 18 June
2010 (being the last Business Day prior to the announcement that Shed was in
discussions with Warner Bros. Entertainment Inc.); and
o 72.9 per cent. to the Closing Price per Shed Share of 66.5 pence on 29 July
2009 (being the last Business Day prior to the commencement of the Offer
Period).
· As an alternative to the Cash Consideration to which they would
otherwise be entitled under the Proposals, Shed Shareholders (other than
Restricted Overseas Shareholders) may elect to receive in respect of all (but
not part only) of their holding of Shed Shares:
for each Shed Share 57.5 pence in cash;
0.5
Bidco B Ordinary Shares; and
8 Bidco
Loan Notes
and in the same proportion for any larger holdings, subject to the terms and
conditions of the Partial Alternative, which include provisions for scaling back
of allocations of Partial Alternative Elections in certain circumstances.
· The Shed Group is a leading creator and distributor of television
content. Shed produces long-running television brands in the genres of drama,
factual, documentary, factual entertainment and history. The Shed Group owns the
rights to its extensive programme library worldwide, and exploits them through
its in-house distribution company, Outright.
· Warner Bros. Entertainment Inc. is a global leader in entertainment
and related businesses across all current and emerging media and platforms. A
Time Warner company, the fully integrated, broad-based studio is home to one of
the most successful collections of brands in the world and stands at the
forefront of every aspect of the entertainment industry from feature film,
television and home entertainment production and worldwide distribution to DVD,
digital distribution, animation, comic books, video games, product and brand
licensing, international cinemas and broadcasting. Warner Bros. Entertainment
Inc. will continue to grow its local television production activities as part of
its strategy to strengthen its portfolio of category-leading worldwide
production and distribution businesses.
· The consideration payable under the Proposals will be financed by
Bidco using a combination of the Warner Bros. Senior Debt Facility and the
subscription proceeds from the issue to Warner Bros. of the Bidco A Ordinary
Shares and the Bidco Preference Shares. Part of the Warner Bros. Senior Debt
Facility will also be used to fund the repayment by the Shed Group of its
existing term loan and other indebtedness to Barclays Bank plc and the Governor
and Company of the Bank of Ireland under facilities currently in place.
· A committee of the Shed Directors comprising the Independent
Directors has been formed for the purposes of evaluating the terms of the
Proposals and making the recommendation to Shed Shareholders in relation to the
Proposals.
· The Independent Directors, who have been so advised by Altium (as
the independent adviser for the purposes of Rule 3 of the Code), consider the
terms of the Proposals to be fair and reasonable. In providing its advice to the
Independent Directors, Altium has taken into account the commercial assessment
of the Independent Directors. Accordingly, the Independent Directors intend to
recommend unanimously that all eligible Shed Shareholders vote in favour of the
Scheme Resolutions to give effect to the Scheme.
· The Partial Alternative is not the subject of a recommendation by
the Independent Directors, and eligible Shed Shareholders are strongly advised
by the Independent Directors to seek their own independent financial, tax and
legal advice before electing to participate in the Partial Alternative.
· Bidco has entered into arrangements with certain key employees of
the Shed Group pursuant to which such individuals have acquired Bidco C Ordinary
Shares. To the extent that any such Sweet Equity Employees are holders of Shed
Shares, they will not be eligible to vote at the Court Meeting to approve the
Scheme in respect of their holdings of Shed Shares nor will they be eligible to
vote at the General Meeting on the Ordinary Resolution in respect of the Sweet
Equity Arrangements.
· Bidco has also entered into arrangements with certain key employees
of Shed's distribution business, Outright, pursuant to which such individuals
will acquire Time Warner restricted stock and stock options. To the extent that
any such Outright Employees are holders of Shed Shares, they will not be
eligible to vote at the Court Meeting to approve the Scheme in respect of their
holdings of Shed Shares nor will they be eligible to vote at the General Meeting
on the Ordinary Resolution in respect of the Outright Arrangements.
· Bidco has also entered into arrangements with holders of Shed Awards
pursuant to which such individuals will be released from their obligations under
the terms of the relevant Shed Share Schemes to pay the employer's NICs arising
from their exercise of their Shed Awards. To the extent that any such Shed
Share Scheme NICs Employees are holders of Shed Shares, they will not be
eligible to vote at the Court Meeting to approve the Scheme in respect of their
holdings of Shed Shares nor will they be eligible to vote at the General Meeting
on the Ordinary Resolution in respect of the Shed Share Scheme NICs
Arrangements.
· Following the implementation of the Proposals in full, and assuming
that only the Management Team elect for the Partial Alternative, it is
anticipated that the issued share capital of Bidco (excluding the Bidco
Preference Shares held by Warner Bros. which will not carry any voting rights)
will be allocated as to 55.75 per cent. to Warner Bros. (Bidco A Ordinary
Shares), 21.37 per cent. to the Management Team (Bidco B Ordinary Shares) and
22.88 per cent. to the Sweet Equity Employees (Bidco C Ordinary Shares). A pool
of further Bidco C Ordinary Shares representing up to 2.75 per cent. in nominal
value of the issued share capital of Bidco as at the Scheme Effective Date will
be made available to certain new joiners to be identified by the Bidco Directors
in the future.
· Bidco has received irrevocable undertakings and letters of intent
from Shed Shareholders in respect of in aggregate 63,691,755 Shed Shares,
representing approximately 73.3 per cent. in nominal value of the existing
issued share capital of Shed.
· Members of the Management Team have irrevocably undertaken, in
respect of in aggregate 48,117,045 Shed Shares representing approximately 55.4
per cent. in nominal value of the existing issued share capital of Shed, to vote
in favour of the Scheme Resolutions and the Ordinary Resolutions to the extent
that they are eligible to do so and to elect to receive the Partial Alternative
in respect of their Shed Shares. Taking into account those members of the
Management Team who are ineligible to vote at the Court Meeting to approve the
Scheme and to approve one or more of the Ordinary Resolutions at the General
Meeting in respect of the Sweet Equity Arrangements and the Shed Share Scheme
NICs Arrangements, such irrevocable undertakings represent 51.2 per cent. in
value of the Shed Shareholders eligible to vote at the Court Meeting to approve
the Scheme, 50.7 per cent. in nominal value of the Shed Shareholders eligible to
vote at the General Meeting on the Ordinary Resolution in respect of the Sweet
Equity Arrangements and 53.7 per cent. in nominal value of the Shed Shareholders
eligible to vote on the Ordinary Resolution in respect of the Shed Share Scheme
NICs Arrangements. Further details of these irrevocable undertakings are set out
in Appendix III to this announcement.
· Certain other current employees of the Shed Group (including three
Outright Employees) have irrevocably undertaken, in respect of in aggregate
903,141 Shed Shares representing approximately 1.0 per cent. in nominal value of
the existing issued share capital of Shed, to vote in favour of the Scheme
Resolutions and the Ordinary Resolutions to the extent that they are eligible to
do so. Further details of these irrevocable undertakings are set out in
Appendix III to this announcement.
· Certain former employees of the Shed Group have irrevocably
undertaken in respect of in aggregate 9,609,343 Shed Shares representing
approximately 11.1 per cent. in nominal value of the existing issued share
capital of Shed and approximately 12.3 per cent. in nominal value of the
Independent Scheme Shares, to vote in favour of the Scheme Resolutions and the
Ordinary Resolutions. Further details of these irrevocable undertakings are set
out in Appendix III to this announcement.
· Bidco has also received letters of intent from other Shed
Shareholders to vote in favour of the Scheme Resolutions and the Ordinary
Resolutions in respect of in aggregate 5,062,226 Shed Shares representing
approximately 5.8 per cent. in nominal value of the existing issued share
capital of Shed and approximately 6.5 per cent. in nominal value of the
Independent Scheme Shares. Further details of these letters of intent are set
out in Appendix III to this announcement.
Commenting on the Proposals, Heather Rabbatts, the Independent Chairman of Shed
said:
"I am delighted to be able to present these Proposals, which provide significant
value to Shed Shareholders in cash and represent a premium of 72.9 per cent. to
the Closing Price on the last Business Day prior to the commencement of the
Offer Period. The Proposals recognise the achievements of the board, management
and employees of Shed in building a market leading creator and distributor of
television content. Warner Bros. Television Group is a globally renowned
entertainment business and will provide the Shed Group with the platform from
which to support and deliver its growth plans."
Commenting on the Proposals, Ronald Goes, Head of International TV Production,
on behalf of Warner Bros. and as a Bidco Director said:
"We are pleased to have reached agreement with the Senior Management Team and
the Independent Directors on this recommended acquisition. The United Kingdom is
an important television market, with a robust, thriving local production sector.
The acquisition of Shed provides Warner Bros. Television Group with immediate
scale in UK production and complements our existing television production and
distribution businesses. The Shed Group's successful existing and future
scripted and non-scripted programming adds programmes and formats to our
catalogue which can be leveraged internationally. The acquisition of Shed will
provide Warner Bros. Television Group with a solid foundation as we extend our
local television production business to other major territories."
Commenting on the Proposals, Nicholas Southgate, CEO of Shed, on behalf of the
Senior Management Team said:
"In Warner Bros. Television Group we have found the right partner to support
Shed's development and future growth strategy. It has an unrivalled reputation
both creatively and in international distribution and my management team are
excited about being in the vanguard of the Warner Bros. Entertainment Inc.
initiative to build on its international production network."
This summary should be read in conjunction with the full text of the following
announcement. The Conditions and certain further terms of the Proposals are set
out in Appendix I. Appendix II contains the sources and bases of certain
information contained in this summary and the following announcement. Appendix
III contains details of the irrevocable undertakings and letters of intent
received by Bidco. Appendix IV contains information on Bidco, a summary of the
rights attaching to the Bidco Consideration Securities and a description of the
Sweet Equity Arrangements, the Outright Arrangements and the Shed Share Scheme
NICs Arrangements. Appendix V contains the definitions of certain terms used in
this summary and the following announcement.
Enquiries:
+------------------------------------------------+-----------------+
| Warner Bros. (Media Enquiries) | |
+------------------------------------------------+-----------------+
| Scott Rowe | +1 818 954 5806 |
+------------------------------------------------+-----------------+
| Deborah Lincoln | +44 (0) 7879 |
| | 484944 |
+------------------------------------------------+-----------------+
| Morgan Stanley (Financial Adviser to Time | |
| Warner Inc. and Joint Financial Adviser to | |
| Bidco) | |
+------------------------------------------------+-----------------+
| Max Herrnstein | +1 212 761 4000 |
+------------------------------------------------+-----------------+
| Laurence Hopkins | +44 (0) 20 |
| | 7425 8000 |
+------------------------------------------------+-----------------+
| Antoine Dresch | +44 (0) 20 |
| | 7425 8000 |
+------------------------------------------------+-----------------+
| Ingenious Corporate Finance Limited (Financial | + 44 (0) 20 |
| Adviser to the Senior Management Team and | 7319 4000 |
| Joint Financial Adviser to Bidco) | |
+------------------------------------------------+-----------------+
| Tom Manwaring | |
+------------------------------------------------+-----------------+
| Chris Graves | |
+------------------------------------------------+-----------------+
| Shed Media plc | +44 (0) 20 |
| | 7239 1010 |
+------------------------------------------------+-----------------+
| Heather Rabbatts | |
+------------------------------------------------+-----------------+
| Altium Capital Limited (Financial Adviser and | + 44 (0) 20 |
| Nominated Adviser to Shed) | 7484 4040 |
+------------------------------------------------+-----------------+
| Ben Thorne | |
+------------------------------------------------+-----------------+
| Sam Fuller | |
+------------------------------------------------+-----------------+
| Melanie Szalkiewicz | |
+------------------------------------------------+-----------------+
| Hudson Sandler (Public Relations Adviser to | + 44 (0) 20 |
| Shed) | 7796 4133 |
+------------------------------------------------+-----------------+
| Nick Lyon | |
+------------------------------------------------+-----------------+
| Michael Sandler | |
+------------------------------------------------+-----------------+
| Wendy Baker | |
+------------------------------------------------+-----------------+
Further information
This announcement does not constitute, or form any part of, any offer for, or
solicitation of any offer for, securities or the solicitation of any vote or
approval in any jurisdiction, pursuant to the Proposals or otherwise. The Scheme
Circular will contain the full terms and conditions of the Proposals (including
details of how to vote in respect of the Proposals and details of, and how to
elect for, the Partial Alternative). Any vote in respect of the Proposals or
decision to elect for the Partial Alternative should only be made on the basis
of the information contained in the Scheme Circular.
Morgan Stanley & Co. Incorporated and Morgan Stanley & Co. Limited are acting
for Time Warner and Bidco and no-one else in connection with the Proposals and
will not be responsible to anyone other than Time Warner and Bidco for providing
the protections afforded to clients of Morgan Stanley & Co. Incorporated and
Morgan Stanley & Co. Limited, nor for providing advice in relation to the
Proposals or any matter referred to herein.
Ingenious Corporate Finance Limited, which is authorised and regulated in the
United Kingdom by the Financial Services Authority, is acting for the Senior
Management Team and Bidco and no-one else in connection with the Proposals and
will not be responsible to anyone other than the Senior Management Team and
Bidco for providing the protections afforded to clients of Ingenious Corporate
Finance Limited, nor for providing advice in relation to the Proposals or any
matter referred to herein.
Altium Capital Limited, which is authorised and regulated in the United Kingdom
by the Financial Services Authority, is acting exclusively for Shed and no-one
else in connection with the Proposals and will not be responsible to anyone
other than Shed for providing the protections afforded to clients of Altium
Capital Limited, nor for providing advice in relation to the Proposals or any
matter referred to herein.
Overseas Jurisdictions
The Partial Alternative is not being made available in the Restricted
Jurisdictions or to any Restricted Overseas Shareholder. Such investors cannot
elect for the Partial Alternative and will not be issued Bidco Consideration
Securities and any purported election for the Partial Alternative by such
investors will be treated as invalid by Bidco. Such investors may only receive
the Cash Consideration.
The Bidco Consideration Securities to be issued pursuant to the Proposals will
not be listed on any recognised stock exchange and have not been, and will not
be, registered under the United States Securities Act of 1933, as amended (the
"US Securities Act"), or under any relevant securities laws of any state or
other jurisdiction of the United States or of any Restricted Jurisdiction. No
regulatory clearances in respect of any of the Bidco Consideration Securities
have been, or will be, applied for in any jurisdiction. Unless an exemption
under relevant securities laws is applicable, the Bidco Consideration Securities
are not being, and may not be, offered, sold, resold, delivered, distributed or
otherwise transferred, directly or indirectly, in or into any Restricted
Jurisdiction or to any Restricted Overseas Shareholder. Accordingly, such
securities may not be offered, sold or delivered, directly or indirectly, in or
into such jurisdictions except pursuant to exemptions from applicable
requirements of such jurisdictions. The Bidco Consideration Securities will be
issued in reliance upon the exemption from the registration requirements of the
US Securities Act provided by section 3(a)(10) thereof. No public offering of
Bidco Consideration Securities will be made in the United States. For the
purpose of qualifying for the exemption from the registration requirements of
the US Securities Act provided by section 3(a)(10) thereof with respect to the
Bidco Consideration Securities issued pursuant to the Scheme, Shed will advise
the Court that its sanctioning of the Scheme will be relied upon by Bidco as an
approval of the Scheme following a hearing on its fairness to Scheme
Shareholders at which hearing all such shareholders are entitled to attend in
person or through counsel to support or oppose the sanctioning of the Scheme and
with respect to which notification has been given to all such shareholders.
This transaction has not been approved or disapproved by the US Securities and
Exchange Commission ("SEC"), nor has the SEC or any US state securities
commission passed upon the merits or fairness of the transaction nor upon the
adequacy or accuracy of the information contained in this announcement. Any
representation to the contrary is a criminal offence in the United States. The
information disclosed in this announcement is not the same as that which would
have been disclosed if this announcement had been prepared for the purpose of
complying with the registration requirements of the US Securities Act or in
accordance with the laws and regulations of any other jurisdiction.
Shareholders in the US should note that the Scheme will relate to the shares of
an English company that is a "foreign private issuer" as defined under Rule 3b-4
of the US Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
will be governed by English law. Neither the proxy solicitation nor the tender
offer rules under the Exchange Act will apply to the Scheme. Moreover, the
Scheme will be subject to the disclosure requirements and practices applicable
in the UK to schemes of arrangement, which differ from the requirements of the
US proxy solicitation rules and tender offer rules. The financial information
relating to the Shed Group included or referred to in this announcement has been
prepared in accordance with accounting standards applicable in the United
Kingdom that may not be comparable to the financial statements of US companies.
US Generally Accepted Accounting Principles differ in certain respects from
International Financial Reporting Standards. None of the financial information
relating to the Shed Group in this announcement has been audited in accordance
with auditing standards generally accepted in the United States or the auditing
standards of the Public Accounting Oversights Board (United States).
Shed is a public limited company incorporated under the laws of England and
Wales. All of the directors of Shed are citizens and residents of countries
other than the United States. As a result, it may not be possible for investors
to effect service of process within the United States upon such persons or the
members of the Shed Group, or to enforce against them judgments of US courts,
including judgments predicated upon civil liabilities under the securities laws
of the United States or any state or territory within the United States.
Bidco is a public limited company incorporated under the laws of England and
Wales. A number of the Bidco Directors are citizens and residents of countries
other than the United States. As a result, it may not be possible for investors
to effect service of process within the United States upon such persons or the
members of Bidco, or to enforce against them judgments of US courts, including
judgments predicated upon civil liabilities under the securities laws of the
United States or any state or territory within the United States.
There is substantial doubt as to the enforceability in the United Kingdom in
original actions, or in actions for enforcement of judgments of US courts, based
on the civil liability provisions of US federal securities laws.
This announcement has been prepared for the purpose of complying with English
law and the City Code and the information disclosed may not be the same as that
which would have been disclosed if this announcement had been prepared in
accordance with the laws of jurisdictions outside the UK.
Forward-looking statements
This announcement contains statements that are or may be, forward looking
statements. All statements other than statements of historical facts included in
this announcement may be forward looking statements. Forward looking statements
often use words such as "target", "plan", "believe", "expect", "aim", "intend",
"will", "should", "could", "would", "may", "consider", "anticipate", "estimate",
"synergy", "cost saving", "project", "goal" or "strategy" or words or terms of
similar substance or the negative of such words. Forward looking statements
include statements relating to the following: (i) the expected timetable for
implementing the Proposals, future capital expenditures, expenses, revenues,
earnings, synergies, economic performance, indebtedness, financial condition,
dividend policy, losses and future prospects of Bidco or Shed; (ii) business and
management strategies and the expansion and growth of Bidco or Shed's operations
and potential synergies resulting from the acquisition of Shed by Bidco; and
(iii) the effects of government regulation on Bidco or Shed's business.
These forward looking statements are not guarantees of future performance. They
have not been reviewed by the auditors of Bidco or Shed. 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, including
among other things, the enactment of legislation or regulation that may impose
costs or restrict activities; the re-negotiation of contracts or licences;
fluctuations in demand and pricing in the television production industry;
fluctuations of exchange controls, changes in government policy and taxation;
industrial disputes; war and terrorism. These forward looking statements involve
known and unknown risks and uncertainties which may cause them to differ from
the actual results, performance or achievements expressed or implied by such
forward looking statements. These forward looking statements are based on
numerous assumptions regarding the present and future business strategies of
such persons and the environment in which each will operate in the future.
Investors are cautioned not to place undue reliance on the forward looking
statements, which speak only as of the date of this announcement. All subsequent
oral or written forward looking statements attributable to Bidco or Shed or any
of their respective members, directors, officers or employees or any persons
acting on their behalf are expressly qualified in their entirety by the
cautionary statement above. All forward looking statements included in this
announcement are based on information available to Bidco and Shed on the date of
this announcement and are made only as of the date of this announcement. Undue
reliance should not be placed on such forward looking statements.
Subject to compliance with their legal and regulatory obligations, neither Shed
nor Bidco intends, or undertakes any obligation, to update any forward looking
statements contained in this announcement.
Publication of this announcement
A copy of this announcement will be available free of charge for inspection on
the following website from 12 noon (London time) today: www.shed-media.com.
Rule 8 Summary
Under the provisions of Rule 8.3 of the City Code, if any person is, or becomes,
"interested" (directly or indirectly) in 1 per cent. or more of any class of
"relevant securities" of an offeree or a paper offeror that person must make an
"Opening Position Disclosure" following the commencement of the offer period
and, if later, following the announcement in which a paper offeror is first
identified.
An "Opening Position Disclosure" must contain details of the person's interests
and short positions in, and rights to subscribe for, any "relevant securities"
of each of (i) the offeree and (ii) the paper offeror. An "Opening Position
Disclosure" by a person to whom Rule 8.3(a) applies must be made by no later
than 3.30 p.m. (London time) on the 10th Business Day following the commencement
of the offer period and, if appropriate, by no later than 3.30 p.m. (London
time) on the 10th Business Day following the announcement in which the paper
offeror is first identified. Relevant persons who deal in the "relevant
securities" of the offeree or of the paper offeror prior to the deadline for
making an "Opening Position Disclosure" must instead make a "Dealing
Disclosure".
Under Rule 8.3(b) of the Takeover Code, any person who is, or becomes,
interested in 1 per cent. or more of any class of "relevant securities" of the
offeree or of the paper offeror must make a "Dealing Disclosure" if the person
deals in any "relevant securities" of the offeree or of the paper offeror. A
"Dealing Disclosure" must contain details of the "dealing" concerned and of the
person's interests and short positions in, and rights to subscribe for, any
relevant securities of each of the offeree, and the paper offeror, save to the
extent that these details have previously been disclosed under Rule 8. A
"Dealing Disclosure" by a person to whom Rule 8.3(b) applies must be made no
later than 3.30 p.m. (London time) on the Business Day following the date of the
relevant dealing.
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 offeree, they will be deemed to be a single person for the purpose of Rule
8.3 of the City Code.
"Opening Position Disclosures" must also be made by the offeree and by the paper
offeror and "Dealing Disclosures" must also be made by the offeree, by the paper
offeror by any persons acting in concert with any of them (see Rules 8.1, 8.2
and 8.4 of the City Code).
Details of the offeree and offeror companies in respect of whose relevant
securities Opening Position Disclosures and Dealing Disclosures must be made can
be found in the Disclosure Table on the Takeover Panel's website at
www.thetakeoverpanel.org.uk, including details of the number of relevant
securities in issue, when the offer period commenced and when any offeror was
first identified. If you are in any doubt as to whether you are required to make
an Opening Position Disclosure or a Dealing Disclosure, you should contact the
Panel's Market Surveillance Unit on +44 (0) 20 7638 0129.
Terms in quotation marks are defined in the City Code, which can be found in the
Panel's website. If you are in any doubt as to whether of not you are required
to disclose a "dealing" under Rule 8 of the City Code, you should contact an
independent financial adviser authorised under FSMA or consult the panel's
website at www.thetakeoverpanel.org.uk or contact the Panel on telephone number
+44 (0) 20 7638 0129.
Not for release, publication or distribution, in whole or in part, directly or
indirectly, in, into or from any jurisdiction where to do so would constitute a
violation of the relevant laws of such jurisdiction.
FOR IMMEDIATE RELEASE
5 August 2010
Recommended proposals for the acquisition by
WB BIDCO PLC ("Bidco")
of
SHED MEDIA PLC ("Shed")
to be effected by means of a scheme of arrangement under Part 26 of the
Companies Act
1. Introduction
The Bidco Directors and the Independent Directors are pleased to announce that
they have reached agreement on the terms of a recommended acquisition by Bidco
of all of the issued and to be issued share capital of Shed. The Proposals value
each Shed Share at 115 pence and the existing issued share capital of Shed at
approximately GBP99.9 million, which represents a premium of approximately:
o 37.7 per cent. to the Closing Price per Shed Share of 83.5 pence on 4 August
2010 (being the last Business Day prior to the date of this announcement);
o 47.4 per cent. to the Closing Price per Shed Share of 78.0 pence on 18 June
2010 (being the last Business Day prior to the announcement that Shed was in
discussions with Warner Bros. Entertainment Inc.); and
o 72.9 per cent. to the Closing Price per Shed Share of 66.5 pence on 29 July
2009 (being the last Business Day prior to the commencement of the Offer
Period).
The Independent Directors, who have been so advised by Altium (as the
independent adviser for the purposes of Rule 3 of the Code), consider the terms
of the Proposals to be fair and reasonable and intend to recommend unanimously
that all eligible Shed Shareholders vote in favour of the Scheme Resolutions to
give effect to the Scheme.
The Cash Consideration enables Shed Shareholders to receive immediate and
certain value in cash at 115 pence per Scheme Share.
2. Summary of the Proposals
It is intended that the Proposals will be effected by way of a court-sanctioned
scheme of arrangement between Shed and the Scheme Shareholders under Part 26 of
the Companies Act and a Capital Reduction under section 641 of the Companies
Act. The detailed terms of the Scheme and the Capital Reduction will be set out
in the Scheme Circular.
The Scheme requires the approval of the Independent Scheme Shareholders and the
sanction of the Court. The resolution to be proposed at the Court Meeting must
be approved by a majority in number of the Independent Scheme Shareholders
present and voting, either in person or by proxy, representing not less than 75
per cent. in value of the Scheme Shares held by such holders. The Capital
Reduction requires the approval of Shed Shareholders by special resolution and
the subsequent approval of the Court. All Shed Shareholders will be entitled to
attend the First Court Hearing in person or through counsel to support or oppose
the sanctioning of the Scheme. The Proposals also require the approval of the
eligible Shed Shareholders by passing the Ordinary Resolutions in respect of the
Sweet Equity Arrangements, the Outright Arrangements and the Shed Share Scheme
NICs Arrangements.
2.1 Cash Consideration
Under the terms of the Proposals, which will be subject to the Conditions and
certain further terms set out in Appendix I to this announcement and set out in
the Scheme Circular, if the Scheme becomes effective, those holders of Scheme
Shares on the register of members of Shed at the Scheme Record Time who do not
validly elect for the Partial Alternative will have their Scheme Shares
cancelled and will receive:
for each Shed Share 115 pence in cash
and in the same proportion for larger holdings.
2.2 Partial Alternative
As an alternative to the Cash Consideration to which they would otherwise be
entitled under the Proposals, Shed Shareholders (other than Restricted Overseas
Shareholders) may elect to receive a combination of cash and Bidco Consideration
Securities (comprising Bidco B Ordinary Shares and Bidco Loan Notes) in respect
of all (but not part only) of their holding of Shed Shares, in each case subject
to the terms and conditions of the Partial Alternative, full details of which
will be set out in the Scheme Circular. If the Scheme becomes effective, those
holders of Scheme Shares on the register of members of Shed at the Scheme Record
Time who validly elect for the Partial Alternative will have their Scheme Shares
cancelled and will receive:
for each Shed Share 57.5 pence in cash;
0.5 Bidco B
Ordinary Shares; and
8 Bidco Loan
Notes
and in the same proportion for any larger holdings, subject to the terms and
conditions of the Partial Alternative.
As the Bidco Consideration Securities to be issued in consideration for the
cancellation of each Shed Share are expected to be formally valued at not less
than 57.5 pence in the Scheme Circular, the Partial Alternative will represent
consideration of not less than 115 pence per Shed Share.
The maximum number of Bidco B Ordinary Shares to be issued pursuant to the
Scheme shall be limited to 28,828,768 (the "Maximum Number of Bidco B Ordinary
Shares") in order to ensure that Warner Bros. will retain a holding of not less
than 50.1 per cent. in nominal value of the issued share capital of Bidco
(excluding the Bidco Preference Shares held by Warner Bros. which do not carry
any voting rights) as at the Scheme Effective Date. If valid Partial Alternative
Elections are made which would, if satisfied in full, require more than the
Maximum Number of Bidco B Ordinary Shares to be issued (the number of Bidco B
Ordinary Shares that would be issued in respect of such valid Partial
Alternative Elections being the "Unadjusted Number of Bidco B Ordinary Shares"),
the number of Scheme Shares in respect of which a Partial Alternative Election
shall be regarded as being made shall be reduced by the same proportion that the
Maximum Number of Bidco B Ordinary Shares bears to the Unadjusted Number of
Bidco B Ordinary Shares. Consideration for the cancellation of any Scheme Shares
in respect of which a valid election for the Partial Alternative has been
reduced pursuant to this scale back mechanism shall be satisfied by way of the
Cash Consideration.
The Partial Alternative is not being made available in the Restricted
Jurisdictions or to any Restricted Overseas Shareholder. Such Shed Shareholders
cannot elect for the Partial Alternative and will not be issued Bidco
Consideration Securities, and any purported election for the Partial Alternative
by such Shed Shareholders will be treated as invalid by Bidco.
The Partial Alternative is not the subject of a recommendation by the
Independent Directors, and eligible Shed Shareholders are strongly advised by
the Independent Directors to seek their own independent financial, tax and legal
advice before electing to participate in the Partial Alternative.
Appendix IV contains a summary of the rights attaching to the Bidco
Consideration Securities. Further details of the Partial Alternative and a
valuation pursuant to Rule 24.10 of the City Code of the Bidco Consideration
Securities will be contained in the Scheme Circular.
3. Irrevocable undertakings and letters of intent
Irrevocable Undertakings
Each member of the Management Team has irrevocably undertaken that he or she
shall (and in relation to any beneficial holdings of Scheme Shares which are
registered in the name of a third party, that he or she shall procure that such
third party shall):
· vote in favour of the resolution to be proposed at the Court Meeting to the
extent that he or she is eligible to do so (the members of the Management Team
who are also Sweet Equity Employees and/or Shed Share Scheme NICs Employees will
be ineligible to vote on the resolution to be proposed at the Court Meeting);
· vote in favour of the Special Resolution and the Ordinary Resolutions to be
proposed at the General Meeting to the extent that he or she is eligible to do
so (the members of the Management Team who are also Sweet Equity Employees will
be ineligible to vote on the Ordinary Resolution to approve the Sweet Equity
Arrangements and the members of the Management Team who are Shed Share Scheme
NICs Employees will be ineligible to vote on the Ordinary Resolution to approve
the Shed Share Scheme NICs Arrangements); and
· elect to receive the Partial Alternative in respect of his or her Scheme
Shares, save in relation to any Shed Shares allotted or otherwise acquired by a
member of the Management Team pursuant to the Shed Share Schemes prior to the
Reorganisation Record Time, which shall be dealt with in accordance with the
proposals referred to in paragraph 12 below.
The aggregate beneficial holdings of the Management Team represented by the
above undertakings total 48,117,045Shed Shares, representing approximately 55.4
per cent. in nominal value of the existing issued share capital of Shed.
Assuming that only members of the Management Team elect to receive the Partial
Alternative, it is anticipated that upon the Scheme Effective Date, the
Management Team will hold Bidco Consideration Securities which, together with
the Bidco C Ordinary Shares now held by the Sweet Equity Employees will
represent 44.25 per cent. in nominal value of the issued share capital of Bidco
(excluding the Bidco Preference Shares held by Warner Bros. which will not carry
any voting rights).
Certain other current employees of the Shed Group (including three Outright
Employees) have irrevocably undertaken that they shall:
· vote in favour of the resolution to be proposed at the Court Meeting to the
extent that they are eligible to do so (the three Outright Employees will be
ineligible to vote on the resolution to be proposed at the Court Meeting); and
· vote in favour of the Special Resolution and the Ordinary Resolutions to be
proposed at the General Meeting to the extent that they are eligible to do so
(the three Outright Employees will be ineligible to vote on the Ordinary
Resolution to approve the Outright Arrangements).
The aggregate beneficial holdings of such employees represented by the above
undertakings total 903,141 Shed Shares, representing approximately 1.0 per cent.
in nominal value of the existing issued share capital of Shed.
Certain former employees of the Shed Group have irrevocably undertaken, in
respect of in aggregate 9,609,343 Shed Shares representing approximately 11.1
per cent. in nominal value of the existing issued share capital of Shed, and
approximately 12.3 per cent. in nominal value of the Independent Scheme Shares,
to vote in favour of the Scheme Resolutions and the Ordinary Resolutions.
These irrevocable undertakings will cease to have any effect if the Scheme is
not implemented by the Long Stop Date, but will otherwise remain binding in all
circumstances.
Letters of Intent
Bidco has also received letters of intent from Shed Shareholders to vote in
favour of the Scheme Resolutions and the Ordinary Resolutions in respect of in
aggregate 5,062,226 Shed Shares representing approximately 5.8 per cent. in
nominal value of the existing issued share capital of Shed and approximately 6.5
per cent. of the Independent Scheme Shares.
Taking into account the ineligibility of certain members of the Management Team
and three of the Outright Employees to vote at the Court Meeting as referred to
above, Bidco has received irrevocable undertakings and letters of intent from
Shed Shareholders to vote in favour of the resolution at the Court Meeting in
respect of in aggregate 54,713,763 Independent Scheme Shares, representing
approximately 70.3 per cent. in nominal value of the number of Independent
Scheme Shares in issue (being 77,855,647 Scheme Shares).
Further details of the irrevocable undertakings and letters of intent are set
out in Appendix III to this announcement.
4. Reasons for the Proposals
Warner Bros. Television Group is committed to building a presence in local
television production worldwide and strengthening its distribution business.
This transaction with Shed, one of the UK's largest independent TV production
companies, and its highly-regarded management team, is an important step towards
advancing this strategic initiative and will allow Warner Bros. to acquire
immediate scale in local television production as well as better enable the
sharing of formats across geographies.
At the same time, the Management Team, who own a majority of Shed, have been
seeking a partner to help them take the business forward in order to achieve the
combined objectives of: (a) putting in place a new incentivisation structure to
motivate existing and new management and creative talent; (b) accessing funding
to implement Shed's acquisition strategy; and (c) providing partial liquidity
for the founder members of management. A transaction with Warner Bros. not only
achieves these objectives, but also provides the business with the benefit of an
international TV production and distribution infrastructure to accelerate the
Shed Group's growth.
This acquisition will build on Warner Bros. Entertainment Inc.'s strong US
presence and allow it to establish a presence in the attractive UK production
market. Shed has a committed management team supported by a deep pool of
creative talent who have forged strong relationships and ongoing commissions
with key UK and US broadcasters and pay TV networks. The Proposals, the Sweet
Equity Arrangements, the Outright Arrangements and the Shed Share Scheme NICs
Arrangements are intended to incentivise the management and senior employees of
the Shed Group and to grow this pool of creative talent.
The Shed Group has a diversified portfolio of programmes and a strong track
record of developing successful formats whose exploitation can be expanded
internationally. Shed's competence in both non-scripted and scripted programming
is complementary to Warner Bros. Entertainment Inc.'s existing strengths in
programming and its international distribution capabilities. The Proposals will
allow Warner Bros. Entertainment Inc. to leverage the Shed Group's capabilities
internationally and to diversify revenues by capturing a greater portion of
programming budgets devoted to local production. Mutual licensing agreements
between members of the Shed Group and Warner Bros. regarding the use of formats
will enhance the returns profile of this investment.
5. Responsibility for considering the Proposals
Nicholas Southgate and Jonathon Kemp, who are currently Shed Directors, have
participated in the Sweet Equity Arrangements and have given irrevocable
undertakings to elect for the Partial Alternative. Christopher Bonney, who is
currently a Shed Director, will be a participant in the Outright Arrangements.
Timothy Carter, who is currently a Shed Director, has participated in the Sweet
Equity Arrangements. Nicholas Powell, Eileen Gallagher, Alexander Graham and
Claire Hungate, who are currently Shed Directors, have given irrevocable
undertakings to elect for the Partial Alternative. Nicholas Southgate, Jonathon
Kemp, Nicholas Powell, Eileen Gallagher, Alexander Graham, Claire Hungate,
Timothy Carter and Christopher Bonney will therefore have an ongoing interest in
the future and prospects of the continuing Shed business. In view of the current
and prospective conflicts of interest for these Shed Directors in connection
with the Proposals, a committee of the board of Shed comprising the Independent
Directors has been formed to evaluate the terms of the Proposals. Accordingly,
none of Nicholas Southgate, Jonathon Kemp, Nicholas Powell, Eileen Gallagher,
Alexander Graham, Claire Hungate, Timothy Carter or Christopher Bonney have
taken part in the Independent Directors' decision to recommend that all Scheme
Shareholders vote in favour of the Scheme Resolutions to give effect to the
Scheme.
6. Background to and reasons for the recommendation
During the course of 2009, the Senior Management Team explored a number of
options for taking Shed and its businesses forward.
In May 2010, Warner Bros. Entertainment Inc. made an unsolicited approach to the
Independent Directors regarding their interest in exploring a possible offer for
the Company working in partnership with the Senior Management Team, and on 21
June 2010, the Independent Directors announced that Shed was in discussions with
Warner Bros. Entertainment Inc., working with certain members of the Shed
management.
Warner Bros. and the Independent Directors today announce that they have reached
agreement on the terms of a recommended acquisition by Bidco of all of the
issued and to be issued share capital of Shed. Under the Proposals, Scheme
Shareholders at the Scheme Record Time who do not validly elect for the Partial
Alternative will be entitled to receive:
for each Shed Share 115 pence in cash
Under the terms of the Partial Alternative, as an alternative to the Cash
Consideration to which they would otherwise be entitled under the terms of the
Proposals, Shed Shareholders (other than Restricted Overseas Shareholders) will
be entitled to receive a combination of cash and Bidco Consideration Securities
(comprising Bidco B Ordinary Shares and Bidco Loan Notes) in respect of all (but
not part only) of their holding of Shed Shares, subject to possible scaling back
if the aggregate Partial Alternative Elections would require more than a
pre-determined number of Bidco B Ordinary Shares to be issued as described in
paragraph 2.2 above.
In considering whether to recommend the Proposals, the Independent Directors
have taken into account the following factors:
· the Proposals value the entire existing issued share capital of Shed
at approximately GBP99.9 million, which represents a premium of approximately:
o 37.7 per cent. to the Closing Price per Shed Share of 83.5 pence on 4 August
2010 (being the last Business Day prior to the date of this announcement);
o 47.4 per cent. to the Closing Price per Shed Share of 78.0 pence on 18 June
2010 (being the last Business Day prior to the announcement that Shed was in
discussions with Warner Bros. Entertainment Inc.);
o 72.9 per cent. to the Closing Price per Shed Share of 66.5 pence on 29 July
2009 (being the last Business Day prior to the commencement of the Offer
Period); and
· the views of the Management Team, who have all irrevocably
undertaken to vote in favour of the Proposals to the extent that they are
eligible to vote in respect of the various resolutions and own in aggregate 55.4
per cent. in nominal value of the existing issued share capital of Shed.
Whilst the Independent Directors remain confident about the future prospects for
the Shed Group they also recognise that the future performance of the Shed Group
is highly dependent on the preservation of a highly motivated and focused
management team.
In light of the above, the Independent Directors consider that the Cash
Consideration offered under the Proposals provides Shed Shareholders with
certainty and offers fair value now for the long-term potential of the Shed
Group.
The Independent Directors, who have been so advised by Altium (as the
independent adviser for the purposes of Rule 3 of the Code), consider the terms
of the Proposals to be fair and reasonable and intend to unanimously recommend
that all eligible Shed Shareholders vote in favour of the Scheme Resolutions to
give effect to the Scheme. In providing its advice to the Independent Directors,
Altium has taken into account the commercial assessment of the Independent
Directors.
The Independent Directors are making and will make no recommendation in relation
to the decision to be taken by eligible Shed Shareholders as to whether they
should elect to participate in the Partial Alternative or whether they should
refrain from making such an election (in which event, they will receive the
whole of the consideration for their Shed Shares as Cash Consideration).
The Cash Consideration enables Shed Shareholders to receive immediate and
certain value in cash at 115 pence per Scheme Share.
7. Information on Warner Bros. Entertainment Inc.
Warner Bros. Entertainment Inc. is a global leader in entertainment and related
businesses across all current and emerging media and platforms. A Time Warner
company, the fully integrated, broad-based studio is home to one of the most
successful collections of brands in the world and stands at the forefront of
every aspect of the entertainment industry from feature film, television and
home entertainment production and worldwide distribution to DVD, digital
distribution, animation, comic books, video games, product and brand licensing,
international cinemas and broadcasting. Warner Bros. Entertainment Inc. will
continue to grow its local television production activities as part of its
strategy to strengthen its portfolio of category-leading worldwide production
and distribution businesses.
8. Information on Bidco
Bidco is a newly incorporated public limited company formed for the purpose of
implementing the Proposals. At the date of this announcement, the issued share
capital of Bidco comprises of Bidco A Ordinary Shares and Bidco Preference
Shares held by Warner Bros. and Bidco C Ordinary Shares held by the Sweet Equity
Employees.
Bidco has not traded since its date of incorporation, nor has it entered into
any obligations other than in connection with the Proposals. The Bidco Directors
are Bruce Rosenblum, Jeff Schlesinger, Ronald Goes, Nicholas Southgate and
Jonathon Kemp.
Warner Bros. has undertaken to make available to Bidco the Warner Bros. Senior
Debt Facility, being a senior debt facility of approximately GBP27.2 million
(which will, following the Scheme Effective Date, be applied in part to fund the
repayment by the Shed Group of its existing term loan and other indebtedness to
Barclays Bank plc and the Governor and Company of the Bank of Ireland under
facilities currently in place). Warner Bros. has also subscribed for a
combination of Bidco A Ordinary Shares and Bidco Preference Shares.
Pursuant to the Partial Alternative Election, members of the Management Team
(and others who validly elect to receive the Partial Alternative) will receive
Bidco B Ordinary Shares and Bidco Loan Notes, subject to possible scaling back
if the aggregate Partial Alternative Elections would require more than a
pre-determined number of Bidco B Ordinary Shares to be issued, further details
of which are set out in paragraph 2.2 above.
Following the implementation of the Proposals in full, and assuming that only
the Management Team elect for the Partial Alternative, it is anticipated that
the issued share capital of Bidco (excluding the Bidco Preference Shares held by
Warner Bros. which will not carry any voting rights) will be allocated as to
55.75 per cent. to Warner Bros. (Bidco A Ordinary Shares), 21.37per cent. to the
Management Team (Bidco B Ordinary Shares) and 22.88 per cent. to the Sweet
Equity Employees (Bidco C Ordinary Shares). A pool of further Bidco C Ordinary
Shares representing up to 2.75 per cent. in nominal value of the issued share
capital of Bidco as at the Scheme Effective Date will be made available to
certain new joiners to be identified by the Bidco Directors in the future.
9. Information on the Shed Group
General
The Shed Group is a leading creator and distributor of television content. Shed
produces long-running television brands in the genres of drama, factual,
documentary, factual entertainment and history. The Shed Group owns the rights
to its extensive programme library worldwide, and exploits them through its
in-house distribution company, Outright.
In the UK, the Shed Group continues to generate new content for terrestrial
broadcasters and a number of digital channels. In the US, the Shed Group is
increasing its brand count and broadcast customers. With a well-established
production office in Los Angeles and a proven track record in successfully
producing UK formats for the US market, there is a growing appetite for Shed's
content and a number of new programmes are in production with US networks and
cable channels.
The year ended 31 December 2009 saw revenue increase to GBP92.6 million (2008:
GBP81.9 million) and statutory reported operating profits of GBP12.3 million
(2008: GBP12.3 million) with a reported profit before tax of GBP9.8 million
(GBP2008: GBP7.9 million). Adjusted operating profits were GBP14.7 million
(2008: GBP14.5 million) with an adjusted profit before tax of GBP12 million.
Current trading and prospects
Six months into its current financial year Shed has good production visibility
with 306 hours commissioned (UK: 194 hours and US: 112 hours), which makes up 83
per cent. of its targeted production revenue. Intellectual property ("IP") gross
profit is at 73 per cent. of target.
The Shed Group is seeing growth in UK production commissioned and it is
particularly pleased that its investment in Scottish drama has paid off so
quickly with the recent announcement by the BBC of the James Herriot drama
'Young James' from Koco Drama Limited, Shed's new drama subsidiary.
The US business continues to perform strongly and IP sales are robust.
The Shed Group is making good progress and the Shed Directors continue to be
confident in the outlook for the current financial year.
10. Management and Employees
Bidco attaches great importance to the skills and experience of the existing
management and employees of the Shed Group. As such Bidco does not currently
intend to make any material changes to the Shed Group's staffing levels, nor,
save as set out in paragraph 11 below in respect of the service agreements of
the Senior Management Team, to any conditions of employment (including pension
benefits), as a result of the Proposals.
Accordingly, Bidco has given assurances to the Independent Directors that it
will procure that the existing rights, including pension rights, of the
employees of the Shed Group will be honoured.
Additionally, Bidco has no plans to change the places of business of any member
of the Shed Group.
Details of the impact of the Proposals on awards made under the Shed Share
Schemes are described in paragraph 12 below.
The Independent Directors intend to resign from the board of directors of Shed
following the Proposals becoming effective and their expectation is that they
will have no further continuing business involvement with the Shed Group.
Details of the arrangements proposed for the Sweet Equity Employees, the
Outright Employees and the Shed Share Scheme NICs Employees are described in
paragraph 11 below and in Appendix IV.
The Independent Directors welcome the assurance of Bidco that, following the
acquisition of the Shed Group, it will procure that the existing rights,
including pension rights, of the employees of the Shed Group will be honoured.
The Independent Directors also welcome the assurance that Bidco has no plans to
change the places of business of any member of the Shed Group.
11. Arrangements with the Management Team, the Sweet Equity Employees, the
Outright Employees and the Shed Share Scheme NICs Employees
Warner Bros. and the Bidco Directors believe that the continuing participation
of the Management Team and the Sweet Equity Employees is critical to the ongoing
performance and growth of the Shed Group. It is intended that the members of the
Management Team and the Sweet Equity Employees will remain in place at an
operational level to operate the businesses of Bidco and the Shed Group once the
Proposals become effective.
The Sweet Equity Employees have already subscribed for Bidco C Ordinary Shares
in consideration of an undertaking to Bidco to pay the higher of the nominal
value of those Bidco C Ordinary Shares and market value at the date of issue of
such Bidco C Ordinary Shares (as agreed with HMRC or, failing that, an
independent valuer based on what it is believed HMRC will accept as the market
value). In the case of certain Sweet Equity Employees who are or may be subject
to US tax, Warner Bros. will loan the subscription amount to such individuals to
allow them to meet their obligations to Bidco. That loan will, broadly, be
repayable as the relevant individuals dispose of their Bidco C Ordinary Shares.
The subscription amounts due from the remaining Sweet Equity Employees will be
deferred until disposal of their Bidco C Ordinary Shares, but to the extent that
the proceeds received on such disposal (together with the bonus described in the
following paragraph) are less than the subscription amounts owed, the amount due
will be waived by Bidco. Warner Bros. will pay to Bidco any shortfall that would
otherwise have been due in respect of such subscriptions. A pool of further
Bidco C Ordinary Shares representing up to 2.75 per cent. in nominal value of
the issued share capital of Bidco as at the Scheme Effective Date will be made
available for allocation to certain new joiners identified by the Bidco
Directors in the future. In addition, all members of the Management Team have
irrevocably undertaken to elect to receive the Partial Alternative and thereby
to acquire Bidco B Ordinary Shares and Bidco Loan Notes as part of the
Proposals.
As part of the incentive arrangements for Sweet Equity Employees, Bidco also
intends to put in place a new bonus arrangement. That bonus arrangement will
provide an opportunity for Sweet Equity Employees to receive an additional cash
bonus, payable in two main tranches as soon as reasonably practicable after
completion of the purchase of Bidco C Ordinary Shares in respect of which the
First Option or Second Option (as the case may be) has been exercised. Broadly,
that bonus will be of an amount equal to the difference (if any) between the
market value of the Bidco C Ordinary Shares (issued to the relevant Sweet Equity
Employee) at the time of their disposal and the value that those Bidco C
Ordinary Shares would have had if they were subject to, and had benefited from,
the same option rights as the Bidco B Ordinary Shares (as described in Appendix
IV to this announcement). The bonus arrangement is not intended to confer any
obligation on Bidco or any member of the Shed Group to implement a similar
arrangement in the future.
The Management Team and the Sweet Equity Employees (together the "Covenantors")
have agreed to give a tax covenant in favour of members of the Wider Bidco Group
and the Shed Group (the "Tax Covenant"). Under the terms of the Tax Covenant,
the Covenantors have, inter alia, given an indemnity in respect of certain tax
liabilities that may arise as a result of the Covenantors taking the Partial
Alternative and/or in relation to the Bidco C Ordinary Shares.
Some of the Covenantors will be entitled to receive loans from Warner Bros. to
meet certain tax-related liabilities that may arise where such Covenantors elect
for the Partial Alternative. Those tax-related liabilities include certain
liabilities for which such individuals are liable under the terms of the Tax
Covenant. Any such loans will bear interest and will be "limited recourse" as
the loans will only be repayable out of the proceeds from the disposal of the
Bidco B Ordinary Shares and Bidco Loan Notes. However, such loans will not be
made available to the members of the Senior Management Team, Brian Park or Ann
McManus.
Bidco intends to implement arrangements with the members of Senior Management
Team so that their service agreements within the Shed Group (which are currently
terminable on 12 months' notice) would continue (save in circumstances
justifying summary dismissal) until the date of exercise of the First Option. In
the event that a relevant member of the Senior Management gives notice of
termination of employment within the Bidco group to expire prior to the date of
exercise of the First Option, that individual will have no further entitlement
to receive salary or benefits.
Shed Shareholders will be asked at the General Meeting to approve the Sweet
Equity Arrangements. No Shed Shareholders who are also Sweet Equity Employees
will be entitled to vote at the General Meeting on the Ordinary Resolution in
respect of the Sweet Equity Arrangements. Voting on such Ordinary Resolution
will be by way of a poll.
Post implementation of the Proposals, it is anticipated that the activities of
Outright, the distribution business within the Shed Group, will be integrated
within the distribution business of Warner Bros. Entertainment Inc. and its role
expanded to include distribution of the content of certain other Warner Bros.
Entertainment Inc. businesses. Warner Bros. therefore considers it desirable
that the key staff at Outright, being the Outright Employees, be incentivised by
the performance of the wider Time Warner group, rather than solely by the
performance of the Shed Group. It is therefore proposed that the Outright
Employees be incentivised by the issue to them of both Time Warner restricted
stock and stock options in the Time Warner 2010 Stock Incentive Plan, rather
than Bidco C Ordinary Shares.
The restricted stock takes the form of Time Warner shares which vest in equal
instalments on the third and fourth anniversaries of the date of grant, assuming
continued employment and subject to accelerated vesting upon the occurrence of
certain events such as retirement, death or disability. The awards of restricted
stock are also subject to restrictions on transfer and forfeiture prior to
vesting. Time Warner stock options granted become exercisable, or vest, in
instalments of 25 per cent. over a four-year period, assuming continued
employment, and expire 10 years from the grant date. The stock options are
subject to accelerated vesting upon the occurrence of certain events such as
retirement, death or disability. The exercise price will be calculated based on
the closing price of Time Warner stock on the New York Stock Exchange as of the
date of the grant.
Shed Shareholders will be asked at the General Meeting to approve the Outright
Arrangements. No Shed Shareholders who are also Outright Employees will be
entitled to vote at the General Meeting on the Ordinary Resolution in respect of
the Outright Arrangements. Voting on such Ordinary Resolution will be by way of
a poll.
On the exercise of share options by UK resident optionholders, an income tax and
employee's NICs charge arises on an optionholder's gains (unless the options are
tax-approved). At the same time, an employer's NICs charge also arises for the
employer (at 12.8 per cent.) on the same amount on which the optionholder is
subject to tax.
Under the rules of the Shed Share Schemes, participants have agreed to bear the
employer's NICs in addition to their own tax liabilities on their gains (if any)
on the exercise of their options granted under such Shed Share Schemes. It is
proposed, however, as part of the Proposals, that Shed will bear its own
employer's NICs costs. The amount of the employer's NICs which will, as a
result, be settled by Shed will be approximately GBP230,000 in aggregate.
Shed Shareholders will be asked at the General Meeting to approve the Shed Share
Scheme NICs Arrangements. No Shed Shareholders who are also Shed Share Scheme
NICs Employees will be entitled to vote at the General Meeting on the Ordinary
Resolution in respect of the Shed Share Scheme NICs Arrangements. Voting on
such Ordinary Resolution will be by way of a poll.
Those members of the Management Team who are also Sweet Equity Employees or Shed
Share Scheme NICs Employees (together with the Outright Employees who are Shed
Shareholders) will not be regarded as Independent Scheme Shareholders and will
not be eligible to vote at the Court Meeting in respect of their holdings of
Scheme Shares. However, each of them has irrevocably agreed to be bound by the
Scheme.
Members of the Management Team and the Outright Employees who are Shed
Shareholders will be entitled to vote on the Special Resolution in respect of
the Shed Shares held or beneficially owned by them. All members of the
Management Team and the Outright Employees who are Shed Shareholders have
irrevocably undertaken to vote at the General Meeting in favour of the Special
Resolution in respect of beneficial holdings amounting to in aggregate
48,824,301 Shed Shares, representing approximately 56.2 per cent. in nominal
value of the issued share capital of Shed at the date of this announcement.
Altium considers the terms of the Sweet Equity Arrangements, the Outright
Arrangements and the Shed Share Scheme NICs Arrangements to be fair and
reasonable so far as all the other Shed Shareholders are concerned.
12. Shed Share Schemes
Shed has granted options to employees under the EMI Scheme and the PSP. At the
date of this announcement there are unexercised options under the EMI Scheme
over 668,236 Shed Shares at exercise prices of one pence, 88 pence, 107 pence,
115 pence and 126 pence and nil cost options outstanding under the PSP in
respect of 1,959,515 Shed Shares.
All options outstanding under the Shed Share Schemes will (to the extent they
are not already exercisable) become exercisable, pursuant to a resolution of the
remuneration committee of Shed, following the passing of the resolution of the
Independent Scheme Shareholders approving the Scheme at the Court Meeting.
Appropriate proposals pursuant to Rule 15 of the Takeover Code will be made to
all holders of outstanding options granted under the Shed Share Schemes as soon
as possible following the posting of the Scheme Circular. Shed Shares acquired
or issued pursuant to the exercise of options granted under the Shed Share
Schemes and entered in the register of members of Shed prior to the
Reorganisation Record Time will be subject to the terms of the Scheme and will
constitute Scheme Shares.
The Scheme will not extend to Shed Shares issued after the Reorganisation Record
Time (on the understanding that no Shed Shares will be issued between the
Reorganisation Record Time and the Scheme Record Time). However, it is proposed
to amend the Articles at the General Meeting to provide that, if the Proposals
become effective, any Shed Shares issued to any person after the Scheme Record
Time (including in satisfaction of an option exercised under one of the Shed
Share Schemes) will be automatically transferred to Bidco in consideration for
the payment by Bidco to such persons of 115 pence in cash for each Shed Share so
transferred.
13. Financing
The consideration payable under the Proposals will be financed by Bidco using a
combination of the Warner Bros. Senior Debt Facility and the subscription
proceeds from the issue to Warner Bros. of the Bidco A Ordinary Shares and the
Bidco Preference Shares. Part of the Warner Bros. Senior Debt Facility will also
be used to fund the repayment by the Shed Group of its existing term loan and
other indebtedness to Barclays Bank plc and the Governor and Company of the Bank
of Ireland under facilities currently in place.
Morgan Stanley & Co. Limited is satisfied that resources are available to Bidco
sufficient to satisfy, in full, the Cash Consideration and the cash element of
the Partial Alternative which may become payable under the terms of the
Proposals.
14. Implementation Agreement and Inducement Fee
Warner Bros., Bidco and Shed have entered into the Implementation Agreement
which provides, among other things, for the implementation of the Proposals and
contains assurances and confirmations between the parties, including provisions
to implement the Proposals on a timely basis and to govern the conduct of the
business of the Shed Group up until the Scheme Effective Date.
Under the terms of the Implementation Agreement, Shed has agreed to pay Bidco an
inducement fee of GBP1,017,600 if:
· the Independent Directors withdraw, suspend or adversely modify or
qualify their recommendation of the Proposals in the terms set out in this
announcement;
· Shed breaches provisions in the Implementation Agreement relating to
the implementation of the Scheme and such breach causes the Scheme not to become
effective (and no breach by Warner Bros. or Bidco causes in whole or in part the
Scheme not to become effective); or
· a Competing Offer is announced before the Scheme becomes effective
or is withdrawn or, in the case of a Takeover Offer, the offer lapses or is
withdrawn and subsequently the Scheme fails to become effective or is withdrawn
or the Takeover Offer lapses or is withdrawn (as the case may be) and that
Competing Offer (or any other Competing Offer which is announced prior to the
lapse or withdrawal of the Scheme failing to become effective) subsequently
becomes or is declared unconditional in all respects or is otherwise implemented
or completed.
15. Disclosure of interests in Shed Shares
As at the close of business on 3 August 2010, being the latest practicable date
prior to the date of this announcement, save for the Shed Shares specified in
the irrevocable undertakings given by the Management Team and the Outright
Employees who are also Shed Shareholders and referred to in paragraph 3 above
and the 2,627,751 Shed Shares which may be issued on exercise of the options, or
transferred to the extent already issued and held in trust, pursuant to the Shed
Share Schemes to the Shed Share Schemes NICs Employees, neither Bidco, nor any
of its directors, nor any person deemed or presumed by the Panel to be acting in
concert with Bidco, owns or controls, or has borrowed or lent, any Shed Shares
or any securities convertible or exchangeable into Shed Shares (including
pursuant to any long exposure, whether conditional or absolute, to changes in
the prices of securities) or any rights to subscribe for or purchase the same,
or holds any options (including traded options) in respect of, or has any option
to acquire, any Shed Shares or has entered into any derivatives referenced to
Shed Shares ("Relevant Shed Shares") which remain outstanding, nor does any such
person hold any short positions in relation to Relevant Shed Shares (whether
conditional or absolute and whether in the money or otherwise), including any
short position under a derivative, any agreement to sell or any delivery
obligation or right to require another person to purchase or take delivery, nor
does any such person have any arrangement in relation to Relevant Shed Shares.
An "arrangement" also includes any indemnity or option arrangement and any
understanding, formal or informal, of whatever nature, relating to Relevant Shed
Shares which may be an inducement to deal or refrain from dealing.
16. Structure of the Proposals
It is intended that the Proposals will be effected by means of a
court-sanctioned scheme of arrangement under Part 26 of the Companies Act and a
capital reduction under section 641 of the Companies Act.
The purpose of the Scheme and the Capital Reduction is to provide for Bidco to
become the owner of all of the issued and to be issued share capital of Shed.
This is to be achieved by the reclassification and, subsequently, the
cancellation of the Scheme Shares and the application of the reserve arising
from such cancellation in paying up in full a number of new Ordinary Shares
(which number is, in aggregate, equal to the number of Scheme Shares cancelled)
and issuing the same to Bidco. The cancellation of the Scheme Shares and the
subsequent issue of such new Ordinary Shares to Bidco will result in Shed
becoming a wholly-owned subsidiary of Bidco.
At the Reorganisation Record Time, the Scheme Shares in respect of which no
valid Partial Alternative Elections have been received will be reclassified as A
Ordinary Shares and the Scheme Shares in respect of which valid elections for
Partial Alternative have been received will be reclassified as B Ordinary
Shares.
In consideration for the cancellation of the A Ordinary Shares, the holders of
such A Ordinary Shares will receive the Cash Consideration on the basis set out
in paragraph 2.1 above. In consideration for the cancellation of the B Ordinary
Shares, the holders of such B Ordinary Shares will receive a combination of cash
and Bidco Consideration Securities on the basis set out in paragraph 2.2 above.
Implementation of the Scheme will be subject to the Conditions and certain
further terms referred to in Appendix I to this announcement and to be set out
in the Scheme Circular. Implementation of the Scheme will require, among other
things, the following events to occur on or before the Long Stop Date:
· the passing of a resolution at the Court Meeting to approve the
Scheme to be approved by a majority in number of the Independent Scheme
Shareholders present and voting, either in person or by proxy, representing not
less than 75 per cent. in value of the Scheme Shares held by such holders. Those
members of the Management Team who are also Sweet Equity Employees or Shed Share
Scheme NICs Employees and the Outright Employees who are Shed Shareholders will
not be entitled to vote at the Court Meeting to approve the Scheme in respect of
any of their holdings of Shed Shares. However, they have agreed to undertake to
the Court to be bound by the Scheme;
· the passing of the Special Resolution to be proposed at the General
Meeting (requiring the approval of Shed Shareholders representing at least 75
per cent. of the votes cast in respect of such special resolution);
· the passing of the Ordinary Resolutions to be proposed at the General
Meeting in respect of the Sweet Equity Arrangements, the Outright Arrangements
and the Shed Share Scheme NICs Arrangements as required by Rule 16 of the
Takeover Code, which resolutions will each require the approval of Shed
Shareholders representing more than 50 per cent. of the votes cast in respect of
such Ordinary Resolutions. Shed Shareholders who are also Sweet Equity Employees
will not be entitled to vote on the Ordinary Resolution in respect of the Sweet
Equity Arrangements. Shed Shareholders who are also Outright Employees will not
be entitled to vote on the Ordinary Resolution in respect of the Outright
Arrangements. Shed Shareholders who are also Shed Share Scheme NICs Employees
will not be entitled to vote on the Ordinary Resolution in respect of the Shed
Share Scheme NICs Arrangements.
Once the Court Meeting and General Meeting have been held and the Scheme has
been approved by the Independent Scheme Shareholders, the Scheme must be
sanctioned and the Capital Reduction confirmed by the Court. Office copies of
the First Court Order must be delivered to the Registrar of Companies and, in
relation to the Capital Reduction, the Second Court Order together with a
statement of capital (approved by the Court) must be delivered to and registered
by the Registrar of Companies. The Proposals will only become fully effective on
the Second Court Order and the statement of capital approved by the Court being
registered by the Registrar of Companies.
The Scheme provides for Shed and Bidco jointly to consent, on behalf of all
persons concerned, to any modification of or addition to the Scheme or to any
condition that the Court may approve or impose.
If the Scheme becomes effective, it will be binding on Shed and all holders of
Scheme Shares including those who did not vote to approve the Scheme or who
voted against the Scheme.
The Scheme Circular containing details of the Scheme and notices of the Court
Meeting and the General Meeting, together with the forms of proxy in respect of
the Court Meeting and the General Meeting and form of election in respect of the
Partial Alternative, will be posted to Shed Shareholders and, for information
only, to participants in the Shed Share Schemes, as soon as reasonably
practicable following the date of this announcement and, in any event, within 28
days of the date of this announcement, unless otherwise agreed with the Panel.
It is expected that the Court Meeting and the General Meeting will be held in
late September 2010. The Proposals are expected to be effective by mid-October
2010.
Bidco may elect at any time to implement the Proposals by way of a Takeover
Offer rather than the Scheme, subject to the consent of, and any modification or
amendments as may be required by, the Panel or the Court.
17. Cancellation of admission to trading on AIM and re-registration
It is intended that the last day of dealings in, and for registration of
transfers of, Shed Shares will be the day of the First Court Hearing which is
expected to be on or about 8 October 2010, following which Shed Shares are
expected to be suspended from trading on AIM. It is expected that no transfers
of Shed Shares will be registered after 6:00 p.m. on that date.
Subject to the Scheme becoming effective, share certificates in respect of Shed
Shares will cease to be valid from the Reorganisation Record Time and should be
destroyed. In addition, entitlements to Shed Shares held within the CREST system
will be cancelled from such time. It is not intended that new share certificates
will be issued to Shed Shareholders in respect of their holdings of A Ordinary
Shares and B Ordinary Shares since the proposed Capital Reduction is expected to
take place shortly after the Reorganisation Record Time on or about 12 October
2010.
Prior to the Scheme Effective Date, applications will be made to the London
Stock Exchange to cancel the admission to trading of Shed Shares on AIM. This is
expected to take effect on the Scheme Effective Date.
With effect from the Scheme Effective Date, Shed will be re-registered as a
private company pursuant to the Proposals.
18. Overseas Shareholders
The availability of the Proposals to persons not resident in the United Kingdom
may be affected by the laws of the relevant jurisdictions. Persons who are not
resident in the United Kingdom should inform themselves about and observe any
applicable requirements.
This announcement does not constitute an offer or an invitation to purchase any
securities.
19. General
The Scheme will be governed by English law and will be subject to the
jurisdiction of the English courts. The Scheme will be subject to the applicable
requirements of the City Code, the Panel, the London Stock Exchange and the
Financial Services Authority.
Appendix I contains the Conditions and certain further terms of the Proposals.
Appendix II contains the sources and bases of certain information contained in
this announcement.
Appendix III contains details of the irrevocable undertakings and letters of
intent received by Bidco.
Appendix IV contains information on Bidco, a summary of the rights attaching to
the Bidco Consideration Securities, and a description of the Sweet Equity
Arrangements, the Outright Arrangements and the Shed Share Schemes NICs
Arrangements.
Appendix V contains the definitions of certain terms used in this announcement.
A copy of this announcement will be available free of charge for inspection on
the following website from 12 noon (London time) today: www.shed-media.com.
Enquiries:
+------------------------------------------------+-----------------+
| Warner Bros. (Media Enquiries) | |
+------------------------------------------------+-----------------+
| Scott Rowe | +1 818 954 5806 |
+------------------------------------------------+-----------------+
| Deborah Lincoln | +44 (0) 7879 |
| | 484944 |
+------------------------------------------------+-----------------+
| Morgan Stanley (Financial Adviser to Time | |
| Warner Inc. and Joint Financial Adviser to | |
| Bidco) | |
+------------------------------------------------+-----------------+
| Max Herrnstein | +1 212 761 4000 |
+------------------------------------------------+-----------------+
| Laurence Hopkins | +44 (0) 20 |
| | 7425 8000 |
+------------------------------------------------+-----------------+
| Antoine Dresch | +44 (0) 20 |
| | 7425 8000 |
+------------------------------------------------+-----------------+
| Ingenious Corporate Finance Limited (Financial | + 44 (0) 20 |
| Adviser to the Senior Management Team and | 7319 4000 |
| Joint Financial Adviser to Bidco) | |
+------------------------------------------------+-----------------+
| Tom Manwaring | |
+------------------------------------------------+-----------------+
| Chris Graves | |
+------------------------------------------------+-----------------+
| Shed Media plc | +44 (0) 20 |
| | 7239 1010 |
+------------------------------------------------+-----------------+
| Heather Rabbatts | |
+------------------------------------------------+-----------------+
| Altium Capital Limited (Financial Adviser and | + 44 (0) 20 |
| Nominated Adviser to Shed) | 7484 4040 |
+------------------------------------------------+-----------------+
| Ben Thorne | |
+------------------------------------------------+-----------------+
| Sam Fuller | |
+------------------------------------------------+-----------------+
| Melanie Szalkiewicz | |
+------------------------------------------------+-----------------+
| Hudson Sandler (Public Relations Adviser to | + 44 (0) 20 |
| Shed) | 7796 4133 |
+------------------------------------------------+-----------------+
| Nick Lyon | |
+------------------------------------------------+-----------------+
| Michael Sandler | |
+------------------------------------------------+-----------------+
| Wendy Baker | |
+------------------------------------------------+-----------------+
Further information
This announcement does not constitute, or form any part of, any offer for, or
solicitation of any offer for, securities or the solicitation of any vote or
approval in any jurisdiction, pursuant to the Proposals or otherwise. The Scheme
Circular will contain the full terms and conditions of the Proposals (including
details of how to vote in respect of the Proposals and details of, and how to
elect for, the Partial Alternative). Any vote in respect of the Proposals or
decision to elect for the Partial Alternative should only be made on the basis
of the information contained in the Scheme Circular.
Morgan Stanley & Co. Incorporated and Morgan Stanley & Co. Limited, are acting
for Time Warner and Bidco and no-one else in connection with the Proposals and
will not be responsible to anyone other than Time Warner and Bidco for providing
the protections afforded to clients of Morgan Stanley & Co. Incorporated and
Morgan Stanley & Co. Limited, nor for providing advice in relation to the
Proposals or any matter referred to herein.
Ingenious Corporate Finance Limited, which is authorised and regulated in the
United Kingdom by the Financial Services Authority, is acting for the Senior
Management Team and Bidco and no-one else in connection with the Proposals and
will not be responsible to anyone other than the Senior Management Team and
Bidco for providing the protections afforded to clients of Ingenious Corporate
Finance Limited, nor for providing advice in relation to the Proposals or any
matter referred to herein.
Altium Capital Limited, which is authorised and regulated in the United Kingdom
by the Financial Services Authority, is acting exclusively for Shed and no-one
else in connection with the Proposals and will not be responsible to anyone
other than Shed for providing the protections afforded to clients of Altium
Capital Limited or for providing advice in relation to the Proposals or any
matter referred to herein.
Overseas Jurisdictions
The Partial Alternative is not being made available in the Restricted
Jurisdictions or to any Restricted Overseas Shareholder. Such investors cannot
elect for the Partial Alternative and will not be issued Bidco Consideration
Securities and any purported election for the Partial Alternative by such
investors will be treated as invalid by Bidco. Such investors may only receive
Cash Consideration.
The Bidco Consideration Securities to be issued pursuant to the Proposals will
not be listed on any recognised stock exchange and have not been, and will not
be, registered under the United States Securities Act of 1933, as amended (the
"US Securities Act"), or under any relevant securities laws of any state or
other jurisdiction of the United States or of any Restricted Jurisdiction. No
regulatory clearances in respect of any of the Bidco Consideration Securities
have been, or will be, applied for in any jurisdiction. Unless an exemption
under relevant securities laws is applicable, the Bidco Consideration Securities
are not being, and may not be, offered, sold, resold, delivered, distributed or
otherwise transferred, directly or indirectly, in or into any Restricted
Jurisdiction or to any Restricted Overseas Shareholder. Accordingly, such
securities may not be offered, sold or delivered, directly or indirectly, in or
into such jurisdictions except pursuant to exemptions from applicable
requirements of such jurisdictions. The Bidco Consideration Securities will be
issued in reliance upon the exemption from the registration requirements of the
US Securities Act provided by section 3(a)(10) thereof. No public offering of
Bidco Consideration Securities will be made in the United States. For the
purpose of qualifying for the exemption from the registration requirements of
the US Securities Act provided by section 3(a)(10) thereof with respect to the
Bidco Consideration Securities issued pursuant to the Scheme, Shed will advise
the Court that its sanctioning of the Scheme will be relied upon by Bidco as an
approval of the Scheme following a hearing on its fairness to Shed Shareholders
at which hearing all such shareholders are entitled to attend in person or
through counsel to support or oppose the sanctioning of the Scheme and with
respect to which notification has been given to all such shareholders.
This transaction has not been approved or disapproved by the US Securities and
Exchange Commission ("SEC"), nor has the SEC or any US state securities
commission passed upon the merits or fairness of the transaction nor upon the
adequacy or accuracy of the information contained in this announcement. Any
representation to the contrary is a criminal offence in the United States. The
information disclosed in this announcement is not the same as that which would
have been disclosed if this announcement had been prepared for the purpose of
complying with the registration requirements of the US Securities Act or in
accordance with the laws and regulations of any other jurisdiction.
Shareholders in the US should note that the Scheme will relate to the shares of
an English company that is a "foreign private issuer" as defined under Rule 3b-4
of the US Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
will be governed by English law. Neither the proxy solicitation nor the tender
offer rules under the Exchange Act will apply to the Scheme. Moreover, the
Scheme will be subject to the disclosure requirements and practices applicable
in the UK to schemes of arrangement, which differ from the requirements of the
US proxy solicitation rules and tender offer rules. The financial information
relating to the Shed Group included or referred to in this announcement has been
prepared in accordance with accounting standards applicable in the United
Kingdom that may not be comparable to the financial statements of US companies.
US Generally Accepted Accounting Principles differ in certain respects from
International Financial Reporting Standards. None of the financial information
relating to the Shed Group in this announcement has been audited in accordance
with auditing standards generally accepted in the United States or the auditing
standards of the Public Accounting Oversights Board (United States).
Shed is a public limited company incorporated under the laws of England and
Wales. All of the directors of Shed are citizens and residents of countries
other than the United States. As a result, it may not be possible for investors
to effect service of process within the United States upon such persons or the
members of the Shed Group, or to enforce against them judgments of US courts,
including judgments predicated upon civil liabilities under the securities laws
of the United States or any state or territory within the United States.
Bidco is a public limited company incorporated under the laws of England and
Wales. A number of the Bidco Directors are citizens and residents of countries
other than the United States. As a result, it may not be possible for investors
to effect service of process within the United States upon such persons or the
members of the Shed Group, or to enforce against them judgments of US courts,
including judgments predicated upon civil liabilities under the securities laws
of the United States or any state or territory within the United States.
There is substantial doubt as to the enforceability in the United Kingdom in
original actions, or in actions for enforcement of judgments of US courts, based
on the civil liability provisions of US federal securities laws.
This announcement has been prepared for the purpose of complying with English
law and the City Code and the information disclosed may not be the same as that
which would have been disclosed if this announcement had been prepared in
accordance with the laws of jurisdictions outside the UK.
Forward-looking statements
This announcement contains statements that are or may be, forward looking
statements. All statements other than statements of historical facts included in
this announcement may be forward looking statements. Forward looking statements
often use words such as "target", "plan", "believe", "expect", "aim", "intend",
"will", "should", "could", "would", "may", "consider", "anticipate", "estimate",
"synergy", "cost saving", "project", "goal" or "strategy" or words or terms of
similar substance or the negative of such words. Forward looking statements
include statements relating to the following: (i) the expected timetable for
implementing the Proposals, future capital expenditures, expenses, revenues,
earnings, synergies, economic performance, indebtedness, financial condition,
dividend policy, losses and future prospects of Bidco or Shed; (ii) business and
management strategies and the expansion and growth of Bidco or Shed's operations
and potential synergies resulting from the acquisition of Shed by Bidco; and
(iii) the effects of government regulation on Bidco or Shed's business.
These forward looking statements are not guarantees of future performance. They
have not been reviewed by the auditors of Bidco or Shed. 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, including
among other things, the enactment of legislation or regulation that may impose
costs or restrict activities; the re-negotiation of contracts or licences;
fluctuations in demand and pricing in the television production industry;
fluctuations of exchange controls, changes in government policy and taxation;
industrial disputes; war and terrorism. These forward looking statements involve
known and unknown risks and uncertainties which may cause them to differ from
the actual results, performance or achievements expressed or implied by such
forward looking statements. These forward looking statements are based on
numerous assumptions regarding the present and future business strategies of
such persons and the environment in which each will operate in the future.
Investors are cautioned not to place undue reliance on the forward looking
statements, which speak only as of the date of this announcement. All subsequent
oral or written forward looking statements attributable to Bidco or Shed or any
of their respective members, directors, officers or employees or any persons
acting on their behalf are expressly qualified in their entirety by the
cautionary statement above. All forward looking statements included in this
announcement are based on information available to Bidco and Shed on the date of
this announcement and are made only as of the date of this announcement. Undue
reliance should not be placed on such forward looking statements.
Subject to compliance with their legal and regulatory obligations, neither Shed
nor Bidco intends, or undertakes any obligation, to update any forward looking
statements contained in this announcement.
Publication of this announcement
A copy of this announcement will be available free of charge for inspection on
the following website from 12 noon (London time) today: www.shed-media.com.
Rule 8 Summary
Under the provisions of Rule 8.3 of the City Code, if any person is, or becomes,
"interested" (directly or indirectly) in 1 per cent. or more of any class of
"relevant securities" of an offeree or a paper offeror that person must make an
"Opening Position Disclosure" following the commencement of the offer period
and, if later, following the announcement in which the paper offeror is first
identified.
An "Opening Position Disclosure" must contain details of the person's interests
and short positions in, and rights to subscribe for, any "relevant securities"
of each of (i) the offeree and (ii)the paper offeror. An "Opening Position
Disclosure" by a person to whom Rule 8.3(a) applies must be made by no later
than 3.30 p.m. (London time) on the 10th Business Day following the commencement
of the offer period and, if appropriate, by no later than 3.30 p.m. (London
time) on the 10th Business Day following the announcement in which a paper
offeror is first identified. Relevant persons who deal in the "relevant
securities" of the offeree or of the paper offeror prior to the deadline for
making an "Opening Position Disclosure" must instead make a "Dealing
Disclosure".
Under Rule 8.3(b) of the Takeover Code, any person who is, or becomes,
interested in 1 per cent. or more of any class of "relevant securities" of the
offeree or of a paper offeror must make a "Dealing Disclosure" if the person
deals in any "relevant securities" of the offeree or of the paper offeror. A
"Dealing Disclosure" must contain details of the "dealing" concerned and of the
person's interests and short positions in, and rights to subscribe for, any
relevant securities of each of (i) the offeree, and (ii) the paper offeror, save
to the extent that these details have previously been disclosed under Rule 8. A
"Dealing Disclosure" by a person to whom Rule 8.3(b) applies must be made no
later than 3.30 p.m. (London time) on the Business Day following the date of the
relevant dealing.
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 offeree, they will be deemed to be a single person for the purpose of Rule
8.3 of the City Code.
"Opening Position Disclosures" must also be made by the offeree and by a paper
offeror and "Dealing Disclosures" must also be made by the offeree, by a paper
offeror and by any persons acting in concert with any of them (see Rules 8.1,
8.2 and 8.4 of the City Code).
Details of the offeree and offeror companies in respect of whose relevant
securities Opening Position Disclosures and Dealing Disclosures must be made can
be found in the Disclosure Table on the Takeover Panel's website at
www.thetakeoverpanel.org.uk, including details of the number of relevant
securities in issue, when the offer period commenced and when any offeror was
first identified. If you are in any doubt as to whether you are required to make
an Opening Position Disclosure or a Dealing Disclosure, you should contact the
Panel's Market Surveillance Unit on +44 (0) 20 7638 0129.
Terms in quotation marks are defined in the City 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 of the City Code, you should
contact an independent financial adviser authorised under FSMA or consult the
Panel's website at www.thetakeoverpanel.org.uk or contact the Panel on telephone
number +44 (0) 20 7638 0129.
APPENDIX I
CONDITIONS AND CERTAIN FURTHER TERMS OF THE PROPOSALS
The Proposals are conditional upon the Scheme and the Capital Reduction becoming
unconditional and becoming effective by not later than the Long Stop Date or
such later date as, subject to the provisions of the Takeover Code, Bidco and
Shed may agree and (if required) the Court and/or the Panel may allow.
1 The Proposals are further conditional upon:
(i) the approval of the Scheme by a majority in number representing not
less than 75 per cent. in value of the holders of Independent Scheme Shares who
are on the register of members of Shed at the Voting Record Time, present and
voting, either in person or by proxy, at the Court Meeting (or any adjournment
of that meeting);
(ii) all resolutions set out in the notice of the General Meeting
(including the special resolution required to approve and implement the Scheme
(including, without limitation, to amend the Company's articles of association))
required to approve and implement the Scheme and to approve certain related
matters being duly passed by the requisite majority at the General Meeting (or
any adjournment of that meeting); and
(iii) the sanction (with or without modification, but subject to any such
modification being on terms acceptable to both Bidco and Shed) of the Scheme and
the confirmation of the Capital Reduction by the Court being obtained and: (i)
an office copy of the First Court Order being delivered to the Registrar of
Companies; and (ii) an office copy of the Second Court Order and a statement of
capital (approved by the Court) attached to that office copy being delivered to
the Registrar of Companies for registration and being registered by the
Registrar of Companies.
2 In addition, Bidco and Shed have agreed that, subject to the
provisions of this Appendix I, the Scheme is also conditional upon, and
accordingly the necessary actions to make the Scheme become effective will only
be taken on, the satisfaction or waiver of the following Conditions (as amended,
if appropriate):
(a) no government or governmental, quasi-governmental, supranational,
statutory or regulatory body, institution, association or agency (including any
trade agency) or any court or other body (including any professional body) or
person in any jurisdiction (each, a "Third Party") having (by notification in
writing) decided to take, institute, implement or threaten, or having announced
its intention to institute or implement, any action, proceedings, suit,
investigation, enquiry or reference or enacted, or made or proposed any statute,
regulation, order or decision or taken any other steps and there not continuing
to be any statute, regulation, order or decision, in each case which would or
might be expected to, in each case to an extent which is material in the context
of the Wider Bidco Group or the Wider Shed Group, as the case may be, taken as a
whole:
(i) make the Proposals or the acquisition or the proposed acquisition of
any shares in, or control of Shed or any member of the Wider Shed Group, by
Bidco void, unenforceable or illegal under the laws of any relevant jurisdiction
or directly or indirectly restrain, restrict, prohibit, frustrate or otherwise
materially delay or interfere with the implementation of, or impose additional
material conditions or obligations with respect to, or otherwise in a material
way challenge, the Proposals, the acquisition of any shares in, or control of,
Shed or any member of the Wider Shed Group by Bidco;
(ii) require, prevent or delay the divestiture (or alter the terms of any
proposed divestiture) by any member of the Wider Bidco Group or any member of
the Wider Shed Group of all or any material part of their respective businesses,
assets or properties or impose any limitation on their ability to conduct all or
any part of their respective businesses or to own any of their respective assets
or properties;
(iii) require, prevent or delay the divestiture (or alter the terms of any
proposed divestiture) by any member of the Wider Bidco Group of any shares or
other securities in Shed or any member of the Wider Shed Group;
(iv) limit or delay, or impose any material limitations on the ability of
any member of the Wider Bidco Group or any member of the Wider Shed Group to
acquire or hold or to exercise effectively, directly or indirectly, all or any
rights of ownership of shares or loans or securities convertible into shares or
other securities in, or to exercise management control over, any member of the
Wider Shed Group or any member of the Wider Bidco Group;
(v) other than in connection with the implementation of the Proposals,
require any member of the Wider Bidco Group or any member of the Wider Shed
Group to subscribe for, acquire, offer to subscribe for or acquire, any shares
or other securities (or interest in) any member of the Wider Shed Group or the
Wider Bidco Group;
(vi) impose any limitation on the ability of any member of the Wider Bidco
Group or any member of the Wider Shed Group to integrate or co-ordinate its
business, or any part of it, with the businesses or any part of the businesses
of any other member of the Wider Bidco Group and/or any other member of the
Wider Shed Group;
(vii) result in any member of the Wider Shed Group ceasing to be able to
carry on business under any name under which it presently does so; or
(viii) otherwise materially adversely affect any or all of the businesses,
assets, financial or trading position or profits or prospects of any member of
the Wider Bidco Group or any member of the Wider Shed Group,
and all applicable waiting and other time periods during which any such Third
Party could institute or implement or threaten any such action, proceeding,
suit, investigation, enquiry or reference or otherwise intervene having expired,
lapsed or been terminated;
(b) all necessary material notifications, filings or applications in
connection with the Proposals or their implementation having been made and all
appropriate waiting and other time periods (including extensions of such
periods) under any applicable legislation or regulation of any relevant
jurisdiction having expired, lapsed or been terminated in each case in respect
of the Proposals and acquisition of any shares in, or control of, Shed or any
other member of the Wider Shed Group by Bidco or the carrying on by any member
of the Wider Shed Group of its business;
(c) all authorisations, orders, grants, recognitions, confirmations,
licences, consents, clearances, permissions and approvals ("Authorisations")
which Bidco reasonably considers necessary in any relevant jurisdiction for or
in respect of the Proposals, the proposed acquisition of any shares or
securities in, or control of, Shed or any member of the Wider Shed Group by
Bidco or any matters arising from such acquisition being obtained in terms and
in a form reasonably satisfactory to Bidco from appropriate Third Parties (in
each case where the absence of such authorisation could reasonably be expected
by Bidco to have a material adverse effect on the Wider Shed Group taken as a
whole or the Wider Bidco Group taken as a whole, as the case may be) and such
Authorisations together with all necessary Authorisations for any member of the
Wider Shed Group to carry on its business (where such business is material in
the context of the Wider Shed Group taken as a whole and where the absence of
such Authorisations would have a material and adverse effect on the Wider Shed
Group taken as a whole) remaining in full force and effect and no notice or
announcement having been made by the relevant Third Party of any intention to
revoke, withdraw, suspend, restrict, withhold or modify or not to renew any of
them having been made under the laws or regulations of any relevant jurisdiction
(in each case to an extent which would have a material and adverse effect on the
Wider Shed Group taken as a whole) and all necessary statutory or regulatory
obligations in any relevant jurisdiction in respect of the Proposals having been
materially complied with;
(d) save as Disclosed, there being no provision of any arrangement,
agreement, lease, licence, permit, franchise or other instrument to which any
member of the Wider Shed Group is a party or by or to which any such member or
any of its assets may be bound or be subject which, as a result of the making or
implementation of the Proposals or the proposed acquisition by Bidco of any
shares or securities in Shed or because of a change in the control or management
of Shed or any member of the Wider Shed Group or otherwise, would reasonably be
likely to result in (in each case to an extent which is material in the context
of the Wider Shed Group taken as a whole):
(i) any monies borrowed by or any indebtedness (actual or contingent)
of, or grant available to, any member of the Wider Shed Group becoming repayable
or capable of being declared repayable immediately or earlier than the stated
repayment date or the ability of such member to borrow monies or incur any
indebtedness being inhibited or capable of being withdrawn;
(ii) the creation or enforcement of any mortgage, charge or other
security interest over the whole or any substantial part of the business,
property or assets of any member of the Wider Shed Group or any such security
interest (whether existing or having arisen) becoming enforceable;
(iii) any such arrangement, agreement, lease, licence, permit, franchise
or other instrument, or any right, interest, liability or obligation of any
member of the Wider Shed Group thereunder being, terminated or adversely
modified or affected or any onerous obligation or liability arising thereunder;
(iv) the rights, liabilities, obligations or interests of any member of
the Wider Shed Group in, or the business of any such member with, any person,
firm or company (or any arrangements relating to such interest or business)
being terminated or adversely modified or affected;
(v) any member of the Wider Shed Group ceasing to be able to carry on
business under any name under which it presently does so;
(vi) any assets or interests of any member of the Wider Shed Group being
or falling to be disposed of or charged (other than in the ordinary course of
business) or any right arising under which any such asset or interest could be
required to be disposed of or charged;
(vii) the creation of liabilities (actual or contingent) by any member of
the Wider Shed Group; or
(viii) the value of any member of the Wider Shed Group or its financial or
trading position or prospects being prejudiced or adversely affected,
and no event having occurred which, under any provision of any arrangement,
lease, agreement, licence, permit, franchise or other instrument to which any
member of the Wider Shed Group is a party, or by or to which any such member or
any of its assets may be bound, entitled or subject, could result in any of the
events or circumstances which are referred to in (i) to (viii) of this
sub-paragraph 2(d) in any case where such result would be material in the
context of the Wider Shed Group taken as a whole;
(e) save as Disclosed, no member of the Wider Shed Group having since 31
December 2009 (being the date to which the latest audited consolidated reports
and accounts of Shed were made up):
(i) issued or agreed to issue or authorised or proposed the issue of
additional shares of any class, or securities convertible into or exchangeable
for, or rights, warrants or options to subscribe for or acquire, any such shares
or convertible securities (save for (i) issues of shares or other securities
made by a wholly owned subsidiary of Shed to another wholly owned member of the
Wider Shed Group; (ii) the grant of options up to the date of this announcement;
and/or (iii) the issue of Shed Shares on or in connection with the exercise of
options or the satisfaction of awards under the Shed Share Schemes);
(ii) recommended, declared, paid or made or proposed to recommend,
declare, pay or make any bonus issue in respect of shares, dividend or other
distribution, whether payable in cash or otherwise, other than a dividend or
other distribution by any wholly-owned subsidiary of Shed to Shed or any of its
wholly-owned subsidiaries;
(iii) other than pursuant to implementation of the Proposals and save for
transactions as between members of the Wider Shed Group, effected, authorised,
proposed or announced any merger or demerger with any body corporate or acquired
or disposed of, or transferred, mortgaged or charged or created any security
interest over, any assets or any right, title or interest in any asset
(including shares) in each case otherwise than in the ordinary course of
business and which, in each case, would be material in the context of the Wider
Shed Group taken as a whole;
(iv) redeemed, purchased or reduced or announced any proposal to redeem,
purchase or reduce any of its own shares or other securities or made, authorised
or proposed or announced its intention to propose any change in its share or
loan capital other than pursuant to the implementation of the Proposals;
(v) issued, authorised or proposed the issue of any debentures or (other
than in the ordinary course of business and other than between Shed and its
wholly-owned subsidiaries or between such wholly-owned subsidiaries) incurred or
increased any indebtedness or contingent liability to an extent which is
material in the context of the Wider Shed Group taken as a whole;
(vi) entered into, varied or terminated, or authorised, proposed or
announced its intention to enter into, vary or terminate any arrangement,
contract or commitment (whether in respect of capital expenditure or otherwise),
other than in the ordinary course of business, which is of a long-term, onerous
or unusual nature or magnitude or which involves or could reasonably be expected
to involve an obligation of an unusual nature or magnitude and in each case
which is material in the context of the Wider Shed Group taken as a whole;
(vii) entered into or varied the terms of, or made any offer (which remains
open for acceptance) to enter into or vary the terms of, any service contract or
other agreement with any director or, save for salary increases in the ordinary
course of business, senior executive of any member of the Wider Shed Group;
(viii) other than for the purpose of giving effect to the Proposals,
proposed, agreed to provide or modified the terms of any share option scheme,
incentive scheme or other benefit relating to the employment of any person
employed by the Wider Shed Group which is, in any such case, material in the
context of the Wider Shed Group;
(ix) (other than in respect of the solvent winding up of any dormant
subsidiary) taken any corporate action or had any legal proceedings started or
threatened (in writing) against it for its winding-up, dissolution or
reorganisation or for the appointment of a receiver, manager, administrator,
administrative receiver, trustee, provisional liquidator, liquidator or similar
officer in respect of all or any of its assets and revenues or for it to enter
into any arrangement or composition for the benefit of its creditors or any
analogous proceedings or steps in any relevant jurisdiction having been taken or
for the appointment of any analogous person in any relevant jurisdiction to have
occurred;
(x) waived, settled or compromised any claim, other than in the ordinary
course of business where such waiver, settlement or compromise is material in
the context of the Wider Shed Group taken as a whole;
(xi) made or agreed or consented to any change to the terms of the pension
arrangements or pension contributions offered to its directors and/or employees
or made any change in its pension provider, or to the basis upon which the
liabilities (including pensions) of such pension arrangements are funded to an
extent which is material in the context of the Wider Shed Group taken as a whole
or adopted or participated in any new or other pension scheme or arrangement
(other than a change in its pension provider);
(xii) save as required to implement the Proposals, made any amendment to
its memorandum or articles of association;
(xiii) entered into any contract, transaction or arrangement which is or is
reasonably likely to be materially restrictive on the business of any member of
the Wider Shed Group (other than of a nature and to an extent which is not
unusual in the context of the business concerned) to an extent which is material
in the context of the Wider Shed Group taken as a whole;
(xiv) terminated or varied the terms of any agreement or arrangement between
any member of the Shed Group and any other person in a manner which would or
might reasonably be expected to have a material adverse effect on the financial
position or prospects of the Shed Group;
(xv) been unable or admitted in writing that it is unable to pay its debts
or having stopped or suspended (or threatened to stop or suspend) payment of its
debts generally or ceased or threatened to cease carrying on all or a
substantial part of its business;
(xvi) sold or transferred or agreed to sell or transfer any treasury shares
other than any treasury shares held at the date of this announcement used to
satisfy any entitlements under the Shed Share Schemes; or
(xvii) entered into or made an offer (which remains open for acceptance) to
enter into any contract, agreement, commitment or arrangement or passed any
resolution with respect to, or proposed or announced any intention to effect or
propose, any of the transactions, matters or events referred to in this
sub-paragraph 2(e);
(f) save as Disclosed, since 31 December 2009 (being the date to which
the latest audited consolidated reports and accounts of Shed were made up):
(i) no adverse change, and no other circumstance which would or might be
likely to result in any adverse change, in the business, assets, financial or
trading position or profits or prospects of any member of the Wider Shed Group
having occurred which is material in the context of the Wider Shed Group taken
as a whole;
(ii) no litigation, arbitration, prosecution or other legal proceedings
having been threatened, announced, instituted or become pending and remaining
outstanding by, against or in respect of any member of the Wider Shed Group or
to which any member of the Wider Shed Group is or may be a party (whether as
claimant or defendant or otherwise) and no enquiry or investigation by or
complaint or reference to any Third Party or other investigative body against or
in respect of any member of the Wider Shed Group having been threatened,
announced, implemented, instituted or become pending and remaining outstanding
by, against or in respect of any member of the Wider Shed Group in any such case
which would or would be reasonably likely to materially affect the Wider Shed
Group taken as a whole;
(iii) no claim being made and no circumstances having arisen which might
reasonably be expected to lead to a claim being made under the insurance of any
member of the Wider Shed Group where such claim would not be covered by such
insurance and where such claim is material in the context of the Wider Shed
Group taken as a whole;
(iv) no steps having been taken which are reasonably likely to result in
the withdrawal (without replacement), cancellation or termination of any
licence, permit or consent held by any member of the Wider Shed Group which is
necessary for the carrying on by such member of its business and which is
material in the content of the Wider Shed Group taken as a whole; and
(v) no contingent or other liability of any member of the Wider Shed
Group having arisen or become apparent to Bidco or increased, which in any case
is material in the context of the Wider Shed Group taken as a whole;
(g) Bidco not having discovered:
(i) any financial, business or other information concerning any member
of the Wider Shed Group which is material in the context of the Proposals and
which has been Disclosed is misleading, contains a misrepresentation of fact or
omits to state a fact necessary to make such information not misleading, in each
case to an extent which is material and adverse in the context of the Wider Shed
Group taken as a whole;
(ii) that any member of the Wider Shed Group is subject to any liability,
contingent or otherwise, which has not been Disclosed and which is material in
the context of the Wider Shed Group taken as a whole; or
(iii) any information which affects the import of any information
disclosed to Bidco at any time by or on behalf of any member of the Wider Shed
Group to an extent which is material in the context of the Wider Shed Group
taken as a whole.
3 The Proposals will lapse and the Scheme will not proceed if, before
the date of the Meetings, following investigation by the Office of Fair Trading
there is a reference of the Proposals, or any part of them, to the Competition
Commission.
4 Save to the extent cancelled pursuant to the Scheme, the Shed Shares
will be acquired by Bidco fully paid and free from all liens, equities, charges,
encumbrances, rights of pre-emption and other interests and together with all
rights now or hereafter attaching thereto, including the right to receive and
retain all dividends and other distributions declared, made or payable after the
date of this announcement. If any dividend or other distribution in respect of
the Shed Shares is declared, paid or made on or after the date of this
announcement, Bidco reserves the right to reduce the value of the consideration
payable for each Shed Share under the Proposals by up to the amount per Shed
Share of such dividend or distribution.
5 Bidco reserves the right, with the consent of the Panel, to elect to
implement the Proposals by way of a Takeover Offer. In such event, such offer
will be implemented on the same terms (subject to appropriate amendments,
including without limitation an acceptance condition set at 90 per cent. (or
such lesser percentage, being more than 50 per cent., as Bidco may decide and
the Panel shall approve) in nominal value of the Shed Shares to which such offer
relates) so far as applicable as those which would apply to the Scheme.
6 Subject to the requirements of the Panel, Bidco reserves the right to
waive all or any of the Conditions contained in paragraph 2, in whole or in
part.
7 If Bidco is required by the Panel to make an offer for Shed Shares
under the provisions of Rule 9 of the Takeover Code, Bidco may make such
alterations to any of the above Conditions as are necessary to comply with the
provisions of that Rule.
8 The Proposals and the Scheme will be governed by English law and
subject to the jurisdiction of the English Courts. The Scheme will be subject to
the applicable requirements of the Takeover Code, the Panel, the London Stock
Exchange and the Financial Services Authority.
9 The availability of the Proposals to persons not resident in the
United Kingdom may be affected by the laws of the relevant jurisdictions.
Persons who are not resident in the United Kingdom should inform themselves
about and observe any applicable requirements.
APPENDIX II
SOURCES AND BASES
1. Unless otherwise stated, the financial information on Shed is
extracted from the Annual Report.
2. For the purposes of the financial comparisons contained in this
announcement, no account has been taken of any liability to taxation or the
treatment of fractions under the Scheme or the Proposals.
3. The value placed by the Proposals on the existing issued and to be
issued share capital of Shed is based on 86,833,639 Shed Shares in issue as at 3
August 2010 (being the latest practicable date prior to the date of this
announcement).
4. The Closing Price of Shed Shares are based on the middle market
quotations of a Shed Share derived from the AIM appendix of the Daily Official
List for the relevant dates.
APPENDIX III
DETAILS OF IRREVOCABLE UNDERTAKINGS AND LETTERS OF INTENT RECEIVED BY BIDCO
1.1 Irrevocable Undertakings from the Management Team
Each member of the Management Team has irrevocably undertaken that he or she
shall (and in relation to any beneficial holdings of Scheme Shares which are
registered in the name of a third party, that he or she shall procure that such
third party shall):
(i) vote in favour of the resolution to be proposed at the Court Meeting
to the extent that he or she is eligible to do so (the members of the Management
Team who are also Sweet Equity Employees and/or Shed Share Scheme NICs Employees
will be ineligible to vote on the resolution to be proposed at the Court
Meeting);
(ii) vote in favour of each of the resolutions to be proposed at the
General Meeting to the extent that he or she eligible to do so (the members of
the Management Team who are also Sweet Equity Employees will be ineligible to
vote on the Ordinary Resolution to approve the Sweet Equity Arrangements and the
members of the Management Team who are also Shed Share Scheme NICs Employees
will be ineligible to vote on the Ordinary Resolution to approve the Shed Share
Scheme NICs Arrangements);
(iii) not sell or transfer (otherwise than pursuant to the Proposals) or
otherwise dispose of or charge all or any of his or her Scheme Shares or any
interest in all or any thereof, nor enter into any agreement or arrangement with
any person, whether conditionally or unconditionally, to do any such act;
(iv) exercise all voting rights attaching to his or her Scheme Shares in
such manner as to enable the Scheme to be implemented and oppose the taking of
any action which may be prejudicial to the successful implementation of the
Scheme; and
(v) elect to receive the Partial Alternative in respect of his or her
Scheme Shares, save in relation to any Scheme Shares allotted or otherwise
acquired pursuant to the Shed Share Schemes prior to the Reorganisation Record
Time.
Details of the irrevocable undertakings received from the Management Team are as
follows:
+-------------------------------+-------------+----------+-------------+
| Name | Number of | | % of issued |
| | Shed Shares | | share |
| | | | capital |
+-------------------------------+-------------+----------+-------------+
| Alexander Graham | 10,385,894 | | 11.96 |
+-------------------------------+-------------+----------+-------------+
| Nicholas Powell | 10,182,581 | | 11.73 |
+-------------------------------+-------------+----------+-------------+
| Eileen Gallagher | 6,546,700 | | 7.54 |
+-------------------------------+-------------+----------+-------------+
| Brian Park | 6,391,443 | | 7.36 |
+-------------------------------+-------------+----------+-------------+
| Ann McManus | 6,339,691 | | 7.30 |
+-------------------------------+-------------+----------+-------------+
| Nicholas Southgate | 3,466,645 | | 3.99 |
+-------------------------------+-------------+----------+-------------+
| Jonathan Hewes | 1,730,982 | | 1.99 |
+-------------------------------+-------------+----------+-------------+
| Leanne Klein | 920,117 | | 1.06 |
+-------------------------------+-------------+----------+-------------+
| Samuel Whittaker | 504,060 | | 0.58 |
+-------------------------------+-------------+----------+-------------+
| Claire Hungate | 498,518 | | 0.57 |
+-------------------------------+-------------+----------+-------------+
| Helena Ely | 353,057 | | 0.41 |
+-------------------------------+-------------+----------+-------------+
| Gavin Rota | 353,057 | | 0.41 |
+-------------------------------+-------------+----------+-------------+
| Charlotte Street | 192,292 | | 0.22 |
+-------------------------------+-------------+----------+-------------+
| Nick Emmerson | 189,252 | | 0.22 |
+-------------------------------+-------------+----------+-------------+
| Mark Rubens | 42,056 | | 0.05 |
+-------------------------------+-------------+----------+-------------+
| Jonathon Kemp | 20,700 | | 0.02 |
+-------------------------------+-------------+----------+-------------+
| | | | |
+-------------------------------+-------------+----------+-------------+
| Total | 48,117,045 | | 55.41 |
+-------------------------------+-------------+----------+-------------+
The undertakings listed in this table will cease to have any effect if the
Scheme is not implemented by the Long Stop Date, but will otherwise remain
binding in all circumstances.
1.2 Irrevocable Undertakings from other employees of the Shed Group
Certain other employees of the Shed Group (including three Outright Employees)
have irrevocably undertaken that they shall:
(i) vote in favour of the resolution to be proposed at the Court Meeting
to the extent that they are eligible to do so (the three Outright Employees will
be ineligible to vote on the resolution to be proposed at the Court Meeting);
(ii) vote in favour of each of the resolutions to be proposed at the
General Meeting to the extent that they are eligible to do so (the three
Outright Employees will be ineligible to vote on the Ordinary Resolution to
approve the Outright Arrangements);
(iii) not sell or transfer (otherwise than pursuant to the Proposals) or
otherwise dispose of or charge all or any of their Scheme Shares or any interest
in all or any thereof, nor enter into any agreement or arrangement with any
person, whether conditionally or unconditionally, to do any such act; and
(iv) exercise all voting rights attaching to their Scheme Shares in such
manner as to enable the Scheme to be implemented and oppose the taking of any
action which may be prejudicial to the successful implementation of the Scheme.
Details of the irrevocable undertakings received from such employees are as
follows:
+-------------------------------+-------------+----------+-------------+
| Name | Number of | | % of issued |
| | Shed Shares | | share |
| | | | capital |
+-------------------------------+-------------+----------+-------------+
| Christopher Bonney | 330,053 | | 0.38 |
+-------------------------------+-------------+----------+-------------+
| David Asher | 220,036 | | 0.25 |
+-------------------------------+-------------+----------+-------------+
| Thomas McClelland | 157,167 | | 0.18 |
+-------------------------------+-------------+----------+-------------+
| Sarah Stinchcombe | 195,885 | | 0.23 |
+-------------------------------+-------------+----------+-------------+
| | | | |
+-------------------------------+-------------+----------+-------------+
| Total | 903,141 | | 1.04 |
+-------------------------------+-------------+----------+-------------+
The undertakings listed in this table will cease to have any effect if the
Scheme is not implemented by the Long Stop Date, but will otherwise remain
binding in all circumstances.
1.3 Irrevocable Undertakings from former employees of the Shed Group
Certain former employees of the Shed Group have irrevocably undertaken that they
shall:
(i) vote in favour of the resolution to be proposed at the Court
Meeting;
(ii) vote in favour of each of the resolutions to be proposed at the
General Meeting;
(iii) not sell or transfer (otherwise than pursuant to the Proposals) or
otherwise dispose of or charge all or any of their Scheme Shares or any interest
in all or any thereof, nor enter into any agreement or arrangement with any
person, whether conditionally or unconditionally, to do any such act; and
(iv) exercise all voting rights attaching to their Scheme Shares in such
manner as to enable the Scheme to be implemented and oppose the taking of any
action which may be prejudicial to the successful implementation of the Scheme.
Details of the irrevocable undertakings received from such former employees of
the Shed Group are as follows:
+-------------------------------+-------------+----------+-------------+
| Name | Number of | | % of issued |
| | Shed Shares | | share |
| | | | capital |
+-------------------------------+-------------+----------+-------------+
| | | | |
+-------------------------------+-------------+----------+-------------+
| Maureen Chadwick | 6,339,691 | | 7.30 |
+-------------------------------+-------------+----------+-------------+
| Peter Casely-Hayford | 2,500,426 | | 2.88 |
+-------------------------------+-------------+----------+-------------+
| Claudia Milne | 269,668 | | 0.31 |
+-------------------------------+-------------+----------+-------------+
| David Whittaker | 269,668 | | 0.31 |
+-------------------------------+-------------+----------+-------------+
| Stuart Mullin | 229,850 | | 0.26 |
+-------------------------------+-------------+----------+-------------+
| | | | |
+-------------------------------+-------------+----------+-------------+
| Total | 9,609,343 | | 11.07 |
+-------------------------------+-------------+----------+-------------+
The undertakings listed in this table will cease to have any effect if the
Scheme is not implemented by the Long Stop Date, but will otherwise remain
binding in all circumstances.
1.4 Letters of Intent
Bidco has also received letters of intent from other Shed Shareholders
indicating their intent to vote in favour of the resolution at the Court Meeting
and the Special Resolution and Ordinary Resolutions to be proposed at the
General Meeting. Details of the letters of intent received from these other Shed
Shareholders are as follows:
+-------------------------------+-------------+----------+-------------+
| Name | Number of | | % of issued |
| | Shed Shares | | share |
| | | | capital |
+-------------------------------+-------------+----------+-------------+
| | | | |
+-------------------------------+-------------+----------+-------------+
| Aviva Investors Global | 2,910,987 | | 3.35 |
| Services Limited | | | |
+-------------------------------+-------------+----------+-------------+
| Ignis Asset Management | 1,696,239 | | 1.95 |
| Limited | | | |
+-------------------------------+-------------+----------+-------------+
| Artemis Institutional Special | 455,000 | | 0.52 |
| Situations Fund | | | |
+-------------------------------+-------------+----------+-------------+
| | | | |
+-------------------------------+-------------+----------+-------------+
| Total | 5,062,226 | | 5.83 |
+-------------------------------+-------------+----------+-------------+
The letters of intent listed in this table will cease to have any effect if the
Scheme is not implemented by the Long Stop Date and the letters of intent from
Ignis Asset Management Limited and Artemis Institutional Special Situations Fund
will cease to have effect if any third party offer for Shed is announced in
accordance with Rule 2.5 of the City Code at a price that is 10 per cent.
greater than the then offer price of the offer made by Bidco to acquire Shed,
but will otherwise remain in force.
APPENDIX IV
INFORMATION ON BIDCO, A SUMMARY OF THE RIGHTS ATTACHING TO BIDCO CONSIDERATION
SECURITIES AND A DESCRIPTION OF THE SWEET EQUITY ARRANGEMENTS, THE OUTRIGHT
ARRANGEMENTS AND THE SHED SHARE SCHEME NICS ARRANGEMENTS
1. Introduction
1.1 Bidco is a public limited company incorporated in England and Wales
for the sole purpose of the acquisition of Shed pursuant to the Proposals. Bidco
has issued: (i) Bidco A Ordinary Shares and Bidco Preference Shares to Warner
Bros.; and (ii) Bidco C Ordinary Shares to the Sweet Equity Employees. Subject
to paragraph 1.2, Bidco will issue Bidco B Ordinary Shares and Bidco Loan Notes
to any eligible Shed Shareholder who validly elects for the Partial Alternative
under the Proposals.
1.2 The maximum number of Bidco B Ordinary Shares to be issued pursuant to
the Scheme is limited to 28,828,768 (the "Maximum Number of Bidco B Ordinary
Shares") in order to ensure that Warner Bros. will retain a holding of not less
than 50.1 per cent. in nominal value of the issued share capital of Bidco
(excluding the Bidco Preference Shares held by Warner Bros. which do not carry
any voting rights) as at the Scheme Effective Date. If valid Partial Alternative
Elections are made which would, if satisfied in full, require more than the
Maximum Number of Bidco B Ordinary Shares to be issued (the number of Bidco B
Ordinary Shares that would be issued in respect of such valid Partial
Alternative Elections being the "Unadjusted Number of Bidco B Ordinary Shares"),
the number of Scheme Shares in respect of which a Partial Alternative Election
shall be regarded as being made shall be reduced by the same proportion that the
Maximum Number of Bidco B Ordinary Shares bears to the Unadjusted Number of
Bidco B Ordinary Shares. Consideration for the cancellation of any Scheme Shares
in respect of which a valid election for the Partial Alternative has been
reduced pursuant to this scale back mechanism shall be satisfied by way of the
Cash Consideration.
1.3 Following the implementation of the Proposals in full, and assuming
that only the Management Team elect for the Partial Alternative, it is
anticipated that the issued share capital of Bidco (excluding the Bidco
Preference Shares held by Warner Bros. which do not carry any voting rights)
will be allocated as to:
· 55.75 per cent. to Warner Bros. (comprising Bidco A Ordinary Shares),
· 21.37 per cent. to the Management Team (comprising Bidco B Ordinary
Shares); and
· 22.88 per cent. to the Sweet Equity Employees (comprising Bidco C Ordinary
Shares).
A pool of further Bidco C Ordinary Shares representing up to 2.75 per cent. in
nominal value of the issued share capital of Bidco as at the Scheme Effective
Date will be made available for allocation to certain new joiners identified by
the Bidco Directors in the future.
2. Capital Structure of Bidco
2.1 The capital structure of Bidco will, assuming the Proposals becomes
effective, comprise the following:
2.1.1 Bidco A Ordinary Shares;
2.1.2 Bidco Preference Shares;
2.1.3 Bidco B Ordinary Shares;
2.1.4 Bidco Loan Notes; and
2.1.5 Bidco C Ordinary Shares.
2.2 Summary of principal terms of Bidco A Ordinary Shares
+-----------------+------------------------------------------------+
| Dividend | The Bidco A Ordinary Shares rank pari passu |
| rights | with the Bidco B Ordinary Shares and Bidco C |
| | Ordinary Shares but after the Preference |
| | Dividend. |
+-----------------+------------------------------------------------+
| Return of | The Bidco A Ordinary Shares rank pari passu |
| capital or | with the Bidco B Ordinary Shares and Bidco C |
| other | Ordinary Shares but after the Liquidation |
| distribution | Preference. |
+-----------------+------------------------------------------------+
| Voting | Each Bidco A Ordinary Share entitles its |
| | holder to one vote in any general meeting of |
| | Bidco. The holder or holders of the majority |
| | of the Bidco A Ordinary Shares has control |
| | over the voting rights of the Bidco C Ordinary |
| | Shares, such that the Bidco C Ordinary Shares |
| | are deemed to have voted in the same way as |
| | the holder of the majority of the Bidco A |
| | Ordinary Shares. |
+-----------------+------------------------------------------------+
| Transferability | Bidco A Ordinary Shares may be transferred (i) |
| | at any time to a company which is an ultimate |
| | holding company of the holder of Bidco A |
| | Ordinary Shares or to a subsidiary undertaking |
| | of such ultimate holding company; and (ii) |
| | after the date that the First Option is |
| | exercisable to any third party, subject in |
| | each case to compliance with the drag rights |
| | and tag rights in the articles of association |
| | of Bidco. |
+-----------------+------------------------------------------------+
| Right to | The Bidco A Ordinary Shares give the holder of |
| appoint Bidco | the majority of the Bidco A Ordinary Shares |
| Directors | the right to appoint, remove and replace up to |
| | three Bidco Directors. The appointees as at |
| | the date of this announcement are Bruce |
| | Rosenblum, Jeff Schlesinger and Ronald Goes. |
+-----------------+------------------------------------------------+
| Put and call | The majority holder of the Bidco A Ordinary |
| arrangements | Shares has the right to exercise the put and |
| | call options described in paragraph 2.7 below. |
+-----------------+------------------------------------------------+
2.3 Summary of principal terms of Bidco Preference Shares
+-----------------+------------------------------------------------+
| Dividend | The Bidco Preference Shares carry the right to |
| rights | a fixed preferential dividend of 10 per cent. |
| | per annum, payable in priority to any other |
| | payment to holders of any other shares of |
| | Bidco ("Preference Dividend"). |
+-----------------+------------------------------------------------+
| Return of | The Bidco Preference Shares carry a |
| capital or | liquidation preference such that the nominal |
| other | value of each Bidco Preference Share must be |
| distribution | paid on a return of assets on liquidation or |
| | otherwise before any payments to the holders |
| | of Bidco Ordinary Shares (the "Liquidation |
| | Preference"). |
+-----------------+------------------------------------------------+
| Voting | The Bidco Preference Shares carry no right to |
| | vote. |
+-----------------+------------------------------------------------+
| Transferability | The Bidco Preference Shares may be transferred |
| | (i) at any time to any company which is its |
| | ultimate holding company of the holder of |
| | Bidco Preference Shares or any company which |
| | is a subsidiary of such ultimate holding |
| | company and (ii) after the date that the First |
| | Option is exercisable, to any person subject |
| | to compliance with the drag rights and tag |
| | rights in the articles of association of |
| | Bidco. |
+-----------------+------------------------------------------------+
| Right to | The Bidco Preference Shares do not carry any |
| appoint Bidco | right to appoint, remove or replace Bidco |
| Directors | Directors. |
+-----------------+------------------------------------------------+
| Put and call | The Bidco Preference Shares are subject to the |
| arrangements | put and call options described in paragraph |
| | 2.7 below. |
+-----------------+------------------------------------------------+
2.4 Summary of principal terms of Bidco B Ordinary Shares
+------------------+------------------------------------------------+
| Dividend | The Bidco B Ordinary Shares rank pari passu |
| rights | with the Bidco A Ordinary Shares and Bidco C |
| | Ordinary Shares but after the Preference |
| | Dividend. |
+------------------+------------------------------------------------+
| Return of | The Bidco B Ordinary Shares rank pari passu |
| capital or | with the Bidco A Ordinary Shares and Bidco C |
| other | Ordinary Shares but after the Liquidation |
| distribution | Preference. |
+------------------+------------------------------------------------+
| Voting | Each Bidco B Ordinary Share entitles its |
| | holder to one vote in any general meeting of |
| | Bidco. |
+------------------+------------------------------------------------+
| Transferability | The Bidco B Ordinary Shares may be transferred |
| | (i) at any time to an immediate family member |
| | or family trust; (ii) after the date that the |
| | First Option becomes exercisable on a listing |
| | of a majority of the issued share capital of |
| | Bidco; (iii) pursuant to the exercise of the |
| | First Option or Second Option; (iv) pursuant |
| | to the leaver provisions in the articles of |
| | association of Bidco (described below); or (v) |
| | to a third party buyer of the Bidco A Ordinary |
| | Shares pursuant to the drag rights and tag |
| | rights in the articles of association of |
| | Bidco. |
+------------------+------------------------------------------------+
| Right to | The Bidco B Ordinary Shares give the holder of |
| appoint Bidco | the majority of the Bidco B Ordinary Shares |
| Directors | the right to appoint, remove and replace up to |
| | two Bidco Directors. The appointees as at the |
| | date of this announcement are Nicholas |
| | Southgate and Jonathon Kemp. |
+------------------+------------------------------------------------+
| Put and call | The Bidco B Ordinary Shares are subject to put |
| arrangements | and call options as described in paragraph 2.7 |
| | below. |
+------------------+------------------------------------------------+
| Good and bad | A shareholder who is an employee or consultant |
| leaver | and who holds Bidco B Ordinary Shares and who |
| provisions | resigns or gives notice and becomes an |
| for holders | employee of a competitor of Bidco or the Shed |
| who are | Group within 12 months, or is dismissed for a |
| employees | reason justifying summary dismissal, is deemed |
| | to be a bad leaver, and their Bidco B Ordinary |
| | Shares may be acquired for their deemed |
| | subscription price. Shareholders who are not |
| | bad leavers will be deemed to be good leavers |
| | and will receive a proportion of the option |
| | price for their Bidco B Ordinary Shares |
| | pursuant to the put and call option as |
| | described in paragraph 2.7 below (such |
| | proportion being more particularly described |
| | in paragraph 2.7.10 below). |
+------------------+------------------------------------------------+
| Non-solicitation | Certain members of the Management Team who |
| undertakings | will become Bidco B Ordinary Shareholders have |
| | agreed to give non-solicitation undertakings |
| | in respect of employees of the Bidco group, |
| | such undertakings to expire 12 months after |
| | the date the relevant Bidco B Ordinary |
| | Shareholder ceases to be an employee. |
+------------------+------------------------------------------------+
2.5 Summary of principal terms of Bidco Loan Notes
+-----------------+------------------------------------------------+
| Interest | The Bidco Loan Notes accrue interest daily at |
| | the rate of 10 per cent. per annum with such |
| | interest being rolled up and not paid until |
| | their final redemption. |
+-----------------+------------------------------------------------+
| Repayment | The Bidco Loan Notes are repayable upon the |
| | exercise of the First Option or, if such |
| | option is not exercised, upon the exercise of |
| | the Second Option or on a share sale or a |
| | listing of a majority of the issued share |
| | capital of Bidco or upon the occurrence of an |
| | event of default in relation to Bidco |
| | (whichever is earlier). Bidco may also redeem |
| | the Bidco Loan Notes at any time after the |
| | date six months from their issue. |
+-----------------+------------------------------------------------+
| Ranking | The Bidco Loan Notes will be secured over the |
| | assets of the Shed Group. Except in relation |
| | to certain permitted payments, the Bidco Loan |
| | Notes are subordinated to the Warner Bros. |
| | Senior Debt Facility and to the Acquisition |
| | Loan Notes. |
+-----------------+------------------------------------------------+
| Transferability | The Bidco Loan Notes may be transferred by a |
| | holder to an immediate family member or family |
| | trust. |
+-----------------+------------------------------------------------+
2.6 Summary of principal terms of Bidco C Ordinary Shares
+-----------------+------------------------------------------------+
| Dividend | The Bidco C Ordinary Shares rank pari passu |
| rights | with the Bidco A Ordinary Shares and Bidco B |
| | Ordinary Shares but after the Preference |
| | Dividend. |
+-----------------+------------------------------------------------+
| Return of | The Bidco C Ordinary Shares rank pari passu |
| capital or | with the Bidco A Ordinary Shares and Bidco B |
| other | Ordinary Shares but after the Liquidation |
| distribution | Preference. |
+-----------------+------------------------------------------------+
| Voting | Each Bidco C Ordinary Share entitles its |
| | holder to one vote in any general meeting of |
| | Bidco. The Bidco A Ordinary Shares give the |
| | holder of the majority of the Bidco A Ordinary |
| | Shares control over the voting rights of the |
| | Bidco C Ordinary Shares such that the Bidco C |
| | Ordinary Shares are deemed to have voted in |
| | the same way as the holder of the majority of |
| | the Bidco A Ordinary Shares. |
+-----------------+------------------------------------------------+
| Transferability | The Bidco C Ordinary Shares may be transferred |
| | (i) at any time to an immediate family member |
| | or family trust; (ii) after the date that the |
| | First Option becomes exercisable on a listing |
| | of a majority of the issued share capital of |
| | Bidco; (iii) pursuant to the exercise of the |
| | First Option or Second Option; (iv) pursuant |
| | to the leaver provisions in the articles of |
| | association of Bidco (described below); or (v) |
| | to a third party buyer of the Bidco C Ordinary |
| | Shares pursuant to the drag rights and tag |
| | rights in the articles of association of |
| | Bidco. |
+-----------------+------------------------------------------------+
| Right to | The Bidco C Ordinary Shares do not give the |
| appoint Bidco | holder the right to appoint, remove and |
| Directors | replace any directors on the board of Bidco. |
+-----------------+------------------------------------------------+
| Put and call | The Bidco C Ordinary Shares are subject to put |
| arrangements | and call options as described in paragraph 2.7 |
| | below. |
+-----------------+------------------------------------------------+
| Good and bad | A shareholder who is an employee or consultant |
| leaver | of the Shed Group who holds Bidco C Ordinary |
| provisions | Shares who resigns or gives notice (other than |
| for holders | as a result of incapacity or long-term illness |
| who are | or to care for a sick relative) or is |
| employees | dismissed for a reason justifying summary |
| | dismissal, will be deemed to be a bad leaver |
| | and will only receive the subscription price |
| | paid for his or her Bidco C Ordinary Shares. |
| | Shareholders who are not bad leavers will be |
| | deemed to be good leavers and will receive a |
| | proportion of the option price for their Bidco |
| | C Ordinary Shares pursuant to the put and call |
| | option as described in paragraph 2.7 below |
| | (such proportion being more particularly |
| | described in paragraph 2.7.9 below). |
+-----------------+------------------------------------------------+
2.7 First Option and Second Option Put and Call for Bidco B Ordinary
Shares and Bidco C Ordinary Shares
2.7.1 The Bidco B Ordinary Shares are subject to a put and call option
arrangement which permits the majority holders of the Bidco B Ordinary Shares to
put the Bidco B Ordinary Shares on the majority holder of the Bidco A Ordinary
Shares or for the majority holder of the Bidco A Ordinary Shares to call for the
Bidco B Ordinary Shares during the period starting on when the Company's
accounts for the financial year ending 31 December 2013 are approved and signed
and ending on 31 May 2014 (the "First Option") and during the period starting on
when the Company's accounts for the financial year ending 31 December 2017 are
approved and signed and ending 31 May 2018 (the "Second Option") (or, in either
case, if those accounts are not signed on or before 31 May 2014 or 31 May 2018
respectively, the period ending on the date falling two months after those
accounts are so signed).
2.7.2 The First Option is exercisable in respect of up to 100 per cent. of
the Bidco B Ordinary Shares and the Second Option is exercisable for all of the
remainder of the Bidco B Ordinary Shares.
2.7.3 On the exercise of the First Option, the price payable for the Bidco B
Ordinary Shares (other than for holders of Bidco B Ordinary Shares who are also
employees and who are a bad leaver under the articles of association of Bidco)
(the "First Option Purchase Price") shall be calculated (the "First Option
Calculation") based on the formula A minus B where:
A equals:
the value of Bidco determined by 10 x EBITDA for the period starting on 1
January 2011 and ending on 31 December 2013, calculated in accordance with the
articles of association of Bidco; and
B equals:
the aggregate amount of Warner Bros. Senior Debt (as at 31 December 2013); the
principal amount of all outstanding Bidco Loan Notes (as at 31 December 2013);
the principal amount outstanding of all Bidco Preference Shares (plus accrued
dividends thereon) (as at 31 December 2013); minus cash and cash equivalents
held by Bidco and its subsidiaries (other than cash in respect of certain
excluded acquisitions) (as at 31 December 2013); plus the principal amount of
all outstanding Acquisition Loan Notes (if any) plus accrued interest thereon
(as at 31 December 2013) other than Acquisition Loan Notes issued in respect of
certain excluded acquisitions; plus the present value of the estimated amount
(as at 31 December 2013) of any deferred consideration still payable thereafter
for any acquisitions made by Bidco, using a discount factor to reflect the time
value of money and the relative likelihood of that consideration being paid
other than any deferred consideration payable in respect of certain excluded
acquisitions; plus the excess amount of the working capital above a normalised
level of working capital of Bidco or if working capital is less than the
normalised level, less such amount (as at 31 December 2013); plus an adjustment
in respect of acquisitions made by Bidco to the extent that such acquisitions do
not reach any relevant target EBITDA.
Bidco shall prepare the First Option Calculation and it shall be reviewed by
Bidco's auditors. The value of Bidco determined by the aforementioned
calculation will be then divided by the total number of Bidco Ordinary Shares in
issue in order to give the First Option Purchase Price per Bidco B Ordinary
Share.
2.7.4 On the exercise of the Second Option, the price payable for the Bidco
B Ordinary Shares (other than for holders of Bidco B Ordinary Shares who are
also employees and who are a bad leaver under the articles of association of
Bidco) (the "Second Option Purchase Price") shall be calculated (the "Second
Option Calculation") based on the formula A minus B where:
A equals:
the value of Bidco determined by 10 x EBITDA for the period starting on 1
January 2015 and ending on 31 December 2017, calculated in accordance with the
articles of association of Bidco; and
B equals:
the aggregate amount of Warner Bros. Senior Debt (as at 31 December 2017); the
principal amount of all outstanding Loan Notes (as at 31 December 2017) other
than Acquisition Loan Notes issued in respect of certain excluded acquisitions;
the principal amount outstanding of all Bidco Preference Shares (plus accrued
dividends thereon) (as at 31 December 2017); minus cash and cash equivalents
held by Bidco and its subsidiaries (other than cash in respect of certain
excluded acquisitions) (as at 31 December 2017); plus the principal amount of
all outstanding Acquisition Loan Notes (if any) plus accrued interest thereon
(as at 31 December 2017), plus the present value of the estimated amount (as at
31 December 2017) of any deferred consideration still payable thereafter for any
acquisitions made by Bidco using a discount factor to reflect the time value of
money and the relative likelihood of that consideration being paid other than
deferred consideration payable in respect of certain excluded acquisitions,
adjusted as appropriate to reflect the value of the deferred consideration used
in calculating the First Option Purchase Price to ensure that the cost of the
deferred consideration is not double counted; plus the excess amount of the
working capital above a normalised level of working capital of Bidco or if
working capital is less than the normalised level, less such amount (as at 31
December 2017); plus an adjustment in respect of acquisitions made by Bidco to
the extent that such acquisitions do not reach any relevant target EBITDA.
Bidco shall prepare the calculation and it shall be reviewed by
Bidco's auditors. The value of Bidco determined by the aforementioned
calculation will be then divided by the total number of Bidco Ordinary Shares in
issue in order to give the Second Option Purchase Price per Bidco B Ordinary
Share.
2.7.5 The Bidco C Ordinary Shares are subject to a put and call option
arrangement which permits the majority holders of the Bidco C Ordinary Shares to
put the Bidco C Ordinary Shares on the majority holder of the Bidco A Ordinary
Shares or for the majority holder of the Bidco A Ordinary Shares to call for the
Bidco C Ordinary Shares during the period starting on when the Company's
accounts for the financial year ending 31 December 2013 are approved and signed
and ending on 31 May 2014 (in the case of the First Option) and during the
period starting on when the Company's accounts for the financial year ending 31
December 2017 are approved and signed and ending 31 May 2018 (in the case of the
Second Option) (or, in either case, if those accounts are not signed on or
before 31 May 2014 or 31 May 2018 respectively, the period ending on the date
falling two months after those accounts are so signed)..
2.7.6 The First Option is exercisable in respect of up to 40 per cent. of
the Bidco C Ordinary Shares during the period starting on when the Company's
accounts for the financial year ending 31 December 2013 are approved and signed
and ending on 31 May 2014 and the Second Option is exercisable for all of the
remainder of the Bidco C Ordinary Shares during the period starting on when the
Company's accounts for the financial year ending 31 December 2017 are approved
and signed and ending 31 May 2018 (or, in either case, if those accounts are not
signed on or before 31 May 2014 or 31 May 2018 respectively, the period ending
on the date falling two months after those accounts are so signed).
2.7.7 The First Option Purchase Price for the Bidco C Ordinary Shares (other
than for holders of Bidco C Ordinary Shares who are also employees or
consultants of the Shed Group and who are bad leavers under the articles of
association of Bidco) shall be calculated based on the lower of: (i) the value
of Bidco determined by the formula used in the First Option Calculation; and
(ii) the market value of Bidco determined by an independent expert valuing the
entire ordinary share capital of Bidco if all of the Bidco Ordinary Shares had
been sold on 31 December 2013 in an arm's length transfer motivated by normal
business considerations. The value of Bidco determined by the aforementioned
calculation will be then divided by the total number of Bidco Ordinary Shares in
issue in order to give the First Option Purchase Price per Bidco C Ordinary
Share.
2.7.8 The Second Option Purchase Price for the Bidco C Ordinary Shares
(other than for holders of Bidco C Ordinary Shares who are also employees or
consultants and who are bad leavers under the articles of association of Bidco)
shall be calculated based on the lower of: (i) the value determined by the
formula used in the Second Option Calculation and (ii) the market value of Bidco
determined by an independent expert valuing the entire ordinary share capital of
Bidco if all of the Bidco Ordinary Shares had been sold on 31 December 2017 in
an arm's length transfer motivated by normal business considerations. The value
of Bidco determined by the aforementioned calculation will be then divided by
the total number of Bidco Ordinary Shares in issue in order to give the Second
Option Purchase Price per C Bidco Ordinary Share.
2.7.9 Any Bidco C Ordinary Shareholder who is an employee or consultant of
the Shed Group and becomes a leaver before the date of exercise of the First
Option or the Second Option (as the case may be) will (unless they are a bad
leaver) receive a time-apportioned price upon the exercise of the First Option
or Second Option (as the case may be) based on the period between becoming a
holder of the shares and his or her deemed leaving date. For these purposes,
the deemed leaving date is (i) in relation to a good leaver who is given notice
to terminate his or her employment or consultancy, the date upon which such
notice expires or such earlier date after such notice has been given that the
Bidco board determines that the good leaver ceases to perform his or her duties
to the standard reasonably required; or (ii) in relation to a good leaver who
was designated as such in any other circumstances, the date upon which notice to
terminate employment or consultancy is given.
2.7.10 Any Bidco B Ordinary Shareholder who is an employee or consultant of
the Shed Group and becomes a leaver before the date of exercise of the First
Option or Second Option (as the case may be) will (unless they are a bad leaver)
receive a time-apportioned price upon the exercise of the First Option or the
Second Option (as the case may be) based on the period between becoming a holder
of the shares and his or her deemed leaving date. For these purposes, the
deemed leaving date is (i) in relation to a good leaver who is given notice to
terminate his or her employment or consultancy, the date upon which such notice
expires or such earlier date after such notice has been given that the Bidco
board determines that the good leaver ceases to perform his or her duties to the
standard reasonably required; or (ii) in relation to a good leaver who was
designated as such in any other circumstances, the date upon which notice to
terminate employment or consultancy is given.
3. Sweet Equity Arrangements
3.1 The Sweet Equity Employees have already subscribed for Bidco C
Ordinary Shares in consideration of an undertaking to Bidco to pay the higher of
the nominal value of those Bidco C Ordinary Shares and market value at the date
of issue of such Bidco C Ordinary Shares (as agreed with HMRC or, failing that,
an independent valuer based on what it is believed HMRC will accept as the
market value). In the case of certain Sweet Equity Employees who are or may be
subject to US tax, Warner Bros. will loan the subscription amount to such
individuals to allow them to meet their obligations to Bidco. That loan will,
broadly, be repayable as the relevant individuals dispose of their Bidco C
Ordinary Shares. The subscription amounts due from the remaining Sweet Equity
Employees will be deferred until disposal of their Bidco C Ordinary Shares, but
to the extent that the proceeds received on such disposal (together with the
bonus described in the following paragraph) are less than the subscription
amounts owed, the amount due will be waived by Bidco. Warner Bros. will pay to
Bidco any shortfall that would otherwise have been due in respect of such
subscriptions. A pool of further Bidco C Ordinary Shares representing up to 2.75
per cent. in nominal value of the issued share capital of Bidco as at the Scheme
Effective Date will be made available for allocation to certain new joiners
identified by the Bidco Directors in the future.
3.2 As part of the incentive arrangements for Sweet Equity Employees,
Bidco also intends to put in place a new bonus arrangement. That bonus
arrangement will provide an opportunity for Sweet Equity Employees to receive an
additional cash bonus, payable in two main tranches as soon as reasonably
practicable after the completion of the purchase of the Bidco C Ordinary Shares
following an exercise of the First Option or Second Option (as the case may be).
Broadly, that bonus will be of an amount equal to the difference (if any)
between the market value of the Bidco C Ordinary Shares (issued to the Sweet
Equity Employee) calculated upon exercise of the First Option and/or Second
Option and the value that those Bidco C Ordinary Shares would have had if they
were subject to and had benefited from the same option rights as the Bidco B
Ordinary Shares. The bonus arrangement is not intended to confer any obligation
on Bidco or any member of the Shed Group to implement a similar arrangement in
the future.
3.3 Shed Shareholders will be asked at the General Meeting to approve the
Sweet Equity Arrangements. No Shed Shareholders who are also Sweet Equity
Employees will be entitled to vote at the General Meeting on the Ordinary
Resolution in respect of the Sweet Equity Arrangements. Voting on such Ordinary
resolution will be by way of a poll.
4.Outright Arrangements
4.1 Post implementation of the Proposals, it is anticipated that the
activities of Outright, the distribution business within the Shed Group, will be
integrated within the distribution business of Warner Bros. Entertainment Inc.
and its role expanded to include distribution of the content of certain other
Warner Bros. Entertainment Inc. businesses. Warner Bros. therefore considers it
desirable that the key staff at Outright, being the Outright Employees, be
incentivised by the performance of the wider Time Warner group, rather than
solely by the performance of the Shed Group. It is therefore proposed that the
Outright Employees be incentivised by the issue to them of both Time Warner
restricted stock and stock options in the Time Warner 2010 Stock Incentive Plan,
rather than Bidco C Ordinary Shares.
4.2 The restricted stock takes the form of Time Warner shares which vest
in equal instalments on the third and fourth anniversaries of the date of grant,
assuming continued employment and subject to accelerated vesting upon the
occurrence of certain events such as retirement, death or disability. The awards
of restricted stock also are subject to restrictions on transfer and forfeiture
prior to vesting. Time Warner stock options granted become exercisable, or vest,
in instalments of 25 per cent. over a four-year period, assuming continued
employment, and expire 10 years from the grant date. The stock options are
subject to accelerated vesting upon the occurrence of certain events such as
retirement, death or disability. The exercise price will be calculated based on
the closing price of Time Warner stock on the New York Stock Exchange as of the
date of the grant.
4.3 Shed Shareholders will be asked at the General Meeting to approve the
Outright Arrangements. No Shed Shareholders who are also Outright Employees will
be entitled to vote at the General Meeting on the Ordinary Resolution in respect
of the Outright Arrangements. Voting on such Ordinary Resolution will be by way
of a poll.
5. Shed Share Scheme NICs Arrangements
5.1 On the exercise of share options by UK resident optionholders, an
income tax and employee's NICs charge arises on an optionholder's gains (unless
the options are tax-approved). At the same time, an employer's NICs charge also
arises for the employer (at 12.8 per cent.) on the same amount on which the
optionholder is subject to tax.
5.2 Under the rules of the Shed Share Schemes, participants have agreed to
bear the employer's NICs in addition to their own tax liabilities on their gains
(if any) on the exercise of their options granted under such Shed Share Schemes.
It is proposed, however, as part of the Proposals, that Shed will bear its own
employer's NICs costs. The amount of the employer's NICs which will, as a
result, be settled by Shed will be approximately GBP230,000 in aggregate.
5.3 Shed Shareholders will be asked at the General Meeting to approve the
Shed Share Scheme NICs Arrangements. No Shed Shareholders who are also Shed
Share Scheme NICs Employees will be entitled to vote at the General Meeting on
the Ordinary Resolution in respect of the Shed Share Scheme NICs Arrangements.
Voting on such Ordinary Resolution will be by way of a poll.
APPENDIX V
DEFINITIONS
The following definitions apply throughout this announcement unless the context
requires otherwise:
+------------------------------------------+---------------------------+--------------------------------------------+
| "GBP" | | the lawful currency for the time being of |
| and | | the United Kingdom; |
| "pence" | | |
+------------------------------------------+---------------------------+--------------------------------------------+
| "A | | A ordinary shares of GBP0.001 each in the |
| Ordinary | | capital of the Company following the |
| Shares" | | Reorganisation; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Acquisition | | the 17.5 per cent. secured acquisition |
| Loan Notes" | | loan notes to be issued by Bidco and |
| | | subscribed for by Warner Bros. in respect |
| | | of future acquisitions by Bidco; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "AIM" | | the AIM market operated by the London |
| | | Stock Exchange; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Altium" | | Altium Capital Limited, independent |
| | | financial adviser to Shed for the purposes |
| | | of Rule 3 of the Code; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Annual | | the report and accounts of Shed for the |
| Report" | | period ended 31 December 2009; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Articles" | | the articles of association of Shed, as |
| | | amended from time to time; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "associated | | in relation to an undertaking, an |
| undertaking" | | undertaking which is its subsidiary or |
| | | holding company or which is a subsidiary |
| | | of its holding company; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "B | | B ordinary shares of GBP0.001 each in the |
| Ordinary | | capital of the Company following the |
| Shares" | | Reorganisation; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Bidco" | | WB Bidco plc, a company incorporated in |
| | | England and Wales with registered number |
| | | 7329044 whose registered office is at 98 |
| | | Theobald's Road, London WC1X 8WB; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Bidco | | the A ordinary shares in Bidco of GBP0.002 |
| A | | each, a summary of the rights of which are |
| Ordinary | | set out in paragraph 2.2 of Appendix IV; |
| Shares" | | |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Bidco | | a holder of Bidco B Ordinary Shares; |
| B | | |
| Ordinary | | |
| Shareholder" | | |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Bidco | | the B ordinary shares of GBP0.002 each in |
| B | | Bidco, a summary of the rights of which |
| Ordinary | | are set out in paragraph 2.4 of Appendix |
| Shares" | | IV; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Bidco | | a holder of Bidco C Ordinary Shares; |
| C | | |
| Ordinary | | |
| Shareholder" | | |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Bidco | | the C ordinary shares of GBP0.002 each in |
| C | | Bidco, a summary of the rights of which |
| Ordinary | | are set out in paragraph 2.6 of Appendix |
| Shares" | | IV; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Bidco | | the Bidco B Ordinary Shares and the Bidco |
| Consideration | | Loan Notes to be issued by Bidco under the |
| Securities" | | Partial Alternative; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Bidco | | the directors of Bidco from time to time |
| Directors" | | being, Bruce Rosenblum, Jeff Schlesinger, |
| | | Ronald Goes, Nicholas Southgate and |
| | | Jonathon Kemp at the date of this |
| | | announcement; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Bidco | | the 10 per cent. secured loan notes of |
| Loan | | GBP0.0712 each to be issued under the |
| Notes" | | Partial Alternative by Bidco, a summary of |
| | | the terms of which are set out in |
| | | paragraph 2.5 of Appendix IV; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Bidco | | the Bidco A Ordinary Shares, the Bidco B |
| Ordinary | | Ordinary Shares and the Bidco C Ordinary |
| Shares" | | Shares; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Bidco | | the preference shares in Bidco of GBP1.00 |
| Preference | | each, a summary of the rights of which are |
| Shares" | | set out in paragraph 2.3 of Appendix IV of |
| | | this announcement; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Bidco | | the one Ordinary Share to be registered in |
| Share" | | the name of and beneficially owned by |
| | | Bidco; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Business | | a day (other than Saturdays, Sundays and |
| Day" | | public holidays in the UK) on which banks |
| | | are generally open for non-automated |
| | | business (other than solely for trading |
| | | and settlement in Euros) in London; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Capital | | the reduction of the share capital of Shed |
| Reduction" | | under section 641 of the Companies Act by |
| | | the cancellation of the Scheme Shares to |
| | | be effected as part of the Scheme; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Cash | | the cash consideration of 115 pence per |
| Consideration" | | Shed Share payable under the terms of the |
| | | Proposals; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Closing | | the closing middle market price of a Shed |
| Price" | | Share as derived from the AIM appendix of |
| | | the Daily Official List of the London |
| | | Stock Exchange; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Code", | | the City Code on Takeovers and Mergers; |
| "City | | |
| Code" | | |
| or | | |
| "Takeover | | |
| Code" | | |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Companies | | the Companies Act 2006, as amended from |
| Act" | | time to time; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Competing | | a formal proposal made by a third party |
| Offer" | | who is not acting in concert (within the |
| | | meaning of the City Code) with Warner |
| | | Bros. or Bidco in respect of or for an |
| | | offer (within the meaning of the City |
| | | Code), scheme of arrangement, merger or |
| | | business combination or similar |
| | | transaction, as revised from time to time, |
| | | the purpose of which is to enable that |
| | | third party (and/or any person acting in |
| | | concert with that third party within the |
| | | meaning of the City Code) to acquire 30 |
| | | per cent. or more (when aggregated with |
| | | shares already held by the third party and |
| | | anybody so acting in concert with that |
| | | third party) of the issued share capital |
| | | of Shed, or all or a majority of the |
| | | undertaking, assets or business of Shed |
| | | including, without limitation, an |
| | | announcement of any such transaction or |
| | | arrangement (whether or not subject to any |
| | | precondition) made in accordance with Rule |
| | | 2.4 or Rule 2.5 of the City Code; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Conditions" | | the conditions to the implementation of |
| | | the Scheme and the Proposals set out in |
| | | Appendix I of this announcement; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Court" | | Her Majesty's High Court of Justice in |
| | | England and Wales; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Court | | the meeting of the Independent Scheme |
| Meeting" | | Shareholders to be convened by order of |
| | | the Court pursuant to section 896 of the |
| | | Companies Act to consider and, if thought |
| | | fit, to approve the Scheme (with or |
| | | without amendment), and any adjournment of |
| | | that meeting; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Covenantors" | | has the meaning given to it in paragraph |
| | | 11 of this announcement; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "CREST" | | the relevant system (as defined in the |
| | | Regulations) in respect of which Euroclear |
| | | is the Operator (as defined in the |
| | | Regulations); |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Disclosed" | | (i) as disclosed in the Annual |
| | | Report; |
| | | (ii) as publicly announced by Shed |
| | | (through a Regulatory Information Service) |
| | | on or before 5:00 p.m. on 4 August 2010; |
| | | or |
| | | (iii) as fairly disclosed in any |
| | | document delivered or made available to |
| | | Bidco, the Senior Management Team, Warner |
| | | Bros. or any of their respective |
| | | professional advisers engaged in |
| | | connection with the Proposals on or before |
| | | 5.00 p.m. on 4 August 2010; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "EMI | | the enterprise management incentive share |
| Scheme" | | option plan operated by Shed for the |
| | | benefit of full-time employees of the Shed |
| | | Group; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Euroclear" | | Euroclear UK & Ireland Limited; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Excluded | | the Bidco Share and any Ordinary Shares |
| Shares" | | held in treasury by Shed; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "First | | the hearing of the Court of the claim form |
| Court | | to sanction the Scheme; |
| Hearing" | | |
+------------------------------------------+---------------------------+--------------------------------------------+
| "First | | the order of the Court sanctioning the |
| Court | | Scheme under Part 26 of the Companies Act; |
| Order" | | |
+------------------------------------------+---------------------------+--------------------------------------------+
| "First | | has the meaning given to it in paragraph |
| Option" | | 2.7.1 of Appendix IV; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "General | | the general meeting of Shed Shareholders |
| Meeting" | | convened to consider and, if thought fit, |
| | | approve certain resolutions in relation to |
| | | the Proposals (with or without amendment) |
| | | and any adjournment of that meeting; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "HMRC" | | Her Majesty's Revenue & Customs; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "holder" | | a registered holder and includes any |
| | | person entitled by transmission; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "holding | | in relation to another company, a company |
| company" | | that: |
| | | (a) holds a majority of the voting |
| | | rights in that other company; |
| | | (b) is a member of that other |
| | | company and has the right to appoint or |
| | | remove a majority of its board of |
| | | directors; or |
| | | (c) is a member of that other |
| | | company and controls alone, |
| | | pursuant to an agreement with other |
| | | members, a majority of the |
| | | voting rights in it; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Implementation | | the implementation agreement dated on or |
| Agreement" | | about 5 August 2010 as entered into |
| | | between Shed, Bidco and Warner Bros.; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Independent | | the non-executive directors of Shed, being |
| Directors" | | Heather Rabbatts, Coline McConville and |
| | | Marc Watson; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Independent | | holders of the Independent Scheme Shares; |
| Scheme | | |
| Shareholders" | | |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Independent | | the Scheme Shares, other than any such |
| Scheme | | shares registered in the name of, or |
| Shares" | | beneficially owned by, the Sweet Equity |
| | | Employees, the Outright Employees and the |
| | | Shed Share Schemes NICs Employees; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Ingenious" | | Ingenious Corporate Finance Limited, |
| | | financial adviser to the Senior Management |
| | | Team and joint financial adviser to Bidco; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Liquidation | | has the meaning given to it in paragraph |
| Preference" | | 2.3 of Appendix IV; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "London | | London Stock Exchange plc, a public |
| Stock | | limited company incorporated in England |
| Exchange" | | and Wales under number 2075721; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Long | | 30 November 2010, or such later date as |
| Stop | | the parties to the Implementation |
| Date" | | Agreement may agree; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Management | | the Senior Management Team, Helena Ely, |
| Team" | | Nick Emmerson, Jonathan Hewes, Claire |
| | | Hungate, Jonathon Kemp, Leanne Klein, Ann |
| | | McManus, Brian Park, Gavin Rota, Mark |
| | | Rubens, Charlotte Street and Samuel |
| | | Whittaker; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Meetings" | | the Court Meeting and the General Meeting; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Morgan | | Morgan Stanley & Co Incorporated and |
| Stanley" | | Morgan Stanley & Co. Limited, financial |
| | | adviser to Time Warner and joint financial |
| | | adviser to Bidco; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "NICs" | | national insurance contributions; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Offer | | the period commencing on 30 July 2009 and |
| Period" | | ending on the date on which either Bidco |
| | | or Shed makes an announcement in |
| | | accordance with clause 5(c) of Appendix 7 |
| | | to the City Code that the Scheme has |
| | | become effective in accordance with its |
| | | terms or that the Scheme has lapsed or |
| | | been withdrawn or, should Bidco elect to |
| | | implement the Proposals by means of a |
| | | Takeover Offer, the date on which the |
| | | Takeover Offer becomes or is declared |
| | | unconditional as to acceptances or lapses; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Ordinary | | the ordinary resolutions to be proposed at |
| Resolutions" | | the General Meeting in accordance with the |
| | | requirements of the Code to approve (i) |
| | | the Sweet Equity Arrangements; (ii) the |
| | | Outright Arrangements; and (iii) the Shed |
| | | Share Scheme NICs Arrangements and |
| | | "Ordinary Resolution" means any one of |
| | | them as the context requires; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Ordinary | | unconditionally allotted and fully paid |
| Shares" | | ordinary shares of GBP0.001 each in the |
| | | capital of Shed; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Outright" | | Outright Distribution Limited, a company |
| | | incorporated in England and Wales with |
| | | registered number 04840749 whose |
| | | registered office is at 2 Holford Yard, |
| | | London WC1X 9HD; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Outright | | the arrangements proposed in respect of |
| Arrangements" | | the Outright Employees, a summary of which |
| | | is included in paragraph 4 of Appendix IV |
| | | of this announcement; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Outright | | David Asher, Christopher Bonney, Claudia |
| Employees" | | Danser and Thomas McClelland; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Overseas | | Scheme Shareholders who are resident in, |
| Shareholders" | | or citizens or nationals of, a |
| | | jurisdiction outside the UK; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Panel" | | the Panel on Takeovers and Mergers; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Partial | | the option for holders of Scheme Shares |
| Alternative" | | (other than Restricted Overseas |
| | | Shareholders) to receive a combination of |
| | | cash, Bidco B Ordinary Shares and Bidco |
| | | Loan Notes for their Scheme Shares in |
| | | accordance with the Scheme; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Partial | | an election, subject to certain terms and |
| Alternative | | conditions set out in this announcement |
| Election" | | and the Scheme, for the Partial |
| | | Alternative in respect of Scheme Shares, |
| | | whether made by the completion and |
| | | delivery of a form of election for holders |
| | | of Scheme Shares in certificated form, or |
| | | by the issue of a TTE Instruction (as |
| | | defined in the CREST manual) for holders |
| | | of Scheme Shares in uncertificated form; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Preference | | has the meaning given to it in paragraph |
| Dividend" | | 2.3 of Appendix IV; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Proposals" | | the proposed acquisition by Bidco of all |
| | | of the issued and to be issued share |
| | | capital (including shares to be issued to |
| | | the holders of Shed Awards) of Shed |
| | | proposed to be effected by means of the |
| | | Scheme and the Capital Reduction; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "PSP" | | the performance share plan operated by |
| | | Shed for the benefit of executive |
| | | directors and employees of the Shed Group; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Registrar | | the Registrar of Companies in England and |
| of | | Wales; |
| Companies" | | |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Regulatory | | any of the services approved by the London |
| Information | | Stock Exchange for the distribution to the |
| Service" | | public of announcements and included |
| | | within the list maintained on the London |
| | | Stock Exchange's website, |
| | | www.londonstockexchange.com; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Regulations" | | the Uncertificated Securities Regulations |
| | | 2001 (SI 2001 No. 3755), as amended from |
| | | time to time; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Reorganisation" | | the redesignation of the Ordinary Shares |
| | | into A Ordinary Shares and B Ordinary |
| | | Shares pursuant to the Special Resolution; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Reorganisation | | 12 noon on the Business Day immediately |
| Record Time" | | before the Second Court Hearing; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Restricted | | any jurisdiction in relation to which the |
| Jurisdiction" | | extension or acceptance of the Partial |
| | | Alternative would violate the laws of that |
| | | jurisdiction or which Bidco decides, in |
| | | its sole discretion, would be likely to |
| | | involve disproportionate complexity, cost |
| | | or risk, subject to the requirements of |
| | | Rule 30.3 of the Code (including, but not |
| | | limited to, Australia, New Zealand, |
| | | Canada, South Africa and Japan); |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Restricted | | an Overseas Shareholder who is resident |
| Overseas | | in, or a citizen or national of, a |
| Shareholders" | | Restricted Jurisdiction and "Restricted |
| | | Overseas Shareholder" means any of them; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Scheme" | | the scheme of arrangement proposed to be |
| | | made under Part 26 of the Companies Act to |
| | | implement the Proposals, to be proposed by |
| | | Shed to the Shed Shareholders, with or |
| | | subject to any modification, addition or |
| | | condition approved or imposed by the Court |
| | | and agreed to by Shed and Bidco; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Scheme | | the document to be sent by Shed to, |
| Circular" | | amongst others, the holders of Ordinary |
| | | Shares containing and setting out the |
| | | Scheme and notices convening the Court |
| | | Meeting and the General Meeting; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Scheme | | the date on which the Proposals become |
| Effective | | effective in accordance with their terms; |
| Date" | | |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Scheme | | 6:00 p.m. on the Business Day immediately |
| Record | | prior to the Second Court Hearing; |
| Time" | | |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Scheme | | the resolution to approve the Scheme to be |
| Resolutions" | | proposed at the Court Meeting and the |
| | | special resolution to be proposed at the |
| | | General Meeting in respect of the |
| | | Proposals; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Scheme | | the holders of Scheme Shares; |
| Shareholders" | | |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Scheme | | Shed Shares which are: |
| Shares" | | |
+------------------------------------------+---------------------------+--------------------------------------------+
| | | (a) unconditionally allotted or |
| | | issued and fully paid at the date of the |
| | | Scheme Circular; |
+------------------------------------------+---------------------------+--------------------------------------------+
| | | (b) (if any) unconditionally |
| | | allotted or issued and fully paid after |
| | | the date of the Scheme Circular but before |
| | | the Voting Record Time; or |
+------------------------------------------+---------------------------+--------------------------------------------+
| | | (c) issued at or after the Voting |
| | | Record Time and before the Scheme Record |
| | | Time, in respect of which the original or |
| | | any subsequent holders are, or have agreed |
| | | in writing to be, bound by the Scheme; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Second | | the hearing by the Court of the claim form |
| Court | | to confirm the Capital Reduction; |
| Hearing" | | |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Second | | the order of the Court confirming the |
| Court | | Capital Reduction under Section 648 of the |
| Order" | | Companies Act provided for by the Scheme; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Second | | has the meaning given to it in paragraph |
| Option" | | 2.7.1 of Appendix IV; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Senior | | Nicholas Southgate, Eileen Gallagher, |
| Management | | Alexander Graham and Nicholas Powell; |
| Team" | | |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Shed" | | Shed Media plc, a company incorporated in |
| or | | England and Wales with registered number |
| "Company" | | 3617464 whose registered office is at 2 |
| | | Holford Yard, London WC1X 9HD; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Shed | | the awards and options granted under the |
| Awards" | | Shed Share Schemes; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Shed | | the directors of Shed at the date of this |
| Directors" | | announcement or, where the context |
| | | requires, the directors of Shed from time |
| | | to time; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Shed | | Shed and its subsidiary and associated |
| Group" | | undertakings from time to time and, where |
| | | the context permits, each of them; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Shed | | the PSP and the EMI Scheme; |
| Share | | |
| Schemes" | | |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Shed | | the arrangements proposed in respect of |
| Share | | employer's NICs in relation to the Shed |
| Scheme | | Share Schemes, a summary of which is |
| NICs | | included in paragraph 5 of Appendix IV; |
| Arrangements" | | |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Shed | | David Asher, Laura Bessell-Martin, |
| Share | | Christopher Bonney, Debra Campbell, |
| Scheme | | Timothy Carter, Lisa Cox, Daniel |
| NICs | | Crunkhorn, Patrick Holland, Jonathon Kemp, |
| Employees" | | Jusna Khanom, Elizabeth Lake, Edward |
| | | Levan, Thomas McClelland, Daniel Pierson, |
| | | Jodi Reynolds, Nicholas Southgate, Kirsten |
| | | Spurr, Rosalind Taylor, Leonora Teale and |
| | | Samuel Whittaker; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Shed | | the holders of Shed Shares from time to |
| Shareholders" | | time; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Shed | | before the Reorganisation Record Time, |
| Shares" | | Ordinary Shares and, after the |
| | | Reorganisation Record Time, Ordinary |
| | | Shares, A Ordinary Shares and B Ordinary |
| | | Shares; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Special | | the special resolution to be proposed at |
| Resolution" | | the General Meeting to approve, among |
| | | other things, the cancellation of the |
| | | issued share capital of Shed, the Capital |
| | | Reduction the alteration of the Articles |
| | | and such other matters as may be necessary |
| | | to implement the Scheme; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "subsidiary" | | in relation to a holding company, the |
| | | company that such holding company: |
| | | (a) holds a majority of the voting |
| | | rights in; |
| | | (b) is a member of and has the right |
| | | to appoint or remove a majority of its |
| | | board of directors; or |
| | | (c) is a member of and controls |
| | | alone, pursuant to an agreement with other |
| | | members, a majority of its voting rights, |
| | | or a subsidiary of a company that is |
| | | itself a subsidiary of that other company; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "substantial | | a direct or indirect interest in 20 per |
| interest" | | cent. or more of voting equity share |
| | | capital; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Sweet | | the arrangements |
| Equity | | proposed in |
| Arrangements" | | respect of the |
| | | Sweet Equity |
| | | Employees, a |
| | | summary of which |
| | | is included in |
| | | paragraph 3 of |
| | | Appendix IV; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Sweet | | the employees of the Shed Group who are |
| Equity | | the holders of Bidco C Ordinary Shares, |
| Employees" | | being Joanna Ball, Laura Bessell-Martin, |
| | | Mark Blatty, Timothy Carter, Kate Croft, |
| | | Daniel Crunkhorn, Ana De Moraes, Helena |
| | | Ely, Nick Emmerson, Jonathan Hewes, |
| | | Patrick Holland, Sharon Hughf, Claire |
| | | Hungate, Jonathon Kemp, Leanne Klein, |
| | | Edward Levan, Lynne Morgans, Jennifer |
| | | O'Connell, Daniel Pierson, Gavin Rota, |
| | | Mark Rubens, Nicholas Southgate, Charlotte |
| | | Street, Rosalind Taylor, Matthew Virgo, |
| | | Samuel Whittaker and Samantha Wilson; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Takeover | | should Bidco elect to attempt to implement |
| Offer" | | the Proposals by way of a takeover offer |
| | | (as that term is defined in the Companies |
| | | Act), the recommended offer to be made by |
| | | Bidco to acquire all of the issued and to |
| | | be issued Shed Shares and, where the |
| | | context admits, any subsequent revisions, |
| | | variations, extensions or renewal of such |
| | | offer; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Tax | | has the meaning given to it in paragraph |
| Covenant" | | 11 of this announcement; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Time | | Time Warner Inc. whose principal place of |
| Warner" | | business is One Time Warner Center, New |
| | | York NY 10019, United States; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "undertaking" | | (a) a body |
| | | corporate or |
| | | partnership; or |
| | | (b) an |
| | | unincorporated |
| | | association carrying |
| | | on a trade or |
| | | business, with or |
| | | without a view to |
| | | profit; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "United | | the United Kingdom of Great Britain and |
| Kingdom" | | Northern Ireland; |
| or "UK" | | |
+------------------------------------------+---------------------------+--------------------------------------------+
| "United | | the United States of America, its |
| States" | | territories and possessions, any state of |
| or "US" | | the United States of America, the District |
| | | of Columbia and all other areas subject to |
| | | its jurisdiction; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Voting | | 6:00 p.m. on the day which is two days |
| Record | | before the date of the Court Meeting or, |
| Time" | | if the Court Meeting is adjourned, 6:00 |
| | | p.m. on the day which is two days before |
| | | the date of such adjourned meeting; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Warner | | Warner Bros. Consumer Products (UK) |
| Bros." | | Limited, a company incorporated in England |
| | | and Wales with registered number 2105993 |
| | | and whose registered office is at 98 |
| | | Theobald's Road, London WC1X 8WB; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Warner | | Warner Bros. Entertainment Inc., a company |
| Bros. | | with registered address at 4000 Warner |
| Entertainment | | Boulevard, Burbank, CA 91522-0001, United |
| Inc." | | States; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Warner | | all amounts outstanding (whether of |
| Bros. | | principal, interest, fees, expenses or |
| Senior | | other liabilities) under or in connection |
| Debt" | | with the Warner Bros. Senior Debt |
| | | Facility; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Warner | | GBP27.2 million non-amortising senior |
| Bros. | | facility agreement between Warner Bros. |
| Senior | | and Bidco dated on or about 5 August 2010 |
| Debt | | as the same may be amended, varied or |
| Facility" | | restated from time to time; |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Warner. | | the television business operated by the |
| Bros | | Wider Bidco Group; |
| Television | | |
| Group" | | |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Wider | | Warner Bros. Entertainment Inc., its |
| Bidco | | subsidiary undertakings, associated |
| Group" | | undertakings and any other undertakings in |
| | | which that company and such undertakings |
| | | (aggregating their interests) have a |
| | | substantial interest including Bidco; and |
+------------------------------------------+---------------------------+--------------------------------------------+
| "Wider | | Shed, its subsidiary undertakings, |
| Shed | | associated undertakings and any other |
| Group" | | undertakings in which that company and |
| | | such undertakings (aggregating their |
| | | interests) have a substantial interest. |
+------------------------------------------+---------------------------+--------------------------------------------+
All references to time are to London time unless otherwise stated.
This information is provided by RNS
The company news service from the London Stock Exchange
END
OFFUGUAARUPUUAA
Shed Media (LSE:SHDP)
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Shed Media (LSE:SHDP)
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