RNS Number:8197A
VTR PLC
31 March 2006
For Immediate Release 31 March 2006
Strategic Investment by Prime Focus Limited
Summary of the announcement
* The Company today announced that, subject inter alia to the approval of
Shareholders, it proposes to raise #4.2 million by way of a Placing of
12,062,990 New Ordinary Shares at a price of 35 pence per New Ordinary
Share
* The Company also proposes to issue 1,428,571 New Ordinary Shares in
exchange for the transfer of certain assets to the Company
* Prime Focus Limited ("PFL"), one of India's largest integrated end-to-end
post production and visual effects services houses, has conditionally
subscribed for the Placing Shares
* An Extraordinary General Meeting has been convened for 24 April 2006, at
which Shareholders will be asked to consider, and if thought fit, to
approve the Resolutions in order to implement, inter alia, the Placing
* In the Board's opinion the investment by PFL, and their addition as a
major new shareholder in the Company, should better position the Group to
take advantage of opportunities that exist in new and international markets
* In addition, the Board believes there is the potential for synergies to
arise from the relationship with PFL, particularly in relation to PFL's
technological skills, that will benefit the Group in the medium term
* Following the completion of the Placing, Mr Namit Malhotra will be
appointed to the Board as non-executive chairman and Philip Lovegrove will
resign from the Board upon the passing of Resolutions at the EGM. In
addition, Mr Naresh Malhotra, Mr Chandir Gidwani and Mr Rivkaran Chadha
will be appointed to the Board as non-executive Directors
Commenting on the proposed investment by PFL Paul Tracey, Managing Director of
VTR plc, said,
"The proposed investment by PFL in VTR plc provides the company, its employees
and shareholders with the potential to benefit from the increasing globalisation
of the industry sectors within which we operate. Having identified the need for
a strategic partner to compete effectively in our markets, I am delighted that
PFL share our vision and desire to build a valuable and exciting business over
the coming years."
Namit Malhotra of PFL further commented,
"We are very excited at the prospect of working with VTR to develop a global
brand and expand the service offerings into new and potentially lucrative
markets. The combination of our scale, technology and cost effective operations
and VTR's expertise and international reputation should provide us with an
opportunity to build a highly attractive business".
For further information please call
Lawrence Dore / Nick Bishop Paul Tracey Philip Davies / Anthony Noakes
Mantra PR VTR Plc Charles Stanley Securities
020 79077800 Tel: 020 7437 0026 Tel: 020 7953 2000
Introduction
The Company today announced that, subject inter alia to the approval of
Shareholders, it proposes to raise #4.2 million by way of a Placing of
12,062,990 New Ordinary Shares at a price of 35 pence per New Ordinary Share. In
addition, the Company proposes to issue 1,428,571 New Ordinary Shares in
exchange for the transfer of certain assets to the Company as described below.
Prime Focus Limited ("PFL"), one of India's largest integrated end-to-end post
production and visual effects services houses, has conditionally subscribed for
the Placing Shares.
An Extraordinary General Meeting has been convened for 24 April 2006, at which
Shareholders will be asked to consider, and if thought fit, to approve the
Resolutions in order to implement, inter alia, the Placing.
Background to and reasons for the Transaction
As Shareholders are aware, the trading conditions facing the Group in recent
years have proved to be particularly challenging and 2005 proved to be no
exception. As reported in our trading updates in the latter half of last year
the Group experienced a severe downturn in trading which started in April 2005
and continued throughout the second half, affecting all parts of the business.
The reasons for this are largely driven by the increasingly competitive
environment, recessions in some of our key markets and a general pressure on
rates which adversely impacted on the Group's profitability.
As detailed in the preliminary results for the year ended 31 August 2005,
announced on 4 November 2005, the Board has taken the corrective action in
re-aligning the Group to enable it to respond to a marketplace which has changed
in terms of activity and economic dynamics over the last five years. The Board
has taken a series of operational measures to increase the Group's
competitiveness including the re-shaping of both the Company and management of
its subsidiaries, reducing costs and reorganising the Group's operating
companies into more clearly defined entities. Strategically, the Board has
reviewed the markets in which VTR operates and identified several opportunities
to grow both domestically and internationally. The advent of new media, the
proliferation of media and the increasing requirement for assets to be digitised
and managed are all driving growth across the industry and provide VTR with
several areas to exploit. Additionally the Board has identified that in order
for VTR to be able to pursue these opportunities, significant investment is
required and that an appropriate way to achieve this would be to find an
international partner to invest in VTR and help its development.
As a result of this requirement the Board approached PFL who have a stated
strategy of overseas expansion, particularly into the London market, and who
have previously expressed an interest in making a strategic investment in the
Company. In the Board's opinion the investment by PFL, and their addition as a
major new shareholder in the Company, should better position the Group to take
advantage of the opportunities outlined above.
In addition, the Board believes there is the potential for synergies to arise
from the relationship with PFL, particularly in relation to PFL's technological
skills, that will benefit the Group in the medium term.
Details of the Placing and use of proceeds
The Company has entered into an agreement with PFL whereby PFL shall subscribe
for such number of ordinary shares in VTR, being 13,491,561 shares as shall give
PFL 55.0 per cent. of the enlarged capital of VTR.
The subscription price shall be satisfied as to 35 pence per share in cash for
12,062,990 shares and as to the remainder, by the transfer of certain assets to
the Company (including arranging and paying for delivery of those assets to the
Company's premises) for 1,428,571 shares in the Company. These assets comprise
(i) a Discreet Lustre digital intermediate system colour grading Master Station
and (ii) a Northlight pin-registered film scanner for Digital Intermediate. A
report, pursuant to s.103 of the Companies Act, has been prepared by Baker Tilly
which supports the issue of 1,428,571 shares in the Company in exchange for the
above assets.
The net proceeds of the Placing will be used by the Company to provide working
capital, to reduce gearing and will be available to fund growth into the new
areas set out above.
The Board, having been advised by Charles Stanley, consider that it is in the
best interests of the Company and Shareholders as a whole for the funds to be
raised by the Placing. If the Company had made an offer, by way of a rights
issue or open offer, to allow existing shareholders to subscribe for any of the
Placing Shares, this would have necessitated the publication of a prospectus at
significant additional cost, imposition on management time and a delay which may
have put the Placing in jeopardy.
Subject to the approval of the Resolutions, application will be made to the
London Stock Exchange for the Placing Shares to be admitted to trading on AIM.
It is expected that Admission will become effective and that trading in the
Placing Shares will commence on AIM on 2 May 2006.
The Placing Shares will, when issued and fully paid, rank pari passu in all
respects with the New Ordinary Shares, including the right to receive any
dividend or other distribution declared, made or paid after the date of their
unconditional allotment.
Current Trading and Prospects
The difficult trading conditions which the company reported on 4 November 2005
have persisted. Whilst the measures initiated by the Board, including a material
reduction in staff costs and control on capital expenditure have put the Company
on a firmer financial footing the Company has continued to be loss making.
Following a period of reasonable trading in the first four months of the
financial year to December 2005, in January 2006 there was a significant
reduction in income resulting in increased losses for the month. There has been
no upturn in income for the month of February. The Board remains confident of
the underlying quality of its businesses.
Strategy
Over the past five years the post production industry in the UK has altered as a
result of globalisation, and the influx of new mediums of delivery, most
significantly the internet, and new standards (high-definition) have taken
effect. Whilst revenues and prices from traditional post-production remain
under pressure the Board have identified several areas of business which
potentially offer prospects to grow and deliver increased returns to
shareholders. To date the Group has been unable to take full advantage of these
opportunities. The investment by PFL will, in the Board's opinion, allow
developments in the following areas:
Film
VTR already has digital cinema facilities. To date it has lacked the scale and
investment to win a high volume of national and international film projects,
especially in the area of visual effects. PFL currently works on approximately
60 major film releases per year in the fast-growing Asian and Indian film
markets, and has already made headway into the international film market. The
combination of VTR and PFL will potentially open up new business opportunities
to VTR.
Digital asset management
We are seeing an increasing requirement from our clients for sophisticated
digital asset management solutions. The scope of these services ranges from
content management for archives through to brand asset management for
multinationals. VTR already has a presence in this market, through TMR Digital,
but has lacked the scale to compete in what is increasingly a global
marketplace. PFL's infrastructure and its access to the Indian software market
will help the growth of VTR's digital asset management business.
New market sectors
New market sectors are developing with the divergence of use of technology by
consumers. Consequently, demands for services tailored to produce output for
devices such as mobile phones is growing at a fast pace. However, the low
margins available, to date, have made it difficult for VTR to operate
profitably. With PFL's ability to deliver solutions at reduced costs, coupled
with VTR's industry knowledge, the Board is optimistic that new revenue streams
can be opened.
Global
The UK post-production industry has, with a few exceptions, remained a
relatively domestic industry. Through PFL's existing operations and partners,
VTR will acquire international access, allowing it to serve customers on a
global, 24/7 basis. PFL's intention is to expand its presence internationally
with openings already planned in Los Angeles, USA and Dubai in the near future.
This will create an international network when combined with VTR's offices in
London.
Financial investment
PFL's investment will reduce VTR's gearing, providing free cashflow to invest in
growth areas of the business. In addition, the provision of equipment, as part
of the investment, will enable the Group to expand its digital cinema
operations.
The Takeover Code
Under Rule 9 of the Takeover Code, any person who acquires shares which, taken
together with shares already held by him or shares held or acquired by any
person acting in concert with him (the "concert party group"), carry 30 per
cent. or more of the voting rights of a company which is subject to the Takeover
Code is normally required to make a general offer to all the remaining
shareholders to acquire their shares.
Similarly, when any person or persons acting in concert already hold more than
30 per cent., but not more than 50 per cent., of the voting rights of such
company, a general offer will normally be required if any further shares
increasing their percentage of the voting rights are acquired.
Any offer under Rule 9 must be in cash and at the highest price paid within the
preceding 12 months for any shares in the company by the person required to make
the offer or any person acting in concert with him.
PFL will hold 55.0 per cent. of the Enlarged Issued Share Capital following the
completion of the Transaction.
The Takeover Panel has agreed, subject to the approval of Shareholders, to waive
the requirement, which would otherwise arise as a result of the Transaction, for
a general offer to be made to all Shareholders under Rule 9 of the Takeover
Code. Accordingly Resolution 1 is being proposed at the EGM and will be taken on
a poll of Shareholders.
Following the EGM, PFL will hold more than 50 per cent. of the Company's voting
share capital and may accordingly increase its shareholding without incurring
any further obligation under Rule 9 to make a general offer.
Intentions of PFL
In the event that the Resolutions are passed at the EGM, Philip Lovegrove has
advised the Board that he will be resigning from the Board.
Following the completion of the Placing, Mr Namit Malhotra will be appointed to
the Board as non-executive chairman. In addition, Mr Naresh Malhotra, Mr Chandir
Gidwani and Mr Rivkaran Chadha will be appointed to the Board as non-executive
Directors.
PFL has confirmed its intention that the business of the Company will be allowed
to continue in substantially the same manner as at present, with no major
changes. PFL has also confirmed that the existing employment rights, including
pension rights of all employees of the Group, will be maintained.
Extraordinary General Meeting
An Extraordinary General Meeting of the Company is to be held at 37 Dean Street,
London, W1D 4PT at 10 am. on 24 April 2006. A circular containing further
details of the Proposals and the notice of the EGM is being posted to
Shareholders today.
Irrevocable undertakings
The Company has received irrevocable undertakings to vote in favour of the
Resolutions from Mr & Mrs Mark H. Dixon who have a beneficial interest in
respect of 1,986,800 Ordinary Shares, Peter Cundill & Associates (Bermuda) Ltd
who has a beneficial interest in respect of 1,100,000 Ordinary Shares, and Mr P
Stone who has a beneficial interest in respect of 476,999 Ordinary Shares.
All of the Directors have irrevocably undertaken to vote in favour of the
Resolutions in respect of their entire holdings of Ordinary Shares, which total
410,034 Ordinary Shares representing approximately 3.71 per cent. of the
Existing Shares.
Therefore in aggregate irrevocable undertakings to vote in favour of the
Resolutions have been received in respect of 3,973,833 Ordinary Shares
representing approximately 36.0 per cent. of the Existing Shares.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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