Publication and Posting of Circular

RNS Number : 1735U

Capital & Regional plc

21 December 2012

 

21 December 2012

CAPITAL & REGIONAL PLC

Publication and Posting of Circular relating to

Disposal of X-Leisure Business and Rule 9 Waiver

Further to the announcement by Capital & Regional plc on 4 December 2012 in relation to the sale of its 11.9% stake in the X-Leisure Fund and its 50% interest in X-Leisure Limited to a subsidiary of Land Securities Group plc, the Group announces that a Circular has been published and posted to shareholders seeking consent to complete this disposal.  The Board unanimously recommends that shareholders vote in favour of the disposal.  The Directors confirm that they will vote in favour of their holdings, representing 30.8% of the issued share capital of the Company.

The Group also confirms the X-Leisure Fund unit holders have today agreed the various governance, ownership and fee amendments.  

The Disposal of the X-Leisure Business is in accordance with the Group's strategy of selling non-core assets enabling the Group to increasingly focus on, and grow, the core UK shopping centre business.  The net cash proceeds of the Disposal are expected to be approximately £30.4 million. The Board intends to use part of the proceeds to further de-leverage the Group and potentially increase the Company's stake in The Mall Fund or acquire complementary shopping centre assets with joint venture partners, In addition the Group intends to use part of the proceeds to buy up to 10 per cent. of the Company's shares in issue, subject to market conditions.

As the result of the proposed share buyback, the Company's Concert Party shareholder may own up to a maximum 32.46 per cent. of the voting rights in the Company. Therefore the Independent Shareholders will be asked, by a proposed ordinary resolution, to waive an obligation on the Concert Party which may arise under Rule 9 of the Takeover Code as a result of the Company purchasing ordinary shares in the market.

The Circular sets out further details of both the Disposal and the Rule 9 Waiver. The General Meeting will be held at The Rubens Hotel, Rembrandt Suite, 39 Buckingham Palace Road, London, SW1W 0PS on 10 January 2013 at 11.00am.

A copy of the Circular will be available for inspection at the registered office of Capital & Regional plc at 52 Grosvenor Gardens, London, SW1W 0AU, during normal business hours on any business day with effect from today and up to and including the conclusion of the General Meeting. In addition, the Circular will be submitted to and made available on the National Storage Mechanism (which can be accessed at www.hemscott.com/nsm.do) and will shortly be available to view on the Company's corporate website (www.capreg.com).

For further information:

Capital & Regional                                         

Hugh Scott-Barrett, Chief Executive                                    Tel: [phone]

Charles Staveley, Group Finance Director                          Tel: [phone]

Numis Securities Limited (Financial adviser and sponsor)

Heraclis Economides / Andrew Holloway                            Tel: [phone]                            

Maitland

Martin Leeburn / Emma Burdett                                           Tel: [phone]

The terms defined in this announcement shall have the meaning ascribed to them in the Circular.

Background to and reasons for the Disposal

The Company is a specialist property company with a core focus on UK retail investments and specifically in dominant community shopping centres.  The Group leverages its in-house asset and property management expertise to maximise returns from its property assets. The Company currently has a significant investment in the Mall Fund, a joint venture with a German retail property portfolio, and a number of interests in leisure properties.

The strategy of the Company is to simplify its portfolio and focus on its UK Shopping Centre Business with an emphasis on delivering growth in net asset value whilst generating attractive income and cash returns.  A key element of this strategy is seeking to realise value from non-core investments and recycling capital into UK shopping centre assets.  The recent announcement of the disposal of the Company's interest in the Junction Fund demonstrates the execution of this strategy.

The Board believes the proposal from Land Securities Group plc represents an excellent opportunity to exit the UK Leisure business at an attractive valuation and further focus the Group's activities on the dominant UK community shopping centre sector.

Information on the X-Leisure Business

The X-Leisure Business comprises the holding of 91.9 million units in the X-Leisure Fund (an 11.9 per cent. interest) and 50 per cent. interests in The X-Leisure General Partner Limited, and X-Leisure Limited, which acts as the property manager for the X-Leisure Fund.

The X-Leisure Fund is the largest specialist investment fund in the ownership and management of leisure assets in the UK. It owns 16 properties with net lettable area of 3 million sq ft.

The X-Leisure General Partner Limited is responsible for the management of the X-Leisure Limited Partnership.

X-Leisure Limited, which is a 50:50 joint venture with AREA, carries out the asset and non-FSA regulated fund management activities for the X-Leisure Fund.  AREA acts as Operator and is responsible for FSA regulated fund management activities.

For the year ended 30 December 2011 the Disposal Assets show profit before tax (including management fees and revaluation) of £6.2 million. The net asset value of the Disposal Assets at 30 June 2012 was £33.3 million.

Information on the Continuing Group and future strategy

Following the Disposal, the Group will focus on maximising the value of its UK Shopping Centre Business and will use the proceeds of disposals of non-core assets to reinforce its presence in UK shopping centres by investing in the Mall and on broader UK shopping centre activities which will be complementary to the Company's strategy in relation to the Mall.  The Group will actively manage its shopping centre portfolio through delivering its asset management and development pipeline. The Company will aim to deliver value enhancement through a consistent approach to the creation and reconfiguration of space, through optimising planning consents and through designing places to shop that meet local demand.

The Group will continue to look to dispose of its other non-core remaining leisure assets where this can be achieved at attractive prices.

Principal terms and conditions of the Disposal

Under the terms of the Disposal Agreement entered into on 4 December 2012, the Company has conditionally agreed to sell the Disposal Assets to LS Mirage Limited, a wholly owned subsidiary of Land Securities Group plc. The consideration for the Disposal, subject to certain adjustments based on the completion balance sheet, will be £31.7 million payable in full and in cash to the Group at Completion.

Completion is conditional upon, inter alia, approval by Shareholders of the Disposal Resolution on or before 31 January 2013 as well as on other matters as set out in the Circular. The Company expects Completion to occur in mid January 2013.

Use of Proceeds and Financial Effects of the Disposal on the Group

At Completion, the net cash proceeds arising from the Disposal are expected to be approximately £30.4 million, after estimated transaction costs of approximately £1.3 million, including £0.5 million for settlement of the profit share arrangement with X-Leisure Limited Management.  The financial effects of the proposed Disposal are set out in the unaudited pro forma statement of net assets for the Continuing Group in the Circular.

Having considered the expected net proceeds of the Disposal, the Board intends that part of the proceeds of the Disposal will be applied to reduce the Group's borrowings by repaying outstanding drawings on the Group's Revolving Credit Facility reducing this facility from an anticipated £5 million as at 31 December 2012 to nil.  The proceeds of the Disposal may also be used by the Company to finance further investment in the UK Shopping Centre Business by increasing the Company's stake in The Mall Fund or by acquiring complementary shopping centre assets with joint venture partners.  Subject to prevailing market conditions, it is also the Company's intention to use part of the proceeds to buy up to 10 per cent of the Company's shares in issue. The Company has the authority to execute an on-market share buyback, subject to certain parameters, as granted at the last AGM. However the Company has a large Concert Party shareholder and, as a consequence, in order to maximise the full capacity of this existing authority, the Company is required to seek further shareholder approval as set out in the Circular.

The effect of the Disposal is expected to reduce recurring profitability by approximately £2.0 million on an annualised basis. The net asset value of the Group as at 30 June 2012 was £186.0 million. Had the Disposal completed on that date, this figure would have been reduced to £183.1 million.

Current trading and future prospects of the Group

On 9 November 2012, the Company issued its interim management statement. The Company commented that its core business has continued to perform well. The slight uplift in valued income reflects continued progress in the re-letting space vacated by retailer administrations in the first half of the year. The pipeline of demand for space continues to provide a cushion against further retailer failures. Passing rent remained broadly stable across the UK funds and in the German portfolio during the third quarter.

General Meeting

A notice convening the General Meeting to be held at The Rubens Hotel, Rembrandt Suite, 39 Buckingham Palace Road, London, SW1W 0PS on 10 January 2013 at 11.00am is set out at the end of the Circular. A Form of Proxy to be used in connection with the General Meeting is  enclosed with the Circular.

As a Class 1 transaction owing to the size of the Disposal relative to the size of the Company, the Company requires the approval of Shareholders to proceed with the Disposal. The completion of the Disposal is, therefore conditional on the approval of Shareholders, amongst other conditions set out in the Circular. The Disposal Resolution will be proposed as an ordinary resolution requiring a simple majority of the votes cast in person or by proxy in respect of that resolution. The full text of the Disposal Resolution is set out in the Notice at the end of the Circular.

The Company proposes that Shareholders approve the waiver by the Takeover Panel of the requirement under Rule 9 of the City Code for the Concert Party to make a general offer to the Shareholders as a result of any market purchase of Ordinary Shares by the Company pursuant to the AGM Authority. The Rule 9 Waiver Resolution will be proposed as an ordinary resolution requiring a simple majority of the votes cast on a poll by Independent Shareholders in respect of that resolution. The full text of the Rule 9 Waiver Resolution is set out in the Notice at the end of the Circular.

Only Shareholders may vote at the General Meeting.  Neither the Disposal Resolution nor the Rule 9 Waiver Resolution is conditional on the other being passed. 

For further information:

Capital & Regional                                         

Hugh Scott-Barrett, Chief Executive                                   Tel: [phone]

Charles Staveley, Group Finance Director                         Tel: [phone]

Numis Securities Limited (Financial adviser and sponsor)

Heraclis Economides / Andrew Holloway                            Tel: [phone]                            

Maitland

Martin Leeburn / Emma Burdett                                           Tel: [phone]

 

END

 

 

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