Disposal

RNS Number : 5837T

Mavinwood PLC

09 June 2009

 



    MAVINWOOD PLC

Proposed sale of ANSA, Independent Inspections and Home and Comforts

Mavinwood plc (the 'Company') has today announced that it has entered into a conditional  agreement for the sale of the entire issued share capital of each of ANSA Holdings Limited, Independent Inspections Holdings Limited and Home and Comforts Limited (the 'Disposal') to a buyout vehicle backed by Lloyds TSB Development Capital Limited (the 'Purchaser') for a consideration of up to £19.55 million. 

Of this sum, £18.05 million is payable to the Company on Completion. A further sum of up to £1.5 million is being paid into an escrow account on Completion and will be released to the Company depending on the EBITA performance of ANSA, Independent Inspections and Home and Comforts during the year ending 31 December 2009. The proceeds of the Disposal will be used to repay bank debt.

The Disposal is conditional on the passing of a resolution (the 'Resolution') at an Extraordinary  General Meeting ('General Meeting'). The General Meeting has been convened for 11 a.m. on 25 June 2009. At the General Meeting, the Resolution will be proposed seeking Shareholder approval of to the Disposal on the terms and subject to the conditions of the sale and purchase agreement.

The Disposal is deemed to be a disposal resulting in a fundamental change of the Company's business for the purpose of Rule 15 of the AIM Rules and is therefore conditional on the approval of Shareholders being given at the General Meeting as further described below.

The Disposal also constitutes a related party transaction under the AIM Rules and a substantial property transaction requiring the approval of Shareholders under section 190 of the 2006 Act as further described below. This is because Steve Watkins is a director and will be a substantial shareholder of the Purchaser, and for that reason he is also not counted as an independent Director of the Company.

A document is today being posted to shareholders setting out the background to the Disposal, the reasons why the independent Directors believe the terms of the Disposal to be fair and reasonable as far as the Shareholders are concerned and why they believe the Resolution should be approved by the Shareholders.

The recommendation of the independent Directors is contained at the end of this announcement. 

As announced on 8 June, Sir William Wells, Charles Skinner and Andrew Wilson were appointed as directors of the Company. As a consequence of these appointments, Philip Reid and Bob Guthrie resigned from the Board and Kevin Mahoney stood down as Chief Executive although he remains an Executive Director of the Company.

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Background to and reasons for the Disposal

On 12 February 2009, the Company announced that it was exploring a number of strategic initiatives to strengthen its financial position, including consideration of the disposal of certain assets.

As announced on 30 September 2008, the Emergency Repair Division has suffered as insurance companies have reacted to global economic difficulties by cutting costs. The social housing business of Mono Services Limited was sold on 27 September 2008. Following that disposal, and having considered a variety of options, the Board decided that the best way for the Company to generate value for Shareholders would be to dispose of certain businesses within the Emergency Repair Division.  The disposal of ANSA, Independent Inspections and Home and Comforts ('Sale Companies') will enable the Company to focus on its document handling division.

ANSA, Independent Inspections and Home and Comforts principally serve the insured repair sector. These businesses perform surveying and repair work on behalf of insurance companies and focus on water damage, including damage to drainage systems. 

Following Completion, the Company will continue to own Peter Cox and ABS in addition to the document handling division. ABS provides insured repair building services pursuant to a contract with Asprea Limited. The Company is in the process of running down the ABS contract with Asprea's agreement by 31 December 2009. 

The Peter Cox business is a national provider of damp proofing, waterproofing, timber preservation and wall stabilisation serving both the residential and commercial property sectors.  

The unaudited profit before tax for the Sale Companies for the year ended 31 December 2008 was £2.9 million. The net assets of the Sale Companies as at 31 December 2008 were £5.9 million. 

The preliminary announcement of the Company's results has been released today. 

The Purchaser is a newly established company backed by Lloyds TSB Development Capital Limited. A number of directors and employees of companies within the Mavinwood Group will, on Completion, hold shares in the Purchaser. Steve Watkins will resign as a director of Mavinwood on Completion.

Further information on the terms of the Sale Agreement can be found in the circular to shareholders which is posted today. The Sale Agreement includes an obligation on the Company to pay the sum of £500,000 to the Purchaser if Shareholders do not approve the Resolution on or before 7 August 2009.

Companies Act 2006

Pursuant to section 190 of the Companies Act 2006, Shareholder approval of the Disposal as provided for in the Sale Agreement is required as a result of the interest in the Purchaser of Steve Watkins and his connected persons (as defined for the purposes of section 190 of the 2006 Act). 

AIM Rule 15

Given the consideration to be received by the Company, the Disposal is deemed to be a disposal resulting in a fundamental change of business for the purpose of AIM Rule 15 and therefore is conditional on Shareholder consent.  

AIM Rule 13

The Purchaser is a related party of the Company as defined in the AIM Rules due to certain directors of companies within the Mavinwood Group also being directors of the Purchaser (being Steve Watkins, John Barrett, Simon Maude and Niall Pollard) and that such directors have interests in the Purchaser enabling them to exercise or control the exercise of 30 per cent. or more of the votes able to be cast at general meetings of the Purchaser.

Given the consideration to be received by the Company, the Disposal is a related party transaction as defined in the AIM Rules. AIM Rule 13 requires the Independent Directors of the Company to confirm, having consulted with the Company's nominated adviser, that they consider the terms of the Disposal to be fair and reasonable insofar as Shareholders are concerned. 

Strategy and current trading

The Group's strategy will be to focus on developing the document handling business in the future. Trading of the document handling division in the first four months of 2009 has been satisfactory compared to the very strong performance in the first half of 2008.

General Meeting

At the General Meeting to be held at 11 a.m. on 25 June 2009 at 33 St James's Square, London SW1Y 4JS, the Resolution will be proposed (as an ordinary resolution) to approve the Disposal on the terms and subject to the conditions of the Sale Agreement.

Shareholders should note that if the Disposal is not approved at the General Meeting by a vote of at least 50 per cent. of the Voting Shareholders, there is a risk that the Company will breach the covenants in relation to its banking facility with Allied Irish Banks p.l.c. ('AIB'). Notwithstanding this risk, Shareholders should draw comfort from the irrevocable undertaking given by Geraldton Services Inc. ('Geraldton') in respect of its entire beneficial holding of 262,496,253 ordinary shares in the Company (representing approximately 56.3 per cent. of the existing issued ordinary share capital of the Company) on 9 June 2009 to vote in favour of the Resolution. 

Financing arrangements 

Geraldton, the Company's principal shareholder, has agreed to extend its commitment to provide additional equity to the Company and to vary the terms of its underwriting commitment given to the Company in February 2009 (the 'Geraldton Underwriting Commitment'). 

Accordingly, if the Company is not in compliance with its bank covenants as at 30 September 2009, Geraldton has agreed to increase its investment in the Company by up to £10 million (less any amounts raised by the Company pursuant to the issue of ordinary shares to persons other than Geraldton) on or before 1 October 2009.  The Company will need to return to Shareholders to approve the increase in the authorised share capital in the Company and for the authority to issue shares before such investment by Geraldton could be made.

In addition, Geraldton has agreed to extend the short term facility of £2.5 million made available to the Company in February 2009 such that the repayment date is now 30 September 2009. This extension provides the Company and its subsidiaries with the flexibility either to refinance with another bank or to reduce the debt by other disposals by 30 September 2009, before the need to issue any equity arises.

 A fee of £150,000 is payable by the Company to Geraldton in connection with these commitments whether or not they are called upon by the Company, in addition to the £750,000 already payable by the Company to Geraldton.  

The principal shareholder is a related party (as defined in the AIM Rules). The Board considers, having consulted with its nominated adviser, Collins Stewart, the terms of this transaction to be fair and reasonable insofar as Shareholders are concerned. For the purpose of this transaction, Mr Wilson is not regarded as an 'independent' director because of his informal links to Lord Ashcroft KCMG, who controls Geraldton. It was therefore agreed that Mr Wilson would not vote, and did not vote at the Board meeting when the above related party transaction was voted on.

Following the Disposal, the Company may be in breach of certain of its financial covenants in relation to its banking facility with AIB. Accordingly, AIB has agreed to the extension of the Geraldton Underwriting Commitment until 30 September 2009 and has agreed to waive any breach of the financial covenants that may occur when the financial covenants are next due to be tested on 30 June 2009. During this time, the Company is anticipating negotiating revised banking arrangements, appropriate for the business going forward. If these negotiations are unsuccessful, it may draw down funding as described in the Geraldton Underwriting Commitment. In the unlikely eventuality of these funds not being available, shareholders of Mavinwood not voting to allow those funds to be invested, or the availability of other funding sources, the Company may not be in a position to meet its ongoing obligations.

In relation to the banking facilities with AIB and Fortis Bank, Mavinwood will pay an additional margin of one per cent above the increased margin agreed with the banks in February 2009.  Fees of £82,500 also remain payable by the Company to AIB in accordance with the arrangements agreed in February 2009.

Action to be taken

Shareholders will find in the circular sent to shareholders today the Form of Proxy. Whether or not Shareholders intend to be present at the General Meeting, Shareholders are requested to complete and return the Form of Proxy as soon as possible and, in any event, so as to be received by the Company's Registrars, Capita Registrars, by no later than 11.00 a.m. on 23 June 2009. The completion and return of the Form of Proxy will not preclude Shareholders from attending the General Meeting and voting in person should they wish to do so.

Recommendation

The independent Directors (ie the Directors excluding Steve Watkins, who is not regarded as independent) consider the Disposal will promote the success of the Company and is in the best interests of the Company and its Shareholders as a whole. The Purchaser is a related party (as defined in the AIM Rules). The independent Directors, having consulted with Collins Stewart, the Company's nominated adviser, consider the terms of the Disposal to be fair and reasonable as far as Shareholders are concerned. In providing such advice, Collins Stewart has taken into account the Independent Directors' commercial considerations in respect of the Disposal.  

Accordingly, the independent Directors unanimously recommend that Shareholders vote in favour of the Resolution at the General Meeting as they have undertaken to do in respect of their own entire beneficial holdings of 4,110,000 Ordinary Shares and 50,000,000 A Shares. Their undertakings, together with the undertaking received from Geraldton to vote in favour of the Resolution, represent, in aggregate, 266,606,253 Ordinary Shares and 50,000,000 A Shares in the Company being approximately 57.2 per cent of the current issued voting share capital of the Company.

Collins Stewart, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as nominated adviser to Mavinwood and is acting for no-one else in connection with the proposed Disposal and will not be responsible to anyone other than Mavinwood for providing the protections afforded to clients of Collins Stewart nor for providing advice in connection with the proposed Disposal or any other matter referred to herein. 

Enquiries to 

Mavinwood plc

Charles Skinner                                                                  07966 234 075

Threadneedle Communications

John Coles                                                                         020 7653 9848

Collins Stewart Europe Limited

Adrian Hadden/Ileana Antypas                                       020 7523 8350

 

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