Disposal

RNS Number : 5274K

STV Group PLC

21 April 2010

 



STV Group plc

FOR IMMEDIATE RELEASE                                                                                 21 April 2010

PROPOSED DISPOSAL OF PEARL & DEAN

HIGHLIGHTS

·      STV confirms agreement to dispose of Pearl & Dean business

·      Deal expected to enable STV to recoup £9.1m of Vue guarantee payment for 2010

·      Disposal will enable STV to continue to focus on delivering growth strategy and KPI targets across television and digital platforms

·      STV Group plc is delighted to announce the proposed sale of Pearl & Dean Cinemas Limited to Image Limited, a newly incorporated company backed by Thomas Anderson, a director and the ultimate beneficial owner of Empire Cinemas Limited.  This represents the final step in the Board's plan to dispose of legacy businesses which it inherited and refocus the Group on its core businesses:

-        the consideration for the Disposal will, subject to certain adjustments, be the sum of £1; and the business will be sold on a cash free, debt free basis

-        the consideration will be adjusted on a £1 for £1 basis to reflect the debt and cash, if any, remaining within Pearl & Dean at 30 April 2010 and to the extent that the working capital of Pearl & Dean is greater or less than the agreed target normalised working capital position as at 30 April 2010

-        Pearl & Dean has paid the 2010 minimum income guarantee of £17.6m to Vue Cinemas by way of an intercompany loan from STV.  As part of the deal agreed with Image, Pearl & Dean will repay the portion of this loan relating to the period from 1 May 2010 to 31 December 2010, amounting to £9.1m.  The first repayment of £2.5m will be received upon Completion, with further monthly repayments to be received thereafter.  STV expects the loan to have been repaid in full by January 2011, with the backstop date for full repayment being June 2011.  The loan is secured and STV retains a pledge over the shares of Pearl & Dean

-        After taking into account transaction costs, the Disposal is expected to be broadly neutral for STV, in terms of its expected impact on the Group's earnings in the current financial year, compared to continued ownership of Pearl & Dean

·      Completion of the Disposal is conditional upon Shareholder approval at a general meeting  targeted for 12 May 2010

·      STV remains committed to continuing to strengthen its relationship with audiences and advertisers across its media platforms, and to delivering shareholder value

·      Irrevocable undertakings to vote in favour of the Disposal have been received from the Board and Hanover Investors Management LLP, which together account for approximately 10.8 per cent. of the voting rights attaching to the ordinary share capital of STV

·      STV confirms that its core business continues to trade in line with the Board's expectations for the current financial year.  During the first quarter of 2010, STV has experienced a strong performance in national television airtime revenues and an improving position in the regional television airtime market.  As a result of the improved advertising market, STV today confirms an acceleration of investment in High Definition, greatly enhancing the viewing experience for its audiences.  The Group, however, remains cautious about the second half of 2010, given the uncertainty caused by the General Election and with visibility remaining very short term

·      Commenting on the Disposal, Rob Woodward, Chief Executive Officer, STV, said:

"Completion of this disposal will enable STV to continue to focus on creating shareholder value through the delivery of our growth strategy and recently announced KPI targets for our core television and digital businesses.  As stated in our recent results, we are continuing to build our portfolio of media assets and our focus is now firmly on growth across all platforms through innovation and the provision of unique, relevant, distinct and entertaining content."

Enquiries:

STV Group plc                                                                                                  0141 300 3000

George Watt, Chief Financial Officer

Kirstin Stevenson, PR Manager

Hawkpoint Partners Limited                                                                             020 7665 4500

Simon Gluckstein

Emily Ashwell

RBS Hoare Govett Limited (corporate broker)                                                  020 7678 8000

Sara Hale

John Fishley

Brunswick Group LLP                                                                                       020 7404 5959

Simon Sporborg

This summary should be read in conjunction with the full text of the following announcement.

Hawkpoint Partners Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for STV and for no one else in relation to the Disposal and is not advising any other person and accordingly will not be responsible to anyone other than STV for providing the protections afforded to the customers of Hawkpoint or for providing advice in relation to the Disposal.

RBS Hoare Govett Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for STV and for no one else in relation to the Disposal and is not advising any other person and accordingly will not be responsible to anyone other than STV for providing the protections afforded to the customers of RBS Hoare Govett Limited or for providing advice in relation to the Disposal.

STV Group plc

FOR IMMEDIATE RELEASE                                                                                 21 April 2010

PROPOSED DISPOSAL OF PEARL & DEAN

Introduction

STV today announces that it has conditionally agreed to sell the entire issued share capital of Pearl & Dean to Image Limited for the consideration of £1, subject to the terms and conditions of the Disposal Agreement.  STV shall act as guarantor of the obligations of STV Out of Home Limited under the Disposal Agreement.

The Disposal is conditional upon approval by STV Shareholders and a circular containing a notice convening a general meeting at which a resolution to approve the Disposal will be proposed will be issued to Shareholders as soon as practicable.

Background to and reasons for the Disposal

STV's Board believes that the Group's future lies in exploiting its core geographical strength in broadcasting, content and new media ventures. 

Following completion of this Disposal, the Board has now fully implemented its strategy of reducing debt through the sale of non-core assets, and Pearl & Dean is the last of these assets previously identified as non-core.  Having reviewed STV's business, the Board believes that, while Pearl & Dean is a good cinema advertising business with an iconic brand in the film world, it is not core to the Group. 

STV has conducted an auction process in respect of Pearl & Dean and has received an offer from Image which the Board believes fairly values Pearl & Dean and takes account of the ongoing liabilities associated with the business.  Pearl & Dean has been loss making due to the minimum income guarantee payments required to be made to Vue Cinemas in respect of rents payable to Vue Cinemas under the onerous screen advertising contract entered into in 2004 between Vue Cinemas and Pearl & Dean. In the financial year ended 31 December 2009, this resulted in STV increasing its provision for future losses expected over the remainder of the contract by £13.3m to £14.3m.  The onerous contract with Vue Cinemas terminates in December 2010.

The disposal of Pearl & Dean, the last of STV's assets identified by the Board as non-core, will enable the Group to focus on its core broadcasting, content and ventures businesses.

Information on Pearl & Dean

Founded in 1953, Pearl & Dean is a premium branded media sales house in UK cinema advertising.  With its well known brand and longstanding screen heritage, Pearl & Dean is synonymous with cinema and film in the UK.

Pearl & Dean is currently the second largest cinema advertising contractor in the UK, with a 36.6 per cent. UK market share by admissions, covering 1,478 screens on 349 sites as at February 2010.  Pearl & Dean's market share across independent exhibitors amounted to 54.9 per cent. of sites as at 31 December 2009. 

As extracted from the consolidation schedules which underlie the audited financial statements for STV for the year ended 31 December 2009, Pearl & Dean had revenues of £19.9m and losses of £13.3m.  As at the same date, Pearl & Dean had gross assets and net liabilities of £12.1m and £9.1m respectively.

Information on Image

Image is a newly incorporated company specifically formed for the purpose of acquiring Pearl & Dean.  The obligations and liabilities of Image under the Disposal Agreement are unconditionally and irrevocably guaranteed by Thomas Anderson who is a resident of the Republic of Ireland. Thomas Anderson owns the entire issued share capital of Image.  Mr Anderson has more than 25 years' direct experience in running a private group in the leisure, entertainment, advertising, forestry and property development businesses in Ireland. He is, inter alia, Non-Executive Chairman and a shareholder of Circle Oil plc and a director and the ultimate beneficial owner of Empire Cinemas Limited.

Principal terms of the Disposal

Under the terms of the Disposal Agreement, STV has conditionally agreed to sell Pearl & Dean to Image.  The consideration for the Disposal shall, subject to certain adjustments, be the sum of £1 and the business will be sold on a cash free, debt free basis.

The consideration will be adjusted on a £1 for £1 basis to reflect the debt and cash, if any, remaining within Pearl & Dean at 30 April 2010 and to the extent that the working capital of Pearl & Dean is greater or less than the agreed target normalised working capital position as at 30 April 2010. 

Pearl & Dean has paid the 2010 minimum income guarantee to Vue Cinemas of £17.6m by way of an intercompany loan from STV.  As part of the deal agreed with Image, Pearl & Dean will repay to STV a portion of this loan relating to the period from 1 May 2010 to 31 December 2010, amounting to £9.1m.  The first repayment of £2.5m will be received upon Completion, with further monthly repayments to be received thereafter.  STV expects the loan to have been repaid in full by January 2011, with the backstop date for full repayment being June 2011.  The loan is secured and STV retains a pledge over the shares of Pearl & Dean.   

Completion of the Disposal is conditional upon approval by STV Shareholders.  STV expects Completion to occur on the second Business Day following the general meeting.

Financial effects of the Disposal and use of Disposal proceeds

Any Disposal proceeds and the repayments by Pearl & Dean of the £9.1m loan from STV in respect of the 2010 minimum income guarantee payment to Vue cinemas will be used to reduce STV's indebtedness.  After taking into account transaction costs, the Disposal is expected to be broadly neutral for STV, in terms of its expected impact on the Group's earnings in the current financial year, compared to the continued ownership of Pearl & Dean.

Current trends in trading and prospects

STV confirms that its core business continues to trade in line with the Board's expectations for the current financial year.  During the first quarter of 2010, STV has experienced a strong performance in national television airtime revenues and an improving position in the regional television airtime market.  The Group, however, remains cautious about the second half of 2010, given the uncertainty caused by the General Election and with visibility remaining very short term.

Key Pearl & Dean personnel

Kathryn Jacob's (Chief Executive Officer), Howard Warren's (Business Development Director) and Mike Hope-Milne's (Enterprise Director) service contracts, which had previously been with STV Services Limited, a wholly-owned subsidiary of STV, will be transferred to Pearl & Dean in conjunction with the Disposal and this team will continue to manage Pearl & Dean under new ownership.

Enquiries:

STV Group plc                                                                                                  0141 300 3000

George Watt, Chief Financial Officer

Kirstin Stevenson, PR Manager

Hawkpoint Partners Limited                                                                             020 7665 4500

Simon Gluckstein

Emily Ashwell

RBS Hoare Govett Limited (corporate broker)                                                  020 7678 8000

Sara Hale

John Fishley

Brunswick Group LLP                                                                                       020 7404 5959

Simon Sporborg

Hawkpoint Partners Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for STV and for no one else in relation to the Disposal and is not advising any other person and accordingly will not be responsible to anyone other than STV for providing the protections afforded to the customers of Hawkpoint or for providing advice in relation to the Disposal.

RBS Hoare Govett Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for STV and for no one else in relation to the Disposal and is not advising any other person and accordingly will not be responsible to anyone other than STV for providing the protections afforded to the customers of RBS Hoare Govett Limited or for providing advice in relation to the Disposal.

DEFINITIONS

The following definitions apply throughout this announcement unless the context requires otherwise:
Board or Directors	the board of directors of STV
Completion	completion of the sale of Pearl & Dean in accordance with the terms and conditions of the Disposal Agreement
Disposal	the proposed sale of the entire issued share capital of Pearl & Dean to Image Limited
Disposal Agreement	the agreement between STV and Image relating to the Disposal
Hawkpoint	Hawkpoint Partners Limited
Image	Image Limited, a company incorporated in the Isle of Man (registered number 005030v) and whose registered office is 15-19 Athol Street, Douglas, Isle of Man, IM1 1LB
Pearl & Dean	Pearl & Dean Cinemas Limited registered in England with number 00614063 whose registered office is at 2nd Floor, Corinthian House, 279 Tottenham Court Road, London, W1T 7RJ
pounds sterling or £	the lawful currency of the United Kingdom for the time being
STV or the Group	STV Group plc, registered in Scotland with number SC203873 and whose registered office is at Pacific Quay, Glasgow, G51 1PQ
STV Shareholder or Shareholder	a holder of STV Shares
STV Shares	ordinary shares of 50 pence each in the capital of the Company
UK or United Kingdom	the United Kingdom of Great Britain and Northern Ireland

Certain statements made in this announcement are forward-looking statements.
These forward-looking statements are not historical facts but rather are based
on STV's current expectations, estimates and projections, its beliefs and assumptions.

Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors, some of which are beyond STV's control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. STV cautions shareholders not to place undue reliance on these forward-looking statements, which reflect the view of STV only as of the date of this announcement.

The forward-looking statements made in this announcement relate only to events
as of the date on which the statements are made. STV will not undertake
any obligation to release publicly any revisions or updates to these
forward-looking statements to reflect events, circumstances or unanticipated
events occurring after the date of this announcement except as required by law
or by any appropriate regulatory authority.

 

END

 

 

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