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Gladstone PLC (GLD)

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Monday 16 February, 2009

Gladstone PLC

Notice of EGM

RNS Number : 3383N
Gladstone PLC
16 February 2009
 



 Press Release 

16 February 2009


Gladstone plc


("Gladstone" or "the Company")


POSTING OF THE NOTICE OF THE GENERAL MEETING REQUESTED BY CONSTELLATION FOR THE PROPOSED APPOINTMENT OF MARK LEONARD AS A DIRECTOR OF GLADSTONE PLC (THE "RESOLUTION")


On 6 January 2009, Gladstone received an unsolicited request sent on behalf of Constellation to convene a General Meeting pursuant to section 303 of the Act to consider the Resolution.  This request contained a defect, that upon notification by Gladstone, was subsequently corrected in a resubmitted request, which was received by Gladstone on 26 January 2009 (the "Requisition").


The Board is required by law to comply with the Requisition, and the General Meeting, at which the Resolution will be considered, will be held the offices of Grant Thornton UK LLP, 30 Finsbury SquareLondonEC2P 2YU on Monday 16 March 2009 at 2.30 p.m.


The following is an extract of the letter to Shareholders dated 13 February 2009:


"The Gladstone Board unanimously advises Shareholders to TAKE POSITIVE ACTION and VOTE AGAINST the Resolution.


The Board has already received letters of intent to vote AGAINST the Resolution from Shareholders holding a total of 10,185,854 Gladstone Shares, representing, in aggregate, approximately 21.2 per cent of Gladstone's Voting Share Capital.


By not voting Shareholders may help Constellation to succeed in gaining a seat on the Gladstone Board.


The Board firmly believes that Gladstone does not need Constellation but that Constellation can use Gladstone for its own gain at the expense of other Gladstone Shareholders.


1.  Reasons to vote against the Resolution:

Constellation has tried this tactic before

  • To protect the interests of Gladstone's other Shareholders, the Board has previously rejected requests made by Constellation in early 2006 and in March 2008 to appoint Mark Leonard, Constellation's chairman and president, to the Gladstone Board.

  • On 16 May 2008, prior to making its hostile Offer for Gladstone, Constellation submitted a formal request to the Board pursuant to section 303 of the Act to convene a general meeting to consider a resolution to appoint Mark Leonard to the Gladstone Board.

  • This request was subsequently withdrawn following an offer by the Gladstone Board to explore with Constellation the possibility of appointing Mark Leonard as a Director, subject to there being appropriate safeguards in place to protect Gladstone and its Shareholders against resulting conflicts of interest and to secure the confidentiality of commercially sensitive information.

  • Despite Constellation's agreement in principle to these conditions and the significant effort made by the Board to resolve the conflicts of interest issues, Constellation declined to enter into arrangements on terms acceptable to Gladstone and withdrew abruptly from discussions in late August 2008.  Not long afterwards it launched its hostile and opportunistic Offer.

  • By these persistent attempts to gain control of Gladstone on the cheap or to obtain a seat on the Board, Constellation is seeking to further its own interests at the expense of other Shareholders.

  • Management time now, once again, is being redirected and significant costs are being incurred in protecting the interests of other Shareholders.

Constellation is an acquisitive competitor to Gladstone

  • Constellation, a company that has for the most part grown through acquisitions, is a major international software solutions and services provider with significant operations that compete in Gladstone's current market sectors.

  • Through its Jonas Software Group of companies, Constellation supplies membership systems, support and other services to private and semi-private clubs in the Health & Leisure market in North America as well as in the UK and Ireland.

  • Gladstone is already a market leader in the Health & Leisure market in the UK and Ireland, is well positioned in Australia and has well-developed plans to enter other international markets with the introduction of its new technology platform OrbitTM.

  • Constellation has also made a number of recent acquisitions in the USA Education market including:

    -       Schoolhouse Software Inc, which designs, develops and supports high quality software solutions to run school cafeteria operations more efficiently;
    -       substantially all the assets of MAXIMUS Inc.'s education solutions business, which provides educational management software tools; and

    -        the food software assets of Superior School Supplies, Inc., including the eTritionWare, Meal Tracker, AccuScan and EZSchoolPay product lines.

  • These are businesses which carry on similar activities to Gladstone in the rapidly expanding education facilities management solutions ("EFMS") market, in which Gladstone has successfully positioned itself.

  • The Board believes that securing a seat on the Board would only benefit Constellation by providing it with an opportunity to access commercially sensitive information about Gladstone and its plans and strategies going forward, thereby severely compromising Gladstone's competitive advantage and position in the market.

Current Board delivering strong results

  • On 30 December 2008 Constellation's hostile bid was rejected by the overwhelming majority of Shareholders. In response to this failed bid, Mark Leonard commented: "…we believe we were able to highlight the potential to increase the operating performance of Gladstone through this process."

  • The Gladstone Board has, however, successfully pursued value enhancing strategies over the past three years. Between 2005 and 2008 there has been a 93 per cent increase in EBITDA (before exceptional and share based payments).

  • In addition a significant proportion of current resources, which are at the same level as three years ago, are now dedicated to Education and Orbit investments.  The benefits of these significant investment programmes have not yet flowed into the trading results of the business.

Risks of having any Constellation representative as a Board member

  • In light of Constellation's failed Offer and the inherent conflicts of interest given its position as a market competitor of Gladstone, the Board believes that Mark Leonard's presence on the Gladstone Board will endanger the interests of all other Shareholders.

  • A Board seat for Constellation would mean the opportunity to obtain information on a competitor without having to acquire the Company.

  • Should Constellation succeed in gaining a seat on the Board, Mark Leonard  will have access to sensitive information, including information relating to:

             -     Gladstone's strategic direction;
             -     investment decisions, including possible acquisitions and mergers;
             -     product and market development plans; and
             -     other corporate matters and value enhancing measures.

  • Section 175 of the Act states: "A director of a company must avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company". How could Mark Leonard manage the information he would receive as a director of Gladstone, and comply with the Act, given his position on Constellation's board and the conflicting duties he owes that company?
  • How much management time will be consumed and Company resources expended in resolving these issues?

The effect of Constellation succeeding

  • If the Resolution is passed, Constellation may gain access to Gladstone value without offering any further premium to Gladstone Shareholders.


  • There is nothing to prevent Constellation from seeking to repeat this exercise and attempting to appoint additional Directors to the Board.  It is therefore essential that this course of action is brought to a halt now.

A seat on the Board for Constellation may reduce Shareholder value

  • Mark Leonard's presence on the Board has the potential to deter potential bidders by further entrenching Constellation's position in relation to Gladstone.

  • The presence of a representative of a market competitor on the Gladstone Board will undermine its independence and strength, which may adversely affect the value of Gladstone Shares.

  • The Board had no hesitation in advising Shareholders that Constellation's hostile 25p per share Offer was at a significant undervalue for your Company.  The Board continues to believe that the Company's inherent worth is significantly more than 25p per share.

  • Shareholders should not risk jeopardizing the value inherent in Gladstone, by having a representative of Constellation, an acquisitive competitor that has already failed to acquire Gladstone on the cheap, on its Board.


  • The Gladstone Board is strongly opposed to Directors who favour one particular shareholder group over the interests of Shareholders as a whole.

The Board firmly believes that there is no benefit to Gladstone in having Mark Leonard as a Director


2.  Why Shareholders' votes are critical?

  • If Shareholders do not cast their vote against the Resolution, it will aid Constellation in its attempt to gain a seat on the Board.

  • Constellation controls approximately 30 per cent of Gladstone's Voting Share Capital and needs only a simple majority at the General Meeting to pass the Resolution.

  • Having already defeated Constellation's hostile Offer, in order to now protect the value of their investment in Gladstone, the Board recommends that Shareholders vote against the Resolution.

  • To stop Constellation please vote against the Resolution and allow the Board to maximise Shareholder value without further distraction.


SHAREHOLDERS' VOTEARE VITAL


3.    Letters of Intent


Gladstone has received non-binding letters of intent to vote against the Resolution in respect of a total of 10,185,854 Gladstone Shares representing, in  aggregate, approximately 21.2 per cent of Gladstone's Voting Share Capital as follows:


(a)    Mr Derick Martin has given a non-binding letter of intent to vote against the Resolution in respect of all of the 2,108,000 Gladstone Shares, representing approximately 4.38 per cent of Gladstone's Voting Share Capital, of which he is the legal and beneficial owner.


(b)    Mr Charlie Ramsay has given a non-binding letter of intent to vote against the Resolution in respect of all of the 360,926 Gladstone Shares, representing approximately 0.75 per cent of Gladstone's Voting Share Capital, of which he is the legal and beneficial owner.


(c)    Mr Jeremy Stokes has given a non-binding letter of intent to vote against the Resolution in respect of all of the 7,716,928 Gladstone Shares, representing approximately 16.05 per cent of Gladstone's Voting Share Capital, of which he is the legal and beneficial owner.


4.  The Board's recommendation

  • The Gladstone Board considers that, for the reasons set out above, the Resolution is NOT in the best interests of Gladstone.

  • The Directors of Gladstone therefore unanimously recommend that Shareholders vote AGAINST the Resolution, as they intend to do in respect of their own beneficial holdings amounting to 43,899 Shares representing approximately 0.09 per cent of the Voting Share Capital of the Company.


DEFINITIONS

"Act"

the Companies Act 2006

"Board" or "Gladstone Board"

the board of Directors

"Constellation"

Constellation Software Inc, a public corporation incorporated under the Ontario Business Corporations Act with registered number 1517581 and having its registered office at 20 Adelaide Street East, Suite 1200TorontoOntarioCanada, M5C 2T6

"Directors"

the directors of Gladstone

"Education market"

the market of providing software solutions to the education sector

"General Meeting"

the general meeting of the Company to be held on 16 March 2009 or any adjournment thereof

"Gladstone" or the "Company"

Gladstone plc, registered in England and Wales (no. 3327360)

"Gladstone Shareholder(s)" or "Shareholder(s)"

the holder(s) of Gladstone Shares

"Gladstone Shares" or "Shares"

ordinary shares of one pence each in the capital of Gladstone

"Health & Leisure market"

the market of providing software solutions to the health and leisure sector

"Offer"

the unsuccessful cash offer by Constellation, on the terms and subject to the conditions set out in the offer document posted to Gladstone Shareholders on 31 October 2008, to acquire all of the Gladstone Shares not already owned by Constellation 

"Requisition"

the letter received from Pershing Nominees Limited, on behalf of Constellation, on 26 January (superseding an earlier letter received on 6 January 2009) requesting the convening of a general meeting pursuant to section 303 of the Act to consider a resolution to appoint Mark Leonard as a Director of the Company 

"Resolution"

the ordinary resolution to be put to Shareholders at the General Meeting 

"UK

The United Kingdom of Great Britain and Northern Ireland

"USA"

the United States of America

"Voting Share Capital"

48,089,283 Shares, being the current issued share capital of Gladstone of 52,614,283 less the 4,525,000 Shares held in treasury

In accordance with AIM Rule 20 a copy of the circular incorporating the notice of General Meeting will also today be posted on the Company's website: www.gladstoneplc.com .


- Ends -


For further information:

Gladstone plc


Dr. Said Ziai, Chairman and Chief Executive

Tel: +44 (0) 1491 201 010


www.gladstoneplc.com


Financial Adviser and Nominated Adviser to Gladstone:


Grant Thornton UK LLP


Charles Cattaneo

Tel: +44 (0) 7774 276 512

Ian Stanway

Tel: +44 (0) 121 232 5193

Gerry Beaney

Tel: +44 (0) 20 7728 2589


Broker to Gladstone:


Fairfax I.S. PLC


Adam Hart / Laura Littley

Tel: +44 (0)20 7598 5368


Media enquiries:

Abchurch Communications Limited


Henry Harrison-Topham Monique Tsang

Tel: +44 (0) 20 7398 7712

[email protected]

www.abchurch-group.com


Notes to Editors 


Gladstone's innovative software products and services, currently targeted at the global health and leisure and education markets, are used daily by thousands of front line staff, managers, end users and students.


Gladstone is a market leader in the provision of member relationship management solutions for a wide range of health and leisure organisations including trusts, leisure centres, and major private leisure chains and is established as the de facto standard for UK local authorities. The Company enables all its clients in both public and private sectors to utilise central database facilities for central and cross-site on-line bookings, Customer Relationship Management ("CRM") and membership management, centralisation of administration, marketing and reporting.


The Company also provides a wide range of integrated systems and software-based solutions for the rapidly expanding Education Facilities Management Solutions ("EFMS") market across the entire spectrum of educational establishments and is a key supplier to the UK Government's Building Schools for the Future ("BSF") initiative.


Gladstone is focused on extending its solutions capabilities, which enable its clients to maximise resource usage, retain customers and improve operational performance, thereby making cost efficiencies, into new vertical and geographic markets aligned with its growth strategy.


The Company's current solutions include the comprehensive Plus2TM product suite which incorporates advanced functionality including web-based remote booking, advanced analysis and the use of kiosks, as well as Gladstone OnRecordTM which serves the education industry with e-registration, biometric and smart card recognition, cashless payment systems, extensive information portals, libraries usage and access control.


Based in Oxfordshire, the Company has sales offices in GlasgowDublin (Ireland) and Sydney (Australia), in addition to development facilities in Sonderborg (Denmark) and Karachi (Pakistan).


For further information, visit www.gladstoneplc.com or call: +44 (0) 1491 202 111


This information is provided by RNS
The company news service from the London Stock Exchange
 
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