Placing and Acquistion
Online Travel Corporation PLC
24 September 2002
ONLINE TRAVEL CORPORATION PLC
FOR IMMEDIATE RELEASE 24th SEPTEMBER 2002
ONLINE TRAVEL CORPORATION PLC
Proposed placing of 11,222,222 new ordinary shares at 18p per share
Acquisition of All-Hotels Limited
Highlights:
• The board of Online Travel Corporation plc ('OTC') announces that
it has conditionally placed 11,222,222 new OTC ordinary shares with
institutional and other investors at 18p per share.
• The placing will raise approximately £2 million of new funds for
OTC.
• OTC has acquired the whole issued share capital of All-Hotels
Limited ('AHL'), a provider of hotel room booking services via the Internet, for
an initial consideration of up to £1.425million to be satisfied by the issue of
new ordinary shares in OTC at 28 pence per share.
Rationale:
1) The placing will significantly strengthen OTC's balance sheet and
enable OTC to meet the anticipated net free asset requirements of the CAA in
order to renew its Air Travel Organisers License for the period to 31st March
2004.
2) The acquisition of AHL will add www.all-hotels.com, a major
online hotel brand, to the OTC Group's portfolio of travel services, supplying
access to over 60,000 hotels worldwide.
3) The acquisition provides OTC with the ability to cross sell its
portfolio of travel products to AHL's 600,000 monthly visitors and a customer
database of 175,000.
Commenting on the placing and the acquisition, Mark Jones, Chief Executive of
OTC said:
'I believe the placing of new shares in the market indicates further acceptance
of the veracity of our business model. If approved by OTC shareholders, it will
significantly strengthen our balance sheet, providing us with additional working
capital and ensuring that we have sufficient funding to meet our current organic
growth plans.
In addition, the acquisition of All-Hotels represents another important building
block in our progress towards becoming a one-stop online travel service. It
satisfies our stringent acquisition criteria and will bring quality content,
technology and expertise to the Group and will add a major hotel brand to our
portfolio and will provide us with additional cross selling opportunities.'
For further information, please contact:
Online Travel Corporation plc
Mark Jones Tel: 020 8607 9281
Altium Capital Limited
Garry Levin Tel: 020 7484 4100
Cardew & Co
Richard Fallowfield Tel: 020 7930 0777
Online Travel Corporation plc ('OTC' or the 'Company')
Proposed placing (the 'Placing') of 11,222,222 new ordinary shares at 18p per
share
Acquisition (the 'Acquisition') of All-Hotels Limited ('AHL')
Introduction
The board of OTC ('Board' or 'Directors') announces that pursuant to an
agreement (the 'Placing Agreement'), Altium Capital has conditionally placed
11,222,222 new OTC shares (the 'Placing Shares') with institutional and other
investors at a price of 18p per share (the 'Placing Price') to raise
approximately £2.0 million of new funds for the Company. The proceeds of the
Placing will strengthen the OTC Group's balance sheet and, the Directors
believe, provide sufficient working capital to satisfy the anticipated net free
asset requirements of the Civil Aviation Authority ('CAA') for its licensing
purposes.
Implementation of the Placing and receipt of the funds is conditional, inter
alia, upon the approval by OTC shareholders of resolutions (the 'Resolutions'),
to be proposed at an extraordinary general meeting convened for 16th October
2002 (the 'Extraordinary General Meeting'), which authorise the Directors to
issue the Placing Shares.
The Directors consider the Placing to be in the best interests of OTC and its
shareholders and are therefore unanimously recommending OTC shareholders to vote
in favour of the Resolutions to be proposed at the Extraordinary General Meeting
as they intend so to do in respect of their own beneficial holdings amounting,
in aggregate, to 6,687,692 OTC shares representing approximately 6.5 per cent of
the issued ordinary share capital of OTC.
The Board also announces that OTC has acquired the whole of the issued share
capital of All-Hotels Limited ('AHL'), a provider of hotel room booking services
via the Internet, for an initial consideration of up to £1.425 million, which
will be satisfied by the issue of up to 5,090,914 new OTC ordinary shares to the
vendors of AHL (the 'Vendors') and Legg Mason Walker Wood Inc. ('Legg Mason') at
an effective price of 28p per share. 2,980,069 and 583,571 of the new OTC shares
(the 'Initial Consideration Shares' and the 'Legg Mason Shares' respectively)
were issued on 23rd September 2002 ('Completion'), and 1,527,274 of the new OTC
shares (the 'Deferred Consideration Shares') have been retained pending
preparation and agreement of completion accounts pursuant to the terms of the
AHL acquisition agreement.
An additional 694,216 new OTC shares (the 'Additional Consideration Shares')
will be issued to the Vendors if the mid-market price of an OTC share (as
derived from the Daily Official List of the London Stock Exchange) does not
equal or exceed 28p for ten consecutive business days during the 90 days
immediately following Completion. The closing mid-market price of an OTC share
(as derived from the Daily Official List of the London Stock Exchange) on 23rd
September 2002, being the latest practicable date prior to this announcement,
was 19.75p. Assuming a value of 28p per share, the issue of the Additional
Consideration Shares would equate to further consideration of £0.19 million.
In addition, as part of the Acquisition, certain lenders to AHL have agreed to
assign to OTC the benefit of loans (and accrued interest) to AHL of, in
aggregate, £1.33 million, in return for potential future cash payments equal to
20 per cent. of AHL's earnings before interest, tax, depreciation and
amortisation in each of the years ending 31st October 2003 and 31st October
2004. The aggregate of such payments will be subject to a minimum of £200,000
and a maximum of £680,000.
Reasons for and details of the Placing
The nature of the OTC Group's business requires it to meet the net free asset
requirements of the CAA in order to renew its annual Air Travel Organisers
Licence. These requirements are calculated by the CAA on the basis of turnover
forecasts submitted by OTC prior to the commencement of the licensing period.
As the OTC Group increases its sales it follows that the level of net free
assets required by the CAA will also increase. Until the Company generates
profits, external funding is required to provide the balance sheet strength to
meet these licensing requirements. Based on the anticipated growth in turnover
during the licensing period to 31st March 2004, the Directors estimate that the
CAA net free asset requirement for the OTC Group will be approximately £2.0
million.
The Company is therefore proposing to raise £2.0 million by way of the Placing
which, with the OTC Group's current cash resources, will allow OTC to meet the
CAA requirements and the costs of integrating All-Hotels into the OTC Group.
As part of the Placing, Mr Tommaso Zanzotto, Chairman of OTC, has agreed to
subscribe for 183,333 Placing Shares at the Placing Price, representing 0.2 per
cent of the issued share capital of OTC following completion of the Placing.
In order for the Directors to issue new OTC shares for cash, other than on a
pre-emptive basis, they require authorisation by the OTC shareholders to
disapply the statutory pre-emption provisions of section 89 of the Companies Act
1985 (the 'Act'). The number of Placing Shares is in excess of the Directors
current authority and additional approval is required for their issue and
allotment. The Placing is therefore conditional, inter alia, on the Resolutions
being passed without amendment.
Pursuant to the Placing Agreement, the Placing has been fully underwritten by
Altium Capital. The Placing Agreement is conditional, inter alia, upon the
approval by OTC shareholders of the Resolutions and admission of the Placing
Shares to trading on AIM ('Admission'). Further, the Placing Agreement can be
terminated in the event of a material breach of the warranties contained in the
AHL Acquisition Agreement or the Placing Agreement prior to Admission.
Subject, inter alia, to Admission, the Placing Shares will be allotted credited
as fully paid and will rank pari passu with the existing OTC shares, including
the right to receive all dividends and other distributions declared made or paid
after these are issued. It is expected that Admission will occur on 17th October
2002.
The Company has received provisional assurance from the Inland Revenue that the
Placing Shares will be eligible for investments by Venture Capital Trusts (i.e.
they will constitute 'qualifying holdings' and will be 'eligible shares' under
the relevant legislation).
Information on AHL
AHL is a provider of hotel reservation services via the Internet. Based in
Edinburgh, AHL employs 25 people and provides services to both retail and
business customers.
Through its website, www.all-hotels.com, AHL provides a method for customers to
book hotels rooms online. It is currently able to offer access to over 60,000
hotels worldwide, both directly and through affiliates and partner programmes.
AHL's website currently receives over 600,000 visitors per month and makes
approximately 15,000 hotel room night bookings per month.
In addition, AHL enables small chain and independent hotels to manage their room
inventory and offer a reservation capability over the Internet utilising AHL's
proprietary ASP booking platform, 'a-Res'. AHL also offers marketing support
services to help hotels attract online business and maximise their Internet
revenue.
In the year ended 31st December 2001, AHL earned gross commissions of £0.95
million (2000: £0.58 million) on total transactional value of £11.44 million
(2000: £8.35 million). It reported a loss before interest, taxation,
depreciation and amortisation of £1.62 million (2000: £1.65 million). As at 31st
December 2001, AHL had net assets (before shareholder loans of £1.28 million) of
£0.44 million (2000: net assets (before shareholder loans of £1.26 million) of
£2.05 million).
Benefits of the Acquisition
Since its flotation in June 2000, the OTC Group has sought to become a one-stop
online travel service for both leisure and corporate travellers and a number of
highly selective acquisitions have subsequently been completed in pursuit of
this. The Directors assess potential acquisitions on their ability to provide
quality content, technology and expertise to the OTC Group, to add major brands
to the OTC portfolio and to generate positive cash from operations within twelve
months of acquisition. The Directors believe that the Acquisition meets these
criteria and consider AHL to be a complimentary business that will:
• add a major online hotel brand to the OTC Group's portfolio of
travel services;
• enable significant cross selling opportunities. AHL's sites
attract over 600,000 visitors per month and have a live database of 175,000
subscribers. The Enlarged Group will be able to generate further revenue by
cross selling other travel products to AHL's customer database in addition to
increasing the throughput of the hotel sections of the current OTC Group sites;
• create economies of scale and cost savings through the
elimination of duplicated costs; and
• add additional proprietary technologies to the OTC Group's
portfolio thereby enhancing its competitive position.
The Directors believe that the Acquisition will further assist OTC in achieving
its objective of becoming a leading and profitable full service e-travel
provider.
Principal terms of the Acquisition
Under the terms of the Acquisition Agreement, the Company has acquired the whole
of the issued share capital of AHL for an initial consideration of up to £1.425
million, which will be satisfied by the issue of up to 5,090,914 new OTC Shares,
being the Initial Consideration Shares, the Legg Mason Shares and the Deferred
Consideration Shares, to the Vendors and Legg Mason at an effective price of
28p per share.
The Initial Consideration Shares were issued to the Vendors and the Legg Mason
Shares were issued to Legg Mason on Completion credited as fully paid and will,
subject to admission to trading on AIM, rank pari passu with the existing OTC
shares, including the right to receive all dividends and other distributions
declared made or paid after their issue. Application will be made for such
admission and it is expected that dealings will commence in the Initial
Consideration Shares and the Legg Mason Shares by 1st October 2002.
The valuation of AHL for the purposes of the Acquisition has been based on a
balance sheet position as at Completion of zero net current assets and no
indebtedness. Under the terms of the AHL acquisition agreement, any net asset
deficiency in this regard will be addressed at the option of the Vendors, either
by a cash injection into AHL by the Vendors or a reduction in the consideration
due to the Vendors. In view of the potential for such an adjustment, the
Deferred Consideration Shares will be not be allotted or issued by the Company
until agreement of the Completion accounts. A pound for pound reduction to the
consideration will be made in the event of any such deficiency, if no cash is
received from the Vendors, with a corresponding reduction in the number of
Deferred Consideration Shares finally issued.
The Additional Consideration Shares will be issued to AHL Shareholders if the
mid-market price of an OTC share (as derived from the Daily Official List of the
London Stock Exchange) does not equal or exceed 28p for ten consecutive business
days during the 90 days immediately following Completion. The closing mid-market
price of an OTC share (as derived from the Daily Official List of the London
Stock Exchange) on 23rd September 2002, being the latest practicable date prior
to the publication of this announcement, was 19.75p. Assuming a value of 28p per
share, the issue of the Additional Consideration Shares would equate to further
consideration of £0.19 million.
The Vendors and Legg Mason will be restricted from selling their Initial
Consideration Shares and Legg Mason Shares respectively for a period of six
months from the date of Completion, and any Deferred Consideration Shares or
Additional Consideration Shares (as the case may be), for a period of six months
from the date of admission to trading on AIM of such shares, subject to certain
exemptions. Following the end of the relevant lock-in period, the Vendors and
Legg Mason will be subject to orderly marketing arrangements in respect of any
sales of their OTC shares.
In addition, as part of the Acquisition, certain lenders to AHL have agreed to
assign to OTC the benefits of loans (and accrued interest) to AHL of, in
aggregate, £1.33 million, in return for potential future cash payments equal to
20 per cent of AHL's earnings before interest, tax, depreciation and
amortisation in each of the years ending 31st October 2003 and 31st October
2004. The aggregate of such payments will be subject to a minimum of £200,000
and a maximum of £680,000.
Also as part of the Acquisition the advisors to AHL, Legg Mason, will subscribe
for 583,571 Ordinary Shares of £0.01 each at a price of £0.28 per share. On
receipt of these funds, OTC will loan the sum of £163,400 to AHL for the
purposes of discharging a liability due to Legg Mason in that amount.
Current trading and prospects
The OTC Group's trading since 8th July 2002, the date on which the results for
the six months ended 30th April 2002 were announced, has been satisfactory,
particularly in view of the challenging environment experienced by the travel
industry since 11th September 2001.
The leisure travel division continues to grow strongly in line with the online
travel market as a whole, however, it has continued to be a challenging period
for the corporate travel business. The Directors anticipate that, in line with
the Company's historic trend, around 60 per cent of its annual sales will be
generated in the second half of the year.
The Company has continued to grow organically and has made a number of
acquisitions to strengthen its product offering. Whilst these acquisitions have
resulted in one off re-organisation costs, the Directors believe they represent
important building blocks in the OTC Group's progress towards becoming a
one-stop online travel service. The Directors are confident that they will
continue to develop and grow the business successfully and remain fully focused
on increasing shareholder value.
Extraordinary General Meeting
An Extraordinary General Meeting of OTC is to be convened for 10.00 a.m. on 16th
October 2002 at the offices of Marriott Harrison, 12 Great James Street, London
WC1N 3DR. At the meeting the Resolutions will be proposed to increase the
authorised share capital of the Company from £1,500,000 to £2,000,000 by the
creation of 50,000,000 new OTC shares ranking pari passu in all respects with
the existing OTC shares, grant authority pursuant to section 80 of the Act to
allot up to £1,637,560.20 in nominal value and to give the Directors authority
to disapply statutory pre-emption rights, pursuant to section 89 of the Act up
to an aggregate nominal amount of £175,058.69. These authorities will be in
substitution for any existing authorities subsisting at the date of the
Resolutions.
While the Directors currently have sufficient section 80 authority to implement
the Acquisition and the Placing, this authority will be substantially utilised
following the issue of the Consideration Shares and the Placing Shares. As
already mentioned, the Directors require authorisation, in excess of that
already obtained, to disapply statutory pre-emption rights in relation to the
issue of the Placing Shares. Following the Acquisition and Placing, the
Directors believe that it is in the best interests of the Company and its
shareholders to increase the authorised share capital and take further section
80 and section 89 authority in order to preserve their flexibility to take
advantage of further opportunities as they arise.
Indications of intent to vote in favour of the Resolutions have been received by
OTC from the Directors and certain other OTC shareholders. The interests
represented by the indications of intent amount, in aggregate, to 27,597,019 OTC
shares, representing approximately 26.9 per cent of the issued ordinary share
capital of OTC.
The Placing is conditional, inter alia, on the passing of the Resolutions.
General
A circular convening the Extraordinary General Meeting is expected to be
dispatched to OTC shareholders later today. Copies of the circular will be
available to the public free of charge, from 25th September 2002 until 24th
October 2002, from the registered office of Online Travel Corporation plc, 12
Great James Street, London WC1N 3DR.
This information is provided by RNS
The company news service from the London Stock Exchange
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