Placing and Open Offer,etc
PEEL HOTELS PLC
10 August 1999
1 FOR 3 PLACING AND OPEN OFFER AT 180P TO RAISE £3.9 MILLION
in connection with the
ACQUISITIONS OF
THE GOLDEN LION HOTEL, LEEDS
AIRE HOUSE, LEEDS
and
THE CALEDONIAN HOTEL, NEWCASTLE-UPON-TYNE
1. Introduction
The Company intends to raise £3.9 million (£3.77 million net of expenses)
through a Placing and Open Offer by Peel Hunt of 2,166,666 new Ordinary
Shares at 180p per share. The net proceeds of the Placing and Open Offer are
to fund part of the aggregate purchase price, stamp duty and other costs of
acquiring the Golden Lion Hotel and the Caledonian Hotel from Grace Hotels, a
subsidiary of Lehman Brothers International (Europe) Limited, and Aire House,
an office block adjacent to the Golden Lion, from a group of individuals.
The Placing and Open Offer has been underwritten by Peel Hunt.
The Company has entered into a conditional agreement with Grace Hotels to
acquire the Golden Lion Hotel and the Caledonian Hotel for cash
considerations of £4.75 million and £4.0 million respectively, payable on
completion. The Company has entered into an unconditional agreement with the
Aire House vendors to acquire Aire House for a cash consideration of £900,000
payable on completion. The Company is borrowing £7.0 million in ten year
secured debt from The Royal Bank of Scotland plc, of which approximately £6.1
million is to fund those hotel acquisition costs which are not financed by
the Placing and Open Offer and the remainder to fund the development of Aire
House.
Grace Hotels is the owner of a portfolio of 27 hotels, all of which,
including the Golden Lion Hotel and the Caledonian Hotel, are run by Peel
Hotels under a Management Agreement. Pursuant to that agreement, Grace
Hotels has Warrants to subscribe for 500,000 Ordinary Shares. The terms of
the Warrants are set out in paragraph 7 of Part III. Grace Hotels currently
holds no issued Ordinary Shares.
2. Information on the Golden Lion Hotel and Aire House
The Golden Lion Hotel is located in the city centre of Leeds, England's
largest financial services centre outside London. It occupies a corner site
at the junction of Lower Briggate and Sovereign Street, which form part of the
city's inner ring road. The business and shopping areas are close by and the
main-line railway station is a two minute walk.
The Golden Lion Hotel is a commercial hotel dating back over 250 years and has
a basement and four upper floors. The accommodation comprises 89 letting
bedrooms, a restaurant, a bar and three function/meeting rooms. There is a
car park for a small number of vehicles in an enclosed courtyard at the rear,
but there is ample additional public car parking close by. The hotel has a
three star AA/ RAC rating.
Aire House is a building formerly used as offices, abutting the Golden Lion
Hotel with 12,900 square feet of office and retail space.
Subject to obtaining planning permission, the Company intends to expand the
capacity of the Golden Lion Hotel by constructing 25 additional bedrooms in
Aire House's office space while letting the retail space on the ground floor.
3. Information on the Caledonian Hotel
The Caledonian Hotel is located in Newcastle-upon-Tyne. The hotel is sited on
Osborne Road, approximately one mile to the north east of the city centre in
Jesmond, Newcastle's university area. It occupies a terrace of bay-fronted
Victorian houses converted to hotel use. The accommodation comprises 89
letting bedrooms and suites, a restaurant, bar and six function/meeting rooms.
Car parking is available for approximately 50 vehicles. The hotel has a three
star AA/ RAC rating.
4. Reasons for the Acquisitions
The Company's strategy is to build an hotels business in the UK by identifying
opportunities where value can be added and superior shareholder returns can be
achieved. By applying the criteria of location, quality, value for price and
the current and continuing needs of the market, the Company actively seeks out
ownership and management opportunities within the hotel and catering sector.
With the Management Agreement, which came into effect in October 1998, the
Company was granted options to purchase both the Golden Lion Hotel and the
Caledonian Hotel. Both hotels are situated in areas of economic growth, and
are sufficiently large (89 bedrooms in each) to provide worthwhile economies
of scale. Further, and more importantly, they have scope for expansion,
giving the Company the opportunity to improve earnings and add value.
The acquisition of Aire House is expected to enable the Company to expand the
Golden Lion Hotel to up to 114 bedrooms, while the Caledonian Hotel grounds
have the capacity for further expansion of the hotel buildings in the future.
The Directors consider the Acquisitions to be immediately earnings enhancing.
5. Current trading and prospects
During the half year ending 5 September 1999 the Company will have benefited
from full contributions from the Management Agreement and the Pennington
Midland Hotel in Bradford, which was acquired in December 1998.
The Directors are confident that a satisfactory result will be achieved in the
full year to 20 February 2000.
6. Terms of the Grace Acquisition Agreement
The Company has entered into a conditional agreement with Grace Hotels
relating to the acquisition of the Golden Lion Hotel and the Caledonian Hotel
for cash considerations of £4.75 million and £4.0 million respectively,
payable on completion. As announced on 4 September 1998, the Golden Lion
Hotel was the subject of an option for the Company to acquire it granted
pursuant to the Management Agreement. The option was exerciseable until 5
January 1999 for a consideration of £4.75 million. The Caledonian Hotel
(formerly named the Hospitality Inn Hotel) is currently the subject of an
option for the Company to acquire it, also granted pursuant to the Management
Agreement. This option is exerciseable between 5 October 1999 and 5 November
1999 for a consideration of £4.0 million. The option over the Golden Lion
Hotel was never exercised because at the exercise date the Company had
recently completed the acquisition of the Pennington Midland Hotel, Bradford.
In order to minimise the expense which would result from acquiring the two
hotels separately, Grace Hotels has agreed to sell the Caledonian Hotel to the
Company in advance of the first exercise date of the option over that hotel.
One of the terms of the Management Agreement was that should any hotel
comprised in the Portfolio be purchased by the Company from Grace Hotels,
whether or not pursuant to either of the options referred to above, the first
such hotel would be acquired pursuant to a new 99 year lease granted by Grace
Hotels. Since the Grace Acquisition will be the first such purchase, a lease
over the Golden Lion Hotel will be granted for 99 years from completion. The
rent payable under the Lease will be one peppercorn until 5 October 2001. If
at that date Grace Hotels has achieved a minimum ungeared cash return on its
cash investment in the Portfolio of 10 per cent. per annum, the rent will
remain at a peppercorn for the remainder of the Lease term. If the ungeared
cash return of 10 per cent. per annum referred to above is not achieved, the
rent will be increased to £100,000 per annum for the remainder of the Lease
term.
The Lease is transferable to any subsequent purchaser of the Golden Lion
Hotel. The Lease will also contain an option for the Company to acquire the
freehold interest in the Golden Lion Hotel for a sum of £1 even if the
aforementioned ungeared cash return of 10 per cent. per annum is not achieved.
However, in such circumstances the Company would be bound by a term of that
option to transfer the freehold of an hotel of equivalent value to Grace
Hotels and lease that hotel back at the same rent as that contained in the
Lease for a term expiring on the same date as the Lease.
The Caledonian Hotel will be acquired with a freehold interest.
Completion of the Grace Acquisition Agreement is conditional on the Placing
Agreement having become unconditional, Grace Hotels obtaining the consent of
its bankers and Admission. Completion is expected to take place on 6
September 1999.
7. Terms of the Aire House Acquisition Agreement
The Company has entered into an unconditional agreement with the Aire House
Vendors relating to the acquisition of a freehold interest in Aire House for a
cash consideration of £900,000, payable on completion. Completion is expected
to take place on 8 September 1999.
8. Details of the Placing and Open Offer
The Placing and Open Offer is intended to raise £3.9 million (£3.77 million
net of expenses) by the placing of 2,166,666 new Ordinary Shares subject to
the rights of Qualifying Shareholders to apply for such shares under the Open
Offer. Qualifying Shareholders will be given the opportunity to subscribe
under the Open Offer for the new Ordinary Shares at a price of 180p per share,
payable in full on acceptance, on the following basis:
1 new Ordinary Share for every 3 Ordinary Shares
and so in proportion for any other number of Ordinary Shares held on the
Record Date. Qualifying Shareholders may apply for any whole number of new
Ordinary Shares up to their maximum entitlement shown in Box B on the
Application Form. Entitlements to new Ordinary Shares will be rounded down to
the nearest whole number of shares. The fractional entitlements which would
otherwise have arisen will not be allotted to Qualifying Shareholders but will
be aggregated and subscribed under the Placing Agreement for the benefit of
the Company.
The net proceeds of the Placing and Open Offer will be used predominantly to
fund part of the consideration for the Acquisitions and to cover stamp duty
and other associated expenses.
The new Ordinary Shares will be allotted credited as fully paid and will rank
pari passu in all respects with the existing Ordinary Shares, including the
right to receive all dividends and other distributions declared, made or paid
after the date of their issue.
Peel Hunt has agreed that it will use its reasonable endeavours to procure
placees for all of the new Ordinary Shares (other than new Ordinary Shares
that are the subject of undertakings from Qualifying Shareholders to take up
their entitlements), subject to the rights of Qualifying Shareholders to
acquire such shares under the Open Offer. Peel Hunt will itself subscribe for
any new Ordinary Shares (other than new Ordinary Shares that are the subject
of undertakings from Qualifying Shareholders to take up their entitlements)
which are not taken up under the Open Offer.
The Placing and Open Offer is conditional, inter alia, on completion of the
Grace Acquisition, the Placing Agreement becoming unconditional in all
respects and not having been terminated in accordance with its terms prior to
Admission and on Admission becoming effective.
Undertakings have been given to the Company by Robert Peel and John Govett to
take up their entitlements under the Open Offer to 80,000 new Ordinary Shares
in aggregate (representing approximately 3.7 per cent. of the new Ordinary
Shares). Robert Peel has undertaken to the Company not to subscribe for the
remainder of his entitlement under the Open Offer, being 945,000 new Ordinary
Shares (representing approximately 43.6 per cent. of the new Ordinary Shares).
Such shares have been conditionally placed firm with institutional and other
investors.
The remaining 1,141,666 new Ordinary Shares (representing approximately 52.7
per cent. of the new Ordinary Shares) have been conditionally placed with
institutional and other investors, subject to clawback to satisfy valid
applications under the Open Offer.
9. Timetable
Record Date for the Open Offer 3 August 1999
Despatch of Application Forms 10 August 1999
and Posting of Documents
Latest time for splitting application forms 3.00 p.m., 26 August 1999
(to satisfy bona fide market claims only)
Latest time for receipt of completed 3.00 p.m., 31 August 1999
Application Forms and payment in full
Dealings to commence in the new Ordinary 6 September 1999
Shares
Crediting of CREST accounts 6 September 1999
Share certificates in respect of new 9 September 1999
Ordinary Shares despatched by
Application Forms in relation to the Open Offer are personal to Qualifying
Shareholders and may not be transferred except to satisfy bona fide market
claims.
Latest directors dealings
- 51 minutes ago Croda International
- 1 hour ago Diageo
- 1 hour ago IMI
- 2 hours ago Softcat
- 5 hours ago Tertiary Minerals