Proposed Open Offer to Raise £1.3m
Creightons PLC
15 February 2000
Proposed Open Offer
(partially underwritten by Seymour Pierce)
Introduction
The Board of Creightons plc ('Creightons' or the
'Company') announces that the Company proposes to raise
approximately £1,300,000, net of cash expenses, through
an open offer of up to 29,814,784 Offer Shares at 5p per
share. The net proceeds of the Open Offer are urgently
needed to reduce the Group's indebtedness and to provide
working capital.
To enable the Open Offer to proceed at the Offer Price of
5p, your Board is proposing the Capital Reorganisation
(as referred to below). The subsequent Capital Reduction
which your Board is proposing (also as referred to below)
should enable the deficit in the Company's distributable
reserves to be reduced.
Irrevocable undertakings from certain existing
shareholders and Directors owning, in aggregate,
12,465,457 Existing Ordinary Shares, representing 62.71
per cent. of the Existing Ordinary Shares have been
received to accept the Open Offer in respect of their
full entitlements to a total of up to 18,698,185 Offer
Shares. The balance of up to 11,116,599 Offer Shares (the
'Underwritten Shares') has been conditionally
underwritten by Seymour Pierce. Subject to the
satisfaction of the conditions of the Open Offer and the
conditions set out in the Underwriting Agreement,
approximately £1,300,000 (net of cash expenses) will be
raised for the Company.
Background to and reasons for the Open Offer
Roger Lane-Smith took over as non-executive chairman of
Creightons on 23 December 1999, following the resignation
of Barry Dale. Since Mr Dale's departure, the Board has
carefully reviewed the financial and trading position of
the Company and concluded that additional capital is
urgently needed to ensure the Company's survival. Set out
below is the background to Creightons' current financial
position and the reasons for the Open Offer.
Since the failure of the fundraising proposed in 1998 in
connection with the proposed acquisition of Potter &
Moore Group Limited, your Board, led until recently by Mr
Dale, tried unsuccessfully to grow Creightons by
acquisition. The quality and nature of the opportunities
available, the Company's scarce resources and the
difficulties of raising funds for small quoted companies
in the personal care sector, combined to prevent the
Board from making any real progress. Allied to this have
been difficult trading conditions in our core toiletries
business and a high cost base. As a result, the Company
made significant losses in the two financial years ended
31 March 1999 and reduced, but nevertheless substantial,
losses in the six months to 30 September 1999.
All in all, the combination of factors outlined above has
represented a highly unsatisfactory state of affairs for
Creightons and for its shareholders.
On 7 July 1999, Bill Hamilton was recruited as Chief
Executive of the Company. Bill came to the Company from
Norit Bodycare Toiletries Limited and had experience of
turning round a business in a position similar to that of
Creightons. Bill's first task at Creightons was to bring
the Company's cost base into line with the level of sales
and to realign the Company's product range and customer
base to improve sales margins.
The Board put in place a plan to make immediate cost
savings and a reorganisation of production facilities to
bring about efficiencies and key new senior personnel
were recruited to reorganise sales and improve production
management.
To date, the effects of the Board's plan have been mixed.
In October and November the Group made a small profit,
but in December, with the extended holiday period, sales
levels were below plan and exceptional costs resulted in
a significant loss. In January, sales levels were back to
budgeted levels, but the effect of the Millennium holiday
and the disproportionately high overheads borne in the
month resulted in a loss as budgeted. Looking forward,
the Board's objective is to achieve its targets and we
are hopeful that, as new customers and products become
more established and cost savings flow through, the
benefits will start to become apparent in terms of
profitability.
Despite the implementation of the Board's plan, the
Company's cash position has continued to worsen. Since 1
October 1999 sales levels have cumulatively been below
breakeven point and reorganisation costs have been
incurred resulting in increased indebtedness and a
significant increase in trade creditors. Furthermore, as
the planned improvement in sales materialises, the
Company will need additional working capital.
During this process our bankers have been extremely
supportive. They have recently renewed the Company's bank
facilities for a 6 month period and have indicated that
they see no reason why the facilities should not be
renewed in the normal course at expiry for a further
period of 12 months.
Creightons is currently operating close to the upper
limit of its bank facilities, it has been holding off
paying its creditors and it urgently needs additional
capital to enable it to continue to trade. For this
reason, it is proposed that funds be raised by means of
the Open Offer. Pending receipt of the funds from the
Open Offer, the Company has agreed with Oratorio that
Oratorio, which owns 21.6 per cent. of the Existing
Ordinary Shares and of which William McIlroy is also a
director, will provide an unsecured bridging loan of up
to £250,000 to enable the Company to meet its immediate
commitments.
If the conditions of the Open Offer and the conditions
set out in the Underwriting Agreement are satisfied, the
amount that would be raised is approximately £1,300,000
(net of cash expenses), being the aggregate of the net
proceeds of the issue of the Irrevocable Shares and the
Underwritten Shares. Your Board believes that this sum
will be sufficient to enable the Company to meet its
present requirements. The Open Offer is fundamental in
enabling the Company to be able to continue to trade.
In the opinion of the Board, taking into account the
existing bank and other facilities available to the Group
and the net proceeds of the Open Offer and the
Underwriting, the working capital available to the Group
is sufficient for its present requirements, that is, for
at least the next 12 months.
One of the conditions of the Open Offer and the
Underwriting is the passing (without material amendment)
of a resolution at the EGM to effect the Capital Reorganisation
(referred to below) and to authorise the Directors to
allot relevant securities pursuant to section 80 of the
Act and to disaply pre-emption rights. Shareholders
should be aware that if they vote against this resolution,
the Open Offer and the Underwriting will not proceed and
the Company will not have sufficient working capital to trade.
Subject to the time constraints imposed in such
circumstances, alternative forms of finance might include
the renegotiation of the Group's bank facilities, the
securing of additional bank facilities and/or accelerated
asset disposals or other fund raising options. Should
these courses of action be unsuccessful, then the
Directors will have no alternative but to put the Company
into receivership.
The Board's strategy for Creightons
Whilst your Board believes that, once it is adequately
funded, Creightons' business would have a viable long
term future, your Board does not believe that there is a
realistic prospect of being able to grow and develop the
present business of the Company successfully as a listed
company such that it could generate attractive returns
for shareholders.
Accordingly, following completion of the Open Offer, your
Board intends to review the possibility of disposing of
the business and the property of the Company with the aim
of turning Creightons into a cash shell. Bill Hamilton
has indicated that he is considering a management buy-out
of the business of the Company and a proposal has been
presented to the Board for consideration. The Board will
carefully consider this proposal and also other options
for the disposal of the business, and will report to
shareholders in due course. Following such disposal, your
Board then proposes that Creightons acquires a business
in a sector of the market favoured by investors, such as
e-commerce.
At each stage in this process, shareholders will be kept
fully informed and their approval obtained as necessary.
Principal terms of the Open Offer
Creightons intends to raise approximately £1,300,000 (net
of cash expenses) under the Open Offer and the
Underwriting. The Offer Price of 5p per Offer Share,
which is at a substantial discount of approximately 58
per cent. to the mid-market price of 12p at which the
Existing Ordinary Shares were quoted at the close of
business on 31 January 2000 (being the last dealing date
prior to the suspension from trading of the Existing
Ordinary Shares), has been based on the current estimated
net asset value per Existing Ordinary Share.
As explained, the proceeds of the Open Offer are urgently
needed to enable the Company to continue to trade.
Qualifying Shareholders will be invited by way of the
Open Offer to subscribe for the Offer Shares at the Offer
Price of 5p per Offer Share, payable in full on
application, on the basis of:
3 Offer Shares for every 2 Existing Ordinary Shares
and so in proportion for any other number of Existing
Ordinary Shares held at the Record Date. Application
Forms are personal to shareholders and may not be
transferred except to satisfy bona fide market claims.
Fractions of Offer Shares will not be allotted.
Irrevocable Undertakings have been received in respect of
a total of 18,698,185 Offer Shares. In addition,
11,116,599 Offer Shares have been conditionally
underwritten by Seymour Pierce. Qualifying Shareholders
should note that any Offer Shares not applied for will
not be sold in the market for their benefit.
The Offer Shares will be issued free from all liens,
charges, equitable interests, encumbrances and other
interests and will be issued credited as fully paid and
will rank pari passu in all respects (including for all
dividends and other distributions, declared, made or paid
on such shares after the date of Admission) with the
Existing Ordinary Shares. Qualifying Shareholders should
note that the Open Offer is conditional, inter alia, upon
the passing of the resolution referred to above and
Admission.
Current trading and prospects
The interim statement of the Company for the 6 months
ended 30 September 1999 is published today. In addition,
the pattern of trading since 30 September 1999 has been
described earlier in this announcement in the section
entitled 'Background to and reasons for the Open Offer'.
The Board believes that the impact of its business plan
will begin to show through in the coming months and
prospects for the forthcoming year will show improvement.
Upon stabilising the Company's business, the Board will
then proceed with its plan to dispose of the business for
the best possible price. As stated earlier in this
announcement, the Board will then seek opportunities to
move Creightons into a sector of the market more favoured
by investors, such as e-commerce.
Capital Reorganisation
In order to issue the New Ordinary Shares at the Offer
Price (which is at a discount to the nominal value of 20p
of the Existing Ordinary Shares and would not be
permitted under the Act), it is necessary first either to
create a new class of ordinary shares with a nominal
value equal to or less than the Offer Price and to apply
to list such shares on the Official List or to reduce the
nominal value of the Existing Ordinary Shares to equal to
or less than the Offer Price. To avoid the Company having
two classes of listed ordinary shares with different
nominal values, your Board is proposing the Capital
Reorganisation to reduce the nominal value of the
Existing Ordinary Shares from 20p to 1p each.
It is proposed to subdivide each Existing Ordinary Share
into 20 new Ordinary Shares of 1p each and then to
redesignate 19 of such Ordinary Shares of 1p each into
Deferred Shares of 1p each. Each resulting new Ordinary
Share of 1p will, effectively, have the same rights
(including voting and dividend rights and rights on
return of capital) as each Existing Ordinary Share.
Certificates of Existing Ordinary Shares will remain
valid for the same number of Ordinary Shares of 1p each
arising out of the subdivision, but will be replaced on
completion of the Capital Reorganisation and Open Offer
by new share certificates. The rights attaching to the
Deferred Shares, which will not be listed, will render
them effectively valueless. It is proposed that the
Deferred Shares will be cancelled under the Capital
Reduction referred to below. No certificates will be
issued in respect of the Deferred Shares.
The authorised but unissued Ordinary Shares of 20p each
are also proposed to be subdivided into Ordinary Shares
of 1p each.
The New Ordinary Shares will each have a nominal value of
1p so as to form a single uniform class with the Existing
Ordinary Shares. The issue of the New Ordinary Shares at
the Offer Price will create further share premium in the
Company's balance sheet of approximately £1,272,591 gross
of expenses of the issue of such shares against such
account.
Capital Reduction and Maintenance
As at 30 September 1999, Creightons had a deficit of
distributable reserves of £4,319,000. To reduce this
deficit, a second resolution will be proposed at the EGM
as a special resolution to seek shareholders' approval to
implement a capital reduction to be effected by
cancelling the Deferred Shares and thereby reducing the
deficit of distributable reserves. This proposed Capital
Reduction will also require the sanction of the High
Court.
The sanction of the High Court is sought by the Company
making application to the High Court after such special
resolution has been passed following which the Court's
order, if granted, is registered with the Registrar of
Companies. The Board expects the application to Court to
be made shortly after the EGM and for the order, if
granted, to be made before the end of this year. The
Capital Reduction will take effect upon registration of
the Court's order with the Registrar of Companies.
In order for the Court's sanction to be obtained, the
Court may, on hearing the application, require the
Company to give certain undertakings or provide certain
guarantees for the protection of creditors of the Company
at the date that the Capital Reduction takes effect. The
precise terms of any undertaking or guarantee will be
decided with the Court during the course of the
application but, if unacceptable to the Company, then the
application for sanction may be discontinued, and the
proposed Capital Reduction will not take effect.
As a result of the Capital Reorganisation and subsequent
Capital Reduction, the Deferred Shares which constitute
19p of each Existing Ordinary Share of 20p in issue will
have been cancelled. The amount of share capital which is
proposed to be cancelled is approximately £3,776,539. If
the Capital Reduction proceeds none of this sum will be
available for return to shareholders, but instead it will
be credited to the profit and loss account of the Company
and accordingly reduce the deficit in distributable
reserves. To the extent that the amount of capital
proposed to be cancelled exceeds the deficit in
distributable reserves at the date that the Capital
Reduction takes effect, this excess will not be
distributable, but will be credited to a separate
undistributable reserve where it may become distributable
at a later date in certain circumstances.
As at 30 September 1999, the Company's net assets had
fallen to below 50 per cent. of its called-up share
capital. Section 142 of the Act requires that the
Directors convene an extraordinary general meeting of the
Company to consider whether any, and if so what, steps
should be taken to deal with the situation. Accordingly,
the EGM has also been convened to consider such steps. If
the Proposals are approved by shareholders by the passing
of the resolutions, it is the Board's intention to
propose not to consider further such steps.
The Prospectus
It is expected that a Prospectus, accompanied by an
Application Form for use in connection with the Open
Offer, setting out details of the Open Offer and
including a notice of the EGM, will be posted to
shareholders today. The attention of shareholders who
have registered addresses outside of the United Kingdom,
or who are citizens or residents of countries other than
the United Kingdom, is drawn to the further information
to be set out in the Prospectus.
Expected timetable of principal events
Record Date for the Open Offer
close of business on 4 February 2000
Latest time and date for splitting of Application Forms
(to satisfy bona fide market claims only)
3.00 pm on Friday 3 March 2000
Latest time and date for receipt of forms of proxy
11.00 am on Tuesday 7 March 2000
Latest time and date for receipt of Application Forms
and payment in full
3.00 pm on Tuesday 7 March 2000
Extraordinary General Meeting
11.00am on Thursday 9 March 2000
Admission of the New Ordinary Shares to the Official
List and dealings expected to commence and CREST
stock accounts credited
Monday 13 March 2000
Certificates for New Ordinary Shares despatched by
no later than
Tuesday 14 March 2000
Appendix 1
Definitions
The following definitions apply throughout this
announcement unless the context requires otherwise:
'Act' the Companies Act 1985, as amended by
the Companies Act 1989 and every statutory modification or re-
enactment thereof for the time being in force
'Admission' the admission to the Official List of the
New Ordinary Shares
'Application Form' the application form for use by
Qualifying Shareholders in connection with
the Open Offer
'Capital Reduction' the reduction of the share
capital of the Company to be effected by
the cancellation of the Deferred Shares
'Capital Reorganisation' the subdivision and re-
designation of the Existing Ordinary Shares into
Ordinary Shares and Deferred Shares and
the subdivision of the authorised but
unissued share capital of the Company into
Ordinary Shares
'Company' or Creightons plc
'Creightons'
'CREST' the relevant system (as defined in the
CREST Regulations) in respect
of which CRESTCo Limited is the Operator
(as defined in the CREST
Regulations) to facilitate the transfer of
title to shares in uncertificated
form
'CREST Regulations' the Uncertificated Securities
Regulations 1995 (SI 1995/3272)
'Deferred Shares' the non-voting deferred shares of 1p
each in the capital of the Company
which will arise on the passing of
Resolution 1
'EGM' the extraordinary general meeting of the
Company to be held at the
offices of KPMG, 1 Puddle Dock,
Blackfriars, London, EC4V 3PD on
9 March 2000 at 11.00 am convened by the
notice to be set out at the
end of the Prospectus
'Existing Ordinary the 19,876,523 existing issued
Ordinary Shares Shares'
'Fee Shares' the 2,000,000 New Ordinary Shares to be
issued to Strand Partners Limited
pursuant to a subscription letter dated 15
February 2000
'Group' the Company and its subsidiaries at the
date of this announcement
'Irrevocable Shares' up to 18,698,185 Offer Shares
which are the subject of the Irrevocable
Undertakings
'Irrevocable irrevocable undertakings given by certain
Undertakings' Qualifying Shareholders and
Directors to accept the Open Offer in
respect of the Irrevocable Shares
'London Stock London Stock Exchange Limited
Exchange'
'New Ordinary Shares' up to 31,814,784 new ordinary
shares of 1p each in the capital of the
Company to be issued pursuant to the Open
Offer and the Underwriting and as Fee
Shares
'Offer Price' 5p per New Ordinary Share
'Offer Shares' up to 29,814,784 New Ordinary Shares
which are being made available
to Qualifying Shareholders pursuant to the
Open Offer
'Official List' the Official List of the London
Stock Exchange
'Open Offer' the conditional invitation by the Company
to Qualifying Shareholders
to apply to subscribe for Offer Shares at
the Offer Price on the
terms and conditions set out in Part II of the
Prospectus and in the Application
Form
'Oratorio' Oratorio Developments Limited
'Ordinary Shares' ordinary shares in the share capital
of the Company which, at the date
of this announcement, each have a nominal
value of 20p but which, upon
the Capital Reorganisation becoming
effective, will each have a
nominal value of 1p
'Proposals' together, the proposed Capital
Reorganisation, the proposed Capital
Reduction and the Open Offer and
Underwriting
'Prospectus' the prospectus relating to Creightons and
prepared in accordance with the listing
rules of the London Stock Exchange, to be
posted to shareholders today in connection
with the Proposals
'Qualifying holders of Existing Ordinary Shares on the
Shareholders' register of members of the
Company on the Record Date, excluding
certain overseas shareholders
who are not entitled to participate in the
Open Offer as described in
Part II of the Prospectus
'Record Date' close of business on 4 February 2000
'Seymour Pierce' Seymour Pierce Limited
'uncertificated' or Ordinary Shares recorded on the
'in relevant register of the Company as
uncertificated being held in
form' uncertificated form in CREST and title to
which, by virtue of the CREST Regulations, may be
transferred by means of CREST
'Underwriting' the conditional underwriting of the
Underwritten Shares at the Offer
Price by Seymour Pierce pursuant to the
Underwriting Agreement
'Underwriting the underwriting agreement dated 15
Agreement' February 2000 between the
Company and Seymour Pierce, pursuant to
which Seymour Pierce has conditionally
agreed to underwrite the Underwritten
Shares
'Underwritten Shares' up to 11,116,599 Offer Shares
(being all of the Offer Shares other than
the Irrevocable Shares)
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