Offer for Southnews - Part 1
Trinity Mirror PLC
27 October 2000
PART 1
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE
UNITED STATES, CANADA, JAPAN OR AUSTRALIA
Trinity Mirror plc
Recommended Cash Offer for Southnews plc
SUMMARY
The boards of Trinity Mirror and Southnews announce that they
have reached agreement on the terms of a recommended cash
offer, to be made by Greenhill & Co. on behalf of Trinity
Mirror Regionals, a wholly-owned subsidiary of Trinity Mirror,
for the whole of the issued and to be issued share capital of
Southnews.
* The Offer will be 1200p in cash for each Southnews Share
and values the whole of the issued share capital of Southnews
(on a fully diluted basis) at £284.6 million
* The Offer represents a premium of approximately 57 per
cent. over the closing middle market price of 762.5p per
Southnews Share on 26 October 2000, the last business day
prior to this announcement
* In addition, Southnews Shareholders will be entitled to
retain the interim dividend of 4.85p per Southnews Share
* As a leading regional newspaper publisher in the South
East of England, publishing weekly paid-for and free titles,
Southnews represents an important opportunity for Trinity
Mirror to increase substantially its exposure to this
economically significant part of the UK
- the combination of Trinity Mirror's existing portfolio of
weekly titles with Southnews' 84 weekly paid-for and free
titles will enable Trinity Mirror to offer extensive newspaper
coverage of the South East of England to advertisers
- the acquisition will also give Trinity Mirror's portfolio
of regional newspapers a better balance across the regional
economies of the UK
* The board of Trinity Mirror believes that operating
profit enhancements can be generated from the elimination of
certain corporate and administrative overheads, the reduction
of materials costs using Trinity Mirror's purchasing power
and, over time, the printing of Southnews' titles on Trinity
Mirror's presses
* The board of Trinity Mirror expects these annual
operating profit enhancements to amount to £4 million in the
first 12 months of ownership and believes that there will be
further benefits thereafter. The board of Trinity Mirror
believes that the acquisition of Southnews will be earnings
enhancing in 2001*
* Irrevocable undertakings to accept the Offer have been
received from certain institutional shareholders of Southnews
and Southnews Directors (and a related family trust) in
respect of, in aggregate, 12,301,027 Southnews Shares,
representing approximately 53.2 per cent. of Southnews' issued
share capital
* The Offer will contain a loan note alternative
* The Offer has the unanimous support and recommendation of
the board of Southnews
Philip Graf, Chief Executive Officer of Trinity Mirror, said:
'I am delighted that we have reached agreement with the board
of Southnews for a recommended offer. Southnews has a
tremendous portfolio of high quality newspaper titles focused
on Greater London and around the M25, as well as in Essex and
Kent, which will be an excellent addition to Trinity Mirror's
regional and local newspaper franchises. Trinity Mirror is
looking forward to working with Southnews' operational
management and staff to develop and expand the enlarged
business in the South East of England.'
Gareth Clark, Chairman of Southnews, said:
'Southnews has made good and pleasing progress since its
formation in 1986. Through a series of acquisitions and by
launching new titles, Southnews has emerged as a substantial
regional newspaper group focused on the attractive London and
Home Counties market. Though we have identified further
opportunities for developing the company, the recent
consolidation within the newspaper industry has undoubtedly
diminished the range of suitable opportunities previously open
to Southnews. With this in mind, I am therefore convinced
that the correct route to ensure the continued long term
prosperity of our newspapers is by them now forming part of a
larger newspaper group.'
This summary should be read in conjunction with and in the
context of the full text of this announcement. A presentation
to analysts will be held at 9:30 a.m. today at The Brewery,
Chiswell Street, London EC1Y 4SD.
Enquiries:
Trinity Mirror 020 7293 3000 Southnews 01932 566 311
Philip Graf Gareth Clark
Margaret Ewing
Greenhill & Co. 020 7440 0400 HSBC 020 7336 9000
Simon Borrows Nigel Medhurst
Brian Cassin Mark Harrison
Finsbury 020 7251 3801
Rupert Younger
James Leviton
* This statement should not be taken to mean that the future
earnings per share of Trinity Mirror, as enlarged by the
acquisition of Southnews, will necessarily be greater than
its historical earnings per share
The Offer (including the Loan Note Alternative) will not be
made, directly or indirectly, in or into the United States,
Canada, Japan or Australia. Accordingly, copies of this
announcement are not being, and must not be, mailed or
otherwise distributed or sent into or from the United States,
Canada, Japan or Australia.
The Loan Notes will not be listed on any stock exchange and
have not been, and will not be, registered under the
Securities Act or under any relevant securities laws of any
State of the United States and the relevant clearances have
not been, and will not be, obtained from the regulatory
authority of any province or territory of Canada. In
addition, no prospectus in relation to the Loan Notes has
been, or will be, lodged with or registered by the Australian
Securities and Investments Commission and no steps have been,
nor will be, taken to enable the Loan Notes to be offered in
compliance with the applicable securities laws of Japan or any
other country or jurisdiction outside the United Kingdom. The
Loan Notes will not be offered, sold, resold, delivered or
distributed, directly or indirectly, in or into the United
States, Canada, Japan or Australia or any other jurisdiction
if to do so would constitute a violation of the relevant laws
in such jurisdiction.
Greenhill & Co., which is regulated in the United Kingdom by
The Securities and Futures Authority Limited, is acting for
Trinity Mirror and Trinity Mirror Regionals and for no one
else in relation to the Offer and will not be responsible to
anyone other than Trinity Mirror and Trinity Mirror Regionals
for providing the protections afforded to customers of
Greenhill & Co. nor for providing advice in relation to the
Offer.
HSBC, which is regulated in the United Kingdom by The
Securities and Futures Authority Limited, is acting for
Southnews and for no one else in relation to the Offer and
will not be responsible to anyone other than Southnews for
providing the protections afforded to customers of HSBC nor
for providing advice in relation to the Offer.
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE
UNITED STATES, CANADA, JAPAN OR AUSTRALIA
Trinity Mirror plc
Recommended Cash Offer for Southnews plc
FULL TEXT
1. Introduction
The boards of Trinity Mirror and Southnews announce that they
have reached agreement on the terms of a recommended cash
offer, to be made by Greenhill & Co. on behalf of Trinity
Mirror Regionals, a wholly-owned subsidiary of Trinity Mirror,
for the whole of the issued and to be issued share capital of
Southnews at 1200p per share. The Offer values Southnews'
share capital (on a fully diluted basis) at £284.6 million.
The Offer represents a premium of approximately 57 per cent.
over the closing middle market price of 762.5p per Southnews
Share on 26 October 2000 (the last business day prior to this
announcement).
2. Background to and reasons for the Offer
The UK regional newspaper industry has been the subject of
considerable change in ownership structure over the last ten
years which, more recently, has featured consolidation among
the industry participants. This has been driven by the
opportunity to share resources and to improve purchasing
power, giving rise to more efficient operations and enhanced
profitability. Trinity Mirror has been an active participant
in the industry consolidation.
Southnews is a leading regional newspaper publisher in the
South East of England, publishing weekly paid-for and free
titles. It represents an important opportunity for Trinity
Mirror to increase substantially its exposure to this
economically significant part of the UK. In addition,
Southnews' titles are highly complementary to Trinity Mirror's
existing franchises in the South East of England.
Southnews' titles comprise some 84 weekly paid-for and free
titles, focused on Greater London and around the M25, as well
as in Essex and Kent. Combined with Trinity Mirror's existing
portfolio of weekly titles in the South East of England,
Trinity Mirror will be able to offer advertisers extensive
newspaper coverage of this part of the UK. The acquisition
will also give Trinity Mirror's portfolio of regional
newspapers a better balance across the regional economies of
the UK.
The board of Trinity Mirror believes that operating profit
enhancements can be generated from the elimination of certain
corporate and administrative overheads, the reduction of
materials costs using Trinity Mirror's purchasing power and,
over time, the printing of Southnews' titles on Trinity
Mirror's presses. In addition, Trinity Mirror will be able to
absorb Southnews' national advertising sales representation
into its existing national sales operation, AMRA.
The board of Trinity Mirror expects these annual operating
profit enhancements to amount to £4 million in the first 12
months of ownership and believes that there will be further
benefits thereafter. The board of Trinity Mirror believes that
the acquisition of Southnews will be earnings enhancing in
2001*.
* This statement should not be taken to mean that the future
earnings per share of Trinity Mirror, as enlarged by the
acquisition of Southnews, will necessarily be greater than
historical earnings per share
3. The Offer
On behalf of Trinity Mirror Regionals, Greenhill & Co. will
offer to acquire all of the Southnews Shares, subject to the
conditions and terms summarised in Appendix I and those to be
set out in the Offer Document and Form of Acceptance, on the
following basis:
for each Southnews Share 1200p in cash
The Offer values the whole of the issued share capital of
Southnews (assuming the exercise in full of all outstanding
options under the Southnews Share Option Schemes) at
approximately £284.6 million.
The Southnews Shares which are the subject of the Offer will
be acquired by Trinity Mirror Regionals fully paid and free
from all liens, charges, equitable interests, third party
rights and encumbrances and together with all rights now or
hereafter attaching thereto, including the right to receive
all dividends and other distributions (if any) declared, made
or paid after the date of this announcement, other than the
interim dividend in respect of the six month period ended 30
September 2000 of 4.85p per share to be paid to Southnews
Shareholders on the register of members of Southnews at the
close of business on 10 November 2000.
The Offer will extend to any Southnews Shares issued or
unconditionally allotted while the Offer remains open for
acceptance, including any such Southnews Shares allotted or
issued pursuant to the exercise of options under the Southnews
Share Option Schemes.
If the Offer becomes or is declared wholly unconditional,
Trinity Mirror Regionals intends to make appropriate proposals
to holders of options under the Southnews Share Option Schemes
to the extent that such options have not been exercised or
lapsed.
The conditions and certain further terms of the Offer are set
out in Appendix I. The Offer is conditional on Trinity Mirror
Regionals receiving the Secretary of State for Trade and
Industry's consent to the transfer of the newspapers and
newspaper assets of Southnews to Trinity Mirror Regionals.
Trinity Mirror Regionals is applying for the Secretary of
State's consent under a statutory procedure which allows the
Secretary of State discretion, in cases where none of the
newspapers concerned has an average daily paid-for circulation
of more than 50,000 copies, to give his consent to a transfer
of newspapers and newspaper assets without requiring a report
from the Competition Commission (none of Southnews' newspaper
titles has an average daily paid-for circulation of more than
50,000 copies).
Further details of the bases and sources of certain financial
information in this announcement and the financial effects of
acceptance are set out in Appendix II.
4. Irrevocable undertakings to accept the Offer
Irrevocable undertakings to accept the Offer have been
received from certain institutional shareholders of Southnews
and Southnews Directors (and a related family trust) in
respect of, in aggregate, 12,301,027 Southnews Shares,
representing approximately 53.2 per cent. of Southnews' issued
share capital. The terms of the irrevocable undertakings of
the Southnews Directors require acceptance of the Offer even
if a third party makes a higher competing offer.
The terms of the irrevocable undertakings given by the
institutional shareholders in respect of 10,063,511 Southnews
Shares, will cease to be binding in the event of a third party
making or announcing a firm intention to make an offer (which
is not subject to any pre-conditions) for the Southnews Shares
if the value of the consideration under such offer is 1300p or
more per Southnews Share.
5. Recommendation
The Directors of Southnews, who have been so advised by HSBC,
consider the terms of the Offer to be fair and reasonable. In
providing advice to the Directors of Southnews, HSBC has taken
into account the Southnews Directors' commercial assessments
of the Offer. Accordingly, the Directors of Southnews will
unanimously recommend all Southnews Shareholders to accept the
Offer, as they (and where appropriate the relevant trustees)
have undertaken to do in respect of their and their immediate
families' and family trusts' holdings of 2,237,516 Southnews
Shares representing, in aggregate, approximately 9.7 per cent.
of Southnews' existing issued share capital.
6. Information on Southnews
Southnews is a leading regional and local newspaper publisher
in the South East of England with 84 weekly titles, of which
24 are paid-for and 60 are free. Its portfolio extends across
Greater London and around the M25, as well as in Essex and
Kent. Four ethnic paid-for titles published by Southnews are
more widely available across the UK. The paid-for titles have
a total circulation of approximately 314,000 and the free
titles have a total distribution of approximately 3,281,000.
In the financial year ended 1 April 2000, Southnews generated
audited consolidated turnover of £75.9 million, audited
consolidated profit on ordinary activities before taxation
(excluding exceptional items and abortive acquisition costs)
of £13.0 million and audited consolidated earnings per share
(excluding exceptional items) of 42.7p. At 1 April 2000,
Southnews had audited consolidated net assets of
£59.8 million.
On 15 March 2000, Southnews acquired Denitz for a total
consideration of £52 million. Southnews subsequently sold a
number of Denitz's titles in Lincolnshire and Northamptonshire
to Johnston Press plc for £16.5 million. In the year ended 1
April 2000 (i.e. from 15 March 2000 to 1 April 2000), the
retained Denitz titles contributed £2.2 million to turnover
and £0.3 million to profit on ordinary activities before
taxation (excluding exceptional items).
For the six month period ended 30 September 2000, Southnews
generated unaudited consolidated turnover of £47.6 million,
unaudited consolidated profit on ordinary activities before
taxation (excluding exceptional items) of £7.8 million and
unaudited consolidated earnings per share (excluding
exceptional items) of 23.7p. As at 30 September 2000,
Southnews had unaudited consolidated net assets of £64.2
million.
An interim dividend in respect of the six month period ended
30 September 2000 of 4.85p per Southnews Share will be payable
on 8 December 2000 to Southnews Shareholders on the register
of members of Southnews at the close of business on 10
November 2000.
7. Information on Trinity Mirror
Trinity Mirror is the UK's largest regional and local
newspaper publisher, with a broad and diverse portfolio of
over 170 titles. It is also the second largest national
newspaper publisher in the UK with its flagship title, The
Mirror and, in Scotland, the market leading Daily Record. In
addition, Trinity Mirror publishes the Sunday Mirror, the
Sunday People and, in Scotland, the Sunday Mail.
Trinity Mirror's sports publications portfolio comprises five
titles including the Racing Post, the UK's leading racing
publication. Trinity Mirror also produces a range of business-
to-business and specialist consumer magazines and exhibitions.
In digital media, Trinity Mirror is currently developing its
'ic' network of national and regional sites.
To provide a more meaningful analysis of the trading results
of the predecessor entities of Trinity Mirror, unaudited pro
forma financial information was prepared for the 53 week
period ended 2 January 2000 on the assumption that the merger
of Trinity plc and Mirror Group PLC had been effective at the
beginning of the accounting period. This information is
provided below, along with the statutory results of Trinity
Mirror for the same period.
In the financial year ended 2 January 2000, Trinity Mirror
generated unaudited consolidated pro forma turnover of
£1,063.0 million, unaudited consolidated pro forma profit on
ordinary activities before taxation (excluding exceptional
items) of £168.1 million and unaudited consolidated pro forma
earnings per share (excluding exceptional items) of 46.1p per
share. In the financial year ended 2 January 2000, Trinity
Mirror generated audited consolidated turnover of £595.8
million, audited consolidated profit on ordinary activities
before taxation (excluding exceptional items) of £115.3
million and audited consolidated earnings per share (excluding
exceptional items) of 45.5p. As at 2 January 2000, Trinity
Mirror had audited consolidated net assets of £1,283.7
million.
For the 26 week period ended 2 July 2000, Trinity Mirror
generated unaudited consolidated turnover of £559.9 million,
unaudited consolidated profit on ordinary activities before
taxation (excluding exceptional items) of £89.6 million and
unaudited consolidated earnings per share (excluding
exceptional items) of 22.0p. As at 2 July 2000, Trinity
Mirror had unaudited consolidated net assets of £1,328.6
million.
8. Employees
Trinity Mirror attaches great importance to the skills,
technical ability and experience of the existing operational
management and employees of Southnews. The board of Trinity
Mirror has confirmed that the existing employment rights,
including pension rights, of all employees of Southnews will
be fully safeguarded. It has been agreed that the executive
Directors of Southnews will, subject to the Offer becoming or
being declared unconditional in all respects, resign as
Directors of Southnews. However, the executive Directors of
Southnews have agreed to continue as employees of the Trinity
Mirror Group with reduced roles.
9. Loan Note Alternative
Southnews Shareholders (other than certain overseas
shareholders) who validly accept the Offer may elect to
receive Loan Notes instead of some or all of the cash
consideration to which they would otherwise be entitled under
the Offer on the following basis:
for every £1 of cash under the Offer £1 nominal of Loan Notes
The issue of Loan Notes will be limited to a maximum aggregate
nominal value of £56 million. If aggregate elections in
respect of the Loan Note Alternative are greater than £56
million, they will be scaled down pro rata to the elections
made.
The Loan Notes will be issued, credited as fully paid, in
amounts and multiples of £1 nominal and will constitute
unsecured obligations of Trinity Mirror Regionals. The
obligations of Trinity Mirror Regionals as issuer of the Loan
Notes will, however, be guaranteed by Trinity Mirror.
Entitlements to Loan Notes will be rounded down to the nearest
pound and the balance of any consideration will be satisfied
in cash.
The Loan Notes will bear interest, payable half-yearly in
arrears (less any tax) on 1 January and 1 July, at the rate
per annum calculated to be half of one per cent. below LIBOR.
The first interest payment date will be 1 July 2001 in respect
of the period from (and including) the date of first issue of
any Loan Note up to (but excluding) 1 July 2001. Holders of
Loan Notes will have the right to redeem all or part (being
£100 of nominal amount or any integral multiple thereof) of
their Loan Notes for cash at par (plus accrued interest less
any tax) on 1 January 2002 and at six monthly intervals on
interest payment dates thereafter, by giving 30 days' prior
notice to Trinity Mirror Regionals. Unless previously
redeemed or purchased, the Loan Notes will be redeemed on 1
July 2005.
The Loan Notes will be transferable in amounts and multiples
of £100 nominal amount. No application has been, nor will be,
made for the Loan Notes to be listed or dealt in on any stock
exchange or other trading facility.
If the number of valid elections for the Loan Note Alternative
received by the date the Offer becomes or is declared wholly
unconditional would not result in the issue of at least
£1,000,000 nominal amount of Loan Notes, no Loan Notes will be
issued unless Trinity Mirror Regionals determines otherwise.
The Loan Note Alternative is conditional on the Offer becoming
or being declared unconditional in all respects.
Hoare Govett has estimated that, had they been in issue on 26
October 2000, the last business day prior to this
announcement, based on market conditions at that date, the
Loan Notes would have had a value of approximately 98p per £1
nominal amount.
10. General
Trinity Mirror is interested in one Southnews Share.
Save as disclosed herein, neither Trinity Mirror Regionals nor
any Trinity Mirror Regionals Director nor, to the best of
Trinity Mirror Regionals Directors' knowledge and belief, any
person acting in concert with Trinity Mirror Regionals for the
purposes of the Offer, owns or controls any Southnews Shares
or holds any options to purchase any Southnews Shares or has
entered into any derivative referenced to securities of
Southnews which remains outstanding or has received any
irrevocable commitment to accept the Offer. In the interest
of secrecy, Trinity Mirror Regionals has not made any
enquiries in this respect of certain parties who may be deemed
by the Panel to be acting in concert with it for the purposes
of the Offer.
Hoare Govett and ING Barings are brokers to the Offer.
This announcement does not constitute an Offer or an
invitation to purchase any securities.
The documents relating to the Offer will be despatched as soon
as practicable.
The Directors of Southnews accept responsibility for the
information contained in this document in relation to the
Southnews Group and themselves. To the best of their
knowledge and belief (having taken all reasonable care to
ensure such is the case), the information contained in this
document for which they are responsible is in accordance with
the facts and does not omit anything likely to affect the
import of such information.
The Directors of Trinity Mirror and the Directors of Trinity
Mirror Regionals accept responsibility for all other
information contained in this document. To the best of their
knowledge and belief (having taken all reasonable care to
ensure that such is the case), the information contained in
this document for which they are responsible is in accordance
with the facts and does not omit anything likely to affect the
import of such information.
Definitions used in this press announcement are set out in
Appendix III.
Enquiries:
Trinity Mirror 020 7293 3000 Southnews 01932 566 311
Philip Graf Gareth Clark
Margaret Ewing
Greenhill & Co. 020 7440 0400 HSBC 020 7336 9000
Simon Borrows Nigel Medhurst
Brian Cassin Mark Harrison
Finsbury 020 7251 3801
Rupert Younger
James Leviton
The Offer (including the Loan Note Alternative) will not be
made, directly or indirectly, in or into the United States,
Canada, Japan or Australia. Accordingly, copies of this
announcement are not being, and must not be, mailed or
otherwise distributed or sent into or from the United States,
Canada, Japan or Australia.
The Loan Notes will not be listed on any stock exchange and
have not been, and will not be, registered under the
Securities Act or under any relevant securities laws of any
State of the United States and the relevant clearances have
not been, and will not be, obtained from the regulatory
authority of any province or territory of Canada. In
addition, no prospectus in relation to the Loan Notes has
been, or will be, lodged with or registered by the Australian
Securities and Investments Commission and no steps have been,
nor will be, taken to enable the Loan Notes to be offered in
compliance with the applicable securities laws of Japan or any
other country or jurisdiction outside the United Kingdom. The
Loan Notes will not be offered, sold, resold, delivered or
distributed, directly or indirectly, in or into the United
States, Canada, Japan or Australia or any other jurisdiction
if to do so would constitute a violation of the relevant laws
in such jurisdiction.
Greenhill & Co., which is regulated in the United Kingdom by
The Securities and Futures Authority Limited, is acting for
Trinity Mirror and Trinity Mirror Regionals and for no one
else in relation to the Offer and will not be responsible to
anyone other than Trinity Mirror and Trinity Mirror Regionals
for providing the protections afforded to customers of
Greenhill & Co nor for providing advice in relation to the
Offer.
HSBC, which is regulated in the United Kingdom by The
Securities and Futures Authority Limited, is acting for
Southnews and for no one else in relation to the Offer and
will not be responsible to anyone other than Southnews for
providing the protections afforded to customers of HSBC nor
for providing advice in relation to the Offer.
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