17 January 2012
Stobart Group Limited
("Stobart" or "the Group")
Stobart Estates to acquire 18 freehold and long leasehold properties known as the 'Moneypenny' portfolio for £12.35m (the "Acquisition")
Group trading in line with full year expectations
Stobart Estates, a division of Stobart Group, through its wholly owned subsidiary Hamsard 3213 Limited, announces that it has entered into a conditional agreement with W.A. Developments International ("the vendor") to acquire the entire issued share capital of WADI Properties Limited ("WADI Properties") for a total consideration of £12.35m.
Stobart Group also reaffirms that it expects to meet current full year expectations for the year to 29 February 2012.
· Stobart Estates has conditionally agreed to acquire the entire issued share capital of WADI Properties Limited ("WADI Properties") from the vendor for £12.35m. WADI Properties is the holding company of 18 freehold and long leasehold properties - known as the 'Moneypenny' portfolio. This is an acquisition outlined at the time of last year's Placing.
· The consideration is £5.15m in cash with the remaining £7.20m to be satisfied through the issue to the vendor of new Stobart Ordinary Shares on completion, based on the average middle market closing price for a Stobart ordinary share on the five business days prior to completion.
· The total enterprise value for the Acquisition is £101.2m, excluding the banking facility fee of £2.8m. The Directors believe the fair value of the assets and liabilities of the acquired business will be in excess of the price to be paid.
· The portfolio, which comprises a mix of UK industrial, commercial, retail and residential properties, has been valued by Knight Frank, in accordance with The RICS Valuation Standards ("The Red Book"), to have a gross market value of £98.93m as at 30 November 2011.
· The Properties are currently divided into 56 lettable areas, 2 of which the Group occupies and 6 are currently vacant. The majority of the properties are located in the South East.
· WADI Properties has net debt of £88.85m. Of the net debt, £74.9m is at the fixed rate of 5% with the balance at a floating rate of 1% over 3-month LIBOR. The banking facility will continue in place following completion and has a maturity date of April 2017. The acquisition is conditional on the completion of amendments to the facilities agreements on terms satisfactory to Stobart.
· The fixed assets which are the subject of the transaction were, at 31 August 2011, (being the WADI Properties year end date) £106.1m and the gross assets were £108.9m. The transaction will increase profit before taxation by £2.3m per annum, enhance the Group's earnings per share and generate free cash flow in excess of £2.0m per annum, net of interest and other costs.
· The portfolio is anticipated to generate a return in excess of 10% per annum, including a forecast investment in certain of the properties of up to £13.5m. There are also likely to be significant potential tax losses available for use if gains are made on disposals of all or some of the properties.
· The vendor is a company controlled by Stobart's CEO and main board director, Andrew Tinkler, and COO, William Stobart. Andrew Tinkler is also a substantial shareholder in Stobart. Ben Whawell, Stobart's Finance Director and main board director, and Richard Butcher, Deputy CEO and CEO of Stobart Estates, are also directors of the vendor and WADI Properties. Ben Whawell, along with Andrew Tinkler, did not participate in the board decision to proceed with the proposed transaction.
· The Acquisition is considered to be a related party transaction. Consequently, the Acquisition is conditional on the approval of Stobart shareholders. Further details of the Acquisition and a notice convening a general meeting, inter alia, to approve the Acquisition will be sent to Stobart shareholders shortly.
· This proposed investment of £12.35m continues the implementation of the Group's strategy to deploy the £119.90m raised in last year's Placing to support growth across its five divisions.
· In trading, overall the Group expects to meet expectations with some Divisions performing ahead and some slightly below expectations.
The board remains confident of delivering the strategic plan and in the medium and long term future of the Group. The full trading update is shown below.
Rodney Baker-Bates, non-executive Chairman of Stobart, commented:
"This portfolio will both diversify and strengthen our existing property portfolio. We have the management capability within the Group to improve both the income and capital performance. It will provide positive cash flow, gives a return above our current cost of capital, and offers substantial capital upside potential.
The transaction brings with it an attractive fixed rate debt package which will benefit the whole Group up to 2017, as well as potential tax advantages given the current mix of earnings and assets."
Paul Orchard-Lisle, a non-executive director of Stobart and Chairman of Stobart Estates, added:
"We know the Moneypenny portfolio intimately and we are satisfied that apart from the attractive income stream, there are significant opportunities where astute asset management and development expertise should deliver very worthwhile capital gains."
Rodney Baker-Bates, Non-Executive Chairman
Stuart Dyble/James Andrew
Tel: +44 1925 605400
Tel: +44 207 287 9610
David Bick/Mark Longson
Patrick Robb/Rowena Murray
Tel: + 44 207 929 5599
Tel: + 44 207 597 4000
Overall to date the Group is trading in line with current expectations for the full year to 29 February 2012 with some divisions performing ahead and some slightly below expectations.
The recently implemented new divisional structure is working well.
Transport and Distribution operates within a challenging economic environment but the ambient transport operations are largely restructured and improved and have progressed well in the second half of the year. These operations are in a strong position for the new financial year. The focus is now on restructuring and improving the chilled and warehousing operations which are performing below the prior year. The restructuring will result in a more efficient operation to take advantage of future market opportunities. Rail freight is performing well with the Valencia service recommencing. The new rail operation at Tesco Grocery in Daventry for up to eight trains a day is fully operational.
Stobart Estates has a number of on-going property initiatives including the proposed purchase of the Moneypenny portfolio. We expect to deliver at least one realisation before the year end.
Civil engineering and infrastructure management is performing as expected and supporting Group development projects.
In the Air division we look forward to opening the new London Southend airport operation on 28 February with the first easyJet flights commencing at the start of April.
The Biomass division is exporting significant volumes which continue to build and a number of UK supply contracts are under negotiation.
The board remains confident on delivering the strategic plan and in the medium and long term future of the Group.
None of Andrew Tinkler, William Stobart, Ben Whawell or Richard Butcher will vote on the resolution in relation to the Acquisition to be proposed at the General Meeting. These Individuals have also undertaken to take all reasonable steps to ensure their respective associates will not vote on the relevant resolution.
The Independent Directors, having been so advised by Investec, consider the proposed Acquisition fair and reasonable and in the best interests of Stobart and shareholders as a whole.
A resolution to authorise the Directors to make on market purchases of Ordinary Shares to buy-back up to 10 per cent of the Ordinary Shares in issue will also be proposed at the forthcoming General Meeting.
The Independent Directors unanimously recommend Shareholders to vote in favour of the resolutions. The Independent Directors intend to vote in favour of both the Acquisition and the buy-back authority.
The Acquisition agreement is conditional upon the passing of the relevant resolution at the General Meeting and completion of amendments to the banking agreements on terms satisfactory to Stobart.
If that resolution is not passed the Acquisition will not complete and will terminate.