RNS Number:1264Q
H.R. Owen PLC
24 September 2003
H R Owen plc ("H R Owen" or "the Company")
Placing of 4,437,398 new ordinary shares at 165p per share, of which 2,537,398
are subject to clawback by qualifying shareholders under an Open Offer
H.R.Owen announces that it proposes to raise approximately #7.3million
(approximately #6.8million net of expenses) by an issue of 4,437,398 new shares
(representing approximately 23.3 per cent. of the Company's existing issued
share capital) through a placing and open offer at an issue price of 165p per
new share. The sponsor and financial adviser to the Company is John East and
Partners Limited; the broker is J M Finn & Co.
The issue price of 165p per new share represents a discount of 16.5p
(approximately 9.1 per cent.) to the closing middle market price of 181.5p per
ordinary share on 23 September 2003 (the latest practicable date prior to this
announcement). The Placing and the Open Offer is not being underwritten.
The Group's business
H.R.Owen is a prestige car group which currently operates forty-six dealerships,
covering both sales and after sales. The Group operates in five divisions. It
represents a number of brands for the following principal manufacturers: for the
BMW Group, nine dealerships for BMW, Mini and Rolls-Royce; for the
DaimlerChrysler Group, seven dealerships for Chrysler, Jeep, Mercedes-Benz and
Smart; for the Premier Automotive Group, twelve dealerships for Jaguar, Land
Rover and Volvo; for the VW Group, ten dealerships for Audi, Bentley,
Lamborghini, SEAT and Volkswagen; and for the Specialist Division (four separate
manufacturers), seven dealerships for Ferrari, Lexus, Lotus, Maserati and Noble.
The Group also operates a Suzuki dealership. The dealerships are located
predominately in Greater London, the Home Counties, East Anglia and the south of
England.
Industry background
Historically, the motor industry in Europe has been the subject of a block
exemption under European competition law. In October 2002, new rules were
introduced following a review of this exemption, which substantially changed the
way in which manufacturers franchise dealers for sales and after sales in
countries within the EU. By October 2003, all existing agreements between
manufacturers and dealers will have to operate under these new rules. Since
2000, the H.R.Owen Group has been repositioning itself and rebalancing its
portfolio in order to gain maximum benefit from the consequent changes.
Changes to the EU block exemption allow manufacturers to choose between offering
either selective or exclusive forms of franchises. H.R.Owen's principal
manufacturers have all chosen the selective system, whereby the franchises are
no longer determined by territories. Following the introduction of the new
rules, current sales and after sales franchises will be separated. A franchisee
will be able to hold a franchise covering either function without having to
operate both. Furthermore, sales and after sales franchisees will be permitted
to sell or service a number of different marques from the same premises, subject
to meeting the criteria set by the manufacturers. The Directors believe that
the cost of entry required for after sales franchises to satisfy the criteria
set down by manufacturers is likely to be high, and expect that, in practice,
the major vehicle retailers will continue to be granted non-exclusive after
sales franchises allowing them to service the brands for which they hold sales
franchises.
A further change concerns the appointment of franchisees. Previously, this was
entirely at the discretion of the manufacturers. Franchisees will, as a result
of the change, be able to sell or acquire other franchises of the same marque
anywhere within the EU without approval from the manufacturers. In addition,
from October 2005, franchised dealers will be permitted to open showrooms
elsewhere in the EU on the same basis. As a result of these changes, a number
of the manufacturers supplying the Group have reduced the number of dealer
partners in the EU. The Directors believe that the ability of dealers to buy
and sell franchises of the same marque with fewer restrictions, together with
the reduction in the number of franchising partners will reduce intra-brand
competition and lead to an increasing polarisation of the industry, as major
groups become larger at the expense of smaller operations.
Strategy of the Group
Following the announcement of the proposed changes to the block exemption the
strategy of the Group has been, since 2000, to focus on holding franchises for
prestige and specialist marques. The Group intends to consolidate its position
in the geographical areas in which it operates and to make further strategic
acquisitions to complete its regional coverage, primarily in the south east of
England.
Current trading and prospects
The Company has today announced its unaudited interim results for the six month
period ended 30 June 2003. Whilst these results show a lower profit before
taxation than that for the corresponding period last year, the Directors believe
that profitability, in the short term, has been held back by the continuing
rationalisation and refocusing programme which the Group has been carrying out
in order to position itself more effectively for the future.
Since the beginning of 2000, H.R.Owen has closed or disposed of seventeen
dealerships and acquired or established twenty two dealerships, resulting in
the Group being appointed to operate a number of adjacent sales and after sales
points for some of the largest catchment areas in the UK. The Directors believe
this confirms the Group as a substantial supplier in the prestige car market.
The Group has recently acquired three new BMW and Mini dealerships. In March
this year, the Company announced that it had acquired Heathrow Limited, a BMW
and Mini dealership trading in the West Drayton and Hillingdon area, for a sum
of approximately #4.7 million. In June, the Group acquired the business and
goodwill of Park West Chiswick, a BMW and Mini dealership in West London, for
approximately #4.7 million. In late August, the Group acquired the business and
goodwill of Sytner Chelsea, a BMW and Mini dealership in Chelsea, for a sum of
approximately #1.8 million.
These three acquisitions, together with plans to develop a new BMW and Mini
dealership at Park Royal and the existing BMW and Mini dealership at Holland
Park, will result in the Group covering a large catchment area in the west of
London for both BMW and Mini.
In March 2003, the Company announced the establishment of a new Jaguar
dealership at the Group's Bury St Edmunds Land Rover dealership. In July 2003,
the Company also announced that it had acquired the business of the Guy Salmon
Jaguar dealership at Colindale and Hampstead in North London for a consideration
of approximately #0.9 million. On the same day, the Group announced the sale of
its Land Rover business in Stockport to Guy Salmon for #1.6 million.
In March 2003, the Group also established a new Lamborghini showroom at its
former Bentley premises in South Kensington and currently intends to establish a
new Lamborghini dealership in Stockport by the end of the year.
In July 2003, the Company announced that it had acquired the business of the
Brighton Mercedes-Benz dealership for a consideration of approximately #1.2
million. The Group already operates the Mercedes-Benz and Smart dealerships for
Gatwick and operated the Mercedes-Benz dealerships for Redhill and Eastbourne.
The Brighton acquisition completes the Group's current Mercedes-Benz acquisition
programme.
Also in July 2003, the Group disposed of its Porsche dealership at Hatfield to a
subsidiary of Porsche Cars Great Britain Limited for a consideration of
approximately #2.3 million.
The Group has also recently agreed in principle to acquire a Lexus dealership
and an Audi dealership. These acquisitions are currently expected to complete
on 30 September 2003. Both dealerships are situated in the south east of
England. In addition, the Group has agreed in principle to sell its Maserati
dealership based in St Albans, which is also expected to complete on 30
September 2003.
The Group has also had preliminary discussions with a number of parties with the
intention of making further acquisitions over the next twelve months.
The Group is currently experiencing mixed fortunes. Despite a downturn in the
London economy, the Group has a strong forward order book for a number of
models, particularly at the top end of the market for Rolls-Royce, Bentley and
Lamborghini, where margins are high. However, margins have been affected by the
delay of new vehicle introductions. Two of the Group's other brands are
experiencing difficulties, due to the high-selling models being changed, and the
Group has also suffered disruptions from delayed acquisitions and disposals as a
result of the introduction of the new franchising rules. The Directors believe
that operating margins will benefit from a more plentiful supply of these new
products and also from the integration of its recent acquisitions into the
overall structure of the Group.
For the above reasons, the Directors believe that the financial and trading
prospects of the Group for the future are very encouraging for the medium term,
but the results for the current financial year ending 31 December 2003 will be
dependent on the receipt and delivery of many of the forward-sold new models
which have previously been delayed.
Reasons for the placing and open offer and use of proceeds
The net proceeds of the Placing and Open Offer, amounting to approximately #6.8
million, will provide the Group with the additional capital necessary to
complete its current acquisition programme. It is anticipated that the net
proceeds will be applied as to #3.5 million for the acquisition costs of new
dealerships, as to #3 million for working capital for the new dealerships and
the balance of #0.3 million for additional working capital.
Details of the placing and open offer
The Company is proposing to raise approximately #7.3 million (approximately #6.8
million net of expenses) by the issue of 4,437,398 new shares at 165p per
share. The Placing and Open Offer are not being underwritten.
The new shares represent approximately 23.3 per cent. of the existing issued
ordinary shares and will represent approximately 18.9 per cent. of the enlarged
issued share capital of the Company following completion of the Placing and Open
Offer.
The Placing and Open Offer are conditional, inter alia, upon the passing of the
resolution to be proposed at an Extraordinary General Meeting of the Company to
be held on 17 October, 2003, on Admission becoming effective by 21 October 2003,
and on the Placing and Open Offer Agreement having become unconditional in all
respects by not later than 21 October 2003 (or such later day, not being later
than 10 November 2003, as the Company, John East & Partners and J M Finn may
agree) and not having been terminated in accordance with its terms.
The new shares will, when issued and fully paid, rank pari passu in all respects
with the existing issued ordinary shares, except that they will not rank for the
interim dividend declared in respect of the six month period ended 30th June
2003. Application has been made to the UK Listing Authority for the New Shares
to be admitted to the Official List and to the London Stock Exchange for the New
Shares to be admitted to trading on its market for listed securities. It is
expected that admission to listing will become effective and dealings in the New
Shares on the London Stock Exchange will commence on 21 October 2003.
The Company has appointed John East & Partners Limited as sponsor and J M Finn &
Co. as broker to the placing and open offer.
The Firm Placing
J M Finn, as agent for the Company, has placed 2,631,261 new shares firm with
institutional and certain other investors at 165p per share.
Of these, 731,261 comprise new shares which are the subject of irrevocable
undertakings from certain existing shareholders not to subscribe for their
entitlements under the Open Offer; the remaining 1,900,000 comprise new shares
which are not being offered to shareholders on a pre-emptive basis and will not
be subject to recall to satisfy applications by qualifying shareholders under
the Open Offer.
The issue price represents a discount of 9.1 per cent. to the middle market
price of an Ordinary Share at the close of business on 23 September 2003 (the
latest practicable date prior to this announcement) of 181.5p.
The Open Offer
Under the Open Offer, qualifying shareholders will be given the opportunity to
apply for 2,537,398 open offer shares at the issue price, free of expenses, pro
rata to their existing holdings of ordinary shares on the record date, on the
following basis:
2 Open Offer Shares for every 15 existing Ordinary Shares
Fractional entitlements to open offer shares will not be allocated but will be
disregarded and entitlements rounded down to the nearest whole number of open
offer shares. Any fractional entitlements that would otherwise have arisen will
be aggregated and issued under the conditional placing for the benefit of the
Company.
The directors (other than John Robertson) and Shelton Corporation have
irrevocably undertaken to take up all or part of their respective entitlements
under the open offer in respect of 684,649 open offer shares, in aggregate,
representing approximately 27 per cent. of the open offer shares.
Certain of the directors have irrevocably undertaken not to take up all or part
of their respective entitlements under the open offer in respect of 731,261 open
offer shares, in aggregate, representing approximately 28.8 per cent. of the
open offer shares. Accordingly, J M Finn, as agent for the Company, has placed
these 731,261 open offer shares firm with institutional and certain other
investors at the issue price and has conditionally placed the remaining
1,121,488 open offer shares (other than those which are the subject of
irrevocable undertakings from existing qualifying shareholders to subscribe for
their entitlements under the open offer) with institutional and certain other
investors at the issue price, subject to recall to satisfy valid applications by
qualifying shareholders pursuant to the Open Offer.
The Open Offer is not a "rights issue" and entitlements to open offer shares
will not be tradeable or sold in the market for the benefit of those who do not
apply under the open offer. Under the open offer, unlike a rights issue, the
open offer shares not applied for will not be sold in the market or placed for
the benefit of the qualifying shareholders who do not apply, but will be placed
for the benefit of the Company at the issue price. Applications by qualifying
shareholders for open offer shares to be issued under the open offer may only be
made on an application form which is personal to that shareholder or
shareholders and may not be sold, assigned, transferred or split, except to
satisfy bona fide market claims.
24 September 2003
Expected timetable of principal events
2003
Record Date for entitlements under the Open Offer 19 September
Latest time and date for splitting Application Forms
(to satisfy bona fide market claims) 3.00 p.m. on 14 October
Latest time and date for receipt of completed Forms of Proxy 10.00a.m.on 15 October
Latest time and date for receipt of completed Application Forms and
payment in full under the Open Offer
3.00 p.m. on 16 October
Extraordinary General Meeting 10.00 a.m.on 17 October
Dealings expected to commence in the New Shares 8.00 a.m. on 21 October
New Shares in uncertificated form expected to be credited to CREST 21 October
accounts
Share certificates for New Shares in certificated form expected to be 27 October
despatched
For further enquiries:
H R Owen plc
Nick Lancaster (Managing Director) 020 7245 1122
John East & Partners Limited
John East/David Worlidge 020 7628 2200
This information is provided by RNS
The company news service from the London Stock Exchange
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