TIDMMIN
RNS Number : 3333B
Minoan Group PLC
20 September 2018
20(th) September 2018
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulation (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
Minoan Group Plc
("Minoan" the "Company")
Proposed disposal of Stewart Travel Limited
Minoan is pleased to announce that it has entered into a
conditional sale and purchase agreement with Zachary Asset Holdings
Limited ("ZAH") for the disposal of the entire issued share capital
of Stewart Travel Limited for a headline consideration of
GBP6,564,520. In addition ZAH will lend Stewart Travel via loans to
Brooklyn Travel Holdings and Brooklyn Travel sufficient monies to
enable it at Completion to repay Intercompany Debt due from Stewart
Travel to the Company, which is currently anticipated to be
approximately GBP781,749. ZAH has incorporated Brooklyn Travel
Holdings as a wholly owned subsidiary and has incorporated Brooklyn
Travel as a wholly owned subsidiary of Brooklyn Travel Holdings. It
is intended that the Managers (being Duncan Wilson, managing
director of the Company and of Stewart Travel and Rick Green and
Brian Cassidy both of whom are members of the senior management
team of Stewart Travel) will, in aggregate, hold a 25% equity stake
in Brooklyn Travel Holdings and that ZAH will transfer Stewart
Travel to Brooklyn Travel post Completion.
A Circular is today being sent out to Minoan Shareholders,
setting out the details of the proposed disposal of the entire
issued share capital of Stewart Travel Limited. The Circular will
provide Shareholders with the background, explaining why the Board
of Minoan considers the Proposed Transaction to be in the best
interests of the Company and its Shareholders, and why the
Independent Directors unanimously recommend that Shareholders vote
in favour of the Resolution, to approve the Proposed Transaction at
a General Meeting to be held at 10.00 a.m. on 8 October 2018, at
the offices of Pinsent Masons LLP, at 30 Crown Place, Earl Street,
London, EC2A 4ES.
Definitions in this Circular and in this announcement are set
out at the end of this announcement.
Proposed Transaction
As previously announced the Board has taken the decision to
dispose of (subject to Shareholder approval) the Group's Travel
& Leisure division which is now conducted by Stewart Travel in
order to substantially reduce the Company's debt. Completion of the
sale of the division will also allow the Directors to concentrate
their efforts on optimising the value of the Group's project in
Crete and its monetisation for the benefit of Shareholders.
The decision to dispose of the Group's Travel and Leisure
division has not been taken lightly. The principal reasons for the
decision are:
-- the Group has been unable to raise funds on acceptable terms
to expand its Travel & Leisure division as fast as it had
originally planned which has placed a strain on the Group's
resources and an inability to reduce its significant debt and its
associated costs;
-- the date for repayment of the sums due under the Existing
Facility Agreements was extended as negotiations with the Managers'
proposed private equity provider continued. These negotiations
resulted in considerable delays and costs to the Company and
eventually the private equity fund at the centre of these
negotiations felt unable to proceed. The final extension of the
on-demand facilities was until 31 August 2018 and ZAH has made it
clear that it would consider enforcing its security over the
Group's principal subsidiaries unless a transaction was concluded
swiftly with ZAH effectively replacing that private equity
provider; and
-- with the grant of outline planning consent in Greece, the
Group now needs to concentrate its efforts on optimising the value
of the Project and monetising it for the benefit of
Shareholders.
The consideration for the sale of the Stewart Shares is
GBP6,564,520. In addition, it was agreed early in the negotiation
process that the purchaser would loan Stewart Travel GBP1.497m in
order that it could pay that amount to the Company to clear the
Intercompany Debt. Since that time the level of indebtedness has
been reduced by Stewart Travel such that the Intercompany Debt due
to the Company will be approximately GBP781,749. At Completion ZAH
will loan Stewart Travel via loans to Brooklyn Travel Holdings and
Brooklyn Travel an amount equal to the Intercompany Debt so that
Stewart Travel can pay this amount to the Company at Completion.
The Consideration and the Intercompany Debt repayment will be used
to substantially reduce the Group's indebtedness under the terms of
the Existing Facility Agreements.
Following Completion the Company will still owe c. GBP900,000 to
ZAH. The terms of this loan are set out in the Revised Facility
Agreement the principal terms of which are summarised below and
which amend and restate the terms of the Existing Facility
Agreements.
The Sale Agreement is conditional on the passing of the
Resolution approving the Proposed Transaction.
Information on Stewart Travel
Stewart Travel is a limited company incorporated in Scotland and
its principal activity is that of operating and managing travel
businesses. The Group's Travel and Leisure division is owned by
Stewart Travel.
In the financial year ended 31 October 2017 Stewart Travel
reported revenues of GBP8,700,039 (FY 2016: GBP7,316,789) and
profit before tax of GBP488,088 (FY 2016: GBP28,623). No management
charge was raised in the year by the Company (FY 2016: GBP100,000).
At 31 October 2017 Stewart Travel had total assets of GBP10,196,781
(FY 2016: GBP8,823,114) consisting of the following:
Intangible assets: GBP6,271,388 (FY 2016: GBP6,451,405)
Property, plant and equipment: GBP574,965 (FY 2016: GBP571,528)
Trade and other receivables: GBP3,338,902 (FY 2016: GBP1,778,686)
Cash and cash equivalents GBP11,526 (FY 2016: GBP21,495)
The fees for directors of Stewart Travel in the financial years
ending 31 October 2016 and 2017 were borne by Loyalward, a Minoan
subsidiary, as were the consultancy and employment costs
respectively of Rick Green and Brian Cassidy but they were largely
recharged to Stewart Travel.
In the six months ended 30 April 2018 Stewart Travel reported
revenues of GBP4,865,000 and profit before taxation of GBP455,000
and assets of GBP8,725,000 consisting of goodwill of GBP5,610,000,
other non-current assets of GBP1,060,000, current assets of
GBP2,305,000 and a charged related to an asset held for sale of
-GBP250,000.
Trading in the four months commencing May 2018 has been slower
than forecast. Revenues in this four month period were up by
GBP515,000 (19%) against the same period in the previous year but
this was offset by an increase in costs of GBP180,000 (7%) as
against the same period in the previous year.
Details of the Sale Agreement
The Sale Agreement was entered into on 19 September 2018 between
(1) the Company as vendor, (2) ZAH as purchaser and (3) Duncan
Wilson, Rick Green and Brian Cassidy (the "Managers"). Duncan
Wilson is a director of the Company and of Stewart Travel and is
employed by Loyalward. Brian Cassidy is also currently employed by
Loyalward and Rick Green provides his services pursuant to a
consultancy agreement with Loyalward. At Completion each of the
Managers will cease to be engaged by the Group.
The total consideration for the sale of the entire issued share
capital of Stewart Travel is GBP6,564,520 which sum will be
increased, if the Proposed Transaction does not complete by 30
September 2018, by an amount of GBP4,000 for each day from 30
September 2018 up to and including the day of Completion. At
Completion ZAH will loan to Stewart Travel an amount equal to the
Intercompany Debt and shall procure that Stewart Travel uses such
sum to settle the Intercompany Debt on Completion.
Completion is conditional on Shareholders passing the Resolution
by the requisite majority. The Company has undertaken to despatch a
circular to Shareholders including the unanimous recommendation of
the Independent Directors to vote in favour of the Resolution and
to convene the General Meeting.
The Company and the Managers have respectively agreed to use
their reasonable endeavours to procure so far as they are
reasonably able that, among other things, the business of Stewart
Travel is carried on as a going concern in the ordinary and normal
course as carried on prior to the date of the Sale Agreement and
that certain other actions do not occur. Such undertakings are in a
form which is usual in a transaction of the nature of the Proposed
Transaction.
The Sale Agreement includes rights of termination for both the
Company and ZAH in certain limited circumstances and will
automatically terminate twenty-one days after the date of the Sale
Agreement if the Resolution has not been passed. If the Sale
Agreement is so terminated then each party's rights under the Sale
Agreement will cease except that the rights and liabilities of the
parties which have arisen before termination will continue to
exist.
The Company and each of the Managers have given warranties and
indemnities which are usual in a transaction of this nature. The
warranties given by the Company are limited to the actual knowledge
of Christopher Egleton. The Company and each of the Managers has
also entered into a tax covenant in terms which are usual in a
transaction of this nature.
The Company has entered into certain restrictive covenants in
favour of ZAH for a period of three years from the date of
Completion including not carrying on a business competitive to that
of Stewart Travel as at the date of Completion.
The maximum liability of the Company (other than in respect of
certain fundamental warranties e.g. as to title and authority) for
breach of warranty or under the tax covenant is capped at GBP75,000
and is subject to other limitations both financial and in time.
Details of the Amendment Agreement and the Revised Facility
Agreement
On 19 September 2018 the Company, ZAH, Silja, ZAH and Loyalward
entered into the Amendment Agreement and the Company, ZAH and
Loyalward entered into the Revised Facility Agreement. Both the
Amendment Agreement and the Revised Facility Agreement are
conditional upon the Sale Agreement becoming unconditional on or
before 30 October 2018 or such later date as the parties may
agree.
Under the Amendment Agreement the parties acknowledge that on 30
September 2018 the Company will owe ZAH the sum of GBP8,258,990. On
Completion ZAH will lend an amount equal to the Intercompany Debt
to Brooklyn Travel Holdings which will lend such sum to Brooklyn
Travel to lend to Stewart Travel and Stewart Travel will repay the
Intercompany Debt to the Company. The Company will then pay that
sum to ZAH in part repayment of the amounts due to ZAH under the
Existing Facility Agreements. After Completion the Loan Balance of
approximately GBP900,000 will remain due to ZAH upon the terms of
the Revised Facility Agreement.
Interest will accrue on the Loan Balance at ten per cent. per
annum quarterly in arrears and the principal is repayable eighteen
months after Completion or, if earlier, upon the occurrence of
specified events of default which are on usual terms for a
transaction of this nature.
The security currently provided by the Group to ZAH will remain
in place except that the share pledge over the Stewart Shares will
be released and Stewart Travel will be released from its
obligations to ZAH.
Silja currently holds warrants exercisable over 50,000,000
Ordinary shares at a price of seven pence per share and over
1,765,733 Ordinary shares at a price of six pence per share. The
warrants are exercisable on or prior to 23 October 2020. Under the
relevant warrant instruments if the Company issues equity
securities at a price lower than the prevailing exercise price then
the exercise price is reset to a price one pence higher than the
relevant issue price and Silja was entitled to a fee of GBP125,000
for every 10 million Ordinary Shares subscribed for out of the
initial 50,000,000. As part of the Amendment Agreement the Company
and Silja have agreed that these warrants will have a subscription
price of 3.5 pence per share, that the fee will no longer apply and
the warrants will expire on the fifth anniversary of
Completion.
In addition if the Company allots additional equity securities
prior to the expiry of the warrants the Company has agreed to grant
Silja such number of warrants as is equivalent to 17% of the equity
securities (subject to certain exceptions) issued with an exercise
price equal to the price at which those equity securities were
issued. Those warrants would expire on the fifth anniversary of the
date of Completion.
AIM Rule 15
In accordance with AIM Rule 15, the Proposed Transaction
constitutes a fundamental change of business of
the Company and accordingly the Proposed Transaction is
conditional on the consent of Shareholders being given in general
meeting. Notice of the General Meeting convened for this purpose is
set out at the end of this announcement.
Related Party Transaction
The Independent Directors consider, having consulted with the
Company's nominated adviser, WH Ireland Limited, that the terms of
the Proposed Transaction are fair and reasonable insofar as
Shareholders are concerned.
Future prospects
The Board appreciates the continued support and forbearance of
ZAH especially as regards the additional sums it has lent in recent
years in order to support the Group's overheads whilst continuous
efforts were made to secure the planning permission for the
Project.
Following Completion the Loan Balance of approximately
GBP900,000 will remain due from the Company to ZAH under the terms
of the Revised Facility Agreement. It is the intention of the
Directors to look to refinance this when an opportunity to do so
becomes available in order to reduce the Group's financing costs
and to release the security for other possible debt based
financing.
With the disposal of Stewart Travel with its historic
contribution to the Group's overheads the Company will be seeking
additional funding in the near term in order to continue to meet
its costs and to advance the Project. Such funding may take the
form of equity and/or debt finance ahead of a realisation of some
or all of its interest in the Project.
The cost structure of the Group remains under careful scrutiny
in order to keep costs to a minimum as the Group will have no
operating income until it begins to monetise the Project or
establishes new and complimentary income streams. Such scrutiny is
likely to result in a number of changes to the management structure
of the Group over the next few months in addition to the departure
of the Managers.
As previously announced by the Board, following the sale of
Stewart Travel, the Group's focus will be on optimising the value
of the Project and progressing towards its monetisation for the
benefit of Shareholders.
Despite having to make the difficult decision to dispose of
Stewart Travel, the Company remains hopeful that the next twelve
months should see significant progress toward the monetisation of
the Project.
General Meeting and Resolution
The notice convening the General Meeting to be held at 10.00
a.m. on 8 October 2018 at the offices of Pinsent Masons LLP, at 30
Crown Place, Earl Street, London EC2A 4ES at which the Resolution
will be proposed as set out within the Circular being sent out to
Shareholders today.
The Resolution, which will be proposed as an ordinary
resolution, asks Shareholders to approve the sale by the Company of
Stewart Travel in accordance with the Sale Agreement.
Action to be taken
A proxy form for use by Shareholders at the General Meeting is
enclosed within the Circular being sent to Shareholders today.
Whether or not Shareholders propose to attend the General Meeting,
they are requested to complete and sign the proxy form in
accordance with the instructions printed thereon and return it to
the Company's registrars, Neville Registrars Limited, Neville
House, Steelpark Road, Halesowen, B62 8HD as soon as possible and
in any event so as to be received by the registrars not later than
10.00 a.m. on 4 October 2018. The completion and return of the
proxy form will not preclude Shareholders from attending the
General Meeting, speaking and voting in person should they wish to
do so.
Recommendation
The Independent Directors consider that the Resolution is in the
best interests of the Company and its Shareholders and they
recommend that you vote in favour of the Resolution as the
Directors intend to do in respect of their entire beneficial
holdings amounting to 3,064,616 Ordinary Shares representing 1.34
per cent of the current issued Ordinary Share.
DEFINITIONS
In this announcement the following terms shall bear the meanings
set out below:
Act the Companies Act 2006
Additional Facility the facility agreement entered into between
Agreement the Company as borrower and ZAH as lender
on 27 March 2018 as amended and restated
from time to time pursuant to which an
additional GBP650,000 loan was made
AIM Rule the relevant rule of the AIM Rules for
Companies as published by London Stock
Exchange plc
Amendment Agreement the conditional agreement entered into
on 19 September 2018 between (1) ZAH,
(2) the Company, (3) Silja and (4) Loyalward
which, among other things, amends and
restates the terms of the Existing Facility
Agreements by way of the Revised Facility
Agreement
Board or Directors the directors of the Company at the date
of this announcement
Brooklyn Travel Brooklyn Travel Limited, a company incorporated
at the direction of the ZAH for the purposes
of the Proposed Transaction and which
is currently wholly owned by Brooklyn
Travel Holdings
Brooklyn Travel Holdings Brooklyn Travel Holdings Limited, a company
incorporated at the direction of ZAH
for the purposes of the Proposed Transaction
and which is currently wholly owned by
ZAH
Completion completion of the Sale Agreement in accordance
with its terms
Consideration GBP6,564,520 being the consideration
for the Stewart Shares pursuant to the
Sale Agreement
Existing Facility the Initial Facility Agreement and the
Agreements Additional Facility Agreement
General Meeting the general meeting of the Shareholders
convened for 10.00 a.m. on 8 October
2018
Group the Company and each subsidiary of the
Company
Independent Directors the Directors other than Duncan Wilson
who is a related party for the purposes
of AIM Rule 13 given his involvement
in the Proposed Transaction through his
proposed interest in the equity of Brooklyn
Travel Holdings the parent company of
Brooklyn Travel to which ZAH proposes
to transfer the entire issued share capital
of Stewart Travel post Completion
Initial Facility the facility agreement entered into between
Agreement the Company as borrower and Hillside
International Holdings Limited as lender
and certain subsidiaries of the Group
as guarantors on 16 October 2013 as amended
and restated from time to time pursuant
to which a GBP5 million loan was made
and which agreement has been assigned
by Hillside International Holdings Limited
to ZAH
Intercompany Debt the aggregate of all amounts due from
Stewart Travel to any other member of
the Group as at the date of Completion
less any amount due from any other member
of the Group to the Company as at the
date of Completion
Loan Balance the balance of the sums due under the
Existing Facility Agreements immediately
following Completion as reduced by the
Consideration and the Intercompany Debt
repayment
Loyalward Loyalward Limited, a subsidiary of the
Company
Managers Duncan Wilson, Rick Green and Brian Cassidy
Minoan or the Company Minoan Group Plc
Notice of General the notice of General Meeting set out
Meeting in the Circular being sent to Shareholders
today.
Ordinary Shares the ordinary shares of 1p each in nominal
value in the capital of the Company
Project the Group's development project in Crete
Proposed Transaction the sale of the entire issued share capital
of Stewart Travel to ZAH
Resolution the shareholders' resolution relating
to the Proposed Transaction set out in
the Notice of General Meeting
Revised Facility the Existing Facility Agreements as amended
Agreement by the Amendment Agreement which governs
the terms of the Loan Balance
Sale Agreement the conditional sale and purchase agreement
entered into on 19 September 2018 between
(1) the Company and (2) ZAH and (3) the
Managers in respect of the Proposed Transaction
Shareholders the holders of Ordinary Shares
Silja Silja Investments Limited, a company
associated with ZAH
Stewart Shares the ordinary shares of GBP1.00 each in
the capital of Stewart Travel
Stewart Travel Stewart Travel Limited, a company registered
in Scotland with company number SC400502
ZAH Zachary Asset Holdings Limited, a company
incorporated in Jersey and the Company's
principal lender pursuant to the Existing
Facility Agreements and the buyer under
the Sale Agreement
Further Information:
Minoan Group Plc
Christopher Egleton christopher.egleton@minoangroup.com
Duncan Wilson duncan.wilson@minoangroup.com
Bill Cole william.cole@minoangroup.com
WH Ireland Limited 020 7220 1666
Adrian Hadden/Chris
Viggor/Matthew Chan
Cornhill Capital
Limited 020 7710 9610
Daniel Gee
Morgan Rossiter 020 3195 3240
Richard Morgan Evans
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END
DISEAANNFFFPEAF
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