TIDMCCT
RNS Number : 9162Z
Character Group PLC
28 January 2022
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR
INDIRECTLY, IN OR INTO, THE UNITED STATES OF AMERICA (INCLUDING ITS
TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES AND THE
DISTRICT OF COLUMBIA), AUSTRALIA, CANADA, JAPAN, NEW ZEALAND, THE
REPUBLIC OF SOUTH AFRICA.
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it
forms part of UK domestic law pursuant to the Market Abuse
(Amendment) (EU Exit) regulations (SI 2019/310) ("MAR"), and is
disclosed in accordance with the Company's obligations under
Article 17 of MAR. Upon the publication of this announcement via
the Regulatory Information Service, this inside information is now
considered to be in the public domain.
THE CHARACTER GROUP PLC
("Character", the "Company" or "Group")
Designers, developers and international distributor of toys,
games and giftware
Tender Offer for up to 2,142,572 Ordinary Shares at 630 pence
per Ordinary Share
London: Friday, 28 January 2022
A circular explaining the terms of a Tender Offer for up to
2,142,572 Ordinary Shares at 630 pence per Ordinary Share (the
"Circular") will today be posted to Shareholders and published on
the Company's website at www.thecharacter.com.
Capitalised terms and expressions shall have the same meanings
as those attributed to them in the Circular.
1. Introduction
The Company intends to return up to approximately GBP13.5
million of cash to Qualifying Shareholders by way of the Tender
Offer and the subsequent repurchase from Panmure Gordon of the
Ordinary Shares successfully tendered. The Tender Offer will be
conducted at the Tender Price. If the maximum number of Ordinary
Shares under the Tender Offer is acquired, this would result in the
purchase of approximately 10 per cent. of the Company's current
issued share capital (excluding Ordinary Shares held in
treasury).
The Tender Offer will be conducted at a fixed price of 630 pence
per Ordinary Shares ("Tender Price"), which represents a premium of
approximately 8.4 per cent. to the average middle market closing
price of an Ordinary Share for the 60 trading days ended 27 January
2022, being the latest practicable date prior to the date of this
announcement.
The Company is authorised to buy back up to 3,200,000 Ordinary
Shares pursuant to the general authority for the Company to make
market acquisitions, including by way of a tender offer, which was
approved by Shareholders on 21 January 2022, since when the Company
has not acquired any Ordinary Shares.
2. Background to and reasons for the Tender Offer
The Company has pursued an active buyback strategy to return
surplus cash to Shareholders since 2004 and, since that time, has
acquired a total of approximately 39.6 million Ordinary Shares,
representing approximately 185 per cent. of the current issued
Ordinary Share capital (excluding Ordinary Shares held in
treasury). However, following the implementation of the EU's Market
Abuse Regulation in the UK from July 2016, the Company's ability to
sustain this strategy has been extremely limited and no buybacks
have been effected by the Company since October 2019.
On 29 April 2021, the Company announced that the Board had
resolved to pursue a new buyback initiative to purchase Ordinary
Shares. In an update issued by the Company on 30 September 2021,
the Board stated, due to adverse trading conditions, that a tender
offer would be deferred until after the announcement of the Group's
preliminary results for the financial year ended 31 August 2021.
Those preliminary results were announced by the Company on 15
December 2021. It is against this background that the Tender Offer
is now being made.
Current trading
On 21 January 2022, the Company provided the following update on
trading for the four months ending 31 December 2021:
"The Group maintained a steady performance in the lead up to and
through the Christmas 2021 period, notwithstanding global
logistical challenges which continue to impact the export of
product from the Far East to UK and our global markets. Whilst the
consequent escalation in freight rates from the Far East has
significantly increased costs, the Group has endeavoured, where
possible, to raise its prices in the UK and Scandinavia to mitigate
the impact on margins. Turnover increased by c.23% in the
four-month period ended 31 December 2021 compared to the previous
year (in part benefiting from delayed shipments in August 2021).
The bulk of this growth was attributable to sales to the USA and
Scandinavia, whilst turnover in the UK and the rest of the world
remained largely flat.
"Our sales levels are a reflection of the strong portfolio of
brands and products that we have at this time. In the UK, retailers
have reported good sell through of our products and this bodes well
for the rest of the financial year. Our teams are excited to be
presenting to our customers at the London Toy Fair at Olympia next
week (25 - 27 January) and showcasing the 2022 range and
introducing new products, brands and refreshed items.
"Assuming no further worsening of the trading conditions,
including adverse COVID developments impacting normal commercial
activity, the Board believes that the Group will achieve current
market expectations* for the year ending 31 August 2022.
"Subject to the share buyback authority being renewed at the
Annual General Meeting later today, the Company will be proceeding
with the tender offer proposed last year and full details of the
size, pricing and exact timing of the offer are expected to be
announced next week.
Note: *Current market consensus compiled by the Company for the
year ending 31 August 2022, prior to the release of this
announcement, is an underlying profit before tax averaging c.
GBP11.275m "
The ongoing cash-generative nature of the Group's business model
has resulted in the Group's cash balances as at 26 January 2022
standing at approximately GBP27 million. This strong cash
generation is anticipated to continue through and beyond the
current financial year. Taking account of the Group's future
working capital expenditure, the funding of the potential future
growth requirements of the business and to ensure the Company's
ability to maintain a progressive dividend, the Board has estimated
the surplus cash in the business to be at least GBP15.0 million.
The Board maintains that a buyback by way of a tender offer
provides the most efficient use of the Company's surplus cash at
this point in time and a means by which to re-establish a clear and
meaningful buyback strategy. Accordingly, the Board has resolved to
seek to return up to approximately GBP13.5 million to Qualifying
Shareholders under the Tender Offer.
3. Benefits of the Tender Offer
The benefits of the Tender Offer, compared to other available
options for a return of surplus cash to Shareholders, are that the
Tender Offer:
-- provides those Qualifying Shareholders who wish to sell
Ordinary Shares with the opportunity to do so;
-- allows the Company to broaden the return of cash to include
those Qualifying Shareholders whose Ordinary Shares might
not otherwise be purchased by the Company through a buy-back
in the market;
-- enables Qualifying Shareholders to decide whether to tender
none, some or all of their Ordinary Shares within the
overall limits of the Tender Offer;
-- enables those Qualifying Shareholders who do not wish
to receive capital at this time to maintain their full
investment in the Company;
-- enables Ordinary Shares to be sold free of commissions
or charges that would otherwise be payable if Qualifying
Shareholders were to sell their shares through their broker;
and
-- enhances earnings per share in respect of Ordinary Shares
and the percentage holdings of Ordinary Shares of Shareholders
not tendered under the Tender Offer.
4. Summary information on the Tender Offer
Structure of the Tender Offer
The Tender Offer will be implemented on the basis of Panmure
Gordon acquiring, as principal, the successfully tendered Ordinary
Shares at the Tender Price. The Company will purchase such Ordinary
Shares from Panmure Gordon at the same price under the Repurchase
Agreement. The Company will cancel the Ordinary Shares purchased by
it under the Repurchase Agreement.
Up to 2,142,572 Ordinary Shares will be purchased under the
Tender Offer, representing approximately 10 per cent. of the
Company's issued Ordinary Share capital (excluding Ordinary Shares
held in treasury) as at 27 January 2022, the latest practicable
date for such determination prior to this announcement, for a
maximum aggregate consideration of approximately GBP13.5
million.
The Tender Offer is conditional on receipt of valid tenders in
respect of at least 476,191 Ordinary Shares, representing an
aggregate value, at the Tender Price, of not less than GBP3.0
million.
Qualifying Shareholders can decide whether they want to tender
all, some or none of their Ordinary Shares in the Tender Offer.
The Tender Offer is being made available to all Qualifying
Shareholders who are on the Register at 6.00 p.m. on the Record
Date.
The Tender Offer will close at 1.00 p.m. (UK time) on 11
February 2022 and tenders received after that time will not be
accepted (unless the Tender Offer is extended).
The Tender Price
A tender price of 630 pence per Ordinary Share will be applied
to all Ordinary Shares purchased by Panmure Gordon pursuant to the
Tender Offer.
The Tender Price will allow Panmure Gordon to purchase the
maximum number of Ordinary Shares for a total cost not exceeding
GBP13,498,203.60 or, if the aggregate price of all Ordinary Shares
validly tendered by Qualifying Shareholders is less than
GBP13,498,203.60, all of the Ordinary Shares validly tendered
pursuant to the Tender Offer.
Number of Ordinary Shares to be purchased and scaling-back
Under the Tender Offer, each Qualifying Shareholder is entitled
to tender up to 10 per cent. of his or her shareholding to be
purchased by Panmure Gordon at the Tender Price (being their Basic
Entitlement).
Each Qualifying Shareholder's Basic Entitlement will be
calculated by the Registrars as at the Record Date by reference to
the Qualifying Shareholder's holding of Ordinary Shares as at that
date.
In addition, Qualifying Shareholders are entitled to make an
application to tender in excess of their Basic Entitlements. The
extent to which excess applications can be accepted will depend on
the number of Ordinary Shares tendered by other Qualifying
Shareholders.
Provided the conditions in paragraph 2.1 of Part III of the
Circular are met, if the aggregate value at the Tender Price of all
validly tendered Ordinary Shares is less than approximately GBP13.5
million (and not less than GBP3.0 million), then all Ordinary
Shares validly tendered (including applications in excess of Basic
Entitlements) will be purchased at the Tender Price.
If the number of Ordinary Shares validly tendered by
Shareholders is more than 2,142,572, tenders will be accepted in
the order set out below:
a) all Ordinary Shares tendered by Qualifying Shareholders
up to their Basic Entitlement will be accepted in full;
and
b) tenders of Ordinary Shares in excess of the Qualifying
Shareholders' Basic Entitlements will be satisfied
pro rata in proportion to the amount tendered in excess
of Basic Entitlements (rounded down to the nearest
whole number of Ordinary Shares) or otherwise at the
discretion of the Board, in agreement with Panmure
Gordon.
For the avoidance of doubt, the number of Ordinary Shares to be
purchased in the Tender Offer will not, in any event, exceed
2,142,572 Ordinary Shares.
Once lodged (in the case of a Tender Form) or settled (in the
case of a TTE Instruction) such Tender shall be irrevocable.
Ordinary Shares will be purchased pursuant to the Tender Offer
on or about 14 February 2022.
Successfully tendered Ordinary Shares will be purchased free of
commission and dealing charges.
Any Ordinary Shares repurchased by the Company from Panmure
Gordon following the purchase by Panmure Gordon will be cancelled.
Any rights of Ordinary Shareholders who do not tender their
Ordinary Shares will be unaffected.
Subject to any applicable rules and regulations, the Company
reserves the right at any time prior to the announcement of the
results of the Tender Offer, and with the prior consent of Panmure
Gordon, to extend the period during which the Tender Offer is open,
based on market conditions and/or other factors.
Basic Entitlement
Tenders in respect of up to approximately 10 per cent. of each
holding of Ordinary Shares of every Qualifying Shareholder on the
Record Date will be accepted in full at the Tender Price and will
not be scaled down, provided that such Ordinary Shares are validly
tendered. This percentage is known as the "Basic Entitlement".
Qualifying Shareholders may tender Ordinary Shares in excess of
their Basic Entitlement. However, if the Tender Offer is
oversubscribed, the tender of such excess Ordinary Shares will only
be successful to the extent that other Qualifying Shareholders have
tendered less than their Basic Entitlement and may be subject to
the scaling-back arrangements described above.
Circumstances in which the Tender Offer may not proceed
The Tender Offer is conditional on, among other things, receipt
of valid tenders in respect of Ordinary Shares to a value at the
Tender Price of not less than GBP3.0 million, by 1.00 p.m. (UK
time) on the Closing Date and the other conditions specified in
Part III of the Circular.
The Tender Offer is also conditional on no material adverse
change or certain other force majeure events arising prior to the
closing of the Tender Offer. Further details of these Conditions
are set out in Part III of the Circular.
Full terms and conditions of the Tender Offer are set out in
Part III of the Circular, which Shareholders are recommended to
read in full.
5. Repurchase Agreement
The Repurchase Agreement between the Company and Panmure Gordon
is dated 28 January 2022. Under this agreement, the parties agree
that, subject to the sum of GBP13,498,203.60 (equal to the Tender
Price multiplied by the maximum number of Ordinary Shares that
could be repurchased under the Tender Offer) being deposited by the
Company into a client account of Panmure Gordon by no later than
5.00 p.m. on 31 January 2022 or such later time and/or date as may
be agreed by Panmure Gordon and the Tender Offer becoming
unconditional in all respects and not lapsing or terminating in
accordance with its terms, Panmure Gordon shall, as principal,
purchase, "On Exchange", at the Tender Price, Ordinary Shares
successfully tendered to it, up to a maximum aggregate Tender Price
of GBP13,498,203.60.
The Company has agreed that, immediately following the purchase
by Panmure Gordon of all Ordinary Shares which it has agreed to
purchase as principal under the terms of the Tender Offer, the
Company will purchase from Panmure Gordon all such Ordinary Shares
at a price per Ordinary Share equal to the Tender Price. All
transactions will be carried out on the London Stock Exchange.
Under the Repurchase Agreement, the Company has agreed to cancel
any Ordinary Shares purchased by it under the Tender Offer
arrangements.
The Repurchase Agreement contains certain representations,
warranties and undertakings from Panmure Gordon in favour of the
Company concerning its authority to enter into the Repurchase
Agreement and to make the purchase of Ordinary Shares pursuant
thereto.
The Repurchase Agreement also contains representations,
warranties and undertakings from the Company in favour of Panmure
Gordon and incorporates an indemnity in favour of Panmure Gordon in
respect of any liability which it may suffer in relation to its
performance under the Tender Offer which is not due to its own
neglect or default.
6. Dividends
Successfully tendered Ordinary Shares will be cancelled and will
not rank for any future dividends. However, the right of
Shareholders, recorded on the Register on 14 January 2022, to
receive and be paid the final dividend declared at the Annual
General Meeting on 21 January 2022 will not be affected by
acceptance of the Tender Offer.
7. Overseas Shareholders
The attention of Qualifying Shareholders who are citizens,
residents or nationals of countries outside the UK wishing to
participate in the Tender Offer is drawn to paragraph 6 entitled
"Overseas Shareholders" in Part III of the Circular.
8. Taxation
Qualifying Shareholders should be aware that there may be tax
considerations that they should take into account when deciding
whether or not and/or the extent to which to participate in the
Tender Offer. A summary of the taxation consequences of the Tender
Offer for UK resident Shareholders is set out in Part IV of the
Circular. It should be noted that this tax summary is merely a
guide to current tax law and practice in the UK. Shareholders are
advised to consult their own professional advisers regarding their
own tax position.
9. Directors' Interests
The interests (all of which are beneficial unless stated
otherwise) of the Directors and of persons connected with them
(within the meaning of Section 252 of the 2006 Act) in the issued
ordinary share capital of the Company and the existence of which is
known to, or could with reasonable due diligence be ascertained by,
any Director as at the date of this announcement are as
follows:
Name Position Number of Percentage
Ordinary of
Shares issued share
capital
Joint Managing Director and
Kiran Shah(1) Group Finance Director 2,176,478 10.16%
------------------------------- ---------- --------------
Jon Diver(2) Joint Managing Director 1,428,248 6.67%
------------------------------- ---------- --------------
Managing Director - Character
Joseph Kissane Options Limited 518,757 2.42%
------------------------------- ---------- --------------
Richard King Non-Executive Chairman 336,286 1.57%
------------------------------- ---------- --------------
Managing Director- Far East
Michael Hyde Operations 268,888 1.25%
------------------------------- ---------- --------------
Jeremiah Healy(3) Group Marketing Director 73,000 0.34%
------------------------------- ---------- --------------
David Harris(4) Non-Executive Director 68,183 0.32%
------------------------------- ---------- --------------
Clive Crouch Non-Executive Director 15,358 0.07%
------------------------------- ---------- --------------
Carmel Warren Non-Executive Director nil nil
------------------------------- ---------- --------------
Notes:
(1) Mr Shah's interests comprise 176,478 Ordinary Shares held
personally by Mr Shah and 2,000,000 Ordinary Shares held by
Sarissa Holdings Limited.
(2) Mr Diver's interests comprise 876,381 Ordinary Shares held
personally by Mr Diver and 551,867 Ordinary Shares held by
Mr Diver's Self Invested Pension Plan.
(3) Mr Healy's interests comprise 16,000 Ordinary Shares held
personally by Mr Healy, 5,000 Ordinary Shares held by Mr Healy's
Self Invested Pension Plan, and 52,000 Ordinary Shares held
by Mr Healy's wife, Kathleen Ann Healy.
(4) Mr Harris's interests comprise 16,780 Ordinary Shares held
personally by Mr Harris and 51,403 Ordinary Shares held by
Mr Harris's Self Invested Pension Plan.
10. Intentions of the Directors in relation to the Tender Offer
The Directors are currently interested, in aggregate, in
4,885,198 Ordinary Shares, representing approximately 22.80 per
cent. of the issued Ordinary Share capital of the Company
(excluding Ordinary Shares held in treasury). The Directors have
indicated their intention to tender their Ordinary Shares (directly
or through their connected parties) as follows:
Name Applications to tender Applications in excess of
Basic Entitlement Basic Entitlement
(Ordinary Shares) (Ordinary Shares)
Kiran Shah 217,647 217,647
----------------------- --------------------------
Jon Diver 142,824 142,824
----------------------- --------------------------
Joseph Kissane 51,875 51,875
----------------------- --------------------------
Richard King 33,628 33,628
----------------------- --------------------------
Michael Hyde 26,888 26,888
----------------------- --------------------------
Jeremiah Healy 7,300 7,300
----------------------- --------------------------
David Harris 6,818 6,818
----------------------- --------------------------
Clive Crouch 1,535 1,535
----------------------- --------------------------
Carmel Warren nil nil
----------------------- --------------------------
Total 488,515 488,515
----------------------- --------------------------
Excess tenders by the Directors will be subject to the
scaling-back arrangement described in paragraph 4 above.
Assuming the maximum number of Ordinary Shares under the Tender
Offer is purchased and that the Directors' tenders (including
excess tenders) are satisfied in full, the Directors, following
completion of the Tender Offer, will be interested, in aggregate,
in 3,908,168 Ordinary Shares, representing approximately 20.27 per
cent. of the issued Ordinary Share capital of the Company
(excluding Ordinary Shares held in treasury).
11. Recommendation
The Directors are making no recommendation to Qualifying
Shareholders in relation to participation in the Tender Offer
itself. Whether or not Qualifying Shareholders decide to tender
their Ordinary Shares will depend, amongst other things, on their
view of the Company's prospects and on their own individual
circumstances (including their own tax position).
If Shareholders are in any doubt as to the action they should
take, they are recommended to seek their own independent
advice.
12. Expected Timetable of Events
The expected timetable for the Tender Offer is as follows:
Announcement of the Tender Offer 28 January 2022
Tender Offer opens 28 January 2022
-------------------------
Latest time and date for receipt of Tender Forms 1.00 p.m. on 11 February
or for settlement of TTE Instructions in respect 2022
of the Tender Offer
-------------------------
Record Date for the Tender Offer 6.00 p.m. on 11 February
2022
-------------------------
Announcement of the results of the Tender Offer 14 February 2022
-------------------------
Cheques despatched and CREST accounts credited On or before 21 February
with proceeds in respect of successfully tendered 2022
Ordinary Shares
-------------------------
CREST accounts credited with uncertificated On or before 21 February
Ordinary Shares unsuccessfully tendered and 2022
despatch of balance share certificates for unsold
certificated Ordinary Shares (if applicable)
-------------------------
Notes:
1. The above times and/or dates are indicative only and may change.
If any of the above times and/or dates change, the revised
times and/or dates will be notified by announcement through
a Regulatory Information Service.
2. All references to times in this announcement are to London
times unless otherwise stated.
Capitalised terms and expressions shall have the same meanings
as those attributed to them in the Circular.
A copy of the Circular will shortly be available for download
from the Company's website www.thecharacter.com.
The Character Group plc
FTSE sector : leisure goods:
FTSE AIM All-share: symbol: CCT
Market cap : GBP131.7m
Email: info@charactergroup.plc.uk
Group website: www.thecharacter.com
Product ranges can also be viewed at
www.character-online.co.uk
CHARACTER GROUP PLC CCT Stock | London Stock Exchange
Enquiries to:
The Character Group plc
Jon Diver, Joint Managing Director
Kiran Shah, Joint Managing Director & Group Finance Director
Office: +44 (0) 208 329 3377
Mobile: +44 (0) 7831 802219 (JD)
Mobile: +44 (0) 7956 278522 (KS)
Panmure Gordon (Nominated Adviser and Joint Broker)
Atholl Tweedie, Corporate Finance
Charles Leigh-Pemberton, Corporate Broking
Rupert Dearden, Corporate Broking
Tel: +44 (0) 20 7886 2500
Allenby Capital Limited (Joint Broker)
Nick Athanas, Corporate Finance
Amrit Nahal, Sales & Corporate Broking
Tel: +44 (0) 20 3328 5656
TooleyStreet Communications Limited (Investor and media relations)
Fiona Tooley
Tel: +44 (0) 7785 703523
Email: fiona@tooleystreet.com
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