Allied Leisure PLC - Proposed Disposal
November 04 1999 - 3:27AM
UK Regulatory
RNS Number:2511A
Allied Leisure PLC
4 November 1999
ALLIED LEISURE PLC
PROPOSED DISPOSAL OF 27 BARS AND DISCOTHEQUES
Highlights
- Proposed disposal of 27 bars and discotheques to Luminar
plc, Allied to receive cash consideration of #34.5m,
payable in full at completion
- The units being disposed comprise a large proportion of
the former bars and discotheques division of European
Leisure PLC
- The remaining bars and discotheques assets, comprising 31
units will be disposed of as soon as practicable and
negotiations are ongoing
- The disposal is the culmination of a targeted auction
process and is consistent with Allied's strategy of
concentrating on the development of its branded leisure
businesses, Megabowl and Rileys
- The net proceeds from the Disposal will be used to reduce
Allied's existing bank borrowings
Commenting on the disposal Neil Goulden, Chief Executive of
Allied, said: "At the time of the merger with European in June
1999, we outlined a strategy of enhancing shareholder value by
concentrating the Group's resources on its Megabowl and Rileys
businesses, both of which provide excellent returns on
capital.
Today's disposal is a key step in the implementation of this
strategy and will release significant capital and management
resource which can be better deployed elsewhere in the Group.
We will dispose of the remaining units in the bars and
discotheques division as soon as practicable.
The anticipated cash proceeds from the disposal, when combined
with other planned disposals and the proposed joint venture
with Duke Street Capital, will leave Allied with a strong
balance sheet, negligible debt and enhanced growth prospects."
This summary should be read in conjunction with the full text
of this announcement.
Enquiries:
Allied Leisure PLC Tel: 01509 414422
Neil Goulden, Chief Executive
Close Brothers Corporate Finance Limited Tel: 0207 655 3100
John Llewellyn-Lloyd, Chief Executive
Alka Bali, Director
Square Mile Communications Tel: 0207 601 1000
Kevin Smith
Close Brothers Corporate Finance Limited, which is regulated
by The Securities and Futures Authority Limited, is acting
exclusively for Allied Leisure PLC and no-one else in
connection with the Disposal described in this announcement
and will not be responsible to any other person for providing
the protections afforded to customers of Close Brothers
Corporate Finance Limited, or advising any such person on the
contents of this announcement or any transaction referred to
herein.
ALLIED LEISURE PLC
PROPOSED DISPOSAL OF 27 BARS AND DISCOTHEQUES
Introduction
The Board of Allied Leisure PLC ("Allied") ("the Board")
announces that agreements have been signed for the sale of 27
bars and discotheques ("the Businesses") owned by the Allied
Group ("the Group") to the Luminar Group ("the Buyers") ("the
Disposal"). The Disposal is conditional, inter alia, on both
Allied's and Luminar's shareholder approval. The Allied Group
will be paid #34.5 million in cash at completion of the
Disposal ("Completion") on the terms described below. Luminar
is raising the money to pay the consideration by way of a
placing and open offer to Luminar's shareholders.
Background to and reasons for the Disposal
The Disposal is the culmination of a targeted auction process
and is a key step towards Allied implementing its strategy,
set out for shareholders at the time of the merger between
Allied and European Leisure PLC ("European") earlier this
year, of focusing on its core businesses of bowling based
family entertainment centres and Rileys cue sports clubs.
The Group's bars and discotheques division continues to be
impacted by competitor activity, and in particular the
increased number of late licences being granted. Whilst the
bars and discotheques division is currently the largest part
of the Group in turnover terms, its low return on capital has
led the Board to conclude that Shareholders' interests will be
better served by concentrating investment in the Group's core
businesses of Megabowl and Rileys, which produce higher
returns.
Following the Disposal, the Group's principal businesses will
comprise 93 cue sports clubs trading mainly under the Rileys
brand, its family entertainment centre business trading under
the Megabowl brand and its Burger King business.
The Disposal will release capital and management resource for
redeployment in the Group's core businesses where further
growth is planned. The Businesses contribute a majority of
the profits generated by the bars and discotheques division.
The Disposal therefore represents a major step towards the
Group's objective of exiting bars and discotheques. Following
the Disposal the Company will own 31 bars and discotheques and
other related assets, which the Directors intend to dispose of
as soon as is practicable.
Principal terms of the Disposal
Under the terms of the disposal agreements, Allied and the
subsidiaries have conditionally agreed to sell the Businesses
to members of the Luminar Group. The consideration for the
Disposal will be #34.5 million which will be payable in cash
at completion. However, Allied has agreed to leave cash
floats in the Businesses at Completion amounting, in total, to
#267,000 which will be for the benefit of the buyers.
Completion of the disposal agreements is conditional on the
approval of the shareholders of Allied and Luminar
respectively. Completion of the disposal agreements is also
conditional on Luminar's placing agreement becoming
unconditional (other than as to any condition relating to the
disposal agreements becoming unconditional) and not having
been terminated. Completion of the sale of the Businesses is
not conditional on receipt of any landlords' consents in
relation to those of the properties from which they operate
which are leaseholds (21 of the 27 Businesses operate from
leasehold properties). However if any relevant landlord's
consent cannot in practice be obtained within 18 months of
Completion, after both parties have made all reasonable
efforts to obtain it (including if necessary taking the
landlord to court), Allied may be obliged to re-acquire the
relevant property for an amount representing an agreed
valuation at the date of the disposal agreements.
Completion is expected to take place on 6 December 1999.
Information on the Businesses
The Businesses comprise 27 bars and discotheques
geographically spread across Britain without common branding.
Notably, the Businesses include both The Hippodrome and Camden
Palace in Central London.
The Businesses were part of the bars and discotheques division
of European, prior to the merger of Allied and European in
June of this year, and represent a mixture of traditional
discotheques with late licences, bars with normal licences and
"chameleon" style bars which have late licences.
The remainder of the 31 bars and discotheques in this division
are expected to be sold off individually or in small groups.
For the year ended 30 June 1999, the Businesses generated
operating profits of #3.5 million on sales of #26.5 million.
Net assets at that date were #29.7 million.
Financial effects of the Disposal on the Allied Group
The net proceeds of the Disposal (amounting to approximately
#32.9 million after costs relating to the Disposal and
deduction of the amount of the cash floats to be left in the
Businesses) will be used to reduce existing Group debt.
Current trading and prospects
As stated in Allied's annual report and accounts for the year
ended 30 June 1999, trading in the first quarter of the new
financial year has been adversely affected by the weather.
Allied's bars and discotheques division continues to trade in
a highly competitive environment and the Board has formed the
view that it would be unlikely to show positive growth without
significant investment and a high focus of attention from
senior management. Today's announcement of the disposal of 27
bars and discotheques to the Luminar Group is therefore an
important first step in the rationalisation of Allied's bars
and discotheques estate and the refocusing of the Group on
consolidating its market leading position in both bowling
based family entertainment centres and cue sports.
Allied's Megabowl business has been impacted by adverse
weather conditions in the first quarter but this is
traditionally the quietest period of its year. The peak (late
October to mid April) trading period for indoor family
entertainment centres is only now commencing.
As previously announced, Allied has formed a joint venture,
with Duke Street Capital, which in September of this year
acquired the family entertainment division of First Leisure,
which includes 28 ten-pin bowling centres trading under the
Superbowl brand. It remains Allied's intention to merge its
Megabowl business into the joint venture, which will then be
owned on a 50/50 basis by Allied and Duke Street Capital and
run by the Allied management team. Final negotiations with
Duke Street Capital and their debt providers are progressing
well towards this stated objective, and we expect to give
further details to Shareholders soon.
Allied's Burger King restaurant business is trading ahead of
last year. Development of the estate will continue on a
selective basis.
Allied's Rileys American pool and snooker business is showing
significant growth over last year. Allied remains extremely
positive regarding the prospects for this market leading brand
in a growth sector and intends to accelerate the roll out
programme for Rileys, with 25 new openings planned in the
current financial year.
The anticipated cash proceeds from the Disposal, when combined
with other planned disposals and Allied's proposed Megabowl
joint venture with Duke Street Capital, will leave Allied with
a strong balance sheet, negligible debt and enhanced growth
prospects both in the bowling joint venture and within
Allied's wholly owned Rileys and Burger King businesses.
Enquiries:
Allied Leisure PLC Tel: 01509 414422
Neil Goulden, Chief Executive
Close Brothers Corporate Finance Limited Tel: 0207 655 3100
John Llewellyn-Lloyd, Chief Executive
Alka Bali, Director
Square Mile Communications Tel: 0207 601 1000
Kevin Smith
Close Brothers Corporate Finance Limited, which is regulated
by The Securities and Futures Authority Limited, is acting
exclusively for Allied Leisure PLC and no-one else in
connection with the Disposal described in this announcement
and will not be responsible to any other person for providing
the protections afforded to customers of Close Brothers
Corporate Finance Limited, or advising any such person on the
contents of this announcement or any transaction referred to
herein
END
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