Offer by CLS Holdings - Pt.2
July 20 2000 - 3:00AM
UK Regulatory
RNS Number:1531O
Citadel Holdings PLC
20 July 2000
Part 2
The Merger Offer will not be made directly or indirectly
in or into, or by use of the mails of or by any means or
instrumentality of interstate or foreign commerce of, or
of any facilities of a national securities exchange of,
the United States, Australia, Canada or Japan. This
includes, but is not limited to, the post, facsimile
transmission, telex and telephone. Furthermore, copies of
this announcement are not being and must not be mailed or
otherwise distributed or sent in or into or from the
United States, Australia, Canada or Japan including to
Citadel Shareholders or participants in the Citadel Share
Option Scheme with registered addresses in the United
States, Australia, Canada or Japan, or to persons whom CLS
knows to be nominees holding Citadel Shares for such
persons.
The New CLS Shares to be issued pursuant to the Merger
Offer will not be registered under the United States
Securities Act of 1933 (as amended) nor under the
securities laws of any jurisdiction of the United States
nor under any of the relevant securities laws of
Australia, Canada or Japan. No prospectus in relation to
the Merger Offer or the New CLS Shares to be issued
pursuant thereto has been lodged with, or registered by,
the Australian Securities and Investments Commission. The
relevant clearances have not been and will not be obtained
from the Securities Commission of any province or
territory of Canada. Accordingly, unless an exemption
under the relevant securities law of such jurisdictions is
available, the New CLS Shares may not be offered, sold, re-
sold or delivered, directly or indirectly, in or into the
United States, Australia, Canada or Japan. All Citadel
Shareholders (including nominees, trustees or custodians)
who would, or otherwise intend to forward this
announcement, should read the further details in this
regard which will be contained in the Offer Document which
will be issued in due course before taking any action.
Appendix II
Bases and sources
In this announcement, unless otherwise stated, or the
context otherwise requires, the following bases and
sources have been used:
(a)The market values of CLS Shares and Citadel Shares are
based on their respective Closing Prices on the dates
specified as derived from the Daily Official List of
the London Stock Exchange.
(b)The implied value of a Citadel Share under the Merger
Offer is based on the Closing Price of a CLS Share on
19 July 2000, being the last dealing day prior to the
date of this announcement.
(c)The value of the whole of the issued share capital of
Citadel is based upon the 33,516,057 Citadel Shares
currently in issue. Any Citadel Shares which may be
issued, on exercise of options in Citadel, the
exercise of the CLS Warrant or otherwise, are excluded
from the calculation.
(d)Unless otherwise stated, the financial information on
CLS is extracted without adjustment from CLS's annual
report and accounts for the years ended 31 December
1998 and 31 December 1999, from the unaudited interim
results for the six months ended 30 June 2000.
Earnings per share stated are basic and not fully
diluted, and inclusive of exceptional items. Net
asset values per share stated are not fully diluted.
(e)Unless otherwise stated, the financial information on
Citadel is extracted without adjustment from Citadel's
annual report and accounts for the years ended 31
December 1998 and 31 December 1999, from the unaudited
interim results for the six months ended 30 June 2000.
Earnings per share stated are basic and not fully
diluted, and inclusive of exceptional items. Net
asset values per share stated are not fully diluted,
but where indicated, have been adjusted for the
notional exercise of the CLS Warrant.
(f)The portfolio value of the Enlarged Group calculated
to be in excess of #640 million comprises the rounded
aggregate of the valuation of the portfolio of CLS of
#509.6 million as at 30 June 2000 (as stated in its
interim statement for the six months ended 30 June
2000) and the aggregate of the valuation of the
portfolio of Citadel of #130.8 million as at 30 June
2000 (as stated in its interim statement for the six
months ended 30 June 2000).
Appendix III
Definitions
The following definitions apply throughout this
announcement unless the context requires otherwise:
"Act" the Companies Act 1985 (as
amended)
"Admission" admission of New CLS Shares to
the Official List
"AIM" the Alternative Investment
Market of the London Stock
Exchange
"Australia" Commonwealth of Australia, its
states, territories or
possessions
"Canada" Canada, its provinces and
territories and all areas
subject to its jurisdiction and
any political sub-division
thereof
"Circular" the circular to be sent to CLS
Shareholders in connection with
the Merger Offer, containing
notice of the EGM
"Citadel" Citadel Holdings plc
"Citadel Directors" the board of directors of
Citadel
"Citadel Independent Richard Lockwood and
Directors" Gavin Kelly
"Citadel Group" Citadel and its subsidiary
undertakings
"Citadel Shareholders" holders of Citadel Shares
"Citadel Shares" existing, unconditionally
allotted or issued and fully
paid ordinary shares of 25 pence
each in Citadel and any further
such shares which are
unconditionally allotted or
issued, including shares
allotted or issued pursuant to
the exercise of any options
under the Citadel Share Option
Scheme or the exercise of the
CLS Warrant, after the date
hereof but before the date on
which the Merger Offer ceases to
be open for acceptance (or such
earlier date, not being earlier
than the Unconditional Date or,
if later, the first closing date
of the Merger Offer, as CLS may,
subject to the Code, decide)
"Citadel Share holders of options under
Optionholders" the Citadel Share Option Scheme
"Citadel Share the Citadel Holdings plc
Option Scheme" Executive Share Option Scheme
(adopted by Citadel 25 June
1997)
"Closing Price" closing middle market price of a
CLS Share or a Citadel Share (as
the case may be) derived from
the London Stock Exchange Daily
Official List
"CLS" or the "Company" CLS Holdings plc
"CLS Group" CLS and its existing
subsidiaries
"CLS Independent Keith Harris, James Dean
Directors" and Patrik Gransater
"CLS Shareholders" holders of CLS Shares
"CLS Shares" ordinary shares of 25 pence each
in the capital of CLS
"CLS Warrant" the warrant agreement between
CLS and Citadel dated 25 June
1997, under which CLS is
entitled to subscribe for a
further 8,000,000 (eight
million) Citadel Shares (4
million at 100 pence and 4
million at 115 pence)
"Code" City Code on Takeovers and
Mergers
"Directors" or the directors of CLS
"CLS Directors"
"EGM" or the CLS extraordinary general
meeting to
"Extraordinary General be held to approve the
Meeting" Merger Offer and
other matters full details of
which will be set out in the Circular
"Enlarged Group" CLS Group, as enlarged by the
proposed acquisition of the
whole of the issued share
capital of Citadel not already
owned by CLS pursuant to the
Merger Offer
"Form of Acceptance" form of acceptance, authority
and election relating to the
Merger Offer to be sent to
Citadel Shareholders
"HSBC" HSBC Investment Bank plc
"Japan" Japan, its cities and
prefectures, territories and
possessions
"Listing Particulars" the listing particulars relating
to CLS to be issued in
connection with the Admission
"Listing Rules" listing rules made under Section
142 Financial Services Act 1986
"London Stock Exchange" London Stock Exchange plc
"Merger Offer" the offer to be made by HSBC on
behalf of CLS to acquire the
Citadel Shares (other than those
Citadel Shares already held by
CLS) on the terms and subject to
the conditions to be set out in
the Offer Document and the Form
of Acceptance including, where
the context so requires, any
subsequent revision, variation,
extension or renewal of such
offer. The Merger Offer is not
considered to be a merger in
accordance with generally
accepted accounting standards,
but is considered by the
Directors to be in the nature of
a merger
"New CLS Shares" new CLS Shares to be issued by
CLS pursuant to the Merger Offer
"Offer Document" the document to be issued
containing the terms of the
Merger Offer
"Offer Period" the period commencing on 20 July
2000 and concluding on the later
of (i) 21 days after the posting
of the Offer Document, (ii) the
Unconditional Date and (iii) the
time at which the Merger Offer
lapses or is withdrawn
"Official List" Official List of the UK Listing
Authority
"Overseas Shareholder" any Citadel Shareholder resident
in, or who is a citizen or
national of, jurisdictions
outside the UK or who are
nominees of, or custodians,
trustees or guardians for,
residents, citizens or nationals
of such jurisdictions
"Panel" the Panel on Takeovers and
Mergers
"Teather & Greenwood" Teather and Greenwood Limited
"UK" or "United Kingdom" United Kingdom of Great Britain
and Northern Ireland
"UK Listing Authority" the Financial Services Authority
acting in its capacity as the
competent authority for the
purposes of Part IV of the
Financial Services Act 1986
"Unconditional Date" the date on which the Merger
Offer becomes or is declared
wholly unconditional in all
respects
"United States" United States of America, its
territories and possessions, any
state of the United States and
the District of Columbia
Appendix IV
Letter from the Citadel Independent Directors
To Citadel Shareholders and, for information only, holders
of options under the Citadel Share Option Scheme
Dear Shareholder
Recommended Merger Offer from CLS
1. Introduction
CLS has today announced a recommended merger offer for the
entire issued share capital of Citadel not already owned
by CLS. The terms of the Merger Offer are 3 New CLS
Shares for every 5 Citadel Shares held. Based on the
Closing Price of a CLS Share at the close of business on
19 July 2000 of 177.5 pence the Merger Offer values each
Citadel Share at 106.5 pence. Under such terms, and
comparing the net asset value per share of Citadel and
CLS, Citadel Shareholders have a larger proportion of the
Enlarged Group than that derived from comparing Citadel
and CLS's respective stockmarket values. CLS currently
owns 5,827,310 Citadel Shares representing 17.4 per cent.
of the issued share capital of Citadel. The purpose of
this letter is to explain the basis of recommending the
Merger Offer to Citadel Shareholders.
Your company was floated on AIM in the summer of 1997,
since which time its undiluted net assets have appreciated
by 67.0 per cent. A solid portfolio of Paris and Lyon
properties has been built up, with prospects for a good
income stream and some further capital uplift.
Nonetheless we must address, on your behalf, Citadel's
prospects from here both in terms of its underlying
business strategy and its stockmarket position.
2. The French property market
Over a period of some months the investment committee of
your board has seen a series of reports on the property
market and possible investment situations. These have
been judged in the context of the quality of the existing
portfolio, the income yield at potential purchase prices
and the prospects for capital uplift. During 1997 and
1998 Citadel was regularly able to invest in properties at
an entry price yield of in excess of nine per cent.
Lesser quality properties are now being offered to Citadel
on yields of around eight per cent. We are advised that
while there is short to medium term potential for capital
uplift, good value is certainly much more difficult to
find.
3. Citadel's stockmarket position
Despite a strong asset performance to date and prospects
for dividend growth, the Citadel Directors feel this has
not been reflected in Citadel's share price. During the
previous 12 months Citadel Shares have traded at between
15.8 per cent. and 32.6 per cent. discount to their
undiluted net asset values per share. Teather &
Greenwood, Citadel's advisers, believe that this discount
is unlikely to change for the positive in the short to
medium term reflecting a general lack of investor interest
in smaller quoted property companies.
Against such a background, your board decided to formalise
a review of the way forward. An independent committee of
non-executive directors was established and Teather &
Greenwood were appointed as financial advisers. We have
set out below a summary of that review, which involved
discussions with the board of CLS and a number of Citadel
Shareholders.
4. Liquidation
We have considered liquidating your company and returning
cash to Citadel Shareholders. Today's interim statement
shows fully diluted net assets of 152.5 pence per share as
at 30 June 2000. We have considered reports from Teather
& Greenwood, DTZ Debenham Tie Leung Limited and CLS in
this regard. Taking into account transaction costs, the
market position of being a perceived forced seller of a
portfolio, potential time delays and property market risks
we have decided not to pursue this route.
In addition, we have taken into account the views
expressed by certain Citadel Shareholders who have
indicated that they would prefer not to see a cash exit
from their investment in the company assets at this time.
5. Third party offer
As mentioned above, we have taken into account the views
of certain Citadel Shareholders who have indicated that
they do not wish to see a cash proposal put forward. The
Citadel Independent Directors believe that the recommended
Merger Offer represents an opportunity for Citadel
Shareholders to participate in the potential for continued
growth of CLS on appropriate terms for Citadel
Shareholders.
6. Continue with the present position
The Citadel Independent Directors, who have consulted with
Teather & Greenwood, believe that as a smaller quoted
property company Citadel Shares are likely to continue to
trade at a discount to net asset value. Doing nothing is
therefore not a practicable option.
7. Information on CLS
CLS is a London listed property and investment company
with a market capitalisation of #167.8 million (based on
the Closing Price of a CLS Share on 19 July 2000, the last
dealing day prior to the date of this announcement) and
net assets of #268.5 million as at 30 June 2000. A copy
of their unaudited interim statement for the six months
ended 30 June 2000, announced today, is enclosed for your
information. CLS was floated on the London Stock Exchange
in 1994 and has achieved annual total shareholder returns
of 18.3 per cent. (1997), 18.3 per cent. (1998) and 23.6
per cent. (1999). CLS has adopted a progressive approach
to shareholder value including the buying in of its own
shares. The attached press release sets out details of
the continuation of that programme. Further details on
CLS will be forwarded to you with the formal offer
documentation shortly.
CLS had indicated a formal interest in acquiring Citadel.
Teather & Greenwood have negotiated terms and the current
proposal represents the result.
8. Other considerations
Certain Citadel Shareholders have given non-binding
letters of intent to accept the Merger Offer who together
hold 8,483,751 Citadel Shares representing 25.3 per cent.
of Citadel's existing issued share capital.
Additionally CLS already owns 5,827,310 Citadel Shares
representing approximately 17.4 per cent. of Citadel's
existing issued ordinary share capital. Further, CLS has
received irrevocable undertakings from Citadel Directors
in respect of a total of 21.5 per cent. of Citadel's
issued share capital.
9. Citadel's interim results for the six months ended 30
June 2000
A copy of our interim results announced today, will be
forwarded to you shortly.
10. Recommendation
We have conducted a review of Citadel's future with
Teather & Greenwood. Certain Citadel Shareholders
representing 25.3 per cent. of the issued share capital of
Citadel have given non-binding letters of intent to accept
the Merger Offer. When taken with CLS's own shareholding
and that of Citadel Directors who own 21.5 per cent. of
the issued share capital, this represents compelling
current support for proceeding with the Merger Offer.
In deciding whether to accept the Merger Offer you should
have regard to an ongoing investment exposure to a listed
property company's shares with a broader investment ambit
than that of Citadel and the discount to net asset value
which may be involved. We have not been invited to join
the Enlarged Group board and will therefore play no part
in the Enlarged Group's strategy.
The Citadel Independent Directors, who have been so
advised by Teather & Greenwood, consider the terms and
conditions of the Merger Offer to be fair and reasonable
so far as Citadel Shareholders are concerned and in the
best interests of Citadel and of Citadel Shareholders as a
whole. In providing advice to the Citadel Independent
Directors, Teather & Greenwood has taken into account the
Citadel Independent Directors' commercial assessment of
the transaction in the circumstances as set out above.
Taking into account the set of circumstances set out in
this letter it is entirely proper that the whole
shareholder body should have the opportunity to accept the
CLS proposal and accordingly we recommend it to you as
being fair and reasonable and in the best interest of
Citadel Shareholders as a whole.
Yours sincerely
Richard Lockwood Gavin Kelly
Non-executive Director Non-executive Director
The Citadel Independent Directors, whose names we set out
above, accept responsibility for the information contained
in this letter. To the best of the knowledge and belief of
the Citadel Independent Directors (who have taken all
reasonable care to ensure that such is the case), the
information contained in this letter for which they are
responsible is in accordance with the facts and does not
omit anything likely to affect the import of that
information.
Teather & Greenwood Limited, which is regulated by the
Securities and Futures Authority, is acting exclusively
for Citadel Holdings plc, acting through the Citadel
Independent Directors, and for no-one else in connection
with the Merger Offer and will not be responsible to
anyone other than Citadel Holdings plc, acting through the
Citadel Independent Directors, for providing the
protections afforded to customers of Teather & Greenwood
Limited or for providing advice in relating to the Merger
Offer or any other matter referred to herein.
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