RNS Number:2655E
GOAL PLC
26 November 2002
GOAL PLC ('GOAL' or 'the Company')
ACQUISITION
Proposed acquisition of the business and certain assets and liabilities of the
London Chamber of Commerce and Industry Examinations Board division of the
London Chamber of Commerce and Industry Commercial Education Trust
Highlights
* GOAL is to acquire the London Chamber of Commerce and Industry
Examinations Board division ('LCCIEB') of the London Chamber of Commerce and
Industry Commercial Education Trust ('LCCICET').
* Consideration for the acquisition of LCCICET is the issue of
24,014,851 new ordinary shares in GOAL equating to a value of #2.22 million.
* LCCIEB's business comprises the provision of vocational qualifications
in the UK and overseas.
* Acquisition widens the UK market for GOAL whilst the combined entity
will continue to operate internationally.
* Opportunity to apply GOAL's skills and technology to further develop
LCCIEB's business and generate operating efficiencies.
* Turnover of LCCIEB in the year to 30 September 2002 was #9,867,000 and
its profit before tax was #292,000 after adjustment to align its accounting
policies with those of GOAL.
* Changes proposed to the Company's Board following approval of the
acquisition by shareholders.
* On completion of the acquisition, Company to change its name to
Education Development International plc.
Commenting on the acquisition, Sir Bryan Nicholson, the Chairman of GOAL said:
"This is an exciting development for GOAL which provides the potential to
exploit the Company's expertise and extend its business into the UK post 16
education market and overseas.
LCCIEB has a well established business operation providing paper-based
examination services which fits well with GOAL's new and innovative approach to
test development and IT-based delivery systems. This match provides the
opportunity to develop both businesses through cross-selling and joint product
development.
The opportunity to achieve operational efficiency, taken with LCCIEB's revenue
and profit streams and GOAL's developing business and funds provides a strong
financial base for the enlarged group.
The proposed Board and management team have a strong mix of commercial expertise
and experience in the provision of examination and education services which
together provide the skills to drive the new business forward."
INTRODUCTION
GOAL is pleased to announce that it has entered into a conditional agreement to
acquire the business and certain assets and liabilities of LCCIEB for a
consideration to be satisfied by the issue of 24,014,851 new Ordinary Shares to
LCCICET (or as it directs), credited as fully paid and representing 49.5 per
cent. of the enlarged share capital. The closing price on 20 November 2002,
being the day before the shares were suspended from trading was 9.25p, equating
to a value for the new Ordinary Shares of #2.22 million at that date.
The value of the net assets to be acquired will be determined at completion and
is estimated to be #279,000, adjusted to include the benefit of the trading
results of LCCIEB between 1 October 2002 and the date of completion.
LCCICET has specified that 500,000 of the Consideration Shares are to be
allocated to IDJ Limited, its financial adviser, in lieu of cash and in respect
of part satisfaction of its fees for advisory services provided to LCCICET. The
number of Consideration Shares allotted and issued to LCCICET will be reduced
accordingly.
In view of the size of the acquisition, this transaction is treated as a reverse
acquisition under the rules of the Alternative Investment Market ('AIM') and is
conditional upon the approval of shareholders. An extraordinary general meeting
has been convened for 10am on 19 December 2002 at which, inter alia, such
approval will be sought.
Due to the size of the proposed shareholding of LCCICET in the enlarged group
following the acquisition, the agreement of the Panel on Takeovers and Mergers
('POTAM') has been obtained that, subject to shareholders' approval of the
resolutions to be considered at that meeting, the Panel will waive the
obligation that would otherwise fall on LCCICET and IDJ Limited under the City
Code on Takeovers and Mergers ('the Code') to make a general offer to
shareholders to acquire all of the ordinary shares not held by it following the
acquisition ('the Whitewash').
An admission document is being sent to shareholders today which will contain
information on the proposed transaction, including the Whitewash, to explain why
the Directors consider them to be in the best interests of the Company and of
shareholders as a whole and to recommend that shareholders vote in favour of the
resolutions to be considered at the extraordinary meeting.
INFORMATION ON LCCIEB
History and description of the LCCIEB business
Following the establishment of the London Chamber of Commerce in 1881, the
Commercial Education Committee of The London Chamber of Commerce was appointed
in 1887 and its first examinations were held in 1890. The examinations were
subsequently made available in overseas markets in Europe and the Commonwealth
countries.
The Commercial Education Committee of The London Chamber of Commerce established
the London Chamber of Commerce Commercial Education Scheme as a charity in 1967.
The assets and undertaking of this charity were transferred into LCCICET, a
company limited by guarantee, in 1989. LCCIEB operates as a separate division
of LCCICET and the trading surpluses generated are applied for the charity's
wider charitable purposes. Certain investments and other assets and liabilities
of LCCICET will be retained by LCCICET following the proposed acquisition of
LCCIEB by GOAL.
LCCIEB's business now comprises the provision of vocational qualifications in
the UK and overseas, particularly in the Far East. Products include paper-based
examinations sold into overseas markets, together with National Vocational
Qualifications ('NVQs') and related qualifications sold into the UK market.
Where the product is examination based, LCCIEB generally identifies the
requirement for the qualification; develops the syllabus and the approach to
assessment; commissions question papers or assessment materials; identifies and
recognises centres to deliver examinations; arranges and quality assures the
marking of examination scripts; and issues certificates to successful
candidates. In the UK, the content of the NVQ qualification is regulated by the
Qualifications and Curriculum Authority and the Scottish Vocational
Qualification by the Scottish Curriculum Authority. LCCIEB is both an
accredited awarding body and administers and delivers examinations.
Qualifications are offered in a range of subjects, including finance,
management, IT, secretarial, marketing and languages. These qualifications are
attractive to potential candidates in overseas markets as they are recognised
both for the purposes of employment and as a means of meeting university
entrance requirements. GOAL believes that the development of new and
commercially relevant products has been, and will continue to be, a key factor
enabling LCCIEB to remain competitive within its chosen markets. Recent
introductions have included IT, e-commerce and web design and GOAL considers
that there are opportunities for the delivery of additional NVQ related products
for the UK market.
A significant and recently completed development has been the English Language
Skills Assessment ('ELSA') which is targeted at the international business
community and is also a qualification recognised by many universities. It is
designed to assess competence in the English language. GOAL considers that the
product provides a competitive advantage as, in addition to a standard multiple
choice test, it provides the ability to test speaking and writing on a 'stand
alone' basis. As elements are administered by multiple choice, it could easily
be adapted to be delivered electronically using computer based systems.
Examinations are set by external examiners who are contracted to LCCIEB.
Similarly, the marking of scripts and the moderation process is undertaken by
external contractors. The examinations themselves are held between April and
June and in November and December of each year. This give rise to some
seasonality of income and costs.
In the UK market, NVQ quality assurance is provided by external verifiers on a
contract basis. The revenues from these assessments are also seasonal.
Markets
LCCIEB targets the market for vocational qualifications in the UK and overseas.
GOAL considers that, in the UK, LCCIEB has an established position in the
provision of NVQ certification to private sector training providers and to
employers. This activity generates approximately one third of total revenues.
GOAL expects that the market for UK vocational training will evolve as Modern
Apprenticeships are likely to require Technical Certificates in addition to
NVQs.
LCCIEB has also positioned itself in overseas markets, providing its products in
over 80 countries delivering approximately 200,000 examination entries per year.
The most significant markets are Hong Kong, Malaysia, Singapore, Cyprus and
Germany. Increasingly competitive conditions have, however, been experienced in
Hong Kong in the recent past but LCCIEB has responded by entering into a
licencing agreement with Educational Resources Pte Limited ('ER'), a Singaporean
company. Under this agreement, LCCIEB granted an exclusive 10 year licence to
ER to operate the business of promoting and organising examinations under the
LCCIEB brand in a number of Far Eastern and Asian territories and in China in
return for a total consideration of S$4,269,407 which was to be satisfied by
periodic cash payments totalling S$2,700,000 with the balance of S$1,569,407
being satisfied by an allotment of 37,000 shares of S$1 in the capital of ER.
In respect of the cash payments, an amount of S$675,000 was subsequently waived
on the basis that e-commerce activities were excluded from the licence. GOAL
believes that the grant of this licence will incentivise ER further to exploit
the positioning of LCCIEB's brand in the Far East and to enable the future
development of this market.
LCCIEB has also continued to develop its presence in other regions. In
particular, it is collaborating with the Chinese government to introduce
vocational qualifications and is using a combination of its language and
vocational qualifications to develop other markets such as Brazil and Eastern
Europe.
Competitive position
GOAL considers that LCCIEB has established a strong position in its markets as a
result of the recognition of its qualifications by employers and higher
education institutions. In addition, GOAL believes that LCCIEB differentiates
itself from its competitors by maintaining a focus on customer service,
particularly through regular contacts with key clients to maintain
relationships. The reputation of its qualifications, its key relationships and
the profile that LCCIEB has developed worldwide over many years has, in the
opinion of the Company, established a strong brand in the field of commercial
educational examinations.
A network of overseas agents covering all territories in which LCCIEB offers its
qualifications is responsible for the enrolment of students and co-ordinating
authorities and the administration of examination centres. This, together with
the strength and profile of the LCCIEB brand provides an important competitive
advantage that can facilitate diversification of the services on offer. In
recognition of the importance of the brand, GOAL will obtain the benefit of a
licence for the use of The London Chamber of Commerce and Industry's name in
connection with LCCIEB's business for an initial period to 30 September 2004.
LCCICET is liable for the licence fee during this initial period. Thereafter,
GOAL is liable to pay a licence fee of 2.5 per cent. of the net revenues arising
from the use of the London Chamber of Commerce and Industry's name.
These factors, together with the emphasis placed on the development of new
products lead GOAL to the view that LCCIEB is well equipped to respond to
competitive pressures in the markets in which it operates and that those markets
will continue to develop and offer additional opportunities.
Management and employees
Operational responsibility for the activities of LCCIEB is delegated by LCCICET
to William Swords (Chief Executive), Kumaresan Padmanathan (Director of
Corporate Services), Dawn Postans (Director of Commercial Development) and Paul
Ellis (Director of Technical Development) who are supported by a team of senior
managers. None of these four individuals is a director or a trustee of LCCICET
and all will become employees of the enlarged group. William Swords and
Kumaresan Padmanathan will become directors of the enlarged group.
As Chief Executive of LCCIEB, William Swords is responsible for all aspects of
its strategic and commercial management. Prior to starting to work for LCCIEB
in 1991, he was employed by Charles Letts (Holdings) Stationery and Publishing
Limited in a variety of positions, becoming Group Managing Director in 1984.
Kumaresan Padmanathan oversees all aspects of the finance, IT and personnel
functions and supervises the warehouse and distribution operation of LCCIEB. He
trained as a Chartered Accountant and joined LCCIEB in 1992 following
appointments as Financial Accountant at Grattan plc and as a management
consultant for Deloitte & Touche in South Africa.
At 20 November 2002, LCCIEB employed 76 people on a permanent basis. In
addition, it makes use of external examiners, markers and moderators.
Financial information on LCCIEB
LCCIEB, as a division of LCCICET, does not publish annual financial statements
in its own right. Its trading results and assets and liabilities have been
reported within the financial statements of LCCICET. Additionally, certain of
LCCICET's accounting policies and bases reflect its status as a charitable
organisation. After adjusting, inter alia, to exclude the investment portfolio
of LCCICET and certain sundry assets and liabilities that specifically relate to
the charitable activities of LCCICET, to release to the profit and loss account
the deferred income from the grant of the licence to ER over the period of that
agreement and to capitalise and depreciate the cost of installing a SAP
operating system that had been fully written off to the profit and loss account
in the year of purchase, in the year ended 30 September 2002, recent financial
performance of LCCIEB is as follows:
Years ended 30 September
2002 2001 2000
#'000 #'000 #'000
Turnover 9,867 9,384 9,351
Profit before tax 292 160 215
Net liabilities (406) (136) (447)
Cash (outflow)/inflow (163) 126 (371)
As the revenue and cost profile of LCCIEB tends to be aligned with the academic
year, the enlarged group will change its accounting reference date to 30
September following completion of the acquisition. Unaudited interim financial
statements of GOAL in respect of the six months ended 30 September 2002 are
being released today. A second interim statement will be presented covering the
twelve month period to 31 March 2003 and audited financial statements will be
prepared for the 18 months ending 30 September 2003.
REASONS FOR THE ACQUISITION
The Directors of GOAL believe that the acquisition of LCCIEB represents an
attractive opportunity that will generate strong synergies for the combined
business:
* The commercial focus of the enlarged group will be broadened. In
the UK the market presence will have a wider base. The activities of the
combined entity will cover both the pre and post 16 age ranges and provide
exposure to the commercial and further and higher education sectors through the
provision of work related NVQs and to the primary and secondary education
sectors. The combined entity will continue to operate internationally and this
is expected to lead to opportunities for GOAL to develop its own overseas
activities.
* LCCIEB has a long established trading record and a focus on
customer service. GOAL is a relatively new company that is continuing to build
its market presence and exploit its culture of product innovation. The Company
is of the opinion that the combined business can build on LCCIEB's revenue and
profit streams which will benefit from the application of GOAL's skills and
technology. At the same time, there is the prospect of incremental profits as
GOAL's assessment products gain market share, reinforced by the relationship
with LCCIEB.
* There will be an opportunity to achieve operational efficiencies
and to accelerate the creation of stronger market awareness and an enhanced
profile for GOAL's technology that could lead to opportunities for it to be
applied in other e-learning applications.
* The executive management of both LCCIEB and GOAL have extensive
knowledge and experience of the broad education and assessment market and the
Company believes that an effective executive team will be created within the
combined business.
* LCCIEB's wide international network of contacts provides the
potential to cross sell GOAL's software, whilst GOAL's recent experience of
developing its profile within educational and governmental sectors in the UK
could be used to open similar markets overseas.
DIRECTORS AND EMPLOYEES
Upon shareholders approving the resolutions to be proposed at the extraordinary
general meeting, a number of changes will be made to the Board following that
meeting. Brian Harris, who is currently the Chairman and a trustee of LCCICET
will be appointed as non-executive Chairman of the enlarged group and Sir Bryan
Nicholson will become non-executive Deputy Chairman. Nigel Snook will continue
as Chief Executive and William Swords and Kumaresan Padmanathan of LCCIEB will
join the Board as Executive Chairman, LCCIEB and Finance Director respectively.
Rohan Courtney will be appointed as an additional non-executive Director. Andrew
Clayton, Michael Giddings, Gareth Newman and Professor David Reynolds will step
down from the Board.
It is the intention to appoint a further non executive director to the Board as
soon as a suitable candidate has been identified. A nomination will be made by
LCCICET for consideration by the Nominations Committee of the enlarged group.
William Swords will enter into a fixed term service contract with the enlarged
group terminating in March 2005. During that period, he will be pursuing a
range of business development opportunities for the enlarged group and will
maintain strategic relationships in overseas territories.
The employment rights, including pension rights, of the management and employees
of LCCIEB will be maintained. In particular, the enlarged group has agreed to
establish a final salary pension scheme for employees of LCCICET transferring to
its employment who are currently members of the London Chamber of Commerce and
Industry (1974) Pension and Life Assurance Scheme (which was closed to new
members in October 2001). GOAL has agreed with LCCICET that the new scheme will
provide benefits that are consistent with those currently provided and that
assets in respect of these employees at the date of acquisition of LCCIEB will
be transferred into the new scheme (subject to a possible reimbursement by the
enlarged group described in the admission document that is being circulated to
shareholders today). GOAL expects that contributions will be made to the new
scheme at the rate of approximately 20 per cent. of employees' salaries and
there will be additional annual contributions in respect of the past service
liabilities of transferring employees. It is the intention of the proposed
Board of directors to review periodically the enlarged group's pension
arrangements to ensure that they continue to meet the commercial and financial
requirements of the business.
GOAL has also agreed to assume LCCICET's liability to make a contribution of
#71,647 in respect of further pension provisions for William Swords.
The Remuneration Committee has agreed (conditional upon the proposed
acquisition, admission of the share capital of the enlarged group to trading on
the Alternative Investment Market ('Admission') and the amendments to the
Unapproved Scheme being approved by shareholders) to the grant of share options
to William Swords, Kumaresan Padmanathan and certain key employees as soon as
practicable and in any event, within one month, of them becoming employees of
the enlarged group but conditional upon Admission, completion of the acquisition
and shareholder approval of the amendments to the Unapproved Scheme. The
exercise price of those options will be fixed at 9.25p being the closing mid
market price of GOAL ordinary share on 20 November 2002, the day before the
ordinary shares were suspended from trading on the Alternative Investment
Market. As this may be less than the market value of a share in the enlarged
group on the date of grant of such options shareholders' approval is being
sought for amendments to the Unapproved Scheme to permit the exercise price of
those options to be granted at 9.25p even if that represents a discount to the
then market value of a share. This ability to grant options at a discount would
not apply to any subsequent option grants under the Unapproved Scheme, whether
to William Swords, Kumaresan Padmanathan, or to any other eligible employees.
DIVIDENDS AND DIVIDEND POLICY
Since first admission of GOAL's shares to trading on AIM, the Company has
focused on the development of its products and markets and the costs of this
development have been charged in full to the profit and loss account. GOAL,
therefore, has yet to establish a profitable trading record and has a deficit on
distributable reserves amounting to #6,082,000 at 30 September 2002. The
Company is unable to pay dividends until this deficit is eliminated.
WHITEWASH PROPOSALS
As noted above, the consideration payable to LCCICET for the acquisition is to
be satisfied by the allotment and issue to it of 24,014,851 new ordinary shares
in GOAL credited as fully paid. LCCICET has specified that 500,000
consideration shares are to be allocated to IDJ Limited, its financial adviser,
in lieu of fees for advisory services. The consideration shares will represent
49.5 per cent. of the issued share capital of the enlarged group. Obtaining an
interest of this size would normally result in an obligation under Rule 9 of the
City Code on Takeovers and Mergers ('the Code') for LCCICET and IDJ Limited to
make a general offer to shareholders for the remaining shares not held by them.
In view of its size, the proposed acquisition requires the approval of the
shareholders of GOAL and an extraordinary general meeting is to be held on 19
December 2002 for that purpose. At that meeting, a resolution is being proposed
for the existing shareholders of GOAL to approve a waiver of the obligation
otherwise imposed on LCCICET and IDJ Limited to make a general offer for the
ordinary shares of the Company not already held by them. This particular
resolution must be voted upon by way of a poll.
The Panel on Takeovers and Mergers has agreed to waive the obligation that would
otherwise fall on LCCICET and IDJ Limited under Rule 9 of the Code to make a
general offer for the ordinary shares of the enlarged group not held by them if
shareholders vote in favour of the Whitewash resolution to be proposed at the
extraordinary general meeting.
The Board of GOAL, who have been so advised by Williams de Broe Plc, GOAL's
financial adviser, unanimously consider this proposal in respect of the
Whitewash to be fair and reasonable and in the best interests of the Company and
they propose to vote their shareholdings, totalling 20,090,613 ordinary shares
(representing 82 per cent. of the existing ordinary share capital of the
Company) in favour of the Whitewash resolution.
EXTRAORDINARY GENERAL MEETING
In view of its size, the proposed acquisition requires the approval of
shareholders in accordance with the AIM Rules. The resolutions are proposed at
the extraordinary general meeting scheduled for 19 December 2002 are as follows:
* to approve the Whitewash (by way of a poll);
* to approve the proposed amendments to the GOAL 2000
Unapproved Executive Share Option Scheme ('the Unapproved Scheme'), details of
which are set out below;
* to approve the acquisition of the business, assets and
liabilities of LCCIEB;
* to increase the authorised share capital of the Company
from #338,000 to #700,000;
* to grant the Directors authority in accordance with
section 80 of the Companies Act (1985) to allot shares up to a maximum nominal
amount of #444,972;
* to grant the Directors authority in accordance with
section 95 (2) of the Companies Act (1985) to allot shares; and
* to change the Company's name to Education Development
International plc.
The proposed change of the Company's name reflects the commercial and
geographical focus of the activities of the enlarged group.
Irrevocable undertakings to vote in favour of the resolutions to be proposed at
the extraordinary general meeting have been received by the Company from Wynford
Dore and Gareth Newman who hold interests in 20,000,000 ordinary shares in the
Company, representing approximately 81.6 per cent. of the issued ordinary share
capital of the Company in respect of which votes may be cast at the
extraordinary general meeting.
ADMISSION OF THE ENLARGED GROUP TO AIM
If Shareholder approval of the acquisition is given at the extraordinary general
meeting scheduled for 10.00am on 19 December 2002, the AIM dealing facility for
GOAL's issued ordinary shares will cease at 4.30pm on that date. Application
will be made for the whole of the issued share capital of the enlarged group to
be admitted to AIM with effect from 8.00am on the next business day. If
shareholder approval is not given for the acquisition, trading will continue in
the Company's existing issued share capital without any interruption.
RECOMMENDATION
Your Directors, who have been so advised by Williams de Broe Plc, consider the
acquisition to be in the best interests of shareholders as a whole. In
providing such advice to the Directors, Williams de Broe Plc
has placed reliance on the
Directors' commercial assessment of the acquisition.
The Directors, who have been so advised by Williams de Broe Plc, also consider
that the remaining proposals described in the admission document, including the
Whitewash proposals as described above, are in the best interests of the Company
and shareholders as a whole.
Accordingly, your Directors unanimously recommend that you vote in favour of the
resolutions to be proposed at the extraordinary general meeting, as they intend
to do in respect of their own beneficial holdings which amount to 20,090,613
Ordinary Shares, (representing 82 per cent. of the existing ordinary share
capital of GOAL).
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Publication of Admission Document 26 November 2002
Latest time and date for receipt of Forms of Proxy 10.00am on 17 December 2002
Extraordinary General Meeting 10.00am on 19 December 2002
Expected time and date for cancellation of the dealing facility for
the existing ordinary shares 4.30pm on 19 December 2002
Expected time and date for admission to AIM of the issued
ordinary shares in the enlarged group 8.00am on 20 December 2002
CREST accounts credited in respect of the
Consideration Shares 20 December 2002
Share certificates in respect of the Consideration Shares in certificated
form despatched by 31 December 2002
GENERAL
This announcement does not constitute an offer or invitation to purchase any
securities.
Williams de Broe Plc is acting for GOAL and no-one else in connection with the
matters described in this announcement and will not be responsible to anyone
other than GOAL for providing the protections afforded to the clients of
Williams de Broe Plc or for providing advice in relation to those matters.
Copies of the Admission Document will be available free of charge at the offices
of Pinsent Curtis Biddle at Dashwood House, 69 Old Broad Street, London, EC2M
1NR until at least one month after admission of the enlarged ordinary share
capital to trading on AIM.
PRESS ENQUIRIES:
GOAL
Nigel Snook, Chief Executive 01926 458600
Williams de Broe Plc, adviser to GOAL
Ian Stanway 0121 609 0050
This information is provided by RNS
The company news service from the London Stock Exchange
END
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