RNS No 7195h
DAVID GLASS ASSOCIATES PLC
22nd July 1997
PART 1
HERCULES PROPERTY SERVICES PLC ("Hercules")
Recommended #8.3 million Offer for David Glass Associates plc
("David Glass")
SUMMARY
- The boards of Hercules and David Glass announce the terms of
a recommended offer to be made for David Glass at 153p per
share which values David Glass at approximately #8.3 million
ignoring the exercise of any outstanding options over David
Glass Shares.
- The Offer will be made by Guinness Mahon on behalf of
Hercules, on the basis of 5.885 New Hercules Shares for
every 10 David Glass Shares.
- A full cash alternative at 133p per share will be available.
- Irrevocable undertakings to accept the Offer have been
received by Hercules from David Glass, Derek Boothman, the
only David Glass director other than David Glass who holds
David Glass shares, and certain other shareholders. In
addition to the 335,000 David Glass Shares already held by
Hercules, this represents an aggregate of approximately 51.86
per cent. of David Glass's current issued ordinary share
capital.
- A Placing and Open Offer, ("the Placing and Open Offer") fully
underwritten by Guinness Mahon, to raise #4.9 million (net of
expenses) to fund the cash alternative and to cover costs.
- David Glass is an established property management business
based in north-west London. It specialises in the
management of principally residential leasehold property on
behalf of the freeholder. Apart from the fees generated
from property management David Glass also derives income
from insurance commissions.
- David Glass currently manages approximately 13,000 units
throughout England and Wales
- Hercules also announces its audited results for the 15 months
to 30th June 1997:
- Pre-tax profits of #853,000 against #256,000 for the year
ended 31st March 1996 - substantially higher than
forecast at time of flotation
- Final dividend of 3p net per ordinary share is
recommended by board
"We now believe that the future of Hercules is particularly
bright. With healthy levels of cash Hercules is perfectly
positioned to continue its acquisition programme, as and when the
right opportunities present themselves, whilst also ensuring that
the Group's existing companies continue to maximise their
profits," Larry Lipman, Chairman.
Enquiries:
Paul Davis, Finance Director, Hercules Tel: 0181-203 9099
David Glass, Chairman, David Glass Associates Tel: 0181-203 7877
Jagjit Mundi, Director, Guinness Mahon Tel: 0171-623 9333
Baron Phillips, Baron Phillips Associates Tel: 0171 224 1302
This summary should only be read in conjunction with the attached
press announcement which includes further information on the
Offer and the Placing and the Open Offer.
Guinness Mahon & Co. Limited, which is regulated by The
Securities and Futures Authority Limited, is acting for Hercules
and no one else in connection with the matters described herein
and will not be responsible to anyone other than Hercules for
providing the protections afforded to its customers nor for
providing advice in relation to the Offer or any of the matters
referred to in this press release.
RECOMMENDED OFFER WITH CASH ALTERNATIVE ON BEHALF OF HERCULES FOR
DAVID GLASS
1. Introduction
The boards of Hercules and David Glass announce the terms of a
recommended offer with a full cash alternative, to be made by
Guinness Mahon on behalf of Hercules, to acquire the whole of the
ordinary share capital of David Glass other than those David
Glass Shares already owned by Hercules.
On the basis set out below, the Offer values each David Glass
Share at approximately 153p and David Glass's currently issued
share capital at approximately #8.3 million.
Hercules already owns 335,000 David Glass Shares representing
approximately 6.18 per cent. of David Glass's issued ordinary
capital. Hercules has also received undertakings to accept the
Offer in respect of a further 2,473,833 David Glass Shares
representing 45.67 per cent. of David Glass's issued share
capital.
2. The Offer
On behalf of Hercules, Guinness Mahon is offering to acquire on
the terms and subject to the conditions set out below, in
Appendix I, all of the David Glass Shares not already owned by
Hercules on the following basis:
5.885 new Hercules Shares for every 10 David Glass Shares
and so in proportion for any other number of David Glass Shares
held. This constitutes the basic terms of the Offer. Fractions
of new Hercules Shares will not be allotted or issued to persons
accepting the Offer but will be disregarded and entitlements
rounded down to the nearest whole number of new Hercules Shares.
The AIM middle market quotation of a Hercules Share as at the
close of business on 21st July, 1997 (the last business day
before the release of this announcement) was 260p. On this
basis, the Offer values each David Glass Share at 153p.
Full acceptance of the Offer (assuming no David Glass
shareholders elect for the Cash Alternative described below and
ignoring the exercise of outstanding options under the David
Glass Share Option Scheme) would result in the issue of 2,990,561
new Hercules Shares. These would represent approximately 47 per
cent. of the enlarged issued share capital of Hercules based on
such full acceptance prior to any further issue of Hercules
Shares pursuant to the Placing and Open Offer.
Your attention is drawn to the conditions and further terms of
the Offer and the Cash Alternative set out in Appendix I.
The first closing date of the Offer is 3.00 p.m. on 12th August,
1997.
3. The Cash Alternative
Accepting shareholders may elect to receive cash instead of all
or any of the new Hercules Shares to which they would otherwise
have become entitled under the Offer on the following basis:
for each David Glass Share 133p in cash
A David Glass shareholder who validly elects for the Cash
Alternative will receive the cash payment at the same time as a
David Glass shareholder who accepts the basic terms of the Offer
receives new Hercules Shares.
If all the David Glass shareholders elect for the Cash
Alternative (other than those who have irrevocably undertaken not
to do so) the maximum amount of cash payable under the Cash
Alternative will be approximately #4.91 million. The cash
required will be provided by Hercules from the proceeds of the
Placing and Open Offer.
The Cash Alternative will remain open until 3.00 p.m. on 12th
August, 1997. If the Offer is then unconditional as to
acceptances, or is then capable of being declared unconditional
as to acceptances, the Cash Alternative will be kept open for at
least 14 days thereafter (or such longer period as Hercules may,
subject to the rules of the Code, decide). If, at that time, the
Offer is not unconditional as to acceptances (or capable of being
so declared) and is extended beyond that time, the right is
reserved to lapse or to close or to extend the Cash Alternative.
If the Cash Alternative has lapsed or has closed for acceptance,
the right is also reserved to reintroduce a further cash
alternative in accordance with the Code as long as the Offer is
still then conditional as to acceptances. The Cash Alternative
is conditional upon the Offer becoming or being declared
unconditional in all respects by 3.00 p.m. on 2nd September,
1997, or (subject to the rules of the Code) such later date(s)
and/or time(s) as Hercules may agree with Guinness Mahon.
4. Conditions and further terms of the Offer
The Offer is conditional, inter alia; (i) upon the passing of a
special resolution by holders of Hercules Shares to, inter alia,
authorise the implementation of the Offer, Placing and Open
Offer; (ii) the passing of a resolution to be put to shareholders
of Safeland enabling Safeland to accept the Offer; (iii)
acceptances being received in respect of not less than 90 per
cent. (or such lesser percentage (not being less than 50 per
cent.) as Hercules may decide) of the David Glass Shares to which
the Offer relates; (iv) the admission to trading of the new
Hercules Shares on AIM and; (v) the Placing Agreement to be
entered into by the Company with Guinness Mahon not having been
terminated in accordance with its terms prior to the Offer having
become or been declared wholly unconditional. The conditions and
further terms of the Offer and the Cash Alternative are set out
in Appendix I.
The David Glass Shares which are the subject of the Offer will
be acquired by Hercules free from all liens, charges, equities,
encumbrances, rights of pre-emption and any other third party
rights of any nature whatsoever and together with all rights now
or hereafter attaching thereto, save the right to receive the
final dividend of 3p (net) per David Glass Share in respect of
the year ended 31st March, 1997, but including all other
dividends and other distributions declared, made or paid in
respect of any period thereafter.
The new Hercules Shares issued pursuant to the Offer will be
issued credited as fully paid and will rank pari passu with the
then existing issued Hercules Shares, including the right to
receive all dividends and distributions declared, made or paid
after the date hereof other than the final dividend in respect
of the period ended 30th June, 1997. The first dividend in which
the new Hercules Shares will participate will be the interim
dividend payable by Hercules in respect of the six months ended
31st December, 1997.
Fractions of new Hercules Shares will not be allotted or issued
to persons accepting the Offer but will be disregarded and
entitlements rounded down to the nearest whole number of new
Hercules shares.
Application will be made for the existing and new Hercules Shares
to be admitted to trading on AIM. It is expected that dealings
will commence on the first business day after the Offer is
declared wholly unconditional.
5. Undertakings to accept the Offer
David Glass has irrevocably undertaken to accept the Offer and
not to elect for the Cash Alternative in respect of his holding
of 160,000 David Glass Shares (representing approximately 2.95
per cent. of the issued share capital of David Glass). Derek
Boothman, being the only David Glass Director other than David
Glass who holds David Glass Shares, has irrevocably undertaken
to accept the Offer but to elect for the Cash Alternative in
respect of his beneficial holding of 10,000 David Glass Shares
(representing approximately 0.18 per cent. of the issued share
capital of David Glass). Mr. Boothman's wife, who also
benefically holds 10,000 David Glass Shares has irrevocably
undertaken to accept the Offer and not to elect for the Cash
Alternative in respect of her David Glass Shares.
Safeland, a company of which Larry Lipman is a shareholder and
director, which holds 1,217,833 David Glass Shares (representing
approximately 22.48 per cent. of the issued share capital of
David Glass) has undertaken irrevocably to accept the Offer and
not to elect for the Cash Alternative (unless it is varied).
Safeland's undertaking is conditional on its own shareholders'
approval which is to be sought at an extraordinary general
meeting of Safeland.
Eaglet Investment Trust plc, which holds 1,076,000 David Glass
Shares (representing approximately 19.86 per cent. of the issued
share capital of David Glass) has undertaken to accept the Offer
but it has not given any undertaking in relation to the Cash
Alternative.
Each of the undertakings for Safeland and Eaglet Investment Trust
plc is subject to there being no higher offer for David Glass
shares.
6. Financial effects of acceptance of the Offer
The following tables set out, for illustrative purposes only, and
on the bases and assumptions set out in the notes below, the
financial effects of acceptance of the Offer on capital value and
gross income for an accepting shareholder of 1,000 David Glass
Shares if the Offer becomes or is declared unconditional in all
respects.
Cash
Notes Offer Alternative
# #
A. Capital Value
Market value of 588.5 new
Hercules Shares (i) 1,530 -
Value of Cash Alternative - 1,330
------- -------
Total 1,530 1,330
Market value of 1,000 David
Glass Shares (ii) 1,275 1,275
------- -------
Increase in capital value 255 55
------- -------
This represents an effective
increase of 20.00% 4.31%
======= =======
Cash
Notes Offer Alternative
# #
B. Gross Income
Gross dividend income on
588.5 new Hercules Shares (iii) 22.07 -
Gross income from cash
consideration (iv) - 93.765
------- -------
Total 22.07 93.765
======= =======
Gross dividend income on
1,000 David Glass Shares (v) 75 75
(Decrease)/increase in gross income (52.93) 18.765
------- -------
This represents an effective
(decrease)/increase of (70.57)% 25.02%
======= =======
Notes:
(i) Based on the mid-market price of 260p per Hercules Share
on 21st July, 1997, being the latest practicable date prior to
the release of this announcement as derived from the AIM Appendix
to the Daily Official List.
(ii) Based on the mid-market price of 127.5p per David Glass
Share derived from the AIM Appendix to the Daily Official List
on 21st July, 1997, being the latest practicable date prior to
release of this announcement.
(iii) Based on the final dividend of 3p (net) per Hercules Share
for the financial period ended 30th June, 1997, together with the
associated tax credits of 20/80ths based on current legislation
of the amounts paid.
(iv) The gross income on the Cash Alternative has been calculated
on the assumption that the cash is re-invested to yield
approximately 7.05 per cent. per annum, being the FT-Actuaries
Government Securities Index average gross redemption yield for
medium coupon UK gilts with maturities of five to fifteen years
published in the Financial Times dated 17th July, 1997.
(v) Based on the final dividend of 3p (net) per David Glass
Share for the financial year ended 31st March, 1997 and the
interim dividend of 3p (net) per David Glass Share for the six
month period ended 30th September, 1996, together with the
associated tax credits of 20/80ths of the amounts paid.
(vi) No account has been taken of any liability to taxation.
7. The business of Hercules
History and Background
Hercules was demerged from Safeland in May 1996 and began trading
on AIM on 20th May, 1996.
The trading subsidiaries of the Hercules Group are Heritage,
Harman Healy, Simmonds and Resolute which, apart from Simmonds,
were acquired by Hercules as part of the demerger of Hercules
from Safeland.
Heritage was established in 1993, and offers buildings insurance
services to property owners and their agents at competitive rates
within a bulk scheme in place with a major insurance company. In
November 1996, a major building insurance contract was acquired
from Rotch Property Group Limited ("Rotch") for five years under
which Heritage secured the right to arrange insurance cover for
over #400 million of commercial property owned by Rotch and its
associates for a period of five years. The growth in the turnover
of Heritage continues to be rapid, and the Hercules Directors
believe that there remains significant potential still to be
exploited.
Harman Healy provides auctioneering, commercial management and
valuation services. The business was established as a partnership
over 60 years ago. Under the name Sallman Harman Healy Limited,
the business was acquired by Safeland in October 1994. 25 per
cent. of the issued share capital of Harman Healy is held by
Jonathan Radgick, the managing director of Harman Healy and the
balance by Hercules.
Simmonds is a specialist chartered surveying practice acquired
by Hercules in June 1997 which concentrates on residential
property management, as well as other professional activities
such as property valuations and surveys.
Resolute, formerly known as Safeland Estate Agencies Limited, was
originally established in 1978 as an estate agency business
dealing primarily with residential properties in North-West
London. The estate agency operation was sold in 1989 and,
following the sale, Resolute has focused its continuing business
on providing property management services to Safeland and other
clients.
Hercules Shareholding in David Glass
Hercules has recently acquired a strategic stake in David Glass
through three separate acquisitions of shares: of 155,000 shares
purchased for 130p each on 30th May, 1997, and of 100,000 shares
purchased for 105p each on 9th June, 1997; and of 80,000 shares
purchased for 107.5p each on 9th June, 1997. At the time of the
first acquisition, Hercules stated that synergy possibilities
existed for Hercules's subsidiary, Heritage, and David Glass due
to the nature of the two companies' business focus.
Trading Record
The trading record of the Hercules Group during the two years
ended 31st March, 1996 and for the fifteen months ended 30th
June, 1997 is summarised below.
Fifteen
months
ended
Year ended 31st March 30th June
1995 1996 1997
Notes #'000 #'000 #'000
Turnover 1,2 914 1,166 2,699
Cost of sales (518) (322) (929)
----- ----- -----
Gross profit 756 844 1,770
Administrative expenses (697) (606) (954)
----- ----- -----
Operating profit 59 238 816
Net interest receiveable/
(payable) 15 18 37
----- ----- -----
Profit on ordinary
activities before tax 74 256 853
Tax on profit on ordinary
activities (23) (83) (305)
----- ----- -----
Profit on ordinary
activities after tax 51 173 548
Equity minority interests 5 (13) (76)
----- ----- -----
Profit for the year/period 56 160 472
===== ===== =====
Notes:
1.Figures for the years ended 31st March, 1995 and 31st March,
1996 are derived from an accountants' report dated 29th April,
1996 on HPS Property Limited, a company that acquired the trading
subsidiaries of Hercules on 23rd April, 1996 in contemplation of
the demerger of these businesses from Safeland which was
completed on 20th May, 1996. The report consolidated the audited
financial statements of the subsidiaries for the periods in
question as if HPS had been the holding company throughout.
Figures for the fifteen months ended 30th June, 1997 are
extracted from the audited annual accounts of Hercules for that
period. Hercules acquired 100 per cent. of the issued share
capital of HPS on 20th May, 1996 and had no other trading
subsidiaries until it acquired Simmonds on 12th June, 1997.
2. All activities are derived from continuing operations.
8. The business of David Glass
Background
David Glass currently manages leasehold units on behalf of
landlords, including private landlords and management companies
controlled by the leaseholders themselves. The type of property
managed ranges from single houses converted into a number of
flats through to major blocks of flats. Whilst David Glass is
prepared to manage any long term leasehold property, it does not
currently manage short term lettings such as assured tenancies.
David Glass derives its income from two main sources: Management
fees charged on an annual basis to leaseholders (where the lease
permits) which are agreed with the freeholder or resident
controlled management company and insurance commissions agreed
with the freeholder for arranging the building's insurance. In
addition, David Glass receives fees for such services as
supervising building works and dealing with leaseholders' and
solicitors' enquiries.
David Glass operates out of 2,000 sq.ft. of offices in North West
London.
David Glass currently manages approximately 13,000 units in the
following geographical areas: Greater London, Home Counties,
Essex, Kent, North West England, Wales, South Coast, West
Midlands, South West England, East Anglia and North of England.
Approximately 55 per cent. of the units managed by David Glass
are freeholds owned by the executive directors, their relatives
and associates. David Glass and these respective parties have
entered into long term management contracts in relation to these
units. In excess of 85 per cent. of all units managed by David
Glass (including those referred to above) are covered by written
management agreements.
Financial Record
The audited trading results of David Glass for the last three
completed financial years are set out below:
Year ended 31st March
1995 1996 1997
#'000 #'000 #'000
Turnover 1,038 1,330 1,687
----- ----- -----
Profit before taxation 121 574 820
Taxation (37) (193) (273)
----- ----- -----
Profit after tax 84 381 547
Dividend (52) (258) (325)
----- ----- -----
Profit retained for the year 32 123 222
===== ===== =====
Earnings per share 1.69p 7.37p 10.11p
The financial information for the three years ended 31st March,
1997 is extracted from David Glass's audited consolidated
accounts.
9. Management and Employees
Hercules has given assurances that the existing rights, including
pension rights, of all management and employees of the David
Glass Group will be fully safeguarded.
10. Placing & Open Offer
On behalf of Hercules, Raphael Zorn Hemsley has agreed to place
conditionally up to 2,990,561 new Hercules Shares at 240p per
share,50 per cent. of which are subject to clawback to satisfy
valid applications by qualifying shareholders of Hercules to
subscribe under the Open Offer also at 240p per share, free of
expenses.
The Placing and Open Offer has been fully underwritten by
Guinness Mahon.
Under the terms of the Open Offer, Qualifying Shareholders may
apply for any number of Open Offer Shares up to a maximum pro
rata entitlement of:
5.885 Open Offer Shares for every 10 Hercules Shares
held at the close of business on 14th July 1997 and so in
proportion for any other number of Hercules Shares then held.
Applications for Open Offer Shares in excess of such maximum pro
rata entitlement will be treated as applications for the maximum
pro rata entitlement. Fractional entitlements will be
disregarded. Any Open Offer Shares not taken up under the Open
Offer will be subscribed for pursuant to the terms of the
Placing.
The Open Offer will close at 3.00p.m. on 12th August, 1997.
The Open Offer Shares will be credited as fully paid and will
rank, at the time of issue, pari passu in all respects with the
existing Hercules Shares save in respect of the dividend declared
in respect of the period ended 30th June, 1997.
The Placing and Open Offer are conditional, inter alia, on:
(i) the passing of a special resolution by Hercules Shareholders
to approve the implementation of the Offer and the Placing and
the Open Offer;
(ii) the Placing Agreement becoming unconditional and not having
been terminated prior to the time when the Offer would otherwise
become or be declared wholly unconditional;
(iii) the Offer becoming or being declared unconditional in all
respects; and
(iv) admission of the New Hercules Shares to trading on AIM.
Full details of the Placing and Open Offer are set out in a
Prospectus and in accompanying application forms which are
expected to be posted to Hercules Shareholders later today.
Application forms are personal to Hercules Shareholders and may
not be transferred except to satisy bona fide market claims and
must be returned with payment in full by not later than 3.00p.m.
on 12th August, 1997.
11. Despatch of Offer Document
The Offer Document will be posted today to all shareholders
(other than restricted overseas shareholders) and option holders
of David Glass. Copies of the Offer Document will be available
at the offices of Titmuss Sainer Dechert, 2 Sergeants' Inn,
London EC14 1LT.
12. Expected Timetable 1997
Record date for the Open Offer 14th July
Latest time and date for splitting
Application Forms in respect of the
Open Offer (to satisfy bona fide market
claims only) 8th August
First closing date for the Offer 12th August
Latest time and date for receipt of
completed Application Forms and
payment in full 3.00p.m. on 12th August
Latest time and date for receipt of
Forms of Proxy for the Extraordinary
General Meeting of Hercules 11.00 a.m. on 12th August
Extraordinary General Meeting 11.00 a.m. on 14th August
Dealings commence in the New
Hercules Shares The business day after the Offer is
declared unconditional in all respects.
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