Lambert Howarth - Proposed Acquisition, etc
November 05 1999 - 2:02AM
UK Regulatory
RNS Number:3282A
Lambert Howarth Group PLC
5 November 1999
LAMBERT HOWARTH GROUP P.L.C. ("LAMBERT HOWARTH")
Proposed acquisition of Fast Forward Holdings Limited ("Fast Forward")
Proposed issue of 7,027,060 new Lambert Howarth shares of 10 pence each
Lambert Howarth Group p.l.c., the leading supplier of footwear and homeware to
Marks & Spencer, today announces the proposed acquisition of the entire issued
share capital of Fast Forward Holdings Limited for a consideration, to be
satisfied in New Lambert Howarth shares and loan notes, of approximately
#20.2m. Fast Forward is a private company whose principal business is the
supply of fashion accessories to Marks and Spencer p.l.c. ("Marks & Spencer"
or "M&S") and other retail trade customers.
Terms:
- Proposed acquisition of Fast Forward Holdings Limited for a consideration of
approximately #20.2m
- Consideration to be satisfied by the issue to Fast Forward shareholders of
an aggregate of 7,027,060 new Lambert Howarth shares, representing
approximately 33.3% of Lambert Howarth's issued share capital, and an
additional #1,800,000 of loan notes
- Richard Brainin and Garry Hogarth of Fast Forward Holdings Limited, to
become executive directors of, and significant shareholders in, Lambert
Howarth
- Fast Forward's shareholders have provided warranties with regards to the
consolidated profit before tax of the Fast Forward group for the years ended
31 December 1999 and 31 December 2000
Reasons for the transaction:
- Creates a broader platform from which the enlarged group can expand
- Strengthened management team
- Compelling commercial rationale, including:
- expansion of product portfolio
- complementary skill base
- strengthened global sourcing capability
- Excellent opportunity to take advantage of the increasing trend of
consolidation within M&S supply chain
- Positions Lambert Howarth as a top 5 supplier to M&S (excluding food) with
enhanced competitive strengths
Commenting on the proposed transaction, Lambert Howarth Chief Executive Robert
Garfit said:
"We believe the rationale for the proposed acquisition is compelling. The
enlarged group will be able to offer Marks & Spencer and other customers a
broader range of accessory products, sourced predominantly from overseas. In
addition, as a top supplier to Marks & Spencer, the enlarged group will have a
broader platform from which its strengthened management team can deliver value
to shareholders by developing the business organically and via acquisition."
Fast Forward Managing Director Garry Hogarth said:
"We believe we have found the ideal partner. We have complementary product
ranges, similar cultures and, going forward a strengthened management team
focused on delivering value for customers."
For further information, please contact:
Lambert Howarth Group p.l.c.
Robert Garfit / John Gibson
Tel: 0171 535 3900
Cazenove & Co.
Patrick Donlea / Nick Garrett
Tel: 0171 588 2828
Financial Dynamics Ltd
Tom Baldock
Tel: 0171 831 3113
Lambert Howarth Group p.l.c.
Proposed Acquisition of Fast Forward Holdings Limited
Lambert Howarth today announces that it has conditionally agreed to acquire
Fast Forward subject, inter alia, to approval by the shareholders of Lambert
Howarth to be sought at an extraordinary general meeting to be held on 22
November (the "Acquisition").
The Acquisition values the entire issued share capital of Fast Forward at
approximately #20.2 million, on the basis of the closing middle market
quotation of a Lambert Howarth share of 261.5p derived from the Daily Official
List at close of business on 4 November 1999, being the last dealing date
before the announcement of the Acquisition.
The consideration for the Acquisition will be satisfied by the issue to Fast
Forward shareholders of an aggregate of 7,027,060 new Lambert Howarth shares
(representing 331/3 per cent. of Lambert Howarth's issued share capital as
enlarged by the Acquisition and #1,800,000 of loan notes.
Reasons for the Acquisition
The Acquisition presents Lambert Howarth with the opportunity to broaden its
product base, strengthen its management team, enhance its global sourcing and
provide a higher level of service to its major customers. This fits with the
increasing trend towards consolidation within the supply chain of M&S.
The directors believe that the combination of these two successful businesses,
given that M&S can see the advantages to its business resulting from this
Acquisition, will offer significant opportunities for the enlarged group.
The enlarged group will become one of M&S top 5 suppliers (excluding food)
operating in one of the more resilient areas of their business. The new group
will be able to react more quickly to changes in fashion and demand and
enhance its competitive strengths.
The businesses of Lambert Howarth and Fast Forward have very compatible
product portfolios, complementary skill bases and will benefit from the
combined strengths of their proven track records in global sourcing. Lambert
Howarth's management will also be strengthened by the appointment to Lambert
Howarth's board of the two founder directors of Fast Forward, Richard Brainin,
and Garry Hogarth, as executive directors.
Overall, the Acquisition will create a stronger platform and management team
which will provide greater opportunities for growth of the enlarged group.
This will further the group's objective to become one of the UK's largest and
most comprehensive accessory suppliers.
Information on Fast Forward
Fast Forward is a private company. Its share capital is held equally between
the family trusts of Richard Brainin and Garry Hogarth, the founder directors
of Fast Forward. Fast Forward's principal business is the supply of fashion
accessories to Marks & Spencer and other major UK retailers.
The Fast Forward group was founded in 1988 to design and supply scarves which
initially it exported to Russia and the USA. In 1989 it was awarded a
contract to supply scarves to M&S.
Fast Forward's current strategy is to act as a "one-stop-shop" for the supply
of accessories to M&S with products such as printed scarves, knitted scarves,
belts and jewellery.
Fast Forward supplies an extensive range of accessory products and has
continued to grow its traditional business of gloves, hats and scarves.
Through its joint venture company it is now a significant supplier of handbags
to M&S. More recently, the Fast Forward group has extended its product range
further into sunglasses, costume jewellery, toiletries and soft textile
homeware products. None of Fast Forward's products are currently manufactured
by the group but by a network of specialist suppliers in the Far East, and to
a lesser extent India and Europe. Fast Forward outsources its warehousing
requirements in the UK.
The business has expanded rapidly in recent years. A key factor in the growth
of the Fast Forward group has been its world-wide sourcing expertise and the
strength of its design and product development. Fast Forward has a proven
"hit rate" in identifying fast selling products while at the same time
maintaining the integrity of its pricing policy. Fast Forward continues to
utilise this successful strategy to identify trends in fashion and to design
and resource products to meet customer driven demand.
For its financial year ended 31 December 1998, Fast Forward had a profit
before tax of #1.9 million (1997: #1.8 million) from sales of #20.4 million
(1997: #17.3 million). As at 31 December 1998, Fast Forward had net assets of
#5.2 million (1997: #4.2 million).
Current Trading of Lambert Howarth and Fast Forward
Lambert Howarth
Throughout this year the Marks & Spencer Division has performed comfortably
ahead of management expectation. This is particularly as a result of the
success of the Global Footwear business. Both Global Homeware and the Isle of
Man manufacturing unit are performing in line with expectation. Lambert
Howarth's General Footwear Division which incorporates the safety business is
experiencing tough trading. However the profitability of this division
remains on target due to tight overhead controls and improved margins. We are
pleased with the performance achieved to date with the re-organisation of this
division.
The group is confident of achieving a successful outcome for the year.
Fast Forward
In the initial nine months of trading this year, the Fast Forward group has
achieved strong sales on its traditional merchandise significantly
outperforming its budget in both sales and profit. This is expected to
continue through to the year end. Due to the seasonality of Fast Forward's
business, the group's sales and profits are substantially weighted to the
second half of the year. This will be reflected in the enlarged group's
interim results for the six month period ending 31 December 2000.
The Fast Forward group continues to develop its strategy by diversifying into
new product areas.
Prospects for the enlarged group
It is expected that the acquisition will be earnings dilutive in the first
full year of ownership and earnings enhancing thereafter, before taking
account of goodwill amortisation. For the avoidance of doubt, nothing in this
announcement should be construed as a profit forecast or interpreted to mean
that the future earnings per share will necessarily be the same as, greater
than or less than the historic published earnings per share of the group.
The directors and proposed directors believe that the more diversified product
range will enable the enlarged group to grow its market share more quickly in
the accessory market. Together with the anticipated synergies from the
combined product range, this leads them to view the future with confidence.
Service contracts of the proposed directors
Pursuant to the terms of the acquisition agreement, the proposed directors
will enter into service agreements with Lambert Howarth on substantially the
same terms as the existing executive directors. The service agreement of each
proposed director shall be terminable on not less than 12 months' notice, such
notice not to be given earlier than 1 January 2000. Under the service
contracts each proposed director will be entitled to a salary (#130,000 and
#150,000 per annum for the year ending 31 December 2000 for Richard Brainin
and Garry Hogarth respectively), a discretionary bonus of up to 30 per cent.
of salary, 33 days holiday (inclusive of statutory holidays and permanent and
private health insurance.
Biographies of the proposed directors
Richard Brainin (45), a co-founder of Fast Forward, has focused on the
strategic development of the Fast Forward group since its foundation in 1988.
After leaving Bache in 1976, where he was head of the metals department in the
commodities section, he set up his own commodities business which he then sold
in 1982. Following that, from 1982 to 1988, he managed his own portfolio of
private investments.
Garry Hogarth (44), a co-founder of Fast Forward, has been responsible for the
establishing and maintaining the supplier/designer networks of the Fast
Forward Group since its foundation in 1988. He began supplying scarves to
Marks & Spencer in 1979 and has maintained and developed contacts at Marks &
Spencer ever since. In 1974 he commenced working for Tweedvale, a textile
business controlled by his family, which he left in 1988 to found Fast
Forward.
Terms of the Acquisition
The Fast Forward shareholders have warranted, in addition to the usual
warranties given by vendors in the context of a share purchase, that the
consolidated profit before tax of the Fast Forward group for the year ended 31
December 1999 will be not less than #3,441,000 (before adjustments for
director and employee bonus entitlements of #520,000) and the consolidated
profit before tax for the year ended 31 December 2000 will be not less than
#4,660,000. Richard Brainin and Garry Hogarth have agreed to indemnify Lambert
Howarth on a pound for pound basis to the extent that there is any breach of
this warranty.
The new Lambert Howarth shares will be allotted and issued credited as fully
paid and will rank pari passu in all respects with the existing Lambert
Howarth shares, including the right to receive all dividends and other
distributions declared, paid or made after the date of allotment including any
final dividend
Fractions of new Lambert Howarth shares will not be allotted to Fast Forward
shareholders but will be disregarded and entitlements will be rounded down to
the nearest whole number.
The Acquisition is conditional, amongst other things, upon the approval of
Lambert Howarth shareholders at an extraordinary general meeting of Lambert
Howarth to be held on Monday 22 November 1999.
City Code
Under Rule 9 of the Code any person, or group of persons acting in concert,
who acquires 30 per cent. or more of the voting rights of a public company is
normally required by the Panel to make a general offer to the shareholders of
such company to acquire the balance of the issued share capital not already
held by them and their associates. Richard Brainin, Garry Hogarth and the Fast
Forward Trustees have been deemed by the Panel to be acting in concert with
each other for the purposes of Rule 9 of the City Code (the "Concert Party").
However, the Panel has agreed, subject to approval from shareholders at
Lambert Howarth's extraordinary general meeting to waive this requirement.
Following completion of the Acquisition this Concert Party will own in
aggregate more than 30 per cent. but less than 50 per cent. of the company's
voting share capital. Accordingly, until Richard Brainin, Garry Hogarth and
the Fast Forward Trustees are no longer deemed by the Panel to be acting in
concert and for so long as the Concert Party holds in excess of 30 per cent.,
they cannot acquire any further shares in the enlarged issued share capital of
the company without incurring an obligation under Rule 9 of the City Code to
make a general offer for Lambert Howarth.
Expected Timetable of Principal Events
1999
Latest time and date for receipt of forms of proxy for the extraordinary
general meeting - 10.00 am on 20 November
Extraordinary general meeting - 10.00 am on 22 November
Admission of new Lambert Howarth shares to the Official List - 23 November
Definitive certificates for new Lambert Howarth shares despatched - 23
November
Circular to shareholders
A circular to shareholders giving further details of the Acquisition and
notice of an extraordinary general meeting of Lambert Howarth to approve the
Acquisition will be posted as soon as practicable.
END
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