RNS Number:9741M
Leisure & Gaming plc
01 June 2005
1 June 2005
Leisure & Gaming plc ("Leisure & Gaming" or the "Company")
Proposed acquisition (the "Acquisition") of VIP Management Services N.V. and Bon
Bini Investments N.V. ("VIP"), Share Consolidation, Placing of 7,954,545 new
Ordinary Shares ("the Placing") at 88p per share (the "Placing Price") and
Admission to trading on AIM ("Admission")
The directors ("Directors" or "Board") of Leisure & Gaming are pleased to
announce that the Company has today conditionally agreed to acquire the entire
issued share capital of VIP, a leading online sports betting and gaming
operator. The Acquisition is the first step in the implementation of Leisure &
Gaming's strategy to identify and acquire businesses or interests which are
suitably positioned to take advantage of the opportunities perceived by the
Board to exist in the online leisure and gaming sector. The Board believes
opportunities exist to create substantial shareholder value through further
acquisitions in the online gambling sector.
HIGHLIGHTS
The Acquisition
* Proposed acquisition of VIP for a consideration of up to #23.45
million including deferred consideration of up to $9.025 million
(#4.75 million) payable dependent upon the profitability of the VIP Group for
the two financial years ending 31 December 2005 and 2006.
* VIP:
o Established in 1997 and recognised as a leading online sports
interactive betting and gaming operator.
o Headquartered in Curacao, Netherlands Antilles, with an office in
Bristol, UK, VIP operates under a Netherlands Antilles gaming licence and
a UK bookmakers permit.
o Product portfolio principally includes online sports book, horse
racing, online casino games under a suite of nine brands under single
integrated infrastructure.
* In the year ended 31 December 2004, VIP reported sales of $330.1
million (#174.0 million) and EBITDA of $6.0 million (#3.2million).
* On completion, Alistair Assheton, founder and Managing Director of
VIP, and Peter Blacker, Finance Director of VIP, will both join the Leisure
& Gaming plc Board as Chief Executive Officer and Finance Director
respectively. Philip Parker will remain as Non-Executive Chairman and
Benjamin Shaw will remain on the Board as an Executive Director. Giles
Willits will also join the Board as a Non-Executive Director.
* The Acquisition by Leisure & Gaming constitutes a reverse takeover
under the AIM Rules, requiring approval of Leisure & Gaming Shareholders at
an Extraordinary General Meeting which is being convened for 24 June 2005.
Subject to shareholders approval being obtained, it is expected that the
Acquisition will be completed and Admission will become effective on 28
June 2005.
* Altium Capital Limited is Nominated Adviser and Broker to
Leisure & Gaming. Marwyn Capital Limited is financial adviser to Leisure &
Gaming.
Funding
* The Placing, which is being underwritten by Altium Capital Limited,
will raise in aggregate #7 million (#5.25 million net of expenses) for the
Company. The proceeds of the Placing will be used to meet the costs and
expenses of the Proposals and to provide working capital for the Enlarged
Group.
Alistair Assheton, Managing Director of VIP, said:
"We are excited and committed to this next stage in VIP's development - and look
forward to combining our resources through Leisure & Gaming, delivering further,
accelerated growth and value for shareholders."
Benjamin Shaw, Chief Executive Officer of Leisure & Gaming plc, said:
"The Board views VIP as a well-positioned business in the growing online
gambling market. This first acquisition provides a strong platform from which
to deliver Leisure & Gaming's strategy to develop a substantial e-gaming group
through acquisition.
VIP is an exciting business and we look forward to working with the management
team and VIP's employees to grow the business as part of the Leisure & Gaming
group."
Certain definitions apply throughout the following announcement and these
definitions are set out in full at the end of this announcement.
For further information, call:
Benjamin Shaw, Leisure & Gaming plc
Tel: 020 7248 0802
James Corsellis, Marwyn Capital Limited
Tel: 020 7782 8501
Garry Levin, Altium Capital Limited
Tel: 020 7484 4040
Jonathon Brill/Billy Clegg, Financial Dynamics
Tel: 020 7831 3113
This summary should be read in conjunction with the full text of this
announcement below.
Altium Capital Limited, which is authorised and regulated in the UK by the
Financial Services Authority, is acting for Leisure & Gaming and no one else in
connection with the Proposals and will not be responsible to anyone other than
Leisure & Gaming for providing the protection afforded to customers of Altium
Capital Limited, or for providing advice in relation to the Proposals.
Marwyn Capital, which is regulated in the UK by the Financial Services
Authority, is acting for Leisure & Gaming and no one else in connection with the
Proposals and will not be responsible to anyone other than Leisure & Gaming for
providing the protection afforded to customers of Marwyn Capital, or for
providing advice in relation to the Proposals.
The Directors accept responsibility for the information contained in this
announcement. To the best of the knowledge and belief of the Directors (who
have taken all reasonable care to ensure that such is the case) the information
contained in this announcement is in accordance with the facts and does not omit
anything likely to affect the import of such information.
This announcement does not constitute, or form part of, an offer or an
invitation to purchase any Ordinary Shares. Any such offer or invitation will
be made solely by means of the AIM admission document published today in
connection with the Proposals and any acquisition of Ordinary Shares should be
made solely on the basis of the information contained in that document.
All statements in this announcement regarding the Enlarged Group's business,
financial position and prospects should be viewed in the light of the "
Regulatory Overview and Risk Factors" set out in Part II of the Admission
Document published today.
Leisure & Gaming plc ("Leisure & Gaming" or the "Company")
Proposed acquisition (the "Acquisition") of VIP Management Services N.V. and Bon
Bini Investments N.V. ("VIP"), Share Consolidation, Placing of 7,954,545 new
Ordinary Shares ("the Placing") at 88p per share (the "Placing Price") and
Admission to trading on AIM ("Admission")
Introduction
The Company announces today that it has entered into a conditional agreement to
acquire the entire issued share capital of VIP (a leading online sports betting
and gaming operator predominantly based in Curacao, Netherlands Antilles, with
an office in Bristol, UK) for an initial consideration of #18.7 million which
will be satisfied by the issue of 21,250,000 Initial Consideration Shares at the
Placing Price. Additional consideration of up to $9.025 million (#4.75 million
on the basis of an exchange rate of #1 = $1.90) may become payable dependent
upon the profitability of the VIP Group for each of the financial years ending
31 December 2005 and 31 December 2006. VIP is being acquired on the basis that
it will be debt-free and cash-free on completion of the Acquisition.
The Company also announces today that it proposes to raise approximately #7.0
million (approximately #5.25 million net of expenses) by issuing 7,954,545 new
Ordinary Shares at the Placing Price. The proceeds of the Placing will be used
to meet the costs and expenses relating to the Proposals and to fund working
capital. The Placing has been fully underwritten by Altium.
The Company also announces today that it proposes to consolidate every five
ordinary shares of 5p each in the share capital of the Company into one ordinary
share of 25p.
The Acquisition constitutes a reverse takeover pursuant to the AIM Rules and is,
therefore, subject to Shareholder approval which will be sought at the EGM. An
application will be made to the London Stock Exchange for the Existing Ordinary
Shares (as consolidated pursuant to the Share Consolidation) and the New
Ordinary Shares to be respectively re-admitted and admitted to trading on AIM.
Admission is conditional, inter alia, on the passing of the Resolutions at the
EGM.
The Current Directors believe that the Proposals are in the best interests of
the Company and its Shareholders as a whole.
Accordingly, the Current Directors unanimously recommend that Shareholders vote
in favour of the Resolutions as they have irrevocably undertaken to do in
respect of their own beneficial shareholdings of Existing Ordinary Shares which
amount to, in aggregate, 2,650,000 Existing Ordinary Shares, representing
approximately 53.0 per cent. of the current issued ordinary share capital of the
Company.
Background
Leisure & Gaming was admitted to trading on AIM on 3 September 2004 with a view
to identifying and acquiring businesses or interests in businesses which are
suitably positioned to take advantage of the opportunities perceived by the
Current Directors to exist in the leisure and gaming sector.
The Current Directors have identified VIP as a well positioned business in the
expanding online gambling market and the Acquisition represents the initial step
in the implementation of the Company's strategy.
The Online Gambling Market
The worldwide gambling market, in terms of net win (being the amount of money
lost by customers), has been estimated to be worth approximately $237 billion in
2004, with the vast majority of gambling still taking place in traditional '
bricks and mortar' locations such as casinos, betting shops and bingo clubs.
This overall market is expected to grow to $277 billion by 2008.
From its origins in 1995, the online gambling market is now believed to account
for approximately 3.9 per cent. of the worldwide gambling market. Whilst there
are no consistent figures produced as to the size of the online gambling market
(due to the fact that it is a relatively new industry and many of its operators
are privately owned companies) it has been estimated that the online gambling
market was worth between $8.0 billion and $9.2 billion in 2004 and the market
has been forecast to grow at a compound annual growth rate of 22 per cent. to
2008. The largest single online gambling market is the US, which has been
estimated to account for more than 40 per cent. of the online gambling market.
The second largest market is the European market which has been estimated to
account for 31 per cent. (including the UK at 7 per cent.) of the online
gambling market followed by the Far East, which has been estimated to account
for 18 per cent.
In terms of online gambling activity, it has been estimated that sports betting
(which includes horse racing) accounts for 35 per cent. of the market, casino
games account for approximately 35 per cent. of the market and poker accounts
for approximately 22 per cent.
The remainder of the market is principally made up of bingo, skill games and
other games of chance.
The Directors believe that online gambling is becoming a well established
industry and that it will continue to grow at a rapid pace.
Information on VIP
Background
The VIP Group was established in 1997 and has become a leading interactive
betting and gaming operator. It is headquartered in Curacao (Netherlands
Antilles), has an office in Bristol, UK and operates under a Netherlands
Antilles gaming licence and a UK bookmaker's permit. Having commenced its
operations with an online sports book, "VIPsports", VIP has since expanded its
product range to offer online casino games and poker under a suite of brands
within a single integrated infrastructure.
Management
The VIP Group has an experienced management team which has been involved with
the business from its early stages. It is led by its managing director and
co-founder, Alistair Assheton, who has grown the business to over 160 employees.
Alistair is a respected industry figure and is the current Chairman of the
Curacao Gaming Association and a former board member of the Interactive Gaming
Council (IGC). Peter Blacker, VIP's finance director, is a qualified accountant
with significant experience in the gambling sector, having worked for a number
of regulated Australian gambling companies.
The VIP business
VIP's principal product suite comprises sports betting, horse racing and casino
games. These products are offered to customers through nine different brands:
VIP (incorporating VIPsports, VIPsoccer, VIPcasinos, VIPpoker and VIPhorses),
BetGameDay, Bet19, FiveCardCharlie, BetonGames, BetEuro, GoodasGold,
WallStreetSuperbook and Fairdeal.
All of the sites offer both sports and casino games, either directly or via web
hyperlink, and use a single account and a common wallet, which means that a
customer can switch seamlessly between the products without having to open a new
account. VIP employs a "cross-selling" strategy across its range of brands and
products. This strategy is focused on maximising customer value and retention
across the VIP Group.
Sportsbook
The largest component of the VIP business is sports betting which, in 2004,
accounted for approximately 58 per cent. of VIP's net win and generated net win
margins of approximately 5.2 per cent. VIP's sportsbook product covers all the
major US sports and a range of non-US sports such as soccer, rugby, cricket and
European golf. In 2004, basketball, American football and baseball accounted for
98 per cent. of all sports net win.
The Directors believe that VIP's sportsbook business is well regarded in the
sector, a view supported by the fact that it has won a number of industry
awards.
Casino
VIP's casino business contributed approximately 34 per cent. of VIP's net win in
2004. The casino sites offer 41 different games, with blackjack and slots being
the most important in terms of net win, contributing 53 per cent. and 17 per
cent. respectively of the casino business' net win.
VIP has enhanced its casino offering in 2005 with the introduction of a new
suite of slot games from Next Gen Games and intends to further develop its
casino with the introduction of an additional downloadable casino offering. The
Directors believe that this will make VIP's extended casino offering more
attractive.
The Directors intend to continue to actively cross-sell the casino offering to
VIP's sportsbook customers with a view to deriving additional revenue from these
customers.
Horse racing
Horse racing contributed 8 per cent. of VIP's net win in 2004 and had a net win
margin of approximately 18 per cent. VIP's horse racing business pays track odds
on races from 63 North American tracks and is offered through five horse book
brands: VIPhorses, BetGameDay, Bet19, WallStreetSuperbook and BetonRaces.
Customers
In 2004, 30,769 customers bet using VIP's services. 25,690 customers wagered on
sports, 6,843 wagered on horse racing, 11,493 were active casino players and
approximately 43 per cent. of VIP customers were active in more than one product
category. VIP's typical customer is the less price-sensitive recreational
gambler which, the Directors believe, has resulted in VIP's sportsbook
experiencing consistent margins and lower volatility. The Directors believe that
there is a direct correlation between bet size and volatility as informed
gamblers tend to bet larger amounts and are sensitive to prices (odds), which
can result in lower margins.
In 2004, the average number of bets per sportsbook customer and horse racing
customer were 172 and 123 respectively, which resulted in average annual net
wins for VIP of $617 per sportsbook customer and $320 per horse racing customer.
VIP's average sports bet and horse racing bet in 2004 were approximately $70 and
$15 respectively. The percentage of combination bets as a proportion of all
bets, at approximately 48 per cent. in 2004, is consistent with a recreational
customer base.
Although VIP has customers in 96 countries, approximately 84 per cent. of its
customer base resides in the US. This is a function of both VIP's established
sportsbook product covering US sports and the fact that the US continues to
account for the largest proportion of the global online gambling market. The
Directors believe that US customers are likely to continue to account for the
majority of VIP's revenues, although it is expected that the proportion of
customers from other geographic markets will increase substantially.
Marketing
VIP promotes its products and services through a variety of online and offline
methods. In 2004, VIP's marketing spend was split between online banner
advertising (27 per cent.), print (14 per cent.), radio advertising (13 per
cent.), publications (16 per cent.) and email marketing (5 per cent.), with
other marketing activities such as guerilla marketing, event sponsorship and
public relations making up the balance. In 2004, VIP's cost of acquiring a
customer through non-affiliate marketing was $166.
VIP employs a range of marketing methods in the US, its core customer market.
Such marketing initiatives include:
* the publication of a bi-annual sports magazine published in
March, for the NCAA basketball tournament, and in August, for the American
Football season. Distributed free of charge, this magazine contains
advertisements for all of VIP's brands;
* the sponsorship of a drag-racing car for the 2005 season. The car
will give VIP extensive brand exposure on the ESPN networks on which the
drag car races are televised and at the race events themselves;
* sports bar promotions - VIP has secured relationships with sports
bars in the US which allow VIP to advertise on the premises using signs,
branded placemats, drink cups and napkins; and
* the sponsorship of charity poker tournaments.
Incentives and Customer Retention
VIP has developed a loyalty programme ("VIP Rewards"), which allows customers to
earn 'rewards', including cash and VIP merchandise, from playing on the various
VIP sites. The VIP Rewards programme was fully integrated across all VIP sites
in January 2005, and the Directors believe that VIP's loyalty programme has
become a significant factor in retaining customers.
The Directors believe another key factor behind VIP's strong record of customer
retention is its high level of customer service. VIP's customer service
representatives are given dedicated training in all elements of both customer
service and the betting industry and are subject to ongoing monitoring and
evaluation. VIP's higher spending customers are given a
personalised service to ensure their loyalty which can include regular gifts and
prizes such as tickets to sporting events. VIP also offers free contests and
sweepstakes throughout the year across its products, which are designed both to
reward existing customers and to attract new customers.
Affiliates
VIP has targeted and retained recreational gamblers using a variety of methods.
VIP has developed a successful affiliate network ("VIP Profits"), whereby third
party web-sites refer customers to VIP's products and brands through a
proprietary real time affiliate management system in return for a revenue share
of, on average, 25 per cent. of the VIP revenues they generate. In 2004,
customers who were referred by affiliates accounted for 24 per cent. of VIP's
net win.
Software
VIP's principal software provider is IGW Software ("IGW"), a Miami and
Curacao-based company. VIP has operated IGW's software since VIP's inception. As
well as the wagering system and gaming engines, IGW provides a back-end system,
real-time analysis tools and management information modules. IGW also supplies
VIP's casino software, which incorporates a range of games from third party
games developers such as Next Gen Games. IGW's software is scalable and offers
multi-language and multi-currency capabilities. VIP is IGW's single biggest
customer and IGW has created a number of customised applications for VIP. IGW is
also responsible for all VIP's server hosting requirements which are located in
a secure data centre at the offices of Curacao's telecoms provider.
New developments
VIP soft launched its poker product in November 2004. The VIP poker product
currently offers a range of poker games including Texas Hold'Em, Omaha, and
Seven Card Stud and both ring games and daily single table tournaments. To date,
VIP has not actively pushed the development of its poker product as it continues
to improve its knowledge of this segment of the online gaming market. It is
VIP's intention to offer multi-table tournaments with a view to expanding this
area of its business in order to capitalise on the rapidly expanding online
poker market.
VIP has also made an initial investment in the European market by securing a
bookmaker's permit in the UK and operating a satellite office in Bristol, UK.
VIP has started to test market its BetEuro brand and will continue to review
international development opportunities, both organic and by way of acquisition.
Whilst both VIP's poker and European operations are at an early stage of
development, the Directors believe that these developments will offer growth
opportunities for the Enlarged Group.
Risk Management
VIP seeks to minimise its exposure to sports betting risk through a series of
operational measures and controls which include, inter alia:
* a policy of no credit betting throughout the VIP Group: customers
must have adequate funds in their accounts before a bet can be accepted;
* player profiling and tracking: each player is assigned a user
profile based on his deposits and betting history and is tracked for any
unusual betting activity;
* player limits: each player is given limits in terms of the amount
that he can wager;
* multiple lines: lines (the odds offered for any given event) can
be adjusted according to a player's profile;
* event liability limits: any event covered by VIP's sportsbook may
have a liability limit to ensure that, whatever the outcome of an event,
VIP's liability is limited to a defined amount;
* odds designed not to attract professional gamblers: by not having
the most competitive odds, the Directors believe VIP attracts a less
price-sensitive, recreational customer base;
* the employment of experienced bookmakers; and
* daily flash reports on VIP's exposure are available to senior
management.
Competition
VIP operates in a competitive market place occupied by a number of companies and
businesses offering similar services. VIP's competitors range from those
offering a multi-product proposition (i.e. sports, casino and poker) such as
Sportingbet, Betonsports, BetandWin, Unibet and Bodog, to those focusing
predominantly on sports betting, and other product specific competitors such as
888.com (casinos).
The Directors believe that VIP is well placed to capitalise on the perceived
growth in the online gambling market through its strong management team, high
levels of customer service and strong customer loyalty and retention.
Summary Financial Information on VIP
Year ended 31 December
2002 2003 2004
$m $m $m
Revenue 121.4 281.9 330.7
Gross Profit 7.5 17.4 19.1
EBITDA* 0.7 5.3 6.0
* excluding goodwill written off
Background to and Reasons for the Acquisition
The online gambling industry remains a fragmented and evolving market. The
Directors believe that the success of an online gambling business is dependent,
to a significant extent, on scale and critical mass and that, as the market
matures, the larger operators will attract and retain a greater proportion of
new customers. This dynamic, when combined with the industry's characteristic of
being able to support significant additional customers and generate greater
gross win on a relatively fixed cost base, has led the Directors to believe that
the online gambling market will experience a period of consolidation.
Some consolidation has already occurred in the sector, notably Sportingbet plc
which has made a number of acquisitions, the most recent being Paradise Poker.
However, the Directors believe that the consolidation process is at an early
stage and that the acquisitions made to date in the sector represent a small
percentage of the online gambling market. The Directors therefore believe that
there are significant opportunities for well structured and managed acquisitive
companies.
The Current Directors believe that VIP is a proven business which has
demonstrated an ability to operate profitably, growing both organically and
through the successful integration of acquisitions. The Current Directors also
believe that VIP has an experienced management team and enjoys a strong
competitive position in the industry and that the Acquisition will provide the
Company with the opportunity to capitalise on the expected growth of the online
gambling industry. The Current Directors believe that the Enlarged Group will
provide a strong platform from which to pursue Leisure & Gaming's consolidation
strategy in the online leisure and gambling industry.
Current Trading and Prospects for the Enlarged Group
The Directors are pleased with the continued progress of the VIP Group following
an encouraging start to its current financial year. Both the sportsbook and
horse racing products had a particularly good start to the year (the sportsbook
being helped by a strong performance during both the NFL Super Bowl and the
college basketball playoffs, where net win was, in aggregate, approximately 10
per cent. up on the corresponding fixtures in 2004) whilst the casino business
has performed moderately in excess of the corresponding period last year.
Overall, in the first quarter of 2005, VIP achieved 5,565 new customer sign ups
which represents a 51 per cent. increase on the first quarter of 2004. VIP's net
win during the period of $9.5 million was also significantly in excess of the
first quarter of 2004 ($7.5 million), the win margin has improved and the
performance of the VIP Group was in line with VIP's management expectations.
The Directors believe that, following completion of the Acquisition, the
Enlarged Group will be well positioned to take advantage of the perceived
consolidation opportunities in the online gambling sector. The Directors also
believe that the Enlarged Group will, if it is able to effect further
acquisitions, benefit from the commercial dynamics and associated benefits of
scale within this sector. Opportunities to make further complementary
acquisitions have already been identified by the Directors and, following
completion of the Acquisition, the Directors will seek to progress these
opportunities.
The Directors will initially focus their attention on three areas. The most
immediate and synergistic targets are other combination sportsbooks, casino and
poker businesses, the majority of which will be located and licensed in offshore
jurisdictions. The second category of potential acquisition targets is
businesses which would provide the Enlarged Group with additional revenues
generated from other geographic markets or channels. The third category
comprises businesses that would provide the Enlarged Group with new products to
complement its existing product portfolio. These product categories include
poker, skill gaming, bingo, pools betting, and tournament and person-to-person
games.
The Board
The board of the Company currently comprises Philip Parker, Benjamin Shaw and
Henry Birch. Following the completion of the Acquisition, Alistair Assheton and
Peter Blacker, respectively the current managing director and finance director
of VIP, will join the Board and Henry Birch will resign from the Board, but will
remain as an executive of the Enlarged Group. Alistair Assheton will become
Chief Executive of the Company and Benjamin Shaw, the current Chief Executive,
will become an Executive Director with responsibility for identifying
acquisition and corporate development opportunities for the Enlarged Group. On
Admission, Giles Willits will join the Company as a Non-Executive Director.
Following Admission, the board of the Company will therefore comprise:
Philip Parker, Non-Executive Chairman - aged 59
After graduating with a law degree from Cambridge University, Philip began his
career in the computer industry, first with IBM and then Unisys, where he spent
10 years in the United States. He returned to the UK in the early 1980s to run
the European operations of Gulf & Western's software and training business,
successfully consolidating their VAR channel. In 1987, he was appointed
marketing director for the defence electronics division of Plessey plc,
subsequently becoming group corporate development director. Following Plessey's
acquisition by GEC plc in 1989, Philip was appointed chief executive of North
Sea Assets plc, a quoted oil services business which was acquired by Halliburton
plc in 1995. Since then, Philip has worked as chairman and a main board director
of a number of businesses and is chairman of Protec plc, a quoted electronic
security business.
Alistair Assheton, Chief Executive - aged 35
Alistair graduated from Aston University in 1993 with a Bsc (Hons) in
International Business and Modern Languages, which included study at Ecole
Superieure de Commerce, Rouen, a French graduate business school. After
finishing his degree, Alistair worked for I.C.B.T. Company Limited from 1994 to
1997 as a commodity broker, involved primarily in international cocoa bean
trading. In 1997, he joined Timab Industries S.A., a private French agricultural
and chemical company, as market manager for the UK and Ireland. Having
co-founded the online betting operation VIPsports.com, he became managing
director of the VIP Group in 1999 in Curacao, with responsibility for
operations, strategy, growth and development. As managing director of VIP,
Alistair has also completed a number of acquisitions of other sportsbooks and
gaming companies. Alistair is a director and Chairman of the Curacao Internet
Gaming Association, is a member of the UK's Institute of Directors and was a
former board member of the Interactive Gaming Council.
Benjamin Shaw, Executive Director - aged 36
Benjamin has extensive experience in the gambling sector. Benjamin was
responsible for setting up the online gambling businesses at the Victor Chandler
bookmaking group. He was involved as a principal in the consortium which
acquired Zetters Group plc, the pools betting operator, where he became group
managing director. In 2000, Benjamin left Zetters to set up a gaming business in
Australia, which was sold to Tattersall's Group, a leading lottery operator, in
2001. Through a joint venture with N M Rothschild & Sons (Australia), Benjamin
was involved in the consolidation of a number of online gambling businesses into
Consolidated Gaming Corporation (now BetCorp Limited). Benjamin is a director of
Talarius plc, an investing company established for the purpose of acquiring
businesses engaged primarily in the land-based "High Street" gambling market,
which was admitted to AIM in April 2005.
Peter Blacker, Finance Director - aged 46
Peter holds a Bachelor of Business (Accty) from the Queensland Institute of
Technology, and is a qualified CPA and a member of ASCPA. He has extensive
gambling sector, accountancy and management experience. Peter worked as a
management and systems accountant for the Queensland Government before becoming
the financial controller of QPM Property Management in Brisbane. Subsequent to
this, Peter took on consulting and interim management roles for a number of
Australian gambling and technology companies, including Golden Casket Lottery
Corporation, Interactive Gold Pty Limited, The Internet Amusements Group Pty
Limited, and Milestone Technology Services Pty Limited. Peter joined the VIP
Group as finance director in February 2003.
Giles Willits, Non-Executive Director - aged 38
Giles is an experienced finance professional. Giles is director of group finance
at Woolworths Group plc, a FTSE 250 retailing group. Giles is a trustee of the
Woolworths Group Pension Fund and also sits on a number of the group's operating
companies boards including Entertainment UK Limited, MVC Entertainment Limited,
Streets Online Limited and Woolworths Insurance (Guernsey) Limited. Giles has
previously held a number of finance positions within the Woolworths Group and
Kingfisher Group plc. Giles is a qualified chartered accountant who started his
career with PricewaterhouseCoopers before working for Freemans plc in both
senior finance and general management roles.
It is the intention of the Directors, following completion of the Proposals, to
further strengthen the Board by the appointment of an additional non-executive
director.
Change in year end
Leisure & Gaming's current accounting reference date is 31 August. VIP has an
accounting reference date of 31 December. In order to align the Company's
accounting reference date with that of VIP, the Current Directors have resolved
to change, with effect from, and subject to, Admission, the Company's accounting
reference date to 31 December. Unaudited results for Leisure & Gaming for the
five months ended 31 December 2004 are contained in the prospectus published
today. Leisure & Gaming's next published results will be for the interim period
ending 30 June 2005.
Principal terms of the Acquisition
Under the terms of the Acquisition Agreement, the Company has conditionally
agreed to acquire the entire issued share capitals of VIP from the Sellers. The
consideration payable to the Sellers comprises:
* an initial payment of #18.7 million to be satisfied by the issue
of the Initial Consideration Shares; and
* additional consideration of up to $9.025 million, the payment of
which is dependent upon the EBITDA of VIP in each of the financial years
ending 31 December 2005 and 31 December 2006. The maximum amount payable
in respect of the year ending 31 December 2005 is $3.325 million and the
maximum amount payable in respect of the year ending 31 December 2006 is
$5.7 million. The additional consideration in respect of the financial
year ended 31 December 2005 will be satisfied in cash and the additional
consideration in respect of the year ended 31 December 2006 may be
satisfied, dependent upon when the amount of the additional consideration
payable (if any) is finalised, in cash or by the issue of Deferred
Consideration Shares, provided that the total number of Ordinary Shares
held by the Sellers, when aggregated with the Deferred Consideration
Shares, will not exceed a threshold of the voting rights attaching
to the issued share capital of the Company which would cause the Sellers,
or any of them, to make a mandoatory offer for the Company under the City
Code. The number of Deferred Consideration Shares to be issued, if
applicable, will be determined by reference to the average closing price
of the Ordinary Shares for the 30 trading days prior to the agreement or
determination (as the case may be) of the EBITDA of VIP in respect of the
relevant financial year.
Under the terms of the Acquisition Agreement, the Sellers have given warranties
and indemnities in respect of certain business, taxation and other matters
(subject to agreed limitations on liability), which, amongst certain other
obligations of the Sellers under the Acquisition Agreement, have been guaranteed
by one of the Proposed Directors, Alistair Assheton. On the basis that the
Acquisition is being effected on a debt-free and cash-free basis, the
Acquisition Agreement provides for a pre-completion dividend to be paid to the
Sellers subject to a deduction for amounts owed by the Sellers to VIP.
The Acquisition Agreement is conditional, inter alia, upon the Placing Agreement
becoming unconditional (save for any condition in the Placing Agreement relating
to the Acquisition Agreement becoming unconditional and Admission) and not being
terminated prior to Admission.
The Sellers have undertaken to the Company not to dispose of any of the Initial
Consideration Shares prior to the announcement of the Company's interim results
for the six-month period ending 30 June 2006, except in certain specified
circumstances. During the 12 months following such period, the Sellers have
agreed not to dispose of any of the Initial Consideration Shares except through
the Company's brokers from time to time. If any Deferred Consideration Shares
are issued to the Sellers, they have agreed not to dispose of such shares,
except through the Company's broker from time to time, during the period of 12
months following their issue.
The Placing and Use of Proceeds
The Company proposes to raise approximately #7.0 million (approximately #5.25
million net of expenses) by issuing 7,954,545 Placing Shares, representing
approximately 26.1 per cent. of the Enlarged Issued Share Capital.
As part of the Placing, Philip Parker, the Non-Executive Chairman of the Company
has undertaken to subscribe for 22,727 Placing Shares at the Placing Price.
The Placing Shares have been conditionally placed by Altium, as agent for the
Company, with institutional and other investors in accordance with the terms of
the Placing Agreement. The Placing, which is being fully underwritten by Altium,
is conditional, inter alia, on Admission and the Placing Agreement becoming
unconditional in all respects by 28 June 2005 or such later date (being no later
than 19 July 2005) as the Company and Altium may agree.
The proceeds of the Placing will be used by the Company to meet the costs and
expenses relating to the Proposals. As VIP is being acquired on a debt-free and
cash-free basis, part of the proceeds will also be used to fund working capital.
The City Code
Pursuant to the terms of the Acquisition, the Sellers will be issued with
21,250,000 Initial Consideration Shares, representing approximately 69.7 per
cent. of the Enlarged Issued Share Capital. Alistair Assheton (and his spouse)
will be beneficially interested in 16,190,375 of these Initial Consideration
Shares, representing approximately 53.1 per cent. of the Enlarged Issued Share
Capital. As such, once the Acquisition is completed, Leisure & Gaming will
become a company controlled, at shareholder level, by the shareholders of VIP
and Alistair Assheton who, by virtue of their relationship as vendors of VIP are
a concert party (the "Concert Party").
As a result of the Ordinary Shares held by the Sellers (in particular the
resultant shareholding of Alistair Assheton and his spouse) the terms of the
Acquisition give rise to certain considerations under the City Code. Brief
details of the Panel, the City Code and the protections they afford are
described below.
The City Code has not, and does not seek to have, the force of law. It has,
however, been acknowledged by both government and other regulatory authorities
that those who seek to take advantage of the facilities of the securities
markets in the United Kingdom should conduct themselves in matters relating to
takeovers in accordance with high business standards and so according to the
City Code.
The City Code is issued and administered by the Panel. The City Code applies to
all takeover and merger transactions, however effected, where the offeree
company is, inter alia, a listed or unlisted public company resident in the
United Kingdom (and to certain categories of private limited companies.) Due to
it being resident in the United Kingdom the Company is such a company and its
shareholders are entitled to the protection afforded by the City Code.
Under Rule 9 of the City Code a party acquiring a holding of 30 per cent. or
more of a company's voting rights is normally obliged to make a general offer to
all other shareholders to acquire the shares not held by them.
Rule 9 of the City Code also states that if any person or group of persons
acting in concert holds not less than 30 per cent., but not more than 50 per
cent. of the voting rights of such a company, a general offer will normally be
required if any further shares are acquired.
The Panel will normally waive the requirement for a general offer to be made if
the independent shareholders of the Company pass an ordinary resolution (a "
whitewash resolution") approving such waiver. The Panel also has the power to
waive the requirement for a general offer to be made under Rule 9 of the City
Code where independent shareholders representing more than 50 per cent. of the
shares of the company which would be eligible to vote on a whitewash resolution
irrevocably undertake to vote in favour of a whitewash resolution, were one to
be put to shareholders. Benjamin Shaw, currently Chief Executive of the Company,
holds 2,500,050 Existing Ordinary Shares in the Company, representing 50.001 per
cent. of the current ordinary issued share capital of the Company. Including
Benjamin Shaw, the Company has received irrevocable undertakings from the
Current Directors to approve the Acquisition in respect of their own beneficial
shareholdings which amount to, in aggregate, 2,650,000 Existing Ordinary Shares
representing approximately 53.0 per cent. of the current ordinary issued share
capital of the Company.
Accordingly the Takeover Panel has waived the requirement under Rule 9 of the
City Code for a general offer to be made by the VIP shareholders following
completion of the Acquisition.
Following completion of the transaction, the members of the Concert Party will
between them hold more than 50 per cent. of the Company's voting share capital
and (for so long as they shall continue to be treated as acting in concert) may
accordingly be able to increase their aggregate shareholding without incurring
any further obligation under Rule 9 of the City Code to make a general offer,
although individual members of the Concert Party will not be able to increase
their percentage shareholdings through a Rule 9 of the City Code to make a
general offer, although individual members of the Concert Party will not be able
to increase their percentage shareholdings through a Rule 9 threshold without
Panel consent. However, if for any reason their interest falls below 50 per
cent. in the future, they will be subject to the City Code restrictions outlined
above.
Directors' Lock Up
In order to maintain an orderly market in the Ordinary Shares, the Directors
have undertaken to the Company and Altium that they shall not (and, in the case
of persons connected with them, they shall use all reasonable endeavours to
procure that such persons shall not) dispose of any interest in Ordinary Shares
or enter into any derivative-type transaction in relation to the Ordinary
Shares, prior to the announcement of the Company's interim results for the six
month period ending 30 June 2006. During the 12 months following such period,
the Directors have agreed that they shall not (and, in the case of persons
connected with them, they shall use all reasonable endeavours, to procure that
such person shall not) dispose of any Ordinary Shares except through the
Company's brokers from time to time.
Share Consolidation
In order to increase the marketability of the Company's shares, every five
Existing Ordinary Shares (each of which currently has a nominal value of 5p)
will be consolidated into one Ordinary Share (with a nominal value of 25p). The
Share Consolidation, which is conditional on Admission, will be implemented by
the passing of Resolution 2 being proposed at the EGM. The Ordinary Shares
arising on the Share Consolidation will have identical rights to those currently
attaching to the Existing Ordinary Shares.
Employee Benefit Trust
The Directors believe that the success of the Enlarged Group will depend to a
significant extent on the future performance of key employees. The Directors
believe that equity incentives are, and will continue to be, an important means
of retaining, attracting and motivating key employees. Therefore, the Directors
have established an Employee Benefit Trust for the benefit of employees of the
Enlarged Group. The benefit of assets comprised in the trust fund will be
allocated to subtrusts for the benefit of selected executives and their
families. The Directors have granted an option over 2,237,862 new Ordinary
Shares (representing approximately 7.3 per cent. of the Enlarged Issued Share
Capital) at the Placing Price to the trustees of the Employee Benefit Trust.
Such grant is conditional on the approval of Shareholders which will be sought
at the EGM.
The aggregate number of options which may be granted to the trustees of the
Employee Benefit Trust is limited to a maximum of 10 per cent. of the issued
share capital of the Company from time to time save that no options may be
granted under the Employee Benefit Trust if the total amount of shares under
option (including, inter alia, the Marwyn Option) exceeds 12.5 per cent. of the
issued share capital of the Company. The exercise price for the options will be
the Placing Price.
The options granted under the Employee Benefit Trust will be exercisable at any
time from the first anniversary of the date of Admission up to the seventh
anniversary of the date of Admission provided that at any time after Admission
and prior to the expiry of the option, the 30 day average mid-market price of an
Ordinary Share is equal to or greater than 132.5 per cent. of the Placing Price.
Relationship with the Marwyn Group
Marwyn Capital Limited, a subsidiary of Marwyn, is financial adviser to the
Company. The Company has also entered into an accommodation and support contract
with Marwyn Partners Limited, another subsidiary of Marwyn.
Philip Parker and Benjamin Shaw are shareholders in Marwyn and Benjamin Shaw has
a service agreement with Marwyn.
Subject to Admission, the Company has also agreed to grant the Marwyn Option to
Marwyn. The Marwyn Option will entitle Marwyn to subscribe for 1,525,241
Ordinary Shares (representing five per cent. of the Enlarged Issued Share
Capital). The Marwyn Option is exercisable at the Placing Price as follows: (a)
as to 50 per cent. at any time from the first anniversary of the date of
Admission up to the seventh anniversary of the date of Admission provided that
at any time after Admission and prior to the expiry of the option, the 30 day
average mid-market price of an Ordinary Share is equal to or greater than 125
per cent. of the Placing Price; and (b) as to 50 per cent., at any time from the
second anniversary of the date of Admission up to the seventh anniversary of the
date of Admission provided that at any time after Admission and prior to the
expiry of the option, the 30 day average mid-market price of an Ordinary Share
is equal to or greater than 140 per cent. of the Placing Price.
As part of the corporate finance agreement outlined above and conditional on
Admission, Marwyn Capital Limited has, outside the Placing, subscribed for
300,284 new Ordinary Shares (representing approximately 1.0 per cent. of the
Enlarged Issued Share Capital) at the Placing Price.
Dividend Policy
The initial focus for the Company will be on delivering capital growth for
Shareholders and therefore the Company will only commence the payment of
dividends as and when it is possible and appropriate to do so.
Dealing Arrangements
Application will be made for the New Ordinary Shares issued pursuant to the
Placing and the Acquisition to be admitted to trading on AIM and for the
Existing Ordinary Shares (as consolidated pursuant to the Share Consolidation)
to be re-admitted to AIM. It is expected that Admission will become effective
and that dealings in the Enlarged Issued Share Capital will commence on 28 June
2005.
The New Ordinary Shares will be issued credited as fully paid and will, on
issue, rank pari passu in all respects with the Ordinary Shares, including the
right to receive all dividends and other distributions declared, made or paid on
the issued ordinary share capital after Admission.
If the Acquisition and the Placing are not completed and the Share Consolidation
does not take effect, the Existing Ordinary Shares will continue to be traded on
AIM and the Proposed Directors will not be appointed to the Board.
CREST
The Existing Ordinary Shares are eligible for CREST settlement. Accordingly,
settlement of transactions in the Ordinary Shares following completion of the
Proposals may take place through CREST if the relevant Shareholder so wishes.
CREST is a voluntary system and Shareholders who wish to receive and/or retain
share certificates will be able to do so.
Extraordinary General Meeting
In view of its size, the Acquisition is conditional upon, inter alia, the
approval of Shareholders in a general meeting. This approval will be sought at
the Extraordinary General Meeting of the Company to be held at 10.30 a.m. on 24
June 2005.
General
The admission document containing details of the Acquisition and the notice of
an Extraordinary General Meeting convened for 10.30 a.m. on 24 June 2005 to be
held at the offices of Berwin Leighton Paisner, Adelaide House, London Bridge,
London EC4R 9HA will be posted today. In addition, a notice of an annual
general meeting ("AGM") of the Company convened for 10.15 a.m. on 24 June 2005
to be held at the offices of Berwin Leighton Paisner at the address set out
above will be posted to shareholders today. Copies of the admission document
and the notice of AGM will be made available from the offices of Altium Capital
Limited, 30 St James's Square, London SW1Y 4AL from the date of this
announcement and for a period of one month from the date of Admission.
Expected Timetable of Principle Events
2005
Latest time and date for receipt of forms of proxy 10.30 a.m. on 22 June
Extraordinary General Meeting 10.30 a.m. on 24 June
Completion of the Acquisition, re-admission of the Existing Ordinary Shares (as 28 June
consolidated pursuant to the Share Consolidation) and admission of the New Ordinary Shares
become effective and trading on AIM commences in Enlarged Issued Share Capital
CREST accounts credited by 28 June
Expected date of despatch of definitive share certificates 3 July
Appendix I
Alistair Assheton, Peter Blacker and Giles Willits currently hold or have,
during the five years preceding the date of this document, held, the following
directorships or partnerships.
Director Current directorships/partnerships Previous directorships/partnerships
Alistair Assheton Assheton Limited Combivac Limited
Assheton N.V.
VIP Management Services
(Europe) Limited
VIP Management Services N.V.
Bon Bini Holdings Limited
Peter Blacker None Blacker & Associates Pty Limited
Giles Willits Chad Valley Limited Astonbury Manor (No. 2) Limited
Disc Distribution Limited
Entertainment Europe Limited
Entertainment Express Limited
Entertainment USA Limited
eUK Direct Limited
Entertainment UK Limited
Flogistics Limited
Furnishing World Limited
GM Group Limited
GM Gift Vouchers Limited
Infront Limited
Kidstore Limited
MVC Entertainment Limited
Sandelcroft Limited
Starvision Enterprises Limited
Strand Services (Watford) Limited
Strand UK Limited
Streets Online Limited
Titles Leisure Limited
Woolworths Media plc
WMS Card Services Limited
Woolco Limited
Woolworths Group Pension TrustLimited
Woolworths Insurance (Guernsey)
Limited
Woolworths Entertainment Group
Limited
Woolworths Group Finance Limited
Woolworths Holdings Limited
Woolworths Marketing Limited
Woolworths Nominees Limited
Woolworths Properties Limited
Woolworths Publishing Limited
Following completion of the Acquisition, Alistair Assheton will be beneficially
interested in 16,190,375 Ordinary Shares (representing approximately 53.1 per
cent. of the Enlarged Issued Share Capital) and Peter Blacker will be
beneficially interested in 350,625 Ordinary Shares (representing approximately
1.1 per cent. of the Enlarged Issued Share Capital).
There are no details requiring disclosure pursuant to paragraph (F) (iii) to (F)
(viii) of Schedule 2 of the AIM Rules.
Appendix II
Definitions
''Acquisition'' the proposed acquisition by the Company of the entire issued
share capital of both companies constituting VIP, as described
in this document
''Acquisition Agreement'' the agreement dated 1 June 2005 between the Company and the
Sellers relating to the Acquisition
''Admission'' admission of the New Ordinary Shares and the re-admission of the
Existing Ordinary Shares (as consolidated pursuant to the Share
Consolidation) to trading on AIM becoming effective in
accordance
with the AIM Rules
''AIM'' AIM, a market operated by the London Stock Exchange
''AIM Rules'' the rules published by the London Stock Exchange relating to AIM
''Altium'' Altium Capital Limited
''Board'' the board of directors of the Company from time to time
"City Code" The City Code on Takeovers and Mergers
''Company'' or ''Leisure & Gaming'' Leisure & Gaming plc
''CREST'' the relevant system (as defined in the CREST Regulations) for
the paperless settlement of share transfers and the holding of
shares in uncertificated form which is administered by CRESTCo
''CRESTCo'' CRESTCo Limited, a company incorporated under the laws of
England and Wales
''CREST Regulations'' the Uncertificated Securities Regulations 2001 (SI 2001 No.
3755)
''Current Directors'' the current directors of the Company, being Philip Parker,
Benjamin Shaw and Henry Birch
''Deferred Consideration Shares'' the new Ordinary Shares which may be allotted and issued to the
Sellers in satisfaction of any deferred consideration which may
become payable pursuant to the terms of the Acquisition
''Directors'' the Current Directors and the Proposed Directors
''EBITDA'' earnings before interest, tax, depreciation and amortization
''EGM'' or ''Extraordinary General the extraordinary general meeting of the Company convened for
Meeting'' 10.30 a.m. on 24 June 2005, or any adjournment thereof
''Employee Benefit Trust'' or '' the Leisure & Gaming Employee Benefit Trust
EBT''
''Enlarged Group'' the Company and its subsidiaries following the Acquisition
''Enlarged Issued Share Capital'' the issued ordinary share capital of the Company immediately
following completion of the Proposals
''Existing Issued Share Capital'' the issued share capital of the Company at the date of this
document
''Existing Ordinary Shares'' the existing ordinary shares of 5p each in the capital of the
Company in issue at the date of this document
''Initial Consideration Shares'' the 21,250,000 new Ordinary Shares to be allotted and issued to
the Sellers pursuant to the terms of the Acquisition
''London Stock Exchange'' London Stock Exchange plc
''Marwyn'' Marwyn Investments Group Limited
''Marwyn Option'' the option to subscribe for new Ordinary Shares representing 5%
of the Enlarged Issued Share Capital issued by the Company in
favour of Marwyn.
''New Ordinary Shares'' the Initial Consideration Shares and the Placing Shares
''Ordinary Shares'' ordinary shares of 25p each in the capital of the Company
arising from the Share Consolidation
''Placing'' the proposed placing by Altium of the Placing Shares
''Placing Agreement'' the agreement dated 1 June 2005 between the Company, Altium and
the Directors relating to the Placing
''Placing Price'' 88p per Placing Share
''Placing Shares'' the 7,954,545 new Ordinary Shares to be allotted and issued
pursuant to the Placing
''Proposals'' the Acquisition, the Placing, the Share Consolidation and the
other proposals set out in the AIM admission document
''Proposed Directors'' the proposed directors of the Company, being Alistair Assheton,
Peter Blacker and Giles Willits
''Resolutions'' the resolutions to be proposed at the EGM
''Sellers'' those persons identified and described as ''Sellers'' in the AIM
admission document.
''Share Consolidation'' the proposed consolidation of the Existing Ordinary Shares and
the unissued ordinary shares of 5p each comprised in the share
capital of the Company into Ordinary Shares
''Shareholder'' a holder of Existing Ordinary Shares
''UK'' the United Kingdom of Great Britain and Northern Ireland
''United States'' or ''US'' the United States of America, its territories and possessions
and the District of Columbia
''VIP'' VIP Management Services N.V. and Bon Bini Investments N.V. or,
as the context may admit, the trading business and operations of
the VIP Group as a whole
''VIP Group'' VIP and VIP Management Services (Europe) Limited, a wholly owned
subsidiary of VIP Management Services N.V.
''$'' US dollars
Altium Capital Limited, which is authorised and regulated in the UK by the
Financial Services Authority, is acting for Leisure & Gaming and no one else in
connection with the Proposals and will not be responsible to anyone other than
Leisure & Gaming for providing the protection afforded to customers of Altium
Capital Limited, or for providing advice in relation to the Proposals
Marwyn Capital, which is regulated in the UK by the Financial Services
Authority, is acting for Leisure & Gaming and no one else in connection with the
Proposals and will not be responsible to anyone other than Leisure & Gaming for
providing the protection afforded to customers of Marwyn Capital, or for
providing advice in relation to the Proposals.
The Directors accept responsibility for the information contained in this
announcement. To the best of the knowledge and belief of the Directors (who
have taken all reasonable care to ensure that such is the case) the information
contained in this announcement is in accordance with the facts and does not omit
anything likely to affect the import of such information.
This announcement does not constitute, or form part of, an offer or an
invitation to purchase any Ordinary Shares. Any such offer or invitation will
be made solely by means of the AIM admission document published today in
connection with the Proposals and any acquisition of Ordinary Shares should be
made solely on the basis of the information contained in that document.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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