RNS Number : 4430F
Pinnacle Bidco Holdings plc
09 October 2008
FOR IMMEDIATE RELEASE
Not for release, publication or distribution, in whole or in part, directly or indirectly in or into or from any jurisdiction (including
the United States, Canada, Australia, the Republic of South Africa or Japan) where to do so would constitute a violation of the laws of such
jurisdiction. No Securities Commission or similar authority in the United States has in any way passed upon the merits of the proposals
contained herein.
9 October 2008
Recommended cash offer
by
Pinnacle Bidco Holdings plc
for the whole of the issued and to be issued ordinary share capital of
Zenith Hygiene Group plc to be implemented by means of a scheme of arrangement
Summary
* The board of directors of Bidco and the board of directors of Zenith are pleased to announce that they have today reached
agreement on the terms of a recommended Cash Offer by Bidco for the entire issued and to be issued ordinary share capital of Zenith. It is
intended that the Offer will be implemented by means of a scheme of arrangement under section 899 of the Companies Act. In addition to the
recommended Cash Offer, the Offer will also include the Unlisted Securities Alternative for Zenith Shareholders who wish to retain an
indirect equity interest in Zenith. The Unlisted Securities Alternative will not be the subject of a recommendation by the Zenith
Directors.
* Bidco has been established by the Offerors for the sole purpose of making the Offer. Following implementation of the Scheme, Bidco
will be owned by the Offerors and those qualifying Zenith Shareholders who have validly elected for the Unlisted Securities Alternative (as
described below).
* Under the terms of the Cash Offer, Zenith Shareholders will receive 12 pence in cash for each Zenith Share held by them, valuing
the existing issued ordinary share capital of Zenith at approximately �2.48 million and valuing the fully diluted issued ordinary share
capital of Zenith (including those Zenith Share Options that are exercisable at a price which is less than the Cash Consideration price) at
approximately �2.58 million.
* The Cash Consideration of 12 pence per Zenith Share represents a premium of approximately 95.76 per cent. to the Closing Price of
6.13 pence per Zenith Share on 7 October 2008 (being the last dealing day prior to the commencement of the Offer Period) and a premium of
approximately 100 per cent. to the average closing price of 6.00 pence per Zenith Share for the three months prior to the commencement of
the Offer Period.
* The Offer also includes the Unlisted Securities Alternative, under which Zenith Shareholders (but not the holder of the Zenith
Warrants) will be entitled to elect, in respect of all (and not some only) of their Zenith Shares, to receive Bidco Shares instead of the
Cash Consideration to which they would otherwise be entitled in respect of such Zenith Shares under the terms of the Cash Offer. Bidco
Shares will be unlisted and there are no plans to seek a public quotation on any recognised investment exchange or other market for the
Bidco Shares which may be issued to Zenith Shareholders under the Unlisted Securities Alternative.
* The number of Bidco Shares available under the Unlisted Securities Alternative will be up to 21,508,190 Bidco Shares which will
represent approximately 20.51 per cent. of the issued share capital of Bidco after the Scheme becomes effective (assuming all Zenith Share
Options which are exercisable at a price below the Cash Consideration price are exercised and assuming all the Zenith Shareholders elect to
take up the Unlisted Securities Alternative). Paragraph 3.2 of this announcement comments on the basis of valuation of such Bidco Shares.
The Unlisted Securities Alternative will be subject to certain restrictions as regards Overseas Shareholders.
* The Scheme will be put to Zenith Shareholders at the Court Meeting and at the General Meeting. Both meetings are expected to be
held on 17 November 2008. In order to become effective, the Scheme must be approved by a majority in number of the Zenith Shareholders
present and voting at the Court Meeting, either in person or by proxy, representing not less than three fourths in value of the Zenith
Shares that are voted at the Court Meeting. In addition, a special resolution implementing the Scheme must be passed by Zenith Shareholders
representing 75 per cent. of the votes cast at the General Meeting. Stanley Fink and Ringo Francis have agreed (because of their interests
in Bidco) to exclude themselves from the Court Meeting. Accordingly, the Zenith Shares in which they are interested will not count towards
the majorities required to approve the Scheme.
* The Zenith Directors, who have been so advised by Oriel Securities, consider the terms of the Cash Offer to be fair and
reasonable. In providing its advice to the Zenith Directors, Oriel Securities has taken into account the commercial assessments of the
Zenith Directors. Accordingly, the Zenith Directors intend unanimously to recommend that Zenith Shareholders accept the Cash Offer.
* The Unlisted Securities Alternative is not and will not be the subject of a recommendation by the Zenith Directors. Accordingly,
Zenith Shareholders are strongly advised to seek their own independent financial advice before electing to participate in the Unlisted
Securities Alternative.
* Irrevocable undertakings to vote in favour of the Scheme and the resolutions at the Court Meeting (or, in the case of Stanley Fink
and Ringo Francis, to be bound by the terms of the Scheme) and the General Meeting have been secured in respect of, in aggregate, 10,273,772
Zenith Shares, representing approximately 47.77 per cent. of the fully diluted ordinary share capital of Zenith (assuming all Zenith Share
Options which are exercisable at a price below the Cash Consideration price are exercised before the Meetings) including undertakings from
Stanley Fink, Ringo Francis, Anthony Cousins, Colin Fogarty, Derek Lafbery, Raymond Freed and AXA Framlington Investment Management Limited
and each Zenith Director who is beneficially interested in Zenith Shares, in respect of their entire shareholdings. The irrevocable
undertakings from Stanley Fink, Ringo Francis, Anthony Cousins, Colin Fogarty, Derek Lafbery, Raymond Freed and from each Zenith Director
who is beneficially interested in Zenith Shares are binding in all circumstances. The irrevocable undertaking from AXA will only lapse if an Independent Competing Offer is made for the entire
issued share capital of Zenith. The irrevocable undertakings from Stanley Fink, Ringo Francis, Anthony Cousins, Colin Fogarty, Derek
Lafbery and Raymond Freed also commit each of them to elect in full for the Unlisted Securities Alternative.
* At the date of this announcement Stanley Fink and Ringo Francis are beneficially interested in, in aggregate, 3,266,860 Zenith
Shares representing approximately 15.19 per cent. of the fully diluted ordinary share capital of Zenith assuming all Zenith Share Options
which are exercisable at a price below the Cash Consideration price are exercised. Stanley Fink and Ringo Francis have agreed (because of
their interests in the Proposal) to exclude themselves from voting at the Court Meeting. Accordingly, the Zenith Shares in which they are
interested will not count towards the majorities required to approve the Scheme. They have, however, undertaken to be bound by the Scheme
and to vote in favour of the resolutions proposed at the General Meeting and have committed to elect in full for the Unlisted Securities
Alternative.
* It is expected that the Scheme Document will be posted to Zenith Shareholders and Zenith Optionholders on 23 October 2008 and that
the Scheme will become effective on 26 November 2008, subject to the satisfaction of the Conditions.
* On 8 October 2008, Zenith agreed with RBS the principal terms of an extension to its existing banking facilities (subject to
finalisation of legal documentation) which will result in an additional �750,000 being made available to Zenith, by way of interim funding,
pending the Scheme becoming effective and the refinancing of the existing RBS Debt being completed. The use of these Additional RBS
Facilities is, however, subject to the terms of the Payment Memorandum of Understanding between Bidco and Zenith. Further details of the
Payment Memorandum of Understanding are set out below in paragraph 12 of this announcement.
Commenting on behalf of the Zenith Directors, Simon Barrell, Acting Chairman of Zenith, said:
"The Zenith Directors believe that the Cash Offer from Bidco represents the best way for Zenith Shareholders to realise the value of
their investment in the immediate future and to provide additional working capital for the Zenith Group. The Board believes that the
injection of capital and the reduction of bank debt will allow the Zenith Group to be more competitive in the current market environment."
Commenting on behalf of the directors of Bidco, Ringo Francis, Chief Executive Officer of Bidco, said:
"I am delighted that we have been able to consummate this transaction, which gives shareholders the option of a significant premium in
cash or the ability to roll over the entirety of their stake into a re-invigorated and re-capitalised Zenith. I very much look forward to
working with Stanley Fink, Arvinder Walia and the existing management team and employees to return Zenith to its former position as one of
the best-regarded, independent manufacturers and suppliers of cleaning and hygiene products to the leisure, industrial and institutional
sectors. I would also like to take this opportunity to thank Stanley Fink for his support, without which this transaction could not have
been consummated."
This summary should be read in conjunction with the full text of this announcement and the Appendices. Implementation of the Offer will
be subject to the conditions set out in Appendix I to this announcement and further conditions to be set out in the Scheme Document and the
Form of Election.
Enquiries:
Pinnacle Bidco Holdings plc Tel: 020 7653 6620
Ringo Francis, Chief Executive Officer
Arvinder Walia, Chief Financial Officer
Strand Partners Limited Tel:020 7409 3494
(Financial Adviser to Bidco)
Stuart Faulkner
David Altberg
Merlin Financial & Business Communications Tel: 020 7653 6620
(PR advisers to Bidco)
Paul Downes
Toby Bates
Zenith Hygiene Group plc Tel: 01707 255 081
Simon Barrell, Acting Chairman
Gavin Gracie, Group Chief Executive
Oriel Securities Limited Tel: 020 7710 7600
(Financial Adviser to Zenith)
Malcolm Strang
Michael Shaw
Strand Partners Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting
exclusively as sole financial adviser to Bidco and no-one else in connection with the matters described in this announcement and will not be
responsible to anyone other than Bidco for providing the protections afforded to clients of Strand Partners Limited or for providing advice
in relation to matters set out in this announcement or any other matter referred to herein.
Oriel Securities Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting
exclusively for Zenith and no-one else in connection with the matters described in this announcement and will not be responsible to anyone
other than Zenith for providing the protections afforded to clients of Oriel Securities Limited or for providing advice in relation to the
matters set out in this announcement or any other matter referred to herein.
The full terms and conditions of the Proposal will be set out in the Scheme Document. Zenith Shareholders are advised to read carefully
the formal documentation in relation to the Proposal once it has been despatched.
THIS ANNOUNCEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR AN INVITATION TO SUBSCRIBE FOR OR PURCHASE, ANY SECURITIES OR THE
SOLICITATION OF ANY VOTE OR APPROVAL IN ANY JURISDICTION, NOR SHALL THERE BE ANY SALE, ISSUANCE OR TRANSFER OF THE SECURITIES REFERRED TO IN
THIS ANNOUNCEMENT IN ANY JURISDICTION IN CONTRAVENTION OF APPLICABLE LAW.
The availability of the Cash Offer, the Unlisted Securities Alternative and the release, publication or distribution of this
announcement to persons who are not resident in the United Kingdom may be affected by the laws of the relevant jurisdictions in which they
are located. Persons who are not resident in the United Kingdom should inform themselves of, and observe, any applicable requirements. Any
failure to comply with such applicable requirements may constitute a violation of the securities laws of any such jurisdiction. This
announcement has been prepared for the purpose of complying with English law and the City Code and the information disclosed may not be the
same as that which would have been disclosed if this announcement had been prepared in accordance with the laws of jurisdictions outside
England.
Bidco Shares have not been and will not be registered under the US Securities Act or under the securities laws of any state of the
United States and may not be offered or sold directly or indirectly in or into the United States unless registered under the US Securities
Act or issued pursuant to an exemption therefrom. Accordingly, notwithstanding the Unlisted Securities Alternative, all Zenith Shareholders
who are US Persons shall receive cash, and there shall be no issuance of Bidco Shares to such Zenith Shareholders, unless Bidco considers
that Bidco Shares may be so issued pursuant to an exemption from the registration requirements of the US Securities Act provided by Section
3(a)(10) of that Act and the registration requirements of the securities laws of any state in the United States provided that Bidco has the
right to deem a Zenith Shareholder not to have made an election under the Unlisted Securities Alternative where such election is by a Zenith
Shareholder to whom the issue of Bidco Shares would be subject to the securities laws of the state of New York or the securities law of any other state in the United States which imposes
regulatory obligations in connection with the sale of such securities which Bidco considers unduly onerous or with which such securities are
unable to comply. Any such issue, and the availability of the Unlisted Securities Alternative, will be subject to the additional
restrictions noted below.
No steps have been taken, nor will any be taken, to enable Bidco Shares to be offered in compliance with the applicable securities laws
of Australia, Canada, Japan or the Republic of South Africa and no prospectus in relation to Bidco Shares has been, or will be, lodged with
or registered in any such territory. Accordingly, Bidco Shares may not be offered, sold, resold, taken up, delivered or transferred,
directly or indirectly, in or into Australia, Canada, Japan or the Republic of South Africa (except in transactions exempt from or not
subject to the registration requirements of the relevant securities laws of Australia, Canada, Japan or the Republic of South Africa).
In accordance with normal United Kingdom market practice and subject to applicable regulatory requirements, Bidco or its nominees or its
brokers (acting as agents) may from time to time make certain purchases of, or arrangements to purchase, Zenith Shares outside the United
States, other than pursuant to the Offer. These purchases may occur either in the open market at prevailing prices or in private
transactions at negotiated prices. Any information about such purchases will be disclosed as required in the United Kingdom and under
applicable regulatory requirements.
The Zenith Directors accept responsibility for all the information contained in this announcement relating to themselves and members of
their immediate families, related trusts and persons connected with them, and to Zenith, and for all the information contained in this
announcement relating to the recommendation of the Cash Offer. To the best of the knowledge and belief of the Zenith Directors (each of whom
has taken all reasonable care to ensure that such is the case), the information contained in this announcement for which they accept
responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information.
The directors of Bidco accept responsibility for all of the information contained in this announcement other than the information for
which the Zenith Directors accept responsibility as stated above. To the best of the knowledge and belief of the directors of Bidco (each
of whom has taken all reasonable care to ensure that such is the case), the information contained in this announcement for which they accept
responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information.
Appendix I sets out the Conditions to the implementation of the Scheme.
Appendix II sets out the bases and sources of information from which the financial calculations used in this announcement have been
derived.
Appendix III contains a letter from Strand Partners to Bidco setting out the valuation required by Rule 24.10 of the City Code.
Appendix IV contains the form of the Payment Memorandum of Understanding.
Appendix V contains the definitions of terms used in this announcement (including in this summary).
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This announcement contains certain forward-looking statements with respect to the financial condition, results of operations and
business of Zenith and certain plans and objectives of the boards of Zenith and Bidco with respect thereto. These forward-looking statements
can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such
as "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "will", "may", "should", "would", "could" or other
words of similar meaning. These statements are based on assumptions and assessments made by the boards of Zenith and Bidco in light of their
experience and their perception of historical trends, current conditions, expected future developments and other factors they believe
appropriate. By their nature, forward-looking statements involve risk and uncertainty, because they relate to events and depend on
circumstances that will occur in the future and the factors described in the context of such forward-looking statements in this announcement could cause actual results and developments to differ materially
from those expressed in or implied by such forward-looking statements. Although Zenith and Bidco believe that the expectations reflected in
such forward-looking statements are reasonable, Zenith and Bidco can give no assurance that such expectations will prove to have been
correct and Zenith and Bidco therefore caution you not to place undue reliance on these forward-looking statements which speak only as at
the date of this announcement. Zenith and Bidco disclaim any obligation in respect of, and do not intend to update, these forward-looking
statements, except as required by applicable law.
DEALING DISCLOSURE REQUIREMENTS
Under the provisions of Rule 8.3 of the City Code, if any person is, or becomes, "interested" (directly or indirectly) in one per cent.
or more of any class of "relevant securities" of Zenith, all "dealings" in any "relevant securities" of Zenith (including by means of an
option in respect of, or a derivative referenced to, any such "relevant securities") must be publicly disclosed by no later than 3.30 p.m.
(London time) on the Business Day following the date of the relevant "dealings". This requirement will continue until the Offer lapses, is
withdrawn, or upon the "offer period" otherwise ending. If two or more persons act together pursuant to an agreement or understanding,
whether formal or informal, to acquire an "interest" in "relevant securities" of Zenith, they will be deemed to be a single person for the
purpose of Rule 8.3.
Under the provisions of Rule 8.1 of the City Code, all "dealings" in "relevant securities" of Zenith, by Bidco or Zenith, or any of
their respective "associates", must also be disclosed by no later than 12.00 noon (London time) on the Business Day following the date of
the relevant transaction.
A disclosure table, giving details of the companies whose "relevant securities" and "dealings" should be disclosed, and the number of
securities in issue, can be found on the Panel's website at www.thetakeoverpanel.org.uk.
"Interests in securities" arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in
the price of securities. In particular, a person will be treated as having an "interest" by virtue of the ownership or control of
securities, or by virtue of any option in respect of or derivative referenced to, securities.
Terms in quotation marks are defined in the City Code, which can also be found on the Panel's website. If you are in any doubt as to
whether or not you are required to disclose a dealing under Rule 8, you should consult the Panel.
In accordance with Rule 2.10 of the City Code, Zenith confirms that it has 20,703,743 ordinary shares of 5 pence each in issue (ISIN
number GB00B05MLF29) as at the date of this announcement.
This announcement does not constitute, or form part of, an offer to sell, or an invitation to subscribe for or purchase, Zenith Shares
or any other securities.
Not for release, publication or distribution, in whole or in part, directly or indirectly in or into or from any jurisdiction
(including the United States, Canada, Australia, the Republic of South Africa or Japan) where to do so would constitute a violation of the
laws of such jurisdiction. No Securities Commission or similar authority in the United States has in any way passed upon the merits of the
proposals contained herein.
9 October 2008
Recommended Cash Offer
by
Pinnacle Bidco Holdings plc
for the whole of the issued and to be issued ordinary share capital of
Zenith Hygiene Group plc to be implemented by means of a scheme of arrangement
1 Introduction
The board of directors of Bidco and the board of directors of Zenith are pleased to announce that they have today reached agreement on
the terms of a recommended cash offer by Bidco for the entire issued and to be issued ordinary share capital of Zenith. The Cash Offer of 12
pence per Zenith Share values the existing issued ordinary share capital of Zenith at approximately �2.48 million and values the fully
diluted issued ordinary share capital of Zenith (including those Zenith Share Options that are exercisable at a price which is less than the
Cash Consideration ) at approximately �2.58 million.
The Offer also includes the Unlisted Securities Alternative, under which Zenith Shareholders will be entitled to elect, in respect of
all (and not some only) of their Zenith Shares, to receive Bidco Shares instead of the Cash Consideration to which they are entitled in
respect of such Zenith Shares under the terms of the Cash Offer. Bidco Shares will be unlisted and there are no plans to seek a public
quotation on any recognised investment exchange or other market for any Bidco Shares issued to Zenith Shareholders electing for the Unlisted
Securities Alternative.
The Unlisted Securities Alternative is not and will not be the subject of a recommendation by the Zenith Directors. Accordingly, Zenith
Shareholders are strongly advised to seek their own independent financial advice before electing to participate in the Unlisted Securities
Alternative.
The Proposal is to be effected by means of a scheme of arrangement of Zenith under section 899 of the Companies Act. The Scheme requires
the approval of the Zenith Shareholders and the sanction of the Court. If the Scheme becomes effective, Zenith will become a wholly-owned
subsidiary of Bidco.
2 The Cash Offer
The Cash Offer, which will be made on the terms and subject to the conditions set out or referred to in Appendix I to this announcement
and subject to the further terms to be set out in the Scheme Document and in the Form of Election, will be made on the following basis:
for each Zenith Share 12 pence in cash
The Cash Offer values the existing issued ordinary share capital of Zenith at approximately �2.48 million and values the fully diluted
issued ordinary share capital of Zenith (including those Zenith Share Options which are exercisable at a price less than the Cash
Consideration) at approximately �2.58 million and represents a premium of approximately 95.76 per cent. to the Closing Price of 6.13 pence
per Zenith Share on 7 October 2008 (being the last dealing day prior to the commencement of the Offer Period) and a premium of approximately
100 per cent to the average closing price of 6.00 pence per Zenith Share for the three months prior to the commencement of the Offer Period.
3 The Unlisted Securities Alternative
3.1 Terms
Under the Unlisted Securities Alternative, Zenith Shareholders may elect, in respect of all (and not some only) of their Zenith Shares,
to receive Bidco Shares instead of the Cash Consideration to which they would otherwise be entitled in respect of such Zenith Shares under
the terms of the Offer on the following basis:
for each Zenith Share 1Bidco Share
The key rights and restrictions attaching to Bidco Shares are briefly summarised in paragraph 3.6 of this announcement and will be more
fully described in the Scheme Document.
3.2 Valuation
As required for the purposes of Rule 24.10 of the City Code, Strand Partners has provided to the directors of Bidco an estimate of the
value of the Bidco Shares (the "Estimated Value"). As at the date of that estimate and based on the various matters set out in the estimate
so provided, the information they have reviewed and the financial analysis they have undertaken, the Estimated Value of one Bidco Share is
approximately 10 pence.
The Estimated Value is based on theoretical valuation techniques and is sensitive to changes in assumptions about the future financial
performance of Zenith and Bidco. Further details of the information reviewed and assumptions relied upon and the methodologies employed in
order to arrive at the Estimated Value are set out in the letter (addressed by Strand Partners to the board of Bidco) in Appendix III (Rule
24.10 Valuation Letter) in this announcement. Strand Partners has based its analysis on financial information regarding the Zenith Group, as
well as assessments made by Bidco.
The valuation set out in Appendix III (Rule 24.10 Valuation Letter) has been provided solely for the use and benefit of the directors of
Bidco for the purposes of Rule 24.10 of the City Code. It is not addressed to, and may not be used or relied upon by, any other parties for
any purpose whatsoever and Strand Partners expressly disclaims any duty or liability with respect to its contents. In particular, it does
not constitute the provision of advice or a recommendation by Strand Partners to any Zenith Shareholder, or any other person as to the
fairness of the Offer or whether or not to accept the Offer or make an election under the Unlisted Securities Alternative and does not
constitute an opinion as to the price at which Bidco Shares may trade or be sold at any point in the future. The valuation does not take
into account any tax that may be incurred by a Scheme Shareholder electing to receive Bidco Shares under the Unlisted Securities Alternative
or transaction costs that may be associated with trading or selling one or more Bidco Shares. Zenith Shareholders are strongly recommended to take their own independent financial advice in
considering whether or not to elect for the Unlisted Securities Alternative.
The Unlisted Securities Alternative is not the subject of a recommendation by the Zenith Directors. Zenith Shareholders are recommended
to consider carefully, in light of their own investment objectives, whether they wish to elect for Bidco Shares under the Unlisted
Securities Alternative and are strongly advised to seek their own independent financial advice before making any such election.
A Rule 24.10 valuation will also be included in the Scheme Document.
3.3 Availability
The number of Bidco Shares available under the Unlisted Securities Alternative will be limited to a maximum aggregate of 21,508,190
Bidco Shares.
If the Unlisted Securities Alternative is fully subscribed and the Scheme is implemented, Bidco Shares held by Zenith Shareholders who
elect for the Unlisted Securities Alternative will represent approximately 20.51 per cent. of the ordinary share capital of Bidco assuming
all Zenith Share Options which are exercisable at a price below the Cash Consideration price are exercised.
3.4 Risk factors
The Unlisted Securities Alternative is not and will not be the subject of a recommendation by the Zenith Directors. It is recommended
that Zenith Shareholders carefully consider, in light of their own investment objectives and having taken independent advice appropriate to
their own financial circumstances, whether they wish to elect for the Unlisted Securities Alternative. The attention of Zenith Shareholders
who may be considering electing for the Unlisted Securities Alternative is drawn to certain risk factors and other investment considerations
relevant to such an election. These will be set out in full in the Scheme Document and include, amongst other things, the following:
* Bidco is an unlisted company and there currently is, and there is expected to continue to be, no market in Bidco Shares;
* Bidco has no plans to seek a listing or public quotation of the Bidco Shares on any recognised investment exchange or other market
following the implementation of the Scheme. Consequently, Bidco Shares may be difficult to sell;
* Bidco will not be subject to the disclosure, corporate governance and shareholder protection requirements of any recognised
investment exchange;
* The Bidco Shares held by Zenith Shareholders will represent a minority interest in Bidco: even if the maximum number of Bidco
Shares are issued to Zenith Shareholders under the Unlisted Securities Alternative, Stanley Fink will hold over 80.52 per cent. of the Bidco
Shares and will have control of Bidco as majority shareholder; if only those shareholders who have irrevocably committed to take up the
Unlisted Securities Alternative do so, Stanley Fink will hold over 91.96 per cent. of the Bidco Shares;
* Bidco currently has no intention to pay dividends; and
* there is a possibility, as set out in paragraph 3.6 below, in the future, that options over Bidco Shares will be granted to the
management and/or employees of Bidco. In these circumstances, the issue of new Bidco Shares would dilute the holding of the Zenith
Shareholders in Bidco.
3.5 Securities law restrictions
Zenith Shareholders who are in any doubt regarding any securities law restrictions which may be applicable to them should consult an
appropriate independent professional adviser in the relevant jurisdiction without delay. Further details in relation to Overseas
Shareholders will be contained in the Scheme Document.
3.6 Bidco Shares
The entire issued share capital of Bidco, will consist of one class of shares, being ordinary shares with a nominal value of 5 pence
each. All of the Bidco Shares will rank equally.
Although the Bidco Shares carry no right to a fixed dividend, the balance of any profits available for distribution which Bidco elects
to distribute shall be payable amongst the holders of Bidco Shares pro rata to their shareholding. Bidco currently has no intention to
declare or pay dividends in the short to medium term.
Each Bidco Share entitles its holder to receive notice of and attend and vote at any general meeting of Bidco.
All Bidco Shares are transferable with the consent of the board of Bidco other than any Bidco Shares issued to employees of the Zenith
Group as a result of their employment with the Zenith Group ("Employment Related Securities") which shall be subject to the restrictions on
transfer contained in the Articles. For the avoidance of doubt, any Bidco Shares issued pursuant to an election for the Unlisted Securities
Alternative shall not constitute Employment Related Securities.
It is intended that additional Bidco Shares will be made available for distribution to or for the benefit of new and existing employees
of the Zenith Group, as determined by the board of directors of Bidco. It is currently anticipated that such shares will be subscribed at
par by an employees benefit trust (to be established after the implementation of the Scheme) which would hold them on trust for employees of
the Zenith Group to be applied as part of an incentivisation package for those employees. Such shares are expected to represent 15 per
cent. of the fully diluted share capital of Bidco (equivalent to 17.65 per cent. of the issued share capital of Bidco immediately after
implementation of the Scheme (i.e. prior to their issue to the employees benefit trust)).
Any proposed transfer of Bidco Shares resulting in the transferee (other than Stanley Fink) holding greater than 50 per cent. of the
fully diluted share capital of Bidco shall trigger a tag-along right whereby the remaining shareholders will be able to require the
prospective transferee to extend its offer to purchase Bidco Shares to those Bidco Shares held by such remaining shareholders (provided that
the transferee's offer has been approved by Stanley Fink).
If the holders of a majority of the Bidco Shares (for example, Stanley Fink) wish to transfer all of their interest in Bidco Shares,
they shall be entitled to exercise a drag-along right, being a right to oblige the remaining shareholders to sell their Bidco Shares on the
same terms and conditions as the holders of a majority of the Bidco Shares (who are exercising the drag-along right).
4 Recommendation of Cash Offer
The Zenith Directors, who have been so advised by Oriel Securities, consider the terms of the Cash Offer to be fair and reasonable. In
providing its advice to the Zenith Directors, Oriel Securities has taken into account the commercial assessments of the Zenith Directors.
Accordingly, the Zenith Directors intend unanimously to recommend that Zenith Shareholders accept the Cash Offer.
The Unlisted Securities Alternative is not and will not be the subject of a recommendation by the Zenith Directors and Zenith
Shareholders are strongly advised to seek their own independent financial advice before electing to participate in the Unlisted Securities
Alternative.
5 Reasons for the Offer and future plans for Zenith
Bidco is confident in the overall prospects for Zenith's operating businesses, but believes that Zenith will be better suited to a
private company environment where it will be able to concentrate on the more efficient delivery of its medium term business plan, free from
the distractions of an equity market's expectations.
As a result of the Offer, the partial refinancing of the existing RBS Debt by the entry into the new RBS Facility (with a balancing
payment coming from Bidco to ensure full repayment of the existing RBS Debt) and the provision by RBS of the Additional RBS Facilities, the
directors of Bidco believe that Zenith will benefit from increased financial flexibility, allowing it to manage its working capital cycle
more effectively and to drive the Company's growth both organically and, over the medium term, via acquisition.
In addition, Bidco believes that, as a small UK quoted company, Zenith will struggle to attract the research coverage, liquidity and
level of market rating that would make retaining its UK quotation worthwhile.
Bidco intends to continue to grow Zenith's revenues, while keeping tight control of costs, within a simplified corporate structure and
without the many expenses associated with maintaining a public quotation.
The following table sets out the sources of funding and the headline uses to which it is expected they will be put.
Sources � Uses
�
Equity subscription by Stanley 10,000,000 Acquisition of 1
1,566,170
Fink into Bidco issued share capital
of Zenith (net of
shareholdings
irrevocably
committed to elect
for the Unlisted
Securities
Alternative)
RBS Facility 9,500,000 Repayment of RBS
12,750,000
Debt
Exercise of Zenith Share 3 48,267 Repayment of
750,000
Options Additional RBS
Facilities
Cash cancellation of
150,557
Zenith Warrants
Additional working 2
4,331,539
capital headroom to
be utilised by
Zenith
19,548,267
19,548,267
(1) Assumes that �1,014,813 is satisfied by the Unlisted Securities Alternative as per the terms of the irrevocable undertakings set out
in paragraph 7,
reducing the Cash Consideration by that amount
(2) Working capital headroom to be partially utilised for the payment of fees and expenses incurred in, and as a result of, the Offer
(3) Assuming the exercise of all Zenith Share Options that are exercisable at a price below the Cash Consideration price
6 Background to and reasons for the recommendation of the Offer
As previously reported, the Zenith Directors initiated and have delivered substantial improvements to the business of the Zenith Group
following the business review carried out during the winter of 2007/8. These initiatives have enhanced the overall business controls, gross
margin and general working capital management. However, as noted in announcements made during the last six months, the Zenith Group has
faced increasingly difficult market conditions this year, with dramatic upward pressure on costs, a cooling of the economy and resistance to
price increases from customers. The Zenith Group continues to be heavily geared with a commensurately high interest cost.
The Zenith Group has been operationally cash generative over the last financial year, albeit not at sufficient levels to fund the
turnaround programme to completion or commence paying down the bank debt, which is currently repayable on 31 August 2009. The Board's
turnaround plans require further investment to improve the efficiency and automation of the Zenith Group's operations, so as to reduce the
ongoing cost-base and provide maximum operational flexibility. The continuing turmoil in the financial markets and resultant general
tightening of cash and credit, make it increasingly unlikely that substantial and sufficient capital could be raised through the normal
market routes.
The Offer is expected to lead to a substantial strengthening of the Zenith Group's balance sheet through a reduction in gearing and debt
levels and an improvement in working capital. A stronger balance sheet, particularly in the current market, should increase the Zenith
Group's flexibility and its ability to remain competitive.
Current Trading Performance
Revenues for the second half of the year ending 31 August 2008 are expected to be slightly lower than for the first half. The Zenith
Group is heavily exposed to the leisure, hotel and associated sectors, which are all facing challenging trading conditions. Supply costs
continue to rise, with phosphates, a material ingredient in many of the Zenith Group's products, in limited supply. Paper suppliers have had
their own production problems, with raw material shortages and increasing demand as buyers repatriate demand from an increasingly costly
Euro zone.
The Zenith Group's gross margin percentage has continued to improve through tighter controls but it has not been possible to pass on
price increases to customers to any significant extent.
On 8 October 2008, Zenith agreed with RBS the principal terms of an extension to its existing banking facilities which will result
(subject to finalisation of legal documentation) in an additional �750,000 being made available to it, by way of interim funding, pending
the Scheme becoming effective and the refinancing of the existing RBS Debt being completed. The use of these Additional RBS Facilities,
which have been agreed between the board of Zenith and RBS is, however, subject to the terms of the Payment Memorandum of Understanding
between Bidco and Zenith.
In arriving at their decision to recommend the Cash Offer, the Zenith Directors have considered the following matters:
the level of the Cash Offer relative to both the Zenith share price of 6.13 pence as at close of business on 7 October 2008 (being the
last dealing day prior to the commencement of the Offer Period) and the average closing price of 6.00 pence per Zenith Share for the three
months prior to the commencement of the Offer Period;
the business outlook for Zenith and the difficult economic and trading environment in which the Zenith Group currently operates;
the risks, costs and availability of additional finance and the timescales associated with the continued turnaround of Zenith's
business;
the effect of Zenith's current level of indebtedness on the operational and trading performance of the Zenith Group, together with the
restricted strategic alternatives to grow the Zenith Group whilst remaining as a quoted company; and
the likely effect of the implementation of the Offer on the business of Zenith, employment and locations of business of the Zenith
Group, in particular in light of the short to mid term challenges faced by the Zenith Group, as described above.
The Zenith Directors have also considered a number of alternative proposals for the Zenith Group, including the possibility of raising
new equity capital, but believe the Cash Offer to be the best option currently available to Zenith Shareholders.
In light of the factors set out above, the Zenith Directors believe that it is in the best interests of Zenith Shareholders to be
afforded the opportunity to realise their investment for cash and that the improved financial structure of the Zenith Group following the
implementation of the Offer will make the Zenith Group more competitive in the current and future market conditions.
The Unlisted Securities Alternative is not the subject of a recommendation by the Zenith Directors and Zenith Shareholders are strongly
advised to seek their own independent financial advice before electing to participate in the Unlisted Securities Alternative.
7 Irrevocable undertakings
Irrevocable undertakings to vote in favour of the Scheme and the resolutions at the Court Meeting (or, in the case of Stanley Fink and
Ringo Francis, to be bound by the terms of the Scheme) and the General Meeting have been secured from Stanley Fink, Ringo Francis, Anthony
Cousins, Colin Fogarty, Derek Lafbery, Raymond Freed and AXA Framlington Investment Managers in respect of, in aggregate, 10,206,772 Zenith
Shares representing approximately 47.46 per cent. of the issued ordinary share capital of Zenith assuming all Zenith Share Options which are
exercisable at a price below the Cash Consideration price are exercised.
In addition, Bidco has received an irrevocable undertaking to vote in favour of the Scheme and the resolutions at the Court Meeting and
the General Meeting from those Zenith Directors who are beneficially interested in Zenith Shares in respect of, in aggregate, 67,000 Zenith
Shares representing approximately 0.31 per cent. of the issued ordinary share capital of Zenith assuming all Zenith Share Options which are
exercisable at a price below the Cash Consideration price are exercised.
The irrevocable undertakings received by Bidco from Stanley Fink, Ringo Francis, Anthony Cousins, Colin Fogarty, Derek Lafbery, Raymond
Freed and the relevant Zenith Directors are binding in all circumstances.
The irrevocable undertaking given by AXA will cease to be binding only if an Independent Competing Offer is made for Zenith.
As a result of their interest in the Proposal, Stanley Fink and Ringo Francis have agreed to exclude themselves from voting at the Court
Meeting. Accordingly, the Zenith Shares in which they are interested will not count towards the total of votes required to approve the
Scheme. They have, however, undertaken to be bound by the Scheme, to vote in favour of the Special Resolution and have committed to elect in
full for the Unlisted Securities Alternative. The irrevocable undertakings from Stanley Fink, Ringo Francis, Anthony Cousins, Colin Fogarty,
Derek Lafbery and Raymond Freed also commit each of them to elect for the Unlisted Securities Alternative.
The irrevocable undertakings referred to above represent, in aggregate, 10,273,772 Zenith Shares representing approximately 47.77 per
cent. of the issued ordinary share capital of Zenith assuming all Zenith Share Options which are exercisable at a price below the Cash
Consideration price are exercised.
The following table sets out the Zenith Shareholders who have provided irrevocable undertakings to vote in favour of the Scheme (or, in
the case of Stanley Fink and Ringo Francis, to be bound by the terms of the Scheme), the number of Zenith Shares that these Zenith
Shareholders held as at the date of this announcement and whether they have elected for the Unlisted Securities Alternative.
Beneficial shareholder*s name No. of Zenith Shares No. of Zenith Shares Whether elected for Percentage of the
held and subject to held and subject to Unlisted Securities total issued share
the irrevocable the irrevocable Alternative capital of
undertakings in undertakings in Zenithassuming all
respect of the respect of the Zenith Share Options
Scheme General Meeting which are
exercisable at a
price below the Cash
Consideration price
are exercised
StanleyFink 1,080,810 1,080,810 Yes 5.03%
Ringo Francis 2,186,050 2,186,050 Yes 10.16%
Colin Fogarty 1,878,250 1,878,250 Yes 8.73%
Derek Lafbery 1,661,050 1,661,050 Yes 7.72%
Anthony Cousins 525,000 525,000 Yes 2.44%
Melvyn Lambert 35,000 35,000 No 0.16%
John Metcalf 32,000 32,000 No 0.15%
Raymond Freed 1,125,612 1,125,612 Yes 5.23%
AXA Framlington Investment 1,750,000 1,750,000 No 8.14%
Management Limited
8 Information relating to the Zenith Group
The business was formed in 1996 and Zenith was incorporated as a private limited company on 19 May 2004. Zenith's business has grown to
become an independent manufacturer and supplier of cleaning and hygiene products to leisure, hotel and associated sectors. It is now a
public company whose shares are traded on the AIM market of the London Stock Exchange.
The total number of Zenith Shares in issue as at the date of this announcement is 20,703,743. The market capitalisation of Zenith, based
on the mid-market price of a Zenith Share of 6.13 pence at the close of business on 7 October 2008 (being the last dealing day prior to
commencement of the Offer Period) was approximately �1.27 million.
9 Information relating to Bidco
Bidco was incorporated in England and Wales on 25 September 2008 and was established by the Offerors specifically for the purpose of
acquiring Zenith. The registered office of Bidco is Queensbury, 5A Hollydell, Morgans Road, Hertford SG13 8BE.
The authorised share capital of Bidco is �6,500,000 divided into 130,000,000 ordinary shares of 5 pence each. The total number of Bidco
Shares in issue as at the date of this announcement is 2.
Bidco is to be funded for the purposes of the Offer by Stanley Fink pursuant to the Investment Agreement, details of which are given in
paragraph 13 below. The directors of Bidco are Stanley Fink (Chairman), Ringo Francis (Chief Executive Officer) and Arvinder Walia (Chief
Financial Officer).
Following implementation of the Scheme, Bidco will be owned by Stanley Fink, Ringo Francis, Anthony Cousins, Colin Fogarty, Derek
Lafbery and Raymond Freed (each of them having committed to elect for the Unlisted Securities Alternative) and, assuming valid elections are
made, all those other qualifying Zenith Shareholders who have validly elected for the Unlisted Securities Alternative.
10 Directors, management and employees and the effect of the Offer on their interests
The board of directors of Bidco has given assurances to the Zenith Directors that, following implementation of the Scheme, the existing
employment rights, including pension rights, of all the directors, management and employees of the Zenith Group will be fully safeguarded.
Immediately after implementation of the Scheme, the board of directors of Bidco will commence a comprehensive review of the business model,
operations and staffing levels and roles within Zenith. This review is expected to be concluded within 6 weeks of the Scheme becoming
effective. The board of directors of Bidco expects that this will lead to a reduction in staffing levels within Zenith which will be
achieved through a combination of redundancies and natural attrition. The board of directors of Bidco does not currently intend to redeploy
the fixed assets of Zenith to an extent that would have a material impact on the business of Zenith.
Following implementation of the Scheme, it is intended that the Offerors will be appointed as directors of Zenith on the terms to be set
out in the Scheme Document. The Zenith Directors will step down from the board immediately following the appointment of the Offerors as
directors of Zenith.
The executive directors of Zenith have agreed to enter into compromise agreements under which they will waive all rights or claims they
may have against the Company in return for a cash payment calculated by reference to their contractual and statutory entitlements under
their existing service contracts.
11 Zenith Share Options and Zenith Warrants
The Offer extends, subject to the terms and conditions set out in the Scheme Document or in any accompanying Form of Election, to any
Zenith Shares which are unconditionally allotted or issued fully paid (or credited as fully paid), for the period prior to implementation of
the Scheme (or by such earlier time and date as Bidco may, subject to the City Code or with the consent of the Panel, determine), as a
result of the exercise of Zenith Share Options or otherwise.
It is proposed that holders of Zenith Share Options who wish to take up the Cash Offer (but not the Unlisted Securities Alternative)
will be entitled to exercise them on a cashless basis. This means they would not have to send a cheque for the monies payable on exercising
such options but instead would simply notify the Company of such exercise and, following the implementation of the Scheme, would receive a
cash payment equal to the aggregate Cash Consideration due (in respect of the Zenith Shares issued to them) less the aggregate exercise
price of their Zenith Share Options. If a Zenith Optionholder wishes to take up the Unlisted Securities Alternative, he will have to
exercise the relevant Zenith Share Options and pay the relevant exercise monies in full at that time. In order to take up the Unlisted
Securities Alternative, a Zenith Optionholder must have exercised the relevant Zenith Share Options prior to the Scheme Record Time.
At the same time as the Scheme Document is posted to Zenith Shareholders (and for information purposes to Zenith Optionholders) Bidco
will write to the participants in the Zenith Share Option Scheme and any other Zenith Optionholders to inform them of the effect of the
implementation of the Scheme on their rights under the Zenith Share Option Scheme or otherwise.
The holder of the Zenith Warrants has agreed with the Company that they will be cancelled in return for a cash payment equal to the
difference between the aggregate exercise price of the Zenith Warrants and the Cash Consideration that would have been payable had such
warrants been exercised. Accordingly, they will not be capable of exercise at the time the Scheme becomes Effective and no Zenith Shares
will be issued in respect of them.
12 Financing of the Offer
Strand Partners is satisfied that the necessary financial resources are available to Bidco for it to satisfy in full the Cash
Consideration and to implement the Offer in full. Full acceptance of the Cash Offer would require a cash payment of approximately �2.58
million by Bidco, which will be funded out of Bidco's cash resources made available by the subscription for Bidco Shares by Stanley Fink
pursuant to the Investment Agreement, details of which are given in paragraph 13 below. The cash element of the Offer will not exceed �1.57
million because Stanley Fink, Ringo Francis, Anthony Cousins, Derek Lafbery, Colin Fogarty and Raymond Freed have undertaken in their
respective irrevocable undertakings to elect for the Unlisted Securities Alternative. Further details of the financing arrangements will be
set out in the Scheme Document.
On 8 October 2008, Zenith agreed with RBS the principal terms on which RBS will provide the Additional RBS Facilities to Zenith (subject
to finalisation of legal documentation). The use by Zenith of the Additional RBS Facilities is to be restricted by the terms of the Payment
Memorandum of Understanding entered into between Zenith and Bidco. The Payment Memorandum of Understanding seeks to ensure that the minimum
working capital requirements of Zenith are satisfied during the period commencing on 9 October 2008 and ending on the Effective Date (from
which time additional working capital will be made available by Bidco) and to provide comfort regarding the working capital assumptions of
Bidco in relation to Zenith as at the Effective Date.
Bidco and RBS have, on 8 October 2008, entered into the RBS Facility, pursuant to which it has been agreed that, with effect from
drawdown under the RBS Facility (on the Effective Date) the existing RBS Debt will be partially refinanced (with a balancing payment coming
from Bidco to ensure full repayment of the existing RBS Debt). Further details of the refinancing will be set out in the Scheme Document.
13 Bidco Investment Agreement
Pursuant to the Investment Agreement, Stanley Fink has agreed, amongst other things, to invest �10,000,000 in Bidco, by way of
subscription of up to 83,333,333 Bidco Shares at a price of 12 pence per share, so as to provide Bidco with the amount required to satisfy
the aggregate cash consideration payable in accordance with the Offer. The obligation to subscribe for Bidco Shares is conditional upon
approval of the Scheme. Stanley Fink will invest �10,000,000 in Bidco regardless of the number of Zenith Shareholders electing to take up
the Unlisted Securities Alternative. Accordingly, if only those Zenith Shareholders who have given irrevocable undertakings to elect for the
Unlisted Securities Alternative do so then Stanley Fink will be interested in 91.96 per cent. of the issued share capital of Bidco following
the Scheme becoming effective but if all Zenith Shareholders elect to take up the Unlisted Securities Alternative (assuming the exercise of
all those Zenith Share Options which are exercisable at a price below the Cash Consideration), then Stanley Fink will be interested in 80.52 per cent. of the issued share capital of Bidco
following the Scheme becoming effective.
14 Structure of the Proposal
The Offer is to be effected by way of a scheme of arrangement. The Scheme is an agreement between Zenith and its shareholders under
section 899 of the Companies Act and is subject to the sanction of the Court.
It is proposed that, under the Scheme, all the Zenith Shares in issue prior to the Voting Record Time will be transferred to Bidco in
consideration for which the holders of the transferred Zenith Shares will receive either (for those Zenith Shareholders that elect for the
Cash Offer) the appropriate Cash Consideration or (for those Zenith Shareholders that elect for the Unlisted Securities Alternative) Bidco
Shares on the basis set out below. Any further Zenith Shares issued before the Scheme Record Time and in respect of which the holders are or
have consented to be bound by the Scheme will also be subject to the Scheme.
Scheme Shareholders who elect for the Unlisted Securities Alternative and who are on the register of members of Zenith at the Scheme
Record Time will receive 1 Bidco share for every 1 Zenith Share then held. No fractions of Bidco Shares will be allotted.
Zenith Shares issued after the Scheme Record Time will not be subject to the Scheme. Accordingly, it is proposed that the articles of
association of Zenith be amended so that Zenith Shares issued after the Scheme Record Time (other than to Bidco or a nominee of Bidco) will
be automatically acquired by Bidco or a nominee of Bidco on the same cash terms as under the Scheme.
Assuming no further shares are issued by Zenith prior to the Scheme becoming effective, implementation of the Scheme, assuming all
Zenith Shareholders elect to take up the Unlisted Securities Alternative, would involve the issue by Bidco of up to approximately 21,508,190
new Bidco Shares for the issued Zenith Shares assuming all Zenith Share Options which are exercisable at a price below the Cash
Consideration price are exercised (representing approximately 20.51 per cent. of Bidco's issued share capital as enlarged by this issue).
It is expected that the Scheme Document will be posted to Zenith Shareholders on 23 October 2008 and that the Scheme will become
effective on 26 November 2008, subject to the satisfaction of all relevant conditions. The Scheme is subject to the Conditions and certain
further terms referred to in Appendix I of this announcement. In particular, the Scheme requires the approval of Zenith Shareholders by the
passing of a resolution at the Court Meeting expected to be held on 17 November 2008. The resolution must be approved by a majority in
number of the Zenith Shareholders present and voting, either in person or by proxy, representing not less than three fourths in value of the
Zenith Shares held by such Zenith Shareholders.
Stanley Fink and Ringo Francis have agreed (because of their interests in Bidco) not to vote at the Court Meeting to approve the Scheme
but they have each given undertakings to be bound by the terms of the Scheme.
Implementation of the Scheme will also require the passing of the Special Resolution (requiring the approval of Zenith Shareholders
representing at least 75 per cent. of the votes cast at the General Meeting, which will be held immediately after the Court Meeting). Bidco,
Stanley Fink and Ringo Francis will be entitled to vote on the Special Resolution.
Following the Meetings, the Scheme must be sanctioned by the Court and will only become effective upon delivery to the Registrar of
Companies of a copy of the Order sanctioning the Scheme. Upon the Scheme becoming effective, it will be binding on all Zenith Shareholders,
irrespective of whether or not they attended or voted at the Court Meeting or the General Meeting.
15 General
The Scheme Document containing the full terms of the Offer will be posted to Zenith Shareholders and, for information only, to
participants in the Zenith Share Option Scheme, as soon as is reasonably practicable and, in any event (save with the consent of the Panel),
within 28 days of the date hereof. The conditions to the Offer are set out in Appendix I and, together with certain further terms of the
Offer, will also be set out in full in the Scheme Document and in the Form of Election.
The availability of the Offer to Zenith Shareholders not resident in and citizens of the United Kingdom may be affected by the laws of
the relevant jurisdictions in which they are citizens or in which they are resident. Such persons should inform themselves about and observe
any applicable legal or regulatory requirements of any such relevant jurisdiction. In particular, the Offer is not being made, directly or
indirectly, in, into or from or by the use of the mails of or any means or instrumentality (including, without limitation, by means of
facsimile transmission, telex, telephone, internet or other forms of electronic communication) of interstate or foreign commerce of, or by
any facility of a national, state or other securities exchange of, the United States, or in, into or from Canada, Australia, the Republic of
South Africa or Japan or any other jurisdiction if to do so would constitute a violation of the relevant laws of such jurisdiction, and the
Offer will not be capable of acceptance by any such use, means, instrumentality or facility from or within the United States, Canada, Australia, the Republic of South Africa or Japan or any
other jurisdiction where to do so would constitute a breach of any relevant securities laws of that jurisdiction. Accordingly, copies of
this announcement are not being, and must not be, mailed or otherwise distributed or sent in or into or from the United States, Canada,
Australia, the Republic of South Africa or Japan. Persons receiving this announcement (including without limitation, custodians, nominees
and trustees) must not distribute or send it in, into or from the United States, Canada, Australia, the Republic of South Africa or Japan.
Any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about, and observe,
any applicable legal or regulatory requirements. Further information in relation to Overseas Shareholders will be set out in the Scheme
Document.
16 Dealing disclosure requirements
Under the provisions of Rule 8.3 of the City Code, if any person is, or becomes, "interested" (directly or indirectly) in one per cent.
or more of any class of "relevant securities" of Zenith, all "dealings" in any "relevant securities" of Zenith (including by means of an
option in respect of, or a derivative referenced to, any such "relevant securities") must be publicly disclosed by no later than 3.30 p.m.
(London time) on the Business Day following the date of the relevant transaction. If two or more persons act together pursuant to an
agreement or understanding, whether formal or informal, to acquire an "interest" in "relevant securities" of Zenith, they will be deemed to
be a single person for the purpose of Rule 8.3.
Under the provisions of Rule 8.1 of the City Code, all "dealings" in "relevant securities" of Zenith by Zenith or Bidco, or any of their
respective "associates", must also be disclosed by no later than 12.00 noon (London time) on the Business Day following the date of the
relevant transaction.
A disclosure table, giving details of the companies whose "relevant securities" and "dealings" should be disclosed, and the number of
securities in issue, can be found on the Panel's website at www.thetakeoverpanel.org.uk.
"Interests in securities" arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in
the price of securities. In particular, a person will be treated as having an "interest" by virtue of the ownership or control of
securities, or by virtue of any option in respect of or derivative referenced to, securities.
Terms in quotation marks are defined in the City Code, which can also be found on the Panel's website. If you are in any doubt as to
whether or not you are required to disclose a dealing under Rule 8, you should consult the Panel.
17 Disclosure of interests
Save for the 2,186,050 Zenith Shares in which Ringo Francis is interested and the 1,080,810 Zenith Shares already held by Stanley Fink,
neither Bidco (nor any of its directors) nor, so far as Bidco is aware, any person acting in concert with Bidco, owns or controls any Zenith
Shares or any securities convertible or exchangeable into Zenith Shares or any rights to subscribe for or purchase the same, or holds any
options (including traded options) in respect of, or has any option to acquire, any Zenith Shares or has entered into any derivatives
referenced to Zenith Shares ("Relevant Securities") which remain outstanding, nor does any such person hold any short positions in relation
to Relevant Securities (whether conditional or absolute and whether in the money or otherwise) including any short position under a
derivative, any agreement to sell or any delivery obligation or right to require another person to purchase or take delivery, nor does any
such person have any arrangement in relation to Relevant Securities. For these purposes, "arrangement" includes any indemnity or option arrangement, any agreement or understanding, formal or
informal, of whatever nature, relating to Relevant Securities which may be an inducement to deal or refrain from dealing in such securities.
Enquiries:
Pinnacle Bidco Holdings plc Tel: 020 7653 6620
Ringo Francis, Chief Executive Officer
Arvinder Walia, Chief Financial Officer
Strand Partners Limited Tel:020 7409 3494
(Financial Adviser to Bidco)
Stuart Faulkner
David Altberg
Merlin Financial & Business Communications Tel: 020 7653 6620
(PR advisers to Bidco)
Paul Downes
Toby Bates
Zenith Hygiene Group plc Tel: 01707 255 081
Simon Barrell, Acting Chairman
Gavin Gracie, Group Chief Executive
Oriel Securities Limited Tel: 020 7710 7600
(Financial Adviser to Zenith)
Malcolm Strang
Michael Shaw
18 Appendices
Appendix I sets out the Conditions to implementation of the Offer.
Appendix II sets out the bases and sources of information from which the financial calculations used in this announcement have been
derived.
Appendix III contains a letter from Strand Partners to Bidco setting out the valuation required by Rule 24.10 of the City Code.
Appendix IV contains the form of the Payment Memorandum of Understanding.
Appendix V contains the definitions of terms used in this announcement.
Strand Partners Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting
exclusively as financial adviser to Bidco and no-one else in connection with the matters described in this announcement and will not be
responsible to anyone other than Bidco for providing the protections afforded to clients of Strand Partners Limited or for providing advice
in relation to matters set out in this announcement or any other matter referred to herein.
Oriel Securities Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting
exclusively for Zenith and no-one else in connection with the matters described in this announcement and will not be responsible to anyone
other than Zenith for providing the protections afforded to clients of Oriel Securities Limited or for providing advice in relation to the
matters described in this announcement or any other matter referred therein.
This announcement has been approved on behalf of Bidco by Strand Partners Limited for the purpose of section 21 of the Financial
Services and Markets Act 2000. The principal place of business of Strand Partners Limited is 26 Mount Row, London W1K 3SQ.
The full terms and conditions of the Scheme (including details of how the Scheme may be approved and the Unlisted Securities Alternative
accepted) will be set out in the Scheme Document and the Form of Election. Zenith Shareholders are advised to read carefully the formal
documentation in relation to the Scheme once it has been despatched.
THIS ANNOUNCEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR AN INVITATION TO SUBSCRIBE FOR OR PURCHASE, ANY SECURITIES OR THE
SOLICITATION OF ANY VOTE OR APPROVAL IN ANY JURISDICTION, NOR SHALL THERE BE ANY SALE, ISSUANCE OR TRANSFER OF THE SECURITIES REFERRED TO IN
THIS ANNOUNCEMENT IN ANY JURISDICTION IN CONTRAVENTION OF APPLICABLE LAW.
The availability of the Offer and the Unlisted Securities Alternative and the release, publication or distribution of this announcement
to persons who are not resident in the United Kingdom may be affected by the laws of the relevant jurisdictions in which they are located.
Persons who are not resident in the United Kingdom should inform themselves of, and observe, any applicable requirements. Any failure to
comply with such applicable requirements may constitute a violation of the securities laws of any such jurisdictions. This announcement has
been prepared for the purpose of complying with English law and the City Code and the information disclosed may not be the same as that
which would have been disclosed if this announcement had been prepared in accordance with the laws of jurisdictions outside England.
Bidco Shares have not been and will not be registered under the US Securities Act or under the securities laws of any state of the
United States and may not be offered or sold directly or indirectly in or into the United States unless registered under the US Securities
Act or issued pursuant to an exemption therefrom. Accordingly, notwithstanding the Unlisted Securities Alternative, all Zenith Shareholders
who are US Persons shall receive cash, and there shall be no issuance of Bidco Shares to such Zenith Shareholders, unless Bidco considers
that Bidco Shares may be so issued pursuant to an exemption from the registration requirements of the US Securities Act provided by Section
3(a)(10) of that Act and the registration requirements of the securities laws of any state in the United States provided that Bidco has the
right to deem a Zenith Shareholder not to have made an election under the Unlisted Securities Alternative where such election is by a Zenith
Shareholder to whom the issue of Bidco Shares would be subject to the securities laws of the state of New York or the securities law of any other state in the United States which imposes
regulatory obligations in connection with the sale of such securities which Bidco considers unduly onerous or with which such securities are
unable to comply. Any such issue, and the availability of the Unlisted Securities Alternative, will be subject to the additional
restrictions noted above.
No steps have been taken, nor will any be taken, to enable Bidco Shares to be offered in compliance with the applicable securities laws
of Australia, Canada, Japan or the Republic of South Africa and no prospectus in relation to Bidco Shares has been, or will be, lodged with
or registered in any such territory. Accordingly, Bidco Shares may not be offered, sold, resold, taken up, delivered or transferred,
directly or indirectly, in or into Australia, Canada, Japan or the Republic of South Africa (except in transactions exempt from or not
subject to the registration requirements of the relevant securities laws of Australia, Canada, Japan or the Republic of South Africa).
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This announcement contains certain forward-looking statements with respect to the financial condition, results of operations and
business of Zenith and certain plans and objectives of the boards of Zenith and Bidco with respect thereto. These forward-looking statements
can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such
as "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "will", "may", "should", "would", "could", or other
words of similar meaning. These statements are based on assumptions and assessments made by the boards of Zenith and Bidco in light of their
experience and their perception of historical trends, current conditions, expected future developments and other factors they believe
appropriate. By their nature, forward-looking statements involve risk and uncertainty, because they relate to events and depend on
circumstances that will occur in the future and the factors described in the context of such forward-looking statements in this announcement could cause actual results and developments to differ materially
from those expressed in or implied by such forward-looking statements. Although Zenith and Bidco believe that the expectations reflected in
such forward-looking statements are reasonable, Zenith and Bidco can give no assurance that such expectations will prove to have been
correct and Zenith and Bidco therefore caution you not to place undue reliance on these forward-looking statements which speak only as at
the date of this announcement. Zenith and Bidco disclaim any obligation in respect of, and do not intend to update, these forward-looking
statements, except as required by applicable law.
Appendix I
Conditions and further terms of the Scheme
1 The Proposal will be conditional upon the Scheme becoming unconditional and becoming effective, subject to the City Code, by not
later than 26 November 2008 or such later date (if any) as Zenith and Bidco may agree and the Court may allow. The Scheme will be
conditional upon:
1.1 the approval by a majority in number representing three-fourths in value of the holders of Scheme Shares present and voting,
either in person or by proxy, at the Court Meeting;
1.2 the resolutions set out in the notice of the General Meeting required to approve and implement the Scheme being duly passed by
the requisite majority at the General Meeting; and
1.3 the Court Sanction being obtained (with or without modifications, but subject to any such modifications being on terms acceptable
to Zenith and Bidco) and a copy of the Order being delivered for registration to the Registrar of Companies.
2 Zenith and Bidco have agreed that the Proposal will be conditional upon the following matters, and, accordingly, the necessary
action to make the Proposal effective will not be taken unless such Conditions (as amended if appropriate) have been satisfied or waived:
2.1 since 31 August 2007, other than as disclosed in the annual report and accounts of Zenith for the year ended on that date or as
publicly announced by Zenith (including, but not limited to, by way of interim results statements and this announcement) or as disclosed in
connection with the Offer in writing (or made available for inspection) by or on behalf of Zenith to Bidco on or prior to the date of this
announcement:
2.1.1 Zenith not having recommended, declared, paid or made, or proposed the recommendation, declaration, paying or making of, any
dividend, bonus or other distribution whether in cash or otherwise;
2.1.2 save in respect of the Zenith Share Options and Zenith Warrants, Zenith not having issued, or authorised or proposed or agreed
the issue or grant of, additional shares of any class or securities convertible into, or rights over, Zenith Shares or convertible
securities or purchased, redeemed, repaid, reduced or reclassified any part of its share capital or proposed or announced an intention to do
so or make any other change to its share capital;
2.1.3 Zenith not having authorised, issued, or proposed the issue of, any debentures or incurred or increased any indebtedness or
contingent liability of an aggregate amount which is material in the context of the Zenith Group taken as a whole;
2.1.4 there having been no adverse change or deterioration of the businesses, financial or trading position or profits or prospects
of Zenith which would be material in the context of the Zenith Group taken as a whole;
2.1.5 Zenith not having merged or demerged with any body corporate or acquired or disposed of or transferred (in each case otherwise
than in the ordinary course of trading or as between members of the Zenith Group) any material assets (including shares in subsidiaries,
associates and trade investments and interests in real property) or made any change in its share or loan capital, or implemented or
authorised or proposed a reconstruction, amalgamation, commitment or scheme of arrangement, or authorised or proposed or announced any
intention to propose any merger, demerger, acquisition, disposal, transfer, reconstruction, amalgamation, commitment, scheme of arrangement
or change as aforesaid;
2.1.6 no litigation or arbitration proceedings, prosecution, investigation or other legal proceedings to which Zenith is or might
reasonably be expected to become a party (whether as claimant, respondent or otherwise) having been instituted or threatened or remaining
outstanding which have not subsequently been irrevocably or unconditionally withdrawn with Zenith being released from all liability in
relation to the subject matter of the claim or action to which it is a party which in each case would be material in the context of the
Zenith Group taken as a whole;
2.1.7 no contingent liability having arisen which might be reasonably likely to adversely affect Zenith to an extent which would be
material in the context of the Zenith Group taken as a whole;
2.1.8 Zenith not having entered into or varied or terminated or authorised, proposed or announced its intention to enter into or vary
or terminate any material contract (including any guarantee), transaction, arrangement or commitment (whether in respect of capital
expenditure or otherwise) which is not in the ordinary course of business or is of a long-term or unusual or onerous nature or magnitude or
which would be restrictive of the business of Zenith or involves or would be reasonably likely to involve an obligation of a nature or
magnitude which is other than in the ordinary course of business and which in each case would be material in the context of the Zenith Group
taken as a whole;
2.1.9 save in the ordinary course of business Zenith not having mortgaged, charged, encumbered or created any other security interest
over the whole or any part of the business, property or assets of Zenith or over any right, title or interest in any such assets to an
extent which would be material in the context of the Zenith Group taken as a whole;
2.1.10 Zenith not having entered into or varied or agreed or offered (such offer remaining open for acceptance) to enter into or vary
the terms of any service agreement with any of the directors or senior executives of Zenith which would in either case lead to a significant
increase in the cost of employing such persons;
2.1.11 Zenith not having taken any corporate action for its winding-up, dissolution or reorganisation or for the appointment of a
receiver, administrator, administrative receiver, trustee or similar officer or had any such person appointed in respect of all or any of
its assets and revenues or any analogous proceedings or steps in any jurisdiction having been taken or for the appointment of any analogous
person in any jurisdiction to have occurred to an extent which would be material in the context of Zenith;
2.1.12 Zenith not having been, or admitted in writing that it is, unable to pay its debts or having stopped or suspended (or
threatened to stop or suspend) payment of its debts generally or ceased or threatened to cease carrying on all or a material part of its
business;
2.1.13 Zenith not having entered into any contract, transaction or arrangement which would be materially restrictive on the scope of
its business or any part of its business and would be reasonably likely to have a material adverse effect on its business;
2.1.14 Zenith not having waived or compromised any claim otherwise than in the ordinary course of business to an extent which would
be material in the context of the Zenith Group taken as a whole;
2.1.15 Zenith not having made any amendments or variations to its memorandum or articles of association, or other constitutional
documents (other than those amendments approved at the annual general meeting of Zenith on 27 June 2008);
2.1.16 Zenith not having sold, assigned or otherwise disposed of any property or any rights to or interests in any property currently
owned or occupied by it to an extent which would be material in the context of the Zenith Group taken as a whole;
2.1.17 Zenith not having proposed or entered into any contract, agreement, arrangement or commitment with respect to any of the
transactions or events referred to in this paragraph 2; and
2.1.19 Zenith not having passed any resolution in general meeting or made any offer (which remains open for acceptance) to sanction,
approve, or implement any such issue, merger, de-merger, acquisition, disposal, change, transaction, contract or commitment or otherwise as
is referred to in this paragraph 2;
2.2 since 31 August 2007, other than as disclosed in the annual report and accounts of Zenith for the year ended on that date or as
otherwise publicly announced (including, but not limited to, by way of interim results statements and this announcement) or as disclosed in
connection with the Offer in writing (or made available for inspection) by or on behalf of Zenith to Bidco on or prior to the date of this
announcement, there being no provision of any authorisation, arrangement, agreement, licence, lease, permit or other instrument to which
Zenith is a party or by or to which any of its assets may be bound, entitled or subject in any circumstance, which would as a consequence of
the making or implementation of the Offer or the acquisition or proposed acquisition by Bidco of the Zenith Shares of or other securities
in, or control of, Zenith or any part thereof or because of a change in the control or management of Zenith or otherwise, result in or might
reasonably be expected to result in, to an extent which would be material in the context of the Zenith Group taken as a whole:
2.2.1 any monies borrowed by, or other indebtedness (actual or contingent) of, or grant available to, Zenith being or becoming
repayable or being capable of being or becoming declared repayable immediately or prior to their or its stated maturity or repayment date or
the ability of Zenith to borrow monies or incur any indebtedness being or capable of being withdrawn, prohibited or inhibited;
2.2.2 the creation of any mortgage, charge or other security interest on or in relation to the whole or any part of the business,
property or assets of Zenith or any such security (whenever arising or having arisen) becoming enforceable or being enforced;
2.2.3 any authorisation, arrangement, agreement, licence, lease, permit or instrument or any right, interest, liability or obligation
of Zenith being terminated or materially or adversely modified or affected or any action being taken or any material obligation or liability
on the part of Zenith arising thereunder;
2.2.4 any interest, asset, or property of Zenith being or becoming liable to be disposed of or charged or any right arising under
which any such asset, interest or property could be required to be disposed of or charged otherwise than in the ordinary course of
business;
2.2.5 the interests, liabilities, business, obligations or rights of Zenith in or with any other venture, person, firm, company,
partnership or body, or any arrangements relating to such interests, liabilities, obligations, rights or business, being terminated or
adversely modified or affected;
2.2.6 Zenith ceasing to be able to carry on business under any name under which it presently does so or any person presently not able
to carry on business under any name which Zenith presently does becoming able to do so; or
2.2.7 the financial or trading position or prospects or value of Zenith being materially adversely affected or prejudiced;
and no event having occurred which, under any provision of any authorisation, arrangement, agreement, licence, lease, permit or other
instrument to which Zenith is a party, or by or to which Zenith or any of its assets may be bound, entitled or subject, is reasonably likely
to result in any of the events or circumstances as are referred to in items (a) to (g) of this paragraph 2.2;
2.3 Other than as specifically disclosed in writing to Bidco by, or on behalf of, Zenith on or prior to the date of this
announcement, Bidco not having discovered:
2.3.1 that any financial, business or other information about Zenith as contained in the information disclosed publicly from time to
time by or on behalf of Zenith, whether in the context of the Offer or otherwise, is materially misleading, contains a material
misrepresentation of fact or omits to state a fact necessary to make the information contained therein not materially misleading and such
information has not been corrected by a subsequent announcement on or prior to the last Business Day prior to the posting of the Offer
Document; or
2.3.2 that Zenith is subject to any liability, contingent or otherwise, which is not disclosed in the annual report and accounts of
Zenith for the year ended 31 August 2007 and which would or could reasonably be expected to affect materially and adversely the business of
the Zenith Group taken as a whole;
2.4 Zenith not intentionally making any payment other than in accordance with paragraph 1 of the Payment Memorandum of
Understanding.
3 Bidco reserves the right to waive, in whole or in part, all or any of the conditions contained in paragraph 2.
4 Bidco shall be under no obligation to waive or treat as fulfilled any of the conditions contained in paragraph 2 by a date earlier
than the date specified above for the fulfilment thereof notwithstanding that the other conditions of the Offer may at such earlier date
have been waived or fulfilled and that there are at such earlier date no circumstances indicating that any of such conditions may not be
capable of fulfilment.
5 The Zenith Shares which are the subject of the Offer will be acquired under the Offer fully paid and free from all liens, equities,
charges, encumbrances, rights of pre-emption and any other third party rights or interests of any nature whatsoever and together with all
rights now or hereafter attaching thereto, including the right to receive and retain in full all dividends and other distributions declared,
made or paid (if any) in respect of the Zenith Shares on or after the date of this announcement.
6 The Offer will comply with the rules and regulations of the London Stock Exchange and the provisions of the City Code. The Offer
and any acceptances under it will be governed by English law and be subject to the jurisdiction of the courts of England.
Appendix II
Bases and sources of information
In this announcement, unless otherwise stated, or the context otherwise requires, the following bases and sources have been used:
1 Financial information concerning the Zenith Group has been extracted from the audited consolidated statutory accounts of Zenith for
the relevant financial year or unaudited preliminary statements of Zenith for the relevant financial year.
2 Information relating to Bidco has been provided by persons duly authorised by the board of directors of Bidco.
3 The market prices of Zenith Shares are closing middle market quotations derived from the Daily Official List.
4 The value of the existing share capital of Zenith is based upon 20,703,743 Zenith Shares in issue as at the date of this
announcement.
5 The maximum cash consideration payable under the Offer is based on 21,508,190 Zenith Shares in issue being the combination of
20,703,743 Zenith Shares in issue as at the date of this announcement, Zenith Share Options with exercise prices at or below 12 pence per
share in respect of no more than 804,447 Zenith Shares.
Appendix III
Rule 24.10 Valuation Letter
The Directors
Pinnacle Bidco Holdings Plc
Queensbury
5A Hollydell
Morgans Road
Hertford
SG13 8BE
8 October 2008
Recommended cash offer by Pinnacle Bidco Holdings Plc ("Bidco") for the whole of the issued and to be issued share capital of Zenith
Hygiene Group Plc ("Zenith") to be implemented by means of a scheme of arrangement
Estimate of Value of Bidco Shares
Dear Sirs
Pursuant to the requirements of the City Code on Takeovers and Mergers (the "Code"), you have requested our opinion as to the estimated
value of a Bidco Share (the "Estimate of Value"). Under the terms of the Offer, for each Zenith Share held, Zenith Shareholders will be
entitled to receive 12 pence in cash, unless they elect for the Unlisted Securities Alternative, under which Zenith Shareholders will be
entitled to elect, in respect of all (and not some only) of their Zenith Shares, to receive Bidco Shares instead of the Cash Consideration
to which they would otherwise be entitled under the terms of the Cash Offer. Under the Unlisted Securities Alternative, Zenith Shareholders
may elect to receive Bidco Shares on the following basis:
for each Zenith Share 1 Bidco Share
Bidco Shares will be unlisted and there are no plans to seek a public quotation on any recognised investment exchange or other market
for the Bidco Shares which may be issued to Zenith Shareholders under the Unlisted Securities Alternative. Bidco Shares available under the
Unlisted Securities Alternative are equivalent in all respects to the securities in Bidco to which Stanley Fink is subscribing. All Bidco
Shares are transferable with the consent of the board of Bidco other than any Bidco Shares issued to employees of the Zenith Group as a
result of their employment with the Zenith Group ("Employment Related Securities") which shall be subject to the restrictions on transfer
contained in the Articles. For the avoidance of doubt, any Bidco Shares issued pursuant to the Unlisted Securities Alternative shall not
constitute Employment Related Securities.
Capitalised terms used in this letter will, unless otherwise stated, have the same meaning given to them in the announcement made by
Bidco and Zenith on 9 October 2008 providing details of the Proposal (the "Announcement").
Purpose
This Estimate of Value has been provided to the directors of Bidco solely for the purposes of Rule 24.10 of the Code and shall not be
used or relied upon for any other purpose whatsoever. It is not addressed to, and may not be relied upon by, any third party for any purpose
whatsoever and Strand Partners Limited ("Strand Partners") expressly disclaims any duty or liability to any third party with respect to the
contents of this letter.
This letter sets out our opinion as to the Estimate of Value of a Bidco Share available under the Unlisted Securities Alternative at
today's date given a willing buyer and seller, neither being under any compulsion to buy or sell, dealing on an arm's length basis, each
having knowledge of all relevant facts. We have assumed for this purpose that, at today's date, the Scheme has become effective in
accordance with its terms and that Bidco has full control of the Company.
This Estimate of Value does not represent the value that a holder of the Unlisted Securities Alternative may realise on any future sale
of a Bidco Share; such a value may be higher or lower than the figure in this letter. Strand Partners assumes no obligation (other than as
required by the City Code) to update or revise this Estimate of Value based upon circumstances or events occurring after the date hereof.
Information
In arriving at our Estimate of Value, we have, among other things:
i. reviewed certain publicly available financial statements and other business and financial information relating to Zenith;
ii. reviewed certain information provided by senior management of Zenith relating to the operations, financial condition and
prospects of Zenith;
iii. relied on the directors of Bidco's discussions with Zenith's senior management as to the past and current operations and
financial condition and prospects of Zenith;
iv. reviewed certain financial projections prepared on behalf of the principal investor in Bidco;
v. considered the commercial assessments of the directors of Bidco and reviewed the commercial due diligence report they commissioned
from a third party consultant; and
vi. considered such other factors and performed such other analyses as we considered appropriate.
We have relied on, and assumed, without independent verification, the accuracy and completeness of the information reviewed by us for
the purposes of this opinion. With respect to the financial projections, we have assumed that they have been reasonably and properly
prepared on bases reflecting the best currently available estimates and judgements of the future financial performance of Zenith. We have
not made any independent valuation or appraisal of the assets and liabilities of Zenith, nor have we sought or been provided with any such
valuation or appraisal. Our opinion is necessarily based on financial, economic, market and other conditions in effect, and the information
made available to us, as at 8 October 2008 (being the latest practicable day prior to the release of the Announcement).
The valuation of non-publicly traded securities is inherently imprecise and is subject to certain uncertainties and contingencies, all
of which are difficult to predict and are beyond our control. In performing this analysis, Strand Partners has made numerous assumptions
with respect to industry performance and general business, economic and market conditions, many of which are beyond the control of Bidco.
Consequently, the view expressed in this letter is not necessarily indicative of: (1) the price at which Bidco Shares might actually trade
in any public market at any future date; or (2) the amount which might be realised upon a sale of Bidco Shares to a third party. This
Estimate of Value may differ substantially from estimates available from other sources. In addition, our view would be expected to fluctuate
with changes in prevailing market conditions, the financial conditions and prospects of Bidco and other factors which generally influence
the valuation of companies and securities.
Methodology
Strand Partners has used a range of widely accepted valuation methods including, inter alia, comparable company trading multiples and
discounted cashflow analysis based on the forecast cash flows for the business prepared on behalf of the directors of Bidco.
We have produced an estimated value of a Bidco Share using these methodologies and taken into account the information, factors,
assumptions and limitations set out above.
The taxation position of individual shareholders will vary and so we have not taken account of an individual shareholder's taxation
position or the effects of any exemptions, allowances or reliefs available for the purposes of income, capital gains, inheritance or any
other applicable tax, duty or levy, notwithstanding that these may be significant in the case of some shareholders.
No account has been taken of any potential transaction costs that a holder of Bidco Shares may incur, including any dealing costs and
any dealing spread (the difference between a buying and selling price quoted by a market maker) that may be associated with the trading of
shares.
Opinion
On the basis of and subject to the foregoing, if Bidco Shares had been in issue as at 8 October 2008 (being the latest practicable day
prior to the release of the Announcement), the estimated value of one Bidco Share, which is receivable in respect of each Scheme Share
pursuant to the Unlisted Securities Alternative under the terms of the Offer, would have been approximately 10 pence.
General
Strand Partners, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively as
financial adviser to Bidco and no one else in connection with the Proposal and will not be responsible to anyone other than Bidco for
providing the protections afforded to clients of Strand Partners nor for providing advice in relation to the Proposal, the content of the
Announcement or any other matter referred to herein. Strand Partners will receive fees from Bidco, as the bidding entity, in respect of
these services.
Zenith Shareholders who may be considering a continuing investment in the future of Bidco through the Unlisted Securities Alternative
are urged to read carefully all the information contained in the Announcement and in the Scheme Document to be sent to Zenith Shareholders
in relation to the Proposal. In particular, Zenith Shareholders should note that Bidco Shares will be unlisted securities and there are no
current plans to seek a public quotation on any recognised investment exchange or other market for the Bidco Shares which may be issued to
Zenith Shareholders under the Unlisted Securities Alternative.
In providing this Estimate of Value, Strand Partners expresses no opinion or recommendation to any person as to whether they should
accept the Offer or whether they should make any election pursuant to the Unlisted Securities Alternative. Zenith Shareholders are
recommended to seek their own independent financial advice. Strand Partners expresses no opinion as to the fairness of the financial terms
of the Offer.
Yours faithfully
For and on behalf of
Strand Partners Limited
Stuart Faulkner
Director
Appendix IV
Payment Memorandum of Understanding
Zenith Hygiene Group PLC
(company number 05132069)
Zenith House
A1(M) Business Centre
Dixons Hill Road
Welham Green
Hertfordshire
AL9 7JE
To: Pinnacle Bidco Holdings PLC
Queensbury
5A Hollydell
Morgans Road
Hertford
SG13 8BE
Date: 8 October 2008
Dear Sirs
Overdraft letter dated 22 February 2008 from The Royal Bank of Scotland PLC to Zenith Hygiene Group PLC ("Zenith") as amended by a
side-letter dated on or about the date of this letter
The additional �750,000 facilities made available by the side-letter referred to above are referred to in this letter as the "Additional
Facilities".
In consideration of your providing certain assurances to our bankers, The Royal Bank of Scotland PLC in connection with the provision of
the Additional Facilities, we agree as follows:
1. Other than contractual payments of wages and salaries (excluding discretionary bonus payments), tax (including VAT) and those
direct debits details of which are set out in the attached schedule, we will make no payment without the written consent of Ringo Francis
and/or Arvinder Walia provided that any inadvertent payments made by us of up to �5,000 in any one instance or of up to �25,000 in aggregate
will not constitute a breach of this provision.
2. In the event that:
(i) such consent is not forthcoming (either due to a negative response or no response at all) by close of business on the first full
business day following the making of a request for consent (a business day being a day other than a Saturday, Sunday, bank holiday or public
holiday); or
(ii) Ringo Francis and/or Arvinder Walia do not consent (either due to a negative response or no response at all) to payment of an
invoice and failure to make such payment immediately is likely to put the directors of Zenith in breach of their statutory duties as
directors,
then the requirement for the written consent of Ringo Francis and/or Arvinder Walia shall be replaced by a requirement for the
written consent of Simon Barrell, which consent (or lack of consent) shall be binding on you and on us and shall be given by the close of
business on the first full business day following the making of a request for consent. Ringo Francis and Gavin Gracie shall each make a
written statement to Simon Barrell setting out their respective positions on the disputed payment, but Simon Barrell shall make his decision
by the required time notwithstanding the failure of either Ringo Francis or Gavin Gracie to provide such a statement. The written consent or
refusal from Simon Barrell shall include a summary of the reasons for consent, or lack of consent.
3. We shall on request at any time provide Ringo Francis and Arvinder Walia with such information as they require concerning our
cashflows, debtors and creditors and those of our subsidiaries, together with any other information of a financial nature as those persons
may request. We confirm that Ringo Francis and Arvinder Walia are free to share such information with FTI Consulting or other professional
advisers, provided always that you procure such information is treated by such recipients as strictly confidential.
4. For all purposes in connection with this letter, the terms "written" and "in writing" include communication by e-mail.
5. This letter shall cease to have effect on the earlier of: (i) completion of any offer by Pinnacle Bidco Holdings PLC for the
entire issued and to be issued share capital of Zenith to be effected by way of a scheme of arrangement under s899 of the Companies Act
2006; and (ii) such scheme of arrangement being withdrawn or otherwise lapsing or ceasing to be capable of becoming effective.
This letter is governed by English law. Please indicate your acceptance of the terms of this letter by signing the enclosed copy of this
letter and returning it to us.
Yours faithfully
****************.
For and on behalf of
Zenith Hygiene Group PLC
We accept the terms set out in the letter of which this is a copy.
****************.
For and on behalf of
Pinnacle Bidco Holdings PLC
Date**************
SCHEDULE OF AGREED DIRECT DEBITS
[REDACTED FOR REASONS OF COMMERCIAL CONFIDENTIALITY]
Appendix V
Definitions
The following definitions apply throughout this announcement unless the context requires otherwise:
"Additional RBS Facilities" the proposed extension of Zenith's existing banking facilities
by RBS in an aggregate amount of �750,000
"Articles" articles of association of Bidco
"Australia" Australia, its possessions and territories and all areas subject
to its jurisdiction and any political subdivision thereof
"AXA" AXA Framlington Investment Management Limited
"Bidco" Pinnacle Bidco Holdings plc (registered in England and Wales
with number 06707511)
"Bidco Shares" ordinary shares of 5 pence each in the capital of Bidco
"Business Day" a day (excluding Saturdays, Sundays and UK public holidays) on
which clearing banks in the City of London are generally open
for business
"Canada" Canada, its possessions and territories and all areas subject to
its jurisdiction and any political subdivision thereof
"Cash Consideration" the cash consideration due to Zenith Shareholders under the
terms of the Cash Offer
"Cash Offer" that part of the Offer that constitutes a cash offer by Bidco
for Zenith Shares
"City Code" the City Code on Takeovers and Mergers
"Closing Price" the closing middle market quotation of a Zenith Share as derived
from the Daily Official List
"Companies Act" the Companies Act 2006 (as amended)
"Conditions" the conditions to the implementation of the Proposal (including
the Scheme), which are set out in Appendix I to this
announcement
"Court" the High Court of Justice in England and Wales
"Court Hearing" the hearing by the Court of the application to sanction the
Scheme
"Court Meeting" the meeting of Scheme Shareholders convened by order of the
Court pursuant to section 899 of the Companies Act to consider
and, if thought fit, approve the Scheme, including any
adjournment thereof
"Court Sanction" the sanction (with or without modification) of the Scheme by the
Court
"Daily Official List" the Daily Official List published by London Stock Exchange
"Effective Date" the date on which the Scheme becomes effective in accordance
with its terms
"Form of Election" the form of election sent to Zenith Shareholders by or on behalf
of the Company pursuant to which a Zenith Shareholder may make
an election for the Unlisted Securities Alternative in respect
of all (but not some only) of his Zenith Shares
"FSMA 2000" the Financial Services and Markets Act 2000 (as amended)
"General Meeting" the general meeting of Zenith to consider any resolution
required to approve and implement the Scheme and the Offer,
including any adjournment thereof
"Hearing Date" the date of the Court Hearing
"HMRC" or "HM Revenue and Her Majesty's Revenue & Customs
Customs"
"Independent Competing Offer" an offer made by or on behalf of a third party for the entire
issued and to be issued ordinary share capital of Zenith (other
than any Zenith Shares already owned by such third party and its
associates) on terms which represent (in the opinion of Strand)
an improvement of 5 per cent. or more on the value of the
consideration offered under the Offer
"Investment Agreement" the agreement dated 8 October 2008 and made between Stanley
Fink, Bidco and the Managers (as defined therein)
"Japan" Japan, its possessions and territories and all areas subject to
its jurisdiction and any political subdivision thereof
"London Stock Exchange" London Stock Exchange plc
"Meetings" the Court Meeting and the General Meeting
"Offer" the offer to be made by Bidco to acquire the entire issued and
to be issued ordinary share capital of Zenith by way of both the
Cash Offer and the Unlisted Securities Alternative
"Offerors" Stanley Fink, Ringo Francis and Arvinder Walia
"Offer Period" has the meaning given in the City Code, and is the period (in
relation to the Offer) which commenced on 8 October 2008 (when
an announcement was released in compliance with Rule 2.4 of the
City Code)
"Order" the order of the Court sanctioning the Scheme under section 899
of the Companies Act
"Oriel Securities" Oriel Securities Limited of 125 Wood Street, London EC2V 7AN
"Overseas Shareholders" Zenith Shareholders (or nominees of, or custodians or trustees
for, Zenith Shareholders) not resident in or citizens of the
United Kingdom
"Panel" the Panel on Takeovers and Mergers
"Payment Memorandum of the letter from Zenith to Bidco under which Zenith agrees that
Understanding" its use of the Additional RBS Facilities shall be subject to
certain restrictions as set out in that letter, substantially in
the form set out in Appendix IV of this announcement
"Proposal" the Scheme and other matters to be considered at the Meetings
"Registrar" the Registrar of Companies in England and Wales
"RBS" The Royal Bank of Scotland plc
"RBS Debt" the financial indebtedness of Zenith and its subsidiaries to RBS
under the �9,750,000 loan agreement dated 22 February 2008
between, amongst others, Zenith and RBS and the �3,000,000
overdraft facility dated 22 February 2008 (to be extended by
�750,000 by a side letter relating to the Additional RBS
Facilities to be entered into between RBS and Zenith) between,
amongst others, Zenith and RBS
"RBS Facility" the �3,750,000 term loan facility and �5,250,000 multi-currency
revolving credit facility provided to Bidco (or, if it so
directs, to Zenith) by RBS under the terms of a facilities
agreement dated 8 October 2008 between, amongst others, Bidco
and RBS, under which the amounts borrowed are to be applied
towards refinancing the RBS Debt and the overdraft facility of
�500,000 and any other overdraft facility made available by RBS
to Bidco or Zenith under the terms of an overdraft letter dated
on or around 8 October 2008 between, amongst others, Bidco and
RBS and each document relating to or evidencing the terms of
such overdraft facility or any other overdraft facility (as the
case may be)
"Registrar of Companies" the Registrar of Companies for England and Wales
"Regulation S" Regulation S under the US Securities Act
"Republic of South Africa" the Republic of South Africa, its possessions and territories
and all areas subject to its jurisdiction and any political
subdivision thereof
"Scheme" the proposed scheme of arrangement under section 899 of the
Companies Act between Zenith and Scheme Shareholders, with or
subject to any modification or addition thereto or condition
approved or imposed by the Court and agreed by Zenith and Bidco
"Scheme Document" the circular to be sent to Zenith Shareholders relating to the
Proposal
"Scheme Record Date" the same day as the Hearing Date
"Scheme Record Time" 6.00 p.m. on the Scheme Record Date
"Scheme Shares" all the Zenith Shares:
(i) in issue at the date of this announcement;
(ii) (if any) issued hereafter and prior to the Voting Record
Time;
(iii) (if any) issued at or after the Voting Record Time and
before the Scheme Record Time, on terms that the holder shall be
bound by this Scheme or in respect of which the holder shall
have agreed in writing by such time to be bound by this Scheme
other than the single Zenith Share held by Bidco's nominee (for
the purpose of complying with the requirement for a public
limited company to have not less than two members)
"Scheme Shareholders" holders of Scheme Shares
"Special Resolution"* a special resolution to be proposed by Zenith at the General
Meeting in connection with, inter alia, the approval of the
Scheme
"Strand Partners" Strand Partners Limited of 26 Mount Row, London W1K 3SQ
"subsidiary" and "subsidiary have the meanings given to them in the Companies Act
undertaking"
"UK Listing Authority" the Financial Services Authority acting in its capacity as the
competent authority for the purpose of Part VI of FSMA 2000
"United Kingdom" or "UK" the United Kingdom of Great Britain and Northern Ireland
"Unlisted Securities the facility provided for in the Offer whereby a Zenith
Alternative" Shareholder may elect, in respect of all (but not part only) of
their Zenith Shares, to receive Bidco Shares in lieu of the Cash
Consideration to which he is entitled under the terms of the
Offer
"US" or "United States" the United States of America as defined in Rule 902(l) under
Regulation S
"US Exchange Act" the United States Securities Exchange Act of 1934, as amended
and rules and regulations thereunder
"US Holder" a holder of the applicable security including a US Person who is
resident in the United States, where securities held of record
by persons resident in the United States shall be determined as
provided in Rule 12g5-1 of the US Exchange Act, except that
securities held of record by a broker, dealer, bank or nominee
for any of them for the accounts of customers resident in the
United States shall be counted as held in the United States by
the number of separate accounts for which the securities are
held
"US Person" a US Person as defined in Rule 902(k) under Regulation S
including, but not limited to, any natural person in the United
States
"US Securities Act" the United States Securities Act of 1933, as amended and rules
and regulations thereunder
"Voting Record Time" in relation to both the Court Meeting and the General Meeting,
6.00 p.m. on the Business Day prior to the day immediately
before the Court Meeting or, if either the Court Meeting or the
General Meeting is adjourned, 48 hours before the time set for
any such adjourned meeting
"Zenith" or "Company" Zenith Hygiene Group plc (registered in England and Wales with
number 05132069)
"Zenith Directors" or "Board" the board of directors of Zenith, being Simon Barrell, Gavin
Gracie, Ian Selby, Melvyn Lambert and John Metcalf
"Zenith Group" Zenith and its subsidiary undertakings
"Zenith Optionholders" holders of Zenith Share Options
"Zenith Share Option Scheme" the Zenith Enterprise Management Incentive Option Scheme
"Zenith Share Options" subsisting options or awards to acquire or subscribe for Zenith
Shares granted in accordance with the terms of the Zenith Share
Option Scheme or under any other existing share option scheme
operated by Zenith
"Zenith Shareholders" holders of Zenith Shares
"Zenith Shares" the existing issued or unconditionally allotted and fully paid
(or credited as fully paid) ordinary shares of 5 pence each in
the capital of the Company and any further such shares which are
unconditionally allotted or issued fully paid (or credited as
fully paid) on or prior to the date on which the Scheme becomes
effective including any such shares issued or unconditionally
allotted upon the exercise of Zenith Share Options granted under
the Zenith Share Option Scheme or upon the exercise of Zenith
Warrants
"Zenith Warrants" the warrants over ordinary shares of 5 pence each in the Company
issued to The Royal Bank of Scotland Plc equal to 10 per cent.
of the Company's fully diluted share capital
This information is provided by RNS
The company news service from the London Stock Exchange
END
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