RNS Number:4069J
BIL International Limited
31 March 2003
THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE
UNITED STATES, CANADA, AUSTRALIA OR JAPAN
31 March 2003
CASH OFFER BY HSBC
ON BEHALF OF BIL (UK) LIMITED
FOR THISTLE HOTELS PLC
POSTING OF OFFER DOCUMENT TO THISTLE SHAREHOLDERS
Introduction
BIL (UK) announces that the Offer Document containing the Cash Offer for
Thistle, being made on its behalf by HSBC, is being posted to Thistle
Shareholders today.
Acceptances to the Offer should be received as soon as possible following
receipt of the Offer Document and in any event, by no later than 3.00pm (London
time) on 22 April 2003.
The Offer
The Offer Price of 115 pence per Thistle Share represents:
* A premium of approximately 29 per cent. to the Closing Middle Market Price
of 89 pence per Thistle Share on 29 January 2003, being the last business
day prior to Investec re-rating Thistle based on "potential for corporate
action";
* A premium of approximately 15 per cent. to the Closing Middle Market Price
of 100 pence per Thistle Share on 20 February 2003, being the last business
day prior to the announcement by BIL that it was contemplating making an
offer for Thistle;
* A multiple of approximately 8.5 times Thistle's 2002 pro-forma EBITDA*;
and
* A multiple of approximately 27.2 times Thistle's 2002 pro-forma earnings*.
BIL believes that the Offer represents full and fair value to Thistle
Shareholders:
Compared to the valuation of Thistle implied by a peer group of comparable
companies**, considered by BIL to be the most comparable to Thistle, the Offer
Price represents:
* A premium of approximately 35 per cent. on the basis of Thistle's 2002
pro-forma EBITDA*; and
* A premium of approximately 138 per cent. on the basis of Thistle's 2002
pro-forma earnings*.
Compared to the valuation of Thistle implied by recent acquisitions** of UK
hotel companies, considered by BIL to be the most comparable to Thistle, the
Offer Price represents:
* A premium of approximately 32 per cent. on the basis of Thistle's 2002
pro-forma turnover*; and
* A premium of approximately 147 per cent. on the basis of Thistle's 2002
pro-forma earnings*.
In arriving at the Offer Price, BIL was mindful of the fact that, in the 12
months prior to BIL's announcement that it was contemplating making an offer for
Thistle, Thistle's share price has been inflated by bid speculation, trading at
an average premium of 21 per cent. to the FTSE All Share Leisure and Hotels
Index, despite Thistle releasing several negative trading statements.
As detailed above, on an earnings-based valuation approach BIL's Offer is at a
premium to the values implied by both comparable companies** and recent
acquisitions**. BIL considers that an NAV based valuation approach is
inappropriate for a hotel company and ignores, in the case of Thistle:
* The contractual early redemption cost of Thistle's debenture debt of
approximately #406 million, a premium of 56 per cent. to its book value;
* A potential tax liability on asset sales of up to #90 million;
* The cost of exiting the hotels business on any asset sale; and
* The #90 million letter of credit relating to the 10 year performance
guarantee to Orb, covering the hotel businesses sold to Orb in April 2002.
Taking into account the full contractual cost of redemption of Thistle's
debenture debt, the current net cash position of approximately #108 million
would become a net debt position of approximately #39 million.
Background to the Offer
BIL originally acquired Mount Charlotte Investments PLC, the forerunner to
Thistle, in 1991 and following significant investment, growth of the portfolio
and a rebranding of the company to Thistle, floated it on the London Stock
Exchange in 1996. The purpose of the flotation was to raise Thistle's profile
and status, increase international recognition of the Thistle brand and further
the development of the business.
BIL considers that since that time Thistle has not performed to its potential
and that its share price has suffered as a consequence.
The UK hotel sector is currently facing difficulties that BIL believes are
unlikely to be short term. An uncertain outlook and negative sentiment
associated with the current conflict in the Gulf combines with generally poor
global economic and political conditions:
* In BIL's view there will be no quick recovery from the current downturn.
Following the Gulf War in 1991 and the last major downturn, it took Thistle
six years to exceed pre-Gulf War operating profit levels; and
* BIL believes that the geopolitical risks and global economic uncertainty
are greater now than in the early 1990s.
Upon completion of the Offer, BIL intends to undertake a thorough strategic,
financial and operational review of Thistle.
Interest in Thistle Shares
The BIL Group currently owns or controls 221,094,640 Thistle Shares,
representing approximately 45.8 per cent. of Thistle's existing issued share
capital.
BIL wishes to make it clear that, even if a competing offer were made, the BIL
Group would not dispose of its shareholding in Thistle. This statement is
intended be binding for a period of at least 12 months.
Extraordinary general meeting
In line with BIL's existing shareholding in Thistle and also as a consequence of
BIL's view that Thistle has not performed to its potential, it is BIL's
intention to write to Thistle to requisition an extraordinary general meeting of
Thistle Shareholders.
At that extraordinary general meeting resolutions will be proposed which would
effect substantial changes to the size and composition of the Thistle board. Any
such changes will be consistent with BIL's obligations to Thistle under the
Relationship Agreement entered into by BIL and Thistle at the time of Thistle's
flotation in 1996, in that the majority of Thistle directors would not be
directors or employees of the BIL Group. Save with the consent of the Panel, any
such extraordinary general meeting would not be requisitioned until after the
end of the Offer Period.
The passing of any resolutions to effect changes to the Thistle board requires a
simple majority of the votes cast by those shareholders present (in person or by
proxy) and voting at the meeting. The BIL Group intends to vote in favour of the
resolutions in respect of its 221,094,640 Thistle Shares, representing
approximately 45.8 per cent. of Thistle's existing issued share capital.
* The calculation of pro-forma 2002 results for Thistle is set out in Appendix 1
to this announcement.
** Further details of the comparable companies and the recent acquisitions of UK
hotel companies are set out in Appendix 1 to this announcement.
Enquiries:
BIL
Arun Amarsi +65 6228 1427
HSBC
Neil Goldie-Scot +44 (0)20 7991 8888
Jan Sanders
Marcus Ayre
Brunswick
Jonathan Glass +44 (0)20 7404 5959
Simon Sporborg
Definitions used in the Offer Announcement dated 4 March 2003 and in the Offer
Document dated 31 March 2003 have the same meaning when used in this
announcement, unless the context requires otherwise.
This announcement has been issued by HSBC, which is regulated in the UK by The
Financial Services Authority, and which is acting as financial adviser to BIL
and BIL (UK) and no one else in connection with the Offer and the matters
described in this announcement and will not be responsible to anyone other than
to BIL and BIL (UK) for providing the protections afforded to customers of HSBC,
nor for providing advice in relation to the Offer or any other matters described
in this announcement.
Unless BIL (UK) otherwise determines, the Offer is not being made, directly or
indirectly, in or into the United States, Canada, Australia or Japan or by use
of the mails of, or by any means or instrumentality of interstate or foreign
commerce of, or any facility of a national securities exchange of any of those
jurisdictions and the Offer should not be accepted by any such use, means,
instrumentality or facility or from within the United States, Canada, Australia
or Japan. This includes, but is not limited to, the post, facsimile
transmissions, telex, telephone, e-mail and the internet. Accordingly, copies of
this announcement and any related documents are not being sent and must not be
mailed or otherwise distributed or sent in, into or from the United States,
Canada, Australia or Japan. Persons receiving such documents (including, without
limitation, custodians, nominees and trustees) should not distribute or send
them in, into or from the United States, Canada, Australia or Japan or use the
United States, Canadian, Australian or Japanese mails or any such means,
instrumentality or facility for any purpose, directly or indirectly, in
connection with the Offer. Doing so may invalidate any related purported
acceptance of the Offer.
The directors of BIL and BIL (UK) accept responsibility for the information
contained in this announcement, save that the only responsibility accepted by
them in respect of the information in this announcement relating to Thistle or
the Thistle Group (which has been compiled from published sources) is to ensure
that such information has been correctly and fairly reproduced and presented.
Subject as aforesaid to the best of the knowledge and belief of the directors of
BIL and BIL (UK) (who have taken all reasonable care to ensure that such is the
case), the information contained in this announcement for which they are
responsible is in accordance with the facts and does not omit anything likely to
affect the import of such information.
APPENDIX 1
BASES AND SOURCES OF INFORMATION
i. Share prices are Closing Middle Market Prices as derived from the Daily
Official List for the relevant date;
ii. Thistle's Closing Middle Market Price on 29 January 2003 was 89.00 pence;
iii. Thistle's Closing Middle Market Price on 20 February 2003 was 100.00 pence;
iv. The premia of 2002 pro-forma EV/EBITDA and 2002 pro-forma earnings for
Thistle compared to those ratios for companies considered by BIL to be most
comparable to Thistle are based on the enterprise value represented by the
Offer, as derived from the Offer Price multiplied by the number of Thistle
Shares in issue and the market value of Thistle's debt as at 28 March 2003
(see section (xi) of this Appendix) net of cash at bank and in hand; and
BIL's calculation of Thistle's 2002 pro-forma results as detailed in section
(xiv) to this Appendix and the average of the same ratios for the comparable
companies set out in section (xii) to this Appendix;
v. The premia of 2002 pro-forma EV/turnover and 2002 pro-forma earnings for
Thistle compared to those ratios for recent transactions considered by BIL
to be most comparable to Thistle are based on the enterprise value
represented by the Offer (as set out in section (iv)) and BIL's calculation
of Thistle's 2002 pro-forma results as detailed in section (xiv) to this
Appendix and the average of the same ratios for the recent transactions set
out in section (xiii) to this Appendix;
vi. The statement "Following the Gulf War in 1991 and the last major downturn,
it took Thistle six years to exceed pre-Gulf War operating profit levels" is
based on Thistle's reported operating profit for each of the years 1990 to
1996 inclusive, as set out in Thistle's annual report and accounts for each
of those years.
vii. The statement "in the 12 months prior to BIL's announcement that it was
contemplating making an offer for Thistle, Thistle's share price has been
inflated by bid speculation, trading at an average premium of 21 per cent.
to the FTSE All Share Leisure and Hotels Index, despite Thistle releasing
several negative trading statements" is based on:
a. a comparison of Thistle's share price performance to that of the FTSE All
Share Leisure and Hotels Index (rebased to Thistle's 21 February 2002 share
price) over that period;
b. the release during that period of the 30 December 2001 preliminary results (4
March 2002), the 14 July 2002 interim results (3 September 2002) and a
trading update (16 January 2003) which disclosed falls in revenue of 5.9 per
cent., 13.6 per cent. and 6.8 per cent. respectively for the periods to
which those reports related; and
c. press and analyst reports of potential corporate activity in relation to
Thistle, as sourced from a Credit Suisse First Boston research note (26
November 2002), Bloomberg (4 August 2002) and Investors Chronicle (31
January 2003).
i. The potential tax liability on asset sales of up to #90 million has been
sourced from Thistle's 2001 report and accounts.
ii. The #90 million letter of credit has been sourced from the circular to
Thistle Shareholders dated 12 March 2002, regarding the disposal of certain
hotels to Orb.
iii. The contractual cost of redemption relates to the cost of redeeming the
debentures as at 28 March 2003, under the basis of calculation set out in
the debenture prospectuses of 4 July 1989 and 26 October 1989 (10.75 per
cent. First Mortgage Debenture Stock 2014) and 19 July 1997 (7.875 per cent.
First Mortgage Debenture Stock 2022).
iv. References to market value relate to the aggregated closing market prices
for each debenture on 28 March 2003, as sourced from Datastream.
v. Comparable companies
a. References to "comparable companies", "peer group" or similar statements in
this announcement refer to Six Continents plc, Whitbread plc, De Vere Group
plc, Macdonald Hotels plc and Jarvis Hotels plc, the UK listed hotel
companies BIL considers to be most comparable to Thistle.
b. Comparisons between the Offer and the peer group have been made as at 3 March
2003, the last business day prior to the announcement of the Offer.
c. Enterprise values for the peer group companies have been derived as follows:
i. equity values have been based on the closing middle market price on 3 March
2003 and the number of shares in issue at that time, as sourced from Topic;
ii. each company's debt has been sourced from its most recent published annual
report and accounts or, where relevant, interim or preliminary results
announcements; and
iii. where appropriate debt has been marked to market using closing prices on 3
March 2003, as sourced from Bloomberg and Datastream.
a. EBITDA and earnings figures have been annualised for each company to 31
December 2002, the approximate financial year end for Thistle, and have been
sourced from the most recent published annual report and accounts,
preliminary results announcements and analyst research notes for those
companies, as appropriate.
b. EBITDA and earnings figures have been restated to exclude exceptional items
and goodwill amortisation (where the applicable information is available).
c. The EBITDA and earnings multiples for each member of the peer group and the
relevant averages for the peer group as a whole, as derived from BIL's
analysis, are set out below:
Company Enterprise value EV/EBITDA Earnings
(FRS 13)
Six Continents plc #6.7bn 7.5x 14.5x
Whitbread plc #2.7bn 6.7x 10.9x
De Vere Group plc #532m 7.0x 11.3x
Macdonald Hotels plc #197m 6.1x 10.2x
Jarvis Hotels plc #156m 4.1x 10.1x
Average 6.3x 11.4x
i. Recent transactions
a. References to "recent transactions", or similar statements in this document,
refer to the recent UK sector transactions set out below involving companies
which BIL considers to be most comparable to Thistle:
Date Enterprise EV /Sales EV /EBITDA Earnings
value
Target company
Heritage Hotels April 2001 #235.0m 2.4x 8.0x n/a
Posthouse Hotels April 2001 #810.0m n/a 6.2x n/a
Regal Hotel Group PLC July 2000 #269.4m 2.3x 9.0x 7.2x
Menzies Hotels PLC June 2000 #45.0m 1.9x 7.5x 3.3x
Swallow Group plc November 1999 #749.4m 3.6x 11.6x 19.7x
Scottish Highland Hotels plc August 1999 #52.3m 2.4x 8.4x 9.4x
County Hotels Group plc January 1999 #107.8m 2.3x 8.0x 15.2x
Average 2.5x 8.4x 11.0x
b. The equity consideration paid under the relevant transaction has been derived
from published offer documents and public announcements or, where such
documents or announcements have not been issued, from analyst research
notes, SDC Platinum or other public information.
c. Historical financial information for each of the target companies has been
sourced from the most recent published annual report and accounts or interim
or preliminary results statements for each company prior to the date of the
transaction, analyst research notes, SDC Platinum or other public
information.
d. Where applicable, debt has been marked to market using the closing prices
prevailing at the time of the transaction, sourced from Bloomberg and
Datastream.
e. Turnover, EBITDA and earnings for each target company have been restated to
exclude exceptional items and goodwill amortisation (where the applicable
information is available).
i. Pro-forma results
a. References to "pro-forma 2002 EBITDA", "pro-forma 2002 earnings" or similar
statements in this announcement relate to Thistle's reported 2002 results as
adjusted by BIL to remove discontinued operations and to reflect the full
year affect of the disposal of 37 hotel businesses to Orb in April 2002.
b. The adjustments set out below have been made by BIL in arriving at the
pro-forma results:
i. the results from disposed operations have been removed;
ii. the management fee from the operation of the disposed hotels has been
adjusted to reflect an estimated full year's fee of #7.3 million,
derived from a Credit Suisse First Boston research note dated 26
November 2002;
iii. interest income and expense have been adjusted to reflect a full year's
reduction in Thistle's debt balance and a full year's interest income
from its cash balance; and
iv. a 30 per cent. tax rate has been assumed in calculations of profit after
tax.
2002 2002 2002 2002 2002
Actual Disposed Mgmt fee Interest adj Pro-forma
(prelims) (prelims) (pro-forma) (pro-forma) (pro-forma)
Turnover 190.0 (33.0) 1.4 158.4
EBITDA 71.9 (12.4)(a) 1.4 61.0
EBITA 49.2 (9.0) 1.4 41.6
PBT 30.9 (9.0) 1.4 5.8(b) 29.1
Assumed tax 30.0%
PAT 21.8 20.4
- EPS 4.5p 4.2p
- Adjusted EPS 5.2p
(a) Disposed depreciation charge calculated as 3/12ths of
the 2001 depreciation charge relating to the disposed hotels of
#13.4 million
(b) Interest adjustment calculated by removing the cost of 3
months' interest at 5.4 per cent. on #174 million of debt
retired following the sale of 37 hotels to Orb on 4 April 2002
and adding #3.5 million, equivalent to 3 months' interest income
on the estimated cash balance of #364.1 million, following the
transaction with Orb (source: Thistle's 29 December 2002
preliminary results, 2001 annual report and 14 July 2002 interim
statement)
This information is provided by RNS
The company news service from the London Stock Exchange
END
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