RNS Number:4175L
Health Club Group PLC
22 May 2003
22 May 2003
Embargoed until 7:00 AM
Not for release, publication or distribution in or into the United States of
America, Canada, The Republic of Ireland, Australia or Japan.
HOLMES PLACE PLC
Recommended Offer by N M Rothschild & Sons Limited on behalf of Health Club
Group plc for Holmes Place PLC
The Independent Directors of Holmes Place and the board of HC Group, which
following completion of the Offer will be effectively controlled by funds
managed or advised by Bridgepoint and Permira, announce the terms of a
recommended offer, to be made by Rothschild on behalf of HC Group, to acquire
the entire issued and to be issued share capital of Holmes Place. The Offer is
a cash offer but also allows Holmes Place Shareholders to elect to receive a
Unit Alternative in relation to a proportion of their holding of Holmes Place
Shares.
The Offer, which is unanimously recommended by the Independent Directors of
Holmes Place, values each Holmes Place Share at 25 pence and values the entire
issued and to be issued share capital of Holmes Place at approximately #25.4
million.
The following is a summary of the key reasons why the Offer is being unanimously
recommended by the Independent Directors:
* the Company is currently in material breach of its existing banking
arrangements;
* the Company has committed capital obligations of approximately #73
million during the next three years which could not be funded out of
its existing debt facilities;
* the Company's trading deteriorated significantly during 2002; and
* the Company continues to underperform against budget and the outlook
remains uncertain.
The Independent Directors believe that the Offer fairly values the Company and
provides an opportunity for Holmes Place Shareholders to derive fair value from
their investment when the Company's future prospects are uncertain. In the event
that Holmes Place Shareholders choose not to accept the Offer, the Company will
have to renegotiate its banking arrangements in order to continue trading. There
is no guarantee that the Company's banks will continue to support the Group.
Furthermore, if the Offer becomes or is declared unconditional in all respects,
Holmes Place's restructured debt facilities will only come into effect if HC
Group immediately reduces the overall debt burden of Holmes Place by #87
million.
HC Group has agreed to acquire the shareholdings in Holmes Place of Allan Fisher
and Lawrence Alkin and persons connected with or deemed to be connected with
them, amounting to, in aggregate, 26,670,996 Holmes Place Shares representing
26.3 per cent. of the issued share capital of Holmes Place. The acquisitions
are conditional on the Offer becoming or being declared unconditional in all
respects. The condition is capable of being waived by the HC Group at any time.
The Independent Directors of Holmes Place, and Lee Ginsberg and Ian Turley,
together owning or controlling an aggregate of 124,436 Holmes Place Shares,
representing approximately 0.12 per cent. of Holmes Place's issued share
capital, have signed irrevocable undertakings to accept, or procure the
acceptance of, the Offer. These undertakings remain binding even in the event
of a higher competing offer being made for Holmes Place.
Accordingly, HC Group has agreed to acquire, or has received irrevocable
undertakings to accept, or procure the acceptance of, the Offer in respect of a
total of 26,795,432 Holmes Place Shares, representing, in aggregate,
approximately 26.4 per cent. of Holmes Place's issued share capital.
The Independent Directors, who have been so advised by Hawkpoint, consider the
terms of the Offer to be fair and reasonable.
Accordingly, the Independent Directors, who have been so advised by Hawkpoint,
unanimously recommend Holmes Place Shareholders to accept the Offer, as they
have irrevocably undertaken to do in respect of their own personal holdings of
111,649 Holmes Place Shares representing, in aggregate, approximately 0.11 per
cent. of the existing issued share capital of Holmes Place. In providing advice
to the Independent Directors in relation to the terms of the Offer, Hawkpoint
has taken into account the commercial assessments of the Independent Directors.
The Independent Directors are making no recommendation in respect of the Unit
Alternative.
Commenting on the announcement, Guy Weldon, a director of Bridgepoint,
commented:
"We are pleased to support this institutional buyout which reunites us with a
company that we first backed successfully in 1996. The Offer is a fair one that
comes with the full recommendation of the Company's Board to its shareholders
and which will allow the Company to resume its expansion plans in a way that it
was unable to as a quoted business."
Charlie Troup, a Permira partner, commented:
"Although the UK health and fitness market has experienced a period of intense
competition, in our view Holmes Place remains the leading pan-European premium
operator. We look forward to building on the operational improvements
identified by Holmes Place and delivering future growth through the provision of
fresh capital to fund the Group's development programme."
Graham Reddish, Non-Executive Chairman and an Independent Director of Holmes
Place, added:
"Holmes Place's ability to create shareholder value has been significantly
constrained by difficult market conditions and a considerable debt burden.
Given these circumstances, the Independent Directors believe that the Offer
fairly values the prospects of the Group and that Holmes Place will be better
able to develop as a private company."
Expressions used in this summary are defined in the attached announcement.
This summary should be read in conjunction with the full text of the attached
announcement.
An analysts' conference call will be held at 12.15 on 22 May 2003. Joining
details can be obtained from Hudson Sandler.
Press Enquiries:
Bridgepoint
James Murray 020 7374 3500
Guy Weldon 020 7374 3562
Michael Black 020 7374 3544
Permira
Charlie Troup 020 7632 1033
Liz Martin 020 7632 1131
Rothschild
Avi Goldberg 020 7280 5000
Alex Midgen 020 7280 5000
Holmes Place
Graham Reddish 020 7796 4133
Simon Purser 020 7796 4133
Hawkpoint
Christopher Darlington 020 7665 4500
Tom Bayne 020 7665 4500
Hudson Sandler
Lesley Allan 020 7796 4133
Wendy Baker 020 7796 4133
N M Rothschild & Sons Limited, which is regulated in the United Kingdom by the
Financial Services Authority, is acting exclusively for the Health Club Group
and is acting for no one else in connection with the Offer and will not be
responsible to anyone other than the Health Club Group for providing the
protections afforded to clients of N M Rothschild & Sons Limited or for giving
advice in relation to the Offer. The contents of this announcement have been
approved by N M Rothschild & Sons Limited for the purposes of Section 21 of the
Financial Services and Markets Act 2000.
Hawkpoint Partners Limited, which is regulated in the United Kingdom by the
Financial Services Authority, is acting exclusively for Holmes Place and is
acting for no one else in connection with the Offer and will not be responsible
to anyone other than Holmes Place for providing the protections afforded to
clients of Hawkpoint Partners Limited or for providing advice in relation to the
Offer.
This announcement is not intended to and does not constitute, or form part of,
an Offer or an invitation to purchase or subscribe for any securities.
The availability of the Offer to persons not resident in the United Kingdom may
be affected by the laws of the relevant jurisdiction. The Offer (including the
Unit Alternative) is not being made, directly or indirectly, in or into or by
the use of the mails of, or by any means or instrumentality (including, without
limitation, telephonically or electronically) of interstate or foreign commerce
of, or any facilities of a national securities exchange of, the United States,
Canada, the Republic of Ireland, Australia or Japan and the Offer will not be
capable of acceptance by any such use, means, instrumentality or facility, or
from within any of those countries.
The Institutional Units, comprising HC Group DDBs and HC Holdings 'B' Ordinary
Shares, to be issued pursuant to the Offer, if any, have not been, and will not
be, registered under the United States Securities Act of 1933 (as amended) nor
under the securities laws of any state of other jurisdiction of the United
States, Canada, the Republic of Ireland, Australia or Japan, the relevant
clearances have not been, nor will they be, obtained from the securities
commission of any province or territory of Canada; no prospectus has been lodged
with, or registered by the Australian Securities and Investments Commission or
the Japanese Ministry of Finance. Accordingly, unless an exemption from the
relevant laws is available, the Institutional Units, comprising HC Group DDBs
and HC Holdings 'B' Ordinary Shares, may not be offered, sold, resold, or
delivered or transferred, directly or indirectly, in or into the United States
or to, or for the account or benefit of, US persons, or in or into Canada, the
Republic of Ireland, Australia or Japan.
22 May 2003
Embargoed until 7:00 AM
Not for release, publication or distribution in or into the United States of
America, Canada, The Republic of Ireland, Australia or Japan.
HOLMES PLACE PLC
Recommended Offer by N M Rothschild & Sons Limited on behalf of Health Club
Group plc for Holmes Place PLC
1. Introduction
The Independent Directors of Holmes Place and the board of HC Group, which
following completion of the Offer will be effectively controlled by funds
managed or advised by Bridgepoint and Permira, announce the terms of a
recommended offer, to be made by Rothschild on behalf of HC Group, to acquire
the entire issued and to be issued share capital of Holmes Place.
2. The Offer
The Offer, which will be made on the terms and subject to the conditions and
further terms set out or referred to in the Offer Document and in the Form of
Acceptance, will be made on the basis set out below:
for each Holmes Place Share 25 pence in cash ("Cash Consideration")
The Cash Consideration under the Offer values the entire issued and to be issued
share capital of Holmes Place at approximately #25.4 million. In addition, under
the Unit Alternative, referred to in paragraph 5 below, Holmes Place
Shareholders who validly accept the Offer may elect to receive Institutional
Units in relation to a proportion of their entire holding of Holmes Place
Shares, subject to the terms set out below.
3. Recommendation from the Independent Directors
In view of the involvement of certain directors of Holmes Place in the Offer,
the involvement of Lawrence Alkin in the negotiation of the Unit Alternative and
the Management Team's interest in the Health Club Group, the Independent
Directors (comprising Messrs Reddish, Hillman, McGinley and Purser), who have no
financial interest in the Health Club Group and are not connected with the
Offer, have taken sole responsibility for considering the Offer.
The Independent Directors, who have been so advised by Hawkpoint, consider the
terms of the Offer to be fair and reasonable.
Accordingly, the Independent Directors, who have been so advised by Hawkpoint,
unanimously recommend Holmes Place Shareholders to accept the Offer, as they
have irrevocably undertaken to do in respect of their own personal holdings of
111,649 Holmes Place Shares representing, in aggregate, approximately 0.11 per
cent. of the existing issued share capital of Holmes Place. In providing advice
to the Independent Directors in relation to the terms of the Offer, Hawkpoint
has taken into account the commercial assessments of the Independent Directors.
4. Reasons for recommending the Offer
The following is a summary of the key reasons why the Offer is being unanimously
recommended by the Independent Directors:
* The Company is currently in material breach of its existing
banking arrangements
The Company is currently highly geared and in breach of most of its existing
banking covenants. The Group's bank syndicate has agreed to allow the Company to
draw down limited additional borrowings to meet the Company's obligations for a
sufficient period to allow Holmes Place Shareholders the opportunity to consider
the Offer.
* The Company has committed capital obligations of approximately #73
million during the next three years which could not be funded out of its
existing debt facilities
The Board has considered pursuing alternative sources of funding for the
Company's significant existing contractual liabilities, but has concluded that
the probability of raising an appropriate amount, on terms acceptable to Holmes
Place Shareholders, is low. Furthermore, if additional financing cannot be
obtained promptly, the Company will be unable to report its results of
operations for the financial year ended 31 December 2002 on a going concern
basis. The Board believes that filing audited accounts that are qualified as to
going concern will place additional pressure on the Group's working capital
requirements.
* The Company's trading has deteriorated significantly during 2002
In the Company's preliminary results for the year ended 31 December 2002 issued
on 30 April 2003, the Company reported that trading deteriorated significantly
during 2002 with a fall in margins and profitability. This deterioration was a
result of, inter alia, heavy attrition in the Company's City of London and other
mature UK clubs, strong (and increasing) local competition throughout the UK and
slower than anticipated sales growth in Holmes Place's less mature overseas
sites, principally in Germany and Austria. As a consequence of these factors,
the Group ended 2002 with approximately 40,000 fewer members than had previously
been anticipated and lower than expected yields per member, which had led to a
deterioration in margins and profitability.
* The Company continues to underperform against budget and the
outlook remains uncertain
In the Company's preliminary results, issued on 30 April 2003, the Company
announced that in relation to the current year, the outcome is likely to be
significantly below the Board's earlier expectations. Since the announcement of
the preliminary results, the business has continued to trade substantially below
budget and the Board believes that the prospects for the previously hoped for
marked improvement in overall Group profitability and cash generation beyond
2003 have declined.
The Independent Directors believe that the Offer fairly values the Company and
provides an opportunity for Holmes Place Shareholders to derive fair value from
their investment when the Company's future prospects are uncertain. In the event
that Holmes Place Shareholders choose not to accept the Offer, the Company will
have to renegotiate its banking arrangements in order to continue to trade.
There is no guarantee that the Company's banks will continue to support the
Group.
Further details of the background to and reasons for the Offer will be set out
in the letter of recommendation from the Independent Directors in the Offer
Document to be published shortly.
If the Offer becomes or is declared unconditional in all respects, Holmes
Place's restructured debt facilities will only come into effect if HC Group
immediately reduces the overall debt burden on Holmes Place by not less than #87
million. In addition, Shareholders should note that, while Allan Fisher and Lee
Ginsberg will continue to be fully involved with the Group, HC Group intends to
make additional senior appointments to the Management Team once the Offer is
completed.
5. The Unit Alternative
As an alternative to receiving the Cash Consideration in relation to the
entirety of their individual shareholding, all Holmes Place Shareholders will be
able to elect to receive Institutional Units in relation to a proportion of
their entire holding of Holmes Place Shares on the following basis:
for each Holmes Place share 0.0849 Institutional Units
subject to a maximum number of 2,152,434 Institutional Units being offered under
the Unit Alternative.
Each Institutional Unit shall entitle the owner to #2.8444 subscription value of
deep discount bonds in HC Group (HC Group DDBs) and one HC Holdings 'B' Ordinary
Share. The Institutional Units are "stapled units" and accordingly there can be
no transfer of one component part of the unit (HC Holdings 'B' Ordinary Share or
HC Group DDBs) without the other component part also being transferred.
Holmes Place Shareholders validly electing to receive the Unit Alternative will
receive Institutional Units in consideration for a number of Holmes Place Shares
as is equal to 25 per cent. of their registered holding of Holmes Place Shares,
rounded down to the nearest whole number, with the balance satisfied in cash.
Fractions of HC Group DDBs and HC Holdings 'B' Ordinary Shares will not be
issued and entitlements thereto will be rounded down, in the case of HC Holdings
'B' Ordinary Shares, to the nearest whole number and, in the case of HC Group
DDBs, to the nearest #1.
Assuming a full take up by Holmes Place Shareholders of Institutional Units, and
taking into account the election of Lawrence Alkin, the Independent Shareholders
would hold, in aggregate, 3.82 per cent. of HC Holdings's voting share capital.
Holmes Place Shareholders are advised to consider the following factors before
electing for the Unit Alternative:
a. following completion of the Offer, HC Group intends to procure
that Holmes Place makes applications to the United Kingdom Listing Authority for
the cancellation of the listing of Holmes Place Shares on the Official List and
to the London Stock Exchange for the cancellation of trading in Holmes Place
Shares;
b. following completion of the Offer, it is proposed to re-register
each of HC Holdings, HC Group and Holmes Place as private companies;
c. the Institutional Units and their component parts will not be
listed on any stock exchange, nor is it the current intention of the Health Club
Group to offer any trading facility for the Institutional Units;
d. the HC Group DDBs and HC Holdings 'B' Ordinary Shares will be
transferable only in very limited circumstances;
e. the holders of HC Holdings 'B' Ordinary Shares shall not enjoy
any minority protections or other rights save for those rights reflected in HC
Holdings's articles of association (as amended from time to time) and for those
rights prescribed by applicable law;
f. the enlarged Health Club Group will be highly leveraged with
total debt of approximately #175 million ranking in priority to the HC Group
DDBs
g. the proportion of total equity in HC Holdings represented by the
HC Holdings 'B' Ordinary Shares following completion of the Offer will be
subject to future dilution on the exercise of warrants over 0.5 per cent. of the
ordinary share capital of HC Holdings issued to the Mezzanine Providers;
h. following completion of the Offer, the Health Club Group will
effectively be controlled by funds managed or advised by Bridgepoint and
Permira, as owners of at least 95.7 per cent. of the HC Holdings 'B' Ordinary
Shares, which carry, in aggregate, 86.2 per cent. of the HC Holdings voting
rights;
i. for so long as the enlarged Health Club Group has outstanding
secured debt, HC Holdings is not entitled to declare or pay any dividend to any
of its shareholders;
j. the HC Group DDBs are not repayable, as to principal or
interest, before the date which is ten years after the Offer becomes or is
declared unconditional in all respects, save at the direction of HC Group;
k. the holders of Institutional Units shall not be entitled to
receive any information relating to the enlarged Health Club Group, save for
information which is required to be provided under applicable law; and
l. the value of Institutional Units will be subject to the same
market and trading risks as are faced by Holmes Place currently, including the
risk of further deterioration in general market conditions and in the trading
performance of Holmes Place.
Subject to the full terms, conditions and all considerations set out in its
letter in the Offer Document, to be published shortly, Rothschild has advised
that, in their opinion, if the Institutional Units had been in issue as at 21
May 2003 (being the last practicable date prior to the posting of the Offer) the
value per Holmes Place Share for a Holmes Place Shareholder electing to receive
Institutional Units in relation to a proportion of their entire holding of
Holmes Place shares would not differ materially to the 25 pence offered to
Holmes Place Shareholders by way of the Cash Consideration under the Offer.
The Unit Alternative will initially remain open for acceptance until 3.00pm on
12 June 2003. If the Offer becomes or is declared unconditional as to
acceptances by reference to acceptances received at or before that time, the
Unit Alternative will remain open for a further period of 14 days, but may be
closed at any time thereafter without prior notice. If the Offer does not
become or is not declared unconditional as to acceptances by reference to
acceptances received at or before 3.00pm on 12 June 2003, HC Group reserves the
right to extend the period for acceptance of the Unit Alternative or to close
the Unit Alternative and to re-introduce it subsequently as long as the Offer is
still conditional as to acceptances. The right is also reserved to revise,
increase and/or extend the Unit Alternative should the Panel so agree or in the
event of a competitive situation arising.
6. Acquisition of Holmes Place Shares by HC Group from Allan Fisher
and Lawrence Alkin
HC Group has agreed to acquire 10,625,720 Holmes Place Shares from Allan Fisher,
Chief Executive of Holmes Place, and persons connected or deemed to be connected
with him, and 16,045,276 Holmes Place Shares from Lawrence Alkin, a
non-executive director of Holmes Place, and persons connected or deemed to be
connected with him. Accordingly, following this announcement, HC Group has
agreed to acquire 26,670,996 Holmes Place Shares, representing approximately
26.3 per cent. of Holmes Place's issued share capital. The acquisitions are
conditional on the Offer becoming or being declared wholly unconditional in all
respects. The condition is capable of being waived by HC Group at any time.
Lawrence Alkin has elected to receive consideration in the form of Institutional
Units in respect of 3,866,205 Holmes Place Shares, representing 25 per cent. of
the Holmes Place Shares registered in his name. 12,179,071 Holmes Place Shares
in which Lawrence Alkin is interested, or deemed to be interested under section
324 of the Act, will be acquired by HC Group at a price of 25 pence per share.
10,625,720 Holmes Place Shares, being all the Holmes Place Shares in which Allan
Fisher is interested, or deemed to be interested under section 324 of the Act,
will be acquired by HC Group at a price of 25 pence per share.
7. Irrevocable undertakings
HC Group has received irrevocable undertakings to accept the offer from each of
the Independent Directors and from Lee Ginsberg and Ian Turley in respect of an
aggregate of 124,436 Holmes Place Shares, representing approximately 0.12 per
cent. of Holmes Place's issued share capital. These undertakings remain binding
even in the event of a higher competing offer being made for Holmes Place.
Accordingly, HC Group has agreed to acquire, or has received irrevocable
undertakings to accept, or procure the acceptance of the Offer in respect of a
total of 26,795,432 Holmes Place Shares, representing, in aggregate,
approximately 26.4 per cent. of Holmes Place's issued share capital. The
irrevocable undertakings, other than those obtained from members of the
Management Team, contain irrevocable undertakings to vote in favour of the
Management Arrangements at the Holmes Place Extraordinary General Meeting.
8. Information on Holmes Place
Holmes Place is one of the leading operators of premium private health clubs
with operations principally in the UK and continental Europe. As at 31 December
2002, the Holmes Place Group had approximately 259,000 members and operated 67
clubs, 49 of which were in the UK.
The Holmes Place Group has pursued a rapid rollout of its business as
demonstrated by the table below.
As at 31 December Notes 1997 1998 1999 2000 2001 2002
Clubs 9 19 35 52 63 67
Members 1. 38,000 73,000 130,000 191,000 242,000 259,000
Notes:
1. Includes members of clubs managed under contract by the Holmes Place
Group.
The Company's preliminary unaudited results for the year ended 31 December 2002
were announced on 30 April 2003. These show that turnover for the period was
#144.1 million (2001: #122.7 million), earnings before interest, tax,
depreciation, amortisation, exceptional items and share of joint venture losses
were #34.2 million (2001: #34.7 million restated), operating profit before
exceptional items and share of joint venture losses was #18.2 million (2001:
#23.2 million) and that the profit before tax, exceptional items and share of
joint venture losses was #11.0 million (2001: #19.7 million). Fully diluted
loss per share was 0.8 pence (2001: 9.1 pence earnings per share restated). Net
debt as at 31 December 2002 was #166.6 million (2001: #128.6 million). Details
of Holmes Place's current trading and prospects are set out below.
9. Current trading and prospects
The Company has had a very difficult start to the current financial year and is
currently in material breach of its banking arrangements. Since the
announcement of the preliminary results, the business has continued to trade
substantially below budget. A substantial part of the shortfall relates to the
mature part of the UK estate which currently generates the bulk of the Group's
profits. For the first four months of the year, like-for-like sales in the
Group's UK mature clubs were 5.4% lower than the comparable period last year.
Overall, the Board continues to believe that the outcome for 2003 is likely to
be significantly below its earlier expectations and that the prospects for the
previously hoped for marked improvement in overall Group profitability and cash
generation beyond 2003 have declined. As a result, the Directors do not
anticipate being in a position to pay a dividend in the foreseeable future. Net
debt as at 31 December 2002 was #166.6 million. Since that date, net debt has
increased to #184.8 million as at 30 April 2003, as a result of working capital
movements and capital expenditure.
10. Information on HC Group
HC Group is a newly formed public company established for the purpose of making
the Offer. HC Group has not traded or entered into any material obligation
other than in connection with the Offer, its financing, and the acquisition of
Holmes Place Shares from Allan Fisher, Lawrence Alkin and persons connected or
deemed to be connected with them. The entire issued share capital of HC Group
is wholly beneficially owned by HC Holdings. Following the Offer becoming or
being declared unconditional in all respects, the shareholders of HC Holdings
will be the Investors (see below), the Management Team and persons connected or
deemed to be connected with them, and those Holmes Place Shareholders who
validly elect to receive Institutional Units, as an alternative, under the Unit
Alternative, to part of the Cash Consideration to which they would otherwise be
entitled under the Offer. It is intended that 4.8 per cent. of the fully
diluted share capital of HC Holdings will remain unissued until such time as
required for future distribution to new and existing employees either directly
or under the terms of a new HC Holdings employee share option plan. HC Holdings
has also agreed to issue the Mezzanine Providers warrants to subscribe for up to
0.5 per cent. of the Ordinary Share Capital of HC Holdings.
The HC Holdings and HC Group boards comprise Allan Fisher, Lee Ginsberg and four
representatives of the Investors, being Guy Weldon, Michael Black, Charlie Troup
and Ian Sellars.
It is the intention of the Health Club Group to continue to develop the business
of Holmes Place in the UK and overseas.
11. Information on the Investors
The Investors comprise certain funds managed or advised by Bridgepoint and
Permira.
Bridgepoint
Bridgepoint is one of the leading providers of private equity in Europe with
funds under management exceeding Euro3.6 billion, including the recently raised Euro2
billion Bridgepoint Europe II. An independently owned and managed business with
offices throughout Europe, Bridgepoint has invested in over 150 European
businesses in the last 10 years.
Permira
Permira is one of Europe's leading private equity firms and acts as adviser to
the Permira Funds, which have funds of nearly Euro6 billion including the current
Euro3.5 billion fund, Permira Europe II. Permira is an independent business with
offices in London, Frankfurt, Milan, Paris, Stockholm and New York focusing on
European buy-out transactions. Since 1985, the Permira Funds have invested in
more than 250 transactions.
12. Holmes Place's management and employees
HC Group has confirmed that, following the Offer becoming or being declared
unconditional in all respects, the existing employment rights, including accrued
pension entitlements, of all employees of Holmes Place will be fully
safeguarded.
The Independent Directors and Lawrence Alkin have agreed to resign from the
board of Holmes Place upon the Offer becoming or being declared unconditional in
all respects.
Following the Offer, the Management Team and certain other senior executives of
Holmes Place will hold HC Holdings Ordinary Shares representing, in aggregate,
approximately 5.2 per cent. of the issued share capital of HC Holdings assuming
issue of all of the authorised HC Holdings 'A' Ordinary Shares.
13. Shareholder approval of the Management Arrangements
The Offer is subject to and conditional upon, inter alia, the approval of
Independent Shareholders at the Extraordinary General Meeting of the Management
Arrangements which are summarised above. Hawkpoint considers the terms of the
Management Arrangements to be fair and reasonable, so far as the Independent
Shareholders are concerned.
Accordingly, in the context of the Offer, the Independent Directors, who have
been so advised by Hawkpoint, unanimously recommend Independent Shareholders to
vote in favour of the Ordinary Resolution that will be put to them at the
Extraordinary General Meeting concerning the Management Arrangements, as they
have irrevocably undertaken to do in respect of their own personal holdings of
111,649 Holmes Place Shares representing, in aggregate, approximately 0.11 per
cent. of the existing issued share capital of Holmes Place. In providing advice
to the Independent Directors in relation to the Management Arrangements,
Hawkpoint has taken into account the commercial assessments of the Independent
Directors.
14. Holmes Place Share Option Schemes
The Offer extends to any Holmes Place Shares which are unconditionally allocated
or issued fully paid (or credited as fully paid) while the Offer is open for
acceptance, or such earlier period as HC Group may, subject to the Code, decide,
including Holmes Place Shares which are unconditionally allotted or issued
pursuant to the exercise of options granted under the Holmes Place Share Option
Schemes. All of the existing Holmes Place Share Options were granted at exercise
prices higher than the Offer Price. Therefore, no proposals will be made to the
holders of Holmes Place Share Options.
15. Compulsory acquisition, de-listing and cancellation of trading
Subject to the Offer becoming or being declared unconditional in all respects,
if HC Group receives acceptances under the Offer in respect of, or otherwise
acquires, 90 per cent. or more of the Holmes Place Shares to which the Offer
relates, HC Group intends to exercise its rights pursuant to the provisions of
sections 428 to 430F (inclusive) of the Companies Act 1985 compulsorily to
acquire the remaining Holmes Place Shares.
Furthermore, if the Offer becomes or is declared unconditional in all respects,
HC Group intends to procure that Holmes Place makes applications to the UKLA for
the cancellation of the listing of Holmes Place Shares on the Official List and
to the London Stock Exchange's market for listed securities for the cancellation
of trading in Holmes Place Shares. It is expected that such cancellations will
take effect no earlier than 20 business days after the date on which the Offer
becomes or is declared unconditional in all respects.
An announcement will be made following (i) the Offer becoming or being declared
unconditional in all respects or (ii) the commencement of the compulsory
acquisition procedures under section 428 to 430F of the Companies Act 1985 in
respect of the remaining Holmes Place Shares, stating the anticipated time and
date, not earlier than 20 business days after such announcement, when the
listing of the Holmes Place Shares on the Official List and their admission to
trading on the London Stock Exchange's market for list securities will be
cancelled.
If the Offer becomes or is declared unconditional in all respects, it is the
intention of the Investors to propose resolutions to re-register HC Holdings, HC
Group and Holmes Place as private companies.
16. Financing of the Offer
Pursuant to the Investment Agreement, subject to the Offer becoming or being
declared unconditional in all respects, the Investors have agreed to subscribe
up to #131,533,528 in cash for HC Holdings 'B' Ordinary Shares and HC Group
DDBs. This will be used to satisfy full take up of the Offer, being a maximum
of approximately #25.4 million. The balance will be used to repay debt and to
pay the fees and expenses of the Offer.
The Investor subscription of HC Holdings 'B' Ordinary Shares and HC Group DDBs
will be scaled back to the extent Holmes Place Shareholders elect to receive
Institutional Units.
The total number of authorised HC Holdings 'A' Ordinary Shares is 5,000,000. Of
those 5,000,000 HC Holdings 'A' Ordinary Shares, the Management Team have
subscribed for 2,600,000 HC Holdings 'A' Ordinary Shares at a price of 10p per
HC Holdings 'A' Ordinary Share. It is intended that the remaining 2,400,000 HC
Holdings 'A' Ordinary Shares, representing 4.8 per cent. of the fully diluted
share capital of HC Holdings, will remain unissued until such time as required
for future distribution to new and existing employees either directly or under
and on the terms of an HC Holdings employee share option plan.
17. Background events since July 2002
On 1 July 2002, the Board announced that, following an approach, it had
authorised Allan Fisher and Lee Ginsberg in conjunction with Bridgepoint and
Permira, to explore a possible offer for the Company. As a consequence, an
independent committee of the Board was appointed to handle matters in relation
to a possible offer for the Company.
In late July 2002, the Company was contacted by persons acting on behalf of
Cannons Group, who expressed an interest in exploring a possible merger of the
two businesses, to be effected by way of a cash offer for Holmes Place. On 4
September 2002, the Board announced its interim results for the period ended 30
June 2002, and also announced that it had chosen to pursue a merger proposal
from Cannons Group whereby Cannons Group proposed to make a recommended cash
offer of 200 pence per Holmes Place Share; Holmes Place Shareholders would also
retain the interim dividend of 1.9 pence per Holmes Place Share announced that
day. During the period leading up to this announcement, the Independent
Directors had received a number of other proposals; the proposal from Cannons
Group was considered by the Independent Directors to be the one most likely to
deliver the greatest value to Holmes Place Shareholders. As a consequence,
Cannons Group was granted a period of exclusivity during which to conduct due
diligence and formalise an offer.
Following the granting of exclusivity to Cannons Group, the Independent
Directors received a joint proposal from Bridgepoint and Permira to acquire the
Company which, because of the exclusivity arrangement, the Company was not able
to progress.
The interim results announcement (released on 4 September 2002) reported that
competition within the health and fitness marketplace was increasing in the UK.
Holmes Place also reported that, although its clubs in the City of London had
not, at that time, experienced a significant downturn in trading, it was mindful
that the City of London was undergoing a period of uncertainty and that,
consequently, it was continuing to take a cautious view on the future
performance of these clubs.
On 17 October 2002, it was announced that, in the UK, Holmes Place had continued
to experience an increasingly competitive environment and that trading at Holmes
Place's City of London clubs and a number of its other established clubs was
below the Board's expectations. This had been as a result of lower retention
rates and fewer new joiners than expected. Consequently, having previously
anticipated a satisfactory outcome for the year, the Board believed that the
outturn for the year would be significantly below its earlier expectations.
The Board also announced on 17 October 2002 that, as a result of the
deterioration in the Company's performance, Cannons Group had informed the Board
that it no longer wished to pursue a merger at 200 pence per Holmes Place Share,
but that it intended to put forward a revised merger proposal in due course. No
such proposal was received.
The announcement on 17 October 2002 also made it clear that, following Cannons
Group's withdrawal, the Independent Directors would consider revised proposals
from any third party in light of the relevant circumstances at the time and
added that it had commenced discussions with a third party (Bridgepoint and
Permira) to determine whether they remained interested in acquiring the Company
on acceptable terms.
Following preliminary discussions, Bridgepoint and Permira expressed an interest
in putting forward a proposal; no other party was interested in submitting a
proposal at that time. During discussions with Bridgepoint and Permira, Holmes
Place received an application under Rule 20.2 of the Code from a third party
that had shown previous interest, requesting that it be furnished with any
information provided to any offerors and, as a consequence, that interested
third party has been receiving information on the business since December 2002.
Such third party has declined to put forward a proposal. For reasons of
confidentiality, the identity of the third party cannot be disclosed.
In the period following 17 October 2002, the Company's trading continued to
deteriorate significantly as a result of, inter alia, heavy attrition in the
Company's City of London and other mature UK clubs, strong (and increasing)
local competition, slower than anticipated sales growth in Holmes Place's less
mature overseas sites, principally in Germany and Austria, and a marked
deterioration in the level of revenue generated by ancillary services, for
example, personal training. As a consequence of these factors, the Group ended
2002 with approximately 40,000 fewer members than had previously been
anticipated and lower than expected yields per member, which has led to a
deterioration in margins and profitability.
On 10 January 2003, the Company announced that it had entered into an
exclusivity agreement with an interested party (Bridgepoint and Permira) in
connection with a possible offer for the Company; the proposed offer was subject
to, inter alia, the completion of due diligence and documentation. The
announcement also indicated that trading remained difficult and that, as a
consequence, the Company had been in discussions with its banks to ensure that
the Group's banking covenants were brought into line with the Board's revised
expectations. The announcement added that approval for the necessary amendments
to the Group's banking covenants had been received from all of the Group's
banks, although documentation of the agreed changes was still to be completed.
The possible offer referred to in the announcement of 10 January 2003 was at a
premium to the Company's share price at that time.
On 25 February 2003, the Company issued a further trading statement which, in
addition to confirming that the outcome for the year ended 31 December 2002
would be significantly below the Board's earlier expectations, provided an
update on trading for the very important first six weeks of the new financial
year.
This announcement stated that the combination of a lower than predicted opening
membership position, coupled with a poor start to the year in the Group's core
clubs, had led the Board to review its expectations for 2003 and that, as a
result, it believed that the outcome was likely to be significantly below the
Board's earlier expectations. The announcement also stated that as a consequence
of the further changes in the Group's trading outlook, the Board had considered
it necessary to discuss its revised trading projections with the Group's lead
bank and that further changes to the Group's banking arrangements were likely to
be required.
The announcement explained that, notwithstanding considerable efforts to reduce
the Group's cost base, find operating efficiencies and defer or cancel the
development of new clubs, there was significant pressure on the Group's banking
arrangements. This was mainly due to a large proportion of the Group's available
facilities having been drawn down in respect of clubs which were either under
development (but not yet open) or which had only recently been opened, but had
not yet reached critical mass. Over time, the Directors believed that recently
opened clubs would be able to develop towards their full potential, resulting in
a marked improvement in overall Group profitability and cash generation. In the
meantime the Group has existing contractual capital expenditure obligations of
approximately #73 million during the next three years, which could not be funded
out of the Group's existing debt facilities.
Since the announcement of the preliminary results on 30 April 2003 the business
has continued to trade substantially below budget. Overall, the Board continues
to believe that the outcome for 2003 is likely to be significantly below its
earlier expectations and that the prospects for the previously hoped for marked
improvement in overall Group profitability and cash generation beyond 2003 have
declined.
As a consequence of this severe deterioration in trading suffered by Holmes
Place, it took a significant period of time to familiarise Bridgepoint and
Permira with the changes taking place in the business, and then to negotiate a
price for Holmes Place Shareholders which was considered acceptable by the
Independent Directors.
In March 2003 the Group's bank syndicate put a hold on the Company's ability to
draw down new borrowings while the Company focused its attention on helping
Bridgepoint and Permira to conclude their due diligence on the business and an
offer for the Company was negotiated. The Group's bank syndicate has, in light
of the Offer being made, agreed to allow the Company to draw down limited
additional borrowings to meet the Company's obligations for a sufficient period
to allow Holmes Place Shareholders the opportunity to consider the Offer.
In the event that Holmes Place Shareholders choose not to accept the Offer, the
Company will have to renegotiate its banking arrangements in order to continue
to trade. There is no guarantee that the Company's banks will support the Group.
The Board has also given consideration to pursuing alternative sources of
funding including finance to be raised by the issue of new shares, and concluded
that the probability of raising an appropriate amount, on terms acceptable to
existing Holmes Place Shareholders, is low. In any event, seeking to put in
place additional finance may require the business to undergo a further prolonged
period of due diligence without any certainty as to outcome, and would
undoubtedly jeopardise the Offer that is currently being made to Holmes Place
Shareholders. Furthermore, if additional financing cannot be obtained promptly,
the Company will be unable to report its results of operations for the financial
year ended 31 December 2002 on a going concern basis. The Board believes that
filing audited accounts that are qualified as to going concern will place
additional pressure on the Group's working capital requirements.
18. Inducement fee
As an inducement to Bridgepoint and Permira to make the Offer, Holmes Place has
agreed to pay an inducement fee to Bridgepoint and Permira of #253,500 in the
event that either the Offer lapses or is withdrawn following the announcement by
a third party of a higher competing offer for Holmes Place, or if the
Independent Directors withdraw or adversely modify their unequivocal unanimous
recommendation of the Offer.
19. General
The Offer Document will be posted to Holmes Place shareholders shortly. A
summary of the conditions and certain further terms of the Offer is set out in
Appendix I of this announcement. Appendix II shows for illustrative purposes
only and on the bases and assumptions set out in the notes therein, the
financial effects on capital value of acceptance of the Offer for an accepting
holder of 1,000 Holmes Place Shares, if the Offer becomes or is declared
unconditional in all respects. The definitions of certain expressions used in
this announcement are contained in Appendix III.
Press Enquiries:
Bridgepoint
James Murray 020 7374 3500
Guy Weldon 020 7374 3562
Michael Black 020 7374 3544
Permira
Charlie Troup 020 7632 1033
Liz Martin 020 7632 1131
Rothschild
Avi Goldberg 020 7280 5000
Alex Midgen 020 7280 5000
Holmes Place
Graham Reddish 020 7796 4133
Simon Purser 020 7796 4133
Hawkpoint
Christopher Darlington 020 7665 4500
Tom Bayne 020 7665 4500
Hudson Sandler
Lesley Allan 020 7796 4133
Wendy Baker 020 7796 4133
N M Rothschild & Sons Limited, which is regulated in the United Kingdom by the
Financial Services Authority, is acting exclusively for the Health Club Group
and is acting for no one else in connection with the Offer and will not be
responsible to anyone other than the Health Club Group for providing the
protections afforded to clients of N M Rothschild & Sons Limited or for giving
advice in relation to the Offer. The contents of this announcement have been
approved by N M Rothschild & Sons Limited for the purposes of Section 21 of the
Financial Services and Markets Act 2000.
Hawkpoint Partners Limited, which is regulated in the United Kingdom by the
Financial Services Authority, is acting exclusively for Holmes Place and is
acting for no one else in connection with the Offer and will not be responsible
to anyone other than Holmes Place for providing the protections afforded to
clients of Hawkpoint Partners Limited or for providing advice in relation to the
Offer.
This announcement is not intended to and does not constitute, or form part of,
an Offer or an invitation to purchase or subscribe for any securities.
The availability of the Offer to persons not resident in the United Kingdom may
be affected by the laws of the relevant jurisdiction. The Offer (including the
Unit Alternative) is not being made, directly or indirectly, in or into or by
the use of the mails of, or by any means or instrumentality (including, without
limitation, telephonically or electronically) of interstate or foreign commerce
of, or any facilities of a national securities exchange of, the United States,
Canada, the Republic of Ireland, Australia or Japan and the Offer will not be
capable of acceptance by any such use, means, instrumentality or facility, or
from within any of those countries.
The Institutional Units, comprising HC Group DDBs and HC Holdings 'B' Ordinary
Shares, to be issued pursuant to the Offer, if any, have not been, and will not
be, registered under the United States Securities Act of 1933 (as amended) nor
under the securities laws of any state of other jurisdiction of the United
States, Canada, the Republic of Ireland, Australia or Japan, the relevant
clearances have not been, nor will they be, obtained from the securities
commission of any province or territory of Canada; no prospectus has been lodged
with, or registered by the Australian Securities and Investments Commission or
the Japanese Ministry of Finance. Accordingly, unless an exemption from the
relevant laws is available, the Institutional Units, comprising HC Group DDBs
and HC Holdings 'B' Ordinary Shares, may not be offered, sold, resold, or
delivered or transferred, directly or indirectly, in or into the United States
or to, or for the account or benefit of, US persons, or in or into Canada, the
Republic of Ireland, Australia or Japan.
APPENDIX I
CONDITIONS OF THE OFFER
For the purpose of the conditions set out below:
(A) the "wider Holmes Place Group" means Holmes Place and its
subsidiaries, subsidiary undertakings and any other undertaking (including any
partnership, joint venture or firm) in which Holmes Place and such undertakings
(aggregating their interests) have a significant interest; for the purposes of
this paragraph and paragraph (B) below "subsidiary", "subsidiary undertaking"
and "undertaking" have the respective meanings given by the Companies Act (but
for this purpose ignoring paragraph 20(1)(b) of Schedule 4A to the Companies
Act) and "significant interest" means a direct or indirect interest in 20 per
cent. or more of the equity capital of an undertaking; and
(B) the "wider Health Club Group" means HC Holdings, HC Group, any
undertaking which has a significant interest in HC Holdings and its subsidiaries
and subsidiary undertakings, any holding company of any such undertaking, any
subsidiary or subsidiary undertaking of any such holding company and any other
undertaking in which any of such companies and undertakings (aggregating their
interests) have a significant interest or any undertaking which has a
significant interest in any of such undertakings (including for the avoidance of
doubt the Permira Funds and the Bridgepoint Funds).
The Offer is subject to the following conditions:
(i) valid acceptances of the Offer being received (and not, where
permitted, withdrawn) by no later than 3.00 p.m. London time on 12 June 2003 (or
such later time(s) and/or date(s) as HC Group may determine, subject to the
rules of the Code) in respect of not less than 90 per cent. (or such lesser
percentage as HC Group may decide) in nominal value of the Holmes Place Shares
to which the Offer relates, provided that, unless agreed by the Panel, this
condition will not be satisfied unless HC Group and/or any of its wholly owned
subsidiaries has acquired or agreed to acquire (either pursuant to the Offer or
otherwise) Holmes Place Shares carrying in aggregate over 50 per cent. of the
voting rights then normally exercisable at general meetings of Holmes Place,
including for this purpose, to the extent (if any) required by the Panel, any
voting rights attributable or attaching to any Holmes Place Shares which are
unconditionally allotted or issued before the Offer becomes or is declared
unconditional as to acceptances (whether pursuant to the exercise of outstanding
conversion, option or subscription rights or otherwise). For the purposes of
this condition:
(a) the expression "Holmes Place Shares to which the Offer
relates" shall be construed in accordance with Sections 428 to 430F (inclusive)
of the Companies Act 1985; and
(b) Holmes Place Shares which have been unconditionally
allotted but not issued shall be deemed to carry the voting rights which they
will carry upon issue;
(ii) it being established in terms satisfactory to HC Group that the
proposed acquisition of Holmes Place by HC Group, or any matters arising from
it, will not be referred to the Competition Commission under the Fair Trading
Act 1973 or the Enterprise Act 2002 and/or that it is not the intention of the
European Commission, pursuant to Council Regulation (EEC) 4064/89, either to
initiate proceedings under article 6(1)(c) of such regulation or to make a
referral to a competent authority of the United Kingdom under article 9(1) of
such regulation;
(iii) the passing at the Extraordinary General Meeting of the Ordinary
Resolution;
(iv) all necessary notifications and filings having been made, all
appropriate waiting periods (including any extension to them) under any
applicable legislation or regulations of any jurisdiction having expired, lapsed
or been terminated, and all authorisations, orders, recognitions, grants,
consents, licences, confirmations, clearances, certificates, permissions and
approvals (collectively "Approvals") necessary or appropriate for or in respect
of the Offer, its implementation or any acquisition of any shares in, or control
of, Holmes Place or any member of the wider Holmes Place Group by any member of
the wider Health Club Group having been complied with and obtained on terms and
in a form reasonably satisfactory to HC Group from all appropriate government or
governmental, quasi-governmental, supranational, statutory, regulatory,
environmental or investigative body or authority or any court in any
jurisdiction (each a "Relevant Authority") or persons with whom any member of
the wider Holmes Place Group has entered into contractual arrangements (where
the absence of an Approval from such a person would have a material adverse
effect on the wider Holmes Place Group), and all such Approvals necessary or
appropriate to carry on the business of any member of the wider Holmes Place
Group, remaining in full force and effect at the time when the Offer becomes
otherwise unconditional in all respects and there being no intimation of any
intention to revoke or not to renew, withdraw, suspend, withhold, modify or
amend the same in consequence of the Offer becoming unconditional in all
respects, and all necessary statutory or regulatory obligations in any
jurisdiction having been complied with;
(v) no Relevant Authority having notified Holmes Place of its decision to
take, institute, implement or threaten any action, suit, proceedings,
investigation, reference or enquiry, or enact, make or propose any statute,
regulation, order or decision, or having taken any other steps or measures that
would or would be reasonably likely to:
(a) make the Offer, its implementation or the acquisition or
proposed acquisition of any shares in, or control over, Holmes Place by HC
Group, illegal, void or unenforceable or otherwise directly or indirectly
restrict, restrain, prohibit, delay, frustrate or interfere in the
implementation of or impose additional conditions or obligations with respect to
or otherwise challenge the Offer or the proposed acquisition of Holmes Place by
HC Group or any acquisition of shares in Holmes Place by HC Group (including
without limitation, taking any steps which would entitle the Relevant Authority
to require HC Group to dispose of all or some of its Holmes Place Shares or
restrict the ability of HC Group to exercise voting rights in respect of some or
all of such Holmes Place Shares); or
(b) result directly or indirectly in a material delay in the
ability of HC Group, or render HC Group unable, to acquire some or all of the
Holmes Place Shares; or
(c) impose any material limitation on the ability of any
member of the wider Health Club Group or any member of the wider Holmes Place
Group to acquire or hold or exercise effectively, directly or indirectly, any
rights of ownership of shares or the equivalent in any member of the wider
Holmes Place Group or management control over any member of the wider Holmes
Place Group; or
(d) require, prevent, delay or affect the divestiture by any
member of the wider Health Club Group or require the divestiture by any member
of the wider Holmes Place Group of all or any material portion of their
respective businesses, assets or properties or impose any limitation on the
ability of any of them to conduct their respective businesses or own their
respective assets or properties; or
(e) require, prevent, delay or affect the divestiture by any
member of the wider Health Club Group of any shares or other securities (or the
equivalent) in Holmes Place; or
(f) otherwise adversely affect in any material respect any or
all of the businesses, assets, profits, financial or trading position or
prospects, or use of any name of any member of the wider Health Club Group or
any member of the wider Holmes Place Group; or
(g) require any member of the wider Holmes Place Group or any
member of the wider Health Club Group to offer to acquire any shares or other
securities (or the equivalent) owned by any third party in any member of the
wider Holmes Place Group; or
(h) impose any limitation on the ability of any member of the
wider Health Club Group or any member of the wider Holmes Place Group to
integrate or co-ordinate its business, or any of it, with the business of any
other member of the wider Health Club Group or any member of the wider Holmes
Place Group;
and all applicable waiting and other time periods during which any
such Relevant Authority could institute, implement or threaten any proceedings,
suit, investigation or enquiry or enact, make or propose any such statute,
regulation or order or take any other such step having expired, lapsed or been
terminated;
(vi) except as disclosed in Holmes Place's annual report and accounts for
the financial year ended 31 December 2001 or Holmes Place's preliminary results
for the financial year ended 31 December 2002 or Holmes Place's interim results
for the six months ended 30 June 2002 or in writing to HC Group or Bridgepoint
or Permira or their respective advisers or as publicly announced via a
Regulatory Information Service by Holmes Place before the date of announcement
of the Offer (collectively "publicly announced"), there being no provision of
any arrangement, agreement, authorisation, lease, licence, consent, franchise,
permit or other instrument ("Instrument") to which any member of the wider
Holmes Place Group is a party, or by or to which any such member, or any of its
assets, may be bound, entitled or subject, that could or might reasonably be
expected, directly or indirectly as a consequence of the Offer or of the
proposed acquisition of all or any part of the issued share capital of, or
control of, Holmes Place, result (in any case to an extent which is material in
the context of the wider Holmes Place Group taken as a whole) in:
(a) any assets or interests of, or any asset the use of which
is enjoyed by, any member of the wider Holmes Place Group being or falling to be
disposed of or ceasing to be available to any member of the wider Holmes Place
Group or being charged or any right arising under which any such asset or
interest could be required to be disposed of or charged other than in the
ordinary course of business; or
(b) any monies borrowed by or other indebtedness or
liabilities (actual or contingent) of any member of the wider Holmes Place Group
becoming repayable or being capable of being declared repayable immediately or
earlier than the repayment date stated in such Instrument or the ability of such
member of the wider Holmes Place Group to incur any indebtedness becoming or
being capable of being or becoming withdrawn, prohibited or inhibited; or
(c) any such Instrument being terminated or adversely
modified, affected, amended or varied or any adverse action being taken or any
onerous obligation or liability arising thereunder; or
(d) the rights, liabilities, obligations or business or
interests of any member of the wider Holmes Place Group with any firm, body or
person or any arrangements relating to such business, being terminated,
modified, affected, amended or varied or its or their financial or trading
position or its or their value being prejudiced or affected in any adverse
manner; or
(e) the business or interests or financial or trading
position or prospects or value of any member of the wider Holmes Place Group
being prejudiced or adversely affected; or
(f) any member of the wider Health Club Group or any member
of the wider Holmes Place Group being required to acquire any shares in any
member of the wider Holmes Place Group owned by any Relevant Authority or repay
any indebtedness of any member of the wider Holmes Place Group to any Relevant
Authority; or
(g) the creation of any mortgage, charge or other security
interest over the whole or any material part of the business, property or assets
of any member of the wider Holmes Place Group or any such security (whenever
arising or having arisen) becoming enforceable or being enforced; or
(h) any member of the wider Holmes Place Group ceasing to be
able to carry on business under any name under which it currently does so;
and no event having occurred that, under any provision of any
Instrument to which any member of the wider Holmes Place Group is a party, or by
or to which any such member, or any of its assets, may be bound, entitled or
subject, could result in any of the events or circumstances as are referred to
in items (a) to (h) inclusive of this sub-paragraph in any case to an extent
which is or would be material in the context of the wider Holmes Place Group
taken as a whole;
(vii) save as publicly announced by Holmes Place (as defined in sub
paragraph (vi) above):
(a) no material litigation, arbitration proceedings,
mediation proceedings, prosecution or investigation or other legal proceedings
having been instituted, announced or threatened or become pending or remaining
outstanding against any member of the wider Holmes Place Group; and
(b) no material adverse change or deterioration having
occurred in the business or financial or trading position or prospects or
profits of any member of the wider Holmes Place Group; and
(c) no material contingent or other liability having arisen
that might reasonably be likely to materially affect adversely the wider Holmes
Place Group taken as a whole; and
(d) no enquiry or investigation by any Relevant Authority
against or in respect of any member of the wider Holmes Place Group having been
threatened, announced, implemented or instituted or remaining outstanding by,
against, or in respect of any member of the wider Holmes Place Group which in
any such case is material and adverse in the context of the wider Holmes Place
Group taken as a whole;
(viii) since 31 December 2002 (being the date to which the latest published
results of Holmes Place were made up), except as publicly announced by Holmes
Place (as defined in sub-paragraph (vi) above) before the date of announcement
of the Offer, neither Holmes Place nor any other member of the wider Holmes
Place Group having:
(a) issued or agreed to issue or authorised or proposed the
issue or grant of additional shares of any class, or securities convertible
into, or rights, warrants or options to subscribe for or acquire any such shares
or convertible securities (except pursuant to the Holmes Place Share Option
Schemes) or redeemed, purchased or reduced or proposed the redemption, purchase
or reduction of any part of its share capital;
(b) recommended, declared, paid or made or proposed to
recommend, declare, pay or make any dividend, bonus or other distribution
whether payable in cash or otherwise, other than to another member of the wider
Holmes Place Group;
(c) entered into or authorised or proposed or announced its
intention to propose any merger or demerger or acquisition or disposal or
transfer of assets except in the ordinary course of business to or from or with
another member of the wider Holmes Place Group or (save for options granted
pursuant to the Holmes Place Share Option Schemes and any Holmes Place Shares
allotted pursuant thereto) acquired or disposed of any assets of a material
value (including shares in subsidiaries and trade investments) or made or
proposed any change in its share or loan capital;
(d) issued or proposed the issue of any debentures or except
in the ordinary course of business incurred or increased any indebtedness or
liability or become subject to a contingent liability in any such case which in
any such case is material in the context of the wider Holmes Place Group taken
as a whole;
(e) granted or created any mortgage, charge, security or
other encumbrance over any assets, or over any right, title, or interest in any
asset of the Holmes Place Group;
(f) entered into any arrangement, contract or commitment
(other than in the ordinary course of business and whether in respect of capital
expenditure or otherwise) that is of a long-term, onerous, loss-making or
unusual nature or that involves or could involve an obligation of a nature and
magnitude that is material in the context of the wider Holmes Place Group;
(g) entered into or varied, or authorised, proposed or
announced its intention to enter into or vary any contract, reconstruction,
amalgamation, transaction, arrangement, scheme or commitment otherwise than in
the ordinary course of business which in any such case is material in the
context of the wider Holmes Place Group taken as a whole;
(h) waived or compromised any material claim;
(i) taken any corporate action, or proposed any voluntary
winding up, or had any legal proceedings started or threatened against it for
its winding-up (whether voluntary or otherwise), dissolution or reorganisation,
or for the appointment of a receiver, trustee, administrator, administrative
receiver or similar officer in any jurisdiction over all or any material part of
its assets and revenues or had any such person appointed, or been unable to pay
its debts generally, or having stopped or suspended (or threatened to do so)
payments of any debts generally, or ceased or threatened to cease carrying on
all or any part of its business which in any such case is material in the
context of the wider Holmes Place Group taken as a whole;
(j) made or authorised or proposed or announced an intention
to propose any change in its loan capital;
(k) entered into any agreement, contract, commitment or
arrangement that is or could be restrictive to, or which gives consent to or
results in or may result in, the restriction of the scope of the business of any
member of the wider Holmes Place Group or any member of the wider Health Club
Group;
(l) entered into or varied or offered to enter into or vary
in any material respect the terms of any service, consultancy or other agreement
with or relating to any of the directors of Holmes Place or senior executives of
any member of the wider Holmes Place Group;
(m) entered into or made an offer to enter into any legally
binding agreement, contract or commitment or passed any resolution with respect
to any of the transactions or events referred to in this sub-paragraph (viii) or
made any material alteration to its memorandum or articles of association or
other incorporation or constitutional documents; or
(n) made or agreed or consented to any material change to the
terms of any trust deed constituting any pension scheme established for its
directors, employees or their dependants or the benefits which accrue, or to the
pensions which are payable, thereunder, or to the basis on which qualification
for, or accrual or entitlement to, such benefit or pension are calculated or
determined or to the basis on which the liabilities (including pensions) of any
such pension scheme is funded or made or agreed or consented to any change to
the trustees involving the appointment of a trust corporation.
(ix) HC Group not having discovered that, before the Offer becomes or is
declared unconditional in all respects, any monies borrowed by or other
indebtedness or liabilities (actual or contingent) of any member of the wider
Holmes Place Group has become repayable or capable of being declared repayable
immediately or earlier than the repayment date stated in any Instrument or the
ability of such member of the wider Holmes Place Group to incur any indebtedness
has become or is capable of being or becoming withdrawn, prohibited or
inhibited;
(x) HC Group not having discovered that, save as publicly announced by
Holmes Place (as defined in sub-paragraph (vi) above) before the date of
announcement of the Offer:
(a) any member of the wider Holmes Place Group is subject to
any material liability incurred otherwise than in the ordinary course of
business, contingent or otherwise;
(b) any financial, business or other information concerning
the wider Holmes Place Group disclosed publicly at any time or disclosed to any
member of the wider Health Club Group or its advisers by any member of the wider
Holmes Place Group either contains a misrepresentation of fact or omits to state
a fact necessary to make the information therein not misleading (and which was
not subsequently corrected before the date of the announcement of the Offer by
disclosure either publicly or otherwise fairly in writing to HC Group,
Bridgepoint or Permira or their respective advisers);
(c) any member of the wider Holmes Place Group has not
complied with any applicable legislation or regulations of any jurisdiction with
regard to the use, treatment, keeping, handling, storage, transport, disposal,
discharge, spillage, leak or emission of any waste or hazardous substance or any
substance likely to impair the environment or to harm human health, or
environmental matters with which non-compliance would be likely to give rise to
any material liability or cost (whether actual or contingent) on the part of any
member of the wider Holmes Place Group;
(d) there has been a material emission, discharge, disposal,
spillage or leak of waste or hazardous substance or any substance likely to
impair the environment or to harm human health on or from any land or other
asset now or previously owned, occupied or made use of by any past or present
member of the wider Holmes Place Group that would be likely to give rise to any
material liability or cost (whether actual or contingent) on the part of any
member of the wider Holmes Place Group;
(e) there is or will be any material liability (whether
actual or contingent) to make good, repair, reinstate or clean up any property
now or previously owned, occupied or made use of by any past or present member
of the wider Holmes Place Group under any environmental legislation, regulation,
notice, circular or order of any Relevant Authority;
(f) circumstances exist (whether as a result of the making of
the Offer or otherwise) that would be likely to lead to any Relevant Authority
(or whereby any past or present member of the wider Holmes Place Group would be
likely to be required) to institute any environmental audit or to take any steps
that would be likely to result in any actual or contingent liability to improve
or install new plant or equipment or to make good, repair, reinstate or clean up
any land or other asset now or previously owned, occupied or made use of by any
past or present member of the wider Holmes Place Group.
Subject to the requirements of the Panel, HC Group reserves the right to waive
in whole or in part all or any of the conditions (iii) to (x) inclusive.
Conditions (iii) to (x) inclusive if not waived (where permitted) must be
fulfilled within 21 days after the later of the First Closing Date and the date
on which condition (i) is fulfilled (or in each case such later date as the
Panel may agree), failing which the Offer will lapse. HC Group shall be under no
obligation to waive or treat as fulfilled any of the conditions (iii) to (x)
inclusive 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 fulfilled and that there are at such earlier date no
circumstances indicating that any of such conditions may not be capable of
fulfilment.
The Offer will be subject to the applicable rules and regulations of the London
Stock Exchange and the Code. The Offer, elections made thereunder, all
acceptances made thereof or pursuant thereto, this document and the Form of
Acceptance and all contracts made pursuant thereto and action taken or deemed to
be taken or made under any of the foregoing shall be governed by and construed
in accordance with English law and are subject to the exclusive jurisdiction of
the courts of England and to the terms and conditions set out in the Appendices.
No parties other than Holmes Place Shareholders, HC Holdings and HC Group shall
have any right under the Contracts (Rights of Third Parties) Act 1999 to enforce
any term of the Offer.
Except with the Panel's consent, the Offer will lapse if it or any matter
arising therefrom is referred to the Competition Commission, or if the European
Commission either initiates proceedings under Article 6(1)(c) of Council
Regulation (EEC) 4064/89 or if, following a referral by the European Commission
under Article 9(1) of that Regulation to a competent authority in the United
Kingdom, there is a subsequent reference to the Competition Commission, in
either case before 3.00 p.m. on 12 June 2003, or if later the date on which the
Offer becomes or is declared unconditional as to acceptances.
If the Offer lapses for any reason, the Offer will cease to be capable of
further acceptance and HC Group, Rothschild and accepting Holmes Place
Shareholders shall, upon the Offer lapsing, cease to be bound by any Form of
Acceptance delivered on or before the date on which the Offer lapses.
If HC Group is required by the Panel to make an offer for the Holmes Place
Shares under the provisions of Rule 9 of the Code, HC Group may make such
alterations to the conditions as are necessary to comply with the provisions of
that Rule.
The Offer is not being made, directly or indirectly, in or into, the United
States, Canada, the Republic of Ireland, Australia or Japan.
The Holmes Place Shares that are the subject of the Offer will be acquired fully
paid up and free from all liens, charges, equitable interests, encumbrances,
other interests, third party rights and together with all rights now or
hereafter attaching thereto, including the right to receive and retain all
dividends and other distributions (if any) declared, made or paid on or after 22
May 2003.
APPENDIX II
FINANCIAL EFFECTS OF ACCEPTANCE OF THE OFFER
The following table shows, for illustrative purposes only and on the bases and
assumptions set out in the notes below, the financial effects on capital value
of acceptance of the Offer for an accepting holder of 1,000 Holmes Place Shares,
if the Offer becomes or is declared unconditional in all respects. No account is
taken of any liability to taxation in assessing these effects.
Notes Shareholder who Shareholder who
elects to receive elects to receive
100% Cash Institutional Units
Consideration in relation to 25%
(#) of their total
shareholding
(#)
Value of the portion of the total 250.00 187.50
consideration receivable under the Offer
satisfied by cash
Value of the portion of the total 1., 2. - 62.50
consideration receivable under the Offer
satisfied by Institutional Units
___________
Notes:
(1) Subject to the full terms, conditions and all considerations set
out in its letter in Appendix IV to this document, Rothschild have advised that,
in their opinion, by reference to market conditions prevailing on 21 May 2003
(the last practicable date prior to the posting of this document), if the
Institutional Units had been in issue on that date, the value per Holmes Place
Share for a Holmes Place Shareholder electing to receive Institutional Units in
relation to a proportion of their entire holding of Holmes Place Shares would
not differ materially from the 25 pence offered to Shareholders by way of Cash
Consideration under the Offer.
(2) The table above does not reflect the impact of rounding down of
fractional entitlements to HC Group DDBs or HC Holdings 'B' Ordinary Shares as
set out in paragraph 4 of Part II of the Offer Document.
APPENDIX III
DEFINITIONS
The following definitions apply throughout this document unless the context
otherwise requires:
"Act" or "Companies Act" the Companies Act 1985 (as amended)
"Australia" the Commonwealth of Australia, its states,
territories and possessions
"Bank" Lloyds TSB Bank plc Capital Markets as security
trustee and agent for, among others, Lloyds TSB
Bank plc, The Governor and The Company of the
Bank of Scotland, Allied Irish Banks plc,
National Westminster Bank plc and Clydesdale
Bank plc
"Board" The board of directors of Holmes Place
"Bridgepoint Funds" Bridgepoint Europe II "A' LP, Bridgepoint
Europe II "B' LP, Bridgepoint Europe II "C' LP,
Bridgepoint Europe II "D' LP, Bridgepoint
Europe II "E' LP, Bridgepoint Europe II "F' LP,
Bridgepoint Europe II "G' LP and The Second
European Private Equity Fund GmbH & Co, KG
"Bridgepoint" Bridgepoint Capital Limited, the manager of the
Bridgepoint Funds
"business day" a day, not being a Saturday or Sunday, on which
banks in the City of London are typically open
for business
"Canada" Canada, its provinces and territories and all
areas subject to its jurisdiction and any
political subdivision thereof
"Cannons Group" Cannons Group Limited
"certificated" or in "certificated form" in relation to a share or other security, title
to which is recorded in the relevant register
of the share or other security as being held in
certificated form
"Code" or "City Code" The City Code on Takeovers and Mergers
"Conditions" the conditions of the Offer set out in Appendix
I to this document and "Condition" means any
of them
"Deferred Shares" deferred shares of 10 pence each in the capital
of HC Holdings
"Disclosure Period" the period commencing on 1 July 2001 (the date
12 months prior to the commencement of the
Offer Period) and ending on the close of
business on 21 May 2003 (the latest practicable
date to obtain the relevant information prior
to the posting of this document)
"Excluded Countries" United States, Canada, the Republic of Ireland,
Australia and Japan
"Executive Share Option Scheme" the Holmes Place PLC 1996 Share Option Scheme
"Extraordinary General Meeting" or "EGM" the extraordinary general meeting of Holmes
Place Shareholders convened for 10.00 a.m. on 9
June 2003, notice of which is set out at the
end of the Offer Document at which the Ordinary
Resolution will be proposed (including any
adjournment thereof)
"Facilities Agreement" The Original Facility Agreement to be further
amended and restated, subject to, inter alia,
the Offer becoming unconditional in all
respects, by a fifth amendment agreement dated
on or about the date hereof (the "Fifth
Amendment Agreement") which shall provide
Holmes Place with a Facility A as defined
therein) of #42,500,000, Facility B (as defined
therein) of #22,500,000, Facility C of
#25,000,000, Facility D (as defined therein) of
#20,000,000; a Mezzanine Facility of #5,000,000
and a Revolving Credit Facility of #45,000,000
"First Closing Date" the first closing date of the Offer being 12
June 2003
"Form of Proxy" the form of proxy for use by Independent
Shareholders of Holmes Place at the
Extraordinary General Meeting and accompanying
the Offer Document
"Form" or "Form of Acceptance" the form of acceptance, election and authority
relating to the Offer which will accompany the
Offer Document for use by Holmes Place
Shareholders
"Hawkpoint" Hawkpoint Partners Limited
"HC Group" Health Club Group plc, a company registered in
England and Wales under company number 4663223
and having its registered office at 20-22
Bedford Row, London WC1R 4JS, being
incorporated for the purpose of making the
Offer
"HC Group DDBs" the deep discount bonds to be issued by HC
Group that form part of the Institutional Units
to be issued to Holmes Place Shareholders who
validly elect for the Unit Alternative, the
terms of which are described in Appendix II of
the Offer Document
"HC Group Shares" ordinary shares of 10p each in the capital of
HC Group
"HC Holdings 'A' Ordinary Shares" "A' ordinary shares of 10p each in the capital
of HC Holdings having the rights set out in the
New Articles of Association
"HC Holdings 'B' Ordinary Shares" "B' ordinary shares of 10p each in the capital
of HC Holdings having the rights set out in the
New Articles of Association that form part of
the Institutional Units to be issued to Holmes
Place Shareholders who validly elect for the
Unit Alternative, the rights to which are
described in Appendix III of the Offer Document
"HC Holdings" Health Club Holdings plc, a company registered
in England and Wales under company number
4663219 and having its registered office at 20-
22 Bedford Row, London WC1R 4JS, being the
holding company of HC Group
"Health Club Group" HC Holdings and its subsidiaries and subsidiary
undertakings from time to time
"Holmes Place" or the "Company" Holmes Place PLC, a company incorporated in
England and Wales under company number 2072529
and having its registered office at 17A Old
Court Place, London W8 4HP
"Holmes Place Directors" the directors of Holmes Place whose names are
set out in paragraph 2(d) of Appendix VI of the
Offer Document
"Holmes Place Group" or "the Group" Holmes Place together with its subsidiaries and
subsidiary undertakings
"Holmes Place Share Option Holders" or "Option holders of options granted under the Holmes
Holders" Place Share Option Schemes
"Holmes Place Share Option Schemes" together the Executive Share Option Scheme and
the Savings Related Share Option Scheme
"Holmes Place Share Option" the subsiding options held pursuant to the
Holmes Place Share Option Schemes
"Holmes Place Shareholders" or "Shareholders" holders of Holmes Place Shares
"Holmes Place Shares" or "Shares" the existing issued or unconditionally allotted
and fully paid ordinary shares of 5 pence each
in the capital of Holmes Place and any further
such shares which are unconditionally allotted
and/or issued and fully paid (or credited as
fully paid) before the date on which the Offer
closes (or such earlier date(s) as HC Group
may, subject to the Code, decide) including any
such shares unconditionally allotted or issued
pursuant to the exercise of options issued or
granted under the Holmes Place Share Option
Schemes
"Independent Directors" Lee Scott Hillman, Nigel Stephen McGinley,
Simon Edmund Kinross Purser and Graham John
Reddish, being those directors of Holmes Place
who are independent in relation to the Offer,
whose names are set out in paragraph 2(e) of
Appendix VI
"Independent Shareholders" the Holmes Place Shareholders, other than
members of the Management Team or their
connected persons and HC Group (in the event
that HC Group acquires any Holmes Place Shares
before the Extraordinary General Meeting)
"Institutional Unit" a unit of #2.8444 subscription value of HC
Group DDBs and one HC Group Share which shall
be exchanged for one HC Holdings "B' Ordinary
Share to be issued pursuant to the Unit
Alternative
"Investment Agreement" the investment agreement dated 21 May 2003 made
between the Bridgepoint Funds (1), the Permira
Funds (2), the Management Team (3) Ecrivier
Credite Societe Limited (4), Abacus (C.I.)
Limited (5), HC Holdings (6) and HC Group (7)
as described in paragraph 6 of Appendix III of
the Offer Document
"Investors" the Bridgepoint Funds and the Permira Funds
"Japan" Japan, its cities and prefectures, territories
and possessions
"London Stock Exchange" London Stock Exchange plc
"Management Arrangements" the arrangements with the Management Team set
out in paragraph 4, 6 and 8 of Appendix III to
the Offer Document
"Management Team" Allan Brian Henry Fisher, Lee Dale Ginsberg,
Nicholas Coutts, Robert Colin Davies, Ian David
Turley, Mark Daniel Murphy and Linda Smeaton
"Mezzanine Providers" Lloyds TSB Bank plc, The Governor and the
Company of the Bank of Scotland, Allied Irish
Banks plc and National Westminster Bank plc
"New Articles of Association" the new articles of association of HC Holdings
adopted on 21 May 2003
"Offer Document" the document addressed to Holmes Place
Shareholders containing the Offer
"Offer Period" the period commencing on 1 July 2002 and ending
on 12 June 2003 or, if later, the time at which
the Offer becomes unconditional as to
acceptances or lapses, whichever first occurs
"Offer Price" 25 pence for each Holmes Place Share
"Offer" or "Recommended Offer" the recommended offer being made by Rothschild
on behalf of HC Group, to acquire the whole of
the issued and to be issued share capital of
Holmes Place on the terms and subject to the
conditions set out in the Offer Document and
the Form of Acceptance
"Official List" the Daily Official List of the United Kingdom
Listing Authority
"Ordinary Resolution" the ordinary resolution to be proposed at the
Extraordinary General Meeting to approve the
terms of the Management Arrangements set out in
the Offer Document
"Original Facility Agreement" The term loan and revolving credit facility
dated 21 October 1999 made between Holmes Place
(1) the banks named in Schedule 1 thereto (2)
Lloyds TSB Bank plc: Capital Markets (as Agent
and Security Trustee) (3) and Lloyds TSB Bank
plc: Capital Markets as Arranger (4) as amended
by a first amendment agreement dated 14 July
2000, as further amended by a second amendment
agreement dated 14 September 2000, as further
amended by a third amendment agreement dated 8
November 2000 and as further amended by a
fourth amendment agreement dated 31 July 2002
"Panel" the Panel on Takeovers and Mergers
"Permira Europe" Permira (Europe) Limited, a company
incorporated in Guernsey having its registered
office at Trafalgar Court, Les Banques, St
Peter Port, Guernsey Channel Islands
"Permira Funds" Permira Europe II L.P. 1, Permira Europe II
L.P. 2, Permira Europe II C.V. 3, Permira
Europe II Europe C.V. 4, Permira Europe II Co-
Investment Scheme and Schroders Ventures
Investments Limited
"Permira" Permira Advisers Limited, an adviser to Permira
Europe
"Preliminary Results" the unaudited preliminary results of Holmes
Place for the period ended 31 December 2002
"Registrar" Capita IRG of PO Box No. 166, Bourne House, 34
Beckenham Road, Beckenham, Kent BR3 4TH
"Regulations" the Uncertificated Securities Regulations 2001
(SI 2001 No. 95/3775)
"Rothschild" N M Rothschild & Sons Limited
"Savings Related Share Option Scheme" the Holmes Place 1997 Savings Related Share
Option Scheme
"Share Exchange Agreements" the Alkin Share Exchange Agreement and the
Fisher Share Exchange Agreement
"Shareholders' Agreement" the shareholders agreement dated 21 May 2003
made between the Bridgepoint Funds (1), the
Permira Funds (2), the Management Team (3),
Ecrivier Credite Societe Limited (4), Abacus
(C.I.) Limited (5), and HC Holdings (6) as
described in paragraph 6 of Appendix III of the
Offer Document
"UK" or "United Kingdom" the United Kingdom of Great Britain and
Northern Ireland
"uncertificated" or "uncertificated form" in relation to a share or other security, a
share or other security title to which is
recorded in the relevant register of the share
or security as being held in uncertificated
form in CREST, and title to which by virtue of
the Regulations, may be transferred by means of
CREST
"Unit Alternative" the alternative made available under the Offer
by which Holmes Place Shareholders who validly
accept the Offer may elect to receive
Institutional Units in relation to 25 per cent.
of their registered holding of Holmes Place
Shares on the basis set out in the Offer
Document
"United States" the United States of America (including the
states of the United States and District of
Columbia), its possessions and territories and
all areas subject to its jurisdiction
This information is provided by RNS
The company news service from the London Stock Exchange
END
OFFSELSIESDSELI