TIDMCPR
RNS Number : 7569R
Carpetright PLC
31 October 2019
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN
PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD
CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH
JURISDICTION.
THIS ANNOUNCEMENT DOES NOT CONSTITUTE AN ANNOUNCEMENT OF A FIRM
INTENTION TO MAKE AN OFFER UNDER RULE 2.7 OF THE CITY CODE ON
TAKEOVERS AND MERGERS (THE "CODE"). THERE CAN BE NO CERTAINTY THAT
ANY FIRM OFFER WILL BE MADE, NOR AS TO THE TERMS ON WHICH ANY FIRM
OFFER MIGHT BE MADE.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014.
LEI: 213800GO32BSNNHXID90
31 October 2019
Carpetright plc
("Carpetright" or the "Company")
Refinancing update, possible offer for the Company and trading
update
Introduction
The Company announces an update in respect of its long-term
financing arrangements.
As previously disclosed, the Company's revolving credit facility
(the "RCF"), purchased by Meditor European Master Fund Limited
("Meditor") on 3 September 2019, is due to expire on 31 December
2019. The Company's overdraft facilities (the "Overdrafts"),
provided by NatWest and Ulster Bank but funded by Meditor, are also
due to expire on 31 December 2019. The unsecured loan provided to
the Company by Meditor on 11 May 2018 is due for repayment on 31
July 2020 at a value of GBP25.7 million (together with the RCF and
the Overdrafts referred to in this announcement as the "Debt
Facilities"). The Company's statutory net debt as at 26 October
2019 was approximately GBP27 million, comprising gross debt of
GBP56 million, offset by cash and cash equivalents of GBP29 million
(of which approximately GBP20 million was restricted cash and
monies due from merchant and finance providers). In addition,
accrued interest amounted to GBP6.2 million. In line with normal
seasonal trends, statutory net debt is expected to increase to
between approximately GBP40 million to GBP50 million in December
2019, and gross debt is expected to rise commensurately.
Refinancing and possible offer for the Company
The Board believes that approximately GBP80 million is needed
for the Company to (i) repay the Debt Facilities; (ii) meet the
Company's ongoing working capital requirements; and (iii) provide
the Company with the necessary growth capital to execute its
strategy as set out below.
The Company has been actively exploring various long-term
financing solutions including standard "high street" refinancing,
asset-backed lending, strategic asset sales and equity
financing.
Having now explored the viability of all of these possible
options, the Board announces that it is in discussions with Meditor
in relation to a possible offer by Meditor (or a company
incorporated for this purpose by Meditor) to acquire all of the
issued and to be issued shares of the Company, expected to be by
way of a Scheme of Arrangement (the "Possible Offer"). Meditor has
indicated that the Possible Offer would be at 5p per Share, paid in
cash. If the Possible Offer is made, then on the Scheme of
Arrangement becoming effective, it is expected Meditor will convert
the majority of the outstanding debt under the Debt Facilities into
equity and provide the Company with additional capital, thereby
providing the Company with a stronger balance sheet to enable it to
pursue the strategic and growth initiatives set out below.
The Company has received irrevocable undertakings to vote in
favour of the Possible Offer in respect of the following ordinary
shares in the capital of the Company ("Shares"):
-- Aberforth Partners LLP - 38,410,929 Shares, representing
in aggregate 12.6% of the Company's issued share capital.
In addition, the Company has received letters of intent to vote
in favour of the Possible Offer from the following:
-- Majedie Asset Management - 20,020,440 Shares representing
in aggregate 6.6 % of the Company's issued share capital;
-- Countywide Developments Limited - 6,534,159 Shares representing
in aggregate 2.2% of the Company's issued share capital;
and
-- Soros Fund Management LLC - 7,985,666 Shares representing
in aggregate 2.6% of the Company's issued share capital.
In aggregate, therefore, irrevocable undertakings and letters of
intent have been received in respect of an aggregate of 72,951,154
Shares representing 24.0% of the issued share capital of the
Company (and 34.3% of the share capital not currently held by
Meditor). See Schedule 1 for further detail.
There can be no certainty that the Possible Offer will be made,
nor as to its terms. A further statement will be made as
appropriate.
In accordance with Rule 2.6(a) of the Code, by not later than
5.00 pm on 28 November 2019, Meditor must either announce a firm
intention to make an offer for Carpetright in accordance with Rule
2.7 of the Code or announce that it does not intend to make an
offer for Carpetright, in which case the announcement will be
treated as a statement to which Rule 2.8 of the Code applies. This
deadline will only be extended with the consent of the Takeover
Panel in accordance with Rule 2.6(c) of the Code.
This announcement has been made with Meditor's agreement.
Strategy and growth initiatives
In line with UK retail generally, the current flooring market
remains challenging, reflecting the wider economic and geopolitical
backdrop. Carpetright's position as market leader nevertheless
remains strong, with recent surveys showing high levels of brand
awareness (88% prompted, 64% unprompted) and an engaged and
dedicated workforce. The Company further believes that the
fundamentals of the floorcovering market are good, with the UK
flooring market expected to grow at a CAGR of 1.9% from GBP1.97
billion in 2019 to GBP2.12 billion in 2023.
Strategy
The Company's strategy is focused on several key areas
including: implementing IT infrastructure upgrades across the UK
business to drive efficiencies and further online opportunities;
entering into new partnerships, such as with Furniture Village, to
deliver increased customer reach with minimal capital commitments;
a continued drive to optimise the UK store estate through selective
closures and relocations to further reduce costs; and investing in
and delivering improved returns from the Company's operations in
the Netherlands and Belgium, together with a turnaround of its
currently loss making business in the Republic of Ireland.
Growth initiatives following a refinanced balance sheet
As a result of the Company's current balance sheet constraints,
its capital expenditure in recent periods has been limited. With a
strengthened balance sheet and an injection of growth capital,
following the refinancing the Company expects to invest further in
the following areas: the store refurbishment programme; staff
training; the development of its digital platform; marketing; and
its operations in Continental Europe. The total cost of these
initiatives over the medium term is expected to be GBP20 to GBP25
million, to be funded as result of the proposed refinancing.
The Company will also use the new funds to mitigate the impact
of competition in the sector. In the longer term, the Company will
explore opportunities to improve its sourcing arrangements, further
develop its distribution model and evaluate potential
acquisitions.
Trading update
The Board believes that Carpetright is performing well despite
the challenging economic backdrop and intense sector competition.
Group profitability is improving as the Company drives store
efficiency and reduces the central cost base.
The Company continues to display strong range management across
categories, with a key focus on expanding in hard flooring and
digital, in line with its strategic growth objectives. Whilst
management of supplier terms has been challenging, the Company
continues to work well with partners in its supply chain and
expects this to yield an improved position moving forward.
The Company's average sales per store ratios have improved in
recent periods and the prolonged sales decline appears to be
bottoming out; however, in the present UK economic climate, the
Board remains cautious. In H1 FY20, LFL sales growth has been
achieved in all territories, however the ongoing impact of negative
consumer confidence and Brexit on the current retail environment
could present a challenge in the balance of the financial year.
The European business, driven by performance in the Netherlands
and Belgium, continues to trade well and the Company believes that
it is in a good position to improve profitability.
Bob Ivell, Chairman of Carpetright, said:
"Shareholders will be aware that we have been engaged in
comprehensive refinancing discussions to replace existing
facilities which expire at the end of this calendar year. The
Possible Offer being announced today would put in place a new
financing structure for Carpetright which would enable us to
continue our recovery and make necessary investments in improving
our business."
For further enquiries please contact:
Carpetright plc Tel: 01708 802000
Wilf Walsh, Chief Executive
Officer
Jeremy Simpson, Chief Financial
Officer
Peel Hunt LLP (Rule 3 Adviser) Tel: 020 7418 8900
Dan Webster
George Sellar
Michael Nicholson
Al Rae
Citigate Dewe Rogerson (Financial Tel: 020 7638 9571
PR)
Kevin Smith
Nick Hayns
For the purposes of MAR and Article 2 of Commission Implementing
Regulation (EU) 2016/1055, this Announcement is being made on
behalf of the Company by Jeremy Simpson.
Notes to Editors
Carpetright plc is Europe's leading specialist floor coverings
and beds retailer. Since the first store was opened in 1988 the
business has developed both organically and through acquisition
within the UK and other European countries. The Group is organised
into two geographical regions, the UK and the Rest of Europe
(comprising the Netherlands, Belgium and the Republic of
Ireland).
Disclosure requirements of the Code
Under Rule 8.3(a) of the Code, any person who is interested in
1% or more of any class of relevant securities of an offeree
company or of any securities exchange offeror (being any offeror
other than an offeror in respect of which it has been announced
that its offer is, or is likely to be, solely in cash) must make an
Opening Position Disclosure following the commencement of the offer
period and, if later, following the announcement in which any
securities exchange offeror is first identified. An Opening
Position Disclosure must contain details of the person's interests
and short positions in, and rights to subscribe for, any relevant
securities of each of (i) the offeree company and (ii) any
securities exchange offeror(s). An Opening Position Disclosure by a
person to whom Rule 8.3(a) applies must be made by no later than
3.30 pm (London time) on the 10th business day following the
commencement of the offer period and, if appropriate, by no later
than 3.30 pm (London time) on the 10th business day following the
announcement in which any securities exchange offeror is first
identified. Relevant persons who deal in the relevant securities of
the offeree company or of a securities exchange offeror prior to
the deadline for making an Opening Position Disclosure must instead
make a Dealing Disclosure.
Under Rule 8.3(b) of the Code, any person who is, or becomes,
interested in 1% or more of any class of relevant securities of the
offeree company or of any securities exchange offeror must make a
Dealing Disclosure if the person deals in any relevant securities
of the offeree company or of any securities exchange offeror. A
Dealing Disclosure must contain details of the dealing concerned
and of the person's interests and short positions in, and rights to
subscribe for, any relevant securities of each of (i) the offeree
company and (ii) any securities exchange offeror(s), save to the
extent that these details have previously been disclosed under Rule
8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies
must be made by no later than 3.30 pm (London time) on the business
day following the date of the relevant dealing.
If two or more persons act together pursuant to an agreement or
understanding, whether formal or informal, to acquire or control an
interest in relevant securities of an offeree company or a
securities exchange offeror, they will be deemed to be a single
person for the purpose of Rule 8.3.
Opening Position Disclosures must also be made by the offeree
company and by any offeror and Dealing Disclosures must also be
made by the offeree company, by any offeror and by any persons
acting in concert with any of them (see Rules 8.1, 8.2 and
8.4).
Details of the offeree and offeror companies in respect of whose
relevant securities Opening Position Disclosures and Dealing
Disclosures must be made can be found in the Disclosure Table on
the Takeover Panel's website at www.thetakeoverpanel.org.uk,
including details of the number of relevant securities in issue,
when the offer period commenced and when any offeror was first
identified. You should contact the Panel's Market Surveillance Unit
on +44 (0)20 7638 0129 if you are in any doubt as to whether you
are required to make an Opening Position Disclosure or a Dealing
Disclosure
Rule 2.9 disclosure
In accordance with Rule 2.9 of the Code, Carpetright confirms
that, as at the date of this announcement, its issued and fully
paid share capital consists of 303,787,164 ordinary shares with par
value of 1p. The International Securities Identification Number
(ISIN) for the ordinary shares is GB0001772945.
Publication on website
In accordance with Rule 26.1 of the Code, a copy of this
announcement will be available on the website of Carpetright at
https://www.carpetright.plc.uk/investors promptly and by no later
than 12 noon (London time) on the business day following this
announcement. The content of the website referred to in this
announcement is not incorporated into and does not form part of
this announcement.
Other notices
Peel Hunt LLP ("Peel Hunt"), which is authorised and regulated
by the Financial Conduct Authority in the UK, is acting exclusively
for Carpetright and no one else in connection with the matters
described in this announcement and will not be responsible to
anyone other than Carpetright for providing the protections
afforded to clients of Peel Hunt nor for providing advice in
connection with the matters referred to herein. Neither Peel Hunt
nor any of its subsidiaries, branches or affiliates owes or accepts
any duty, liability or responsibility whatsoever (whether direct or
indirect, whether in contract, in tort, under statute or otherwise)
to any person who is not a client of Peel Hunt in connection with
this announcement, any statement contained herein or otherwise.
Additional information
This announcement includes statements that are, or may be deemed
to be, forward-looking statements. These forward-looking statements
can be identified by the use of forward-looking terminology,
including the terms anticipates, believes, estimates, expects,
intends, may, plans, projects, should or will, or, in each case,
their negative or other variations or comparable terminology, or by
discussions of strategy, plans, objectives, goals, future events or
intentions. These forward-looking statements include all matters
that are not historical facts. They appear in a number of places
throughout this announcement and include, but are not limited to,
statements regarding the Company's and/or Directors' intentions,
beliefs or current expectations concerning, amongst other things,
the Group's results of operations, financial position, prospects,
growth, strategies and expectations for the floorcoverings and beds
market.
Any forward-looking statements in this announcement reflect the
Company's current view with respect to future events and are
subject to risks relating to future events and other risks,
uncertainties and assumptions relating to the Group's operations,
results of operations and growth strategy. Shareholders should
specifically consider the factors identified in this announcement
which could cause actual results to differ before making any
investment decision. Subject to the requirements of the Prospectus
Rules, the Disclosure Guidance and Transparency Rules, and the
Listing Rules, none of the Company, the Directors nor Peel Hunt
undertakes any obligation publicly to release the result of any
revisions to any forward-looking statements in this announcement
that may occur due to any change in the Company's expectations or
to reflect events or circumstances after the date of this
announcement. Past performance of the Company is not necessarily
indicative of future performance.
This announcement is not an offer to sell or the solicitation of
an offer to buy any securities, and neither this announcement nor
anything herein forms the basis for any contract or commitment
whatsoever. In light of these risks, uncertainties and assumptions,
the events described in the forward-looking statements in this
announcement may not occur.
Neither the content of the Company's website (or any other
website) nor any website accessible by hyperlinks on the Company's
website (or any other website) is incorporated in, or forms part
of, this announcement.
Schedule 1: Irrevocable undertaking and letters of intent
Irrevocable undertaking
In accordance with Rule 2.10 of the Code, the Company announces
that Aberforth Partners LLP has entered into an irrevocable
undertaking with Meditor and the Company representing a
shareholding of approximately 12.6 per cent in Carpetright to vote
in favour of any offer to be made by Meditor for the Company by way
of Scheme of Arrangement (the "Irrevocable Undertaking").
The Irrevocable Undertaking will cease to be binding if, among
other things:
-- an announcement is made under Rule 2.7 of the Code in
respect of a competing offer which represents a value
of 8 pence per Share or more;
-- an announcement under Rule 2.7 of the Code is not made
prior to 5.00 pm on 29 November 2019 ("2.7 Announcement");
or
-- the Scheme Document has not been posted within 28 days
of the 2.7 Announcement, or the Scheme of Arrangement
does not become effective or is withdrawn.
Aberforth may transfer Shares in certain circumstances and the
Irrevocable Undertaking ceases to bind any of the Shares to which
it is subject to the extent that such Shares are transferred by
Aberforth as a result of (i) a distribution to an investor in funds
managed by Aberforth by way of redemption in specie; (ii) a
termination or amendment of Aberforth's discretion to manage the
assets of the relevant investor; or (iii) disposal at a price of 8
pence or higher, or (iv) the Shares being subject to stock lending
(save that Aberforth has agreed to endeavour to recall such
Shares).
Letters of intent
The Company has received a non-binding letter of intent from
Majedie Asset Management in favour of the Possible Offer
representing approximately 6.6% of the Company's issued share
capital of on 30 October 2019.
The Company has received a non-binding letter of intent from
Countywide Developments Limited in favour of the Possible Offer
representing approximately 2.2% of the Company's issued share
capital of on 30 October 2019.
The Company has received a non-binding letter of intent from
Soros Fund Management LLC in favour of the Possible Offer
representing approximately 2.6% of the Company's issued share
capital of on 30 October 2019.
Name of Carpetright Shareholder Number of Shares Percentage of Carpetright
over which Irrevocable share capital as of
Undertaking is given 30 October 2019
Aberforth Partners LLP 38,410,929 12.6%
----------------------- -------------------------
Total 38,410,929 12.6%
----------------------- -------------------------
Name of Carpetright Shareholder Number of Shares Percentage of Carpetright
over which letter share capital as of
of intent is given 30 October 2019
Majedie Asset Management 20,020,440 6.6%
------------------- -------------------------
Countywide Developments
Limited 6,534,159 2.2%
------------------- -------------------------
Soros Fund Management 7,985,666 2.6%
------------------- -------------------------
Total 34,540,265 11.4%
------------------- -------------------------
At the close of business on 30 October 2019, Meditor held
91,097,241 Shares. Accordingly, in aggregate, irrevocable
undertakings and letters of intent have been received in respect of
34.3% of the share capital of the Company not currently held by
Meditor.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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