REG - Character Group PLC - Tender Offer

CharacterAnnouncement

28/01/2022 07:00

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RNS Number : 9162Z  Character Group PLC  28 January 2022

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR
INTO, THE UNITED STATES OF AMERICA (INCLUDING ITS TERRITORIES AND POSSESSIONS,
ANY STATE OF THE UNITED STATES AND THE DISTRICT OF COLUMBIA), AUSTRALIA,
CANADA, JAPAN, NEW ZEALAND, THE REPUBLIC OF SOUTH AFRICA.

 

This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
pursuant to the Market Abuse (Amendment) (EU Exit) regulations (SI 2019/310)
("MAR"), and is disclosed in accordance with the Company's obligations under
Article 17 of MAR. Upon the publication of this announcement via the
Regulatory Information Service, this inside information is now considered to
be in the public domain.

 

 

 

 

THE CHARACTER GROUP PLC

("Character", the "Company" or "Group")

Designers, developers and international distributor of toys, games and
giftware

 

Tender Offer for up to 2,142,572 Ordinary Shares at 630 pence per Ordinary
Share

 

 

 

London: Friday, 28 January 2022

 

A circular explaining the terms of a Tender Offer for up to 2,142,572 Ordinary
Shares at 630 pence per Ordinary Share (the "Circular") will today be posted
to Shareholders and published on the Company's website at www.thecharacter.com
(http://www.thecharacter.com) .

 

Capitalised terms and expressions shall have the same meanings as those
attributed to them in the Circular.

 

1.     Introduction

 

The Company intends to return up to approximately £13.5 million of cash to
Qualifying Shareholders by way of the Tender Offer and the subsequent
repurchase from Panmure Gordon of the Ordinary Shares successfully tendered.
The Tender Offer will be conducted at the Tender Price. If the maximum number
of Ordinary Shares under the Tender Offer is acquired, this would result in
the purchase of approximately 10 per cent. of the Company's current issued
share capital (excluding Ordinary Shares held in treasury).

 

The Tender Offer will be conducted at a fixed price of 630 pence per Ordinary
Shares ("Tender Price"), which represents a premium of approximately 8.4 per
cent. to the average middle market closing price of an Ordinary Share for the
60 trading days ended 27 January 2022, being the latest practicable date prior
to the date of this announcement.

 

The Company is authorised to buy back up to 3,200,000 Ordinary Shares pursuant
to the general authority for the Company to make market acquisitions,
including by way of a tender offer, which was approved by Shareholders on 21
January 2022, since when the Company has not acquired any Ordinary Shares.

 

2.     Background to and reasons for the Tender Offer

 

The Company has pursued an active buyback strategy to return surplus cash to
Shareholders since 2004 and, since that time, has acquired a total of
approximately 39.6 million Ordinary Shares, representing approximately 185 per
cent. of the current issued Ordinary Share capital (excluding Ordinary Shares
held in treasury).  However, following the implementation of the EU's Market
Abuse Regulation in the UK from July 2016, the Company's ability to sustain
this strategy has been extremely limited and no buybacks have been effected by
the Company since October 2019.

 

On 29 April 2021, the Company announced that the Board had resolved to pursue
a new buyback initiative to purchase Ordinary Shares. In an update issued by
the Company on 30 September 2021, the Board stated, due to adverse trading
conditions, that a tender offer would be deferred until after the announcement
of the Group's preliminary results for the financial year ended 31 August
2021. Those preliminary results were announced by the Company on 15 December
2021. It is against this background that the Tender Offer is now being made.

 

Current trading

 

On 21 January 2022, the Company provided the following update on trading for
the four months ending 31 December 2021:

 

"The Group maintained a steady performance in the lead up to and through the
Christmas 2021 period, notwithstanding global logistical challenges which
continue to impact the export of product from the Far East to UK and our
global markets. Whilst the consequent escalation in freight rates from the Far
East has significantly increased costs, the Group has endeavoured, where
possible, to raise its prices in the UK and Scandinavia to mitigate the impact
on margins. Turnover increased by c.23% in the four-month period ended 31
December 2021 compared to the previous year (in part benefiting from delayed
shipments in August 2021).  The bulk of this growth was attributable to sales
to the USA and Scandinavia, whilst turnover in the UK and the rest of the
world remained largely flat.

 

"Our sales levels are a reflection of the strong portfolio of brands and
products that we have at this time. In the UK, retailers have reported good
sell through of our products and this bodes well for the rest of the financial
year. Our teams are excited to be presenting to our customers at the London
Toy Fair at Olympia next week (25 - 27 January) and showcasing the 2022 range
and introducing new products, brands and refreshed items.

 

"Assuming no further worsening of the trading conditions, including adverse
COVID developments impacting normal commercial activity, the Board believes
that the Group will achieve current market expectations* for the year ending
31 August 2022.

 

"Subject to the share buyback authority being renewed at the Annual General
Meeting later today, the Company will be proceeding with the tender offer
proposed last year and full details of the size, pricing and exact timing of
the offer are expected to be announced next week.

 

Note: *Current market consensus compiled by the Company for the year ending 31
August 2022, prior to the release of this announcement, is an underlying
profit before tax averaging c. £11.275m"

 

The ongoing cash-generative nature of the Group's business model has resulted
in the Group's cash balances as at 26 January 2022 standing at approximately
£27 million. This strong cash generation is anticipated to continue through
and beyond the current financial year. Taking account of the Group's future
working capital expenditure, the funding of the potential future growth
requirements of the business and to ensure the Company's ability to maintain a
progressive dividend, the Board has estimated the surplus cash in the business
to be at least £15.0 million. The Board maintains that a buyback by way of a
tender offer provides the most efficient use of the Company's surplus cash at
this point in time and a means by which to re-establish a clear and meaningful
buyback strategy.  Accordingly, the Board has resolved to seek to return up
to approximately £13.5 million to Qualifying Shareholders under the Tender
Offer.

 

3.     Benefits of the Tender Offer

 

The benefits of the Tender Offer, compared to other available options for a
return of surplus cash to Shareholders, are that the Tender Offer:

 

 ·       provides those Qualifying Shareholders who wish to sell Ordinary Shares with
         the opportunity to do so;
 ·       allows the Company to broaden the return of cash to include those Qualifying
         Shareholders whose Ordinary Shares might not otherwise be purchased by the
         Company through a buy-back in the market;
 ·       enables Qualifying Shareholders to decide whether to tender none, some or all
         of their Ordinary Shares within the overall limits of the Tender Offer;
 ·       enables those Qualifying Shareholders who do not wish to receive capital at
         this time to maintain their full investment in the Company;
 ·       enables Ordinary Shares to be sold free of commissions or charges that would
         otherwise be payable if Qualifying Shareholders were to sell their shares
         through their broker; and
 ·       enhances earnings per share in respect of Ordinary Shares and the percentage
         holdings of Ordinary Shares of Shareholders not tendered under the Tender
         Offer.

 

4.     Summary information on the Tender Offer

 

Structure of the Tender Offer

 

The Tender Offer will be implemented on the basis of Panmure Gordon acquiring,
as principal, the successfully tendered Ordinary Shares at the Tender Price.
The Company will purchase such Ordinary Shares from Panmure Gordon at the same
price under the Repurchase Agreement. The Company will cancel the Ordinary
Shares purchased by it under the Repurchase Agreement.

 

Up to 2,142,572 Ordinary Shares will be purchased under the Tender Offer,
representing approximately 10 per cent. of the Company's issued Ordinary Share
capital (excluding Ordinary Shares held in treasury) as at 27 January 2022,
the latest practicable date for such determination prior to this announcement,
for a maximum aggregate consideration of approximately £13.5 million.

 

The Tender Offer is conditional on receipt of valid tenders in respect of at
least 476,191 Ordinary Shares, representing an aggregate value, at the Tender
Price, of not less than £3.0 million.

 

Qualifying Shareholders can decide whether they want to tender all, some or
none of their Ordinary Shares in the Tender Offer.

 

The Tender Offer is being made available to all Qualifying Shareholders who
are on the Register at 6.00 p.m. on the Record Date.

 

The Tender Offer will close at 1.00 p.m. (UK time) on 11 February 2022 and
tenders received after that time will not be accepted (unless the Tender Offer
is extended).

 

The Tender Price

 

A tender price of 630 pence per Ordinary Share will be applied to all Ordinary
Shares purchased by Panmure Gordon pursuant to the Tender Offer.

 

The Tender Price will allow Panmure Gordon to purchase the maximum number of
Ordinary Shares for a total cost not exceeding £13,498,203.60 or, if the
aggregate price of all Ordinary Shares validly tendered by Qualifying
Shareholders is less than £13,498,203.60, all of the Ordinary Shares validly
tendered pursuant to the Tender Offer.

 

Number of Ordinary Shares to be purchased and scaling-back

 

Under the Tender Offer, each Qualifying Shareholder is entitled to tender up
to 10 per cent. of his or her shareholding to be purchased by Panmure Gordon
at the Tender Price (being their Basic Entitlement).

 

Each Qualifying Shareholder's Basic Entitlement will be calculated by the
Registrars as at the Record Date by reference to the Qualifying Shareholder's
holding of Ordinary Shares as at that date.

 

In addition, Qualifying Shareholders are entitled to make an application to
tender in excess of their Basic Entitlements.   The extent to which excess
applications can be accepted will depend on the number of Ordinary Shares
tendered by other Qualifying Shareholders.

 

Provided the conditions in paragraph 2.1 of Part III of the Circular are met,
if the aggregate value at the Tender Price of all validly tendered Ordinary
Shares is less than approximately £13.5 million (and not less than £3.0
million), then all Ordinary Shares validly tendered (including applications in
excess of Basic Entitlements) will be purchased at the Tender Price.

 

If the number of Ordinary Shares validly tendered by Shareholders is more than
2,142,572, tenders will be accepted in the order set out below:

 

 a)  all Ordinary Shares tendered by Qualifying Shareholders up to their Basic
     Entitlement will be accepted in full; and
 b)  tenders of Ordinary Shares in excess of the Qualifying Shareholders' Basic
     Entitlements will be satisfied pro rata in proportion to the amount tendered
     in excess of Basic Entitlements (rounded down to the nearest whole number of
     Ordinary Shares) or otherwise at the discretion of the Board, in agreement
     with Panmure Gordon.

 

For the avoidance of doubt, the number of Ordinary Shares to be purchased in
the Tender Offer will not, in any event, exceed 2,142,572 Ordinary Shares.

 

Once lodged (in the case of a Tender Form) or settled (in the case of a TTE
Instruction) such Tender shall be irrevocable.

 

Ordinary Shares will be purchased pursuant to the Tender Offer on or about 14
February 2022.

 

Successfully tendered Ordinary Shares will be purchased free of commission and
dealing charges.

 

Any Ordinary Shares repurchased by the Company from Panmure Gordon following
the purchase by Panmure Gordon will be cancelled. Any rights of Ordinary
Shareholders who do not tender their Ordinary Shares will be unaffected.

 

Subject to any applicable rules and regulations, the Company reserves the
right at any time prior to the announcement of the results of the Tender
Offer, and with the prior consent of Panmure Gordon, to extend the period
during which the Tender Offer is open, based on market conditions and/or other
factors.

 

Basic Entitlement

 

Tenders in respect of up to approximately 10 per cent. of each holding of
Ordinary Shares of every Qualifying Shareholder on the Record Date will be
accepted in full at the Tender Price and will not be scaled down, provided
that such Ordinary Shares are validly tendered. This percentage is known as
the "Basic Entitlement".

 

Qualifying Shareholders may tender Ordinary Shares in excess of their Basic
Entitlement. However, if the Tender Offer is oversubscribed, the tender of
such excess Ordinary Shares will only be successful to the extent that other
Qualifying Shareholders have tendered less than their Basic Entitlement and
may be subject to the scaling-back arrangements described above.

 

Circumstances in which the Tender Offer may not proceed

 

The Tender Offer is conditional on, among other things, receipt of valid
tenders in respect of Ordinary Shares to a value at the Tender Price of not
less than £3.0 million, by 1.00 p.m. (UK time) on the Closing Date and the
other conditions specified in Part III of the Circular.

 

The Tender Offer is also conditional on no material adverse change or certain
other force majeure events arising prior to the closing of the Tender Offer.
Further details of these Conditions are set out in Part III of the Circular.

 

Full terms and conditions of the Tender Offer are set out in Part III of the
Circular, which Shareholders are recommended to read in full.

 

5.     Repurchase Agreement

 

The Repurchase Agreement between the Company and Panmure Gordon is dated 28
January 2022. Under this agreement, the parties agree that, subject to the sum
of £13,498,203.60 (equal to the Tender Price multiplied by the maximum number
of Ordinary Shares that could be repurchased under the Tender Offer) being
deposited by the Company into a client account of Panmure Gordon by no later
than 5.00 p.m. on 31 January 2022 or such later time and/or date as may be
agreed by Panmure Gordon and the Tender Offer becoming unconditional in all
respects and not lapsing or terminating in accordance with its terms, Panmure
Gordon shall, as principal, purchase, "On Exchange", at the Tender Price,
Ordinary Shares successfully tendered to it, up to a maximum aggregate Tender
Price of £13,498,203.60.

 

The Company has agreed that, immediately following the purchase by Panmure
Gordon of all Ordinary Shares which it has agreed to purchase as principal
under the terms of the Tender Offer, the Company will purchase from Panmure
Gordon all such Ordinary Shares at a price per Ordinary Share equal to the
Tender Price. All transactions will be carried out on the London Stock
Exchange.

 

Under the Repurchase Agreement, the Company has agreed to cancel any Ordinary
Shares purchased by it under the Tender Offer arrangements.

 

The Repurchase Agreement contains certain representations, warranties and
undertakings from Panmure Gordon in favour of the Company concerning its
authority to enter into the Repurchase Agreement and to make the purchase of
Ordinary Shares pursuant thereto.

 

The Repurchase Agreement also contains representations, warranties and
undertakings from the Company in favour of Panmure Gordon and incorporates an
indemnity in favour of Panmure Gordon in respect of any liability which it may
suffer in relation to its performance under the Tender Offer which is not due
to its own neglect or default.

 

6.     Dividends

 

Successfully tendered Ordinary Shares will be cancelled and will not rank for
any future dividends. However, the right of Shareholders, recorded on the
Register on 14 January 2022, to receive and be paid the final dividend
declared at the Annual General Meeting on 21 January 2022 will not be affected
by acceptance of the Tender Offer.

 

7.     Overseas Shareholders

 

The attention of Qualifying Shareholders who are citizens, residents or
nationals of countries outside the UK wishing to participate in the Tender
Offer is drawn to paragraph 6 entitled "Overseas Shareholders" in Part III of
the Circular.

 

8.     Taxation

 

Qualifying Shareholders should be aware that there may be tax considerations
that they should take into account when deciding whether or not and/or the
extent to which to participate in the Tender Offer.  A summary of the
taxation consequences of the Tender Offer for UK resident Shareholders is set
out in Part IV of the Circular. It should be noted that this tax summary is
merely a guide to current tax law and practice in the UK. Shareholders are
advised to consult their own professional advisers regarding their own tax
position.

 

9.     Directors' Interests

 

The interests (all of which are beneficial unless stated otherwise) of the
Directors and of persons connected with them (within the meaning of Section
252 of the 2006 Act) in the issued ordinary share capital of the Company and
the existence of which is known to, or could with reasonable due diligence be
ascertained by, any Director as at the date of this announcement are as
follows:

 

 Name                 Position                                            Number of           Percentage of

                                                                           Ordinary Shares     issued share capital
 Kiran Shah((1))      Joint Managing Director and Group Finance Director  2,176,478           10.16%
 Jon Diver((2))       Joint Managing Director                             1,428,248           6.67%
 Joseph Kissane       Managing Director - Character Options Limited       518,757             2.42%
 Richard King         Non-Executive Chairman                              336,286             1.57%
 Michael Hyde         Managing Director- Far East Operations              268,888             1.25%
 Jeremiah Healy((3))  Group Marketing Director                            73,000              0.34%
 David Harris((4))    Non-Executive Director                              68,183              0.32%
 Clive Crouch         Non-Executive Director                              15,358              0.07%
 Carmel Warren        Non-Executive Director                              nil                 nil

 

Notes:

 

 (1)  Mr Shah's interests comprise 176,478 Ordinary Shares held personally by Mr
      Shah and 2,000,000 Ordinary Shares held by Sarissa Holdings Limited.
 (2)  Mr Diver's interests comprise 876,381 Ordinary Shares held personally by Mr
      Diver and 551,867 Ordinary Shares held by Mr Diver's Self Invested Pension
      Plan.
 (3)  Mr Healy's interests comprise 16,000 Ordinary Shares held personally by Mr
      Healy, 5,000 Ordinary Shares held by Mr Healy's Self Invested Pension Plan,
      and 52,000 Ordinary Shares held by Mr Healy's wife, Kathleen Ann Healy.
 (4)  Mr Harris's interests comprise 16,780 Ordinary Shares held personally by Mr
      Harris and 51,403 Ordinary Shares held by Mr Harris's Self Invested Pension
      Plan.

 

10.   Intentions of the Directors in relation to the Tender Offer

 

The Directors are currently interested, in aggregate, in 4,885,198 Ordinary
Shares, representing approximately 22.80 per cent. of the issued Ordinary
Share capital of the Company (excluding Ordinary Shares held in treasury). The
Directors have indicated their intention to tender their Ordinary Shares
(directly or through their connected parties) as follows:

 

 Name            Applications to tender Basic Entitlement  Applications in excess of Basic Entitlement

                 (Ordinary Shares)                         (Ordinary Shares)
 Kiran Shah      217,647                                   217,647
 Jon Diver       142,824                                   142,824
 Joseph Kissane  51,875                                    51,875
 Richard King    33,628                                    33,628
 Michael Hyde    26,888                                    26,888
 Jeremiah Healy  7,300                                     7,300
 David Harris    6,818                                     6,818
 Clive Crouch    1,535                                     1,535
 Carmel Warren   nil                                       nil
 Total           488,515                                   488,515

 

Excess tenders by the Directors will be subject to the scaling-back
arrangement described in paragraph 4 above.

 

Assuming the maximum number of Ordinary Shares under the Tender Offer is
purchased and that the Directors' tenders (including excess tenders) are
satisfied in full, the Directors, following completion of the Tender Offer,
will be interested, in aggregate, in 3,908,168 Ordinary Shares, representing
approximately 20.27 per cent. of the issued Ordinary Share capital of the
Company (excluding Ordinary Shares held in treasury).

 

11.   Recommendation

 

The Directors are making no recommendation to Qualifying Shareholders in
relation to participation in the Tender Offer itself. Whether or not
Qualifying Shareholders decide to tender their Ordinary Shares will depend,
amongst other things, on their view of the Company's prospects and on their
own individual circumstances (including their own tax position).

 

If Shareholders are in any doubt as to the action they should take, they are
recommended to seek their own independent advice.

 

12.   Expected Timetable of Events

 

The expected timetable for the Tender Offer is as follows:

 

 Announcement of the Tender Offer                                              28 January 2022
 Tender Offer opens                                                            28 January 2022
 Latest time and date for receipt of Tender Forms or for settlement of TTE     1.00 p.m. on 11 February 2022
 Instructions in respect of the Tender Offer
 Record Date for the Tender Offer                                              6.00 p.m. on 11 February 2022
 Announcement of the results of the Tender Offer                               14 February 2022
 Cheques despatched and CREST accounts credited with proceeds in respect of    On or before 21 February 2022
 successfully tendered Ordinary Shares
 CREST accounts credited with uncertificated Ordinary Shares unsuccessfully    On or before 21 February 2022
 tendered and despatch of balance share certificates for unsold certificated
 Ordinary Shares (if applicable)

 

Notes:

 

 1.  The above times and/or dates are indicative only and may change. If any of the
     above times and/or dates change, the revised times and/or dates will be
     notified by announcement through a Regulatory Information Service.
 2.  All references to times in this announcement are to London times unless
     otherwise stated.

 

Capitalised terms and expressions shall have the same meanings as those
attributed to them in the Circular.

 

A copy of the Circular will shortly be available for download from the
Company's website www.thecharacter.com (http://www.thecharacter.com) .

 

 

 

The Character Group plc

FTSE sector:  leisure goods:

FTSE AIM All-share: symbol: CCT

Market cap: £131.7m

Email:  info@charactergroup.plc.uk

Group website: www.thecharacter.com (http://www.thecharacter.com)

Product ranges can also be viewed at www.character-online.co.uk
(http://www.character-online.co.uk)

CHARACTER GROUP PLC CCT Stock | London Stock Exchange
(https://www.londonstockexchange.com/stock/CCT/character-group-plc/company-page)

 

 

 

 Enquiries to:

 The Character Group plc

 Jon Diver, Joint Managing Director

 Kiran Shah, Joint Managing Director & Group Finance Director

 Office:  +44 (0) 208 329 3377

 Mobile: +44 (0) 7831 802219 (JD)

 Mobile: +44 (0) 7956 278522 (KS)

 Panmure Gordon (Nominated Adviser and Joint Broker)

 Atholl Tweedie, Corporate Finance

 Charles Leigh-Pemberton, Corporate Broking

 Rupert Dearden, Corporate Broking

 Tel:  +44 (0) 20 7886 2500

 Allenby Capital Limited (Joint Broker)

 Nick Athanas, Corporate Finance

 Amrit Nahal, Sales & Corporate Broking

 Tel:  +44 (0) 20 3328 5656

 TooleyStreet Communications Limited (Investor and media relations)

 Fiona Tooley

 Tel:  +44 (0) 7785 703523

 Email: fiona@tooleystreet.com

 

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