REG - Fulham Shore PLC - Proposed acquisition of Kefi, move to AIM <Origin Href="QuoteRef">FSp.ISD</Origin> <Origin Href="QuoteRef">PGY.L</Origin>

Fulham ShoreAnnouncement

30/09/2014 07:07

RNS Number : 9367S
Fulham Shore PLC (The)
30 September 2014
The Fulham Shore plc
(the "Company" or "Fulham Shore")
Proposed acquisition of Kefi Limited, subscription to raise 1.6 million, withdrawal from ISDX, proposed admission to trading on AIM and notice of general meeting
The Board of Fulham Shore announces that the Company has conditionally agreed to acquire 99.04 per cent. of the issued share capital of Kefi Limited ("Kefi"), the owner of The Real Greek restaurant group (the "Acquisition"). The Board further announces: (i) its intention to withdraw the ordinary shares of 1p each in the Company ("Ordinary Shares") from trading on the ISDX Growth Market and seek admission to trading on AIM; and (ii) a conditional subscription to raise approximately 1.6 million (the "Subscription") at 6p per Ordinary Share (the "Subscription Price"). 
The Acquisition will result in a fundamental change in the business of the Company and therefore constitutes a reverse takeover for the purposes of the ISDX Rules for Issuers. Accordingly, the Acquisition requires shareholder approval, which is being sought at a general meeting to be held at the offices of Allenby Capital Limited at 10.00 a.m. on 17 October 2014 (the "General Meeting"). An admission document for the purposes of the proposed admission to AIM (which contains a notice of general meeting), will today be posted to shareholders of the Company.
Assuming the passing of the resolutions at the General Meeting it is expected that admission to AIM will become effective and dealings in the enlarged issued share capital of the Company will commence on AIM at 8.00 a.m. on 20 October 2014 ("Admission").
 
Further information on the above proposals isset out below.
Contact:
The Fulham Shore plc
Telephone: 07836 346 934
David Page
www.fulhamshore.com


Allenby Capital Limited
Telephone: 020 3328 5656
Nick Naylor / Jeremy Porter / James Reeve



The following has been extracted from, and should be read in conjunction with, the Company's admission document, which will be available later today for download from www.fulhamshore.com.
Information on Kefi
Kefi owns and operates the estate of restaurants called The Real Greek. The Real Greek serves a freshly prepared selection of hot and cold food dishes from the Eastern Mediterranean region. All of the restaurants are licensed and serve a wide range of Greek wines and beers and, on occasion, in some branches, complemented by live bouzouki music. The Real Greek provides a relaxed Mediterranean dining experience, offering meze sharing plates and a selection of other dishes.
The Real Greek originated as an individual plate, fine dining operation in London. Over the first few years of its existence the model was adjusted in terms of locations (three restaurants were closed whilst seven were opened) and the menu was changed to a meze style, family and friends sharing proposition. Since the acquisition of The Real Greek by Kefi over three years ago, the directors of Kefi have changed The Real Greek's offer so that it is now delivered at a price that is accessible to average income earners. The average spend per diner at The Real Greek is estimated to be 14, although this is likely to vary in each restaurant depending on the food and drink mix, the layout of the restaurant and the demographics of the customers. Over the past three years The Real Greek has achieved an increase in turnover and profits which the directors of Fulham Shore ("Directors") attribute to this change in menu offering, along with a restructuring of the company's suppliers, deliveries and operations.
Restaurants
Kefi currently operates seven The Real Greek restaurants, six in London and one in Windsor:


No. of covers
Location 
Opened
(inside)
(outside)
Bankside, London 
July 2004
165 
45
Marylebone, London 
November 2005
44 
2
Covent Garden, London 
March 2006
56 
-
Westfield Shepherd's Bush, London
November 2008 
100
45
Spitalfields, London 
December 2008
160 
60
Westfield Stratford City, London 
September 2011
80
45
Windsor 
May 2014 
105
-
The Directors believe that at present there is the potential for up to 40 The Real Greek restaurants in the UK and a good number of potential locations have already been identified. They further believe that the successful opening in Windsor has demonstrated the ability of The Real Greek's model to operate successfully outside London in towns with populations of more than 20,000. The Directors are actively seeking more sites, initially in, and within manageable reach of London.
An eighth The Real Greek restaurant, in Berwick Street, Soho, central London, is scheduled to open in early 2015.
For the year ended 29 June 2014 Kefi generated revenues of 8.6 million and a profit after tax of 0.8 million. The aggregate consideration for the Acquisition is 13.9 million, to be satisfied by the issue of 222,255,000 Ordinary Shares (the "Consideration Shares") and the payment of the 552,270 in cash. 
Reasons for the Acquisition
The Board of Fulham Shore believes that the acquisition is in the best interests of the Company for a number of reasons. The Real Greek is a profitable business, which has grown since its foundation and the directors of Fulham Shore Directors consider that it has shown particular improvements over the last three years in terms of menu selection and food quality and that these have contributed to an increase in turnover and profits. As indicated above the Directors believe that, supported by the Company's resources, The Real Greek has the potential to grow from its current estate of seven sites to up to 40 restaurants in the UK.
The Directors believe that performance of The Real Greek has been above the UK industry average for restaurants over its last three financial years, a period in which, until recently, many operators have not only reported subdued trading levels but have also been selling branches. The Directors believe that The Real Greek's current estate of seven restaurants, which are successful both in and outside of London, provide a firm base on which to expand and open even more The Real Greek restaurants throughout the UK.
The Acquisition is in line with the investing strategy adopted by the Company at the time of its admission to ISDX Growth Market and the Directors believe that it represents a major step forwards in the implementation of that strategy. They further believe that, as part of the group, as enlarged by the Acquisition (the "Enlarged Group"), The Real Greek will represent a successful, cash generative platform on which to base the further development of Fulham Shore.
Principal terms and conditions of the Acquisition
On 30 September 2014 the Company entered into acquisition agreements with the owners of Kefi, pursuant to which the Company has conditionally agreed to acquire 99.04% of Kefi's issued share capital. The consideration is 13,887,570, to be satisfied as to 13,335,300 by the issue of 222,255,000 Ordinary Shares credited as fully paid up at a price of 6p per Consideration Share and as to 552,270 in cash. The closing price of an Ordinary Share on 29 September 2014, being the latest practicable date before the date of this announcement, was 12.5p.
Completion of the acquisition agreements is conditional, inter alia, on the resolutions being passed at the General Meeting and Admission.
 
David Page, Nabil Mankarious and Nicholas Donaldson, who are directors of the Company, together own 50.05 per cent. of the issued shares in Kefi. Following Admission, David Page and Nabil Mankarious will each retain 0.48 per cent. of the issued shares in Kefi.
As David Page, Nabil Mankarious and Nicholas Donaldson are directors of and shareholders in Kefi, the Acquisition constitutes a related party transaction for the purposes of the ISDX Rules for Issuers. All decisions of the Company relating to the Acquisition have been delegated to a committee of the two independent directors, Martin Chapman and Nicholas Wong.
The Subscription and use of proceeds
The Subscription comprises the issue of the 26,749,900 new Ordinary Shares (the "Subscription Shares") to existing shareholders and new investors at the subscription price of 6p per share. Of the gross amount raised of 1,604,994, 510,720 has been subscribed by the Directors (including their families and connected persons). 
The Directors intend to use the proceeds of the Subscription in supporting the expansion of The Real Greek's business, to pursue the Company's strategy to seek further acquisition opportunities in the restaurant and food services sector and for general working capital purposes.
Current trading and prospects of the Enlarged Group
Fulham Shore
Trading in the first five months of the current financial year ending 29 March 2015 has been in line with the Directors' expectations, with the Franco Manca franchise making a welcome contribution to the Company's revenues.
Kefi
As noted above, Kefi's profits have grown in the three years ended 29 June 2014. Revenues for July and August 2014 were in line with the Directors' expectations and were ahead of the same months in the previous year.
The Directors believe that the prospects of the Enlarged Group are positive. According to Mintel, the UK eating out market as a whole is forecast to grow 16 per cent. in value over the next five years to 38.9 billion. The UK economic outlook continues to improve with consumer confidence up during the first half of 2014.
The Enlarged Group's Strategy
Overview
The Enlarged Group's strategy will focus on both enhancing the The Real Greek's business in its existing restaurants, as well as opening new restaurants, and seeking further acquisition opportunities in the restaurant and food service sectors. The opening of a Franco Manca franchise at 98 Tottenham Court Road, London in November 2013 represented the Company's first step in this strategy.
Expansion of The Real Greek
The Real Greek is targeting the opening of its eighth restaurant, in Berwick Street, Soho, London, early in 2015. The opening programme envisaged by the Directors contemplates one or two The Real Greek new restaurants per year. The Directors have already identified a number of potential sites for new restaurants in preferred locations nationwide. In order to identify and acquire new sites The Real Greek will use the knowledge of the Directors who collectively have extensive experience in the industry. Further, the Company has arrangements in place with a number of estate agents, to which they have agreed fee structures for the identification of sites ultimately leased by the Enlarged Group.
Seeking further acquisitions
The Directors will continue to evaluate opportunities for acquisitions of either groups of individual restaurants, or multiple restaurants trading under the same name, focusing on the value for money and casual dining sectors. The Enlarged Group's current intention is to look to operate up to three distinct restaurant businesses under its ownership. Restaurant businesses to be considered by the Company are likely to be capable of expansion to 40 or more restaurants, simple to operate but with a reputation for 'best in class' food. The Directors are likely to prefer opportunities which have two or more restaurants already in operation, retaining, and incentivising, existing management and aiding an expansion programme with both restaurant management and financial input. The Directors will, where possible, seek to use the Ordinary Shares, either in full or in part, as consideration for future acquisitions.
In addition to the acquisition strategy, the Directors will continue to evaluate opportunities for acquisitions of portfolios of restaurants or distressed restaurant groups that would be suitable for conversion into brands that the Enlarged Group may own at the time. The Directors believe such acquisitions would enable the Enlarged Group to obtain access to additional properties and accelerate any expansion programme.
Directors' interests
Assuming the passing of the resolutions at the General Meeting, the Directors' shareholdings on Admission, and following the issue to them of Consideration Shares and Subscription Shares, will be as follows:
Name
At the date of this announcement

At Admission
Number of Ordinary Shares 
% of Ordinary Shares
Number of Consideration Shares
Number of Subscription Shares
Number of Ordinary Shares
% of Ordinary Shares
David Page
15,400,100
18.44%
55,002,500
1,670,000
72,072,600
21.68%
Nabil Mankarious
17,300,0001
20.72%
55,002,500
4,337,0002
76,639,5003
23.05%
Nicholas Donaldson
5,300,000
6.35%
4,714,500
1,250,000
11,264,500
3.39%
Nicholas Wong
6,800,000
8.14%
-
670,000
7,470,000
2.25%
Martin Chapman
-
-
-
585,000
585,000
0.18%
Totals
44,800,100
53.65%
114,719,500
8,512,000
168,031,600
50.55%
1 Includes the following Ordinary Shares, the legal and beneficial interest in which are held by: (i) Teresa Mankarious (400,000); and (ii)Eleanor Mankarious (500,000). Nabil Mankarious holds the legal and beneficial interest in 16,400,000 Ordinary Shares at the date of this Document.

2 Includes the Subscription Shares in which the legal and beneficial interest is held by Eleanor Mankarious (167,000). Nabil Mankarious is subscribing for 4,170,000 Subscription Shares.

3 Includes the following Ordinary Shares, the legal and beneficial interest in which are held by: (i) Teresa Mankarious (400,000); and (ii)Eleanor Mankarious (667,000). Nabil Mankarious will hold the legal and beneficial interest in 75,572,500 Ordinary Shares on Admission.

Management Incentive Schemes
In order to incentivise the management of the Company and, if appropriate, the management of any other business or company that the Company acquires, the Directors have adopted an EMI option scheme and an unapproved option scheme. In addition, to those already held by them, it is intended that the following options will be granted to the Directors on Admission:
Director
Option in respect of Ordinary Shares
Exercise price
Type
David Page 
3,332,842
6p 
EMI Options

1,647,256 
6p 
Unapproved Options
Martin Chapman 
3,325,135
6p
Unapproved Options
Nicholas Donaldson 
4,980,098 
6p 
Unapproved Options
Nabil Mankarious 
3,332,842 
6p 
EMI Options

1,647,256 
6p 
Unapproved Options
Nicholas Wong 
2,774,856 
6p 
EMI Options

2,205,242 
6p 
Unapproved Options
Total
23,245,527


Further grants will be made to employees and directors of the Company as appropriate, subject to the number of Fulham Shore options not exceeding 10 per cent. of the issued share capital of the Company.
Withdrawal from ISDX and Admission to AIM
The Directors believe that, on completion of the Acquisition, the Enlarged Group will have reached a stage in its development at which it will benefit from the Ordinary Shares being admitted to trading on AIM. In particular, they believe that Admission will increase the liquidity of the Ordinary Shares and, make the Company more accessible to larger investing institutions and that this should, in turn, enhance the Company's ability to raise equity capital cost effectively and make the Ordinary Shares a more attractive form of consideration for future transactions.
In addition, the Directors believe that as an AIM quoted company Fulham Shore should have a higher profile and greater publicity, which could open up more opportunities for the Company and broaden its investor base. Furthermore, the Directors believe that the ability to grant options over shares traded on AIM will help towards attracting and retaining key personnel. 
The existing Ordinary Shares are currently traded on the ISDX Growth Market. As part of the arrangements for Admission, the Company intends to cancel the admission of the existing Ordinary Shares to the ISDX Growth Market. It is expected that such cancellation will become effective at the close of business on 17 October 2014, subject to the passing of the resolutions at the General Meeting.
Application has been made for the Ordinary Shares to be admitted to trading on AIM. Subject to the passing of the resolutions, it is expected that Admission will become effective and dealings in the enlarged share capital will commence on or around 20 October 2014. 
General Meeting
The General Meeting is being held at the offices of Allenby Capital Limited, 3 St Helens Place, London EC3A 6AB, at 10.00 a.m. on 17 October 2014, for the purpose of considering, and if thought fit, passing the resolutions. Resolutions 1, 2 and 3 will be proposed as ordinary resolutions and resolution 4 will be proposed as a special resolution.
Resolution 1 is to approve the Acquisition for the purposes of section 190 of the Companies Act, which requires shareholder approval to be given for the acquisition of any substantial non cash asset from one of its directors. In this case approval is required for the purchase of Kefi shares from each of David Page, Nicholas Donaldson and Nabil Mankarious.
Resolution 2 is to approve the Acquisition for the purposes of the ISDX Rules as it constitutes a reverse takeover for the purposes of those rules.
Resolution 3 is to grant the Directors an authority to allot and issue Ordinary Shares up to a nominal value of 5,815,184.00 for the purposes of section 551 of the Companies Act.
Resolution 4 is to authorise the Directors pursuant to section 570 of the Companies Act to allot and issue Ordinary Shares up to a nominal value of 766,270.00 for cash without first making a pre-emptive offer to the Company's shareholders under section 561 of the Act.

This information is provided by RNS
The company news service from the London Stock Exchange
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