13 October 2011 TRAFALGAR NEW HOMES PLC ("Trafalgar" or the "Company")
Proposed Acquisition of the Issued Share Capital of Combe Bank Homes Ltd ("Combe Bank") (the "Acquisition")
Introduction
The Directors of Trafalgar (the "Directors") are pleased to announce that the Company has entered into a conditional agreement with Christopher Johnson and Alexander Johnson (the "Vendors" or the "Proposed Directors") to acquire the entire issued share capital of Combe Bank for a consideration of approximately GBP2,250,000 to be satisfied through the issue to the Vendors of 186,817,671 new ordinary shares in Trafalgar representing approximately 87 per cent of the issued share capital after issue. Completion of the Acquisition will constitute a "reverse takeover" under the PLUS Rules for Issuers and is conditional, inter alia, on approval of the Company's shareholders. A circular (the "Circular"), which constitutes a PLUS Admission Document, is today being posted to shareholders of Trafalgar. The Circular gives full details of the Acquisition and contains a Notice convening a General Meeting for 8 November 2011 at which resolutions will be proposed, inter alia, to approve the Acquisition. It is expected that completion of the Acquisition ("Completion") will occur as soon as practicable following passing of the resolutions. Re-
Shareholders owning approximately 61.5 per cent of the existing issued share capital of the Company have entered into voting commitments to vote or procure votes in favour of the Acquisition. These shareholders include Mr Andrew Moore, the Non-
Background to the Acquisition
Trafalgar has been a small house builder which encountered financial difficulties, principally in relation to its development at Mitcham, Surrey. On 7 July 2010 Trafalgar announced that dealings in its ordinary shares on PLUS-
The Directors regard the Acquisition of Combe Bank, with its established development portfolio and banking and other financial arrangements to be a logical step in taking the enlarged group forward.
Combe Bank
Combe Bank was incorporated on 20 November 2006 to undertake residential development in both new build, conversions and refurbishment. The founders, Christopher and Alexander Johnson, together with their support staff, have direct experience in the residential housing sector.
Combe Bank currently owns eight residential development sites. In common with many newly formed house building companies, activity in the first two years centred on land and property acquisition and the commencement of the development of sites acquired.
The Proposed Directors believe that land acquisition, at the right price, is key to the success of residential development. Combe Bank intends to concentrate on smaller unit number sites in order to avoid having to compete with larger developers, and acquire sites out of the reach of the small jobbing builder. Combe Bank's principal area of operation is the south-
Combe Bank's modus operandi is to outsource the majority of its activities to third parties. All building and construction work is also outsourced.
Combe Bank's development programme is concentrated in Kent and embraces new build of detached, semi-
Oakhurst Manor and Oakhurst Lodge, Hildenborough, Kent.
This is Combe Bank's principal site, having been acquired in January 2007 with planning permission for residential development. The existing residential development was in the course of being improved by their predecessors in title. The current application was continued with and resulted in planning permission for 18,000 sq.ft. of residential development being granted, to be built on the footprint of a former nursing home, out of a total site area of some four acres. The development is under way.
In view of the fact that the Local Planning Authority, when granting the latest consent, requested that Combe Bank submit an affordable housing scheme for the site, the Proposed Directors, in consultation with Combe Bank's architects and planning consultant, have drawn up a revised scheme covering the entire site with approximately 80 affordable housing units, consisting of one, two and three bedroom flats and houses. The 80 unit scheme will provide for some 280 habitable rooms which will represent a substantial enhancement of the land value for the site.
The application for permission for the revised scheme was recently refused. Following the recommendation of the planning consultant the Proposed Directors are considering lodging an appeal against the refusal and, in the light of the advice received, believe the appeal will be successful. Should planning permission for the revised scheme not be granted, which the Proposed Directors do not believe will be the case, Combe Bank will continue with the development on the basis of the permission already obtained for 18,000 sq ft of residential units. In this event the Proposed Directors anticipate that the development's revenues should not be significantly affected.
67 High Street, Edenbridge, Kent
Combe Bank acquired this property with the benefit of planning permission for nine new build two bedroom apartments and a studio together with a cottage for re-
The Engineer Public House, Dover, Kent
As the name implies the site consists of a public house which was acquired with the intention of conversion into four apartments after obtaining planning permission. Permission was obtained not only for the apartments but also for a small detached property in the rear yard. Construction was completed in 2009. The completed development is fully let, pending future sale.
Square Hill Road, Maidstone, Kent
This development of six apartments was completed in 2009 and is currently fully let, pending future sale.
Sheerness, Kent
This site was acquired with planning permission for five one bedroom houses. Combe Bank submitted a revised planning application and has received consent for six two bedroom units on the site thereby increasing the land value. Development of this site will commence in the near future.
Ravenscourt Road, Deal, Kent
This site was acquired with the benefit of planning permission for three units, being a pair of semi-
Fermor Road, Crowborough, East Sussex
Combe Bank acquired a site with planning permission for one detached and a pair of semi-
Stanhope Road, Dover, Kent
This site consists of a number of garages for which Combe Bank has been successful in obtaining permission for the construction of a small block of two apartments. On completion of the development the property was let, pending future sale.
Chalk Pit Hill, Chatham, Kent
Combe Bank has obtained planning permission for the construction of a small block of three town houses on this site. The site originally consisted of a small industrial unit used as a car repair shop and the price paid on acquisition reflected this. Development of this site will commence in the near future.
In addition to the developments referred to above, Combe Bank owns one other property situated at Stanhope Road, Dover, Kent. This property was acquired to facilitate the grant of planning permission for the adjoining site referred to above. The property is tenanted at a rent reflecting a return in excess of the Combe Bank's borrowing cost. It is proposed that the property will be sold in due course.
The funding for the acquisition and development of land and property has typically been provided through the Combe Bank's bankers who, subject to valuation, typically provide 60 per cent of the value of land and 60 per cent of the building cost, with the remainder being typically funded through Christopher Johnson's own resources. Combe Bank has facilities with its banks which enable it to purchase land and property, with or without planning permission. Where sites are acquired without planning permission, separate facilities are granted by Combe Bank's banks to finance the development of the site once planning permission has been granted and the development of the site is due to commence.
Combe Bank does not have an overdraft facility and all of its bank loans are site specific. The balance of funding required over and above that provided by the Combe Bank's bank for site acquisition and development and to service overheads is provided by Christopher Johnson and other sources.
The Board of Directors Trafalgar (the "Board")
The Board currently comprises Andrew Moore, Robert McKendrick and James Reid. On Completion Mr McKendrick and Mr Reid will stand down and Mr Christopher Johnson and Mr Alexander Johnson will join the Board as Executive Chairman and Sales and Marketing Director respectively. Mr Moore will remain as a non-
Christopher Johnson is qualified as a solicitor. During the 1990s he established his own residential property development company which was floated on the OFEX Market in 1999 and subsequently on AIM in 2001. The company was sold through a public offer for approximately GBP9.4 million in 2004. He then set up another house building company which was sold for GBP3 million in December 2006, prior to establishing Combe Bank.
Alexander Johnson is Christopher Johnson's son. He worked as a manager in an estate agency until 2002 when he joined his father in his residential property development company as sales director. He has subsequently been involved in the development of Christopher Johnson's residential businesses, including the establishment of Combe Bank.
Further information on the Proposed Directors is set out in the Circular.
Current Trading and Prospects
Combe Bank's land and property portfolio falls into three categories. The first consists of those sites which have been fully developed and which have been retained following a decision not to market them in a declining market. Construction work on these sites situated at Maidstone (six units), the Engineer Public House, Dover (five units), Stanhope Road, Dover, (two maisonettes), and houses at 1 Stanhope Road, Dover, and Oakhurst Lodge, Bank Lane, Hildenborough, Kent was completed in 2009 and 2010. All these units have been let and generate income. At the appropriate time it is the intention of the Proposed Directors to offer these properties for sale.
Properties in the second category consist of those which have been developed in the past year, which have been offered for sale or sold, and should contribute to the Company's trading results in the current financial year. These properties are two units at Aylesford, three units at Crowborough and six at Deal. All the units at Aylesford and Crowborough have been sold. Construction of the units at Deal has been completed. Four of the units have been sold, and it is expected that the two remaining units will be sold during the current financial year.
The third category consists of four sites which have been retained for development. Of these, construction work has been commenced on twelve units at Oakhurst Manor, Bank Lane, Hildenborough and eleven units and a shop at High Street, Edenbridge.
Combe Bank has also obtained planning permission for six units in Sheerness and three units in Chatham where it is anticipated construction work will commence during the current year.
In the financial information on Combe Bank set out in the Circular, the Profit and Loss Account for the year ended 30 November 2010 reflected a loss of GBP903,100, principally resulting from a write-
Also included in the Circular are the audited results of Combe Bank for the six months ended 31 May 2011 which reflect a profit for the financial period of GBP329,495 on turnover of GBP645,000.
The City Code on Takeovers and Mergers (the "City Code")
On Completion, Christopher and Alexander Johnson (who together constitute a concert party for the purposes of the City Code) will hold 186,815,803 ordinary shares representing 87.14 per cent of the ordinary share capital and 1,868 ordinary shares representing 0.01 per cent of the ordinary share capital respectively, or 87.15 per cent of the Company's issued share capital in aggregate. The members of the concert party would normally be required to make a general offer under Rule 9 of the City Code. The Panel on Takeovers and Mergers (the "Panel") will normally agree to waive the obligation to make a general offer that would otherwise arise through the issuance of new shares, subject to the approval of independent shareholders on a poll at a general meeting. In this instance the Panel has agreed to grant a waiver from the requirements for the Vendors to make a Rule 9 offer to the shareholders following the provision of certain confirmations by independent shareholders holding in excess of 50 per cent of the existing ordinary share capital of Trafalgar. Full details of these confirmations and the Panel waiver are set out in the Circular.
Notice of General Meeting
A Circular, constituting a PLUS Admission Document, is expected to be posted to shareholders today. The formal notice convening the General Meeting, to be held at 12:00 noon on 8 November 2011 will be enclosed with the Circular, alongside an accompanying form of proxy. The General Meeting will be held at the offices of SVS Securities Plc, 21 Wilson Street, London, EC2M 2SN. Subject, inter alia, to the passing of the General Meeting Resolutions application will be made for the enlarged share capital of Trafalgar to be admitted to PLUS-
Copies of the Circular, the notice convening the General Meeting and the form of proxy may be obtained from the offices of SVS Securities PLC, 21 Wilson Street, London EC2M 2SN for a period of one month from the date of this announcement.
Undertakings in respect of Voting Intentions and Recommendation
Shareholders including Mr R McKendrick and Central Corporate Finance, a limited liability partnership controlled by Mr Andrew Moore who hold, in aggregate, 12,777,861 ordinary shares in Trafalgar representing 61.56 per cent of the existing ordinary share capital have irrevocably undertaken to vote in favour of the resolutions to be proposed at the General Meeting. The Directors of Trafalgar consider the proposals set out in the circular to be fair and reasonable and in the best interests of the Company and its shareholders as a whole. The Directors who hold in aggregate 8,527,861 ordinary shares representing approximately 41.08 per cent of the issued ordinary share capital of the Company have irrevocably committed to the Vendors to vote in favour of the resolutions to be proposed at the General Meeting set out in the Notice of Meeting contained in the Circular. The Directors of Trafalgar unanimously recommend shareholders to vote in favour of the resolutions set out in the Notice of General Meeting as they have irrevocably undertaken to do in respect of their own beneficial holdings of ordinary shares.
THE DIRECTORS OF THE COMPANY ACCEPT RESPONSIBILITY FOR THE CONTENTS OF THIS ANNOUNCEMENT
Enquiries: Trafalgar New Homes PLC Andrew Moore Tel: +44 (0)7836 722840 PLUS Corporate Adviser SVS Securities PLC Peter Ward/Alex Brearley Tel: +44 207 638 5600 Trafalgar New Homes Plc (END) Dow Jones Newswires October 13, 2011 10:33 ET (14:33 GMT)