In October 2002 Bennelong announced an offer for Crown Sports plc at a price of five pence per share. The Independent Directors advised shareholders to reject this offer on the basis that it materially undervalued the company. On 25th November 2002 the Independent Directors announced that discussions were taking place with Bennelong about increasing its offer.
Following these discussions, Bennelong announced an increased offer of 7 pence per Crown Sports share. Linked to this offer is an agreement under which Crown Sports’ listing will be maintained, a new board will be put in place and the strategy of the group will be focused on the health and fitness business; thereby leading to a reduction of debt, increased management focus and reduced business risk.
As a key step in implementing this strategy, the Independent Directors decided to pursue the sale of Crown Golf, the largest of the Group’s non-health and fitness businesses, and over recent weeks have been conducting detailed sale negotiations with New Golf Club Investments Limited (“NGCI”). All commercial terms of the proposed sale have now been agreed and the board of Crown Sports has formally resolved to approve the sale of Crown Golf to NGCI for £14.5 million in cash.
NGCI’s capital structure comprises senior debt facilities of £10 million with first ranking security over the golf club assets, £4 million of secured loan stock with second ranking security and £0.5 million of equity.
It is expected that a formal binding agreement with NGCI will be entered into immediately following the finalisation by NGCI of the documentation relating to its financing arrangements. Although there can be no assurance that the timetable will be achieved or that NGCI will successfully conclude its financing arrangements, both the Independent Directors and NGCI wish to proceed to exchange of contracts as soon as possible and to completion by the end of Crown Sports’ current financial year.
As part of the proposed transaction, Crown Sports has agreed to subscribe in cash for £2,000,000 of the secured loan stock of NGCI referred to above. The loan stock will be repayable after two years and will bear a coupon of 3 per cent above base rate in the first year and 4 per cent above base rate in the second year, payable semi-annually in arrears.
In addition, the agreed terms for the sale of Crown Golf provide that, in the event that any of the golf assets are sold by NGCI within an 18 month period following completion, Crown Sports will be entitled to 10 per cent of the amount (if any) by which the sale proceeds exceed an agreed value for the relevant golf asset.
Following exchange of contracts for the sale of Crown Golf, a circular will be sent to shareholders giving them full details of the proposed transaction and convening the necessary extraordinary general meeting at which their approval will be sought.
The eight golf clubs which make up the Crown portfolio are Batchworth Park, Hertfordshire; Broke Hill in Kent; The Chase Golf Club in Staffordshire; Ecclestone Park, Merseyside; South Winchester in Hampshire; The Vale Golf Club in Worcestershire; Vale Royal Abbey in Cheshire; and Wickham Park, Hampshire.
Crown Sports plc www.crownsportsplc.com