RNS Number:0253K
BIL International Limited
14 April 2003
THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE
UNITED STATES, CANADA, AUSTRALIA OR JAPAN
BIL International Limited
14 April 2003
CASH OFFER BY HSBC
ON BEHALF OF BIL (UK) LIMITED
FOR THISTLE HOTELS PLC
FULL AND FAIR VALUE
* Certain cash value of 115 pence per share.
* 29 per cent. premium to Thistle's share price on 29 January 2003.
* Thistle pre-Offer share price already contained a large element of bid
premium, having traded at an average premium of 21 per cent. to the FTSE All
Share Leisure and Hotels Index, despite releasing several negative trading
statements over the period.
* Premium to the value of Thistle implied by comparable companies and recent
transactions.
* Fairness of value supported by target share prices of rated analysts and
supported by their commentary.
BASIS OF VALUATION
* NAV basis of valuation is appropriate to property investment companies not
trading hotel companies, which should be valued on an earnings basis. The
two types of company fundamentally differ in terms of revenue, cost and
capital expenditure flows.
* Thistle suggests that the value achieved in the sale of hotel assets to
Orb proves that Thistle's remaining hotel assets are worth their stated
value. The sale to Orb was only possible due to Thistle granting Orb a
10-year performance guarantee.
* Thistle's analysis of net assets ignores the significant and real
liabilities of Thistle, which would be triggered in the event of asset
sales.
PREMIUM TO IMPLIED VALUE OF THISTLE'S NON-CASH ASSETS
* On the basis that BIL is buying Thistle's cash balances at 100 per cent.
of their value, the Offer Price represents a premium of approximately 175
per cent. to the value implied by Thistle's non-cash assets by applying the
average 2002 peer group EBITDA multiple to Thistle's pro-forma EBITDA.
* On the same basis, if a return of 50 pence per share were made, the Offer
price represents a premium of approximately 61.5 per cent. over the implied
value of Thistle's residual assets.
UNCERTAIN OUTLOOK FOR THISTLE
* Following the Gulf War in 1991 and the last major downturn, it took
Thistle six years to exceed pre-Gulf war operating profit levels. As with
the last downturn, the UK hotel sector's problems are unlikely to be short
term.
* BIL believes that both geopolitical risk and global economic uncertainty
are greater now than in the early 1990s and that any potential recovery
could take even longer.
WORSENING COMPETITIVE ENVIRONMENT FOR THISTLE
* The number of available hotel rooms in London has increased by
approximately 13.7 per cent. between 1998 and 2002.
* Over the same period the number of visitor nights spent in London is
estimated to have fallen by approximately 1.9 per cent..
* A further 4,866 hotel rooms are currently under construction in London (an
additional increase of approximately 7.4 per cent. over 2002 levels).
* BIL believes that the increased competition will continue to have an
adverse impact on room rates, occupancy levels and REVPAR, further hampering
any potential recovery for Thistle.
HISTORIC UNDERPERFORMANCE BY THISTLE
* Between 1996 and 2002 the number of Thistle owned, operated or managed
hotels has fallen by approximately 44 per cent., whilst central costs have
increased by approximately 72 per cent..
* In 1998 Thistle's return on shareholders' funds was 5.9 per cent. Since
that time Thistle's returns have fallen steadily. Between 1998 and 2002,
despite investing #231.8 million in capital expenditure programmes,
Thistle's return on shareholders' funds has fallen by 58.5 per cent. to a
mere 2.4 percent in 2002.
* BIL does not believe that Thistle is currently positioned to derive the
full benefit from any upturn.
CERTAIN CASH FROM BIL AGAINST THISTLE'S UNCERTAIN FUTURE
* The Offer affords Thistle Shareholders a certain cash exit at a full and
fair value in an uncertain market.
* BIL will not dispose of its 45.8 per cent. holding in Thistle for a period
of at least 12 months, even in the event that a competing offer is made.
* Trading in Thistle Shares has historically been illiquid with, on average
only approximately 3.2 per cent. of Thistle's issued share capital changing
hands in any given month.
* BIL would expect, in the event that the Offer did not complete, that the
Thistle share price would fall back to, at best, pre-Offer levels. Taking
into account the inflation of the Thistle pre-Offer share price through bid
speculation, BIL believes that there is every chance that the Thistle share
price could fall even further.
Enquiries:
BIL
Arun Amarsi +65 6228 1427
HSBC
Neil Goldie-Scot +44 (0)20 7991 8888
Jan Sanders
Marcus Ayre
Brunswick
Jonathan Glass +44 (0)20 7404 5959
Simon Sporborg
THIS ANNOUNCEMENT SHOULD BE READ IN CONJUNCTION WITH THE ATTACHED PRESS RELEASE.
Definitions used in the Offer Announcement dated 4 March 2003 and in the Offer
Document dated 31 March 2003 have the same meaning when used in this
announcement, unless the context requires otherwise.
This announcement has been issued by HSBC, which is regulated in the UK by The
Financial Services Authority, and which is acting as financial adviser to BIL
and BIL (UK) and no one else in connection with the Offer and the matters
described in this announcement and will not be responsible to anyone other than
to BIL and BIL (UK) for providing the protections afforded to customers of HSBC,
nor for providing advice in relation to the Offer or any other matters described
in this announcement.
Unless BIL (UK) otherwise determines, the Offer is not being made, directly or
indirectly, in or into the United States, Canada, Australia or Japan or by use
of the mails of, or by any means or instrumentality of interstate or foreign
commerce of, or any facility of a national securities exchange of any of those
jurisdictions and the Offer should not be accepted by any such use, means,
instrumentality or facility or from within the United States, Canada, Australia
or Japan. This includes, but is not limited to, the post, facsimile
transmissions, telex, telephone, e-mail and the internet. Accordingly, copies of
this announcement and any related documents are not being sent and must not be
mailed or otherwise distributed or sent in, into or from the United States,
Canada, Australia or Japan. Persons receiving such documents (including, without
limitation, custodians, nominees and trustees) should not distribute or send
them in, into or from the United States, Canada, Australia or Japan or use the
United States, Canadian, Australian or Japanese mails or any such means,
instrumentality or facility for any purpose, directly or indirectly, in
connection with the Offer. Doing so may invalidate any related purported
acceptance of the Offer.
THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE
UNITED STATES, CANADA, AUSTRALIA OR JAPAN
BIL International Limited
14 April 2003
CASH OFFER BY HSBC
ON BEHALF OF BIL (UK) LIMITED
FOR THISTLE HOTELS PLC
INTRODUCTION
BIL notes the announcement by Thistle that it is today posting its defence
document to Thistle Shareholders.
BIL considers that the Offer represents full and fair value for Thistle
Shareholders. The Offer Price represents a significant premium to not only a
Thistle pre-Offer share price already inflated by bid-speculation, but also the
value of Thistle implied by both comparable companies and recent transactions,
as well as the implied value of Thistle's non-cash assets. The Offer further
provides Thistle Shareholders with a certain cash exit from an illiquid
investment which BIL believes has failed to perform and which faces an uncertain
outlook in a worsening competitive environment.
BIL urges all Thistle Shareholders to accept its full and fair Offer as soon as
possible, and in any event, by no later than 3.00pm (London time) on 22 April
2003.
FULL AND FAIR OFFER
BIL believes that the Offer provides Thistle Shareholders with full and fair
value. The Offer Price represents:
* 115 pence per share of certain cash value;
* a 29 per cent. premium to Thistle's share price on 29 January 2003;
* a 15 per cent. premium to Thistle's share price on 20 February 2003;
* a multiple of 27.2 times Thistle's 2002 pro-forma earnings;
* a multiple of 8.5 times Thistle's 2002 pro-forma EBITDA; and
* a premium to both comparable companies and recent transactions.
Market commentators endorse BIL's view that the Offer is fair. In its research
report dated 7 March 2003, CSFB comments: "Our fair value for the stock is
86p...The BIL bid represents a 34% premium to this price and therefore
represents in our view a fair value for shareholders. Given BIL's existing level
of ownership of Thistle stock, it could be argued that they might not be
expected to pay a full control premium in any case, which further enhances our
view that the price offered is fair."
PREMIUM TO COMPARABLES
Compared to the valuation of Thistle implied by a peer group of comparable
companies, considered by BIL to be the most comparable to Thistle, the Offer
Price represents:
* a premium of approximately 35 per cent. on the basis of Thistle's 2002
pro-forma EBITDA; and
* a premium of approximately 138 per cent. on the basis of Thistle's 2002
pro-forma earnings.
In addition, compared to the valuation of Thistle implied by recent acquisitions
of UK hotel companies, considered by BIL to be the most comparable to Thistle,
the Offer Price represents:
* a premium of approximately 32 per cent. on the basis of Thistle's 2002
pro-forma turnover; and
* a premium of approximately 147 per cent. on the basis of Thistle's 2002
pro-forma earnings.
PREMIUM TO INFLATED PRE-OFFER SHARE PRICE
During the last 12 months, although Thistle was only in a formal offer period
for a limited time, there was nonetheless significant bid speculation
surrounding Thistle. As a result, there is a significant element of bid premium
contained within the Thistle pre-Offer share price. The Offer premium is in
addition to this.
Despite Thistle releasing several negative trading statements over the period,
Thistle's share price over the 12 months prior to 20 February 2003 traded at an
average premium of 21 per cent. to the FTSE All Share Leisure and Hotels Index.
BIL believes, and commentators agree, that this is due to numerous instances
throughout the year of speculation surrounding corporate action and possible
bids for Thistle. Indeed, in a research report dated 5 September 2002, Schroder
Salomon Smith Barney notes: "Thistle shares have been run up on expectation of
some corporate action which explains why Thistle has outperformed other hotel
shares and stands on a PE multiple well above the peer group." In addition, on
31 January 2003, the Investors' Chronicle wrote: "Thistle's share price has
massively outperformed both the sector and the market. That's entirely a result
of corporate activity and speculation surrounding the four-star chain."
NAV VALUATION APPROACH INAPPROPRIATE
As set out in the Offer Document, BIL considers that a NAV based valuation
approach, whilst an accepted methodology for valuing a property investment
company, is entirely inappropriate for valuing a hotel company as the two types
of company differ fundamentally in terms of all the key parameters, namely
revenue, costs and capital expenditure.
In any event, Thistle's analysis of net asset value ignores the significant and
real liabilities of Thistle, which would be triggered in the event of asset
sales:
* the contractual early redemption cost of Thistle's debenture debt of
approximately #406 million, a premium of 56 per cent. to its book value.
This has the effect of reducing Thistle's stated net cash position of
approximately #108 million to a net debt position of approximately #39
million, a movement of some #147 million;
* a potential tax liability on asset sales of up to #70 million;
* the cost of exiting the hotels business on any asset sale, including the
cost of terminating the relationship agreement entered into in 2002 at the
time of the disposal of the 37 regional hotels to Orb which "contains terms
which are designed to ensure that the (Orb) Hotels are provided with
marketing services, purchasing services, technology support, property and
building management support and accounting support"*; and
* the #90 million letter of credit relating to the 10 year performance
guarantee to Orb, covering the hotel businesses sold to Orb.
PREMIUM TO IMPLIED VALUE OF THISTLE'S NON-CASH NET ASSETS
Thistle's peers trade on an average enterprise value ("EV") multiple of
approximately 6.3 times 2002 EBITDA. Removing the effect of the approximately
76.1 pence per share of cash on Thistle's balance sheet and applying the average
6.3 times EV/EBITDA multiple on which Thistle's peer group currently trades to
Thistle's 2002 pro-forma EBITDA implies an (ex cash) share price of only 14.2
pence per share:
2002 pro-forma EBITDA #61.0m
Peer group EV/EBITDA multiple 6.3x
Implied enterprise value #383.2m
Less: FRS13 value of debt (#314.9m)
Implied (ex cash) equity value #68.3m
Thistle Shares in issue 482.4m
Implied Thistle (ex cash) share price 14.2p
Excluding the effect of the cash on Thistle's balance sheet further emphasises
the full and fair value of BIL's offer:
BIL Offer 115.0p
Thistle cash per share (76.1p)
BIL ex cash Offer value 38.9p
Premium to implied Thistle (ex cash) share price 174.7%
In addition, BIL notes the statement by Thistle that it is considering returning
approximately 50 pence per share to Thistle Shareholders.
Thistle Shareholders should be aware that, on the basis set out above, if a
return of 50 pence per share were made, the implied value of Thistle's residual
assets would be approximately 40.2 pence per share. In comparison, BIL's Offer
Price, net of a 50 pence per share distribution, is 65 pence per share. This
represents a premium of approximately 61.5 per cent. over the implied value of
Thistle's residual assets.
BIL's Offer provides Thistle Shareholders with a certain cash value of 115 pence
per share today.
UNCERTAIN OUTLOOK FOR THISTLE
Following the Gulf War in 1991 and the last major downturn, it took Thistle six
years to exceed pre-Gulf war operating profit levels. As with the last downturn,
the UK hotel sector's problems are unlikely to be short term. Indeed, BIL
believes that both geopolitical risk and global economic uncertainty are greater
now than in the early 1990s and that any potential recovery could take even
longer.
WORSENING COMPETITIVE ENVIRONMENT FOR THISTLE
Having disposed of virtually all of its regional UK portfolio, Thistle's
performance is now almost entirely dependent on its owned and leased London
hotels. Since the last economic recovery in the mid 1990s, competition has
increased significantly in the London hotel market:
* the number of available hotel rooms in London has increased from 57,768 in
1998 to 65,691 in 2002 (an increase of approximately 13.7 per cent.);
* over the same period the number of visitor nights spent in London is
estimated to have fallen by approximately 1.9 per cent.;
* a further 4,866 hotel rooms are currently under construction in London (an
additional increase of approximately 7.4 per cent. over 2002 levels); and
* by way of illustration, Thistle's largest hotel, the 801 room Thistle
Tower, now competes against several nearby hotels including the London
Bridge Hotel, the Four Seasons Hotel Canary Wharf, the Novotel London Tower
Bridge and the Great Eastern Hotel representing, in total, 568 rooms, all of
which commenced trading between 1998 and 2002. Additionally, the Crowne
Plaza London Hotel, the Holiday Inn Canary View and the Novotel Southwark
Bridge, representing a further 785 rooms are all currently under
construction and are expected to compete directly with the Thistle Tower.
BIL believes that the increased competition will continue to have an adverse
impact on room rates, occupancy levels and REVPAR, further hampering any
recovery.
HISTORIC UNDERPERFORMANCE BY THISTLE
For some time BIL has been concerned by Thistle's failure to perform to its
potential. BIL considers that Thistle's underperformance began long before the
current industry downturn and does not believe that Thistle is currently
positioned to derive the full benefit from any upturn:
* Between 1996 and 2002 the number of Thistle owned, operated or managed
hotels has fallen by approximately 44 per cent. (from 100 to 56 hotels)
whilst central costs have increased by approximately 72 per cent. (from
#12.3 million to #21.1 million). Thistle Shareholders should in no way
confuse significant central costs with Thistle's claims of "operational
leverage"; and
* in 1998 Thistle's return on shareholders' funds was 5.9 per cent. Since
that time Thistle's returns have fallen steadily. Between 1998 and 2002,
despite investing #231.8 million in capital expenditure programmes,
Thistle's return on shareholders' funds has fallen by 58.5 per cent. to a
mere 2.4 percent in 2002.
THISTLE VIEW:
Thistle has compared the Offer repeatedly to Thistle's twelve-month average
share price.
BIL RESPONSE:
CERTAIN CASH FROM BIL AGAINST THISTLE'S UNCERTAIN FUTURE
Despite Thistle releasing several negative trading statements over the period,
Thistle's share price over the twelve months prior to 20 February 2003 traded at
an average premium of 21 per cent. to the FTSE All Share Leisure and Hotels
Index. BIL believes, and commentators agree, that this is due to numerous
instances throughout the year of speculation surrounding corporate action and
possible bids for Thistle. Indeed, in a research report dated 5 September 2003,
Schroder Salomon Smith Barney notes: "Thistle shares have been run up on
expectation of some corporate action which explains why Thistle has outperformed
other hotel shares and stands on a PE multiple well above the peer group." In
addition, on 31 January 2003, the Investors' Chronicle wrote: "Thistle's share
price has massively outperformed both the sector and the market. That's entirely
a result of corporate activity and speculation surrounding the four-star chain."
At a premium of approximately 29 per cent. to the Closing Middle Market Price of
89.0 pence per Thistle Share on 29 January 2003, being the last business day
prior to Investec re-rating Thistle based on "potential for corporate action",
BIL considers that the Offer Price represents full and fair value for Thistle
Shareholders.
Compared to the valuation of Thistle implied by a peer group of comparable
companies, considered by BIL to be the most comparable to Thistle, the Offer
Price represents:
* a premium of approximately 35 per cent. on the basis of Thistle's 2002
pro-forma EBITDA; and
* a premium of approximately 138 per cent. on the basis of Thistle's 2002
pro-forma earnings.
In addition, compared to the valuation of Thistle implied by recent acquisitions
of UK hotel companies, considered by BIL to be the most comparable to Thistle,
the Offer Price represents:
* a premium of approximately 32 per cent. on the basis of Thistle's 2002
pro-forma turnover; and
* a premium of approximately 147 per cent. on the basis of Thistle's 2002
pro-forma earnings.
Market commentators endorse BIL's view of the fairness of the Offer. In its
research report dated 7 March 2003, CSFB comments: "Our fair value for the stock
is 86p...The BIL bid represents a 34% premium to this price and therefore
represents in our view a fair value for shareholders. Given BIL's existing level
of ownership of Thistle stock, it could therefore be argued that they might not
be expected to pay a full control premium in any case, which further enhances
our view that the price offered is fair."
BIL considers that the Offer affords Thistle Shareholders a certain cash exit at
a full and fair value in an uncertain market. This compares with a possible 50
pence per share of certain cash value today plus an uncertain share price in an
illiquid stock tomorrow.
BIL will not dispose of its 45.8 per cent. holding in Thistle for a period of at
least 12 months, even in the event that a competing offer is made. This should
be considered in the light of general market uncertainty and the fact that
trading in Thistle Shares has historically been illiquid with, on average only
approximately 3.2 per cent. of Thistle's issued share capital changing hands in
any given month.
BIL would expect, therefore, in the event that the Offer did not complete, that
the Thistle share price would fall back to, at best, pre-Offer levels. Taking
into account the comments above surrounding the inflation of the Thistle
pre-Offer share price through bid speculation, BIL believes that there is every
chance that the Thistle share price could fall even further.
Arun Amarsi, Chief Executive of BIL said:
"Over the past few years we have become increasingly concerned by Thistle's
performance in an ever more competitive market. I firmly believe that BIL is
offering Thistle Shareholders the opportunity to realise a cash exit at a full
and fair value from an investment that, in our opinion, has failed to perform
and that is facing an increasingly uncertain outlook. The offer represents a
significant premium to Thistle's pre-offer price which itself was already
inflated by bid speculation. We urge shareholders to accept the offer."
*Extracted from the circular issued by Thistle dated 12 March 2002 regarding the
disposal of certain hotels to Orb.
Enquiries:
BIL
Arun Amarsi +65 6228 1427
HSBC
Neil Goldie-Scot +44 (0)20 7991 8888
Jan Sanders
Marcus Ayre
Brunswick
Jonathan Glass +44 (0)20 7404 5959
Simon Sporborg
THIS ANNOUNCEMENT SHOULD BE READ IN CONJUNCTION WITH THE ATTACHED APPENDIX WHICH
CONTAINS THE BASES AND SOURCES OF INFORMATION.
Definitions used in the Offer Announcement dated 4 March 2003 and in the Offer
Document dated 31 March 2003 have the same meaning when used in this
announcement, unless the context requires otherwise.
This announcement has been issued by HSBC, which is regulated in the UK by The
Financial Services Authority, and which is acting as financial adviser to BIL
and BIL (UK) and no one else in connection with the Offer and the matters
described in this announcement and will not be responsible to anyone other than
to BIL and BIL (UK) for providing the protections afforded to customers of HSBC,
nor for providing advice in relation to the Offer or any other matters described
in this announcement.
Unless BIL (UK) otherwise determines, the Offer is not being made, directly or
indirectly, in or into the United States, Canada, Australia or Japan or by use
of the mails of, or by any means or instrumentality of interstate or foreign
commerce of, or any facility of a national securities exchange of any of those
jurisdictions and the Offer should not be accepted by any such use, means,
instrumentality or facility or from within the United States, Canada, Australia
or Japan. This includes, but is not limited to, the post, facsimile
transmissions, telex, telephone, e-mail and the internet. Accordingly, copies of
this announcement and any related documents are not being sent and must not be
mailed or otherwise distributed or sent in, into or from the United States,
Canada, Australia or Japan. Persons receiving such documents (including, without
limitation, custodians, nominees and trustees) should not distribute or send
them in, into or from the United States, Canada, Australia or Japan or use the
United States, Canadian, Australian or Japanese mails or any such means,
instrumentality or facility for any purpose, directly or indirectly, in
connection with the Offer. Doing so may invalidate any related purported
acceptance of the Offer.
The directors of BIL and BIL (UK) accept responsibility for the information
contained in this announcement, save that the only responsibility accepted by
them in respect of the information in this announcement relating to Thistle or
the Thistle Group (which has been compiled from published sources) is to ensure
that such information has been correctly and fairly reproduced and presented.
Subject as aforesaid to the best of the knowledge and belief of the directors of
BIL and BIL (UK) (who have taken all reasonable care to ensure that such is the
case), the information contained in this announcement for which they are
responsible is in accordance with the facts and does not omit anything likely to
affect the import of such information.
APPENDIX
BASES AND SOURCES OF INFORMATION
i. Unless otherwise stated, share prices are Closing Middle Market Prices as
derived from the Daily Official List for the relevant date;
ii. Thistle's Closing Middle Market Price on 29 January 2003, the last business
day before Investec re-rated Thistle based on "potential for corporate
action", was 89.00 pence;
iii. Thistle's Closing Middle Market Price on 20 February 2003, the last
business day prior to the announcement by BIL that it was contemplating
making an offer for Thistle, was 100.00 pence;
iv. The premia of 2002 pro-forma EV/EBITDA and 2002 pro-forma earnings for
Thistle compared to those ratios for companies considered by BIL to be most
comparable to Thistle are based on the enterprise value represented by the
Offer, as derived from the Offer Price multiplied by the number of Thistle
Shares in issue and the market value of Thistle's debt as at 28 March 2003,
being the last practicable business day before the posting of the Offer
Document, (see section (xi) of this Appendix) net of cash at bank and in
hand; and BIL's calculation of Thistle's 2002 pro-forma results as detailed
in section (xiv) to this Appendix and the average of the same ratios for the
comparable companies set out in section (xii) to this Appendix;
v. The premia of 2002 pro-forma EV/turnover and 2002 pro-forma earnings for
Thistle compared to those ratios for recent transactions considered by BIL
to be most comparable to Thistle are based on the enterprise value
represented by the Offer (as set out in section (iv) to this Appendix) and
BIL's calculation of Thistle's 2002 pro-forma results as detailed in section
(xiv) to this Appendix and the average of the same ratios for the recent
transactions set out in section (xiii) to this Appendix;
vi. The statement "Following the Gulf War in 1991 and the last major downturn,
it took Thistle six years to exceed pre-Gulf War operating profit levels" is
based on Thistle's reported operating profit for each of the years 1990 to
1996 inclusive, as set out in Thistle's annual report and accounts for each
of those years.
vii. The statement "Despite Thistle releasing several negative trading
statements over the period, Thistle's share price over the twelve months
prior to 20 February 2003 traded at an average premium of 21 per cent. to
the FTSE All Share Leisure and Hotels Index." is based on:
a. a comparison of Thistle's share price performance to that of the FTSE All
Share Leisure and Hotels Index (rebased to Thistle's 21 February 2002 share
price) over that period;
b. the release during that period of the 30 December 2001 preliminary results (4
March 2002), the 14 July 2002 interim results (3 September 2002) and a
trading update (16 January 2003) which disclosed falls in revenue of 5.9 per
cent., 13.6 per cent. and 6.8 per cent. respectively for the periods to
which those reports related; and
c. press and analyst reports of potential corporate activity in relation to
Thistle, as sourced from a Credit Suisse First Boston research note (26
November 2002), Bloomberg (4 August 2002) and Investors Chronicle (31
January 2003).
i. The potential tax liability on asset sales of up to #70 million has been
sourced from Thistle's 2002 report and accounts.
ii. The #90 million letter of credit has been sourced from the circular to
Thistle Shareholders dated 12 March 2002, regarding the disposal of certain
hotels to Orb.
iii. The contractual cost of redemption relates to the cost of redeeming the
debentures as at 28 March 2003, under the basis of calculation set out in
the debenture prospectuses of 4 July 1989 and 26 October 1989 (10.75 per
cent. First Mortgage Debenture Stock 2014) and 19 July 1997 (7.875 per cent.
First Mortgage Debenture Stock 2022).
iv. References to market value relate to the aggregated closing market prices
for each debenture on 28 March 2003, as sourced from Datastream.
v. Comparable companies
a. References to "comparable companies", "peer group" or similar statements in
this announcement refer to Six Continents plc, Whitbread plc, De Vere Group
plc, Macdonald Hotels plc and Jarvis Hotels plc, the UK listed hotel
companies BIL considers to be most comparable to Thistle.
b. Comparisons between the Offer and the peer group have been made as at 3 March
2003, the last business day prior to the announcement of the Offer.
c. Enterprise values for the peer group companies have been derived as follows:
i. equity values have been based on the closing middle market price on 3 March
2003 and the number of shares in issue at that time, as sourced from Topic;
ii. each company's debt has been sourced from its most recent published annual
report and accounts or, where relevant, interim or preliminary results
announcements; and
iii. where appropriate debt has been marked to market using closing prices on 3
March 2003, as sourced from Bloomberg and Datastream.
a. EBITDA and earnings figures have been annualised for each company to 31
December 2002, the approximate financial year end for Thistle, and have been
sourced from the most recent published annual report and accounts,
preliminary results announcements and analyst research notes for those
companies, as appropriate.
b. EBITDA and earnings figures have been restated to exclude exceptional items
and goodwill amortisation (where the applicable information is available).
c. The EBITDA and earnings multiples for each member of the peer group and the
relevant averages for the peer group as a whole, as derived from BIL's
analysis, are set out below:
Company Enterprise value EV/EBITDA Earnings
(FRS 13)
Six Continents plc #6.7bn 7.5x 14.5x
Whitbread plc #2.7bn 6.7x 10.9x
De Vere Group plc #532m 7.0x 11.3x
Macdonald Hotels plc #197m 6.1x 10.2x
Jarvis Hotels plc #156m 4.1x 10.1x
Average 6.3x 11.4x
i. Recent transactions
a. References to "recent transactions", or similar statements in this document,
refer to the recent UK sector transactions set out below involving companies
which BIL considers to be most comparable to Thistle:
Date
Enterprise EV /Sales EV /EBITDA Earnings
Target company value
Heritage Hotels April 2001 #235.0m 2.4x 8.0x n/a
Posthouse Hotels April 2001 #810.0m n/a 6.2x n/a
Regal Hotel Group PLC July 2000 #269.4m 2.3x 9.0x 7.2x
Menzies Hotels PLC June 2000 #45.0m 1.9x 7.5x 3.3x
Swallow Group plc November 1999 #749.4m 3.6x 11.6x 19.7x
Scottish Highland Hotels August 1999 #52.3m 2.4x 8.4x 9.4x
plc
County Hotels Group plc January 1999 #107.8m 2.3x 8.0x 15.2x
Average 2.5x 8.4x 11.0x
b. The equity consideration paid under the relevant transaction has been derived
from published offer documents and public announcements or, where such
documents or announcements have not been issued, from analyst research
notes, SDC Platinum or other public information.
c. Historical financial information for each of the target companies has been
sourced from the most recent published annual report and accounts or interim
or preliminary results statements for each company prior to the date of the
transaction, analyst research notes, SDC Platinum or other public
information.
d. Where applicable, debt has been marked to market using the closing prices
prevailing at the time of the transaction, sourced from Bloomberg and
Datastream.
e. Turnover, EBITDA and earnings for each target company have been restated to
exclude exceptional items and goodwill amortisation (where the applicable
information is available).
i. Pro-forma results
a. References to "2002 pro-forma EBITDA", "2002 pro-forma earnings" or similar
statements in this announcement relate to Thistle's reported 2002 results as
adjusted by BIL to remove discontinued operations and to reflect the full
year affect of the disposal of 37 hotel businesses to Orb in April 2002.
b. The adjustments set out below have been made by BIL in arriving at the
pro-forma results:
(1) the results from disposed operations have been removed;
(2) the management fee from the operation of the disposed hotels has
been adjusted to reflect an estimated full year's fee of #7.3 million,
derived from a Credit Suisse First Boston research note dated 26
November 2002;
(3) interest income and expense have been adjusted to reflect a full
year's reduction in Thistle's debt balance and a full year's interest
income from its cash balance; and
(4) a 30 per cent. tax rate has been assumed in calculations of
profit after tax.
2002 2002 2002 2002 2002
Actual Disposed Mgmt fee Interest adj Pro-forma
(prelims) (prelims) (pro-forma) (pro-forma) (pro-forma)
Turnover 190.0 (33.0) 1.4 158.4
EBITDA 71.9 (12.4)(*) 1.4 61.0
EBITA 49.2 (9.0) 1.4 41.6
PBT 30.9 (9.0) 1.4 5.8(**) 29.1
Assumed tax 30.0%
PAT 21.8 20.4
- EPS 4.5p 4.2p
- Adjusted EPS 5.2p
(*) Disposed depreciation charge calculated as 3/12ths of the 2001
depreciation charge relating to the disposed hotels of #13.4 million
(**) Interest adjustment calculated by removing the cost of 3
months' interest at 5.4 per cent. on #174 million of debt retired
following the sale of 37 hotels to Orb on 4 April 2002 and adding #3.5
million, equivalent to 3 months' interest income on the estimated cash
balance of #364.1 million, following the transaction with Orb (source:
Thistle's 2002 annual report, 2001 annual report and 14 July 2002
interim statement)
i. The statement "trading in Thistle Shares has historically been illiquid with,
on average only approximately 3.2 per cent. of Thistle's issued share
capital changing hands in any given month" is derived from the average
number of Thistle Shares traded in any calendar month between January 1997
and December 2002 inclusive (sourced from Datastream) divided by the average
number of Thistle Shares in issue for the corresponding calendar month
(sourced from Datastream).
ii. The number of hotels owned, operated or managed by Thistle in 1996 is
sourced from the 1996 Thistle annual report. The number of hotels owned,
operated or managed by Thistle in 2002 is sourced from the 2002 Thistle
annual report. Central costs for 1996 and 2002 are taken to be
"Administrative Expenses" as disclosed and restated in the 1997 annual
report and as disclosed in the 2002 annual report respectively.
iii. Thistle's return on shareholders' funds for 1998 and 2002 is calculated by
dividing Thistle's pre-exceptional post-tax profit by Thistle's
shareholders' funds as disclosed in the 1998 Thistle annual report and the
2002 Thistle annual report.
iv. The statement "Between 1998 and 2002, despite investing #231.8 million in
capital expenditure programmes" is calculated by adding the disclosed
capital expenditure line from Thistle's audited cash flow statements from
the relevant audited results for 1998 to 2002 inclusive.
v. The number of available hotel rooms in London in 1998 and 2002 is sourced
from Jones Lang LaSalle Hotel Research.
vi. The estimated fall in the number of visitor nights spent in London is
sourced from London Trends 2003 produced by PKF.
vii. The number of hotel rooms currently under construction in London is sourced
from the London Tourist Board.
viii. The number of rooms in the Thistle Tower is sourced from the 2002 Thistle
annual report.
ix. The new hotel openings since 1998 competing with the Thistle Tower, and
their respective number of rooms, are sourced from the London Tourist Board.
x. The calculation of the implied price of a Thistle Share is based on the
enterprise value, as derived from the 2002 pro-forma EBITDA multiplied by
the 2002 EV/EBITDA for comparable companies, less the market value of
Thistle's debt as at 28 March 2003 net of cash at bank and in hand and any
cash distributed, divided by Thistle's existing issued share capital.
This information is provided by RNS
The company news service from the London Stock Exchange
END
OUPUSONROARSAAR