TIDMMAN
RNS Number : 5393J
Manroy PLC
01 July 2011
FOR IMMEDIATE RELEASE
1 July 2011
MANROY PLC
("MANROY" OR THE "COMPANY")
EXERCISE OF MANROY USA OPTION AGREEMENT
The Directors of Manroy (AIM:MAN), the UK's leading machine gun
manufacturer, are pleased to announce that the Company has
exercised its call option (the "Option") to acquire a 49 per cent.
stake in Manroy USA LLC ("MUSA") and a 50 per cent. share in the
factory premises occupied by MUSA for a total consideration of $2.5
million (GBP1.6 million).
On 3 December 2010, Manroy entered into a call option agreement
(the "Option Agreement") with, inter alia, Caledonian Heritable
Limited ("Caledonian") over 490 units of membership in MUSA,
representing Caledonian's member's capital account in MUSA and
Caledonian's 50 per cent. share in the factory premises in
Scottsboro, Alabama, occupied by MUSA, at an option price of US$2.5
million (GBP1.6 million) payable in cash or in shares at the
discretion of Caledonian.
The Option Agreement was due to expire on 31 March 2011 but, as
announced by Manroy on 1 April 2011, it was extended to 30 June
2011 following MUSA's acquisition of related assets in the United
States and Manroy's request to undertake further due diligence on
the acquired assets.
Acquisition of business and assets of Sabre Defence Industries
LLC by MUSA
In March 2011, MUSA completed the acquisition of the business
and assets of Sabre Defence Industries LLC ("Sabre") for a total
cost of approximately $6.0 million (GBP3.7 million) in cash. An
initial payment of $4.95 million (GBP3.1 million) was made on 15
March 2011 for substantially all of the operating assets of Sabre
and a subsequent payment of $0.63 million (GBP0.4 million) was made
on 31 March 2011. The balance was provided as a loan for working
capital while the MUSA management team developed the Sabre assets
to their full operating capacity. This acquisition significantly
increased MUSA's size and capability and the Manroy Directors
consider that, following the exercise of the Option, it improves
Manroy's future prospects.
Sabre was established in 2002 following the asset purchase of a
business manufacturing M2 Heavy Machine Guns ("HMG"), Quick Change
Barrel kits and M2 parts. These are also the principal products
which are designed, manufactured and supplied by Manroy in the UK.
Sabre's principal customer is the US Department of Defense ("DoD"),
together with additional US law enforcement agencies and commercial
customers. Sabre is based in Nashville, Tennessee and operates from
a 35,240 ft(2) facility.
Over the past nine years, Sabre has completed contracts for the
DoD worth in aggregate approximately $83 million (GBP52 million).
As a result of the acquisition of the business and assets of Sabre,
MUSA gained a barrel manufacturing line, manufacturing capacity for
key elements of the HMG and production capability for M4, M5 and
M16 rifles. In addition, Sabre has a commercial product line for
civilian and law enforcement customers which, in due course, could
potentially be sold to a trade buyer if considered by the Directors
of MUSA not to be a core activity. The assets purchased include
machinery at a fair market value of $4.1 million (GBP2.5 million)
and work in progress and inventory currently valued at
approximately $6.6 million (GBP4.1 million). Therefore, in
aggregate, MUSA acquired assets with a value of $10.7 million
(GBP6.6 million) for approximately $6.0 million (GBP3.7
million).
The Directors of Manroy believe that the purchase by MUSA of the
business and assets of Sabre has immediately accelerated MUSA's
capabilities by at least two years. This transformational
opportunity for MUSA resulted from Sabre's filing for bankruptcy in
late 2010 following legal action against its then management.
Consequently, MUSA acquired the business and assets of Sabre from
Cadence Bank in an open auction. Sabre has not supplied the DoD
since July 2010 as a result of this legal action; however contracts
with the DoD, worth approximately $10.2 million (GBP6.4 million),
are in the process of being novated to MUSA. MUSA's management
expects the manufacture and supply of Sabre's products to resume
shortly. MUSA's management intends to fully integrate Sabre's
business and assets into the current MUSA business and will manage
the enlarged company without the previous Sabre management.
Caledonian provided a loan to MUSA of approximately $2.7 million
(GBP1.7 million) for Caledonian's 49 per cent. share of the
acquisition cost of the business and assets of Sabre. By exercising
the Option, Manroy is proposing, subject to shareholder approval as
set out below, to advance $2.8 million (GBP1.8 million) to MUSA to
enable MUSA to repay this loan along with interest of approximately
$0.1 million. The Directors of Manroy are considering various
funding options in this regard and will make a further announcement
as appropriate.
MUSA Option Agreement
Under the terms of the Option Agreement, Caledonian is entitled
to elect to receive the consideration of US$2.5 million (GBP1.6
million) in either cash or ordinary shares of 5p each in the
Company ("Ordinary Shares"), to be issued at 75p per share, which
was the placing price at the time of the Company's admission to
trading on AIM in December 2010 when the Option Agreement was
entered into.
As Caledonian is a member of the concert party, which is
currently interested in 39.2 per cent. of the Company's issued
share capital, in the event that Caledonian elects to receive its
consideration in Ordinary Shares, the Company will seek a waiver of
the obligations of the concert party under Rule 9 of the City Code
on Takeovers and Mergers (the "Whitewash"). Any such Whitewash
would require approval of the Company's independent shareholders at
a general meeting. Any allotment of Ordinary Shares would be
deferred until the business day immediately following expiry of
five days following approval of the Whitewash by independent
shareholders.
Further details regarding MUSA
MUSA was incorporated in 2009 and since then has received
technical and business development support from Manroy. MUSA is
owned as to 51 per cent. by John Buckner, an experienced operator
in the US defence industry, with the balance currently owned by
Caledonian.
MUSA's strategy is to sell into the US defence market, through
licensing technology and products, and to provide support in the
same manner as Manroy provides to the MoD and its export customers.
A technical assistance agreement has been finalised which has been
endorsed by the US Department of State confirming US authority for
the technical agreement between Manroy and MUSA.
In addition to the acquisition of the business and assets of
Sabre, a further recent significant development for MUSA is the
receipt of confirmation that it is a recognised Small Business,
under the Small Business Administration ("SBA") in the United
States. Confirmation of this status from the SBA enables MUSA to
tender for additional contracts and improves its prospects of
winning those contracts. This is expected to enable MUSA to
generate significantly increased revenue and profitability.
MUSA is managed by John Owens (President) and a number of senior
managers. It is expected that, following exercise of the Option,
Glyn Bottomley, Manroy's Chief Executive, and David Low, a
Non-Executive Director of Manroy, will represent Manroy on the
board of MUSA.
Glyn Bottomley, CEO of Manroy, said: "We are very pleased to
have exercised our option to acquire the stake in MUSA. Since we
entered the Option Agreement in December 2010, MUSA has
significantly developed as a business - firstly through the
acquisition of Sabre's assets and secondly through gaining
accreditation from the Small Business Administration. Both of these
will have a very positive impact on MUSA and will consequently
enhance Manroy's prospects."
For further information please contact:
Manroy Plc Tel: 01252 874 177
Glyn Bottomley, Chief Executive
Paul Carter, Finance Director
Arbuthnot Securities Limited Tel: 020 7012 2000
Tom Griffiths
Ed Groome
Tavistock Communications Tel: 020 7920 3150
Baron Phillips
Simon Compton
This information is provided by RNS
The company news service from the London Stock Exchange
END
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