2015

Sale of Beale PLC

« back to transactions

Smith Square acts as financial adviser to Beale PLC in relation to recommended cash offer by English Rose Enterprises Limited

On 19 January 2015, the boards of Beale PLC and English Rose Enterprises Limited, a company controlled by Andrew Perloff, announced that they had reached agreement on the terms of a recommended cash offer by English Rose for the entire issued and to be issued ordinary share capital of Beales.

Beales operates 29 department stores across the United Kingdom. The Beales Group was founded in 1881 and has its flagship store and corporate headquarters in Bournemouth, UK.

The offer by English Rose contained an acceptance condition of 75 per cent. On 20 February 2015, having received valid acceptances in relation to approximately 63.2 per cent. of the issued ordinary share capital of Beales, the English Rose Directors announced that they had decided to waive the acceptance condition and that all of the other conditions to the Offer had been either satisfied or waived. Accordingly, the Offer was declared unconditional in all respects.

Prior to the approach, English Rose and parties connected to English Rose (Portnard Limited, Panther Securities plc, the Maland Pension Fund and Andrew Perloff; together with English Rose the “Concert Party”) held, in aggregate, approximately 29.7 per cent. of the issued ordinary share capital of Beales. In addition, Portnard held 7,000,000 of 7,983,953 outstanding Preference Shares with an agreement to purchase the balance; Maland Pension Fund and Harold Perloff held the benefit of a £1.0 million term loan to Beales; and Panther was the landlord of 10 of Beales’ 29 stores, some of which had landlord break options, with an option to acquire one other store from its current third party owner. Portnard also held a right under the Beales Articles to convert some or all of the Preference Shares held by it into a maximum of 9.99 per cent. of the fully-diluted issued ordinary share capital of Beales on a change of control.

The Offer Price represented a discount of approximately 48 per cent. to the Closing Price of 11.5p per Beales Share on 16 January 2015, being the last business day prior to the date of the announcement. The Board of Beales considered the Offer Price to be disappointing. However, taking all relevant factors into account, in particular the complex capital structure inherited by the then Beales Board and the restrictions this imposed on Beales’ ability to fund its activities, including the requirement of the Concert Party to agree to any alternative funding options the Beales Board had identified (which meant that Beales might have been unable to generate sufficient cash flows to meet its financial commitments in the future), the Board of Beales unanimously recommended the Offer. It should be noted that, in addition, the Concert Party committed to support the Beales business with additional capital which is expected to improve the future security of the business, its employees and the Beales pension schemes.

Commenting on the Offer, William Tuffy, Chairman of Beales, said:

“English Rose’s proposal offers the certainty of a cash exit for shareholders today and improves the medium term financial security of the Beales business. Despite the significant progress made by the current management team in first stabilising and then greatly improving operating performance, the business continues to face significant challenges and financial constraints. The Board of Beales has explored all other realistic alternatives to raise additional capital to address these challenges and constraints but none could be delivered without the Concert Party’s agreement and consequently, we believe that this proposal represents a better alternative for all stakeholders than the business continuing with its current capital structure, given the level of risk this would entail.”

« back to transactions