NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS IN THAT JURISDICTION
Metro Baltic Horizons plc
Response to the announcement of a
Cash Offer by Eagleheads Investments OU
For immediate release
20 July 2012
The board of Metro Baltic Horizons plc ("MBH" or the "Company") notes cash offer for the entire issued share capital of MBH (the "unsolicited Offer") by Eagleheads Investments OU ("Eagleheads").
Preliminary observations on the unsolicited Offer
Eagleheads has been formed by Metro Capital Management AS ("MCM"), affiliates of MCM and Ms Margarita Novikova.
MBH is close to filing claims in excess of €20 million against MCM and others.
The Board's preliminary view is that the unsolicited Offer is an effort to win control of the Company at an offer price value of €2.36 million for the purpose of stopping MBH pursuing legal claims against MCM (and others) and to acquire its principal asset at a significant undervalue.
MBH is at an advanced stage of preparation of legal proceedings against the Company's former directors and professional advisers, including MCM and its principal, Mart Habakuk, and TAS (formerly Metro Frontier Limited, a wholly owned subsidiary of MCM) and its former principal, James Kenny. The Board anticipates that such claims will be for an amount in excess of €20 million and will include serious allegations of mismanagement of the Company.
The Board believes that shareholders suffered a loss in the value of their shares due to the mis-management of the Company's assets by MCM when it was the Company's investment adviser between December 2006 and its dismissal in August 2011. The Board fears that similar mismanagement might cause further losses if Eagleheads gains control of the Company.
The Board has set out its preliminary observations on the unsolicited Offer below:
- The Company's NAV has fallen dramatically since the initial admission of the Company's shares to AIM as a result of the mismanagement of the Company (as stated in the trading updated dated 3 August 2011 and Chairman's statements to the Annual Reports for the years ended 31 December 2010 and 31 December 2011). The mismanagement included, inter alia, excessive leverage, misleading announcements, the purchase of properties from related parties, including MCM/or and parties related to it, and unauthorised profits to the manager.
- The Company's NAV stated in the 2011 annual report of 12.50 Euro cents was arrived at on a conservative basis, after deducting various costs including (i) investment management fees claimed by MCM, which the Board does not intend to pay given MCM's breaches of duty as investment manager, and (ii) purported liabilities and costs that are contested by the Company and which are associated with the loan note transaction pursuant to security granted over the St Petersburg site in favour of a former wholly-owned subsidiary of MCM.
- Valuations can be prepared on various bases. The valuation of the St Petersburg site referred to in Eagleheads' announcement was prepared in connection with Russian court proceedings on a forced sale basis and is not directly comparable with the open market value that MBH will seek in the event of a sale of the property. The Board is currently reviewing its options in the market at the same time as disputing the validity of the loan facility allegedly secured on the property. This is anticipated to lead to a decision to place the property on the market, which was independently valued at 31 December 2011 at €6.2m.
- The Board has prepared litigation based on a reasonable expectation of material recoveries. The value of such litigation cannot be reflected in the accounts.
- Accordingly, while the Board believes that the NAV is fully and accurately calculated in accordance with MBH's accounting policies, it does not reflect the full potential value of the Company.
In addition, the unsolicited Offer clearly states Eagleheads' intention to seek the cancellation of the Company's admission to AIM. The Board believes that the AIM quotation and related corporate governance and disclosure requirements provide a valuable set of protections for Shareholders which could be lost should MCM acquire control of the Company.
3. Additional concerns
In addition, the Board has the following concerns with the content of the unsolicited Offer:
- The Board believes that the unsolicited Offer is misleading in that it refers to a purported right on the part of MCM to convert outstanding investment management fees into ordinary shares in MBH. While an amended investment management agreement was entered into by TAS and the the previous board, the Board believes it was subject to shareholder consent and that such specific consent was not sought and therefore no such right exists. Furthermore this specific issue was the catalyst for the actions taken leading to the appointment of Messrs Reid and Murphy to the Board, in relation to what they believed to be an attempt in part by TAS and MCM to take control of the Company. The Board also notes that the Company does not intend to discharge these fees owing to breaches of the Investment Management and Investment Advisory agreements.
- The unsolicited Offer contains insufficient information on the property investment background of Ms Novikova. MCM's property investment track record in relation to the Company's assets is self-evident to MBH's shareholders.
- Certain of the entities disclosed in announcement of the unsolicited Offer as related parties to MCM are the same parties who subscribed for the disputed loan notes allegedly secured on the St Petersburg property.
As stated above, the Board is considering its full response to the unsolicited Offer with Fairfax and will make a further announcement in due course. Shareholders are recommended to not take any immediate action in relation to the unsolicited Offer.
MBH Shares in issue
MBH confirms that it has 26,200,270 ordinary shares of €0.01 each in issue and admitted to trading on the AIM market of the London Stock Exchange with the ISIN: IM00B14GZ.
MBH Holdings PLC
Ronan Reid Tel: +353 1 6333843
Fairfax I.S. PLC Nominated Adviser
James King, David Floyd Tel: 020 7598 5368
This announcement will be available on MBH's website http://www.metrobaltichorizons.com/ as soon as practicable in accordance with AIM Rule 26.
The persons responsible for this announcement are the directors of MBH.
MBH is being advised by Fairfax I.S. PLC ("Fairfax") which is acting for MBH and no-one else in relation to the possible offer. Fairfax will not regard any other person as its customer or be responsible to any other person for providing the protections afforded to customers of Fairfax nor for providing advice to any other person relating to the possible offer.