WTL Waterlogic

RNS Number:4170M
Waterline Group plc
23 January 2008





                              Waterline Group PLC

                  ("Waterline", "the Company or "the Group")


   Notice of EGM to approve the acquisition of Property from a Related Party


Introduction


The Company has agreed, subject to contract, to acquire the freehold interest at
Interchange Point, Renny Park Road, Newport Pagnell, MK16 9TG from the Trustees
of the Jenna Pension Fund for the sum of �4,500,000. It is anticipated that
contracts for the Acquisition will be exchanged on the 7 February 2008 following
the EGM (and subject to the approval of the Acquisition by Shareholders) with a
contractual completion date to be agreed for 8 February 2008.


The Property is currently leased to the Group's subsidiary, Coolectric Limited,
and is adjacent to Jenna House whose freehold is already owned by the Group.


Interchange Point - the purchase proposal


The property being purchased is Interchange Point, Renny Park Road, Newport
Pagnell, MK16 0HA. The Property was acquired by the Jenna Pension Fund in June
2003 with vacant possession from a developer. The property is situated on the
same site as Jenna House, North Crawley Road, Newport Pagnell, MK16 9TG but has
the frontage situated onto Renny Park Road, off which it also has direct
vehicular access.


The property is positioned on a 2.38 acre site and has warehousing/office space
to a total of 45,147 square feet. There has been no external development of the
building since purchase, however, the internal office space has been developed
to include a showroom and offices to the first floor. The office accommodation
is generally open plan with glazed partitions, a meeting room and a cellular
office.


The property was rented by Waterline Limited on a fifteen year lease from June
2003. The rent was agreed at stipulated amounts for each of the first three
years and thereafter a review on every third anniversary of the commencement
date. The property was used for warehousing only, predominantly the storage of
bulk stock. In September 2005 the Group acquired the entire share capital of
Coolectric Limited and in February 2006 moved the premises of Coolectric Limited
from Wakefield to Newport Pagnell. Since then the property has been used by
Coolectric Limited for its warehousing and office requirements.


Other property currently owned/leased by the Company in Newport Pagnell


The Company currently operates from three further properties, all of which are
used for warehousing in Newport Pagnell. The properties are;-


(i) Jenna House, North Crawley Road, Newport Pagnell, MK16 9TG. This property is
the Group's Head Office from which the administrative and operational functions
are centralised. The property is a freehold building positioned on a 3.22 acre
site and has warehousing/office space to a total of 65,948 square feet.


(ii) Unit 1, North Crawley Road, Newport Pagnell. This property is currently
used as overflow warehousing for furniture stock or reject stock. The property
is leased under a five year agreement from June 2006. This property is adjacent
to the proposed acquisition property.


(iii) Tanners Drive, Blakelands, Milton Keynes. This property is approximately
six miles from the Head Office and is currently used as overflow warehousing for
bulk appliance stock or bulk stock relating to the Coolectric Limited business.
The property is leased under a five year agreement from May 2007.


Future Management of the Company's Property Portfolio


The Group's and the Company's operations have expanded considerably over the
past few years and the Board has taken a strategic view that it needs to secure
its future warehousing requirements by increasing warehousing capacity at
Interchange Point by up to 20,000 square feet. Once complete, this proposed
expansion will allow the Group to relinquish its tenancy of Tanners Drive, which
is currently being used to store bulk stock. It is anticipated that the
completion of this expansion will allow the Company to relinquish the lease of
the Tanners Drive property twelve months after the Acquisition.


In addition, the future development of the portfolio can be best assured if all
of the Properties are under single ownership. This will obviate any future need
to obtain consents from third party owners, notwithstanding that they may be
related parties.


By further consolidating all of the property portfolio to a single site the
Board expects to achieve further operational efficiencies in warehousing and
logistics.


Valuation of the Property being acquired


The property was valued at �4,500,000 in July 2007 by Savills who were
commissioned to do a professional valuation for the Bank for the purpose of
securing a mortgage offer. This valuation was undertaken on an investment basis
as the property was leased by the Jenna Pension Fund to the Company on a fifteen
year lease until 2018.


Given changes in the investment climate in the months since the original
valuation was completed, the Independent Directors requested that Savills update
their valuation to the current date and address that updated valuation to
themselves and the Group's Nominated

Adviser. Accordingly a valuation, dated 23 January 2008, was undertaken on an
investment basis, given that the lease of the Property will be assigned to
Coolectric Limited for a further fifteen years after the date of Acquisition.
This resulted in a revised value of �4,150,000.


As outlined below the Independent Directors believe that value of the property
to the Group exceeds both these valuations and are prepared to offer the Jenna
Pension Fund �4,500,000 in order to secure the purchase in a timely manner.


Financial Impact on the Profits of the Company over the term of the Mortgage


The Directors have considered the financial impact of the Acquisition on the
Company's profit before taxation over a period of 20 years, being the length of
the mortgage outlined above.


In the first year the Company will benefit from rental savings which in turn
will be offset by additional bank interest and depreciation charges.


As noted above, once further development of the Property is completed this
Acquisition will allow the Company to relinquish its tenancy of Tanners Drive.
Consequently in the remaining 19 years of the mortgage term the Company will
make further rental savings which will also be offset by further bank interest
and depreciation charges.


The Directors consider, based on reasonable assumptions as to future interest
rate movements, that these savings will outweigh the additional costs of
mortgage interest and depreciation, and therefore the Acquisition will have a
beneficial effect on the Group's profits over the 20 year period of the mortgage
term.


Financing of the Acquisition


The Company has agreed to finance the proposed purchase of the Property by means
of a commercial mortgage granted from the Bank. The terms of the mortgage are
for a 20 year term and a capital repayment mortgage with an interest rate at
1.25% above the Bank's base rate.


Related Party nature of the Acquisition


The parties to the agreement are:


(a) The Sellers


The Sellers of the property are the Trustees of the Jenna Pension Fund. They are
Mr Michael Lawrence, the Group's majority shareholder and a director of the
Group, and IPS Actuarial Services Limited. The beneficiaries of the Jenna
Pension Fund are Mr Michael Lawrence and his family, and therefore the trustees
of the Fund are related parties to the Group. Accordingly, the transaction
requires to be approved by shareholders in general meeting.


(b) The Buyer


The Buyer of the Property will be the Company, which is a wholly owned
subsidiary of the Group.


Extraordinary General Meeting


As the Company wishes to acquire a substantial non-cash asset from a related
party of a Director of the Company (Michael Lawrence) the transaction requires
approval under Section 190 of the Companies Act 2006. The Acquisition is
therefore conditional upon the approval of the Resolution by Shareholders at the
Extraordinary General Meeting convened for 9.30 a.m. on the 7 February 2008 to
be held at Jenna House, North Crawley Road, Newport Pagnell, MK16 9TG.


The Resolution is proposed as an ordinary resolution and therefore requires
approval by a simple majority of those Shareholders attending and entitled to
vote in person or by proxy at the EGM


To be valid, the Form of Proxy must be completed and returned to the Company
Secretary at the address printed on the Form of Proxy. The Form of Proxy must be
received by no later than 9.30 a.m. on 5 February 2008. The completion and
return of the Form of Proxy will not prevent shareholders who are entitled to
vote from attending and voting in person at the EGM if they so wish.
Shareholders are therefore encouraged to complete and return the Form of Proxy
whether or not they intend to attend the EGM.


Recommendation


Having considered all of the information available to them and having discussed
all of the factors outlined above the Directors, excluding Michael Lawrence,
believe that the Acquisition of the Property is as follows:


   * In the best strategic interests of the property portfolio of the Group;
   * In the best interests of the profitability of the Group in the mid to
     long-term;
   * In the best interests of the Shareholders in the mid to long-term; and
   * Gives rise to significant benefits to be obtained by a maturing company
     reducing reliance upon the original founder and majority shareholder of the
     Group.


Notwithstanding recent changes in the property market, the Directors are of the
opinion that the transaction should proceed at the original offer price of
�4,500,000 for the reasons stated above.


The Independent Directors consider, having consulted with the Group's Nominated
Advisor, that the terms of the transaction are fair and reasonable insofar as
the Shareholders are concerned and to be in the best interests of the Company
and unanimously recommend Shareholders to vote in favour of the Resolution at
the EGM.


The Directors and those connected with them have themselves irrevocably
undertaken to vote in favour of the Resolution in respect of a total of
8,443,005 Ordinary Shares, representing 64.38% of the Ordinary Shares.





                     EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Record Date                                                     23 January 2008

Latest time of receipt of Form of Proxy             9.30 a.m. on 5 February 2008

Extraordinary General Meeting                       9.30 a.m. on 7 February 2008



DEFINITIONS


The following terms apply in this document unless the context requires
otherwise:



"Acquisition"                        the purchase of the freehold interest at 
                                     Interchange Point, Renny Park Road,
                                     Newport Pagnell MK16 0HA by the Company


"AIM"                                AIM, a market operated by the London Stock 
                                     Exchange


"AIM Rules"                          the AIM Rules for Companies, governing 
                                     admission to, and the operation of AIM


"Bank"                               Royal Bank of Scotland/National Westminster 
                                     Bank PLC, 152 Silbury Boulevard, Central 
                                     Milton Keynes MK16 1LT


"Board" or "Directors"               the Directors of the group as at the date 
                                     of this Document whose names are set out on 
                                     page 4


"Company"                            Waterline Ltd


"EGM" or "Extraordinary              the extraordinary general meeting of the 
General Meeting"                     Group convened for 9.30a.m. on 7 February 
                                     2008 (or any adjournment thereof), notice 
                                     of which is set out at the end of this
                                     document.


"Group"                              Waterline Group PLC


"Independent Directors"              Peter F Dicks and David C Rogers


"Nominated Adviser"                  Daniel Stewart and Company PLC, 
                                     36 Old Jewry, London EC2R 8DD


"Property"                           the freehold interest at Interchange Point, 
                                     Renny, Park Road, Newport Pagnell MK16 OHA


Enquiries:


Waterline Group plc                                01908 219748
Steven J Steel, Chief Financial Officer
www.waterlinegroup.plc.uk


Daniel Stewart & Company Plc                       020 7776 6550
Simon Leathers


Bishopsgate Communications Ltd                     020 7562 3350
Dominic Barretto / Sophie Davis
www.bishopsgatecommunications.com



                      This information is provided by RNS
            The company news service from the London Stock Exchange

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