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The offer will be effected through a ‘scheme of arrangement’ and, prior to a proposed 10-for-1 share consolidation by Tandem, is on the basis of 43 MV Sports shares for every two Tandem ordinary shares.
MV had a turnover of £22.7m for the year ended 30 June 2002.
Tandem chairman Graham Waldron said a successful tie-up with MV Sports would give the enlarged group a "larger base to grow from and save the costs of running two publicly traded companies."
Welcoming the absorption, MV Sports MD Stephen Grant said: "We have seen that consolidation in our sector is inevitable given market conditions and believe that MV Sports Shareholders will welcome the opportunity to exchange their MV Sports Shares at a premium to today’s market price for shares in a larger public company with a higher market capitalisation. We see Tandem as an excellent fit with our business and that there is an opportunity to increase market share and margin contribution by joining Tandem whilst, at the same time, achieving diversification into new business areas."
As well as Bob the Builder, MV holds the licences for Barbie, Action Man and Lord of the Rings. However, despite these big names, the sector sales of character wheeled toys during the first half of 2002 declined by up to 30 percent, said MV Sports.
Over at Tandem, Waldron said trading in two of its three operating businesses in recent weeks has not met the board’s expectations.
"In the bicycle and bicycle accessories business, the increased competition in the lower specification bicycle market has continued. Whilst sales are expected to be broadly in line with those reported last year, despite enjoying the benefit of a full years trading from Dawes which was acquired in June 2001, margins have been under pressure and, as a result, profits will be lower," said Waldron.
Tandem said it has made considerable efforts to improve the profitability of the business and the product range has been changed to allow sales of these lower price products at acceptable margins.
The Tandem board expects that Tandem will increase market share in the lower specification bicycle market during 2003 and view 2003 with confidence.
"Tandem’s new product range has been well received by key customers and increased listings have been achieved not only in lower value products, but also in higher value models," said Waldron.
Tandem is now supplying British Eagle bikes to the top 40 Tesco supermarkets in the UK and is working on a Tesco own-brand range.
MV Sports supplies its trikes and bikes to Argos, Index, Toys R Us, Halfords, Littlewoods, GUS and Woolworths.
And what about the wee compast problem, then? Tandem is currently defending a claim by a former customer in relation to compost supplied between 1994 and 1995 by a Tandem subsidiary during its ownership of a horticultural business. Although Tandem was unsuccessful on liability at trial, the matter continues to be vigorously defended and the
appeal process is ongoing.
Tandem directors said they have been advised that there is a reasonable prospect of success. If the appeal succeeds, the case will be concluded, otherwise quantum is still to be determined.
Currently there is evidence to suggest that quantum could be between £80 000
and £215 000 stg (plus interest and costs but less any allowance for mitigation).
Tandem also said today that the group’s profit before goodwill and taxation will not exceed £440 000 for the year ending January 31st 2003, compared to £715 000 profits last year.
New bank facility agreements with HSBC Bank PLC were signed by Tandem on Jan 30th. As part of the agreements, HSBC will provide a £2.5m, three year loan together with overdraft facilities of up to £3m. This replaces the previous facility which was repayable on demand.
