UPDATE REGARDING STRATEGIC REVIEW AND FUNDRAISING
The Board of betinternet.com plc, (‘betinternet’ or ‘the Company’) the globalon-line gaming group, advised shareholders on 25 June 2004 that it hadcommenced a strategic review which was intended to address the longer termstrategy and financing of the Company, including the strategic options open toits Sports Book and Pari-Mutuel businesses.
Having completed that review, the Board has concluded that the furtherdevelopment of the Pari-Mutuel business will provide the best opportunity forenhancing shareholder return. Key to this decision is the fact that theCompany’s Pari-Mutuel business has continued to trade ahead of expectationsince the acquisition of the outstanding 50% interest in June 2004. In thefirst four months of the current financial year Pari-Mutuel turnover was$48.8m, an increase of 480% over the comparable period last year. Pari-Mutuelwagering provides a risk-free return to the promoter and is the predominantform of wagering in the world, with an estimated turnover of $116bn. The Boardfurther believes that there are significant global opportunities to exploit thewagering and technical services that the Company can provide from its Isle ofMan hub. The Board considers that betinternet is uniquely placed to provide thelink between the major track operators and content providers and the customerswho wish to wager.
Based on the strategic review, the Board considers that the increasing cost ofattracting and retaining customers to the Sports Book business, together withthe inherent risk of running a fixed odds operation, makes it unlikely thatreturns similar to the Pari-Mutuel operation will be achieved from thatoperation. Having taken steps both to reduce costs and improve its trading riskstrategy, the Board will seek opportunities to maximise the returns generatedfrom that activity.
In the meantime, the Board has determined to undertake a further round offundraising in order to provide additional resource for the Company, and toreplace the guarantee entered into in favour of the Company by Burnbrae Limitedand Mill Properties Limited which expires on 24 October 2004 and which hasremained undrawn during the period.
In support of the above objectives, and as a reflection of confidence in thefuture of the business, the Board is pleased to announce that financing of £1mhas, in principle, been put in place for the development of the Group. TheBoard announces its intention to undertake a placing of 20 million new OrdinaryShares with Burnbrae Limited (‘Burnbrae’) at a price of 4p per share to raise atotal of £800,000 for the Company. Additionally, to replace the temporaryshareholder financing announced in June 2004 which is due to expire on 24October 2004, Burnbrae will immediately loan an amount of £200,000 to theCompany by way of a 6% Convertible Loan. This Convertible Loan will convert to5 million new Ordinary Shares in the Company in the event that shareholdersapprove the waiver of the requirements of Rule 9 of the City Code, such waiverto cover both the proposed placing and the conversion of the Convertible Loanto Ordinary Shares.
Burnbrae is owned by a trust of which Mr J Mellon, a director, is abeneficiary. The proposed placing and anticipated conversion of the loan to 5million new Ordinary Shares will increase the holding of Burnbrae and itsconnected parties to 34.72 per cent of the issued ordinary share capital.Accordingly, before the proposed placing and loan conversion can proceed, awaiver of the requirements of Rule 9 of the City Code on Takeovers and Mergers(‘the City Code’) must be obtained from the Panel on Takeovers and Mergers(‘the Panel’) in respect of the increase in Burnbrae’s holding in the Companyabove 30 per cent. That waiver will be subject to the approval, at anextraordinary general meeting, of shareholders who are deemed independent ofthe proposed arrangement. The Board is currently in the process of making thenecessary arrangements for the placing and the grant of the waiver by thePanel.
The terms of the Convertible Loan have been considered by the independentdirector, Paul Doona. The independent director, who has consulted Williams deBroë Plc with respect to the terms of the Convertible Loan, considers thatthose terms are fair and reasonable as far as shareholders are concerned.
Full details of the proposed fundraising arrangements and waiver of Rule 9 ofthe City Code are expected to be announced, and a circular detailing thearrangements posted to shareholders, in late October, at which time the Companywill also release its preliminary statement for the year to 30 May 2004.Anextraordinary general meeting will be convened to consider the variousproposals in due course and shareholders will be notified of it accordingly.