http://www.billboard.com/bb/biz/newsroo ... 1001019517
August 23, 2005, 6:00 AM ET
Sanctuary Buy-out Talks Collapse
By Lars Brandle, London
Financially-pressed independent music company Sanctuary Group today (Aug. 23) confirmed that talks on a buy-out had fallen through and that trading conditions remained "difficult" going forward.
The London-based firm, which has recently helped re-launch the careers of Morrissey, Robert Plant and Alison Moyet, had announced on June 3 that it was in talks with a third party that could result in a bid for part or all of the company. Today it said that those negotiations were "unlikely to lead to an offer at or near to the current share price".
Discussion are ongoing with a number of third parties, it says, which could lead to "a range of possible transactions including a possible offer for the company."
In a statement issued to the London Stock Exchange, Sanctuary said "trading has remained difficult which, together with the operational constraints placed on the business during this time, seems likely to result in a further deterioration of the results for the full year." Its directors are now reviewing expectations against forecast for the August-September trading period.
In morning trading, the company's stock price was down 36.23% to 11p -- its lowest point in more than 13 years. Sanctuary's stock has a 52-week high of 44p.
Sanctuary also said it has obtained waivers and amendments to its financial covenants, and increased some of its bank facilities to £120 million ($216 million). It has also obtained waivers and amendments to its outstanding £30 million ($54 million) of convertible loan notes.
The company posted in June what it described as "regrettable and unacceptable" first-half financial results, particularly in the Recorded Product aspect of its 360-degree business model. Most blame was directed to its bullish expansion activities in recent years and on the "slippage" of urban genre album releases.
"While we are relieved that Sanctuary has renegotiated some its covenants, we believe the situation remains highly risky until Sanctuary provides some evidence of being able to pay down debt, perhaps through a disposal of some of its music catalog," Numis Securities, which formerly handled brokering for Sanctuary, said today in a research note.
Sanctuary added that it has commenced its cost reduction programme and is on track to achieve its planned £7 million-£8 million ($12.6 million-$14.4 million) in annualised cost savings. Staff cuts have begun at Sanctuary's U.S. business, sources say.
Discussions on the sale of unidentified businesses are ongoing. The company's underperforming books division is understood to be among the units on the block.
