International Hotel Investments plc - Completion of investment

On 7 September 2011 Island Hotels referred to the announcement made by the Company on 18 May 2011 in relation to the entry by IHG into a “Framework Agreement” for the acquisition of a maximum of €1,314,460 (by way of subscription) of 50% of the share capital of Buttigieg Holdings Limited (“the Target”) – which owns 100% of R.J.C Caterers Limited (a company which operates mainly in the retail and contract catering sector). IHG explained that the Framework Agreement was executed on 18 May 2011 between the Company, the Target, Pierre Bartolo, Doris Bartolo, John Buttigieg, Kay Elizabeth Buttigieg, Mario Mifsud, Marie-Louise Mifsud, RJC Caterers Limited and RJC Operations Limited.

The Company stated that the objective behind the investment in the Target is to strengthen the operations currently carried out by Island Caterers Limited (IHG’s subsidiary) with a view of increasing overall turnover levels, to exploit market opportunities effectively both locally and overseas and to enhance the efficiency of the business due to the synergies that would arise in all other areas of operations as a result of the combined resources.

IHG explained that its investment in Buttigieg Holdings Limited is expected to increase revenues and profitability of the Company by approximately 10% and will also add a central production unit to IHG’s current production facilities aimed at streamlining the food production proceses and bringing about increased efficiency within the group. Moreover, IHG also expects the transaction to enable it to access new niches which have to date not been the Company’s main focus (mainly retail catering and the contract catering markets). IHG confirmed that the Target’s management team will remain involved in the business in order to ensure stability and continuity whilst bringing new skills into IHG’s catering operations.

IHG also confirmed that the investment in the Target was subject to certain regulatory and counter party consents which have now been satisfied and accordingly the Framework Agreement became unconditional. In fact, 227,752 Ordinary B Shares in the Target (representing 50% of the Target’s total issued share capital) were issued in favour of IHG today. The Target’s shares have a nominal value of €1 per share and are 100% paid up.

Moreover, the consideration payable by the Company to the shareholders of the Target consists of the issue of 1,070,960 ordinary shares in the Company (IHGH shares). These shares will be issued at €1 each and will be allotted to John Buttigieg – 642,576 shares; Pierre Bartolo – 278,450 shares; and Mario Mifsud – 149,934 shares, by not later than 10 days from this announcement. IHG stated that the issue of IHGH shares was authorised at the Annual General Meeting which was held on 19 May 2010. Meanwhile an application for the listing of the IHGH shares on the Official List of the Malta Stock Exchange has also been submitted.

Moreover, IHG explained that the Framework Agreement contemplates an additional allotment in favour of the shareholders of the Target of a maximum of 243,500 IHGH Shares conditional upon the satisfaction of certain conditions which have not as yet been satisfied. The transaction also contemplates an option for IHG to purchase the remaining 50% of the Target’s issued share capital within a specified period under certain terms and conditions set out in the agreement.

The book value of the gross assets of Buttigieg Holdings Limited as at 31 August 2011 stood at €2.6 million whilst the three year average annual profit (taken from the last two audited financial statements and the management accounts as at 30 June 2011) is €301,949.