Demand for CNG shares high before AIM float

The planned flotation of shares worth £22.1 million (€33 million) by the Kenmare, Co Kerry hotel bookings company CNG Travel Group, has been oversubscribed, according to the company.

Shares in the company, valued at £64.7 million following the placing, will begin trading on the Alternative Investment Market (AIM) in London tomorrow.

The company, formed in 1999 by Mr Finbarr Power, owns software used in the online booking of hotel rooms. It employs 55 people in Kenmare and expects this to increase.

CNG said the shares had attracted strong demand from quality institutional investors in the UK and Europe. The placing is set to cost the company £2.8 million in fees.

A prospectus published yesterday states that, following the placement, the Menolly group will be the largest shareholder in CNG, owning 29.9 per cent. CNG director Mr Séamus Ross Jnr is a director of Menolly Properties, parent company of the Menolly group.

Mr Power, CNG chief executive, will own 12.09 per cent of the company and recently appointed director Dr Michael Smurfit will own 4.63 per cent. Director Mr P J King will own 2.42 per cent, while non-executive chairman Mr Luke Mooney will own 1.52 per cent. Directors Ms Zara Stassin and Mr Ronnie Culliton will own 1.17 per cent and 0.21 per cent respectively.

The funds raised will be used for a variety of purposes:

£5.5 million will go to repay loans made to CNG Hotels;

£4.2 million will fund the purchase of the remaining 20 per cent of US airline and hotel room bookings company Tzell, which CNG assumed control of last July;

£4 million will be accounted for by acquisition, reconstruction and flotation costs;

£7.9 million will be used for working capital;

the balance of £500,000 will repay directors' loans.

According to the prospectus, Mr Ralph Manaker will act as a consultant to the group. Mr Manaker, co-president of one of the world's largest travel agents, WorldTravel BTI, has been appointed a director of subsidiary CNG USA.

The prospectus states that the Menolly group has made investments in CNG "equating to some $25 million" (€20.8 million) in the period since November 2002. In July 2002, CNG issued stock worth $2.7 million to Menolly Homes Ltd in return for a guarantee on an $8 million loan from Anglo Irish Bank to CNG Hotels.

In July 2003, CNG Hotels gave Menolly Homes an option on 15 per cent of the fully diluted share capital of CNG Hotels if it did not meet deadlines in relation to the repayment of a loan. The company did not meet the requirements and on May 4th, 2004, Menolly exercised its option.

On the same date, Bacchantes Ltd, a company associated with Dr Smurfit, agreed to invest $4 million in CNG. The investment will be converted into shares at a 25 per cent discount to the placing price.

CNG made a loss of $3.3 million in the nine months to the end of September 2003. Tzell made a profit of $4.9 million in the same period. CNG projects an overall profit for 2004.

Group revenue is generated by commissions on hotel, car and airline reservations.

Mr Power will receive a salary of €300,000. Mr King, Mr Culliton and Ms Stassin will receive salaries of €200,000. The non-executive directors will receive a fee of €25,000 each per annum.