Avid Holdings Plc
Proposed Acquisition of Electro-Mec (Reading) Limited
Placing of 133,333,333 new ordinary shares at 0.75p per ordinary share
Grant of new Share Options
and
Notice of an Extraordinary General Meeting
Key Highlights
* Acquisition of Electro-Mec (Reading) Limited for an initial consideration
of �800,000
* Deferred consideration payable up to �750,000 dependent on future profits
of Electro- Mec (Reading) Limited
* Placing of 133,333,333 at 0.75p per new Ordinary Shares to raise �1
million, before expenses
* Grant of new Share Options to the Board and senior management
* Extraordinary General Meeting to approve proposals to be held on 15 March
2007
The Company is pleased to announce that it has entered into an agreement
pursuant to which it has conditionally agreed to acquire the entire issued
share capital of Electro-Mec (Reading) Limited ("Electro-Mec") for an initial
consideration of �800,000, to be satisfied by the issue of 28,333,333 new
Ordinary Shares at an average price of 1.41 pence per new Ordinary Share
(which, upon allotment, will rank pari passu in all respects with the Existing
Ordinary Shares) and a cash payment of �400,000. Deferred consideration of up
to �750,000, to be satisfied by the issue of further new Ordinary Shares, will
be due, calculated on a formula basis, dependent on future profits of
Electro-Mec for the two consecutive years ending 31 December 2007 and 31
December 2008.
The Company also announces that it is seeking to raise �1 million by means of a
Placing of 133,333,333 new Ordinary Shares at a price of 0.75 pence per share.
The broker to the Placing is Ellis Stockbrokers Limited.
Application has been for the Consideration Shares and the Placing Shares to be
admitted to trading on the AIM market of the London Stock Exchange. It is
expected that Admission will become effective and that dealings in the
Consideration Shares and Placing Shares will commence on 16 March 2007.
The Company currently does not have the necessary shareholder authorities to
issue sufficient numbers of Ordinary Shares to satisfy the terms of the
Acquisition Agreement, the Placing Agreement and the grant of the new Share
Options. Therefore, an Extraordinary General Meeting has been convened for 15
March 2006 at which the directors will seek additional authorities from
shareholders to issue ordinary shares and grant the new Share Options.
Avid
The Company supplies specialist child resistant packaging solutions for blister
pack drugs through its subsidiary Pill Protect. The main benefits of Pill
Protect's products are:
* they have received a certificate under BS 8404 and BSEN 14375 and are
compliant with relevant parts of The Medicines (Child Safety) Regulations
2003;
* they provide a smooth surface for increased brand presence which, compared
to foil, allows improved messaging in up to eight colours;
* the products do not alter the primary packaging material and consequently
The Medicine and Healthcare Products Regulatory Agency can issue a type 1
licence upgrade, at minimal cost; and
* the products have been designed to be run on existing packaging lines with
minimal loss of production time.
The Company is focused on the development of its pharmaceutical packaging
business and the Acquisition is a continuation of this strategy.
Electro-Mec
Electro-Mec, founded in 1969, is a precision engineering business producing
high quality blister pack change tooling for the pharmaceutical industry (from
which it generates the majority of its revenues) as well as offering some
machining and assembly for the defence industry.
In 1989, Electro-Mec started to develop one-off feeding systems for placing
tablets and capsules in blister packs, improving on existing technology. This
development culminated in the design and manufacture of the company's branded
range of feeders, which can be fitted to most blister pack packaging machinery
either as original specification or retro fit. Electro-Mec currently employs 38
people at its Reading facilities.
Electro-Mec has no formal marketing structure or dedicated sales resource.
However, the company, mainly through customer referral and recommendation, has
become a successful third party supplier of change tooling for blister pack
packaging machinery in the UK, whilst also selling to overseas customers.
The company competes against similar services and goods from primary
manufacturers of packaging equipment.
As well as supplying blister pack part change tooling and its branded feeders
to many major international pharmaceutical companies, Electro-Mec also produces
components and assemblies for a range of industries and has developed
relationships with several customers where work is quoted for and won through
competitive tender.
In the year ended 31 July 2006 (the last period for which audited accounts have
been published) Electro-Mec recorded turnover of �3,003,571, and made profits
on ordinary activities before taxation of �157,635. At 31 July 2006 audited net
assets were �540,672.
The Directors, have reviewed the current management accounts and prospects for
Electro-Mec and, notwithstanding a small loss for the period since 31 July
2006, are encouraged by the opportunities available to the business for the
current financial year.
The Directors believe that there are a number of benefits of the Acquisition:
- Electro-Mec is an established business;
- There will be a number of cross selling opportunities with Electro-Mec's
existing customers in the pharmaceutical sector;
- Pill Protect's European marketing activities will benefit Electro-Mec, which
currently has few European export sales; and
- Electro-Mec could become a useful internal resource for Pill Protect's
engineering requirements which, in the Directors' opinion, will facilitate
faster research and development programmes.
Deferred Consideration
Under the Acquisition Agreement, deferred consideration, of up to a maximum
aggregate amount of �750,000, is due, calculated as follows: in respect of each
of the two years ending 31 December 2007 and 31 December 2008, an amount equal
to 75 per cent. of the net profit before tax of Electro-Mec for such year,
after certain adjustments for, inter alia, discretionary charges, non-ordinary
course of business transactions and directors' fees, subject to a limit of �
375,000. Any deferred consideration will be satisfied by the issue of new
Ordinary Shares.
The Placing
The Company proposes to raise �1 million by the allotment and issue of the
Placing Shares at the Placing Price pursuant to the Placing. The net proceeds
of the Placing, being �720,000, will be used to fund the cash element of the
initial consideration (�400,000) and to provide working capital for the
Enlarged Group.
Upon allotment the Placing Shares will rank pari passu in all respects with the
Existing Ordinary Shares and will have the right to receive all dividends and
other distributions thereafter declared, made or paid in respect of the issued
ordinary share capital of the Company.
Current Trading and Future Prospects
At the time of its acquisition of Pill Protect in June 2006, which transferred
the Group from an investing group to an operating business, the Directors
stated that they had secured some initial orders from three large
pharmaceutical companies and were in discussions with a number of other
international companies for the supply of its products. However, lead times can
be significant and consequently they anticipated turnover to be at a nominal
level for the year ended 31 December 2006.
The Directors made some progress in the second half of 2006, with further
orders received from customers and product deliveries made in connection with
the launch of a new over the counter drug in October 2006.
The majority of the Group's products remain under development.
Whilst turnover for the year ended 31 December 2006 will be below management
expectations, reductions in the Group's overhead are likely to result in the
overall performance being in line with management's expectations.
The Directors are in advanced discussions with two major international
pharmaceutical companies which, if successful, should result in turnover
commencing in the second half of the current year which would progressively
build during 2008.
The Group has commenced its sales initiatives in Europe and the United States
of America and has received positive enquires following the Pharmapack 2007
Exhibition, Paris, January 2007, an International Exhibition of packages for
medicines and pharmaceuticals, at which it was an exhibitor.
The results for the year ended 31 December 2006 are expected to be announced in
April 2007.
The Directors are of the opinion that, having made due and careful enquiry and
taking into account the net proceeds of the Placing and the existing facilities
available to the Group, the Enlarged Group will have sufficient working capital
for its present requirements, that is for at least 12 months from the date of
Admission.
Grant of new Share Options
The Company has previously granted options to an employee and directors to
acquire a total of 16,350,000 Ordinary Shares and proposes to grant new options
over a further 25,650,000 Ordinary Shares. Details of these previous and new
grants are described below:
Name of Optionholder Previous number of Additional number of
Ordinary Shares under Ordinary Shares under
Option Option
Jonathan Bobbett 5,000,000 10,000,000
Jonathan Neal 5,000,000 10,000,000
Joe Waters 3,000,000 1,000,000
Mike Nash 1,350,000 650,000
Michael Walter 2,000,000 1,000,000
David Walton Masters - 3,000,000
Total 16,350,000 25,650,000
All of the new Share Options will have an exercise price of 0.75p per share.
The new Share Options will be exercisable in the period between the second and
seventh anniversary of their grant. For Joe Waters the exercise of his new
Share Options will be conditional on gross margins of Pill Protect reaching �
500,000 in any twelve month period. For the remaining Optionholders the
exercise of the new Share Options are conditional on the mid market price for
the Ordinary Shares being at least 1.5p for 20 consecutive business days.
Key Statistics
Placing Price 0.75p
Number of Existing Ordinary Shares 213,999,999
Number of Consideration Shares 28,333,333
Number of Placing Shares 133,333,333
Number of Ordinary Shares in issue immediately after 375,666,665
Admission
Estimated gross proceeds of the Placing �1 million
Estimated net proceeds of the Placing �720,000
Market capitalisation of the Company at the Placing �2.82 million
Price
Expected timetable of Events 2007
Latest time and date for receipt of Forms of Proxy to be 10.00 a.m. on 13
valid at the Extraordinary General Meeting March
Extraordinary General Meeting 10.00 a.m. on 15
March
Commencement of dealings in the Consideration Shares and 8.00 a.m. on 16
the Placing Shares March
CREST accounts credited for the Consideration Shares and 16 March
Placing Shares
Despatch of definitive share certificates for the 23 March
Consideration Shares and the Placing Shares in
certificated form
CONTACT DETAILS
Avid Holdings Plc
Jonathan Bobbett: Tel: 01622 872022
City Financial Associates Limited
Ross Andrews Tel: 020 7090 7800
DEFINITIONS
The following definitions apply throughout the announcement unless the context
otherwise requires:
"Acquisition" the proposed acquisition by the Company of the
entire issued share capital of Electro-Mec
"Acquisition Agreement" the agreement dated 20 February 2007 between M W
Ellis and B K Hansford (1) and the Company (2)
under which the Company has conditionally agreed
to acquire the entire issued share capital of
Electro-Mec
"Admission" the admission of the Consideration Shares and
the Placing Shares to trading on AIM becoming
effective in accordance with the AIM Rules
"Board" or "Directors" the directors of the Company as at the date of
this announcement
"Company" or "Avid" Avid Holdings plc
"Consideration Shares" the 28,333,333 new Ordinary Shares to be issued
as part of the initial consideration for the
acquisition of Electro-Mec
"CREST the relevant system (as defined in the CREST
Regulations) in respect of which CRESTCo is the
Operator (as defined in the CREST Regulations)
"Electro-Mec" Electro-Mec (Reading) Limited
"Enlarged Group" the Company and its subsidiaries as enlarged by
the Acquisition
"Existing Ordinary Shares" 213,999,999 Ordinary Shares in issue at the date
of this announcement
"Extraordinary General the extraordinary general meeting of the Company
Meeting" convened for 15 March 2007
"Group" the Company and its subsidiaries
"London Stock Exchange" London Stock Exchange plc
"new Share Options" the proposed grant of options over new Ordinary
Shares
"Ordinary Shares" ordinary shares of 0.5p each in the capital of
the Company
"Pill Protect" Pill Protect Limited, formerly called 3 Point
Blue Limited, a subsidiary of the Company
"Placees" those persons subscribing for the Placing Shares
in the Placing at the Placing Price
"Placing" the conditional placing of the Placing Shares by
Ellis Stockbrokers Limited, as agent for the
Company, pursuant to the Placing Agreement
"Placing Agreement" the conditional agreement dated 20 February 2007
between the Company (1), City Financial
Associates Limited (2) and Ellis Stockbrokers
Limited (3) relating to the Placing, further
details of which are set out in a circular to
Shareholders dated 20 February 2007
"Placing Price" 0.75 pence per Placing Share
"Placing Shares" 133,333,333 new Ordinary Shares to be issued
pursuant to the Placing Agreement
"Shareholders" the holders of Ordinary Shares
END
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