TIDMCMCP
RNS Number : 3373F
Content Media Corporation PLC
14 June 2012
14 June 2012
Content Media Corporation plc
Bonus Issue and Conversion of Preference Shares
Share Capital Reorganisation
Cancellation of admission of Ordinary Shares to trading on
AIM
Re-registration as a private company
Approval for waiver of obligations under Rule 9
of the City Code on Takeovers and Mergers
Authorities to issue shares
and
Notice of General Meeting and Notice of Class Meeting of the
Preference Shareholders
Content Media Corporation plc ("Content" or the "Company") is
pleased today to announce a set of proposals ("the Proposals")
which, if approved by Shareholders, will comprise the
following:
-- the conversion of each of the 34,840,262 Preference Shares in
issue into 5 new ordinary shares of 1p ("Existing Ordinary Shares")
("Conversion");
-- a bonus issue of 2,619,362 new Existing Ordinary Shares to
the Preference Shareholders pro rata to their holdings of
Preference Shares ("Bonus Issue");
-- the subdivision of each Existing Ordinary Share, including
the Existing Ordinary Shares arising pursuant to the Conversion and
the Bonus Issue, into one ordinary share of 1/13p each and one
deferred share of 12/13p. The ordinary shares of 1/13p will then be
consolidated into New Ordinary Shares on the basis of 1,300
ordinary shares of 1/13p for one new ordinary share of GBP1 each
("New Ordinary Shares");
-- the cancellation of the Company's admission to trading on AIM;
-- the re-registration of the Company as a private limited
company and the adoption of new articles of association;
-- seeking the approval from Independent Shareholders for a
waiver granted by the Panel (being the Waiver); of the obligations
under Rule 9 of the Takeover Code which would otherwise apply to
the members of the Concert Party as a result of their acquiring new
Existing Ordinary Shares pursuant to the Conversion and the Bonus
Issue; and
-- the granting to the Directors of authorities to issue shares other than pro rata to existing shareholdings.
The Company is today posting a circular to Shareholders ("the
Circular") convening a general meeting of Ordinary Shareholders
("General Meeting") and a class meeting of Preference Shareholders
("Class Meeting"), at which the Proposals will be considered and,
subject to the requisite majority, approved. The Circular also
contains information about the background to and the reasons for
the Proposals and explains why the Board considers the Proposals to
be in the best interests of the Company and its Shareholders as a
whole. In addition, the Circular sets out why the Directors
recommend that Shareholders vote in favour of the Resolutions to be
proposed at the General Meeting and the Class Meeting, to be held
on 5 July 2012.
Shareholders should note that the Proposals are
inter-conditional. It is expected that Completion will take place
and the Company's admission to trading on AIM cancelled at 07.00 am
on 13 July 2012.
Huw Davies, Chairman of Content said: "For some time the Company
and its shareholders have sought a solution to the Company's share
structure which we believe has proven an obstacle to the growth of
the Company's business and overall equity value. The Directors are
pleased to announce this solution which we believe is good news for
shareholders and for the Company as a whole."
John Schmidt, CEO of Content said: "We believe these
transactions will provide the Company with a far better opportunity
to grow the Company's business and we look forward to the prospect
of executing on any growth opportunities that arise in the
future."
The Proposals are summarised below.
A copy of the Circular will be available on the Company's
website, www.contentmediacorp.com.
Capitalised terms not otherwise defined, shall have the same
meanings as set out in the Circular.
For further information:
Content Media Corporation PLC Tel: 44 (0) 20 7851
6500
John Schmidt/Geoff Webb
www.contentmediacorp.com
Grant Thornton, Nominated Adviser Tel: +44 (0) 20 7383
5100
Colin Aaronson/David Hignell
www.grant-thornton.co.uk
Throgmorton Street Capital Tel: +44 (0) 20 7071
0801
Robert Emmett
Background to and reasons for the Proposals
Introduction
The Directors believe that the Company's share structure has
proven to be a significant barrier to the development of the
business and the growth of the Company's equity value, which has
fallen consistently over recent years.
In particular, the Directors have for some time sought to
resolve the issues concerning the Preference Shares, which rank
ahead of Existing Ordinary Shares in respect of future dividend
payments and on a return of capital. As at 30 September 2011, the
Preference Shares were entitled in aggregate to a redemption
payment of GBP9.756 million and, should the Company be in a
position to make such payment in the future, this amount attracts
ongoing interest. The existence of the Preference Shares has been a
barrier to potential strategic deals or financial investment in the
Company. This is not in the best interests of the Company's
Existing Ordinary Shareholders and Preference Shareholders as the
Company needs to grow in order to deliver equity value to both
groups of Shareholders. The Proposals involve a conversion and
re-classification of the Preference Shares into new Existing
Ordinary Shares, together with a bonus issue of new Existing
Ordinary Shares to ensure the Preference Shareholders hold 50% of
the Ordinary Shares following completion of the Proposals.
The Proposals create a single class of New Ordinary Shares, with
the Preference Shareholders and the Existing Ordinary Shareholders
owning 50% respectively of the New Ordinary Shares. Upon Completion
of the Proposals all of the New Ordinary Shares will carry the same
rights and rank pari passu with one another and there will no
longer be in issue any Preference Shares. The Proposals will also
eliminate the GBP9.756 million redemption payment currently due to
the Preference Shareholders.
The Company is also proposing a share capital reorganisation
("Share Capital Reorganisation ") under which the Existing Ordinary
Shares will be subdivided into ordinary shares and deferred shares
and then the ordinary shares consolidated into a smaller number of
New Ordinary Shares with a larger nominal value. This is in order
to deal with the fact that the Existing Ordinary Shares are
currently trading at a discount to their nominal value of 1
pence.
The Directors do not believe the Company's best interests are
served by remaining listed on AIM or operating as a public limited
company. Accordingly the Board is proposing that the Company
de-lists from AIM and re-registers as a private company. The
Company will continue to communicate with shareholders through its
website and will implement a matched bargain settlement facility
provider service for Shareholders as further described below.
The Conversion and the Bonus Issue will result in the members of
the Concert Party increasing their shareholding in the Company to
48.1 per cent of the voting rights. As a consequence, the approval
of Independent Shareholders is required to the waiver of the
obligations of members of the Concert Party, which may otherwise
arise under Rule 9 of the Takeover Code, to make a general offer to
all remaining Shareholders to acquire their shares.
Lastly, the Board is also seeking the authority to issue New
Ordinary Shares on a non pre-emptive basis.
If approved by Shareholders, these Proposals will result in the
Company becoming a private company, with a unified share capital
structure and a group of Shareholders whose interests are aligned.
The Board believes these steps will position the Company for future
transactions that should assist in generating future value for all
Shareholders and should assist in the negotiations relating to the
renewal of the Company's senior loan facility, due in July
2013.
On the other hand, if the Proposals are not approved by
Shareholders, the Directors believe that it will remain difficult
for the Company to undertake transactions that will assist in
growing the business. Looking into the mid-term, the Directors
believe that a lack of growth in the Company's business will mean
that the value of the Company will struggle to improve and this
could also present challenges relating to the renewal of the
Company's senior loan facility.
Conversion of Preference Shares and Bonus Issue
The Company presently has in issue 34,840,262 Preference Shares.
The Preference Shares can be converted into Existing Ordinary
Shares on a one for one basis and were redeemable from 26 March
2009 at 26p per share.
On 15 July 2009, the Company announced that it had received
valid redemption notices in respect of all of the Preference Shares
in issue at that time which created a redemption liability of
approximately GBP9.756 million as at 30 September 2011. This
liability attracts simple interest at the rate of 2 per cent per
annum above the base rate of Barclays Bank Plc. The redemption
amount plus the interest amount ranks ahead of any dividend payment
to holders of Existing Ordinary Shares and in any case is liable to
be paid to the relevant Preference Shareholder upon redemption of
those Preference Shares, when the Company is legally able to do
so.
The Company has reached agreement with the majority holders of
the Preference Shares that would see the Preference Shareholders
giving up their rights attaching to the Preference Shares,
including the right to receive a redemption amount of approximately
GBP9.8 million, in return for New Ordinary Shares representing 50%
of the Company's share capital following completion of the
Proposals. Subject to the approval of holders of both Ordinary
Shares and Preference Shares, this will be achieved through the
conversion of each Preference Share into 5 new Existing Ordinary
Shares and through a bonus issue of 2,619,362 new Existing Ordinary
Shares. Further details of this agreement are set out in the
Circular.
The Resolutions giving effect to the Conversion and the Bonus
Issue will, if approved, become effective on the Company's Ordinary
Shares ceasing to be traded on AIM, as further described below.
Accordingly, no application will be made for admission to trading
on AIM of the Ordinary Shares issued to the Preference Shareholders
pursuant to the Bonus Issue or arising from the Conversion.
Share Capital Reorganisation
As at 13 June 2012, being the latest practicable date prior to
the dispatch of the Circular, the Existing Ordinary Shares were
trading at a mid-market price of 0.70p, whilst the nominal value of
the Existing Ordinary Shares is 1p. Accordingly, the Company is
presently unable to issue shares at a price at or near the current
mid-market price as such issue of shares would be at a price below
the nominal value of the Existing Ordinary Shares, which is
prohibited by company law. In order to allow the Company to issue
further Ordinary Shares in due course, the Share Capital
Reorganisation is being proposed whereby each Existing Ordinary
Share, including those arising pursuant to the Conversion and the
Bonus Issue, is to be divided into one ordinary share of 1/13p and
one deferred share of 12/13p each.
The ordinary shares of 1/13p will then be consolidated into New
Ordinary Shares on the basis of 1,300 ordinary shares of 1/13p for
one New Ordinary Share.
The deferred shares will have minimal rights and, as such, will
have negligible commercial value. No application will be made for
the deferred shares to be admitted to trading on AIM or any other
stock exchange. No share certificates will be issued for any of the
deferred shares.
Any fractional entitlements arising upon the Share Capital
Reorganisation will be aggregated and sold in the market for the
best price reasonably obtainable and the net proceeds of the sale
will be distributed to the Shareholders entitled to such sums, save
that the Company shall be entitled to retain the net proceeds of
the sale representing such fractions where the individual amount of
the net proceeds to which a Shareholder is entitled is less than
ten pounds (GBP10).
Shareholders who hold their Existing Ordinary Shares in
uncertificated form will have their CREST accounts credited with
the New Ordinary Shares as soon as practicable after the De-listing
(as defined below).
The Resolution giving effect to the Share Capital Reorganisation
will, if approved, become effective on the De-listing (as defined
below).
Cancellation of Admission to AIM
After careful consideration, the Directors have concluded that
it is no longer in the interests of the Company to retain its
admission on AIM and, accordingly, it is proposed that, subject to
the requisite 75 per cent. majority of Shareholders voting in
favour, the Directors be authorized to apply to the London Stock
Exchange for the cancellation of the Company's admission to AIM
(the "De-listing").
The reasons for the Directors' conclusion above include:
-- the Company's share price performance and share trading
volume has been very limited over the last year, with a significant
fall in share price and very limited trading overall;
-- the current market conditions make it difficult for a company
of the size of Content to raise capital through AIM;
-- the requirement to provide regular trading updates under the
AIM Rules is potentially commercially disadvantageous in the
current climate; and
-- where there are advantages to retaining admission to AIM,
they are overridden by the above reasons and the additional costs
and management time related to the admission.
Effects of and Arrangements Related to the Share Capital
Reorganisation and AIM Cancellation
The Directors recognise that the value of the holdings of
Existing Ordinary Shares of many Shareholders is very small and
that opportunities to sell those holdings is presently limited. In
order to help Shareholders with smaller stakes in the Company
dispose of their holdings, the Board has made arrangements for a
nil cost share dealing facility to be available to all Shareholders
with less than 500,001 Existing Ordinary Shares wishing to sell
shares prior to cancellation of the Company's admission to AIM. The
Board has also arranged a matched bargain arrangement, provided by
Capita Share Dealing Services, to enable Shareholders to trade the
New Ordinary Shares following De-listing.
Details of these arrangements are set out in the Circular.
CREST
The Company's CREST trading facility will remain in place for so
long as it remains economic to do so.
Re-registration as a Private Company
It is proposed that, if the De-listing is approved, the Company,
which is currently a public limited company, be re-registered as a
private company and that amendments to reflect this change in
status be made to the Articles.
The Directors believe re-registration of the Company as a
private limited company should provide the Company with greater
flexibility to structure potential future transactions to grow the
business.
The Company intends adopting a number of policies and procedures
after the De-listing and re-registration as a private company.
These include, retaining at least one non-executive director on the
Board, providing Annual Financial Statements on the Company's
web-site and keeping shareholders updated in respect of certain
matters via the Company's web-site. In the short term the Company's
board of directors will remain as currently constituted.
Explanation of the changes to the Articles of Association of the
Company
The main changes to the Articles of Association of the Company
are to grant such a general authority to the Directors of the
Company (subject to the Concert Party Agreement) to allot
indefinite amount and disapply the statutory rights of pre-emption
on the issue of new shares, to remove the requirement for an annual
general meeting and a Company Secretary and to authorise the board
of directors to approve conflicts of interest without recourse to
shareholders. Further details are set out in the Circular.
Concert Party Agreement
In agreeing to support the Proposals, the Concert Party have, as
a condition to their support, required the Company to enter into
the Concert Party Agreement, the principal terms of which are that
for so long as it holds at least 25 per cent of the voting rights
in the Company, the approval of the Concert Party is required for
certain issues of shares, certain substantial acquisitions and
disposals of assets and for reverse takeovers (as defined in the
AIM Rules) and that it has the right to appoint a director to the
board.
Further details of the Concert Party Agreement, which will
become effective on completion of the Proposals, are set out in the
Circular.
Waiver
Following the Conversion and Bonus Issue, an aggregate of
176,820,672 Existing Ordinary Shares would be issued and allotted
to holders of Preference Shares. Of this amount, 104,395,270
Existing Ordinary Shares would be issued to members of the Concert
Party. Together with Existing Ordinary Shares already held by them,
the members of the Concert Party would come to hold 170,164,501
Existing Ordinary Shares representing 48.1 per cent. of the
Company's voting rights. Following the Share Capital
Reorganisation, the Concert Party will hold 130,893 New Ordinary
Shares representing 48.1 per cent. of the Company's voting
rights.
Pursuant to the Whitewash Resolution, Independent Shareholders
will be asked at the General Meeting to waive the obligation on the
members of the Concert Party which may otherwise arise under Rule 9
of the Takeover Code as a result of the Conversion and Bonus Issue,
and which would otherwise require them to make a general offer to
all remaining shareholders to acquire their shares.
Granting of authorities to Directors to issue shares
The Company is seeking authority to undertake a placing for cash
of up to 48,006 New Ordinary Shares, representing 15 per cent. of
the Company's issued share capital as enlarged by the placing, at
any time in the period up to 5 years following the date of the
General Meeting and that Shareholders' existing statutory
pre-emption rights be disapplied in respect of such placing. The
Directors intend to use these authorities in full and to issue
shares pursuant to a placing as soon as practicable following
Completion of the Proposals, in order to raise further working
capital for the Company. No guarantee, however, is given that such
placing will be successful.
The Company is also seeking authority to allot further New
Ordinary Shares with an aggregate nominal value of up to GBP10
million, without having to offer those shares pro rata to existing
Shareholders. This authority would also last 5 years and is
intended to give the Directors further flexibility in order to
undertake further cash placings of shares as appropriate.
Allotments of shares in excess of the 48,006 New Ordinary Shares
that could be issued pursuant to these authorities, will require
the approval of the Concert Party pursuant to the Concert Party
Agreement as described above.
Related Party Transactions
As at the date of this document, John Schmidt and Franz von
Auersperg, being directors of the Company, and Golden.e which is
treated as a substantial shareholder of the Company under the AIM
Rules, are all deemed to be related parties to the Company under
the AIM Rules by virtue of holding Preference Shares. They are
interested in the following numbers of Preference Shares which,
under the Proposals, would be converted into new Existing Ordinary
Shares. They would also receive their pro rata entitlement to new
Existing Ordinary Shares under the Bonus Issue. The aggregate
number of new Existing Ordinary Shares they would therefore receive
following the Conversion and Bonus Issue (but prior to the Share
Capital Reorganisation) is shown below.
Number of Preference Shares Number of new Existing Ordinary Shares to be issued
John Schmidt 6,367,690 32,317,186
Franz von Auersperg 2,361,269 11,983,870
Golden.e 15,079,781 76,532,633
The issue of new Existing Ordinary Shares to John Schmidt, Franz
von Auersperg and Golden.e following the Bonus Issue and pursuant
to the Conversion constitutes a related party transaction for the
purposes of AIM Rule 13.
The Directors, with the exception of John Schmidt and Franz von
Auersperg (who by reason of their holdings of Preference Shares are
precluded from considering the matter) consider, having consulted
with Grant Thornton in its capacity as the Company's nominated
adviser, that the terms of the Bonus Issue and Conversion are fair
and reasonable insofar as Shareholders are concerned.
Background to and reasons for the Waiver
General
The Takeover Code governs, inter alia, transactions which may
result in the change of control of a public company.
Under Rule 9 of the Takeover Code, any person who acquires an
interest in shares (as defined in the Takeover Code) which, taken
together with shares in which he is already interested and in which
persons acting in concert with him are interested, carry 30 per
cent. or more of the voting rights of a company which is subject to
the Takeover Code, he is normally required to make a general offer
to all the remaining shareholders to acquire their shares.
Similarly, when any person, together with persons acting in
concert with him, is interested in shares which in aggregate carry
not less than 30 per cent. of the voting rights of such company but
do not carry more than 50 per cent. of such voting rights, a
general offer will normally be required if any further interest in
shares is acquired by such person.
An offer under Rule 9 must be in cash and at the highest price
paid by the person required to make the offer, or any person acting
in concert with him, for any interest in shares acquired during the
12 months prior to the announcement of the offer.
Under the Takeover Code, a concert party arises where persons
acting together pursuant to an agreement or understanding (whether
formal or informal) actively co-operate to obtain or consolidate
control of a company or to frustrate the successful outcome of an
offer for a company. Control means the holding, or aggregate
holdings, of interests in shares carrying 30 per cent. or more of
the voting rights of the company, irrespective of whether the
holding or holdings give de facto control.
The Concert Party is currently beneficially interested in
65,769,231 Existing Ordinary Shares, representing 37.2 per cent. of
the existing voting shares of the Company.
Potential voting rights of the Concert Party
Upon Completion, the potential voting rights attributable to the
interests of the Concert Party will be as follows:
Number of Percentage Existing Number of Number of Percentage
Existing of voting Ordinary Existing New Ordinary of voting
Ordinary rights Shares Ordinary Shares following rights
Shares at issued Shares following completion
the date pursuant the Bonus of the Proposals
of the document to the Issue and
Bonus Issue Conversion
and Conversion
------------ ----------------- ----------- ---------------- ------------------ ------------------ -----------
Syntek 56,489,686 31.9% 0 56,489,686 43,453 16.0%
------------ ----------------- ----------- ---------------- ------------------ ------------------ -----------
Golden.e 4,330,454 2.4% 76,532,633 80,863,087 62,202 22.9%
------------ ----------------- ----------- ---------------- ------------------ ------------------ -----------
Franz von
Auersperg 309,318 0.2% 11,983,870 12,293,188 9,450 3.5%
------------ ----------------- ----------- ---------------- ------------------ ------------------ -----------
Christoph
Schoeller 4,639,773 2.6% 12,072,381 16,712,154 12,855 4.7%
------------ ----------------- ----------- ---------------- ------------------ ------------------ -----------
Martin
Schoeller 0 0.0% 3,806,386 3,806,386 2,927 1.1%
------------ ----------------- ----------- ---------------- ------------------ ------------------ -----------
65,769,231 37.2% 104,395,270 170,164,501 130,893 48.1%
------------ ----------------- ----------- ---------------- ------------------ ------------------ -----------
Following completion of the Proposals, the Concert Party will be
interested in 130,893 New Ordinary Shares representing
approximately 48.1 per cent. of the voting rights attached to the
New Ordinary Share capital.
The Panel has agreed to waive the obligation of the members of
the Concert Party to make a general offer that would otherwise
arise as a result of the Conversion and Bonus Issue, subject to the
approval of Independent Shareholders. Accordingly, a resolution is
being proposed at the General Meeting and will be taken on a poll.
The Concert Party will not be entitled to vote on this
Resolution.
Following the issue and allotment of the new Existing Ordinary
Shares pursuant to the Conversion and Bonus Issue, the members of
the Concert Party would hold more than 30 per cent. of the
Company's voting share capital but not more than 50 per cent. of
the Company's voting share capital and any further increase in
their shareholdings would be subject to the provisions of Rule 9 of
the Takeover Code.
As stated above, the Conversion and Bonus Issue is conditional
upon, inter alia, the Shareholders approving the Waiver.
Intentions of the Concert Party following Completion
The Board and the members of the Concert Party do not intend
that any changes will be introduced to the Company's business as a
result of the Proposals. In addition, they have no intention to
change the strategic plans for the Company, the locations of the
Company's places of business or the continued employment of its
employees and management, including any material change in the
conditions of employment nor will there be any redeployment of the
fixed assets of the Company.
Shareholders are referred to the Concert Party Agreement,
details of which are set out above and in paragraph 6 of part 3 of
the Circular.
Irrevocable Undertakings
The Company has received irrevocable undertakings from the
Directors to vote in favour of each of the Resolutions (other than
from Franz von Auersperg in relation to the Waiver) in respect of
16,603,162 Ordinary Shares beneficially held by them and 6,367,690
Preference Shares held by them, representing approximately 9.4 per
cent. of the votes capable of being cast at the General Meeting and
18.3 per cent of the votes capable of being cast at the Class
Meeting. In addition, the Company has received irrevocable
undertakings from certain other Shareholders to vote in favour of
the Resolutions in respect of, in aggregate, a further 81,174,955
Ordinary Shares and 20,569,759 Preference Shares, representing
approximately 45.9 per cent. of the votes capable of being cast at
the General Meeting and 59.0 per cent. at the Class Meeting.
Recommendation
The Directors consider the terms of the Proposals (other than
the Bonus Issue, Conversion and the Waiver which are dealt with
below) to be fair and reasonable and in the best interests of the
Shareholders and the Company as a whole. Accordingly, the Directors
have unanimously recommended that Shareholders vote in favour of
the Resolutions for the Proposals (other than the Bonus Issue,
Conversion and the Waiver) to be proposed at the General Meeting
and the Class Meeting.
The Directors (other than Franz von Auersperg and John Schmidt
who have been precluded from considering the matter by virtue of
the fact that they are holders of Preference Shares), who have been
so advised by Grant Thornton, consider the terms of the Bonus Issue
and the Conversion to be fair and reasonable insofar as the
Shareholders are concerned. Accordingly, the Directors (other than
Franz von Auersperg and John Schmidt) have unanimously recommended
that Shareholders vote in favour of the Resolutions for the Bonus
Issue and the Conversion to be proposed at the General Meeting and
Class Meeting.
The Directors (other than Franz von Auersperg who has been
precluded from voting on the matter by virtue of the fact he is a
member of the Concert Party), who have been so advised by Grant
Thornton, consider the terms of the Waiver to be fair and
reasonable and in the best interests of the Independent
Shareholders and the Company as a whole. In providing advice to the
Directors, Grant Thornton has taken into account the Directors'
commercial assessments (other than those of Franz von Auersperg).
Accordingly, the Directors (other than Franz von Auersperg) have
unanimously recommended that Shareholders vote in favour of the
Resolution for the Waiver to be proposed at the General
Meeting.
Whilst all the Resolutions (other than the Waiver) are
inter-conditional, Grant Thornton does not express an opinion on
any of the Proposals other than the Bonus Issue, Conversion and the
Waiver, and does not express an opinion on the Concert Party
Agreement.
The Directors who hold shares in the Company have irrevocably
undertaken to vote in favour of all Resolutions (other than the
Whitewash Resolution) in respect of their own shareholdings
amounting to 16,912,480 Existing Ordinary Shares (representing 9.6%
of the Existing Ordinary Shares in issue) and 8,728,959 Preference
Shares (representing 25.1% of the Preference Shares in issue).
The Directors who hold shares in the Company (other than Franz
von Auersperg, who, by virtue of being a member of the Concert
Party is precluded from voting on the matter) have irrevocably
undertaken to vote in favour of the Whitewash Resolution in respect
of their own shareholdings amounting to 16,603,162 Existing
Ordinary Shares (representing 9.4% of the Existing Ordinary Shares
in issue).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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