TIDMCOS
RNS Number : 7779W
Collagen Solutions PLC
14 February 2017
This announcement contains inside information.
Collagen Solutions Plc
(the "Company" or the "Group")
Conditional Placing and Open Offer to raise up to GBP8.0
million
Conditional issue of up to GBP4.0 million in senior secured
private bonds with warrants
and Notice of General Meeting
Collagen Solutions plc (AIM: COS), the developer and
manufacturer of medical grade collagen components for use in
regenerative medicine, announces a conditional Placing (the
"Placing") and Open Offer to raise up to approximately GBP8.0
million with new and existing investors. Furthermore, the Company
has received a conditional commitment from Norgine Ventures to
subscribe up to GBP4.0 million in secured private bonds with
Warrants.
Highlights
-- Placing and Open Offer, which is subject to Shareholder
approval, will raise gross proceeds of up to GBP8.0 million
-- Conditional commitment from Norgine Ventures to subscribe up
to GBP4.0 million in senior secured private bonds with Warrants
-- Placing of 123,799,999 Ordinary Shares at the Offer Price of 5p per share
-- Open Offer for an aggregate of 35,924,258 Offer Shares on the
basis of 1 new Ordinary Share for every 5 Existing Ordinary Shares
at 5p each
The net proceeds of the Placing and Open Offer will go towards
investment in the development and commericalisation of high value
device products, accelerate the launch of ChondroMimetic and aid
expansion of the existing medical collagen supply business. The
Placing demonstrates continued strong support by existing and new
investors.
Commenting on the Transaction, Jamal Rushdy, CEO of Collagen
Solutions said: "This strategically important funding round
strengthens our balance sheet and provides the resources to
accelerate our core biomaterials and tissue business. Furthermore,
the capital will provide the Company with the opportunity to fund
the development of a range of exciting new products for use in the
rapidly emerging field of regenerative medicine. We are
appreciative of the support from both existing and new
shareholders, and to our stakeholders and global staff in the UK,
US, South Korea, and New Zealand. We look forward to updating the
market about our progress as we embark on this exciting phase of
the Company's development"
An explanatory circular (the "Circular") is today being posted
to Shareholders in relation to the Placing and Open Offer and is
also available to view on the Company's website at
www.collagensolutions .com
Enquiries:
Collagen Solutions Plc Contact via Walbrook
Jamal Rushdy, Chief Executive
Officer
Gill Black, Chief Financial
Officer
Cenkos Securities plc (Nominated Tel: 0207 397 8900
Adviser and Broker)
Stephen Keys
Steve Cox
Callum Davidson
Walbrook PR Tel: 020 7933 8780 or collagen@walbrookpr.com
Mike Wort Mob: 07900 608 002
Anna Dunphy Mob: 07876 741 001
1. Introduction
Collagen Solutions plc (AIM: COS), the developer and
manufacturer of medical grade collagen components for use in
regenerative medicine, announces a conditional Placing to raise
approximately GBP6.2 million (before expenses) by the issue of
123,799,999 new Ordinary Shares at the Offer Price of 5 pence per
Ordinary Share.
In addition, in order to provide Shareholders who have not taken
part in the Placing with an opportunity to participate in the
proposed issue of New Ordinary Shares, the Company is providing all
Qualifying Shareholders with the opportunity to subscribe at the
Offer Price for an aggregate of 35,924,258 Offer Shares, to raise
up to approximately GBP1.8 million, on the basis of 1 New Ordinary
Share for every 5 Existing Ordinary Shares held on the Record Date,
at the Offer Price of 5 pence each, payable in full on
acceptance.
Furthermore, the Company has received a conditional commitment
from Norgine Ventures to subscribe for up to GBP4.0 million in
senior secured private bonds with Warrants. The notes are issuable
in three tranches:
(i) Tranche A (GBP2.0 million) with a term of 42 months;
(ii) Tranche B (GBP1.0 million) with a term of 42 months; and
(iii) Tranche C (GBP1.0 million) with a term of 36 months.
The interest rate on Tranche A is 10%; and the interest rate on
Tranches B and C is the higher of:
(i) 10%; and
(ii) the three year GBP Swap Rate plus 935 basis points.
On completion of the bond transaction, Norgine Ventures shall be
issued with Warrants to purchase up to 6,767,044 Ordinary Shares at
a price of 5.911p per ordinary share.
The Transaction is conditional, inter alia, upon:
(i) Shareholders approving the Resolutions at the General
Meeting that will grant to the Directors the authority to allot the
New Ordinary Shares, as well as Ordinary Shares in satisfaction of
the Warrants and certain additional shares as described therein and
the power to disapply pre-emption rights in respect of such shares,
and
(ii) Admission
The Resolutions are contained in the Notice of General Meeting
at the end of the Circular. Admission is expected to occur no later
than 8.00 a.m. on 7 March 2017 (or such later time and/or date as
Cenkos Securities plc ("Cenkos") and the Company may agree, being
no later than 8.00 a.m. on 21 March 2017). The Transaction is not
underwritten.
The Open Offer provides Qualifying Shareholders with an
opportunity to participate in the proposed issue of the New
Ordinary Shares on a pre-emptive basis whilst providing the Company
with additional capital to invest in the business of the Group. The
Offer Price is at a discount of 11.1 per cent. to the closing
market price of 5.625 pence per Existing Ordinary Share on 13
February 2017 (being the last practicable date before publication
of this announcement).
2. Background to Collagen Solutions and reasons for the Transaction
Background to Collagen Solutions
Collagen Solutions is a global supplier, manufacturer and
developer of biomaterials and medical device components based on
natural biomaterials. Its principal raw materials are bovine
collagen and tissues sourced from negligible BSE risk countries.
These materials are used in a wide variety of currently marketed
and in-development advanced medical products in multiple
specialties including orthopaedic soft tissue, bone and cartilage
repair; cardiovascular heart valves and haemostats; dental bone
void fillers and membranes; wound management products and healing
scaffolds; and in other applications including regenerative
medicine.
Regenerative medicine has gained a high profile in recent years
based on the promise of curative treatments for unmet medical
needs, with approximately 700 companies receiving $2.9 billion in
funding according to the Alliance for Regenerative Medicine.
Collagen scaffolds, such as those made from Collagen Solutions'
materials, are a critical component of regenerative medicine
products in that they provide both physical support and a conducive
environment for cellular migration and growth.
Collagen Solutions' current products range from simple
formulations of medical grade biopolymers to complex medical
devices, which combine different collagen materials in the form of
gels, foams and films to either coat synthetic products, or to
fabricate a device which will ultimately be absorbed by the body
during the healing and/or regenerative process.
In addition to products manufactured from purified forms of
collagen, the Company also derives revenues from the sale of
pericardium, a delicate yet tough membrane which forms a protective
sac in which the heart sits and which can be used to make synthetic
replacement heart valves. The Company also supplies tendons to
various medical device companies who utilise this material in the
manufacture of collagen-based medical devices.
The Company is also developing its own line of products based on
its core biomaterials know-how as well as acquired intellectual
property, including devices to repair cartilage defects of the
knee, encourage wound healing and regenerate bone. The Directors
believe these "finished devices" will enable the Company to move up
the value chain and capture incremental business from customers
that have demonstrated demand for these devices in their product
portfolio and will value an immediately available and
differentiated product.
The Company's scientific and management team has expertise in
collagen biomaterials as well as finished medical devices. The
Group's core collagen expertise includes manufacturing (including
collagen chemistry, sterile processing, medical device manufacture
and collagen characterisation) as well as the development of new
collagen-based biomaterials, enabling the Company to offer research
and development services to external contract manufacturers which
take a product from concept to the clinic including technology
transfer. The Company's management team also has experience
directly in its customers' markets, with over 85% of the Company's
executive, commercial and research and development teams having
experience in the medical device and/or research industries.
The Company sells its biomaterial products and services
primarily to medical device manufacturers. Collagen Solutions works
with established, as well as emerging, medical device companies to
support the development of biomaterials with specified properties
which are used in new or improved products for market. Customers
range in size from academic groups and start-up firms to larger
blue-chip companies. The Company's manufactured collagen materials
are intrinsically linked to products under development by their
customers; once a product has begun clinical development overseen
by regulatory authorities, it is costly and time consuming for the
customer to change suppliers. The Company believes that if it
continues to provide its customers with superior service and
quality, combined with high customer switching costs, it will
maintain a sustainable revenue stream from its core business.
Establishing relations early in a customer's product development
programme is therefore key to securing repeating revenue
streams.
History of the Group
Healthcare Investment Opportunities plc, a vehicle established
to make acquisitions in the sector was formed in March 2013 and
changed its name to Collagen Solutions plc in December 2013. The
Company has grown significantly by acquisition. These acquisitions
have brought access to safe and certified raw materials; the
scientific knowledge to convert these raw materials into functional
formulations; and the expertise and equipment to undertake the
clean room manufacturing to make medical grade materials required
by regulatory agencies. These businesses, now integrated, have a
good strategic fit and the ability to furnish medical device
manufacturers with a specialist end-to-end development solution.
The acquisitions have comprised:
(i) In December 2013, the Company acquired Collbio Limited
("Collbio"), a Glasgow-based contract manufacturer of medical-grade
collagen components and soluble collagen, for use in regenerative
medicine, medical devices and in-vitro diagnostics. The acquisition
also provided the Company with a 6,500 sq ft leased manufacturing
facility and clean rooms, together with additional laboratory and
office space.
(ii) In parallel to this transaction, Collbio established a US
subsidiary which entered into an agreement to acquire certain
assets and liabilities of Collagen Solutions LLC, a San Jose,
California-based business which provided medical grade bovine
collagen, corium and tendon. Collagen Solutions LLC also provided
contract research and laboratory-scale product development services
relating to collagen-based devices, working with customers from
concept to clinical trial stage and subsequently transferring the
technology and know-how to outside contract manufacturing
facilities.
(iii) In December 2014, the Company acquired Southern Lights
Ventures 2002 Limited (now renamed CSNZL). Based at an ISO 13485
certified production and engineering facility at Marton on the
North Island of New Zealand, it provides an international client
base of medical device manufacturers with processed and semi
processed bovine biomaterials and also produces preserved
pericardium, which is widely used to form the leaves in prosthetic
heart valves. In addition, CSNZL provides consultancy services
focussing on collagen, collagen related services and regulatory
support to its customers. CSNZL also benefits from having access to
a ready and consistent source of bovine tissue from New Zealand,
which is ranked by the World Health Organisation as presenting a
"negligible BSE risk."
(iv) In September 2015, the Company acquired all of the assets
relating to ChondroMimetic from Orthomimetics Limited
("Orthomimetic") together with an exclusive worldwide licence to
the intellectual property ("IP") from Cambridge Enterprise Limited.
These assets have transformed the commercial opportunity for the
Company: Orthomimetic's intellectual property details the
integration of collagen scaffolds with regenerative techniques. The
acquisition also gives Collagen Solutions access to a portfolio of
patents and patent applications covering a range of additional
collagen-based orthopaedic product technologies. These technologies
may potentially promote the structural repair of bones and joints
as well as the delivery of biological agents such as stem cells and
other therapeutic agents. The first manifestation of this IP is
ChondroMimetic, an off-the-shelf collagen based implant for the
treatment of small osteochondral (cartilage and underlying bone)
defects.
Market
The global biomaterials market at end-user prices is estimated
to be in excess of US$50 billion. The biomaterials market serves
many clinical segments such as cardiovascular, orthopaedics,
neurology, dental, tissue engineering, plastic surgery, urogenital,
wound healing and others. The Company has identified two broad end
markets in which it will focus: medical devices, inclusive of
regenerative medicine technologies, and research/diagnostics
supply. Within medical devices, the Company's emphasis is on the
orthopaedic, dental, cardiovascular, and wound care segments.
The Company's addressable market is difficult to ascertain and
is a sub-set of this global biomaterials market as it sells its
products and services to intermediary customers who in turn sell to
end-users, focusing on tissue and collagen rather than all
biomaterials. The Directors believe the end-user market value of
devices that utilise its products is at least US$15 billion growing
in excess of 10% annually, and that it could potentially capture at
least 10% of this value as a supplier, developer, and contract
manufacturer, implying an addressable market of at least US$1.5
billion. The Directors believe that by seeking to move up the value
chain, from supply of raw materials to development of higher
added-value collagen formulations and customers' medical devices,
to contract manufacturing services and ultimately to the
development of proprietary products, a larger addressable market
can be targeted.
Future Growth Driver
The Company's growth strategy is based on (i) accelerating its
core supply, development and manufacturing business by implementing
a global sales and marketing organisation along with improved
processes for scalable growth, and (ii) developing and
commercialising a programme of finished devices for
partnering/distribution through medical device companies starting
with its ChondroMimetic technology for cartilage regeneration.
The Company has set out a plan which, the Directors believe,
will see it exceed the market's growth rate. The Directors have
identified multiple drivers of growth which they believe could be
capable of delivering 5x YE 2016 revenue within the next five years
(although many factors, some of which are outside of the Company's
control, will determine whether such growth is achieved and there
can be no assurance that the Company will achieve such growth).
Such drivers include:
Organic Growth of Core Business
Today all of the Company's revenues are derived from the sale of
bovine collagen and tissue materials, customised collagen-based
formulations and components, and related services. As described
earlier, once established into the customers' supply chain for its
end-products, this can lead to sustainable long-term revenue
streams, although the sales cycles can be long and complex. The
Company has established key core customers already in North
America, Europe, and Asia through management's historical network
and acquired businesses, and recently established a
regionally-focused sales team and global marketing and sales
support group. The recent above market growth has been driven by
these investments as well as maturation of its historical core
business and therefore the Directors believe that further
investment in the resourcing and geographic scope of marketing
within the sales channel will enable it to access new customers and
to continue to expand its core business at above market rate.
Higher Value Finished Device products
The Company's expertise, experience, and infrastructure in
collagen and tissue engineering can be leveraged to move up the
value chain to produce its own finished devices, which can address
current customer needs to improve their own product portfolios with
immediately available and differentiated products. The Company
expects to invest in developing those higher value finished device
products as part of a longer term collaborative relationship with
its customers. The Directors believe that further investment in
development and commercialisation of these products via partners
will realise greater value from its core biomaterials manufacturing
and development platform. The Company has established a multi-year
development programme to develop multiple finished devices,
starting with the following:
a) Launch of ChondroMimetic
ChondroMimetic represents a near-term opportunity to establish
and realise revenue from the Company's first wholly-owned medical
device. ChondroMimetic is a collagen based implant for the
treatment of small osteochondral (cartilage and underlying bone)
defects and having previously received CE-mark approval for the
treatment of small chondral and subchondral lesions, with
approximately 1,000 units previously supplied into European
markets, and had what the Directors consider to be successful
clinical results as documented in an early-use six month clinical
study of 17 patients. ChondroMimetic benefits from being a single
surgery costing less than 10% of current two-surgery cell therapy
devices. It also addresses the cause of the lesion in both the
chondral and the underlying osseous (bony) tissue. The cost to the
healthcare system of an ageing, but more active population means
that the ability to effectively repair joints, rather than
replacing them, could deliver substantial savings and represents a
clear commercial opportunity for Collagen Solutions. The
addressable market is estimated to be in excess of US$500m. The
Company is already seeking to collect follow-up data from some of
the original clinical
trial participants which should give it up to six years of data
evidencing the effectiveness of ChondroMimetic. Such retrospective
data should provide a valuable marketing tool upon reissue of the
CE mark and market launch with a strategic partner, which is
expected in 2017.
b) Launch of bone graft
The treatment of post-traumatic or post-surgical orthopaedic
conditions where there has been a loss of bone is challenging.
Surgeons must pack those areas where there has been bone loss with
materials which provide a scaffold for the regrowth of bone into
the void. Various forms of bonegraft substitutes are available
including allografts (bone removed from the patient); demineralized
bone matrices (prepared from real bone) and synthetic graft
materials. The Company is developing a synthetic bone graft
substitute comprising a natural osteoconductive collagen matrix
which has the potential to compete in this US$1.3 billion market.
The product is expected to benefit from superior handling and a
price point which will position it between basic synthetic
materials and the more expensive biological materials and is
currently expected to receive market clearance in 2018.
c) Launch of wound treatment
There are several types of wounds, including chronic non-healing
wounds such as diabetic foot ulcers and venous stasis ulcers and
burns, for which there are few effective therapeutic options. These
wounds are often associated with injury or underlying conditions,
such as diabetes or circulatory insufficiency, which undermine the
migration of cells to the wound-site and the rebuilding of those
tissue structures required to close the wound. The Company's
fibrillar Type 1 collagen gel has good handling characteristics and
the promise of providing a scaffold material which may accelerate
wound closure in the treatment of partial and full thickness
wounds. The product, which also has potential in combination with
cell therapies and other therapeutics, is currently expected to
receive market clearance in 2018.
Private Bond Issue
Conditional on Admission and subject to the satisfaction of
certain conditions to drawdown, the Group will issue up to GBP4.0
million in private bonds in three tranches as follows:
(a) Tranche A: comprises GBP2.0 million in senior secured bonds
repayable over the 42 months following drawdown and will be issued
upon the closing of a successful equity fundraise of over GBP3.5
million (inclusive of the proceeds from the Placing and Open
Offer); and
(b) Tranche B: comprises GBP1.0 million in senior secured bonds
repayable over the 42 months following drawdown and will be issued
at the Company's option between May 1, 2017 and July 31, 2017,
provided that the Group has achieved certain revenue targets in the
12 months prior to drawdown; and
(c) Tranche C: comprises GBP1.0 million in senior secured bonds
repayable over 36 months, and will be issued at the Company's
option between November 1, 2017 and December 31, 2017, provided
that either: the Group has achieved certain revenue targets in the
12 months prior to the drawdown and the Group has raised a further
GBP1.0 million in equity finance in the 12 months prior to the
drawdown or alternatively GBP2.0 million in equity finance in that
period against a lower level of revenue achievement. Those proceeds
in excess of GBP3.5 million from the Placing and Open Offer will
contribute to the fundraising requirements stipulated for Tranche
C.
The interest rate on the Tranche A Bonds will be 10%. The
interest rate on Tranches B and C will be the higher of 10% or 935
basis points above the three year GBP Swap Rate, and will be fixed
upon issuance. The Bonds are secured against the assets of the
Group, but contain no other financial covenants in relation to the
operation of the business during the term of the Bonds.
Warrants
As a condition of the issue of the Bonds, the Company has agreed
to issue to Norgine Ventures 10 year Warrants to purchase Ordinary
Shares, comprising Warrants for 5,075,283 Ordinary Shares and an
additional 1,691,761 Ordinary Shares if the Company draws down
Tranche C (as described above), in all cases exercisable at 5.911p
per Ordinary Share over the 10 years from drawdown or, if earlier,
on sale of the whole share capital of the Company, after which they
shall lapse. The terms of the Warrants are subject to adjustment in
certain circumstances including a share capital reorganisation of
the Company.
Call Option
In addition, a Call Option has been granted to Norgine Ventures
by the Company's Chairman, David Evans, in tandem with the
Warrants, exercisable at an aggregate cost of GBP1, over a maximum
of 20,000,000 of his Ordinary Shares. The Call Option is only
exercisable following any further fundraising having raised over
GBP2,000,000 during the term of the Bonds at a price per share
lower than 5.911p, with the number of Options capable of exercise
increasing the greater the difference between the price per
Ordinary Share at which the further funding is conducted and
5.911p. An exercise of Warrants following a fundraising at or above
the Warrant Price would not trigger a right under the Call Option
for David Evans to deliver any shares while his maximum liability
would only arise as a result of a fundraising round as described
above and subsequent exercise of the option when the fundraising
price was below 1.5785p.
3. Use of Proceeds
The net proceeds of the Transaction together with the proceeds
of the Bond Facility will, in the opinion of the Directors, provide
the Company with sufficient working capital to fund the Group until
it achieves cash flow positive operations expected after 2019,
including the milestones set out below (subject to final protocol
designs and regulatory approvals not already received. There can be
no assurance that such milestones or positive cashflow will be
achieved in that timeline (or at all) and Shareholders attention is
drawn to Part 2 (Risk factors) of the Circular.
ChondroMimetic completion, R&D expansion and product
pipeline development
ChondroMimetic had previously been sold by Orthomimetics under a
CE Mark. The Company is in the process of compiling existing and
new supplementary data in order to regain the CE Mark under its
current ISO 14385 manufacturing operations. Furthermore, the
Company is initiating a 6+ year retrospective study of up to 17
patients from an original study to provide long term evidence of
ChondroMimetic's incorporation and remodeling ability. The Company
believes that this follow up study will, if successfully completed,
provide it with a compelling additional data-set which will make it
attractive to a commercial partner for full launch in European
markets and support for clinical trials required for entry into the
United States. The elements of this plan can be achieved for
relatively modest investment with a relatively large potential
return. In addition to ChondroMimetic, the Company acquired a suite
of IP relating to additional collagen-based orthopaedic products
for tendon, ligament, meniscus, and bone that the Company may also
potentially finish and commercialise via a commercial partner.
In addition to ChondroMimetic, the Company has a pipeline of
potential new products which it wishes to progress to
commercialisation. The first of these additional products include a
flowable collagen matrix for wound healing and a collagen-ceramic
bone graft substitute for use in multiple orthopaedic indications.
The Company plans to invest a portion of the Transaction proceeds
for these projects as well as additional next-stage collagen-based
products in its pipeline to create additional value.
Expansion of its core business activities
The Company's core business activities focus on providing
standard and custom-developed collagen and tissue biomaterials and
components for an array of medical device developers, regenerative
medicine companies, and researchers. In addition, the Company
provides development services to these customers for products based
on its collagen and tissue biomaterials in advance of supply
agreements for such materials, once the products are commercialised
by the customers. This business forms all of the existing Group
revenues and it is believed that there are significant
opportunities to further develop these activities, especially in
Asia, Europe and the US. In particular, the Company aims to expand
its commercial channels both in terms of breadth of customer
relationships and geographic scope. The Company intends to utilise
a portion of the Placing to Open Offer proceeds to expand its
recently established sales and marketing operation.
Payment of deferred consideration for CSNZL and working
capital
Some of the Transaction proceeds will be used to pay deferred
consideration primarily to the vendors of CSNZL. The acquisition of
CSNZL included a provision for deferred consideration of NZ$4
million (circa GBP2.3 million)* to be satisfied in cash depending
on the achievement of certain future performance criteria. If
CSNZL's sales reach NZ$6.5 million (equivalent to circa GBP3.7
million)* in any of the years to the year ended 31 March 2017, and
they are sustained in any of the following years during the period
ended 31 March 2018, a maximum of NZ$4 million (equivalent to circa
GBP2.3 million)* is payable. If the target sales are not met in
that period a pro rata amount is payable subject to sales exceeding
the base level of NZ$2.5 million (equivalent to circa GBP1.4
million)*.
*NZ$:GBP FX rate of 1:0.57
The Transaction proceeds will also provide additional working
capital and general corporate facilities for the Group.
4. Current Trading and Outlook
The Company separately announced on 19 December 2016 the interim
unaudited financial statements for the period ended 30 September
2016 and provided in such announcement an update regarding its
therapeutic programmes and other activities. A copy of this
announcement is available from the Company's website. Since this
date, the Company has continued to trade in line with market
expectations.
5. The Placing and Open Offer
The Board believes that raising the bulk of the majority finance
using the flexibility provided by a non-pre-emptive placing is the
most appropriate and optimal structure for the Company at this
time. This combined with the Open Offer (which is on a pre-emptive
basis) allows both existing Shareholders and new institutional and
other investors the opportunity to participate in the equity
financing. The Placing Shares and Offer Shares when issued will
rank pari passu with the Ordinary Shares and will rank in full for
any dividends and distributions paid or made in respect of the
Ordinary Shares.
Details of the Placing
The Company proposes to raise gross proceeds of up to
approximately GBP6.2 million (GBP5.8 million net of expenses)
through the issue of the Placing Shares at the Offer Price by way
of the Placing to certain institutional and other investors. The
Offer Price represents a discount of 11.1 per cent. to the closing
market price of 5.625 pence on 13 February 2017, being the last
practicable date prior to this announcement. The Placing Shares
will represent 36.5 per cent. of the Company's Enlarged Share
Capital (assuming the Open Offer is fully subscribed).
As part of the Placing, the Company proposes to issue 99,999,999
VCT/EIS Shares to certain investors seeking EIS relief and for the
purposes of investment by VCTs pursuant to the Placing. It is not
anticipated that EIS/VCT relief will be available in respect of the
Offer Shares.
Application will be made for the Placing Shares to be admitted
to trading on AIM. It is expected that dealings in the Placing
Shares will commence on AIM on 7 March 2017.
It is anticipated that the EIS/VCT Placing Shares will be issued
unconditionally to investors on the day prior to Admission.
Placing Agreement
Under the Placing Agreement, Cenkos has conditionally agreed to
act as placing agent to the Company and to use reasonable
endeavours to procure placees to acquire the Placing Shares at the
Offer Price. The Placing has not been underwritten.
The Placing Agreement is conditional upon, inter alia, the
satisfaction of the following conditions:
(a) the passing of the Resolutions to be proposed at the General
Meeting;
(b) Admission taking place no later than 8.00 a.m. on 7 March
2017 (or such later time and date as the Company and Cenkos may
agree, being no later than 8.00 a.m. 21 March 2017);
(c) there being no breach of warranty in the Placing Agreement
prior to Admission which is material in the context of the
Placing;
(d) the performance by the Company of its obligations under the
Placing Agreement and/or other terms of or conditions to the
Placing prior to Admission; and
(e) drawdown of Tranche A (as described above) under the Bond
Facility having become unconditional in all respects (save for any
condition relating to Admission).
The Placing Agreement contains certain warranties from the
Company in favour of Cenkos in relation to, inter alia, the
accuracy of the information contained in the announcement and
certain other matters relating to the Group and its business. In
addition, the Company has given certain undertakings to Cenkos and
has agreed to indemnify Cenkos in relation to certain liabilities
they may incur in respect of the Placing. Cenkos has the right to
terminate the Placing Agreement in certain circumstances prior to
Admission including inter alia (i) for certain force majeure events
or other events involving certain material adverse changes or
prospective material adverse changes relating to the Group or (ii)
in the event of a breach of the warranties or other obligations of
the Company set out in the Placing Agreement.
Under the Placing Agreement, the Company has agreed to pay
certain commissions to Cenkos and certain other fees and expenses
in connection with the Placing and Open Offer.
Details of the Open Offer
The Company is proposing to raise up to approximately GBP1.8
million before expenses under the Open Offer. A total of 35,924,258
new Ordinary Shares are available to Qualifying Shareholders
pursuant to the Open Offer at the Offer Price, payable in full on
acceptance. Any Offer Shares not subscribed for by Qualifying
Shareholders will be available to Qualifying Shareholders under the
Excess Application Facility.
Qualifying Shareholders may apply for Offer Shares under the
Open Offer at the Offer Price on the following basis:
1 Offer Share for every 5 existing Ordinary Shares
and so in proportion for any number of Existing Ordinary Shares
held on the Record Date. Entitlements of Qualifying Shareholders
will be rounded down to the nearest whole number of Offer Shares.
Fractional entitlements which would otherwise arise will not be
issued to the Qualifying Shareholders but will be made available
under the Excess Application Facility. The Excess Application
Facility enables Qualifying Shareholders to apply for Excess Shares
in excess of their Open Offer Entitlement. Not all Shareholders
will be Qualifying Shareholders. Shareholders who are located in,
or are citizens of, or have a registered office in certain overseas
jurisdictions will not qualify to participate in the Open
Offer.
Application has been made for the Open Offer Entitlements to be
admitted to CREST. It is expected that such Open Offer Entitlements
will be credited to CREST on 15 February 2017. The Open Offer
Entitlements will be enabled for settlement in CREST until 11.00
a.m. on 2 March 2017. Applications through the CREST system may
only be made by the Qualifying CREST Shareholder originally
entitled or by a person entitled by virtue of bona fide market
claims. The Offer Shares must be paid in full on application. The
latest time and date for receipt of completed Application Forms or
CREST applications and payment in respect of the Open Offer is
11.00 a.m. on 2 March 2017.
The Open Offer is conditional on the Placing becoming or being
declared unconditional in all respects and not being terminated
before Admission (as the case may be). Accordingly, if the Placing
Agreement conditions are not satisfied or waived (where capable of
waiver), the Open Offer will not proceed and the Offer Shares will
not be issued and all monies received by Capita will be returned to
the applicants (at the applicants' risk and without interest) as
soon as possible thereafter. Any Open Offer Entitlements admitted
to CREST will thereafter be disabled.
Application will be made for the Offer Shares to be admitted to
trading on AIM. It is expected that dealings in the Offer Shares
will commence on AIM on 7 March 2017.
Directors'/PDMR dealings
The following Directors have agreed to subscribe for Placing
Shares in the following amounts.
Director Position Existing Placing Aggregate Number
Ordinary Shares price of
Shares subscribed paid Ordinary
held for at for Placing Shares
Offer Shares held
Price following
Admission
David Evans Chairman 18,874,167 16,500,000 GBP825,000 35,374,167
Chief Executive
Jamal Rushdy* Officer 0 1,000,000 GBP50,000 1,000,000
Gillian Chief Financial
Black Officer 357,143 500,000 GBP25,000 857,143
Malcolm Non-Executive
Gillies Director 1,653,000 2,000,000 GBP100,000 3,653,000
*Jamal Rushdy is subscribing for such shares pursuant to a
separate subscription letter with the Company.
6. Related Party Transaction
David Evans has agreed to subscribe for 16,500,000 Placing
Shares in the Placing. This transaction is considered to be a
related party transaction pursuant to AIM Rule 13 of the AIM Rules
for Companies. The independent Directors (being those Directors
other than Mr Evans) consider, having consulted with Cenkos, that
the terms of the transaction are fair and reasonable insofar as
shareholders of the Company are concerned.
7. Concert Party
The existing Concert Party, as is detailed in the Company's
Admission Document dated 10 December 2013, is currently interested
in less than 30 per cent. of the Existing Ordinary Shares.
Following Admission, the Concert Party's aggregate interest in the
Enlarged Share Capital will be approximately 16.78 per cent.
Assuming that the Open Offer has a zero take-up, the Concert
Party's aggregate interest in the issued share capital immediately
following Admission is expected to be approximately 18.77 per cent.
Whilst the Concert Party holds less than 30 per cent. of the issued
share capital, if any of the members were to purchase or subscribe
for any shares in the Company which takes their or the Concert
Party's aggregate interest above 30 per cent., under Rule 9 of the
Code that person (and potentially the Concert Party in its
entirety) will normally be required to make an offer to all
Shareholders for those shares it does not own (in cash at the
highest price paid in the last 12 months).
8. General Meeting
A notice convening the General Meeting is set out at the end of
the Circular. A summary and explanation of the Resolutions to be
proposed at the General Meeting is set out below. Please note that
the summary and explanation is not the full text of the Resolutions
and Shareholders should review the full text of the Resolutions
before deciding whether or not to approve them.
The first Resolution proposes to grant to the Directors a
general authority pursuant to section 551 of the Act to allot
shares in the Company or to grant rights to subscribe for or
convert any security into shares in the Company.
The second Resolution proposes to confer upon the Directors a
general power to allot equity securities for cash on a non
pre-emptive basis pursuant to the authority granted to the
Directors by the first Resolution. The second resolution is a
special resolution. Accordingly, for the second resolution to be
passed, not less than 75 per cent. of votes cast must be in
favour.
If passed, the Resolutions will confer upon the Directors the
authority to issue the New Ordinary Shares as well as certain
additional shares as described therein. The Placing and the Open
Offer are conditional upon the passing of the Resolutions and,
accordingly, if the Resolutions are not passed, the Placing and
Open Offer will not complete. If the Resolutions are passed, the
authority and power conferred will, to the extent not used, expire
at the end of the next annual general meeting of the Company to be
held on in 2017.
9. Recommendation
The Directors consider that the Placing and Open Offer and the
Bond Facility are in the best interests of the Company and its
Shareholders as a whole. Accordingly, the Directors unanimously
recommend that Shareholders vote in favour of the Resolutions, as
they intend to do in respect of their entire beneficial holdings of
Ordinary Shares totalling in aggregate 32,228,217 Ordinary Shares
and representing approximately 17.94 per cent. of the current
issued share capital of the Company.
Timetable of Principal Events
Record Date for the Open Offer 5.00 5.00 p.m. on 10
p.m. on 10 February 2017 February 2017
Announcement of the Transaction, 14 February 2017
publication and posting of the Circular,
the Application Form and Form of
Proxy
Ex-entitlement Date 14 February 2017
Open Offer Entitlements and Excess 15 February 2017
CREST Open Offer Entitlements credited
to stock accounts of Qualifying
CREST Shareholders
Recommended latest time and date 4.30 p.m. on 24
for requesting withdrawal of Open February 2017
Offer Entitlements and Excess CREST
Open Offer Entitlements from CREST
Latest time and date for depositing 3.00 p.m. on 27
Open Offer Entitlements and Excess February 2017
CREST Open Offer Entitlements in
CREST
Latest time and date for splitting 3.00 p.m. on 28
Application Forms (to satisfy bona February 2017
fide market claims only)
Latest time and date for acceptance 11.00 a.m. on 2
of the Open Offer and receipt of March 2017
completed Application Forms and
payment in full under the Open Offer
or settlement of relevant CREST
instructions (if appropriate)
Latest time and date for receipt 2.00 p.m. on 2
of completed Forms of Proxy to be March 2017
valid at the General Meeting
General Meeting 2.00 p.m. on 6
March 2017
Announcement of result of General 6 March 2017
Meeting and Open Offer
Admission and commencement of dealings 8.00 a.m. on 7
in the New Ordinary Shares on AIM March 2017
New Ordinary Shares credited to 7 March 2017
CREST members' accounts
Despatch of definitive share certificates within 10 business
in certificated form days of
Admission
Note:
Each of the times and dates in the above table is a reference to
the time in London and is subject to change.
If any of the above times and/or dates change, the revised times
and/or dates will be notified by amendment by the Company on a
regulatory information service.
Definitions
"Act" the Companies Act 2006
"Admission" admission of the New Ordinary
Shares to trading on AIM
becoming effective in accordance
with rule 6 of the AIM
Rules
"AIM" the market of that name
operated by London Stock
Exchange
"AIM Rules" the rules published by
London Stock Exchange entitled
"AIM Rules for Companies"
"Application Form" the application form which
accompanies the Circular
for Qualifying Non-CREST
Shareholders for use in
connection with the Open
Offer
"Board" or "Directors" the directors of the Company
"Bond(s)" senior secured private
bonds (with an interest
rate of the higher of either
10% or 935 basis points
above the three year GBP
Swap/ Rate inclusive)
with a term of up to 42
months and final repayment
(depending on the date
drawn down) of 2021, issued
pursuant to the Bond Facility
"Bond Facility" the facility to issue up
to GBP4,000,000 in Bonds
in three contingent tranches
with Warrants
"BSE" bovine spongiform encephalopathy
"Company" or "Collagen Collagen Solutions plc
Solutions"
"CSNZL" Collagen Solutions NZ Limited
"CREST" the relevant system (as
defined in the CREST Regulations)
in respect of which Euroclear
UK & Ireland Limited is
the Operator (as defined
in the CREST Regulations)
"CREST member" a person who has been admitted
by Euroclear UK & Ireland
as a system-member (as
defined in the CREST Regulations)
"CREST participant" a person who is, in relation
to CREST, a system participant
(as defined in the CREST
Regulations)
"CREST payment" shall have the meaning
given in the CREST Manual
issued by Euroclear UK
& Ireland
"CREST Regulations" the Uncertificated Securities
Regulations 2001 (SI 2001
No. 3755), as amended,
and any applicable rules
made under those regulations
"CREST sponsor" a CREST participant admitted
to CREST as a CREST sponsor
"CREST sponsored member" a CREST member admitted
to CREST as a sponsored
member (which includes
all CREST Personal Members)
"enabled for settlement" in relation to Open Offer
Entitlements or entitlements
to Excess Shares, enabled
for the limited purpose
of settlement of claim
transactions and unmatched
stock event transactions
(each as described in the
CREST Manual issued by
Euroclear UK & Ireland)
"Enlarged Share Capital" the issued share capital
of the Company, as enlarged
by the issue of the New
Ordinary Shares, assuming
that the Open Offer is
fully subscribed
"Euroclear UK & Ireland" Euroclear UK & Ireland
or "Euroclear" Limited, the operator of
CREST
"Excess Application Facility" the arrangement pursuant
to which Qualifying Shareholders
may apply for Offer Shares
in excess of their Open
Offer Entitlements
"Excess CREST Open Offer in respect of each Qualifying
Entitlement" CREST Shareholder, the
entitlement to apply for
Offer Shares in addition
to his Open Offer Entitlement
credited to that Shareholder's
stock account in CREST,
pursuant to the Excess
Application Facility, which
is conditional on the Shareholder
taking up their Open Offer
Entitlement in full and
which may be subject to
scaling back in accordance
with the provisions of
the Circular
"Excess Open Offer Entitlement" an entitlement for each
Qualifying Shareholder
to apply to subscribe for
Offer Shares in addition
to his Open Offer Entitlement
pursuant to the Excess
Application Facility which
is conditional on him taking
up his Open Offer Entitlement
in full and which may be
subject to scaling back
in accordance with the
provisions of the Circular
"Excess Shares" Offer Shares in addition
to the Open Offer Entitlement
for which Qualifying Shareholders
may apply under the Excess
Application Facility
"Ex-entitlement Date" the date on which the Existing
Ordinary Shares are marked
"ex" for entitlement
under the Open Offer, being
14 February 2017
"Existing Ordinary Shares" all issued Ordinary Shares
of the Company prior to
the issue of the New Ordinary
Shares
"FCA" the UK Financial Conduct
Authority
"FSMA" the Financial Services
and Markets Act 2000 (as
amended)
"GBP SwapRate" the GBP Swap Rate (ask
side) (as reported by ICE
Benchmark Administration
Limited or comparable body)
"General Meeting" the general meeting of
the Company convened for
2.00 p.m. on 6 March 2017
to approve the Resolution
(or any adjournment thereof),
notice of which is set
out at the end of the Circular
"Form of Proxy" the form of proxy for use
in connection with the
General Meeting accompanying
the Circular
"Group" the Company and its subsidiaries
and subsidiary undertakings
"ISIN" International Securities
Identification Number
"Money Laundering Regulations" the Money Laundering Regulations
2007 (as amended)
"New Ordinary Shares" the Placing Shares and
the Offer Shares
"Nominated Adviser" or Cenkos Securities plc,
"Cenkos" the Company's nominated
adviser and broker
"Norgine Ventures" Norgine Ventures Fund I
S.C.A. SICAR Registered
number B205399 Luxembourg
"Offer Price" 5 pence per New Ordinary
Share
"Open Offer" the conditional invitation
by the Company to Qualifying
Shareholders to apply to
subscribe for the Offer
Shares at the Offer Price
on the terms and subject
to the conditions set out
in the Circular and, where
relevant, in the Application
Form
"Open Offer Entitlement" the individual entitlements
of Qualifying Shareholders
to apply to subscribe for
Offer Shares allocated
to Qualifying Shareholders
pursuant to the Open Offer
"Offer Shares" up to 35,924,258 new Ordinary
Shares being made available
to Qualifying Shareholders
pursuant to the Open Offer
"Ordinary Shares" ordinary shares of GBP0.01
each in the capital of
the Company
"Overseas Shareholders" Shareholders who are resident
in, or who are citizens
of, or who have registered
addresses in, territories
other than the United Kingdom
"participant ID" the identification code
or membership number used
in CREST to identify a
particular CREST member
or other CREST participant
"Placing" the conditional placing
by Cenkos, as agent for
the Company, of the Placing
Shares at the Offer Price
on the terms and subject
to the conditions set out
in the Placing Agreement
"Placing Agreement" the placing agreement dated
on 14 February 2017 between
the Company and Cenkos
in connection with the
Placing
"Placing Shares" 123,799,999 new Ordinary
Shares to be issued pursuant
to the Placing (which number
includes the 99,999,999
VCT/EIS Shares)
"Prospectus Rules" the prospectus rules made
by the FCA pursuant to
section 73A of FSMA
"Qualifying CREST Shareholders" Qualifying Shareholders
holding Existing Ordinary
Shares in a CREST account
"Qualifying Non-CREST Qualifying Shareholders
Shareholders" holding Existing Ordinary
Shares in certificated
form
"Qualifying Shareholders" holders of Existing Ordinary
Shares on the register
of members of the Company
at the Record Date (but
excluding, subject to certain
exceptions, any Overseas
Shareholder who is located
or resident or who has
a registered address in,
or who is a citizen of,
the United States of America
or any other Restricted
Jurisdiction)
"Receiving Agent" Capita Asset Services,
71 Victoria Street, Westminster,
London, SW1H 0XA
"Record Date" 5.00 p.m. on 10 February
2017 in respect of the
entitlements of Qualifying
Shareholders under the
Open Offer
"Regulatory Information has the meaning given in
Service" the AIM Rules
"Resolutions" the resolutions to be proposed
at the General Meeting
"Restricted Jurisdiction" the United States, Canada,
Australia, New Zealand,
the Republic of South Africa,
Japan or the Republic of
Ireland, and any of their
territories or possessions
"Securities Act" the United States Securities
Act of 1933, as amended
"Shareholder" a holder of Ordinary Shares
"Transaction" the Placing and Open Offer
"United Kingdom" or "UK" the United Kingdom of Great
Britain and Northern Ireland
"United States" or "US" the United States of America,
its territories and possessions,
any state of the United
States of America and the
District of Columbia
"VCT/EIS Shares" 99,999,999 Placing Shares
issued to investors seeking
EIS relief and for the
purposes of investment
by VCTs pursuant to the
Placing
"Warrants" the warrants to purchase
up to 6,767,044 Ordinary
Shares at a price of 5.911p
per Ordinary Share issued
pursuant to the Bond Facility
"GBP", "pence" or "p" the lawful currency of
the United Kingdom
"$", "US$" or "dollar" the lawful currency of
the United States
Important notice:
This announcement does not constitute or form part of any offer
or invitation to sell or issue, or any solicitation of any offer to
purchase or subscribe for, any New Ordinary Shares, nor shall it
(or any part of it), or the fact of its distribution, form the
basis of, or be relied on in connection with or act as any
inducement to enter into, any contract or commitment whatsoever
with respect to the proposed Placing and Open Offer or otherwise.
This announcement is not a prospectus and investors should not
subscribe for or purchase any New Ordinary Shares on the basis of
this announcement. Any offer to acquire New Ordinary Shares
referred to in this announcement will be made, and any investor
should make his investment, solely on the basis of information in
the Circular expected to be published and made generally available
in the United Kingdom today. When made generally available, copies
of the Circular may be obtained at no cost through the Company's
corporate website (www.collagensolutions.com).
The distribution of this announcement and/or the transfer of the
New Ordinary Shares in or into jurisdictions other than the United
Kingdom may be restricted by law and therefore persons into whose
possession this announcement comes should inform themselves about
and observe such restrictions. Any failure to comply with such
restrictions may constitute a violation of the securities laws of
any such jurisdiction. In particular, this announcement should not
be distributed, forwarded to, or transmitted in or into the United
States, Canada, Japan, the Republic of South Africa, the Republic
of Ireland or Australia.
The New Ordinary Shares referred to in this announcement will
not be offered in or into any jurisdiction unless such an offer can
be made without contravention of any unfulfilled registration or
other legal or regulatory requirements. The New Ordinary Shares,
the Open Offer Entitlements and the Excess Open Offer Entitlements
have not been, nor will they be, registered under the United States
Securities Act of 1933, as amended, (the "US Securities Act") and
may not be offered, sold or delivered in, into or from the United
States except pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the US Securities
Act.
Cenkos Securities plc, which, in the United Kingdom, is
authorised and regulated by the Financial Conduct Authority, is
acting as nominated adviser and broker to the Company for the
purposes of the AIM Rules in connection with the proposed Placing
and Admission and will not be acting for any other person
(including a recipient of the Circular) or otherwise be responsible
to any person for providing the protections afforded to clients of
Cenkos Securities plc or for advising any other person in respect
of the proposed Placing and Admission. Cenkos Securities plc's
responsibilities as the Company's nominated adviser and broker are
owed solely to London Stock Exchange and are not owed to the
Company or to any Director or to any other person in respect of his
decision to acquire shares in the Company in reliance on any part
of the Circular.
Cautionary note regarding forward looking statements:
This announcement includes certain "forward-looking statements"
with respect to the business, strategy and plans of the Company and
its current goals and expectations relating to its future financial
condition and performance. Statements that are not historical
facts, including statements about the Company's or the Directors'
and/or management's beliefs and expectations are forward looking
statements. Words such as "believes", "anticipates", "estimates",
"expects", "intends", "aims", "potential", "will", "would",
"could", "considered", "likely", "estimate" and variations of these
words and similar future or conditional expressions are intended to
identify forward-looking statements but are not the exclusive means
of identifying such statements. By their nature, forward looking
statements involve risk and uncertainty because they relate to
events and depend upon circumstances that will occur in the future.
A number of important factors could cause actual results or
outcomes to differ materially from those expressed in any
forward-looking statements. These factors include, but are not
limited to, those discussed in the Circular. Neither the Company
nor any member of its group undertake any obligation publicly to
update or revise any of the forward-looking statements, whether as
a result of new information, future events or otherwise, save in
respect of any requirement under applicable laws, the AIM Rules,
the Prospectus Rules, the Disclosure and Transparency Rules and
other applicable regulations.
About Collagen Solutions:
Collagen Solutions Plc is a global provider of medical grade
collagen formulations and components for use in regenerative
medicine, medical devices and in-vitro diagnostics and research.
The capabilities of the Company include the provision of native,
soluble and powdered collagen formulations, processed and
semi-processed tissues such as pericardium, bone, and blood
vessels, and expertise in the development and contract manufacture
of collagen components for use as engineered tissue scaffolds and
other medical devices. These products are used in a wide variety of
applications including orthopaedics, cardiovascular, dental,
plastic surgery, wound healing, neurology and urology. Collagen
Solutions' unique offering extends beyond material supply and
contract services through the highly skilled staff who support
customers through the various stages of development and regulatory
approval. For additional information, please visit
www.collagensolutions.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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