TIDMMERC
RNS Number : 6298V
Mercia Technologies PLC
31 January 2017
31 January 2017
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
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Mercia Technologies PLC
("Mercia", the "Company" or the "Group")
Placing of new Ordinary Shares to raise approximately
GBP40.0million
Mercia Technologies, a national investment group focused on the
creation, funding and scaling of innovative technology businesses
with high growth potential from the UK regions, is pleased to
announce a conditional placing of, in aggregate, 86,956,521 Placing
Shares at 46 pence per Placing Share. The Placing Price represents
a discount of approximately 8.9 per cent. to the closing mid-market
price of 50.5 pence per Ordinary Share on 30 January 2017 (being
the last practical date prior to the announcement of the
Placing).
Once completed, the gross proceeds from the Placing will be
approximately GBP40.0million. The primary purpose of the Placing is
to accelerate the development of the Group's existing portfolio
companies and to capture the opportunity to invest in new direct
investment opportunities across its target sectors nationally and
specifically within the UK regions. The number of opportunities has
been significantly enhanced through the acquisition of Enterprise
Ventures Group Limited in March 2016 which took the number of
investee technology companies in the Group's third party managed
funds from circa 35 to circa 150.
Together with the potential for a marked growth in capital
deployment over the coming 12 to 24 months, the Directors are also
optimistic about the commercial opportunities facing the Group's
portfolio companies as a whole and their potential for delivering
shareholder returns. The Directors therefore unanimously believe
that the Placing will significantly enhance shareholder value over
the medium term, via sustained growth in net asset value.
The allotment of the Placing Shares is conditional, inter alia,
upon the Company obtaining approval of Shareholders to grant the
Directors the authority to allot such Placing Shares and to
disapply statutory pre-emption rights which would otherwise apply
to such allotment. A General Meeting is therefore being convened at
Forward House, 17 High Street, Henley-in-Arden, Warwickshire B95
5AA on 16 February 2017 at 10.00 a.m. for the purpose of
considering, and if thought fit, passing the Resolutions.
The circular (the "Circular"), which will provide further
details of the Placing and includes a notice convening the General
Meeting, is expected to be sent to Shareholders and be available on
the Company's website later today www.merciatech.co.uk.
Mark Payton, Chief Executive of Mercia Technologies PLC,
commented:
"The Placing to raise circa GBP40.0million which we are
announcing today is the next step in Mercia's exciting growth
journey. Since IPO in December 2014, we have made substantial
progress in establishing Mercia as a leading investor in innovative
companies across the UK's capital-underserved regions. We have a
growing portfolio of direct investments where we see significant
exit potential in the years ahead, as recently demonstrated by the
sale of Allinea Software to ARM, the world's leading semiconductor
IP company. Moreover, we have a greatly enlarged pipeline of future
investment prospects in our substantial managed funds, underpinning
our confidence in the potential to increase capital deployment over
the next few years in both new and existing 'Emerging Stars'. The
Placing will support these growth ambitions, utilising our Complete
Capital Solution to significantly enhance shareholder value in the
medium term."
Enquiries:
Mercia Technologies PLC
Mark Payton, Chief Executive Officer
Martin Glanfield, Chief Financial Officer
www.merciatech.co.uk +44 (0)330 223 1430
Cenkos Securities plc
Ivonne Cantu / Mark Connelly (NOMAD) +44 (0)20 7397 8900
Russell Kerr / Michael Johnson (Sales)
Buchanan
Bobby Morse / Victoria Hayns / Stephanie Watson
www.buchanan.uk.com +44 (0)20 7466 5000
Defined terms used but not defined in this announcement have the
meaning set out in the Circular.
About Mercia Technologies PLC
Mercia is a national investment group focused on the creation,
funding and scaling of innovative businesses with high growth
potential from the UK regions. Mercia benefits from 18 university
partnerships and six offices across the Midlands, the North of
England and Scotland providing it with access to high quality,
regional deal flow. Mercia Technologies PLC is quoted on AIM with
the epic "MERC".
Mercia's 'Complete Capital Solution' initially nurtures
businesses via its third party funds (with more than
GBP228.0million under management) and then over time Mercia can
provide further funding to its 'Emerging Stars' by deploying direct
investment follow-on capital from its own balance sheet.
Since its IPO in December 2014, the Company has invested over
GBP30.0million directly across its portfolio of 'Emerging
Stars'.
ADDITIONAL INFORMATION
BACKGROUND TO, AND REASONS FOR, THE PLACING
Reproduced below without material adjustment is an extract from
the Chair's letter to Shareholders, the full text of which will be
contained in the Circular.
1. Background to, and reasons for, the Placing
1.1 The Mercia model
Mercia is a national investment company focused on the creation,
funding and scaling of innovative businesses with high growth
potential from the UK regions. Mercia uses its 'Complete Capital
Solution' to initially nurture early stage businesses via its third
party funds and then over time, as these businesses develop, to
provide further funding to the most promising businesses ("Emerging
Stars") using its own capital. This approach allows the Group to
monitor and nurture a large pool of early stage businesses before
committing its own capital to a small proportion of the managed
funds' investee businesses, therefore substantially de-risking the
Group's investment process in respect of its direct investment
strategy.
Mercia's vision is to become a leader in its sector and to
achieve this, the Company is:
-- focusing on technology rich sectors with high growth
potential in which the Group has developed significant expertise,
namely Software & the Internet, Digital & Digital
Entertainment, Electronics, Materials &
Manufacturing/Engineering and Life Sciences & Biosciences;
-- building a team of Investment Directors with significant
industry and investment experience. With circa 60 employees, 26 of
whom are threshold competent investment executives, Mercia benefits
from a blended team of industry veterans, successful entrepreneurs
and venture capitalists, providing the necessary insight to scale
and exit investments across its selected sectors;
-- seeking strategic syndication into the direct investments in
which material equity positions have been established, thus
achieving progressive valuations while retaining meaningful equity
holdings until an appropriate exit path is chosen;
-- expanding the size of its managed funds to invest in a
sustainable pipeline of future 'Emerging Stars', whilst also
generating fee income to materially offset the Group's operating
costs;
-- continually assessing its operating environment to evaluate
acquisition opportunities of complementary businesses or investment
assets;
-- leveraging its relationships with universities, accelerators,
incubators, other deal flow sources and its in-house business
creation experience, to target known market opportunities; and
-- operating in the capital-underserved regions of the Midlands,
the North of England and Scotland where having a local presence
provides a material advantage in identifying and supporting some of
the most promising and innovative technology businesses.
Mercia aims to build a material stake when investing directly,
typically between 20 to 40 per cent. before considering
syndication. This enables Mercia to benefit from the value created
in scaling the business and to exert a degree of influence as a
principal shareholder.
Valuation approach
The Company conducts half yearly valuations of its portfolio
based on International Private Equity and Venture Capital Valuation
Guidelines (the "IPEV Guidelines"). In line with the IPEV
Guidelines, investments are held initially at cost or the price of
a recent funding round, with subsequent fair value movements
triggered by external third party validation or comparable company
metrics where available, once a portfolio company is in revenue
growth or reaches profitability. In addition the Company may, from
time to time, engage a professional adviser to provide an opinion
on the valuation of a portfolio company, when there has been
material commercial progress in the business and, in the absence of
a recent funding round, the holding value is considered to be out
of date. Similarly, in the event that an investee company is
materially behind plan, Mercia may adjust, in accordance with its
valuation policy, the equity valuation on a 25 per cent. declining
basis, against the previously reported holding value. Individual
portfolio company valuations are discussed and agreed with the
Company's auditors as part of the annual statutory audit and
interim results review process.
1.2 Mercia's 2014 IPO
At its IPO on 18 December 2014, Mercia successfully raised
GBP70.0million gross proceeds with the specific proposed use of
funds:
-- 70 to 80 per cent. of funds to invest into existing or new
direct investments, including sector consolidation platforms. By 31
March 2017 Mercia expects to have invested approximately 58 per
cent. of the IPO proceeds into existing and new 'Emerging Stars'
and have approximately 17 per cent. of the original IPO proceeds
remaining; and
-- 20 to 30 per cent. of funds for regional expansion,
recruitment of experienced staff, working capital, IPO costs and
selective complementary acquisitions. By 31 March 2017 Mercia
expects to have spent approximately 25 per cent. of the IPO
proceeds on its IPO costs, trading and acquisition activities.
1.3 Progress since IPO
Mercia has benefitted from accelerated expansion since its debut
on AIM via a combination of organic and acquired growth as
follows:
-- university partnerships have grown from nine to 18;
-- direct investment portfolio has grown from 11 to 26 companies as at 30 September 2016;
-- direct investment value has grown from GBP9.0million to
GBP46.6million as at 30 September 2016;
-- over GBP30.0million has been invested across its portfolio of 'Emerging Stars';
-- acquisition of Enterprise Ventures: one of the leading
providers of investment capital for SMEs in the North of England,
Enterprise Ventures was acquired on 9 March 2016 for a total
consideration of up to GBP11.0million plus GBP2.0million of net
cash. The acquisition has resulted in:
o managed funds growing from circa GBP22.0million to circa GBP228.0million;
o materially increased trading revenue with the majority of the
Group's operating costs now being covered by the total revenues
being generated;
o pipeline of new potential direct investments (via the Group's
managed funds) growing from circa 35 companies to circa 150;
o office locations which provide access to, and management of,
early-stage deal flow have grown from two to six; and
-- experienced investment team and professional back office
staff numbers have grown from circa 10 at IPO to circa 60,
including Enterprise Ventures' staff, reflecting the planned
scaling of the Group.
Mercia's objective of creating a stable, sustainable and
scalable infrastructure has been successfully achieved. In
parallel, the Directors are focused on building value from the
direct investment portfolio to realise shareholder value over the
medium term. Given the time frame to maximise the value of an
investment, Mercia's strategy is to hold investments for the medium
to long term, while taking advantage of value crystalisation
opportunities that may arise.
First exit
The sale of Allinea Software Limited ("Allinea") to ARM Limited
("ARM") in December 2016 for a total cash consideration of up to
GBP18.1million is a good illustration of the Company's strategy.
Allinea is a leading provider of software tools for developing and
optimising high performance computing applications. In 2009, Mercia
identified the investment opportunity and led the funding of a
management buyout of Allinea from a University of Warwick spinout.
Over a period of seven years, with backing from Mercia, Allinea was
scaled into a profitable, cash generative and dividend paying
business before being sold to ARM, the world's leading
semiconductor IP company. This first full cash divestment
demonstrates how Mercia can create significant value through its
Complete Capital Solution, delivering a return of circa 1.7x on
Mercia's total investment cost and an immediate realised gain of
GBP0.7million, compared with the holding value of GBP1.9million as
at 30 September 2016.
1.4 Mercia's direct investment portfolio
The 26 direct investments (including Allinea) were held at a
combined value of GBP46.6million on 30 September 2016. Of those,
the 18 leading direct investments accounted for GBP45.7million
(98.0 per cent.) of the total carrying value of the portfolio, with
77.8 per cent. of the carrying value found within the top 10
assets. In the period from IPO to 30 September 2016 across the
entire portfolio, GBP7.6million (25.4 per cent.) has been invested
in the Software & the Internet sector, GBP9.8million (32.6 per
cent.) in Digital & Digital Entertainment, GBP7.8million (25.9
per cent.) in Electronics, Materials &
Manufacturing/Engineering and GBP4.8million (16.0 per cent.) in
Life Sciences & Biosciences. The continual monitoring and
balancing of the direct investment portfolio (by value and number)
ensures that no single company or sector overweighs the portfolio
and therefore the exposure to any one sector is mitigated. As at 30
September 2016, the number of portfolio companies in each sector
were:
-- Software & the Internet - six;
-- Digital & Digital Entertainment - five;
-- Electronics, Materials & Manufacturing/Engineering- seven; and
-- Life Sciences & Biosciences - eight.
The direct investment portfolio, often benefiting from strong
corporate partnerships, has significantly grown since IPO. Net fair
value gains in the most recent interim results period were
GBP2.8million and since IPO, net fair value gains have totalled
GBP7.6million.
Recent progress by 13 of the Group's leading direct investments
is summarised below.
Software & the Internet
The Gartner Worldwide IT Spending Forecast (a leading indicator
of technology trends across the hardware, software, IT services and
telecom markets) provides a sense of scale to this sector,
estimating that worldwide IT spend is forecast to total
$3.5trillion in 2017. Global enterprise software market is worth
c$357billion (Gartner), information security market is worth
c$75.0billion (Gartner) and the artificial intelligence market is
expected to be worth $70.0billion in next five years (Bank of
America Merrill Lynch).
Mercia focuses principally on application software and security
solutions targeting businesses with the potential for fast growing,
scalable revenues.
Science Warehouse Limited
Founded in 2000 and a Leeds University spinout, Science
Warehouse delivers a cloud-based procurement, catalogue and spend
analysis platform with a highly intuitive user interface, ensuring
customers have control of the purchasing cycle from requisition to
payment, helping deliver cost savings and manage spend. Its core
vertical markets are in further education and health services. The
Science Warehouse business continues to make progress. The company
has experienced encouraging results in Australia where it recently
opened a sales office.
Ton UK Limited - trading as Intelligent Positioning
Intelligent Positioning is a developer of real-time search
intelligence and search engine optimisation analytics solutions for
businesses. The company helps businesses to optimise their web
presence through detailed and actionable reports on search ranking
performance against key competitors. It works with agencies and
leading brands to help them enhance their online presence.
Customers include L'Oreal, Financial Times, Invesco Perpetual and
Legal & General. The company is seeing revenue growth and the
team has recently opened a new sales office in New York and has
started to make inroads into the much larger US market.
Digital & Digital Entertainment
The global digital games market is forecast to grow from close
to $81.3billion in 2014 to $113.0billion in 2018, making it the
largest market in the entertainment sector (Newzoo/Ukie). The total
virtual reality ("VR") market is expected to be worth $30.0billion
by 2020. China is now the largest single games market.
The UK is recognised globally as a centre of real expertise in
game development, publishing and creativity and we continue to see
a strong flow of opportunities. Examples within Mercia's direct
investments in this sector include:
nDreams Limited
nDreams was founded in 2006 by Patrick O'Luanaigh, the creative
director of Tomb Raider, as a game and experiences developer.
Created initially to provide content for Sony PlayStation Home
virtual world (a virtual 3D social gaming platform for the
PlayStation 3), Mercia later leveraged this expertise through its
managed funds to position nDreams as one of the first organisations
to move into software development purely for VR.
In the last six months the management team has made excellent
progress building out a portfolio of games and experiences for both
high end and mobile VR, including the successful launch of The
Assembly in July 2016 which made it to number one in the Oculus VR
charts. Meanwhile, development continues on many fronts including
two exclusive titles for the new Google VR platform, Daydream. One
of the titles was released simultaneously with the platform launch
in late 2016.
VirtTrade Limited
VirtTrade has developed an engine that takes the principle of a
traditional printed trading card collection and turns it into an
interactive digital trading experience. This results in the players
being able to trade one digital card for many globally in an open
market. Unlike traditional trading cards, the VirtTrade platform
can take live data feeds from the player, the brand or IP owner and
the outside world. This enriches the trading experience as well as
providing some exciting and novel opportunities.
In the last six months VirtTrade has continued to build on its
global relationship with Panini, which has recently released the
2017 version of its digital collectible app NFL GRIDIRON, making it
to number one in the US sports IOS charts just two weeks after
release. Panini has provided marketing support for the title
through the months to Christmas. The updated and improved NBA Dunk
app was also released before Christmas plus one other new
title.
Edge Case Games Limited
Edge Case Games was established in June 2014 as a new business
under Mercia's guidance using seed and early stage finance through
its third party funds and is a free to play, games-as-a-service
business. The business, which is led by industry veterans James
Brooksby and Chris Mehers, operates in the massive multiplayer
online ("MMO") sub-sector of the gaming market. The team
successfully took 'Fractured Space', their space PC game, out of
Steam's 'Early Access' and into a full launch in September 2016.
Early download and sales data have been strong with average revenue
per paying customer as high as $20 and the company achieved more
than 150,000 unique installs of the innovative game during the
first week following the launch as a free to play title.
Electronics, Materials & Manufacturing/Engineering
Manufacturing in the UK contributes 11 per cent. of UK Gross
Value Added, employing over 2.6million people. Over recent years
there has been a resurgence of advanced manufacturing in the UK and
this is evidenced by the many examples of innovation in the areas
of material and hardware technology throughout the UK regions where
Mercia is active.
Smart Antenna Technologies Limited
A University of Birmingham spinout, Smart Antenna Technologies
is developing multi-function antenna solutions for mobile phones,
tablets, laptops and smart TVs and its highly scalable technology
has the potential to lower costs, reduce size, increase frequency
range and offer much needed performance gains over existing designs
and technologies. In the last six months the management team has
continued to engage with leading global manufacturers of portable
devices.
Impression Technologies Limited
Impression Technologies is involved in the forming of complex,
high strength, lightweight, ductile components used in the
automotive, rail and aerospace industries. The company's patented
heat treatment, forming and in-die quenching (HFQ(R)) technology
was developed by Impression Technologies, building on founding
research at the University of Birmingham and Imperial College. The
result is complex but lightweight aluminium components which do not
compromise the strength or metallurgical properties of the
material. The business has begun production at its new pilot
pressing facility.
Warwick Audio Technologies Limited
A University of Warwick spinout, Warwick Audio Technologies has
developed and patented a new style of electrostatic speaker. This
speaker is extremely lightweight, thin, flexible and produces a
very high quality audio sound. The novel manufacturing process
pioneered with this design enables these speakers to be produced
reliably at scale to a very high standard, with consistent
performance. This makes them potentially one of the most
cost-effective Hi-Res audio transducers on the market. In the last
six months, the company has worked on delivering its product to the
headphone market, initially focusing on the audiophile segment with
a wired at-home product. Over the next 12 months, it will turn its
focus to the wireless closed back premium portable segment, where
the company believes that major opportunities lie in creating a
premium product for the iPhone 7 and other portable players. In the
long term, the company will look to expand into other markets where
the characteristics of its technology deliver benefits, in
particular the automotive market. The company has recently
announced the appointment of former BOSE VP, Gary Waters, to the
board as a non-executive director.
sureCore Limited
sureCore was established under the direction of Enterprise
Ventures and is an example of a startup which was specifically
built by the investment team leveraging its expansive networks. It
is led by a team of industry experts with a combined experience of
nearly 100 years. The company develops and licenses low power and
low operating voltage embedded memory ("SRAM") IP designs for the
semiconductor industry. sureCore is addressing the growing demand
for more memory and lower power consumption in leading edge
devices, such as those serving the networking space as well as the
Internet of Things ("IoT") and wearable and consumer/handheld
products. In the last six months the company has received verbal
confirmation from a large Japanese customer of its intention to
license the technology for its next product development.
Life Sciences & Biosciences
The Life Sciences & Biosciences sector is of particular
interest to Mercia with 98 per cent. of the medical technology
(MedTech) sector in the UK driven by SMEs (Office for Life
Sciences). One subsector of strong interest to Mercia is
diagnostics, with the worldwide in vitro diagnostics ("IVD") market
being estimated to be worth $71billion globally by 2020. This means
that there are a wealth of investment opportunities in this
subsector.
Concepta plc
Like sureCore, Concepta is an example of a startup established
by the Enterprise Ventures investment team and its professional
networks. The company is developing a portfolio of women's health
diagnostics which monitor pregnancy, fertility and menopause. This
is initially targeted at the Chinese market but will have the
potential for rollout to the rest of the world. The choice of China
as the initial market reflects the core management strength and
knowledge of the Chinese consumer diagnostic market and a clear
market need as the current gold-standard western-developed devices
are not currently available. The last six months have been
extremely busy following the company's successful admission to AIM,
which took place in July 2016. The focus for the management team is
now the siting of a new manufacturing plant in Yorkshire and the
launch of MyLotus in China later this year and, subsequent to CE
marking, targeting its launch in the UK and Europe in 2017.
Oxford Genetics Limited
Oxford Genetics has rapidly grown into one of the leading
players in synthetic biology and is a specialised contract research
organisation offering services to support the discovery,
development and production of biologics, gene and cell therapies.
The company has expertise in designing DNA, optimising expression
of proteins, cell line development and improving viral gene
delivery systems. In the last six months the team has moved to new
purpose fitted 6,000 sq ft facilities, achieved ISO quality status,
expanded its commercialisation and management teams and its board
and is now providing services to a number of pharmaceutical
clients. Over the next 12 months the company aims to license its
technologies in the rapidly expanding markets of cell and gene
therapy.
The Native Antigen Company Limited
Based on technology and expertise from the University of
Birmingham, Native Antigen is another business created under the
guidance of Mercia. The company specialises in the research,
development and scale-up manufacturing of highly pure viral and
bacterial native antigens. It trades with over 50 organisations
worldwide with exports accounting for 90 per cent. of its sales,
much of which is annual repeat business. Revenues continue to grow
and this year doubled, taking the business into profitability and
cash generation. The next step for the business is to further
develop its growth opportunities and explore related applications
of its technology, with a strong focus on the infectious disease
sector.
Medherant Limited
Medherant is a University of Warwick spinout and is an IP-rich
business focused on developing a transdermal drug delivery patch,
known as the TEPI Patch(R), for the widely used pain management
drugs Ibuprofen and methyl salicylate. The technology was
co-developed with Bostik using their latest proprietary adhesive
technology. The patch will also provide wider drug delivery
opportunities across a number of pharmaceutical areas. As a result
of the patch's ease of manufacture, efficient drug delivery and
reduced use of material, the technology also has the potential to
remove huge cost burdens from healthcare systems.
1.5 Third party funds
Mercia differentiates itself from its comparators through the
scale and varied nature of its third party managed funds, which
total circa GBP228.0million, supporting the early stage investment
activity of the Group. Mercia's third party funds are generating a
pipeline of potential new direct investments for the Group and
importantly the revenues generated therefrom contribute materially
to covering the Group's operating costs. This ensures that the vast
majority of the Group's cash is deployed into direct investment
activity rather than funding operating losses, which lease directly
to net asset erosion.
Looking forward, in addition to the Company's ability to raise
and deploy Enterprise Investment Scheme ("EIS") and Seed EIS
investment capital at a growing rate of circa GBP10.0million per
annum, Mercia is also participating in the bidding process to
manage certain public sector supported regional funds such as those
connected to the Northern Powerhouse, Midlands Engine Room and
North East investment funds. The Board believes that this pipeline
of managed funds provides a sustainable investment platform for
Mercia.
1.6 Current trading and outlook
The Group announced its most recent interim results on 10
November 2016. Financial performance was on plan for the six months
to 30 September 2016, with the Group reporting revenues of
GBP2.9million (2015: GBP0.7million), mainly generated from its fund
management activities. The Group reported a profit after tax of
GBP1.1million for the period. Since then, on 16 December 2016,
Mercia has also announced its first cash exit, with the sale of
Allinea achieving a return of 1.7x on Mercia's total investment
cost and an immediate realised gain of GBP0.7million, compared with
the holding value of GBP1.9million as at 30 September 2016.
Central to Mercia's investment philosophy are three consistent
themes; ambition, expertise and sustainability. The Directors have
significant ambition to scale Mercia through informed decision
making, resulting in a sustainable business model and a growing
portfolio capable of delivering long term shareholder value. Since
IPO Mercia has established itself as a leading investor in the
Midlands and the North of England with a regional infrastructure
capable of accessing and building dynamic, ambitious businesses
within Mercia's sectors of focus, leveraging its deal flow networks
and university partnerships. Mercia has also commenced its
investment activities in Scotland via its Edinburgh office.
The Directors are optimistic about the commercial opportunities
facing the Group's portfolio companies as a whole and their
potential for delivering shareholder returns.
1.7 Reasons for the Placing
The Directors believe that there are significant opportunities
to invest in both existing and new 'Emerging Stars'. Since their
initial funding, a number of the Company's 'Emerging Stars' would
now benefit from further capital to scale globally. In addition,
the pipeline of potential direct investments from the Group's
managed funds was materially expanded with the acquisition of
Enterprise Ventures. As a result it is envisaged that there will be
a marked growth in capital deployment over the coming 12 to 24
months.
In summary, the net proceeds of the Placing will enable Mercia
to:
-- scale the growth of its existing direct investments;
-- add new direct investments from the greatly expanded managed funds portfolio;
-- where appropriate and value enhancing, continue to appraise
complementary acquisition opportunities; and
-- fund Mercia's relatively low net operating costs.
In addition, the Directors believe that liquidity in the
Company's shares may be enhanced following the Placing as a result
of the enlarged share capital and shareholder register.
The Board believes that the strategic direction of the Group has
now been set, with a greatly enlarged pipeline of future investment
prospects and a growing portfolio of direct investments with
significant exit potential in the years ahead, as demonstrated by
the recent sale of Allinea. The Directors unanimously believe that
the Placing will significantly enhance shareholder value over the
medium term, via sustained growth in net asset value.
2. The Placing
86,956,521 Placing Shares have been placed with placees at the
Placing Price to raise gross proceeds of approximately
GBP40.0million. The Placing is not underwritten. The Placing Price
of 46 pence per Share represents a discount of approximately 8.9
per cent. to the closing mid-market price of 50.5 pence per
Ordinary Share on 30 January 2017 (being the last practical date
prior to the announcement of the Placing).
The Placing of the Placing Shares is conditional, inter alia, on
the approval of Resolutions 1 and 2 at the General Meeting of the
Company to be held at 10.00 a.m. on 16 February 2017 and upon
Admission of the Placing Shares to trading on AIM. It is expected
that Admission of the Placing Shares will occur on 17 February
2017.
The Directors intend to vote in favour of each of the
Resolutions in respect of their aggregate beneficial interest of
67,348,065 Ordinary Shares, representing approximately 31.5 per
cent. of the Existing Ordinary Shares.
The Placing Shares issued pursuant to the Placing will, when
issued, be credited as fully paid and will rank pari passu in all
respects with the Existing Ordinary Shares including the right to
receive all dividends and other distributions declared, made or
paid after their date of issue.
3. Use of proceeds
The Placing is expected to raise gross proceeds of approximately
GBP40.0million.
The expected application of funds raised in the Placing through
to 31 March 2019, after expenses, is as follows:
-- at least 90 per cent. to invest into existing and new direct
investments, including sector consolidation platforms; and
-- up to 10 per cent. to fund net operating costs.
4. The Placing Agreement
Pursuant to the terms of the Placing Agreement, Cenkos, as agent
for the Company, conditionally agrees to use its reasonable
endeavours to place the Placing Shares on a non-underwritten basis
at the Placing Price.
The Placing Agreement contains certain warranties from the
Company in favour of Cenkos in relation to, inter alia, certain
matters relating to the Company and its business. In addition, the
Company has agreed to indemnify Cenkos in relation to certain
liabilities it may incur in respect of the Placing. Cenkos has the
right to terminate the Placing Agreement in certain circumstances
prior to Admission including, without limitation, in the event of a
material breach of the Company to comply in any material respect
with its obligations under the Placing Agreement, the occurrence of
a force majeure event or a material adverse change in the financial
condition of the Group. Under the terms of the Placing Agreement
the Company has agreed to pay Cenkos commissions based on the
number of Placing Shares which are the subject of the Placing.
Cenkos has elected to utilise approximately 70 per cent. of its
commissions to subscribe for Placing Shares in the Placing.
5. Admission and dealings
Application will be made to the London Stock Exchange for the
Placing Shares to be admitted to trading on AIM. The Placing Shares
will, when issued, rank pari passu in all respects with the
Existing Ordinary Shares, including the right to receive dividends
and other distributions declared following Admission. It is
expected that Admission will become effective and that dealings in
the Placing Shares will commence on 17 February 2017.
6. General Meeting
A notice convening the General Meeting to be held at Forward
House, 17 High Street, Henley-in-Arden, Warwickshire B95 5AA, at
10.00 a.m. on 16 February 2017 is set out at the end of the
Circular. At the General Meeting, the following Resolutions will be
proposed:
Resolutions relating to the Placing (Resolutions 1 and 2)
Resolutions 1 and 2 will be proposed to grant the Directors the
authority to allot the Placing Shares (which are equivalent to
approximately 28.9 per cent. of the Enlarged Share Capital) without
first offering them to existing Shareholders on a pre-emptive
basis.
The Directors believe it would not be in the Shareholders' best
interests to incur the significant additional expense that would be
required to implement a fully pre-emptive offer of Ordinary Shares
to Shareholders. The Directors have therefore concluded that
seeking general authority from Shareholders to issue the Placing
Shares other than on a pre-emptive basis is the most flexible and
cost effective method available to the Company.
Resolutions relating to general authority to allot Ordinary
Shares and waiver of pre-emption rights (Resolutions 3 and 4)
Resolutions 3 and 4 will, if passed, renew the authorities given
to the Directors to allot Ordinary Shares on a non-pre-emptive
basis at last year's annual general meeting on 19 September 2016,
but reflecting the increased number of Ordinary Shares comprised in
the Enlarged Issued Share Capital broadly on the same terms as the
equivalent resolution passed at that meeting.
The authority sought under these Resolutions will expire at the
earlier of the conclusion of the annual general meeting of the
Company in 2017 or 30 September 2017.
7. Directors' participation in the Placing
The Directors are subscribing for the following Ordinary Shares
pursuant to the Placing:
Director No. of Ordinary Resulting % of Enlarged
Shares subscribed holding of Share Capital
for pursuant Ordinary Shares
to the Placing
------------------- ------------------- ----------------- ---------------
Susan Searle 54,348 1,097,388 0.37%
------------------- ------------------- ----------------- ---------------
Mark Payton 32,609 6,655,472 2.21%
------------------- ------------------- ----------------- ---------------
Martin Glanfield 32,609 293,369 0.10%
------------------- ------------------- ----------------- ---------------
Matthew Mead 32,609 75,730 0.03%
------------------- ------------------- ----------------- ---------------
Jonathan Diggines 54,348 857,919 0.29%
------------------- ------------------- ----------------- ---------------
Ray Chamberlain 2,450,056 60,824,766(1) 20.23%
------------------- ------------------- ----------------- ---------------
Ian Metcalfe 32,609 132,609 0.04%
------------------- ------------------- ----------------- ---------------
Martin Lamb 32,609 132,609 0.04%
------------------- ------------------- ----------------- ---------------
(1) Ray Chamberlain will be personally interested in 6,149,752
Ordinary Shares at Admission. The remaining 54,675,014 Ordinary
Shares at Admission will be held by Forward Innovation Fund
(34,072,336 Ordinary Shares), Croftdawn Limited (3,994,786 Ordinary
Shares), Mercia Growth Nominees Limited (126,436 Ordinary Shares)
and Forward Nominees Limited (as nominee for certain members of the
Chamberlain family (including Ray Chamberlain)) (16,481,456
Ordinary Shares).
8. Related party transactions
Woodford Investment Management and Invesco Perpetual have
conditionally subscribed for 31,375,000 Placing Shares and
26,130,000 Placing Shares respectively at the Placing Price. The
subscription of Placing Shares by Woodford Investment Management
and Invesco Perpetual are related party transactions pursuant to
the AIM Rules. Cenkos, the Company's nominated adviser, considers
that the terms of the subscriptions by Woodford Investment
Management and Invesco Perpetual in the Placing are fair and
reasonable insofar as the Shareholders are concerned.
EXPECTED TIMETABLE
Publication of the Circular 31 January 2017
Latest time and date for receipt 10.00 a.m. on 14
of Forms of Proxy February 2017
General Meeting 10.00 a.m. on 16
February 2017
Admission of Placing Shares 8.00 a.m. on 17
February 2017
Expected date for CREST accounts 17 February 2017
to be credited in relation
to Placing Shares
Despatch of definitive share by 24 February 2017
certificates (where applicable)
in relation to Placing Shares
Notes:
1. Certain of the events in the above timetable are conditional
upon, amongst other things, the approval of the Resolutions at the
General Meeting.
2. If any of the events contained in the timetable should
change, the revised times and dates will be notified by means of an
announcement through a Regulatory Information Service
IMPORTANT INFORMATION
The distribution of the announcement and the offering of the
Placing Shares in certain jurisdictions may be restricted or
prohibited by law or regulation. Persons distributing the
announcement must satisfy themselves that it is lawful to do so. No
action has been taken by the Company or Cenkos Securities plc
("Cenkos") that would permit an offering of such shares or
possession or distribution of the announcement or any other
offering or publicity material relating to such shares in any
jurisdiction where action for that purpose is required. Persons
into whose possession the announcement comes are required by the
Company and Cenkos to inform themselves about, and to observe, such
restrictions.
The announcement contains (or may contain) certain
forward-looking statements with respect to certain of the Company's
plans and its current goals and expectations relating to its future
financial condition and performance and which involve a number of
risks and uncertainties. The Company cautions readers that no
forward-looking statement is a guarantee of future performance and
that actual results could differ materially from those contained in
the forward-looking statements. These forward-looking statements
can be identified by the fact that they do not relate only to
historical or current facts. Forward-looking statements sometimes
use words such as "aim", "anticipate", "target", "expect",
"estimate", "intend", "plan", "goal", "believe", "predict" or other
words of similar meaning. Examples of forward-looking statements
include, amongst others, statements regarding or which make
assumptions in respect of the planned use of the proceeds for the
Placing, the Group's liquidity position, the future performance of
the Group, future interest rates and currency controls, the Group's
future financial position, plans and objectives for future
operations and any other statements that are not historical fact.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances,
including, but not limited to, economic and business conditions,
the effects of continued volatility in credit markets,
market-related risks such as changes in interest rates and foreign
exchanges rates, the policies and actions of governmental and
regulatory authorities, changes in legislation, the further
development of standards and interpretations under IFRS applicable
to past, current and future periods, evolving practices with regard
to the interpretation and application of standards under IFRS, the
outcome of pending and future litigation or regulatory
investigations, the success of future acquisitions and other
strategic transactions and the impact of competition. A number of
these factors are beyond the Company's control. As a result, the
Company's actual future results may differ materially from the
plans, goals, and expectations set forth in the Company's
forward-looking statements. Any forward-looking statements made in
the announcement by or on behalf of the Company speak only as of
the date they are made. These forward-looking statements reflect
the Company's judgement at the date of the announcement and are not
intended to give any assurance as to future results. Except as
required by the Financial Conduct Authority ("FCA"), the London
Stock Exchange plc, the AIM Rules or applicable law, the Company
expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to any forward-looking statements
contained in the announcement to reflect any changes in the
Company's expectations with regard thereto or any changes in
events, conditions or circumstances on which any such statement is
based.
Cenkos, which is authorised and regulated in the United Kingdom
by the FCA and is a member of the London Stock Exchange, is the
Company's nominated adviser and broker for the purposes of the AIM
Rules in connection with the Placing and, as such, its
responsibilities as the Company's nominated adviser under the AIM
Rules for Nominated Advisers are owed solely to the London Stock
Exchange and are not owed to the Company or to the Directors or to
any other person or entity in respect of their reliance on any part
of the announcement.
Cenkos is acting for the Company and no one else and will not be
responsible to any other person for providing the protections
afforded to customers of Cenkos nor for providing advice in
relation to the contents of the announcement or any matter referred
to herein. No representation or warranty, express or implied, is
made by Cenkos for the accuracy of any information or opinions
contained in the announcement or for the omission of any material
information. Cenkos expressly disclaims all and any responsibility
or liability, whether arising in tort, contract or otherwise, which
it might otherwise have in respect of the announcement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IOEFMGFMDMNGNZM
(END) Dow Jones Newswires
January 31, 2017 09:40 ET (14:40 GMT)
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