TIDMR4E
RNS Number : 3345Y
Reach4Entertainment Enterprises PLC
04 December 2017
Prior to publication, the information contained within this
announcement was deemed by the Company to constitute inside
information as stipulated under the Market Abuse Regulations (EU)
No. 596/2014 ("MAR"). With the publication of this announcement,
this information is now considered to be in the public domain.
04 December 2017
reach4entertainment enterprises plc
("r4e", the "Company" or the "Group")
Proposed placing to raise GBP5.5 million,
posting of Circular and Notice of General Meeting
r4e, the transatlantic media and entertainment company,
announces a conditional placing of 366,666,668 new ordinary shares
in the Company ("Placing Shares") at a price of 1.5p per Placing
Share (the "Placing") to raise GBP5.5 million (before expenses).
The Placing is subject, inter alia, to shareholder approval at a
general meeting.
The Company is undertaking the Placing to assist the Company's
strategy for growth through the expansion of its existing
activities and beyond into promoting non-theatre productions, both
organically and through strategic acquisitions, as well as focusing
on new geographic markets and providing working capital to support
cost saving initiatives.
Further information on the Company, current trading and its
strategy is set out below in the extracts from the shareholder
circular which is today being posted to shareholders (the
"Circular").
Placing Highlights:
-- The Company has conditionally raised GBP5.5 million (before
expenses) through the issue of the Placing Shares at the Placing
Price
-- Marc Boyan, CEO, has subscribed for 113,333,336 Placing
Shares, representing 31 per cent. of the Placing
-- The Placing Price represents a discount of approximately 8
per cent. to the closing mid-market price of 1.625 pence per
Ordinary Share on 01 December 2017
-- The Placing is subject to shareholder approval at a General
Meeting of the Company on 20 December 2017. If approved, the
Placing Shares are expected to be admitted to AIM on 21 December
2017
-- The Placing Shares will represent 37.35 per cent of the
enlarged share capital of the Company
Marc Boyan, Chief Executive Officer of r4e said:
"Since recently joining, I have already seen enough to know why
r4e has consistently represented many of the world's most
recognisable theatre productions both in London and New York and
continues to do so. I am confident that r4e has significant future
potential and that this capital raising will accelerate the
Company's ability to achieve it. Central to this, will be to expand
the business both organically and by acquisition and putting
innovation and leading marketing technology at the heart of all we
do."
Notice of General Meeting and Shareholder Circular
The Placing is conditional, inter alia, on the approval of
shareholders of resolutions to be proposed at a general meeting of
the Company to provide authority to the Directors to allot further
new ordinary shares otherwise than on a pre-emptive basis.
A General Meeting of the Company will be held at the offices of
r4e, Wellington House, 125 Strand, London WC2R 0AP at 10:00 a.m. on
20 December 2017, to seek this shareholder approval. A Circular
containing a Notice of General Meeting is being posted to
shareholders today and will be available on the Company's website
later today at www.r4e.com.
Further information
The above summary should be read in conjunction with the full
text of this announcement and the Circular, extracts from which are
set out below.
Enquiries:
reach4entertainment enterprises
plc
Marc Boyan, Chief Executive +44 (0) 20 7968
Officer 1655
Allenby Capital (Nominated Adviser +44 (0) 20 3328
and Broker) 5656
Jeremy Porter/James Reeve
Novella Communications (Financial +44 (0) 20 3151
PR) 7008
Tim Robertson/Toby Andrews
Extracts from the Circular
(References to pages or paragraphs below refer to the relevant
pages or paragraphs of the Circular. References to 'this document'
refer to the Circular.)
LETTER FROM THE CHAIRMAN OF REACH4ENTERTAINMENT ENTERPRISES
PLC
1. Introduction
On behalf of the Directors of r4e, I am pleased to be able to
write to you to set out the proposals for the next phase of the
Company's growth and provide notice of a general meeting of the
Company to be held on 20 December 2017, formal notice of which is
set out at the end of this document.
Earlier today the Company announced that it has conditionally
raised GBP5.5 million (before expenses) by way of a placing of the
Placing Shares at a price of 1.5p per Placing Share. The Placing
Shares have been conditionally placed by Allenby Capital with
institutional and other investors, subject to, inter alia,
Admission and the passing of the Resolutions at the General Meeting
to provide authority to the Directors to allot further new Ordinary
Shares otherwise than on a pre-emptive basis. Further details of
the Placing and the use of proceeds are set out below.
The Company announced on 13 October 2017 the appointment of Lord
Grade as Chairman and Marc Boyan as CEO. Marc is a highly
successful entrepreneur with a wealth of experience in the media
sector. Having worked closely with brands and media owners over a
number of years in the fields of media trading and creative and
content solutions, Marc has a detailed understanding of how to
navigate the media landscape and drive value-enhancing solutions to
his clients. The Directors believe that his experience is a natural
fit with the businesses of r4e, which provide integrated solutions
to their entertainment client base. The Board is delighted Marc has
joined the Company and is confident he is well placed to lead the
business.
The Company is undertaking the Placing to assist the Company's
strategy for growth through the expansion of its existing
activities and beyond into non-theatre production, both organically
and through strategic acquisitions, as well as focusing on new
geographic markets and providing working capital to support cost
saving initiatives. The Company has historically been constrained
by the costs associated with the high level of debt the Company has
compared to its market capitalisation. The Board has been working
to address this issue for some time and the Company's debt
reduction programme has yielded additional results in the current
financial year.
r4e is a world leader in providing promotion, advertising and
marketing services to the theatre and live entertainment
industries. The Company is currently undergoing an operational
review in order to capitalise on its leading position in its sector
and to support its next phase of growth. The Board believes that
the Placing will strengthen the Company's financial base and enable
it to pursue its strategy for growth.
The purpose of this document is to explain the background to and
reasons for the Placing, to explain why the Board considers the
Placing to be in the best interests of the Company and its
Shareholders as a whole and why the Directors recommend that, to
enable the Placing to be completed, you vote in favour of the
Resolutions to be proposed at the GM, notice of which is set out at
the end of this document.
2. Background to the Placing
On 13 October 2017, the Company announced the appointment of
Marc Boyan as Chief Executive Officer and Lord Michael Grade as
Non-executive Chairman. Marc Boyan is the founder of Miroma
International, a successful media trading business which works with
brands, media agencies and media owners to enable brand owners to
extract additional value from their marketing budgets. Marc founded
Miroma International in 2003 and has extended the business under
Miroma Ventures to focus on investing in, seeding and managing
media and technology companies. With over 40 years' of experience
in the entertainment industry, Lord Michael Grade was formerly
Chairman of the BBC, Executive Chairman of ITV plc and Chief
Executive of Channel 4 and benefits from a deep history in the
theatrical production space.
Since their appointment, the senior management team has
commenced an operational review to support the next phase of growth
of the business which aims to build on: (i) the Company's industry
leading creative capabilities; (ii) its deep relationships with the
theatrical space; and (iii) a rich understanding of its clients'
audiences. Furthermore, the Company has made significant steps in
recent years to place the business on a strong footing as it looks
to future growth. This has included:
-- building the foundations of an integrated service offering with cross-sell solutions;
-- progressing a debt reduction programme, yielding additional
results in the 2017 year to date;
-- implementing cost savings achieved over the last three years;
-- testing new geographic markets, initially in Germany but with
the potential for further expansion into new territories; and
-- successfully broadening the offering to clients in the non-theatrical entertainment sector.
Though early in its operational review, the senior management
team has identified a number of areas to focus its efforts on,
which include:
-- placing a greater focus on the commercial targets of the business;
-- improving cost savings initiatives across the group through
shared knowledge and skills, achieved by:
o implementing more efficient staffing structures;
o improving media buying activities;
o implementing centralised capabilities to service all
subsidiaries;
-- placing innovation and data driven decision making at the heart of all client solutions;
-- partnering with rather than buying into leading
marketing-technology providers to ensure the business is always at
the cutting edge of its field; and
-- exporting capabilities built out through its integrated
offering into new sectors outside of the entertainment space.
Use of Placing proceeds
The Company has conditionally raised GBP5.5 million pursuant to
the Placing, further details of which are set out below. The net
proceeds of the Placing will be used to support the new management
team in its endeavours set out above and with a focus on:
-- the expansion of the Company's activities and beyond into
non-theatrical production, both organically and via strategic
acquisitions;
-- entering into new geographic markets; and
-- providing working capital support for the Board's cost saving initiatives.
3. Details of the Placing
The Company has conditionally raised GBP5.5 million (before
expenses) pursuant to the conditional placing of the Placing Shares
at the Placing Price subject to the terms of the Placing Agreement.
The Placing Price represents a discount of approximately 8 per
cent. to the closing mid-market price of 1.625 pence per Ordinary
Share on 01 December 2017, being the last Trading Day prior to the
announcement of the Placing. Having considered the price at which
the Ordinary Shares are currently traded, feedback from investor
marketing and other factors, the Directors have resolved that the
Placing Price is appropriate. The Placing Shares will represent
37.35 per cent. of the Enlarged Share Capital.
The Placing is conditional, inter alia, upon:
a) the passing of the Resolutions;
b) the Placing Agreement (as described in more detail below)
becoming unconditional in all respects and not having been
terminated in accordance with its terms; and
c) admission of the Placing Shares to trading on AIM becoming
effective by not later than 8.00 a.m. on 21 December 2017 (or such
later time and/or date (not being later than 08 January 2018) as
Allenby Capital and the Company may agree).
Accordingly, if such conditions are not satisfied, or, if
applicable, waived, the Placing will not proceed.
The Placing is being undertaken on a non pre-emptive basis. The
making of a pre-emptive offer would require the production of a
prospectus which would have to comply with the Prospectus Rules of
the FCA and be pre-vetted and approved by the FCA. Having given the
matter careful consideration, the Directors do not believe that the
time and costs involved in producing a prospectus would be
justified in the context of a fundraising of this size and
nature.
The Placing Shares 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 on the
Ordinary Shares following Admission.
Placing Agreement
Pursuant to the terms of the Placing Agreement, Allenby Capital,
as agent for the Company, has agreed to use its reasonable
endeavours to procure subscribers for the Placing Shares at the
Placing Price. The Placing Agreement is conditional upon, inter
alia, the Resolutions being duly passed at the General Meeting and
Admission becoming effective on or before 8.00 a.m. on 21 December
2017 (or such later date as may be agreed, but not later than 08
January 2018). The Placing Agreement contains certain warranties
and indemnities given by the Company in favour of Allenby Capital
as to certain matters relating to the Company and its business and
contains provisions entitling Allenby Capital to terminate the
Placing Agreement at any time prior to Admission in certain
circumstances. If this right is exercised the Placing will not
proceed. The Placing has not been underwritten by Allenby Capital
or any other person. The Company has agreed to pay a fee and
commission to Allenby Capital in respect of the Placing.
Admission
Application will be made to the London Stock Exchange for the
Placing Shares to be admitted to trading on AIM. Conditional on,
inter alia, the passing of the Resolutions, it is expected that
Admission will become effective and that dealings in the Placing
Shares on AIM will commence on 21 December 2017.
Directors' and PDMRs' participation in the Placing
Certain Directors and PDMRs have agreed to subscribe for Placing
Shares as follows:
At the date On Admission
of this document
------------------------ ---------------------------
No. of
Existing No. of No. of Percentage
Ordinary Placing Ordinary of Enlarged
Shares Shares Shares Share
Director/PDMR held subscribed held Capital
Marc Boyan (CEO)(1) - 113,333,336 113,333,336 11.55
Paul Summers (PDMR) - 8,000,000 8,000,000 0.81
James Charrington
(PDMR) 3,666,666 666,668 4,333,334 0.44
Simon Shimell (PDMR) 460,000 533,334 993,334 0.10
(1) Marc Boyan's placing participation is being undertaken
through Miroma r4e Holdings Limited, a company wholly owned
by Miroma Holdings Limited, a company of which Marc Boyan is a
director and controlling shareholder.
The participation of Marc Boyan and James Charrington in the
Placing constitutes a related party transaction pursuant to Rule 13
of the AIM Rules. Accordingly, the Independent Directors, having
consulted with the Company's nominated adviser, Allenby Capital,
consider that the terms of subscription of the Placing Shares by
Marc Boyan and James Charrington to be fair and reasonable insofar
as Shareholders are concerned.
Substantial shareholders' participation in the Placing
As part of the Placing, Herald Investment Management, Nigel
Wray, via his investment company, Euroblue Investments Limited and
Gate Ventures plc (of which Lord Michael Grade is the Chairman)
(together, the "Substantial Shareholders") have agreed to subscribe
for 51,296,668, 33,333,334 and 88,256,668 Placing Shares
respectively at the Placing Price. As the Substantial Shareholders
each hold more than 10 per cent. of the Existing Ordinary Shares,
the subscriptions by them for Placing Shares are deemed to be
related party transactions pursuant to Rule 13 of the AIM Rules.
Accordingly, the Independent Directors, having consulted with the
Company's nominated adviser, Allenby Capital, consider that the
terms of subscription of the Placing Shares by the Substantial
Shareholders are fair and reasonable insofar as Shareholders are
concerned.
Following Admission, Herald Investment Management will be
interested in 137,340,158 Ordinary Shares, representing
approximately 13.99 per cent. of the Enlarged Share Capital, Mr
Wray will be interested in 192,959,504 Ordinary Shares,
representing approximately 19.66 per cent. of the Enlarged Share
Capital and Gate Ventures plc will have an interest in 236,306,668
Ordinary Shares, representing approximately 24.07 per cent. of the
Enlarged Share Capital.
4. Share incentive scheme
The Directors are aware of the importance of retaining and
incentivising its key employees and the Company has in place a
share incentive scheme for employees and Directors which allows
grants to be made under this scheme of, in aggregate, up to 20 per
cent. of the Company's issued share capital
Immediately following Admission, it is the Board's intention to
grant to Marc Boyan options over new Ordinary Shares representing
approximately 12.9 per cent. of the Enlarged Share Capital (the
"CEO Options"). The CEO Options would be exercisable at the Placing
Price and become exercisable provided the following conditions are
met within three years of the date of grant:
1. one third of the CEO Options shall become exercisable if either:
(i) the Company's mid-market closing share price is no less than
GBP0.025 per Ordinary Share for five Trading Days (which may be
non-consecutive) within a period of 30 consecutive calendar days;
or
(ii) there is an increase in Adjusted EBITDA (as defined in the
Company's report and financial statements for the year ended 31
December 2016) of GBP1,000,000 over the Company's Adjusted EBITDA
for the year ending 31 December 2017.
2. a further one third of the CEO Options shall become exercisable if either:
(iii) the Company's mid-market closing share price is no less
than GBP0.035 per Ordinary Share for five Trading Days (which may
be non-consecutive) within a period of 30 consecutive calendar
days; or
(iv) there is an increase in Adjusted EBITDA (as defined in the
Company's report and financial statements for the year ended 31
December 2016) of GBP2,000,000 over the Company's Adjusted EBITDA
for the year ending 31 December 2017.
3. the remaining one third of the CEO Options shall become exercisable if either:
(v) the Company's mid-market closing share price is no less than
GBP0.045 per Ordinary Share for five Trading Days (which may be
non-consecutive) within a period of 30 consecutive calendar days;
or
(vi) there is an increase in Adjusted EBITDA (as defined in the
Company's report and financial statements for the year ended 31
December 2016) of GBP3,000,000 over the Company's Adjusted EBITDA
for the year ending 31 December 2017.
The CEO Options will become exercisable on the third anniversary
from the date of grant, to the extent they may not already have
become exercisable under the performance conditions set out above.
After grant of the CEO Options, the total options over new Ordinary
Shares outstanding would represent approximately 20 per cent. of
the Enlarged Share Capital, and therefore be at the maximum limit
of the Company's share option scheme for the time being.
The grant of the CEO Options constitutes a related party
transaction pursuant to Rule 13 of the AIM Rules. Accordingly, the
Independent Directors, having consulted with the Company's
nominated adviser, Allenby Capital, consider that the terms of the
grant of the CEO Options are fair and reasonable insofar as
Shareholders are concerned.
5. Current trading and prospects
The interim accounts of the Company for the six-month period
ended 30 June 2017 were announced on 20 September 2017 and are
available on the Company's website, www.r4e.com. Since then,
trading has remained in line with managements' expectations.
As part of the operational review of the business as discussed
above, the Board is currently reviewing the Company's media
suppliers and partners and is discussing with Miroma International,
a company owned by Miroma Holdings Limited, which Marc Boyan has an
86.2 per cent. interest in, for Miroma International to enter into
an agency referral and media barter agreement with one of r4e's
subsidiaries. The Independent Directors believe that if an
agreement is reached, based on the terms being currently discussed
and given Miroma International's expertise and track record, it
could represent a significant strategic advantage for the Company,
as well as benefits for its clients. Further announcements will be
made if these discussions are concluded.
6. General Meeting
Set out at the end of this document is the notice convening the
GM to be held on 20 December 2017 at the offices of the Company,
Wellington House, 125 Strand, London WC2R 0AP at 10.00 a.m. at
which the Resolutions will be proposed. The Resolutions to be
proposed at the GM are as follows:
Resolution 1
An ordinary resolution to grant the Directors authority pursuant
to section 551 of the Act to allot new Ordinary Shares up to a
nominal value of GBP4,118,591.58 representing the Placing Shares
and the new Ordinary Shares that may be the subject of the share
incentive scheme referred to in paragraph 4 above, plus an amount
equivalent to approximately 33.3 per cent. of the Enlarged Share
Capital. Such authority will expire at the earlier of the
conclusion of the next annual general meeting of the Company or the
date 15 months from the date the resolution is passed. The Board is
proposing this level of authority in order to provide flexibility
in future to finance and grow the Company as required and believe
it is important that such headroom is available to it.
Resolution 2
A special resolution to disapply pre-emption rights pursuant to
section 570 of the Act. This resolution allows the Directors to
allot shares for cash on a non pre-emptive basis pursuant to the
authority conferred by Resolution 1, limited to:
(a) the issue and allotment of the Placing Shares;
(b) allotments pursuant to offers of shares to existing
Shareholders in proportion to their existing holdings subject only
to exclusions to deal with fractional entitlements and legal or
practical problems in connection with overseas territories;
(c) the new Ordinary Shares that may be the subject of the share
incentive scheme referred to in paragraph 4 above; and
(d) a nominal value of GBP490,829.67, representing approximately
10 per cent. of the Enlarged Share Capital.
Such authority will expire at the earlier of the conclusion of
the next annual general meeting of the Company or the date 15
months from the date the resolution is passed.
The Board is proposing this level of authority in order to
provide flexibility in future to finance and grow the Company as
required, without the inherent cost and delays associated with a
pre-emptive offer, and believe it is important that such headroom
is available to it.
Resolution 1 will be proposed as an ordinary resolution and
requires a majority of more than 50 per cent. of the Shareholders
voting in person or by proxy to vote in favour to be passed.
Resolution 2 will be proposed as a special resolution and requires
not less than 75 per cent. of the Shareholders voting in person or
by proxy to vote in favour to be passed. All authorities in respect
of the issue and allotment of new Ordinary Shares contained in the
Notice of GM are in substitution for any unexercised authorities
previously granted to the Directors.
7. Irrevocable undertakings
The Company has received irrevocable undertakings from certain
Shareholders to vote in favour of the Resolutions at the GM in
respect of aggregate of 307,676,170 Ordinary Shares, being 50.03
per cent. of the Existing Ordinary Shares.
8. Action to be taken
Shareholders will find enclosed with this document a reply-paid
Form of Proxy for use at the GM. Whether or not you intend to be
present at the GM, you are requested to complete and sign the Form
of Proxy and return it to the Company's Registrars, Link Asset
Services, PXS, The Registry, 34 Beckenham Road, Beckenham, Kent BR3
4TU as soon as possible and, in any event, so as to arrive no later
than 10.00 a.m. on 18 December 2017. Unless the Form of Proxy is
received by this date and time, it will be invalid. The completion
and return of a Form of Proxy will not preclude you from attending
the GM and voting in person if you so wish.
9. Recommendation
The Directors consider that the Placing is 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 to be proposed at the GM, as they intend to do in
respect of their own beneficial holdings amounting in aggregate to
1,200,943 Ordinary Shares (representing approximately 0.20 per
cent. of the Existing Ordinary Shares).
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Publication of this Circular 04 December 2017
Latest time and date for 10.00 a.m. on 18
receipt of Forms of Proxy December 2017
General Meeting 10.00 a.m. on 20
December 2017
Admission and dealings in 08:00 a.m. on 21
the Placing Shares expected December 2017
to commence on AIM
Despatch of definitive share by 4 January 2018
certificates in respect of
Placing Shares (where applicable)
DEFINITIONS
The following definitions apply throughout this document, unless
the context requires otherwise:
"Act" the Companies Act 2006 (as amended);
"Admission" the admission of the Placing
Shares to trading on AIM becoming
effective in accordance with
the AIM Rules;
"AIM" the market of that name operated
by London Stock Exchange;
"AIM Rules" the AIM Rules for Companies
and the AIM Rules for Nominated
Advisers published by London
Stock Exchange;
"Allenby Capital" Allenby Capital Limited, the
Company's nominated adviser
and broker;
"Board" or "Directors" the Directors of the Company,
whose names are set out on page
5 of this document;
"Company" or "r4e" reach4entertainment enterprises
plc;
"CREST" the computerised settlement
system (as defined in the CREST
Regulations) operated by Euroclear
which facilitates the transfer
of title to shares in uncertificated
form;
"CREST Regulations" The Uncertificated Securities
Regulations 2001 (SI 2001/3755),
as amended;
"Enlarged Share the issued share capital of
Capital" the Company immediately following
Admission;
"Euroclear" Euroclear UK & Ireland Limited,
the operator of CREST;
"Existing Ordinary The 614,992,671 Ordinary Shares
Shares" in issue as at the date of this
document;
"Form of Proxy" the form of proxy enclosed with
this document for use in connection
with the GM;
"General Meeting" the general meeting of the Company
or "GM" convened for 10.00 a.m. on 20
December 2017, notice of which
is set out at the end of this
document;
"Independent Directors" the Directors other than Lord
Michael Grade, who is a director
of Gate Ventures plc and Marc
Boyan who is participating in
the Placing;
"Link Asset Services" the trading name of Link Asset
or "Registrars" Services, the Company's registrars;
"London Stock London Stock Exchange Group
Exchange" plc;
"Miroma International" Miroma International Limited;
"Miroma Ventures" Miroma Ventures Limited;
"Notice of GM" the notice convening the GM,
which is set out at the end
of this document;
"Ordinary Shares" the ordinary shares of 0.5 pence
each in the capital of the Company;
"PDMR" a person discharging managerial
responsibilities, as defined
in Article 3(1)(25) of the Market
Abuse Regulation;
"Placees" subscribers for Placing Shares
pursuant to the Placing;
"Placing" the conditional placing by Allenby
Capital of the Placing Shares
with the Placees pursuant to
the Placing Agreement;
"Placing Agreement" the conditional agreement dated
04 December 2017 between the
Company and Allenby relating
to the Placing;
"Placing Price" 1.5p per Placing Share;
"Placing Shares" the 366,666,668 new Ordinary
Shares to be issued pursuant
to the Placing;
"Prospectus Rules" The prospectus rules of the
FCA made under Part VI of FSMA
"Resolutions" the resolutions set out in the
Notice of GM at the end of this
document;
"Shareholders" holders of Existing Ordinary
Shares at the date of this document;
"Takeover Code" the City Code on Takeovers and
Mergers which is administered
by the Panel on Takeovers and
Mergers;
"Trading Day" any day during which AIM is
open for business; and
"United Kingdom" the United Kingdom of Great
or "UK" Britain and Northern Ireland.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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