TIDMCHNS
RNS Number : 8736D
China Shoto plc
30 March 2011
THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR
DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR
INTO THE UNITED STATES, CANADA, AUSTRALIA, NEW ZEALAND, JAPAN, THE
REPUBLIC OF IRELAND, SOUTH AFRICA OR ANY OTHER JURISDICTION IN
WHICH THE SAME WOULD BE UNLAWFUL. THIS ANNOUNCEMENT IS NOT AN OFFER
OF SECURITIES IN THE UNITED STATES, CANADA, AUSTRALIA, NEW ZEALAND,
JAPAN, THE REPUBLIC OF IRELAND, SOUTH AFRICA OR ANY OTHER
JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL.
30 March 2011
China Shoto plc
("China Shoto" or the "Company")
De-listing and Tender Offer
1. Introduction and summary
China Shoto (AIM:CHNS) a leading Chinese producer of industrial
batteries and power supply systems, announces that it will today be
publishing a circular to shareholders (the "Circular") proposing
the following:
-- the purchase by Seymour Pierce Limited of Ordinary Shares
in the Company at 380 pence per Ordinary Share by way of
a Tender Offer;
-- the buyback by the Company as an on-market purchase of
the Ordinary Shares purchased by Seymour Pierce Limited
pursuant to the Tender Offer; and
-- the cancellation of admission of its Ordinary Shares to
trading on AIM.
The Circular will be available on the Company's website shortly
at www.chinashoto.com. Terms defined in the Circular have the same
meaning in this announcement.
2. Background to and reasons for the Proposals
Following a challenging year for the Group, the Directors have
conducted a detailed review of the Group's strategic options. This
review has included evaluating the benefits and disadvantages of
the admission of the Company's shares to trading on AIM. The
Directors have concluded that it is in the best interests of the
Company and Shareholders as a whole for the admission of the
Company's Ordinary Shares to trading on AIM to be cancelled.
The past 12 months have seen a dramatic reduction of
infrastructure spending by China's three major telecom operators.
In part, this is a result of lower levels of economic stimulus from
the Chinese national government. The 12th Five Year Plan identifies
the development of high-efficiency, energy-saving technical
equipment and products, as part of its emerging strategic
industries, together with forecast GDP growth during the period of
7 per cent. per annum as opposed to an average 11.2 per cent.
achieved during the period of the 11th Five Year Plan, there can no
certainty about the future growth of the Group's sales to existing
domestic markets. The Board had hoped that a recovery of global
markets and the development of export opportunities would mitigate
the fall in domestic demand. Amid an uncertain economic climate,
the Group's export strategy has insufficiently penetrated overseas
markets to offset the decline in the domestic market.
As a result the share price performance of the Company has been
disappointing. However the Directors believe that the Group remains
the largest supplier of back-up batteries to China's major telecom
operators and enjoys a higher gross margin than its competitors
(despite falling over the last 12 months). The Directors believe
that the declining share price has overreacted and consequently the
business is undervalued. This has become a source of frustration
for the Board.
The Directors believe that the development of the business and
its growth potential has not been adequately reflected in the value
attributed by the public market to the Ordinary Shares. The reasons
for this undervaluation are multiple and complex, but the Directors
consider the main reason to be a lack of interest in Chinese small
cap companies listed on AIM.
In addition, the Directors consider that the costs and
regulatory requirements associated with maintaining a listing on
AIM are a significant burden, both financially and in terms of
management resource. They believe that the costs of the Company's
admission to AIM outweigh the benefits.
After careful consideration, the Directors have therefore
concluded that it would be in the best interests of the Company and
Shareholders as a whole if the Company's admission to trading on
AIM was cancelled. The Company will submit a notice to cancel its
admission to trading on AIM shortly after the Annual General
Meeting (assuming that the relevant Resolution is passed).
Following the cancellation of the Company's admission to trading
on AIM, the Directors will consider various strategic options which
may include a listing on the Hong Kong Stock Exchange, the Shanghai
Stock Exchange or any other Stock Exchange. It should be noted
there can be no certainty of another listing on any Stock
Exchange.
3. Effect of De-listing
The principal effect of the Proposals and the De-listing in
particular is that Shareholders will no longer be able to buy and
sell Ordinary Shares through a public stock market. It is
anticipated that cancellation of the admission to trading of the
Ordinary Shares on AIM will significantly reduce the liquidity and
marketability of Ordinary Shares not acquired by the Company via
the Tender Offer.
Should the De-listing be approved, the Company intends to act in
a manner befitting a company whose shares no longer trade through a
public market. Those that remain Shareholders after the De-listing
will need to be aware of the implications of this.
The principal effects that the De-listing will have on
Shareholders are as follows:
-- there will no longer be a formal market mechanism enabling
Shareholders to trade their Ordinary Shares through the
AIM market. The volume of trading in the Ordinary Shares
is likely to be severely reduced;
-- the Company will not be bound to announce material events,
nor announce interim or final results; and
-- the Company will cease to have a nominated adviser and
will no longer be required to comply with any of the corporate
governance requirements for companies traded on AIM.
Following the De-listing, as the Ordinary Shares will no longer
be traded on a public market, the Company intends to use reasonable
endeavours to facilitate introductions and communication among any
remaining Shareholders who wish to sell their Ordinary Shares and
those persons who wish to purchase Ordinary Shares. To do this
Shareholders or persons wishing to acquire Ordinary Shares will be
able to leave an indication with the Company that they are prepared
to buy and sell Ordinary Shares at a specified price. In the event
that the Company is able to match that order with an opposite sell
or buy instruction, the Company will contact both parties to effect
the order. In carrying out such activities, the Company will take
no responsibility to match-up Shareholders wishing to sell and
purchase Ordinary Shares, and no responsibility in respect of the
time frame in which introductions or communications (if any) are
made.
4. Summary
The Board has accordingly concluded that it is in the best
interests of Shareholders as a whole that the De-listing be
approved.
Under the AIM Rules for Companies, the De-listing can only be
effected by the Company after securing a resolution of Shareholders
in a general meeting passed by a majority of not less than 75 per
cent. of the votes cast, and the expiration of a period of twenty
Business Days from the date on which notice of the De-listing is
given. In addition, a period of at least five Business Days
following the Shareholder approval of the De-listing is required
before the De-listing may be put into effect.
Resolution 9 contained in the Notice seeks Shareholder approval
for the De-listing. The Company and Seymour Pierce have received
irrevocable undertakings from Shareholders and beneficial owners of
the Ordinary Shares holding, in aggregate, 17,573,065 Ordinary
Shares, representing 75.19 per cent. of the current issued ordinary
share capital of the Company, to vote in favour of the De-listing
as follows:
Percentage
of issued
Name Current Shareholding share capital
Yang Shanji 12,923,077 55.36
Qian Shangao 615,385 2.64
Zhou Yuezhang 615,385 2.64
Zhou Ping 307,692 1.32
Zhou Weigang 307,692 1.32
Zhu Shiping 615,385 2.64
Petercam S.A. (Asset Management) 722,000 3.09
RC Brown Investment Management PLC 687,500 2.95
Mars Asset Management Ltd 395,000 1.69
Hargreave Hale Ltd 363,950 1.56
Shareholders should note that there is no minimum acceptance
level which must be reached under the Tender Offer to prevent the
Board from continuing with the De-listing.
Assuming that Shareholders approve this resolution, it is
proposed that the De-listing will take place on 5 May 2011.
5. Tender Offer
The Board recognises that not all Shareholders will be able or
willing to continue to own Shares in the Company following the
De-listing. Although it is under no formal obligation to do so, the
Board is therefore arranging for Seymour Pierce to provide the
Tender Offer Shareholders with the opportunity to sell Tender Offer
Shares at the Tender Offer Record Date.
The Board considers that the Tender Offer:
-- provides an opportunity for Tender Offer Shareholders to
tender their Ordinary Shares prior to the De-listing;
-- allows Tender Offer Shareholders the opportunity to dispose
of Ordinary Shares efficiently, free of dealing costs and
stamp duty (which will be borne by the Company); and
-- provides a return of cash now.
The Tender Offer is to be effected by Seymour Pierce purchasing
Tender Offer Shares as principal and then selling such Tender Offer
Shares on the London Stock Exchange to the Company for cancellation
pursuant to the Repurchase Agreement. The maximum aggregate number
of Ordinary Shares which may be purchased in the Tender Offer is
7,959,155, representing 34.1 per cent. of the issued share capital
of the Company. The price to be paid for each Ordinary Share
subject to the Tender Offer is 380 pence, being a premium of:
-- 54.2 per cent. to the closing mid-market price of 246.5
pence per Ordinary Share on 29 March 2011, being the last
Business Day before the announcement of the Proposals;
-- 42.0 per cent. to the average closing mid-market price
of 267.6 pence per Ordinary Share over the three month
period ended 29 March 2011 being the last Business Day
before the announcement of the Proposals; and
-- 49.7 per cent. to the average closing mid-market price
of 253.9 pence per Ordinary Share over the six month period
ended 29 March 2011 being the last Business Day before
the announcement of the Proposals.
The Company and Seymour Pierce have received irrevocable
undertakings from the Directors and certain other Shareholders who
currently hold, in aggregate, 15,384,615 Ordinary Shares at the
date of this document, representing 65.9 per cent. of the current
issued ordinary share capital of the Company, that they will not
accept the Tender Offer or will procure that the Tender Offer is
not accepted in respect of their holding of Ordinary Shares as
follows:
Percentage
of issued
Name Current Shareholding share capital
Yang Shanji 12,923,076 55.36
Qian Shangao 615,385 2.64
Zhou Yuezhang 615,385 2.64
Zhou Ping 307,692 1.32
Zhou Weigang 307,692 1.32
Zhu Shiping 615,385 2.64
Accordingly, the maximum number of Ordinary Shares which may be
purchased in the Tender Offer is 7,959,155 Ordinary Shares,
representing 34.1 per cent. of the issued share capital of the
Company.
Tender Offer Shareholders may tender some, all, or none of their
holdings. The Tender Offer will enable all Tender Offer
Shareholders (excluding those who have irrevocably undertaken not
to accept or procure acceptance of the Tender Offer) to sell,
should they elect to do so, all or part of their holding of Tender
Offer Shares.
The Optionholders have waived their Options and will therefore
not be entitled to exercise Options that are vested and capable of
exercise in relation to the Tender Offer.
A guide to the general tax position of Shareholders under UK law
and HM Revenue & Customs practice in respect of the Tender
Offer is set out in Part 4 of the Circular. All Shareholders are
strongly advised to consult their professional advisers about their
own tax position.
The attention of Shareholders who are citizens or nationals of
or resident in jurisdictions outside the UK and who wish to
participate in the Tender Offer is drawn to the section headed
"Overseas Shareholders" in Part 3 of the Circular.
Full details of the Tender Offer are given in Part 3 of the
Circular. Under the terms of the Tender Offer:
(a) the maximum number of Ordinary Shares subject to the Tender
Offer shall be 7,959,155 Ordinary Shares; and
(b) the price to be paid for each Ordinary Share subject to the
Tender Offer shall be 380 pence, being a premium of:
i. 54.2 per cent. to the closing mid-market price of 246.5 pence
per Ordinary Share on 29 March 2011, being the last business day
before the announcement of the Proposals;
ii. 42.0 per cent. to the average closing mid-market price of
267.6 pence per Ordinary Share over the three month period ended 29
March 2011 being the last business day before the announcement of
the Proposals; and
iii. 49.7 per cent. to the average closing mid-market price of
253.9 pence per Ordinary Share over the six month period ended 29
March 2011 being the last business day before the announcement of
the Proposals.
In the light of the limited trading volumes in the Ordinary
Shares and the proposed De-listing which will reduce trading
opportunities further, the Directors believe that the Tender Offer
provides Tender Offer Shareholders with an opportunity to sell the
Ordinary Shares which might not otherwise have been available in
current market conditions.
6. Repurchase
Under the terms of the Repurchase Agreement, the Company has
agreed to purchase from Seymour Pierce such number of Ordinary
Shares as Seymour Pierce acquires from Tender Offer Shareholders
pursuant to the Tender Offer at a price per Ordinary Share equal to
the Tender Offer Price. The Repurchase Agreement is conditional,
inter alia, upon the Tender Offer becoming unconditional in all
respects (save in respect of any condition relating to the
Repurchase Agreement becoming unconditional) and not being
terminated by 26 April 2011. In the event that the conditions to
the Repurchase Agreement are not satisfied by 13 May 2011 (or such
date as the Company and Seymour Pierce shall determine pursuant to
the Repurchase Agreement), the Repurchase Agreement shall
terminate.
Subject to satisfaction of these conditions, completion of the
Repurchase Agreement shall take place on 28 May 2011. On completion
of the Repurchase Agreement, the Company will acquire such title in
the Ordinary Shares as Seymour Pierce acquired in those Ordinary
Shares purchased from Tender Offer Shareholders pursuant to the
Tender Offer.
Resolution 7 contained in the Notice seeks Shareholders'
approval for the Repurchase by way of an ordinary resolution.
7. City Code
Although the Company is incorporated in England and Wales and
the Ordinary Shares are admitted to trading on AIM, because the
Company's central place of management is in China the Company is
not considered to be resident in the UK for the purposes of the
City Code which for the time being does not apply to the Company.
Accordingly, the Company is not subject to takeover regulation in
the UK under the City Code until such time as the position changes.
Investors should be aware in particular that the protections
afforded to shareholders by the City Code which are designed to
regulate the way in which the purchase by a company of its own
shares is conducted will not be available.
8. Dividend
On 30 March 2011, the Company announced a final dividend of five
pence per Ordinary Share for the year ended 31 December 2010.
Further details are included in the Annual Report of the
Company.
The Dividend Record Date and payment date for the dividend for
the year ended 31 December 2010 are 8 April 2011 and 4 May 2011
respectively. Whether or not Shareholders tender their Ordinary
Shares under the Tender Offer, they will still be eligible for the
dividend.
As announced on 30 March 2011, Two Stars Invest Limited which
holds 15,384,615 shares (or 65.9 per cent. of the issued share
capital of the Company), has opted not to take up its dividend
entitlement. Mr Yang is the sole director of Two Stars Invest
Limited and the beneficial owners of Two Stars Invest Limited are
the following Directors or former directors of the Company:
Yang Shanji;
Qian Shangao;
Zhou Yuezhang;
Zhou Ping;
Zhou Weigang; and
Zhu Shiping.
9. Current Trading
Today, the Company announced its final results for the year
ended 31 December 2010. In the results, the Chairman made the
following statement;
"Against the backdrop of continuing complications both in
China's domestic markets and internationally, marked in particular
by a huge decrease in infrastructure construction spending by
China's three telecom operators, 2010 proved to be a challenging
year for China Shoto. In spite of these difficulties, the Company
implemented developments that we believe position us strongly to
expand the business as we continue working to create value for our
Shareholders. During the year, the Company successfully completed
the acquisition of Rugao Tianpeng, providing us with a battery
recycling operation that enables the Group to meet environmental
criteria imposed by key customers. We also continued working to
maximise our existing technology advantages and customer
relationships and focussed our sales strategy to maintain market
share and remain the largest back-up battery supplier to China's
huge telecoms sector. Further, our strong R&D capabilities
resulted in the successful development of new battery types,
providing opportunities into other domestic markets, such as the
electric of power, railway and electric bicycle sectors.
Considerable progress in our exploration of key customer potential
has been made in overseas markets. We have also continued working
hard to controls costs and evaluate more efficient production
methods whilst maintaining overall production levels. At the end of
the year, the Company disposed of its entire shareholding in
Yangzhou Zhenghe for a cash consideration of RMB 4 million being a
profit on disposal of RMB 820,000."
10. Expected Timetable of Events
Tender Offer Commences 30 March 2011
Ex-div Date for Dividend 6 April 2011
Dividend Record Date 8 April 2011
Latest time and date for receipt of Tender 1:00 p.m. on 20 April
Forms and share certificates for certificated 2011
shares
Transfer to escrow of tendered uncertificated 1:00 p.m. on 20 April
Tender Offer Shares settled by 2011
Record Date for Tender Offer 5:00 p.m. on 20 April
2011
Latest time and date for receipt of Forms 11:00 a.m. on 24 April
of Proxy 2011
Announcement of take-up level under Tender 8:00 a.m. on 26 April
Offer by 2011
Annual General Meeting 11:00 a.m. on 26 April
2011
Purchase of Tender Offer Shares under 28 April 2011
the Tender Offer and completion of the
Repurchase by Seymour Pierce
CREST Account credited with Tender Offer by 4 May 2011
proceeds
Despatch of cheques for Tender Offer by 4 May 2011
proceeds
Despatch of share certificates for Tender by 4 May 2011
Offer Shareholders not tendering their
entire holding of Ordinary Shares
Earliest date that the admission to trading 5 May 2011
of the Ordinary Shares on AIM will be
cancelled
All times stated in this expected timetable of events and in
this document are London times, unless otherwise stated. If any of
the above times and/or dates change, the revised times and/or dates
will be notified to Shareholders by announcement through a
Regulatory Information Service.
- Ends -
Contacts:
China Shoto plc Tel: +44(0) 20 7242 2666 / +86
Yang Shanji, Executive Chairman 159 6108 0515
www.chinashoto.com
Seymour Pierce Limited Tel: +44(0) 20 7107 8000
Stewart Dickson / David Foreman www.seymourpierce.com
(Corporate Finance)
Leti McManus (Corporate Broking)
Media enquiries: Tel: +44(0) 20 7242 2666 / +852
Allan Piper/ Jiang Lei 2854 2666
lei@firstcitypr.com www.firstcitypr.cn
This information is provided by RNS
The company news service from the London Stock Exchange
END
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