TIDMOPE
RNS Number : 3367U
Optare PLC
20 December 2011
Optare plc
("Optare" or the "Company")
Issue of Equity, Waiver of Rule 9 of the City Code, Proposed
Share Capital Sub-division
and
Notice of General Meeting
The Board of Optare is pleased to announce that the Company has
conditionally raised GBP4,000,000 (before expenses) in a Placing
(the "Placing") with Ashok Leyland Limited and associated companies
(the "Ashok Companies") at a price of approximately 0.270 pence per
share.
The Placing is intended to enable the Company to re-bank through
banking relationships of the Ashok Companies.
Following the Placing the Ashok Companies will own approximately
75.1 per cent of the Company's enlarged share capital.
The Placing is conditional, inter alia, upon the passing of
resolutions by shareholders to authorise the Directors to allot the
Placing Shares for cash on a non-pre-emptive basis. Accordingly, a
General Meeting is being convened on 6 January 2012.
A circular containing the details of these proposals is being
posted to shareholders today and will be available on the Company's
website: www.optare.com.
Background to and reasons for the Placing
As noted in the Company's half yearly results released on 27
September 2011, the Company's order book had increased to GBP55
million as at 30 June 2011 from GBP24 million as at the
corresponding date last year. The order book at 20 December 2011
stands at GBP59 million, which includes the announced contract for
South Africa. The Board believes the level of the current order
book is a reflection of the investments made in new product and
export market development in the past two years. The current order
book compares to GBP34 million in January 2011 and a low of GBP7
million in October 2009.
In addition, the UK Government has also recently announced a
further round of "Green Bus Funding" from April 2012, from which
the Board believes Optare is well placed to secure further
orders.
The Board has always been mindful of the requirement for
increased banking facilities to a level commensurate with the
Company's growing order book and export opportunities. Accordingly,
it has been in continuing discussions with the Company's current
bank and other banks with a view to ensuring that the working
capital facilities are appropriate for the Company. The Company has
also been in discussions with Ashok regarding the Company's
re-banking options. The Board previously entered into a facility
agreement (the "Facility Agreement") with the parent company of
Ashok to provide Optare with up to GBP3.0 million working
capital.
The Company's current banking facility fell due for renewal on
30 September 2011, but the Company reached an agreement to extend
this facility to 30 December 2011 provided the Facility Agreement
is in place.
The Facility Agreement is for a fixed term to 31 December 2011
unless varied by mutual agreement and carries interest at eight
percentage points above base rate per annum.
Following discussions with the Company's current bank and other
banks the Board has, as yet, been unable to find a solution to the
re-banking of the Company on a standalone basis. Accordingly, Ashok
has confirmed that it would be prepared to facilitate, through its
own banking relationships, the Company's re-banking with a credit
line of GBP12 million. However, in order to be in a position to do
this, the Ashok Companies have indicated to the Board that they
require voting control of at least 75.10 per cent. of the Company's
share capital to be effected by way of the Placing at the Placing
Price (the "Ashok Proposal"). The Board anticipates that the
re-banking of the Company under the Ashok Proposal will take
approximately four weeks to implement. Accordingly, the Board has
agreed a further extension to the Company's current bank facility
and to the Facility Agreement until the end of January 2012 to
allow the re-banking under the Ashok Proposal to be completed.
Accordingly, the Board believes that the Placing and Accelerated
Panel Waiver are in the best interests of the Company and
Shareholders as the Placing is the only course presently available
to ensure that Optare has an appropriate long term level of
headroom and the working capital facilities that it needs.
Shareholders should be aware that, if the Resolutions are not
approved at the General Meeting, the Company will be unable to
complete the Placing. If the Placing does not proceed, the Company
does not have, at this stage, alternative means with which to
finance its ongoing operations and thus will not be able to
continue to trade. The Board is, however, very confident that the
Resolutions will be approved at the General Meeting due to the
voting intentions and irrevocable undertakings received by the
Company, as detailed in the paragraph below.
Voting intentions
The Company has received written indications from Shareholders
holding, in aggregate, 227,728,202 Existing Ordinary Shares,
representing 30.28 per cent. of the Existing Ordinary Share,s that
they intend to vote in favour of the Resolutions at the General
Meeting.
In addition to the above indications, the Company has received
irrevocable undertakings from Shareholders (including Ashok) to
vote in favour of the Resolutions at the General Meeting in respect
of, in aggregate, 253,891,161 Existing Ordinary Shares representing
33.76 per cent. of the Existing Ordinary Shares.
The Independent Directors have also given irrevocable
undertakings to vote in favour of the Resolutions at the General
Meeting in respect of 7,367,852 Existing Ordinary Shares
representing 0.98 per cent. of the Existing Ordinary Shares.
Accordingly, the Company has received, in aggregate, irrevocable
undertakings to vote in favour of the Resolutions at the General
Meeting in respect of 261,259,013 Existing Ordinary Shares
representing approximately 34.74 per cent. of the Existing Ordinary
Shares.
Current trading and prospects
As previously announced, the move to Optare's new assembly plant
in Sherburn was completed during September and October this year as
planned. The Leeds site previously occupied by the Company was also
formally handed back to its landlord on 10 December 2011 and now
incurs no further establishment costs. The Board anticipates that
one of the key benefits of consolidation of production onto a
single, modern site will be an overall reduction in the operation's
fixed costs. The Directors believe that the move from a 'coach
building' to a 'modern assembly' approach to designing and building
buses will improve productivity and allow the business to scale
output volume more efficiently as well as giving the major groups
the confidence that Optare can support fleet orders.
As noted above, the order book is at a record levels and the
Board also anticipates stronger UK demand for single deck buses in
2012 and 2013, driven by an expected pre-buy of existing Euro 5
emission buses to avoid the additional cost of Euro 6 legislation
compliance due in 2013, and to comply with the Disability
Discrimination Act legislation which is required for all single
deck buses by 2014.
To support the planned growth the Board has, for some time, been
focused on reviewing banking and facility options. As highlighted
in previous announcements, the industry has been challenged by a
lack of trade credit insurance. This, along with the increase in
credit requirements and the higher levels of export and fleet
business, which the Directors expect to achieve, places
considerable pressure on the Company's working capital position. To
support the Company going forward the business requires banking
facilities and headroom that is substantially higher than the
present arrangements. As outlined above the Company has been unable
to achieve this to date on a standalone basis and the Directors
believe that the Ashok Proposal is the only way the Company can
achieve the level of banking facility that it requires to support
it during its growth stage.
The Placing
The Company proposes to raise gross proceeds of GBP4 million
(before expenses) through the issue of the Placing Shares at the
Placing Price. The Placing Price represents a discount of
approximately 80 per cent. to the closing mid-market price of
1.375pence on 19 December2011, being the latest practicable date
prior to the publication of this document. The Placing Shares will
represent approximately 66.35 per cent. of the Enlarged Ordinary
Share Capital.
The Ashok Companies have conditionally agreed to subscribe for
1,483,146,334 Placing Shares in aggregate pursuant to the Placing,
of which 25 per cent. will be subscribed by Ashok Leyland, 35 per
cent. by Ashley Holdings and 40 per cent. by Ashley Investments.
Conditional upon and following completion of the Placing, the Ashok
Companies will hold the following interests in the Enlarged
Ordinary Share Capital:
% of Enlarged
Ordinary
Share Capital
Ashok Leyland 25.34
Ashley Holdings 23.22
Ashley Investments 26.54
Total for the Ashok Companies 75.10
The Placing is conditional, inter alia, upon:
-- the Resolutions being passed at the General Meeting; and
-- Admission of the Placing Shares having occurred by 8.00 am on
13 January 2012 (or such later time and date as Ashok and the
Company may agree).
The Placing Shares will be issued credited as fully paid and
will rank in full for all dividends and other distributions
declared, made or paid in respect of the New Ordinary Shares after
the date of Admission and will otherwise rank pari passu in all
respects with the existing New Ordinary Shares.
Dealings
Application will be made to the London Stock Exchange for the
Placing Shares to be admitted to trading on AIM. It is expected
that Admission will become effective, and dealings in the Placing
Shares will commence, at 8.00 a.m. on 9 January 2012.
The Ashok Share Warrants
Following completion of the Placing, the Ashok Companies will
have acquired, in aggregate, interests in 75.10 per cent. of the
Enlarged Ordinary Share Capital. As existing share warrants and
share options issued by the Company are exercised, the Ashok
Companies will, pursuant to the Ashok Share Warrants, have the
right to subscribe for further New Ordinary Shares by exercising
the Ashok Share Warrants so that they are together able to maintain
their aggregate holding of 75.10 per cent. of the voting rights of
the Company. The existing share warrants issued to Ashok Leyland
will be cancelled on the issue of the Ashok Share Warrants.
Share Capital Sub-division
The Placing Price represents a discount to the current 1 pence
nominal value of an Existing Ordinary Share. Company law prohibits
the issue of shares at a price below their nominal value.
Accordingly, a share capital sub-division will be necessary in
order to undertake the Placing. It is therefore proposed that the
share capital of the Company be sub-divided so that each Existing
Ordinary Share is sub-divided into one New Ordinary Share of 0.1
pence and one Deferred Share of 0.9 pence.
The New Ordinary Shares will have the same rights (including
voting and dividend rights) as each Existing Ordinary Share has at
present. No new certificates will be issued in respect of the New
Ordinary Shares and existing share certificates in respect of
Existing Ordinary Shares will be valid and will continue to be
accepted as evidence of title for the New Ordinary Shares.
In order to effect the Sub-division, the Articles will need to
be amended to include the rights attaching to the Deferred Shares,
which will be minimal thereby rendering them effectively
valueless.
A summary of the rights which will attach to the Deferred Shares
is as follows:
-- they will not entitle holders to receive any dividend or
other distribution or to receive notice or, speak or vote at
general meetings of the Company;
-- on a return of assets on a winding up, they will only entitle
the holder to the amounts paid up on such shares after the
repayment of GBP10 million per New Ordinary Share;
-- they will not be freely transferable;
-- the creation and issue of further shares which rank equally
or in priority to the Deferred Shares or the passing of a
resolution of the Company to cancel the Deferred Shares or to
effect a reduction of capital shall not constitute a modification
or abrogation of their rights; and
-- the Company shall have the right at any time to purchase all
of the Deferred Shares in issue for an aggregate consideration of
GBP1.00.
Application will be made for the New Ordinary Shares in issue
immediately following the Sub-division to be admitted to trading on
AIM, and Admission is expected to become effective at 8.00am on 9
January 2012. The Company will also apply for the New Ordinary
Shares to be admitted to CREST so that general market transactions
in the New Ordinary Shares may be settled within the CREST
system.
No application will be made for the Deferred Shares to be
admitted to trading on AIM or any other stock exchange. No share
certificates will be issued for any of the Deferred Shares. There
are no immediate plans to purchase or cancel the Deferred Shares,
although the Directors propose to keep the situation under
review.
Information on Ashok Companies
Ashok Leyland
Ashok is an Indian commercial vehicle manufacturing company
based in Chennai selling approximately 94,000 vehicles and about
17,000 engines annually and is the second largest commercial
vehicle company in India in the medium and heavy commercial vehicle
segment, with a market share of about 25.7 per cent. in 2010-11.
Ashok is a market leader in the Indian bus market selling over
21,000 buses annually.
The sales turnover of Ashok in 2010-11 was US$ 2.5 billion.
Ashok has seven plants in India, one in the Czech Republic and
one in the Middle East with a current global capacity of over
150,000 buses and trucks.
In 2006 Ashok became the first automobile company in India to
achieve the internationally renowned TS16949 certification.
The Directors believe that Ashok's two strategic business units
in India and Detroit, USA, underpin its substantial global reach in
technology-enabled end-to-end bus design, engineering, prototyping,
manufacturing and testing and validation.
Ashok, listed on the Bombay Stock Exchange, is 51 per cent.
owned by the Hinduja Group and has a current market capitalisation
of approximately US$ 1.2 billion.
Ashley Holdings and Ashley Investments
Ashley Holdings and Ashley Investments are investment companies,
incorporated and based in India. Ashok Leyland holds 49.80 per
cent. of the issued share capital of Ashley Holdings, with a
further 49.97 per cent. held by Ashley Investments. Ashok Leyland
holds 49.96 per cent. of the issued share capital of Ashley
Investments with a further 49.82 per cent. held by Ashley
Holdings.
Ashley Holdings and Ashley Investments act as investment
companies for the Ashok Leyland group, holding various strategic
investments in the automotive industry around the globe. Their
joint investments currently include Avia Ashok Leyland Motors
s.r.o., Prague, Czech Republic, Albonair GmbH, Germany, Ashok
Leyland (UAE) LLC, in Ras-Al-Khaimah, United Arab Emirates and
Defiance Testing and Engineering Services Inc. in the United States
of America.
The Ashok Companies' intentions and strategic plans for
Optare
Strategic plans for Optare
As part of its "global bus strategy", Ashok Leyland has in
recent years been building its presence in the manufacture of buses
across the globe. Following completion of the Placing, Ashok
intends to work with the management and employees of Optare to grow
Optare's business, in part by using Ashok's own expertise in
launching cost-effective bus models suitable for application in
various countries and integrating the technologies it uses with the
design and production capabilities of Optare. The first step will
be for Ashok to carry out a strategic review of Optare's business
and operations, focussing in particular on how Ashok might further
assist Optare to improve productivity within its business, in
particular through the cost-effective sourcing of materials on a
global basis and potentially through the launch in the future of
new models assisted by Ashok's own technology. A full strategic
review has not as yet been undertaken, but Ashok has no firm
intentions regarding any rationalisation or restructuring of
Optare's own facilities and operations other than those already
announced by and being implemented by Optare itself. Indeed,
Ashok's own internal global bus strategy attaches significant
importance to the role that Optare might in the future play in
enhancing Ashok's global footprint, and Ashok presently envisages
further increases in the volumes of buses manufactured by Optare in
the future as part of this.
Ashok Leyland's intentions for Optare's management, employees
and location of business
Ashok Leyland attaches great importance to the active
participation and continued commitment of Optare's management and
employees. Accordingly Ashok intends that, upon and following
completion of the Placing, the existing contractual and statutory
employment rights and pension rights of all employees will be fully
safeguarded and that the Optare Group will continue to comply with
the contractual and other entitlements in relation to pension and
employment rights of existing employees.
Optare has been implementing a restructuring plan itself, which
has involved a move to its new modern assembly plant in Sherburn,
which was completed recently, together with related improvements to
design, production and assembly techniques facilitated by these new
premises. The Ashok Companies intend to continue to support Optare
and its management in implementing these restructuring plans with a
view to supporting Optare in making its operations viable and
products competitive in the markets in which it operates. Whilst
Ashok cannot pre-empt what the results of any future detailed
strategic review of Optare's business and operations might be,
Ashok has not presently formulated any additional restructuring or
strategic plans, beyond the restructuring plans already announced
by and being implemented by Optare's current management, which will
have any repercussions on the employment of the management and
employees of the Optare Group, the location of the Optare Group's
places of business or any redeployment of Optare's fixed assets.
Ashok recognises that the employees and management of the Optare
Group will be key to the success of the Group going forward.
Maintenance of existing trading facilities
Optare is currently listed on AIM, and the Ashok Companies have
no present intention to cancel that listing.
Related Party Transaction
As at 19 December 2011 (the latest practicable date prior to the
publication of this document), Ashok held Existing Ordinary Shares
representing approximately 26 per cent of the Existing Ordinary
Shares. As stated above, the Ashok Companies have agreed to
subscribe for 1,483,146,334 Placing Shares. Under the AIM Rules, as
a Shareholder holding more than 10 per cent of the Existing
Ordinary Shares, Ashok is a related party of the Company and the
subscription by the Ashok Companies for Placing Shares constitutes
a related party transaction. Where a company enters into a related
party transaction, under the AIM Rules the independent directors of
the company are required, after consulting with the company's
nominated adviser, to state whether, in their opinion, the
transaction is fair and reasonable in so far as its shareholders
are concerned. Having consulted with Cenkos Securities, the
Company's nominated adviser, the Independent Directors believe that
the participation by Ashok in the Placing is fair and reasonable in
so far as Shareholders are concerned.
The AIM Rules do not prohibit Ashok from exercising the voting
rights attached to its holding of Existing Ordinary Shares at the
General Meeting.
The Takeover Code
The proposed Placing gives rise to certain considerations under
the Code. Brief details of the Panel, the Code and the protections
they afford are described below.
The Code is issued and administered by the Panel. The Code
applies to all takeover and merger transactions, however effected,
where the offeree company is, inter alia, a listed or unlisted
public company resident in the United Kingdom, the Channel Islands
or the Isle of Man (and to certain categories of private limited
companies). The Company is a listed public company resident in the
United Kingdom and its Shareholders are entitled to the protections
afforded by the Code.
Under Rule 9 of the Code, where any person acquires, whether by
a series of transactions over a period of time or not, an interest
in shares which (taken together with shares already held by him and
an interest in shares held or acquired by persons acting in concert
with him) carry 30 per cent. or more of the voting rights of a
company which is subject to the Code, that person is normally
required to make a general offer to all the holders of any class of
equity share capital or other class of transferable securities
carrying voting rights in that company to acquire the balance of
their interests in the company.
Rule 9 of the Code also provides that, among other things, where
any person who, together with persons acting in concert with him,
is interested in shares which in aggregate carry not less than 30
per cent. but does not exceed more than 50 per cent. of the voting
rights of a company which is subject to the Code, and such person,
or any person acting in concert with him, acquires an additional
interest in shares which increases the percentage of shares
carrying voting rights in which he is interested, then such person
is normally required to make a general offer to all the holders of
any class of equity share capital or other class of transferable
securities carrying voting rights of that company to acquire the
balance of their interests in the company.
A Rule 9 Offer must be in cash (or with a cash alternative) and
at the highest price paid within the preceding 12 months for any
shares in the company by the person required to make the offer or
any person acting in concert with him.
Rule 9 of the Code further provides, among other things, that
where any person who, together with persons acting in concert with
him holds over 50 per cent. of the voting rights of a company,
acquires an interest in shares which carry additional voting
rights, then they will not generally be required to make a general
offer to the other shareholders to acquire the balance of their
shares.
For the purposes of the Code, persons acting in concert comprise
persons who, pursuant to an agreement or understanding (whether
formal or informal), actively co-operate, through the acquisition
by them of shares in a company, to obtain or consolidate control of
that company. The Ashok Companies are acting in concert for the
purposes of the Code.
Following completion of the Placing, the Ashok Companies will
have acquired in aggregate interests in shares carrying
approximately 75.10 per cent. of the voting rights of the Company
which, without a waiver of the obligations under Rule 9, would
oblige the Ashok Companies to make a general offer to Shareholders
under Rule 9.
Dispensation from Rule 9 Offer
Under Note 1 on the Notes on the Dispensations from Rule 9 of
the Code, the Takeover Panel will normally waive the requirement
for a general offer to be made in accordance with Rule 9 of the
Code if, inter alia, the shareholders of the company who are
independent of the person who would otherwise be required to make
an offer and any person acting in concert with him pass an ordinary
resolution on a poll at a general meeting (a "Whitewash
Resolution") approving such a waiver. The Takeover Panel may waive
the requirement for a Whitewash Resolution to be considered at a
general meeting (and for a circular to be prepared in accordance
with Section 4 of Appendix 1 to the Code) if shareholders who are
independent of the person who would otherwise be required to make
an offer and who hold more than 50 per cent. of the company's
shares capable of being voted on such a resolution confirm in
writing that they would vote in favour of the Whitewash Resolution
were such a resolution to be put to the shareholders of the company
at a general meeting.
The Company has obtained such written confirmation from
Independent Shareholders holding more than 50 per cent. of the
Company's shares capable of being voted at a general meeting and
the Panel has accordingly waived the requirement for a Whitewash
Resolution. Accordingly, by voting in favour of the Resolutions to
be proposed at the General Meeting, the Placing will be effected
without the requirement for any of the Ashok Companies to make a
Rule 9 Offer.
Shareholders should note that, following the Placing, the Ashok
Companies will together hold over 50 per cent. of the voting rights
of the Company and will therefore be entitled to increase their
interest in the voting rights of the Company without incurring a
further obligation under Rule 9 of the Code to make a general
offer.
Shareholders should also note that, following completion of the
Placing, the Ashok Companies will together control 75.10 per cent.
of the voting rights of the Company. This may in turn have the
effect of reducing the liquidity of trading in the New Ordinary
Shares on AIM. The voting rights of the Company held by the Ashok
Companies will also mean that the Ashok Companies will be able, if
they so wish, to exert significant influence over resolutions
proposed at future general meetings of the Company. Although it is
not the current intention of Ashok to seek a resolution at a
general meeting of the Company to de-list the New Ordinary Shares
from AIM, the Ashok Companies could, if they so wish in the future,
propose and pass such a resolution.
Recommendation
As Ashok is participating in the Placing and is a related party
(as defined in the AIM Rules), and as Mr Halonen andMr Seshasayee
are directors of Ashok and Mr Venkataraman is a senior executive of
Ashok's parent company, Hinduja Automotive Limited, they are not
independent directors for the purposes of the Placing.
The Directors consider that the Placing is in the best interests
of the Company and the Shareholders as a whole. In addition, the
Independent Directors, having been so advised by Cenkos Securities,
the nominated advisers to the Company, consider that the
participation in the Placing by Ashok is fair and reasonable in so
far as the Independent Shareholders and the Company as a whole are
concerned.
The Independent Directors unanimously recommend Shareholders to
vote in favour of the Resolutions to be proposed at the General
Meeting as they intend to do in respect of their own beneficial
holdings, amounting, in aggregate, to 7,367,852 Existing Ordinary
Shares representing 0.98 per cent. of the Existing Ordinary
Shares.
Jim Sumner CEO, commented, "The re-banking of Optare is a
critical milestone and will allow completion of the final phase of
the three year turnaround plan which commenced in June 2009. I also
remain very confident about the future growth potential of the
business demonstrated by the capacity of our new factory in
Sherburn, recent investment in new Green Technology products,
progress on export including the South Africa contract and finally
the support provided by Ashok Leyland."
Expected timetable of principal events
This document posted to Shareholders (by 20 December 2011
first class post)
Latest time and date for receipt of Forms 11:00 a.m. on 4 January
of Proxy 2012
General Meeting 11:00 a.m. on 6 January
2012
Admission and dealings in the Placing Shares 8:00a.m. on 9 January
and other New Ordinary Shares expected 2012
to commence on AIM
For further information please contact:
Jim Sumner, CEO, Optare plc
Peter Phillips, Finance Director,
Optare plc +44 (0) 845 838 9901
Camilla Hume, Cenkos Securities
plc
Stephen Keys, Cenkos Securities
plc +44 (0) 20 7397 8900
The same definitions apply throughout this announcement as are
applied in the Circular. The Circular will be sent to shareholders
today and is available on the Company's website: www.optare.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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