TIDMXPT
RNS Number : 1214B
Xploite PLC
21 October 2009
Xploite plc ("Xploite" or the "Company")
Proposed Tender Offer to purchase up to 46.57 per cent. of the
Company's issued share capital at 50 pence per Share
This announcement is not for release, publication or distribution, directly or
indirectly, in or into the United States, Canada, Australia, Japan, the Republic
of Ireland or South Africa or any other jurisdiction in which the same would be
unlawful (each a "Restricted Jurisdiction").
Xploite, the operator and aggregator of strategic high growth IT services
businesses, is pleased to announce that it is today publishing a Circular to
Shareholders (the "Circular") detailing a proposed tender offer, pursuant to
which Brewin Dolphin will purchase up to 19,000,000 Shares (representing 46.57
per cent. of the Company's issued share capital) at a price of 50 pence per
Share (the "Tender Offer"). Following the Tender Offer, which is available to
Shareholders on the Register at 5.00 p.m. on 19 November 2009, the Company will
purchase for cancellation such Shares as are thereby acquired by Brewin Dolphin
(or otherwise a corresponding number of Ordinary Shares).
The Tender Offer requires the approval of Shareholders and, accordingly,
attached to the Circular is a Notice of a General Meeting of Shareholders to be
held at 100 Fetter Lane, London EC4A 1BN at 11.00 a.m. on 13 November 2009.
Terms used in this announcement shall have the meaning ascribed to them in the
Circular unless otherwise stated.
A copy of the Circular may be also obtained from the Company's website:
www.xploite.com.
Background to and reasons for the Tender Offer
In the letter sent to Shareholders on 26 May 2009, the Company announced that,
following the disposal of VBHG Limited ("VBHG") for the aggregate sum of
GBP31.5m (less a deduction for debt and working capital of c.GBP3 million), it
would continue to seek further ways to create value for Shareholders through
acquisitions in the Information Communication Technology market. It also stated
that if no suitable acquisitions were identified, the Board would consider
making a cash distribution to Shareholders.
Having assessed a number of potential investments, the Board has concluded that
none of the potential targets represents a sufficiently attractive investment
opportunity and that it is an appropriate time to allow Shareholders the
opportunity to realise part or all of their investment by tendering Shares for
sale to Brewin Dolphin under the Tender Offer.
In particular, in the period since 26 May 2009, the Board has assessed a number
of potential acquisitions of significant scale which, for price and value
reasons, were considered not suitable for the Company in the current
environment. Having conducted a review of the opportunities available to the
Company, the Board feels that, in order to continue with its policy of
delivering value for Shareholders through a 'buy and build' strategy, the
Company should focus on smaller acquisitions with less requirement for
significant cash investment.
The Company has recently sought appropriate advice on how its cash and
distributable reserves should best be applied in the interests of Shareholders.
After considering a number of alternative strategies, the Board has decided that
GBP9,500,000 of the cash resources currently held on the Group's balance sheet
is not required and the Board is therefore proposing to return this surplus cash
to Shareholders by way of a tender offer.
Details of the Tender Offer
Under the Tender Offer, Brewin Dolphin will purchase up to 46.57 per cent. of
the Company's Shares at a price of 50 pence per Share. The Shares purchased by
Brewin Dolphin under the Tender Offer (or otherwise a corresponding number of
Shares) will be subsequently purchased by the Company under the terms of a
Repurchase Agreement entered into with Brewin Dolphin and will then be
cancelled. Following completion of the Repurchase Agreement, the Company's
issued share capital will be reduced to 21,796,955, assuming the Tender Offer is
taken up in full.
Accompanying the Circular is a Tender Form for those Shareholders whose Shares
are held in certificated form who wish to take advantage of the Tender Offer,
which they should complete and return to the Company's registrars, Capita
Registrars, in the accompanying reply paid envelope by no later than 3.00 p.m.
on 19 November 2009. Shareholders whose Shares are held in uncertificated form
who wish to take advantage of the Tender Offer should send the TTE instruction
through CREST so as to settle by no later than 3:00 p.m. on 19 November
2009. The Tender Offer is being made subject to the passing of the Resolution
and the Repurchase will be funded from available cash of the Company and paid
out of its distributable reserves.
Under the Tender Offer, Shareholders will be entitled to sell up to 46.57 per
cent. of their shareholdings. They may tender to sell more or less than this
number. If they tender to sell a number less than or equal to 46.57 per cent. of
their Shareholding, their tender will be satisfied in full (subject to
completion of the Tender Offer). If the aggregate number of Shares tendered
exceeds 19,000,000, the Shares tendered by Shareholders in excess of 46.57% of
their respective holdings will be scaled back pro rata to the number of Shares
tendered by such Shareholders.
Current Trading of Storage Fusion
Since the sale of VBHG in June 2009, the main operating business of the Company
has been Storage Fusion, a storage resource analysis ("SRA") software business
which comprised part of the software business of Itheon, the data centre
management company acquired in October 2007 and sold, after the Storage Fusion
business had been hived out into another member of the Group, in November 2008.
As the Company approaches its financial year end, the Board anticipates that
Storage Fusion will considerably underperform against its own projections and
market expectations for the year to 31 October 2009 and that Storage Fusion will
record a significant loss for the period. The SRA software has, however, had
positive feedback from customers which the Board believes is testament to the
quality of the company's product.
As outlined in the circular to Shareholders dated 26 May 2009, the Board's
proposed strategy was to sell the software on an enterprise licence basis.
However, the directors now believe that this pricing level has introduced too
many obstacles to significant take-up of the product and, accordingly, the
pricing strategy was altered in July 2009, since when Storage Fusion has secured
a further 11 customers.
The Board believes that the measures adopted to date will have the effect of
reducing the cash burn of the Storage Fusion business and it remains the Board's
objective to ensure that the Storage Fusion business is cash positive on a
month-to-month basis.
Furthermore, it is the belief of the Board that the increased customer volumes
will, in turn, increase market awareness of the SRA software, supporting the
continued growth of the Storage Fusion business and maintaining its recent,
improved, levels of performance. However, in light of the above, the Board will
review the carrying value of Storage Fusion as part of the year end process.
The Company intends to announce its preliminary results for the period to 31
October 2009 in the week commencing 25 January 2010.
The Company following the Tender Offer
In order to reduce costs whilst the search for further acquisitions continues,
the Board will reduce their employment costs during this period and the Board
structure will be kept under review to ensure it is appropriate to the needs of
the Company.
The Group, following completion of the Tender Offer, will comprise principally:
1. its sole trading business, Storage Fusion;
2. cash of GBP3,100,000, being the cash balance at 30 September 2009 less the
assumed full take up of the Tender Offer plus associated costs;
3. the right to deferred consideration totaling GBP4,100,000, being the balances
due from ACS Business Process Solutions Limited of GBP3,100,000, due 30 October
2010, and Blue Chip Engineering Limited of GBP1,000,000, due 30 October 2009;
and
4. liabilities of GBP1,250,000.
The Company will continue to operate as a holding company for its operating
divisions that will be run independently, with separate management, in order to
enhance future disposal potential. The Company will continue to look for
suitable acquisitions in order to continue with its 'buy and build' strategy
and in line with its stated aim of seeking to discover, consolidate and develop
innovative, high growth businesses in the IT sector.
In assessing current investment opportunities, the Board has identified that
vendor and purchaser price expectations are often not aligned so as to make a
transaction attractive to both parties. The Company's current strategy of
targeting larger acquisitions will remain viable if the Tender Offer does not
proceed for any reason or if only a limited number of Shares are tendered.
However, as the Board has not to date been able to identify appropriate,
sensibly-priced, assets in which to invest, it has concluded that it is not
appropriate to retain the level of funds currently held by the Company and that
the Shareholders should therefore be offered a partial return of capital.
The Company has recently assessed a large number of acquisition opportunities at
the smaller end of the market and is excited by the prospect of building a new
platform. If, however, Shareholder appetite for the Tender Offer is such that
Xploite retains funds substantially in excess of the level envisaged after its
completion, the Board is confident that it will, in due course, be able to
identify opportunities for investment in line with its existing strategy which
will have the potential to deliver appropriate returns to Shareholders.
It is likely that Shareholder approval of any future acquisition will be
required under the AIM Rules.
General Meeting
The authorisation of the Repurchase and, accordingly the implementation of the
Tender Offer, requires, inter alia, the passing of a special resolution, which
will be proposed at the General Meeting.
There is set out at the end of the Circular a notice convening a General Meeting
of the Company to be held at 100 Fetter Lane, London EC4A 1BN on 13 November
2009 at 11.00 a.m.
Overseas Shareholders
The Tender Offer is not available to Shareholders with a registered address in
the United States, Canada, Australia, New Zealand, South Africa or Japan or any
other Restricted Jurisdiction. Overseas Shareholders should note that they
should satisfy themselves that they have fully observed any applicable legal
requirements under the laws of their relevant jurisdiction if they tender
Ordinary Shares in the Tender Offer. The attention of Shareholders with
registered addresses outside the United Kingdom is drawn to the paragraph headed
"Overseas Shareholders" in Part 2 of the Circular.
Action to be taken in relation to the General Meeting
Shareholders will find accompanying Circular a form of proxy for use in
connection with the General Meeting. Whether or not Shareholders intend to be
present at the General Meeting, they are requested to complete and return the
relevant form of proxy as soon as possible and, in any event, so as to be
received by Capita Registrars, Proxies Department, 34 Beckenham Road,
Beckenham, Kent BR3 4TU by not later than 11.00 a.m. on 11 November 2009.
The completion and return of a form of proxy will not preclude Shareholders from
attending the General Meeting and voting in person should they wish to do so.
Action to be taken in relation to the Tender Offer
Shareholders who hold Shares in certificated form will also find accompanying
the Circular a Tender Form for use in connection with the Tender Offer. Such
Shareholders who wish to tender some or all of the Shares registered in their
name on the Record Date should complete the Tender Form in accordance with the
instructions printed thereon and in Part 2 to the Circular and return it by post
or by hand (during normal business hours) to the Receiving Agents, Capita
Registrars, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent
BR3 4TU by no later than 3.00 p.m. on 19 November 2009. A prepaid envelope is
enclosed with the Circular for this purpose.
Shareholders who hold Shares in certificated form should also return their share
certificate(s) in respect of the Shares tendered with the Tender Form.
Shareholders who hold Shares in CREST who wish to participate in the Tender
Offer should comply with those procedures set out in Parts 2 and 3 to the
Circular in respect of transferring uncertificated Shares to escrow through
CREST.
Brewin Dolphin Rule 9 Waiver
Under the Tender Offer, Brewin Dolphin will purchase, as principal, Shares in
the Company which could result in Brewin Dolphin coming to have an interest in
such shares carrying 30 per cent. or more of the voting rights of the Company.
Brewin Dolphin has unconditionally undertaken that, promptly following such
purchase, it will sell all those Shares acquired pursuant to the Tender Offer to
the Company for cancellation and the Company has unconditionally undertaken to
buy all such shares. Brewin Dolphin has undertaken that, so far as it is
interested in the tendered shares, it will not exercise any rights attached to
those Shares. Accordingly, a waiver has been obtained from the Panel in respect
of the application of Rule 9 to the purchase by Brewin Dolphin of Shares under
the Tender Offer.
Recommendation and Director Participation in the Tender Offer
The Board considers that the Proposals described in the Circular are in the best
interests of Shareholders as a whole and accordingly recommends that
Shareholders vote in favour of the Resolution as they intend to do in respect of
their own holdings of 6,879,733 Shares representing 16.86 per cent. of the
issued share capital of the Company.
Each of the Directors has indicated that he will be tendering 60 per cent of his
current Shareholding under the Tender Offer.
The Board makes no recommendation to Shareholders in relation to participation
in the Tender Offer. Whether or not Shareholders decide to tender Shares will
depend, amongst other things, on their view of the Company's prospects and their
own individual circumstances, including their tax position. In making their
decision, Shareholders should seek advice from an appropriately qualified
financial adviser.
Expected timetable of principal events
+----------------------------------------------------+--------------------+
| Announcement of the Proposals and Tender Offer | 21 October 2009 |
| opens | |
+----------------------------------------------------+--------------------+
| Latest time for receipt of forms of proxy | 11.00 a.m. on 11 |
| | November 2009 |
| | |
+----------------------------------------------------+--------------------+
| General Meeting | 11.00 a.m. on 13 |
| | November 2009 |
| | |
+----------------------------------------------------+--------------------+
| Latest time for receipt of Tender Forms and TTE | 3.00 p.m. on 19 |
| Instructions in relation to the Tender Offer | November 2009 |
| | |
+----------------------------------------------------+--------------------+
| Record date for Tender Offer | 5.00 p.m. on 19 |
| | November 2009 |
| | |
+----------------------------------------------------+--------------------+
| Announcement of results of Tender Offer | 20 November 2009 |
| | |
+----------------------------------------------------+--------------------+
| Posting of cheques in respect of the Tender Offer, | by 27 November |
| along with any balance certificates or the | 2009 |
| crediting of CREST accounts | |
+----------------------------------------------------+--------------------+
For further information please contact:
+-------------------------------------------+--------------------+--------------------------------+
| Xploite plc | 0870 737 2001 | |
+-------------------------------------------+--------------------+--------------------------------+
| Ian Smith (Chief Executive Officer) | | |
+-------------------------------------------+--------------------+--------------------------------+
| Robert Arrowsmith | | |
| (Chief Financial Officer) | | |
+-------------------------------------------+--------------------+--------------------------------+
| | | |
+-------------------------------------------+--------------------+--------------------------------+
| Brewin Dolphin Limited | 0845 213 4217 | |
+-------------------------------------------+--------------------+--------------------------------+
| Matt Davis | | |
| Neil McDonald | | |
+-------------------------------------------+--------------------+--------------------------------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
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