Placing and Acquisition

RNS Number : 2892K

Parallel Media Group PLC

26 July 2013

 

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26 July 2013

Parallel Media Group PLC

("PMG" or the "Company")

Proposed placing and debt capitalisation, Acquisition and notice of General Meeting

PMG, the AIM quoted sports, entertainment and media agency, is pleased to announce a number of proposals, which, if completed, will strengthen the Company's balance sheet and provide the funds to support the Group's future growth strategy. These include:

•    a placing to raise up to £501,000, before expenses, from the issue of up to 10,020,000 Ordinary Shares at 5p per Ordinary Share to institutional and other investors;

•    a debt capitalisation by the Directors, senior management and certain other creditors amounting to £788,766, to remove certain debts owed by the Company;

•    the renegotiation of a debt owed to Luna Trading Limited, a company controlled by David Ciclitira;

•    the renegotiation of a debt owed to David Ciclitira;

•    the acquisition of 25 per cent. of PMGA from Urban Strategic for a consideration of 1,074,283 Ordinary Shares and a further 411,935 Ordinary Shares dependent on PMGA achieving prescribed performance targets in relation to the financial year ended 31 December 2013; and

•    the issue of 408,169 Ordinary Shares to senior management in satisfaction of bonuses which are payable to them by the Company and in lieu of the waiver of certain options.

Further details of the Proposals are set out below. The First Debt Capitalisation, the Acquisition and the issue of the Bonus Shares at 5 pence per share to certain employees of the Company will take place immediately following the Annual General Meeting assuming the resolutions approving the issue and allotment of shares are passed and First Admission is expected to take place on 6 August 2013.

The proposed Second Debt Capitalisation comprises the issue of 8,560,000 Ordinary Shares to David Ciclitira and a further 154,160 Ordinary Shares to Serenella Ciclitira, who both form part of the Concert Party, the Company's largest shareholder and the issue of 1,126,316 Ordinary Shares to Urban Strategic. These issues will take place at the Placing Price.

The Second Debt Capitalisation and the Placing are conditional, inter alia, upon First Admission occurring, independent shareholders passing the Resolutions at the General Meeting to approve the Rule 9 Waiver, to grant the Directors the authority to allot the Placing Shares and the Second Debt Capitalisation Shares, and to disapply the statutory pre-emption rights arising in respect of those allotments. They are also conditional upon the Second Debt Capitalisation Shares and the Placing Shares being admitted to trading on AIM.  Application will be made for the Second Debt Capitalisation Shares and the Placing Shares to be admitted to AIM and it is expected that Second Admission will become effective and that dealings in these shares will commence on 21 August 2013.

Background to and reasons for the Proposals

As Shareholders will be aware, the Company underwent a strategic review during 2011, following which Parallel refocused its business into three distinct areas: sport, entertainment and media. Parallel is now a leading communications agency connecting lifestyle brands to opportunities in its chosen sectors in Asian markets, and events previously held include:

•    The Championship (as rebranded), a men's golf tournament held in South Korea;

•    The Kazakhstan Open, a men's golf tournament held in Kazakhstan;

•    The ADT CAPS Championship, a ladies golf tournament held in Singapore; and

•    The AIA K-Pop series, which promotes K-Pop concerts with AIA, the largest independent listed pan-Asian life insurance group.

The London office has been re-structured as the creative and financial hub of the Group, offering creative solutions to the emerging markets of Asia. In addition, the Company has an office in Seoul which runs the widely acclaimed Ballantine's Championship and is in the process of re-launching the rebranded 'The Championship' in 2014 in partnership with the European Tour and a newly created office in Singapore which is focused on South-East Asia and specifically the emerging and frontier markets such as Malaysia, Vietnam and Cambodia.

In the last year, the Group has created and run a number of new events, expanding its portfolio to 11 events this year. The growth in the Company's business can be principally attributed to the recruitment of certain new key senior employees and the establishment of the local offices referred to above. In addition, the Group has proactively controlled its cost base and believes that there are further savings which can be identified.

It is therefore the Directors' belief that the Company is now streamlined for growth and is in a position to leverage the current team to create further events in the areas of the business where it has the expertise and is able to achieve preferable margins. Accordingly, the Company has agreed the Proposals to allow it to endeavor to refinance a loan from Lloyds TSB Bank plc, totalling approximately £500,000 ("Lloyds Loan"), to remove certain other legacy debts and to renegotiate the terms of a payment due to Luna Trading Limited, an entity owned by David Ciclitira. By refinancing the Lloyds Loan and thereby removing David Ciclitira's personal guarantee, the Company will benefit from the removal of certain monthly fees owed to David Ciclitira, amounting to £50,000 per annum, as part of that personal guarantee and the removal of a debenture he holds over the Company's assets.

The Company has agreed a payment plan with Luna Trading Limited, a company controlled by David Ciclitira and a member of the Concert Party, in relation to £135,000 which is owed to it. The repayment terms will allow a payment holiday of 12 months from 1 July 2013, followed by 24 monthly payments of £5,625. There are no other charges attached to the amount owing to Luna Trading Limited and the Company retains the right to repay the balance faster if it wants to.

In addition, David Ciclitira has today entered into an agreement providing a facility to the Company for the amount of £103,000, of which £47,000 will be capitalised upon Second Admission. Under the terms of the loan facility agreement the remaining £56,000 will be repaid, from 1 September 2013, at a rate of £10,000 per month with a final payment of £6,000. These payments shall be suspended if the Board resolves that the cashflow requirements of the Company's business do not permit the payment of such monthly sum.

In the event that an offer is made for the Company which would result in the offeror holding shares carrying over 50 per cent. of the voting rights of Parallel and which is declared unconditional in all respects then the full amount outstanding under the loan provided by Luna Trading Limited and the facility provided by David Ciclitira personally at that time would become payable immediately. 

These arrangements will strengthen the Company's balance sheet and provide the funds to support the Group's growth strategy.

The Placing

Under the terms of the Placing Agreement Sanlam Securities UK has agreed, as agent for the Company, to use reasonable endeavours to procure placees for the Placing Shares at the Placing Price to raise £501,000 (gross) and approximately £350,000 (net of expenses) for the benefit of the Company.  

The Placing is conditional, inter alia, upon the passing of the Resolutions, the Placing Agreement becoming unconditional and not being terminated in accordance with its terms, First Admission taking place by 8.00 am on 6 August 2013 (or such later date, being not later than 30 September 2013, as the Company and Sanlam Securities UK may agree) and Second Admission taking place by 8.00 am on 21 August 2013 (or such later date, being not later than 30 September 2013, as the Company and Sanlam Securities UK may agree).

The Placing Shares, when issued and fully paid, will rank equally in all respects with the Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid after the Second Admission.  The Placing Shares will be allotted and issued prior to Second Admission credited as fully paid subject only to Second Admission.

The Company intends to use the net proceeds of the Placing primarily to reduce its debt obligations and to provide working capital generally.

Debt Capitalisation

Conditional on Admission, certain of the Directors, have agreed to capitalise loans (together with accrued interest and associated fees, where applicable) and certain other payments owed to them, totalling £585,774. The debts will be satisfied through the issue by the Company of 10,665,931 Ordinary Shares to these Directors at the Placing Price. The number of Ordinary Shares to be issued as a result of the Debt Capitalisation and the resulting aggregate shareholding of each Director is as follows:

	Existing debts to be capitalised (including interest and fees)	Ordinary Shares issued on the First Debt Capitalisation	Percentage of the share capital held following First Admission	Ordinary Shares issued on the Second Debt Capitalisation	Percentage of the Enlarged Issued Share Capital held on Second Admission
David Ciclitira	£428,000	-	27.61	8,560,000	33.96
Serenella Ciclitira	£7,708	-	-	154,160	0.31
Ranjit Murugason (held through Urban Strategic)	£150,066	825,455	10.96	1,126,316	8.82

Furthermore, certain other senior management and creditors have also agreed to capitalise certain payments owed to them by receiving 4,059,840 Ordinary Shares at the Placing Price.

The First Debt Capitalisation is conditional, inter alia, on First Admission taking place. The Second Debt Capitalisation is conditional, inter alia, upon the passing of the Resolutions, First Admission having taken place and Second Admission taking place.

It is expected that First Admission will become effective and dealings in the 4,885,295 First Debt Capitalisation Shares arising from the First Debt Capitalisation will commence on 6 August 2013 and that Second Admission will become effective and dealings in the 9,840,476 Second Debt Capitalisation Shares arising from the Second Debt Capitalisation will commence on 21 August 2013.

The Company has agreed a payment plan with Luna Trading Limited, a company controlled by David Ciclitira and a member of the Concert Party, in relation to £135,000 which is owed to it. The repayment terms will allow a payment holiday of 12 months from 1 July 2013, followed by 24 monthly payments of £5,625. There are no other charges attached to the amount owing to Luna Trading Limited and the Company retains the right to repay the balance faster if it decides to.

In addition, David Ciclitira has today entered into an agreement providing a facility to the Company in the amount of £103,000, of which £47,000 will be capitalised upon Second Admission. Under the terms of the loan agreement the remaining £56,000 will be repaid, from 1 September 2013, at a rate of £10,000 per month with a final payment of £6,000. These payments shall be suspended if the Board resolve that the cashflow requirements of the Company's business do not permit the payment of such a monthly sum.

In the event an offer is made for the Company which would result in the offeror holding shares carrying over 50 per cent. of the voting rights of Parallel and which is declared unconditional in all respects (a change of control) then the full amount outstanding at that time under both the loan provided by Luna Trading Limited and the facility provided by David Ciclitira personally would become payable immediately. 

Neither Luna Trading Limited nor David Ciclitira intend to make further loans to the Company.  However, under the terms of the loan agreement, if Luna Trading Limited or David Ciclitira are required to make a further loan prior to the Second Admission any such sum shall be repaid to the respective party immediately after the Second Admission out of the proceeds received from the Placing Shares.

Bonus Shares

In addition, certain bonus payments have become payable to members of the senior management team not including the Directors and certain shares being issued in lieu of the waiver of options by a member of senior management, and, accordingly, the Company proposes to issue the Bonus Shares in satisfaction of those payments.

The issue of the Bonus Shares is conditional on First Admission taking place. It is expected that First Admission will become effective and dealings in the 408,169 Bonus Shares will commence on 6 August 2013.

Acquisition

The Company has today entered into an acquisition agreement with Urban Strategic pursuant to which it has conditionally agreed to acquire 25 per cent. of PMGA, for a consideration of 1,074,283 Consideration Shares (representing 2.19 per cent. of the Enlarged Issued Share Capital), payable on First Admission, and the issue of 411,935 further Ordinary Shares dependent on PMGA achieving prescribed performance targets in relation to the financial year ended 31 December 2013.

The acquisition agreement is conditional, inter alia, upon First Admission becoming effective by not later than 6 August 2013.

Following the Placing, the Debt Capitalisation, the Acquisition and the issuance of the Bonus Shares, the Company will have 49,140,569 Ordinary Shares in issue and admitted to trading on AIM.

Related Party transaction

David and Serenella Ciclitira, as members of the Concert Party (which holds an interest in approximately 35.28 per cent. of the Existing Ordinary Shares) are classified as related parties of the Company for the purposes of the AIM Rules, by virtue of them having a substantial shareholding (as defined by the AIM Rules) in the Company. David and Serenella Ciclitira will be receiving Ordinary Shares as part of the Debt Capitalisation and such participation constitutes a related party transaction under the AIM Rules.

In addition, Urban Strategic will be receiving Ordinary Shares as part of the Debt Capitalisation and the Acquisition. Accordingly, due to Urban Strategic, a company owned and controlled by Ranjit Murugason, receiving Ordinary Shares as part of the Debt Capitalisation, its participation constitutes related party transactions under the AIM Rules.

Leonard Fine, acting as independent director in relation to the Debt Capitalisation, considers, having consulted with Sanlam Securities UK, the Company's nominated adviser, that the terms of the Debt Capitalisation are fair and reasonable insofar as Shareholders are concerned.

The loan facility agreement that has been entered into between David Ciclitira and the Company for an amount of £103,000 is classified as a related party transaction under the AIM Rules. Both Ranjit Murugason and Leonard Fine, acting as independent directors in relation to the loan facility agreement consider, having consulted with Sanlam Securities UK, the Company's nominated adviser, that the terms of the loan facility agreement are fair and reasonable insofar as Shareholders are concerned.

Current trading

The Group's revenue for the year ended 31 December 2012 was £6.26 million (2011: £6.4 million) which resulted in a loss for 2012 of £832,000 compared to a loss of £375,000 in 2011. This included certain non-cash items and a one off cost relating to the set up costs of the Group's Singapore office. In the period, the Group continued to focus on reducing costs and streamlining administrative expenses.

However, since the year end, and as announced on 26 June 2013, the Group has already run seven events with an estimated contribution of £1.7 million, compared to one event in the same period last year, which made a gross contribution of £0.8 million. Since publication of the accounts on 26 June 2013 the Company has successfully staged its second AIA K-Pop event in Kuala Lumpur and has announced the promotion of the AIA sponsored Justin Bieber concert in Seoul on 10 October 2013. During the second half of the financial year, the Company is committed to staging two new events including the promotion of the new Vietnam Masters, as well as the existing Kazakhstan Open. In total the Company is currently expecting to hold 11 events during 2013.

Changes to the Board

Immediately following, and conditional on Second Admission occurring, Leonard Fine will be resigning from the Board to pursue his other business interests. Mr Fine stated that he has enjoyed his time with the Company and believes that the Proposals will strengthen the Company's balance sheet and provide the funds to support the Group's growth strategy.

As a result of Mr Fine's resignation the Company has undertaken to seek, identify and appoint at least one new, experienced non-executive director following Second Admission. The Company has already started a search for suitable candidates and is hopeful to identify someone suitable in the near future. Further updates will be announced in due course.

Circular and General Meeting

The circular to shareholders and notice of General Meeting will be posted shortly and will be available from the Company's website, www.parallelmediagroup.com.  The General Meeting of the Company has been convened for 9.00 a.m. on 20 August 2013 at the offices of Sanlam Securities UK Limited, 10 King William Street, London EC4N 7TW.

-ENDS-

For further information, please contact:

Parallel Media Group plc (London)
Amelia Wix	Tel: [phone]
Sanlam Securities UK Limited
Virginia Bull / Simon Bennett	Tel: [phone]

Definitions The following definitions apply throughout this announcement unless the context requires otherwise:
"Acquisition"	the proposed acquisition by the Company of 25 per cent. of the issued share capital, which it does not currently own, of PMGA
"Admission"	First Admission and the Second Admission, or in the event that Second Admission does not occur, First Admission
"AIM"	AIM, a market operated by the London Stock Exchange
"AIM Rules"	the rules for companies whose securities are admitted to trading on AIM as published by the London Stock Exchange, as amended from time to time
"Annual General Meeting" or "AGM"	means the annual general meeting of the shareholders of the Company, scheduled to occur at 9.00 am on 31 July 2013
"Board" or "Directors"	the board of directors of the Company from time to time and as at the date hereof
"Bonus Shares"	the 408,169 Ordinary Shares that will be issued to certain employees of the Company
"Circular"	the circular to Shareholders setting out the Proposals
"Company" or "Parallel"	Parallel Media Group plc, a company incorporated and registered in England and Wales with registered number 00630968
"Code" or "Takeover Code"	the City Code on Takeovers and Mergers
"Concert Party"	(i) Serenella Ciclitira (aka Maria Serena Papi); (ii) Barclays Wealth Trustees (Jersey) Limited; (iii) Luna Trading Limited; and (iv) Lynchwood Nominees
"Consideration Shares"	the 1,074,283 Ordinary Shares being issued to Urban Strategic in consideration for the acquisition of its minority interest in PMGA
"Debt Capitalisation"	the satisfaction of certain liabilities by the issue of the Debt Capitalisation Shares
"Debt Capitalisation Shares"	First Debt Capitalisation Shares and the Second Debt Capitalisation Shares
"Enlarged Issued Share Capital"	the enlarged issued ordinary share capital of the Company, following the issue of the New Ordinary Shares assuming that the Placing is fully subscribed
"Existing Ordinary Shares"	the 22,912,346 ordinary shares of 2.2 pence each in the capital of the Company
"First Admission"	the admission of the First Debt Capitalisation Shares, the Bonus Shares and the Consideration Shares to trading on AIM becoming effective in accordance with the AIM Rules
"First Debt Capitalisation Shares"	4,885,295 Ordinary Shares to be issued to Urban Strategic, certain employees of the Company and other creditors pursuant to the Debt Capitalisation
"GM" or "General Meeting"	the general meeting of the Company convened for 9.00 a.m. on 20 August 2013
"Group"	the Company, its Subsidiaries and Subsidiary Undertakings and/or (where the context requires) any one or more of them
"Independent Director"	Leonard Fine who is deemed independent for the purposes of the Code
"Independent Shareholders"	the Shareholders, other than the Concert Party and Herald Investment Management due to its participation in the Placing
"London Stock Exchange"	London Stock Exchange plc
"New Ordinary Shares"	the Placing Shares, the Debt Capitalisation Shares, the Consideration Shares and the Bonus Shares
"Notice"	the notice of the General Meeting
"Ordinary Shares"	the ordinary shares of 2.2 pence each in the capital of the Company
"Options" or "Share Options"	the 44,935 options granted to David Ciclitira to acquire Ordinary Shares
"Placing"	the conditional placing of the Placing Shares at the Placing Price pursuant to the Placing Agreement
"Placing Agreement"	the conditional agreement dated 26 July 2013 between the Company, the Directors and Sanlam Securities UK relating to the Placing
"Placing Price"	5p per Placing Share
"Placing Shares"	up to 10,020,000 Ordinary Shares to be issued by the Company pursuant to the Placing
"PMGA"	Parallel Media Group Asia Limited a company incorporated in Singapore
"Proposals"	together the Placing, the Debt Capitalisation, the Acquisition, the issuance of the Bonus Shares and the Rule 9 Waiver
"Resolutions"	the resolutions to be proposed at the General Meeting, as set out in the Notice
"Rule 9 Waiver"	the agreement of the Panel to waive the obligation on the Concert Party, which would otherwise arise upon the issuance of Debt Capitalisation Shares to the Concert Party, to make a general offer to all Shareholders pursuant to Rule 9 of the Takeover Code, conditional upon the approval of Resolution 1 at the General Meeting
"Sanlam Securities UK"	Sanlam Securities UK Limited, a company incorporated and registered in England and Wales with registered number 1825671, whose registered office is at 16 South Park, Sevenoaks, Kent TN13 1AN
"Second Admission"	the admission of the Second Debt Capitalisation Shares and the Placing Shares to trading on AIM becoming effective in accordance with AIM Rules
"Second Debt Capitalisation Shares"	9,840,476 Ordinary Shares to be issued to David Ciclitira, Urban Strategic and Serenella Ciclitira pursuant to the Debt Capitalisations
"Shareholder(s)"	a holder of Existing Ordinary Shares
"Subsidiary"	a subsidiary of the Company as that term is defined in Section 1159 and schedule 6 of the Act
"Subsidiary Undertaking"	a subsidiary undertaking of the Company as that term is defined in Section 1162 and Schedule 7 of the Act
"Urban Strategic"	Urban Strategic Private Limited, a company owned and controlled by Ranjit Murugason and incorporated in Singapore under the number 200919890G

 

END

 

 

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