Placing and Notice of General

RNS Number : 0842M

Sagentia Group PLC

18 May 2010

 



Sagentia Group plc

("Sagentia" or the "Company")

Placing of new Ordinary Shares and Trading Update

Sagentia Group plc, a technology and product development business servicing niche markets in the medical, consumer and industrial sectors, is pleased to announce that it proposes to raise £8.0 million (before expenses) through a placing (the "Placing") of 20,000,000 new Ordinary Shares of 1p each (the "Placing Shares") at a price of 40p per share (the "Placing Price").

The Placing Price represents a premium of approximately 3.2 per cent. to the closing mid-market price of 38.75p per Existing Ordinary Share on 17 May 2010, being the last dealing day prior to the date of this announcement. The Placing Shares will represent approximately 47.9 per cent. of the Enlarged Issued Share Capital. Following Admission, the Company will have 41,723,595 Ordinary Shares in issue.

The Placing Shares have been conditionally placed by Arbuthnot Securities Limited with institutional and other investors, including the Company's Chairman, Martyn Ratcliffe and David Courtley, a non-executive Director of the Company. A circular will today be posted to Shareholders containing further details of the Placing and a Notice of General Meeting to be held on 4 June 2010. Subject, inter alia, to the passing of the Resolutions at the General Meeting, Admission and dealings in the Placing Shares are expected to commence on AIM at 8.00 a.m. on 7 June 2010.

The Company has received irrevocable undertakings to vote in favour of the Resolutions from the Directors and certain other Shareholders representing approximately 60.5 per cent. of the Company's current issued share capital.

The Placing is intended to strengthen the Company's balance sheet and enable it to invest in acquisition opportunities as and when they become available.

For further information, please contact:

Sagentia Group plc
Martyn Ratcliffe, Chairman	Tel: [phone]
Brent Hudson, CEO
Guy McCarthy, CFO
Arbuthnot Securities Limited
Nick Tulloch/Paul Gillam	Tel: [phone]

Sagentia Group plc

("Sagentia" or the "Company")

Placing of new Ordinary Shares and Trading Update

Introduction

The Board of Sagentia announces that the Company has raised, subject to certain conditions, £8.0 million (before expenses) by way of a placing of new Ordinary Shares, which is intended to strengthen the Company's balance sheet and enable it to invest in acquisition opportunities as and when they become available. All of the Placing Shares have been conditionally placed firm with certain new and existing Shareholders at 40 pence per share.

The Placing is conditional, inter alia, upon the passing of the Resolutions by Shareholders to authorise the Directors to allot additional Ordinary Shares for cash on a non-pre-emptive basis.  Accordingly, a General Meeting will be convened for the purpose of considering the Resolutions to approve these authorities. 

A Circular will today be posted to Shareholders to provide further information about the background to and the 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 Shareholders vote in favour of the Resolutions to be proposed at the General Meeting.

Recent events

On 5 October 2009, Brent Hudson started as Chief Executive Officer and has subsequently continued the restructuring of the Group's operations which had commenced earlier in 2009. This restructuring included organisational changes following the transfer of the Vodafone money transfer service to a global IT organisation in September 2009, the closure of the operations in Germany, the disposal of Sagentia Catella AB in Sweden, the disposal of Sagentia Public Sector Limited and a reduction in the Group's cost base.

On 23 March 2010, Martyn Ratcliffe acquired 10,512,080 Ordinary Shares at a price of 23.8 pence per share, equivalent to approximately 48.4 per cent. of the issued share capital of the Company. As a result, it was necessary for him to make a mandatory cash offer under Rule 9 of the City Code at the same price. This offer did not become unconditional and lapsed on 15 April 2010, at which time Martyn Ratcliffe was appointed Chairman of Sagentia, David Courtley was appointed a non-executive Director on the same date and Dr Christopher Masters, Mr Lars Kylberg and Mr Staffan Ahlberg resigned from the Board. The Group intends to appoint an additional non-executive Director in due course.

Trading Update

Trading for the first three months of the current financial year is ahead of the Board's expectations with the core consultancy revenue growing by approximately 20 per cent. over the comparable figures for the same period last year, excluding the discontinued activities associated with the Vodafone M-PESA project, disposed businesses and recharged expenses. For the year ended 31 December 2009, the core consultancy revenue was £14.2 million. The Group is trading profitably and ahead of the Board's expectations. The Directors believe this improvement in performance is a result of the actions taken in 2009 to reduce costs and reposition the Group. To complete this restructuring there are a number of further activities in progress including: consolidation of all US operations into a facility in Boston, Ma; alignment of organisational and financial management reporting and completion of the corporate/legal restructuring of the Group following the redomiciliation in 2008.

At 31 March 2010, the Group had free cash of £3.7 million (31 December 2009: £4.2 million) and debt of £5.9 million (31 December 2009: £6.9 million). At 31 December 2009, Sagentia had Shareholder funds of £12.7 million, equivalent to approximately 58.7 pence per Ordinary Share, including freehold land and property of £14.1 million and equity investments of £1.4 million. The Group's banking facilities are currently being renegotiated and the Board is seeking to limit the security granted in respect of this debt to the Group's freehold property or corporate entity. At 31 December 2009, the Group's reported tax losses were £56.3 million, of which £29.4 million were related to UK activities, £2.1 million were related to US activities and the balance was in jurisdictions where the Group no longer carries on business.

Whilst for the past three years the Group's core consultancy operations have been profitable, its other activities, including write-downs in the value of certain investments, have resulted in the Group reporting operating losses throughout this period. With regard to the Group's legacy investments, the Board does not intend to make any follow-on investment in these companies and intends to exit these at the earliest opportunity. Whilst there have been no events since 31 December 2009 to materially change the book value of these investments, the realisable value may or may not reflect the book value.

Reasons for the Placing

The then holding company of the Group was listed on the main market of the London Stock Exchange plc in 2000 as Generics Group AG. Subsequently, the Group redomiciled when the Company was admitted to trading on the AIM market in July 2008. Throughout this period, a single Shareholder has held a large shareholding, sufficient, in the Directors' opinion to have been a deterrent to new investors and which has had the effect of reducing liquidity for Shareholders.

Following the acquisition of Martyn Ratcliffe's shareholding in March this year and his subsequent appointment as Chairman in April, together with the improved operating performance of the core consulting operations in the first three months of the current financial year, a review by the Board of the strategy of the Group has determined that Sagentia could benefit from an increase in the scale of its operations. This strategy could potentially include evaluating acquisition opportunities. Such acquisition opportunities could include businesses which have the potential to accelerate growth in an existing Sagentia business sector or could enable the Group to enter a new business sector or market that is complementary to the Group's current operations. Whilst the Group is financially stable and trading profitably, it does not currently have the cash resources necessary to pursue such opportunities.

After considering various options, the Board considers that the Placing is the most effective method of establishing the cash resources to enable the Group to pursue this element of its strategy. The Placing with primarily institutional Shareholders would seek to establish a foundation for the Group from which Sagentia can pursue acquisition opportunities. The Directors believe that the proceeds of the Placing will provide the Company a competitive advantage in bid processes, increase its leverage in negotiations and offer the ability to move quickly once a deal has been reached in principle.

Martyn Ratcliffe has conditionally agreed to participate in the Placing in respect of 2,000,826 Ordinary Shares. The effect of this participation would be to dilute his shareholding to below 30 per cent. of the Enlarged Issued Share Capital. Details of the Placing are set out below.

Details of the Placing

Overview

The Company proposes to raise £8.0 million before expenses through the issue of the Placing Shares at the Placing Price of 40p. The Placing Price represents a premium of approximately 3.2 per cent. to the closing middle market price of 38.75p on 17 May, 2010, being the last practicable dealing day prior to the date of this announcement. The Placing Shares will represent approximately 47.9 per cent. of the Enlarged Issued Share Capital.

The Placing Agreement

Pursuant to the terms of the Placing Agreement, Arbuthnot has agreed to use its reasonable endeavours, as agent for the Company, to conditionally place the Placing Shares at the Placing Price with certain institutional and other investors. The Placing Agreement is conditional upon, inter alia, certain Resolutions being duly passed at the General Meeting and Admission becoming effective at 8.00 a.m. on 7 June, 2010 (or such later time and/or date as Arbuthnot may decide, but in any event by no later than 8.00 a.m. on 21 June 2010).  The Placing is not underwritten.

The Placing Agreement contains warranties which expire after three years from the Company in favour of Arbuthnot in relation to, inter alia, the accuracy of the information contained in this Circular and certain other matters relating to the Company. In addition, the Company has agreed to indemnify Arbuthnot in relation to liabilities that it might incur in respect of the Placing. Arbuthnot has the right to terminate the Placing Agreement in certain circumstances prior to Admission, including, inter alia, for force majeure or in the event of a material breach of the Placing Agreement.

Related party transactions

As stated above, Martyn Ratcliffe has conditionally subscribed for 2,000,826 Placing Shares at the Placing Price. In addition, David Courtley, a non-executive director, has also conditionally subscribed for 375,000 Placing Shares at the Placing Price. Both Martyn Ratcliffe and David Courtley's subscriptions constitute related party transactions under Rule 13 of the AIM Rules. The Directors, excluding Martyn Ratcliffe and David Courtley, having consulted with Arbuthnot as nominated adviser to the Company, consider the terms of the Placing to be fair and reasonable so far as Shareholders are concerned.

Employees of Arbuthnot who have been advising Sagentia hold, in aggregate, an interest in 55,000 Existing Ordinary Shares.

Admission and dealings

Application will be made to the London Stock Exchange plc for the Placing Shares to be admitted to trading on AIM. The Placing Shares will, when issued, rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive dividends and other distributions declared following Admission. It is expected that such Admission will become effective and that dealings will commence at 8.00 a.m. on 7 June 2010.

Irrevocable Undertakings

The Company has received irrevocable undertakings to vote in favour of the Resolutions from the Directors and certain other Shareholders representing approximately 60.5 per cent. of the Company's current issued share capital.

Incentive Share Options

The Company proposes to award options over up to 4.17 million Ordinary Shares, being approximately 10 per cent. of the Enlarged Issued Share Capital under the rules of the Company's unapproved share option scheme. The grant of these options will be outside of the Scheme Limits and ABI guidelines. It is intended that these share options will be issued at the higher of the market price at the time of grant or 40 pence per Ordinary Share and be subject to a performance condition such that the vesting will be the later of three years from the date of grant and the share price reaching 80 pence per Ordinary Share for 20 consecutive trading days. The Directors intend that these share options will be allocated on the basis of 2.5 million to Martyn Ratcliffe, 1.0 million to Brent Hudson, and the remainder to other key managers.

This approach will provide the Company with the flexibility within the Scheme limits to attract and retain key management, both within the current operations and associated with any acquisition.

General Meeting

The Placing is subject, inter alia, to the approval of Shareholders of the Resolutions at the General Meeting.  The General Meeting will be held at the offices of Arbuthnot Securities Limited, Arbuthnot House, 20 Ropemaker Street, London, EC2Y 9AR at 9.30 a.m. on 4 June, 2010 at which the Resolutions will be put to the Shareholders.

Act	the Companies Act 2006 (as amended);
Admission	the admission of the Placing Shares to trading on AIM becoming effective pursuant to rule 6 of the AIM Rules;
AIM	a market operated by  the London Stock Exchange plc;
AIM Rules	the AIM Rules for Companies with a class of securities admitted to AIM, as in force at the date of the Circular;
Arbuthnot	Arbuthnot Securities Limited which is authorised and regulated in the UK by the FSA and is broker to the Placing;
Board or Directors	the board of directors of the Company;
City Code	The City Code on Takeovers and Mergers;
Company or Sagentia	Sagentia Group plc;
Circular	the circular to be sent to Shareholders to convene the General Meeting, in connection with the Placing;
Enlarged Issued Share Capital	41,723,595 Ordinary Shares, being the issued ordinary share capital of the Company as enlarged by and following completion of the Placing (assuming no exercise of any of the existing options over Ordinary Shares);
Existing Ordinary Shares	the 21,723,595 Ordinary Shares in issue at the date of this announcement;
FSA	the UK Financial Services Authority;
General Meeting	the general meeting of the Company convened for 9.30 a.m. on 4 June 2010 (or any adjournment thereof), notice of which will be set out in the Circular;
Group	the Company and its subsidiaries and/or any of them;
Ordinary Shares	ordinary shares of one penny each in the capital of the Company;
Placing	the placing of the Placing Shares pursuant to the Placing Agreement;
Placing Agreement	the conditional placing agreement dated the date of this announcement and made between the Company and Arbuthnot;
Placing Price	40p per Placing Share;
Placing Shares	the 20,000,000 new Ordinary Shares which have been conditionally placed with institutional and other investors pursuant to the Placing;
Resolutions	the resolutions set out in the notice of the General Meeting to be included in the Circular;
Scheme Rules	the rules of the Company's Unapproved Share Option Scheme and the rules of the Company's Approved Share Option Plan;
Shareholders	holders of Existing Ordinary Shares; and
UK or United Kingdom	the United Kingdom of Great Britain and Northern Ireland.

END

Arbuthnot Securities Limited is nominated adviser and broker to the Company for the purpose of the AIM Rules. Arbuthnot, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for the Company in relation to the Placing. Arbuthnot is not acting for any other person in connection with the matters referred to in this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Arbuthnot or for giving advice in relation to the matters referred to in this announcement.

This announcement has been issued by the Company and is the sole responsibility of the Company.  This announcement has not been approved by Arbuthnot for the purposes of section 21 of the Financial Services and Markets Act 2000 (as amended).

This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities or any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, such securities by any person in any circumstances, and in any jurisdiction, in which such offer or solicitation is unlawful.  Accordingly, copies of this announcement are not being and must not be mailed or otherwise distributed or sent in or into or from the United States, Canada, Australia or Japan or any other jurisdiction if to do so would constitute a violation of the relevant laws of, or require registration thereof in, such jurisdiction or to, or for the account or benefit of, any United States, Canadian, Australian or Japanese person and any person receiving this announcement (including, without limitation, custodians, nominees and trustees) must not distribute or send it in or into or from the United States, Canada, Australia or Japan or any other jurisdiction if to do so would constitute a violation of the relevant laws of, or require registration thereof in, such jurisdiction.

This announcement includes statements that are, or may be deemed to be, "forward-looking statements".  These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will", or "should" or, in each case, their negative or other variations or comparable terminology.  These forward-looking statements include matters that are not historical facts.  They appear in a number of places throughout this announcement and include statements regarding the Directors' current intentions, beliefs or expectations concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies and the Company's markets.  By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances.  Actual results and developments could differ materially from those expressed or implied by the forward-looking statements.  Forward-looking statements may and often do differ materially from actual results.  Any forward-looking statements in this announcement are based on certain factors and assumptions, including the Directors' current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's operations, results of operations, growth strategy and liquidity.  Whilst the Directors consider these assumptions to be reasonable based upon information currently available, they may prove to be incorrect.  Save as required by law or by the AIM Rules, the Company undertakes no obligation to publicly release the results of any revisions to any forward-looking statements in this announcement that may occur due to any change in the Directors' expectations or to reflect events or circumstances after the date of this announcement.

 

END

 

 

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