Acquisition of Liquidlogic Li

RNS Number : 7551V

System C Healthcare plc

16 July 2009

 



Acquisition of Liquidlogic Limited

Institutional Placing of 25,000,000 Ordinary Shares at 48 pence per share

System C, the provider of specialist IT products and services to the healthcare sector, is pleased to announce that it has acquired Liquidlogic Limited, a provider of software and related services to the social care sector, for a total consideration of up to £14.2 million including up to £4.0 million in deferred consideration. In conjunction, the Company has raised approximately £12.0 million through a placing of Ordinary Shares in the Company with new and existing institutional shareholders by Charles Stanley Securities, subject to shareholder approval.

The Enlarged Group is the first major company to specialise in both health and social services solutions for the UK market.  

Liquidlogic has over 43,000 users working across 29 children's and 11 adult social care services and a range of NHS organisations.  System C has provided consultancy services at over 200 healthcare trusts and installed products from its Medway Sigma range of patient management and clinical software applications in over 30.  

Liquidlogic is highly regarded for its innovative range of systems for the social care sector. Its approach is based on providing multi-agency solutions, allowing health, social care, education, police and voluntary sectors to work collaboratively. Its software has been developed specifically to support the secure sharing of information and facilitate the move towards collaborative working which is a major part of the government's vision for delivering improved public services for all.  

For System C, the Acquisition represents a significant strategic advance in terms of expanding its customer base and enhancing its portfolio of products and services.

Liquidlogic is System C's largest acquisition to date with an initial consideration of £10.2 million in cash, and deferred consideration of up to £4.0 million, contingent on performance following completion.

In conjunction with the acquisition, System C has raised £12.0 million to maintain the Company's balance sheet strength and provide funding for future growth opportunities. 

Commenting, Ian Denley, Chief Executive of System C said:

"I believe the Acquisition has created an exciting group. Not only does the Enlarged Group have excellent prospects in the health market and the social care sector, but it is well positioned to support the government's drive to provide integrated care."

For further information, please contact: 

System C Healthcare plc	01622 691 616
Dr. Ian Denley, Chief Executive
Andrew Coll, Finance Director
Close Brothers	020 7655 3100
Financial Adviser
Paul Lewington / David Sanders
Charles Stanley Securities	020 7149 6000
Nominated Adviser
Mark Taylor / Russell Cook / Jen Boorer
Maitland	020 7379 5151
Emma Burdett / Richard Farnsworth

System C Healthcare plc

Acquisition of Liquidlogic Limited

Institutional Placing of 25,000,000 Ordinary Shares at 48 pence per share

Introduction

System C has today announced the acquisition of Liquidlogic for a total consideration of up to £14.2 million.  Liquidlogic is an established provider of IT solutions to the social care market in the UK. The Acquisition creates the first health and social care IT company of significant scale in the UK.  Consideration for the Acquisition comprises an initial cash payment of £10.2 million, based upon Lima's net assets at completion being £2.4 million, and a deferred consideration of up to £4.0 million, payable 50 per cent. in cash and loan notes to be issued by the Company and 50 per cent. in Ordinary Shares.

The Company has also announced that it has raised £12.0 million through the Placing of 25,000,000 Placing Shares at 48 pence per Ordinary Share with new and existing institutional shareholders by Charles Stanley Securities. The Placing is subject to, inter alia, approval by Shareholders at the General Meeting to be held on 3 August 2009.

The initial consideration payable under the Acquisition has been financed from the Company's existing cash resources and the Acquisition is not conditional on completion of the Placing.

If the Resolutions are approved, it is expected that the Placing Shares will be admitted to trading on AIM on 5 August 2009.

Information on Liquidlogic

Liquidlogic is a provider of software and related services to the public sector, based in Leeds. Liquidlogic was founded in 2000 by Ted Brierley and Denise Harrison to address the need for products capable of helping Government agencies, particularly those concerned with the health and social care of citizens, to improve service delivery and communications. 

Liquidlogic offers a range of software solutions, designed principally for use by the departments of local authorities responsible for delivering social care services.  Liquidlogic's products allow customers to track and manage individual cases, store and retrieve the information necessary for providing appropriate care and co-ordinate the delivery of services to the relevant individual.  The products offered by Liquidlogic have been designed to promote collaborative working between the various bodies that may be involved in providing care to a vulnerable adult or child: these may include police services, case workers, youth offending teams and healthcare providers.  The Directors believe that this multi-agency capability confers upon Liquidlogic a significant competitive advantage.

The Liquidlogic product range is based upon the PROTOCOL system, which is available in separately developed versions aimed at providers of adults' services and children's services.  PROTOCOL 360 is Liquidlogic's latest generation of product and is a software platform designed to detect and process events from multiple systems and combine these inputs to create a single view for the user.  Liquidlogic currently has 29 childrens' services systems and 11 adults' services systems deployed across a range of English local authorities.

Liquidlogic also generates revenues from providing services to its customers, including data matching and cleansing, system integration and maintenance.

In the year ended 31 March 2009, Liquidlogic reported revenues of £6.5 million and normalised operating profit of £0.9 million (excluding one off non-recurring costs of £0.7m).  Liquidlogic had net assets of £2.2 million at 31 March 2009.  Approximately 80 per cent. of Liquidlogic's revenues are derived from product sales, with the remaining 20 per cent. derived from maintenance and other services.  Liquidlogic has a strong pipeline of potential additional orders.

The Acquisition furthers the Company's strategy of broadening its portfolio of products and services, and will allow System C to apply its accumulated skills and expertise to a new, but adjacent market and position itself to meet the national drive for high quality integrated care.  The Directors believe that the social care sector represents an attractive niche market, which is likely to create opportunities for System C as the need for improved co-ordination encourages collaboration between the providers of social care and healthcare services.

The Enlarged Group has a substantial presence in the health and social care markets.  Liquidlogic has over 43,000 users working across 40 service departments.  System C has provided consultancy services at over 200 healthcare trusts and installed products from its Medway Sigma range of patient management and clinical software applications in over 30.

Terms of the Acquisition

System C has acquired the entire issued share capital of Liquidlogic from its shareholders, comprising Ted Brierley, Denise Harrison, Northern Investors Company plc (and certain of its affiliates) and other Liquidlogic employees.

The initial cash consideration for the Acquisition was £10.2 million based upon Liquidlogic's net assets at completion being £2.4 million. The initial cash consideration is subject to adjustment if the net assets are greater than or less than £2.4 million. In addition, deferred consideration of up to £4.0 million may be payable if Liquidlogic achieves certain EBIT targets during the financial year ending 30 June 2010. 50 per cent. of the deferred consideration will be paid in cash or loan notes and 50 per cent. in Ordinary Shares, such shares to be valued at the closing mid-market price of an Ordinary Share on 30 June 2010. The number of Ordinary Shares to be issued is capped at 29.9 per cent of the then issued share capital of the Company.  However, the maximum number of Ordinary Shares to be issued as deferred consideration at the Placing Price would be 4,166,667 which would represent approximately 3.6 per cent. of the issued share capital of the Company following completion of the Placing.

Background to and reasons for the Placing

The total consideration for the Acquisition is up to £14.2 million, of which the initial consideration of £10.2 million has been financed from the Company's existing cash resources.  The purpose of the Placing is to maintain the strength of System C's balance sheet following the Acquisition, and to provide funding to allow the Company to pursue opportunities for organic growth and, where appropriate, further acquisitions.  The Board considers that its strategy of maintaining significant cash reserves is important to the Company's ability to compete for larger contracts whilst preserving financial flexibility.

Details of the Placing

The Company is proposing to raise £12.0 million, by way of a Placing of 25,000,000 Placing Shares at the Placing Price with institutional and other investors. The Placing will raise approximately £11.0 million net of expenses. The Placing is conditional on the passing of the Resolutions and on Admission.

The Placing Shares will represent approximately 21.8 per cent. of the fully diluted share capital of the Company as enlarged by the Placing. The Placing Price of 48 pence per Ordinary Share represents a 3.8 per cent. premium to the closing mid-market price of 46.25 pence per Ordinary Share on 15 July 2009, being the latest practicable date prior to this announcement. 

The Placing is not a rights issue or open offer and the Placing Shares will not be offered generally to Shareholders on a pre-emptive basis.  The Directors believe that the considerable extra cost and delay involved in a rights issue or open offer would not be in the best interests of the Company in the circumstances, particularly given that the Placing Shares are being issued at a premium to the prevailing mid-market price. Accordingly, the Board considers that it is in the best interests of the Company and Shareholders as a whole for the funds to be raised through the Placing.

The Directors are not participating in the Placing. The Board's Remuneration Committee has recommended that the EBT should be provided a loan of £1.5 million by the Company to acquire Ordinary Shares, of which £1.0 million will be used by the EBT to subscribe for 2,083,333 Placing Shares. The increased shareholding of the EBT in the Company will allow the Remuneration Committee to award additional share-based incentives to the senior management team in conjunction with the EBT trustees.  The £12.0 million to be raised pursuant to the Placing therefore includes £1.0 million to be subscribed for Placing Shares by the EBT.

Conditional on the passing of the Resolutions, 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 that trading in the Placing Shares will commence on AIM at 8.00 a.m. on 5 August 2009.

The Placing Shares will, when issued and fully paid, rank equally in all respects with the Existing Ordinary Shares, including the right to receive any dividend or other distribution declared, made or paid after the date of their unconditional allotment.

It is expected that share certificates for the Placing Shares which are to be held in certificated form will be despatched to placees by 30 August 2009.  The Placing Shares will be in registered form and no temporary documents of title will be issued.

Placing Agreement

The Company and Charles Stanley have entered into the Placing Agreement, pursuant to which Charles Stanley has conditionally agreed to use its reasonable endeavours to procure subscribers for the Placing Shares at the Placing Price. Charles Stanley may terminate the Placing Agreement in specified circumstances, including for material breach of warranty at any time prior to Admission, in the event of force majeure at any time prior to Admission or on the material breach of certain other obligations under the Placing Agreement.

The Placing Agreement, which contains certain customary warranties, undertakings and indemnities by the Company in favour of Charles Stanley, is conditional as regards Admission upon, inter alia, (i) Admission occurring not later than 5 August 2009 as regards Admission (or such later date as the Company and Charles Stanley may agree not being later than 31 August 2009) and (ii) none of the warranties given to Charles Stanley being untrue, inaccurate or misleading in any material respect prior to Admission.  

General Meeting

A notice convening a general meeting to consider and, if thought fit, to pass the Resolutions in relation to the Placing will be held at the offices of Travers Smith LLP, 10 Snow Hill, London EC1A 2AL at 10.00 a.m. on 3 August 2009.  Details of the General Meeting are set out in the Notice of General Meeting provided at the end of the Circular, posted today, and are available to view on the Company's website at www.systemc.com.

Irrevocable undertakings

The Company has received irrevocable undertakings to vote in favour of the Resolutions from each of the Directors holding 6,830,386 Existing Ordinary Shares in aggregate, representing approximately 7.6 per cent. of the Existing Ordinary Shares.

Recommendation

The Directors believe that the Placing is in the best interests of the Company and Shareholders as a whole. Accordingly, the Directors unanimously recommend that Shareholders vote in favour of the Resolutions as they have irrevocably undertaken to do in respect of their beneficial holdings of 6,830,286 Ordinary Shares in aggregate, representing approximately 7.6 per cent. of the existing ordinary share capital of the Company.

DEFINITIONS

The following definitions apply throughout this announcement unless the context requires otherwise:

"1985 Act"	the Companies Act 1985 (as amended)
"Acquisition"	the purchase of the entire issued share capital of Liquidlogic
"Admission"	the admission of the Placing Shares to trading on AIM and such admission becoming effective in accordance with the AIM Rules
"AIM"	AIM, a market operated by the London Stock Exchange
"AIM Rules"	the rules governing the admission to, and the operation of, AIM as published by the London Stock Exchange from time to time
"Charles Stanley"	Charles Stanley Securities, a trading division of Charles Stanley & Co. Limited, the Company's Nominated Adviser and Broker for the purposes of the AIM Rules
"Company" or "System C"	System C Healthcare PLC
"Directors" or the "Board"	the directors of the Company
"EBT"	the System C Healthcare PLC employee benefit trust
"Enlarged Group"	the company and its subsidiary undertakings following completion of the Acquisition
"Existing Ordinary Shares"	the 89,838,459 Ordinary Shares in issue at the date of this document
"General Meeting"	the general meeting of the Company convened for 10.00 a.m. on 3 August 2009 and any adjournment thereof
"Liquidlogic"	Liquidlogic Limited
"London Stock Exchange"	London Stock Exchange plc
"New Ordinary Shares"	the 25,000,000 new Ordinary Shares in the Company to be issued pursuant to the Placing
"Ordinary Shares"	the ordinary shares of 1p each in the capital of the Company
"Placing Agreement"	the agreement dated 16 July 2009 between the Company and Charles Stanley in connection with the Placing of the Placing Shares
"Placing"	the conditional placing of the Placing Shares with institutional and other investors, as described in this document
"Placing Price"	48 pence per New Ordinary Share
"Placing Shares"	25,000,000 Ordinary Shares which are proposed to be allotted and issued pursuant to the Placing Agreement
"Remuneration Committee"	the remuneration committee of the Board, comprising Dr Christopher McLaren, Thomas Chambers and Dr John Forrest
"Resolutions"	the resolutions to be approved at the General Meeting in relation to the Placing
"Shareholders"	holders of Ordinary Shares

 

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