Presentation re. Recommended Cash Offer

Instem plc

05 October 2023

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION

FOR IMMEDIATE RELEASE

Instem plc

("Instem" or "the Company")

Publication of Presentation re. Recommended Cash Offer

On 30 August 2023, the board of directors of Ichor Management Limited ("Bidco") and the board of directors of Instem plc announced that they had reached agreement on the terms of a recommended cash offer by Bidco for the entire issued and to be issued share capital of Instem (the "Offer").

In order to help shareholders further understand the background to and reasons for the Board's unanimous recommendation of the Offer, the Board has published a short presentation which has been made available on the Company's website https://investors.instem.com/.

The presentation provides additional commentary to explain why, as stated in the announcement of the Offer on 30 August 2023 (the "Offer Announcement"), the Board is of the view that the Offer represents an attractive valuation for the Company. The Board notes in particular:

·      FY23 Adjusted EBITDA is expected to be no greater than £11.1m¹, as highlighted in the Company's interim results for the six months ended 30 June 2023 ("H1 FY23") published on 15 September 2023.

·      The equity research analysts covering the Company withdrew their forecasts and target prices following publication of the Offer Announcement. Consensus market expectations have not been updated for the Company's H1 FY23 interim results. Market consensus FY23 Adjusted EBITDA immediately prior to the Offer Announcement was £12.0m².

·      The Board expects that the softer market conditions referred to in the Company's H1 FY23 interim results will continue at least into FY24. This includes slower transition of Instem's larger and more material on-premise customers to SaaS delivery. As disclosed in the Company's H1 FY23 interim results, there were no transitions of material on-premise customers to SaaS delivery during H1 FY23.

·      The analysis in the presentation of (i) peer group valuation metrics showing that the Offer ascribes a significantly higher Adjusted EV/EBITDA multiple to the Company than the average FY23 trading multiples for other UK-listed Pharmaceutical Services and Software/IT Services businesses in its peer group; and (ii) precedent transactions showing that the FY22 EV/EBITDA multiple ascribed to the Company by the Offer compares favourably with other multiples paid for UK-listed Pharmaceutical Services businesses. 

·      The all-time high share price of 910p was first reached on 17 September 2021² before the widely publicised deterioration in macro-economic conditions which has adversely affected investor sentiment, particularly towards UK-listed companies in the small-cap arena.

·      There are delivery risks associated with Toxhub, which is in the early stages of generating revenue and has a meaningful start-up investment requirement. Given its current stage of development, Toxhub's valuation was assessed on a discounted cash flow basis and the result of this analysis was not considered material to the Board's overall assessment of the Company's valuation.

·      The 41% premium to the undisturbed share price of 590p³ implied by the 833p Offer is based on an undisturbed share price prior to Instem's update to the market which indicated a deteriorating financial outlook for FY23.

Having regard to the above factors and the commentary regarding the background to and reasons for the Board's recommendation of the Offer as set out in the Offer Announcement, the Board continues to be of the view that, in the absence of the Offer, the Company's share price would be unlikely to reach 833p in the foreseeable future.

As such, the Board continues to believe that the Offer represents an attractive valuation and provides Shareholders with the certainty of realising their investments in full for cash and accordingly, unanimously recommends that Shareholders vote in favour of (or procure votes in favour of) the Scheme at the Court Meeting and the Resolution to be proposed at the General Meeting.

The Board will be seeking to continue its programme of proactive engagement with Shareholders ahead of the Court Meeting and General Meeting on 19 October 2023.

1  This statement constitutes a profit forecast for the purposes of Rule 28 of the Takeover Code. Please see related disclosures in the Scheme Document published on 25 September 2023

² Source: FactSet

3 Source: FactSet - Closing mid-price as at 29 August 2023

Capitalised terms used in this announcement shall, unless otherwise defined, have the meanings set out in Part 8 of the Scheme Document published 25 September 2023.

This announcement contains material new information and significant new opinions and is being published pursuant to Rule 20.1(b)(i) of the Takeover Code. The presentation referred to in this announcement is being made available on the Company's website pursuant to Rule 20.1(c)(i) of the Takeover Code.

This announcement contains inside information for the purposes of the retained UK version of the EU Market Abuse Regulation (EU) 596/2014 ("UK MAR").

Instem

Phil Reason                                                                                                                                                   Via Walbrook

Nigel Goldsmith

Rothschild & Co (Financial Adviser to Instem)

Alistair Allen                                                                                                                             Tel: [phone]

Julian Hudson

Tom Palmer

Singer Capital Markets Advisory LLP (Nominated Adviser, Joint Financial Adviser and Joint Broker to Instem)

Peter Steel                                                                                                                               Tel: [phone]

Alex Bond

Oliver Platts

Stifel Nicolaus Europe Limited (Joint Broker to Instem)

Ben Maddison                                                                                                                        Tel: [phone]

Richard Short

Walbrook Financial PR (Public Relations Adviser to Instem)

Tom Cooper                                                                                                                             Tel: [phone]

Nick Rome

Joe Walker

Disclaimers

Rothschild & Co, which is authorised and regulated by the FCA in the United Kingdom, is acting exclusively as joint financial adviser to Instem and for no one else in connection with the matters referred to in this Announcement and will not be responsible to anyone other than Instem for providing the protections afforded to clients of Rothschild & Co, nor for providing advice in relation to the acquisition of Instem or any other matters referred to in this Announcement. Neither Rothschild & Co nor any of its subsidiaries, branches or affiliates (nor their respective directors, officers, employees or agents) owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Rothschild & Co in connection with this Announcement, any statement contained in this Announcement, the acquisition of Instem or otherwise. No representation or warranty, express or implied, is made by Rothschild & Co as to the contents of this Announcement.

Singer Capital Markets, which is authorised and regulated by the FCA in the United Kingdom, is acting exclusively as joint financial adviser and nominated adviser to Instem and no one else in connection with the matters referred to in this Announcement and will not be responsible to anyone other than Instem for providing the protections afforded to clients of Singer Capital Markets, nor for providing advice in relation to the acquisition of Instem or any other matters referred to in this Announcement. Neither Singer Capital Markets nor any of its affiliates (nor their respective directors, partners, officers, employees or agents) owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Singer Capital Markets in connection with this Announcement, any statement contained in this Announcement, the acquisition of Instem or otherwise. No representation or warranty, express or implied, is made by Singer Capital Markets as to the contents of this Announcement.

Moelis, which is authorised and regulated by the FCA in the United Kingdom, is acting exclusively for ARCHIMED and Bidco and no one else in connection with the matters referred to in this Announcement and will not be responsible to anyone other than ARCHIMED and Bidco for providing the protections afforded to clients of Moelis, nor for providing advice in relation to the acquisition of Instem or any other matters referred to in this Announcement. Neither Moelis nor any of its affiliates (nor their respective directors, officers, employees or agents) owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Moelis in connection with this Announcement, any statement contained in this Announcement, the acquisition of Instem or otherwise.

Further information

This Announcement is for information purposes only and is not intended to and does not constitute, or form any part of, an offer to sell or subscribe for or any invitation to purchase or subscribe for any securities or the solicitation of any vote or approval in any jurisdiction pursuant to the Acquisition or otherwise. The Acquisition will be made solely through and on the terms set out in the Scheme Document (or, in the event that the Acquisition is to be implemented by means of a Takeover Offer, the Offer Document) and the accompanying Forms of Proxy, which contain the full terms and conditions of the Acquisition, including details of how to vote in respect of the Acquisition. Any vote, approval, decision or other response to the Acquisition should be made only on the basis of the information in the Scheme Document (or, if the Acquisition is implemented by way of a Takeover Offer, the Offer Document). Scheme Shareholders are strongly advised to read the formal documentation in relation to the Acquisition once it has been despatched.

This Announcement does not constitute a prospectus or prospectus exempted document.

The statements contained in this Announcement are made as at the date of this Announcement, unless some other time is specified in relation to them, and service of this Announcement shall not give rise to any implication that there has been no change in the facts set forth in this Announcement since such date.

Overseas shareholders

This Announcement has been prepared for the purpose of complying with English law, the AIM Rules and the Code and the information disclosed may not be the same as that which would have been disclosed if this Announcement had been prepared in accordance with the laws of jurisdictions outside the United Kingdom.

The laws of the relevant jurisdictions may affect the availability of the Acquisition to persons who are not resident in the United Kingdom. Persons who are not resident in the United Kingdom, or who are subject to laws of any jurisdiction other than the United Kingdom, should inform themselves about, and observe any applicable requirements. Any person (including, without limitation, nominees, trustees and custodians) who would, or otherwise intends to, forward this Announcement, the Scheme Document or any accompanying document to any jurisdiction outside the United Kingdom should refrain from doing so and seek appropriate professional advice before taking any action. In particular, the ability of persons who are not resident in the United Kingdom to vote their Instem Shares at the Court Meeting or the General Meeting, or to execute and deliver Forms of Proxy appointing another to vote their Instem Shares in respect of the Court Meeting or the General Meeting on their behalf, may be affected by the laws of the relevant jurisdiction in which they are located.

Any failure to comply with the applicable legal or regulatory requirements may constitute a violation of the laws and/or regulations of any such jurisdiction. To the fullest extent permitted by applicable law, the companies and persons involved in the Acquisition disclaim any responsibility and liability for the violation of such restrictions by any person.

Unless  otherwise  determined  by  Bidco  or  required  by  the  Code  and  permitted  by  applicable  law  and  regulation, the Acquisition will not be made, directly or indirectly, in or into or by use of the mails or any other means or instrumentality (including, without limitation, telephonic or electronic) of interstate or foreign commerce of, or any facility of a national, state or other securities exchange of, a Restricted Jurisdiction, and the Acquisition will not be capable of acceptance by any such use, means, instrumentality or facility or from within a Restricted Jurisdiction. Accordingly, copies of this Announcement and formal documentation relating to the Acquisition are not being, and must not be, directly or indirectly, mailed or otherwise forwarded or distributed in, into or from a Restricted Jurisdiction and persons receiving this Announcement (including custodians, nominees and trustees) must not distribute or send it into or from a Restricted Jurisdiction. In the event that the Acquisition is implemented by way of a Takeover Offer and extended into the US, Bidco will do so in satisfaction of the procedural and filing requirements of US securities laws at that time, to the extent applicable thereto. The Acquisition relates to the shares of a company incorporated in England and it is proposed to be made by means of a scheme of arrangement provided for under English law. The Scheme will relate to the shares of a UK company that is a "foreign private issuer" as defined under Rule 3b-4 under the US Exchange Act. A transaction effected by means of a scheme of arrangement is not subject to any shareholder vote, proxy solicitation and tender offer rules under the US Exchange Act. Accordingly, the Scheme is subject to the disclosure requirements and practices applicable in the UK to schemes of arrangement, which differ from the disclosure requirements and practices of US shareholder vote, proxy solicitation or tender offer rules. Financial information included in the relevant documentation will have been prepared in accordance with accounting standards applicable in the UK and may not be comparable to the financial information of, or the accounting standards applicable to, US companies. However, if Bidco were to elect to implement the Acquisition by means of a Takeover Offer, such Takeover Offer shall be made in compliance with all applicable laws and regulations, including section 14(e) of the US Exchange Act and Regulation 14E thereunder, if applicable. Such Takeover Offer would be made in the US by Bidco and no one else. In addition to any such Takeover Offer, Bidco, certain affiliated companies and the nominees or brokers (acting as agents) may make certain purchases of, or arrangements to purchase, shares in Instem outside such Takeover Offer during the period in which such Takeover Offer would remain open for acceptance. If such purchases or arrangements to purchase are made they would be made outside the United States in compliance with applicable law, including the US Exchange Act. It may be difficult for a US-based investor to enforce his or her rights and any claim he or she may have arising under US securities laws, since the Scheme relates to the shares of a company located in the UK, and some or all of its officers and directors may be residents of non-US jurisdictions. A US-based investor may not be able to sue a company located in the UK, or its officers or directors, in a foreign court for alleged violations of US securities laws, and it may be difficult to compel a foreign company and its affiliates to subject themselves to a US court's judgment.

Forward-looking statements

This Announcement, oral statements made regarding the Acquisition, and other information published by Instem, Bidco and ARCHIMED may contain certain "forward-looking statements" with respect to Instem, Bidco and ARCHIMED. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "will", "may", "should", "would", "could" or other words or terms of similar meaning or the negative thereof. Forward-looking statements include, for example, statements relating to the following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; (ii) business and management strategies of ARCHIMED and/or Bidco and the expansion and growth of Instem and potential synergies resulting from the Acquisition; and (iii) the effects of government regulation on the business of Instem.

These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or developments to differ materially from those expressed in or implied by such forward-looking statements. These forward-looking statements are based on numerous assumptions regarding present and future strategies and environments. None of ARCHIMED, Bidco or Instem, nor any of their respective associates, directors, officers, employees or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this Announcement will actually occur. You are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. All subsequent oral or written forward-looking statements attributable to ARCHIMED, Bidco or Instem or any person acting on their behalf are expressly qualified in their entirety by the cautionary statement above. Should one or more of these risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this Announcement. None of ARCHIMED, Bidco or Instem assume any obligation to update publicly or revise forward-looking or other statements contained in this Announcement, whether as a result of new information, future events or otherwise, except to the extent legally required.

No profit forecasts, estimates or quantified financial benefits statements

With the exception of the statement "FY23 Adjusted EBITDA is expected to be no greater than £11.1m", no other statement in this Announcement is intended as a profit forecast or estimate for ARCHIMED, Bidco or Instem in respect of any period and no statement in this Announcement should be interpreted to mean that earnings or earnings per Instem Share for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per Instem Share.

Right to switch to a Takeover Offer

Subject to the terms of the Co-operation Agreement, Bidco reserves the right to elect, with the consent of the Takeover Panel, to implement the Acquisition by way of a Takeover Offer for the entire issued and to be issued ordinary share capital of Instem as an alternative to the Scheme. In such an event, the Takeover Offer will be made in accordance with the terms and conditions set out in this Announcement which would apply to the Scheme (with any modifications or amendments to such terms and conditions as may be required by the Takeover Panel or which are necessary as a result of Bidco's election to implement the Acquisition by way of a Takeover Offer), in accordance with the Co-operation Agreement and subject to the amendment referred to in Appendix I to this Announcement.

Publication on website

In accordance with Rule 26.1 of the Code, a copy of this Announcement will be made available (subject to certain restrictions relating to persons resident in Restricted Jurisdictions), free of charge, on Instem's website at https://investors.instem.com and on Bidco's website at www.Ichor-offer.com by no later than 12:00 noon on the Business Day following the date of this Announcement. Neither the contents of this website nor the content of any other website accessible from hyperlinks on such websites is incorporated into, or forms part of, this Announcement.

Requesting hard copies

In accordance with Rule 30.3 of the Code, a person so entitled may request a hard copy of this Announcement, free of charge, by contacting Instem's registrar, Computershare Investor Services PLC during business hours (8.30 a.m. to 5.30 p.m.) on [phone] or by submitting a request in writing to Computershare Investor Services PLC at The Pavilions, Bridgwater Road, Bristol, BS13 8AE. For persons who receive a copy of this Announcement in electronic form or via a website notification, a hard copy of this Announcement will not be sent unless so requested. In accordance with Rule 30.3 of the Code, a person so entitled may also request that all future documents, announcements and information to be sent to them in relation to the Acquisition should be in hard copy form.

Electronic communications - information for Instem Shareholders

Please be aware that addresses, electronic addresses and certain information provided by Instem Shareholders, persons with information rights and other relevant persons for the receipt of communications from Instem may be provided to Bidco during the Offer Period as required under section 4 of Appendix 4 of the Code to comply with Rule 2.11(c) of the Code.

Rounding

Certain figures included in this Announcement have been subjected to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

Disclosure requirements of the Code

Under Rule 8.3(a) of the Code, any person who is interested in 1 per cent. or more of any class of relevant securities of Instem or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the Offer Period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of: (i) Instem and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 p.m. (London time) on the 10th Business Day following the commencement of the Offer Period and, if appropriate, by no later than 3.30 p.m. (London time) on the 10th Business Day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of Instem or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1 per cent. or more of any class of relevant securities of Instem or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of Instem or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) Instem and (ii) any securities exchange offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 p.m. (London time) on the Business Day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of Instem or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by Instem and by any offeror, and Dealing Disclosures must also be made by Instem, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the Offer Period commenced and when any offeror was first identified. You should contact the Takeover Panel's Market Surveillance Unit on [phone] if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

General

If you are in any doubt about the contents of this Announcement or the action you should take, you are recommended to seek your own independent financial advice immediately from your stockbroker, bank manager, solicitor or independent financial adviser duly authorised under FSMA if you are resident in the United Kingdom or, if not, from another appropriate authorised independent financial adviser.

 

END