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Freshwater UK PLC (FWUK)

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Wednesday 31 March, 2010

Freshwater UK PLC

Acquisition and Open Offer

RNS Number : 4757J
Freshwater UK PLC
31 March 2010
 



NOT FOR DISTRIBUTION IN OR INTO AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA, THE REPUBLIC OF IRELAND OR THE UNITED STATES OR ANY OTHER JURISDICTION IF TO DO SO WOULD CONSTITUTE A VIOLATION OF THE LAWS OF SUCH JURISDICTION

 

Freshwater UK plc

("Freshwater UK" or the "Company" or the "Group")

 

 

Proposed Open Offer of up to 3,088,492 Ordinary Shares at 20 pence per share on the basis of 1 Offer Share for every 5 Existing Ordinary Shares

 

Freshwater UK, the AIM listed PR, public affairs and marketing services group, announces an Open Offer to raise up to £617,698 (before expenses) to fund the acquisition of Profile Plus (UK) Ltd and augment the Group's working capital.

 

The Group has acquired the entire issued share capital of Profile Plus, a well established PR agency in Edinburgh. The Directors believe the Acquisition will complement the Group's existing Glasgow office and strengthen its presence in the Scottish market.

 

Founded in 1997, Profile Plus was set up by its managing director Robyn Glynne-Percy and specialises in the leisure and lifestyle sector. Its clients include: Turnberry, A Luxury Collection Resort, Scotland; Sheraton Grand Hotel & Spa; Drambuie Liqueur Company; Ian Macleod Distillers and Tourism Ireland.

 

The acquisition significantly enhances the Group's market position in these sectors both in Scotland and elsewhere in the UK as potential clients become aware of the Group's strengthened expertise in these areas.

 

Freshwater UK has acquired the entire issued share capital of Profile Plus, for a maximum consideration of £380,000 and a payment for the net tangible assets of up to £50,000 plus cash at the bank to the extent it exceeds that figure. The initial consideration of £160,000 was satisfied by a payment of £135,000 in cash and the issue of 126,390 Ordinary Shares at 19.78 pence per share, being the average middle market closing price of Freshwater UK over the preceding 30 trading days. Further deferred consideration of up to a maximum of £220,000, of which up to 50 per cent may be paid in Ordinary Shares, will be payable, subject to the profit performance of the Company in the two years following completion.

 

Freshwater UK is financing the acquisition by means of an Open Offer to raise up to approximately £617,000 (before expenses), thus allowing the Company's existing Shareholders the opportunity to participate in the fundraising. Of the 3,088,492 Offer Shares 2,000,000 have been subscribed for by Hillco Investments (UK) Limited ("Hillco") subject to claw back to satisfy valid applications from Qualifying Shareholders of their Open Offer Entitlements.

 

Hillco is a private company wholly owned by the family of David Howell, a former Chairman of Freshwater UK and the brother of Steve Howell, the Chief Executive of the Company. As at 31 December 2008, Hillco had total assets of £6.4 million and as at the date of this announcement is the holder of 600,000 Ordinary Shares, representing 3.89 per cent. of the existing issued share capital of the Company.

 

In addition, the Company has received irrevocable undertakings from Steve Howell, Edward Carter, Haydn Evans and John Underwood, Directors of the Company, to take up 121,600, 13,000, 868 and 68,480 Offer Shares, respectively.

 

The Company has also received irrevocable undertakings from Kim Howell, Isca Mercatura Limited and FWUK Pension Fund, all of which are connected with directors of the Company, to take up 84,400, 35,170 and 11,586 Offer Shares, respectively.

 

Steve Howell commented:

 

"The acquisition of Profile Plus is another positive step forward that strengthens our presence in the Scottish market, while also adding to our market share in the UK leisure and lifestyle sector.

 

"It would not have been possible without the support for the Open Offer from directors and Hillco, which reflect our confidence in the Company's distinctive strategy and its improved trading position

 

"In recent months, Freshwater has seen a return to double digit EBITDA as a result of a small increase in revenue and the impact of cost savings. We're also seeing an encouraging level of new business enquiries and conversions. 

 

"Overall, although EBITDA in the first half will be slightly below the same period last year, Freshwater is well placed to deliver a strong second half as the group benefits fully from cost savings already implemented, and revenue continues to improve. 

 

"The board is therefore confident of meeting full year expectations."

 

 

Enquiries to:

 

Freshwater UK


Steve Howell, Chief Executive

Haydn Evans, Finance Director

Alex Love, Corporate Affairs Director

 

02920 545 383

07791 200391

Charles Stanley Securities (Nominated Adviser)

Mark Taylor / Ben Johnston

 

Tel: 0207 149 6000

 

Notes to Editors:

 

·      Freshwater is a modern communications consultancy offering a wide range of services to clients across the UK, the Republic of Ireland and Brussels

 

·      With circa 90 professional staff working from offices throughout the UK as well as in Dublin and Brussels Freshwater offers specialist expertise in public relations, public affairs, stakeholder communications, social marketing, online media and creative services.

 

·      Freshwater has more than 300 clients in sectors as diverse as energy, transport, health, education, consumer, retail, local government, leisure, property, technology and professional services.

 

 

1.      Introduction

Freshwater UK is pleased to announce that it has acquired the entire issued share capital of Profile Plus, a well established PR agency in Edinburgh for a maximum consideration of £380,000 and a payment for the net tangible assets of up to £50,000 plus cash at the bank to the extent it exceeds that figure. The initial consideration of £160,000 was satisfied by a payment of £135,000 in cash and the issue of 126,390 Ordinary Shares at 19.78 pence per share, being the average middle market closing price of Freshwater UK over the preceding 30 trading days. Further deferred consideration of up to a maximum of £220,000, of which up to 50 per cent. may be paid in Ordinary Shares, will be payable, subject to the profit performance of the Company in the two years following completion. Application was made on 30 March 2010 to admit the 126,390 Ordinary Shares to trading on AIM. It is expected that the 126,390 Ordinary Shares will be admitted to trading on AIM and that dealings will commence on 7 April 2010.

Freshwater UK is also pleased to announce that the Company is to raise up to £617,698 (before expenses) by way of an Open Offer, thus allowing the Company's existing Shareholders the opportunity to participate in the fundraising. In addition, 2,000,000 Offer Shares have been subscribed for by Hillco subject to claw back to satisfy valid applications from Qualifying Shareholders of their Open Offer Entitlements.

 

Qualifying Shareholders are being offered the opportunity to participate in the fundraising through the Open Offer on the basis of:

 

1 Offer Shares for every 5 Existing Ordinary Shares

 

Details of the Open Offer are set out in paragraph 3 of this announcement.

 

The Company is able to undertake the Open Offer within the authorities that were approved by shareholders at the annual general meeting of the Company held on 24 February 2010.

 

The purpose of this document is to provide you, inter alia, with information about the background to and reasons for the Open Offer.

 

 

2.      Background to and Reasons for the Proposals

 

On 30 March 2010, Freshwater UK acquired the entire issued share capital of Profile Plus, a well established and profitable PR agency, based in Edinburgh, Scotland specialising in the leisure and lifestyle sector. The Directors believe that Profile Plus is an excellent strategic fit for the Group. It provides the entry point for Freshwater UK into the Edinburgh market and its operations can be integrated into the Group's existing Scottish operations located in Glasgow, Scotland. The Directors believe the Scottish market offers real growth potential for the Group.

 

The Directors believe that there were various compelling reasons for the Acquisition, including but not limited to:

 

Ÿ        the Acquisition fits within the Group's stated strategy to build a regional specialist public relations and media company;

 

Ÿ        it provides the Group with greater scale and presence in the Scottish market;

 

Ÿ        it diversifies the Group's existing Scottish operations by adding a leisure and lifestyle sector specialism and complementing the Group's activities elsewhere; and

 

Ÿ        it strengthens the Group's management team.

 

The net funds raised by the Open Offer of approximately £563,000 will be used to finance the initial payment to the vendor in relation to the Acquisition of the business of Profile Plus and to help finance organic growth and provide additional working capital for the Group.

 

 

3.      Details of the Open Offer

 

Qualifying Shareholders are invited to apply for Offer Shares under the Open Offer at a price of 20 pence per Offer Share, payable in full on application and free of all expenses, pro rata to their existing

shareholdings on the basis of:

 

1 Offer Share for every 5 Existing Ordinary Shares

 

held at the Open Offer Record Date. Entitlements of Qualifying Shareholders will be rounded down to the nearest whole number of Offer Shares. Fractional entitlements which would have otherwise arisen will not be issued.

 

The Open Offer is subject to Admission becoming effective by 8.00 a.m. on 26 April 2010 (or such later date being not later than 28 May 2010, as the Company may decide).

 

The Offer Shares will, when issued and fully paid, rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid after the date of Admission.

 

The Open Offer has been structured so as to allow Qualifying Shareholders to subscribe for Ordinary

Shares at the Offer Price pro rata to their existing holdings. To the extent that Offer Shares are not subscribed by Qualifying Shareholders, Open Offer Entitlements will lapse.

 

Hillco has subscribed for 2,000,000 Offer Shares subject to clawback to satisfy valid applications from Qualifying Shareholders of their Open Offer Entitlements.

 

Hillco is a private company wholly owned by the family of David Howell, a former Chairman of Freshwater UK and the brother of Steve Howell, the Chief Executive of the Company. As at 31 December 2008, Hillco had total assets of £6.4 million and as at the date of this announcement the holder of 600,000 Ordinary Shares, representing 3.89 per cent. of the existing issued share capital of the Company.

 

Settlement and dealings

 

Application will be made to the London Stock Exchange for the Offer Shares to be admitted to trading on AIM. It is expected that such Admission will become effective and that dealings will commence on 26 April 2010.

 

 

4.      Details on Profile Plus

 

Profile Plus is a well established and profitable PR agency, based in Edinburgh, Scotland specialising in the leisure and lifestyle sector. Its clients include:

 

Ÿ        Hotels - Turnberry, A Luxury Collection Resort, Scotland; Sheraton Grand Hotel & Spa, Carlton George Hotel Glasgow and Fitzwilliam Hotel Belfast;

 

Ÿ        Food and beverage - Drambuie Liqueur Company, Ian Macleod Distillers and Café Fish; and

 

Ÿ        Others - Tourism Ireland; Your Healthy Living Show and Rabbie's Trail Burners. 

 

It significantly enhances the Group's market position in the leisure and lifestyle sectors both in Scotland and elsewhere in the UK as potential clients become aware of the Group's strengthened expertise in these areas.

 

The managing director of Profile Plus, Robyn Glynne-Percy, founded Profile Plus in 1997 and leads a team of six based in Edinburgh, Scotland.

 

The trading record of Profile Plus for the three years ended 30 Novemberas extracted from the financial statements of Profile Plus is detailed below:

 


2007

2008

2009


£

£

£





Turnover

321,086

466,601

349,848

Gross profit

286,400

416,289

320,493

Operating profit

69,279

130,252

74,232

Profit before taxation

69,838

132,203

74,577





Net assets

51,954

65,202

85,741

 

 

5.      Details of the Acquisition Agreement

 

Under the terms of the Acquisition Agreement, Robyn Glynne-Percy agreed to sell and the Company agreed to purchase the entire issued share capital of Profile Plus. The purchase price paid for Profile Plus was £160,000 payable on completion which was satisfied by the payment of £135,000 in cash and the allotment of 126,390Ordinary Shares. An additional payment for the net tangible assets of up to £50,000 plus cash at bank to the extent that it exceeds this figure. Further consideration may be payable depending on the performance of the business of Profile Plus of up to £220,000 over two years. Up to 50 per cent. of this deferred consideration may, at the option of the Company, be satisfied by the issue of new Ordinary Shares. The share purchase agreement contained warranties and tax indemnities in a form consistent with market practice for the acquisition of a private company of the size and nature of Profile Plus. Application was made on 30 March 2010 to admit the 126,390 Ordinary Shares to trading on AIM. It is expected that the 126,390 Ordinary Shares will be admitted to trading on AIM and that dealings will commence on 7 April 2010.

 

 

6.       Directors' Interests

 

The interests of the Directors (and their immediate families and/or persons connected with them, as at the date of this announcement and on completion of the Proposals, in the issued share capital of the Company are as follows:

 


     As at the date of this
            document

         Immediately Following
                   Admission

Name

Number of Existing Ordinary Shares

Percentage of existing issued share capital

Number of Offer Shares

Percentage of enlarged issued share capital

Steve Howell*

 

1,263,780

8.18

1,516,535

8.18

Edward Carter

 

65,000

0.42

78,000

0.42

Haydn Evans*

 

62,270

0.40

74,723

0.40

Marie Louise Windeler

 

-

-

-

-

John Underwood

 

342,400

2.22

410,880

2.22

 

The above figures assume that (i) the maximum number of new Ordinary Shares to be issued pursuant to the Open Offer have been issued (ii) that the Open Offer shares that the Directors intend to take up under the Open Offer are so taken up (iii) that no Ordinary Shares are issued between 30 March 2010, being the last practicable date prior to the date of this announcement, and the completion of the Open Offer.

 

*  Includes 57,928 Ordinary Shares at the date of this announcement, held by FWUK Pension Fund, of which Steve Howell and Haydn Evans are joint beneficiaries

 

 

7.      Subscription Agreement

 

Under the terms of the Subscription Agreement, Hillco has agreed to subscribe (subject to claw back) for the Subscription Shares and the Company has agreed (subject to claw back) to allot the Subscription Shares to Hillco at a price of 20 pence per Ordinary Share. The claw back arrangement operates such that the number of Ordinary Shares subscribed for by Hillco will be reduced by a number equal to the number of Ordinary Shares accepted by Shareholders pursuant to the Open Offer in excess of 1,088,492. No fee is payable to Hillco pursuant to the Subscription Agreement.

 

 

8.      Current trading and prospects

 

Since the Company's last trading statement on 24 February 2010, trading has continued to be in line with the Board's expectations. The company saw a return to double digit EBITDA in its second quarter as a result of a small increase in revenue and the impact of cost savings. 

 

The Group continues to be encouraged by the level of new business enquiries and conversions. In the public sector, successes since the last update include selection for two additional supplier frameworks and a contract with Sport Wales to deliver its 'Behind Every Star' roadshow promoting sports coaching and volunteering. In transport, recent wins include new projects for P&O, Northern Rail and the Low Carbon Vehicle Partnership. Freshwater has also been appointed to handle the PR for the next John Lewis shop opening in Croydon and to co-ordinate media relations for RNLI's fund-raising activities and organise two events for Lindé Heavy Truck Division, including the launch of a new product..

 

Profile Plus has a high level of revenue visibility for the rest of the year as many of its larger clients are on annual contracts paying monthly retainers. It is also anticipated that there will be increased revenue opportunities as a result of Profile Plus and Freshwater UK working closely together.

 

Although EBITDA in the first half will be slightly below that for the same period last year, Freshwater UK is well placed to deliver a strong second half as the Group benefits fully from cost savings already implemented and revenue prospects improve. The Board is therefore confident of meeting full year expectations.

 

 

9.      Irrevocable undertakings

 

The Company has received irrevocable undertakings from Steve Howell, Edward Carter, Haydn Evans and John Underwood, Directors of the Company, to take up 121,600, 13,000, 868 and 68,480 Offer Shares, respectively.

 

The Company has also received irrevocable undertakings from Kim Howell, Isca Mercatura Limited and FWUK Pension Fund, all of which are connected with directors of the Company, to take up 84,400, 35,170 and 11,585 Offer Shares, respectively.

 

 

10.        Circular

 

A circular has today been posted to Shareholders providing details of all matters relating to the Proposals and is available on the Company's website www.freshwater-uk.com.

 

 

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

2010

 

Open Offer Record Date for entitlement                                     Close of business on Monday 29 March

 

Ex-entitlement date                                                                                           Wednesday 31 March

 

Dispatch of this document                                                                                 Wednesday 31 March

 

Open Offer Entitlements credited to CREST stock accounts

of Qualifying CREST Shareholders                                                                             Thursday 1 April 

 

Recommended latest time for requesting withdrawal of Open Offer

Entitlements                                                                                            4.30 p.m. on Friday 16 April

 

Latest time and date for depositing Open Offer entitlements 

into CREST                                                                                           3.00 p.m. on Monday 19 April

 

Latest time and date for splitting Application Forms (to satisfy bona fide

market claims only)                                                                               3.00 p.m. on Tuesday 20 April

 

Latest time and date for receipt of completed Application Forms

and payment in full under the Open Offer or settlement of

relevant CREST instruction (as appropriate)                                          11.00 a.m. on Thursday 22 April

 

Admission effective and dealings commence on AIM
in the Offer Shares                                                                                 8.00 a.m. on Monday 26 April

 

CREST accounts credited with Offer Shares                                                                Monday 26 April

 

Share certificates dispatched in respect of Offer Shares by                                            Tuesday 4 May

 

The dates set out in the timetable of principal events above and mentioned throughout this document and in the Application Form may be adjusted by the Company, in which event the details will be notified to the London Stock Exchange and, where appropriate, to Shareholders.

 

 

OPEN OFFER STATISTICS

Offer Price                                                                                                                                  20p

Number of Ordinary Shares in issue as at the Open Offer Record Date                                  15,442,458

Basis of the Open Offer                                                                                                            1 for 5

Number of New Ordinary Shares to be offered for subscription
by the Company pursuant to the Open Offer                                                                         3,088,492

Percentage of the Enlarged Issued Share capital represented
by the New Ordinary Shares
1                                                                                                   16.7%

Estimated gross proceeds of the Open Offer1                                                                                                £617,698

Estimated maximum net proceeds of the Open Offer 1                                                            £563,000

Estimated minimum net proceeds of the Open Offer 2                                                             £413,020

Number of Ordinary Shares in issue at Admission1                                                             18,530,950

 

1 assuming maximum take up under the Open Offer 
2 assuming take up under the Open Offer by those giving Irrevocable Undertakings and entering into subscription agreements only

 

 

DEFINITIONS

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

 

"Acquisition"

the acquisition of the entire issued share capital of ProfilePlus by the Company, which will complete on 30 March 2010

 

"Acquisition Agreement"

the sale and purchase agreement dated 30 March 2010 relating to the Acquisition

 

"Admission"

 

the admission to trading on AIM of the 3,088,492 Open Offer Shares to be issued pursuant to the Open Offer and which is expected to take place on 26 April 2010

 

"AIM"

the AIM market operated by the London Stock Exchange

 

"Application Form"    

the application form to be used by Qualifying non-CREST Shareholders in connection with the Open Offer

 

"certificated form" or "in certificated form"

an ordinary share recorded on a company's share register as being held in certificated form (namely, not in CREST)

 

"Charles Stanley"

 

Charles Stanley Securities, a trading division of Charles Stanley & Co. Limited

 

"Company" or "Freshwater UK"

Freshwater UK plc

 

"CREST"

the relevant system (as defined in the Uncertificated Securities Regulations 2001) in respect of which Euroclear UK & Ireland Limited is the operator (as defined in those regulations)

 

"Directors" or "Board"

the directors of the Company or any duly authorised committee thereof

 

"Enlarged Issued Share Capital"

the 18,530,950 Ordinary Shares in issue following Admission, assuming full subscription under the Open Offer

 

"Euroclear"

Euroclear UK & Ireland Limited

 

"Existing Ordinary Shares"

any or all of the 15,442,458 Ordinary Shares of 10 pence each in the capital of the Company in issue at the date of this announcement, all of which are admitted to trading on AIM

 

"Group"

the Company, its existing subsidiaries and subsidiary undertakings

 

"Hillco"

Hillco Investments (UK) Limited

 

"Irrevocable Undertakings"

the irrevocable  undertakings entered into by certain Directors to take up their entitlements under the Open Offer

 

"London Stock Exchange"

London Stock Exchange plc

 

"Offer Price"

20 pence per Offer Share

 

"Offer Shares"

the 3,088,492 New Ordinary Shares which are made available for subscription by Qualifying Shareholders under the Open Offer

 

"Open Offer"

the conditional offer to Qualifying Shareholders to subscribe for Offer Shares at the Offer Price, on the terms and conditions set out in this document and, in respect of non-CREST Qualifying Shareholders only, the Application Form

 

"Open Offer Entitlements"

entitlements to subscribe for Offer Shares, allocated to a Qualifying Shareholder pursuant to the Open Offer

 

"Open Offer Record Date"

the close of business on Monday 29 March 2010

 

"Ordinary Shares"

ordinary shares of 10 pence each in the capital of the Company

 

"Profile Plus"

Profile Plus UK Limited, a company registered in Scotland with a registered number SC30829

 

"Proposals"

the proposals set out in this document including the Acquisition and the Open Offer

 

"Qualifying non-CREST Shareholders"

Qualifying Shareholders whose Existing Ordinary Shares are on the register of members of the Company on the Open Offer Record Date and which are held in certificated form

 

"Qualifying CREST Shareholders"

Qualifying Shareholders whose Existing Ordinary Shares are on the register of members of the Company on the Open Offer Record Date and which are held in uncertificated form

 

"Qualifying Shareholders"

holders of Existing Ordinary Shares on the register of members of the Company at the Open Offer Record Date

 

"PR"

Public relations, public affairs and marketing

 

"Shareholders"

holders of Ordinary Shares

 

"Subscription Agreement"

 

the subscription agreement dated 30 March 2010 between the Company and Hillco relating to the Open Offer

 

"Subscription Shares"

 

the 2,000,000 new Ordinary Shares which have been subscribed for by Hillco subject to clawback by Qualifying Shareholders of their Open Offer Entitlements

 

"uncertificated" or "in uncertificated form"

an ordinary share recorded on a company's share register as being held in uncertificated form in CREST and title to which, by virtue of the Uncertificated Securities Regulations 2001, may be transferred by means of CREST

 

 

 

 


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The company news service from the London Stock Exchange
 
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