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Microcap Equities PLC (MEQ)

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Tuesday 08 December, 2009

Microcap Equities PLC

Issue of Equity


                                                                8 December 2009

                             Microcap Equities Plc                             

                         ("Microcap" or the "Company")                         

     Proposed Subscription, Capital Reorganisation and directorate change      

The Company announces that it intends to raise £200,000 before expenses by
means of a subscription for 307,693,000 New Ordinary Shares at 0.065p per New
Ordinary Share, following the implementation of the Capital Reorganisation, the
terms of which are set out below. Defined terms in this announcement are set
out below.

A Circular setting out full details of the Proposals will be posted to all
Shareholders today. The Proposals are conditional, inter alia, on the Rule 9
Waiver and the passing of certain resolutions to be proposed at a general
meeting to be held on 30 December 2009 and on Admission. It is expected that
Admission will become effective and dealings in the Enlarged Issued Share
Capital will commence on AIM on 31 December 2009.

Introduction

Kevin Burke and David Marshall, together the Investors, have conditionally
agreed to subscribe for the Subscription Shares. The Investors have significant
experience in the oil and gas sector and intend to use the Company to create an
investment vehicle to operate in that sector. More information on the Investors
is set out below

The Company has all but exhausted its cash resources and therefore failure to
pass the Resolutions will result in the Company needing to seek alternative
financing agreements, which the Directors believe would be difficult to find in
the current economic environment. Failure to secure alternative financing would
result in the Company being unable to meet its obligations as they fall due and
lead to inevitable liquidation. Therefore, the Directors believe that the
Proposals afford the Company its last realistic opportunity to survive and to
restart its investing business.

Background to the Proposals and intended investing policy

The Company was incorporated in November 1999 and its share capital was
admitted to trading on AIM in December of that year. The directors' original
strategy was to create a business that would assist early stage companies with
their capital requirements and, in particular, to support the development of
small and medium sized technology related businesses.

The level of failure in early stage technology companies caused the Company to
cease its investment strategy and the original board to resign or to retire in
2003. Rakesh Patel and Nicolas Greenstone joined the Board in October 2003.
Apart from six investments made since 2003, the Company has had no investment
activity and the Directors' attempts to identify and conclude terms for a
suitable investment opportunity have been thwarted by the Company's lack of
funds.

New investing policy

The core strategy of the New Board will be to take advantage of the prevailing
opportunities in the oil and gas sector resulting from the resurgent price for
oil and gas, underlying energy commodity fundamentals and the opportunities
which currently exist for investment in the North Sea oil and gas industry. The
Company intends to invest in oil and gas development projects, assets and
companies to exploit these opportunities.

In particular, the Company will seek to invest in oil and gas assets with
technical and/or other challenges (often referred to as `stranded assets'),
which make potential development projects less attractive to the major energy
companies and where the Company may deploy its expertise to exploit the
opportunity but which nevertheless have the potential to generate high returns
for shareholders. The focus will be on assets with known hydrocarbon
accumulations and whose development in the form of sub sea tie-backs can
deliver near term production and shareholder returns within two years. Suitable
assets will be acquired either in their entirety or by utilising other
partnership, joint venture or farm-in arrangements, in which event the Company
will actively operate them. When the Company identifies companies suitable for
acquisition, the aim will be to acquire the business in entirety and integrate
that with its other businesses and thereafter proactively manage a portfolio of
oil and gas development projects and producing assets consistent with its core
agenda. of focusing on development and production. As part of its risk
management strategy, the Company does not intend to invest in exploration
projects. Moreover, the Company intends to focus its investing strategy in the
North Sea.

The New Board has already identified and intends, as soon as possible, to
appoint a highly experienced team of oil and gas industry executives with
proven expertise of oil and gas project delivery in the North Sea to develop
the Company's new investing policy and to implement, in the longer term, the
Company's objectives of substantial shareholder returns from oil and gas
development and production. 

Investments in oil and gas projects are capital intensive and, therefore, the
immediate strategy of the New Board will be to begin the process of
raising significant additional capital for the Company. The funds raised
through the Subscription will not be sufficient to allow the Company to carry
out its investment policy but will be used for working capital purposes until
sufficient additional capital is raised to allow the Company to implement that
policy fully. The New Board will arrange to raise substantial additional
capital in the form of equity or a convertible instrument as soon as
practicable, in which Shareholders will be given the opportunity to
participate, but has no intention to use traditional external debt in the short
term. There will be no limit on the life of the Company, but, if the Company
has not substantially implemented its investing policy within 18 months of
Admission, it will seek the consent of its shareholders for its investing
policy on an annual basis.

The Directors stress that the Company has all but exhausted its cash resources
and cannot dispose of its remaining investments. It therefore cannot survive
without the Subscription which will provide it with sufficient working capital
for at least 12 months. It is for this reason that the Directors urge
Shareholders strongly to vote in favour of the Proposals.

The Capital Reorganisation

The Company presently has 114,941,002 Existing Ordinary Shares in issue which
are held by more than 1,100 shareholders. This substantial body of shareholders
adds a significant cost to the overheads of the Company because of the need to
produce a large number of annual accounts and also increases registrars' costs.
Over 64.9 per cent. of Shareholders have holdings with a value, at the current
share price, of £5 or less. Accordingly, it is proposed to consolidate the
Company's share capital on the terms set out below, prior to carrying out the
Subscription. The Subscription Price (which is the equivalent of 0.013p per
share prior to the Capital Reorganisation) is, however, below the present
nominal value of the Existing Ordinary Shares and the Company is prohibited by
law from issuing fully paid shares at a discount to the nominal, or par, value
of its shares. Therefore, in order to carry out the Subscription, it is
necessary to reduce the nominal value of the Company's authorised and issued
Existing Ordinary Shares to an appropriate level which is less than the
Subscription Price. Accordingly, the Directors have decided that a share
reorganisation should be effected on the following basis:

a) every 500 Existing Ordinary Shares will be consolidated into one new
ordinary share of 500p;

b) each of the resulting issued ordinary shares of 500p will then be subdivided
by a factor of 100 into ordinary shares of 5p each;

c) each of the issued ordinary shares of 5p resulting from the consolidation
will then be subdivided into and redesignated as one New Ordinary Share and one
New Deferred Share. The New Ordinary Shares will then have a nominal value of
0.01p each; and

d) each of the unissued ordinary shares of 1p will be subdivided into 100 New
Ordinary Shares.

Any fractions of issued New Ordinary Shares arising from the Capital
Reorganisation will be aggregated, issued and sold for the benefit of the
Company.

The rights attaching to the New Ordinary Shares will, apart for the change in
nominal value, be identical in all respects to those of the Existing Ordinary
Shares.

The New Deferred Shares will rank equally with the Deferred Shares and as such
will have no voting rights and will not carry any entitlement to attend general
meetings of the Company. They will carry only the right to participate in any
return of capital to the extent of 4.99p per New Deferred Share but only after
each New Ordinary Share has received in aggregate capital repayments totalling
£10,000 per New Ordinary Share.

Accordingly, the New Deferred Shares will, for all practical purposes, be
valueless and it is the Board's intention, at an appropriate time, to make an
application to the court for the New Deferred Shares and Deferred Shares to be
cancelled.

Existing share certificates will cease to be valid following the Capital
Reorganisation and new share certificates in respect of the New Ordinary Shares
will be issued by 7 January 2010; no certificates will be issued in respect of
New Deferred Shares.

The Subscription

Under the terms of the Subscription Agreement, the Investors have conditionally
agreed to subscribe for 307,693,000 New Ordinary Shares at the Subscription
Price, raising approximately £200,000 before expenses for the benefit of the
Company. The Investors have already provided a loan of £36,000, as announced on
23 November 2009, which they propose to capitalise by subscribing for Ordinary
Shares. For the avoidance of doubt, the total subscription will be for £200,000
which includes the £36,000 already provided as a loan.

The Subscription is conditional, inter alia, upon Admission of the Subscription
Shares to trading on AIM.

The Subscription Shares, when issued and fully paid, will rank equally in all
respects with the issued New Ordinary Shares, including the right to receive
all dividends and other distributions declared, made or paid after the relevant
Admission.

It is expected that Admission will become effective and dealings in the
Subscription Shares and the issued New Ordinary Shares will commence on 31
December 2009.

The Subscription is also conditional upon the passing of all the Resolutions,
including the passing of an ordinary resolution to approve a Rule 9 Waiver.
Accordingly, the Company has convened the General Meeting, notice of which is
set out in the Circular.

Following the Capital Reorganisation and the Subscription, the Company will
have 330,681,200 New Ordinary Shares in issue and admitted to trading on AIM.

The New Board

Conditional on Admission, Kevin Burke will be appointed as executive chairman
of the Company in my place and David Marshall will be appointed as chief
executive officer. Rakesh Patel and Nicolas Greenstone will remain on the Board
as non-executive directors. Further information on Kevin Burke and David
Marshall is set out below.

Kevin Burke, FCA (proposed executive chairman), aged 64, has 30 years'
experience in the structuring and financing of transactions and the broader
strategic development of companies in the natural resources and oil and gas
sectors. He was a co-founder and executive chairman of two publicly listed
companies, Dana Petroleum (Russia) Limited and Vanguard Petroleum. The latter
was one of the first Western companies engaged in oil production in the West
Siberian oil province of the former Soviet Union and was subsequently sold to
Sibir Energy. Mr Burke was until September 2009 a non-executive director of
Oilexco Incorporated which was listed on both the Toronto Stock Exchange and
the Main Market of the London Stock Exchange. Prior to that, he worked in
corporate finance, mergers and acquisitions and venture capital. He is a
qualified chartered accountant and holds a Sloan Fellowship from the London
Business School.

David Marshall (proposed chief executive officer), aged 51, has 30 years'
experience in the oil and gas sector.  He was until August 2009, Senior Vice
President Operations and General Manager of Oilexco N.S. Exploration Limited
and has previously held various managerial positions in both onshore and
offshore oil and gas drilling and production operations in the UK , the Caspian
region,  Africa, the Middle East and Western Europe. David has worked for Hess
Corporation, Monument, Lasmo and Eni.   He holds a Masters Degree in Petroleum
Engineering from Heriot Watt University and a Bachelor of Science Honours
Degree in Civil Engineering from Glasgow University

Change of name

Conditional on Admission, the Company will change its name to Deo Petroleum
plc.

Circular and General Meeting

The Circular to Shareholders and notice of General Meeting will be posted to
Shareholders and will be available from the Company's website,
www.microcapequities.plc.uk, later today. The General Meeting of the Company
has been convened for 11.05 a.m. (or such later time as the AGM convened for
11.00 a.m. has concluded or been adjourned) on 30 December 2009 at the offices
of Merchant John East Securities Limited, 10 Finsbury Square, London EC2A 1AD.

For enquiries:

Microcap Equities Plc                                             020 7247 9691
                                                                               
Nicolas Greenstone                                                020 8371 3071
                                                                               
Rakesh Patel                                                                   
                                                                               
Merchant John East Securities Limited                             020 7628 2200
                                                                               
Bidhi Bhoma                                                                    

                                  Definitions                                  
                                                                               
The following definitions apply throughout this announcement unless the context
requires otherwise:                                                            
                                                                               
"Admission"              the admission of the New Ordinary Shares in issue     
                         immediately following the Capital Reorganisation and  
                         the Subscription Shares to trading on AIM becoming    
                         effective in accordance with the AIM Rules            
                                                                               
"AGM" or "Annual General the annual general meeting of the Company convened for
Meeting"                 11.00 a.m. on 30 December 2009, notice of which is set
                         out in the Circular                                   
                                                                               
"AIM"                    the AIM Market of the London Stock Exchange           
                                                                               
"AIM Rules"              the rules published by the London Stock Exchange      
                         relating to AIM, as amended from time to time         
                                                                               
"Capital Reorganisation" the proposed consolidation and sub-division of every  
                         50 Existing Ordinary Shares into one New Ordinary     
                         Share and one New Deferred Share                      
                                                                               
"Circular"               the circular to Shareholders date 8 December 2009     
                                                                               
"Code"                   The City Code on Takeovers and Mergers                
                                                                               
"Concert Party" or       Kevin Burke and David Marshall                        
"Investors"                                                                    
                                                                               
"Deferred Shares"        the 2,667,229 deferred shares of 24p each in the      
                         capital of the Company in issue at the date of this   
                         announcement                                          
                                                                               
"Directors" or "Board"   the directors of the Company as set out in the        
                         Circular                                              
                                                                               
"Enlarged Issued         330,681,200 New Ordinary Shares in issue at Admission 
Ordinary Share Capital"                                                        
                                                                               
"Existing Ordinary       the 114,941,002 ordinary shares of 1p each in the     
Shares"                  capital of the Company in issue at the date of this   
                         announcement                                          
                                                                               
"GM" or "General         the general meeting of the Company convened for 11.05 
Meeting"                 a.m. (or such later time as the Annual General Meeting
                         convened for 11.00 a.m. has concluded or been         
                         adjourned) on 30 December 2009, notice of which is set
                         out in the Circular                                   
                                                                               
"London Stock Exchange"  London Stock Exchange plc                             
                                                                               
"MJES"                   Merchant John East Securities Limited                 
                                                                               
"New Articles"           the new articles of association of the Company        
                         proposed to be adopted at the GM, a draft of which is 
                         available for inspection as referred to in the        
                         Circular                                              
                                                                               
"New Board"              the Directors and the Investors                       
                                                                               
"New Deferred Shares"    the new deferred shares of 4.99p each arising from the
                         Capital Reorganisation                                
                                                                               
"New Ordinary Shares"    the new ordinary shares of 0.01p each in the capital  
                         of the Company arising from the Capital Reorganisation
                                                                               
"Panel"                  the Panel on Takeovers and Mergers                    
                                                                               
"Proposals"              the Capital Reorganisation, the proposed Subscription,
                         the Rule 9 Waiver, the adoption of the New Articles,  
                         the change of name, change of investing policy and    
                         Admission                                             
                                                                               
"Resolutions"            the resolutions set out in the notice of the General  
                         Meeting                                               
                                                                               
"Rule 9 Waiver"          the agreement by the Panel to waive the obligation on 
                         the Investors to make a general offer to all          
                         Shareholders pursuant to Rule 9 of the Code subject to
                         approval, by way of a poll vote, of the Shareholders  
                                                                               
"Shareholders"           holders of Existing Ordinary Shares                   
                                                                               
"Subscription"           the subscription for the Subscription Shares pursuant 
                         to the Subscription Agreement                         
                                                                               
"Subscription Agreement" the conditional agreement dated 8 December 2009       
                         between (1) the Company and (2) the Investors relating
                         to the Subscription, further details of which are set 
                         out in the Circular                                   
                                                                               
"Subscription Price"     0.065p per New Ordinary Share                         
                                                                               
"Subscription Shares"    the 307,693,000 New Ordinary Shares to be issued      
                         pursuant to the Subscription                          


                                                                                                                                                                                                              

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