21st Sep 2006 07:03
Sondex PLC21 September 2006 Sondex plc 21 September 2006 NOT FOR DISTRIBUTION OR TRANSMISSION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, JAPAN AND THE REPUBLIC OF SOUTH AFRICA Sondex plc ("Sondex" or the "Company") Acquisition of Innicor Subsurface Technologies Inc. ("Innicor") and Firm Placing and Placing & Open Offer Sondex, a leading international downhole technology supplier to the oil & gasindustry, today announces the recommended cash offer to acquire Innicor aCanadian based designer, manufacturer and provider of downhole completionsequipment to the oil & gas industry. The Company also announces that it isproposing to raise approximately £40 million (net of expenses) by way of a FirmPlacing and a Placing & Open Offer. Summary Acquisition: • Recommended cash offer to acquire all of the outstanding common shares in the capital of Innicor (the "Offer") a company traded on the Toronto Stock Exchange. • The Offer, which has been unanimously recommended by the board of Innicor, is being made on the basis of C$3.75 per Innicor Share, valuing the fully diluted share capital of Innicor at approximately C$72.8 million (£34.7 million) and Sondex has received undertakings to accept the Offer from holders of 51.1% of Innicor Shares. • Innicor designs, manufactures and services subsurface equipment in the completion and work-over of oil & gas wells. Innicor is headquartered in Calgary, Alberta, Canada and is listed on the Toronto Stock Exchange (Ticker: TSX: IST). • The Directors believe the acquisition of Innicor is in line with Sondex's stated strategy and is expected to bring opportunities for further expansion both organically and via "bolt on" acquisitions that can be high growth and cash generative. • The acquisition of Innicor is expected to be accretive to earnings per share and cashflow of the Enlarged Group in the first full year following completion of the acquisition of Innicor. • The proposed acquisition of Innicor is subject to the approval of Sondex Shareholders at the EGM. Fundraising: • The Company proposes, subject inter alia to Shareholder approval, to raise approximately £40 million (net of expenses) by the issue of 15,678,571 New Ordinary Shares at 280 pence each by way of a Firm Placing and Placing & Open Offer. • It is intended that the net proceeds of the Firm Placing and Placing & Open Offer will be used to finance the acquisition of Innicor and the further growth of the Group. Sondex has also arranged new facilities with the Bank to fund the working capital requirements of the Enlarged Group. Trading Update: • Market conditions have remained favourable as operators of oil & gas fields continue to turn to sophisticated technologies and instruments, such as those supplied by the Group, to optimize production from maturing oil & gas fields. • First half revenues continued to benefit from these conditions and are expected to be over 50% higher than the same period last year. • Gross margins remain consistent and the Group has continued to invest in research and development. • Recent acquisitions of AES and Bluestar are performing well. Commenting on the acquisition of Innicor, Martin Perry, Chief Executive ofSondex said: "Innicor is an innovative business with a highly regarded management team. Webelieve that this is an exceptional fit with Sondex and are delighted to havegained the Innicor Board's recommendation for our offer. On finalisation of the acquisition, Innicor will form the basis for a new 'completions division' at Sondex adding to the range of products and servicesoffered to our international customer base. The continued increases in revenues, both from strong organic growth andsuccessful acquisitions, positions Sondex well for its future development." For further information, please contact: Sondex Tel: 01252 862 200Martin Perry (Chief Executive)Chris Wilks (Finance Director) Investec Tel: 020 7597 5970James Grace / Patrick Robb College Hill Tel: 020 7457 2020Nick Elwes / Paddy Blewer www.sondex.com For further information about Innicor please visit: www.innicor.com This announcement has been issued by, and is the sole responsibility of Sondex. Investec Investment Banking, a division of Investec Bank (UK) Limited, which isauthorised and regulated by the Financial Services Authority and is a member ofthe London Stock Exchange plc, is acting exclusively for Sondex in connectionwith the acquisition of Innicor, Firm Placing and Placing & Open Offer and isnot acting for any person other than Sondex and will not be responsible to anyperson other than Sondex for providing the protections afforded to its customersor for providing advice on the transactions and arrangements proposed in thisannouncement. This announcement is for information only and does not constitute an offer orinvitation to acquire or dispose of any securities or investment advice in anyjurisdiction. Past performance is no guide to future performance and persons needing adviceshould consult an independent financial advisor. The information contained in this announcement is not for release, publicationor distribution, directly or indirectly, to persons in the United States,Canada, Australia, Japan or the Republic of South Africa. This announcement isnot an offer of securities for sale into the United States. The Placing Shareshave not and will not be registered under the US Securities Act of 1933, asamended and may not be offered or sold directly or indirectly, in the UnitedStates absent registration or an exemption from registration. There will be nopublic offering of securities in the United States. The Placing Shares have notand will not be registered with any regulatory authority of any State within theUnited States. Appendix 1 contains the definitions of certain terms used in this announcement. This summary should be read in conjunction with the full text of the followingannouncement. NOT FOR DISTRIBUTION OR TRANSMISSION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, JAPAN AND THE REPUBLIC OF SOUTH AFRICA Sondex plc ("Sondex" or the "Company") Acquisition of Innicor Subsurface Technologies Inc. ("Innicor") and Firm Placing and Placing & Open Offer 1. Introduction Sondex has agreed to make a recommended cash offer to acquire all of theoutstanding common shares in the capital of Innicor (the "Offer"). The Offervalues the fully diluted share capital of Innicor at approximately C$72.8million (£34.7 million). As at 30 June 2006 Innicor had net debt of C$8.4million (£4.0 million). Due to the size of the Offer in relation to the Group, it constitutes a Class 1transaction under the Listing Rules and accordingly the Company is required toobtain the prior approval of Shareholders to completion of the Offer. The Offeris conditional, inter alia, upon such approval being obtained. The Company also, subject inter alia to Shareholder approval, proposes to raiseapproximately £40 million (net of expenses) by the issue of 15,678,571 NewOrdinary Shares at 280 pence each by way of a Firm Placing and Placing & OpenOffer. Of the 15,678,571 New Ordinary Shares being issued, 7,575,481 have beenplaced firm and 8,103,090 have been conditionally placed, subject only toclawback by Qualifying Shareholders in each case, with institutional and otherinvestors by Investec. Qualifying Shareholders will have the right to subscribefor the Open Offer Shares in accordance with the terms of the Open Offer.Qualifying Shareholders will not be offered the right to subscribe for the FirmPlaced Shares. It is intended that the net proceeds of the Firm Placing and Placing & OpenOffer will be used to finance the consideration due under the Offer and thebalance to provide funding for the further growth of the Group. Sondex has alsoarranged new facilities with the Bank to fund the working capital requirementsof the Enlarged Group and, in the event that the Firm Placing and the Placing &Open Offer does not proceed but the Offer becomes unconditional in accordancewith its terms, to finance the consideration due under the Offer. A prospectus incorporating a notice of Extraordinary General Meeting and settingout the background to and reasons for the Proposals will be sent to Shareholdersin due course. 2. Information on Innicor Innicor is headquarted in Calgary, Alberta, Canada and its shares are traded onthe Toronto Stock Exchange. Innicor designs, manufactures and servicessubsurface equipment in the completion andwork-over of oil & gas wells. Innicor's product offerings include perforating systems, liner hangers, flowcontrol equipment and completion tools such as packers, profile nipples andsliding sleeves. Innicor holds a number of patents on its tool designs andcontinues to invest in the research and development of new products and tools. The original business of Innicor was founded in 1999 as Core Oils Tools and hassince that date expanded both organically and via acquisition. In May 2001Innicor acquired a listing on the Toronto Stock Exchange via a merger withCodorna Resources an existing Canadian public company. Since May 2001 Innicor has made five acquisitions: • May 2002, Independent Oils Tools Inc, a completion services company, based in Brooks, Alberta for C$0.9 million. • July 2002, Prime Perforating Systems Inc, a supplier and manufacturer of perforating equipment based in Calgary for C$2.1 million. • April 2003, Summit Tool Services Inc, a supplier of subsurface equipment used in drilling, completion and workover of oil & gas wells based in Reed Deer, Alberta for C$0.2m. • May 2004, the Polar Completions division of Precision Drilling Technology Services Group Inc, based in Calgary for C$14.0 million. Polar Completions was a full service provider of completion tools and liner hanger systems with its own integrated engineering, manufacturing and technical service components. • February 2005, Innicor purchased certain assets in the form of proprietary intellectual property related to tool designs from Noram Tools Services Inc. for an aggregate purchase price of C$750,000 consisting of C$250,000 in cash and the issuance of 169,906 common shares of Innicor. Innicor currently operates from two manufacturing sites and 13 services sites,all in Canada and has approximately 277 employees. Over 20% of Innicor's totalrevenue is generated from international oilfield markets. Innicor is the onlyCanadian manufacturer of shaped charges. The Directors consider that Innicor operates in growing markets and estimate theglobal market for Innicor's products in millions of US$ as follows: Estimate Forecast Year (US $ millions) 2003 2004 2005 2006 2007 2008 2009Perforating equipment 327 353 464 539 564 610 671Completion services 2,727 2,910 3,852 4,489 4.587 4,733 5,149 The historical financial record of Innicor is as follows: Profit and Loss Account 2006 2005 2004 2003 6m ended 12m ended 12m ended 12m ended(Canadian GAAP) 30 June 31 December 31 December 31 December C$ C$ C$ C$Revenue 31,290,148 55,259,619 40,999,278 23,194,731Cost of goods sold 15,567,037 29,821,206 23,330,054 14,658,824Gross margin 15,723,111 25,438,413 17,669,224 8,535,907Operating ExpensesSalaries and wages 7,271,904 12,035,817 8,604,325 3,531,444General and administrative 4,005,153 7,201,055 5,421,253 2,991,985Foreign exchange (gain) loss (3,497) 106,326 206,761 202,533Interest 171,059 375,498 301,500 301,258Depreciation and amortization 521,127 807,777 492,146 302,950 11,965,746 20,526,473 15,025,985 7,330,170Income (loss) before income taxes 3,757,365 4,911,940 2,643,239 1,205,737Provision for (recovery of) income taxes 1,342,061 1,985,619 1,081,148 305,658Net income (loss) 2,415,304 2,926,321 1,562,091 900,079Net income (loss) per shareBasic 0.13 0.16 0.10 0.08Diluted 0.13 0.16 0.10 0.08 Balance Sheet 2006 2005 2004 2003 as at as at 31 as at as at(Canadian GAAP) 30 June December 31 December 31 December C$ C$ C$ C$AssetsCurrent AssetsCash and cash equivalents - - - 299,147Accounts receivable 9,110,938 10,554,833 10,130,872 5,509,664Inventory 23,168,288 18,825,910 16,394,272 6,872,860Prepaid expenses and deposits 1,895,546 1,054,905 231,038 200,333Income taxes recoverable - - - 21,071 34,174,772 30,435,648 26,756,182 12,903,075Capital assets 13,286,544 11,695,846 9,817,524 5,090,523Future income tax assets - - 67,809 6,150Goodwill 2,331,781 2,331,781 2,331,781 2,331,781 49,793,097 44,463,275 38,973,296 20,331,529LiabilitiesCurrent liabilitiesAccounts payable and accrued liabilities 7,228,809 7,526,488 7,672,663 2,542,994Other 5,884,442 3,093,742 2,615,814 6,035,674 13,113,251 10,620,230 10,288,477 8,578,668Obligations under capital leases 2,539,523 2,675,256 1,610,470 832,817Future income tax liability 548,098 335,605 - - 16,200,872 13,631,091 11,898,947 9,411,485Shareholders' equityShare capital 25,514,699 25,321,934 24,715,864 10,214,239Contributed surplus 500,830 348,858 123,414 32,825Retained earnings 7,576,696 5,161,392 2,235,071 672,980 33,592,225 30,832,184 27,074,349 10,920,044 49,793,097 44,463,275 38,973,296 20,331,529 The financial information above has been extracted, without material adjustment,from the audited consolidated financial statements of Innicor for the threeyears ended 31 December 2005 and the financial statements of Innicor for the sixmonths ended 30 June 2006. No material adjustments need to be made to Innicor's financial statements toachieve consistency with Sondex's accounting policies and accordingly noreconciliation has been included. 3. Background to and reasons for the acquisition of Innicor Sondex has a clear strategy of growth as a supplier of technology to theupstream oil & gas industry. Its principal clients are oilfield servicecompanies and national oil companies. The strategy has been consistentlyfollowed by a combination of: • investment in in-house technology development (£4.7 million was expended on research and development in the year ended 28 February 2006); • investment in international expansion (the Company has 10 locations in 8 countries worldwide and has approximately 425 staff) and • through acquisition (four successful acquisitions in the last three years). The area of market focus has been consistently identified as technology whichwill assist with recovery of oil from identified oil & gas fields and inparticular the areas of technology associated with drilling and wireline. Sondex's origins were in the design of instrumentation used in productionlogging. These products were enhanced by in-house design to become anestablished system for monitoring flow conditions in oil or gas wells duringproduction. The Directors believe that Sondex Production Logging Tools are nowestablished and optimized as an industry standard around the world. A number ofrelated product lines have been added through both in-house design andtechnology licensing, the combination becoming the Sondex Wireline Division.This division was also expanded by two acquisitions: Computer Sonic Systems Inc.in Calgary, Canada for C$3.7 million (£1.8 million) in 2003, and AES inLouisiana, USA for up to US$14.0 million (£7.9 million) in December 2005, eachof which brought complementary wireline products. These product lines togetherwith Sondex's other wireline products are sold through Sondex's internationalnetwork of offices. In line with the strategy of broadening the range of products within its area ofmarket focus, Sondex acquired Aberdeen based Geolink, for £31.5 million in July2004. Geolink's product lines are for measurement and logging while drilling,which enable reservoir engineers to position a well in the required location tooptimize production and also to evaluate the geological formations which arebeing drilled through. Since acquiring Geolink, Sondex has increased researchand development investment and added international sales and marketing resource.Geolink now forms the basis of the Sondex Drilling Division and its productrange has recently been enhanced by the acquisition in July 2006 of Calgarybased Bluestar. Bluestar provides measurement and drilling tools for verticalwells and positive Pulse Environments. Bluestar's products are complementary tothose of Geolink and provide strong sales in North America. The considerationfor the acquisition of Bluestar comprises an initial payment of C$5.5 million(£2.6 million) with further earn out potential of up to C$17.25 million (£8,21million) in total over three years, of which C$7.4 million (£3.5 million) can besatisfied by the issue of new Ordinary Shares. In the year ended 31 May 2006 theunaudited management accounts of Bluestar recorded revenues of C$5.9 million(£2.8 million) and operating profit of C$1.9 million (0.9 million). Having established the Wireline Division and the Drilling Division, theacquisition of Innicor will enable the Company to establish a CompletionsDivision. Perforating products create a channel into the rocks which enable the oil or gasto flow in to a well after it has been drilled and cased. Completion systems allow for production zones to be isolated or separated and,later in life, for non productive zones to be by-passed whilst the newtechnology area of liner hangers enables wells to be completed at deeper levelsand in deviated situations in order to optimize recovery. Innicor, established in 1999 and grown through both organic means and alsoacquisition, has established a strong presence in Canada and has a growingreputation internationally for completions products. Innicor will form a third division for Sondex, bringing critical mass andexpertise. Many of Innicor's customers are potentially the same as those ofSondex, but Innicor has a more direct link to the oil & gas companies throughthe need to contract directly with them for completion installations. It is envisaged, as has happened in Sondex's Wireline and Drilling Divisions,that Innicor will form the platform for introducing new technologies to thecompletions market. Sondex's international distribution will assist in givingInnicor products access to additional markets world-wide, and Innicor'sdistribution in Canada will give incremental opportunities for other Sondexproducts in that territory. The unaudited results for Innicor for the four consecutive quarters ended 30June 2006 show total revenues of C$62.7 million (£29.9 million) and pre-taxprofit of C$7.3 million (£3.5 million). The Offer values the fully diluted shares of Innicor at approximately C$72.8million (£34.7 million). As at 30 June 2006 Innicor had net debt of C$8.4million (£4.0 million). Using the value of the Offer and Innicor's pre-taxprofit for the four quarters ended 30 June 2006, the Offer represents a multipleof approximately 10 times pre-tax profits. The Directors believe the acquisition of Innicor is in line with Sondex's statedstrategy and is expected to bring opportunities for further expansion bothorganically and via "bolt on" acquisitions that can be high growth and cashgenerative. The experienced management of Innicor is expected to remain with thebusiness with appropriate incentives in place. The Board expects that the acquisition of Innicor will be accretive to earningsper share and cashflow of the Enlarged Group in the first full year followingcompletion. On the basis set out below, the pro-forma net assets of the Enlarged Group,following the acquisition of Innicor and the Firm Placing and Placing & OpenOffer are expected to be £101.9 million. The figure of £101.9 million is basedon the audited net assets of Sondex at 28 February 2006 of £59.9 million and thenet proceeds of the Firm Placing and Placing & Open Offer of approximately £40million. The difference between the cost of the acquisition of Innicor andInnicor's net assets as at 30 June 2006 has been treated as goodwill. Includedin the pro forma net assets figure of £101.9 million is net bank debt of £34.5million. 4. Principal terms of the Offer Sondex and Innicor have entered into a pre-acquisition agreement ("Agreement").Under the terms of the Agreement, Sondex (or a subsidiary of Sondex) will,through a new company which is to be incorporated in Canada, offer to purchaseall the issued and outstanding common shares of Innicor for C$3.75 per share incash pursuant to the Offer. The Offer is conditional upon Sondex acquiring atleast 90% of the Innicor Shares and is subject to other conditions usual inoffers for public companies in Canada. The Agreement provides that Innicor will pay Sondex a non-completion fee of C$3million in certain circumstances. Innicor has agreed not to solicit furtheroffers or initiate discussions or negotiations with any third party concerningthe sale of Innicor, subject to fiduciary obligations. If the Offer does notcomplete in certain circumstances, Sondex is liable to reimburse Innicor forreasonable expenses capped at C$300,000. The Agreement also contains certain warranties and representations from Innicorto Sondex which are usual in a transaction of this nature. In connection with the Offer, certain major shareholders and all of thedirectors and officers of Innicor have entered into lock-up agreements withSondex pursuant to which they have agreed to tender all of their common sharesto the Offer, subject to certain exceptions, representing in the aggregateapproximately 9.3 million common shares and approximately 0.7 million optionsover common shares representing not less than 51.1% of the Innicor Shares. The transaction is subject to Canadian regulatory approvals and other conditionscustomary in offers for Canadian companies. As required by the Listing Rules,the Offer is also conditional on the approval of the transaction by Shareholdersat an EGM. 5. Current trading and prospects Market conditions have remained favourable as operators of oil & gas fieldscontinue to turn to sophisticated technologies and instruments, such as thosesupplied by the Group, to optimize recovery from maturing oil & gas fields.Revenues for the first half of the financial year have continued to benefit fromthese good market conditions and the strong position of the Group's products intheir markets and are expected to be over 50% higher than the same period lastyear. Growth in revenues has been largely organic but with contributions from theacquisitions made by the Group in the last year; AES acquired in December 2005,and Bluestar (now Sondex Drilling Tools Inc) have both performed well. The likefor like growth has been generated from both the wireline and drilling divisionof the company. North America has had a particularly good period, but the broadspread of sales throughout the world has continued. Whilst historically the Company has relied heavily on the second half of theyear to provide the annual profitability due to high proportion of sales beingmade in the second half, the current year has seen a smoothing of the expectedannual revenue due to the improvements in production capacity made over the pastyear. The Group's businesses have enjoyed consistent gross margins and have continuedto invest in research and development. The Directors are confident in the underlying financial and trading prospects inthe current financial year. 6. Interim results and dividends It is expected that the Company will announce its interim results for the sixmonths to 31 August 2006 at the end of October 2006. The Company's dividend policy is to ensure that Shareholders continue to benefitfrom the growth in the Group's business, while providing sufficient funds forinvestment in future growth. It is the Directors' intention that they willmaintain this policy following the acquisition of Innicor and the Firm Placingand Placing & Open Offer. The New Ordinary Shares issued as part of the Firm Placing and Placing & OpenOffer will not be entitled to receive any interim dividend which may be paid inrespect of the six months ended 31 August 2006. 7. Principal terms of the Firm Placing and Placing & Open Offer The Company is proposing to raise approximately £40 million (net of expenses)through the Firm Placing and Placing & Open Offer. The Firm Placing is inrespect of 7,575,481 New Ordinary Shares and the Placing & Open Offer is inrespect of 8,103,090 New Ordinary Shares. Of the 15,678,571 New Ordinary Sharesbeing issued, 7,575,481 have been placed firm and 8,103,090 have beenconditionally placed, subject only to clawback by Qualifying Shareholders ineach case, with institutional and other investors by Investec. QualifyingShareholders will have the right to subscribe for the Open Offer Shares inaccordance with the terms of the Open Offer. Qualifying Shareholders will not beoffered the right to subscribe for the Firm Placed Shares. The net proceeds ofthe Firm Placing and Placing & Open Offer will be used to fund the acquisitionof Innicor and to finance the expected future expansion of the Group. The fundraising is to be structured by way of the Firm Placing and Placing &Open Offer in order to strengthen the Company's shareholder base by allowing,subject to Shareholder approval, new institutional shareholders to subscribe fornew Ordinary Shares on a firm basis through the Placing, whilst at the same timeproviding existing Shareholders with the opportunity to participate in thefundraising to an extent through the Open Offer. Qualifying Shareholders will be invited to subscribe for Open Offer Shares inthe Open Offer at the Issue Price on the following basis: 1 Open Offer Share for every 7 Existing Ordinary Shares registered in the names of Qualifying Shareholders at the close of business onthe Record Date, and so in proportion for any other number of Existing OrdinaryShares then registered. The full terms and conditions of the Open Offer will beset out in the Prospectus. The New Ordinary Shares will, when allotted and fully paid, rank pari passu inall respects with Existing Ordinary Shares save that they will not be entitledto receive any interim dividend which may be paid in respect of the six monthsended 31 August 2006. Under the terms of the Placing Agreement, Investec as agent for the Company, hasplaced with institutional and other investors the Firm Placed Shares and theOpen Offer Shares at the Issue Price, of which the Open Offer Shares have beenconditionally placed, subject only to clawback by Qualifying Shareholders inorder to meet valid acceptances pursuant to the terms of the Open Offer. To theextent that Investec does not procure placees for the New Ordinary Shares it hasagreed itself to subscribe for such New Ordinary Shares. The Firm Placing and Placing & Open Offer will be conditional on the PlacingAgreement becoming unconditional in all respects and not being terminated before8.00 a.m. the business day following the Offer being declared or becomingunconditional in all respects (or such later time and/or date, being not laterthan 8.00 a.m. on 30 November 2006 as Investec and the Company may agree). Theprincipal conditions to the Placing and Open Offer Agreement are: (i) the passing of the Resolutions at the EGM or anyadjournment thereof; (ii) the Offer becoming or being declared unconditional in allrespect; (iii) the Facilities Agreement having become unconditional in allrespects; and (iv) Admission having become effective by no later than 8.00 a.m.the business day following the Offer being declared or becoming unconditional inall respects 2006 or such later time and/or date as Investec and the Company mayagree (but in any event not later than 8.00 a.m. on 30 November 2006). Under the terms of the Placing Agreement, Investec has the right to terminateits obligations under the Placing Agreement in the event of, inter alia, any ofthe warranties contained therein not being true in any material respect, or abreach by the Company in any material respect of the Placing Agreement. 8. Extraordinary General Meeting The acquisition of Innicor is a Class 1 transaction for the Company under theListing Rules and it is therefore subject to Shareholder consent. Accordingly,the Company will convene the Extraordinary General Meeting through a noticewhich will be set out in the Prospectus. In addition, and for the purpose of effecting the Firm Placing and Placing &Open Offer, a resolution which, if passed, will authorise: (i) an increase inthe Company's authorised share capital from £8 million to £10 million by thecreation of 20 million additional Ordinary Shares; (ii) the Directors to issueand allot up to 16 million Ordinary Shares; and (iii) the Directors to issue upto 8 million Ordinary Shares on a non-pre-emptive basis. In order to comply with Canadian Securities regulations, the resolutions toapprove (a) the acquisition of Innicor; and (b) the Firm Placing and Placing &Open Offer are not conditional upon one another. In the event that theresolution to approve the Firm Placing and Placing & Open Offer are not approvedand the resolution to approve the Offer is approved, the new facilities arrangedwith the Bank incorporates a facility to enable the Company to complete theacquisition of Innicor even if the Firm Placing and Placing & Open Offer doesnot proceed. For further information please contact: Sondex Tel: 01252 862 200Martin Perry (Chief Executive)Chris Wilks (Finance Director) Investec Tel: 020 7597 5970James Grace / Patrick Robb College Hill Tel: 020 7457 2020Nick Elwes / Paddy Blewer www.sondex.com For further information about Innicor please visit: www.innicor.com This announcement has been issued by, and is the sole responsibly of, Sondex. Investec Investment Banking, a division of Investec Bank (UK) Limited, which isauthorised and regulated by the Financial Services Authority and is a member ofthe London Stock Exchange plc, is acting exclusively for Sondex in connectionwith the acquisition of Innicor, Firm Placing and Placing & Open Offer and isnot acting for any person other than Sondex and will not be responsible to anyperson other than Sondex for providing the protections afforded to its customersor for providing advice on the transactions and arrangements proposed in thisannouncement. This announcement is for information only and does not constitute an offer orinvitation to acquire or dispose of any securities or investment advice in anyjurisdiction. Past performance is no guide to future performance and persons needing adviceshould consult an independent financial advisor. The information contained in this announcement is not for release, publicationor distribution, directly or indirectly, to persons in the United States,Canada, Australia, Japan or the Republic of South Africa. This announcement isnot an offer of securities for sale into the United States. The Placing Shareshave not and will not be registered under the US Securities Act of 1933, asamended and may not be offered or sold directly or indirectly, in the UnitedStates absent registration or an exemption from registration. There will be nopublic offering of securities in the United States. The Placing Shares have notand will not be registered with any regulatory authority of any State within theUnited States. Appendix 1 contains the definitions of certain terms used in this Announcement. APPENDIX 1 DEFINITIONS The following definitions apply throughout this announcement, unless the contextotherwise requires: "AES" Applied Electronic Systems Inc."Admission" admission of the New Ordinary Shares to the Official List becoming effective in accordance with the Listing Rules and to trading on the London Stock Exchange's market for listed securities being granted"Application Form" the application form accompanying the Prospectus on which Qualifying Shareholders may apply for Open Offer Shares under the Open Offer"Bank" Halifax Bank of Scotland PLC"Bluestar" Bluestar Tools"Board" or "Directors" the directors of the Company as at the date of this announcement"C$" Canadian Dollars"Canadian GAAP" generally accepted accounting principles in Canada"Enlarged Group" the Group as enlarged by its acquisition of Innicor"Existing Ordinary Shares" the 56,721,635 Ordinary Shares in issue at the date of this announcement"Extraordinary General Meeting the extraordinary general meeting of the Company to be held at at Nabarro" or "EGM" Nathanson, Lacon House, Theobald's Road, London, WC1X 8RW, notice of which is set out in Prospectus"Facilities Agreement" an amended and restated facilities agreement between (1) the Bank, (2) Sondex and (3) certain other members of the Group"Firm Placing" the placing of the Firm Placed Shares by Investec on behalf of the Company pursuant to the Placing Agreement"Firm Placed Shares" 7,575,481 New Ordinary Shares"Geolink" Geolink International Limited"Group" the Company and its subsidiaries at the date of this announcement"Innicor Shares" the issued common shares in the capital of Innicor and any common shares of Innicor issued after the date of the Offer pursuant to the exercise of outstanding options over common shares of Innicor"Investec" Investec Bank (UK) Limited, acting through its division Investec Investment Banking"Issue Price" 280 pence per New Ordinary Share"Listing Rules" the listing rules made by the UK Listing Authority for the purposes of Part VI of the Financial Services Market Act 2000 as amended from time to time"London Stock Exchange" or " London Stock Exchange plcLSE""New Ordinary Shares" 15,678,571 new Ordinary Shares proposed to be allotted and issued pursuant to the Firm Placing and Placing & Open Offer"Offer Price" C$3.75 per Innicor Share"Official List" the Official List of the UK Listing Authority"Open Offer" the conditional offer, being made by Investec on behalf of the Company, inviting Qualifying Shareholders to subscribe for the Open Offer Shares at the Issue Price on the terms and subject to the conditions set out in the Prospectus and the Application Form"Open Offer Shares" 8,103,090 New Ordinary Shares which are being made available to Qualifying Shareholders at the Issue Price pursuant to the Open Offer"Ordinary Shares" ordinary shares of 10 pence each in the capital of the Company"Placing" the placing of the Open Offer Shares by Investec on behalf of the Company at the Issue Price pursuant to the Placing Agreement"Placing Agreement" the conditional agreement dated 21 September 2006 between the Company and Investec relating to the Firm Placing and Placing & Open Offer"Proposals" the acquisition of Innicor, the Firm Placing, Placing & Open Offer and the Resolutions to be proposed at the EGM permitting the Board to issue securities under section 80 and section 95 of the Companies Act 1985, as amended"Prospectus" a document comprising a combined prospectus and circular setting out the reasons for the Proposals, which is expected to be sent to Shareholders in October 2006"Qualifying Shareholders" holders of Ordinary Shares on the register of members of the Company at the close of business on the Record Date;"Record Date" the record date for the Open Offer to be set out in the Prospectus"Resolutions" the resolutions to be set out in the Notice of Extraordinary General Meeting in the Prospectus"Shareholder" a holder of Existing Ordinary Shares"UK Listing Authority" or " the Financial Services Authority acting in its capacity as the competentUKLA" authority for the purposes of Part VI of the Financial Services Market Act 2000 as amended from time to time This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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