9th Nov 2009 07:00
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For immediate release |
9 November 2009 |
FUSION IP PLC
("Fusion" or "the Company")
£3.2m Fundraising led by IP Group Plc
New Co-investment Agreement with IP Group Plc
Notice of General Meeting
Highlights:
Fusion is proposing to raise approximately £3.2 million (before expenses) by way of a Subscription through the issue of 10,740,741 new Ordinary Shares (the "Subscription Shares") to be issued credited as fully paid at a price of 27 pence per share and a Placing of 925,926 new Ordinary Shares issued at a price of 27 pence per share. It is intended that IP Group will subscribe for all the Subscription Shares with such Subscription Shares being issued credited as fully paid in consideration for the issue of the shares in IP Group to be subject to a vendor placing.
The New Co-investment Agreement with IP Group gives IP Group the right to acquire for cash, at a predetermined portfolio company valuation of £500,000, 20 per cent. of Fusion's equity in any new portfolio company formed from its agreements with Cardiff and Sheffield. This will normally equate to a 12 per cent. stake in the new portfolio company's share capital. If IP Group exercises this right, it will be legally bound to invest in the seed funding round of the portfolio company, in excess of £200,000, at the same value as the Company and in proportion to the shareholdings of the Company.
The Company also today announces that it has agreed with CCVU (formerly NPI Ventures Limited) to terminate the CCVU Co-Investment Agreement signed in March 2006 and that CCVU intends to sell its 6.3 per cent. holding (equating to 2,668,858 Ordinary Shares) in Fusion and Seymour Pierce has procured purchasers for such Ordinary Shares. As a result of terminating the CCVU Co-Investment Agreement, CCVU will lose the right to appoint a director to the board of the Company but will retain its warrants to subscribe for 3,675,000 Ordinary Shares which have exercise prices between 150p and 220p.
A circular relating to the proposals and convening the General Meeting, which will take place at the offices of Ashurst LLP, Broadwalk House, 5 Appold Street, London EC2A 2HA at 11.00 a.m. on 2 December 2009, will be sent to Shareholders today.
Each of the executive directors of the Company and certain other shareholders holding in aggregate 30,833,851 Ordinary Shares, representing approximately 73.1 per cent. of the Existing Ordinary Shares, have irrevocably undertaken to vote in favour of the resolutions to be proposed at the General Meeting.
IP Group's investment in Fusion is being funded via the allotment and issue of new ordinary IP Group shares, which will be subject to a vendor placing.
The Company has also announced today its preliminary results for the year ended 31 July 2009.
Commenting on the Placing, David Baynes, Chief Executive Officer of Fusion IP, said:
"We are delighted to be working with IP Group and welcome them, both as a new shareholder in Fusion and a co-investment partner. Their investment, combined with the strength of our IP pipelines, will enable us to continue to create long term value from Cardiff and Sheffield's world class research.
"Fusion currently has a strong portfolio of 20 active spin-out investments, including successful companies such as Simcyp which has reported its fifth consecutive year of both revenue and profit growth, with revenues up by 24% to £3.9m and profits up by 26% to £1.2m this year alone. We are expecting to spin-out up to three new companies during the period ending July 2010 and anticipate spinning out further companies in 2011 and 2012. The funds raised today, combined with our existing strong relationship with Finance Wales, will allow us to continue this momentum to spin out further high quality portfolio companies.
"IP Group's investment in Fusion is a strong endorsement of Fusion's investment proposition and ability to identify and commercialise IP. Together, Fusion and IP Group will make a powerful combination of knowledge and resources and we look forward to working with Alan and his team."
Commenting on IP Group's investment in Fusion IP, Alan Aubrey, Chief Executive Officer of IP Group PLC, said:
"We are very pleased to have agreed this proposed strategic investment in Fusion. We have a high regard for the Fusion management team and the portfolio which they have established from the exclusive framework agreements which Fusion has with the Universities of Sheffield and Cardiff, two of the leading research universities in the UK. We look forward to working together with the Fusion team."
For further information please contact:
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Fusion IP |
+44 (0)114 275 5555 |
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David Baynes, CEO Tony Gardiner, CFO |
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Buchanan Communications |
+44 (0)20 7466 5000 |
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Tim Anderson / Lisa Baderoon / Catherine Breen |
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Seymour Pierce |
+44 (0)20 7107 8000 |
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Chris Howard |
Introduction
The Company announced today that it is proposing to raise approximately £3.2 million (before expenses) by way of (i) a subscription of 10,740,741 new Ordinary Shares (the "Subscription Shares") to be issued credited as fully paid at a price of 27 pence per share and (ii) a Placing of 925,926 new Ordinary Shares issued at a price of 27 pence per share. It is intended that IP Group plc, a company which is listed on the London Stock Exchange's main market for listed securities and which is the leader in the field of commercialising university intellectual property, will subscribe for all the Subscription Shares with such Subscription Shares being issued credited as fully paid in consideration for the issue of the Consideration Shares. As a result of this transaction IP Group will hold approximately 19.8 per cent. of Fusion.
The Company further announced today that it has agreed with Citigroup Capital Ventures UK Limited ("CCVU") (formerly NPI Ventures Limited) to terminate the CCVU Co-Investment Agreement signed in March 2006 and that CCVU intends to sell its 6.3 per cent. holding in Fusion and Seymour Pierce has procured purchasers for such Ordinary Shares. As a result of terminating the CCVU Co-Investment Agreement, CCVU will lose the right to appoint a director to the board of the Company.
In addition, the Company has today entered into a New Co-Investment Agreement with IP2IP0 Limited (a wholly owned subsidiary of IP Group) ("IP2IP0"). As part of the New-Co-Investment Agreement, IP2IP0 will have the right to acquire for cash, at a predetermined portfolio company valuation of £500,000, 20 per cent. of the Company's equity in any new portfolio company incorporated during the remaining term of Fusion's current university agreements with Cardiff University and the University of Sheffield. As Fusion normally owns 60 per cent. of any new portfolio company at start-up, IP2IP0's shareholding will normally equate to a 12 per cent. stake in the new portfolio company's share capital. If IP2IP0 exercises this right, IP2IP0 will be legally bound to invest in the first funding round of the portfolio company in excess of £200,000 at the same value as the Company and in proportion to the shareholdings of the Company and IP2IP0.
Under the terms of the New Co-Investment Agreement, IP Group has agreed that, in respect of any Fusion companies in which it has exercised its co-investment rights, it will make available its in-house portfolio support services, including the key areas of senior management recruitment and capital markets, on the same basis and terms on which it makes available such services to existing IP Group portfolio companies.
The Company will appoint a representative of IP Group to the board of the Company.
The Company has also announced today its preliminary results for the year ended 31 July 2009. The purpose of this letter is to provide Shareholders with more information on and reasons for the Subscription and the Placing, the entry into by the Company of the New Co-Investment Agreement and to seek Shareholder approval to:
adopt new articles of association of the Company;
authorise the Directors to issue and allot new Ordinary Shares, otherwise than on a pre-emptive basis for the purpose of the Subscription and the Placing;
authorise the Directors to allot the Additional Sheffield Shares to the University of Sheffield, otherwise than on a pre-emptive basis; and
authorise the Directors to allot Ordinary Shares both generally and otherwise than on a pre-emptive basis following the GM.
Background on the Company
Fusion owns the exclusive rights to 100 per cent. of the university-owned research generated at two of the UK's leading Russell Group universities - The University of Sheffield and Cardiff University. These exclusive partnerships enable Fusion to invest in some the world's most advanced science and turn world class research into business through the creation of a growing portfolio of companies, in fields as varied as alternative energy, drug discovery and engineering.
In 2005, Fusion signed a 10 year agreement with the University of Sheffield for the exclusive rights to commercialise all of their university-owned medical IP, through either licensing or the creation of spin-out companies.
In 2007, Fusion signed a second 10 year agreement with Cardiff University for the exclusive rights to commercialise all of their university-owned IP, through the creation of spin-out companies.
In July 2008, Fusion signed a new expanded agreement with the University of Sheffield to add all university owned physical sciences IP to the original agreement, such that Fusion had the rights over all of the University of Sheffield's IP, through either licensing or the creation of spin-out companies. This new expanded agreement gives Fusion the exclusive rights to all physical sciences IP until 2018, in addition to the exclusive medical IP rights, which currently run to 2015.
Under both agreements, the universities continue to identify IP with commercial potential and patent appropriate IP disclosures, such that Fusion can select the IP with the greatest commercial potential and concentrate its money and resources on creating value from this world class research.
The Fusion teams, who are based within both universities, are well integrated into the key university departments, enabling the commercialisation to be an integrated part of the university process.
Background to and reasons for the Subscription
The Company currently has 20 active spin-out investments and is expecting to spin-out up to three new companies during the period ending July 2010. It would anticipate spinning out further companies in 2011 and 2012.
Current companies include:
Magnomatics, with its revolutionary magnetic gear-based technologies for use in green energy applications, marine propulsion and hybrid vehicles. Magnomatics has just signed a six-figure contract with the Ministry of Defence to perform a detailed design study of a magnetically geared propulsion motor, based on Magnomatics patented Pseudo Direct Drive and is in negotiation with a number of companies regarding its wind turbine technology.
Simcyp, which sells pharmacokinetic software to predict the effect of new drugs on patient populations. Simcyp has increased turnover fourfold, and profit fivefold, in the last four years.
Phase Focus, which has developed a revolutionary lensless imaging technology for use in microscopy. Phase Focus' directors believe that this technology has the potential to provide a better performance at a considerably cheaper price than current optical and electron microscopes.
Asterion, which is developing a third generation of biologics that mimic the actions of natural hormones, with potentially considerable benefits to patients. Asterion is currently in the middle of a £4-5 million fund raising.
Mesuro, which has launched a number of new and innovative RF testing and measurement devices, which overcome many of the limitations inherent in the traditional high frequency RF design and testing processes. Mesuro's first product went on sale in August this year.
Diurnal, which is developing a 'once a day' drug that releases replacement hormones in a way that mimics the body's natural circadian rhythm (its 24 hour clock). Its first product, Chronocort, has achieved Orphan Drug Status in the EU and the company is currently hoping to complete a fund raising that will take Chronocort into Phase II trials.
Demasq, which this year received FDA clearance and CE approval for its software engine that helps a clinician visualise the soft tissue of the knee joint using the original digital X-ray. Demasq has not yet completed its proposed funding round because of difficulties between shareholders. Following recent negotiations, the Directors believe that Demasq has resolved these shareholder issues and are hoping that Demasq will be in a position to complete its funding plans within the next six months. Once completed Demasq would then be in a position to initiate a number of independent studies to validate the product, prior to launch in the UK and US towards the end of 2010.
The Directors believe that there is a reasonable possibility that at least one portfolio company could achieve an exit with a significant value during the course of the next year but that a number of the other portfolio companies require a longer period to achieve significant value and hence provide a cash return to Fusion.
To this end, the Company is proposing to:
fund its ongoing operation whilst the current portfolio is brought to fruition; and
sign the New Co-investment Agreement with IP2IP0 that will offer IP2IP0 the right to acquire 20 per cent. of Fusion's equity in any new portfolio company formed during the remaining term of Fusion's current university agreements with Cardiff University and the University of Sheffield. This shareholding, which will ordinarily equate to a 12 per cent. stake in the new portfolio company, will be acquired from Fusion for cash, the amount of which will be calculated by reference to a £500,000 valuation of the new portfolio company.
IP Group Plc
IP Group are the leaders in the field of university intellectual property ("IP") commercialisation with unrivalled access to university IP, having entered into long-term partnership agreements with 10 of the UK's leading universities.
From its partner universities' intellectual property, IP Group has created a strong and diversified portfolio of 65 companies valued, as at 30 June 2009, at £97.1 million. To date, eleven of its portfolio companies have listed on AIM, one on PLUS Markets and there have been four trade sales.
Founded in 2001, IP Group listed on AIM in October 2003 and moved to the Official List in June 2006 where it has a market capitalisation of approximately £138 million.
The New Co-investment Agreement
There are two elements to the New Co-investment Agreement:
The IP Group co-investment Right Pursuant to the New Co-Investment Agreement, IP2IP0 will have the right, exercisable in each case at its discretion, to acquire 20 per cent. of Fusion's initial equity holding in each new portfolio company formed by Fusion under Fusion's current agreements with Cardiff University and the University of Sheffield at a predetermined valuation of each such company of £500,000. Following the allocation of founder equity in its new portfolio companies, Fusion typically holds 60 per cent. of the share capital of such companies. IP2IP0 will therefore ordinarily acquire from Fusion a shareholding of 12 per cent. of the issued share capital for £60,000 on the exercise of its co-investment rights. In the event that IP2IP0 has exercised its right to acquire this initial shareholding from Fusion in respect of any particular portfolio company, IP2IP0 will thereafter be legally bound to invest 20 per cent. of the total amount of the first seed funding round in excess of £200,000 undertaken by Fusion in such company. Such investment will be made at the same price and on the same basis (for example, by way of a subscription for shares or by way of convertible loan note or otherwise) as that made by Fusion.
The New Co-Investment Agreement is conditional on the Resolutions being passed at the General Meeting and is thereafter terminable by either party in the event the Subscription Agreement fails to become unconditional in all respects by 16 December 2009.
The New Co-Investment Agreement provides for a process and timeline in accordance with which the co-investment rights as detailed above are to be exercised and further provides that, in the event IP2IP0 shall in any two year period have declined to exercise its co-investment rights in respect of more than 50 per cent. of the portfolio company opportunities with which it is presented and in respect of which Fusion has committed to invest at least £200,000 of seed funding, Fusion may terminate the agreement.
The co-investment rights detailed above shall, unless terminated earlier in accordance with the New Co-Investment Agreement, subsist throughout the terms of the Cardiff Agreement (being to 9 January 2017) and the Sheffield Agreement (being to 16 February 2015 for medical IP and 1 August 2018 for all physical IP).
The Additional Services
Under the terms of the New Co-Investment Agreement, IP Group has agreed that, in respect of any Fusion companies in which it has exercised its co-investment rights, it will make available its in-house portfolio support services, including the key areas of senior management recruitment and capital markets, on the same basis and terms on which it makes available such services to existing IP Group portfolio companies.
The Directors believe that the New Co-Investment Agreement, when combined with its existing Memorandum of Understanding with Finance Wales, will:
continue to enhance the ability of the Fusion portfolio companies to raise third party funding and support their expansion and growth;
continue to reduce the time devoted to raising third party funding for Fusion portfolio companies; and
typically change new Fusion portfolio companies from subsidiaries to associate companies, removing the overhead costs of the portfolio companies from the Fusion profit and loss account.
The Subscription
The Subscription
Pursuant to the Subscription, the Company is proposing to issue 10,740,741 Subscription Shares at 27 pence per Subscription Share to raise approximately £2.9 million (before expenses) for the Company.
IP Group has conditionally agreed to subscribe for the Subscription Shares by issuing the Consideration Shares to the Company. On completion of this transaction IP Group will hold approximately 19.8 per cent. of the Enlarged Issued Share Capital.
The Subscription Shares have not been and will not be offered generally to Shareholders, whether on a pre-emptive basis or otherwise. Following the introduction of the Prospectus Rules on 1 July 2005 and the consequential increase in costs and the time required for AIM companies to raise new equity capital on a pre-emptive basis, the Directors believe that the Subscription is the most cost effective and expeditious method of raising new equity capital.
The Subscription Shares will, on Admission, rank in full for all dividends or other distributions declared, made or paid in respect of Ordinary Shares after Admission and will otherwise rank pari passu in all respects with the Existing Ordinary Shares.
The Subscription has not been underwritten but the sale of the Consideration Shares has been underwritten by KBC Peel Hunt Limited, brokers to IP Group.
Subscription Agreement
Pursuant to the Subscription Agreement, IP Group has conditionally agreed to subscribe for 10,740,741 new Ordinary Shares in the capital of the Company at 27 pence per Subscription Share. The subscription for the Subscription Shares is conditional on the passing of Resolutions 1 and 2 at the GM, the IP Group Placing Agreement remaining in full force and effect and the IP Group Placing Agreement becoming unconditional in all respects other than in respect of any condition in the Subscription Agreement regarding the allotment, issue and listing of the Consideration Shares. The conditions in the Subscription Agreement are not capable of waiver. The consideration payable by IP Group for the Subscription Shares is the allotment and issue of 5,471,699 new ordinary shares of 2 pence each in the capital of IP Group at 53p per share to such person or persons (other than Fusion) as Fusion shall direct, having given KBC Peel Hunt Limited (broker to IP Group) a power of attorney to procure such persons as its agent on its behalf, with KBC Peel Hunt Limited agreeing to pay or procure to be paid the proceeds due in respect of the payment of such Consideration Shares from the third party allottees, being gross proceeds of £2.9 million, direct to Fusion.
The Subscription Agreement further provides that the Company, in respect of the Subscription Shares, and IP Group, in respect of the Consideration Shares shall, following satisfaction of the conditions, take all necessary steps to ensure that Admission occurs in respect of the Subscription Shares and that the Consideration Shares are admitted to listing on the Official List and trading on the Main Market of the London Stock Exchange and shall co-ordinate to ensure that the aforementioned happens simultaneously.
Termination of the CCVU Co-Investment Agreement and the sale by CCVU of its shareholding
CCVU and Fusion have together decided to terminate the CCVU Co-Investment Agreement entered into between them in March 2006. CCVU has also indicated its intention to sell its 6.3 per cent. stake (equating to 2,668,858 Ordinary Shares) in the capital of Fusion and Seymour Pierce has procured purchasers for such Ordinary Shares.
As a result of the termination of the CCVU Co-Investment Agreement, CCVU will lose its right to appoint a director to the Board but will retain its warrants over 3,675,000 Ordinary Shares which have exercise prices between 150p and 220p.
Further issue of Ordinary Shares to the University of Sheffield
Pursuant to the terms of the agreements between Fusion and the University of Sheffield dated 26 January 2005 and 7 July 2008 respectively, the University of Sheffield is entitled, on the occurrence of certain trigger events, to receive up to a further 1,207,826 Ordinary Shares in the capital of Fusion.
As a consequence of the Subscription and the Placing, the shareholding of the University of Sheffield will no longer represent more than the shareholding of Cardiff University plus 3.5 per cent. This is one of the trigger events referred to above and therefore the Additional Sheffield Shares are to be issued to restore the required ratio between the Sheffield and Cardiff shareholdings.
The General Meeting
Set out in the circular to shareholders is a notice convening a General Meeting of the Company to be held at the offices of Ashurst LLP, Broadwalk House, 5 Appold Street, London EC2A 2HA at 11.00 a.m. on 2 December 2009. At this meeting the following resolutions will be proposed:
Resolution 1
The provisions regulating the operations of the Company are currently set out in the Company's memorandum and articles of association. The Company's memorandum contains, among other things, the objects clause which sets out the scope of the activities the Company is authorised to undertake. The Companies Act 2006 significantly reduces the constitutional significance of a company's memorandum.
Under the Companies Act 2006, the objects clause and all other provisions which are contained in a company's memorandum, for existing companies at 1 October 2009, are deemed to be contained in a company's articles of association. The company can, however, remove these provisions by special resolution. Further the Companies Act 2006 states that, unless a company's articles provide otherwise, a company's objects are unrestricted. This abolishes the need for companies to have objects clauses. For this reason the Company is proposing to remove its objects clause together with all other provisions of its memorandum which, by virtue of the Companies Act 2006, are treated as forming part of the Company's articles of association as of 1 October 2009. Resolution 1(a), which is proposed as a special resolution, confirms the removal of such provisions for the Company.
Further, it is proposed in Resolution 1(b), which is proposed as a special resolution, to adopt new articles of association in order to update the Company's current articles of association. The new articles of association primarily take account of changes to law and practice since the Company's articles of association were last updated and, in particular, the Companies (Shareholders' Rights) Regulations 2009 and the implementation of the Companies Act 2006.
The principal changes introduced in the new articles of association are summarised in Appendix I in the circular to shareholders. Other changes, which are of a minor, technical or clarifying nature, and also some more changes which merely reflect changes made by the Companies Act 2006 and the Companies (Shareholders' Rights) Regulations 2009 have not been noted.
Resolution 2
It is proposed pursuant to Resolution 2, which is a special resolution, to:
(a) authorise the Directors to allot the Subscription Shares and the Placing Shares; and
(b) disapply Shareholders' statutory pre-emption rights in relation to the Subscription and the Placing.
The authority and power granted pursuant to Resolution 2 will expire 12 months from the date of it being passed.
Resolution 3
It is proposed pursuant to Resolution 3, which is a special resolution and conditional upon the Subscription taking place, to:
(a) authorise the Directors to allot the Additional Sheffield Shares; and
(b) disapply Shareholders' statutory pre-emption rights in relation to the issue of the Additional Sheffield Shares.
The authority and power granted pursuant to Resolution 3 will expire 12 months from the date of it being passed.
Resolution 4
Resolution 4, which is proposed as an ordinary resolution, is conditional upon the Subscription and the Placing having taken place. If passed this resolution will grant the Directors pursuant to section 551 of the Companies Act 2006 authority to allot new Ordinary Shares for general purposes and also to grant rights to subscribe for or to convert any security into Ordinary Shares up to a maximum nominal amount of £178,992. This authority would be in substitution for the unutilised portion of the authority to allot Ordinary Shares which was given to the Directors on 31 July 2008. The maximum nominal amount of £178,992 represents approximately 33 per cent. of the Company's Enlarged Issued Share Capital (assuming no further exercise of options). If given (and to the extent not subsequently revoked or replaced), this authority will expire five years from the date of the passing of such resolution.
Resolution 5
Resolution 5, which is proposed as a special resolution, is conditional upon the passing of Resolution 4. It will, if passed, disapply Shareholders' statutory pre-emption rights in respect of the issue of Ordinary Shares by the Company for cash consideration: (i) by way of an offer of equity securities to shareholders in proportion to their respective holdings of such shares (excluding shares held in treasury); and (ii) generally (otherwise than pursuant to (i) above), up to an aggregate maximum nominal value of £27,120. This represents approximately 5 per cent. of the Company's Enlarged Issued Share Capital (assuming no further exercise of options). If given (and to the extent not subsequently revoked or replaced) this power will expire on 31 December 2010 or at the conclusion of the Company's annual general meeting in 2010, whichever is the earlier.
Further information on the Resolutions
The Company currently holds no Ordinary Shares in treasury. The Directors currently have no specific plans to allot Ordinary Shares other than the Additional Sheffield Shares, the Subscription Shares and the Placing Shares or as a result of the exercise of any outstanding options.
Admission, Settlement and CREST
Application will be made to the London Stock Exchange for the Subscription Shares, the Placing Shares and the Additional Sheffield Shares to be admitted to trading on AIM. It is expected that Admission will become effective and dealings in the Subscription Shares, the Placing Shares and the Additional Sheffield Shares will commence on 3 December 2009.
The Articles permit the Company to issue shares in uncertificated form. CREST is a computerized paperless share transfer and settlement system which allows shares and other securities, including depository interests, to be held in electronic rather than paper form. Application has been made for the Subscription Shares to be admitted to CREST.
CREST is a voluntary system and Shareholders who wish to retain certificates will be able to do so.
Recommendation
The Directors believe that the New Co-Investment Agreement with IP2IP0 and IP Group's investment in Fusion is a strong endorsement of Fusion, its model and its management and is in the best interests of the Company and Shareholders as a whole. For these reasons the Directors unanimously recommend to Shareholders that they vote in favour of the Resolutions to be proposed at the GM, as they intend to do in respect of their own beneficial holdings of shares, totalling 3,999,996 Ordinary Shares, and representing approximately 9.5 per cent. of the Existing Ordinary Shares.
Irrevocable undertakings
Each of the executive directors of the Company and certain other shareholders holding in aggregate 30,833,851 Ordinary Shares, representing approximately 73.1 per cent. of the Existing Ordinary Shares, have irrevocably undertaken to vote in favour of the resolutions to be proposed at the General Meeting.
Related Shares:
Ip Group