18th Aug 2006 18:32
Penna Consulting PLC18 August 2006 18 August 2006 Penna Consulting Plc ("Penna" or "the Company") Placing of 5,714,286 new Ordinary Shares of 5p each at 70p per Share Penna Consulting Plc, today announces a placing of £4 million to provideadditional working capital and fund expansion of the business and also proposesto move to AIM, a market operated by the London Stock Exchange. Highlights • Penna to raise £4 million through a placing of 5,714,286 new ordinary shares at a placing price of 70 pence per share. • The proceeds of the proposed placing will be used to fund the working capital requirements of the group and in particular the growth of the Company's recruitment communications and interim management businesses. • Proposed cancellation of listing on the Official List and admission to trading on AIM, a market operated by the London Stock Exchange. • New longer term banking facilities have been signed with RBS comprising a term loan and an invoice discounting facility Stephen Rowlinson, Chairman of Penna, commented on the proposed transaction. "Iam pleased to announce the successful placing, subject to shareholder approval,of new shares to raise £4 million of new equity finance and that we have signednew longer term loan arrangements with RBS. We are also proposing to move to alisting on AIM which will reduce corporate costs and provide tax advantages tomany of our shareholders." For further information please contact: Penna Consulting PlcStephen Rowlinson 07710 023 699Gary Browning 020 7648 2448David Firth 020 7648 2448 Bridgewell Limited 020 7003 3000James Wellesley WesleyStephen CheungClaes Spang Expected Placing Timetable Extraordinary General Meeting 11 a.m. on 11 September 2006Admission to AIM 8 a.m. on 10 October 2006 Placing Statistics Placing Price 70pNumber of Placing Shares being placed on behalf of the Company 5,714,286Number of Ordinary Shares in issue following Admission 25,273,348Percentage of enlarged issued share capital subject to the Placing 22.6Proceeds of the Placing available to the Company (net of expenses) £4,000,000 1. Introduction The Company proposes to raise £4 million by way of a placing of 5,714,286 NewOrdinary Shares at a price of 70 pence per New Ordinary Share. In addition, theCompany is seeking the cancellation of the listing of the Existing OrdinaryShares on the Official List and will apply for the Existing Ordinary Shares andNew Ordinary Shares to be admitted to trading on AIM. The Proposals are subject to the approval of the Shareholders at anExtraordinary General Meeting convened for this purpose at 11.00 a.m. on 11September 2006. Details of the EGM will be set out in the notice of EGM to besent to Shareholders today. The Placing, Cancellation and Admission are inter conditional on each other,such that none will be completed unless they all are. Accordingly, if theResolutions are not approved by the Shareholders at the EGM: • the Placing will not proceed and the New Ordinary Shares will not be allotted; • the Cancellation will not proceed and the Existing Ordinary Shares will remain listed on the Official List; and • no application will be made for the Existing Ordinary Shares to be admitted to trading on AIM. 2. Background to and reasons for the Placing As set out in the Company's preliminary results announcement on 6 June 2006, theDirectors have been considering the optimum way to finance the Group and inparticular, how to finance the expansion of the Company's recruitmentcommunications and interim management businesses. Historically the Group has financed its working capital by way of a £4.25million overdraft facility from RBS. However, the projected future workingcapital needs of the business indicate that the Group will require additionalfunds. Accordingly, the Board has decided to extend the term of a portion of itscurrent indebtedness and also to raise additional equity finance. Specifically, the Company has entered into new borrowing arrangements with RBScomprising a term loan of £2.25 million (repayable over the next two years) andan invoice discounting facility of £1 million. In addition, and as a conditionprecedent to the term loan, the Company has agreed to raise £4 million of newequity finance by 16 October 2006 which will be achieved by way of the Placing.Currently, the Company also has an unsecured loan of £1.2 million from StephenRowlinson which will be increased by an additional £724,873 on or prior to 1September 2006 and the Company intends to capitalise such unsecured loans by theallotment to Stephen Rowlinson of New Ordinary Shares at the Issue Price as partof the Placing. RBS may request immediate repayment of the £2.25 million loan ifthe Company does not raise £4 million of new equity finance by 16 October 2006and if Stephen Rowlinson's additional loan of £724,873 is not received by theCompany on or prior to 1 September 2006. The Board considers that the Placing is the most appropriate form of fundraising and, in the circumstances, is in the best interests of the Company. TheDirectors believe that should the Shareholders not vote in favour of theProposals or the Placing not proceed for any other reason this would result inuncertainty around the Company's ability to continue as a going concern unlessthe Directors were able to find alternative funding in the period between theDirectors becoming aware of the fact that the Placing will not proceed and 16October 2006 (which would be difficult as the Directors have not to dateexplored alternative funding arrangements). In the context of the Proposals, theDirectors consider it highly likely that the conditions of the Placing (whichare customary placing conditions) will be satisfied and consequently the onlypossible circumstance which they currently envisage as preventing the Placingfrom proceeding is if the Shareholders eligible to vote (which excludes theRelated Parties) choose to vote against the Resolutions described in paragraph 9below. Accordingly the Directors would refer Shareholders to paragraph 10 belowand the Independent Directors' recommendations as set out in paragraph 11 below. 3. Use of Proceeds After consultation with its principal Shareholders, the Independent Directorshave decided to recommend that the Company proceeds with the Placing, the termsof which are set out in paragraph 5. In conjunction with the Placing, theIndependent Directors have also decided to recommend to Shareholders that theCompany should transfer the listing of the Existing Ordinary Shares to AIM, thereasons for which are, again, more fully set out in paragraph 6. As previouslyindicated, the Directors intend to use the proceeds of the Placing to fund theworking capital requirements of the Group and in particular to finance thegrowth of the Company's recruitment communications and interim managementbusinesses. 4. Current Trading and Prospects On 4 July 2006 the Company made the following trading statement: "Trading in the first quarter of the financial year (April - June) has beensimilar to the same period of last year for the majority of our service lines,with particularly strong performance being achieved by HR Consulting andLeadership Services. However, our largest division, Career Transition, hasexperienced subdued demand for its outplacement services particularly in theCity, which historically accounts for a third of the division's revenue. This isa result of the current buoyant conditions in Financial Services and the absenceof major rationalisation projects. Accordingly the Board is expecting that the profit outcome for the year as awhole will be marginally below that achieved in the last financial year." 5. Principal Terms of the Placing The Company announced today that it proposes, inter alia, to raise £4 millionthrough the issue of 5,714,286 New Ordinary Shares at a price of 70 pence perNew Ordinary Share. The New Ordinary Shares have been conditionally placed with certain Shareholdersand new investors on a non pre-emptive basis. The Directors believe that theadditional costs that would be incurred if the New Ordinary Shares were offeredto Shareholders on a pre-emptive basis by way of a rights issue or open offerwould not be in the best interests of Penna Consulting. The Issue Price represents a discount of approximately 17.75 per cent. to theclosing mid-market price of 85 pence per Ordinary Share as at 17 August 2006,being the latest practicable date prior to this announcement. As the Issue Pricerepresents a discount exceeding 10 per cent., the terms of the Placing of NewOrdinary Shares at the Issue Price must be approved by the Shareholders pursuantto Listing Rule 9.5.10. The New Ordinary Shares will, when issued, rank pari passu in all respects withthe Existing Ordinary Shares including the right to receive all dividends andother distributions made or paid on or after Admission. The New Ordinary Sharesmay be held in certificated or uncertificated form. The New Ordinary Shares will represent approximately 22.6 per cent. of theissued share capital of the Company following completion of the Placing. The Placing is conditional, inter alia, upon: • the passing of the Resolutions; • the Placing Agreement becoming unconditional in all respects (save as to Admission) and not having been terminated in accordance with its terms; and • Admission occurring by 8.00 a.m. on or around 10 October 2006 (or such later date as may be agreed between the Company and Bridgewell, not being later than 8.00 a.m. on 20 October 2006). 6. Cancellation of Listing and Admission to Trading on AIM The Directors believe that there are a number of benefits for the Company intransferring its listing to AIM from the Official List. AIM is more appropriatefor a company of Penna Consulting's size and in particular the cost ofadministering the requirements of the Listing Rules and certain associated rulesand Code provisions that apply to companies on the Official List is considerableand disproportionate for smaller companies. By contrast, AIM has proved to be anextremely supportive environment for companies such as Penna Consulting with asmaller capitalisation. The Directors believe that AIM provides a more flexible environment in which theCompany will be better able: • to achieve its business and strategic objectives; • to reduce costs and formalities associated with maintaining a listing on a regulated market, whilst continuing to provide a platform for trading in its Ordinary Shares; • to reduce costs and formalities associated with corporate transactions. In addition, there are possible beneficial tax consequences for individualShareholders. However, the Board is also aware that there may be circumstancesin which certain Shareholders may be prohibited from investing in AIM shares.AIM shares are not allowed to be held in a personal equity plan or an individualsavings account. Such Shareholders are advised to review their position in thisrespect as soon as possible and take independent professional advice ifnecessary. The AIM Rules are less demanding than those of the Official List. For example,in many cases, companies admitted to trading on AIM are not required to producedocumentation: when effecting acquisitions and disposals; or in connection with the admission of securities to trading on AIM; and in any event, such documentation, if required to be produced, is nottypically pre-vetted by the London Stock Exchange plc or the UKLA. The AIM Rules require that the Company appoints a nominated adviser and brokerbefore its Ordinary Shares are admitted to trading on AIM. Bridgewell has agreedto act as nominated adviser and broker to Penna Consulting. The Cancellation is conditional on Admission. Admission will not affect the wayin which Shareholders buy or sell Ordinary Shares and, following Admission,existing share certificates in issue in respect of Existing Ordinary Shares willremain valid. Subject to approval of the Resolutions by the Shareholders at the EGM, theCompany intends to apply for the cancellation of the listing of its OrdinaryShares on the Official List. The prior approval of the Resolution for theCancellation from a majority of not less than seventy-five per cent. of theShareholders entitled to vote at the EGM is required under Listing Rule 5.2.5(2). Further, application will be made for the Ordinary Shares to be admitted totrading on AIM. Cancellation will take effect not less than 20 business daysafter the date of the EGM and it is expected that the Cancellation and Admissionwill occur on or around 10 October 2006. The New Ordinary Shares will not bedealt with on a regulated market and no application will be made for the NewOrdinary Shares to be admitted to any such market. Following Cancellation and Admission the Ordinary Shares will be traded on AIMrather than the Official List. By virtue of AIM being less regulated than theOfficial List, an investment in shares traded on AIM carries a higher risk thanthose listed on the Official List. Admission to AIM should not be taken asimplying that there will be a liquid market for the Ordinary Shares. 7. Directors' Intentions and Related Party Transactions Stephen Rowlinson has agreed, conditional on the prior approval of theResolutions, to subscribe £1,924,872.60 (partly by way of capitalisation of hisexisting unsecured loan of £1.20 million to the Company and the further loan of£724,873 to be made by him on or prior to 1 September 2006) for 2,749,818 NewOrdinary Shares at the Issue Price. David Banks, Gary Browning and David Firthhave also agreed to subscribe for an aggregate of £155,673.00 for 222,390 NewOrdinary Shares at the Issue Price. Each of Stephen Rowlinson, David Banks, Gary Browning and David Firth areDirectors and so are treated as Related Parties for the purposes of the Placingunder the Listing Rules. In addition Jeremy Hosking, by virtue of the fact that he is entitled toexercise and control the exercise of 11.41 per cent. of the votes able to becast on matters at general meetings of the Company and because he has undertakento subscribe for £669,455.5 for 956,365 New Ordinary Shares pursuant to thePlacing, is also a Related Party for the purposes of the Placing under theListing Rules. The beneficial and non-beneficial interests of the Related Party Directors whohave agreed to subscribe in the Placing for New Ordinary Shares (not includingunexercised options over the Ordinary Shares) and of Jeremy Hosking on the dateof this document and following the Placing are set out below: Current Interest Interest after placing New Ordinary Ordinary Number of Shares Number Percentage Ordinary Shares Percentage subscribed for Shares David Banks 501,724 2.50 218,009 719,733 2.85Gary Browning 10,000 0.05 2,921 12,921 0.05David Firth 5,000 0.02 1,460 6,460 0.03 Stephen Rowlinson 5,863,222 29.98 2,749,818 8,613,040 34.08Jeremy Hosking 2,232,100 11.41 956,365 3,188,465 12.62 The remaining 1,249,999 New Ordinary Shares, representing 4.95 per cent. of theordinary share capital of the Company following the Placing, are being placedwith other non-related parties. The Shareholders are being asked to vote on andapprove the subscription of New Ordinary Shares as described because thearrangement is with Related Parties. Under the Listing Rules, the subscription of New Ordinary Shares by the RelatedParties requires the prior approval of independent Shareholders at a generalmeeting. The Related Parties will not vote on the Special Resolution and haveundertaken to take all reasonable steps to ensure that their associates will notvote on the Special Resolution at the EGM. In addition, the subscription by Stephen Rowlinson of the New Ordinary Shares asset out above will be conditional upon Shareholders approving the waiver of theobligation for Stephen Rowlinson to make a Rule 9 Offer under the Code asdescribed in paragraph 8 and as set out in the Ordinary Resolution. The Related Party Directors have, therefore, not taken part in the Board'sconsideration of the Related Party Transaction matters described in thisparagraph. 8. The City Code on Takeovers and Mergers The terms of the Placing give rise to certain considerations under the Code.Brief details of the Takeover Panel, the Code and the protections they affordare described below. The Code is issued and administered by the Takeover Panel. Penna Consulting is acompany to which the Code applies and Shareholders are accordingly entitled tothe protections afforded by the Code. The Code and the Takeover Panel operateprincipally to ensure that shareholders are treated fairly and are not denied anopportunity to decide on the merits of a takeover and that shareholders of thesame class are afforded equal treatment by an offeror. The Code also provides an orderly framework within which takeovers areconducted. In addition, it is designed to promote, in conjunction with otherregulatory regimes, the integrity of the financial markets. Pursuant to Rule 9of the Code, any person, or group of persons acting in concert, who acquiresinterests in shares which, when taken together with interests in shares alreadyheld by him or persons acting in concert with him, carry 30 per cent. or more ofthe voting rights of a company which is subject to the Code, is normallyrequired by the Takeover Panel to make a Rule 9 Offer. A Rule 9 Offer must be incash and at the highest price paid, within the 12 months prior to announcementof the Rule 9 Offer, for any interest in shares of the company by the personrequired to make the Rule 9 Offer or any person acting in concert with him. Assuming completion of the Placing, Stephen Rowlinson will be interested in8,613,040 Ordinary Shares, representing 34.08 per cent. of the enlarged issuedshare capital of Penna Consulting. The Takeover Panel has agreed, however, towaive the obligation to make a Rule 9 Offer, subject to the approval ofindependent Shareholders at the Extraordinary General Meeting voting on a poll.To be passed, the Ordinary Resolution will require the approval of a simplemajority of votes cast on a poll. Stephen Rowlinson will be disenfranchised fromvoting on the Ordinary Resolution at the EGM due to his involvement in theProposals. The Directors (excluding Stephen Rowlinson) consider the waiver of theobligation to make a Rule 9 Offer to be in the best interests of the Company andthe Shareholders as a whole and that is why they recommend that you vote infavour of the Ordinary Resolution as set out in paragraph 10. Shareholdersshould note that if the Ordinary Resolution is passed, Stephen Rowlinson will beinterested in Ordinary Shares carrying more than 30 per cent. of the Company'svoting share capital and that any further increase in the number of OrdinaryShares in which Stephen Rowlinson is interested will be subject to theprovisions of Rule 9. 9. Extraordinary General Meeting and Action to be Taken A notice convening the EGM to be held at 1st Floor, 55 Gracechurch Street,London EC3R 0EE at 11.00 a.m. on 11 September 2006 will be sent to Shareholderstoday.At the EGM, the Resolutions will be proposed. The Special Resolution is proposed: • to increase the authorised share capital of the Company from £1,300,000 to £1,500,000 by the creation of 4,000,000 Ordinary Shares in connection with the Placing (representing an increase of approximately 15.38 per cent. required inorder to allot New Ordinary Shares pursuant to the Placing); • to empower the Directors to allot equity securities for cash inconnection with the Placing otherwise than in accordance with the statutorypre-emption provisions set out in the Act up to 5,714,286 Ordinary Shares of 5pence each in the share capital of the Company being up to a maximum of£285,714.30 (representing 29.2 per cent. of the existing issued ordinary sharecapital of 19,559,062 Ordinary Shares of 5 pence each of the Company as at 17August 2006 (being the latest practicable date prior to the publication of thisdocument)). This authority will expire on the conclusion of the Annual GeneralMeeting of the Company in September 2006; • to approve the terms of the discounted Issue Price; • to approve the Cancellation; and • to approve the subscription by the Related Parties for an aggregate of up to 3,928,573 New Ordinary Shares at 70 pence per New Ordinary Share. The Directors currently propose only to allot Ordinary Shares in connection withthe Placing pursuant to the authority to be granted by the Special Resolution.The Ordinary Resolution is proposed, conditional upon the passing of the SpecialResolution, to approve the waiver by the Takeover Panel of any obligation ofStephen Rowlinson to make a Rule 9 Offer. The increase in the authorised sharecapital of the Company and the authorities for the Directors to allot the NewOrdinary Shares and disapply preemption rights require the prior authorisationof the Shareholders at a general meeting under sections 123, 80 and 89 of theAct respectively. The subscription for New Ordinary Shares by the Directors is aRelated Party Transaction and requires the prior authorisation of theShareholders under rule 11.1.7(3)b of the Listing Rules. The Ordinary Resolutionis required pursuant to the Code. A form of proxy for use by Shareholders in connection with the EGM is attachedat the end of this document. Whether or not you propose to attend the EGM inperson, you are requested to complete the form of proxy in accordance with theinstructions printed on it and to return it to the Registrars as soon aspossible and in any event so as to arrive no later than 11.00 a.m. on 8September 2006. Completion and return of the form of proxy will not preclude youfrom attending the EGM and voting in person should you so wish. 10. Importance of Voting in favour of the Proposals As described in paragraph 2 above, the Directors believe that shouldShareholders not vote in favour of the Proposals or the Placing not proceed forany other reason, this would result in uncertainty around the Company's abilityto continue as a going concern unless the Directors were able to findalternative funding in the period between the Directors becoming aware of thefact that the placing will not proceed and 16 October 2006 (which would bedifficult as the Directors have not to date explored alternative fundingarrangements) and therefore, the Directors would urge Shareholders to vote infavour of the Proposals. 11. Recommendation and Voting Intentions The Board believes that the Special Resolution is in the best interests of theCompany and its Shareholders as a whole. Accordingly the Board recommend thatyou vote in favour of the Special Resolution to be proposed at the EGM. Stephen Rowlinson, David Banks, Gary Browning, David Firth and Jeremy Hoskingwill not vote on the Special Resolution at the EGM and have undertaken to takeall reasonable steps to ensure that their associates will not vote on theSpecial Resolution at the EGM. The Board consider that the terms of StephenRowlinson's, David Banks', Gary Browning's, David Firth's and Jeremy Hosking'srespective subscriptions for New Ordinary Shares, (including the discountedIssue Price and the capitalisation of Stephen Rowlinson's unsecured loan of£1.20 million and the additional unsecured loan of £724,873 which he will makeon or prior to 1 September 2006), to be fair and reasonable as far as theShareholders are concerned and have been so advised by Bridgewell. The RelatedParty Directors have not taken part in the Board's consideration of this matter. The Board (excluding Stephen Rowlinson), who has been so advised by Bridgewell,believes the waiver of Rule 9 so that Stephen Rowlinson can subscribe for theNew Ordinary Shares as set out in paragraph 7, is in the best interests ofShareholders as a whole. In providing its advice, Bridgewell has taken intoaccount the commercial assessment of the Board (excluding Stephen Rowlinson).Accordingly, the Board (excluding Stephen Rowlinson) recommend that you vote infavour of the Ordinary Resolution to be proposed at the EGM, as they intend todo in respect of their own holdings of Ordinary Shares, being in aggregate585,975 Ordinary Shares (representing 3.0 per cent. of the existing issuedordinary share capital of the Company). This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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