17th Dec 2007 08:58
API Group PLC17 December 2007 The headline for the API Group PLC announcement released today at 08:24under RNS No 0322K should read Open Offer to raise GBP8m. The announcement text is unchanged and is reproduced in full below. Not for release, publication, transmission, or distribution directly orindirectly in or into any other jurisdiction including the United States ofAmerica, Canada, Japan, Australia, New Zealand or the Republic of South Africa. 17 December 2007 For Immediate Release API Group plc (the "Company") Announcement regarding Open Offer and Amended UK Bank Facilities API Group PLC ("API") announces a fully underwritten Open Offer to raise approximately £8 million (before expenses). Highlights • Approximately £8 million (before expenses) to be raised through anOpen Offer of new Shares. • 36 new Ordinary Shares for every 35 existing Ordinary Shares at 22.5pence representing a discount of 10% to API's closing middle market price onFriday 14 December, the last dealing day prior to this announcement. • Fully underwritten by API's two largest shareholders, Steel (a 29.36%Shareholder) and Wynnefield (a 25.91% Shareholder). • Net proceeds of approximately £7.2 million to be used to repay £2.5million of funds drawn down under short term bridging loan facilities which theCompany has agreed with each of Steel and Wynnefield and reduce UK Bank termdebt by way of an immediate repayment of £2 million. Balance of proceeds to beretained by the Company for general corporate purposes. • Key changes to UK Bank Facilities include beneficial revisions tofinancial covenants. • The Open Offer is conditional, inter alia, upon the passing at theGeneral Meeting of the first five Resolutions described in section 15 of thefull announcement which follows. • Proposed waiver of the usual requirements under Rule 9 of the TakeoverCode for Steel and/or Wynnefield to make a general offer to all Shareholders inthe event that either acquires an interest in 30 per cent. or more of a Companyas a consequence of the Open Offer, subject to Independent Shareholder approval. • Potential to delist from the Official List and seek admission to AIMpost-Open Offer. • Irrevocable commitments received from Shareholders representing 71.3%of the issued share capital in favour of the Resolutions (except those relatingto the Rule 9 waiver) and irrevocables received from Independent Shareholdersrepresenting 35.7% of eligible votes in favour of the Rule 9 waiver Resolutions. • A prospectus containing full details of the Proposals and conveningthe General Meeting is expected be posted to Shareholders shortly. Commenting on the Open Offer, Richard Wright, Non Executive Chairman, said: "Following the announcement made on 21 September 2007 the Board has beenreviewing a number of options for meeting the Company's short and medium termcash requirements and also reducing its UK structural indebtedness. We areconfident that the issue of new shares, fully underwritten by our two largestshareholders, combined with the new banking facilities, represents the best wayforward. Once the Open Offer becomes unconditional and the new credit facility comes intoeffect, we are confident that API will have financing arrangements in placewhich provide sufficient working capital for the Group's foreseeablerequirements. The Board believes that the new management will then be in aposition to develop and execute a comprehensive plan to turn around thefinancial performance of the Group." Enquiries Andrew Turner, Group Chief Executive Officer, 01625 858700API Group plc Tim Spratt / Nicola Biles 020 7831 3113Financial Dynamics Nick Westlake/Bruce Garrow 020 7260 1000Numis Securities Ltd This summary should be read in conjunction with the detailed announcement whichfollows. Section 17 of the full announcement contains the definitions of certainterms used in this summary and the full announcement. This announcement does notconstitute, or form part of, an offer to sell, or the solicitation of an offerto subscribe for or buy, any of the New Ordinary Shares to be issued inconnection with the Open Offer. The Directors of API have taken all reasonable care to ensure that theinformation contained in this announcement is, to the best of their knowledge,in accordance with the facts and contains no omission likely to affect theimport of such information. The release, publication or distribution of this announcement in certainjurisdictions may be restricted by law and therefore persons in suchjurisdictions into which this announcement is released, published or distributedshould inform themselves about and observe such restrictions. Numis, which is authorised and regulated in the United Kingdom by the FinancialServices Authority, is acting exclusively for the Company and for no one else inrelation to the Open Offer and will not be responsible to anyone other than theCompany for providing the protections afforded to its clients or for providingadvice in relation to the Open Offer or any other matter referred to in thisannouncement. Not for release, publication, transmission, or distribution directly orindirectly in or into any other jurisdiction including the United States ofAmerica, Canada, Japan, Australia, New Zealand or the Republic of South Africa.This announcement is not an offer of securities for sale in the United States.Securities may not be offered or sold in the United States absent registrationor an exemption from registration under the U.S. Securities Act of 1933, asamended. Any public offering of securities to be made in the United States willbe made by means of a prospectus that may be obtained from the issuer or sellingsecurity holder and that will contain detailed information about the company andmanagement, as well as financial statements. THIS ANNOUNCEMENT DOES NOT CONSTITUTE, OR FORM PART OF, AN OFFER TO SELL OR THESOLICITATION OF AN OFFER TO SUBSCRIBE FOR OR BUY ANY SECURITIES, NOR THESOLICITATION OF ANY VOTE OR APPROVAL IN ANY JURISDICTION, NOR SHALL THERE BE ANYSALE, ISSUE OR TRANSFER OF THE SECURITIES REFERRED TO IN THIS ANNOUNCEMENT INANY JURISDICTION IN CONTRAVENTION OF APPLICABLE LAW. ANY DECISION TO INVEST INTHE ISSUE SHARES SHOULD ONLY BE MADE ON THE BASIS OF INFORMATION CONTAINED INTHE PROSPECTUS. Not for release, publication, transmission, or distribution directly orindirectly in or into any other jurisdiction including the United States ofAmerica, Canada, Japan, Australia, New Zealand or the Republic of South Africa. 17 December 2007 For Immediate Release API Group plc (the "Company") Announcement regarding Open Offer and Amended UK Bank Facilities API Group plc ("API") announces a fully underwritten Open Offer to raise approximately £8 million (before expenses) 1. Introduction API Group plc announces today that it is proposing to raise approximately £8.0million (before expenses) by means of an open offer to Shareholders. The OpenOffer of 35,557,213 new Ordinary Shares at 22.5p per share is being made toQualifying Shareholders on the basis of: 36 new Ordinary Shares for every 35 existing Ordinary Shares Following the Company's announcement on 21 September 2007 that it expected acash shortfall in respect of its UK Bank Facilities to occur in November 2007,the Company entered into discussions with its UK Bank and its two largestshareholders, namely Steel and Wynnefield, and has been reviewing a number ofoptions for meeting its short and medium term cash requirements. The Company hasagreed with its UK Bank an amendment to its UK Bank Facilities which isconditional inter alia upon the completion of the Open Offer. The Company hasreceived irrevocable commitments from Steel and Wynnefield to accept the OpenOffer and Steel and Wynnefield have also agreed to subscribe to their maximumpro rata entitlements to the Excess Shares. In addition, Steel and Wynnefieldhave agreed to subscribe for 53 per cent. and 47 per cent. (respectively) of theNew Ordinary Shares not subscribed for by Qualifying Shareholders, in accordancewith the terms of the Open Offer and Underwriting Agreement. If the Resolutions(numbered 1 to 5 as set out in section 15 below) required to effect the OpenOffer are not passed at the General Meeting, the Open Offer will not be effectedand one of the potential consequences of this could be the Company's insolvency. The Issue Price of 22.5 pence per share under the Open Offer represents adiscount of 10 per cent. to the closing middle market price of 25 pence perExisting Ordinary Share on 14 December 2007, the last dealing day prior to theannouncement of the Open Offer. In order to enable the Company to issue shares at below the 25 pence nominalvalue of the Existing Ordinary Shares, the Company is proposing to effect theShare Sub-division by dividing each Existing Ordinary Share into a 1p OrdinaryShare and a Deferred Share, and dividing each authorised and unissued ordinaryshare of 25 pence into twenty five 1p Ordinary Shares. Resolutions numbered 1and 2 as described in section 15 below will be proposed at the General Meetingto, if passed, effect this Share Sub-division. 2. Information about API API is a producer and distributor of speciality foils and laminated productsused primarily in the graphics and packaging industries. The main end usemarkets are in premium, fast moving consumer goods such as alcoholic drinks,perfumery, cosmetics, healthcare, speciality food and tobacco. These sectors usehigh impact graphics and finishes on labelling and packaging to reinforce brandidentity. Notable brand names utilising API materials are Chivas Regal, Moet &Chandon, Benson & Hedges, Chanel, Nurofen, Twinings and Nivea. The Group is alsoa supplier to the greeting card and document security sectors. Foils The Group's decorative foil business is its main area of activity. Theproduction process involves the coating, metalising and finishing of polyesterfilm to a range of specifications optimised for different methods ofapplication, performance criteria and visual appearance. The Group also producesa range of holographic-effect foils, which are growing in popularity due totheir increased visual impact, as well as pigment foils used for indeliblelabelling and coding of components. Manufacturing is carried out at five worldwide locations: Salford and Livingstonin the UK; New Jersey and Kansas in the US; and Shanghai in China. In general,the Group's UK manufacturing facilities supply the European market, the USmanufacturing facilities the Americas, and China the Asian Market. However, theGroup has a number of specialist products which are manufactured at singlefacilities and the Chinese plant is being developed as a source of standard foilgrades for worldwide markets. While some foil is taken in bulk by large users, the majority is produced forstock and cut to size, packaged and shipped to meet customer needs on a quickturnaround basis. Competitive service levels require this activity and theassociated sales and technical support to be located close to customers. Therefore, in addition to servicing the local customer base direct from its fivemanufacturing locations, API has finishing and distribution operations inGermany, France, Italy, the US, Australia, New Zealand and Hong Kong and hasarrangements with third party distributors for other major markets. In total,API products are sold in more than 60 countries worldwide. As well as decorative foils, API's plant in Salford produces bespoke, discreetholograms for adherence to packaging and documents as a brand authentication orsecurity feature. These products, which are technically demanding to produce,are sold to the tobacco, security printing and other industries, primarily on asub-contract basis to security solutions companies. The Directors regard API as one of three global players in the foils market,together with privately held Kurz of Germany and the foils division of the USengineering conglomerate, ITW. The Directors also perceive there to be a numberof significant local competitors, most notably Crowne in the US, for whom APIacts as a distributor in certain markets and producers in China, South Korea andTaiwan. Laminates API Laminates, based in Poynton, England, is a specialist producer ofdecorative-effect paperboard. The operation adheres aluminium foil andmetallised polyester to paperboard resulting in a high lustre metallic finish.The resulting product is cut into specified sheet sizes or shipped in reel formto customers primarily in the carton printing industry. More sophisticatedfinishes can also be achieved by utilising holographic foil supplied from API'splant in Salford. Laminates' immediate customers are the large carton printers but it is thepremium consumer products companies who specify laminated board for use in theircarton packaging. In this respect, Laminates serves substantially the sameend-use sectors as the Foils business. The Directors believe that API Laminates is the market leader in Europe. TheDirectors consider that API's significant competitors are Walki (Finland),Picopac (Germany) and Iggesund (Sweden). There is also a large segment of theEuropean market served by small scale, local trade finishers using less capitalintensive, sheet-fed production technology. 3. Background to and reasons for the Open Offer The Company announced on 21 September 2007 that it was likely to have a cashshortfall in relation to its UK Bank Facilities during November 2007. On 19October 2007, the Company released a trading update warning of reducedexpectations for its results for the six months ended 30 September 2007 and alsoindicated that the Company was continuing to work towards a resolution of itsfunding issues but had achieved improvements in its short term cash position. The Company has meanwhile been in discussions with its UK Bank and its majorshareholders and has been reviewing a number of options for meeting short andmedium term cash requirements and also reducing its UK indebtedness. Aftertaking relevant advice, the Board has concluded that the best way forward isthrough an issue of new shares, fully underwritten by its two largestshareholders, namely Steel and Wynnefield, together with re-negotiated UK BankFacilities. In the short term, the Company has implemented a number of measures to improveits immediate cash position and defer the cash shortfall until the announcementtoday of the Open Offer. In addition, the Company has agreed bridging loans witheach of Steel and Wynnefield to extend funding from the date of the announcementof the Open Offer until the Company receives the proceeds from the Open Offer. Subject to the approval of the Resolutions numbered 1 to 5 as described insection 15 below, completion of the Open Offer and then immediate repayment of£2 million of term debt to the UK Bank, the Company has agreed amendments to itsUK Bank Facilities. Key changes include beneficial revisions to the financialcovenants, an increase of the interest margin by 0.35 per cent. and an increasein four scheduled repayments commencing April 2008 from £500,000 to £750,000 perquarter. The Directors believe that, once the Open Offer has become unconditional and theAmended UK Bank Facilities have become effective, the Company has financingarrangements in place which provide sufficient working capital for the Group'spresent requirements, that is, for at least the next 12 months from the date ofthe Prospectus. The Directors believe that the new management will then be in aposition to develop and execute a comprehensive plan, which is intended to turnaround the financial performance of the Group. In the event that the Open Offer does not become unconditional, which wouldoccur inter alia in the circumstance that any of the Resolutions numbered 1 to 5(as described in section 15 below) are not approved at the General Meeting on 9January 2008, the UK Bank would have a right to terminate the UK BankFacilities, declare all outstanding monies immediately due and payable, demandimmediate repayment of these loans and enforce its security. This in turn wouldtrigger a default under the terms of the Steel and Wynnefield bridging loanfacilities, potentially resulting in an immediate obligation for the Company torepay all monies drawn down under these facilities. The Group would then have acash shortfall of approximately £26.25 million plus accrued interest. In thesecircumstances, the Group would face a high level of uncertainty over its goingconcern status and would be at immediate risk of withdrawal If credit terms bysuppliers and trade credit insurers and cancellation of orders by customers.Cognisant of their fiduciary duties in respect of insolvent trading, theDirectors would have no alternative but to conclude an immediate agreement withthe UK Bank and Steel and Wynnefield. The Board does not believe that therewould be sufficient time to explore alternative sources of finance. TheDirectors believe that any new terms with existing lenders would be onerous,including significantly increased costs of borrowing, significant feesassociated with restructuring, the likely forced sale of one or more of theGroup's businesses and possible insolvency proceedings. 4. Use of proceeds The proceeds from the Open Offer, being approximately £7.2 million (net ofexpenses), will be used to: (i) repay any funds drawn down under the Steel and Wynnefield bridgingfacilities; and (ii) reduce the UK Bank's term debt in accordance with the Amendment andRestatement Agreement by way of an immediate repayment of £2 million. The balance of the proceeds will be retained by the Company for its generalcorporate purposes, including the funding of working capital requirements,maintenance capital expenditure and any restructuring or exceptional expenses. 5. Potential Delisting and admission to AIM The Company is seeking the approval of Shareholders to permit its OrdinaryShares to be delisted from the Official List and from trading on London StockExchange's main market for listed securities, and for the Ordinary Shares to beadmitted to trading on AIM. Subject to the approval of Resolution 6 (describedin section 15 below), which requires the approval of not less than 75 per cent.of the Shareholders (being entitled to do so) voting in person or by proxy, ineither the event that less than 25 per cent. of the Company's issued sharecapital is in public hands following the completion of the Open Offer, or evenif this is not the case, if the Directors of the Company determine that adelisting and admission to AIM is in the best interests of the Company, theCompany will make an announcement on or before 11 January 2008 that it intendsto effect such a Delisting. 6. Strategy and Prospects The Group's executive management team has recently been replaced with theappointment of Andrew Turner as Chief Executive Officer on 15 October 2007 andAndrew Robertson as Group Finance Director on 1 April 2007. Mr. Turner has morethan 15 years' experience in the packaging sector and has held senior managementpositions in Field Group plc, and more recently, in Alcan Inc. The Board (Mr.Turner abstaining from forming such Board approval) believes that Mr. Turner'scombination of operational, commercial and leadership skills and experience arehighly appropriate to the challenges facing the Group at this time. Mr.Robertson has previously held senior finance positions in Laporte plc, Jardinesand Laird plc. Notwithstanding the fact that the new executive team has been in place for arelatively short period, accelerated progress on the existing Group strategy,combined with a successful outcome from a number of current initiatives, providepotential for enhanced Group's prospects and especially the turnaround of itsfinancial performance in Europe. In the Group's manufacturing operations, a programme is underway aimed atimproving efficiency through the introduction of the latest productiontechniques and selective capital investment. In addition, the Group's managementhas launched a cost reduction programme targeted at non-revenue generatingoverheads. Savings of not less than £1 million per annum in central costs havealready been identified and the programme is now moving on to a review of thecost base at business unit level. The Group has a number of product innovations in the pipeline which utilise thecombined technical capabilities of the European businesses. The Directorsbelieve that a successful outcome of one of these developments could have amaterial impact on the Group's overall short term financial performance. Foils In the foils market, API's traditional positioning has been based on technicalinnovation and customer service. The Group has a history of innovation inproduct applications such as over-printable foil, rotary coding foil and coldfoil, and has a reputation for flexibility and high levels of service, which theDirectors believe provide the basis of differentiation with customers. TheDirectors' future strategy is to continue to build on the Group's existingstrengths by establishing a greater sales, technical support and distributionpresence, close to customers in key markets and by expanding the product rangeto include good quality, low cost foil from China. The Group's new distribution operation in Italy has made a good start and theDirectors anticipate that it will achieve profitable trading by mid 2008. TheGroup intends to continue developing its representation in key markets, throughthe extension of its network of sales and distribution centres and also bystrengthening relationships with third party distributors, especially in EasternEurope. Construction of the Group's new factory in Shanghai is substantially completeand the relocation of equipment from the existing site is well progressed andexpected to be finalised by mid-2008. Foil for export is now in production atthe new facility and its availability, especially in Europe, should provide asignificant growth opportunity while releasing UK manufacturing capacity to meethigher added value, short run customer requirements. In addition, the completionof the China relocation project will enable local management to refocusattention on growing volumes, in both home and export markets. Laminates The Directors' strategy for Laminates is to concentrate on the packaging supplychain for the major luxury consumer products companies in the alcoholic drinks,beauty, healthcare and tobacco sectors. The aim is to leverage API's productionscale and technical capabilities, as well as develop synergies with the foilsbusiness, to meet high volume, added value requirements for major brands. Afterthe restructuring programme carried out in the first quarter of 2007, the Groupis focusing on rebuilding sales while holding down costs and avoiding margindilution. Recent contract successes lead the Directors to believe this businessis well placed for a recovery. On a longer term basis, Laminates is pursuingopportunities for its newly-announced biodegradable product line with majorretailers and brand owners. Once the short-term position of the Group has been addressed, the Board intendsto carry out a wider strategic review of the business including the Group'sfunding structure. 7. Current trading and outlook Current Trading In line with the Company's announcement of 19 October 2007, results for the sixmonth period to 30 September 2007 were below the Board's expectations and thecomparable period last year, reflecting difficult trading conditions andunderperformance in a number of the Group's businesses. Group sales, at £47.2 million, were 7.3 per cent. lower than last year (5.6 percent. at constant exchange rates) due primarily to contract losses in Laminatesand weak demand in the US, partially offset by growth in the European Foils andHolographics businesses. The Group recorded an operating loss, before exceptional items, of £0.2 million,compared with an operating profit of £1.0 million for the same period in 2006and breakeven for the 6 month period ending 31 March 2007. Exceptional items of £0.2 million (2006: £0.4 million) related principally toseverance costs offset by a gain on the sale of the Group's site in Charlotte,US, which was closed in 2006. Net financing costs of £1.0 million (2006: £1.2 million) reflected an increaseof £0.4 million in the Group's interest costs as a result of the higher averagedebt and interest rates compensated by a UK pension plan credit of £0.3 million(2006: £0.3 million charge). The pension deficit, as calculated in accordance with IAS 19, reduced from £11.0million at 31 March 2007 to £6.1 million at 30 September on the basis of theCompany's latest actuarial assessment and an improved outlook for long terminvestment returns. Outlook The Board was pleased to announce the appointment of Andrew Turner as GroupChief Executive with effect from 15 October 2007. If the Group is successful in gaining the support of shareholders for theproposed Open Offer, it will emerge with restored cash headroom and asignificantly strengthened balance sheet. With the possible exception of the US, there are no clear indications, at thisstage, that the uncertainty in the banking sector and weakness in consumerconfidence is affecting general market demand for the Group's products. The Group has a number of product innovations in the pipeline which utilise thecombined technical capabilities of the European businesses. The Directorsbelieve that a successful outcome of one of these developments could have amaterial impact on the Group's overall short-term financial performance. Volumes have recovered somewhat in Laminates and the business is benefiting fromits lower cost base, post restructuring. European foil sales are expected tobenefit from the start-up of export production at the new site in China as wellas continued growth through the new distribution operation in Italy. An overhead cost reduction programme has been launched by the new Groupmanagement which is expected to fully impact results from the beginning of thenext financial year. 8. Principal terms of the Open Offer Qualifying Shareholders are being given the opportunity to subscribe under theOpen Offer for New Ordinary Shares at the Issue Price payable in full onapplication and free of expenses, pro rata to their existing shareholdings, onthe following basis: 36 New Ordinary Shares for every 35 Existing Ordinary Shares held by them and registered in their names on the Record Date and so inproportion to any other number of Existing Ordinary Shares then held, roundeddown to the nearest whole number of New Ordinary Shares. Qualifying Shareholdersmay apply for any whole number of New Ordinary Shares. Applications for ExcessShares will be satisfied only to the extent that corresponding applications byother Qualifying Shareholders are not made or are made for less than their prorata entitlements. Applications for Excess Shares will be scaled back to suchpercentage of the Excess Shares as is represented by the Shareholder'spercentage interest in the total number of issued Ordinary Shares as at theRecord Date. All of the New Ordinary Shares will be offered to Shareholders pursuant to theOpen Offer and will, to the extent not subscribed for pursuant to validapplications (including Excess Applications) from Qualifying Shareholders underthe Open Offer, be subscribed for by each of Steel and Wynnefield pursuant tothe Open Offer and Underwriting Agreement. Steel and Wynnefield have irrevocablyundertaken to take up their own respective Open Offer Entitlements (and, in thecase of Steel, to promise that its affiliates do the same) and to make anapplication for 3,785,633 and 3,340,607 New Ordinary Shares pursuant to theExcess Application Facility (the number of such shares issued pursuant to theExcess Application Facility to be scaled back in accordance with the terms ofthe Open Offer to approximately 29.4 per cent. and 25.9 per cent. (respectively)of the number of Excess Shares) and these are therefore not subject to the termsof the underwriting provisions of the Open Offer and Underwriting Agreement. The New Ordinary Shares will, when issued and fully paid, rank pari passu in allrespects with the 1p Ordinary Shares. Applications have been made to theFinancial Services Authority for the New Ordinary Shares to be admitted to theOfficial List and to the London Stock Exchange for the New Ordinary Shares to beadmitted to trading on the London Stock Exchange's main market for listedsecurities. It is expected that Admission will become effective and dealings inthe New Ordinary Shares will commence on 18 January 2008. The Open Offer will not be made to Overseas Shareholders in, under or pursuantto the Prospectus or the Application Form. The Open Offer will being made toOverseas Shareholders, in accordance with section 90(5) of the Act, by way ofthe Gazette Notice. The Open Offer is conditional, inter alia, upon the following: (i) the passing of the Resolutions (other than the Resolution numbered 6described in section 15 below); (ii) Admission becoming effective on or before 8.00 a.m. 18 January 2008(or such later date and/or time as the Company, Numis, Steel and Wynnefield mayagree, being no later than 9.00 a.m. on 18 January 2008); and (iii) the Open Offer and Underwriting Agreement having becomeunconditional in all other respects and not having been terminated in accordancewith its terms prior to Admission. 9. The Takeover Code Steel and its affiliates currently have a beneficial interest in 10,150,000existing Ordinary Shares representing approximately 29.4 per cent. of the issuedshare capital of the Company and Wynnefield has a beneficial interest in8,956,800 existing Ordinary Shares representing approximately 25.9 per cent. ofthe issued share capital of the Company. Depending on the levels of take up by Qualifying Shareholders of theirentitlements to New Ordinary Shares under the Open Offer, the interests of Steeland its affiliates and Wynnefield in the voting rights of the Company followingthe Open Offer may increase to a maximum of 38.3 per cent. and 33.8 per cent.respectively. These figures assume Steel and Wynnefield subscribe for all of theNew Ordinary Shares, other than those for which the Company has received anirrevocable commitment from Independent Shareholders. If either Steel orWynnefield were to acquire additional interests in Ordinary Shares whichresulted in their respective aggregate interests in Ordinary Shares being equalto or greater than the 30 per cent. threshold set out in Rule 9.1 of theTakeover Code they would each normally be obliged to make a general offer to allother Shareholders to acquire the balance of the Company's issued shares. TheCompany has applied to the Takeover Panel for a waiver of Rule 9 of the TakeoverCode in order to permit each of Steel or Wynnefield to participate in the OpenOffer and the Underwriting without triggering an obligation on the part ofeither Steel and/or Wynnefield to make such a general offer. The Takeover Panelhas agreed to such a waiver where the obligation arises as a result of the OpenOffer and Underwriting Agreement and subject to the approval of a majority ofthe Independent Shareholders. The Takeover Panel has agreed with the view of Steel, Wynnefield and theCompany, that it does not consider Steel and Wynnefield to be acting in concertfor the purposes of the Takeover Code. Following the Open Offer, Steel and Wynnefield may each be interested inOrdinary Shares which carry not less than 30 per cent. but neither will holdmore than 50 per cent. of the Company's voting share capital. Any furtherincrease in the number of shares in which they are respectively interested wouldthen be subject to the provisions of Rule 9 of the Takeover Code. For the avoidance of doubt, this waiver, which is valid only for so long as theauthority granted pursuant to Resolutions numbered 4 and 5 (described in section 15 below) remainin force, applies only in respect of increases in shareholdings of Steel andWynnefield resulting from the Open Offer and pursuant to the Open Offer andUnderwriting Agreement and not in respect of other increases in their respectiveholdings. Steel and Wynnefield and their representatives on the Board have nottaken part in any decision of the Board relating to the proposal to seek awaiver of Rule 9 from the Takeover Panel. The Open Offer is conditional upon each of the Resolutions 1 to 5 (described insection 15 below) being passed, including Resolutions numbered 4 and 5 relatingto the approval by a majority of Independent Shareholders of the waiver grantedby the Takeover Panel of the obligations of Steel and Wynnefield respectively.If any of Resolutions 1 to 5 is not passed, the Open Offer will not be effectedand Admission will not occur. In those circumstances, neither Steel nor Wynnefield will acquire more than 30per cent. of the issued share capital of the Company and there will be norequirement on either to make a takeover offer under Rule 9 of the TakeoverCode. 10. Information on Steel (a) Background information on Steel Steel was founded in 1993 by Warren Lichtenstein. As at 30 June 2007, Steel hadapproximately $2.65 billion under management which is invested in public andprivate debt and equity investments in companies with market capitalisations ofup to $10 billion in the United States, Asia and Europe. In the UK, Steel hasmade investments in nine listed companies. (b) Investment strategy Steel's investment strategies reflect a value-orientation and investmentdiscipline that are the result of having investments in public and private debtand equity, as well as distressed debt over 14 years in a diverse range ofindustries. Steel's focus is on maintaining discipline with respect to purchase price,analysing the business based on long-term value creation that can be achieved,extensive business and financial analysis and utilising numerous resources tomaximise value post-acquisition. Steel often invests in businesses that itbelieves are fundamentally sound but potentially in need of certain financial,operational, strategic or managerial redirection to maximise value. Steel willnot typically acquire start-up companies, companies with speculative businessplans or companies that are excessively leveraged. (c) Intentions Steel's current intention is to remain a long term investor in the Company.Steel has no specific intentions regarding the future business of the companynor any strategic plans for the Company and, therefore, there are norepercussions on employment and the locations of the Company's places ofbusiness. Steel has no intentions to redeploy the Company's fixed assets.Steel's long term commercial justification for underwriting the Open Offer is toseek to prevent a company in which it has a substantial investment from facingsevere difficulties. Steel is not proposing any change in the general nature of the Company'sbusiness including in relation to the continued employment of the Company'semployees. Luke Wiseman, who is responsible for research at an affiliate of Steel, is aNon-Executive director of the Company. It is currently proposed that Mr. Wisemanretain his office following completion of the Open Offer. Further information on Steel will be set out in the Prospectus. 11. Information on Wynnefield (a) Background Information on Wynnefield Wynnefield currently has in excess of US$450 million under management. (b) Investment strategy Wynnefield is a long term specialist investor in small capitalisation stocks. Itemploys tax effective trading strategies seeking equity ownership in undervaluedcompanies which will provide long term capital growth. Wynnefield seeks to identify industry or company catalysts which will change theperceived value of a business. It seeks to provide hedged returns, not onlythrough individual securities, but through the use of index futures whenresearch indicates systemic market, or sector, risk. Indications sought includeover-extended valuations relative to earnings potential, increasing balancesheet risk, unfavourable marketplace changes for a company's products,management instability, extreme speculative market moves, or the emergence ofdeteriorating industry macros. (c) Intentions Wynnefield's current intention is to remain a long term investor in the Company.Wynnefield has no immediate strategic plans for the Company and, therefore,there are no repercussions on employment and the locations of the Company'splaces of business. Wynnefield has no intentions to redeploy the Company's fixedassets. Wynnefield's long term commercial justification for underwriting theOpen Offer is to seek to prevent a company in which it has a substantialinvestment from facing severe difficulties. Wynnefield is not proposing any change in composition of the Board or thegeneral nature of the Company's business including in relation to the continuedemployment of the Company's employees. Max Batzer, who is a portfolio manager for Wynnefield, is a Non-ExecutiveDirector of the Company. It is currently proposed that Mr. Batzer retain hisoffice following completion of the Open Offer. Further information on Wynnefield will be set out in the Prospectus. 12. General Meeting The full terms of and conditions to the Open Offer, including the procedure foracceptance and payment and the procedure in respect of rights not taken up, willbe set out in the Prospectus. In addition, the Prospectus will be accompanied bya notice convening the GM. The GM is being convened for the purpose of seekingShareholders' approval, inter alia, for Resolutions 1 to 6 as described insection 15 below. 13. Irrevocable commitments The Directors have given irrevocable commitments to take up their entitlementsunder the Open Offer and, as a result, the Directors will subscribe in total for162,011 New Ordinary Shares (excluding Excess Shares to be applied for by theDirectors). This will comprise 61,714 New Ordinary Shares for Richard Wright,14,242 for Andrew Robertson, 17,485 for Brian Birkenhead, 25,714 for MartinO'Connell and 42,856 for Andrew Walker. The Directors will also apply in totalfor 58,746 Excess Shares such applications to be scaled back in accordance withthe terms of the Open Offer to 0.46 per cent. of the number of Excess Shares.Applications by the Directors for Excess Shares will comprise 22,378 ExcessShares for Richard Wright, 5,164 Excess Shares for Andrew Robertson, 6,340Excess Shares for Brian Birkenhead, 9,324 Excess Shares for Martin O'Connell and15,540 Excess Shares for Andrew Walker. The Directors have also givenirrevocable commitments to vote in favour of the Resolutions. In addition, theCompany has received irrevocable commitments from certain other Shareholders(including Steel and Wynnefield) to accept the Open Offer in respect of22,501,850 New Ordinary Shares. Steel and Wynnefield have also irrevocablycommitted to apply for 3,785,633 and 3,340,607 Excess Shares (respectively)(such applications to be scaled back to 29.4 per cent. and 25.9 per cent.(respectively) of the number of Excess Shares in accordance with the terms ofthe Open Offer) and also to vote in favour of the Resolutions. The Company hasalso received an irrevocably commitment, from another Shareholder, to apply for1,033,123 Excess Shares and to vote in favour of the Resolutions. In aggregate, irrevocable commitments have been received to accept the OpenOffer in respect of 22,663,861 New Ordinary Shares, representing approximately63.7 per cent. of the New Ordinary Shares, and irrevocable commitments have beenreceived to subscribe for, in aggregate, 63.7 per cent. of the total number ofExcess Shares are subscribed for by Qualifying Shareholders. The Company hasalso received irrevocable commitments from certain other Shareholders in respectof 2,600,000 Ordinary Shares to vote is favour of the Resolutions. In aggregate, the Company has therefore received irrevocable commitments fromShareholders in respect of 24,634,313 Ordinary Shares, representingapproximately 71.3 per cent. of the Ordinary Shares, to vote in favour of theResolutions numbered 1, 2, 3 and 6. In relation to the Resolutions numbered 4and 5, the Company has received irrevocable commitments from the IndependentShareholders in respect of 5,527,513 Ordinary Shares, representing approximately35.7 per cent. of the Ordinary Shares which are eligible to vote, to vote infavour of such Resolutions. 14. Recommendation The Board (with Messrs. Wiseman and Batzer abstaining in respect ofconsideration of Resolutions numbered 4 and 5 respectively) considers that theOpen Offer and the passing of the Resolutions are in the best interests of theCompany and its Shareholders as a whole. Accordingly, the Board (with Messrs. Wiseman and Batzer abstaining in respect ofconsideration of Resolutions numbered 4 and 5 respectively) unanimouslyrecommends you to vote in favour of all of the Resolutions to be proposed at theGeneral Meeting, as it intends to do (or as the case may be, procure) in respectof the 157,513 Ordinary Shares in which members of the Board or their spousesare beneficially interested, representing approximately 0.5 per cent. of theissued share capital of the Company. The Board (other than Messrs. Wiseman and Batzer who are connected to Steel andWynnefield), which has been so advised by Numis, considers that the Proposalsare in the best interests of the Company and its Shareholders as a whole (and,in the case of the Rule 9 Waivers, the Independent Shareholders as a whole). Inproviding advice to the Board, Numis has taken into account the commercialassessments of the Board. 15. Resolutions The Resolutions to be proposed at the General Meeting: 1. As an ordinary resolution: that, immediately prior to Admission, eachof the existing authorised and issued ordinary shares of 25 pence each in thecapital of the Company shall be subdivided so as to create: (a) one ordinary share of 1 pence ranking pari passu in all respects withthe existing ordinary shares of 25 pence each in the capital of the Company; and (b) one Deferred Share. 2. As an ordinary resolution: that, each of the existing authorised andunissued ordinary shares of 25 pence each in the capital of the Company shall besubdivided to create twenty five ordinary shares of 1 pence each, each suchshare ranking pari passu with the existing ordinary shares of 25 pence each inthe capital of the Company. 3. As an ordinary resolution: that, subject to the passing of theresolutions numbered 1, 2, 4 and 5 as described in this section 15, theDirectors shall be generally and unconditionally authorised in accordance withSection 80 of the Companies Act 1985 to exercise all the powers of the Companyto allot relevant securities (as defined in Section 80(2) of that Act) of theCompany with a nominal value of up to £589,327.88 to such persons, at such timesand on and subject to such terms and conditions as the Directors may determine. 4. As an ordinary resolution: that, subject to the passing ofresolutions 1, 2, 3 and 5 as described in this section 15, the waiver granted bythe Panel on Takeovers and Mergers of the obligations that would otherwise ariseon the Steel Partners II, L.P. under Rule 9 of the City Code on Takeovers andMergers for Steel Partners II, L.P. to make a general offer to the shareholdersof the Company as a result of the issue to it of the New Ordinary Shares (asdefined in the prospectus issued to the Shareholders of the Company on or around17 December 2007) pursuant to which Steel Partners II, L.P. may become theholders of up to 26,858,187 new ordinary shares of 1 pence each representing upto 38.3 per cent. of the issued share capital of the Company pursuant to theUnderwriting, be and is hereby approved. 5. As an ordinary resolution: that, subject to the passing ofresolutions 1, 2, 3 and 4 as described in this section 15, the waiver granted bythe Panel on Takeovers and Mergers of the obligations that would otherwise ariseon the Wynnefield Capital Inc. under Rule 9 of the City Code on Takeovers andMergers for Wynnefield Capital Inc. to make a general offer to the shareholdersof the Company as a result of the issue to it of the New Ordinary Shares (asdefined in the prospectus issued to the Shareholders of the Company on or around17 December 2007) pursuant to which Wynnefield Capital Inc. may become theholders of up to 23,702,803 new ordinary shares of 1 pence each representing upto 33.8 per cent. of the issued share capital of the Company pursuant to theOpen Offer Underwriting be and is hereby approved. 6. As a special resolution: that, if following the closing date for theopen offer made by the Company to its shareholders in accordance with the termsof the prospectus to be issued by the Company on or around 17 December 2007("Prospectus"), either: (a) less than 25 per cent. of the Company's ordinary share capital isexpected to be in public hands for the purpose of Listing Rule 9.2.15immediately following Admission (as defined in the Prospectus); or (b) if the board of directors of the Company otherwise determines, and in either case, providing an announcement of either circumstance (a) or (b)occurring is made by the Company on or before 11 January 2008, the listing ofthe Company's ordinary shares on the official list of the UK Listing Authorityand trading of the Company's ordinary shares on London Stock Exchange plc'smarket for listed securities shall be cancelled no less than 20 business daysafter the date of such announcement and the Company shall apply for its ordinaryshares to be admitted to trading on AIM (the market operated by the London StockExchange plc). 16. Expected Timetable of Events Record Date for entitlement under the Open Offer close of business on 13 December 2007 Posting of Prospectus and Application Forms 17 December 2007 Open Offer Entitlements credited to stock accounts of 18 December 2007Qualifying CREST Shareholders in CREST Recommended latest time for requesting withdrawal of 4.30 p.m. on 3 January 2008Open Offer Entitlements from CREST Latest time and date for receipt of Forms of Proxy 2.00 p.m. on 7 January 2008 Latest time for depositing Open Offer Entitlements into 3.00 p.m. on 7 January 2008CREST Latest time and date for splitting of white Application 3.00 p.m. on 8 January 2008Forms and blue Excess CREST Application Forms (tosatisfy bona fide market claims only) General Meeting 2.00 p.m. on 9 January 2008 Latest time and date for receipt of completed white 11.00 a.m. on 10 January 2008Application Forms and blue Excess CREST ApplicationForms and payment in full under the Open Offer orsettlement of relevant CREST instruction Admission and commencement of dealings in New Ordinary 8.00 a.m. on 18 January 2008Shares CREST members' accounts credited in respect of New 18 January 2008Ordinary Shares in uncertificated form Despatch of definitive share certificates for New 23 January 2008Ordinary Shares in certificated form by no later than Changes to this expected timetable of events will be notified to RNS and/orshareholders as appropriate. 17. Definitions The following definitions apply throughout this announcement, unless the contextrequires otherwise: "1p Ordinary Shares" ordinary shares in the capital of the Company with a nominal value of one pence each to be created by the Share Sub-division ''£'' pounds sterling the Companies Act 1985, as amended, and, to the extent in force, the Companies Act 2006"Act" admission of the New Ordinary Shares to: ''Admission'' (i) the Official List; and (ii) trading on the London Stock Exchange's main market for listed securities becoming effective in accordance with, respectively, the Listing Rules and the Admission and Disclosure Standards the requirements contained in the publication dated 1 November 2007 (as amended from time to time) containing, amongst other things, the"Admission and Disclosure Standards" admission requirements to be observed by companies seeking admission to trading on the London Stock Exchange's main market for listed securities "AIM" AIM, a market operated by London Stock Exchange "Amended UK Bank Facilities" the UK Bank facilities as amended by the Amendment and Restatement Agreement "Amendment and Restatement Agreement the amendment and restatement agreement dated 17 December 2007, details" of which are set out in the prospectus "API" or "Company" API Group plc "API Group" or "Group" API and its direct and indirect subsidiaries "Application Form'' the white Application Form or the blue Excess CREST Application Form as the case may be (and "Application Forms" shall mean both) and which shall accompany the Prospectus when sent to Qualifying Shareholders (other than certain Overseas Shareholders) ''Articles'' the articles of association of the Company "blue Excess CREST Application Form" the blue Excess CREST Application Form on which Qualifying CREST Shareholders may apply for New Ordinary Shares in excess of their pro rata entitlement ''certificated'' or ''in a share or other security which is not in uncertificated form (that is,certificated form'' not in CREST) ''CREST'' the relevant system (as defined in the CREST Regulations) in respect of which Euroclear UK & Ireland is the operator (as defined in the CREST Regulations) "CREST Member" a person who has been admitted by Euroclear UK & Ireland as a system member (as defined in the CREST Regulations) "Deferred Shares" deferred shares in the capital of the Company with a nominal value of 24 pence each to be created by the Share Sub-division ''Directors'' or ''Board'' the directors of the Company "Excess Application" application for Excess Shares using the Excess Application Facility "Excess Application Facility" the facility to apply for Excess Shares "Excess Shares" New Ordinary Shares which may be applied for in addition to Open Offer Entitlements ''Executive Directors'' each of Andrew Turner and Andrew Robertson ''Existing Ordinary Shares'' the 34,569,513 ordinary shares of 25 pence each in the capital of the Company in issue at the date of this document ''Financial Services Authority'' the competent authority for the purposes of FSMA or "FSA" "Foils" API's foils division, comprising manufacturing and sales and distribution operations in Europe, North America and Asia Pacific ''FSMA'' Financial Services and Markets Act 2000 (as amended) "Gazette Notice" a notice to be published in the London Gazette pursuant to section 90(5) of the Companies Act 1985, to make the Open Offer to Overseas Shareholders ''General Meeting'' or ''GM'' a general meeting of the Company expected to be convened for 2.00 p.m. on 9 January 2008 and any adjournment thereof (such meeting being an " extraordinary general meeting" for the purposes of the Company's Articles) for the purpose of considering the Resolutions ''Group'' the Company and its subsidiaries "Holographics" the Group's business of designing and manufacturing holographic products for use in packaging and as a security measure "Independent Shareholders" Shareholders, excluding Steel and Wynnefield ''Issue Price'' Pence per New Ordinary Share "Kurz" Lenhard Kurz GmbH & Kg, a company based in Germany which competes with the Group in the manufacture and supply of Foils "Laminates" the Group's business of manufacturing laminated paper and boards for use in packaging ''Listing Rules'' the listing rules made by the UK Listing Authority for the purpose of Part VI of FSMA ''London Stock Exchange'' London Stock Exchange plc ''Numis" Numis Securities Limited, registered in England and Wales with company no. 2285918, being a company regulated in the UK by the FSA and appointed by API as its broker and sponsor ''New Ordinary Shares'' the 35,557,213 new 1p Ordinary Shares to be issued pursuant to the Open Offer''Non-Executive Directors'' the Directors, other than the Executive Directors ''Official List'' the Official List of the UK Listing Authority ''Open Offer'' the conditional offer inviting Qualifying Shareholders to subscribe for the New Ordinary Shares at the Issue Price ''Open Offer and Underwriting" the conditional agreement dated 17 December 2007 and made between the Company and (1); Numis (2); Steel (3) and Wynnefield (4) relating to the Open Offer, Underwriting and Admission ''Open Offer Entitlements'' the pro rata entitlements to subscribe for New Ordinary Shares allocated to Qualifying Shareholders pursuant to the Open Offer " Ordinary Shares" ordinary shares in the capital of the Company, being either ordinary shares with a nominal value of 25 pence each prior to the Share Sub-division, or 1p Ordinary Shares, after the Share Sub-division ''Overseas Shareholders'' Shareholders with registered addresses in, or who are citizens, residents or nationals of, jurisdictions outside the United Kingdom "Proposals" the Share Sub-division, the Open Offer and the Rule 9 Waivers ''Prospectus'' the prospectus, prepared in accordance with the Prospectus Rules and the Listing Rules made by the UKLA for the purpose of Part VI of FSMA and expected to be sent out shortly containing details of the Open Offer and the notice convening the General Meeting ''Prospectus Rules'' the prospectus rules made by the UK Listing Authority for the purpose of Part IV of FSMA ''Qualifying CREST Shareholders'' Qualifying Shareholders holding Existing Ordinary Shares in a CREST account ''Qualifying non-CREST" Qualifying Shareholders holding Existing Ordinary Shares in certificated form ''Qualifying Shareholders'' Shareholders on the register of members of the Company at the Record Date ''Record Date'' the close of business on 13 December 2007 being the latest time by which transfers of Existing Ordinary Shares must be received for registration by the Company in order to allow transferees to be recognised as Qualifying Shareholders ''Resolutions'' the resolutions to be proposed at the General Meeting as described in section 15 of this announcement "Rule 9" rule 9 of the Takeover Code "Rule 9 Waiver" the waiver of Rule 9 referred to in the letter from the Chairman, which waives any requirement on Steel and Wynnefield to make an offer for the shares in the capital of the Company not already owned by them on a result of them holding more than 30 per cent. of the ordinary share capital of the Company immediately following Admission "Share Sub-division" the sub-division of API's Existing Ordinary Shares to create 1p Ordinary Shares and Deferred Shares, to be effected by passing the Resolutions numbered 1 and 2 described in section 15 above at the GM ''Shareholders'' holders of Existing Ordinary Shares "Steel" Steel Partners II, L.P ''Takeover Code'' the City Code on Takeovers and Mergers "Takeover Panel" the Panel on Takeovers and Mergers ''UK'' or ''United Kingdom'' the United Kingdom of Great Britain and Northern Ireland, its territories and dependencies "UK Bank" Barclays Bank plc "UK Bank Facilities" the Group's bank facilities which are provided by the UK Bank for utilisation by the UK Group "UK Group" the Company, API Foils Limited, API-Stace Limited, API Holographics Limited, Learoyd Group Limited, API Laminates Limited, API Group Services Limited and API Overseas Holdings Limited ''UK Listing Authority'' or ''UKLA'' the Financial Services Authority acting in its capacity as the competent authority for the purposes of FSMA ''uncertificated'' or ''in recorded on the register of members as being held in uncertificated formuncertificated in CREST and title to which, by virtue of the CREST Regulations, may be transferred by means of CREST form'' "Underwriting" each of Steel and Wynnefield undertaking to subscribe for the New Ordinary Shares which are not subscribed for by Qualifying Shareholders (other than in respect of their own Open Offer Entitlements which each of Steel and Wynnefield have respectively irrevocably undertaken to take up), pursuant to the terms of the Open Offer and Underwriting Agreement ''United States'' or "US" the United States of America, its territories and dependencies "White Application Form" the white application form to be used by Qualifying non CREST Shareholders (and if required in accordance with the terms of the Open Offer, by Qualifying CREST Shareholders to accept the Open Offer "Wynnefield" Wynnefield Capital Inc., as umbrella general manager for each of Wynnefield Partners Small Cap Value, LP 1, Wynnefield Partners Small Cap Value, LP, Wynnefield Small Cap Value Offshore Fund, Ltd. and Channel Partnership IILP For the purposes of this announcement, "subsidiary", "subsidiary undertaking", "undertaking" and "associated undertaking" have the meanings given by theCompanies Act 1985 (but for this purpose ignoring paragraph 20(1)(b) of Schedule4A to the Companies Act 1985). Enquiries Andrew Turner, Group Chief Executive Officer, 01625 858700API Group plc Tim Spratt / Nicola Biles 020 7831 3113Financial Dynamics Nick Westlake/Bruce Garrow 020 7260 1000Numis Securities Ltd This announcement does not constitute, or form part of, an offer to sell, or thesolicitation of an offer to subscribe for or buy, any of the New Ordinary Sharesto be issued in connection with the Open Offer. The Directors of API have taken all reasonable care to ensure that theinformation contained in this announcement is, to the best of their knowledge,in accordance with the facts and contains no omission likely to affect theimport of such information. The release, publication or distribution of this announcement in certainjurisdictions may be restricted by law and therefore persons in suchjurisdictions into which this announcement is released, published or distributedshould inform themselves about and observe such restrictions. Numis, which is authorised and regulated in the United Kingdom by the FinancialServices Authority, is acting exclusively for the Company and for no one else inrelation to the Open Offer and will not be responsible to anyone other than theCompany for providing the protections afforded to its clients or for providingadvice in relation to the Open Offer or any other matter referred to in thisannouncement. Not for release, publication, transmission, or distribution directly orindirectly in or into any other jurisdiction including the United States ofAmerica, Canada, Japan, Australia, New Zealand or the Republic of South Africa.This announcement is not an offer of securities for sale in the United States.Securities may not be offered or sold in the United States absent registrationor an exemption from registration under the U.S. Securities Act of 1933, asamended. Any public offering of securities to be made in the United States willbe made by means of a prospectus that may be obtained from the issuer or sellingsecurity holder and that will contain detailed information about the company andmanagement, as well as financial statements. THIS ANNOUNCEMENT DOES NOT CONSTITUTE, OR FORM PART OF, AN OFFER TO SELL OR THESOLICITATION OF AN OFFER TO SUBSCRIBE FOR OR BUY ANY SECURITIES, NOR THESOLICITATION OF ANY VOTE OR APPROVAL IN ANY JURISDICTION, NOR SHALL THERE BE ANYSALE, ISSUE OR TRANSFER OF THE SECURITIES REFERRED TO IN THIS ANNOUNCEMENT INANY JURISDICTION IN CONTRAVENTION OF APPLICABLE LAW. ANY DECISION TO INVEST INTHE ISSUE SHARES SHOULD ONLY BE MADE ON THE BASIS OF INFORMATION CONTAINED INTHE PROSPECTUS. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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