1st Aug 2006 07:03
Coe Group PLC01 August 2006 COE GROUP PLC PLACING TO RAISE £950,000 IP GROUP TO BECOME MAJOR SHAREHOLDER COE Group plc ("COE" or the "Company"), the developer and supplier of advanced video surveillancesystems, today announces that IP Group plc, the intellectual property commercialisation company,through its subsidiary, IP2IPO Limited ("IP2IPO") (together "IP Group"), and Richard Farleigh, oneof IP Group's key business angels, have agreed to be the lead investors in a proposed fundraisingof £950,000, before expenses, by way of a placing of 11,875,000 ordinary shares at price of 8p pershare (the "Placing"). Following the Placing, IP Group and Richard Farleigh, who has backed over 50 early stagetechnology companies including Wolfson Microelectronics plc, ARC International plc, AminoTechnologies plc, ANT plc, Celoxica Holdings plc, Oxonica plc and Clearspeed Technology plc, willown 60.95 per cent. of COE's enlarged share capital. The Directors of COE are confident that the Placing will result in the Company being well fundedand with both the financial and business support to move forward for the benefit of allshareholders. The proceeds of the Placing will be used by COE to fund continued sales growth andto strengthen the Company's balance sheet. As at 31 July 2006, IP Group's market capitalisation was approximately £311 million. Its shareswere admitted to the Official List on 19 June 2006 and trading in its shares on AIM ceased at thesame time. As at 31 May 2006, IP Group had cash of £56.6 million. Andrew Wallace, Chief Executive of COE Group, said: "We are delighted that IP Group sees thepotential growth in COE. This transaction is a major endorsement of COE's technology and itsprospects while providing important financing for COE to fund expansion and further exploit ourproducts. IP Group's extensive portfolio of core technologies, several of which have applicationsin the surveillance and counter-terrorism markets, provides COE with excellent technology sourcesfor addressing customers' needs. We also plan to use IP Group's extensive resources to help COEbecome a consolidator in the swiftly evolving surveillance and security markets." Alan Aubrey, Chief Executive of IP Group, said: "This is the first time in IP Group's history thatit has made a direct investment into another quoted company and it is consistent with our strategyof investing in interesting technology companies where we see excellent opportunities andsignificant market growth. We are extremely excited by the growth prospects for COE and areparticularly impressed with its international reputation for complex video surveillance systems indemanding environments - something that has potential operational and financial synergies withcertain companies and technologies within the IP Group portfolio. COE's management has madeexcellent progress in the last few years and we are very much looking forward to working withthem." COE Group plc 0113 230 8800 Andrew Wallace 07768 021977 Westhouse Securities LLP 0113 246 2610 Tim Feather IP Group plc 020 7489 5200 Magnus Goodlad Liz Vaughan-Adams 020 7489 5206 / 07979 853802 About COE COE is a leading developer and exporter of advanced video surveillance (CCTV) systems with a global installed base oflarge safety-critical systems, many in extreme environments. COE focuses on three sectors - traffic & transport,city-centre surveillance and industrial complexes. Traffic and transport references include the London CongestionCharge, the underground rail systems in France, Singapore, Hong Kong & Delhi, high-speed rail systems in Spain, Germanyand the UK, airports across Germany, Hong Kong and SE Asia, and road systems worldwide. City-centre systems includeover 35 UK towns & cities, while industrial complexes include the South Pars gas field in the Middle East. Introduction COE announces that it proposes to raise £950,000, before expenses, by way of a placing of 11,875,000 new ordinaryshares at a price of 8p per share (the "Placing Shares"). The Placing is conditional, inter alia, on shareholder approval which will be sought at an extraordinary generalmeeting of the Company to be held on 24 August 2006 (the "EGM"). Application will be made for the Placing Shares to beadmitted to trading on AIM and dealings are expected to commence on 25 August 2006 ("Admission"). On Admission, two of the subscribers in the Placing, IP2IPO and Richard Farleigh (together the "Concert Party") will bethe beneficial owners of, in aggregate, 10,000,000 ordinary shares of 1p each ("Ordinary Shares"), representing 60.95per cent. of the enlarged share capital of the Company (the "Enlarged Share Capital"). In addition, conditional onAdmission, members of the Concert Party will also be granted warrants to subscribe for 846,840 Ordinary Shares at anexercise price of 20p per share at any time prior to the date 30 months from Admission (the "Warrants"). Subject tothe exercise of the Warrants, the Concert Party will together be the beneficial owners of a maximum of 10,846,840Ordinary Shares, representing a maximum of 62.87 per cent. of the Enlarged Share Capital. Shareholders are therefore being asked to vote on a resolution at the EGM to approve a waiver by the Panel on Takeoversand Mergers (the "Panel") of any obligation on the part of the members of the Concert Party to make a general offer toshareholders to acquire the balance of the equity share capital of the Company under Rule 9 of the City Code onTakeovers and Mergers (the "City Code") arising from the issue to members of the Concert Party of Placing Shares andthe issue of Ordinary Shares pursuant to the exercise of the Warrants. Background to and reasons for the Placing COE won several major long term projects which contributed substantially to revenues over the last five years. Morerecently, COE has been less successful in gaining major projects which caused revenues to fall significantly during theyear ended 30 June 2005. The level of order intake has shown improvement in each of the half years since 1 January2005, but the rate of growth has not been sufficient to return COE to profitability. Action was taken, including amajor cost reduction programme, to address several operational issues which contributed to the ongoing poorperformance. Although the operational performance has improved and the level of borrowings has stabilised, the accumulated losseshave resulted in the need for the Company to raise additional funds in order to reduce borrowings further, strengthenthe balance sheet and to provide sufficient working capital for the business to take advantage of developing salesopportunities. With unfavourable market conditions for raising equity funds for companies with a relatively low market capitalisation,the Directors explored a number of potential fundraising routes, including the possibility of undertaking a rightsissue or open offer to all shareholders. However, the Directors came to the view that the significant additional costand delay which a rights issue or an open offer would entail would not be in the best interests of the Company in thecontext of the relatively small amount of funds being raised. Having considered a number of alternative proposals to achieve the funding objectives, the Directors decided that itwould be in the best interests of shareholders for the necessary funds to be raised by way of the Placing. Theprincipal investor in the Placing is IP Group plc, a quoted company with substantial financial strength and whosebusiness is investing in growing companies with strong intellectual property rights. IP Group can provide not only thenecessary funds for the development of COE, but is also in a position to provide support and business synergies to helpto develop success in the future. The Directors of COE are confident that the Placing will result in the Company being well funded and with both thefinancial and business support to move forward for the benefit of all shareholders. Subscriptions by the Concert Party and Warrants Details of subscriptions by members of the Concert Party for the Placing Shares, together with their proposed holdingsof Warrants, are set out below: Name Placing Shares to % following Warrants % following exercise be subscribed for Placing of Warrants* IP2IPO 6,250,000 38.09 529,275 39.29Richard Farleigh 3,750,000 22.86 317,565 23.58 10,000,000 60.95 846,840 62.87 * following the Placing and the exercise of the Warrants, but assuming the issue of no further Ordinary Shares In addition to the subscription for Placing Shares, it is proposed that, conditional on Admission, members of theConcert Party also receive the Warrants, which will entitle the holders of the Warrants to subscribe for, in aggregate,846,840 Ordinary Shares (representing 5 per cent. of the fully diluted enlarged issued share capital following thePlacing) at a price of 20p per share at any time until the date which is 30 months from Admission. Information on IP Group IP Group is an intellectual property ("IP") company that specialises in commercialising university technology. Thecompany was founded in 2001, was admitted to AIM in October 2003 and to the Official List of the UK Listing Authorityon 19 June 2006. IP Group currently has eight long-term partnerships with universities, including the University of Oxford, theUniversity of Southampton, King's College, London and the University of York. Under these agreements, IP Groupprovides seed funding for technology companies developing within the university in return for equity stakes. To date, seven companies from the IP Group portfolio have floated on AIM, namely Offshore Hydrocarbon Mapping plc,Synairgen plc, VASTox plc, Proximagen Neuroscience plc, GETECH Group plc, Syntopix Group plc and Oxford Catalysts Groupplc. Since 31 December 2005, Syntopix Group plc has floated on AIM raising £4 million before expenses. IP Group recorded afair value gain of £1 million. Oxford Catalysts Group plc floated on AIM raising £15 million before expenses. IPGroup realised proceeds on sale of shares in Oxford Catalysts Group plc of £2 million before expenses and recorded afair value gain of £15 million on its remaining holding. In May 2006, Ilika Technologies Limited, a spin-out company from the University of Southampton, raised £1.5 millionthrough a private placement at a pre-new money valuation of £25 million. IP Group recorded a fair value gain of £5.5million. In May 2006, Oxford Nanolabs Limited, a spin-out company from the University of Oxford, raised £7.6 millionthrough a private placement. IP Group recorded a fair value again of £10.3 million. IP Group had cash resources at 31 May 2006 of £56.6 million following a successful £16.8 million placing in May 2006. Since 31 December 2005, the trading of IP Group has been in line with the expectations of its directors. IP Group's strategy has been and remains to enter into and deliver on partnerships with universities to deliver valuethrough the formation of a portfolio of spin-out companies formed to exploit the intellectual property generated fromresearch carried out at these universities. IP Group has entered into, and will continue to enter into furtherpartnerships with leading research universities on a selective basis where it identifies institutions with sufficientbreadth and depth of research and the right innovative culture to build a diversified portfolio of high growth spin-outcompanies over the lifetime of a partnership. Information on Richard Farleigh Richard Bruce Farleigh, aged 45, of Le Formentor, 27 Avenue Princesse Grace, Monaco MC98000, studied economics andmathematics, and worked at the Australian Central Bank before becoming an investment banker and hedge fund manager. In1994 he branched out on his own to become a "business angel". Since then, he has backed over fifty early-stagetechnology companies including Wolfson Microelectronics plc, ARC International plc, Amino Technologies plc, ANT plc,Celoxica Holdings plc and Oxonica plc. He invested in and is a non-executive director of Clearspeed Technology PLC,which is quoted on AIM. He was also the major backer behind Home House in London and is the author of the investmentbook, Taming The Lion. Intentions of the Concert Party The members of the Concert Party have confirmed that, following Admission, they intend that the business of the Groupwill continue in substantially the same form as it does currently, including in respect of the continued employment ofthe existing staff and the locations of COE's business. However, they believe that they will be able to assist COE to: • exploit synergies which have been identified between COE and companies within the IP Group portfolio; • pursue a strategy of organic profit growth through existing sales channels; and • strengthen the range of products through appropriate corporate acquisitions and potentially through the in-licensing of complementary intellectual property. The members of the Concert Party have indicated that they intend to work with the existing board of COE (the "Board")to develop the business. However, the members of the Concert Party have stated that they will seek furtherappointments to strengthen the Board in due course. John Cook has indicated his intention to step down from the Boardat the time of any such appointments. The members of the Concert Party have confirmed that the existing employment rights, including pension rights (whererelevant), of all employees of the Company will be maintained following Admission. They have further confirmed thatthey have no intention to implement any redeployment of the fixed assets of COE. Subscriptions by Directors Details of the subscriptions proposed to be made by Directors for the Placing Shares are set out below: Name Placing Shares to be Shareholding following Percentage holding subscribed for Placing following Placing Andrew Wallace 315,650 415,650 2.53Colin Glass 312,500 393,866 2.40 Share Options The Directors have discussed the need for an appropriate management incentive scheme with IP Group plc. It is expectedthat incentive schemes will be introduced in due course which, when aggregated with existing options over COE OrdinaryShares, will provide for the grant of options over Ordinary Shares up to a maximum of 20 per cent. of the EnlargedShare Capital. The terms of the potential incentive schemes and the allocations of any grants to be made have yet to be decided. City Code The issue of Placing Shares to the Concert Party and the possible exercise of the Warrants by members of the ConcertParty give rise to certain considerations under the City Code. The Panel is an independent body, established in 1968, whose main functions are to issue and administer the City Codeand to supervise and regulate takeovers and other matters to which the City Code applies in accordance with the Rulesset out in the City Code. The Panel has been designated as the supervisory authority to carry out certain regulatoryfunctions in relation to takeovers pursuant to the Directive on Takeover Bids (2004/25/EC) (the "Directive"). ItsDirective functions are set out in and under The Takeovers Directive (Interim Implementation) Regulations 2006 (the "Regulations"). Under Rule 9 of the City Code ("Rule 9"), a person who acquires, whether by a series of transactions over a period oftime or not, an interest in shares which (taken together with shares in which persons acting in concert with him areinterested) carry 30 per cent. or more of the voting rights of a company which is subject to the City Code, is normallyrequired to make a general offer in cash to all other shareholders of that company to acquire the balance of the sharesnot held by such a person (or group of persons acting in concert). In addition, Rule 9 provides that where any person, together with persons acting in concert with him, is interested inshares in a company which is subject to the City Code and which in aggregate carry not less than 30 per cent. but notmore than 50 per cent. of that company's voting rights, and such person, or any person acting in concert with him,acquires an interest in any other shares which increases the percentage of the shares carrying voting rights in thatcompany in which he is interested, such person is normally required, in the same way, to make a general offer to allshareholders. An offer under Rule 9 must be in cash and at the highest price paid within the preceding 12 months for any shares inthe company by the person required to make the offer or any person acting in concert with him. Under the City Code, "acting in concert" is defined as follows: Persons acting in concert comprise persons who, pursuant to an agreement or understanding (whether formal or informal),actively co-operate, through the acquisition by any of them of shares in a company, to obtain or consolidate control(as defined below) of that company. Under the City Code, "control" is defined as follows: Control means a holding, or aggregate holdings, of shares carrying 30 per cent. or more of the voting rights of acompany, irrespective of whether the holding or holdings gives de facto control. On Admission, the Concert Party will hold in aggregate 10,000,000 Ordinary Shares, representing 60.95 per cent. of theEnlarged Share Capital. If the Warrants are exercised by members of the Concert Party in accordance with their terms, the Concert Party willhold a maximum of 10,846,840 Ordinary Shares, representing a maximum of 62.87 per cent. of the Enlarged Share Capital. Unless the waiver by the Panel of the obligations under Rule 9 (the "Waiver") is approved by shareholders, the issue tomembers of the Concert Party of Placing Shares would give rise to an obligation on the Concert Party to make a generaloffer to all shareholders for the balance of the equity share capital of the Company under Rule 9 of the City Code. The Panel has agreed, subject to the resolution concerning the Waiver being passed on a poll by the shareholders, towaive the obligation of the Concert Party to make a general offer under Rule 9 that would otherwise arise. For theavoidance of doubt, the Waiver applies only in respect of increases in the holding of Ordinary Shares of the ConcertParty and members of the Concert Party resulting solely from the issue to them of the Placing Shares, or the exerciseby them of the Warrants to be granted to them on Admission. Shareholders should be aware that members of the Concert Party will together hold more than 50 per cent. of the votingrights attaching to the Company's issued share capital. Accordingly, the Concert Party, for so long as the members ofthe Concert Party continue to be treated as acting in concert, may be able to increase its aggregate shareholding at alater date (including the exercise of Warrants as described above) without incurring any further obligation under Rule9 to make a general offer. However, individual members of the Concert Party will not be able to increase theirpercentage shareholdings through a Rule 9 threshold without Panel consent. EGM A circular setting out further background to and details of the Placing and incorporating a notice of the EGM to beheld at Photon House, Percy Street, Leeds LS12 1EG at 2.30 p.m. on 24 August 2006 will be posted to shareholders today. Recommendation As set out above, Andrew Wallace and Colin Glass have conditionally agreed to subscribe for Placing Shares. As aresult they are not participating in the recommendation to shareholders in respect of voting at the EGM. In addition,they will not vote on the resolutions to be proposed at the EGM. The Independent Directors (namely Dick Eykel, John Cook and Mark Marriage), who have been so advised by WesthouseSecurities LLP, consider that the resolutions to be proposed at the EGM, including the resolution to approve the waiverby the Panel of the requirements under Rule 9 of the City Code for either member of the Concert Party to make a generaloffer for all of the issued Ordinary Shares following receipt of the Placing Shares or any Ordinary Shares issued onexercise of Warrants held by them, are in the best interests of Independent Shareholders (namely all shareholdersexcluding Andrew Wallace and Colin Glass) and are fair and reasonable so far as Independent Shareholders are concerned.Consequently, the Independent Directors recommend that Independent Shareholders vote in favour of the resolutions tobe proposed at the EGM as they intend so to do in respect of their own holdings of, in aggregate 91,500 OrdinaryShares, which represent 2.0 per cent. of the Company's issued share capital. In providing advice to the IndependentDirectors, Westhouse has taken into account the Independent Directors' commercial assessments. A subscription by a related party (the definition of which includes a director) in a non pre-emptive issue ofsecurities can constitute a related party transaction under Rule 13 of the AIM Rules. Accordingly, the IndependentDirectors consider, having consulted with Westhouse Securities LLP, that the terms of the subscriptions proposed to bemade by Andrew Wallace and Colin Glass in the Placing are fair and reasonable insofar as Shareholders are concerned. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Ip Group