18th Jun 2007 07:01
Rotala PLC18 June 2007 Rotala plc ("Rotala" or 'the Company') Acquisitions and a Placing to raise £2.5 million Rotala is pleased to announce that it has exchanged contracts to acquire theentire issued share capital of North Birmingham Busways Limited ("NBB") andcertain customer contracts and vehicles currently owned by or of which SouthGloucestershire Bus and Coach Company Limited has the benefit (the "Business")(together the "Acquisitions"). The Directors expect the Acquisitions to be earnings enhancing immediately. The Company has also entered into an exclusivity arrangement to make a furtheracquisition ("Company A"). Due diligence and negotiation of terms are currentlyprogressing. Further details on the Acquisitions and Company A are set out below. Today, the Company also announces that it has raised £2.5 million, beforeexpenses, by way of a conditional placing, arranged by Blue Oar Securities Plc,with institutional and other investors of 100 million new ordinary shares of 1penny each in the capital of the Company ("Ordinary Shares") at 2.5 pence pernew Ordinary Share ("Placing"). The Placing is conditional upon approval ofcertain resolutions by the shareholders at an Extraordinary General Meeting tobe held on 17 July 2007 ("EGM"). The Acquisitions are being funded in partthrough the proceeds of the Placing and are therefore dependent upon the Placingbecoming unconditional. At the EGM the Board also proposes to simplify the Company's share structure toprovide a more appropriate share price on AIM; the Board proposes to consolidateevery 25 ordinary shares of 1p each into 1 new ordinary share of 25p each ("Consolidation"). John Gunn, Non Executive Chairman of Rotala, said: "The board is delighted to take this major step forward in Rotala's development.We are beginning to see the benefits of all the moves we have initiated in thepast year or so. By bringing in now the positive results that we can expect byadding the turnover and profits from the Acquisitions, we shall begin to see thecompany achieving the levels of turnover and profitability we have alwaysplanned for. This will of course become more clear as 2008 progresses. Current trading is satisfactory, being a little in excess of budget. We lookforward to the coming year with great confidence; we will welcome our newcolleagues to our Group and thank both our current staff and our shareholdersfor their efforts in supporting our endeavours". Information on the Acquisitions and Company A: The Acquisitions consist of the following: (1) North Birmingham Busways Limited The main depot of Flights Hallmark Limited ("Flights Hallmark"), a subsidiary ofthe Company, is at Long Acre in the Aston area of Birmingham. NBB is a buscompany that operates 28 buses from a site in the Erdington district ofBirmingham, some two miles from Long Acre. NBB is long established on a numberof its routes and the majority of the work undertaken by NBB is commercial stagecarriage. Approximately one third of its revenues derive from contracts withCentro, which is the operating name of The West Midlands Passenger TransportExecutive. The Directors believe that NBB is one of Birmingham's most well knownand respected small bus operators. The Directors believe that immediate cost savings can be made from a reductionin maintenance, accounting and administration overheads. The Company willacquire NBB for a price of £860,000, payable in cash. NBB is exempt from audit. It reported sales of £1.4 million in its unauditedaccounts for the financial year ended 30 November 2006, with profit before taxof £155,000 and net assets of £409,000 as at 30 November 2006. (2) The Business Flights Hallmark will acquire a total of 68 buses for a price of £1.26 million.The right to operate the routes that these buses run on will be acquired for aconsideration of a further £600,000. The acquisition of the buses and routeswill be in tranches but will be completed in full by 31 March 2008 and the totalconsideration of £1.86 million will be apportioned to particular buses androutes on completion of the acquisition of particular buses and routes. Theacquisition of the right to operate each of the routes is conditional upon thenovation or sub-contracting of the relevant contract to Flights Hallmark and inthe event that such novation or sub-contracting is not forthcoming FlightsHallmark shall have no obligation to the vendor to acquire in any way suchcontract although the buses allocated to service such contract will still bepurchased. The vendor will transfer routes and vehicles to Flights Hallmark as soon as itis able to do so but the pace of this process is dictated by workingarrangements and (as referred to above) is conditional upon the agreement of theissuers of the bus operation contracts, principally Bristol City Council andSouth Gloucestershire County Council, to the novation or sub-contracting of thecontracts to Flights Hallmark. These local authorities have not indicated anyobjection to the transfer of these routes and the process is expected to takebetween nine and twelve months. The assets being acquired have a current annual turnover attaching to them ofapproximately £4.2 million, consisting primarily of contracts with Bristol CityCouncil and South Gloucestershire County Council. The assets of the Businessbeing acquired amounted to £1.26 million as at 30 April 2007. In addition the Company has entered into an exclusivity agreement to makeanother acquisition: Company A Company A is a bus business that operates some 20 buses in the West Midlandsarea. The current work undertaken by Company A is almost exclusively commercialstage carriage. The Directors believe that the acquisition of Company A will improve the abilityof the enlarged Group to tender for and operate subsidised routes in certainparts of the West Midlands by enhancing the efficiency of the routes that theGroup currently carries out in such parts. Details of the placing The Company is proposing to raise £2.5 million, before expenses, through aplacing arranged by Blue Oar Securities Plc of 100 million Ordinary Shares at2.5 pence per Placing Share. Blue Oar Securities Plc has conditionally agreed,as agent for the Company, to use its reasonable endeavours to procuresubscribers for the Placing Shares at the Placing Price. The Placing Shares will represent approximately 20 per cent. of the EnlargedShare Capital at Admission. On Admission, the Company will have a marketcapitalisation of approximately £12.5 million at the Placing Price. Following approval of the EGM resolutions and the Placing, the Company will have499,982,696 Ordinary Shares in issue (19,999,308 after the Consolidation whichis one of the EGM resolutions). Admission of the Placing shares to trading onAIM is expected to occur on or around 18 July 2007. John Gunn, together with his wife Mrs R S Gunn, the Wengen Pension Plan and theGunn Trusts (of which John Gunn is one of the trustees), has subscribed for18,800,000 Ordinary Shares as part of the Placing. The Placing funds will be utilised on the prospective acquisitions. In addition,the Directors have available to them a number of other sources of workingcapital. These include additional borrowings that can be secured on freehold andleasehold property, use of sales discounting arrangements on trade debtors andthe sale and leaseback of vehicles unencumbered by existing hire purchaseagreements. April 2007 placing In relation to the placing of Ordinary Shares with warrants announced on 25April 2007, there was agreed with the placees ("April Placees") at that timethat:- 1. if there was a further placing by the Company in thefollowing 12 months to raise in excess of £500,000 at an equivalent issue priceof less than 3 pence per Ordinary Share, there would be a bonus issue ofadditional ordinary shares made to the April Placees such that the average priceper Ordinary Share received as a result of the April placing and the subsequentissue would be reduced to the equivalent issue price of the further placing; and 2. the subscription price for the Ordinary Shares thesubject of such warrants ("April Warrants") would also be reduced accordingly. The Company does not currently have distributable reserves and is therefore notin a position to issue bonus shares. The Directors therefore propose to issuefurther share purchase warrants ("Warrants") to the April Placees so as topermit them to subscribe for such number of Ordinary Shares at 1 pence perOrdinary Share, which, if subscribed for in full, would bring the average priceper Ordinary Share issued pursuant to the April Placing and under the Warrantsto 2.5 pence per Ordinary Share, being the price per Placing Share. Inaddition, the subscription price for the Ordinary Shares the subject of theApril Warrants will be reduced to 2.5 pence per Ordinary Share. The April Placees would have participated in the Placing, but at the behest ofthe Company the April Placees subscribed for Ordinary Shares in advance of thePlacing to provide the Company with the funds to commence business in Bristolwhere it had won certain park and ride contracts. Details of the Consolidation The middle market share price for the Ordinary Shares as at the close ofbusiness on 15 June 2007 was 3p. In order to simplify the Company's sharestructure and provide a more appropriate share price on AIM, the Board proposesto consolidate every 25 ordinary shares of 1p each into 1 new ordinary share of25p. Upon implementation of the Consolidation, shareholders on the register ofmembers of the Company at the record date will exchange 25 Ordinary Shares for 1New Ordinary Share and so on in proportion for any other number of OrdinaryShares then held. Any resulting fractional entitlements of shareholders will be aggregated and theDirectors will then sell the resulting shares and where the individualentitlement to net proceeds is less than £3 such proceeds will be retained bythe Company Other than the change in nominal value, the New Ordinary Shares arising onimplementation of the Consolidation will have the same rights as the OrdinaryShares, including voting, dividend and other rights. On the Consolidation becoming effective the April Warrants and the Warrants willbe amended to refer to New Ordinary Shares and the subscription price will beadjusted accordingly. Issue of Options Conditional upon completion of the Placing the Company is also granting30,000,000 options to management and key employees ("Options"). Under the grantof the Options the following will be granted to the Directors: Grant Price TermKim Taylor 6,000,000 2.5p 10 yearsSimon Dunn 5,000,000 2.5p 10 yearsJohn Gunn 5,000,000 2.5p 10 yearsGeoffrey Flight 3,500,000 2.5p 10 yearsNicholas Kennedy 2,500,000 2.5p 10 years Convertible Security The holders of the 8% convertible loan notes issued in June 2006 have given theCompany written notice that they wish to convert, on 30 June 2007, £250,000 ofthe loan note principal into Ordinary Shares at the rate of 1.6 pence ofprincipal for each Ordinary Share. Such conversion will result in a further15,625,000 Ordinary Shares being issued to John Gunn, his wife Mrs R.S. Gunn andthe Gunn Trusts (of which John Gunn is a trustee). Directors' Interests Following the Placing, the issue of the Warrants, the issue of further shareoptions as set out above and the conversion of the convertible loan notes as setout above, (but before the Consolidation) the Directors will have the followinginterests: Ordinary Shares % of enlarged Options Warrants Convertible Loan share capital of Notes the Company John Gunn *, (1) 120,018,119 24.0 10,000,000 7,983,333 £90,000Nick Kennedy** 3,346,227 0.7 6,500,000 - -Kim Taylor 500,000 0.1 12,000,000 - -Geoff Flight*** 24,758,334 4.9 5,500,000 1,422,221 £35,000Simon Dunn 875,000 0.2 9,000,000 - - * Includes Mrs R.S. Gunn, Wengen Pension Plan, and the Gunn Trusts (of whichJohn Gunn is a trustee) . ** Includes Mr Kennedy's pension fund. *** Includes Mr Flight's pension fund. (1) John Gunn holds his shares through WB Nominees Ltd. EGM A notice convening the EGM of the Company to be held at 10 a.m. on 17 July 2007at 46 Cannon Street, London, EC4N 6JJ and circular to shareholders will be sentout shortly. The following resolutions ("Resolutions") will be proposed at theEGM: (i) as an ordinary resolution to increase the authorised sharecapital of the Company and (subject to the New Ordinary Shares being admitted toAIM and (if the Second Resolution is passed) the Placing Shares being issued,allotted and admitted to AIM) consolidate the existing Ordinary Shares and thePlacing Shares on the basis of 25 Ordinary Shares for every 1 New OrdinaryShare; (ii) as a special resolution to authorise the Directors to allotthe new Ordinary Shares for the purposes of the Placing and to disapplyshareholders' pre-emption rights for the purposes of the Placing, and also tocancel any Ordinary Shares of 1p each existing 3 months after the date of thepassing of the Resolutions; and (iii) as a special resolution authorise the Directors to allot theWarrants and to disapply shareholders' pre-emption rights for the purposes ofissuing the Warrants. Recommendation The Directors consider that the Consolidation, the Placing, the issued Warrantsand the Resolutions are in the best interests of the Company and itsshareholders as a whole. Accordingly, the Directors unanimously recommendshareholders to vote in favour of the Resolutions as they have irrevocablyundertaken to do so in respect of their own beneficial and non-beneficialshareholdings which amount, in aggregate to 115,072,680 Ordinary Shares,representing approximately 30 per cent. of the Existing Share Capital. Enquiries: Contacts: John Gunn, Chairman 020 7236 6236Kim Taylor, CEO 07918 883796Romil Patel / Rhod Cruwys, Blue Oar Securities 020 7448 4400 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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