15th Dec 2006 07:58
Mercury Group PLC15 December 2006 Not for release, publication or distribution in or into or from Australia,Canada, Japan, the Republic of South Africa or the United States of America orany other jurisdiction where to do so would constitute a violation of therelevant laws of such jurisdiction (each a 'Restricted Jurisdiction'). 15 December 2006 Mercury Group plc ("Mercury" or the "Company") Proposed Capital Reorganisation and Placing and Open Offer of 20,000,000 New Ordinary Shares at 7.5p per share and Notice of Extraordinary General Meeting Summary • Proposed Capital Reorganisation to significantly reduce the costs associated with servicing a large shareholder base of over 4,000 shareholders. • Placing and Open Offer to raise £1.5 million (before expenses) to alleviate the current working capital constraints and establish a base to rebuild the business. • Pursuant to the Placing and Open Offer 20,000,000 New Ordinary Shares will be issued at 7.5 pence per New Ordinary Share resulting from the Capital Reorganisation (equivalent to 0.75p per Existing Ordinary Share). • Following the proposed Capital Reorganisation and Placing and Open Offer the Company will have 31,297,520 New Ordinary Shares in issue This summary should be read in conjunction with, and is subject to, theaccompanying full text of this announcement. The conditions and certainfurther terms of the Offer are set out in this announcement. It is expected that the circular to Shareholders and the Application Form willbe dispatched today, other than in relation to a Restricted Jurisdiction. Enquires:Mercury Group plc Simon Michaels, Finance Director Tel: 020 7393 4000 Walter Goldsmith, Non-Executive Chairman John East & Partners Limited John East/Simon Clements Tel: 020 7628 2200 College Hill Matthew Smallwood Tel: 020 7457 2020 If you are in any doubt about the action you should take, you are recommended toseek your own personal financial advice immediately from your stockbroker, bankmanager, solicitor, accountant or independent financial adviser authorisedunder the Financial Services and Market Act 2000 if you are resident in theUnited Kingdom or, if not, from another appropriately authorised independentfinancial adviser. This announcement does not constitute, or form any part of, an offer orinvitation to purchase any securities or a solicitation or an offer to buy anysecurities, pursuant to the Open Offer or otherwise. The Open Offer will bemade solely by the circular to be sent to Shareholders, an advertisement to bepublished in the London Gazette and the Application Form, which will containthe full terms and conditions of the Open Offer, including details of how theOpen Offer may be accepted. Pendana Limited accepts responsibility for the information in thisAnnouncement relating to Pendana Limited. The Independent Directors,comprising Simon Michaels and Ronald Franks, accept responsibility for therecommendation and opinions of the Independent Directors relating to thePlacing and Open Offer contained in this Announcement. The Directors acceptresponsibility for all of the other information in this Announcement. To thebest of the knowledge and belief of Pendana, the Directors and the IndependentDirectors (who have taken all reasonable care to ensure such is the case) theinformation contained in this Announcement for which they are respectivelyresponsible is in accordance with the facts and does not omit anything likelyto affect the import of such information. This announcement contains definitions of certain expressions used in this announcement. The availability of the Open Offer to Shareholders who are not resident in theUnited Kingdom may be affected by the laws of the relevant jurisdictions inwhich they are located. Shareholders who are not resident in the United Kingdomshould inform themselves about and observe any applicable legal or regulatoryrequirements in their jurisdictions. The Open Offer is not being made, andwill not be made, directly or indirectly, in or into, or by use of mail, or byany means or instrumentality (including, without limitation, by means oftelephone, facsimile, telex, internet or other forms of electroniccommunication) of interstate or foreign commerce, or by any facilities of anational securities exchange of, Australia, Canada, Japan, the Republic ofSouth Africa or the United States of America or any other RestrictedJurisdiction and the Open Offer will not be capable of acceptance by any suchuse, means, instrumentality or facility or from within those jurisdictions. Accordingly, copies of this announcement, the circular to Shareholders, theApplication Form and any related offering documents are not being, and must notbe, mailed, transmitted or otherwise forwarded, distributed or sent, in wholeor in part, in, into or from Australia, Canada, Japan, the Republic of SouthAfrica or the United States of America or any other Restricted Jurisdiction. Custodians, nominees and trustees should observe these restrictions and shouldnot send or distribute copies of this announcement, the circular toShareholders, the Application Form and any related offering documents in, intoor from Australia, Canada, Japan, the Republic of South Africa or the UnitedStates of America. John East & Partners, which is authorised and regulated in the United Kingdom bythe Financial Services Authority, is acting exclusively for the Company and forno-one else in connection with the proposed Placing and Open Offer and other matters and will not be responsible to anyone other than the Company forproviding the protections afforded to customers of John East & Partners nor forgiving advice in relation to the Placing and Open Offer or any other matter referred to in this announcement. Proposed Capital Reorganisation and Placing and Open Offer of 20,000,000 New Ordinary Shares at 7.5p per share and Notice of Extraordinary General Meeting Introduction In the Company's interim statement, issued on 29 June 2006, the Chairman madereference to the slippage in the timing of some key contracts throughout thebusiness, which were expected to affect results adversely for the year to 30September 2006. In addition, the Chairman stated that the results for the yearwould include non-recurring costs totalling £450,000, relating to an abortedacquisition and a restructuring programme. On 4 September 2006, the Company announced that, since issuing the interimstatement, all three of the Company's operating subsidiaries had experienceddifficult trading conditions and the cash balance reported as at 31 March 2006of £805,000 had been substantially reduced, that the resulting working capitalconstraints had been further compounded by a number of large unpaid debts, whichwere proving difficult to recover and that the Company was rigorously pursuingthe recovery of these debts, including taking appropriate legal action wherenecessary. The Company intends to raise £1.5 million (before expenses) by means of aPlacing and Open Offer. Pendana has conditionally agreed to subscribe for up to£1.5 million in a Placing, which is subject to clawback by Shareholders underthe Open Offer. Pendana, which currently holds 26,666,667 Existing OrdinaryShares, equivalent to 23.60 per cent of the existing ordinary share capital ofthe Company, is an investment company which is ultimately owned by the TchenguizFamily Trust. Pendana has conditionally agreed to subscribe for the Placing Shares, subject tothe rights of Qualifying Shareholders to apply for Offer Shares under the OpenOffer. If Qualifying Shareholders do not apply for any of their entitlementsunder the Open Offer, Pendana will subscribe for them itself and this willresult in Pendana acquiring up to 20,000,000 Placing Shares, which wouldincrease its shareholding to a maximum of 72.42 per cent. of the enlarged issuedordinary share capital. Since this exceeds 30 per cent. of the enlarged issuedordinary share capital, Pendana would, in the absence of a waiver from theprovisions of Rule 9 of the Code being granted by the Panel, be obliged to makea general offer for the Company. The Panel has agreed, subject to a resolutionbeing passed on a poll by the Independent Shareholders at the EGM, to waive thisobligation. Shareholders should be aware that the Company is reliant on its bankerscontinuing to provide the existing bank facility, which has recently beenreduced, at the bank's request, to £300,000 from £750,000. In the event that theProposals are not completed there can be no certainty that such support willcontinue. In this eventuality the Company would be unable to pay its debts asand when they fall due and would have to cease trading. Furthermore, the Directors have been advised by John East & Partners that in theevent that the Proposals are not completed, John East & Partners would not be ina position to confirm to the London Stock Exchange that the Company remainedsuitable for trading on AIM. Consequently, the trading in the Company's existingordinary shares would be suspended. Capital Reorganisation The Company presently has in excess of 4,000 Shareholders. This adds aconsiderable cost to the overheads of the Company caused by the need to produceinterim and annual accounts and registrars costs. Over 60 per cent. ofShareholders have holdings with a value (at the Placing Price) of £3 or less.Accordingly, it is proposed to consolidate the shareholdings in the Company onthe terms set out below. The Placing Price is below the present nominal value ofthe Ordinary Shares. Company law prohibits a company from issuing fully paidshares at a discount to the nominal, or par, value of its shares. Therefore, inorder to carry out the Placing and Open Offer, it is necessary to reduce thenominal value of the Company's authorised and issued Ordinary Shares.Accordingly, the Directors have decided that a share reorganisation will beeffected on the following basis: (a) every 400 Existing Ordinary Shares will be consolidated into one new ordinary share of £4 each in the capital of the Company; (b) each new ordinary share of £4 each will be subdivided into 40 new ordinary shares of 10p each in the capital of the Company; (c) each of the issued ordinary shares of 10p each resulting from the consolidation will be subdivided and redesignated into one New Ordinary Share and one Deferred Share; and (d) each of the authorised and unissued Ordinary Shares will be redesignated into one New Ordinary Share. Any fractions arising from the Capital Reorganisation will be aggregated, issuedand sold for the benefit of the Company. The rights attaching to the New Ordinary Shares will, apart for the change innominal value and the entitlement of Shareholders in respect of a return ofcapital or other distributions arising from them, be identical in all respectsto those of the Existing Ordinary Shares. The Deferred Shares will have no voting rights and will not carry anyentitlement to attend general meetings of the Company. They will carry only theright to participate in any return of capital to the extent of 1p per DeferredShare but only after each New Ordinary Share has received in aggregate capitalrepayments totalling £1 million per New Ordinary Share. Accordingly, the Deferred Shares will, for all practical purposes, be valuelessand it is the Board's intention, at an appropriate time, to make an applicationto the Companies Court for the Deferred Shares to be cancelled. Existing share certificates will cease to be valid following the CapitalReorganisation and new share certificates are expected to be issued on 19January 2007; no certificates will be issued in respect of Deferred Shares. The Placing and Open Offer The Company is proposing to raise approximately £1.5 million (before expenses)by the issue of the Placing Shares and Offer Shares pursuant to the Placing andOpen Offer. Accordingly, 20,000,000 Placing Shares have been conditionallyplaced by the Company with Pendana, subject to the right of QualifyingShareholders to apply for their allocation of Offer Shares under the Open Offerat a price of 7.5p per Offer Share, payable in full on application and free ofall expenses, pro rata to their existing shareholdings on the basis of: 71 Offer Shares for every 400 Existing Ordinary Shares held at the close of business on the Open Offer Record Date and so on inproportion for any greater number of Existing Ordinary Shares then held.Entitlements to Offer Shares will be rounded down to the nearest whole number ofOffer Shares. Fractional entitlements will not be allotted to Shareholders butwill be issued pursuant to the Placing for the benefit of the Company. The Open Offer is subject to the satisfaction, amongst other matters, of thefollowing conditions on or before 12 January 2007, (or such later date being notlater than 31 January 2007, as the Company may decide): (i) the passing without amendment of the Resolutions; (ii) the subscription monies for the Placing Shares being received in full by the Company; (iii) the Placing Letter becoming unconditional in all respects and not having been rescinded in accordance with its terms; and (iv) Admission becoming effective by 8.00 am on 12 January 2007, (or such later time or date not being later than 8.00 am on 31 January 2007 as the Company may decide). The Offer Shares and the Placing Shares will, when issued and fully paid, rankpari passu in all respects with the New Ordinary Shares, including the right toreceive all dividends and other distributions declared, made or paid after thedate of Admission. The Open Offer has been structured so as to allow Qualifying Shareholders tosubscribe for New Ordinary Shares at the Placing Price pro rata to theirexisting holdings. Qualifying Shareholders may make excess applications underthe Open Offer up to a maximum additional amount equal to their pro rataentitlement. Excess applications will be met to the extent that correspondingapplications by other Qualifying Shareholders are not made or are made for lessthan their pro rata entitlements. If there is an over-subscription resultingfrom excess applications, allocations in respect of such excess applications (tothe extent of any competition) be scaled back in such manner, as the Companyshall, in its absolute discretion, determine. To the extent that Offer Sharesare not subscribed by existing Shareholders, Open Offer entitlements will lapseand the related Offer Shares will be issued pursuant to the Placing. Following completion of the Proposals, a Shareholder with a shareholding of lessthan 400 Existing Ordinary Shares at the Capital Reorganisation Record Date willreceive no New Ordinary Shares and will not qualify to apply for Offer Sharesunder the Open Offer. Following the completion of the Proposals, allShareholders with a shareholding of greater than 400 Existing Ordinary Shares atthe Capital Reorganisation Record Date will receive 40 New Ordinary Shares forevery 400 Existing Ordinary Shares held ignoring fractional entitlements andwill qualify to subscribe for Offer Shares in the Open Offer. Therefore, if a Shareholder holds 4,240 Existing Ordinary Shares at the CapitalReorganisation Record Date, the Shareholder will hold 400 New Ordinary Sharesfollowing the Capital Reorganisation and will have the right to subscribe for752 Offer Shares in the Open Offer plus an additional 752 Offer Shares by way ofexcess applications but may be scaled back on a pro rata basis if he applies formore than his pro rata entitlement. Therefore, if at present you have less than400 Existing Ordinary Shares you will not receive any New Ordinary Shares andwill not qualify to apply for any Offer Shares. Ronald Franks, being the only Independent Director owning shares in the Company,beneficially holds 284,480 Existing Ordinary Shares, equivalent to 0.25 percent. of the Existing Ordinary Shares, has an aggregate entitlement under theOpen Offer to 50,495 Offer Shares. Ronald Franks intends to take up his fullentitlement under the Open Offer and his full entitlement under the excessapplications. Use of proceeds The Placing proceeds will be applied in reducing bank debt, improving theGroup's working capital position and investing in the infra-structure and growthof SMPA. Current trading and future prospects The Group has experienced difficult trading conditions in the Company'soperating subsidiaries since issuing the interim statement. Accordingly, theBoard anticipates that the results for the year ended 30 September 2006 willshow material losses. These losses, coupled with the loss and goodwillimpairment of £2.5 million arising from the sale of Navitas Hemway and furthergoodwill impairment will result in a very substantial erosion of the Company'snet assets. Following completion of the Proposals, the Company will concentrate on growingand developing SMPA, its core commercial property agency. Whilst the Group iscurrently performing below expectations, the Board believes that the costcutting measures already achieved and further planned, combined with the plannedinvestment in SMPA and the additional levels of business anticipated fromparties associated with Pendana, will improve the Group's future tradingprospects. Directors Walter Goldsmith (Non-Executive Chairman), is a chartered accountant, withsubstantial board level experience in a number of public and private companies.A considerable part of his career was spent at The Black & Decker Corporation,where he was latterly Corporate Vice President. Mr Goldsmith was subsequentlygroup planning and marketing director at Forte plc and, for five years, was theDirector General of the Institute of Directors. He is currently Deputy Chairmanof Asite plc (formerly Premisys plc). Mr Goldsmith is a consultant to theConsensus Business Group, which is associated with Pendana. Ronald Franks (Chief Executive Officer), was appointed to the Board followingthe acquisition of SMPA in March 2005. Mr Franks has worked for SMPA since 1969and has been managing director of SMPA since 2001 and is currently jointmanaging director. Simon Michaels (Finance Director and Company Secretary), was appointed FinanceDirector on 1 January 2006. A Chartered Accountant, Mr Michaels was previouslyfinance director of Harvey Nash Group Plc's UK and US operations. Previously, MrMichaels worked for RP Corporate Strategy, the privately owned StrategyConsultancy. At RP Corporate Strategy, he provided business strategy advice onproperty-related ventures. Between 1990 and 1998, he held financial positionswith Coopers & Lybrand, London and Gibson Appleby Chartered Accountants,Brighton. James Lugg (Non-Executive Director), joined the Board as an executive directoron 16 August 2006. He has over twenty years' experience in the property servicessector. He is also a director of Energy Technique Plc, an AIM quoted company. MrLugg is a consultant to the Consensus Business Group, which is associated withPendana. The Board has appointed, conditional on Admission, George Kynoch as anindependent Non-Executive Director with effect from Admission. George Kynoch (proposed Non-Executive Director) has over 30 years' experience inindustry and was chief executive of G & G Kynoch plc, the predecessor of KynochGroup plc, now called Bioquell PLC, a design and manufacture company listed onthe Official List, until 1990. He continued as an executive director until 1992and a non-executive director until 1995. Mr Kynoch was the Scottish OfficeIndustry and Local Government Minister from 1995 to 1997, while serving as aMember of Parliament for Kincardine and Deeside between 1992 and 1997. He isnon-executive chairman of ToLuna Plc, OCZ Technology Group, Inc. and TEPExchange Group plc, all of which are companies which are listed on AIM and ofMountwest 146 Limited and Madwaves (UK) Limited. He is a non-executive directorof Talent Group plc, which is also quoted on AIM. Independent Directors Recommendation Walter Goldsmith and James Lugg are associated with Pendana and have,accordingly, taken no part in the deliberations of the Board with regard to thematters set out in the circular to Shareholders and are precluded from makingany recommendation to Shareholders with regard to the Proposals. The Independent Directors, who have been so advised by John East & Partners,believe that the Proposals, including the waiver of the obligation on Pendana tomake a general offer to Shareholders under Rule 9 of the Code, are fair andreasonable and are in the best interests of the Company and its Shareholders andrecommend you to vote in favour of the Resolutions as they have undertaken to doin respect of their aggregate shareholdings of 284,480 Existing Ordinary Shares,equivalent to 0.25 per cent of the Existing Ordinary Shares. In providing adviceto the Independent Directors, John East & Partners has taken into account thecommercial assessment of the Independent Directors. Expected timetable of events Record Date for the Open Offer 12 December 2006 Latest time and date for receipt of Application Forms and payment in full 3.00 pm on 9 January 2007 Latest time and date for receipt of Proxy Forms 10.00 am on 9 January 2007 EGM 10.00 am on 11 January 2007 Admission effective and dealings commence on AIM 12 January 2007 Definitions The following definitions apply throughout this announcement unless the context requires otherwise: "Act" the Companies Act 1985 (as amended) "Admission" the admission of the Enlarged Issued Ordinary Share Capital to trading on AIM becoming effective in accordance with the AIM Rules "AIM" the AIM Market of the London Stock Exchange "AIM Rules" the rules published by the London Stock Exchange relating to AIM, as amended from time to time "Application Form" the application form accompanying the circular to Shareholders to be used by Qualifying Shareholders in connection with the Open Offer "Capital Reorganisation" the proposed consolidation and sub-division of each Existing Ordinary Share into one New Ordinary Share and one Deferred Share "Capital Reorganisation the close of business on 11 January 2007 Record Date" "Code" the Takeover Code "Company" or "Mercury" Mercury Group plc "CREST" the system for paperless settlement of trades and the holding of uncertificated shares administered through CRESTCo. Limited "Deferred Shares" the deferred shares of 9p each arising from the Capital Reorganisation "Directors" or "the Board" the directors of the Company as set out in this announcement "EGM" or "Extraordinary the extraordinary general meeting of the Company General Meeting" convened for 10.00 a.m. on 9 January 2007, notice of which is set out in the circular to Shareholders "Enlarged Issued Ordinary the 31,297,560 New Ordinary Shares in issue Share Capital" following completion of the Proposals "Existing Ordinary Shares" the 112,975,684 Ordinary Shares in issue at the date of this announcement "Form of Proxy" the form of proxy accompanying the circular to Shareholders for use in connection with the EGM "Group" the Company and its subsidiary undertakings "Independent Directors" Simon Michaels and Ronald Franks "Independent Shareholders" holders of Existing Ordinary Shares, excluding Pendana and its associated parties "John East & Partners" John East & Partners Limited "London Stock Exchange" London Stock Exchange plc "Navitas Hemway" Navitas Hemway Limited "New Ordinary Shares" the new ordinary shares of 1p each in the capital of the Company arising from the Capital Reorganisation "Offer Shares" the New Ordinary Shares to be issued by the Company for subscription under the Open Offer "Open Offer" the conditional offer to Qualifying Shareholders to subscribe for the Offer Shares at the Placing Price, as described in the circular to Shareholders "Open Offer Record Date" the close of business on 12 December 2006 "Ordinary Shares" ordinary shares of 1p each in the capital of the Company "Panel" the Panel on Takeovers and Mergers "Pendana" Pendana Limited "Placing" the conditional placing of the Placing Shares at the Placing Price pursuant to the Placing Letter "Placing Letter" the conditional letter dated 15 December 2006 between the Company and Pendana "Placing Price" 7.5p per Placing Share "Placing Shares" the 20,000,000 New Ordinary Shares placed conditionally with Pendana, all of which are subject to recall by Qualifying Shareholders under the Open Offer "Proposals" the proposals set out in the circular to Shareholders "Qualifying Shareholders" holders of 400 or more Existing Ordinary Shares at the Open Offer Record Date "Resolutions" the resolutions set out in the notice of the Extraordinary General Meeting in the circular to Shareholders "Rule 9 Waiver" the agreement by the Panel to waive the obligation on Pendana to make a general offer to all Shareholders pursuant to Rule 9 of the Code subject to approval, by way of a poll vote, of the Shareholders "Shareholders" holders of Existing Ordinary Shares "SMPA" Smith Melzack Pepper Angliss Limited "Telco Solutions" Telco Solutions Limited This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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