22nd Mar 2007 08:23
Cape PLC22 March 2007 22 March 2007 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO OR FROM THE UNITED STATES, CANADA, AUSTRALIA, JAPAN, THE REPUBLIC OF IRELAND OR THE REPUBLIC OF SOUTH AFRICA Cape PLC Proposed placing by Collins Stewart of 26,923,077 Placing Shares at 260p per share Summary of the Placing • Cape proposes to raise approximately £70 million, before expenses and subject to certain conditions, by way of a Placing of 26,923,077 new Ordinary Shares at a price of 260p per Placing Share • The Placing Price represents a discount of approximately 3.2 per cent. to the closing middle market price of an Ordinary Share on 21 March 2007 • The Placing Shares represent approximately 32.2 per cent. of the Company's issued share capital immediately prior to the Placing • The Placing is conditional on, inter alia, Shareholder approval at an Extraordinary General Meeting to be convened for 10.00 am on 23 April 2007 • The net proceeds of the Placing, which are expected to amount to approximately £67.75 million, are to be utilised to finance both acquisition opportunities and to fund organic growth Reasons for the Placing • To fund anticipated organic growth - Cape has a solid platform from which to achieve further growth. The Company's existing executive management team has overseen a period of significant growth, recently announcing pre-tax profits of £14.4 million for the year ended 31 December 2006 and with significant new contract awards and renewals during 2006 • Future growth by acquisition to complement organic growth - The Board believes a material proportion of future growth can be generated organically but has also identified a number of acquisition opportunities which, if completed, would have the potential to add significant shareholder value in the next 12 months • PCH - As announced on 22 February 2007, Cape is in discussions with PCH Group, a public company listed on the Australian Stock Exchange. These discussions are ongoing, but are at an early stage and may or may not lead to an offer by Cape for PCH Group. Were an offer to be made and accepted by PCH Group shareholders, the Board believes that the acquisition of PCH Group would bring a number of benefits to Cape including: o extension of Cape's footprint in the Far East/Pacific Rim; o synergies based on Cape's expertise in supplying labour and a broader range of products and services to PCH's customer base; and o the opportunity for Cape management to apply their expertise towards generating additional revenue and margin growth • Use of proceeds - The Placing is required in order to provide the Group with the cash resources to facilitate its acquisition strategy - The Directors intend to apply the net proceeds of the Placing towards financing, in the first instance, the potential acquisition of the PCH Group or, alternatively, one or more other acquisition opportunities - In addition, the Board considers it prudent to strengthen the capital base of the Group to finance further organic growth in the business and to support proposed new banking facilities Martin May, Chief Executive of Cape plc said: "Cape ended 2006 at a record high and entered 2007 trading significantly aheadof management's expectations. This growth has put the Company in an idealposition to consolidate growth further both organically and by acquisition. Webelieve this Placing will enable management to optimise the return to Cape'sshareholders that the current market opportunity offers." Further information Cape PLCMartin May, Chief Executive +44 (0) 1924 876 276 Collins StewartChris Wells / Mark Connelly / Stewart Wallace +44 (0) 20 7523 8350 Bell Pottinger Corporate & FinancialNick Lambert / Victoria Geoghegan +44 (0) 20 7861 3232 Collins Stewart Europe Limited, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting as nominated adviser andbroker to the Company in relation to the Placing and Admission and is not actingfor any other persons in relation to the Placing and Admission. Collins StewartEurope Limited will not be responsible to anyone other than the Company forproviding the protections afforded to clients of Collins Stewart Europe Limited,or for providing advice in relation to the contents of this announcement or anymatter referred to in it. Neither the Ordinary Shares nor the Placing Shareshave been, or will be, registered under the United States Securities Act of 1933(as amended), or under the securities laws of any state of the United States orany province or territory of Canada, Australia, Japan, the Republic of Irelandor the Republic of South Africa. Subject to certain exceptions, the PlacingShares may not, directly or indirectly, be offered, sold, taken up or deliveredin or into or from the United States, Canada, Australia, Japan, the Republic ofIreland or the Republic of South Africa or their respective territories orpossessions. This announcement does not constitute an offer to sell or issue orthe solicitation of an offer to buy or subscribe for Ordinary Shares in anyjurisdiction in which such offer or solicitation is unlawful. Accordingly,copies of this announcement are not being and must not be mailed or otherwisedistributed or sent in or into or from the United States, Canada, Australia,Japan, the Republic of Ireland or the Republic of South Africa and any personreceiving this announcement (including custodians, nominees and trustees) mustnot distribute or send it in or into or from the United States, Canada,Australia, Japan or the Republic of Ireland or the Republic of South Africa. EXPECTED TIMETABLE OF PRINCIPAL EVENTS 2007 Latest time and date for receipt of Forms of Proxy 10.00 a.m. on 21 April Extraordinary General Meeting 10.00 a.m. on 23 April Admission of the Placing Shares to AIM 24 April CREST stock accounts credited for Placing Shares 24 April Definitive share certificates for Placing Shares 4 Maydespatched (as applicable) PLACING STATISTICS Placing Price 260p Number of Ordinary Shares in issue at the date ofthis document 83,543,010 Number of new Ordinary Shares the subject of thePlacing 26,923,077 Number of Ordinary Shares in issue followingAdmission 110,466,087 Estimated gross proceeds of the Placing * £70.0m * Stated before deducting the estimated expenses of the Placing of approximately£2.25 million 22 March 2007 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO OR FROM THE UNITED STATES, CANADA, AUSTRALIA, JAPAN, THE REPUBLIC OF IRELAND OR THE REPUBLIC OF SOUTH AFRICA Proposed placing by Collins Stewart of 26,923,077 Placing Shares at 260p per share Introduction Cape announces today that it proposes, subject to the satisfaction of certainconditions, to raise £70 million, before expenses, by way of a Placing of26,923,077 new Ordinary Shares at a price of 260p per Placing Share. For thereasons described below, it is proposed that the Placing is carried out on a nonpre-emptive basis. The Placing is conditional on, inter alia, Shareholderapproval at an Extraordinary General Meeting to be convened for 10.00 a.m. on 23April 2007. Further details of the Placing are set out below. The authorities necessary for the allotment of the Placing Shares pursuant tothe Placing will be sought at the EGM. It is expected that a circular will bedespatched to Shareholders shortly ("the Circular"), the purpose of which willbe to provide Shareholders with information about the Placing, to explain whythe Directors believe that the Placing is in the best interests of the Companyand Shareholders and to seek Shareholders' approval of the Resolutions to beproposed at the EGM. Application will be made to the London Stock Exchange for the Placing Shares tobe admitted to trading on AIM. Subject to, inter alia, Admission, it is expectedthat dealings in the Placing Shares will commence on 24 April 2007. Background to and reasons for the Placing Cape is a leading international provider of essential support services for theenergy sector, providing a broad range of services across the life cycle ofmajor industrial assets. Its services are used during initial project build,routine maintenance and during outages, extension of life projects and finallyfor decommissioning. It works globally with many of the world's leading nationaland international power, oil and LNG companies. Cape's geographic footprintextends from the UK, through the Gulf and Caspian into the Far East and PacificRim. It offers services both on and offshore and has offices in 23 countries andaround 8,000 employees worldwide. On 16 March 2007, the Company announced its preliminary results for the yearended 31 December 2006 reporting sales from continuing operations of £270.7million. As at 21 March 2007 (the latest practicable date before the date ofthis announcement) Cape's share price closed at 268.5p, giving Cape a marketcapitalisation of approximately £224 million. The existing executive managementteam led by Martin May and Mike Reynolds has overseen a period of significantgrowth of the Group with the Company recently announcing pre-tax profits of£14.4 million for the year ended 31 December 2006. The Directors believe that Cape has been substantially de-risked by the implementation of the asbestos Scheme of Arrangement, which became effective on 14 June 2006. The Scheme effectively ring-fences the great majority of future asbestos related claims emanating from the Group's past activities and the Directors believe this has removed a significant obstacle to Cape's growth. Cape acquired the DBI Group in October 2006, its first acquisition in which it had no previous controlling interest since 1999. The DBI Group operates across the UK and provides onshore and offshore specialist cleaning services to a number of large blue chip clients in the pharmaceutical, oil, petrochemical and manufacturing industries. The Directors believe that the DBI Group represents an excellent fit for Cape, with a number of significant clients in common, a similarly exacting approach to matters of health and safety and a well matched geographic footprint. The Directors also believe that the DBI Group brings an additional level of technical specialisation to Cape's existing industrial cleaning services division. In the period between its acquisition and 31 December 2006, the DBI Group generated turnover of £3.5 million and contributed profits before tax of £0.6 million (before goodwill amortisation of £0.2 million) and £0.5 million tothe Group's operating cash flow. The Board recently approved new investment inplant and machinery for the business of £1.0 million and it is anticipated thatthis, along with a further strengthening of the management team, will result in significantly increased growth in 2007. Cape has continued to win significant new contract awards and renewalsthroughout 2006. As at 31 December 2006, the Group's order book showed thatapproximately 70 per cent. of budgeted Group turnover for 2007 was alreadyunderpinned with firm contracts. There is also clear visibility of a substantialproportion of anticipated 2008 turnover. The Directors believe that the Group has a solid platform from which to achievefurther growth. Whilst the Directors believe that a material proportion of thisgrowth can be generated organically, the Board has identified a number ofacquisition opportunities, including that of PCH Group. As announced on 22 February 2007, Cape is in discussions with PCH Group, apublic company which is listed on the Australian Stock Exchange. Thesediscussions are ongoing but are at an early stage and may or may not lead to anoffer by Cape for PCH Group. Were an offer to be made and be accepted by PCHGroup shareholders, the Board believes that the acquisition of PCH Group wouldbring a number of benefits to Cape including: • the extension of Cape's geographic footprint in the Far East/Pacific Rim;• synergies based on Cape's expertise in supplying labour and a broader range of products and services to PCH's customer base; and• the opportunity for Cape's management team to apply their expertise towards generating additional revenue and margin growth. However, should the current discussions with PCH Group not reach a successfulconclusion, the Board has identified a number of other potential acquisitionopportunities as alternatives as follows: • the acquisition of a mechanical & electrical business which would increase bundling capacity;• the acquisition of a business with existing contracts in nuclear decommissioning; and• the acquisition of a high-end cleaning business in order to consolidate the Group's investment in DBI Group. The Placing is therefore not conditional on the acquisition of the PCH Group.There are no current negotiations in respect of the alternative acquisitionopportunities identified above and there is thus no certainty of execution ofthese opportunities. The Directors believe that all of the above acquisition opportunities would, ifcompleted, strengthen the Group's product offering and would have the potentialto add significant shareholder value in the next 12 months. The Board believes that the Placing is required in order to provide the Groupwith the cash resources to facilitate its acquisition strategy. The Directorsintend to apply the net proceeds of the Placing, in the first instance, towardsfinancing the potential acquisition of the PCH Group or, alternatively, one ormore of the other acquisition opportunities outlined above. In addition, theBoard considers it prudent to strengthen the capital base of the Group tofinance further organic growth in the business and to support the proposed newbanking facilities described below. The Placing Pursuant to the Placing, the Company is proposing to issue 26,923,077 newOrdinary Shares at the Placing Price. The Placing is fully underwritten byCollins Stewart. The Company will raise gross proceeds of approximately £70million (or approximately £67.75 million net of expenses). The Placing Pricerepresents a discount of approximately 3.2 per cent. to the closing middlemarket price of an Ordinary Share on 21 March 2007 (the latest practicable dateprior to the release of this announcement). The Placing Shares represent approximately 32.2 per cent. of the Company'sissued share capital immediately prior to the Placing. Following completion ofthe Placing, the issued ordinary share capital of the Company will increase to110,466,087 fully paid Ordinary Shares and the Placing Shares will representapproximately 24.4 per cent. of the Enlarged Share Capital. The Placing Shares have not been and will not be offered generally toShareholders, whether on a pre-emptive basis or otherwise. Following theintroduction of the Prospectus Rules on 1 July 2005 and the consequentialincrease in costs and the time required for AIM companies to raise new equitycapital on a pre-emptive basis, the Directors believe that the Placing is themost cost effective and expeditious method of raising new equity capital. The Placing Shares will, on Admission, rank in full for all dividends or otherdistributions declared, made or paid in respect of Ordinary Shares afterAdmission and will otherwise rank pari passu in all respects with the ExistingOrdinary Shares. The Placing, is conditional, inter alia, upon: • the passing of the Resolutions at the EGM;• the Placing Agreement becoming unconditional in all respects and not having been terminated in accordance with its terms; and• Admission. The Directors have conditionally agreed to subscribe in aggregate for 40,000Placing Shares pursuant to the Placing. The table set out below shows thecurrent shareholdings of the Directors and their shareholdings followingcompletion of the Placing: Director Existing Percentage Number of Placing Shareholding Percentage holding of of Existing Shares following of Enlarged Ordinary Share conditionally completion of Share Shares Capital subscribed for the Placing Capital David McManus 25,000 0.03 10,000 35,000 0.03 Martin May 100,000 0.12 20,000 120,000 0.11 Mike Reynolds 12,779 0.02 5,000 17,779 0.02 David Robins 12,000 0.01 5,000 17,000 0.02 The Placing Shares have been conditionally placed by Collins Stewart withinstitutional and other investors (including the Directors as set out above). Banking facilities At the time of the DBI Group acquisition, Cape secured a new £60 million fiveyear committed facility from Barclays Bank Plc and The Governor and Company ofthe Bank of Scotland. The facility comprised a term loan of up to £13 million tofund the acquisition of DBI Group and revolving credit and other facilitiestotalling £47 million for working capital and other purposes. The new facility,which is on improved terms, replaces the previous Barclays facility other thanin respect of the £15 million term loan used to part fund the Scheme, whichremains in place and is unamended. The Directors intend to approach the Company's existing bankers in the near termwith a view to increasing the Company's banking facilities in order to providesufficient capital to finance projected growth, both organic and by acquisition. Current trading and prospects Cape has a demonstrable track record of growing a profitable business. TheGroup's strategy is designed to ensure that this continues. Cape's strong growthin recent years has been generated organically and has been driven by strongdemand in the industrial support services sector and its current order bookprovides excellent visibility for the short to medium term. In addition to thesubstantial orders won in 2006 and early 2007 in the UK and the Middle East, theDirectors intend to exploit demand for Cape's services in North Africa and tofurther strengthen the Group's position in Kazakhstan in 2007. From this stableplatform and with the support of its key stakeholders, the Directors believethat Cape is now also well positioned to make acquisitions that fit within itsstrategic criteria. During 2007, the Directors will also decide whether, and if so when, to considera return to the Official List of the London Stock Exchange. Cape ended 2006 with utilisation levels at a record high and is currentlytrading significantly ahead of management's expectations. The Directors haveevery reason to look forward to continuing growth in 2007 and beyond. Extraordinary General Meeting and action to be taken An Extraordinary General Meeting of the Company, notice of which will beincluded in the Circular, is to be held at 10.00 a.m. on 23 April 2007 at theoffices of Collins Stewart, 8th Floor, 88 Wood Street, London EC2V 7QR. At theEGM, resolutions will be proposed, inter alia, to authorise the Directors toallot and issue the Placing Shares and to dis-apply pre-emption rights inrespect of such allotment. The Placing is conditional, inter alia, on theseresolutions being passed without amendment. Recommendation The Directors consider the Placing to be in the best interests of the Companyand its Shareholders as a whole and accordingly they unanimously recommend thatShareholders vote in favour of the resolutions to be proposed at the EGM as theyhave irrevocably confirmed their intention to do in respect of their ownbeneficial holdings which, in aggregate, amount to 149,779 Ordinary Shares,representing approximately 0.18 per cent. of the Existing Ordinary Shares. Collins Stewart Europe Limited, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting as nominated adviser andbroker to the Company in relation to the Placing and Admission and is not actingfor any other persons in relation to the Placing and Admission. Collins StewartEurope Limited will not be responsible to anyone other than the Company forproviding the protections afforded to clients of Collins Stewart Europe Limited,or for providing advice in relation to the contents of this announcement or anymatter referred to in it. Neither the Ordinary Shares nor the Placing Shareshave been, or will be, registered under the United States Securities Act of 1933(as amended), or under the securities laws of any state of the United States orany province or territory of Canada, Australia, Japan, the Republic of Irelandor the Republic of South Africa. Subject to certain exceptions, the PlacingShares may not, directly or indirectly, be offered, sold, taken up or deliveredin or into or from the United States, Canada, Australia, Japan, the Republic ofIreland or the Republic of South Africa or their respective territories orpossessions. This announcement does not constitute an offer to sell or issue orthe solicitation of an offer to buy or subscribe for Ordinary Shares in anyjurisdiction in which such offer or solicitation is unlawful. Accordingly,copies of this announcement are not being and must not be mailed or otherwisedistributed or sent in or into or from the United States, Canada, Australia,Japan, the Republic of Ireland or the Republic of South Africa and any personreceiving this announcement (including custodians, nominees and trustees) mustnot distribute or send it in or into or from the United States, Canada,Australia, Japan or the Republic of Ireland or the Republic of South Africa. APPENDIX 1 DEFINITIONS The following definitions apply throughout this announcement unless the contextrequires otherwise: "Admission" the admission to trading on AIM of the Placing Shares becoming effective in accordance with the AIM Rules for Companies "AIM" the AIM market of the London Stock Exchange "Board" or the directors of the Company"Directors" "Bank of Scotland" The Governor and Company of the Bank of Scotland "Collins Stewart" Collins Stewart Europe Limited, the Company's nominated adviser, broker and placing agent "Company" or Cape plc"Cape" "Companies Act" the Companies Act 1985, as amended "CREST" the relevant system (as defined in the Uncertificated Securities Regulations 2001) in respect of which CRESTCo is the operator (as defined in those regulations) "DBI Group" DBI Group Limited and its subsidiaries, DBI Industrial Services Limited and DBI Offshore Services Limited "EGM" or the extraordinary general meeting of the Company to be"Extraordinary convened for 10.00 a.m. on 23 April 2007 (or any adjournmentGeneral Meeting" thereof) "Enlarged Share the Existing Ordinary Shares and the Placing SharesCapital" "Existing Ordinary the 83,543,010 Ordinary Shares in issue at the date of thisShares" document "Group" Cape plc and its subsidiaries "London Stock London Stock Exchange plcExchange" "Option Holders" holders of options under the Cape plc Employee Incentive Plan and the Cape plc 2006 Sharesave Plan "Ordinary Shares" ordinary shares of 25p each in the Company "PCH Group" PCH Group Limited, a public company which is listed on the Australian Stock Exchange "Placing the conditional agreement dated 22 March 2007 between CollinsAgreement" Stewart and the Company relating to the Placing "Placing" the conditional placing by Collins Stewart of the Placing Shares pursuant to the Placing Agreement "Placing Shares" 26,923,077 new Ordinary Shares which are to be conditionally placed for cash in accordance with the terms of the Placing Agreement and whose allotment and issue is conditional, inter alia, on the approval of Shareholders at the EGM "Placing Price" 260p per Placing Share "Resolutions" the resolutions to be proposed at the EGM "Shareholders" holders of Existing Ordinary Shares "UK" or "the the United Kingdom of Great Britain and Northern IrelandUnited Kingdom" This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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