10th Apr 2006 07:02
Plant Health Care PLC10 April 2006 10 April 2006 Plant Health Care plc ("PHC", the "Company" or "Plant Health Care") Proposed placing of 10,000,000 new Ordinary Shares to raise £6.5 million (before expenses) Summary of the Placing: • Placing of 10,000,000 new Ordinary Shares at a placing price of 65p to raise £6.5 million (before expenses). • Funds raised to be used primarily to develop the market for Myconate(R), the Company's unique natural plant root compound. • Myconate(R) trials to date conducted in the USA, Europe and Brazil have shown that under varying conditions Myconate(R) generated yield increases of up to 25 per cent. • Plant Health Care is the only company in the world with the legal right to use this unique and exclusive technology. • Based on recent US corn prices, a yield increase of only 5 per cent. would produce a 75 per cent. return on the incremental cost of the application of Myconate(R). A circular containing a notice of extraordinary general meeting convened for10.00 a.m. on 5 May 2006 has today been sent to shareholders of the Companyoutlining the terms of the Placing and seeking Shareholder approval to, interalia, enable the Directors to allot the Placing Shares in connection with thePlacing. This summary should be read in conjunction with, and is subject to, the fulltext of the attached announcement. Notes: Evolution Securities Limited, which is regulated in the United Kingdom by TheFinancial Services Authority, is acting exclusively for Plant Health Care plcand for no one else in relation to the Placing and will not be responsible toanyone other than Plant Health Care plc for providing the protections affordedto customers of Evolution Securities Limited or for providing advice in relationto matters referred to in this announcement. 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. 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. These written materials are not an offer of securities for sale in the UnitedStates. Securities may not be offered or sold in the United States absentregistration under the US Securities Act of 1933 (the "US Securities Act") or anexemption there from. Plant Health Care plc has not and does not intend toregister any of the New Ordinary Shares under the US Securities Act. The NewOrdinary Shares will not be offered or sold to the public in the United States. For enquiries:Plant Health Care plc Tel: 001 603 525 3702John Brady, Chief Executive Tavistock Communications Tel:020 7920 3150Jeremy Carey/Christian Taylor-Wilkinson Evolution Securities Tel: 020 7071 4300Tim Worlledge/Tim Redfern Definitions:Words and expressions where defined in the circular issued by the Company anddated 10 April 2006 shall, unless the context requires otherwise, have the samemeaning in this announcement. Plant Health Care plc ("PHC", the "Company" or "Plant Health Care") Proposed placing of 10,000,000 new Ordinary Shares to raise £6.5 million (before expenses) 1. Introduction The Board announced today that it proposes to raise £6.5 million (beforeexpenses) by way of a placing of 10,000,000 new Ordinary Shares at a price of 65pence per share. The net proceeds of the Placing will be used primarily todevelop the market for Myconate(R), the Company's unique natural plant rootcompound, which recent trials have confirmed can increase the yield from manyagricultural crops. The Placing is conditional, inter alia, upon the Company obtaining approval fromits Shareholders to grant the Board authority to allot the Placing Shares and todisapply statutory pre-emption rights which would otherwise apply to, inter alia, the allotment of the Placing Shares. The Placing, which has been arranged andfully underwritten by Evolution Securities pursuant to the terms of the PlacingAgreement, is also conditional upon Admission. The Company also announced today its preliminary results for the year ended 31December 2005. 2. Background to and Reasons for the Placing In 2004 the Group purchased VAMTech, a company specialising in the synthesis ofFormononetin, a compound that stimulates the growth of mycorrhizal fungi alreadyexisting in the soil, thereby improving the growth and health of plants andcrops. In 2005 the compound was branded PHC Myconate(R). The technology isprotected by long-term patents covering both manufacturing and usage in the USand Europe. Plant Health Care is the only company in the world with the legalright to use this unique and exclusive technology. A number of trials (including field trials) have been undertaken on thistechnology since 1992. In April 2005 Plant Health Care expanded the scope ofthese trials, and initiated extensive trials around the world on a variety ofcrops and in a variety of conditions. In the final quarter of 2005 and in thefirst quarter of 2006, the results from the trials were received, confirming theBoard's belief that Myconate(R) has the potential to revolutionize the farmingof row crops, including corn (or maize) and soybeans, two of the most widelycultivated row crops in the world. Plant Health Care now wishes to raise fundsto conclude its trial program, prove the commercial viability of Myconate(R) in2006 and commence commercialisation of Myconate(R) during 2006 and 2007. 3. Myconate(R) Trials to Date Trials conducted in the USA, Europe and Brazil, have shown that across a varietyof different soils and in varying climatic and growing conditions, Myconate(R)generated yield increases of up to 25 per cent., with the greater effectobserved in situations of heightened environmental stress, such as drought andpoor soil. The trials demonstrated that Myconate(R) can be applied as a mix with fertilizeror as a coating applied directly to the seed. The significant increase in yieldand the ease of application has led a number of the world's major agrichemicaland seed companies to carry out further tests in 2006. Accordingly, it isunlikely to be any earlier than 2007 before Plant Health Care achieves anysignificant degree of adoption of Myconate(R) by agrichemical and seed coatingcompanies. However, the Board believes that major agrichemical and seed coating companieswill be more inclined to early adoption if there is already a market demand forMyconate(R). The economics of farming are becoming increasingly demanding andthe Company expects that farmers will be willing to experiment with newproducts, in this case Myconate(R), due to the economic benefits beingsufficiently compelling. In terms of economic impact for the farmer, based on recent US corn prices, ayield increase of 3 per cent. would cover the incremental cost of applyingMyconate(R) and that a yield increase of 5 per cent. would increase gross profitper acre by $6.50 from an extra cost of $8.50 per acre and accordingly over a 75per cent. return on the incremental cost of application of Myconate(R). The Board therefore believes that the Company should endeavour to bring Myconate(R) to market at the earliest opportunity in order to shorten the time toadoption by major agrichemical and seed coating companies. 4. Global Market for Myconate(R) The Company's trials have shown that Myconate(R) is particularly effective whenapplied to corn and soybeans, two of the most widely cultivated row crops in theworld. In 2005, 763 million tons of corn were produced worldwide on 363 million acres,the United States being the largest corn producer accounting for 40 per cent. ofworld production. In general, yields around the world fluctuate due to variablegrowing conditions and the intensity of crop management. The world average yieldin 2005 was 77 bushels per acre. In 2005, 230 million tons of soybeans were produced worldwide on 225 millionacres. The world average yield in 2005 was 34 bushels per acre. The size of the worldwide agricultural market presents a significant opportunityfor Plant Health Care, as Myconate(R) can be used with a wide range of crops.The table below gives an indication of the potential value of the corn andsoybeans markets that the Company is entering: Worldwide Yield kg Price Average Estimated Estimated Hectares Per Per kg Trial Yield Gross kg Gross Value (millions) Hectare Increase Increase of kg Yield (million) Increase Soybeans 91 2,293 $0.21 13% 27,126 $5.7 billionCorn 147 4,707 $0.08 9% 62,274 $5.0 billion(Maize) 5. The Route to Market for Myconate(R) Plant Health Care's objective is to become the world's leading supplier ofnatural products for the promotion of plant health and growth. Over the past 12months Plant Health Care has moved the focus of its business efforts towardsproducts for the agriculture sector. The Directors believe that agriculture is a larger worldwide market than other"Green Markets" and that Myconate(R) will have applicability across a wide rangeof the world's most valuable agricultural crops. Whilst Plant Health Care is making considerable progress with the agrichemicaland seed companies, the Board also believes it is important to introduceMyconate(R) into the farming sector as soon as possible. The Company hasidentified the following three principal channels to market: (i) Distributors. Sales of Myconate(R) to distributors who sell into existingchannels through integrated sales forces and who offer farmers the fullcomplement of products required for crop production; (ii) Seed companies. Sales of Myconate(R) to seed companies who will sellcoated-seed to distributors and farmers; and (iii) Agrichemical companies. Chemical companies selling into the agriculturesector supply their products either to the seed coating companies or to farmersvia distributors. The commercialisation of Myconate(R) is being undertaken in a staged process.Trials with the agrichemical and seed companies are continuing into 2006. TheCompany anticipates that its first sales of Myconate(R) will be to distributorsin three US States during 2006. The Company believes that by targeting distributors directly, Myconate(R) willobtain early adoption by end users (i.e. farmers), which will increase thelikelihood of adoption by the agrichemical and seed companies and of the Companyentering into one or more licensing agreements with a significant partner. The Board's ultimate objective is to enter into a partnership or licensingagreement with one or more of the large agrichemical and seed companies toglobally distribute Myconate(R). 6. Current trading and prospects As detailed in the Company's audited preliminary results year ended 31 December2005 announced today, trading conditions for the Company remain encouraging. TheCompany showed a 19 per cent. increase in turnover to $10.2 million (2004 - $8.6million). The operating loss for the year before exceptional costs was $2.3million (2004 - loss of $2.2 million). After exceptional costs, interest andother finance charges and taxation on certain overseas operations, the net lossfor the year was $3 million (2004 - loss of $2.9 million). At 31 December 2005the Group had cash balances (net of short-term borrowings) of $1 million. These results reflect a significant increase in revenues in the second half of2005 in comparison with the same period in 2004. Second half turnover rose by 34per cent. to $5.5 million (2004 - $4.1 million) and second half margins were 52per cent. (2004 - 42 per cent.), while overhead expenses in the second halfincreased by only 6 per cent. compared to 2004. The operating loss for thesecond half was $0.7 million (2004 - loss of $1.6 million). The Board is confident that turnover in the year to December 2006 will continueto show significant growth as the contracts the Company signed last year withJohn Deere, Symbiot and the relationship with Ewing Irrigation continue todevelop. European sales are expected to grow by over 50 per cent. in 2006, led by thesuccessful commercialization of Pre-Tect(TM). In Mexico sales are also expectedto increase in 2006 and in the US the Company expects to achieve $1.0 million offirst year sales into the agriculture sector. The Board also continues to participate in discussions with several othercompanies regarding potential strategic alliances and/or joint venturingopportunities. 7. The Placing The Company proposes to raise approximately £6.0 million (net of expenses)through the issue of the Placing Shares at the Placing Price. The Placing Pricerepresents a discount of 3.7 per cent. to the closing middle market price of67.5 pence on 6 April 2006, being the last practicable date prior to thepublication of this document. The Placing Shares will represent 24.9 per cent.of the Company's issued share capital immediately following Admission. 8. The Placing Agreement Pursuant to the terms of the Placing Agreement, Evolution Securities hasconditionally agreed to use its reasonable endeavors, as agent for the Company,to place the Placing Shares at the Placing Price with certain institutional andother investors. The Placing has been fully underwritten by EvolutionSecurities. The Placing Agreement is conditional upon, inter alia, theResolutions being duly passed at the EGM and Admission becoming effective on orbefore 8.00 a.m. on 9 May 2006 (or such later time and/or date as the Companyand Evolution Securities may agree, but in any event by no later than 8.00 a.m.on 31 May 2006). The Placing Agreement contains warranties from the Company in favour ofEvolution Securities in relation to, inter alia, the accuracy of the informationcontained in this document and certain other matters relating to the Group andits business. In addition, the Company has agreed to indemnify EvolutionSecurities in relation to certain liabilities it may incur in respect of thePlacing. Evolution Securities has the right to terminate the Placing Agreementin certain circumstances prior to Admission, in particular, for force majeure orin the event of a material breach of the warranties set out in the PlacingAgreement. 9. Settlement and dealings Application will be made to the London Stock Exchange for the Placing Shares tobe admitted to trading on AIM. It is expected that such Admission will becomeeffective and that dealings will commence on 9 May 2006. The Placing Shareswill, when issued, rank pari passu in all respects with the Existing Shares,including the right to receive dividends and other distributions declaredfollowing Admission. It is expected that CREST accounts will be credited on theday of Admission and that share certificates (where applicable) will bedispatched by first class post by 18 May 2006. 10. Directors' participation in the Placing Samuel Wauchope has agreed to subscribe for 20,000 Placing Shares at the PlacingPrice. This represents 0.2 per cent. of the Placing Shares. None of the otherDirectors will participate in the Placing. 11. Use of Proceeds The net proceeds of the Placing will be approximately £6.0 million. The proceedswill be used to develop the market for Myconate(R) and to satisfy the generalworking capital requirements of the Group following Admission. 12. Extraordinary General Meeting The circular to be sent out to shareholders today contains a notice conveningthe EGM to be held on 5 May 2006 at the offices of Reed Smith, Minerva House, 5Montague Close, London SE1 9BB at 10.00 a.m at which the Resolutions, all ofwhich are inter-conditional, will be proposed for the purposes of implementingthe Placing. PLACING STATISTICS Placing Price 65p Number of Existing Shares 30,150,462 Number of Placing Shares being 10,000,000placed on behalf of the Company Estimated proceeds receivable by £6.0 millionthe Company, net of expenses Number of Ordinary Shares in issue 40,150,462following Admission Number of Placing Shares as a percentage of the enlarged issued share capital 24.9 per cent. EXPECTED TIMETABLE OF PRINCIPAL EVENTS Publication of this document 10 April 2006 Latest time and date for receipt of Forms of Proxy 10.00 a.m. on 3 May 2006 Extraordinary General Meeting 10.00 a.m. on 5 May 2006 Admission and dealings in the Placing Shares expected to commence on AIM 8.00 a.m. on 9 May 2006 Expected date for CREST stock accounts to be credited for Placing Shares in uncertificated form 9 May 2006 Expected date for posting of share certificates for Placing Shares by 18 May 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
PHC.L