Online brokerage firm London Capital Group Holdings plc (LON:LCG) has filed plans with the London Stock Exchange for a planned recapitalization of the company.
Charles-Henri Sabet, LCG
More details are provided below, but the main elements of the recap will see Charles-Henri Sabet and his partners in the GLIO holding company inject several million pounds into LCG to increase the company’s capital base. Sabet and his partners will increase their collective direct interest in LCG from just 20% currently to over 80%, if the transaction is approved by shareholders at the company’s General Shareholder Meeting to be held on July 6.
As at year-end 2015, LCG’s common equity Tier 1 Capital was £8.4 million. After effecting the proposals, this figure will be increased by £4.3 million to £12.7 million. Note that doesn’t include any profits or losses made to date in 2016.
In the filing, LCG indicated that while it saw a strong start to 2016, second quarter volumes have been weak due to traders staying on the sidelines with the Brexit vote looming.
London Capital Group has had somewhat of a rough ride since Mr. Sabet and his partners took over control of the company in late 2014. Revenues for 2015 fell 32% YoY to £15.5 million and the company posted a £15 million loss for the year, although most of 2015 was spent restructuring the company and rebuilding its management team and technology infrastructure. LCG announced the launch of its new brand and spread betting platform in January of 2016.
LCG shares have declined from about 28 pence at the time of Sabet’s takeover to about 6p today.
Details of the restructuring plan read as follows, and can also be seen on the London Stock Exchange website.
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Circular regarding a proposed Capital Reorganisation, Subscription and Open Offer
London Capital Group is pleased to announce that it has yesterday posted to Shareholders a circular (the “Circular”) detailing the Company’s proposals, following and conditional on the Capital Reorganisation (details of which are set out below), to issue 215,245,578 Subscription Shares pursuant to the Subscription, to issue 70,962,201 Open Offer Shares pursuant to the underwritten Open Offer (and issue of up to 7,096,220 Underwriting Commission Shares), each at 5 pence per new ordinary share in the Company, the agreement to issue up to 18,649,880 CLN Interest Shares at a conversion price of 25.02 pence per share, the redemption of the CLNs, the proposed waiver of Rule 9 of the City Code on Takeovers and Mergers, and a notice of general meeting (the “GM”).
The Circular, together with the notice of GM, form of proxy and application form was posted to Shareholders on 20 June 2016. The GM is scheduled for 11.30 a.m. on 6 July 2016 at the Company’s offices at 1 Knightsbridge, London SW1X 7LX.
The definitions set out in the Circular apply in this announcement unless the context otherwise requires. The Circular, excerpts of which can be found below, and this announcement have been posted on the Company’s website www.ir.lcg.com.
About London Capital Group
London Capital Group Holdings plc (hereafter “LCGH plc” or “LCG” or “London Capital Group” or “the Group”) is a financial services company offering online trading services.
London Capital Group Limited (“LCG Ltd”), a wholly-owned trading subsidiary of LCGH plc, is authorised and regulated by the Financial Conduct Authority. Its core activity is the provision of spread betting and CFD products on the financial markets to retail clients under the trading names Capital Spreads, Capital CFDs and LCG MT. Its other division provides online foreign exchange trading services. LCG Ltd has a European passport and is a member of the London Stock Exchange. LCG Ltd also has access to international markets through its global clearing relationships.
LCGH plc is quoted on the London Stock Exchange’s AIM market. LCG is included in the General Financial sector (8770) and Speciality Finance sub sector (8775) and has a RIC code of LCG.L.
1. Introduction
As announced on 29 April 2016, along with its final results for the year ended 31 December 2015, following the extensive restructuring and investment programme that the Group has undertaken over the last 18 months, the Company is now well positioned for future growth. Furthermore, that against this background, the Board would be looking at increasing the Company’s regulatory capital in order to provide the Company with the appropriate capital base to support this growth. To this end, the Board has now agreed with GLIO that GLIO will subscribe for 195,677,799 Subscription Shares at an issue price of 5 pence per New Ordinary Share. A further 19,567,779 Subscription Shares will be issued to GLIO as part of the Subscription in payment of commission at ten per cent. charged on the initial subscription amount. There will also be a fully underwritten Open Offer of 70,962,201 Open Offer Shares, pursuant to which up to a further 7,096,220 New Ordinary Shares may be issued to GLIO in payment of commission at ten per cent. charged on any Open Offer Shares subscribed for by GLIO pursuant to its commitment to underwrite the Open Offer. The Company has also agreed to redeem the outstanding CLNs, and intends to issue a further 18,649,880 New Ordinary Shares to GLIO at a later date, at GLIO’s election, in repayment of the accrued interest on the CLNs.
As a result of the Proposals, the Company’s regulatory capital will be increased. Furthermore, the Subscription and Open Offer (assuming no Independent Shareholders participate in the Open Offer), will lead to GLIO’s shareholding increasing from 11.41 per cent. to 81.23 per cent., and to 82.13 per cent. on the subsequent issue of the CLN Interest Shares. Mr Sabet’s shareholding (together with GLIO’s shareholding, and again assuming no Independent Shareholder participation in the Open Offer) will increase from 21.3 per cent. to 83.33 per cent., and to 84.12 per cent. on issue of the CLN Interest Shares. Further details on this are set out in paragraph 8 of this Part l.
The purpose of this letter is to set out the background to and reasons for the Proposals and why the Independent Directors (Nicholas Lee, Rebecca Fuller and Frank Chapman), consider them to be in the best interests of the Company and its Shareholders as a whole. This letter also recommends that Shareholders vote in favour of the Resolutions that are required to be passed in order for the issue of Subscription Shares, Open Offer Shares (and, if applicable, Underwriting Commission Shares) and CLN Interest Shares to take place.
Shareholder approval in respect of the Proposals will be sought at the General Meeting which is convened for 11.30 a.m. on 6 July 2016 at the offices of the Company, 1 Knightsbridge, Belgravia, London SW1X 7LX.
Your attention is drawn to the Notice of General Meeting contained at the end of this document and paragraphs 10 and 11 of this Part I of this letter which explain the purpose of the General Meeting and action to be taken by you in relation to the Notice of General Meeting.
2. Background to and reasons for the Subscription and the Open Offer
In 2014, Mr Charles-Henri Sabet together with certain other individuals introduced by Mr Sabet, agreed to make a substantial investment in the Company, through a special purpose investment company incorporated in Jersey, GLIO Holdings Limited. GLIO subscribed for £15 million of unsecured convertible loan notes in the Company and also received 80,935,251 warrants. The investment by GLIO was approved by Shareholders at a general meeting held on 3 July 2014.
Following the investment by GLIO, Mr Sabet became Executive Chairman, then CEO, and, subsequently in October 2014, he appointed a new management team. Since then, the Group has undergone a substantial restructuring of its entire business, including changes to its premises, staff, a major overhaul of its IT systems and the development and launch of a new trading platform. With these key elements in place, the Directors believe that the Company is now well positioned to grow its business. Whilst the Company has sufficient cash resources available to fund this growth as a result of the original investment by GLIO, given that its wholly-owned subsidiary, LCG, is a provider of regulated financial services (and is classified as a full scope IPFRU firm), LCG also needs the appropriate regulatory capital base in order to meet its regulatory capital obligations and to support both its current activities and this anticipated future growth.
Regulatory capital is split into Tier 1 and Tier 2 capital. Tier 1 capital is the measure of a company’s financial strength from a regulatory point of view and comprises primarily share capital and retained earnings. Given the nature of its business, the ability of the Company to take market risk (which has a direct impact on the required levels of regulatory capital) is a key driver of revenues. Against this background, the Company believes that its Tier 1 capital ratios should be strengthened so that it is able to take advantage of its restructured platform in order to grow and improve its trading results.
Following the investment by GLIO in July 2014, it was necessary to carry out a restructuring of the business. As part of this process, the Company incurred significant costs and delays in the release of new products, the implementation of new technology and the start of its scheduled marketing campaign. At the same time, the Company was affected by certain external factors such as the exchange rate announcement by the Swiss National Bank on 15 January 2015. As a result, the Company’s financial performance has been poor and below expectation. During this period the Company’s share price has also fallen significantly.
The Company has considered raising additional equity from new investors, by way of a placing of new shares at a discount to the Company’s prevailing share price. The Company has approached various potential new investors with regard to such investment. However, as a consequence of the Company’s financial and share price performance as described above, this has been without success.
As an alternative, discussions have been held with GLIO and GLIO has agreed to subscribe for New Ordinary Shares at a price of 5p per Ordinary Share, on the terms set out below. Whilst this price is at an 18 per cent. discount to the prevailing share price and so represents a lower discount than what may ordinarily be available in such circumstances, it is still below the nominal value of the Existing Ordinary Shares, and, as a result the Company will need to implement a capital reorganisation. This will be done, if approved, by splitting the company’s ordinary shares into new ordinary shares of a lower nominal value and a number of deferred shares. However, in the Company’s case, the consequence of this will be to reduce its level of Tier 1 capital as deferred shares do not count towards Tier 1 capital. The Company may therefore subsequently seek to recover the Tier 1 capital that has been lost as a result of the capital reorganisation by applying to the Court for a reduction in capital. GLIO currently holds Convertible Loan Notes with an outstanding principal amount of £13.3 million and under FCA rules this is classified as Tier 2 and not Tier 1 capital. As such, the Convertible Loan Notes subscribed for by GLIO, whilst providing cash resources for the business, do not count towards its Tier 1 regulatory capital requirements. GLIO has only agreed to subscribe on the basis of the early redemption of the CLNs and payment to GLIO of a commission of 10 per cent. of the amount of the Subscription and 10 per cent. of the amount subscribed for by GLIO pursuant to its commitment to underwrite the Open Offer, which will be payable by the issue of New Ordinary Shares.
The Directors believe that, at this stage, this is the only realistic route open to the Company in order to increase its level of Tier 1 capital. The proposed subscription by GLIO would enhance the Company’s capital base whilst, at the same time, reducing the Company’s indebtedness.
It is intended that redemption of the CLNs in full will occur shortly after completion of the Subscription and Open Offer and the accrued interest paid at a later date, at GLIO’s election, through the issue of New Ordinary Shares. As part of the Proposals, the Company is also providing the other existing Shareholders with the opportunity to subscribe for New Ordinary Shares at the Issue Price. Details of the Subscription and the Open Offer are set in paragraph 7 of this Part I.
3. Tier 1 Capital position
As at 31 December 2015, the Group’s common equity tier 1 capital (after regulatory adjustments) was £8.4 million. After effecting the Proposals, this figure will be increased by £4.3 million to £12.7 million. Clearly, any profits or losses subsequently made by the Company would result in an adjustment to this figure.
Whilst neither the Subscription, the Open Offer nor the redemption of the CLNs will increase the Company’s net cash position, they would serve to reduce the Company’s indebtedness.
4. Information on GLIO
The shareholders of GLIO are set out at paragraph 3.3 in Part III of this document and include three current Directors of the Company, namely Mr Sabet (via his company, ILOG Investments Limited), Charles Poncet and Dimitri Goulandris, as well as Florian Rais, the Chief Commercial Officer of the Company. Georges Cohen, also a shareholder of GLIO, is the father of Julien Cohen, a non-executive Director of the Company. GLIO has two directors: Mr Sabet and Mr David Green. Mr Green does not hold any shares in the Company but is presumed to be acting in concert with Mr Sabet.
The Concert Party comprises GLIO, the GLIO Directors, the GLIO Shareholders (including amongst others, Mr Sabet, Dr Poncet, Mr Goulandris, Mr Rais, and excluding STP Fund (EUR) Limited), Mr Julien Cohen, and the trustees of the EBT (in respect of the unallocated shares held by the EBT and the JSOP Shares held jointly by the EBT and each of Mr Sabet and Dr Poncet).
5. Final results for the period ending 31 December 2015
On 29 April 2016, the Company announced final results for 2015:
Financial Highlights
● Adjusted loss before tax from continuing operations of £13.9 million (2014 restated: profit £1.2 million)
● Statutory loss before tax from continuing operations of £14.5 million (2014 restated: £7.7 million)
● Statutory loss after tax from continuing operations of £14.9 million (2014 restated: £7.8 million)
● Revenue from UK financial spread betting and contracts for difference down 21 per cent. to £15.3 million (2014: £19.4 million)
● Revenue from continuing operations decreased 32 per cent. to £15.5 million (2014 restated: £22.7 million)
● Net cash and short term receivables of £16.1 million at year end (2014 restated: £32.9 million) including amounts due from brokers £3.7 million (2014: £6.1 million)
6. Current trading and outlook
The Group made a good start to 2016, with trading for the first quarter ahead of management expectations. Trading in the second quarter, however, has been noticeably weaker due to a lack of volatility and concerns about Brexit, reducing clients’ propensity to trade. At the same time, the integration of the Group’s new technology has been successful and most clients have now migrated across to the new platform. This confirms that the Group’s client base is finding the new platform attractive and easy to use which is encouraging.
7. Details of the Subscription and the Open Offer
The Directors have given careful consideration to the structure of the proposed transaction and have concluded that the Subscription and the Open Offer are the most suitable option available to the Company and its Shareholders at this time.
Principal terms of the Subscription
The Company is proposing to issue to GLIO 215,245,578 Subscription Shares at 5 pence per New Ordinary Share (including 19,567,779 Subscription Shares to be issued to GLIO in payment of commission for entering into the Subscription arrangements).
The Subscription Shares are not subject to clawback and are not part of the Open Offer.
Principal terms of the Open Offer
The Board considers it important that Qualifying Shareholders also have the opportunity to subscribe for New Ordinary Shares at the Issue Price, and the Directors have concluded that the Open Offer is the most suitable option available to the Company and its Shareholders.
The Open Offer provides an opportunity for all Qualifying Shareholders to subscribe for New Ordinary Shares at the Issue Price by both subscribing for their respective Basic Entitlements and by subscribing for Excess Shares under the Excess Application Facility, subject to availability. GLIO has undertaken not to take up and to procure that its fellow Concert Party members do not take up their entitlements if the Open Offer is fully subscribed (including under the Excess Application Facility) by the Independent Shareholders. GLIO has also committed to subscribe for any Open Offer Shares not subscribed for by Independent Shareholders, up to the maximum number of Open Offer Shares.
In consideration of underwriting the Open Offer, GLIO is receiving a commission of 10 per cent. of the total amount it is required to subscribe for pursuant to its underwriting commitment, payable by the issue of New Ordinary Shares.
Pursuant to the Open Offer, Qualifying Shareholders will be given the opportunity to subscribe for 9 Open Offer Shares for every 10 Existing Ordinary Shares held on the Record Date.
The Open Offer has been structured such that the maximum amount that can be raised by the Company is approximately £3.9 million which is the maximum amount that can be raised before exceeding the threshold of €5 million (or an equivalent amount) under the FSMA, at which point the Company would be required to issue a full FCA-approved prospectus. All proceeds from Independent Shareholders under the Open Offer will be used towards the redemption of the CLNs.The Issue Price represents a 18.37 per cent. discount to the Closing Price of 6.125 pence per Ordinary Share on the Latest Practicable Date.
Basic Entitlement
Qualifying Shareholders are invited, on and subject to the terms and conditions of the Open Offer, to apply for any number of Open Offer Shares (subject to the limit on the number of Excess Shares that can be applied for using the Excess Application Facility) at the Issue Price. Qualifying Shareholders have a Basic Entitlement of:
9 Open Offer Shares for every 10 Existing Ordinary Shares
registered in the name of the relevant Qualifying Shareholder on the Record Date.
Basic Entitlements under the Open Offer will be rounded down to the nearest whole number and any fractional entitlements to Open Offer Shares will be disregarded in calculating Basic Entitlements and will be aggregated and made available to Qualifying Shareholders under the Excess Application Facility.
The aggregate number of Open Offer Shares available for subscription pursuant to the Open Offer will not exceed 70,962,201 New Ordinary Shares.
Allocations under the Open Offer
In the event that valid acceptances are not received in respect of all of the Open Offer Shares under the Open Offer, unallocated Open Offer Shares will be allotted to Qualifying Shareholders to meet any valid applications under the Excess Application Facility provided always that no Qualifying Shareholder shall be entitled to receive in excess of the total number of Open Offer Shares available less an amount equal to such Qualifying Shareholder’s Basic Entitlement.
Excess Application Facility
Subject to availability and assuming that Qualifying Shareholders have accepted their Basic Entitlement in full, the Excess Application Facility enables Qualifying Shareholders to apply for any whole number of Excess Shares in addition to their Basic Entitlement up to an amount equal to the total number of Open Offer Shares available under the Open Offer less an amount equal to a Qualifying Shareholder’s Basic Entitlement.
Qualifying Non-CREST Shareholders who wish to apply to subscribe for more than their Basic Entitlement should complete the relevant sections on the Application Form and should refer to paragraph 4.1(c) of Part II of this document for further information. Qualifying CREST Shareholders will have Excess CREST Open Offer Entitlements credited to their stock account in CREST and should refer to paragraph 4.2(c) of Part II of this document for information on how to apply for Excess Shares pursuant to the Excess Application Facility.
Excess Applications may be allocated in such manner as the Directors determine, in their absolute discretion, and no assurance can be given that applications by Qualifying Shareholders under the Excess Application Facility will be met in full or in part or at all.
Application procedure under the Open Offer
Qualifying Shareholders may apply for any whole number of Open Offer Shares subject to the limit on applications under the Excess Application Facility referred to above. The Basic Entitlement, in the case of Qualifying Non-CREST Shareholders, is equal to the number of Basic Entitlements as shown in Box 7 on their Application Form or, in the case of Qualifying CREST Shareholders, is equal to the number of Basic Entitlements standing to the credit of their stock account in CREST.
Qualifying Shareholders with holdings of Existing Ordinary Shares in both certificated and uncertificated form will be treated as having separate holdings for the purpose of calculating their Basic Entitlements.
Qualifying CREST Shareholders will receive a credit to their appropriate stock accounts in CREST in respect of their Basic Entitlement and also in respect of their Excess CREST Open Offer Entitlement as soon as practicable after 8.00 a.m. on 22 June 2016.
Application will be made for the Basic Entitlements and Excess CREST Open Offer Entitlements to be admitted to CREST. The Basic Entitlements and Excess CREST Open Offer Entitlements will also be enabled for settlement in CREST as soon as practicable after 8.00 a.m. on 22 June 2016. Applications through the CREST system may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim.
Qualifying CREST Shareholders should note that, although the Basic Entitlements and Excess CREST Open Offer Entitlements will be admitted to CREST and be enabled for settlement, applications in respect of entitlements under the Open Offer may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim raised by Euroclear’s Claims Processing Unit. Qualifying Non-CREST Shareholders should note that their Application Form is not a negotiable document and cannot be traded.
Further information on the Open Offer and the terms and conditions on which it is made, including the procedure for application and payment, are set out in Part II of this document and, where relevant, on the Application Form.
Conditionality
The Subscription and the Open Offer are each conditional, inter alia, upon the following:
(a) the passing, without amendment, of the Resolutions at the General Meeting; and
(b) Admission occurring by no later than 8.00 a.m. on 7 July 2016 (or such later times and/or dates as may be agreed between the Company and Allenby Capital, being no later than 5.00 p.m. on 29 July 2016).
If the conditions set out above are not satisfied or waived (where capable of waiver), the Subscription and the Open Offer will lapse; and
(a) the Subscription Shares will not be issued; and
(b) any Basic Entitlements and Excess CREST Open Offer Entitlements admitted to CREST will, after that time and date, be disabled and application monies under the Open Offer will be refunded to the applicants, by cheque (at the applicant’s risk) in the case of Qualifying Non-CREST Shareholders and by way of a CREST payment in the case of Qualifying CREST Shareholders, without interest, as soon as practicable thereafter.
Application for Admission
Application will be made to the London Stock Exchange for the Subscription Shares and the Open Offer Shares to be admitted to trading on AIM. Admission of the Subscription Shares and the Open Offer Shares is expected to take place, and dealings on AIM are expected to commence, at 8.00 a.m. on 7 July 2016 (or such later times and/or dates as may be agreed between the Company and Allenby Capital being no later than 5.00 p.m. on 29 July 2016). No temporary document of title will be issued.
The Subscription Shares and the Open Offer Shares will, following Admission, rank pari passu in all respects with the New Ordinary Shares in issue at the date of this document and will carry the right to receive all dividends and distributions declared, made or paid on or in respect of the New Ordinary Shares after Admission.
Important notice
Qualifying Shareholders should note that the Open Offer is not a rights issue. Qualifying Shareholders should be aware that in the Open Offer, unlike with a rights issue, any Open Offer Shares not applied for by Qualifying Shareholders under their Basic Entitlements will not be sold in the market on behalf of, or placed for the benefit of Qualifying Shareholders who do not apply under the Open Offer, but may be allotted to Qualifying Shareholders to meet any valid applications under the Excess Application Facility and that the net proceeds will be retained for the benefit of the Company.
The Subscription and the Open Offer are separate and distinct transactions involving the issue of New Ordinary Shares.
Qualifying Shareholders are being invited to participate in the Open Offer and Qualifying Non-CREST Shareholders (subject to certain exceptions) will have received an Application Form with this document. However Qualifying Shareholders are not entitled to participate in the Subscription unless expressly invited by the Company and Allenby Capital to do so.
In issuing this document and structuring the Open Offer in this manner, the Company is relying on the exemption from the requirement to publish a prospectus by virtue of section 85(5) and paragraph 9 of Schedule 11A of FSMA and on paragraphs 43 and 60 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended).
Any Qualifying Shareholder who has sold or transferred all or part of his registered holding(s) of Existing Ordinary Shares prior to the date on which the shares are marked ‘ex-entitlement’ is advised to consult his stockbroker, bank or other agent through or to whom the sale or transfer was effected as soon as possible since the invitation to apply for Open Offer Shares under the Open Offer may be a benefit which may be claimed from him by the purchasers under the rules of the London Stock Exchange.
8. The City Code on Takeovers and Mergers
As indicated above, the terms of the Proposals set out in this letter give rise to certain considerations under the Takeover Code. Brief details of the Panel, the Takeover Code and the protection they afford are given below.
The purpose of the Takeover Code is to supervise and regulate takeovers and other matters to which it applies. The Takeover Code is issued and administered by the Panel. The Company is a company to which the Code applies and as such its Shareholders are therefore entitled to the protections afforded by the Takeover Code.
Under Rule 9 of the Takeover Code, where any person acquires, whether by a single transaction or a series of transactions over a period of time, an interest (as defined in the Takeover Code) in shares which (taken together with shares in which persons acting in concert with him are interested) carry 30 per cent. or more of the voting rights of a company which is subject to the Takeover Code, that person is normally required by the Panel to make a general offer, in cash, to all the remaining shareholders to acquire their shares.
Rule 9 of the Takeover Code further provides that, inter alia, where any person who, together with persons acting in concert with him, holds shares which in aggregate carry not less than 30 per cent. of the voting rights of a company but does not hold shares carrying more than 50 per cent. of such voting rights and such person, or any such person acting in concert with him, acquires an interest in additional shares which increases his percentage of shares carrying voting rights, such person is normally required by the Panel to make a general offer to the remaining shareholders to acquire their shares.
Where any person who, together with persons acting in concert with him holds shares carrying over 50 per cent. of the voting rights of a company, acquires an interest in shares which carry additional voting rights, then they will not generally be required to make a general offer to the other shareholders to acquire the balance of their shares subject to Note 4 on Rule 9.1.
A table setting out each member of the Concert Party’s individual holding of Ordinary Shares, where applicable, as at the date of this document, immediately following Admission and immediately following completion of the Proposals (i.e. following issue of the CLN Interest Shares) is set out in this paragraph 8 of this Part I and reasons for them being treated as a concert party are included in Part III of this document.
The interests of the Concert Party following completion of the Proposals are set out in the table below. Without a waiver of the obligations under Rule 9 of the City Code, this would oblige the Concert Party to make a Rule 9 Offer.
|
Holdings of Concert Party members at Admission |
Holdings of Concert Party members after the issue of the CLN Interest Shares2 |
||||
|
Shareholder |
Current holding |
(assuming Open Offer is fully subscribed by Independent Shareholders) |
(assuming no Independent Shareholders participate in the Open Offer) |
(assuming Open Offer is fully subscribed by Independent Shareholders) |
(assuming no Independent Shareholders participate in the Open Offer) |
|
GLIO |
9,000,000 |
224,245,578 |
302,304,000 |
242,895,459 |
320,953,880 |
|
Charles-Henri Sabet |
7,800,000 |
7,800,000 |
7,800,000 |
7,800,000 |
7,800,000 |
|
EBT1 |
4,970,000 |
4,970,000 |
4,970,000 |
4,970,000 |
4,970,000 |
|
Charles Poncet |
200,000 |
200,000 |
200,000 |
200,000 |
200,000 |
|
Florian Rais |
50,000 |
50,000 |
50,000 |
50,000 |
50,000 |
|
Total |
22,020,000 |
237,265,578 |
315,324,000 |
255,915,459 |
333,973,880 |
Note 1: This figure does not include 5,000,000 JSOP Shares held jointly by Mr Sabet and the EBT, and the 200,000 JSOP Shares held jointly by Charles Poncet and the EBT. Mr Sabet and Dr Poncet’s JSOP Shares have both been included in the figures representing their respective individual holdings in the table above.
Note 2: The percentages in these two columns assume no other New Ordinary Shares are issued by the Company between Admission and the date of issue of the CLN Interest Shares. As referred to above, there is no date fixed for the issue of the CLN Interest Shares.
Note: Aside from GLIO, Mr Sabet, Dr Poncet and Mr Rais, there are no other members of the Concert Party who currently hold interests in Ordinary Shares (excluding the indirect interests held by GLIO Shareholders by virtue of their shareholdings in GLIO).
Note: On completion of the Proposals the CLNs will be redeemed. On redemption it is intended that the Warrants are cancelled.
Shareholders should note that:
Both Admission and on completion of the Proposals (following the issue of the CLN Interest Shares), the Concert Party will hold Ordinary Shares carrying more than 50 per cent. of the voting
rights of the Company and (for so long as they continue to be treated as acting in concert) the Concert Party (and any person acting in concert with them) will be able to acquire further Ordinary Shares without incurring an obligation to make a general offer to Shareholders under Rule 9 of the City Code. However, individual members of the Concert Party will not be able to increase their percentage interests in the voting rights of the Company through or between a Rule 9 threshold without Panel Consent. On completion of the Proposals, GLIO will hold more than 50 per cent. of the voting share capital of the Company and may be able to increase its aggregate shareholding in the Company without incurring any obligations under Rule 9 to make a general offer to the Company’s other Shareholders.
Following Admission and on completion of the Proposals, individual Concert Party members interested in less than 30 per cent. of the Company’s voting rights will be free to increase their individual interests in Ordinary Shares without being required to make a Rule 9 Offer, providing that their individual holding remains less than 30 per cent. of the voting rights of the Company.
Shareholders should also note that as the Concert Party will hold Ordinary Shares carrying more than 50 per cent. of voting rights, the Concert Party might, collectively, have significant influence if they vote together on the passing of any proposed resolutions at future general meetings of the Company.
Dispensation from General Offer
Under Note 1 of the Notes on the Dispensations from Rule 9 of the City Code, the Takeover Panel will normally waive the requirement for a general offer to be made in accordance with Rule 9 of the City Code if, inter alia, the shareholders of the company who are independent of the person who would otherwise be required to make an offer, and any person acting in concert with him, pass an ordinary resolution on a poll at a general meeting approving such a waiver.
The Panel has agreed to such waiver, subject to the Whitewash Resolution being passed.
Accordingly, by voting in favour of the Whitewash Resolution to be proposed at the General Meeting, the Proposals can be effected without the requirement for the Concert Party to make a general offer for the Company.
The Concert Party will not vote on the Whitewash Resolution. The Concert Party, and/or any member of the Concert Party, will not be restricted from making an offer for the Ordinary Shares that it will not own post Admission.
9. Capital Reorganisation
The nominal value of each Existing Ordinary Share is 10 pence, which is the minimum price at which additional Ordinary Shares can be issued. As the Existing Ordinary Shares are now trading at below this price, in order to proceed with the Subscription and/or the Open Offer, the Company is proposing to undertake the Capital Reorganisation so that the nominal value of the Ordinary Shares is reduced to below the Issue Price. This proposal would, if passed, involve sub-dividing each issued Existing Ordinary Share into one New Ordinary Share of 5 pence nominal value and one Deferred Share of 5 pence nominal value. For the avoidance of doubt, the nominal value of the Ordinary Shares is unrelated to the AIM market price of an Ordinary Share.
The New Ordinary Shares will have the same rights (including as to voting, dividends and return of capital) as the Existing Ordinary Shares. The number of New Ordinary Shares held by Shareholders will be the same as the number of Existing Ordinary Shares held by them immediately prior to the Capital Reorganisation, but the Capital Reorganisation will allow the Subscription and Open Offer to take place. A Shareholder’s pro rata entitlement to Existing Ordinary Shares will not be affected. The Capital Reorganisation should not affect the market value of a Shareholders aggregate holding of Ordinary Shares.
The rights attaching to the Deferred Shares are set out in the Notice of GM. The Deferred Shares will effectively be valueless as they will not carry any rights to vote or any dividend rights. In addition, holders of Deferred Shares will only in extremely remote and limited circumstances be entitled to a payment on a return of capital or on a winding up of the Company. The Deferred Shares will not be quoted on AIM or any other stock market and will not be transferable unless with the prior written consent of the Company. No share certificates will be issued in respect of any of the Deferred Shares. The Board may further appoint any person to act on behalf of all holders of the Deferred Shares to transfer all such shares to the Company (or its nominee) for an aggregate consideration of 5 pence.
It is not intended that new share certificate(s) will be issued to the holders of the New Ordinary Shares following the Capital Reorganisation. Pending the issue of a new share certificate, Shareholders’ existing share certificate(s) will remain valid for the same number of shares but with a different par value of 5 pence.
10. General Meeting
The General Meeting of the Company, notice of which is set out at the end of this document, is to be held on 6 July 2016 at the offices of the Company at 1 Knightsbridge, London SW1X 7LX. The General Meeting is being held for the purpose of considering and, if thought fit, passing the Resolutions to approve the Proposals.
A summary and explanation of the Resolutions is set out below. Please note that this is not the full text of the Resolutions and you should read this section in conjunction with the Resolutions contained in the Notice of General Meeting at the end of this document.
Resolution 1: Capital Reorganisation
This ordinary resolution approves the sub-division of each Existing Ordinary Share of 10p into one New Ordinary Share of 5p and one Deferred Share of 5p.
Resolution 2: Rule 9 whitewash waiver
This resolution, which will be proposed as an ordinary resolution and will be taken on a poll of the Independent Shareholders, approves, conditional on the passing of Resolutions 1, 3, 4, 6 and 8, the waiver granted by the Panel of the obligation that would otherwise fall on GLIO or any person acting in concert with it to make a general offer to Shareholders pursuant to Rule 9 of the Code as a result of the Proposals.
Resolution 3: Authority to allot shares
Conditional on the passing of Resolutions 1 and 8, this ordinary resolution will grant the Directors authority to allot to GLIO (or its nominee(s)) the Subscription Shares pursuant to the Subscription. The authority given by this Resolution will expire 180 days after the date of the passing of the Resolution. This authority will be in addition to that given to the Directors pursuant to Resolutions 4 and 5.
Resolution 4: Authority to allot shares
Conditional on the passing of Resolutions 1 and 8, this ordinary resolution will grant the Directors authority to allot the Open Offer Shares and, if applicable, the Underwriting Commission Shares for the purposes of the Open Offer. The authority given by this Resolution will expire 180 days after the date of the passing of the Resolution. This authority will be in addition to that given to the Directors pursuant to Resolutions 3 and 5.
Resolution 5: Authority to allot shares
Conditional on the passing of Resolutions 1, 3, 4 and 8, this ordinary resolution grants the Directors authority to allot (i) the CLN Interest Shares, and (ii) also renews the authority of the Directors to allot Ordinary Shares (or to grant rights to subscribe for or convert any securities into Ordinary Shares) up to a maximum nominal amount of £6,513,347 which represents approximately one-third of the enlarged share capital on completion of the Proposals (i.e. following issue of the CLN Interest Shares).
The authority given by this Resolution will expire at the conclusion of the next annual general meeting of the Company or on 30 June 2017, whichever is earlier. This authority will be in addition to that given to the Directors pursuant to Resolutions 3 and 4.
Resolution 6: Disapplication of pre-emption rights
Conditional on the passing of Resolutions 1, 3 and 8, this special resolution disapplies the statutory pre-emption rights in respect of the allotment of the Subscription Shares to be allotted pursuant to Resolution 3 in connection with the Subscription. The authority given by this Resolution will expire 180 days after the date of the passing of the Resolution. This authority will be in addition to that given to the Directors pursuant to Resolution 7.
Resolution 7: Disapplication of pre-emption rights
Conditional on the passing of Resolutions 1, 4, 5 and 8 this special resolution renews the authority of the Directors to allot equity securities otherwise than in accordance with statutory pre-emption rights in connection with (i) any rights issue or other pro rata offer (including the Open Offer), (ii) the allotment of the Underwriting Commission Shares; (iii) the allotment of the CLN Interest Shares; and (iv) otherwise up to an aggregate nominal value of £1,954,004 which represents approximately 10 per cent. of the enlarged share capital on completion of the Proposals (i.e. following issue of the CLN Interest Shares). The authority given by this Resolution will expire at the conclusion of the next annual general meeting of the Company or on 30 June 2017, whichever is earlier. This authority will be in addition to that given to the Directors pursuant to Resolution 6.
Resolution 8: Amendment to Articles
Conditional on the passing of Resolution 1, Resolution 8 (a special resolution) makes certain consequential amendments to the Articles to include provisions in respect of the Deferred Shares. The Deferred Shares will have no voting rights and will have no rights as to dividends and only very limited rights on a return of capital.
11. Action to be taken in relation to the General Meeting
You will find enclosed a Form of Proxy for use at the General Meeting. Whether or not you intend to be present at the General Meeting, you are requested to complete the Form of Proxy in accordance with the instructions printed on it and to return it as soon as possible and in any case so as to be received by the Company’s registrars at Capita Asset Services, PXS1, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4ZF no later than 11.30 a.m. on 4 July 2016. If you hold shares in CREST you may appoint a proxy by completing and transmitting a CREST Proxy Instruction to Capita Asset Services (CREST Participant ID: RA10) so that it is received by no later than 11.30 a.m. on 4 July 2016. The return of the Form of Proxy or transmission of a CREST Proxy Instruction will not prevent you from attending the meeting and voting in person if you wish.
12. Action to be taken in respect of the Open Offer
Qualifying Non-CREST Shareholders (i.e. holders of Existing Ordinary Shares who hold their Existing Ordinary Shares in certificated form)
If you are a Qualifying Non-CREST Shareholder you will receive an Application Form which gives details of your Basic Entitlement under the Open Offer (as shown by the number of Basic Entitlements set out in Box 7 of the Application Form). If you wish to apply for Open Offer Shares under the Open Offer, you should complete the Application Form in accordance with the procedure for application set out in paragraph 4.1 of Part II of this document and on the Application Form itself.
Qualifying Non-CREST Shareholders who wish to subscribe for more than their Basic Entitlement should complete Boxes 2, 3, 4 and 5 on the Application Form. Completed Application Forms, accompanied by full payment in accordance with the instructions in paragraph 4.1 of Part II of this document, should be posted using the accompanying reply-paid envelope (if posted from the UK only) or returned by post or by hand (during normal business hours only) to Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, in either case, as soon as possible and in any event so as to be received by no later than 11.00 a.m. on 5 July 2016. If you do not wish to apply for any Open Offer Shares under the Open Offer, you should not complete or return the Application Form.
Qualifying CREST Shareholders (i.e. holders of Existing Ordinary Shares who hold their Existing Ordinary Shares in uncertificated form)
If you are a Qualifying CREST Shareholder you will not be sent an Application Form. You will receive a credit to your appropriate stock account in CREST in respect of your Basic Entitlement under the Open Offer and also an Excess CREST Open Offer Entitlement for use in connection with the Excess Application Facility. You should refer to the procedure for application set out in paragraph 4.2 of Part II of this document. The relevant CREST instructions must have settled in accordance with the instructions in paragraph 4.2 of Part II of this document by no later than 11.00 a.m. on 5 July 2016.
Qualifying CREST Shareholders who are CREST sponsored members should refer to their CREST sponsors regarding the action to be taken in connection with this document and the Open Offer.
If you are in any doubt as to the action you should take, you should immediately seek your own personal financial advice from an appropriately qualified independent professional adviser.
13. Overseas Shareholders
The attention of Qualifying Shareholders who have registered addresses outside the United Kingdom, or who are citizens or residents of countries other than the United Kingdom, or who are holding Ordinary Shares for the benefit of such persons (including, without limitation, subject to certain exceptions, custodians, nominees, trustees and agents), or who have a contractual or other legal obligation to forward this document, the Form of Proxy or (if applicable) an Application Form to such persons, is drawn to the information which appears in paragraph 6 of Part II (Terms and Conditions of the Open Offer) of this document.
In particular, Qualifying Shareholders who have registered addresses in or who are resident in, or who are citizens of, countries other than the UK (including, without limitation, the United States or any other Restricted Jurisdiction) should consult their professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to take up their entitlements to the Open Offer.
14. Taxation
Your attention is drawn to the taxation section contained in Part IV of this document.
This information is intended only as a general guide to the current UK tax position. Shareholders who are in any doubt as to their tax position, or who are subject to tax in a jurisdiction other than the UK should consult an appropriate professional adviser immediately.
15. Irrevocable voting commitments from the Directors and GLIO
The Directors who in aggregate hold 12,500,000 Ordinary Shares (being Charles-Henri Sabet, Charles Poncet and Frank Chapman, and excluding in the case of Mr Sabet and Dr Poncet any indirect interests held by virtue of their shareholdings in GLIO), representing approximately 15.85 per cent. of the Existing Issued Share Capital, have irrevocably undertaken to vote (and where such Ordinary Shares are registered in the name of any other persons have irrevocably undertaken to use reasonable endeavours to procure that those persons will vote) in favour of all of the Resolutions at the General Meeting except for the Whitewash Resolution (in relation to which the Directors who are also members of the Concert Party are excluded from voting).
Frank Chapman, who in aggregate holds 4,500,000 Ordinary Shares, representing approximately 5.71 per cent. of the Existing Issued Share Capital, has also irrevocably undertaken to vote (and, where such Ordinary Shares are registered in the name of any other persons, has irrevocably undertaken to use reasonable endeavours to procure that those persons will vote) in favour of Resolution 2: the Whitewash Resolution at the General Meeting.
GLIO, which currently holds 9,000,000 Ordinary Shares representing approximately 11.41 per cent. of the Existing Issued Share Capital, has irrevocably undertaken to vote (and, where such Ordinary Shares are registered in the name of any other persons, has irrevocably undertaken to use reasonable endeavours to procure that those persons will vote) in favour of all of the Resolutions at the General Meeting except for the Whitewash Resolution (in relation to which GLIO is excluded from voting).
Each of the above parties giving undertakings has also undertaken not to, and in the case of GLIO to procure that its fellow Concert Party Members do not, exercise any entitlement to participate in the Open Offer save pursuant to GLIO’s commitment to underwrite the Open Offer.
16. Related party transactions
The proposed participation of GLIO (the Shareholders of which include, amongst others, Mr Sabet, Dr Poncet and Mr Goulandris) in the Subscription (including the issue to GLIO of New Ordinary Shares in payment of commission) and the Open Offer (including the issue to GLIO of Underwriting Commission Shares), and the amendment to the GLIO Convertible Loan Note Instrument to allow the early redemption of the CLNs (including payment of the accrued interest in Ordinary Shares) will together constitute related party transactions under the AIM Rules. The Independent Directors consider, having consulted with Allenby Capital, Nominated Adviser to the Company, that the terms of the transactions are fair and reasonable insofar as its Shareholders are concerned.
17. Recommendation and voting intentions
The Independent Directors, who have been so advised by Allenby Capital, consider the Proposals to be fair and reasonable and in the best interests of the Shareholders and the Company as a whole. Accordingly, the Independent Directors recommend that Shareholders vote in favour of the Resolutions as they have irrevocably undertaken to do so in respect of their beneficial holdings of 4,500,000 Ordinary Shares representing 5.71 per cent. of the Company’s issued share capital. Dr Poncet, Julien Cohen, Mr Sabet and Mr Goulandris are not considered independent as they are part of the Concert Party and have therefore taken no part in the recommendation.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
|
Record Date for entitlement to participate in the Open Offer |
6.00 p.m. 15 June 2016 |
|
Announcement of the Subscription and the Open Offer and despatch of the Circular, the Form of Proxy and, to Qualifying Non-CREST Shareholders, the Application Form |
20 June 2016 |
|
Expected ex-entitlement date for the Open Offer Basic |
8.00 a.m. on 21 June 2016 |
|
Basic Entitlements and Excess CREST Open Offer Entitlements credited to CREST stock accounts of Qualifying CREST Shareholders |
22 June 2016 |
|
Recommended latest time and date for requesting withdrawal of Basic Entitlements and Excess CREST Open Offer Entitlements from CREST |
4.30 p.m. on 29 June 2016 |
|
Latest time for depositing Basic Entitlements and Excess CREST Open Offer Entitlements into CREST |
3.00 p.m. on 30 June 2016 |
|
Latest time and date for splitting Application Forms (to satisfy bona fidemarket claims only) |
3.00 p.m. on 1 July 2016 |
|
Latest time and date for receipt of Forms of Proxy for the General Meeting |
11.30 a.m. on 4 July 2016 |
|
Latest time and date for receipt of completed Application Forms and payment in full under the Open Offer or settlement of relevant CREST instruction (as appropriate) |
11.00 a.m. on 5 July 2016 |
|
General Meeting |
11.30 a.m. on 6 July 2016 |
|
Record Date for the Capital Reorganisation |
5.00 p.m. 6 July 2016 |
|
Result of Open Offer announced on RNS |
6 July 2016 |
|
Admission of the Subscription Shares and the Open Offer Shares to trading on AIM |
8.00 a.m. on 7 July 2016 |
|
Subscription Shares and the Open Offer Shares in uncertificated form expected to be as soon as practicable credited to accounts in CREST (uncertificated holders only) |
after 8.00 a.m. on 7 July 2016 |
|
Expected date of despatch of definitive share certificates for theSubscription Shares and the Open Offer Shares in certificated form (certificated holders only) |
on 18 July 2016 |
|
Expected date of redemption of the CLNs |
By 21 July 2016 |
Notes:
(1) The ability to participate in the Open Offer is subject to certain restrictions relating to Qualifying Shareholders with registered addresses or located or resident in countries outside the UK (particularly any Excluded Overseas Shareholders), details of which are set out in paragraph 6 of Part II of this document. Subject to certain exceptions, Application Forms will not be despatched to, and Open Offer Entitlements will not be credited to the stock accounts in CREST of, Shareholders with registered addresses in any of the Restricted Jurisdictions.
(2) Each of the times and dates set out in the above timetable and mentioned in this document is subject to change by the Company (with the agreement of Allenby Capital Limited), in which event details of the new times and dates will be notified to the London Stock Exchange and the Company will make an appropriate announcement to a Regulatory Information Service.
(3) References to times in this document are to London times unless otherwise stated.
(4) Different deadlines and procedures for applications may apply in certain cases. For example, if you hold your Ordinary Shares through a CREST member or other nominee, that person may set an earlier date for application and payment than the dates noted above.
(5) Assumes Resolutions 1 to 8 (inclusive) that are set out in the Notice of General Meeting are passed.
If you require assistance please contact Capita Asset Services on 0371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 a.m. – 5.30 p.m., Monday to Friday excluding public holidays in England and Wales. Please note that Capita Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes.