RNS Number:1400T
Keystone Solutions Group PLC
18 March 2002
Not for release, publication or distribution in or into the United States,
Canada, the Republic of Ireland, South Africa or Japan. This announcement is
being released in Australia solely for the purpose of allowing Solution 6 to
comply with its obligations under the listing rules of the Australian Stock
Exchange.
FOR IMMEDIATE RELEASE
18 March 2002
RECOMMENDED SHARE OFFER AND WARRANT OFFER TO BE MADE BY ANDERSEN CORPORATE
FINANCE ON BEHALF OF SOLUTION 6 (EUROPE) LIMITED FOR KEYSTONE SOLUTIONS GROUP
PLC
Summary
The boards of Solution 6 Holdings Limited ("Solution 6") and Keystone Solutions
Group PLC ("Keystone") announce that they have reached agreement on the terms of
a recommended offer, to be made by Andersen Corporate Finance on behalf of
Solution 6 (Europe) Limited ("Solution 6 (Europe)"), a wholly owned subsidiary
of Solution 6, to acquire the whole of the issued and to be issued share capital
of Keystone.
In addition, the boards of Solution 6 and Keystone announce the terms of a
recommended offer, to be made by Andersen Corporate Finance on behalf of
Solution 6 (Europe), for the whole of the issued Keystone Warrants.
The Offers will be unanimously recommended by the Keystone Directors who have
given irrevocable undertakings to accept the Offers in respect of all of their
own beneficial holdings of Keystone Shares, representing approximately 0.4 per
cent. of the issued share capital of Keystone.
The Share Offer will value the whole of the issued share capital of Keystone at
approximately £13.5 million and each Keystone Share at approximately 11.8p,
based on (i) the Closing Price of Solution 6 Shares of 80 cents on 15 March
2002, being the last practicable business day prior to this announcement, and
(ii) the Illustrative Exchange Rate.
The Share Offer will:
• be 2 New Solution 6 Shares for every 5 Keystone Shares; and
• represent a premium of approximately 27.3 per cent. to the
Closing Price of 9.25p per Keystone Share on 7 March 2002, being the last
business day prior to the announcement by the board of Keystone that it was in
talks that may or may not lead to an offer. In addition the Share Offer will
represent a premium of approximately 34.6 per cent. to the Closing Price of
8.75p per Keystone Share on 15 March 2002, being the last practicable business
day prior to this announcement.
Keystone Shareholders who validly accept the Share Offer will have the option to
elect for the Cash Alternative, being 10p per Keystone Share.
Solution 6 (Europe) has received irrevocable undertakings and letters of intent
to accept the Share Offer in respect of a combined total of 27,017,466 Keystone
Shares, representing approximately 23.6 per cent. of the existing issued share
capital of Keystone.
The Warrant Offer will be 2p in cash for every Keystone Warrant.
Solution 6 Chief Executive Officer, Mr Neil Gamble, said:
"The combination of the Solution 6 and Keystone businesses will create a group
of talented development and support professionals who will be focused on
delivering first class products and services to customers.
I believe that the enlarged group will be afforded expanded opportunities in the
global market for professional services software products and that the benefits
from these opportunities will help to enhance shareholder value."
Commenting on the Offers, Mr Claes Hultman, non-executive chairman of Keystone
said:
"Keystone's strength lies in its professional services software products and in
the high levels of positive feedback from its customer base. Its vulnerability
has been the speed at which it can move to achieve business scale and critical
mass in the global marketplace.
Solution 6 will bring access to new customer relationships and increased sales
and product development resources.
I believe that only as part of a larger group will Keystone's strengths be
maximised, and its potential for profitable growth be unlocked. The board of
Keystone unanimously recommend the offers from Solution 6 as the best option
currently available to Keystone share holders and warrant holders."
Enquiries:
Solution 6 (Europe) Limited/ Solution 6 Holdings Limited
Neil Gamble 00 61 2 9278 0666
Iain Keddie
Andersen Corporate Finance
Byron Griffin 020 7438 3000
Leonie Grimes
Keystone Solutions Group plc
Claes Hultman 020 7919 5800
Graeme Frost
Investec Henderson Crosthwaite
James Grace 020 7597 5970
Derek Rawlings
This summary should be read in conjunction with the full text of the following
announcement.
The Offers will not be made, directly or indirectly, in or into, or by use of
the mails, or by any means or instrumentality (including, without limitation,
facsimile transmission, telex and telephone) or interstate or foreign commerce
of, or of any facility of a national securities exchange of, the United States,
Canada, the Republic of Ireland, South Africa, Australia or Japan.
An application will be made to the Australian Stock Exchange for the quotation
of the New Solution 6 Shares on the Australian Stock Exchange. The New Solution
6 Shares will be traded on the Australian Stock Exchange on exactly the same
basis and in exactly the same manner as Solution 6 Shares. It is expected that
quotation will occur following the issue of New Solution 6 Shares to Keystone
Shareholders validly accepting the basic terms of the Share Offer and the
despatch of holding statements to such shareholders.
The New Solution 6 Shares have not been, nor will they be, registered under the
United States Securities Act of 1933 (as amended) or under any of the securities
laws of any state or other jurisdiction of the United States, nor have any steps
been taken to enable the New Solution 6 Shares to be offered in compliance with
applicable securities laws of Canada, the Republic of Ireland, South Africa,
Australia or Japan. Accordingly, unless an exception under relevant securities
laws is applicable, the New Solution 6 Shares may not be offered, sold,
delivered or transferred, directly or indirectly, in or into the United States,
Canada, the Republic of Ireland, South Africa, Australia or Japan or to or for
the account or benefit of any US persons (as defined in Regulation S under the
Securities Act) or residents of Canada, the Republic of Ireland, South Africa,
Australia or Japan.
This announcement is being released in Australia solely for the purpose of
allowing Solution 6 to comply with its obligations under the listing rules of
the Australian Stock Exchange. No offer or invitation to subscribe for or
acquire New Solution 6 Shares is being made in Australia.
Andersen Corporate Finance, which is regulated by the Financial Services
Authority, is acting only for Solution 6 and Solution 6 (Europe) and no-one else
in connection with the Offers and will not regard any other person as its client
or be responsible to any person other than Solution 6 and Solution 6 (Europe)
for providing the protections afforded to clients of Andersen Corporate Finance
or for giving advice to any such person in relation to the Offers, this
announcement or any other matter referred to herein.
Investec Henderson Crosthwaite, which is regulated by the Financial Services
Authority, is acting only for Keystone and no-one else in connection with the
Offers and will not regard any other person as its client or be responsible to
any person other than Keystone for providing the protections afforded to clients
of Investec Henderson Crosthwaite or for giving advice to any such person in
relation to the Offers, this announcement or any other matter referred to
herein.
This announcement does not constitute an offer or an invitation to purchase any
securities. Andersen Corporate Finance of 180 Strand, London WC2R 1BL, which is
regulated by the Financial Services Authority, has approved this announcement as
a financial promotion solely for the purpose of section 21 of the Financial
Services and Markets Act 2000.
The full text of the conditions of the Offers and a results forecast for
Keystone are set out in Appendices I and II respectively, all of which form part
of, and should be read with this announcement. Defined terms have the meanings
set out in Appendix III, which also forms part of and should be read with this
announcement.
The formal offer document will be despatched by Andersen Corporate Finance on
behalf of Solution 6 (Europe) as soon as practicable.
The directors of Solution 6 and Solution 6 (Europe) accept responsibility for
the information contained in this announcement, other than that relating to the
Keystone Group, the Keystone Directors and members of their immediate families.
To the best of the knowledge and belief of the directors of Solution 6 and
Solution 6 (Europe) (who have taken all reasonable care to ensure that such is
the case), the information contained in this announcement for which they take
responsibility is in accordance with the facts and does not omit anything likely
to affect the import of such information.
The Keystone Directors accept responsibility for the information contained in
this announcement relating to the Keystone Group, the Keystone Directors and
members of their immediate families. To the best of the knowledge and belief of
the Keystone Directors (who have taken all reasonable care to ensure that such
is the case), the information contained in this announcement for which they take
responsibility is in accordance with the facts and does not omit anything likely
to affect the import of such information.
Not for release, publication or distribution in or into the United States,
Canada, the Republic of Ireland, South Africa or Japan. This announcement is
being released in Australia solely for the purpose of allowing Solution 6 to
comply with its obligations under the listing rules of the Australian Stock
Exchange.
RECOMMENDED SHARE OFFER AND WARRANT OFFER TO BE MADE BY ANDERSEN CORPORATE
FINANCE ON BEHALF OF SOLUTION 6 (EUROPE) LIMITED FOR KEYSTONE SOLUTIONS GROUP
PLC
Introduction
The boards of Solution 6 and Keystone announce that they have reached agreement
on the terms of a recommended offer, to be made by Andersen Corporate Finance on
behalf of Solution 6 (Europe), to acquire the whole of the issued and to be
issued share capital of Keystone. In addition, the boards of Solution 6 and
Keystone announce the terms of a recommended offer, to be made by Andersen
Corporate Finance on behalf of Solution 6 (Europe), for the whole of the issued
Keystone Warrants (together the "Offers").
The Share Offer will value the whole of the issued share capital of Keystone at
approximately £13.5 million and each Keystone Share at 11.8p based on (i) the
Closing Price of Solution 6 Shares of 80 cents on 15 March 2002, being the last
practicable business day prior to this announcement, and (ii) the Illustrative
Exchange Rate.
The Keystone Directors, who have been so advised by Investec Henderson
Crosthwaite, consider the terms of the Offers to be fair and reasonable.
Accordingly, the Keystone Directors will be unanimously recommending Keystone
Shareholders to accept the Share Offer or the Cash Alternative and Keystone
Warrantholders to accept the Warrant Offer. In providing advice to the board of
Keystone, Investec Henderson Crosthwaite has taken into account the commercial
assessments of the Keystone Directors.
Solution 6 (Europe) has received irrevocable undertakings from the Keystone
Directors to accept the Offers in respect of all of their own beneficial
holdings of Keystone Shares amounting to 433,721 Keystone Shares, representing
approximately 0.4 per cent. of the existing issued share capital of Keystone.
These undertakings remain binding in the event of a higher offer.
Solution 6 (Europe) has received from certain other Keystone Shareholders
irrevocable undertakings and letters of intent to accept the Share Offer in
respect of a combined total of 26,583,745 Keystone Shares, representing
approximately 23.2 per cent. of the existing issued share capital of Keystone.
These comprise:-
(i) an irrevocable undertaking representing approximately 1.1
per cent. of the existing issued share capital of Keystone which remains binding
in the event of a higher offer;
(ii) an irrevocable undertaking representing approximately 2.9
per cent. of the existing issued share capital of Keystone which will cease to
be binding if an offer is made for Keystone by a third party under which the
amount or value of the consideration offered for each Keystone Share is not less
than 13p per share or 11p per share if the consideration is wholly in cash; and
(iii) letters of intent (which are not legally binding)
representing approximately 19.2 per cent. of the existing issued share capital
of Keystone.
Solution 6 (Europe) has accordingly received irrevocable undertakings and
letters of intent to accept the Share Offer in respect of an aggregate of
27,017,466 Keystone Shares, representing approximately 23.6 per cent. of the
existing issued share capital of Keystone.
The Share Offer
On behalf of Solution 6 (Europe), Andersen Corporate Finance will offer to
acquire, on the terms and subject to the conditions set out or referred to in
this announcement and any further terms and conditions that will be set out in
the Offer Document and the Forms of Acceptance, the whole of the issued and to
be issued Keystone Shares on the following basis:
for every 5 Keystone Shares 2 New Solution 6 Shares
and so in proportion for any other number of Keystone Shares.
Based on (i) the Closing Price of a Solution 6 Share of 80 cents on 15 March
2002, being the last practicable business day prior to this announcement, and
(ii) the Illustrative Exchange Rate, the Share Offer values the whole of the
existing issued share capital of Keystone at approximately £13.5 million and
each Keystone Share at approximately 11.8p.
The Share Offer represents a premium of approximately 27.3 per cent. to the
Closing Price of 9.25p per Keystone Share on 7 March 2002, being the last
business day prior to the announcement by the board of Keystone that it was in
talks that may or may not lead to an offer. In addition, the Share Offer
represents a premium of approximately 34.6 per cent. to the Closing Price of
8.75p per Keystone Share on 15 March 2002, being the last practicable business
day prior to this announcement.
Acceptance in full of the Share Offer by all Keystone Shareholders (assuming no
exercise of outstanding options under the Keystone Share Option Schemes and no
subscription of shares arising from the Keystone Warrants) would result in the
issue of up to approximately 45.8 million New Solution 6 Shares, representing
approximately 18.0 per cent. of the enlarged issued share capital of Solution 6
after taking account of the New Solution 6 Shares and the Additional Placing
Shares.
The Share Offer will be subject to the conditions set out in paragraph 1 of
Appendix I to this announcement.
The Cash Alternative
Keystone Shareholders who validly accept the Share Offer will be given the
opportunity to elect in respect of all of their holdings of Keystone Shares to
receive cash consideration instead of their entitlement to New Solution 6 Shares
under the Share Offer. A Keystone Shareholder who elects for the Cash
Alternative will receive:
for each Keystone Share 10p in cash
The Cash Alternative is conditional on the Share Offer becoming or being
declared unconditional in all respects and will remain open for so long as the
Share Offer remains open for acceptance.
The Warrant Offer
On behalf of Solution 6 (Europe), Andersen Corporate Finance will offer to
acquire, on the terms and subject to the conditions set out or referred to in
this announcement and any further terms and conditions that will be set out in
the Offer Document and the Forms of Acceptance, the whole of the issued Keystone
Warrants on the following basis:
for each Keystone Warrant 2p in cash
and so in proportion for any other number of Keystone Warrants.
The Keystone Warrants are exercisable at 50p per Keystone Share at any time up
to 30 November 2006. This compares to the Share Offer which values each
Keystone Share at approximately 11.8p and the Cash Alternative which values each
Keystone Share at 10p in cash. The Closing Price of a Keystone Warrant on 7
March 2002, being the last business day prior to the announcement by the board
of Keystone that it was in talks that may or may not lead to an offer, was 6p.
Following the announcement, the trading price of a Keystone Warrant has fallen,
and the Closing Price on 15 March 2002, being the last practicable business day
prior to this announcement, was 3.5p, based on a market bid/offer spread of 2-5p
per Keystone Warrant.
Keystone Warrantholders would have no benefit from the Cash Alternative and
little possible benefit from the Share Offer were they to exercise their
Keystone Warrants. Accordingly, Solution 6 (Europe) is under no obligation under
the City Code, on the basis that the Keystone Warrants are significantly out of
the money, to extend proposals to the Keystone Warrantholders but has chosen to
do so after taking account of the market bid price of 2p on 15 March 2002.
If the Warrant Offer becomes unconditional, Solution 6 (Europe) intends to
cancel the trading of Keystone Warrants on the London Stock Exchange and the
listing of Keystone Warrants on the Official List of the UK Listing Authority,
irrespective of the actual level of acceptances received in respect of the
Warrant Offer. If the listing is cancelled, any outstanding Keystone
Warrantholder would hold an unlisted warrant and would not have access to a
public market to trade such warrants. At the same time, Solution 6 (Europe)
intends to cancel the trading of the Keystone Shares on the London Stock
Exchange and the listing of Keystone Shares on the Official List of the UK
Listing Authority. On exercise of their Warrants, Keystone Warrantholders would
be entitled to receive unlisted Keystone Shares and would not have access to a
public market to trade such shares.
The Warrant Offer will be subject to the condition set out in paragraph 2 of
Appendix I to this announcement.
Further Terms of the Offers
The Keystone Shares are to be acquired by Solution 6 (Europe) fully paid, or
credited as fully paid, and free from all charges, liens, equitable interests,
encumbrances, rights of pre-emption and any other third party rights of any
nature whatsoever together with all rights attaching thereto on or after 18
March 2002, including the right to receive all dividends and any other
distributions declared, made or paid on or after that date.
The Keystone Warrants are to be acquired by Solution 6 (Europe) free from all
charges, liens, equitable interests, encumbrances, rights of pre-emption and any
other third party rights of any nature whatsoever together with all rights
attaching thereto on or after 18 March 2002.
The Share Offer will be extended to any Keystone Shares issued or
unconditionally allotted and fully paid whilst the Share Offer remains open for
acceptance (or such earlier date or dates as Solution 6 (Europe) may, subject to
the City Code, determine) including those unconditionally allotted or issued and
fully paid, or credited as fully paid, pursuant to the exercise of options under
the Keystone Share Option Schemes or the subscription of shares arising from the
Keystone Warrants.
The New Solution 6 Shares will be issued credited as fully paid and will rank
pari passu in all respects with the existing Solution 6 Shares. An application
will be made to the Australian Stock Exchange for the quotation of the New
Solution 6 Shares on the Australian Stock Exchange. It is expected that
quotation will occur following the issue of New Solution 6 Shares to Keystone
Shareholders validly accepting the basic terms of the Share Offer and the
despatch of holding statements to such shareholders. The New Solution 6 Shares
will be traded on the Australian Stock Exchange on exactly the same basis and in
exactly the same manner as the existing Solution 6 Shares.
Background to and Reasons for the Offers
The success of Keystone's business model is dependent on the Keystone Group
securing large new business sales contracts on a regular basis and on building a
loyal customer base to provide a stream of recurring revenue from maintenance
contracts and system upgrades. The Keystone Directors consider that whilst the
quality of the Keystone products is reflected in the calibre of customers within
its existing customer base, the size of Keystone has always been a handicap in
significant sales opportunities. The Keystone Directors believe therefore, that
the true potential of the Keystone products is more likely to be realised if
represented and backed by a much larger group.
The Keystone Group has not recorded a profit in any full financial year since it
obtained a listing through the reverse takeover of the former Calidore Group PLC
in 1997. As explained in more detail in the section headed 'Keystone Results
Forecast for the Year Ending 31 March 2002' below, the Keystone Directors
believe that the Keystone Group will most likely report a consolidated loss
before taxation and exceptional items for the year ending 31 March 2002 in
excess of £4.2 million. The Keystone Directors believe that, should Keystone
remain an independent entity, the Keystone Group will need to see a sustained
and material improvement in the conversion rate of its sales pipeline before it
will be able to meet its goal of reaching profitability.
Since the last equity fund raising in February 2001, the board of Keystone has
taken steps to reduce the cost base but has been unsuccessful in its attempts to
secure substantial new sales contracts to expand the customer base. If the
failure to achieve significant new contracts were to continue in the short term,
additional cost reductions would be needed if the Keystone Group is to remain
independent. The Keystone Directors believe that a consequence of any further
overhead reductions would be a reduction in the prospective revenue growth of
the Keystone Group.
In contrast, as part of the Enlarged Group, the Keystone Directors believe that
the Keystone business would be subject to substantially reduced financial risk,
as well as benefiting from the other advantages as set out below.
The Keystone Directors believe that the acquisition of Keystone on terms which
allow Keystone Shareholders the choice of realising the value of their Keystone
Shares at a premium to the market price or continuing their investment exposure
to the professional services software industry through an investment in a
company offering considerably reduced investment risk represents the most
effective way of providing value to Keystone Shareholders.
Benefits of the Offers to the Keystone Shareholders
The Keystone Directors believe that those Keystone Shareholders who accept the
Share Offer will benefit from exposure to any upside potential of an improvement
in trading by Keystone, whilst also benefiting from the reduced investment risk
that will come from holding shares in a larger company such as Solution 6.
Given Solution 6's market capitalisation, its ratio of recurring to
non-recurring income, its size, and ability to access capital markets, as
demonstrated by the private placing announced by the board of Solution 6 on 1
March 2002, the board of Keystone believes that holding an investment in
Solution 6 offers a reduced risk profile and better prospects than holding the
same value of investment in Keystone.
In this connection, given Keystone's market capitalisation of approximately
£10.0 million, based on the Closing Price of Keystone Shares of 8.75p on 15
March 2002, being the last practicable business day prior to this announcement,
the Keystone Directors believe that Keystone is too small to attract significant
interest from institutional and other investors. As a result, trading in
Keystone Shares has been, and is likely to stay, relatively illiquid. This may
make it difficult for Keystone Shareholders, particularly those with larger
shareholdings, to realise the value of their shares. Those Keystone Shareholders
that wish to reduce their investment exposure to the professional services
software industry will, should they so wish, be able to benefit, via the Cash
Alternative, from receiving cash consideration for their entire holding of
Keystone Shares at a premium to the current market price.
Benefits of the Offers for the Enlarged Group
The Directors of Solution 6 consider that the acquisition of Keystone will help
to enhance the Enlarged Group's position as a leader in the market for
professional services software. The board of Solution 6 believe that the key
benefits to the Enlarged Group of the acquisition include the following:
• Complementary customer base - the Keystone customer base is
presently focused more towards large legal firms. In contrast, Solution 6 has a
broader customer base for its professional service products with greater
penetration amongst the major accounting firms in Europe and the Asia Pacific
region and legal firms in the United States and Europe;
• Geography - the directors of Solution 6 believe that the Enlarged
Group will benefit from a strengthened geographic coverage. Both Solution 6 and
Keystone have an established presence in the legal segment of the professional
services software market in Australia and New Zealand. In addition both
Solution 6 and Keystone also have a presence in that segment of the market in
the United States and the UK and Solution 6 has a more diversified customer base
within the European and Asia Pacific markets;
• Complementary product range - the directors of Solution 6 believe
that Solution 6 and Keystone will be able to cross-sell the new products
available to them into their existing customer bases. Solution 6 considers that
Keystone's main products, Keystone Professional, which operates on an Oracle
platform, and Keystone Net Results, both complement Solution 6's current product
offerings to the professional services market;
• Product development - Solution 6 recognises the investment that is
required in product research and development in order to remain competitive in
its markets. The directors of Solution 6 believe that the combined expertise
and resources of the Enlarged Group will allow more effective and efficient
development of new products for the professional services software market; and
• Cost synergies - cost efficiencies, that are achievable from
operating a business on a large scale, are becoming increasingly important. The
board of Solution 6 anticipates that cost savings within the Enlarged Group will
be achievable in the medium term in the areas of customer care and support,
research and development, finance, administration and corporate functions.
The directors of Solution 6 are optimistic as regards the prospects of the
Enlarged Group. The board of Solution 6 believes that the acquisition of the
Keystone Group will be earnings enhancing in the year ending 30 June 2003,
assuming the Additional Placing Shares are issued. This statement should not be
interpreted to mean that the loss per share reported in the year ended 30 June
2001 will necessarily be reduced in the year ending 30 June 2003.
Information on Keystone
Keystone specialises in the development of enterprise software for professional
services organisations ("PSOs"). This software is purpose-designed to span the
business management, practice management, and client management needs of PSOs.
Keystone employs more than 120 personnel, specialists in software design,
development and related business consulting, working from offices in the United
Kingdom, the United States, Australia and New Zealand.
Keystone's current client base primarily consists of large legal firms.
Keystone's focus is on boosting practice profitability, through automated fee
capture and billing, improving productivity and client service, with online
matter management and supporting efficient practice management, with
industry-leading real time forecasting, budgeting and analysis applications.
Keystone has a client list of over 220 law firms in the UK, the US and the Asia
Pacific regions. Keystone's main applications are Keystone Professional (a
software suite of over 30 modules which integrate the management of all the key
business functions undertaken by a PSO) and Keystone Net Results (a suite of
business intelligence and financial analytics software).
In the year ended 31 March 2001, the Keystone Group made a consolidated loss
before taxation and exceptional items of £7,623,000 (2000: £165,000) on a
turnover of £4,477,000 (2000: £4,799,000). As at 31 March 2001, Keystone had
consolidated net assets of £14,711,000 (2000: £9,171,000).
The Keystone Group announced its unaudited consolidated interim results for the
six months ended 30 September 2001 on 13 December 2001. The consolidated loss
before taxation and exceptional items was £2,026,000 (2000: £3,173,000) on
revenues of £2,841,000 (2000: £1,989,000). As at 30 September 2001, the
Keystone Group had consolidated net assets of £12,320,000 (2000: £8,778,000).
Keystone Results Forecast for the Year Ending 31 March 2002
The Keystone Directors do not anticipate that the Keystone Group will complete
the signing of any large new contracts before the end of March 2002. In
particular, there have been a number of delays in entering into the contract to
supply the Keystone Professional product to Clifford Chance, a major legal firm.
The Keystone Directors believe that the contract with Clifford Chance is
scheduled to be finalised in the first quarter of Keystone's new financial year
although this is not certain. Accordingly, the board of Keystone believes that
the Keystone Group will most likely report a consolidated loss before taxation
and exceptional items for the year ending 31 March 2002 in excess of £4.2
million. This includes a £280,000 charge for amortisation of goodwill.
The basis of preparation and principal assumptions for this results forecast,
together with related letters from Horwath Clark Whitehill, auditors to
Keystone, and from Investec Henderson Crosthwaite, financial advisers to
Keystone, are set out in Appendix II to this announcement.
Information on Solution 6 (Europe) and Solution 6
Solution 6 (Europe) is a wholly-owned subsidiary of Solution 6. It is the
holding company for the Solution 6 Group's UK businesses and, operationally,
provides certain practice management software and services to businesses in
Europe and the US. In the year ended 30 June 2000, Solution 6 (Europe) Group
made a consolidated loss before taxation and exceptional items of £2,580,593
(1999: £378,268) on turnover of £15,229,614 (1999: £14,081,000). As at 30 June
2000, the Solution 6 (Europe) Group had consolidated net liabilities of £672,654
(1999: consolidated net assets of £2,167,570).
Solution 6 is an international company which specialises in the development,
installation and support of business applications software. Its core operations
comprise of two separate divisions, one provides specialised software solutions
to professional services firms worldwide and the other provides information
technology ("IT") services in the Asia Pacific region. Solution 6 has 33
offices in 11 countries in North America, Europe and the Asia Pacific region. It
is a public company listed on the Australian Stock Exchange and has headquarters
in Sydney.
The Professional Services and Software ("PSS") Division of Solution 6 provides
practice management and professional services automation ("PSA") solutions, tax
preparation software and compliance software to a global client base. The PSS
Division also develops, implements and provides related consulting, education
and support services to its customers. This division has over 900 personnel and
has established a global presence serving three major regions of the world: the
Americas, Europe and the Asia Pacific region. The division has established a
broad blue-chip customer base, both globally and in each region, which includes
major legal firms, global accounting and professional practices and consulting
practices.
Practice management and PSA software accounts for approximately two-thirds of
the PSS Division turnover. The software provides specialised time management and
billing software to accountancy, legal and consultancy firms, in particular, the
"Big Five" global accountancy practices and major legal firms around the world.
The primary PSA brands are CMS and CABS and these products enable resource time
and expenses to be tracked to either clients or projects. The tax preparation
software is used by tax professionals to calculate and submit various corporate,
business and individual tax filings to government agencies, and has a strong
market position in Australia and the United Kingdom. The compliance software is
used by professionals to develop statutory and management accounts on behalf of
their clients, to manage superannuation assets and share portfolios, and to
maintain corporate registers.
The IT Services Division provides various services to its clients including
software support, managed web-site services, systems integration and knowledge
management services. The division operates largely independent of the PSS
Division and has over 650 personnel. Its primary market is Australia, targeting
government institutions and the top 500 Australia companies.
In the year ended 30 June 2001, the Solution 6 Group reported a consolidated
loss before taxation and exceptional items of A$48,944,000 (2000: A$39,021,000)
from revenues of A$283,631,000 (2000: A$180,456,000). As at 30 June 2001, the
Solution 6 Group had consolidated net assets of A$196,629,000 (2000:
A$282,246,000).
Current Trading of Solution 6
Solution 6 announced its unaudited interim results for the six months ended 31
December 2001 on 7 March 2002.
Despite difficult conditions in the world economy and in particular the global
software and IT markets, the Solution 6 Group achieved an increase in revenues
(including the effect of acquisitions) of approximately 20 per cent. to
A$153,785,000 in the six months ended 31 December 2001 (2000: A$128,522,000). In
addition, the Solution 6 Group achieved its best half-year result in five years,
with EBITDA reaching A$2,638,000 for the period (2000: A$(24,306,000)). The main
contribution was from the PSS Division, which exceeded its target EBITDA margin
of 10 per cent. (before corporate allocations) and achieved a 35 per cent.
increase in revenues. The consolidated loss from ordinary activities before
taxation and exceptional items for the period was A$10,123,000 (2000:
A$34,142,000). As at 31 December 2001, the Solution 6 Group had consolidated
net assets of A$181,308,000 (2000: A$183,802,000).
The main focus of the board of Solution 6 remains the continuous improvement of
the Solution 6 Group's operating margins and cash flow performance. Taking
account of further acquisition opportunities, the directors of Solution 6
consider there to be considerable scope for growth.
Management and Employees
Solution 6 (Europe) has given assurances to the Keystone Directors that the
existing employment rights, including pension rights, of all Keystone Group
employees will be fully safeguarded.
Keystone Share Option Schemes
The Share Offer will be extended to any Keystone Shares issued or
unconditionally allotted and fully paid whilst the Share Offer remains open for
acceptance (or such earlier date or dates as Solution 6 (Europe) may, subject to
the City Code, determine) including those unconditionally allotted or issued and
fully paid, or credited as fully paid, pursuant to the exercise of options under
the Keystone Share Option Schemes.
Given that the exercise price of all outstanding Keystone Share Options is
greater than the value of the Share Offer based on the Closing Price of Solution
6 Shares on 15 March 2002, being the last practicable business day prior to this
announcement and the Cash Alternative, Solution 6 (Europe) does not intend to
make any proposal to those Keystone Share Option Holders who have not exercised
their options before the Share Offer becomes or is declared unconditional in all
respects and is closed. However, if the value of the basic terms of the Share
Offer exceeds the exercise price of any of the Keystone Share Options whilst the
Share Offer remains open for acceptance, Solution 6 will make appropriate
proposals to the relevant Keystone Share Option Holders in accordance with the
requirements of the City Code.
It is Solution 6's intention to allow the Keystone management and employees to
participate in appropriate incentivisation schemes established for the
management and employees of the Enlarged Group as soon as practicable after the
Offers become or are declared unconditional in all respects.
Compulsory Acquisition and De-listing
If the Offers become or are declared unconditional in all respects and on the
receipt of valid acceptances in respect of not less than 90 per cent. of the
Keystone Shares and the Keystone Warrants, Solution 6 (Europe) intends to
exercise its rights pursuant to the provisions of sections 428 to 430F of the
Act to acquire compulsorily the remaining Keystone Shares and Keystone Warrants
to which the Offers relate.
As soon as the board of Solution 6 (Europe) considers it appropriate to do so,
and subject to the Offers becoming or being declared unconditional in all
respects and subject to any applicable requirements of the UK Listing Authority,
Solution 6 (Europe) intends to procure that Keystone applies for cancellation
of the trading in Keystone Shares on the London Stock Exchange and the listing
of Keystone Shares on the Official List of the UK Listing Authority.
In the event that the Warrant Offer becomes unconditional in all respects,
Solution 6 (Europe) intends to procure that Keystone will apply for the
cancellation of the trading in Keystone Warrants on the London Stock Exchange
and the listing of Keystone Warrants on the Official List of the UK Listing
Authority irrespective of whether condition (ii) in paragraph 1 of Appendix I to
this announcement has been satisfied.
Recommendation
The board of Keystone, which has been so advised by Investec Henderson
Crosthwaite, considers the terms of the Offers to be fair and reasonable.
Accordingly, the board of Keystone will unanimously recommend all Keystone
Shareholders to accept the Share Offer or the Cash Alternative and all Keystone
Warrantholders to accept the Warrant Offer. In providing advice to the board of
Keystone, Investec Henderson Crosthwaite has taken into account the commercial
assessments of the Keystone Directors.
Other information
The Offer Document, containing the full terms and conditions of the Offers
together with the Forms of the Acceptance, will be posted to Keystone
Shareholders and Keystone Warrantholders and, for information purposes only, to
Keystone Share Option Holders as soon as practicable.
This announcement does not constitute an offer or an invitation to purchase any
securities. Andersen Corporate Finance of 180 Strand, London WC2R 1BL, which is
regulated by the Financial Services Authority, has approved this announcement as
a financial promotion solely for the purpose of section 21 of the Financial
Services and Markets Act 2000.
Save for the irrevocable undertakings to accept the Offers summarised above,
neither Solution 6 or Solution 6 (Europe) or any person acting in concert with
Solution 6 or Solution 6 (Europe), owns or controls any Keystone Shares or
Keystone Warrants or has any options to buy Keystone Shares or Keystone Warrants
or any outstanding derivatives referenced to any such shares or warrants.
Save for the irrevocable undertakings to accept the Offers summarised above
neither Solution 6 (Europe), Solution 6 nor any person acting in concert with
Solution 6 for the purposes of the Offers has any arrangement in relation to
Keystone Shares and Keystone Warrants, or any securities convertible or
exchangeable into Keystone Shares and Keystone Warrants or options (including
traded options) in respect of, or derivatives referenced to, any such shares or
warrants. For these purposes, "arrangement" includes an indemnity or option
arrangement, any agreement or understanding, formal or informal, or whatever
nature, relating to Keystone Shares and Keystone Warrants which may be an
inducement to deal or refrain from dealing in such shares and warrants.
The Offers will not be made, directly or indirectly, in or into, or by use of
the mails, or by any means or instrumentality (including, without limitation,
facsimile transmission, telex and telephone) or interstate or foreign commerce
of, or of any facility of a national securities exchange of the United States,
Canada, the Republic of Ireland, South Africa, Australia or Japan.
This announcement is being released in Australia solely for the purpose of
allowing Solution 6 to comply with its obligations under the listing rules of
the Australian Stock Exchange. No offer or invitation to subscribe for or
acquire New Solution 6 Shares is being made in Australia.
The New Solution 6 Shares have not been, nor will they be, registered under the
United States Securities Act of 1933 (as amended) or under any of the securities
laws of any state or other jurisdiction of the United States, nor have any steps
been taken to enable the New Solution 6 Shares to be offered in compliance with
applicable securities laws of Canada, the Republic of Ireland, South Africa,
Australia or Japan. Accordingly, unless an exception under relevant securities
laws is applicable, the New Solution 6 Shares may not be offered, sold,
delivered or transferred, directly or indirectly, in or into the United States,
Canada, the Republic of Ireland, South Africa, Australia or Japan or to or for
the account or benefit of any US persons (as defined in Regulation S under the
Securities Act) or residents of Canada, the Republic of Ireland, South Africa,
Australia or Japan.
The definition of terms used in this announcement are contained in Appendix III
to this announcement.
The Panel wishes to draw the attention of member firms of the Australian Stock
Exchange to certain UK dealing disclosure requirements following the
announcement by Solution 6 (Europe) of the Offers. An announcement made on 7
March 2002 by the board of Keystone that it was in talks which might lead to an
offer commenced an Offer Period in accordance with the City Code which is
published and administered by the Panel. The Offer Period is deemed to commence
at the time when an announcement is made of a proposed or possible offer, with
or without terms. Keystone has equity securities traded on the London Stock
Exchange.
The disclosure requirements referred to below are set out in more detail in Rule
8 of the City Code. In particular Rule 8.3 requires public disclosure of
dealings during the Offer Period by persons who own or control, or who would as
a result of any transaction own or control, 1 per cent. or more of any class of
relevant securities.
Relevant securities include Keystone Shares and Keystone Warrants and
instruments convertible into Keystone Shares and Keystone Warrants. By virtue
of Solution 6 (Europe) agreeing to offer New Solution 6 Shares as a form of
consideration in the Share Offer, Solution 6 Shares and instruments convertible
into Solution 6 Shares become relevant securities for the purposes of Rule 8.3
of the City Code. Solution 6, the ultimate parent entity of Solution 6
(Europe), has equity securities traded on the Australian Stock Exchange.
The obligation in respect of Solution 6 Shares commences with the issue of this
announcement. In the case of the Offers, this requirement will apply until the
end of the Offer Period.
Disclosure should be made on an appropriate form no later than 12 noon London
time on the business day following the date of the dealing transaction. These
disclosures should be sent to the Company Announcements Office of the London
Stock Exchange (fax number: +44 (0) 20 7588 6057).
The Panel requests that member firms advise those of their clients who wish to
deal in the relevant securities of Solution 6 or Keystone, whether in Australia
or in the UK, that they may be affected by these requirements. If there is any
doubt as to their application, the Panel should be consulted (telephone number:
+44(0) 20 7638 0129, fax number: +44 (0) 20 7638 1554).
The directors of Solution 6 and Solution 6 (Europe) accept responsibility for
the information contained in this announcement, other than that relating to the
Keystone Group, the Keystone Directors and members of their immediate families.
To the best of the knowledge and belief of the directors of Solution 6 and
Solution 6 (Europe) (who have taken all reasonable care to ensure that such is
the case), the information contained in this announcement for which they take
responsibility is in accordance with the facts and does not omit anything likely
to affect the import of such information.
The Keystone Directors accept responsibility for the information contained in
this announcement relating to the Keystone Group, the Keystone Directors and
members of their immediate families. To the best of the knowledge and belief of
the Keystone Directors (who have taken all reasonable care to ensure that such
is the case), the information contained in this announcement for which they take
responsibility is in accordance with the facts and does not omit anything likely
to affect the import of such information.
Andersen Corporate Finance, which is regulated by the Financial Services
Authority, is acting only for Solution 6 and Solution 6 (Europe) and no-one else
in connection with the Offers and will not regard any other person as its client
or be responsible to any person other than Solution 6 and Solution 6 (Europe)
for providing the protections afforded to clients of Andersen Corporate Finance
or for giving advice to any such person in relation to the Offers, this
announcement or any other matter referred to herein.
Investec Henderson Crosthwaite, which is regulated by the Financial Services
Authority, is acting only for Keystone and no-one else in connection with the
Offers and will not regard any other person as its client or be responsible to
any person other than Keystone for providing the protections afforded to clients
of Investec Henderson Crosthwaite or for giving advice to any such person in
relation to the Offers, this announcement or any other matter referred to
herein.
APPENDIX I
CONDITIONS OF THE OFFER
1. Conditions of the Share Offer
The Share Offer will be subject to the following conditions:
(i) valid acceptances being received (and not, where permitted, withdrawn) by not later than
3.00 pm on the First Closing Date (or such later time(s) and/or date(s) as Solution 6
(Europe) may, subject to the rules of the City Code, decide) in respect of not less than 90
per cent. in nominal value (or such lower percentage as Solution 6 (Europe) may decide) of
the Keystone Shares to which the Share Offer relates, provided that this condition will not
be satisfied unless Solution 6 (Europe) shall have acquired or agreed to acquire (whether
pursuant to the Share Offer or otherwise) directly or indirectly Keystone Shares carrying
in aggregate more than 50 per cent. of the voting rights then normally exercisable at
general meetings of Keystone, including for this purpose (to the extent (if any) required
by the Panel) any such voting rights attaching to any Keystone Shares that may be
unconditionally allotted or issued whether pursuant to the exercise of any outstanding
conversion or subscription rights or otherwise before the Share Offer becomes or is
declared unconditional as to acceptances. For the purpose of this condition: (i) Keystone
Shares which have been unconditionally allotted but not issued shall be deemed to carry the
voting rights they will carry upon issue; and (ii) the expression "Keystone Shares to which
the Share Offer relates" shall be construed in accordance with sections 428 to 430F of the
Act;
(ii) valid acceptances being received by not later than 3.00 pm on the First Closing Date (or
such later time(s) and/or date(s) as Solution 6 (Europe) may, subject to the rules of the
City Code, decide) in respect of not less than 90 per cent. (or such lower percentage as
Solution 6 (Europe) may decide) of the Keystone Warrants to which the Warrant Offer relates
(such expression shall be construed in accordance with sections 428 to 430F of the Act);
(iii) (a) Solution 6 (Europe) being satisfied that the Secretary of State for Trade and
Industry, acting on the advice of the Office of Fair Trading, will not refer the
proposed acquisition of Keystone by Solution 6 (Europe) or any matters arising
therefrom to the Competition Commission;
(b) the Australian Competition and Consumer Commission indicating, in terms satisfactory
to Solution 6 (Europe), that it has no objection to, or does not propose to take any
action in respect of, the proposed acquisition of Keystone by Solution 6 (Europe) or
any matters arising therefrom under the Trade Practices Act 1974 (Australia); and
(c) the New Zealand Commerce Commission granting a clearance or authorisation, in terms
satisfactory to Solution 6 (Europe), for the proposed acquisition of Keystone by
Solution 6 (Europe) under the Commerce Act 1986 (New Zealand);
(iv) all necessary notifications and filings having been made, all appropriate waiting and other
time periods (including any extension to them) under any applicable legislation or
regulations of any jurisdiction having expired, lapsed or been terminated, and all
authorisations, orders, recognitions, grants, determinations, consents, licences,
confirmations, clearances, certificates, permissions and approvals (each an "Authorisation
") necessary or reasonably considered appropriate by Solution 6 or Solution 6 (Europe) for
or in respect of the Share Offer, or any acquisition of any shares or other securities in,
or control of Keystone, or any other member of the Keystone Group, by any member of the
Solution 6 Group having been obtained in terms and in a form reasonably satisfactory to
Solution 6 or Solution 6 (Europe) from all relevant government or governmental, quasi-
governmental, supranational, statutory, regulatory, environmental or investigative body or
authority (including any national anti-trust or merger control authorities) or any court,
trade agency, association, institution or professional body or any other person or body
whatsoever in any jurisdiction (each a "Relevant Authority") or persons with whom any
member of the Keystone Group has entered into contractual arrangements (where the absence
of an Authorisation from such a person would have a material adverse effect on the Keystone
Group taken as a whole), and all such Authorisations, together with all Authorisations
necessary or reasonably considered appropriate by Solution 6 or Solution 6 (Europe) to
carry on any material business of any member of the Keystone Group, remaining in full force
and effect and there being no written notice or written intimation of any intention to
revoke, withdraw, suspend, withhold, modify, amend or not to renew the same in consequence
of the Share Offer becoming unconditional in all respects, and all necessary statutory or
regulatory obligations in any jurisdiction having been complied with where, in each case,
the absence of such compliance would have a material adverse effect on the Keystone Group
taken as a whole;
(v) no Relevant Authority having instituted, implemented or threatened any action, suit,
proceedings, investigation, reference or enquiry, or enacted or made any statute,
regulation, order or decision, or having taken any other steps or measures that would or is
reasonably likely to:
(a) make the Share Offer, its implementation or the acquisition or proposed acquisition
of any Keystone Shares or other securities in, or control of, Keystone by Solution 6
(Europe) or any other member of the Solution 6 Group, illegal, void and/or
unenforceable or otherwise directly or indirectly restrict, restrain, prevent,
prohibit or delay, or impose additional conditions or obligations with respect to or
otherwise materially impede, interfere with or challenge the Share Offer or the
proposed acquisition of Keystone by Solution 6 (Europe) or any acquisition of shares
by Solution 6 (Europe) or any other member of the Solution 6 Group (including,
without limitation, taking any steps which would entitle the board of Keystone to
require Solution 6 (Europe) or any other member of the Solution 6 Group to dispose
of all or some of its Keystone Shares or restrict the ability of Solution 6 (Europe)
or any other member of the Solution 6 Group to exercise voting rights in respect of
some or all of such Keystone Shares); or
(b) result in a material delay in the ability of Solution 6 (Europe) or any other member
of the Solution 6 Group, or render Solution 6 (Europe) or any other member of the
Solution 6 Group unable, to acquire some or all of the Keystone Shares or the
Keystone Warrants pursuant to the Offers; or
(c) impose any material limitation on, or result in a material delay in, the ability of
Solution 6 (Europe) or any other member of the Solution 6 Group or Keystone or any
other member of the Keystone Group to acquire or hold or exercise effectively,
directly or indirectly, all or any rights of ownership of shares or other securities
(or the equivalent) in any member of the Keystone Group or management control over
any member of the Keystone Group; or
(d) require, prevent or materially delay the divestiture by Solution 6 (Europe) or any
other member of the Solution 6 Group or require the divestiture by any member of
the Keystone Group of all or any material part of their respective businesses,
assets or properties or impose any limitation on the ability of any of them to
conduct their respective businesses (or any of them) or own their respective assets
or properties or any material part thereof to an extent which is material in the
context of the Solution 6 Group or the Keystone Group, respectively, in each case
taken as whole; or
(e) otherwise affect any or all of the businesses, assets or profits of any member of
the Keystone Group in a manner which is material and adverse in the context of the
Keystone Group taken as a whole; or
(f) save pursuant to the Offers, require any member of the Keystone Group or Solution
6 (Europe) or any other member of the Solution 6 Group to offer to acquire any
shares or other securities (or the equivalent) or interest in and/or indebtedness of
any member of the Keystone Group owned by any third party; or
(g) require, prevent or delay the divestiture by any member of the Solution 6 Group of
any shares or other securities in Keystone, or impose any limitation on the ability
of any member of the Solution 6 Group or any member of the Keystone Group to
integrate or co-ordinate its business, or any material part of it, with the related
business of any other member of the Solution 6 Group or the Keystone Group to an
extent which is material in the context of the Solution 6 Group or the Keystone
Group, respectively, in each case taken as a whole, or result in any member of the
Solution 6 Group or the Keystone Group ceasing to be able to carry on business
under any name under which it presently does so, the consequences of which would be
material in the context of the Solution 6 Group or the Keystone Group taken as a
whole;
and all applicable waiting and other time periods during which any such Relevant Authority
could institute, or implement or threaten any action, suit, proceedings, investigation,
reference or enquiry or enact or make any such statute, regulation, order or decision or
take any other such step or measure having expired, lapsed or been terminated;
(vi) save as disclosed in Keystone's Annual Report and Accounts for the year ended 31 March 2001
or in any public announcement by Keystone by the delivery of an announcement to the Company
Announcements Office of the London Stock Exchange prior to 18 March 2002 (such disclosures
or information together being hereinafter referred to as being "publicly announced"), and
save as fairly disclosed in writing by or on behalf of Keystone to Solution 6 or its
advisers prior to 18 March 2002 (such disclosure being hereinafter referred to as being "
disclosed to Solution 6"), there being no provision of any arrangement, agreement, lease,
licence, permit, franchise or other instrument to which any member of the wider Keystone
Group is a party, or by or to which any such member, or any of its assets, is or are or may
be bound, entitled or subject, which could reasonably be expected, as a consequence of the
Share Offer or of the proposed acquisition of all or any part of the issued share capital
of, or other securities of, or control of, Keystone, to result in (to an extent which is
material in the context of the wider Keystone Group taken as a whole):
(a) any assets or interests of any member of the wider Keystone Group being or falling
to be disposed of or charged or any right arising under which any such asset or
interest could be required to be disposed of or charged other than in the ordinary
course of business; or
(b) any monies borrowed by or other indebtedness or liabilities (actual or contingent)
of, or any grant made to, any member of the wider Keystone Group being or becoming
repayable or being capable of being declared repayable immediately or earlier than
the repayment date stated in such arrangement, agreement or other instrument or the
ability of such member of the wider Keystone Group to borrow monies or to incur any
indebtedness being or becoming or being capable of being or becoming withdrawn,
prohibited or inhibited; or
(c) any such arrangement, agreement, lease, licence, consent, permit, franchise or
other instrument or the rights, liabilities, obligations or interests or business of
any member of the Keystone Group under any such arrangement, agreement, lease,
licence, consent, permit, franchise or instrument being, or becoming capable of
being, terminated or adversely modified or affected or any adverse action being
taken or any material obligation or liability arising thereunder; or
(d) the rights, liabilities, or interests of any member of the wider Keystone Group in
or with any firm, body or person, or any arrangements relating to such rights,
liabilities or interests, being terminated or adversely modified or affected; or
(e) the financial or trading position or value of any member of the wider Keystone Group
being prejudiced or adversely affected; or
(f) the creation or enforcement of any mortgage, charge or other security interest over
the whole or any part of the business, property, assets or interests of any member
of the wider Keystone Group or any such mortgage, charge or security (whenever
arising or having arisen) becoming enforceable or being enforced; or
(g) any member of the wider Keystone Group ceasing to be able to carry on business under
any name under which it currently does so; or
(h) the creation of liabilities, actual or contingent, of any member of the wider
Keystone Group (save as in the ordinary course of business);
and no event having occurred which, under any provision of any arrangement, agreement or
other instrument to which any member of the wider Keystone Group is a party, or by or to
which any such member, or any of its assets, is or are or may be bound, entitled or
subject, would result, to an extent which is material and adverse in the context of the
wider Keystone Group taken as a whole, in any of the events or circumstances as are
referred to in items (a) to (h) inclusive of this paragraph;
(vii) since 31 March 2001 and save as publicly announced or disclosed to Solution 6:
(a) no litigation, arbitration proceedings, prosecution or investigation or other legal
business or proceedings to which any member of the wider Keystone Group is or may
become a party (whether as claimant or defendant or otherwise) having been
instituted or threatened, in each case which is material in the context of the wider
Keystone Group taken as a whole;
(b) no material adverse change having occurred in the business, assets or financial or
trading position or profits of any member of the wider Keystone Group which is
material in the context of the wider Keystone Group taken as a whole;
(c) no contingent or other liability having arisen or been incurred or become apparent
which might reasonably be expected to materially and adversely affect the wider
Keystone Group taken as a whole; and
(d) no inquiry or investigation by any Relevant Authority against or in respect of any
member of the wider Keystone Group having been threatened, announced or instituted
or remaining outstanding by, against, or in respect of any member of the wider
Keystone Group which, in each case, could have a material and adverse effect on the
wider Keystone Group taken as a whole;
(viii) since 31 March 2001 and save as publicly announced or disclosed to Solution 6 neither
Keystone nor any other member of the wider Keystone Group having:
(a) issued or agreed to issue or authorised or proposed the issue or grant of additional
shares of any class, or securities convertible into, or rights, warrants or options
to subscribe for or acquire any such shares or convertible securities (save pursuant
to the terms of the Keystone Warrants and the Keystone Share Option Schemes and save
as between members of Keystone and wholly owned subsidiaries of Keystone);
(b) recommended, declared, paid or made or proposed to recommend, declare, pay or make
any dividend, bonus or other distribution whether payable in cash or otherwise,
other than to Keystone or a wholly-owned subsidiary of Keystone;
(c) merged with or demerged or acquired any body corporate or (other than in the
ordinary course of business) acquired or disposed of or transferred, mortgaged or
charged or created any security interest over any assets or any right, title or
interest in any assets (including shares and trade investments), or authorised,
proposed or announced any intention so to do (which in each case would be material
in the context of the Keystone Group taken as a whole);
(d) issued, authorised or proposed the issue of any debentures or, save in the ordinary
course of business, incurred or increased any indebtedness or liability or become
subject to a contingent liability which, in any such case, is material in the
context of the wider Keystone Group taken as a whole;
(e) (save as between Keystone and wholly owned subsidiaries of Keystone) entered into or
varied, or authorised or proposed the entry into or variation of, or announced its
intention to enter into or vary any transaction, arrangement, contract,
reconstruction, amalgamation or commitment (other than in the ordinary course of
business and whether in respect of capital expenditure or otherwise) which is of a
long term, unduly onerous or unusual nature or which involves or could reasonably be
expected to involve an obligation of a nature and magnitude which in any such case
is material in the context of the wider Keystone Group taken as a whole or which is
or could reasonably be expected to be materially restrictive to the scope of the
existing business of any member of the wider Keystone Group taken as a whole;
(f) waived or compromised any claim which is material in the context of the Keystone
Group taken as whole;
(g) taken any corporate action or proposed any voluntary winding up or had any legal
proceedings started or threatened against it or petition presented for its winding-
up (whether voluntary or otherwise), dissolution or reorganisation or for the
appointment of a receiver, trustee, administrator, administrative receiver or
similar officer of all or any of its assets and revenues or any analogous event,
proceedings or steps having occurred in any jurisdiction or had any analogous person
appointed or been unable to pay its debts generally or having stopped or suspended
(or threatened to do so) payment of its debts generally or ceased or threatened to
cease carrying on all or any material part of its business;
(h) purchased, redeemed or repaid or proposed or announced any proposal to purchase,
redeem or repay any of its own shares or other securities or redeemed or reduced or
made any other change to any part of its share capital;
(i) (save as between Keystone and wholly owned subsidiaries of Keystone) made or
authorised or proposed or announced an intention to propose any change in its loan
capital;
(j) entered into any agreement, contract, commitment or arrangement which consents to or
results in the restriction of the scope of the business of any member of the wider
Keystone Group which, in any such case, is material in the context of the wider
Keystone Group taken as a whole or which is otherwise than in the ordinary course of
business;
(k) entered into or varied to a significant extent, the terms of any service,
consultancy or other agreement with or relating to any of the directors of Keystone
or senior executives of any member of the Keystone Group;
(l) made any alteration to its memorandum or articles of association or equivalent
constitutional documents;
(m) entered into or made an offer (which remains open for acceptance) to enter into any
agreement, contract or commitment or passed any resolution or announced or made any
proposal with respect to any of the transactions or events referred to in this
paragraph (viii);
(ix) Neither Solution 6 nor Solution 6 (Europe) having discovered on or after the date of this
announcement:
(a) that, save as publicly announced or disclosed to Solution 6, any member of the wider
Keystone Group is subject to any liability incurred otherwise than in the ordinary
course of business, contingent or otherwise, which is material in the context of the
wider Keystone Group taken as a whole;
(b) that any financial, business or other information concerning the wider Keystone
Group publicly announced or disclosed to Solution 6 in the course of due diligence
conducted by or on behalf of Solution 6 is materially misleading or contains a
material misrepresentation of fact or omits to state a fact necessary to make the
information not materially misleading;
(c) that any member of the wider Keystone Group has not complied in a material respect
with any applicable legislation or regulations of any jurisdiction with regard to
the treatment, keeping, disposal, discharge, spillage, leak or emission of any waste
or hazardous substance or any substance reasonably likely to impair the environment
or harm human health, or environmental matters which non-compliance would be likely
to give rise to any material liability or cost (whether actual or contingent) in the
context of the wider Keystone Group taken as a whole;
(d) that there has been a material emission, discharge, disposal, spillage or leak of
waste or hazardous substance or any substance reasonably likely to impair the
environment or harm human health on or from any land or other asset now or
previously owned, occupied or made use of by any past or present member of the wider
Keystone Group which would be likely to give rise to any material liability or cost
(whether actual or contingent) in the context of the wider Keystone Group taken as a
whole;
(e) that there is or is reasonably likely to be any material liability (whether actual
or contingent) in the context of the wider Keystone Group taken as a whole to make
good, repair, reinstate or clean up any property now or previously owned, occupied
or made use of by any past or present member of the wider Keystone Group under any
environmental legislation, regulation, notice, circular or order of any Relevant
Authority;
(f) that circumstances exist whereby a person or class of persons would be reasonably
likely to have any material claim or claims in the context of the wider Keystone
Group taken as a whole in respect of any product or materials used therein now or
previously developed, sold or carried out by any past or present member of the wider
Keystone Group.
For the purpose of these conditions:
(i) the "wider Keystone Group" means Keystone and its subsidiaries, subsidiary undertakings and
any other undertaking in which Keystone and such undertakings (aggregating their interests)
have a significant interest and for these purposes "subsidiary", "subsidiary undertaking"
and "undertaking" have the respective meanings given by the Act (but for this purpose
ignoring paragraph 20(1)(b) of Schedule 4A to the Act) and "significant interest" means a
direct or indirect interest in 20 per cent. or more of the equity capital of an
undertaking; and
(ii) the "wider Solution 6 Group" means Solution 6 (Europe) and its subsidiaries and subsidiary
undertakings, any holding company of Solution 6 or its subsidiaries or subsidiary
undertakings, any subsidiary or subsidiary undertaking of any such holding company and any
other undertaking in which any of such companies has a significant interest or any
undertaking which has a significant interest in any of such companies.
Subject to the requirements of the Panel, Solution 6 (Europe) reserves the right to waive in whole or
in part all or any of the conditions (ii) to (ix) inclusive. Conditions (ii) to (ix) inclusive, if not
waived (where capable of waiver), must be fulfilled within 21 days after the later of the first closing
date of the Share Offer and the date on which condition (i) is fulfilled (or, in each case, such later
date as the Panel may agree) failing which the Share Offer will lapse. Solution 6 (Europe) shall be
under no obligation to waive (if capable of waiver) or treat as fulfilled any of conditions (ii) to
(ix) inclusive by a date earlier than the date specified above for the fulfilment thereof
notwithstanding that the other conditions of the Share Offer may at such earlier date have been waived
or fulfilled and that there are as at such earlier date no circumstances indicating that any of such
conditions may not be capable of fulfilment.
The Share Offer will lapse if the Share Offer or the proposed acquisition by Solution 6 (Europe) is
referred to the Competition Commission by the First Closing Date, or the date when the Share Offer
becomes unconditional as to acceptances, whichever is the later.
Solution 6 (Europe) reserves the right to make such changes to the above conditions as may be
appropriate in the event that the conditions of the Share Offer are required to be amended to comply
with Rule 9 of the City Code.
The Cash Alternative is conditional on the Share Offer becoming or being declared unconditional in all
respects.
2. Condition of the Warrant Offer
The Warrant Offer is conditional on the Share Offer becoming or being declared
unconditional in all respects. The Warrant Offer will lapse if the Share Offer
lapses or expires.
APPENDIX II
Results forecast for the year ending 31 March 2002
1. Forecast of results
The Keystone Directors forecast that, in the absence of unforeseen circumstances
and on the bases of preparation and principal assumptions set out in paragraph 2
below, the Keystone Group will report a consolidated loss before taxation and
exceptional operating items for the year ending 31 March 2002 in excess of £4.2
million. This includes a £280,000 charge for amortisation of goodwill.
2. Bases of preparation and principal assumptions
(a) The forecast of consolidated loss before taxation for the year
ending 31 March 2002 has been prepared using the accounting policies adopted by
the Keystone Group in its audited consolidated financial statements for the year
ended 31 March 2001. The forecast is based on the unaudited interim results for
the six months ended 30 September 2001, the unaudited management accounts of the
Keystone Group for the five months ended 28 February 2002 and a forecast,
prepared by the Keystone Directors, for the month ending 31 March 2002.
No account has been taken of the expenses to be incurred in relation to the
Offers.
(b) The principal assumptions for factors exclusively outside the
influence or control of the Keystone Directors upon which the forecast is based
are:
• exchange rates have been assumed to remain constant at the
following rates:
US$1.4185 / £1;
A$2.7263 /£1; and
NZ$3.3298 / £1
(c) The principal assumptions for factors for which the Keystone
Directors are responsible upon which the forecast is based are:
• no significant new licence contracts are signed between 15
March 2002 and 31 March 2002, and therefore no revenue has been recognised from
such contracts;
• no additional write off will be required in relation to
goodwill, which is being amortised on a straight-line basis over 20 years. The
value of goodwill at 31 March 2001 was approximately £5.1 million; and
• there will be no resolution of outstanding claims and disputes
with existing customers that will result in any material charge or credit to the
profit and loss account for the year ending 31 March 2002.
3. Letters
The Keystone Directors, who are solely responsible for the results forecast,
have received the following letters in connection therewith:
The Directors
Keystone Solutions Group PLC
4th Floor
21-26 Garlick Hill
London
EC4V 2AU
The Directors
Investec Henderson Crosthwaite
2 Gresham Street
London
EC2V 7QP
18 March 2002
Dear Sirs
Keystone Solutions Group PLC
We have reviewed the accounting policies and calculations used in preparing the
results forecast for Keystone Solutions Group PLC ("Keystone" or the "Company")
and its subsidiaries (together the "Keystone Group") for the year ending 31
March 2002 (the "results forecast"), for which the directors of Keystone are
solely responsible, set out in Appendix II to the announcement of the offers
issued by Andersen Corporate Finance on behalf of Solution 6 (Europe) Limited
dated 18 March 2002 (the "Announcement"). The forecast is based on the unaudited
interim results for the six months ended 30 September 2001, the unaudited
management accounts of the Keystone Group for the five months ended 28 February
2002 and a forecast for the month ending 31 March 2002.
We conducted our work in accordance with the Statements of Investment Circular
Reporting Standards issued by the Auditing Practices Board in the United
Kingdom.
In our opinion, the results forecast, so far as the accounting policies and
calculations are concerned, have been properly compiled on the bases and
assumptions adopted by the directors of the Company set out in Appendix II to
the Announcement and have been prepared on a basis consistent with the
accounting policies normally adopted by the Keystone Group.
Yours faithfully
Horwath Clark Whitehill
The Directors
Keystone Solutions Group PLC
4th Floor
21-26 Garlick Hill
London
EC4V 2AU
18 March 2002
Dear Sirs
Keystone Solutions Group PLC (the "Keystone Group")
We refer to the forecast of consolidated loss before taxation of the Keystone
Group for the year ending 31 March 2002 (the "results forecast"), set out in
Appendix II to the announcement dated 18 March 2002 issued in relation to the
offers by Andersen Corporate Finance on behalf of Solution 6 (Europe) Limited
(the "Announcement"). Terms used in this letter have the same meanings as in
the Announcement.
We have discussed the results forecast, together with the basis and assumptions
on which it is made, with you and Horwath Clark Whitehill. We have also
considered the letter from Horwath Clark Whitehill dated 18 March 2002 addressed
to you and us regarding the accounting policies and calculations on which the
results forecast is based.
On the basis of these discussions and, having regard to the letter from Horwath
Clark Whitehill, we consider that the results forecast, for which you as
directors of the Keystone Group are solely responsible, has been made with due
care and consideration.
Yours faithfully
James Grace
Managing Director of Corporate Finance
For and on behalf of
Investec Henderson Crosthwaite
APPENDIX III
DEFINITIONS
The following definitions apply throughout this announcement, unless the context
requires otherwise:
"Act" Companies Act 1985, as amended
"Additional Placing Shares" 10.5 million new ordinary shares in the capital of Solution 6 to be
issued to certain placees under the terms of an option exercisable by
Solution 6 pursuant to the private placing announced by Solution 6 on 1
March 2002
"Australian dollar" or "A$" the lawful currency of Australia
"Australian Stock Exchange" Australian Stock Exchange Limited
"Cash Alternative" the alternative under which the Keystone Shareholders who validly accept
the Share Offer may elect to receive cash in respect of all of their
holdings of Keystone Shares and thus to receive 10p for each Keystone
Share instead of the New Solution 6 Shares to which they would otherwise
be entitled under the basic terms of the Share Offer
"cents" Australian cents
"City Code" the City Code on Takeovers and Mergers
"Closing Price" in relation to the Keystone Shares and the Keystone Warrants, the closing
middle-market quotation of a Keystone Share or Keystone Warrant, as
derived from the Official List and in relation to the Solution 6 Shares,
the closing middle-market quotation of a Solution 6 Share as shown in the
Australian Financial Review
"EBITDA" earnings before interest, taxation, depreciation and amortisation
"Enlarged Group" the Solution 6 Group as enlarged by the acquisition of the Keystone Group
"First Closing Date" the first closing date of the Offers
"Forms of Acceptance" the forms of acceptance, election and authority for use in connection
with the Offers
"Illustrative Exchange Rate" A$ 2.717:£1, being the mid-point of the closing bid-ask of the Australian
dollar to Sterling spot exchange rate at the close of business on 14
March, the last practicable business day prior to this announcement, as
shown in the London edition of the Financial Times on 15 March
"Investec Henderson Crosthwaite" Investec Henderson Crosthwaite, a division of Investec Bank (UK) Limited
"Keystone" Keystone Solutions Group PLC
"Keystone Directors" the directors of Keystone
"Keystone Group" Keystone and its subsidiary undertakings
"Keystone Share Options" options to subscribe for Keystone Shares under the Keystone Share Option
Schemes
"Keystone Share Option Holders" holders of options to subscribe for Keystone Shares under the Keystone
Share Option Schemes
"Keystone Share Option Schemes" the 1997 Executive Share Option Scheme, the 1999 Executive Share Option
Scheme and the 2000 Executive Share Option Scheme
"Keystone Shareholders" holders of Keystone Shares
"Keystone Shares" the existing unconditionally allotted or issued and fully paid ordinary
shares of 5p each in Keystone and any further such shares which are
unconditionally allotted or issued and fully paid or credited as fully
paid whilst the Share Offer remains open for acceptance (or by such
earlier date or dates as Solution 6 may, subject to the City Code or with
the Panel's consent, determine) including shares unconditionally allotted
or issued pursuant to the exercise of options under the Keystone Share
Option Schemes or pursuant to the subscription for shares arising from
the Keystone Warrants
"Keystone Warrantholders" holders of Keystone Warrants
"Keystone Warrants" the existing warrants in Keystone Shares, giving the holder the right to
subscribe for a Keystone Share at 50p per share
"London Stock Exchange" London Stock Exchange plc
"New Solution 6 Shares" the new ordinary shares in the capital of Solution 6 to be issued to
Keystone Shareholders pursuant to the Share Offer
"Offers" the Share Offer including the Cash Alternative and the Warrant Offer
"Offer Document" the offer document to be sent to Keystone Shareholders and Keystone
Warrantholders which contains details of the Offers
"Offer Period" the period commencing on 8 March 2002, being the date of the announcement
by the board of Keystone that it was in talks that might lead to an offer
and ending on the date when Solution 6 announces that the Offers have
lapsed, or that the Offers have been declared unconditional in all
respects
"Official List" the London Stock Exchange Daily Official List setting out the daily
record of prices of all trades in securities on that exchange
"Overseas Shareholders" Keystone Shareholders resident outside the United Kingdom
"p" UK pence
"Panel" the Panel on Takeovers and Mergers
"Share Offer" the recommended offer to be made by Andersen Corporate Finance on behalf
of Solution 6 (Europe) to acquire all of the issued and to be issued
Keystone Shares on the terms and conditions set out in this announcement
and the Offer Document and the relevant Form of Acceptance and, where the
context permits, any subsequent revision or variation of such offer or
any extension or renewal thereof
"Solution 6" Solution 6 Holdings Limited
"Solution 6 (Europe) " Solution 6 (Europe) Limited
"Solution 6 (Europe) Group" Solution 6 (Europe) and its subsidiary undertakings
"Solution 6 Group" Solution 6 and its subsidiary undertakings
"Solution 6 Shares" the existing Solution 6 ordinary shares
"UK Listing Authority" the Financial Services Authority acting in its capacity as the competent
authority for the purposes of Part VI of the Financial Services and
Markets Act 2000
"United Kingdom" or "UK" the United Kingdom of Great Britain and Northern Ireland
"United States" or "US" the United States of America, its territories and possessions, any state
of the United States of America and the District of Columbia and any area
subject to its jurisdictions and any political sub-division thereof
"Warrant Offer" the recommended offer to be made by Andersen Corporate Finance on behalf
of Solution 6 (Europe) to acquire all the Keystone Warrants on the
condition set out in this announcement and the Offer Document and the
relevant Form of Acceptance and, where the context permits, any
subsequent revision or variation of such offer or any extension or
renewal thereof.
All references to times and dates in this announcement shall be deemed to be
London times and dates.
This information is provided by RNS
The company news service from the London Stock Exchange
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