Cancellation of admission to trading on AIM

 

TIDMPYN 
 
RNS Number : 2402W 
Phynova Group PLC 
24 July 2009 
 

24 July 2009 
 
 
 
 
Phynova Group PLC 
("Phynova" or the "Company") 
 
 
Proposed cancellation of admission to trading on AIM 
 
 
The Company announces that following an approach by a number of major 
shareholders (including shareholders who subscribed for a total of 4,755,000 new 
Ordinary Shares, representing 53 per cent. of the new ordinary shares issued in 
our recent Placing), the Directors have considered the merits of maintaining the 
Company's listing on AIM set against the costs of maintaining it. 
 
 
Under the AIM Rules, it is a requirement that cancellation of admission to 
trading on AIM must be approved by not less than 75 per cent. of shareholders 
voting in general meeting. Accordingly, the notice of General Meeting set out in 
the circular to shareholders which will be posted today contains a special 
resolution to approve the application to the London Stock Exchange for 
cancellation of admission of the Company's shares to AIM. If the resolution is 
approved, it is expected that Cancellation will take effect on 18 August 2008, 
being five business days following the date of the GM. 
 
 
Reasons for the Proposals 
The primary purpose of being listed on a public market is to provide a market in 
a company's shares and gain access to capital. If these objectives cannot be 
achieved efficiently and cost effectively, the Board has a duty to reconsider 
the benefits of a listing. For some time there has been very little liquidity in 
our shares and, as a result, when even very small numbers of shares have been 
sold, the company's share price has declined significantly. As a result, it is 
difficult for shareholders to sell shares at a reasonable price and in 
reasonable size. This problem is not confined to Phynova. Many other small 
companies suffer from a lack of liquidity in their shares and a consequential 
adverse impact on their share prices. A total of 57 companies have sought to 
delist from AIM so far this year. 
 
 
We calculate the direct and indirect costs of staying on AIM and remaining as a 
PLC to be in excess of GBP200,000 per annum. This estimate takes no account of 
the considerable senior executive time which is spent dealing with issues 
related to our listing on AIM. In the current financial climate the Board's 
strategy is to pursue a number of business development opportunities which have 
good prospects of delivering revenue in the short term. In order to achieve this 
objective we are having to husband very carefully our existing cash resources 
and have concluded that the benefits of maintaining our listing on AIM do not 
justify the costs. 
 
 
We also believe that it will be easier and less expensive to raise money as a 
private company. Taking the Company private has no adverse consequences on our 
EIS status. The proposed new articles of association for the Company, a copy of 
which has been sent to Shareholders with the notice of general meeting, contain 
provisions relating to share transactions which are similar to those of a public 
company. 
 
 
We believe that the current stock market valuation does not fairly reflect 
Phynova's inherent value and that as a private company we would be able to 
achieve a more realistic valuation in any M&A transaction. We also believe that 
as a private company it would be easier and less costly to consummate M&A 
transactions. 
 
 
Trading Update 
In the statement accompanying the Company's placing and debt capitalisation 
announced on 1 May 2009, the Company stated that, having regard to discussions 
with potential licensees and development partners, the Group would have 
sufficient working capital for its present and reasonably foreseeable future 
requirements for at least six months following the completion of the placing. 
 
 
Trading since that date has been difficult, particularly in light of the current 
financial conditions and although some progress has been made with progressing 
the Company's commercial interest in its pipeline, no agreements have been 
concluded. 
 
 
Since the discussions referred to have yet to produce any tangible income, the 
Company's cash position is lower than that forecast in May, with the result that 
in the absence of signing an agreement or raising additional funds the Company 
now only has enough cash to continue to trade for approximately one to two 
months. 
 
 
Post Cancellation 
Two of our major shareholders holding in aggregate 22.1 per cent. of the 
Company's share capital have written to the directors stating their willingness 
to provide further investment for the Company following Cancellation and the 
expeditious implementation of the corporate governance safeguards referred to 
below. Such additional funding will enhance our prospects of delivering revenues 
in the short term. Any offers of new ordinary shares in the capital of the 
Company made to these shareholders (or any other shareholders) will be made 
available to all shareholders on a pro rata basis. 
 
 
Shareholders should note that following the proposed Cancellation there will be 
no market on which they can trade their Shares. However, in order to facilitate 
shareholders who wish to buy or sell shares in the Company, the Board will 
investigate the setting up of either our own arrangements to facilitate the 
purchase and sale of shares or employing the services of a third party matched 
bargain trading facility. 
 
 
Following the proposed Cancellation, the Company will continue to hold Annual 
General Meetings, to supply shareholders with copies of the Annual Report and 
Accounts, to maintain good standards of corporate governance, including the 
appointment of an independent non-executive director, to retain similar 
provisions in the Company's articles of association as those of a public company 
regarding share transactions and will generally keep shareholders informed of 
major developments in the business, which the Company intends to do by 
posting significant business announcements on its web site. The Company would 
also be subject to the City Code on Takeovers and Mergers for at least ten years 
following the date of Cancellation. 
 
 
As previously announced we have appointed advisers to consider possible merger 
and acquisition opportunities which would be complementary with our strategy and 
which would give us greater critical mass. If these transactions are successful 
and the enlarged entity achieves its objectives, we would consider seeking a 
listing on a public market appropriate to the size and business base of the 
company at that time. 
 
 
For further information, please contact: 
 
 
+--------------------------------------------+----------------------------+ 
| Phynova Group PLC                          |        [phone] | 
+--------------------------------------------+----------------------------+ 
| Steve Harris (Non-Executive Chairman)      |                            | 
+--------------------------------------------+----------------------------+ 
| Robert Miller (Chief Executive Officer)    |                            | 
+--------------------------------------------+----------------------------+ 
|                                            |                            | 
+--------------------------------------------+----------------------------+ 
| Nominated Adviser and Broker:              |                            | 
+--------------------------------------------+----------------------------+ 
| John East & Partners Limited               |       [phone] | 
+--------------------------------------------+----------------------------+ 
| John East/Simon Clements                   |                            | 
+--------------------------------------------+----------------------------+ 
|                                            |                            | 
+--------------------------------------------+----------------------------+ 
 
 
Notes to Editors: 
 
 
About Phynova 
Phynova is a UK company developing new prescription pharmaceuticals derived from 
plants used in Chinese medicines. The Company is focused on viral and bacterial 
diseases, metabolic diseases and cancer. Phynova's lead product for hepatitis C 
has now completed a Phase I/II trial in the US. One further product, for 
post-operative ileus, is targeted for entry to the clinic and there are a 
further four products in preclinical development. 
 
 
For further information please visit www.phynova.com. 
 
 
+-------------------+-------------------------------------------------------------+ 
|                                  Definitions                                    | 
|                                                                                 | 
+---------------------------------------------------------------------------------+ 
| "Admission"       | admission of the Ordinary Shares to trading on AIM in       | 
|                   | accordance with the AIM Rules                               | 
|                   |                                                             | 
+-------------------+-------------------------------------------------------------+ 
| "AIM"             | the market of that name operated by London Stock Exchange   | 
|                   | plc                                                         | 
|                   |                                                             | 
+-------------------+-------------------------------------------------------------+ 
| "AIM Rules"       | the rules published by London Stock Exchange plc from time  | 
|                   | to time governing admission to and the operation of AIM     | 
|                   |                                                             | 
+-------------------+-------------------------------------------------------------+ 
| "Directors" or    | the directors of the Company                                | 
| "Board"           |                                                             | 
+-------------------+-------------------------------------------------------------+ 
| "Cancellation"    | cancellation of admission of the Company's shares to        | 
|                   | trading on AIM becoming effective in accordance with Rule   | 
|                   | 41 of the AIM Rules                                         | 
|                   |                                                             | 
+-------------------+-------------------------------------------------------------+ 
| "General Meeting" | the general meeting of the Company to be held on 10 August  | 
|                   | 2009                                                        | 
|                   |                                                             | 
+-------------------+-------------------------------------------------------------+ 
| "Notice of        | the notice convening the meeting set out at the end of the  | 
| General Meeting"  | circular to Shareholders dated 24 July 2009                 | 
|                   |                                                             | 
+-------------------+-------------------------------------------------------------+ 
| "Ordinary Shares" | the ordinary shares of 1 pence each in the share capital of | 
|                   | the Company                                                 | 
|                   |                                                             | 
+-------------------+-------------------------------------------------------------+ 
| "Proposals"       | together the proposed cancellation of Admission and the     | 
|                   | Re-registration                                             | 
|                   |                                                             | 
+-------------------+-------------------------------------------------------------+ 
| "Re-registration" | the proposed re-registration of the Company as a private    | 
|                   | company limited by shares in accordance with the provisions | 
|                   | of section 53 of the Companies Act 1985                     | 
|                   |                                                             | 
+-------------------+-------------------------------------------------------------+ 
| "Resolution"      | the special resolution set out in the Notice of General     | 
|                   | Meeting                                                     | 
|                   |                                                             | 
+-------------------+-------------------------------------------------------------+ 
| "Shareholder"     | a shareholder in the capital of the Company                 | 
|                   |                                                             | 
+-------------------+-------------------------------------------------------------+ 
 
 
 
 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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