Zamano PLC Disposal Announcement (8406N)

TIDMZMNO

RNS Number : 8406N

Zamano PLC

11 August 2017

This announcement contains inside information

zamano plc

("zamano" or the "Company")

Disposal of All of the Company's Operating Business and Assets

zamano announces that, further to the announcement on 9 August 2017, it has entered into a conditional sale and purchase agreement (the "SPA") to sell all of the Company's operating business and assets to Kilavan Holdings Limited (the "Purchaser" or "Kilavan") (the "Disposal").

On 3 February 2017 the Company announced its intention to wind down the existing business lines in order to protect the cash position on the balance sheet. The board of zamano ("Board") has considered its options for effecting this course of action in a manner that maximises the cash available for distribution to shareholders. The Board concluded that the wind down would most effectively be completed by a sale of the Company's remaining operating business and assets comprising its premium rate SMS ("PRSMS") business. Accordingly, having conducted discussions with several parties, the Company has entered into the SPA with Kilavan, a company formed by the existing management team of this business.

Under the terms of the SPA, zamano is proposing to sell the entire issued share capital of its wholly-owned subsidiaries which operate the PRSMS business, zamano Solutions Limited and zamano Limited (the "Target Companies"), to Kilavan for a total consideration of EUR1 on a debt-free / cash-free basis (agreed between the parties as being the net amount of cash, debt, debtors and creditors of the Target Companies) (the "Consideration"). Based on an effective date of 30 June 2017, the amount of cash which would have to remain in the Target Companies for this purpose is EUR982,000. This represents the amount by which the Target Companies current liabilities exceeded their current assets at that date and such amount would be retained by the Target Companies to pay those excess liabilities in all sale or wind-down scenarios.

Pursuant to the terms of the SPA, zamano is making a pre-completion contribution to the Target Companies of EUR555,000. This amount is primarily provided in respect of known and unknown liabilities that may arise after completion of the Disposal which may have otherwise been protected through post-completion warranty and indemnity protection.

Following completion of the Disposal, zamano will retain cash of approximately EUR5,582,000 out of which it shall discharge existing Plc liabilities and transaction expenses related to the Disposal of approximately EUR282,000 and will have no other significant assets or liabilities. Following completion of the Disposal, the Board will commence the process required for the company to be in a position to make a return of cash to shareholders. Such process is expected to take up to six months. During this time, the Board considers it is in Shareholders' interest to continue to examine possible investment opportunities whilst this process is ongoing. The Board confirms that any material or significant investment opportunity will be conditional on Shareholder approval being obtained.

The Disposal constitutes a disposal resulting in a fundamental change in business of zamano pursuant to Rule 15 of the AIM Rules and the ESM Rules and requires the approval of the Company's shareholders ("Shareholders"). Contingent on the approval of the Disposal by Shareholders, the Company will become an AIM Rule 15 cash shell pursuant to the AIM Rules and an investing company pursuant to the ESM Rules. Accordingly, the Company will have a period of six and twelve months under the AIM Rules and the ESM Rules, respectively, to complete a reverse takeover before trading in its shares will be automatically suspended by the relevant exchange. The Company will also seek Shareholder approval for its investing policy. A circular, which will contain further details of the Disposal and the investing policy (the "Circular") is expected to be posted to Shareholders shortly and will also be available on the Company's website at www.zamano.com.

Kilavan is a newly incorporated company owned by the existing management team of the Target Companies (Brian Gilsenan and Michael Connolly). As Mr Gilsenan is a director of zamano Solutions Limited and Mr Connolly is a director of both Target Companies, the Disposal also constitutes a related party transaction pursuant to Rule 13 of the AIM Rules and ESM Rules and the Directors consider, having consulted with the Company's nominated adviser and ESM advisor, that the terms of the transaction are fair and reasonable insofar as its Shareholders are concerned.

The Company's three largest shareholders comprising Pageant Holdings Limited (holding 19,747,442 ordinary shares), The Ulster Bank Diageo Venture Fund Limited Partnership (holding 13,888,889 ordinary shares) and Grillon Investments (holding 9,085,928 ordinary shares) have each undertaken to vote in favour of the Resolutions to be proposed at the extraordinary general meeting (the "EGM"). In aggregate, these shareholdings represent approximately 43 per cent of the existing issued share capital of zamano.

Notice of the EGM to approve the Disposal and the investing policy will be included in the Circular that will shortly be posted to shareholders and it is expected to be held at the Conrad Hotel, Earlsfort Terrace, Dublin 2 on 30 August 2017.

Summary of the proposals:

-- zamano to dispose of all of the Company's business operations and assets for a total consideration of EUR1. Based on an effective date of 30 June 2017, the amount of cash which would have to remain in the Target Companies for this purpose is EUR982,000. This represents the amount by which the Target Companies current liabilities exceeded their current assets at that date and such amount would be retained by the Target Companies to pay those excess liabilities in all sale or wind-down scenarios.

-- Pursuant to the terms of the SPA, zamano is making a pre-completion contribution to the Target Companies of EUR555,000. This amount is primarily provided in respect of known and unknown liabilities that may arise after completion which may have otherwise been protected through post completion warranty and indemnity protection.

-- Upon completion of the Disposal, zamano will retain cash of approximately EUR5,582,000 out of which it will discharge existing Plc liabilities and transaction expenses related to the Disposal of approximately EUR282,000 and will have no other significant assets or liabilities.

-- All of the operating business of the Company is within the Target Companies. Accordingly, the Target Companies generated a pre-tax loss for the 12 months to 31 December 2016 of EUR5.2 million.

-- Following completion of the Disposal, the Board will commence the process required for the company to be in a position to make a return of cash to shareholders and / or continue to examine possible investment opportunities. Such process is expected to take up to six months.

-- Whilst this process is ongoing, zamano will be classified as an AIM Rule 15 cash shell under the AIM Rules and an investing company under the ESM Rules with a new investing policy implemented for the purpose of reviewing potential investment opportunities that may arise.

-- Investing policy will have a focus on target companies with either strong existing profitability or significant growth potential, operating in both cases in attractive underlying markets.

Commenting on the Disposal, Colin Tucker, Interim Chairman said:

"The Board has worked hard to achieve the Disposal and carefully compared and considered the merits of the Disposal against all alternatives that were available to the Company and is satisfied, based on its analysis of all such alternatives, that the Disposal provides the Company with the most appropriate option in terms of (1) maximising the amount of cash that will be available for distribution to shareholders or reinvestment; (2) minimising the remaining contingent liabilities of the Group and the risk that the remaining cash will not be available for shareholders; (3) providing the highest level of certainty regarding completion and costs; and (4) achieving the highest level of simplification of the remaining group structure. We believe the Disposal is the most favourable outcome for our shareholders at this time."

Background to and reasons for the Disposal

Regulatory Environment

For some time, the regulatory environment for zamano's core business has posed an increasing challenge to the Company's operations. PayForIt, a UK mobile network operators joint initiative to further regulate mobile payments was implemented by all major UK mobile network operators on 1 November 2016 and has had a significant adverse impact on all of zamano's UK business lines. The Company has experienced a significant reduction in new business in the UK market as a direct result of this change and operations in that market are in the process of being discontinued and realising the remaining revenue from existing clients. Furthermore, actions by certain mobile network operators in Ireland in 2017 have also further significantly impacted the Group's business in Ireland.

Following the implementation of PayForIt in November 2016 the Group has taken steps to reduce the cost base of the business. This included the implementation of a redundancy programme across all divisions (reducing payroll and related costs by approximately EUR330,000 on an annualised basis) as well as a number of other cost saving measures including reducing the number of Directors and streamlining I.T. and customer service costs.

Whilst these actions achieved material cost reductions it became clear to the Board during early 2017 that the impact of the regulatory changes across zamano's business lines will prevent the Group from maintaining a cashflow positive trading position going forward. In light of this, the Board took the decision in early February 2017 to formally wind down the existing business lines in order to protect the cash position on the balance sheet.

Alternative Exit Considerations

In assessing the merits of the Disposal, the Board has considered its options for effecting the wind down in a manner that maximises the cash available for distribution to shareholders following the wind down. This included a full orderly wind-down and termination of the current activities overseen by the Company itself as well as a small number of approaches from third parties that expressed an interest in acquiring the Target Business.

The Board has carefully compared and considered the merits of the Disposal against these alternatives and has formed the view, based on its analysis of all the available alternatives, that the Disposal provides the Company with the most appropriate option in terms of (1) maximising the amount of cash that will be available for distribution to shareholders or reinvestment; (2) minimising the remaining contingent liabilities of the Group and the risk that the remaining cash will not be available for shareholders; (3) providing the highest level of certainty regarding completion and costs; and (4) achieving the highest level of simplification of the remaining group structure.

In the event that the Disposal is not approved by shareholders or does not complete for some other reason, the Board's intention will be to proceed immediately to progress the wind down of all existing business operations.

Details of the Disposal

If approved, the Disposal will be effected in accordance with the terms of the SPA. Pursuant to the SPA, zamano is proposing to sell the entire issued share capital of the Target Companies to Kilavan for a total consideration of EUR1 on a debt-free / cash-free basis (agreed between the parties as being the net amount of cash, debt, debtors and creditors of the Target). Based on an effective date of 30 June 2017, the amount of cash which would have to remain in the Company for this purpose is EUR982,000. This represents the amount by which the Target Companies current liabilities exceed their current assets and such amount is required to be retained by the Target Companies to pay those excess liabilities in all sale or wind-down scenarios.

Pursuant to the terms of the SPA, zamano is making a pre-completion contribution to the Target Companies of EUR555,000. This amount is primarily provided in respect of known and unknown liabilities that may arise after completion which may have otherwise been protected through post completion warranty and indemnity protection. Such liabilities would include regulatory, employment and any other commercial issues that may arise. The warranties of zamano (as Seller) that remain in the SPA are limited to fundamental warranties such as title to shares of the Target Companies being sold and the capacity of zamano to enter this transaction.

Upon completion of the disposal, zamano will retain cash of approximately EUR5,582,000 out of which it will discharge existing Plc liabilities and transaction expenses related to the Disposal of approximately EUR282,000 and will have no other significant assets or liabilities.

Completion of the Disposal is conditional, inter alia, on approval of the Disposal by Shareholders and completion of certain inter-group distributions and contributions necessary for the purpose of the disposal.

Future Strategy and Investing Policy

Following the Disposal, it is estimated that zamano's net cash position will be approximately EUR5,582,000, which will be used in part to discharge zamano's existing Plc liabilities and transaction costs related to the Disposal of approximately EUR282,000. Following the discharge of such liabilities and transaction expenses related to the Disposal, it is expected that zamano will retain approximately EUR5,300,000 of cash, and will have no other significant assets or liabilities.

Following completion of the Disposal, the Board will commence the process required for the company to be in a position to make a return of cash to shareholders. Such process is expected to take up to six months. During that time, the Board considers it is in Shareholders' interest to continue to examine possible investment opportunities whilst this process is ongoing. The Board confirms that any material or significant investment opportunity will be conditional on Shareholder approval in due course.

Following the Disposal, the Company will be classified as an AIM Rule 15 cash shell company under the AIM Rules and an investing company under the ESM Rules. Details of the Company's proposed investing policy going forward will be set out in Section 8 of the Circular, which is also subject to Shareholder approval. The investing policy will have a focus on opportunities with either strong existing profitability or significant growth potential, in both cases in attractive underlying markets.

Recommendation

The Directors consider the passing of the Resolutions to be proposed at the EGM to be in the best interests of zamano and its Shareholders as a whole and, accordingly unanimously recommend that Shareholders vote in favour of the Resolutions. Furthermore, Pageant Holdings Limited, The Ulster Bank Diageo Venture Fund Limited Partnership and Grillon Investments, the largest shareholders of the Company, support the Directors view and, accordingly, have undertaken to vote in favour of the Disposal in respect of their aggregate shareholdings of 42,722,259 Ordinary Shares representing approximately 43 per cent of the issued share capital of zamano.

 
 zamano plc 
 Colin Tucker, Interim        Tel: + 353 1 488 5820 
  Chairman 
 
 Investec Corporate Finance 
 Shane Lawlor/Ian McGreal     Tel: + 353 1 421 0000 
 
 Cenkos Securities 
 Derrick Lee/Neil McDonald    Tel: + 44 (0) 131 220 
                               6939 
 
 
 MCOMM Communications Consultants 
 Richard Moore                      Tel: [phone] 
                                     Mob: [phone] 
 

This information is provided by RNS

The company news service from the London Stock Exchange

END

DOCUAUNRBOAWAAR

(END) Dow Jones Newswires

August 11, 2017 12:27 ET (16:27 GMT)