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Share Name | Share Symbol | Market | Type |
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Infineon Technologies AG | TG:IFX | Tradegate | Ordinary Share |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.38 | 1.25% | 30.855 | 30.78 | 30.925 | 31.165 | 30.25 | 30.645 | 157,212 | 22:50:02 |
RNS Number:4103U Inflexion PLC 20 January 2004 Inflexion plc Acquisition of investment portfolio and fund raising Summary of the acquisition and fund raising The Company announces proposals which will result in a significant increase in the Company's net asset value from approximately #13.4 million to approximately #45.8 million through the acquisition of an investment portfolio from London Merchant Securities plc ("LMS"), together with a fundraising. The proposals in summary involve: * The acquisition from LMS of a portfolio of minority interests in companies listed on the Official List or traded on AIM together with certain gilts for an aggregate consideration of #12 million to be satisfied by the issue of new ordinary shares. * A minimum #21 million fundraising including: - An open offer of up to #10 million of which #6 million will be subscribed by LMS - A deferred cash raising to which LMS has committed to pay a further #15 million. * LMS, a member of the FTSE 250, is a leading property and venture and development capital company with assets valued at over #1 billion. Following the transaction LMS will hold a minimum of 53.7 per cent. of Inflexion and Robert Rayne and Martin Pexton will join the Board as additional non- executive directors. A relationship agreement will ensure the independence of the activities of Inflexion. * The proposed appointment of Cazenove as broker to Inflexion following the transaction. The directors and the proposed directors believe that the proposals will enable the development of a more efficient and better capitalised company, well positioned to build the business based on mid market private equity investment. The transaction is subject to shareholder approval. Commenting on the announcement: Simon Turner, Joint Chief Executive of Inflexion plc, said: "The last twelve months have been successful for Inflexion - funds under management have grown substantially and we have continued to focus on mid-market private equity investments. This transaction, which includes a substantial capital injection from LMS, is a great endorsement of Inflexion's investment strategy and team. It is a step change for the business and will enable it to thrive with a larger capital base to call upon." Robert Rayne, Chief Executive of LMS, commented: "This is a good strategic step, which continues LMS's history of collaborative partnerships in the UK and US. The acquisition of a strategic interest in Inflexion presents LMS with a good opportunity for profitable future investment in mid-market buy-outs and development capital. We believe that Inflexion is a superb choice of partner - their strong development and buyout team are a natural complement to LMS's strong venture management." This summary should be read in conjunction with the accompanying full announcement. Enquiries Inflexion plc Simon Turner / John Hartz 020 7487 9888 London Merchant Securities plc Robert Rayne / Martin Pexton 020 7935 3555 Citigate Dewe Rogerson Simon Rigby / Sarah Gestetner / Freida Moore 020 7638 9571 Cazenove Michael Wentworth-Stanley / Angus Gordon Lennox 020 7588 2828 Grant Thornton Corporate Finance Philip Secrett 020 7383 5100 Copies of the document being dispatched to shareholders today will be available from the offices of Grant Thornton Corporate Finance, Grant Thornton House, Melton Street, Euston Square, London NW1 2EP. Grant Thornton Corporate Finance is authorised in the United Kingdom by the Financial Services Authority. Grant Thornton Corporate Finance is acting for Inflexion plc in connection with the Proposals and is not acting for any person other than Inflexion and will not be responsible to any person other than Inflexion for providing the protections afforded to its customers or for providing advice to any other person in connection with the Proposals. Cazenove is authorised in the UK by the Financial Services Authority and is acting for LMS in connection with the Proposals and is not acting for any person other than LMS and will not be responsible to any person other than LMS for providing the protections afforded to its customers or for providing advice to any other person in connection with the Proposals. Inflexion plc ("Inflexion" or the "Company") Acquisition of investment portfolio and fund raising 1. INTRODUCTION The Company announces proposals which will result in a significant increase in the Company's net asset value from approximately #13.4 million to approximately #45.8 million on a pro forma basis through the acquisition of an investment portfolio from the LMS Group, together with an Open Offer to Qualifying Shareholders, the subscription by LMS for Committed B Shares and a bonus issue of Bonus Shares. The Directors and the Proposed Directors believe that the Proposals will enable the development of a more efficient and better capitalised company, well positioned to build the business based on mid-market private equity investment. The Proposals in summary involve: * the acquisition from the LMS Group of a portfolio of minority interests in companies listed on the Official List or traded on AIM together with certain gilts for consideration of #12 million to be satisfied by the issue of 66,666,667 new Ordinary Shares at a price of 18 pence per share (plus deferred consideration as described at paragraph 4 below), which will result in the LMS Group holding 50.49 per cent. of the Company's enlarged issued share capital; * the grant by LMS to the Company of a right to sell a substantial part of the Portfolio back to LMS at any time up to 30 March 2005 at 80 per cent. of the original acquisition cost for the Company (such acquisition cost being approximately #7.8 million), providing the Company with considerable downside protection; * a cash fundraising of between #6.00 million (which the LMS Seller has undertaken to subscribe) and approximately #9.98 million (before expenses) by way of a non-underwritten open offer to all Qualifying Shareholders; * the subscription by LMS for the Committed B Shares for an aggregate of #15 million to be paid no later than 30 September 2009; * a bonus issue to all Shareholders of A Shares which entitle the holders to subscribe for Ordinary Shares; * a bonus issue to all Shareholders (other than members of the LMS Group) of Bonus B Shares entitling them to subscribe for Ordinary Shares on the same terms as the Committed B Shares; * the grant of a series of options to subscribe for Ordinary Shares in order to incentivise the managers of IML and the cancellation of existing warrants held by certain of such managers of IML; and * the appointment of Robert Rayne and Martin Pexton as additional non-executive directors of the Company, plus an intention to appoint an additional non-executive director within three months. Due to the size of the Acquisition relative to the Company, the transaction amounts to a reverse takeover within the meaning of the AIM Rules and, as required by those rules, is subject to the approval of Shareholders in general meeting. Shareholder approval will also be required, inter alia, to approve on a poll a waiver granted by the Panel of the requirement which would otherwise arise under Rule 9 of the City Code for certain members of the LMS Group to make an offer for the whole of the Company (as the Acquisition will result in the LMS Group holding more than 30 per cent. of the issued shares in the Company). In addition, Shareholder approval will be required to increase the Company's authorised share capital, authorise the Directors to allot the various shares described in the admission document, and amend the Company's articles of association. Notices convening two Extraordinary General Meetings of the Company are being sent to Shareholders today. 2. INFORMATION ON THE COMPANY Inflexion is an AIM traded investment company with a primary strategy of committing its capital alongside other institutional investors into private equity funds managed by the Company's investment manager IML. These funds have a focus on the acquisition of, or investment into, mid-sized unquoted companies. The Directors believe this market offers the potential for significant investment returns as in their view the opportunity exists to acquire profitable growing companies at attractive prices. Since the original placing and admission to AIM in 2000, the Company has developed its investment model from balance sheet investment to deploying capital principally alongside other investors through Inflexion managed funds. The rationale for this is to achieve greater diversity and access to more mature investments through committing the Company's capital alongside that of other investors. In addition, the management fees received from other investors contribute to the fixed costs of managing the private equity business. As part of this strategy, IML has been appointed as investment adviser to Guinness Flight Venture Capital Trust plc and has recently concluded a first closing for Fund 2, to which institutional investors, including the Company and the LMS Group, have committed capital. Notwithstanding these developments, the Company is small by quoted private equity investment vehicle standards. In the Directors' opinion this has a number of disadvantages including a relatively high expense ratio, a lack of liquidity in the shares and insufficient capital to take best advantage of the investment opportunities that are available to it. The Directors believe the Proposals will help address these issues. 3. REASONS FOR THE PROPOSALS AND USE OF PROCEEDS The key rationale for the Proposals is described below: * The Company's unaudited net asset value as at 30 September 2003 was approximately #13.4 million (net asset value per issued share of 20.6 pence). Following implementation of the Proposals and assuming the minimum subscriptions under the Open Offer and the Committed B Shares are made, the unaudited net asset value will increase to approximately #45.8 million (net asset value per issued share of 17.3 pence) on a pro forma basis. In the Directors' opinion, this increased scale will enable the Company to pursue a more cost effective and diversified investment programme. * Inflexion's existing asset base is relatively immature and in the Directors' opinion, offers limited possibility for near term realisations. As at 30 September 2003, approximately 90 per cent. of the Company's assets comprised cash substantially committed to Fund 2 and awaiting investment and early stage investments. Following implementation of the Proposals, approximately 26 per cent. of the Company's assets will comprise more mature investments. These should be realizable in the short to medium term, with limited downside due to the structure of the transaction. The Directors believe that this change to the maturity profile of the Company's asset base affords the opportunity of nearer term realisations and therefore greater potential for liquidity for future investments. * The Company's enlarged capital base will enable it to make a further commitment of capital to Fund 2 taking the Company's commitment up from #7.5 million to at least #20.0 million. Fund 2 focuses on buy-outs of mid-sized profitable businesses operating in growth markets. The Directors believe the opportunities in this market are now attractive following changes to the competitive landscape in the UK private equity industry and in particular the focus of many investors on larger buy-outs. Fund 2 concluded its first acquisition in July 2003, buying the multiplex cinema assets of Ster Century for #22 million. Ster Century is a profitable business, and achieved turnover of approximately #27 million for the year ended 30 June 2003. The Directors believe there are good opportunities to increase profits and sell Ster Century to an industry consolidator, and that this transaction exemplifies the investment approach of Fund 2. * It will remain a cornerstone of the Company's investment strategy to invest its capital through IML-managed funds, into which other investors may also invest. The cash proceeds of the Open Offer, the realisation of the Portfolio, the obligation of LMS to pay #15 million in cash in respect of the Committed B Shares prior to 30 September 2009 and any further cash subscription resulting from the exercise of the A Shares and Bonus B Shares will enable the Company to maintain that strategy. Once Fund 2 is substantially invested, Inflexion intends to commit to a third IML-managed fund. In addition to the primary strategy described above, the Company will from time to time consider co-investments as well as the opportunistic acquisition of other private equity assets. * Inflexion's ratio of operating expenses to net assets has historically been much higher than desirable. Given the increased scale of the business following implementation of the Proposals, this ratio is expected to fall substantially. * The implementation of the Proposals will make the Company of a size more consistent with its private equity peers and consequently the Directors and the Proposed Directors believe that the Company will be better able to encourage broader investor and analyst interest. In the medium term, when conditions are appropriate, the Company will consider seeking investment trust status and a transfer to the Official List. * LMS is already a limited partner in Fund 2 and has a long track record of investing capital with third party fund managers. The LMS Group is committed to venture and development capital as an asset class and has built a significant portfolio of direct investments. LMS has identified Inflexion as an emerging manager with growth potential in an area of the private equity market which complements its existing investments. Accordingly, the LMS Group is committing an aggregate of #33 million in assets and cash to the Company pursuant to the Proposals. 4. THE PROPOSALS Acquisition of the Portfolio It is proposed that the Company acquires the Portfolio from the LMS Seller for a consideration of #12 million, to be satisfied by the issue of 66,666,667 New Ordinary Shares at a price of 18 pence per New Ordinary Share plus any deferred consideration as described below. This base price of 18 pence per share represents a premium of approximately 27.7 per cent. to the three month daily average closing mid-market price of 14.1 pence calculated as at 19 January 2004, a premium of 20 per cent. to the closing mid-market price of 15.0 pence as at 19 January 2004 (being the last practicable date prior to the despatch of the admission document) and a discount of approximately 12.6 per cent. to the unaudited net asset value per Ordinary Share as at 30 September 2003, the date of the most recent interim report published by the Company. Under the terms of the Transaction Agreement, the Company may require LMS to buy back a substantial part of the Portfolio (being shares in Crown Sports plc, DMATEK Limited and NMT Group plc) for cash at 80 per cent. of the Company's original acquisition cost (such acquisition cost being approximately #7.8 million), at any time up to 30 March 2005. This provides the Company with considerable downside protection. The Company will pay the LMS Seller deferred consideration of an amount equal to 25 per cent. of aggregate gross cash profits (if any) realised by it on the sale of the same Portfolio shares Due to the size of the Acquisition relative to the Company, the transaction amounts to a reverse takeover within the meaning of the AIM Rules and, as required by those rules, is subject to the approval of Shareholders in general meeting. In addition, the Acquisition is conditional upon the passing of the resolutions necessary to effect the required increase in the Company's authorised share capital, to grant the Directors authority to allot the newly created shares and to approve the waiver granted by the Panel described further in paragraph 9 below. The Open Offer The Company is proposing to make an Open Offer to Qualifying Shareholders at a price of 15 pence per share, subject to the Acquisition having taken place, on the basis that each Qualifying Shareholder will be entitled to subscribe for: 3 new Ordinary Shares for every 5 Ordinary Shares held and so in proportion for any other number of Ordinary Shares held. Fractions of new Ordinary Shares will not be allotted and entitlements will be rounded up or down to the nearest whole number of new Ordinary Shares. The Open Offer has not been underwritten. As a result of the issue of the LMS Consideration Shares, the LMS Seller will be a Qualifying Shareholder at the time the Open Offer is proposed to be made and has agreed to take up its entitlement under the Open Offer in full representing an anticipated cash subscription of #6 million. Certain shareholders, being John Hartz, Simon Turner and the EBT have undertaken not to take up their entitlements under the Open Offer. Depending on the extent to which other Qualifying Shareholders take up their entitlements, the Open Offer will result in the issue of between 40,000,000 and 66,517,576 new Ordinary Shares and the raising of between #6,000,000 and #9,977,636 (before expenses). The pricing of the Open Offer is at a 6.4 per cent. premium to the three month daily average closing mid-market price of 14.1 pence calculated as at 19 January 2004 and is at the same price as the closing mid-market price of 15.0 pence as at 19 January 2004 (being the latest practicable date prior to the dispatch the admission document). The Open Offer is fully pre-emptive such that existing Qualifying Shareholders may subscribe for new Ordinary Shares pro rata to their existing holdings should they wish to do so. To the extent that Qualifying Shareholders do not apply for their respective pro rata entitlements under the Open Offer, the new Ordinary Shares not so applied for (the "excess shares") will be made available to other Qualifying Shareholders who apply for more than their respective pro rata entitlements provided that the maximum number of new Ordinary Shares issued pursuant to the Open Offer, plus any application for excess shares, will be 66,517,576. In the event there are more applications for excess shares than there are excess shares available, the available shares will be allocated pro rata to the applicants' existing shareholdings (up to a maximum of the amount of each such application) until the available shares are exhausted. The Open Offer is conditional on the passing of the resolutions numbered 1 and 2 in the notice of the First EGM and the completion of the Acquisition. Assuming these conditions are satisfied, it is anticipated that the Offer and Application Forms will be dispatched to Qualifying Shareholders on 9 February 2004. If the Conditions are not satisfied, the Open Offer will not be made. The Bonus Issue of Bonus Shares and the subscription by LMS for Committed B Shares Following completion of the Acquisition and the issue of New Ordinary Shares pursuant to the Open Offer, it is proposed that the Company will make a bonus issue of A Shares to each Qualifying Shareholder (including any members of the LMS Group) on the basis of one A Share for each five Ordinary Shares held by each such Qualifying Shareholder on the Bonus Issue Record Date. It is also proposed to issue Committed B Shares to LMS and, by way of bonus issue, Bonus B Shares to all Qualifying Shareholders other than members of the LMS Group. Where necessary, Qualifying Shareholders' entitlements will be rounded down to the nearest whole number of Bonus Shares and fractions will not be issued. A Shares Each A Share will entitle the holder to subscribe for one new Ordinary Share at a price of 18 pence in the 30 day period following publication of the Company's preliminary statement of results annually for each of the financial years up to and including the year ending 31 March 2009. The A Shares will be freely transferable and are expected to be admitted to trading on AIM on 12 March 2004. Committed B Shares As part of the Proposals, LMS has agreed to subscribe #15 million in cash for Ordinary Shares, at a price per Ordinary Share equal to 90 per cent. of the Company's then consolidated net asset value per issued Ordinary Share. These subscriptions will take place by no later than 30 September 2009 and only during the 30 day periods following the publication of the Company's preliminary statement of results for each of the financial years up to and including the year ending 31 March 2009. The consolidated net assets used to calculate the price per Ordinary Share will be as set out in those results (but excluding from such net asset value the value of LMS' commitment to pay the #15 million referred to above). This obligation will be effected by LMS subscribing for Committed B Shares as part of the Proposals which will be convertible into Ordinary Shares upon payment in the manner described above. The Committed B Shares will not be admitted to trading on AIM. Bonus B Shares The Board wishes to afford every Shareholder the opportunity to maintain their pro rata interest in the Company's ordinary share capital. Therefore, as a result of the subscription by LMS for the Committed B Shares, it is proposed that there will be a bonus issue of Bonus B Shares to all Qualifying Shareholders (other than members of the LMS Group) on the basis of 0.140625 Bonus B Shares for each Ordinary Share held by a Qualifying Shareholder. Each Bonus B Share will entitle (but not oblige) the holder to subscribe #1.00 for new Ordinary Shares in the 30 day period following publication of the Company's preliminary statement of results annually for each of the financial years up to and including the year ending 31 March 2009. Such amount of #1.00 will be applied in subscribing for new Ordinary Shares at a price per share equal to 90 per cent. of the Company's then consolidated net asset value per issued Ordinary Share as disclosed each year in such preliminary statement of results (excluding for these purposes the value of LMS' commitment to pay the #15 million referred to above). It is expected that the Company's preliminary statement of results will be published annually within 90 days of the relevant year end. The Bonus B Shares will be freely transferable and are expected to be admitted to trading on AIM on 12 March 2004. Issue of IML management options Consistent with incentive arrangements within many listed private equity investment vehicles, subject to completion of the Acquisition it is proposed to grant Simon Turner and John Hartz options on an annual basis to subscribe for Ordinary Shares. The first option shall be granted no more than 35 dealing days after the Company's preliminary announcement of results for the year ending 31 March 2004, and thereafter an option shall be granted each year up to and including 2008. Thereafter options may be granted in each subsequent year on the same basis at the discretion of the Remuneration Committee. Each option shall be over Ordinary Shares representing a value equal to their respective salaries in each year of grant. The exercise price will be derived from the average closing mid-market price of the Ordinary Shares. Each option is subject to performance criteria such that it is only exercisable if the average mid-market price of Ordinary Shares for the 30 dealing days commencing on and including the day following the Company's preliminary announcement of its results in the fifth year following the year in which the relevant option was granted, is such that the average compound growth in such price over the exercise price of the relevant option is no less than compound growth (over the same period) of the Retail Prices Index ("RPI") plus at least four per cent. per annum at which level the option will be exercisable as to 40 per cent. of the shares. An option will be exercisable in full if compound growth in the market price of Ordinary Shares equals or exceeds compound growth of RPI plus eight per cent. per annum. The option will become exercisable in increasing proportions on the achievement of compound growth targets between growth in RPI plus four per cent. and growth in RPI plus eight per cent. Simon Turner and John Hartz have entered into an agreement with the Company which, subject to the completion of the Acquisition, cancels their rights to subscribe in aggregate for 9 per cent. of the Company's issued ordinary share capital under the existing Warrant Agreements. 5. INVESTMENT STRATEGY AND DECISION MAKING The Company will continue to pursue a primary strategy of investing its capital into unquoted mid market buy-out and expansion opportunities. These will be accessed by way of investment through private equity funds managed by IML as well as by way of co-investment and other opportunities. Prior to the date of this announcement, Inflexion has committed #7.5 million to Fund 2. Assuming the successful implementation of the Proposals, the Directors and Proposed Directors propose an increase in that commitment to at least #20 million. It is expected that the Company will be a substantial cornerstone investor in future IML-managed investment funds. This is a model that has been followed by some of the most successful private equity investment trusts. In addition, the Company may, from time to time, co-invest alongside IML-managed funds, as well as opportunistic private equity investments outside the remit of IML-managed funds. The Directors believe that there are opportunities to acquire private equity assets or portfolios of assets at attractive prices, perhaps as a consequence of vendors' decisions to sell assets to meet a strategic or regulatory imperatives. IML will advise the Company's board on its activities and on capital allocation and will recommend investment opportunities to the board. The Directors and Proposed Directors will be responsible for capital allocation decisions, including the making of new commitments to investment funds. IML will continue to manage Inflexion Funds 1 and 2 and the Guinness Flight Venture Capital Trust plc under the existing management arrangements, and will report to the Company's board on its activities and on the performance of the IML-managed investment funds. 6. INFORMATION ON LMS LMS is a leading property and venture and development capital investment company quoted on the Official List and a member of the FTSE 250 and the FTSE Real Estate index. The LMS property portfolio had a book value of more than #800 million as at 30 September 2003 and contains a blend of offices, based largely in central London, and retail and leisure property across prime UK towns. The investment division had a book value of more than #180 million as at 30 September 2003 and comprises investments in both the US and UK, with a spread of private equity and venture investments. LMS had a net asset value of approximately #718.1 million as at 30 September 2003, the date of its latest interim report, and a market capitalisation of approximately #575.3 million, based on closing mid-market prices of 177.75 pence for the ordinary shares and 169.5 pence for the deferred ordinary shares as at 19 January 2004, being the latest practicable date prior to the despatch of the admission document. For the six months ended 30 September 2003, LMS reported unaudited profit before tax of #10.7 million. 7. CURRENT TRADING AND PROSPECTS The unaudited interim results of the Company for the six months ended 30 September 2003 were announced on 22 December 2003. A current priority is the sourcing and completion of investments of appropriate quality for Fund 2, which held a first closing in 2003. To date, Fund 2 has completed one buy-out, and IML is actively considering a pipeline of potential transactions, while building strong relationships with the intermediary community which is a major provider of deals. Fundraising for Fund 2 will continue until a final closing in 2004, and a number of major institutional investors are currently actively considering commitments and reviewing the opportunity. The management of the Company's relatively small existing portfolio continues, and there are positive early signs from the buy-out of Ster Century, the first investment by Fund 2. 8. DIRECTORS AND PROPOSED DIRECTORS On completion of the Acquisition, it is proposed that Robert Rayne and Martin Pexton join the Board as non-executive directors and that Darren Jordan will resign from the Board. Darren Jordan will remain as Company Secretary for Inflexion, will remain responsible for the finance function of the Group and remain the finance director of IML. The employment rights of existing management and employees will be safeguarded. Brief details of the Proposed Directors, are given below. Robert Anthony Rayne (aged 54) - Non-executive Director Robert Rayne is the Chief Executive of LMS where he has been a director since 1983. He has over 20 years' experience as a public company director and of investing in venture and development capital situations. He is a trustee of The Rayne Trust and The Rayne Foundation. He was a founder director of First Leisure plc and Chairman of Jazz FM plc and Cullens plc. Martin Andrew Pexton (aged 47) - Non-executive Director Martin Pexton joined LMS as Director of Corporate Development in April 2002. His core responsibilities entail a wide range of management functions, including strategy and organizational development, and providing support to companies in which LMS's investment division has invested. Prior to LMS he worked at Allen & Overy where he was the director responsible for human resources. Robert Rayne and Martin Pexton are to become non-executive directors of the Company following completion of the Acquisition under the terms of letters of appointment with the Company. Each is to receive an annual director's fee of #16,000 from the Company. These appointments are to be terminable on three months' notice from either party. It is intended that an additional non-executive director will be appointed within three months of completion of the Proposals. 9. THE CITY CODE ON TAKEOVERS AND MERGERS The terms of the Acquisition give rise to certain considerations under the City Code. Brief details of the Panel, the City Code and the protections they afford are described below. The City Code has not, and does not seek to have, the force of law. It has, however, been acknowledged by both government and other regulatory authorities that those who seek to take advantage of the facilities of the securities markets in the United Kingdom should conduct themselves in matters relating to takeovers and mergers in accordance with best business standards and so according to the City Code. The City Code is issued and administered by the Panel. The City Code applies to all takeover and merger transactions, however effected, where the offering company is, inter alia, a listed or unlisted public company resident in the United Kingdom (and to certain categories of private limited companies). Inflexion is such a company and its Shareholders are entitled to the protection afforded by the City Code. Under Rule 9 of the City Code, any person who acquires shares which, when taken together with shares already held by him or shares held or acquired by persons acting in concert with him, carry 30 per cent. or more of the voting rights of a company which is subject to the City Code is normally required to make a general offer to all the remaining shareholders to acquire their shares. An offer under Rule 9 must be in cash and at the highest price paid within the preceding 12 months for any shares in the company by the person required to make the offer or any person acting in concert with him. Following the issue of new Ordinary Shares by the Company to the LMS Seller in consideration of the sale to the Company of the Portfolio, the LMS Seller will hold 66,666,667 Ordinary Shares (representing 50.49 per cent. of the Company's then enlarged share capital) and following completion of the Open Offer it will hold 106,666,667 Ordinary Shares. If all Shareholders take up their entitlement under the Open Offer, excluding John Hartz, Simon Turner and the EBT (who have each agreed not to participate in the Open Offer) then the LMS Seller will hold approximately 53.7 per cent. of the Company's then enlarged ordinary share capital. If no Shareholder other than the LMS Seller takes up their entitlement under the Open Offer then the LMS Seller will hold a maximum of 62.0 per cent. of the Company's then enlarged ordinary share capital. Exercise of their rights under the A Shares and Committed B Shares will further increase the LMS Group's holding of Ordinary Shares in the Company. Whether the percentage interest increases, and if so to what extent, depends upon whether and at what subscription price other Shareholders exercise their rights under the A Shares and B Shares. However, if only LMS Group members exercise their rights under the A Shares and Committed B Shares, and assuming the worst case of a fall in net asset value per share to a minimal amount such that the Committed B Shares convert into Ordinary Shares at par value, then the LMS Group members could hold a maximum of 96.1 per cent. of the Company's then enlarged ordinary share capital. The Panel has agreed, however, to waive the obligation to make a general offer that would otherwise arise as a result of the completion of the Acquisition, the Open Offer and the exercise of rights under the A Shares and B Shares, subject to the approval of Shareholders. Accordingly, resolution numbered 1 is being proposed at the First EGM and will be taken on a poll. Shareholders should be aware that following the Acquisition and the Open Offer, the LMS Seller will hold more than 50 per cent. of the Company's enlarged share capital and members of the LMS Group may accordingly increase the aggregate shareholding of the LMS Group without incurring any obligation under Rule 9 of the City Code to make a general offer for the Company. Neither LMS nor any person acting in concert with LMS has purchased any Ordinary Shares in the 12 months immediately preceeding the date of the admission document. The waiver which the Panel has agreed to grant, subject to Shareholder approval, will be invalidated if any purchases of Ordinary Shares are made by LMS or any person acting in concert with LMS in the period between the date of the admission document and the First EGM. 10. ARRANGEMENTS WITH LMS Relationship Agreement As the LMS Group will own in excess of 50 per cent. of the issued ordinary share capital of the Company on completion of the Proposals, the Company, the LMS Seller and LMS have, as a matter of best practice, entered into a Relationship Agreement (as would be required under the Listing Rules if the Company were listed on the Official List). The Relationship Agreement regulates the relationship between LMS, the LMS Seller and the Company while the LMS Seller is a controlling shareholder of the Company (by holding 30 per cent. or more of the voting rights of the Company alone or together with members of the LMS Group or its associates). Each of LMS and the LMS Seller has agreed that, while it is a controlling shareholder, it will not take any action which precludes or inhibits the Company or Group from carrying on their business independently from LMS, that all transactions and relationships between the LMS Group and the Group will be conducted on arms' length terms and on a normal commercial basis and that they will exercise their voting rights so as to procure that the number of directors of the Company independent of LMS and the management of the Group always exceeds the number of LMS appointed directors. Whilst, other than as set out in the admission document, there are currently no further transactions contemplated between LMS and the Company, in the event that any such transaction was proposed LMS has undertaken to procure that such a transaction would be at arm's length and on a normal commercial basis. The Company has also agreed not to make non pre-emptive issues of voting shares which would result in the aggregate holding of Ordinary Shares by members of the LMS Group falling below 50 per cent. of the issued Ordinary Share capital of the Company without the consent of LMS. Intentions with respect to shareholding The LMS Group is not restricted from buying, selling or otherwise dealing in the Company's securities in the market, or otherwise. However, LMS regards itself as a long term strategic investor in Inflexion and has no present intention that the LMS Group's shareholding should fall below 50.01 per cent of the Company's issued share capital following the Proposals. Save as set out in the admission document, LMS has no present intentions to make any changes to the nature of the Company's business. 11. DIVIDEND POLICY The Company intends to initiate a dividend policy in the medium term, as and when its resources allow. The declaration and payment by the Company of any dividends and the amount thereof will depend on the results of the Group's operations, its financial position, cash requirements, prospects, and the generation of profits available for distribution and other factors deemed to be relevant at the time. 12. CORPORATE GOVERNANCE The Board is committed to high standards of Corporate Governance throughout the Group. The Company has complied with the Combined Code to the extent recommended by the Quoted Companies Alliance and insofar as practicable for a public company of its size. The Board currently has a remuneration committee and an audit committee, with delegated duties and responsibilities. The Company will continue to hold board meetings at regular intervals during the year and it is anticipated that such meetings will occur no less than quarterly. The Board currently consists of three full time executive directors and two independent non-executive directors. LMS will have the right to appoint two persons to be non-executive directors of the Company for so long as members of the LMS Group together hold at least 30 per cent. of the Ordinary Shares in issue from time to time. Following the completion of the Acquisition, Robert Rayne and Martin Pexton will be appointed to the board as the first such non-executive directors. It is intended that an additional independent non-executive director will be appointed within three months of completion of the Proposals and Darren Jordan will resign from the Board on completion of the Acquisition. Following these appointments and resignation, the board will consist of three independent non-executive directors, two non-executive directors appointed by LMS and two executive directors. Robert Rayne and Martin Pexton will absent themselves from any board discussions and decisions on matters in which LMS has an interest. The audit and remuneration committees will comprise a majority of independent directors. The audit committee will receive and review reports from management relating to the interim and annual accounts and to the internal control procedures in use throughout the Group and will also receive and review reports from the Company's auditors relating to the annual accounts and the internal control procedures in use throughout the Group. The remuneration committee will determine and review terms and conditions of service, including the remuneration of and grant of options to, executive directors, employees of the Group and executives of its investment managers under any share option scheme of the Company. The Company has adopted and will continue to operate a share dealing code for directors and applicable employees on the same terms as the Model Code on Directors' Dealings in Securities as set out in the appendix to chapter 16 of the Listing Rules. 13. EXTRAORDINARY GENERAL MEETINGS Notices convening two EGMs of the Company are being posted to Shareholders today. The First EGM of the Company is to be held on 5 February 2004 and the Second EGM of the Company is to be held on 10 March 2004. First EGM Resolution numbered 1 set out in the notice of the First EGM is an ordinary resolution which approves the Acquisition and the resulting issue of the LMS Consideration Shares and approves the waiver by the Panel described in paragraph 9 above. In accordance with the City Code, a poll will be held in respect of this resolution. Resolution numbered 2 set out in the notice of the First EGM is an ordinary resolution which provides for an increase in the authorised share capital of the Company and authorises the directors pursuant to section 80 of the Act to allot Ordinary Shares in connection with the Acquisition and the Open Offer. Second EGM Resolution numbered 1 set out in the notice of the Second EGM is a special resolution relating to the A Shares and B Shares; it provides for a further increase in the authorised share capital of the Company; authorises the Directors pursuant to section 80 of the Act to allot the A Shares and the B Shares; disapplies the pre-emption rights conferred by section 89(1) of the Act in respect of the allotment of the Committed B Shares; and amends the articles of association of the Company to include the rights and restrictions attaching to the A Shares and B Shares. The resolution numbered 2 to be proposed at the Second EGM is a special resolution which, subject to the passing of the resolution numbered 1 at the Second EGM and the issue of the A Shares and B Shares, provides for a further increase in the authorised share capital of the Company; authorises the Directors pursuant to section 80 of the Act to allot Ordinary Shares representing up to approximately 33 per cent. of the Company's enlarged ordinary share capital (assuming only the LMS Seller takes up its entitlement under the Open Offer); and disapplies the pre-emption rights conferred by section 89(1) of the Act in respect of the issue of Ordinary Shares by way of a rights issue or other pre-emptive offer or for cash up to a nominal amount equal to 5 per cent. of such enlarged share capital. 14. UNDERTAKINGS TO VOTE The Directors, their related family trusts and the EBT have undertaken to vote in favour of the resolutions to be proposed at the First EGM and the Second EGM. Such undertakings have been given in respect of a total of 21,174,040 Ordinary Shares representing approximately 32.4 per cent. of the Company's issued share capital as at the date of the First EGM and between 10.7 per cent. and 12.3 per cent. as at the date of the Second EGM (depending on the level of acceptance of the Open Offer). The LMS Seller has also undertaken to vote in favour of the resolutions to be proposed at the Second EGM in respect of its then holding of 106,666,667 Ordinary Shares (representing between 53.7 per cent. and 62.0 per cent. of the Company's then issued ordinary share capital, depending on the level of acceptance of the Open Offer). Together with the Directors, their related family trusts and the EBT, the Company therefore has undertakings to vote in favour of the resolutions to be proposed at the Second EGM in respect of total holdings of 127,840,707 Ordinary Shares (representing between 64.4 per cent. and 74.3 per cent. of the Company's then issued ordinary share capital, depending on the level of acceptance of the Open Offer). 15. RECOMMENDATION The Board, which has been so advised by Grant Thornton Corporate Finance, considers the Proposals to be fair and reasonable so far as the Shareholders are concerned. In providing advice to the Board, Grant Thornton Corporate Finance has relied upon information supplied by the Directors and the Proposed Directors and taken into account the Directors' and Proposed Directors' commercial assessments. The Directors recommend that you vote in favour of the resolutions to be proposed at the EGMs as they have undertaken to do in respect of their own aggregate beneficial holdings of 16,737,400 Ordinary Shares representing 25.6 per cent. of the current issued share capital of the Company. KEY STATISTICS Stage 1 - the Acquisition Number of existing Ordinary Shares 65,370,000 Number of LMS Consideration Shares 66,666,667 Number of Ordinary Shares in issue following completion of the Acquisition 132,036,667 LMS Consideration Shares as a percentage of the enlarged issued share capital following 50.49% completion of the Acquisition Estimated net asset value of the Company following completion of the Acquisition (after #24.8 million transaction costs) Stage 2 - the Open Offer and further subscription by LMS for Committed B Shares Open Offer Price 15p Min* Max** Number of Open Offer Shares 40,000,000 66,517,576 Number of Ordinary Shares in issue following the Open Offer 172,036,667 198,554,243 Open Offer Shares as a percentage of the enlarged issued share capital 23.25% 33.50% following the Open Offer Number of Ordinary Shares held by the LMS Group following the Open 106,666,667 106,666,667 Offer LMS Group's holding of Ordinary Shares as a percentage of the enlarged 62.0% 53.7% issued share capital following the Open Offer Gross proceeds of the Open Offer #6.0 million #9.98 million Estimated net asset value of the Company following the Open Offer #30.8 million #34.8 million (after transaction costs) Pro forma net asset value of the Company following the issue of the #45.8 million n/a Committed B Shares (after transaction costs) * Assuming only the LMS Seller takes up its entitlement under the Open Offer ** Assuming maximum take up under the Open Offer, excluding those Shareholders who have agreed not to take up their entitlements EXPECTED TIMETABLE OF PRINCIPAL EVENTS Latest time for receipt of white forms of proxy for the First EGM 10.00 a.m. on 3 February 2004 First EGM 10.00 a.m. on 10.00 a.m. on 5 February 2004 Completion of Acquisition, dealings in the LMS Consideration Shares to 6 February 2004 commence and re-admission of existing Ordinary Shares to AIM Record Date for the Open Offer 6 February 2004 Despatch of Offer and Application Forms 9 February 2004 Ex-Entitlement Date 9 February 2004 Latest time and date for splitting of Offer and Application Forms (to 3.00 p.m. on 27 February 2004 satisfy bona fide market claims) Latest time and date for receipt of completed Offer and Application 3.00 p.m. on 2 March 2004 Forms and payment in full under the Open Offer Open Offer Shares issued 3 March 2004 Open Offer Shares admitted to trading on AIM 4 March 2004 Latest time for receipt of blue forms of proxy for the Second EGM 10.00 a.m. on 8 March 2004 CREST accounts credited with Open Offer Shares 9 March 2004 Second EGM 10.00 a.m. 10 March 2004 Bonus Issue Record Date 10 March 2004 Issue of Bonus Shares 11 March 2004 Subscription by LMS for the Committed B Shares 11 March 2004 Bonus Shares admitted to trading on AIM and CREST accounts credited 12 March 2004 Defintive share certificates for Open Offer Shares and Bonus Shares 17 March 2004 dispatched by DEFINITIONS In this announcement, unless the context otherwise requires, the following expressions have the following meanings: "A Shares" the "A" subscription shares of 1p each in the capital of the Company proposed to be issued pursuant to the Bonus Issue "Acquisition" the acquisition by the Company of the Portfolio from the LMS Seller "Act" the Companies Act 1985 (as amended) "Admission" the re-admission of the existing Ordinary Shares or the admission of the LMS Consideration Shares and Open Offer Shares (as appropriate) to trading on AIM becoming effective in accordance with rule 6 of the AIM Rules "AIM Rules" the rules published by the London Stock Exchange from time to time governing admission to and the operation of AIM "AIM" the Alternative Investment Market of the London Stock Exchange "Articles of Association" or "Articles" the articles of association of the Company "B Shares" the Bonus B Shares and the Committed B Shares "Bonus Shares" the A Shares and the Bonus B Shares "Bonus B Shares" the B subscription shares of 1p each in the capital of the Company proposed to be issued pursuant to the Bonus Issue "Board" or "Directors" the current directors of the Company "Bonus Issue Record Date" the record date for the Bonus Issue being 10 March 2004 "Bonus Issue" the proposed bonus issue of the Bonus Shares "City Code" The City Code on Takeovers and Mergers "Combined Code" the Combined Code and the Principles of Good Governance and Code of Best Practice published by the Committee on Corporate Governance "Committed B Shares" the convertible shares of #1 each in the capital of the Company proposed to be subscribed by LMS for an aggregate subscription price of #15 million "Company" or "Inflexion" Inflexion plc "Concert Party" for the purposes of the City Code, LMS and its direct and indirect subsidiaries and associates (including the LMS Seller) and any other person acting, or deemed to be acting, in concert with LMS in relation to Inflexion "Conditions" the conditions which are to be met before the Open Offer will be made, being the passing of the resolutions numbered 1 and 2 in the notice of the First EGM and the completion of the Acquisition "CREST Regulations" the Uncertificated Securities Regulations 2001 "CREST" the computerised settlement system to facilitate the transfer of title of shares in uncertificated form, operated by CRESTCo Limited "EBT" the Inflexion 2000 Employee Benefit Trust "Extraordinary General Meetings" or "EGMs" the First EGM and the Second EGM "Ex-Entitlement Date" 9 February 2004 "First EGM" the extraordinary general meeting of the Company convened for 5 February 2004 "Fund 2" Inflexion Private Equity Fund 2, a fund to invest in buy-outs in the UK mid market "Grant Thornton Corporate Finance" the corporate finance division of Grant Thornton which is authorised in the UK by the Financial Services Authority to carry on investment business "Group" the Company and its subsidiary and associated undertakings "IML" Inflexion Managers Limited, a wholly owned subsidiary of Inflexion plc "Listing Rules" the listing rules of the UK Listing Authority "LMS Consideration Shares" the 66,666,667 new Ordinary Shares proposed to be issued by the Company to the LMS Seller in consideration for the sale to the Company of the Portfolio "LMS Group" LMS and its subsidiary and associated undertakings "LMS Seller" LMS Capital (Bermuda) Limited, a member of the LMS Group and a wholly owned, indirect subsidiary of LMS "LMS" London Merchant Securities plc of Carlton House, 33 Robert Adam Street, London W1U 3HR "London Stock Exchange" London Stock Exchange plc "New Ordinary Shares" the LMS Consideration Shares and the Open Offer Shares "New Shares" the New Ordinary Shares, A Shares and B Shares "Offer and Application Form" the form which, if the Conditions are met, will be sent to Qualifying Shareholders and which will make the Open Offer to such Qualifying Shareholders "Official List" the official list of the UK Listing Authority "Open Offer Price" 15 pence per new Ordinary Share "Open Offer Record Date" the record date for the Open Offer, being 6 February 2004 "Open Offer Shares" up to 66,517,576 new Ordinary Shares to be issued by the Company pursuant to the Open Offer "Open Offer" the open offer to Qualifying Shareholders "Ordinary Shares" ordinary shares of 1p each in the capital of the Company "Panel" the Panel on Takeovers and Mergers "Portfolio" the portfolio of quoted securities proposed to be sold by the LMS Seller to Inflexion "POS Regulations" the Public Offers of Securities Regulations 1995 (as amended) "Proposals" the proposals described in th admission document being, inter alia, the Acquisition and the issue of the LMS Consideration Shares, the approval of the waiver of Rule 9 of the City Code granted by the Panel, the Open Offer, the issue of the A Shares and B Shares and the grant of options to John Hartz and Simon Turner "Proposed Directors" the proposed directors of the Company, being Robert Rayne and Martin Pexton "Qualifying Shareholders" holders of Ordinary Shares on the Company's Register of Members on the Open Offer Record Date or the Bonus Issue Record Date, as appropriate "Relationship Agreement" that part of the Transaction Agreement which governs the relationship between LMS Group members and the Company following completion of the Proposals "Second EGM" the extraordinary general meeting of the Company convened for 10 March 2004 "Share Option Plans" the Inflexion plc 2000 Company Share Option Plan and the Inflexion plc 2000 Unapproved Company Share Option Plan "Shareholders" holders of Ordinary Shares "Transaction Agreement" the agreement entered into between the Company, LMS, the LMS Seller, John Hartz and Simon Turner relating to, inter alia, the Acquisition, acceptance of the Open Offer, undertakings to vote in favour of resolutions at the First EGM and the Second EGM, the issue of the Committed B Shares and including the Relationship Agreement "UK" United Kingdom of Great Britain and Northern Ireland "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 "Uncertificated"or "Uncertificated Form" recorded in the relevant register of the share or security concerned as being held in uncertificated form in CREST and title to which by virtue of the CREST Regulations may be transferred by means of CREST "USA" or "US" the United States of America, its territories and possessions, any state of the United States and any areas subject to its jurisdiction or under its control and the District of Columbia "Warrant Agreements" the agreements between the Company and each of John Hartz and Simon Turner conferring rights to subscribe for Ordinary Shares "Whitewash" the waiver granted by the Panel, conditionally on the passing of resolution numbered 1 in the notice of the First EGM, of any obligation on the Concert Party to make a mandatory cash offer for the issued Ordinary Shares not owned by the Concert Party which would otherwise arise under Rule 9 of the City Code This information is provided by RNS The company news service from the London Stock Exchange END ACQGUURAGUPCPUB
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