APC Technology Group PLC Placing and Acquisition (6575V)

TIDMAPC

RNS Number : 6575V

APC Technology Group PLC

25 July 2018

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, NEW ZEALAND, RUSSIA, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A BREACH OF THE RELEVANT SECURITIES LAWS OF SUCH JURISDICTION.

This announcement does not constitute a prospectus or offering memorandum or an offer in respect of any securities of APC Technology Group PLC or of any other entity and should not be considered as a recommendation that any person should subscribe for or purchase any such securities.

This announcement contains inside information for the purposes of the market abuse regulation (EU No. 596/2014) ("MAR"). In addition, market soundings (as defined in MAR) were taken in respect of certain of the matters contained in this announcement, with the result that certain persons became aware of such inside information, as permitted by MAR. Upon the publication of this announcement, this inside information is now considered to be in the public domain and such persons shall therefore cease to be in possession of inside information.

25 July 2018

APC Technology Group PLC

(the "Company")

Acquisition of Aspen Electronics Limited

and

Placing and Subscription of 37,563,591 Ordinary Shares to raise GBP2.54 million

APC Technology Group PLC (AIM: APC), the provider of design-in, specification and distribution services for specialist electronic components and systems, lighting technologies and connectivity products, is pleased to announce the acquisition of Aspen Electronics Limited and a placing, including the sale of Vendor Ordinary Shares, and subscription of 37,563,591 new Ordinary Shares in the Company at 6.75 pence per Ordinary Share, to raise approximately GBP2.54 million before expenses.

Highlights:

-- Acquisition of Aspen for a net consideration of GBP2.2 million to be funded by a combination of part of the proceeds of the Placing and the Subscription and the issue of 7,407,407 Consideration Shares which will be subject to a lock-in.

-- Aspen is a premium distributor of electronic components, specialising in radio frequency (RF) and microwave components and test and measurement equipment.

-- Complementary RF and microwave business to APC's which the Board expects will lead to top line synergy opportunities.

-- The Acquisition is expected to be earnings enhancing in the first full year after Completion.

-- Placing of 26,761,587 Ordinary Shares and vendor placing of 3,835,341 Ordinary Shares by Stockdale Securities and Subscription of 6,966,663 Ordinary Shares with existing and new institutional and other investors at 6.75 pence per Ordinary Share to raise approximately GBP2.54 million before expenses.

-- Including the 7,407,407 Consideration Shares, a total 44,970,998 new Ordinary Shares are being issued at 6.75 pence each for a total value of GBP3.04 million.

-- Approximately GBP200,000 of the proceeds from the Subscription immediately used to repay Loan Notes held by a current shareholder.

-- Anthony Lochery, Chairman of the Company, has subscribed for 1,481,481 Ordinary Shares for a total amount of GBP99,999.97 and Richard Hodgson, Chief Executive of the Company, has subscribed for 300,000 Ordinary Shares for a total amount of GBP20,250.00.

Placing Statistics

 
Placing Price                                                     6.75p 
Number of Existing Ordinary Shares                          134,912,990 
Number of New Ordinary Shares                                26,761,587 
Number of Vendor Ordinary Shares                              3,835,341 
Number of Subscription Shares                                 6,966,663 
Number of Consideration Shares                                7,407,407 
Expected gross proceeds of the placing of               GBP2.54 million 
 the New Ordinary Shares and the Vendor Ordinary 
 Shares and the Subscription before expenses 
Number of Ordinary Shares in issue immediately 
 following Completion                                       179,883,988 
Number of new Ordinary Shares, including the               25 per cent. 
 New Ordinary Shares, the Vendor Ordinary Shares, 
 the Subscription Shares and the Consideration 
 Shares, expressed as a percentage of the Enlarged 
 Share Capital 
 

The new Ordinary Shares are being issued under the Company's existing authorities.

Commenting on the placing and acquisition, Richard Hodgson, Chief Executive, said:

"We are delighted to have been able to complete the acquisition of such a premium-quality, complementary RF and Microwave business which has an excellent reputation and which is expected to lead to top line growth opportunities as part of the enlarged APC group. APC continues to trade in line with management expectations and we expect this acquisition to be earnings enhancing in its first full financial year. Following on from the Company's successful acquisition and integration of First Byte Micro, this is a further step in the Company's stated aim of consolidation led growth in its components division"

Enquiries

APC Technology Group PLC [phone]

   Richard Hodgson, Chief Executive                                                     www.apcplc.com 

Michael Thompson, Finance Director

Stockdale Securities Limited (Nominated Adviser and Broker) [phone]

Mark Brown / Antonio Bossi / Rose Ramsden / Henry Willcocks / Fiona Conroy

ACQUISITION OF ASPEN ELECTRONICS LIMITED

AND

PLACING AND SUBSCRIPTION OF 37,563,591 NEW ORDINARY SHARES TO RAISE GBP2.54 MILLION

   1.         Introduction 

The Company is pleased to announce that it has agreed to acquire Aspen, for a total net consideration of GBP2.2 million, and a Placing of 26,761,587 New Ordinary Shares and a Subscription of 6,966,663 Subscription Shares at a price of 6.75 pence per Ordinary Share. The consideration payable for Aspen will be satisfied by part of the net proceeds of the Placing along with the Consideration Shares.

In addition, Howard Venning and Robert Johnson, the vendors of Aspen, have agreed to sell down 3,835,341 Vendor Ordinary Shares to be allotted and issued to them, taking the total placing and subscription to GBP2.54 million.

Aspen, is a premium RF and Microwave distribution business, specialising in a wide range of radio frequency and microwave components and test and measurement equipment.

The Placing Shares and the Subscription Shares have been placed with existing and new institutional and other investors. Admission and dealings in the Placing Shares, the Subscription Shares and the Consideration Shares are expected to commence on AIM at 8.00 a.m. on 26 July 2018.

   2.         Background to and reasons for the Acquisition and Placing 

APC's strategy is to complement organic growth within its Components distribution division with acquisitions in the highly fragmented UK electronic components distribution market. In line with this strategy, in January 2018, APC acquired First Byte Micro Ltd, now rebranded APC Locator, a franchised and independent component sourcing company.

APC recently announced that APC Locator has integrated successfully into the enlarged Group, expanded its offering and has delivered GBP1 million in bookings in its first six months of ownership which is well in excess of its acquired run rate of GBP1.5 million per annum.

The Directors believe that Aspen's RF and microwave business will complement APC's existing Components business and will create top line synergy opportunities. APC intends to grow its business to revenue of GBP50 million to 75 million within 3 to 5 years, principally by growing its Components and Property Technology divisions.

Approximately GBP1.7 million of the net proceeds of the Placing to be received by the Company and the Vendors will be used to satisfy the cash element of the consideration for the Acquisition. Aspen has cash of GBP1 million on its balance sheet which reduces the effective consideration payable by APC to GBP2.2 million. As set out above approximately GBP0.2 million of the proceeds of the Subscription to be received by the Company will immediately be used to repay part of the existing Loan Notes on which interest of 10 per cent. per annum is payable; in addition, the Company expects to use a further GBP0.42 million of the proceeds of the Placing and the Subscription to repay the balance of the existing Loan Notes and to satisfy outstanding professional fees.

The Acquisition is expected to be earnings enhancing in the first full year after Completion.

   3.         Information on Aspen 

In addition to the distribution of radio frequency and microwave components, Aspen has in-house testing facilities which allow it to provide enhanced value-added services to key customers and suppliers.

It also distributes own brand products and has an online sourcing business for lower value RF and microwave components.

In the year to 30 June 2017, Aspen reported Revenue of GBP4.3 million, Gross Profit of GBP1.35 million and adjusted* EBITDA of GBP0.35 million.

Aspen has continued to grow in the year to 30 June 2018 and it is expected to report an adjusted EBITDA of GBP0.55 million.

In addition, Aspen has GBP0.8m of debtors on its balance sheet, which is available to be refinanced through the Group's existing invoice discounting facility.

* Excluding the salary of its founder and vendor

   4.         Proposed terms of the Acquisition 

The consideration payable for the entire issued share capital of Aspen on a cash and debt free basis is GBP3.2 million. However, the business has GBP1 million on its balance sheet which will be distributed to the Vendors thus reducing the net consideration payable by APC to GBP2.2 million.

The cash consideration payable by APC is therefore GBP1.7 million in addition to GBP0.5 million to be satisfied by the issue of 7,407,407 Consideration Shares.

The Consideration Shares will be subject to a 12 month lock in agreement and a further 12 month orderly market arrangement afterwards.

   5.         Details of the Placing 

The Company has raised GBP2.54 million (before expenses) through the issue of the New Ordinary Shares and the Subscription Shares at the Placing Price in order to fund part of the consideration payable pursuant to the Acquisition, to repay the existing Loan Notes and to provide additional working capital to the Group. The Placing Price represents a premium of approximately 2 per cent. to the closing mid-market price of 6.625 pence per Ordinary Share on 24 July 2018, being the last business day prior to the publication of this announcement. The Placing Shares, the Subscription Shares and the Consideration Shares will represent approximately 25 per cent. of the Enlarged Share Capital.

Pursuant to the terms of the Placing Agreement, Stockdale Securities, as agent for APC and the Vendors, has procured Placees for the Placing Shares at the Placing Price.

The obligations of Stockdale Securities under the Placing Agreement are conditional, inter alia, upon Admission having occurred by 8.00 a.m. on 26 July 2018 (or such later time and/or date as may be agreed, being no later than 8.00 a.m. on 31 August 2018), and there being prior to Admission no material breach of the warranties given to Stockdale Securities.

Stockdale Securities may terminate the Placing Agreement in specified circumstances (including for breach of warranty at any time prior to Admission, if such breach is reasonably considered by Stockdale Securities to be material in the context of the Placing) and in the event of a force majeure event occurring at any time prior to Admission. If the conditions of the Placing Agreement are not fulfilled on or before the relevant date in the Placing Agreement, placing monies will be returned to Placees without interest as soon as possible thereafter.

Application has been made to the London Stock Exchange for the Placing Shares, the Subscription Shares and the Consideration Shares to be admitted to trading on AIM. The Placing Shares, the Subscription Shares and the Consideration Shares will rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive any dividend or other distribution declared, made or paid following Admission. It is expected that Admission will become effective and that dealings in the Placing Shares, the Subscription Shares and the Consideration Shares will commence at 8.00 a.m. on 26 July 2018.

   6.         Related party transaction 

Canaccord Genuity and Rockridge Investments are substantial shareholders in the Company. Accordingly, each of their participations in the Placing is deemed to be a related party transaction pursuant to the AIM Rules for Companies. The directors of the Company, having consulted with the Company's Nominated Adviser, Stockdale Securities Limited, consider that the terms of each of their participations in the Placing are fair and reasonable insofar as shareholders are concerned.

   7.         Total voting rights 

Following Admission, the Company's issued share capital will comprise 179,883,988 Ordinary Shares.

Therefore the figure of 179,883,988 Ordinary Shares should be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the Company under the FCA's Disclosure Guidance and Transparency Rules.

Following Admission, Anthony Lochery will hold 3,603,703 Ordinary Shares and Richard Hodgson will hold 2,300,000 Ordinary Shares representing respectively 2.00 per cent. and 1.28 per cent. of the Company's enlarged share capital.

   8.         Forward-looking statements 

This announcement may contain forward-looking statements relating to the Company's expected operations that are based on management's current expectations, estimates and projections. Words such as "expects", "intends", "plans", "projects", "believes", "estimates", and similar expressions are used to identify such forward-looking statements. These statements are not warranties or guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. By their nature forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that may occur in the future. Although the Company believes the expectations reflected in such statements are reasonable, no assurance can be given that such expectations will prove to be correct. There are a number of factors, many of which are beyond the control of the Company, which could cause actual results and developments to differ materially from those expressed or implied by forward-looking statements.

Definitions

 
"Acquisition"             the acquisition by APC of the entire 
                           issued share capital of Aspen 
"Acquisition Agreement"   the sale and purchase agreement relating 
                           to the Acquisition 
"Admission"               the admission of the Placing Shares, 
                           the Subscription Shares and the Consideration 
                           Shares to trading on AIM becoming effective 
                           in accordance with the AIM Rules 
"AIM"                     the market of that name operated by 
                           the London Stock Exchange 
"AIM Rules"               the AIM Rules for Companies 
"Aspen"                   Aspen Electronics Limited 
"Company" or "APC"        APC Technology Group plc 
"Completion"              completion of the Acquisition which 
                           is expected to take place at 8.00 on 
                           26 July 2018 
"Consideration Shares"    the 7,407,407 new Ordinary Shares allotted 
                           and issued to the Howard Venning pursuant 
                           to the Acquisition Agreement 
"Directors" or the        members of the board of directors of 
 "Board"                   APC 
"Enlarged Share Capital"  the 179,883,988 Ordinary Shares in 
                           issue immediately following Admission 
"Existing Ordinary        the 134,912,990 Ordinary Shares in 
 Shares"                   issue at the date of this announcement 
"Group"                   the Company and its subsidiary undertakings 
"Loan Notes"              the existing loan notes issued by the 
                           Company which carry an interest of 
                           10 per cent. per annum 
"London Stock Exchange"   London Stock Exchange plc 
"New Ordinary Shares"     the 26,761,587 new Ordinary Shares 
                           which are proposed to be allotted and 
                           issued pursuant to the Placing but 
                           excluding the Vendor Ordinary Shares 
"Ordinary Shares"         ordinary shares of 2p each in the share 
                           capital of the Company 
"Placees"                 the subscribers of Placing Shares pursuant 
                           to the Placing 
"Placing"                 the placing by Stockdale Securities 
                           of the New Ordinary Shares and the 
                           Vendor Ordinary Shares pursuant to 
                           the Placing Agreement 
"Placing Agreement"       the agreement dated 24 July 2018 between 
                           the Company, the Vendors and Stockdale 
                           Securities in connection with the Placing 
"Placing Price"          6.75 pence per Placing Share 
"Placing Shares"          the New Ordinary Shares and the Vendor 
                           Ordinary Shares 
"Shareholders"            holders of Ordinary Shares 
"Subscription"            the direct subscription with the Company 
                           of 6,966,663 new Ordinary Shares 
"Subscription Shares"     the 6,966,663 new Ordinary Shares to 
                           be allotted and issued pursuant to 
                           the Subscription 
"Vendors"                 Howard Venning and Robert Johnson 
"Vendor Ordinary Shares"  the 3,835,341 Ordinary Shares which 
                           are proposed to be sold by the Vendors 
                           pursuant to the Placing 
"RF"                      radio frequency 
"Stockdale Securities"    Stockdale Securities Limited, the Company's 
                           financial adviser, broker and AIM nominated 
                           adviser 
 

All references in this announcement to "GBP" or "p" are to the lawful currency of the United Kingdom.

Ends

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July 25, 2018 02:01 ET (06:01 GMT)