Notice of General Meeting (3373F)

TIDMCMCP

RNS Number : 3373F

Content Media Corporation PLC

14 June 2012

14 June 2012

Content Media Corporation plc

Bonus Issue and Conversion of Preference Shares

Share Capital Reorganisation

Cancellation of admission of Ordinary Shares to trading on AIM

Re-registration as a private company

Approval for waiver of obligations under Rule 9

of the City Code on Takeovers and Mergers

Authorities to issue shares

and

Notice of General Meeting and Notice of Class Meeting of the Preference Shareholders

Content Media Corporation plc ("Content" or the "Company") is pleased today to announce a set of proposals ("the Proposals") which, if approved by Shareholders, will comprise the following:

-- the conversion of each of the 34,840,262 Preference Shares in issue into 5 new ordinary shares of 1p ("Existing Ordinary Shares") ("Conversion");

-- a bonus issue of 2,619,362 new Existing Ordinary Shares to the Preference Shareholders pro rata to their holdings of Preference Shares ("Bonus Issue");

-- the subdivision of each Existing Ordinary Share, including the Existing Ordinary Shares arising pursuant to the Conversion and the Bonus Issue, into one ordinary share of 1/13p each and one deferred share of 12/13p. The ordinary shares of 1/13p will then be consolidated into New Ordinary Shares on the basis of 1,300 ordinary shares of 1/13p for one new ordinary share of GBP1 each ("New Ordinary Shares");

   --    the cancellation of the Company's admission to trading on AIM; 

-- the re-registration of the Company as a private limited company and the adoption of new articles of association;

-- seeking the approval from Independent Shareholders for a waiver granted by the Panel (being the Waiver); of the obligations under Rule 9 of the Takeover Code which would otherwise apply to the members of the Concert Party as a result of their acquiring new Existing Ordinary Shares pursuant to the Conversion and the Bonus Issue; and

   --    the granting to the Directors of authorities to issue shares other than pro rata to existing shareholdings. 

The Company is today posting a circular to Shareholders ("the Circular") convening a general meeting of Ordinary Shareholders ("General Meeting") and a class meeting of Preference Shareholders ("Class Meeting"), at which the Proposals will be considered and, subject to the requisite majority, approved. The Circular also contains information about the background to and the reasons for the Proposals and explains why the Board considers the Proposals to be in the best interests of the Company and its Shareholders as a whole. In addition, the Circular sets out why the Directors recommend that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting and the Class Meeting, to be held on 5 July 2012.

Shareholders should note that the Proposals are inter-conditional. It is expected that Completion will take place and the Company's admission to trading on AIM cancelled at 07.00 am on 13 July 2012.

Huw Davies, Chairman of Content said: "For some time the Company and its shareholders have sought a solution to the Company's share structure which we believe has proven an obstacle to the growth of the Company's business and overall equity value. The Directors are pleased to announce this solution which we believe is good news for shareholders and for the Company as a whole."

John Schmidt, CEO of Content said: "We believe these transactions will provide the Company with a far better opportunity to grow the Company's business and we look forward to the prospect of executing on any growth opportunities that arise in the future."

The Proposals are summarised below.

A copy of the Circular will be available on the Company's website, www.contentmediacorp.com.

Capitalised terms not otherwise defined, shall have the same meanings as set out in the Circular.

For further information:

 
 Content Media Corporation PLC       Tel: [phone] 
                                      6500 
 John Schmidt/Geoff Webb 
 www.contentmediacorp.com 
 
 Grant Thornton, Nominated Adviser   Tel: [phone] 
                                      5100 
 Colin Aaronson/David Hignell 
 www.grant-thornton.co.uk 
 
 Throgmorton Street Capital          Tel: [phone] 
                                      0801 
 Robert Emmett 
 

Background to and reasons for the Proposals

Introduction

The Directors believe that the Company's share structure has proven to be a significant barrier to the development of the business and the growth of the Company's equity value, which has fallen consistently over recent years.

In particular, the Directors have for some time sought to resolve the issues concerning the Preference Shares, which rank ahead of Existing Ordinary Shares in respect of future dividend payments and on a return of capital. As at 30 September 2011, the Preference Shares were entitled in aggregate to a redemption payment of GBP9.756 million and, should the Company be in a position to make such payment in the future, this amount attracts ongoing interest. The existence of the Preference Shares has been a barrier to potential strategic deals or financial investment in the Company. This is not in the best interests of the Company's Existing Ordinary Shareholders and Preference Shareholders as the Company needs to grow in order to deliver equity value to both groups of Shareholders. The Proposals involve a conversion and re-classification of the Preference Shares into new Existing Ordinary Shares, together with a bonus issue of new Existing Ordinary Shares to ensure the Preference Shareholders hold 50% of the Ordinary Shares following completion of the Proposals.

The Proposals create a single class of New Ordinary Shares, with the Preference Shareholders and the Existing Ordinary Shareholders owning 50% respectively of the New Ordinary Shares. Upon Completion of the Proposals all of the New Ordinary Shares will carry the same rights and rank pari passu with one another and there will no longer be in issue any Preference Shares. The Proposals will also eliminate the GBP9.756 million redemption payment currently due to the Preference Shareholders.

The Company is also proposing a share capital reorganisation ("Share Capital Reorganisation ") under which the Existing Ordinary Shares will be subdivided into ordinary shares and deferred shares and then the ordinary shares consolidated into a smaller number of New Ordinary Shares with a larger nominal value. This is in order to deal with the fact that the Existing Ordinary Shares are currently trading at a discount to their nominal value of 1 pence.

The Directors do not believe the Company's best interests are served by remaining listed on AIM or operating as a public limited company. Accordingly the Board is proposing that the Company de-lists from AIM and re-registers as a private company. The Company will continue to communicate with shareholders through its website and will implement a matched bargain settlement facility provider service for Shareholders as further described below.

The Conversion and the Bonus Issue will result in the members of the Concert Party increasing their shareholding in the Company to 48.1 per cent of the voting rights. As a consequence, the approval of Independent Shareholders is required to the waiver of the obligations of members of the Concert Party, which may otherwise arise under Rule 9 of the Takeover Code, to make a general offer to all remaining Shareholders to acquire their shares.

Lastly, the Board is also seeking the authority to issue New Ordinary Shares on a non pre-emptive basis.

If approved by Shareholders, these Proposals will result in the Company becoming a private company, with a unified share capital structure and a group of Shareholders whose interests are aligned. The Board believes these steps will position the Company for future transactions that should assist in generating future value for all Shareholders and should assist in the negotiations relating to the renewal of the Company's senior loan facility, due in July 2013.

On the other hand, if the Proposals are not approved by Shareholders, the Directors believe that it will remain difficult for the Company to undertake transactions that will assist in growing the business. Looking into the mid-term, the Directors believe that a lack of growth in the Company's business will mean that the value of the Company will struggle to improve and this could also present challenges relating to the renewal of the Company's senior loan facility.

Conversion of Preference Shares and Bonus Issue

The Company presently has in issue 34,840,262 Preference Shares. The Preference Shares can be converted into Existing Ordinary Shares on a one for one basis and were redeemable from 26 March 2009 at 26p per share.

On 15 July 2009, the Company announced that it had received valid redemption notices in respect of all of the Preference Shares in issue at that time which created a redemption liability of approximately GBP9.756 million as at 30 September 2011. This liability attracts simple interest at the rate of 2 per cent per annum above the base rate of Barclays Bank Plc. The redemption amount plus the interest amount ranks ahead of any dividend payment to holders of Existing Ordinary Shares and in any case is liable to be paid to the relevant Preference Shareholder upon redemption of those Preference Shares, when the Company is legally able to do so.

The Company has reached agreement with the majority holders of the Preference Shares that would see the Preference Shareholders giving up their rights attaching to the Preference Shares, including the right to receive a redemption amount of approximately GBP9.8 million, in return for New Ordinary Shares representing 50% of the Company's share capital following completion of the Proposals. Subject to the approval of holders of both Ordinary Shares and Preference Shares, this will be achieved through the conversion of each Preference Share into 5 new Existing Ordinary Shares and through a bonus issue of 2,619,362 new Existing Ordinary Shares. Further details of this agreement are set out in the Circular.

The Resolutions giving effect to the Conversion and the Bonus Issue will, if approved, become effective on the Company's Ordinary Shares ceasing to be traded on AIM, as further described below. Accordingly, no application will be made for admission to trading on AIM of the Ordinary Shares issued to the Preference Shareholders pursuant to the Bonus Issue or arising from the Conversion.

Share Capital Reorganisation

As at 13 June 2012, being the latest practicable date prior to the dispatch of the Circular, the Existing Ordinary Shares were trading at a mid-market price of 0.70p, whilst the nominal value of the Existing Ordinary Shares is 1p. Accordingly, the Company is presently unable to issue shares at a price at or near the current mid-market price as such issue of shares would be at a price below the nominal value of the Existing Ordinary Shares, which is prohibited by company law. In order to allow the Company to issue further Ordinary Shares in due course, the Share Capital Reorganisation is being proposed whereby each Existing Ordinary Share, including those arising pursuant to the Conversion and the Bonus Issue, is to be divided into one ordinary share of 1/13p and one deferred share of 12/13p each.

The ordinary shares of 1/13p will then be consolidated into New Ordinary Shares on the basis of 1,300 ordinary shares of 1/13p for one New Ordinary Share.

The deferred shares will have minimal rights and, as such, will have negligible commercial value. No application will be made for the deferred shares to be admitted to trading on AIM or any other stock exchange. No share certificates will be issued for any of the deferred shares.

Any fractional entitlements arising upon the Share Capital Reorganisation will be aggregated and sold in the market for the best price reasonably obtainable and the net proceeds of the sale will be distributed to the Shareholders entitled to such sums, save that the Company shall be entitled to retain the net proceeds of the sale representing such fractions where the individual amount of the net proceeds to which a Shareholder is entitled is less than ten pounds (GBP10).

Shareholders who hold their Existing Ordinary Shares in uncertificated form will have their CREST accounts credited with the New Ordinary Shares as soon as practicable after the De-listing (as defined below).

The Resolution giving effect to the Share Capital Reorganisation will, if approved, become effective on the De-listing (as defined below).

Cancellation of Admission to AIM

After careful consideration, the Directors have concluded that it is no longer in the interests of the Company to retain its admission on AIM and, accordingly, it is proposed that, subject to the requisite 75 per cent. majority of Shareholders voting in favour, the Directors be authorized to apply to the London Stock Exchange for the cancellation of the Company's admission to AIM (the "De-listing").

The reasons for the Directors' conclusion above include:

-- the Company's share price performance and share trading volume has been very limited over the last year, with a significant fall in share price and very limited trading overall;

-- the current market conditions make it difficult for a company of the size of Content to raise capital through AIM;

-- the requirement to provide regular trading updates under the AIM Rules is potentially commercially disadvantageous in the current climate; and

-- where there are advantages to retaining admission to AIM, they are overridden by the above reasons and the additional costs and management time related to the admission.

Effects of and Arrangements Related to the Share Capital Reorganisation and AIM Cancellation

The Directors recognise that the value of the holdings of Existing Ordinary Shares of many Shareholders is very small and that opportunities to sell those holdings is presently limited. In order to help Shareholders with smaller stakes in the Company dispose of their holdings, the Board has made arrangements for a nil cost share dealing facility to be available to all Shareholders with less than 500,001 Existing Ordinary Shares wishing to sell shares prior to cancellation of the Company's admission to AIM. The Board has also arranged a matched bargain arrangement, provided by Capita Share Dealing Services, to enable Shareholders to trade the New Ordinary Shares following De-listing.

Details of these arrangements are set out in the Circular.

CREST

The Company's CREST trading facility will remain in place for so long as it remains economic to do so.

Re-registration as a Private Company

It is proposed that, if the De-listing is approved, the Company, which is currently a public limited company, be re-registered as a private company and that amendments to reflect this change in status be made to the Articles.

The Directors believe re-registration of the Company as a private limited company should provide the Company with greater flexibility to structure potential future transactions to grow the business.

The Company intends adopting a number of policies and procedures after the De-listing and re-registration as a private company. These include, retaining at least one non-executive director on the Board, providing Annual Financial Statements on the Company's web-site and keeping shareholders updated in respect of certain matters via the Company's web-site. In the short term the Company's board of directors will remain as currently constituted.

Explanation of the changes to the Articles of Association of the Company

The main changes to the Articles of Association of the Company are to grant such a general authority to the Directors of the Company (subject to the Concert Party Agreement) to allot indefinite amount and disapply the statutory rights of pre-emption on the issue of new shares, to remove the requirement for an annual general meeting and a Company Secretary and to authorise the board of directors to approve conflicts of interest without recourse to shareholders. Further details are set out in the Circular.

Concert Party Agreement

In agreeing to support the Proposals, the Concert Party have, as a condition to their support, required the Company to enter into the Concert Party Agreement, the principal terms of which are that for so long as it holds at least 25 per cent of the voting rights in the Company, the approval of the Concert Party is required for certain issues of shares, certain substantial acquisitions and disposals of assets and for reverse takeovers (as defined in the AIM Rules) and that it has the right to appoint a director to the board.

Further details of the Concert Party Agreement, which will become effective on completion of the Proposals, are set out in the Circular.

Waiver

Following the Conversion and Bonus Issue, an aggregate of 176,820,672 Existing Ordinary Shares would be issued and allotted to holders of Preference Shares. Of this amount, 104,395,270 Existing Ordinary Shares would be issued to members of the Concert Party. Together with Existing Ordinary Shares already held by them, the members of the Concert Party would come to hold 170,164,501 Existing Ordinary Shares representing 48.1 per cent. of the Company's voting rights. Following the Share Capital Reorganisation, the Concert Party will hold 130,893 New Ordinary Shares representing 48.1 per cent. of the Company's voting rights.

Pursuant to the Whitewash Resolution, Independent Shareholders will be asked at the General Meeting to waive the obligation on the members of the Concert Party which may otherwise arise under Rule 9 of the Takeover Code as a result of the Conversion and Bonus Issue, and which would otherwise require them to make a general offer to all remaining shareholders to acquire their shares.

Granting of authorities to Directors to issue shares

The Company is seeking authority to undertake a placing for cash of up to 48,006 New Ordinary Shares, representing 15 per cent. of the Company's issued share capital as enlarged by the placing, at any time in the period up to 5 years following the date of the General Meeting and that Shareholders' existing statutory pre-emption rights be disapplied in respect of such placing. The Directors intend to use these authorities in full and to issue shares pursuant to a placing as soon as practicable following Completion of the Proposals, in order to raise further working capital for the Company. No guarantee, however, is given that such placing will be successful.

The Company is also seeking authority to allot further New Ordinary Shares with an aggregate nominal value of up to GBP10 million, without having to offer those shares pro rata to existing Shareholders. This authority would also last 5 years and is intended to give the Directors further flexibility in order to undertake further cash placings of shares as appropriate. Allotments of shares in excess of the 48,006 New Ordinary Shares that could be issued pursuant to these authorities, will require the approval of the Concert Party pursuant to the Concert Party Agreement as described above.

Related Party Transactions

As at the date of this document, John Schmidt and Franz von Auersperg, being directors of the Company, and Golden.e which is treated as a substantial shareholder of the Company under the AIM Rules, are all deemed to be related parties to the Company under the AIM Rules by virtue of holding Preference Shares. They are interested in the following numbers of Preference Shares which, under the Proposals, would be converted into new Existing Ordinary Shares. They would also receive their pro rata entitlement to new Existing Ordinary Shares under the Bonus Issue. The aggregate number of new Existing Ordinary Shares they would therefore receive following the Conversion and Bonus Issue (but prior to the Share Capital Reorganisation) is shown below.

 
                        Number of Preference Shares   Number of new Existing Ordinary Shares to be issued 
 John Schmidt           6,367,690                     32,317,186 
 Franz von Auersperg    2,361,269                     11,983,870 
 Golden.e               15,079,781                    76,532,633 
 

The issue of new Existing Ordinary Shares to John Schmidt, Franz von Auersperg and Golden.e following the Bonus Issue and pursuant to the Conversion constitutes a related party transaction for the purposes of AIM Rule 13.

The Directors, with the exception of John Schmidt and Franz von Auersperg (who by reason of their holdings of Preference Shares are precluded from considering the matter) consider, having consulted with Grant Thornton in its capacity as the Company's nominated adviser, that the terms of the Bonus Issue and Conversion are fair and reasonable insofar as Shareholders are concerned.

Background to and reasons for the Waiver

General

The Takeover Code governs, inter alia, transactions which may result in the change of control of a public company.

Under Rule 9 of the Takeover Code, any person who acquires an interest in shares (as defined in the Takeover Code) which, taken together with shares in which he is already interested and in which persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights of a company which is subject to the Takeover Code, he is normally required to make a general offer to all the remaining shareholders to acquire their shares.

Similarly, when any person, together with persons acting in concert with him, is interested in shares which in aggregate carry not less than 30 per cent. of the voting rights of such company but do not carry more than 50 per cent. of such voting rights, a general offer will normally be required if any further interest in shares is acquired by such person.

An offer under Rule 9 must be in cash and at the highest price paid by the person required to make the offer, or any person acting in concert with him, for any interest in shares acquired during the 12 months prior to the announcement of the offer.

Under the Takeover Code, a concert party arises where persons acting together pursuant to an agreement or understanding (whether formal or informal) actively co-operate to obtain or consolidate control of a company or to frustrate the successful outcome of an offer for a company. Control means the holding, or aggregate holdings, of interests in shares carrying 30 per cent. or more of the voting rights of the company, irrespective of whether the holding or holdings give de facto control.

The Concert Party is currently beneficially interested in 65,769,231 Existing Ordinary Shares, representing 37.2 per cent. of the existing voting shares of the Company.

Potential voting rights of the Concert Party

Upon Completion, the potential voting rights attributable to the interests of the Concert Party will be as follows:

 
               Number of          Percentage   Existing          Number of           Number of           Percentage 
                Existing           of voting    Ordinary          Existing            New Ordinary        of voting 
                Ordinary            rights      Shares            Ordinary            Shares following     rights 
                Shares at                       issued            Shares following    completion 
                the date                        pursuant          the Bonus           of the Proposals 
                of the document                 to the            Issue and 
                                                Bonus Issue       Conversion 
                                                and Conversion 
------------  -----------------  -----------  ----------------  ------------------  ------------------  ----------- 
 Syntek        56,489,686           31.9%      0                 56,489,686          43,453              16.0% 
------------  -----------------  -----------  ----------------  ------------------  ------------------  ----------- 
 Golden.e      4,330,454             2.4%      76,532,633        80,863,087          62,202              22.9% 
------------  -----------------  -----------  ----------------  ------------------  ------------------  ----------- 
 Franz von 
  Auersperg    309,318               0.2%      11,983,870        12,293,188          9,450               3.5% 
------------  -----------------  -----------  ----------------  ------------------  ------------------  ----------- 
 Christoph 
  Schoeller     4,639,773            2.6%      12,072,381        16,712,154          12,855              4.7% 
------------  -----------------  -----------  ----------------  ------------------  ------------------  ----------- 
 Martin 
  Schoeller    0                       0.0%    3,806,386         3,806,386           2,927               1.1% 
------------  -----------------  -----------  ----------------  ------------------  ------------------  ----------- 
               65,769,231           37.2%      104,395,270       170,164,501         130,893             48.1% 
------------  -----------------  -----------  ----------------  ------------------  ------------------  ----------- 
 

Following completion of the Proposals, the Concert Party will be interested in 130,893 New Ordinary Shares representing approximately 48.1 per cent. of the voting rights attached to the New Ordinary Share capital.

The Panel has agreed to waive the obligation of the members of the Concert Party to make a general offer that would otherwise arise as a result of the Conversion and Bonus Issue, subject to the approval of Independent Shareholders. Accordingly, a resolution is being proposed at the General Meeting and will be taken on a poll. The Concert Party will not be entitled to vote on this Resolution.

Following the issue and allotment of the new Existing Ordinary Shares pursuant to the Conversion and Bonus Issue, the members of the Concert Party would hold more than 30 per cent. of the Company's voting share capital but not more than 50 per cent. of the Company's voting share capital and any further increase in their shareholdings would be subject to the provisions of Rule 9 of the Takeover Code.

As stated above, the Conversion and Bonus Issue is conditional upon, inter alia, the Shareholders approving the Waiver.

Intentions of the Concert Party following Completion

The Board and the members of the Concert Party do not intend that any changes will be introduced to the Company's business as a result of the Proposals. In addition, they have no intention to change the strategic plans for the Company, the locations of the Company's places of business or the continued employment of its employees and management, including any material change in the conditions of employment nor will there be any redeployment of the fixed assets of the Company.

Shareholders are referred to the Concert Party Agreement, details of which are set out above and in paragraph 6 of part 3 of the Circular.

Irrevocable Undertakings

The Company has received irrevocable undertakings from the Directors to vote in favour of each of the Resolutions (other than from Franz von Auersperg in relation to the Waiver) in respect of 16,603,162 Ordinary Shares beneficially held by them and 6,367,690 Preference Shares held by them, representing approximately 9.4 per cent. of the votes capable of being cast at the General Meeting and 18.3 per cent of the votes capable of being cast at the Class Meeting. In addition, the Company has received irrevocable undertakings from certain other Shareholders to vote in favour of the Resolutions in respect of, in aggregate, a further 81,174,955 Ordinary Shares and 20,569,759 Preference Shares, representing approximately 45.9 per cent. of the votes capable of being cast at the General Meeting and 59.0 per cent. at the Class Meeting.

Recommendation

The Directors consider the terms of the Proposals (other than the Bonus Issue, Conversion and the Waiver which are dealt with below) to be fair and reasonable and in the best interests of the Shareholders and the Company as a whole. Accordingly, the Directors have unanimously recommended that Shareholders vote in favour of the Resolutions for the Proposals (other than the Bonus Issue, Conversion and the Waiver) to be proposed at the General Meeting and the Class Meeting.

The Directors (other than Franz von Auersperg and John Schmidt who have been precluded from considering the matter by virtue of the fact that they are holders of Preference Shares), who have been so advised by Grant Thornton, consider the terms of the Bonus Issue and the Conversion to be fair and reasonable insofar as the Shareholders are concerned. Accordingly, the Directors (other than Franz von Auersperg and John Schmidt) have unanimously recommended that Shareholders vote in favour of the Resolutions for the Bonus Issue and the Conversion to be proposed at the General Meeting and Class Meeting.

The Directors (other than Franz von Auersperg who has been precluded from voting on the matter by virtue of the fact he is a member of the Concert Party), who have been so advised by Grant Thornton, consider the terms of the Waiver to be fair and reasonable and in the best interests of the Independent Shareholders and the Company as a whole. In providing advice to the Directors, Grant Thornton has taken into account the Directors' commercial assessments (other than those of Franz von Auersperg). Accordingly, the Directors (other than Franz von Auersperg) have unanimously recommended that Shareholders vote in favour of the Resolution for the Waiver to be proposed at the General Meeting.

Whilst all the Resolutions (other than the Waiver) are inter-conditional, Grant Thornton does not express an opinion on any of the Proposals other than the Bonus Issue, Conversion and the Waiver, and does not express an opinion on the Concert Party Agreement.

The Directors who hold shares in the Company have irrevocably undertaken to vote in favour of all Resolutions (other than the Whitewash Resolution) in respect of their own shareholdings amounting to 16,912,480 Existing Ordinary Shares (representing 9.6% of the Existing Ordinary Shares in issue) and 8,728,959 Preference Shares (representing 25.1% of the Preference Shares in issue).

The Directors who hold shares in the Company (other than Franz von Auersperg, who, by virtue of being a member of the Concert Party is precluded from voting on the matter) have irrevocably undertaken to vote in favour of the Whitewash Resolution in respect of their own shareholdings amounting to 16,603,162 Existing Ordinary Shares (representing 9.4% of the Existing Ordinary Shares in issue).

This information is provided by RNS

The company news service from the London Stock Exchange

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