Proposed Cancellation of Admission to AIM

 
TIDMSIN 
 
26 March 2010 
 
 
                   Proposed Cancellation of Admission to AIM, 
             Proposed Re-registration as a Private Limited Company, 
                                General Meetings 
                     Cancellation of Share Premium Account 
                                      and 
                  Offer To Buy Back 13,208,072 Shares of  GBP0.01 
                   At 7 pence per Spectrum Interactive Share 
 
 
The  following  announcement  incorporates  extracts  from the Chairman's letter 
contained  in  a  Circular  which  will  be posted to the Company's Shareholders 
today,  relating  to  Spectrum  Interactive's  proposed  cancellation of its AIM 
listing: 
 
1. Introduction 
 
The Company announces that it is proposing to seek Shareholder approval to: 
 
  * cancel the admission of the Company's Shares to trading on AIM; 
 
 
  * re-register the Company as a private limited company; and 
 
 
  * make  an Offer to Shareholders other than the Majority Group, conditional on 
    the De-listing and Re-registration occurring and no Cancellation Application 
    having  been made  by the  applicable Condition  Date, to  buy back Spectrum 
    Interactive Shares in accordance with the provisions of the Act. 
 
 
In  light of the proposed De-listing and  Re-registration and in order to afford 
Shareholders  an opportunity  to realise  their investment  in the  Company, the 
Company is making the Offer to Qualifying Shareholders (that is all shareholders 
other  than  the  Majority  Group)  which  is  conditional  on  the  De-listing, 
Re-registration   and  on  no  Cancellation  Application  having  been  made  or 
successfully disposed of or withdrawn by the Condition Date. 
 
The  price payable under the  Offer is 7 pence per  share, which is a premium of 
approximately  14.3 per cent. to the closing price of a Share on 25 March 2010, 
being the last practicable date prior to the date of this announcement. 
 
The  Company has also received irrevocable  undertakings not to accept the Offer 
from   the   Majority  Group  and  certain  Shareholders  holding  in  aggregate 
21,384,801 Spectrum  Shares,  representing  in  aggregate approximately 63.1 per 
cent. of the Existing Issued Share Capital. 
 
A  circular will be sent  later today to all  Shareholders convening the General 
Meetings  and to explain the background to,  and reasons for, the De-listing and 
Re-registration  and why the  Directors unanimously consider  the De-Listing and 
the  Re-registration  to  be  in  the  best  interests  of  the  Company and its 
Shareholders as a whole. 
 
2. Background to and reasons for the De-listing 
 
The Board wishes to effect the De-listing for the following reasons: 
 
  * Lack of Liquidity in Spectrum Shares 
 
 
The Majority Group is interested in approximately 61.0 per cent. of the Existing 
Issued  Share  Capital,  and  there  has  been  very  low  trading volume in the 
Company's shares since the Company's listing on AIM in April 2005. 
 
  * Administrative costs 
 
 
The   financial   statements   for   the   year  ended  30 June  2009 note  that 
administrative  costs  in  the  period  which  they  cover were approximately  GBP5 
million. 
 
Administrative  costs  of  between   GBP100,000  and   GBP150,000 will be saved by the 
Company  as a  result of  the De-listing  and Re-registration. Such cost savings 
include  significant  internal  costs  in  ensuring  ongoing compliance with the 
Company's  requirements  as  a  publicly  quoted  company  and professional fees 
associated  with  the  AIM  quotation  (including legal, accounting, broking and 
Nominated   Adviser  costs).  In  addition,  further  administrative  costs  and 
professional fees will be saved as a result of the Re-registration. 
 
  * Strategy 
 
 
The Board believes that the Company can implement its current strategy with more 
flexibility without the need to comply with the reporting and other requirements 
imposed  by the AIM  Rules and free  from short term  concerns about share price 
movements. 
 
  * Lighter regulatory burden 
 
 
As a result of De-listing and Re-registration, the Company would be subject to a 
less  onerous regulatory and legislative  regime than publicly quoted companies, 
with  attendant lower administrative costs.  For instance, as a private company, 
the  Company would have more flexibility and  be subject to less onerous company 
administration procedures under the Act than apply to public companies. 
 
As such, after careful consideration, your Board has therefore concluded that it 
is  in  the  best  interests  of  the  Company and Shareholders if the Company's 
admission to trading on AIM is cancelled. 
 
3. Background to and Reasons for the Offer 
 
The  De-listing will reduce significantly the liquidity and marketability of the 
Company's  Shares.  After  the  De-listing  there  will  be  no  guarantee  that 
Shareholders  will be able to sell their Shares  in the Company or, if they were 
so able to do so, at an acceptable price. 
 
In  light  of  the  De-listing  and  the  Re-registration and in order to afford 
Minority  Shareholders  with  an  opportunity  to  realise  some or all of their 
investment in the Company, the Company has determined to make the Offer. 
 
The  Offer  price  of  7 pence  per  Spectrum  Interactive Share is a premium of 
approximately  14.3 per cent. to the closing price of a Share on 25 March 2010, 
being the last practicable date prior to the date of this announcement. 
 
4. The Offer 
 
Spectrum  Interactive hereby offers to acquire, on  the terms and subject to the 
conditions  set  out  in  the  Shareholder circular, 13,208,072 Shares being all 
Spectrum  Interactive Shares other  than those owned  by the Majority Group. The 
Offer  values each  Spectrum Interactive  Share at  7 pence. Acceptance  in full 
would  result  in  an  aggregate  payment  of   GBP924,565.04  by  the  Company  to 
participating  Shareholders. Shareholders may accept the Offer in respect of all 
or any number of their Shares. 
 
Minority  Shareholders should note  that the percentage  of Spectrum Interactive 
Shares  held by the Majority Group will  increase and the percentage of Spectrum 
Interactive  Shares held by the remaining Minority Shareholders will decrease if 
the Offer is accepted by any Minority Shareholders. 
 
Please  note  that  there  will  be  no requirement for Minority Shareholders to 
accept the Offer if they wish to remain as Shareholders in the Company. A number 
of  employees wish to maintain their equity stake in the Company's business and, 
accordingly,  have given  irrevocable undertakings  not to  accept the  Offer in 
respect of any of their holdings of Shares. 
 
5. Financing of the Offer 
 
Full  acceptance of the Offer, save in  respect of those who have undertaken not 
to  accept as described above,  would result in a  maximum cash consideration of 
 GBP924,595.42  being payable by Spectrum Interactive to Minority Shareholders. The 
Company  will fund the cash consideration and  fees payable under the Offer from 
its own cash resources, from an additional senior loan of  GBP560,000 from the Bank 
of  Scotland plc pursuant to a facility  letter dated 25 March 2010 and from the 
subscription  for up to  GBP240,000 convertible secured loan notes by Simon Alberga 
and Yoav Kurtzbard pursuant to a loan agreement dated 25 March 2010. 
 
The principal terms of the BoS Loan are: 
 
  * Security: existing fixed and floating charge 
  * Interest:4% over LIBOR 
  * Arrangement fee2% of principal loan 
  * Repaymentby equal monthly installments over three years 
 
 
The principal terms of the Directors' Loan are as follows:- 
 
  * Security:fixed  and floating  charge subordinated  to debt  owed to  Bank of 
    Scotland 
  * Interest:5% over LIBOR 
  * Term:three-years,  extendable by  a further  two years  at the option of the 
    noteholders 
  * Conversion:convertible into ordinary shares at any time at the option of the 
    noteholders at a price per share equivalent to a 15 per cent. premium to the 
    Offer price 
 
 
6. Share dealing after De-listing 
 
Shares  will remain  freely transferable  after De-listing.  To the  extent that 
Shareholders are unable or unwilling to hold Shares in the Company following the 
De-listing  becoming  effective,  or  wish  to  realise  their investment in the 
Company  beyond their  allocated participation  in the  Offer, such Shareholders 
should  consider  selling  their  interests  prior  to  the  Delisting  becoming 
effective. 
 
In  accordance  with  Rule  41 of  the  AIM Rules, cancellation of the Company's 
listing  on AIM will  not take effect  until at least  twenty Business Days have 
passed  following the announcement of the proposed De-Listing. If the De-Listing 
Resolution  is  passed  at  the  First  General  Meeting,  it  is  proposed that 
De-listing will take effect at 7.00 a.m. on 28 April 2010. 
 
In  the event that the De-listing proceeds, there will be no market facility for 
dealing  in the Shares and  no price will be  publicly quoted for Shares as from 
close of business on 27 April 2010. As such, interests in Shares are unlikely to 
be  readily capable of sale and where a buyer is identified, it may be difficult 
to place a fair value on any such sale. 
 
7. Risks  associated with  retaining an  interest in  the Company  following the 
De-listing 
 
The  Directors draw to the attention of Shareholders the following factors which 
should  be  taken  into  account  in  assessing  whether  or not to retain their 
interests  in Shares in  the event that  the De-listing is  approved and becomes 
effective: 
 
  * as  indicated above,  there will  be no  market facility  for dealing in the 
    Shares  and no price will be publicly  quoted for Shares. As such, interests 
    in  Shares are unlikely to  be readily capable of  sale and where a buyer is 
    identified, it will be difficult to place a fair value on any such sale; 
 
 
  * as shareholders in an unquoted company, Shareholders will no longer have the 
    protections  afforded by the AIM Rules and will  only be able to rely on the 
    protections afforded to minority shareholders under general English law; 
 
 
  * the Company will no longer be subject to the rules relating to disclosure of 
    interests  in Shares set  out in the  DTR, such that  it may be difficult to 
    ascertain the ownership of Shares from time to time; and 
 
 
  * the  levels of transparency and corporate  governance within the Company are 
    unlikely to be as stringent as for a company quoted on AIM. 
 
 
The  above considerations are non-exhaustive  and Shareholders should seek their 
own  independent advice  when assessing  the likely  impact of the De-listing on 
them. 
 
8. Information on the Majority Group 
 
The  Majority  Group  consists  of  Lord  Young  of  Graffham,  the  David Young 
Charitable  Trust, Simon Alberga (and his family trust), Yoav Kurtzbard (and his 
family  trust), Mark Lewarne and Philip  Congdon.  Lord Young, Simon Alberga and 
Yoav  Kurtzbard are all directors of  Young Associates Limited, a private equity 
firm, and Mark Lewarne and Philip Congdon are, respectively, Chief Executive and 
Finance  Director of  the Company.   Together, the  five members of the Majority 
Group,  including interests held by a charitable trust and family interests, are 
interested in aggregate in 20,695,434 Shares representing approximately 61.0 per 
cent. of the Existing Issued Share Capital. 
 
Shareholders  should be aware that Lord  Young of Graffham, his family interests 
and  the David  Young Charitable  Trust, Simon  Alberga, and  Yoav Kurtzbard and 
their  family interests are deemed  by the Panel on  Takeovers and Mergers to be 
acting in concert. 
 
Depending on the level of acceptances under the Offer (and taking account of the 
undertakings  received  not  to  accept  the  Offer)  the Majority Group will be 
interested  in between approximately 61.0 and 97.2 per cent. of the issued share 
capital of the Company. 
 
9. Irrevocable Undertakings 
 
The  Company  has  received  irrevocable  undertakings  to vote in favour of the 
Resolutions  from each member of  the Majority Group in  respect of all of their 
respective holdings of Shares being 20,695,434 Shares in aggregate, representing 
approximately 61.0 per cent. of the Existing Issued Share Capital. 
 
The  Company has received irrevocable undertakings  not to accept the Offer from 
Minority  Shareholders who  are key  employees of  the Company,  in respect of a 
total of 689,367 Shares representing approximately 2.0 per cent. of the Existing 
Issued Share Capital. These undertakings have been secured because the Directors 
consider  it to be  in the interests  of the Company  that its key personnel are 
committed  to the  Company and  have the  ability to  participate in  any future 
success to which they contribute by retaining an equity stake. 
 
 
For further information please contact: 
 
Spectrum Interactive plcTel: 01442 205 511 
Mark Lewarne, Chief Executive Officer 
Philip Congdon, Chief Financial Officer 
 
Arbuthnot SecuritiesTel: 020 7012 2000 
Alasdair Younie/Ben Wells 
 
 
                     Expected Timetable of Principal Events 
 
 
 Latest time and date for receipt of Forms          10.00 a.m. on 10 April 2010 
 of Proxy 
 for the first General Meeting 
 
 
 First General Meeting                              10.00 a.m. on 12 April 2010 
 
 Latest time and date for receipt of                1.00 p.m. on  16 April 2010 
 completed Acceptance Form and TTE 
 Instruction 
 
 Offer closes                                        1.00 p.m. on 16 April 2010 
 
 Offer Record Date                           Close of business on 16 April 2010 
 
 Announcement as to acceptances                      8.00 a.m. on 19 April 2010 
 
 Trading on AIM cancelled                            7.00 a.m. on 28 April 2010 
 
 Latest time for application to court to                            10 May 2010 
 cancel Re-registration Resolution 
 
 Latest time and date for receipt of Forms            10.00 a.m. on 10 May 2010 
 of Proxy 
 for the Second General Meeting 
 
 Expected date for Re-registration                                  11 May 2010 
 
 Second General Meeting                               10.00 a.m. on 12 May 2010 
 
 Expected date for Share Premium Account                            13 May 2010 
 Resolution to take effect 
 
 CREST accounts credited with Offer proceeds                        24 May 2010 
 
 Cheques dispatched for certified shares                            24 May 2010 
 purchased pursuant to the Offer 
 
 Balance share certificates dispatched where                        24 May 2010 
 relevant by 
 
 
Note: If any of the above times or dates should change, the revised times and/or 
dates will, prior to cancellation of trading on AIM, be notified to Shareholders 
by  an  announcement  on  a  Regulatory  Information Service (whilst the Company 
remains listed on AIM) and thereafter by post. 
 
DEFINITIONS 
 
"Acceptance  Form"the acceptance  form, election  and authority  relating to the 
Offer, for use in respect of Spectrum Interactive Shares 
 
"Act" or "Companies Act"the Companies Act 2006 
 
"acting in concert"has the meaning attributed to it in the City Code 
 
 "AIM" the AIM market of the London Stock Exchange 
 
 "AIM Rules"the AIM Rules for Companies published by the London Stock Exchange 
 
"Arbuthnot Securities"Arbuthnot Securities Limited 
 
"Board" or "Directors"the Spectrum Interactive directors 
 
"BoS  Loan"an additional senior loan  of  GBP560,000 from the  Bank of Scotland plc 
pursuant  to a  facility letter  dated 25 March  2010 to be  made as part of the 
financing of the Offer 
 
"Business Days"Monday to Friday other than bank or public holidays in the United 
Kingdom 
 
 "Cancellation   Application"   an  application  to  the  court  to  cancel  the 
Re-registration Resolution pursuant to section 98 of the Act 
 
"Cancellation Period" the period from the date of passing of the Re-registration 
Resolution to the Condition Date 
 
"Closing Date" the closing date of the Offer, being 1.00 p.m. on 16 April 2010 
 
"Code" or "City Code" the City Code on Takeovers and Mergers 
 
"Company", "Spectrum" or "Spectrum Interactive" Spectrum Interactive plc, 
company number 4440500 
 
"Condition Date" 28 days after the Re-registration Resolution is passed 
 
"CREST" the relevant system in respect of which Euroclear is the operator and in 
accordance  with which securities may be  held and transferred in uncertificated 
form 
 
 "De-listing"  the  cancellation  of  the  admission  of the Company's Shares to 
trading on AIM 
 
"De-listing  Resolution" the special  resolution approving the  De-listing to be 
proposed at the First General Meeting 
 
"Directors' Loan" the convertible loans of  GBP240,000 made to the Company by Simon 
Alberga and Yoav Kurtzbard 
 
 "DTR" Disclosure and Transparency Rules published by the FSA 
 
"Euroclear" Euroclear UK & Ireland Limited, the operator of CREST 
 
"Excluded Territories" the United States of America, Canada, Japan, the Republic 
of  Ireland, Australia, the  Republic of South  Africa or any jurisdiction where 
such actions may violate the laws in that jurisdiction 
 
 "Existing  Issued  Share  Capital"   the  issued  ordinary share capital of the 
Company as at the date of this announcement 
 
"First General Meeting" the general meeting of the Company 
 
"Form of Proxy" the form of proxy for use by Shareholders at the relevant 
General Meeting 
 
"General  Meetings" the First General Meeting  and the Second General Meeting of 
the Company 
 
"Group" the Company and its subsidiaries (as defined in the Act) 
 
 "London Stock Exchange" London Stock Exchange plc 
 
"Minority  Shareholder" means any Shareholder on  the share register of Spectrum 
Interactive on the Record Date other than the Majority Group 
 
"Majority  Group" the  Directors (other  than Peter  Benson), the  Rt. Hon. Lord 
Young of Graffham, The David Young Charitable Settlement and their family trusts 
and nominees 
 
"Notice"  the notice of the First General  Meeting or the Second General Meeting 
(as appropriate) 
 
"Offer"  the cash offer made by  Spectrum Interactive to Qualifying Shareholders 
to acquire from them the Offer Shares 
 
"Offer Shares"13,208,072 Shares not already owned by the Majority Group 
 
"Offer Price" 7 pence per Share 
 
"Qualifying  Shareholders" Shareholders who  are entitled to  participate in the 
Offer,  being shareholders  other than  a member  of the  Majority Group  on the 
register  of  members  of  the  Company  at  the Record Date who are not persons 
resident in any of the Excluded Territories 
 
"Receiving Agent" Capita Registrars 
 
"Record Date" 16 April 2010 
 
"Registrar" Capita Registrars Limited 
 
"Re-registration"  the  re-registration  of  the  Company  as  a private limited 
company 
 
"Re-registration    Resolution"    the    special   resolution   approving   the 
Re-registration to be proposed at the First General Meeting 
 
"Regulatory  Information Service"  any channel  recognised as  a channel for the 
dissemination  of regulatory information  by listed companies  as defined in the 
AIM Rules 
 
"Resolutions" all the resolutions to be proposed at the General Meetings 
 
"Second  General Meeting"  the general  meeting of  the Company  convened by the 
notice 
 
"Shareholders" holders of Spectrum Interactive Shares on the Record Date 
 
"Share   Premium  Account  Resolution"  the  special  resolution  approving  the 
cancellation of the Company's share premium account to be proposed at the Second 
General Meeting 
 
"Spectrum Interactive Shares" 
or  "Shares" the  issued ordinary  shares of   GBP0.01 each  in the  capital of the 
Company and any such further shares which are unconditionally allotted or issued 
after  the date hereof and before the date  on which the Offer ceases to be open 
for acceptance (or such earlier date or dates as the Company may decide) 
 
"Takeover Panel" or "Panel" the Panel on Takeovers and Mergers 
 
 
END 
 
 
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