Replacement - Proposed Cancellation and Offer

 
TIDMSIN 
 
29 March 2010 
 
Replacement - Proposed Cancellation and Offer 
 
The following announcement replaces the Company's previous announcement released 
at 15.11 on Friday 25 March 2010. The Panel on Takeovers and Mergers has 
requested certain additional information to be notified. The full amended 
announcement is reproduced below. 
 
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successfully disposed of or withdrawn by the Condition Date.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. 
 
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. Recommendations 
 
The Directors (other than myself and Yoav Kurtzbard who have abstained from 
consideration of the merits of the Offer as we are deemed to be acting in 
concert and as we are providing finance to the Company to enable it to make the 
Offer), who have been so advised by Arbuthnot Securities consider that the 
Resolutions and the Offer are fair and reasonable and in the best interests of 
Shareholders and the Company as a whole and unanimously recommend that 
Shareholders vote in favour of the Resolutions as they have irrevocably 
undertaken to do in respect of their own shareholdings, amounting in aggregate 
to 6,049,422 Shares, representing approximately 17.8 per cent. of the Existing 
Issued Share Capital. In providing advice to the Board, Arbuthnot Securities has 
taken into account the Directors' commercial assessments. 
 
3. 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. 
 
4. 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. 
 
5. 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. 
 
6. Financing of the Offer 
 
Full acceptance of the Offer would result in a maximum cash consideration of 
 GBP924,565.04 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 fee 2% of principal loan 
  * Repayment by 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 
 
 
Young Associates Limited, a related party to Simon Alberga and Yoav Kurtzbard, 
will receive an advisory fee of  GBP15,000 in connection with the structuring and 
negotiation of the transactions set out above and the funding for the Offer. 
 
Arbuthnot Securities has confirmed that sufficient resources are available to 
the Company to satisfy full acceptance of the Offer. 
 
7. 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. 
 
8. 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. 
 
9. 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. 
 
10. 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 plc 
Tel: [phone] 
 
Mark Lewarne, Chief Executive Officer 
 
Philip Congdon, Chief Financial Officer 
 
Arbuthnot Securities 
Tel: [phone] 
 
Alasdair Younie/Ben Wells 
 
Expected Timetable of Principal Events 
 
Latest time and date for receipt of Forms of Proxy 
 
for the first General Meeting 
 
10.00 a.m. on 10 April 2010 
 
First General Meeting 10.00 a.m. on 12 April 2010 
 
Latest time and date for receipt of completed Acceptance Form and TTE 
Instruction 1.00 p.m. on  16 April 2010 
 
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 cancel Re-registration Resolution 10 May 
2010 
 
Latest time and date for receipt of Forms of Proxy 
 
for the Second General Meeting 10.00 a.m. on 10 May 2010 
 
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 Resolution to take effect 13 May 2010 
 
CREST accounts credited with Offer proceeds 24 May 2010 
 
Cheques dispatched for certified shares purchased pursuant to the Offer 24 May 
2010 
 
Balance share certificates dispatched where relevant by 24 May 2010 
 
 
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. 
 
 
This announcement and a copy of the Offer Document will be available on the 
Company's website, www.spectruminteractive.co.uk 
 
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, Australia 
and 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 Document" the document to be posted to Shareholders setting out the Offer 
 
"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 
 
In accordance with Rule 2.10 of the City Code on Takeovers and Mergers, the 
Company confirms that it has 33,903,506 ordinary shares of 1p each in issue and 
admitted to trading on the London Stock Exchange under UK ISIN code 
GB00B07BZ552. 
 
Arbuthnot Securities Limited, which is authorised and regulated in the United 
Kingdom by the Financial Services Authority is acting exclusively for Spectrum 
Interactive and is acting for no one else in connection with the Offer and will 
not be responsible to anyone other than Spectrum Interactive for providing the 
protections afforded to clients of Arbuthnot Securities Limited or for providing 
advice in relation to the Offer or any other matter referred to herein. 
 
This announcement is not intended to, and does not, constitute an offer or an 
invitation to purchase or subscribe for any securities or the solicitation of an 
offer to purchase any securities, pursuant to the Offer or otherwise. Any 
response in relation to the Offer should be made only on the basis of the 
information in the Offer Document or any document by which the Offer and Scheme 
are made. Shareholders are advised to read the Offer Document when it becomes 
available because it will contain important information relating to the Offer. 
 
The distribution of this announcement in jurisdictions in or into certain 
jurisdictions may be restricted by the laws of those jurisdictions. Accordingly, 
copies of this announcement and all other documents relating to the Offer are 
not being, and must not be, released, published, mailed or otherwise forwarded, 
distributed or sent in, into or from any Excluded Territories. Persons receiving 
such documents (including, without limitation, nominees, trustees and 
custodians) should observe these restrictions. Failure to do so may constitute a 
violation of the securities laws of any such jurisdiction. 
 
Any response in relation to the Offer should be made only on the basis of the 
information contained in the Offer Document or any document by which the Offer 
is made. This announcement is made pursuant to Rule 2.5 of the Code. 
 
This announcement contains certain forward-looking statements with respect to 
the financial condition, results of operations and business of Spectrum 
Interactive and certain plans and objectives of the board of directors of 
Spectrum Interactive.  These forward-looking statements can be identified by the 
fact that they do not relate only to historical or current facts. 
 Forward-looking statements often use words such as "anticipate", "target", 
"expect", "estimate", "intend", "plan", "goal", "believe", "will", "may", 
"should", "would", "could" or other words of similar meaning.  By their nature, 
forward-looking statements involve risks and uncertainties that could cause 
actual results and developments to differ materially from those expressed in or 
implied by such forward-looking statements.  Many of these risks and 
uncertainties relate to factors that are beyond Spectrum Interactive's abilities 
to control or estimate precisely, such as future market conditions and the 
behaviours of other market participants, and therefore undue reliance should not 
be placed on such statements.  Should one or more of these risks or 
uncertainties materialise, or should underlying assumptions prove incorrect, 
actual results may vary materially from those described in this announcement. 
 Spectrum Interactive assumes no obligation and do not intend to update or 
correct these forward-looking statements, except as required pursuant to 
applicable law. 
 
The Spectrum Interactive Directors accept responsibility for the information 
contained in this announcement. To the best of the knowledge and belief of the 
Spectrum Interactive Directors (who have taken all reasonable care to ensure 
that such is the case) the information contained in this announcement for which 
they are responsible is in accordance with the facts and does not omit anything 
likely to affect the import of such information. 
 
Arbuthnot Securities Limited has given and has not withdrawn its written consent 
to the issue of this announcement with the inclusion of references to its name 
in the form and context in which they appear. 
 
Dealing Disclosure Requirements: 
 
Under the provisions of Rule 8.3 of the City Code on Takeovers and Mergers (the 
'Code'), if any person is, or becomes, 'interested' (directly or indirectly) in 
1% or more of any class of 'relevant securities' of the Company, all 'dealings' 
in any 'relevant securities' of that company (including by means of an option in 
respect of, or a derivative referenced to, any such 'relevant securities') must 
be publicly disclosed by no later than 3.30 pm (London time) on the London 
business day following the date of the relevant transaction. This requirement 
will continue until the date on which the offer becomes, or is declared, 
unconditional as to acceptances, lapses or is otherwise withdrawn or on which 
the 'offer period' otherwise ends. If two or more persons act together pursuant 
to an agreement or understanding, whether formal or informal, to acquire an 
'interest' in 'relevant securities' of the Company, they will be deemed to be a 
single person for the purpose of Rule 8.3. 
 
Under the provisions of Rule 8.1 of the Code, all 'dealings' in 'relevant 
securities' of the Company by the Company, or by any of its respective 
'associates', must be disclosed by no later than 12.00 noon (London time) on the 
London business day following the date of the relevant transaction. 
 
A disclosure table, giving details of the companies in whose 'relevant 
securities dealings' should be disclosed, and the number of such securities in 
issue, can be found on the Takeover Panel's website at 
www.thetakeoverpanel.org.uk. 
 
'Interests in securities' arise, in summary, when a person has long economic 
exposure, whether conditional or absolute, to changes in the price of 
securities. In particular, a person will be treated as having an 'interest' by 
virtue of the ownership or control of securities, or by virtue of any option in 
respect of, or derivative referenced to, securities. 
 
Terms in quotation marks are defined in the Code, which can also be found on the 
Panel's website. If you are in any doubt as to whether or not you are required 
to disclose a 'dealing' under Rule 8, you should consult the Panel. 
 
END 
 
 
 
 
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