Proposed Sale of TwentyCi, Moveme and Holdings (9223Q)

TIDMTWE

RNS Number : 9223Q

Twenty PLC

27 October 2011

TWENTY PLC

(AIM: TWE)

Proposed sale of TwentyCi, Moveme and Holdings, cancellation of Admission of Ordinary Shares to trading on AIM, Re-registration as a Private Limited Company

The Company announces that it is seeking Shareholder approval of the sale of the entire issued share capital of each of TwentyCi Limited (the holding company of the TwentyCi Subsidiaries), The Moving Service Limited and TwentyCi Holdings Limited to the Purchaser, to cancel the admission of the Ordinary Shares to trading on AIM; and to re-register the Company as a private limited company following the Cancellation.

   1.   Introduction 

As set out in the Company's final results for the year ended 31st December 2010 announced on 30th June 2011 ("2010 Results"), trading performance for the full year reported a loss of GBP6.34m. Following the sale of DFPP, the loss on continuing operations was GBP6.7m, compared to the previous year's loss of GBP1.72m. Despite restructuring the business during the reported period, the revenues generated from the sale of data had a disappointing start and delivered well below the Board's expectations. Trading conditions remain very challenging in 2011 due to a combination of the current economic climate and slower than expected progress on the newly formed TwentyData business. The Directors have concluded that in light of the progress of the Group's business, the Company lacks a critical mass to sustain the costs associated with being an AIM company and the Board has concluded that it is no longer viable to maintain the AIM Admission.

As a consequence, the Board decided that serious consideration must be given to evaluating a number of strategic options and the Independent Directors have concluded that it would be in the best interests of Shareholders to sell TwentyCi, Moveme and Holdings to the Purchaser (a company controlled by the Related Parties). Robert Unsworth and Mark Patron, the Independent Directors, have represented the Board in negotiations with the Purchaser in relation to the Disposals.

Consequently, the Company has today entered into a conditional agreement for, and is seeking Shareholder approval of, the sale of the entire issued share capital of each of TwentyCi Limited (the holding company of the TwentyCi Subsidiaries), The Moving Service Limited and TwentyCi Holdings Limited to the Purchaser for an initial consideration of GBP1 ("Initial Consideration") plus potential additional consideration equal to 12.5 per cent. of the amount by which the aggregate proceeds received on any further share sale, business sale or listing of TwentyCi and/or Moveme and/or Holdings in the 24 month period following the Disposals exceeds GBP1,000,000 subject to certain adjustments ("Additional Consideration"). Any Additional Consideration that may become payable under the terms of the Sale Agreement will be subject to adjustments. In addition, owing to the net liabilities of the businesses to be disposed of, the Company has agreed to pay to the Purchaser the sum of GBP112,500 on 3rd January 2012 to contribute to its working capital requirements, subject to certain terms and conditions.

As part of the proposals the Company is seeking Shareholder approval to cancel the admission of the Ordinary Shares to trading on AIM; and it is seeking Shareholder approval to re-register the Company as a private limited company following the Cancellation.

A circular which sets out the background to and reasons for, and provides further details of, the proposed Disposals, Cancellation and Re-registration will be posted to shareholders today. The Circular will explain why the Directors consider the Cancellation and the Re-registration to be in the best interests of the Company and Shareholders as a whole and why the Independent Directors consider the Disposals to be in the best interests of the Company and the Shareholders as a whole.

In accordance with the AIM Rules:

-- the Disposals are a Related Party transaction under Rule 13 of the AIM Rules;

-- the Disposals are a disposal resulting in a fundamental change of the Company's business for the purpose of AIM Rule 15 and are therefore conditional on the consent of more than 50 per cent. of the votes cast by Shareholders at a general meeting; and

-- the Cancellation is conditional on the consent of not less than 75 per cent. of the votes cast by Shareholders at a general meeting.

Under the 2006 Act:

-- the Disposals are a 'substantial property transaction' and therefore require the approval of more than 50 per cent of the votes cast by Shareholders at a general meeting; and

-- the Re-registration requires the approval of not less than 75 per cent. of the votes cast by Shareholders at a general meeting.

The approval of Shareholders to the Resolutions to implement the Proposals is therefore being sought at the General Meeting to be held at 2.00 p.m. on 14th November 2011.

Shareholders should note that the Proposals are being presented as a package and therefore none of the Proposals will proceed unless all of the Proposals are approved at the General Meeting and the Sale Agreement becomes unconditional in accordance with its terms.

2. Background to and reasons for the proposed Disposals

In May 2010 the Company disposed of its customer interaction and outsourcing business through the sale of DFPP (the then holding company for Dataforce Interact Limited) for a total consideration of GBP7.69m, of which GBP6.19m was received on completion, allowing all bank and other indebtedness to be repaid in full and to provide additional working capital for the Group. The deferred consideration was originally agreed at GBP2.95m, but it was subsequently re-negotiated to GBP1.5m, payable in instalments over the period to 31st December 2012. As at today the sum of GBP642,857 of this deferred consideration has been paid to the Company, the balance of GBP857,143 is payable in quarterly instalments up to 31st December 2012.

The Group's remaining businesses are both much smaller than Dataforce Interact Limited and comprise a data analytics and hosting business branded 'TwentyCi' carried on by TwentyCi, a web business branded 'TwentyWeb' carried on by TwentyCi and a start up data business branded 'TwentyData' carried on by Moveme. Twenty acquired Holdings in April 2006. Holdings was a former intermediate trading company within the Group and does not trade.

Our product strategy has been to focus on the faster growing Customer Intelligence, Data, Database Development and E-commerce product segments, but the 2010 Results were disappointing as progress has been much slower than expected.

The following segment results have been extracted from the audited accounts of the Company for the year ended 31st December 2010 and the unaudited interim accounts for the six months ended 30th June 2011:

 
 Period ended:           31 December 2010             30 June 2011 
                               Year                      6 months 
---------------- 
 
                    Sales       Loss before        Sales    Loss before 
                                unallocated                 unallocated 
                             corporate expenses              corporate 
                                                             expenses 
                   GBP000         GBP000          GBP000      GBP000 
 TwentyCi data 
  analytics and 
  hosting          2,049           (248)           759         (63) 
 TwentyData         573            (676)           108        (296) 
 TwentyWeb          536             33             270         (89) 
 
                   3,158           (891)          1,137       (448) 
                  -------  --------------------  -------  ------------- 
 

As set out in the announcement of the 2010 Results and the interim results for the six months ended 30th June 2011, trading conditions remain very challenging in 2011 due to a combination of the current economic climate and slower than expected progress on the newly formed TwentyData Business. The announcement of the 2010 Results also stated that the Board was exploring a number of strategic options.

.

The Independent Directors have explored a number of options to segregate the receipt of the Deferred DFP Consideration due to the Company from the rest of the Group and they have concluded that, given the need to preserve cash by conducting a sale quickly, it would be in the best interests of Shareholders to dispose of TwentyCi, Moveme and Holdings.

The Initial Consideration is payable in cash at Disposal Completion. Any Additional Consideration that may become due to the Company under the terms of the Sale Agreement is also payable to the Company in cash within 5 business days of such consideration being received. The Additional Consideration will be reduced: (i) in the case of a share sale or business sale, by the amount of any indebtedness of the Purchaser's Group and the amount of any capital gains tax or corporation tax liability (including any degrouping charge) of the Purchaser's Group that the Purchaser can reasonably show as being payable by a member of the Purchaser's Group as a result of any such share sale or business sale; and (ii) by the amount of sums subscribed by investors in the Purchaser's Group after Disposal Completion. In addition, owing to the net liabilities of the businesses to be disposed of, the Company has agreed to pay to the Purchaser the sum of GBP112,500 to contribute to its working capital requirements. The Company has agreed to pay this sum on 3rd January 2012, subject to certain terms and conditions.

The Company will waive the inter-company debt owed by TwentyCi and Moveme to the Company in the sum of GBP561,050. TwentyCi, Moveme, Holdings and the TwentyCi Subsidiaries will also waive any debt that may be owed by the Company to any of them.

The sale of TwentyCi and Moveme will give rise to a de-grouping charge as there will be a deemed disposal of goodwill. To the extent that this goodwill was created or acquired before 1st April 2002 the de-grouping charge will arise on the Company by supplementing any chargeable gain on the sale of the shares in TwentyCi and Moveme. If the substantial shareholding exemption from chargeable gains is available to the Company in connection with the Disposals this exemption should also apply to any chargeable gain on the deemed disposal of the goodwill.

Under the Sale Agreement the Purchaser has agreed to pay to the Company an amount equal to any PAYE and National Insurance liabilities of the Company in relation to payments made to the Related Parties. As part of the Disposals, Grant Newton and Ian Lancaster will resign as directors and employees of the Company and enter into compromise agreements with the Company. The compromise agreements provide that in the event that the Purchaser fails to comply with its obligations to make such payments the Related Parties will make such payments to the Company.

The net liabilities to be disposed of, based on the unaudited interim accounts at 30 June 2011, amounted to approximately GBP400,000, excluding the further payment to the Purchaser of GBP112,500 on 3(rd) January 2012.

The effect of the Disposals on the Company will be to divest the Company of substantially all of its trading business, activities and assets.

The Company's estimated net assets, immediately following Disposal Completion, and assuming receipt of the full amount of the Deferred DFP Consideration, will be approximately GBP700,000, before administrative costs to be incurred prior to the Company entering members' voluntary liquidation. As noted above, as at today the sum of GBP642,857 of the Deferred DFP Consideration has been paid to the Company. The balance of GBP857,143 is payable in equal quarterly instalments on 31st December 2011, 31st March 2012, 30th June 2012, 30th September 2012 and 31st December 2012. The purchaser of DFPP is entitled to set off the sum of GBP88,000 owed to it by the Company against the 31st December 2012 instalment of the Deferred DFP Consideration.

The estimate of net assets above do not include the benefit of certain research and development tax credit claims for the years ended 31st December 2009 and 2010 potentially available to TwentyCi and certain of the TwentyCi Subsidiaries. The Purchaser has agreed to use all reasonable endeavours to recover such tax credits and, if recovered, to pay 85 per cent. of such sums to the Company.

It is also a condition of the Sale Agreement that the cash balances of the Company as at 5.30 p.m. on the date of the General Meeting and after deducting all cash commitments of the Company as at that time, is not less than GBP122,728. This condition may be waived in whole or in part by the Company.

It is the current intention of the Independent Directors to recommend that, after 31st December 2012, once the final payment of the Deferred DFP Consideration has been received, along with any Additional Consideration that may become due to the Company under the terms of the Sale Agreement, the remaining assets of the Company are distributed by way of a members' voluntary liquidation. In the interim period and, assuming the resolution to re-register the Company as a private limited company is passed at the General Meeting, the Company may be able to effect a capital reduction in order to create distributable reserves and return value to Shareholders should the Independent Directors elect to do so. The procedure involved in effecting a capital reduction for a private limited company is simpler and more cost effective than that which applies to a public limited company (which involves a court process).

Further administrative costs will be incurred by the Company prior to it entering into members' voluntary liquidation, including directors' remuneration as described below.

As noted above, Grant Newton and Ian Lancaster will resign as directors and employees of the Company at Disposal Completion. Following Disposal Completion the Board will comprise Mark Patron and Robert Unsworth, the two Independent Directors. Mark Patron will be paid a director's fee of GBP20,000 per annum and Consensus Business Group (who provide the services of Robert Unsworth as a director of the Company) will be paid a director's fee of GBP20,000 per annum.

3. Background to and reasons for the proposed Cancellation

Following the Disposals, the Company will have disposed of substantially all of its trading business, activities and assets. The Directors have therefore concluded that it would be in the best interests of Shareholders to cancel the AIM Admission if the Disposals are approved by Shareholders at the General Meeting and the Sale Agreement becomes unconditional in accordance with its terms. This would save the Company the costs associated with maintaining the AIM Admission which include fees paid to the Company's nominated adviser and broker and registrars, annual fees paid to the London Stock Exchange plc, costs relating to regulatory announcements and additional fees of accountants and lawyers engaged to provide accountancy, legal or other services in connection with maintaining the AIM Admission. The Company estimates that if the Cancellation takes place the Group will, as a result, save up to approximately GBP50,000 per annum.

In addition to the direct and indirect costs involved in maintaining the AIM Admission, the Board consider few benefits accrue to the Company or Shareholders from the AIM Admission and in particular:

-- save for consideration shares issued to vendors of companies in connection with acquisitions, the Company has rarely utilised AIM to raise equity capital for its expansion and has no plans to do so given current trading; and

-- the Board considers that the Company will not attract any new institutional investors or analyst interest in the secondary market.

Following the Cancellation, although the Ordinary Shares will remain transferable, they will no longer be capable of being traded on AIM and no other trading facility will be available to enable the trading of the Ordinary Shares.

Following the Cancellation transfers of Ordinary Shares may be effected in accordance with the provisions of the Company's articles of association concerning off-market transfers of shares in certificated form. In summary, to effect a transfer of Ordinary Shares following the Cancellation, the registered holder of the shares must duly execute a stock transfer form and send the original stamped (to the extent stamp duty is payable thereon), duly executed stock transfer form, together with the relevant share certificate (if any) for such transferred holding, to the Company's registered office.

In accordance with AIM Rule 41, the Cancellation is conditional on the consent of not less than 75 per cent. of the votes cast by Shareholders at a general meeting. Such consent will be sought through Resolution 2. Assuming Resolution 2 is passed and the Sale Agreement becomes unconditional in accordance with its terms, the Cancellation is expected to take effect from 7.00 a.m. on 28th November 2011.

4. Reason for the proposed Re-registration

The main advantage to the Company of re-registering as a private limited company is that it will be able to effect a capital reduction in the future in order to create distributable reserves and return value to Shareholders should the Board elect to make an interim distribution to Shareholders. As noted above, the procedure involved in effecting a capital reduction for a private limited company is simpler and more cost effective than that which applies to a public limited

company (which involves a court process).

Assuming the resolution to approve the Re-registration is passed, the Company, as a private limited company, will not be required to hold annual general meetings. However, the Independent Directors intend that, following completion of the Proposals, the Company will continue to hold annual general meetings.

Under the 2006 Act, as part of the Re-registration the Company is required to make such changes to its name and to its articles of association as are required in connection with the Company becoming a private company limited by shares.

A resolution will therefore be proposed to adopt new articles of association to make, inter alia, the following changes:

-- change the name of the Company to Witan Gate Limited; and

-- delete references to uncertificated securities.

The Re-registration also requires the consent of not less than 75 per cent. of the votes cast by Shareholders at a general meeting.

5. General Meeting

Implementation of the Proposals requires the approval of Shareholders at a general meeting to be held at 9-13 St. Andrew Street, London EC4A 3AF at 2.00 p.m. on 14th November 2011 where the following resolutions will be proposed:

1. Resolution 1 - an ordinary resolution to approve the Disposals for the purposes of AIM Rule 15 and section 190 of the 2006 Act, on the terms and subject to the conditions set out in the Sale Agreement;

2. Resolution 2 - a special resolution to approve the cancellation of the AIM Admission (subject to the passing of Resolution 1 and to the Sale Agreement becoming unconditional in accordance with its terms);

3. Resolution 3 - a special resolution to approve the re-registration of the Company under the name Witan Gate Limited (subject to the passing of Resolution 2 and to the Sale Agreement becoming unconditional in accordance with its terms); and

4. Resolution 4 - a special resolution to adopt new articles of association in place of the existing articles of association (subject to the passing of Resolution 3 and to the Sale Agreement becoming unconditional in accordance with its terms).

Resolution 1 is proposed as an ordinary resolution and must be passed by more than 50 per cent. of the votes cast by Shareholders at the General Meeting. Resolutions 2, 3 and 4 are proposed as special resolutions which mean they must be approved by not less than 75 per cent. of votes cast by Shareholders at the General Meeting.

6. Recommendations

The Disposals

Neither of the Related Parties has taken part in any decision by the Board to approve or enter into the Sale Agreement, on the basis that they are directors and shareholders of the Purchaser and are therefore 'related parties' for the purposes of the AIM Rules.

The Independent Directors consider the Disposals to be in the best interests of the Company and Shareholders as a whole. The Independent Directors consider, having consulted with Daniel Stewart, that the Disposals are fair and reasonable insofar as Shareholders are concerned. In giving its advice Daniel Stewart has relied on the Independent Directors' commercial assessments.

The Cancellation and The Re-registration

The Board considers the Cancellation and the Re-registration to be in the best interests of the Company and Shareholders as a whole. The Board, having consulted with Daniel Stewart, also consider the Cancellation to be fair and reasonable insofar as Shareholders are concerned. In giving its advice Daniel Stewart has relied on the Board's commercial assessment.

Enquiries:

Twenty Plc Tel: [phone]

Mark Patron, Non-Executive Chairman

www.twentyplc.com

Daniel Stewart & Company plc Tel: [phone]

Paul Shackleton

DEFINITIONS

"2006 Act" the Companies Act 2006;

"AIM" AIM, a market operated by the London Stock Exchange plc;

"AIM Admission" the admission of the Ordinary Shares to trading on AIM;

"AIM Rules" the AIM rules for companies published by the London Stock Exchange plc from time to time;

"Board" or "Directors" the directors of the Company;

"Business Day" any day other than a Saturday, Sunday or public holiday on which banks are

open in the City of London for the transaction of general commercial business;

"Cancellation" the cancellation of the AIM Admission;

"Company" or "Twenty" Twenty plc;

"Daniel Stewart" Daniel Stewart & Company plc, the Company's Nominated Adviser and Broker;

"Deferred DFP Consideration" the deferred consideration due to the Company in respect of the sale by the Company in May 2010 of DFPP, the outstanding amount of which, at the date of this announcement, is the sum of GBP857,143;

"DFPP" DF Property Portfolio Limited (registered number 01025092), a former

subsidiary of the Company;

"Disposal Completion" completion of the Disposals pursuant to the Sale Agreement;

"Disposals" the disposal of the entire issued share capital of TwentyCi, Moveme and Holdings on the terms and subject to the conditions set out in the Sale Agreement;

"General Meeting" the General Meeting of the Company convened for 2.00 p.m. on 14th November 2011 by the Notice and any adjournment thereof;

"Group" the Company and its subsidiaries from time to time;

"Holdings" TwentyCi Holdings Limited, a subsidiary of the Company incorporated and registered in England and Wales with number 03946301;

"Independent Directors" Mark Patron and Robert Unsworth;

"Moveme" The Moving Service Limited, a subsidiary of the Company incorporated and registered in England and Wales with number 05672869;

"Notice" the notice of the General Meeting;

"Ordinary Shares" ordinary shares of 0.1 pence nominal value each in the capital of the Company;

"Proposals" the Disposals, the Cancellation and the Re-registration as described in this document;

"Proxy Form" the form of proxy enclosed with this document for use at the General Meeting or any adjournment thereof;

"Purchaser" RB138 Limited, a company incorporated in England and Wales with registered number 07762646;

"Purchaser's Group" the Purchaser and its subsidiaries from time to time following Disposal Completion;

"Related Parties" Ian Lancaster and Grant Newton, both Directors of Twenty;

"Re-registration" the re-registration of the Company as a private limited company;

"Resolutions" the resolutions to be proposed at the General Meeting, and a reference to a "Resolution" shall be construed accordingly;

"Sale Agreement" the conditional agreement dated 27th October 2011 made between the Company and the Purchaser relating to the Disposals;

"Shareholders" holders of Ordinary Shares;

"TwentyCi" TwentyCi Limited, a subsidiary of the Company incorporated and registered in England and Wales with number 06943607;

"TwentyCi Subsidiaries" each of: Twenty Web Limited (registered number 04432155); Emaginating Limited (registered number 05020371); TwentyCi Central Services Limited (registered number 06943656) and the following dormant companies:

Twenty Online Limited (registered number 02713950); Mailforce Limited (registered number 04180985); Dataforce Systems Limited (registered number 02766537); Dataforce Limited (registered number 04149517) and The Customer Management Company Limited (registered number 03532549); and

"TwentyData Business" the home mover data business branded 'TwentyData' carried on by Moveme.

This information is provided by RNS

The company news service from the London Stock Exchange

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