Circular and Notice of General Meeting

 

TIDMVERO 
 
RNS Number : 8689A 
Vero Software PLC 
15 October 2009 
 
 
 
Vero Software plc 
 
 
("Vero" or "the Company") 
 
 
Circular and Notice of General Meeting 
 
 
 
 
 
 
The Directors are pleased to announce that the Company has entered into Heads of 
Agreement ("Heads of Agreement") with a respectable third party institution 
("Lender") to raise GBP2 million before expenses by the issue of a secured 
mezzanine term loan ("Loan"). As the Company is in an offer period for the 
purposes of the Takeover Code ("Offer Period"), certain features of the Loan are 
required, under the Takeover Code, to be approved in advance by Shareholders. 
 
 
A circular has today been sent to Shareholders setting out the background to and 
the reasons for taking the Loan and to seek approval from Shareholders (the 
"Circular"). 
 
 
The Circular contains the Directors' recommendation that you vote in favour of 
the Resolution to be proposed at the General Meeting convened for 10:00 a.m. on 
2 November 2009 at the Company's offices at Hadley House, Bayshill Road, 
Cheltenham, Gloucestershire GL50 3AW. 
 
 
 
 
Preliminary Approach Update 
Following the announcement by the Company on 16 September 2009 that it had 
received a provisional approach from a financial institution that may or may not 
lead to an offer being made for the Company, the Company has continued to pursue 
discussions. As at the date of this announcement the Company had not received a 
firm intention to make an offer from a third party and as such there can be no 
guarantee that these discussions will result in an offer being made.  The 
Company is in an Offer Period. 
 
 
 
 
Takeover Code Rule 21.1 Approval 
 
 
Rule 21.1 of the Takeover Code ("Rule 21.1") provides that during the course of 
an offer, or even before the date of the offer, if the Board has reason to 
believe that a bona fide offer might be imminent, the Board must not take any 
action without shareholder approval which may result in any offer or bona fide 
possible offer being frustrated or in shareholders being denied the opportunity 
to decide on its merits ("frustrating action"). The Company is seeking approval 
from Shareholders only in respect of those terms of the Loan Agreement (as 
defined below) which might constitute frustrating action and accordingly is not 
asking Shareholders to approve the commercial terms of the Loan, which are being 
negotiated by the Board. The Company is therefore seeking Shareholder approval 
for the purposes of Rule 21.1 at the General Meeting before signing and 
completing the Loan Agreement and granting the Warrant (as defined below). 
 
 
The Proposed Loan 
 
 
The Company and the Lender have entered into the Heads of Agreement in respect 
of the Loan. The parties have agreed in principle that the final Loan 
Agreement ("Loan Agreement") will contain two features which are subject to Rule 
21.1: 
 
 
  *  an Exit Event provision which, if triggered during the term of the Loan, would 
  allow the Lender to exercise its rights pursuant to a warrant ("Warrant"), to be 
  issued on Completion, to subscribe for up to 3 per cent. of the share capital of 
  the Company (on a fully diluted basis) on the date of exercise of the Warrant at 
  no cost to the Lender. 
 
 
 
  *  an obligation on the Company to pay a redemption premium on an escalating basis 
  during the course of the Loan, on any redemption made. The Exit Event provision 
  would trigger the repayment of the Loan and the redemption payment. 
 
 
 
If Shareholders do not agree to these terms the directors believe that it is 
unlikely that agreement will be reached with the Lender. As set out below, the 
Board unanimously recommends that Shareholders vote in favour of the Resolution. 
 
 
Entering into the Loan Agreement and issue of the Warrant is conditional upon, 
amongst other things, the Resolution being passed at the General Meeting and 
satisfactory due diligence by the Lender. 
 
 
 
 
Background to and Reasons for the Loan 
 
 
Vero's annual accounts show more than 20 years of continuously increasing sales 
and rising profitability over the last five years. Vero had used term loans from 
the UK subsidiary of Fortis Bank (now part of the French bank BNP Paribas) to 
finance acquisitions in 2005 and 2006. The Company has come under pressure from 
Fortis to repay its loans, a substantial amount of which has already been 
repaid. The outstanding balance is repayable on demand and the proceeds of the 
Loan are intended to be used to repay the Fortis indebtedness and provide 
working capital for the Company. 
 
 
For reasons of expediency the Company is seeking Shareholder approval for the 
Loan in advance of entering into a binding agreement. Should Shareholders 
approve the Loan a further announcement will be made at the date of Completion. 
 
 
In the event that Shareholders do not approve the Resolution, the Board will 
have to consider alternative short term funding solutions for the business to 
maintain normal operations. There can be no guarantee that any alternative 
funding solutions will be found or that these would be available on reasonable 
terms and the Directors believe these alternatives could have a negative impact 
on Shareholder value. 
 
 
Change of Control 
 
 
The Heads of Agreement state that the Loan Agreement will include the following 
provisions: 
 
 
  *  The outstanding balance of the Loan is payable in full on the occurrence of an 
  Exit Event; 
 
  *  There is a stepped scale redemption premium payable on any capital being repaid 
  in the first three years of the Loan of 15 per cent. increasing by 10 percentage 
  points each subsequent year; 
  *  The Warrant will be issued to the Lender on Completion. The Warrant will give 
  the Lender the right to subscribe for up to 3 per cent. of the share capital of 
  the Company (on a fully diluted basis) on the date of exercise of the Warrant 
  and will be exercisable on the occurrence of an Exit Event. 
 
 
 
General Meeting 
 
 
 
 
Set out below are details of the Resolution to be proposed at the General 
Meeting: 
 
 
Resolution: THAT, the Company may, as borrower, enter into a loan agreement 
including the following terms and that such terms be and are hereby approved 
(for the purpose of ensuring compliance with Rule 21.1 of the Takeover Code ): 
 
  1.     The outstanding balance of the Loan is payable in full on the 
occurrence of an Exit 
 

             Event; 
 
2.    There is a stepped scale redemption premium payable on any capital being 
repaid 
 

      as follows: 
 
         a)   15 per cent. if capital is repaid before the third anniversary of 
Completion; 
 
       b)   25 per cent. if capital is repaid on or after the third anniversary 
of 
 

            Completion but before the fourth anniversary of Completion; 
and 
 
       c)  35 per cent. if capital is repaid on or after the fourth anniversary 
of 
 

           Completion. 
 
    3.   The lender will be issued on Completion with a Warrant to subscribe for 
up to 
 

         3 per cent. of the equity share capital of the Company (on 
a fully diluted basis) 
 

         on the date of exercise of the Warrant at 
no cost to the lender and that the 
 

         rights granted pursuant to such 
Warrant will be exercisable by the lender on 
 

         the occurrence of 
an Exit Event. 
 
 
 
 
Document available 
 
 
Copies of the Circular will be available to the public, free of charge, at the 
Company's registered office and at the offices of Daniel Stewart at 36 Old 
Jewry, London, EC2R 8DD during usual business hours on any weekday (Saturdays, 
Sunday and public holidays excepted) for one month from the date of this 
document. The Circular will also be available on the Company's website, 
www.vero-software.com. 
 
 
 
 
Recommendation 
 
 
The directors do not believe that entering into the Loan would, in practice, 
frustrate an offer but it may affect the price paid per share through dilution. 
On the other hand the Directors believe that this would be mitigated by holding 
bid negotiations from a position of relative financial strength. 
 
 
Shareholders should also consider that there can be no guarantee that an offer 
will be forthcoming, whereas the Company has a short term funding requirement. 
 
 
The Directors consider that the Loan is in the best interests of the Company and 
its Shareholders as a whole and recommend that you vote in favour of the 
Resolution, as they intend to do in respect of their own beneficial holdings, 
amounting in aggregate to 5,511,380 Ordinary Shares, which represents 
approximately 14.8 per cent. of the Company's issued ordinary share capital. 
 
 
 
 
For further information: 
 
 
Don Babbs, Chief Executive Officer 
Tel: [phone] 
Vero Software plc 
www.vero-software.com 
 
 
Paul Shackleton 
    Tel: [phone] 
Daniel Stewart & Company plc 
www.danielstewart.co.uk 
 
 
Will Henderson 
     Tel: [phone] 
Smithfield PR 
 
 
 
 
 
 
Notes to Editor: 
 
 
Vero Software plc is a company that creates and distributes CAD/CAM/CAE software 
for aiding the design and manufacturing process in specific sectors of the 
industry with a knowledge-driven focus on mould and die. The specific sectors 
include the design and manufacture of plastic injection moulds, sheet metal 
stamping dies, progressive dies, shoe moulds, and electrode production which, in 
turn, are to be found in a multitude of manufacturing industry sectors such as 
automotive, electronic and medical. 
 
 
Vero has offices in Italy, England, Japan, France, Canada, USA and China and now 
has a user base that numbers more than 20,000 and supplies products to more than 
40 countries via its wholly owned subsidiaries and competence centres. 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
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