Acquisition

RNS Number:6284F
Vert-Eco Group PLC
25 November 2004

Embargoed until 7.00 a.m.

25 November 2004



NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, IN OR INTO THE
UNITED STATES, CANADA, JAPAN, THE REPUBLIC OF IRELAND OR AUSTRALIA



                               Vert-eco Group plc

                   Proposed Acquisition and proposed Placing



Vert-eco Group plc ("Vert-eco" or the "Company") today announces that it has
conditionally agreed to acquire the entire issued share capital of HydroDec
Development Corporation Pty Limited ("HydroDec") for a consideration valued at
#7.4 million and the repayment of #0.5 million of debt due to HydroDec's vendor,
Virotec Limited ("Virotec").


Highlights


*         HydroDec was established to commercialise the HydroDec Technology,
which is an oil re-refining process designed to remove harmful contaminants,
such as PCBs. The HydroDec Technology is based on intellectual property
comprising a protected patent in Australia and certain other jurisdictions
developed by the Commonwealth Scientific and Industrial Research Organisation of
Australia. HydroDec has entered into an exclusive global licence with CSIRO for
the marketing and distribution of the HydroDec Technology.


*         Vert-eco proposes to raise up to #1,035,000 by way of a placing of up
to 9,000,000 new ordinary shares at 11.5p per share.  There is no minimum
subscription level under the Placing.


*         Proposed change of the Company's name to HydroDec Group plc.


*         Proposed appointment to the Board of Directors of Mark McNamara as
Executive Chief Operating Officer, Brian Sheeran as Non-executive Deputy
Chairman and Bruno Bamonte as Non-executive Director.




For further details please contact:


John Gunn, Chairman          Martin Forrest / Nick Fox       Richard Swindells / 
Vert-eco Group plc           M: Communications Limited       Katherine Roe        
Tel:  [phone]          Tel:  [phone]             Durlacher Limited        
                                                             Tel: [phone]



Introduction

The Board of Vert-eco is pleased to announce that the Company has today entered
into a formal agreement to acquire the entire issued share capital of HydroDec
for a consideration valued at #7.4 million, to be satisfied by the allotment of
60,000,000 Consideration Shares at a price of 11.5p each and the payment of
#500,000 cash consideration, in each case at Completion.  The vendor of HydroDec
is Virotec.


Under the Acquisition, the Company will also fund the repayment of up to
#500,000 of debt due from HydroDec to Virotec.


The Company is also proposing to raise up to #1,035,000 before expenses by way
of the Placing of up to 9,000,000 Placing Shares at a price of 11.5p each. There
is no minimum subscription level to be achieved under the Placing and the
Acquisition and Admission will proceed even if no sums are raised under the
Placing. Any amounts raised under the Placing will be used to augment the
Company's existing cash resources.


In view of its size, the Acquisition constitutes a Reverse Takeover (in
accordance with the AIM Rules) and is conditional, inter alia, on the approval
of Vert-eco Shareholders, which is to be sought at the Extraordinary General
Meeting. Also at the Extraordinary General Meeting, the Company will seek the
approval of Vert-eco Independent Shareholders for a waiver of the obligation of
the Virotec Concert Party to make a mandatory cash offer for the Company (on the
basis that, as a result of the issue to it of the Consideration Shares, it will
hold 38.3 per cent. of the issued ordinary share capital of the Company at
Completion, assuming the Placing is fully subscribed, and 40.7 per cent. on the
basis that no Placing Shares are issued under the Placing) and to change the
Company's name to HydroDec Group plc.


An explanatory admission document and circular, which will contain the notice of
Extraordinary General Meeting, is being sent to Shareholders today.


It is expected that dealings in the Enlarged Share Capital will commence on AIM
on 21 December 2004.


Background to and reasons for the Acquisition

In the Company's AIM admission document dated 6 August 2004, the Board stated
its intention to acquire businesses within the environmental industry
concentrating on two key areas: environmental protection, which includes the
collection, treatment, prevention and elimination of pollutants, and the
development and operation of renewable or alternative energy sources.


The Board believes that the activities of HydroDec fit within the above
acquisition criteria. The Board also considers that the HydroDec business
represents an excellent base from which to develop further the Vert-eco business
in the environmental industry.


Following Completion, the business of the Company will be that of operating the
business of HydroDec. In addition, the Directors and Proposed Directors will
continue to assess further suitable acquisition opportunities.


Background to HydroDec

HydroDec was incorporated in 2000 as a subsidiary of Virotec, whose business
involves the application of geochemical processes within the environmental
protection industry. Virotec's shares were admitted to trading on AIM in July
2001.


HydroDec was established to commercialise the HydroDec Technology, which is an
oil re-refining process designed to remove harmful contaminants, such as PCBs.
The HydroDec Technology is based on intellectual property rights comprising a
patent in Australia and certain other jurisdictions, developed by the
Commonwealth Scientific and Industrial Research Organisation of Australia.
HydroDec has entered into an exclusive global licence with CSIRO for the
marketing and distribution of the HydroDec Technology.


At the current time, HydroDec operates one small plant in Australia under the
Joint Venture Agreement with Oil Treatment Services Pty Ltd. To date, the
HydroDec Technology has been used principally to treat contaminated transformer
oil.


The Directors and Proposed Directors consider that HydroDec Technology has a
number of key advantages over other re-refining processes and, in particular, is
able to:


*         recycle and re-refine used and contaminated transformer oils; and

*         destroy a wide range of POPs (e.g. PCB, DDT, PCP, HCB and dioxins)
which are considered to be hazardous.


A significant benefit of the process is that it does not result in the formation
of dioxins and there is virtually no consequential environmental damage as the
POPs are harmlessly dissipated.


Since the HydroDec facility has only been operating since June 2004, the latest
audited financial information shows minimal trading activity based upon the
operation of a single plant with a maximum treatment capacity of approximately
3,000 litres per day of used transformer oil. Whilst trading to date has been
minimal, the Directors and Proposed Directors believe that there is significant
potential to increase the turnover of the existing plant and to roll-out the
HydroDec Technology, both geographically and for many different forms of oil
treatment.


HydroDec has entered into the Virotec Royalty Agreement with Virotec pursuant to
which it will pay to Virotec 5.0 per cent. of amounts received by HydroDec in
relation to the commercialisation of the HydroDec Technology. The Virotec
Royalty Agreement will continue in force until the expiry of the intellectual
property rights in relation to the HydroDec Technology.


On Completion, Mark McNamara, Brian Sheeran and Bruno Bamonte (the latter of
whom are respectively Chief Executive Officer and Finance Director of Virotec)
will be appointed to the Board as executive Chief Operating Officer,
non-executive Deputy Chairman and a non-executive Director respectively. Mark
McNamara will continue to take day-to-day operational responsibility for the
running of the business of HydroDec. The Company is actively seeking a suitable
candidate to fulfill the role of Chief Executive Officer.


Principal terms of the Acquisition

Under the terms of the Acquisition Agreement, the Company has conditionally
agreed to buy the entire issued share capital of HydroDec from Virotec. The
consideration is to be satisfied by the issue of 60,000,000 Ordinary Shares at
an issue price of 11.5p per Ordinary Share and the payment of #500,000 cash
consideration, each at Completion. The consideration, therefore, values HydroDec
at #7,400,000. In addition, the Company has agreed to discharge up to #500,000
of debt owing by HydroDec to Virotec.


The Acquisition Agreement contains certain warranties and indemnities (subject
to certain financial and other limitations) given by Virotec in relation to
HydroDec and its business, including the operations under the Joint Venture
Agreement.


Completion of the Acquisition Agreement is conditional upon, inter alia, the
approval of Vert-eco Shareholders, Admission and the AIM Sponsorship and Placing
Agreement becoming unconditional. However, as noted above, the Acquisition is
not dependent upon the Placing itself proceeding or any particular level of
subscription thereunder.


The Placing

The Placing Shares will rank in full for all dividends or other distributions
hereafter declared, made or paid on the issued ordinary share capital of the
Company and will rank pari passu in all other respects with all other Ordinary
Shares in issue on Admission (including the Consideration Shares).


The Placing is conditional on, inter alia, the AIM Sponsorship and Placing
Agreement becoming unconditional (save for Admission) and not having been
terminated in accordance with its terms prior to Admission and Admission taking
place on or before 21 December 2004 (or such later date as the Company and
Durlacher may agree, but in any event no later than 7 January 2005).


The Placing is intended to raise up to #1,035,000 for the Company, before
expenses. There is no minimum subscription level to be achieved under the
Placing and the Acquisition and Admission will proceed even if no sums are
raised under the Placing.


The Directors have indicated that they may wish to participate in the Placing
although no subscription commitments have been made at the time of this
announcement.


The Board

As at the date of this announcement the Board comprises:


John Gunn (Non-executive Chairman), aged 62, is a director of a number of quoted
and unquoted companies including Turbo Genset Inc, Corac plc, Ceres Power plc
and DAT Enterprises Limited. He is also founder and director of Scheidegg
Limited. He was formerly chief executive officer of Exco International plc and
chairman of Telerate Inc and British and Commonwealth plc.


Rodger Sargent ACA (Finance Director), aged 32, is the co-founder and finance
director of Coliseum Group plc, the AIM quoted sports bar and restaurant
business and is non-executive director of TMT Group plc. He was also a founder
and the finance director of Sports Internet Group plc, InTechnology plc and
Sports Resource Group Limited. He was a non-executive director of I Feel Good
(Holdings) plc, Interactivity Group plc (now known as Healthcare Enterprise
Group plc) and Newsplayer Group plc (now known as Catalyst Media Group plc). He
qualified as a chartered accountant with Price Waterhouse, London in 1996,
before working with Merrill Lynch, London, as a debt analyst.


New Board

On Completion, in addition to John Gunn and Rodger Sargent, the New Board will
comprise:


Mark McNamara (Proposed Executive Chief Operating Officer), aged 45, has a
Bachelor of Applied Science (Chemistry). He is currently employed by AirTerAq
Pty Ltd, a company established by him in July 2001, involved in the engineering
technology and environmental services field, providing contracting, project
management and technology management services. He managed the construction and
subsequent commissioning of the HydroDec plant in 2004. Previously he was
employed for ten years by the Clough Engineering Ltd group and was responsible
for the formation, strategic direction and management of their environment
technology and engineering subsidiary.


Brian Sheeran (Proposed Non-executive Deputy Chairman), aged 56, is the
Executive Chairman and Chief Executive Officer of Virotec, which is quoted both
on AIM and the Australian Stock Exchange. He is also a member of the Australian
Institute of Company Directors. He started his career in mechanical engineering
and has extensive business experience gained, from firstly a 25 year career in
private business, having founded and operated commercial ventures in the
Australian tourism, mining, marine and road transport industries, and from a
seven year period of service consulting to the public company environment, as a
specialist in resource beneficiation and commercialising new environmental
technologies.


Bruno Bamonte (Proposed Non-executive Director), aged 46, is the Finance
Director and an Executive Director of Virotec. He is a chartered accountant and
a member of the Australian Institute of Company Directors. He has acted as a
consultant to a number of public companies on a range of areas including
preparation of prospectuses, assistance to gain admission to the official list
of the Australian Stock Exchange, assistance to seek re-quotation of shares for
suspended companies, corporate governance and other financial areas.


Relationship with Virotec

Following Completion, as a result of the issue of the Consideration Shares,
Virotec will hold approximately 38.3 per cent. of the Enlarged Share Capital,
assuming the Placing is fully subscribed and 40.7 per cent. on the basis that no
Placing Shares are issued under the Placing. Further, as stated above, two of
the Company's Non-executive Directors will be Brian Sheeran and Bruno Bamonte,
executive directors of Virotec and there will be an on-going contractual
relationship between the Enlarged Group and Virotec under the Virotec Royalty
Agreement.


Whilst the Directors consider that the relationship of the Company with Virotec
will afford many commercial opportunities going forward, given the similar
nature of the respective businesses, they considered it necessary to put in
place certain contractual safeguards with the objective of ensuring that the
Company is capable of carrying on business independently of Virotec.
Accordingly, the Company and Virotec have entered into a controlling shareholder
agreement, conditional upon Admission, with the objective of achieving such
independence in relation to decision making and ensuring that all transactions
between the Company and Virotec will be at arm's length and on normal commercial
terms.


Change of name

A resolution will be proposed at the EGM to change the Company's name to
HydroDec Group plc. The existing certificates in relation to Existing Ordinary
Shares will remain valid.


Dividend policy

There is no current intention to pay a dividend following Completion. However,
the New Board will review dividend policy in light of the future performance of
the Enlarged Group and the availability of distributable reserves.


City Code

Following Completion, Virotec will own 60,000,000 Consideration Shares
representing approximately 38.3 per cent. of the Enlarged Share Capital assuming
the Placing is fully subscribed and 40.7 per cent. on the basis that no Placing
Shares are issued. The Virotec Directors, who are members of the Virotec Concert
Party, will not hold any Ordinary Shares. Under Rule 9 of the City Code when (i)
a person acquires shares which, when taken together with shares already held by
him or persons acting in concert with him, carry 30 per cent. or more of the
voting rights of a company subject to the City Code or (ii) any person who,
together with persons acting in concert with him, holds not less than 30 per
cent. but not more than 50 per cent. of the voting rights of a company subject
to the City Code, and such person, or any person acting in concert with him,
acquires additional shares which increases his percentage of the voting rights,
then in either case that person, together with the persons acting in concert
with him, is normally required to make a general offer in cash, at the highest
price paid by him or any person acting in concert with him, for shares in the
relevant company within the preceding 12 months, for all the remaining equity
share capital of the company.


The Panel has been consulted and has agreed to waive any obligation of Virotec
(and any persons acting in concert with it, together comprising the Virotec
Concert Party), which would otherwise arise as a result of the implementation of
the Proposals, to make, pursuant to Rule 9, a general offer for the Company,
subject to Resolution 2 (as set out in the notice of EGM being sent to Vert-eco
Shareholders today) being passed on a poll of Vert-eco Shareholders. To be
passed, this Resolution will require a simple majority of votes cast by Vert-eco
Shareholders.


Current trading and prospects


The Company

The Company has not engaged in any commercial operations since its admission to
AIM on 25 August 2004 and there has been no significant change in its financial
position since 30 September 2004.


Following Admission the operating business of the Company will comprise
HydroDec. The Directors' and Proposed Directors' assessment of the prospects of
HydroDec are set out immediately below. In addition, as stated above the Company
will continue to assess further suitable acquisition opportunities going
forward.


HydroDec

HydroDec commenced processing contaminated transformer oils in Australia in June
2004 and its plant currently has a maximum treatment capacity of approximately
3,000 litres per day. Based on the interest received to date in Australia,
HydroDec is contemplating the construction of a larger plant which will be
designed to have a capacity of up to 20,000 litres a day. HydroDec is seeking
opportunities to establish additional plants in other geographic locations to
service the recycling of transformer oils and consider other markets that may
arise in the treatment of other contaminated oil feedstocks.


Employee incentivisation schemes

The New Board believes that a key element of the Company's retention and reward
strategy for employees will be to align their interests with those of the
Vert-eco Shareholders, as well as to encourage employee share ownership and to
facilitate the retention of key staff through the operation of employee
incentivisation schemes.


Although there will be no employee incentivisation schemes in force at
Completion, it is the New Board's intention to review alternative
incentivisation scheme structures that may be appropriate for the Enlarged Group
going forwards. Incentivisation arrangements may involve the establishment of a
share option scheme which would allow options to be granted to employees with
rights to subscribe for no more than 10 per cent. of the Company's issued share
capital.


The existing rights of the employees of both Vert-eco and HydroDec (where
applicable) will be fully safeguarded.


Extraordinary General Meeting

A circular and notice to Vert-eco Shareholders convening an Extraordinary
General Meeting to be held at the offices of Durlacher at Moorgate Hall, 155
Moorgate, London EC2M 6XB at 9.30 a.m. on 20 December 2004 is being sent to
Vert-eco Shareholders today.


Copies of the admission document and circular will be available from the offices
of the Company's Nominated Adviser, Durlacher Limited, at Moorgate Hall, 155
Moorgate, London EC2M 6XB.


Terms used in this announcement have the same meaning as those defined in the
admission document and circular being posted to Vert-eco Shareholder today.


                      This information is provided by RNS
            The company news service from the London Stock Exchange
END

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