Placing and Notice of GM (8354C)

TIDMWFCA

RNS Number : 8354C

WFCA PLC

14 March 2011

WFCA Plc

("WFCA", "the Company" or "the Group")

Subscription

Approval of waiver of Rule 9 of the Takeover Code

and

Notice of General Meeting

WFCA plc (AIM: WFCA.L), a leading regional advertising and marketing agency, announces that it has today sent a circular to Shareholders (the "Circular") seeking their approval to raise further finance by means of a subscription of 177,500,000 Ordinary Shares at 1 pence per Ordinary Share raising gross proceeds of GBP1,775,000. The Subscription is conditional upon Shareholder approval at a General Meeting to be held at 11.30 a.m, on 30 March 2011 at the offices of the Company at Vale House, Clarence Road, Tunbridge Wells, Kent TN1 1HE.

Set out below is a summary and extracts of the information contained in the Circular. The full document is available at the offices of the Company, Vale House, Clarence Road, Tunbridge Wells, Kent TN1 1HE GM and on the Company's website, www.wfca.co.uk..

For further information please contact:

WFCA plc

Stephen Latter, Financial Director Tel: [phone]

Daniel Stewart & Company Plc

Oliver Rigby/James Felix Tel: [phone]

 
EXPECTED TIMETABLE OF PRINCIPAL EVENTS 
                                                                   2011 
Latest time and date for receipt of Forms 
 of Proxy                                          11.30 a.m., 28 March 
General Meeting                                    11.30 a.m., 30 March 
Admission to trading on AIM of the Subscription 
 Shares                                            07.00 a.m., 31 March 
Expected date for CREST accounts to be credited            On Admission 
                                                  5 Business Days after 
Expected date for posting of share certificates               Admission 
 
If any details contained in the timetable above should change, 
 the revised times and dates will be notified by means of an 
 announcement through a regulatory information service. 
 
SUBSCRIPTION STATISTICS 
 
Subscription Price                                              1 pence 
Number of Ordinary Shares in issue at the 
 date of this announcement                                  268,466,008 
Maximum number of new Ordinary Shares the 
 subject of the Subscription                                177,500,000 
Number of Ordinary Shares in issue immediately 
 following completion of the Subscription                   445,966,008 
Estimated gross proceeds of the Subscription         up to GBP1,775,000 
 

Proposed Placing, Subscription and Notice of General Meeting

1. Introduction

The Company today announces that it proposes to raise further finance by means of a subscription of 177,500,000 Ordinary Shares at the Subscription Price raising gross proceeds of GBP1,775,000. The Subscription is being undertaken by Hawk, a company which Bob Morton, Chairman of WFCA, wholly owns with his wife, John Foley, Steve Latter, Herald and Williams De Broe. The gross proceeds will be used to repay the Seraffina Debt and to provide further working capital. Seraffina is a Company that is owned by a trust for the benefit of Bob Morton's adult son and is therefore also connected to Bob Morton.

The Subscription is classified as a related party transaction under the AIM Rules as a result of Bob Morton's role acting as the Non-Executive Chairman of the Company, Steve Latter's role as Group Finance Director and John Foley's role as a Non Executive Director. The Related Party Independent Directors consider, having consulted with Daniel Stewart (the Company's nominated adviser), that the Subscription is fair and reasonable insofar as the Company's shareholders are concerned.

In addition, as a result of commercial, financial and personal relationships, Hawk, John Foley and Bob Morton are deemed to be acting in concert with each other. As at the date of this announcement, the Concert Party is interested in approximately 20 per cent. of the Issued Share Capital. Following the Concert Party Subscription, the Concert Party will, assuming no further Ordinary Shares are issued, be interested in approximately 41.1 per cent. of the Enlarged Share Capital. Ordinarily, the issue and allotment of the Subscription Shares would trigger an obligation on the Concert Party to make a general offer to shareholders for the entire issued share capital of the Company pursuant to Rule 9 of the Takeover Code. Under Rule 9 of the Takeover Code, when a person acquires an interest in shares (which taken together with shares in which he and persons acting in concert with him are interested) carry 30 per cent. or more of the voting rights of a company subject to the Takeover Code, such person (or persons acting in concert) would usually be required to make a general offer to shareholders.

The Panel has agreed, however, to waive the obligation to make a general offer that would arise on the part of the Concert Party members, either collectively or individually with respect to Hawk, as a result of the issue of the Subscription Shares, subject to approval on a poll by the Independent Shareholders of the Rule 9 Waiver. Further details are set out below.

The Subscription Shares will be issued credited as fully paid and will rank pari passu with the Company's existing Ordinary Shares (including the right to receive all dividends or other distributions declared, made or paid thereon). It is expected that, should the relevant approvals be obtained at the General Meeting, the Subscription Shares will be admitted to trading on AIM on 31 March 2011.

2. Reasons for the proposed Subscription

WFCA is a leading regional marketing and advertising company, providing effective solutions across all marketing services, including television, radio, press, on-line, outdoor and direct mail. In addition and in accordance with standard industry practice, the Company acts as a financial principal in placing substantial media booking orders on behalf of its clients.

The Company has today announced that its net profit before taxation, exceptional items and discontinued operations for the six months ended 31st December 2010 was GBP127,073 compared to a profit of GBP416,189 for the six months ended 31st December 2009. The result follows the loss of two major clients reported to the market in previous statements. Cost cutting measures were made to substantially mitigate the lost income but there will be a period of reduced activity while the Company continues to rebuild its client base and turnover.

Turnover in the period was GBP8,073,019 (2009, GBP15,198,936) with a gross profit of GBP1,770,486 (2009, GBP2,729,658). The loss of these high turnover but lower margin 'media' clients has resulted in the overall gross margin increasing from 18% to 22%. Basic earnings per share are -0.03p (2009 0.11p).

In the light of market conditions and in recognition of the Company's proven operating skills in these areas, the Board has refocused its business strategy to concentrate on taking medium sized challenger brands through to being mature retailers. This provides a clear differentiation between the Company and the main London agencies. The approach is already demonstrating its attraction as shown by recently secured new business wins for Nom Dairies, Clarence Court, Armour Group, Infinity and Pataks, together with a series of smaller appointments. These clients, along with a growing pipeline of new opportunities, provide a platform to rebuild underlying profitability. However, as mentioned above, there will be a reduced level of activity during the balance of the financial year as revenues from these new clients take time to come on stream.

This new capital will provide sufficient funds to allow the Group to repay the Serrafina Debt and to provide the necessary financial stability to enable it to explore acquisition opportunities in order to expand its service offering and sector reach.

3. The Subscription

The Company proposes to raise GBP1,775,000 via the subscription for 177,500,000 new Ordinary Shares at the Subscription Price. The Subscription will be used to repay the Seraffina Debt and for additional working capital.

4. City Code onTakeovers and Mergers

The Proposals give rise to certain considerations under the Takeover Code. Brief details of Rule 9 of the Takeover Code are described below. The Takeover Code is issued and administered by the Panel. The Takeover Code applies to all takeover and merger transactions, however effected, where the offeree company is, inter alia, a listed or unlisted public company with its place of central management and control in the United Kingdom. The Company is such a company and its shareholders are entitled to the protection afforded by the Takeover Code.

Under Rule 9 of the Takeover Code, any person who acquires an interest (as defined in the Takeover Code) in shares which, taken together with shares in which he is already interested and in which persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights of a company which is subject to the Takeover Code, is normally required to make a general offer to all the remaining shareholders to acquire their shares. Similarly, when any person, together with persons acting in concert with him, is interested in shares which in aggregate carry not less than 30 per cent. of the voting rights of the company but does not hold shares carrying more than 50 per cent. of such voting rights, a general offer will normally be required if a further interest in shares is acquired by any such person, or any person acting in concert with him.

An offer under Rule 9 must be made in cash and at the highest price paid by the person required to make the offer, or any person acting in concert with him, for any interest in shares of the Company during the 12 months prior to the announcement of the offer.

For the purposes of the Takeover Code, a concert party arises where persons acting in concert pursuant to an agreement or understanding (whether formal or informal) actively co-operate to obtain or consolidate control of a company or to frustrate the successful outcome of an offer for a company. Control for the purposes of the Takeover Code is defined as an interest, or interests, in shares carrying in aggregate 30 per cent. or more of the voting rights of a company, irrespective of whether such interest or interests give de facto control.

The Concert Party Members are Hawk, John Foley and Bob Morton. They are currently interested in 53,183,343 Ordinary Shares, representing 19.8 per cent. of the Company's Issued Share Capital. On issue of the Subscription Shares the members of the Concert Party would be interested in 183,183,343 Ordinary Shares, representing approximately 41.1 per cent. of the Company's Enlarged Share Capital.

 
                   Number of 
                    Ordinary      Percentage        Number of 
                 Shares held   holding as at         Ordinary       Percentage 
                   as at the     the date of           Shares          holding 
                date of this            this        following        following 
 Name           announcement    announcement        Admission        Admission 
 Hawk             42,916,677             16%      162,916,677             36.5 
 John Foley       10,266,666            3.8%       20,266,666              4.5 
 

The issue of the Subscription Shares to the members of the Concert Party would, together, trigger an obligation on the members of the Concert Party to make a general offer to the Shareholders pursuant to Rule 9 of the Takeover Code. The Panel has agreed to waive the obligation to make a general offer that would otherwise arise as a result of the issue of the Subscription Shares being issued to the Concert Party, if the Independent Shareholders pass an ordinary resolution on a poll approving the Rule 9 Waiver. Members of the Concert Party will not be entitled to vote on these resolutions. Further details of the Concert Party and its holdings are set out in the Circular.

Shareholders should be aware that, following Completion, members of the Concert Party would hold between 30 per cent. and 50 per cent. between them in the Enlarged Share Capital of the Company and will therefore (for so long as they are treated as acting in concert) not be entitled to increase their interest in the voting rights of the Company without incurring a further obligation under Rule 9 of the Code to make a general offer.

5. Intentions of the Concert Party

The members of the Concert Party have confirmed their intention that, following any increase in their holdings of Ordinary Shares as a result of the issue of the Subscription Shares, the Group should continue operating in substantially the same manner as it is at present, with no major changes. The members of the Concert Party have also confirmed that the existing employment rights, including pension rights (where relevant), of all employees of the Group would be maintained. The members of the Concert Party have no intention of relocating the business or redeploying the fixed assets of the Group.

6. General Meeting

You will find set out at the end of the Circular, a notice convening a General Meeting of the Company to be held at the offices of the Company at 11.30 a.m. on 30 March 2011 for the purpose of considering, and if thought fit, passing the following resolutions:

1. To approve the Rule 9 Waiver;

2. To grant the Directors the authority to issue and allot New Ordinary Shares up to a nominal value of GBP4,748,076 under section 551 of the Act; and

3. To empower the Directors pursuant to Section 570 of the Act to allot equity securities (as defined in Section 560(1) of the Act) for cash pursuant to the authority conferred by point 2 above as if Section 561(1) of the Act did not apply.

To be passed, Resolution 1 requires a majority of more than 50 per cent. of the Independent Shareholders voting on a poll in person or by proxy in favour of the Resolution.

Resolution 2 is proposed as an ordinary resolution and therefore requires more than 50 per cent of Shareholders voting in person or by proxy in favour of the Resolution.

Resolutions 3 is a special resolution and therefore requires 75 per cent. or more of Shareholders voting in person or by proxy in favour of each Resolution.

Shareholders should be aware that the Proposals are conditional upon the passing of all the Resolutions. If any of the Resolutions is not passed then the proposed injection of capital and the repayment of the Seraffina Debt will not proceed.

7. General Meeting and action to be taken

A Form of Proxy for use by Shareholders in connection with the GM is enclosed with the Circular. Whether or not you propose to attend the GM in person, you are requested to complete the Form of Proxy in accordance with the instructions printed on it and to return it to the Company's registrars, Capita Registrars, P4XS 32, Beckenham Road, Beckenham, BR3 4TH, as soon as possible and in any event so as to arrive no later than 11.30 a.m. on 28 March 2011. Completion and return of the Form of Proxy will not preclude you from attending the GM and voting in person should you so wish.

Please note that only Independent Shareholders are entitled to vote on the resolution to approve the Rule 9 Waiver and that the vote will be by way of poll. Accordingly it is very important that the Form of Proxy is completed and returned.

8. Recommendation

The Rule 9 Independent Directors, who have been so advised by Daniel Stewart, consider the Proposals to be fair and reasonable and in the best interests of the Company and its Independent Shareholders as a whole. In providing its advice to the Rule 9 Independent Directors, Daniel Stewart has taken into account the Rule 9 Independent Directors' commercial assessments. Accordingly, the Rule 9 Independent Directors recommend shareholders to vote in favour of the Resolutions.

The Company has received irrevocable commitments to vote in favour of the Proposals from the Rule 9 Independent Directors and third parties in respect of 161,486,461 Ordinary Shares representing 60% of the Issued Share Capital of the Company. Further details in respect of the irrevocable undertakings are set out in the Circular.

In accordance with the provisions of the Takeover Code, the Concert Party is considered to be interested in the outcome of the resolution to approve the Rule 9 Waiver and, accordingly, none of its members will vote on the resolution to approve the Rule 9 Waiver, and they have so confirmed this to the Company.

 
                                 DEFINITIONS 
The following definitions apply throughout this announcement and 
 in the accompanying Form of Proxy unless the context requires otherwise: 
"Act"                             the Companies Act 2006; 
"Admission"                       the admission of the Subscription Shares to 
                                  trading on AIM becoming effective in 
                                  accordance with the AIM Rules; 
"AIM"                             AIM, a market operated by London Stock 
                                  Exchange plc; 
"AIM Rules"                       the rules for AIM companies published by 
                                  London Stock Exchange plc governing 
                                  admission to and the operation of AIM (as 
                                  amended from time to time); 
"Board" or "Directors"            the directors of WFCA, being Steve Latter, 
                                  Michael Richards, Rodger Braidwood, John 
                                  Foley, Rob Hamer and Bob Morton; 
"Company" or "WFCA"               WFCA Plc; 
"Concert Party"                   together Hawk, Bob Morton and John Foley 
                                  (each a "Concert Party Member"); 
"Concert Party Subscription"      the issue of 130,000,000 Subscription Shares 
                                  to Hawk and John Foley pursuant to the 
                                  Subscription Agreement; 
"Daniel Stewart"                  Daniel Stewart & Company plc; 
"Enlarged Share Capital"          the enlarged issued ordinary share capital 
                                  of the Company immediately following the 
                                  issue of the Subscription Shares assuming 
                                  that no further shares are issued after the 
                                  date of this announcement and before the 
                                  issue of the Subscription Shares; 
"Form of Proxy"                   the form of proxy enclosed with the Circular 
                                   for use by Shareholders in connection with 
                                   the GM; 
"GM" or "General Meeting"         the general meeting of WFCA to be held at 
                                  Vale House, Clarence Road, Tunbridge Wells 
                                  TN1 1HE, at 11.30 a.m. on 30 March 2011, 
                                  notice of which is set out in the Circular; 
"Group"                           the Company and its subsidiaries; 
"Hawk"                            Hawk Investment Holdings Limited, a company 
                                   owned by Bob Morton and his wife; 
"Herald"                          Herald Investment Management Limited; 
"Independent Shareholders"        shareholders other than members of the 
                                  Concert Party; 
"Issued Share Capital"            the 268,466,008 Ordinary Shares in issue as 
                                   at the date of this announcement; 
"Loan Agreement"                  the loan agreements dated 7 October 2010 and 
                                  25 January 2011 made between Seraffina and 
                                  the Company lending the Company in aggregate 
                                  GBP1,200,000 further details of which are 
                                  set out in the Circular; 
"Non Concert Party Subscription"  the issue of 47,500,000 Subscription Shares 
                                  to Herald, Steve Latter and Williams De Broe 
                                  pursuant to the Subscription Agreement; 
"Ordinary Shares"                 ordinary shares of 1 pence each in the 
                                  capital of the Company; 
"Panel"                           the Panel on Takeovers and Mergers; 
"Proposals"                       the approval of the Resolutions, including 
                                   a resolution concerning the Rule 9 Waiver; 
"Related Party Independent        Rodger Gordon Braidwood, Robert Hamer and 
 Directors"                        Michael John Richards; 
"Resolutions"                     the resolutions to be proposed at the GM, 
                                   as set out in the notice of GM at the end 
                                   of the Circular; 
"Rule 9 Independent Directors"    Steve Latter, Michael John Richards, Rodger 
                                   Gordon Braidwood and Robert Hamer; 
"Rule 9 Waiver"                   the waiver of the obligation to make a 
                                  general offer under Rule 9 of the Takeover 
                                  Code to acquire the Ordinary Shares not 
                                  already owned by the Concert Party, which 
                                  would otherwise arise as a consequence of 
                                  the issue of the Subscription Shares; 
"Seraffina"                       Seraffina Holdings Limited, a company 
                                  registered in the British Virgin Islands 
                                  under number 538758 wholly owned by a trust 
                                  for the benefit of Bob Morton's adult son, 
                                  Charles N Morton; 
"Seraffina Debt"                  the GBP1,200,000 owed to Seraffina by the 
                                   Company pursuant to the Loan Agreement; 
"Shareholders"                    the holders of Ordinary Shares and 
                                  "Shareholder" means any one of them; 
"Subscribers"                     Hawk, Herald, John Foley, Steve Latter and 
                                   Williams De Broe; 
"Subscription"                    the Concert Party Subscription and the Non 
                                   Concert Party Subscription; 
"Subscription Agreement"          the agreements entered into between the 
                                  Company and the Subscribers, pursuant to 
                                  which the Subscribers have agreed to 
                                  subscribe for the Subscription Shares at the 
                                  Subscription Price; 
"Subscription Price"              1 pence per Subscription Share; 
"Subscription Shares"             the 177,500,000 Ordinary Shares issued 
                                  pursuant to the Subscription Agreement; 
"Sterling" or "GBP"               the lawful currency of the United Kingdom; 
"Takeover Code"                   the City Code on Takeovers and Mergers; 
"UK" or "the United Kingdom"      the United Kingdom of Great Britain and 
                                  Northern Ireland; and 
"Williams De Broe"                Williams De Broe Limited a company 
                                  registered in the UK under company number 
                                  02485266 . 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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