APC Technology Regulatory News (APC)

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, NEW ZEALAND, RUSSIA, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A BREACH OF THE RELEVANT SECURITIES LAWS OF SUCH JURISDICTION.

This announcement does not constitute a prospectus or offering memorandum or an offer in respect of any securities of APC Technology Group PLC or of any other entity and should not be considered as a recommendation that any person should subscribe for or purchase any such securities.

This announcement contains inside information for the purposes of the market abuse regulation (EU No. 596/2014) ("MAR"). In addition, market soundings (as defined in MAR) were taken in respect of certain of the matters contained in this announcement, with the result that certain persons became aware of such inside information, as permitted by MAR. Upon the publication of this announcement, this inside information is now considered to be in the public domain and such persons shall therefore cease to be in possession of inside information.

25 July 2018

APC Technology Group PLC

(the "Company")

Acquisition of Aspen Electronics Limited

and

Placing and Subscription of 37,563,591 Ordinary Shares to raise £2.54 million

APC Technology Group PLC (AIM: APC), the provider of design-in, specification and distribution services for specialist electronic components and systems, lighting technologies and connectivity products, is pleased to announce the acquisition of Aspen Electronics Limited and a placing, including the sale of Vendor Ordinary Shares, and subscription of 37,563,591 new Ordinary Shares in the Company at 6.75 pence per Ordinary Share, to raise approximately £2.54 million before expenses.

Highlights:

· Acquisition of Aspen for a net consideration of £2.2 million to be funded by a combination of part of the proceeds of the Placing and the Subscription and the issue of 7,407,407 Consideration Shares which will be subject to a lock-in.

· Aspen is a premium distributor of electronic components, specialising in radio frequency (RF) and microwave components and test and measurement equipment.

· Complementary RF and microwave business to APC's which the Board expects will lead to top line synergy opportunities.

· The Acquisition is expected to be earnings enhancing in the first full year after Completion.

· Placing of 26,761,587 Ordinary Shares and vendor placing of 3,835,341 Ordinary Shares by Stockdale Securities and Subscription of 6,966,663 Ordinary Shares with existing and new institutional and other investors at 6.75 pence per Ordinary Share to raise approximately £2.54 million before expenses.

· Including the 7,407,407 Consideration Shares, a total 44,970,998 new Ordinary Shares are being issued at 6.75 pence each for a total value of £3.04 million.

· Approximately £200,000 of the proceeds from the Subscription immediately used to repay Loan Notes held by a current shareholder.

· Anthony Lochery, Chairman of the Company, has subscribed for 1,481,481 Ordinary Shares for a total amount of £99,999.97 and Richard Hodgson, Chief Executive of the Company, has subscribed for 300,000 Ordinary Shares for a total amount of £20,250.00.

Placing Statistics

The new Ordinary Shares are being issued under the Company's existing authorities.

Commenting on the placing and acquisition, Richard Hodgson, Chief Executive, said:

"We are delighted to have been able to complete the acquisition of such a premium-quality, complementary RF and Microwave business which has an excellent reputation and which is expected to lead to top line growth opportunities as part of the enlarged APC group. APC continues to trade in line with management expectations and we expect this acquisition to be earnings enhancing in its first full financial year. Following on from the Company's successful acquisition and integration of First Byte Micro, this is a further step in the Company's stated aim of consolidation led growth in its components division"

Enquiries

APC Technology Group PLC +44 (0) 330 313 3220

Richard Hodgson, Chief Executive www.apcplc.com

Michael Thompson, Finance Director

Stockdale Securities Limited (Nominated Adviser and Broker) +44 (0)20 7601 6100

Mark Brown / Antonio Bossi / Rose Ramsden / Henry Willcocks / Fiona Conroy

ACQUISITION OF ASPEN ELECTRONICS LIMITED

AND

PLACING AND SUBSCRIPTION OF 37,563,591 NEW ORDINARY SHARES TO RAISE £2.54 MILLION

1. Introduction

The Company is pleased to announce that it has agreed to acquire Aspen, for a total net consideration of £2.2 million, and a Placing of 26,761,587 New Ordinary Shares and a Subscription of 6,966,663 Subscription Shares at a price of 6.75 pence per Ordinary Share. The consideration payable for Aspen will be satisfied by part of the net proceeds of the Placing along with the Consideration Shares.

In addition, Howard Venning and Robert Johnson, the vendors of Aspen, have agreed to sell down 3,835,341 Vendor Ordinary Shares to be allotted and issued to them, taking the total placing and subscription to £2.54 million.

Aspen, is a premium RF and Microwave distribution business, specialising in a wide range of radio frequency and microwave components and test and measurement equipment.

The Placing Shares and the Subscription Shares have been placed with existing and new institutional and other investors. Admission and dealings in the Placing Shares, the Subscription Shares and the Consideration Shares are expected to commence on AIM at 8.00 a.m. on 26 July 2018. 

2. Background to and reasons for the Acquisition and Placing

APC's strategy is to complement organic growth within its Components distribution division with acquisitions in the highly fragmented UK electronic components distribution market. In line with this strategy, in January 2018, APC acquired First Byte Micro Ltd, now rebranded APC Locator, a franchised and independent component sourcing company.

APC recently announced that APC Locator has integrated successfully into the enlarged Group, expanded its offering and has delivered £1 million in bookings in its first six months of ownership which is well in excess of its acquired run rate of £1.5 million per annum.

The Directors believe that Aspen's RF and microwave business will complement APC's existing Components business and will create top line synergy opportunities. APC intends to grow its business to revenue of £50 million to 75 million within 3 to 5 years, principally by growing its Components and Property Technology divisions.

Approximately £1.7 million of the net proceeds of the Placing to be received by the Company and the Vendors will be used to satisfy the cash element of the consideration for the Acquisition. Aspen has cash of £1 million on its balance sheet which reduces the effective consideration payable by APC to £2.2 million. As set out above approximately £0.2 million of the proceeds of the Subscription to be received by the Company will immediately be used to repay part of the existing Loan Notes on which interest of 10 per cent. per annum is payable; in addition, the Company expects to use a further £0.42 million of the proceeds of the Placing and the Subscription to repay the balance of the existing Loan Notes and to satisfy outstanding professional fees.

The Acquisition is expected to be earnings enhancing in the first full year after Completion.

3. Information on Aspen

In addition to the distribution of radio frequency and microwave components, Aspen has in-house testing facilities which allow it to provide enhanced value-added services to key customers and suppliers.

It also distributes own brand products and has an online sourcing business for lower value RF and microwave components.

In the year to 30 June 2017, Aspen reported Revenue of £4.3 million, Gross Profit of £1.35 million and adjusted* EBITDA of £0.35 million.

Aspen has continued to grow in the year to 30 June 2018 and it is expected to report an adjusted EBITDA of £0.55 million.

In addition, Aspen has £0.8m of debtors on its balance sheet, which is available to be refinanced through the Group's existing invoice discounting facility.

* Excluding the salary of its founder and vendor 

4. Proposed terms of the Acquisition

The consideration payable for the entire issued share capital of Aspen on a cash and debt free basis is £3.2 million. However, the business has £1 million on its balance sheet which will be distributed to the Vendors thus reducing the net consideration payable by APC to £2.2 million.

The cash consideration payable by APC is therefore £1.7 million in addition to £0.5 million to be satisfied by the issue of 7,407,407 Consideration Shares.

The Consideration Shares will be subject to a 12 month lock in agreement and a further 12 month orderly market arrangement afterwards.

5. Details of the Placing

The Company has raised £2.54 million (before expenses) through the issue of the New Ordinary Shares and the Subscription Shares at the Placing Price in order to fund part of the consideration payable pursuant to the Acquisition, to repay the existing Loan Notes and to provide additional working capital to the Group. The Placing Price represents a premium of approximately 2 per cent. to the closing mid-market price of 6.625 pence per Ordinary Share on 24 July 2018, being the last business day prior to the publication of this announcement. The Placing Shares, the Subscription Shares and the Consideration Shares will represent approximately 25 per cent. of the Enlarged Share Capital.

Pursuant to the terms of the Placing Agreement, Stockdale Securities, as agent for APC and the Vendors, has procured Placees for the Placing Shares at the Placing Price.

The obligations of Stockdale Securities under the Placing Agreement are conditional, inter alia, upon Admission having occurred by 8.00 a.m. on 26 July 2018 (or such later time and/or date as may be agreed, being no later than 8.00 a.m. on 31 August 2018), and there being prior to Admission no material breach of the warranties given to Stockdale Securities.

Stockdale Securities may terminate the Placing Agreement in specified circumstances (including for breach of warranty at any time prior to Admission, if such breach is reasonably considered by Stockdale Securities to be material in the context of the Placing) and in the event of a force majeure event occurring at any time prior to Admission. If the conditions of the Placing Agreement are not fulfilled on or before the relevant date in the Placing Agreement, placing monies will be returned to Placees without interest as soon as possible thereafter.

Application has been made to the London Stock Exchange for the Placing Shares, the Subscription Shares and the Consideration Shares to be admitted to trading on AIM. The Placing Shares, the Subscription Shares and the Consideration Shares will rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive any dividend or other distribution declared, made or paid following Admission. It is expected that Admission will become effective and that dealings in the Placing Shares, the Subscription Shares and the Consideration Shares will commence at 8.00 a.m. on 26 July 2018.

6. Related party transaction

Canaccord Genuity and Rockridge Investments are substantial shareholders in the Company. Accordingly, each of their participations in the Placing is deemed to be a related party transaction pursuant to the AIM Rules for Companies. The directors of the Company, having consulted with the Company's Nominated Adviser, Stockdale Securities Limited, consider that the terms of each of their participations in the Placing are fair and reasonable insofar as shareholders are concerned.

7. Total voting rights

Following Admission, the Company's issued share capital will comprise 179,883,988 Ordinary Shares.

Therefore the figure of 179,883,988 Ordinary Shares should be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the Company under the FCA's Disclosure Guidance and Transparency Rules.

Following Admission, Anthony Lochery will hold 3,603,703 Ordinary Shares and Richard Hodgson will hold 2,300,000 Ordinary Shares representing respectively 2.00 per cent. and 1.28 per cent. of the Company's enlarged share capital.

8. Forward-looking statements

This announcement may contain forward-looking statements relating to the Company's expected operations that are based on management's current expectations, estimates and projections. Words such as "expects", "intends", "plans", "projects", "believes", "estimates", and similar expressions are used to identify such forward-looking statements. These statements are not warranties or guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. By their nature forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that may occur in the future. Although the Company believes the expectations reflected in such statements are reasonable, no assurance can be given that such expectations will prove to be correct. There are a number of factors, many of which are beyond the control of the Company, which could cause actual results and developments to differ materially from those expressed or implied by forward-looking statements.

Definitions

All references in this announcement to "£" or "p" are to the lawful currency of the United Kingdom.

Ends