Assetco Regulatory News (ASTO)

7 Nov 2005 07:00

Asfare Group plc07 November 2005 Press Release 7 November 2005 Asfare Group plc ("Asfare" or "the Company") Acquisition of Todd Research Limited and Placing The directors of Asfare, a leading specialist supplier of high quality productsand services supplying the Emergency Services market, are pleased to announcethe agreement to, and the exchange of, the sale and purchase agreement for theacquisition of the whole of the issued share capital of Todd Research Ltd("Todd"). Final completion of the acquisition is expected to occur this month.Todd will be acquired for an initial consideration of £1,650,000, plus an amountequal to the cash balance in the business on completion (currently £170,000) anda further deferred consideration of up to £2,080,000. Todd is involved in the design, manufacture and supply of x-ray apparatusdesigned primarily for the interception of suspect mail. Todd operates fromfreehold premises in Chelmsford, Essex and has a blue chip client base includingthe Foreign and Commonwealth office, Shell UK, Exxon Mobil, Johnson and Johnson,Lloyds TSB and Scottish Widows with sales in over 80 countries. Todd, which was established in 1947, is being acquired from its controllingshareholder, Michael Lambarth. Michael Lambarth and sales director Sandra Downswill both retire after a brief handover period. For the year ended 31st January 2005 Todd reported turnover of £1,896,891 andprofit before taxation of £110,815. Profit before interest and tax, as adjustedfor Directors remuneration and one-off pension payments, was £506,000 for theyear. Net assets of Todd at 31st January 2005 were £765,099, including a freeholdproperty at book value of £522,726 which was re-valued in October 2005 at£1,250,000. Including this revaluation surplus, net assets would have beenincreased at 31st January 2005 on a pro forma basis to £1,492,373. The consideration for Todd will be as follows: 1. An initial payment of £1,650,000 satisfied in cash at completion plus an amount equal to the cash balance in Todd estimated at £170,000. 2. A payment of £80,000 in cash on achievement by Todd of at least £1,700,000 of revenues in the current Todd financial year to 31st January 2006. 3. Deferred consideration capped at £2,000,000 which will be payable in a mixture of cash and shares over two years upon finalisation of each year's revenue: • Deferred consideration will be based on Todd's sales. • For the first 12 months following completion the vendors will receive, 75p for every £1 of sales above £2,250,000 subject to certain adjustments depending on the gross margin achieved. The total possible deferred consideration for the first 12 months will be capped at £1,000,000, with the consideration being satisfied by £750,000 in cash and £250,000 in shares valued at 90p. • For the second 12 months following completion the vendors will receive, 75p for every £1 of sales above £2,600,000 subject to certain adjustments depending on the gross margin achieved. The total possible deferred consideration for the second 12 months will be capped at £1,000,000, with the consideration being satisfied by £750,000 in cash and £250,000 in shares valued at 90p. Todd will be acquired on a debt free basis. The directors of Asfare expect thata substantial portion of any deferred payments will be met from cash generatedby the increased level of Todd's sales needed to generate such earn-outpayments. The acquisition of Todd will reflect the Board's strategy to diversify theGroup's product portfolio by acquiring complementary businesses within thehomeland security sector. The sector is effectively divided into two areas:Detection & Protection, and Fire, Search & Rescue. Asfare's existing productportfolio is targeted at Fire, Search & Rescue, while Todd's operations arefocused within Detection & Protection. By servicing the two areas, Asfare'sstrategy aims to align its own product portfolio with an increasing drive by thehomeland security forces to provide a combined response. The directors of Asfare believe that there is significant potential to expandthe sales performance of Todd in the current security climate. They intend tobuild on the excellence of the Todd products to expand its blue chip clientbase. Tim Wightman, Chairman of Asfare, commented on the acquisition; "We aredelighted to be purchasing Todd on attractive terms both in relation to itshistoric earnings and the substantial asset backing. We believe that the Toddbusiness can be expanded significantly in the UK and abroad by building on thereputation of the Todd product with the support of Asfare's management." Tony O'Neill, newly appointed CEO of Asfare, will take immediate day to daymanagement control of the Todd business. To part fund the initial consideration, the Company also today announces theplacing of 771,111 new ordinary shares in the Company at 90p per share ("thePlacing Shares") to raise £694,000. Certain of the existing directors aresubscribing for in aggregate, a total of 72,222. Following the admission of thePlacing Shares to trading on AIM, the Directors will hold the following ordinaryshares in the Company: Director Number of Number of % of issued Placing Shares Ordinary share capital Shares on on Admission AdmissionTim Wightman* 33,333 532,083 10.7%David Chisnall - 648,750 13.1%Tony O'Neill 11,111 11,111 0.2%Tim O'Connor 11,111 11,111 0.2%Adrian Bradshaw **16,667 267,917 5.4% * Tim Wightman is interested in 158,333 of the Ordinary Shares set out againsthis name by reason of his wife's beneficial ownership of those shares. ** Adrian Bradshaw is interested in 16,667 Ordinary Shares set out against hisname, held in the Bradmount SSAS pension scheme. The balance of the initial consideration will be satisfied through new debtfacilities with HSBC secured on the Todd freehold property. Application for admission to trading on AIM for the Placing Shares has been madeand trading in the Placing Shares is expected to occur on 10th November 2005.The Placing Shares will, on admission to AIM, rank pari passu in all respectswith the existing ordinary shares of the Company. Following successful completion of this acquisition, Tony O'Neill will beallocated share options over a total of 120,295 ordinary shares and Tim O'Connorwill be allocated share options over a total of 21,872 ordinary shares, makingthe total allocated share options 10% of the issued share capital. The exerciseprice of these options shall be at 90p. Enquiries: Asfare Group plcTony O'Neill, Chief Executive Tel: +44 (0) 2380 861 966Tim O'Connor, Finance Director Seymour PierceMark Percy / John Depasquale Tel: +44 (0) 20 7107 8000 Media enquiries:Abchurch CommunicationsAriane Comstive Tel: +44 (0) 20 7398 7700ariane.comstive@abchurch-group.com www.abchurch-group.com - Ends - This information is provided by RNS The company news service from the London Stock Exchange