Last checked at 9 Jun 2016 07:00
9 June 2016
Velox3 plc
("Velox3" or the "Group")
Proposed Acquisition of Sheltyco Enterprises Group Ltd., Change of Name to Veltyco Group plc and Notice of General Meeting
Velox3 plc (AIM: VLOX) is pleased to announce the conditional acquisition of the entire issued share capital of Sheltyco Enterprises Group Limited for a consideration of £10.9 million to be satisfied by the issue of 43,753,775 new consolidated Ordinary Shares. Sheltyco is a holding company for several subsidiary companies focused on the marketing and promotion of third party online gaming, lottery and binary option operators, such as Betsafe (online casino and sports betting), Lottopalace (lottery) and Option888 (binary options).
Key points
· Sheltyco (founded in 2011) is specialised in marketing and promotion activities in three fast growing markets:
o Online gaming (Betsafe - online casino and sports betting)
o Lottery (Lottopalace)
o Binary options (Option888)
· Profitable and cash generative since 2013
· Following Admission, the Enlarged Group will also review potential acquisition opportunities which fit into the company's profile.
· The net proceeds of the transaction will be used to support the working capital needs of the Enlarged Group and to continue Sheltyco's marketing activities in gaming, lottery and binary options
· The Directors intend to declare dividend payments as soon as it becomes commercially prudent to do so
The Company also announces that it has conditionally raised c.£538,000 before expenses by way of a Subscription of 2,152,172 Subscription Shares at a price per Subscription Share of 25 pence. The approximate net proceeds of the Subscription of £251,000 will be applied as working capital for the Enlarged Group.
The Subscription is anticipated to complete in two stages with 1,273,181 Subscription Shares being issued on Admission, raising approximately £318,295 (gross), and a further 878,991 Subscription Shares issued in early July raising approximately £219,747 (gross).
As a term of the Subscription, each Subscriber shall also receive 1 Warrant for every 5 Subscription Shares subscribed, exercisable at 31 pence per Warrant at any time during the period from the date of issue until the 5th anniversary of issue. It is not intended that the Warrants will be listed on any stock market.
In addition, the Company intends to convert outstanding loans of c.€818,000 into 2,717,932 Ordinary Shares and 503,586 Warrants.
Share Consolidation
The Company currently has 193,031,360 Existing Ordinary Shares in issue; the last recorded price per
Existing Ordinary Share was 0.20 pence on 4 December 2015, the last day that the Existing Ordinary Shares were trading on AIM before suspension. The Existing Directors believe that consolidating the Existing Ordinary Shares will lead to the Enlarged Group having a more readily understood share price and number of Ordinary Shares in issue.
Accordingly, the Existing Directors have decided to implement a consolidation of its share capital so that each Shareholder of every 25 or more Existing Ordinary Shares will be entitled to receive one new Ordinary Share. Shareholders with a holding in excess of 25 Existing Ordinary Shares, but which is not exactly divisible by 25, will have their holdings of Ordinary Shares rounded down to the nearest whole number of Ordinary Shares following the Share Consolidation.
Conversion of outstanding fees
In settlement of certain fees and remuneration due to the Existing Directors in the aggregate sum of €106,400, it is envisaged that the Board will propose to issue on Admission to David Mathewson 173,538 new Ordinary Shares and to Mark Rosman 153,846 new Ordinary Shares at the Issue Price.
Assuming that these share issues are carried out, David Mathewson's interest in the Enlarged Share Capital on Admission will comprise 249,769 Ordinary Shares representing 0.44 per cent. of the Enlarged Share Capital and warrants over 240,000 Ordinary Shares and Mark Rosman's interest will comprise 486,927 Ordinary Shares representing 0.86 per cent. of the Enlarged Share Capital.
Change of Name
To reflect the changing nature of the business the Directors propose a change of name to Veltyco Group Plc.
Notice of General Meeting
The Acquisition is classified as a reverse takeover under the AIM Rules requiring the approval of Shareholders. The Acquisition is also conditional on the approval by the Shareholders of a waiver of Rule 9 of the Takeover Code. As a result, the Company is today also publishing a readmission document (Readmission Document) which is available from the Company's website at www.velox3.com.
Conditional upon the completion of the Acquisition, application will be made for the Enlarged Issued Share Capital to be admitted to trading on AIM.
An Extraordinary General Meeting of the Company will be held at the offices of Estera Trust (Isle of Man) Limited, 33-37 Athol Street, Douglas, Isle of Man IM1 1LB on 27 June 2016 at 10.30a.m. for the purpose of considering and, if thought fit, passing the resolutions.
A copy of the Readmission Document, notice of Extraordinary General Meeting and Proxy Form will be posted to Shareholders later today
Trading in the Company's Existing Ordinary Shares on AIM is currently suspended; it is anticipated that following completion of the Acquisition the suspension will be lifted and trading in the Enlarged Share Capital will commence at 8.00 a.m. on or around 29 June 2016.
Stockdale Securities is acting as Nominated Advisor and Broker to the Company.
Capitalised terms used in this announcement but not defined have the meanings given to them in the Readmission Document.
For further information please contact:
Velox3
David Mathewson, Executive Chairman + 44 (0)1624 647 979
Stockdale Securities +44 (0)20 7601 6100
Antonio Bossi
David Coaten
Newgate Communications +44 (0)20 7653 9850
Adam Lloyd
Robyn McConnachie
Helena Bogle
Below are extract from the Readmission Document published today
Dear Shareholder
PROPOSED ACQUISITION OF SHELTYCO ENTERPRISES GROUP LIMITED
PROPOSED CHANGE OF NAME TO VELTYCO GROUP PLC
25 TO 1 SHARE CONSOLIDATION
SUBSCRIPTION OF 2,152,172 ORDINARY SHARES AT 25 PENCE PER SHARE
APPROVAL OF A WAIVER OF RULE 9 OF THE CITY CODE
ADMISSION OF THE ENLARGED ISSUED SHARE CAPITAL TO TRADING ON AIM
AND
NOTICE OF EXTRAORDINARY GENERAL MEETING
1. INTRODUCTION
The Company today announced two conditional transactions. The first is the proposed issue of 2,152,172 new Ordinary Shares at a subscription price of 25 pence per Ordinary Share to various investors to raise approximately £538,000 before expenses for working capital purposes. The second is the Company's proposed acquisition of Sheltyco Enterprises Limited ("Sheltyco") in consideration for the issue of 43,753,775 new Ordinary Shares that, at a notional price of 25 pence per share, values Sheltyco at £10.9 million.
Sheltyco is a holding company for several subsidiary companies interested in the marketing and promotion of online gaming, lottery and binary option operators, such as Betsafe (online casino and sports betting), Lottopalace (lottery) and Option888 (binary options). Sheltyco was incorporated in The British Virgin Islands in November 2011. Detailed information on Sheltyco and its business is set out in paragraph 3 of this Part I of this document.
In addition to the Subscription Shares, each Subscriber will be issued one Warrant for every 5 Subscription Share subscribed, exercisable at 31 pence per Ordinary Share at any time during the period from the date of issue until the 5th anniversary of issue. The Subscription is anticipated to complete in two stages with 1,273,181 Subscription Shares issued on Admission and a further 878,991 Subscription Shares to be issued in early July.
The approximate net proceeds of the Subscription of £251,00 will be applied as working capital for the Enlarged Group. Details of Sheltyco's future strategic aims are detailed in paragraph 2 of Part I of this document.
Details of the Acquisition Agreement are set out in paragraph 5 of this Part I and in paragraph 12 of Part VIII of this document. Details of the Subscription are set out in paragraph 1 of this Part I.
The Acquisition is classified as a reverse takeover under the AIM Rules requiring the approval of Shareholders. It is therefore conditional upon, inter alia, the passing of the Resolutions. The Acquisition is also conditional on the approval by the Shareholders of a waiver of Rule 9 of the Takeover Code. Conditional upon the completion of the Acquisition, application will be made for the Enlarged Share Capital to be admitted to trading on AIM.
The purpose of this document is to set out the reasons for the Acquisition and the Subscription, and to explain why the Existing Directors consider that the Proposals are in the best interests of the Company and the Shareholders and to seek Shareholder approval for the Proposals.
You should read the whole of this document and your attention in particular is drawn to the Risk Factors set out in Part IV of this document.
2. BACKGROUND TO AND REASONS FOR THE ACQUISITION
Velox3 was admitted to AIM in July 2013 under the name of 24/7 Gaming Group Holdings plc as a service provider to the mobile gaming industry for smart phones and tablets. The Company developed HTML 5 based games, however, the board of directors realised during 2014 that returns from its investment in the mobile gaming sector were not satisfactory. At that juncture, the board of directors decided to explore alternative acquisition opportunities and entered in discussions to acquire a binary options business. Whilst it was considering this acquisition opportunity, the Board initiated a restructuring of the Group and, in December 2014, decided to cease operations and further funding to its gaming and publishing operations.
After careful consideration, the board of directors decided not to progress with the acquisition opportunity in the binary options space and sought approval from shareholders to re-classify Velox3 as an investing company with an investing policy focused on the acquisition of direct and indirect interests in the online trading services industry. Shareholders approved this investing policy in February 2015.
Recently, the Board has been introduced to the Sheltyco acquisition opportunity. The Board has reviewed the Acquisition and believes that, considering its stage of development, historical financial performance and profitability, the presence of certain common shareholders between the two groups and the sector in which Sheltyco operates, it would constitute a good fit with Velox3's current focus and expertise.
Sheltyco operates in growing markets and have industry experts who run the operational side of the business. By achieving Admission, the Enlarged Group can benefit from the increased visibility afforded by the stock market. Being quoted on AIM is expected to enable the Enlarged Group to carry out acquisitions through equity deals, retain key employees by providing long term (equity) incentive plans and have easier access to funding, if required.
In addition, Sheltyco has been generating profits and positive net cash flows almost since the start of its operations, and therefore the Independent Director will be recommending that Shareholders vote in favour of the Whitewash Resolution and the Existing Directors will be recommending that Shareholders vote in favour of the other resolutions which are required to implement the Acquisition.
3. INFORMATION ON THE SHELTYCO GROUP
Sheltyco
Sheltyco is a holding company primarily focused on generating marketing leads and entering into marketing contracts for the activities of its partners in sports betting, casinos, poker games, lottery and binary options, such as Betsafe (online casino and sports betting), Lottopalace (lottery) and Option888 (binary options). Sheltyco focuses on all of these three complementary activities under one umbrella, leveraging its historical cash generative activities of marketing online casinos and sports betting.
Audited historical financial information relating to Sheltyco for the three years ended 31 December 2013, 2014 and 2015 is set out in Part V of this document.
History of the Group
Sheltyco was incorporated in The British Virgin Islands in November 2011 under the name of Pollard Marketing Ltd and initially focussed on marketing activities in gaming and sports betting. Sheltyco started its marketing operations in 2012 and changed its name to Sheltyco Enterprises Group Limited in July 2013. The Sheltyco Group has been profitable since 2013 and has been using its expertise to start marketing lottery and binary option operations in 2015.
Sheltyco Enterprises Ltd (Betsafe)
The Sheltyco Group entered into a partner agreement with Betsson Services Ltd in March 2012 to exclusively market the Betsafe brand and all related products (including, but not limited to, sports betting, casino and poker games) in the German speaking territories (Germany, Austria, Switzerland). Betsson Services Ltd is part of the Betsson AB group, the Swedish quoted investor and manager of companies in the online gaming industry. At 31 May 2016, Betsson AB had a market capitalisation of c. SEK 14,900 million (€1.6 billion). Sheltyco receives a share on all revenues generated from the Betsafe operations in Germany, Austria and Switzerland regardless of how the player is originated in recognition of its marketing activities. The revenue share is a percentage of net revenues which is calculated as bets less winnings after deducting licencing fees, third party royalties, gaming tax, bonuses, promotions, loyalty and jackpot contributions, payment processing fees, fraud costs and refunds. The Existing Directors and the Proposed Directors believe that revenue from the Betsafe operations will be increasingly derived from live betting and mobile devices. The contract with Betsson Services Ltd was recently renewed and further details of the contract are set out in paragraph 12 of Part VIII of this document.
To increase visibility and reliability of the brand Betsafe, Sheltyco Group has historically maintained a premium partnership with 1. FC Köln (who compete in the German Bundesliga) and it has plans to renew such arrangements for the next season. Whilst the agreement with Betsson Services Ltd is in relation to the German speaking countries, there is increasing recognition of the global Betsafe brand as demonstrated by the recent sponsoring deal that the Betsson AB group has entered into with Manchester City, who compete in the English Premier League.
Historically the Betsafe operations have generated stable cash flows for the Sheltyco Group and going forward are expected to form the basis of the core of the Enlarged Groups operations. Through the Betsafe brand, the Betsson AB group offers casino, sports betting and poker games on their site, including live casino.
Tunegames (LottoPalace)
Tunegames Holding Ltd ("Tunegames") is a wholly owned subsidiary of Sheltyco and holds an exclusive license to utilise an online platform for purchasing, processing and delivery of lottery tickets. Tunegames has appointed Altair Entertainment NV ("Altair") to operate the Lottopalace.com gaming website. Tunegames is responsible for the marketing and promotion of the site and receives a revenue share of the net income Altair generates from the players acquired as a result of Tunegames' marketing efforts.
The LottoPalace.com website offers players the opportunity to play some of the world's most well-known lotteries anywhere at any time including Germany Lotto, Mega Millions (USA), Power Ball (USA), National Lottery (UK) and Euro Millions. By providing a new lottery system, it gives access to some of the most entertaining lotteries and biggest jackpots. Lotteries have different rules, but the principle is that a player picks his favourite numbers (or let the computer pick randomly) and then waits for the official lotto organiser to draw the winning numbers. Furthermore, lottery may be played in a group (or syndicate), which lowers the price of a ticket and therefore allows a player to buy more tickets to increase the chance of winning.
LottoPalace was launched in August 2015 and it is currently focusing its marketing efforts on the German and Scandinavian markets.
Tunegames engaged Dream Partners Solutions Ltd to provide certain software and support in the development of the Lottopalace.com platform. These arrangements have been terminated and a new agreement to provide similar services is to be agreed shortly with the software developer Softlot (a company, the majority of the shares in which are ultimately beneficially owned by Karsten Uwe Lenhoff).
Silkline Marketing Ltd (Option888)
Silkline Marketing Ltd ("Silkline") is a wholly owned subsidiary of Sheltyco, and is a Cyprus incorporated and domiciled company. Silkline has entered into an agreement with Novox Capital Ltd ("Novox"), a Cypriot company that is regulated by the Securities and Exchange Commission of Cyprus (CySEC) under license CIF 224/14 to operate the Options888 site under the option888.eu domain. Silkline is responsible for the marketing and promotion of the Option888 site and receives a revenue share of the net income Novox generates from the players acquired as a result of Silkline's marketing efforts.
Option888 is an online binary option platform. Binary option traders speculate on short term movements in volatile underlying assets or indices. Binary options can be based on, inter alia, exchange rates, stock values, market indices and commodity prices. A binary option holder's payoff is either a fixed amount of compensation if the option expires "in the money" or nothing at all if the option expires "out of the money". The success of a binary option is thus based on a yes/no proposition, hence the name "binary".
The value of the potential gain or loss on the binary option will be known to the trader at the time of purchase of the binary option. A trader will purchase a binary option at a particular price and stipulate the time to expiration, within the timeframes offered by the trading platform. If the option expires "out of the money" then the trader has lost the value of the option purchased. If the option expires "in the money" then the trader receives a fixed return based on the value of the option purchased. Option888 offers a fixed 70% return over the value of the binary option.
The Existing Directors and the Proposed Directors believe that binary options is a growing area of financial trading products and expect that this product will continue to show growth in markets such as Asia, Canada, Australia and UK. In the Existing Directors and the Proposed Directors experience, the relatively high customer deposits, of approximately €1,000 - €1,500 per customer, make binary options an attractive product compared to other gaming and gambling activities.
A binary option is a financial instrument, in which the payoff can take only two possible outcomes. This generally focuses on high/low or in or out of a range of prices for an underlying financial product. In the Existing Directors and Proposed Directors experience, options offered by binary option providers generally pay 70-85% of the amount staked and they expect that Novox will pay out similar amounts going forward. On an incorrect prediction, the trader loses his entire bet. Binary options are "momentum" bets based on the prediction of a financial product price movement over the following 30 second to approximately one hour, or longer.
The Option888 brand was launched in early 2015, focussing initially on the Swedish and German markets. Through Novox Capital Ltd, the Option888 platform is offered in three different languages (English, German and Swedish) and five different currencies alongside customer support both through e-mail and live-chat. The Option888 platform offers a variety of advanced payment methods, allowing customers to make fast and safe deposits as well as quick withdrawals.
Binary options has seen strong growth in popularity in two of Sheltyco's main markets; Italy and Germany. The Sheltyco Group intends to become a leading provider of marketing and promotion services in the binary option market and will seek to launch into other markets in Scandinavia such as Norway, Denmark and Finland. Other markets where Sheltyco will focus on promoting the Option888 platform include Australia, Canada and UK.
The Sheltyco Group has also entered into a sponsoring agreement with FC Bologna, who compete in the Italian premier league (Series A).
4. EFFECT OF THE ACQUISITION ON THE ENLARGED GROUP
The Acquisition will not have an immediate effect on the day-to-day business or the assets of either Velox3 or Sheltyco. The business of Velox3 will continue as a holding company with Sheltyco as its trading company subsidiary. Velox3 intends to change its name to Veltyco Group plc.
The Existing Directors believe the Acquisition will facilitate access to the capital markets and will provide increased visibility and market recognition to the business of Sheltyco.
On completion of the Acquisition, the Company will cease to be an investing company as defined in the AIM Rules for Companies.
5. SUMMARY OF THE PRINCIPAL TERMS OF THE ACQUISITION
The Company has entered into the Acquisition Agreement, pursuant to which it has conditionally agreed to acquire the entire issued share capital of Sheltyco in exchange for the issue of the Consideration Shares by the Company to the Vendors, pro rata, to their respective holdings in Sheltyco. The Consideration Shares will be credited as fully paid and will represent approximately 85 per cent of the Existing Ordinary Share Capital following the Share Consolidation. The Acquisition Agreement contains usual warranties, a tax covenant and restrictive covenants for a period of 3 years restricting the Vendors from competing with Sheltyco following the Acquisition.
Completion of the Acquisition is subject to certain conditions being satisfied including the passing of the Resolutions by Shareholders at the Extraordinary General Meeting and Admission.
Further details of the Acquisition Agreement are set out in paragraph 12 of Part VIII of this Document.
6. SHARE CONSOLIDATION
The Company currently has 193,031,360 Existing Ordinary Shares in issue; the last recorded price per Existing Ordinary Share was 0.20 pence on 4 December 2015, the last day that the Existing Ordinary Shares were trading on AIM before suspension. The Existing Directors believe that consolidating the Existing Ordinary Shares will lead to the Enlarged Group having a more readily understood share price and number of Ordinary Shares in issue.
Accordingly, the Existing Directors have decided to implement a consolidation of its share capital so that each Shareholder of every 25 or more Existing Ordinary Shares will be entitled to receive one new Ordinary Share. Shareholders with a holding in excess of 25 Existing Ordinary Shares, but which is not exactly divisible by 25, will have their holdings of Ordinary Shares rounded down to the nearest whole number of Ordinary Shares following the Share Consolidation. Fractional entitlements, whether arising from holdings of fewer or more than 25 Existing Ordinary Shares, will be sold in the market and the proceeds will be retained for the benefit of Company.
As a consequence of the Share Consolidation, each Shareholder's holding of Ordinary Shares will (ignoring factional entitlements) immediately following the Share Consolidation becoming effective be one twenty fifth of the number of Existing Ordinary Shares held by them on completion of the Share Consolidation. However, each Shareholder's proportionate interest in the company's issued ordinary share capital will remain unchanged as a result of the Share Consolidation.
7. SUBSCRIPTION
The Company is proposing to raise approximately £538,000 (gross) through the Subscription.
The Subscription is conditional, amongst other things, on:
(a) the passing of the Resolutions; and
(b) Admission.
The Issue Price represents a premium of approximately 500 per cent. to the middle market price per Ordinary Share immediately prior to suspension of trading in the Company's Ordinary Shares on AIM on 7 December 2015.
The Subscription is anticipated to complete in two stages with 1,273,181 Subscription Shares being issued on Admission, raising approximately £318,295 (gross), and a further 878,991 Subscription Shares issued in early July raising approximately £219,747 (gross).
The Ordinary Shares issued pursuant to the Subscription will represent approximately c. 3.8 per cent. of the Enlarged Share Capital (assuming Admission and that no other Ordinary Shares are issued between the date of this document and completion of Subscription other than the Consideration Shares, the Convertible Debt Shares and the Settlement Shares) and will rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid after their date of issue.
As a term of the Subscription, each Subscriber shall also receive 1 Warrant for every 5 Subscription Shares subscribed, exercisable at 31 pence per Warrant at any time during the period from the date of issue until the 5th anniversary of issue. It is not intended that the Warrants will be listed on any stock market.
Further details of the Warrants are set out in paragraph 14 of Part I of this Document.
8. USE OF PROCEEDS
The net proceeds of the Subscription will be used to support the working capital needs of the Enlarged Group and to continue Sheltyco's marketing activities in gaming, lottery and binary options.
9. CONVERSION OF DEBT
The Company has previously entered into a number of convertible loan facilities for the provision of additional working capital. On 8 June 2016 the Lenders served notice on the Company seeking to convert the outstanding balance due under the facilities into Ordinary Shares at the Issue Price, subject to Admission. In addition, for every 5 New Ordinary Share allotted pursuant to the conversion, the Company agreed to grant to the Lenders one Warrant exercisable at 31 pence per Warrant at any time during the period from the date of issue until the 5th anniversary of issue.
As at the date of service of the conversion notice, the aggregate total owing under these facilities was approximately €818,000 (£629,000). In satisfaction of the outstanding sums due, it is intended that the Company shall issue to the Lenders immediately following Admission 2,517,932 Ordinary Shares and 503,586 Warrants.
In addition to the New Ordinary Shares to be issued above, the terms of the DGS Convertible Facility provided for a closing fee due to be satisfied by the issue of 200,000 Ordinary Shares to DGS C.V.
Further details of the DGS Convertible Facility are set out in paragraph 12 of Part VIII of this Document.
10. INFORMATION ON THE CONCERT PARTY
The existing shareholders of Sheltyco together with DGS C.V., Mark Rosman, Dirk Jan Bakker, Karsten Uwe Lenhoff and certain entities associated with them are deemed to be acting in concert in respect of the Acquisition for the purposes of the City Code All of them are referred in this document together as the "Concert Party". The Concert Party members are:
• Vancom Ventures Limited, a company incorporated under the laws of Cyprus, registration number HE333041, having its registered office at 2 Apostolou Varnava, Centaur House, 2571 Nisou, Nicosia, Cyprus. It is owned indirectly by Mr Bakker;
• Vistra (Malta) Limited, a company incorporated under the laws of Malta, registration number C52997, having its registered office at 114 The Strand, GZR1027 Gzira, Malta. It is also owned indirectly by Mr Bakker;
• Lensing Management Services Limited, a company existing under the laws of the British Virgin Islands, registered under number 1638197 and having its registered office address at Geneva Place, PO Box 431, Road Town, Tortola, British Virgin Islands. The interest in the share capital of Sheltyco of Lensing Management Services Limited is registered in the name of Aster Worldwide Limited as a nominee shareholder. It is also owned indirectly by Mr Lenhoff;
• DGS C.V., a limited liability company incorporated under the laws of the Netherlands, having its registered seat in 1071 DW Amsterdam, van Miereveldstraat nr 11, the Netherlands. DGS C.V. is an investment vehicle for a number of independent investors, including Bakkerstaete B.V.
• Bakkerstaete B.V. a limited liability company incorporated under the laws of the Netherlands, having its registered address at Amsteldijk Noord 103 E, 1183 TH Amstelveen. Bakkerstaete B.V is directly owned by Mr Johannes Alberts Bakker, the father of Dirk Jan Bakker.
• Mark Joost Rosman of Palestrinastraat 26-huis, 1071 LG Amsterdam, Netherlands, a Dutch national and resident in the Netherlands. Mr Rosman is a director and shareholder of Velox3, a director of Sheltyco and an adviser to Dirk Jan Bakker. Further details on Mr Rosman are provided at Part 2 of this document. Details of all companies and partnerships of which Mr Rosman has been a director or partner at any time in the last 5 years are provided at paragraph 7 of Part VIII of this document.
• Dirk Jan Bakker of PC Hooftstraat 175C, 1071 BW Amsterdam Netherlands Mr Bakker is a shareholder of Velox3; he is also, indirectly through Vancom Ventures Limited and Vistra (Malta) Limited of which he is the sole beneficial owner, a c.40 per cent. shareholder of Sheltyco and is indirectly interested in DGS C.V.
In addition to his involvement with the Sheltyco Group, Mr Bakker is a real estate investor and a director of Diman BV, NRE Amsterdam I B.V., NRE Amsterdam II B.V., Beleggingsmij Andantino B.V. and Pisa Beheer B.V.
• Karsten Uwe Lenhoff of 25 Mixalakopoulou Stv, 1075 Nicosia, Cyprus, a German national resident in Cyprus. Mr Lenhoff is the founder and director of Sheltyco and is, indirectly through Lensing Management Services Limited of which he is the sole beneficial owner, a c.60 per cent. shareholder and director of Sheltyco. Further details on Mr Lenhoff are provided at Part 2 of this document. Details of all companies and partnerships of which Mr Lenhoff has been a director or partner at any time in the last 5 years are provided at paragraph 7 of Part VIII of this document.
None of Mr Rosman, Mr Bakker or Mr Lenhoff have been: (i) a director of a company which has been placed in receivership, compulsory liquidation, administration, been subject to a voluntary arrangement or any composition or arrangement with its creditors generally or any class of creditors, whilst he was a director of that company or within the 12 months after he ceased to be a director of that company; or (ii) a partner in any partnership which has been placed in compulsory liquidation, administration or been subject of a partnership voluntary arrangement, whilst he was a partner in that partnership or within 12 months after he ceased to be a partner in that partnership.
None of Mr Rosman, Mr Bakker or Mr Lenhoff have (i) has any unspent convictions in relation to indictable offences; (ii) is or has been bankrupt or made any voluntary arrangement; (iii) has been the subject of public criticism by a statutory or regulatory authority (including recognised professional bodies); or (iv) has been disqualified by a court from acting as a director of any company or from acting in the management or conduct of the affairs of any company.
11. INTENTIONS OF THE CONCERT PARTY
Each of Mr Lenhoff, Mr Bakker and Mr Rosman has confirmed on the Concert Party's behalf that, other than for the changes described in this document, following completion of the Acquisition the business of the Company will be continued in substantially the same manner as at present, with no major changes, no likely redeployment of the Company's fixed assets and no likely repercussions on the future business of the Company, the continued employment of the employees and management of the Company (including any material change in the conditions of employment), the pension rights of the employees, and the locations of the Company's places of business.
The Concert Party has no intention of making a general offer for the Company, nor cause the Company to cease to maintain any of the trading facilities in respect of the Ordinary Shares. Each of Mr Lenhoff, Mr Bakker and Mr Rosman has confirmed that the Concert Party has no intention of disposing of any interests in the Ordinary Shares outside the Concert Party, save that DGS C.V. expects in due course to distribute its interests in the Ordinary Shares to its investors in accordance with its investment strategy.
12. IRREVOCABLE UNDERTAKINGS TO VOTE IN FAVOUR OF THE RESOLUTIONS
David Mathewson, the Independent Director has given an irrevocable undertaking to the Company to vote in favour of the Resolutions in respect of his entire beneficial and direct holding of Existing Ordinary Shares totalling, in aggregate, 1,905,788 Existing Ordinary Shares, representing approximately 0.99 per cent. of the Existing Ordinary Share Capital.
Mark Rosman, a member of the Concert Party, has also given an irrevocable undertaking to the Company to vote in favour of the Resolutions, save for the Whitewash Resolution (for which he is excluded from voting) in respect of his entire beneficial and direct holding of Existing Ordinary Shares totalling, in aggregate, 8,327,038 Existing Ordinary Shares, representing approximately 4.32 per cent. of the Existing Ordinary Share Capital.
Certain Independent Shareholders have also given irrevocable undertakings to the Company to vote in favour of the Resolutions (and, where relevant, to procure that such action is taken by the relevant registered holders if that is not one of them) in respect of their holdings totalling, in aggregate, 85,903,888 Existing Ordinary Shares, representing approximately 51.3 per cent. of the Existing Ordinary Share Capital eligible to vote on the Whitewash Resolution.
In addition, irrevocable undertakings to vote in favour of the Resolutions, save for the Whitewash Resolution have been given by certain Shareholders (including members of the Concert Party) in respect of their holdings totalling, in aggregate, 11,522,197 Existing Ordinary Shares, representing approximately 6 per cent. of the Existing Ordinary Share Capital.
In total, therefore, the Company has received irrevocable undertakings to vote in favour of:
1. the Whitewash Resolutions in respect of holdings totalling, in aggregate, 87,809,676 Existing Ordinary Shares, representing 50.7 per cent of the Existing Ordinary Shares entitled to vote thereon; and
2. all other Resolutions (excluding the Whitewash Resolution) in respect of holdings totalling, in aggregate, 107,658,911 Existing Ordinary Shares, representing 55.77 per cent of the Existing Ordinary Shares entitled to vote thereon.
13. ORDERLY MARKET ARRANGEMENTS
In order to maintain an orderly market in the Ordinary Shares, the Company has agreed with each of Mr Dirk Jan Bakker and Karsten Uwe Lenhoff that, for a period of 12 months after Admission shall not dispose of any interest in the Ordinary Shares held by them unless such disposal is effected through Stockdale Securities or with Stockdale Securities' prior consent.
Further details of the Orderly Market Agreements are set out in paragraph 12 of Part VIII of this document.
14. OPTIONS AND WARRANTS
Share Options
On 21 February 2014 the Company granted David Mathewson 6,000,000 (240,000 post Share Consolidation) options on Existing Ordinary Shares, with an exercise price of £0.03 (£0.75 post Share Consolidation) per Existing Ordinary Shares. The options vest over three equal yearly instalments starting 1 year after the date of grant, provided Mr Mathewson remains a director or employee of the company during this period. Further details on the terms of the option grant are provided at paragraph 4 of Part VIII.
Following Admission, it is the intention of the Board (on the advice of the Remuneration Committee) to amend the exercise price of these options to £0.25 per Ordinary Share and amend the vesting date such that the options vest over three equal yearly instalments starting 1 year after Admission.
Further, on 22 October 2013, the Company granted to Mr Mathewson options over 78,000 Existing Ordinary Shares (6,120 Ordinary Shares post Share Consolidation), with an exercise price of £0.385p (£9.62 post Share Consolidation) per share. The options vest over three equal yearly instalments starting 1 year after the date of grant. It is the intention of the Board to cancel these options following Admission in light of the revision to Mr Mathewson's option grant of 21 February 2014.
Warrants
On 18 February 2014, the Company raised £502,000 by issuing new Existing Ordinary Shares to institutional clients and other investors of Daniel Stewart & Company plc. The Company granted Daniel Stewart 500,000 (20,000 post Share Consolidation) warrants on Existing Ordinary Shares of the Company, with an exercise price of £0.03 (£0.75 post share Consolidation) per Existing Ordinary Share. The warrants can be exercised upon issuance and have a 5 year term.
Pursuant to the terms of the Subscription, the Subscribers shall be granted on Admission 430,434 Warrants to subscribe for Ordinary Shares, with an exercise price of £0.31 per Ordinary Share. The warrants can be exercised upon issuance and have a 5 year term.
In addition, upon the conversion of the convertible loan facilities on Admission, the Lenders shall be granted in aggregate 503,586 warrants to subscribe for Ordinary Shares, with an exercise price of £0.31 per Ordinary
Share. The warrants can be exercised upon issuance and have a 5 year term.
15. RELATIONSHIP AGREEMENT
Dirk Bakker and Karsten Uwe Lenhoff have each agreed to exercise their votes as Shareholders and to procure the same in respect of any connected person in accordance with certain restrictions set out in a Relationship Agreement entered into between the Company, Stockdale Securities and each of them. The restrictions seek to ensure that the Group is capable of carrying on its business and making decisions independently and in the best interests of the Group and that any transactions between any member of the Group and either of Dirk Bakker or Karsten Uwe Lenhoff or any connected person are made on an arm's length basis.
The agreement will continue until the second anniversary of completion and therefore until either Dirk Bakker or Karsten Uwe Lenhoff (or both of them) cease to hold 30 per cent. or more of the Ordinary Shares then in issue, or either of them together with their associates cease to hold 50 per cent. or more of the Ordinary Shares then in issue.
Further details of the Relationship Agreement are set out in paragraph 12 of Part VIII of this document.
16. SETTLEMENT OF FEES AND REMUNERATION
In settlement of certain fees and remuneration due to directors, former employees, consultants and advisors in the aggregate sum of £147,989, the Board will propose to issue on Admission 593,127 Ordinary Shares at the Issue Price (the "Settlement Shares"). Further details of the Settlement Shares due to the directors are set out in paragraph 9.1 of Part VIII of this document.
17. ADMISSION, SETTLEMENT & DEALING
Application will be made for the Enlarged Share Capital to be admitted to trading on AIM. If the Resolutions are passed at the Extraordinary General Meeting, it is expected that Admission will become effective and dealings in the Enlarged Share Capital will commence on 29 June 2016. These dates and times may change.
The Company has applied for the Ordinary Shares to be admitted to CREST with effect from Admission. Accordingly, settlement of transactions in Ordinary Shares held in uncertificated form following Admission will take place within the CREST system.
CREST is a voluntary system and holders of Ordinary Shares who wish to receive and retain share certificates will be able to do so.
All New Ordinary Shares will be issued payable in full at the Issue Price. It is intended that, if applicable, definitive share certificates in respect of the New Ordinary Shares will be distributed by 12 July 2016 or as soon as practicable thereafter. No temporary documents of title will be issued.
18. DTR 5
Pursuant to the Articles, Shareholders are obliged to comply (where necessary) with the notification and disclosure requirements set out in DTR 5 as if the Company were a UK domestic company. The Disclosure and Transparency Rules can be accessed and downloaded from the FCA's website at www.handbook.fca.org.uk/handbook/DTR/5/1.
19. CURRENT TRADING AND PROSPECTS OF SHELTYCO
The financial information on Sheltyco for the year ended 31 December 2015 is set out in Part IV of this document.
Since 31 December 2015, trading at Sheltyco has continued to be in line with the Existing Directors' and the Proposed Directors' expectations.
In January 2016 Sheltyco began its marketing and promotion activities on the binary options and lottery platforms. The results of these campaigns are in line with the Existing Directors' and the Proposed Directors' expectations.
Following Admission, the Enlarged Group will also review potential acquisition opportunities which fit into the company's profile.
20. WORKING CAPITAL
The Existing Directors and the Proposed Directors are of the opinion, having made due and careful enquiry, that, taking into account the Subscription and the Company's and Sheltyco's available working capital resources, the Enlarged Group will have sufficient working capital available to it for its present requirements, that is for at least 12 months from the date of Admission.
21. UNAUDITED PRO FORMA STATEMENT OF NET ASSETS OF THE ENLARGED GROUP
An unaudited pro forma statement of net assets of the Enlarged Group is set out in Part VI of this document illustrating the effect of the Acquisition as if it had taken place as at 31 December 2015.
22. DIVIDENDS
It is the Existing Directors' intention for the Company to achieve growth and the Existing Directors believe it is inappropriate to attempt to predict the likely level or timescale for the declaration and payment of dividends by the Company. However, as soon as it becomes commercially prudent to declare dividend payments and subject to the then availability of sufficient distributable reserves for the purpose, the Existing Directors intend to do so.
23. TAXATION
Your attention is drawn to the Taxation section contained in paragraph 16 of Part VIII of this document. If you are in any doubt as to your tax position, you should consult your own independent financial adviser immediately.
24. CITY CODE
The Company is incorporated in the Isle of Man, and application will be made for the Enlarged Share Capital to be admitted to trading on AIM. The City Code applies to all companies who have their registered office in the UK, Channel Islands or Isle of Man and whose securities are traded on a regulated market in the UK or a stock exchange in the Channel Islands or Isle of Man or a multilateral trading facility. Accordingly, the City Code applies to the Company.
Under Rule 9 of the City Code, any person who acquires an interest in shares (as defined in the City Code), whether by a series of transactions over a period of time or not, which (taken together with any interest in shares held or acquired by persons acting in concert with him) in aggregate, carry 30 per cent. or more of the voting rights of a company which is subject to the City Code, is normally required by the Panel to make a general offer to all of 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 such a company but does not hold shares carrying more than 50 per cent. of such voting rights, a general offer will normally be required if any further interests in shares are acquired by any such person.
An offer under Rule 9 must be in cash or be accompanied by a cash alternative 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.
Under the City Code, a concert party arises where persons who, pursuant to an agreement or understanding (whether formal or informal), co-operate to obtain or consolidate control (as defined below) of a company or to frustrate the successful outcome of an offer for a company. Control means holding, or aggregate holdings, of shares carrying 30 per cent. or more of the voting rights of the company, irrespective of whether the holding or holdings give de facto control.
25. WAIVER OF RULE 9 OF THE CITY CODE
The City Code governs, amongst other things, transactions that may result in a change of control of a public company to which the City Code applies, including the Company. Under Rule 9, where a person acquires an interest (as such term is defined in the City Code) in shares which, when taken together with any 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 that is subject to the City Code, such person or group 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 the aggregate, carry not less than 30 per cent. of the voting rights of such a company but does not hold shares carrying more than 50 per cent. of such voting rights, a general offer will normally be required if any further interests in shares are acquired by any such person.
An offer under Rule 9 must be in cash and at the highest price paid during the preceding 12 months for any interest in shares of the Company by the person required to make the offer or any person acting in concert with him.
Persons acting in concert comprise persons who, pursuant to an agreement or understanding (whether formal or informal), co-operate to obtain or consolidate control (as defined in the City Code) of, or frustrate the successful outcome of an offer for, the Company.
For the purposes of the City Code, all of the members of the Concert Party are deemed to be acting in concert, and their interests are to be aggregated. Further information about the Concert Party is set out in paragraph 10 of Part I and Part VII of this document.
In the absence of a waiver granted by the Takeover Panel, Rule 9 would require the Concert Party to make a general offer for the balance of the Ordinary Shares in issue immediately following the Acquisition. The Takeover Panel has been consulted and has agreed, subject to the passing on a poll by Independent Shareholders of the Whitewash Resolution, to waive the obligation on the Concert Party that would otherwise arise under Rule 9, as a result of the issue of Ordinary Shares and Warrants to the Concert Party pursuant to the Proposals, for a general offer to be made by the Concert Party for the balance of the issued
Ordinary Shares not already held by the Concert Party. Accordingly, Resolution 2 is being proposed at the Extraordinary General Meeting and will be taken on a poll of Independent Shareholders.
The City Code provides that, if a person (or group of persons acting in concert) hold an interest in shares carrying more than 50 per cent. of the voting rights of the Company's voting share capital and, for as long as they continue to be treated as acting in concert, may accordingly increase their aggregate interests in shares without incurring any obligation under Rule 9 to make a general offer. Individual members of the Concert Party will not be able to increase their percentage interests in shares through or between a Rule 9 threshold without the Takeover Panel's consent.
Maximum controlling position of the Concert Party
Immediately following Admission, the Concert Party will hold, in aggregate, 48,107,212 Ordinary Shares, representing approximately 85.8 per cent. of the Company's Enlarged Share Capital (assuming no exercise of Warrants or Options between the date of this document and Admission nor taking into account the second subscription of DGS C.V to complete in early July).
In addition, DGS C.V., a member of the Concert Party has conditionally agreed to subscribe for 878,991 new Ordinary Shares and 175,798 Warrants, to be allotted in July 2016.
On the basis that all additional Ordinary Shares are issued to DGS C.V. (including the second subscription in early July) and all Warrants issued, and to be issued, are exercised by DGS.C.V. in full, and assuming no exercise of any other Warrants and no other changes in the holding of the Concert Party in Ordinary Shares, the Concert Party would hold 87.5 per cent. of the issued share capital of the Company on a fully diluted basis.
26. EXTRAORDINARY GENERAL MEETING
To enable the Proposals to be implemented, it is necessary for Shareholders to:
(a) approve the Share Consolidation;
(b) approve the Acquisition;
(c) approve the waiver of the Concert Party's obligation to make a general offer under Rule 9; and
(d) give the Board the necessary authorities to allot the New Ordinary Shares.
Accordingly, you will find at the end of this document a notice convening an Extraordinary General Meeting to be held at 10.30 a.m. on 27 June 2016 at the offices of Estera Trust (Isle of Man) Limited, 33-37 Athol Street, Douglas, Isle of Man IM1 1LB where the following Resolutions will be proposed:
• Resolution 1, which will be proposed as an ordinary resolution pursuant to which every 25 Existing Ordinary Shares will be consolidated into 1 Ordinary Share;
• Resolution 2, which will be proposed as an ordinary resolution and is the Whitewash Resolution, pursuant to which the Independent Shareholders are being asked to approve the Rule 9 Waiver. This resolution requires approval by the Independent Shareholders on a poll (voting in person or by proxy at the Extraordinary General Meeting;
• Resolution 3, which will be proposed as an ordinary resolution, is to approve the acquisition of Sheltyco for the purposes of Rule 14 of the AIM Rules for Companies;
• Resolution 4, which will be proposed as an ordinary resolution, is to authorise the Existing Directors to be generally and unconditionally authorised in accordance with article 5.1 of the Company's articles of association to exercise all the powers of the Company to allot shares in the Company or grant rights to subscribe for or to convert any security into shares in the Company provided that such power be limited to the allotment of 49,217,007 Ordinary Shares.
• Resolution 5, which will be proposed as a special resolution, grants the Existing Directors authority to allot equity securities for cash (as defined in the Company's articles of association) pursuant to the authority conferred by resolution 4 as if article 6.1 (pre-emption) did not apply to any such allotment, provided that such power shall be limited to the allotment of up to 49,217,007 Ordinary Shares.
• Resolution 6, which will be proposed as a special resolution, seeks Shareholders' approval to change the Company's name to Veltyco Group Plc.
All of the Resolutions need to be passed at the Extraordinary General Meeting for the Proposals to be implemented. The passing of each Resolution is conditional on the passing of each other Resolution.
27. ACTION TO BE TAKEN
In respect of the Extraordinary General Meeting
You will find enclosed a Form of Proxy for use by Shareholders at the Extraordinary General Meeting. The Form of Proxy should be completed in accordance with the instructions printed thereon and forwarded to the Company's Transfer Agent, Neville Registrars Limited c/o Velox3 plc, 33-37 Athol Street, Douglas, Isle of Man IM1 1LB as soon as possible and in any event so as to be received by no later than 10.30 a.m. on 24 June 2016. Completion and return of a Form of Proxy will not preclude you from attending the Extraordinary General Meeting and voting in person if you wish.
28. FURTHER INFORMATION
Your attention is drawn to the further information set out in Parts II to VIII of this document and in particular to the Risk Factors set out in Part III of this document.
29. RECOMMENDATION
The Independent Director who has been so advised by Stockdale Securities considers the Rule 9 Waiver and the Acquisition to be fair and reasonable and in the best interests of Independent Shareholders and the Company. In providing advice to the Independent Director, Stockdale Securities has taken into account the Independent Director's commercial assessment. Accordingly, the Independent Director recommends that Independent Shareholders vote in favour of the Whitewash Resolution.
Shareholders should note that if the Resolutions are not approved at the Extraordinary General Meeting the Company's admission to trading on AIM will be cancelled.
The Independent Director recommends that Shareholders vote in favour of the Whitewash Resolution as he has irrevocably committed to do in respect of his holding amounting to 1,905,788 Existing Ordinary Shares, representing approximately 0.99 per cent of the voting rights in Velox3.
Further, the Existing Directors recommend that Shareholders vote in favour of Resolutions 1, 3, 4, 5 and 6, as they have irrevocably committed to do in respect of their beneficial holding amounting to, in aggregate, 10,232,826 Existing Ordinary Shares, representing approximately 5.3 per cent. of the voting rights in Velox3.
Yours faithfully
David Mathewson
Chairman
FURTHER BACKGROUND INFORMATION
Key financial information on Sheltyco
Year ended 31 December | 2013 €m | 2014 €m | 2015 €m |
Revenue | 2.2 | 2.8 | 2.6 |
Operating profit | 1.4 | 1.2 | 0.7 |
Profit for the year | 1.4 | 1.1 | 0.7 |
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|
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Total equity | 1.1 | 2.3 | 2.3 |
Directors and Senior Management
The Board currently comprises David Mathewson and Mark Rosman, Marcel Noordeloos is a senior manager of the Company.
On Admission, Karsten "Uwe" Lenhoff, Marcel Noordeloos and Hans Dahlgren will join the Board.
Brief biographical details of the Existing Directors, Proposed Directors who are expected to be in place on Admission are set out below:
Existing Directors
David Mathewson, Chairman, aged 68, was appointed to Velox3 plc's Board in May 2013. Between June 2010 and December 2012, David Mathewson was a Non-Executive Director of Playtech Limited, one of the world's leading publicly traded online gaming software supplier, latterly becoming Playtech's CFO. Previously to this, Mr Mathewson has acted in a number of positions as Non-Executive Director, including Chairman of Sportech Plc and Non-Executive Director at Edinburgh UK Tracker Trust plc, Robertson Group and Asian Growth Properties Limited.
Mark Rosman, Non-Executive Director, aged 49, has 15 years of experience advising on private equity investments and managing private equity portfolios. Mark worked for Galladio Capital Management B.V. for eleven years and held the role of chief operating officer from 2006 until his departure in 2010. Since leaving Galladio, Mark has served as chief executive officer of The Nestegg B.V., a private equity management and advisory firm that advises high net worth individuals on the structuring and management of investments. Mark is a law graduate from VU University Amsterdam and has an MBA from Rotterdam School of Management.
Existing Senior Manager and Proposed Director
Marcel Noordeloos, Chief Financial Officer, aged 47, was Group Finance Director at Playlogic International NV between 2006 and 2009 and Chief Financial Officer at Playlogic Entertainment Inc on from March 2009 until September 2010 prior to becoming Chief Financial Officer at Velox3 plc, Marcel has held several management positions with among others Nike EMEA (2002-2006) and PricewaterhouseCoopers (1992-2001). Marcel holds an RA Degree (Registered Accountant) from the University of Amsterdam.
Proposed Directors
Karsten "Uwe" Lenhoff, Chief Operating Officer, aged 53, is the founder of Sheltyco and his responsibilities include marketing and business development. Uwe is an industry veteran who started one of the first online casino with real money gaming in 1995. Furthermore, Uwe initiated and built a poker platform for RTL (www.rtlpoker.de) and worked as an affiliate for Party Poker and Full Tilt Poker. Also, Uwe worked as a consultant to several (online) gaming and gambling companies, before he started working as a B2B partner for the Betsson Group in the German speaking countries in 2012.
Hans Dahlgren, Chief Technical Officer, aged 33, has been working for Sheltyco as a private consultant involved in technical and business development. Hans has extensive experience within the Gaming sector from working in an international setting as well as from a broad range of roles such as CEO, CTO, Director, Business Development Manager, Team Manager and Head of Payments. Hans also developed game platforms, affiliate systems and websites himself. His most recent appointment prior to founding his own consulting firm, Helix, was as CEO of Starfish Media which was divested from Betsson Group in 2012.
Staff and Employees
Apart from the Existing Directors and the senior manager, the Velox3 Group has no other employees.