Braveheart Inv Regulatory News (BRH)

The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

19 October 2020

Remote Monitored Systems plc

("Remote Monitored Systems", "RMS", the "Company" or the "Group")

Update on Acquisition of Pharm 2 Farm

Publication of Circular and Notice of General Meeting

On 21 August 2020, the Company announced that it had signed a binding Share Purchase Agreement for the acquisition of 100% of the share capital of Pharm2Farm Limited ("P2F") (the "Acquisition"). Completion of the Acquisition is subject to regulatory and RMS shareholder approval. The Acquisition will be satisfied by the issue of 600,000,000 new ordinary shares of 0.01 pence each in the capital of the Company ("Consideration Shares"), equating to approximately £2,370,000 based on RMS's closing share price on 20 August 2020. 

RMS is pleased to announce a shareholder circular (the "Circular") will be published today that contains information on the background to, and reasons for, the Acquisition and includes a notice convening a general meeting of the Company (the "General Meeting"). The General Meeting will be held at 10:30 a.m. on 4 November 2020 at GyroMetric Systems Limited, Unit 23, The Heathcoat Building, Nottingham Science and Technology Park, University Boulevard, Nottingham, NG7 2QJ. The Circular is expected to be posted to RMS Shareholders shortly.

Given the evolving situation regarding Covid-19 and the changing restrictions on social contact, public gatherings and non-essential travel, RMS Shareholders will not be permitted to attend the General Meeting in person, save for those RMS Shareholders permitted by the chairman of the meeting to attend to establish a quorum. Instead, shareholders should appoint the chairman of the meeting, rather than a third party, as their proxy by the relevant time. A copy of the Circular will be available for inspection on the Company's website at https://www.remotemonitoredsystems.com.

The Acquisition of P2F is expected to be completed on 5 November 2020, subject to satisfaction or (where applicable) waiver of the conditions, the outstanding condition being the passing of the resolutions at the General Meeting.

Unless otherwise indicated, all defined terms in this announcement shall have the same meaning as described in the Circular.

ENQUIRIES:

Remote Monitored Systems plc

Trevor Brown (Executive Director) +41 7941 55384

Paul Ryan (Non-Executive Chairman) +32 475 754 148

SP Angel Corporate Finance LLP     +44 20 3470 0470

Nominated Adviser and joint broker    

Stuart Gledhill

Caroline Rowe

Peterhouse Capital Limited      +44 20 7469 0930

Joint broker 

Lucy Williams

Duncan Vasey

 EXPECTED TIMETABLE OF PRINCIPAL EVENTS

The dates and times set out below are based on the Company's current expectations and may be subject to change. References to times in the Circular are to London times, unless otherwise stated.

Proposed issue of 600,000,000 Consideration Shares in connection with the proposed acquisition of the entire issued share capital of Pharm2Farm Limited

Approval of waiver of obligations under Rule 9 of the Takeover Code

and Notice of General Meeting

1. Introduction

As announced on 21 August 2020, the Company has conditionally agreed to acquire a 100 per cent. interest in Pharm2Farm Limited ("P2F" or "Pharm2Farm"), a business utilising a patented process for producing and functionalising nanoparticles for various applications including human, animal and crop health (the "Acquisition").

The total consideration for the Acquisition is to be satisfied by the issue of the Consideration Shares to the Vendors.

The Acquisition provides the opportunity to acquire and unite the two shareholdings of P2F, a business operating in two vital sectors and on the brink of near term growth, which the Directors believe will lead to significant enhancement of shareholder value for RMS Shareholders.

The vendors of P2F are Braveheart Investment Group plc (51.72%) ("Braveheart") and Dr. Gareth Cave, the founder of P2F (48.28%) who will receive 310,354,815 and 289,645,185 Consideration Shares respectively (the "Vendors"), equating to approximately £2,370,000 based on RMS's closing share price on 20 August 2020, being the last practicable day prior to the Announcement of the Acquisition Agreement. On Completion of the Acquisition, Braveheart will hold 509,992,405 Ordinary Shares, representing 37.12 per cent. of the Enlarged Issued Share Capital of the Company. Dr. Gareth Cave will own 21.08per cent. of the Enlarged Issued Share Capital of the Company.

Braveheart currently holds 10 million warrants in RMS which are exercisable immediately. Assuming these and no other RMS options or warrants are exercised in full, the maximum shareholding of Braveheart will be 519,992,405 Ordinary Shares, representing 37.57 per cent. of the Potential Enlarged Issued Share Capital and total voting rights of the Company. Dr. Cave will be interested in 289,645,185 Ordinary Shares, which will represent 20.93 per cent. of the Potential Enlarged Issued Share Capital and total voting rights of the Company. Mr. Trevor Brown does not own any Ordinary Shares in the Company. Therefore in total the Concert Party's maximum potential holding will be 809,637,590 Ordinary Shares, which will represent 58.50 per cent. of the Potential Enlarged Issued Share Capital and total voting rights of the Company.

The issue of the Consideration Shares and exercise of the Braveheart Warrants gives rise to certain considerations under the Takeover Code. Brief details of the Panel, the Takeover Code and the protections they afford are set out in paragraph 6 of this Part I below.

Since the Acquisition will, upon Completion, result in the Concert Party owning more than 50 per cent. of the total voting rights of RMS, Completion is conditional on the Panel waiving the obligation of the Concert Party to make a general offer to Shareholders under Rule 9 of the Takeover Code.

The Panel has agreed to a waiver of the obligations under Rule 9 of the Takeover Code (commonly referred to as a "Whitewash"), subject to the Whitewash Resolution being approved on a poll at the General Meeting by Independent Shareholders (being Shareholders other than members of the Concert Party).

The Acquisition is conditional on the Whitewash Resolution being passed by the relevant majority of Independent Shareholders. As a Vendor and member of the Concert Party, Braveheart is not an Independent Shareholder and therefore will not be allowed to vote on the Whitewash Resolution.

The purpose of the Circular is to give you details of, and the reasons for, the Acquisition, to explain why the Board considers the Acquisition to be in the best interests of the Company and its Shareholders as a whole and why the Independent Directors recommend that you vote in favour of the Resolutions to be proposed at the General Meeting, notice of which is set out at the end of the Circular.

2. Information on RMS

RMS is focused on the continued development of the Company's two operating businesses being GyroMetric Systems Limited, which develops and manufactures digital monitoring and safeguarding systems for rotating shafts and where the Company holds a majority interest and the Company's wholly owned Cloudveil Limited subsidiary, which provides intelligence services, security risk management and bespoke management information systems.

In addition, the Company is implementing an enhanced growth strategy via the appraisal of complementary acquisition or investment opportunities in line with the Company's stated objective to achieve improved financial performance in the near term. The Acquisition represents a furtherance of this enhanced growth strategy.

3. Background to, reasons for and details of the Acquisition 

Pharm2Farm uses a patented process for producing and functionalising nanoparticles for various applications including human, animal and crop health. Unlike competing nanotechnology production processes, such as hydrothermal synthesis, Pharm2Farm's process has the advantages of being highly efficient, using a small physical lab/factory footprint and is extremely scalable. 

Since Braveheart Investment Group acquired an interest in Pharm2Farm in July 2019, the team has moved into a new facility in MediCity Nottingham and more than doubled nanoparticle production capacity. Pharm2Farm's strategy is focused on two markets: 

· Crop nutrition: Pharm2Farm has already received orders from key distributors in the UK and South Korea for its unique crop nutrition products. Pharm2Farm is specifically targeting the growing global hydroponics market where its water-soluble nutrients with high bioavailability have a clear competitive advantage. A number of trials are underway to explore further applications of Pharm2Farm formulations.

· Anti-viral Face Mask: Pharm2Farm is developing a nanotechnology enabled anti-viral face mask. Proof of concept and the design of a prototype is currently underway and expected to be completed by the end of the year. Once proven, Pharm2Farm will commence the commercial manufacture of masks in the UK.

In addition Pharm2Farm's modular platform technology and flat organisational structure provides the agility and flexibility to respond to the specific needs of each market segment. Hence, Pharm2Farm is able to capture very high value - low volume markets such as in electronics. Pharm2farm's main competitor (Promethean) which has a large 1,000MT inefficient reactor requires large minimum order sizes to be profitable. Looking at the face mask market alone: global face mask market was valued at $1.52 billion in 2019 and is expected to grow by 4.4% CAGR reaching $2.45 billion in 2027. Pharm2Farm's Innovate UK project is expected to produce a higher value anti- viral face mask prototype by December 2020. 

P2F had unaudited revenues of £11,979 and profit of £4,292 for the seven month period ending 31 March 2020.

The directors of Braveheart believe that by combining the two shareholdings of P2F in RMS, and thereafter retaining a significant interest in RMS, the business prospects for P2F can be more rapidly exploited and resourced, thus enabling Braveheart to continue having an economic interest in P2F without the continuing requirement to fund P2F. The directors of Braveheart intend to retain the Consideration Shares for the foreseeable future.

The directors of RMS believe that the Acquisition is in the interest of RMS shareholders, the proposed price to be paid and its settlement in new equity of the Company is fair and reasonable, based upon the Company's assessment of the significant potential of the Pharm2Farm business and the potential upside for shareholders if P2F can successfully execute its plans.

The directors of RMS also believe that the terms of Braveheart's participation in the transaction are fair and reasonable insofar as the Company's shareholders are concerned. The consideration is being paid in equity at mid-market price which is exceptional in any market, let alone in the current pandemic, which is unequivocally positive news for all RMS shareholders. The acquisition is in the Company's long term commercial benefit and commercial interests and for the benefit of its members as a whole.

The Independent Directors do not expect the proposed Acquisition to impact employment in RMS or the Enlarged Group and does not consider that the Concert Party's strategic plans for the Company will impact upon employment and the locations of the offeree Company's places of business. The Independent Directors' note the Relationship Agreement entered into by the Concert Party, the Company and SP Angel further details of which are set out below.

Further information on the terms of the Acquisition is set out in paragraph 5 of Part III of the Circular.

4. Relationship Agreement

The Company, the Concert Party and SP Angel, being the Company's nominated adviser pursuant to the AIM Rules, have agreed to enter into a relationship agreement subject to and with effect from Completion.

The Relationship Agreement will terminate automatically upon the earlier of:

(i) an agreement between its parties to that effect; or

(ii) the Ordinary Shares ceasing to be admitted to trading on AIM.

Pursuant to the Relationship Agreement, the Concert Party undertakes to the Company and SP Angel (for so long as the Concert Party (together with their associates) are interested in voting rights in the Company comprising 15 per cent. or more of the aggregate voting rights of all issued Ordinary Shares), inter alia, that, so far as they are able to do so, they shall (and will procure that each of their associates shall) exercise (or procure the exercise of) their voting rights in the Company (subject always to applicable law) so that:

(i) the Group is capable at all times of, and is not precluded or inhibited at any time from, carrying on business independently of the Concert Party and their associates;

(ii) the Company shall be managed in accordance with the principles of the QCA Code as far as they are deemed by the Board to be appropriate for a company of its size;

(iii) no variations are to be made to the Articles which shall fetter the Company's ability to carry out its business independently;

(iv) all transactions between the Concert Party (and their associates) and the Group are conducted on an arm's length and normal commercial basis;

(v) neither the Concert Party nor their associates will seek to de-list the Ordinary Shares from trading on AIM without the approval of the Independent Directors (save in connection with a general offer made to the Company's Shareholders to acquire the entire issued share capital of the Company);

(vi) any actual or potential conflict of interest of the Concert Party is declared to the Independent Directors; and

(vii) the Board consists of a majority of Directors who are not connected to the Concert Party.

For further details of the terms of the Relationship Agreement, please refer to paragraph 5 of Part III of the Circular.

5. Related Party Transactions

Braveheart, as a substantial Shareholder of the Company, is considered to be a "related party" as defined under the AIM Rules and accordingly, the proposed purchase of Braveheart's shareholding in P2F as part of the Acquisition, constitutes a related party transaction for the purposes of Rule 13 of the AIM Rules.

The Directors independent of the Acquisition, being Paul Ryan (Non‐Executive Chairman) and John Richardson (Chief Operating Officer) consider, having consulted with the Company's nominated adviser, that the terms of the Acquisition are fair and reasonable insofar as the Company's Shareholders are concerned.

6. Takeover Code

The Acquisition and exercise of the Braveheart Warrants gives rise to certain considerations under the Takeover Code and Shareholders are entitled to the protections afforded under the Takeover Code. The Takeover Code is issued and administered by the Panel. The Takeover Code applies to, inter alia, a company which has its registered office in the United Kingdom and whose shares are admitted to trading on AIM.

Under Rule 9 of the Takeover Code, where any person acquires, whether by a series of transactions over a period of time or not, an interest in shares which (taken together with shares 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, that person is normally required to make a general offer to all the holders of any class of equity share capital and to the holders of any other class of transferable securities carrying voting rights in that company to acquire the balance of their interests in the company.

Rule 9 of the Takeover Code also provides, amongst other things, that where any person who, together with persons acting in concert with him, is interested in shares which in aggregate carry not less than 30 per cent. but does not hold shares carrying more than 50 per cent. of the voting rights of a company which is subject to the Takeover Code, and such person, or any person acting in concert with him, acquires an additional interest in shares which increases the percentage of shares carrying voting rights in which he is interested, then that person is normally required to make a general offer to all the holders of any class of equity share capital and to the holders of any other class of transferable securities carrying voting rights in that company to acquire the balance of their interests in the company.

An offer under Rule 9 of the Takeover Code must be in cash (or be accompanied by a cash alternative) at not less than 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 in the company during the 12 month period prior to the announcement of the offer.

For the purposes of the Takeover Code, persons acting in concert comprise persons who, pursuant to an agreement or understanding (whether formal or informal), cooperate to obtain or consolidate control of a company or to frustrate the successful outcome of an offer for a company. A person and each of its affiliated persons will be presumed to be acting in concert with each other. Certain categories of person are presumed to be acting in concert under the Takeover Code unless the contrary is established. The members of the Concert Party are presumed to be acting in concert for the purposes of the City Code.

Immediately following Admission and assuming exercise of the Braveheart Warrants in full, the Vendors will own 809,637,590 Ordinary Shares carrying in aggregate approximately 58.50 per cent. of the enlarged voting rights of the Company which, without a waiver of the obligations under Rule 9 of the Takeover Code, would oblige the Vendors (and any party deemed to be acting in concert with them) to make a general offer to the Shareholders under Rule 9 of the Takeover Code.

A table which sets out the current interests of the members of the Concert Party and their maximum potential interests in the Company following Completion of the Acquisition and exercise in full of the Braveheart Warrants in the Ordinary Share capital and voting rights of the Company is set out in paragraph 2 of Part II of the Circular.

7. Waiver of obligations under Rule 9 of the Takeover Code

As a consequence of the issue of the Consideration Shares and the exercise of the Braveheart Warrants, the members of the Concert Party would normally be required to make a general offer to Shareholders pursuant to Rule 9 of the Takeover Code.

In accordance with Note 1 on the Notes on the Dispensations from Rule 9, the Panel has been consulted and has agreed, subject to the Whitewash Resolution being passed by the Independent Shareholders (on a poll) at the General Meeting, to waive the requirement that would otherwise arise under Rule 9 of the Takeover Code as a result of the issue of the Consideration Shares to the Vendors and the exercise of the Braveheart Warrants. The Whitewash Resolution will be passed if approved by a simple majority of votes cast by Independent Shareholders on a poll. The members of the Concert Party have undertaken to the Company not to vote on the Whitewash Resolution.

Shareholders should note that the members of the Concert Party currently hold less than 30 per cent. of the voting rights of the Company. Once the Consideration Shares are issued and the Braveheart Warrants are exercised, the Concert Party will hold over 50 per cent. of the total voting rights of the Company. In those circumstances, the Concert Party would be permitted (for so long as its members continue to be treated as acting in concert) to make purchases of Ordinary Shares without incurring an obligation under Rule 9 to make a general offer to all holders of Ordinary Shares, although each separate member of the Concert Party will not be able to increase their percentage interest to over 30 per cent. of the Ordinary Shares or, if already holding more than 30 per cent. of the Ordinary Shares, at all without Panel consent.

Following the issue of Consideration Shares and exercise of the Braveheart Warrants, Braveheart will own more than 30 per cent. of the Ordinary Shares and therefore will not be able to increase its percentage interest in Ordinary Shares without Panel consent.

In the event that the Whitewash Resolution is approved, the Concert Party will not be restricted from making an offer for the Company.

Further background information in relation to the Concert Party and the Waiver is set out in Part II of the Circular. 

8. Independent advice provided to the Board

The Takeover Code requires the Board to obtain competent independent advice regarding the merits of the transaction which is the subject of the Whitewash Resolution, the controlling position which it will create, and the effect it will have on Shareholders generally.

Accordingly, SP Angel, as the Company's financial adviser, has provided formal advice to the Independent Directors regarding the Acquisition.

9. Application for Admission

Application will be made to the London Stock Exchange for the Consideration Shares to be admitted to trading on AIM conditional on the Resolutions being passed at the General Meeting. The Consideration Shares are expected to be admitted to AIM and commence trading at 8:00 a.m. on 5 November 2020.

The Consideration Shares will rank pari passu in all respects with the Existing Ordinary Shares including the right to receive all dividends and other distributions declared, paid or made after the date of issue.

10. General Meeting

You will find a Notice convening the General Meeting of the Company at the end of the Circular. The General Meeting will be held at the offices of the offices of GyroMetric Systems Limited at Unit 23, The Heathcoat Building, Nottingham Science and Technology Park, University Boulevard, Nottingham, NG7 2QJ at 10.30 a.m. on 4 November 2020 to consider and, if thought appropriate, pass the Resolutions summarised below.

Shareholders should be aware that, if any of the Resolutions are not approved by Shareholders at the General Meeting, the Acquisition will not complete and the Company will therefore be required to abandon plans to acquire P2F or otherwise seek to amend the terms of the Acquisition.

Resolution 1 - Approval of the Waiver

Resolution 1, which will be proposed as an ordinary resolution, is to approve the Panel's waiver of Rule 9 of the Takeover Code. This resolution will be taken on a poll of the Independent Shareholders only and, in order to be passed, requires a simple majority of the issued Ordinary Shares held by the Independent Shareholders present (whether in person or by proxy) at the General Meeting.

Resolution 2 - Authority to allot

Resolution 2, which will be proposed as an ordinary resolution and is conditional upon the passing of Resolution 1, will, if passed, grant authority to the Directors under section 511 of the Companies Act, to allot Ordinary Shares up to a maximum aggregate nominal amount of £130,000 (being 95 per cent. of the aggregate nominal value of the Enlarged Issued Share Capital) and being the maximum required for the purposes of issuing the Consideration Shares. This authority will expire at the end of the next annual general meeting of the Company following the passing of the Resolutions or, if earlier, 15 months after the date of the Resolutions.

Resolution 3 - Dis-application of pre-emption rights

Resolution 3, which will be proposed as a special resolution and is conditional upon the passing of Resolutions 1 and 2, will, if passed, empower the Directors, pursuant to section 570 of the Companies Act, to dis-apply the statutory pre-emption rights in relation to the allotment of the Consideration Shares provided for in Resolution 2, such power expiring at the end of the next annual general meeting of the Company following the passing of the Resolutions or, if earlier, 15 months after the date of the Resolutions.

11. Action to be taken by Shareholders

General Meeting

A Form of Proxy for use in connection with the General Meeting is enclosed with the Circular. Given the current Covid-19 pandemic, the Company and the Board remind all Shareholders of the British Government's current restrictions on gatherings of persons from different households and the rules regarding social distancing. Unless and until the current restrictions are relaxed or lifted, the Directors are asking all Shareholders not to attend the General Meeting. Shareholders who intend to attend the General Meeting in person in breach of any stay at home measures, which are in place on the date of the General Meeting, will not be admitted. Instead, you are asked to vote by way of proxy in advance of the General Meeting and we encourage you to appoint the chairman of the General Meeting as your proxy with your voting instructions. You are requested to complete, sign and return a Form of Proxy in accordance with the instructions printed thereon so as to be received by the Registrar, Share Registrars Limited, no later than 10:30 a.m. on 2 November 2020.

You can also submit questions to the Company in advance of the General Meeting by email to info@remotemonitoredsystems.com. If the restrictions on gatherings and social distancing are relaxed or lifted by the British Government prior to the date of the General Meeting, the Company will notify Shareholders of any resulting change(s) which may affect the ability of Shareholders to attend the General Meeting on its website at www.remotemonitoredsystems.com

12. Additional Information

Your attention is drawn to the additional information set out in Part III of the Circular.

13. Irrevocable Undertakings

Mr. Paul Ryan has given an irrevocable undertaking to the Company to vote in favour of all the Resolutions in respect of his own beneficial holding of 54,794,270 Ordinary Shares, representing 7.08 per cent. of the Existing Issued Share Capital.

Irrevocable undertakings have also been received from the following individuals to vote in favour of all the Resolutions:

The Company has received irrevocable undertakings to vote in favour of all Resolutions to be proposed at the General Meeting, other than the Whitewash Resolution, representing a total of 361,673,618 Ordinary Shares, or 46.73 per cent. of the Existing Issued Share Capital. In respect of the Whitewash Resolution, on which only the Independent Shareholders are entitled to vote, the Company has received irrevocable undertakings representing a total of 162,036,028 Ordinary Shares, or 20.93 per cent. of the Existing Issued Share Capital entitled to vote on that Resolution.

In total, therefore, the Company has received irrevocable undertakings to vote in favour of the Resolutions to be proposed at the General Meeting in respect of, in the case of all Resolutions other than the Whitewash Resolution, 361,673,618 Ordinary Shares, representing, in aggregate, approximately 46.73 per cent. of the Existing Issued Share Capital and, in respect of the Whitewash Resolution, 162,036,028 Ordinary Shares, representing 20.93 per cent. of the Existing Issued Share Capital entitled to vote on that Resolution.

14. Directors' Recommendation

The Board considers the Acquisition to be in the best interests of the Company and its Shareholders as a whole.

Mr. Trevor Brown is not considered independent in respect of the Waiver by virtue of his role as CEO of Braveheart and so does not feel it appropriate to make any recommendation in respect of the Whitewash Resolution. The Independent Directors, having been so advised by SP Angel, consider that the terms of the Acquisition and the Waiver are fair and reasonable in so far as the Independent Shareholders and the Company are concerned. In providing advice to the Independent Directors, SP Angel has taken into account the Independent Directors' commercial assessments. Accordingly, the Independent Directors recommend that Shareholders vote in favour of the Resolutions. Mr. Paul Ryan has given an irrevocable undertaking to the Company to vote in favour of all the Resolutions in respect of his own beneficial holding of 54,794,270 Ordinary Shares, representing 7.08 per cent. of the Existing Issued Share Capital.

Yours faithfully,

P Ryan

Chairman

Remote Monitored Systems plc