Calnex Solutio. Regulatory News (CLX)

17 May 2006 07:02

Calyx Group PLC17 May 2006 For Immediate Release 17 May 2006 Calyx Group plc ("Calyx" or "the Company") Acquisition of the Matrix Companies for up to £40.5 million Placing of 25,000,000 Placing Shares at 70p per share raising £17.5 million Admission to trading on AIM and IEX and Notice of Extraordinary General Meeting Calyx, the largest single-source provider of information and communicationtechnology ("ICT") network solutions throughout Ireland, today announces that ithas agreed to acquire, subject to Shareholder approval, the entire issued sharecapital of Network Partners Holdings and MXC and their subsidiaries ("the MatrixCompanies") from Matrix Communications Group plc ("the Seller"). The total consideration for the Acquisition will be up to £40.5 million (€59.4million), to be satisfied by an initial cash consideration of £33.5 million(€49.2 million) and the issue of Calyx Ordinary Shares to the value of £2million (€2.9 million) on Completion, and payment of a deferred consideration ofup to £5 million (€7.3 million) contingent on the achievement of certainperformance targets. In addition the Company has today announced that, along with the joint listingof the Company on the Irish Enterprise Exchange ("IEX"), it is raising £17.5million (€25.7 million) by way of a Placing of 25,000,000 Placing Shares at 70pence (€1.027) per Ordinary Share. Of this approximately £11.5 million (€16.9million) is to provide funds for the payment of the cash element of theconsideration for the Acquisition. Evolution Securities acted as NOMAD and Broker, and Davy Stockbrokers acted asIEX Adviser and Broker. Highlights •Calyx will, subject to the approval of Calyx's and the Seller's shareholders, acquire Network Partners Holdings and MXC and their subsidiaries from Matrix Communications Group plc for a total consideration of up to £40.5 million. •The Matrix Companies are engaged in the consultancy, design, supply, implementation and ongoing support of ICT network solutions, across different technologies, to the public and private sectors in the UK. •The Matrix Companies' customers include the BBC, BAR (Honda F1), Vodafone, Betfair, Party Gaming, and ARM. •The Enlarged Group Board believes that the consolidated turnover and EBITDA for the Matrix Companies for the year ended 31 October 2005 was £35.1 million and £4.4 million respectively. •Calyx is raising £17.5 million by way of a Placing of 25,000,000 shares at 70 pence (€1.027) per Ordinary share. • The Group has also decided that it would be appropriate at this time to seek admission to the Irish Stock Exchange's IEX market. It is expected that liquidity in the Ordinary Shares will be enhanced by the provision of a euro-denominated quote and trading facility. Trading on AIM and the IEX is expected to commence on Monday 12 June 2006. • Following the Acquisition and subject to Shareholder approval, Calyx proposes to elect Ian Smith as a new Non-Executive Director of the enlarged Calyx Group. - Mr Smith (42) is Chief Executive and co-founder of the Seller, prior to which he ran the UK and Ireland operations of Foundry Networks, a California-based designer and manufacturer of computer network equipment. • In total the Company has received irrevocable undertakings to vote in favour of the resolutions to approve the Acquisition from 58% of Calyx shareholders and from 31% of the Seller's shareholders. • An Extraordinary General Meeting will be held in the Crowne Plaza Hotel, Dublin Airport, Northwood Park Santry Demesne, Dublin 9, Ireland on Friday 9 June at 10:00am. Commenting on the Acquisition and Placing Maurice Healy Chief Executive of Calyxsaid; "This is our largest acquisition to date and firmly establishes Calyx as a forcein the UK ICT market. The combined strength of Calyx and Matrix provides a morecomplete service for our customers, from ICT infrastructure through toinformation security as well as positioning the Group in the much sought afternetworked ICT services market. The scale of the Group and the broad customer base, across both Ireland and theUK provides an excellent platform for continued organic growth. The foundationhas now been set to roll out our enhanced service offerings which will greatlybenefit our customers. I am grateful to our Shareholders and the investment community for theircontinued support, and I look forward to trading on both the AIM in London andthe IEX in Dublin." Terms defined in the admission document issued today by Calyx shall have thesame meaning in this announcement. For further details please contact:Calyx Group plc Tel: +353 1 676 3363Maurice Healy, Chief ExecutiveBuchanan Communications Tel: +44 (0)20 7466 5000Tim Thompson / James StrongEvolution Securities Tel: +44 (0)20 7071 4300Tom Price / Simon LeathersDavy Stockbrokers Tel: +353 1 679 77 88Ronan Godfrey EXPECTED TIMETABLE OF PRINCIPAL EVENTS Latest date and time for receipt of completed Proxy Forms 10:00am on 7 June 2006Extraordinary General Meeting 10:00am on 9 June 2006Completion of Acquisition 12 June 2006Dealings in the Enlarged Issued Ordinary Share Capital 8:00 a.m. on 12 Junecommence on AIM and IEX 2006CREST accounts in respect of New Ordinary Shares credited 8:00 a.m. on 12 Juneby 2006Despatch of definitive share certificates in respect of New by 19 June 2006Ordinary Shares ACQUISITION AND PLACING STATISTICS Number of New Ordinary Shares being issued pursuant tothe Placing 25,000,000Placing Price 70 pence (€1.027)Gross proceeds of the Placing £17.5 millionEstimated net proceeds of the Placing receivable by the Company £15.5 millionNumber of New Ordinary Shares being issued pursuant tothe Acquisition 2,547,771Number of Ordinary Shares in issue following theAcquisition and the Placing 67,186,108Market capitalisation at the Placing Price following completion of approx. £47the Acquisition and the Placing millionNew Ordinary Shares expressed as a percentage of the Existing 69.5 perOrdinary Shares cent. Amounts in this document expressed in pounds sterling or equivalent amountsstated in Euro have, unless otherwise stated, been calculated using a rate of£1: €1.4674. Acquisition of the Matrix Companies Placing of 25,000,000 Placing Shares at 70p (€1.027) per share Admission to trading on AIM and IEX Notice of Extraordinary General Meeting INTRODUCTION CTL, a wholly owned subsidiary of the Calyx Group plc, has agreed to acquire,subject, inter alia, to Shareholder approval, the entire issued share capital ofNetwork Partners Holdings and MXC and their subsidiaries, together comprisingthe Matrix Companies, from the Seller. The total consideration for theAcquisition will be up to £40.5 million, to be satisfied by the issue ofConsideration Shares to the value of £2 million and payment of £33.5 million incash on Completion, and payment of deferred consideration of up to £5 millioncontingent on the achievement of certain performance targets. In addition, theCompany announced today that it is raising £15.5 million (net of expenses) byway of a Placing of 25,000,000 Placing Shares at 70 pence (€1.027) per OrdinaryShare. Of this net amount, approximately £11.5 million is to provide funds forthe payment of the cash element of the consideration for the Acquisition and £4million is to provide ongoing working capital for the Enlarged Group. The Acquisition is classified as a "reverse takeover" under the AIM Rules byvirtue of the size of the transaction. As such it is subject to the approval ofShareholders, which is to be sought at the EGM. Under the terms of the Placing Agreement, Evolution Securities and Davy haveconditionally agreed to procure subscribers for the Placing Shares at thePlacing Price and to the extent that such subscribers are not obtained for anyof the Placing Shares, Evolution Securities and Davy will themselves subscribefor such Placing Shares at the Placing Price. The Proposals are conditional, inter alia, upon the approval of the Resolutionsby the Shareholders at the EGM and the approval of the Seller Resolution by theSeller Shareholders. In aggregate, the Company has received irrevocableundertakings to vote in favour of the Resolutions to be proposed at the EGM inrespect of 23,109,963 Ordinary Shares, representing approximately 58 per cent.of the Existing Ordinary Shares. The Seller has also received irrevocableundertakings to vote in favour of the Seller Resolution in respect of 11,776,942ordinary shares in the capital of the Seller, representing approximately 31 percent. of the issued ordinary share capital of the Seller. In addition, the Group has decided to seek admission of the Enlarged IssuedOrdinary Share Capital to trading on the IEX market and has appointed Davy asIEX adviser and broker. BACKGROUND TO AND REASONS FOR THE ACQUISITION The Company's Ordinary Shares were admitted to AIM on 17 March 2005 for thepurposes of raising the Group's profile; better positioning itself as a sectorinnovator; expanding its product and technologies portfolio; attracting newclients and strengthening the Group's balance sheet. The Existing Directors alsoanticipated that the admission to AIM would better position the Group to makecomplementary acquisitions. Since the Company was admitted to AIM, the Existing Directors have consideredand successfully executed a number of acquisition opportunities across a numberof business sectors in Ireland and the UK and believe that the Acquisition willallow the Board the opportunity to increase shareholder value at the currenttime. The Existing Directors view the acquisition of the Matrix Companies as aneffective means of expanding its ICT business in the UK, which was recentlyestablished through the acquisition of ITS Technology Services Limited (nowCalyx (UK) Limited). The Group has achieved a significant market position inthis sector in Ireland and the continued expansion into the UK market as aresult of the Acquisition, will provide an opportunity to sell to a wider marketand to achieve synergies from greater economies of scale. The Board commenced discussions with the Seller in September 2005. Followingthese initial discussions and, considering the potential for growth and marketopportunities in the ICT sector that the Existing Directors believe exist in theUK, the Existing Directors believe that the Enlarged Group will be well placedto develop its business and to exploit the opportunities ahead. The Existing Directors believe that the location and scale of the MatrixCompanies' business presents a strong platform from which to expand furtherwithin the UK. THE MATRIX COMPANIES Business The Matrix Companies are engaged in the consultancy, design, supply,implementation and ongoing support of ICT network solutions, across differenttechnologies, to the public and private sectors in the UK. The Matrix Companiesoperate from headquarters in East Grinstead and regional offices which arelocated in Rainford and Hook. The Matrix Companies operate a 24 hour, 365 daysupport centre from the East Grinstead facility. Products and Services The business of the Matrix Companies is based on designing, developing andimplementing bespoke ICT network designs to service its customers' voice anddata requirements. The range of products and services offered by the Matrix Companies includes: •LAN Integration; •WAN Integration; •ICT Security; •Voice over IP; •Specialist telephony services; and •Specialist ICT technical support and maintenance services. Whilst the MXC business is not reliant on any single hardware manufacturer, theNetwork Partners Business has strong supply relationships with a number ofcarriers, including British Telecom. These relationships are all contractedunder industry standard terms and conditions and BT is currently providing themajority of these services. This gives the Matrix Companies the flexibility tooffer bespoke solutions to satisfy their customers' needs. Following the Acquisition, the Seller will retain its Fujin Technology business,but will no longer have the right to use the "Matrix", "MXC" and "NetworkPartners" names, which will transfer to the Enlarged Group pursuant to theAcquisition Agreement. Competition and Market The ICT marketplace in the UK is fragmented and characterised by many small orregional suppliers. The Enlarged Group Board believes that the Enlarged Groupwill become more competitive as a result of the synergies and financial andoperational advantages of acquiring the technologies, services infrastructureand the customer base of the Matrix Companies. The customers of the Matrix Companies include the BBC, BAR (Honda F1), Vodafone,LINX, Betfair, Galileo, Party Gaming, Red Bee Media, Test Valley and ARM. PRINCIPAL TERMS OF THE ACQUISITION Pursuant to the terms of the Acquisition Agreement the Company has agreed toacquire the entire issued share capital of MXC and Network Partners Holdingsthrough its wholly owned subsidiary CTL. The consideration payable pursuant tothe Acquisition Agreement comprises initial consideration of £33.5 million incash and Consideration Shares having an aggregate value of £2 million, anddeferred consideration of up to £3 million payable if the Matrix Companiesachieve profits before tax of £2.5 million in the seven month period to 31December 2006 and up to a further £2 million if the Matrix Companies achieveprofits before tax of £3.1 million for the five month period to 31 May 2007. Asliding scale applies to the deferred consideration if the targets for profitsbefore tax are not met. The value to be attributed to the Consideration Shareswill be the mid-market closing price for Ordinary Shares on AIM for the fivedays prior to the earlier of (a) the date of the announcement of the transactionand (b) 17 May 2006. The Acquisition Agreement contains business and tradingwarranties from the Seller and a separate tax indemnity given by the Seller inrelation to the tax liabilities of MXC and Network Partners Holdings arisingprior to the date of the Acquisition Agreement. In the Acquisition Agreement the Seller has agreed to a twelve month lock-in inrespect of the Consideration Shares with a subsequent arrangement not to disposeof the Consideration Shares except on an orderly market basis. KEY STRENGTHS OF THE ENLARGED GROUP The Existing Directors and the Proposed Director consider that the following arethe Enlarged Group's key strengths: • A Proven Management Team The Enlarged Group's Board and the expanded senior management team haveconsiderable experience in the ICT sector in Ireland and the UK, with eachhaving spent many years in the industry. The Executive Directors have alsodemonstrated their expertise by identifying suitable complementary acquisitiontargets and integrating them into the Group. Both QCL and Convergent are nowfully integrated and operating from Calyx premises. • Breadth and Depth of the Client Base The Enlarged Group has a broad client base, in terms of size, industry sectorand geography across Ireland, Northern Ireland and the UK. It is the EnlargedGroup Board's opinion that there is considerable scope for strong organic growththrough the marketing of centralised remote network management servicesthroughout the Enlarged Group's existing client base. No single client accountsfor more than 10 per cent. of the Enlarged Group's revenues and none of itsbusinesses are reliant on any one client. • Recurring Revenue The Enlarged Group exhibits a growing contracted recurring revenue stream andthis is especially true of the Matrix Companies. • Industry Relationships The Enlarged Group has long established relationships with well known ICTservice providers and network equipment suppliers. The Enlarged Group, throughdiscussions with its clients, has identified a demand for centralised remotenetwork management services, and continues to work with existing and futurepotential partners to generate solutions that satisfy this demand. • ICT Services Infrastructure Ongoing support of its clients' ICT network solutions will be provided by theEnlarged Group's ICT services infrastructure in Ireland and the UK. Thisconsists of its field service teams, its technical help desks based in Dublin,Rainsford and Hook, and its 24 hour, 365 day support centres which are locatedin Dublin and East Grinstead. • Integrated Voice, Data and Consultancy Skill-sets The technical division currently consists of engineers who specialise in datatechnologies, engineers who specialise in voice technologies, helpdesk staff andworkshop staff. Ongoing service quality and technical training is provided forthe support team. The Enlarged Group Board considers that the combination of these strengths willdifferentiate the Enlarged Group from its competitors and will enable it to maximise its growthopportunities in the future. STRATEGY The Enlarged Group's strategy is to continue to develop a comprehensiveportfolio of ICT solutions and support offerings which can be tailored to fitindividual clients' needs. The Directors and the Proposed Director believe thatthe Enlarged Group is well placed to achieve a significant competitive advantagein the growing ICT managed services market in Ireland and the UK by utilisingthe Enlarged Group's range of existing resources, which include: • experience in the design and provision of LAN and WAN and enabling voice and data services • partnerships with leading voice and data industry suppliers • experience in enabling networks for integrated solutions • ability to support multi-vendor and multi-site hardware and software solutions • field service engineering infrastructures • 24 hour, 365 day client support and contact centres in Dublin and East Grinstead COMPETITION The Enlarged Group Board believes that the Enlarged Group will be one of thelargest independent single-source service suppliers, to both the private andpublic sectors, of their telecommunications and computer needs in the UK andIreland. The Enlarged Group has a number of competitors in both the telephonyand computer supply and service markets. However, the Enlarged Group Boardbelieves that few, if any, are in a position to provide as comprehensive a rangeof total ICT services. The Enlarged Group Board believes that one of the Enlarged Group's competitiveadvantages lies in its ability to offer businesses the option of an alternativeand more comprehensive service from that of the original supplier of theirequipment. The Enlarged Group Board believes that a further strength of the Enlarged Groupis its ability to react to client demand and its committed approach to servicequality and client care. The Enlarged Group Board believes that these factorshave enabled the Group, the Network Partners Business and the MXC Business towin major contracts in a competitive environment. RATIONALE FOR ADMISSION TO IEX The Group has decided that it would be appropriate at this time to seekadmission to the Irish Stock Exchange's IEX market. It is expected thatliquidity in the Ordinary Shares will be enhanced by the provision of aeuro-denominated quote and trading facility. The incremental costs are notexpected to be material as the regulatory regime and continuing obligations ofIEX are similar to those of AIM. CURRENT TRADING AND PROSPECTS Current Trading of the Group The Group continues to trade in line with expectations which underpins theExisting Directors' confidence for 2006. The Group has restructured its Sales and Marketing team to concentrate onservices revenue. A media campaign which promoted the Group's NOC services inIreland was undertaken in the last quarter of 2005. The Existing Directorsconsider that these factors have resulted in an increase in the Group's managedservices sales order book. The Existing Directors believe that there remains continued demand by ICT usersfor outsourced solutions. Current Trading and Prospects of MXC Integration Limited and Network PartnersLimited In the first half of the financial year order intake within the Matrix Companieshas been in line with budget and the Proposed Director believes the business isin a strong trading position with a significant order book. Prospects of the Enlarged Group The Enlarged Group Board considers that the Acquisition is an effective means ofexpanding its ICT business in the UK. It also believes that the Acquisitiongives the Enlarged Group the opportunity to sell to a wider market and topotentially achieve synergies from greater economies of scale. The EnlargedGroup Board considers that the Acquisition will also give the Enlarged Group astronger position in the converging network services market and provide anopportunity to sell converged network services, which creates a base ofrecurring revenue. The Enlarged Group Board will continue to focus on the integration of theacquired businesses and to seek out acquisitions appropriate to the EnlargedGroup's strategy. This information is provided by RNS The company news service from the London Stock Exchange