Digitalbox Regulatory News (DBOX)

13 Dec 2006 07:02

PLUS Markets Group PLC13 December 2006 Not for release, publication or distribution in or into or from United States ofAmerica, Canada, Australia, Japan, the Republic of Ireland or the Republic ofSouth Africa. PLUS Markets Group plc Placing of 178,571,429 new Ordinary Shares at 14 pence per share Notice of Extraordinary General Meeting Highlights • Placing to raise £25 million, fully underwritten by Numis Securities Limited • Proceeds to be used to strengthen the Company's balance sheet, extend its trading services in preparation for MiFID and expand and promote PLUS's current equity market offering • New Board appointments Summary PLUS Markets Group plc ("PLUS Markets" or "the Company") announces a Placing of178,571,429 new Ordinary Shares at 14 pence per share to raise £25 millionbefore expenses which has been fully underwritten by Numis Securities Limited.This is a significant equity fundraising for the Company and the Placing Sharesrepresent 57.02 per cent. of the Enlarged Issued Share Capital. The Directors and the Proposed Directors propose to use the net proceeds of thefunds raised pursuant to the Placing to strengthen the Company's balance sheetto command additional customer and regulatory confidence, improve its tradingplatforms ahead of MiFID, recruit and retain high-calibre staff, expand salesand relationship management activities, and develop and promote new tradingservices, market data services and company services products. As part of this expansion the Company will make certain Board changes upon theResolutions being passed at the EGM, further details of which are set out below.The EGM is to be held at 11.00 a.m. on 8 January 2007, to approve the Placing. Commenting on the Placing, Simon Brickles, Chief Executive Officer of PLUSMarkets said: "PLUS Markets Group has evolved rapidly over the last two years. The proposalsthat we have announced today represent a sea change in the scale of ouroperations. The Placing will enable us to fund a further substantial extensionof our trading and quotation services including into more liquid securities.The new appointments to our Board will ensure that we have the leadershipnecessary to develop into a fully competitive stock exchange for London." For further enquires, please contact: PLUS Markets Group plc Simon Brickles 020 7553 2020 Numis Securities Limited David Poutney 020 7776 1500(Nominated Adviser & Broker) Nick Westlake Rostron Parry John Parry 020 7490 8062(Press enquiries) Background to the Placing The Company operates an equity market in the City of London and is in the courseof seeking RIE status from the FSA, with the aim of achieving RIE status duringthe second quarter of 2007. The Directors currently know of no reason why thisstatus should not be granted. The Company's current focus is on providingcost-effective quotation and trading services dovetailed to the needs of smalland mid-cap companies, and to the UK private client broking community. From thisbasis, it is seeking to expand into offering services to meet the quotation andtrading needs of larger companies and the UK institutional community. The Directors believe that there are significant new business opportunitiesavailable to the Company as a result of factors such as potential globalexchange consolidation and the changing regulatory framework under MiFID, due tobe implemented from November 2007. MiFID provides an opportunity for investmentfirms to review the current products and services provided to them bytraditional stock exchanges. The Directors believe that it is a competitiveadvantage that the Company's market is already operational. To be able tocapitalise effectively on such opportunities and ensure that the regulatory andtechnical infrastructure is in place by November 2007, PLUS Markets is seekingadditional funds from existing and new shareholders. Overview of current operations The Group has developed rapidly over the last two years under its currentmanagement team, expanding its business model in December 2005 by offeringtrading in a wider range of securities and introducing two new lines of revenuefrom trading services and market data services, as described below. The Company's market offering comprises three segments: Trading services - a quote-driven trading platform which supports liquidity insmall and mid-cap companies offering trading in unlisted (e.g. AIM) and listedsecurities quoted elsewhere in London, as well as securities quoted on its ownprimary market. PLUS Markets has brought competition to the UK market for thetrading of small and mid-cap securities by introducing a choice of executionvenue. Brokers and market makers who wish to trade on PLUS must be a member ofthe market. Market data services - the Company provides a real-time information feedoffering proprietary PLUS trading data. Information vendors subscribe to thedata and market participants pay an end-user per-terminal charge to accessreal-time data. Company services - the Company provides services for the admission to trading onPLUS via a quotation on the PLUS primary market or by being listed or quoted onother markets in London, company news dissemination via Newstrack PLUS, and amembership structure for PLUS corporate advisers. The Directors believe that trading on PLUS as opposed to other trading platformsreduces transaction costs by eliminating trade reporting fees. Empiricalevidence produced by Cass Business School has also demonstrated that improvedprices are available on PLUS when compared to other trading platforms. In 2006(to the end of October), over 400,000 bargains have been executed on the PLUSplatform representing a combined market value of over £2.3 billion, with inexcess of 4 billion shares traded. The PLUS primary market has historically focussed on the needs of smallercompanies seeking admission to a public market. There are currentlyapproximately 180 PLUS-quoted companies with a combined market capitalisation ofover £2 billion. The Directors believe that PLUS is the second largest growthcompany market in Europe by reference to number of companies. The net number ofPLUS-quoted companies is on a gradual increase for its second subsequent year. PLUS Markets has a well-developed operational infrastructure, already offeringcompetition and choice of execution for trading shares in London. Over 800 smalland mid-cap company shares currently trade on the PLUS platform, representing acombined market capitalisation of over £145 billion. These comprise a listedsegment (FTSE 250, FTSE Small Cap, FTSE Fledgling securities, includinginvestment trusts), an unlisted segment containing AIM securities traded onPLUS, and securities quoted on the PLUS primary market. In the UK, the Group hasonly one direct competitor offering both secondary and primary markets. TheDirectors believe that, other than this direct competitor, PLUS Markets is theonly FSA regulated entity that meets the regulatory requirements to offer amarket in AIM securities. Key recent milestones The Company has successfully delivered a number of developments previouslyoutlined to Shareholders, with the objective of building PLUS into a crediblealternative to traditional exchanges. The Company raised £3.15 million in November 2004 to provide the business withongoing working capital, to reform and re-position its former Ofex market, andto strengthen the management team. At that time the Company indicated that itintended to become an RIE, potentially by way of an application to the FSAwithin two years. In the first six months of 2005 the new management teamreduced operational costs and reformed its company services offering. The Company raised a further £2.5 million in September 2005 to broaden markedlyits trading services to encompass a wider range of listed and unlistedsecurities quoted elsewhere in London. At that time, the Company secured furtherbacking from important market participants in the small and mid-cap market. Itapplied funds to build and operate the new quote-driven trading platform, whichcommenced operations in December 2005. The fundraising in September 2005 enabled the Company to increase the number ofsecurities currently trading on its market to over 800, compared to 134securities traded at the end of 2004. During 2006, the Company built up its trading services customer base. In doingso, it began to capture significant liquidity in the small cap listed segmentsof the FTSE Fledgling and FTSE Small Cap indices. The Directors believe thatincreasing market share will generate an increase in market data servicesrevenue. The Company also reorganised and re-branded its market offering which it haddeveloped under two separate identities ("Ofex" and "the PLUS service") - into asingle equity market offering under the name of "PLUS", with effect from October2006. Proposed extension of market services PLUS Markets intends to leverage its existing operational presence to competemore widely for non-order book business. PLUS Markets proposes to expand itstrading services to allow investment firms to meet their execution, reporting,and transparency needs under MiFID in an efficient and cost-effective manner.Its enlarged market structure will provide investment firms with on andoff-exchange quote driven services. The Company intends to introduce new trading technology to facilitate: • electronic connectivity with brokers, allowing for message routing between PLUS market participants, and the enhanced PLUS Markets trading capacity; • brokers to display client limit orders which, under MiFID, brokers will have a legal obligation to publish in certain circumstances; • off-exchange quotation facilities in liquid shares for systematic internalisers and quote service and trade reporting facilities to support bilateral off-book trading providing pre and post-trading transparency. The Directors believe that this is a significant opportunity given that in the first nine months of 2006 this accounted for the majority of the value of equity trading activity in London. Following the attainment of RIE status, PLUS Markets intends to broaden itsrange of market services, facilitating trading in a wider range of securities,including in the areas of investment trusts, real estate investment trusts ("REITs") and structured products. Board changes A number of Directors will be leaving the Board upon the Resolutions beingpassed at the EGM. After three years with the Company, Darren Francis, ourcurrent Chief Financial Officer, has decided to leave the Board. Darren hashelped transform the Company. Two of our non-executive Directors, Helen Baganand John Wedgwood, will be stepping down from the Board as well. Helen and Johnhave provided wise counsel and Board level continuity during their tenures. I amgrateful to Darren, Helen and John for their significant contribution to theCompany's development and wish them well for the future. The Board intends to appoint Brian Taylor as Chief Financial Officer. Brian willoversee the Company's finance and I.T. functions at executive level. CyrilTheret will be appointed Business Development Director. In addition, the Boardintends to appoint two new non-executive Directors, namely Ian Salter and GilesVardey. Amongst many other achievements, both are former directors of LondonStock Exchange having served as deputy chairman and an executive directorrespectively. The Directors believe that these appointments will strengthen theCompany's management. Further details about Brian Taylor, Cyril Theret, Ian Salter and Giles Vardeyare given below. All of the Board appointments detailed in this document areintended to be made following the Resolutions being passed at the EGM and uponreceipt of appropriate approval from the FSA. Brian Taylor, proposed chief financial officer (aged 47) Brian is currently the managing director of BTA Consulting Limited a nichefinancial markets consultancy group with over 80 clients world-wide including anumber of stock exchanges. He is a qualified chartered accountant. Brian haspreviously been retained as a senior manager at Price Waterhouse and avice-president at Merrill Lynch Europe Limited. He is a graduate of the VictoriaUniversity of Manchester. Cyril Theret, proposed business development director (aged 36) Cyril joined the Group in January 2004, where he has been responsible for salesactivities. He previously spent five years with London Stock Exchange where heheld several positions in market supervision and issuer services includingbusiness development manager for North America. Cyril previously worked forState Street Bank and Trust in Paris, Munich and London. He graduated in 1994with a Maitrise d'Ingenierie Financiere and B.A. in International Economics. Giles Vardey, proposed non-executive director (aged 50) A graduate of Oxford University, Giles has spent over 25 years in financialservices holding senior positions in major investment banks including SalomonBrothers, County Natwest and Swiss Bank Corporation. Between 1992 and 1997, heserved on the main board of the London Stock Exchange leading the successfulimplementation of the electronic trading system (SETS) and the creation of AIMin 1995. After that he became CEO of Fidelity Brokerage Services and then GreigMiddleton & Co. Limited, the UK's largest private client stockbroking businessand was on the board of the parent company Gerrard PLC. He became chairman ofHunter-Fleming Limited in 2001, a private pharmaceutical development company andmore recently, he was Chairman of CQS, one of Europe's leading hedge funds andhas advised a number of fast growing technology companies. He is a member of theSecurities Institute (MSI), and has served in the past on the Securities TradingCommittee of the London Investment Banking Association, and on the APCIMS EuropeCommittee. He remains chairman of Hunter-Fleming Limited and he is also chairmanof Trident Gaming Ltd and chairman of the Boat Race Company Limited, whichorganises the annual Oxford and Cambridge University Boat Race. Ian Salter, proposed non-executive director (aged 63) Ian was non-executive deputy chairman of the London Stock Exchange from 1990until 2004. He is investment director of Tilney Investment Management, London,which took over SG Investment Management Limited where he had been managingdirector. He is a member of the Finance Committee for the City Take-Over Paneland sat on the Code Committee. He also served on the Financial Reporting Councilfor eight years and was a member of the UK Listing Authority Advisory Committee. Current Trading The Company's interim statement for the six month period ended 30 June 2006 wasannounced on 6 September 2006. Since 30 June 2006, trading has been broadly inline with the Company's expectations. In July 2006 PLUS Markets introduced asingle membership structure, with 46 brokers and 7 market makers. In October2006 a unified market data feed was introduced. In November 2006, PLUS Marketsannounced an increase in fees for company services, to take effect from 1January 2007. The Directors believe that the results for the second half of theyear will deliver an improvement on the first half. The Placing The Company is proposing to raise up to £25 million, before expenses, by theissue of up to 178,571,429 new Ordinary Shares to institutional and otherinvestors, pursuant to the Placing, at 14 pence per Ordinary Share. Numis, asagent for the Company, has agreed conditionally to use its reasonable endeavoursto procure subscribers for the Placing Shares and failing which to subscribeitself for the Placing Shares pursuant to the terms of the Placing Agreement.The Placing is conditional upon Shareholder approval at the EGM. The PlacingShares will represent 57.02 per cent. of the Company's Enlarged Issued ShareCapital. Reasons for the Placing and Use of Proceeds The Company is seeking additional funds which it intends to apply as follows: • Strengthen the Group's balance sheet, command additional customer and regulatory confidence and provide the Company with the financial flexibility to respond to strategic opportunities in the short and medium term. • Improve its trading platform, including introducing a dynamic interface for broker dealer and market maker members to connect directly to PLUS and increasing capacity to accommodate trading services for a wider range of securities, to include liquid shares, as defined under MiFID. • Recruitment and retention of high-calibre staff to deliver the Group's business plan. • Expand its sales and relationship management activities to capture and service trading services customers in both the retail broking and the institutional sectors. • Regulatory and marketing support to develop and promote new market data services products, including services associated with trade data monitor status as proposed by the FSA, and the extension of PLUS Markets' existing Newstrack PLUS news dissemination service into a regulatory information service. • Development and promotion of new company services products, as well as promote more widely its existing product in the UK and internationally. Possible admission to the Official List Within 12 months of attaining RIE status the Company intends to consider a moveto the Official List. Admission to the Official List would enable the Company toadmit its shares to trading on its own market. Any such move will be conditionalon shareholder approval. Reasons for calling the EGM Section 80 of the Act prohibits Directors from allotting any shares in theCompany without prior authority from Shareholders. Section 89 of the Act givesholders of equity securities certain rights of pre-emption on the issue for cashof new equity securities. The section 80 authority granted to the Directors by Shareholders at the annualgeneral meeting of the Company held on 20 April 2006 permits the Directors toallot equity securities in the Company up to an aggregate nominal amount of£2,239,969, being 44,799,380 Ordinary Shares. The disapplication of section 89granted at the same meeting permits, inter alia, the Directors to allot equitysecurities having an aggregate nominal amount not exceeding £336,331 (being6,726,620 Ordinary Shares and representing approximately 5 per cent. of theissued equity share capital of the Company as at the date of the annual generalmeeting) on a non-pre-emptive basis. In order to implement the Placing the Directors wish to seek a new section 80authority in respect of an aggregate nominal amount of £14,148,307 and further,a disapplication of section 89 in respect of the Placing Shares and theallotment of further equity securities up to an aggregate nominal amount of£782,960 (being approximately 5 per cent. of the enlarged issued share capitalof the Company following completion of the Placing). This authority will expireat the end of the annual general meeting to be held in 2007. A resolution willalso be proposed to increase the Company's authorised share capital from£10,000,000 to £21,000,000 by the creation of 220,000,000 new Ordinary Shares. The Resolutions being proposed at the EGM will enable the Company to completethe Placing as well as giving the Directors the flexibility to raise additionalfunds or make acquisitions in the future as and when suitable opportunities mayarise. Additional Information on the Proposed Directors (a) The Proposed Directors hold or have held the following directorships orhave been partners in the following partnerships within the five years prior tothe date of this document: (i) Brian Taylor Current Directorships Past Directorships BTA Consulting Limited Udexi Limited INB plc (ii) Cyril Theret Current Directorships Past Directorships None None (iii) Giles Vardey Current Directorships Past Directorships 54 Onslow Gardens Management Limited Brightview Internet Services Limited Hunter-Fleming Limited The Boat Race Company Brightview Limited Limited CQS Management Limited Knightserve Limited Totalise Internet Access Limited Xtorp Limited (iv) Ian Salter Current Directorships Past Directorships CCH International plc London Stock Exchange plc TIM (London) Limited (b) Giles Vardey was a director of a company known as ProtX Limited, now XtorpLimited, when the company was placed in administration on 16 March 2001. MrVardey had joined the company on 1 September 2000 in order to assist with therescue of the company. A payment counterparty froze significant funds of thecompany in March 2001 and the board of directors called in administrators. MrVardey ceased to be a director on 14 October 2002. The administration isongoing. Mr Vardey joined Brightview Limited as a director on 17 September 2001. Heresigned on 23 April 2002. 11 months following his resignation, on 9 April 2003,the company was placed in administration. The administration followed thewithdrawal of funds by the main lender. All creditors were repaid in full andthe company was liquidated on 26 April 2006. Brian Taylor joined INB plc as a non-executive director on 12 June 2000. Heresigned as a director on 1 March 2001. Nine months following his resignation,on 18 December 2001, the company entered into a creditors' voluntaryliquidation. The company was dissolved on 10 March 2003. (c) Save as disclosed above, none of the Proposed Directors has: (i) any unspent convictions in relation to indictable offences; (ii) had any bankruptcy order made against him or entered into anyvoluntary arrangements; (iii) been a director of a company which has been placed in receivership,compulsory liquidation, creditors' voluntary liquidation, administration, beensubject to a voluntary arrangement or any composition or arrangement with itscreditors generally or any class of its creditors whilst he was a director ofthat company or within the 12 months after he ceased to be a director of thatcompany; (iv) been a partner in any partnership which has been placed incompulsory liquidation, administration or been the subject of a partnershipvoluntary arrangement whilst he was a partner in that partnership or within the12 months after he ceased to be a partner in that partnership; (v) been the owner of any assets or a partner in any partnership whichhas been placed in receivership whilst he was a partner in that partnership orwithin the 12 months after he ceased to be a partner in that partnership; (vi) been publicly criticised by any statutory or regulatory authority(including recognised professional bodies); or (vii) been disqualified by a court from acting as a director of any companyor from acting in the management or conduct of the affairs of a Company. Directors' and Other Interests The interests of the Directors and their immediate families (all of which arebeneficial unless otherwise stated) and of connected persons within the meaningof section 346 of the Act in the issued share capital of the Company which havebeen notified to the Company pursuant to Section 324 and 328 of the Act (or arerequired to be disclosed in the register of Directors' interests pursuant toSection 325 of the Act) as at the date of this document and as expected to beimmediately following Admission are as follows: Directors Number of Existing % of Existing Number of % of EnlargedName Ordinary Shares Ordinary Shares Ordinary Shares Issued Share immediately Capital following AdmissionS J Allcock 750,000 0.56 750,000 0.24H Bagan 200,000 0.15 271,429 0.09S M Brickles 900,000 0.67 1,078,571 0.34D S Francis 300,000 0.22 300,000 0.10S J Hazell-Smith 1,100,000 0.82 1,814,286 0.58N M N Smith 100,000 0.07 278,571 0.09J A T Wedgwood 300,000 0.22 300,000 0.10 Definitions The following definitions apply throughout this announcement, unless the contextotherwise requires: "Act" or "Companies Act" the Companies Act 1985 (as amended) "Admission" the admission of the Placing Shares to trading on AIM becoming effective in accordance with the AIM Rules "AIM" the market of that name operated by the London Stock Exchange "AIM Rules" the rules for AIM companies and their nominated advisers issued by the London Stock Exchange "Board" or "Directors" the directors of the Company "Company" or "PLUS Markets" PLUS Markets Group plc, the operator of PLUS "Enlarged Issued Share Capital" the issued ordinary share capital of the Company immediately following Admission, comprising the Existing Ordinary Shares and the Placing Shares "Existing Ordinary Shares" the 134,612,701 Ordinary Shares in issue at the date of this document "Extraordinary General Meeting" the extraordinary general meeting of the company to be held on 8or "EGM" January 2007 "FSA" the Financial Services Authority "Group" PLUS Markets Group plc and its subsidiary undertakings "London Stock Exchange" London Stock Exchange plc "MiFID" the Markets in Financial Instruments Directive "Newstrack PLUS" PLUS Markets' proprietary market news dissemination service "Numis" Numis Securities Limited, nominated adviser and broker to the Company "Ordinary Shares" the ordinary shares of 5 pence each in the share capital of the Company "Placing" the conditional placing by Numis pursuant to the Placing Agreement of the Placing Shares with institutional and other investors at the Placing Price "Placing Agreement" the agreement dated 13 December 2006 between the Company and Numis pursuant to which Numis has conditionally agreed to use reasonable endeavours to procure subscribers for the Placing Shares "Placing Price" 14 pence per Placing Share "Placing Shares" the 178,571,429 new Ordinary Shares which are the subject of the Placing "PLUS" the market operated by PLUS Markets "Proposed Directors" Brian Taylor, Cyril Theret, Giles Vardey and Ian Salter "Resolutions" the resolutions set out in the notice of Extraordinary General Meeting "RIE" recognised investment exchange "Shareholders" holders of Ordinary Shares This information is provided by RNS The company news service from the London Stock Exchange