Escher Group Holdings Regulatory News (ESCH)

NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE PROHIBITED BY APPLICABLE LAW

24 April 2012

Escher Group Holdings plc ("Escher" or the "Company")

Successful Placing raising £3.9 million

Escher, a world-leading provider of outsourced, point-of-service software to the postal industry, is pleased to announce that it has successfully raised gross proceeds of £3.9 million (approximately £3.7 million net of expenses) to accelerate growth via the proposed issue of 1,599,999 new Ordinary Shares (the "Placing Shares") at a price of 245 pence per share ("Placing Price"). The Placing, conducted by Panmure Gordon, was to existing and new institutional investors.

Background to and reasons for the Placing

On 12 April 2012, Escher announced its audited results for the 12 months ended 31 December 2011 ("2011 Final Results") and highlighted that the drivers of its business were positive and this was translating into wider opportunities for our technology and growing contracts for services work. More recently, Escher has observed an acceleration in its markets driven by factors such as:

• Post Offices expanding to incorporate a wider retail offering

• the introduction of Near Field Communications ("NFC") creating a potential new market as "Interactive Retail" is growing

• the continued spend by government on Post Office infrastructure

• continued development of Financial Services in Asian Post Offices

• Government policy being directed towards "TrEx" like products

Escher believes that these trends have created an opportunity to capitalise on its achievements since joining AIM last year. Escher has secured important contracts with postal operators, or their suppliers, in Armenia, Ireland, Pakistan, Saudi Arabia and the United States. The Board wishes to raise funds to invest further in the growth of the business.

In February 2012, Escher announced that following a major tender process, it had been awarded a significant contract to provide its Riposte suite of software, maintenance and services to the United States Postal Service ("USPS"). The USPS contract is expected to generate approximately US$50m in revenues over a 15 year period of which approximately $4 million in revenues is expected for the Company in 2012.

The Directors also believe that there are significant opportunities present for the Company in NFC and through the provision of complementary technology that connects into its Retail Software Division, offering managed services and identity management to retailers and mobile network operators alike. 

Use of proceeds

To take advantage of these new opportunities Escher has conditionally raised £3.9 million and the Directors intend to use the proceeds of the Placing as follows:

·; Pursuing large scale point of sale ("POS") opportunities

o The Directors are aware of a number of large post offices who have or may embark on a tender process, including Russia, Japan, the UK and another large European country

o Enhancing the platform through the integration of NFC and standard point of sale terminals

·; Pursuing further TrEx opportunities

o An Post and central and local government pilots

o Engaging in pan European communications initiatives

·; Developing Escher Interactive - NFC Services

The Company also plans to use funds to integrate NFC and POS transaction streams into TrEx.

The Company has also secured indicative terms for a project finance loan of $2.75m from an established corporate bank for the purposes of expanding the workforce, opening a new Washington office and carrying out development work to ensure the delivery of the recently secured contracts.

Details of the Placing

Panmure Gordon, as placing agent for the Company, has conditionally placed 1,599,999 Placing Shares with new and existing institutional investors at the Placing Price to raise gross proceeds of approximately £3.9 million, before total costs of approximately £0.2 million. The Placing is conditional upon admission of the Placing Shares to trading on the AIM Market of the London Stock Exchange ("Admission"). Application has been made for the Placing Shares to be admitted to AIM. It is expected that Admission will become effective and dealings will commence on AIM on 27 April 2012.

The Placing Shares will, on Admission, be credited as fully paid and rank pari passu in all respects with existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid on the Ordinary Shares after that date.

The Placing Price of 245 pence represents a discount of 9.3 per cent. to the closing mid-market price of 270 pence on 23 April 2012. The Placing Shares will represent approximately 8.6 per cent. of the enlarged share capital.

The terms and conditions of the Placing are set out in the Appendix to this press release.

Related Party Transactions

As part of the Placing, Legal & General Group Plc has subscribed for 240,000 Placing Shares. Legal & General Group Plc is currently the holder of 2,554,965 Ordinary Shares, equating to 15.0 per cent. of the Company's issued share capital. As such, under the AIM Rules for Companies, Legal & General Group Plc is deemed to be a related party and its participation in the Placing is deemed to be a related party transaction (the "Transaction").

The Directors consider, having consulted with Panmure Gordon, the Company's nominated adviser, that the terms of the Transaction are fair and reasonable insofar as its Shareholders are concerned.

Commenting on the Placing, Liam Church, the Company's Chief Executive Officer, said:

"Escher is pleased that market developments are expanding the scale of the opportunities that can be addressed by our world-class software and technology. We are delighted that our shareholders and new investors have supported this Placing to enable us to continue and accelerate the growth of the business "

Following Admission, the Company's enlarged issued share capital will comprise 18,633,096 ordinary shares ("Ordinary Shares") with one voting right per share. There are no shares held in treasury and the total number of voting rights in the Company will therefore be 18,633,096.

This figure of 18,633,096 Ordinary Shares may, with effect from 27 April 2012, be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the Company under the FSA's Disclosure and Transparency Rules.

For further information please contact:

About Escher

Escher is a world-leading developer and provider of outsourced, point-of-service software for use in the postal industry worldwide. Its core software, RiposteEssential, enables post offices to expand upon their traditional offering, providing additional new services, reducing costs and increasing efficiency. Riposte is a messaging middleware that enables applications operating on different computers to communicate with each other. The Riposte software manages data, monitors the system status and communicates across the network. Escher operates across two divisions - its Retail Software Division and its Message Based Communications Division.

The Retail Software Solution (RiposteEssential) serves the postal and courier markets. Transactions include mail and financial services and the system is integrated with utilities and financial services companies, banks and central and local governments.

Escher's Message Based Communications Division (RiposteTrEx) is based on a digital post office box model and is designed to provide a national digital infrastructure linking governments, businesses and citizens via a secure platform.

Additional Information:

Neither the Company's website nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of, this announcement.

This announcement does not constitute an offer to underwrite, subscribe or otherwise acquire or dispose of any new Ordinary Shares or other shares in Escher.

The Placing Shares have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the "Securities Act"), or under the securities legislation of any State of the United States. This announcement is not an offer of securities for sale in the United States, and the Offer Shares may not be offered or sold in the United States absent the registration of the Offer Shares under the Securities Act, or an exemption therefrom, or in a transaction not subject to, the registration requirements of the Securities Act. The relevant clearances have not been, and will not be, obtained from the Securities Commission of any province or territory of Canada; no document in relation to the Placing has been, or will be, lodged with, or registered by, the Australian Securities and Investments Commission; no registration statement has been, or will be, filed with the Japanese Ministry of Finance in relation to the Placing. Accordingly, subject to certain exceptions, the Ordinary Shares the subject of the Placing may not, directly or indirectly, be offered or sold within the United States, Canada, Australia, Japan or offered or sold to a resident of the United States, Canada, Australia or Japan.

This press release may contain forward-looking statements with respect to Escher and its operations, strategy, financial performance and condition. These statements generally can be identified by use of forward looking words such as "may", "will", "expect", "estimate", "anticipate", "intends", "believe" or "continue" or the negative thereof or similar variations. The actual results and performance of Escher could differ materially from those expressed or implied by such statements. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations, including that the transactions contemplated herein are completed. Important factors that could cause actual results to differ materially from expectations include, among other things, general economic and market factors, competition and changes in government regulation. The cautionary statements qualify all forward-looking statements attributable to Escher and persons acting on its behalf. Unless otherwise stated, all forward-looking statements speak only as of the date of this press release and the parties have no obligation to update such statements.

Panmure Gordon (UK) Limited is authorised and regulated in the United Kingdom by the Financial Services Authority, is advising Escher and no-one else in connection with the Placing and will not be responsible to any person other than Escher for providing the protections afforded to its clients or for advising any other person in relation to the Placing.

APPENDIX

This appendix contains important information for the Placees (as defined below). This press release and this appendix are for information proposes only, and the terms set out herein are directed only at persons: (a) who, if in the United Kingdom, have been selected by Panmure Gordon and who have professional experience in matters relating to investments and are "investment professionals" within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) (the "Order"), or are persons falling within Article 49(2)(a) to (d) ("high net worth companies, unincorporated associates, etc.") of the Order and who, if in a member state of the European Economic Area, are "qualified investors" (as defined in article 2(1)(e) of EU Directive 2003/71/EC of the European Parliament and the Council of 4 November 2003 (together with any implementing directive measure in such member states, the "Prospectus Directive")); or (b) are otherwise persons to whom it may lawfully be communicated (all such persons together being referred to as "Relevant Persons"). Any investment or investment activity to which the terms and conditions set out herein relates is available only to such persons and will be engaged in only with such persons. :

Terms of the Placing

If a person chooses to participate in the Placing by making or accepting an offer to acquire Placing Shares (each such person whose participation is accepted by Panmure Gordon in accordance with this appendix being hereinafter referred to as a "Placee" and together "Placees") it will be deemed to represent and warrant that it has read and understood this announcement and this appendix in its entirety and to be making or accepting such offer on the terms and to be providing the terms, conditions, representations, warranties, acknowledgements, agreements and undertakings, contained in this appendix.

The Placing Shares have not been and will not be registered under the US Securities Act of 1933 (as amended) (the "Securities Act") or under the securities laws of any State of the United States. The relevant clearances have not been, and will not be, obtained from the Securities Commission of any province or territory of Canada, no document in relation to the Placing has been, or will be, lodged with, or registered by, the Australian Securities and Investments Commission, and no registration statement has been, or will be, filed with the Japanese Ministry of Finance in relation to the Placing. Accordingly, subject to certain exceptions, the Placing Shares may not, directly or indirectly, be offered, sold, re-sold or delivered in or into the United States, Canada, Australia or Japan or offered or sold to, a person within the United States or a resident of Canada, Australia or Japan.

The price of securities and the income from them may go down as well as up and investors may not get back the full amount on disposal of securities.

Any indication in this press release of the price at which ordinary shares in the capital of the Company have been bought or sold in the past cannot be relied upon as a guide to future performance. No statement in this press release is intended to be a profit forecast and no statement in this press release should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.

Each Placee should consult with its own advisers as to legal, tax, business and related aspects of a purchase of Placing Shares.

1. Panmure Gordon will arrange the Placing as agent on behalf of the Company. Participation will only be available to persons invited to participate by Panmure Gordon. Panmure Gordon will, following consultation with the Company, determine in its absolute discretion the extent of each Placee's participation in the Placing, which will not necessarily be the same for each Placee.

2. The price payable per new Ordinary Share shall be the Placing Price.

3. A Placee's commitment to subscribe for a fixed number of Placing Shares will be agreed with and confirmed to it orally by Panmure Gordon (the "Placing Commitment") and a contract note (a "Contract Note") will be dispatched as soon as possible thereafter. The oral confirmation to the Placee by Panmure Gordon (the "Oral Confirmation") constitutes an irrevocable, legally binding contractual commitment to Panmure Gordon (as agent for the Company) to subscribe for the number of Placing Shares allocated to it on the terms set out in this appendix.

4. The obligations and rights of the Placees in connection with the Placing are conditional on the agreement entered into between Panmure Gordon and the Company in connection with the Placing (the "Placing Agreement") have become unconditional in all respects and not having been terminated in accordance with its terms prior to Admission. The Placing Agreement itself is conditional upon, amongst other things Admission becoming effective by not later than 8.00 a.m. on 27 April 2012 (or such later date and time as may be agreed by the Company and Panmure Gordon, being no later than 8.00 a.m. on 1 May 2012 (the "Long Stop Date").

5. If the Placing Agreement has not become unconditional in all respects by the Long Stop Date, the obligations of the Placees will cease and cheques by way of refund for monies paid in respect of the Placees' participating in the Placing will be dispatched by post at the Placees' risk as soon as possible without interest.

6. The Placing Agreement may be terminated by Panmure Gordon at any time prior to Admission if, among other things, the Company fails to comply with its obligations under the Placing Agreement, for material breach of warranty, if any statement contained in this press release or the 2011 Final Results is untrue or misleading or if there is a material omission from this press release or the 2011 Final Results. Further Panmure Gordon has the right to terminate the Placing Agreement upon the occurrence of a force majeure event or if there is a material adverse change in the financial position or prospects of the Company prior to Admission. If the Placing Agreement is terminated prior to Admission, the Placing will lapse and the rights and obligations of the Placees hereunder shall cease and determinate at such time and no claim can be made by any Placee in respect thereof. In such event, all monies (if any) paid by the Placees to Panmure Gordon at such time shall be returned to the Placees at their sole risk without any obligation on the part of the Company or Panmure Gordon or any of their respective affiliates to account to the Placees for any interest earned on such funds. The Placees acknowledge and agree that the Company and Panmure Gordon may, at its sole discretion, exercise its contractual right to waive or to extend the time and/or date for fulfilment of any of the conditions in the Placing Agreement. Any such extension or waiver will not affect Placees' commitments.

7. Commissions will not be paid to Placees in connection with the Placing.

8. The Placing Shares will be issued credited as fully paid, subject to the memorandum and articles of association of the Company and will rank pari passu in all respects with the existing issued ordinary shares of the Company.

9. Each Placee acknowledges to, and agrees with, Panmure Gordon for itself and as agent for the Company, that except in relation to the information in this press release, it has relied on its own investigations of the business, financial or other position of the Company in deciding to participate in the Placing.

10. Settlement of transactions in the Placing Shares following Admission will take place within CREST, subject to certain exceptions. Panmure Gordon reserves the right to require settlement for and delivery of the Placing Shares to the Placees in such other means it deems necessary if delivery or settlement is not possible within CREST within the timetable set out in this press release or would not be consistent with the regulatory requirements in the jurisdiction of such Placees.

11. It is expected that settlement of the Placing will occur on 27 April 2012, on which date each Placee must settle the full amount owed by it in respect of the Placing Shares allocated to it. Panmure Gordon may (after consultation with the Company) specify a later settlement date (or dates) at its absolute discretion. Payment must be made in cleared funds. The payment instructions for settlement in CREST and settlement outside of CREST will be set out in the Contract Note. The trade date of the Placing Shares is 24 April 2012. Interest is chargeable daily on payments to the extent that value is received after the due date at the rate per annum of four percentage points above the Barclays Bank plc base rate. If a Placee does not comply with these obligations, Panmure Gordon may sell the Placing Shares allocated to such Placees (as agent for such Placee) and train from the proceeds, for its own account, an amount equal to the Placing Price plus any interest due. The relevant Placee will, however, remain liable, inter alia, for any shortfall between the Placing Price and it may be required to bear any stamp duty or stamp duty reserve tax (together with any interest or penalties) which may arise upon the sale of its Placing Shares on its behalf. Time shall be of the essence as regards the obligations of the Placees to settle payment for the Placing Shares and to comply with their other obligations under this appendix.

12. If Placing Shares are to be delivered to a custodian or settlement agent of a Placee, the relevant Placee should ensure that its Contract Note is copied and delivered immediately to the relevant person within that organisation. Insofar as Placing Shares are to be registered in the name of a Placee or that of its nominee or in the name of any person for whom the Placee is contracting as agent or that of a nominee for such person, such Placing Shares will, subject as provided below, be so registered free from any liability to UK stamp duty or stamp duty reserve tax. Placees should match the CREST details as soon as possible or if using a settlement agent they should instruct their agent to do so. Failure to do so could result in a CREST Settlement fine.

Representation and Warranties by the Placees

By participating in the Placing, each Placee (and any person acting on its behalf):

1. represents and warrants that it has read this press release in its entirety and acknowledges that is participation in the Placing will be governed by the terms, conditions, representations, warranties, acknowledgements, warranties, acknowledgements, agreements and undertakings of this press release (including this appendix);

2. acknowledges that no offering document or prospectus has been or will be prepared in accordance with the Placing and that it has not received a prospectus or other offering document in connection herewith;

3. represents, warrants and undertakes that it will subscribe for the Placing Shares allocated to it in the Placing and pay up for the same in accordance with the terms of this appendix failing which the relevant Placing Shares may be placed with other subscribers or sold as Panmure Gordon determines and without liability to such Placee;

4. confirms Panmure Gordon's absolute discretion with regard to the Placing Agreement and confirms that Panmure Gordon owes no fiduciary duties in respect of any claim it may have relating to the Placing;

5. undertakes and acknowledges that its obligations under the Placing are legally binding and irrevocable;

6. represents and warrants that its obligations under the Placing are valid, binding and enforceable and that it has all authority, and has obtained all necessary consents and authorities to enable it to commit to participation in the placing and to perform its obligations in relation thereto and will honour its obligations (including, without limitation, in the case of any person on whose behalf it is acting, all necessary consents and authorities to agree to the terms set out or referred to in this press release);

7. represents and warrants that it is entitled to subscribe for Placing Shares under the laws of all relevant jurisdictions which apply to it and that it has fully observed and complied with such laws and obtained and all such governmental and other guarantees and other consents which may be required thereunder and complied will all necessary formalities;

8. represents and warrants that it is not a person falling within subsections (6), (7) or (8) of sections 67 or 70 or subsections (2) and (3) of section 93 or subsection (1) of section 96 of the UK Finance Act 1986 (or an agent or nominee of such person);

9. represents and warrants that the issue or transfer of Placing Shares to it (whether as principal, agent or nominee) will not be subject to stamp duty or stamp duty reserve tax at the increased rates referred to in sections 67 or 93 (Depositary Receipts) or sections 70 or 96 (Clearance Services) of the UK Finance Act 1986;

10. acknowledges that Panmure Gordon is acting solely for the Company and that participation in the Placing is on the basis that it is not and will not be a client or customer of Panmure Gordon or any of its affiliates and that Panmure Gordon and its affiliates have no duties or responsibilities to it for providing the protections afforded to their clients or customers or for providing advice in relation to the Placing or in respect of any representations, warranties, undertakings or indemnities contained in the Placing Agreement nor for the exercise or performance of any of Panmure Gordon's rights and obligations thereunder, including any right to waive or vary conditions or exercise any termination right;

11. agrees that the exercise by Panmure Gordon of any right of termination or any right of waiver exercisable by Panmure Gordon contained in the Placing Agreement shall be within the absolute discretion of Panmure Gordon and Panmure Gordon shall not have any liability to it whatsoever in connection with any decision to exercise or not exercise any such rights;

12. acknowledges that any agreements entered into by it pursuant to these terms and conditions shall be governed by and construed in accordance with the laws of England and it submits (on behalf of itself and on behalf of any person on whose behalf it is acting) to the exclusive jurisdiction of the English courts as regards any claim, dispute or matter arising out of any such contract;

13. warrants that it has not engaged, and will not engage, in any "direct selling efforts" with respect to any Placing Shares, and that it will not make any offer to the public of the Placing Shares prior to Admission;

14. warrants and undertakes that it is not are not a person who is resident in, or a citizen of, the United States, Canada, Australia, Japan or South Africa (or an agent or nominee of such a person);

15. warrants and undertakes that it is one of the following types of person: (i) a person outside the United Kingdom; (ii) an investment professional within the meaning of Article 19(5) of the Order; (iii) a person who falls within Article 49(2)(a) to (d) of the Order; (iv) a person who has been classified as an intermediate customer or a market counterparty of Panmure Gordon; or (v) any other person to whom the Press Release may lawfully be communicated; and

16. warrants and undertakes that it has not relied on any representation relating to the Placing, the Placing Shares or the Company other than information contained in this press release and/or its own investigations of the Company and in particular you are not relying on any representations or warranties by Panmure Gordon;

17. acknowledges and agrees that the Placing Shares have not been, and will not be, registered under the Securities Act or under the securities laws of any State of the United States, that the relevant clearances have not been and will not be obtained from the Securities Commission of any province of Canada and that the Placing Shares have not been and will not be registered under the securities laws of Australia, South Africa or Japan and, therefore, the Placing Shares may not be, directly or indirectly, offered or sold in the United States, Canada, Australia, South Africa or Japan or any province thereof or any area subject to their respective jurisdictions;

18. acknowledges and agrees that neither it nor any affiliate, nor any person acting on its or any affiliate's behalf, has or will offer, sell, take up, renounce, transfer or deliver directly or indirectly any Placing Shares within the United States, Canada, Australia, South Africa or Japan or offer, sell, take up, renounce, transfer or deliver in favour of or to or for the account of a US Person (as that expression is defined in Regulation S under the Securities Act) or a resident of Canada, Australia, South Africa or Japan;

19. warrants and undertakes that it, and any other person for whom it is subscribing for Placing Shares, are a 'qualified investor' (as defined in section 86(7) of the UK Financial Services and Markets Act 2000 ("FSMA") are otherwise permitted by law to have the offer for Placing Shares made to it and/or them without requiring the publication and registration of a prospectus under FSMA;

20. if in the United Kingdom, represents and warrants that it has complied and will comply with all applicable provisions of FSMA with respect to anything done by it in relation to the Placing Shares in, from or otherwise involving the United Kingdom and will not sell or offer to sell the Placing Shares in a manner which will result in an offer to the public in the United Kingdom within the meaning of FSMA;

21. confirms, to the extent that it is subscribing for Placing Shares on behalf of a third party, that:

21.1. it has carried out applicable procedures to verify the identity of such third party for the purposes of the Money Laundering Regulations 2007 (the "Regulations");

21.2. it has complied fully with your obligations pursuant to the Regulations;

21.3. it will provide Panmure Gordon on demand with any information it might require for the purposes of verification under the Regulations; and

21.4. it is not accepting the Placing Shares on a non-discretionary basis other than as agent for persons who are acquiring securities in the ordinary course of their business;

22. confirms that it is aware of, has complied with and will comply with its obligations in connection with the Regulations, the UK Proceeds of Crime Act 2002, the UK Criminal Justice Act 1993 and section 118 of FSMA; and

23. undertakes and agreed that (i) the person whom it specifies for registration as holder of the Placing Shares will be (a) the Placee or (b) a nominee of the Placee (ii) neither Panmure Gordon nor the Company or any of their respective affiliates will be responsible for any liability to stamp duty or stamp duty reserve tax resulting from a failure to observe this requirement; and (iii) the Placee and any persona acting on its behalf agrees to subscribe on the basis that the Placing Shares will be allotted to the CREST stock account of Panmure Gordon which will act as settlement agent in order to facilitate the settlement process.

The acknowledgements, undertakings, representations and warranties referred to above are given to each of the Company and Panmure Gordon (for their own benefit and, where relevant, the benefit of their respective affiliates) and are irrevocable. The Company and Panmure Gordon will rely upon the truth and accuracy of the foregoing acknowledgements, undertakings, representations and warranties.