Ixico Regulatory News (IXI)

19 July 2013

Proposed Cancellation of Listing and Admission to AIM

Phytopharm plc announces that it will today post a circular to shareholders convening a General Meeting to be held at the Company's offices, Lakeview House, 2 Lakeview Court, Ermine Business Park, Huntingdon, Cambridgeshire PE29 6UA at 10 a.m. on 5 August 2013 at which it will seek shareholder approval for the proposed cancellation of admission to the premium segment of the Official List and to trading on the London Stock Exchange's Main Market for listed securities and detail its intention to apply for admission to AIM, adoption of an Investing Policy and undertake a share capital consolidation.

The circular will be available shortly on the Company's website at www.phytopharm.com and will be submitted to the National Storage Mechanism where it will shortly be available at www.morningstar.co.uk/uk/nsm

Background to and reasons for Cancellation and Admission

On 21 May 2013, the Company announced that it had signed heads of terms in connection with the possible acquisition of a revenue generating UK-based private company in the healthcare sector. Whilst the Board initially was planning to seek shareholder approval for the acquisition of the a revenue generating UK based private company in the healthcare sector at a General Meeting to be convened in due course, after which the Company also expected to delist from the Main Market and seek admission of the enlarged share capital to trading on AIM, the Board and the Target believe that there are a number of benefits from transferring the Company's quote to AIM before a definitive agreement is reached with the Target. Upon Admission to trading on AIM, the Board expects the Company to be classified as an Investing Company (defined as an AIM company which has as its primary business or objective, the investing of its funds in securities, businesses or assets of any description).

The Board believes that AIM is a more appropriate market for a company of Phytopharm's size and that a transfer of the Existing Ordinary Shares to trading on AIM should lead to lower ongoing costs associated with being a publicly quoted company and a simplification of the Company's administrative and regulatory requirements. It also believes that AIM will offer greater flexibility, particularly with regard to corporate transactions, and should therefore enable the Company to agree and execute certain transactions more quickly.

In addition, the Company intends to consolidate its existing ordinary shares on the basis of 1 consolidated ordinary share for every 50 Existing Ordinary Share in order to create a share capital base which is more consistent with that of companies with a similar size.

Expected timetable of Principle Events

The expected timetable of principal events is as follows:

Proposals to be voted at the General Meeting

Resolution 1 - Delisting Resolution

The Directors believe that there will be significant benefits to the Company delisting and seeking admission to trading on AIM as set out in further detail in Section 2 below. The Listing Rules require that if a Company wishes to cancel its listing on the Official List then it must seek the approval of not less than 75 per cent. of its shareholders in a general meeting (Listing Rule 5.2.5(2)). Accordingly, this special resolution is being sought to authorise the Board to cancel the Company's listing of Existing Ordinary Shares on the Official List of the UKLA, remove such Existing Ordinary Shares from trading on the Main Market and to apply for admission of the Company's issued share capital to trading on AIM. Resolution 1 is subject to and conditional upon the passing of Resolution 2 below.

Resolution 2 - Approval of Investing Policy

Shareholder approval of the Company's Investing Policy will be sought at the General Meeting and Shareholders must be aware that Admission is conditional upon such Shareholder approval being obtained as the proposed acquisition of the Target (which constitutes a reverse takeover) is not going to complete before Admission. Approval of the Company's Investing Policy is subject to the approval of not less than 50 per cent. of Shareholders voting in person or by proxy and, accordingly, an ordinary resolution is being proposed at the General Meeting to approve the Investing Policy as set out in section 4 of the circular. Resolution 2 is subject to and conditional upon the passing of Resolution 1 above.

Resolution 3 - Share Capital Consolidation

The Company is proposing to consolidate the Existing Ordinary Shares on the basis of 1 Consolidated Ordinary Share for every 50 Existing Ordinary Shares held. The Directors believe that the proposed Share Capital Consolidation is necessary in order to create a share capital base which is more consistent with that of companies of a similar size and may encourage greater investor appetite for, and accordingly liquidity in, the New Ordinary Shares

Recommendation

The Board believes that the Delisting, Adoption of Investing Policy and Share Capital Consolidation are in the best interests of the Company and its shareholders as a whole. Accordingly, the Board unanimously recommends that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting.

Proposed cancellation of the listing on the Official List and Admission to trading on AIM

Approval of Investing Policy and

Share Capital Consolidation

1 Introduction

The Company has today announced the proposed cancellation of the Company's listing on the Official List and Admission to trading on AIM, the proposed adoption of an Investing Policy as well as a Share Capital Consolidation. This document sets out further details on these developments and convenes the General Meeting at which certain Resolutions will be proposed. 

These developments follow on from the announcement made on 18 February 2013 when the Company announced that analysis of the headline results from its Phase II clinical trial of Cogane™ in Parkinson's disease indicated that the drug had not demonstrated clinically meaningful efficacy. After discussions with the Company's major shareholder, the Board initiated a review of the strategic options available to the Company, including a review of a number of merger and acquisition opportunities which included the possible acquisition of a revenue generating UK-based private company in the healthcare sector. On 21 May 2013 the Company announced that it had signed heads of terms in connection with the possible acquisition of the Target which, if concluded, would be classified as a "reverse takeover" under the Listing Rules and as a result trading in the Company's Premium listing on the Main Market was suspended.

Whilst the Board initially was planning to seek shareholder approval for the acquisition of the Target at a General Meeting to be convened in due course, after which the Company also expected to delist from the Main Market and seek admission of the enlarged share capital to trading on AIM, the Board and the Target believe that there are a number of benefits from transferring the Company's quote to AIM before a definitive agreement is reached with the Target. Upon Admission to trading on AIM, the Board expects the Company to be classified as an Investing Company (defined as an AIM company which has as its primary business or objective, the investing of its funds in securities, businesses or assets of any description), and therefore in light of this refined strategy the Board is proposing to:

1 cancel the Premium Listing of the Existing Ordinary Shares on the Official List of the UKLA and to trading on the Main Market and to seek admission to trading on AIM;

2 adopt a formal Investing Policy as required by the AIM Rules; which is a pre-condition to Admission; and

3 reduce the Company's share capital to consolidate the Existing Ordinary Shares on the basis of 1 Consolidated Ordinary Share for every 50 Existing Ordinary Shares.

2 Background to and reasons the move to AIM

On 18 February 2013 the Company announced that analysis of the headline results from its Phase II clinical trial of Cogane™ in Parkinson's disease indicated that the drug had not demonstrated clinically meaningful efficacy. Analysis of the complete dataset was performed which confirmed that Cogane™ had no beneficial effects on patients' symptoms measured by the primary or secondary endpoints in the study, although the plasma levels of Cogane™ in Cogane™ dosed patients were in line with expectations, indicating that the drug had been well absorbed. After discussions with the Company's major shareholder, the Board initiated a review of the strategic options available to the Company, including a review of a number of merger and acquisition opportunities.

Following the completion of this strategic review process on 21 May 2013, the Company announced it had signed heads of terms in connection with the possible acquisition of the Target.

The Company announced that it expected that the transaction would be structured by way of an acquisition of the Target by Phytopharm in consideration for the issue of new Phytopharm shares to the shareholders of the Target. Due to its size in relation to Phytopharm, the proposed acquisition of the Target would constitute a "reverse takeover" for the purposes of the Listing Rules. The Company also announced that it expected to delist from the Main Market and seek admission to trading on AIM.

At the request of the Company, trading in the Company's Premium Listed shares on the Main Market was suspended on 21 May 2013 by the UKLA pending publication of the required shareholder documents. Shareholder approval would be required to approve the acquisition of the Target company which would be sought at a general meeting to be convened in due course.

The Board is progressing with the proposed acquisition and will make further announcements in due course. In the meantime, following continued discussions with the Target, the Company's advisers and the UKLA, in order to complete the acquisition of the Target in the most timely and cost effective manner whilst also reducing transaction risks, the Board is proposing to move the Company's listing to AIM as soon as is practicable.

The UKLA has opined that the transaction would be deemed a related party transaction given the size of the transaction compared to the Company and because the Company's largest shareholder, IAML, also has a significant shareholding in one of the vendor shareholders of the Target and thus IAML would likely have been prevented from voting on any resolutions to approve the acquisition of the Target in a general meeting as required by the Listing Rules which apply to the Company whilst it is admitted to the Main Market.

The Board is now proposing that the acquisition of the Target takes place after the Company has been admitted to AIM. The Company will be required to publish an AIM Admission Document, as opposed to a prospectus, in connection with the proposed acquisition of the Target if and when a binding agreement between the parties is entered into.

Shareholders should be aware that the acquisition of the Target would constitute a "reverse takeover" under AIM Rule 14 and would require shareholder approval under the AIM Rules.

Under the AIM Rules, the transaction is still likely to be deemed a related party transaction under AIM Rule 13 which (unlike the Listing Rules) does not require a shareholder vote under AIM Rules, however AIM Rule 13 does require a statement that the Directors of Phytopharm consider, having consulted with its nominated adviser, that the terms of the transaction are fair and reasonable insofar as its Shareholders are concerned. All shareholders, including IAML would be allowed to vote on the transaction in a general meeting. Both the Board of Phytopharm and the board of the Target believe that IAML'S freedom to vote on the proposed transaction in a general meeting is an attractive aspect of the deal in terms of providing additional certainty of shareholder support.

The Target is a privately owned, revenue generating company, operating in the healthcare sector and based in the UK. The Company expects to finalise discussions with the Target over the coming weeks and based on the current timetable expects to agree definitive terms for the proposed acquisition shortly after Admission.

The Company's Existing Ordinary Shares are currently suspended and will remain suspended post Admission until such time as the Company publishes the AIM Admission Document (or equivalent) in connection with the proposed acquisition of the Target or discussions with the Target are terminated. Under the AIM Rules the Company will still require Shareholder approval for the proposed acquisition of the Target and the requisite documentation is expected to be sent to Shareholders in due course. Shareholders should also be aware that the proposed cancellation of the Company's Premium Listing on the Official List and Admission to trading on AIM, adoption of the Investing Policy and the Share Capital Consolidation are in no way conditional upon the acquisition of the Target being announced or completed, as under the terms of the Listing Rules the Company is no longer suitable for a Premium Listing on the Official List. Shareholders need to be aware of the AIM Rule 9 condition set out in Section 5.

As part of the strategic review process and discussions with potential merger and acquisition opportunities, the Board considered the advantages to the Company which AIM may have over the Official List. These include greater flexibility particularly with regard to transactions. The AIM Rules have been written to make it easier for smaller quoted companies to undertake transactions without triggering requirements to incur substantial professional fees.

In addition, the Board believes that AIM is a more appropriate market for a company of Phytopharm's size and that a transfer of the Existing Ordinary Shares to trading on AIM should lead to lower ongoing costs associated with being a publicly quoted company and a simplification of the Company's administrative and regulatory requirements. It also believes that AIM will offer greater flexibility, particularly with regard to corporate transactions, and should therefore enable the Company to agree and execute certain transactions more quickly.

The Board envisages no material alteration in the standards of reporting and governance which the Company currently maintains. Once admitted to trading on AIM, Shareholders should be able to trade the Existing Ordinary Shares in the usual manner through their stockbroker or other suitable intermediary, subject to liquidity.

The AIM Rules require that AIM companies retain a nominated adviser at all times. Peel Hunt has agreed to act as nominated adviser and broker to the Company from Admission.

Overview of AIM

AIM, which is operated and regulated by the London Stock Exchange, has an established reputation with investors and analysts. It was launched in June 1995 as the London Stock Exchange's market specifically designed for smaller companies, with a more flexible regulatory regime. More than 3,000 companies have chosen to join AIM and AIM is now an internationally recognised market.

Obligations of an AIM company and key differences to those of Official List companies.

Following Admission, the Company will be subject to the regulatory and disciplinary controls of the AIM Rules. Shareholders should note that the regulatory framework of AIM is different from the premium segment of the Official List. AIM also differs from the Official List in that it is self-regulated.

Whilst for the most part the obligations of a company whose shares are traded on AIM are similar to those of companies whose shares are listed on the premium segment of the Official List, there are certain exceptions, including those referred to below:

·; under the AIM Rules, prior shareholder approval is required only for: (i) reverse takeovers (being an acquisition or acquisitions in a 12 month period which would: (a) exceed 100 per cent. in various class tests; or (b) result in a fundamental change in the Company's business, board or voting control; or (c) in the case of an Investing Company, depart materially from its Investing Policy as approved by shareholders; or (ii) disposals which, when aggregated with any other disposals over the previous 12 months, result in a fundamental change of business (being disposals that exceed 75 per cent. in various class tests). Under the Listing Rules, a more extensive range of transactions are conditional on shareholder approval and require a detailed circular

·; there is no requirement under the AIM Rules for a prospectus or an AIM Admission Document to be published for further issues of securities to institutional investors, except when seeking admission for a new class of securities or as otherwise required by law.

·; unlike the Listing Rules, the AIM Rules do not specify any required structure or discount limits in relation to further issues of securities.

·; the Combined Code does not apply directly to companies who are admitted to trading on AIM. The Directors recognise, however, the importance of high standards of corporate governance and intend that the Company should observe the requirements of the QCA Corporate Governance Guidelines for AIM companies and the Combined Code to the extent the Directors consider appropriate having regard to the size, nature and resources of the Company and the enlarged Group.

·; the ABI Guidelines, which give guidance on issues such as executive compensation and share based remuneration, corporate governance, share capital management and the issue and allotment of shares on a pre-emptive or non pre-emptive basis, do not apply directly to companies whose shares are traded on AIM. The Directors recognise, however, the importance of high standards of corporate governance and intend that the Company should observe the requirements of the ABI Guidelines to the extent the Directors consider appropriate having regard to the size, nature and resources of the Company.

·; under the Listing Rules, a company is required to appoint a 'sponsor' for certain corporate transactions, such as when undertaking a large transaction or capital raising. The responsibilities of the sponsor include providing assurance to the FCA, when required, that the responsibilities of the listed company have been met. Corporate transactions on the Official List often require the approval of shareholders and the engagement of a sponsor to oversee the process and liaise with the UK Listing Authority. In particular, on a proposed transaction, where the size of the target represents 25 per cent. or greater of the listed company as determined by the class tests set out in Annex 1 of Chapter 10 of the Listing Rules a circular to shareholders is required explaining the transaction and seeking the consent of shareholders. As a result, a transaction of this nature may incur high transaction costs to meet the requirements of the Listing Rules and, therefore, prove prohibitive.

Under the AIM Rules a 'nominated adviser' is required to be engaged by an AIM listed company at all times and has ongoing obligations to the company and responsibilities to the London Stock Exchange. On Admission, the Company has agreed to appoint Peel Hunt LLP as its nominated adviser.

·; Under the AIM Rules there is no minimum requirements for the percentage of shares required to be held in public hands, whereas on the Official List, a minimum of 25 per cent. of a company's issued ordinary share capital normally has to be maintained in public hands at all times under the Listing Rules.

·; certain securities laws will no longer apply to the Company following Admission, for example, the Disclosure and Transparency Rules (save that Chapter 5 in respect of significant shareholder notifications will continue to apply to the Company) and the Prospectus Rules (unless an offer is made to the public). This is because AIM is not a regulated market for the purposes of the European Union's directives relating to securities. Additionally, the Listing Rules for premium listed companies, the Combined Code and the ABI Guidelines do not apply directly to companies whose shares are admitted to trading on AIM.

Risks associated with trading on AIM

AIM has a regulatory framework well suited to emerging or smaller growing companies yet may not provide the levels of liquidity normally associated with the Official List or other exchanges. IIt may therefore be more difficult for an investor to realise its investment in an AIM-traded company than a company whose securities are listed on the Official List.

The future success of AIM and liquidity in the Company's shares cannot be guaranteed. The market for the Company's shares may be, or may become, relatively illiquid and therefore the Company's shares may be or may become more difficult to sell. Potential investors and Shareholders should be aware that the value and any income from the Existing Ordinary Shares can go down as well as up and that investment in securities which are traded on AIM might be less realisable and might carry a higher risk than a security listed on the Official List. Liquidity on AIM is currently provided by market makers who are member firms of the London Stock Exchange and are obliged to quote a share price for each company for which they make a market between 8.00 a.m. and 4.30 p.m. on business days. The Directors believe that AIM has demonstrated that it can provide a liquid trading platform for shares.

There is no guarantee that the Company will be successful in achieving admission on AIM or that there will not be a further period during which the Company's Existing Ordinary Shares will not be admitted to trading on an exchange. If the Company's issued Existing Ordinary Shares are not admitted to trading on an exchange the ability to buy and sell shares in the Company could be materially restricted. The Company's shares are currently suspended and will remain suspended post Admission until such time as the Company publishes the AIM Admission Document (or equivalent) in connection with the proposed acquisition of the Target or discussions with the Target are terminated. If within 6 months of Admission the Company's AIM securities remain suspended and have not been restored to trading as the company has not published an AIM Admission Document (or equivalent) in connection with the proposed acquisition of the Target or announced that discussions with the Target have been terminated, then the Company's AIM securities will be cancelled from trading on AIM in the normal course pursuant to AIM Rule 41.

3 Proposed cancellation of listing on the Premium Segment of the Official List and admission to trading on AIM

In order to effect the move to AIM, the Company will require the approval of Shareholders at the General Meeting. Resolution 1 in the Notice of General Meeting will authorise the Board to cancel the Premium Listing of the Existing Ordinary Shares on the Official List, remove such Existing Ordinary Shares from trading on the Main Market and facilitate the Admission of the Consolidated Ordinary Shares to trading on AIM.

Conditional on Resolution 1 being approved at the General Meeting, the Company will apply to cancel the listing of Existing Ordinary Shares on the Official List and to trading on the Main Market. The Company will also inform the FCA and give 20 business days' notice of its intention to seek admission on AIM under AIM's streamlined process for companies that have had their securities traded on an AIM Designated Market subject to the passing of the first Resolution at the General Meeting. Resolution 1 is subject to and conditional upon the passing of Resolution 2. The Company's shares are currently suspended from trading on the Main Market and it is anticipated that cancellation of listing of the Existing Ordinary Shares on the Premium Segment of the Official List will take effect at 8.00 a.m. on 3 September 2013 2013 being not less than 20 business days following the passing of the Resolution as required by the Listing Rules.

Admission to AIM is expected to take place at 8.00 a.m. on 3 September 2013.

4 Investing Company status and Investing Policy

These developments follow on from the announcement made on 18 February 2013 when the Company announced that analysis of the headline results from its Phase II clinical trial of Cogane™ in Parkinson's disease indicated that the drug had not demonstrated clinically meaningful efficacy. After discussions with the Company's major shareholder, the Board initiated a review of the strategic options available to the Company, including a review of a number of merger and acquisition opportunities, which included the possible acquisition of a revenue generating UK-based private company in the healthcare sector. The Company has historically been classified as a commercial company under chapter 6 of the Listing Rules and has not previously been required to adopt a formal investing policy. However, upon Admission, the Board expects the Company to be classified as an Investing Company as defined by the AIM Rules and is therefore proposing to adopt a formal Investing Policy which will comply with the requirements of the AIM Rules.

The Directors intend to pursue suitable corporate acquisitions offering the potential to deliver a favourable return to Shareholders over the medium term, primarily in the form of capital gain. 

The Company's Investing Policy is to invest in businesses that typically have attributed to them some or all of the following criteria and characteristics:

·; healthcare sector; 

·; revenue generating or near revenue generating;

·; embedded or protected IP;

·; UK based;

·; capable of significant growth potential; and

·; a credible management team.

The Directors identified the Target as being a company which fits this investment strategy and expect to be in a position to enter into a binding agreement to acquire the Target shortly after the Company is due to be admitted to AIM. In the event that the Company and the Target are unable to agree definitive terms then the Directors will identify and pursue other suitable acquisition opportunities which have the potential to deliver favourable returns to Shareholders over the medium term, primarily in the form of capital gain.

Resolution 2 to be proposed at the General Meeting seeks Shareholder approval of the Company's Investing Policy, which is a pre-condition to Admission as a result of the proposed acquisition (which constitutes a reverse takeover) not completing prior to Admission. The Directors will also seek Shareholder approval of the Company's Investing Policy on an annual basis in general meeting, as required by the AIM Rules, however should the Company complete a reverse takeover with the Target or any other company, annual approval for the Investing Policy will not be required.

5. AIM Rule 9 Condition

Within 12 months from the date of Admission to AIM, under the provisions of AIM Rule 9the Company will be required to undertake one of the following, either:  

(i) to complete an acquisition which constitutes a reverse takeover under AIM Rule 14; or

(ii) to implement the Investing Policy to the satisfaction of the London Stock Exchange; or

(iii) to complete an equity fundraise of no less than £3 million so as to fully satisfy the requirements of AIM Rule 8.

Should the Company not satisfy at least one of the required actions in (i), (ii) or (iii) above within 12 months of Admission, the Exchange may suspend trading in the Company's AIM securities pursuant to AIM Rule 40 for the Company's failure to comply with the special condition imposed by AIM Rule 9. Should the Company's AIM securities not be restored to trading within six months of such suspension, the Company's AIM securities will cancelled from trading on AIM in the normal course pursuant to AIM Rule 41. In respect of such suspension, a restoration event will be the satisfaction of at least one of either (i), (ii) or (iii) above. Furthermore, it should be noted that, if within six months of Admission the Company's AIM securities remain suspended and have not been restored to trading as the Company has not published an AIM Admission Document (or equivalent) in connection with the proposed acquisition of the Target or announced that discussions with the Target have been terminated, then the Company's AIM Securities will be cancelled from trading on AIM in the normal course pursuant to AIM Rule 41.

6. Background to and reasons for the Share Capital Consolidation

The Company intends to consolidate the Existing Ordinary Shares on the basis of 1 Consolidated Ordinary Share for every 50 Existing Ordinary Shares held. The Directors believe that the proposed Share Capital Consolidation is necessary in order to create a share capital base which is more consistent with that of companies of a similar size and may encourage greater investor appetite for, and according liquidity in, the Consolidated Ordinary Shares.

Example

If a Shareholder holds 1,000 Existing Ordinary Shares at the Record Date, such Shareholder will, following the implementation of the Share Capital Consolidation, hold 20 Consolidated Ordinary Shares.

Resulting share capital

The issued share capital of the Company on Admission immediately following the Share Capital Consolidation will be 6,938,034 Consolidated Ordinary Shares.

Rights attached to the Consolidated Ordinary Shares

The Consolidated Ordinary Shares will have the same rights as the Existing Ordinary Shares including voting, dividend and other rights. Where, as a result of the Share Capital Consolidation, fractional entitlements arise, no fractions of shares will be issued, but will be aggregated and, as soon as possible after Admission, sold in the market on behalf of the relevant Shareholder save that, where net proceeds are less than £5.00 per relevant Shareholder (which is expected to be the case), the net proceeds of such sale will be retained for the benefit of the Company.

New certificates in respect of the Consolidated Ordinary Shares will be issued following Admission. After despatch of definitive share certificates, certificates for Existing Ordinary Shares will cease to be valid for any purpose whatsoever.

Shareholders who hold their Existing Ordinary Shares in uncertificated form are expected to have their CREST accounts credited with the Consolidated Ordinary Shares on 3 September 2013. For Shareholders who hold their Existing Ordinary Shares in certificated form, share certificates for the Consolidated Ordinary Shares will be despatched by 10 September 2013. Certificates for Existing Ordinary Shares will no longer be valid after 10 September 2013 and should be destroyed on receipt of certificates in respect of the Consolidated Ordinary Shares. Pending despatch of the definitive certificates in respect of the Consolidated Ordinary Shares, transfers of Consolidated Ordinary Shares held in certificated form will be certified against the register.

7. General Meeting

In order to cancel the listing of the Existing Ordinary Shares on the Official List, a special resolution is required by the Listing Rules to be approved by Shareholders. Accordingly, the passing of this Resolution requires the approval of 75 per cent. of votes cast by Shareholders voting at the general meeting, in person or by proxy, to be obtained.

In order to adopt the Investing Policy an ordinary resolution is required by the Companies Act 2006 to be approved by Shareholders.

In order to effect the Share Capital Consolidation an ordinary resolution is required by the Companies Act 2006 to be approved by Shareholders.

A notice convening a General Meeting of the Company to be held at the Company's registered office, Lakeview House, 2 Lakeview Court, Ermine Business Park, Huntingdon, Cambridgeshire PE29 6UA at 10.00 a.m. on 5 August 2013, at which the Resolutions to approve the Delisting, the Investment Policy and the Share Capital Consolidation will be proposed will be mailed to shareholders today.

Appendix

Definitions

The following definitions apply throughout this document, unless the context requires otherwise: