KCOM Regulatory News (KCOM)

RNS Number : 8883I

CityFibre Infrastructure Hldgs PLC

14 December 2015

 

For immediate release

14 December 2015

 

 

CITYFIBRE INFRASTRUCTURE HOLDINGS PLC

('CityFibre' or the 'Group' or the 'Company')

 

Acquisition of National Infrastructure Assets from KCOM Group plc

Underwritten placing to raise £80.0 million

 

 

CityFibre (AIM: CFHL), a leading designer, builder, owner, and operator of fibre optic infrastructure in UK towns and cities, today announces the conditional acquisition of certain national infrastructure assets of KCOM Group plc ('KCOM') (the "Acquisition") for a total consideration of £90.0 million together with an underwritten placing to raise £80.0 million at 50 pence per share (the "Placing"), through finnCap and Liberum, acting as joint bookrunners for the Placing.

 

The national infrastructure being acquired by CityFibre comprises approximately 1,100 route kms of metro network assets in 24 towns and cities, and a national long distance network totalling approximately 1,100 route kms that connects 22 towns and cities and offers connectivity into key data centres and wholesale internet peering points in London. The acquired assets do not include KCOM's network assets in Hull and East Yorkshire. The consideration is £90.0 million in cash, to be financed through a combination of the net Placing proceeds and debt financing, and which the Directors estimate represents a 45 per cent. discount to costs of constructing the networks.

 

Under the terms of the Acquisition, CityFibre will provide KCOM with access to the acquired infrastructure for a term up to fifteen years, subject to a minimum term of five years and a minimum revenue of £5.0 million per annum for those five years.

 

The Acquisition will expand CityFibre's footprint to 36 cities and major towns across the UK, providing pure fibre connectivity for use by regional and national service providers and mobile operators as a competitive wholesale alternative to BT Openreach.

 

The Acquisition constitutes a reverse takeover under Rule 14 of the AIM Rules for Companies and is therefore subject to shareholder approval. Accordingly, the Company has published an AIM Admission Document containing detailed information about CityFibre, the Acquisition and the Enlarged Group (further detail of which is included below) and explains why the Directors consider that the Acquisition and the Placing are in the best interests of the Company and its Shareholders as a whole and recommend that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting, to be held at the offices of Olswang LLP, 90 High Holborn, London WC1V 6XX at 10.00 a.m. on 12 January 2016.

 

 

Key transaction highlights include:

 

· Acquisition of metro networks in 24 towns and cities, including 21 towns and cities that are entirely new to CityFibre;

· Marks an acceleration in CityFibre's footprint expansion by five to seven years over the Company's organic growth plan and provides greater scope to supply national service providers;

· The combined footprint of 36 metro markets positions CityFibre as a national alternative to BT Openreach in the wholesale fibre infrastructure market;

· The Directors estimate a pro forma footprint of 36 metro markets with significant asset presence from day one - expanded footprint addresses 24,500 public sector sites, 7,000 cell sites, 245,000 businesses and 3.5 million homes, or approximately 15 per cent. of the UK market;

· Contractual agreement with KCOM anchors the Acquisition within the Company's usual TCV-capex guidelines, and forms a platform for future revenue through further provision of fibre connectivity to KCOM in the business and public sector markets;

· The addition of the national long distance network allows CityFibre to serve connectivity needs of national service providers, data centres and mobile operators in search of a genuine alternative to combined connectivity solutions offered by BT Wholesale.

 

The Company proposes to finance the Acquisition through the drawdown of £35.0 million of its new committed debt facilities of £100.0 million, on which EY acted as debt advisor, and by utilising part of the net proceeds of the Placing, of approximately £76.2 million.

 

Greg Mesch, Chief Executive Officer of CityFibre, commented:

"We are pleased to announce this transformational acquisition, which we believe will accelerate our growth target by five to seven years, creating a credible alternative to BT Openreach across the UK. Furthermore, we are delighted to have received the support of our existing shareholders to fund this transaction, and we welcome new shareholders to the register.

"The acquisition of these assets represents a unique opportunity for CityFibre to increase its reach into 21 new markets, and enables this asset to be integrated into CityFibre's wholesale shared infrastructure model, opening up the use of the network to many users. Following the acquisition, CityFibre will have a national footprint covering 36 cities with abundant fibre capacity for use by national and regional service providers and mobile operators.

"The demand for greater connectivity and future-proof networks in the UK has never been greater, and there is increasing recognition of this need from all stakeholders in the market. The acquisition of these assets will enable CityFibre to significantly accelerate its Gigabit City roll out and play a very meaningful role in redressing the legacy of underinvestment currently plaguing the UK connectivity landscape."

 

 

 

 

For further information, please contact:

CityFibre Infrastructure Holdings plc	www.cityfibre.com
Greg Mesch, Chief Executive Officer	Tel: 0845 293 0774
Terry Hart, Chief Financial Officer
James Enck, Head of Investor Relations	Tel: 0333 150 6283
finnCap (Nomad and Joint Bookrunner)	www.finncap.com
Stuart Andrews / Christopher Raggett (Corporate Finance)	Tel: 020 7220 0500
Simon Johnson (Corporate Broking)
Liberum (Joint Bookrunner)	www.liberum.com
Steve Pearce / Steven Tredget / Richard Bootle / Ben Roberts	Tel: 020 3100 2000
Vigo Communications	www.vigocomms.com
Jeremy Garcia / Fiona Henson	Tel: 020 7016 9570

 

About CityFibre:

CityFibre enables gigabit connectivity through designing, building, owning, and operating fibre optic network infrastructure. It is the largest independent wholesale provider of fibre infrastructure to mid-sized cities and major towns across the UK, providing gigabit-capable infrastructure for enterprise and public sector organisations, service providers, mobile network operators and businesses.

The Group owns and operates 618 route kms of local access networks serving 1,017 customer connections in 61 towns and cities in the UK, including Aberdeen, Bath, Bournemouth, Coventry, Derby, Doncaster, Dundee, Edinburgh, Huddersfield, Kingston-upon-Hull, Newcastle, Newport, Peterborough, Sheffield, and York.

To date the Company has launched six Gigabit City projects in York, Peterborough, Coventry, Aberdeen, Edinburgh and Glasgow, where city-wide pure fibre networks known as 'COREs' bring world-class Internet connectivity and the benefits of gigabit speeds to every aspect of the city's community. The Company has also delivered the UK's first dark fibre-based Fibre-to-the-Tower network in Kingston-upon-Hull, under a national framework agreement with MBNL, Three UK and EE.

The CityFibre COREs are deployed using the Company's Well Planned City (WPC) design philosophy, in which its city-wide core fibre infrastructure is designed with thousand-strand fibre cables in dual ducts optimally routed to serve the present and future demand of the public sector, mobile base stations, business park estates, and ultimately designed to serve as feeder and distribution network for Fibre-to-the- Home deployments.

CityFibre is also a founding member of a joint venture with TalkTalk and Sky. Established in early 2014, the collaboration aims to prove the viability of gigabit speed Fibre-to-the-Premises (FTTP) networks and services for homes and businesses. Work is currently underway to connect tens of thousands of homes and businesses in York to a future-proof FTTP modern digital infrastructure.

CityFibre is based in London, United Kingdom, and its shares trade on the AIM Market of the London Stock Exchange (AIM: CFHL). To find out more, please visit: www.cityfibre.com

 

 

The following text has been extracted from the Admission Document which has been published today.

Capitalised terms shall have the same meaning as in the Admission Document unless the context requires otherwise.

ADMISSION STATISTICS

Placing Price	50 pence
Number of Existing Ordinary Shares	105,672,644
Number of New Ordinary Shares	160,000,000
Enlarged Share Capital on Admission	265,672,644
Percentage of the Enlarged Share Capital represented by the New Ordinary Shares	60.2 per cent
Gross proceeds of the Placing receivable by the Company	£80.0 million
Estimated net proceeds of the Placing receivable by the Company	£76.2 million
Market capitalisation of the Company at the Placing Price	£132.8 million
ISIN on Admission	GB00BH581H10
SEDOL	BH581H1
TIDM	CFHL

 

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Date of publication of Admission Document	14 December 2015
Latest time and date for receipt of Forms of Proxy	10.00 a.m. on 8 January 2016
General Meeting	10.00 a.m. on 12 January 2016
Admission effective and dealings in the Enlarged Share Capital expected to commence on AIM	8.00 a.m. on 14 January 2016
CREST accounts credited (where applicable)	14 January 2016
Completion of Acquisition	18 January 2016
Despatch of definitive share certificates (where applicable)	by 28 January 2016

 

Each of these times and dates above is subject to change. Any such change will be notified by an announcement on a Regulatory Information Service.

 

 

 

 

1. INTRODUCTION

The Company is pleased to announce that it has conditionally agreed to purchase certain of the national network infrastructure assets of KCOM Group plc for a cash consideration of £90.0 million.

The Acquisition constitutes a reverse takeover for the purposes of the AIM Rules and accordingly requires Shareholder approval, which is being sought at the General Meeting to be held at the offices of Olswang LLP, 90 High Holborn, London WC1V 6XX at 10.00 a.m. on 12 January 2016.

The Company proposes to finance the Acquisition through the drawdown of £35.0 million of its new debt facilities of £100.0 million and by utilising part of the net proceeds of the Placing, being approximately £76.2 million. The Placing has been fully underwritten by finnCap and Liberum.

In addition, the Company has, through its wholly owned subsidiary CF Limited, entered into the Network Access and Maintenance Agreement with KCOM. Pursuant to this agreement CF Limited will provide KCOM with access to the Network Assets for a term of up to fifteen years for an annual fee of £5.0 million per annum for the first five years. The Network Access and Maintenance Agreement will become effective on completion of the Acquisition.

The Acquisition and Placing are conditional upon, inter alia, the passing of Resolutions 1, 2 and 4 and Admission. It is expected that Admission will become effective and that dealings in the Enlarged Share Capital will commence on AIM on 14 January 2016.

 

2. BACKGROUND INFORMATION ON CITYFIBRE

 

CityFibre is a company incorporated in England and Wales and is the holding company of the Group. The Group owns and operates over 600 route kms of local access fibre networks serving over 1,000 customer locations in 61 towns and cities in the UK.

CityFibre provides wholesale fibre connectivity through designing, building, owning, and operating fibre optic network infrastructure. It is a large independent provider of wholesale-only fibre networks to mid-sized cities and major towns across the UK, providing gigabit-capable infrastructure for public sector organisations, service providers, mobile network operators and businesses.

In the period prior to the 2014 Admission, the CFHL Group was engaged in developing its business following the acquisition of assets from i3 Group and H2O in 2011. In this period, the construction of the York network was completed and the Gigler service was launched in Bournemouth as a demonstrator of FTTH services. The CFHL Group focused on business development activities with target cities and potential service provider partners, and in November 2013 CFHL secured an anchor contract with Serco Limited to deploy a 90 km fibre optic network in Peterborough (further described below).

To date CityFibre has deployed or has contracts to deploy a metropolitan fibre optic network presence in 15 metropolitan markets - Aberdeen, Ayr, Bath, Bournemouth, Coventry, Dundee, Edinburgh, Glasgow, Huddersfield, Kingston-Upon-Hull, Newcastle, Newport, Peterborough, Weston-Super-Mare and York.

The Group's vision is to promote "Gigabit Cities", delivering a fibre optic infrastructure network which can provide greater data capacity and offer local authorities, businesses and consumers connectivity speeds significantly faster than legacy copper based broadband services. To date CityFibre has launched branded Gigabit City projects in five of the 15 metropolitan markets - Aberdeen, Coventry, Edinburgh, Peterborough and York.

CityFibre's Ordinary Shares were admitted to trading on AIM on 17 January 2014 with an associated placing of £16.5 million (before expenses). The Group subsequently raised an additional £30.0 million (before expenses) pursuant to a placing in June 2014.

Upon the completion of committed construction projects that are currently underway, and without including the network to be acquired pursuant to the Acquisition, CityFibre's total fibre network footprint will extend to approximately 1,000 route kms and connect over 2,000 customer locations.

3. THE CITYFIBRE BUSINESS

 

CityFibre is a wholesale-only provider of dark fibre networks in towns and cities outside London on a shared infrastructure basis, under which the Company's service provider partners, which currently number 35, deliver connectivity solutions to their end customers spanning the public sector, business, mobile operator and residential markets.

The Company operates a contract-backed model, whereby infrastructure deployment or acquisition is committed to only once the Company has secured contracted revenues which cover a substantial portion of capital expenditure. This "anchor contract" approach also provides the basis for further success-based network expansion in a city, which the Directors believe should deliver a high level of financial return on incremental investment.

Evidence of this anchor contract model is seen in the Company's York fibre infrastructure deployment. From an initial 10 year public sector contract with a total contract value of £4.2 million and an associated capital investment requirement of £4.5 million for a 94km network, the network had, as at 30 June 2015, secured an additional £3.8 million of contracted revenue. This has therefore secured a cumulative total contract value of £8.0 million on a cumulative network investment of £6.1 million (including additional capital expenditure of £1.6 million) since the project went live in 2011. Thus, the ratio of total contract value to capital expenditure has improved from 93 per cent. at the time of the initial anchor contract to 131 per cent. as at 30 June 2015. The ratio of total contract revenue secured to incremental capital expenditure since the project went live is 243 per cent. as at 30 June 2015.

CityFibre's metro fibre networks support the connectivity needs of three customer segments - public sector, business and mobile. The Company's decision to enter a new city is underpinned by an anchor contract from any one of these customer segments. Thereafter, the networks are made available to service providers in all three segments and the Company seeks to increase the number of revenue generating sites connected to the networks over time. This is achieved by providing a portfolio of fibre services that are used by service providers to enable high speed digital connectivity to retail end-users or to provide data transmission facilities within the service provider's networks. In this regard, CityFibre's infrastructure provides a competitive alternative to BT Openreach.

The metro fibre networks have capacity that is able to support the core backbone infrastructure of a residential FTTH network. Therefore, a potential future option exists for CityFibre to expand its metro fibre networks to provide wholesale fibre connections for FTTH. A trial is underway in York with Sky and Talk Talk to demonstrate this capability.

4. THE MARKET OPPORTUNITY

Global IP traffic is estimated to grow at a compound annual growth rate of 23 per cent. from between 2014 and 2019. The continued growth of broadband use and the advance in internet delivered services and cloud computing is driving the need for affordable data growth. Global IP traffic has increased fivefold over the past five years and is forecast to triple over the next five years, and by 2019 forecasts show that approximately two thirds of total IP traffic will originate or terminate within urban metro networks. To support the rapid growth in data traffic high capacity digital infrastructure is needed in the metropolitan markets.

The demand for higher speed digital connectivity is common to all market segments including the public sector, businesses, mobile and consumers. By way of example, in the public sector digital technologies in education, health and security need bandwidth connections and in the mobile sector there is demand in the UK for 4G and the preparation of 5G. Furthermore, the Internet of Things is driving consumer demand for fibre to the home. In addition, the transmission network communications service providers must support the exponential growth of traffic that results from the aggregated data demands of their end users. This is particularly the case in mobile networks where mobile data traffic is forecast to grow three times faster than in fixed networks.

The Directors believe that the UK's communications networks need a significantly higher level of fibre optic infrastructure than currently exists today. According to figures published by Ofcom in 2015, the UK is lagging behind many developed countries in terms of fibre connected buildings.

Currently, due to a historical lack of investment in communications infrastructure, service providers have a high dependency on BT Openreach networks for broadband and data connectivity. BT's local access networks are largely reliant on copper cable, and BT's recently announced strategy to use VDSL and G.FAST technology to deliver broadband over its copper networks demonstrates its focus on other technologies.

Whereas London supports a competitive market of alternative fibre infrastructure providers via metropolitan area networks, the availability to service providers of alternative wholesale fibre infrastructure via metropolitan area networks outside of London is limited. The Directors believe there is a significant market opportunity for CityFibre to establish and commercialise a major footprint of wholesale fibre optic infrastructure in regional towns and cities outside of London to support the demand for higher capacity broadband and data communications.

5. PROGRESS MADE SINCE ADMISSION TO AIM

Since the 2014 Admission, CityFibre has demonstrated its capability to develop new fibre optic networks through a number of different methods and across the public sector, business and mobile customer segments as described below.

Public sector anchor contracts:

· York was CityFibre's first Gigabit City branded project. As at 30 September 2015 the Company had increased the number of connected sites to 350 with annualised revenues of £920,000 at 93 per cent. gross margin, of which £340,000 of annualised revenue is attributed to the anchor contract and £580,000 is generated from additional contracts. Network route length has increased from 94 kms at the anchor stage to approximately 120 kms.

· The Peterborough CORE project, signed in November 2013, commenced construction in April 2014 and was completed in March 2015, becoming CityFibre's second Gigabit City branded project after York. During construction, CityFibre ran a pre-registration campaign, "Gig Up Peterborough" to measure interest and demand in the local business market. The results of this campaign far exceeded management expectations, with over 1,000 businesses having registered interest to date, representing approximately 25 per cent. of all businesses in Peterborough. As at 30 September 2015 the Peterborough network was serving 260 customer sites with an annualised revenue of £580,000 at 90 per cent. gross margin, of which £170,000 of annualised revenue is attributed to the anchor contract and £410,000 is generated from additional contracts. Network route length is approximately 90 kms and additional contracts represent a 50 per cent. uplift in TCV over the anchor contract.

· The acquisition of the Coventry metro network asset from Coventry City Council was completed in June 2014. This added 306 additional public sector sites to CityFibre's base and increased CityFibre's total footprint of metro local access fibre networks by approximately 62 per cent. The Coventry network has been opened for commercial development to business services providers who are able to address approximately 9,000 businesses. Coventry became the Company's third Gigabit City branded project. The Coventry network currently measures approximately 180 kms.

· In August 2014 CityFibre secured a landmark PSN contract to supply connectivity to Kirklees Council in conjunction with national service provider Easynet. The construction of a 72 km metro network is underway to connect 176 public sector sites in communities including Huddersfield, Dewsbury and Batley. This project marked the first PSN procurement to incorporate a significant dark fibre component procured through the PSN framework. In addition to this PSN anchor contract, 10 per cent. of businesses have pre-registered interest to date.

Business service provider anchor contracts:

· In September 2014, CityFibre announced an anchor contract supporting a metro fibre network deployment in Aberdeen. The anchor contract with locally-based service provider Internet For Business constitutes CityFibre's first project to anchor a network deployment based on aggregation of contracted business revenues. The initial deployment of approximately 50 kms of network is underway with 150 businesses having registered their interest. Aberdeen became CityFibre's fourth Gigabit City branded project.

· In March 2015, CityFibre entered into an anchor contract with locally-based service provider Commsworld Ltd for 200 business sites. The contract has a total value of £4.1 million and supports an initial infrastructure build of 50 kms of network in Edinburgh. As with the Aberdeen anchor contract, the Edinburgh project is based on aggregation of contracted business sites. Edinburgh became CityFibre's fifth Gigabit City branded project.

· In September 2015, CityFibre announced an extension of the Edinburgh project in partnership with Commsworld as subcontractor to global systems integrator CGI, as part of the Edinburgh PSN award. Under the 19-year framework with a total lifetime contract value of £16.2 million, CityFibre will connect 294 local authority sites to an additional 100 kms of dark fibre, taking the total route length fibre in the city to 150 kms with an estimated capex investment of £10.0 million. The initial seven-year term of the PSN contract carries a TCV of £5.6 million, making it the Group's single largest contract win to date.

· In November 2015, CityFibre announced that it had signed an anchor contract with ISP HighNet to construct a new fibre network in Glasgow. The 10 year contract will involve ISP HighNet migrating 100 of its existing customers onto this new fibre network. The first phase of this anchor contract carries a TCV of £3.0 million.

Mobile operator anchor contracts:

· On 13 November 2014, CityFibre entered into a national framework agreement with major mobile operators Three UK and EE, along with their infrastructure joint venture MBNL, to supply dark fibre for backhaul connectivity to mobile base stations. The first deployment under the framework agreement is currently underway in Kingston-Upon-Hull, comprising 56 kms of new high resilience network, to connect 37 sites for MBNL, anchoring CityFibre into another new metro city. The addition of contracts with wireless service providers Connexin and Purebroadband have increased the TCV on the networks by 36 per cent. above the anchor contract value.

· On 6 October 2015, CityFibre announced the first contract under a Master Services Agreement ("MSA") with Vodafone, utilising its existing 120 km York network asset. The MSA sets out standard contractual terms under which CityFibre may supply fibre connectivity to parts of Vodafone UK's national estate of mobile cell site locations, corporate customers, as well as interexchange connectivity to support the enhancement of Vodafone's national network.

FTTH joint venture:

· On 15 April 2014, CityFibre announced a joint venture with Sky and Talk Talk, to develop a trial FTTH network in the City of York. The joint venture, which is owned 33.3 per cent. equally by the three partners, intends to utilise CityFibre's existing York metro network to trial the deployment of FTTH throughout the city. The Directors believe this was the first example in the UK of two large established service providers collaborating to procure fibre infrastructure from a new alternative provider.

· Following the successful completion of the first phase of the trial, construction is now underway to deliver the second phase of the FTTH build, extending the network to thousands of homes in York. Joint venture partners Sky and Talk Talk have commenced marketing of FTTH broadband services under the proposition brand of Ultra Fibre Optic (UFO), and the first customers are now connected.

In addition to the organic growth of CityFibre's business through the anchor contracts and service provider partnerships outlined above, the Company started an initiative to evaluate select opportunities to expand its fibre infrastructure footprint through acquisition of constructed networks. The Coventry metro network, acquired from Coventry City Council, was the first of such transactions completed by CityFibre following its admission to AIM.

To further this strategy, on 14 December 2015, the Company announced that it had conditionally agreed to purchase certain of the national network infrastructure assets of KCOM.

6. THE ACQUISITION

The Company has, through its wholly owned subsidiaries, CF Limited and CF Metro, conditionally agreed to purchase the Network Assets from KCOM for a cash consideration of £90.0 million together with VAT of £18.0 million. The VAT will be funded from the Company's existing resources and reclaimed in due course from HMRC.

Overview of the Network Assets

The Network Assets comprise approximately 2,200 route kms of ducted infrastructure together with fibre optic cable, access chambers and other assets which enable access to, and operation of, the Network Assets. These assets fall into two categories:

· Metropolitan Area Networks (MANs) of varying lengths located in 24 towns and cities across the UK. The combined total route length of the 24 MANs is approximately 1,100 kms serving areas of high business density.

· A national "figure of eight" Long Distance Network (LDN) that interconnects 22 of the 24 MANs, and further provides diverse connectivity to major data centre locations in London. This LDN has an approximate route length of 1,100 kms.

21 of the 24 MANs are additive to CityFibre's metro city footprint. As CityFibre does not currently own and operate a national long distance network the LDN is additional to and traverses CityFibre's existing metro fibre footprints in York, Coventry and Huddersfield. The combination of the LDN with both KCOM's MANs and CityFibre's current metro footprint creates a comprehensive and well interconnected duct and fibre infrastructure throughout a large number of the UK's regional towns and cities outside of London.

Background of the Network Assets

Other than the three MANs which were acquired in 1998 in respect of Plymouth, Bristol and Exeter, construction of the majority of the MANs was completed by 2002.

The 24 communities served by the networks today are:

•	Bracknell	•	Manchester
•	Bradford	•	Milton Keynes
•	Bristol	•	Northampton
•	Derby	•	Nottingham
•	Doncaster	•	Plymouth
•	Exeter	•	Reading
•	Halifax	•	Rotherham
•	Harrogate	•	Sheffield
•	Huddersfield	•	Slough
•	Leeds	•	Swindon
•	Leicester	•	Wakefield
•	Maidenhead	•	York

 

A typical MAN comprises two or four 90 millimetre ducts, each capable of housing four sub-ducts. The ducts and sub-ducts are able to house fibre optic cables that provide fibre connectivity. Where installed, the fibre count per cable varies, but typically the current installed fibre cable comprises 48-fibre cables conforming to either the ITU-T G.652, ITU-T G.652d or ITU-T G.655 specification commonly deployed in metro fibre networks of this type.

There is significant underutilised duct capacity in the MANs, meaning that the infrastructure can be upgraded to higher capacity by installing new fibre cables in empty duct space, which is a standard process in the operation of fibre optic infrastructure for wholesale dark fibre to multiple customer segments.

The LDN was built between 2000 and 2001 and has a "figure of 8" configuration, stretching from Manchester and Leeds in the north to Bristol and London in the south. The LDN network generally consists of two 90 millimetre ducts, each of which has capacity for four sub-ducts. Fibre used in the LDN generally conforms to the ITU-G.655 specification, which is standard for long distance optical networks.

Current utilisation of the LDN is low, so this offers significant incremental capacity which CityFibre will seek to exploit in capturing emerging opportunities with mobile operators and other service providers seeking city-to-city, regional, or national dark fibre connectivity.

The Acquisition Agreement is conditional, inter alia, on the passing of the Resolutions numbered 1, 2 and 4 by CityFibre Shareholders and on Admission occurring on or before 14 January 2016.

There is no guarantee that these (or other) conditions will be satisfied (or waived) in which case the Acquisition will not be completed. Completion of the Acquisition is intended to occur within 2 Business Days of Admission. In the unlikely event that the Acquisition does not complete in circumstances where Admission has already taken place, the Directors' current intention is that the net proceeds of the Placing will be invested and/or applied to manage the Company's debt and cash position on a short term basis while the Directors evaluate other acquisition opportunities and, if no acquisitions can be found on acceptable terms within a suitable timeframe the Directors will consider how best to return surplus capital to Shareholders. Such a return could carry financial and tax costs for certain Shareholders, will incur costs on the part of the Company and would be subject to applicable securities laws such that the total amount of any return of capital may be less than the amount subscribed in the Placing.

7. CITYFIBRE'S PROPOSED USE OF THE NETWORK ASSETS

The Network Assets will support the delivery by CityFibre of the services under the Network Access and Maintenance Agreement, as described below. In addition, CityFibre intends to use the Network Assets in a manner consistent with its other network assets which it has previously acquired or built, being the provision of metro local access dark fibre connectivity on a wholesale basis to service providers covering thee market segments served by the Company today. Furthermore, as the networks have generally been constructed to a similar specification to CityFibre's new build networks, the acquired assets may be suited to support the backbone infrastructure for future FTTH deployments.

The Acquisition will allow the Enlarged Group to offer city-to-city, regional and national connectivity solutions via the LDN, either in tandem with its metro fibre offering or as a standalone product, thus diversifying its revenue streams.

8. THE NETWORK ACCESS AND MAINTENANCE AGREEMENT

The Anchor Contract

Pursuant to the Acquisition, CF Limited has entered into the Network Access and Maintenance Agreement with KCOM.

The Network Access and Maintenance Agreement is the anchor contract for the Acquisition. It is a 15 year national framework agreement (subject to earlier termination as described below) that governs KCOM's continued use of the Network Assets for both 'on-net' customer sites at the date of Completion and for further potential fibre connectivity post Completion.

Anchor Total Contract Value

For continued use of the Network Assets for KCOM's 'on net' connected customer sites at Completion, KCOM will meet a financial commitment to CF Limited of £5,000,000 per annum. The agreement includes a price benchmarking clause that applies annually after the fifth year, where CityFibre's charge for the use of the Network Assets may increase or decrease over time. The agreement can be terminated on notice by KCOM on the fifth anniversary of its commencement or on any subsequent anniversary. Either party can terminate from the 15th (or any subsequent) anniversary of commencement.

If annual prices remain static through the 15-year term and the agreement is not terminated and KCOM does not reduce the scope of the connections that it uses under the agreement, the contract value for on-net connected customer sites is £75.0 million, which is 83 per cent. of the consideration paid for the Network Assets.

Should KCOM exercise the break clause at the end of fifth year, the minimum contract value for on-net connected customer sites at Completion will be £25.0 million over that five year period.

As part of the Acquisition CF Limited has agreed to assume certain costs associated with the Network Assets. These consist primarily of the costs associated with certain supplier agreements which will be novated to CF Limited and enable the provision of certain connections to KCOM. The annual cost of the supplier agreements to CF Limited is expected to be £862,000. In addition, certain employees will transfer to CF Limited as part of the Acquisition by operation of law. The cost of CF Limited employing these employees is expected to be approximately £340,000 per annum.

The Network Access and Maintenance Agreement provides a framework for further revenue opportunities in addition to the 'on-net' customer sites connected at Completion. These are described below.

The Network Access and Maintenance Agreement will only come into effect on completion of the Acquisition Agreement.

Further Revenue Opportunities with KCOM

As a consequence of the Acquisition and KCOM entering into the Network Access and Maintenance Agreement, KCOM becomes CityFibre's largest service provider partner. As such there are a number of commercial opportunities that may be developed between the parties over time.

· Migration of off-net circuits - the Directors believe that the majority of KCOM's national customer sites (outside of Hull) currently utilise third party infrastructure for connectivity. The Directors believe there is an opportunity to replace a proportion of these 'off-net' sites with fibre connections supplied by CityFibre either utilising the Network Assets or other metro networks owned and operated by CityFibre.

· Conversion of LDN pipeline contracts - KCOM has established a pipeline of opportunities with third parties seeking city-to-city, regional, or national dark fibre connectivity provided across the LDN. The Directors believe there is an opportunity to convert a proportion of this pipeline into commercial contracts.

· Future connectivity from new contracts - as KCOM continues to develop its service provider business nationally and secure new customer contracts, CityFibre has the opportunity where appropriate to supply KCOM with fibre connectivity for those new customer sites either utilising the Network Assets or other metro networks owned and operated by CityFibre.

The Directors believe that the Network Access and Maintenance Agreement with KCOM provides the Company with the benefit of anchoring into 21 new towns and cities simultaneously with the required infrastructure transferring to CityFibre through the Acquisition.

9. REASONS FOR THE ACQUISITION

The Directors consider entry into the Acquisition Agreement and the Network Access and Maintenance Agreement to be in the best interests of the Company and Shareholders for the following key reasons:

Accelerates CityFibre's metro city plan by five to seven years

· Single anchor contract for 21 new towns and metro cities - the Directors estimate that based on the Company's current organic growth, the Company would be able to secure anchor contracts in three to four new towns and cities per annum. The Acquisition delivers 21 new metro towns and cities to CityFibre immediately and in the Directors' opinion accelerates the rollout of the metro plan by approximately five to seven years when compared to organic growth, speeding time to market.

 

· Increases coverage to 36 cities - the combination of CityFibre's 15 existing metro towns and cities with the 21 new towns and cities from the Acquisition results in a footprint of 36 metro towns and cities, equating to approximately 15 per cent. coverage of UK households, which will be available for use by the Company's service provider partners.

· Fully funded plan provides potential to expand coverage to 50 towns and cities - pursuant to the Fundraising (including the potential use of the £65.0 million accordion facility that may provide further debt capacity) the Directors believe that the Company will be sufficiently funded to expand into a further 14 towns and cities over a four to five year period post Completion. This would result in a footprint that extends to 50 metro towns and cities, equating to an approximately 20 per cent. coverage of the UK market. However, the accordion facility is not committed and may only be drawn with the consent of the Lender and credit approval being obtained.

· Increased visibility of near term revenues - the pro-forma cumulative gross TCV is approximately 4.6x higher than at the end of 2014, being £129.0 million, of which approximately £120.0 million will remain unrealised at the date of completion of the Acquisition. Additionally, the revenue commitment from KCOM is expected to accelerate revenue and EBITDA growth of the Company.

[1] Assuming break clauses under the Network Access and Maintenance Agreement and other contracts are not exercised.

 

Provides significant scale benefits

· Substantial increase in infrastructure footprint - the addition of the Network Assets to the existing CityFibre network will increase the total length of the CityFibre network from approximately 1,000 kms (once completed) to approximately 3,200 kms. This combined network distance is eleven times larger than at the 2014 Admission.

· An alternative for national service providers - on completion of the Acquisition the Enlarged Group will own and operate metro infrastructure in 36 towns and cities in attractive tech hubs, including a presence in 24 of the top 30 towns and cities by population, the majority of which are outside of London. This scale provides an alternative wholesale infrastructure network with potential scope to serve the connectivity needs of national service providers across all customer segments. Additionally, the Enlarged Group will have smaller partial network coverage in over 30 further towns and cities.

· Mobile backhaul opportunity - there is high demand for dark fibre mobile backhaul. The Directors believe the greater scale of the Enlarged Group will potentially enable a larger scale rollout of mobile sites under CityFibre's national agreements with Vodafone and MBNL, Three UK and EE. The mobile operators have entered into network sharing agreements in which EE and Three UK share approximately 14,000 sites through their MBNL joint venture, and Vodafone and O2 share approximately 18,000 sites through their Cornerstone joint venture. Of these 32,000 mobile sites the Directors estimate that over 7,000 mobile sites are addressable by the Company's enlarged network footprint following completion of the Acquisition. This opportunity enables rapid migration of cell sites that are close to CityFibre's networks, and has the potential to grow further as mobile operators deploy small cell sites in accordance with plans to evolve towards 5G mobile technology, and as CityFibre's footprint potentially expands towards 50 towns and cities.

· The LDN opens up potential new revenue streams - the addition of the LDN may facilitate potential new revenue streams as operators and service providers seek city-to-city, regional, or national dark fibre connectivity. Furthermore, the ability to combine dark fibre in both the metro networks and the LDN will provide CityFibre with an opportunity to provide an alternative to BT's combined backhaul and longhaul connectivity, which the Directors believe could be a significant benefit to mobile operators and other national service providers.

· Enhancing the FTTH strategy - CityFibre's trial of FTTH in York has been undertaken to demonstrate the design and economic benefits of deploying fibre to the home from an existing metro network. The use of proceeds of the Placing does not include a FTTH roll out. However, the Directors believe that the Acquisition will position CityFibre as an enabler and accelerant for any large scale rollout of FTTH that is independent of BT Openreach, with an estimated addressable coverage of between 3.5 million and 5.0 million households, being up to 20 per cent. of UK homes.

Generates efficiencies and savings

· Enhances operating leverage - the Network Access and Maintenance Agreement with KCOM will generate a minimum of £5.0 million of additional annual revenue to CityFibre for five years, with a high gross margin that is consistent with CityFibre's other revenue streams. As there is limited additional operating overhead associated with the Acquisition (including that described in paragraph 8 above), the Directors believe that the Company will benefit from improved operating leverage and efficiencies from operating at a larger scale.

· Eliminates risk and overheads associated with anchoring and construction - as the metro towns and networks in the 21 new towns and metro cities are built (to varying lengths) and the Network Access and Maintenance Agreement provides contracted revenue, the Company will benefit significantly from time efficiencies and cost savings that would otherwise be incurred to secure anchor contracts and to design and construct the infrastructure. Focus can shift to immediate commercialisation with service provider partners.

· Network Assets are acquired at a discount to the cost of self building - the metro networks are in CityFibre's target towns and cities, which would require a large amount of capital expenditure to construct networks in due course. The Directors estimate that the acquisition of the Network Assets delivers a 45 per cent. discount to the cost of the Company constructing the same networks itself.

Enhances the Company's market positioning

The Directors believe that the enhanced scale of the Enlarged Group's metro network footprint, as well as the broader business scope enabled by the addition of the LDN, will enhance the Company's market positioning.

Enables CityFibre to better accommodate and influence potential changes to regulation

The industry regulator, Ofcom, is undertaking its ten year Strategic Review of Digital Communications with an objective to ensure best outcomes for consumers are met by promoting competition and investment. This review is coming at a time when BT's competitors are expressing concerns relating to BT's dominance, poor performance and lack of ambition to invest in fibre. This is potentially exacerbated by BT's proposed acquisition of EE, which would make BT the dominant provider in both fixed line and mobile markets. This is currently being reviewed by the Competition and Markets Authority and the final decision is expected in January 2016. In light of these concerns, there are calls for regulation to support alternative approaches to the provision of wholesale infrastructure, including the potential structural separation of BT.

Furthermore, Ofcom is undertaking its Business Connectivity Market Review to ensure effective competition in the supply of leased line connectivity to businesses, including proposals for BT Openreach to introduce a regulated dark fibre product by April 2017. If introduced it will stimulate the development of a national competitive market for dark fibre. BT's entry into the mobile sector has motivated mobile operators and national service providers to find alternatives to Openreach.

The Directors believe that the enhanced scale of the Enlarged Group better positions CityFibre to provide input into any future changes to the regulatory landscape, including the potential structural separation of BT or a move to an industry structure as in New Zealand where fibre rollout was mandated by government with 30 per cent. contracted to alternative operators.

10. FINANCING THE ACQUISITION

The Company proposes to finance the Acquisition through a combination of the proceeds of the Placing and funds drawn down under the Facility Agreement as follows:

· The Facility Agreement

CF Limited has entered into the Facility Agreement under which it has the capacity to draw down up to £100.0 million (gross) from Admission. In order to finance the Acquisition, on completion of the Acquisition CF Limited will drawdown a term loan of £35.0 million. The drawdown of this amount is conditional upon a number of items including: (i) entry by the Company and its subsidiaries into a debenture and charge over shares, (ii) completion of the Acquisition, (iii) Admission, and (iv) evidence that the Company has raised at least £80,000,000 in the Placing.

· The Placing

The Company has conditionally raised £80.0 million (gross) pursuant to the Placing through the issue of the New Ordinary Shares at the Placing Price. Part of the net proceeds will be used to fund the Acquisition and the remaining net proceeds from the Placing will be used to provide working capital for the Enlarged Group. The New Ordinary Shares will represent approximately 60.2 per cent. of the Enlarged Share Capital immediately following Admission.

Under the Underwriting Agreement, finnCap and Liberum have conditionally agreed to place, with institutional and other investors, the New Ordinary Shares at the Placing Price. Conditional on Admission, finnCap and Liberum have agreed to underwrite the issue of all of the New Ordinary Shares at the Placing Price.

The Placing is conditional, amongst other things, on the approval of CityFibre Shareholders of the Resolutions numbered 1,2 and 4 at the General Meeting and on Admission taking place on or before 14 January 2016 (or such later time and date as the Company, finnCap and Liberum may agree, but in any event not later than 28 January 2016) and on the Underwriting Agreement becoming unconditional and not being terminated prior to Admission.

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

Application will be made to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on AIM. Subject to the Resolutions having been passed and the Placing and Underwriting Agreement not having been terminated in accordance with its terms, it is expected that Admission will become effective and that dealings in the New Ordinary Shares will commence at 8.00 a.m. on 14 January 2016 (or such other time and/or date, being no later than 8.00 a.m. on 28 January 2016, as the Joint Bookrunners and the Company may agree).

11. CURRENT TRADING, OPERATING TRENDS AND FUTURE PROSPECTS FOR THE ENLARGED GROUP

For the six months to 30 June 2015, CityFibre reported the following financial highlights:

· Turnover up 115 per cent. year-over-year in the period, to £2.7 million (H1 2014: £1.3 million);

· Further gross margin expansion to 86 per cent., from 85 per cent. in financial year 2014;

· Adjusted EBITDA loss reduced 8 per cent. year-over-year, to £1.8 million (H1 2014: £2.0 million loss);

· New contracts with TCV of £8.1 million added, versus £11.1 million for full financial year 2014;

· Unrealised TCV at period end £27.0 million, from £21.1 million as at 31 December 2014;

· Period end cash, cash equivalents, and short term deposits of £26.2 million.

Current trading is consistent with the Board's expectations.

The Company expects to incur certain exceptional costs associated with the acquisition of the Network Assets, the Fundraising and Admission process and has also continued to incur some excess administrative and sales costs in anticipation of the completion of the Acquisition.

As previously stated, the Directors believe that the expanded scale and scope of network capability offered by the Enlarged Group will afford it a strong footing for future growth in the national dark fibre market. The addition of the Network Assets to the CityFibre portfolio will result in an enlarged footprint approximately double the size of CityFibre on a standalone basis.

On completion of the Acquisition, CityFibre's expanded footprint will increase by 21 additional towns and cities and the Directors believe it will treble its addressable market by opening up a total of 36 cities to the Company's wholesale shared infrastructure model.

The Directors estimate that this significantly expanded footprint covers 7,000 mobile cell site locations, 24,500 public sector locations, 245,000 businesses and 3.5 million homes. This assumes a "typical" city, being a UK city containing 100,000 homes, 7,000 businesses, 700 public sector sites and 200 mobile cell sites. Based on current pricing assumptions, the Directors believe that at maturity the revenue potential from 36 cities is approximately £100.0 million per annum. Furthermore, the potential growth to 50 cities would expand the footprint to an addressable market of approximately 10,000 mobile cell site locations, 35,000 public sector sites, 350,000 businesses and 5 million homes and enable further revenue opportunities for the Enlarged Group.

Currently, the Company has established relationships with 35 service providers that use CityFibre's infrastructure. With the enlarged scale of the infrastructure acquired pursuant to the Acquisition, the Company is currently aiming to grow the number of service provider partners using its infrastructure to approximately 100 service provider partners within three years, which represents approximately 20 per cent. of the 500 or more service providers using BT Openreach infrastructure.

12. SHARE OPTION SCHEME

The Directors believe that the success of the Group will depend to a high degree on the retention and future performance of the management team. The Directors also recognise the importance of ensuring that all employees are well motivated and identify closely with the success of the Group. Prior to its admission to AIM in January 2014, the Company implemented share option plans for its employees, key contractors and Non-Executive Directors ("Pre-Admission Option Plans"). In order to make the arrangements as cost effective as possible for both the Company and the participants, the Company made use of tax advantaged enterprise management incentive (or EMI) options.

Following the 2014 Admission, the Company was no longer eligible to use EMI options and no further awards could be granted pursuant to the Pre-Admission Option Plans. As a result, the Company adopted the JSOPs on 22 May 2014 and adopted the Option Schemes on 9 June 2014.

In May 2014, the Company granted awards under the JSOPs to executive and non-executive directors. These awards were granted after the executive and Non-Executive Directors had surrendered options previously granted under the Pre-Admission Option Plans.

On 20 April 2015 the Company adopted the LTIP. No awards have been granted pursuant to the LTIP to date. Following the implementation of the LTIP, the Company does not intend to grant further awards under the Employee JSOP save for in exceptional circumstances.

The terms of the LTIP include a 'dilution limit' that restricts the number of new issue shares and treasury shares that may be used or capable of use under the LTIP or other arrangement in any rolling ten year period to no more than those equal to 12.5 per cent. of the Company's issued ordinary share capital. It is expected that awards made under the LTIP shall in practice not exceed 1.5 per cent. of the Company's issued share capital per annum (save in exceptional circumstances such as recruitment) and that the Company will move within a 10 per cent. in ten year dilution limit over time.

The Remuneration Committee believes that the Acquisition represents an exceptional circumstance and also recognises that no award has yet been made under the LTIP. As such the Remuneration Committee has resolved to make a 2015 award under the LTIP of up to 2 per cent. of the existing issued share capital before 31 December 2015. No Directors will receive a grant under the 2015 award. The Remuneration Committee also intends to make awards under the LTIP in 2016 of up to 2 per cent. of the Enlarged Issued Share Capital and further announcements will be made on the specific allotment of awards following completion of the Acquisition. It is intended that Executive Directors will receive awards in 2016 that will be subject to various performance conditions.

13. GENERAL MEETING

The General Meeting is being convened as required under the AIM Rules to seek shareholder approval of the Acquisition as a reverse takeover. In addition, the Directors are seeking authority to allot the New Ordinary Shares on a non pre-emptive basis to implement the Placing. The Directors are also seeking general authority to allot Ordinary Shares separate to the Placing in line with certain institutional investor guidelines. The General Meeting will be held at the offices of Olswang LLP, 90 High Holborn, London WC1V 6XX at 10.00 a.m. on 12 January 2016.

[1] Assuming break clauses under the Network Access and Maintenance Agreement and other contracts are not exercised.

 

 

Important notice

This announcement, including the Appendix, and the information contained herein is not for release, publication or distribution, directly or indirectly, in whole or in part, in or into or from the United States, Canada, the Republic of South Africa, Australia, Japan or any other jurisdiction where to do so might constitute a violation of the relevant laws or regulations of such jurisdiction.

This announcement does not constitute or form part of any offer to sell, or any solicitation of an offer to buy, securities in the United States. Securities may not be offered or sold in the United States absent (i) registration under the Securities Act or (ii) an available exemption from registration under the Securities Act. The New Ordinary Shares have not been and will not be registered under the Securities Act or under the securities laws of any state or other jurisdiction of the United States and may not be offered, sold, resold or delivered, directly or indirectly, in or into the United States absent registration except pursuant to an exemption from or in a transaction not subject to the registration requirements of the Securities Act. No public offering of the New Ordinary Shares is being made in the United States. The Placing is being made (i) outside the United States in offshore transactions (as defined in Regulation S under the Securities Act ("Regulation S")) meeting the requirements of Regulation S under the Securities Act; and (ii) to a limited number of "qualified institutional buyers" within the meaning of Rule 144A under the Securities Act who have executed and delivered a United States investor representation addressed to the Company and the Joint Bookrunners substantially in the form agreed between the Company and the Joint Bookrunners, in transactions that are exempt from or not subject to the registration requirements of the Securities Act. Persons receiving this announcement (including custodians, nominees and trustees) must not forward, distribute, mail or otherwise transmit it in or into the United States or use the United States mails, directly or indirectly, in connection with the Placing.

This announcement does not constitute an offer to sell or issue or a solicitation of an offer to buy or subscribe for New Ordinary Shares in any jurisdiction including, without limitation, the United States, Canada, the Republic of South Africa, Australia, Japan or any other jurisdiction in which such offer or solicitation is or may be unlawful (a "Prohibited Jurisdiction"). This announcement and the information contained herein are not for publication or distribution, directly or indirectly, to persons in a Prohibited Jurisdiction unless permitted pursuant to an exemption under the relevant local law or regulation in any such jurisdiction. No action has been taken by the Company, finnCap, Liberum or any of their respective affiliates that would permit an offer of the New Ordinary Shares or possession or distribution of this announcement or any other publicity material relating to such New Ordinary Shares in any jurisdiction where action for that purpose is required. Persons receiving this announcement are required to inform themselves about and to observe any such restrictions.

This announcement is directed at and is only being distributed to: (A) persons in member states of the European Economic Area who are "qualified investors", as defined in article 2.1(e) of the Prospective Directive (Directive 2003/71/EC) as amended, (B) if in the United Kingdom, persons who (i) have professional experience in matters relating to investments who fall within the definition of "investment professionals" in article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 as amended (the "FPO") or fall within the definition of "high net worth companies, unincorporated associations etc." in article 49(2)(a) to (d) of the FPO and (ii) are "qualified investors" as defined in section 86 of FSMA or (C) otherwise to persons to whom it may otherwise lawfully be communicated (each, a "Relevant Person"). No other person should act or rely on this announcement and persons distributing this announcement must satisfy themselves that it is lawful to do so. By accepting the terms of this announcement, you represent and agree that you are a Relevant Person.

Persons (including, without limitation, nominees and trustees) who have a contractual or other legal obligation to forward a copy of this announcement should seek appropriate advice before taking any action.

Certain statements in this announcement are forward-looking statements which are based on the Company's expectations, intentions and projections regarding its future performance, anticipated events or trends and other matters that are not historical facts. These forward-looking statements, which may use words such as "aim", "anticipate", "believe", "intend", "estimate", "expect" and words of similar meaning, include all matters that are not historical facts. These forward-looking statements involve risks, assumptions and uncertainties that could cause the actual results of operations, financial condition, liquidity and dividend policy and the development of the industries in which the Company's businesses operate to differ materially from the impression created by the forward-looking statements. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Given those risks and uncertainties, prospective investors are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date of such statements and, except as required by the FCA, the London Stock Exchange or applicable law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Any indication in this announcement of the price at which the ordinary shares of the Company have been bought or sold in the past cannot be relied upon as a guide to future performance. Persons needing advice should consult an independent financial adviser. No statement in this announcement is intended to be a profit forecast and no statement in this announcement 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.

finnCap, which is authorised and regulated in the United Kingdom by the FCA, is acting for CityFibre and for no one else in connection with the Placing and will not be responsible to anyone other than CityFibre for providing the protections afforded to clients of finnCap or for affording advice in relation to the Placing, or any other matters referred to herein.

Liberum, which is authorised and regulated in the United Kingdom by the FCA, is acting for CityFibre and for no one else in connection with the Placing and will not be responsible to anyone other than CityFibre for providing the protections afforded to clients of Liberum or for affording advice in relation to the Placing, or any other matters referred to herein.

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

 

 

APPENDIX - TERMS AND CONDITIONS OF THE PLACING

IMPORTANT INFORMATION FOR PLACEES ONLY

THIS ANNOUNCEMENT, INCLUDING THIS APPENDIX AND THE INFORMATION CONTAINED HEREIN (TOGETHER THE "ANNOUNCEMENT") IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, THE REPUBLIC OF IRELAND, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL. THIS ANNOUNCEMENT HAS NOT BEEN APPROVED BY THE LONDON STOCK EXCHANGE, NOR IS IT INTENDED THAT IT WILL BE SO APPROVED.

MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE PLACING. THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND IS DIRECTED ONLY AT: (A) PERSONS IN MEMBER STATES OF THE EUROPEAN ECONOMIC AREA ("EEA") WHO ARE QUALIFIED INVESTORS AS DEFINED IN SECTION 86(7) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000, AS AMENDED ("QUALIFIED INVESTORS"), BEING PERSONS FALLING WITHIN THE MEANING OF ARTICLE 2(1)(e) OF DIRECTIVE 2003/71/EC AS AMENDED, INCLUDING BY THE 2010 PROSPECTUS DIRECTIVE AMENDING DIRECTIVE (DIRECTIVE 2010/73/EC) AND TO THE EXTENT IMPLEMENTED IN THE RELEVANT MEMBER STATE (THE "PROSPECTUS DIRECTIVE"); AND (B) IN THE UNITED KINGDOM, QUALIFIED INVESTORS WHO ARE PERSONS WHO (I) HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS FALLING WITHIN ARTICLE 19(5) (INVESTMENT PROFESSIONALS) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005, AS AMENDED (THE "ORDER"); (II) ARE PERSONS FALLING WITHIN ARTICLE 49(2)(A) TO (D) (HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS, ETC.) OF THE ORDER; OR (III) ARE PERSONS TO WHOM IT MAY OTHERWISE BE LAWFULLY COMMUNICATED (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS "RELEVANT PERSONS").

THIS ANNOUNCEMENT AND THE INFORMATION IN IT MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. PERSONS DISTRIBUTING THIS ANNOUNCEMENT MUST SATISFY THEMSELVES THAT IT IS LAWFUL TO DO SO. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS ANNOUNCEMENT RELATES IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS. THIS ANNOUNCEMENT DOES NOT ITSELF CONSTITUTE AN OFFER FOR SALE OR SUBSCRIPTION OF ANY SECURITIES IN CITYFIBRE INFRASTRUCTURE HOLDINGS PLC.

THIS ANNOUNCEMENT IS NOT AN OFFER OF SECURITIES FOR SALE INTO THE UNITED STATES. THE NEW ORDINARY SHARES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT 1933, AS AMENDED (THE "SECURITIES ACT") OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR JURISDICTION OF THE UNITED STATES, AND MAY NOT BE OFFERED, SOLD OR TRANSFERRED, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. THE NEW ORDINARY SHARES ARE BEING OFFERED AND SOLD ONLY OUTSIDE THE UNITED STATES IN "OFFSHORE TRANSACTIONS" WITHIN THE MEANING OF, AND IN ACCORDANCE WITH, REGULATION S UNDER THE SECURITIES ACT AND OTHERWISE IN ACCORDANCE WITH APPLICABLE LAWS. NO PUBLIC OFFERING OF THE NEW ORDINARY SHARES IS BEING MADE IN THE UNITED STATES, THE UNITED KINGDOM OR ELSEWHERE. NO MONEY, SECURITIES OR OTHER CONSIDERATION FROM ANY PERSON INSIDE THE UNITED STATES IS BEING SOLICITED AND, IF SENT IN RESPONSE TO THE INFORMATION CONTAINED IN THIS ANNOUNCEMENT, WILL NOT BE ACCEPTED.

EACH PLACEE SHOULD CONSULT WITH ITS OWN TAX ADVISERS AS TO LEGAL, TAX, BUSINESS AND RELATED ASPECTS OF AN INVESTMENT IN NEW ORDINARY SHARES. THE DISTRIBUTION OF THIS ANNOUNCEMENT, ANY PART OF IT OR ANY INFORMATION CONTAINED IN IT MAY BE RESTRICTED BY LAW IN CERTAIN JURISDICTIONS, AND ANY PERSON INTO WHOSE POSSESSION THIS ANNOUNCEMENT, ANY PART OF IT OR ANY INFORMATION CONTAINED IN IT COMES SHOULD INFORM THEMSELVES ABOUT, AND OBSERVE, SUCH RESTRICTIONS.

No action has been taken by the Company, finnCap, Liberum or any of their respective affiliates, agents, directors, officers or employees that would permit an offer of the New Ordinary Shares or possession or distribution of this Announcement or any other offering or publicity material relating to such New Ordinary Shares in any jurisdiction where action for that purpose is required.

This Announcement or any part of it does not constitute or form part of any offer to issue or sell, or the solicitation of an offer to acquire, purchase or subscribe for, any securities in the United States (including its territories and possessions, any state of the United States and the District of Columbia), Canada, Australia, the Republic of Ireland, the Republic of South Africa, Japan or any other jurisdiction in which the same would be unlawful. No public offering of the New Ordinary Shares is being made in any such jurisdiction.

All offers of the New Ordinary Shares will be made pursuant to an exemption under the Prospectus Directive from the requirement to produce a prospectus. In the United Kingdom, this Announcement is being directed solely at persons in circumstances in which section 21(1) of the Financial Services and Markets Act 2000 (as amended) (the "FSMA") does not apply.

The New Ordinary Shares have not been approved or disapproved by the US Securities and Exchange Commission, any state securities commission or other regulatory authority in the United States, nor have any of the foregoing authorities passed upon or endorsed the merits of the Placing or the accuracy or adequacy of this Announcement. Any representation to the contrary is a criminal offence in the United States. The relevant clearances have not been, nor will they be, obtained from the securities commission of any province or territory of Canada, no prospectus has been lodged with, or registered by, the Australian Securities and Investments Commission, the Central Bank and Financial Services Authority of Ireland or the Japanese Ministry of Finance; the relevant clearances have not been, and will not be, obtained for the South Africa Reserve Bank or any other applicable body in the Republic of South Africa in relation to the New Ordinary Shares and the New Ordinary Shares have not been, nor will they be, registered under or offering in compliance with the securities laws of any state, province or territory of Australia, Canada, the Republic of Ireland, Japan or the Republic of South Africa. Accordingly, the New Ordinary Shares may not (unless an exemption under the relevant securities laws is applicable) be offered, sold, resold or delivered, directly or indirectly, in or into Australia, Canada, the Republic of Ireland, Japan or the Republic of South Africa or any other jurisdiction outside the United Kingdom.

Persons (including, without limitation, nominees and trustees) who have a contractual right or other legal obligations to forward a copy of this Announcement should seek appropriate advice before taking any action.

This Announcement should be read in its entirety. In particular, you should read and understand the information provided in the "Important Notices" section of this Announcement.

By participating in the Placing, each person who is invited to and who chooses to participate in the Placing (a "Placee") will be deemed to have read and understood this Announcement in its entirety, to be participating, making an offer and acquiring New Ordinary Shares on the terms and conditions contained herein and to be providing the representations, warranties, indemnities, acknowledgements and undertakings contained in this Appendix.

In particular, each such Placee represents, warrants, undertakes, agrees and acknowledges (amongst other things) that:

(1) it is a Relevant Person and undertakes that it will acquire, hold, manage or dispose of any New Ordinary Shares that are allocated to it for the purposes of its business;

(2) in the case of a Relevant Person in a member state of the EEA which has implemented the Prospectus Directive (each, a "Relevant Member State") who acquires any New Ordinary Shares pursuant to the Placing:

a) it is a Qualified Investor within the meaning of Article 2(1)(E) of the Prospectus Directive; andb) in the case of any New Ordinary Shares acquired by it as a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive:(i) the New Ordinary Shares acquired by it in the Placing have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Relevant Member State other than Qualified Investors or in circumstances in which the prior consent of finnCap has been given to the offer or resale; or(ii) where New Ordinary Shares have been acquired by it on behalf of persons in any member state of the EEA other than Qualified Investors, the offer of those New Ordinary Shares to it is not treated under the Prospectus Directive as having been made to such persons; and(3) it is acquiring the New Ordinary Shares for its own account or is acquiring the New Ordinary Shares for an account with respect to which it exercises sole investment discretion and has the authority to make and does make the representations, warranties, indemnities, acknowledgements, undertakings and agreements contained in this Announcement; and(4) it understands (or if acting for the account of another person, such person has confirmed that such person understands) the resale and transfer restrictions set out in this Appendix; and

except as otherwise permitted by the Company and subject to any available exemptions from applicable securities laws, it (and any account referred to in paragraph 3 above) is outside the United States acquiring the New Ordinary Shares in offshore transactions as defined in and in accordance with Regulation S under the Securities Act.

No prospectus

No prospectus or other offering document has been or will be submitted to be approved by the FCA in relation to the Placing or the New Ordinary Shares and Placees' commitments will be made solely on the basis of the information contained in this Announcement and the Admission Document and subject to any further terms set forth in the contract note to be sent to individual Placees.

Each Placee, by participating in the Placing, agrees that the content of this Announcement is exclusively the responsibility of the Company and confirms that it has neither received nor relied on any information, representation, warranty or statement (other than in the Admission Document) made by or on behalf of finnCap, Liberum or the Company or any other person and none of finnCap, Liberum, the Company or any other person acting on such person's behalf nor any of their affiliates has or shall have any liability for any Placee's decision to participate in the Placing based on any other information, representation, warranty or statement. Each Placee acknowledges and agrees that it has relied on its own investigation of the business, financial or other position of the Company in accepting a participation in the Placing. Nothing in this paragraph shall exclude the liability of any person for fraudulent misrepresentation.

Details of the Acquisition and the Fundraising

The proposed Acquisition constitutes a reverse takeover for the purposes of the AIM Rules and accordingly requires shareholder approval, which is being sought at the General Meeting to be held at Olswang LLP, 90 High Holborn, London WC1V 6XX at 10 a.m. on 12 January 2016.

The Company proposes to finance the Acquisition through the partial drawdown under the Facilities Agreement and the net proceeds of the Placing. The Placing is fully underwritten by finnCap and Liberum.

The Acquisition and Fundraising are conditional upon, inter alia, shareholder approval and Admission.

Details of the Underwriting Agreement and the New Ordinary Shares

finnCap and Liberum have today entered into an underwriting agreement (the "Underwriting Agreement") with the Company under which, on the terms and subject to the conditions set out in the Underwriting Agreement, finnCap and Liberum, each as an agent for and on behalf of the Company, have agreed to use their respective reasonable endeavours to procure Placees for the New Ordinary Shares at the Placing Price. Conditional upon Admission, finnCap and Liberum have agreed to underwrite the issue of all of the New Ordinary Shares at the Placing Price.

The New Ordinary Shares will, when issued, be subject to the articles of association of the Company and credited as fully paid and will rank pari passu in all respects with the existing issued ordinary shares with a nominal value of 1 pence each in the capital of the Company ("Ordinary Shares"), including the right to receive all dividends and other distributions declared, made or paid in respect of such Ordinary Shares after the date of issue of the New Ordinary Shares.

As part of the Placing, the Company has agreed that it will not for a period of 6 months following Admission:

(a) enter into any agreement, commitment or arrangement or put itself into a position where it is obliged to make any announcement concerning any agreement, commitment or arrangement which might be material in the context of the Placing or Admission; or(b) issue any shares or options to subscribe for any shares (other than options granted pursuant to the share schemes referred to in the Admission Document) or securities convertible or exchangeable into shares or enter into any agreement or undertaking to do so.

Save for members of the finnCap Group and Liberum Group and their affiliates (as defined therein), no one other than the parties to the Underwriting Agreement shall be entitled to enforce rights or enjoy any terms under the Underwriting Agreement under the Contracts (Rights of Third Parties) Act 1999.

Application for admission to trading

Application will be made to the London Stock Exchange for Admission subject to (i) shareholder approval and (ii) the Fundraising and the Acquisition becoming unconditional (save for any conditions relating to Admission or the payment of any placing proceeds thereunder).

It is expected that Admission will take place at 8.00 a.m. on 14 January 2016 and that dealings in the New Ordinary Shares on AIM will commence at the same time.

Principal terms of the Placing

1. finnCap is acting as nominated adviser and joint bookrunner to the Placing, as agent for and on behalf of the Company. finnCap is regulated by the FCA, is acting exclusively for the Company and no one else in connection with the matters referred to in this Announcement and will not be responsible to anyone other than the Company for providing the protections afforded to the customers of finnCap or for providing advice in relation to the matters described in this Announcement.

2. Liberum is acting as joint bookrunner to the Placing, as agent for and on behalf of the Company. Liberum is regulated by the FCA, is acting exclusively for the Company and no one else in connection with the matters referred to in this Announcement and will not be responsible to anyone other than the Company for providing the protections afforded to the customers of Liberum or for providing advice in relation to the matters described in this Announcement. 

3. Participation in the Placing will only be available to persons who may lawfully be, and are, invited by finnCap or Liberum to participate. finnCap and Liberum and any of its respective affiliates are entitled to participate in the Placing as principal.

4. The price per Placing Share (the "Placing Price") is fixed at 50 pence and is payable to the relevant broker (being finnCap or Liberum) by all Placees.

5. Each Placee's allocation will be determined by finnCap or Liberum (as applicable) in its discretion following consultation with the Company and will be confirmed orally by finnCap or Liberum (as applicable) and a contract note will be dispatched as soon as possible thereafter. That oral confirmation will give rise to an irrevocable, legally binding commitment by that person (who at that point becomes a Placee), in favour of finnCap or Liberum and the Company, under which it agrees to acquire the number of New Ordinary Shares allocated to it on the terms and subject to the conditions set out in this Appendix and in accordance with the Company's articles of association. Except with finnCap's or Liberum's consent (as the case may be), such commitment will not be capable of variation or revocation at the time at which it is submitted.

6. Each Placee's allocation and commitment will be evidenced by a contract note issued to such Placee by finnCap or Liberum (as the case may be). The terms of this Appendix will be deemed incorporated in that contract note.

7. Each Placee will have an immediate, separate, irrevocable and binding obligation, owed to either finnCap or Liberum (each as agent for the Company), to pay on Admission to either finnCap or Liberum (as the case may be) (or as each may direct) in cleared funds an amount equal to the product of the Placing Price and the number of New Ordinary Shares such Placee has agreed to acquire and the Company has agreed to allot and issue to that Placee.

8. Irrespective of the time at which a Placee's allocation(s) pursuant to the Placing is/are confirmed, settlement for all New Ordinary Shares to be acquired pursuant to the Placing will be required to be made at the same time, on the basis explained below under "Registration and Settlement".

9. All obligations under the Placing will be subject to fulfilment of the conditions referred to below under "Conditions of the Placing" and to the Placing not being terminated on the basis referred to below under "Termination of the Placing".

10. By participating in the Placing, each Placee will agree that its rights and obligations in respect of the Placing will terminate only in the circumstances described below and will not be capable of rescission or termination by the Placee.

11. To the fullest extent permissible by law and applicable FCA rules, none of (a) finnCap, (b) any of finnCap's affiliates, agents, directors, officers consultants (c) to the extent not contained within (a) or (b), any person connected with finnCap as defined in FSMA ((b) and (c) being together "affiliates" and individually an "affiliate" of finnCap) (d) Liberum, (e) any of Liberum's affiliates, agents, directors, officers consultants or (f) to the extent not contained within (d) or (e), any person connected with Liberum as defined in FSMA ((e) and (f) being together "affiliates" and individually an "affiliate" of Liberum) shall have any liability (including to the extent permissible by law, any fiduciary duties) to Placees or to any other person whether acting on behalf of a Placee or otherwise. In particular, none of finnCap, Liberum or any of its respective affiliates shall have any liability (including, to the extent permissible by law, any fiduciary duties) in respect of finnCap's or Liberum's conduct of the Placing or of such alternative method of effecting the Placing as finnCap, Liberum and the Company may agree.

Registration and Settlement

If Placees are allocated any New Ordinary Shares in the Placing they will be sent a contract note by finnCap or Liberum which will confirm the number of New Ordinary Shares allocated to them, the Placing Price and the aggregate amount owed by them to finnCap or Liberum (as applicable).

Each Placee will be deemed to agree that it will do all things necessary to ensure that delivery and payment is completed as directed by finnCap or Liberum (as applicable) in accordance with either the standing CREST or certificated settlement instructions which they have in place with finnCap or Liberum (as applicable).

Settlement of transactions in the New Ordinary Shares (ISIN: GB00BH581H10) will take place within the CREST system, subject to certain exceptions and will occur at 8.00 a.m. on 14 January 2016 (the "Settlement Date") in accordance with the contract notes. Settlement will be on a delivery versus payment (DVP) basis. However, in the event of any difficulties or delays in the admission of the New Ordinary Shares to CREST or the use of CREST in relation to the Placing, the Company, finnCap and Liberum may agree that the New Ordinary Shares should be issued in certificated form. Both finnCap and Liberum reserves the right to require settlement for the New Ordinary Shares, and to deliver the New Ordinary Shares to Placees, by such other means as they deem necessary if delivery or settlement to Placees is not practicable within the CREST system or would not be consistent with regulatory requirements in a Placee's jurisdiction.

The expected timetable for settlement will be as follows:

Trade Date	Monday 14 December 2015
Settlement Date	Thursday 14 January 2016
ISIN Code	GB00BH581H10
SEDOL	BH581H1
Deadline for input instruction into CREST	10.00 a.m. on Thursday 31 December 2015

Please refer to the contract note for the CREST ID of finnCap or Liberum (as relevant).

Interest is chargeable daily on payments not received from Placees on the due date in accordance with the arrangements set out above, in respect of either CREST or certificated deliveries, at the rate of 2 percentage points above prevailing LIBOR as determined by finnCap or Liberum (as applicable).

Each Placee is deemed to agree that if it does not comply with these obligations, finnCap or Liberum (as applicable) may sell any or all of their New Ordinary Shares on their behalf and retain from the proceeds, for finnCap's or Liberum's own account and benefit (as applicable), an amount equal to the aggregate amount owed by the Placee plus any interest due. The relevant Placee will, however, remain liable for any shortfall below the amount owed by it and for any stamp duty or stamp duty reserve tax (together with any interest or penalties) which may arise upon the sale of their New Ordinary Shares on their behalf.

If New Ordinary Shares are to be delivered to a custodian or settlement agent, Placees must ensure that, upon receipt, the conditional contract note is copied and delivered immediately to the relevant person within that organisation. Insofar as New Ordinary Shares are registered in a Placee's name or that of its nominee or in the name of any person for whom a Placee is contracting as agent or that of a nominee for such person, such New Ordinary Shares should, subject as provided below, be so registered free from any liability to United Kingdom stamp duty or stamp duty reserve tax. Placees will not be entitled to receive any fee or commission in connection with the Placing.

Conditions of the Placing

The Placing is conditional upon the Underwriting Agreement becoming unconditional and not having been terminated in accordance with its terms.

The obligations of finnCap and Liberum under the Underwriting Agreement are, and the Placing is, conditional upon, inter alia:

(a) the performance by the Company of its obligations under the Underwriting Agreement to the extent that they fall to be performed prior to Admission;(b) the Resolutions having been duly passed (without amendment unless approved by finnCap and Liberum) at the General Meeting (or at any adjournment thereof);(c) none of the warranties on the part of the Company contained in the Underwriting Agreement having been breached or being untrue or inaccurate or misleading when made as of the date of the Underwriting Agreement, and none of such warranties having been breached or being untrue or inaccurate in any material respect or misleading were it to be repeated by reference to the facts subsisting at the date of Admission;(d) the Underwriting Agreement having not been terminated by both of finnCap and Liberum in accordance with its terms;(e) finnCap and Liberum not having received notice of any material breach of any warranty, undertaking or covenant under the Acquisition Agreement;(f) the Acquisition Agreement having become unconditional in all respects (save for any condition relating to the Underwriting Agreement becoming unconditional, the Facilities Agreement becoming unconditional, Admission or the payment of any consideration thereunder);(g) there having been no significant change in the financial or trading position of the Group since 31 December 2014; and(h) Admission occurring not later than 8.00a.m. on 14 January 2016 or such later time as finnCap and Liberum may agree in writing with the Company (but in any event not later than the Long Stop Date (as defined therein).

(all conditions to the obligations of finnCap and Liberum included in the Underwriting Agreement being together, the "conditions").

If any of the conditions set out in the Underwriting Agreement are not fulfilled or, where permitted, waived in accordance with the Underwriting Agreement within the stated time periods (or such later time and/or date as the Company, finnCap and Liberum may agree), or the Underwriting Agreement is terminated in accordance with its terms, the Placing will lapse and the Placee's rights and obligations shall cease and terminate at such time and each Placee agrees that no claim can be made by or on behalf of the Placee (or any person on whose behalf the Placee is acting) in respect thereof.

By participating in the Placing, each Placee agrees that its rights and obligations cease and terminate only in the circumstances described above and under "Termination of the Placing" below and will not be capable of rescission or termination by it.

Certain conditions may be waived in whole or in part by finnCap and Liberum, acting jointly, in their absolute discretion by notice in writing to the Company and finnCap and Liberum may also agree in writing with the Company to extend the time for satisfaction of any condition. Any such extension or waiver will not affect Placees' commitments as set out in this Announcement.

finnCap or Liberum may terminate the Underwriting Agreement in certain circumstances, details of which are set out below.

None of finnCap, Liberum, any of its respective affiliates, agents, directors, officers or employees or the Company shall have any liability to any Placee (or to any other person whether acting on behalf of a Placee or otherwise) in respect of any decision any of them may make as to whether or not to waive or to extend the time and/or date for the satisfaction of any condition to the Placing nor for any decision any of them may make as to the satisfaction of any condition or in respect of the Placing generally and by participating in the Placing each Placee agrees that any such decision is within the absolute discretion of finnCap and Liberum.

Termination of the Placing

finnCap or Liberum may terminate the Underwriting Agreement at any time prior to Admission if, inter alia:

1. there shall occur or come into effect any change in national or international financial, economic, fiscal, political or market conditions or changes in legislation or an incident of terrorism or the outbreak of hostilities in certain specified location(s) which in the sole opinion of either of finnCap or Liberum is likely to materially and adversely affect the financial position or prospects of the Group taken as a whole or in the opinion of either finnCap or Liberum is or will or is likely to be materially prejudicial to the Company or to the Placing or to the acquisition of the New Ordinary Shares by Placees;

2. finnCap or Liberum becomes aware that:

(a) any statement contained in the Issue Documents (as defined in the Underwriting Agreement) is or has become untrue or inaccurate in any material respect or misleading in any material respect; or(b) there has, in the opinion of finnCap or Liberum (as relevant) occurred a material adverse change in the financial or trading position or prospects of the Group taken as a whole or in the opinion of finnCap or Liberum (as relevant) is or will or is likely to be materially prejudicial to the Company or to the Placing or to the acquisition of the New Ordinary Shares by Placees; or(c) any matter has arisen which would, if the Issue Documents were issued at that time, constitute a material omission therefrom of a material matter required to be included therein; or(d) in the opinion of finnCap or Liberum (as relevant), any of the Warranties are not when given, true and accurate in any material respect or have become misleading in any material respect (or would not be true and accurate in any material respect or would be misleading in any material respect if they were repeated at any time up to Admission) by reference to the facts subsisting at such time; or(e) the Company has not complied or cannot comply in any respect with its obligations under the Underwriting Agreement, the Companies Act, FSMA or the AIM Rules; or

3. it shall come to the notice of either of finnCap or Liberum that any of the following shall occur:

(a) the suspension of trading in securities generally on the London Stock Exchange for a period of three days or trading is limited or minimum prices established on such exchange by measures imposed by the London Stock Exchange; and/or(b) the declaration of a banking moratorium in London or any material disruption to commercial banking or securities settlement or clearance services in certain customary market location(s).

If the Underwriting Agreement is terminated in accordance with its terms, the rights and obligations of each Placee in respect of the Placing as described in this Announcement shall cease and terminate at such time and no claim can be made by any Placee in respect thereof.

By participating in the Placing, each Placee agrees with the Company, finnCap and Liberum that the exercise by the Company, finnCap or Liberum of any right of termination or any other right or other discretion under the Underwriting Agreement shall be within the absolute discretion of the Company, finnCap or Liberum or for agreement between the Company, finnCap or Liberum (as the case may be) and that none of the Company, finnCap or Liberum need make any reference to such Placee and that none of the Company, finnCap, Liberum or any of their respective affiliates, agents, directors, officers or employees shall have any liability to such Placee (or to any other person whether acting on behalf of a Placee or otherwise) whatsoever in connection with any such exercise.

By participating in the Placing, each Placee agrees that its rights and obligations terminate only in the circumstances described above and under the "Conditions of the Placing" section above and will not be capable of rescission or termination by it after the issue by finnCap or Liberum (as applicable) of a contract note confirming each Placee's allocation and commitment in the Placing.

Representations, warranties and further terms

By participating in the Placing, each Placee (and any person acting on such Placee's behalf) represents, warrants, acknowledges and agrees (for itself and for any such prospective Placee) that (save where finnCap or Liberum expressly agrees in writing to the contrary):

1. it has read and understood this Announcement and the Admission Document in its entirety and that its acquisition of the New Ordinary Shares is subject to and based upon all the terms, conditions, representations, warranties, indemnities, acknowledgements, agreements and undertakings and other information contained herein and that it has not relied on, and will not rely on, any information given or any representations, warranties or statements made at any time by any person in connection with Admission, the Placing, the Company, the New Ordinary Shares or otherwise, other than the information contained in this Announcement and the Admission Document;

2. it has not received a prospectus or other offering document in connection with the Placing and acknowledges that no prospectus or other offering document: (a) is required under the Prospectus Directive; and (b) has been or will be prepared in connection with the Placing;

3. it has made its own assessment of the New Ordinary Shares and has relied on its own investigation of the business, financial or other position of the Company in accepting a participation in the Placing and none of finnCap, Liberum or the Company nor any of their respective affiliates, agents, directors, officers or employees nor any person acting on behalf of any of them has provided, and will not provide, it with any material regarding the New Ordinary Shares or the Company or any other person other than the information in this Announcement or the Admission Document; nor has it requested finnCap, Liberum, the Company, any of their respective affiliates, agents, directors, employees or officers or any person acting on behalf of any of them to provide it with any such information;

4. none of finnCap, Liberum nor any person acting on behalf of them nor any of its respective affiliates, agents, directors, officers or employees has or shall have any liability for any publicly available information or any representation relating to the Company, provided that nothing in this paragraph excludes the liability of any person for fraudulent misrepresentation made by that person;

5. the only information on which it is entitled to rely on and on which it has relied in committing to subscribe for the New Ordinary Shares is contained in the Admission Document, such information being all that it deems necessary to make an investment decision in respect of the New Ordinary Shares and it has made its own assessment of the Company, the New Ordinary Shares and the terms of the Placing based on the Admission Document; (b) none of finnCap, Liberum or the Company (nor any of their respective affiliates, agents, directors, officers and employees) have made any representation or warranty to it, express or implied, with respect to the Company, the Placing or the New Ordinary Shares or the accuracy, completeness or adequacy of the Admission Document; (c) it has conducted its own investigation of the Company, the Placing and the New Ordinary Shares, satisfied itself that the information is still current and relied on that investigation for the purposes of its decision to participate in the Placing; and (d) has not relied on any investigation that finnCap, Liberum or any person acting on its behalf may have conducted with respect to the Company, the Placing or the New Ordinary Shares;

6. the content of this Announcement and the Admission Document has been prepared by and is exclusively the responsibility of the Company and that none of finnCap, Liberum nor any persons acting on behalf of any of them is responsible for or has or shall have any liability for any information, representation, warranty or statement relating to the Company contained in this Announcement or the Admission Document nor will they be liable for any Placee's decision to participate in the Placing based on any information, representation, warranty or statement contained in this Announcement, the Admission Document or otherwise. Nothing in this Appendix shall exclude any liability of any person for fraudulent misrepresentation;

7. the New Ordinary Shares have not been registered or otherwise qualified, and will not be registered or otherwise qualified, for offer and sale nor will a prospectus be cleared or approved in respect of any of the New Ordinary Shares under the securities laws of the United States, or any state or other jurisdiction of the United States, Australia, Canada, Republic of Ireland, Republic of South Africa or Japan and, subject to certain exceptions, may not be offered, sold, taken up, renounced or delivered or transferred, directly or indirectly, within the United States, Australia, Canada, South Africa or Japan or in any country or jurisdiction where any such action for that purpose is required;

8. it has the funds available to pay for the New Ordinary Shares for which it has agreed to subscribe and acknowledges and agrees that it will pay the total subscription amount in accordance with the terms of this Announcement on the due time and date set out herein and will do all things necessary on its part to ensure that payment for such shares and their delivery to it is completed with the standing CREST instructions that it has in place with finnCap or Liberum, failing which the relevant New Ordinary Shares may be placed with other placees at such price as finnCap or Liberum determines;

9. it and/or each person on whose behalf it is participating:

a) is entitled to acquire New Ordinary Shares pursuant to the Placing under the laws and regulations of all relevant jurisdictions;b) has fully observed such laws and regulations;c) has capacity and authority and is entitled to enter into and perform its obligations as an acquirer of New Ordinary Shares and will honour such obligations; andd) has obtained all necessary consents and authorities (including, without limitation, in the case of a person acting on behalf of a Placee, all necessary consents and authorities to agree to the terms set out or referred to in this Appendix) under those laws or otherwise and complied with all necessary formalities to enable it to enter into the transactions contemplated hereby and to perform its obligations in relation thereto and, in particular, if it is a pension fund or investment company it is aware of and acknowledges it is required to comply with all applicable laws and regulations with respect to its subscription for New Ordinary Shares;

10. it is not, and any person who it is acting on behalf of is not, and at the time the New Ordinary Shares are subscribed will not be, a resident of, or with an address in, or subject to the laws of, Australia, Canada, the Republic of Ireland, Japan or the Republic of South Africa, and it acknowledges and agrees that the New Ordinary Shares have not been and will not be registered or otherwise qualified under the securities legislation of Australia, Canada, Republic of Ireland, Japan or the Republic of South Africa and may not be offered, sold, or acquired, directly or indirectly, within those jurisdictions;

11. it and the beneficial owner of the New Ordinary Shares is, and at the time the New Ordinary Shares are acquired will be, outside the United States and acquiring the New Ordinary Shares in an "offshore transaction" as defined in, and in accordance with, Regulation S under the Securities Act;

12. the New Ordinary Shares have not been, and will not be, registered under the Securities Act and may not be offered, sold or resold in or into or from the United States except pursuant to an effective registration under the Securities Act, or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in accordance with applicable state securities laws;

13. it (and any account for which it is purchasing) is not acquiring the New Ordinary Shares with a view to any offer, sale or distribution thereof within the meaning of the Securities Act;

14. it will not distribute, forward, transfer or otherwise transmit this Announcement or any part of it, or any other presentational or other materials concerning the Placing in or into or from the United States (including electronic copies thereof) to any person, and it has not distributed, forwarded, transferred or otherwise transmitted any such materials to any person;

15. none of finnCap, Liberum, its respective affiliates and any person acting on behalf of any of them is making any recommendations to it, advising it regarding the suitability of any transactions it may enter into in connection with the Placing and that participation in the Placing is on the basis that it is not and will not be a client of finnCap or Liberum and neither finnCap nor Liberum has any duties or responsibilities to it for providing the protections afforded to its clients or for providing advice in relation to the Placing nor in respect of any representations, warranties, undertakings or indemnities contained in the Underwriting Agreement nor for the exercise or performance of any of its rights and obligations thereunder including any rights to waive or vary any conditions or exercise any termination right;

16. it will make payment to finnCap or Liberum (as applicable) for the New Ordinary Shares allocated to it in accordance with the terms and conditions of this Announcement on the due times and dates set out in this Announcement, failing which the relevant New Ordinary Shares may be placed with others on such terms as finnCap or Liberum (as applicable) determines in its absolute discretion without liability to the Placee and it will remain liable for any shortfall below the net proceeds of such sale and the placing proceeds of such New Ordinary Shares and may be required to bear any stamp duty or stamp duty reserve tax (together with any interest or penalties due pursuant to the terms set out or referred to in this Announcement) which may arise upon the sale of such Placee's New Ordinary Shares on its behalf;

17. no action has been or will be taken by any of the Company, finnCap, Liberum or any person acting on behalf of the Company, finnCap or Liberum that would, or is intended to, permit a public offer of the New Ordinary Shares in the United States or in any country or jurisdiction where any such action for that purpose is required;

18. the person who it specifies for registration as holder of the New Ordinary Shares will be: (a) the Placee; or (b) a nominee of the Placee, as the case may be. finnCap, Liberum and the Company will not be responsible for any liability to stamp duty or stamp duty reserve tax resulting from a failure to observe this requirement. Each Placee and any person acting on behalf of such Placee agrees to acquire New Ordinary Shares pursuant to the Placing and agrees to indemnify the Company, finnCap and Liberum in respect of the same on the basis that the New Ordinary Shares will be allotted to a CREST stock account of finnCap or Liberum or transferred to a CREST stock account of finnCap or Liberum who will hold them as nominee on behalf of the Placee until settlement in accordance with its standing settlement instructions with it;

19. it is acting as principal only in respect of the Placing or, if it is acting for any other person, (a) it is duly authorised to do so and has full power to make the acknowledgments, representations and agreements herein on behalf of each such person and (b) it is and will remain liable to the Company, finnCap and/or Liberum for the performance of all its obligations as a Placee in respect of the Placing (regardless of the fact that it is acting for another person);

20. the allocation, allotment, issue and delivery to it, or the person specified by it for registration as holder, of New Ordinary Shares will not give rise to a stamp duty or stamp duty reserve tax liability under (or at a rate determined under) any of sections 67, 70, 93 or 96 of the Finance Act 1986 (depository receipts and clearance services) and that it is not participating in the Placing as nominee or agent for any person or persons to whom the allocation, allotment, issue or delivery of New Ordinary Shares would give rise to such a liability;

21. it and any person acting on its behalf (if within the United Kingdom) falls within Article 19(5) and/or 49(2) of the Order and undertakes that it will acquire, hold, manage and (if applicable) dispose of any New Ordinary Shares that are allocated to it for the purposes of its business only;

22. prior to Admission, it will not make an offer to the public of the New Ordinary Shares and it has not offered or sold and will not offer or sell any New Ordinary Shares to persons in the United Kingdom or elsewhere in the EEA except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and which will not result in an offer to the public in the United Kingdom within the meaning of section 85(1) of the FSMA or an offer to the public in any other member state of the EEA within the meaning of the Prospectus Directive;

23. it is a person of a kind described in: (a) Article 19(5) (Investment Professionals) and/or 49(2) (High net worth companies etc.) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, and/or an authorised person as defined in section 31 of FSMA; and (b) section 86(7) of FSMA ("Qualified Investor"), being a person falling within Article 2.1(e) the Prospectus Directive. For such purposes, it undertakes that it will acquire, hold, manage and (if applicable) dispose of any New Ordinary Shares that are allocated to it for the purposes of its business only;

24. it has only communicated or caused to be communicated and it will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) relating to New Ordinary Shares in circumstances in which section 21(1) of the FSMA does not require approval of the communication by an authorised person and it acknowledges and agrees that neither finnCap nor Liberum has approved this Announcement in their capacity as authorised persons under section 21 of FSMA and it may not therefore be subject to the controls which would apply if it was made or approved as financial promotion by an authorised person;

25. it has complied and it will comply with all applicable laws with respect to anything done by it or on its behalf in relation to the New Ordinary Shares (including all relevant provisions of the FSMA in respect of anything done in, from or otherwise involving the United Kingdom);

26. represents and warrants that, if it is a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive (including any relevant implementing measure in any member state), the New Ordinary Shares acquired by it in the Placing will not be acquired on a non-discretionary basis on behalf of, nor will they be acquired with a view to their offer or resale to, persons in a member state of the EEA which has implemented the Prospectus Directive other than Qualified Investors, or in circumstances in which the express prior written consent of finnCap has been given to the offer or resale;

27. it has neither received nor relied on any confidential price sensitive information concerns in the Company in accepting this invitation to participate in the Placing;

28. none of finnCap, Liberum, any of its respective affiliates or any person acting on behalf of any of them has or shall have any liability for any information, representation or statement contained in this Announcement or for any information previously published by or on behalf of the Company or any other written or oral information made available to or publicly available or filed information or any representation, warranty or undertaking relating to the Company, and will not be liable for its decision to participate in the Placing based on any information, representation, warranty or statement contained in this Announcement or elsewhere, provided that nothing in this paragraph shall exclude any liability of any person for fraud;

29. none of finnCap, Liberum, the Company or any of their respective affiliates, agents, directors, officers or employees nor any person acting on behalf of finnCap, Liberum, the Company or its respective affiliates, agents, directors, officers or employees is making any recommendations to it, advising it regarding the suitability of any transactions it may enter into in connection with the Placing nor providing advice in relation to the Placing nor in respect of any representations, warranties, acknowledgements, agreements, undertakings, or indemnities contained in the Underwriting Agreement nor the exercise or performance of any of finnCap's or Liberum's rights and obligations thereunder including any rights to waive or vary any conditions or exercise any termination right;

30. acknowledges and accepts that finnCap and Liberum may, in accordance with applicable legal and regulatory provisions, engage in transactions in relation to the New Ordinary Shares and/or related instruments for their own account for the purpose of hedging their underwriting exposure or otherwise and, except as required by applicable law or regulation, neither finnCap nor Liberum will make any public disclosure in relation to such transactions;

31. finnCap, Liberum and each of its respective affiliates, each acting as an investor for its or their own account(s), may bid or subscribe for and/or purchase New Ordinary Shares and, in that capacity, may retain, purchase, offer to sell or otherwise deal for its or their own account(s) in the New Ordinary Shares, any other securities of the Company or other related investments in connection with the Placing or otherwise. Accordingly, references in this Announcement to the New Ordinary Shares being offered, subscribed, acquired or otherwise dealt with should be read as including any offer to, or subscription, acquisition or dealing by, finnCap, Liberum and/or any of their respective affiliates acting as an investor for its or their own account(s). None of finnCap, Liberum or the Company intend to disclose the extent of any such investment or transaction otherwise than in accordance with any legal or regulatory obligation to do so;

32. it has complied with its obligations in connection with money laundering and terrorist financing under the Proceeds of Crime Act 2002, the Terrorism Act 2000, the Terrorism Act 2006 and the Money Laundering Regulations 2007 (together, the "Regulations") and, if making payment on behalf of a third party, that satisfactory evidence has been obtained and recorded by it to verify the identity of such third party as required by the Regulations;

33. it is aware of the obligations regarding insider dealing in the Criminal Justice Act 1993, section 118 of FSMA and the Proceeds of Crime Act 2002 and confirms that it has and will continue to comply with those obligations;

34. in order to ensure compliance with the Money Laundering Regulations 2007, finnCap, Liberum (each for itself and as agent on behalf of the Company) or the Company's registrars may, in their absolute discretion, require verification of its identity. Pending the provision to finnCap, Liberum or the Company's registrars, as applicable, of evidence of identity, definitive certificates in respect of the New Ordinary Shares may be retained at finnCap's or Liberum's (as applicable) absolute discretion or, where appropriate, delivery of the New Ordinary Shares to it in uncertificated form may be delayed at finnCap's, Liberum's or the Company's registrars', as the case may be, absolute discretion. If within a reasonable time after a request for verification of identity finnCap, Liberum (each for itself and as agent on behalf of the Company) or the Company's registrars have not received evidence satisfactory to them, finnCap, Liberum and/or the Company may, at its absolute discretion, terminate its commitment in respect of the Placing, in which event the monies payable on acceptance of allotment will, if already paid, be returned without interest to the account of the drawee's bank from which they were originally debited;

35. acknowledges that its commitment to acquire New Ordinary Shares on the terms set out in this Announcement and in the contract note will continue notwithstanding any amendment that may in future be made to the terms and conditions of the Placing and that Placees will have no right to be consulted or require that their consent be obtained with respect to the Company's, finnCap's or Liberum's conduct of the Placing;

36. it has knowledge and experience in financial, business and international investment matters as is required to evaluate the merits and risks of subscribing for the New Ordinary Shares. It further acknowledges that it is experienced in investing in securities of this nature and is aware that it may be required to bear, and is able to bear, the economic risk of, and is able to sustain, a complete loss in connection with the Placing. It has relied upon its own examination and due diligence of the Company and its affiliates taken as a whole, and the terms of the Placing, including the merits and risks involved;

37. it irrevocably appoints any duly authorised officer of finnCap or Liberum (as applicable) as its agent for the purpose of executing and delivering to the Company and/or its registrars any documents on its behalf necessary to enable it to be registered as the holder of any of the New Ordinary Shares for which it agrees to subscribe or purchase upon the terms of this Announcement;

38. the Company, finnCap, Liberum and others (including each of their respective affiliates, agents, directors, officers and employees) will rely upon the truth and accuracy of the foregoing representations, warranties, acknowledgements and agreements, which are given to finnCap and Liberum, each on its own behalf and on behalf of the Company and are irrevocable;

39. if it is acquiring the New Ordinary Shares as a fiduciary or agent for one or more investor accounts, it has full power and authority to make, and does make, the foregoing representations, warranties, acknowledgements, agreements and undertakings on behalf of each such accounts;

40. time is of the essence as regards its obligations under this Appendix;

41. any document that is to be sent to it in connection with the Placing will be sent at its risk and may be sent to it at any address provided by it to finnCap or Liberum;

42. it will be bound by the terms of the Articles;

43. the New Ordinary Shares will be issued subject to the terms and conditions of this Appendix; and

44. these terms and conditions in this Appendix and all documents into which this Appendix is incorporated by reference or otherwise validly forms a part and/or any agreements entered into pursuant to these terms and conditions and all agreements to acquire shares pursuant to the Placing will be governed by and construed in accordance with English law and it submits to the exclusive jurisdiction of the English courts in relation to any claim, dispute or matter arising out of any such contract, except that enforcement proceedings in respect of the obligation to make payment for the New Ordinary Shares (together with any interest chargeable thereon) may be taken by the Company, finnCap or Liberum in any jurisdiction in which the relevant Placee is incorporated or in which any of its securities have a quotation on a recognised stock exchange.

The agreement to allot and issue New Ordinary Shares to Placees (or the persons for whom Placees are contracting as agent) free of stamp duty and stamp duty reserve tax in the United Kingdom relates only to their allotment and issue to Placees, or such persons as they nominate as their agents, direct by the Company. Such agreement assumes that the New Ordinary Shares are not being acquired in connection with arrangements to issue depositary receipts or to transfer the New Ordinary Shares into a clearance service. If there are any such arrangements, or the settlement related to any other dealings in the New Ordinary Shares, stamp duty or stamp duty reserve tax may be payable. In that event, the Placee agrees that it shall be responsible for such stamp duty or stamp duty reserve tax and neither the Company, finnCap nor Liberum shall be responsible for such stamp duty or stamp duty reserve tax. If this is the case, each Placee should seek its own advice and they should notify finnCap or Liberum accordingly. In addition, Placees should note that they will be liable for any capital duty, stamp duty and all other stamp, issue, securities, transfer, registration, documentary or other duties or taxes (including any interest, fines or penalties relating thereto) payable outside the United Kingdom by them or any other person on the acquisition by them of any New Ordinary Shares or the agreement by them to acquire any New Ordinary Shares and each Placee, or the Placee's nominee, in respect of whom (or in respect of the person for whom it is participating in the Placing as an agent or nominee) the allocation, allotment, issue or delivery of New Ordinary Shares has given rise to such non-United Kingdom stamp, registration, documentary, transfer or similar taxes or duties undertakes to pay such taxes and duties, including any interest and penalties (if applicable), forthwith and to indemnify on an after-tax basis and to hold harmless the Company, finnCap and Liberum in the event that either the Company, finnCap and/or Liberum have incurred any such liability to such taxes or duties.

The representations, warranties, acknowledgements and undertakings contained in this Appendix are given to each of finnCap and Liberum for itself and on behalf of the Company and are irrevocable and will survive completion of the Placing.

Each Placee and any person acting on behalf of the Placee acknowledges that finnCap and Liberum does not owe any fiduciary or other duties to any Placee in respect of any representations, warranties, undertakings, acknowledgements, agreements or indemnities in the Underwriting Agreement.

When a Placee or any person acting on behalf of the Placee is dealing with finnCap or Liberum, any money held in an account with finnCap or Liberum on behalf of the Placee and/or any person acting on behalf of the Placee will not be treated as client money within the meaning of the relevant rules and regulations of the FCA made under FSMA. Each Placee acknowledges that the money will not be subject to the protections conferred by the client money rules: as a consequence this money will not be segregated from finnCap's or Liberum's money in accordance with the client money rules and will be held by it under a banking relationship and not as trustee.

References to time in this Announcement are to London time, unless otherwise stated.

All times and dates in this Announcement may be subject to amendment.

No statement in this Announcement is intended to be a profit forecast, and no statement in this Announcement 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.

The price of shares and any income expected from them may go down as well as up and investors may not get back the full amount invested upon disposal of the shares. Past performance is no guide to future performance, and persons needing advice should consult an independent financial adviser.

The New Ordinary Shares to be issued or sold pursuant to the Placing will not be admitted to trading on any stock exchange other than the London Stock Exchange.

Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this Announcement.

 

 

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