15 Feb 2010 07:30
EMBARGOED FOR 7:30 A.M. 15 FEBRUARY 2010
Baylon Holdings Limited
(formerly Molectra Group Limited)
("Baylon" or "the Company")
Proposed acquisition of Ila Security Limited ("Ila")
Approval of waiver of Rule 9 of the City Code
Proposed change of name to Ila Group Limited
Admission of Enlarged Share Capital to trading on AIM
and
Notice of Extraordinary General Meeting
Baylon, the Aim-quoted company, today announces that terms have been agreed for the acquisition of the whole of the issued share capital of Ila and a change of name to Ila Group Limited, conditional on Shareholder approval at the Baylon EGM. The consideration for the Acquisition will be satisfied entirely by the issue of up to 763,308,454 Shares to the shareholders of Ila, made up of 388,600,221 Initial Consideration Shares and up to 374,708,233 Contingent Consideration Shares (subject to adjustment).
The Acquisition constitutes a reverse takeover under the AIM Rules and will therefore require Shareholder approval. In addition, following completion of the Acquisition, members of the Concert Party will between them be interested in more than 30 per cent. of the voting rights of the Company and the Acquisition is therefore subject to Shareholder approval of a waiver of the obligations under Rule 9 of the City Code.
Trading of the Existing Shares on AIM is expected to be restored at 7.30 a.m. today and a copy of the Admission Document, today being posted to Baylon Shareholders, will shortly be available on Baylon's website at www.molectragroup.co.uk.
Ila Security Limited
·; Ila was incorporated in July 2008 to manufacture and market innovative, style-conscious personal security and other devices for women. Ila was founded by Zag (a subsidiary of leading communications agencyBartle Bogle Hegarty), Simon McGivern and James Phillips each of whom, since 2003, have experience designing, manufacturing and distributing consumer products. Ila's products are aimed at the 'brand gap' in the female personal security market, in a society where personal safety is perceived as an increasing issue.
·; Ila's first product was the Dusk, a pocket-sized alarm that emits a 120 decibel female scream, to scare away a potential attacker and give women time to escape. It is designed as an accessory to be worn on a key chain or handbag, with a range of styles to choose from.
·; The Directors consider that a key to future growth of Ila is the pipeline of new products. The development of five new Ila products (provisionally called Jogger, Hook, Wedge, Pebble and Leash) is at a relatively advanced stage. The new products have received indications of early interest from existing retailers and offer potential new distribution opportunities for Ila as an extended product range facilitates approaches to prospective new distributors
On Completion, Simon McGivern will become Chief Executive and James Phillips will become Sales Director. Paul Gazzard, the current Chief Executive of Baylon will become Chief Operating Officer. Neil Munn and Adam Arnold will become non-executive directors.
Rodger Sargent, Chief Financial Officer of Baylon will stand down from the Board on completion but will remain with the Enlarged Group as Financial Controller.
A notice of EGM to approve the Resolutions, including the change of name of the Company to Ila Group Limited, to be held at 10.00 a.m. on 4 March 2010 is today being posted to Baylon Shareholders together with the Admission Document.
Completion of the Acquisition and Admission of the Initial Consideration Shares is expected to take place on 5 March 2010, and dealings are expected to commence in the Enlarged Share Capital on AIM with effect from 8.00 a.m. on that date. Application will be made for the Contingent Consideration Shares to be admitted to trading on AIM once it is confirmed whether, and if so how many, Contingent Consideration Shares will be issued.
Paul Gazzard, Chief Executive Officer of Baylon, commented: "Baylon are delighted to be acquiring Ila at this time of its growth. Ila has created a brand with huge potential with limited capital and we hope the additional resources this deal provides will allow Ila to fulfill its potential and grow into an international brand."
Simon McGivern, Chief Executive Officer of Ila, added: "The acquisition is ideally timed to allow the expansion of Ila's existing relationships with major UK retailers as well as our international sales programme within the US, Canada and Europe. It also accelerates our research and development programme, which aims to produce a range of six Ila products by 2011"
The above summary should be read in conjunction with the full text of this announcement set out below.
For further information please contact:
Baylon Holdings Limited +44 20 7355 7660
Paul Gazzard, CEO
Rodger Sargent, Chief Financial Officer
Ila Security Limited +44 20 7501 1052
Simon McGivern, CEO
Arbuthnot Securities Limited +44 20 7012 2000
Antonio Bossi
Ed Groome
This announcement does not constitute an offer to sell, or the solicitation of an offer to buy, shares in any jurisdiction in which such offer or solicitation is unlawful and, in particular, is not for distribution into the United States, Canada, Australia, the Republic of Ireland or Japan. None of the Existing Shares, the Consideration Shares, or the Arbuthnot Shares has been, nor will be, registered under the United States Securities Act of 1933, as amended, or under the applicable securities laws of any state of the United States, Canada, Australia, the Republic of Ireland or Japan. Accordingly, subject to certain exceptions, none of the Existing Shares, the Consideration Shares, or the Arbuthnot Shares may, directly or indirectly, be offered or sold within the United States, Canada, Australia, the Republic of Ireland or Japan or to or for the account or benefit of any national, resident or citizen of the United States, Canada, Australia, the Republic of Ireland or Japan. The distribution of the Admission Document in other jurisdictions may be restricted by law and therefore persons into whose possession the Admission Document comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities law of any such jurisdictions.
Arbuthnot Securities Limited, which is regulated by the Financial Services Authority, is acting as Nominated Adviser and Broker to the Company and no-one else and will not be responsible to any person other than the Company for providing the protections afforded to customers of Arbuthnot Securities Limited or for advising any other person on the contents of this announcement or any transaction or arrangement referred to herein. The responsibilities of Arbuthnot Securities Limited as the Company's Nominated Adviser and Broker under the AIM Rules are owed solely to the London Stock Exchange. Arbuthnot Securities Limited is not making any representation or warranty, express or implied, as to the contents of this announcement (without limiting the statutory rights of any person to whom this announcement is issued).
Proposed Acquisition of Ila Security Ltd
Approval of waiver of Rule 9 of the City Code
Proposed change of name to Ila Group Limited
Admission of Enlarged Share Capital to trading on AIM
and
Notice of Extraordinary General Meeting
1. Introduction
On 22 January 2010, the Company announced that it had completed the disposal of the business and assets of its operating subsidiary, Molectra Australia and thereafter would be an investing company with a policy of acquiring a company or business in the consumer retail and/or manufacturing sector. On that date the Company's Shares were suspended as the Company reported that it was in discussions regarding a transaction which could constitute a reverse takeover. Further to that announcement, the Company announced today that it has conditionally agreed to acquire the entire issued share capital of Ila, a UK based company established to develop and market Ila branded personal security and other devices. The consideration for the Acquisition will be satisfied entirely by the issue of up to 763,308,454 Shares to the shareholders of Ila, made up of 388,600,221 Initial Consideration Shares representing approximately 71.9 per cent. of the Enlarged Share Capital and up to 374,708,233 Contingent Consideration Shares (subject to adjustment), together representing approximately 83.4 per cent. of the Contingent Enlarged Share Capital.
The Acquisition, if implemented, will result in a fundamental change in the business, board and voting control of the Company and will also constitute a reverse takeover under the AIM Rules. Accordingly, the Acquisition requires the approval of Existing Shareholders at the Baylon EGM.
2. Background to and Reasons for the Acquisition
Following the recent disposal of the Molectra Australia business, the Company is treated as an investing company under the AIM Rules with an investing policy of acquiring a company or business in the consumer retail and/or manufacturing sectors. With the Disposal in mind, the Company has for some time been considering potential acquisitions and a review of possible targets has been undertaken. After considering a number of possible businesses and after due diligence, Ila was identified as a potential merger partner and the terms of the Acquisition were negotiated. Ila was introduced to the Company by Rodger Sargent, an Existing Director and a shareholder in Ila. The Existing Directors consider Ila to be a business with significant potential and, given its need for working capital to help fund its continued expansion, a good fit for the Company which has the benefit of an AIM quotation and cash on its balance sheet.
Ila, which started business in 2008, manufactures and markets branded personal security and other devices designed, primarily, to appeal to women. Ila was founded following an approach from Zag (a subsidiary of leading communications agency Bartle Bogle Hegarty) to Simon McGivern and James Phillips each of whom have experience designing, manufacturing (via outsourced manufacturers in China) and distributing alarms through another company, Locca Tech Limited, which was established in 2003.
The Acquisition, if implemented, will provide the Ila business with additional resources to assist in exploiting the potential opportunities in the market and in building the awareness of the Ila brand. In particular, the increased cash position provided by Baylon's cash reserves (which stood at approximately £650,000 as at 12 February 2010 - this figure has not been audited) and the appointment of the Proposed Directors are intended to enable the Enlarged Group to achieve some or all of the following objectives:
·; the expansion of Ila's existing relationships with major retailers, including the roll out of merchandising programmes;
·; the expansion of Ila's research and development programme with a view to increasing its range to six products within the next 12 months;
·; to increase Ila's retail presence in the UK more generally to multiple nationwide retailers; and
·; to increase Ila's international sales programme to the US and Canada and more widely across Europe. This may include the appointment of sales representatives or distributors with whom Ila is currently in discussions.
Further details of the history, current business and prospects of Ila are set out in Part II of the Admission Document.
Financial information on Ila for the 15 month period to 30 September 2009 is set out in Part V of the Admission Document.
3. The Board and key employees
Immediately following the completion of the Acquisition, the Board will consist of three executive directors and two non-executive directors. It is the Directors' intention to appoint an independent non-executive director in due course. Brief biographical details of all members of the Board and any key employees and their proposed roles are set out below.
Board of the Company as enlarged by the Acquisition
Simon McGivern, Chief Executive Officer (currently chief executive officer of Ila) Age 36
Mr McGivern gained an MA (Hons) in Business and French from Edinburgh University. He began his professional career at Panmure Gordon Investments in 1997, where he trained in investment management. His work there involved financial analysis, portfolio management and the sourcing of venture capital opportunities. Mr McGivern left Panmure Gordon to start up Locca, a technology company headquartered in London whose primary business was designing and manufacturing a range of innovative electronic products for the retail and SME markets, in 2003. As Managing Director at Locca, Mr McGivern was responsible for key projects such as raising seed capital, designing and developing products, creating and implementing the marketing plan and running the financial operations of the company. In 2008 Mr McGivern became one of the founding directors of Ila with overall responsibility for the financial, product development, manufacturing and legal aspects of the company.
James Phillips, Sales Director (currently sales director of Ila) Age 36
Mr Phillips gained an MA (Hons) in Geography from Edinburgh University. He entered recruitment consultancy following university and then moved into corporate sales at Quintus Group. While at Quintus Group, he was chosen to set up the company's Asian operations. Following this, he left to set up his own corporate sponsorship company in Hong Kong. Mr Phillips was a founding director of Locca and was responsible for originating and completing a number of national and international distribution deals. In 2008, Mr Phillips became a founding director of Ila with responsibility for originating sales and growing retail and distribution partnerships. Mr Phillips has developed the majority of Ila's existing relationships with major national and international retailers.
Paul Terence Gazzard, Chief Operating Officer (currently Chief Executive Officer of Baylon) Age 38
Mr Gazzard graduated from London University in 1993 with a degree in Biochemistry and Human Physiology. He worked in the City, including at Panmure Gordon, as a fund manager and investment analyst specialising in small cap technology stocks. He left the City in 2002 to join Virotec International plc. Mr Gazzard was involved in the launch of The Greenhouse Fund Limited in January 2006 and, as a principal of the strategic adviser to the fund, was involved in advising Greenhouse on its portfolio of investments. When The Greenhouse Fund Limited acquired Molectra Australia in 2008 and concurrently changed its name to Molectra Group Limited, Mr Gazzard became Chief Executive Officer of the enlarged group. It is proposed that on Completion of the Acquisition, Mr Gazzard will become Chief Operating Officer of the Enlarged Group.
Neil Munn, Non-executive Director, Age 45
Mr Munn spent 16 years at Unilever working with some of its most successful brands. Mr Munn's roles included 5 years in Asia helping Unilever establish its China business, in France as Brand Director of Unilever's beverages business with executive responsibility for strategy, innovation and communication and extensively in the UK market in both general management and brand development. His final role at Unilever was as Global Brand Director on Lynx. In 2006 Mr Munn left Unilever to become CEO of Zag.
Adam Arnold, Non-executive Director, Age 31
Mr Arnold graduated from Cambridge University in 2000 with a first class MA degree in Geography. He joined Bartle Bogle Hegarty advertising agency as a graduate trainee in the same year. He spent eight years in the BBH account management department working for blue chip brands such as Audi, Warburtons and ITV and served as global business director for Vodafone. He was responsible for brand strategy and communications campaigns that ran across different media and multiple territories. In 2008, he joined Zag as General Manager. He oversees all of Zag's brand assets and leads the majority of its partnerships.
Key Employees
Rodger David Sargent, Financial Controller (currently Chief Financial Officer of Baylon) Age 38
Mr Sargent qualified as a chartered accountant with PricewaterhouseCoopers, London in 1996. He was a founder and the finance director of Sports Resource Group Limited, Sports Internet Group plc and InTechnology plc. Mr Sargent was involved in the launch of The Greenhouse Fund Limited in January 2006 and as a principal of the strategic adviser to the fund, was involved in advising The Greenhouse Fund Limited. When The Greenhouse Fund Limited acquired Molectra Australia in 2008 and concurrently changed its name to Molectra Group Limited, Mr Sargent became Chief Financial Officer of the enlarged group.
Mr Sargent will retire from the Board immediately following Admission but will continue as an employee of the Company carrying on the role of financial controller.
4. Principal Terms of the Acquisition
The Acquisition comprises the conditional purchase by the Company of the entire issued share capital of Ila from the Vendors in consideration for the allotment and issue, credited as fully paid, of up to 763,308,454 Consideration Shares. The Consideration Shares will be split into two tranches: 388,600,221 Initial Consideration Shares, which will be allotted to the Vendors on Completion; and up to 374,708,233 Contingent Consideration Shares, which will be allotted to the Vendors depending on whether or not Baylon receives a tax rebate from the Australian authorities, as described further below. The Consideration Shares will rank pari passu in all respects with the Existing Shares in issue as at the date of the Acquisition Agreement.
The Existing Directors understand that Molectra Australia, which remains a wholly owned subsidiary of Baylon, may receive a potentially material tax credit following Admission. There is no guarantee that any tax credit will be received or, if such a tax credit is received, what its value will be. As this tax credit could potentially be a material asset for Baylon, it was taken into account when the terms of the Acquisition were negotiated. If the full estimated value of the potential tax credit (£554,444) is received, then none of the Contingent Consideration Shares will be allotted to the Vendors. If no tax credit is received by the deadline of 31 December 2010 (subject to extension to 31 March 2011), or if such a tax credit is received but it is less than the estimated value of £554,444, then some or all of the Contingent Consideration Shares will be allotted to the Vendors, depending on the value of the tax credit received. As the tax credit will be paid in Australian Dollars, the Company will be subject to the risk of exchange rate movements prior to the receipt of the tax credit, if any. The Acquisition Agreement has been entered into by the Company with certain shareholders of Ila, representing approximately 64 per cent. of the entire issued share capital of Ila. Arrangements have been put in place for the remaining shareholders of Ila to execute a voluntary transfer of their shares in favour of Baylon, or failing which, for such shares to be acquired pursuant to a drag-along right in the articles of association of Ila. Completion of the Acquisition Agreement is conditional upon the effective transfer of these remaining shares to the Company. This condition may be waived in whole or in part by the Company, but this announcement and the Admission Document assumes the acquisition of all of the shares in Ila by the Company.
The Acquisition is conditional, inter alia, upon (i) the passing of the Resolutions numbered 1, 2 and 3 at the Baylon EGM, (ii) the Acquisition Agreement being unconditional except in respect of Admission, (iii) the Takeover Panel granting a waiver of the obligation of Ila to make a general offer for the Company under Rule 9 of the City Code, and (iv) Admission of the Enlarged Share Capital to trading on AIM.
The Company has the ability to terminate the Acquisition Agreement prior to Completion if there shall have occurred a material breach of the Acquisition Agreement by certain of the key Vendors, including a material breach of any warranty or pre-completion undertaking, upon the occurrence of any event which would result in a material breach of any of the warranties upon their repetition at Completion, or upon the occurrence of certain other adverse events in respect of Ila, provided that any such event or events have or is likely to have a material adverse effect on Ila.
Simon McGivern also has the ability to terminate the Acquisition Agreement on behalf of the relevant Vendors prior to Completion if there shall have occurred a material breach of the Acquisition Agreement by the Company, including a material breach of any warranty or pre-completion undertaking, upon the occurrence of any event which would result in a material breach of any of the warranties upon their repetition at Completion, or upon the occurrence of certain other adverse event in respect of the Company, provided that any such termination event has or is likely to have a material adverse effect on the Company.
Subject to certain very limited circumstances, the Company has agreed to make a contribution to Ila's costs. This contribution is classified as an inducement fee under the City Code and the maximum amount of such payment by the Company is £50,000.
5. Dividend Policy
It is the intention of the Directors to retain cash generated through the operations of the Enlarged Group to finance expansion and investment opportunities. Accordingly, the Directors do not believe that the Company will pay dividends for the foreseeable future.
6. Waiver of Rule 9 of The City Code
The City Code governs, amongst other things, transactions that may result in a change of control of a public company to which the City Code applies, including the Company. Under Rule 9, where a person acquires an interest (as such term is defined in the City Code) in shares which, when taken together with any shares in which he is already interested and in which persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights of a company that is subject to the City Code, such person or group is normally required to make a general offer to all the remaining shareholders to acquire their shares.
Similarly, when any person together with persons acting in concert with him is interested in shares which, in the aggregate, carry not less than 30 per cent. of the voting rights of such a company but does not hold shares carrying more than 50 per cent. of such voting rights, a general offer will normally be required if any further interests in shares are acquired by any such person.
An offer under Rule 9 must be in cash and at the highest price paid during the preceding 12 months for any interest in shares of the Company by the person required to make the offer or any person acting in concert with him.
Persons acting in concert comprise persons who, pursuant to an agreement or understanding (whether formal or informal), actively co-operate to obtain or consolidate control of, or frustrate the successful outcome of an offer for, the Company.
For the purposes of the City Code, all of the members of the Concert Party are deemed to be acting in concert, and their interests are to be aggregated. Further information about the Concert Party is set out in paragraph 7.6 of Part VII of the Admission Document.
Assuming that (i) the Resolutions are duly passed, (ii) all of the Consideration Shares (i.e. the Initial Consideration Shares and the Contingent Consideration Shares) are issued under the terms of the Acquisition Agreement, (iii) the potential tax credit due to Molectra Australia is not received before 31 December 2010, and (iv) no options or other rights to subscribe for Shares are exercised between the date of this document and Admission, the Concert Party will hold, in aggregate, 488,910,608 Shares, representing approximately 53.4 per cent. of the Company's issued ordinary share capital. Assuming exercise in full by the members of the Concert Party of the Rollover Options that will be held by members of the Concert Party following Admission (and assuming that no other person exercises any option or other right to subscribe for shares in the Company) the members of the Concert Party will between them own 531,296,260 Shares representing approximately 55.8 per cent. of the Company's enlarged issued share capital. The Rollover Options will become exercisable on 31 March 2010 subject to the terms of the Ila EMI Scheme. The relevant holdings of each Concert Party member, now and following implementation of the Acquisition and following the exercise of the Rollover Options on the basis set out above, are stated in paragraph 7.6 of Part VII of the Admission Document.
At Admission, when the Initial Consideration Shares and the Arbuthnot Shares will be allotted, the members of the Concert Party will between them be issued with 248,904,318 Shares, representing approximately 46.0 per cent. of the Company's issued ordinary share capital.
Following the issue of the Contingent Consideration Shares (and based on the above assumptions), the members of the Concert Party will between them be interested in 488,910,608 Shares, representing approximately 53.4 per cent. of the Company's issued ordinary share capital. This means that members of the Concert Party may acquire further Shares without limit without being required to make a general offer for the balance of the Shares not held by them.
In the absence of a waiver granted by the Panel, Rule 9 would require the Concert Party to make a general offer for the balance of the Shares in issue immediately following the Acquisition. The Panel has been consulted and has agreed, subject to the passing on a poll by Shareholders of the Whitewash Resolution, to waive the obligation on the Concert Party that would otherwise arise under Rule 9, as a result of the issue of the Consideration Shares pursuant to the Acquisition, for a general offer to be made by the Concert Party for the balance of the issued Shares not already held by the Concert Party.
7. Share Option Arrangements
On 24 March 2009, the Company adopted a new share option scheme (the Share Option Scheme), under which the Company has authority to grant options to employees or directors of, and consultants to, the Company and any of its subsidiaries. Options over 16,600,000 Shares have been granted under this scheme. Under the terms of the scheme the number of Shares under option cannot exceed 10 per cent. of the Company's issued share capital as at the date of grant.
The Company proposes to continue to use the Share Option Scheme to reward and incentivise directors and senior management and attract, retain and motivate individuals to ensure the long term success of the Company.
Ila has granted options over its own shares under the Ila EMI Scheme to Simon McGivern, James Phillips and another employee, Nick Christie. These options will be exchanged for new options over Shares on Completion (the Rollover Options) and remain subject to the rules of the Ila EMI Scheme. Following Completion, the number of Shares that will be under option to these individuals will be 54,329,284. The exercise price of the Rollover Options will be 0.078p per Share. The total percentage of the diluted Contingent Enlarged Share Capital (i.e. assuming conversion of all outstanding options) under option immediately following Completion will be 7.4 per cent.
As the number of Shares subject to the Rollover Options to be granted to Messrs McGivern, Phillips and Christie is based on the number of Consideration Shares issued to the Vendors as a whole (i.e. the total number of Initial Consideration Shares and Contingent Consideration Shares), the receipt of any tax credit by Molectra Australia that would lead to some or all of the Contingent Consideration Shares not being issued will require the concurrent cancellation of a proportion of the Rollover Options in respect of the relevant number of Shares. This will be done on the same mathematical basis as the reduction in the number of Contingent Consideration Shares to be allotted under the Acquisition Agreement. The maximum number of Shares in respect of which a proportion of the Rollover Options will be cancelled will be 26,670,255, and the Rollover Options will be cancelled in respect of the maximum number of Shares if a tax credit to the value of £554,444 or above is received prior to 31 December 2010 (subject to extension to 31 March 2011). If no tax credit is received by 31 December 2010 (subject to extension to 31 March 2011), or if it has a value of zero, no proportion of the Rollover Options will be cancelled. If a tax credit of between zero and £554,444 is received, the Rollover Options will be cancelled in respect of a proportionate number of Shares on a pro rata basis.
8. Lock-In Arrangements
Under the terms of the lock-in deeds, the Existing Directors, (including Rodger Sargent who will continue to be an Applicable Employee within the meaning of the AIM Rules, Simon McGivern, James Phillips and Zag, being Related Parties as defined by the AIM Rules, have agreed with Arbuthnot and the Company not to sell, transfer or otherwise dispose of any interest in any Shares held by them immediately following Admission, other than in certain limited circumstances, for a period of 12 months following Admission pursuant to Rule 7 of the AIM Rules.
The Existing Directors (including Rodger Sargent) the Proposed Directors and Zag have also agreed that any sale or disposal of Shares will be effected through Arbuthnot for such time as it remains the Company's broker and/or nominated adviser under the AIM Rules and offers competitive terms for such sale or disposal.
Assuming all of the Contingent Consideration Shares are issued during the lock-in period, the lock-in arrangements outlined above will apply in respect of 466,601,208 Shares representing approximately 51.0 per cent. of the Enlarged Share Capital.
9. Financial Information on Baylon
In accordance with Rule 28 of the AIM Rules, the Admission Document does not contain historical financial information on Baylon which would otherwise be required under Section 20 of Annex I of the AIM Rules. Audited financial statements of Baylon for the three years ended 31 December 2008 and unaudited interim financial accounts of Baylon for the six months to 30 June 2009 are available from the Company's website at www.molectra.com.au. As at 12 February 2010, Baylon had cash reserves of approximately £650,000.
10. Financial Information on Ila
Ila has been in operation since July 2008 and has not, to date, filed any statutory accounts. Historical financial information has been prepared for the financial period from 2 July 2008 to 30 September 2009 for the purposes of the Admission Document and does not include any comparative historical information.
For the period from 2 July 2008 to 30 September 2009, Ila achieved Gross Profit of £149,647 on Revenues of £450,855. Net Loss for the period was £47,168. As at 30 September 2009, Ila had Total Assets of £463,492.
11. Current trading and prospects of Ila
In the period from 1 October 2009 to 31 December 2009, Ila has continued to make satisfactory progress in relation to both its sales pipeline and new product development. A number of trials of Ila's products are beginning with major new retailers, in particular in Canada and across Europe. In the UK, Ila is currently discussing trials of its products with a number of further major retailers. In addition, new channels are responding well to sales initiatives, in particular, television sales networks and catalogue chains. Following a strong Christmas trading period, relationships with existing retailers are developing well, with Ila's largest customer requesting the presentation of three new Ila products for 2010. New product development is providing further momentum, with prototypes being well received by existing and new customers.
12. Extraordinary General Meeting
An Extraordinary General Meeting, notice of which is set out in the Admission Document will be held at the offices of Norton Rose LLP, 3 More London Riverside, London SE1 2AQ, on 4 March 2010 at 10.00 a.m. at which the Resolutions will be proposed to approve the waiver of Rule 9 of the City Code, the acquisition of Ila, an extension of the Company's authority to allot shares in the Company in order to effect the acquisition, and the Company's change of name to Ila Group Limited.
The Resolutions are set out in full in the notice of Baylon EGM in the Admission Document.
13. Admission and Dealings
Application will be made to the London Stock Exchange for the Existing Shares to be re-admitted to trading on AIM and for the Initial Consideration Shares and the Arbuthnot Shares to be admitted to trading on AIM, conditional upon, inter alia, the approval of the Acquisition at the Baylon EGM. Application will be made for the Contingent Consideration Shares to be admitted to trading on AIM once it is confirmed whether, and if so how many, Contingent Consideration Shares will be issued.
It is expected that Admission will become effective and dealings will commence in the Enlarged Share Capital on 5 March 2010. No application has or will be made for the Enlarged Share Capital to be admitted to trading or to be listed on any other stock exchange.
The Articles permit the Company to issue Shares in uncertificated form in accordance with the CREST Regulations. CREST is a paperless settlement system enabling title to securities to be evidenced otherwise than by certificate and transferred otherwise than by written instrument, in accordance with the CREST Regulations.
Settlement of transactions in the Shares following Admission may take place within the CREST system if Shareholders so wish. CREST is a voluntary system and holders of Shares who wish to receive and retain share certificates will be able to do so.
For more information concerning CREST, Shareholders should contact their brokers or Euroclear UK & Ireland Limited at 33 Cannon Street, London EC4M 5SB. Trading in the Company's Shares on AIM will require Shareholders to deal through a stockbroker or other intermediary who is a member of the London Stock Exchange.
14. Admission Document
The Company has published an Admission Document in connection with the above proposals which is being sent to Baylon Shareholders together with a notice of EGM and a Form of Proxy for use at the Baylon EGM. A copy of the Admission Document is available from the Company's registered office and on its website at www.molectragroup.co.uk.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
| Latest time and date for lodging forms of proxy for the Baylon EGM
| 10.00 a.m. on 2 March 2010
|
| Baylon EGM | 10.00 a.m. on 4 March 2010
|
| Completion of the Acquisition | 5 March 2010
|
| Expected date of Admission and commencement of dealings in the Enlarged Share Capital on AIM | 8.00 a.m. on 5 March 2010
|
DEFINITIONS
| Acquisition | the proposed acquisition by Baylon of the entire issued share capital of Ila; |
| Acquisition Agreement | the agreement relating to the Acquisition, made between Baylon and certain of the Vendors, a summary of which is set out in paragraph 3 of Part VII of the Admission Document; |
| Admission | admission of the Enlarged Share Capital to trading on AIM becoming effective in accordance with Rule 6 of the AIM Rules; |
| Admission Document | the document which has been produced pursuant to the AIM Rules, disclosing information required for Admission, which has today been sent to Baylon Shareholders and made available on the Company's website at www.molectragroup.co.uk; |
| AIM | the market of that name operated by the London Stock Exchange; |
| AIM Rules | the rules of the London Stock Exchange for AIM companies and their nominated advisers governing admission to and operation of AIM, as amended from time to time; |
| Arbuthnot or Arbuthnot Securities | Arbuthnot Securities Limited, the Company's nominated adviser and broker, authorised and regulated by the FSA and a member of the LSE; |
| Arbuthnot Shares | the 5,681,819 Shares to be allotted and issued to Arbuthnot at Admission pursuant to the Introduction Agreement; |
| Articles | Articles of Association of Baylon; |
| Austrlian Assets | The assets of Molectra Australia sold by Molectra Australia or Baylon, as appropriate, pursuant to the Disposal Agreements; |
| Baylon EGM | the Extraordinary General Meeting of Baylon Shareholders at which Baylon Shareholders will vote on the Resolutions, such Resolutions and a copy of the notice of extraordinary general meeting being in the Admission Document; |
| Baylon Shareholders | registered holders of Shares; |
| BBH or Bartle Bogle Hegarty | Bartle Bogle Hegarty Limited; |
| City Code | the City Code on Takeovers and Mergers administered by the Panel; |
| Company or Baylon | Baylon Holdings Limited; |
| Completion | completion of the Acquisition in accordance with the terms of the Acquisition Agreement; |
| Concert Party | Simon McGivern, James Phillips, Brian McGivern, Vanessa McGivern, Timothy Phillips and Zag, (each of them being "a member of the Concert Party"), all of whom are regarded for the purposes of the City Code as acting in concert (as defined in the City Code) in relation to the Company and its share capital; |
| Consideration Shares | the Initial Consideration Shares and the Contingent Consideration Shares; |
| Contingent Consideration Shares | the up to 374,708,233 Shares to be allotted and issued to the Vendors following Completion pursuant to the Acquisition Agreement (or arrangements made pursuant thereto) depending on the value of any tax credit received by Molectra Australia, if any; |
| Contingent Enlarged Share Capital | the issued share capital of the Enlarged Group assuming all of the Consideration Shares and the Arbuthnot Shares are issued; |
| CREST | the computerised settlement system to facilitate the transfer of title of shares in uncertificated form, operated by CRESTCo Limited; |
| CREST Regulations | the Uncertificated Securities Regulations 2001 (SI 2001/3755), including modifications thereof or any regulations in substitution thereof made under section 207 of the Act for the time being in force and the Companies (Uncertificated Securities) (Jersey) Order 1999 (and in the event of any inconsistency, the latter shall prevail); |
| Directors or Board | the directors of Baylon immediately following Admission; |
| Disposal | the disposal of the Australian Assets on the terms of the Disposal Agreements; |
| Disposal Agreements | the agreements between, inter alia, Baylon, Molectra Australia, Molectra Holdings Limited and Molectra Technologies Pty Limited relating to the sale by Baylon and Molectra Australia of the Australian Assets; |
| Enlarged Group | the Group as enlarged by the Acquisition; |
| Enlarged Share Capital | the issued share capital of the Enlarged Group immediately following Admission including the Existing Shares, the Initial Consideration Shares and the Arbuthnot Shares; |
| Existing Directors | the directors of Baylon at the date of this announcement, whose names appear on page 4 of the Admission Document; |
| Existing Shares | the Shares in issue as at the date of this announcement; |
| Existing Share Capital | the issued share capital of Baylon as at the date of this announcement; |
| Existing Shareholders | holders of Existing Shares; |
| Form of Proxy | the form of proxy which accompanies the Admission Document for use by Existing Shareholders in connection with the Baylon EGM; |
| FSA | The Financial Services Authority of the United Kingdom; |
| Group | Baylon Holdings Limited and its subsidiaries; |
| Ila EMI Scheme | the Ila Security Limited Enterprise Management Incentive Share Scheme; |
| Ila | Ila Security Limited, a company incorporated on 2 July 2008 under the laws of England and Wales with company no. 06635706; |
| Introduction Agreement | The conditional agreement dated 15 February 2010 between Arbuthnot, Baylon, Paul Gazzard and the Proposed Directors relating to the Admission, further details of which are set out in paragraph 11.6 of Part VII of the Admission Document; |
| Jersey | the Bailiwick of Jersey; |
| Law or Jersey Law | The Companies (Jersey) Law 1991, as amended; |
| Locca | Locca Tech Limited, a company incorporated on 4 August 2003 under the laws of England and Wales with company no. 04854785; |
| London Stock Exchange | London Stock Exchange plc; |
| Molectra Australia | Molectra Australia Pty Limited, a company incorporated on 6 March 2006 in Queensland, Australia with company no. 118664430; |
| Ordinary Resolution | a resolution proposed and passed as such by a simple majority of the total number of votes cast for an against such resolution; |
| Panel | The Panel on Takeovers and Mergers; |
| Proposed Directors | the proposed directors of Baylon whose names appear on page 4 of the Admission Document; |
| QCA Guidelines | the guidelines for corporate governance of AIM companies published by the Quoted Companies Alliance; |
| Resolutions | the resolutions described in the notice of extraordinary general meeting set out at page 73 of the Admission Document; |
| Rollover Options | the options over Baylon Shares to be issued at Completion to the current holders of options over Ila shares in exchange for the cancellation of those options; |
| Share Option Scheme | the Baylon Holdings Limited Share Option Scheme; |
| Shares | ordinary shares of no par value in the capital of Baylon; |
| Shareholders or Baylon Shareholders | persons who are registered holders of Shares; |
| UK or United Kingdom | the United Kingdom of Great Britain and Northern Ireland; |
| US or United States | the United States of America (including states of the United States and District of Columbia), its possessions and territories and all other areas subject to its jurisdiction; |
| Vendors | the current shareholders of Ila, who will be selling their shares in Ila to the Company pursuant to the Acquisition Agreement and the other agreements or mechanisms described in the Admission Document; |
| Whitewash | waiver of the obligations that would otherwise arise under Rule 9 of the City Code for the Concert Party to make a general cash offer for the whole of the Company's Existing Share Capital; |
| Whitewash Resolution | the Ordinary Resolution concerning the Whitewash to be proposed on a poll at the Baylon EGM and set out in the notice of EGM as Resolution 1; |
| Zag | Zag Limited, a company registered in England with company number 05589757 and whose registered office address is at 60 Kingly Street, London W1B 5DS; and |
| £ or Sterling | the lawful currency of the United Kingdom. |