14 May 2010 07:00
14 May 2010
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, JAPAN, CANADA, AUSTRALIA, NEW ZEALAND OR THE REPUBLIC OF SOUTH AFRICA.
Management Consulting Group PLC
("MCG" or the "Company")
Proposed Firm Placing and Placing and Open Offer of 113,725,732 New Ordinary Shares and 53,109,916 Warrants to raise approximately £25 million
BlueGem to become new cornerstone investor; refocused strategy and strengthening of balance sheet
The Board today announces that the Company has conditionally raised gross proceeds of approximately £25.0 million (approximately £23.6 million net of expenses) in a Firm Placing, Placing and Open Offer:
n The Firm Placing will raise approximately £17.0 million, before expenses and before exercise of Warrants, through the issue to BlueGem (acting through its wholly-owned subsidiary, BlueGem Beta) of 77,272,727 New Ordinary Shares at a price of 22 pence per New Ordinary Share. In addition, BlueGem will receive 36,086,363 Warrants at no additional cost, each of which will entitle BlueGem to subscribe at any time up to and including 31 December 2011 for one new Ordinary Share at an exercise price of 22 pence per new Ordinary Share.
n In conjunction with the Firm Placing, the Company will undertake a Placing and Open Offer to raise additional funds of approximately £8.0 million before expenses and before exercise of Warrants. The Placing and Open Offer will result in the issue of 36,453,005 New Ordinary Shares at a price of 22 pence per New Ordinary Share. Each New Ordinary Share will be issued together with 0.467 Warrants at no additional cost (representing 17,023,553 Warrants in aggregate).
The Capital Raising will significantly strengthen MCG's balance sheet and will provide increased headroom over the existing financial covenant levels under the current banking facilities with the Group's lenders. This will enable the executive management of MCG to focus its efforts on the Group's new strategic focus of driving organic growth, capitalising on new opportunities provided by economic recovery in core markets and delivering operational improvements.
MCG's largest shareholder, Gartmore, is fully supportive of the Capital Raising and has agreed together with certain of the Directors to subscribe for all of the New Ordinary Shares and Warrants which are the subject of the Placing and Open Offer. The commitment of Gartmore is subject to claw back (i) in respect of valid applications for Open Offer Shares by Qualifying Shareholders under the Open Offer and Excess Application Facility and (ii) to enable the issue by the Company of New Ordinary Shares and related Warrants to certain Directors and the other MCG Placees, who consist of certain Group employees who do not currently hold any interest in Ordinary Shares.
Highlights:
n Total gross proceeds of approximately £25.0 million, before the exercise of Warrants
n 113,725,732 New Ordinary Shares at an issue price of 22 pence per New Ordinary Share, representing a:
§ discount of 13.7 per cent. to the Closing Price of the Ordinary Shares on 13 May 2010; and
§ premium of 4.7 per cent. to the average Closing Price for the period of 90 Business Days up to and including 13 May 2010
n 53,109,916 Warrants, each of which entitle holders to subscribe for one new Ordinary Share at an exercise price of 22 pence per new Ordinary Share at any time up to and including 31 December 2011, raising further gross proceeds of £11.7 million if exercised in full
n BlueGem to become an active long-term cornerstone investor in MCG, working closely with the Board, the new CEO and the executive management team. BlueGem will be represented on the Board by two non-executive Directors
n New leadership under Nick Stagg, who will take up the role of CEO on 1 July 2010, focusing on organic growth of the Company's existing businesses, improved financial discipline and the delivery of operational improvements and efficiencies at head office and divisional level
n Participation in the Capital Raising by Gartmore, MCG's largest shareholder
n Participation in the Capital Raising by certain Directors of MCG, representing a total commitment to subscribe for approximately £300,000 worth of Open Offer Shares and further participation expected by certain senior employees within the Group who do not currently hold any Ordinary Shares, thereby further aligning their interests with those of Shareholders generally
n Deleveraging of the business to create a more suitable capital structure that provides greater resilience and financial flexibility to capture organic growth opportunities in an improving environment
n Significant reduction of the risk that a deterioration in the Group's trading performance and financial condition could give rise to a breach of banking covenants
About BlueGem
n BlueGem Capital Partners LLP, led by Marco Capello, is the management company of BlueGem, a London-based private equity fund formed at the end of 2006
n BlueGem makes private equity investments in mid-market companies mainly in the UK and in Italy; MCG is its fifth announced investment and the second in the UK
n BlueGem has capital commitments of over €200 million and targets companies with an enterprise value of up to €200 million
The Capital Raising is conditional on, amongst other things, the approval of Shareholders in the General Meeting. Shareholders representing approximately 28.9 per cent. of the total current share capital of MCG, including Gartmore and all of the current Directors of MCG and certain senior Group employees, have signed firm irrevocable undertakings to vote their shares in favour of the Resolutions.
Welcoming BlueGem as a significant shareholder in the Company, Alan Barber, MCG's executive chairman, said:
"With a strengthened balance sheet, refocused strategic priorities and a new CEO, MCG is entering an important new phase of its development. We are now much better placed to capture the improving organic growth opportunities as we enter more benign trading conditions. We welcome the support of our new and existing shareholders and are keenly focused on delivering improved returns to shareholders."
Marco Capello, founder and Managing Partner of BlueGem Capital Partners LLP, said:
"Having performed extensive due diligence, we are delighted to make a material investment in MCG. With a refocused strategy on financial and operating discipline, and improving trading prospects, we believe that MCG has the opportunity to deliver considerable shareholder value over the medium term."
Timetable
It is anticipated that a prospectus containing further details of the Capital Raising, including a final timetable with the Record Date and ex-entitlement date for the Open Offer and the notice of the General Meeting will be posted to Shareholders in early June 2010, with completion of the Capital Raising expected to occur later in that month.
This summary should be read in conjunction with the full text of this announcement.
| Management Consulting Group PLC | |
| Alan Barber Nick Stagg Craig Smith | 020 7710 5000 |
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| Rothschild (financial adviser to MCG) | |
| Sian Westerman Dominic Epton | 020 7280 5000 |
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| Collins Stewart (joint corporate broker to MCG) | |
| Mark Dickenson Piers Coombs | 0207 523 8350 |
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| Oriel Securities (joint corporate broker to MCG) | |
| Emma Griffin Jonathan Walker | 0207 710 7600 |
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| Financial Dynamics (financial PR adviser to MCG) | |
| Ben Atwell | 0207 831 3113 |
BDO LLP is acting as financial adviser to BlueGem.
Rothschild, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as Sponsor and Sole Financial Adviser to MCG and is acting for no-one else in connection with the Capital Raising and will not be responsible to anyone other than MCG for providing the protections afforded to clients of Rothschild nor for providing advice in relation to the Capital Raising or any matters referred to in this announcement. Rothschild is not underwriting the Capital Raising.
Collins Stewart Europe Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as broker to MCG and is acting for no-one else in connection with the Capital Raising and will not be responsible to anyone other than MCG for providing the protections afforded to clients of Collins Stewart Europe Limited nor for providing advice in connection with the Capital Raising or any other matter referred to in this announcement. Collins Stewart Europe Limited is not underwriting the Capital Raising.
Oriel Securities Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as broker to MCG and is acting for no-one else in connection with the Capital Raising and will not be responsible to anyone other than MCG for providing the protections afforded to clients of Oriel Securities Limited nor for providing advice in connection with the Capital Raising or any other matter referred to in this announcement. Oriel Securities Limited is not underwriting the Capital Raising.
This announcement is an advertisement and not a prospectus and investors should not subscribe for or purchase any Ordinary Shares or Warrants referred to in this announcement in connection with the Capital Raising except on the basis of information to be contained in the Prospectus which is expected to be published in early June 2010 by MCG in connection with the proposed Capital Raising. Copies of the prospectus will, following publication, be available from the Company's registered office.
No representation or warranty express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by either Rothschild, Collins Stewart Europe Limited or Oriel Securities Limited or by any of their respective affiliates or agents as to or in relation to, the accuracy or completeness of this announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefor is expressly disclaimed.
IMPORTANT NOTICE:
The distribution of this announcement in certain jurisdictions may be restricted by law and such distribution could result in violation of the laws of such jurisdictions. In particular, this announcement is not for release, publication or distribution, directly or indirectly, in or into the United States, Canada, Japan, Australia, New Zealand or the Republic of South Africa.
This announcement shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, the securities referred to herein in any jurisdiction in which such offer, solicitation or sale would require preparation of further prospectuses or other offer documentation, or be unlawful prior to registration, exemption from registration or qualification under the securities laws of any such jurisdiction.
This announcement does not constitute or form a part of any offer or solicitation to purchase or subscribe for securities in the United States. The securities mentioned herein have not been, and will not be, registered under the United States Securities Act of 1933 (the "US Securities Act"). The securities mentioned herein may not be offered or sold in the United States except pursuant to an applicable exemption from or in a transaction not subject to the registration requirements of the Securities Act. There will be no public offer of securities in the United States.
The information in this announcement may not be forwarded or distributed to any other person and may not be reproduced in any manner whatsoever. Any forwarding, distribution, reproduction, or disclosure of this information in whole or in part is unauthorised. Failure to comply with this directive may result in a violation of the US Securities Act or the applicable laws of other jurisdictions.
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS:
Certain statements made in this announcement constitute ''forward-looking statements'' within the meaning of the US Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms ''believes'', ''estimates'', ''plans'', ''anticipates'', ''targets'', ''aims'', ''continues'', ''expects'', ''intends'', ''hopes'', ''may'', ''will'', ''would'', ''could'' or ''should'' or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include matters that are not facts. They appear in a number of places throughout this announcement and include statements regarding the Group's intentions, beliefs or current expectations concerning, amongst other things, the Group's results of operations, financial condition, liquidity, financial covenants, prospects, growth, strategies and the industries in which the Group operates. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. A number of factors could cause actual results and developments to differ materially from those expressed or implied by the forward-looking statements including, without limitation: the Company's ability successfully to combine the business of the Group and to realise expected synergies from that combination; conditions in the markets; the market position of the Company or its subsidiaries; earnings, financial position, cash flows, liquidity, financial covenants, return on capital and operating margins of the Company; anticipated investments and capital expenditures of the Company; changing business or other market conditions; and general economic conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described herein. Forward-looking statements contained in this announcement based on past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Save as required by law or by the Listing Rules, the Prospectus Rules or the Disclosure and Transparency Rules, MCG does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on forward-looking statements, which are applicable only as at the date of this announcement.
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, JAPAN, CANADA, AUSTRALIA, NEW ZEALAND OR THE REPUBLIC OF SOUTH AFRICA.
PROPOSED FIRM PLACING AND PLACING AND OPEN OFFER
1. Introduction
The Board today announces that the Company has conditionally raised gross proceeds of approximately £25.0 million (approximately £23.6 million net of expenses) in a Firm Placing, Placing and Open Offer.
The Company has conditionally raised approximately £17.0 million,before expenses and before exercise of Warrants, in a Firm Placing with BlueGem (through its wholly-owned subsidiary BlueGem Beta) of 77,272,727 New Ordinary Shares at a price of 22 pence per New Ordinary Share. In addition, BlueGem will receive 36,086,363 Warrants in the Firm Placing, each of which will entitle BlueGem to subscribe at any time up to and including 31 December 2011 for one new Ordinary Share at an exercise price of 22 pence per new Ordinary Share.
In conjunction with the Firm Placing, the Company will also undertake a Placing and Open Offer to raise additional proceeds of approximately £8.0 million before expenses and before exercise of Warrants. The Placing and Open Offer will result in the issue of 36,453,005 New Ordinary Shares at a price of 22 pence per New Ordinary Share. Each New Ordinary Share will be issued together with 0.467 Warrants (representing 17,023,553 Warrants in aggregate).
The issue price of 22 pence per New Ordinary Share represents a:
§ discount of 13.7 per cent. to the Closing Price of the Ordinary Shares on 13 May 2010 (being the last Business Day prior to this announcement); and
§ premium of 4.7 per cent. to the average Closing Price for the period of 90 Business Days up to and including 13 May 2010.
MCG's largest shareholder, Gartmore, is fully supportive of the Capital Raising and has agreed together with certain of the Directors to subscribe for all of the New Ordinary Shares and Warrants which are the subject of the Placing and Open Offer. The commitment of Gartmore is subject to claw back (i) in respect of valid applications for Open Offer Shares by Qualifying Shareholders under the Open Offer and Excess Application Facility and (ii) so as to enable the issue by the Company of New Ordinary Shares and related Warrants to certain Directors and the other MCG Placees, who consist of certain Group employees who do not currently hold any interest in Ordinary Shares.
BlueGem will become a new cornerstone investor in MCG and is committed to the future growth and development of MCG. The Board believes that the support of the Capital Raising by Gartmore and BlueGem represents an important endorsement of MCG's long-term strategy and vision, and underscores the confidence of these institutions in MCG and its management team.
The Capital Raising will significantly strengthen MCG's balance sheet and will provide increased headroom over the existing financial covenant levels under the current banking facilities with the Group's lenders. This will enable the executive management of MCG to focus its efforts on the Group's new strategic direction of organically growing the business, capitalising on new opportunities provided by economic recovery in core markets and delivering operational improvements.
The Capital Raising is conditional on, among other things, the approval of Shareholders in the General Meeting. Shareholders representing approximately 28.9 per cent. of the total current share capital of MCG, including Gartmore, all current Directors owning shares and certain other senior Group employees, have signed firm irrevocable undertakings to vote their shares in favour of the Resolutions.
The participation of a number of the Directors as part of the MCG Placees, demonstrates the confidence that the Directors have in the future of the Company, as well as allowing Nick Stagg and Julian Waldron, who are current Directors of MCG but do not currently hold any Ordinary Shares, to acquire an interest in the Ordinary Shares and therefore help align their interests with those of Shareholders generally. The other MCG Placees will consist of senior employees within the Group's businesses that also do not currently hold any interest in Ordinary Shares, and their participation in the Placing will also help to align their interests with those of Shareholders. The relevant Directors have agreed and the other MCG Placees will agree, subject to certain exceptions, not to dispose of any interest in any of the New Ordinary Shares subscribed for by them pursuant to their respective Placing Letters until (in the case of the Directors) the earlier of them ceasing to be a member of the Board and the date falling eighteen months from Admission and (in the case of the other MCG Placees) the date falling twelve months from Admission.
2. Background to, and reasons for, the Capital Raising
In 2009, the core markets in which the Group operates experienced a significant decline in the demand for the management consulting and professional services provided by the Group, as existing and target clients tried to reduce expenditure. As economic conditions improve, the businesses of the Group have the capacity to generate strong positive cash flows that will reduce the net indebtedness of the Group over time. The Board has reviewed its strategy alongside the appointment of a new CEO and has decided that strengthening the balance sheet, a reduction in gearing and a focus on organic growth with financial discipline will drive shareholder value.
Against this background, the Directors believe that it is necessary for the Company to raise approximately £23.6 million of new equity capital, net of expenses, via the Capital Raising, in order to:
n Create a more suitable capital structure that provides greater resilience and financial flexibility to enable future growth;
n Create a stronger position from which to pursue the Company's strategic goals; and
n Significantly reduce the risk that a deterioration in the Group's trading performance and financial condition could give rise to a breach of its financial covenants under its existing banking facilities.
The proceeds of the Capital Raising will significantly strengthen MCG's balance sheet and substantially amend the capital structure of the Group. The Directors believe this will also change a perception that the Group has a burden of debt that is too high for the Group to sustain. The terms of the existing banking facilities with the Group's lenders will not be affected by the reduction in net indebtedness and the Group will continue to benefit from the terms negotiated when the banking facilities were agreed in 2007, up to maturity in September 2012.
The Directors believe that the reduction in net indebtedness that will result from the proceeds of the Capital Raising will enable the Group to support organic growth initiatives in its existing businesses, to take advantage of positive cyclical trends in the markets in which the Group operates and to create a stronger position from which to pursue the Group's strategic objectives (as set out in section 3 below).
The Company believes that if the Resolutions required to approve the Capital Raising are not passed, there is a risk that, in the absence of the successful implementation of alternative mitigating actions, the financial covenant in relation to leverage set out in the banking facilities may not be met at its 30 June 2010 testing date. In such a scenario, the Company's lenders could demand repayment of all sums outstanding and, in any event, the Company would face a renegotiation of its financing arrangements, which would result in the need to agree to financing arrangements at a materially higher cost than the current banking facilities, both in terms of refinancing fees and ongoing margin costs, and/or the Company may be required to seek alternative methods of financing, all of which would significantly impact shareholder value.
Accordingly, it is very important that Shareholders vote in favour of the Resolutions in order that the Capital Raising can proceed.
3. Strategic and operational focus
As reported in the Group's Interim Management Statement on 20 April 2010, the Directors believe that, as economic uncertainty is diminishing, confidence is beginning to return and this is leading to signs of improved demand for the Group's services and capabilities. In the first four and a half months of 2010, the Group's businesses have identified an increasing number of client opportunities. Although some of these opportunities have been slow to convert to projects, the underlying metrics of the Group's businesses are now much stronger than in 2009.
The Group's revised strategy is therefore to exploit the platform provided by its existing operations in order to drive revenue and margin growth in its current operating businesses. The Board believes that the geographical spread of the business and its global office infrastructure will support an increase in operational activity. The recently announced merger between Ineum and KSA is expected to enhance the Group's ability to execute this strategy successfully and will result in a larger and more integrated global consulting practice. Preparations for this merger are at an advanced stage.
The Board believes that this is a critical point in the economic cycle and is determined to provide the necessary resources and flexibility to its operating businesses to enable them to capitalise on increasing client confidence and demand for services.
The Board is focused on organic growth and has no current intention to make further significant acquisitions. Any acquisition would only be considered if it is earnings enhancing, does not adversely affect MCG's financial condition and would not create a significant additional burden on management time.
As previously announced, the Board has been strengthened by the appointment of Nick Stagg as Chief Executive of the Group, effective from 1 July 2010. Nick was previously the CEO of Landsbanki Securities (UK) Holdings Plc (formerly Teather and Greenwood Plc) and before that he was the Group Managing Director of Lambert Smith Hampton Plc. In both instances, these people-led companies grew substantially and produced superior increases in shareholder value. Alan Barber will remain as Executive Chairman until 31 December 2010 and will then become Non-Executive Chairman.
Nick and the rest of the management team are committed to delivering further efficiencies in the Group's operations and infrastructure at both the divisional and head office levels. A greater focus on financial discipline and further cost reductions will drive profitability across the Group.
The Group will continue to seek to align the performance of its employees with the interests of Shareholders through appropriate incentive and retention arrangements.
The changes to the Group's capital structure and the additional flexibility provided by reducing financial indebtedness will also allow the Board to commence a share buyback programme at the appropriate time, subject to market conditions, aimed at (i) improving liquidity in shares and (ii) providing a source of shares for use in incentive schemes.
As BlueGem intends to become an active, long-term cornerstone investor in MCG, this new relationship will support the Board's new strategic direction and help focus its efforts on its plans for the organic growth of the Group's businesses. The Board will be further strengthened with the proposed addition of two non-executive directors from BlueGem. One of these Directors will become a member of each of the Nominations Committee and the Remuneration Committee. The Board welcomes BlueGem's involvement with the Company and looks forward to its positive contribution to the future growth of MCG.
4. Irrevocable undertakings
Firm irrevocable undertakings to vote in favour of the Capital Raising at the General Meeting and to vote against any shareholder resolution in respect of any alternative transaction involving a subscription for Ordinary Shares or other equity securities in the Group have been received from all of the members of the Board over an aggregate of 9,813,467 Ordinary Shares, representing approximately 3.0 per cent. of the Company's current issued share capital.
Firm irrevocable undertakings to vote in favour of the Capital Raising at the General Meeting and to vote against any shareholder resolution in respect of any alternative transaction involving a subscription for Ordinary Shares or other equity securities in the Group have also been received from Gartmore, certain senior Group employees and others representing in aggregate approximately 25.9 per cent. of the Company's current issued share capital.
5. Use of proceeds
The net proceeds of the Capital Raising will be used to reduce the borrowings of the Company and thereby increase headroom over the existing financial covenant levels under the current banking facilities, which will remain in place unchanged.
The Board believes that the resultant reduction in financial indebtedness will provide increased headroom over the existing financial covenant levels through to the maturity of the Group's existing banking facilities in September 2012 and thereby give the Company the resilient and flexible capital structure that it needs.
6. Current trading and prospects
As reported in the Group's Interim Management Statement on 20 April 2010, the economic climate has eased from the extremely difficult trading conditions experienced in the middle of 2009.
Proudfoot has significantly more leads for new business than at any stage last year. It has booked and is currently working on some sizeable projects but is finding that others in the pipeline are taking longer than expected to come to fruition. In total, input at Ineum is good and the business continues to trade robustly. However the performance of the French market continues to be patchy, with some sectors strong and others weaker. KSA continues to trade more profitably than in 2009, leveraging its reduced cost base to good effect.
Overall, the Board believes that the outlook is improving, although there is slower conversion of new business prospects to revenues.
7. Details of the Capital Raising
Overview
MCG is proposing to raise approximately £23.6 million (net of expenses related to the Capital Raising) under the Capital Raising through the issue of 113,725,732 New Ordinary Shares at 22 pence per New Ordinary Share. 36,453,005 New Ordinary Shares will be issued through the Placing and Open Offer and 77,272,727 New Ordinary Shares will be issued through the Firm Placing. In addition, under the terms of the Capital Raising, the Company is proposing to issue 53,109,916 Warrants at no additional cost, which will each be convertible into one new Ordinary Share at a price of 22 pence and which will raise a further approximately £11.7 million before expenses if exercised in full.
Open Offer
Qualifying Shareholders, on and subject to the terms and conditions of the Open Offer, are being given the opportunity to apply for the Open Offer Shares at the Issue Price pro rata to their holdings of Existing Ordinary Shares on the Record Date on the basis of 11 Open Offer Shares for every 100 Existing Ordinary Shares together with Warrants, at no additional cost, in a ratio of 0.467 Warrants for every one New Ordinary Share subscribed.
Fractions of Open Offer Shares and Warrants will not be allotted to Qualifying Shareholders in the Open Offer and fractional entitlements under the Open Offer will be rounded down to the nearest whole number of Open Offer Shares or Warrants.
Placing
The Company has entered into a Placing Letter with Gartmore dated 13 May 2010, pursuant to which Gartmore has conditionally agreed to subscribe for all of the New Ordinary Shares and Warrants (other than those placed with certain of the Directors as detailed below) which are the subject of the Placing and Open Offer at the Issue Price, subject to (i) clawback resulting from take up of the Open Offer by other Shareholders according to their pro rata entitlement and their application for Excess Shares pursuant to the Excess Application Facility and (ii) in circumstances where there is a sufficiently high level of valid applications by Qualifying Shareholders for Open Offer Shares, so as to enable the Company to issue New Ordinary Shares and Warrants to the MCG Placees including certain of the Directors who have entered into Placing Letters as set out below.
Certain of the Directors of the Company have entered into Placing Letters with the Company dated 13 May 2010, pursuant to which they have, in aggregate, agreed to subscribe for 1,365,826 New Ordinary Shares and 637,839 Warrants (which commitments include, in the case of those of the relevant Directors who are current Shareholders, their entitlements to subscribe for New Ordinary Shares pursuant to the Open Offer), representing a total commitment to subscribe for approximately £300,000 worth of Open Offer Shares.
The Company proposes to enter into further Placing Letters with each of the MCG Placees (other than the Directors described above) to subscribe for New Ordinary Shares and Warrants at the Issue Price.
The commitment by Gartmore to acquire New Ordinary Shares and Warrants is conditional upon the Subscription Agreement becoming unconditional in all respects on or before 30 June 2010 (including in relation to Admission) and not being terminated. By agreeing to acquire New Ordinary Shares and Warrants, Gartmore is deemed to have applied to take up its entire Open Offer entitlement.
The commitments of the relevant Directors under their respective Placing Letters are conditional only on Admission. The relevant Directors have agreed and the other MCG Placees will agree, subject to certain exceptions, not to dispose of any interest in any of the New Ordinary Shares subscribed for by them pursuant to their respective Placing Letters until (in the case of the Directors) the earlier of them ceasing to be a member of the Board and the date falling eighteen months from Admission and (in the case of the other MCG Placees) the date falling twelve months from Admission.
The Company will pay Gartmore a commission equal to 1.25 per cent. of the total maximum amount payable by Gartmore to the Company for the New Ordinary Shares it has agreed to subscribe for pursuant to its Placing Letter. No commission is payable to any of the relevant Directors, or will be payable to any of the other MCG Placees, under their respective Placing Letters.
Firm Placing
MCG and BlueGem have entered into a subscription agreement under which BlueGem has agreed to subscribe for 77,272,727 Firm Placed Shares and 36,086,363 Warrants at a price of 22 pence per New Ordinary Share, subject to the satisfaction of the following conditions:
(a) each of the warranties given by the Company being true and accurate in all material respects and not misleading in any material respect;
(b) compliance in all material respects by the Company with all of its obligations and satisfaction by it of all conditions to be satisfied by it under the Subscription Agreement prior to Admission of the New Ordinary Shares;
(c) the Company having complied with certain conduct of business obligations;
(d) approval of the Prospectus and circular to be sent to the Shareholders from the Financial Services Authority;
(e) the approval of the Capital Raising by the Shareholders; and
(f) admission of the Firm Placed Shares to the Official List and to trading on the London Stock Exchange.
The Company has given warranties, in a form customary in relation to a transaction of this nature, to BlueGem.
The Subscription Agreement terminates in the event that the Company does not comply with certain obligations prior to completion of the Capital Raising. The Subscription Agreement contains a longstop date that requires the Capital Raising to have been completed by 30 June 2010.
The Company and BlueGem have also agreed that BlueGem shall have the right to nominate two directors to the Board for so long as BlueGem holds at least 10 per cent. of the issued shares in MCG and one director to the Board for so long as BlueGem holds at least 5 per cent. (but less than 10 per cent.) of the issued shares in MCG (or the number of executive directors on the Board reduces to five or fewer). BlueGem will also be entitled to appoint one of its appointees to each of MCG's Nomination and Remuneration Committees for so long as BlueGem holds at least 10 per cent. of the issued shares in MCG.
BlueGem has agreed that it will not, except in certain permitted circumstances, dispose of any interest in the Firm Placed Shares or Warrants before such date falling 12 months from the date of completion of the Capital Raising and will not, save as contemplated by the Capital Raising, prior to completion of the Capital Raising purchase, sell or otherwise deal in any shares or other securities of the Company or enter into or agree to enter into any derivative transaction of any type whatsoever in respect of, or referenced to, any securities of the Company.
On completion of the Capital Raising, Marco Capello and Emilio Di Spiezio Sardo (whose details are set out below) will join the Board.
Marco Capello, aged 49, is the founder and managing partner of BlueGem Capital Partners LLP. From 2002 to 2006 he was a managing director of Merrill Lynch Global Private Equity. Previously he worked for over 18 years at First Boston, Wasserstein Perella and, since 1994, at Merrill Lynch. During his career in investment banking he worked primarily in mergers and acquisitions both in New York and London. Mr Capello holds an MBA from Columbia University in New York. He graduated in Civil Engineering from the Politecnico di Torino. He is a board member of Olicar SpA, The Private Clinic Ltd., Fintyre SpA and Neomobile SpA.
Emilio Di Spiezio Sardo, aged 33, is a partner of BlueGem Capital Partners LLP. Before joining BlueGem as a partner, in 2007, he worked in London as a hedge fund manager at York Capital Management, a global multi-strategy hedge fund with approximately $10 billion under management. Before that he worked for six years in investment banking at Merrill Lynch in London and Rome. Mr Di Spiezio Sardo graduated summa cum laude in Economics and Finance from Bocconi University in Milan. He is a board member of Olicar SpA, The Private Clinic Ltd., Fintyre SpA and Neomobile SpA.
Summary of the terms of the Warrants
A Warrant holder may exercise its rights to subscribe for new Ordinary Shares at any time at a price of 22 pence per new Ordinary Share up to and including 31 December 2011, failing which the rights attaching to the Warrants automatically lapse and cease to be exercisable. New Ordinary Shares issued following the exercise of the rights under the Warrants will be credited as fully paid and have the same rights and obligations as the Existing Ordinary Shares, and the Company will use all reasonable efforts to ensure the admission of any new Ordinary Shares issued following exercise of the Warrants to the Official List and to trading on the London Stock Exchange's market for listed securities.
Warrant holders will be entitled to exercise rights under the Warrants in whole or in part, subject to exercising such rights in relation to at least the lower of their holding of Warrants and 50,000 Warrants.
The Warrants will constitute a separate class of security from (and will not be attached to) the New Ordinary Shares. The Company will not apply for Admission of the Warrants nor for their listing on any other stock exchange or trading platform. The Company will also not make any application for the Warrants to be enabled for settlement through CREST or otherwise in dematerialised form. The Warrants may only be transferred: (i) to the Company should it agree with the holder of the Warrants to repurchase them; or (ii) with the prior written consent of the Board, not to be unreasonably withheld or delayed. The Company is permitted to withhold consent to such a transfer notwithstanding inter alia that the Warrant holder in question has transferred or intends to transfer all or any of the Ordinary Shares in which it has any interest.
Exclusivity and break fee agreement
The Company has also entered into an agreement with BlueGem Capital Partners LLP pursuant to which the Company has agreed to pay to BlueGem Capital Partners LLP a fee, of the lower of £700,000 (plus VAT) and 1 per cent. of the total market capitalisation of the Company in certain circumstances, including where the Company breaches non-solicitation obligations relating to discussions with any third party that may be interested in subscribing for additional shares or other equity or debt in the Company, providing material financing to the Company or any of its subsidiaries or making an offer for all or part of the business, assets or undertaking of the Company and/or its subsidiaries, or any proposal involving a scheme of arrangement, reorganisation or recapitalisation of the Company or any of its subsidiaries.
Notes:
About the BlueGem Group
BlueGem Beta Limited is a newly formed company wholly owned by BlueGem LP, a private equity fund formed at the end of 2006. BlueGem has capital commitments of over €200 million from investors, of which approximately 40 per cent. has been invested so far. By value of commitments, these investors are 50 per cent. financial institutions and 50 per cent. families and high net worth individuals. BlueGem is managed by BlueGem Capital Partners, whose investment team, based in London, is led by Marco Capello, formerly a Managing Director of Merrill Lynch Global Private Equity. Marco Capello has over 18 years of investment banking experience in London and New York at First Boston, Wasserstein Perella and Merrill Lynch. The second partner (and member of the investment team) is Emilio Di Spiezio Sardo, who previously worked in London in the hedge fund industry at York Capital Management and in investment banking at Merrill Lynch. The investment team also includes Marco Anatriello, who previously worked at Merrill Lynch investment banking in Milan and London and Vishesh Srivastava, who previously worked in investment banking at Greenhill & Co. International in London. BlueGem makes private equity investments in mid-market companies mainly in the UK and Italy. BlueGem's investment philosophy is built around creating long term value in quality companies. Previous investments include The Private Clinic Ltd (active in the non-invasive and minimally invasive cosmetic treatments sector in the U.K.), Olicar SpA (active in the energy facility management sector in Italy), Fintyre SpA (leader in the wholesale tyres distribution sector in Italy) and Neomobile SpA (active in the mobile entertainment industry in Italy, Spain, Brazil, Turkey, Mexico, France and India).
DEFINITIONS
| "Admission" | the admission of the New Ordinary Shares to the Official List of the UKLA and to trading on the main market for listed securities of the London Stock Exchange, becoming effective; | ||
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| "BlueGem" | BlueGem LP, a fund managed by BlueGem Capital Partners LLP; | ||
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| "BlueGem Beta" | BlueGem Beta Limited, a wholly owned subsidiary of BlueGem LP; | ||
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| "Board" | the board of directors of MCG; | ||
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| "Business Day" | any day (excluding Saturdays and Sundays) on which banks are open in London for normal banking business; | ||
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| "Capital Raising" | the Firm Placing, Placing and Open Offer; | ||
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| "Closing Price" | the closing middle market quotation of an Ordinary Share, as derived from the Daily Official List; | ||
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| "Collins Stewart" | Collins Stewart Europe Limited; | ||
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| "CREST" | the relevant systems (as defined in the CREST Regulations) for paperless settlement of share transfers and the holding of shares in uncertificated form in respect of which Euroclear is the operator (as uncertificated form in respect of which Euroclear is the operator (as defined in the CREST Regulations); | ||
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| "CREST Regulations | the Uncertificated Securities Regulations 2001 (S.I. 2001/3755), as amended from time to time; | ||
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| "Daily Official List" | the daily record setting out the prices of all trades in shares and other securities conducted on the London Stock Exchange; | ||
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| "Directors" | the directors of the Company at the date of this document and "Director" means any one of them; | ||
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| "Euroclear" | Euroclear UK & Ireland Limited, the operator of CREST; | ||
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| "Excess Application Facility" | the arrangement pursuant to which Qualifying Shareholders may apply for Open Offer Shares in excess of their Open Offer entitlement; | ||
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| "Excess Shares" | New Ordinary Shares, together with the relevant number of related Warrants, for which Qualifying Shareholders may apply under the Excess Application Facility; | ||
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| "Existing Ordinary Shares" | the Ordinary Shares in issue as at the Record Date; | ||
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| "Firm Placed Shares" | the aggregate 77,272,727 New Ordinary Shares which the Company is proposing to issue in the Firm Placing; | ||
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| "Firm Placing" | the subscription by BlueGem Beta pursuant to the Subscription Agreement for the Firm Placed Shares together with the issue to BlueGem Beta of 0.467 Warrants, at no additional cost, for every Firm Placed Share issued pursuant to the Subscription Agreement; | ||
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| "FSMA" | the Financial Services and Markets Act 2000, as amended; | ||
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| "Gartmore" | Gartmore Investment Limited; | ||
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| "General Meeting" | the general meeting of the Company at which the Resolutions will be proposed, notice of which will be set out in the Prospectus; | ||
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| "Group" | the Company and its subsidiary undertakings and, where the context permits, each of them; | ||
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| "Ineum" | Ineum Consulting; | ||
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| "Issue Price" | 22 pence per New Ordinary Share; | ||
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| "KSA" | Kurt Salmon Associates; | ||
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| "London Stock Exchange" | London Stock Exchange PLC; | ||
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| "MCG" or the "Company" | Management Consulting Group PLC; | ||
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| "MCG Placees" | certain of the Directors of the Company and certain other employees of the Group participating in the Placing; | ||
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| "New Ordinary Shares" | the new Ordinary Shares to be issued by the Company in accordance with the Capital Raising, excluding additional Ordinary Shares issued pursuant to the exercise any of the Warrants; | ||
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| "Official List" | the list maintained by the UK Listing Authority pursuant to Part VI of FSMA; | ||
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| "Open Offer" | the offer to Qualifying Shareholders to subscribe for New Ordinary Shares and receive Warrants, at no additional cost, in a ratio of 0.467 Warrants for every one New Ordinary Share subscribed for in the Open Offer, including pursuant to the Excess Application Facility, at the Issue Price, on the terms and subject to the conditions to be set out in the Prospectus | ||
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| "Open Offer Entitlement" | an offer to a Qualifying Shareholder pursuant to the Open Offer to subscribe for 11 New Ordinary Shares for every 100 Existing Ordinary Shares held by such Qualifying Shareholder on the Record Date and to receive Warrants, at no additional cost, in a ratio of 0.467 Warrants for every one New Ordinary Share subscribed for in the Open Offer, on and subject to the terms of the Open Offer, but excluding the offer under the Excess Application Facility; | ||
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| "Open Offer Shares" | the 36,453,005 Ordinary Shares to be offered to Qualifying Shareholders under the Open Offer (which for the avoidance of doubt includes the Excess Shares); | ||
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| "Ordinary Shares" or "shares" | the Ordinary Shares of one pence each in the capital of the Company and "Ordinary Share" or "share" means one of them; | ||
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| "Placing" | the placing of the Open Offer Shares and Warrants in accordance with the Placing Letters; | ||
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| "Placing Letter" or "Placing Letters" | the placing letter dated 13 May 2010 between the Company and Gartmore, and/or the placing letters dated 13 May 2010 between the Company and those of the Directors who are MCG Placees and/or the placing letters to be entered into between the Company and each of the other MCG Placees (as appropriate); | ||
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| "Prospectus" | the prospectus to be issued by the Company in relation to the Capital Raising; | ||
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| "Proudfoot" | Alexander Proudfoot; | ||
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| "Qualifying Shareholders" | holders of Ordinary Shares on the register of members of the Company at the close of business on the Record Date, with the exclusion (subject to certain exceptions) of Shareholders in the United States or who have registered addresses in, or who are resident or ordinarily resident in, or citizens of, Canada, Japan, Australia, New Zealand or the Republic of South Africa; | ||
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| "Record Date" | the record date for the Capital Raising to be announced by the Company at or prior to the posting of the Prospectus; | ||
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| "Resolutions" | the resolutions relating to the Capital Raising to be proposed at the General Meeting; | ||
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| "Rothschild" | N M Rothschild & Sons Limited; | ||
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| "Shareholders" | the holders of any shares issued in the share capital of the Company from time to time and "Shareholder" means any one of them; | ||
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| "Subscription Agreement" | the agreement between MCG and BlueGem dated 13 May 2010 pursuant to which BlueGem has agreed to subscribe for the Firm Placed Shares and related Warrants on the terms and subject to the conditions thereof; | ||
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| "UK Listing Authority" or "UKLA" | the Financial Services Authority in its capacity as the competent authority for the purposes of Part VI of FSMA and in exercise of its functions in respect of the admission to the Official List otherwise than in accordance with Part VI of FSMA; | ||
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| "United Kingdom" or "UK" | the United Kingdom of Great Britain and Northern Ireland; | ||
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| "United States" or "US" | the United States of America, its territories and possessions, any state of the United States of America and the District of Columbia; | ||
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| "Warrants" | the warrants to be issued together with the New Ordinary Shares, at no additional cost, in a ratio of 0.467 Warrants for every 1 New Ordinary Share. | ||
All references to "pounds", "pounds sterling", "sterling", "£", "pence" and "p" are to the lawful currency of the United Kingdom.
All references to "Euros", "€" and "c" are to the lawful currency of the member states of the European Union that adopt a single currency in accordance with the Treaty establishing the European Community as amended by the Treaty on European Union.
All references to "US dollars" and "$" are to the lawful currency of the United States.
All references in this document to times are, unless the context otherwise appears, references to the time in London, United Kingdom.