MPAY.L Regulatory News (MPAY)

6 November 2012

Autoclenz Holdings plc ("Autoclenz" or "the Company")

Proposals in connection with the sale of the Autoclenz businesses (Autoclenz Limited and its subsidiary), Investing Policy, Change of Company Name and Amendment of the Articles and Notice of General Meeting

Autoclenz Holdings Plc is pleased to announce, that it has entered into an agreement for the sale of the Company's wholly-owned subsidiary, Autoclenz Limited and Autoclenz Services Limited (a subsidiary of Autoclenz Limited), to the Purchaser (a company controlled by Management and External Equity Investors), for a total consideration of £4 million (equivalent to approximately 38.5p per share)

Under the AIM Rules, the Disposal represents a fundamental change to the business of the Company and is therefore subject to approval of the Shareholders. The Disposal is also a related party transaction under the AIM Rules as Grahame Rummery and Trevor Clingo are Directors of the Company.

The Disposal will result in the Company disposing all of its tangible operating assets and becoming an Investing Company. As a consequence, Rule 15 of the AIM Rules further requires the Company to obtain the approval of the Shareholders for its proposed future Investing Policy.

A circular, containing further details of the Disposal is expected to be posted to Shareholders today and will be available on the Company's website www.autoclenz.co.uk

James Leek, Non-executive Chairman, Autoclenz, commented:

"The disposal of the trading businesses at a value in excess of the current share price follows on our previously announced review of the challenges of maintaining an AIM listing for these particular mature and low growth operating activities. The Independent Directors on the Board have consulted with Zeus Capital, the Company's Nominated Adviser, and believe that the Disposal and the Investing Policy are in the best interests of the Company and Shareholders as a whole, and we are pleased that 46.85% of our shareholders have indicated their support for the disposal and the new investing policy. We are also pleased that the business is being acquired by the existing management who we are confident will continue to deliver the highest standard of service to all our customers which has been the hallmark of Autoclenz for many years. Together with our advisors we shall now seek to acquire within this well funded clean AIM listed shell company a high growth business with a view to further increasing shareholder value."

Enquiries:

Autoclenz Holdings Plc Tel: 07966 528295

James Leek (Chairman)

Michael Stone

Zeus Capital Limited (Nominated Advisor) Tel: 0161 831 1512

Nick Cowles

Andrew Jones

OVERVIEW

The Company announces that it has entered into an agreement for the sale of its wholly-owned subsidiary, Autoclenz Limited, including its wholly-owned subsidiary company Autoclenz Services Limited, to the Purchaser (a company controlled by Management and External Equity Investors), for a total consideration of £4 million. The Consideration will be settled by the payment to the Company of £3 million in cash at Completion and the issue of £1 million of Loan Notes, which are interest bearing and repayable in instalments over a 3 year period.

Further details on the terms of the Disposal are contained in Part II of the Circular. Under the AIM Rules, the Disposal represents a fundamental change to the business of the Company and is therefore subject to approval of the Shareholders. The Disposal is also a related party transaction under the AIM Rules as Grahame Rummery and Trevor Clingo are Directors of the Company.

The Disposal will result in the Company disposing all of its tangible operating assets and becoming an Investing Company. As a consequence, Rule 15 of the AIM Rules further requires the Company to obtain the approval of the Shareholders for its proposed Investing Policy going forward.

Shareholders representing 4,872,198 Ordinary Shares, approximately 46.85 per cent. of the issued share capital of the Company, have provided irrevocable undertakings to vote in favour of the Resolutions. Further details of the irrevocable undertakings are contained in this announcement and in paragraph 7 of Part I of the Circular.

The Independent Directors, having consulted with Zeus Capital, the Company's Nominated Adviser, believe that the Disposal and the Investing Policy are in the best interests of the Company and Shareholders as a whole.

BACKGROUND TO AND REASONS FOR THE DISPOSAL

Background to the Disposal

Following its acquisition of the Autoclenz Business from Yule Catto & Co plc, the Company listed on AIM in December 2005. The Autoclenz Business is one of the leading outsourced car valeting and vehicle preparation services providers in the UK. It is also, under the name REACT, a specialist provider of rapid response deep cleaning and emergency decontamination services.

The Company admitted to AIM with a share price of 125 pence and has seen its share price decline to as low as 11.5 pence in 2008 and as at 5 November 2012 (being the latest practicable date prior to publication of this announcement) the Company had a share price of 31.75 pence and a market capitalisation of £3.3 million.

While the Board are confident that the fundamentals of the Autoclenz Business are sound, over the past 18 months the Board has been mindful of the challenging market for car valeting services which has been impacted by the recession and the relentless competition which have continued to apply pressure to margins. The fragmented nature of the valeting services market and the unpredictability of customers in changing service providers has consistently led the Board to conclude that acquisitions of other valeting providers would be high risk and therefore not advisable. These difficult market conditions, combined with restricted conditions in the banking and debt market and a low share price have hampered the Company's ability to take advantage of acquisition opportunities.

Although there has been some growth in the Autoclenz Business's valeting revenues it has been at the expense of margin. It has also been difficult to maintain the profitability of the REACT business in the face of declining public sector budgets. The Company's share price performance has been impaired, in the Board's view, by a number of factors, including its lack of growth, relatively small size and resultant illiquidity, and changes in the nature of the AIM market which generally favours higher growth companies.

Consequently, the Board has had cause to weigh both the costs and benefits of maintaining an independent London quotation on AIM for the current business, with the uncertain future growth in equity value for its investors. As set out in the Annual Report for the year ended 31 December 2011, the Chairman's statement included the following:

"Being listed on the AIM market with its detailed reporting requirements does of course give our private company competitors a lot of useful knowledge about our performance and strategies, and also entails a degree of extra overhead and management resource. We continue to monitor this, particularly in the light of the relatively low market valuation accorded to a number of profitable smaller AIM companies like us."

The Board has continued to consider how best to create shareholder value against the environment in which the Autoclenz Business operates. Following an approach from Management, expressing an interest in acquiring the Autoclenz Business, the Board considered the opportunities and options available to them, the future strategy of the Autoclenz Business and the ability to enhance shareholder value in the short to medium term.

The Board has reviewed a number of options in the past 18 months in connection with the growth of the Autoclenz Business, through organic and acquisition opportunities, and has considered a number of factors in deciding to recommend the Disposal, including valuation, deliverability and timing as well as the potential impact on the existing business and the opportunities available as a cash shell on AIM.

Under the terms of the Disposal Agreement, the Purchaser shall pay £3 million in cash at Completion and will issue Loan Notes of £1 million, bearing a 7 per cent. interest rate, and repayable over a 3 year period.

The funds will be applied in accordance with the proposed Investing Policy with the intention to create increased value for Shareholders. Further details of the Disposal are contained in Part II of the Circular.

The Independent Directors have taken advice and believe that there are interesting growth companies in the private arena that would find a well funded cash shell very attractive. The Independent Directors also believe that, in conjunction with the Company's major shareholders and current advisory team, who have extensive experience in supporting and advising growth companies on AIM, they will have access to a range of opportunities that will present suitable candidates for a reverse takeover.

The Independent Directors believe that Shareholders would have a better opportunity to achieve capital growth by completing a reverse takeover, against the alternative of continuing with the existing Autoclenz Business.

Current trading

On 27 September 2012, the Company announced its unaudited interim results for the six months ended 30 June 2012. These can be seen in the investor relations section of the Company's website www.autoclenz.co.uk. Revenue for the six months ended 30 June 2012 was £13.8 million (2011: £13.0 million) resulting in underlying operating profit before interest and tax, and before amortisation of intangibles of £0.62 million (2011: £0.61 million). Net debt at the half year was £0.51 million.

As stated in the interim statement, despite the flat economy and relentless competitor pressure, the Company remains focused on maintaining the current financial performance levels and therefore expects the full year underlying operating profit to be similar to last year.

Reasons for Disposal

In considering whether to recommend the Disposal to Shareholders, the Independent Directors have also considered the following factors:

·; the total consideration offered for the Disposal Subsidiaries is equivalent to 38.5 pence per share compared to the middle market price per share of 31.75 pence as at 5 November 2012 (being the latest practicable date prior to the posting of the Circular) representing a premium of 21 per cent.;

·; the equivalent consideration offered per share also represents a premium of 40 per cent. to the average closing share price of 27.52 pence for the last 12 months and a premium of 32 per cent. to the weighted average share price of 29.1 pence for the last 6 months.

·; the mature market in which the Disposal Subsidiaries operate, together with the limited barriers to entry and high number of both large and smaller independent competitors;

·; the low growth predicted in future revenues and the continued pressure on margins is likely to continue, thereby restricting future growth in profitability in the short to medium term;

·; the reliance on major contracts and the significant impact on the Disposal Subsidiaries of the loss or material change in terms of any of these contracts;

·; the risk of diversification with limited funding resources. The Company has investigated several acquisition opportunities in the last 18 months without success and has also established React Property Services which was subsequently closed due to unacceptable losses;

·; the consideration payable by the Purchaser should allow the Company to have the resources to execute the proposed Investing Policy; and

·; the support received from over 46.85 per cent. of the Company's Shareholders for the Disposal (in

the form of irrevocable undertakings to vote in favour of the Disposal).

In forming their view on the Disposal, the Independent Directors have also considered the deliverability and timing of the transaction as well as the future prospects of the Disposal Subsidiaries.

As such, the Independent Directors consider the Disposal to be in the best interests of Shareholders as a whole and to represent an opportunity for the Company to realise value today whilst retaining the ability to make an investment (by way of a reverse takeover) which could deliver higher levels of future growth and returns for Shareholders.

SUMMARY OF THE PROPOSED DISPOSAL AGREEMENT

Under the terms of the Disposal Agreement, the Purchaser (a company controlled by Management and External Equity Investors) will pay £3 million in cash at Completion and issue interest bearing Loan Notes of £1 million (to be repaid over a 3 year period).

The Loan Notes will be secured and carry a second charge over the assets of the Purchaser. The Loan Notes will be guaranteed by the Disposal Subsidiaries and secured by second charges over the assets of the Disposal Subsidiaries and will attract a fixed coupon of 7 per cent. over the 3 year period. The first capital repayment of £333,333 together with accrued compound interest on a quarterly basis will be paid to the Company on the first anniversary of the date of Completion and the remaining balance will be paid, together with accrued interest, in quarterly instalments during the following 2 years.

The Purchaser is a company controlled by the Exiting Directors and the External Equity Investors. The Purchaser has raised sufficient finance through equity and bank debt to fund the acquisition of the Disposal Subsidiaries.

Further details of the Disposal are contained in Part II of the Circular.

RELATED PARTY TRANSACTION

The Exiting Directors, together with the External Equity Investors will be investing in the Purchaser, which will acquire and run the Disposal Subsidiaries following Completion and the Exiting Directors will have a significant interest in the equity share capital of the Purchaser. As a result, the Disposal is treated as a related party transaction under the AIM Rules.

The Company has agreed with Management that they will each receive a one off bonus of 40 per cent. of their respective annual salaries to be paid by Autoclenz Limited, in the event that there is a disposal of the Disposal Subsidiaries. Management shall waive their rights to any other bonus contained within their current terms of employment or engagement with the Company (including, without limitation, pursuant to any executive bonus scheme or performance bonus) and the Exiting Directors shall each enter into an appropriate compromise arrangement.

In addition, Management have agreed with the Company that they shall each surrender any rights granted to them to acquire Ordinary Shares pursuant to the terms of the Company's share option plan. Management have also agreed that they will not receive any compensation for the surrender of these rights.

The Independent Directors, having consulted with Zeus Capital, the Company's Nominated Adviser, consider the terms of the Disposal to be fair and reasonable insofar as the Shareholders are concerned.

FUNDAMENTAL CHANGE OF BUSINESS

By virtue of its size, completion of the Disposal will result in a fundamental change of business for the Company. As such, the Disposal requires the prior approval of Shareholders, to be sought at the General Meeting as Resolution 1, in accordance with the AIM Rules.

Grahame Rummery and Trevor Clingo currently hold 42,660 and 8,010 Ordinary Shares in the Company respectively, representing in aggregate 0.49 per cent. of the issued share capital of the Company.

As a result of their involvement in the Purchaser, neither of the Exiting Directors have taken part in the recommendation given by the Independent Directors in relation to the Disposal.

CHANGES TO THE COMPANY AND TO THE BOARD OF DIRECTORS OF THE COMPANY FOLLOWING THE DISPOSAL

If the Disposal is approved by Shareholders, the Company will not hold any tangible operating assets going forward. The asset base of the Company will comprise cash of £3 million received at Completion and the Loan Notes of £1 million repayable over a 3 year period.

Following the proposed Disposal, the Company will no longer be involved (and will be restricted for a period of 3 years from operating) in the automotive or specialist cleaning industries and it is proposed that the Company will change its name to AimShell plc. This change requires the prior approval of Shareholders, to be sought at the General Meeting as Resolution 3.

In order to have the flexibility to change the name of the Company in the future, it is also proposed that the Board be given authority to change the name of the Company by Board resolution.

Consequently, the approval of Shareholders is being sought at the General Meeting as Resolution 4 to amend the Articles.

The proposed Disposal will also result in the Company becoming an Investing Company, as a consequence of which Rule 15 of the AIM Rules further requires the Company to obtain the approval of the Shareholders for its proposed Investing Policy going forward. Further details of the proposed Investing Policy are set out in this announcement and in paragraph 7 of the Circular.

Each Exiting Director has agreed to resign from his role as a director of the Company on Completion. Following Completion, the directors of the Company will comprise James Leek as Non-executive Chairman and Michael Stone as Non-executive Director. In addition, the Purchaser has agreed to make Trevor Clingo (the Company's existing Finance Director) available to the Company for an agreed period after Completion to assist with the ongoing reporting and financial control requirements of the Company.

INVESTING POLICY

Investing Policy

As referred to above, on Completion, the Company will have disposed of all of its trading businesses and therefore (under Rule 15 of the AIM Rules) it will be re-classified as an Investing Company and will be required to adopt an Investing Policy, which must also be approved by Shareholders.

It is proposed that the Company will have a generalist investing policy with the ability to invest in all sectors, however the focus will be on businesses exhibiting the factors and management necessary for significant growth over the short to medium term. The Directors intend initially to focus primarily on the UK where the Directors believe that there are suitable opportunities, although other European countries may also be considered in due course.

It may be considered appropriate to take an equity interest in any proposed business, which may range from a majority position to 100 per cent. ownership. Any investment is likely to be made into an unquoted company and structured as a direct acquisition.

As the Company's financial resources are likely to be invested in just one investment, this acquisition is also likely to be deemed to be a reverse takeover pursuant to Rule 14 of the AIM Rules. The Company does not currently intend to fund any investment with debt or other borrowings, but may do so if appropriate.

The Company's primary objective is that of achieving for Shareholders, over time, both capital growth and income through increasing profitability coupled with dividend payments on a sustainable basis.

The Independent Directors believe that the collective business experience in the areas of acquisitions and corporate and financial management of both the Independent Directors and of the Company's advisers and institutional shareholders will assist the Company in the identification and evaluation of suitable opportunities.

The Independent Directors consider that current market conditions and the general difficulty of securing both equity and debt financing for businesses, means there exists considerable opportunity to implement the proposed Investing Policy. The Directors also expect to have available to them such additional independent technical and commercial advice as they judge may be required.

Acquisition Timeframe

Subject to the approval of the Investing Policy by the Shareholders at the General Meeting, the Company will be required to make an acquisition or acquisitions which constitute a reverse takeover under the AIM Rules or otherwise implement its Investing Policy within 12 months of the General Meeting, failing which the Company's Ordinary Shares would then be suspended from trading on AIM. If the Company's Ordinary Shares are suspended, the Directors propose to convene a general meeting of the Shareholders to consider whether to continue seeking investment opportunities or to wind up the Company and distribute any surplus cash back to Shareholders.

IRREVOCABLE UNDERTAKINGS

Irrevocable undertakings to vote, or (where applicable) to procure that the registered holder votes, in favour of the Resolutions have been given to the Company by the Independent Directors in respect of their entire beneficial holdings of 994,198 Ordinary Shares representing, in aggregate, approximately 9.56 per cent. of the issued Ordinary Shares.

In addition to the Independent Directors, Shareholders who in aggregate have a beneficial interest in 3,878,000 Ordinary Shares representing 37.29 per cent. of the issued Ordinary Shares have irrevocably undertaken to vote in favour of the Resolutions.

In total, irrevocable undertakings to vote, or (where applicable) to procure that the registered holder votes, in favour of the Resolutions have been given to the Company for 4,872,198 Ordinary Shares, representing 46.85 per cent. of the issued Ordinary Share capital of the Company.

GENERAL MEETING

At the General Meeting, the Resolutions will be proposed to approve (a) the Disposal (b) the proposed Investing Policy (c) the change of name of the Company and (d) the amendment of the Articles in order to allow the Board to change the name of the Company by Board resolution. Notice of the General Meeting, which is to take place at 10.00 a.m. on 23 November 2012, is set out at the end of the Circular.

The Disposal is conditional on passing Resolution 1 and Resolution 2 at the General Meeting.

RECOMMENDATION

The Independent Directors, having consulted with Zeus Capital, the Company's Nominated Adviser, believe that the Disposal and the Investing Policy are in the best interests of the Company and Shareholders as a whole. Accordingly, the Independent Directors unanimously recommend that Shareholders vote in favour of the Resolutions, as the Independent Directors have irrevocably undertaken to do in respect of their own beneficial holdings of 994,198 Ordinary Shares, representing approximately 9.56 per cent. of the existing ordinary share capital of the Company.

DEFINITIONS

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