PEL.L Regulatory News (PEL)

REG - Marwyn Capital II Ltd - Reverse Takeover of Paragon Creative Limited

16/12/2011

Marwyn Capital II Limited

16 December 2011

MARWYN CAPITAL II LIMITED (the "Company")

Reverse takeover of Paragon Creative Limited ("Paragon Creative") and fundraising of up to £2.5 million

Posting of Admission Document and Notice of General Meeting

Further to the announcement dated 8 December 2011, the Company is pleased to announce today that it has entered into a conditional agreement to acquire Paragon Creative, a UK based attraction design, production and fit-out business, for a maximum consideration of approximately £4.0 million. This is to be satisfied on Completion in cash (£1.75 million) and Ordinary Shares (£1.5 million) and a further £750,000 (when it becomes payable to the Vendors) in cash and/or Ordinary Shares (at the absolute discretion of the Company) up to a maximum of 18.75 million Ordinary Shares.

Immediately post admission of the Enlarged Group to AIM, certain of the Vendors of Paragon Creative and a newly appointed management team will retain approximately 30% of the Enlarged Issued Share Capital of the Company.

The Acquisition will constitute a reverse takeover under the AIM Rules for Companies, and as such will require Shareholder approval at a general meeting of the Company, to be held on 20 December 2011. The Admission Document has been published and is expected to be sent at short notice to Shareholders later today and trading in the Company's Ordinary Share Capital on AIM will resume at 7:30am on 16 December 2011.

The Company also announces that it proposes to raise £2.5 million (before expenses) by way of a conditional placing of up to 62,500,000 new ordinary shares at 4 pence per share and to appoint Mark Pyrah as Chief Executive Officer to lead the Enlarged Group together with Robert Hersov as Non-Executive Chairman. In addition, Peter Holdsworth (Production Director), David Gray (Operations Director) and Mark Taylor (Commercial Director) will be appointed to the Board.

Shortly after Admission, the Company will be renamed Paragon Entertainment Limited.

Highlights

·; Paragon Creative designs and produces third party attractions (including interactive exhibits, models and fully themed attractions) for museums, shopping malls, theme parks, science centres and other clients globally

·; Paragon Creative's management team has over 20 years of experience and have completed over 1,000 projects worldwide with Paragon Creative work present in attractions drawing over 50 million visitors a year

·; Paragon Creative is experiencing increased demand for themed work, driven by increased inward tourism, increased domestic tourism and underlying consumer, corporate and retail demand

·; The opportunity exists to own and operate attractions directly extending Paragon Creative's business model across more of the value chain creating an end-to-end integrated attractions business

·; Approximately £2 million of growth capital will be available to the Enlarged Group post Completion to undertake a roll-out of themed attractions

·; An experienced management team will be appointed from Completion with extensive operational track-record

·; Paragon Creative Vendors and the new management team to retain approximately 30% post Completion

·; Largest shareholder Marwyn has a proven track record in assisting portfolio companies to deliver

Shareholder value

Commenting on the Acquisition, Mark Pyrah, proposed CEO, said:

"I am looking forward to the opportunity to lead Paragon Creative onto AIM and realise a long-standing ambition to create a fully integrated attraction design, production, fit-out and now operating business. I am thrilled to be leading a new, expanded management team bolstered by extensive operational experience as we look to roll-out proprietary attractions across the UK and abroad, while at the same time continuing to deliver great work to our existing clients."

Mark Watts, Non-Executive Director of the Company and Managing Partner of Marwyn Investment Management LLP, said:

"We are delighted to announce the acquisition of Paragon Creative. The combination of an experienced management team and the backing that Marwyn brings has already transformed many of our portfolio businesses and this dynamic approach will enable Paragon Creative to build real shareholder value in a sector full of potential".

Enquiries:

Cenkos Securities plc (nominated adviser and broker)

+44 (0)20 7397 8900

Max Hartley / Ivonne Cantu

Marwyn Capital LLP (financial adviser)

+44 (0)20 7004 2700

Vanessa Bolger / Gianpaolo Pera

Shareholders are informed that the Admission Document has been published and will be posted today, together with a notice convening the General Meeting at which the approval of Shareholders will be sought, inter alia, for the Acquisition, the authority to allot new Ordinary Shares pursuant to the Placing, to change the name of the Company to Paragon Entertainment Limited and to adopt a new memorandum and articles of association of the Company.

A copy of the Admission Document is available from the Company's website: www.marwyncapitaltwo.com.

Background to the Acquisition and the fundraising

The Company was admitted to AIM on 24 December 2009 as a special purpose vehicle with initial funding of £4.9 million (before expenses). As at that date, the stated strategy of the Company was to acquire one or more quoted or unquoted businesses or companies (in whole or in part) initially by way of a reverse takeover. The Company was established to focus on businesses or companies conducting activities wholly or mainly in the UK with particular focus on the leisure, healthcare, testing and inspection sectors. The Directors have reviewed a number of potential acquisition targets since the Company was admitted to AIM and, for the past six months, the Company's focus has been to review the leisure sector and to identify potential acquisition opportunities therein. Specifically, the Company has identified Paragon Creative as a platform from which to create value for Shareholders thanks to organic and acquisitive growth opportunities in addition to the opportunity to leverage Paragon Creative's existing skill base and expand into the development, funding and operation of proprietary attraction concepts.

Paragon Creative has experienced strong growth in the financial year to 31 August 2011 despite the weak economic climate, with revenues up 28 per cent. As at 31 October 2011, two months into its financial year, Paragon Creative had over 70 per cent. of its full year budgeted revenue already within its contracted order book. In addition, Paragon Creative's project pipeline stood at almost five times FY11 revenues giving the Enlarged Group excellent revenue visibility.

The proposed Board believes that there are a number of factors which suggest that Paragon Creative is well positioned to pursue this strategy and to derive significant value, namely:

·; the expansion of Paragon Creative's existing third party attraction design and production business through targeted acquisition opportunities which further expand Paragon Creative's already extensive customer base;

·; the roll-out of a pipeline of owned and licensed branded attraction concepts which the proposed Board believe have significant roll-out potential; and

·; the development and operation of larger stand-alone attraction opportunities, leveraging specific brand and theming opportunities with extensive market appeal.

Details of the Acquisition and Board appointments

Mark Pyrah will be appointed as the new Chief Executive Officer of the Company on Admission. Mark has 20 years of experience in the entertainment industry including film & media, theming and attractions and has spent the last seven years developing Paragon Creative into a market leading theming business.

Robert Hersov will be appointed as the new Non-Executive Chairman on Admission. Robert has over 20 years of experience in the global investment banking, media and private aviation sectors. Alongside his role as managing partner at merchant bank Sapinda, Robert continues to hold a number of senior executive and non-executive roles in addition to significant interests as a private investor and entrepreneur.

Peter Holdsworth will be appointed as Production Director on Admission. Peter has over 22 years of experience in the realisation of interactive visitor attractions, models and themed environments, 20 of which were at the helm of his own company.

David Gray will be appointed Operations Director on Admission. David has over 20 years of experience in funding, developing, operating, managing and marketing tourist attractions globally. He has developed and managed over $50 million in entertainment projects over the last 20 years.

Mark Taylor will be appointed Commercial Director on Admission. Mark has over a decade's private equity and venture capital experience. Mark has spent the last five years as managing director of Global Aquariums BV, a business which develops, owns and manages aquariums in emerging markets.

Previous directors Paul Everitt and Paul Cookson stepped down from the Board yesterday, and Mark Watts remains on the Board as a Non-Executive Director. The Company would like to thank them both for their assistance and wishes

them well for the future.

The maximum consideration payable under the Acquisition Agreement will be approximately £4.0 million. Such amount will be satisfied as to £1.75 million in cash on Completion and £1.5 million by the issue and allotment of 37.8 million Ordinary Shares at the Placing Price to certain of the Vendors. Further consideration of up to a maximum of £750,000 payable to the Vendors will be deferred pending determination or settlement of certain potential liabilities of the Target and the Vendors. Such deferred consideration will be satisfied (at the Company's absolute discretion) in cash and/or by the issue and allotment of Ordinary Shares of an equivalent value up to a maximum of 18.75 million Ordinary Shares.

The net proceeds of the Placing will be utilised by the Company to part fund the cash consideration and provide additional growth capital to the Enlarged Group to undertake the proposed strategy.

Proposed Directors' service agreements

The following agreements have been entered into between the Proposed Directors and the Company and in each case are conditional upon, and commencing from Admission:

Robert Hersov is to enter into a non-executive director letter of appointment with the Company which will commence upon Completion. The letter of appointment may be terminated by either party giving the other not less than six months' written notice. The non-executive director is entitled to a fee of £30,000 per annum, which will increase to £60,000 per annum on the later of 1 July 2012 and either: (i) the successful opening of the fifth attraction funded, developed and operated by the Company or another member of the Group following admission; or (ii) compliance with such other similar metric, measurement or criteria as determined by the remuneration committee of the Board from time to time in its absolute discretion. The Company may terminate Robert Hersov's appointment on the occurrence of certain events.

Mark Pyrah and Peter Holdsworth will each be entitled to a fee of £84,000 per annum, which will increase to £120,000 per annum on the later of 1 July 2012 and either: (i) the successful opening of the fifth attraction funded, developed and operated by the Company or another member of the Group following Admission; or (ii) compliance with such other similar metric, measurement or criteria as determined by the remuneration committee of the Board from time to time in its absolute discretion.

David Gray will be entitled to £60,000 per annum, which will increase to £120,000 per annum on the later of 1 July 2012 and either: (i) the successful opening of the fifth attraction funded, developed and operated by the Company following admission; or (ii) compliance with such other similar metric, measurement or criteria as determined by the remuneration committee of the Board from time to time in its absolute discretion.

Mark Taylor will be entitled to £48,000 per annum, which will increase to £96,000 per annum on the later of 1 July 2012 and either: (i) the successful opening of the fifth attraction funded, developed and operated by the Company following admission; or (ii) compliance with such other similar metric, measurement or criteria as determined by the remuneration committee of the Board from time to time in its absolute discretion.

Existing Director of the Company

On 18 December 2009, the Company entered into a letter of appointment and a bonus letter with Mark Irvine John Watts. It is proposed that Mark Watts will enter into an amended letter of appointment commencing on Completion. Mark Watts will be entitled to a fee of £25,000 per annum. The letter of appointment may be terminated by either party giving not less than three months' written notice. The Company may terminate Mark Watts' appointment on the occurrence of certain events.

Details of the Placing and Admission

The Company will conduct two placings due to the requirements of the VCT Scheme and EIS Scheme. The New VCT/EIS Placing Shares will be offered to VCT's and to EIS investors. The General Placing Shares will be offered to other investors who will not be seeking relief under the VCT/EIS legislation.

It is expected that:

·; First Admission will become effective and that dealings in the New VCT/EIS Placing Shares and the Existing Ordinary Shares will commence at 8.00 a.m. on 21 December 2011.

·; Subject to First Admission having occurred, Second Admission will become effective and that dealings in the General Placing Shares will commence at 8.00 a.m. on 22 December 2011.

Commitment Agreement

Pursuant to a commitment agreement dated 15 December 2011 between (1) David Gray, (2) Vulcan, (3) Robert Hersov and (4) the Company, as consideration for: (i) the introduction made by such parties to the Company of the opportunity to acquire the issued share capital of the Target pursuant to the terms of the Acquisition Agreement; and (ii) the on-going commitments to be made by such parties to the Group through, inter alia, the Deed of Undertaking (details of which are to be set out in the Admission Document), the Company has agreed to issue and allot:

i) 8.4 million Ordinary Shares to Vulcan on Admission;

ii) 1.6 million Ordinary Shares to David Gray on Admission;

iii) within 20 Business Days following: (i) the successful opening (such opening being a success in the opinion of the remuneration committee) of the fifth attraction funded, developed and operated by the Company or another member of the Group following Admission; or (ii) compliance with such other similar metric, measurement or performance criteria as determined by the remuneration committee of the Board from time to time in its absolute discretion, 1.6 million Ordinary Shares to David Gray.

The obligations of the Company under the Commitment Agreement are conditional, inter alia, upon Completion occurring.

Recommendation

The Director recommends that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting.

Notice of General Meeting

An Admission Document is expected to be posted to Shareholders later today. The formal notice convening the General Meeting, will be enclosed with the Admission Document sent to Shareholders.

ADMISSION AND PLACING STATISTICS

Number of Existing Ordinary Shares 49,000,000

Existing Ordinary Shares as a percentage of the Enlarged Issued Share Capital (1) 30.7 per cent.

Placing Price 4 pence

Number of Placing Shares being issued and allotted pursuant to the Placing (1) up to 62,500,000

Placing Shares as a percentage of the Enlarged Issued Share Capital 39.2 per cent.

Number of New VCT/EIS Placing Shares (1) 34,550,000

VCT/EIS Placing Shares as a percentage of Enlarged Issued Share Capital (1) 21.7 per cent.

Number of General Placing Shares (1) 27,950,000

Number of Consideration Shares to be issued on Completion (1) 37,826,525

Number of Commitment Shares to be issued on Completion (1) 10,036,528

General Placing Shares as a percentage of the Enlarged Issued Share Capital 17.5 per cent.

Consideration Shares to be issued on Completion as a percentage

of the Enlarged Issued Share Capital 23.7 per cent.

Commitment Shares to be issued on Completion as a percentage

of the Enlarged Issued Share Capital 6.3 per cent.

Enlarged Issued Share Capital immediately following Admission 159,363,053

Market capitalisation of the Company at the Placing Price on Admission (1) £6,374,522 [£4,100,000]

Gross proceeds of the Placing (1) £2,500,000

Estimated proceeds of the Placing net of expenses (1,2) £1,907,575

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Each of the dates and times in the above expected timetable are subject to change at the absolute discretion of the Company and Cenkos and satisfaction of all conditions contained in the Acquisition Agreement are assumed.

Definitions

The following words and expressions taken from the Admission Document shall have the following meanings in this Announcement, unless the context otherwise requires:

"Acquisition" means the proposed acquisition by the Company of the entire issued share capital of Paragon Creative;

"Acquisition Agreement" means the conditional agreement, dated 15 December 2011, between the Company and the Vendors relating to the sale and purchase of the existing ordinary shares in Paragon Creative, details of which will be set out in Admission Document;

"Admission" means: (i) in relation to the VCT/EIS Placing Shares, First Admission; and (ii) in all other respects including: (a) in relation to the issue and allotment of those Consideration Shares and Commitment Shares to be issued on Admission; (b) the admission of the General Placing Shares; and (c) the readmission of the Existing Ordinary Shares and the VCT/EIS Placing Shares, Second Admission;

"AIM" means AIM, a market operated by the London Stock Exchange;

"AIM Rules for Companies" means the rules for AIM companies published by the London Stock Exchange;

"Board" means the directors of the Company from time to time, or any duly constituted meeting of such directors or (where relevant) a committee thereof;

"Cenkos" means Cenkos Securities plc, a company incorporated in England and Wales with registered number 05210733;

"Commitment Shares" means the 10,036,528 Ordinary Shares to be issued to David Gray and Vulcan at Completion and a further 1,593,628 Ordinary Shares to be issued to David Gray pursuant to the Commitment;

"Company" means Marwyn Capital II Limited, an exempted company incorporated in the Cayman Islands with registered number 234231 to be renamed Paragon Creative Entertainment Limited on Completion (subject to the passing of the Resolutions at the General Meeting);

 "Completion" means completion of the Acquisition in accordance with its terms;

"Consideration Shares" means the 37,826,525 Ordinary Shares to be issued and allotted to certain of the Vendors at Completion and up to a further 18,750,000 Ordinary Shares that could be issued and allotted to the Vendors, each such issue and allotment pursuant to the Acquisition Agreement;

 "CREST" means the relevant system (as defined in the Uncertificated Securities Regulations 2001 SI 2001 No. 3755) in respect of which Euroclear UK & Ireland is the operator (as defined in the Uncertificated Securities Regulations 2001 SI 2001 No. 3755);

 "Deed Poll" means the deed poll dated 18 December 2009 entered into by the Depositary pursuant to which the Depositary will issue the Depositary Interests in respect of the Placing Shares, summary details of which will be set out in the Admission Document;

"Depositary Interests" the dematerialised Depositary interests created and issued in respect of the Existing Ordinary Shares and to be created in respect of the Placing Shares, in each case pursuant to and issued on the terms of the Deed Poll;

"Director" means the director of the Company;

"EIS" means the enterprise incentive scheme and related reliefs, as detailed in Part 5 of the Income Tax Act 2007 and in Sections 150A to 150C and Schedules 5B and 5BA of the Taxation of Chargeable Gains Act 1992;

"EIS Scheme" means a scheme under which the legislation under which subscribers enjoy certain tax relief under EIS;

"Enlarged Group" means the combined Existing Group and Target Group;

"Enlarged Issued Share Capital" means the enlarged issued share capital of the Company, immediately following Completion and Admission, to include the Existing Ordinary Shares, the Placing Shares, and those Consideration Shares and Commitment Shares to be issued on Admission;

"Existing Group" means the Company and its subsidiary undertaking as at the date of this announcement;

"Existing Ordinary Shares" means existing Ordinary Shares in issue at the date of this announcement;

"First Admission" means the admission of the VCT/EIS Placing Shares to trading on AIM becoming effective in accordance with Rule 6 of the AIM Rules for Companies;

"FSMA" means the Financial Services and Markets Act 2000, as amended from time to time;

"General Placing" means the proposed conditional placing of the General Placing Shares with certain institutional and other investors at the Placing Price;

"General Placing Shares" means the 27,950,000 new Ordinary Shares to be allotted and issued by the Company pursuant to the General Placing;

"Group" means the Company and its subsidiary undertakings from time to time;

"ISIN" means International Securities Identification Number;

 "London Stock Exchange" means London Stock Exchange plc;

 "Marwyn" means Marwyn Investments Group Limited and its subsidiary undertaking and affiliates from time to time including Marwyn Capital and Marwyn Investment Management;

"Ordinary Shares" means ordinary shares of 0.1 pence in the share capital of the Company;

 "Placing" means the conditional placing of the Placing Shares by Cenkos, at the Placing Price;

"Placing Price" means 4 pence per Placing Share;

"Placing Shares" means VCT/EIS Placing Shares and the General Placing Shares;

"Proposed Directors" means Robert Hersov, Mark Pyrah, Peter Holdsworth, David Gray and Mark Taylor;

 "Resolutions" means the resolutions set out in the notice of General Meeting;

 "Second Admission" means admission of the General Placing Shares, the Consideration Shares, and those Commitment Shares to be issued and allotted on Admission and the readmission of the Existing Ordinary Shares and the VCT/EIS Placing Shares to trading on AIM, becoming effective in accordance with Rule 6 of the AIM Rules for Companies;

"Shareholder" means a holder of Ordinary Shares;

"Target" or "Paragon Creative" means Paragon Creative Limited, a private company limited by shares incorporated in England and Wales with registered number 4409463;

"Target Group" means Target and its subsidiary undertaking as at the date of this announcement;

"VCT" means a venture capital trust for the purposes of Part 6, Chapters 1 to 6 of the UK Income Tax Act 2007, being a company, broadly similar to an investment trust, which has been approved by Her Majesty's Revenue and Customs and which subscribes for shares in, or lends money to, unquoted (including AIM listed) companies;

"VCT/EIS Placing" means the proposed conditional placing of the VCT/EIS Placing Shares with certain institutional investors at the Placing Price;

"VCT/EIS Placing Shares" means the 34,550,000 new Ordinary Shares to be allotted and issued by the Company pursuant to the VCT/EIS Placing;

"VCT Scheme" means the legislation under which VCTs and their investors enjoy certain tax reliefs;

"Vendors" means Mark Pyrah, Peter Holdsworth, Colin Pyrah and Stephen Jackson; and

"Vulcan" means Vulcan International Trading Limited, a business company incorporated in the British Virgin Islands with registered number 1380948.

This announcement does not constitute an offer or invitation to purchase or subscribe or a solicitation of an offer to buy any securities pursuant to this announcement or otherwise in any jurisdiction and investors should not subscribe for any shares referred to herein except on the basis of the Admission Document, produced by the Company, drawn up in accordance with the AIM Rules for Companies. It is intended that copies of the Admission Document when published, will be available at www.marwyncapitaltwo.com.

The release, publication or distribution of this announcement in jurisdictions other than the UK may be restricted by the laws of those jurisdictions and therefore persons should inform themselves about and observe such restrictions. Any failure to comply with any such restrictions may constitute a violation of the securities laws of any such jurisdictions.

This communication does not constitute an offer of securities to the public in the United Kingdom. No prospectus has been or will be registered in the United Kingdom in respect of the securities referred to in this communication. This annoucement is exempt from the general restriction on the communication of invitations or inducements to enter into investment activity (within the meaning of section 21 of FSMA) and has therefore not been approved by an authorised person within the meaning of FSMA. This communication is being distributed only to and directed only at (i) persons falling within Article 19(5) ("investment professionals") of The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") who have professional experience in matters relating to investments, (ii) persons falling within Article 49 ("high net worth companies etc") and/or (iii) other persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as "relevant persons"). This communication must not be acted on or relied on by any person who is not a relevant person. Any investment or investment activity to which this communication relates is available only to relevant persons and will be engaged in only with relevant persons.

Information for United States and other overseas shareholders

This announcement is not for release in the United States, South Africa, Australia, Canada or Japan. This information is not for publication or distribution to persons in the United States. The distribution of this announcement in whole or part may, in certain jurisdictions, be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about and observe any restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

The information herein is not an offer of securities for sale in the United States. The Ordinary Shares have not been and nor will be, registered or qualified for sale under the US Securities Act of 1933, as amended (the "Securities Act") and, unless the Ordinary Shares are registered under the Securities Act or an exemption from the requirements of the Securities Act is available, the Ordinary Shares may not be offered or sold directly or indirectly within the United States or to, or for the account or benefit of, any US persons or any national, citizen or resident of the United States.

For the attention of Cayman Island Residents

No invitation or offer, whether direct or indirect, may be or has been made to the public in the Cayman Islands to subscribe for the Ordinary Shares. Neither the Cayman Islands Monetary Authority nor any other governmental authority in the Cayman Islands has passed judgment upon or approved the terms or merits of this announcement. There is no investment compensation scheme available to investors in the Cayman Islands.

Cautionary note regarding forward-looking statements

This announcement contains forward-looking statements. Such statements are subject to certain risks and uncertainties, in particular statements regarding plans, goals, prospects, developments and strategies for the Enlarged Group's future. The Enlarged Group's actual results and operations could differ fundamentally from those anticipated in such forward-looking statements as a result of many factors including the risks faced by the Enlarged Group which will be described in Part III and elsewhere in the Admission Document. These statements and assumptions that underly them are based on the current expectations of the Directors and proposed Directors and are subject to a number of factors, many of which are beyond their control. As a result, there can be no assurance that actual results will not differ materially from those described in this announcement. Forward-looking statements are identified by their use of terms and phrases such as "believe", "could", "envisage", "estimate", "intend", "may", "plan", "will" or the negative of those, variations or comparable expressions, including reference to assumptions.

This information is provided by RNS, the company news service from the London Stock Exchange.