ROL.L Regulatory News (ROL)

26 January 2023

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION

Rotala Plc

("Rotala", the "Company" or the "Group")

Proposed Tender Offer of up to 18,181,818 Shares at 55 pence per Share

Rotala plc (AIM:ROL), an operator of bus routes in the UK for businesses, local authorities and the general public, announces that it proposes to return up to £10.0 million by way of a tender offer pursuant to which Eligible Shareholders are invited to tender some or all of their Shares. Each Eligible Shareholder is entitled to tender 35.7 per cent. of the Shares held by them at the Record Date, rounded down to the nearest whole number of Shares at a price of 55 pence per Share ("Basic Entitlement").

The Tender Price of 55 pence per Share represents:

• a premium of 34.1 per cent. to the closing price of 41.0 pence per Share on the Latest Practicable Date; and

• a premium of 51.9 per cent. to the volume weighted average price per Share over one month to the Latest Practicable Date.

A table showing the closing price for the Shares on the first Business Day of each of the six months before the date of this announcement and on the Latest Practicable Date is set out below.

The Company expects to post later today a circular (the "Circular") to shareholders explaining details of the Tender Offer and including a Notice of General Meeting containing a resolution to repurchase up to 18,181,818 Shares (the "Resolution"). The Resolution shall be proposed at the General Meeting which will be convened at 10.00 a.m. on 16 February 2023. The Directors are unanimously recommending Shareholders to vote in favour of the Resolution as they have irrevocably undertaken to do in respect of their own beneficial holdings of Shares amounting, in aggregate, to 16,198,934 Shares, representing approximately 31.82 per cent. of the Company's issued share capital.

A copy of the Circular will be published on the Company's website later today at http://www.rotalaplc.com/our-investors/key-shareholder-documents.html. A Tender Form for use by Shareholders who hold their Ordinary Shares in certificated form in connection with the Tender Offer is also being despatched with the Circular. Capitalised terms used but not defined in this announcement will have the same meaning given to them in the Circular.

The Tender Offer is being made available to all Eligible Shareholders who are on the Register at the Record Date.

The Tender Offer is to be effected by Shore Capital Stockbrokers (acting as principal and not as agent, nominee or trustee) purchasing Shares from Eligible Shareholders. Shore Capital Stockbrokers in turn, has the right to require the Company to purchase from it, and can be required by the Company to sell to it, such Shares at the Tender Price pursuant to the terms of the Repurchase Agreement. The Company proposes to hold up to 4,188,684 of the Shares purchased pursuant to the Repurchase Agreement in treasury with any remaining shares being cancelled as it intends to use such shares, together with the 1,721,316 Shares already held in treasury, to satisfy any allotment of shares required upon the valid exercise of existing share options in the Company.

The Board is making no recommendation to Shareholders in relation to their participation in the Tender Offer. Whether or not Eligible Shareholders decide to tender all or any of their Shares will depend on, among other things, their view of Rotala's prospects, further details of which are set out below, and their own individual circumstances, including their tax position. Eligible Shareholders should make their own decision and are recommended to consult a duly authorised independent financial adviser. However, Shareholders should note that certain Directors, being John Gunn, Non-Executive Chairman, Simon Dunn, Chief Executive, and Robert Dunn, Managing Director - North West, (see below), who, in aggregate, hold approximately 23.62 per cent. of the number of Shares available for tender on the Latest Practicable Date, have irrevocably undertaken that they shall not tender any of their beneficial holdings of Shares in the Tender Offer whilst the other Directors, being Kim Taylor, Group Finance Director, Graham Peacock, Independent Non-Executive Director, and Graham Spooner, Non-Executive Deputy Chairman and Senior Independent Director, who hold, in aggregate, 4,574,722 Shares, representing approximately 9.30 per cent. of the number of Shares available for tender on the Latest Practicable Date, have irrevocably undertaken to tender an aggregate of 1,358,909 Shares, representing approximately 2.76 per cent. of the number of Shares available for tender on the Latest Practicable Date, in the Tender Offer.

In addition, two significant Shareholders, namely Nigel Wray who is the beneficial owner of 7,662,400 Shares, representing approximately 15.57 per cent. of the number of Shares available for tender on the Latest Practicable Date, and Mrs Susan Tobbell, who holds 3,184,166 Shares, representing approximately 6.47 per cent. of the number of Shares available for tender on the Latest Practicable Date, have signed letters of intent to tender a minimum of 2,500,000 Shares and 909,091 Shares respectively in the Tender Offer.

In order to finance the Tender Offer, the Company has drawn down £10.0 million on its existing revolving commercial loan facility ("Revolving Loan") from HSBC Bank plc ("HSBC") which is available to it for general corporate purposes. HSBC has made it a condition of the draw down under the Revolving Loan for the purposes of the Tender Offer that each of John Gunn (and 181 Fund Ltd, with which he is deemed to be acting in concert), Simon Dunn, and Robert Dunn does not tender any Shares in the Tender Offer. The Company intends to repay the sums drawn down under the Revolving Loan to finance the Tender Offer from the net proceeds of the Proposed Disposal, as defined below (assuming such disposal completes accordingly). The termination date of the Revolving Loan is 14 March 2025.

Expected timetable of principal events

2023

Background to and reasons for the Tender Offer

Further to the Company's announcement on 23 December 2022, the Board has resolved to return up to £10.0 million of cash to Shareholders in anticipation of, and by way of preparation for, the proposed disposal by the Company of its bus depot in Bolton, Greater Manchester, including the related fixtures, fittings, plant and machinery, and the majority of its Bolton bus fleet (the "Proposed Disposal"), further details of which are set out below.

The Board considers the Tender Offer to be beneficial to Shareholders for the following principal reasons:

· it is available to all Eligible Shareholders regardless of the size of their holding;

· it permits Shareholders who wish to retain their current investment in the Company and their Shares to do so, as no Shareholder is required to participate in the Tender Offer, and thus provides Shareholders with flexibility; and

· it provides Eligible Shareholders who wish to reduce their holdings of Shares with an opportunity to do so at a premium of 34.1 per cent. to the closing price per Share on the Latest Practicable Date.

Use of Capital Released by the Proposed Disposal

During FY 2022, the Company's requirements for new vehicles were very limited, being restricted to vehicles for new work or contracts won. Aside from the new vehicles for the Small Franchise contracts won in the GMCA area included in the table in the Company's announcement of 23 December 2022, subject to any additional requirements for new business, the Company does not expect to acquire a material number of new vehicles in FY 2023. The Company does expect that in FY 2024, it will begin a fresh cycle of fleet replacement. It is intended that these vehicles will be electric and not diesel fuelled.

In addition, over FY 2023 and FY 2024, the Company expects to begin rebuilding its Preston bus depot, building a new freehold depot in the Eccles area of Greater Manchester and acquiring a new freehold depot in the Heathrow area. Whilst these steps might involve a total outlay of up to £17.0 million, the Company's hire purchase debt and mortgage debt will continue to amortise in FY 2023 and FY 2024, such that the Company's total net debt will remain within the target of £40 million set by the Board for 30 November 2022. As set out in the table above, this target was successfully met.

Therefore, given the historic capacity of the Company to obtain loan capital and asset finance lines to facilitate business acquisitions, freehold property acquisition and development, and the renewal of the vehicle fleet, the Disposal is anticipated to realise capital of which the Company has no current need. 

In light of the above, the Board believes that by way of preparation for the Proposed Disposal and the arrangements which will need to follow, certain cash should be returned to Shareholders in advance of such arrangements being formally completed. Following consideration and consultation, the Board has concluded that the Tender Offer is the best and most efficient way to return a significant amount of capital to Shareholders in a short space of time, taking account of the relative costs, complexity and timeframes of the various possible methods, as well as the likely tax treatment for Shareholders.

The Tender Offer

The Tender Offer is being made on behalf of the Company by Shore Capital Stockbrokers to all Shareholders who are on the Register at the Record Date save that for legal and regulatory reasons, the Company is unable to make the opportunity to participate in the Tender Offer available to Shareholders who are resident in the Restricted Territories. Full details of the Tender Offer, including the terms and conditions on which it is being made, will be set out in the Circular and, in relation to Eligible Shareholders holding Shares in certificated form, on the Tender Form.

There is no guarantee that any Shares will be acquired pursuant to the Tender Offer. The Tender Offer is conditional, inter alia, on the passing of the Resolution at the General Meeting and the satisfaction of the other Conditions set out in set out in the Circular. The approval of the Resolution requires not less than 75 per cent. of those voting at the General Meeting in person or by proxy to vote in favour of the Resolution. It is possible that Shareholders may not approve the Tender Offer.

The Tender Offer involves the following:

· The Tender Offer is being made to Eligible Shareholders by Shore Capital Stockbrokers for the purchase of up to 18,181,818 Shares. Under the Tender Offer, each Shareholder is entitled to have up to 35.7 per cent. of his or her shareholding purchased by Shore Capital Stockbrokers at the Tender Price (55 pence per Share) together with potentially further purchases depending on the number of Shares tendered by other Shareholders.

· Eligible Shareholders will be able to decide to tender none, some, or all of their Shares within the overall limits of the Tender Offer.

· Tenders in excess of a Shareholder's Basic Entitlement will only be accepted to the extent that other Shareholders tender less than their Basic Entitlement or do not tender any Shares.

· All Shares validly tendered by any Shareholder up to their Basic Entitlement will be accepted in full.

· The Tender Form to be completed by Shareholders who hold their Shares in certificated form contains a box to enable those Shareholders to specify the total number of Shares that they wish to tender. If the number of Shares to be tendered is more than the relevant Shareholder's Basic Entitlement, such tender in excess of such Shareholder's Basic Entitlement will only be satisfied to the extent that other Shareholders tender less than their Basic Entitlement or do not tender any Shares.

· Shareholders who hold their Shares in uncertificated form (i.e. in CREST) and who wish to tender their Basic Entitlement should send a TTE instruction through CREST to the member account, details of which will be set out in the Circular. The Receiving Agent will calculate Eligible Shareholders' Basic Entitlement on the Record Date and return any excess Shares. If Eligible Shareholders wish to tender a different number of Shares to their Basic Entitlement, they should send a TTE Instruction through CREST to the same member account specifying such number of Shares that they wish to tender.

· If the aggregate value of Shares validly tendered by all Shareholders equates to an amount greater than £10.0 million, tenders will be accepted in the order set out below:

o first, all Shares validly tendered by any Shareholder up to their Basic Entitlement will be accepted in full; and

o second, all Shares validly tendered by Shareholders in excess of their Basic Entitlements will be scaled down pro rata to the total number of such Shares tendered such that the total number of Shares purchased pursuant to the Tender Offer does not exceed 18,181,818, provided that Shore Capital Stockbrokers shall be entitled to exercise its absolute discretion as regards any fractional entitlements resulting from the Tender Offer.

· All successfully tendered Shares purchased by Shore Capital Stockbrokers will be repurchased from Shore Capital Stockbrokers by the Company and will either be held in treasury or cancelled.

· While any rights of Shareholders who choose not to tender their Shares will be unaffected, the reduction in the Company's issued share capital may result in a reduction in the liquidity of the Shares in the secondary market.

Repurchase Agreement

Under the terms of the Repurchase Agreement, the Company has granted a put option to Shore Capital Stockbrokers which, on exercise by Shore Capital Stockbrokers, obliges the Company to purchase from Shore Capital Stockbrokers, at the Tender Price, the Shares purchased by Shore Capital Stockbrokers pursuant to the Tender Offer. In addition, under the terms of the Repurchase Agreement, Shore Capital Stockbrokers has granted the Company a call option which, on exercise by the Company, obliges Shore Capital Stockbrokers to sell to the Company, at the Tender Price, the Shares purchased by Shore Capital Stockbrokers pursuant to the Tender Offer. Under the Repurchase Agreement and pursuant to the Tender Offer generally, Shore Capital Stockbrokers will act as principal and not as agent, nominee, or trustee. 

General Meeting to approve the Resolution

Under CA 2006, the Company will require the authority from Shareholders at a general meeting to purchase Shares under the Tender Offer. A notice convening the General Meeting, which is to be held at the Company's registered offices at Cross Quays Business Park, Hallbridge Way, Tividale, Oldbury, West Midlands B69 3HW at 10.00 a.m. on 16 February 2023, will be set out in the Circular. At this meeting, the Resolution will be proposed to authorise the Company to make the repurchase of Shares which is necessary to enable the Tender Offer to be implemented. The Resolution will be proposed as a special resolution requiring the approval of 75 per cent. of the votes cast at the General Meeting. The Company will not be able to purchase any Shares pursuant to the Tender Offer unless the Resolution is duly passed.

The authority to repurchase Shares pursuant to the Resolution which is being sought at the General Meeting will be in addition to, and not in substitution for, the Company's existing authority relating to market purchases of Shares obtained at the Company's Annual General Meeting on 19 May 2022. Whether the Company will be in a position to, or will wish to, use that authority before the Company's Annual General Meeting due to be held later this year, which is anticipated to be held in May 2023, will depend upon the outcome of the Tender Offer. Therefore, at this stage it is not possible to be definitive about this matter. A further announcement, if necessary, will be made in due course. The results of the General Meeting will be announced through a Regulatory Information Service and the Company's website as soon as possible once known.

Irrevocable undertakings and letters of intent

As set out above, the Company has received irrevocable undertakings from certain Directors, being John Gunn, Simon Dunn, and Robert Dunn, who, in aggregate, hold approximately 23.62 per cent. of the number of Shares available for tender, that they shall not tender any of their beneficial holdings of Shares in the Tender Offer. In addition, the Company has received irrevocable undertakings from the remaining Directors, being Kim Taylor, Graham Peacock and Graham Spooner, in respect of, in aggregate, 4,574,722 Shares, representing approximately 9.30 per cent. of the number of Shares available for tender on the Latest Practicable Date, to tender an aggregate of 1,358,909 Shares, representing approximately 2.76 per cent. of the number of Shares available for tender on the Latest Practicable Date, in the Tender Offer. Details of the irrevocable undertakings received by the Company are as follows:

1 Assumes full take up of the Tender Offer

In addition, as set out above, the Company has received letters of intent from certain significant Shareholders, namely Nigel Wray and Mrs Susan Tobbell, who hold, in aggregate, 10,846,566 Shares, representing approximately 22.04 per cent. of the Shares available for tender, to tender a minimum of an aggregate of 3,409,091 Shares, representing approximately 6.93 per cent. of the Shares available for tender on the Latest Practicable Date, in the Tender Offer. Details of the letters of intent received by the Company are as follows:

1 A minimum of 2,500,000 Shares

2 Assumes full take up of the Tender Offer

Related party transaction

Nigel Wray who so far as the Company is aware holds 7,662,500 Shares, representing approximately 15.57 per cent. of the Company's total voting rights, is a substantial shareholder in the Company, therefore his participation in the Tender Offer is deemed to constitute a related party transaction under Rule 13 of the AIM Rules for Companies. The independent Directors (for the purposes of the Tender Offer, being John Gunn, Simon Dunn and Robert Dunn), having consulted with Shore Capital and Corporate (in its capacity as the Company's nominated adviser) consider that the terms of Mr Wray's participation in the Tender Offer are fair and reasonable insofar as Shareholders are concerned.

Takeover Code

Eligible Shareholders with significant holdings of Shares who do not tender into the Tender Offer in circumstances where other Eligible Shareholders do participate in the Tender Offer will see their proportionate holding in the Company increased, with a corresponding increase in the voting power of the Shares held by such Shareholders. Such holders of significant holdings of Shares could exercise their voting rights in a manner that is not aligned with the interests of other Shareholders. In addition, a decision to sell the Shares by such a significant Shareholder could have a materially greater adverse effect on the price for Shares (due to greater proportionate supply) following the completion of the Tender Offer.

As a public company which has its registered office and central place of management and control in the United Kingdom, the Company is subject to the Takeover Code. Under Rule 9 of the Takeover Code, any person who acquires an interest (as such term is defined in the Takeover Code) in shares which taken together with the shares in which they and persons acting in concert (as defined by the Takeover Code) with them are interested, carry 30 per cent or more of the voting rights in a company which is subject to the Takeover Code is normally required to make a general offer to all of the remaining shareholders to acquire their shares.

Similarly, when any person, who together with persons acting in concert with them, is interested in shares which in aggregate carry not less than 30 per cent. of the voting rights of a company subject to the Code, but does not hold shares carrying more than 50 per cent. of the voting rights of such a company, and such person, or persons acting in concert with them, acquires an interest in any shares which increases the percentage of shares carrying voting rights in which they are interested, that person together with the persons acting in concert with them, is normally required to extend an offer in cash at a price not less than the highest price paid by them, for shares in the company within the preceding 12 months, to the holders of any class of equity share capital whether voting or non-voting and also to the holders of any class of transferable securities carrying voting rights.

Under Rule 37.1 of the Takeover Code, when a company purchases its own voting shares, any resulting increase in the percentage of shares carrying voting rights in which a person or group of persons acting in concert is interested will be treated as an acquisition for the purpose of Rule 9.

However, Note 1 of Rule 37.1 states that a person who comes to exceed the limits in Rule 9.1 as a consequence of a company's redemption or purchase of its own shares will not normally incur an obligation to make a mandatory offer unless that person is a director, or the relationship of the person with any one or more of the directors is such that the person is, or is presumed to be acting in concert with any of the directors. A person who has appointed a representative to the board of the company, and investment managers of investment trusts, will be treated for these purposes as a director. 

Shore Capital Stockbrokers will purchase, as principal (not as agent, nominee or trustee) shares under the Tender Offer which could result in Shore Capital Stockbrokers acquiring an interest in Shares carrying 30 per cent. or more of the voting rights of the Company. Promptly following such purchase, under the terms of the Repurchase Agreement, Shore Capital Stockbrokers will sell all the Shares purchased by Shore Capital Stockbrokers pursuant to the Tender Offer to the Company and the Company will buy and thereafter hold up to 4,188,684 Shares in treasury and cancel any remaining Shares which it has purchased.

Accordingly, a waiver has been obtained from the Panel on Takeovers and Mergers in respect of the application of Rule 9 to the purchase by Shore Capital Stockbrokers of the voting shares under the Tender Offer.

Market Quotations

The following table shows the closing price for the Shares as derived from the AIM Appendix to the Daily Official List on the first Business Day of each of the six months before the date of this announcement and on 25 January 2023 being the Latest Practicable Date:

Settlement

Subject to the Tender Offer becoming unconditional, payment of the Tender Price due to Shareholders under the Tender Offer whose tenders have been accepted (rounded down to the nearest whole penny) is expected to be effected by the despatch of cheque(s) or the crediting of CREST accounts (as appropriate) by 3 March 2023.

Recommendation

The Board unanimously recommends Shareholders to vote in favour of the Resolution to be proposed at the General Meeting, as each of the Directors has irrevocably undertaken to do in respect of their own aggregate beneficial holdings of 16,198,934 Shares, representing approximately 32.92 per cent. of the Company's total voting rights.

The Board is making no recommendation to Shareholders in relation to their participation in the Tender Offer. Whether or not Eligible Shareholders decide to tender all or any of their Shares will depend on, among other things, their view of Rotala's prospects and their own individual circumstances, including their tax position. Shareholders should make their own decision and are recommended to consult a duly authorised independent financial or professional adviser.

Notification of interests

Following the Company's purchase of Shares from Shore Capital Stockbrokers pursuant to the terms of the Repurchase Agreement, and regardless of whether a Shareholder tenders any or all of their Shares pursuant to the terms of the Tender Offer, the number of Shares in which a Shareholder is interested when taken as a percentage of the Company's aggregate Issued Share capital as a whole may change. This may give rise to an obligation on the part of such Shareholder pursuant to the Disclosure Guidance and Transparency Rules to notify the Company of their interest in Shares within two days of becoming aware of such change. If you are in doubt as to whether you should notify the Company, or as to the form of that notification, please consult your professional adviser.

The information communicated in this announcement contains inside information for the purposes of Article 7 of the UK version of the EU Market Abuse Regulation (2014/596) which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended and supplemented from time to time.

About the business

Rotala provides a range of transport solutions, ranging from local bus services under contract to local authorities, through to commercial bus routes. Rotala has operations at Heathrow Airport, in the East and West Midlands and in the North West. Operating companies are Diamond Bus Ltd, Diamond Bus (North West) Ltd, Diamond Bus (East Midlands) Ltd, Hallmark