3 Aug 2010 07:00
The 600 Group PLC
("600 Group", "the Company" or "the Group")
Fundraising - £2.5 million loan
Notice of General Meeting
The 600 Group PLC, the diversified engineering group servicing international markets, announces that, subject to Shareholder approval, it proposes to raise £2.5 million (£2.0 million net of expenses) through the advance of the Loan to the Group by Haddeo and others.
The net proceeds of the Loan will be used to:
·; fund the anticipated growth of the Group's machine tools and laser marking businesses;
·; complete the final stages of the turnaround; and
·; increase manufacturing capacity in Europe.
As part of the arrangements for the Fundraising, the Company will issue Warrants to the Lenders, granting the Lenders subscription rights over 12,500,000 New Ordinary Shares at an exercise price of 20 pence per share. Haddeo, which, at the date of this announcement, holds 28.18 per cent of the Company's issued share capital, is being treated by the Panel as acting in concert with certain other Lenders, such that the exercise of the Warrants by the Haddeo Concert Party could trigger a Mandatory Offer.
The Company is therefore convening a General Meeting to seek Shareholder approval of a number of aspects to these arrangements, including, inter alia, the Whitewash and the Related Party Transactions, thereby enabling the Company to enter into the Loan. The General Meeting will take place at 10.00 a.m. on 27 August 2010 at Union Street, Heckmondwike, West Yorkshire, WF16 0HL.
For further information, please contact:
| The 600 Group PLC | Tel: 01924 415 000 |
| David Norman, Group Chief Executive | www.600Group.com |
| Martyn Wakeman, Group Finance Director |
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| Evolution Securities Limited | Tel: 0113 243 1619 |
| Joanne Lake / Peter Steel |
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| Rawlings Financial PR Limited | Tel: 01653 618 016 |
| Catriona Valentine |
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The following information is extracted from a circular to Shareholders (the "Circular") expected to be posted today. Copies of the Circular will be available at the Company's registered office (Union Street, Heckmondwike, West Yorkshire WF16 0HL) upon request. Definitions used in the Circular apply in this announcement unless the context otherwise requires.
Approval of waiver of obligation under Rule 9 of the City Code on Takeovers and Mergers, Related Party Transactions, Capital Reorganisation and Notice of General Meeting
1. Introduction
The Directors announce that, subject to Shareholder approval, 600 Group proposes to raise £2.5 million (approximately £2.0 million net of expenses) by way of the advance of the Loan to the Group by Haddeo and others.
As part of the arrangements for the Fundraising, the Company intends to create 12,500,000 share warrants to be issued to the Lenders under the Loan Agreement granting the right, subject to the terms of the Warrant Instrument to be entered into by the Company upon passing of the Resolutions, to subscribe for (in aggregate) 12,500,000 New Ordinary Shares at a price of 20 pence per share (subject to any adjustment pursuant to the provisions contained in the Warrant Instrument). As Haddeo is a substantial Shareholder in the Company, the Loan and the issue of the Warrants each constitutes a related party transaction under the Listing Rules requiring Shareholder approval.
The Lenders include Haddeo and certain other Shareholders that hold, in aggregate, a beneficial interest in 29.27 per cent of the Company's issued share capital and are providing, in aggregate, approximately £0.93 million of the Loan. Of this amount Haddeo is providing £0.81 million, which, assuming full exercise of the related Warrants by all of the Lenders, will result in Haddeo's beneficial interest in the Company's Enlarged Share Capital increasing from its current level of 28.18 per cent to 28.93 per cent.
Haddeo and certain other Lenders are being treated by the Panel as acting in concert such that the exercise of the Warrants by the Haddeo Concert Party could trigger a Mandatory Offer. In such circumstances, the Haddeo Concert Party would be obliged to make a Mandatory Offer for the remaining shares in 600 Group that it does not already own, unless granted a waiver by the Panel and approved by 600 Group's Independent Shareholders. The Company is therefore seeking the approval of the Independent Shareholders, inter alia, of the Whitewash and to disapply statutory pre-emption rights and to authorise the Directors of the Company to issue and allot the New Ordinary Shares to the Lenders (or any of them) which will arise from the exercise of the Warrants by the Lenders (and only to that extent).
2. Background to and reasons for the Fundraising and use of proceeds
The Fundraising - overview
Net borrowings increased to £4.3 million at 3 April 2010 (28 March 2009: £1.5 million), largely as a result of the Group funding the cash costs of the turnaround.
600 Group is seeking greater working capital headroom to focus on creating value through expanding its principal product areas and to invest further in the Group's manufacturing facilities. The Loan will enable the Group to fund the growth of the business as markets recover, complete the final stages of the turnaround and enable development of our manufacturing base in Europe. Subject to Shareholder approval, 600 Group will draw down the Loan, which will provide additional funds for the Group of £2.5 million (approximately £2.0 million net of expenses) and meet the requirement for additional headroom. The Loan is repayable within five years of the date of drawdown and subject to an 8 per cent interest charge per annum, calculated on a non-compound basis.
As part of these arrangements, the Company will, subject to Shareholder approval, issue the Warrants, which will grant the Lenders subscription rights over 12,500,000 New Ordinary Shares at an exercise price of 20 pence per New Ordinary Share. The Warrants will be freely transferable and exercisable at any time up to five years from the date of grant.
On 6 July 2010, the Group agreed with HSBC to renew its overdraft facility and temporarily increase it by £0.5 million to £3.5 million until 31 August 2010, whilst the arrangements for the Fundraising are completed. The arrangement fee for renewal of the overdraft facility was £52,500. On 1 September 2010, the overdraft with HSBC will revert to its previous level of £3.0 million. The Group's worldwide banking facilities, provided by HSBC in the UK and South Africa, Crestmark Bank in the US and Westpac Bank in Australia, will then total £6.5 million, fully secured against assets of £38.8 million (as extracted from the unaudited accounting records of the Company at 3 April 2010). The split of the banking facilities (excluding the Loan) between each of the countries in which the Group operates, will then be as follows:
·; UK: £3.0 million;
·; USA: £1.2 million;
·; South Africa: £1.5 million; and
·; Australia: £0.8 million.
The Directors believe that the above banking facilities, together with the net proceeds of the Loan, will provide the Group with greater working capital headroom to focus on creating value through its principal product areas and invest in its manufacturing base. The Loan will be used, in particular, to:
·; fund the anticipated growth of the Group's machine tools and laser marking businesses;
·; complete the final stages of the turnaround; and
·; increase manufacturing capacity in Europe.
If, however, the Resolutions are not passed at the General Meeting and the Fundraising does not proceed, the Directors believe that the Group would be required to continue to manage its short-term cash position ahead of longer term strategic goals, which the Directors believe would not be in the best interests of Shareholders or the Group as a whole.
3. Effect of the Fundraising on existing Shareholders
Subject to Shareholder approval, the Warrants will provide the Lenders with the rights to subscribe for New Ordinary Shares representing approximately 22 per cent of the Company's current issued share capital.
If the Lenders exercise the Warrants in full, the Company's Enlarged Share Capital would comprise 69,723,679 New Ordinary Shares. On this basis, the New Ordinary Shares to be issued to the Lenders would represent approximately 18 per cent of the Company's Enlarged Share Capital.
Upon the issue of the New Ordinary Shares following exercise of the Warrants, the Independent Shareholders will be diluted as to approximately 13 per cent in terms of their interests in the Enlarged Share Capital of the Company.
4. The Related Party Transactions
Haddeo currently holds 16,125,868 Ordinary Shares, representing 28.18 per cent of the Company's issued share capital. The entry into the Loan and the issue of the Warrants by the Company therefore each constitutes a related party transaction requiring Shareholder approval under Chapter 11 of the Listing Rules. Haddeo will, given the related party nature of the Loan and the Warrants, not vote at the General Meeting on (i) Resolution 1 authorising the Directors to enter into the Loan; and (ii) Resolution 2 authorising the Directors to issue the Warrants. Haddeo has undertaken to take all reasonable steps to ensure that its associates will also not vote on Resolutions 1 and 2 at the General Meeting.
5. The Capital Reorganisation
Reasons for the Capital Reorganisation
The Warrants will be exercisable at 20 pence per Ordinary Share which represents a discount to the current 25 pence nominal value of an Ordinary Share. Company law prohibits the issue of shares at a price below their nominal value and, accordingly, a share capital reorganisation will be necessary in order to undertake the issue of the Warrants.
6. The Takeover Code
Under Rule 9 of the Takeover Code, any person who acquires an interest (as defined in the Code) in shares which, taken together with shares in which he is already interested and in which persons acting in concert with him are interested, carry 30 per cent or more of the voting rights of a company which is subject to the Code, is normally required to make a general offer to all the remaining shareholders to acquire their shares.
An offer under Rule 9 must be made in cash and at the highest price paid by the person required to make the offer, or any person acting in concert with him, for any interest in shares of the Company during the 12 months prior to the announcement of the offer.
The members of the Haddeo Concert Party are deemed to be acting in concert for the purpose of the Code. At the date of this document, the members of the Haddeo Concert Party are between them interested in 16,750,668 Ordinary Shares, representing approximately 29.27 per cent of the Company's issued share capital. Following completion of the Fundraising, assuming exercise in full by the members of the Haddeo Concert Party of the Warrants issued as part of the Fundraising (and assuming that no other person converts any convertible securities or exercises any options or any other right to subscribe for shares in the Company, the members of the Haddeo Concert Party would between them be interested in 23,145,868 Ordinary Shares, representing approximately 36.38 per cent of the Company's enlarged issued voting share capital. The earliest date on which the Warrants can be exercised is 27 August 2010.
The Panel has agreed, however, to waive the obligation to make a general offer that would otherwise arise as a result of the exercise of the Warrants, subject to the approval of the Independent Shareholders. Accordingly, Resolution 3 is being proposed at the General Meeting and will be taken on a poll. Any member of the Haddeo Concert Party who is also a Shareholder will not be entitled to vote on the resolution.
Following exercise of the Warrants, the members of the Haddeo Concert Party will between them be interested in shares carrying 30 per cent or more of the Company's voting share capital but will not hold shares carrying more than 50 per cent of such voting rights and for so long as they continue to be treated as acting in concert any further increase in the aggregate interest in shares will be subject to the provisions of Rule 9.
7. General Meeting
The notice convening the General Meeting of the Company to be held at Union Street, Heckmondwike, Wakefield WF16 0HL on 27 August 2010 at 10.00 a.m. The purpose of this meeting is to seek Shareholders' approval of the Resolutions set out in the notice of the General Meeting.
8. Recommendation
The Board has received financial advice from Evolution in relation to the Fundraising, the Rule 9 Waiver, the Related Party Transactions and the Capital Reorganisation. In providing advice to the Board, Evolution has taken into account the Board's commercial assessment of the Group's funding requirements.
The Board, having been so advised by Evolution, believes that the entry into of the Loan is fair and reasonable as far as Shareholders are concerned. Haddeo will, given the related party nature of the Loan, not vote on Resolution 1 authorising the Directors to draw down the Loan. Haddeo has taken all reasonable steps to ensure that its associates will also not vote on Resolution 1.
The Board, having been so advised by Evolution, believes that the issue of the Warrants is fair and reasonable as far as Shareholders are concerned. Haddeo will, given the related party nature of the Warrants, not vote on Resolution 2 authorising the Directors to issue the Warrants. Haddeo has taken all reasonable steps to ensure that its associates will also not vote on Resolution 2.
The Board, having been so advised by Evolution, believes that the Rule 9 Waiver is fair and reasonable and in the best interests of the Independent Shareholders and the Company as a whole. In accordance with the Code, members of the Haddeo Concert Party who are also Shareholders will not vote on the Whitewash Resolution.
The Board considers, having been so advised by Evolution, the Fundraising, the Rule 9 Waiver, the Related Party Transactions, the Capital Reorganisation and each of the associated Resolutions to be fair and reasonable and in the best interests of the Shareholders and the Company as a whole.
The Board unanimously recommends Shareholders to vote accordingly in favour of the Resolutions, as the Directors intend to do in respect of their own beneficial holdings amounting, in aggregate, to 40,000 Ordinary Shares, representing approximately 0.06 per cent of the Company's issued share capital.
9. Timetable
Each of the times and dates in the timetable below is indicative only and may be subject to change:
| Latest time and date for receipt of Forms of Proxy | 10.00 a.m. on 25 August 2010 |
| Latest time and date for receipt of electronic proxy appointments via the CREST system | 10.00 a.m. on 25 August 2010 |
| General meeting | 10.00 a.m. on 27 August 2010 |
| Record date for Capital Reorganisation | 5.00 p.m. on 27 August 2010 |
| Capital Reorganisation implemented | 8.00 a.m. on 31 August 2010 |
DEFINITIONS
The following definitions apply throughout this announcement, unless the context otherwise requires:
| "£" | pounds sterling, the lawful currency of the UK |
| "Board" or "Directors" | the members of the board of directors of the Company listed on page 5 of the Circular |
| "Capital Reorganisation" | the proposed reorganisation of the Ordinary Shares into New Ordinary Shares and Deferred Shares, as more particularly described in this document |
| "CREST" | the relevant system (as defined in the Regulations) in respect of which Euroclear UK and Ireland Limited is the operator (as defined in the Regulations) |
| "Enlarged Share Capital" | the issued share capital of the Company as enlarged by the admission to trading of the New Ordinary Shares following the completion of the Fundraising assuming the full exercise of all the Warrants |
| "Evolution" | Evolution Securities Limited, financial adviser to the Company in respect of the Fundraising |
| "FSMA" | Financial Services and Markets Act 2000 (as amended) |
| "Fundraising" | the Company's plans to raise additional funds through the Haddeo Loan |
| "General Meeting" | the general meeting of the Company to be held at Union Street, Heckmondwike, West Yorkshire WF16 0HL on 27 August 2010 at 10.00 a.m., notice of which is set out on page 28 of the Circular |
| "Haddeo" | Haddeo Partners LLP |
| "Haddeo Concert Party" | means Haddeo, RHPS, WH Ireland and the employees of WH Ireland named in paragraph 4 of Part III of the Circular including their immediate families and related trusts |
| "HSBC" | HSBC Bank plc |
| "Independent Shareholders" | all of the Shareholders excluding Haddeo and any other Lender to the extent that they are holders of the Company's issued share capital carrying voting rights (and only to such extent) |
| "Lenders" | Haddeo and the other lenders to the Company pursuant to the Loan Agreement, and "Lender" means one of them |
| "Listing Rules" | the listing rules made by the UK Listing Authority for the purpose of Part VI of FSMA |
| "Loan" | the £2.5 million term loan to be provided by the Lenders on the terms set out in the Loan Agreement |
| "Loan Agreement" | the loan facility agreement constituting the Loan to be entered into by the Company pursuant to which the Lenders agree to make available to the Company a secured term loan of £2,500,000, subject to the passing of the Resolutions |
| "Mandatory Offer" | from Rule 9 of the Code |
| "New Ordinary Shares" | the New Ordinary Shares of one penny each in the capital of the Company following sub-division of the Ordinary Shares as a result of the Capital Reorganisation, and "New Ordinary Share" means one of them |
| "Ordinary Shares" | existing ordinary shares of 25 pence each (or, as appropriate, following the Capital Reorganisation, New Ordinary Shares of one penny each) in the capital of the Company, and "Ordinary Share" means one of them |
| "Panel" | the Panel on Takeovers and Mergers |
| "Related Party Transactions" | the entering into of the Loan and the grant of the Warrants |
| "Resolutions" | the resolutions set out in the notice of General Meeting at the end of this document |
| "RHPS" | Rupert Hambro & Partners Limited Pension Scheme |
| "Shareholders" | holders of Ordinary Shares (or, as appropriate, following the Capital Reorganisation, New Ordinary Shares or Deferred Shares) and "Shareholder" means any of them |
| "Takeover Code" or "Code" | the City Code on Takeovers and Mergers |
| "UK" | United Kingdom |
| "UK Listing Authority" or "UKLA" | the FSA acting in it capacity as the competent authority for the purposes of FSMA |
| "US" or "USA" | the United States of America, its territories and dependencies |
| "Warrants" | the warrants to be granted to the Lenders on the terms set out in the Warrant Instrument, giving them the right to subscribe for up to an aggregate of 12,500,000 New Ordinary Shares at a price of 20 pence per New Ordinary Share |
| "Warrant Instrument" | the warrant instrument to be executed by the Company pursuant to which, subject to the passing of the Resolutions, the Warrants are constituted |
| "WH Ireland" | WH Ireland Limited, a wholly owned subsidiary of WH Ireland Group PLC |
| "Whitewash Resolution" or "Whitewash" | the ordinary resolution of the Independent Shareholders concerning the waiver of obligations under Rule 9 of the Code to be proposed at the General Meeting as set out in the notice of the General Meeting at the end of this document |