StatPro Regulatory News (SOG)

27 Sep 2006 07:03

Statpro Group PLC27 September 2006 27 September 2006 StatPro Group plc ("StatPro", the "Group" or the "Company") PROPOSED ACQUISITION OF FRI CORPORATION, PLACING OF NEW ORDINARY SHARES TO RAISE APPROXIMATELY £10.6 MILLION TRADING UPDATE StatPro, the AIM listed provider of portfolio analytics solutions for the globalasset management industry, today announces the proposed acquisition of FRICorporation ("FRI"). Highlights: • acquisition of FRI for an aggregate consideration of CDN$53.0 million (£25.0 million) to be funded by a combination of a Placing, new banking facilities and existing cash resources • Placing of 12,000,000 new shares by Arbuthnot Securities Limited with institutional and other investors at 88 pence per share representing a discount of approximately 5 per cent. to the prevailing mid-market price, to raise approximately £10.6 million before expenses, representing approximately 23.4 per cent. of the enlarged issued share capital of the Company • The Board expects that the Acquisition will be earnings enhancing in the Group's financial year to 31 December 2007 • As part of the Placing, certain of the Directors and senior management have agreed to subscribe for an aggregate of 585,223 Placing Shares • Since its interim results, the Company has continued to perform well; prospects for the remainder of 2006 continue to be positive for all of the Company's products across all of its territories. As expected, the Company is continuing to see strong demand in particular for its risk and fixed income products • The Placing and the Acquisition are conditional upon the approval of shareholders at an extraordinary general meeting of the Company to be held on 20 October 2006 • Arbuthnot Securities Limited are acting as NOMAD and broker to the Company Placing Statistics Placing Price 88pNumber of Existing Ordinary Shares 39,341,410Number of Placing Shares being placed on behalf of the Company 12,000,000Gross proceeds of the Placing receivable by the Company £10.6 millionNumber of Ordinary Shares in issue immediately followingAdmission 51,341,410Percentage of the Enlarged Share Capital being placed pursuant to the Placing 23.4 per cent. Commenting on the Acquisition and the Placing, Justin Wheatley, Chief Executiveof StatPro said: "The Acquisition significantly strengthens the Company's position in the NorthAmerican market and creates a number of cross-selling opportunities to ourclients. FRI is one of the leading sources of bond data and the Acquisition willenable the Company to provide a total solution for our clients. The Acquisitioncontinues our stated strategy to grow by acquiring new products and investing insuch products for growth, rather than developing products from inception. "Furthermore, we are delighted with the success of the Placing and we welcomeour new institutional shareholders and thank our existing shareholders for theircontinued support." Commenting on the transaction Eligio M. Gaudio, President and Chief ExecutiveOfficer, FRI said: "This is a truly exciting, great step forward for both FRI and our clients. Webelieve that there are considerable product synergies to be realised in joiningFRI and StatPro. Together, we will be able to bring to our clients a full rangeof integrated solutions to meet their needs." An analysts' meeting will be held at 9.45 for 10.00am at the offices of Smithfield, 10 Aldersgate Street, London, EC1A 4HJ For further information please contact: StatPro Group plc 020 8410 9876Justin Wheatley, Chief Executive www.statpro.comAndrew Fabian, Finance Director Arbuthnot Securities 020 7012 2000Tom Griffiths/Neil Kirton Smithfield 020 7360 4900Reg Hoare Notes to Editors: StatPro Group plc is a leading provider of portfolio analyticssolutions for the global asset management industry. StatPro floated on theLondon Stock Exchange in May 2000 and transferred its listing in June 2003 toAIM. StatPro has grown its revenue from continuing operations from £1.8 millionin 1999 to £10.8 million in 2005. 1. Introduction The Company announces the proposed acquisition of FRI (the "Acquisition") for anaggregate consideration of approximately CDN$53.0 million (£25.0 million) and toraise £10.6 million (before expenses) by way of a placing of 12,000,000 newOrdinary Shares at a price of 88 pence per share (the "Placing"). The netproceeds of the Placing will be used to fund part of the cash element of theconsideration payable for FRI. The balance of the cash element of theconsideration payable for FRI will be satisfied out of the Bank Facility andexisting cash resources. FRI is an investment management solutions company based in Canada. It is aleading provider of securities information services, asset, wealth and tradingmanagement software solutions to approximately 190 clients. The aggregateconsideration payable for the entire issued share capital of FRI is CDN$53.0million (£25.0 million), subject to certain adjustments, which is to besatisfied as to CDN$50.3 million (£23.7 million) in cash payable on Completion.The balance of the consideration payable for FRI is to be provided by way of aclass of exchangeable shares in FRI to be retained by FRI's senior management,which exchangeable shares will effectively be exchangeable for new OrdinaryShares in the Company. The Acquisition is in line with StatPro's stated strategy to grow by acquiringnew products and investing in such products for growth, rather than developingproducts from inception. The Directors believe that investing in new productsrather than developing from inception reduces risk, brings critical expertise inthe domain of each product and helps build the strong client relationships andservice culture that increase the number of products used by each client. In the opinion of the Directors, the acquisition of FRI will thus complement theGroup's existing activities and strengthen the Group's competitive andgeographical positions. It will allow StatPro to extend its product reach,namely by the provision of software combined with market and other data, whilstalso enhancing the Group's ASP offering and providing a total solution that canbe offered to smaller customers. In addition, the Acquisition will significantlyincrease the Group's North American presence and provide opportunities to offerthe Group's existing products to FRI's clients and vice-versa. It will alsofurther boost the Group's successful South African business, which was recentlystrengthened by the acquisition of Kizen in May 2006. In addition, the Directorsexpect that the Group will derive operational synergies as a result of combiningFRI with StatPro. The Board expects that the Acquisition will be earnings enhancing in the Group'sfinancial year to 31 December 2007. The Placing Shares have been conditionally placed with institutional and otherinvestors. Subject, inter alia, to the passing of the resolution numbered 1 inthe EGM Notice at the EGM, Completion of the Acquisition and Admission anddealings in the Placing Shares are expected to commence on AIM on 24 October2006. 2. Information on FRI FRI, which is a Canadian corporation, is based in Toronto and Montreal. It wasfounded in 1968 and the current management team has managed the business since1995. FRI has grown revenues from CDN$10.6 million (£5.0 million) in 2002 toCDN$19.6 million (£9.2 million) in 2005. FRI's business comprises valuation data, where it provides pricing onapproximately 450,000 assets, and portfolio management systems. FRI is a leadingsource of Canadian bond data and also supplies pricing data on otherinternational instruments. Furthermore, FRI is capable of handling complexassets such as credit derivatives and mortgage-backed securities. FRI hasapproximately 190 clients, comprising fund managers and custodians, primarilybased in the US and Canada, and including many of the industry leaders. OutsideNorth America, clients include the Johannesburg Stock Exchange. For the yearended 31 December 2005, FRI reported audited turnover of CDN$19.6 million (£9.2million) and profit before tax of CDN$2.6 million, (£1.2 million). As at 31December 2005, it had net assets of CDN$12.3 million (£5.8 million). 3. Background to and reasons for the Acquisition StatPro has made seven acquisitions of either products or small businesses since2000, the year its shares were first listed on the Official List of the LondonStock Exchange (before subsequently transfering to AIM in 2003). Each acquisition has added to, and complemented, the Company's existing range ofproducts and thereby created an opportunity to use the enhanced and enlargedproduct base to cross sell to both existing and new clients. This reduces theCompany's risk, and also brings critical expertise in the domain of each productby the addition of expert professionals to StatPro's team from the acquiredbusinesses. The Company's strategy, which the Board believes is beginning to come tofruition, is to provide a complete solution to its clients for all theirportfolio analytics needs. However, the Directors have recognised for some timethat the Group was under-represented in North America, which it believescomprises more than half of the global market opportunities for portfolioanalytics products. The Directors also believe that the North American market isa growing one, benefiting from consolidation and fragmentation amongst thecustomer base, whilst increasing regulation, such as Sarbanes Oxley, continuesto drive customer needs to invest in the type of products sold by the Group.Therefore, the acquisition of FRI is significant as it will enable the Companyto address this under-representation and further develop its products globally,thereby increasing its growth prospects. Following Completion, the Enlarged Group will have approximately 75 per cent.more clients, 440 client contracts in aggregate, of which nearly half by valuewill be with clients based in North America. In the short term, the Directorsintend to focus on addressing the opportunities to sell FRI's data products tothe Group's existing clients and offer the Group's portfolio of analyticsproducts to FRI's customers. The Board believes that the addition of FRI's datawill strengthen the Group's ability to offer a complete and enhanced service andthereby provide a realistic alternative to other systems/data solutionproviders, especially in the important North American market. 4. Terms of the Acquisition The total consideration payable by the Company for FRI is approximately CDN$53.0million (£25.0 million). The consideration is to be satisfied as to CDN$50.3million (£23.7 million) in cash payable on Completion. The cash element of theconsideration will be satisfied out of the net proceeds of the Placing, a termloan facility of up to £12 million, a revolving facility of up to £2.5 million(together the "Bank Facility") and existing cash resources. The balance of the consideration payable for FRI, being CDN$2.7 million (£1.3million) is to be provided by way of a class of exchangeable shares in FRI to beretained by FRI's senior management. The exchangeable shares in FRI willeffectively be exchangeable for new Ordinary Shares in the Company for up to 5years from Completion. The aggregate number of new Ordinary Shares to be issuedby the Company in respect of the exchangeable shares in FRI is 1,446,573Ordinary Shares. 5. Details of the Placing The Company proposes to raise approximately £10.6 million (before expenses)through the issue of the Placing Shares at the Placing Price. The Placing Pricerepresents a discount of approximately 5 per cent. to the closing mid-marketprice of 92.5 pence per Ordinary Share on 26 September 2006, being the lastdealing day prior to the publication of this document. The Placing Shares willrepresent 23.4 per cent. of the Company's Enlarged Share Capital. Application has been made to the London Stock Exchange for the Placing Shares tobe admitted to trading on AIM. It is expected that the Acquisition will becompleted, Admission will become effective and that dealings in the PlacingShares on AIM will commence on 24 October 2006. The Placing Shares will rank pari passu in all respects with the ExistingOrdinary Shares, including the right to receive all dividends and otherdistributions declared following Admission. It is expected that CREST accountswill be credited on the day of Admission and that share certificates (whereapplicable) will be despatched by 31 October 2006. As part of the Placing, certain of the Directors have agreed to subscribe inaggregate for 210,224 Placing Shares at the Placing Price, representing 1.8 percent. of the Placing Shares. The Directors' interests at the date of thisannouncement and on Admission are set out in the table below: As at the date of this document Immediately following Admission Directors Number of % of Existing Number of % of Enlarged Ordinary Shares Ordinary Shares Ordinary Shares Share Capital C.R. 295,000 0.75 317,727 0.62Bacon J.M.B.T 6,437,000 16.36 6,476,772 12.62Wheatley A.M. 10,000 0.03 21,363 0.04Fabian M.C. 265,500 0.67 299,590 0.58Fairbairn M.A. 1,454,000 3.70 1,533,545 2.99Adorian D.M.D.A. 1,804,760 4.59 1,827,487 3.56Wheatley In addition to the above holdings, J.M.B.T. Wheatley and D.M.D.A Wheatley hold255,000 Ordinary Shares (representing 0.65 per cent. of the Ordinary Shares atthe date of this announcement) in a family trust, each of them being a trusteeand potential beneficiary of the trust. 6. Bank Facility In order to finance part of the cash element of the consideration payable forthe Acquisition, the Company has entered into the Bank Facility. The Boardconsiders that it is in the best interests of the Company that the cash elementof the consideration payable for the Acquisition be funded by a combination ofdebt and equity in order to maximise the return to Shareholders. As part of thebanking arrangements, it has been agreed that the exercise period of theexisting warrant held by Kaupthing Singer & Friedlander Limited to subscribe forup to 130,000 Ordinary Shares at a price of 62.5 pence per share will beextended by one year so as to be exercisable at any time up until 31 October2007. 7. Current trading and prospects The Company reported its interim results for the six months ended 30 June 2006on 31 July 2006. The Group achieved a strong performance in the first half of2006 reflecting a significant increase in new business, strong demand for itsexpanding range of portfolio analytics products and a positive market place.Revenue increased by 26 per cent. to £6.33 million from £5.02 million in thecomparable period in 2005 and earnings per share rose by 43 per cent. to 2.0pfrom 1.4p in the comparable period in 2005. The Company's annualised value of recurring revenue grew to £12.0 million as at30 June 2006 (June 2005: £9.0 million) up from £10.1 million as at 31 December2005; of this £1.35 million resulted from net new contracts, £0.74 million wasderived from acquisitions during the period, and there was an adverse impact of£0.19 million due to currency movements. The increase in organic revenue since30 June 2005 was approximately 23 per cent. The Company paid a maiden dividend of 0.5 pence per Ordinary Share for thefinancial year 2005 on 31 May 2006 and as announced in the interim results for2006, proposes to pay a maiden interim dividend of 0.3 pence per share on 1November 2006 to Shareholders on the register at the close of business on 6October 2006. The Directors intend to maintain a progressive dividend policy,balancing the investment needs of the business and the growth in underlying cashand earnings per share. The Board is pleased to report that since the interim results, the Group hascontinued to perform well and prospects for the remainder of 2006 continue to bepositive for all of the Group's products across all of its territories. Asexpected, the Company is continuing to see strong demand in particular for itsrisk and fixed income products. This information is provided by RNS The company news service from the London Stock Exchange