Last checked at 8 Sep 2010 07:00
08 September 2010
TANFIELD GROUP PLC ("Tanfield" or the "Company")
Open Offer of 20,000,000 new Ordinary Shares at 10p per share
Highlights
·; Open Offer to all shareholders of 20 million new ordinary shares to raise up to £2.0m before costs
·; Issue Price of 10p per share (31.0% discount to closing price on 7 September 2010), one new share for approximately every 3.7 existing shares
·; Over 90% of Open Offer underwritten by certain Directors and Institutional Investors
·; Directors undertaking to take up entlements in full in respect of their beneficial holdings
·; Provides short term working capital to allow completion of expected electric vehicle consolidation
·; Certain Directors also providing £750,000 standby loan facility in the interim
Jerry Wooding, Deputy Chairman of The Tanfield Group Plc, said:
"The Board believes that this fundraising represents the best solution to Tanfield's immediate working capital requirements and the high proportion of underwriting gives us certainty of success of the Open Offer"
"It is imperative that shareholders support this initiative by voting in favour of the resolution at the General Meeting on 30 September 2010, whether or not they are planning to take up their entitlement under the Open Offer."
This announcement should be read in conjunction with the full announcement below and Circular which will be posted to shareholders today and is available on the Company's website www.tanfieldgroup.com .
Further information
Tanfield Group plc 0845 155 7755
Darren Kell / Charles Brooks
Arbuthnot Securities Limited (NOMAD and Broker) 020 7012 2000
James Steel / Edward Gay
Open Offer of 20,000,000 new
Ordinary Shares at 10 pence per share
The Board today announces that the Company is proposing an Open Offer to shareholders of up to 20,000,000 new Ordinary Shares at 10 pence per Open Offer Share to raise gross proceeds of up to approximately £2.0 million (approximately £1.8 million net of expenses).
Qualifying Shareholders are being offered the opportunity to subscribe at the Issue Price for Open Offer Shares on the following basis:
1 Open Offer Share for every 3.7038609 Existing Ordinary Shares
Of the 20,000,000 Open Offer Shares, undertakings have been received from the Directors to subscribe for 1,614,554 Open Offer Shares (representing the Open Offer Entitlements in respect of their beneficial holdings of Ordinary Shares). In addition, an Underwriting Group of Directors (Roy Stanley, Darren Kell and Jon Pither (through his management company Surrey Management Services)) and institutional investors has undertaken to subscribe for, in aggregate, up to a further 18,250,000 Open Offer Shares, to the extent that these are not taken up by Qualifying Shareholders. Accordingly, the Company expects to issue at least 19,864,554 Open Offer Shares and to raise minimum gross proceeds of £1.99 million (£1.8 million net of expenses).
The Issue Price represents a discount of approximately 31.0 per cent. to the Closing Price of 14.5 pence per Ordinary Share on 7 September 2010 (being the last business day before the announcement of the Open Offer).
The Open Offer is conditional, inter alia, on the passing at the General Meeting of the Resolution, which will provide the Directors with authority to implement the Open Offer.
Extracts from the Circular, including the expected timetable and Open Offer statistics, are set out below and the document will be available on the Company's website at www.tanfieldgroup.com, in accordance with the requirements of the AIM Rules.
All defined terms used in this announcement shall have the meaning given to them in the Circular unless otherwise defined herein.
Reasons for the Open Offer and use of proceeds
On 9 August 2010, the Board of the Company announced that it had signed non-binding Heads of Terms to consolidate its electric vehicle businesses under SEV US, its US associate company. In its Interim Statement published on 18 August 2010 the Board announced that, despite the Company's focus on cash preservation, its net cash had fallen to £2.2 million at 30 June 2010 and that, as a priority, it was reviewing alternative ways to fund the continuing cash outflow until it could complete the consolidation of its electric vehicle businesses which was under negotiation and successful implementation of which was expected to lead to a cash inflow for the Company.
On 26 August 2010 the Board announced that, in view of the absence of available credit facilities, the Company was in negotiations to finalise a possible equity raising, to be structured on a pre-emptive basis as an open offer to all Shareholders and partially underwritten by certain of its Directors, at a substantial discount to the then share price. The Open Offer announced today represents the culmination of those negotiations.
The Board announces today that:
i. certain institutional investors have agreed to underwrite a proportion of the Open Offer in addition to the partial underwriting provided by certain Directors; and
ii. pending receipt of the Open Offer proceeds and in addition to their underwriting commitments, Roy Stanley, Darren Kell and Jon Pither (through his management company Surrey Management Services) have today agreed to provide the Company with facilities under Standby Loan Agreements amounting to £0.75 million. The terms of these facilities are set out below.
The Directors believe that the Company needs access to the proceeds of the Open Offer and, in the meantime, the funds available under the Standby Loan Agreements in order to strengthen its financial position. The funds will be used to support its supply chain and for general working capital purposes and are expected to provide funding for a short period within which to complete the consolidation of the Company's electric vehicle businesses. The Directors expect such consolidation, if implemented successfully, to result in a cash inflow in the short-term and in the longer-term to allow the combined electric vehicle business to fulfil its potential.
Consolidation of the electric vehicle businesses
The consolidation of the electric vehicles businesses remains subject to negotiation.
SEV US is currently discussing with potential investors the possibility of raising additional funds to support its ambitious growth plans. The money raised would be used to provide working capital to accelerate the growth of the business and to pay the Company for its electric vehicle operations. This round of SEV US fundraising is seen as a precursor to a possible public offering of SEV US's equity securities on the US NASDAQ exchange, which could take place as early as the first half of 2011.
SEV US's progress to date has been reported in various announcements by the Company and includes the award of a $32m US Government Department of Energy grant to accelerate the implementation of the electric vehicles. In addition it has successfully implemented its build and delivery plan and won new business with US blue chip clients. The Directors expect that future growth in the US will be significantly more rapid than in the European market, due to the number of Federal and State initiatives to drive demand and application. These factors, together with the opportunities presented in its market place, suggest to the Board that with adequate funding, the growth potential of SEV US is very significant. The Company expects to retain its holding in SEV US in order to benefit from any increased value in the event that this growth potential is realised.
The Directors consider that SEV US has an attractive investment case to present to potential investors. The current round of funding under discussion by SEV US will result in a dilution of the Company's shareholding in SEV US. However, the Directors believe that the potential acceleration in its performance following an injection of additional capital will result in a higher value of the Company's retained holding.
On completion of the expected consolidation and associated cash inflow for the Company, the Company will continue to operate in the powered access market. As indicated in the Company's Interim Statement, the Directors believe that the global market for aerial lifts has bottomed out, but that the low levels of activity mean there is little potential for growth before 2011. However, major buyers of powered access products have been ageing their fleets. Growth may result from some re-investment in new equipment at some point in 2011, dependent also on wider economic indicators and the availability of financing. The Company should be in a position to address this growth.
There can be no assurance that SEV US will secure the necessary funding within the short time available. Without that funding, the Company would not receive a cash inflow and would have to review its financial position and ability to access alternative sources of financing.
Principal Terms of the Open Offer
Structure
The Company is proposing to raise gross proceeds of up to £2.0 million (approximately £1.8 million net of expenses) by the issue of up to 20,000,000 new Ordinary Shares through the Open Offer at 10 pence per Open Offer Share. Qualifying Shareholders are being offered the right to subscribe for Open Offer Shares in accordance with the terms of the Open Offer on the basis of one new Open Offer Share for approximately every 3.7038609 Ordinary Shares held.
The Issue Price represents a discount of approximately 31.0 per cent. to the Closing Price of 14.5 pence per Ordinary Share on 7 September 2010 (being the last Business Day before the announcement of the Open Offer).
The New Issue is expected to result in up to 20,000,000 new Ordinary Shares being issued (representing up to approximately 27 per cent. of the existing issued share capital and 21.26 per cent. of the Enlarged Ordinary Share Capital).
The Open Offer is being partially underwritten by the Underwriting Group. Under the terms of the Underwriting Agreement, the Underwriting Group has agreed to subscribe for, in aggregate, up to a further 18,250,000 Open Offer Shares in the proportions Roy Stanley 41.1 per cent., Darren Kell 17.8 per cent., Jon Pither (through Surrey Management Services) 8.2 per cent. and Institutional Underwriters 32.9 per cent. respectively, to the extent that these are not taken up by Qualifying Shareholders. Each of the Underwriting Directors and Surrey Management Services is entitled to set off against subscription monies due under the Underwriting Agreement corresponding amounts owing to them by the Company under the Standby Loan Agreements. No warranties or indemnities are given under the Underwriting Agreement (other than that the Open Offer Shares to be issued to the Underwriting Group shall be issued free from all encumbrances). No fees or commissions are payable in respect of these underwriting obligations. The obligations of the Underwriting Group are conditional, inter alia, on the passing of the Resolution at the General Meeting.
Taken together with undertakings received from the Directors to subscribe for 1,614,554 Open Offer Shares (representing the Open Offer Entitlements in respect of their beneficial holdings of Ordinary Shares), the Company expects the Open Offer to result in the issue of at least 19,864,554 Open Offer Shares and to raise minimum gross proceeds of £1.99 million (£1.8 million net of expenses).
Some questions and answers in relation to the Open Offer, together with details of further terms and conditions of the Open Offer, including the procedure for application and payment, are set out in the Circular and, where relevant, are set out in the Application Form.
Open Offer
The Directors recognise the importance of pre-emption rights to Shareholders and consequently all of the Open Offer Shares are being offered to Qualifying Shareholders by way of the Open Offer, which is being made in accordance with the statutory pre-emption provisions of the 2006 Act. The Open Offer provides an opportunity for Qualifying Shareholders to participate in the fundraising by subscribing for their respective Open Offer Entitlements.
In the event that valid applications are not received in respect of all of the Open Offer Shares under the Open Offer, unallocated Open Offer Shares will not be allotted to Qualifying Shareholders and will instead be subscribed by members of the Underwriting Group up to in aggregate 18,250,000 Open Offer Shares. The Directors may arrange for any remaining unallocated Open Offer Shares to be placed with investors, with the net proceeds retained for the benefit of the Company. Any such placing would involve investors paying at least the same price per share as the Issue Price.
Open Offer Entitlements
Qualifying Shareholders are being offered the opportunity to subscribe at the Issue Price for Open Offer Shares on the following basis:
1 Open Offer Share for every 3.7038609 Existing Ordinary Shares
registered in their name at the close of business on the Record Date.
Open Offer Entitlements under the Open Offer will be rounded down to the nearest whole number and any fractional entitlements to Open Offer Shares will not be allocated but will be aggregated and sold for the benefit of the Qualifying Shareholders who subscribe for Open Offer Entitlements save that to the extent that the net proceeds of any such sale for such Qualifying Shareholders shall be less than £3, such amount shall be retained for the benefit of the Company. If a shareholder has sold or otherwise transferred all of his Existing Ordinary Shares before the Ex-Entitlement Date, he will not be entitled to participate in the Open Offer.
Conditionality
The Open Offer is conditional, inter alia, upon:
·; the Press Announcement having been released via a Regulatory Information Service by not later than today's date;
·; the posting of this document to Qualifying Shareholders by not later than today's date;
·; the passing of the Resolution to be proposed at the General Meeting; and
·; Admission becoming effective by not later than 8.00 a.m. on 1 October 2010 (or such later time and date as the Company may agree, not being later than 8.00 a.m. on 15 October 2010).
Standby Loan Agreements
In addition to their underwriting commitments as members of the Underwriting Group, three Directors, Roy Stanley, Darren Kell and Jon Pither (through his management company Surrey Management Services), have today entered into Standby Loan Agreements on the same terms with the Company pursuant to which they will make available to the Company on demand £450,000, £225,000 and £75,000 respectively pending receipt of the Open Offer proceeds. The principal terms of the Standby Loan Agreements are summarised in the Circular, however some of the terms are detailed below.
The loans are available for draw down and are repayable on a pari passu basis
Interest is payable on the loans at the rate of 12 per cent. per annum.
Each of the Directors entering into Standby Loan Agreements (in the case of Jon Pither through Surrey Management Services) have a right to set off monies due by them to the Company under the Underwriting Agreement against monies due by the Company to them under their Standby Loan Agreement. Repayment of these loans will be made from the net proceeds of the Open Offer or set off as specified. If the Open Offer is not concluded by 8 October 2010, the loans become repayable on 15 Business Days notice by either party.
The Company's obligations under the Standby Loan Agreements are secured by Debentures granted to Roy Stanley, Darren Kell and Surrey Management Services. The Debentures are in a relatively standard form and constitute a fixed and floating charge over the Company's assets. If the Open Offer proceeds to Admission and the Standby Loan Agreements are set off or repaid, the Debentures will be released. Further details of the Debentures are summarised in the Circular.
Irrevocable Undertakings
The Company has received irrevocable undertakings from its Directors to apply for their full Open Offer Entitlements amounting in aggregate to 1,614,554 Open Offer Shares in respect of their beneficial holdings of Ordinary Shares.
These undertakings are in addition to the underwriting commitments given by the members of the Underwriting Group that in the event that not all of the Open Offer Shares are taken up by Qualifying Shareholders, they will subscribe for up to an aggregate of 18,250,000 Open Offer Shares in the proportions Roy Stanley 41.1 per cent., Darren Kell 17.8 per cent., Jon Pither (through Surrey Management Services) 8.2 per cent. and Institutional Underwriters 32.9 per cent. respectively.
Related Party Transactions
The subscriptions by Roy Stanley, Darren Kell and Jon Pither (through his management company Surrey Management Services) under the Underwriting Agreement and their entry into the Standby Loan Agreements and the Debentures constitute related party transactions within the meaning of the AIM Rules. The Directors consider, having consulted with Arbuthnot, the Company's nominated adviser, that the terms of these transactions are fair and reasonable in so far as the Shareholders are concerned.
General Meeting
For the reasons set out in the Circular, it is proposed to implement the Open Offer pursuant to the Resolution to be proposed at a General Meeting on 30 September 2010. If the Resolution is passed at the General Meeting, the authority of the Directors to allot new shares will be limited to allotting the Open Offer Shares.
A notice convening the General Meeting to be held at 9.00 a.m. on 30 September 2010 at the registered office of the Company at Vigo Centre, Birtley Road, Washington, Tyne and Wear, NE38 9DA, for the purpose of considering and, if thought fit, passing the Resolution, is contained within the Circular.
The Resolution proposes to authorise the Directors for the purposes of Section 551 of the 2006 Act to exercise all the powers of the Company to allot shares and/or to grant such rights to subscribe for or to convert any security into shares in the Company in connection with the Open Offer up to an aggregate nominal amount of £1,000,000. If passed, such authority will expire on 30 October 2010.
The Resolution will be proposed as an ordinary resolution, requiring the consent of more than 50 per cent. of the Shareholders or their proxies who vote on such resolution.
Risk Factors and Additional Information
An investment in Open Offer Shares carries a significant degree of risk. In particular, there can be no assurance that the discussions with SEV US, which remain subject to financing, will lead to a successful outcome and a cash inflow for the Company. If the Company failed to receive the expected cash inflow in the short-term, it would have to review its financial position and ability to access alternative sources of funding.
Shareholders' attention is drawn to the risk factors and additional information contained in the Circular. Shareholders are advised to read the whole of the Circular and not rely only on the summary information presented in this announcement.
Expected Timetable of Principal Events
|
| 2010 |
| Record Date for Open Offer Entitlements | close of business on Monday 6 September |
| Announcement of the Open Offer, publication and posting of this document, Forms of Proxy and Application Forms | Wednesday 8 September |
| Ex-Entitlement Date for the Open Offer | Wednesday 8 September |
| Open Offer Entitlements credited to stock accounts of Qualifying CREST Shareholders | as soon as possible after 8.00 a.m. on Thursday 9 September |
| Notice of the Open Offer published in the London Gazette | Friday 10 September |
| Recommended latest time for requesting withdrawal of Open Offer Entitlements into CREST | 4.30 p.m. on Wednesday 22 September |
| Latest time for depositing Open Offer Entitlements | 3.00 p.m. on Thursday 23 September |
| Latest time and date for splitting of Application Forms (to satisfy bona fide market claims only) | 3.00 p.m. on Friday 24 September |
| Latest time and date for receipt of completed Application Forms and payment in full under the Open Offer or Settlement of relevant CREST Instruction | 11.00 a.m. on Tuesday 28 September |
| Latest time and date for receipt of Forms of Proxy | 9.00 a.m. on Tuesday 28 September 2010 |
| General Meeting | 9.00 a.m. on Thursday 30 September 2010 |
| Admission and commencement of dealings in Open Offer Shares | by 8.00 a.m. on Friday 1 October |
| CREST members' accounts credited in respect of Open Offer Shares in uncertificated form | as soon as possible after 8.00 a.m. on Friday 1 October |
| Despatch of definitive share certificates for Open Offer Shares in certificated form | within 10 Business Days of Admission |
Open Offer Statistics
| Issue Price per Open Offer Share | 10 pence |
| Open Offer Entitlements under the Open Offer | 1 Open Offer Share for every 3.7038609 Existing Ordinary Shares |
| Number of Ordinary Shares in issue at the date of this document | 74,077,218 |
| Number of Open Offer Shares to be issued by the Company | up to 20,000,000 |
| Enlarged Ordinary Share Capital | up to 94,077,218 Ordinary Shares |
| Open Offer Shares as a percentage of Enlarged Ordinary Share Capital | up to 21.26 per cent. |
| Gross proceeds of the New Issue | up to £2.0 million |
| Estimated net proceeds of the New Issue receivable by the Company | £1.8 million |
ENDS