24 Oct 2012 07:01
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TANGENT COMMUNICATIONS PLC
("Tangent" or the "Company")
Acquisition of Goodprint UK Limited ("Goodprint")
Placing of 100,000,000 Placing Shares at 10.00 pence per share (the "Placing")
Proposal for approval of a waiver of obligation under Rule 9 of the City Code on Takeovers and Mergers ("Rule 9 Waiver")
Notice of General Meeting
TANGENT ANNOUNCES A PLACING TO RAISE £10 MILLION TO ACQUIRE GOODPRINT AND TRANSFORM ITS PRESENCE IN THE RAPIDLY GROWING ONLINE CUSTOMISATION MARKET
Summary
·; Tangent announces the Acquisition of the entire issued share capital of the multi-national online company Goodprint for £10.2 million (assuming £3.4 million of cash on Goodprint's balance sheet at Completion). The consideration net of cash is therefore approximately £6.8 million;
·; The Acquisition provides access to Goodprint's 120,000 existing customers, boosts Tangent's international profile with immediate presence in 17 countries, including Germany, France, and the Netherlands, and gives access to Goodprint's innovative mobile technology. Goodprint delivered underlying operating profit of £1.2m for the year ended September 2012;
·; The Acquisition is to be partly funded by way of a £10 million placing, in which Tangent directors will subscribe for over 30% of the Placing Shares. The Placing was 51% over subscribed at 10.00 pence per share and attracted both existing and new institutional support;
·; The Placing proceeds will also be used to accelerate investment in online growth for the printed.com, goodprint.co.uk and smileprint (pan European domain) brands;
·; Tangent, earlier today, published its interim results for the half year ended 31 August 2012, which were in-line with expectations;
·; Tangent announces a proposal for shareholders to waive an obligation that would arise under Rule 9 of the City Code on Takeovers and Mergers upon the exercise of share options to be issued to certain directors;
·; Tangent gives notice of the General Meeting of the Company to be held at the offices of Slaughter and May, which are located at One Bunhill Row, London, EC1Y 8YY, at 11.00 a.m. on 9 November 2012. The acquisition, the Placing and the Rule 9 Waiver are conditional on, inter alia, the passing of the resolutions to be proposed at the General Meeting.
Timothy Green, Chief Executive Officer of Tangent, commented:
"Goodprint will sit alongside the existing printed.com business to create a multi brand web division. Printed.com has seen revenues grow by more than 100% in the six months to the end of August 2012. We believe that the combined company will be a major force in the rapidly growing market of small businesses and consumers who value the convenience online customisation and personalisation offers.
"Through the acquisition, Tangent will gain instant access to an international market since Goodprint already operates in 17 countries, including Germany, France, and the Netherlands. The deal will also boost Tangent's portfolio with access to a greater range of creative templates for marketing materials, over 120,000 new customers across Europe and an immediate presence on mobile.
"This acquisition represents a step change for our business. This industry is expanding and we intend to be amongst the leaders".
This summary should be read in conjunction with the full announcement that follows below.
A full copy of the circular (the "Circular") providing further details on, inter alia, the Acquisition and the Placing is available at the Company's website (http://tangentplc.com/reports)
For further information, please contact:
Tangent Communications plc
Timothy Green, CEO 020 7462 6100
Canaccord Genuity Limited
Bruce Garrow, Cameron Duncan, Emma Gabriel 020 7523 8350
Portland Communications 020 7842 0123
Louise Rutter
All capitalised terms used in this announcement shall (unless stated otherwise) have the same meaning as is given to them in the Circular which is available at the Company's website (http://tangentplc.com/reports)
Details of the Acquisition of Goodprint
The Company announces today that it will acquire the entire issued share capital of Goodprint (the "Acquisition"). The aggregate consideration for the Acquisition is £10,225,647.40, which has been calculated on the assumption that Goodprint's balance sheet includes £3,400,000 of cash at Completion (subject to the payment of certain tax liabilities totalling no more than £78,000). Accordingly, the net consideration is £6,825,647.40.
Goodprint is an online publisher based in the United Kingdom, offering the creation and delivery of marketing material to businesses and personal customers. Goodprint was incorporated in 1992 and has approximately 20 employees
Goodprint operates online through the brand name "Goodprint" in the UK and US markets, and "Smileprint" in other international markets.
The Acquisition Agreement is conditional on (inter alia): (i) the passing of the Resolutions at the General Meeting; (ii) the Placing Agreement not having been terminated in accordance with its terms; and (iii) receipt of the proceeds of the Placing by the Company.
Summary financials for Goodprint are set out below:
Financial year ended 30 September | Audited 2012 | Unaudited 2011 |
Revenues (£) | 4,049,495 | 3,744,325 |
Gross margin | 81% | 82% |
Operating profit (£) | 1,171,470(1) | 925,842 |
Profit after tax (£) | 611,176 | 693,257 |
Orders | 107,125 | 91,259 |
(1) Underlying adjusted operating profits
Strategic rationale for the Acquisition
The Directors believe that the Acquisition will provide Tangent with the following strategic benefits to facilitate the expansion of its online business:
(a) International access: the Enlarged Group will be immediately active in 17 international markets. Goodprint has demonstrated strong growth in overseas markets, with a 43% year-on-year increase in revenues between September 2011 to September 2012 and 37% of revenues coming from international markets for the year ended 30 September 2012;
(b) Design and content: the Enlarged Group will be immediately active in the retail market and Goodprint's existing technology and content will provide the Enlarged Group with a basis from which to offer an expanded range of products to customers;
(c) Customers: access to 120,000 online customers to drive loyalty programs and the cross selling of products;
(d) Mobile: the Enlarged Group will have the opportunity to capitalise on the mobile market through Goodprint's mobile site; and
(e) Increased profitability: Goodprint's underlying operating margin increased to 29% for the year ended 30 September 2012 from 25% for the year ended 30 September 2011. The Directors intend to draw on Goodprint's profile to improve Tangent's margin in its online business.
Details of the Placing
The Company proposes to raise gross proceeds of £10,000,000 through the issue of the 100,000,000 Placing Shares at the Placing Price of 10.00 pence per share to institutional and other investors. The Placing Price represents a discount of approximately 1.2 per cent. to the closing middle market price of 10.125 pence on 23 October 2012. The Placing Shares will represent approximately 36.2 per cent. of the Enlarged Share Capital.
The Placing Shares will rank pari passu with the existing Ordinary Shares and application will be made for the Placing Shares to be admitted to trading on AIM. It is expected that dealings in the First Placing Shares will commence on AIM on 12 November 2012. It is expected that dealings in the Second Placing Shares will commence on AIM on 13 November 2012.
In order to fall within the requirements of the legislation governing VCTs and EISs, the Placing will be carried out in two tranches. The First Placing Shares will be offered to those investors who may seek relief under the VCT and EIS legislation. The Second Placing Shares will be offered to non-EIS investors and to other investors who will not be seeking relief under the VCT and EIS legislation.
Use of proceeds of the Placing
The Company intends to use the gross proceeds from the Placing (and cash available following the acquisition) to:
·; Partly fund the acquisition of Goodprint;
·; Expand the Enlarged Group's online business, in particular the brands printed.com, Goodprint and Smileprint (the brand name through which Goodprint operates in certain international markets) and for the general working capital purposes of the Enlarged Group; and
·; Pay fees and expenses of approximately £780,000 (including VAT) incurred in connection with the Acquisition and the Placing.
Concert Party
The Company's largest Shareholder is Michael Green, who currently owns approximately 30.1 per cent. of the Company. Additionally, Nicholas Green (Tangent's Executive Director) owns approximately 1.5 per cent. of the Company and Timothy Green (Tangent's Chief Executive Officer) (together with his wife, Vicki Green) owns approximately 1.5 per cent. of the Company. Nicholas Green and Timothy Green are Michael Green's nephews.
These persons (the "Concert Party") are considered to be acting in concert for the purposes of the City Code and their aggregate shareholding is 58,538,464 Ordinary Shares, representing approximately 33.2 per cent. of the current issued share capital of the Company.
The participation of the Concert Party in the Placing will be pro rata to or proportionately lower than its members' existing holdings (the Concert Party will only participate in the Second Placing), as shown below.
The Panel on Takeovers and Mergers has confirmed that the Concert Party, or its individual members, will be able to subscribe for Placing Shares without triggering an obligation under Rule 9 of the City Code on Takeovers and Mergers provided that the resultant aggregate percentage interest of the Concert Party in the Ordinary Shares, following the completion of the Placing, does not exceed the Concert Party's current percentage interest in the Ordinary Shares of the Company.
Related Party Transactions
The participation of the Concert Party in the Placing will be a related party transaction for the purposes of Rule 13 of the AIM Rules for Companies as (i) each of Michael Green, Nicholas Green and Timothy Green are Directors of the Company and Vicki Green is the wife of Timothy Green, and (ii) the subscription by the Concert Party pursuant to the Placing for 32,628,925 Placing Shares at the Placing Price for a cash consideration of £3,262,892.50 will exceed 5 per cent. in certain of the class tests (as that term is defined in the AIM Rules for Companies). The resulting shareholding of the Concert Party, following its participation in the Placing, will be 33.0 per cent. of the Enlarged Share Capital of Tangent.
Additionally, ISIS Equity Partners ("ISIS") currently holds 17,923,077 Ordinary Shares, representing 10.2 per cent. of the
current issued share capital of Tangent. As this holding is more than 10 per cent. of the issued share capital of Tangent, ISIS is a substantial shareholder, and consequently a related party, for the purposes of the AIM Rules for Companies. The subscription by ISIS for 10,750,000 Placing Shares at the Placing Price for a cash consideration of £1,075,000.00 will exceed 5 per cent. in certain of the class tests and therefore will also be classified as a related party transaction for the purposes of Rule 13 of the AIM Rules for Companies. The resulting shareholding of ISIS, following its participation in the Placing, will be 10.4 per cent. of the Enlarged Share Capital of Tangent.
The Independent Directors, having consulted with the Company's nominated adviser, Canaccord Genuity, consider the terms on which Ordinary Shares are to be allotted to such persons pursuant to the Placing to be fair and reasonable insofar as Shareholders are concerned, and in the best interests of Shareholders and of the Company as a whole.
Directors' Dealings
The following directors have committed to acquire Ordinary Shares pursuant to the Placing at the Placing Price of 10.00 pence:
Director | Number of Ordinary Shares prior to the Placing (% of issued share capital) | Number of new Ordinary Shares to be acquired pursuant to the Placing (% of Placing Shares) | Number of Ordinary Shares after the Placing (% of issued share capital) | |||
Michael Green | 53,076,924 (30.1%) | 30,081,266 (30.1%) | 83,158,190 (30.1%) | |||
Nicholas Green | 2,730,770 (1.5%) | 1,000,000 (1.0%) | 3,730,770 (1.3%) | |||
Timothy Green(1) | 2,730,770 (1.5%) | 1,547,659 (1.5%) | 4,278,429 (1.5%) | |||
Kevin Cameron | 722,524 (0.4%) | 151,706 (0.2%) | 874,230 (0.3%) | |||
Alan Smith | 500,000 (0.3%) | 100,000 (0.1%) | 600,000 (0.2%) | |||
David Steyn | 150,853 (0.1%) | 149,147 (0.1%) | 300,000 (0.1%) | |||
Total Issued Share Capital | 176,445,113 (100%) | 276,445,113 (100%) |
(1) For the purposes of this table, Timothy Green's holding is taken together with that of his wife (Vicki Green). Vicki Green holds 2,500,000 Ordinary Shares. Each of Timothy Green and Vicki Green will participate in the Placing pro rata to their respective shareholdings.
Rule 9 Waiver
Introduction
The Company currently operates a number of share options schemes under which employees, managers and executives are awarded an option over Ordinary Shares, with such awards being subject to time and performance conditions. In addition to the Placing, the Company proposes that the Independent Shareholders waive the obligation on the Concert Party to make a mandatory offer under Rule 9 of the City Code which would otherwise arise as a result of any exercise of share options which are issued to either of Nicholas Green and Timothy Green pursuant to the Concert Party Proposed Option Awards.
The exercise of any share options issued pursuant to the Concert Party Proposed Option Awards by either Nicholas Green or Timothy Green would increase the percentage shareholding of the Concert Party, that are together already interested in Ordinary Shares representing in aggregate over 30 per cent. of the current issued share capital of the Company, and as such prompt a mandatory offer under Rule 9 of the City Code.
Proposed Executive Option Scheme
In order to ensure that its key executive directors remain appropriately incentivised, the Company would like to secure the flexibility to grant additional share options to Nicholas Green, Timothy Green and Kevin Cameron in the future as follows:
Director | Maximum number of options | Exercise Price | Exercise Period |
Nicholas Green | 6,000,000 | Nil | 4 years following grant |
Timothy Green | 6,000,000 | Nil | 4 years following grant |
Kevin Cameron | 2,000,000 | Nil | 4 years following grant |
Total | 14,000,000 |
The options to be awarded pursuant to the Proposed Executive Option Scheme would be exercisable for nil consideration and settled via an employee benefit trust. The options would be subject to share price performance conditions and only be exercisable after four years from the date of grant. Any options which have not been exercised after ten years would lapse. The options would be capable of vesting at 24 months and 36 months from the date of grant. At each such vesting date, the weighted average share price for the 28 days prior to such vesting date would be compared to the base share price of 10.00 pence (set at such level to reflect the Placing Price) and the following performance criteria would apply:
Percentage by which the weighted average share price has increased against the base price | Proportion of options which vest |
20.0% | 1/3 |
35.0% | 1/3 |
50.0% | 1/3 |
Assuming that the Company awarded the options pursuant to the Proposed Executive Option Scheme immediately after the date of the General Meeting and all price performance conditions are met at the vesting dates, the earliest possible date of exercise of such options would be 10 November 2016 for all such options.
Waiver of the obligation to make a mandatory offer under Rule 9 of the City Code
The exercise of any share options issued pursuant to the Concert Party Proposed Option Awards by either Nicholas Green or Timothy Green would increase the percentage shareholding of the Concert Party, that are together already interested in Ordinary Shares representing in aggregate over 30 per cent. of the current issued share capital of the Company, and as such prompt a mandatory offer under Rule 9 of the City Code.
As a result, the Company announces a proposal for the Independent Shareholders to waive an obligation on the Concert Party to make a mandatory offer for the shares in the Company not already owned by it which would otherwise arise under Rule 9 of the City Code upon exercise of the Concert Party Proposed Option Awards. It is proposed that the waiver be effected by the passing of the Whitewash Resolution by the Independent Shareholders.
The Panel has agreed to the Rule 9 Waiver on the basis that the Independent Directors, who have been so advised by the Company's nominated adviser, Canaccord Genuity, consider the terms of the Rule 9 Waiver to be fair and reasonable.
Whitewash Resolution
The Company will seek the approval of the Independent Shareholders pursuant to the Whitewash Resolution to a waiver of the obligation on the Concert Party to make a mandatory offer under Rule 9 in respect of the exercise of any share options granted pursuant to the Concert Party Proposed Option Awards.
The Whitewash Resolution will be conditional on approval by the Shareholders of the Share Authority Resolutions. This means that, if the Shareholders do not approve the resolutions necessary to effect the Placing, the Company will not make the Concert Party Proposed Option Awards.
Potential voting rights of the Concert Party
If the Share Authority Resolutions and the Whitewash Resolution are passed at the General Meeting, on the assumption that:
(a) 100,000,000 Placing Shares are issued pursuant to the Placing
(b) the Concert Party (Michael Green, Nicholas Green and Tim Green) participates in the Placing as detailed above;
(c) the 2005 Options are exercised in full;
(d) the Concert Party Proposed Option Awards are granted and exercised in full;
(e) no other options are awarded under the Proposed Executive Option Scheme,
the Company's issued share capital would increase to 298,445,113 Ordinary Shares, the number of Ordinary Shares held by the Concert Party would increase to 113,167,389 Ordinary Shares and the Concert Party's holding would constitute 37.9 per. cent of all the voting rights in the Company. Full details of the Concert Party's holding are included in the Circular, which is available on the Company's website.
If the Whitewash Resolution is not passed at the General Meeting, the Concert Party Proposed Option Awards will not be granted. On the assumption that the Placing proceeds and the 2005 Options are exercised in full, the Company's issued share capital would then increase to 286,445,113 Ordinary Shares, the number of Ordinary Shares held by the Concert Party would increase to 101,167,389 Ordinary Shares and the Concert Party's holding would constitute 35.3 per cent. of all the voting rights in the Company.
If options are awarded to Kevin Cameron (or any other person who is not a member of the Concert Party) under the Proposed Executive Option Scheme, then the Concert Party's proportionate holding of voting rights in the Company would be reduced. Accordingly, the figures set out above show the Concert Party's maximum potential holding of voting rights in the Company.
Rule 9 fairness opinion
Canaccord Genuity has provided advice to the Independent Directors in relation to the Rule 9 Waiver in accordance with the requirements of paragraph 4(a) of Appendix 1 to the City Code.
This advice was provided by Canaccord Genuity to the Independent Directors only and, in providing such advice, Canaccord Genuity has taken into account the Independent Directors' commercial assessments as well as, but not limited to, the confirmations of the future intentions of the Concert Party as set out in the Circular.
The Independent Directors, who have been so advised by Canaccord Genuity, consider that the approval of the waiver by the Panel of any requirement for the members of the Concert Party to make a general offer to shareholders under Rule 9 of the City Code, is fair and reasonable and in the best interests of the Independent Shareholders and the Company as a whole.
Notice of General Meeting
A General Meeting of the Company is to be held at the offices of Slaughter and May, which are located at One Bunhill Row, London, EC1Y 8YY, at 11.00 a.m. on 9 November 2012, at which the Resolutions, included in the Circular, will be proposed.