TPG.L Regulatory News (TPG)

The information contained in this announcement is restricted and is not for publication, release or distribution. directly or indirectly, in whole or in part, in or into Canada, Japan, the United States of America, the Republic of Ireland, Australia or the Republic of South Africa or any other jurisdiction in which the same would be unlawful.

This announcement is an advertisement. It is not a prospectus. Investors should not subscribe for or purchase any shares referred to in this announcement except solely on the basis of information contained in the prospectus to be published by Corac Group plc in connection with the proposed fundraising. Copies of the prospectus will, following publication, be available for inspection at the offices of Corac Group plc at Brunel Science Park, Kingston Lane, Uxbridge, UB8 3PQ, United Kingdom and at the offices of Nabarro LLP at Lacon House, 84 Theobald's Road, London, WC1X 8RW during normal business hours on any weekday (Saturdays, Sundays and public holidays excepted) up to and including the date which is one month following Admission.

CORAC GROUP plc

Firm Placing and Placing and Open Offer at 15 pence per share to raise up to £21 million

The Board of Corac, the intellectual property, engineering and licensing company specialising in compressor technology, announces a proposed Placing and Open Offer of up to 140,000,596 New Shares at 15 pence per New Share to raise gross proceeds of up to approximately £21 million (approximately £19.7 million net of expenses).

The Company intends to post a prospectus (the "Prospectus") today to all shareholders setting out full details of the Firm Placing and Placing and Open Offer. The Prospectus will also be made available on the Company's website at www.corac.co.uk

Firm Placing and Placing and Open Offer

- 100,000,000 Firm Placed Shares to raise gross proceeds of £15m

- Up to 40,000,596 Open Offer Shares of which 20,000,000 are conditionally placed subject to clawback to raise gross proceeds of up to £6m 

Current Trading

Commenting on the proposed Placing & Open Offer, Phil Cartmell, Executive Chairman said:

"The Placing and Offer secures the longer term future of the Company by providing the necessary working capital and therefore strong balance sheet to widen the opportunities and development of further exciting applications of our core technology. The additional funding also provides important assurances to all our existing and prospective partners, customers and suppliers that we are able to fulfil our obligations under current and future contracts and development projects. It also gives the team at Corac, who have been very supportive, confidence in the future and importantly provides the ability to attract additional talent necessary to support our on-going technology development plans.

Therefore, I and the Board have no hesitation in recommending to all our shareholders this major step forward to deliver growth and value to Corac."

For further information please contact:

THIS ANNOUNCEMENT IS AN ADVERTISEMENT. IT IS NOT A PROSPECTUS AND INVESTORS SHOULD NOT SUBSCRIBE FOR OR PURCHASE ANY SHARES REFERRED TO IN THIS ANNOUNCEMENT EXCEPT ON THE BASIS OF INFORMATION CONTAINED IN THE PROSPECTUS.

Neither the content of Corac's website nor any website accessible by hyperlinks on Corac's website is incorporated in, or forms part of, this Announcement.

This Announcement is not for release, publication or distribution, directly or indirectly, in or into the Canada, Japan, the United States of America, the Republic of Ireland, Australia or the Republic of South Africa or any other jurisdiction into which the same would be unlawful. 

This Announcement does not contain or constitute an offer of, or the solicitation of an offer to buy or subscribe for, the New Shares or any other securities to any person in Canada, Japan, the United States of America, the Republic of Ireland, Australia or the Republic of South Africa or in any jurisdiction to whom or in which such offer or solicitation is unlawful. Subject to certain exceptions, the securities referred to herein may not be offered or sold in Canada, Japan, the United States of America, the Republic of Ireland, Australia or the Republic of South Africa or to, or for the account or benefit of, any national, resident or citizen of Canada, Japan, the United States of America, the Republic of Ireland, Australia or the Republic of South Africa. The offer and sale of the securities referred to herein has not been and will not be registered under the US Securities Act of 1933, as amended, or under the applicable securities laws of Canada, Japan, the United States of America, the Republic of Ireland, Australia or the Republic of South Africa. The ability of persons not resident in the United Kingdom to participate in the Issue may be affected by the laws of the relevant jurisdictions in which they are resident or incorporated. Such persons should inform themselves about and observe any applicable requirements in connection herewith. 

The New Shares have not been and will not be registered under the US Securities Act 1933, as amended, or under the securities laws of any state or other jurisdiction of the United States or under any securities laws of Canada, Japan, the Republic of Ireland, Australia or the Republic of South Africa or any other jurisdiction where to do so would be unlawful and may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, within the United States, or within any of Canada, Japan, the Republic of Ireland, Australia or the Republic of South Africa or any other jurisdiction where to do so would be unlawful. There will be no public offer of the New Shares in the United States. 

The distribution of this Announcement and the offering of the New Shares in jurisdictions other than the United Kingdom may be restricted by law. No action has been taken by the Company or Cenkos Securities plc that would permit an offering of such shares or possession or distribution of this Announcement or any other offering or publicity material relating to such shares in any jurisdiction where action for that purpose is required. Persons into whose possession this Announcement comes are required by the Company and Cenkos Securities plc to inform themselves about, and to observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

This Announcement is for information only and does not constitute or form part of any offer or invitation to issue, acquire or dispose of any securities or investment advice in any jurisdiction. 

No statement in this Announcement is intended to be a profit forecast and no statement in this Announcement should be interpreted to mean that earnings per share of Corac for the current or future financial years would necessarily match or exceed the historical published earnings per share of Corac.

This Announcement includes statements that are, or may be deemed to be, "forward looking statements". These forward looking statements can be identified by the use of forward looking terminology, including the terms "believes", "projects", "estimates", "anticipates", "expects", "intends", "plans", "goal", "target", "aim", "may", "will", "would", "could", "should" or "continue" or, in each case, their negative or other variations or comparable terminology. These forward looking statements include all matters that are not historical facts. They appear in a number of places throughout this Announcement and include statements regarding the intentions, beliefs or current expectations of the Directors, the Company or the Group concerning, among other things, the Company's financial position and projections, business plan, financial model and future covenant ratios and compliance, the results of operations, prospects, growth, strategies and dividend policy of the Group and the industry in which it operates.

By their nature, forward looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and may be beyond the Company's ability to control or predict. Forward looking statements are not guarantees of future performance. The Company's actual financial performance, results of operations, dividend policy and the development of the industry in which it operates may differ materially from the impression created by the forward looking statements contained in this Announcement. In addition, even if the financial performance, results of operations and dividend policy of the Company or the Group (as the case may be), and the development of the industry in which it operates, are consistent with the forward looking statements contained in this Announcement, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause these differences include, but are not limited to: the effect of the Fundraising on the Company; the Company's ability to generate growth or profitable growth; the Company's ability to generate sufficient cash over the longer term to service its debt; the Company's ability to control its capital expenditure and other costs; changes in the competitive framework in which the Company operates and its ability to retain market share; industry trends; general local and global economic, political, business and market conditions; significant changes in exchange rates, interest rates and tax rates; significant technological and market changes; future business combinations or dispositions; changes in government and other regulation, including in relation to the environment, health and safety and taxation; labour relations and work stoppages; and changes in business strategy or development plans. More detailed information on the potential factors which could affect the financial results of the Company is contained in the Company's public filings and reports.

The forward looking statements contained in this Announcement speak only as of the date of this Announcement. Other than in accordance with their legal or regulatory obligations (including under the Listing Rules and/or the Prospectus Rules and/or the Disclosure and Transparency Rules) and as required by the FSA, the London Stock Exchange or the City Code on Takeovers and Mergers, the Company does not undertake any obligation to update or revise publicly any forward looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward looking statements attributable to the Company or the Group or individuals acting on behalf of the Company or the Group are expressly qualified in their entirety by this paragraph. Prospective investors should specifically consider the factors identified in this Announcement which could cause actual results to differ before making an investment decision.

This Announcement should not be considered a recommendation by the Company or its directors, officers, employees, advisers or any of its respective affiliates, parent undertakings, subsidiary undertakings or subsidiaries of its parent undertakings in relation to any subscription for the New Shares. Prices and volumes of, and income from, securities may go down as well as up and an investor may not get back the amount invested. It should be noted that past performance is no guide to future performance. You are advised to read this Announcement and, once available, the Prospectus and the information incorporated by reference therein, in their entirety for a further discussion of the factors that could affect the Group's future performance and the industry in which it operates. Persons needing advice should consult an independent financial adviser.

"Safe Harbor" Statement under the US Private Securities Litigation Reform Act of 1995: Some or all of the statements in this document that relate to future plans, expectations, events, performances and the like are forward-looking statements, as defined in the US Private Securities Litigation Reform Act of 1995. Actual results of events could differ materially from those described in the forward-looking statements due to a variety of factors.

Cenkos Securities plc, which is a member of the London Stock Exchange and is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for the Company and no one else in connection with the Firm Placing, Placing and Open Offer and Admission. It will not be responsible to anyone other than the Company for providing the protections afforded to customers of Cenkos Securities plc or for advising any other person on the transactions and arrangements referred to herein. No representation or warranty, express or implied, is made by Cenkos Securities plc as to any of the contents of this announcement for which the Company and the Directors are solely responsible. Cenkos Securities plc has not authorised the contents of, or any part of, this announcement and (without limiting the statutory rights of any person to whom this announcement is issued) no liability whatsoever is accepted by Cenkos Securities plc for the accuracy of any information or opinions contained in this announcement or for the omission of any material information, for which the Company and the Directors are solely responsible.

This Announcement has been issued by, and is the sole responsibility of, the Company. No representation or warranty, express or implied is, or will be made as to, or in relation to, and no responsibility or liability is, or will be, accepted by either Cenkos Securities plc or by any of their affiliates or agents as to, or in relation to, the accuracy or completeness of this Announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefore is expressly disclaimed.

FURTHER INFORMATION ON THE PLACING AND OPEN OFFER

INTRODUCTION

The Board is pleased to announce that the Company proposes to raise gross proceeds of up to approximately £21 million (approximately £19.7 million net of expenses) by the issue of up to 140,000,596 New Shares through the Placing and Open Offer at 15 pence per New Share. The Issue Price represents a discount of approximately 17.8 per cent, to the Closing Price of 18.25 pence per Ordinary Share on 11 November 2010 (being the last business day before the announcement of the Firm Placing and Placing and Open Offer. The Placing and Open Offer is conditional, among other things, upon the approval of the New Issue Resolutions by Shareholders at the General Meeting of the Company to be held on 6 December 2010 at the offices of Buchanan Communications, 45 Moorfields, London, EC2Y 9AE. The Placing and Open Offer is not being underwritten.

INFORMATION ON THE COMPANY AND THE DIRECTORS

Corac is a technology and engineering group that has developed high performance compressors through a unique combination of technologies. Corac has consistently developed technology and experience in high speed turbomachinery that has enabled the establishment of its core technology solution, the no-oil compressor. The development has been underpinned by the creation of patented intellectual property and internal "know-how" and has been validated by laboratory trials at the Uxbridge facility, the test site in Spadeadam and in factory trials.

The Company has been successful in developing two main applications for its core technology; a downhole gas compressor (DGC) and a range of compressors targetting applications requiring clean air supply.

Engineering development to date has centred on the first trial DGC for Eni (SpA). The Company is currently focussed on delivery of the final stages of this DGC development project, with completion of the project scheduled for the fourth quarter of 2010. The Company continues to seek and enter into development agreements with other partners to continue the development and testing of its DGC technology for commercialisation in the future, as well as pursuing opportunities to apply Corac's high speed compressors in other applications.

Corac's strategy is to build on its core technology and continue to develop the existing applications within three business streams (gas in harsh environments, clean air supply and efficient air power) as well as to identify future applications and development partners to fund the creation and commercial exploitation of patented viable applications.

BACKGROUND TO AND REASONS FOR THE NEW ISSUE

Over the last year the Company has appointed a new management team to address the challenges, risks and opportunities facing the business. Phil Cartmell joined Corac in September 2009 initially as Chief Executive Officer and is now Executive Chairman & Chief Executive Officer. Mark Crawford, Commercial & Finance Director, joined Corac in October 2009 and became a Director in November 2009. Rohan Courtney, formerly a senior non-executive director at Tullow Oil, joined the Board as a Non-Executive Director in April 2010. Gerry Musgrave, the Group's former Executive Chairman, stepped down from the Board at the annual general meeting in June 2010.

As a result of management's strategic review of the business, the Directors believe that Corac's core technology can deliver clean pressurised gases in an economic and robust manner across a broader range of business streams as outlined above.

The Company had a cash balance of £3.2 million as of 30 September 2010. In order to deliver its strategy of developing, proving and commercialising the core technology in each of the business streams, Corac requires further investment.

CURRENT TRADING AND PROSPECTS

The Company announced its interim results on 12August 2010 for the six month period ended 30 June 2010, reporting a net loss after tax of £2.41 million (2009: £1.28 million). The Company is in a development stage, investing in its technology, and, as at 30 June 2010, had an accumulated deficit of £15.45 million. The Company expects to incur further operating losses as it continues to invest in the development and commercialisation of its technology.

The first half financial results also reflected the focus on delivery of the final stages of the Eni (SpA) Downhole Gas Compressor (DGC) development project, as well as investment in securing additional gas lift application projects with other partners. The Eni (SpA) field trial development work continues to progress in line with a revised timetable and plans for Corac to deliver in the second half of 2010. In the three month period to 30 September 2010, the Group has recorded an unaudited operating loss of £1.3 million. Unaudited cash and cash equivalents decreased by £0.5 million from £3.7 million at 30 June 2010 to £3.2 million at 30 September 2010.

On 25 August 2010 the Company announced that it had signed a new agreement with an independent exploration and production company with gas interests in the United States. The agreement has a maximum value of $1.5 million, based on achievement of certain operational milestones over a period of eighteen months. An upfront payment of $750,000 was received in September 2010. The project is to develop, build, test and field trial Corac's DGC in a depleting well in North America with the aim of accelerating gas flow through artificial lift, thereby increasing production and extending the life of the well. The development phase is expected to take approximately twelve months followed by a six month field trial. The project requires deployment of the DGC in a well via a deployment method, which is less expensive and easier than alternative methods.

The project will allow Corac to build on the development work already underway with Eni (SpA) in Italy, as well as provide another means to test the DGC technology in an important geographical market.

In addition, Corac and Baker Hughes have recently formalised arrangements that will help with the commercialisation phase of the Corac DGC. These agreements enable Baker Hughes to market and sell Corac DGCs and related equipment into the worldwide gas market.

Negotiations are still in progress for the development trial of a new application of the DGC technology in the Middle East where negotiations are nearing the final stages.

PRINCIPAL TERMS OF THE NEW ISSUE

The Company intends to issue up to 140,000,596 New Shares through the Firm Placing and Placing and Open Offer. 100,000,000 of the New Shares will be issued through the Firm Placing and up to 40,000,596 of the New Shares will be issued through the Placing and Open Offer. The Firm Placed Shares and 20,000,000 of the Open Offer Shares have been conditionally placed with institutional and other investors by Cenkos (subject, in the case of the Conditionally Placed Shares, to clawback to satisfy valid applications from Qualifying Shareholders under the Open Offer.)

In addition to the Firm Placing and Placing Open Offer, up to 14,000,000 New Shares may be issued at the option of the Company and Cenkos at the Issue Price pursuant to the Additional Share Issue to meet any unsatisfied demand from Qualifying Shareholders for Open Offer Shares.

The New Issue is not being underwritten.

Firm Placing

Institutional and other investors have agreed to subscribe in the Firm Placing for 100,000,000 of the New Shares at the Issue Price (representing gross proceeds of £15 million). Certain of the Directors have agreed to subscribe for 900,000 Firm Placed Shares at the Issue Price as follows:

The Firm Placed Shares are not subject to clawback to satisfy valid applications under the Open Offer and are not part of the Placing and Open Offer.

Placing and Open Offer

Qualifying Shareholders have Basic Entitlements of:

0.3692 Open Offer Shares for every Existing Ordinary Share, and up to 1 Excess Share for every Existing Ordinary Share

registered in the name of the relevant Qualifying Shareholder on the Record Date.

As part of the Placing and Open Offer, 20,000,000 of the New Shares are being allocated to Conditional Placees who have agreed to subscribe for the Conditionally Placed Shares pursuant to the Placing. The Conditionally Placed Shares are subject to clawback to satisfy valid applications by Qualifying Shareholders under the Open Offer (including under the Excess Application Facility).

The New Issue is conditional, inter alia, upon:

·; the passing of the New Issue Resolutions without amendment;

·; the Placing and Open Offer Agreement having become unconditional in all respects save for the

condition relating to Admission; and

·; Admission becoming effective by not later than 8.00 a.m. on 7 December 2010 (in respect of the VCT Placing Shares) and 8.00 a.m. on 8 December 2010 (in respect of the remainder of the New Shares) (or such later times and dates as the Company and Cenkos may agree, not being later than 8.00 a.m. on 22 December 2010).

The New Shares, when issued and fully paid, or credited as fully paid, will rank in full for all dividends or distributions made, paid or declared after the date of this document and otherwise pari passu in all respects with the Existing Ordinary Shares.

The VCT Placing is being effected to ensure that the VCT Placing Shares subscribed by certain places meet the VCT Conditions, and as such qualify as VCT investments. In order to achieve this, it is necessary to ensure that the VCT Placing is completed prior to completion of the remainder of the New Issue.

Application will be made to the London Stock Exchange for the New Shares to be admitted to trading on AIM, a market operated by the London Stock Exchange.

The Open Offer is not a rights issue and any Open Offer Shares not applied for by Qualifying Shareholders under their Basic Entitlements will not be sold in the market on behalf of, or placed for the benefit of, Qualifying Shareholders who do not apply under the Open Offer, but may be allotted to Qualifying Shareholders to meet any valid applications under the Excess Application Facility or will be placed under the Placing and the net proceeds will be retained for the benefit of the Company.

USE OF PROCEEDS

The net proceeds of the Firm Placing and Placing are expected to be approximately £16.7 million. If the Open Offer is fully subscribed, further proceeds of approximately £3 million will be raised. If the Additional Share Issue is implemented in full, further proceeds of £2.1 million will be raised. The net proceeds of the Firm Placing and Placing will be invested in new facilities and equipment that are efficient and scaleable at a cost of approximately £2 million. The Company intends to relocate its facilities at Uxbridge to an alternative site that is able to meet Corac's specific requirements for power, noise control and harsh gas management as well as being in the right catchment area to attract suitably skilled personnel. Equipment investment will provide recognised business tools, high precision engineering tooling and measurement equipment, systems and unit test capability as well as analysis and simulation systems to support ongoing technology development.

The remainder of the net proceeds of the Firm Placing and Placing will be employed in meeting the Group's anticipated annual working capital requirement of approximately £5 million for each of the three years following the date of this document. Of this sum, approximately £3 million per year will support the Company's research and development costs, including meeting the cost of the intended recruitment of additional high quality engineers and scientists to support technical innovation and additional projects and trials and solution architects to drive application development. A further £2 million per year will fund the Company's administrative overheads including meeting the cost of the intended recruitment of commercial personnel to develop and exploit commercial opportunities for the Group's applications and support customers and partners.

Any further proceeds of the New Issue will give Corac the flexibility to fund its working capital requirements for a longer period, to expand the scope of anticipated research and development activity and/or to consider small acquisitions. A strengthened balance sheet and working capital position will also improve Corac's ability to negotiate more effectively with large multinational partners.

CAPITAL RESOURCES

Corac has not used any form of debt financing and has predominantly relied on funds raised from issues of equity, together with funds received from industry partners to support its R&D activities. Cash available to the Group as at 30 September 2010 was £3.2 million. The Group's anticipated sources of funds required to fulfil its commitments are the proceeds of the Firm Placing and Placing, together with existing cash resources and receipts from committed funding contributions to be made by industrial partners for development projects. As at 31 October 2010, being the latest practicable date prior to publication of this document, cash available to the Group was £2.8 million.

SELECTED FINANCIAL INFORMATION

The selected consolidated historical financial information for the Group below has been derived or extracted without material adjustment from the Group's annual financial statements and interim financial information

GRANT OF OPTIONS

In connection with the New Issue, the Board has approved, conditional on Admission, the grant to the Directors of options to subscribe for an aggregate of 6,705,000 Ordinary Shares (representing 2.6 per cent. of the Enlarged Ordinary Share Capital). These options will be exercisable at the Issue Price at any time on or before the tenth anniversary of Admission and vest in three equal tranches on the first, second and third anniversaries of Admission.

RECOMMENDATION

The Board considers the New Issue and the passing of the New Issue Resolutions to be in the best interests of Shareholders as a whole.

Accordingly, the Board recommends unanimously that Shareholders vote in favour of the New Issue Resolutions, as each of the Directors intends to do in respect of his own beneficial holding to the extent that he has any such holding, which together amount to 113,300 Ordinary Shares representing approximately 0.1 per cent. of the Ordinary Shares in issue as at 11 November 2010 (being the last practicable date prior to the publication of this document).

Shareholders should also be aware that if the New Issue Resolutions to be proposed at the General Meeting are not passed and Admission does not take place, the New Issue will not proceed and accordingly the net proceeds will not be received by the Company.

M&G Investment Funds 3, an open ended investment company controlled by a subsidiary of Prudential plc, has conditionally agreed to take up 19,097,000 New Shares under the Firm Placing and the Placing. The placing of New Shares with M&G Investment Funds 3 is a related party transaction under the AIM Rules. The Directors consider, having consulted with Cenkos as the Company's nominated adviser, that the terms of the placing of New Shares with M&G Investment Funds 3 are fair and reasonable so far as Shareholders are concerned.

FIRM PLACING AND PLACING AND OPEN OFFER STATISTICS

The above statistics assume the Open Offer is fully subscribed and that the Additional Share Issue is implemented in full.

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

The times set out in the expected timetable of principal events above and mentioned throughout this document are times in London unless otherwise stated, and may be adjusted by the Company in consultation with or, if required, with the agreement of Cenkos, in which event details of the new times and dates will be notified to the London Stock Exchange and, where appropriate, Shareholders.

DEFINITIONS

In this document the following expressions have the meaning ascribed to them unless the context otherwise requires: