Tissue Regenix Group Regulatory News (TRX)

27 Mar 2007 11:18

Oxeco PLC27 March 2007 Oxeco Plc ("Oxeco" or the "Company") Acquisition of Oxray Limited Oxeco is pleased to announce that the Company is proposing to acquire the entireissued share capital of Oxray Limited ("Oxray"). Oxray is currently a start upbusiness with the objective of becoming a provider of molecular structuredetermination services to both industry and academic institutions. This is to beachieved by developing novel molecular structure determination software in houseas well as in-licensing IP and potentially also making acquisitions in thisfield. The total consideration will be £2 million by the issue of 200,000,000 newordinary shares at 1 penny per share ("Consideration Shares") at a 4.5 pencediscount to the mid-market closing price of 5.5 pence per Ordinary Share on 26March 2007. This will give the shareholders of Oxray a holding of 33.3 per centin the enlarged group. The proposed acquisition of Oxray falls within the ambitof Rule 9 of the City Code on Takeover and Mergers the City Code. The Consideration Shares will rank pari passu with the existing Ordinary Shares. This transaction does not constitute a reverse takeover under the AIM rules. The acquisition is subject to: 1. The granting of the rule 9 waiver by the Panel on Takeover and Mergers; and 2. The approval of all resolutions at the EGM. EGM At the EGM the following resolutions will be proposed: • as an ordinary resolution, to approve the Acquisition; • as an ordinary resolution, to approve, for the purposes of section 320of the Act, the entry by the Company into the Norwood Agreement (everybodyexcept David Norwood and Michael Bretherton may vote); • as an ordinary resolution on a poll, to approve the Rule 9 waiver asmentioned above ;and • as an ordinary resolution, to approve the ongoing investment strategy. Shareholders will receive further information regarding the date of the EGM,issue of the related circular and information in relation to the granting of therule 9 waiver in further announcements without delay. Information on Oxray Oxray was incorporated on 31 August 2006 with the objective of becoming aprovider of molecular structure determination services to both industry andacademic institutions. This is to be achieved by developing novel molecularstructure determination software in house as well as in-licensing IP andpotentially also making acquisitions in this field. Determining or verifying the molecular structure of a compound is a fundamentalresearch activity that underpins some of the most commercially important areasof science being drug discovery, synthetic chemistry and materials science.Oxray's initial focus is a structure determination technique known as X-raycrystallography. Oxray's shareholders include Professor Stephen Davies, who is currently chairmanof the Department of Chemistry at the University of Oxford and founder of bothOxford Asymmetry International plc and VASTox plc, and Dr David Watkin, theleader of the Chemical Crystallography Laboratory at the University of Oxford. The Technology The process of determining a molecular structure using X-ray crystallographyinvolves two main processes: 1. X-ray diffraction X-ray diffraction uses a specialist X-ray source, a diffractometer, to generatea diffraction pattern that occurs when the X-rays encounter a crystal (i.e. amolecular structure in crystalline form). The basic physics behind the techniquehas been understood for nearly 100 years. 2. Interpretation of the X-ray data Currently the interpretation of the data generated by the X-ray diffractionprocess typically requires a mixture of software tools and human intervention.Evolved versions of these programmes are used widely in current molecularstructure analysis but because they are written in old programming languagesthey are becoming increasingly difficult to maintain and develop. Oxray's R&D objective is to develop novel structure determination software that: • is designed to industrial standards and written in modern maintainableprogramming languages; • offers improved reliability; and • enables improved performance by minimising the requirement for humanintervention. The Market The market for X-ray crystallography is currently relatively informal in nature,comprising a mixture of in-house laboratory work within large companies,academic and public-sector institutes and some specialist commercial providers. Since X-ray crystallography is largely performed within industrial and academicinstitutions the market value is difficult to measure as such information is notwidely reported by those Institutions. Therefore, it is estimated that the totalmarket value for molecule and protein structure determination is $2.55billionper annum which is made up of $1.2billon for small molecule structuredetermination and $1.35billion for large structures/proteins. These figuresinclude X-ray crystallography, mass spectrometry and nuclear magnetic resonancetechniques. The market for small molecule X-ray crystallography is estimated at$200million per annum. Commercial Objectives of Oxray Oxray's primary objectives are the development of novel X-ray crystallographystructure determination software and the provision of a small molecule X-raycrystallography structure service. The service will use a web portal behindwhich the company will work to maximise the extent to which the service can beautomated. The company intends to offer standardised response times to itscustomers but will also market premium services such as a fast-response andextended scientific reporting suitable to support customers'patent applications. Future Opportunities In addition to the objectives described above, the directors of Oxray believethat there are a number of other opportunities which it will be able to pursueas it builds its reputation in the small molecule X-ray crystallography market: • Large molecules/proteins The resolution of large molecule/protein structures is generally regarded as amore technically challenging field but an area of growing demand. • Structure determination techniques other than X-ray crystallography The directors of Oxray plan to extend Oxray's service provision to includestructure determination techniques such as mass spectroscopy and NMR. • Powder diffraction Powder diffraction is a method for verifying the structure of molecules whichare available as microcrystalline powders. The Directors and Proposed Directors(as defined below) believe there is an opportunity to improve the accuracy ofthe interpretation of the data generated by powder diffraction techniques inorder to extend the technique's utility. Trading Oxray has no trading history but has prepared financial statements, for purposesof the Acquisition, for the period from incorporation to 31 December 2006 whereit recorded audited net assets of £92,105. The Directors and Proposed Directorsaim to generate revenues during the short term and continue to maintain a lowcost structure for the company. Oxray has recently employed three members ofstaff to implement the business plan and rents premises in Oxford. Related Party Transaction David Norwood, a director of Oxeco, also holds 28 per cent of the issued sharecapital of Oxray. and so before he can agree to sell his shares in Oxray to theCompany, that arrangement must be approved by shareholders in general meetingpursuant to section 320 of the Act. A resolution will therefore be proposed atthe EGM to approve, for the purposes of section 320 of the Act, the entry by theCompany into an agreement with David Norwood whereby the Company will acquireOxray shares from David Norwood. The acquisition of Oxray is also a relatedparty transaction for the purposes of the AIM Rules for Companies. The Acquisition Agreement Under the terms of an agreement dated 23 March 2007 made between the Company (1)Professor Stephen Davies, IPX Global Limited, Dr David Watkin, and John Montgomery (together "the Vendors") (2), Jussi Westergren (3), and DavidNorwood (4) ("the Acquisition Agreement") the Company conditionally agreed topurchase 72 per cent of the entire issued share capital of Oxray. Theconsideration, which is payable on admission, is £1,440,000 (which will besatisfied by the allotment by the Company of 144,000,000 new Ordinary Shares tothe Vendors credited as fully paid at 1 penny per share). The Acquisition Agreement is conditional upon, inter alia, (i) the Resolutionsbeing passed; (ii) the agreement with David Norwood having been entered into byboth parties thereto; (iii) and admission of the Consideration shares to AIM ("Admission"). The Company has a right to rescind the agreement if a material adverse changeoccurs in relation to the assets or financial position of Oxray prior toAdmission. The Vendors have a right to rescind the agreement if a materialadverse change occurs in relation to the Company prior to Admission. The Acquisition Agreement contains restrictive covenants from the Vendors, JussiWestergren and David Norwood. The Acquisition Agreement contains certainwarranties and indemnities from the Vendors and David Norwood (together "theWarrantors") to the Company ("the Seller Warranties"). Such warranties are givenon a several basis. The Acquisition Agreement contains certain warranties andindemnities from the Company to the Warrantors ("the Buyer Warranties"). TheAcquisition Agreement contains a maximum liability of the Warrantors for breachof the Seller Warranties and a maximum liability of the Company for breach ofthe Buyer Warranties. The liability of the Warrantors under the SellerWarranties and of the Buyer under the Buyer Warranties shall cease three monthsafter the publication of the audited accounts of the Group for a period endingnot earlier than 30 September 2007. The Norwood Agreement It is proposed that immediately following the EGM assuming that the relevantresolution is passed the agreement with David Norwood ("the Norwood Agreement")will be entered into between David Norwood (1) and the Company (2) whereby theCompany conditionally agrees to purchase 28 per cent of the entire issued sharecapital of Oxray. The consideration, which is payable on Admission, will be£560,000 (and will be satisfied by the allotment by the Company of 56,000,000new Ordinary Shares to David Norwood credited as fully paid at 1 pence pershare). The Norwood Agreement is conditional only upon Admission. As David Norwood gavewarranties and restrictive covenants under the Acquisition Agreement, there willbe no similar provisions in the Norwood Agreement. The entry by the Company into the Norwood Agreement will be a related partytransaction for the purposes of the AIM Rules. The Directors (other than DavidNorwood and Michael Bretherton) confirm that, having consulted with ZimmermanAdams International Limited, the Company's nominated adviser, they consider theterms of the Norwood Agreement to be fair and reasonable insofar as theShareholders are concerned. Ongoing Investment Strategy The Directors and Proposed Directors intend to continue to identifyopportunities they believe fulfil the Company's original objectives of investingin the technology and science sectors and especially those which arecomplementary to the Company's enlarged business. Acquisitions and investmentsmay be funded with a combination of equity and cash, although the Company mayalso utilise debt under certain conditions. It is still anticipated that any further acquisitions, other than pureintellectual property transactions, will be structured through limited liabilityvehicles. The Directors will continue to be active investors and monitor anyinvestments and/or acquisitions made by the Company. It is not the current intention of the Directors or Proposed Directors that theCompany will seek further funds from Shareholders. A resolution will be proposed at the EGM to approve the ongoing investmentstrategy. Proposed Directors On completion of the Acquisition, the following directors are proposed to jointhe board of the Company. Jussi Westergren, aged 36 (Proposed Executive Chairman) Jussi Westergren's academic background lies in theoretical physics andmathematics. He studied at McGill University, Canada, the University of Helsinkiand The University of Oxford respectively. In 1994 he founded his first company,Lateral Logic, in Montreal to develop complex simulation software primarily forspecialised engineering and gaming applications. In 1998, Jussi sold LateralLogic and in 2000 he set up a second company, GameCluster, Oy, a distributedcomputing company based in Helsinki. GameCluster, Oy was sold in 2003 toSoftbank. In 2001, Jussi launched Capacity Networks, based in the UK andHelsinki, which focuses on providing technology solutions to the leading gamescompanies. Jussi is a founder shareholder of SRC Holdings (BVI) Limited, aholding company with diverse technology and research interests which owns all ofthe share capital of IPX Global Limited, a company that focuses on thecommercialisation of IP in the field of molecular physics and shareholder inOxray. Professor Stephen Davies, aged 56 (Proposed Non-executive Director) Steve is currently chairman of the Department of Chemistry at the University ofOxford. He has published over 420 research papers, and has been the recipient ofa numerous awards for his contribution to organic synthesis, including theHickinbottom Fellowship (1984), the Pfizer Award for Chemistry (both 1985 and1988), the Royal Society of Chemistry Award for Organometallic Chemistry (1987). In 1992 Steve founded the spin-out chemistry service company Oxford Asymmetry,followed in 1995 by the combinatorial chemistry company Oxford Diversity. Thesewere combined in 1998 for the floatation of Oxford Asymmetry International whichwas subsequently merged in 2000 with Evotec (to form Evotec-OAI). In 2003, Stevebecame a founding shareholder of VASTox Limited, the holding company of whichfloated on AIM in 2004. David Norwood will continue to act as non-executive director albeitnon-independent and Graham Richards will change roles from Non-executiveChairman to a Non-executive Director if Shareholders approve the Proposals. Lock-Ins and Orderly Market Arrangements At Admission, the Vendors and David Norwood will, in aggregate, be interested in200,500,000 new Ordinary Shares, representing approximately 33.33 per cent. ofthe Enlarged Share Capital. The Vendors and David Norwood have agreed toundertake to the Company, ZAI and Hichens Harrison that they will not sell ordispose of, except in certain limited circumstances (as permitted by the AIMRules), any interest in Ordinary Shares held by them at any time before thesecond anniversary of Admission, save in certain limited circumstances. In addition: • Ora Capital partner plc ("Ora") Ora has agreed to undertake to theCompany, ZAI and Hichens Harrison that it will not sell or dispose of, except incertain limited circumstances (as permitted by the AIM Rules), any of itsinterest in Ordinary Shares at any time before the second anniversary ofAdmission; • Bainunah Trading Limited has agreed to undertake to the Company, ZAIand Hichens Harrison that it will not sell or dispose of, except in certainlimited circumstances (as permitted by the AIM Rules), any of its interest inOrdinary Shares at any time before the first anniversary of Admission and, forthe 12 months immediately following, will effect a sale only through the brokersfor the time being of the Company with a view to maintaining an orderly marketin the Ordinary Shares; • Graham Richards and Michael Bretherton have each agreed to undertake tothe Company, ZAI and Hichens Harrison that they will not sell or dispose of,except in certain limited circumstances (as permitted by the AIM Rules), any oftheir respective interests in Ordinary Shares at any time before 21 December2007 (being the first anniversary of the admission of the existing OrdinaryShares to trading on AIM) and, for the 12 months immediately following, willeffect a sale only through the brokers for the time being of the Company with aview to maintaining an orderly market in the Ordinary Shares. Controlling Shareholder On completion of the Acquisition, Ora will hold Ordinary Shares representingapproximately 45.53 per cent. of the enlarged issued share capital of theCompany. The Directors are satisfied that the Company is capable of carrying onits business independently of Ora and that all transactions and relationshipsbetween Ora and the Company are and will continue to be at arm's length and oncommercial terms. To ensure that Shareholders continue to be adequately protected in this regard,the Company and Ora have entered into a new relationship agreement which,conditional on Admission taking place before 30 April 2007, will replace therelationship agreement entered into with Ora on 12 December 2006) to reflect thefact that, following completion of the Acquisition, the Company will have newinvestment interests following its first acquisition. Pursuant to theRelationship Agreement, Ora has given certain undertakings to the Company to theeffect that the Board can amongst other things operate on an independent basis.In considering any proposed arrangements or contracts between Ora and theCompany, David Norwood and Michael Bretherton are not considered to beindependent of Ora and will abstain from voting on any such arrangements orcontracts at any Board meeting of the Company. The Relationship Agreement is effective for so long as Ora, together with itsassociates, hold (whether directly or indirectly) in aggregate, shares in thecapital of the Company representing 25 per cent. or more of the Company's entireissued ordinary share capital. CONTACTOxeco Plc - Michael Bretherton 020 7099 7260 Zimmerman Adams International - Nominated Adviser 020 7060 1760 Ray Zimmerman/Jonathan Evans This information is provided by RNS The company news service from the London Stock Exchange