11 Mar 2009 17:13
Canisp Plc
(Canisp or 'the Company')
Proposed Disposal of the Entire Business and Certain Assets of
The Airtime Group Limited
Proposed Investing Strategy
Notice of General Meeting
The board of directors of the Company (the Board) is pleased to announce today a proposal for the disposal of the entire business and certain assets of the Airtime Group Limited (TAG) to Opal Telecom Limited (Opal) for an aggregate consideration of £752,360 in cash (Proposal). TAG is the main operating subsidiary of Canisp and supplies fixed line communications services to corporate and residential customers in the UK. In the year ended 31 March 2008, TAG achieved a loss after tax of £50,829 on turnover of £2,592,996 (2007: loss of £1,450,369 on turnover of £2,804,674).
The Board has been open to strategic solutions to recover shareholder value, whilst continuing to work hard to grow the Company's customer base and maintain a strict control of costs despite the very competitive economic climate throughout that period.
TAG has continued to record losses, although the degree of losses has reduced recently. The board considered that further efficiencies could only be achieved within a larger organisation and hence considered the sale of TAG's business as being the most suitable means of achieving the objective stated above.
The Board has spoken to a number of parties interested in acquiring all or part of the Company's business, but these interests did not meet its valuation of the Canisp group's business at the time.
As the effect of the Proposal will be to divest the Company of all its trading business activities, the Company will, upon disposal of TAG's entire business and certain assets, be treated as an investing company for the purposes of the AIM Rules for Companies (AIM Rules). The Proposal is subject to, amongst other things, the approval of shareholders in general meeting. Shareholders are also asked to approve the Investing Strategy. Full details of the Proposal and Investing Strategy are set out in the Appendix below.
A circular will be posted to shareholders today with a notice of general meeting (GM) to be held on 30 March 2009 at 11:00 am at the offices of Fladgate LLP, 25 North Row, London, W1K 6D ("GM"). The circular is available for download from the Company's website at www.canispplc.com
Enquiries:
Nominated advisor and broker: Canaccord Adams Limited tel: +44 (0) 207 050 6500
Andrew Chubb, Adria Da Breo Richards
John Bick, Hansard Group tel: +44(0)7917 649362
Appendix
Reasons for the Proposal
We have reported to you since 2006 that the Board has been open to strategic solutions to recover shareholder value, whilst continuing to work hard to grow our customer base and maintain a strict control of costs despite the very competitive economic climate throughout that period.TAG has continued to record losses, although the degree of losses has reduced recently. The board considered that further efficiencies could only be achieved within a larger organisation and hence considered the sale of TAG's business as being the most suitable means of achieving the objective stated above.
Over the course of the last few years, we have spoken to a number of parties interested in acquiring all or part of our business, but these interests did not meet our valuation of the Canisp group's business at the time. The Board, however, considers the sale of TAG's business to Opal, and the consideration payable in respect of such sale, to be at a valuation which is both acceptable to the Board, and in the Board's view, in the best interests of shareholders as a whole.
Details of the Proposal
TAG proposes to sell its entire business and certain assets to Opal. The sale is conditional on, amongst other things, the passing of the ordinary resolution of the Company approving the Proposal. The terms of the disposal of TAG's business and certain assets pursuant to the sale and purchase agreement and the effects of the Proposal are as follows:
The transaction is conditional upon:
the passing of resolution 1 at the GM; and
the number of minutes tolled by customers using TAG's services in each of the months of February and March 2009 being not less than 85 per cent. of the average monthly minutes tolled by customers during the period from November 2008 to January 2009 inclusive.
As consideration for the disposal of the entire business and certain of the assets of TAG, TAG will receive £752,360 in cash on completion of the transaction (Completion) which, subject to satisfaction of the above conditions, will be on 31 March 2009.The consideration was calculated on a multiple of 13 times average gross margins of TAG's business over the three months to 31 January 2009. In addition, Opal will pay TAG on a pound for pound basis in respect of the assignment of book debts of TAG existing on Completion (Book Debts).
The payment of the consideration is subject to a retention against potential warranty claims of
£70,000 for twelve months.
Five per cent. of the value of the Book Debts will be paid direct to TAG on Completion and the
remaining 95 per cent. will be held in an escrow account with monies being transferred to TAG on a weekly basis calculated on the amount of Book Debts collected in the previous week.
The Company and TAG will be subject to restrictive covenants in the field of the supply of nongeographic indirect access, CPS fixed line and other telecommunications products and services carried on by TAG for periods of between three and five years following Completion.
The Company and TAG are giving normal commercial warranties on a joint and several basis in respect of the business and assets being sold. TAG has granted a licence to Opal to use its trading name, domain name and logos (IPR) for one month after Completion. TAG will retain all rights and obligations in respect of this IPR.
At Completion the Company will terminate Mark Shrosbree's employment and directorship as his role in managing the Company's investment in TAG will no longer be required. Mark Shrosbree has entered into a compromise agreement which is conditional on Completion.
Approximately £250,000 of the consideration will be used to repay bank debt. Other suppliers and creditors of the Company will also be settled as appropriate. Residual resources will remain in Canisp to enable the directors to pay costs and evaluate potential investments following Completion of the Proposal and allow Canisp to meet its obligations for the next 12 months.
On Completion, Tim Moss and John Maundrell will resign as directors of the Company and Tim Moss will resign as a director of TAG.
Investing Strategy
As the effect of the Proposal will be to divest the Company of all its trading business activities, the Company will, upon disposal of TAG's entire business and the closure of TAG, be treated as an investing company for the purposes of the AIM Rules. The Company's investing strategy going forwards will be to invest in technology companies with an initial consideration of opportunities in the UK and Europe, though investments in other sectors may also be considered. At present the directors intend to invest in no more than two private companies but the Company may also consider publicly listed targets as well (Investing Strategy). Shareholders are asked to approve the Investing Strategy at the GM.
Pursuant to the AIM Rules, Canisp will be required to make an acquisition or acquisitions which constitute a reverse takeover in accordance with Rule 14 of the AIM Rules or otherwise implement the Investing Strategy approved at the GM to the satisfaction of the London Stock Exchange within 12 months of having received the consent of its shareholders, failing which, Canisp's trading facility on the AIM market will be suspended for a further period of six months followed by cancellation of the Company's AIM listing.
The board will make the decision whether to be an active or a passive investor depending on the nature of the investing business and whether an investee company is a start-up or a mature business.
The Chairman and Ian Tickler have experience in evaluating and investing in a range of businesses. The directors will carry out initial screening due diligence but will utilise specialists where considered appropriate.
General Meeting
A notice of GM is set out in the circular convening the GM to be held at 11:00 a.m. on 30 March 2009 at the offices of Fladgate LLP, 25 North Row, London, W1K 6DJ, at which ordinary resolutions will be proposed to approve the Proposal and the Investing Strategy.
Recommendation
The Board believes that the Proposal and the Investing Strategy are in the best interests of the Company and its shareholders as a whole and accordingly recommend that shareholders vote in favour of the resolutions proposed at the GM, as they intend to do so in respect of their own holdings of 2,536,893 ordinary shares representing, in aggregate, 2.09 per cent of the Company's issued share capital.