Uk Oil & Gas Regulatory News (UKOG)

31 Mar 2008 13:49

Sarantel Group PLC31 March 2008 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTOTHE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR THE REPUBLIC OF SOUTH AFRICA ORANY JURISDICTION IN WHICH SUCH PUBLICATION IS UNLAWFUL. 31 March 2008 Sarantel Group PLC ("Sarantel" or the "Company") Placing to raise approximately £3 million Sarantel announces that it has conditionally raised approximately £3 million,before expenses, from the placing by John East & Partners Limited of 101,167,400A Ordinary Shares of 1 pence each in the capital of the Company at 3p per sharewith institutional and other investors. The placing is conditional on, amongstother things, the passing of certain resolutions at the general meeting of theCompany and on admission of the new A Ordinary Shares to trading on AIM. Background to and reasons for the Placing In its trading statement issued on 12 November 2007, the Company indicated thatsales for the year to 30 September 2007 remained depressed, principally due tothe slower than expected development of the market for handheld GPS devicescontaining the Group's second generation GPS antenna, together with lower volumesales of portable satellite radio units. Significant developments since that trading statement was made include: • a broad based recovery in shipments of the second generation GPS antenna; • the selection of the Group's GeoHelix GPS antenna by Garmin, to be used exclusively in its new Colorado range of handheld GPS receivers; • the selection of the Group's newly launched third generation GPS antenna, the world's smallest GPS antenna, by a major Asian consumer electronic OEM customer; • the selection of the Group's GeoHelix GPS antenna for a ruggedised mobile phone by Sonim; • the award of a development contract for a GPS antenna for its tactical military radios from a major US military radio supplier; and • the award by Iridium, the satellite phone operator, to the Group of a development contract for an antenna for its new generation of satellite phones. The Company's cash resources as at 30 September 2007 were £2.4 million (of which£0.7 million was blocked to secure leasing liabilities). Current monthlyoverheads are approximately £0.3 million. In order to improve the cash resourcesof the Group, the Directors have decided to effect the Placing. The proceeds ofthe Placing, which amount to approximately £2.7 after expenses, will allow theGroup to continue to develop the customer pipeline for both its second and thirdgeneration GPS antennas and provide working capital generally. It is the Board's view that the Placing is the most appropriate means ofproviding additional working capital for the Group. The cost of funds raisedthrough the Placing are substantially less than those for an open offer orrights issue to Shareholders. These alternatives would have required thepublication of a prospectus, which would have delayed the fund raising and wouldalso have cost the Company a significantly higher percentage of the funds beingraised. Capital Reorganisation The Placing Price is below the present nominal value of the Existing OrdinaryShares. Company law prohibits a company from issuing shares at a discount to thenominal, or par, value of its shares. Therefore, in order to carry out thePlacing, it is necessary to reduce the nominal value of the Company's authorisedand issued A Ordinary Shares and B Ordinary Shares. Accordingly, the Directors,propose to effect a share reorganisation on the following basis: (a) each of the issued A Ordinary Shares of 10p will be subdivided andredesignated into one New A Ordinary Share and one Deferred Share; (b) each of the issued B Ordinary Shares of 10p will be subdivided andredesignated into one New B Ordinary Share and one Deferred Share; (c) each of the authorised and unissued A Ordinary Shares will be subdividedinto 10 New A Ordinary Shares; and (d) each of the authorised and unissued B Ordinary Shares be subdivided into 10New B Ordinary Shares. The rights attaching to the New A Ordinary Shares and New B Ordinary Shareswill, apart from the change in nominal value and the entitlement of Shareholdersin respect of a return of capital arising from them, be identical in allrespects to those of the A Ordinary Shares and the B Ordinary Shares,respectively. The Deferred Shares will have no voting rights and will not carry anyentitlement to attend general meetings of the Company; nor will they be admittedto AIM or any other market. They will carry only a priority right to participatein any return of capital to the extent of £1 in aggregate over the class. Inaddition, they will carry only a priority right to participate in any dividendor other distribution to the extent of £1 in aggregate over the class. In eachcase, a payment to any one holder of Deferred Shares shall satisfy the paymentrequired. The Company will be authorised at any time to effect a transfer of theDeferred Shares without reference to the holders thereof and for noconsideration. Accordingly, the Deferred Shares will, for all practical purposes, be valuelessand it is the Board's intention, at an appropriate time, to have the DeferredShares cancelled, whether through an application to the Companies Court orotherwise. Existing share certificates will continue to be valid following theCapital Reorganisation and no certificates will be issued in respect of theDeferred Shares. The Placing Under the terms of the Placing Agreement, JEP has conditionally placed, as agentfor the Company, 101,167,400 New A Ordinary Shares at the Placing Price to raiseapproximately £3 million (gross) and approximately £2.7 million (net ofexpenses) for the benefit of the Company. In addition to a corporate finance fee and the placing commission, JEP will beissued with warrants to subscribe for 1,776,029 New A Ordinary Shares at 3p pershare exercisable until 25 April 2013. The Placing is conditional, inter alia, upon First Admission taking place by 8:00am on 25 April 2008 (or such later date, being not later than 31 May 2008, asthe Company and JEP may agree) and Second Admission taking place by 8:00am on 28April 2008 (or such later date, being not later than 31 May 2008, as the Companyand JEP may agree). The Placing Agreement contains provisions entitling JEP to terminate the PlacingAgreement at any time prior to First Admission in certain circumstances. If thisright is exercised, the First Placing and the Second Placing will lapse. ThePlacing Agreement contains provisions entitling JEP to terminate its obligationsin respect of the Second Placing where certain circumstances arise after theFirst Placing and prior to the Second Placing. The First Placing is notdependent upon the Second Placing occurring. However the Second Placing cannotoccur unless the First Placing has occurred. The Placing of the New Ordinary Shares will take place in two tranches; (a) the First Placing amounting to 25,933,700 A New Ordinary Shares; and (b) the Second Placing amounting to 75,233,700 A New Ordinary Shares. The Placing Shares, when issued and fully paid, will rank equally in allrespects with the issued New A Ordinary Shares, including the right to receiveall dividends and other distributions declared, made or paid after the relevantAdmission. It is expected that First Admission will become effective and dealings in theFirst Placing Shares and the issued New A and New B Ordinary Shares willcommence on 25 April 2008 and that Second Admission will become effective anddealings in the Second Placing Shares will commence on 28 April 2008. Directors' participation in the Placing John Uttley, David Wither, Sitkow Yeung and Geoff Shingles have conditionallyagreed to subscribe respectively for 500,000, 500,000, 200,000, and 333,400Second Placing Shares at the Placing Price in the Placing, which will represent0.28 per cent., 0.28 per cent., 0.11 per cent., 0.19 per cent. respectively ofthe Enlarged Issued Share Capital. Immediately following Second Admission JohnUttley, David Wither, Sitkow Yeung and Geoff Shingles will hold 711,876,702,079, 200,000 and 579,132 New A Ordinary Shares, equivalent to 0.40 percent., 0.40 per cent., 0.11 per cent. and 0.33 per cent. respectively of theEnlarged Issued Share Capital. Taxation The following paragraphs apply to the Company and to persons and entities whoare holders of Existing Ordinary Shares and /or proposed holders of New AOrdinary Shares under the Placing and resident in the UK. The information isbased on current UK legislation and practice, is subject to changes therein, isgiven by way of general summary and does not constitute legal or tax advice. If you are in doubt about your tax position, or if you are subject to tax in ajurisdiction other than the UK, you should consult your independent financialadviser. a. Capital Reorganisation The Company has received confirmation that the Capital Reorganisation will notaffect the treatment of Shareholders' holdings of shares in the Company(including, for these purposes, under the venture capital trust and enterpriseincentive scheme ("VCT" and "EIS" respectively) legislation). Each issued NewOrdinary Share to be created under the Capital Reorganisation will be treated ashaving been acquired at the same time and for the full cost of the originalExisting Ordinary Share from which it derives and the creation and anysubsequent cancellation of the Deferred Shares will not trigger a disposal. In summary, the New Ordinary Shares will replace the Existing Ordinary Shares. The Company has obtained clearance under the current tax legislation that theCapital Reorganisation is being effected for bona fide commercial reasons andnot for the purposes of tax avoidance. As such, the Company does not considerthat HM Revenue & Customs will seek to treat any aspect of the CapitalReorganisation as a distribution for the purposes of income tax. b. Placing The Company has previously obtained clearance from HM Revenue & Customs thatsubscriptions made to date in the Company by VCTs and investors seeking EISrelief constituted qualifying holdings under VCT and EIS legislation. The Company has obtained a further clearance from HM Revenue & Customs that thePlacing Shares will also qualify as a qualifying holding for VCTs and forinvestors seeking EIS relief as follows: • First Closing - investment will, subject to investors' own personal circumstances, for EIS relief and as a qualifying holding for funds raised by VCTs on or after 6 April 2007; and • Second Closing - investment will, subject to investors' own personal circumstances, for VCT funds raised before 6 April 2007. Although the Company satisfies the relevant conditions contained in the VCT andEIS legislation, neither the Company nor the Directors make any representationor warranty or give any undertaking that VCT and EIS relief will be available inrespect of any investment in the Placing Shares, nor do they represent, warrantor undertake that the Company will keep its qualifying status throughout therelevant holding periods for VCTs and EIS investors or that, once given, suchrelief will not be withdrawn. Employee share options The Company operates the following employee share option schemes: the Sarantel2000 Unapproved Executive Share Option Scheme; the 2005 Scheme; the SarantelSharesave Scheme; and the Sarantel Long Term Incentive Plan (together, the"Share Schemes"). Summaries of the principal terms of the Share Schemes have previously beenprovided to shareholders in the following documents: the Company's AIM admissiondocument, the notice of the Company's 2006 annual general meeting; and theChairman's letter accompanying the notice of the Company's 2007 annual generalmeeting. All of the subsisting options under the Share Schemes (including thosegranted at nominal value under the Sarantel Long Term Incentive Plan) arecurrently underwater (i.e. the exercise price per Ordinary Share is higher thanthe current market value of an Ordinary Share). The numbers of Ordinary Shares under option under each of the Share Schemes andthe option exercise prices will not be adjusted to take account of the proposedCapital Reorganisation, as, in the opinion of the Directors, the CapitalReorganisation will not affect the value of the subsisting options. The Capital Reorganisation will cause a "disqualifying event" in relation toeach of the options granted by the Company as qualifying enterprise managementincentive options ("EMIs"). EMI options are normally exempt from income tax andNational Insurance contributions ("NICs") when such options are exercised, andthe beneficial rate of business assets taper relief for capital gains taxapplies from the date of grant of such options. The effect of a "disqualifyingevent" is that, with effect from the date of the disqualifying event, the EMIoptions cease to have these tax benefits, meaning that any growth in value ofthe underlying shares after that date is subject to income tax and NICs, and thebeneficial taper relief treatment is lost. In any event, the beneficial taperrelief treatment will no longer apply from 6 April 2008, as taper relief as awhole will then be abolished. However, as all of the Company's subsisting shareoptions are underwater, this is unlikely to disadvantage existing optionholders. Amendment of the 2005 Scheme The 2005 Scheme enables the Company to grant market value share options toselected employees of the Group. Shareholder approval is being sought to allowthe Directors to amend the overall limit on the grant of options over New AOrdinary Shares under the 2005 Scheme. Currently, the Directors are only able to grant options over new issue OrdinaryShares under the 2005 Scheme up to a maximum of 2.5 per cent. of the ordinaryshare capital in issue at the time Ordinary Shares were first admitted totrading on AIM (on 2 March 2005). The Company has reached this limit andtherefore is seeking shareholder approval to amend this limit in order thatfurther options can be granted under the 2005 Scheme in future, should theCompany's remuneration committee recommend. The Company proposes to amend rule 6.1 of the 2005 Scheme to bring it into linewith the Sarantel Sharesave Scheme, which provides that the grant ofsubscription options under that scheme and any other employees' share schemeoperated by the Company is limited to a maximum of 10 per cent. of the issuedshare capital in any rolling 10 year period. Under all of the Share Schemes, options granted before Ordinary Shares werefirst admitted to trading on AIM on 2 March 2005 and any options to be satisfiedby the transfer of existing Ordinary Shares are left out of account. Theproposed amendment to rule 6.2 of the 2005 Scheme is a consequential amendmentas a result of the amendment of rule 6.1, and is intended to ensure that suchoptions continue to be left out of account. The Company adopted the Sarantel Long-Term Incentive Plan (the "LTIP") in 2007,under which nominal cost and nil-cost options may be granted to selectedexecutives. However, the Company would also like to retain the ability to grantfurther market value options under the 2005 Scheme in appropriate circumstances.The Directors therefore consider that the proposed amendments to the 2005 Schemewould benefit the Company by giving it the flexibility to choose whether togrant market value options under the 2005 Scheme or nominal or nil-cost optionsunder the LTIP, as the LTIP may not be suitable for all circumstances. The Company is currently considering granting new options under the 2005 Schemeto Directors and members of the senior management team. No decision has beenreached as to the number of such options, the exercise price, or, indeed, thatany options will definitely be granted. Annual General Meeting The Annual General Meeting of the Company has been convened for 10.00 a.m. on 24April 2008. The notice convening the AGM is set out in the report and accountsfor the year ended 30 September 2007. General Meeting A General Meeting of the Company has been convened for 10.05 a.m. (or such latertime as the AGM of the Company to be held at 10.00 a.m. on the same day shall beconcluded or adjourned) on 24 April 2008 at the offices of JEP, 10 FinsburySquare, London EC2A 1AD. The Resolutions seek to: (a) approve the Capital Reorganisation; (b) authorise the directors to allot the Placing Shares and issue the Warrants; (c) disapply statutory pre-emption rights in respect of the allotment of thePlacing Shares and the issue of Warrants; (d) amend the Company's Articles of Association; and (e) amend the rules of the 2005 Scheme. Following the proposed Placing, the Company will have 177,602,931 ordinaryvoting shares in issue. It is intended that application will be made for the NewA Ordinary Shares to be admitted to trading on AIM. The First Admission isexpected to be on 25 April 2008. The Second Admission is expected to be on 28April 2008. Further information: Sarantel David Wither, Chief Executive Officer 01933 670 560Sitkow Yeung, Finance Director John East & Partners Limited 020 7628 2200 John East/Simon Clements College Hill 020 7457 2020 Adrian Duffield/ Ben Way This announcement is for information purposes only and does not constitute anoffer or invitation to acquire or dispose of any securities or investment advicein any jurisdiction. John East & Partners Limited, which is authorised and regulated by the FinancialServices Authority, is acting exclusively for the Company and no one else inconnection with the Placing and will not be responsible to anyone other than theCompany for providing the protections afforded to customers of John East &Partners Limited or for providing advice in relation to the Placing or anytransaction or any other matters referred to herein. Past performance is no guide to future performance and persons needing adviceshould consult an independent financial adviser. The information contained in this announcement is not for release, publicationor distribution, directly or indirectly, to persons in the United States,Australia, Canada, Japan or the Republic of South Africa or in any jurisdictionin which such publication or distribution is unlawful. The Placing Shares havenot been and will not be registered under the United States Securities Act of1933, as amended, or under the laws of any state of the United States. Thisannouncement does not constitute an offer to sell or issue, or the solicitationof an offer to buy or subscribe for, securities in the United States, Australia,Canada, Japan or the Republic of South Africa or in any jurisdiction in whichsuch offer or solicitation is unlawful and should not be relied upon inconnection with any decision to acquire Placing Shares or other securities inthe capital of the Company. There will be no public offer of Placing Shares inthe United Kingdom or elsewhere. Definitions "2005 Scheme" the Sarantel 2005 Unapproved Share Option Scheme "A Ordinary "A" ordinary shares of 10 pence each in the capital of theShares" Company "Act" the UK Companies Act 1985 (as amended) or as replaced by the Companies Act 2006 or otherwise "Admission" the First Admission and the Second Admission, or in the event that Second Admission does not occur, First Admission "AIM" the AIM market of London Stock Exchange plc "AIM Rules" the AIM Rules for Companies issued by the London Stock Exchange plc as amended from time to time "Annual General the annual general meeting of the Company to be held at 10.00Meeting" or a.m. on 24 April 2008 and any adjournment thereof"AGM" "B Ordinary "B" ordinary shares of 10 pence each in the capital of theShares" Company "Capital the proposed subdivision of each Existing Ordinary Share intoReorganisation" one New Ordinary Share and one Deferred Share "Company" or Sarantel Group PLC"Sarantel" "Computershare" Computershare Investor Services PLC"Deferred the deferred shares of 9p each arising from the CapitalShares" Reorganisation "Directors" or the directors of the Company as set out in the circular to"Board" shareholders "EIS" the Enterprise Investment Scheme and related reliefs as detailed in Income Tax Act 2007, Part V and in sections 150A to 150C and Schedule 5B and 5BA of the Taxation of Chargeable Gains Act 1992 (as amended) "Enlarged the issued New Ordinary Shares immediately following AdmissionIssued ShareCapital" "Existing the 76,435,531 Ordinary Shares in issue at the date of thisOrdinary announcementShares" "First the effective admission of the New A and New B Ordinary SharesAdmission" in issue immediately following the Capital Reorganisation and the First Placing Shares to trading on AIM, in accordance with the AIM Rules "First Placing" the placing of the First Placing Shares pursuant to the Placing "First Placing the 25,933,700 New A Ordinary Shares to be issued pursuant toShares" the First Placing "Form of Proxy" the form of proxy enclosed with the circular to Shareholders for use by Shareholders in connection with the GM "GM" or the general meeting of the Company convened for 10.05 a.m. (or "General such later time as the AGM on the same day shall have concludedMeeting" or been adjourned) and any adjournment thereof, on 24 April 2008, notice of which is set out in the circular to Shareholders "Group" the Company and its subsidiary undertakings "JEP" John East & Partners Limited, the Company's Nominated Adviser and Broker "New Ordinary the New A Ordinary Shares and New B Ordinary SharesShares" "New A Ordinary the new A ordinary shares of 1p each in the capital of theShares" Company arising from the Capital Reorganisation "New B Ordinary the new B ordinary shares of 1p each in the capital of theShares" Company arising from the Capital Reorganisation "Ordinary together the A Ordinary Shares and B Ordinary SharesShares" "Placees" the subscribers for Placing Shares pursuant to the Placing "Placing" the conditional placing of the Placing Shares at the Placing Price pursuant to the Placing Agreement "Placing the conditional agreement dated 31 March 2008 between theAgreement" Company, JEP and the Directors of the Company "Placing Price" 3p per Placing Share "Placing the 101,167,400 New A Ordinary Shares which have beenShares" conditionally placed by JEP "Proposals" the proposals set out in the circular to Shareholders, namely the Placing, the Capital Reorganisation and the Rule Change "Resolutions" the resolutions set out in the notice of General Meeting "Rule Change" the proposed changes to the rules of the 2005 Scheme, details of which are set out in the circular to Shareholders "Second the effective admission to trading on AIM of the Second PlacingAdmission" Shares in accordance with the AIM Rules "Second the placing of the Second Placing Shares pursuant to the PlacingPlacing" "Second Placing 75,233,700 New A Ordinary Shares to be issued pursuant to theShares" Second Placing "Shareholders" holders of Existing Ordinary Shares "VCT" a venture capital trust for the purposes of Income Tax Act 2007, Part VI "Warrant" warrants to be issued to JEP to subscribe for 1,776,029 New A Ordinary Shares at 3p per share This information is provided by RNS The company news service from the London Stock Exchange