UK Oil & Gas Regulatory News (UKOG)

28 Jun 2007 08:00

Sarantel Group PLC28 June 2007 Posting of Circular to Shareholders Introduction Further to the announcements on the 18 May 2007 and 6 June 2007 whereby theCompany announced that it was proposing to raise £2,130,000, before expenses bymeans of a proposed placing ("Placing"), the Company confirms that a circular ("Circular") has today been posted to shareholders. The Placing is conditional inter alia, upon shareholders passing the resolutionat the Extraordinary General Meeting of the Company to approve an increase inthe authorised share capital of the Company and to grant to the Directorsauthority to allot shares and power to disapply statutory pre-emption rights onallotment (the "Resolution"), and upon the placing shares to be issued pursuantto the Placing being admitted to trading on AIM. The Resolution is contained inthe notice of EGM within the Circular. The purpose of the Circular is to explain the background to and reasons for thePlacing and why the Directors believe the Placing is in the best interests ofSarantel and its shareholders as a whole, and to recommend that shareholdersvote in favour of the Resolution. Background to and reasons for the Placing Following admission of the entire issued share capital of the Company to tradingon AIM in March 2005, the Company set out to implement its strategy and thefunds raised at that time have been used mainly to: • expand production capacity • improve production processes and reduce manufacturing costs • develop and launch new antennas • develop new business, and • fund working capital. Since floating on AIM, the Company has successfully launched two new products,the satellite radio antenna and the second generation GPS antenna. The satelliteradio antenna gave rise to the largest single order for antennas ever receivedby Sarantel, but follow-on orders were disappointing due to what the Directorsbelieve was the poor commercial success to date of the portable satellite radiodevice. In GPS applications, the Company has announced a total of 28 designwins including successes with HP, TomTom and LG Telecom. However none of theseproved to be high volume, despite initial indications. Recently, the Company hasreceived a number of design wins in what the Directors consider to be aninteresting and relatively new sector, the GPS tracker. In that sector theCompany's GPS antenna provides in the Directors' opinion, the most viablesolution for devices that are small, hand-portable and highly integrated withGSM transceivers. The personal navigation device market ("PND") has grown dramatically since 2005but the first generation of dash-mounted PNDs were never intended for handportable use. These dash-mounted devices are relatively large in size and haveaccess to a power source which enables the GPS chipset to use additional powerto mitigate poor antenna performance. However, hand portable GPS applicationsoutside of PNDs continue to proliferate and the Directors remain confident thatthe Company's technology is well positioned to capitalize on the growth in theseparticular market segments. Additionally, the Company is in discussion with anumber of potential customers who are looking at integrating the Company'santenna technology into high performance devices in outside markets of GPS suchas WiMax and satellite communications. These nascent markets are attractive toSarantel as they require a high performance antenna technology. The locationbased services market is starting to emerge and this is driving the integrationof GPS in mobile phones. The Company's technology is very well positioned toprovide a high quality solution to this market although the Board does notexpect mass adoption to come for some time yet. The Company is also developing its third generation GPS antenna for launch inthe spring of 2008. This antenna is small and is specifically targeted at thehand portable GPS market and should enable high performance GPS in productswhich are less than 10mm thick. Initial samples have already been delivered to alead customer and the Company has received very good feedback. In order to help the Company consider alternative financing options andimplement an optimal strategy to realise the best value for shareholders, theBoard has appointed Needham and Company LLC, a US-based investment bank, toadvise it. At the end of May 2007, the Group's free cash balances (total cash less amountswithheld to secure leasing commitments) were £0.8m. The Group's average monthlycash burn rate since 31 March 2007 was £0.4m and consequently the Company needsto raise additional funds for its immediate working capital requirements. Current trading The Group's interim results for the six months to 31st March 2007 were releasedon 19 June 2007 and a copy of the text of the announcement of these results isprovided in Part II of the Circular. Shareholders are referred to the outlookstatement contained therein. The Company is engaged with a number of potential high-volume new customers inthe GPS navigation market. It is however very difficult to predict if and whenthese opportunities will materialise. In order to ensure that the Company is aswell positioned as reasonably possible to capitalise on future high volume GPS,we have adjusted the Company's immediate focus. Therefore, we are working with anumber of companies which are developing new applications which have thepotential to reach high volumes of sales (in the fields of WiMax and satellitecommunications). In addition we are working with companies that could providerevenue generating short term contracts. In these markets, customers place asufficiently high value on the performance benefits our technology provides andmay be willing to fund development projects. In parallel, we are reducing our manpower and cost base to align better with ourpresent level of activity. We continue to make very good progress in reducing our production costs andachieved a 38 per cent. cost reduction with our second generation GPS antenna.We are working to achieve a further significant break-through in both materialcost and improved manufacturing processes with our third generation GPS antenna. The Placing The Company is proposing to raise £2,130,000 (before expenses) by way of aconditional placing by Ambrian Partners of 21,300,000 new "A" Ordinary Shares at10p per share with certain existing shareholders on a non pre-emptive basis, inorder to avoid the significant cost to the Company, which would arise, were theCompany to make an open offer to all shareholders to subscribe for OrdinaryShares. The Placing Shares (if subscribed for in full) will, on issue,represent approximately 27.9 per cent. of the Enlarged Share Capital. The Placing Shares will, when issued and fully paid, rank pari passu in allrespects with the existing issued "A" Ordinary Shares, including the right toreceive all dividends and other distributions thereafter declared, made or paidon the 'A' Ordinary Shares. The Takeover Code (the "Code") In the Company's announcement of 6 June 2007 regarding the Placing it wasmentioned that it was believed that it would be necessary to obtain a waiverfrom the Panel on Takeovers and Mergers (the "Panel") from the obligation of theprincipal shareholders, who have conditionally agreed to subscribe under thePlacing, to make a mandatory cash offer for the Company under Rule 9 as a resultof such subscription. Following the Placing, the principal shareholders who participated in thePlacing, conditional on shareholder approval, will have shareholdings in theCompany as set out in the table at paragraph 4.3 of Part III of the Circular. Accordingly, no Shareholder or Shareholders deemed to be acting in concert willhold in excess of 30 per cent. of the Company (as indicated in the table atparagraph 4.3 of Part III of the Circular) following the Placing. Therefore (i)no waiver from the requirement of Rule 9 of the Code is being sought from thePanel; (ii) Shareholder approval is not required in connection with thedispensation from the requirements of Rule 9 of the Code in respect of thePlacing and (iii) the Panel has not reviewed the Circular. Undertakings The Company is in receipt of undertakings to vote in favour of the Resolution inrespect of 42,241,541 Ordinary Shares (representing approximately and inaggregate 76.6 per cent. of the current issued share capital of the Company). The EGM The EGM will be held at the offices of Pinsent Masons, CityPoint, One RopemakerStreet, London EC2Y 9AH am at 10 a.m. on 23 July 2007, at which the Resolutionwill be proposed. Recommendation The Directors unanimously recommend that you vote in favour of the Resolution tobe proposed at the EGM, as they intend to do in respect of their ownshareholdings. For further information please contact: Sarantel Group plc Tel: 01933 670 560Geoff Shingles, Chairman College Hill Tel: 020 7457 2020Carl Franklin / Ben Way Ambrian Partners Tel: 020 7776 6421Tim Goodman This information is provided by RNS The company news service from the London Stock Exchange