RNS Number:0864Z
Sondex PLC
26 May 2004
Sondex plc
Proposed acquisition of Geolink International Limited
and Underwritten Placing and Open Offer of 13,118,029 Open Offer Shares at 160
pence per Open Offer Share
Key points
* Proposed acquisition of Geolink International Limited for a total
consideration of #31.5 million
* Geolink is a specialist designer, manufacturer and supplier of
Measurement While Drilling (MWD) downhole technology and has also recently
introduced Logging While Drilling (LWD) products
* Proposed acquisition will be funded by a new term loan of #13.0
million, the issue of shares of approximately #4.1 million to the vendors and
the majority of the net proceeds of a placing and open offer raising
approximately #21.0 million
* In the 10 months to 29 February 2004, Geolink generated operating
profits before goodwill amortisation of #3.5 million on sales of #11.2 million
* The proposed acquisition is expected to be earnings enhancing and the
Directors believe that the favourable outlook for Geolink will contribute
significantly to the enlarged Group's earnings potential
* Geolink has a similar business model to Sondex and operates in a
closely related sector
* The Directors believe that Geolink will:
- provide a good technical fit of downhole technologies
- provide a number of opportunities for further significant growth
- fit Sondex's strategy of developing a range of solutions to enhance oil & gas
recovery
- provide a platform for further product range extensions
* Subject to shareholder approval at an EGM to be held on 23 June 2004,
the proposed acquisition is expected to complete on 30 June 2004
* In a separate announcement issued this morning, Sondex reported its
preliminary results for the year ended 29 February 2004
* The Annual General Meeting of Sondex is to be held immediately prior
to the EGM on 23 June 2004. Notice of the AGM is expected to be sent to
shareholders today
Martin Perry, Chief Executive, said:
"The acquisition of Geolink will significantly enhance Sondex's position as a
leading supplier of downhole technology to the oil and gas industry; there is an
excellent fit with our own products and business model. In addition to immediate
earnings enhancement, the acquisition will provide important opportunities for
further growth."
26 May 2004
Enquiries:
Sondex plc
Martin Perry, Chief Executive 020 7457 2020 (today)
Chris Wilks, Finance Director 0118 932 6755 (thereafter)
College Hill
James Henderson 020 7457 2020
Nick Elwes 020 7457 2020
This announcement has been issued by and is the sole responsibility of Sondex
plc and has been approved solely for the purposes of section 21 of the Financial
Services and Markets Act 2000 by Collins Stewart Limited, which is acting
exclusively for Sondex plc and no-one else in connection with the Acquisition
and the Placing and Open Offer. Collins Stewart Limited, which is a member of
the London Stock Exchange and is authorised and regulated by the Financial
Services Authority, will not be responsible to anyone other than Sondex plc for
providing the protections offered to the clients of Collins Stewart Limited, or
for providing advice to any other person in relation to the contents of this
announcement or matters or arrangements referred to herein.
This announcement does not constitute or form part of an offer, or any
solicitation of an offer to subscribe or buy, any securities to any person in
any jurisdiction to whom or in which such offer or solicitation is unlawful.
The distribution of this announcement in certain jurisdictions may be restricted
by law and therefore persons into whose possession this announcement comes
should inform themselves about and observe any such restrictions. Any failure
to comply with these restrictions may constitute a violation of the securities
laws of any such jurisdiction. Any purchase of or application for shares in the
Placing and Open Offer should only be made on the basis of information contained
in the formal prospectus to be issued in connection with the Placing and Open
Offer and any supplement thereto.
The information contained herein is not for publication or distribution in or
into the United States of America. These materials are not an offer of
securities for sale in the United States. The securities referred to herein
have not been and will not be registered under the U.S. Securities Act of 1933,
as amended, and may not be offered or sold in the United States absent
registration under that Act or an available exemption from registration. No
public offering of the securities referred to herein will be made in the United
States.
The information contained in this announcement is not for publication or
distribution to persons in Australia, Canada, Japan, the Republic of Ireland or
South Africa. Subject to certain exceptions, the Open Offer Shares may not,
directly or indirectly, be offered, sold, taken up or delivered in, into or from
Australia, Canada, Japan, the Republic or Ireland or South Africa.
Prices and values of, and incomes from shares 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. Persons needing advice should
consult an independent financial adviser.
Certain statements made in this announcement are forward-looking statements.
Such statements are based on current expectations and, by their nature, are
subject to a number of risks and uncertainties that could cause actual results
and performance to differ materially from any expected future results or
performance expressed or implied by the forward-looking statement. The
information and opinions contained in this announcement are subject to change
without notice and Sondex plc assumes no responsibility or obligation to update
publicly or revise any of the forward-looking statements contained herein.
Not for release, publication or distribution, in whole or in part, in or into
the United States, Australia, Canada, Japan, the Republic of Ireland or South
Africa.
Introduction
Sondex announced today that it has agreed, subject, inter alia, to Shareholder
approval, to acquire the entire issued share and loan capital of Geolink for a
consideration of approximately #31.5 million, of which #26.3 million will be
payable in cash to the Loan Note Holders on Completion and #5.2 million will be
satisfied by payment of approximately #1.1 million in cash and the allotment of
the Consideration Shares to the Geolink Shareholders.
In order to fund the Acquisition, Sondex proposes to raise approximately #18.2
million (net of expenses of the Acquisition and the Placing and Open Offer) by
way of a Placing and Open Offer of 13,118,029 Open Offer Shares at 160 pence per
Open Offer Share, representing a discount of 3.9 per cent. to the closing
middle-market price of an Ordinary Share on 25 May 2004 (the latest practicable
date prior to the publication of this announcement). In addition, Sondex has
entered into an agreement to borrow up to #33 million (comprising an existing
term loan facility of approximately #14 million, a new term loan facility of #13
million and a new working capital facility of #6 million) under the terms of
committed bank facilities provided by Bank of Scotland. The Open Offer Shares
(other than the Committed Shares) are to be placed conditionally with
institutional and other investors, subject to the right of Qualifying
Shareholders to participate in the Open Offer. The Placing and Open Offer (save
in respect of the Committed Shares) has been underwritten by Collins Stewart and
is conditional on, inter alia, the approval of the Acquisition by Shareholders.
Reasons for the Acquisition
Geolink has a similar business model to Sondex and operates in a closely related
sector. The Directors believe that Geolink has a strong reputation within its
marketplace, a good product range, experienced management and that the
Acquisition is in the best interests of the Company and its Shareholders as a
whole. In addition, the Directors believe that the Acquisition will:
* provide a good technical fit of downhole technologies;
* provide a number of opportunities for further significant growth;
* fit Sondex's strategy of developing a range of solutions to enhance oil
and gas recovery; and
* provide a platform for further product range extensions.
The Acquisition is expected to be earnings enhancing and the Directors believe
that the favourable outlook for Geolink will contribute significantly to the
Enlarged Group's earnings potential. References to the anticipated effect of the
Acquisition on future earnings should not be interpreted as a profit forecast.
Information on Geolink
Introduction
Geolink is a specialist designer, manufacturer and supplier of Measurement While
Drilling (MWD) downhole technology for the global oil and gas industry. Geolink
has also recently entered the Logging While Drilling (LWD) market. Geolink's
products, over 90 per cent. of which are exported, are sold around the world to
national oil companies and independent directional drilling companies. Geolink
also rents its product range to customers. The data generated by Geolink's
products facilitate cost efficient directional drilling of oil and gas wells
within known reservoirs, which, in turn, enables the recovery of oil and gas
from existing fields to be maximised. The Directors believe that Geolink has a
strong reputation within its market and represents a significant opportunity to
enhance the prospects of Sondex. In the ten month period ended 29 February 2004,
Geolink generated operating profits before amortisation of intangible assets of
#3.5 million on sales of #11.2 million. In the ten month period ended 29
February 2004, Geolink directors' aggregate emoluments were #452,000. The
aggregate emoluments of the ongoing directors of Geolink for the current
financial year are expected to be #179,000. Geolink had net assets of #0.7
million as at 29 February 2004.
History
Geolink (UK) Limited was founded in Aberdeen in 1989 with the objective of
producing an innovative MWD system for sale to directional drilling operators in
the international oil and gas market. At that time, existing MWD systems had
only been developed by the large service companies. The "Orienteer" Directional
Survey MWD System was launched by Geolink in 1990 and by the mid 1990s
significant growth had been achieved as the Orienteer System had gained good
market penetration.
In 1996, Geolink launched the Gamma Ray Logging System and between the late
1990s and 2002 the product line was further developed with the introduction of
new products including the "Sentinel" Shock and Vibration Monitor System, a
Positive Mud Pulser System and an Electromagnetic Telemetry System, which are
described below.
In 1999, Unidril Energy Limited was incorporated with the objective of
purchasing MWD equipment from Geolink (UK) Limited for the purpose of renting it
to directional drilling operators. The shareholding structure of Unidril Energy
Limited differed from that of Geolink (UK) and the companies were therefore
independent and not part of a group. Unidril Energy Limited established a
subsidiary, Unidril Energy L.P., which opened an office in Houston, USA in 2001
and it also established a subsidiary, Unidril Energy de Venezuela C.A., in
Venezuela in 2002.
Geolink International Limited, a new holding company, was incorporated in March
2002 and, to facilitate the exit of four of the six founder shareholders of
Geolink (UK) Limited and Unidril Energy Limited, acquired ownership of the
entire issued share capital of Geolink (UK) from the Geolink (UK) Vendors on 30
April 2002 and Unidril Energy Limited from the Unidril Vendors on 31 May 2002.
Since that date, the day to day management of Geolink has been undertaken by
Alasdair Macrae, aged 49, and other senior managers. Alasdair joined the Geolink
Group in April 1998 and is the Managing Director. Two of the founder
shareholders, Messrs. Moorley and Dickinson, have remained, largely in a
non-executive capacity and are to resign as directors from the Geolink board and
as employees on Completion.
An important enhancement to the product range, the "TRIM" resistivity tool, was
introduced in 2002/2003 and allowed Geolink to enter a newer and growing LWD
market.
Marketplace and products
Information gathered during the drilling of a well comes from a number of
sources, with logging and measurement while drilling being important elements.
Measurement While Drilling is the gathering of data relating to the position and
movement of the drillstring itself. Logging While Drilling is retrieval of data
that helps identify the formation properties of rocks being drilled through.
The Directors believe that the full range of MWD and LWD services are only
provided by the major oilfield service companies, such as Schlumberger, Baker
Hughes and Halliburton and are typically performed on the high profile
exploration and development wells, which are drilled in newly discovered oil or
gas fields. In known fields a reduced range of MWD and LWD services is usually
run, to keep the cost of drilling wells down, to maximise efficiency and to
reach remaining reserves, with further formation evaluation data retrieved, if
needed, by wireline logging.
Geolink provides products to companies who perform directional drilling in known
fields, where the number of wells drilled is higher but the production cost, and
therefore the level of reliance on oil and gas prices, is lower than in newly
discovered oil and gas fields.
Geolink's products provide information to the operator of a drillstring in
respect of the direction and position of the drill bit and also information in
respect of the characteristics of the formations being drilled through. This
information enables the operator to direct the drillstring towards the target
reserves.
A key challenge with MWD and LWD is the transmission of data to the surface, in
real time. Geolink has taken a patent protected "mud pulse" data transmission
technology and incorporated it in a product which is marketed as being simple to
operate, of high quality and reliable.
Conditions while drilling are particularly arduous, with high temperatures,
pressures and vibration and shock. Instruments such as those supplied by
Geolink are made up of precision sensors and electronics. Survival and
reliability is crucial to an MWD or LWD product's success. Any failure of an
instrument will have negative financial consequences, since more than twelve
hours drilling rig time could be lost if the equipment needs to be replaced. The
Directors believe that Geolink's products have a reputation within the
marketplace for quality and reliability. Geolink's current product range
includes the following:
* "Orienteer" Directional Survey MWD system - the original Geolink
electronics survey assembly provides directional and position information and
forms the platform for the other Geolink sensors that are available.
* Gamma Ray Logging System - uses Geolink's own gamma ray sensor to
monitor background radiation levels in strata being drilled. It has its own
battery and power supply and is therefore able to provide real-time and memory
logging, independent of the main tool functions.
* "TRIM" Resistivity Tool - provides LWD information on resistivity of
materials being drilled. Information from the Gamma tool and the TRIM tool is
used by the operator to identify the nature of the rock strata in which the
drill is operating.
* "Sentinel" Shock and Vibration Monitor System - provides continuous data
in respect of shocks and vibration to the drillstring, enabling action to be
taken before the drill bit, drillstring or MWD tool is caused to fail.
* Retrievable System/Positive Mud Pulser System - an optional, alternative
telemetry-driven system that enables Geolink's product range to be recovered in
the event that the drillstring becomes stuck in the borehole.
* "EmTel" EM Telemetry System - an electromagnetic data transmission
system compatible with the Orienteer product range. Two-way communication with
the surface enables downhole selection of the tool operating mode.
Geolink has also developed the "Guardian" Pressure During Drilling Monitoring
System which is expected to be commercially launched in 2004. It provides a
measurement of the pressure in the drill string and the borehole near to the
drill bit and transmits the information to the surface. This information can be
used to enhance drilling performance and to give early warning of events that
might compromise the integrity of the reservoir.
Research and development
The Geolink research and development function plays an important part in both
developing existing products and in designing new products in order to increase
the product offering to both existing and potential customers. The research and
development team totals 11 personnel comprising development staff, technicians
and software engineers. Current projects include: modernising user control
software to a Windows environment, enhancements to several existing products and
development of a number of new products, either in response to specific customer
demand or to envisaged market demand.
Intellectual property
Geolink develops and typically retains ownership of the majority of the
intellectual property it uses in the operation of its business. Geolink owns or
has applications pending for a number of patents in several jurisdictions
relating to, inter alia, the "Gamma Ray Detection and Measurement Device", the "
Positive Mud Pulser" and the "Improved Signalling System". Historically Geolink
has also licensed numerous patents and used and sublicensed the related
technology in conjunction with its MWD equipment. Some of the licensed patents
have expired, but the Directors believe that there is no one patent which is
critical to the ongoing success of Geolink. Rather, it is the combination of
know-how, material usage and experience of manufacturing processes which
differentiate Geolink's products in the marketplace and thereby create barriers
to entry for potential competitors.
Geolink is also the registered owner of two trade marks embodying Geolink's
company name. These are registered in class 9 (computer and data processing
apparatus and instruments, computer programmes, computer software, data storage
materials, magnetic and optical data carriers and recording media disks, tapes
and wires). These trademarks are due for renewal on 6 December 2004.
Manufacture and production
Geolink manages production of its entire product range in-house from its sites
in Aberdeen. Like Sondex, Geolink sub-contracts the manufacture of the majority
of components to specialist suppliers, most of whom are located in Scotland and
the Midlands. Sub-assembly and final assembly are conducted in-house. In order
to maintain Geolink's reputation for the quality and reliability of its
products, each product is thoroughly tested by Geolink prior to being despatched
to the customer.
Sales and marketing
Geolink carries out its sales and marketing operations from its head-office in
Aberdeen and through sales offices in Houston, USA and Venezuela. Regular sales
trips are made to existing and potential customers by a team of five sales
professionals, with marketing material distributed by email and mail. The
Directors believe that a significant number of new leads come from 'word of
mouth' referrals, thereby reinforcing Geolink's reputation for the quality of
its products within its marketplace.
The Directors believe a significant opportunity exists to broaden Geolink's
sales and also to generate increased sales for Sondex by marketing the Geolink
product range to Sondex's client base and vice versa.
Customers
Geolink's customer base includes national and independent oil and gas companies
in countries such as China and Iran. Geolink's customers also include
independent directional drilling companies and MWD specialists. Geolink is not
reliant on any one customer and due to the nature of its product range the top
two or three customers vary from year to year. In addition, there is also the
opportunity for exceptional orders to be secured such as those from the Iranian
National Oil Company in 2001 and 2002. In the ten months ended 29 February 2004,
Geolink's top five clients accounted for approximately 62 per cent. of turnover.
Geolink sells to a number of Sondex's existing customers but the Directors
believe that further opportunities exist to market Sondex's product range to
those of Geolink's customers that Sondex currently does not sell to and vice
versa.
Competition
The main competitors, but also potential customers of Geolink, are the major
service companies such as Schlumberger, Baker Hughes and Halliburton. These
companies develop and produce equipment for their own drilling service units,
but do not sell such equipment, except in territories where their freedom to
market drilling services is restricted, such as Russia and China. Schlumberger
and Baker Hughes have, however, also been customers of Geolink in territories
where US embargoes preclude the use of US built equipment.
The Directors believe that the only significant independent MWD system supplier
currently competing with Geolink is Tensor, a subsidiary of GE Power Systems.
Senior management and employees
The Directors believe that Geolink has an experienced management team in the
essential areas of sales, research and development and manufacturing. Strategic
management will be injected from Sondex, together with strong financial
controls. Many of the development and production activities are similar and will
allow for cross-fertilisation between the two companies.
A table setting out Geolink's employees as at 29 February 2004 split by function
is set out below:
Manufacturing 28
Directors 4
Research and development 11
Sales and customer support 15
Repair and maintenance 4
Administration 13
Total: 75
Summary financial information on Geolink
In the ten months ended 29 February 2004, Geolink generated operating profits
before amortisation of intangible assets of #3.5 million on turnover of #11.2
million. This compares to operating profits before amortisation of intangible
assets of #2.3 million on turnover of #12.4 million in the fourteen month period
ended 30 April 2003. In the ten month period ended 29 February 2004, Geolink
directors' aggregate emoluments were #452,000. The aggregate emoluments of the
ongoing directors of Geolink for the current financial year are expected to be
#179,000. As at 29 February 2004, net assets were #0.7 million (30 April 2003: #
(0.3) million). The vast majority of Geolink's revenues are earned in US Dollars
and these results have been achieved despite Geolink not hedging its income
versus the weakness in the US Dollar. Following the Acquisition it is proposed
to extend the Sondex Group currency hedging arrangements to include Geolink.
Accordingly, the new term loan facility totalling #13 million will be
denominated in US Dollars and the excess dollar generation (over that required
to fund the Group's US Dollar costs such as its US office and US sourced
components) will be hedged using appropriate hedging instruments such as forward
and option contracts.
Principal terms and funding of the Acquisition
Sondex has agreed, conditional upon, inter alia, Shareholder approval and
Admission, to acquire the entire issued share and loan capital of Geolink for a
consideration of approximately #31.5 million, of which #26.3 million will be
payable in cash to the Loan Note Holders on Completion and #5.2 million will be
satisfied by payment of approximately #1.1 million in cash and the allotment of
the Consideration Shares in the Company to the Geolink Shareholders.
Of the cash consideration, #1.0 million will be paid into a joint retention
account pending the agreement or determination of the net working capital and
the tangible fixed assets of Geolink as shown by completion accounts to be
prepared following Completion and #1.6 million will be paid into a joint account
as security for claims under the warranties and the tax deed.
The overall consideration payable to the Geolink Shareholders is subject to a
net working capital adjustment mechanism. The maximum additional consideration
to be paid by the Company under this mechanism to the Geolink Shareholders shall
not exceed #1.5 million, which is in addition to the #1.0 million to be paid
into the joint retention account referred to above.
The Company proposes to fund the Acquisition as to approximately #14.4 million
from the net proceeds of the Placing and Open Offer and the balance from the
committed bank facilities provided by Bank of Scotland, namely the new term loan
of #13 million. The remainder of the net proceeds of the Placing and Open Offer,
being approximately #3.8 million, will be applied towards increased investment
to accelerate the expansion of the Enlarged Group.
It is anticipated that Completion will take place on 30 June 2004 following
Shareholder approval and Admission.
Current trading and prospects
Sondex has today issued its audited results for the financial year ended 29
February 2004, from which the financial information in this section is
extracted.
Group revenues grew to #17.5 million, an increase of 21 per cent., and earnings
before amortisation of goodwill and one-off flotation costs and taking into
account realised exchange gains increased by 31 per cent. to #5.9 million
representing earnings per share of 9.4p per share on a diluted pro-forma basis.
The Group's operating profit before flotation costs and amortisation of goodwill
and intangible assets was #5.3 million in 2004 (2003 - #4.5 million),
representing a net margin on turnover of 30.3 per cent. (2003 - 31.0 per cent.).
This operating profit increase of 17 per cent. was achieved despite an increase
in Research & Development expenditure from #1.5 million to #2.0 million (an
increase of 33 per cent.) and a depreciation in the Sterling value of Dollar
sales achieved during the year.
Reflecting these results, the Board is proposing a final dividend for the year
of 1.2p per share, amounting to a total of 1.8p for the year.
Sondex
Trading since the year-end for Sondex has been in line with the Directors'
expectations with positive current market and customer indications. The actual
order book and pending order list provide confidence in continuing underlying
growth.
Geolink
Management accounts for Geolink since 29 February 2004 indicate that monthly
revenues are in line with expectations. Customer indications are positive and
provide confidence for the current financial year.
Prospects of the Enlarged Group
As stated in the annual results released today the Board intends to continue to
expand the Enlarged Group through investment in organic product development and
growth, and through a considered and focused acquisition strategy with the aim
of bringing together a platform of technology that can be made available to the
service sector of the oil and gas industry. The Directors believe that the
Enlarged Group can look forward to sustainable growth in the current financial
year.
Management of the Enlarged Group
Day to day management of Geolink will continue to be undertaken by the existing
management team under the leadership of the current Managing Director, Alasdair
Macrae. An executive board will be established, with representation from the key
Geolink management and the Sondex executive team, which will meet regularly and
ensure that synergies are being achieved where possible and a common direction
is maintained across the Enlarged Group.
New banking arrangements
As referred to above, the Company has entered into new committed bank facilities
with Bank of Scotland of up to #33 million (comprising an existing term loan
facility of approximately #14 million, a new term loan facility of #13 million
and a new working capital facility of #6 million) to fund the Acquisition and
provide additional working capital facilities for the Enlarged Group.
Principal terms of the Placing and Open Offer
The Company proposes to raise approximately #18.2 million (net of expenses of
the Acquisition and Placing and Open Offer) by the allotment and issue of
13,118,029 Open Offer Shares at 160 pence per Open Offer Share pursuant to the
Placing and Open Offer. The Open Offer Shares (other than the Committed Shares)
are being conditionally placed by Collins Stewart at the Issue Price with
institutional and other investors subject to clawback (other than in relation to
the Firm Placed Shares) in respect of valid applications made by Qualifying
Shareholders under the Open Offer for such Open Offer Shares.
Collins Stewart has agreed, acting as agent on behalf of the Company, to invite
Qualifying Shareholders to apply under the Open Offer for 13,118,029 Open Offer
Shares at the Issue Price on the basis of:
1 Open Offer Share for every 3 Existing Ordinary Shares
registered in the names of Qualifying Shareholders on the Record Date. If a
Shareholder has sold or otherwise transferred all of his Existing Ordinary
Shares before the Record Date, he is not entitled to participate in the Open
Offer. Where appropriate, entitlements of Qualifying Shareholders will be
rounded down to the nearest whole number of Open Offer Shares and any fractional
entitlements to Open Offer Shares that would otherwise have arisen will be
disregarded in calculating Qualifying Shareholders' pro rata entitlements. Such
fractional entitlements will be aggregated and included within the Placing, with
the proceeds retained for the benefit of the Company.
Qualifying Shareholders may apply for any number of Open Offer Shares up to
their maximum entitlement which, in the case of Qualifying non-CREST
Shareholders, is equal to the number of Open Offer Entitlements as shown in
their Application Form, or in the case of Qualifying CREST Shareholders, is
equal to the number of Open Offer Entitlements standing to the credit of their
stock account in CREST. No application in excess of a Qualifying Shareholder's
pro rata entitlement will be met and any Qualifying Shareholder so applying will
be deemed to have applied for his or her maximum entitlement. Qualifying
Shareholders with holdings of Existing Ordinary Shares in both certificated and
uncertificated form will be treated as having separate holdings for the purposes
of calculating pro rata entitlements under the Open Offer.
Pursuant to the Placing and Open Offer Agreement, Collins Stewart has
conditionally agreed to place with institutional and other investors or, to the
extent that it fails to do so, to itself subscribe for the Open Offer Shares
(other than the Committed Shares) at the Issue Price, subject to and to the
extent that valid applications are not made by Qualifying Shareholders under the
Open Offer for such Open Offer Shares.
The New Ordinary Shares will be issued credited as fully paid, be identical to
and rank pari passu in all respects with the Existing Ordinary Shares, including
the right to receive all dividends and other distributions declared, made or
paid on or after Admission, with the exception of the proposed final dividend
announced today, for which only the Existing Ordinary Shares are eligible. None
of the New Ordinary Shares are being made available to the public other than
pursuant to the Placing and Open Offer and the Acquisition Agreement.
The Placing and Open Offer is conditional on the Placing and Open Offer
Agreement becoming or being declared unconditional in all respects and not being
terminated before 8.00 a.m. on 28 June 2004 (or such later time and/or date,
being not later than 8.00 a.m. on 12 July 2004, as Collins Stewart and the
Company may agree). The principal conditions to the Placing and Open Offer
Agreement are:
* the passing of the Resolutions;
* the Facilities Agreement becoming unconditional in all respects (save
for any condition relating to the Placing and Open Offer Agreement becoming
unconditional);
* the Acquisition Agreement having become unconditional in all respects
(save for any condition relating to the Placing and Open Offer Agreement or
Admission) and completed in escrow subject only to payment of the consideration
due under that agreement; and
* Admission having become effective by no later than 8.00 a.m. on 28 June
2004 or such later time and/or date as Sondex and Collins Stewart may agree
(but, in any event, not later than 8.00 a.m. on 12 July 2004).
If Admission does not take place, the Open Offer Shares will not be issued under
the Placing or the Open Offer and all monies received by the Company's receiving
agent, Capita IRG, will be returned to the applicants (at the applicants' risk
and without interest) as soon as possible thereafter and in any event not later
than 26 July 2004. Any Open Offer Entitlements admitted to CREST will thereafter
be disabled.
Application has been made to the UK Listing Authority for the New Ordinary
Shares to be admitted to the Official List and to the London Stock Exchange for
the New Ordinary Shares to be admitted to trading on the London Stock Exchange's
market for listed securities. It is expected that Admission will become
effective and that dealings in the New Ordinary Shares will commence on 28 June
2004.
The Open Offer is not being made, subject to certain exemptions, to certain
Shareholders (including those resident in the United States, Canada, Australia,
Japan, South Africa or the Republic of Ireland) and, accordingly, Application
Forms are not being sent to and Open Offer Entitlements are not being credited
to such Shareholders.
The Board is mindful of the Competition Commission's recommendations with regard
to competitive tendering of sub-underwriting commissions. To this end the
Company has agreed to pay sub-underwriting commissions to sub-underwriters of
0.5 per cent. of the aggregate value of the Open Offer Shares (other than the
Committed Shares and the Firm Placed Shares) issued subject to clawback by
Qualifying Shareholders under the Open Offer.
Directors' intentions
The Directors have irrevocably undertaken to vote in favour of the Resolutions
in respect of their aggregate holdings of 6,271,031 Existing Ordinary Shares,
representing approximately 15.9 per cent. of the issued ordinary share capital
of the Company.
Certain of the Directors, namely Messrs Paterson, Colvin and Pinchbeck, have
irrevocably committed to take up, or procure to be taken up, their entitlements
in full which represent, in aggregate, 9,999 Open Offer Shares under the Open
Offer. Further, William Stuart-Bruges has irrevocably committed to take up, or
procure to be taken up, his entitlements to 15,625 Open Offer Shares. Such
Committed Shares, representing approximately 0.2 per cent. of the total Open
Offer Shares, have not been placed by Collins Stewart under the Placing and are
not being underwritten by Collins Stewart. Martin Perry, Christopher Wilks and
Peter Collins have irrevocably undertaken not to take up all of their
entitlements and William Stuart-Bruges has irrevocably undertaken not to take up
the remainder of his entitlements, representing, in aggregate, 2,064,718 Open
Offer Shares under the Open Offer, representing approximately 15.7 per cent. of
the total Open Offer Shares. These Firm Placed Shares have been placed firm by
Collins Stewart with institutional and other investors (including William Colvin
who has undertaken to subscribe for 7,500 of the Firm Placed Shares) and are not
subject to clawback by Qualifying Shareholders under the Open Offer.
Dividends
The New Ordinary Shares will rank pari passu in all respects with the Existing
Ordinary Shares including the right to receive any dividends paid, made or
declared by the Company save for the final dividend proposed today of 1.2 p per
Existing Ordinary Share for the year ended 29 February 2004.
Following the Acquisition, the Board intends to maintain Sondex's stated
dividend policy of paying dividends on Ordinary Shares, while maintaining a
suitable level of dividend cover and retaining the majority of earnings to fund
the development and growth of the Enlarged Group's business and products under
development.
References to dividends and dividend policy should not be interpreted as a
dividend forecast or a profit forecast.
Prospectus
A Prospectus containing further details of the proposed Acquisition and the
Placing and Open Offer is expected to be sent to Shareholders today.
Expected Timetable of Principal Events
2004
Record Date for the Open Offer close of business on 25 May
Ex-entitlement date for the Open Offer 26 May
Open Offer Entitlements credited to stock accounts in
CREST of Qualifying CREST Shareholders by 27 May
Recommended latest time for requesting withdrawal of
Open Offer Entitlements from CREST 4.30 p.m. on 15 June
Latest time for depositing Open Offer Entitlements into
CREST 3.00 p.m. on 17 June
Latest time and date for splitting of Application Forms (to
satisfy bona fide market claims) 3.00 p.m. on 18 June
Latest time and date for receipt of Forms of Proxy
for the Annual General Meeting 11.00 a.m. on 21 June
Latest time and date for receipt of Forms of Proxy
for the Extraordinary General Meeting 11.15 a.m. on 21 June
Latest time and date for receipt of completed Application
Forms and payment in full under the Open Offer or
settlement of relevant CREST instruction (as appropriate) 11.00 a.m. on 22 June
Annual General Meeting 11.00 a.m. on 23 June
Extraordinary General Meeting Immediately after the AGM on
23 June
Admission and commencement of dealings in the New
Ordinary Shares 8.00 a.m. on 28 June
Expected date for crediting of Open Offer Shares to CREST
stock accounts in uncertificated form 28 June
Completion of Acquisition 30 June
Despatch of definitive share certificates for the New
Ordinary Shares in certificated form by 6 July
Definitions
The following definitions apply throughout this announcement unless the context
requires otherwise:
"Acquisition" the proposed acquisition of the entire issued share and loan capital of
Geolink International Limited by Sondex plc pursuant to the Acquisition
Agreement
"Acquisition Agreement" the conditional agreement between Robert Trevor Dickinson and Anthony
Moorley and others and the Company, a summary of the principal terms of
which will be set out in the Prospectus
"Admission" admission of the New Ordinary Shares (i) to the Official List and (ii)
to the London Stock Exchange's market for listed securities becoming
effective in accordance, respectively, with the Listing Rules and the
Admission and Disclosure Standards
"Admission and Disclosure the requirements contained in the publication "Admission and Disclosure
Standards" Standards" dated April 2004 containing, inter alia, the admission
requirements to be observed by companies seeking admission to trading
on the London Stock Exchange's market for listed securities
"Annual General Meeting" the annual general meeting of the Company convened for 11.00am on 23
June 2004, notice of which is to be posted to Shareholders with the
Prospectus
"Application Form" the application form relating to the Open Offer being sent to
Qualifying non-CREST Shareholders only with the Prospectus
"Bank of Scotland" or "BoS" the Governor and Company of the Bank of Scotland, a wholly owned
subsidiary of HBoS plc
"Board" or "Directors" the Board of Directors of the Company
"Capita IRG" Capita IRG Plc, The Registry, 34 Beckenham Road, Beckenham, Kent BR3
4TU
"Collins Stewart" Collins Stewart Limited, a wholly owned subsidiary of Collins Stewart
Tullett plc
"Committed Shares" 25,624 Open Offer Shares which represent the entitlements to apply to
the Company for Open Offer Shares under the Open Offer of Messrs.
Paterson, Stuart-Bruges, Colvin and Pinchbeck who have provided
irrevocable undertakings to the Company to take up such Open Offer
Shares under the Open Offer
"Company" Sondex plc, the ultimate holding company of the Group
"Completion" completion of the Acquisition in accordance with the terms of the
Acquisition Agreement
"Consideration Shares" the 2,500,886 new Ordinary Shares to be issued pursuant to the
Acquisition Agreement
"CREST" the relevant system (as defined in the Uncertificated Securities
Regulations 2001) ("the Regulations)) in respect of which CRESTCo
Limited is the Operator (as defined in the Regulations)
"CRESTCo" CRESTCo Limited, the operator of CREST
"Currency" unless otherwise indicated, all references in this announcement to "
pounds sterling", "#" or "p" are to the lawful currency of the United
Kingdom and references to "US Dollars", or "$" are to the lawful
currency of the United States. Sondex prepares its financial
statements in pounds sterling
"Enlarged Group" the Group as enlarged following the Acquisition
"Existing Ordinary Shares" the 39,354,089 Ordinary Shares in issue as at the date of the
Prospectus, all of which are traded on the London Stock Exchange's
market for listed securities
"Extraordinary General Meeting" the extraordinary general meeting of the Company to be held immediately
after the Annual General Meeting on 23 June 2004, notice of which will
be set out at the end of the Prospectus
"Facilities Agreement" the #13,000,000 senior term loan facility agreement dated 25 May 2004
between the Company, BoS and certain other material subsidiaries of the
Company, details of which will be set out in the Prospectus
"Firm Placed Shares" 2,064,718 Open Offer Shares which represent the entitlements to apply
to the Company for Open Offer Shares under the Open Offer of Messrs.
Perry, Stuart-Bruges, Wilks and Collins who have provided irrevocable
undertakings to the Company not to take up such Open Offer Shares under
the Open Offer
"Form of Proxy" the forms of proxy for use in connection with the Annual General
Meeting and the Extraordinary General Meeting to be sent to the
Shareholders with the Prospectus
"Geolink" Geolink International Limited
"Geolink Group" Geolink and, where applicable, its subsidiaries
"Geolink Shareholders" namely, Victor Allan, Federico Casavantes, Robert Trevor Dickinson,
John Elphinstone, James Harrison, Anthony Moorley, Alasdair Macrae,
Stephen Page and Shaun Robertson
"Geolink (UK)" Geolink (UK) Limited
"Geolink (UK) Vendors" namely, Anthony Moorley, Kenneth Prain, David McLaughlin, the
McLaughlin Family Trust, Robert Trevor Dickinson, David Newton, the
Gearhart Family Partnership and the trustees of the Geolink (UK)
Limited Funded Unapproved Retirement Benefit Scheme
"Group" the Company and, where applicable, its subsidiaries
"Issue Price" 160p per Open Offer Share
"Listing Rules" the Listing Rules of the UK Listing Authority, made under Part VII of
the Financial Services and Markets Act 2000
"Loan Note Holders" namely, Trevor Dickinson, the Gearhart Family Partnership, David
McLaughlin, Anthony Moorley, David Newton, Kenneth Prain, the Geolink
(UK) Limited Unapproved Retirement Benefit Scheme and the McLaughlin
Family Trust
"London Stock Exchange" London Stock Exchange plc
"New Ordinary Shares" together, the Open Offer Shares and the Consideration Shares
"Official List" the Official List of the UK Listing Authority
"Open Offer" the offer by Collins Stewart as agent for the Company to Qualifying
Shareholders to subscribe for Open Offer Shares on the terms and
subject to the conditions set out in the letter from Collins Stewart in
Part II of the Prospectus and in the Application Form
"Open Offer Entitlement" an entitlement to apply to subscribe for one Open Offer Share,
allocated to a Qualifying Shareholder pursuant to the Open Offer
"Open Offer Shares" the 13,118,029 new Ordinary Shares to be issued pursuant to the Placing
and Open Offer
"Ordinary Shares" ordinary shares of 10 pence each in the capital of the Company
"Placing" the conditional placing of the Open Offer Shares (other than the
Committed Shares) at the Issue Price, subject to the right of
Qualifying Shareholders to apply for such shares pursuant to the Open
Offer (other than in relation to the Firm Placed Shares)
"Placing and Open Offer Agreement the conditional agreement dated 26 May 2004 between Sondex and Collins
" Stewart
"Prospectus" the Prospectus detailing the proposed Acquisition and the Placing and
Open Offer
"Qualifying CREST Shareholders" Qualifying Shareholders whose Ordinary Shares on the register of
members of the Company at the close of business on the Record Date are
in uncertificated form
"Qualifying non-CREST Qualifying Shareholders whose Ordinary Shares on the register of
Shareholders" members of the Company at the close of business on the Record Date are
in certificated form
"Qualifying Shareholders" Shareholders of Existing Ordinary Shares whose names appear in the
register of members at the close of business on the Record Date, other
than certain Overseas Shareholders as set out in paragraph 7 of Part
VIII of the Prospectus
"Record Date" the record date for the Open Offer, being close of business on 25 May
2004
"Resolutions" the resolutions set out in the Notice of Extraordinary General Meeting
at the end of the Prospectus
"Shareholder" a holder of Ordinary Shares
"Sondex" or "the Group" the Company and where applicable, its subsidiaries
"stock account" an account within a member account in CREST to which a holding of a
particular share or other security in CREST is credited
"UK Listing Authority" the Financial Services Authority, in its capacity as the competent
authority under the Financial Services and Markets Act 2000 for
admission of securities to the Official List
"Unidril" Unidril Energy Limited, a wholly owned subsidiary of Geolink
"Unidril Vendors" namely, the Newton Family Trust, Marvin Gearhart, the Geolink (UK)
Limited Funded Unapproved Retirement Benefit Scheme, Alasdair Macrae,
Melanie Macrae, James Macrae, Alice Macrae, James Hamson, Stephen Page,
Shaun Robertson and Victor Allan
"United Kingdom" or "UK" the United Kingdom of Great Britain and Northern Ireland
"United States" or "US" the United States of America, its territories and possessions, any
state of the United States of America and the District of Columbia
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACQUNURRSWRVURR
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