TIDMIDEA
RNS Number : 1090A
Ideagen PLC
18 December 2014
Ideagen plc
("Ideagen" or the "Group")
Proposed Acquisition of Gael, Placing to raise GBP17.5m and
Notice of General Meeting
Further step in strategy to build a leading Governance, Risk and
Compliance ("GRC") Software business.
Ideagen, a leading supplier of Information Management software
to highly regulated organisations, is pleased to announce the
proposed acquisition of the entire issued share capital of Gael
Limited (the "Acquisition"), and a conditional oversubscribed
placing of 51,470,589 ordinary shares of 1 pence each (the "Placing
Shares") at 34 pence per share raising gross proceeds of GBP17.5
million.
Highlights:
-- Proposed acquisition of Gael Limited ("Gael") a GRC software
company supplying the healthcare, manufacturing and aviation
sectors for a net cash consideration of GBP18m
-- Current year forecast adjusted EV/EBITDA* multiple of 7.8
-- For the year to 31 December 2014 Gael is expected to deliver
revenues of approximately GBP9 million and adjusted EBITDA* of
GBP2.3 million
o 14% compound annual organic revenue growth between 2011 and
2014
o Recurring revenues of approximately GBP4.5m
-- Acquisition is expected to be immediately earnings enhancing
-- Heavily oversubscribed placing, including 11 new institutional shareholders
-- Placing of 51,470,589 new Ordinary Shares at a price of 34
pence per share (the "Placing Price"), raising gross proceeds of
GBP17.5 million to be used for cash consideration and working
capital
Strategic Rationale for Acquisition:
-- Delivers strong IP in the area of Governance, Risk & Compliance ("GRC")
-- Consolidates the Group's position in the "Compliance and
Standards management" market and significantly enhances the Group's
Risk Management proposition
-- Strengthens Ideagen's position within the NHS and Complex Manufacturing sectors
-- Provides Ideagen with a strong entry point into the highly regulated aviation sector
-- Adds over 1,000 customers to the Group
-- Strengthens the Group's management team and marketing capability
-- Delivers significant cross-selling opportunities
David Hornsby, CEO, commented;
"I am delighted to announce the proposed acquisition of Gael
which we believe will augment the Group both strategically and
financially, thereby enhancing shareholder value. Gael has
established an extremely compelling value proposition comprising
strong IP and long-term relationships with its extensive customer
base which includes over 130 NHS Trusts and over 300 airlines. We
believe the combination of Gael and Ideagen will enable the
Enlarged Group to rapidly develop new markets and provides an
outstanding opportunity to leverage the growing risk and compliance
market"
A circular will be sent to shareholders giving notice of a
general meeting of Ideagen to be held on 7 January 2015 at noon at
the offices of finnCap Limited, 60 New Broad Street, London EC2M
1JJ. A copy of the circular will be available on the Company's
website www.ideagenplc.com.
Capitalised but undefined terms shall have the meaning given to
them in the definitions appearing in the circular.
Enquiries:
Ideagen Plc Tel: 01629 699100
David Hornsby, Chief Executive
Graeme Spenceley, Finance Director
finnCap (Nominated Adviser and Broker) Tel: 020 7220 0500
Charlotte Stranner (Corporate Finance)
Victoria Bates/Stephen Norcross
(Corporate Broking)
The following text has been extracted from the circular
Introduction
The Companyannounced earlier today that it had conditionally
placed,in aggregate, 51,470,589 new Ordinary Shares at 34p per
share and had entered into an agreement to acquire the entire
issued share capitalof Gael Limited for net cash consideration of
GBP18 million. The Placing requires the approval of Shareholders at
the General Meeting in order for the Directors to be able to allot
such shares. Conditional on inter alia, the passing of the
Resolutions at the General Meeting, the Placing Shares are to
beallotted as detailed in this document and admitted to trading on
AIM on 9 January 2015. The Placing Price represents a discount of
approximately 1.4 per cent. to the closingmid-market price of 34.5
pence per Ordinary Share on 17 December 2014 (being the last
practicaldate prior
to the announcement of the Acquisition and the Placing).
Once completed, the proceeds from the Placing will be
approximately GBP17.5 million (before commissions and expenses).
The purpose of the Placingis to fund the acquisition of Gael and
the costs associated with the Acquisition as well as to provide the
Company with working capital.
The purpose of this document is to explain the background to and
reasons for the Placing, to explain why the Board considers the
Placing to be in the best interests of the Company and its
Shareholders, and why the Directors unanimously recommend that you
vote in favour of the Resolutions to be proposed at the General
Meeting, as they have irrevocably undertaken to do in respect of
their beneficial interests amounting, in aggregate, to 13,127,899
Ordinary Shares representing 10.7 per cent. of the existing issued
ordinary share capital of the Company at the date of this document
and approximately 7.5 per cent. of the issued share capital of the
Company following Admission.
Background and Reasons for the Acquisition and Placing
It has been the Directors' stated strategy to acquire businesses
with strong IP and recurring revenues. Gael has both of these
qualities. Furthermore, Gael operates within complementary markets
to Ideagen and is growing, profitable and cash generative. The
Acquisition will bring enhanced scale to the Group as well as
marketing strength and management expertise, and is expected to be
immediately earnings enhancing. The Acquisition will also enable
further consolidation of the sectors within which the Group
currently operates, namely manufacturing and healthcare, together
with a strong entry point into the aviation sector, all of which
are subject to increasing regulatory pressures.
The proceeds of the Placing will part fund the cash
consideration for the Acquisition and will also be used to cover
transaction costs and to provide the Enlarged Group with working
capital.
Information on Gael
Gael is a software company that has developed products which
help organisations manage their Governance, Risk and Compliance
("GRC") requirements. Established in 1992, Gael specialises within
the complex manufacturing, aviation and healthcare sectors.
Increasingly, highly regulated organisations operating within these
sectors are required to demonstrate that they have the tools in
place to proactively monitor and assess their operations to ensure
that they can respond quickly to potential risks.
Gael has made significant investment in R&D over the past
few years as it has developed new products to meet the demand for
"risk based compliance" solutions for its target markets which has
generated strong organic revenue growth.
Gael has three primary products:
1. Q-Pulse - an ISO compliance and standards management solution
2. Gael Risk - an operational risk management solution
3. Gael Enlighten - a SaaS risked based compliance solution
Current revenues are generated predominantly through the Q-Pulse
and Gael Risk products, however significant investment has been
made in Enlighten which was launched earlier this year. Gael
Enlighten is a cloud based SaaS solution that is delivered over the
Amazon cloud platform. This product will enable the Enlarged
Group's existing customer base to migrate to cloud solutions,
thereby providing the potential to increase the Enlarged Group's
current recurring revenue base. The Directors also believe
Enlighten represents a significant growth opportunity and should
enable Gael to win larger and higher value contracts.
Gael has a well dispersed customer base of over 1,000 customers,
with no single customer representing more than 5% of revenue in any
given year, and has a number of high profile clients, including
Emirates, BAE Systems, Dairy Crest and the NHS.
Gael is based in East Kilbride and currently has circa 100
employees, including the current chief executive who will remain
with the Enlarged Group post Completion.
Financial Information on Gael Limited
In the year ended 31 December 2013 Gael generated revenues of
GBP8.0 million, EBITDA of GBP1.6 million and profit after tax of
GBP1.4 million. At 31 December 2013 Gael had net assets of GBP1.4
million.
Management accounts for the nine months to 30 September 2014
show revenues of GBP6.4 million, EBITDA of GBP1.1 million and
profit after tax of GBP1.0 million.
Gael currently expenses R&D costs, certain elements of
which, under International Financial Reporting Standards, would
need to be capitalised. Furthermore, cost savings in Gael in
respect of directors' remuneration, consultancy and training of
approximately GBP0.25m have been identified. The Directors also
believe that further synergies in the Enlarged Group can be
achieved.
Terms of the Acquisition
Under the terms of the Acquisition Agreement, the Company is to
acquire Gael for total consideration of GBP21 million assuming cash
balances in Gael of GBP3 million as at 31 December 2014, subject to
certain adjustments. The Acquisition is in line with the Company's
strategy of acquiring profitable businesses with intellectual
property and recurring revenues. The Acquisition will be completed
within 3 business day following Admission when payment of the cash
consideration in accordance with the terms of the Acquisition
Agreement will be paid to the Vendors.
The headline terms of the Acquisition are as follows:
(a) The purchase price is GBP21 million assuming cash balances
in Gael as at 31 December 2014 of GBP3 million, subject to certain
adjustments, and subject to an upper cash balance cap of GBP3.15
million;
(b) The purchase price is payable in cash as follows:
(i) GBP14,774,000 plus the amount of the cash in Gael as at 31
December 2014, subject to certain adjustments;
(ii) GBP1,613,000 payable on the first anniversary of the date of Completion; and
(iii) GBP1,613,000 payable on the second anniversary of the date of Completion;
(c) The purchase price may be reduced in the event that the net
current assets excluding cash of Gael Limited as at 31 December
2014 are less than GBP1.4 million
The Acquisition Agreement contains warranties (including a tax
covenant) from certain Vendors in favour of the Company. Their
liability is capped at GBP18 million.
The Placing
The Company is proposing to raise, in aggregate, GBP17.5 million
(before commissions and expenses) by means of the Placing. The
Placing Shares will represent approximately 29.5% of the Enlarged
Issued Share Capital. The Placing Shares will rank in full for all
dividends and otherwise pari passu with the existing Ordinary
Shares from the date of their unconditional allotment. It is
expected that the Placing Shares will be admitted to trading on AIM
on 9 January 2015.
The placing of the Placing Shares will be conducted in three
separate tranches to assist investors in the EIS Placing and the
VCT Placing to claim certain tax reliefs available to EIS investors
and VCT investors, respectively. EIS Shares will be offered to
those investors seeking to claim EIS relief in relation to their
subscription, VCT Shares will be offered to VCTs and the remaining
Placing Shares will be offered to those investors who are neither
seeking EIS relief nor whom are VCTs.
The EIS Placing is conditional, among other things, upon the
Placing Agreement becoming unconditional in respect of the matters
that fall to be performed prior to the issue of the EIS Shares and
not having been terminated in accordance with its terms. The VCT
Placing is conditional, among other things, upon the Placing
Agreement becoming unconditional in respect of the matters that
fall to be performed prior to the issue of the VCT Shares and not
having been terminated in accordance with its terms.
EIS and VCT investors should note that it is intended that the
Company will issue the EIS Shares on 7 January 2015 and the VCT
Shares on 8 January 2015 and that Admission is expected to occur at
8.00 a.m. on 9 January 2015 and, accordingly, completion of each of
the EIS Placing and the VCT Placing is not conditional upon
Admission.
The placing of the Non-Eligible Shares is conditional, among
other things, upon the Placing Agreement becoming unconditional
(including Admission taking place on 9 January 2015 (or such later
time and/or date as finnCap and the Company may agree, not being
later than 30 January 2015)) and not having been terminated in
accordance with its terms prior to Admission.
VCT
The Company has applied for and obtained advance assurance from
HMRC that the VCT Shares will be eligible for the purposes of
section 285(3A) of the Income Tax Act 2007 and that the VCT Shares
will be "qualifying holdings" for the purposes of Chapter 4, Part
6, Income Tax Act 2007. The conditions for relief are complex and
depend not only upon the qualifying status of the Company but upon
certain factors and characteristics of the VCT concerned. Moreover,
VCT investors should be aware that, whilst advance assurance has
been obtained from HMRC, the Directors cannot guarantee that the
VCT Shares will satisfy, and will continue to satisfy, the
requirements for tax relief under VCT legislation or that the
Company will, or will continue to be, a qualifying company for VCT
purposes. VCTs should consult their own tax advisers regarding
this.
EIS
Advance assurance has been sought and obtained from HMRC that
the Company should be a qualifying company and the EIS Shares are
eligible shares for the purposes of EIS provisions. However, EIS
investors should be aware that, whilst advance assurance has been
obtained from HMRC, the Directors cannot guarantee that the EIS
Shares will satisfy, and will continue to satisfy, the requirements
for tax relief under EIS or that the Company will, or will continue
to be, a qualifying company for EIS purposes.
The PlacingAgreement
Pursuant to the terms of the Placing Agreement, finnCap, as
agent for the Company, has conditionally agreed to use its
reasonable endeavours to place the Placing Shares on a
non-underwritten basis at the Placing Price.
The Placing Agreement contains certain warranties from the
Company in favour of finnCap in relation to, inter alia, certain
matters relating to the Company and its business, subject to
certain limitations. In addition, the Company has agreed to
indemnify finnCap in relation to certain liabilities it may incur
in respect of the Placing. finnCap has the right to terminate the
Placing Agreement in certain circumstances prior to Admission,
including without limitation for an event of force majeure or in
the event of a material breach of the warranties set out in the
Placing Agreement. Under the terms of the Placing Agreement the
Company has agreed to pay finnCap commissions based on the number
of Placing Shares which are the subject of the Placing.
The Share Sale
Certain existing Shareholders, including certain employees of
Ideagen, have conditionally agreed to sell 4,400,000 Sale Shares at
the Placing Price. The Share Sale is conditional upon, inter alia,
the Resolutions being passed at the General Meeting and Admission
becoming effective on or before 8.00 a.m. on 9 January 2015 (or
such later time and/ or date as the Company and finnCap may agree,
but in any event, no later than 8.00 a.m. on 30 January 2015).
Admission and dealings
Application will be made to the London Stock Exchange Plc for
the Placing Shares to be admitted to trading on AIM. The Placing
Shares will, when issued, rank pari passuin all respects with the
existing Ordinary Shares, including the right to receive dividends
and other distributions declared following the date of their
unconditional allotment. It is expected that Admission will become
effective and that dealingsin the Placing
Shares will commence at 8.00 a.m. on 9 January2015.
General Meeting
A notice convening the General Meeting to be held at the offices
of finnCap Limited, 60 New Broad Street, London EC2M 1JJ at noon on
7 January 2015 is set out at the end of this document.
At the General Meeting, the Resolutions will be proposed to
grant the Directors the authority to allot the Placing Shares and
further to allot the Placing Shares without first offering them to
existing Shareholders on a pre-emptive basis.
The Directors appreciate that it would be normal when a company
issues a material number of new shares for cash for that issue to
be fully pre-emptive i.e. to incorporate an offer to all
Shareholders. However, the Directors believe it would not be in
Shareholders' best interests to incur the significant additional
expense that would be required for such an offer to Shareholders to
be implemented.
The Directors have therefore concluded that seeking general
authority from Shareholders to issue Ordinary Shares other than on
a pre-emptive basis is the most flexible and cost effective method
available to the Company. At the General Meeting, the following
Resolutions will be proposed:
Resolution 1 - which is an ordinary resolution to grant the
Directors authority to allot shares in the Company and/or to grant
right to subscribe for, or to convert any security into, shares in
the Company pursuant to section 551 of the Act up to a maximum
nominal amount of GBP514,705.89, such authority to expire at the
end of the next annual general meeting of the Company to be held
after the date of the passing of such Resolution or, if earlier,
fifteen months from the date of the passing of the Resolution.
Resolution 2 - which is conditional on the passing of Resolution
1, is a special resolution to empower the Directors pursuant to
section 570 of the Act to allot equity securities for cash pursuant
to the authority conferred on them by Resolution 1 as if the
statutory pre-emption rights did not apply to such allotment
provided that such power is limited to the allotment to any persons
of equity securities up to an aggregate nominal amount of
GBP514,705.89, such authority to expire at the end of the next
annual general meeting of the Company to be held after the date of
the passing of such Resolution or, if earlier, fifteen months from
the date of the passing of the Resolution.
Irrevocable Undertakings
The Directors have irrevocably undertaken to vote in favour of
the Resolutions in respect of their aggregate beneficial interest
of 13,127,899 Ordinary Shares representing 10.69 per cent. of the
existing issued share capital of the Company at the date of this
document.
Certain other Shareholders have also given irrevocable
undertakings to vote in favour of the Resolutions in respect of a
total of 13,805,361 Ordinary Shares, representing 11.2 per cent. of
the existing issued share capital of the Company at the date of
this document.
Action to be taken
Shareholders have been sent a Form of Proxy for use at the
General Meeting. Whether or not you propose to attend the General
Meeting in person, you are requested to complete the Form of Proxy
and to return it to the Company's Registrars, SLC Registrars,
Thames House, Portsmouth Road, Esher, Surrey KT10 9AD, so as to
arrive not later than noon on 5 January 2015. Unless the Form of
Proxy is received by this date and time, it will be invalid. The
completion and return of a Form of Proxy will not preclude you from
attending the General Meeting and voting in person if you so
wish.
Recommendation
The Directors consider the Resolutions to be proposed at the
General Meeting to be in the best interests of the Company and the
Shareholders as a whole. Consequently, the Directors unanimously
recommend that you vote in favour of the Resolutions to be proposed
at the General Meeting as they have irrevocably undertaken to do in
respect of their beneficial interests amounting, in aggregate, to
13,127,899 Ordinary Shares representing 10.7 per cent. of the
existing issued share capital of the Company at the date of this
document.
Shareholders should read the Notice of General Meeting for the
full text of the Resolutions and for further details about the
General Meeting.
Forward Looking Statements
All statements other than statements of historical facts
included in this announcement, including, without limitation, those
regarding the Group's and/or the Enlarged Group's financial
position, business strategy, plans and objectives of management for
future operations or statements relating to expectations in
relation to dividends or any statements preceded by, followed by or
that include the words "targets", "believes", "expects", "aims",
"intends", "plans", "will", "may", "anticipates", "would", "could"
or similar expressions or the negative thereof, are forward-looking
statements. Such forward-looking statements involve known and
unknown risks, uncertainties and other important factors beyond the
Group's and/or the Enlarged Group's control that could cause the
actual results, performance, achievements of or dividends paid by,
the Group and/or the Enlarged Group to be materially different from
future results, performance or achievements, or dividend payments
expressed or implied by such forward-looking statements. Such
forward-looking statements are based on numerous assumptions
regarding the Group's and/or the Enlarged Group's present and
future business strategies and the environment in which the Group
and/or the Enlarged Group will operate in the future. These
forward-looking statements speak only as of the date of this
announcement. The Company expressly disclaims any obligation or
undertaking to disseminate any updates or revisions to any
forward-looking statements contained herein to reflect any change
in the Company's expectations with regard thereto or any change in
events, conditions or circumstances on which any such statements
are based unless required to do so by applicable law or the AIM
Rules.
Important Notice
This announcement is for informational purposes only, does not
constitute a prospectus or admission document and has not been
approved by the Financial Conduct Authority or any other regulator.
This announcement does not constitute or form part of, and should
not be construed as, an offer, invitation or inducement to sell,
purchase or subscribe for or a solicitation of an offer to sell,
purchase or subscribe for any securities in the Company, or any
other entity, nor shall it or any part of it form the basis of, or
be relied upon in connection with, any contract or commitment by or
with the Company, finnCap, or any of their respective directors,
officers, partners, employees, agents, advisers or affiliates for
any purpose. This announcement does not constitute a recommendation
regarding any securities in the Company.
finnCap is the trading name of finnCap Ltd, which is a private
company authorised and regulated by the Financial Conduct
Authority. finnCap is acting as nominated and financial adviser to
the Company in connection with the matters described in this
announcement. finnCap is not responsible to anyone other than the
Company for providing the protections afforded to customers of
finnCap or for advising any other person on the arrangements
described in this announcement. finnCap has not authorised the
contents of, or any part of this announcement and no liability
whatsoever is accepted by finnCap for the accuracy of any
information or opinions contained in this announcement or for the
admission of any information. No representation or warranty,
express or implied, is made by finnCap as to, and no liability
whatsoever is accepted by finnCap in respect of any of the contents
of this announcement (without limiting the statutory rights of any
person to whom this announcement is issued).
It is the responsibility of any person receiving a copy of this
announcement outside the United Kingdom, to satisfy themselves as
to the full observance of the laws and regulatory requirements of
the relevant territory in connection therewith, including obtaining
any governmental or other consents which may be required or
observing any other formalities required to be observed in such
territory and paying any other issue, transfer or other taxes due
in such other territory. Persons (including, without limitation,
nominees and trustees) receiving this announcement should not
distribute or send this announcement into any jurisdiction when to
do so would, or might contravene local securities laws or
regulations.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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