TIDMTRK
RNS Number : 5842R
Torotrak PLC
30 June 2015
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED IN IT IS NOT FOR
RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN
WHOLE OR IN PART, IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO
SO MIGHT CONSTITUTE A VIOLATION OF LOCAL APPLICABLE SECURITIES LAWS
OR REGULATIONS.
THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND IS NOT AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES. IT IS
NOT A CIRCULAR, A PROSPECTUS OR PROSPECTUS EQUIVALENT DOCUMENT.
INVESTORS SHOULD NOT SUBSCRIBE FOR OR PURCHASE ANY SHARES REFERRED
TO IN THIS ANNOUNCEMENT EXCEPT SOLELY ON THE BASIS OF INFORMATION
CONTAINED IN THE PROSPECTUS PUBLISHED BY TOROTRAK PLC DATED 30 JUNE
2015.
30 June 2015
Torotrak plc
("Torotrak" or the "Company")
Proposed Firm Placing of 128,571,428 New Ordinary Shares
Proposed Placing and Open Offer of 69,071,511 New Ordinary
Shares
Proposed Subscription for up to 21,428,571 New Ordinary Shares
by Allison Transmission, Inc.
each at an Issue Price of 7 pence per New Ordinary Share
Proposed Reorganisation of Share Capital
Proposed Related Party Transactions
and
Notice of General Meeting
Torotrak (LSE: TRK), a leading developer and supplier of
emissions reduction and fuel efficiency technology for vehicles,
announces a proposed Subscription, Firm Placing and Placing and
Open Offer (together the "Issue") to raise approximately GBP13.8
million (before costs). The Company also announces that it has
entered into a conditional agreement with the Flybrid Vendors to
amend the terms of the Acquisition Agreement relating to the
acquisition of Flybrid and the proposed Reorganisation of Share
Capital to allow the Company to issue the New Ordinary Shares at
the Issue Price. The Proposals, comprising the Flybrid Agreement,
the Reorganisation of Share Capital, the Subscription, the Firm
Placing, the Placing and Open Offer and the Chief Executive
Officer's Proposed Remuneration, require Shareholder approval at
the General Meeting to be held on 22 July 2015.
The net proceeds of the Issue will be used to finance the
expenditure required to complete the productionisation and start of
commercial production of the bus KERS technology, to invest in the
development and testing of the Group's V-Charge technology, to
finance the ongoing development of the Group's IVT/CVT technology,
to settle the cash consideration due to the Flybrid Vendors under
the Flybrid Agreement and to provide the Group with additional
working capital.
Highlights
The Issue
-- 197,642,939 New Ordinary Shares at 7 pence per share will be
issued pursuant to the Issue, of which 128,571,428 New Ordinary
Shares have been placed firm with institutional investors.
-- Open Offer to Qualifying Shareholders on the basis of:
1 Open Offer Share for every 4 Existing Ordinary Shares at 7
pence per share
Qualifying Shareholders can also subscribe for Excess Shares
under the Excess Application Facility, subject to availability. All
of the Open Offer Shares have been conditionally placed with
institutional investors pursuant to the Placing and with Allison
pursuant to the Subscription, subject to claw-back to satisfy valid
applications by Qualifying Shareholders under the Open Offer.
-- Allison has agreed to subscribe for up to 21,428,571 New
Ordinary Shares at the Issue Price, subject to claw-back to satisfy
valid applications by Qualifying Shareholders under the Open Offer.
As Allison owns (as at the date of the Prospectus) Existing
Ordinary Shares representing approximately 12.9 per cent. of the
existing issued share capital of the Company, the Subscription is a
related party transaction under the Listing Rules requiring
Shareholder approval.
-- The Issue, which is subject to Shareholder approval, will
raise gross proceeds of approximately GBP13.8 million (before
costs).
Flybrid Agreement
-- The Flybrid Agreement is a conditional agreement between the
Company and the Flybrid Vendors to amend the Acquisition Agreement,
including restructuring of the rights of the Flybrid Vendors in
relation to the redemption of GBP2.8 million of loan notes and the
earn-out consideration of up to GBP15 million (of which not less
than GBP10 million was payable in cash) payable under the
Acquisition Agreement. Under the Flybrid Agreement, the loan notes
will be redeemed by the payment of GBP1 million in cash from the
proceeds of the Issue and through drawing down a new GBP1.8 million
five year term loan from the Flybrid Vendors to the Company, and
the Acquisition Agreement earn-out consideration is to be satisfied
by the issue of 71,428,571 New Ordinary Shares (GBP5.0 million at
the Issue Price).
-- The Flybrid Vendors, Jonathan Hilton (a Director of the
Company) and Douglas Cross (a director of a subsidiary of the
Company) are regarded as related parties under the Listing Rules
and the Flybrid Agreement is therefore subject to Shareholder
approval. If the Flybrid Agreement is approved by Shareholders,
Jonathan Hilton will become Non-Executive Deputy Chairman of
Torotrak and will cease to be an Executive Director. Douglas Cross
will continue in his position as Chief Technology Officer and as a
member of the executive team.
Reorganisation of Share Capital
-- In order for the Company to issue the New Ordinary Shares at
the Issue Price, it will be necessary for the Company first to
reduce the nominal value of the Existing Ordinary Shares. The
Company therefore proposes to sub-divide and convert the
276,286,047 Existing Ordinary Shares of 10 pence each into the same
number of Existing Ordinary Shares of 1 pence each and the same
number of Deferred Shares of 9 pence each. In connection with the
Reorganisation of Share Capital, the Company proposes to adopt new
Articles of Association. The Reorganisation of Share Capital is
conditional on Shareholder approval.
Notice of General Meeting
-- A notice convening the General Meeting, to be held at the
offices of Tavistock Communications at 131 Finsbury Pavement,
London EC2A 1NT at 11.00 a.m. on 22 July 2015 is contained in the
Prospectus which is being posted to Shareholders (except those
resident in Excluded Territories).
Further details of the Proposals, including the Issue, are set
out in this announcement and in the Prospectus due to be published
today.
Nick Barter, Chairman of Torotrak, said:
"These proposals, together with our refocused strategy and
internal reorganisation, will deliver, we believe, a solid
financial and operational platform from which to realise the value
of our technology. We have made considerable progress over the last
year with bus KERS, V-Charge and IVT. Adam Robson, our new CEO, has
already given us a new strategic impetus and under his leadership
we expect to expand our Tier 1 partnerships and licensee base as
they prepare themselves to deliver our market leading products into
production for automotive OEMs who we expect to adopt our new
solutions to reduce emissions and fuel consumption.
"This fundraise underpins our plans to realise the value of our
products and offers all shareholders the chance to participate. The
Board recommends all shareholders to vote in favour of the
proposals, which we believe will allow us to deliver value to our
loyal shareholders."
For more information, please visit www.torotrak.com or
contact:
Torotrak plc +44 1772 900 931
Adam Robson, Chief Executive Officer
Rex Vevers, Finance Director
Charles Stanley Securities (Joint Financial Adviser &
Joint Broker) +44 20 7149 6000
Marc Milmo / Karri Vuori / Freddie Crone
Cantor Fitzgerald Europe (Joint Financial Adviser & Joint
Broker) +44 20 7894 7000
Rick Thompson / Will Goode / David Banks
Tavistock +44 20 7920 3150
Simon Hudson / James Collins
IMPORTANT NOTICE
This announcement is not a prospectus but an advertisement and
Qualifying Shareholders should not acquire any New Ordinary Shares
referred to in this announcement except on the basis of the
information contained in the Prospectus.
Neither the content of the Company's website nor any website
accessible by hyperlinks to the Company's website is incorporated
in, or forms part of, this announcement. The distribution of this
announcement, the Prospectus and any other documentation associated
with the Proposals into jurisdictions other than the United Kingdom
may be restricted by law. Persons into whose possession these
documents come should inform themselves about and observe any such
restrictions. Any failure to comply with these restrictions may
constitute a violation of the securities laws or regulations of any
such jurisdiction. In particular, such documents should not be
distributed, forwarded to or transmitted, directly or indirectly,
in whole or in part, in, into or from the United States, Canada,
Japan or Australia or any other jurisdiction where to do so may
constitute a violation of the securities laws or regulations of any
such jurisdiction (each an "Excluded Territory").
No action has been taken by the Company or any other person that
would permit an offer of the New Ordinary Shares or possession or
distribution of this announcement, the Prospectus or any other
documentation or publicity material or the Application Form in any
jurisdiction where action for that purpose is required, other than
in the United Kingdom.
The New Ordinary Shares have not been and will not be registered
under the US Securities Act 1933 (as amended) (the "US Securities
Act") or with any securities regulatory authority of any state or
other jurisdiction of the United States and, accordingly, may not
be offered, sold, resold, taken up, transferred, delivered or
distributed, directly or indirectly, within the United States
except in reliance on an exemption from the registration
requirements of the US Securities Act and in compliance with any
applicable securities laws of any state or other jurisdiction of
the United States.
There will be no public offer of the New Ordinary Shares in the
United States. The New Ordinary Shares are being offered and sold
outside the US in reliance on Regulation S under the US Securities
Act. The New Ordinary Shares have not been approved or disapproved
by the US Securities and Exchange Commission, any state securities
commission in the US or any other US regulatory authority, nor have
any of the foregoing authorities passed upon or endorsed the merits
of the offering of the New Ordinary Shares or the accuracy or
adequacy of the Application Form or this announcement. Any
representation to the contrary is a criminal offence in the US.
The New Ordinary Shares have not been and will not be registered
under the relevant laws of any state, province or territory of any
Excluded Territory and may not be offered, sold, resold, taken up,
transferred, delivered or distributed, directly or indirectly,
within any Excluded Territory except pursuant to an applicable
exemption from registration requirements. There will be no public
offer of New Ordinary Shares in Canada, Japan, or Australia.
This announcement is for information purposes only and does not
constitute or form part of any offer to issue or sell, or the
solicitation of an offer to acquire, purchase or subscribe for, any
securities in any jurisdiction and should not be relied upon in
connection with any decision to subscribe for or acquire any of the
New Ordinary Shares. In particular, this announcement does not
constitute or form part of any offer to issue or sell, or the
solicitation of an offer to acquire, purchase or subscribe for, any
securities in the United States.
This announcement has been issued by, and is the sole
responsibility of, the Company. No person has been authorised to
give any information or to make any representations other than
those contained in this announcement and, if given or made, such
information or representations must not be relied on as having been
authorised by the Company, Charles Stanley Securities or Cantor
Fitzgerald Europe. Subject to the Listing Rules, the Prospectus
Rules and the Disclosure and Transparency Rules the issue of this
announcement shall not, in any circumstances, create any
implication that there has been no change in the affairs of the
Company since the date of this announcement or that the information
contained in it is correct at any subsequent date.
Charles Stanley Securities, which is authorised and regulated in
the United Kingdom by the Financial Conduct Authority, is acting
for the Company and no one else in connection with the Proposals
and will not regard any other person (whether or not a recipient of
this announcement) as a client in relation to the Proposals and
will not be responsible to anyone other than the Company for
providing the protections afforded to its clients or for providing
advice in relation to the Proposals or any matters referred to in
this announcement.
Cantor Fitzgerald Europe, which is authorised and regulated in
the United Kingdom by the Financial Conduct Authority, is acting
for the Company and no one else in connection with the Proposals
and will not regard any other person (whether or not a recipient of
this announcement) as a client in relation to the Proposals and
will not be responsible to anyone other than the Company for
providing the protections afforded to its clients or for providing
advice in relation to the Proposals or any matters referred to in
this announcement.
Apart from the responsibilities and liabilities, if any, which
may be imposed on Charles Stanley Securities or Cantor Fitzgerald
Europe by the Financial Services and Markets Act 2000 or the
regulatory regime established thereunder, neither Charles Stanley
Securities or Cantor Fitzgerald Europe accepts any responsibility
whatsoever for the contents of this announcement, and makes no
representation or warranty, express or implied, for the contents of
this announcement, including its accuracy, completeness or
verification, or for any other statement made or purported to be
made by them, or on their behalf, in connection with the Company or
the New Ordinary Shares or the Proposals, and nothing in this
announcement is or shall be relied upon as, a promise or
representation in this respect whether as to the past or future.
Charles Stanley Securities and Cantor Fitzgerald Europe accordingly
disclaim to the fullest extent permitted by law all and any
liability whether arising in tort, contract or otherwise (save as
referred to above) which they might otherwise have in respect of
this announcement or any such statement.
No statement in this announcement is intended to be a profit
forecast or estimate and no statement in this announcement should
be interpreted to mean that earnings per share of the Company for
the current or future financial years would necessarily match or
exceed the historical published earnings per share of the
Company.
This announcement may include statements that are, or may be
deemed to be, "forward-looking statements". These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms "believes", "estimates", "plans",
"projects", "anticipates", "expects", "intends", "may", "will", or
"should" or, in each case, their negative or other variations or
comparable terminology. These forward-looking statements include
matters that are not historical facts. They appear in a number of
places throughout this announcement and include statements
regarding the Directors' current intentions, beliefs or
expectations concerning, among other things, the Company's results
of operations, financial condition, liquidity, prospects, growth,
strategies and the Company's markets. By their nature,
forward-looking statements involve risk and uncertainty because
they relate to future events and circumstances. Actual results and
developments could differ materially from those expressed or
implied by the forward-looking statements. Forward-looking
statements may and often do differ materially from actual results.
Any forward-looking statements in this announcement are based on
certain factors and assumptions, including the Directors' current
view with respect to future events and are subject to risks
relating to future events and other risks, uncertainties and
assumptions relating to the Company's operations, results of
operations, growth strategy and liquidity. Whilst the Directors
consider these assumptions to be reasonable based upon information
currently available, they may prove to be incorrect. Save as
required by law or by the Listing Rules the Prospectus Rules and
the Disclosure and Transparency Rules, the Company undertakes no
obligation to release publicly the results of any revisions to any
forward-looking statements in this announcement that may occur due
to any change in the Directors' expectations or to reflect events
or circumstances after the date of this announcement.
This announcement should not be considered a recommendation by
the Company, Charles Stanley Securities or Cantor Fitzgerald Europe
or any of their respective directors, officers, employees, advisers
or any of their respective affiliates, parent undertakings,
subsidiary undertakings or subsidiaries of their parent
undertakings in relation to any purchase of or subscription for the
New Ordinary Shares. Price and volumes of, and income from,
securities 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. You are advised to read this
announcement and the Prospectus and the information incorporated by
reference therein in their entirety for a further discussion of the
factors that could affect the Group's future performance and the
industry in which it operates. Persons needing advice should
consult an independent financial adviser.
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED IN IT IS NOT FOR
RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN
WHOLE OR IN PART, IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO
SO MIGHT CONSTITUTE A VIOLATION OF LOCAL APPLICABLE SECURITIES LAWS
OR REGULATIONS.
THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND IS NOT AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES. IT IS
NOT A CIRCULAR, A PROSPECTUS OR PROSPECTUS EQUIVALENT DOCUMENT.
INVESTORS SHOULD NOT SUBSCRIBE FOR OR PURCHASE ANY SHARES REFERRED
TO IN THIS ANNOUNCEMENT EXCEPT SOLELY ON THE BASIS OF INFORMATION
CONTAINED IN THE PROSPECTUS TO BE PUBLISHED BY TOROTRAK PLC IN
CONNECTION WITH THE PROPOSED FUNDRAISING.
30 June 2015
Torotrak plc
("Torotrak", the "Company" or the "Group")
Proposed Firm Placing of 128,571,428 New Ordinary Shares
Proposed Placing and Open Offer of 69,071,511 New Ordinary
Shares
Proposed Subscription for up to 21,428,571 New Ordinary Shares
by Allison Transmission, Inc.
each at an Issue Price of 7 pence per New Ordinary Share
Proposed Reorganisation of Share Capital
Proposed Related Party Transactions
and
Notice of General Meeting
1. Introduction
The Company today announces the Issue (through the proposed
Subscription, Firm Placing and Placing and Open Offer) to raise
approximately GBP12.4 million net of costs. The net proceeds of the
Issue will be used principally to finance the continued investment
required for the commercial launch of the Company's first
manufactured KERS product for the on-highway commercial vehicle
market and to finance the on-going design, development, testing and
commercialisation of Torotrak's V-Charge technology and KERS
technology for the passenger car and commercial vehicle
markets.
On 30 March 2015, the Company announced the appointment of Adam
Robson as Chief Executive Officer (effective from 13 April 2015).
Adam's experience in managing and building high growth technology
businesses and commercialising new technology will help lead the
Group through the next phase of its development and growth. Adam
has announced that his focus is to commercialise the Group's
technologies, delivering revenues and Shareholder value. The
Proposals being put to Shareholders are a key part in delivering
the significant value that the Directors believe is embedded in the
Group's product and technology portfolio.
The Group is focused on now bringing its portfolio of products
and technologies to market, offering the automotive sector
potential solutions to the incoming regulatory obligations to
reduce vehicle fuel consumption and emissions. In the opinion of
the Directors, the prospects for monetising the Group's
technologies across multiple applications through licensing and
lower volume unit sales are significant. The continued tightening
of global vehicle emissions regulations and the growing requirement
for vehicle manufacturers to access low-cost, practical solutions
are expected to continue to underpin the growing opportunities for
the Group's products and technologies in both light vehicle and
commercial vehicle applications.
The Proposals
The Proposals comprise the Flybrid Agreement, the Reorganisation
of Share Capital, the Subscription, the Firm Placing, the Placing
and Open Offer and the Chief Executive Officer's Proposed
Remuneration and, if the Resolutions (other than the Chief
Executive Officer's Proposed Remuneration Resolution) are passed,
will result in the issue of 269,071,510 New Ordinary Shares at an
Issue Price of 7 pence each.
The Flybrid Agreement sets out the terms of a conditional
agreement between the Company and the Flybrid Vendors to amend the
Acquisition Agreement, including restructuring the rights of the
Flybrid Vendors in relation to the redemption of the GBP2.8 million
of loan notes and the earn-out consideration payable under the
Acquisition Agreement. As Jonathan Hilton, one of the Flybrid
Vendors, is a Director of the Company and Douglas Cross, the other
Flybrid Vendor, is a director of a subsidiary of the Company, they
are regarded as related parties pursuant to Chapter 11 of the
Listing Rules. Therefore, the Flybrid Agreement is regarded as a
related party transaction which requires Shareholder approval. The
Flybrid Agreement is therefore conditional on the Flybrid Agreement
Resolution being passed by Shareholders.
Prior to the issue of the New Ordinary Shares, the Company
intends to sub-divide and convert the 276,286,047 Existing Ordinary
Shares of 10 pence each into 276,286,047 Existing Ordinary Shares
of 1 pence each and 276,286,047 Deferred Shares of 9 pence each.
The purpose of the Reorganisation of Share Capital is to reduce the
nominal value of the Ordinary Shares from 10 pence each to 1 pence
each, to allow the Company to issue the New Ordinary Shares at the
Issue Price and to remove a potential restriction on the Company's
ability to raise funds in the future (English company law prohibits
the issue of new shares by an English company at a price below
their nominal value).
Pursuant to the Subscription Agreement, Allison has agreed to
subscribe for up to 21,428,571 New Ordinary Shares at the Issue
Price subject to clawback by Qualifying Shareholders in order to
satisfy valid applications under the Open Offer. As at 29 June
2015, Allison held 35,562,788 Existing Ordinary Shares which
represent approximately 12.9 per cent. of the Company's existing
issued share capital and therefore Allison is regarded as a related
party pursuant to Chapter 11 of the Listing Rules. Therefore, the
Subscription by Allison is regarded as a related party transaction
which requires Shareholder approval. The Subscription is therefore
conditional on the Subscription Resolution being passed by
Shareholders.
The Firm Placees have conditionally agreed to subscribe for, in
aggregate, 128,571,428 Firm Placed Shares at the Issue Price
(representing gross proceeds of approximately GBP9.0 million). The
Firm Placed Shares are not subject to claw-back to satisfy valid
applications under the Open Offer and are not part of the Placing
or the Open Offer. The Firm Placing is conditional on Shareholder
approval at the General Meeting.
The Open Offer Shares will be allocated to Qualifying
Shareholders under the Open Offer on a pre-emptive basis in
accordance with the Articles. Charles Stanley Securities and Cantor
Fitzgerald Europe have conditionally pre-placed all of the Firm
Placed Shares and the Placed Shares with institutional investors at
the Issue Price (subject to claw-back in respect of the Placed
Shares to satisfy valid applications by Qualifying Shareholders
under the Open Offer).
In addition, the Remuneration Committee is proposing,
conditional on Shareholder approval, to grant Torotrak's Chief
Executive Officer, Adam Robson, a one-off LTPSP award of 4,285,714
Ordinary Shares (subject to certain performance criteria). In
addition, Adam Robson's service agreement includes certain
provisions that will be triggered on a change of control of the
Company. The LTPSP grant and change of control related provisions
are not currently within the remit of the remuneration policy
approved by Shareholders and are therefore subject to Shareholder
approval.
The Prospectus (containing the Notice of General Meeting) is
being sent to eligible Shareholders to give them the background to
and reasons for the Proposals and to explain why the Directors
consider the Proposals to be in the best interests of the Company
and its Shareholders as a whole.
Importance of Vote
The Proposals require Shareholder approval. If the Resolutions
(other than the Flybrid Agreement Resolution and the Chief
Executive Officer's Proposed Remuneration Resolution) are not
passed, the Issue will not proceed.
If the Issue does not proceed, the Directors believe that
Torotrak has sufficient financial resources to fund the business
only until the end of September 2015. The Directors would therefore
have a limited timeframe in which to take any remedial actions and
take measures to raise further funds. If the Issue does not proceed
and alternative immediate funding is not obtained in the limited
timeframe available, the Directors would need to consider whether
it is appropriate for the Group to cease trading and enter into a
liquidation process. Accordingly, it is very important that
Shareholders vote in favour of the Resolutions and that the Issue
proceeds.
2. Background to and reasons for the Issue and the Group's
strategy going forward
Group's Strategy
Since the acquisition of Flybrid in January 2014, the Group has
invested in application engineering, product development and
testing as the Company focused its attention on taking greater
control of routes to market for its technology. The Directors
believe that this strategy has enabled the Group to make
significant progress in identifying potential market applications
for the Group's technologies and crucially, developing prototype
products that meet vehicle manufacturers' needs. With the level of
engagement with potential customers currently being seen by the
Company and the current work programmes the Group is engaged in,
the focus is now firmly centred on realising the potential and
monetising the value of the Group's technologies and products.
The Group's potential markets have been evolving. Automotive
OEMs have in most cases been successful in meeting the 2020/21
emissions hurdles without significant innovations. However, the
requirements upon them beyond 2021, combined with an expected
tightening of the testing requirements under World Harmonised Light
Duty Test Procedure (WLTP), mean that new technologies, such as
those the Group provides, are expected to be needed. At the same
time advances in electric hybrid technologies have not seen the
major breakthroughs required and consequently the Directors believe
that the Group's mechanical hybrid solutions are becoming
increasingly attractive. Lastly, oil prices have fallen materially
but to date the Group has seen no resulting changes in customers'
plans for new technology take-up.
The Group's recently appointed Chief Executive Officer, Adam
Robson, has a proven track record and experience of commercialising
technology and of bringing new technologies to market in the
automotive sector. Under his leadership, the Group will look to
build on the progress made over the last year in developing and
productionising the bus and off-highway KERS products and
developing V-Charge and securing engagements with Tier 1/OEMs to
take the technologies through into commercial production.
The Group's strategy and organisation have evolved under Mr
Robson's leadership. A greater focus is being given to delivery of
the key products which are most likely to secure commercial take-up
and deliver near term commercial returns (notably KERS and
V-Charge), to the securing of Tier 1 commercial partners and to
advancing opportunities to monetise the products. At the same time,
the Group's manufacturing intentions are being scaled back; the
Group will manufacture initial low volumes where necessary but its
preferred outcome will be to transfer this activity to Tier 1
partners and help them to develop their own capabilities.
Accordingly, the Group's near term objectives are as follows:
-- Complete the productionisation and commercial launch of the
Group's bus KERS technology, working in collaboration with the
Group's global Tier 1 commercial vehicle systems partner. The start
of commercial production and sales, is scheduled for mid-2016;
-- In partnership with JCB, complete the production level design
and testing programme for the Group's KERS product for off-highway
commercial vehicles, with the aim of achieving implementation of
the technology in excavators;
-- Complete the V-Charge development and evaluation programme
with Ford, the University of Bath and a global Tier 1 engine
boosting company and negotiate licensing arrangements to secure
go--to-market programmes for passenger car applications;
-- Pursue opportunities to license the Group's KERS technology
in passenger cars and commercial vehicles;
-- Progress the commercial opportunities for the Group's IVT/CVT
technology in off-highway commercial vehicle markets and secure
commercial partners to help exploit these opportunities; and
-- Secure engineering services programmes (e.g. feasibility,
demonstration projects) targeting further opportunities to
commercialise the Group's existing technology and generate
commercial revenues, with a reduced focus on longer term technology
development projects.
To support the Group's focus on commercialising its
technologies, the Directors are implementing an internal
reorganisation of the Group that will see additional resources and
investment in the key near term commercial and business development
areas and a reduction in resources and capital in those areas of
the Group that relate to longer term research and development and
volume manufacturing capabilities. The Group will focus on
engineering services projects that underpin or deliver clear near
term commercial opportunities.
The Group has an excellent portfolio of products and
technologies that are well-positioned to help vehicle
manufacturers, including manufacturers of passenger cars and
commercial vehicles , address the regulatory challenges of the post
2020/21 CO2 emission targets and beyond. With OEMs' typical product
development cycles of more than five years, this means that the
window of opportunity for the Group is now opening. Given the
ongoing engagement with, and interest from, the automotive industry
and the projects currently being undertaken by the Group, the
Directors are confident that the Company is well positioned to
capitalise on this opportunity. The Group's focus therefore is to
secure commercial uptake of the technologies during this important
period.
The Group's business model remains predominantly a licensing
model for the higher volume markets, as well as in applications
where the Group's partners are best suited to make the up-front
investments to complete the product development and
productionisation programmes. This is particularly true in the
passenger car market where established Tier 1 partners are the
logical route to market for the Group's products. The value model
in this instance includes up-front licence fees, in conjunction
with engineering services fees, to support the transfer of the
technology and the product development programme, followed by per
unit royalties from product sales. In lower volume market
applications (e.g. bus KERS), the Group is more likely to complete
the initial product development and productionisation programme on
a self-funded basis itself or in collaboration with partners, as
the initial market entry strategy. As volumes grow or to address
other markets, it is likely that the Group will also license the
technology, but may if necessary remain a Tier 2 supplier of
certain high value core components/assemblies.
This strategy reflects the immediate emphasis and focus on
commercialising the significant investments made by the Group in
developing its products and technologies to a stage where they are
now being seen as a viable solution to the industry's regulatory
requirements to reduce emissions. The window for OEMs to adopt new
technology is now open and the Group must secure its share of this
global market opportunity.
Review of the Group's technologies and products
KERS
On-highway commercial vehicles:
The Group has made progress towards commercialising its KERS
technology in the bus market. The first prototype bus KERS units
have been manufactured and assembled in-house and successfully
integrated into Wrightbus StreetLite vehicles. In the final quarter
of 2014, a KERS-enabled StreetLite vehicle completed independent
testing at the Millbrook test facility, based on the standard MLTB
(Millbrook London Transport Bus) test cycle, validating fuel
savings and confirming operator paybacks. The Group has also
completed extensive accelerated flywheel durability testing
equivalent to more than 10 years' in-service operation, confirming
target design life of least one million kilometres. In addition, a
comprehensive programme of destructive and non-destructive tests
has been successfully completed proving out the KERS safety
systems, including the patented containment system.
In March 2015, a KERS-enabled StreetLite bus commenced
in-service field trials with Arriva on a public bus route in
Gillingham, Kent. This trial is intended to demonstrate the
successful operation of the KERS unit under real-world operating
conditions and target operator benefits.
The engineering team has completed a new production-intent
design of the bus KERS unit reducing the weight of the unit and
parts count, and targeting improvements in fuel savings and bus
operator payback. The Group has been working in collaboration with
its strategic partner, a global Tier 1 supplier of driveline
systems to the automotive and commercial vehicle markets, to ensure
the product is designed for manufacture and assembly and to meet
the volume requirements of the bus sector. The Group has signed a
memorandum of understanding with the Tier 1 partner which is
expected to lead to a formal supply agreement. By leveraging an
established Tier 1 volume supply chain with proven expertise in
delivering production transmission systems, the Directors believe
the target cost of the KERS unit can be met. The first units of the
new production-intent design are currently being assembled at the
Group's facility in Leyland and will be used as part of a
comprehensive design verification test programme to validate the
functional performance, reliability and improved fuel efficiency of
the KERS system. Part of the proceeds of the Issue will be used to
complete the development and testing of the new production-intent
design and finance the future investment in production tooling in
the supply chain to deliver the bill of materials volume cost
targets and ensure that the Group is ready to meet the volume needs
of the Group's bus OEM customers and the end-user bus
operators.
The Directors believe the initial business model for bus KERS is
likely to see the Group's Tier 1 partner supply to the Group
critical components and sub-assemblies for bus KERS units, with
Torotrak manufacturing and integrating flywheel assemblies into the
KERS units and supplying the completed bus KERS units in volume to
bus OEM customers.
The Group's market entry strategy is initially focused on
installing KERS units into new buses manufactured by Wrightbus and
for delivery to bus operators from mid-2016 onwards. The recently
announced UK Government Ultra Low Emission Bus Scheme provides
capital grants that will finance up to 75 per cent. of the
additional cost of a low emission bus when compared to a standard
vehicle. Importantly, the legislation requires bus operators to
demonstrate the selected technology represents value for money and
can help to reduce the need for government subsidies over the
period of the scheme and beyond. The Directors believe that the
Group's low-cost mechanical KERS technology can meet both of these
requirements. Wrightbus has stated that encouraging results from
test track assessments have confirmed their predictions that the
KERS system can offer bus operators payback within five years. The
Directors believe that payback will be significantly faster with
initial grants (dependent on the level of fuel prices and grants).
Discussions with Wrightbus indicate that there is a significant
standing bus parc of StreetLite vehicles that could deliver
substantial benefits to bus operators with a retrofit KERS unit.
The Directors believe that this retrofit opportunity potentially
offers the Group an additional addressable market. In parallel, the
Group is also investigating other opportunities that could lead to
sales of further KERS units for fitment to new and existing
vehicles.
Flybrid was the 2014 winner of the prestigious Society of Motor
Manufacturers and Traders (SMMT) Award for Automotive Innovation
(AAI) for KERS for buses and commercial vehicles. The AAI
recognises new UK-developed low carbon vehicle technologies which
will make a lasting impression on the motor industry for years to
come. Previous winners include the Ford 1.0 EcoBoost engine.
Off highway commercial vehicles:
The Group has an on-going product development programme with
JCB, part-funded by the Advanced Propulsion Centre, to design,
develop and commercialise Flybrid flywheel systems for excavators.
The first development units have been built and have commenced
functional/performance testing. In parallel, the Group's
engineering team is working closely with JCB to meet the demanding
requirements of cost, durability and payback. The next phase of the
programme will be to complete the design for manufacture and
assembly followed by testing of validation units to demonstrate
that they can meet the in-service durability targets. It is
currently anticipated that the Group will manufacture the high
value flywheel assemblies in-house with the final assembly of the
complete unit being undertaken either by the Group or a Tier 1
partner, such as the Group's current partner for bus KERS. The
Group's business development team is also working on securing
another significant off-highway flywheel application. The Directors
believe that the off-highway commercial vehicle market offers the
potential for both lower volume unit sales and longer term
licensing opportunities. In the opinion of the Directors, the
off-highway commercial vehicle market opportunity could be larger
than the bus market opportunity with more than 480,000 excavators
and loaders sold globally each year.
Passenger cars:
The Directors believe that the passenger car market represents a
significant opportunity for the Group's KERS technology. This
market opportunity, and the likely take-up of the technology is
probably further away than the bus and off-highway commercial
vehicle markets given the time taken for the passenger car OEMs and
Tier 1s to fully appraise the benefits of flywheel KERS technology,
secure the necessary Tier 1 supply chain and complete the
development and productionisation programmes. Accordingly, the
Directors anticipate OEMs will target uptake of KERS technology in
passenger cars from 2020/2021 onwards. The Directors expect the
technology to be adopted initially in the premium segment of the
car market and then more widely in the B to C car segments either
integrated in the transmission or as a separate stand-alone unit.
Key drivers for adoption of the Group's KERS technology will be a
combination of efficient energy recovery, improved performance and
enabling engine downsizing and advanced powertrain strategies to
allow vehicle manufacturers to meet the demanding post 2020/2021
CO2 emissions targets. In the medium term, the Group's expectation
is that to meet the likely emissions regulations, passenger cars
will require much smaller internal combustion engines and much
larger hybrid power systems. The Group has demonstrated the
potential of its KERS technology to support this trend for high
power hybrid systems with a Flybrid designed flywheel KERS system
for motorsport.
The Directors believe there are also opportunities to install
Flybrid KERS units in electric vehicles where the power-dense KERS
unit can operate as a range extender and has the potential to
improve battery life by avoiding the need for batteries to undergo
many rapid charge and discharge events.
The Group has recently completed feasibility studies for two
major European-based OEMs. Whilst these studies are early-stage
feasibility studies, the Directors believe that such studies
confirms the Group's view that OEMs are looking at mechanical-based
energy recovery systems as a lower cost and more effective solution
than battery-based hybrid solutions. The Group is in discussions
with several OEMs and Tier 1s and is targeting licensing
arrangements to secure adoption on the upcoming vehicle platforms.
These discussions are with partners in the EU, North America and
Asia and to meet the post 2020/2021 adoption timeline, OEMs will
need to secure commercial access to the Group's KERS technology
within the next 24 months. This will require OEMs and Tier 1s to
pay the Group up-front licence fees and engineering services
revenue to secure transfer of the KERS technology during the circa
five year product development cycle ahead of 2020/21.
V-Charge
Passenger cars:
V-Charge is the Group's variable speed supercharger technology,
enabling the level of engine boosting to be adjusted independently
of engine speed and providing rapid torque response at any engine
speed. The technology is a potential key enabler for downsized
engines, which are recognised by the industry as critical for
vehicle OEMs to meet the challenging CO2 emissions regulations in
passenger cars from 2020/21 onwards in a cost-effective way.
In June 2014, the Group secured funding from Innovate UK
(previously the Technology Strategy Board) to develop a production
orientated version of V-Charge for a specific downsized engine
application for passenger cars. The project is being conducted in
collaboration with the University of Bath ("Bath"), a global Tier 1
supplier of engine boosting systems and with the participation of
the Ford Motor Company ("Ford"). Ford is a class leader in
efficient passenger car engines and Bath is a world-recognised
centre of excellence in the field of pressure charging. The primary
objective of the project is to evaluate the potential of V-Charge
to improve fuel consumption and performance compared to incumbent
boosting technology, through optimisation of multiple engine
parameters.
The initial simulation phase of the project using Ford supplied
engine models has now confirmed the potential for V-Charge to
improve the performance of modern downsized engines while retaining
fuel economy benefits. It is therefore anticipated that V-Charge
could potentially enable more aggressive engine downsizing. The
simulation results confirm V-Charge can provide better transient
response (avoiding 'lag') and improved full load fuel economy when
compared to competing advanced boosting technology. When configured
with next generation compressor technology that fully exploits the
characteristics of V-Charge, the Directors believe that further
improvements in torque at low engine speed will be delivered. The
Directors believe that V-Charge provides additional benefits over
competing boosting solutions including simplified hardware
integration and superior noise, vibration and harshness.
The next phase of the project which is now underway is targeting
fitment of the Group's latest generation V-Charge hardware into two
passenger cars. Installation of V-Charge to the first of these
vehicles is currently in progress. In-vehicle tests are intended to
validate the simulation results on a downsized gasoline engine in a
vehicle demonstrating the real-world performance improvements and
fuel economy and the ability for V-Charge to enable fundamental
engine downsizing, and should provide valuable analysis and
feedback for the next stage production-intent design.
The Group's on-going product development programme with another
passenger car manufacturer has now moved to delivery of hardware in
preparation for engine testing.
The Directors believe that the annual production of downsized
gas boosted engines will grow from 12 million in 2014 to 25 million
in 2018. The aim of the Group now is to license the V-Charge
technology and secure uptake of the technology onto the next
generation passenger car platforms that are being developed to meet
the post 2020/21 emissions regulations. The Directors believe that
the successful results from the project with the University of
Bath, Ford and the global Tier 1 supplier will provide an excellent
platform to demonstrate the capability of V-Charge as an enabling
technology for downsized engines and to secure licensing and
engineering services revenues to transfer the technology to enable
OEM/Tier 1s to commence production-intent development in time for
uptake by 2021.
Commercial vehicles:
The Group's strategic partner, Univance, is in discussions with
potential OEM partners regarding the evaluation of the V-Charge
continuously variable transmission (CVT) technology to improve fuel
economy in a range of on-highway vehicle applications, including
commercial vehicles. Whilst these discussions are at an early
stage, the Directors anticipate that one or more of these
discussions could result in a part-funded demonstrator programme as
a precursor to a decision to commence a production-intent
commercial programme. The Directors believe that there are also
opportunities for the technology in a range of off-highway
applications.
Main drive transmissions
Discussions are continuing with Allison to determine the first
target product for the Group's technology. Building on the
significant improvements in key component durability and lifetime
achieved last year, the engineering teams are exploring the
potential opportunities to maximise the benefits in terms of
packaging, weight and cost.
The Group's strategic partner, Univance, is in discussions with
a number of OEMs about implementing continuously variable
transmissions (CVT) technology in a range of off-highway commercial
vehicle applications. The Directors anticipate that one or more of
these discussions could result in a part-funded demonstrator
programme as a precursor to a decision to commence a
production-intent commercial programme.
The Directors anticipate commencing an evaluation project with a
major OEM for off-highway commercial vehicle applications. This
project is expected to commence later this year. Feedback received
from the OEM in terms of drivability and performance is positive
and the Directors believe this has the potential to lead to a
'go-to-market' programme with the potential for annual volumes of
over twenty thousand.
The Group is also seeking to monetise the technology in the
off-highway market in a way that can realise value for Shareholders
in markets such as China. The technology is well developed with
well-proven advantages over competing solutions and the focus now
is to crystalise value from the significant investments already
made.
Regulatory drivers
The law and regulations covering vehicle fuel efficiency and
emissions continue to tighten in developed countries. For example,
in the EU, passenger car manufacturers are now required to reduce
fleetwide average vehicle CO2 emissions to 95g/km by 2020/2021,
representing a 27 per cent. reduction from the 2015 level. This
corresponds to fuel consumption of approximately 3.6l/100km
(Diesel) and 4.1l/100km (gasoline). Penalties of EUR95 are charged
for every g/km of excess CO2 emissions per vehicle. Further
significant reductions are planned to be introduced by 2025, with
an indicative target range of 68-78g/km. With the long lead times
for vehicle manufacturers to develop and launch new vehicle
platforms, the window to secure adoption onto the post 2021 models
is now open.
The WLTP planned for introduction from 2017/2018 onwards will
result in higher measured real-world CO2 emissions compared with
those measured under the current EU type-approval driving cycle
(NEDC) test protocol. As a result, it is expected to become even
more challenging for vehicle manufacturers to satisfy the CO2
emissions requirements.
CO2 emissions legislation enacted in America, Japan and China
requires EU equivalent CO2 emissions limits of 93g/km, 105g/km and
117g/km respectively, which is driving OEMs to seek new low cost
technologies to meet these targets.
The Directors consider that the new law and regulations covering
vehicle fuel efficiency and emissions, together with the planned
introduction of the WLTP, will cause OEMs to accelerate the
adoption of new technologies, such as those offered by the Group,
in order to meet the new regulatory emissions targets.
China
The Directors believe that China offers a significant
opportunity for all of the Group's products and technologies.
Vehicle production in China is growing rapidly; for example,
passenger car production is expected to rise from 15 million units
in 2014 (24 per cent. of world production) to 40 million in 2030.
Chinese vehicle manufacturers, and in particular their Tier 1
suppliers, are keen to secure access to innovative technologies
which can address China's pressing environmental challenges and
enable them to gain independence from their western competitors.
Accordingly, early last year the Group launched an active business
development programme to evaluate and address these opportunities.
Awareness of the Group and its technologies is being raised and
initial discussions on potential partnerships have started with a
number of OEMs and Tier 1s active in China for V-Charge and KERS
for both commercial vehicle and passenger car applications.
Reorganisation
As part of the strategy to re-focus the Group's activities on
commercialising its technology, the Group is implementing an
internal reorganisation to reduce manufacturing overheads and
on-going development costs and to realign resources with the key
commercial drivers for the Group. The effect of this will be to
reduce engineering resources in the areas of research and
development and longer term development programmes that are not
linked to tangible opportunities and to only take on engineering
services programmes that are clearly aligned with nearer term
commercial opportunities such as licensing and lower volume product
sales.
In areas such as IVT/CVT off-highway applications, the Group
will seek to leverage its existing partnerships/licensees
relationships (such as the partnership the Company has with
Univance) to secure commercial uptake, focusing on technology
transfer and ongoing support to those partners who are incentivised
to roll out the technology. The reorganisation will release
engineering resources from longer term engineering programmes to
support the commercial teams. It will also reduce the Group's cash
operating costs by an annualised equivalent of approximately 20 per
cent. through a reduction in employees and other cost reduction
measures.
The reorganisation will also complete the integration of the
Flybrid and Torotrak organisations, bringing together the best
aspects of both businesses. Jonathan Hilton will be appointed
Non-Executive Deputy Chairman and will assume a part-time
non-executive role, working with the Chief Executive Officer in
identifying and developing new opportunities to commercialise the
Group's technologies. In addition, Mr Hilton will also provide
certain consultancy and advisory services to the Company. In his
new role, the Group will be able to continue to benefit from Mr
Hilton's engineering and sector experience and relationships.
Douglas Cross will remain in his full-time executive role as Chief
Technology Officer.
As part of the reorganisation, the Board intends to submit a
proposed restructuring of the executive management's remuneration
for Shareholder approval at the next AGM of the Company to be held
in September 2015. This restructuring will involve a reduction in
cash remuneration (including the elimination of cash bonuses) and a
restructuring of the LTPSP scheme to more closely align the
interests of executives and Shareholders. Non-Executive Directors
will also participate and reduce their fees. The intention of the
reorganisation is to reduce on-going cash operating costs, improve
staff retention, improve staff alignment with the Shareholders and
so enhance long term Shareholder value.
Summary
The Directors believe that the Group has made significant
progress in developing and building the platform for
commercialisation of all of its main technologies and in particular
the bus KERS system and V-Charge. The Group is trialling a
KERS-enabled bus in conjunction with Arriva and the Directors
believe validated fuel savings at the Millbrook facility and bill
of materials established in collaboration with its Tier 1 partner
confirms the attractive payback to bus operators. The Issue will
enable the Group, in collaboration with its global Tier 1
manufacturing partner, to invest in production tooling and commence
commercial sales of bus KERS systems in mid-2016. In addition, it
will allow the Group to continue the progress made with the project
to develop a production oriented V-Charge unit in passenger cars
that is being undertaken with the participation of Ford, a global
Tier 1 supplier of engine boosting systems and the University of
Bath. The Group's V-Charge technology has in simulation already
demonstrated it is a potential enabler for fundamental engine
downsizing and, based on simulation results, the Directors believe
that it can deliver improved performance with resulting fuel
economy benefits when compared to incumbent solutions. The Group is
confident that it can secure V-Charge licensing arrangements
building on the successful in-vehicle tests expected later in the
year. In parallel, the Issue will enable the Group to continue
discussions with several Tier 1 and OEM partners about the
potential to license the Group's KERS technology into the passenger
car and commercial vehicle markets in North America, Europe and
China.
Under Adam Robson's leadership, the Group will build on the
progress and achievements of the last 12 months and will focus on
capitalising on the work streams and negotiations already in place
in order to commercialise the Group's technologies. The Directors
believe that the Issue will enable Torotrak to fully exploit the
near term opportunities for the Group and enable it to finally
realise its potential and deliver long term value for
Shareholders.
3. Flybrid Agreement
The Company has reached a conditional agreement with the Flybrid
Vendors to amend the Acquisition Agreement, including restructuring
the rights of the Flybrid Vendors in relation to the redemption of
the GBP2.8 million of loan notes and the earn-out consideration
payable under the Acquisition Agreement. As Jonathan Hilton, one of
the Flybrid Vendors, is a Director and Douglas Cross, the other
Flybrid Vendor, is a director of a subsidiary of the Company, they
are regarded as related parties pursuant to Chapter 11 of the
Listing Rules and therefore the Flybrid Agreement is subject to
approval by Shareholders at the General Meeting. The key terms of
the Flybrid Agreement are, subject to the satisfaction of certain
conditions, as follows:
-- The redemption of the GBP2.8 million of loan notes in the following manner:
- GBP1.0 million to be paid in cash to the Flybrid Vendors from the proceeds of the Issue; and
- the entering into of a new loan agreement for a GBP1.8 million
fixed term loan from the Flybrid Vendors to the Company which will
be used by the Company to redeem the balance of the loan notes. The
loan is repayable at the end of a 5 year term (or earlier at the
Company's option) and secured against the assets of Flybrid under a
new debenture and carries a fixed annual interest rate of seven per
cent. payable in cash monthly in arrears (the existing loan notes
do not attract any interest);
-- The Acquisition Agreement earn-out consideration of up to
GBP15.0 million (of which not less than GBP10.0 million was payable
in cash) is to be satisfied by the issue of 71,428,571 New Ordinary
Shares (GBP5.0 million at the Issue Price), with (subject to
certain exceptions) 28,571,428 of such New Ordinary Shares being
subject to lock-in arrangements for a period of 12 months from the
date of the General Meeting , 21,428,571 of such New Ordinary
Shares being subject to lock-in arrangements for a period of 24
months from the date of the General Meeting and 21,428,571 of such
New Ordinary Shares being subject to lock-in arrangements for a
period of 36 months from the date of the General Meeting;
-- The Company agreeing not to proceed with any claims in
respect of a breach of warranty (other than a breach of a tax
warranty) under the Acquisition Agreement and confirming that it is
not aware of any ther potential claims under the Acquisition
Agreement;
-- The existing debenture over the assets of Flybrid is cancelled;
-- The term of the restrictive covenants that apply to the
Flybrid Vendors under the Acquisition Agreement is reduced so as to
expire on the date which is 5 years after the date of completion
under the Acquisition Agreement; and
-- Jonathan Hilton will, within 20 business days of the General
Meeting, cease to be an Executive Director for which he will
receive a severance payment of GBP174,000. Upon ceasing to be an
Executive Director, Jonathan Hilton will be appointed as
Non-Executive Deputy Chairman of Torotrak and will also act as a
consultant to the Group working on specific business development
projects as agreed with the Chief Executive Officer.
The proposed employment arrangements with Mr Hilton are not
within the limits of the directors' remuneration policy approved by
Shareholders at the 2014 AGM and therefore require the approval of
Shareholders. In particular, the severance payment is in excess of
Mr Hilton's contractual entitlements under his service agreement
with the Company based on his salary and benefits and his six
months' notice period. The severance payment is a negotiated
settlement in respect of the termination of his executive
directorship and forms part of the wider settlement represented by
the Flybrid Agreement. In particular, the Board does not consider
that this severance payment has any gratuitous element.
Should the Flybrid Agreement be approved by Shareholders,
Jonathan Hilton will be directly or indirectly interested in
55,485,893 Ordinary Shares and Douglas Cross will be directly or
indirectly interested in 23,779,668 Ordinary Shares.
The Flybrid Agreement constitutes a related party transaction
under Chapter 11 of the Listing Rules. As a consequence,
Shareholder approval is required for completion of the Flybrid
Agreement. The Flybrid Agreement Resolution seeks, by way of
ordinary resolution, the approval of Shareholders for the Flybrid
Agreement. Pursuant to the requirements of Chapter 11 of the
Listing Rules, the Flybrid Vendors will not vote on the Flybrid
Agreement Resolution and they have undertaken to take all
reasonable steps to ensure that their associates will not do so
either.
The Directors believe that the Flybrid Agreement is an important
step in completing the integration of the businesses, aligning the
interest of all the parties to the agreement and continuing the
progress being made by Flybrid and the Group as a whole. The
proposed restructuring of the Acquisition Agreement significantly
reduces the potential consideration for the acquisition of Flybrid
and ensures that the future cash flows generated by the Flybrid
technology are retained for the benefit of the Group and its
Shareholders; under the previous earn-out arrangements, of the
GBP15.0 million maximum earn-out consideration, up to GBP10.0
million would have been paid in cash. The Directors believe that
the Flybrid acquisition has already proved to be significantly
beneficial to the Group, not only from the near term commercial
opportunities provided by the bus KERS unit using Flybrid's
flywheel technology, but also from the engineering and commercial
expertise within the Flybrid business. By simplifying the structure
of the transaction, Torotrak can fully utilise this expertise
across the Group and remove the potential conflicts arising with a
long-term earn-out structure in place.
4. Reorganisation of Share Capital
Under English company law, a company is prohibited from issuing
new shares at a price below their nominal value. As at the date of
the Prospectus, the Existing Ordinary Shares have a nominal value
of 10 pence each. In order for the Company to issue the New
Ordinary Shares at the Issue Price (being 7 pence each), it will be
necessary for the Company to first reduce the nominal value of the
Ordinary Shares.
Pursuant to the Reorganisation of Share Capital and prior to the
issue of the New Ordinary Shares, the Company intends to sub-divide
and convert the 276,286,047 Existing Ordinary Shares of 10 pence
each into 276,286,047 Existing Ordinary Shares of 1 pence each and
276,286,047 Deferred Shares of 9 pence each. The Reorganisation of
Share Capital is conditional on Shareholder approval.
The Existing Ordinary Shares of 1 pence each will have the same
rights and be subject to the same restrictions (save as to nominal
value) as the Existing Ordinary Shares of 10 pence each, as set out
in the Articles. The New Ordinary Shares of 1 pence each will have
the same rights and be subject to the same restrictions as the
Existing Ordinary Shares of 1 pence each, as set out in the
Articles. The Deferred Shares will have the rights and be subject
to the restrictions, as set out in the new Articles to be adopted
by the Company pursuant to the Resolutions, but will be effectively
valueless as they will not carry any rights to vote, to attend
general meetings or to receive dividends. No application will be
made for the Deferred Shares to be admitted to the premium listing
segment of the Official List of the UK Listing Authority or to
trading on the London Stock Exchange's main market for listed
securities or any other exchange and the Deferred Shares will not
be transferable without the prior written consent of the Board.
5. Subscription
As at 29 June 2015 (being the latest practicable date prior to
the publication of the Prospectus) Allison held approximately 12.9
per cent. of the Existing Ordinary Shares. Allison has agreed to
subscribe for up to 21,428,571 New Ordinary Shares at the Issue
Price subject to clawback by Qualifying Shareholders in order to
satisfy valid applications under the Open Offer, on the terms and
subject to the conditions of the Subscription Agreement, further
details of which are set out in the Prospectus. Assuming the
Proposals proceed, the issue of 21,428,571 New Ordinary Shares to
Allison will result in Allison holding approximately 10.5 per cent.
of the Enlarged Issued Share Capital (assuming no take up of Open
Offer Entitlements by Qualifying Shareholders). The Subscription
will raise gross proceeds of up to approximately GBP1.5
million.
The Subscription constitutes a related party transaction under
Chapter 11 of the Listing Rules. As a consequence, Shareholder
approval is required for the Subscription. The Subscription
Resolution seeks, by way of ordinary resolution, the approval of
Shareholders for the Subscription. Pursuant to the requirements of
Chapter 11 of the Listing Rules, Allison will not vote on the
Subscription Resolution and has undertaken to take all reasonable
steps to ensure that its associates will not do so either.
6. The Firm Placing and the Placing and Open Offer
Torotrak intends to raise gross proceeds of approximately
GBP13.8 million in total through the issue of 197,642,939 New
Ordinary Shares pursuant to the Subscription, the Firm Placing and
the Placing and Open Offer.
Placing and the Placing Agreement
Charles Stanley Securities and Cantor Fitzgerald Europe have
entered into the Placing Agreement with the Company pursuant to
which they have, on the terms and conditions set out therein,
procured Firm Placees and Placees to subscribe for (i) the Firm
Placed Shares at the Issue Price; and (ii) the Placed Shares at the
Issue Price subject to claw-back by Qualifying Shareholders in
order to satisfy valid applications under the Open Offer.
Firm Placing
Pursuant to the Firm Placing and the Placing Agreement, Charles
Stanley Securities and Cantor Fitzgerald Europe have conditionally
placed the Firm Placed Shares, which represent approximately 47.8
per cent. of the New Ordinary Shares, at the Issue Price with
institutional and other investors, conditional, amongst other
things, upon Admission. The Firm Placed Shares are not subject to
claw-back by Qualifying Shareholders in order to satisfy valid
applications under the Open Offer. The gross proceeds of the Firm
Placing are expected to be approximately GBP9.0 million.
Polar Capital is currently interested in approximately 10.7 per
cent. of the Company's issued share capital and is therefore deemed
to be a substantial shareholder of the Company for the purposes of
the Listing Rules. As part of the Firm Placing, Polar Capital has
conditionally subscribed for 13,571,428 Firm Placed Shares at the
Issue Price amounting to approximately GBP950,000 at the Issue
Price. Polar Capital's participation in the Firm Placing therefore
constitutes a smaller related party transaction pursuant to Listing
Rule 11.1.10R.
Open Offer
The Directors recognise the importance of pre-emption rights to
Shareholders and consequently the 69,071,511 Open Offer Shares are
being offered to existing Shareholders by way of the Open Offer.
The Open Offer provides Qualifying Shareholders with an opportunity
to participate in the Issue by both subscribing for their
respective Basic Entitlements and by subscribing for Excess Shares
under the Excess Application Facility, subject to availability.
Basic Entitlements
The Open Offer Shares will be offered to Qualifying Shareholders
on the following basis:
1 Open Offer Share for every 4 Existing Ordinary Shares
held by them and registered in their names on the Record Date
and so in proportion to any other number of Existing Ordinary
Shares then held.
Basic Entitlements under the Open Offer will be rounded down to
the nearest whole number and any fractional entitlements to Open
Offer Shares will not be allocated but will be aggregated and made
available in the Excess Application Facility.
If Qualifing Shareholders have sold or otherwise transferred all
of their Existing Ordinary Shares before the ex-entitlement date,
they are not entitled to participate in the Open Offer. Qualifying
Shareholders are also being offered the opportunity to subscribe
for Excess Shares in excess of their Basic Entitlements pursuant to
the Excess Application Facility as described below.
Excess Application Facility
Qualifying Shareholders may apply for Excess Shares using the
Excess Application Facility. Qualifying Non-CREST Shareholders
wishing to apply to subscribe for Excess Shares, may do so by
completing the relevant sections on the Application Form.
Applications for Excess Shares will be satisfied only to the
extent that corresponding applications for Basic Entitlements are
not made by other Qualifying Shareholders or are made for less than
their pro rata entitlements. The total number of Open Offer Shares
to be issued by the Company is fixed and will not be increased in
response to any applications under the Excess Application Facility.
If there is an oversubscription for Open Offer Shares resulting
from applications under the Excess Application Facility,
allocations of Open Offer Shares in respect of such applications
will be scaled down pro rata to the number of Excess Shares applied
for under the Excess Application Facility by Qualifying
Shareholders or allocated in such manner as the Board may, in its
absolute discretion, determine. No assurances can be given that the
applications by Qualifying Shareholders under the Excess
Application Facility will be met in full, in part or at all.
Qualifying Shareholders should note that the Open Offer is not a
rights issue and that Open Offer Shares not applied for under the
Open Offer will not be sold in the market for the benefit of
Qualifying Shareholders who do not apply under the Open Offer. Open
Offer Entitlements are not transferable unless to satisfy a bona
fide market claim and the Application Forms, not being documents of
title, cannot be traded.
Further details of the Open Offer and the terms and conditions
on which it is being made, including the procedure for application
and payment, are contained in the Prospectus and, in respect of
Qualifying Non-CREST Shareholders only, on the accompanying
Application Form.
The Placing and Open Offer are not underwritten, but through the
Placing and the Subscription, all of the Open Offer Shares have
been pre-placed with institutional investors and Allison (subject
to clawback by Qualifying Shareholders in order to satisfy valid
applications made under the Open Offer). Pursuant to the Firm
Placing and the Placing, Charles Stanley Securities and Cantor
Fitzgerald Europe have conditionally pre-placed all of the Firm
Placed Shares and the Placed Shares at the Issue Price with
institutional investors (subject to claw-back by Qualifying
Shareholders in order to satisfy valid applications made under the
Open Offer).
General
The Board considers the Firm Placing and the Placing and Open
Offer to be a suitable fundraising structure as it will allow
access to a wide variety of new investors to broaden the Company's
shareholder base, whilst providing existing Shareholders with the
opportunity to participate in the fundraising through the Open
Offer.
All elements of the Issue have the same Issue Price. The Issue
Price was set based on the Directors' assessment of market
conditions following discussions with a number of institutional
investors and has been decided upon in order to obtain the level of
new funds to be received by the Company under the Subscription, the
Firm Placing and the Placing and Open Offer and in order to
facilitate the introduction of new institutional investors capable
of supporting the long-term development of the Company as
Shareholders in Torotrak. The Issue Price represents a discount of
8.5 per cent. to the closing middle market price of 7.65 pence per
Existing Ordinary Share of the Company on 29 June 2015 (being the
latest practicable date prior to the publication of the
Prospectus).
Under the terms of the placing letters entered into between the
Firm Placees or Placees, Charles Stanley Securities and Cantor
Fitzgerald Europe, each Firm Placee and Placee has agreed to
subscribe for its placing commitment at the Issue Price (amounting
to an aggregate of 176,214,368 New Ordinary Shares). The Issue and
the Firm Placees and Placees' obligations under the placing letters
are conditional upon the Placing Agreement having become
unconditional in all respects and not having been terminated in
accordance with its terms prior to Admission.
The Placing Agreement is conditional upon, amongst other
things:
-- the passing of the Resolutions (other than the Flybrid
Agreement Resolution and the Chief Executive Officer's Proposed
Remuneration Resolution); and
-- Admission occurring on or before 8.00 a.m. on 23 July 2015
(or such later date as the Company, Charles Stanley Securities and
Cantor Fitzgerald Europe may jointly agree, being not later than
the Longstop Date).
The Placing Agreement contains warranties from the Company in
favour of Charles Stanley Securities and Cantor Fitzgerald Europe
in relation to, amongst other things, the accuracy of the
information in the Prospectus and other matters relating to the
Group and its business. In addition, the Company has agreed to
indemnify Charles Stanley Securities and Cantor Fitzgerald Europe
in respect of certain liabilities which they may incur in respect
of the Proposals. Each of Charles Stanley Securities and Cantor
Fitzgerald Europe has the right to terminate both Charles Stanley
Securities' and Cantor Fitzgerald Europe's obligations under the
Placing Agreement in certain circumstances prior to Admission,
including in the event of a breach of the warranties or a force
majeure event.
The New Ordinary Shares will, when issued and fully paid, rank
pari passu in all respects with the Existing Ordinary Shares.
Applications will be made to the UK Listing Authority for the New
Ordinary Shares to be admitted to the premium listing segment of
the Official List of the UK Listing Authority and to the London
Stock Exchange for the New Ordinary Shares to be admitted to
trading on the London Stock Exchange's main market for listed
securities. It is expected that Admission will become effective and
dealings for normal settlement in the New Ordinary Shares will
commence at 8.00 a.m. on 23 July 2015.
Further details of the Open Offer, the terms and conditions on
which it is being made and details of the procedure for application
and payment for the Open Offer Shares are set out in the Prospectus
and, in respect of Qualifying Non-CREST Shareholders only, in the
accompanying Application Form.
Dilution
Qualifying Shareholders who take up their full Open Offer
Entitlements will have their proportionate shareholdings in the
Company diluted by approximately 36.7 per cent. as a consequence of
the Proposals.
Qualifying Shareholders who do not take up their full Open Offer
Entitlements will have their proportionate shareholdings in the
Company diluted by approximately 49.3 per cent. as a consequence of
the Proposals (assuming no take up of Open Offer Entitlements by
Qualifying Shareholders).
Fractions
Fractions of Open Offer Shares will not be allocated to
Qualifying Shareholders in the Open Offer and will instead be
aggregated and made available under the Excess Application
Facility.
7. Use of proceeds of the Issue
Pursuant to the Issue, the Company intends to raise net proceeds
of GBP12.4 million, which the Company intends to use to fund the
following:
-- the cash payment of GBP1.0 million to the Flybrid Vendors
pursuant to the Flybrid Agreement;
-- GBP3.0 million of expenditure to complete the
productionisation and start of commercial production of the bus
KERS technology in the mid-2016, including investment in the
manufacture of production tooling and other non-recurring
expenditure by the Group's Tier 1 and other supply chain
partners;
-- GBP2.9 million to invest in the development and testing of
the Group's V-Charge technology and the KERS off-highway product
and to support licensing activities for KERS and V-Charge;
-- GBP0.8 million of investment to support our licensees,
Allison and Univance, with the development and productionisation of
the Group's IVT/CVT technology; and
-- GBP4.7 million to help with the working capital commitments
of the Group, including the costs to complete the internal
reorganisation programme to reduce ongoing cash operating costs by
approximately 20 per cent.
8. Current trading and prospects
On 30 March 2015, the Group announced the appointment of Adam
Robson as Chief Executive Officer (effective 13 April 2015), taking
over from Jeremy Deering, who announced his intention to stand down
as Chief Executive Officer in November last year. Adam's experience
and track record in commercialising technology in the automotive
sector will prove extremely helpful to Torotrak as it looks to
further its discussions and negotiations with customers and bring
its technologies to market.
The Group has also made significant progress against the key
objectives it set itself at the time the half year results were
published in November 2014:
-- In March 2015, a Flybrid KERS-enabled Wrightbus StreetLite
vehicle entered service with Arriva on a public bus route in
Gillingham, Kent. Initial feedback has been positive and the trial
is anticipated to continue for at least 3 months, during which time
operational performance of the KERS system will be monitored
through the collection and analysis of in-service data;
-- The Group has been working in close collaboration with a
major global Tier 1 partner on delivering, in the volumes required
by bus operators, the new lower-cost industrialised bus KERS system
by leveraging the partner's experience and supply chain;
-- The first units of the latest lower-cost industrialised bus
KERS system are currently being assembled at the Group's facility
in Leyland and will be used as part of a comprehensive design
verification test programme to validate the functional performance,
reliability and improved fuel efficiency of the KERS system.
Concurrently, the commercial team is working closely with Wrightbus
to secure initial sales orders for the bus KERS system and ensuring
the KERS system secures the available capital grants;
-- The on-going product development programme with JCB to
design, develop and commercialise Flybrid flywheel systems for
excavators, is also progressing to plan. In-vehicle and rig testing
of flywheel systems is encouraging. The combined engineering and
procurement teams are already engaged with supply chain partners
working on cost reduction activities; and
-- The next generation V-Charge hardware has been built and
supplied to the Group's OEM partner in preparation for engine
testing and the Group is engaged with a number of Tier 1s and OEMs
about the opportunities to license both KERS and V-Charge in
applications, including passenger cars.
The Group announced its unaudited preliminary results for the
year ended 31 March 2015 on 30 June 2015 which showed the following
financial highlights:
-- Revenue of GBP3.8 million (2014: GBP3.52 million)
-- Operating loss of GBP8.4 million (2014: GBP4.77 million)
-- Closing cash balance of GBP7.6 million (2014: GBP14.9 million)
9. Admission to trading of the New Ordinary Shares
Applications will be made to the UK Listing Authority and to the
London Stock Exchange, respectively, for the New Ordinary Shares to
be admitted to the premium listing segment of the Official List of
the UK Listing Authority and to trading on the London Stock
Exchange's main market for listed securities. Subject to the
conditions to the Issue having been satisfied (or, if applicable,
waived), it is expected that Admission will occur at 8.00 a.m. on
23 July 2015. Existing Ordinary Shares are already admitted to the
premium listing segment of the Official List of the UK Listing
Authority, the London Stock Exchange's main market for listed
securities and to CREST. It is expected that the New Ordinary
Shares, when allotted and issued, credited as fully paid, will be
capable of being held and transferred by means of CREST. The New
Ordinary Shares will trade under UK ISIN code GB0002922382.
The Company will announce the number of New Ordinary Shares
admitted to listing and admitted to trading pursuant to the
Proposals via a Regulatory Information Service by no later than
8.00 a.m. on the business day following the date of Admission.
10. Chief Executive Officer's Proposed Remuneration
As part of the process of appointing Adam Robson as Chief
Executive Officer, the Remuneration Committee was keen to ensure
that it balanced the need to offer a proposal that would attract
individuals of the required calibre with the need to align the
Chief Executive Officer's remuneration with the delivery of long
term Shareholder return. As such, it was agreed with Adam Robson
that, subject to Shareholder agreement, he would be granted a
one-off award under the Torotrak Long Term Performance Share Plan
(the "LTPSP") over 4,285,714 Ordinary Shares, being 150 per cent.
of Mr Robson's annual salary divided by the Issue Price (subject to
certain performance criteria set by the Remuneration Committee). In
addition, Adam Robson's service agreement includes certain
provisions that will be triggered on a change of control of the
Company (as defined in the LTPSP rules).
Full details of Mr Robson's service agreement together with the
proposed award under the LTPSP are set out in the Prospectus. The
LTPSP grant and the change of control related provisions are not
currently within the remit of the remuneration policy approved by
Shareholders and are therefore subject to Shareholder approval.
11. Dividend Policy
The declaration and payment by the Group of any future dividends
on the Ordinary Shares and the amount of any such future dividends
will depend on the results of the Group's operations, its financial
condition, cash requirements, future prospects, profits available
for distribution and other factors deemed to be relevant at the
time. However, the Directors do not envisage that the Company will
pay dividends in the foreseeable future and intend to re-invest
surplus funds in the development of the Group's business.
12. Directors, employees and key personnel of the Group
The average number of people employed by Torotrak in the
financial years ended 31 March 2013, 31 March 2014 and 31 March
2015 was 39, 76 and 91 respectively, the increase being driven by
the Flybrid acquisition and the bus KERS productionisation
programme. As set out above, the Group is implementing an internal
reorganisation, part of which will include reducing resources in
areas of the business that are not linked to tangible near-term
opportunities and realising the full synergies from the acquisition
of Flybrid. This may involve a reduction in the Group's headcount
through a formal redundancy process.
13. General Meeting
A notice convening the General Meeting, to be held at the
offices of Tavistock Communications at 131 Finsbury Pavement,
London EC2A 1NT at 11.00 a.m. on 22 July 2015, is contained at the
end of the Prospectus. At the General Meeting, Resolutions will be
proposed to:
-- approve the terms of the Flybrid Agreement;
-- approve the sub-division and conversion of the 276,286,047
Existing Ordinary Shares of 10 pence each into 276,286,047 Existing
Ordinary Shares of 1 pence each and 276,286,047 Deferred Shares of
9 pence each;
-- approve the allotment of the Subscription Shares to Allison
pursuant to Chapter 11 of the Listing Rules;
-- grant the Directors authority to allot shares in the capital
of the Company generally and in connection with the issue of the
New Ordinary Shares pursuant to the Proposals;
-- disapply where relevant statutory pre-emption rights set out in section 561 of the Act;
-- adopt new Articles which (among other things) will set out
the rights and restrictions of the Deferred Shares;
-- delete from the Articles any provision which sets a maximum
amount of shares that may be allotted by the Company; and
-- approve the LTPSP award to Adam Robson and certain change of
control related provisions in his service agreement.
14. Further information
Shareholders should read the whole of the Prospectus and not
just rely on the information contained in this announcement
15. Directors' intentions regarding the Issue
The Directors are fully supportive of the Issue. Adam Robson
intends to subscribe for, in aggregate, a total of 428,571 Firm
Placed Shares. Nick Barter, Rawdon Vevers, John Weston and John
McLaren intend to apply for Open Offer Shares with an aggregate
value of at least GBP91,000 under the Open Offer and the Excess
Application Facility.
16. Working Capital
In the opinion of the Company, taking into account existing cash
balances and the net proceeds of the Issue receivable by the
Company, the Group has sufficient working capital for its present
requirements, that is for at least 12 months following the date of
the Prospectus.
17. Importance of vote
If the Resolutions (other than the Flybrid Agreement Resolution
and the Chief Executive Officer's Proposed Remuneration Resolution)
are not approved, the Issue will not proceed. In such
circumstances, the Group will not receive the net proceeds of the
Issue and therefore would not be able to pursue its strategy of
developing its products to commercialisation and taking the Group
to profitability. Should the Issue not proceed, the Group will have
approximately GBP4.9 million of cash remaining as at 29 June 2015,
being the latest practicable date prior to the date of the
Prospectus (before the repayment of the loan notes to the Flybrid
Vendors) which will be insufficient to meet its ongoing working
capital needs and to deliver the current strategy beyond
approximately the end of September 2015. As at the date of the
Prospectus, the working capital requirements of the Company for the
next 12 months are estimated by the Directors to amount to
approximately GBP7.5 million (including one-off restructuring costs
of approximately GBP0.8 million associated with the
reorganisation).
If the Issue does not proceed, the Group would have a very
limited period of time in which to take remedial measures available
to address its cash flow requirements. Should the Issue not
proceed, the Directors would severely reduce discretionary spend
and would immediately endeavour to conserve cash and raise further
funds by:
-- the rapid sale of the intellectual property relating to the
Group's technologies and the associated decrease in development
expenditure;
-- implementing redundancies and cutting back on all
discretionary expenditure, which is likely to reduce the
capabilities of the Company; and
-- attempt to source alternative forms of financing that may be
on terms less attractive to Shareholders than the Issue.
In addition, the Directors would have to consider whether they
could find a purchaser for the Group as a whole, or any of the
individual entities therein, within the limited timeframe
available. Whilst the exact timeframe available to the Group to
implement these potential remedial measures is dependent on the
circumstances of the Group over the coming months and therefore not
definitive, as at the date of the Prospectus, the Directors believe
that the Group would have until approximately the end of September
2015 to try and find a solution to address its cash flow
requirements if the Issue does not proceed.
Although these measures are potentially available to the Group,
the outcome of such measures lies outside of the full control of
the Group and, as a result, the Directors cannot be certain that
they will be successful. In addition, the Company would have a very
limited period of time in which to effect such recourses. If the
Issue does not proceed and alternative immediate funding is not
obtained, it would have a material adverse impact on the Group's
prospects and its financial condition and the Directors would need
to consider whether it is appropriate for the Group to cease
trading and enter into a liquidation process. The Company is not in
advanced discussions regarding alternative funding and therefore
there can be no guarantee that any other funding will be available
to the Group within the required period.
Accordingly, it is very important that Shareholders vote in
favour of the Resolutions in order that the Issue can proceed.
18. Recommendation
The Board, which has received financial advice from Charles
Stanley Securities, considers that the Proposals are in the best
interests of the Group and Shareholders as a whole. In providing
its advice to the Board, Charles Stanley Securities has relied upon
the Board's commercial assessment of the Proposals.
The Board, which has been so advised by Charles Stanley
Securities, the Company's sponsor, considers that the terms of each
of the Flybrid Agreement and the Subscription are fair and
reasonable so far as the Shareholders are concerned. In providing
its advice to the Board, Charles Stanley Securities has taken into
account the Board's commercial assessment of the Flybrid Agreement
and the Subscription.
Jonathan Hilton, as a Director and a related party for the
purposes of the Flybrid Agreement, has not taken part in the
Board's consideration of the Flybrid Agreement. In addition, Adam
Robson, as a Director, has not taken part in the Board's
consideration of the Chief Executive Officer's Proposed
Remuneration.
Accordingly, the Board unanimously recommends that Shareholders
vote in favour of the Resolutions to be proposed at the General
Meeting, as it intends to do (or, as the case may be, procure) in
respect of the 6,769,598 Ordinary Shares in which members of the
Board or their spouses are beneficially interested, representing
approximately 2.45 per cent. of the existing issued share capital
of the Company (for the avoidance of doubt, Jonathan Hilton, as a
related party, will abstain from voting on the resolution to
approve the Flybrid Agreement and Adam Robson will abstain from
voting on the resolution to approve the Chief Executive Officer's
Proposed Remuneration).
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Record Date for entitlements under the 6.00 p.m. on 26 June
Open Offer 2015
Publication and posting of Prospectus, 30 June 2015
Form of Proxy and Application Form
Ex-entitlement date for the Open Offer 8.00 a.m. on 30 June
2015
Basic Entitlements and Excess CREST Open as soon as possible
Offer Entitlements credited to stock accounts after
of Qualifying CREST Shareholders in CREST 8.00 a.m. on 1 July
2015
Recommended latest time and date for requesting 4.30 p.m. on 14 July
withdrawal of Basic Entitlements and Excess 2015
CREST Open Offer Entitlements
from CREST
Latest time and date for depositing Open 3.00 p.m. on 15 July
Offer Entitlements into CREST 2015
Latest time and date for splitting of Application 3.00 p.m. on 16 July
Forms (to satisfy bona fide market claims) 2015
Latest time and date for receipt of Forms 11.00 a.m. on 20 July
of Proxy and receipt of electronic proxy 2015
appointments via the CREST system
Latest time and date for receipt of completed 11.00 a.m. on 20 July
Application Forms and payment in full under 2015
the Open Offer or settlement of relevant
CREST instruction
General Meeting 11.00 a.m. on 22 July
2015
Record date for Reorganisation of Share 5.00 p.m. on 22 July
Capital 2015
Admission and commencement of dealings as soon as possible
in New Ordinary Shares on the main market after
of the London Stock Exchange 8.00 a.m. on 23 July
2015
CREST Members' accounts credited in respect as soon as possible
of New Ordinary Shares in uncertificated after
form 8.00 a.m. on 23 July
2015
Dispatch of definitive share certificates by no later than 6
for New Ordinary Shares in certificated August 2015
form
ISSUE STATISTICS
Number of Existing Ordinary Shares in issue
as at the date of the Prospectus 276,286,047
Number of New Ordinary Shares to be issued by
the Company pursuant
to the Proposals 269,071,510
Enlarged Issued Share Capital immediately following
Admission 545,357,557
New Ordinary Shares as a percentage of the Enlarged
Issued Share Capital immediately following Admission 49.3%
Number of Flybrid Agreement Shares to be issued
by the Company pursuant to the Flybrid Agreement 71,428,571
Number of Deferred Shares to be issued by the
Company pursuant to
the Reorganisation of Share Capital 276,286,047
Maximum number of Subscription Shares to be
issued by the Company
pursuant to the Subscription 21,428,571
Number of Firm Placed Shares to be issued by
the Company pursuant
to the Firm Placing 128,571,428
Maximum number of Open Offer Shares to be issued
by the Company
pursuant to the Open Offer 69,071,511
Basic Entitlements under the Open Offer 1 Open Offer Share
for every 4 Existing
Ordinary Shares
Issue Price 7 pence
Discount of Issue Price to the closing market
price of Existing
Ordinary Shares on 29 June 2015 8.5%
Estimated net proceeds of the Issue receivable
by the Company GBP12.4 million
Estimated expenses of the Issue GBP1.4 million
DEFINITIONS
The following definitions apply throughout this announcement
unless the context otherwise requires:
"Acquisition Agreement" the agreement entered into on 13 December
2013 between the Company and the Flybrid
Vendors pursuant to which the Company
acquired the entire issued share capital
of Flybrid
-------------------------------- -----------------------------------------------------------------
"Act" the Companies Act 2006 (as amended)
-------------------------------- -----------------------------------------------------------------
"Admission" admission of the Flybrid Agreement Shares,
the Subscription Shares, the Firm Placed
Shares, the Placed Shares and the Open
Offer Shares to the premium listing segment
of the Official List of the UK Listing
Authority in accordance with the Listing
Rules and to trading on the London Stock
Exchange's main market for listed securities
in accordance with the Admission and
Disclosure Standards
-------------------------------- -----------------------------------------------------------------
"AGM" annual general meeting
-------------------------------- -----------------------------------------------------------------
"Allison" Allison Transmission, Inc.
-------------------------------- -----------------------------------------------------------------
"Application Form" the application form accompanying the
Prospectus on which Qualifying Non-CREST
Shareholders may apply for Open Offer
Shares under the Open Offer (including
under the Excess Application Facility)
-------------------------------- -----------------------------------------------------------------
"Articles" the articles of association of the Company
-------------------------------- -----------------------------------------------------------------
"Basic Entitlement" the pro rata entitlement of Qualifying
Shareholders to subscribe for 1 Open
Offer Share for every 4 Existing Ordinary
Shares registered in their name on the
Record Date
-------------------------------- -----------------------------------------------------------------
"Board" the board of directors of the Company
-------------------------------- -----------------------------------------------------------------
"Cantor Fitzgerald Europe" Cantor Fitzgerald Europe, registered
in England and Wales with company number
02505767
-------------------------------- -----------------------------------------------------------------
"Charles Stanley Securities" Charles Stanley Securities, a division
of Charles Stanley & Co. Limited, registered
in England and Wales with company number
01903304
-------------------------------- -----------------------------------------------------------------
"Chief Executive Officer's the proposed remuneration payable to
Proposed Remuneration" Torotrak's Chief Executive Officer, Adam
Robson,
-------------------------------- -----------------------------------------------------------------
"Company" or "Torotrak" Torotrak plc, registered in England and
Wales with company number 03580465
-------------------------------- -----------------------------------------------------------------
"CREST" the relevant system (as defined in the
CREST Regulations) in respect of which
Euroclear is the operator
-------------------------------- -----------------------------------------------------------------
"CREST Member" a person who has been admitted to Euroclear
as a system-member (as defined in the
CREST Regulations)
-------------------------------- -----------------------------------------------------------------
"CREST Regulations" the Uncertificated Securities Regulations
2001 (SI 2001 No. 3755)
-------------------------------- -----------------------------------------------------------------
"CVT" continuously variable transmission, a
type of main drive transmission
-------------------------------- -----------------------------------------------------------------
"Deferred Shares" deferred shares of 9 pence each in the
capital of the Company
-------------------------------- -----------------------------------------------------------------
"Directors" the directors of the Company at the date
of the Prospectus
-------------------------------- -----------------------------------------------------------------
"Enlarged Issued Share the issued share capital of Torotrak
Capital" at Admission, as enlarged pursuant to
the Proposals
-------------------------------- -----------------------------------------------------------------
"EU" or "European Union" the European Union
-------------------------------- -----------------------------------------------------------------
"Euroclear" Euroclear UK & Ireland Limited
-------------------------------- -----------------------------------------------------------------
"ex-entitlement date" the date on which the Ordinary Shares
trade ex-entitlement to participate in
the Open Offer
-------------------------------- -----------------------------------------------------------------
"Excess Application Facility" the arrangement pursuant to which Qualifying
Shareholders may apply for additional
Open Offer Shares in excess of their
Basic Entitlements in accordance with
the terms and conditions of the Open
Offer
-------------------------------- -----------------------------------------------------------------
"Excess CREST Open Offer in respect of each Qualifying CREST Shareholder,
Entitlement" the entitlement (in addition to their
Basic Entitlement) to apply for Open
Offer Shares pursuant to the Excess Application
Facility
-------------------------------- -----------------------------------------------------------------
"Excess Shares" Open Offer Shares which may be applied
for by Qualifying Shareholders under
the Excess Application Facility
-------------------------------- -----------------------------------------------------------------
"Excluded Territory" the United States, Canada, Japan and
Australia and any other jurisdiction
where the making of the Open Offer would
breach the relevant securities laws or
regulations of such jurisdictions
-------------------------------- -----------------------------------------------------------------
"Executive Directors" Adam Robson, Rawdon "Rex" Vevers and
Jonathan Hilton
-------------------------------- -----------------------------------------------------------------
"Existing Ordinary Shares" the Ordinary Shares in issue as at the
date of the Prospectus
-------------------------------- -----------------------------------------------------------------
"FCA" the Financial Conduct Authority in its
capacity as competent authority for the
purposes of Part VI of the FSMA
-------------------------------- -----------------------------------------------------------------
"Firm Placed Shares" the 128,571,428 New Ordinary Shares to
be issued at the Issue Price by the Company
pursuant to the Firm Placing
-------------------------------- -----------------------------------------------------------------
"Firm Placees" any persons who have agreed to subscribe
for the Firm Placed Shares pursuant to
the Firm Placing
-------------------------------- -----------------------------------------------------------------
"Firm Placing" the conditional placing of the Firm Placed
Shares by Charles Stanley Securities
and Cantor Fitzgerald Europe as agent
for and on behalf of the Company pursuant
to the terms of the Placing Agreement
-------------------------------- -----------------------------------------------------------------
"Flybrid" Flybrid Automotive Limited, registered
in England and Wales with company number
06025271
-------------------------------- -----------------------------------------------------------------
"Flybrid Agreement" the conditional agreement dated 30 June
2015 between the Company and the Flybrid
Vendors, pursuant to which, subject to
Shareholder approval and the other conditions
set out therein, disputes between the
Company and the Flybrid Vendors will
be compromised and the Acquisition Agreement
will be amended,
-------------------------------- -----------------------------------------------------------------
"Flybrid Agreement Resolution" the resolution numbered 1 set out in
the Notice of General Meeting at the
end of the Prospectus
-------------------------------- -----------------------------------------------------------------
"Flybrid Agreement Shares" the 71,428,571 Ordinary Shares to be
issued at the Issue Price by the Company
pursuant to the Flybrid Agreement
-------------------------------- -----------------------------------------------------------------
"Flybrid Vendors" Jonathan Hilton and Douglas Cross
-------------------------------- -----------------------------------------------------------------
"Form of Proxy" the form of proxy relating to the General
Meeting being sent to Shareholders with
the Prospectus
-------------------------------- -----------------------------------------------------------------
"FSMA" the Financial Services and Markets Act
2000 (as amended)
-------------------------------- -----------------------------------------------------------------
"General Meeting" the general meeting of the Company to
be held at the Offices of Tavistock Communications
at 131 Finsbury Pavement, London EC2A
1NT at 11.00 a.m. on 22 July 2015
-------------------------------- -----------------------------------------------------------------
"Group" Torotrak and its subsidiary undertakings
and "Group Company" shall be interpreted
accordingly
-------------------------------- -----------------------------------------------------------------
"Issue" together, the Subscription, the Firm
Placing and the Placing and Open Offer
-------------------------------- -----------------------------------------------------------------
"Issue Price" 7 pence per New Ordinary Share
-------------------------------- -----------------------------------------------------------------
"IVT" infinitely variable transmission, a type
of main drive transmission
-------------------------------- -----------------------------------------------------------------
"KERS" kinetic energy recovery systems
-------------------------------- -----------------------------------------------------------------
"Listing Rules" the listing rules made by the FCA pursuant
to section 73A of the FSMA
-------------------------------- -----------------------------------------------------------------
"London Stock Exchange" London Stock Exchange plc
-------------------------------- -----------------------------------------------------------------
"Longstop Date" 7 August 2015
-------------------------------- -----------------------------------------------------------------
"LTPSP" the Torotrak Long Term Performance Share
Plan
-------------------------------- -----------------------------------------------------------------
"main drive transmission" the transmission is central to a vehicle's
powertrain as it adapts the output of
the internal combustion engine to the
drive wheel. Torotrak's IVT and CVT transmission
systems each use a system which replaces
gears with a seamless variable drive,
managing the engine at optimum speed
and maximising energy efficiency. A CVT
requires a clutch to launch the vehicle
from rest, whereas an IVT does not.
-------------------------------- -----------------------------------------------------------------
"New Ordinary Shares" together, the Flybrid Agreement Shares,
the Subscription Shares, the Firm Placed
Shares, the Placed Shares and the Open
Offer Shares and, where the context requires,
each of them
-------------------------------- -----------------------------------------------------------------
"Non-Executive Directors" Nicolas Barter, John Weston and John
McLaren
-------------------------------- -----------------------------------------------------------------
"Notice of General Meeting" the notice of the General Meeting which
is set out at the end of the Prospectus
-------------------------------- -----------------------------------------------------------------
"OEM" original equipment manufacturer
-------------------------------- -----------------------------------------------------------------
"Official List" the official list maintained by the UK
Listing Authority
-------------------------------- -----------------------------------------------------------------
"Open Offer" the conditional offer inviting Qualifying
Shareholders to subscribe for Open Offer
Shares at the Issue Price, on the terms
and subject to the conditions set out
in Part IX of the Prospectus
-------------------------------- -----------------------------------------------------------------
"Open Offer Entitlements" together, the Basic Entitlement and the
entitlement to apply for Open Offer Shares
pursuant to the Excess Application Facility
-------------------------------- -----------------------------------------------------------------
"Open Offer Shares" the 69,071,511 Ordinary Shares which
are being offered to Qualifying Shareholders
under the Open Offer and, where the context
requires, the Excess Application Facility
-------------------------------- -----------------------------------------------------------------
"Ordinary Shares" either:
* prior to the Reorganisation of Share Capital
Resolution being passed, ordinary shares of 10 pence
each in the capital of the Company; or
* following the Reorganisation of Share Capital
Resolution being passed, ordinary shares of 1 pence
each in the capital of the Company
-------------------------------- -----------------------------------------------------------------
"Overseas Shareholders" Qualifying Shareholders with registered
addresses in, or who are citizens, residents
or nationals of, jurisdictions outside
the United Kingdom
-------------------------------- -----------------------------------------------------------------
"Placed Shares" the 47,642,940 Ordinary Shares to be
issued at the Issue Price by the Company
pursuant to the Placing, subject to clawback
to satisfy valid applications by Qualifying
Shareholders under the Open Offer
-------------------------------- -----------------------------------------------------------------
"Placees" any persons who have agreed to subscribe
for Placed Shares pursuant to the Placing
-------------------------------- -----------------------------------------------------------------
"Placing" the conditional placing of the Placed
Shares by Charles Stanley Securities
and Cantor Fitzgerald Europe as agent
for and on behalf of the Company pursuant
to the terms of the Placing Agreement
subject to clawback to satisfy valid
applications by Qualifying Shareholders
under the Open Offer
-------------------------------- -----------------------------------------------------------------
"Placing Agreement" the conditional placing agreement entered
into on 30 June 2015 between the Company,
Charles Stanley Securities and Cantor
Fitzgerald Europe relating to the Firm
Placing, the Placing and Open Offer,
-------------------------------- -----------------------------------------------------------------
"premium listing" a listing by the FCA of equity securities
of a company which is required to comply
with the provisions of Chapter 6 of the
Listing Rules and the other rules in
the Listing Rules that are expressed
to apply to such securities with a premium
listing
-------------------------------- -----------------------------------------------------------------
"Proposals" together, the Flybrid Agreement, the
Reorganisation of Share Capital, the
Subscription, the Firm Placing, the Placing
and Open Offer and the Chief Executive
Officer's Proposed Remuneration
-------------------------------- -----------------------------------------------------------------
"Prospectus" the combined circular and prospectus
published by the Company dated 30 June
2015
-------------------------------- -----------------------------------------------------------------
"Qualifying CREST Shareholders" Qualifying Shareholders holding Existing
Ordinary Shares in a CREST account
-------------------------------- -----------------------------------------------------------------
"Qualifying Non-CREST Qualifying Shareholders holding Existing
Shareholders" Ordinary Shares in certificated form
-------------------------------- -----------------------------------------------------------------
"Qualifying Shareholders" Shareholders on the register of members
of the Company at the Record Date except
for Overseas Shareholders with addresses
in an Excluded Territory
-------------------------------- -----------------------------------------------------------------
"Record Date" 6.00 p.m. on 26 June 2015, being the
latest time by which transfers of Existing
Ordinary Shares must be received for
registration by the Company in order
to allow transferees to be recognised
as Qualifying Shareholders
-------------------------------- -----------------------------------------------------------------
"Regulation S" Regulation S under the Securities Act
-------------------------------- -----------------------------------------------------------------
"Related Party Transactions" the Flybrid Agreement and the Subscription
-------------------------------- -----------------------------------------------------------------
"Remuneration Committee" the remuneration committee of Torotrak
-------------------------------- -----------------------------------------------------------------
"Reorganisation of Share the sub-division and conversion of 276,286,047
Capital" Existing Ordinary Shares of 10 pence
each into 276,286,047 Existing Ordinary
Shares of 1 pence each and 276,286,047
Deferred Shares of 9 pence each pursuant
to the Reorganisation of Share Capital
Resolution
-------------------------------- -----------------------------------------------------------------
"Reorganisation of Share the resolution numbered 2 set out in
Capital Resolution" the Notice of General Meeting at the
end of the Prospectus
-------------------------------- -----------------------------------------------------------------
"Resolutions" all of the resolutions set out in the
Notice of General Meeting at the end
of the Prospectus and "Resolution" shall
mean any of them
-------------------------------- -----------------------------------------------------------------
"Securities Act" the United States Securities Act of 1933,
as amended
-------------------------------- -----------------------------------------------------------------
"Shareholders" a holder of Ordinary Shares
-------------------------------- -----------------------------------------------------------------
"Subscription" the subscription by Allison for the Subscription
Shares pursuant to the Subscription Agreement
-------------------------------- -----------------------------------------------------------------
"Subscription Agreement" the conditional agreement dated 30 June
2015 between Allison and the Company
pursuant to which, subject to Shareholder
approval and the other conditions set
out therein, Allison has agreed to subscribe
for the Subscription Shares at the Issue
Price,
-------------------------------- -----------------------------------------------------------------
"Subscription Resolution" the resolution numbered 3 set out in
the Notice of General Meeting
-------------------------------- -----------------------------------------------------------------
"Subscription Shares" the up to 21,428,571 Ordinary Shares
to be subscribed for by Allison pursuant
to the Subscription Agreement, subject
to clawback to satisfy valid applications
by Qualifying Shareholders under the
Open Offer
-------------------------------- -----------------------------------------------------------------
"Tier 1" the immediate or primary suppliers to
OEMs
-------------------------------- -----------------------------------------------------------------
"UK" or "United Kingdom" the United Kingdom of Great Britain and
Northern Ireland
-------------------------------- -----------------------------------------------------------------
"UK Listing Authority" the FCA acting in its capacity as the
or "UKLA" competent authority for the purposes
of Part VI of the FSMA
-------------------------------- -----------------------------------------------------------------
"uncertificated" or "in recorded on the register of Ordinary
uncertificated form" Shares as being held in uncertificated
form in CREST, entitlement to which,
by virtue of the CREST Regulations, may
be transferred by means of CREST
-------------------------------- -----------------------------------------------------------------
"US", "USA" or "United the United States of America, its territories
States" and possessions, any state of the United
States of America and the District of
Columbia
-------------------------------- -----------------------------------------------------------------
"V-Charge" variable boost device
-------------------------------- -----------------------------------------------------------------
All references to legislation in this announcement are to the
legislation of England and Wales unless the contrary is indicated.
Any reference to any provision of any legislation or regulation
shall include any amendment, modification, re-enactment or
extension thereof.
Words importing the singular shall include the plural and vice
versa, and words importing the masculine gender shall include the
feminine or neutral gender.
-ends-
This information is provided by RNS
The company news service from the London Stock Exchange
END
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