RNS Number:3714J
Timeload PLC
28 March 2003
FOR IMMEDIATE RELEASE
28 March 2003
Timeload plc
Reverse of COE Limited into Timeload plc
Tender Offer to buy back up to 40 per cent. of the ordinary shares of Timeload
plc at 0.75 pence per share, Admission to the Alternative Investment Market
Summary
Further to the announcement on 18 February 2003 that Timeload ordinary shares
had been suspended pending the full notice of a transaction, Timeload is pleased
to announce the following:
* Timeload is acquiring COE, a premium provider of technology for managed
video networks, by means of a reverse takeover;
* COE's vendor shareholders will receive 30 per cent. of the enlarged issued
share capital of Timeload on completion. Further share consideration of up
to a maximum of 70 per cent. of the enlarged issued share capital as at
completion may be issuable dependent on the enlarged group's results for
2004 and 2005, assuming full take up of a tender offer to be made available
to existing shareholders in Timeload;
* conditional on Court approval of a capital reduction, shareholders in
Timeload will be guaranteed an opportunity to sell at least 40 per cent. of
their ordinary shares pursuant to a tender offer at 0.75 pence per share;
* Timeload proposes to change its name to COE Group plc;
* Timeload will seek admission of its enlarged issued share capital to AIM;
and
* following a capital reduction and the Tender Offer, Timeload proposes to
undertake a consolidation of its ordinary shares, , on the basis of one new
ordinary share for every 50 existing ordinary shares.
An Extraordinary General Meeting of shareholders to approve, inter alia, the
proposals above, which are all inter-conditional, will be convened for 10.30
a.m. on 22 April 2003. It is anticipated, subject to shareholder approval and,
where required, Court approval, that completion of the acquisition of COE and
admission to AIM will take place on 28 May 2003 and the despatch of monies for
the Tender Offer will proceed on, or about, 30 May 2003.
This summary should be read in conjunction with the full announcement. Defined
terms have the meanings set out in the full announcement.
For further information, please contact:
Paul Dudley/Suzanna Temple-Morris 01895 457 400
Timeload plc
Robin Binks/Byron Griffin 020 7438 3000
Deloitte & Touche Corporate Finance
The Directors and Proposed Directors of the Company accept responsibility for
the information contained in this document. To the best of the knowledge and
belief of the Directors and Proposed Directors (who have taken all reasonable
care to ensure that such is the case) the information contained in this document
is in accordance with the facts and does not omit anything likely to affect the
import of such information.
Deloitte & Touche Corporate Finance is acting for Timeload as sponsor in
connection with the acquisition and as nominated adviser in relation to the
admission to AIM and for no-one else and will not be responsible to anyone other
than Timeload for providing the protections offered to clients of Deloitte &
Touche Corporate Finance nor for providing advice in relation to the acquisition
or admission to AIM. Deloitte & Touche Corporate Finance is a division of
Deloitte & Touche which is authorised and regulated by the Financial Services
Authority in respect of regulated activities.
Durlacher Limited is authorised by the Financial Services Authority in respect
of regulated activities. Durlacher Limited is acting for Timeload as independent
financial adviser in relation to the acquisition and as broker in relation to
the Tender Offer and the admission to AIM and for no-one else in connection with
the acquisition, the Tender Offer and the admission to AIM and will not be
responsible to anyone other than the Company for providing the protections
offered to clients of Durlacher Limited nor for providing advice in relation to
the acquisition, the Tender Offer and the admission to AIM.
FOR IMMEDIATE RELEASE
28 March 2003
Timeload plc
Reverse of COE Limited into Timeload plc
Tender Offer to buy back up to 40 per cent. of the ordinary shares of Timeload
plc at 0.75 pence per share, Admission to the Alternative Investment Market
1. Introduction
Acquisition
The Board of Timeload plc ("Timeload" or the "Company") announces that it has
today entered into a conditional agreement to acquire the whole of the share
capital of COE Limited ("COE"). COE is a premium provider of technology for
managed video networks.
The initial consideration will comprise that number of ordinary shares that will
give the shareholders of COE 30 per cent. of the issued share capital of the
enlarged group as at completion after Timeload has returned approximately #2.2
million of its existing cash resources to Timeload shareholders (the
"Shareholders") through a tender offer (the "Tender Offer"). This will leave an
expected #3.2 million in the Timeload group. The initial consideration, being
the allotment and issue of new ordinary shares in Timeload (the "Initial
Consideration Shares"), has an implied valuation of approximately #1.4 million
based on the price of the Tender Offer (the "Tender Price").
The Directors and Proposed Directors (as set out in paragraph six below) believe
that COE has yet to exploit its full potential and has the prospect of achieving
substantial growth following completion. In recognition of this potential,
further shares (the "Deferred Consideration Shares"), will be issuable to the
COE shareholders based on the results of the enlarged group for the financial
years ending 30 June 2004 and 30 June 2005. The total implied valuation of COE,
on the assumption that the maximum number of shares is issued to the COE
shareholders, is approximately #7.5 million based on the Tender Price.
Due to the size of COE relative to Timeload, the Company is required, under the
Listing Rules, to obtain the approval of the Shareholders for the acquisition.
As Timeload has no trading business, the acquisition will be a reverse takeover
and accordingly, under the Listing Rules, the listing of the Company's existing
ordinary shares was suspended on 18 February 2003, pending publication of the
full terms of the acquisition. It is expected that the document setting out
details of the proposals will be posted to Shareholders today. The suspension of
the Company's existing ordinary shares will be lifted on 31 March 2003, being
the next business day after the publication of the document.
Tender Offer
Immediately prior to the acquisition, it is the Board's intention, subject to
High Court approval, to return up to #2.2 million of Timeload's existing cash
resources to Shareholders by means of the Tender Offer.
Subject to the Tender Offer becoming unconditional, each Shareholder is
guaranteed the opportunity to sell at least 40 per cent. of his/her ordinary
shares back to the Company at a price of 0.75 pence per ordinary share. The
price per ordinary share reflects the estimated #5.4 million of net cash in
Timeload at completion and represents a premium of 114 per cent. to the price of
0.35 pence per ordinary share immediately before the announcement of the
potential acquisition on 18 February 2003. Shareholders will be able to sell a
greater proportion of their ordinary shares, should they so wish, to the extent
that other Shareholders elect to sell less than 40 per cent. of their ordinary
shares.
The Tender Offer will not proceed if the acquisition is not completed.
General
On completion of the acquisition, Timeload will apply to have the enlarged share
capital, including the Initial Consideration Shares, admitted to the Alternative
Investment Market ("AIM").
If Shareholders do not approve the proposals, the Directors will promptly seek
to commence a voluntary winding-up of the Company, in order to distribute its
remaining assets to Shareholders.
2. Background to and reasons for the proposals
On 1 August 2002, Timeload completed the disposal of the Scoot business to
British Telecommunications plc. Following the sale, the main asset of the
Timeload group comprises its cash reserves, including money market investments
and deposits. As at 27 March 2003, the net cash in the Timeload group totalled
#5.3 million, and net cash is estimated to be #5.4 million at completion.
The Timeload group's main liability comprises the loan notes outstanding from
the original acquisition of Loot in the sum of #30.9 million as at 31 December
2002. The loan notes are fully backed by #30.9 million of additional cash
deposits.
Since the disposal of the Scoot Business, the Directors of Timeload have
considered how best to protect and deliver value to Shareholders, either through
the injection of a separate trading business into Timeload, a return of capital
to Shareholders or a combination of the two. The Directors have looked at a
number of potential acquisition candidates and consider that the acquisition of
COE, coupled with the return of up to #2.2 million of cash, is in the best
interests of Shareholders as a whole.
3. Information on COE
COE is a leading designer and manufacturer of networked analogue and digital
video solutions for surveillance applications, focused on transport
infrastructure, security and industrial applications. The Directors and Proposed
Directors believe that a key market differentiator for COE is its expertise and
knowhow in the transmission of data (e.g. video images) and its control or
manipulation, enabling COE to provide clients with an integrated solution from a
single provider.
Network transmission products transmit video, audio or data information from
multiple surveillance cameras to single or multiple surveillance control rooms.
The command and control products enable the operator to access and remotely
manipulate specific cameras and also support the automatic intelligent analysis
of the information supplied by the camera network. COE software tools provide
the operator with a graphical representation of the surveillance network to
enable easy access and management of the surveillance system.
COE's products and technology are best applied to large, complex infrastructure
projects where multiple operator access to multiple camera networks is required.
In addition, increasing client specifications, in terms of integration of
disparate communication systems and the shift towards more intelligent systems,
have led to an increase in demand for networking technology in mid-range
security projects. The Directors and Proposed Directors believe that this
represents an attractive growth opportunity for COE.
COE targets the transport infrastructure, security and industrial sectors. These
sectors are currently experiencing strong growth, which the Directors and
Proposed Directors believe is attributable, inter alia, to (i) heightened
terrorist security concerns in urban areas, public transport networks and
utility and petrochemical facilities, and (ii) an increase in infrastructure
investment for improved, safer public transport networks and urban congestion
management. The Directors and Proposed Directors believe that future growth will
also be stimulated by technological developments and increasing demand for
integrated solutions of the kind COE provides.
COE's products are generally categorised within the wider closed circuit
television ("CCTV") market. The European CCTV market in 2001 was estimated to be
worth Euro1.6 billion and is expected to grow at an average annual compound growth
rate of approximately 10 per cent. per annum to Euro2.5 billion in 2006 (source:
Proplan Report 2002). The Proposed Directors believe the global CCTV market to
be currently more than triple the size of the European market. Whilst COE's
addressable market represents a niche element of the total global CCTV market,
the Directors and Proposed Directors believe that the products of the type
manufactured by COE are at the forefront of the positive market trends noted
above and that COE is well positioned to benefit from this market growth.
COE principally undertakes two types of project, being (i) large capital
projects with extended gestation periods and long lead times to delivery, and
(ii) mid-range security projects with shorter gestation periods and shorter lead
times to delivery.
Examples of recent projects and customers include:
* Transport for London Congestion Charging Scheme - working with COLT
Telecom Group PLC to provide a comprehensive network management system to
control the transmission of vehicle number plate images captured by the
extensive network of approximately 1,300 surveillance cameras;
* Kowloon Canton Railway Corporation West Rail Project - working as the
primary CCTV subcontractor to Siemens Hong Kong Limited to implement systems
to control a network of over 700 cameras covering 30 kilometres of railway
line;
* JFK Airport to New York Light Rail System - working through one of COE's
value added resellers ("VARs") which was contracted to Bombardier Inc. to
provide an analogue video solution to control the output from a network of
over 300 cameras;
* UK Highways Agency Traffic Information System - working with The Highways
Agency to allow the Traffic Police access to motorway cameras for traffic
flow monitoring from a single central location;
* Singapore Mass Rapid Transit North East Line - contracted by NEC System
Integration Construction Limited in the rail line project linking the new
towns of Sengkang, Punggol and Hougang with the Central Harbour area of
downtown Singapore; and
* Bradford Metropolitan District Council Security Scheme - assisting in the
design and development of a complex scheme utilising over 250 cameras for
both city centre security and urban traffic control.
COE has an established market position which it has developed by supplying
equipment to a number of high profile transport infrastructure and city centre
surveillance projects world-wide and also through a global network comprising a
direct sales team and third party VARs. COE principally operates in the
European, Middle Eastern and Asia Pacific markets.
The Directors and Proposed Directors consider that it is the combination of this
market position together with the global sales network that has started to
generate considerable new business opportunities over the last eighteen months.
This is evident from COE's major project new business pipeline, which has grown
substantially over the last three years.
There are a considerable number of potential opportunities that fall outside
this classification that are also available to COE. In addition, this pipeline
does not include the mid-range security projects, which are likely to represent
a significant element of total future revenues.
Financial results of COE
Financial years ended 30 June
2000 2001 2002
#'000 #'000 #'000
Turnover 5,153 4,276 9,357
Operating profit/(loss) 499 (303) 628
Profit/(loss) before tax 378 (429) 511
The value of COE's net assets at 30 June 2002 was #994,000.
Turnover in the year ended 30 June 2002 included approximately #1.8 million of
sales being a supply of commodities which was outside normal operations, with
only a small handling margin accruing to COE.
The loss made in the year ended 30 June 2001 was in part due to an unexpected
shortage of key components from suppliers. COE was forced to source a range of
key components from alternative suppliers which in itself required the internal
engineering team to redesign several products. This delayed the shipment of
product to customers. The cumulative result was a loss for the year and some
customers were forced to source products elsewhere, thereby reducing turnover.
In the current year to 30 June 2003, COE has attempted to reduce its reliance on
a small number of major projects and has, in the year to date, realised turnover
on six major projects. However, while attempting to diversify its risk in this
way, it has experienced a number of project delays and is unlikely to exceed the
previous year's turnover from major projects. Despite an improvement in
mid-range security projects/product sales, COE's trading in the year to date has
been disappointing and it is expected that sales in the current year will fall
short of the underlying turnover achieved in the year ended 30 June 2002.
As a result of these major project slippages and an additional investment to
increase mid-range security projects/product sales, COE's financial resources
have been stretched, further limiting its ability to fund major project work. As
at 28 February 2003, COE's overdraft had increased to approximately #1.3
million.
The Directors and Proposed Directors believe that the cash that will be made
available to COE from Timeload (an estimated #3.2 million before the costs of
the proposals which are estimated to be #1.3 million) will allow COE to drive
forward more quickly and effectively with its ongoing major projects and to
resume growth during the year ending 30 June 2004.
4. Terms and funding of the acquisition
In accordance with the acquisition agreement, the Company has conditionally
agreed to acquire the entire issued share capital of COE.
The initial consideration for the acquisition is the allotment to the COE
shareholders of such number of new ordinary shares in the capital of the Company
that, immediately following completion, represents 30 per cent. of the new
ordinary shares then in issue. On the assumption that the Timeload group has net
cash resources of #3.2 million following the Tender Offer (but before the
expenses of the proposals), the Initial Consideration Shares are valued at
approximately #1.4 million based on the Tender Price. The Initial Consideration
Shares are to be credited as fully paid and will rank pari passu with the new
ordinary shares existing as at completion.
As the Directors and Proposed Directors believe that the financial constraints
faced by COE in the current year (as discussed in paragraph 3 above) are only
short-term, there is a provision in the acquisition agreement for substantial
further consideration in the form of Deferred Consideration Shares to be
issuable to the COE shareholders depending on the earnings before interest, tax,
depreciation and amortisation ("EBITDA") achieved by the enlarged group in the
years ending 30 June 2004 and 2005, on the following basis:
Enlarged group EBITDA to 30 June 2004 COE Shareholders shareholding in the enlarged group
30% (i.e. no further issue of shares)
* Less than #1.5 million
Between 30% and 50% (on a pro rata basis)
* #1.5 million to #2.0 million
Capped at 50%
* Greater than #2.0 million
Enlarged group EBITDA to 30 June 2005 COE Shareholders shareholding in the enlarged group
On the assumption that the Vendors reached 50% in the prior year:
50% (i.e. no further issue of shares)
* Less than #3.0 million
Between 50% and 70% (on a pro rata basis)
* #3.0 million to #4.0 million
Capped at 70%
* Greater than #4.0 million
On this basis, if the enlarged group achieves an EBITDA of more than #2 million
in the year ending 30 June 2004 and more than #4 million in the year ending 30
June 2005, the COE shareholders will receive that number of Deferred
Consideration Shares that would have taken their stake to 70 per cent. of the
enlarged group's share capital at completion (had the Deferred Consideration
Shares been issued at completion).
If the EBITDA achieved by the enlarged group in the year ending 30 June 2004 is
less than #2 million, and hence the number of 2004 Deferred Consideration Shares
issued is less than the maximum available, the acquisition agreement allows for
the shortfall to be issued to the COE shareholders if the EBITDA achieved in the
year ending 30 June 2005 exceeds the above targets. The number of shares to be
issued increases as the EBITDA to 30 June 2005 increases subject always to the
COE shareholders' holding being a maximum of 70 per cent. of the enlarged group
share capital as at completion (had the Deferred Consideration Shares been
issued at Completion).
If the maximum number of Deferred Consideration Shares is issued, the total
consideration payable (including the value of the Initial Consideration Shares)
would equate to approximately #7.5 million based on the Tender Price.
The acquisition is conditional, inter alia, on the approval of Shareholders and
admission to AIM as well as the approval by the High Court to the capital
reduction, as set out below.
5. Current trading and prospects of the Enlarged Group
As outlined in paragraph 2 above, the Timeload group's main asset comprises cash
reserves and, since the disposal of the Scoot Business, the Directors have been
looking at how best to protect and deliver value to Shareholders. Immediately
following completion, the only operating activity of the enlarged group will
comprise the business of COE.
The trading performance of COE in the year ending 30 June 2003 has been
materially affected by slippage on major projects and a consequential lack of
financial resources. This in turn has led to further project delays. As a
result, COE's trading in the year to date has been disappointing and it is
expected that sales in the current year will fall short of the underlying
turnover achieved in the year ended 30 June 2002.
Despite these constraints, the Proposed Directors believe COE has not lost any
major projects due to the delays noted above. It continues to work with
customers to ensure the most important project milestones are met and also has
significant new business opportunities ahead of it as evidenced by the major
project new business opportunities pipeline. The Directors and the Proposed
Directors believe that Timeload's cash resources will relieve these constraints
and allow COE quickly to complete projects where delivery has been delayed and
to make considerable progress with respect to other pipeline projects.
The Directors and Proposed Directors accordingly believe that the additional
cash resources should lead to substantial turnover growth during the year ending
30 June 2004, though currently anticipated project sales are weighted towards
the second half and any further slippage would adversely impact profit and cash
for 2004. Nevertheless, the Directors and Proposed Directors are optimistic
about the future prospects of the enlarged group.
The Directors and Proposed Directors have identified several risks which should
be taken into account when considering the COE business. These include the
retention of high calibre employees, technological changes, competition,
shipment timings, the project pipeline and macro environmental factors.
6. Directors and Proposed Directors
On completion, Jon Molyneux will resign from the Board, Dick Eykel (aged 63)
will change from executive to non-executive Chairman and Brian Wadsworth, Mark
Marriage, John Cook, and Colin Glass (the "Proposed Directors") will be
appointed to the Board.
A full-time finance director and a further non-executive director are being
sought and will be appointed to the Board as soon as is practicable following
admission to AIM.
7. Directors' and Shareholders' intentions
Undertakings have been received from each of the Directors in respect of the 1.3
million ordinary shares held by them in aggregate, which at the date of this
document, represents approximately 0.2 per cent. of the issued share capital of
the Company, to vote in favour of the resolutions to be proposed at the EGM in
respect of the ordinary shares held by them.
An undertaking has been received from Vivendi in respect of approximately 153.8
million ordinary shares held by it, which at the date of this document
represents approximately 21.2 per cent. of the issued share capital of the
Company, to vote in favour of the resolutions to be proposed at the EGM in
respect of the ordinary shares held by it.
An undertaking has been received from Ronald Zimet in respect of 32.0 million
ordinary shares held by him, which at the date of this document represents
approximately 4.4 per cent. of the issued share capital of the Company, to vote
in favour of the resolutions to be proposed at the EGM in respect of the
ordinary shares held by him.
8. Proposed Directors service contracts
Each of the Proposed Directors has entered into conditional service agreements
with the Company, to take effect upon completion, the key terms of which are as
follows:
Name Title Salary Bonus
Brian Wadsworth(1) Chief Executive Officer #100,000 per annum up to 40% of annual basic
salary
Mark Marriage(1) Technical Director #58,150 per annum up to 40% of annual basic
salary
John Cook(2) Non-executive Director #15,000 per annum none
Colin Glass(2) Non-executive Director #15,000 per annum none
1. Terminable on 12 months notice by the Company or 6 months notice by the
Proposed Director.
2. Terminable on 1 months notice by the Proposed Director or at any time by the
Company in accordance with its articles of association, following a
resolution of its shareholders or in the event of a conflict of interest.
In addition, Winburn Glass Norfolk ("WGN"), the accountancy firm with whom Mr
Glass is a partner, has entered into a conditional consultancy agreement with
the Company under which WGN has agreed to provide additional consultancy
services to the Company and for which WGN will receive a consultancy fee of #120
plus VAT for every hour Mr Glass is provided to the Company subject to provision
of an invoice.
9. Lock-in arrangements
The COE shareholders have each given an undertaking that they will not sell,
transfer or otherwise dispose of any new ordinary shares or interests in new
ordinary shares held on admission to AIM at least until 31 December 2004 or any
Deferred Consideration Shares issued until 31 December 2006 in relation to
potential claims relating to tax except in certain limited circumstances,
including if a takeover offer is made for the Company.
Mr Eykel has given an undertaking that he will not sell, transfer or otherwise
dispose of any new ordinary shares or interests in new ordinary shares held on
admission to AIM for a period of 12 months from completion without the prior
written consent of Durlacher except in certain limited circumstances including
if a takeover offer is made for the Company.
Vivendi has given an undertaking that it will not sell, transfer or otherwise
dispose of any new ordinary shares or interests in new ordinary shares held on
admission to AIM for a period of 12 months from completion without the prior
written consent of Durlacher except in certain limited circumstances including
if a takeover offer is made for the Company.
10. The City Code
The Panel on Takeovers and Mergers has determined that the COE shareholders (the
"Concert Party") are acting in concert for the purposes of Rule 9 of the City
Code. Following completion, the Concert Party will own 30 per cent. of the
enlarged issued share capital of the Company. As these shareholders may
otherwise have an obligation under the City Code to make a general offer for the
entire issued share capital of Timeload, the Panel on Takeovers and Mergers has
agreed, subject to the necessary resolution being passed on a poll at the EGM,
to waive the requirement to make a general offer.
11. General
It is expected that the document setting out details of the above will be posted
to Shareholders today. The document will contain a notice convening the EGM to
approve, inter alia, the acquisition of COE and the Tender Offer.
The EGM will be convened for 10.30 a.m. on 22 April 2003. It is anticipated
subject, inter alia, to Shareholder approval and, where required, High Court
approval, that completion of the acquisition of COE Limited and admission to AIM
will take place on 28 May 2003 and the despatch of monies for the Tender Offer
will proceed on, or about, 30 May 2003.
For further information, please contact:
Paul Dudley/Suzanna Temple-Morris 01895 457 400
Timeload plc
Robin Binks/Byron Griffin 020 7438 3000
Deloitte & Touche Corporate Finance
The Directors and Proposed Directors of the Company accept responsibility for
the information contained in this document. To the best of the knowledge and
belief of the Directors and Proposed Directors (who have taken all reasonable
care to ensure that such is the case) the information contained in this document
is in accordance with the facts and does not omit anything likely to affect the
import of such information.
Deloitte & Touche Corporate Finance is acting for Timeload as sponsor in
connection with the acquisition and as nominated adviser in relation to the
admission to AIM and for no-one else and will not be responsible to anyone other
than Timeload for providing the protections offered to clients of Deloitte &
Touche Corporate Finance nor for providing advice in relation to the acquisition
or admission to AIM. Deloitte & Touche Corporate Finance is a division of
Deloitte & Touche which is authorised and regulated by the Financial Services
Authority in respect of regulated activities.
Durlacher Limited is authorised by the Financial Services Authority in respect
of regulated activities. Durlacher Limited is acting for Timeload as independent
financial adviser in relation to the acquisition and as broker in relation to
the Tender Offer and the admission to AIM and for no-one else in connection with
the acquisition, the Tender Offer and the admission to AIM and will not be
responsible to anyone other than the Company for providing the protections
offered to clients of Durlacher Limited nor for providing advice in relation to
the acquisition, the Tender Offer and the admission to AIM.
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACQSESFMASDSEED