RNS Number:5196H
Interactivity Group PLC
14 February 2003
PROPOSED ACQUISITION OF L&P-MCC, INC.
PRELIMINARY ANNNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2002
1. INTRODUCTION
Interactivity Group PLC ("Interactivity" or "the Company") announces that it has
conditionally agreed to acquire the entire issued share capital of L&P-MCC Inc
("L&P"), an advisory firm specialising in the healthcare sector.
The consideration for the Acquisition is to be satisfied by the issue of
approximately 1.18 billion New Ordinary Shares to the Vendors of L&P which, at
the closing mid-market price of the Existing Ordinary Shares of 0.625p on 13
February 2003, values L&P at approximately #7.4 million.
In addition, at Admission, the management and employees of L&P will hold options
to subscribe for approximately 228 million New Ordinary Shares at a price of
0.1p per New Ordinary Share, representing approximately 16.6 per cent. of the
Enlarged Share Capital. These options reflect the existing options in L&P.
Principally due to the consideration payable for L&P relative to the size of the
Company, the Acquisition is a "reverse takeover" under the AIM Rules. In
addition the acquisition requires shareholders to approve a waiver of Rule 9 of
the City Code. An extraordinary general meeting is being convened for 10 March
2003 to approve the transaction.
Corporate Synergy PLC has been appointed as nominated adviser to the Company,
its previous nominated adviser having resigned. Seymour Pierce Limited is
acting as broker.
2. BACKGROUND TO THE PROPOSALS
The Company's ordinary shares were admitted to trading on AIM in May 2000, at
which time its business was an Internet based consultancy which was carried out
through its subsidiary, MyVal Limited. In March 2001 the Company entered into an
agreement with, amongst others, Interglen Limited in relation to a #1 million
refinancing of the Company, of which #250,000 was to be used as ongoing working
capital in MyVal, and #750,000 was to be ring-fenced within the Company to
pursue other investment opportunities. This agreement was conditional upon the
approval of the shareholders of the Company, which was obtained on 30 April
2001.
As part of the refinancing package, the Company entered into a put and call
option arrangement with Interglen in respect of the entire issued share capital
of MyVal. On 21 August 2001, the Company exercised its put option, disposing of
MyVal to Interglen for a consideration of #1. Under the terms of the put option,
Interglen agreed to pay the Company 25 per cent. of the proceeds of any
subsequent disposal of the business, undertaking or assets of MyVal.
Following the disposal of MyVal, the Company has actively sought acquisition
opportunities whilst maintaining a minimal cost base.
3. REASONS FOR THE ACQUISITION
Since August 2001 the Directors have considered a number of potential
acquisitions for Interactivity. In L&P the Directors believe that they have
identified a suitable business that satisfies the Company's acquisition criteria
of combining a sustainable early stage business model with the potential to
generate significant profit and a high calibre board with a proven track record
in the public markets and expertise in their chosen field.
L&P is an advisory firm specialising in the healthcare sector, which derives its
income from advisory fees, paid in the form of cash and equity interests, which
has enabled it to establish a portfolio of interests in the healthcare sector.
The principal attractions of L&P are as follows:
* L&P has a high calibre board. Its chief executive is Stuart Bruck who has
spent twenty five years in the healthcare industry. From 1997 until 1999 he was
chief executive of Barbican Healthcare plc which was sold successfully to BUPA
in 1999 for #23 million. Michael Low, chief operating officer, has twenty years
experience in the healthcare sector. The other directors of L&P have worked at
senior levels in the healthcare and global corporate finance markets for many
years;
* Healthcare is a substantial, worldwide, growing industry. In 2003
healthcare expenditure is expected to be approximately $3 trillion (source: The
World Medical Association, January 2003);
* L&P has an attractive, diversified portfolio of equity interests in the
healthcare sector; and
* Moore, Clayton & Co. Inc, a shareholder in L&P, is a global private
equity services firm which provides various corporate finance and other services
to L&P and will give L&P access to new business opportunities.
L&P carried out a private placing which closed on 31 December 2002 and was
over-subscribed. The net consideration payable per new share of common stock
issued valued the entire enlarged issued share capital of L&P at approximately
$10.5 million (#6.5 million).
On 23 January 2003 LPMCC, the majority shareholder in L&P, sold 4 million shares
of common stock in L&P to two investors for an aggregate consideration of $9
million payable over 5 years, which placed a value on the entire issued share
capital of L&P of approximately $23.5 million (#14.5 million).
L&P receives a certain proportion of its fees from clients in the form of either
shares or rights over shares. In a number of cases the issue of these shares or
exercise of rights over shares is conditional upon the occurrence of future
events, such as the successful completion of a fundraising or the achievement of
certain milestones in relation to the development of the relevant client's
business. The Directors and Proposed Directors believe that in the majority of
cases where such events have not occurred, there is a reasonable likelihood of
this happening.
An independent valuers' report included in the admission document being issued
in connection with the acquisition of L&P places a valuation on the current
portfolio of interests held by L&P of #10.6 million and a potential valuation of
#17.4 million on the assumption that certain conditions, referred to above, have
been satisfied.
In summary therefore, undiluted valuations for L&P range from #6.5 million
(based on the price at which the private placing was effected, excluding
options) to #14.5 million (based on the sales of shares by L&P to two
institutional investors). The underlying portfolio of interests (which excludes
the value of L&P itself as a trading business) has been independently valued at
#10.6 million (on the basis of L&P's current interests) and at #17.4 million
(based on the potential value of L&P's interests). These figures compare with
the price being paid of #7.4 million.
4. PRINCIPAL TERMS OF THE ACQUISITION
Under the terms of the Acquisition, Interactivity is proposing to acquire L&P's
entire issued share capital, for a consideration to be satisfied by the
allotment and issue to the Vendors of 1,180,723,605 New Ordinary Shares.
Details of the treatment of options over L&P shares granted to employees and
management under the Acquisition are set out below.
The Consideration Shares will rank pari passu in all respects with the other New
Ordinary Shares in issue following Admission.
The Acquisition is conditional, inter alia, on:
* the passing of and the necessary resolutions at an extraordinary general
meeting of the Company; and
* Admission.
Under the terms of the Acquisition, the Company has undertaken not to dispose of
its holding of shares in L&P until after 31 December 2008 and has agreed
(subject to certain conditions) to indemnify each of LPMCC, MCCI, LPHD, Stuart
Bruck and Michael Low in respect of any U.S. tax liability they may incur as a
result of the Company breaching such undertaking.
5. L&P OPTIONS
Options over L&P shares have been granted to employees and management of L&P.
In general, those options which have vested (that is, currently capable of being
exercised) will be replaced by options granted by LPMCC over shares held by it
in L&P. Upon the completion of the Acquisition, the option holders and LPMCC
have agreed that these options will then convert into options over 90,588,882
issued New Ordinary Shares held by LPMCC (representing approximately 6.6 per
cent. of the Enlarged Share Capital). These options are exercisable at 0.0054p
per New Ordinary Share between Admission and 31 December 2007.
The options over L&P shares which are currently unvested (that is, currently not
capable of being exercised) will be rolled over under the terms of the existing
L&P scheme into options over 228,387,172 New Ordinary Shares (representing 16.6
per cent. of the Enlarged Share Capital). No additional options will be granted
under the existing L&P option scheme. These options are exercisable at 0.1p per
New Ordinary Share between Admission and 31 December 2007.
As the resultant exercise price for the options over new shares in the Company
(which will be 0.1p per New Ordinary Share) will be less than the nominal value
of an Existing Ordinary Share, the Company is proposing a capital
reorganisation to reduce the nominal value to 0.1p.
6. CURRENT TRADING
Since August 2001 the Company has been seeking acquisition opportunities and has
had a minimal cost base.
The annual report and the accounts for the year ended 30 September 2002, which
are being posted to Shareholders today, show that the Company had net assets of
#682,931 at 30 September 2002, including net cash of #701,486. Since then, the
Company's only income has been interest on its cash and it has incurred minimal
overheads. The preliminary announcement of the results of the Company is set
out later in this announcement.
In the six months ended 30 June 2002 L&P reported a loss before taxation of
$27,000 on revenue of $116,000 and had net assets of $63,000. Since then it has
successfully concluded a private placing, raising $792,000 net of expenses and
has been engaged by four new clients to provide strategic advisory services.
7. PROSPECTS OF THE ENLARGED GROUP
The Enlarged Group intends to fully explore the revenue generating opportunities
in the current L&P portfolio of interests, as well as pursuing the new
opportunities afforded by the changes in the healthcare industry worldwide.
The Directors and Proposed Directors are optimistic about the Enlarged Group's
prospects for the coming year.
8. DIRECTORS AND PROPOSED DIRECTORS
In view of the proposed change of direction of the Enlarged Group, the current
Directors have agreed to resign, without compensation, upon Admission. Upon
Admission the Proposed Directors will be appointed to the Board. Interactivity
has no other employees.
Proposed Directors
Stuart Bruck (52) - proposed Executive Chairman
Stuart Bruck is Chairman and Chief Executive of L&P and has over twenty-five
years of executive-level experience in the healthcare industry. Before forming
LPHD in 1998, he was chief executive of Barbican Healthcare plc, an AIM listed
healthcare company, which was sold successfully to BUPA in 1999.
Mr. Bruck's role within the Enlarged Group will be to have overall
responsibility for determining and implementing its strategy, for identifying
and assessing potential investments and for advising clients on strategy,
acquisitions and business development.
Michael Low (47) - proposed Chief Operating Officer
Michael Low is Chief Operating Officer of L&P. He has over twenty years of
experience in the healthcare industry, covering business development, strategic
planning and mergers and acquisitions.
Mr. Low will be responsible for the day-to-day management of the Enlarged Group
including client liaison, research and business planning.
Lyndon Gaborit ACA (55) - proposed Finance Director and company secretary
Lyndon Gaborit was previously the Chief Operating Officer (Europe) for MCCI. He
is an Australian chartered accountant by background and has gained extensive
corporate experience during his career in acquisitions, disposals,
restructurings and start-ups.
Mr Gaborit will be responsible for overseeing the financial and administration
functions of the Enlarged Group and for negotiating acquisitions and corporate
development. Mr Gaborit has agreed to commit a minimum of one day per week to
the Enlarged Group's affairs.
Nicholas Brigstocke (60) - proposed Non-executive Director
Nicholas Brigstocke is a director of L&P and has been Chairman of the MCCI
Advisory Board since January 2001. Between 1998 and 2001, he was Chairman of UK
Equity Capital Markets at Credit Suisse First Boston in London following its
acquisition of Barclays de Zoete Wedd at the beginning of 1998, where he was
Chairman and Managing Director of UK Corporate Broking.
Anthony Moore (57) - proposed Non-executive Director
Anthony Moore is co-chairman and Chief Executive Officer of MCCI. Prior to
co-founding MCCI, he was President and CEO of New Energy Technologies, a
subsidiary of New Energy Inc., which was at the time a substantial deregulated
energy services provider in the US.
Mr. Moore was previously chairman of corporate finance at BZW in London. From
1982 to 1991, he held various senior positions with Goldman Sachs including head
of investment banking in Tokyo, managing director of Goldman Sachs Asia in Hong
Kong and executive director responsible for large corporate clients in London.
Mark Tompkins (62) - proposed Non-executive Director
Mark Tompkins is a private investor with experience in assisting emerging
companies in Europe and the USA. His prior experience includes investment
banking, management consulting and investment advice on an international basis.
He currently serves, inter alia, on the boards of Sodexho Alliance SA, the Paris
listed food services and facilities management company, and BioProjects
International PLC, which is traded on AIM. In the past he has served on the
boards of two New York Stock Exchange listed healthcare companies, Abbey
Healthcare Group Inc. and Apria Healthcare Group Inc.
Details of the service contracts of the Proposed Directors are contained in the
admission document of the Company being posted to shareholders today.
9. LOCK-INS AND ORDERLY MARKET ARRANGEMENTS
At Admission the Concert Party will be interested in 1,180,723,605 New Ordinary
Shares in aggregate, representing 86.0 per cent. of the Enlarged Share Capital.
In addition the Concert Party will hold options to subscribe for up to a further
228,387,172 New Ordinary Shares, representing 16.6 per cent. of the Enlarged
Share Capital.
The Proposed Directors, L&P's parent company (LPMCC), Moore Clayton, certain
employees and advisers to L&P, Medical Investment Group Holdings Limited and
European Life Science Investors will hold in aggregate 1,037,079,597 New
Ordinary Shares at Admission representing 75.5 per cent. of the Enlarged Share
Capital. They have undertaken to the Company and Corporate Synergy that (save in
the context of the acceptance of a public offer for the Company, the giving of
irrevocable undertakings in respect of a public offer for the Company, in
relation to a court order or, where applicable, upon the death of the
shareholder) they will not sell or dispose of, or agree to sell or dispose of,
any of their New Ordinary Shares or any interests in such shares at any time in
the year following Admission. In addition, they have agreed that for a further
year thereafter they will only sell or dispose of any of their New Ordinary
Shares through Seymour Pierce or such other broker to the Company from time to
time, provided that they are offered terms as to price and other terms broadly
comparable to terms obtainable elsewhere.
At Admission, the members of the Concert Party (other than those set out in the
paragraph above) will be interested in 143,644,008 New Ordinary Shares in
aggregate, representing 10.5 per cent. of the Enlarged Share Capital. The
Vendors (other than those persons giving the above undertakings) have undertaken
to the Company and Corporate Synergy that (save in the context of the acceptance
of a public offer for the Company, the giving of irrevocable undertakings in
respect of a public offer for the Company, in relation to a court order or,
where applicable, upon the death of the shareholder) they will not sell or
dispose of, or agree to sell or dispose of, any of their New Ordinary Shares or
any interests in such shares at any time in the six month period following
Admission. In addition, they have agreed that for a further six months
thereafter will only sell or dispose of any of their New Ordinary Shares through
Seymour Pierce or such other broker to the Company from time to time, provided
that they are offered terms as to price and other terms broadly comparable to
terms obtainable elsewhere.
10. EXERCISE OF EXISTING INTERACTIVITY OPTIONS
The Directors own, in aggregate, 50,610,882 Existing Ordinary Shares and options
over 8,500,000 Existing Ordinary Shares. Conditional upon Admission, Rodger
Sargent and Graham Perske have each agreed to exercise options over 3,000,000
New Ordinary Shares.
The Directors intend to dispose of their shareholdings following Admission, as
they will no longer be involved with the activities of the Company.
11. ADMISSION TO AIM
Application will be made to the London Stock Exchange for the New Ordinary
Shares to be admitted to trading on AIM. Admission is expected to become
effective and trading in the Enlarged Share Capital to commence on 11 March
2003.
12. CHANGE OF NAME
The Directors and Proposed Directors consider it appropriate to change the name
of the Company to reflect the Enlarged Group's new business.
13. CHANGE OF ACCOUNTING REFERENCE DATE
Following Admission the Proposed Directors intend to change the accounting
reference date of the Company to 28 February. Accordingly the Company proposes
to publish accounts for the five months ending 28 February 2003, reflecting the
prior activities of the Company. The audited accounts for the year ending 29
February 2004 will therefore accurately portray the first year of trading of the
Enlarged Group.
14. ADMISSION DOCUMENT
Copies of the admission document dated today are being sent to shareholders and
will be available free of charge from the company's registered office and at the
offices of Corporate Synergy PLC, 12 Nicholas Lane, London EC4N 7BN, during
normal business hours on any weekday and shall remain available for a least one
month after Admission.
15. FURTHER INFORMATION
Interactivity Group plc Tel: 020 7643 5398
Rodger Sargent, Finance Director
L&P-MCC, Inc. Tel: 020 7907 9857
Stuart Bruck, proposed Executive Chairman
Lyndon Gaborit, proposed Finance Director
Corporate Synergy PLC
Nominated Adviser to the Company Tel: 020 7626 2244
Lindsay Mair, Managing Director
William Vandyk, Associate Director
Seymour Pierce Limited
Broker to the Company Tel: 020 7648 8700
Jonathan Wright, Director
The Wriglesworth Consultancy
Public Relations Tel: 020 7620 2228
Justin Strong / Michelle James
Corporate Synergy PLC and Seymour Pierce Limited, each of which is regulated by
the Financial Services Authority, are acting exclusively for Interactivity Group
plc in connection with the matters referred to in this announcement and for
nobody else. Corporate Synergy PLC and Seymour Pierce Limited will not be
responsible to anyone other than Interactivity Group plc for providing the
protections afforded to the customers of Corporate Synergy PLC and Seymour
Pierce Limited, nor for providing advice in relation to the contents of this
announcement or any matter referred to herein.
This announcement has been approved by Corporate Synergy PLC for the purposes of
Section 21 of the Financial Services and Markets Act 2000.
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEAR ENDED 30 SEPTEMBER 2002
CHAIRMAN'S STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 2002
I am pleased to present the Company's financial statements for the year ended 30
September 2002.
For the year ended 30 September 2002, the Company had a loss before tax of
#49,175 and as at 30 September 2002 had cash reserves of #701,486.
Since I last wrote to you, the Board has been continuing to seek acquisition
opportunities for the Company. I am pleased to tell you that, having considered
a number of possible options, we have identified L&P-MCC, Inc ("L&P") as an
opportunity that satisfies the Company's acquisition criteria.
A circular is being sent to shareholders which contains full details of the
proposed transaction. Shareholders will be able to vote on the proposals at the
Extraordinary General Meeting. The normal business of the Company will then be
considered at the Annual General Meeting to be held immediately prior to the
Extraordinary General Meeting.
C R AKERS
Chairman
31 January 2003
Profit And Loss Account
For The Year Ended 30 September 2002
2002 2001
# #
Turnover
Discontinued operations - 189,130
- 189,130
Cost of Sales - (112,216)
Gross Profit - 76,914
Administrative Expenses (77,071) (830,035)
Operating Loss (77,071) (753,121)
Interest Receivable 28,079 14,198
Interest Payable and Similar Charges (183) (358)
Loss on Ordinary Activities
Before Taxation (49,175) (739,281)
Taxation on Loss on
Ordinary Activities - -
Loss for the Financial Year #(49,175) #(739,281)
Earnings Per Share (0.00p) (0.01p)
Diluted Earnings Per Share (0.00p) (0.01p)
There are no gains or losses for the year other than those recognised in the
profit and loss account.
The profit and loss account has been prepared on the basis that all operations
are continuing operations.
Balance Sheet
As At 30 September 2002
2002 2001
# #
Current Assets
Debtors 5,243 7,871
Cash at Bank and in Hand 701,486 759,586
706,729 767,457
Creditors - Amounts
Falling Due Within One Year (23,798) (29,013)
Net Current Assets 682,931 738,444
Total Assets Less Current Liabilities 682,931 738,444
Capital and Reserves
2002 2001
# #
Called Up Share Capital 932,514 932,752
Share Premium Account 1,918,980 1,918,980
Profit and Loss Account (2,270,939) (2,221,764)
Other Reserves 102,376 108,476
Shareholders' Funds
- Equity Interests #682,931 #738,444
The Financial Statements were approved by the Board of Directors on 31 January
2003.
Cash Flow Statement
For The Year Ended 30 September 2002
2002 2001
# #
Net cash outflow from operating activities (85,758) (785,800)
Returns on investments and servicing of
finance
Interest received 28,079 14,198
Interest payable (183) (358)
Net cash inflow for returns on investments
and servicing of finance 27,896 13,840
Net cash outflow before management of liquid
resources and financing (57,862) (771,960)
Financing
Issue of share capital (238) 1,146,439
Repayment of bank loan - (8,527)
Net cash (outflow)/inflow from financing (238) 1,137,912
(Decrease)/Increase in cash in the year (58,100) 365,952
Notes To The Financial Statements
For The Year Ended 30 September 2002
1 ACCOUNTING POLICIES
a) Accounting Convention
The Financial Statements are prepared under the Historical Cost Convention and
in accordance with applicable Accounting Standards in the United Kingdom. A
summary of the more important Company policies, which have been applied
consistently, is set out below.
b) Depreciation
Depreciation is provided on all tangible fixed assets in order to write off
their cost less estimated residual value of each asset over their expected
useful lives. The rates adopted are as follows:-
Plant and Machinery 20% reducing balance
Fixtures and Fittings 20% reducing balance
Computer Equipment 20% reducing balance
c) Turnover
Company turnover, which excludes Value Added Tax, sales between group companies
and trade discounts, represents the invoiced value of goods and services
supplied.
d) Investments
Fixed asset investments are stated at cost less provision for diminution in
value.
e) Deferred Taxation
Where material, deferred tax is provided in full, as required by FRS 19 -
Deferred Tax, in respect of timing differences between the treatment of certain
items for taxation and accounting purposes. The deferred tax balance has not
been discounted.
f) Leasing
Rentals paid under operating leases are charged to profit and loss account on a
straight line basis over the period of the lease.
g) Foreign Currency Translation
Monetary assets and liabilities denominated in foreign currencies are translated
into Sterling at the rates of exchange ruling at the balance sheet date.
Transactions in foreign currencies are recorded at the rate ruling at the date
of the transaction.
All differences are taken to the profit and loss account in the year in which
they arise.
h) Pensions
The pension costs charged in the Company Financial Statements represent the
contributions payable by the Company during the year in accordance with FRS 17.
i) Financial Statements
The Company has included additional disclosures in line with the requirements of
FRS 13 "derivatives and other financial instruments".
2 OPERATING LOSS
The loss on ordinary activities before taxation is stated after charging:-
2002 2001
# #
Auditors' Remuneration 5,875 10,000
Depreciation of Tangible Assets - 7,508
Hire of Equipment - 2,249
Operating Lease Rentals:
Land and Buildings - 13,990
Loss on Disposal of Business - 173,953
________ ________
3 EARNINGS PER SHARE
The calculations of Earnings Per Share are based on the following losses and
numbers of shares.
Basic Diluted
2002 2001 2002 2001
# # # #
Operating Loss for the Financial Year (77,071) (739,281) (77,071) (739,281)
________ ________ ________ ________
2002 2001
Number of Shares Number of
Shares
Weighted average number of shares:
For basic earnings per share 186,502,731 102,164,997
________ ________
The diluted earnings per share has been restricted due to the current share
price being below the exercise price on the options.
4. The financial information contained in this preliminary announcement
of audited results does not constitute the group's statutory accounts for the
years ended 30 September 2002 or 30 September 2001. The financial information
has been prepared using consistent financial policies. The accounts for the
year ended 30 September 2001 have been delivered to the Registrar of Companies
and those for 2002 will be delivered following the company's annual general
meeting.
The statutory accounts for the years ended 30 September 2002 and 30 September
2001 have been reported on by the company's auditors; the reports on these
accounts were unqualified and they did not contain a statement under section 237
(2) or (3) of the Companies Act 1985.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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