NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO, THE UNITED STATES OF AMERICA (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES AND THE DISTRICT OF COLUMBIA), AUSTRALIA, CANADA, THE REPUBLIC OF SOUTH AFRICA OR JAPAN
For immediate release 17 April 2013
Hargreaves Services Plc
("Hargreaves" or the "Company")
Proposed placing of new ordinary shares at a price of 775p per share to raise approximately £42 million
Details of the proposed Placing
Hargreaves (AIM: HSP) announces its intention to raise gross proceeds of approximately £42 million pursuant to a placing of new ordinary shares (the "Placing Shares") in the Company at a price of 775p per Placing Share (the "Placing Price") with both new and existing institutional investors (the "Placing"), in order to capitalise on the potential opportunities to expand its portfolio of surface mining assets.
The Placing is being conducted through an accelerated bookbuilding process to be carried out by N+1 Singer Advisory LLP ("N+1 Singer") and Jefferies International Limited ("Jefferies") in accordance with the terms and conditions set out in the Appendix to this announcement. N+1 Singer and Jefferies are acting as joint bookrunners (the "Bookrunners") in connection with the Placing.
The book will open with immediate effect and is expected to close no later than 4.30 p.m. on 18 April 2013. The timing of the closing of the book, pricing and allocations is at the discretion of the Bookrunners. The number of Placing Shares to be allocated and issued to each prospective investor pursuant to the Placing is subject to agreement between the Company and the Bookrunners at the close of the bookbuilding process. Details of the final terms of the Placing, including its completion, will be announced as soon as practicable after the close of the book-building process.
Participation in the Placing will be limited to institutional investors. Members of the general public are not eligible to take part in the Placing.
The Placing will be split into two tranches, with the first tranche (the "First Placing") expected to be in respect of 2,730,040 Placing Shares (the "First Placing Shares") and the second tranche (the "Second Placing") expected to be in respect of 2,730,040 Placing Shares (the "Second Placing Shares"). The First Placing and the Second Placing are not inter-conditional. The First Placing Shares will be issued pursuant to existing shareholder authorities and the Second Placing Shares will be issued conditional on, amongst other things, the approval by Shareholders of a special resolution seeking to disapply pre-emption rights in respect of the Second Placing Shares,at a general meeting of the Company to be held at Walker Morris, Kings Court, 12 King Street, Leeds LS1 2HL at11.30 a.m. on 7 May 2013 (the "General Meeting"). A Circular containing details of the proposed Placing and the notice of the General Meeting will be sent to shareholders shortly.
Applications will be made to the London Stock Exchange for the Placing Shares, comprising the First Placing Shares and the Second Placing Shares, to be admitted to trading on AIM (the "Admissions"). It is expected that Admission in respect of the First Placing Shares (the "First Admission") will become effective on or around 22 April 2013 and that dealings in the First Placing Shares will commence at that time, and that Admission in respect of the Second Placing Shares (the "Second Admission") will become effective on or around 8 May 2013 and that dealings in the Second Placing Shares will commence at that time.
The Placing is conditional upon, amongst other things, the relevant Admissions becoming effective and the Placing Agreement between the Company and the Bookrunners becoming unconditional and not being terminated, in accordance with its terms.
The Appendix to this announcement (which forms part of this announcement) sets out the terms and conditions of the Placing. By choosing to participate in the Placing and by making an oral and legally binding offer to acquire Placing Shares, institutional investors will be deemed to have read and understood this announcement in its entirety, including the Appendix, and to be making such offer on the terms and subject to the conditions contained herein and to be making the representations, warranties, undertakings and acknowledgements contained in the Appendix to this announcement.
Background to and Reasons for the Placing
The net proceeds of the Placing are intended to be used primarily to accelerate the implementation of the Group's stated strategy of developing and expanding its portfolio of UK surface mining assets, which the Board believes will have significant benefits for the Group's wider operations. The Board strongly believes that there is a significant opportunity to use the Group's existing strengths and expertise in planning, operating surface mines and marketing coal to consolidate its position as a leading owner and operator of surface mining assets in the UK.
The Board strongly believes that raising equity finance using the flexibility provided by a non pre-emptive placing is the most appropriate and optimal structure for the Company at this time. This allows both existing institutional holders and new institutional investors to participate in the Placing and avoids the need for a prospectus, which is a costly and time consuming process.
The Board believes that there is a unique opportunity to selectively acquire key surface mining assets, together with a strong development pipeline, as the sector undergoes a major restructuring. The Company is already engaged in active negotiations with principals and other key stakeholders which, if successful, could lead to the acquisition of surface mining assets with current annual production of between one and two million tonnes and the Board's view is that further attractive acquisition opportunities are likely to emerge in the near term. The timely receipt of proceeds raised via this structure is necessary to give Hargreaves the financial flexibility to pursue these existing and emerging opportunities. Assuming that the net proceeds of the Placing are fully invested by 1 June 2013, the Group expects that the capital investment in surface mining assets will be earnings enhancing in the 2014 financial year.
Use of Proceeds
The net proceeds of the First Placing and Second Placing of approximately £42 million will be used for:
· the acquisition of strategic surface coal mining assets, including operating sites, pipeline sites and railheads and coal processing facilities;
· investment in and restructuring of surface mining sites;
· investment in plant and machinery to optimise the efficiency of the expanded surface mining site portfolio;
· working capital for operating the expanded surface mining site portfolio; and
· capital to support the bonding of future restoration liabilities.
Tim Ross, Non-Executive Chairman, commented: "The UK coal industry is undergoing a major restructuring and we believe that this provides Hargreaves with an exceptional opportunity to acquire surface coal mining assets. The fundraising which we have announced today will enable us to accelerate our strategy of expanding Hargreaves' portfolio of UK surface mining assets and development pipeline through acquisition. This will consolidate the Company's position as a leading owner and operator of surface mines and provide significant benefits for the wider operations of Hargreaves."
For further details:
Hargreaves Services plc
Tel: 0191 373 4485
Gordon Banham, Group Chief Executive
Iain Cockburn, Group Finance Director
Tel: 020 7466 5000
Mark Court / Fiona Henson / Sophie Cowles
Tel: 0131 226 1951
N+1 Singer (Nominated Adviser, joint broker and joint bookrunner)
Tel: 020 7496 3000
Sandy Fraser / Nick Owen / Richard Lindley
Jefferies International Limited (joint broker and joint bookrunner)
Tel: 020 7029 8000
Sara Hale / Harry Nicholas
Overview of the UK coal sector
The UK remains a significant consumer of coal. In 2011 total coal demand in the UK comprised approximately 51.5 million tonnes. This demand was satisfied through the importation of approximately 33.6 million tonnes of coal, with 7.3 million tonnes sourced from deep mines within the UK and a further 10.6 million tonnes sourced from surface mines in the UK. The main operators of both deep mines and surface mines in the UK include:
· UK Coal Mining Limited (a business within Coalfield Resources plc, formerly UK Coal plc ("UKC")), which now produces an estimated 3.6 million tonnes per annum and 1.8 million tonnes per annum from its deep mines and surface mines, respectively;
· Scottish Resources Group Limited ("SRG"), which produces an estimated 2.7 million tonnes per annum from its surface mines;
· ATH Resources PLC ("ATH"), which produces an estimated 1.8 million tonnes per annum from its surface mines;
· Tower Colliery, which began production in 2012 and sits within Hargreaves' production division, is expected to produce up to one million tonnes per annum from its surface mine;
· Hatfield Colliery, in which Hargreaves has a minority equity stake of 10% and to which it provides contracted management support and marketing services, which produces 0.7 million tonnes per annum from its deep mine; and
· Other operators include Miller Argent, Celtic Energy and Banks Group, which together produce approximately 4.2 million tonnes per annum from their surface mines.
A number of producers of coal in the UK are currently facing significant operational and financial issues:
· Having completed a restructuring in December 2012 that split its operations into two separate businesses comprising the Mining Division (UK Coal Mine Holdings Limited) and the Property Division (Harworth Estates Property Group Limited), on 7 March 2013, the UK's largest producer, UKC, announced the closure of Daw Mill Colliery in Warwickshire following a major fire;
· SRG is experiencing significant business challenges and recently announced potentially wide-ranging redundancies; and
· ATH, the third largest coal producer in the UK, was placed into administration in December 2012.
However, because of the supply and demand dynamics, the Board strongly believes that indigenous UK coal production has a long term future, with an established market in the UK that has attractive fundamentals and Government support, especially in Scotland.
The Group's current position in industrial and household coal markets
Hargreaves supplies coal to the power generation, industrial and household coal markets. The industrial and household coal markets in the UK are important markets for the Group. In 2009, a long term supply agreement was signed with UKC. Under this agreement the Group is supplied with up to 270,000 tonnes of coal per annum for the industrial and household coal markets. This is a key supply agreement for Hargreaves and accounts for a significant proportion of the industrial and household coal it supplies.
The coal that Hargreaves supplies to the household coal market is mainly sourced from UKC's deep mines, in particular Kellingley and, to date, Daw Mill, which produce a coal that is suitable for the household coal market. Daw Mill has now been closed and whilst this reduces the sources of household coal available to Hargreaves, more significantly it has also led UKC to announce that it is engaged in discussions with HM Government, led by officials at the Department of Energy and Climate Change, with a view to helping the company manage the closure of Daw Mill and seeking a way forward for the remaining mines within UKC.
Over the last two years the Group's strategy has been to increase the supply of industrial and household coals from other sources, including international markets. Security of supply is a key factor that has led the Group to explore the potential to acquire or develop its own surface mining assets in the UK. Not all deep and surface mines produce coal of the right quality for household coal consumption. However, the Group believes with investment in the proper equipment, there are several surface mines in the UK which could produce such coal.
Since early 2012 UKC has sought to enter into discussions with Hargreaves to vary the terms of its supply agreement with the Group as part of the wider rescue restructuring, but no mutually agreeable variation to the supply contract has yet been concluded. In the short term, UKC's failure or refusal to perform under the existing contract or the disruption and/or cessation of a significant tonnage of coal supply to the Group from UKC would force the Group to source a greater proportion of coal from international markets. Whilst the Board is confident that it will be possible to secure coal of equivalent specification from international markets, it will in all likelihood be achieved at a higher cost than that at which the Group currently sources coal under the supply agreement with UKC. These factors increase the importance of accelerating the development of the Group's surface mining portfolio in the UK, to provide additional sources of coal for these markets under the Group's direct control and to provide an alternative source of coal to UKC.
The Group's surface mining strategy
Hargreaves has been developing a strategy for growing its surface mining activities over the last two years. Following the commencement of the Tower Regeneration Limited project in South Wales, as previously announced, the Group has started to develop a pipeline of surface mining sites. Three sites in the North East of England are currently in the planning or development phase.
On 1 March 2013, it was announced that Hargreaves had acquired debt with a face value of £12.5 million, secured over the assets of the principal operating subsidiary of ATH, for £5 million. The Group undertook this transaction after extensive discussions with many of the key stakeholders of ATH, including management, landowners, local authorities and the Scottish Government. The Group intends to work with key stakeholders to achieve a restructuring that would create a platform for the Group to invest in surface mining in Scotland. Detailed due diligence undertaken by the Group indicates that ATH has viable sites that could produce circa one million tonnes per annum. Active discussions are ongoing and, although it is expected to take several weeks to finalise a transaction, the Board is confident of a positive outcome. The Group has also recently commenced discussions on a second major surface mining asset opportunity.
The Board believes that the current operational and financial issues facing certain operators in the UK coal sector present the Group with a much broader opportunity to acquire and operate specific surface mining assets. The Board recognises the potential negative impact of these legacy issues relating to low price sales contracts, pension deficits and under-funded restoration obligations and will perform appropriate due diligence to enable the Board to understand and, to the extent practicable, mitigate these issues. Any such acquisitions will be structured to ensure that the Group does not assume material legacy problems or historic liabilities. For all prospective material sites, coal reserves, ratios and mining plans will be reviewed by independent experts to validate the diligence performed by our mining team.
Bringing substantial producing assets under Hargreaves' control is expected to allow the Group to utilise its established skills, sector-wide relationships, marketing disciplines and financial strength to benefit all stakeholders; operating the sites profitably, ensuring appropriate provision is made for restoration, that restoration is performed on a timely basis and offering continuity of employment. If successful, this will allow the Group to accelerate significantly the development of its surface mining activity.
The Group's objective is to acquire and develop additional surface mining capacity of around three million tonnes per annum to increase the Group's overall surface mining production to four million tonnes per annum and to target a coal reserves base in excess of 20 million tonnes. This would add significant scale to the Group's activities in the UK and allow Hargreaves to source a greater proportion of its industrial and household grade coal without recourse to more expensive international coals. The mitigation of that risk, combined with the opportunity to consolidate lower risk surface mine production, provides an attractive business case which, the Directors believe, offers an appropriate return on the additional capital the Group is seeking to raise. The Directors will target a return on capital employed of in excess of 20 per cent. when appraising surface mining asset investment opportunities. The Directors believe that this is an adequate return taking account of the risks involved in the surface mining sector.
The Directors estimate that it would typically require between £25 million and £30 million of investment to support each additional one million tonnes of annual production capacity. The Board believes that the current challenges and issues facing the sector in the UK are likely to present opportunities to acquire proven assets with attractive production characteristics at a lower cost. The net proceeds of the Placing, along with an appropriate combination of hire purchase funding and drawdown of existing core banking facilities, together provide the financial resources to implement in full the strategy set out above.
Surface mines in the UK, provided they are carefully selected and managed, represent attractive assets that offer significant benefits to the Group:
· Hargreaves would select only those sites that have the potential to deliver an operating profit in the range of circa £5-£7.50 per tonne at current market prices. To manage price volatility, such profit streams would be hedged by fixing the price of coal and fuel oil at the outset of any project for a three year period;
· the assets will provide additional product for the Group to market into the power generation sector, helping to leverage existing relationships and introducing new relationships to the Group. Hargreaves is one of the few companies in the UK to combine indigenous production and large scale importation of coal;
· the sites will offer sources of industrial and household coal under the direct control of Hargreaves that would mitigate the potential impact of losing the supply of such coals from UKC following the closure of Daw Mill;
· the Board expects that the acquisition of sites in the region will provide access to the important Scottish market for power station, industrial and household coals; and
· the Board further expects that opportunities will become available for other divisions of Hargreaves to supply coal transportation and site restoration services.
Following a strong underlying performance in the first half of the financial year, trading volumes continue to underpin the anticipated strong second half. Orders and stocks are in place to support increased shipments of thermal, coking and PCI coals, in particular to support the new coal terminal at Redcar, which will be reflected in readily marketable inventories at the year end.
The decision to mothball Maltby Colliery was announced in December 2012 and is largely complete. As already announced, although this decision will impact the Group's results in the current financial year, the asset sales remain on track and in financial terms are in line with previous guidance. The closure of Maltby significantly de-risks the Group's production profile.
The Group is confident that the financial impact of the fraud in Belgium is in line with the guidance provided within the interim results statement.
The Board expects a strong second half performance and remains confident of achieving its expectations for the full year, excluding the impacts of Maltby and Belgium.
TERMS AND CONDITIONS OF THE PLACING
IMPORTANT INFORMATION FOR PLACEES ONLY REGARDING THE PLACING
Details of the Placing
The Bookrunners have entered into an agreement with the Company (the "Placing Agreement") under which, subject to the conditions set out in that agreement, the Bookrunners have agreed, as agents and on behalf of the Company, to use reasonable endeavours to procure placees (the "Placees") for the Placing Shares at a single price of 775p per Placing Share (the "Placing Price"), where the exact number of the Placing Shares to be allocated and issued to each Placee shall be determined following completion of an accelerated bookbuilding process (the "Bookbuild"), described in this announcement and set out in the Placing Agreement (the "Placing"). Nplus 1 Singer Capital Markets Limited is acting as agent of N+1 Singer in respect of the Placing. The Placing is not underwritten.
The Placing will be split into two tranches: the First Placing expected to be in respect of 2,730,040Placing Shares (the "First Placing Shares") and the Second Placing expected to be in respect of 2,730,040 Placing Shares (the "Second Placing Shares"). The First Placing and the Second Placing are not inter-conditional. The First Placing Shares will be issued pursuant to existing shareholder authorities, and the Second Placing Shares will be issued conditional on, amongst other things, the approval by Shareholders of a special resolution seeking to disapply pre-emption rights in respect of the Second Placing Shares,at a General Meeting of the Company. A Circular containing details of the proposed Placing and the notice of the General Meeting will be sent to shareholders shortly.
The Placing Shares will, when issued, be credited as fully paid and will rank pari passuin all respects with the existing Ordinary Shares of the Company including the right to receive all dividends and other distributions declared, made or paid on or in respect of such Ordinary Shares after the date of issue of the Placing Shares.
As a term of the Placing, the Company has agreed that it will not issue or sell any Ordinary Shares for a period of 60 dealing days after the date of the General Meeting convened in relation to the Second Placing, without the prior consent of the Bookrunners. This agreement does not however prevent the Company from granting or satisfying exercises of options granted pursuant to existing share schemes of the Company.
Applications for admission to trading
Applications will be made to the London Stock Exchange for the Admission of the First Placing Shares and the Second Placing Shares, respectively, to trading on AIM. It is expected that First Admission will become effective on or around 22 April 2013 and that dealings in the First Placing Shares will commence at that time, and that Second Admission will become effective on or around 8 May 2013 and that dealings in the Second Placing Shares will commence at that time.
The Bookrunners will today commence the Bookbuild to determine demand for participation in the Placing by Placees. This Appendix gives details of the terms and conditions of, and the mechanics of participation in, the Placing. No commissions will be paid to Placees or by Placees in respect of any Placing Shares.
The Bookrunners shall be entitled to effect the Placing by such alternative method to the Bookbuild as they may, in their absolute discretion following consultation with the Company, determine.
Participation in, and principal terms of, the Placing
1. Each of Jefferies and N+1 Singer, severally and not jointly nor jointly and severally, is acting as joint bookrunner and agent of the Company in respect of the Placing.
2. Participation in the Placing will only be available to persons who may lawfully be, and are, invited to participate by the Bookrunners. The Bookrunners and their respective affiliates are each entitled to enter bids in the Bookbuild as principal.
3. The Bookbuild will be carried out on the basis of the Placing Price of 775p per Placing Share payable to the Bookrunners by all Placees whose bids are successful. The number of the Placing Shares to be allocated and issued to each Placee will be agreed between the Bookrunners and the Company following completion of the Bookbuild. Further details of the Placing, including its completion, will be announced on a RIS following the completion of the Bookbuild.
4. To bid in the Bookbuild, Placees should communicate their bid by telephone to their usual sales contact at the relevant Bookrunner. Each bid should state the number of Placing Shares which the prospective Placee wishes to subscribe for at the Placing Price. Bids may be scaled down by the Bookrunners on the basis referred to in paragraph 8 below.
5. The Bookbuild is expected to close no later than 4.30 p.m. (London time) on 18 April 2013, but may be closed earlier or later at the discretion of the Bookrunners. The Bookrunners may, in agreement with the Company, accept bids that are received after the Bookbuild has closed. The Company reserves the right (upon the agreement of the Bookrunners) to reduce or seek to increase the amount to be raised pursuant to the Placing, in its absolute discretion.
6. Each prospective Placee's allocation will be agreed between the Bookrunners and the Company and will be confirmed orally by the relevant Bookrunner as agent of the Company following the close of the Bookbuild. That oral confirmation will constitute an irrevocable legally binding commitment upon that person (who will at that point become a Placee) in favour of the relevant Bookrunner and the Company to subscribe for the number of Placing Shares allocated to it at the Placing Price on the terms and conditions set out in this Appendix and in accordance with the Company's articles of association. The number of Placing Shares allocated to each Placee will comprise an equal number of the First Placing Shares and the Second Placing Shares.
7. Each Placee will also have an immediate, separate, irrevocable and binding obligation, owed to the Bookrunners as agents of the Company, to pay the relevant Bookrunner (or as it may direct) in cleared funds, an amount equal to the product of the Placing Price and the number of Placing Shares that such Placee has agreed to subscribe for and the Company has agreed to allot and issue to that Placee.
8. The Bookrunners may choose to accept bids, either in whole or in part, on the basis of allocations determined in agreement with the Company and may scale down any bids for this purpose on such basis as they may determine. The Bookrunners may also, notwithstanding paragraphs 4 and 5 above, subject to the prior consent of the Company (i) allocate Placing Shares after the time of any initial allocation to any person submitting a bid after that time and (ii) allocate Placing Shares after the Bookbuild has closed to any person submitting a bid after that time.
9. A bid in the Bookbuild will be made on the terms and subject to the conditions in this announcement and will be legally binding on the Placee on behalf of which it is made and except with the consent of the Bookrunners will not be capable of variation or revocation after the time at which it is submitted.
10. Irrespective of the time at which a Placee's allocation pursuant to the Placing is confirmed, settlement for all First Placing Shares to be acquired pursuant to the First Placing will be required to be made at the same time and settlement for all Second Placing Shares to be acquired pursuant to the Second Placing will also be required to be made at the same time, on the basis explained below under "Registration and Settlement".
11. All obligations under the Bookbuild and Placing will be subject to fulfilment of the conditions referred to below under "Conditions of the Placing" and to the Placing not being terminated on the basis referred to below under "Termination of the Placing Agreement".
12. By participating in the Bookbuild, each Placee will agree that its rights and obligations in respect of the Placing will terminate only in the circumstances described below and will not be capable of rescission or termination by the Placee.
13. To the fullest extent permissible by law, neither the Bookrunners nor any of their respective affiliates shall have any liability to Placees (or to any other person whether acting on behalf of a Placee or otherwise). In particular, neither the Bookrunners nor any of their respective affiliates shall have any liability (including to the fullest extent permissible by law, any fiduciary duties) in respect of their conduct of the Bookbuild or of such alternative method of effecting the Placing as the Bookrunners may determine.
Conditions of the Placing
The obligations of the Bookrunners under the Placing Agreement in respect of the First Placing are conditional on, amongst other things:
a) agreement being reached between the Company and the Bookrunners on the terms of the Placing, including the number of Placing Shares to be allocated and issued to each Placee and publication of an announcement by the Company regarding completion of the Placing, through a RIS, as soon as reasonably practicable thereafter;
b) the allotment of the First Placing Shares by the Company, subject only to First Admission;
c) none of the representations and warranties contained in the Placing Agreement not being, or ceasing to be, true and accurate and not misleading on the date of the Placing Agreement or at any time between the date of the Placing Agreement and First Admission (by reference to the facts and circumstances then existing);
d) the Company complying with its obligations under the Placing Agreement to the extent the same fall to be performed or satisfied prior to First Admission;
e) First Admission taking place by 8.00 a.m. (London time) on 22 April 2013 (or such later date as the Company and the Bookrunners may otherwise agree) (the "First Admission Date"); and
f) in the good faith opinion of the Bookrunners, there shall not have been a material adverse change, or a prospective material adverse change, in or affecting the condition (financial, operational, legal or otherwise) or the business affairs, operations, business prospects, financial prospects, solvency or funding position of the Company and its subsidiaries, whether or not arising in the ordinary course of the business and whether or not foreseeable at the date of the Placing Agreement (a "Material Adverse Change") since the date of the Placing Agreement.
The obligations of the Bookrunners under the Placing Agreement in respect of the Second Placing are conditional on, amongst other things:
a) First Admission having taken place by the First Admission Date;
b) the passing of the Resolution at the GM;
c) the allotment of the Second Placing Shares by the Company, subject only to Second Admission;
d) none of the representations and warranties contained in the Placing Agreement not being, or ceasing to be, true and accurate and not misleading on the date of the Placing Agreement or at any time between the date of the Placing Agreement and Second Admission (by reference to the facts and circumstances then existing);
e) the Company complying with its obligations under the Placing Agreement to the extent the same fall to be performed or satisfied prior to Second Admission;
f) Second Admission taking place by 8.00 a.m. (London time) on 8 May 2013 (or such later date as the Company and the Bookrunners may otherwise agree) (the "Second Admission Date"); and
g) in the good faith opinion of the Bookrunners, there not having been a Material Adverse Change since the date of the Placing Agreement.
If any of the conditions contained in the Placing Agreement in relation to the First Placing are not fulfilled or waived by the Bookrunners, by the time or date where specified (or, in each case, such later time and/or date as the Company and the Bookrunners may agree), the Placing will not proceed and the Placee's rights and obligations hereunder in relation to the Placing Shares shall cease and terminate at such time and each Placee agrees that no claim can be made by the Placee in respect thereof. For the avoidance of doubt, the First Placing and the Second Placing are not inter-conditional.
If any of the conditions contained in the Placing Agreement in relation to the Second Placing are not fulfilled or waived by the Bookrunners by the time or date where specified (or, in each case, such later time and/or date as the Company and the Bookrunners may agree), the Second Placing will not proceed and the Placee's rights and obligations hereunder in relation to the Second Placing Shares shall cease and terminate at such time and each Placee agrees that no claim can be made by the Placee in respect thereof.
The Bookrunners may, at their discretion and upon such terms as they think fit, waive compliance by the Company with the whole or any part of any of the Company's obligations in relation to the conditions in the Placing Agreement save that the conditions in the Placing Agreement relating to, in respect of the First Placing, the First Admission taking place and in respect of the Second Placing, the Second Admission taking place, may not be waived. Any such extension or waiver will not affect Placees' commitments as set out in this announcement.
None of the Bookrunners, the Company or any other person shall have any liability to any Placee (or to any other person whether acting on behalf of a Placee or otherwise) in respect of any decision they may make as to whether or not to waive or to extend the time and/or the date for the satisfaction of any condition to the Placing nor for any decision they may make as to the satisfaction of any condition or in respect of the Placing generally, and by participating in the Placing each Placee agrees that any such decision is within the absolute discretion of the Bookrunners.
Termination of the Placing Agreement
The Bookrunners may in their absolute discretion at any time on or before First Admission, in relation to the First Placing, and at any time before Second Admission, in relation to the Second Placing, terminate the Placing Agreement by giving notice in writing to the Company, if, amongst other things:
a) the Company's application for the relevant Admission of the Placing Shares has been withdrawn by the Company and/or refused by the London Stock Exchange (as appropriate); or
b) in the good faith opinion of the Bookrunners, there has been a Material Adverse Change as a result of which the Bookrunners consider it impractical or inadvisable to proceed with the Placing; or
c) there has occurred:
i. any material adverse change in the financial markets in the United States, the United Kingdom, any member state of the European Economic Area (the "EEA") or the international financial markets; or any outbreak of hostilities or escalation thereof, any act of terrorism or war or other calamity or crisis; or any change or development involving a prospective change in national or international political, financial or economic conditions, exchange rates or exchange controls; or
ii. trading in any securities of the Company has been suspended or limited by the London Stock Exchange, or on any exchange or over-the counter market, or if trading generally on the New York Stock Exchange, the NASDAQ National Market or the London Stock Exchange has been suspended or limited; or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of such exchanges or by such system or by order of the SEC, the National Association of Securities Dealers, Inc. or any governmental authority; or a material disruption has occurred in commercial banking or securities settlement or clearance services in the United States, the United Kingdom or in the EEA; or
iii. a banking moratorium has been declared by the United States, the United Kingdom, a member state of the EEA, or New York authorities; or
iv. there has occurred an adverse change or a prospective adverse change since the date of the Placing Agreement in the United States, the United Kingdom or a member state of the EEA in respect of taxation affecting the Placing Shares or the transfer thereof or exchange controls have been imposed by the United States, the United Kingdom or a member state of the EEA; or
v. there is an announcement of intended withdrawal from the Euro currency or intended redenomination of any obligations, public or private, by any EEA member state,
which event, singly or together with other events in this paragraph (c), in the good faith opinion of the Bookrunners, makes it impracticable or inadvisable to proceed with the Placing.
Upon such termination, the parties to the Placing Agreement shall be released and discharged (except for any liability arising before or in relation to such termination) from their respective obligations under or pursuant to the Placing Agreement subject to certain exceptions. For the avoidance of doubt, the First Placing cannot be terminated after First Admission has occurred. If the Placing Agreement is terminated following First Admission but prior to Second Admission, the Second Placing will not proceedand the Placee's rights and obligations hereunder in relation to the Second Placing Shares shall cease and terminate at such time and each Placee agrees that no claim can be made by the Placee in respect thereof.
By participating in the Placing, Placees agree that the exercise by either of the Bookrunners of any right of termination or other discretion under the Placing Agreement shall be within the absolute discretion of such Bookrunner and that such Bookrunner need not make any reference to Placees and that it shall have no liability to Placees whatsoever in connection with any such exercise or failure so to exercise.
No offering document, prospectus or admission document has been or will be submitted to be approved by the FCA or submitted to the London Stock Exchange in relation to the Placing and Placees' commitments will be made solely on the basis of the information contained in this announcement (including this Appendix) , and subject to the further terms set forth in the placing letter to be provided to individual prospective Placees.
Each Placee, by accepting a participation in the Placing, agrees that the content of this announcement (including this Appendix) is exclusively the responsibility of the Company and confirms that it has neither received nor relied on any other information, representation, warranty, or statement made by or on behalf of the Company or the Bookrunners or any other person and none of the Bookrunners or the Company nor any other person will be liable for any Placee's decision to participate in the Placing based on any other information, representation, warranty or statement which the Placees may have obtained or received. Each Placee acknowledges and agrees that it has relied on its own investigation of the business, financial or other position of the Company in accepting a participation in the Placing. Nothing in this paragraph shall exclude the liability of any person for fraudulent misrepresentation.
Registration and Settlement
Settlement of transactions in the Placing Shares following the relevant Admission will take place within the system administered by Euroclear UK & Ireland Limited ("CREST"), subject to certain exceptions. The Company reserves the right to require settlement for and delivery of the Placing Shares (or a portion thereof) to Placees in certificated form if, in the Bookrunners' opinion, delivery or settlement is not possible or practicable within the CREST system or would not be consistent with the regulatory requirements in the Placee's jurisdiction.
Following the close of the Bookbuild for the Placing, each Placee to be allocated Placing Shares in the Placing will be sent a placing letter stating the number of Placing Shares allocated to it at the Placing Price and settlement instructions. The number of Placing Shares allocated to each Placee will comprise an equal number of the First Placing Shares and the Second Placing Shares.
Each Placee agrees that it will do all things necessary to ensure that delivery and payment is completed in accordance with the standing CREST or certificated settlement instructions that it has in place with the relevant Bookrunner.
The Company will deliver the Placing Shares to a CREST account operated by the relevant Bookrunner as agent for the Company and the relevant Bookrunner will enter its delivery (DEL) instruction into the CREST system. The input to CREST by a Placee of a matching or acceptance instruction will then allow delivery of the relevant Placing Shares to that Placee against payment.
It is expected that settlement in respect of the First Placing Shares will take place on 22 April 2013 and settlement in respect of the Second Placing Shares will take place on 8 May 2013, in each case on a delivery versus payment basis.
Interest is chargeable daily on payments not received from Placees on the due date in accordance with the arrangements set out above at the rate of two percentage points above LIBOR as determined by the Bookrunners.
Each Placee is deemed to agree that, if it does not comply with these obligations, the relevant Bookrunner may sell any or all of the Placing Shares allocated to that Placee on such Placee's behalf and retain from the proceeds, for the Bookrunners' account and benefit, an amount equal to the aggregate amount owed by the Placee plus any interest due. The relevant Placee will, however, remain liable for any shortfall below the aggregate amount owed by it and may be required to bear any stamp duty or stamp duty reserve tax (together with any interest or penalties) which may arise upon the sale of such Placing Shares on such Placee's behalf.
If Placing Shares are to be delivered to a custodian or settlement agent, Placees should ensure that the trade confirmation is copied and delivered immediately to the relevant person within that organisation. Insofar as Placing Shares are registered in a Placee's name or that of its nominee or in the name of any person for whom a Placee is contracting as agent or that of a nominee for such person, such Placing Shares should, subject as provided below, be so registered free from any liability to UK stamp duty or stamp duty reserve tax. Placees will not be entitled to receive any fee or commission in connection with the Placing.
Representations and warranties
By participating in the Placing each Placee (and any person acting on such Placee's behalf) irrevocably acknowledges, confirms, undertakes, represents, warrants and agrees (as the case may be) with each of the Bookrunners (in its capacity as joint bookrunner and agent of the Company, in each case as a fundamental term of their application for Placing Shares), the following:
a) it has read and understood this announcement in its entirety and that its subscription of Placing Shares is subject to and based upon all the terms, conditions, representations, warranties, acknowledgements, agreements and undertakings and other information contained herein;
b) that no offering document, listing particulars, prospectus or admission document has been or will be prepared in connection with the Placing and it has not received a prospectus, admission document or other offering document in connection with the Placing or the Placing Shares;
c) that the existing Ordinary Shares in the capital of the Company are admitted to trading on AIM, and that the Company is therefore required to publish certain business and financial information in accordance with the rules and practices of AIM, which includes a description of the nature of the Company's business and its most recent balance sheet and profit and loss account, and that it is able to obtain or access such information and such information or comparable information concerning any other publicly traded company, in each case without undue difficulty;
d) that neither the Bookrunners nor the Company nor any of their respective affiliates nor any person acting on behalf of any of them has provided, and none of them will provide it, with any material regarding the Placing Shares or the Company or any other person other than this announcement; nor has it requested the Bookrunners, the Company, any of their respective affiliates or any person acting on behalf of any of them to provide it with any such information;
e) unless otherwise specifically agreed with the Bookrunners, that neither it nor the beneficial owner of the Placing Shares is, or at the time the Placing Shares are acquired, neither it nor the beneficial owner of the Placing Shares will be, a resident of, or otherwise located in, the United States, Australia, Canada, Japan or the Republic of South Africa and it further acknowledges that the Placing Shares have not been and will not be registered under the securities legislation of the United States, Australia, Canada, Japan or the Republic of South Africa and, subject to certain exceptions, may not be offered, sold, transferred, delivered or distributed, directly or indirectly, in or into those jurisdictions;
f) that (i) it is not within the United States, (ii) it is not within Australia, Canada, Japan, the Republic of South Africa or any other jurisdiction in which it is unlawful to make or accept an offer to acquire the Placing Shares, (iii) it is not acquiring the Placing Shares for the account of any person who is located in the United States, unless the instruction to acquire was received from a person outside the United States and the person giving such instruction has confirmed that it has the authority to give such instruction, and that either (a) it has investment discretion over such account or (b) it is an investment manager or investment company and, in the case of each of (a) and (b), that it is acquiring the Placing Shares in an "offshore transaction" (within the meaning of Regulation S under the US Securities Act of 1933, as amended (the "Securities Act")); and (iv) it is not acquiring the Placing Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any such Placing Shares into the United States or any other jurisdiction referred to in (ii) above;
g) that the content of this announcement is exclusively the responsibility of the Company and that neither the Bookrunners nor any person acting on their behalf have or shall have any liability for any information, representation or statement contained in this announcement or any information previously or subsequently published by or on behalf of the Company, including, without limitation, any information required to be published by the Company pursuant to applicable laws (the "Exchange Information") and will not be liable for its decision to participate in the Placing based on any information, representation or statement contained in this announcement or otherwise. It further represents, warrants and agrees that the only information on which it is entitled to rely and on which it has relied in committing itself to subscribe for the Placing Shares is contained in this announcement and any information previously published by the Company by notification to a RIS, such information being all that it deems necessary to make an investment decision in respect of the Placing Shares and that it has neither received nor relied on any other information given or representations, warranties or statements made by the Bookrunners or the Company and neither the Bookrunners nor the Company will be liable for its decision to accept an invitation to participate in the Placing based on any other information, representation, warranty or statement. It further acknowledges and agrees that it has relied on its own investigation of the business, financial or other position of the Company in deciding to participate in the Placing. None of the Bookrunners, the Company or any of their respective affiliates has made any representations to it, express or implied, with respect to the Company, the Placing and the Placing Shares or the accuracy, completeness or adequacy of the Exchange Information, and each of them expressly disclaims any liability in respect thereof. Nothing in this paragraph or otherwise in this announcement excludes the liability of any person for fraudulent misrepresentation made by that person;
h) that it has complied with its obligations under the Criminal Justice Act 1993, section 118 of FSMA and in connection with money laundering and terrorist financing under the Proceeds of Crime Act 2002 (as amended), the Terrorism Act 2000, the Terrorism Act 2006, the Money Laundering Regulations 2007 and the Money Laundering Sourcebook of the FCA (the "Money Laundering Regulations") and, if making payment on behalf of a third party, that satisfactory evidence has been obtained and recorded by it to verify the identity of the third party as required by the Regulations;
i) that it is acting as principal only in respect of the Placing or, if it is acting for any other person: (i) it is duly authorised to do so and has full power to make the acknowledgments, representations and agreements herein on behalf of each such person; and (ii) it is and will remain liable to the Company and/or the Bookrunners for the performance of all its obligations as a Placee in respect of the Placing (regardless of the fact that it is acting for another person);
j) if it is a financial intermediary, as that term is used in Article 3(2) of the EU Prospectus Directive (which shall mean Directive 2003/71/EC and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), that the Placing Shares subscribed by it in the Placing will not be acquired on a non-discretionary basis on behalf of, nor will they be acquired with a view to their offer or resale to, persons in a member state of the EEA other than qualified investors, or in circumstances in which the prior consent of the Bookrunners has been given to the proposed offer or resale;
k) that it has not offered or sold and will not offer or sell any Placing Shares to the public in any member state of the EEA except in circumstances falling within Article 3(2) of the Prospectus Directive which do not result in any requirement for the publication of a prospectus pursuant to Article 3 of that Directive;
l) that it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) relating to the Placing Shares in circumstances in which section 21(1) of FSMA does not require approval of the communication by an authorised person;
m) that it has complied with and will comply with all applicable provisions of FSMA with respect to anything done by it in relation to the Placing Shares in, from or otherwise involving, the United Kingdom;
n) if in a member state of the EEA, unless otherwise specifically agreed with the Bookrunners in writing, that it is a "qualified investor" within the meaning of Article 2(1)(e) of the Prospectus Directive;
o) if in the United Kingdom, that it is a person (i) having professional experience in matters relating to investments who falls within the definition of "investment professionals" in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or (ii) who falls within Article 49(2)(a) to (d) ("High Net Worth Companies, Unincorporated Associations, etc") of the Order, or (iii) to whom this announcement may otherwise lawfully be communicated;
p) that no action has been or will be taken by either the Company or the Bookrunners or any person acting on behalf of the Company or the Bookrunners that would, or is intended to, permit a public offer of the Placing Shares in any country or jurisdiction where any such action for that purpose is required;
q) that it and any person acting on its behalf is entitled to acquire the Placing Shares under the laws of all relevant jurisdictions which apply to it and that it has fully observed such laws and obtained all such governmental and other guarantees, permits, authorisations, approvals and consents which may be required thereunder and complied with all necessary formalities and that it has not taken any action or omitted to take any action which will or may result in the Bookrunners, the Company or any of their respective directors, officers, agents, employees or advisers acting in breach of the legal or regulatory requirements of any jurisdiction in connection with the Placing;
r) that it has all necessary capacity and has obtained all necessary consents and authorities to enable it to commit to its Placing Participation and to perform its obligations in relation thereto (including, without limitation, in the case of any person on whose behalf it is acting, all necessary consents and authorities to agree to the terms set out or referred to in this announcement) and will honour such obligations;
s) that it and any person acting on its behalf will make payment for the Placing Shares allocated to it in accordance with this announcement on the due time and date set out herein, failing which the relevant Placing Shares may be placed with other subscribers or sold as the Bookrunners may in their absolute discretion determine and without liability to it;
t) that its allocation (if any) of Placing Shares will represent a maximum number of Placing Shares to which it will be entitled, and required, to subscribe for, and that the Bookrunners or the Company may call upon it to subscribe for a lower number of Placing Shares (if any), but in no event in aggregate more than the aforementioned maximum;
u) that the person whom it specifies for registration as holder of the Placing Shares will be (i) itself or (ii) its nominee, as the case may be. Neither the Bookrunners nor the Company will be responsible for any liability to stamp duty or stamp duty reserve tax resulting from a failure to observe this requirement. It and any person acting on its behalf agrees to indemnify the Company and the Bookrunners in respect of the same on the basis that the Placing Shares will be allotted to the CREST stock account of the relevant Bookrunner who will hold them as nominee on its behalf until settlement in accordance with standing settlement instructions;
v) that neither the Bookrunners, nor any of their affiliates, nor any person acting on their behalf, is making any recommendations to it or, advising it regarding the suitability of any transactions it may enter into in connection with the Placing and that participation in the Placing is on the basis that it is not and will not be a client of either of the Bookrunners and that the Bookrunners do not have any duties or responsibilities to it for providing the protections afforded to their clients or customers or for providing advice in relation to the Placing nor in respect of any representations, warranties, undertakings or indemnities contained in the Placing Agreement nor for the exercise or performance of any of its rights and obligations thereunder including any rights to waive or vary any conditions or exercise any termination right;
w) that in making any decision to subscribe for the Placing Shares, it has knowledge and experience in financial, business and international investment matters as is required to evaluate the merits and risks of subscribing for or purchasing the Placing Shares. It further confirms that it is experienced in investing in securities of this nature in this sector and is aware that it may be required to bear, and is able to bear, the economic risk of participating in, and are able to sustain a complete loss in connection with, the Placing. It further confirms that it relied on its own examination and due diligence of the Company and its associates taken as a whole, and the terms of the Placing, including the merits and risks involved, and not upon any view expressed or information provided by or on behalf of the Bookrunners;
x) that in connection with the Placing, each of the Bookrunners and any of their affiliates acting as an investor for its own account may take up Placing Shares in the Company and in that capacity may retain, purchase or sell for its own account such Placing Shares in the Company and any securities of the Company or related investments and may offer or sell such securities or other investments otherwise than in connection with the Placing. The Bookrunners do not intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligation to do so;
y) that these terms and conditions and any agreements entered into by it pursuant to these terms and conditions and any non-contractual obligations arising out of or in connection with such agreements shall be governed by and construed in accordance with the laws of England and Wales and it submits, on its own behalf and on behalf of any person on whose behalf it is acting, to the exclusive jurisdiction of the English courts as regards any claim, dispute or matter arising out of any such contract, except that enforcement proceedings in respect of the obligation to make payment for the Placing Shares (together with any interest chargeable thereon) may be taken by the Company or the Bookrunners in any jurisdiction in which it is incorporated or in which any of its securities have a quotation on a recognised stock exchange;
z) that the Company, the Bookrunners and their respective affiliates and others will rely upon the truth and accuracy of the representations, warranties and acknowledgements set forth herein and which are given to the Bookrunners on their own behalf and on behalf of the Company and are irrevocable and it irrevocably authorises the Company and the Bookrunners to produce this announcement, pursuant to, in connection with, or as may be required by any applicable law or regulation, administrative or legal proceeding or official inquiry with respect to the matters set forth herein; and
aa) that it will indemnify and hold the Company and the Bookrunners and their respective affiliates harmless from any and all costs, claims, liabilities and expenses (including legal fees and expenses) arising out of or in connection with any breach of the representations, warranties, acknowledgements, agreements and undertakings in this announcement and further agrees that the provisions of this announcement shall survive after completion of the Placing.
By participating in the Placing, each Placee (and any person acting on the Placee's behalf) subscribing for Placing Shares acknowledges that: (i) the Placing Shares are being offered and sold only pursuant to Regulation S under the Securities Act, or another exemption from the registration requirements of the Securities Act, in a transaction not involving a public offering of securities in the United States and the Placing Shares have not been and will not be registered under the Securities Act; and (ii) the offer and sale of the Placing Shares to it has been made outside of the United States in an "offshore transaction" (as such term is defined in Regulation S under the Securities Act) and it is outside of the United States during any offer or sale of Placing Shares to it.
Please also note that the agreement to allot and issue Placing Shares to Placees (or the persons for whom Placees are contracting as agent) free of stamp duty and stamp duty reserve tax in the UK relates only to their allotment and issue to Placees, or such persons as they nominate as their agents, direct from the Company for the Placing Shares in question. The Company and the Bookrunners are not liable to bear any transfer taxes that arise on a sale of Placing Shares subsequent to their acquisition by Placees or for transfer taxes arising otherwise than under the laws of the United Kingdom. Each Placee should, therefore, take its own advice as to whether any such transfer tax liability arises. Furthermore, each Placee agrees to indemnify on an after-tax basis and hold the Bookrunners and/or the Company and their respective affiliates harmless from any and all interest, fines or penalties in relation to stamp duty, stamp duty reserve tax and all other similar duties or taxes to the extent that such interest, fines or penalties arise from the unreasonable default or delay of that Placee or its agent.
Each Placee and any person acting on behalf of each Placee acknowledges and agrees that the Bookrunners or any of their respective affiliates may, at their absolute discretion, agree to become a Placee in respect of some or all of the Placing Shares.
When a Placee or person acting on behalf of the Placee is dealing with any of the Bookrunners, any money held in an account with the relevant Bookrunner on behalf of the Placee and/or any person acting on behalf of the Placee will not be treated as client money within the meaning of the rules and regulations of the FCA made under FSMA. The Placee acknowledges that the money will not be subject to the protections conferred by the client money rules; as a consequence, this money will not be segregated from the relevant Bookrunner's money in accordance with the client money rules and will be used by the relevant Bookrunner in the course of its own business; and the Placee will rank only as a general creditor of the relevant Bookrunner.
All times and dates in this announcement may be subject to amendment. The Bookrunners shall notify the Placees and any person acting on behalf of the Placees of any changes.
Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser.