Embargoed Release: 07:00hrs Friday 16 May 2008
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR
INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR THE REPUBLIC OF SOUTH
AFRICA OR ANY JURISDICTION IN WHICH SUCH PUBLICATION IS UNLAWFUL.
Block Shield Corporation plc
("Block Shield" or the "Company")
Proposed acquisition of Mu-Gahat Holdings Inc, proposed placing of 12,578,791
new Ordinary Shares (the "Placing Shares") at 33p per share
(the "Placing Price") (together the "Proposals"),
and Notice of General Meeting
Block Shield Corporation plc, the provider of innovative electronic components
and processes utilised in electromagnetic compatibility (`EMC') and Radio
Frequency Identification (`RFID') applications, is pleased to announce it has
conditionally agreed to acquire the entire issued share capital of Mu-Gahat
Holdings Inc ("Mu-Gahat"), a developer and producer of custom RFID and gaming
technology solutions, for a total consideration of 29,605,263 ordinary shares
at the Placing Price (the "Consideration Shares") in Block Shield (the
"Acquisition"), which represents 39 per cent. of the issued share capital of
the Company as enlarged by the Consideration Shares and the Placing Shares (the
"Enlarged Share Capital").
The Acquisition combines and broadens Block Shield's technology portfolio,
enabling the Company to provide end-to-end RFID solutions through to the
delivery of highly cost effective and high volume applications. It is proposed
that Edwin Oh, currently a director of Mu-Gahat, will join the Board of Block
Shield as chief executive officer.
In addition, in order to fund the working capital requirements of the group as
enlarged by the Acquisition (the "Enlarged Group"), it is proposing to raise �
4,151,001 (before expenses) through a placing (the "Placing") of 12,578,791 new
Ordinary Shares at the Placing Price which includes the application of �1.5
million of existing loans by Cloverleaf Holdings Limited ("Cloverleaf
Holdings"). Ambrian Partners Limited ("Ambrian") has agreed, as agent for the
Company, to use its reasonable endeavours to procure subscribers for the
Placing Shares
The Proposals are conditional, inter alia upon shareholders passing certain
resolutions and upon the Consideration Shares and the Placing Shares being
admitted to trading on AIM ("Admission"). Details regarding the General Meeting
are set out further in the announcement under the heading "General Meeting" and
in the Circular to shareholders of Block Shield (the "Shareholders") to be
dispatched shortly.
Gary Koos, acting chief executive officer of Block Shield, commented:
"The proposed acquisition of Mu-Gahat by Block Shield represents the progress
the Company has made towards delivering a complete RFID solution to meet
customers' demands. By merging the two highly complementary businesses, Block
Shield will be able to offer a broadened suite of products and services and
will be placed in a prime position to exploit new opportunities in a wider
range of sectors including the gaming industry."
For further information contact:
Block Shield Corporation Plc +1 408 830 5100
Gary Koos, Acting Chief Executive Officer
Hansard Group 020 7245 1100
Vikki Krause
Ambrian Partners Limited 020 7634 4711
Tim Goodman
Transaction Overview
Block Shield creates highly specialised, low-cost electronic components
utilising its radio frequency expertise and proprietary vacuum deposition
solutions and focuses on three key markets: EMC; RFID; and the sale of process
equipment.
In late 2007 Block Shield commercialised its first proprietary high volume RFID
manufacturing module, the Dedivol. This completed more than three years of
research and development towards a potentially market-leading high volume RFID
solution. Dedivol is capable of producing over 200 million individual RFID
inlays per annum.
The Company's R&D and industrialisation programme is now complete and it is
focussed on increasing sales and marketing, across EMC and RFID markets, in
order to achieve the growth in sales necessary for the Company to achieve
critical mass and become cash flow positive.
The proposed acquisition of Mu-Gahat assists in achieving these goals by
acquiring:
* complementary technology that addresses RFID customer needs today;
* the capability to migrate customers to high volume Dedivol manufacturing
module over time;
* a dedicated Native American sales channel enabling Block Shield to provide
RFID solutions to the fast growing Native American gaming market; and
* an experienced, synergistic and highly motivated management team.
Information on Mu-Gahat
Mu-Gahat is a developer of low volume, custom RFID inlays for application
development and smaller volume programmes. The Company believes that the
Enlarged Group will be well positioned against the competitive landscape, given
the complementary nature of Mu-Gahat and Block Shield, which operates in the
high volume, low cost RFID market segment.
The Directors believe that most competitors are focused on eventual high volume
market solutions and are ignoring the current development needs of the
customer. Furthermore, the Directors believe that Mu-Gahat has innovative
technology to allow the Company to effectively address immediate customer RFID
needs.
Mu-Gahat's business comprises three main segments: custom RFID inlays, RFID
gaming systems and printed electronics.
1) Custom RFID: Mu-Gahat provides prototyping products and services for rapid
RFID deployment including custom UHF antennae and inlays made from aluminium
and copper. Mu-Gahat uses a proprietary, environmentally-friendly, software
controlled dry laser ablation process. Mu-Gahat provides pilot RFID production
runs from 150 to 2 million inlays. This production flexibility allows customers
to run field trial validations before committing to large scale ramp ups.
Although the RFID market has developed more slowly than anticipated, it is
apparent that a mass market is now emerging. Customers are, however, hesitant
to immediately purchase equipment that requires significant capital outlay. In
addition, customers require assistance in developing custom RFID solutions that
apply to their particular needs as well as desiring a seamless migratory path
providing a high volume solution. The proposed Acquisition will assist the
Company in addressing these customer needs.
2) RFID gaming systems: Mu-Gahat is developing a patent pending RFID casino
gaming chip and playing card system that provides casinos protection against
fraud and counterfeiting, maximises player tracking efficiency and reduces
floor operation costs. This system seeks to address the technical and accuracy
based limitations of existing optical and RFID solutions for the gaming
industry.
3) Printed electronics: Mu-Gahat's research and development in laser
patterning, metallised polymer substrates and roll-to-roll processing has
resulted in enabling applicable technologies to manufacture printed electronics
(of which RFID is a partial example). These technologies help position it for
the next generation of electronics. This is likely to include flexible
circuitry, passive printed electronics and active printed electronics.
Currently, Mu-Gahat has seven patent applications on file with respect to laser
ablation patterning and ten patent applications on file relating to RFID gaming
solutions.
Under the proposed Acquisition, Block Shield is to acquire Mu-Gahat, including
all of its intellectual property and Mu-Gahat's right to call for the transfer
of the majority of the management team currently working for Mu-Gahat
Enterprises ("Enterprises"). Enterprises was founded in mid 2006 with the
primary purpose of selling RFID equipment, product and applications to Native
American customers. Mu-Gahat was subsequently established in late 2007 to
finance Enterprises and to acquire the breakthrough photonic custom RFID and
gaming technologies developed by Enterprises. Post Acquisition, Enterprises
will be a contract manufacturer producing RFID inlays under license from Block
Shield. In addition, Enterprises will be a dedicated Native American sales
channel whereby it markets to customers' RFID inlays and gaming solutions
manufactured under license from Block Shield.
Strategy and Acquisition Rationale
Although not uncommon when dealing with potentially large but emerging
technology markets, the RFID market has taken longer to develop than industry
expectation. To date, the industry has been hampered by several issues,
including: (i) a lack of industry agreed technical standards; (ii) the high
unit cost of tags; (iii) an inability to manufacture (cost effective)
prototypes for application development; and (iv) a fragmented supply chain for
integrated deployments.
As the industry is now accepting standardisation through the adoption of EPC
Gen 2 standards, the unit cost of tags is decreasing and there is more
widespread adoption of cost effective prototyping and development processes,
such as that developed by Mu-Gahat, the Directors believe that the RFID market
is poised to grow rapidly. This view is supported by leading industry research
highlighting that the RFID market grew by more than 70 per cent. last year on a
unit volume basis and it is expected to grow at a compound annual growth rate
of approximately 80 per cent. per annum for the next 10 years.
The Directors expect that the Enlarged Group will be better positioned to
address the RFID needs of its existing and potential customers as the mass RFID
market emerges.
The Directors believe that the Acquisition:
* broadens Block Shield's technology portfolio and enables it to more
effectively address the low volume/high margin custom RFID markets;
* provides an end-to-end solution from engineering and design in partnership
with our customers using the Mu-Gahat laser technology through to
delivering a highly cost effective and high volume application solution
using Block Shield's Dedivol technology;
* increases the depth, market penetration and geographic focus of the Company
and its products;
* provides the Company with a path to HF RFID commercialisation - beyond the
reach of Block Shield's existing technology;
* enables the Company to acquire the intellectual property and emerging
technology expertise including, but not limited to, large market
applications beyond traditional RFID (such as gaming and printed
electronics);
* enables the Company to access a dedicated Native American sales channel
which enables the provision of RFID solutions to the fast growing Native
American gaming market; and
* brings an experienced, synergistic and highly motivated management team to
the Company. Due to the complementary nature of the two organisations and
their teams, the Directors do not expect significant headcount reduction
synergies, but anticipate that the Enlarged Group will be able to
rationalise its facilities, general and administrative overhead and
research and development costs.
Principal terms of the Acquisition
Under the terms of an agreement entered into today (the "Acquisition
Agreement") between the Company and the shareholders of Mu-Gahat (the
"Vendors"), the Company has conditionally agreed to purchase the entire issued
share capital of Mu-Gahat for a consideration of �9,769,737 to be satisfied by
the issue to the Vendors of 29,605,263 Consideration Shares credited as fully
paid at the placing price, which will represent approximately 39 per cent. of
the enlarged share capital. Approximately nine per cent. of the Consideration
Shares will be issued to Vendors who are the founders and management of
Mu-Gahat and will be subject to vesting provisions whereby such Consideration
Shares will vest in tranches over a period of three years. If such a Vendor
ceases to be employed by any member of the Enlarged Group or Enterprises, in
certain circumstances such Vendor will be required to offer any unvested
Consideration Shares for sale to the Company (or an entity nominated by the
Company) for a nominal consideration. Under the terms of the Acquisition
Agreement various warranties and indemnities have been given by certain of the
Vendors in favour of the Company. In addition certain of the Vendors who are
involved in the management of Mu-Gahat or Enterprises have given certain
limited restrictive covenants in favour of the Company.
The Vendors will be subject to a six month lock up on the disposal of their
Consideration Shares following Admission without the Board's prior consent and
thereafter will be subject to certain ongoing orderly market provisions.
The Vendors include the founders and management of Mu-Gahat as well as early
stage financial sponsors and later stage equity investors in the company.
Details of the resultant shareholdings of the largest Vendors in the enlarged
share capital are set out below under the heading "Significant Shareholders".
Cloverleaf Ventures LLC ("Cloverleaf Ventures") an entity ultimately controlled
by Cloverleaf Holdings (which is an entity connected with Michael Fitzgerald,
the Chairman of Block Shield and a 32 per cent. Shareholder in the Company)
owns 5 per cent. of the issued share capital of Mu-Gahat. As the Acquisition
therefore involves the acquisition of a substantial non cash asset from an
entity connected with a director of the Company, the Acquisition will require
the approval of Shareholders for the purposes of section 190 of the Companies
Act 2006 (the "2006 Act") and accordingly an ordinary resolution will be
proposed at the General Meeting for this purpose.
Completion of the Acquisition is conditional, inter alia, upon the passing of
the resolutions, completion of the Placing, and Admission occurring on or
before 13 June 2008.
As the central place of management and control of the Company is outside the
United Kingdom (the "UK"), the Company does not fall within paragraph 3(a)(ii)
of the introduction to the City Code on Takeovers and Mergers (the "City
Code"). The UK Panel on Takeovers and Mergers has therefore confirmed that the
Company is not subject to the provisions of the City Code and notwithstanding
the fact that, following completion of the Acquisition, the Vendors will in
aggregate hold 40,700,419 ordinary shares (representing approximately 53.63 per
cent. of the Enlarged Share Capital), they are not required to make a general
offer for the Company pursuant to Rule 9 of the City Code.
Following completion of the Acquisition and the board changes outlined below,
the main business of the Company will continue to be located outside the UK,
board meetings will continue to be held outside the UK and all of the Board
will be resident outside the UK. Therefore the central place of management and
control of the Company will continue to be outside the UK and accordingly the
City Code will continue to not be applicable to the Company whilst this is the
case and shareholders will not be afforded any protections under the City Code.
Board and Management Changes
It was announced on 2 May 2008 that Pier Antoniucci had stepped down as chief
executive officer of the Company due to personal health reasons. Gary Koos, the
chief financial officer of Block Shield was appointed an executive director of
the Company on 13th May 2008. Upon completion of the Acquisition it is
anticipated that Edwin Oh of Mu-Gahat will join the Board as chief executive
officer. In addition David Whelan will join the Board as non-executive vice
chairman.
Edwin Oh (age 46) Proposed Chief Executive Officer
Ed is a director of Mu-Gahat and currently president/COO of Mu-Gahat
Enterprises, LLC, with a background in high tech marketing and
commercialisation. Prior to Mu-Gahat, Ed was CEO of the Luxtron Corporation, a
maker of fibre optic temperature measurement systems for semiconductor, medical
and military applications, and vice-president of marketing at OK International,
a maker of production equipment to the electronics manufacturing industry. He
has an MBA. and MS. in chemical engineering from Stanford University and S.B.
degrees in chemical engineering and chemistry from MIT.
David Mark Whelan (age 34) Proposed Non-Executive Vice Chairman
David is the managing partner of the Cloverleaf Group, a privately held
investment firm which is primarily focussed on venture capital and private
equity investment opportunities in the healthcare, life sciences and
breakthrough technology sectors. Prior to joining the Cloverleaf Group in 2006,
David was vice president of corporate development at the Virgin Group in the US
and the UK and was previously an investment banker with Goldman Sachs & Company
and before that Deutsche Bank.
The Placing
The Company is proposing to raise approximately �4,151,001 through a Placing by
Ambrian of 12,578,791 Placing Shares. This includes the application of �
1,500,000 of existing unsecured loans which Cloverleaf Holdings has made to the
Company which will be applied to subscribe for 4,545,455 Placing Shares.
Cloverleaf Holdings is controlled by Michael Fitzgerald, the Chairman of Block
Shield, and his family. Accordingly the participation of Cloverleaf in the
Placing constitutes a related party transaction for the purposes of the AIM
Rules for Companies. The remaining placees comprise the Company's two other
largest shareholders, M&G Investments and Schroder Investment Management.
The net proceeds of the Placing will be used to purchase process equipment
inventory and fund the accelerated rollout of Mu-Gahat's RFID gaming
technology, to repay the balance of the outstanding loans from Cloverleaf
Holdings and related interest (totalling approximately �40,000)and for the
general working capital purposes of the Enlarged Group including increased
sales and marketing efforts.
Placing Agreement
The Company has entered into a placing agreement dated 16 May 2008 with Ambrian
(the "Placing Agreement") under the terms of which Ambrian has agreed, as agent
for the Company, to use its reasonable endeavours to procure placees for the
Placing Shares at the Placing Price. Completion of the Placing is conditional,
inter alia, upon the resolutions being passed, completion of the Acquisition
and Admission occurring on or before 13 June 2008 (or such later date as may be
agreed by Ambrian being not later than 17 July 2008). The Placing Agreement
contains provisions entitling Ambrian to terminate the placing agreement at any
time prior to Admission in certain circumstances to include the occurrence of
certain events which are deemed to constitute force majeure. Ambrian will be
paid a corporate finance fee together with commissions in respect of the
placing shares other than those issued to Cloverleaf Holdings.
The Placing Shares will represent 17 per cent. of the Enlarged Share Capital
and will rank pari passu with the Consideration Shares and existing Ordinary
Shares.
Significant Shareholders
Save as otherwise disclosed as at the date of this announcement and immediately
following Admission, so far as the Directors are aware, the following persons
are or will have, directly or indirectly, an interest in three per cent. or
more of the voting rights of the Company which is notifiable to the Company
under the Disclosure and Transparency Rules:
As at the date of this On Admission
announcement
Number of Percentage Number of Percentage of
Ordinary of Existing Ordinary Enlarged
Shares Share Shares Issued Share
Capital Capital
Name
Cloverleaf Holdings 10,900,279 32.8% 16,948,921 22.3%
Limited
Talbot Investments 0 0 14,864,847 19.6%
Limited
M&G Investments 4,990,165 14.8% 11,363,937 14.9%
Narawally Investments 0 0 7,318,849 9.6%
Limited
Schroder Investment 4,363,333 12.9% 6,022,897 7.9%
Management
Fidelity Investments 1,297,700 3.8% 1,297,700 1.7%
New Star Asset Management 1,250,000 3.7% 1,250,000 1.6%
Facility Arrangements
Conditional upon Admission, Cloverleaf Holdings has agreed by way of a
supplemental facility letter ("Supplemental Facility") with the Company dated
16 May 2008 to extend the terms of its $5 million facility agreement with the
Company from 31 December 2008 until 31 December 2009. Pursuant to the terms of
the Supplemental Facility, the Company has agreed to pay Cloverleaf Holdings an
arrangement fee of 2.5 per cent. of the facility amount. The facility will also
become repayable in the event Cloverleaf Holdings' shareholding in the Company
falls below 15 per cent. As described above, due to the interests of Michael
Fitzgerald in Cloverleaf Holdings, the entering into of the Supplemental
Facility constitutes a related party transaction for the purposes of the AIM
Rules for Companies.
Current Trading
As summarised in our Trading Update dated 4 March 2008, the Company continued
to expand both its EMC and RFID businesses, particularly in Asia, during the
year ended 29 February 2008, some of the highlights of which include the
following:
* commercialisation and sale of our first proprietary high volume RFID
manufacturing module - the Dedivol - completing more than three years of
research and development. The first Dedivol was sold to our existing Asian
EMC customer, the Hyundai RFmon Corporation("RFmon");
* signing of joint venture M.O.U.s with PolyPlas in Malaysia and SinoStar in
Taiwan to establish Asian based partnerships, similar to that established
with RFmon;
* exclusive distribution contract signed with the Basch Corporation in China,
a leading distributor of manufacturing equipment to the printing industry
and to the RFID industry, providing the Company with a significant sales
channel into the rapidly growing Chinese RFID market;
* securing multi-year, multi-million dollar, EMC contracts with Microsun and
EF Johnson - subcontractors to US government military programmes - awarded
in part due to our proprietary EMC solutions; and
* establishment of our dedicated EMC facility in Shanghai, China enabling the
local fulfilment of contracts recently secured with manufacturers including
Radiospire and Intel.
There have been disappointments during the current year as well. EMC revenues
experienced a decline, due to a slowdown in the US based medical devices
market, which represents a significant portion of our existing US based EMC
product order book. Whilst all our major contracts remain in place, order flow
from them decreased in the period. Newly secured contracts will significantly
bolster our pipeline, but have not yet increased to a level sufficient to
compensate for the decline in orders from embedded clients.
The Company is due to announce its audited preliminary results for the year
ended 29 February 2008 during the first half of June. The Board expects the
Company to report that revenues for the year ended will be approximately $7.95
million (2007: $10.57 million). Sales and marketing and general administrative
and research and development expenses are approximately $7.1 million, prior to
stock option expenses (2007: $7.1 million) leading to a loss on operating
activities before taxation and before stock option expenses of $3.7 million
(2007: $2.42 million). At 29 February 2008, the Company had a small net cash
balance and had drawn down approximately $3 million under the $5 million loan
facility made available by Cloverleaf Holdings. All these figures are currently
the subject of the audit review by the Company's auditors and therefore remain
unaudited but are not expected by the Board to change materially.
General Meeting
The General Meeting has been convened for 11 am on 9 June 2008 at the offices
of Lawrence Graham LLP, 4 More London Riverside, London SE1 2AU. The following
resolutions will be proposed:
* to approve the Acquisition for the purposes of section 190 of the 2006 Act;
* to increase the authorised share capital of the Company from �750,000 to �
1,050,000 by the creation of an additional 30 million new Ordinary Shares;
* in addition to their existing authority, to authorise the Directors
pursuant to section 80(1) of the Companies Act 1985 to allot relevant
securities up to an aggregate nominal amount of �300,000; and
* in addition to their existing authority, to disapply statutory pre-emption
rights pursuant to rights issues and other pre-emptive offers and, in
addition, up to a maximum aggregate nominal amount of �300,000. The
Proposals are not conditional upon the passing of this resolution as the
Company has suf*cient existing authority for these purposes.
Following completion of the Proposals, the issued share capital of the Company
is anticipated to comprise 75,891,926 Ordinary Shares with existing options and
warrants over an additional 2,286,785 Ordinary Shares. Pursuant to the proposed
resolutions, following Admission the Directors will have the ability to allot
relevant securities (for cash or otherwise) over the then remaining unissued
share capital of the Company (representing approximately 34 per cent of the
Enlarged Share Capital).
Resolutions 1 to 3 above will be proposed as ordinary resolutions and
resolution 4 will be proposed as a special resolution.
The Acquisition and the Placing are conditional, inter alia, upon the passing
of the resolutions and therefore if any of them is not approved by the
Shareholders neither the Acquisition nor the Placing will be completed.
Voting intentions
Shareholders and Directors who hold in aggregate 21,012,240 of the existing
issued Ordinary Shares (representing 62.34 per cent. of the existing issued
share capital of the Company) have indicated to the Company that they intend to
vote in favour of all the resolutions. These include Cloverleaf Holdings which
holds 10,900,279 Ordinary Shares.
Recommendation
The Directors (other than Michael Fitzgerald due to his relationship with
Cloverleaf Ventures and Cloverleaf Holdings) (the "Independent Directors")
consider, having consulted with the Company's nominated adviser Ambrian, that
the terms of the participation of Cloverleaf Holdings in the Placing and
Supplemental Facility are fair and reasonable insofar as its Shareholders are
concerned. In providing advice to the Independent Directors, Ambrian has taken
into account the commercial assessments of the Independent Directors. The
Independent Directors consider that the Acquisition is in the best interests of
Shareholders as a whole.
Accordingly, the Independent Directors unanimously recommend Shareholders to
vote in favour of all the resolutions as they themselves intend to do so in
respect of their own beneficial holdings which amount in aggregate to 758,463
Ordinary Shares representing approximately 2.25 per cent. of the existing
ordinary shares.
Ambrian, which is authorised and regulated by the Financial Services Authority,
is acting for the Company as Nominated Adviser and Broker for the purpose of
the AIM Rules in connection with the Placing and is not acting for any person
other than the Company and will not be responsible to any person other than the
Company for providing the protections afforded to its customers or for
providing advice to any other person in connection with the Placing or the
contents of this document.
This announcement is for information purposes only and does not constitute an
offer or invitation to acquire or dispose of any securities or investment
advice in any jurisdiction.
The information contained in this announcement is not for release, publication
or distribution, directly or indirectly, to persons in the United States,
Australia, Canada, Japan or the Republic of South Africa or in any jurisdiction
in which such publication or distribution is unlawful. The Placing Shares have
not been and will not be registered under the United States Securities Act of
1933, as amended, or under the laws of any state of the United States. This
announcement does not constitute an offer to sell or issue, or the solicitation
of an offer to buy or subscribe for, securities in the United States,
Australia,
Canada, Japan or the Republic of South Africa or in any jurisdiction in which
such offer or solicitation is unlawful and should not be relied upon in
connection with any decision to acquire Placing Shares or other securities in
the capital of the Company. There will be no public offer of Placing Shares in
the United Kingdom or elsewhere.
END
Block Shield (LSE:BLS)
Gráfico Histórico do Ativo
De Mai 2024 até Jun 2024
Block Shield (LSE:BLS)
Gráfico Histórico do Ativo
De Jun 2023 até Jun 2024
