CTNO Cantono

    RNS Number : 2132F
  Cantono PLC
  07 October 2008
   


    Cantono PLC ("Cantono" or the "Company")
    7 October 2008

    Circular posted to Shareholders

    The Company is pleased to announce that it posted a circular to shareholders yesterday to convene a General Meeting (the "GM") of
shareholders on 29 October 2008. The purpose of the GM is to seek shareholder authority to implement a capital reorganisation of the
Company's share capital, increase the authorised share capital and share capital authorities and make certain amendments to the Company's
articles of association. Key extracts of the circular are set out below:

    "Dear Sir/Madam,

    NOTICE OF GENERAL MEETING

    Introduction

    I am writing to you to advise you of a general meeting which is being convened for 29 October 2008. At the meeting your Board will be
seeking to obtain the flexibility to fund the business by increasing the Company's share capital and significantly increasing the
authorities that the Directors need in order to allot shares and to allot such shares free from the statutory pre-emption rights. 

    The Company needs to raise funds in the immediate short-term to finance capital expenditure and power sourcing commitments which the
Company has made and to further invest in its Data Centre business. 

    The Company is currently in discussions with a number of potential funders with a view to raising new capital for the business, which is
likely to involve the issue of new share capital.

    At present the Company has very limited headroom which would allow it to raise funds through an issue of shares. It is believed that the
significant costs, both financially and in terms of management time, of producing a full prospectus which would be required if the Company
were to offer all shareholders the opportunity to invest in the Company at this time, e.g. via a rights issue, are such that a
non-pre-emptive marketing of New Ordinary Shares or other financial instruments convertible into New Ordinary Shares with a limited number
of institutional investors is a more appropriate method of raising finance in this instance.

    The Company therefore now seeks from Shareholders the flexibility to raise finance by means of issuing new equity without pre-emption
for existing shareholders. At the General Meeting we will be seeking your approval of various resolutions to provide this flexibility.
Further details are provided below. 

    In addition, at the General Meeting, the Company will take the opportunity to adopt new articles of association in substitution for the
existing articles of association of the Company. A copy of the new articles with all the amendments highlighted is appended to the notice of
General Meeting and will be available for inspection at the place of the General Meeting for a period of 15 minutes prior to the start of
the meeting until the conclusion of the meeting. All of the changes to be made by the adoption of the new articles are to give effect to
various provisions of the Companies Act 2006 now in force, for example, to reflect new provisions relating to communication with
shareholders, the giving of notices and changes to meeting procedures in order to provide clarity for shareholders and those organising
meetings.

    In assessing the level of funds raised, and the terms on which such funds are raised, the Board will seek to negotiate the best
commercial terms available to it taking account of the current state of the equity market, the Company's funding requirement and the
willingness of investors to back the Company as an investment proposition. The amount of funds raised will be determined by the demand
received for the Company's new equity (or instruments convertible into equity), the cost of such investment, and the Board's assessment of
the benefit of the returns available from that investment versus the cost of the funding. 

    The Company is therefore seeking the authority to issue up to 2 billion shares for cash without first offering such shares to existing
Shareholders (assuming that the nominal value of an ordinary share is reduced from 20p to 1p). It is not anticipated that all of this
authority will be utilised in this Fundraising, however given the difficult state of the equity markets, it is not certain as to what terms
can be successfully negotiated, and consequently a significant degree of flexibility is sought. It is highly likely that any issue of New
Ordinary Shares in the Company will be highly dilutive to existing shareholders. If and to the extent that funds can be raised without the
need to utilise all of the headroom created by the passing of the resolutions sought at the General Meeting, that unused element will fall
away and the Directors will not be able to use that headroom for a further fundraising.

    Shareholders should be aware that the Company will be seeking to raise up to �10 million, given the ongoing operational and capital
requirements of the business, within the very near future. The Board remains confident, based on negotiations held to date, that this will
be achieved, although no agreement has been reached with potential funders as yet.

    Capital Reorganisation 

    The Company's share price is currently less than the 20p nominal value of an Ordinary Share. Accordingly, in order for the Company to
successfully complete a Fundraising, the Directors consider that the nominal value of each Ordinary Share needs to be reduced.  

    In light of the above, resolution 2 proposes that each Ordinary Share is converted into 1 New Ordinary Share and 1 New Deferred Share.
The New Deferred Shares shall rank pari passu with the existing Deferred Shares and it should be noted that no application will be made for
the New Deferred Shares to be admitted to trading on AIM or on any other recognised investment exchange.

    By effecting the reorganisation in this way, the Company's authorised share capital remains the same, although we are also seeking to
increase the authorised share capital by �10 million as part of this process.  At the date of this document there are 45,341,160 Deferred
Shares in issue. No application has been or will be made for the Deferred Shares to be admitted to trading on AIM or to any other recognised
investment exchange. The Deferred Shares were created as part of the capital reorganisation carried out by the Company in 2006 and it is
intended that the Company will exercise its right to purchase the Deferred Shares for �1 per holding thereof, utilising �26 of the proceeds
of the Fundraising in order to effect this. Following the Capital Reorganisation, there will be 29,045,255 New Deferred Shares in issue. It
is also intended that the Company will exercise its right to purchase the New Deferred Shares for �1 in aggregate, utilising �1 of the
proceeds of the Fundraising when it takes place.

    Pursuant to Resolution 3 it is proposed that every Deferred Share is converted into 9 New Ordinary Shares and every New Deferred Share
is converted into 19 New Ordinary Shares so that the Company's share capital only comprises New Ordinary Shares. This conversion, if
approved, will not take place until after the Deferred Shares and New Deferred Shares in issue have been purchased in the manner set out
above.

    Resolutions

    A notice convening the General Meeting to be held at the offices of Halliwells LLP, One Threadneedle Street, London EC2R 8AY at 10.00am
on 29 October 2008 is set out at the end of this document. At the General Meeting, the following Resolutions will be proposed:

    (1)    an ordinary resolution to increase the share capital of the Company from �17,500,000 to �27,500,000 by the creation of an
additional 50,000,000 Ordinary Shares;

    (2)    an ordinary resolution to sub-divide each existing Ordinary Share into 1 New Ordinary Share and 1 New Deferred Share;

    (3)    an ordinary resolution to convert and sub-divide every Deferred Share into 9 New Ordinary Shares and every New Deferred Share
into 19 New Ordinary Shares, such conversion and sub-division is only to take place following the purchase of the Deferred Shares and New
Deferred Shares described above;

    (4)    an ordinary resolution to authorise the Directors to allot relevant securities (as defined in section 80 of the Act), inter alia,
for the purposes of the Fundraising;

    (5)    a special resolution to allow the Directors, subject to the limits set out in that resolution, to issue New Ordinary Shares for
cash on a non pre-emptive basis, including a specific authority to allot New Ordinary Shares under the Fundraising; and

    (6)    a special resolution to adopt new articles of association of the Company to take account of, and to give effect to, various
provisions of the Companies Act 2006.

    Recommendation

    The Directors unanimously recommend Shareholders to vote in favour of the Resolutions at the General Meeting as they intend to do in
respect of their own beneficial holdings of 764,679 Ordinary Shares representing 2.63 per cent. of the issued Ordinary Shares at the date of
this document.

    Yours faithfully

    Michael Northall
    Chairman" 

    A copy of the circular is available on the Company's website.

    Contacts:

    Cantono PLC
    Eamus Halpin, Chief Executive              01895 444 420

    Brewin Dolphin Investment Banking
    Neil Baldwin, Director                          0845 270 8612








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