TIDMIDE
RNS Number : 0940C
IDE Group Holdings PLC
07 October 2022
IDE Group Holdings Plc
("IDE", the "Group" or the "Company")
Notice of Annual General Meeting and General Meeting
IDE, the mid-market network, cloud and IT Managed Services
provider, announces that the Notice of Annual General Meeting
("AGM"), Notice of General Meeting ("GM"), Circular's and Form of
Proxy's have today been posted to shareholders.
The Company's AGM and GM will be held on 2nd November 2022 at
the offices of finnCap, 1 Bartholomew Close, London EC1A 7BL at
10:00 a.m. and 10:30 a.m. respectively.
A copy of the Notice of AGM and GM can be found on the Company's
website at www.idegroup.com .
The GM Circular contains a Letter from the Chairman and
timetable of principal events which is set out below.
Contacts:
IDE Group Holdings Plc Tel: +44 (0)344 874
Andy Parker, Non-Executive Chairman 1000
finnCap Limited Tel: +44 (0)20 7220
Nominated Adviser and Broker 0500
Corporate finance: Jonny Franklin-Adams/ Abby
Kelly
ECM: Tim Redfern
Dear Shareholder
Proposed Conversion of Loan Notes, Capital Reorganisation and
Notice of General Meeting
1. Introduction and summary
I am writing in connection with proposals recommended by the
Board whereby the Company seeks to reduce its indebtedness through
the capitalisation of the majority of its outstanding loan notes
("LNs") of GBP25.5 million (including interest and fees), ("Loan
Note Conversion") together with an associated Capital
Reorganisation.
The Company currently has in issue 496,702,792 Ordinary Shares
with a nominal value of 2.5p each. The Company's current share
price, and the price at which the Loan Note Conversion is being
proposed, is below the current nominal value per Ordinary Share.
The Company is not permitted by law to issue shares below their
nominal value. Therefore, the Directors propose to reorganise the
Company's share capital so as to enable the Company to issue New
Ordinary Shares following the Capital Reorganisation (in connection
with the Loan Note Conversion and otherwise) at a price which is
both acceptable to the market and, as required by law, is at least
equal to the nominal value of such New Ordinary Shares. The steps
involved in the Capital Reorganisation are explained in more detail
in paragraph 3 below.
The purpose of this document is to explain the background to the
Capital Reorganisation and the Loan Note Conversion, why the
Directors unanimously consider this to be in the best interests of
the Company and Shareholders as a whole, and to seek Shareholders'
approval for the Capital Reorganisation and the Loan Note
Conversion.
Shareholders should note that, unless the Resolutions are all
approved at the GM, the Capital Reorganisation and the Loan Note
Conversion will not take place.
2. Background to and reasons for the Loan Note Conversion
As announced in a trading update by the Company on 27 January
2022, the Company has been exploring resolutions for the LNs as the
final stage of its restructuring, in order to reduce the Company's
indebtedness which it is hoped will allow the Company to grow
organically and possibly through acquisition should the right
accretive opportunities become available.
The Company does not have adequate cash resources to repay the
LNs and therefore, after exploring several options, the Board
believes that the Capital Reorganisation and Loan Note Conversion
is the best option available to the Company. Whilst the Loan Note
Conversion will result in MXC materially increasing their
percentage shareholding in the Company, MXC have confirmed to the
Company that they have no current intention in taking the Company
private. It is the Company's intention to expand the Board in order
to increase the expertise and broaden the depth of the Board.
Background to the LNs
Between January and March 2019 IDE raised approximately GBP10
million by way of an issue of secured loan notes in two tranches.
In January 2019, approximately GBP5.3 million of LNs were
subscribed for by existing shareholders of the Company, MXC, Funds
Managed by Kestrel and Richard Griffiths (formally held by Blake
Holdings, a company controlled by Richard Griffiths).
The second tranche of approximately GBP4.7 million of the LNs
(the "Second Tranche LNs") was made available to all other
shareholders by way of an open offer (the "Open Offer"). The Open
Offer was underwritten by MXC who further subscribed for
approximately GBP3.7 million of the Second Tranche LNs in March
2019 following uptake on the Open Offer from other shareholders of
approximately GBP1 million in February 2019.
To provide additional working capital for the Company, GBP1.5
million was raised in December 2019 through the issue of further
LNs, under the same terms as the LNs issued in January 2019, to
MXC, Richard Griffiths and Funds Managed by Kestrel.
In November 2021 further short term loan notes were created and
issued to MXC in the principal amount of GBP1 million with an
arrangement fee of 3.75 per cent and interest rate of 3 per cent
per month ("Short Term Loan Notes"). As the Short Term Loan Notes
were not repaid before 31 March 2022, per the loan agreement, the
Short Term Loan Notes persist on similar terms as the LNs issued in
December 2019 (as described above) and are secured on the same
terms as the outstanding LNs.
In summary, at the current date, the LNs (including the Short
Term Loan Notes) are held by the following holders in the following
principal amounts (excluding interest and fees):
Holder January, December 2019 November 2021 Total
February issue issue
and March
2019 issue
MXC GBP8,030,170 GBP1,231,800 GBP1,000,000 GBP10,261,970
--------------- -------------- -------------- --------------
Richard Griffiths GBP1,000,095 GBP150,000 0 GBP1,150,095
--------------- -------------- -------------- --------------
Funds Managed GBP903,289 GBP118,200 0 GBP1,021,489
by Kestrel
--------------- -------------- -------------- --------------
Other GBP86,496 0 0 GBP86,496
--------------- -------------- -------------- --------------
Total GBP10,020,050 GBP1,500,000 GBP1,000,000 GBP12,520,050
--------------- -------------- -------------- --------------
The LNs each have a term of six years (the "Term") such that
they are due for repayment in January and December 2025. The LNs
carry an annual coupon of between 12 per cent. and 20.3075 per
cent., which is rolled up, compounded annually and payable at the
end of the Term. The LNs carry an arrangement fee of between 2.5
per cent. and 3.75 per cent, payable at the end of Term
("Arrangement Fee"), and an exit fee of between 2.5 per cent. and
3.75 per cent, also payable at the end of the Term ("Exit
Fee").
Therefore, the resulting balance due to LN holders is summarised
below:
Holder Value of LNs
MXC GBP20,995,862
--------------
Richard Griffiths GBP2,326,893
--------------
Funds Managed GBP2,044,783
by Kestrel
--------------
Other GBP172,948
--------------
Total GBP25,540,486
--------------
Conversion of the Loan Notes
Following the Capital Reorganisation (described below) the
following is proposed in respect of the LNs:
1) the conversion of GBP20,995,862 existing secured LNs
(including interest and fees), held by MXC ("MXC LNs") at a rate
equivalent to 70 pence in the pound, into New Ordinary Shares at an
Assumed Share Price (as defined below) of GBP0.892 per New Ordinary
Share, ("MXC Conversion")); and
2) giving the option to LN holders (other than MXC) to do one of
the following: a) convert their LNs on the same terms as the MXC
Conversion; or b) making no change to their LNs.
MXC has irrevocably agreed to the MXC Conversion which is to be
effected, conditional upon the Resolutions being passed at the GM,
by MXC requesting repayment of (and the Company agreeing to repay)
all MXC LNs for an agreed sum (the "Redemption Sum"). It has been
agreed that the Redemption Sum will satisfy in full: (i) the
principal amount of all LNs to be repaid; (ii) interest accrued
from the inception of such LNs to May 2022 (interest accruing after
this date being waived); (iii) the full Exit Fee (which would
otherwise payable); and (iv) a partial waiver of 24 per cent. of
the Arrangement Fee (which would otherwise be payable in full). MXC
has irrevocably directed the Company to apply the Redemption Sum to
the payment up of 16,476,574 New Ordinary Shares at a notional
price of GBP0.892 per New Ordinary Share (the five day closing
market average price of an Ordinary Share between the 28th of
September 2022 and 5th of October 2022) multiplied by 100, which
arithmetically should equate to the price of a New Ordinary Share
following completion of the Capital Reorganisation, (the "Assumed
Share Price")). Based on the Assumed Share Price, the number of New
Ordinary Shares to be received by MXC on conversion of Redemption
Sum equates to 70p worth of New Ordinary Shares for every GBP1 of
the MXC LNs.
All LN holders will be offered the option to hold their LNs
until they are due for repayment in January or December 2025, or
convert into New Ordinary Shares on the same basis as the MXC
Conversion.
Funds Managed by Kestrel and Richard Griffiths have confirmed to
the Company they will not convert their LNs, which, together
represent approximately 96 per cent of the LNs not held by MXC.
3. Background and reasons for Capital Reorganisation
The Company currently has in issue 496,702,792 Ordinary Shares
with a nominal value of 2.5p each. The Company's current share
price, and the price at which the Loan Note Conversion is being
proposed, is below the current nominal value per Ordinary Share.
The Company is not permitted by law to issue shares below their
nominal value. Therefore, the Directors propose to reorganise the
Company's share capital so as to enable the Company to issue New
Ordinary Shares following the Capital Reorganisation at a price
which is both acceptable to the market and, as required by law, is
at least equal to the nominal value of such New Ordinary
Shares.
The Consolidation is being undertaken as the Company's Directors
and advisers consider the number of shares currently in issue to be
considerably higher than the majority of companies of a similar
size on AIM, which, when combined with the current share price of
approximately 1 pence per share, unduly affects investor perception
of the Company and volatility in its share price. Following
discussions with advisers on these factors, including a period of
monitoring of movements in the Company's share price, the Company
decided to take steps to consolidate its shares to a more
appropriate level.
The Board also believes that the Capital Reorganisation could
potentially improve the liquidity and marketability of the
Company's shares to a range of investors, including institutional
investors, through the creation of a higher price per Ordinary
Share.
The proposed Capital Reorganisation will consist of the
following steps:
1. the amendment of the Articles to set out the rights and
restrictions attaching to the Deferred Shares;
2. the sub-division of each Existing Ordinary Share into 2 new
shares - a Redenominated Ordinary Share of 0.01p and a Deferred
Share of 2.49p; and
3. every 100 Redenominated Ordinary Shares of 0.01p each will
then be consolidated into one New Ordinary Share of 1p each.
Step 1 - Amendment of the Articles
The Company will need to amend its Articles to set out the
rights and restrictions attaching to the Deferred Shares.
The Deferred Shares will not be admitted to trading on AIM (or
any other investment exchange). The Deferred Shares will have
limited rights and will be subject to the restrictions, as set out
in the Company's Articles, as amended by special resolution at the
General Meeting and as summarised below.
The Deferred Shares will not be transferable. The holders of the
Deferred Shares shall not, by virtue or in respect of their
holdings of Deferred Shares, have the right to receive notice of
any general meeting of the Company or the right to attend, speak or
vote at any such general meeting.
The Deferred Shares will not entitle their holders to receive
any dividend or other distribution. The Deferred Shares will on a
return of assets in a winding up entitle the holders only to the
repayment of GBP1.00 for the entire class of Deferred Shares.
The Company will have irrevocable authority at any time to
appoint any person to execute on behalf of the holders of the
Deferred Shares a transfer thereof and/or an agreement to the
transfer of the same to such persons as the Company may determine
or as the Company determines as custodian thereof, without making
any payment to the holders thereof, and/or consent to cancel the
same (in accordance with the provisions of the Act) without making
any payment to or obtaining the sanction of the holders
thereof.
The Company may, at its option at any time, purchase all or any
of the Deferred Shares then in issue, at a price not exceeding
GBP1.00 for each aggregate holding of Deferred Shares so
purchased.
The Directors consider the Deferred Shares, so created, to be of
no economic value.
Step 2 - Sub-Division
Every Existing Ordinary Share of 2.5p will be sub-divided into 1
Redenominated Ordinary Share of 0.01p and 1 Deferred Share of
2.49p.
Assuming an issued share capital immediately prior to the
General Meeting of 496,702,800 Ordinary Shares of 2.5p each
(following the issue of 8 Ordinary Shares as described in Step 3
below), this will result in 496,702,800 Redenominated Ordinary
Shares and 496,702,800 Deferred Shares being in issue immediately
following the Sub-Division. The Sub-Division of the Existing
Ordinary Shares will not, of itself, affect the value of any
shareholding, as the number of Redenominated Ordinary Shares held
by each Shareholder will be equal to the number of Ordinary Shares
held by each Shareholder immediately prior to the Sub-Division.
No share certificates will be issued in respect of either the
Redenominated Ordinary Shares, which will be consolidated by the
Company (see Step 3 below), or the Deferred Shares.
Step 3 - Consolidation
In order to reduce the number of Ordinary Shares in issue, the
Board is proposing that, immediately following the Sub-Division,
the Redenominated Ordinary Shares of 0.01p each are consolidated on
a 100-for-1 basis such that every 100 Redenominated Ordinary Shares
are consolidated and redesignated as 1 New Ordinary Share of
1p.
In anticipation of the Resolutions being passed by the
Shareholders, the Company will, immediately prior to the General
Meeting and Record Date, issue such number of additional Ordinary
Shares as will result in the total number of Ordinary Shares in
issue being exactly divisible by 100. On the assumption that no new
Ordinary Shares are issued between the date of this document and
immediately before the General Meeting, this will result in 8
additional Ordinary Shares being issued. These additional 8
Ordinary Shares will be issued to Rosaleen Herbert, Company
Secretary and as these additional Ordinary Shares will only
represent a fraction of a New Ordinary Share, this fraction will be
sold pursuant to the arrangements for fractional entitlements
detailed below.
No Shareholder will, pursuant to the Capital Reorganisation, be
entitled to receive a fraction of a New Ordinary Share. In the
event the number of Existing Ordinary Shares attributed to a
Shareholder is not exactly divisible by 100, the Consolidation will
generate an entitlement to a fraction of a New Ordinary Share. Such
fractional entitlements will be aggregated and sold on the open
market (see further explanation regarding fractional entitlements
below).
Accordingly, following the implementation of the Capital
Reorganisation, any Shareholder who, as a result of the
Consolidation, has a fractional entitlement to any New Ordinary
Share, will not have a resultant proportionate shareholding of New
Ordinary Shares exactly equal to their proportionate holding of
Existing Ordinary Shares.
Furthermore, any Shareholder who holds fewer than 100 Existing
Ordinary Shares as at the Record Date will cease to be a
Shareholder. The minimum threshold to receive New Ordinary Shares
will be 100 Existing Ordinary Shares.
Disposal of fractional entitlements
As set out above, the Consolidation will give rise to fractional
entitlements to a New Ordinary Share where any holding is not
precisely divisible by 100. As regards the New Ordinary Shares, no
certificates regarding fractional entitlements will be issued. Any
New Ordinary Shares in respect of which there are fractional
entitlements will be aggregated and sold in the market for the best
price reasonably obtainable on behalf of Shareholders entitled to
fractions (" Fractional Shareholders ").
As the net proceeds of sale due to a Fractional Shareholder are
expected to amount to less than GBP3.00, the Board is of the view
that, as a result of the disproportionate costs, it would not be in
the best interests of the Company to consolidate and distribute all
such proceeds of sale, which instead shall be donated to The
Prince's Trust, a charity registered with the Charities Commission
with Charity number 1079675 and which has been selected by the
Board in accordance with article 15 of the Articles.
For the avoidance of doubt, the Company is only responsible for
dealing with fractions arising on registered holdings. For
Shareholders whose shares are held in the nominee accounts of UK
stockbrokers, the effect of the Capital Reorganisation on their
individual shareholdings will be administered by the stockbroker or
nominee in whose account the relevant shares are held. The effect
is expected to be the same as for shareholdings registered in
beneficial names, however it is the stockbroker's or nominee's
responsibility to deal with fractions arising within their customer
accounts, and not the Company's.
Resulting Share Capital
The issued ordinary share capital of the Company immediately
following the Capital Reorganisation, assuming that it is approved
by the Shareholders and that no further Existing Ordinary Shares
are issued before the General Meeting, is expected to comprise
4,967,028 New Ordinary Shares.
The New Ordinary Shares arising upon implementation of the
Capital Reorganisation will have the same rights as the Existing
Ordinary Shares including voting, dividend and other rights.
Admission of the New Ordinary Shares to CREST
The Existing Ordinary Shares are currently admitted to CREST.
Application will be made for the simultaneous cancellation of the
Existing Ordinary Shares from CREST and admission of the New
Ordinary Shares to CREST (and admission to trading on AIM). The New
Ordinary Shares may thereafter be held and transferred by means of
CREST.
It is expected that those New Ordinary Shares which will arise
as a result of the Consolidation and Sub-Division of the Existing
Ordinary Shares and are held in uncerti cated form, i.e. in CREST,
will be credited to the relevant CREST accounts on 3 November 2022
and admitted to trading on AIM on the same day. De nitive share
certi cates in respect of those New Ordinary Shares which will be
held in certi cated form are expected to be despatched to the
relevant Shareholders on or around 17 November 2022. No temporary
documents of title will be issued. Any existing share certi cates
in respect of Existing Ordinary Shares will cease to be valid upon
the Record Date and, pending delivery of share certi cates in
respect of New Ordinary Shares, transfers will be certi ed against
the register.
The Record Date is close of business on the date of the GM,
being 2 November 2022.
The current ISIN [ GB00B4NJ4984]) and SEDOL ([B4NJ498] in
respect of the Company's Existing Ordinary Shares will be disabled
in CREST as at 6 p.m. on 2 November 2022. The ISIN code for the New
Ordinary Shares is GB00BN4M3M55 and the SEDOL number is BN4M3M5,
which will come into effect at 8a.m. on 3 November 2022.
4. Takeover Code
As a result of the Loan Note Conversion, MXC, an existing 34.8
per cent. shareholder in the Company, will have a maximum possible
shareholding of 18,204,685 shares or 83.8 per cent. of the
Company's voting rights at such time.
The Company has successfully applied, on behalf of MXC, for a
dispensation from making a mandatory offer under Rule 9 of the City
Code on Takeovers and Mergers (the " Code ") in relation to the
Loan Note Conversion. In accordance with Note 5(c) in the Notes on
Dispensations from Rule 9 of the Code, in the case of an issue of
new securities, independent shareholders holding shares carrying
more than 50% of the voting rights of the Company which would be
capable of being cast on a "whitewash" resolution have confirmed in
writing that they approve the proposed waiver and would vote in
favour of any resolution to that effect at a general meeting. The
Company has subsequently approached the Panel and successfully
obtained its permission to waive the requirement for a whitewash
resolution to be considered at a general meeting (and for a
circular to be prepared in accordance with Section 4 of Appendix 1
to the Code).
5. General Meeting and Resolutions
You will nd set out at the end of this document a notice
convening the General Meeting to be held at 10:30 a.m. on 2nd
November 2022, at the offices of finnCap, 1 Bartholomew Cl, London,
EC1A 7BL at which the Resolutions will be proposed.
6. Related Party Transaction
As MXC is a substantial shareholder of the Company, they are
deemed to be a related party pursuant to the AIM Rules for
Companies. The participation of MXCLN Conversion is therefore a
related party transaction for the purposes of Rule 13 of the AIM
Rules. Ian Smith, Executive Director, is not independent for the
purposes of the Related Party Transaction given that he is a
substantial shareholder and CEO of MXC. The independent Chairman of
IDE, Andy Parker, considers, having consulted with the Company's
nominated adviser, finnCap, that the terms of the related party
transaction are fair and reasonable insofar as the shareholders of
the Company are concerned.
7. Action to be taken
Shareholders will find enclosed with this document a Form of
Proxy for use in connection with the General Meeting. Whether or
not Shareholders intend to be present at the General Meeting, they
are requested to complete and return the Form of Proxy in
accordance with the instructions printed thereon as soon as
possible and, in any event, so as to be received by the Company's
Registrars, by post to Computershare Investor Services PLC,
Corporate Actions Projects, Bristol BS99 6AH or by hand (during
normal business hours only) to Computershare Investor Services PLC,
The Pavilions, Bridgwater Road, Bristol BS13 8AE, not later than 48
hours (excluding non-working days) before the General Meeting is
scheduled to begin. The completion and return of the Form of Proxy
will not preclude Shareholders from attending the General Meeting
and voting in person should they so wish.
If you hold your Ordinary Shares in uncertificated form (that
is, in CREST) you may vote using the CREST Proxy Voting service in
accordance with the procedures set out in the CREST Manual (please
also refer to the accompanying notes to the Notice of the General
Meeting set out in Part V of this document). Proxies submitted via
CREST must be received by the Company's agent (ID 3RA50) by no
later than 10.30 a.m. on 31 October 2022 (or, in the case of an
adjournment, not less than 48 hours before the time fixed for the
holding of the adjourned meeting (at the discretion of the
Directors, excluding any part of a day that is not a Business
Day)).
8. Recommendation
The Directors consider the Loan Note Conversion and Capital
Reorganisation and the matters set out in the Resolutions to be in
the best interests of the Company and its Shareholders as a whole.
Accordingly, the Directors unanimously recommend Shareholders to
vote in favour of the Resolutions to be proposed at the GM as they
intend to do in respect of their bene cial holdings amounting, in
aggregate, to 172,811,125 (being MXC's current holding) Existing
Ordinary Shares, representing approximately 34.8 per cent. of the
existing issued ordinary share capital of the Company as at the
date of this document.
If you are in any doubt as to what action you should take, you
are recommended to seek your own personal financial advice from
your broker, bank manager, solicitor, accountant or other
independent financial adviser authorised under the Financial
Services and Markets Act 2000 (as amended) if you are resident in
the United Kingdom or, if not, from another appropriately
authorised independent financial adviser, immediately.
Shareholders are recommended to seek their own personal tax
advice in relation to the proposals.
Yours faithfully
Andy Parker
Non-Executive Chairman
IDE Group Holdings Plc
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Publication of this document Friday 7th October 2022
Latest time and date for receipt 10:30 a.m. on Monday 31st
of forms of proxy, CREST Proxy Instruction October 2022
or electronic proxy appointment for
use at the General Meeting
---------------------------
General Meeting 10:30 a.m. on Wednesday
2nd November 2022
---------------------------
Record Date 6 p.m. on Wednesday 2nd
November 2022
---------------------------
Expected effective date of the Consolidation Thursday 3rd November 2022
and Sub-Division
---------------------------
Expected date of admission of New 8 a.m. on Thursday 3rd
Ordinary Shares to trading on AIM November 2022
---------------------------
Expected date CREST accounts are As soon as practicable
to be credited with New Ordinary after 8 a.m. on Thursday
Shares 3rd November 2022
---------------------------
Expected date share certi cates in Thursday 17th November
respect of New Ordinary Shares are 2022
to be by despatched to non-CREST
Shareholders
---------------------------
Notes :
(1) The timing of the events in the above timetable and in the
rest of this document is indicative only and may be subject to
change.
(2) The timetable assumes that there is no adjournment of the
GM. If there is an adjournment, all subsequent dates are likely to
be later than those shown.
(3) If any of the above times or dates should change, the
revised times and/or dates will be noti ed by an announcement to a
Regulatory Information Service.
(4) All of the events listed in the above timetable following
the holding of the GM are conditional upon the passing of the
Resolutions.
(5) All of the times referred to above are references to London
time.
STATISTICS RELATING TO THE CAPITAL REORGANISATION
Existing Ordinary Shares in issue at the
date of this document 496,702,792
Expected existing Ordinary Shares in issue
immediately prior to the General Meeting 496,702,800
----------------------
Conversion ratio of Existing Ordinary Shares 100 Existing Ordinary
to New Ordinary Shares Shares to 1 New
Ordinary Share
----------------------
Total number of New Ordinary Shares in issue
following the Capital Reorganisation 4,967,028
----------------------
ISIN code for the New Ordinary Shares GB00BN4M3M55
----------------------
SEDOL code for the New Ordinary Shares BN4M3M5
----------------------
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