Placing and Open Offer [MSC]

RNS Number : 3638U
Corac Group Plc
02 December 2013

 

 

This announcement is an advertisement and is not an offer to sell or the solicitation of an offer to buy any securities. It is not a circular, a prospectus or prospectus equivalent document. Investors should not subscribe for or purchase any shares referred to in this announcement except solely on the basis of information contained in the circular to be published by Corac Group plc in connection with the proposed fundraising.

 

2 December 2013

CORAC GROUP PLC

Proposed Firm Placing and Open Offer to raise up to £13.1 million and Notice of General Meeting

 

Corac Group plc (AIM:CRA) is pleased to announce that it has conditionally raised funds of £11.0  million through a Firm Placing of 110,010,232  New Ordinary Shares with new and existing institutional investors, together with an Open Offer to raise up to £2.1 million, before fees and expenses,  in each case through the issue of New Ordinary Shares at an Issue Price of 10 pence per New Ordinary Share.

 

Placing and Open Offer Highlights

 

  • · £11.0 million conditionally raised by the Group through a Firm Placing of 110,010,232 New Ordinary Shares

 

  • · Up to £2.1 million conditionally raised through a 1 for 15 Open Offer of up to 20,528,694 New Ordinary Shares

 

  • · Issue Price discount of 13.0 per cent *

 

  • · Board and senior management subscribing for 800,000 shares in the Firm Placing

 

Background to and reasons for the Placing and Open Offer

 

  • Funding for the next stage of Corac's development:

o  to accelerate the rate of commercial return at CET; and

o  provide organic investment to grow ACI and Hunt Graham

 

  • · Further investment in CET gas compression technology;

follows strong progress with testing to date and new and amended customer contracts

funding existing and new customer design, build and development projects

intensive testing and accelerated compliance of completed products

o  customers include BP and  Saudi Aramco

 

  • · Expected that this should lead to the first commercial sales from turbo compressors in 2014, and from gas compression technology in 2016

 

*to Closing Price on Latest Practicable Date

 

Phil Cartmell, Executive Chairman said:

 

" The funding we have announced today is expected to enable us to accelerate the commercialisation of CET's technology and thereby build the future value of the Group.  We have made marked progress with the technology and with customers especially in recent years and are poised to take the business to the next stage of its development.  I thank existing and new shareholders for their support."

 

A circular containing details of the Proposed Firm Placing and Open Offer, terms and conditions of the Open Offer, actions to be taken by Shareholders in respect of the Open Offer and a Notice containing details of the General Meeting of the Company (the "Circular"), was sent to Shareholders this morning and is available to view on the Company's website at www.corac.co.uk. The same definitions apply throughout this announcement as are applied in the Circular.

For further information please contact:

Corac Group plc

www.corac.co.uk

Phil Cartmell, Chief Executive Officer

01753 285 800

Jon Carter, Chief Financial Officer

 

Cenkos

 

Ivonne Cantú / Elizabeth Bowman - Nomad

020 7397 8980

Jeremy Warner-Allen - Sales

 

MHP Communications

020 3128 8100

Reg Hoare / Vicky Watkins / Naomi Lane

corac@mhpc.com

 

 

IMPORTANT NOTICE

 

This announcement is for information only and does not constitute or form part of any offer or invitation to issue, acquire or dispose of any securities or investment advice in any jurisdiction. Investors should not subscribe for or purchase any shares referred to in this announcement except solely on the basis of information contained in the circular to be published by Corac Group plc in connection with the proposed fundraising. Copies of the circular will be available for collection, free of charge, for a period of one month from the date of this announcement, at the Company's registered office during normal business hours (Saturdays, Sundays and public holidays excepted) and at the Company's website: www.corac.co.uk.

 

No statement in this announcement is intended to be a profit forecast and no statement in this Announcement should be interpreted to mean that earnings per share of Corac Group plc for the current or future financial years would necessarily match or exceed the historical published earnings per share of Corac Group plc.

 

The New Ordinary Shares have not been, and will not be, registered under the US Securities Act of 1933, as amended (the ''Securities Act'') or under the securities laws of any state of the United States, and may not be offered, sold, resold, transferred or delivered, directly or indirectly, within the United States except pursuant to an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. There will be no public offer of the New Ordinary Shares in the United States. The New Ordinary Shares have not been approved or disapproved by the US Securities and Exchange Commission, any state securities commission in the United States or any US regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of the offering of the New Ordinary Shares or the accuracy or adequacy of this announcement. Any representation to the contrary is a criminal offence in the United States. In addition, offers, sales or transfers of the New Ordinary Shares in or into the United States for a period of time following completion of the Placing and Open Offer by a person (whether or not participating in the Placing or Open Offer) may violate the registration requirement of the Securities Act. Furthermore, the New Ordinary Shares have not been and will not be registered under the applicable laws of any of Australia, New Zealand, Canada, the Republic of South Africa or Japan and, subject to certain exceptions, may not be offered or sold to any national, resident or citizen thereof or any other jurisdiction where to do so might constitute a violation of local securities laws or regulations.

 

The distribution of this announcement in or into jurisdictions other than the United Kingdom may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about, and observe such restrictions. Any failure to comply with the applicable restrictions may constitute a violation of the securities laws of any such jurisdiction. Subject to certain exceptions, this announcement is not for release, publication or distribution, directly or indirectly, in or into the United States, Australia, New Zealand, Canada, the Republic of South Africa, Japan or any other jurisdiction where to do so might constitute a violation of local securities laws or regulations.

 

If in any doubt about any of the contents of this announcement, independent professional advice should be obtained.

 

 

Background to and reasons for the Firm Placing and Open Offer

 

Over the past decade, the Company has successfully developed integrated high speed turbo machinery solutions in the fileds of gas bearings, permanent magnet motors, aerodynamics, thermal heat transfer and power electronics.

 

In April 2012, the Group raised £6.35 million through a placing to fund the acquisitions of Wellman Hunt Graham Limited (renamed Hunt Graham Limited ("Hunt Graham")) and Wellman Defence Limited (renamed Atmosphere Control International Limited ("ACI")).  In January 2013, the trading of Corac was hived down into Corac Energy Technologies Limited ("CET").  All three companies are now wholly owned subsidiaries of Corac Group plc.

 

Over the past 18 months, Corac has integrated these acquired businesses and made significant progress within CET. The following key developments have been achieved by the Group:

 

  • Tested the downhole gas compressor technology in Texas;
  • Signed a contract with BP for the development of offshore compression technology, which has led to £1.12 million of firm orders to date, and could lead to development revenues in total of £2.5 million;
  • Signed a contract amendment with Saudi Aramco for the design and build of an in-pipe gas compressor at the wellhead;
  • Joint development and exclusive licence agreement with a global market leader to apply CET's core technology in a range of industrial compressors and expanders for new commercial applications, with initial partner investment of £0.73 million;
  • Signed a tripartite funded agreement with major corporate partners in the UK and United States to develop an electricity generation system using waste energy in the gas transmission network;
  • Hunt Graham signed a contract for multiple heat exchangers valued in excess of £1.6 million for delivery in Saudi Arabia; and
  • ACI signed a £0.7 million contract with a foreign navy for submarine air purification equipment.

 

 

The Directors believe that the Group's structure of two successful trading businesses and the proprietary technology, development programme, partnerships and multidisciplinary team of industry experts at CET represents a strong platform to create a technology-led industrial engineering group in the UK.  The Directors believe that further investment is required in the gas compression technology to prove the technology meets industry requirements.  It is expected that this will lead to the first commercial sales from turbo compressors in 2014 and from gas compression technology in 2016.

Accordingly, the Directors believe that a firm placing and open offer of Ordinary Share is in the best interests of the Company and Shareholders as the funds raised will enable the Company to complete its programme of testing to required industry standards and allow all Shareholders to participate.

Use of Proceeds

The Group is seeking up to £13.1 million to fund the next stage of progress.  This funding will be used to accelerate the rate of commercial return at CET through the following specific items:

  • £4 million to complete the on-going support to enlarged partner programmes (net of income);
  • £3.5 million for production of additional systems and components for intensive testing and accelerated for compliance of completed products;
  • £3 million for capital expenditure on testing facilities (£1.5 million) and a small batch production facility (£1.5 million); and
  • up to £2.6 million working capital requirement to accelerate growth in the trading businesses.

It is envisaged that funding of the above programmes will place the Group in a position of having implemented several installations of gas compressor applications in downhole and wellhead applications with track records of delivering the known benefits to customers thus enabling the first commercial sales from turbo compressors in 2014, and from gas compression technology in 2016.

Information on the Firm Placing and Open Offer

Principal terms of the Firm Placing

 

The Company is proposing to issue 110,010,232 Firm Placing Shares pursuant to the Firm Placing. In accordance with the terms of the Placing and Open Offer Agreement, Cenkos has, as agent for the Company, conditionally placed, with institutional and other investors, the Firm Placing Shares at the Issue Price to raise approximately £11.0 million.

 

The Firm Placing Shares are not subject to clawback and are not part of the Open Offer.

 

The Placing and Open Offer Agreement contains warranties and indemnities given by the Company to Cenkos which are customary for an issue of this nature. Under the Placing and Open Offer Agreement, the Company has agreed to pay to Cenkos a commission based on the aggregate value of certain of the Firm Placing Shares placed at the Issue Price and the costs and expenses of the Firm Placing together with any applicable VAT.

 

It is expected that the VCT/EIS Placing Shares will be allotted and issued on 19 December 2013, and all remaining Firm Placing Shares will be allotted and issued at before 8:00 a.m. on 20 December 2013. CREST accounts are expected to be credited with Firm Placing Shares on the day of Admission and share certificates in respect of Firm Placing Shares (where applicable) will be dispatched by post (at Shareholders' risk) by 31 December 2013.

 

Principal terms of the Open Offer

 

The Board considers it important that Qualifying Shareholders have the opportunity to participate in the fundraising, and the Directors have concluded that the Open Offer is the most suitable option available to the Company and its Shareholders.

 

The Open Offer provides an opportunity for all Qualifying Shareholders to participate in the fundraising. Pursuant to the Open Offer, Qualifying Shareholders will be given the opportunity to subscribe for 1 Open Offer Share for every 15 Existing Ordinary Shares held on the Record Date.

 

The Open Offer will raise gross proceeds of up to approximately £2.1 million, assuming full take-up.

 

The Issue Price represents a 13.0 per cent. discount to the Closing Price of 11.5 pence per Ordinary Share on the Latest Practicable Date.

 

Open Offer Entitlement

 

Qualifying Shareholders are invited, on and subject to the terms and conditions of the Open Offer, to apply for any number of Open Offer Shares at the Issue Price up to their Open Offer Entitlement. Qualifying Shareholders have an Open Offer Entitlement of:

 

  • 1 Open Offer Share for every 15 Existing Ordinary Shares registered in the name of the relevant Qualifying Shareholder on the Record Date.

 

  • Open Offer Entitlements under the Open Offer will be rounded down to the nearest whole number and any fractional entitlements to Open Offer Shares will be disregarded in calculating Open Offer Entitlements.

 

  • The aggregate number of Open Offer Shares available for subscription pursuant to the Open Offer will not exceed 20,528,694 New Ordinary Shares.

 

The Open Offer has not been underwritten. None of the Open Offer Shares have been conditionally placed with institutional or other investors. Therefore there is no guaranteed minimum number of Open Offer Shares which will be issued under the Open Offer.

 

Application procedure under the Open Offer

 

Further information on the Open Offer and the terms and conditions on which it is made, including the procedure for application and payment, are set out in the Circular.

 

Conditionality

 

The Firm Placing in respect of the VCT Placing Shares is conditional, inter alia, on:

 

  • the passing, without amendment, of the Resolutions at the General Meeting; and

 

  • the performance by the Company of its obligations under the Placing and Open Offer Agreement insofar as the same are required to be performed prior to the allotment and issue of the VCT Placing Shares.

 

 

The Firm Placing in respect of the Firm Placing Shares (other than the VCT Placing Shares) and the Open Offer are conditional, inter alia, upon the following:

 

  • the passing, without amendment, of the Resolutions at the General Meeting;

 

  • Admission occurring by not later than 8.00 a.m. on 20 December 2013 (or such later date as may be agreed between the Company and Cenkos); and

 

  • the Placing and Open Offer Agreement becoming unconditional in all respects (save for the condition relating to Admission) and not having been terminated in accordance with its terms.

 

If the Resolutions are not passed, Admission does not take place by 8.00 a.m. on 20 December 2013 (or such later time and/or date as the Company and Cenkos may agree) or the Placing and Open Offer Agreement does not become unconditional or is terminated, the Firm Placing (save for the VCT Placing Shares in certain circumstances as described in the next paragraph) and the Open Offer will lapse, any Open Offer Entitlements admitted to CREST will, after that time and date, be disabled and application monies under the Open Offer will be refunded to the applicants, by cheque (at the applicant's risk) in the case of Qualifying Non-CREST Shareholders and by way of a CREST payment in the case of Qualifying CREST Shareholders, without interest, as soon as practicable thereafter.

 

The VCT Placing Shares will not be issued conditional on their admission to trading on AIM. Accordingly, although unlikely in the opinion of the Directors, there is a possibility that the VCT Placing Shares may not be admitted to trading on AIM following their allotment. As the VCT Placing Shares will be allotted before the allotment of the other Firm Placing Shares and the Open Offer Shares, it is possible, although unlikely in the opinion of the Directors, that the allotment of the VCT Placing Shares could occur and, due to unforeseen circumstances in the intervening time, the allotment of the other Firm Placing Shares and Open Offer Shares may not occur.

 

 

VCT and EIS

 

The Company has applied for and obtained advance assurance from HMRC, based on information provided, that: (i) following receipt of a properly completed form EIS 1, they will be able to authorise the Company to issue certificates under section 204(1) Income Tax Act 2007 in respect of the VCT Placing Shares; and (ii) the New Ordinary Shares will be eligible shares for the purpose of section 285(3A) of the Income Tax Act 2007 and may be part of a qualifying holding for the purposes of Chapter 4 of Part 6 of the Income Tax Act 2007 (iii) the proposed utilisation of funds raised will constitute satisfactory employment for the purposes of section 293 of the Income Tax Act 2007 and the placing of those funds raised on deposit account pending eventual use within the business will not jeopardise the Group's qualifying status.

 

In order to ensure the VCT Placing Shares qualify with the relevant requirements of EIS and VCT legislation, it is necessary to ensure that the VCT Placing Shares are issued prior to the remainder of the New Ordinary Shares. Accordingly, it is expected that the VCT Placing Shares will be unconditionally allotted and issued after 5.00 p.m. on 19 December 2013 and the remaining New Ordinary Shares will be allotted and issued before 8.00 a.m. on 20 December 2013, subject to Admission. It is expected that Admission of all New Ordinary Shares will occur at 8.00 a.m. on 20 December 2013.

 

Although the Company currently expects to satisfy the relevant conditions for EIS and VCT investment, and the Directors are not aware of any subsequent change in the qualifying conditions or the Company's circumstances that would prevent the VCT Placing Shares from being eligible EIS and VCT investments on this occasion, neither the Directors nor the Company gives any warranty or undertaking that relief will be available in respect of any investment in the VCT Placing Shares pursuant to this document, nor do they warrant or undertake that the Company will conduct its activities in a way that qualifies for or preserves its status.

 

As the rules governing EIS and VCT reliefs are complex and interrelated with other legislation, if Shareholders or any potential investors are in any doubt as to their tax position, require more detailed information than the general outline above, or are subject to tax in a jurisdiction other than the United Kingdom, they should consult their professional adviser.

 

General Meeting

Shareholders will be today sent a notice convening a General Meeting of the Company to be held at the offices of Nabarro LLP at Lacon House, 84 Theobald's Road, London WC1X 8RW at 10:30am a.m. on 19 December  2013, at which resolutions (the "Resolutions") authorising the Directors to allot the New Ordinary Shares on a non pre-emptive basis will be proposed.

 

Action to be taken by Shareholders in respect of the General Meeting

 

Shareholders will find enclosed with the Circular a Form of Proxy for use at the General Meeting.  Whether or not Shareholders propose to attend the General Meeting in person, they are strongly encouraged to complete, sign and return the Form of Proxy in accordance with the instructions printed on it as soon as possible, but in any event so as to be received, by post or, during normal business hours only, by hand, at Equiniti Share Registrars, PO Box 4630, Aspect House, Spencer Road, Lancing, West Sussex BN99 6QQ by no later than 10:30 a.m. on 17 December 2013 (or, in the case of an adjournment, not later than 48 hours before the time fixed for the holding of the adjourned meeting (excluding any part of a day that is not a working day)).

 

Appointing a proxy in accordance with the instructions set out above will enable your vote to be counted at the General Meeting in the event of your absence.  The completion and return of the Form of Proxy will not prevent Shareholders from attending and voting at the General Meeting, or any adjournment thereof, in person should Shareholders wish to do so.

 

Action to be taken by Qualifying Shareholders in respect of the Open Offer

 

Qualifying Non-CREST Shareholders (i.e. holders of Existing Ordinary Shares who hold their Existing Ordinary Shares in certificated form)

 

Qualifying Non-CREST Shareholders will receive an Application Form enclosed with the Circular which gives details of Shareholders' Open Offer Entitlement under the Open Offer. If Shareholders wish to apply for Open Offer Shares under the Open Offer, they should complete the Application Form in accordance with the procedure for application set out in the Circular and on the Application Form itself.

 

 

Qualifying CREST Shareholders (i.e. holders of Existing Ordinary Shares who hold their Existing Ordinary Shares in uncertificated form)

 

Qualifying CREST Shareholders will not be sent an Application Form. They will receive a credit to their appropriate stock account in CREST in respect of their Open Offer Entitlement under the Open Offer. Shareholders should refer to the procedure for application set out in the Circular.

 

Qualifying CREST Shareholders who are CREST sponsored members should refer to their CREST sponsors regarding the action to be taken in connection with this document and the Open Offer.

 

If Shareholders are in any doubt as to the action they should take, they should immediately seek their own personal financial advice from an appropriately qualified independent professional adviser.

 

 

Intention of Directors and Senior Management

 

Certain of the Directors intend to subscribe for an aggregate of Firm Placing Shares as set out below:

 

Directors

No of Firm Placing Shares

Phil Cartmell

350,000

Richard King

150,000

Mark Crawford

150,000

 

In addition, certain members of the senior management team of the Company intend to subscribe for an additional 150,000 ordinary shares in the Firm placing.

 

Related Party

 

The participation of M&G Investment Management Ltd. ("M&G") and Legal &General Investment Management Ltd (L&G") in the Firm Placing constitute a related party transaction under the AIM Rules for Companies by virtue of  the fact that  M&G and L&G are substantial shareholders in the Company and that their respective participation in the Firm Placing represents more than 5% of the market capitalisation of the Company as of this date. The Directors consider, having consulted with Cenkos, its nominated adviser, that the terms of the transaction are fair and reasonable insofar as its shareholders are concerned.

 

Recommendation

 

The Directors believe that the Firm Placing and Open Offer and the Resolutions to be proposed at the General Meeting are in the best interests of the Company and Shareholders as a whole and unanimously recommend that Shareholders vote in favour of the Resolutions as they intend to do (or procure be done) in respect of their own beneficial holdings totalling 2,248,603 Ordinary Shares, representing approximately 0.7 per cent. of the Existing Ordinary Shares.

 

 

 

For further information please contact:

Corac Group plc

www.corac.co.uk

Phil Cartmell, Chief Executive Officer

01753 285 800

Jon Carter, Chief Financial Officer

 

Cenkos

 

Ivonne Cantú / Elizabeth Bowman - Nomad

020 7397 8980

Jeremy Warner-Allen - Sales

 

MHP Communications

020 3128 8100

Reg Hoare / Vicky Watkins / Naomi Lane

corac@mhpc.com

 

NOTES TO EDITORS

Corac is a group of innovative UK based engineering companies, active in energy and environmental technologies. Group companies produce valuable solutions in compression systems, atmosphere management and heat exchangers for government, energy and industrial users. It has traded shares on the London Alternative Investment Market (AIM) since July 2001.

 

 

 

 

Expected Timetable of Principal Events

 

 

Record Date for entitlement to participate in the Open Offer

5.00 p.m. on 28 November 2013

Announcement of the Firm Placing and the Open Offer and despatch of the Circular, Form of Proxy and, to certain Qualifying Non‑CREST Shareholders, the Application Form

2 December 2013

Expected ex‑entitlement date for the Open Offer

8.00 a.m. on 2 December 2013

Open Offer Entitlements credited to CREST stock accounts of Qualifying CREST Shareholders

as soon as practicable after 8.00 a.m. on 3 December 2013

Recommended latest time and date for requesting withdrawal of Open Offer Entitlements from CREST

4.30 p.m. on 12 December 2013

Latest time for depositing Open Offer Entitlements into CREST

3.00 p.m. on 13 December 2013

Latest time and date for splitting Application Forms (to satisfy bona fidemarket claims only)

3.00 p.m. on 16 December 2013

Latest time and date for receipt of Forms of Proxy for the General Meeting

10.30 a.m. on 17 December 2013

Latest time and date for receipt of completed Application Forms and payment in full under the Open Offer or settlement of relevant CREST instruction (as appropriate)

11.00 a.m. on 18 December 2013

General Meeting

10.30 a.m. on 19 December 2013

Allotment and issue of VCT Placing Shares

after 5.00 p.m. on 19 December 2013

Allotment and issue of New Ordinary Shares (other than VCT Placing Shares)

before 8.00 a.m. on 20 December 2013

Admission of the New Ordinary Shares to trading on AIM

8.00 a.m. on 20 December 2013

New Ordinary Shares in uncertificated form expected to be credited to accounts in CREST (uncertificated holders only)

as soon as practicable after 8.00 a.m. on 20 December 2013

Expected date of despatch of definitive share certificates for the New Ordinary Shares in certificated form (certificated holders only)

by 31 December 2013

 

 

Firm Placing and Open Offer Statistics

 

 

Issue Price per New Ordinary Share

10 pence

Closing Price per Existing Ordinary Share on the Latest Practicable Date

11.5 pence

Discount to Closing Price of an Existing Ordinary Share on the Latest Practicable Date

13.0 per cent.

Open Offer Entitlement of Qualifying Shareholders under the Open Offer

1 Open Offer Share for every 15 Existing Ordinary Shares

Number of Existing Ordinary Shares

307,930,416

Number of New Ordinary Shares to be issued by the Company pursuant to the Firm Placing

110,010,232

Gross proceeds of the Firm Placing

£11.0 million

Maximum number of New Ordinary Shares to be issued by the Company pursuant to the Open Offer

20,528,694

Maximum gross proceeds of the Open Offer

£2.1 million

Number of Ordinary Shares in issue immediately following Admission1

438,469,342

New Ordinary Shares as a percentage of the Enlarged Share Capital1

29.7 per cent.

Estimated net cash proceeds of the Firm Placing and Open Offer1

£12.4 million

ISIN Code for Open Offer entitlements

GB00BGP6P540

Notes:

(1) Assumes the maximum number of New Ordinary Shares under the Open Offer are allotted.

 

END

 

 


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