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Quercus Publishing plc LSE: QUPP |
Nov 14, 2008 02:00 ET
Proposed Placing and Open Offer
Page 1 of 7
14 November 2008
GB00B1G17S00/GBP/PLUS-exn
QUERCUS PUBLISHING PLC
("Quercus" or the "Company")
Proposed Placing and Open Offer,
Approval of the waiver of obligations under Rule 9 of the Takeover Code and
Notice of a General Meeting
Directorate Change
Proposed Placing and Open Offer
Quercus Publishing PLC (PLUS: QUPP) announces that it is proposing to raise approximately £1.75 million (before
expenses) through a Placing and an Open Offer comprising 5,853,846 New Ordinary Shares at 30p per share. The
net proceeds of the Placing and Open Offer (amounting to approximately £1.64 million) will provide the Company
with additional working capital and will also strengthen its balance sheet.
Pentland Group plc ("Pentland") has conditionally undertaken to apply for its full entitlement of 1,133,333 New
Ordinary Shares under the Open Offer at 30p per share. David Potter, a director of the Company, has also
irrevocably undertaken to apply for 25,000 New Ordinary Shares. The balance of the Open Offer shares (4,695,513
New Ordinary Shares) have been conditionally placed with Pentland, subject to the right of Qualifying
Shareholders to apply under the Open Offer and take up their entitlements.
Qualifying Shareholders may participate in the Open Offer, at the Offer Price of 30p per Offer Share, on the
basis of 1 Offer Share for every 2 Existing Ordinary Shares held on the Record Date.
Waiver of Obligations under Rule 9 of the Takeover Code
Pentland currently holds 2,266,666 Existing Ordinary Shares, representing 19.4 per cent. of the existing
ordinary share capital. Depending on the level of applications under the Open Offer by Qualifying Shareholders
other than Pentland, Pentland's interest in the Company may, on completion of the Placing and Open Offer,
exceed 30 per cent. of the Enlarged Ordinary Share Capital, requiring the approval of Shareholders of a waiver
from the obligations of Rule 9 of the Takeover Code that would otherwise require Pentland to make a general
offer to the holders of all of the Ordinary Shares. Similarly, should Pentland decide to convert the Pentland
Loan Notes after completion of the Placing and Open Offer, its interest in the Company upon such conversion may
exceed 50 per cent. of the Enlarged Ordinary Share Capital (as increased by the Ordinary Shares resulting from
such conversion), again requiring approval of Shareholders of a waiver from the obligations of Rule 9 of the
Takeover Code.
The Panel has agreed, subject to the passing of the Waiver Resolution, to waive the obligation of Pentland to
make a general offer to Shareholders under Rule 9 of the Takeover Code that would otherwise arise as a result
of the implementation of the Proposals or upon conversion of the Pentland Loan Notes. The Independent
Directors, who have been so advised by St Helen's Capital, consider the Waiver to be fair and reasonable and in
the best interests of the Company and the Independent Shareholders as a whole. In providing advice to the
Independent Directors, St Helen's Capital has taken into account the commercial assessments of the Independent
Directors.
Reasons for the Fundraising and Use of Proceeds
The Company's main area of activity is the publishing of books for the contract and trade markets.
Contract Publishing
Contract publishing is the creation and supply of books on a pre-contracted and firm-sale basis to chain
booksellers, multiple retailers and direct marketing specialists. The books are designed to the customer's
specifications and delivered in bulk quantities.
Trade Publishing
Trade publishing is the conventional route to market used by most authors: the publisher prints at its own risk
and sells, on a non-exclusive basis, to book retailers and wholesalers. The publisher incurs the cost of sales,
distribution and marketing.
Proposed Fundraising
The proposed Fundraising is to provide the Company with additional working capital and to strengthen its
balance sheet. The Company has recently utilised significant cash resources to acquire, invest in and develop
the Group's intellectual property rights, as well as to invest in staff to support, produce, develop, sell and
market the Group's intellectual property.
Prevailing economic and stock market conditions have meant that the Group has been obliged to fund its recent
development principally through loans provided by certain Directors and Pentland, which currently amount to
£775,000 in aggregate. These loans are due for repayment shortly. The Directors believe that the loans are no
longer a viable source of ongoing funding for the Company and that the Group now also needs additional funding
to continue its development.
Pentland has conditionally offered to provide the Group with additional funding via the Placing, whilst
allowing other Shareholders to participate in the Fundraising through the Open Offer. Despite the success of
the Company's business, it currently has limited cash resources and its ability to secure external debt
financing is severely hampered by the current global financial turmoil. The Company is looking to strengthen
its balance sheet and to repay the Directors' loans and Pentland's loan which should, in due course, facilitate
its ability to obtain further bank funding for working capital purposes. In light of current market conditions
and the limited alternative financing options available to the Group (as well as of there being few
institutional investors amongst the Shareholders), the Independent Directors believe that the Placing is in the
best interests of Shareholders as a whole. Subject to Shareholder approval, the Placing will provide the
Company with certainty of funding on acceptable terms, particularly as Pentland will not be receiving any fees
or commissions in respect of the Placing.
However, Pentland is not willing to provide funds via the Placing if, as a consequence of the Placing or of the
conversion of the Pentland Loan Notes, it would be required to make an offer for the Ordinary Shares that it
does not own under Rule 9 of the Takeover Code. The Independent Directors therefore believe that it is in the
best interests of the Independent Shareholders that the Waiver be approved.
Use of Proceeds
The Company published 33 trade titles in 2006, 101 in 2007 and 184 in 2008. The Company intends marginally to
decrease the number of trade titles published to approximately 170 in 2009 but to return to increasing the
number of trade titles it publishes on a year by year basis in 2010 when it intends to publish approximately
200 trade titles. Part of the Fundraising monies will be invested in both new Trade Publishing and Contract
Publishing titles which will be published in 2010 and subsequent years. Approximately £650,000 of the funds
raised will be used for advances to authors and to expand the Company's list of contracts.
In respect of Contract Publishing, the Board intends to invest part of the monies from the Fundraising into
improving and strengthening the Company's marketing resources, in particular in those geographic areas where it
is currently not well represented, namely continental Europe and Asia. Approximately £200,000 of the funds
raised will be used to strengthen the publishing teams and the foreign rights team which sells and licenses the
Group's intellectual property around the world.
Directors' and Other Loans
As referred to above, several of the Directors and Pentland have loaned funds to the Company. Approximately
£800,000 of the funds raised in the Placing and Open Offer will be used to repay these loans of £775,000 in
full, together with approximately £25,000 of interest thereon.
Details of the Placing and Open Offer
Pursuant to the Placing Letter, all of the Placing Shares have been conditionally placed with Pentland subject
to the rights of Qualifying Shareholders under the Open Offer.
Qualifying Shareholders may apply for any number of Offer Shares under the Open Offer up to a maximum of their
pro rata entitlement, calculated on the following basis:
1 Offer Share for every 2 Existing Ordinary Shares
and so in proportion for any greater number of Existing Ordinary Shares held on the Record Date. Entitlements
of Qualifying Shareholders have been rounded down to the nearest whole number of Offer Shares. Fractional
entitlements which would have otherwise arisen will not be capable of being applied for by the Qualifying
Shareholders but have been aggregated and placed with Pentland under the Placing.
The Offer Shares must be paid for in full on application. The latest time and date for receipt of completed
Application Forms and payment in respect of the Open Offer is 11 a.m. on 5 December 2008. The Open Offer is not
being made to Overseas Shareholders.
Qualifying Shareholders should note that the Open Offer is not a rights issue and therefore the Offer Shares
which are not applied for by Qualifying Shareholders will not be sold in the market for the benefit of the
Qualifying Shareholders who do not apply. The Application Form accompanying the circular to Shareholders is not
a document of title and cannot be traded.
The Offer Shares will be issued credited as fully paid and free of all liens, charges and encumbrances and
will, when issued, rank pari passu in all respects with the Existing Ordinary Shares, including the right to
receive all dividends and other distributions declared, made or paid after the date of their issue.
The Placing and Open Offer are conditional on the Placing Letter becoming or being declared unconditional in
all respects and not being terminated in accordance with its terms before 8 a.m. on 10 December 2008 (or such
later time and/or date, being not later than 8 a.m. on 15 December 2008, as the Company may decide). The
Placing and Open Offer are also conditional on the Waiver Resolution being passed by the Independent
Shareholders and on the other Resolutions being passed by the Shareholders at the General Meeting.
Application will be made for the New Ordinary Shares to be admitted to trading on PLUS Markets. It is expected
that Admission will become effective and dealings in the New Ordinary Shares will commence on 10 December 2008.
Current Trading and Prospects
In the Company's interim results for the six months ended 30 June 2008, it was stated that the Group's revenues
for the period had met the Directors' expectations. The Group has continued to perform well since then, with
strong sales growth from both its Contract Publishing and Trade Publishing divisions.
The Directors intend to continue to seek further growth by expanding the Group's contract publishing to new
categories, developing its paperback division and securing new authors and titles. Whilst the current economic
climate requires the Group to maintain a cautious outlook, the Directors believe that the Group's strategy,
organisational structure and publishing programmes continue to provide a strong platform from which the Group
can continue to grow its business.
Notice of General Meeting
A circular containing further information about the Proposals and convening a General Meeting of the Company
for 11.00 am on 1 December 2008 to approve, amongst other matters, the waiver of Rule 9 of the Takeover Code,
is being posted to Shareholders today.
Change in Directorate
Quercus also announces that Anthony Cheetham will move from Executive Chairman to become Non-Executive Chairman
of the Company with immediate effect.
Anthony Cheetham has been the Chairman of Quercus for two years, during which time he has overseen the
Company's development into one of the UK's leading independent publishers. Anthony remains a significant
shareholder in the Company with 1,101,668 shares, representing approximately 9.4% of the issued share capital
of the Company.
In addition, Quercus has appointed David North as Managing Director of its Trade Publishing business. David
North left Pan Macmillan in April of this year after eight years as Managing Director and joined Quercus on 3rd
November 2008.
Anthony Cheetham commented:
"The Group has seen transformational growth since flotation in October 2006 and I'm confident that we have a
strong team in place to continue to drive the Group's strategic vision. Assuming the role of Non-Executive
Chairman is therefore a natural progression to ensure a stable transition into the next stage of the Group's
development."
Mark Smith, Chief Executive, commented:
"Anthony has made a significant contribution to Quercus in his Executive role, and the Company thanks him for
that. I look forward to working closely with Anthony on the Group's future strategy and publishing policy.
The appointment of David North completes the management structure that Quercus has been putting in place over
the last 18 months and I am delighted to have someone with David's knowledge and experience joining us at a
time when we face the challenges and opportunities that moving from a small publisher to a medium sized
publisher brings."
The Directors of Quercus Publishing PLC accept responsibility for this announcement.
Enquiries:
QUERCUS PUBLISHING PLC Mark Smith, Chief Executive Officer Tel: 020 7291 7200
REDLEAF COMMUNICATION Emma Kane/Sanna Sumner Tel: 020 7822 0200
ST HELEN'S CAPITAL PLC Mark Anwyl/Duncan Vasey Tel: 020 7628 5582
Expected Timetable for the Open Offer
Record Date - Close of business on 10 November 2008
Ex-entitlement date for the Open Offer 14 November 2008
Latest time and date for splitting Application Forms
(to satisfy bona fide market claims only) 3 p.m. on 1 December 2008
Latest time and date for receipt of completed Application Forms
and payment in full under the Open Offer 11 a.m. on 5 December 2008
Admission and commencement of dealings in New Ordinary Shares 8.a.m on 10 December 2008
Definitions
The following definitions apply throughout this announcement unless the context otherwise requires:
"Admission" the admission of the New Ordinary Shares to trading on PLUS becoming
effective in accordance with the PLUS Rules;
"Application Form" the application form on which Qualifying Shareholders may apply for
Offer Shares under the Open Offer;
"Board" or "Directors" the directors of the Company as at the date of this announcement;
"Company" or "Quercus" Quercus Publishing plc, a company registered in England and Wales
with company number 05437517;
"Contract Publishing" the creation and supply of books on a pre-contracted and firm sale
basis to chain booksellers, multiple retailers and direct marketing
specialists, where the books are designed to the customers'
specifications and delivered in bulk quantities;
"Enlarged Ordinary Share Capital" the issued ordinary share capital of the Company immediately
following Admission comprising the Existing Ordinary Shares and the
New Ordinary Shares;
"Existing Ordinary Shares" 11,707,692 Ordinary Shares in issue at the date of this document;
"General Meeting" the general meeting of the Company, to be held at the offices of
Beachcroft LLP, 100 Fetter Lane, London EC4A 1BN at 11 a.m. on 1
December 2008, notice of which is set out at the end of this
document;
"Fundraising" the fundraising by the Company by way of the Placing and Open Offer;
"Group" the Company and its subsidiaries as at the date of this document;
"Independent Directors" or the Board or Directors, in either case excluding Barry Mosheim;
"Independent Board"
"Independent Shareholders" Shareholders other than Pentland;
"Loan Notes" the £850,000 secured convertible loan notes issued to Pentland (the
"Pentland Loan Notes") and the £300,000 unsecured convertible
subordinated loan notes issued to Anthony Cheetham;
"New Ordinary Shares" new Ordinary Shares to be issued by the Company under the Placing
and Open Offer;
"Offer Price" 30 pence per New Ordinary Share;
"Offer Shares" 5,824,836 New Ordinary Shares being made available to Qualifying
Shareholders under the Open Offer (being all the New Ordinary Shares
other than those New Ordinary Shares for which Overseas Shareholders
would have been entitled to apply if they were considered Qualifying
Shareholders and fractional entitlements arising from the rounding
down of Open Offer Entitlements to the nearest whole number);
"Open Offer" the conditional offer to Qualifying Shareholders, constituting an
invitation to apply to subscribe for Offer Shares on the terms and
subject to the conditions set out in the circular to Shareholders
and in the Application Form;
"Open Offer Entitlement" the pro-rata entitlement of a Qualifying Shareholder to apply to
subscribe for Offer Shares in proportion to the number of Existing
Ordinary Shares held by him on the Record Date;
"Ordinary Shares" ordinary shares of 0.8 pence each in the capital of the Company;
"Overseas Shareholder" a Shareholder with a registered address outside the United Kingdom;
"Panel" the Panel on Takeovers and Mergers;
"Pentland" Pentland Group plc, a company registered in England and Wales with
company number 00793577;
"Placing" the conditional placing of the Placing Shares with Pentland under
the Placing Letter;
"Placing Letter" the conditional placing letter dated 13 November 2008;
"Placing Shares" the 4,695,513 New Ordinary Shares conditionally placed with Pentland
(being all the New Ordinary Shares, other than Pentland's Open Offer
Entitlement and the 25,000 New Ordinary Shares for which David
Potter, a non-executive Director, has irrevocably undertaken to
apply);
"PLUS" or "PLUS Markets" PLUS Markets Group plc;
"PLUS-quoted market" the primary market for unlisted securities operated by PLUS;
"PLUS Rules" the PLUS Rules for issuers, which set out the admission and
disclosure standards for companies on the PLUS-quoted market;
"Proposals" the Placing, the Open Offer and the Waiver;
"Qualifying Shareholders" holders of Ordinary Shares on the register of members of the Company
at the Record Date (but excluding any Overseas Shareholder);
"Record Date" the close of business in London on 10 November 2008 in respect of
the entitlements of Qualifying Shareholders under the Open Offer;
"Resolutions" the resolutions set out in the notice of the General Meeting at the
end of the circular to Shareholders;
"Shareholders" holders of Ordinary Shares;
"St Helen's Capital" St Helen's Capital Plc, the Company's corporate adviser, which is
authorised and regulated by the FSA;
"Takeover Code" The City Code on Takeovers and Mergers, published by the Panel;
"Trade Publishing" the conventional route to market used by most authors: the publisher
prints at its own risk and sells, on a non exclusive basis, to book
retailers and wholesalers, with the publisher incurring the cost of
sales, distribution and marketing;
"Waiver" the waiver by the Panel of Rule 9 of the Takeover Code; and
"Waiver Resolution" the resolution contained in the notice of General Meeting approving
the Waiver for the purposes of Rule 9 of the Takeover Code.
For more information, please contact
Quercus Publishing plc