REG - In The Style Group - Completion of strategic review

ItsarmAnnouncement

07/03/2023 07:00

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RNS Number : 0748S  In The Style Group PLC  07 March 2023

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
THE UK VERSION OF THE MARKET ABUSE REGULATION (EU) 596/2014 WHICH IS PART OF
UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018.

For immediate release

7 March 2023

 

In The Style Group plc

Completion of strategic review

Proposed sale of the operating subsidiary of In The Style Group plc

Proposed name change

Board changes

and

Proposed cancellation of admission to trading on AIM

In The Style Group plc (AIM:ITS) ("In The Style", the "Company" or, together
with its subsidiary undertakings, the "Group"), the disruptive and inclusive
digital womenswear fashion brand, today announces the completion of its
strategic review and the conditional agreement to sell its only operating
subsidiary, In The Style Fashion Limited ("ITSFL"), for a total cash
consideration of £1.2 million (the "Sale").

Highlights:

·      Completion of the Company's strategic review ("Strategic
Review"), which concludes the offer period (as defined in The City Code on
Takeovers and Mergers (the "Code")).

·      During the Strategic Review, the Company's board of directors
(the "Board" or the "Directors"), along with its financial adviser, Lincoln
International LLP ("Lincoln"), reviewed several strategic options, including a
potential sale of the Company.  While the Company has had positive engagement
with several potentially interested parties, some of the parties made
proposals that were not deemed by the Board to be deliverable on an acceptable
timescale. None of the proposals involved an offer for the whole Company.

·      The Company, however, received a deliverable offer for ITSFL from
Baaj Capital LLP ("Baaj"), a UK-based, private family office.  This offer
included a pre-condition that Adam Frisby agreed to take an equity position in
ITS Holdings 2023 Limited ("Bidco"), a newly established company formed for
the purposes of the Sale, equivalent to his current holding in the Company and
to also become Chief Executive Officer of ITSFL on completion of the Sale
("Completion").

·      Considering, amongst other factors, the comprehensive review of
options undertaken as part of the Strategic Review, the Company's near-term
trading environment, its current liquidity position and Baaj's scale and
extensive sector expertise, the Directors other than Adam Frisby (the
"Independent Directors") have unanimously concluded that it is in the best
interests of the Company, its Shareholders and other stakeholders to sell
ITSFL to Bidco.

·      The Independent Directors therefore intend to recommend that
Shareholders approve the Sale for a total cash consideration of £1.2 million,
which is payable on Completion.

·      Each of Nancy Cruickshank, Adam Bellamy and Matthew Scaife,
non-executive directors of the Company, will also step down from the Board on
Completion without pay in lieu of notice.

·      The Company proposes to change its name to Itsum plc on
Completion to avoid any confusion with the "In The Style" brand and to reflect
the Company becoming a cash shell for the purposes of Rule 15 of the AIM Rules
for Companies (the "AIM Rules").

·      The Sale constitutes a fundamental change of business for the
purposes of Rule 15 of the AIM Rules and a substantial property transaction
for the purposes of section 190 of the Companies Act 2006 (the "Act") and is
therefore conditional upon the approval of the Company's shareholders
("Shareholders") in general meeting.

·      In addition, the Company is seeking the approval of Shareholders
to cancel the admission of the issued ordinary shares of £0.0025 each in the
capital of the Company ("Ordinary Shares") to trading on the AIM market of
London Stock Exchange plc ("AIM") following Completion (the "Cancellation").

Jim Sharp, Chair of In The Style, commented:

"Following a thorough review of different strategic options with our advisers
and interactions with numerous parties, the Independent Directors have
unanimously concluded that it is in the best interests of the Company, its
Shareholders and its stakeholders to sell In The Style Fashion Limited to
Bidco.

"The Independent Directors therefore believe that under the new ownership
structure - with Adam's continued leadership and Baaj's backing - the In The
Style brand can continue to build on its potential whilst protecting the
interests of the Group's employees, suppliers and other stakeholders."

 

Enquiries:

 

In The Style Group
plc
Via Hudson Sandler

Jim Sharp, Chairman

Rich Monaghan, Chief Financial Officer

 

Hudson
Sandler
+44 (0)20 7796 4133

Alex
Brennan
inthestyle@hudsonsandler.com

Ben Wilson

 

Lincoln International LLP (Financial
Adviser)                           +44 (0)20 7022
9880

Harry Kalmanowicz

Julian Tunnicliffe

 

Liberum Capital Limited (Nomad and
Broker)                           +44 (0)20 3100
2000

Clayton Bush

Scott Mathieson

Miquela Bezuidenhoudt

 

 

 

 

Background to and reasons for the Sale

On 8 December 2022, the Company announced its intention to conduct a strategic
review of its business.  As the Strategic Review included a potential offer
for the whole Company it was conducted under the Code.  Lincoln was appointed
to assist with that process.  The Board instructed Lincoln to review
strategic options including equity and debt financing and a potential sale of
the Company or some or all of the Group's business and assets.

Since that date, Lincoln approached or was approached by a significant number
of parties, many from outside the United Kingdom, interested in a variety of
potential transactions involving the Company or ITSFL. Approximately half of
these parties were potential strategic buyers and half potential financial
buyers.

The performance of the Company deteriorated, as announced in the trading
update on 20 January 2023. The Group's cash position has fallen from £3.2
million at 31 December to £0.9 million at 28 February.  While the Company
has had positive engagement with several potentially interested parties, some
of the parties made proposals that were not deemed by the Board to be
deliverable on an acceptable timescale. None of the proposals involved an
offer for the whole Company.

The Company did, however, receive interest in acquiring ITSFL from a UK-based
private family office, Baaj.  After conducting its due diligence on ITSFL,
Baaj made an offer for ITSFL which included a pre-condition that Adam Frisby
agreed to maintain an equity position in Bidco equivalent to his current
holding in the Company and become the Chief Executive Officer of ITSFL.

Considering, amongst other factors, the comprehensive review of options
undertaken as part of the Strategic Review, the Company's near-term trading
environment, its current liquidity position and Baaj's extensive sector
expertise, the Independent Directors have unanimously concluded that it is in
the best interests of the Company, its shareholders and other stakeholders to
sell ITSFL to Bidco.

Consequently, on 6 March 2023, the Company and Bidco entered into a sale and
purchase agreement (the "Sale Agreement") pursuant to which the Company has
conditionally agreed to sell the entire issued share capital of ITSFL to
Bidco. Further details of the Sale Agreement, Baaj and Bidco are set out
below.

Accordingly, the Company has terminated the Strategic Review and, as such, the
Company is no longer in an offer period (as defined in the Code).

Current trading

The trading environment through January and February remained challenging as
was anticipated following the Christmas period, reflecting cost-of-living
pressures on our customers, high levels of markdown and a reduction in
wholesale demand.

As was stated in the Company's trading update on 20 January 2023, the Board
expects revenue for the full year to 31 March 2023 to be in the region of £46
million. The adjusted EBITDA loss for the year is likely to be towards the
higher end of the previously guided range of between £4.25 million to £4.75
million.

The Company's cash position at 31 December 2022 and 28 February 2023 was £3.2
million and £0.9 million respectively. At both dates, the invoice discounting
facility of £0.4 million remained undrawn. As a result of this expected
reducing cash balance and the expectation that the trading environment will
remain challenging in the near term, the Board is of the opinion that, in the
absence of raising further funds or Completion, there would be no alternative
other than the Company and ITSFL to enter into administration or some other
form of insolvency procedure in due course.

 

Information on ITSFL

ITSFL, which is a wholly-owned, direct subsidiary of the Company, is the
Group's only operating business.  "In the Style" is an inclusive online
women's clothing brand, differentiated by its innovative social media
influencer collaborations and engaging brand campaigns on key issues that
matter to the Group's customers.

For the year ended 31 March 2022, ITSFL had revenue of £57.3 million and made
an operating loss of £1.5 million.  ITSFL's net assets at 31 March 2022 were
£0.6 million.

Information on Baaj and Bidco

Baaj

Baaj is a situational investor with a particular focus on retail, wholesale
and manufacture. It has investments in a range of businesses across the UK
where it works with existing management teams and owners.

Bidco

Bidco is a newly established company incorporated in England and Wales and
formed solely for the purposes of acquiring ITSFL. As at the date of this
announcement, it is wholly-owned by Jaswinder Singh, the founder and principal
of Baaj, however, Adam Frisby has agreed, conditional only upon Completion, to
subscribe for new equity in the capital of Bidco representing approximately 23
per cent. of the voting rights of Bidco.

Further details of the Sale

On 6 March 2023, the Company and Bidco entered into the Sale Agreement
pursuant to which the Company has conditionally agreed to sell the entire
issued share capital of ITSFL to Bidco.

The consideration under the Sale Agreement is £1.2 million in cash, payable
on Completion.

The Sale Agreement only contains warranties on the Company's title, authority
and capacity and its liability thereunder is limited to £1.2 million.

On Completion, the Company will cease to own, control or conduct all of its
existing trading business, activities and assets and, therefore, the Sale
constitutes a fundamental change of business for the purposes of Rule 15 of
the AIM Rules.

In addition, due to Adam Frisby's interest in Bidco, the Sale also constitutes
a substantial property transaction for the purposes of section 190 of the Act.

Accordingly, the Sale Agreement is conditional upon the approval of the
Company's Shareholders in a general meeting (the "General Meeting").  A
circular (the "Circular") containing, amongst other things, further details of
the Sale, the Independent Director's recommendation to vote in favour of the
resolution approving the Sale for the purposes of Rule 15 of the AIM Rules and
section 190 of the Act (the "Sale Resolution") and the notice convening the
General Meeting will be published by the Company as soon as practicable.  The
Sale Resolution will be proposed as an ordinary resolution of the Company.

Assuming the Sale Resolution is duly passed by Shareholders, it is expected
that Completion will take place the following business day.

 

 

AIM Rule 15 and use of proceeds

AIM Rule 15

Following Completion, the Company will become a cash shell for the purposes of
Rule 15 of the AIM Rules and as such would be required to make an acquisition
or acquisitions which constitutes a reverse takeover under Rule 14 of the AIM
Rules (including seeking re-admission as an investing company (as defined in
the AIM Rules)) on or before the date falling six months from Completion or be
re-admitted to trading on AIM as an investing company under the AIM Rules
(which requires the raising of at least £6 million) (a "Rule 14 Transaction")
failing which, the Company's Ordinary Shares would then be suspended from
trading on AIM pursuant to Rule 40 of the AIM Rules.  Admission to trading on
AIM would be cancelled six months from the date of suspension should the
reason for the suspension not have been rectified.

Use of proceeds

The net proceeds of the Sale receivable by the Company are expected to be
approximately £500,000 (the "Net Proceeds").

The Company does not intend to enter into a Rule 14 Transaction but instead to
seek to return the Net Proceeds to Shareholders, net of expenses, in the most
cost-effective and efficient manner as soon as practicable.  Accordingly, the
Company will be seeking the approval of Shareholders for the Cancellation at
the General Meeting (the "Cancellation Resolution" and together with the Sale
Resolution, the "Resolutions"), further details of which are set out below.
The Cancellation Resolution will be conditional upon the passing of the Sale
Resolution and Completion.

At this stage, the Company expects any distribution to be conducted through a
members voluntary liquidation of the Company as it does not have the available
distributable reserves to declare and pay a dividend nor would it want to
incur additional costs by conducting a return of capital.

The Cancellation

The Independent Directors have concluded that, on the basis that the Company
would become an AIM Rule 15 cash shell with no trading business on Completion,
it is in the best interests of the Company and its Shareholders to seek
Shareholders' approval to cancel the admission of the Company's Ordinary
Shares to trading on AIM.  In accordance with Rule 41 of the AIM Rules, the
Company has notified the London Stock Exchange of the proposed Cancellation.

Assuming the passing of the Cancellation Resolution, which will be conditional
upon the passing of the Sale Resolution and Completion, it is expected that
the Cancellation will take place 20 business days from the day following this
announcement.

Pursuant to Rule 41 of the AIM Rules, the Cancellation Resolution requires the
approval of not less than 75 per cent. of the votes cast by Shareholders
(whether present in person or by proxy) at the General Meeting.

The Independent Directors have considered the benefits and disadvantages to
the Company and its Shareholders in retaining its admission to trading on
AIM.  The Independent Directors believe that the Cancellation is in the best
interests of the Company and its Shareholders as a whole.  Following the
Sale, the Company will have no trading business and very limited cash
resources which the Company intends to distribute through a members voluntary
liquidation.

Given the Company's intention to liquidate the Company as soon as reasonably
practicable following the Sale and the Cancellation, no matched bargain
facility will be implemented and there will be no formal market for
Shareholders to effect transactions in the Ordinary Shares following
Cancellation.

The principal effects of the Cancellation will be that:

●          there will be no public market on any recognised
investment exchange or multilateral trading facility for the Ordinary Shares
and, consequently, there can be no guarantee that a Shareholder will be able
to purchase or sell any Ordinary Shares;

●          while the Ordinary Shares will remain freely
transferable, it is likely that the liquidity and marketability of the
Ordinary Shares will, in the future, be more constrained than at present and
the secondary market value of such Ordinary Shares may be adversely affected
as a consequence;

●          in the absence of a formal market and quote, it may be
more difficult for Shareholders to determine the market value of their
investment in the Company at any given time;

●          the regulatory and financial reporting regime applicable
to companies whose shares are admitted to trading on AIM will no longer apply;

●          the levels of disclosure and corporate governance within
the Group may not be as stringent as those for a Company quoted on AIM;
however the Company will continue to be subject to the Code for a period of at
least 10 years from the date of Cancellation;

●          Shareholders will no longer be afforded the protections
given by the AIM Rules, such as the requirement to be notified of certain
events and the requirement that the Company seek shareholder approval for
certain corporate actions, where applicable, including substantial
transactions, financing transactions, reverse takeovers, related party
transactions and fundamental changes in the Company's business, including
certain acquisitions and disposals;

●          in order to increase the cost saving by becoming a
private company, following the Cancellation, the Company will no longer be
obligated to produce and publish half-yearly reports and related financial
statements;

●          the Company will cease to have a nominated adviser and
broker;

●          whilst the Company's CREST facility will remain in place
following the Cancellation, the Company's CREST facility may be cancelled in
the future and, in that event, although the Ordinary Shares will remain
transferable, they will cease to be transferable through CREST.  In this
instance, Shareholders who hold Ordinary Shares in CREST will receive share
certificates; and

●          the Cancellation may have taxation consequences for
Shareholders.  Shareholders who are in any doubt about their tax position
should consult their own professional independent tax adviser.

Shareholders should be aware that if the Cancellation takes effect, they will
at that time cease to hold shares in a quoted company and will become
Shareholders in an unquoted company which will be likely significantly to
reduce the marketability and liquidity of the Ordinary Shares and the
principal effects referred to above will automatically apply to the Company
from the date of the Cancellation.

The above considerations are not exhaustive, and Shareholders should seek
their own independent advice when assessing the likely impact of the
Cancellation on them.

Board changes

Adam Frisby, the Group's founder and Chief Executive Officer, has agreed to
resign from the Board with effect from Completion.

In addition, given the Company will become an AIM Rule 15 cash shell on
Completion, will have no operating business and will be focussed on protecting
the residual cash remaining in the Company as far as possible, each of Nancy
Cruickshank, Adam Bellamy and Matthew Scaife have agreed to resign from the
Board with effect from Completion without pay in lieu of notice.

As such, on Completion, the Board will comprise Jim Sharp (Non-Executive
Chairman) and Richard Monaghan (Executive Director) who will be responsible
for managing the transition from Completion to completion of the anticipated
members voluntary liquidation.  Given the constraints on the Company, and the
intention to cancel its admission to trading on AIM in the near future, the
Board consider this streamlined approach following Completion to be
appropriate and in the best interests of the Company and its Shareholders.
From Completion, the Remuneration Committee and the Audit and Risk Committee
will be discontinued and the duties and responsibilities which were delegated
to them will revert to the Board.

Change of name

Under the articles of association of the Company, the Board has power to
change the name of the Company without the need for the approval of the
Company's Shareholders.  As such, the Independent Directors have resolved to
change the name of the Company to Itsum plc, conditional upon Completion.

The Company's TIDM, "ITS", will remain unchanged.

Recommendation

The Independent Directors believe that the Sale and the Cancellation are in
the best interests of Shareholders and the Company as a whole and accordingly
intend to recommend that the Shareholders vote in favour of the Resolutions as
they intend to do in respect of their own beneficial shareholdings, which
amount in aggregate to 174,709 Ordinary Shares, representing 0.33 per cent. of
the Company's existing issued share capital.

In addition, Adam Frisby intends to vote in favour of the Resolutions in
respect of his own beneficial shareholding, which amounts in aggregate to
12,103,446 Ordinary Shares, representing 23.05 per cent. of the Company's
existing issued share capital.

Importance of the vote

Shareholders should be aware that if the Sale Resolution is not approved by
Shareholders at the General Meeting, the Sale would not proceed as currently
envisaged and, as such, the anticipated net proceeds of the Sale would not
become available to the Group.  Accordingly, in light of the Group's reducing
cash position and the challenging trading environment, it would be likely that
in due course the Company and ITSFL would not be able to meet their respective
financial obligations as they fall due and there would be no alternative other
than for the Company and ITSFL to enter into administration or some other form
of insolvency procedure under which the prospects for recovery of value, if
any, by Shareholders would be uncertain.

The person responsible for making this announcement on behalf of the Company
is Richard Monaghan, Chief Financial Officer of the Company.

Important notice

Financial and other advisers

Lincoln International LLP ("Lincoln"), which is authorised and regulated in
the United Kingdom by the Financial Conduct Authority, is acting exclusively
as financial adviser to In The Style Group plc and no one else in connection
with the Sale and will not be responsible to anyone other than In The Style
Group plc for providing the protections afforded to clients of Lincoln nor for
providing advice in relation to the Sale or any other matters referred to in
this announcement.  Neither Lincoln nor any of its affiliates owes or accepts
any duty, liability or responsibility whatsoever (whether direct or indirect,
whether in contract, in tort, under statute or otherwise) to any person who is
not a client of Lincoln in connection with this announcement, any statement
contained herein or otherwise.

Liberum Capital Limited ("Liberum"), which is authorised and regulated in the
United Kingdom by the Financial Conduct Authority, is acting exclusively as
nominated adviser and corporate broker to In The Style Group plc and no one
else and will not be responsible to anyone other than In The Style Group plc
for providing the protections afforded to clients of Liberum nor for providing
advice in relation to any matters referred to in this announcement.  Neither
Liberum nor any of its affiliates owes or accepts any duty, liability or
responsibility whatsoever (whether direct or indirect, whether in contract, in
tort, under statute or otherwise) to any person who is not a client of Liberum
in connection with this announcement, any statement contained herein or
otherwise.

General

This announcement is for information purposes only and does not constitute or
form part of any offer to issue or sell, or the solicitation of an offer to
acquire, purchase or subscribe for, any securities in any jurisdiction and
should not be relied upon in connection with any decision to subscribe for or
acquire ordinary shares in the capital of the Company.  In particular, this
announcement does not constitute or form part of any offer to issue or sell,
or the solicitation of an offer to acquire, purchase or subscribe for, any
securities in the United States.

This announcement has been issued by, and is the sole responsibility of, the
Company.  No person has been authorised to give any information or to make
any representations other than those contained in this announcement and, if
given or made, such information or representations must not be relied on as
having been authorised by the Company.

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

This announcement may include statements that are, or may be deemed to be,
"forward-looking statements". These forward-looking statements can be
identified by the use of forward-looking terminology, including the terms
"believes", "estimates", "plans", "projects", "anticipates", "expects",
"intends", "may", "will", "would" or "should" or, in each case, their negative
or other variations or comparable terminology. These forward-looking
statements include matters that are not historical facts. They appear in a
number of places throughout this announcement and include statements regarding
the directors of the current Company's intentions, beliefs or expectations
concerning, among other things, the Company's results of operations, financial
condition, liquidity, prospects, growth, strategies, and the Company's
markets. By their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances. Actual
results and developments could differ materially from those expressed or
implied by the forward-looking statements. Forward-looking statements may and
often do differ materially from actual results. Any forward-looking statements
in this announcement are based on certain factors and assumptions, including
the directors of the Company's current view with respect to future events and
are subject to risks relating to future events and other risks, uncertainties
and assumptions relating to the Company's operations, results of operations,
growth strategy and liquidity. Whilst the directors of the Company consider
these assumptions to be reasonable based upon information currently available,
they may prove to be incorrect. Save as required by applicable law, the AIM
Rules or the Disclosure Guidance and Transparency Rules of the Financial
Conduct Authority, the Company undertakes no obligation to release publicly
the results of any revisions to any forward-looking statements in this
announcement that may occur due to any change in the directors of the
Company's expectations or to reflect events or circumstances after the date of
this announcement.

Neither the content of the Company's website nor any website accessible by
hyperlinks to the Company's website is incorporated in, or forms part of, this
announcement.

Certain figures contained in this announcement, including financial
information, have been subject to rounding adjustments. Accordingly, in
certain instances, the sum or percentage change of the numbers contained in
this announcement may not conform exactly with the total figure given.

All references to time in this announcement are to London time, unless
otherwise stated.

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