REG - Sondrel (Holdings) - Subscription and Posting of Circular
14/05/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240514:nRSN2567Oa&default-theme=true
RNS Number : 2567O Sondrel (Holdings) plc 14 May 2024
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) 596 / 2014 which forms part of United Kingdom law by virtue of the
European Union (Withdrawal) Act 2018. Upon the publication of this
announcement, this inside information is now considered to be in the public
domain.
14 May 2024
Sondrel (Holdings) plc
("Sondrel", the "Company" and together with its subsidiaries the "Group")
Conditional Subscription to raise £5.6 million
Proposed Board Changes
Proposed approval of waiver of the obligations under Rule 9 of the Takeover
Code
Posting of Circular and Notice of General Meeting
Sondrel (AIM: SND), a leading provider of ultra-complex chips for leading
global technology brands, announces, further to the Company's notification of
28 March 2024, that it has conditionally raised gross proceeds of £5,625,400
pursuant to a subscription by ROX Equity Partners Limited for 56,254,000 New
Ordinary Shares at the Issue Price of 10 pence per New Ordinary Share.
Furthermore, pursuant to the terms of the ROX Loan Agreements entered into on
5 March 2024 and 28 March 2024 respectively, upon completion of the
Fundraising, the principal sums of the ROX Loan Agreements will convert into
28,746,000 New Ordinary Shares.
A circular, containing further details of the Fundraising and Notice of
General Meeting to be held at 10:00 a.m. on 30 May 2024 is expected to be
published and despatched to Shareholders on or around 14 May 2024 (the
"Circular").
A copy of the Circular and the Notice of General Meeting is available on the
Company's website at
https://ir.sondrel.com/investors/shareholder-information#notices
(https://ir.sondrel.com/investors/shareholder-information#notices) and defined
terms used in this announcement are set out at the end of the announcement.
The General Meeting has been called in order to put to Shareholders the
Resolutions required to approve the Rule 9 Waiver, complete the Fundraising
and, if required, the Additional Fundraising.
Transaction Summary
· Subscription by ROX to raise £5,625,400 (before expenses) via the
conditional issue of New Ordinary Shares at the Issue Price.
· Pursuant to the terms of the ROX Loan Agreements, upon completion of
the Fundraising, the ROX Loan Agreements will convert into 28,746,000 New
Ordinary Shares.
· The Fundraising is conditional upon Shareholders approving the Rule 9
Waiver Resolution and the NSIA Approval. If these approvals are not obtained
the Fundraising will not proceed.
· The Takeover Panel has been consulted and has agreed, subject to the
passing of the Rule 9 Waiver Resolution at the General Meeting, to waive the
obligation of ROX to make a mandatory offer for the Ordinary Shares in the
capital of the Company not already owned by them.
· Assuming the Regulatory Approvals are received for the Fundraising
and conditional upon Admission, ROX will hold 85,000,000 Ordinary Shares,
representing 49.29% of the Enlarged Share Capital.
· The Company has entered into a relationship agreement with ROX,
conditional upon Admission and effective for so long as ROX (together with its
associates and any persons acting in concert with it) holds 20% or more of the
voting rights of the Company;
· It is expected that the following board changes will take effect on
Admission:
o Nigel Vaughan will retire from his position as Non-Executive Chairman and
step down as a director of the Company;
o David Mitchard will become Chairman and, until such time as a suitable
candidate can be found, will continue his role as interim Chief Executive
Officer;
o Fred Walsh, currently Managing Director of Investment Banking at Stifel
Nicolaus Europe Limited, will be appointed as an Independent Non-Executive
Director; and
o Miles Woodhouse will be appointed as a Non-Executive Director as ROX's
appointed director.
· The Company requires the Fundraising in order to continue to operate.
The net proceeds of the Fundraising (assuming the Regulatory Approvals are
received), will be used to settle existing creditors, meet the Company's
immediate working capital requirements and execute the Transformation Plan as
announced on 28 March 2024.
The Board, having been so advised by Cavendish Capital Markets Limited
("Cavendish"), consider the terms of the Fundraising and the Proposals to be
in the best interests of Shareholders taken as a whole. Accordingly, the Board
unanimously recommends that Shareholders vote in favour of the Resolutions to
be proposed at the General Meeting, as the Directors have irrevocably
undertaken to do in respect of their own beneficial holdings (and, in the case
of Graham Curren, the holdings of persons connected with him), amounting as at
the Reference Date in aggregate to 40,390,736 Ordinary Shares, representing
approximately 46.18% of the Existing Ordinary Shares.
Admission, Settlement, Dealings and Total Voting Rights
The New Ordinary Shares will, when issued, be credited as fully paid up and
will 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 on or in respect of the Ordinary Shares after the date of issue
of the New Ordinary Shares, and will on issue be free of all claims, liens,
charges, encumbrances and equities.
Application will be made to the London Stock Exchange for the admission of the
New Ordinary Shares to trading on AIM. Admission of the New Ordinary Shares to
trading on AIM is expected to occur at 8.00 a.m. on 31 May 2024 (or such later
times(s) and/or date(s) as ROX and the Company may agree, being no later than
8.00 a.m. on 13 June 2024).
Following Admission, the total number of Ordinary Shares in the capital of the
Company in issue is expected to be 172,461,772 with each Ordinary Share
carrying the right to one vote. There are no Ordinary Shares held in treasury
and therefore the total number of voting rights in the Company is expected to
be 172,461,772. The above figure may be used by Shareholders in the Company as
the denominator for the calculations by which they will determine if they are
required to notify their interest in, or a change to their interest in, the
share capital of the Company under the FCA's Disclosure Guidance and
Transparency Rules.
For further information:
Sondrel (Holdings) plc Via Buchanan
David Mitchard, Interim CEO Tel: +44 (0) 20 7466 5000
Nick Stone, Interim CFO
Cavendish Capital Markets Limited Tel: +44 (0) 20 7220 0500
Ben Jeynes / Katy Birkin / George Lawson - Corporate Finance
Michael Johnson / Charlie Combe - Sales and ECM
Buchanan Communications Tel: +44 (0) 20 7466 5000
Chris Lane / Stephanie Whitmore / Abby Gilchrist sondrel@buchanan.uk.com (mailto:sondrel@buchanan.uk.com)
About Sondrel
Sondrel is a UK-based fabless semiconductor company specialising in high end,
complex digital Application Specific Integrated Circuits (ASICs) and System on
Chips (SOCs). It provides a full turnkey service in the design, prototyping,
testing, packaging and production of ASICs and SoCs.
The Company is one of only a few companies capable of designing and supplying
the higher-spec chips built on the most advanced semiconductor technologies,
selling into a range of hyper growth end markets such as high-performance
computing, automotive, artificial intelligence, VR/AR, video analytics, image
processing, mobile networking and data centres. Sondrel designs have enabled
products by leading technology brands including Apple (iPhone), Sony
(PlayStation), Meta's (Oculus), Samsung, Google and Sony smartphones, JVC
(prosumer camcorders), Tesla and Mercedes-Benz cars.
Sondrel is well-established, with a 20-year track record of successful
delivery, supported by long standing ecosystem partnerships including Arm,
TSMC and Samsung. Headquartered in the UK, Sondrel has a global presence with
offices in UK, USA, China, India and Morocco.
For more information please visit: ir.sondrel.com
(http://www.ir.sondrel.com/) .
BACKGROUND TO, AND REASONS FOR, THE FUNDRAISING
Sondrel business overview
Sondrel is a UK founded and headquartered, AIM quoted, fabless semiconductor
business providing turnkey services in the design and delivery of complex,
high end 'application specific integrated circuits' ("ASICs") and 'system on
chips' ("SoCs") for leading global technology brands. Sondrel's capabilities
are provided to customers seeking competitive advantage by including
customised ASIC/SoC devices enabling differentiation of their end products
when addressing fast growth technology megatrends.
Sondrel delivers complex ASIC/SoC designs on a consultancy and/or project
basis for a wide range of leading multi-national corporate customers. The
high-end complex ASICs/SoCs designed and supplied by Sondrel to its customers
and Sondrel's previous designs have been included in well-known products such
as Apple iPhone, Sony PlayStation, Meta's Oculus Quest virtual reality
headset, Samsung, Google and Sony smartphones, JVC prosumer camcorders and
Tesla and Mercedes-Benz cars.
Sondrel has transitioned its business model to provide a full turnkey ASIC
design and supply service for its customers. This includes contracting for the
manufacture, testing and production of ASICs as well as previously offered
design and production consulting. Although the testing, packaging, and other
capital-intensive engineering functions necessary for production of an ASIC
will continue to be outsourced to third parties, Sondrel provides the product
engineering and manages the complex manufacturing process by engaging third
parties directly.
Reasons for the Fundraising
On 28 December 2023, and further detailed below, Sondrel announced that the
Company would need to secure additional capital prior to end of March 2024 to
provide a more permanent solution to meet the Company's short-term working
capital requirements. This message was repeated in the Company's statements of
10 January 2024 and 5 February 2024. On 27 February 2024, Sondrel announced
that it would "…now require additional capital by the end of February 2024,
in order inter alia, to meet payroll and other working capital requirements".
The Company took the decision to carry out the Fundraising to provide a more
permanent solution to meet the Group's short-term working capital
requirements. The Company requires the Fundraising in order to continue to
operate.
On 1 March 2024, the Company announced "that discussions with a potential
provider of capital to meet the Group's immediate working capital requirements
are now at a very advanced stage in respect of a proposed £0.9 million
secured 15% convertible loan note".
Subsequently, on 6 March 2024, Sondrel announced that it had, amongst other
things, entered into the Exclusivity Agreement with ROX pursuant to which,
subject to the satisfaction of a number of conditions (including the Rule 9
Waiver), ROX would subscribe for up to 65,000,000 new Ordinary Shares at a
price of 10 pence per Ordinary Share. On the same day, the Company announced
that it had entered into the First ROX Loan Agreement with ROX in order to
assist the Company in meeting the Group's February 2024 payroll and certain
overdue supplier obligations.
On 28 March 2024, the Company announced that it had entered into the Second
ROX Loan Agreement, the proceeds of which would be utilised to enable the
Group to meet its March and April 2024 payroll and immediate working capital
requirements. On the same day, the Company announced that the Exclusivity
Agreement had been further amended so that ROX would subscribe for up to
85,000,000 Ordinary Shares at 10 pence per Ordinary Share. In addition, if
during the 12-month period following the Fundraising the Company were to
require additional funding to finance the Transformation Plan detailed in the
paragraph headed 'Transformation Plan' below, ROX may (if approved by ROX)
subscribe for an additional 15,000,000 shares at 10 pence per Ordinary Share.
The Fundraising is subject to the Rule 9 Waiver Resolution being passed at the
General Meeting and receiving NSIA Approval.
The Fundraising will provide the Company with sufficient working capital
required to meet its working capital needs and to execute its Transformation
Plan detailed below.
CURRENT TRADING
On 28 December 2023, the Company announced the following update:
"Although continued progress has been made with regard to the ASIC project
with a Tier 1 automotive OEM, £1.7m of payments for the achievement of a
significant milestone under the contract initially expected to be received in
December 2023 have been subject to an unexpected delay and are now expected to
be received during January and February 2024. This automotive contract will
not now achieve the next milestone, being tape out, until late Q1 2024 and
will require additional resource to complete, the funding for which is
currently under discussion with the customer.
Significant new ASIC business opportunities are in final negotiation for
project start in early 2024 and indications remain encouraging that European
and US market demand for Sondrel's turnkey ASIC services is strong.
However, as a consequence of the above delay, the cash position of the Group
has further declined during December 2023. Sondrel was unable to meet December
2023 payroll in full and therefore the Company's Directors and senior
management agreed to defer their salaries and fees until such time as the
delayed funds are received. Sondrel asked certain employees to defer on the
same basis, and was pleased that in excess of 67% of Group staff agreed to
full deferral, with a significant additional number agreeing to partial
deferral.
With a view to managing Group liquidity, negotiations are underway with
suppliers to improve the terms of existing supply arrangements. The Group will
need to secure additional capital prior to the end of March 2024 to provide a
more permanent solution to meet the Company's short-term working capital
requirements. However, should the delayed payments not be received through
January and February 2024, the Group will need to secure this funding in
shorter order."
On 10 January 2024 the Company announced the following update:
"… It is therefore expected that revenue associated with the automotive
project of approximately £2.7m will instead now be recognised in the year
ending 31 December 2024 ("FY24"). This revenue includes the £1.7m that is now
expected to be received in January and February 2024, as per the announcement
on 28 December 2023.
As a result, reported FY23 revenue is now expected to be materially lower than
previous expectations* at approximately £10m. There will also be a
corresponding impact on reported FY23 loss before tax due to the delay and
also the additional resources and cost in advancing the project. …
* Current consensus analyst forecasts are for FY23 revenues of £13.0 million
and an adjusted loss before tax of £6.0 million."
The current consensus analyst forecasts have not changed since 10 January 2024
and are for FY23 revenues of £10 million. ((1))
( )
((1) For the purposes of rule 28 of the Takeover Code, the Directors confirm
that this forecast consensus remains valid.)
On 5 February 2024 the Company announced the following update:
"Sondrel… is pleased to confirm that it has received £1.5 million of
payments in relation to the material turnkey ASIC engagement with its
automotive Tier 1 supplier in January 2024, further to the announcement of 10
January 2024.
As a result, previously deferred December 2023 Group payroll has been met
along with January 2024 Group payroll and certain creditor payments.
Discussions with the customer over resolution of the funding for the project
extension continue and additional payments are expected in the coming months,
assuming completion of the 'tapeout' milestone and including the balance of
£0.2 million.
Significant new ASIC business opportunities are in final negotiation for
project start in early 2024 and indications remain encouraging that European
and US market demand for Sondrel's turnkey ASIC services is strong.
Negotiations remain ongoing with suppliers to improve the terms of existing
supply arrangements but the Group continues to need to secure additional
capital prior to the end of March 2024 to provide a more permanent solution to
meet the Company's short-term working capital requirements."
On 27 February 2024 the Company announced the following update:
"Sondrel… is pleased to announce that it has won a new design and supply
contract for a next generation video processing chip with a total estimated
value of US$23 million across the design, qualification and projected
production life of the product.
The complex chip is to be used for high performance professional video
streaming solutions. The Company has entered into the master agreement with
the customer and design work has commenced whilst the parties finalise
negotiations to the exhibits to the agreement.
The initial contract value is for over US$9 million for the duration of the
design and qualification phases and the work will be fully funded by the
customer.
Chip production and supply are anticipated to start in 2026 and, subject to
successful tapeout and qualification of prototypes, the contract is expected
to generate production revenue of US$14 million, over 10 to 15 year production
lifetime of the product, based on current customer forecasts.
The Company also reports that it has received four new orders in 2024 year to
date for its design consulting services, engaging with two existing customers
and two new customers. These contracts will generate a combined revenue of
US$0.9 million in the current financial year.
Further to the announcement on 5 February 2024, negotiations with the
Company's largest supplier to improve the terms of existing and future supply
arrangements are now well advanced and have secured an agreement in principle.
Discussions with other suppliers are positive and remain ongoing.
Notwithstanding the progress made, negotiations with the Company's largest
supplier have been slower than originally anticipated and the Group will now
require additional capital by the end of February 2024, in order to inter
alia, meet payroll and other short-term working capital requirements. The
Company is in advanced discussions with a potential provider of capital which
would serve to extend this working capital runway."
On 1 March 2024 the Company announced the following update:
"Further to the announcement on 27 February 2024, Sondrel confirms that
discussions with a potential provider of capital to meet the Group's immediate
working capital requirements are now at a very advanced stage in respect of a
proposed £0.9 million secured 15% convertible loan note (the "CLN").
If agreed between the parties, the CLN would be mandatorily convertible into
new ordinary shares in the Company at a price of 10 pence per new ordinary
share on completion of a wider fundraise by the Company to raise net proceeds
of not less than c.£6 million (the "Fundraise"). The provider of the CLN is
expected to invest a further material equity amount in the Fundraise, which is
intended to be completed prior to the end of March 2024.
The Fundraise is expected to provide the Company with the necessary working
capital resources to support it through to a positive trading cash flow
position in the year ending 31 December 2024 ("FY24").
Whilst the CLN is expected to be secured imminently, the Company cautions that
the provision of the CLN remains subject to agreement between the parties. The
Company will not be able to meet February 2024 payroll in full prior to
receipt of CLN proceeds."
On 6 March 2024 the Company announced its entry into the First ROX Loan
Agreement and the Exclusivity Agreement and on 28 March 2024 it announced its
entry into the Second ROX Loan Agreement and that it had agreed an amendment
to the Exclusivity Agreement such that the size of the proposed Fundraising
was increased from £6.5 million to £8.5 million. The ROX Loan Agreements
were entered into to in order to assist the Company in meeting its immediate
working capital requirements.
Further to its announcement on 27 February 2024, the Company announced on 27
March 2024 that it had concluded negotiations with the Company's largest
supplier referenced in the 27 February 2024 announcement and provided the
following information in respect of the outcome of the negotiations:
" …. it has now concluded negotiations with a supplier (the "Supplier") in
respect of existing and future supply arrangements under an addendum to an
existing supply contract ("Addendum").
Under the Addendum, contract minimum utilisation levels have been reduced to
bring them in line with the Company's current license usage rates until 2025
and are expected to increase thereafter in line with usage over the life of
the contract as Sondrel scales. Payments will be made quarterly according to
utilisation and licence bundles drawn down. Historical license fee liabilities
currently owed by the Company to the Supplier are to be paid in equal monthly
instalments of US$0.2m up to April 2027 and total cash payments to the
Supplier are expected to not exceed US$1.9 million in 2024."
The attention of Shareholders is drawn to the principal risks and
uncertainties of the Group detailed on pages 11 to 12 of the Company's 2022
Annual Report and Accounts published on 24 May 2023.
TRANSFORMATION PLAN
On 28 March 2024, the Company announced that it has resolved to adopt a
Transformation Plan, which is currently expected to be fully implemented
within six months from its adoption on 28 March 2024 based on the outcomes
of ROX's due diligence into the Group carried out in connection with their
proposed investment in the Company. The Transformation Plan will assist the
Company in re-establishing its baseline costs, introducing revised robust
management processes and refocusing the business to resolve matters that are
central to the cash flow issues faced by the Group to date.
Through the Transformation Plan, the Company will continue to focus on the
Group's core customer and supplier relationships and believes that the changes
proposed at Board and managerial levels outlined in paragraph 5 of Part I
(Letter from the Chairman) in the Circular will provide the Company with the
breadth and depth of expertise to execute its plan.
The Company recognises the need to strengthen the management of projects and
to further develop its intellectual property to ensure that it maintains and
strengthens its capability to deliver projects efficiently utilising the most
advanced technologies.
The Company attaches great importance to the skills and experience of the
Group's employees and recognises the contribution that they have made to date
and believes that a greater focus on the management of the projects coupled
with the increased development of intellectual property will enable strong
growth in the target markets. The Company intends to review the Group's
current incentivisation structure and establish a revised scheme for its
employees.
In the long term, the Company will look to revise its growth strategy focusing
on learned experiences and will seek growth opportunities including via
strategic acquisitions.
The Company is currently undertaking a review to reduce its cost base and
increase its revenue. The review will include the Company assessing the most
efficient use of the locations in which the Group operates and the Group's
headcount. The initial review has been completed and resulted in 13 employees
being made redundant at the end of April.
As part of the Transformation Plan the Company has resolved (including by
unanimous approval of the independent Non-Executive Directors) to seek a
proposal to cancel the admission of the Ordinary Shares to trading on AIM
("Cancellation") in such manner that would allow an orderly exit for those
shareholders who do not wish to hold shares in a private company environment,
where a trading facility will not be offered. The Company and ROX are of the
opinion that the costs and complexities of being quoted on AIM do not benefit
the Company and its Shareholders during a period where the business is
undergoing transformation. It is anticipated that a Cancellation resolution
will be put to Shareholders within six months of completion of the
Fundraising.
BOARD AND MANAGEMENT CHANGES
On 28 March 2024, it was announced that Graham Curren would transition from
his role as Chief Executive Officer of the Company and on completion of the
Fundraising would become Chief Executive Officer of a newly established
subsidiary of the Company. However, following the announcement of 28 March
2024, it has been agreed instead that on completion of the Fundraising, Mr
Curren will become Chief Executive Officer of Sondrel Ventures Ltd, an
existing subsidiary of the Company incorporated in the UK. Sondrel Ventures
Ltd will concentrate on the strategy and growth of the Group including
acquisition opportunities in the semiconductor value chain. In this new role,
Graham's significant experience and relationships with participants in the
semiconductor industry will continue to deliver value to the Company. Graham
will retain his role as a statutory director on the board of the Company,
however, with effect from 2 April 2024, Graham has moved to a Founder and
Non-Executive Director role as further detailed in paragraphs 13.1 and 13.2 of
Part II (Takeover Code Disclosures for the Purpose of the Rule 9 Waiver) of
the Circular.
On 2 April 2024, David Mitchard was appointed by the Company as interim Chief
Executive Officer in a non-board capacity. David has more than 20 years'
experience in leading large corporate divisions in complex engineering
environments and successfully implementing turnaround strategies. Most
recently, David was Managing Director of Maritime Services at BAE Systems.
David brings with him a wealth of experience which the Company believes will
benefit its ability to execute the transformation of its business.
In connection with the Transformation Plan, the Company has appointed a
transformation director, in a non-board capacity on an interim basis with
effect from 8 April 2024. It is also expected that the Company will seek to
create additional new managerial roles which may include, amongst others, a
project management director.
Post completion of the Fundraising
It is expected that the following board changes will take effect on Admission:
1. Nigel Vaughan will retire from his position as Non-Executive Chairman
of the Board and as a Non-Executive Director of the Company;
2. David Mitchard will become Chairman of the Board and, until such time
as a suitable candidate can be found, will continue his role as interim Chief
Executive Officer;
3. Fred Walsh will be appointed as a Non-Executive Director of the
Board. Fred is currently Managing Director of Investment Banking at Stifel
Nicolaus Europe Limited, bringing experience from previous roles at Praxonomy,
Panmure Gordon, Arden Partners and Landsbanki. With a robust skill set that
includes Corporate Finance, Investment Banking, Mergers & Acquisitions and
extensive Capital Markets experience in the technology and telecoms sectors,
Fred brings deep expertise in funding for the sector; and
4. Miles Woodhouse will be appointed as a Non-Executive Director of the
Board as ROX's appointed director. Miles brings extensive experience in
building businesses from his years as an entrepreneur and director on the
boards of various UK technology groups. He has particular expertise in turning
operations around through shaping strategy and making tactical acquisitions.
Prior to joining ROX, Miles was the Chief Technology Officer of a £3bn
subsidiary of a global defence business.
Both David Mitchard (once he is no longer interim Chief Executive Officer) and
Fred Walsh will be deemed to be independent Non-Executive Directors alongside
the Company's existing Non-Executive Directors, Sherry Madera and Adrian
Carey. Prior to the Cancellation the Company intends to consider the roles of
all Non-Executive Directors in the Company in connection with the
Cancellation.
Under the terms of the Second ROX Loan Agreement, ROX has the right either to
appoint two directors to the Board or to appoint two observers at meetings of
the Board. As set out above, ROX has nominated Miles Woodhouse to become its
representative director on the Board.
The Company is of the opinion that the revised Board structure will bring a
range of experience to assist it in executing the Transformation Plan and
provide a stable platform to accelerate growth.
Pursuant to the Transformation Plan, the Company will look to bolster
management through appointing a permanent Chief Financial Officer, who will
become a statutory director of the Company.
INTENTIONS OF ROX FOR THE COMPANY
As set out in paragraphs 4 and 5 of Part I (Letter from the Chairman) of the
Circular, it is intended that there will be changes made to the business as
part of the Transformation Plan, including the intention to undertake the
Cancellation and certain board and management changes. ROX notes that
regrettably the Transformation Plan has resulted in a headcount reduction of
13 employees being made redundant at the end of April.
ROX confirms that the Transformation Plan aligns with the outcomes of its due
diligence on the Group and is therefore supportive of the Company's plan.
Except as outlined in paragraphs 4 and 5 of Part I (Letter from the Chairman)
of the Circular, ROX has no intention to change the Company's plans in respect
of:
1. the composition of the Board, the continued management of the Company
and its subsidiaries (including any material change in engagement terms of its
Non-Executive Directors);
2. the continued employment of the employees of the Company and its
subsidiaries, including any material change in the conditions of employment or
in the balance of the skills and functions of the employees;
3. the Company's future business and its strategic, research and
development plans;
4. the location of the Company's headquarters or headquarter functions
or the location of the Company's places of business;
5. the redeployment of the Company's fixed assets; or
6. employer contributions into the Company's pension schemes, the
accrual benefits of existing members and the admission of new members.
ROX does not intend to put any incentivisation arrangements in place for the
Company's management in connection with the Proposals.
The Board considers the Proposals to be in the best interests of the Company
and the Shareholders as a whole and welcome the strategic rationale which
underpins them. The Board also welcome the confirmations from ROX as set out
above.
The Rule 9 Waiver Resolution will be proposed as an ordinary resolution to
approve the Rule 9 Waiver. If the Rule 9 Waiver Resolution is passed by
independent Shareholders on a poll at the General Meeting, the Takeover Panel
will approve the Rule 9 Waiver and, subject to receipt of the NSIA Approval,
will allow the issue of the ROX Subscription Shares and if relevant, the
Additional Fundraising Shares, to ROX without ROX being required to make a
mandatory offer under Rule 9 of the Takeover Code. If ROX were to participate
in the Additional Fundraising, ROX would hold shares carrying more than 50% of
the voting rights of the Company and could accordingly increase its aggregate
interests in Ordinary Shares without incurring any obligation to make an offer
under Rule 9 of the Takeover Code.
USE OF PROCEEDS
The Company has conditionally raised gross proceeds of £5,625,400 by way of
the ROX Subscription. Under the ROX Subscription Letter, ROX has agreed,
subject to the Regulatory Approvals having been received, to subscribe, at the
Issue Price, for 56,254,000 New Ordinary Shares.
The net proceeds of the Fundraising (assuming the Regulatory Approvals are
received), will be used to settle existing creditors, meet the Company's
immediate working capital requirements and execute the Transformation Plan.
CONVERSION OF THE ROX LOANS AND THE ROX SUBSCRIPTION
ROX Loans and ROX Subscription
The total amount expected to be raised in the Fundraising is £8.5 million,
comprising:
· the conversion of the principal sum of the First ROX Loan Agreement,
being £874,600, into 8,746,000 New Ordinary Shares at a price of 10 pence per
share;
· the conversion of the principal sum of the Second ROX Loan Agreement,
being £2 million, into 20,000,000 New Ordinary Shares at a price of 10 pence
per share; and
· the subscription by ROX for 56,254,000 New Ordinary Shares at a price
of 10 pence per share pursuant to the terms of the ROX Subscription Letter.
The Fundraising is conditional upon the Regulatory Approvals outlined below.
Assuming the Regulatory Approvals are received, ROX will upon Admission hold
85,000,000 Ordinary Shares being 49.29% of the Enlarged Share Capital.
The Issue Price of 10 pence per New Ordinary Share represents an approximate
54%premium to the closing middle market price of 4.6 pence per Existing
Ordinary Share on 10 May 2024 (being the last practicable date prior to the
date of the announcement of the Fundraising released by the Company on 14 May
2024).
Additional Financing
Additionally, if the Fundraising completes, the Company could request (but not
require) ROX to invest up to a further £1.5 million by way of a subscription
for up to 15,000,000 Ordinary Shares at a price of 10 pence per share pursuant
to the terms of the Exclusivity Amendment Agreement. In the event that the
Additional Fundraising of £1.5 million is required by the Company in full and
agreed to by ROX, ROX will hold 100,000,000 Ordinary Shares being 53.34% of
the Enlarged Share Capital.
Regulatory Approvals
The Fundraising is conditional upon the Shareholders approving the Rule 9
Waiver Resolution and the NSIA Approval. If approval is not obtained the
Fundraising will not proceed.
Unless and until the NSIA Approval has been received, nothing in the ROX
Subscription Letter or otherwise shall require or allow ROX's interest in the
Company to exceed 25% of its total issued share capital.
The Takeover Panel has agreed to waive the obligation on ROX to make a general
offer to all Shareholders that would otherwise arise pursuant to Rule 9 of the
Takeover Code as referred to above, subject to the approval by the
Shareholders (all of whom are considered independent for this purpose) of the
Rule 9 Waiver Resolution on a poll.
If the Regulatory Approvals are not obtained, ROX will have the option to
convert the ROX Loans into a total of 28,746,000 New Ordinary Shares (being
the ROX Conversion Shares), at the agreed price of 10 pence per New Ordinary
Share but will not subscribe for any further shares under the Subscription
Letter. This will result in ROX's percentage holding in the Company being
24.74% of the share capital of the Company (as enlarged by the ROX Conversion
Shares).
Statutory allotment authorities
The Company entered into the First ROX Loan Agreement on the basis of
statutory authorities to allot shares and securities convertible into Ordinary
Shares in the Company free from pre-emption rights which were granted at the
Company's annual general meeting held on 27 June 2023.
The Company has entered into the Second ROX Loan Agreement on the basis of the
statutory authorities to allot shares and securities convertible into Ordinary
Shares in the Company which were granted at the Company's general meeting held
on 25 March 2024.
The Company has sufficient statutory authorities to allot shares in connection
with the issue and allotment of the ROX Subscription Shares.
In order to complete the Fundraising (due to the required Rule 9 Waiver
resolution requirement) and to ensure the Company has sufficient statutory
authorities to allot shares to execute the Additional Fundraising (should it
need to do so), the Company requires the approval of the Resolutions by
Shareholders holding the requisite number of Ordinary Shares at the General
Meeting.
APPLICATION OF THE TAKEOVER CODE AND RULE 9 WAIVER
Takeover Code
The Company is subject to the Takeover Code. Under Rule 9 of the Takeover
Code, any person who acquires an interest in shares (as defined in the
Takeover Code) which, taken together with any shares in which that person or
any other person acting in concert with that person is interested, carry 30%
or more of the voting rights of a company which is subject to the Takeover
Code, is normally required to make an offer to all of the remaining
shareholders to acquire their shares in the company.
Similarly, when any person, together with persons acting in concert with him,
is interested in shares which in aggregate carry not less than 30% of the
voting rights of such a company, but does not hold shares carrying more than
50% of such voting rights, a general offer will normally be required if any
further interest in shares is acquired by any such person, or persons acting
in concert with him, which increases the percentage of shares carrying voting
rights held by such persons.
An offer under Rule 9 would have to be made in cash and at the highest price
paid for any interest in shares by that person or by any person acting in
concert with it within the 12 months prior to the announcement of the offer.
Rule 9 Waiver Resolution
As noted in paragraph 8 above, on Admission it is expected that ROX will be
interested in shares carrying more than 30% of the voting rights of the
Company but will not hold shares carrying more than 50% of the voting rights
of the Company. The Takeover Panel may waive ROX's obligation to make an offer
under Rule 9 if independent Shareholders (all Shareholders are deemed
independent for this purpose) ("Independent Shareholders") pass the Rule 9
Waiver Resolution.
The Takeover Panel has been consulted and has agreed, subject to the passing
of the Rule 9 Waiver Resolution by the Company's Independent Shareholders on a
poll at the General Meeting, to waive the obligation of ROX to make a
mandatory offer for the Ordinary Shares in the capital of the Company not
already owned by them which would otherwise arise following completion of the
Fundraising and if relevant, the Additional Fundraising. Accordingly, the
Company is proposing the Rule 9 Waiver Resolution to seek the approval of the
Company's Independent Shareholders to the Rule 9 Waiver Resolution.
Shareholders should be aware that under the Takeover Code, if a person (or
group of persons acting in concert) holds interests in shares carrying 30% or
more of the voting rights in that company and they do not hold shares carrying
more than 50% of the voting rights in that company, no member of that group
may acquire an interest in any other shares carrying voting rights in that
company without incurring a similar obligation under Rule 9 to make a
mandatory offer (save to the extent permitted by the Rule 9 Waiver).
Shareholders should also be aware that under the Takeover Code, if a person
(or group of persons acting in concert) holds shares carrying more than 50% of
the Company's voting rights, that person (or any person(s) acting in concert
with him) may acquire further shares without incurring any obligation under
Rule 9 to make a mandatory offer.
If ROX were to participate in the Additional Fundraising, ROX would hold
shares carrying more than 50% of the voting rights of the Company and could
accordingly increase its aggregate interests in Ordinary Shares without
incurring any obligation to make an offer under Rule 9 of the Takeover Code.
The Rule 9 Waiver to which the Takeover Panel has agreed under the Takeover
Code will be invalidated if any purchases are made by ROX or any party acting
in concert with ROX in the period between the date of the Circular and the
General Meeting. Furthermore, neither ROX nor any person acting in concert
with it, has purchased Ordinary Shares in the 12 months preceding the date of
the Circular.
GENERAL MEETING
The Company has called the General Meeting in order to (i) put to Independent
Shareholders the Rule 9 Waiver Resolution required to approve the Rule 9
Waiver and to (ii) put to Shareholders the other Resolutions set out in Part
III (Notice of General Meeting) of the Circular. Your attention is drawn to
the fact that all of the Resolutions must be passed by Shareholders at the
General Meeting in order for the Fundraising to proceed.
The Notice of General Meeting, which is proposed to be held at Sondrel House,
Theale Lakes Business Park, Moulden Way, Sulhamstead, Reading, RG7 4GB at
10:00 a.m. (UK time) on 30 May 2024, is set out at the end of the Circular.
The Rule 9 Waiver Resolution will be proposed as an ordinary resolution to
approve the Rule 9 Waiver. If passed it will approve the Rule 9 Waiver and,
subject to receipt of the NSIA Approval, will allow the issue of the ROX
Subscription Shares and if relevant, the Additional Fundraising Shares, to ROX
without ROX being required to make a mandatory offer under Rule 9.
The Takeover Code requires the Rule 9 Waiver Resolution to be passed by the
Independent Shareholders only. All existing Shareholders are considered
independent for this purpose.
At the General Meeting the following inter-conditional Resolutions will be
proposed:
Resolution 2 - Authority to allot shares
Resolution 2 is an ordinary resolution to authorise the Directors to allot
relevant securities with an aggregate nominal value of up to £15,000, being
equal to 15,000,000 New Ordinary Shares (i.e. the maximum number of Ordinary
Shares that may be allotted pursuant to or in connection with the Additional
Fundraising).
Resolution 3 - Disapplication of statutory pre-emption rights
Resolution 3, which is conditional on the passing of Resolution 2, is a
special resolution to authorise the Directors to allot up to 15,000,000 New
Ordinary Shares (i.e. the maximum number of Ordinary Shares that may be
allotted pursuant to or in connection with the Additional Fundraising) for
cash on a non-pre-emptive basis.
The authorities given by the Resolutions 2 and 3 will be in addition to any
existing similar authorities which the Directors may have.
If the Resolutions are not approved by Shareholders at the General Meeting, no
Ordinary Shares will be issued to ROX pursuant to the Fundraising and the
Fundraising will not proceed. As such, the anticipated net proceeds of the
Fundraising would not become available to the Company. There is no certainty
that other funding would be available on suitable terms or at all.
Accordingly, in light of the Group's reducing cash position, it would be
likely that the Company would have to ceasing trading in such circumstances.
Furthermore, if the Resolutions are not passed at the General Meeting, the
Company will not have the necessary allotment authorities in place to allot
the new Ordinary Shares needed for the Additional Fundraising, should the
Company and ROX proceed with the Additional Fundraising in the 12-month period
following completion of the Fundraising.
INDEPENDENT ADVICE IN RESPECT OF THE WAIVER
The Takeover Code requires the Directors to obtain competent independent
advice regarding the merits of the Proposals. Cavendish has provided formal
advice to the Directors regarding the Proposals and in providing such advice,
Cavendish has taken into account the Directors' commercial assessments.
Cavendish confirms that it, and any person who is or is presumed to be acting
in concert with it, is independent of ROX and has no personal, financial or
commercial relationship, or arrangements or understandings with ROX. Cavendish
has given and has not withdrawn its written consent to the inclusion in the
Circular of its name and the references to it in the form and context in which
they are included.
ROX RELATIONSHIP AGREEMENT
On 14 May 2024, the Company entered into a relationship agreement (the "ROX
Relationship Agreement") with ROX pursuant to which ROX agreed, amongst other
things, that:
(a) the Group shall be managed for the benefit of shareholders
as a whole and shall be capable at all times of carrying on its business
independently of ROX and/or its associates;
(b) all transactions, agreements and arrangements between any
member of the Group and ROX or its associates) shall be on an arm's length
basis and on normal commercial terms;
(c) at least 2 directors who are considered to be independent
shall at all times be appointed to the Board;
(d) any dispute between ROX and/or its associates and the
Company (including any matter relating to the terms of the ROX Relationship
Agreement) shall be dealt with by a committee comprising only independent
directors; and
(e) the remuneration and nomination committee and audit and risk
committee established by the Board from time to time shall comprise a majority
of independent directors and shall be chaired by an independent Director.
The ROX Relationship Agreement is effective for so long as ROX (together with
its associates and any persons acting in concert with him) hold in aggregate
shares in the capital of the Company representing 20% or more of the rights to
vote at a general meeting of the Company. The ROX Relationship Agreement will
lapse on Cancellation.
The ROX Relationship Agreement is governed by English law.
DEFINITIONS AND GLOSSARY
The following definitions and glossary apply throughout the Circular
(including the Notice of General Meeting) unless the context otherwise
requires:
"Act" the Companies Act 2006 (as amended);
"acting in concert" has the meaning attributed to it in the Takeover Code;
"Admission" the admission of the New Ordinary Shares to trading on AIM becoming effective
in accordance with the AIM Rules for Companies;
"Additional Fundraising" the Company requesting and ROX determining to subscribe for up to a further
15,000,000 new Ordinary Shares in the Company at the Issue Price per new
Ordinary Share;
"Additional Fundraising Shares" up to 15,000,000 New Ordinary Shares that may subscribed for by ROX at the
price of 10 pence per share pursuant to the Additional Fundraising;
"AIM" the market of that name operated by the London Stock Exchange;
"AIM Rules for Companies" the AIM Rules for Companies, as published and amended from time to time by
the London Stock Exchange;
"Australia" the Commonwealth of Australia, its states, territories and possessions;
"Board" or "Directors" the directors of the Company as at the date of the Circular, whose names are
set out on page 5 of the Circular;
"Canada" Canada, its provinces, territories and all areas subject to its jurisdiction
and any political sub-division thereof;
"Cavendish" Cavendish Capital Markets Limited, a private limited company incorporated in
England and Wales under registered number 06198898 and having its registered
office at 1 Bartholomew Close, London, EC1A 7BL, the Company's nominated
adviser and broker;
"certificated" or "in certificated form" an ordinary share recorded on a company's share register as being held in
certificated form (namely, not in CREST);
"Chairman" the chairman of the Board;
"Circular" or "the Circular" the Circular, posted to Shareholders on 14 May 2024;
"Company" Sondrel (Holdings) plc, a company incorporated in England and Wales with
registered number 07275279);
"CREST" the relevant system (as defined in the CREST Regulations) for paperless
settlement of share transfers and holding shares in uncertificated form, in
respect of which Euroclear is the operator (as defined in the CREST
Regulations);
"CREST member" a person who has been admitted by Euroclear as a system member (as defined in
the CREST Regulations);
"CREST participant" a person who is, in relation to CREST, a system-participant (as defined in the
CREST Regulations);
"CREST Regulations" the Uncertificated Securities Regulations 2001 (SI 2001/3755) including any
enactment or subordinate legislation which amends or supersedes those
regulations and any applicable rules made under those regulations or any such
enactment or subordinate legislation for the time being in force;
"CREST sponsor" a CREST participant admitted to CREST as a CREST sponsor;
"CREST sponsored member" a CREST member admitted to CREST as a CREST sponsored member;
"Disclosure Guidance and Transparency Rules" the disclosure guidance and transparency rules made by the FCA under Part V
of the FSMA from time to time;
"Enlarged Share Capital" the entire issued share capital of the Company on Admission following
completion of the Fundraising;
"Euroclear" Euroclear UK & International Limited;
"Exclusivity Agreement" the exclusivity agreement entered into between the Company, ROX on 5 March
2024;
"Exclusivity Amendment Agreement" a deed of amendment to the Exclusivity Agreement containing, amongst other
things, an increase in the Fundraising to £8.5 million dated 28 March 2024;
"Existing Ordinary Shares" the 87,461,772 Ordinary Shares in issue at the date of the Circular;
"FCA" the UK Financial Conduct Authority;
"First ROX Loan Agreement" the convertible loan agreement entered into between the Company and ROX on 5
March 2024;
"FSMA" the Financial Services and Markets Act 2000 (as amended);
"Fundraising" the ROX Subscription;
"FY23" the financial year ended 31 December 2023 of the Company;
"General Meeting" the General Meeting of the Company convened for 10:00 a.m. (UK time) on 30
May 2024 or any adjournment thereof, notice of which is set out at the end of
the Circular;
"Group" or "Sondrel" the Company and its subsidiaries (as defined in the Act);
"Issue Price" 10 pence per New Ordinary Share;
"Japan" Japan, its cities and prefectures, territories and possessions;
"LinkVote+" a free app for smartphone and tablet provided by Link Group (the Company's
Registrar) enabling Shareholders the option to submit a proxy appointment
electronically;
"London Stock Exchange" London Stock Exchange Group plc;
"New Ordinary Shares" the ROX Shares;
"Non-Executive Directors" the non-executive directors of the Company, being Graham Curren, Nigel
Vaughan, Adrian Carey and Sherry Madera;
"Notice of General Meeting" the notice convening the General Meeting as set out at the end of the
Circular;
"NSIA Approval" approval by the UK secretary of state of ROX's proposed investment in the
Company as required by the National Security and Investment Act 2021;
"Official List" the Official List of the FCA;
"Ordinary Shares" the ordinary shares of £0.001 each in the capital of the Company in issue
from time to time;
"Proposals" the recommended proposals by the board for the (i) allotment of the ROX
Conversion Shares, (ii) allotment of the ROX Subscription Shares, (iii) the
Rule 9 Waiver, and (iv) the allotment of any shares in connection with the
Additional Fundraising;
"Reference Date" 10 May 2024, being the latest practicable date prior to publication of the
Circular;
"Registrar" Link Group, the Company's registrar;
"Regulatory Approvals" the NSIA Approval and the Rule 9 Waiver;
"Republic of South Africa" the Republic of South Africa, its territories and possessions;
"Resolutions" the resolutions to be proposed at the General Meeting, details of which are
set out in the Notice of General Meeting;
"ROX" means ROX Equity Partners Limited, a company incorporated in England and Wales
with registered number 10937650 and whose registered office address is at
Devonshire House, One Mayfair Place, London, England, W1J 8AJ;
"ROX Conversion Shares" 28,746,000 new Ordinary Shares to be allotted and issued to ROX upon
conversion of the ROX Loans (which shall take place automatically upon
Admission);
"ROX Loan Agreements" together, the First ROX Loan Agreement and the Second ROX Loan Agreement;
"ROX Loans" the secured convertible loans made by ROX to the Company pursuant to the ROX
Loan Agreements in the aggregate principal amount of £2,874,600;
"ROX Shares" the ROX Conversion Shares and the ROX Subscription Shares;
"ROX Subscription" the conditional private subscription at the Issue Price by ROX directly with
the Company for the ROX Subscription Shares pursuant to the ROX Subscription
Letter;
"ROX Subscription Letter" the conditional subscription letter dated 14 May 2024 between ROX and the
Company, details of which are set out in paragraph 8.1 of Part II (Takeover
Code Disclosures for the Purpose of the Rule 9 Waiver) of the Circular;
"ROX Subscription Shares" 56,254,000 new Ordinary Shares to be allotted and issued to ROX pursuant to
the ROX Subscription Letter, subject to receipt of the Regulatory Approvals,
and conditional upon Admission which, together with the ROX Conversion Shares,
which will take ROX's percentage shareholding in the Company to 49.29% of the
Enlarged Share Capital;
"Rule 9" Rule 9 of the Takeover Code;
"Rule 9 Waiver" the waiver granted by the Takeover Panel, conditional upon the approval by
the Shareholders (all of whom are considered independent for this purpose) of
the Rule 9 Waiver Resolution at the General Meeting, of an obligation which
would otherwise be imposed on ROX to make a general offer to all Shareholders
under Rule 9 of the Takeover Code, as a result of the Fundraising and the
Additional Fundraising;
"Rule 9 Waiver Resolution" the ordinary resolution numbered 1 in the Notice of General Meeting to approve
the Rule 9 Waiver
"Second ROX Loan Agreement" the convertible loan agreement entered into between the Company and ROX on 28
March 2024;
"Shareholders" the holders of Existing Ordinary Shares, and the term "Shareholder" shall be
construed accordingly;
"Siemens" Siemens Industry Software Limited (formerly Mentor Graphics (Ireland) Ltd), a
private limited company incorporated in Ireland with registered number
FC022985;
"Sondrel Ventures Ltd" Sondrel Ventures Ltd (previously named Sondrel (SOC Solutions) Ltd, a
wholly-owned subsidiary of the Company incorporated in England with registered
number 10246519;
"Sprk" means Sprk Capital Limited, a company incorporated in England and Wales with
registered number 12248853and whose registered office address is at 10 John
Street, London, England, WC1N 2EB;
"Takeover Code" the City Code on Takeovers and Mergers issued by the Takeover Panel, as
amended from time to time;
"Takeover Panel" the Panel on Takeovers and Mergers;
"Transformation Plan" means the transformation plan detailed in paragraph 4] of Part I (Letter from
the Chairman) of the Circular;
"uncertificated" or "uncertificated form" means recorded on the relevant register or other record of the share or other
security concerned as being held in uncertificated form in CREST, and title
to which, by virtue of the CREST Regulations, may be transferred by means of
CREST;
"United Kingdom" or "UK" the United Kingdom of Great Britain and Northern Ireland;
"United States" or "US" the United States of America, each State thereof, its territories and
possessions (including the District of Columbia) and all other areas subject
to its jurisdiction; and
"£", "pounds sterling", "sterling" "pence" or "p" the lawful currency of the United Kingdom.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IOEFFFLLETIVLISRecent news on Sondrel (Holdings)
See all newsREG - AIM Sondrel (Holdings) - Cancellation - Sondrel (Holdings) plc
AnnouncementREG - Sondrel (Holdings) - Result of GM, Cancellation and Re-registration
AnnouncementREG - Sondrel (Holdings) - Proposed cancellation of Admission, Notice of GM
AnnouncementREG - AIM Sondrel (Holdings) - Restoration - Sondrel (Holdings) plc
AnnouncementREG - Sondrel (Holdings) - Chief Financial Officer Succession
Announcement