REG - Sportech PLC - Publication of Circular and Notice of GM

SportechAnnouncement

19/09/2023 07:00

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RNS Number : 8343M  Sportech PLC  19 September 2023

19 September 2023

 

SPORTECH PLC

('Sportech' or the 'Group')

 

Publication of Circular and Notice of General Meeting

 

Further to the announcement on 11 September 2023, Sportech, an international
betting and technology business, announces that a circular (the "Circular")
and notice of general meeting  will be posted to shareholders today.

 

The Circular is in relation to the proposed cancellation of admission of
Sportech's ordinary shares of 10p each to trading on AIM (the "Cancellation"),
re-registration as a private limited company (the "Re-registration") and
adoption of new articles of association (the "New Articles") announced on 11
September 2023. The Circular also contains a notice convening a general
meeting (the "General Meeting") at which Shareholders are invited to consider
and, if thought fit, approve the proposed Cancellation, Re-registration and
associated adoption of the New Articles.

 

To be passed, the Cancellation Resolution requires, pursuant to Rule 41 of the
AIM Rules, the approval of not less than 75 per cent. of the votes cast by
Shareholders at the General Meeting. The Re-registration Resolution (which
includes the adoption of the New Articles) also requires the approval of not
less than 75 per cent. of the votes cast by Shareholders at the General
Meeting.

 

A copy of the Circular and the New Articles will be made available on the
Company's website at www.sportechplc.com (http://www.sportechplc.com) later
today.

 

The General Meeting will be held on 5 October 2023 at 9.00 a.m. at the offices
of Dickson Minto, 16 Charlotte Square, Edinburgh, EH2 4DF.

 

Certain extracts of the Circular, providing further details of the proposals,
are set out in the Appendix. Capitalised terms used in this announcement and
the Appendix have the meanings set out in the Circular unless otherwise
defined.

 

 EXPECTED TIMETABLE OF PROPOSED DE-LISTING
 Event                                                                      Time and/or date

 Notice provided to the London Stock Exchange to notify it of the proposed  14 September 2023
 Cancellation
 Publication and posting of the Circular                                    19 September 2023
 Latest time for receipt of proxy appointments in respect of the General    9.00 a.m. on 3 October 2023
 Meeting
 General Meeting                                                            9.00 a.m. on 5 October 2023
 Last day of dealings in Ordinary Shares on AIM                             16 October 2023
 Cancellation                                                               7.00 a.m. on 17 October 2023
 Re-registration                                                            week commencing 23 October 2023

 

 

For further information, please contact:

 

 Sportech PLC                                  enquiries@sportechplc.com

 Richard McGuire, Executive Chairman

 Clive Whiley, Senior Independent Director

 Peel Hunt (Nominated Adviser & Broker)        Tel: +44 (0) 20 7418 8900

 George Sellar

 Andrew Clark

 Lalit Bose

 

 APPENDIX

 

 Background to and reasons for the Cancellation and Re-registration
 As Shareholders will be aware, the Company undertook a share consolidation and
 subdivision and capital distribution in July 2023 (the "Share Capital
 Reorganisation"). Following the Share Capital Reorganisation becoming
 effective, the Board undertook a thorough review of the corporate costs being
 borne by the Company as a result of its status as a publicly traded company.
 Following that review, the Board has concluded that the Company's continued
 status as a publicly traded company is not appropriate given the scale of its
 business and, accordingly, the Cancellation and Re-registration are in the
 best interests of the Company and its Shareholders as a whole for reasons
 including those set out below.
 §   Costs and regulatory burden: The considerable cost and management time
 and the legal and regulatory burden associated with maintaining the Company's
 admission to trading on AIM is, in the Board's opinion, disproportionate to
 the benefits of the Company's continued admission to trading on AIM.  These
 costs: (a) amounted to approximately £450,000 in the year ended 31 December
 2022; (b) contributed to the Group's pre-tax loss of £934,000 in that period
 to a material extent; and (c) represented approximately 28 per cent. of the
 Group's adjusted EBITDA of £1.6 million in that period.  Given the lower
 costs associated with private limited company status, it is estimated that the
 Cancellation and Re-registration will materially reduce the Company's
 recurring administrative and adviser costs by approximately £450,000 per
 annum, which the Board believes can be better spent supporting and investing
 in the Group's business.
 §   Lack of liquidity: Notwithstanding the Share Capital Reorganisation,
 there continues to be limited liquidity in the Ordinary Shares.  As a result,
 the Board believes that Shareholders are not provided with the opportunities
 to trade in meaningful volumes or with frequency in an active market in
 Ordinary Shares.
 §   Market volatility:  As a result of the limited liquidity in Ordinary
 Shares described above, small trades in Ordinary Shares can have a significant
 impact on price and, therefore, market valuation, which, the Board believes,
 in turn has a materially adverse impact on: (a) the Company's status within
 its industry; (b) the perception of the Company amongst its customers,
 suppliers and other partners; (c) staff morale; and (d) the Company's ability
 to seek appropriate financing or realise an appropriate value for any material
 future disposal(s).
 §   Challenges related to the Company's position as a micro-cap stock:
 Growing the Company, a UK micro-cap stock, comes with a range of challenges,
 which, in the Board's view, stem from the Company's small market valuation,
 limited resources, and the dynamic nature of the market. These challenges
 include, but are not limited to: (a) access to capital; (b) a lack of
 visibility among analysts, media and potential investors; (c) increased
 volatility in Company valuation unrelated to company performance leading to
 higher risk perception; and (d) an aversion from potential investors, seeking
 stability and a valuation that aligns with Company performance.
 §   Strategic flexibility: The Board believes that a private limited
 company can take and implement strategic decisions more quickly than a company
 which is publicly traded as a result of the more flexible regulatory regime
 that is applicable to a private company.
 Therefore, following careful consideration, the Board believes that it is in
 the best interests of the Company and Shareholders to seek the proposed
 Cancellation, Re-registration and associated adoption of the New Articles.

PROCESS FOR, AND PRINCIPAL EFFECTS OF, THE CANCELLATION

 

 Under the AIM Rules, the Company is required to give at least 20 Business
 Days' notice of the Cancellation. Additionally, the Cancellation will not take
 effect until at least five Business Days have passed following the passing of
 the Cancellation Resolution. If the Cancellation Resolution is passed at the
 General Meeting, it is proposed that the last day of trading in Ordinary
 Shares on AIM will be 16 October 2023 and that the Cancellation will take
 effect at 7.00 a.m. on 17 October 2023.

 The Directors are aware that certain Shareholders may be unable or unwilling
 to hold Ordinary Shares in the event that the Cancellation is approved and
 becomes effective. Such Shareholders should consider selling their interests
 in the market prior to the Cancellation becoming effective.

 The principal effects of the Cancellation will include the following:

 §   there will cease to be a formal market mechanism enabling Shareholders
 to trade Ordinary Shares (other than any limited off-market mechanism provided
 by the Matched Bargain Facility);
 §   it is possible that, following the publication of the Circular, the
 liquidity and marketability of the Ordinary Shares is reduced and their value
 adversely affected (however, as set out above, the Directors believe that the
 existing liquidity in the Ordinary Shares is, in any event, limited);
 §   the Ordinary Shares may be more difficult to sell compared to shares of
 companies traded on AIM (or any other recognised market or trading exchange);
 §   in the absence of a formal market and quoted price, it may be 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;
 §   Shareholders will no longer be afforded the protections given by the
 AIM Rules, such as the requirement to be notified of price sensitive
 information or certain events and the requirement that the Company seek
 shareholder approval for certain corporate actions, where applicable,
 including substantial transactions, reverse takeovers, related party
 transactions and fundamental changes in the Company's business, including
 certain acquisitions and disposals;
 §   the levels of disclosure and corporate governance within the Company
 may not be as stringent as for a company quoted on AIM;
 §   the Company will no longer be subject to UK MAR regulating inside
 information and other matters;
 §   the Company will no longer be required to disclose publicly any change
 in its major shareholdings under the Disclosure Guidance and Transparency
 Rules;
 §   Peel Hunt LLP will cease to be nominated adviser and broker to the
 Company;
 §   whilst the Company's CREST facility will remain in place immediately
 following the Cancellation, the Company's CREST facility may be cancelled in
 the future and, although the Ordinary Shares will remain transferable, they
 may cease to be transferable through CREST (in which case, Shareholders who
 hold Ordinary Shares in CREST will receive share certificates);
 §   stamp duty will be due on transfers of shares and agreements to
 transfer shares unless a relevant exemption or relief applies to a particular
 transfer; and
 §   the Cancellation and Re-registration may have taxation consequences for
 Shareholders. Shareholders who are in any doubt about their tax position
 should consult their own professional independent tax adviser.
 The above considerations are not exhaustive, and Shareholders should seek
 their own independent advice when assessing the likely impact of the
 Cancellation on them.
 For the avoidance of doubt, the Company will remain registered with the
 Registrar of Companies in Scotland in accordance with, and subject to, the
 Companies Act, notwithstanding the Cancellation and Re-registration.

 The Resolutions to be proposed at the General Meeting include the adoption of
 the New Articles, which reflect the change in the Company's status to a
 private limited company with effect from the Re-registration. A summary of the
 principal differences between the Current Articles and the proposed New
 Articles is included in Part 2 of the Circular. A copy of the New Articles can
 be viewed at https://www.sportechplc.com.

 

 Board composition and provision of information, SERVICES AND FACILITATES
 following the Cancellation

 Board composition
 There will be no change to the composition of the Board immediately following
 the Cancellation and Re-registration although the Board intends to keep its
 composition under review following the Cancellation and Re-registration.  In
 particular, the Company is mindful of the need for its Board to be
 representative of its operating divisions and geographic operating areas and
 for the Company to take advantage of the flexibility which its status as a
 private limited company will allow.
 As described in the Circular (and, in particular, paragraph 8 of Part 1 of the
 Circular and Part 3 of the Circular), the Takeover Code will continue to apply
 to the Company for a period of at least 10 years from the date of Cancellation
 if the Company is considered by the Panel to have its place of central
 management and control in the United Kingdom, the Channel Islands or the Isle
 of Man. This is known as the "residency test". In determining whether the
 residency test is satisfied, the Panel has regard primarily to whether a
 majority of a company's directors are resident in these jurisdictions.  If,
 following any changes to the Board's composition, the residency test is no
 longer considered by the Company to be met, the Company will seek a
 determination from the Panel on the continued applicability of the Takeover
 Code to the Company. In the event that the Panel advises the Company that the
 "residency test" is no longer met, the Company will seek to inform
 Shareholders of this outcome.
 Provision of information, services and facilities following the Cancellation
 The Company currently intends to continue to provide certain information,
 services and facilities to Shareholders following the Cancellation. The
 Company will:
 §   continue to communicate information about the Company (including annual
 accounts) to its Shareholders, as required by the Companies Act;
 §   continue, for at least 12 months following the Cancellation, to
 maintain its website, https://www.sportechplc.com (albeit the domain name may
 be altered as a result of changes to the Company's name in connection with the
 Cancellation and Re-registration) and to post updates on the website from time
 to time, although Shareholders should be aware that there will be no
 obligation on the Company to include all of the information required under the
 Disclosure Guidance and Transparency Rules, AIM Rule 26 or to update the
 website as required by the AIM Rules; and
 §   make available to Shareholders, through JP Jenkins, the Matched Bargain
 Facility (as further described in paragraph 5.2 of Part 1 of the Circular)
 which will allow Shareholders to buy and sell Ordinary Shares on a matched
 bargain basis following the Cancellation.
 Transactions in the Ordinary Shares prior to and FOLLOWING the Cancellation

 Transactions prior to the Cancellation
 Shareholders should note that they are able to continue trading in the
 Ordinary Shares on AIM prior to the Cancellation.
 If Shareholders wish to buy or sell Ordinary Shares on AIM they must do so
 prior to the Cancellation becoming effective. As noted above, in the event
 that Shareholders approve the Cancellation, it is anticipated that the last
 day of dealings in the Ordinary Shares on AIM will be 16 October 2023 and that
 the effective date of the Cancellation will be on 17 October 2023.
 Transactions following the Cancellation

 The Directors are aware that Shareholders may wish to acquire or dispose of
 Ordinary Shares in the Company following the Cancellation. Should the
 Cancellation be approved by Shareholders at the General Meeting, the Company
 will implement a matched bargain facility with JP Jenkins which will allow
 Shareholders to buy and sell Ordinary Shares on a matched bargain basis
 following the Cancellation (the "Matched Bargain Facility").
 Under the Matched Bargain Facility, Shareholders (or persons wishing to
 acquire Ordinary Shares) will be able to provide an indication to JP Jenkins,
 through their stockbroker (JP Jenkins is unable to deal directly with
 individuals), of the number of Ordinary Shares that they are willing to buy or
 sell and the price at which they are willing to do so. In the event that JP
 Jenkins is able to match that buy or sell order with an opposite sell or buy
 instruction, JP Jenkins would contact both parties and carry out the trade.
 Should the Cancellation become effective, details of the Matched Bargain
 Facility will be made available on the Company's website.
 The Matched Bargain Facility is expected to operate for a minimum period of
 twelve months from the Cancellation. The Directors' current intention is that
 it will continue beyond that time but Shareholders should note that it could
 be withdrawn and, therefore, inhibit the ability to trade the Ordinary Shares.
 Further details will be communicated to Shareholders via the Company's website
 at the relevant time.
 Current Trading

 On 11 September 2023, the Company released a trading update for the six months
 ended 30 June 2023 which contained the following information.
 "The Group has continued to deliver solid operational performance, marked by
 stable revenue growth and a renewed emphasis on margin enhancement. This
 strategic approach has led to a 7.2% increase in gross profit and a notably
 improved Adjusted EBITDA performance, in comparison to the same period of the
 previous year.

 The Group's Adjusted EBITDA demonstrated positive momentum, reaching £0.9
 million (£0.4 million in H1 2022). This improvement was fuelled by several
 key factors, most notably growth in contributions from US gaming and a
 sustained focus on optimizing operational and corporate costs."

 Re-registration

 As set out above, following the Cancellation, the Directors believe that the
 requirements and associated costs of the Company maintaining its public
 company status will be difficult to justify and that the Company will benefit
 from the more flexible requirements and lower costs associated with private
 limited company status. It is, therefore, proposed to re-register the Company
 as a private limited company. In connection with the Re-registration, it is
 proposed that the New Articles be adopted to reflect the change in the
 Company's status to a private limited company. The principal effects of the
 Re-registration and the adoption of the New Articles on the rights and
 obligations of Shareholders and the Company are summarised in Part 2 of the
 Circular.
 An application will be made to the Registrar of Companies for the Company to
 be re-registered as a private limited company. Re-registration will take
 effect when the Registrar of Companies issues a Certificate of Incorporation
 on Re-registration. The Registrar of Companies will issue the Certificate of
 Incorporation on Re-registration when it is satisfied that no valid
 application can be made to cancel the resolution to re-register as a private
 limited company or that any such application to cancel the resolution to
 re-register as a private limited company has been determined and confirmed by
 a court of competent jurisdiction.
 Takeover Code
 Notwithstanding the Cancellation and Re-registration, the Company will
 continue to be subject to the terms of the Takeover Code for a period of at
 least 10 years following the Cancellation (subject to the Re-registration
 occurring). However, the Takeover Code may cease to apply earlier, if a
 majority of the directors of the Company cease to be resident in the United
 Kingdom, the Channel Islands or the Isle of Man.

 The Takeover Code applies to all offers for companies which have their
 registered offices in the United Kingdom, the Channel Islands or the Isle of
 Man if any of their equity share capital or other transferable securities
 carrying voting rights are admitted to trading on a regulated market or a
 multilateral trading facility in the United Kingdom or on any stock exchange
 in the Channel Islands or the Isle of Man.
 The Takeover Code also applies to all offers for companies (both public and
 private) which have their registered offices in the United Kingdom, the
 Channel Islands or the Isle of Man and which are considered by the Panel to
 have their place of central management and control in the United Kingdom, the
 Channel Islands or the Isle of Man, but in relation to private companies only
 if one of a number of conditions are met, including that any of the company's
 equity share capital or other transferable securities carrying voting rights
 have been admitted to trading on a regulated market or a multilateral trading
 facility in the United Kingdom or on any stock exchange in the Channel Islands
 or the Isle of Man at any time in the preceding 10 years.
 If the Cancellation and Re-registration are approved by Shareholders at the
 General Meeting, the Company will be re-registered as a private company and
 its securities will no longer be admitted to trading on a regulated market or
 a multilateral trading facility in the United Kingdom. In these circumstances,
 the Takeover Code will only apply to the Company if it is considered by the
 Panel to have its place of central management and control in the United
 Kingdom, the Channel Islands or the Isle of Man. This is known as the
 "residency test". In determining whether the residency test is satisfied, the
 Panel has regard primarily to whether a majority of a company's directors are
 resident in these jurisdictions.

 On the basis of the current residency of the Directors, the Company will have
 its place of central management and control in the United Kingdom following
 the Cancellation. In light of the Re-registration, and provided that the
 Company's place of central management and control continues to be considered
 by the Panel to be in the United Kingdom, the Takeover Code will continue to
 apply to the Company for the period of 10 years following the Cancellation,
 including the requirement for a mandatory cash offer to be made if either:

 §   a person acquires an interest in shares which, when taken together with
 the shares in which persons acting in concert with it are interested,
 increases the percentage of shares carrying voting rights in which it is
 interested to 30 per cent. or more; or

 §   a person, together with persons acting in concert with it, is
 interested in shares which in the aggregate carry not less than 30 per cent.
 of the voting rights of a company but does not hold shares carrying more than
 50 per cent. of such voting rights and such person, or any person acting in
 concert with it, acquires an interest in any other shares which increases the
 percentage of shares carrying voting rights in which it is interested.
 In particular, under Rule 9 of the Takeover Code, when any person or group of
 persons acting in concert, individually or collectively, are interested in
 shares which in aggregate carry not less than 30 per cent. of the voting
 rights of a company but do not hold shares carrying more than 50 per cent. of
 the voting rights of a company and such person or any person acting in concert
 with him acquires an interest in any other shares, which increases the
 percentage of the shares carrying voting rights in which he is interested,
 then that person or group of persons is normally required by the Panel to make
 a general offer in cash to all shareholders of that company at the highest
 price paid by them for any interest in shares in that company during the
 previous 12 months. Rule 9 of the Takeover Code further provides that where
 any person, together with persons acting in concert with him, holds over 50
 per cent. of the voting rights of a company to which the Takeover Code applies
 and acquires additional shares which carry voting rights, then that person
 will not generally be required to make a general offer to the other
 shareholders to acquire the balance of the shares not held by that person or
 his concert parties.

 Following the expiry of the 10 year period from the date of the Cancellation
 (subject to the Re-registration occurring), or such other date on which the
 Takeover Code ceases to apply to the Company, the Company will no longer be
 subject to the provisions of the Takeover Code.

 Brief details of the Panel, and of the protections afforded to Shareholders by
 the Takeover Code are set out in Part 3 of the Circular.
 Process for Cancellation
 Under the AIM Rules, it is a requirement that the Cancellation must be
 approved by Shareholders holding not less than 75 per cent. of votes cast by
 Shareholders at the General Meeting. Accordingly, the Notice of General
 Meeting set out in Part 4 of the Circular contains a special resolution to
 approve the Cancellation.
 Furthermore, Rule 41 of the AIM Rules requires any AIM company that wishes the
 London Stock Exchange to cancel the admission of its shares to trading on AIM
 to notify shareholders and to separately inform the London Stock Exchange of
 its preferred cancellation date at least 20 Business Days prior to such date.
 In accordance with AIM Rule 41, the Directors have notified the London Stock
 Exchange of the Company's intention, subject to the Cancellation Resolution
 being passed at the General Meeting, to cancel the Company's admission of the
 Ordinary Shares to trading on AIM on 17 October 2023. Accordingly, if the
 Cancellation Resolution is passed, the Cancellation will become effective at
 7.00 a.m. on 17 October 2023. If the Cancellation becomes effective, Peel Hunt
 LLP will cease to be nominated adviser and broker to the Company and the
 Company will no longer be required to comply with the AIM Rules.

 ACTION TO BE TAKEN IN RELATION TO THE GENERAL MEETING

 In line with the Company's approach at annual general meetings, hard copy
 proxy forms are not being sent to Shareholders in connection with the General
 Meeting. The Company would like to encourage shareholders to vote
 electronically or appoint a proxy electronically, which can be done via
 www.signalshares.com, via the LinkVote+ app or, where Ordinary Shares are held
 in CREST, via CREST. Certain shareholders may also be able to appoint a proxy
 electronically via the Proximity platform. Shareholders may also request a
 hard copy form of proxy directly from the Company's registrar, Link Group, by
 calling 0371 664 0300 or by emailing shareholderenquiries@linkgroup.co.uk.
 Notwithstanding the method of appointment, proxy appointments must be received
 by Link Group by 9.00 a.m. on 3 October 2023, being 48 hours before the time
 fixed for the General Meeting. Further details of the proxy appointment
 methods are set out in the Notice of General Meeting in Part 4 of the
 Circular.

 Shareholders are encouraged to appoint the chair of the General Meeting as
 their proxy with directions as to how to cast their vote on the Resolutions
 proposed. For further details on how to submit a proxy vote, see the notes to
 the Notice of General Meeting at Part 4 of the Circular.

 The appointment of a proxy will not preclude Shareholders from attending and
 voting at the General Meeting in person should they so wish. All Shareholders
 planning to attend the General Meeting in person are, however, requested to
 confirm their attendance by emailing ir@sportechplc.com (marked for the
 attention of the Company Secretary) by no later than 9.00 a.m. on 3 October
  2023.

 RECOMMENDATION

 The Directors consider that each of the Cancellation Resolution and the
 Re-registration Resolution is in the best interests of the Company and its
 shareholders as a whole. Accordingly, the Directors unanimously recommend that
 Shareholders vote in favour of the resolutions at the General Meeting as
 Richard McGuire and Clive Whiley (being the only Directors who are interested
 in Ordinary Shares) intend to do in respect of their own beneficial holdings,
 insofar as they are able to control or direct the exercise of the voting
 rights attaching to the relevant Ordinary Shares.

 

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