REG - Tribal Group PLC - Rights Issue <Origin Href="QuoteRef">TRBG.L</Origin> - Part 2
16/03/2016 07:13
- Part 2: For the preceding part double click ID:nRSP2431Sa
believes that the move
is likely to be of significant benefit to the Company going forward and enable
Tribal to deliver enhanced value to Shareholders.
None of the other proposals in the Prospectus are conditional on the Delisting
and AIM Admission. Accordingly, even if the AIM Resolution is not passed the
other proposals would proceed (subject to Shareholder approval).
However, the Delisting and AIM Admission is conditional on completion of the
Disposal and the Rights Issue. In the event that that the Disposal and Rights
Issue do not complete, or the Company does not satisfy requirement for AIM
Admission, the Company's Shares will remain admitted to the Official List and
traded on the main market of the London Stock Exchange. The Company will
therefore be subject to the higher costs and greater regulatory burden
associated with a listing on the Official List. While the Board believes that
the Company would be able to continue to meet its obligations as a premium
listed company on the Official List, the Board does not consider a Main Market
listing to be the most appropriate option for the Company or to deliver the
best value for Shareholders.
8. Current trading and prospects
The Company expects the wider market backdrop for education management systems
and services to be stable in 2016.
While the timing of order completions and the achievement of major customer
contract milestones remains difficult to predict, the Board believes that the
Group is well positioned to participate in continuing international demand for
student management systems and upgrades. The Group has secured a number of
software and service contract wins in the early part of the current year,
including a significant system upgrade programme with the University of
Bristol. Discussions in relation to the TAFE Queensland contract are ongoing
and it is uncertain as to whether any amounts will be received in respect of
past or future work. No such revenues or cash receipts have been assumed to be
received by the Group in its forecasts.
During the 2016 financial year the Board intends to focus on reducing the
Group's cost base and improving operational efficiency. While delivering long
term benefits for the Group, actions to change its cost base are likely to
result in restructuring costs during the year. Given the factors described
above and after allowing for the effects of the disposal of Synergy, the Board
now expects an improvement in the Group's underlying profitability during the
2016 financial year compared to 2015, and expects the Group's overall results
for the 2016 financial year to be weighted strongly towards the second half of
the year.
9. Dividends and dividend policy
The New Shares, when issued and fully paid, will be identical to and rank in
full for all dividends or other distributions declared, made or paid after
Admission and in all respects will rank pari passu with the Existing Shares.
The Group has historically operated a progressive dividend policy. The
Directors have decided that it is not appropriate, in the context of the
Rights Issue, to declare a final dividend in respect of the 2015 financial
year. However, the Company expects to resume its progressive dividend policy,
starting from a lower base, in due course once the Group has returned to
delivering strong financial performance and significant cash generation.
10. Overseas shareholders
New Shares will be provisionally allotted (nil paid) to all Qualifying
Shareholders on the register at the Record Date (including Overseas
Shareholders). However, subject to certain exceptions, Provisional Allotment
Letters will not be sent to, and CREST stock accounts will not be credited in
respect of, Qualifying Shareholders with a registered address in the United
States or any of the other Excluded Territories.
Persons who have registered addresses in, or who are resident in, or who are
citizens of, countries other than the UK should consult their professional
advisers as to whether they require any governmental or other consents or need
to observe any other formalities to enable them to take up their entitlements
to the Rights Issue.
Notwithstanding any other provision of the Prospectus or the Provisional
Allotment Letter, the Company reserves the right to permit any Shareholder on
the register at the Record Date to take up his rights if the Company in its
sole and absolute discretion is satisfied that the transaction in question
will not violate applicable laws.
11. Principal terms of the Rights Issue
Pursuant to the Rights Issue, it is proposed that up to 94,849,241 Rights
Issue Shares be issued by way of rights to Qualifying Shareholders (other
than, subject to certain exceptions, to Shareholders with a registered
address, or who are located, in the United States or one of the other Excluded
Territories) at 22 pence per Rights Issue Share, payable in full on acceptance
by no later than 11.00 a.m. on 18 April 2016. The Rights Issue is expected to
raise gross proceeds of approximately £21 million. The Issue Price
represents:
(a) a 59.5 per cent. discount to the Closing Price of 54.4 pence per
Share on 11 December 2015 (being the last Business Day before the announcement
of a rights issue on 14 December 2015);
(b) a 32.7 per cent. discount to the theoretical ex-rights price of an
Share, when calculated by reference to the Closing Price of 43.375 pence per
Share on 15 March 2016 (being the last Business Day before the announcement of
the Rights Issue); and
(c) a 49.3 per cent. discount to the Closing Price of 43.375 pence per
Share on 15 March 2016. The Rights Issue will be made on the basis of:
1 Rights Issue Share at 22 pence per Rights Issue Share for every
1 Existing Share
held by and registered in the name of each Qualifying Shareholder at the close
of business on the Record Date, and in proportion to any other number of
Existing Shares each Qualifying Shareholder then holds.
Entitlements to Rights Issue Shares will be rounded down to the nearest whole
number and fractional entitlements will not be allotted to Shareholders but
will be aggregated and sold in the market for the benefit of the Company.
Holdings of Existing Shares in certificated and uncertificated form and
holdings under different designations will be treated as separate holdings for
the purpose of calculating entitlements under the Rights Issue.
Qualifying Shareholders who take up their pro rata entitlements to Rights
Issue Shares in full will suffer no dilution of their shareholdings in the
Company as a result of the Rights Issue. However, if a Qualifying Shareholder
does not take up the offer of Rights Issue Shares in full, his/her
proportionate shareholding will be diluted by up to approximately 50 per
cent.. The Rights Issue Shares will rank for all dividends declared, made or
paid after the date of allotment and issue of the Rights Issue Shares and
otherwise pari passu with the Existing Shares.
The Rights Issue has been fully underwritten by Investec on, and subject to,
the terms of the Underwriting Agreement.
The Rights Issue will result in up to 94,849,241 Rights Issue Shares being
issued (representing 100 per cent. of the existing issued share capital and 50
per cent. of the enlarged issued share capital immediately following
completion of the Rights Issue).
The Rights Issue is conditional, among other things, upon:
(a) the Underwriting Agreement having become unconditional in all respects
save for the condition relating to Admission of the Rights Issue Shares and
not having been terminated in accordance with its terms;
(b) Admission of the Rights Issue Shares becoming effective by not later
than 8.00 a.m. on 24 April 2016 (or such later time and date as may be agreed
pursuant to the Underwriting Agreement);
(c) the passing without amendment of the Rights Issue Resolutions; and
(d) the passing without amendment of the Disposal Resolution approving the
Disposal and completion of the Disposal, which is expected to take place on 1
April 2016.
The Rights Issue is not conditional on the passing of the AIM Resolution or
AIM Admission occurring.
In the event that the conditions to the Rights Issue are not satisfied, in
full prior to 8.00 a.m. on 30 April 2016 and the Rights Issue does not
proceed, then there will remain a material risk that the Group will breach the
net debt to EBITDA covenant in its Facility Agreement at 30 June 2016.
12. Directors' intentions regarding the Rights Issue
The Directors are fully supportive of the Rights Issue.
Notwithstanding the announcement on 9 March 2016 of his intention to stand
down as Group Finance Director and to leave the Group, Steve Breach, who is
the only director who owns shares in the Company as at the time of this
announcement, has confirmed that he intends to take up his rights in full.
13. Importance of your vote
Your attention is drawn to the fact the Disposal is conditional and dependent
upon the Disposal Resolution being passed by Shareholders at the General
Meeting and the Rights Issue is conditional and dependent upon the Rights
Issue Resolutions and Disposal Resolution being passed by Shareholders at the
General Meeting.
Shareholders are asked to vote in favour of the Rights Issue Resolutions (the
Allotment Resolution and Disapplication Resolution) and the Disposal
Resolution in order for both the Disposal and the Rights Issue to proceed.
The Directors believe that the resulting stronger capital base and
significantly reduced net debt will remove any material risk for at least next
12 months that there will be a breach of the covenants in the Facility
Agreement.
In addition, the strengthening of the Group's balance sheet will:
• enable Tribal confidently to continue to develop its products and
services and enhance its capabilities to deploy its systems in the Cloud and
to offer SaaS models, as well as moving forward decisively with plans to
streamline and simplify its operational structure and re-build momentum;
• reassure Tribal's current and prospective customers; and
• assist the Group in retaining and/or hiring appropriately skilled and
experienced management to drive the business forward.
The Board believes that if the Rights Issue Resolutions and the Disposal
Resolution are not passed and the Disposal and the Rights Issue do not both
proceed, the Group's ability to implement these changes would be constrained
and the Group's capitalisation and balance sheet concerns would not be
addressed.
In addition, unless both the Disposal and the Rights Issue proceed, the Board
believes there is a material risk that the Company would breach the net debt
to EBITDA covenant when it is next tested on 30 June 2016. In addition, the
Company would be obliged under the terms of its existing waiver to
enter into further discussions with its lending banks immediately. There is
no guarantee that the lending banks under the Facility Agreement would agree
to a waiver or amendment of the covenants in future and in the event that the
covenants were breached the banks would be entitled to demand repayment in
full of the Facility Agreement. In such circumstances, Tribal would not have
sufficient cash resources available to repay the Facility Agreement, without:
• borrowing money from other sources (which might potentially not be
available at that time, or might not be available on as favourable terms as
the existing Facility Agreement);
• selling other assets of the Group. The sale of such assets at a time
which is not of the Group's choosing might result in a failure to realise the
full value of the assets, or might not be possible at all;
• undertaking another type of equity issuance. Such an equity issuance
would be likely to be subject to Shareholder approval but, if approved, might
result in a lower issue price than the Rights Issue and may be more
dilutive to Shareholders; or
• the Group being acquired by another party, at a price which might not
reflect the full value of the Group.
The Board has considered these options, but does not consider that they are
likely to maximise value for Shareholders in the circumstances. In
particular:
• the Directors have not so far been able to secure an improved covenant
position in light of the fact that, in the absence of the waiver obtained, it
would have breached its net debt to EBITDA covenant at 31 December 2015;
• the Board does not believe it is sufficiently certain that the Group
would be able to procure a purchaser for any of the Group's other assets at
their full value in time to meet the next covenant test at 30 June 2016;
• the Board does not believe that an equity issuance which is more
dilutive to Shareholders unable to participate is in the best interests of
Shareholders as a whole; and
• the Board believes that undertaking a formal sale process would be
likely to be perceived as a distressed sale and valuations would be depressed
accordingly. The Board does not believe the current share price of the Company
reflects the full value of the Group.
In the event that none of the above options was possible, the Group might be
forced to cease trading, in which case Shareholders could lose their
entire equity investment. Such cessation of trading could occur as early as
the Group's results for the period ending 30 June 2016 are known, which might
result in a breach of the net debt to EBITDA covenant which is tested based on
the results for the period ending on that date.
The Rights Issue cannot take place unless the Disposal completes. However, the
Disposal could complete without the Rights Issue proceeding. In this case, the
Company will have received the net proceeds of the Disposal. This will improve
the Group's immediate cash position, however, the Board is of the view that
while the net proceeds of the Disposal would result in a reduction in the
likelihood of a breach of the net debt to EBITDA covenant at 30 June 2016,
depending on the performance of the Group's business, there would still be a
material risk of a breach of covenant at that time which would have the
results set out above.
Accordingly, even with the net proceeds of the Disposal, the Board is of the
view that further steps would be required to reduce the net debt of the Group,
and that the above options and risks would continue to apply.
Finally, the Board strongly believes that AIM is the most appropriate market
for the Company's Shares to be listed, and that the lower costs and more
flexible regulatory environment are in the interests of both the Company and
Shareholders. Pursuant to the AIM Rules, the Company will not be permitted to
move to AIM unless it has sufficient working capital. Accordingly, the
Delisting and AIM Admission is conditional on completion of the Disposal and
Rights Issue, as well as the passing of the AIM Resolution.
Accordingly, the Board believes that the Disposal, the Rights Issue,
the CEO Subscription, the NED Subscription, the Share Matching Plan, and
Delisting and AIM Admission are in the best interests of the Company and
Shareholders as a whole, and recommends that Shareholders vote in favour of
all the Resolutions.
Several of the Directors have conflicts of interest in relation to particular
matters (or are party to related party transactions) and so those Directors
have not participated in the Board's consideration of the proposals in respect
of which they are conflicted. Specifically:
(a) Richard Last and Roger McDowell are conflicted in respect of the
Disposal as they are also directors of Servelec, the parent company of the
purchaser; and
(b) Richard Last, Ian Bowles and Roger McDowell are conflicted in
respect of the Subscriptions and the Share Matching Plan (which are also
related party transactions).
None of Mr Last, Mr Bowles nor Mr McDowell, nor any person deemed to be
associated with him for the purposes of the Listing Rules has participated in
the Board's consideration of the Subscriptions or the Share Matching Plan.
In addition, Duncan Lewis has been unwell during the latter stages of the
Board's deliberations on the matters covered by this announcement.
Accordingly, he has not been able to attend Board meetings or participate in
the Board's decisions in respect of these matters.
In setting the Rights Issue Price, the Directors have considered the price at
which the Rights Issue Shares need to be offered to investors to ensure the
success of the Rights Issue and to raise significant equity compared with the
current market capitalisation of the Company. The Directors believe that the
Rights Issue Price, and its discount to the recent trading price of the
Existing Shares, is appropriate.
Appendix 1
Expected timetable of principal events
2016
Publicationandpostingofthe Prospectus,thenoticeofGeneral MeetingandtheFormsofProxy 16 March
LatesttimeanddateforreceiptofFormsofProxy 9.30a.m.on30March
RecordDateofentitlementundertheRightsIssuefor QualifyingShareholders 6p.m.on30 March
GeneralMeeting 9.30a.m.on1 April
AnnouncementoftheresultsoftheGeneralMeeting 1 April
Schedule1announcementofDelistingandapplicationforAIMAdmission 1 April
ProvisionalAllotmentLetterspersonalisedanddespatched (toQualifyingNon-CRESTShareholdersonly 1 April
AnnouncementofcompletionoftheDisposal Before4.00p.m.on1 April
AdmissionanddealingsinRights IssueShares, nil paid, commenceontheLondon Stock Exchange andShares marked"ex-rights" 8.00a.m.on4 April
NilPaidRightscreditedtostockaccountsinCREST (ofQualifyingCRESTShareholders) Assoonaspossibleafter 8.00a.m.on4 April
NilPaidRightsandFullyPaidRightsenabledinCREST Assoonaspossibleafter 8.00a.m.on4 April
RecommendedlatesttimeforrequestingwithdrawalofNilPaid RightsandFullyPaidRightsfromCREST(i.e.ifyourNilPaid RightsorFullyPaidRightsareinCRESTandyouwishtoconvert themtocertificatedform) 4.30p.m.on12 April
Latesttimefordepositingrenounced ProvisionalAllotmentLetters 3.00 p.m. on 13 April
Letters, nil or fully paid, into CREST or for dematerialising Nil Paid Rights or Fully Paid Rights into a CREST stock account (i.e. if your Nil Paid Rights of Fully Paid Rights are represented by a Provisional Allotment Letter and you wish to convert them to uncertificated form) 3.00 p.m. on 13 April
LatesttimeanddateforsplittingProvisionalAllotmentLetters, nilorfullypaid 3.00p.m.on14 April
Latest timeanddateforacceptance,payment infull and registrationofrenunciationofProvisionalAllotmentLetters 11.00a.m.on18 April
AnnouncementofresultsoftheRightsIssue By8.00a.m.on 19 April
AdmissionofSubscriptionSharestolistingontheOfficialList By 8.00 a.m. on 19 April
Dealings inNewShares(includingSubscriptionShares), fully paid,commenceontheMainMarket By8.00a.m.on19 April
New Shares credited to CREST stock accounts As soon as possible after 8.00 a.m. on 19 April
Expected despatch of definitive share certificates for the New Shares in certificated form Notlaterthan26 April
LastdayofdealingsintheSharesontheMainMarket 29 April
CancellationoflistingoftheSharesontheOfficialList 8.00a.m.on3May
AIMAdmissionandcommencementofdealingsinthe SharesonAIM 8.00a.m.on 3 May
Appendix 2
Definitions
The following definitions apply throughout this announcement unless the
context otherwise requires:
"AdmissionandDisclosureStandards" the requirements contained in the publication "Admission and Disclosure Standards" (as amended from time to time) published by the London Stock Exchange containing, amongst other things, the requirements to be observed by companies seeking admission to trading on the London Stock Exchange's Main Market for listed securities
"Admission" the admission of the Rights Issue Shares (nil paid or fully paid as the case may be) and the Subscription Shares to listing on the premium listing segment of the Official List in accordance with the Listing Rules and of the Rights Issue Shares and the Subscription Shares to trading on the London Stock Exchange's Main Market for listed securities in accordance with the Admission and Disclosure Standards and references to Admission becoming "effective" shall be construed
accordingly
"AIMAdmission" the admission of the Shares to trading on AIM becoming effective in accordance with the AIM Rules
"AIMResolution" the resolution to be proposed as a special resolution at the General Meeting (numbered Resolution 3 in the Notice) to approve the Delisting and AIM Admission
"AIMRules" the AIM Rules for Companies published by the London Stock Exchange from time to time
"AIM" theAlternativeInvestmentMarket,amarketoperatedbythe LondonStockExchange
"AllotmentResolution" the resolution to be proposed at the General Meeting as an ordinary resolution (numbered Resolution 1 in the Notice) granting the Directors authority to allot the Rights Issue Shares in connection with the Rights Issue
"Board"or"Directors" theboardofdirectorsofTribal and"Director"meansanymemberoftheBoard
"BusinessDay" any day on which the banks are generally open for business in England and Wales for the transaction of business, other than a Saturday, Sunday or public holiday
"CEOSubscription" the subscription for the CEO Subscription Shares by Ian Bowles at the Subscription Price
"CEOSubscriptionAgreement" the subscription agreement dated 16 March 2016 between the Company and Ian Bowles
"CEOSubscriptionShares" the 1,136,363 new Shares to be issued to Ian Bowles pursuant to the CEO Subscription
"CEOSubscriptionResolution" the resolution to be proposed at the General Meeting as a special resolution (numbered Resolution 5 in the Notice) approving the CEO Subscription
"certificated"or"incertificatedform" a share or other security not held in uncertificated form (i.e. not in CREST)
"ClosingPrice" the closing, middle market quotation of an Existing Share, as published in the Daily Official List
"CorporateGovernanceCode" the UK Corporate Governance Code published by the Financial Reporting Council in September 2012
"ContinuingGroup" the Group following completion of the Disposal
"CRESTRegulations" the Uncertificated Securities Regulations 2001, as amended from time to time
"CREST" the relevant system (as defined in the CREST Regulations) in respect of which Euroclear is the operator
"DailyOfficialList" the daily official list of the London Stock Exchange
"Delisting" the proposed cancellation of the listing of the Existing Shares on the Official List and from trading on the Main Market
"DisapplicationResolution" the resolution to be proposed at the General Meeting as a special resolution (numbered Resolution 2 in the Notice) granting power to the Directors to issue the Rights Issue Shares and disapplying pre-emption rights in connection with the Rights Issue
"DisclosureandTransparencyRules" the disclosure rules and transparency rules made by the FCA pursuant to section 73A of the FSMA
"Disposal" the disposal of the Synergy business
"DisposalResolution" the resolution to be proposed at the General Meeting as an ordinary resolution approving the Disposal
"EBITDA" earnings before interest, tax, depreciation and amortisation
"EnlargedIssuedShareCapital" the issued share capital of Tribal at Admission, as enlarged by the issue of the New Shares
"Euroclear" Euroclear UK & Ireland Limited
"ExcludedTerritories" the United States, Australia, Canada, Japan, New Zealand, South Africa and any other jurisdiction where the extension or availability of the Rights Issue (and any other transaction contemplated thereby) would breach any applicable law and "Excluded Territory" shall mean any one of them
"ExistingShares" theSharesinissueasatthedateofthisannouncement
"FacilityAgreement" the multicurrency revolving credit facility summarised in the Prospectus
"FCA" the Financial Conduct Authority in its capacity as competent authority for the purposes of Part VI of the FSMA
"FormofProxy" the enclosed form of proxy for use by shareholders in connection with the General Meeting
"FSMA" theFinancialServicesandMarketsAct2000(asamended)
"FullyPaidRights" rightstoacquireRightsIssueShares,fullypaid
"GeneralMeeting" the general meeting of the Company convened for 9.30 a.m. on 1 April 2016, notice of which is set out at the end of the Prospectus
"Group" Tribal, its subsidiary undertakings and joint ventures from time to time and "Group Company" should be interpreted accordingly
"Investec" InvestecBankplc
"ListingRules" the listing rules made by the FCA pursuant to section 73A of the FSMA
"LondonStockExchange" LondonStockExchangeplc
"LTIP" theGroup'slongtermincentiveplan
"MainMarket" theregulatedmarketoftheLondonStockExchange
"MatchingShareOption" means the options granted to Richard Last and Roger McDowell over Share Matching Plan Shares pursuant to the Share Matching Plan
"NEDSubscription" the subscription for the NED Subscription Shares by Richard Last and Roger McDowell at the Subscription Price
"NEDSubscriptionShares" the 4,545,454 new Shares to be issued to Richard Last and Roger McDowell pursuant to the NED Subscription
"NEDSubscriptionResolution" the resolution to be proposed at the General Meeting as a special resolution (numbered Resolution 6 in the Notice) approving the NED Subscription
"NewShares" the Rights Issue Shares and the Subscription Shares
"NilPaidRights" rights to subscribe for Rights Issue Shares, nil paid
"Non-executiveDirectors" Richard Last, David Egan, Duncan Lewis and Roger McDowell
"NoticeofGeneralMeeting"or "Notice" the notice of the General Meeting set out at the end of the Prospectus
"OfficialList" theofficiallistmaintainedbytheFCA
"OverseasShareholders" means shareholders with registered addresses outside the United Kingdom or who are incorporated in, registered in or otherwise resident or located in, countries outside the United Kingdom
"PRA"or"PrudentialRegulation Authority" the Prudential Regulation Authority of the UK, or any successor entity
"PremiumListing" a listing by the FCA of equity securities of a company which is required to comply with the provisions of Chapter 6 of the Listing Rules and the other rules in the Listing Rules that are expressed to apply to such securities with a premium listing
"Prospectus" means the combined prospectus and circular in respect of the Disposal, the Rights Issue, the Subscriptions, the Share Matching Plan and Delisting and AIM Admission, to be published by the Company
"ProspectusRules" the prospectus rules made by the FCA pursuant to section 73A of the FSMA
"ProvisionalAllotmentLetter" a provisional allotment letter to be issued in connection with the Rights Issue
"QualifyingShareholders" holders of Shares on the register of members of the Company on the Record Date
"QualifyingCRESTShareholder" Qualifying Shareholders holding Shares in uncertificated form
"QualifyingNon-CRESTShareholders" Qualifying Shareholders holding Shares in certificated form
"RecordDate" the close of business in London on 30 March 2016
"Resolutions" theresolutionstobeproposedattheGeneralMeetingassetoutintheNotice
"RevolvingCreditFacility" the multicurrency revolving facility of £50 million with a maturity date of 28 July 2018 provided under the terms of the Facility Agreement
"RightsIssue" the offer by way of rights to Qualifying Shareholders to subscribe for Rights Issue Shares, on the terms and conditions set out in the Prospectus and, in the case of Qualifying Non-CREST Shareholders, the Provisional Allotment Letter
"RightsIssuePrice" the price at which the Rights Issue Shares are issued, being 22 pence per Rights Issue Share
"RightsIssueResolutions" theAllotmentResolutionandtheDisapplicationResolution
"RightsIssueShares"
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