TIDMSWC
RNS Number : 5761Q
Summerway Capital PLC
28 October 2021
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS
RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN
WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE
UNITED STATES, AUSTRALIA, CANADA, THE REPUBLIC OF SOUTH AFRICA OR
JAPAN OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION
OR DISTRIBUTION WOULD BE UNLAWFUL.
This announcement is not an admission document or a prospectus
and does not constitute or form part of an offer to sell or issue
or a solicitation of an offer to subscribe for or buy any
securities nor should it be relied upon in connection with any
contract or commitment whatsoever. Investors should not purchase or
subscribe for any transferable securities referred to in this
announcement except in compliance with applicable securities laws
on the basis of the information in the admission document (the
"Admission Document") to be published by Summerway Capital Plc in
connection with the placing of ordinary shares by the Company and
the proposed admission of its issued and to be issued ordinary
shares to trading on AIM, a market operated by London Stock
Exchange Plc. Before any purchase of shares, persons viewing this
announcement should ensure that they fully understand and accept
the risks which will be set out in the Admission Document when
published. Copies of the Admission Document will, following
publication, be available during normal business hours on any day
(except Saturdays, Sundays and public holidays) from the registered
office of the Company and on the Company's website.
This announcement contains inside information for the purposes
of article 7 of the Market Abuse Regulation (EU) 596/2014 as
amended by regulation 11 of the Market Abuse (Amendment) (EU Exit)
Regulations 2019/310. With the publication of this announcement,
this information is now considered to be in the public domain.
28 October 2021
Summerway Capital Plc
("Summerway" or the "Company")
Proposed Acquisition
Proposed Placing
Summerway Capital Plc has today entered into a conditional
agreement to acquire the entire issued share capital of Vertigrow
Technology Ltd (t/as Celadon Pharmaceuticals "Vertigrow"), a UK
based pharmaceutical company specialising in the researching,
growing and supply of medicinal cannabis, for total consideration
of GBP80 million (the "Proposed Acquisition").
Highlights
-- Vertigrow is one of the first pharmaceutical companies in the
UK to receive a Home Office licence, following approval from the
MHRA to apply for the licence, to grow high tetrahydrocannabinol
("THC") cannabis, which is expected to be used in medicinal
products, initially focusing on the chronic pain market
-- Operates within a highly regulated market with substantial
growth potential, benefiting from positive tailwinds and strong
regulatory and operational barriers to entry
-- Experienced leadership, scientific and operational team
-- Majority owner of a clinically led business which aims to
undertake a major clinical study on the potential benefits of
medicinal cannabis in the field of chronic pain, with the long-term
intention of changing the NHS's approach towards reimbursement
-- At full capacity, Vertigrow's current facility could supply
up to 50,000 patients, which has the potential to generate revenue
of GBP90 million per annum with EBITDA margins of approximately 50
per cent.
-- Provides Summerway with a compelling foundation from which
accretive and complementary M&A opportunities could be executed
alongside Vertigrow's existing organic growth initiatives
-- GBP80 million consideration, payable through the issue of
approximately 48.5 million Ordinary Shares at 165 pence per
Summerway share
-- In support of the Proposed Acquisition, the Company has also
made available to Vertigrow a term loan of up to GBP4.25 million
ahead of completion of the Proposed Acquisition, which will be
principally applied to accelerate Vertigrow's capital expenditure
in its Midlands based facility
-- Proposed Placing to raise GBP7 million (before expenses) to
provide additional working capital for the Enlarged Group
-- Pro forma estimated equity value of approximately GBP100
million post completion of the Proposed Acquisition and Proposed
Placing, with the Enlarged Group intending to apply for
re-admission to AIM or another alternative exchange within the UK
or North America
Benjamin Shaw, Interim Chairman of Summerway, said:
"The Board of Summerway is delighted to announce the proposed
acquisition of Vertigrow and to be partnering with James Short and
his team. We believe the pharmaceutical medical cannabis market
will be substantial in the UK and internationally and Vertigrow is,
in our view, a clear leader in the sector."
James ("Jim") Short, Founder and Chief Executive Officer of
Vertigrow, said:
"I am delighted to have agreed terms with Summerway. I believe
there is a compelling opportunity to create a substantial
pharmaceutical business contributing to life changing treatments to
chronic pain sufferers, and other therapeutic areas that could
benefit from medicinal cannabis, and this transaction, and becoming
a public company are important corporate steps for us."
Enquiries:
Summerway Capital Plc
Tony Morris 020 7440 7520
Canaccord Genuity Limited (Nominated Adviser and Broker)
Andrew Potts 020 7523 8000
Acquisition Agreement
The Company has today entered into a conditional agreement to
acquire the issued share capital of Vertigrow for total
consideration of GBP80 million (the "Acquisition Agreement"). The
Proposed Acquisition will be subject, inter alia, to Summerway
shareholder approval at a general meeting, customary regulatory
approvals and re-admission of the share capital of Summerway (as
enlarged by the Proposed Acquisition and Proposed Placing) (the
"Enlarged Group") to AIM, or admission to another stock exchange
within the UK, North America or other certain territories.
The total consideration of GBP80 million will be satisfied by
the issue of approximately 48.5 million new ordinary shares in the
capital of the Company ("Ordinary Shares") at 165 pence per
Ordinary Share to the shareholders of Vertigrow (the "Consideration
Shares"). The Consideration Shares issued to the founders of
Vertigrow will be subject to a lock in arrangement for a period of
12 months following completion of the Proposed Acquisition, and
customary orderly market provisions for a further 12 months
following the expiry of the lock in arrangement.
Information on Vertigrow Technology Ltd
Vertigrow owns a UK based pharmaceutical group that was
established in 2018 and is focused on growing highly controlled
indoor hydroponic, high THC cannabis for manufacture for
cannabis-derived medicinal products for use within products to
treat chronic pain. Vertigrow is also involved in planning research
into cannabinoids for use in chronic pain and the treatment of
other conditions such as autism and multiple sclerosis, within the
UK's highly regulated market.
Vertigrow has received a Home Office licence, following approval
from the Medicines and Healthcare products Regulatory Agency (the
"MHRA") to apply for the licence, allowing it to legally grow
medicinal cannabis in the UK for the purpose of producing test
batches of cannabis oil to support its application to the MHRA for
registration as a manufacturer of medicinal product APIs. The
process of obtaining this licensing is complex, has taken over two
years, required material investment and is technically extensive.
The directors of Summerway (the "Directors") believe this is one of
the first such licences granted in the UK. Following receipt of
MHRA registration and the grant of a further licence from the Home
Office permitting supply for manufacture into finished medicinal
products, the business will be able to supply medicinal cannabis
(in the form of an API, which in this case is an extracted oil used
in the finished pharmaceutical product) with a high THC content in
the UK, allowing it an opportunity to enter what is expected to be
a substantial (and extensively regulated) and fast-growing UK
market.
Vertigrow has a 100,000 square foot facility located in the
Midlands, UK, that comprises (i) a laboratory designed to meet
UK-GMP standards; and (ii) capacity for a large growing facility
that has received Home Office approval to legally grow high THC
cannabis. Once fully licensed, at full capacity, the facility can
expect to produce an estimated nine tonnes of dry flower per year,
which could supply up to circa 50,000 patients per annum, which has
the potential to generate annual revenues of approximately GBP90
million and EBITDA margins in the region of 50 per cent. per the
Company's business model.
Vertigrow has a majority shareholding in Harley Street (CPC)
Limited ("LVL"), a prospective private pain clinic business, that
is in the advanced stages of the approval process to be the sponsor
of a MHRA and Research Ethics Committee authorised clinical trial
for medicinal cannabis in the UK (the "Trial"). The Directors
believe the Trial would, once approved by the MHRA and the Research
Ethics Committee, be the only authorised medicinal cannabis trial
of its type in the UK. The aim of the Trial will be to document and
demonstrate the safety and efficacy of the studied cannabinoids, in
the form of a third party cannabis-based medicinal product, for the
treatment of chronic pain related conditions. Following the
successful completion of the Trial, Vertigrow expect to be in a
position to present the data from the Trial to NICE in a form that
may enable NICE to recommend the cannabis-based medicinal product
for prescription on the NHS for the uses studied in the Trial and,
as a result, further facilitate the legal use of medicinal cannabis
by the NHS in the UK. LVL has received conditional approval for the
Trial from the MHRA, subject to (among other things) approval by
the Research Ethics Committee. Ahead of the Trial being approved by
the Research
Ethics Committee, LVL will undertake a preliminary study to
evaluate the feasibility of the Trial regarding recruitment rates
and acceptability of the Trial.
Vertigrow and LVL have an experienced management team, including
leading experts in researching, cultivating and manufacturing
cannabis API, which should enable the business to optimise
cultivation for use in developing and manufacturing cannabinoid
derived medicines.
The Loan Agreement is classified as a substantial transaction
under the AIM Rules for Companies. In accordance with Schedule 4 of
the AIM Rules for Companies, Vertigrow's statutory accounts to 31
December 2020 as submitted to Companies House are micro-entity
accounts and therefore were unaudited and not consolidated and were
not required to contain a profit & loss statement. Vertigrow's
gross assets as at 31 December 2020 were GBP1,812,025.
Enlarged Group Strategy
In line with the amended investing policy of the Company as
announced on 20 October 2021, the Company is focused on investment
and acquisition opportunities across the healthcare and
pharmaceutical sectors, particularly in new and emerging
therapeutic areas. The Directors believe there are numerous
opportunities to invest in, or acquire, businesses that can be
organically or acquisitively grown to become leading healthcare and
pharmaceutical companies. In Vertigrow, the Directors believe they
have identified a business which meets the criteria and would
provide a compelling acquisition as part of the Company's growth
strategy.
Recognising the embryonic nature of the cannabis sector within
the UK and the Company's current pipeline of investment and
acquisition opportunities, the Directors remain cognisant of other
markets and stock exchanges other than AIM which are available to
the Enlarged Group as part of its re-admission process. These such
opportunities may be within the UK or North America, or certain
other territories.
In considering the most appropriate listing venue, the Directors
will consider what is in the best interests of the Enlarged Group
in terms of access to liquidity and will be most conducive for
accelerating the Enlarged Group's growth strategy, and the delivery
of value for its current and prospective shareholders.
The Company will make a further announcement in due course.
Loan Agreement
Concurrently with signing of the Acquisition Agreement, the
Company has also entered into a loan agreement under which it has
agreed to provide Vertigrow with a GBP4.25 million short term, term
loan facility in order to fund its growth plans pending completion
of the Proposed Acquisition (the "Loan Agreement"). The entry into
the Loan Agreement is in accordance with the Company's amended
investing policy.
Under the terms of the Loan Agreement, Vertigrow is entitled to
draw up to GBP2.125 million on an unsecured basis, with any
subsequent drawings being conditional upon Vertigrow granting the
Company security over the assets of Vertigrow and its wholly owned
subsidiaries.
The term loan facility is subject to customary information
covenants and is repayable on the earlier of 7 months from signing
and admission to trading of the Enlarged Group on a stock exchange
which may include AIM, other UK markets, North America, or certain
other territories. The term loan interest charge is 10 per cent.
per annum, which is accrued and payable at maturity with the
principal borrowings.
Proposed Placing
In order to provide additional working capital for the Enlarged
Group following the Proposed Acquisition, the Company is proposing
to raise approximately GBP7 million (before expenses) through a
placing of new Ordinary Shares (the "Placing Shares") (the
"Proposed Placing").
The net proceeds of the Proposed Placing, plus Summerway's
existing cash of GBP6.75 million (prior to any amounts advanced
under the Loan Agreement), will be used to provide working capital
for the Enlarged Group.
Further details of the Proposed Placing will be provided in due
course.
Admission
The Company's enlarged share capital will comprise the Company's
existing ordinary shares in issue, the Placing Shares and the
Consideration Shares (the "Enlarged Share Capital"). The Proposed
Acquisition constitutes a reverse takeover under rule 14 of the AIM
Rules for Companies (the "AIM Rules"). Admission of the Enlarged
Share Capital to trading on AIM ("Admission") will therefore be
conditional upon, inter alia, shareholder approval at a general
meeting and completion of the Proposed Placing. The Company's
Ordinary Shares will remain suspended from trading on AIM until
such time as the Company publishes a combined shareholder circular
and AIM admission document (the "Circular") or confirmation is
given that the Proposed Acquisition is not proceeding.
As a result of the Proposed Acquisition, it is anticipated that
certain of the current shareholders in Vertigrow will be deemed to
be acting in concert for the purposes of the City Code on Takeovers
and Mergers (the "Takeover Code") and that this concert party would
control more than 30 per cent. of the Enlarged Share Capital. This
would normally result in a requirement to make a general offer to
all the remaining shareholders of the Company to acquire their
shares under Rule 9 of the Takeover Code. Accordingly, the Company
intends to apply to the Takeover Panel for a waiver of Rule 9 of
the Takeover Code in order to permit the Proposed Acquisition
without triggering an obligation on the part of those Vertigrow
shareholders who are deemed to be acting in concert to make a
general offer to the Company's shareholders. Any such waiver is
expected to be subject to the approval of the Company's
shareholders who are independent of Vertigrow and its shareholders.
Completion of the Proposed Acquisition and Admission will therefore
be conditional on the passing of any such resolution.
As such, there can be no certainty that the Proposed Acquisition
will proceed. If Admission is pursued by the Company, the Company
will publish a Circular in relation to the Proposed Acquisition and
details of the Enlarged Group in due course.
Management and Board
Following completion of the Proposed Acquisition, James Short,
Founder and Chief Executive Officer of Vertigrow will join the
Board of Directors of Summerway as Chief Executive Officer of the
Enlarged Group.
Further executive and non-executive Director appointments will
be announced by the Company as part of the Enlarged Group's
re-admission process and will be tailored according to the proposed
market and exchange that the Enlarged Group deems the most
appropriate to seek re-admission to.
Important Notice
This announcement is for information purposes only and is not
intended to and does not constitute, or form part of, any offer or
invitation to purchase, subscribe for or otherwise acquire or
dispose of, or any solicitation to purchase or subscribe for or
otherwise acquire or dispose of, any securities in the United
States, Republic of South Africa, Australia, Canada or Japan or any
other jurisdiction in which such an offer or solicitation may lead
to a breach of any applicable legal or regulatory requirements.
Persons needing advice should consult with an independent financial
adviser authorised under the Financial Services and Markets Act
2000, as amended ("FSMA"), who specialises in advising on the
acquisition of shares and other securities, if that person is in
the United Kingdom, or any appropriately authorised person under
applicable laws, if that person is located in any other
jurisdiction. The information contained in this announcement is not
for release, publication or distribution to persons in any
jurisdiction where to do so might constitute a violation of local
securities laws or regulations. This announcement has been issued
by and is the sole responsibility of the Company. The information
contained in this announcement is for background purposes only and
does not purport to be full or complete. The information in this
announcement is subject to change without notice. Upon the
publication of this announcement via a Regulatory Information
Service, this inside information is now considered to be in the
public domain. If you have any queries on this, then please contact
Benjamin Shaw, Interim Chairman of the Company (responsible for
arranging release of this announcement) via Tony Morris, Adviser to
the Company.
This announcement may contain and the Company may make verbal
statements containing "forward-looking statements" with respect to
certain of the Company's plans and its current goals and
expectations relating to its future financial condition,
performance, strategic initiatives, objectives and results.
Forward-looking statements sometimes use words such as "aim",
"anticipate", "target", "expect", "estimate", "intend", "plan",
"goal", "believe", "seek", "may", "could", "outlook" or other words
of similar meaning. By their nature, all forward-looking statements
involve risk and uncertainty because they relate to future events
and circumstances which are beyond the control of the Company,
including amongst other things, United Kingdom domestic and global
economic business conditions, market-related risks such as
fluctuations in interest rates and exchange rates, the policies and
actions of governmental and regulatory authorities, the effect of
competition, inflation, deflation, the timing effect and other
uncertainties of future acquisitions or combinations within
relevant industries, the effect of tax and other legislation and
other regulations in the jurisdictions in which the Company and its
affiliates operate, the effect of volatility in the equity, capital
and credit markets on the Company's profitability and ability to
access capital and credit, a decline in the Company's credit
ratings; the effect of operational risks; and the loss of key
personnel. As a result, the actual future financial condition,
performance and results of the Company may differ materially from
the plans, goals and expectations set forth in any forward-looking
statements. Any forward-looking statements made in this
announcement by or on behalf of the Company speak only as of the
date they are made. Except as required by applicable law or
regulation, the Company expressly disclaims any obligation or
undertaking to publish any updates or revisions to any
forward-looking statements contained in this announcement to
reflect any changes in the Company's expectations with regard
thereto or any changes in events, conditions or circumstances on
which any such statement is based. The distribution of this
announcement in certain jurisdictions may be restricted by law. No
action has been taken by the Company or Canaccord Genuity Limited
("Canaccord") that would permit an offering of such shares or
possession or distribution of this announcement or any other
offering or publicity material relating to such shares in any
jurisdiction where action for that purpose is required, other than
the United Kingdom. Persons into whose possession this announcement
comes are required by the Company and Canaccord to inform
themselves about, and to observe, such restrictions. The
information contained in this announcement may not be distributed,
published, reproduced, transmitted or otherwise made available in
whole or in part or disclosed by recipients to any other person and
may not be reproduced in any manner whatsoever. Any forwarding,
distribution, reproduction, or disclosure of any information
contained in this announcement in whole or in part is unauthorised.
Failure to comply with these restrictions may constitute a
violation of the US Securities Act of 1933, as amended or the
applicable laws of other jurisdictions. Subject to certain
exemptions, the securities referred to in this announcement may not
be offered or sold in the United States, Australia, Canada, Japan,
South Africa or certain other jurisdictions or for the account or
benefit of any national resident or citizen of certain
jurisdictions. No prospectus will be made available in connection
with the matters contained in this announcement and no such
prospectus is required to be published. Persons needing advice
should consult an independent financial adviser.
Canaccord, which is authorised and regulated in the United
Kingdom by the Financial Conduct Authority is acting as nominated
adviser and broker to Summerway in connection with the Proposed
Acquisition and the Proposed Placing. Canaccord is acting
exclusively for Summerway and no one else in connection with the
Proposed Acquisition and the Proposed Placing and will not be
responsible to anyone other than Summerway for providing the
protections afforded to clients of Canaccord or for providing
advice in relation to the Proposed Acquisition and the Proposed
Placing or the contents of this announcement or any transaction,
arrangement or matter referred to herein. Apart from the
responsibilities and liabilities, if any, which may be imposed on
Canaccord by the FSMA or the regulatory regime established
thereunder, Canaccord does not accept any responsibility whatsoever
for the contents of this announcement, and makes no representation
or warranty, express or implied, for the contents of this
announcement, including its accuracy, completeness or verification,
or for any other statement made or purported to be made by it, or
on its behalf, in connection with the Company or the Placing Shares
or the Proposed Placing, and nothing in this announcement is or
shall be relied upon as, a promise or representation in this
respect whether as to the past or future. Canaccord accordingly
disclaims to the fullest extent permitted by law all and any
liability whether arising in tort, contract or otherwise (save as
referred to above) which it might otherwise have in respect of this
announcement or any such statement.
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END
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