TIDMCNS
RNS Number : 5727X
Corero Network Security PLC
20 November 2014
THIS ANNOUNCEMENT IS RESTRICTED AND IT IS NOT FOR RELEASE,
PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR
INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, JAPAN, SOUTH
AFRICA, THE REPUBLIC OF IRELAND OR AUSTRALIA OR ANY OTHER STATE OR
JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION
WOULD BE UNLAWFUL.
Corero Network Security plc
("Corero" or the "Company")
Proposed Fundraising to raise GBP4.5 million
Corero Network Security plc (AIM: CNS),a leading provider of
security solutions for defending against DDoS (Distributed Denial
of Service) attacks and cyber threats, is pleased to announce a
conditional placing to new and existing shareholders and a
conditional subscription by Jens Montanana, chairman of the
Company, of a total of 30,000,000 new ordinary shares of 1p each
(the "New Ordinary Shares") at a price of 15 pence per New Ordinary
Share to raise up to GBP4.5 million (before expenses) (the
"Fundraising").
Pursuant to the intention set out in the Company's trading
update of 6 November 2014, the Fundraising is being undertaken to
provide funding for the further development of the Company's
SmartWall Threat Defense System ("SmartWall") product suite, to
fund targeted SmartWall sales and marketing activities in the US
and Europe, and to cover the funding gap arising from lower than
expected revenue from the previous generation product, with a view
to achieving sustainable positive cash flows from trading after the
year ending 31 December 2015.
The Fundraising consists of a conditional placing with new and
existing shareholders of 18,253,333 New Ordinary Shares (the
"Placing" and the "Placing Shares") and a conditional subscription
of 11,746,667 New Ordinary Shares by Jens Montanana, chairman of
the Company (the "Subscription" and the "Subscription Shares"), as
set out below. Jens Montanana has lent the Company the total
principal sum of GBP450,000 on terms described below (the "Loan"),
and it is intended that the Loan be set off against some of the
subscription monies owed by Jens Montanana pursuant to the
Subscription.
This Fundraising is conditional upon, inter alia, the passing of
a resolution (the "Resolution") to be proposed at a general meeting
(the "General Meeting") to be held at 9.30 a.m. on 8 December 2014,
notice of which is set out in a circular which will be posted to
holders of existing ordinary shares of the Company (the "Circular",
"Ordinary Shares" and the "Shareholders" respectively) today. By
way of the Resolution, the Company is seeking the authority of
Shareholders to provide the directors of the Company (the
"Directors" or the "Board") with authority to allot and issue the
New Ordinary Shares and to disapply pre-emption rights in relation
to the issue of the New Ordinary Shares.
Further details of the Placing, Subscription and the Loan are
set out below and in the Circular. Unless stated otherwise, terms
and expressions defined in the Circular have the same meaning in
this announcement.
Background to and Reasons for the Fundraising
Further to the trading update by the Company on 6 November 2014,
the Directors maintain a positive outlook on the future for the
Company. A copy of the trading update is available on the Company's
website at www.corero.com.
Corero is seeing an acceleration in the shift for enterprises
looking to their internet service providers and cloud data centre
providers for delivery of protection against DDoS attacks.
In the first half of 2014, and following a two year investment
plan, the Company launched its new family of SmartWall products to
enable it to address the growing service provider market demand for
DDoS solutions. The Board believes that SmartWall has several
competitive differentiators to its peers, particularly that it is
the only DDoS product, of which the Directors are aware, that has
specifically been designed to be deployed in-line.
The Company intends that the core target market for SmartWall
will initially be the substantial number of opportunities amongst
hosting and data centre providers and service providers such as
internet service and telecommunication providers in North America
and Europe, where deals are potentially more lucrative than in the
Company's traditional enterprise customer orientated market.
As highlighted in the trading update, Corero secured a flagship
SmartWall order in October this year by an on-line gaming company
(the Company's largest DDoS defence deployment to date), alongside
multiple other SmartWall orders in recent months and a growing
number of SmartWall proof of concept customer trials are in
progress. The Directors are highly encouraged by this and the
validation that it provides of SmartWall.
2014 was planned to be a year of transition for Corero with the
second half of 2014 focused on the commercialisation, marketing and
sales of SmartWall. The Directors now believe that the requisite
key individuals and resources are in place and aligned to implement
this strategy. Looking forward, therefore, the Directors intend in
2015 to:
-- establish SmartWall as the leading solution for DDoS
protection through raising Corero's profile, increasing its base of
reference customers, and participating in independent market
testing and thought leadership initiatives;
-- continue improvement of the DDoS protection product suite,
with incremental added functionality and forensic and analytical
capabilities, a Cloud enabled software model, and additional attack
protections; and
-- refine its 'go to market' proposition by prioritising markets
by geography and market segment, broadening available routes to
market to include selling through 'bundled' offerings with partners
such as systems integrator and original equipment manufacturers,
and enhancing and scaling its post-sales customer support
offering.
The Company is pleased that the market dynamics are shifting in
its favour, but the shift away from the previous generation product
is occurring faster than expected, and therefore the Company
intends to undertake the Fundraising to provide the requisite
funding to continue aligning its sales and marketing activities and
product development, on its strategy centred upon SmartWall.
With the Fundraising, the Directors are confident in the outlook
for SmartWall with the Company focusing its development efforts on
market driven features and SmartWall sales in priority target
geographies and markets so as to deliver a step change in its
revenues. The Directors, who hold approximately 41.8 per cent of
the Existing Shares support the Fundraising and, furthermore,
Shareholders who hold approximately 24.9 per cent of the Existing
Shares are also participating in the Fundraising. If the Resolution
is not approved by the requisite number of Shareholders or the
Fundraising does not proceedfor any other reason, the Company will
be required to secure financing for the purposes set out above from
alternative sources.
The Loan
Pursuant to the Loan Agreement, Jens Montanana has lent the
Company the total principal sum of GBP450,000. This loan is
unsecured and repayable on the earlier of (i) the day immediately
following the date that the Resolution is passed at the General
Meeting and (ii) 31 December 2015. The Company may have to repay
the loan early if it commits an event of default. Interest is
payable on the loan at the end of each three month period at a
percentage rate per annum equivalent to the Bank of England's
published base rate from time to time plus 5 per cent. However no
interest shall be payable and accrue on the loan if it is repaid or
prepaid by the Company during the period of 60 days commencing on
the date the loan is made.
The intention is for part of the subscription monies owed by
Jens Montanana pursuant to his Subscription Agreement to be
satisfied by the release of the Company of its obligation to repay
the liquidated sum which the Company will owe Jens Montanana
pursuant to the Loan Agreement if the Resolution is passed at the
General Meeting.
If the Fundraising does not proceed the Company will continue to
owe the principal sum plus accrued interest under the Loan
Agreement to Jens Montanana in accordance with its terms.
Details of the Fundraising
The Subscription is conditional upon admission of the New
Ordinary Shares (the "Admission") and the Placing is conditional
upon, inter alia, the following:
-- the passing (without amendment) of the Resolution as a
special resolution at the General Meeting to authorise the
Directors, pursuant to section 551 of the Act, to allot relevant
securities up to a maximum aggregate nominal value of GBP300,000.00
pursuant to the Fundraising and to disapply the pre-emption rights
conferred by the Act in connection with the allotment of Ordinary
Shares pursuant to the Fundraising up to 30,000,000 New Ordinary
Shares;
-- the Subscription Agreement remaining in full force and effect
and having become unconditional and the Company having received the
subscription monies from Jens Montanana in respect of the
Subscription Shares, less the amount which is owed by the Company
under the Loan Agreement by no later than 5.00 p.m. on the Business
Day prior to Admission; and
-- Admission.
The Circular setting out full details of the Fundraising and
convening the General Meeting will be posted to Shareholders today.
The Circular will explain why the Board considers the Fundraising
to be in the best interests of the Company and the Shareholders as
a whole.
The Placing Agreement may be terminated by finnCap in certain
circumstances prior to Admission including, inter alia, in
circumstances where any of the warranties are found not to be true
or accurate or were misleading in any material respect or on the
occurrence of certain force majeure events.
Neither the Placing nor the Subscription is being underwritten
by finnCap. The New Ordinary Shares will be credited as fully paid
and will rank pari passu with the existing Ordinary Shares if and
when issued.
Application will be made for the New Ordinary Shares to be
admitted to trading on AIM. It is expected that Admission will
become effective and dealings in the New Ordinary Shares will
commence on 9 December 2014.
Participation by Directors
It is proposed that Jens Montanana will participate in the
Subscription, as set out below. The interests of the Directors
immediately following Admission will be as follows:
Director Number of Number of New Resulting Resulting
Ordinary Ordinary Shares number of holding as
Shares held subscribed Ordinary Shares a percentage
as at the for in the held immediately of the Enlarged
date of this Subscription following Issued Share
announcement Admission Capital*
Jens Montanana 33,943,687** 11,746,667 45,690,354 39.5%
Andrew Miller 723,255 - 723,255 0.6%
Richard Last 1,066,667 - 1,066,667 0.9%
Andrew Lloyd - - - -
Ashley Stephenson 38,000 - 38,000 0.0%
------------------ --------------------- ---------------------- ---------------------
Total 35,771,609 11,746,667 47,518,276 41.0%
* "Enlarged Issued Share Capital" means the 115,637,416 Ordinary
Shares of the Company as it will be immediately following the
Fundraising (assuming the Fundraising is fully subscribed).
** held in the name of Jens Montanana and beneficial
entities.
Related Party Transactions
The proposed participation in the Fundraising by Jens Montanana
and the provision by him to the Company of the Loan, as a director
of the Company, constitute related party transactions pursuant to
the AIM Rules for Companies. The Directors of the Company,
excluding Jens Montanana, consider, having consulted with finnCap,
the Company's nominated adviser, that these transactions, as set
out above, are fair and reasonable insofar as the Shareholders are
concerned.
Enquiries:
Corero Network Security plc Tel: 01895 876382
Andrew Miller, Chief Financial Officer and COO
finnCap Tel: 020 7220 0500
Stuart Andrews / Henrik Persson
Redleaf Polhill Tel: 020 7382 4747
Rebecca Sanders-Hewett / Dwight Burden / David Ison cns@redleafpr.com
About Corero Network Security
Corero Network Security, an organization's First Line of
Defense(R) against DDoS (Distributed Denial of Service) attacks and
cyber threats, is a pioneer in global network security. Corero
products and services provide online enterprises, service
providers, hosting providers, and Managed Security Service
Providers with an additional layer of security capable of
inspecting Internet traffic and enforcing real-time access and
monitoring policies designed to match the needs of the protected
business. Corero technology enhances any defense-in-depth security
architecture with a scalable, flexible and responsive defence
against DDoS attacks and cyber threats before they reach the
targeted IT infrastructure allowing online services to perform as
intended. For more information, visit www.corero.com.
Disclaimer
This announcement contains a number of forward looking
statements relating to Corero and its subsidiaries (the "Group")
with respect to, amongst others, the following: financial
conditions; results of operations; the business of the Group;
future benefits of the Fundraising; and management plans and
objectives. The Company considers any statements that are not
historical facts to be "forward looking statements". They relate to
events and trends that are subject to risks, uncertainties and
assumptions that could cause the actual results and financial
position of the Group to differ materially from the information
presented in the relevant forward looking statement. When used in
this announcement, the words "estimate"; "project"; "intend";
"aim"; "anticipate"; "believe"; "expect"; "should" and similar
expressions, as they relate to the Group or management of it, are
intended to identify such forward looking statements. Shareholders
are cautioned not to place undue reliance on these forward looking
statements which speak only as at the date of this announcement.
The Company does not undertake any obligation to update publicly or
revise any of the forward looking statements whether as a result of
new information, future events or otherwise, save in respect of any
requirement under applicable laws, the AIM Rules or other
regulations.
finnCap Ltd, which is authorised and regulated by the Financial
Conduct Authority, is acting as nominated adviser and broker to the
Company in connection with the matters described in this
announcement. finnCap Ltd will not be responsible to anyone other
than the Company for providing the protections afforded to clients
of finnCap Ltd or for advising any other person on the Fundraising
or any other arrangements described in this announcement. finnCap
Ltd has not authorised the contents of, or any part of, this
announcement and no liability whatsoever is accepted by finnCap Ltd
for the accuracy of any information or opinions contained in this
announcement or for the omission of any information.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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