A Circular to Shareholders has been sent today regarding the following
proposals:
Open Offer of 152,628,016 New Ordinary Shares at a price of 1p per share
Approval of �1.5 million of Loan Notes
Notice of Extraordinary General Meeting
INTRODUCTION
The Board of Energy Technique announced on 6 September 2005 a �1.5 million
Equity Funding (before expenses), by means of 30 unsecured Loan Notes of �50,000
each, conditionally convertible in aggregate into 150 million New Ordinary
Shares at a conversion price of 1p per share. The Loan Notes are conditional,
inter alia, upon the approval of Independent Shareholders, which is to be sought
at the Extraordinary General Meeting to be held on 26 October 2005 and the Panel
on Takeovers and Mergers granting a waiver from the requirement under Rule 9 of
the City Code to make a general offer to Shareholders which would normally arise
on conversion of the Loan Notes.
In conjunction with these proposals and to give Qualifying Shareholders an
opportunity to avoid dilution, an Open Offer to Qualifying Shareholders of
152,628,016 New Ordinary Shares will be made available at the Issue Price on the
basis of one New Ordinary Share for each Existing Ordinary Share held on the
Record Date.
Money raised by the Open Offer will be used to redeem the relevant number of
Loan Notes.
USE OF PROCEEDS
The financial results for the year ended 31 March 2005 show that the Group
sustained further significant losses in that financial year of approximately
�2.5 million. This coupled with continuing trading conditions has placed severe
constraints on the Groups working capital position. As a consequence, it is now
essential to provide the necessary additional working capital for the Group to
continue to trade solvently. The proceeds of the Equity Funding will be used for
this purpose.
TERMS OF THE LOAN NOTES
The Parties to the Loan Notes are the Company, London & Boston and Triandra.
Each of London & Boston and Triandra has agreed to subscribe for 15 Loan Notes
of �50,000 each. London & Boston is an Existing Ordinary Shareholder with
13,845,160 Existing Ordinary Shares, representing 9.1% of the Companys existing
called up share capital. Triandra is an Existing Ordinary Shareholder, on behalf
of the Tchenguiz Family Trust, with 12,314,444 Existing Ordinary Shares,
representing 8.1% of the Companys existing called up share capital. The Panel
has previously treated London & Boston and Mr. Vincent Tchenguiz as a concert
party in June 2001 and London & Boston and Triandra are therefore deemed to be a
concert party going forward.
Under the terms of a Letter Agreement dated 6 September 2005 and accepted by the
Company on that date, it was, inter alia, agreed by the parties that in the
event the Company issues no later than 30 September 2005, an equity fund raising
document to raise funds at the same subscription price as the conversion price
set out in the Loan Notes and the Company uses the proceeds of that equity
funding to repay any sum drawn down under the Loan Notes, the Loan Note Holders
will only exercise their Conversion Rights in respect of the money drawn down
under the Loan Notes and not repaid consequent upon that equity issue.
The conversion of the sums drawn down under the Loan Notes into New Ordinary
Shares is conditional upon the following Conversion Conditions having been
satisfied: -
The approval of the Loan Note Instrument by Independent Shareholders by an
ordinary resolution to be passed on a poll at the EGM convened for this
purpose;
The Company receiving in a form satisfactory to it of a waiver by the Panel
of those requirements under Rule 9 of the City Code that would otherwise
apply upon the exercise by the Loan Note holders of their conversion
rights.
Following conversion, but before exercise of options, London & Boston would hold
88,845,160 Ordinary Shares representing 29.4% of the Enlarged Share Capital and
Triandra 87,314,444 Ordinary Shares representing 28.9% of the Enlarged Share
Capital. These calculations have been carried on the basis that no Existing
Ordinary Shareholders accept any part of the Open Offer.
On issue and prior to conversion, the Company may request drawdown of all or
part of the Loan Notes rateably in tranches as set out in the Schedule agreed
between the Parties to the Loan Notes, and further amounts as and when agreed
between the Parties. Further details of the Loan Notes are set out in Part III
of the document.
PRINCIPAL TERMS OF THE OPEN OFFER
In the document KBR invites Qualifying Shareholders to apply for the Open Offer
Shares at the Issue Price on the basis of:
One Open Offer Share for each Existing Ordinary Share held on the Record Date
conditional on the passing of the Resolutions at the EGM.
To be valid, completed Application Forms, together with payment in full must be
received by 3.00 p.m. on 25 October 2005.
Further information on the Open Offer including the procedure for application
and payment is set out in the letter from KBR in Part II of the document and in
the Application Form contained therein.
BUSINESS STRATEGY
The Group seeks to exploit the current and future opportunities in the Heating
Ventilation and Air Conditioning market (HVAC) by focusing its strategy on the
following: -
Further developing Diffusion Heating and Cooling, a division of ET
Environmental, into the brand leader for air conditioning fan coils and, in
particular, commercial heating products, through continued product innovation
and development;
Building on the strong organic growth already achieved by Diffusion DX Air
Conditioning in the packaged air conditioning market, by concentrating on
securing consultant led project work, which will reduce the current
seasonality of the business;
Fully to exploit the sales growth opportunities created by Part L of the
Building (Amendment) Regulations 2001 (and subsequent Building (Amendment
(No.2) Regulations 2002), through the aggressive marketing of Lifebreath
products in the UK and EU.
To capitalise on the sales growth opportunities created by the developing air
treatment and sanitisation markets, by offering a complete range of ultra
violet products, ranging from the premium priced high specification
Nightingale UVGI unit to the lower and medium specified products manufactured
by NQ Environmental Inc.;
To develop a duct-mounted UVGI air treatment unit using the same technology
as the mobile Nightingale UVGI unit, which the Directors believe will have
more widespread application in hotels and offices;
To explore opportunities for manufacturing certain of the Groups products
and components in China, thereby providing the Group with a lower cost base.
CURRENT TRADING AND PROSPECTS
Since 31 March 2005 the Group has continued to experience very difficult trading
conditions and working capital constraints. The Board has taken steps to improve
sales and reduce the Groups operating costs and, although it is expected that
the benefit of the cost reductions will begin to flow through in the coming
months, these benefits have not impacted in the six months to 30 September 2005.
THE CONCERT PARTY
The Concert Party comprises London & Boston, Stephen Komlosy and Triandra.
London & Boston
London & Boston, which holds a number of investments in listed and unlisted
companies, including a holding of 9.1% in Energy Technique, was incorporated in
England & Wales as a public company limited by shares on 12 March 1996 under the
Act with the name of Moneyadvance Public Limited Company and with registered
number 03170812. On 6 June 1996 its name was changed to Cybertec Holdings plc
and on 28 September 2001 to London & Boston Investments plc. Its registered
office is at Winchester House, Deane Gate Avenue, Taunton, Somerset TA1 2UH and
its principal place of business is at 133 Ebury Street, London SW1W 9QU. The
directors of London & Boston are Stephen Anton Komlosy (who is also a non-
executive director of the Company), John Joseph May, Peter Leonard George
Cotgrove Barry Edward Adams and John Martin Burley and Julie Amanda Hester.
The authorised share capital of London and Boston Investments is �5 million
comprising 250,000,000 ordinary shares of 2p each of which 186,902,829 have been
issued. The shares of London and Boston Investments have been admitted to
trading on AIM and details of persons who are interested in more than 3% of its
share capital are as follows:
Percentage of
Number of ordinary share
ordinary shares capital
J Hester 27,522,970 17.0
G Hester 27,522,970 17.0
Southwind Limited 21,655,681 13.4
WillBro Nominees Limited 18,836,077 11.6
Rondene Investments Inc 6,000,000 3.7
Frank Nominees Limited 5,650,000 3.5
Stephen Komlosy is beneficially interested in 4,707,859 shares in London &
Boston.
Triandra
Triandra was incorporated in the Commonwealth of the Bahamas as a private
company limited by shares on 18 August 1998 under the International Business
Companies Act 2002 with the name of Triandra Limited and with the registered
number 80,720B. Its registered office is at Saffrey Square, Suite 205, Bank
Lane, PO Box N-8 188, Nassau, Bahamas. The directors of Triandra are Finistere
Limited and GFT Directors Limited. The authorised share capital of Triandra is
$50,000 comprising 50,000 shares of $1 each of which one share has been issued
to Finistere Limited. Triandra is an investment company which has only invested
in Energy Technique. Triandra is ultimately owned by the Tchenguiz Family Trust.
Stephen Komlosy Non-executive Director Aged 64
Stephen Komlosy joined the Board in June 2001. He has over 40 years experience
in business, including manufacturing, property and leisure. Since 1964 he has
built up three private property companies, two of which were amalgamated with
public companies. He is a director of a number of public companies operating
both in the UK and the United States including Avatar Systems Inc. Stephen
Komlosy is executive Chairman of Netcentric Systems Plc and London & Boston. He
does not have a service contract.
THE CITY CODE
Under Rule 9 of the City Code (Rule 9), any person, or group of persons acting
in concert, which acquires shares which, when taken together with shares already
held by him or shares held or acquired by persons acting in concert with him,
carry 30% or more of the voting rights of a company which is subject to the City
Code, that person is normally obliged to make a general offer in cash to all
shareholders at the highest price paid by him, or any person acting in concert
with him, within the preceding 12 months. The members of the Concert Party are
acting in concert in relation to Energy Technique for the purposes of the City
Code.
Rule 9 also provides, inter alia, that, where any person, together with persons
acting in concert with him, holds shares carrying not less than 30% but not more
than 50% of the voting rights of a company which is subject to the City Code,
and such person, or any other person acting in concert with him, acquires
additional shares carrying voting rights in such company, that person is
normally obliged to make a general offer to all shareholders at the highest
price paid by him, or any person acting in concert with him, within the
preceding 12 months.
After conversion of the Loan Notes, and assuming that no New Ordinary Shares are
subscribed for under the Open Offer, London & Boston would hold 88,845,160
Ordinary Shares and Triandra 87,314,444 Ordinary Shares, representing 29.4% and
28.9% respectively of the issued share capital as enlarged by conversion of the
Loan Notes. Accordingly, the members of the Concert Party would then be
interested in a total of 176,159,604 Ordinary Shares, representing approximately
5 8.3% of the voting rights of Energy Technique. In addition, Stephen Komlosy,
holds on trust for London & Boston outstanding options under the 2001 Option
Schemes to subscribe for 4% of the issued share capital at the time of exercise
of the options at an exercise price of 3p per share. Following full conversion
of the Loan Notes this option would represent a further 12,609,500 Ordinary
Shares, increasing the interests of London & Boston to 101,454,660 Ordinary
Shares, representing 32.2% of the Companys issued share capital after exercise
of the options, which together with the holding of the other members of the
Concert Party would result in an aggregate shareholding representing 59.9% of
the Companys then issued share capital.
Therefore, following conversion of the Loan Notes, members of the Concert Party
would hold more than 50% of the Companys voting share capital and for so long
as they continue to be treated as acting in concert, may accordingly be able to
increase their aggregate shareholding without incurring any further obligation
under Rule 9 to make a general offer, although individual members of the Concert
Party will not be able to increase their percentage shareholding through a Rule
9 threshold without Panel consent..
The Panel has agreed, subject to resolution 1 of the Resolutions being passed on
a poll of Shareholders independent of the Concert Party at the EGM, to waive the
obligation on the Concert Party to make a general offer to shareholders under
Rule 9 which would otherwise arise as a result of the conversion of the Loan
Notes.
Details of the individual holdings of the Concert Party in Ordinary Shares of
the Company as they are at present, and they will be, (a) assuming full
conversion of the Loan Notes, and (b) assuming full conversion and exercise of
the 2001 Options are shown below:
After conversion
and exercise
Before conversion After conversion of 2001 Share Options
Ordinary % Ordinary % Ordinary %
Shares holding Shares holding Shares holding
London & Boston 13,845,160 9.1 88,845,160 29.4 88,845,160 28.2
Stephen Komlosy held on
trust for London & Boston 12,609,500 4.0
Triandra 12,314,444 8.1 87,314,444 28.9 87,314,444 27.7
Concert Party 26,159,604 17.2 176,159,604 58.3 188,769,104 59.9
The earliest date on which the 2001 Options became exercisable was the date on
which they were created.
Save as disclosed in the table above, no member of the Concert Party, no
director of any member of the Concert Party, nor anyone acting in concert with
any member of the Concert Party holds nor have any of them dealt in any Ordinary
Shares in 12 months prior to the date of the document. The waiver to which the
Panel has agreed will be invalidated if any purchases of Ordinary Shares are
made by any member of the Concert Party in the period between the date of the
document and the EGM.
The Concert Party has no intentions of increasing its shareholdings in the
Company above the levels set out above.
INTENTIONS OF CONCERT PARTY
The Group is engaged in the design and manufacture of air conditioning fan coils
and commercial heating products, the distribution and marketing of packaged air
conditioning products and the importation and marketing of products for the air
treatment and energy efficiency markets.
The members of the Concert Party have confirmed to the Board that following
completion of the Equity Funding, it would be their intention that the business
of the Group be continued in substantially the same manner as at present, with
no major changes to the business of the Group, and that they have no present
intentions to make any material amendments to the existing rights of the Groups
employees.
EIS RELIEF
Application has been made to the Inland Revenue for EIS relief in connection
with the issue of New Ordinary Shares. The Inland Revenue has indicated in
connection with the placing of Ordinary Shares which took place in March 2004
that following that issue the holding of Ordinary Shares would, subject to the
minimum �500
subscription mentioned below, comply with the requirements of Schedule 28B ICTA
1988 for Venture Capital Trust Schemes and that the shares to be issued will be
eligible shares. On the same basis, the Inland Revenue would be able to
authorise the Company to issue certificates under Section 306(2) ICTA 1988 for
Enterprise Investment Scheme purposes in respect of the shares to be issued. EIS
relief only applies to original subscribers and not to subsequent purchasers.
In all other respects the New Ordinary Shares will, when issued as fully paid,
rank pari passu with the Existing Ordinary Shares.
For EIS relief to apply, investors must subscribe for a minimum of �500 of Open
Offer Shares.
DIVIDEND POLICY
It is not the present intention of the Directors to pay a dividend on the
Ordinary Share capital of the Company and they intend to retain any profits for
use within the business for the time being. Once the Company has sufficient
distributable reserves, and as and when the Directors consider it appropriate,
the Directors will adopt an appropriate dividend policy.
EXTRAORDINARY GENERAL MEETING
A notice convening the EGM for 12 Noon on 26 October 2005 has been included in
the document at which resolution 1 of the Resolutions will be proposed to
approve the terms of the Rule 9 Waiver and the Loan Notes and resolutions 2 and
3 will be proposed to authorise the Directors to allot New Ordinary Shares.
DIRECTORS INTENTIONS AND RECOMMENDATIONS
The Directors, (excluding Stephen Komlosy who is a director of London & Boston,
a member of the Concert Party) consider that the net proceeds of the Equity
Funding, estimated to amount to �1.4 million after expenses, are essential to
provide the necessary working capital for the Group to continue to trade
solvently. They believe, having consulted with ARMCF, that the terms of the Open
Offer and the terms of conversion of the Loan Notes are fair and reasonable and
that conversion of the Loan Notes and the Rule 9 waiver are accordingly in the
best interests of the Company and its Shareholders as a whole. In providing
advice to the Directors, ARMCF has taken into account the Directors commercial
assessment.
Accordingly, the Directors (excluding Stephen Komlosy who is a director of
London & Boston, a member of the Concert Party), unanimously recommend
Shareholders to vote in favour of the Resolutions, as they intend to do in
respect of their own beneficial shareholdings, being in aggregate 2,510,619
Ordinary Shares (representing 1.6 % of the existing issued ordinary share
capital of the Company).
Enquiries:
Robert Unsworth, Acting Finance Director, Tel. 020-8783-0033
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