Fundraising Announcement

RNS Number : 4164A

Allergy Therapeutics PLC

30 March 2012

 



30 March 2012

Allergy Therapeutics plc

("Allergy Therapeutics" or "the Company")

Proposed Placing, Subscription and Issue of Convertible Loan Notes and Offer

to Raise up to £13.66 Million

To repay debt facilities and accelerate growth

Allergy Therapeutics plc (AIM: AGY), the fully integrated specialty pharmaceutical company specialising in allergy vaccines announces that it has issued a Circular regarding a proposed Placing and Subscription of New Ordinary Shares and issue of Convertible Loan Notes and an Offer of up to 5,154,639 shares to Qualifying Participants and Notice of General Meeting to raise up to £13.66 million before expenses.

As a result of the Fundraising, the Directors have also agreed to put in place, conditional upon passing of the Resolutions, a new overdraft facility to finance the seasonal fluctuation in working capital. The fundraising is intended to repay existing debt facilities and deleverage the Company's balance sheet thus allowing greater flexibility and speed in executing the Company's strategy.

The Fundraising will consist of:

·      A placing of 32,512,369 New Ordinary Shares to institutional investors to raise £3.15 million. The Placing has been underwritten by Nomura Code.

·      A subscription of in aggregate 61,497,845 New Ordinary Shares by CFR International  and the following Directors: Peter Jensen, Ignace, Goethals, Virinder Nohria and Stephen Smith to raise £5.97 million

·      The issue of Convertible Loan Notes to CFR International to raise £4.04 million. On redemption, the Convertible Loan Notes shall be redeemed into 41,674,938 fully paid Ordinary Shares. Redemption shall occur on 20 April 2014 or such earlierdate as CFR International may nominate to the Company. The subscription price on redemption is 9.7 pence per share and the interest payable is 3 per cent. per annum annually in arrears; and

·      An Offer to Qualifying Shareholders and Qualifying Employees that may raise up to a further £0.5 million through the issue of New Ordinary Shares.

The Company's strategy is:

·      Accelerating organic growth by leveraging the current infrastructure to

1.   accelerate penetration of products in current markets;

2.   enter into new emerging markets; and

3.   strengthen the Company's existing product portfolio by acquiring new products and/or entering into further licensing agreements;

·      Maximising the Company's opportunities in the US market by strengthening the Company's negotiation position with potential US partners; and

·      Diversifying through acquisition opportunities in the specialty pharmaceuticals field.

The fundraising is subject to the approval of the shareholders of the Company at a General Meeting to be held on 19 April 2012. A circular containing a notice convening the General Meeting has today been posted to the Company's shareholders.  Defined terms in this announcement are as set out in the Circular.

Further details of the Placing, Subscription and Convertible Loan Notes can be found in Parts I, IV and VI of the Circular.

The Company today also announces Board changes, which are set out below in the full announcement, and the publication of interim results for the six months ended 31 December 2011. Both the circular and the interim results will be available to view on the Company's website www.allergytherapeutics.com.

Chief Executive Officer of Allergy Therapeutics, Manuel Llobet, commented:

"The Fundraising announced today is intended to repay existing debt facilities and deleverage the Company's balance sheet. The proceeds of the fundraising will allow greater flexibility and speed in executing the Group's strategy to accelerate sales in Europe and pursue in-licensing opportunities using our existing infrastructure."

-Ends-

For further information

Allergy Therapeutics	[phone]
Manuel Llobet, Chief Executive Officer
Ian Postlethwaite, Finance Director
www.allergytherapeutics.com
Nomura Code Securities	[phone]
Juliet Thompson/ Clare Terlouw
FTI Consulting	[phone]
Jonathan Birt/ Susan Quigley/ Simon Conway

Notes to editors

About Allergy Therapeutics

Allergy Therapeutics is a specialty pharmaceutical company focused on allergy vaccination. It has a growing business achieving sales in the prior financial year of £42 million mainly in Europe through its own sales and marketing infrastructure and further afield through distributors. The Company is expanding its infrastructure into the Emerging Markets.

Your Board announced today that we are proposing to raise up to £13.66 million before expenses by means of a placing and a subscription of New Ordinary Shares, and through the issuance of Convertible Loan Notes. The Fundraising will be made up of:

(a)     Placing of 32,512,369 New Ordinary Shares to institutional investors to raise £3.15 million. The Placing has been underwritten by Nomura Code.

(b)     Subscription of in aggregate 61,497,845 New Ordinary Shares by CFR International and the following Directors: Peter Jensen, Ignace Goethals, Virinder Nohria and Stephen Smith, to raise £5.97 million.

(c)     The issue of Convertible Loan Notes to CFR International to raise £4.04 million. The Convertible Loan Notes shall convert into fully paid Ordinary Shares on 20 April 2014 or such earlier date as nominated by the Company. The conversion price is 9.7 pence and the interest payable is 3 per cent. per annum annually in arrears; and

(d)     An Offer to Qualifying Shareholders and Qualifying Employees that may raise up to a further £0.5 million through the issue of New Ordinary Shares.

CFR International, to whom New Ordinary Shares and Convertible Loan Notes will be issued in the Fundraising, is a member of the Concert Party. As at the date of the Circular, the Concert Party held in aggregate 46.24% of the Existing Ordinary Shares. More information on the Concert Party is set out below. CFR International has conditionally agreed to subscribe for 61,417,845 Subscription Shares and £4,042,469 Convertible Loan Notes. On the issue of such Subscription Shares the Concert Party will together hold 50.67 per cent. of the Enlarged Issued Share Capital with a maximum potential interest in the Company of 55.49 per cent., assuming the Convertible Loan Notes were exercised in full on Admission. Since the issue of the 61,417,845 Subscription Shares would result in the Concert Party increasing their interest in the Company, the Concert Party would, in the absence of a waiver from the provisions of Rule 9 of the Takeover Code being granted by the Panel, be obliged to make a general offer for the Company. The Panel has agreed, subject to Resolutions 1 and 2 being passed on a poll of Independent Shareholders, to waive this obligation.

Further details of the Placing, Subscription and Convertible Loan Notes can be found in Part VI of the Circular. Further details of the Offer can be found in Part IV of the Circular.

The Placing, the Subscription, the issue of Convertible Loan Notes and the Offer are all conditional upon inter alia the approval of the Resolutions by the Shareholders at the General Meeting. The main purpose of the Circular is to explain the reasons for, and details of, the Proposals and to explain why your Board considers that they are in the best interests of the Company and, if you are a Shareholder, to seek your approval of the Proposals which includes approval of the Whitewash. The Notice of General Meeting is set out at the end of the Circular.

Business Update

The Company today also issued its unaudited half yearly results for the six month period ending 31 December 2011. Please refer to the Company's announcement as notified through the Regulatory Information Service or on the Company's website at www.allergytherapeutics.com/investor-relations.aspx

Highlights

·           Revenue 4 per cent. higher at £28.5 million (prior period H1 2011: £27.4 million)

·           At constant currency Pollinex Quattro grew by 4 per cent. to £16.9 million (H1 2011: £16.3 million)

·           At constant currency 17 per cent. growth of gross sales in non German markets

·           Operating profit higher at £8.0 million (H1 2011: £7.3 million)

·           Profit after tax higher at £8.6 million (H1 2011: £5.9 million)

·           Net debt reduced to £7.4 million (H1 2011: £8.4m)

·           Extension of licensing deal signed with Lincoln Medical for Anapen in the UK and Ireland

·           Submitted complete response to the PEI for marketing authorisation application for Pollinex® Quattro Complete Grass in Germany

·           Submitted detailed study protocol to the FDA which, once agreed, will enable the formal lifting of the clinical hold, allowing the MATA MPL development programmes in the US to progress

·           HMRC tax rebate of £0.7 million received March 2012

Allergy is a specialist pharmaceutical company with growing sales of allergy vaccines in many of the EU markets, Canada, South Korea, and, more recently, a number of emerging markets with the initial focus in Latin America.

European Sales

A number of the Company's vaccine products are registered in several European countries. Germany, the world's largest immunotherapy market, is the Company's main market generating approximately 69 per cent. of the Company's net sales in the six months ending 31 December 2011, followed by Italy (8.2 per cent.), Austria (4.6 per cent.), Czech Republic and Slovakia (4 per cent. combined), Switzerland (4 per cent.), Spain (3.1 per cent.), the Netherlands (3.1 per cent.), and the UK (2.5 per cent.).

Through its direct sales strategy in the Netherlands and Switzerland, the Company has achieved double digit growth in allergy vaccines in Q4 2011 when compared to the previous period. For the same period, the Company has achieved a growing market share in the UK, Austria, Italy and the Netherlands becoming the fastest growing company when compared to its direct competitors in all but Italy. The Company has also improved its competitive position in Germany.

Generally, it is expected by the Company that the growth outlook across the Company's European markets is likely to be no more than 5 per cent. per annum in the medium term due to various austerity measures being implemented by Euro zone governments and the continuing Euro zone economic difficulties.

Emerging Markets Sales

The Company continues to work towards expanding its revenue base outside Europe. In Latin America the first supplies to the market were shipped to Columbia in August 2011. Operations in emerging markets are expected to generate an increasing contribution to the Company's revenues over the next five years.

Sales by Products

Pollinex Quattro continued to be the largest generator of product sales for the Group equating to approximately 61 per cent. of products sales by value for the six months ending 31 December 2011, followed by, Pollinex (12.2 per cent.), Oralvac (10.5 per cent.), Tyrosune S/TU (9 per cent.), Venomil and Anapen (3 per cent. each) and TA Mix Top (0.8 per cent.)

European Regulatory Update

Pollinex® Quattro, currently sold as a named patient product, is the Company's best-selling product and the registration of Pollinex® Quattro in Europe remains a key priority. The marketing authorisation application for the Pollinex® Quattro Complete Grass formulation was submitted to the PEI in Germany in March 2009. The PEI review took longer than expected and further information and analysis was required from the Company. A complete response was submitted to the PEI by the Company in November 2011. The Company addressed all the questions raised by the PEI in their report but the final outcome of the registration application is, as per normal practice, a matter of regulatory review and consequently the outcome of such review is difficult to predict. The Company expects a decision on this new presentation of Pollinex® Quattro during the first half of 2012. The new presentation differs from the existing marketed version of Pollinex® Quattro due to its lower injection volume of 0.5ml; compared to a 1.0ml injection volume for Pollinex® Quattro. If the Company receives approval for Pollinex® Quattro Complete it will pursue further registrations through the mutual recognition procedure (MRP) in other European countries.

At the end of November 2010 the Group submitted 10 marketing authorisation applications to the PEI. These marketing authorisation applications have been made in response to the introduction of the Therapeutic Allergen Regulation (TAV), which has changed the regulatory landscape in Germany. To date many products have been available in Germany on a 'named patient' basis. However, as a result of the TAV, all immunotherapy products containing common allergens (grass, trees, house dust mites and insect venoms) will require marketing authorisations by 2017. Since 2008, Allergy has reviewed its product portfolio and has submitted marketing authorisation applications for its top 10 products in the Pollinex® Quattro, Tyrosin TU t.o.p. and Oralvac Compact ranges.

The PEI has given the Company timelines for a transition period ending in 2017 by which time approval of these applications must have been obtained. The Company currently intends to meet the requirements associated with those applications which are likely to result in the group incurring R&D spend of up to £5 million per annum.

There have also been changes in the reimbursement regime in Germany. As announced in the Company's preliminary annual results for the year ended 30 June 2011, which was notified to RNS on 16 September 2011, there has been a price freeze in Germany on reimbursed products from the prices in the market on 1 August 2009. The rebate paid to sick-funds increased from August 2010 from the previous level of 6 per cent. to 16 per cent. and although the Company has received an exemption from this rebate rise until mid 2011 and preliminary exemption extension until the end of 2011, it is currently uncertain as to whether the Company will continue to receive such an exemption.

FDA Update

The Company continues to work towards commercialising Pollinex® Quattro in the US market. As announced on 26 April 2011, following the Company's meeting with the FDA on March 17, 2011, it has received official communication from the FDA stating that the clinical hold on the Investigational New Drug applications for the three MATA-MPL^© products will be lifted once certain protocols have been agreed. The Company submitted a detailed study protocol to the FDA in November 2011. The Company is currently in discussions with the FDA to agree the protocol that will allow the Company to resume its clinical activity. Burrill & Co (San Francisco) has been appointed to run the partnering process to commercialise Pollinex® Quattro in the US.

Outlook

The growth for the Company in the medium term is limited in Europe, where growth is expected to be not more than 5 per cent. per annum. However, the Company expects to strengthen its revenue from growth in the emerging markets and from product in-licensing opportunities so that it can leverage its sales force infrastructure.

The Company initiated a review of its cost base in 2009 and undertook a number of cost saving actions including streamlining a number of products in Germany. Given the economic environment in Europe and the awaited outcome over the exemption from the increase in rebates in Germany, the management will continue to focus on increasing efficiencies with the aim of protecting net margins.

Business Development Activities

The Company has been actively seeking new products from in-licensing opportunities to complement the portfolio offered to its prescribers to continue to drive growth in European sales. In addition, the Company aims to diversify its product portfolio through pursuing acquisition opportunities in the specialty pharmaceuticals field.

Board Composition

The Company has today announced that Ignace Goethals, non-executive director, is retiring and has therefore decided to resign from the Board, such resignation to be effective on 30 June 2012. Mr. Goethals was chairman of the Group's previous holding company from 1999 and then of the Company from flotation until handing over to Peter Jensen on 1 January 2011.

The Company has today announced that Dr. Virinder Nohria, non-executive director, a UK and US trained physician and global drug developer who has provided oversight of research and development and human safety activities of the Company for more than 6 years, has resigned from the Board such resignation to beeffective on 30 June 2012 in order to pursue other business interests. Dr. Nohria will continue to make himself available to the Company to advise as and when necessary.

The search for a non-executive director with European regulatory experience has commenced.

CFR Group has a right, for so long as it holds not less than 25 per cent of the issued share capital of the Company, to nominate the chief executive officer and one non-executive director to the Board. CFR Group's current appointments having exercised this right are Manuel Llobet and Alejandro Weinstein Jr., respectively. Where the CFR Group's interest in the share capital of the Company falls below 25 per cent., its right to nominate the chief executive officer falls away, and where its interest falls below 15 per cent, its right to nominate any director falls away. At present, the contractual basis of these rights are contained in the Yissum Holding Limited Subscription Agreement (further details of which are set out in paragraph 6.1(e) of Part VI). Following completion of the Fundraising, the Yissum Holding Limited Subscription Agreement will be terminated and these rights will be contained in the CFR Subscription Agreement (further details of which are set out in paragraph 6.1(b) of Part VI).

Financing and Financial position of the Company RBS Facility

The Fundraising will permit the repayment of the RBS Facility. This has enabled the Company to negotiate the terms of a new facility from RBS. Under the new terms, which will replace the existing RBS facility, the Company will have access to a tiered overdraft facility of up to £7 million, which will vary in size in accordance with the seasonal nature of the Group's balance sheet. Further details of which are set out in paragraphs 6.1(1) of Part VI of the Circular.

The revised facility reflecting these new terms is conditional the Fundraising being approved at the General Meeting.

Working capital

The Company is of the opinion that, taking into account existing cash balances and the net proceeds of the Fundraising (assuming no take-up under the Offer), the Group has sufficient working capital for its present requirements, that is for at least 12 months following Admission.

Rationale for the Fundraising

The Company is intending to raise up to £13.66 million to repay existing debt facilities which will deleverage further the Company's balance sheet and will use any balance to meet the continuing working capital requirements of the Group. The Directors have also agreed to put in place, conditional upon passing of the Resolutions, a new overdraft facility to finance the seasonal fluctuation in working capital. The deleveraging will allow for greater flexibility and speed of execution of the Company's strategy (explained below).

The Company's strategy is based on the principles of growth, diversification and careful cost management.Specifically, it is the Directors' intention to focus on the following strategies:

·           accelerating organic growth by leveraging the current infrastructure to:

-         accelerate penetration of products in current markets;

-         enter into new emerging markets; and

-        strengthen the Company's existing product portfolio by acquiring new products and/or entering into further licensing agreements;

·           maximising the Company's opportunities in the US market by strengthening the Company's negotiation position with potential US partners; and

·           diversifying through acquisition opportunities in the specialty pharmaceuticals field.

Offer to Qualifying Shareholders and Qualifying Employees

The Company considers it important that Qualifying Shareholders and Qualifying Employees have an opportunity to participate in the Fundraising at the same Issue Price as the Placing. Qualifying Participants can subscribe for up to 5,154,639 New Ordinary Shares under the Offer. In the event that Qualifying Participants apply for an aggregate amount that is greater in aggregate than 5,154,639 New Ordinary Shares, the Directors will use their discretion to scale back such applications by such amounts as the Directors shall decide on an application by application basis such that this maximum number of New Ordinary Shares is not exceeded. If the Offer is fully subscribed for, the proceeds raised under the Offer by the Company will be £0.5 million. Given the size of the Offer, the Company has been advised that it does not have to produce a prospectus which would be time consuming and costly. For further information on the Offer see Part IV of the Circular. Qualifying Participants' attention is drawn to the risk factors detailed in Part V of the Circular. Members of the Concert Party are not permitted to apply for Offer Shares under the Offer.

In order to apply for Offer Shares, Qualifying Participants should complete the Application Form in accordance with the instructions set out on the Application Form and return it and the appropriate remittance, by post, to Capita Registrars, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU or by hand (during normal business hours only) to Capita Registrars at that address together, in each case, with payment in full, so as to be received no later than 11.00 a.m. on 17 April 2012.

The Offer is not being underwritten and it is not possible to participate under the Offer through CREST.

Placing

Nomura Code has, pursuant to the Placing Agreement, undertaken to use its reasonable endeavours to place up to 32,512,369 Placing Shares at the Issue Price, failing which it will subscribe for the Placing Shares as principal upon the terms and subject to the conditions of the Placing Agreement. The obligations of Nomura Code under the Placing Agreement are conditional upon, inter alia, the Resolutions being passed, the Subscription Agreements remaining in full force and effect and having become unconditional, the Company having complied with its obligations under the Placing Agreement and Admission having occurred by not later than 8.00 a.m. on 27 April 2012. Further details of the Placing are set out in Part VI of the Circular.

Investment by CFR International pursuant to the Subscription and Convertible Loan

Pursuant to the CFR Subscription Agreement, CFR International has agreed to subscribe for 61,417,845 New Ordinary Shares at the Issue Price and £4,042,469 Convertible Loan Notes, conditional upon, inter alia, the Placing Agreement having become unconditional (save for any condition relating to the CFR Subscription Agreement becoming unconditional and Admission) and the Resolutions being passed by not later than 8.00 a.m. on 27 April 2012. Pursuant to the terms of the CFR Subscription Agreement, CFR International has the right to nominate the chief executive officer and one non-executive director to the board of the Company for so long as it holds a certain percentage of Ordinary Shares. Further details of these rights are set out in Part VI of the Circular.

The CFR Subscription Agreement also requires the CFR Group, for a period of 12 months following Admission, to effect any proposed on market disposal of Ordinary Shares through the Company's broker. The CFR Subscription Agreement also contains undertakings that the CFR Group will exercise its voting rights to procure, so far as it is able, independence between the CFR Group and the Company (for so long as its Ordinary Shares remain admitted to trading on AIM or a regulated market in the European Economic Area) the independence of the Board and the maintenance of the Company's admission to trading on AIM or a regulated market in the European Economic Area.

The Convertible Loan Notes are being subscribed for pursuant to the terms of the Convertible Loan Note Instrument and will be redeemed for fully paid Ordinary Shares on 20 April 2014 or such earlier date as nominated by CFR International. The price for which the Convertible Loan Notes will be redeemed into Ordinary Shares under the instrument is 9.7 pence per Ordinary Share and the Convertible Loan Notes attract interest at a rate of 3 per cent. per annum until such time as they are redeemed.

In the event that between issuing the Convertible Loan Notes and their redemption for Ordinary Shares, the Company issues securities in the Company for the purpose of raising cash, repaying debt or acquiring assets, CFR International shall also have the right, only upon and simultaneously with conversion of the Convertible Loan Notes, to subscribe for such number of additional Ordinary Shares so as to result in CFR International receiving the same percentage of the issued share capital of the Company as would have been the case had no such transaction occurred. The subscription price with respect to such Ordinary Shares shall equal the price for which each Ordinary Share was issued under the relevant transaction.

Subscription by the Directors

As part of the Subscription, Peter Jensen, Virinder Nohria, Stephen Smith and Ignace Goethals have agreed to subscribe for 80,000 New Ordinary Shares at the Issue Price. Each Director's obligation to subscribe is conditional upon certain matters and events including, inter alia, the Resolutions being passed, the Placing Agreement having become unconditional and Admission of the Subscription Shares becoming effective on or before 27 April 2012.

Related Party Transaction

Where a company enters into a related party transaction, under the AIM Rules the independent directors of the company are required, after consulting with the company's nominated adviser, to state whether, in their opinion, the transaction is fair and reasonable in so far as its shareholders are concerned.

As at the date of the Circular, Yissum Holding Limited holds 137,491,788 Existing Ordinary Shares representing approximately 44.24 per cent. of the Existing Ordinary Shares. As stated above, CFR International which is an associated entity of Yissum Holding Limited has agreed to subscribe for 61,417,845 Subscription Shares and £4,042,469 Convertible Loan Notes. Under the AIM Rules, as an associated entity to a Shareholder holding more than 10 per cent. of the Existing Ordinary Shares, CFR International is a related party of the Company and the subscriptions by CFR International for each of Subscription Shares and Convertible Loan Notes constitute a related party transaction.

Having consulted with Nomura Code, the Company's nominated adviser, the Independent Directors believe that the participation by CFR International in the Fundraising is fair and reasonable in so far as Shareholders are concerned. In providing its advice, Nomura Code has taken into consideration the commercial assessments of the Independent Directors.

Implications of the Proposals under the Takeover Code

The Concert Party

Alejandro Weinstein Jr. and Manuel Llobet are deemed to be acting in concert with CFR International, CFR Pharmaceuticals, Yissum Holding Limited, Azure, Wild Indigo, Alejandro Weinstein Snr., Nicolás Weinstein, Natacha Olarte, Joshua Llobet and Antua Llobet in relation to the Proposals. These parties are referred to as the Concert Party throughout the Circular for the purposes of the Takeover Code. Further details of the Concert Party are set out in Part III of the Circular.

As at the date of the document, the members of the Concert Party together are interested in 143,693,287 Existing Ordinary Shares. In aggregate, the Concert Party will be interested in 248,976,071 New Ordinary Shares, representing 55.49 per cent. of the potential enlarged issued share capital of the Company on Admission assuming: (a) the exercise in full of the Convertible Loan Notes; (b) the subscription of New Ordinary Shares pursuant to the Subscription; (c) assuming no take up under the Offer; and (d) vesting in full of the Llobet LTIPs.

The subscription by CFR International for the Subscription Shares and the Convertible Loan Notes would ordinarily incur an obligation under Rule 9 of the Takeover Code for the Concert Party to make a general offer for the remainder of the entire issued share capital of the Company. Similarly, any award to Manuel Llobet pursuant to his entitlements under the Allergy Therapeutics plc 2005 Long Term Incentive Plan would trigger the same general offer requirement on the Concert Party. However, the Panel has agreed to waive these obligations subject to the approval of the Independent Shareholders voting on a poll at the General Meeting.

Further details regarding the provisions of the Takeover Code, the Whitewash Resolutions and the interests of the Concert party in the Company are set out below in the section headed "Waiver of Rule 9 of the Takeover Code" of this Part I and in Part III of the Circular.

Intentions of the Concert Party

The Concert Party has confirmed that following completion of the Proposals its intention is that the business of the Company be continued in the same manner as at present and that CFR International intends to help to expand the Company's sales in other markets using its experience and global network. The Concert Party also supports the Company's strategy of growth, diversification and efficiencies which is described in detail on page 15 of Part I of the Circular.

In addition, the Concert Party has confirmed its intention that the locations of the Company's places of business and the continued employment of its employees and management (and those of its subsidiaries) would not be altered, nor would there be any material changes in the conditions of employment, nor any redeployment of the fixed assets of the Company.

The Concert Party has also confirmed its intention to maintain the Company's admission to trading on AIM.

Waiver of Rule 9 of the Takeover Code

The Takeover Code is issued and administered by the Panel. The Company is a company to which the Takeover Code applies and its Shareholders are entitled to the protections afforded by the Takeover Code.Under Rule 9 of the Takeover Code, any person who acquires an interest (as defined in the Takeover Code) in shares which, taken together with shares in which he is already interested and in which persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights of a company which is subject to the Takeover Code, is normally required to make a general offer to all the remaining shareholders to acquire their shares.

Rule 9 of the Takeover Code further provides that where any person, together with persons acting in concert with him, is interested in shares which in 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 such person acting in concert with him, acquires an interest in any other shares which increases the percentage of shares carrying voting rights in which he is interested, such person or persons acting in concert with him will normally be required to make a general offer to all remaining shareholders to acquire their shares.

An offer under Rule 9 of the Takeover Code must be made in cash and at the highest price paid by the person required to make the offer, or any person acting in concert with him, for any interest in shares of the company during the 12 months prior to the announcement of the offer.

Under the Takeover Code a Concert Party arises when persons acting together pursuant to an agreement or understanding (whether formal or informal), actively co-operate to obtain or consolidate control of, or frustrate the successful outcome of an offer for, the Company. Control means an interest or interests in shares carrying an aggregate of 30 per cent. or more of the voting rights of the Company irrespective of whether the holding or holdings give de facto control. The members of the Concert Party are deemed to be acting in concert for the purpose of the Takeover Code.

Subject to the approval of Independent Shareholders, the Panel has agreed to waive the obligation to make a general offer for the entire issued share capital of the Company that would otherwise arise as a result of the Fundraising and the issue of the Llobet LTIPs. Accordingly, the Whitewash Resolutions are being proposed at the General Meeting and will be taken by means of a poll of Independent Shareholders attending and voting at the General Meeting. None of the members of the Concert Party are permitted to exercise their voting rights in respect of the Whitewash Resolutions but may exercise their voting rights in respect of the remainder of the Resolutions.

The waiver to which the Panel has agreed under the Takeover Code will be invalidated if any purchases are made by any member of the Concert Party, or any person acting in concert with it in the period between the date of the Circular and the General Meeting. Furthermore, no member of the Concert Party, nor any person acting in concert with it, has purchased Ordinary Shares in the 12 months preceding the date of the Circular.

The changes in the interests of the Concert Party following approval of the Proposals are as follows, in each case assuming the Offer, Subscription and Placing is taken up in full, no other person has converted any convertible securities or exercised any option or any other right to subscribe for shares in the Company following the date of the Circular.

1.       Immediately following Admission:

a.        the Concert Party would be interested in 205,111,132 Ordinary Shares, representing 50.67 per cent. of the Company's Enlarged Issued Share Capital (assuming no take up under the Offer); and

b.        CFR Pharmaceuticals, through its wholly owned subsidiaries CFR International and Yissum Holding Limited, would be interested in 201,986,132 Ordinary Shares, representing 49.9 per cent. of the Company's Enlarged Issued Share Capital.

2.       Assuming full vesting of the Llobet LTIPs and assuming further that between the date of Admission and the date of exercise of the Llobet LTIPs there has been no change to the issued Ordinary Share Capital of the Company, Wild Indigo would be interested in 5,315,000 Ordinary Shares, representing 1.31 per cent. of the Company's enlarged issued share capital, as enlarged by such number of shares issued pursuant to the Llobet LTIPs.

3.       On conversion of the Convertible Loan Notes, assuming no take up under the Offer, and assuming there has been no change to the issued Ordinary Share Capital of the Company between the date of Admission and the date of conversion of the Convertible Loan Notes:

a.       the Concert Party would be interested in 248,976,071 Ordinary Shares, representing 55.77 per cent. of the Company's enlarged issued share capital immediately following conversion; and

b.       CFR Pharmaceuticals, through its wholly owned subsidiaries CFR International and Yissum Holding Limited would be interested in 243,661,071 Ordinary Shares, representing 54.31 per cent. of the Company's enlarged issued share capital immediately following conversion.

A table setting out each member of the Concert Party's individual interests as at the date of the Circular, immediately following Admission and on conversion of the Convertible Notes is set out in paragraph 3.4 of Part VI. Details of Manuel Llobet's interests under the Allergy Therapeutics plc Long Term Incentive Plan are set out in paragraph 3.3 of Part VI.

Shareholders should note that:

1.       On Admission the Concert Party will be interested in Ordinary Shares carrying more than 50 per cent. of the voting rights of the Company and (for so long as they continue to be treated as acting in concert) the Concert Party (and any person acting in concert with them) will be able to acquire further Ordinary Shares without incurring an obligation to make a general offer to Shareholders under Rule 9 of the Takeover Code. However, any individual members of the Concert Party (for example,Yissum Holding Limited) will not be able to increase their percentage interest in the voting rights of the Company to 30 per cent. or more or increase their interest between 30 and 50 per cent. of the voting rights of the Company without Panel consent. If they did so they would incur an obligation to make a general offer for the Company under Rule 9 of the Takeover Code.

2.       Following Admission and the conversion of the Convertible Loan Notes, the CFR Group will hold over 50 per cent. of the voting rights of the Company and will therefore be entitled to increase its interest in the voting rights of the Company without incurring a further obligation under Rule 9 of the Code to make a general offer to Shareholders.

3.       Following Admission and conversion of the Convertible Loan Notes, the members of the Concert Party will together control a maximum of 55.49 per cent. of the voting rights of the Company. This may in turn have the effect of reducing the liquidity of trading in the Ordinary Shares on AIM. The voting rights of the Company held by the members of the Concert Party will also mean that the members of the Concert Party will be able, if they so wish, to exert significant influence over resolutions proposed at future general meetings of the Company.

4.       Following Admission, Manuel Llobet and Wild Indigo will be free to acquire shares in the Company without being required to make a Rule 9 offer providing their collective holdings remain less than 30 per cent. of the voting rights of the Company.

General Meeting

The General Meeting is being convened at which Independent Shareholders will be asked to consider and, if thought fit, pass the Whitewash Resolutions required to provide the requisite waiver of Rule 9 of the Takeover Code. Furthermore, the Shareholders will be asked to provide the Directors with the relevant authorities, inter alia, to allot and issue the Placing Shares, the Subscription Shares, the Offer Shares and Ordinary Shares on conversion of the Convertible Loan Notes and to disapply pre-emption rights. The Notice of Meeting is set out at the end of the Circular.

Set out at the end of the Circular is a notice convening the General Meeting to be held at Reed Smith LLP's offices at the Broadgate Tower, 20 Primrose Street, London EC2A 2RS. 19 April 2012, commencing at 12 noon.

The Resolutions to be proposed at the General Meeting are as follows: Resolution 1

An ordinary resolution, to be taken on a poll of Independent Shareholders, to approve the waiver of the obligation on CFR International to make a general offer to the shareholders of the Company on the subscription by CFR International for the Subscription Shares and on the subscription for Ordinary Shares on redemption of the Convertible Loan Notes.

Resolution 2

An ordinary resolution, subject to and conditional on the passing of Resolution 1, to be taken on a poll of Independent Shareholders, to approve the waiver of the obligation on Wild Indigo to make a general offer to the shareholders of the Company on vesting of the Llobet LTIPs.

Resolution 3

An ordinary resolution, subject to and conditional on the passing of Resolution 1 and 2, to grant the Directors authority to allot the New Ordinary Shares

Resolution 4

A special resolution, subject to and conditional on the passing of Resolution 1, 2 and 3 and to disapply pre-emption rights

Action to be taken

You will find enclosed with the Circular a Form of Proxy for use at the General Meeting. Whether or not you propose to attend the General Meeting in person, it is important that you complete and sign the enclosed Form of Proxy in accordance with the instructions printed thereon and return it to the Company's Registrars, Capita Registrars, PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU, as soon as possible and, in any event, so as to be received not later than 12 noon on 17 April 2012.

The completion and return of a Form of Proxy will enable you to vote at the General Meeting without having to be present in person but will not preclude you from attending the General Meeting and voting in person if you so wish. If a Shareholder has appointed a proxy and attends the General Meeting in person, his proxy appointment will automatically be terminated and his votes in person will stand in its place.

Importance of vote and Recommendation by the Directors and the Independent Directors

The Placing, Subscription, Convertible Loan, Offer and the Whitewash are conditional,inter alia, upon the passing by Shareholders of the Resolutions at the General Meeting.

Neither of Manuel Llobet nor Alejando Weinstein Jr., as members of the Concert Party, have taken part in any decision of the Board relating to the Whitewash, since they are interested in the Ordinary Shares which are the subject of the Whitewash Resolutions.

The Independent Directors, who have been so advised by Nomura Code, consider the Whitewash to be fair and reasonable and in the best interests of the Company and the Independent Shareholders as a whole. In providing advice to the Independent Directors Nomura Code has taken into account the Independent Directors' commercial assessments.

The members of the Concert Party are prohibited under the Takeover Code from (and will not be) voting its interest in 143,693,287 Ordinary Shares, representing 46.24 per cent. of issued share capital, in relation to the Whitewash Resolutions (Resolutions 1 and 2).

Ian Postlethwaite, Manuel Llobet and Alejandro Weinstein Jr, being the Directors not subscribing for New Ordinary Shares under a Director Subscription Agreement consider that the terms on which Mr. Jensen, Mr. Smith, Mr. Goethals and Dr. Nohria are participating in the Fundraising are fair and reasonable in so far as the Company's Shareholders are concerned.

The Directors, who have been so advised by Nomura Code, consider the terms of the Fundraising to be fair and reasonable and in the best interest of the Company and its existing Shareholders as a whole. In providing advice to the Directors, Nomura Code has taken into account the Board's commercial assessments.

Accordingly: (1) the Independent Directors unanimously recommend that Shareholders vote in favour of the Resolutions 1 and 2 as they intend to do so in respect of their entire beneficial holdings amounting, in aggregate, to 6,874,782 Ordinary Shares, representing approximately 2.21 per cent. of the Existing Share Capital; and (2) the Directors recommend that Shareholders vote in favour of Resolutions 3 and 4, as they intend to do in respect of their entire beneficial holdings amounting, in aggregate, to 150,568,069 Ordinary Shares, representing approximately 48.45 per cent. of the Existing Share Capital.

Yours faithfully,

Peter Jensen

Non-Executive Chairman

 

END

 

 

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