Acquisition and Placing
Quintessentially English PLC
24 August 2006
Quintessentially English PLC
(the 'Company')
Proposals for the acquisition of Omega Diagnostics Limited,
placing of 50,000,000 new ordinary shares of 1p each at 2p per share,
issue of up to 5,588,432 warrants to existing shareholders in the Company,
change of name to Omega Diagnostics Group PLC,
waiver of Rule 9 of the Takeover Code,
notice of Extraordinary General Meeting and
admission to trading on AIM
by
City Financial Associates Limited
Nominated adviser to the Company
• Acquisition of Omega Diagnostics Limited which produces in-vitro
diagnostics test kits and related products through a distribution network
in more than 100 countries worldwide for initial consideration of
approximately £1.2 million and an earn-out of up to approximately
£1.8 million, to be earned based on future profits of the Company for the
year ending 31 March 2008
• Consideration for the Acquisition to be satisfied entirely in new
ordinary shares in the Company
• Placing of 50,000,000 new Ordinary Shares at a placing price of 2
pence per share to raise gross proceeds of £1 million
• Issue of warrants to existing shareholders in the Company,
exerciseable at 2p per share from 1 April 2008 until the third anniversary
of Admission
• Strategy to expand through selected acquisitions, complemented by organic
growth of Omega's business Michael Gurner, Quintessentially English PLC
Chairman commented: 'The Company is now entering a period of great activity
and growth. We believe the Enlarged Group can make a valuable contribution
within the in vitro diagnostics sector. The strategy will be focused on
selected acquisitions complemented by organic growth of the existing Omega
business.'
Andrew Shepherd, Chief Executive of Omega commented: 'Through the transaction
with Quintessentially English PLC, Omega will now be able to execute its planned
acquisition strategy. The in vitro diagnostics market has polarised into large
multinationals and smaller niche players such as Omega and these market
conditions have created opportunities on which the Enlarged Group will
capitalise in the future.'
Enquiries:
Quintessentially English PLC
Michael Gurner, Chairman 07768 231 731
City Financial Associates Limited
Barry Saint, Director 02070 907 800
Seymour Pierce Ellis Limited
Neil Badger 01293 517 744
Omega Diagnostics Limited 01259 763 030
Andrew Shepherd, Chief Executive 01259 763 030 / 07769 688 369
Kieron Harbinson, Finance Director 01259 763 030 / 07764 819 845
City Financial Associates Limited, which is authorised and regulated by The
Financial Services Authority and is a member of the London Stock Exchange, is
the Company's Nominated Adviser for the purposes of the AIM Rules. Its
responsibilities as the Company's Nominated Adviser are owed solely to London
Stock Exchange plc and are not owed to the Company or any Director. City
Financial Associates Limited will not be responsible to anyone other than the
Company for providing the protections afforded to customers of City Financial
Associates Limited.
Seymour Pierce Ellis Limited, which is regulated in the United Kingdom by the
Financial Services Authority and is a member of the London Stock Exchange, is
the Company's Broker for the purposes of the AIM Rules. Seymour Pierce Ellis
Limited's responsibilities as the Company's Broker are owed solely to London
Stock Exchange plc. Seymour Pierce Ellis Limited is acting for the Company and
no one else in connection with the arrangements described in this document and
will not be responsible to anyone other than the Company for providing the
protections afforded to customers of Seymour Pierce Ellis Limited.
ADMISSION STATISTICS
Placing price 2p
Mid-market closing price per Ordinary Share on 31 March 2006
(being the last date prior to the suspension of the Company's shares
by AIM at 7.00 a.m. on 3 April 2006) 8.25p
Number of Existing Ordinary Shares 11,176,865
Number of Initial Consideration Shares being issued and allotted
under the Acquisition 60,600,000
Number of Placing Shares being issued on Admission 50,000,000
Total number of Ordinary Shares in issue following Admission 121,776,865
Market capitalisation of the Company on Admission at the Placing Price £2,435,537
Percentage of the Enlarged Issued Share Capital to be held by
the Vendors immediately following Completion and Admission 49.76 per cent.
Quintessentially English PLC
(the 'Company')
Proposals for the acquisition of Omega Diagnostics Limited,
placing of 50,000,000 new ordinary shares of 1p each at 2p per share,
issue of up to 5,588,432 warrants to existing shareholders in the Company,
change of name to Omega Diagnostics Group PLC,
waiver of Rule 9 of the Takeover Code,
notice of Extraordinary General Meeting and
admission to trading on AIM
by
City Financial Associates Limited
Nominated adviser to the Company
Introduction
The board of Quintessentially English PLC announced today that it has
conditionally agreed to acquire the entire issued share capital of Omega
Diagnostics Limited, a medical diagnostics company whose profitable business
produces and sells a wide range of in-vitro diagnostics (IVD) test kits and
related products through a distribution network in more than 100 countries
worldwide.
IVD is defined as reagents, assays, instruments and systems intended for use in
the diagnosis of disease or other conditions including the determination of a
state of health, in order to mitigate, treat or prevent disease. Tests are
performed on samples removed from the body.
The maximum consideration for the Acquisition is £3.0 million payable entirely
in new Ordinary Shares in the Company, comprising initial consideration of
approximately £1.2 million to be satisfied by the issue of the Initial
Consideration Shares to the Vendors at the Placing Price, plus deferred
consideration of up to approximately £1.8 million based on an earn out target
being achieved. Further details of the Acquisition are set out below.
The Company also announced today that it is seeking to raise £1 million before
expenses by means of a placing of 50,000,000 new Ordinary Shares at a placing
price of 2 pence per share. Further details of the Placing are set out below.
Conditional on Admission, the Company has granted to each existing member of the
Company on the register at the close of business on 22 August 2006 (the last
practicable date prior to the publication of this document) a warrant to
subscribe, at the Placing Price, for one Ordinary Share in respect of every two
Ordinary Shares held by the member on such date, exercisable in full from 1
April 2008 until the third anniversary of Admission.
On 3 April 2006 trading in the Company's Ordinary Shares on AIM was suspended
pending the Company making an acquisition constituting a reverse takeover under
the AIM Rules. The Company's Admission to trading on AIM is to be cancelled on 3
October 2006 if the Company has not, by that time, completed such an
acquisition.
In view of the size of Omega relative to the Company and since it will represent
a fundamental change of the Company's business, the Acquisition will constitute
a reverse takeover of the Company under the AIM Rules. The AIM Rules require
that completion of the Acquisition is subject to the prior approval of
Shareholders, which is to be sought at the Extraordinary General Meeting, and
the publication of an AIM Admission Document which has been posted today to
Shareholders.
In view of the size of the shareholding of the Concert Party in the Company
following Admission, completion of the Acquisition will represent a change of
control under the Takeover Code and would require an offer to be made on behalf
of the Concert Party for the balance of the Ordinary Shares not owned by them
pursuant to Rule 9 of the Takeover Code unless a waiver of this requirement is
approved by Independent Shareholders at an extraordinary general meeting. A
resolution to approve such a waiver is included in the notice of EGM contained
in the document that was posted today to Shareholders.
The Proposals are subject to the passing by Shareholders at the Extraordinary
General Meeting of the Resolutions.
Completion of the Acquisition is conditional inter alia on Admission. If the
Resolutions are duly passed by Shareholders at the EGM and the other conditions
set out in the Acquisition Agreement are met, trading in the Existing Ordinary
Shares on AIM will be cancelled and the Enlarged Issued Share Capital will be
admitted to trading on AIM, with dealings expected to commence on 19 September
2006. Conversely if the Acquisition is not completed, trading in the Company's
shares will be cancelled in the event the Company fails to complete an
alternative reverse takeover under the AIM Rules. The Existing Directors do not
believe an alternative to the Acquisition could be achieved in the time
available.
Upon Completion the Company's name will change to Omega Diagnostics Group PLC,
to reflect the new management and business of the Enlarged Group. Upon Admission
the Proposed Directors, being David Evans (Non-Executive Chairman), Andrew
Shepherd (Chief Executive) and Kieron Harbinson (Finance Director) will join the
Board and Robert Coe and Graham Ashley will resign from the Board. Michael
Gurner will change his role and will become a Non-Executive Director. It is also
proposed that Kieron Harbinson replace Robert Coe as Company Secretary.
Reasons for the Proposals
The Company is an investing company that was admitted to trading on AIM on 18
March 2004. Since that date, the Existing Directors have reviewed a number of
potential reverse takeover opportunities but not found one suitable to propose
to Shareholders and consequently the Company has made no investments. The
Existing Directors believe the Acquisition represents a good opportunity for
Shareholders to participate in the planned growth of Omega by way of potential
future acquisitions complemented by organic expansion.
The Existing Directors and the Proposed Directors believe that the global
medical diagnostics market shows good prospects for continued growth and
anticipate that the Enlarged Group will be well positioned to benefit from this
growth.
Principal terms of and conditions to the Acquisition
The Vendors and the Company have entered into the Acquisition Agreement,
pursuant to which the Company will acquire from the Vendors the entire issued
share capital in Omega. The maximum consideration payable by the Company to the
Vendors will be £3.0 million and it will be payable as follows:
(a) as to approximately £1.2 million, satisfied entirely by the issue to
the Vendors at Admission of the Initial Consideration Shares at the Placing
Price, credited as fully paid; and
(b) as to up to approximately £1.8 million, satisfied entirely by the issue
to the Vendors of the Earn Out Shares, provided always that the maximum total
number of Earn Out Shares to be allotted to the Vendors on the basis of a value
per share, at the time of allotment, equal to the Placing Price shall be
89,400,000. This represents a maximum of approximately £1.8 million of Earn Out
Shares at the Placing Price on achievement by the Enlarged Group of
approximately £0.9 million of EBITDA for the financial year ending 31 March 2008
and EBITDA per share for the same period equalling or exceeding 0.2p per
Ordinary Share. A calculation of 'EBITDA' is included in the document that was
posted today to Shareholders.
The Initial Consideration Shares will, when issued, and the Earn Out Shares
will, if issued, rank pari passu with the existing Ordinary Shares. The Company
has not declared, paid or made any dividends.
Completion of the Acquisition is conditional inter alia upon:
(a) Admission;
(b) the passing by Shareholders of the Resolutions; and
(c) the granting by the Panel of a waiver of the obligation which would
otherwise fall due upon the Concert Party to make a compulsory offer
for those Ordinary Shares in the Company not already held by them
pursuant to Rule 9 of the Takeover Code.
The number of Earn Out Shares to be allotted to the Vendors will be calculated
as a multiple of twice the audited EBITDA of the Enlarged Group for the
financial year ending 31 March 2008 divided by the higher of (a) the average of
the closing mid-market prices of the Company's Ordinary Shares for the five days
prior to the publication of the audited results for that year and (b) the
Placing Price.
The allotment of the first £770,000 of Earn Out Shares has no further
performance conditions other than the satisfaction of the test of twice EBITDA
referred to in the paragraph above. The balance of the Earn Out Shares of up to
approximately £1.0 million of Earn Out Shares will only be allotted if EBITDA
per share (defined as EBITDA divided by the weighted average number of Ordinary
Shares in issue) for the year ending 31 March 2008 is greater than or equal to
0.2p.
It is anticipated that any Earn Out Shares will be admitted to trading on AIM
following the publication of the audited accounts of the Enlarged Group for the
year ending 31 March 2008.
Information on the Company
The Company is an investing company that was admitted to trading on AIM on 18
March 2004. Since that time there has been no operational business of the
Company, other than to review potential acquisition opportunities. The Company
announced its final results for the year ended 31 December 2005 on 23 March
2006.
Trading in the Company's Ordinary Shares was suspended in accordance with Rule 8
of the AIM Rules on 3 April 2006, pending the identification and execution of a
reverse takeover that provided the Company with an operating business. In the
absence of completing such an acquisition before 3 October 2006, trading in the
Company's shares on AIM will be cancelled. The Existing Directors believe that,
if the Proposals do not proceed, insufficient time remains to execute a reverse
takeover of an alternative target company before 3 October 2006, when the
Company's admission to trading on AIM is scheduled to be cancelled.
Information on Omega
Omega is a privately held medical diagnostics company whose business produces
and sells a wide range of immunoassay and infectious disease in vitro
diagnostics (IVD) test kits and other products through a distribution network in
more than 100 countries worldwide.
The Proposed Directors believe that the opportunity exists for the Enlarged
Group to make further acquisitions of other medical diagnostics companies in
order to increase the size of the Enlarged Group and to extend the range of its
products and market segments covered.
Following Completion, the Enlarged Group plans to grow by making selected
acquisitions complemented by organic growth of Omega's existing business. The
Ongoing Directors plan to focus on acquiring target companies that they believe
provide the opportunity to enhance the Enlarged Group's EBITDA per share.
Further information about Omega and its expansion strategy is set out below.
In the three financial years ended 31 March 2006, the summarised consolidated
trading results of Omega Group, restated in accordance with International
Financial Reporting Standards (IFRS) were as follows:
Year ended 31 March
2004 2005 2006
£'000 £'000 £'000
Revenue 2,206 2,227 2,144
EBITDA (139) (85) 263
Operating (loss)/profit (190) (158) 132
(Loss)/profit before tax (217) (174) 198
(Loss)/profit after tax (208) (174) 255
As at 31 March 2004, 2005 and 2006 respectively, the consolidated total equity
and liabilities of the Omega Group, restated in accordance with IFRS were as
follows:
As at 31 March
2004 2005 2006
£'000 £'000 £'000
Total equity and liabilities 1,096 934 878
Net borrowings include all external borrowings net of cash held. At 31 March
2006 net borrowings were £418,804.
Scottish Enterprise is an institutional shareholder in Omega. It is the main
economic development agency for Scotland, funded by the Scottish Executive, and
currently holds 29.9 per cent. of Omega. Following Admission, Scottish
Enterprise will hold approximately 14.9 per cent. of the Enlarged Issued Share
Capital.
Current trading and prospects of the Enlarged Group
Trading in Omega has continued favourably and in line with management
expectations since 31 March 2006. The Ongoing Directors are confident in the
prospects of the Enlarged Group for the remainder of the current financial year
and beyond.
Following Admission, the Company intends to change its year end to that of
Omega, to assist Shareholders in future in comparing the financial results of
the Enlarged Group with the historical financial results of Omega. The next
period for which the consolidated audited financial results of the Company will
be published is intended to be the 15 month period ending 31 March 2007.
Furthermore, it is intended that the Enlarged Group will have adopted
International Financial Reporting Standards (IFRS) in the presentation of its
audited accounts and will 'reverse acquisition' account, to consolidate the
Company's financial results into the audited results of Omega from Completion.
The Placing
The Company proposes to raise approximately £1 million before expenses (or,
after expenses, approximately £675,400) by the allotment and issue of 50,000,000
Ordinary Shares at the Placing Price pursuant to the Placing. The Placing Shares
will represent approximately 41.06 per cent. of the Enlarged Issued Share
Capital of the Company on Admission and, assuming the maximum number of Earn Out
Shares are issued, exercise of the Kieron Harbinson Option Arrangement, exercise
of the QE Warrants, exercise of the David Evans Warrant and any right to
Ordinary Shares pursuant to the Andrew Shepherd Deferred Salary Arrangement all
in full, approximately 21.66 per cent. of the Further Enlarged Share Capital of
the Company.
The net proceeds of the Placing will be used to provide working capital for the
Enlarged Group and possibly to provide cash consideration for future selected
acquisitions the Enlarged Group may wish to make.
Pursuant to the Placing Agreement, Seymour Pierce Ellis has conditionally agreed
to use its reasonable endeavours to place with investors, the Placing Shares, at
the Placing Price.
The obligations of Seymour Pierce Ellis under the Placing Agreement are
conditional inter alia upon:
(a) the Placing Agreement becoming or being declared unconditional in all
respects and not being terminated before 8.00 a.m. on 19 September 2006 (or such
later time and date, being not later than 8.00 a.m. on 29 September 2006, as
CFA, Seymour Pierce Ellis and the Company may agree); and
(b) Admission.
Application will be made to the London Stock Exchange for the Enlarged Issued
Share Capital to be admitted to trading on AIM.
Dealings in the Enlarged Issued Share Capital are expected to commence on 19
September 2006.
Issue of QE Warrants
Members of the Company as at the close of business on 22 August 2006 (being the
last practicable date prior to the publication of this document) will be issued
with QE Warrants to subscribe for Ordinary Shares on the basis of:
one QE Warrant for every two Ordinary Shares held
Each QE Warrant will entitle the holder thereof to subscribe for one new
Ordinary Share at the Placing Price. The QE Warrants will be exercisable from 1
April 2008 until the third anniversary of Admission. Fractions of QE Warrants
will not be allotted.
The QE Warrants will be generally non-transferable and will not be admitted to
trading on AIM or on any other stock exchange nor will any other dealing
facility in them be sought.
Shareholder lock-in Arrangements
Under the terms of the lock-in agreements entered into between the Company and
each of the Existing Directors and the Vendors in turn and subject to Admission
taking place, each of the Existing Directors, Andrew Shepherd and Kieron
Harbinson has undertaken to the Company, Seymour Pierce Ellis and CFA that they
will not, save in certain circumstances (such circumstances include, inter alia,
(i) the acceptance of a takeover offer for the Company and (ii) the giving of an
irrevocable undertaking to accept a takeover offer), sell or otherwise dispose
of any interest in any Ordinary Shares, including Initial Consideration Shares
beneficially owned or otherwise held or controlled by them on or after Admission
for a period up to the publication of the interim results for the half year
ending 30 September 2007.
Furthermore, Andrew Shepherd and Kieron Harbinson have also undertaken to the
Company, Seymour Pierce Ellis and CFA that they will not, save in the
circumstances referred to above, sell or otherwise dispose of any interest in
any Earn Out Shares beneficially owned or otherwise held or controlled by them
on or after Admission for a period up to the publication of the final results
for the year ending 31 March 2009.
Each of the Existing Directors, Andrew Shepherd and Kieron Harbinson has further
undertaken not to dispose of any Ordinary Shares for a further period of one
year following expiry of the relevant lock-in periods referred to above save
following consultation with Seymour Pierce Ellis and CFA and through the
Company's broker on an orderly market basis.
In addition, the Vendors other than Andrew Shepherd and Kieron Harbinson have
undertaken to the Company, Seymour Pierce Ellis and CFA that they will not, save
in certain circumstances (such circumstances include, inter alia, (i) the
acceptance of a takeover offer for the Company and (ii) the giving of an
irrevocable undertaking to accept a takeover offer), sell or otherwise dispose
of any interest in any Ordinary Shares beneficially owned or otherwise held or
controlled by them on or after Admission for a period up to the publication of
the interim results for the half year ending 30 September 2007 other than
through the Company's broker, in order to maintain an orderly market in the
Ordinary Shares.
Furthermore, the Vendors other than Andrew Shepherd and Kieron Harbinson have
also undertaken to the Company, Seymour Pierce Ellis and CFA that they will not,
save in the circumstances referred to above, sell or otherwise dispose of any
interest in any Earn Out Shares beneficially owned or otherwise held or
controlled by them on or after Admission for a period up to the publication of
the final results for the year ending 31 March 2009 other than through the
Company's broker, in order to maintain an orderly market in the Ordinary Shares.
Board
Upon Admission the Proposed Directors, being David Evans (Non-Executive
Chairman), Andrew Shepherd (Chief Executive) and Kieron Harbinson (Finance
Director) will join the Board and Robert Coe and Graham Ashley will resign from
the Board. Michael Gurner will change his role and will become a Non-Executive
Director and Kieron Harbinson will also replace Robert Coe as Company Secretary.
Details of the proposed members of the board of the Company following Admission
are as follows:
Executive Directors
The Executive Directors will comprise:
Andrew Shepherd, BSc.(Hons), Chief Executive
Aged 50, Andrew Shepherd is the Founder and Managing Director of Omega
Diagnostics Limited. He has been involved in the medical diagnostics industry
for the last 32 years.
He started his career in 1974 by holding technical positions at G.D. Searle
Limited and then attended university, graduating with a Bachelor of Science in
Biology. He then moved into a sales and marketing position at Cambridge Life
Sciences plc in 1981, before establishing his first diagnostics company,
Cambridge Biomedical Limited in 1982. In 1986 he moved to Scotland to join
Bioscot Limited and shortly afterwards he established Omega.
Mr Shepherd used his technical experience and knowledge of exporting to oversee
the growth of the export of Omega products to exceed £2 million per annum. Omega
now exports to over 100 countries around the world, and he travels regularly to
many of the countries in which Omega customers are based.
Mr Shepherd is an active member of a number of relevant trade associations and
was a member of the Scottish Exports Forum, a body which reported to the
Scottish Parliament to oversee and guide the export activity of Scottish
Development International.
Mr Shepherd is also a member of the Bill & Melinda Gates Foundation's (BMGF)
Global Health Diagnostics Forum, which provides direct guidance to BMGF in
advising on future investments in worldwide diagnostics programmes for
developing countries.
Kieron Harbinson, FCCA, Finance Director
Aged 41, Kieron Harbinson joined Omega in August 2002 as Finance Director. He is
responsible for finance, information technology, human resources and operations
planning.
Mr Harbinson joined Scotia Holdings plc in 1984. He qualified as an accountant
in 1991, and became a Fellow of the Association of Chartered Certified
Accountants in 1997. He was at the company for approximately 14 years, during
which time he held various roles including Group Financial Controller and Chief
Accountant. These roles enabled him to acquire a broad range of knowledge in a
high growth technology company, and experience in corporate acquisitions,
disposals and intellectual property matters. He also gained experience in
various debt and equity transactions, and was involved in raising over £100
million for the company. He was also head of Tax and Treasury, responsible for a
treasury programme of cash investments of over £50 million and management of
currency exposures.
Mr Harbinson then joined Kymata Limited, a start up optoelectronics company as
Finance Director. Over a period of 18 months, he was involved in raising
approximately US$85 million of venture capital funding. He was responsible for
implementing financial controls and accounting systems, over which time the
company grew to over 200 employees by the time he left in 2000. The company was
sold in 2001 to Alcatel for €134 million.
Before joining Omega, Mr Harbinson helped to establish a company called
I-Genomics Limited, set up to exploit an opportunity licensing certain
intellectual property from the University of Glasgow.
Non-Executive Directors
The Non-Executive Directors will comprise:
David Evans, Non-Executive Chairman
Aged 46, David Evans has considerable experience within the diagnostics
industry. As Financial Director he was a key member of the team that floated
Shield Diagnostics Limited in 1993 and was Chief Executive Officer responsible
for the merger of Shield Diagnostics Group plc with Axis Biochemicals ASA of
Norway in 1999 to create Axis-Shield plc. In addition to his role as
Non-Executive Chairman of Omega, he is also Non-Executive Chairman of BBI
Holdings plc and Immunodiagnostic Systems Holdings plc, which are both AIM
quoted medical diagnostic groups operating in different areas of the industry
from Omega.
Michael Gurner, FCA, Non-Executive Director
Aged 61, Michael Gurner led the flotation of the Company on AIM as Chairman and
Chief Executive. He has reviewed numerous potential acquisition candidates
before the Company entered into the Acquisition Agreement.
He qualified as a Chartered Accountant in 1967, before embarking on a career in
merchant banking with Keyser Ullmann, M&A with the Ryan Group of Companies and
senior management, including as Managing Director of a fully Listed company,
Continuous Stationery plc, an acquisitive business forms manufacturer between
1986 and 1991. During this time, he was responsible for acquisitions, including
Prontaprint, the photographic print retail chain where he led the turn around of
its performance in the ensuing 18 months.
Mr Gurner thereafter focused on turning around under-performing and ailing
businesses, in association with Postern Executive Group Limited ('Postern'), a
leading UK turnaround specialist which provided management teams for troubled
companies. At Postern's request, he joined the board of several companies which
were successfully turned around. Those beyond rescue are mentioned in paragraphs
2.7.1.4 and 2.7.1.5 of Part VII of this document. Successful assignments include
Starmin plc in July 1994 (raising finance by way of a rights issue of £1.76
million in a £5.78 million fund-raising) and PSB Holding Limited, a pumped power
plant business owned by the National Grid Company plc, where he negotiated in
conjunction with Kleinwort Benson the sale of the business to a US buyer
(Mission Energy of California) for around £600 million when the original guide
price was around £300 million.
Employees, pensions and incentivisation
As at 31 March 2006, Omega employed 22 staff in total, all of whom are based at
Omega's premises at Alva, Scotland. Omega operates defined contribution pension
schemes for certain of its Directors and employees. In respect of Andrew
Shepherd and Kieron Harbinson, Omega contributes 5 per cent. of pensionable
salary. In respect of certain other employees Omega contributes 5 per cent. on
condition that the employee also contributes not less than 5 per cent.
Following Admission, the Ongoing Directors intend to consider recommending to
Shareholders the adoption of appropriate long term incentivisation arrangements,
including share option schemes.
Intentions for the Enlarged Group
The Concert Party (which comprises the Proposed Directors) intend to grow the
Enlarged Group by selectively making acquisitions, complemented by organically
growing the existing business of Omega.
The Concert Party have confirmed that, following Completion, the employment,
including the existing terms and pension rights, of all employees and management
of the Enlarged Group will be fully safeguarded. The Concert Party have no
present intention to relocate the business operations of Omega from its present
location.
Transactions with the Proposed Directors
Andrew Shepherd, a Vendor and the proposed Chief Executive of the Company, has
previously agreed to defer payment of part of his salary to assist the cash flow
of Omega. The Company has entered into an arrangement with Mr Shepherd that,
following Admission, deferral of Mr Shepherd's salary will cease and the
deferred salary outstanding (amounting to approximately £104,000) will fall due
for payment at the later of 1 April 2009 or the publication of annual results of
the Enlarged Group showing consolidated profit before tax of at least £0.5
million for any year thereafter. Such payment is to be made in either cash or in
Ordinary Shares (to be allotted at the Placing Price) at the election of Mr
Shepherd.
The Company has entered into an agreement with Kieron Harbinson, a Vendor and
proposed Finance Director of the Company, under which his existing option to
purchase 23,278 Omega shares (which would represent approximately 2.83 per cent.
of the fully diluted share capital of Omega should that option be exercised)
will be cancelled and replaced by the granting (once an Enlarged Group share
option scheme has been approved by Shareholders) of an option over 2,800,800 new
Ordinary Shares at the Placing Price.
David Evans, the Chairman of Omega and the proposed Non-Executive Chairman of
the Company following Admission, has entered into an agreement with the Company
that he will be granted, conditional on Admission, a warrant over 6,088,843
Ordinary Shares at the Placing Price. The objective of this grant is to
recompense Mr Evans for advice provided to Omega since 2000 for which he has not
received any remuneration and advice to be given to the Enlarged Group following
Admission. Mr Evans has agreed not to be paid any fees until 31 March 2008.
The Proposed Directors' Arrangements constitute related party transactions under
the AIM Rules.
The Existing Directors, having consulted with CFA, consider that the terms of
the above arrangements with Andrew Shepherd, Kieron Harbinson and David Evans
are fair and reasonable insofar as Shareholders are concerned.
Corporate governance and internal controls
As an AIM-listed company, the Company is not obliged to, and does not currently,
comply fully with the corporate governance regime in the UK, as set out in the
Combined Code on Corporate Governance.
Following Admission, the Company intends to comply with the Combined Code on
Corporate Governance, so far as is practicable and appropriate for a public
company of its size and nature.
The Company has established an audit committee and a remuneration committee. The
remuneration committee comprising of Michael Gurner as Chairman and David Evans
and will determine the terms and
conditions of service of the Executive Directors, including their remuneration
and grant of options. The audit committee comprising of David Evans as Chairman
and Michael Gurner will have primary responsibility for monitoring the quality
of internal controls, ensuring that the financial performance of the Enlarged
Group is properly measured and reported on, and for reviewing reports from the
Company's auditors relating to the Company's accounting and internal controls,
in all cases having due regard to the interests of Shareholders. Such committees
have been established with effect from and conditional on Completion.
The Directors will comply with Rule 21 of the AIM Rules relating to Directors'
dealings as applicable to AIM companies and will also take all necessary steps
to ensure compliance by the Company's applicable employees. The Company has
adopted a share dealing code which is appropriate for an AIM-listed company, for
this purpose.
The Takeover Code
Under Rule 9 of the Takeover Code, where any person acquires, whether by a
series of transactions over a period of time or not, an interest 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, that
person is normally required to make a general offer to all remaining
shareholders to acquire their shares.
Similarly, where any person, together with persons acting in concert with him,
is interested in shares which in the aggregate carry not less than 30 per cent.
of the voting rights of such a company, but does not hold shares carrying more
than 50 per cent. of the voting rights of a company, a general offer will be
required if any further interest in shares is acquired by any such person, or
any person acting in concert with him, within the preceding twelve months.
An offer under Rule 9 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 acquired during the 12 months prior to the announcement
of the offer.
The members of the Concert Party are deemed to be the directors of Omega: Andrew
Shepherd, Kieron Harbinson and David Evans. Andrew Shepherd is the founder,
Managing Director and majority shareholder in Omega (with a holding of
approximately 53.0 per cent. of Omega's issued share capital). The Concert Party
members, together with their potential interests in the share capital of the
Company, are Andrew William Shepherd (84,670,593 Ordinary Shares), Kieron Antony
Harbinson (6,650,688 Ordinary Shares) and David Eric Evans (6,088,843 Ordinary
Shares)..
The Concert Party's interests following the implementation of the Proposals will
amount to 33,658,111 Ordinary Shares, representing 27.64 per cent. of the
Enlarged Share Capital. Assuming that the maximum numbers of Earn Out Shares and
the Proposed Directors' Arrangements Shares are issued, the Concert Party's
interests would amount to 97,410,124 Ordinary Shares representing 43.24 per
cent. of the Further Enlarged Diluted Share Capital (or 42.19 per cent. of the
Further Enlarged Diluted Share Capital as adjusted for full exercise of the QE
Warrant Issue). The earliest date upon which this could occur is 1 April 2008.
The Panel has agreed, subject to the passing of Resolution 2 at the EGM on a
poll by Shareholders (excluding the Concert Party), to waive the obligation of
the Concert Party to make a general offer to Shareholders under Rule 9 of the
Takeover Code that would otherwise arise as a result of the implementation of
the Proposals.
Following the transactions set out above, and if the Earn Out Shares and the
Proposed Directors' Arrangements Shares are allotted in full at the Placing
Price, the Concert Party will be interested in shares carrying 30 per cent. or
more of the Company's voting share capital but will not hold shares carrying
more than 50 per cent. of the voting rights of the Company. Accordingly, the
Concert Party, for so long as its members continue to be treated as acting in
concert, will not be able to increase its aggregate interests in Ordinary Shares
without incurring any further obligation under Rule 9 to make a general offer.
Initial Consideration Shares issued Initial Consideration Shares,
on Admission Earn Out Shares, and the Proposed
Directors' Arrangements Shares
assuming no exercise of the QE
Warrants
Number Percentage Number Percentage
Concert Party members 33,658,111 27.64 97,410,124 43.24
No member of the Concert Party has purchased Ordinary Shares in the 12 months
preceding the date of this document. The Waiver which the Panel has agreed will
be invalid if purchases of Ordinary Shares are made by any member of the Concert
Party in the period between the date of this document and the EGM. Each member
of the Concert Party has undertaken that he will not make any such purchases.
This table assumes that all Placing Shares are issued and that the Earn Out
Shares are issued at the Placing Price based on the maximum deferred
consideration for the Acquisition and that the Proposed Directors' Arrangements
are satisfied in full by the allotment of 14,097,968 new Ordinary Shares at the
Placing Price. Shareholders should note that the Earn Out Shares may not
necessarily be issued at the Placing Price.
Further details of the Concert Party are set out in the document posted today to
Shareholders.
Dividend policy
It is the Ongoing Directors' intention for the Company to achieve capital growth
and the Ongoing Directors believe it is inappropriate to attempt to predict the
likely level or timescale for the declaration and payment of dividends by the
Company. However, as soon as it becomes commercially prudent to declare dividend
payments and subject to the then availability of sufficient distributable
reserves for the purpose, the Ongoing Directors intend to do so.
Recommendation
The Existing Directors unanimously recommend all Shareholders to vote in favour
of the Resolutions, as the Existing Directors intend to do in respect of their
own beneficial shareholdings, which amount in aggregate to 6,666,865 Ordinary
Shares (representing approximately 59.65 per cent. of the Ordinary Shares
currently in issue).
The Existing Directors, who have been so advised by CFA, consider the Proposals
and the Proposed Directors' Arrangements to be fair and reasonable and in the
best interests of the Company and its
Shareholders as a whole. In providing its advice to the Board, CFA has taken
into account the commercial assessments of the Existing Directors.
Further information on Omega Diagnostics Limited
Omega Diagnostics Limited is an established business in the medical diagnostics
market. Omega sells a wide range of products primarily in the immunoassay and
infectious disease in-vitro diagnostics (IVD) market through a strong
distribution network in over 100 countries. Omega has grown organically since
incorporation and in the year ended 31 March 2006 sales were approximately £2.1
million. As at 31 March 2006, the Company employed 22 staff at its 10,040 square
foot facility in Alva, Central Scotland.
Omega operates in a niche market, in supplying tests for specific infectious
diseases and other clinical conditions. The tests are based on Agglutination,
Enzymeimmunoassay (EIA), Fluorescence and Rapid Test technologies. The
infectious diseases include Syphilis, TB, Dengue Fever and Malaria.
All products are designed for use in Clinical Laboratories and Rapid Tests are
designed for use at the point of care.
Omega currently exports over 95 per cent. of its products. Omega's export
success was officially recognised with the Queen's Award for Export Achievement
in 1993.
History of Omega
Omega was formed in December 1987 to exploit opportunities in IVD testing for
infectious diseases based on the extensive technical and marketing knowledge of
its founder, Andrew Shepherd. Omega grew organically until the 2002/3 financial
year when sales reached £2.6 million.
Earnings have been largely reinvested in the business including new product
development.
Developed and Manufactured Products
Broadly, Omega's product range fits within the infectious disease/immunoassay/
blood bank screening segments of the IVD market. In terms of current product
groups listed below, Omega is a niche player serving markets for a small number
of diseases and selected other testing areas.
Product Group: Testing for:
IMMUTREPTM Screening and confirming the presence of Syphilis infection
BETATETM A pregnancy test kit (non-disease test kit)
AVITEXTM Tests for the presence of particular antibodies and antigens, including serology test for
C-Reactive Protein, Rheumatoid Factor, Anti- Streptolysin-O, Systemic Lupus Erythematosus
and Infectious Mononucleosis
MICROPATHTM This product range consists of stained bacterial antigens for use in slide or tube
agglutination assays to test for a range of febrile diseases including salmonellosis,
brucellosis and rickettsial diseases
VIROTECTTM These include products to test for Rotavirus and Hepatitis B Surface Antigen
AVIPATHTM This range consists of tests for the detection of various groups of Streptococci and
Staphylococci bacteria
PATHOZYMETM A range of EIA Tests for various infectious diseases such as Syphilis, TB and Dengue
Fever. The range also includes tests for various Cancer Markers and Hormones
VISITECTTM A range of Rapid Tests which include tests for Syphilis, Malaria, Hepatitis B, HIV 1 & 2,
TB, Dengue Fever and Leptospira
FLUOROTECTTM A fluorescence test for Chlamydia infection
Omega's sales, marketing and distribution channels
Omega sells its products through a network of exclusive and non-exclusive
distributors in over 100 countries.
These distributors purchase products in their own right and then distribute most
to the clinical laboratories in their country. In addition, Omega also sells
directly to several Ministries of Health in countries who favour international
tenders over local supply contracts.
Omega also supplies other IVD manufacturers on an OEM basis with several
products and these are then sold under the OEM customers' label. This
represented approximately 11.5 per cent. of sales in the year ended 31 March
2006.
Omega's largest distributor by sales value in the year ended 31 March 2006 was
GlaxoSmithKline in India, accounting for approximately 10.9 per cent. of Omega's
sales in that financial year.
Omega's geographical market coverage is wide without any dominant area. The
Proposed Directors believe this ensures that there is a spread of risk and
opportunity.
Omega currently has no sales into the US and Japanese markets. Omega does not
currently hold regulatory approval from the US Food and Drug Administration
(FDA) for either products or facilities. However, the US sales potential for the
new HSV2 test is such that the Directors consider that this market is a prime
target, albeit that application for FDA regulatory approval would require to be
made beforehand.
The market for IVD products
The global IVD market in 2004 was valued at approximately US$27.7 billion, with
the immunoassay/ infectious disease/blood bank screening market worth
approximately US$5.4 billion. This latter market was forecast to grow to
approximately US$8 billion by 2008. Immunoassays have become a widely accepted
technique in the field of clinical diagnosis of disease.
There has been a significant degree of consolidation in the IVD market over
recent years. The Proposed Directors believe that, based on 2003 data,
approximately 90 per cent. of the global market is shared by about 10 companies
while the remaining 10 per cent. of the market is shared by several hundred
companies. A number of companies are thought by the Proposed Directors to be
achieving success in the IVD marketplace by focusing on high growth niches.
Merger and acquisition strategies are being followed by many of the major
players and those aspiring to become the major players through acquisitive
growth. A recent example of this is the acquisition by the Medical Solutions
group of Siemens AG of Diagnostic Products Corporation for approximately US$1.86
billion and Bayer Diagnostics for €4.2 billion which now makes Siemens a top 10
player in the IVD industry. Smaller companies are also growing rapidly through
acquisition and one particular example is Trinity Biotech plc (''Trinity'')
which is listed on NASDAQ and the Irish Stock Exchange. Trinity was formed in
1992 as a small IVD company and has grown to have sales of approximately US$100
million by 2005 and a market value of approximately US$111 million as at 27 July
2006.
Recent changes in legislation relating to IVD products have increased regulatory
requirements for markets in a number of countries, most notably North America
and Europe with the coming into force of the IVD Directive and CE Mark
certification. This has had the effect of increasing the barrier to entry for
new market entrants.
At the current sales levels for the existing Omega product range, Omega has a
very small share of the current addressable IVD market. The potential therefore
exists, given adequate resources and skilled management, to expand this business
in the future.
With consolidation continuing with the major players, the Proposed Directors
believe that smaller companies such as Omega have an opportunity to increase the
use of their product development expertise and product-specific know-how to feed
the distribution pipeline for the global players. This strategy has been
actively pursued by Omega and will continue to form part of its expansion
strategy.
Competition
The Proposed Directors consider that smaller companies such as Omega are able to
compete with global players with Omega benefiting in particular given its broad
geographical spread and the extent of its marketing distribution network,
particularly with key distributors such as GlaxoSmithKline.
Also, many of Omega's tests are performed manually and do not require expensive
instrumentation in order to perform the test. This means that the large global
players cannot gain advantage from their dominance of instrument-based assay
menus.
The Directors believe that there is no one single, dominant player in any area
in which Omega is active.
Omega's future strategy
The Ongoing Directors' intention following Admission is that the Enlarged
Group's future strategy will be focused on selected acquisitions complemented by
organic growth of the existing Omega business.
The Proposed Directors believe that continued consolidation in the diagnostics
industry has polarised the IVD market into large multi-nationals and smaller
niche players such as Omega. These market conditions have created acquisition
opportunities which are of insufficient size to interest the major industry
players but which the Proposed Directors believe could enhance the growth of
Omega in the future. Other publicly quoted medical diagnostics groups have
followed acquisition strategies, including Trinity Biotech plc and more recently
three IVD companies recently floated on the AIM market namely, Cozart plc, BBI
Holdings Plc (BBI) and Immunodiagnostic Systems Holdings plc (IDS). All three
companies had profitable businesses with turnovers of less than £5 million at
flotation date. Their market capitalisations stood at approximately £27 million,
£23 million and £20 million respectively as at the close of business on 25 July
2006. David Evans, the proposed Non-Executive Chairman of the Enlarged Group
following Admission, is Chairman of BBI and IDS.
Following Admission, Omega plans to pursue an acquisition strategy by initially
acquiring small companies either in the UK or elsewhere in the IVD field that
have all or most of the following:
• profitable sales
• limited routes to market/export sales
• complementary products to those of the Enlarged Group
• well established management teams
• owner managers seeking to exit
In line with the consolidation of the global medical diagnostics industry, the
Proposed Directors believe there are also opportunities to acquire products/
product lines which do not fit the acceptance criteria of the larger groups,
either by reason of product speciality or due to their small size.
Enquiries:
Quintessentially English PLC
Michael Gurner, Chairman and Chief Executive 07768 231 731
City Financial Associates Limited
Barry Saint, Director 020 7090 7800
Seymour Pierce Ellis Limited
Neil Badger 01293 517 744
Omega Diagnostics Limited 01259 763 030
Andrew Shepherd, Chief Executive 01259 763 030 / 07769 688 369
Kieron Harbinson, Finance Director 01259 763 030 / 07764 819 845
City Financial Associates Limited, which is authorised and regulated by The
Financial Services Authority and is a member of the London Stock Exchange, is
the Company's Nominated Adviser for the purposes of the AIM Rules. Its
responsibilities as the Company's Nominated Adviser are owed solely to London
Stock Exchange plc and are not owed to the Company or any Director. City
Financial Associates Limited will not be responsible to anyone other than the
Company for providing the protections afforded to customers of City Financial
Associates Limited.
Seymour Pierce Ellis Limited, which is regulated in the United Kingdom by the
Financial Services Authority and is a member of the London Stock Exchange, is
the Company's Broker for the purposes of the AIM Rules. Seymour Pierce Ellis
Limited's responsibilities as the Company's Broker are owed solely to London
Stock Exchange plc. Seymour Pierce Ellis Limited is acting for the Company and
no one else in connection with the arrangements described in this document and
will not be responsible to anyone other than the Company for providing the
protections afforded to customers of Seymour Pierce Ellis Limited.
DEFINITIONS
The following definitions apply throughout this document, unless the context
requires otherwise:
'Acquisition' the acquisition of Omega pursuant to the Acquisition Agreement
'Acquisition Agreement' the agreement dated 23 August 2006 between the Vendors and the Company
for the sale of the issued share capital of Omega to the Company
'Act' the Companies Act 1985, as amended
'Admission' the re-admission of the Existing Ordinary Shares and the admission of the
New Ordinary Shares to trading on AIM and such admission becoming
effective in accordance with the AIM Rules
'Admission Document' the document posted today to Shareholders containing details of the
transactions the subject of this announcement
'AIM' an exchange regulated market of that name operated by the London Stock
Exchange
'AIM Rules' the rules for AIM companies and their nominated advisers published by
London Stock Exchange from time to time
'Articles' the articles of association of the Company
'Board' or 'Directors' the directors of the Company, from time to time
'Cardiopath' Cardiopath Limited incorporated in Scotland with registered number
SC194466
'CFA' City Financial Associates Limited, nominated adviser to the Company
'Combined Code' the combined code on corporate governance issued by the Financial
Reporting Council, as amended from time to time
'Company' Quintessentially English PLC
'Completion' completion of the Acquisition
'Concert Party' Andrew Shepherd, Kieron Harbinson and David Evans
'CREST' the relevant system (as defined in the CREST Regulations) in accordance
with which securities may be held and transferred in uncertificated form
'Earn Out Shares' up to 89,400,000 Ordinary Shares that may, subject to the achievement of
certain performance conditions, be issued pursuant to the Acquisition
Agreement
'Enlarged Group' the Company and its subsidiaries from time to time, from Admission
'Enlarged Issued Share Capital' the entire issued Ordinary Share capital of the Company immediately
following Admission, comprising of the Existing Ordinary Shares, the
Initial Consideration Shares and the Placing Shares
'Existing Directors' the existing directors of the Company, whose names appear on page 4 of
this document
'Existing Ordinary Shares' the 11,176,865 Ordinary Shares in issue as at the date of this document
'Extraordinary General Meeting' or 'EGM' the extraordinary general meeting of the Company to be held at 12.00 p.m.
on 18 September 2006
'Form of Proxy' the form of proxy to be used by Shareholders in respect of the
Extraordinary General Meeting
'FSA' the Financial Services Authority, the single statutory regulator under
FSMA
'FSMA' the Financial Services and Markets Act 2000, as amended
'Further Enlarged Diluted Share Capital' the Further Enlarged Issued Share Capital and the Proposed Directors'
Arrangements Shares
'Further Enlarged Issued Share Capital' the Enlarged Issued Share Capital and the Earn out Shares
'HMRC' HM Revenue & Customs
'Independent Shareholders' the members of the Company excluding members of the Concert Party
'Initial Consideration Shares' the 60,600,000 Ordinary Shares to be issued by the Company pursuant to
the Acquisition Agreement
'New Ordinary Shares' the Initial Consideration Shares and the Placing Shares
'Omega' Omega Diagnostics Limited, a private limited company registered in
Scotland with company number SC107178
'Omega Directors' means the current directors of Omega, being Andrew Shepherd, Kieron
Harbinson and David Evans
'Ongoing Directors' the Proposed Directors and Michael Stephen Gurner
'Ordinary Shares' ordinary shares of 1p each in the capital of the Company
'Panel' the Takeover Panel
'Placing' the conditional placing of the Placing Shares at the Placing Price,
pursuant to the Placing Agreement
'Placing Agreement' the conditional agreement, dated 23 August 2006, between (1) the Company,
(2) the Directors, (3) the Proposed Directors, (4) CFA, and (5) Seymour
Pierce Ellis relating to the Placing,
'Placing Price' 2p per Ordinary Share
'Placing Shares' the 50,000,000 Ordinary Shares to be issued by the Company pursuant to
the Placing
'Proposals' the Acquisition, the Placing, the QE Warrant Issue, the change of name
and Admission
'Proposed Directors' the proposed directors of the Company, to be appointed on Admission,
being Andrew Shepherd, Kieron Harbinson and David Evans
'Proposed Directors' Arrangements' the Andrew Shepherd Deferred Salary Arrangement, the Kieron Harbinson
Option Arrangement and the David Evans Warrant
'Proposed Directors' Arrangements Shares' 14,097,968 new Ordinary Shares, representing the maximum number of
Ordinary Shares held by the Proposed Directors following the completion
of the Proposed Directors' Arrangements
'QE Warrantholder' a holder of QE Warrants
'QE Warrant Instrument' the deed poll instrument issued by the Company on 23 August 2006 which
constitutes the QE Warrants the subject of the QE Warrant Issue
'QE Warrant Issue' the issue of warrants entitling the holders of Existing Ordinary Shares
to subscribe for up to 5,588,432 Ordinary Shares under the terms of the
QE Warrant Instrument
'QE Warrants' warrants to subscribe for Ordinary Shares constituted by the QE Warrant
Instrument
'Resolutions' the resolutions to be proposed at the Extraordinary General Meeting
'Shareholder' a holder of Ordinary Shares from time to time
'Seymour Pierce Ellis' Seymour Pierce Ellis Limited, broker to the Company
'Takeover Code' the Takeover Code, published by The Takeover Panel
'US' or 'United States' the United States of America
'Vendors' the shareholders of Omega
'Whitewash Resolution' resolution 2 to be proposed at the EGM, being the resolution to be voted
upon by Independent Shareholders, on a poll, regarding the proposed
waiver of Rule 9 of the Takeover Code
This information is provided by RNS
The company news service from the London Stock Exchange
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