Completion of strategic review

RNS Number : 0748S

In The Style Group PLC

07 March 2023

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE UK VERSION OF THE MARKET ABUSE REGULATION (EU) 596/2014 WHICH IS PART OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018.

For immediate release

7 March 2023

In The Style Group plc

Completion of strategic review

Proposed sale of the operating subsidiary of In The Style Group plc

Proposed name change

Board changes

and

Proposed cancellation of admission to trading on AIM

In The Style Group plc (AIM:ITS) ("In The Style", the "Company" or, together with its subsidiary undertakings, the "Group"), the disruptive and inclusive digital womenswear fashion brand, today announces the completion of its strategic review and the conditional agreement to sell its only operating subsidiary, In The Style Fashion Limited ("ITSFL"), for a total cash consideration of £1.2 million (the "Sale").

Highlights:

· Completion of the Company's strategic review ("Strategic Review"), which concludes the offer period (as defined in The City Code on Takeovers and Mergers (the "Code")).

· During the Strategic Review, the Company's board of directors (the "Board" or the "Directors"), along with its financial adviser, Lincoln International LLP ("Lincoln"), reviewed several strategic options, including a potential sale of the Company.  While the Company has had positive engagement with several potentially interested parties, some of the parties made proposals that were not deemed by the Board to be deliverable on an acceptable timescale. None of the proposals involved an offer for the whole Company.  

· The Company, however, received a deliverable offer for ITSFL from Baaj Capital LLP ("Baaj"), a UK-based, private family office .  This offer included a pre-condition that Adam Frisby agreed to take an equity position in ITS Holdings 2023 Limited ("Bidco"), a newly established company formed for the purposes of the Sale, equivalent to his current holding in the Company and to also become Chief Executive Officer of ITSFL on completion of the Sale ("Completion").

· Considering , amongst other factors , the comprehensive review of options undertaken as part of the Strategic Review, the Company's near-term trading environment, its current liquidity position and Baaj's scale and extensive sector expertise, the Directors other than Adam Frisby (the "Independent Directors") have unanimously concluded that it is in the best interests of the Company, its Shareholders and other stakeholders to sell ITSFL to Bidco.

· The Independent Directors therefore intend to recommend that Shareholders approve the Sale for a total cash consideration of £1.2 million, which is payable on Completion.

· Each of Nancy Cruickshank, Adam Bellamy and Matthew Scaife, non-executive directors of the Company, will also step down from the Board on Completion without pay in lieu of notice.

· The Company proposes to change its name to Itsum plc on Completion to avoid any confusion with the "In The Style" brand and to reflect the Company becoming a cash shell for the purposes of Rule 15 of the AIM Rules for Companies (the "AIM Rules").

· The Sale constitutes a fundamental change of business for the purposes of Rule 15 of the AIM Rules and a substantial property transaction for the purposes of section 190 of the Companies Act 2006 (the "Act") and is therefore conditional upon the approval of the Company's shareholders ("Shareholders") in general meeting.

· In addition, the Company is seeking the approval of Shareholders to cancel the admission of the issued ordinary shares of £0.0025 each in the capital of the Company ("Ordinary Shares") to trading on the AIM market of London Stock Exchange plc ("AIM") following Completion (the "Cancellation").

Jim Sharp, Chair of In The Style, commented:

"Following a thorough review of different strategic options with our advisers and interactions with numerous parties, the Independent Directors have unanimously concluded that it is in the best interests of the Company, its Shareholders and its stakeholders to sell In The Style Fashion Limited to Bidco.

"The Independent Directors therefore believe that under the new ownership structure - with Adam's continued leadership and Baaj's backing - the In The Style brand can continue to build on its potential whilst protecting the interests of the Group's employees, suppliers and other stakeholders."

Enquiries:

In The Style Group plc  Via Hudson Sandler

Jim Sharp, Chairman

Rich Monaghan, Chief Financial Officer

Hudson Sandler  [phone]

Alex Brennan  [e-mail]

Ben Wilson

Lincoln International LLP (Financial Adviser)  [phone]

Harry Kalmanowicz

Julian Tunnicliffe

Liberum Capital Limited (Nomad and Broker)  [phone]

Clayton Bush

Scott Mathieson

Miquela Bezuidenhoudt

Background to and reasons for the Sale

On 8 December 2022, the Company announced its intention to conduct a strategic review of its business.  As the Strategic Review included a potential offer for the whole Company it was conducted under the Code.  Lincoln was appointed to assist with that process.  The Board instructed Lincoln to review strategic options including equity and debt financing and a potential sale of the Company or some or all of the Group's business and assets. 

Since that date, Lincoln approached or was approached by a significant number of parties, many from outside the United Kingdom, interested in a variety of potential transactions involving the Company or ITSFL. Approximately half of these parties were potential strategic buyers and half potential financial buyers.

The performance of the Company deteriorated, as announced in the trading update on 20 January 2023. The Group's cash position has fallen from £3.2 million at 31 December to £0.9 million at 28 February.  While the Company has had positive engagement with several potentially interested parties, some of the parties made proposals that were not deemed by the Board to be deliverable on an acceptable timescale. None of the proposals involved an offer for the whole Company.

The Company did, however, receive interest in acquiring ITSFL from a UK-based private family office, Baaj.  After conducting its due diligence on ITSFL, Baaj made an offer for ITSFL which included a pre-condition that Adam Frisby agreed to maintain an equity position in Bidco equivalent to his current holding in the Company and become the Chief Executive Officer of ITSFL.

Considering , amongst other factors, the comprehensive review of options undertaken as part of the Strategic Review, the Company's near-term trading environment, its current liquidity position and Baaj's extensive sector expertise, the Independent Directors have unanimously concluded that it is in the best interests of the Company, its shareholders and other stakeholders to sell ITSFL to Bidco.

Consequently, on 6 March 2023, the Company and Bidco entered into a sale and purchase agreement (the "Sale Agreement") pursuant to which the Company has conditionally agreed to sell the entire issued share capital of ITSFL to Bidco. Further details of the Sale Agreement, Baaj and Bidco are set out below.

Accordingly, the Company has terminated the Strategic Review and, as such, the Company is no longer in an offer period (as defined in the Code).

Current trading

The trading environment through January and February remained challenging as was anticipated following the Christmas period, reflecting cost-of-living pressures on our customers, high levels of markdown and a reduction in wholesale demand.

As was stated in the Company's trading update on 20 January 2023, the Board expects revenue for the full year to 31 March 2023 to be in the region of £46 million. The adjusted EBITDA loss for the year is likely to be towards the higher end of the previously guided range of between £4.25 million to £4.75 million.

The Company's cash position at 31 December 2022 and 28 February 2023 was £3.2 million and £0.9 million respectively. At both dates, the invoice discounting facility of £0.4 million remained undrawn. As a result of this expected reducing cash balance and the expectation that the trading environment will remain challenging in the near term, the Board is of the opinion that, in the absence of raising further funds or Completion, there would be no alternative other than the Company and ITSFL to enter into administration or some other form of insolvency procedure in due course.

Information on ITSFL

ITSFL, which is a wholly-owned, direct subsidiary of the Company, is the Group's only operating business.  "In the Style" is an inclusive online women's clothing brand, differentiated by its innovative social media influencer collaborations and engaging brand campaigns on key issues that matter to the Group's customers.

For the year ended 31 March 2022, ITSFL had revenue of £57.3 million and made an operating loss of £1.5 million.  ITSFL's net assets at 31 March 2022 were £0.6 million.

Information on Baaj and Bidco

Baaj

Baaj is a situational investor with a particular focus on retail, wholesale and manufacture. It has investments in a range of businesses across the UK where it works with existing management teams and owners.

Bidco

Bidco is a newly established company incorporated in England and Wales and formed solely for the purposes of acquiring ITSFL. As at the date of this announcement, it is wholly-owned by Jaswinder Singh, the founder and principal of Baaj, however, Adam Frisby has agreed, conditional only upon Completion, to subscribe for new equity in the capital of Bidco representing approximately 23 per cent. of the voting rights of Bidco.

Further details of the Sale

On 6 March 2023, the Company and Bidco entered into the Sale Agreement pursuant to which the Company has conditionally agreed to sell the entire issued share capital of ITSFL to Bidco.

The consideration under the Sale Agreement is £1.2 million in cash, payable on Completion.

The Sale Agreement only contains warranties on the Company's title, authority and capacity and its liability thereunder is limited to £1.2 million.

On Completion, the Company will cease to own, control or conduct all of its existing trading business, activities and assets and, therefore, the Sale constitutes a fundamental change of business for the purposes of Rule 15 of the AIM Rules.

In addition, due to Adam Frisby's interest in Bidco, the Sale also constitutes a substantial property transaction for the purposes of section 190 of the Act.

Accordingly, the Sale Agreement is conditional upon the approval of the Company's Shareholders in a general meeting (the "General Meeting").  A circular (the "Circular") containing, amongst other things, further details of the Sale, the Independent Director's recommendation to vote in favour of the resolution approving the Sale for the purposes of Rule 15 of the AIM Rules and section 190 of the Act (the "Sale Resolution") and the notice convening the General Meeting will be published by the Company as soon as practicable.  The Sale Resolution will be proposed as an ordinary resolution of the Company.

Assuming the Sale Resolution is duly passed by Shareholders, it is expected that Completion will take place the following business day.

AIM Rule 15 and use of proceeds

AIM Rule 15

Following Completion, the Company will become a cash shell for the purposes of Rule 15 of the AIM Rules and as such would be required to make an acquisition or acquisitions which constitutes a reverse takeover under Rule 14 of the AIM Rules (including seeking re-admission as an investing company (as defined in the AIM Rules)) on or before the date falling six months from Completion or be re-admitted to trading on AIM as an investing company under the AIM Rules (which requires the raising of at least £6 million) (a "Rule 14 Transaction") failing which, the Company's Ordinary Shares would then be suspended from trading on AIM pursuant to Rule 40 of the AIM Rules.  Admission to trading on AIM would be cancelled six months from the date of suspension should the reason for the suspension not have been rectified.

Use of proceeds

The net proceeds of the Sale receivable by the Company are expected to be approximately £500,000 (the "Net Proceeds").

The Company does not intend to enter into a Rule 14 Transaction but instead to seek to return the Net Proceeds to Shareholders, net of expenses, in the most cost-effective and efficient manner as soon as practicable.  Accordingly, the Company will be seeking the approval of Shareholders for the Cancellation at the General Meeting (the "Cancellation Resolution" and together with the Sale Resolution, the "Resolutions"), further details of which are set out below.  The Cancellation Resolution will be conditional upon the passing of the Sale Resolution and Completion.

At this stage, the Company expects any distribution to be conducted through a members voluntary liquidation of the Company as it does not have the available distributable reserves to declare and pay a dividend nor would it want to incur additional costs by conducting a return of capital.

The Cancellation

The Independent Directors have concluded that, on the basis that the Company would become an AIM Rule 15 cash shell with no trading business on Completion, it is in the best interests of the Company and its Shareholders to seek Shareholders' approval to cancel the admission of the Company's Ordinary Shares to trading on AIM.  In accordance with Rule 41 of the AIM Rules, the Company has notified the London Stock Exchange of the proposed Cancellation.

Assuming the passing of the Cancellation Resolution, which will be conditional upon the passing of the Sale Resolution and Completion, it is expected that the Cancellation will take place 20 business days from the day following this announcement.

Pursuant to Rule 41 of the AIM Rules, the Cancellation Resolution requires the approval of not less than 75 per cent. of the votes cast by Shareholders (whether present in person or by proxy) at the General Meeting.

The Independent Directors have considered the benefits and disadvantages to the Company and its Shareholders in retaining its admission to trading on AIM.  The Independent Directors believe that the Cancellation is in the best interests of the Company and its Shareholders as a whole.  Following the Sale, the Company will have no trading business and very limited cash resources which the Company intends to distribute through a members voluntary liquidation. 

Given the Company's intention to liquidate the Company as soon as reasonably practicable following the Sale and the Cancellation, no matched bargain facility will be implemented and there will be no formal market for Shareholders to effect transactions in the Ordinary Shares following Cancellation.

The principal effects of the Cancellation will be that:

● there will be no public market on any recognised investment exchange or multilateral trading facility for the Ordinary Shares and, consequently, there can be no guarantee that a Shareholder will be able to purchase or sell any Ordinary Shares;

● while the Ordinary Shares will remain freely transferable, it is likely that the liquidity and marketability of the Ordinary Shares will, in the future, be more constrained than at present and the secondary market value of such Ordinary Shares may be adversely affected as a consequence;

● in the absence of a formal market and quote, it may be more difficult for Shareholders to determine the market value of their investment in the Company at any given time;

● the regulatory and financial reporting regime applicable to companies whose shares are admitted to trading on AIM will no longer apply;

● the levels of disclosure and corporate governance within the Group may not be as stringent as those for a Company quoted on AIM; however the Company will continue to be subject to the Code for a period of at least 10 years from the date of Cancellation;

● Shareholders will no longer be afforded the protections given by the AIM Rules, such as the requirement to be notified of certain events and the requirement that the Company seek shareholder approval for certain corporate actions, where applicable, including substantial transactions, financing transactions, reverse takeovers, related party transactions and fundamental changes in the Company's business, including certain acquisitions and disposals;

● in order to increase the cost saving by becoming a private company, following the Cancellation, the Company will no longer be obligated to produce and publish half-yearly reports and related financial statements;

● the Company will cease to have a nominated adviser and broker;

● whilst the Company's CREST facility will remain in place following the Cancellation, the Company's CREST facility may be cancelled in the future and, in that event, although the Ordinary Shares will remain transferable, they will cease to be transferable through CREST.  In this instance, Shareholders who hold Ordinary Shares in CREST will receive share certificates; and

● the Cancellation may have taxation consequences for Shareholders.  Shareholders who are in any doubt about their tax position should consult their own professional independent tax adviser.

Shareholders should be aware that if the Cancellation takes effect, they will at that time cease to hold shares in a quoted company and will become Shareholders in an unquoted company which will be likely significantly to reduce the marketability and liquidity of the Ordinary Shares and the principal effects referred to above will automatically apply to the Company from the date of the Cancellation.

The above considerations are not exhaustive, and Shareholders should seek their own independent advice when assessing the likely impact of the Cancellation on them.

Board changes

Adam Frisby, the Group's founder and Chief Executive Officer, has agreed to resign from the Board with effect from Completion.

In addition, given the Company will become an AIM Rule 15 cash shell on Completion, will have no operating business and will be focussed on protecting the residual cash remaining in the Company as far as possible, each of Nancy Cruickshank, Adam Bellamy and Matthew Scaife have agreed to resign from the Board with effect from Completion without pay in lieu of notice.

As such, on Completion, the Board will comprise Jim Sharp (Non-Executive Chairman) and Richard Monaghan (Executive Director) who will be responsible for managing the transition from Completion to completion of the anticipated members voluntary liquidation.  Given the constraints on the Company, and the intention to cancel its admission to trading on AIM in the near future, the Board consider this streamlined approach following Completion to be appropriate and in the best interests of the Company and its Shareholders. From Completion, the Remuneration Committee and the Audit and Risk Committee will be discontinued and the duties and responsibilities which were delegated to them will revert to the Board.

Change of name

Under the articles of association of the Company, the Board has power to change the name of the Company without the need for the approval of the Company's Shareholders.  As such, the Independent Directors have resolved to change the name of the Company to Itsum plc, conditional upon Completion.

The Company's TIDM, "ITS", will remain unchanged.

Recommendation

The Independent Directors believe that the Sale and the Cancellation are in the best interests of Shareholders and the Company as a whole and accordingly intend to recommend that the Shareholders vote in favour of the Resolutions as they intend to do in respect of their own beneficial shareholdings, which amount in aggregate to 174,709 Ordinary Shares, representing 0.33 per cent. of the Company's existing issued share capital.

In addition, Adam Frisby intends to vote in favour of the Resolutions in respect of his own beneficial shareholding, which amounts in aggregate to 12,103,446 Ordinary Shares, representing 23.05 per cent. of the Company's existing issued share capital.

Importance of the vote

Shareholders should be aware that if the Sale Resolution is not approved by Shareholders at the General Meeting, the Sale would not proceed as currently envisaged and, as such, the anticipated net proceeds of the Sale would not become available to the Group.  Accordingly, in light of the Group's reducing cash position and the challenging trading environment, it would be likely that in due course the Company and ITSFL would not be able to meet their respective financial obligations as they fall due and there would be no alternative other than for the Company and ITSFL to enter into administration or some other form of insolvency procedure under which the prospects for recovery of value, if any, by Shareholders would be uncertain.

The person responsible for making this announcement on behalf of the Company is Richard Monaghan, Chief Financial Officer of the Company.

Important notice

Financial and other advisers

Lincoln International LLP ("Lincoln"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively as financial adviser to In The Style Group plc and no one else in connection with the Sale and will not be responsible to anyone other than In The Style Group plc for providing the protections afforded to clients of Lincoln nor for providing advice in relation to the Sale or any other matters referred to in this announcement.  Neither Lincoln nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Lincoln in connection with this announcement, any statement contained herein or otherwise.

Liberum Capital Limited ("Liberum"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively as nominated adviser and corporate broker to In The Style Group plc and no one else and will not be responsible to anyone other than In The Style Group plc for providing the protections afforded to clients of Liberum nor for providing advice in relation to any matters referred to in this announcement.  Neither Liberum nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Liberum in connection with this announcement, any statement contained herein or otherwise.

General

This announcement is for information purposes only and does not constitute or form part of any offer to issue or sell, or the solicitation of an offer to acquire, purchase or subscribe for, any securities in any jurisdiction and should not be relied upon in connection with any decision to subscribe for or acquire ordinary shares in the capital of the Company.  In particular, this announcement does not constitute or form part of any offer to issue or sell, or the solicitation of an offer to acquire, purchase or subscribe for, any securities in the United States.

This announcement has been issued by, and is the sole responsibility of, the Company.  No person has been authorised to give any information or to make any representations other than those contained in this announcement and, if given or made, such information or representations must not be relied on as having been authorised by the Company.

No statement in this announcement is intended to be a profit forecast or profit estimate and no statement in this announcement should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.

This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will", "would" or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include matters that are not historical facts. They appear in a number of places throughout this announcement and include statements regarding the directors of the current Company's intentions, beliefs or expectations concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies, and the Company's markets. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual results and developments could differ materially from those expressed or implied by the forward-looking statements. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements in this announcement are based on certain factors and assumptions, including the directors of the Company's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's operations, results of operations, growth strategy and liquidity. Whilst the directors of the Company consider these assumptions to be reasonable based upon information currently available, they may prove to be incorrect. Save as required by applicable law, the AIM Rules or the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, the Company undertakes no obligation to release publicly the results of any revisions to any forward-looking statements in this announcement that may occur due to any change in the directors of the Company's expectations or to reflect events or circumstances after the date of this announcement.

Neither the content of the Company's website nor any website accessible by hyperlinks to the Company's website is incorporated in, or forms part of, this announcement.

Certain figures contained in this announcement, including financial information, have been subject to rounding adjustments. Accordingly, in certain instances, the sum or percentage change of the numbers contained in this announcement may not conform exactly with the total figure given.

All references to time in this announcement are to London time, unless otherwise stated.

 

END

 

 

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