Open Offer and Notice of General Meeting
6 June 2012
The TEG GROUP PLC (AIM: TEG)
("TEG" or "the Company")
THIS ANNOUNCEMENT (AND THE INFORMATION CONTAINED HEREIN) IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, REPUBLIC OF SOUTH AFRICA OR JAPAN OR ANY JURISDICTION IN WHICH SUCH PUBLICATION OR DISTRIBUTION IS UNLAWFUL
Open Offer and Notice of General Meeting
The TEG Group PLC, the AIM listed cutting edge green technology company, which develops and operates organic composting and energy plants, is pleased to announce an Open Offer to raise up to approximately £2.0 million.
The Company announces an Open Offer of New Ordinary Shares to its Shareholders on the basis of 57 New Ordinary Shares for every 100 Existing Ordinary Shares held at a price of 3 pence. Should it be fully subscribed, the Open Offer will generate gross proceeds of approximately £2.0 million to the Company.
The Open Offer is conditional upon, amongst other things, the passing of Resolutions by the members of the Company at a General Meeting.
In order to implement the Open Offer, the Directors will need authority from the Shareholders to allot the New Ordinary Shares, to reorganise the share capital of the Company, to appoint Rory Maw as non-executive director of the Company and to dis-apply statutory pre-emption rights in respect of the Open Offer Shares.
Should the Open Offer not proceed and there be any further delays in the receipt of income from certain projects, the Directors believe this will place the Company in a position of significant uncertainty and the Company's status as a going concern will require review.
As announced earlier today, the Board has decided to terminate the formal sale process and to resume normal business with immediate effect, and the Company is no longer deemed to be in an offer period under the Takeover Code.
A circular setting out details of the Open Offer and containing the notice of General Meeting will be sent to Shareholders later today.
Contact:
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The TEG Group Plc |
Tel: 01772 644980 |
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Michael Fishwick, Chief Executive |
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Peckwater PR |
Tel: 07879 458 364 |
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Tarquin Edwards |
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N+1 Brewin (NOMAD and Broker) |
Tel : 0845 213 1000 |
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Andrew Craig / Ben Wright |
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The Open Offer
The Company proposes to raise approximately £2.0 million by way of an Open Offer. The Open Offer Shares will comprise 36 per cent. of the Enlarged Share Capital (assuming the Open Offer is subscribed in full) following Admission. The Open Offer is conditional, inter alia, on the passing of the Resolutions at the General Meeting and Admission. It is expected that Admission will occur and trading in the Open Offer Shares will commence on 25 June 2012.
The Company has entered into an Underwriting Letter with Weekcorp, the controller and manager of shares held by Southern Fox Investments Limited in the Company, whereby Weekcorp have agreed, subject to certain conditions, to underwrite up to £1.2 million of the Open Offer.
The Company has also entered into separate Undertaking Agreements with Bridges and Impax who have undertaken to apply for their respective pro rata Basic Entitlements under the Open Offer. The undertakings provided by Bridges and Impax when aggregated amount to approximately £0.6 million of the Open Offer. Therefore at the date of this announcement, the Company has received aggregate commitments for the Open Offer from the Major Shareholders of approximately £1.8 million.
The Directors believe that the support of Weekcorp, Bridges and Impax demonstrates confidence in TEG and the Directors' plans for the future development of the Group.
The Board considers it important that Qualifying Shareholders have the opportunity to participate in the fundraising, and the Directors have concluded that the Open Offer is the most suitable option available to the Company and its Shareholders.
Pursuant to the Open Offer, Qualifying Shareholders will be given the opportunity to subscribe for up to, in aggregate, 57 Open Offer Shares for every 100 Existing Ordinary Shares held on the Record Date.
It is expected that the Open Offer will raise gross proceeds of up to approximately £2.0 million. Assuming full subscription under the Open Offer, net proceeds to the Company from the Open Offer will be approximately £1.8 million.
The Offer Price represents a 59 per cent. discount to the closing price mid-market price of 7.25p per Ordinary Share on 1 June 2012 (being the latest practicable date prior to this announcement).
Background to the Open Offer
Greater Manchester PFI contract
In 2009, TEG was awarded a contract for the provision of four TEG IVC silo cage facilities to the Greater Manchester Waste Authority with an aggregate value of over £38 million over the term of the contract and a total plant capacity of 175 ktpa. This followed an advanced works order that was issued in 2008.
Progress on the four facilities has been as follows:
The first site in Rochdale has been in operation since November 2009 and the plant has operated satisfactorily since handover. The defects liability and snagging period was due to be completed by November 2010, but before final acceptance of the plant a number of snagging issues were raised that require resolution. Following remedial action on the snagging issues the Directors expected final acceptance in the first half of 2011. Following further discussions with the Client, the Directors now expect final acceptance to take place in 2012 and for the associated retentions to be released to TEG at that time.
Construction was completed on the second site in Bredbury in August 2010 and the plant was successfully commissioned in the first quarter of 2011 and has operated satisfactorily since handover. The defects liability period was due to be completed in the second quarter of 2012 and the Directors expect acceptance and release of retentions during 2012.
The third site in Trafford was constructed and commissioned to schedule in the third quarter of 2011 and the 50,000 tonne per annum plant has also operated satisfactorily since handover. The defects liability period will be due to be completed in the second half of 2012 and the Directors expect acceptance and release of retentions during 2012.
Following a significant delay, the Company received the ITP for the construction of the fourth site at Bolton on 30 June 2011. Unfortunately, owing to sub ground conditions, the initial construction at the site was delayed further with construction of the IVC facility having only commenced on 28 February 2012. Whilst this was outside the scope and responsibility of the Company, this caused further delay to revenues and cash flow. The facility is due to be completed and commissioned in the first half of 2013.
As detailed in the circular posted to shareholders on 21 June 2011, the delay in receiving the Bolton ITP had a significant impact on cash flow at that time.
The retentions are in relation to acceptance of the facilities, a contractual step following takeover by the client. Takeover was successfully achieved at all three facilities and they remain in full operation. Some of the payments and retentions relating to the facilities, detailed above, have been expected since June 2011 and whilst a number of outstanding payments were released the retentions still remain outstanding. The delay in receiving these retentions further compounded the impact caused by the delay in receiving the Bolton ITP in 2011. At present the total of these retentions amount to approximately £1 million. TEG believes these payments are all properly due and is making considerable efforts to resolve all outstanding issues and to secure their release.
Dagenham Project
As announced on 13 December 2010, TEG is developing a new 30,000 tonnes per annum AD plant with a 19,000 tonnes per annum TEG IVC plant in Dagenham, East London. Once commissioned, the Directors expect that the project will provide approximately 1.4MW of electrical power. The planning permission and Section 106 agreement have both been completed. Under the terms of this project, a new special purpose vehicle ("SPV") will be created on financial close and TEG will receive a design and build contract from the SPV to construct the facility together with an additional 15 year operating contract. The contracts will be on normal commercial terms. Under the design and build contract, TEG will receive a deposit on contract completion followed by milestone payments throughout the construction period. TEG will hold a minority shareholding in the SPV and will have a seat on its board of directors.
The Company is pleased to announce that the Foresight Environmental Fund has now obtained firm offers for the entire funding for the project, with the London Waste & Recycling Board providing part of that funding. Subject to final credit approval, the Directors now expect financial close and contract completion to occur on the project in the next three months with construction commencing immediately after and full commissioning expected within approximately 12 months of financial close.
The Directors had originally expected that financial close on the project would take place in the second half of 2011. The delay in securing the necessary financing package has consequently further delayed the revenues and cash flow expected by the Company.
North East Wales
The Company had previously announced its joint venture subsidiary with Alkane Energy PLC, NEAT Biogas Limited ("NEAT"), had been awarded preferred bidder status by three Councils in North East Wales (the "Hub") to construct and operate an AD facility. The preferred bidder status was subject to NEAT securing satisfactory finance for the project and whilst NEAT had received an offer of bank finance, it was not possible to agree contractual terms with the funders that were satisfactory to the joint venture partners or the Hub. Consequently, as was announced on 25 April 2012, NEAT was unable to continue as preferred bidder.
As a consequence of this, the Company was required to write off bid costs in excess of £100,000 and furthermore is unable to recover the project overhead costs allocated to this contract in 2012.
Offer process
During January 2012, the Group received a significant number of preliminary expressions of interest from potential purchasers and, as a result, the Board decided it should conduct a formal sale process in order to explore the expressions of interest. On 26 January 2012, the Company announced the commencement of a formal sale process with a view to identifying appropriate partners for the Company or major strategic investors. The deadline for receipt of indicative proposals from interested parties was 14 March 2012.
The Company received indicative proposals which were carefully considered. Potential offerors were provided with access to management but following further discussions and consideration the Board did not believe a transaction could be completed in a reasonable period of time and this would lead to further shareholder uncertainty.
As a consequence, the Board has decided to terminate the formal sale process and to resume normal business with immediate effect, and the Company is no longer deemed to be in an offer period under the Takeover Code.
Working capital constraints
The delays associated with the Bolton project in Manchester and the Dagenham project have significantly delayed revenues to the Company in the second half of 2011 and first half of 2012. Furthermore, the termination of the North East Wales project has reduced the anticipated overhead recovery revenues for that project in 2012.
TEG has made significant efforts with all contractual parties to obtain a release of the retentions under the Manchester project but, whilst a number of payments were released in the second half of 2011, approximately £1 million of retentions have still not been paid.
Internally, TEG has implemented a cost reduction programme across the Group. Following the termination of the North East Wales project reductions have been made to overheads by reduction in staff numbers. Bank facilities have been put in place and a number of other cash flow measures have been implemented.
Considering these delays and uncertainties, the Directors believe that it is necessary, and in the best interests of its Shareholders to proceed with the Open Offer at this time. When the retentions are released to the Company, and revenues commence following financial close at Dagenham, these sums will be used to fund future project finance and for general working capital purposes.
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Current Trading and Prospects |
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TEG currently owns and operates three IVC facilities, being: |
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Facility |
Capacity |
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Perth |
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35 thousand tonnes per annum ("ktpa") |
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Todmorden |
35 ktpa |
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Carleton Rode |
35 kpta |
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In addition, TEG operates six open windrow facilities acquired as part of the acquisition of Simpro Limited in 2010.
Together these are known as the "TEG BOO plants".
TEG BOO Plants
Revenues and profit margins at the Group's own plant operations grew impressively in 2011. This reflected the increasing desire of customers to place waste contracts rather than procure plants, as the Board had anticipated, together with a continued increase in the diversion of waste from landfill.
Overall gate fee revenue in 2011 increased 50 per cent. to £8.9 million compared to the same period in 2010. Waste volumes grew by 32 per cent. with the Group processing 244,000 tonnes in 2011 compared to 185,000 tonnes in 2010. Whilst there remain regional differences, the average gate fee across the plant operations continued to rise, up 16 per cent. on the prior year.
Performance of the Group's BOO plants during the year to date has been very good. Revenues and profits increased significantly in Q1 of 2012 compared to the same period in 2011 and the TEG BOO plants are ahead of budget both in terms of revenues and profits. TEG has secured significant further waste contracts since the year end with LondonWaste, WRG Viridor and South Staffordshire Council. The latter is a 7 year, £1.5 million revenue contract that was announced on 6 June 2012.
TEG has completed extensive improvement works to the environmental control systems to meet the requirements of new Defra guidance issued in 2009. These works, including the upgrade of air management systems and biofilters at the IVC plants, were completed satisfactorily and the environmental performance of TEG's facilities has subsequently been very good.
The Simpro business is successfully integrated into the Company and the Board continues to be very pleased with its performance.
Third Party Sales
TEG has constructed and sold six further IVC plants to third parties, being:
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Location |
Capacity |
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Swansea |
7 ktpa |
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Gwynedd |
6 ktpa |
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Exeter |
14 ktpa |
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Rochdale - Manchester PFI |
25 ktpa |
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Bredbury - Manchester PFI |
54 ktpa |
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Trafford - Manchester PFI |
50 ktpa |
IVC Technology
The Board believes that TEG has a competitive advantage in the market place as TEG is well established with more plants than any other technology provider, has a high quality management team and is a proven operator with proven technology. TEG's Silo Cage technology has full animal by-product approval and is a continuous, single pass operation.
The plant offers very good environmental control and the Board believes it is well positioned to benefit from the increasing focus on raising industry standards with the Environmental Agency taking a more robust position on containment.
The technology also offers low process energy costs and a small carbon footprint. It produces consistent, high quality end product (all plants have achieved PAS100) and it has a small process footprint.
Anaerobic Digestion
The commissioning of TEG first's AD plant at Glenfarg, Perthshire, is proceeding well and the plant has commenced the generation of electricity. The combined heat and power unit has been commissioned and the plant has generated at levels over 600KW of electricity, which is used to power the adjacent TEG composting plant with surplus power being sold to the grid.
The next phase at Glenfarg is to begin the supply of heat to the Binn Eco Park; this is a commercial heat supply agreement independent of the Renewable Heat Incentive.
TEG has a collaboration licensing agreement with UTS to develop AD facilities in the UK. The UK Government has highlighted the potential for AD as a form of renewable energy, whether as electricity or as a captured methane fuel and the Government is committed to encouraging a significant growth in the use of AD. The Board believes that the licensing agreement together with its proven IVC technology offers a competitive advantage in the emerging AD market.
Project Pipeline
TEG has a number of major projects in its pipeline from pre-qualification through to submitted tender. The Company has planning permission in place for a new IVC and AD plant at Gaydon and increased IVC capacity at Todmorden, and the Company is exploring the potential development of other portfolio sites. Furthermore local authority tender activity is increasing again following the flat period during the Comprehensive Spending Review.
Current market conditions
The overall market has continued to grow as local authorities increasingly implement the separation of organic wastes from the municipal waste stream and the private sector increases its level of organic waste recycling. Statutory obligations to divert waste from landfill are increasing annually and are expected to increase continuously until 2020. Landfill Tax ("LFT") continues to rise annually; LFT rose by £8.00 per tonne in April 2012 increasing the tax to a total of £64.00 per tonne. The UK Government has confirmed that LFT will rise by £8.00 per tonne per annum until at least 2014/2015. This is expected to continue to stimulate market growth for the foreseeable future.
In addition, the Welsh Government has maintained its policy to procure the construction of a number of organic waste facilities and the Scottish Assembly has introduced a ban on the landfill of organic waste in both the public and private sectors, to be introduced progressively commencing in 2014.
Following the Government's Comprehensive Spending Review, a short term reduction was observed in some waste streams and some local authorities delayed implementation of new collection rounds for segregated waste streams to reduce expenditure but this was short lived and the volume of waste secured has grown significantly. Local authority procurement activity has increased again but, as anticipated by the Company and previously reported, TEG has noted a significant change in procurement policy by local authorities with emphasis on the letting of waste recycling contracts in return for private sector investment, as opposed to direct plant procurement.
TEG has also noted the continued increase in market interest in energy generation from food waste and the strengthening of interest in technologies such as AD. TEG is progressing a number of tender enquiries for AD capacity in addition to a continuing interest in IVC technology. Government incentives for AD and other renewable energy technologies are largely by way of subsidy for sales of power in the form of either ROCs or FITs. The level of subsidy available through ROCs and FITs for existing schemes has been determined by the Government though a further review of FITs subsidy for future AD projects is underway.
TEG expects that Government policy will continue to support the expansion of the market for the foreseeable future.
The Directors believe that the longer term regulatory environment will also benefit the Group. As stated above, TEG has further invested in its facilities to ensure they meet the enhanced guidance introduced by Defra in 2009 and the Group believes its technology lends itself to the additional level of containment required. In addition, the regulators have introduced policies to reduce the level of low grade green waste disposal which is expected to take effect in the first half of 2012, increasing the volume of green waste diverted into the composting sector.
Whilst the Company has generated significant interest from potential financiers to fund AD and IVC projects and has secured provisional funding for the Dagenham project, the general financial market has been very difficult for the whole waste sector and the lead-time to reach financial close on projects has been extended considerably. The Company believes there is sufficient interest in funding further projects, particularly from the private equity sector, and it is encouraged by recent initiatives such as the launch of the UK Green Investment Fund. However the Board believes the financial close of projects will continue to be challenging until such time as the general financial markets recover. The Board will continue to evaluate opportunities and funding options on a case by case basis.
Business Strategy
TEG continues to target growth through:
· Build own and operate projects - these provide sustainable, long term revenues which service the waste outsourcing market while allowing the Company to take advantage of rising prices;
· Third party sales - these provide large revenues to the Company and services the participants in the market preferring to make capital investments (including the private equity market);
· IVC and AD technologies - the Company believes that offering both IVC and AD offers both defence and opportunities for growth to the Company.
The Directors have also identified opportunities for expansion into the related renewable energy markets. The Directors believe that local authority activity throughout the UK is greater than ever, with a particular focus on Wales, the Midlands and London/South East.
Board changes
Nigel Moore has announced he is to retire in 2012 and will therefore not be seeking re-election at the AGM on 29 June 2012. Rory Maw will be joining the Board as a non executive director assuming his appointment is approved at the General Meeting and, following the AGM, he will be appointed as Chairman. Rory is the current Chief Financial Officer of Bridges Ventures LLP.
Rory has 15 years' corporate finance experience with Schroders and Morgan Stanley, focusing mainly on the consumer products and private equity sectors. Prior to joining Bridges Ventures, he was CFO of Speedcard Limited, a payment solutions provider. In addition to his responsibilities for compliance and financial control and reporting as CFO of Bridges Ventures, Rory is actively involved in certain of the portfolio companies. Rory has a MA in Economics from Trinity College, Cambridge. He is Vice-Chairman of Guy's & St Thomas' NHS Foundation Trust and is also a Trustee of the Guy's & St Thomas' Charity.
Relationship Agreement
On 1 June 2012, the Company entered into the Relationship Agreement with Bridges which is to continue in full force and effect until Bridges and its associates cease to control 20 per cent. or more of the Company or the trading of the Company's Ordinary Shares on AIM are cancelled. The key terms of the Relationship Agreement are set out below:
· Rory Maw is to be appointed as a Director of the Company, as a nominee of Bridges, subject to the approval of his appointment at the General Meeting;
· Bridges is entitled to nominate one individual for election as a Director of the Company in advance of each annual general meeting of the Company and if Bridges' nominee fails to be elected, the Company shall take such steps as permitted by the Articles and applicable law to appoint him or her to fill any vacancy. Upon termination of the Relationship Agreement, Bridges will cause its nominee Director to resign from the Board with immediate effect;
· Bridges has undertaken for the term of the Relationship Agreement: (i) to exercise all voting rights and powers of control in such a way as to ensure (so far as it is able to do so) that the Group has its own dedicated management and a sufficient number of independent Directors on the Board, carries on its business independently of Bridges, and acts for the benefit of its Shareholders as a whole and (ii) that any transaction or relationship between Bridges, its associates and any member of the Group is at arm's length and on a normal commercial basis; and
· Bridges has undertaken to not recruit, solicit or entice any senior employee from the Company save for any person responding to a general advertisement without solicitation from Bridges.
Capital Reorganisation
The Offer Price represents a discount to the current 5 pence nominal value of an Existing Ordinary Share. However, company law prohibits the issue of shares at a price below their nominal value and, accordingly, a share capital reorganisation will be necessary in order to undertake the Open Offer. It is therefore proposed to reorganise the share capital of the Company by sub-dividing each issued Existing Ordinary Share of 5 pence into one Ordinary Share of 1 pence and one Deferred Share of 4 pence.
The Ordinary Shares following the Reorganisation will have the same rights (including voting and dividend rights) as each Existing Ordinary Share has at present. No new certificates will be issued in respect of the Ordinary Shares arising as a result of the capital reorganisation and existing share certificates in respect of Existing Ordinary Shares will be valid and will continue to be accepted as evidence of title for the Ordinary Shares arising as a result of the Sub-Division.
In order to effect the Reorganisation, the Articles will need to be amended to include the rights of the Deferred Shares, which will be minimal, thereby rendering them effectively valueless. The rights attaching to the Deferred Shares can be summarised as follows:
· they do not entitle holders to receive any dividend or other distribution or to receive notice or, speak or vote at general meetings of the Company;
· on a return of assets on a winding up, they only entitle the holder to the amounts paid up on such shares after the repayment of £10 million per Ordinary Share;
· they are not freely transferable;
· the creation and issue of further shares which rank equally or in priority to the Deferred Shares or the passing of a resolution of the Company to cancel the Deferred Shares or to effect a reduction of capital shall not constitute a modification or abrogation of their rights; and
· the Company shall have the right at any time to purchase all of the Deferred Shares for an aggregate consideration of £1.00.
No application will be made for the Deferred Shares to be admitted to trading on AIM or any other stock exchange. No share certificates will be issued for any of the Deferred Shares. There are no immediate plans to purchase or to cancel the Deferred Shares, although the Directors propose to keep the situation under review.
Use of Proceeds
The proceeds of the Open Offer will be used initially for general working capital and, as working capital increases through the forthcoming projects, will be used as working capital and to allow the Company to secure further project finance.
Should the Open Offer not proceed and there be any further delays in the receipt of income from certain projects, the Directors believe this will place the Company in a position of significant uncertainty and the Company's status as a going concern will require review.
Admission, settlement and dealings
Application will be made to the London Stock Exchange for Admission of the New Ordinary Shares. It is expected that Admission will become effective and that dealings in the New Ordinary Shares will commence at 8.00 a.m. on 25 June 2012. Following Admission and assuming the Open Offer is subscribed in full, the Company will have 184,106,027 Ordinary Shares in issue.
General Meeting
A circular containing a notice of General Meeting of the Company and setting out the Resolutions, convening a General Meeting at Westmarch House, 42 Eaton Avenue, Buckshaw Village, Chorley, PR7 7NA at 1.00 p.m. on 22 June 2012 will today be posted to Shareholders of the Company.
Pursuant to the Underwriting Letter and Undertaking Agreements, Weekcorp, Bridges and Impax have undertaken to vote in favour of the Resolutions. If the Resolutions are not passed, unless such conditions are waived by the relevant underwriter or undertaker, the conditions of the Underwriting Letter and the Undertaking Agreements will not be satisfied and the Open Offer will not occur.
Important notice
Shareholders should note that the Open Offer is not a rights issue. Qualifying Shareholders should be aware that in the Open Offer, unlike with a rights issue, any Open Offer Shares not applied for by Qualifying Shareholders under their Basic Entitlements will not be sold in the market on behalf of, or placed for the benefit of Qualifying Shareholders who do not apply under the Open Offer, but may be allotted to Qualifying Shareholders to meet any valid applications under the Excess Application Facility and that the net proceeds will be retained for the benefit of the Company.
The Ex-Entitlement Date for the Open Offer is 8.00 a.m. on 7 June 2012.
Effect of the Open Offer
Upon completion of the Open Offer, the New Ordinary Shares will represent approximately 36 per cent. of the Enlarged Share Capital (assuming the Open Offer is subscribed in full).
Following the issue of the New Ordinary Shares (assuming the Open Offer is subscribed in full), a Qualifying Shareholder who does not take up any of his Basic Entitlement (and who therefore does not take up any Excess Shares under the Excess Application Facility) will suffer a dilution of approximately 36 per cent. to his economic interests in the Company.
Underwriting Letter and Undertaking Agreements
Weekcorp, Bridges and Impax have each entered into separate arrangements with the Company pursuant to which they have undertaken to vote in favour of the Resolutions, apply for their pro rata Basic Entitlement under the Open Offer and, in the case of Weekcorp apply for Excess Shares up to a total aggregate of £1.2 million. In consideration for the Major Shareholders entering into these commitments,they will each receive a commission of 6 per cent. of their respective commitment which, in the case of Bridges and Impax, will be settled in whole against any amounts owed by each of them to the Company in respect of their respective applications for Open Offer Shares pursuant to their agreed arrangements with the Company and, in the case of Weekcorp, will be settled as to 5/6 against any amounts owed by them to the Company in respect of its applications for Open Offer Shares pursuant to its agreed arrangements with the Company.
Each of these undertakings contain standard warranties and termination rights. The Open Offer is conditional on neither of these undertakings being terminated in accordance with its terms.
Related Party Transactions
As at 1 June 2012 (the latest practicable date prior to this announcement), Weekcorp holds 12,700,000 Existing Ordinary Shares, representing approximately 10.8 per cent. of the Company's existing issued share capital and is, as such, a "substantial shareholder" in the Company.
Weekcorp has conditionally agreed to subscribe for up to 40,000,000 New Ordinary Shares pursuant to the Open Offer in accordance with the terms of its Underwriting Letter and, immediately following Admission, may hold a total of 52,700,000 Ordinary Shares, representing approximately 29.7 per cent. of the Enlarged Share Capital. By virtue of Weekcorp being a "substantial shareholder" of the Company, the entry into the Underwriting Letter will constitute a "related party transaction" for the purposes of AIM Rule 13.
The Directors consider, having consulted with the Company's Nominated Adviser, N+1 Brewin, that the terms of Weekcorp' participation in the Open Offer and the terms and conditions of their respective Underwriting Letter are fair and reasonable in so far as its Shareholders are concerned.
As at 1 June 2012 (the latest practicable date prior to the publication of this document), the Bridges Fund holds 24,892,774 Existing Ordinary Shares, representing approximately 21.2 per cent. of the Company's existing issued share capital and is, as such, a "substantial shareholder" in the Company.
Bridges has conditionally agreed to subscribe for 14,130,852 New Ordinary Shares pursuant to the Open Offer in accordance with the terms of its Undertaking Agreement and, immediately following Admission, the Bridges Fund may hold a total of 39,023,626 Ordinary Shares, representing approximately 21.2 per cent. of the Enlarged Share Capital. By virtue of the Bridges Fund being a "substantial shareholder" of the Company, the entry into the Undertaking Agreement will constitute a "related party transaction" for the purposes of AIM Rule 13.
The Directors consider, having consulted with the Company's Nominated Adviser, N+1 Brewin, that the terms of Bridges' participation in the Open Offer and the terms and conditions of their respective Undertaking Agreement are fair and reasonable in so far as its Shareholders are concerned.
Recommendation and Voting Intentions
The Directors believe that the Open Offer is in the best interests of the Company and its Shareholders as a whole.
Accordingly, the Directors unanimously recommend that you vote in favour of the Resolutions as they and Shareholders connected with them intend to do so in respect of their aggregate beneficial holdings of 1,120,448 Ordinary Shares representing approximately 0.95 per cent. of the Existing Ordinary Shares.
In addition, the Directors have agreed to subscribe for at least 73,148 Open Offer Shares pursuant to the Open Offer.
Accordingly, when aggregated with the irrevocable undertakings provided by Major Shareholders, the Company is in receipt of irrevocable undertakings to vote in favour of the Resolutions in respect of 49,075,358 Ordinary Shares representing approximately 41.8 per cent. of the Existing Ordinary Shares.
DEFINITIONS AND GLOSSARY
The following definitions apply throughout this announcement:
"Act" the Companies Act 2006;
"AD" anaerobic digestion;
"Admission" admission of the New Ordinary Shares to trading on AIM and
such admission becoming effective in accordance with the
AIM Rules;
"AIM" the market of that name operated by the London Stock Exchange;
"AIM Rules" the "AIM Rules for Companies" published by the London Stock
Exchange as in force at the date of this announcement or, where the content requires, as amended or modified after the date of this announcement;
"Application Form" the application form accompanying the Circular to be used by Qualifying Shareholders in connection with the Open Offer;
"Basic Entitlement" the Open Offer Shares which a Qualifying Shareholder is entitled
to subscribe for under the Open Offer calculated on the basis of 57 Open Offer Shares for every 100 Existing Ordinary Shares
held by that Qualifying Shareholder as at the Record Date;
"Board" or "Directors" the board of directors of the Company;
"BOO" build, own and operate;
"Bridges" Bridges Ventures LLP, acting as manager for and on behalf of the Bridges Fund;
"Bridges Fund" Bridges Community Development Venture Fund II LP, a Shareholder of the Company whose Existing Ordinary Shares are held on its behalf by its nominee, Bridges Community Ventures Nominees Limited;
"Circular" the Circular to be dated 6 June 2012;
"Company" or "TEG" The TEG Group plc;
"CREST" the system for paperless settlement of trades and the holding of uncertificated shares administered through Euroclear;
"Deferred Shares" deferred shares of 4 pence each in the capital of the Company,
arising pursuant to the Sub-Division;
"Enlarged Share Capital" the Existing Ordinary Shares and the New Ordinary Shares;
"Euroclear" Euroclear UK & Ireland Limited;
"Ex-Entitlement Date" 8.00 a.m. on 7 June 2012;
"Excess Applications" applications pursuant to the Excess Application Facility;
"Excess Application Facility" the mechanism whereby a Qualifying Shareholder can apply for Excess Shares up to an amount equal to the total number of Open Offer Shares available under the Open Offer less an amount equal to a Qualifying Shareholder's Basic Entitlement, subject always to the 29.9 per cent. Aggregate Limit, as more fully set out in Part II of the Circular;
"Excess Shares" the Open Offer Shares which a Qualifying Shareholder is entitled
to apply for in addition to their Basic Entitlement by virtue of the
Excess Application Facility;
"Existing Ordinary Shares" the 117,439,360 Ordinary Shares in issue at the date of this
announcement;
"FITs" feed in tariffs;
"General Meeting" or "GM" the general meeting of the Company to be held at Westmarch
House, 42 Eaton Avenue, Buckshaw Village, Chorley, PR7 7NA
at 1.00 p.m. on 22 June 2012, notice of which is set out at the end
of the Circular;
"Group" the Company and its subsidiary undertakings at the date of this announcement;
"Impax" Impax Asset Management Limited;
"ITP" instruction to proceed;
"IVC" in vessel composting;
"LFT" or "Landfill Tax" any tax on the disposal of material as waste made by way of
landfill site charged pursuant to section 40 Finance Act 1996;
"London Stock Exchange" London Stock Exchange plc;
"Major Shareholders" Bridges, Impax and Weekcorp;
"New Ordinary Shares" the Open Offer Shares to be issued pursuant to the Open Offer;
"N+1 Brewin" the trading name of Nplus1 Brewin LLP, a limited liability
partnership, registered in England and Wales, with registered
number OC364131, the Company's nominated adviser and broker;
"N+1 Brewin Shares" the Ordinary Shares to be issued to N+1 Brewin in satisfaction
of amounts owing pursuant to their engagement letter with the
Company dated 1 June 2012;
"Offer Price" 3 pence per New Ordinary Share;
"Ordinary Shares" ordinary shares of 5 pence each in the capital of the Company and,following the Sub-Division, the ordinary shares of 1 pence each in the share capital of the Company;
"Open Offer" the conditional invitation to Qualifying Shareholders to
subscribe for the Open Offer Shares at the Offer Price on the
terms and subject to the conditions set out in the Circular and in the case of the Qualifying Non-CREST Shareholders only, the Application Form;
"Open Offer Entitlements" an entitlement to subscribe for Open Offer Shares, allocated to a
Qualifying Shareholder pursuant to the Open Offer;
"Open Offer Shares" the 66,666,667 new Ordinary Shares which are to be made
available for subscription by Qualifying Shareholders under the Open Offer;
"Proposals" the Open Offer, the Reorganisation, the authorities to be granted
under sections 551 and 571 of the Act and Admission;
"Qualifying Non-CREST Qualifying Shareholders whose Existing Ordinary Shares on the
Shareholders" register of members of the Company on the Record Date are held
in certificated form;
"Qualifying Shareholders" holders of Existing Ordinary Shares at the Record Date;
"Record Date" 5.00 p.m. on 31 May 2012;
"Relationship Agreement" the relationship agreement dated 1 June 2012 entered into
between Bridges and the Company;
"Reorganisation" the proposed reorganisation of the share capital of the Company as described in the Circular and pursuant to the Resolutions set out in the Notice of General Meeting;
"Resolutions" the resolutions to be proposed at the General Meeting in relation
to the Proposals;
"Restricted Jurisdictions" any of the United States, Canada, Japan, Australia or South Africa;
"ROCs" Renewable Obligations Certificate;
"Shareholders" holders of Ordinary Shares;
"Sub-Division" the proposed sub-division of each of the issued Existing Ordinary
Shares into one Ordinary Share of 1 pence and one Deferred
Share of 4 pence;
"UK" the United Kingdom of England, Scotland, Wales and
Northern Ireland;
"Undertaking Agreements" the agreements dated 1 June 2012 entered into between (1) Bridges and the Company; and (2) Impax and the Company;
"Underwriting Letter" the letter agreement dated 1 June 2012 entered into between Weekcorp and the Company;
"UTS" UTS Biogastechnik GmbH;
"Weekcorp" Weekcorp Limited; and
"29.9 per cent. Aggregate Limit" the restriction on the number of Open Offer Shares that each Qualifying Shareholder may receive under the Open Offer on the basis that no Qualifying Shareholder shall be entitled to receive in excess of such number of Open Offer Shares as would bring its aggregate interest in the Company to more than 29.9 per cent of the Enlarged Share Capital.
This information is provided by RNS
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