Greenchip Investments PLC
12 December 2001
GREENCHIP INVESTMENTS PLC ('Greenchip' or the 'Company')
PROPOSED ACQUISITION OF PROGRAMMABLE LIFE INC
RE-ADMISSION TO AIM
Number of Existing Ordinary Shares in issue 35,281,597
Initial number of Consideration Shares 100,000,000
Number of Ordinary Shares in issue following Admission 135,281,597
Initial Consideration Shares as a percentage of the Enlarged Issued 73.9%
Share Capital on Admission
Market capitalisation of the Company at 6.5p per Ordinary Share, £8,793,000
the price at which trading was suspended from AIM on 13 August 2001
Number of potential further Consideration Shares 60,000,000
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Dealings recommence in Ordinary Shares 7:30 am 12 December 2001
Latest time and date for receipt of forms of proxy
for the Extraordinary General Meeting 10am on 6 January 2002
Extraordinary General Meeting 10am on 8 December 2002
Admission and dealings commence in the
Ordinary Shares on AIM 9 January 2002
The Company is pleased to announce that it has conditionally agreed to acquire
the entire issued share capital of Programmable Life Inc. ('Programmable Life'
or 'P-Life') for a consideration to be satisfied by the issue of 100 million
initial Consideration Shares to the shareholders of Programmable Life and then
up to an additional 60 million Consideration Shares. The additional
Consideration Shares are to be issued in various tranches dependent, inter
alia, on the future performance of Programmable Life and the future market
capitalisation of the Company as enlarged by the Acquisition.
The initial Consideration Shares represent approximately 73.9 per cent. of the
issued ordinary share capital of the Company as enlarged by the Acquisition,
and value Greenchip at approximately £8.8 million (on the basis that the value
of Greenchip shares was 6.5p per Ordinary Share as at 13 August 2001, the date
the shares were suspended from trading on AIM). If all the Consideration
Shares were to be issued, they would represent 81.9 per cent. of the issued
ordinary share capital of the Company as enlarged by the Acquisition, and
would value Greenchip at approximately £12.7 million.
Programmable Life has developed and acquired rights to numerous international
patents and patent applications over additives and processes that assist in
the degradation of plastics, particularly polyethylene. It has a range of
existing products under the 'Ecostar' brand name and has sold its products to
various customers ranging from initial sample takers to established clients
through its licensee in Japan, Novon Japan Inc.
On completion of the Acquisition Robert Downie, the founder of P-Life and
Charles Cannon-Brookes a representative of Arlington will join the board of
Greenchip and Ian Burne will resign. I will remain on the board and become the
By reason of the size and the relative value of Programmable Life, the
Acquisition is a reverse takeover and therefore requires the approval of
Shareholders pursuant to Rule 13 of the AIM Rules. The Company is today
posting a document to Shareholders explaining the background to and reasons
for the Proposals and to recommend that Shareholders vote in favour of each of
the resolutions to be proposed at the Extraordinary General Meeting of the
Company to be held on 8 January 2002.
The Ordinary Shares have been suspended since 13 August 2001 when this
proposed transaction was first announced. A document explaining the proposals
is being posted to Shareholders and the suspension from trading on AIM is
being lifted and trading in the Existing Ordinary Shares will recommence with
effect from 7:30 am today.
INFORMATION ON PROGRAMMABLE LIFE
Programmable Life owns the rights to a line of additives that facilitate the
degradation of polyethylene. These have been used by a range of customers in
Japan with product roll-out now also occurring in the USA and Canada.
Programmable Life has also developed a process that permits degradable
polyethylene products to be produced at prices that are competitive with '
ordinary'' polyethylene products. This technology is in the late development
stage and is currently being trailed in North America and the Far East. All
of Programmable Life's essential technologies are wholly owned by Programmable
Life and are protected by duly filed patents and patents pending.
In the year ended 31 December 2000 Programmable Life achieved turnover and
other income of approximately $358,000 (£250,000) (including a gain on sale of
investment assets of $175,000 (£122,000)) and a net loss before tax of
approximately $(218,000) (£(152,000)). Programmable Life's net assets at 31
December 2000 were $226,000 (£158,000). In the six months ended 30 June 2001,
Programmable Life achieved turnover and other income of $88,000 (£62,000) and
a net loss before tax of $(151,000) (£(106,000)). Programmable Life's net
assets at 30 June 2001 were $77,000 (£54,000).
P-Life was established to exploit and further develop its portfolio of patents
and technology. P-Life's intellectual property is focused on the field of
degradable plastics and, most applicably, on degradable polyethylene, the most
widely used plastic in the world today. Since the first major breakthroughs
in the development of the Ecostar product range of chemical additives and the
P-Life resin, careful attention has been paid to securing adequate protections
for all P-Life's innovations and proprietary processes. P-Life either own
appropriate patents or has appropriate patent applications pending in all
countries in which the Directors consider there to be sufficient potential
future demand to warrant the costs of maintaining the respective patents in
them. Some of these patents or patent applications are currently registered
in the names of Predecessor Companies and in those cases steps are being taken
to transfer registered ownership to P-Life itself.
Equal in importance to the formal protectio0n of P-Life's intellectual
property is the proprietary knowledge and database that has been gained over
many years of research. P-Life owns a database of biodegradable additive
formulae on all customer applications and can access that information to find
the correct formula for a particular customer's needs without additional cost
and delay. this database of knowledge will be expanded over time and the
Directors believe that it will create an ever increasing barrier to
Technical Investment Services Limited ('TISL'') was retained by P-Life to
carry out an independent
assessment of certain aspects of its business. The summary of this technical
report is repeated below:
'Programmable Life and its predecessor companies have been successful
manufacturers of additives for many years. The Ecostar range of degradants in
masterbatches has been used in a variety of applications. We have also seen
documents confirming that plastic produced by adding degradants like Ecostar
masterbatch to conventional polymers is genuinely degradable. So there can be
little doubt that the company's degradant chemistry is effective.
Recently Programmable Life has developed a method of manufacturing PE resins
that already contain the company's proprietary degradant additives. In the new
patented process, the established Ecostar degradants are added by the resin
manufacturer together with other processing aids in the extruder directly
after the reactor. This process creates a new grade of polyethylene resin
which is inherently biodegradable.
Resin containing Programmable Life additives has been prepared using the
patented process on pilot scale by both Nagase and Petromont. We have seen
evidence that the P-Life chemistry (identical to that of Ecostar) produces PE
with acceptable performance characteristics. The company reports that the
trials at Petromont and Nagase indicated that no deleterious e!ects on PE
manufacturing equipment were expected in the use of the P-Life process and
chemistry on a full scale.
We have seen a quotation from Petromont that gives a cost for P-Life resin of
USD0.51 per lb. We are convinced that incorporating degradability at the stage
of bulk resin manufacture could offer significant cost savings in comparison
with current practice whereby degradants are added at the masterbatch stage.
It is clear that the main challenges faced by all makers of degradable
plastics in the past have been to offer comparable pricing and performance to
conventional materials. In particular we believe the market to be very
price-sensitive and to date the prices of degradable plastics have been much
higher than those of conventional plastics.
Despite the fact that the current conservatism of the major PE manufacturers
does, in our view, still represent a significant risk factor, we still believe
that Programmable Life is well-positioned with its new process and proven
degradant chemistry to 'kick-start'' a mass market for degradable polymers.
The total PE market is worth around $11bn in the US, and some $9bn in the EU.
It is growing at around 4-5 per cent. annually, and it is expected to continue
at that level of growth over the next five years. Currently degradable
products account for less than 0.01 per cent. of plastics production. With the
price breakthrough promised by the Programmable Life process we believe that
this proportion could plausibly increase by 10 or 100 times.''
On 13 August 2001, the Company announced that one of the conditions in the
Heads of Terms was that
Greenchip was bound to use all reasonable endeavours to ensure that it had £1
million or more in cash at Completion. In order that the Company had the
reasonable prospect of meeting that condition and to finance the estimated
acquisition expenses, Arlington subscribed for 6,250,000 new Ordinary Shares
at a price of 3.5 pence each, the net asset value of the Company at that time.
As a result Arlington now holds 29.1 per cent. of the current issued share
capital of Greenchip. As at 7 December 2001 the Company had cash reserves of
Additionally, Arlington has provided development finance to Programmable Life
and has a 25.2 per cent. interest in the share capital of that company and, in
consequence, must be regarded as a related party under rule 12 of the AIM
As at 30 September 2001, there were loans of $333,333 (£233,000) due to
Arlington and $166,666 (£117,000) to the other Warrantors from Programmable
BACKGROUND TO AND REASONS FOR THE ACQUISITION
In the circular to Shareholders dated 20 October 2000 applying for admission
to trading on AIM, the stated principal aim and investment strategy of the
Company was to bring into European markets, technology-driven business
ventures, with a particular focus on life science, environmental technology
and internet related technologies.
The Current Directors believe that in Programmable Life they have identified
an acquisition opportunity that satisfies their investment criteria and
provides significant prospects to grow shareholder value. As stated in my
Chief Executive's Review for the eighteen-month period through to 31 December
2000, the Company has rarely committed its limited cash resources to its other
licensed technologies. Since the balance sheet date Greenchip has committed no
further funds to these licensee companies and, apart from one, all are now
either dormant, liquidated or have been disposed of.
PRINCIPAL TERMS OF THE ACQUISITION
The consideration for the acquisition of the entire issued share capital of
Programmable Life will be the allotment and issue by the Company of the
Consideration Shares to the current shareholders of Programmable Life. The
Consideration Shares will rank pari passu in all respects with the Existing
The Consideration Shares are to be issued in various tranches, with 100
million new Ordinary Shares being issued on Completion, and up to a maximum
further 60 million new Ordinary Shares being issued over a period of 3 years
dependent upon, inter alia, the future performance of Programmable Life and
the future market capitalisation of the Company as enlarged by the
The Acquisition Agreement is conditional, inter alia, upon:
(1) the passing of resolution (1) on a poll and resolution (2) at the
Extraordinary General Meeting; and
(2) Admission becoming effective.
It is expected that completion of the Acquisition and Admission will take
place on 9 January 2002.
DIRECTORS AND ADVISORY BOARD
On completion of the Acquisition, Ian Burne will resign as a director of the
Company and Robert Downie and Charles Cannon-Brookes will be appointed as new
directors. I will remain on the board and become the Non-Executive Chairman.
The board of directors on Completion will be as follows:
Malcolm Burne (aged 57), Current Chief Executive Officer, Proposed
Non-Executive Chairman, commenced his career as an equity analyst, later
moving into financial journalism and fund management. He has worked as a
venture capitalist and has founded a number of public and private companies,
including Golden Prospect Plc, an AIM listed company, where he is executive
Robert Downie (aged 77), Proposed Interim CEO, has an extensive background in
research and development. He has served as Research Director at American Can
and as Senior Vice President of Development for Moore Corp. In 1984 he founded
and served as president of International Imaging Materials inc, a NASDAQ
listed manufacturer of thermal heat-transfer ribbons. He is a member of the
Board of Trustees of the Rochester Institute of Technology. He will enter
into a service agreement for a fee of £70,000 per annum and will be entitled
to six months notice.
Colin Hill (aged 56), Finance Director, has been a member of the Chartered
Institute of Management
Accountants since 1968. He spent 15 years in industry specialising in
corporate turnaround and development work before becoming a freelance
consultant in 1981. Since that time, he has focused on due diligence relating
to corporate finance assignments in SME's and public companies with small
market capitalisations in the UK, USA and overseas. Since April 1998 he has
been the finance director of Arlington Group Plc.
Charles Cannon-Brookes (aged 25), Proposed Non-Executive Director, is an
Investment Analyst at
Arlington Group Plc and represents that company as a major shareholder in both
Greenchip and Programmable Life. He worked as a research analyst at BZW and
then ABN Amro in Sydney, specialising in banking and mining sectors. In late
1998 he joined Jupiter Asset Management as a fund manager. In January 2000, he
moved to Arlington Group plc. He sits on the investment committee of Arlington
and to date has been involved in assisting with the roll out strategy for
Programmable Life. He will has enter into a letter of appointment for a one
year rolling term for a fee of £10,000 per annum.
The Advisory Board will provide a body of critical expertise and networking in
the markets, products and
materials in which P-Life operates. Brief details of the proposed members of
the Advisory Board are given below:
Dr Ron Robinson currently holds the position of President of the Technology
Division at Texaco. After earning a Master's degree in Physics and a Ph.D.
degree in Petroleum Engineering, Dr Robinson launched his career in the
petroleum industry working first with Getty Oil Company, followed by Grace
Petroleum Corporation before moving finally to Texaco in 1984 where he has
been responsible for technology transfer within Texaco's global operations
which span more than 150 countries. He assumed his current position of
President, Technology Transfer in 1996. In 1968, Dr Robinson was named a NASA
fellow and has authored many papers on petroleum engineering.
Dr Jerry Moore Ph.D, JD will bring to the Company experience in the areas of
environmental protection and government regulation. Dr. Moore is currently an
environmental consultant to some 20 companies. Dr. Moore was a Charter Member
of the United States Environmental protection Agency (''EPA'') where he served
since the EPA's founding until 1998. Dr. Moore chaired the Air Research
Committee in the Office of Research and Development for the Office of Health
and Environmental Assessment and was Co-Chair of the Water Research Committee.
Dr. Moore has his Ph.D from HEED University and his Juris Doctor degree from
Dr Brian Rushton is a former president of the American Chemical Society, Dr.
Rushton has introduced a number of new products to market. He is formerly Vice
President of Technology of Celanese Corporation where he was simultaneously
President of Celanese Research Company. Subsequently, for 12 years he was Vice
President of Research & Development of Air Products and Chemicals. He
currently is a director of Mallinckrodt Inc. and is a technical advisory board
member for Mobil Corporation.
Immediately following Completion, the shareholding of the Concert Party will
be, in aggregate, 110,250,000 Ordinary Shares, representing approximately 81.5
per cent. of the issued share capital of the Company as enlarged by the issue
of the first tranche of 100,000,000 Consideration Shares. The maximum
potential shareholding of the Concert Party will be, in aggregate, assuming
that all the deferred New Ordinary Shares are allotted and issued to the
Vendors, 170,250,000 Ordinary Shares, representing approximately 87.2 per
cent. of the issued share capital of the Company as enlarged by the issue of
all the Consideration Shares.
The Panel has agreed however, subject to resolution numbered 1 set out in the
notice of Extraordinary General Meeting being passed on a poll by independent
Shareholders at the Extraordinary General Meeting, (a) to waive the obligation
on the Concert Party to make a general offer to Shareholders under Rule 9 of
the Code which would otherwise arise on Completion and (b) that Rule 9 of the
Code will not apply to the issue of further New Ordinary Shares (if any) to
the Vendors pursuant to the terms of the Acquisition Agreement. The only
Vendor that currently holds any Ordinary Shares is Arlington. Therefore,
resolution 1 set out in the notice of Extraordinary General Meeting will be
voted upon by all of the Shareholders other than Arlington.
The Independent Directors (comprising the Current Directors excluding Colin
Hill, who has taken no part in the Board's deliberations as he is also a
director of Arlington which is both a member of the Concert Party and a
substantial shareholder in Programmable Life), who have been so advised by
Grant Thornton, consider the terms of the Acquisition, its related party
nature and the waiver of the obligation on the members of the Concert Party
(both individually and collectively) to make a general offer to Shareholders
under Rule 9 of the City Code to be fair and reasonable. In giving its advice,
Grant Thornton has taken into account the Independent Directors' commercial
assessment. Accordingly, the Independent Directors unanimously recommend
Shareholders to vote in favour of the resolutions numbered 1, 2 and 3 to be
proposed at the Extraordinary General Meeting, as they intend to do in respect
of their shareholdings of 3,260,000 Existing Ordinary Shares in aggregate
representing approximately 9.2 per cent. of the existing issued ordinary share
capital of the Company.
Copies of the document being posted to shareholders today are available free
of charge from the offices of Grant Thornton, Grant Thornton House, Melton
Street, Euston Square, London NW1 2EP.
For further information please contact:
Colin Hill 020 7389 5010
Graeme Thom 020 7383 5100
Grant Thornton, which is authorised by the Financial Services Authority, is
acting as nominated adviser exclusively for the Company in connection with the
proposals and is not acting for any other person and will not be responsible
to any other person for providing the protections afforded to clients of Grant
Thornton, or for advising any other person in connection with the transactions
and arrangements proposed in this document. The responsibilities of Grant
Thornton, as nominated adviser, are owed solely to the London Stock Exchange.