Tex Holdings PLC

Proposed Subscription/Open Offer/Loan Conversion

RNS Number : 0189E
Tex Holdings PLC
03 November 2020
 

THIS ANNOUNCEMENT, INCLUDING THE APPENDIX, AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, NEW ZEALAND, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL. PLEASE SEE THE IMPORTANT NOTICES WITHIN THIS ANNOUNCEMENT.

 

FURTHER, THIS ANNOUNCEMENT IS MADE FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE AN OFFER TO SELL OR ISSUE OR SOLICITATION TO BUY, SUBSCRIBE FOR OR OTHERWISE ACQUIRE SHARES IN TEX HOLDINGS PLC IN ANY JURISDICTION IN WHICH ANY SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.

 

Note: On 13 October 2020, the ordinary shares in Tex Holdings plc were delisted from the standard segment of the Official List and trading on the London Stock Exchange's Main Market was cancelled.

 

3 November 2020

TEX HOLDINGS PLC

("Company")

Proposed Subscription, Open Offer, Loan Conversion and Share Buyback

Tex Holdings plc is pleased to announce that it has conditionally raised approximately £2.6 million before expenses by way of an issue of 13,000,000 new ordinary shares in the capital of the Company ("New Ordinary Shares") at 20 pence per share (the "Fundraising").

The Fundraising comprises a subscription (the "Subscription") for 8,000,000 New Ordinary Shares at 20 pence per share (the "Subscription Shares") and an open offer (the "Open Offer") of 5,000,000 New Ordinary Shares to the Company's shareholders at 20 pence per share (the "Open Offer Shares").

The Company's major shareholder, Edward Le Bas Limited ("Le Bas"), has conditionally subscribed for all of the Subscription Shares at 20 pence per Subscription Share, raising approximately £1.6 million before expenses. In addition, the Open Offer of 5,000,000 Open Offer Shares at 20 pence per Open Offer Share will raise £1.0 million before expenses. The Open Offer is available to all Qualifying Shareholders and Le Bas has agreed to acquire any Open Offer Shares not subscribed for by Qualifying Shareholders.

As a condition to Le Bas agreeing to subscribe for the Subscription Shares and any Open Offer Shares not subscribed for by Qualifying Shareholders pursuant to the Open Offer, Le Bas has required that the £7,000,000 loan represented by the facility agreement dated 27 November 2019 entered into between the Company and Edward Le Bas Properties Limited (who assigned its rights and obligations in respect of the facility agreement to Le Bas on 26 October 2020) (the "Le Bas Loan") be converted into new Ordinary Shares in the capital of the Company at a conversion price equivalent to 20 pence per Ordinary Share (the "Loan Conversion"). The Loan Conversion will enable the Company to benefit from reduced interest payments and provide potential security for third party lending should this be required in the future.

Whilst the timing of the Loan Conversion and the quantum of the Le Bas Loan to be converted have yet to be fully determined, the conversion price has been agreed between Le Bas and the Company at 20p per new Ordinary Share. Therefore, a maximum of 35,000,000 new Ordinary Shares will be issued to Le Bas pursuant to the Loan Conversion.

The Fundraising and the Loan Conversion are conditional upon, amongst other things, Shareholder approval of the Resolutions which will be sought at the forthcoming Extraordinary General Meeting ("EGM") to be held at Claydon Business Park, Gipping Road, Great Blakenham, Ipswich, Suffolk, IP6 0NL on 27 November 2020 at 11.00 a.m.

Hard copies of a Circular, Notice of Extraordinary General Meeting, Form of Proxy and Open Offer Application Form have today been sent to shareholders.

 

Background to and reasons for the Fundraising, Loan Conversion and Share Buyback

 

On 27 July 2020, the Company updated the market on its financial position and outlook in light of the significant ongoing disruption caused by COVID-19. As announced to the market, the Board has concluded that, as a result of the financial challenges facing the Company, it requires additional working capital. The Board, having given careful consideration to the best way to raise capital to enable the Company to move to a position of financial stability, approached Le Bas, its major shareholder, for further funding.

On 27 July 2020, the Board received a letter from Le Bas outlining the terms on which it would be willing to provide additional funding to the Company.  These terms formed the basis for the Fundraising. The Independent Directors consider that the Fundraising represents the only certain method in the current circumstances that the future of the Company can be safeguarded for the benefit of all stakeholders in the business.

On 15 September 2020, the Board announced that it had concluded that it was in the best interests of the Company's stakeholders (including but not limited to its Shareholders) to apply to the FCA to seek a cancellation of the listing of its ordinary shares on the standard segment of the Official List and to trading on the London Stock Exchange's Main Market. The cancellation became effective on 13 October 2020.

In reaching its decision to recommend the Fundraising, the Loan Conversion and the Share Buyback to Shareholders, the Independent Directors have given careful consideration to the following factors: 

· Prior to the Le Bas Loan being drawn by the Company on 28 November 2019, the Board carefully reviewed the alternative options available to provide the required funding for the Company.  This review included discussions with the Company's bank.  During the course of this review it became clear that the bank would not be willing to consider lending the required funds to the Company without a full independent business review completed by a firm of accountants at the Company's expense. The Directors considered that an independent business review, which is normally used by banks to assess companies in financial distress, would not have assisted the Company in raising additional funding and would cause unnecessary cost and delay.

· The Independent Directors, having reviewed the budgets and cash flows for the year ending 31 December 2020, believe that it was unlikely that operating cash flow could sufficiently finance the Company, and the Independent Directors considered that there were too many significant trading, economic and structural risks associated to be confident that objective could be achieved.

· The Company has made Le Bas aware that should the Company's trading be in line with the Board's current forecasts there is a strong probability that the asset cover required in the Le Bas Loan agreement will be breached.  In such circumstances, without the Fundraising, Le Bas would be entitled to (and would be likely to) require the full repayment of the Le Bas Loan, which in the Independent Directors' opinion would certainly lead to the Company being placed into administration as they believe it remote in the extreme that there would be a third party investor willing to repay the £7m loan and provide £2m of additional working capital and other expenses.

· Le Bas has a first charge over all the assets of the Company, save for QK Honeycomb Products Ltd freehold property, in Brigg, Lincolnshire, which is charged to the bank as security for a bank loan. As a result, without repayment of the Le Bas Loan the Company has no significant collateral to offer any alternative lender.

· The Directors, having reviewed alternative funders and in light of the Company's financial position and the existence of the Le Bas Loan and associated security, do not believe that an alternative acceptable funder can be found.

· The ability of the Company to raise funding from a fire sale of its assets should it require working capital is, in the opinion of the Board, extremely uncertain as to viability, timing and quantum in the current environment.

· The fact that Le Bas has agreed to acquire any Open Offer Shares not subscribed for by Qualifying Shareholders and that despite the Company's perilous financial position, some of the proceeds of the Fundraising will be applied to funding a share buy-back exercise.

· The likely damage to the business and resultant loss to stakeholders and Shareholders from the Company going into administration.

 

Use of Net Proceeds

 

The estimated net proceeds of the Fundraising is approximately £2.5 million. T he Company intends to use the net proceeds as follows:

· Approximately £1.7 million for general working capital purposes.

 

· Up to approximately £0.8 million to purchase and cancel Ordinary Shares of those Shareholders (other than those held by the Concert Party) pursuant to the Proposed Share Buyback should they not wish to remain Shareholders in the Company following the completion of the Fundraising. The Proposed Share Buyback will take place at a price of 20 pence per Ordinary Share.

Details of the Subscription

 

The Company has conditionally raised £1.6 million before expenses through the issue by the Company of 8,000,000 Subscription Shares at the Issue Price to Le Bas pursuant to the Subscription Letter .

The Subscription is conditional, amongst other things, upon the passing of the Fundraising and Loan Conversion Resolutions, the Proposed Share Buyback Resolution and the Whitewash Resolution at the EGM (or any adjournment thereof).

Details of the Open Offer

 

In addition, the Company is proposing to raise a further £ 1.0 million before expenses pursuant to the Open Offer. The Open Offer Shares will be issued at the Issue Price. The Open Offer is being made on a pre-emptive basis, allowing all Shareholders on the register as at 6.00 p.m. on 29 October 2020 the opportunity to participate in the Fundraising. Le Bas has agreed to subscribe for any Open Offer Shares not subscribed for by Shareholders.  This both allows Qualifying Shareholders to participate in the Open Offer on a pre-emptive basis whist providing the Company with the certainty that the Open Offer will raise £ 1.0 million before expenses.

Subject to fulfilment of the conditions below, and Part III of the Circular, t he Open Offer provides Qualifying Shareholders with the opportunity to apply to acquire Open Offer Shares at the Issue Price pro rata to their holdings of Qualifying Shares as at the Record Date on the following basis:

1 Open Offer Share for every 1.2702904 Qualifying Shares

registered in the name of each Qualifying Shareholder on the Record Date and so on in proportion to any other number of Qualifying Shares then held. Entitlements to apply to acquire Open Offer Shares will be rounded down to the nearest whole number and any fractional entitlement to Open Offer Shares will be disregarded in calculating the Entitlement.

Qualifying Shareholders who do not take up any of their Entitlements will experience a dilution to their interests of approximately 67.2 per cent. following completion of the Fundraising.

The Open Offer is conditional, amongst other things, upon the passing of the Fundraising and Loan Conversion Resolutions, the Proposed Share Buyback Resolution and the Whitewash Resolution at the EGM (or any adjournment thereof).  If any of the conditions are not satisfied, the Open Offer Shares will not be issued.

The Open Offer Shares will be issued free of all liens, charges and encumbrances and will, when issued and fully paid, rank pari passu in all respects with the Existing Ordinary Shares.

Further information relating to the Open Offer and the options available to Qualifying Shareholders is contained in the Circular dated 3 November 2020.

Proposed Share Buyback and Matched Bargain Service

 

The Board is mindful that following the Fundraising and any debt for equity conversion of the Le Bas Loan, Le Bas will become the controlling shareholder of the Company. 

The Company intends, following completion of the Fundraising, to use up to approximately £0.8 million of the Fundraising proceeds to purchase (at a price of 20p per Ordinary Share) and cancel Ordinary Shares held by Shareholders (other than those held by the Concert Party) should they not wish to remain Shareholders in the Company following the completion of the Fundraising.

 

The Board understands that as a result of the cancellation of the listing of the Ordinary Shares, the ability of minority Shareholders to buy or sell their Ordinary Shares will be restricted.  As a result, the Board is seeking to establish a matched bargain service for Shareholders which should provide the opportunity for Shareholders to buy and sell Ordinary Shares at specified points in the financial year.

 

Further details of the Share Buyback and Matched Bargain Service will be made available to shareholders in due course.

 

Takeover Code

 

The terms of the Fundraising give rise to certain considerations under the Takeover Code. Edward Le Bas, Le Bas Investment Trust, Redmayne (Nominees) and Minnowdown have confirmed to the Company   that they are presumed to be acting in concert (as defined in the Takeover Code). As at the Latest Practicable Date, the Concert Party is interested in 2,488,551 Existing Ordinary Shares representing 39.2 per cent. of the Existing Ordinary Shares. Le Bas, Le Bas Investment Trust, Redmayne (Nominees) and Minnowdown have confirmed that they will not take up their Open Offer Entitlements. On completion of the Fundraising, depending on participation in the Open Offer by Qualifying Shareholders, the Concert Party's interest in the Company would increase to, in aggregate, a maximum of 80.0 per cent. of the enlarged share capital following the issue of the Subscription Shares and the Open Offer Shares pursuant to the Fundraising . On completion of the Loan Conversion and completion of the Proposed Share Buyback, the Concert Party's interest in the Company would increase to a maximum of 100%, assuming that the Le Bas Loan is converted in its entirety and there is full take up of the Proposed Share Buyback.

Waiver of Rule 9 of the Takeover Code

The Company applied to the Panel for a waiver of Rule 9 of the Takeover Code in order to permit Le Bas to subscribe for 8,000,000 Ordinary Shares pursuant to the Subscription and up to 5,000,000 Ordinary Shares pursuant to the Open Offer and its undertaking to subscribe for all Open Offer Shares not taken up by Qualifying Shareholders (which assumes Qualifying Shareholders do not take up any of their Entitlements) and in addition, permit the Company and Le Bas to convert the Le Bas Loan from debt to equity pursuant to the Loan Conversion and implement the Proposed Share Buyback of up to 3,862,901 Ordinary Shares, without triggering an obligation on the part of the Concert Party, or any member of the Concert Party, to make a mandatory general offer for the Company. The Panel has agreed, subject to the Whitewash Resolution being passed on a poll of Independent Shareholders, to waive the requirement for the Concert Party, or any member of the Concert Party, to make a general offer to all Shareholders where such an obligation would arise as a result of Le Bas subscribing for new Ordinary Shares pursuant to the Fundraising, implementation of the Loan Conversion or the Proposed Share Buyback.

Further details of the Concert Party, the Panel, the Takeover Code and the protections they afford are given in the Circular dated 3 November 2020.

Current Trading

 

Current trading has seen some slippage from post COVID expectations. There have been no significant contracts cancelled, but the timing of the projects has been delayed. Following the announcement of 15 September 2020 of the Company's intention to delist, the Board has carried out a further review of expected cash flow forecasts. This review has revealed that Company's already fragile forecast financial position is now expected to be worse than had previously been envisaged. The Government has now imposed a further set of COVID related restrictions, which for business will most surely result in a setback to the small recovery in confidence that was underway, and there is continued uncertainty surrounding Brexit and the possibility of leaving the EU without an agreement. The Board therefore sees the passing of the resolutions to effect the Transactions as essential to the survival of the Company going forward.

 

EGM

 

It is proposed that the EGM will be held at Claydon Business Park, Gipping Road, Great Blakenham, Ipswich, Suffolk, IP6 0NL on 27 November at 11.00 a.m. where the following resolutions will be proposed as ordinary or special resolutions as indicated below:

1.  to approve the Rule 9 Waiver (ordinary resolution) (the Whitewash Resolution);

2.  to authorise the Directors to allot the New Ordinary Shares for the purposes of the Fundraising and the Loan Conversion (ordinary resolution);

3.  to approve the Proposed Share Buyback (ordinary resolution); and

4.  (i) to waive the statutory pre-emption rights in respect of the allotment of equity securities pursuant to the Fundraising and the Loan Conversion, (ii) revoke the authorised share capital provision contained in Paragraph 6 of the Company's memorandum of association, and (iii) amend the articles of association of the Company by the replacement of article 1 A) with the following:

"SHARE CAPITAL

The share capital of the Company is divided into Ordinary Shares of 10p each."

(special resolution).

Following the compulsory COVID-19 'Stay at Home Measures' imposed by the UK Government prohibiting, amongst other things, all non-essential travel and large public gatherings, the Board will be implementing the following measures in respect of the EGM:

· We expect only the Chairman and two Shareholder Directors to be in attendance in person at the venue for quorum purposes to conduct the business of the meeting.

· Shareholders will not be permitted to attend the EGM and, if they attempt to do so, will be refused entry to the meeting in line with the Stay at Home Measures.

· Relevant questions related to the EGM from shareholders can be raised in advance of the EGM and, in so far as is relevant to the business of the meeting, will be responded to by email and taken into account as appropriate at the EGM itself.

· Voting at the EGM will be carried out by way of poll so that votes cast in advance and the votes of all shareholders appointing the Chairman of the meeting as their proxy can be taken into account.

· The results of the EGM will be announced as soon as practicable after it has taken place.

In light of the Coronavirus pandemic, Shareholders are urged to appoint the chairman of the meeting as his or her proxy as, given current Government advice on social gatherings in particular, attendance in person is not advised and members and their proxies shall be refused entry if circumstances permit or require. The Company is actively following developments and will issue further information through an RIS and/or on its website at https://tex-holdings.co.uk/announcements/ if it becomes necessary or appropriate to make any alternative arrangements for the EGM.

Irrevocable Undertakings

 

Christopher Palmer-Tomkinson has given an irrevocable undertaking to the Company to procure that the registered holders, in respect of his entire beneficial holding totalling, in aggregate, 180,000 Existing Ordinary Shares, representing approximately 2.80 per cent. of the Existing Ordinary Share Capital will vote in favour of the Resolutions.

David Redhead has given an irrevocable undertaking to the Company to procure that the registered holders, in respect of his entire beneficial holding totalling, in aggregate, 3,000 Existing Ordinary Shares, representing approximately 0.05 per cent. of the Existing Ordinary Share Capital will vote in favour of the Resolutions.

In total, therefore, the Company has received irrevocable undertakings to vote in favour of the Resolutions from certain Shareholders in respect of holdings totalling, in aggregate, 183,000 Existing Ordinary Shares, representing approximately 2.85 per cent. of the Existing Ordinary Share Capital .

Risk Factors and Additional Information

 

The Circular, which is expected to be posted to shareholders later today, contains a number of risk factors and additional information in relation to the Open Offer and the Company.

Expected Timetable of Principal Events

 

2020

Record Date for entitlements under the Open Offer                                                                                        6.00 p.m. on 29  October

Announcement of details of the Fundraising                                                                                                   7.00 a.m. on 3 November

Publication of this Document                                                                                                                                                   3 November

Entitlements credited to stock accounts in CREST                                                                                                                 4 November

of Qualifying CREST Holders

Recommended latest time and date for requesting withdrawal of                                                           4.30 p.m. on 20 November

Entitlements from CREST

Recommended latest time and date for depositing Entitlements                                                             3.00 p.m. on 23 November

into CREST

Latest time and date for splitting of Application Forms under the Open Offer                                                3.00 p.m. on 24 November

Latest time and date for receipt of Forms of Proxy                                                                                11.00 a.m. on 25 November

Latest time and date for receipt of completed Application Forms                                                     11.00 a.m. on 26 November

and payment in full under the Open Offer or settlement of
relevant CREST instruction (as appropriate)

Extraordinary General Meeting                                                                                                                    11.00 a.m. on 27 November

Announcement of result of Fundraising                                                                                                                           27 November

Issue of the Subscription Shares and Open Offer Shares                                                                                                   2 December

Subscription Shares and Open Offer Shares in uncertificated form                                                                                 2 December

credited to CREST accounts

Despatch of definitive share certificates in respect of Subscription Shares                                              within 10 Business Days

and Open Offer Shares to be issued in certificated form                            of Issue

Definitions

 

Definitions contained within this announcement have the same meaning as in the Circular dated 3 November 2020.

 

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