PROPOSED DISPOSAL OF THE BILL
microgen
www.microgen.com
3 November 2009
PROPOSED DISPOSAL OF THE BILLING SERVICES DIVISION
Introduction
The Board of Microgen plc ("Microgen" or "Group") is pleased to announce that it has entered into a conditional agreement with Swiss Post Solutions Ltd ("SPS Ltd") for the sale of the Billing Services Division ("BSD").
Microgen has conditionally agreed to dispose of BSD to SPS Ltd, details of which are to be set out in the circular to shareholders to be dispatched today ("the Circular"). The consideration under the Disposal Agreement is £7.5 million, payable in cash on the basis of a stated level of net current assets of BSD on the date of Completion.
In view of the size of BSD in relation to the Group, the Disposal requires the approval of Shareholders under the Listing Rules. A notice convening a General Meeting of the Company is set out in the Circular, and it is anticipated that it will be held on 26 November 2009. Completion of the Disposal is anticipated to occur on 30 November 2009.
Background to and reasons for the Disposal
BSD provides managed services to process, store and distribute billing and related documentation via electronic and print media.
The Board has progressively migrated BSD from its original print based delivery to electronic distribution and enhanced the service offering through the development of related value added services. During the financial year to 31 December 2008, 44 per cent. of all document output was distributed electronically.
Whilst BSD has remained profitable with good operating margins, the Board recognises that the current business would benefit from greater scale for its long term success. Furthermore, BSD has a different operating model and customer base to the other parts of the Group and there are minimal synergies between BSD and the Group's other business activities.
BSD reported a revenue of £2.9 million in the six month period ended 30 June 2009 (30 June 2008: £3.3 million) and an operating profit before Group overheads of £0.74 million (30 June 2008: £1.0 million). The Board has determined that for BSD to be successful in the long term, the business would benefit from greater scale. Having considered the options for BSD, particularly in light of the opportunities across the Group, the Board has concluded that a disposal of BSD would be the most appropriate course of action to maximise shareholder value.
Following the divestment of BSD, the Continuing Group will comprise the Microgen Aptitude Solutions Division and the Financial Systems Division. In recent years, Microgen has invested significantly in Microgen Aptitude and has also acquired a number of other software businesses, now integrated into the Financial Systems Division. As a result, the revenue derived from the Group's software-based activities contributed 73 per cent. of the Group's revenues for the financial year to 31 December 2008 and 76 per cent. in the six month period ended 30 June 2009.
Principal Terms of the Disposal Agreement
Microgen has conditionally agreed to sell BSD for a cash consideration of £7.5 million by way of a Disposal of the shares of Microgen UK Limited as the trade of BSD is held within this Group entity. The total Consideration assumes a stated level of net current assets on the date of Completion as set out in the Disposal Agreement. The Disposal is conditional only on passing of the Disposal Resolution in relation to which a General Meeting of Microgen is being convened. Completion of the Disposal is not dependent on the passing of resolution 2 to be proposed at the General Meeting. The scheduled date of Completion is 30 November 2009.
A summary of the principal terms of the Disposal Agreement is set out in the Circular.
Information on Swiss Post Solutions Ltd
SPS Ltd is part of the Swiss Post Solutions division of Swiss Post. SPS Ltd is a leading provider of outsourced mailroom and document processing solutions in the UK & Ireland employing over 1,200 personnel delivering services to a blue-chip client base.
Swiss Post Solutions comprises of Document, Dialogue and e-Business Solutions and forms part of Swiss Post. It employs around 8,000 personnel with operations in Europe, the Middle East, the USA and South East Asia. Swiss Post Solutions is the leading provider of e-Billing solutions in its native Switzerland, also servicing clients in neighbouring Germany.
Swiss Post was established in 1849 and is the second largest employer in Switzerland with around 45,000 personnel providing postal, payment and transportation services. It is a public company owned by the Swiss Confederation. Swiss Post's strategy is to continue to expand internationally and to position itself as an innovative company and its core values, 'credible', 'entrepreneurial' and 'cooperative' apply to all.
Current Trading of Microgen and Prospects
On 21 July 2009 Microgen published its unaudited interim results for the six months ended 30 June 2009. Microgen has today published an Interim Management Statement, including the following summary on current trading.
"The Group's financial results for the three months ended 30 September 2009 are ahead of the Group's annual plan. The Group's balance sheet remains strong, with £17.5 million of cash (30 June 2009: £15.2 million) and net funds of £15.2 million (30 June 2009: £12.8 million) at 30 September 2009, including proceeds of approximately £0.8 million from the disposal of 54% of the Group's shareholding in Scisys plc.
In summary, the Board is pleased that the Group is on track to exceed the Board's current expectations, which have, despite the economic environment, already been increased this year. The success in 2009 also provides an excellent platform for 2010 and the Group's strong balance sheet, further enhanced by the proposed disposal of BSD, provides the Board with the resources to consider acquisition opportunities if appropriate."
Financial effects of Disposal and use of proceeds
For the financial year ended 31 December 2008, BSD contributed £1.9 million to Group operating profit (excluding Group overheads) and consequently, had the Disposal occurred on 1 January 2008, the Group would have reported a reduced profit before tax for that year. For the six months ended 30 June 2009, BSD reported revenue of £2.9 million and an operating profit before Group overheads of £0.74 million.
The net cash proceeds at Completion arising from the Disposal are expected to be approximately £7 million after applying estimated expenses of the Disposal of £0.5 million. Subject to Completion, a special dividend of 4.0 pence per share, equivalent to an aggregate of £3.5 million, is proposed to be declared, which would be paid on 18 December 2009 to Shareholders on the Register of Members as at 6.00 pm on 4 December 2009. The remaining proceeds are to be applied to strengthen further the Group's balance sheet.
Following Completion, the Group's central overheads will be allocated to a smaller operating base with no material savings in such overheads anticipated. However, as noted in the Interim Management Statement, the growth being experienced in the Microgen Aptitude Solutions Division will materially compensate for the reduction in profit contribution associated with the disposal of BSD.
The value of the gross assets the subject of the Disposal is £1.79 million, extracted from the financial information relating to BSD.
Risk Factors
Shareholders should consider fully the risk factors involved with the Continuing Group and the Disposal as set out in the Circular.
General Meeting
In view of the size of BSD in relation to the Group, the Disposal is conditional upon the approval of Shareholders at the General Meeting to be held at Fleet House, 3 Fleetwood Park, Barley Way, Fleet, Hampshire, GU51 2QJ at 9:00 am on 26 November 2009.
The Disposal Resolution is proposed as resolution 1 and is required in order to approve and effect the Disposal and to grant the Directors authority to proceed with the Disposal, including amending or varying the terms of the same, provided that in all cases such changes are non-material. The Disposal Resolution will be proposed as an ordinary resolution which will be passed if more than 50 per cent. of the votes cast are in favour.
There will also be proposed a resolution to allow the Company to convene all future general meetings (other than its AGM) on 14 clear days notice. Although Shareholders approved changes to the Company's articles of association (allowing general meetings to be held on 14 clear days notice) at the 2008 AGM, the Shareholders' Rights Regulations which came into force on 3 August 2009 had the effect of amending the 2006 Act and increasing the notice period required for listed companies to 21 days. The Disposal is not dependent on the passing of resolution 2. Resolution 2 will be proposed as a special resolution which will be passed if 75 per cent. or more of the votes cast are in favour. The result of the General Meeting will be announced through a Regulatory Information Service as soon as possible after the conclusion of the General Meeting.
Management and employees of BSD
Certain members of the management and employees of BSD currently employed by Microgen Management Services Limited will transfer to BSD by operation of the Transfer of Undertakings (Protection of Employees) Regulations 2006 ("TUPE") immediately prior to the Disposal. For the purposes of the Listing Rules, there are no key individuals in the Group transferring to SPS Ltd pursuant to the Disposal.
Irrevocable Undertakings and further information
The Company has obtained irrevocable undertakings to vote in favour of the Resolutions from the Directors in respect of 5,877,911 Microgen Shares, in aggregate, representing 6.76 per cent. of the issued ordinary share capital of the Company.
Shareholders should read the whole of the Circular and not just rely on the summarised information set out in this announcement.
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For further information: |
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Microgen plc |
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Martyn Ratcliffe, Chairman Philip Wood, Group Finance Director |
01252-772300 |
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Investec Bank plc |
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Rowena Murray |
020-7597-5088 |
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Financial Dynamics |
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Giles Sanderson Haya Chelhot |
020-7831-3113 |
Investec, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Microgen and no-one else in connection with the proposed Disposal and will not be responsible to anyone other than Microgen for providing the protections afforded to clients of Investec nor for providing advice in relation to the proposed Disposal.
Definitions
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"2006 Act"
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the Companies Act 2006, as amended
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"AGM"
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the annual general meeting of Microgen
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"Billing Services Division" or "BSD"
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the billing services and document management business of Microgen all of whose trade and assets are held within Microgen UK (which does not have any other trade or business other than such billing services and document management business) and any references to the Billing Services Division shall include Microgen UK and all and any contracts entered into by Microgen UK regarding such business
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"Board"
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the board of directors of Microgen, as at the date of this announcement
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“Circular”
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circular to shareholders to be dispatched today
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"Completion"
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completion of the Disposal in accordance with the terms of the Disposal Agreement
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"Continuing Group"
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the Group following the disposal of the Billing Services Division
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"Directors" or “Board”
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the directors of Microgen whose names are set out in the Circular
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"Disposal"
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the proposed disposal of the Billing Services Division
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"Disposal Agreement"
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the conditional agreement dated 2 November 2009 between (1) Microgen and (2) Swiss Post for the disposal of the BSD
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"Disposal Resolution"
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the resolution numbered 1 to be proposed at the General Meeting in order to approve the Disposal
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“Financial Systems Division”
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the financial systems business of Microgen
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"FSMA"
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the Financial Services and Markets Act 2000, as amended
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"General Meeting" or "GM"
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the general meeting of the Company convened for the purposes of the approval by Shareholders of the Disposal
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"Group"
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Microgen and its subsidiaries
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"Interim Management Statement"
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means the statement released on 3 November 2009
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"Interim Results"
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the unaudited interim results of the Group
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"Investec"
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Investec Investment Banking (a division of Investec Bank (UK) Limited), the Sponsor to Microgen for the purpose of the Disposal
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"Irrevocable Undertakings"
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the undertakings given to the Company and Investec from Directors to vote their own shareholdings in favour of the Resolutions
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"Listing Rules"
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the listing rules published by the Financial Services Authority pursuant to Part VI of FSMA
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"Microgen Aptitude"
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the product owned by Microgen supplying technical architecture for full transaction process management to customers and which has a Patent Pending (Serial No: 1686466).
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“Microgen Aptitude Solutions Division”
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the Microgen Aptitude solutions business of Microgen
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"Microgen" or the "Company"
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Microgen plc, a company incorporated in England and Wales with registered number 01602662
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"Microgen Shares"
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ordinary shares of 5 pence each in Microgen
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“Microgen UK”
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Microgen UK Limited
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"Shareholders"
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holders of ordinary shares in Microgen
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"Shareholders' Rights Regulations"
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The Companies (Shareholders' Rights) Regulations 2009 (SI 2009/1632)
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"Sponsor"
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Investec Investment Banking (a division of Investec Bank (UK) Limited), the sponsor to the Company and approved under Section 88 of the FSMA by the FSA
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"SPS Ltd"
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Swiss Post Solutions Ltd incorporated in England and Wales under number 04482213 being a wholly owned subsidiary of Swiss Post whose registered office is Richmond Place, Petersham Road, Richmond, Surrey TW10 6TP
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"Swiss Post"
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Die Schweizerische Post, a company incorporated in Switzerland whose address is Viktoriastrasse 21, Postfach, 3030 Bern, Switzerland
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“TUPE”
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the Transfer of Undertakings (Protection of Employment) Regulations, which preserve employee’s terms and conditions when a business or undertaking, or part of one, is transferred to a new employer
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"United Kingdom" or "UK"
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the United Kingdom of Great Britain and Northern Ireland and its dependent territories
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"United States" or "USA"
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the United States of America (including the District of Columbia), its territories and possessions, any state of the United States of America and all other areas subject to its jurisdiction
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For the purposes of this announcement, "subsidiary", "subsidiary undertaking", "undertaking", "associated undertaking" have the meanings given by the 2006 Act.
This information is provided by RNS
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