Statement regarding Elektron Technology plc
microgen
www.microgen.com
17 June 2014
STATEMENT REGARDING ELEKTRON TECHNOLOGY PLC
Announcement falling under Rule 2.8 of the City Code on Takeovers and Mergers (the "Code")
Microgen plc ("Microgen") announced its interest in exploring opportunities consistent with the Elektron Technology plc ("Elektron") Strategic Alternatives Process ("SAP") on 20 May 2014 and provided a further update on 27 May 2014.
Microgen submitted its original proposal to the Board of Elektron on 2 May 2014 ("Refinancing Proposal"). The Refinancing Proposal indicated, subject to due diligence information being provided and other terms typical of a transaction of this nature, that Microgen could make a potential equity-based investment of between £12 million and £18 million and that Elektron would remain listed on AIM. Further information in respect of this proposal was detailed in Microgen's announcement of 20 May 2014.
The Refinancing Proposal was rejected by the Board of Elektron on 7 May 2014 who also then advised that, contrary to the SAP announcement, only offers for the entire issued share capital of Elektron would be considered. Following Microgen's announcement of 20 May 2014, access to due diligence information was progressed allowing Microgen to determine whether or not it was able to submit such an offer.
Whilst Microgen's preferred structure remains the Refinancing Proposal, on 11 June 2014 Microgen submitted to the Board of Elektron a non-binding letter with details of a potential offer by Microgen for the entire issued share capital of Elektron ("Offer Proposal"). Microgen's Offer Proposal was, subject to a number of conditions typical of a transaction of this nature, to make an offer for all of the issued equity of Elektron at a price of 5 pence per share in cash. This would represent:
· A value for the existing issued ordinary share capital of Elektron of approximately £6.0 million equivalent to an enterprise value for Elektron, adjusting for net debt at 30 April 2014, of £13.6 million. (The level of investment required under the Offer Proposal (enterprise value of £13.6 million) is similar in value to that of the Refinancing Proposal (£12 million to £18 million), taking into account investment in additional growth opportunities.)
· A premium of approximately 17.6% to the mid-market closing share price of 4.25 pence per Elektron share on 16 June 2014
Whilst Microgen's Offer Proposal would have sought to acquire 100% of the issued Elektron shares, any offer would have been declared unconditional as to acceptances once Microgen had received valid acceptances and/or acquired voting share rights representing in excess of 75% of the issued Elektron shares. Microgen's offer would have been funded from Microgen's existing cash resources. The Board of Elektron rejected Microgen's Offer Proposal on 13 June 2014 and did not express any interest in reconsidering Microgen's Refinancing Proposal.
Microgen considers that its Offer Proposal reflected fair, and arguably generous, value for Elektron shareholders. However, without a recommendation from the Board of Elektron, Microgen confirms that it is inappropriate to proceed with its Offer Proposal at the present time and therefore Microgen does not intend to make an offer for Elektron. Similarly Microgen cannot proceed with its Refinancing Proposal without the support of the Elektron Board.
Microgen stated in its announcement of 20 May 2014 that the Refinancing Proposal, with its investment in the £12 million to £18 million range, "offered Elektron shareholders the opportunity to share in the Elektron recovery from a stable financial platform." Microgen also stated in its announcement of 20 May 2014 that "In view of the cash resources absorbed by Elektron in recent years, the continuing deterioration of Elektron's financial position and the proven inability of Elektron to forecast future business prospects, should Elektron receive only a limited cash injection, this may only provide short-term relief and may not provide the confidence required with non-equity stakeholders (customers, suppliers, banks, employees) to enable Elektron to rebuild". It is therefore disappointing that the Board of Elektron have decided not to progress either of the Microgen proposals.
Under Rule 2.8 of the Code, and except with the consent of the Panel, the statement that Microgen does not intend to make an offer for Elektron will prevent Microgen, or anyone acting in concert with it (or any person who is subsequently acting in concert with it or them), from announcing an offer or possible offer for Elektron or taking certain other action within the next six months unless there is, in the opinion of the Panel, a material change of circumstances or there has occurred an event which is specified in Note 2 of Rule 2.8 as enabling this statement to be set aside. Accordingly, for the purposes of Rule 2.8, Microgen reserves the right (on behalf of itself and anyone acting in concert with it) to announce an offer or possible offer for Elektron and/or to take any other action which would otherwise be restricted under Rule 2.8 within the next six months in circumstances set out in Note 2 of Rule 2.8.
Contacts
Martyn Ratcliffe, Chairman 020-7496-8100
Philip Wood, Group Finance Director
Lucy Delaney, FTI Consulting 020-3727-1131
Rowena Murray, Investec Bank plc 020-7597-5970
This information is provided by RNS
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