Circular for proposed iseemed
Synchronica plc
('Synchronica' or 'the Company')
Proposed Acquisition of iseemedia and Placing
Synchronica plc, the AIM listed mobile email, instant messaging and data synchronisation provider, has taken a further step towards completion of the proposed takeover of competitor iseemedia Inc. by way of an all-share tender offer. The Company has sent a Circular to its shareholders describing the proposed acquisition of iseemedia Inc., a proposed placing of 118,417,239 Placing Units, a proposed Share Consolidation and Notice of General Meeting on 31st August 2010.
The proposed acquisition will enable Synchronica to accelerate its market penetration in high-growth emerging markets such as India (through iseemedia's contracts with three Indian mobile operators), expand its addressable market, benefit from iseemedia's patents and further enhance product functionality.
This announcement contains key elements of the Circular, a complete copy of which can be found on the Company's website at www.synchronica.com
Background
On 20 July 2010, the Company announced the conditional offer to acquire all of the common shares and warrants of iseemedia, a Canadian company, with the intention of seeking a listing on the TSXV for the Enlarged Group and the consolidation of the Company's shares, all of which are subject to Synchronica shareholder approval of the Resolutions to allow the Directors to allot the new Ordinary Shares required to complete the Proposals.
Northern Securities Inc., the Toronto based Investment Bank and adviser to iseemedia, confirmed its intention to obtain a firm commitment from its parent company, Northern Financial Corporation, to invest a minimum of CDN$3 million in iseemedia, subject to certain conditions. In addition, and conditional upon a minimum Financing of CDN$3 million, Synchronica has received indications from investors for a further £1,717,050 by the issue of 118,417,239 Placing Units.
Who is iseemedia Inc.?
iseemedia Inc. is a mobile telecommunications software company focused on the commercialisation of a service delivery platform (iseemail) for delivering push email services to the mass market and an advanced content delivery platform (iseedocs) for rich media adaptation and extremely cost-efficient network delivery to mobile devices.
iseemedia has had initial success in Asia, particularly in India, the world's second largest mobile market. To date three carriers, with a total user base of 196 million, have licensed iseemedia's software. These carriers all pay a subscription fee per user per month. iseemedia is currently negotiating the licensing of its software to a further three carriers in Asia with a combined user base of 273 million.
Besides, iseemedia has a patent portfolio which protects its intellectual property, particularly for Streaming Documents, Email Attachments and Maps to Wireless Devices. Three patents are expected to be issued in 2010.
Further information on iseemedia can be found on its website www.iseemedia.com.
Rationale for the Take-Over
Synchronica has a very clear strategy of targeting mobile operators and device manufacturers focusing strongly on high-growth emerging markets. The company consistently executes this strategy and has aligned its product development, marketing and sales to the specific requirements of its target markets. As a result of this strategy, the Company believes it has a product that ideally meets the requirements of its target customers. This is being validated by recent increases in customer-win rates and rising deal sizes.
In emerging markets, broadband infrastructure is often outdated or simply unavailable, and very few households own a personal computer. Internet bandwidth tends to be an expensive commodity which is unjustifiable to the average wage earner. Consequently, Internet cafes are popular in emerging markets providing access to Internet services like email, instant messaging and social networking.
Synchronica believes that in emerging markets, where consumers are mostly reliant on Internet cafes, the mobile phone has a unique opportunity to become the primary access device for Internet services. Synchronica believes that its products and its strategy are well positioned to take advantage of this opportunity and accelerate the Group to a leading position in the race to market leadership for next-generation mobile messaging in emerging markets.
The combination of Synchronica's Mobile Gateway product, providing mobile email synchronisation, social networking and mobile instant messaging, with iseemedia's iseedoc and iseemail products is expected to produce an application that Synchronica anticipates will be highly attractive to mobile operators and device manufacturers in emerging markets, delivering a service to mass-market mobile phones that is akin to the core services and functionalities provided by devices such as the "BlackBerry", but at a price that is attainable by users in emerging markets.
Synchronica also believes that the addition of iseemedia's patent portfolio will provide enhanced protection to their combined businesses. Synchronica believes that areas where enhanced protection would result are those relating to real-time content adaptation, transcoding and on-demand streaming.
Synchronica's customers include more than 40 mobile telecommunications operators worldwide, with a combined addressable market of more than 660 million end users. iseemedia has been successful in deploying its software to four carriers. For two of those carriers, Synchronica believes that provided that additional time, effort and funds are devoted to developing the opportunity with those carriers, significant revenues could be generated. Synchronica also believes that significant revenues would be generated more quickly with Synchronica's input and its resources applied to the opportunity than would be the case if iseemedia were to try to develop this opportunity on its own.
Benefits of the Proposed Transaction
The Directors expect that the proposed transaction will produce a number of strategic benefits for the Enlarged Group:
· Synchronica will enjoy an enhanced market position in global mobile messaging with a combined addressable market of 853 million subscribers.
· Synchronica will accelerate its market penetration, in particular in the high-growth market of India, by gaining ownership of contracts with two large mobile operators (Reliance Communications Infrastructure Limited and Tata Teleservices Limited) with recurring revenue streams.
· Opportunity to up-sell Synchronica's Instant Messaging (IM) and Social Networking Services (SNS) to the four iseemedia contracts with large mobile operators in emerging markets.
· Immediate access to two revenues of live deployments with large mobile operators in India, the world's 2nd largest mobile messaging market, with monthly subscription fees that will accelerate the transition of Synchronica's revenue profile to recurring revenue streams.
· Synchronica's Mobile Gateway product will benefit from being integrated with iseemedia's advanced document transcoding engine resulting in significantly improved product functionality.
· Through its acquisition of iseemedia, Synchronica gains access to a patent portfolio, all of which relate to mobile communications applications, providing access to potential additional revenue streams through licensing arrangements, other commercialization arrangements, or outright sales.
· iseemedia's products, in particular the document transcoding and EAS technologies, combined with Synchronica Mobile Gateway will provide a step-change in product functionality from iseemedia's perspective.
· Synchronica will benefit from reduced competition in the market place, a broader shareholder base and access to international capital markets. The expanded investor base and dual listing expected to result in additional liquidity in the Enlarged Group's stock from investors in North America.
Details of the Take-Over Offer
Under the Offer and pre the Share Consolidation:
· iseemedia Shareholders will be entitled to receive, for each iseemedia Share, 4.03 Ordinary Shares;
· each whole iseemedia Warrant outstanding as of the date of the Offer that is tendered would be exchanged for 4.03 Synchronica Warrants exercisable until 11 December, 2011, each whole Synchronica Warrant being exercisable for one Ordinary Share at £0.0515 per share; and
· each whole iseemedia Warrant issued in the Financing would be tendered and exchanged for 4.03 Synchronica Warrants exercisable for 36 months, each whole Synchronica Warrant exercisable for one Ordinary Share at £0.0193 per share.
Details of the Placing
The Placing comprises approximately 118,417,239 Placing Units which will be placed conditional on, inter alia, the passing of the relevant Resolutions to be proposed at a General Meeting of the Company. The Placing Shares are expected to be admitted to trading on AIM on or around 8 September 2010. All the Placing Units will be placed at the Placing Price with existing UK institutional shareholders and other new UK investors. Subject to the passing of the Resolutions, the Placing will raise proceeds of approximately £1.7 million, before expenses, for the Company. The Placing Shares will represent approximately 8 per cent. of the issued share capital of the Enlarged Group, based on full acceptance of the Offer and the minimum Financing of CDN $3m and 7 per cent. of the issued share capital of the Enlarged Group based on full acceptance of the Offer and the maximum Financing of CDN $7m. The Placing Shares would be in registered form and capable of being held in certificated form or uncertificated form in CREST.
Following completion of the Initial Offer Closing, it is anticipated that Anthony DeCristofaro, President and CEO of iseemedia, will join the Synchronica board as a non-executive director.
For the Acquisition and the Initial Offer Closing to proceed it is necessary for Synchronica shareholders to approve the Resolutions, there to be a minimum associated fund-raising in iseemedia of between approximately £1.83 million (CDN $3 million) and £4.28 million (CDN $7 million) and the completion of the disposal of a non-core element of iseemedia's business for a minimum consideration of £0.92m (CDN$1.5m).
Share Consolidation
The Directors consider that the current share price is detrimental to the interest of shareholders and results in abnormally large bid/offer spreads. Accordingly it is proposed that every 15 of the Ordinary Shares should be consolidated into one Consolidated Share which the Directors believe will alleviate this issue and make the shares more attractive to institutional investors.
There are currently 839,619,249 Existing Shares in issue which, in the last 12 months traded in the range of a high of 4.625 pence to a low of 1.5 pence. This can give a perception of a low share price for the Company. In order to avoid any negative effects that the above may have, the Board proposes, by way of a share consolidation, that each Shareholder will receive one consolidated Ordinary Share, credited as fully paid, in place of every 15 Ordinary Shares held.
Approval for the Share Consolidation will be sought at the General Meeting. It is expected that the Consolidated Shares will commence trading on AIM on 1 September 2010. The record date in respect of the consolidation is 31 August 2010, being the date of the General Meeting.
If a holding of Ordinary Shares held by any Shareholder is not exactly divisible by 15, in accordance with article 22.1 of the articles of association of the Company, fractional entitlements will be aggregated into Consolidated Shares and the resulting Consolidated Shares will be sold and the net proceeds will be distributed amongst the Shareholders to whom such fractional entitlements are attributable. Proceeds of less than £3 will not be so distributed but will be retained for the benefit of the Company.
Assuming the resolution to effect the Share Consolidation is passed, the Further Colibria Consideration Shares, the iseemedia Consideration Shares, the Financing Shares, the Placing Shares, as and when they are issued, together with any Synchronica Warrants, shall also be subjected to the Share Consolidation and shall carry the rights and be subject to the restrictions set out in the articles of association of the Company (as amended from time to time).
If the Share Consolidation is completed prior to any iseemedia Shares or iseemedia Warrants being taken up and paid for pursuant to the Offer, then Synchronica will be deemed to have offered to purchase:
· all of the iseemedia Shares for consideration of 0.2687 of one Consolidated Share for each iseemedia Share;
· all of the iseemedia Warrants outstanding on the date of the Offer that are tendered on the basis that each such whole iseemedia Warrant would be exchanged for 0.2687 of one Synchronica Warrant exercisable until 11 December, 2011, each whole Synchronica Warrant being exercisable for one Consolidated Share at £0.7718 per share; and
· all of the iseemedia Warrants issued in the Financing would be tendered and exchanged on the basis that each such whole iseemedia Warrant would be exchanged for 0.2687 of one Synchronica Warrant exercisable for 36 months, each whole Synchronica Warrant being exercisable for one Consolidated Share at £0.2894 per share.
Enquiries:
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Synchronica plc
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Carsten Brinkschulte, CEO Angus Dent, CFO Nicole Meissner, COO |
+44 (0) 7977 256 406 +44 (0) 7977 256 347 +44 (0) 7977 256 412 |
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finnCap |
Clive Carver, Nomad Charlotte Stranner, Corporate Finance Stephen Norcross, Corporate Broker
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+44 (0) 20 7600 1658
+44 (0) 20 7600 1658
+44 (0) 20 3207 3211 |
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Walbrook PR Ltd
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Paul McManus
Ben Knowles |
+44 (0) 20 7933 8787 +44 (0) 7980 541 893 +44 (0) 20 7933 8788 +44 (0) 7900 346 978 |
About Synchronica
Synchronica plc is a leading developer of next-generation mobile messaging solutions based on open industry standards. The award-winning product portfolio includes the flagship product Mobile Gateway, providing push email, synchronization, instant messaging (IM), backup and restore, and mobile connectivity to social networks. Synchronica's products are white-labeled and offered by mobile operators in emerging and developed markets to provide mass market messaging services, increasing data revenues and reducing churn.
Synchronica Mobile Gateway provides a unique multi-protocol gateway combining Push IMAP, SyncML, ActiveSync, Email to MMS, and Email to SMS, delivering push email and synchronization to literally any mobile phone currently in the market without requiring an additional client to be downloaded. Expanding instant messaging to mobile devices, Mobile Gateway establishes operator-branded IM communities, using the industry standard XMPP and provides gateways to popular internet IM communities, connecting any IMPS-enabled handset.
Headquartered in England, Synchronica also maintains a development center in Germany, in addition to a regional presence in the USA, Hong Kong, and Dubai. Synchronica plc is a public company traded on the AIM list of the London Stock Exchange (SYNC.L). For further information, please visit www.synchronica.com
This information is provided by RNS
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