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Malvern Inter. PLC (MLVN)

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Wednesday 16 May, 2018

Malvern Inter. PLC

Acquisition & Placing

RNS Number : 3089O
Malvern International PLC
16 May 2018
 

THIS ANNOUNCEMENT (AND THE INFORMATION CONTAINED HEREIN) IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, WITHIN, IN OR INTO THE UNITED STATES (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES AND THE DISTRICT OF COLUMBIA), CANADA, AUSTRALIA, JAPAN, NEW ZEALAND AND SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.

This announcement does not constitute an offer of, or a solicitation to subscribe for or purchase, any securities in any jurisdiction including in the United States.

Securities may not be offered or sold in the United States absent registration under the United States Securities Act of 1933, as amended (the "Securities Act"), or an exemption from, or in a transaction not subject to, registration.  The Company has not and does not intend to register any securities under the Securities Act, and does not intend to offer any securities to the public in the United States unless registered under the Securities Act or an exemption from such registration is available. No public offering of securities of the Company is being made in the United States.

No communication or information relating to the issue and offering of securities may be disseminated to the public in jurisdictions other than the UK where prior registration or approval is required for that purpose. No action has been taken that would permit an offer of securities in any jurisdiction where action for that purpose is required, other than in the UK.

 

16 May 2018

 

MALVERN INTERNATIONAL PLC

("Malvern", the "Group" or the "Company")

 

PROPOSED ACQUISITION

CONDITIONAL PLACING OF 100,000,000 NEW ORDINARY SHARES

AND

NOTICE OF GENERAL MEETING

 

Malvern International plc (AIM: MLVN), the global learning and skills development partner, is pleased to announce details of an acquisition and a placing to raise in aggregate up to £4.0 million, before expenses.

 

Highlights include:

 

·     Acquisition of Manchester based Communicate English School Limited, founded in 2013, for consideration of £2.34m, broadening Malvern's UK footprint

·     Malvern's second acquisition as part of its acquisition strategy

·     First acquisition, SAA-GE in Singapore acquired in November 2017, successfully integrated and delivering transformational growth opportunities

·     Placing to raise £4.0m before expenses at 4 pence per Ordinary Share

·     Support of existing shareholders in placing and introduction of new Institutional Shareholders to the share register

·     Strengthened balance sheet for working capital purposes and to support further growth

·     Malvern's global proposition greatly strengthened by broader geographic and subject offering; complemented by momentum carried into 2018

 

 

Commenting on the Acquisition and Placing, the Chairman, Gopinath Pillai, said:

"The acquisition of Communicate, our second in seven months, illustrates the consolidation opportunities in our industry and Malvern's ability to partner with willing vendors.

 

"The strength of offering students a wide choice of course subjects and locations, coupled with the flexibility of being able to study across multiple sites and online, sets Malvern apart.

 

"The new management team under Dr Sam Malafeh has a strong growth strategy which is starting to demonstrate its true potential which is very exciting.  We look forward to updating the market on further progress in due course."

 

 

This announcement includes inside information as defined in Article 7 of the Market Abuse Regulation No. 596/2014 and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations. 

 

Capitalised terms used in this announcement have the same meaning as in the Circular to be published by the Company on 17 May 2018 which will be available on its website at www.malverninternational.com

 

For further information please contact:

 

 

Malvern International Plc

www.malverninternational.com

Dr Sam Malafeh - Chief Executive Officer

Via Walbrook PR

Navin Khattar - Non-Executive Director

[email protected]

 

 

WH Ireland (NOMAD & Broker)

www.whirelandcb.com

Mike Coe / Ed Allsopp

+44 117 945 3470

 

 

Walbrook PR

+44 20 7933 8780

Tom Cooper / Paul McManus

+44 797 122 1972

 

[email protected]

 

 

Information to Distributors

 

With respect to the product governance rules as set out in the Markets in Financial Instruments Directive 2014/65/EU ("MiFID II") and supplementing texts, as a manufacturer of financial instruments WH Ireland Limited ("WHI") has taken steps to maintain, operate and review a process for the approval of the following proposed financial instruments: (i) the Placing Shares ( the "Financial Instruments").  This approval process has been used to determine an appropriate target market for the Financial Instruments (the "Target Market Assessment").  The purpose of the Target Market Assessment is to ensure that the distribution of the Financial Instruments is consistent and congruent with an appropriate end target market. 

Following the Target Market Assessment, WHI has concluded that the Financial Instruments are compatible with retail clients, professional clients and eligible counterparties, each as defined in MiFID II.   WHI has further concluded that the Financial Instruments are eligible for all distribution channels permitted under MiFID II.

Notwithstanding the Target Market Assessment, distributors of the Financial Instruments ("Distributors") should be aware that the Financial Instruments may also be compatible with clients: (i) with basic capital markets knowledge or experience about shares; (ii) who have the ability to bear up to 100% capital loss; (iii) who are willing to accept price fluctuations in exchange for the opportunity to receive higher returns and who have a medium to high risk tolerance; and (iv) who seek capital growth in liquid instruments which are easily disposable and can be suitable for any investment horizon.

The Financial Instruments do not offer: (i) capital protection or the full repayment of the amount invested; or (ii) a fully guaranteed income or a fully predictable return profile.  WHI considers that the Financial Instruments are inappropriate for clients who are fully risk averse or who have no risk tolerance.

For the avoidance of doubt, the Target Market Assessment does not constitute a recommendation to any investor or group of investors to invest in, purchase, or take any other action whatsoever with respect to the Financial Instruments or otherwise act as an assessment of suitability or appropriateness for the purposes of MiFID II, and WHI disclaims all and any liability whether arising in tort, contract or otherwise in respect of the assessment of the Financial Instruments, this announcement or any such statement. 

Furthermore, the Target Market Assessment shall be without prejudice to any selling restrictions applicable to the Financial Instruments as identified within the terms of and conditions to such Financial Instruments.

In addition, notwithstanding the Target Market Assessment, WHI will only solicit investors who meet the criteria of professional clients and eligible counterparties.

Each distributor is responsible for undertaking its own target market assessment in respect of the Financial Instruments and determining appropriate distribution channels.
 

 

Proposed Acquisition

Conditional Placing of up to 100,000,000 New Ordinary Shares

and

Notice of General Meeting

 

1.       Introduction

The Company announces today that it has exchanged a conditional agreement to acquire the entire issued share capital of Communicate English School Limited for a consideration of £2.34 million, subject to adjustments for surplus cash on Completion. The consideration is to be satisfied on Completion as to £1.65 million in cash and £0.69 million by the issue of 13,800,000 New Ordinary Shares at a price of five pence each.

In order to meet the cash element of the Consideration and to provide additional funding for the Enlarged Group, the Company has also announced a conditional placing of up to 100,000,000 New Ordinary Shares to raise a total of up to £4.0 million (before expenses).

The Issue Price of four pence per Placing Share represents a discount of 23.8 per cent. against the mid-market price of 5.25 pence per share at which the Ordinary Shares were quoted on AIM as at close of trading on 15 May 2018, the last trading day prior to announcement of the Acquisition and Placing. The Placing is conditional, amongst other matters, upon the passing of certain resolutions in order to ensure that the Directors have the necessary authorities and powers to allot the New Ordinary Shares.

The Acquisition is conditional, inter alia, on the passing of the Resolutions to authorise the Directors to issue the Consideration Shares and the Placing Shares.  In addition, because the Issue Price of the Placing Shares is below the nominal value of the Existing Ordinary Shares their issue is conditional on the Sub-division being approved by Shareholders.

A circular setting out the details of the background to and reasons for the Acquisition, the Placing and the Sub-division and to explain why the Directors believe that the Acquisition, the Placing and the Sub-division are in the best interests of the Company and Shareholders as a whole and to recommend that Shareholders vote in favour of all of the Resolutions at the General Meeting will be sent to Shareholders shortly.

2.       Background to and reasons for the Acquisition, the Placing and the Sub-division

The Board's stated strategic plan is to further develop and grow the Malvern business through a combination of organic growth and selective acquisitions. In terms of acquisitions the Board's intention is to supplement its existing geographic areas of operations in the UK, Singapore and Malaysia before it considers moving into new territories. The first such acquisition was completed in November 2017 when the Group completed the acquisition of SAA Global Education in Singapore.  The proposed acquisition of Communicate is consistent with this strategy and will supplement the Group's existing UK operations.

The Directors are of the opinion that the Acquisition will be earnings accretive. In addition, they believe that the Acquisition is in the best interests of the Company and its Shareholders for the following reasons:

·     Communicate is well established and has a good track record for quality and growth;

·     its revenues and profits have increased in each of the last four years;

·     being based in Manchester it will complement the Group's existing London school and provide an alternative location for potential Malvern students; and

·     Communicate will benefit from Malvern's international marketing and agency network.

 

The cash consideration of £1.65 million payable on Completion will be satisfied entirely from the net proceeds of the Placing. The Sellers will remain in the Communicate business following Completion. Therefore the Consideration Shares, which represent approximately 29.5 per cent. of the Consideration will ensure that interests of the Sellers are aligned with those of the Company and its Shareholders.

 

The Issue Price of the Placing Shares is below the nominal value of the Existing Ordinary Shares. The Act prohibits companies from issuing new shares at less than the nominal value. Therefore, in order for the Placing Shares to be issued and the Acquisition to be completed, a sub-division of the Existing Ordinary Shares is required. Details of the Sub-division are set out in paragraph 5 below.

3.     Information on Communicate

Communicate is a private company owned by Mr Richard Mace and Mrs Marzena Mace. Communicate operates the Communicate School of English based in Manchester city centre. The school was founded in 2013 and in 2017 taught over 1000 students. The school is established, growing and British Council accredited.

For the year ended 30 June 2017, Communicate reported unaudited revenues of £1.0 million and profit before tax of £0.41 million. As at 30 June 2017 Communicate had net assets of £0.4 million

4.     Principal terms and conditions of the Acquisition

On 16 May 2018, the Company entered into the Acquisition Agreement with the Sellers pursuant to which the Company has conditionally agreed to acquire the entire issued share capital of Communicate.

The Consideration for the Acquisition is £2.34 million, which will be satisfied on Completion by the payment of £1.65 million in cash and £0.69 million through the issue of 13,800,000 New Ordinary Shares at a price of 5 pence per share to the Sellers in each case pro rata to their shareholdings in Communicate.

The Cash Consideration is subject to customary working capital and cash adjustments following Completion.

Completion of the Acquisition Agreement is conditional, amongst other things, on the passing of the Resolutions at the General Meeting. Completion is expected to take place on 2 July 2018.  Admission of the Consideration Shares is expected to take place on 3 July 2018.

The Sellers have given certain customary warranties and indemnities pursuant to the Acquisition Agreement. 

5.     Details of the Sub-division

Under the Act a company is unable to issue shares at a subscription price which is less than their nominal value. The par value of each Existing Ordinary Share is 5 pence, and the Issue Price for the Placing Shares is four pence per share. Therefore in order to proceed with the Acquisition and the Placing, the Company is proposing to undertake the Sub-division so that the par value of the Ordinary Shares is reduced to below the Issue Price. The proposal would, if passed, involve sub-dividing each issued Existing Ordinary Share into one New Ordinary Share of one pence and four Deferred Shares of one pence each.

The percentage and number of New Ordinary Shares held by each Shareholder immediately following the Sub-division will be the same as the percentage and number of Existing Ordinary Shares held by them on the Sub-division Record Date.

Save for the dilution which will result from the issue of the Consideration Shares and the Placing Shares, the interests of existing Shareholders (both in terms of their economic interest and voting rights) will not be diluted by the implementation of the Sub-division and each New Ordinary Share will have the same rights (including voting and dividend rights) as each Existing Ordinary Share has at present.

In order to effect the Sub-division, the Company proposes to adopt the New Articles which will consist of the Articles amended to include reference to the new Deferred Shares.  The new Deferred Shares created as a result of the Sub-Division will have the same rights as the existing deferred shares of five pence each in the capital of the Company. These rights are minimal, thereby rendering the Deferred Shares effectively valueless.

The rights attaching to the new Deferred Shares can be summarised as follows:

•           they will not entitle holders to receive any dividend or other distribution or to receive notice or speak or vote at general meetings of the Company;

•           they will have no rights to participate in a return of assets on a winding up;

•           they will not be freely transferable;

 •          the creation and issue of further shares will rank equally or in priority to the Deferred Shares;

•           the passing of a resolution of the Company to cancel the Deferred Shares or to effect a reduction of capital shall not constitute a modification or abrogation of their rights; and

•           the Company shall have the right at any time to purchase all of the Deferred Shares in issue for an aggregate consideration of £0.01.

Existing share certificates will continue to be valid following the Sub-division. No certificates will be issued in respect of the Deferred Shares, nor will CREST accounts of Shareholders be credited in respect of any entitlement to the Deferred Shares. No application will be made for the Deferred Shares to be admitted to trading on AIM or any other investment exchange.

There are no immediate plans to purchase or to cancel the Deferred Shares, although the Directors propose to keep the situation under review.

A copy of the New Articles proposed to be adopted at the General Meeting will be available for inspection at the General Meeting and will be made available free of charge on the Company's website at www.malverninternational.com.

6.     Details of the Placing

Subject to the satisfaction of the conditions under the Placing, inter alia, the passing of the Resolutions, the Company will place a total of 100,000,000 New Ordinary Shares raising in aggregate approximately £4.0 million (before expenses).  The Placing Shares have been conditionally placed by WH Ireland, as agent for the Company with institutional and other investors.  The Placing Shares will be allotted at the Issue Price. The Issue Price of four pence per Placing Ordinary Share represents a discount of 23.8 per cent. against the mid-market price of 5.25 pence per share at which the Ordinary Shares were quoted on AIM as at close of trading on 15 May 2018, the last trading day prior to announcement of the Placing.

The Placing is conditional upon, inter alia, the Acquisition Agreement becoming unconditional in all respects (save for any condition relating to the Placing Agreement becoming unconditional) and Admission of the Placing Shares occurring no later than 8.00 a.m. on 12 June 2018 (or such later date as the Company and WH Ireland shall agree, being no later than 6 July 2018).

CG Corp and KSP Investments Pte Limited ("KSP"), the Company's two largest shareholders and each of whom is represented on the Board, together intend to subscribe for up to 12,500,000 Placing Shares (a total of £0.5 million at the Issue Price), as part of the Placing. In addition, Ramasamy Jayapal, a non-executive Director, intends to subscribe for up to 500,000 Placing Shares, These intentions are not legally binding and any subscription by CG Corp and/or KSP and Mr Jayapal pursuant to the Placing will be announced through a Regulatory Information Service.

As at 31 December 2017 the Company had outstanding loans of approximately £836,000 with CG Corp and KSP. These loans are interest free and have no fixed repayment dates. The Company's intention is that these loans are repaid during 2018 and 2019.

Settlement and dealings

In due course application will be made for the Consideration Shares and the Placing Shares to be admitted to trading on AIM and, on the assumption that, inter alia, the Resolutions are passed, Admission of the Placing Shares is expected to become effective and that dealings will commence at 8.00 a.m. on 12 June 2018.  Admission of the Consideration Shares is expected to become effective and that dealings will commence at 8.00 a.m. on 3 July 2018. 

The New Ordinary Shares will rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared on or after the date on which they are issued.  It is expected that CREST accounts will be credited with entitlements to the Placing Shares as soon as practicable after 8.00 a.m. on the day of First Admission and that share certificates (where applicable) will be despatched as soon as practicable after First Admission.

If you are in any doubt as to what action you should take, you are recommended to immediately seek your own personal financial advice from your stockbroker, bank manager, solicitor, accountant or other independent professional adviser duly authorised under the Financial Services and Markets Act 2000 (as amended) if you are resident in the United Kingdom or, if not, from another appropriately authorised independent financial adviser.

7.         Use of proceeds

The net proceeds of the Fundraising are expected to be approximately £3.725 million, assuming full subscription under the Placing. These proceeds will be applied in satisfying the Cash Consideration of £1.65 million. The balance of the proceeds will be used to support the future growth  of the business.

8.         Current trading and prospects

Malvern's last reported results were the final results for the year ended 31 December 2017. These results reported revenues of £4.1 million and a loss after tax of £0.7 million, significantly below the losses of £1.5 million reported for 2016.

Trading in the current year has commenced well, with sales to date plus sales already booked for delivery in the remainder of the year standing at £3.95 million which is approximately 92 per cent. of the sales turnover for the whole of 2017.

Trading momentum in London is being maintained with a strong level of bookings at the school. In addition in April 2017 the Company announced a partnership agreement with the University of East London ("UEL") which will see Malvern established as an embedded college within UEL, delivering pre-sessional foundation and English language courses for international students at both Degree and Masters levels. While the impact for this on the current financial year will be modest, the potential for next year is more significant and the long term potential of this and other similar ventures is exciting.

Trading in Singapore will benefit from a first full year of revenue from SAA Global Education ("SAA-GE"). The integration of SAA-GE into the Group has gone smoothly following its acquisition in November 2017. Operations in Singapore have now been consolidated onto one site and the Board estimates that the property, staff and other costs savings that have been implemented since SAA-GE's acquisition should result in annualised costs savings of approximately £200,000.

In Malaysia a licence to teach international students for vocational training has been awarded to Malvern for the first time. This, together with the significant management and operational changes made last year, gives the Board confidence that the overall performance in Malaysia will improve on last year.

The Board is now confident that, with the Group strategically aligned, focused and directed, the impact on the performance of the Group will be highly positive going forward and that this will bring the Group to profitability in 2018.

9.         Recommendation

The Directors believe the Sub-division, Placing and the Acquisition to be in the best interests of the Company and its Shareholders as a whole. Accordingly, the Directors unanimously recommend Shareholders to vote in favour of the Resolutions as they intend so to do in respect of their beneficial shareholdings.

10.       General Meeting

The Circular will contain a notice convening the General Meeting to be held at the offices of WH Ireland at 24 Martin Lane, London EC4R 0DR on 11 June 2018 at 11.15 a.m. or as soon thereafter as the AGM convened for 11 a.m. on that day has concluded, at which resolutions will be proposed to, inter alia, to grant sufficient share authorities to the Directors, to enable the Acquisition and Placing to take place.

Capitalised terms used in this announcement have the same meaning as in the Circular to be published by the Company on 17 May 2018 which will be available on its website at www.malverninternational.com

 

 

 

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

 

 

 

2018

Announcement of the Placing and Acquisition

 

16 May

Latest time and date for receipt of Forms of Proxy

 

11.15 a.m. on 9 June

Annual General Meeting

 

11.00 on 11 June

General Meeting

 

11.15 a.m. on 11 June

Sub-division Record Date

 

6.00 p.m. on 11 June

First Admission and commencement of dealings in the Placing Shares

 

8.00 a.m. on 12 June

Placing Shares credited to CREST stock accounts

 

12 June

Despatch of definitive share certificates for Placing Shares

 

Week commencing 18 June

Completion of Acquisition

 

2 July

Second Admission and commencement of dealings in the Consideration Shares

 

8.00am on 3 July

 

PLACING STATISTICS

                                                                                                                                                                                                         

Closing Price per Existing Ordinary Share on 15 May 20181

 

5.25 pence

Number of Existing Ordinary Shares in issue

 

114,188,333

Issue Price of each Placing Share

 

4 pence

Discount to market price of 5.25 pence per Existing Ordinary Share1

 

23.8 per cent.

Number of Consideration Shares to be issued pursuant to the Acquisition

 

13,800,000

Number of Placing Shares to be issued pursuant to the Placing Shares2

 

up to 100,000,000

Expected proceeds of the Placing (before expenses)

 

up to £4.0 million

Estimated net proceeds of the Placing2

 

up to £3.725 million

Enlarged Share Capital following Admission2

 

227,988,333

Percentage of Enlarged Share Capital represented by the Consideration Shares2

 

6.1 per cent.

Percentage of Enlarged Share Capital represented by the Placing Shares2

 

43.9 per cent.

 

 

 

Notes:

1      Based on the Closing Price on 15 May 2018, being the last practicable date prior to the announcement of the Acquisition and Placing.

2      Assuming full subscription under the Placing.

 

 

FORWARD LOOKING STATEMENTS

This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "forecasts", "plans", "prepares", "anticipates", "projects", "expects", "intends", "may", "will", "seeks", or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this announcement and include statements regarding the Company's and the Directors' intentions, beliefs or current expectations concerning, amongst other things, the Enlarged Group's prospects, growth and strategy.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance. The Enlarged Group's actual performance, achievements and financial condition may differ materially from those expressed or implied by the forward-looking statements in this announcement. In addition, even if the Enlarged Group's results of operations, performance, achievements and financial condition are consistent with the forward-looking statements in this announcement, those results or development may not be indicative of results or developments in subsequent periods.

Any forward-looking statements that the Company makes in this announcement speak only as of the date of such statement, and none of the Company, the Directors or WH Ireland undertakes any obligation to update such statements unless required to do so by applicable law. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

IMPORTANT INFORMATION

WH Ireland Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for the Company in relation to the Fundraising and will not be responsible to any person other than the Company under the Financial Services and Markets Act 2000, the rules of the Financial Conduct Authority or otherwise for providing the protections afforded to its clients or for advising any other person in relation to the contents of this announcement, the Fundraising or any matter, transaction or arrangement referred to in this announcement.  WH Ireland Limited is not making any representation or warranty, express or implied, as to the contents of this announcement.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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