INNO Innovise

 
TIDMINNO 
 
Innovise plc 
 
                         ("Innovise" or the "Company") 
 
 
The Board of Innovise announces that it today posted a circular to 
shareholders, a copy of which is available on the Company's Rule 26 website, 
www.innovise.com. 
 
The text of the Chairman's letter included in the circular is set out below. 
 
 
 
 
Mike Taylor                                         0870 626 0400 
Chief Executive Officer, Innovise plc 
 
Tony Edwards                                        0870 626 0400 
Finance Director, Innovise plc 
 
Liam Murray or Avi Robinson                         020 7492 4777 
Dowgate Capital Advisers Limited 
 
Ruari McGirr or Mark Anwyl                          020 7628 5582 
St Helen's Capital plc 
 
Ian Foster                                          07739 185 050 
Wordsworth Communication Ltd 
 
 
 
 
"Dear Shareholder 
 
             Proposed disposal of the entire issued share capital 
 
              and part of the business of Data Technology Limited 
 
                    Adoption of new Articles of Association 
 
                           Notice of General Meeting 
 
 1. Introduction 
 
The purpose of this document is to provide you with, inter alia, the background 
to and the reasons for the proposed disposal, further information on the terms 
of the disposal, and the resolutions which will be proposed at the General 
Meeting. The Notice convening the General Meeting for 2.00 pm on Monday, 7 
September 2009, at which the resolutions will be proposed, is set out at the 
end of this document. 
 
 2. Background to and reasons for the disposal 
 
The Board of Innovise is committed to maximising shareholder returns over the 
medium term. In line with these objectives, we described in the Interim Report 
sent to you in June 2009 how we are restructuring our growing business 
portfolio into two specialist divisions: Innovise Enterprise Service Management 
(ESM) and Innovise Software & Solutions. 
 
As part of this restructuring, we are seeking your approval at the General 
Meeting to replace the Company's Articles of Association with the New Articles. 
This will enable the Company to dispose of certain non-core assets associated 
with our acquisition of Data Technology Group Limited in July 2007 through the 
process described in the resolutions set out in the Notice of General Meeting 
at the end of this document. 
 
These assets, called the Business-to-Business Electronic Data Interchange or 
EDI:b2b services, have no significant synergy with the rest of our growing 
group and are therefore not an area of strategic focus for us (the "Non-core 
Business"). 
 
The Non-core Business generates annualised turnover of GBP1.2 million and net 
assets attributable are GBP0.1 million. 
 
 3. The disposal 
 
The plan is to retain those assets acquired with Data Technology Group that 
relate to managed services and this business is to be transferred out of DTL to 
RapidHost Limited, another Group company, prior to completion. The Indian 
subsidiary of DTL, which is used to provide services cost-effectively, will 
also be retained in the Group and its shares will be transferred to Timegate 
Group Limited prior to completion. The Board believes that the combination of 
the retained assets and the valuable system hosting capability gained through 
the recent acquisition of RapidHost Limited provides a solid growth foundation 
for a services offering within the Innovise Software & Solutions division. 
Moreover, the Board believes that exiting those areas (EDI:b2b) that do not fit 
within the division will enable a tighter focus for management. The EDI:b2b 
business is currently operating around break-even. 
 
The terms of the proposed disposal include the transfer by way of share 
buy-back by the Company at a nominal consideration of 2,905,418 Ordinary Shares 
owned by Gus Machado and Seatal Patel. Prior to the share buy-back, these 
shares will be cancelled from trading on AIM and converted into non-voting "B" 
Shares entitling the holders to receive a dividend of the entire issued share 
capital of Data Technology Limited. In consideration for the transfer of these 
shares to Innovise, Innovise will declare a dividend in specie of all of the 
issued shares in DTL to Gus Machado and Seatal Patel (the "Dividend in 
Specie"). Following the share buy-back, the "B" Shares will be cancelled. 
 
Innovise has committed to ensure that DTL has free working capital at 
completion of GBP100,000 and in addition the net asset value of DTL shall be GBP 
100,000. To the extent that DTL has net assets of more than GBP100,000 prior to 
completion, a dividend will be declared by DTL prior to completion of such an 
amount that will be equal to the distributable reserves of that company at the 
date of completion. The dividend declared will be offset against existing 
intra-group indebtedness between DTL and the rest of the Group. It is estimated 
that after this dividend, Innovise will have net amounts owing to DTL in the 
region of GBP100,000; however, the final amount will not be determined until 
completion accounts for DTL are drawn up following completion. Innovise will 
issue loan notes in respect of this indebtedness, which will be interest-free 
and redeemable at par 12 months after completion. To the extent that DTL's net 
assets are less than GBP100,000 at completion, Innovise will issue loan notes to 
DTL on the same terms in the amount of any such deficit. 
 
Following the transaction, Gus Machado will still retain a substantial 
shareholding (approximately 18 per cent) in Innovise and will remain on the 
Board as a non-executive director, for which he will not receive any 
remuneration. He will resign as CEO of Innovise Managed Services and, as part 
of a compensation package whereby he will waive any rights he has under the 
terms of his employment agreement, will receive a payment of GBP38,400. 
 
Accordingly, in view of the fact that Gus Machado is a director of Innovise, 
the disposal amounts to a transaction with a connected party and requires 
shareholder approval pursuant to Section 190 of the 2006 Act. Shareholder 
approval is required to adopt the New Articles and approve the Disposal 
Agreement, the reclassification of the relevant Ordinary Shares as "B" Shares, 
the declaration of the Dividend in Specie and the own share purchase of the "B" 
Shares. 
 
Furthermore, the disposal is a related party transaction pursuant to AIM Rule 
13, about which further details are set out under heading 5 below. 
 
The Directors are confident that the restructured managed services practice, 
incorporating and integrating the RapidHost system hosting capability and the 
remote management capabilities retained from the Data Technology acquisition, 
will generate substantial benefits in terms of sales, competitiveness and 
further growth potential. 
 
  * Sales: Our managed services capability will now span infrastructure, 
    operating system, database and application levels, enabling us to offer a 
    broader spread of solutions to existing and new customers. 
 
  * Costs: Further investment will be made to streamline the administration 
    processes needed to support low value sales, which should reduce overhead 
    and operating costs, provide greater scalability, and ultimately lead to 
    lower development costs. The acquisition of RapidHost and disposal of the 
    EDI:b2b activities is also expected to increase Innovise's profitability 
    from 2010, and enhance earnings per share as a result of the net reduction 
    of 2 million issued shares associated with these two transactions. 
 
  * Growth: The restructured Innovise Software & Solutions division will be 
    well positioned to make further acquisitions to extend its competitiveness 
    and market position over time. 
 
 4. General Meeting 
 
You will find at the end of this document a Notice convening a General Meeting 
of the Company, to be held at 2.00 pm on Monday, 7 September 2009, for the 
purpose of considering, and if thought fit, passing the following resolutions: 
 
   1. To approve the re-designation of 2,905,418 Ordinary Shares held by the 
    Purchasers into "B" Shares; 
 
   2. To approve the declaration of the Dividend in Specie; 
 
   3. To approve the adoption of the New Articles; 
 
   4. To approve the Disposal Agreement; and 
 
   5. To authorise the Company to purchase the "B" Shares. 
 
 
 
 5. Related party transaction 
 
Gus Machado is a Director of the Company and a substantial shareholder. The 
disposal is therefore deemed to be a related party transaction under Rule 13 of 
the AIM Rules. 
 
In accordance with the AIM Rules, the Directors (excluding Gus Machado) have 
considered the terms of the disposal and, having consulted with Dowgate, being 
the Company's Nominated Adviser, are satisfied that those terms are fair and 
reasonable insofar as the Company's shareholders are concerned. 
 
 6. Action to be taken 
 
The Notice of General Meeting, to be held at Mallard Court, Market Square, 
Staines, Middlesex TW18 4RH at 2.00 pm on Monday, 7 September 2009, sets out 
the Resolutions to be proposed at the General Meeting. A Form of Proxy for use 
in connection with the General Meeting accompanies this document and, whether 
or not you intend to be present at the General Meeting, you are requested to 
complete and sign the Form of Proxy and return it to Share Registrars Limited, 
Suite E, First Floor, 9 Lion and Lamb Yard, Farnham, Surrey GU9 7LL, as soon as 
possible and, in any event, so as to arrive not later than 2.00 pm on Saturday, 
5 September 2009. 
 
Unless the Form of Proxy is received by this date and time, it will be invalid. 
The completion and return of a Form of Proxy will not preclude you from 
attending the General Meeting and voting in person if you so wish. 
 
 7. Recommendation 
 
The Directors (excluding Gus Machado, who is an interested party) believe that 
the disposal is in the best interests of the Company and its shareholders. 
Accordingly, the Directors unanimously recommend shareholders to approve this 
proposal, which is described in more detail in the enclosed Notice of General 
Meeting and accompanying notes. 
 
Furthermore, the Directors (excluding Gus Machado), who own 16,192,407 ordinary 
shares, representing approximately 39.7 per cent of the Company's issued share 
capital respectively, have irrevocably undertaken to vote in favour of the 
resolutions. 
 
Yours faithfully, 
 
Vin Murria 
 
Chairman" 
 
 
 
END 
 

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