TIDMMRS
RNS Number : 6082F
Management Resource Solutions PLC
16 July 2019
16 July 2019
Management Resource Solutions plc
("MRS", the "Company" or the "Group")
Result of independent legal review
As previously announced, the board of MRS (the "Board")
commissioned an independent legal review to investigate and report
on the merit of shareholder concerns regarding certain matters
arising from the acquisition by MRS of Alerion Consulting Ltd
("Alerion") in March 2019. In particular, a number of allegations
were made concerning potential conflicts of interest in relation to
the independence of the vendors of Alerion (the "Vendors") from the
Board and the involvement in MRS of Leon Hogan, who is a
significant shareholder of MRS.
Memery Crystal LLP, solicitors, was instructed to conduct the
investigation. This involved asking detailed questions of each
member of the Board at the time of the Alerion acquisition, Mr
Hogan, the Vendors and third parties, as well as various other
enquiries. Unsolicited submissions from a limited number of MRS
shareholders were also received and considered. This process has
now been completed and Memery Crystal has reported its findings.
The report is subject to the customary limitations, bases and
assumptions for a report of this kind, including reliance on the
statements and other evidence provided to Memery Crystal. Memery
Crystal did not advise on the acquisition of Alerion, but has
previously advised the Company from time to time.
As solicitors, Memery Crystal expressed no opinion on the
valuation of Alerion, or the commercial rationale for its
acquisition by MRS, and were not instructed to do so. The Company
has previously announced that Leadenhall Services has been
instructed to provide an independent valuation report on Alerion,
and this is now expected to be completed in the latter half of July
2019, when its conclusions will be announced.
A summary of the principal findings on these matters is set out
below.
1. Memery Crystal is of the opinion that the process of the
acquisition of Alerion, which took several months, was appropriate
and the negotiations were conducted at arm's length, although
Memery Crystal has identified a number of matters that are detailed
below and has provided recommendations to address these issues. The
report further states that the documentation appears to be adequate
and appropriate for the size of the transaction, and that due
consideration seems to have been given by the Board to the process
of an internal valuation of Alerion and to the advice of a
solicitor who advised MRS on the acquisition, and who appears to
have participated in the transaction to an appropriate extent. The
report gives further detail about the methodology of the
transaction and the fact that there was no legal due diligence
report, noting that as Alerion was a newly incorporated company and
its principal assets unregistered intellectual property, the
ability to perform legal due diligence would have been limited. No
evidence was found that the acquisition was a sham transaction.
2. Mr Hogan introduced the Vendors to the Chairman in autumn
2018. The Chairman negotiated the transaction on behalf of MRS. He
considered alternative acquisitions and concluded that none were
suitable for MRS's purposes; however, the rest of the Board did not
consider these alternatives. The Board was kept informed throughout
the negotiations from November 2018 onwards. An internal valuation
was prepared by the Chief Executive Officer, assisted by management
of Bachmann Plant Hire, the division of MRS into which the Alerion
business would be integrated. There were regular informal
discussions, and the acquisition was given formal consideration at
two full Board meetings as well as a final approval by written
resolution of all members of the Board.
3. The report sets out that Mr Hogan's role in the acquisition
of Alerion was as the introducer of the opportunity and to
facilitate the transaction by liaising with the Vendors to elicit
the disclosure of necessary information to MRS. The Chairman
negotiated an introducer fee directly with Mr Hogan, after the
initial introduction but before the acquisition was completed,
which the other Board members were aware of even though it was not
formally approved at a Board meeting ; and MRS did not formally
engage Mr Hogan or take adequate steps to ensure that Mr Hogan was
aware that he was an insider or ask him to sign a confidentiality
undertaking. Accordingly, Memery Crystal has recommended that the
Board reviews MRS's policies and procedures in respect of the
control and safeguarding of inside information, and the retention
of consultants, so that these are in accordance with the Market
Abuse Regulation, the AIM Rules for Companies and best
practice.
4. No evidence was found of any material conflict of interest in
relation to MRS's acquisition of Alerion based on any pre-existing
relationship between any member of the Board of MRS and any of the
Vendors of Alerion, or any such conflict as would be relevant for
disclosure by MRS in its announcement of the acquisition of
Alerion, whether under AIM Rule 13 or otherwise. No member of the
Board of MRS appears to have had an interest either in the
acquisition of Alerion or any interest that conflicts with the
interests of the Company, thereby complying with the restrictions
on directors' conflicts of interest enshrined in the Companies Act
2006. The Board has concluded that it has no further notifications
to make in this regard further to the RNS of 28 March 2019 and 15
April 2019.
5. The report states that it does not appear that Leon Hogan is
a shadow director or de facto director of MRS. However, there do
appear to have been occasions where third parties were unclear as
to Mr Hogan's role and where it may appear that Mr Hogan is
involved in the business of MRS to a greater extent than is
appropriate for a significant shareholder. Accordingly, Memery
Crystal has recommended that the Board establish policies in
relation to its dealings with Mr Hogan and other significant
shareholders to ensure that they (or indeed any other shareholder)
are not held out as representing the Board, and that any dealings
between MRS and Mr Hogan (or any other shareholder) are conducted
by an independent non-executive director.
6. Allegations were made by certain shareholders as to the
possible existence of a concert party between the Board, the
Vendors and others. It should be noted that only the City Panel on
Takeovers and Mergers can rule upon the question as to whether a
concert party exists, and this is not a determination that Memery
Crystal can make.
The Company has reminded the Alerion Vendors of their obligation
to make TR-1 notifications.
Paul Brenton, Chief Executive Officer of Management Resource
Solutions, commented:
"The board of MRS has always maintained that Alerion represents
an acquisition that is expected to replace services currently
outsourced by the Group, complementing our service offering and
enhancing the industry-leading services we offer to our customers.
At the same time, we recognise that some of our shareholders had
concerns and are therefore pleased that this independent legal
review has shown the transaction process to be appropriate and that
there was no conflict of interest between the parties involved. We
have reviewed Memery Crystal's recommendations, referred to in
paragraphs 3 and 5 above, and accordingly we have already started
to implement measures to ensure that the Company's governance,
policies and procedures are in accordance with best practice.
To this end, we have recently welcomed Robert Hackett onto the
Board as an independent non-executive director and with our
Chairman now being classified as non-independent, we have announced
our further intentions on evolving the Board through the
appointment of a further two independent non-executive
directors."
ENDS
Enquiries:
Management Resource Solutions plc via FTI Consulting
John Zorbas, Chairman Tel: +44 (0) 20
Paul Brenton, CEO 3727 1000
Tim Jones, Finance Director
Robert Hackett
Arden Partners plc (NOMAD & Broker) Tel: +44 (0) 20
Tom Price 7614 5900
Paul Shackleton
Maria Gomez de Olea
FTI Consulting (Financial PR) Tel: +44 (0) 20
Alex Beagley 3727 1000
James Styles
Sam Macpherson
About MRS
Management Resource Solutions plc (MRS), through its
subsidiaries Bachmann Plant Hire and MRS Services Group, offers
plant hire, equipment repair, refurbishment and fabrication, mine
rehabilitation, earthmoving, road construction and other support
services to a wide base of private and public sector clients in
Australia. MRS caters predominately for the mining, civil
engineering, construction and infrastructure industries. Further
information on the Company can be found at
http://www.mrsplc.info
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END
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