TIDMSPHR
RNS Number : 5908O
Sphere Medical Holding plc
21 August 2017
For immediate release 21 August 2017
Sphere Medical Holding plc
("Sphere", "Sphere Medical" or the "Company")
Proposed Investment and Cancellation
General Meeting
Proposed waiver of obligations under Rule 9 of the Takeover
Code
Sphere Medical Holding plc (AIM: SPHR.L), an innovative
point-of-care monitoring and diagnostic devices company,
announces:
-- the proposed investment of up to GBP8 million in the share
capital of the Company (the "Investment");
o certain funds managed by Woodford Investment Management
Limited ("Woodford") and the Wales Life Sciences Investment Fund LP
(the "Wales Fund") have conditionally agreed to invest the
aggregate sum of GBP5 million by way of subscription for
Convertible Preferred Shares
o other new and existing investors will have the opportunity to
invest an additional aggregate sum of up to GBP3 million by way of
subscription for Convertible Preferred Shares
o working capital will be used to focus on the continued
development of the Proxima platform to maximise the total
addressable market to USD $1 billion worldwide, compared to the USD
$160 million of Proxima 4 for Europe only, whilst scaling back
current commercial activities;
-- the proposed cancellation of admission of the Company's
ordinary shares to trading on AIM (the "Cancellation") and
re-registration of the Company as a private limited company (the
"Re-Registration"); and
-- a General Meeting to approve the Cancellation, Investment and Re-Registration, including:
o the proposed approval from independent Shareholders for a
waiver of obligations under Rule 9 of the Takeover Code in
connection with the proposed Investment (the "Whitewash
Resolution").
Shareholders should be aware that, if all the General Meeting
resolutions (the "Resolutions") are not approved at the General
Meeting, the Cancellation will not occur and the net proceeds of
the Investment will not be received by the Company.In these
circumstances, the Company would in all likelihood be forced to
enter into an insolvency process.
Reasons for the Investment and Cancellation
The Board has conducted a review of the terms and conditions
attaching to the Investment and of the benefits and drawbacks to
the Company and its Shareholders in retaining its quotation on AIM.
The Board believes that the Investment and the Cancellation are in
the best interests of the Company, its creditors and its
Shareholders as a whole. In reaching this conclusion, the Board has
considered the following key factors:
-- in attempting to raise capital in the past few months, there
was a lack of available finance to fund equity capital through the
public markets to enable the Group to roll-out its strategy and
support it in meeting its near-term working capital
requirements;
-- a private company structure allows its substantial
shareholder Woodford to invest a greater quantum in the Investment
as there are certain fund restrictions for public market
investments;
-- unless finance is secured, the Group's working capital will
be exhausted in late September 2017. If the Company is not
successful in obtaining the Investment, the Board believes it is
very unlikely that an alternative source of funding will be found
and hence it will in all likelihood be forced to enter into an
insolvency process;
-- by undertaking the Investment and Cancellation, the Company
will continue to be able to develop the Proxima platform under a
revised business model which significantly reduces commercial
operations in the short term; and
-- the Group's progress since launching Proxima 3 has not been
reflected in the market price of the Company's Ordinary Shares.
After careful consideration and after taking professional
advice, the Directors have concluded that accepting the conditions
of the Investment is in the best interests of its Shareholders and
that the costs and other disadvantages of remaining quoted on AIM
outweigh the potential benefits and it is no longer in the best
interests of the Company or its Shareholders to maintain the
Company's admission to trading on AIM.
Conditional upon the Cancellation and the passing of the
Resolutions, Woodford and the Wales Fund have agreed to invest the
aggregate sum of GBP5 million by way of subscription of shares in
the capital of the Company which will provide sufficient working
capital for the Group for the next 12 months. The Group's secured
lender, Silicon Valley Bank, has given its consent to the
Investment, Cancellation and Re-Registration.
The Investment is conditional upon the Cancellation having
occurred and the Resolutions being passed.
Background and Summary
The Company currently only has sufficient working capital to
trade through to late September 2017. However, pursuant to the
terms of the Subscription Agreement, Woodford have conditionally
agreed to invest GBP4 million and the Wales Fund has conditionally
agreed to invest GBP1 million by way of a subscription for
Convertible Preferred Shares at 2.822 pence each (the "Initial
Investment Round").
Other new and existing investors will have the ability to invest
an additional aggregate sum of up to GBP3 million by way of a
subscription of up to 106,307,583 Convertible Preferred Shares (set
at the same valuation as the Initial Investment Round) (the "Second
Investment Round") at any time in the period up to 4 October 2017.
Woodford and the Wales Fund do not intend to participate in the
Second Investment Round. The Investment is conditional upon: (i)
the Cancellation; and (ii) the passing of the Resolutions
(including the Whitewash Resolution).
In connection with the Investment, the Company has conditionally
agreed to issue 283,486,888 Investment Warrants to the participants
in the Investment pro rata to the number of Preferred Convertible
Shares subscribed for in the Investment. Each Investment Warrant
confers the right to subscribe for one Convertible Preferred Share.
The Investment Warrants will be exercisable at a price of 2.822
pence per Convertible Preferred Share (subject to customary
adjustment) for the period up to 31 October 2018. The Investment
Warrants shall be freely transferable.
Each Convertible Preferred Share will have full voting rights
and will be capable of conversion into one Ordinary Share at the
direction of the holder.
As a result of a review of the terms of the Investment, which
included inter alia the requirement for the Cancellation to allow a
larger quantum of investment from its substantial shareholder
Woodford, which it could otherwise not receive if remaining a
quoted company, and of the benefits and drawbacks of being a quoted
company, the Board has concluded that the Cancellation is in the
best interests of the Company, its Shareholders and creditors and
is therefore seeking Shareholder approval to cancel admission of
its Ordinary Shares to trading on AIM pursuant to Rule 41 of the
AIM Rules.
Shareholders should be aware that, if the Resolutions are not
approved at the General Meeting, the Cancellation will not occur
and the net proceeds of the Investment will not be received by the
Company. If this were to happen, the Group would only have
sufficient working capital to trade through to late September 2017
without taking any mitigating action and therefore the Company
would in all likelihood be forced to enter an insolvency
process.
The strategy of the Group following completion of the
Investment
With the limited funds available, the Board believes that the
best strategy for creating shareholder value over the next 2 to 3
years is to focus on the continued development of Proxima to
maximise the total addressable market, while scaling back the
current commercial activities. Continued development includes
developing an automated version of Proxima, which is expected to
simplify the route to obtaining FDA approval in the US. Product
development also includes adding lactate to the panel of analytes,
which is already well advanced, and expanding the sensor to host
more analytes. These activities will significantly increase the
total addressable market to USD $1 billion worldwide, compared to
the USD $160 million of Proxima 4 for Europe only. Once the
necessary product approvals have been obtained, the Company will
assess its commercialisation options in Europe and the US.
As a result of the revised strategy, the level of operations is
expected to reduce by around 35 per cent. and the overall monthly
cash usage by around 40 per cent. It is intended to continue to
operate across the two sites in Harston, near Cambridge, and St
Asaph, north Wales.
Woodford and the Wales Fund strongly support this strategy and
wish to participate in the proposed Investment, underwriting GBP5
million thereof by way of a conditional commitment to the Initial
Investment Round. The proposed Second Round Investment is open to
all new and existing Shareholders for the period up to 4 October
2017, subject to a minimum participation of GBP5,000 each.
The Whitewash Resolution
Under the Takeover Code, Woodford and the Wales Fund (together
the "Concert Party") are deemed to be acting in concert. The
members of the Concert Party, in aggregate are currently
beneficially interested in 67,526,575 Existing Ordinary Shares,
representing 47.6 per cent. of the existing voting shares of the
Company. Following completion of the Investment, assuming no
Convertible Preferred Shares are issued in respect of the Second
Round Investment, the Concert Parties' aggregated voting rights in
the Company will be 76.7 per cent, if none of the Investment
Warrants are exercised or 87.7 per cent, if the Concert Parties
exercise all the Investment Warrants.
The Panel on Takeovers and Mergers (the "Panel") has agreed to
grant a waiver of Rule 9 of the Takeover Code in respect of each of
Woodford and the Wales Fund (the "Panel Waiver"), subject to the
Whitewash Resolution. To be passed, the Whitewash Resolution will
require a simple majority of the votes cast on a poll by
shareholders other than Woodford and the Wales Fund, and anyone
acting in concert with them.
Shareholders should be aware that if the Resolutions are not
approved at the General Meeting the Investment, Cancellation and
Re-Registration will not occur. If this were to happen, the Group
would only have sufficient working capital to trade through to
late-September 2017 without taking any mitigating action resulting
in the Company in all likelihood being forced to enter into an
insolvency process.
Related party transaction
The participation by Woodford and the Wales Fund in the
Investment constitute related party transactions under the AIM
Rules for Companies by virtue of each of them being a substantial
shareholder in the Company. The Directors independent of Woodford
and the Wales Fund, being the Board as a whole (excluding Brenig
Preest), consider, having consulted with Panmure Gordon, the
Company's nominated adviser, that the terms of the related party
transactions are fair and reasonable insofar as the Company's
Shareholders are concerned.
Current trading
By 30 June 2017, 55 hospital departments engaged with Sphere
Medical on Proxima 4 and requested evaluations, of which 38 had
received a product demonstration. Furthermore, six customers placed
orders within the first six months after launch.
The Board is pleased to report that the main issues surrounding
the limitation on supply of Proxima 4 sensors announced on 2 May
this year have been effectively addressed. This limitation
constrained sales activity during the first half of this year.
Our three distributors in continental Europe have all now
received initial supplies of Proxima 4 and have received training.
Patient evaluations have also commenced in all three
territories.
The Company is immediately scaling back its sales and marketing
activities and commencing a restructuring in line with the new
strategy.
Irrevocable Undertakings
Certain of the Directors have given irrevocable undertakings to
the Company to vote in favour of the Resolutions (and to procure
that such action is taken by the relevant registered holders) in
respect of their beneficial holdings totalling 1,080,985 Ordinary
Shares, representing approximately 0.8 per cent. of the Ordinary
Shares in issue.
In addition, the Company has received letters of intent from
certain institutional Shareholders to vote in favour of the
Resolutions in respect of a total of 6,250,000 Ordinary Shares,
representing approximately 4.4 per cent. of the Ordinary Shares in
issue.
Importance of the Vote and Recommendation
Shareholders should be aware that, if the Resolutions are not
approved at the General Meeting, the Investment, Cancellation and
Re-Registration will not occur and the net proceeds of the
Investment will not be received by the Company. If this were to
happen, the Group would only have sufficient working capital to
trade through to late September 2017 without taking any mitigating
action.
The Directors, who have been so advised by Panmure Gordon,
consider the terms of the Cancellation, Investment and
Re-Registration to be fair and reasonable and in the best interests
of the Shareholders, creditors and the Company as a whole.
Accordingly, with respect to the Resolutions to effect the
Cancellation, Investment and Re-registration to be proposed at the
General Meeting, the Directors unanimously recommend that you vote
in favour.
The Directors (other than Brenig Preest who has been precluded
from voting on the matter by virtue of the fact he is a
representative of the Wales Fund (being itself a member of the
Concert Party) (the "Independent Directors") who have been so
advised by Panmure Gordon, consider the terms of the Panel Waiver
to be fair and reasonable and in the best interests of the
independent Shareholders and the Company as a whole.
Accordingly, the Independent Directors unanimously recommend
that you vote in favour of the Whitewash Resolution to be proposed
at the General Meeting.
In providing advice to the Directors, Panmure Gordon has taken
into account the Directors' commercial assessments of the Company
in the event that the Proposals are not completed.
General Meeting and Circular
The General Meeting will be held at 12:00 noon on 8 September
2017 at the offices of Taylor Wessing LLP, 5 New Street Square,
London EC4A 3TW.
Further details of the Cancellation, Investment and
Re-registration and notice of the General Meeting will be published
in a circular which will be distributed to shareholders and made
available on the Company's website shortly.
Expected Timetable
2017
Notice of the proposed Cancellation 21 August
provided in accordance with
AIM Rule 41
Posting of the circular and 22 August
Form of Proxy to Shareholders
Latest time and date for receipt 12:00 noon on
of Forms of Proxy in respect 6 September
of the General Meeting
Time and date of General Meeting 12:00 noon on
8 September
Expected last day of dealings 19 September
on AIM in the Ordinary Shares
Cancellation of the admission 20 September
to trading on AIM of the Ordinary
Shares expected to be effective
Completion of the Initial 26 September
Investment Round
Completion of the Second Investment 4 October
Round
- Ends -
For further information, please contact:
Sphere Medical Holding Tel: +44 (0)1223 875
plc 222
Dr Wolfgang Rencken, Chief
Executive Officer
Richard Wright, Chief
Financial Officer
Panmure Gordon Tel: +44 (0) 20 7886
2500
Freddy Crossley (Corporate
Finance)
Duncan Monteith (Corporate
Finance)
Tom Salvesen (Corporate
Broking)
Consilium Strategic Tel: +44 (0) 20 3709
Communications 5700
Mary-Jane Elliott spheremedical@consilium-comms.com
Ivar Milligan
Notes for Editors
About Sphere Medical (AIM: SPHR.L)
Sphere Medical is an innovative point-of-care medical device
company. Its Proxima platform measures blood gases, electrolytes
and metabolites at the patient's bedside and aims to improve
patient care and reduce health system costs. For further
information, please visit www.spheremedical.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCQFLFLDVFZBBK
(END) Dow Jones Newswires
August 21, 2017 12:53 ET (16:53 GMT)
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