TIDMBSST
RNS Number : 1866R
BlueStar SecuTech, Inc.
23 October 2013
BlueStar SecuTech, Inc. ("BlueStar" or the "Company")
AIM Cancellation and Tender Offer
The Board of BlueStar has concluded, after discussion with a
number of its shareholders and advisers, that it is in the best
interests of Shareholders to cancel the Company's admission to
trading on the AIM Market of the London Stock Exchange.
The Company is today posting a circular to Shareholders (the
"Circular") regarding a tender offer ("Tender Offer") for Ordinary
Shares and the proposed cancellation of admission of the Company's
Ordinary Shares to trading on AIM (the "De-listing"). The proposed
Tender Offer applies to a maximum of approximately 23.52 per cent.
of the Company's current issued Ordinary Shares, representing
17,121,766 Ordinary Shares, and the price at which the Tender Offer
will be undertaken is 2.5 pence per Ordinary Share.
A copy of the Circular will shortly be available on the
Company's website at http://www.bstar.com.cn/en/. Capitalised terms
in this announcement follow the same definitions as in the Circular
unless otherwise specified.
A Shareholders' Meeting is to be convened for 5.00 pm (Beijing
time) / 9.00 am (London time) on 14 November 2013 to consider the
Proposals which are contained in the Circular. The De-listing is
conditional upon the approval of more than 75 per cent. of the
votes cast by Shareholders at the Meeting. Prior to making this
announcement, the Board has sought the views of a limited number of
large Shareholders regarding the De-listing. As a result of that
consultation, the Board has received irrevocable undertakings from
Shareholders representing 76.48 per cent. of the currently issued
Ordinary Shares to vote in favour of the Resolution. If the
Resolution is passed at the Shareholders' Meeting, it is
anticipated that the De-listing will become effective on 22
November 2013.
The information in this announcement has been extracted from the
Circular without material adjustment.
Enquiries:
BlueStar SecuTech, Antonia Ping CFO & Company +86 (0) 10 8225
Inc. Secretary 5855
Westhouse Securities +44 (0) 20 7601
Limited Richard Baty 6100
The De-listing
Reasons for the De-Listing
Having carefully considered the overall position of the Company,
especially the current trading environment, the Group's operating
performance and continued working capital and cash flow management
problems, the Board has concluded that the best option is for the
Company to seek to cancel its admission to AIM and to continue its
strategy away from the public market, at least in the short
term.
The Group's trading difficulties and falling share price have
resulted in a position where in the view of the Directors the
financial, management and potential reputational costs of
maintaining the listing outweigh the benefits of remaining on a
public market. The Company is now capitalised at approximately GBP3
million and the Directors consider that the prospects of raising
funds whilst on the AIM market are remote and, furthermore,
liquidity in the Ordinary Shares is extremely limited. The
estimated costs of maintaining the Company's AIM quote in the
region of GBP150,000 a year are material when compared with the
Group's net profit for the year to 31 March 2013 of RMB 3.3 million
(approximately GBP330,000, using an exchange rate as at 21 October
2013).
Whilst the Group's results for the year ended 31 March 2013 saw
growth over the comparative figures for the year ended 31 March
2012, the Group's net profit of RMB 3.3 million was significantly
below the levels achieved up to and including the financial year
ended 31 March 2011. The Group's customers are principally PRC
banks and in 2011 the Company announced that it was optimistic and
looked forward to continued growth for the business. In November
2011, the Company announced that it was confident of achieving its
revenue and profits targets for the year to 31 March 2012. In early
February 2012 the Company made a further announcement, ahead of the
financial year end of 31 March 2012, that the optimism for the
period had dissipated and that the results for the year were likely
to be significantly below the Board's forecasts. The outcome for
that financial year saw revenues decline by 17 per cent. from the
previous year, gross profitability fall by 20 per cent. and net
profits decline by 94 per cent. to just over RMB 2 million.
Despite the Company's initiatives, seeking to grow the Group's
channel sales business and continuing to seek to win more clients
in the banking, police and government security agency sectors, the
Company recorded only minor growth in revenues of 5 per cent. in
the last full financial year to 31 March 2013, suffered a decline
in gross profitability and recorded net profits of approximately
RMB 3.3 million. The Company has been reliant upon its lenders'
continued support and their provision of increased short term loan
facilities to bridge working capital troughs.
The Group has had longstanding problems with working capital
management and the collection of receivables. Despite attempts to
address the issue, debtor days have been consistently high and have
continued to rise. The lengthy customer payment terms are a result
of a lack of leverage over the Group's main customers and this is
exacerbated by payment structures which mandate that payments fall
due on completion of long term projects. The Group's consolidated
accounts for the year ended 31 March 2013 stated that trade
receivables and accrued income amounted to RMB 254 million with
debtor days at that time of approximately 500 days based on
reported revenues for the period.
The results and trading updates published by the Company since
February 2011 have recognised the Group's on-going difficulties in
collecting revenue from its customers. Whilst management has
attempted to address the working capital problems through a revised
approach to payment terms and changes to the sales and customer
mix, the Directors consider that the difficulties in funding
working capital remain an obstacle to the Group's growth.
The fall in the Company's share price since November 2011 has
reflected the trading updates of the Company's operating
performance and challenging trading conditions. In the period since
November 2011, the Group has maintained net profitability on an
annual basis, but trading conditions remain difficult, the Group is
dependent upon the continued support of its banks and the Directors
consider that further cost savings are required, if the Company is
to remain profitable.
Current Operating Results
The Company's last completed financial period was the six months
ended on 30 September 2013. Management information for the period
indicates that whilst revenues for the period are expected to be
between 15-20 per cent. below those for the comparable period ended
30 September 2012, losses for the six month period ended 30
September 2013 are expected to be broadly in line with those for
the first half of the financial year ended 31 March 2013.
The Group's issues with the collection of receivables continues
with trade payables at 30 September 2013 equating to approximately
667 days' sales (at 30 September 2012: 606 days), based on revenues
for the six month period. Whilst the final quarter of the calendar
year is traditionally a period of significant cash collection for
the Group, the Group's short term bank borrowings in the period to
30 September 2013 have increased significantly from RMB 30 million
at 30 September 2012 to RMB 40 million at 31 March 2013, and at 30
September 2013 were RMB 45 million.
Whilst management are confident in the long term prospects for
the Group and revenues have recently been second half weighted, the
Directors consider that trading conditions remain difficult.
The De-listing will allow the Company to carry on its business
without the pressure the Directors believe a quoted company may
face to deliver short term performance over long term positioning.
Importantly, the Directors also believe that the De-listing will
allow executive management based in China more time to focus on
driving the business forward. Ultimately, the Board believes that
greater shareholder value will be derived by operating the
Company's business off-market for the immediate future.
Due to the Group's current working capital and cash flow
management problems, the Directors believe the Company is unable to
offer Shareholders a price above 2.5 pence for each Ordinary Share
purchased under the Tender Offer, which the Company is able to fund
from its current banking facilities. The price of 2.5 pence
reflects the Company's average share price of 2.51 pence per share
during the three months to 30 September 2013. The proposed Tender
Offer price does not reflect the recent share price increase from a
mid market price of 2.5 pence on 26 September 2013 to a mid market
price of 4.13 pence at the close of business on 22 October 2013
(the latest practicable date before this announcement). This
increase has occurred despite there being no significant uplift in
trading volumes for the Ordinary Shares since 26 September 2013.
The Directors consider the price to be offered under the Tender
Offer to be appropriate given the challenging circumstances
confronting the Company and Shareholders' ability to choose whether
or not to accept the Tender Offer.
Under the terms of the Proposals, which are subject to
Shareholder approval, Tender Offer Shareholders who are registered
as such at the Tender Offer Record Date will have the opportunity
to offer to sell to the Company all (or some of) the Ordinary
Shares registered in their names at the price of 2.5 pence per
share. This price is 1.63 pence less than the closing price of 4.13
pence per Ordinary Share on 22 October 2013.
In deciding whether to make an offer to sell Ordinary Shares to
the Company, Tender Offer Shareholders should balance the potential
of receiving 2.5 pence in cash immediately for each Ordinary Share
sold with the uncertainty of being able to realise their investment
in the future. Whilst the Directors' objective is to increase
Shareholder value, there is no certainty as to whether they will be
successful or when a Shareholder may be able to sell Shares in the
future or at what value.
Effect of De-listing
The principal effect of the Proposals and the De-Listing in
particular is that Shareholders will no longer be able to buy and
sell shares in the Company through a public stock market; that is,
liquidity in the Company's shares will be very limited. Upon the
De-listing becoming effective, Ordinary Shares shall cease to be
available in uncertificated form and shall be withdrawn from CREST.
Holders of Ordinary Shares in uncertificated form will then hold
those shares in certificated form, for which they will be sent
share certificates within 7 days of the CREST facility being
withdrawn.
The three non-executive Directors, Mr. Liu Xiao Chuan, Mr. Teo
Kean Eek and Mr. Derrick Woolf have agreed with the Board to resign
upon the De-listing becoming effective.
The Company also proposes to adopt new articles of
association.
Summary
Your Board has accordingly concluded that it is in the best
interests of Shareholders as a whole that the De-listing be
approved.
The Board believes that it is appropriate to give those
Shareholders who are not able or willing to continue to own shares
in the Company following the De-listing an opportunity to dispose
of their interest in the Company through the Tender Offer more
fully described below.
Under the AIM Rules, the De-listing can only be effected by the
Company after securing a resolution of Shareholders in a
Shareholders' Meeting, whereby at least 75 per cent. of votes cast
are in favour of such a resolution, and the expiration of a period
of twenty clear Business Days from the date on which notice of the
De-listing is given. In addition, a period of at least five clear
Business Days following the Shareholder approval of the De-listing
is required before the De-listing may be put into effect.
Resolution 1 contained in the Notice seeks Shareholder approval
for the De-listing. The Company has received irrevocable
undertakings from Shareholders holding 55,686,234 Ordinary Shares,
representing approximately 76.48 per cent. of the current issued
Ordinary Shares, to vote in favour of the De-listing. Assuming that
Shareholders approve this resolution, it is proposed that the
De-listing would take place by 22 November 2013.
Tender Offer
Tender Offer
The Board recognises that not all Shareholders will be able or
willing to continue to own Ordinary Shares following the
De-listing. Although it is under no formal obligation to do so, the
Board is therefore arranging for the Company to provide the Tender
Offer Shareholders with the opportunity to sell Ordinary Shares
held at the Tender Offer Record Date by means of a Tender Form (in
the case of Tender Offer Shares held in certificated form, that is,
not in CREST) or by TTE Instruction (in respect of Tender Offer
Shares held in uncertificated form, that is, represented by
Depositary Interests in CREST).
The maximum aggregate number of Ordinary Shares which may be
purchased in the Tender Offer is 17,121,766 Ordinary Shares
representing approximately 23.52 per cent. of the issued Ordinary
Shares. The price to be paid for each Ordinary Share subject to the
Tender Offer is 2.5 pence.
A Tender Offer Shareholder may tender up to all of their
holdings.
The Company has received irrevocable undertakings in respect of
their entire holdings from SecuLine Technologies Inc. and other
persons currently beneficially owning 55,686,234 Ordinary Shares in
aggregate, representing approximately 76.48 per cent. of the
current issued Ordinary Shares, that they will not participate in
the Tender Offer in respect of those Ordinary Shares. Details of
the undertakings obtained are set out in the table below:
Undertaking provided Number of Ordinary Shares Percentage of
by owned issued Ordinary
Shares
SecuLines Technologies
Inc.(1) 18,450,000 25.34 %
Sunshine Holdings (Private)
Limited(2) 13,720,000 18.84 %
Members of staff of the
Company 7,422,734 10.19 %
Video Sources Communication
Limited(3) 5,370,000 7.38 %
Heartland Capital Management
Limited 3,990,540 5.48 %
Balance Partners Limited 3,207,050 4.40 %
NewTech Capital Management
Limited 2,923,410 4.02 %
Teo Kean Eek/Agile Partners
Ltd(4) 602,500 0.83 %
(1) Undertaking also given by the beneficial owner of this
company, Xiao Gang, a Director, to procure that this company
complies with its undertakings.
(2) Undertaking also given by the beneficial owner of this
company, Liu Jin Qing, a Director, to procure that this company
complies with its undertakings.
(3) Undertakings also given by the beneficial owners of this
company, including He Cai Guang, a Director, to procure that this
company complies with its undertakings.
(4) Teo Kean Eek, a Director, is the beneficial owner of Agile
Partners Limited, which holds 600,000 of these Ordinary Shares. Teo
Kean Eek has given undertakings in relation to the 2,500 Ordinary
Shares held by him personally and to procure compliance by Agile
Partners Limited with its undertakings.
The above irrevocable undertakings are in the same terms, and in
each case the party giving the undertaking agrees not to
participate in the Tender Offer and to vote their Ordinary Shares
in favour of the De-listing at the Shareholders' Meeting.
A guide to the general tax position of Shareholders under UK law
and HM Revenue & Customs practice in respect of the Tender
Offer will be set out in Part 3 of the Circular.
Articles of Association
The Board considers that there are certain provisions of the
Articles which it would not be appropriate to maintain following
the De-listing. Resolution number 2 in the Notice would, if passed,
provide for new articles of association of the Company to be
adopted, which would not include provisions equivalent to the
following regulations contained in the current Articles:
(a) Regulation 2.2: pre-emption rights in favour of existing
Shareholders on a new issue of shares of the Company;
(b) Regulations 2.9 and 2.10: provision for shares of the
Company to be held in uncertificated form;
(c) Regulations 8.15 and 8.16: requirement for one-third of the
Directors to retire at each annual general meeting of the
Company;
(d) Regulation 13: Shareholders subject to provisions which are
equivalent to certain of those contained in the City Code;
(e) Regulation 20: requirements for the Company to comply in
certain respects with UK law and practice in relation to its
accounting records and published accounts; and
(f) Regulations 25 to 28: provisions requiring Shareholders to
disclose interests in shares of the Company.
The new articles of association also reflect certain minor
consequential and other changes to the provisions of the
Articles.
The current Articles, as well as copies of the proposed new
articles of association, will be displayed at the "Investor
Relations" page on the Company's website at
http://www.bstar.com.cn/en/ and copies will be available for
inspection 15 minutes before and during the Shareholders' Meeting
at the place of the meeting and at the offices of Edwin Coe LLP, 2
Stone Buildings, Lincoln's Inn, London WC2A 3TH during normal
business hours (Saturdays and Sundays excepted) until the time of
the meeting.
The Company has received irrevocable undertakings in relation to
55,686,234 Ordinary Shares in aggregate, representing approximately
76.48 per cent. of the current issued Ordinary Shares, to vote in
favour of Resolution 2 providing for the adoption of the new
articles of association of the Company.
A copy of the Circular will shortly be available from the
Company's website at http://www.bstar.com.cn/en/.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Tender Offer opens 23 October 2013
Latest time for receipt of Forms of Direction 9.00 am (London time) on 11
November 2013
Latest time for receipt of Forms of Proxy 9.00 am (London time) on 12
November 2013
Latest time for receipt of TTE Instructions by 10.00 am (London time)
in respect of Depositary Interests representing on 13 November 2013
uncertificated shares
Latest time for receipt of Tender Forms by 1.00 pm (London time) on
for certificated shares 13 November 2013
Record Date for the Tender Offer 5.00 pm (London time) on 13
November 2013
Shareholders' Meeting to approve De-listing 5.00 pm (Beijing time)/ 9.00
am (London time) on 14 November
2013
Announcement of results of the Tender 14 November 2013
Offer and Shareholders' Meeting
CREST Account credited with Tender Offer 21 November 2013
proceeds
Dispatch of cheques for Tender Offer 21 November 2013
proceeds
Last day of trading of Ordinary Shares 21 November 2013
on AIM
Ordinary Shares de-listed from AIM 22 November 2013
CREST facilities for Depositary Interest 22 November 2013
Holders cancelled
If any of the above times and/or dates change, the revised times
and/or dates will be notified to Shareholders by announcement
through the Regulatory News Service of the London Stock
Exchange.
All references to times in this announcement and the Circular
are to London (UK) time unless otherwise stated. Pursuant to Rule
41 of the AIM Rules, the Directors have notified the London Stock
Exchange of the date of the proposed Cancellation.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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