TIDMSIXH
RNS Number : 9397E
600 Group PLC
16 February 2015
The 600 Group PLC
Acquisition of TYKMA, Inc and issue of loan notes
The 600 Group PLC ("600" or "the Group"), the machine tools and
laser marking company, is pleased to announce that its wholly owned
subsidiary 600 Group Inc. has completed the acquisition of 80% of
the common stock of TYKMA, Inc ("TYKMA"), a US based laser marking
business, for an initial consideration of US$4.68m (GBP3.04m). The
acquisition will be financed by an issue of loan notes ("the Loan
Note") which will also be used to repay existing debt and provide
the Group with additional working capital. The first tranche of
loan notes will raise an aggregate of GBP6.739m with up to an
additional GBP1.761m to be raised in future Loan Note issues.
TYKMA is a privately owned company based in Chillicothe, Ohio,
which specialises in the design, production and distribution of
laser marking systems for a broad range of industry applications.
These industrial laser marking systems are used for traceability,
branding and component identification on metals, carbide, painted
or anodized materials, most plastics and many other substrates and
have been incorporated into the production processes of numerous US
industrial companies in the electronics, medical, tooling and
automotive sectors. During the year ended 31 December 2014, the
Company reported net operating income of US$0.73m on revenues of
US$8.40m. As at 31 December 2014, TYKMA had US$1.0m of net assets.
The final conditions of the acquisition are expected to be
completed by 18 February 2015.
The vendor management team will retain 20% of the common stock
in TYKMA, and continue to be engaged in full time management
positions. Under the terms of the acquisition there is a put option
exercisable no earlier than 1 April 2017, and a call option
exercisable no earlier than 1 April 2018, which provides for the
remaining 20% equity to be acquired by 600 Group Inc. under a
pre-determined formula.
The TYKMA business will be fully integrated with Electrox, the
Group's existing laser business, which will be hived down into a
new UK subsidiary, Electrox Laser Limited. Upon integration, the
management of the combined business will be led by David Grimes,
the principal shareholder in TYKMA, who will report to the Group
Chief Executive.
The Directors believe that the combined business will realise
significant benefits from its additional scale and market
penetration, together with enhanced operational and engineering
capabilities.
The acquisition of TYKMA will be financed by an issue of Loan
Notes. The first tranche will raise GBP6.739m and there is
potential for up to a further GBP1.761m to be raised in further
tranches up to a maximum of GBP8.5m. The Loan Notes have a 5 year
maturity and carry a coupon of 8% payable quarterly in arrears. The
Loan Notes are redeemable at any time after 18 February 2016
without any penalty. Of the GBP6.739m raised, GBP1.549m comprises
existing shareholder loans which are being repaid and reinvested in
the Loan Note issue. The remaining GBP0.951m of the existing loans
will be repaid upon the issue of Loan Notes. It is intended that
the Loan Notes will be listed on the Bermuda Stock Exchange.
Subscribers for the Loan Notes are also entitled to receive
warrants, with an expiry date of 18 February 2020, to subscribe for
35.145m ordinary shares of 1 pence each in the Company ("Ordinary
Shares") at a price of 20 pence per Ordinary Share. These warrants
include 9.195m warrants that will be issued to replace the same
number of warrants entered into as part of the existing shareholder
loan arrangement, which will be cancelled. Up to a further 8.805m
warrants may also be granted in the event of further Loan Note
issues up to GBP1.761m. The grant of all of the warrants will be
subject to shareholder approval at a General Meeting of the Company
("GM"). A circular convening the GM will be posted to shareholders
as soon as practicable.
In the event that shareholders do not approve the resolutions
required to approve the grant of warrants to the Loan Note holders
within 3 months of the issuance of the Loan Notes, the Company
would have to pay a redemption premium to the Loan Note holders on
maturity of the Loan Notes as compensation for not being granted
the warrants. The redemption premium would be calculated as being
an amount equal to 20% per annum of the principal amount
outstanding under the Loan Note less any interest already paid by
the Company on the Loan Note principal. The redemption premium
would accrue annually until such time as the Loan Notes are repaid
in full.
In the event that the warrants in connection with the Loan Notes
are issued, following the issue, there will be 37.545m warrants in
issue with the potential for a further 8.805m to be issued in the
event that further Loan Notes are issued. 2.4m of these warrants
expire on 27 August 2015 with the remaining 35.145m warrants
expiring on 18 February 2020. All of the warrants have an exercise
price of 20p.
Haddeo Partners LLP ("Haddeo"), of which Paul Dupee, the
Chairman of 600, is the managing partner, is a holder of GBP810,000
of the existing shareholder loan and 5,050,000 of the existing
warrants. All of the Haddeo shareholder loan will be refinanced by
the new Loan Note issue on the same terms as all other Loan Notes
and it is intended, subject to shareholder approval, to issue
5,050,000 new warrants to Haddeo (and upon this occurrence the
5,050,000 existing Haddeo warrants will be cancelled). Because of
Paul Dupee's relationship with Haddeo and because Haddeo is a
25.44% shareholder in 600, the refinancing of the shareholder loan
is deemed to be a related party transaction under the AIM Rules for
Companies.
Furthermore, Mrs M Carrick, wife of Neil Carrick, Group Finance
Director has subscribed for GBP50,000 of Loan Notes and will
therefore be entitled, subject to shareholder approval, to receive
250,000 warrants. This is also deemed to be a related party
transaction under the AIM Rules for Companies.
The Independent Directors of 600 being, Nigel Rogers, Derek
Zissman and Stephen Rutherford having consulted with Spark Advisory
Partners Limited, as Nominated Adviser to the Company, consider the
refinancing of the Haddeo shareholder loan (and the issue of new
warrants to Haddeo) and the Loan Note subscription by Mrs M Carrick
to be fair and reasonable insofar as the shareholders are
concerned. In providing advice to the Independent Directors, Spark
Advisory Partners Limited has taken into account the Independent
Directors' commercial assessments of these related party
transactions.
Proceeds from the Loan Note issue will be used to fund payment
of approximately GBP4.0m for the initial consideration for the
acquisition and related expenses, and to repay existing shareholder
loans of approximately GBP0.951m, with the balance being applied to
reduce bank borrowings in the UK. The Group retains the option to
issue up to a further GBP1.761m of Loan Notes. If it were to do so,
the Directors intend that the funds raised would be used to finance
further increases in working capital and/or additional investment
in Group businesses.
Current trading and prospects for Group businesses continue to
be in line with the board's expectations. The board is satisfied
that the acquisition of TYKMA, together with the substantial
benefits that can be achieved by the combination of the two laser
marking businesses, will be earnings enhancing in the first full
year of trading. Over the longer term, the Directors of 600 believe
that this acquisition will enable the Group to grow materially its
laser marking business and consequently the profits and revenues of
the Group.
Commenting on the acquisition and the significant financing,
Nigel Rogers, CEO said:
"We are delighted to announce this strategic investment in the
product identification industry segment. We share a common vision
with the TYKMA management that the combination of Electrox and
TYKMA will enable us to build a leading position in this fast
developing marketplace, based on shared values of outstanding
customer service, excellent product technology, unrivalled
professionalism in sales and distribution, and depth of engineering
expertise".
More information on the Group can be viewed at:
www.600group.com
Enquiries:
------------------------------ ---------------------
The 600 Group PLC Tel: 01924 415000
------------------------------ ---------------------
Nigel Rogers, Chief
Executive
------------------------------ ---------------------
Neil Carrick, Finance
Director
------------------------------ ---------------------
Spark Advisory Partners Tel: 020 3368 3553
Limited (NOMAD)
------------------------------ ---------------------
Sean Wyndham-Quin/ Miriam
Greenwood
------------------------------ ---------------------
Cadogan PR Limited (Financial Tel: 020 7499 5002 /
PR) 07771 713608
------------------------------ ---------------------
Alex Walters
------------------------------ ---------------------
FinnCap (Broker) Tel: 020 7600 1658
------------------------------ ---------------------
Tony Quirke/Mia Gardiner
(Sales/Broking)
------------------------------ ---------------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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