Proposed placing to raise approximately £5.0 million by way of an accelerated bookbuild
Open offer to raise up to approximately £2.0 million
Offering of convertible bonds in aggregate principal amount of £55.0 million
Further to the Company’s announcement this morning on its proposed acquisition of Launch Diagnostics Holdings Limited (“Launch Diagnostics”) for up to £37 million (the “Acquisition“), the Company today also announces a proposed:
- non-pre-emptive placing of new ordinary shares of 10 pence each in the capital of the Company (the “Ordinary Shares“) (the “Placing Shares“) to raise gross proceeds of approximately £5.0 million (the “Placing“) at an offer price of 95 pence per new Ordinary Share (the “Offer Price“). The Offer Price represents a discount of approximately 4.0% per cent. to the middle market closing price of an Ordinary Share on 17 October 2022;
- subscription for 15,000 new Ordinary Shares (the “Management Subscription Shares“) by the Company’s chair, Dr Eliot Forster, at the Offer Price (the “Management Subscription“);
- open offer of new Ordinary Shares to Qualifying Shareholders (the “Open Offer Shares“) to raise gross proceeds of up to approximately £2.0 million (the “Open Offer“) at the Offer Price; and
- offering of convertible bonds of £55 million in aggregate principal amount with an issue price of 95 per cent. of the principal amount (resulting in gross cash proceeds of £52.25m) to be issued by its wholly-owned subsidiary Addition Finance (Jersey) Limited, with 6.5 per cent. per annum coupon (payable quarterly in cash or shares at the Company’s option) and an initial 25 per cent. conversion premium to the Offer Price, with a 5 year term (the “Convertible Bonds” and the “Convertible Bond Offering“).
It is intended that the Placing, the Management Subscription, the Open Offer and the Convertible Bond Offering (together, the “Fundraise“) will result in the Company raising total gross proceeds of up to approximately £62.0 million.
Background to and reasons for the Fundraise
The Acquisition provides Avacta with an established route to market in the UK and several European in-vitro diagnostics (“IVD“) markets for existing and future products that it distributes, develops or acquires. It is the first step in building an integrated IVD business with global reach that has the advantage of Avacta’s proprietary Affimer® platform to differentiate its immunodiagnostic products in a competitive market. The Company intends to use the net proceeds of the Fundraise to pay the initial consideration of £24 million for the Acquisition, for general working capital purposes of the enlarged Group and to support expected growth of the Group (as enlarged by the Acquisition and any future acquisitions).
The Fundraise is not conditional on Shareholder approval, nor is the Fundraise conditional on the completion of the Acquisition which is expected to close on or around 21 October 2022.
If the Acquisition terminates or otherwise does not complete by 14 November 2022 (being the long stop date under the Acquisition Agreement), the Company may, at its option, decide to use the net proceeds of the Fundraise allocated to pay the consideration for the Acquisition for alternative acquisitions.
Details of the Fundraise
The Placing will be conducted through an accelerated bookbuild (the “Bookbuild“) which will be launched immediately following this announcement (being, together with the Appendices hereto, the “Announcement“) and will be made available to new and existing institutional investors. Stifel Nicolaus Europe Limited (“Stifel“) is acting as sole bookrunner in respect of the Placing.
The Placing is subject to the Terms and Conditions set out in Appendix I to this Announcement. Stifel will commence the Bookbuild immediately following the release of this Announcement. The number of Placing Shares to be placed at the Offer Price will be decided following completion of the Bookbuild. The book will open with immediate effect following this Announcement. The timing of the closing of the book and allocations are at the absolute discretion of the Company and Stifel. Details of the number of Placing Shares to be issued will be announced as soon as practicable after the close of the Bookbuild.
The Company acknowledges that it is seeking to issue Placing Shares representing up to 5 per cent. of its existing issued ordinary share capital on a non pre-emptive basis and has therefore consulted, where possible, with the Company’s major institutional shareholders ahead of this Announcement. The Placing structure has been chosen as it minimises cost, time to completion and use of management time.
The Placing Shares and Management Subscription Shares, when issued, will be credited as fully paid and will rank pari passu in all respects with the Company’s then existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid on or in respect of such shares after the date of issue. The aggregate number of Placing Shares and Management Subscription Shares shall not exceed 12,719,000 Ordinary Shares (being approximately 5 per cent. of the Company’s current issued ordinary share capital).
Application has been made to the London Stock Exchange for the Placing Shares and the Management Subscription Shares to be admitted to trading on AIM (“Admission“). It is expected that settlement for the Placing Shares and the Management Subscription Shares and Admission will take place at 8.00 a.m. on 20 October 2022. The Placing and the Management Subscription are conditional upon, among other things, Admission becoming effective and the placing agreement entered into today between the Company and Stifel (the “Placing Agreement“) not being terminated in accordance with its terms.
Appendix I sets out further information relating to the Bookbuild and the terms and conditions of the Placing. Persons who chose to participate in the Placing, by making an oral, electronic or written offer to subscribe for Placing Shares, will be deemed to have read and understood this Announcement in its entirety (including the Appendices) and to be making such offer on the terms and subject to the conditions herein, and to be providing the representations, warranties, agreements, acknowledgements and undertakings contained in Appendix I.
Placees should note that the Placing Shares do not carry any entitlement to participate in the Open Offer. The Placing Shares are not subject to clawback in respect of valid applications for Open Offer Shares by Qualifying Shareholders pursuant to the Open Offer.
In order to provide Qualifying Shareholders with an opportunity to participate in the Fundraise, on the terms and subject to the conditions to be set out in the Circular (and, the case of Qualifying Non-CREST Shareholders, the Application Form), the Company is providing Qualifying Shareholders with the opportunity to subscribe for Open Offer Shares pro rata to their existing shareholdings at the Offer Price on the basis of:
3 Open Offer Shares for every 365 Ordinary Shares
Fractions of Ordinary Shares will not be issued and each Qualifying Shareholder’s entitlement under the Open Offer will be rounded down to the nearest whole number. Shareholders who have sold or otherwise transferred all of their Existing Shares before the ex-entitlement date will not be entitled to participate in the Open Offer. Qualifying Shareholders subscribing for their full entitlement under the Open Offer may also apply to subscribe for additional Open Offer Shares under the Excess Application Facility up to the total number of Open Offer Shares available in the Open Offer. The Open Offer is not underwritten and no prospectus will be published in connection with the Open Offer.
The Open Offer Shares will not be made available (in whole or in part) to the public except under the terms of the Open Offer. Subject to certain exceptions, the Open Offer will not be made to Qualifying Shareholders in any jurisdiction other than the United Kingdom. Accordingly, Application Forms will not be sent to, and Open Offer Entitlements will not be credited to the accounts of, Qualifying Shareholders outside the United Kingdom.
Shareholders should note that the Open Offer is not a rights issue. Qualifying Shareholders should be aware that in the Open Offer, unlike in a rights issue, any Open Offer Shares not applied for will not be sold in the market on behalf of or placed for the benefit of Qualifying Shareholders who do not apply under the Open Offer.
Full terms and conditions of the Open Offer will be contained in the Circular and, in respect of Qualifying Non-CREST Shareholders, in the Application Form, which are expected to be sent to Shareholders and be made available on the Company’s website at www.avacta.com on or around 19 October 2022.
Convertible Bond Offering
The Company has conditionally agreed to issue £55 million in aggregate principal amount of senior unsecured convertible bonds due 2027 to a fund advised by Heights Capital Ireland LLC (the “Convertible Bond Investor”), a global equity and equity-linked focused investor. Stifel is acting as sole private placement agent in respect of the Convertible Bond Offering.
The Bonds will be issued by Addition Finance (Jersey) Limited, a wholly-owned subsidiary of the Company incorporated in Jersey (the “Issuer“), and will be guaranteed by the Company. Subject to certain conditions, the Bonds will be convertible into preference shares of the Issuer which, subject to the Company electing to pay cash, will be automatically exchangeable into fully paid Ordinary Shares.
The issuance of the Convertible Bonds is conditional on, among other things, the completion of the Placing and the Management Subscription resulting in no less than £5.0 million gross proceeds to the Company and on the satisfaction or waiver of other customary conditions. Subject to the satisfaction of the conditions to the Convertible Bonds subscription, it is intended that the Convertible Bonds will be issued to the Convertible Bond Investor on or shortly after the Closing Date.
The Convertible Bonds will be issued at 95 per cent. of their principal amount, have a coupon of 6.5 per cent. per annum and amortise quarterly at 5 per cent. of the initial principal amount, payable quarterly in cash or new Ordinary Shares at the Company’s option. The initial conversion price for the Convertible Bonds will be set at a 25 per cent. premium to the Offer Price (the “Initial Conversion Price“). The Initial Conversion Price will be subject to customary adjustment provisions, and will be subject to one reset on the date falling 18 months after the Issue Date (to a price no lower than the Offer Price (as adjusted pro rata for any subsequent adjustment made to the Initial Conversion Price)). Following any downward reset, the conversion price may reset back upwards to the previous conversion price if the daily VWAP on each of at least 20 trading days in any period of 30 consecutive trading days in the nine month period following the reset date is greater than 130 per cent. of the Initial Conversion Price.
A summary of the principal terms of the Convertible Bonds is set out in Appendix II to this Announcement.
Capitalised terms used but not otherwise defined in the text of this Announcement are defined in Appendix III to this Announcement.
Expected Timetable of Principal Events(1)(2)
|Record Date for entitlements under the Open Offer||6.00 p.m. on 14 October 2022|
|Announcement of the Fundraise||7.00 a.m. on 18 October 2022|
|Announcement of the results of the Bookbuild||18 October 2022|
|Ex-Entitlement Date for the Open Offer||19 October 2022|
|Posting of the Circular and, to certain Qualifying non-CREST Shareholders only, the Application Form||19 October 2022|
|Admission of the Placing Shares and the Management Subscription Shares||20 October 2022|
|Expected settlement of the Convertible Bonds||20 October 2022|
|Open Offer Entitlements and Excess CREST Open Offer Entitlements credited to stock accounts in CREST of Qualifying CREST Shareholders||21 October 2022|
|Recommended latest time and date for requesting withdrawal of Open Offer Entitlements and Excess CREST Open Offer Entitlements from CREST||4.30 p.m. on 1 November 2022|
|Latest time and date for depositing Open Offer Entitlements into CREST||3.00 p.m. on 2 November 2022|
|Latest time and date for splitting Application Forms (to satisfy bona fide market claims only)||3.00 p.m. on 3 November 2022|
|Latest time and date for receipt of completed Application Forms and payment in full from Qualifying Shareholders under the Open Offer or settlement of relevant CREST instruction (as appropriate)||11.00 a.m. on 7 November 2022|
|Announcement of the results of the Open Offer||8 November 2022|
|Admission effective and dealings in the Open Offer Shares expected to commence on AIM||9 November 2022|
|Expected date for crediting of the Open Offer Shares in uncertificated form to CREST stock accounts||9 November 2022|
|Expected date of dispatch of share certificates in respect of the Open Offer Shares||by 16 November 2022|
|(1) Each of the times and dates are indicative only and are subject to change at the absolute discretion of the Company. If any of the above times and/or dates change, the revised times and/or dates will be notified by the Company by announcement through a RIS.|
|(2) References to times in this Announcement are to London, UK times unless otherwise stated.|
This announcement is released by the Company and contains inside information under the UK Market Abuse Regulation, encompassing information relating to the Fundraise described above. The person responsible for arranging for the release of this announcement on behalf of the Company is Tony Gardiner, Chief Financial Officer.