Recommended increased share offer for Synchronica plc ("Synchronica") by Myriad Group AG ("Myriad")

/NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO THE SAME WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS AND / OR REGULATIONS OF SUCH JURISDICTION/

ROYAL TUNBRIDGE WELLS, UK, March 7, 2012 /CNW/ -

Recommendation

The Board of Myriad and the Board of Synchronica announce that they have reached agreement on the terms of a recommended increased share offer for the entire issued and to be issued share capital of Synchronica (the "Revised Offer"). Myriad is a Swiss joint stock company traded on the Main Standard of the SIX Swiss Exchange (SIX: MYRN).  Synchronica is a company incorporated under the laws of England and Wales, with its ordinary shares traded on the AIM Exchange of the London Stock Exchange (AIM: SYNC) and on the TSX Venture Exchange in Canada (TSX Venture: SYN).

Revised Offer

Under the terms of the Revised Offer, Synchronica Shareholders will receive 4.83 New Myriad Shares for every 100 Synchronica Shares. Based on the Closing Price of a Myriad Share of CHF4.50 and an exchange rate of CHF1.4462 to £1.00 on 6 March 2012 (being the latest practicable date prior to the publication of this announcement), the Revised Offer of 4.83 New Myriad Shares for every 100 Synchronica Shares now values each Synchronica Share at 15 pence (and the entire issued share capital of Synchronica at approximately £23.85 million).

Pursuant to the terms of the Offer Document, Synchronica Shareholders who have previously accepted Myriad's original offer of 4.67 New Myriad Shares for every 100 Synchronica Shares made on 28 February 2012 (the "Original Offer") (and who have not withdrawn those acceptances) will automatically be deemed to have accepted the terms of the Revised Offer by virtue of their prior acceptances and therefore need take no further action.

Synchronica Shareholders who have not yet accepted the Original Offer and who wish to accept the Revised Offer must accept the Revised Offer in accordance with the procedures for acceptance set out in the Offer Document, the Revised Offer Document (as defined below) and the Forms of Acceptance by 1.00 p.m. (London time) (corresponding to 8.00 a.m. Toronto time) on 4 April 2012. Copies of the Offer Document, the Forms of Acceptance and the Prospectus Equivalent Document (together with other documents related to the Offer) are available on Myriad's website (www.myriadgroup.com/investors/share-offer-synchronica.aspx and on Synchronica's website www.synchronica.com) and under Synchronica's profile on SEDAR at www.sedar.com.  A copy of the Revised Offer Document (as defined below) will be available at such places upon its publication.

In accordance with Rule 32 of the Code, the Board of Myriad and the Board of Synchronica will issue a revised recommended offer document  ("Revised Offer Document") containing details of the Revised Offer, any material changes in information set out by Myriad in the Offer Document pursuant to Rule 27 of the Code, and, in accordance with Rule 25 of the Code, details of the recommendation by the Board of Synchronica of the Revised Offer together with certain other information required by Rule 25 of the Code. The Board of Myriad and the Board of Synchronica will, prior to 13 March 2012 (or such later date as the Panel may agree), send the Revised Offer Document to all Synchronica Shareholders (and persons with information rights). In addition, Myriad will also promptly mail a notice of change and variation of the Offer (the "Notice of Variation") to Synchronica securityholders in accordance with applicable Canadian securities laws.

The Board of Myriad and the Board of Synchronica believe accepting the Revised Offer will give a Synchronica Shareholder (upon the Revised Offer becoming or being declared wholly unconditional) an investment in a Combined Group with a larger established base of installed products, a global spread of revenues, a stronger balance sheet, an experienced management team and the potential to take advantage of significant future growth opportunities.

Loan Arrangements

The Board of Myriad announces that, at the request of the Board of Synchronica, it has entered into a short term unsecured loan agreement, of up to US $3 million, with Synchronica in order to fund some of the payroll costs of Synchronica in March and April 2012.  Subject to the terms of the loan agreement, the drawdown of the loan is in four instalments as follows: US $0.5 million on 13 March 2012; US $1.0 million on 25 March 2012; US $0.5 million on 13 April 2012; and US $1.0 million on 25 April 2012. At Myriad's request, Synchronica will use its best endeavours to obtain the consent of Nokia to Synchronica granting to Myriad fixed and floating charges over the assets of Synchronica and its subsidiaries (in such form as Myriad may require). If required, Synchronica will enter into a deed of priority / inter-creditor agreement with Nokia and Myriad in such customary form as Nokia and Myriad may reasonably require. The loan is repayable within 14 days of the Revised Offer being declared unconditional as to acceptances or being withdrawn or lapsing (or such later date as may be agreed in writing between the parties).  The loan is subject to a fixed annual interest rate of 4.0 per cent. together with default interest which will be 4.0 per cent. higher than the fixed annual interest rate and compounded monthly. Exceptionally, the Panel has consented to Synchronica entering into this agreement for the purpose of Rule 21.2 of the Code.

Irrevocable Undertakings

Myriad has received irrevocable undertakings to accept the Revised Offer in respect of, in aggregate, 16,323,814 Synchronica Shares representing approximately 10.29 per cent. of the issued share capital of Synchronica, details of which are set out below:

Irrevocable Undertakings to accept the Revised Offer from Synchronica Directors

Myriad has received irrevocable undertakings to accept the Revised Offer from each of the Synchronica Directors, being David Mason, Angus Dent, Michael Jackson and Anthony DeCristofaro, in respect of, in aggregate, 1,978,656 Synchronica Shares representing approximately 1.25 per cent. of the issued share capital of Synchronica.

These irrevocable undertakings will continue to be binding in the event of a higher competing offer being made for Synchronica.

Irrevocable Undertaking to accept the Offer from Fidelity

As announced on 28 February 2012, Myriad has received an irrevocable undertaking to accept the Offer, which applies equally to the Revised Offer, from FIL Investments International and FIL Pensions Management, together "Fidelity", (which, collectively, the Board of Myriad understands to be the largest Synchronica shareholder) in respect of, in aggregate, 14,345,158 Synchronica Shares representing approximately 9.04 per cent. of the issued share capital of Synchronica.

Background to and reasons for recommending the Revised Offer

On 3 January 2012, Synchronica announced that it had received an approach from Myriad regarding a possible offer for Synchronica.  In accordance with Rule 2.6(a) of the Code, Myriad had to, by not later than 5.00 p.m. on 31 January 2012, either announce a firm intention to make an offer for Synchronica in accordance with Rule 2.7 of the Code or announce that it did not intend to make an offer. The Synchronica Directors were unable to reach agreement with Myriad by this time and on 31 January 2012 Myriad announced a share offer which valued each Synchronica Share at 13 pence.

On 8 February 2012, Synchronica announced the signing of a Letter of Intent with Intertainment Media Inc ("Intertainment Media"). In that announcement, Synchronica noted that, subject to shareholder approval, the first CDN $1 million of investment by Intertainment Media would be used for additional working capital.

The deferred consideration agreement with Nokia, as referred to in Synchronica's announcement released on 29 February 2012, relating to Synchronica's purchase of Nokia's operator branded messaging business in July 2011, contains a clause which provides for any additional funds from any equity, or debt financing above a threshold of US $5 million, to be applied to the repayment of the outstanding deferred consideration.

In the announcement of 29 February 2012, the Synchronica Board stated that it had believed that this threshold would be applied equally to additional equity or debt. The announcement also stated that, on 28 February 2012 Nokia clarified that in its view the threshold applied only to debt and that therefore any amount of additional equity may, at Nokia's discretion, need to be applied to the repayment of the outstanding deferred consideration. Whilst Nokia did not say that it categorically intended to apply this clause, the Synchronica Board believes that it would not be able to take such a risk on behalf of shareholders.  Consequently, Synchronica informed its shareholders that it no longer intended to seek approval for an investment by Intertainment Media. Synchronica stated that its shareholders should note that this will be a key consideration for the Synchronica Board in deciding upon what advice to provide to shareholders. Whilst Nokia cannot unreasonably withhold its consent to Synchronica raising up to US$5 million of debt, in practice the Synchronica Board would only want to proceed with any fundraising with Nokia's agreement given that Nokia has a charge over all the assets of Synchronica and its subsidiaries.

On 17 October 2011, with a view to aligning its costs with its revenue billings, Synchronica announced that it was implementing several cost reduction initiatives across its entire business. Some benefit from these cost reductions was seen in 2011 and the Synchronica Directors expect that a greater benefit from these cost reduction initiatives will be recognised in 2012. The Synchronica Directors have previously stated that they were committed to managing cash carefully, but the continued support of Synchronica's customers is an important factor in this. The Synchronica Directors believe that the uncertainty caused by Myriad's hostile offer for Synchronica may lead to delays in customers paying outstanding invoices and a reluctance on the part of new customers to complete discussions with Synchronica and enter contracts; were both of these factors to happen, this will place Synchronica's cash flow under further pressure.

On 23 September 2011, Synchronica announced that it was having difficulty collecting cash from certain device manufacturer customers. In its accounts to 30 September 2011 Synchronica made provision for some of these accounts receivable. Discussions continue with all the customers concerned and some are currently testing updated software and the Synchronica Directors are confident that this will result in payments to Synchronica. However, the timing of these payments remains uncertain, and the licensing model under which these payments will be made is likely to change. It is now likely therefore that when completing its accounts for the year ended 31 December 2011, Synchronica will make further provisions against these outstanding accounts.

Given the above and without the intention to pursue the previously proposed investment by Intertainment Media, Synchronica will need to seek additional funding and, if so, would also need to obtain Nokia's agreement to the use of such funds for working capital purposes. Shareholders should also be aware that there is a risk that the short term loan from Myriad of up to US $3 million, to be drawn down in four instalments, to cover some of the payroll costs of Synchronica may not be sufficient to enable Synchronica to cover the overall working capital requirements of Synchronica during the Offer Period, particularly if the Offer remains open for the full 60 days.  In addition, as the loan is repayable within 14 days after the expiry of the Offer Period, Synchronica may not have sufficient time to put alternative financing arrangements in place.

In assessing the Revised Offer, the Synchronica Directors have taken into account the agreement between Nokia and Myriad, as set out in paragraph 14.3 of Part 10 of the Prospectus Equivalent Document, and the short term loan facility from Myriad referred to above, as well as the irrevocable undertaking that has been given by Fidelity, Synchronica's largest shareholder. The Synchronica Directors have also considered the likely impact of the Revised Offer and their response to it on the stability of Synchronica's business.

The Synchronica Directors consider that the Revised Offer will enable Synchronica Shareholders to gain access to the benefits and opportunities that come with being part of a larger group, including:

• a platform and compelling product and service portfolio to facilitate the global social mobile revolution;
• an opportunity to compete more effectively against global alternative suppliers;
• enhanced cross-selling opportunities;
• an expanded base of proprietary intellectual property;
• improved access to development and working capital;
• opportunities for cost savings through elimination of duplication of resources; and
• access to a larger experienced management team to drive business development and exploitation.

The Revised Offer, which values each Synchronica Share at 15 pence, represents a premium of 15.38 per cent to the offer announced on 31 January 2012 and a premium of 93.55 per cent. to the Closing Price of 7.75 pence per Synchronica Share on 30 December 2011, being the last dealing day prior to the announcement by Synchronica that it had received an approach from Myriad.

Recommendation

In view of the restrictions on raising additional equity and debt funding outlined above and the short term loan being provided by Myriad, the Synchronica Directors, who have been so advised by BDO Corporate Finance, a division of BDO LLP, consider the terms of the Revised Offer to be fair and reasonable. In providing advice to the Synchronica Directors, BDO Corporate Finance has taken into account the commercial assessments of the Synchronica Directors.

Accordingly, the Synchronica Directors unanimously recommend that Synchronica Shareholders accept the Revised Offer, as they have irrevocably undertaken to do (or procure to be done) in respect of their entire beneficial holdings and those of their associated interests, which amount to 1,978,656 Synchronica Shares, representing, approximately 1.25 per cent. of the existing issued ordinary share capital of Synchronica.

Commenting on the recommendation by the Board of Synchronica of the Revised Offer, together with the irrevocable undertakings referred to above, Simon Wilkinson, Chief Executive Officer of Myriad, said:

"We view our all share offer as attractive to the shareholders of Synchronica. It represents a significant premium to Synchronica's volume-weighted average share price in November and December 2011 and a compelling value proposition, affording Synchronica Shareholders continued participation in a combined business that we consider will be a leader in mobile software technology, with an enhanced product portfolio and cross-selling opportunities. The combined businesses should be well-positioned to exploit the opportunities presented by the growing global demand for mobile data consumption and to deliver enhanced value for shareholders."

Commenting on the recommendation by the Board of Synchronica of the Revised Offer, David Mason, Executive Chairman of Synchronica, said:

"With the support of our shareholders we have built Synchronica from an embryonic software company into one of the world's leading mobile messaging businesses. Synchronica has expanded rapidly and working capital has been a constant challenge.  The Board had planned to raise additional working capital through a share placement in connection with the Intertainment Media collaboration.  However, following the announcement that Nokia may require any equity funds raised to be used to repay the deferred consideration, there is considerable uncertainty that any equity funds raised could be used for working capital.  Furthermore, because of Nokia's charge over Synchronica's assets, we have not been able to raise debt funding on acceptable commercial terms.  Given these circumstances, the Synchronica Board has concluded that the increased Myriad offer and their loan to fund some of the payroll costs represent the best option for Synchronica and its shareholders.  The two companies are a good commercial fit with complementary customer bases and technology.  The Synchronica Board wishes to thank its shareholders for their steadfast support and hopes that the combined business will deliver the value that they deserve."

Capitalised terms used in this announcement have the meanings ascribed to them in the Offer Document. 

Zeus Capital, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Myriad and for no one else in connection with the Offer and is not advising any other person or treating any other person as its client in relation thereto and will not be responsible to anyone other than Myriad for providing the protections afforded to clients of Zeus Capital, or for giving advice to any other person in relation to the Offer, the contents of this announcement or any other matter referred to herein.

BDO Corporate Finance, a division of BDO LLP, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Synchronica, as financial advisor in relation to this announcement, and is not acting for or advising any other person and accordingly will not be responsible to any other person other than Synchronica for providing the protections afforded to the clients of BDO LLP or for providing advice in relation to this announcement, or any other matter referred to herein.

This announcement is not intended to and does not constitute an offer to sell, or form part of, or constitute the solicitation of an offer to purchase or subscribe for or an invitation to purchase, any securities.

This announcement does not constitute a prospectus or a prospectus equivalent document. Shareholders are advised to read carefully the terms of the Offer Document, the Forms of Acceptance, the Prospectus Equivalent Document, the Notice of Variation (once it has been mailed) and the Revised Offer Document (once it has been dispatched). Any acceptance or other response to the Revised Offer should be made on the basis of these documents and not on the basis of this announcement.

Forward Looking Statements

This announcement contains statements that are, or may be, forward-looking statements. All statements other than statements of historical facts included in this announcement may be forward-looking statements. Without limitation, any statements preceded or followed by or that include words such as "target", "plan", "believe", "expect", "aim", "intend", "will", "should", "could", "would", "may", "consider", "anticipate", "estimate", "synergy", "cost saving", "project", "goal" or "strategy" or words or terms of similar substance or the negative of such words are forward-looking statements. Forward-looking statements include statements relating to the following: (i) the expected timetable for implementing the Revised Offer, future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects of Myriad or Synchronica or the Combined Group; (ii) business and management strategies and the expansion and growth of Myriad's, Synchronica's or the Combined Group's operations and potential synergies resulting from the Revised Offer by Myriad for Synchronica; and (iii) the effects of government regulation on Myriad's, Synchronica's or the Combined Group's respective businesses.

These forward-looking statements are not guarantees of future financial performance. They have not been reviewed by the auditors of Myriad or Synchronica. Such forward-looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Many factors could cause actual results to differ materially from those projected or implied in any forward-looking statements. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. All subsequent oral or written forward-looking statements attributable to Myriad or Synchronica or any of their members, directors, officers or employees or any persons acting on their behalf are expressly qualified in their entirety by the cautionary statement above. Myriad and Synchronica disclaim any obligation to update any forward-looking or other statements contained herein, except as required by applicable law. All forward-looking statements included in this announcement are based on information available to Myriad and Synchronica on the date of this announcement and are made only as of the date of this announcement. Undue reliance should not be placed on such forward-looking statements.

Cautionary Statement

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein.

Dealing Disclosure Requirements

Under Rule 8.3(a) of the Code, any person who is interested in 1 per cent or more of any class of relevant securities of an offeree company or of any paper offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the Offer Period, and, if later, following the announcement in which any paper offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 p.m. (London time) on the 10th business day following the commencement of the Offer Period and, if appropriate, by no later than 3.30 p.m. (London time) on the 10th business day following the announcement in which any paper offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a paper offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1 per cent. or more of any class of relevant securities of the offeree company or of any paper offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any paper offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 p.m. (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a paper offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the Offer Period commenced and when any offeror was first identified.  You should contact the Panel's Market Surveillance Unit on [phone] if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Overseas Jurisdictions

The release, publication or distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by the laws of those jurisdictions and therefore persons into whose possession this announcement comes should inform themselves about and observe any such restrictions. Failure to comply with any such restrictions may constitute a violation of the securities laws of any such jurisdiction.

This announcement has been prepared for the purposes of complying with English law and the Code and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside of England.

In particular, this announcement is not an offer which is being made, directly or indirectly, in or into or by the use of the mails of, or by any means or instrumentality (including, without limitation, email, facsimile transmission, telex, telephone, the internet or other forms of electronic transmission) of interstate or foreign commerce, or of any facility of a national securities exchange of a Restricted Jurisdiction and the Revised Offer cannot be accepted by any such use, means, instrumentality or facility from or within a Restricted Jurisdiction.

Publication on website 

A copy of this announcement is available free of charge on Myriad's website at www.myriadgroup.com/investors/share-offer-synchronica.aspx

And on Synchronica's website at
www.synchronica.com

 

Enquiries:

For Myriad Group AG

Simon Wilkinson, Chief Executive Officer
Tel: [phone]
www.myriadgroup.com

Zeus Capital Limited
(Financial Adviser to Myriad)
Richard Hughes
Nick Cowles
Andrew Jones
Tel: [phone]
www.zeuscapital.co.uk
 
Big Stick Communications Limited
(Public Relations Adviser to Myriad)
Jonathan Simnett
Tel: [phone]

For Synchronica

Synchronica plc
[phone]
Chief Executive Officer
Angus Dent

BDO Corporate Finance
[phone]
Rule 3 Advisor
John Stephan
David Abbott
Susan Brice

Northland Capital Partners
[phone]
Nominated Advisor
Shane Gallwey
Rod Venables
Corporate Broker
Katie Shelton

For Synchronica investor relations enquiries, please contact:

Walbrook PR Ltd
[phone]
Media and Analyst Enquiries, UK
Paul McManus
[email protected]

TMX Equicom
[phone] Ext 290
Media and Analyst Enquiries, North America
Craig MacPhail
[email protected]