Asfare Group plc
AIM : ASF

November 07, 2005 03:36 ET

Asfare Group plc: Acquisition of Todd Research Limited and Placing

LONDON, UNITED KINGDOM--(CCNMatthews - Nov. 7, 2005) - The directors of Asfare (AIM:ASF), a leading specialist supplier of high quality products and services supplying the Emergency Services market, are pleased to announce the agreement to, and the exchange of, the sale and purchase agreement for the acquisition of the whole of the issued share capital of Todd Research Ltd ("Todd"). Final completion of the acquisition is expected to occur this month. Todd will be acquired for an initial consideration of Pounds Sterling 1,650,000, plus an amount equal to the cash balance in the business on completion (currently Pounds Sterling 170,000) and a further deferred consideration of up to Pounds Sterling 2,080,000.

Todd is involved in the design, manufacture and supply of x-ray apparatus designed primarily for the interception of suspect mail. Todd operates from freehold premises in Chelmsford, Essex and has a blue chip client base including the Foreign and Commonwealth office, Shell UK, Exxon Mobil, Johnson and Johnson, Lloyds TSB and Scottish Widows with sales in over 80 countries.

Todd, which was established in 1947, is being acquired from its controlling shareholder, Michael Lambarth. Michael Lambarth and sales director Sandra Downs will both retire after a brief handover period.

For the year ended 31st January 2005 Todd reported turnover of Pounds Sterling 1,896,891 and profit before taxation of Pounds Sterling 110,815. Profit before interest and tax, as adjusted for Directors remuneration and one-off pension payments, was Pounds Sterling 506,000 for the year.

Net assets of Todd at 31st January 2005 were Pounds Sterling 765,099, including a freehold property at book value of Pounds Sterling 522,726 which was re-valued in October 2005 at Pounds Sterling 1,250,000. Including this revaluation surplus, net assets would have been increased at 31st January 2005 on a pro forma basis to Pounds Sterling 1,492,373.

The consideration for Todd will be as follows:

1. An initial payment of Pounds Sterling 1,650,000 satisfied in cash at completion plus an amount equal to the cash balance in Todd estimated at Pounds Sterling 170,000.

2. A payment of Pounds Sterling 80,000 in cash on achievement by Todd of at least Pounds Sterling 1,700,000 of revenues in the current Todd financial year to 31st January 2006.

3. Deferred consideration capped at Pounds Sterling 2,000,000 which will be payable in a mixture of cash and shares over two years upon finalisation of each year's revenue:

- Deferred consideration will be based on Todd's sales.

- For the first 12 months following completion the vendors will receive, 75p for every Pounds Sterling 1 of sales above Pounds Sterling 2,250,000 subject to certain adjustments depending on the gross margin achieved. The total possible deferred consideration for the first 12 months will be capped at Pounds Sterling 1,000,000, with the consideration being satisfied by Pounds Sterling 750,000 in cash and Pounds Sterling 250,000 in shares valued at 90p.

- For the second 12 months following completion the vendors will receive, 75p for every Pounds Sterling 1 of sales above Pounds Sterling 2,600,000 subject to certain adjustments depending on the gross margin achieved. The total possible deferred consideration for the second 12 months will be capped at Pounds Sterling 1,000,000, with the consideration being satisfied by Pounds Sterling 750,000 in cash and Pounds Sterling 250,000 in shares valued at 90p.

Todd will be acquired on a debt free basis. The directors of Asfare expect that a substantial portion of any deferred payments will be met from cash generated by the increased level of Todd's sales needed to generate such earn-out payments.

The acquisition of Todd will reflect the Board's strategy to diversify the Group's product portfolio by acquiring complementary businesses within the homeland security sector. The sector is effectively divided into two areas: Detection & Protection, and Fire, Search & Rescue. Asfare's existing product portfolio is targeted at Fire, Search & Rescue, while Todd's operations are focused within Detection & Protection. By servicing the two areas, Asfare's strategy aims to align its own product portfolio with an increasing drive by the homeland security forces to provide a combined response.

The directors of Asfare believe that there is significant potential to expand the sales performance of Todd in the current security climate. They intend to build on the excellence of the Todd products to expand its blue chip client base.

Tim Wightman, Chairman of Asfare, commented on the acquisition; "We are delighted to be purchasing Todd on attractive terms both in relation to its historic earnings and the substantial asset backing. We believe that the Todd business can be expanded significantly in the UK and abroad by building on the reputation of the Todd product with the support of Asfare's management."

Tony O'Neill, newly appointed CEO of Asfare, will take immediate day to day management control of the Todd business.

To part fund the initial consideration, the Company also today announces the placing of 771,111 new ordinary shares in the Company at 90p per share ("the Placing Shares") to raise Pounds Sterling 694,000. Certain of the existing directors are subscribing for in aggregate, a total of 72,222. Following the admission of the Placing Shares to trading on AIM, the Directors will hold the following ordinary shares in the Company:



Director Number of Number of % of issued
Placing Shares Ordinary share capital
Shares on on Admission
Admission

Tim Wightman(i) 33,333 532,083 10.7%
David Chisnall - 648,750 13.1%
Tony O'Neill 11,111 11,111 0.2%
Tim O'Connor 11,111 11,111 0.2%
Adrian Bradshaw (ii)16,667 267,917 5.4%


(i) Tim Wightman is interested in 158,333 of the Ordinary Shares set out against his name by reason of his wife's beneficial ownership of those shares.

(ii) Adrian Bradshaw is interested in 16,667 Ordinary Shares set out against his name, held in the Bradmount SSAS pension scheme.

The balance of the initial consideration will be satisfied through new debt facilities with HSBC secured on the Todd freehold property.

Application for admission to trading on AIM for the Placing Shares has been made and trading in the Placing Shares is expected to occur on 8th November 2005. The Placing Shares will, on admission to AIM, rank pari passu in all respects with the existing ordinary shares of the Company.

Following successful completion of this acquisition, Tony O'Neill will be allocated share options over a total of 120,295 ordinary shares and Tim O'Connor will be allocated share options over a total of 21,872 ordinary shares, making the total allocated share options 10% of the issued share capital. The exercise price of these options shall be at 90p.

Contact Information

  • Asfare Group plc
    Tony O'Neill
    Chief Executive
    +44 (0) 2380 861 966
    or
    Asfare Group plc
    Tim O'Connor
    Finance Director
    +44 (0) 2380 861 966
    or
    Seymour Pierce
    Mark Percy / John Depasquale
    +44 (0) 20 7107 8000
    or
    Abchurch Communications
    Ariane Comstive
    Media enquiries
    +44 (0) 20 7398 7700
    ariane.comstive@abchurch-group.com
    www.abchurch-group.com