Deltex Medical Group PLC Successful Placing, Subscription and Offer

23rd January 2018 – Deltex Medical Group PLC Successful Placing, Subscription and Offer
RNS Number : 5953C

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, NEW ZEALAND, RUSSIA, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A BREACH OF THE RELEVANT SECURITIES LAWS OF SUCH JURISDICTION.

This Announcement does not constitute a prospectus or offering memorandum or an offer in respect of any securities of Deltex Medical Group plc or of any other entity and should not be considered as a recommendation that any person should subscribe for or purchase any such securities.
This Announcement contains inside information for the purposes of the market abuse regulation (EU No. 596/2014) (“MAR”). In addition, market soundings (as defined in MAR) were taken in respect of certain of the matters contained in this Announcement, with the result that certain persons became aware of such inside information, as permitted by MAR. Upon the publication of this Announcement, this inside information is now considered to be in the public domain and such persons shall therefore cease to be in possession of inside information.
23 January 2018

Deltex Medical Group plc
(“Deltex” or the “Company”)

Placing by way of an accelerated bookbuild and proposed Subscription to raise £1.75 million
and Offer to Shareholders to raise up to £350,000

Deltex (AIM: DEMG), announces its intention to undertake an equity placement of £1,064,500 (the “Placing”). The Placing will be effected by way of an accelerated bookbuild, which will be launched immediately following this announcement at a minimum price of 1.25p. Certain other investors are proposing to invest £685,500 in the Company, by way of a subscription at the Issue Price (the “Subscription”).
Arden Partners plc (“Arden”) and Turner Pope Investments (TPI) Ltd (“TPI”) are acting as joint brokers (together, the “Joint Brokers”) in connection with the Placing.
1. Placing and Subscription
The proceeds of the Placing and the Subscription will be used to strengthen the Company’s balance sheet and for general working capital purposes.
2. Offer to Shareholders
In addition to the Placing and the Subscription, the Company intends to provide all Qualifying Participants with the opportunity to subscribe for new Ordinary Shares (“Offer Shares”) at the Issue Price, to raise up to £350,000 before expenses (“Offer”).
3. Variations to the terms of the £1.125 million nominal Loan Notes issued 2016
The holders of the Loan Notes (with the exception of a holder of £25,000 nominal amount) have conditionally agreed (subject, inter alia, to Admission) to defer the redemption date of 26 February 2019 by two years to 26 February 2021. As a result, the Company has agreed, subject to the same conditions, to reduce the conversion price from 6p to 4p to reflect the dilutive effect of the Capital Raising. The impact of the Convertible Loan Note Arrangements is that the maximum number of Ordinary Shares to be issued under the Loan Notes will increase from 18.75 million to 27.50 million. The £25,000 nominal amount holding referred to above will be redeemed with the consent of the other holders.
4. General Meeting
To enable the Capital Raising to take place and to authorise the issue of the additional Ordinary Shares on conversion of the Loan Notes under the Convertible Loan Note Arrangements, a General Meeting will be convened for 9 February 2018 at which the Resolution will be proposed to enable the Proposals to proceed.
Expected timetable:
Announcement of the Placing and Bookbuild commences – 23 January 2018
Dispatch of the Circular, Application Form and Form of Proxy – 24 January 2018
Latest time and date for receipt of completed Forms of Proxy and receipt of electronic proxy appointments via the CREST system for the General Meeting – 10.00 a.m. on 7 February 2018
Latest time for receipt of applications under the Offer – 12.00 p.m. on 7 February 2018
General Meeting – 10.00 a.m. on 9 February 2018
Announcement of results of the General Meeting and the Offer – 9 February 2018
Admission and commencement of dealings in the New Ordinary Shares and any Offer Shares on AIM and CREST accounts expected to be credited for the New Ordinary Shares and any Offer Shares – 8.00 a.m. on 12 February 2018
Latest date for dispatch of share certificates in respect of the Placing Shares, the Subscription Shares and the Offer Shares by – 23 February 2018
Each of the times and dates above refer to London time and are subject to change by the Company and/or the Joint Brokers. Any such change will be notified to Shareholders by an announcement on a Regulatory Information Service. The Circular will contain further details of the expected timetable for the Placing, the Offer, the General Meeting and admission of the New Ordinary Shares and any Offer Shares.

ADDITIONAL INFORMATION
The Placing
The Company is proposing to raise £1,064,500 (before expenses) pursuant to the Placing. The Placing will be conducted by the Joint Brokers on behalf of the Company in accordance with the terms and conditions set out in the Appendix to this Announcement. The Placing is being conducted through an accelerated bookbuilding process (the “Bookbuild”) which will commence immediately following this Announcement.
The Bookbuild will determine the final demand for and participation in the Placing and the Issue Price, which will not be less than 1.25p per share. The Bookbuild is expected to close not later than 5.30 p.m. (London) today, but may be closed at such earlier or later time as the Joint Brokers, in their absolute discretion (following consultation with the Company), determine. The number of Placing Shares, the making of allocations and the Issue Price will be agreed between the Company and the Joint Brokers and will be confirmed orally or by email by the Joint Brokers following the closure of the Bookbuild. A further announcement will be made following the completion of the Bookbuild (the “Bookbuild Announcement”).
Completion of the Placing is subject, inter alia, to Shareholder approval of the Resolution to authorise the issue of the New Ordinary Shares and to authorise the issue of additional Ordinary Shares in connection with the changes to be made to the Loan Notes as described below, which will be sought at a General Meeting of the Company to be held at 10.00 a.m. on 9 February 2018.
Subject to successful completion of the Bookbuild and the release of the Bookbuild Announcement, a Circular containing further details of the Capital Raising including a notice convening the General Meeting is expected to be despatched to Shareholders tomorrow and will thereafter be available on the Company’s website at www.deltexmedical.com.
The Appendix (which forms a part of this Announcement) contains the detailed terms and conditions of the Placing.

The Subscription
The Company is also proposing to raise £685,500 (before expenses) pursuant to the Subscription. In connection with the Subscription, certain new and existing Shareholders of the Company, including Mr Keen (a Director and Chairman of the Company) or interests associated with him, have indicated their intention to subscribe for new Ordinary Shares at the Issue Price (not being less than 1.25p per share). The number of new Ordinary Shares to be subscribed in the Subscription will be set out in the Bookbuild Announcement.
Completion of the Subscription is conditional upon the passing of the Resolution. It is expected that the Subscription Shares will be admitted to trading at the same time as the Placing Shares and the Offer Shares, that is, at 8.00 a.m. on 12 February 2018.

The Offer
It is proposed that the Offer will comprise an offer to Qualifying Participants of Offer Shares with the aggregate consideration to be received by the Company limited to £350,000 (before expenses), being the Offer Maximum. Qualifying Participants can apply for as many Offer Shares as they wish. In the event that Applications are received in excess of the Offer Maximum, Applications will generally be scaled back pro-rata. However, the Directors reserve the right to exercise their absolute discretion (with the agreement of the Joint Brokers) in the allocation of successful Applications, including, without limitation, to ensure no Offer Shares are issued so as to exceed the Offer Maximum.
It is proposed that the Offer will only be open to Qualifying Participants and, save as set out in the preceding paragraph, there is no maximum or minimum subscription per Applicant. No Qualifying Participant may subscribe for Offer Shares in excess of the Offer Maximum. Multiple applications may be submitted. Qualifying Participants who are joint Shareholders may only apply for Offer Shares as joint Applicants.

The Offer is conditional on the Placing and is not being underwritten. The Application Form and accompanying procedure for application will set out, in detail, how Qualifying Participants may participate under the Offer.
In order to apply for Offer Shares, Qualifying Participants should complete the Application Form in accordance with the instructions to be set out in the Circular intended to be published tomorrow. A further announcement setting out timings in respect of the Offer will be made in due course.
Application will be made to the London Stock Exchange for any Offer Shares to be admitted to trading on AIM. It is expected that any Offer Shares will be admitted to trading on AIM at the same time as the New Ordinary Shares, that is, at 8.00 a.m. on 12 February 2018.

Directors Participation
Certain Directors have indicated their interest in participating in the Capital Raising. Their participation and their consequent interests in the Company’s issued share capital will be described in a further announcement.

Background to and reasons for the Placing
Further to the announcement on 5 January 2018, the Company stated that it was in discussions regarding the future funding of the Company and the Capital Raising concludes this process.

Use of Proceeds
The Company will use the proceeds raised under the Placing, the Subscription and the Offer to strengthen its balance sheet and for general working capital purposes.

Future Prospects
The Directors expect that the additional funds, applied as set out above under “Use of Proceeds”, should help the Company to get past the operating cash break-even point so that it would be able to finance future expansion from cash generated from trading.
The Company plans to become operating cash positive through a combination of cost reductions and revenue growth. With respect to cost reductions, the Company reduced its cash consumption in 2017 by £1m from £2.3m in 2016 to £1.3m; this reduction was after c. £0.4m of margin improvements and c. £0.5m of overhead reductions. Towards the end of 2017 the Company put in place additional overhead reductions to reduce 2018 cash costs by a further £0.5m. Since the year end the Company has started to implement a third set of cost reductions aimed at reducing annualised overheads by an additional £0.5m.
The Company is focused on a number of export markets where the Company has established a base of recurring revenues from sales of ODM probes and where the Directors believe there are opportunities for further growth. The five largest such markets of the USA, France, South Korea, Peru and Scandinavia together accounted for over 80% of 2017 export sales. In the USA the Company has established a critical mass of over 30 potentially major accounts including several nationally and internationally recognised hospitals. It expects to continue to increase its US revenues by supporting the wider adoption of ODM in these accounts, adding new accounts and introducing its multi-modal TrueVue system as its new elements gain US regulatory approval.
The Group’s progress has been hampered by significant declines in UK revenues since early 2014 when the NHS made material changes to its approach to implementation of its 2011 policy to roll out ODM at pace and scale. UK ODM sales have declined from £4.3m in 2013 to £1.5m in 2017. This decline has been exacerbated by severe NHS financial challenges which have adversely impacted the medical technology procurement landscape. The Company has been working on a number of strategies to reverse the trends in the UK and return the ODM business to growth. The Company is moving its product offer from the single ODM technology to the multi-modal TrueVue system and is now offering each of the three leading modern advanced haemodynamic monitoring technologies on a single platform: ODM, Pulse Pressure Waveform Analysis and Impedance Cardiography allowing doctors to choose the technology they deem most appropriate for their patient both for monitoring and to guide interventions. The TrueVue system allows the Company to reposition ODM as a higher skilled, higher precision, higher value technology for intervention while offering monitoring solutions throughout the hospital. The Company’s view on the superiority of ODM at guiding fluid and drug administration in patients identified at increased risk of periods of harmful haemodynamic compromise is expected to be further supported by new clinical studies including the publication in a peer reviewed journal of the largest ever trial of ODM. These initiatives are expected to drive ongoing and additional growth in export markets as they are rolled out there in due course.

Principal risks and uncertainties
A description of the principal risks and uncertainties associated with the Group’s business and how the Group seeks to manage them is included in the strategic report of the Company on page 15 of the Group’s Annual Report and Accounts for the financial year ended 31 December 2016. Save as set out below, the Board is of the view that these principal risks and uncertainties are those which continue to be applicable to the Company at the date of this Announcement.

Brexit
On 29 March 2019, the United Kingdom (UK) is expected to leave the European Union (EU). However, as negotiations between the UK and the EU are at a very early stage it is unclear what the effect may be on the Company in several areas. However, the main matter of concern is the potential for change, if any, that may be made to medical device regulations that may require the Company to act to ensure that its products can continue to be sold to EU member states after 29 March 2019. Dealing with any such changes may be both onerous and expensive for the Company. The Company will monitor developments with the Brexit negotiations and will take the necessary steps to deal with the matters that may arise.

For more information, contact:

Deltex Medical Group PLC

Ewan Phillips Tel: + 44 (0) 1243 774 837
Jonathan Shaw investorinfo@deltexmedical.com
Arden Partners PLC
Chris Hardie Tel: + 44 (0) 20 7614 5900
Ciaran Walsh
Turner Pope Investments (TPI) Limited
Andy Thacker, Corporate Broking Tel: +44 (0)20 3621 4120
IFC Advisory Ltd
 Tim Metcalfe Tel: +44 (0)20 3053 8671
 Graham Herring / Heather Armstrong

Further information on the Placing and Admission is included in the section headed ‘Additional Information’ above. Attention is also drawn to the section headed ‘Important Information’ of this Announcement and the terms and conditions of the Placing (representing important information for Placees only) in the Appendix to this Announcement.
Capitalised terms used but not defined in this Announcement shall have the meanings given to such terms in the section headed ‘Definitions’ below save that any capitalised term defined in the Appendix shall have such meaning in the Appendix to the exclusion, in the Appendix only, of any definition of such term elsewhere in this Announcement.

IMPORTANT INFORMATION
This Announcement has been issued by, and is the sole responsibility, of the Company. No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by Arden Partners or TPI or by any of their respective Affiliates as to or in relation to, the accuracy or completeness of this Announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefore is expressly disclaimed.
This Announcement does not constitute, or form part of, a prospectus relating to the Company, nor does it constitute or contain any invitation or offer to any person, or any public offer, to subscribe for, purchase or otherwise acquire any shares in the Company nor does it advise persons to do so in any jurisdiction, nor shall it, or any part of it (other than the Appendix in relation to Placees) form the basis of or be relied on in connection with any contract or as an inducement to enter into any contract or commitment with the Company. In particular, the New Ordinary Shares and the Offer Shares have not been, and will not be, registered under the United States Securities Act of 1933 as amended or qualified for sale under the laws of any state of the United States or under the applicable laws of any of Canada, Australia, New Zealand, Russia, the Republic of South Africa, or Japan and, subject to certain exceptions, may not be offered or sold in the United States or to, or for the account or benefit of, US persons (as such term is defined in Regulation S under the Securities Act) or to any national, resident or citizen of Canada, Australia, New Zealand, Russia, the Republic of South Africa or Japan.
The distribution or transmission of this Announcement and the offering of the New Ordinary Shares and the Offer Shares in certain jurisdictions may be restricted or prohibited by law or regulation. Persons distributing this Announcement must satisfy themselves that it is lawful to do so. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. No action has been taken by the Company or the Joint Brokers that would permit an offering of such shares or possession or distribution of this Announcement or any other offering or publicity material relating to such shares in any jurisdiction where action for that purpose is required. Persons into whose possession this Announcement comes are required by the Company and the Joint Brokers to inform themselves about, and to observe, such restrictions. In particular, this announcement may not be distributed, directly or indirectly, in or into the United States, Canada, New Zealand, Russia, the Republic of South Africa, Australia or Japan. Overseas Shareholders and any person (including, without limitation, nominees and trustees), who have a contractual or other legal obligation to forward this document to a jurisdiction outside the UK should seek appropriate advice before taking any action.
This Announcement includes “forward-looking statements” which includes all statements other than statements of historical fact, including, without limitation, those regarding the Company’s financial position, business strategy, plans and objectives of management for future operations, or any statements preceded by, followed by or that include the words “targets”, “believes”, “expects”, “aims”, “intends”, “will”, “may”, “anticipates”, “would”, “could”, “indicative”, “possible” or similar expressions or negatives thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Company’s control that could cause the actual results, performance or achievements of the Group to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company’s present and future business strategies and the environment in which the Company will operate in the future. These forward-looking statements speak only as at the date of this Announcement. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based unless required to do so by applicable law or the AIM Rules for Companies.
No statement in this Announcement is intended to be a profit forecast and no statement in this Announcement should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.
Arden Partners, which is authorised and regulated by the FCA in the United Kingdom, is acting as the Company’s nominated adviser and joint broker to the Company in connection with the Placing and, as nominated adviser and Joint Broker, its responsibilities under the AIM Rules for Companies and the AIM Rules for Nominated Advisers are owed to the London Stock Exchange and not to any other person in respect of his decision to acquire Ordinary Shares in reliance on any part of this announcement. Arden Partners will not be responsible to any person other than the Company for providing the protections afforded to clients of Arden Partners or for providing advice to any other person in connection with the Placing or any acquisition of shares in the Company. Arden Partners is not making any representation or warranty, express or implied, as to the contents of this Announcement. Arden Partners has not authorised the contents of, or any part of, this Announcement, and no liability whatsoever is accepted by Arden Partners for the accuracy of any information or opinions contained in this Announcement or for the omission of any material information.
TPI, which is authorised and regulated by the FCA in the United Kingdom, is acting as joint broker to the Company in connection with the Placing and its responsibilities as the Company’s Joint Broker under the AIM Rules for Companies are owed to the London Stock Exchange and not to any other person in respect of his decision to acquire Ordinary Shares in reliance on any part of this announcement. TPI will not be responsible to any person other than the Company for providing the protections afforded to clients of TPI or for providing advice to any other person in connection with the Placing or any acquisition of shares in the Company. TPI is not making any representation or warranty, express or implied, as to the contents of this Announcement. TPI has not authorised the contents of, or any part of, this Announcement, and no liability whatsoever is accepted by TPI for the accuracy of any information or opinions contained in this Announcement or for the omission of any material information.
Neither the New Ordinary Shares nor any Offer Shares will be admitted to trading on any stock exchange other than the AIM market of the London Stock Exchange.
The Appendix to this Announcement (which forms part of this Announcement) sets out the terms and conditions of the Placing. By participating in the Placing, each person who is invited to and who chooses to participate in the Placing by making or accepting an oral and legally binding offer to acquire Placing Shares will be deemed to have read and understood this Announcement in its entirety (including the Appendix) and to be making such offer on the terms and subject to the conditions set out in this Announcement and to be providing the representations, warranties, undertakings agreements and acknowledgements contained in the Appendix. The Company, the Joint Brokers and their respective Affiliates will rely upon the truth and accuracy of the representations, warranties, undertakings, agreements and acknowledgements contained in the Appendix.
Neither the content of the Company’s website (or any other website) nor the content of any website accessible from hyperlinks on the Company’s website (or any other website) is incorporated into, or forms part of, this Announcement.
Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended (“MiFID II”); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the “MiFID II Product Governance Requirements”), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any “manufacturer” (for the purposes of the Product Governance Requirements) may otherwise have with respect thereto, the Placing Shares have been subject to a product approval process, which has determined that the Placing Shares are: (i) compatible with an end target market of (a) retail investors, (b) investors who meet the criteria of professional clients and (c) eligible counterparties (each as defined in MiFID II); and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the “Target Market Assessment”). Notwithstanding the Target Market Assessment, distributors should note that: the price of the Placing Shares may decline and investors could lose all or part of their investment; the Placing Shares offer no guaranteed income and no capital protection; and an investment in the Placing Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the offer. Furthermore, it is noted that, notwithstanding the Target Market Assessment, Arden will only procure investors who meet the criteria of professional clients and eligible counterparties but TPI will procure investors who meet the criteria of retail clients, professional clients and eligible counterparties.
For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the Placing Shares.
Each distributor is responsible for undertaking its own target market assessment in respect of the Placing Shares and determining appropriate distribution channels.

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