TIDMCSFG
RNS Number : 7926K
CSF Group PLC
26 September 2016
26 September 2016
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR")
CSF Group plc
("CSF", the "Company" or the "Group")
Proposed cancellation of admission of the Company's ordinary
shares to trading on AIM
and
Proposed extraordinary general meeting
The Board of CSF announces that the Company intends to seek
Shareholders' approval to cancel the admission of the Company's
ordinary shares of 10p each ("Ordinary Shares") to trading on AIM
(the "Proposal" or the "Cancellation").
Under the AIM Rules for Companies (the "AIM Rules"), it is a
requirement that the cancellation of admission to trading on AIM
must be approved by not less than 75 per cent. of Shareholders
voting in general meeting. Under the AIM Rules, the Cancellation
also requires a notice period of not less than 20 business days
from the date on which notice of the intended Cancellation is
notified via a Regulatory Information Service and is given to the
London Stock Exchange.
The Company intends to send a circular (the "EGM Circular") to
Shareholders, which will also contain a notice of an extraordinary
general meeting (the "Extraordinary General Meeting"), which is
intended to take place immediately following the conclusion or the
adjournment (as the case may be) of the Company's 7th Annual
General Meeting which will take place at 7:00 a.m. British Summer
Time ("BST") / 2:00 p.m. Malaysia Time ("MYT") on 18 October 2016
at the Business Centre, Mezzanine Floor, CSF Computer Exchange 5,
Jalan Cyber Point 2, Cyber 12, 63000 Cyberjaya, Selangor Darul
Ehsan, Malaysia.
The Extraordinary General Meeting is to be held for the purpose
of considering, and if thought fit, passing the following
resolution (the "Resolution"), to take effect as a resolution of
the Company requiring 75 per cent. of the votes cast (in person or
by proxy) to be in favour: THAT, the admission of the ordinary
shares of 10p each in the capital of the Company to trading on AIM,
a market operated by the London Stock Exchange plc, be cancelled
and that the directors of the Company be authorised to take all
steps which they consider to be necessary or desirable in order to
effect such cancellation.
Certain of the Directors, members of the Company's senior
management team and the Company's employee benefit trust, whose
shareholdings in aggregate represent 11.02 per cent. of the issued
share ordinary capital of the Company, have given irrevocable
undertakings to vote in favour of the Resolution.
Subject to the passing of the Resolution at the proposed
Extraordinary General Meeting on 18 October 2016, Cancellation will
occur no earlier than 5 business days after the proposed
Extraordinary General Meeting and it is therefore expected that
trading in the Ordinary Shares on AIM will cease at the close of
business on 25 October 2016, with Cancellation expected to take
effect at 7:00 a.m. (BST) / 2.00 p.m. (MYT) on 26 October 2016.
Pursuant to Rule 41 of the AIM Rules, the Directors have
notified the London Stock Exchange of the date of the proposed
Cancellation.
The EGM Circular will set out the following, details of which
can also be found further below within this announcement:
-- the background to the Proposal;
-- why the Board has decided to proceed with the Proposal,
subject to Shareholders' approval; and
-- why the Directors believe that the Proposal is in the best
interests of the Company and Shareholders as a whole and why the
Board recommends that Shareholders vote in favour of the Resolution
at the forthcoming Extraordinary General Meeting.
Should Cancellation be approved by Shareholders at the
Extraordinary General Meeting, the Company intends to put in place
a matched bargain settlement facility which should facilitate
Shareholders buying and selling Ordinary Shares on a matched
bargain basis following Cancellation. The Board is reviewing
several matched bargain settlement facilities and the Company
intends to make an announcement in respect of such a facility ahead
of the date of Cancellation.
It is anticipated that the EGM Circular and the notice of the
Company's 7th Annual General Meeting will be posted to Shareholders
on 30 September 2016 and the Company will make a further
announcement once these documents have been posted and are
available to view and download from the Company's website at
www.csf-group.com, in accordance with Rule 26 of the AIM Rules.
Background to, and reasons for, the Proposal
Level of trading in the Ordinary Shares and lack of
institutional demand
The Board considers that the total trading volumes in the
Company's Ordinary Shares over the period from 1 January 2016 to 23
September 2016 were effectively negligible, representing less than
5.1 per cent. of the Company's issued ordinary share capital. The
Board does not believe that there are currently any likely
circumstances that would reverse this trend, and believes that the
level of liquidity in the market for the Ordinary Shares is
effectively meaningless.
Despite efforts to attract investors, the Board is of the view
that there has been a relatively low demand for the Ordinary
Shares, especially from institutional investors.
The Board also has certain reservations regarding the practical
value of institutional investors. The Directors remain cognizant of
the fact that meaningful amounts of additional working capital
would be useful to the smooth-running of the Company's data centre
infrastructure management business, given the expenses associated
with capital and operating expenditure. However, the Board is also
mindful that institutional investors may require shorter-term
levels of return, which may be incompatible with the long-term
nature of the data centre business and the Board's long-term
strategy and business model. In any event, the Board is of the
belief that the aversion to risk by institutional investors means
that the illiquidity in the market for the Ordinary Shares acts as
a further deterrent.
Inability to raise capital
At the beginning of 2015, the Company's share price plateaued
and since then has never risen above a level of 3.5p, which
represents a 65 per cent. discount to the Ordinary Shares' par
value of 10p. As at 23 September 2016, being the latest practicable
closing price prior to this announcement regarding the Company's
intention to seek Shareholder approval for the Cancellation, the
closing middle market price of an Ordinary Share on AIM was 1p. The
Board views the continuing low share price as being a significant
hindrance to the Company and partially as a consequence of this,
despite significant efforts, the Directors have not been able to
secure additional capital, especially by way of equity
financing.
The Company's main reason for having its Ordinary Shares
admitted to trading on AIM in 2010 was to access capital and the
Board has now concluded that it is no longer possible for the
Company to raise equity capital on AIM.
The cost of the Company's listing
It is estimated by the Board that the total costs directly
related to the maintenance of the admission of the Ordinary Shares
to trading on AIM are over GBP200,000 per annum. This includes fees
payable to the London Stock Exchange, nominated adviser fees,
shareholder communication time and costs, and other professional
fees. Given that the Company's operations are principally based in
Malaysia, a country currently facing declining economic growth, the
fact that a significant number of these expenses are payable in
currencies other than the Malaysian Ringgit exacerbates the costs
to the Company of maintaining the admission to trading on AIM of
the Ordinary Shares.
The Directors therefore believe that Cancellation will,
accordingly, reduce the Company's recurring administrative costs,
allowing the funds currently spent on such expenses to be better
spent in running the business in a private capacity.
Conclusion
After careful consideration of the matters laid out above, the
Directors have therefore concluded that the commercial
disadvantages and costs of maintaining the admission to trading on
AIM of the Ordinary Shares at this time in the Company's
development outweigh the potential benefits, and that it is
therefore no longer in the Company's or its Shareholders' best
interests to maintain the admission to trading on AIM of the
Ordinary Shares. Particular consideration has been given by the
Directors to the very low liquidity in the Ordinary Shares, the
lack of financing opportunities available to the Company, and the
relative expense of the Company's quotation on AIM.
Potential consequences if the Cancellation is not approved
Shareholders should be aware that there may be potential
consequences if the Cancellation is not approved at the
Extraordinary General Meeting, which may include:
-- The Company's non-executive Board members considering their
position and potentially resigning. This would lead to Company's
nominated adviser considering the suitability of the Company to be
a Company with shares admitted to a public market in the UK.
-- In the event that the Company's nominated adviser believes
that the Company is not suitable to be a Company with shares
admitted to a public market in the UK, then the nominated adviser
will resign.
-- Following the resignation of the Company's nominated adviser
taking effect, in the absence of the appointment of a new nominated
adviser, trading in the Company's Ordinary Shares on AIM will be
suspended.
-- If the Company cannot appoint a replacement nominated adviser
within one month of such suspension, the admission of the Company's
Ordinary Shares to trading on AIM will be cancelled.
Cancellation of admission of ordinary shares to trading on
AIM
Cancellation
Under the AIM Rules, it is a requirement that the cancellation
of admission to trading on AIM must be approved by not less than 75
per cent. of Shareholders voting in general meeting. Under the AIM
Rules, the Cancellation also requires a notice period of not less
than 20 business days from the date on which notice of the intended
Cancellation is notified via a Regulatory Information Service and
is given to the London Stock Exchange. Pursuant to Rule 41 of the
AIM Rules, the Directors have notified the London Stock Exchange of
the date of the proposed Cancellation.
Subject to the passing of the Resolution at the proposed
Extraordinary General Meeting on 18 October 2016, Cancellation will
occur no earlier than 5 business days after the proposed
Extraordinary General Meeting and it is therefore expected that
trading in the Ordinary Shares on AIM will cease at the close of
business on 25 October 2016, with Cancellation expected to take
effect at 7:00 a.m. (BST) / 2.00 p.m. (MYT) on 26 October 2016.
Trading in the Ordinary Shares after Cancellation
Whilst the Board believes that the Cancellation is in the
interests of Shareholders as a whole, it recognises that the
Cancellation will make it more difficult for Shareholders to buy
and sell Ordinary Shares should they wish to do so. Following the
Cancellation, although the Ordinary Shares will remain transferable
they will no longer be tradable on AIM.
Accordingly, the Board intends, following the Cancellation, to
put in place a matched bargain settlement facility (the "Proposed
Facility") which should facilitate Shareholders buying and selling
Ordinary Shares on a matched bargain basis following Cancellation.
The Board is reviewing several matched bargain settlement
facilities and the Company intends to make an announcement in
respect of such a facility ahead of the date of Cancellation.
However, it is likely that the Proposed Facility will offer a
substantially lesser degree of liquidity and potentially less
attractive share prices than are currently available via the
Company's quotation on AIM.
The Board's choice of matched bargain settlement facility
provider will determine whether the Company's existing CREST
facility will remain in place following Cancellation and therefore
whether Shareholders will be able to elect to hold their Ordinary
Shares in dematerialised form. If the Company's CREST facility is
ceased, then it is likely that Shareholders will be issued share
certificates in respect of their Ordinary Shares.
Following the implementation of the Proposed Facility, the Board
intends to monitor its popularity amongst Shareholders and will
review it at regular intervals to consider whether it remains cost
effective.
Effects of Cancellation on shareholders
Market for the Company's Ordinary Shares
The principal effect of the proposed Cancellation is that there
would no longer be a formal market mechanism enabling Shareholders
to trade their Ordinary Shares on AIM or any other recognised
market or trading exchange. The underlying liquidity in the
Ordinary Shares is low and, in the opinion of the Directors, is
likely to remain that way for the foreseeable future. As described
above, the Company intends to, shortly following Cancellation, put
in place the Proposed Facility to serve as a limited platform for
Shareholders and other persons to seek to buy or sell Ordinary
Shares. However, the Proposed Facility is likely to offer a
substantially lesser degree of liquidity and potentially less
attractive share prices than are currently available via the
Company's quotation on AIM.
Taxation
Shareholders who are in any doubt about their tax position
should consult with their own independent professional adviser as
soon as possible.
Loss of shareholder protections
Shareholders should also be aware that the Company will no
longer be bound by the AIM Rules following Cancellation. As a
consequence, investors will not be able to benefit from certain of
the protections provided by the AIM Rules. For example, the Company
will no longer be required to announce material events, interim or
final results or transactions (including related party
transactions) and certain previously prescribed corporate
governance procedures may not be adhered to by the Company in the
future. Shareholders' approval will also not be required for
reverse takeovers and/or fundamental changes in the Company's
business. The Company will no longer be bound to comply with the
corporate governance requirements applicable to UK-quoted companies
and the Company would also no longer be required to have a
nominated adviser, nor be required to retain a broker.
The Directors intend to keep Shareholders informed of the
Company's progress from time to time and remain committed to high
standards of corporate governance. Accordingly, following
Cancellation, the Directors intend to:
-- hold an annual general meeting and, when required, other
general meetings, in accordance with applicable statutory
requirements and the articles of association of the Company;
-- make available to all Shareholders an annual report and the
Company's annual financial statements;
-- maintain an 'investors' section on the Company's website at
www.csf-group.com providing information on any significant events
or developments in which Shareholders may be interested.
Shareholders should, however, be aware that there will be no
obligation on the Company to update this section of the website as
is presently required under the AIM Rules and other currently
applicable regulation; and
-- comply with corporate governance standards appropriate for a
company with the number of Shareholders it has.
Takeover Code
The City Code on Takeovers and Mergers (the "Takeover Code")
currently applies to the Company and as such the Shareholders
currently benefit from a number of protections contained in the
Takeover Code. Following Cancellation, the Company's place of
central management and control will not be in the United Kingdom,
the Channel Islands or the Isle of Man and, pursuant to paragraph
3(a)(ii) to the Introduction to the Takeover Code, the Company will
no longer be subject to the Takeover Code.
Shareholders should note that, if the Cancellation becomes
effective, they will not receive the protections afforded by the
Takeover Code in the event that there is a subsequent offer to
acquire their Ordinary Shares.
Brief details of the Takeover Code and the protections given by
the Takeover Code are described below. Before giving your consent
to the Cancellation, you may want to take independent professional
advice from an appropriate financial adviser.
The Takeover Code
The Takeover Code is issued and administered by the Panel on
Takeovers and Mergers of the United Kingdom (the "Panel"). The
Company is presently a company to which the Takeover Code applies
and its Shareholders are accordingly entitled to the protections
afforded by the Takeover Code.
The Takeover Code and the Panel operate principally to ensure
that shareholders are treated fairly and are not denied an
opportunity to decide on the merits of a takeover and that
shareholders of the same class are afforded equivalent treatment by
an offeror. The Takeover Code also provides an orderly framework
within which takeovers are conducted. In addition, it is designed
to promote, in conjunction with other regulatory regimes, the
integrity of the financial markets.
The General Principles and Rules of the Takeover Code
The Takeover Code is based upon a number of general principles
("General Principles") which are essentially statements of
standards of commercial behaviour. The General Principles apply to
all transactions with which the Takeover Code is concerned. They
are expressed in broad general terms and the Takeover Code does not
define the precise extent of, or the limitations on, their
application. They are applied by the Panel in accordance with their
spirit to achieve their underlying purpose.
In addition to the General Principles, the Takeover Code
contains a series of rules ("Rules"), of which some are effectively
expansions of the General Principles and examples of their
application and others are provisions governing specific aspects of
takeover procedure. Although most of the Rules are expressed in
more detailed language than the General Principles, they are not
framed in technical language and, like the General Principles, are
to be interpreted to achieve their underlying purpose. Therefore,
their spirit must be observed as well as their letter. The Panel
may derogate or grant a waiver to a person from the application of
a Rule in certain circumstances.
Giving up the protection of the Takeover Code
Shareholders will be giving up certain important protections
upon Cancellation. Your attention is drawn in particular to the
following protections under the Takeover Code:
(i) all holders of Ordinary Shares must be afforded equivalent
treatment and, moreover, if a person acquires 30 per cent. or more
of the Ordinary Shares in the Company (other than in the context of
a voluntary offer to all Shareholders) such person would be
required to make a mandatory offer to all of the other
Shareholders;
(ii) the holders of Ordinary Shares must have sufficient time
and information to enable them to reach a properly informed
decision on any bid; where it advises the holders of Ordinary
Shares, the Board must give its views on the effects of
implementation of the bid on employment, conditions of employment
and the locations of the Company's place of business;
(iii) the Board would be required to act in the interests of the
Company as a whole and must not deny any holders of Ordinary Shares
the opportunity to decide on the merits of a bid for the Company;
and
(iv) if a bid for the Company were to be made, the Board would
be required to obtain competent independent advice as to whether
the financial terms of any offer (including any alternative offers)
are fair and reasonable and the substance of such advice must be
made known to Shareholders.
The Jersey framework for takeovers following Cancellation
Certain brief details of the Jersey legal framework for
takeovers, which following Cancellation will be applicable to the
Company, as appropriate, are described below.
Acquisitions
A Jersey public limited company may be acquired in a number of
ways, including by means of a "scheme of arrangement" between the
company and its shareholders or by means of a takeover offer.
Scheme of arrangement
A "scheme of arrangement" is a statutory procedure under the
Companies (Jersey) Law 1991 (as amended) (the "Act") pursuant to
which the Royal Court of Jersey may approve an arrangement between
a Jersey company and some or all of its shareholders. In a "scheme
of arrangement," the company would make an initial application to
the Royal Court of Jersey to convene a meeting or meetings of its
shareholders at which a majority in number of shareholders
representing 3/4ths of the voting rights of the shareholders
present and voting either in person or by proxy at the meeting must
agree to the arrangement by which they will sell their shares in
exchange for the consideration being offered by the bidder. If the
shareholders so agree, the company will return to the Royal Court
of Jersey to request the court to sanction the arrangement. Upon
such a scheme of arrangement becoming effective in accordance with
its terms and the Act, it will bind the company and such
shareholders.
Takeover offer
A takeover offer is an offer to acquire all of the outstanding
shares of a company (other than shares which at the date of the
offer are already held by the offeror). The offer must be made on
identical terms to all holders of shares to which the offer
relates. If the offeror, by virtue of acceptances of the offer,
acquires or contracts to acquire not less than 90% in nominal value
of the shares to which the offer relates, the Act allows the
offeror to give notice to any non-accepting shareholder that the
offeror intends to acquire his or her shares through a compulsory
acquisition (also referred to as a "squeeze out"), and the shares
of such non-accepting shareholders will be acquired by the offeror
6 weeks later on the same terms as the offer, unless the
shareholder objects to the Royal Court of Jersey and the court
enters an order that the offeror is not entitled to acquire the
shares or specifying terms of the acquisition different from those
of the offer.
The Act permits a scheme of arrangement or takeover offer to be
made relating only to a particular class or classes of a company's
shares.
Further information
Current trading and prospects
As at the date of this announcement, the Company is still
incurring operating losses, due to insufficient data centre rental
revenue to cover its operating overheads. Therefore, the Company's
immediate focus is to fill the available capacity of its CX2 and
CX5 data centres. The Board and the management team continue to
follow-up on a number of key strategic initiatives and pursue a
pipeline of potential customers and business alliances. The Board
believes that the key strategic initiatives that are being
undertaken have positioned the business in a more favourable
direction and the Board remains focused on this strategy going
forward. However, the Board expects for the data centre rental
market in Malaysia to remain soft, especially when bidding for the
business of larger users of data centres such as cloud computing
service providers and digital content storage providers, due to
competition from data centre companies owned by larger Malaysian
telecommunications companies and competition from more established
markets, such as Singapore.
The Board and the management team will continue to ensure that
cash outlay is kept to a minimum other than the sums required to
cover the committed lease rentals and other necessary operating
overheads, subject to any further capital or operating expenditure
that may be required in relation to tenancy contracts.
Future strategy of the Company
The Company will seek to continue to improve operational
efficiencies and implement strategies to reduce operating costs. In
spite of the soft data centre market in Malaysia, the Board intends
to aggressively pursue new tenancy contracts, with a greater focus
on Malaysian government agencies.
In order to expand its market reach, the Company intends to
collaborate with data centre operators in Singapore and offer the
Company's data centres as a means of expanding their capacity.
However, such collaboration plans will require connectivity between
Malaysia and Singapore. In this regard, the Company is currently
formulating suitable collaboration strategies for approaching data
centre owners and operators and telecommunications companies within
Singapore.
Irrevocable undertakings
The Company has received irrevocable undertakings to vote in
favour of the Resolution at the proposed Extraordinary General
Meeting from certain of the Directors, members of the Company's
senior management team and the Company's employee benefit trust in
respect of their respective holdings of, in aggregate, 17,635,463
Ordinary Shares, representing approximately 11.02 per cent. of the
total current issued ordinary share capital of the Company.
The aforesaid irrevocable undertakings will lapse if the
Extraordinary General Meeting is not held or the Resolution is not
put to Shareholders or in the event that the Resolution is not
approved.
Recommendation
The Board considers the Resolution that will be set out in the
notice of the proposed Extraordinary General Meeting to be in the
best interests of the Company and its Shareholders as a whole.
Accordingly, the Directors unanimously recommend Shareholders to
vote in favour of the Resolution. The Directors intend to vote
their own beneficial holdings in favour of the Resolution, and
procure the same from certain members of the management of the
Company and the Company's employee benefit trust, which, in
aggregate, amounts to 17,635,463 Ordinary Shares, representing
approximately 11.02 per cent. of the issued ordinary share capital
of the Company as at the date of this announcement.
--ENDS--
For further information, please contact:
CSF Group
Phil Cartmell, Chairman +603 8318 1313
Allenby Capital (Nominated Adviser
and Broker) +44 (0) 20 3328
Nick Naylor / Alex Brearley 5656
This information is provided by RNS
The company news service from the London Stock Exchange
END
NOGAKADBOBKKDCB
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