TIDMRXB
RNS Number : 9776D
Rex Bionics PLC
03 May 2017
Rex Bionics Plc
("Rex Bionics" or the "Company")
-- Restructuring and New Investment of GBP4.4 million
-- Collaborative Development Agreement for next generation REX
3(rd) May 2017: Rex Bionics Plc (AIM: RXB), the pioneer of the
REX(TM) Robot technology that enhances the mobility of wheelchair
users, today announces that Rex Bionics Group ("Rex Group")
companies have entered into various agreements, the combination of
which will result in a major restructuring of the Rex Group (the
"Proposed Transaction"), as indicated in the outline plan described
in the Company's announcement of 13(th) March 2017.
These agreements are inter-conditional and are subject to
approval by shareholders of the Company. Their effect would be that
on completion of the Proposed Transaction ("Completion"), the
Company would have a 36% shareholding in an Australian company that
will own all the technology and assets that support the REX robotic
mobility aid and can access funding to promote technological
innovation in Australia. That company will have funding for, and
will progress, the next phase of development of the REX technology
in collaboration with McLaren Applied Technologies Ltd, the applied
technologies division of the McLaren group of companies, and will
be responsible for its subsequent commercialisation.
A shareholders' meeting (the "General Meeting") of the Company
will be held on 22(nd) May 2017 to approve the resolution required
to give effect to the Proposed Transaction. The Board recommends
that shareholders vote in favour of the resolution, as all the
Directors intend to do in respect of their own shareholdings,
amounting in aggregate to 995,028 shares, representing 3.9% of the
current issued share capital.
If shareholders do not approve the Proposed Transaction at the
General Meeting, the Board considers that the Company would become
unable to pay its debts as they fall due and will be forced to
cease operating and/or enter into an insolvency procedure with
immediate effect, in which case, shareholders would lose their
entire equity investment.
Additional information relating to the shareholders' meeting
will be contained in a circular to shareholders (the "Circular")
which is expected to be posted tomorrow, 4(th) May 2017.
Summary of the Transaction
The principal agreements (the "Agreements") involved in the
Proposed Transaction and their implications are described below.
Further detail on the Agreements can be found in the Appendix to
this announcement and in the Circular:
-- Asset Transfer Agreement between the Company and its
wholly-owned Australian subsidiary Rex Bionics Pty Ltd ("Rex
Pty"):
o This agreement provides for the transfer by the Company of
essentially all of the Rex business and assets (but not cash) to
Rex Pty as well as ownership of the entire issued share capital of
Company's two other wholly-owned subsidiaries: Rex Bionics Ltd (New
Zealand) and Rex Bionics Inc (United States) for a consideration of
shares in Rex Pty.
o All intercompany debts will be waived or repaid on
Completion.
-- Subscription Agreement (the "Subscription Agreement") between
the Company, Rex Pty and funds ("the BML Funds") managed by
BioScience Managers Pty Ltd ("BML"), a fund management company
based in Melbourne, Australia:
o Under the terms of this agreement, the BML Funds will together
make an initial investment in Rex Pty of AUD7.5 million (GBP4.4
million) and have also committed to make a further investment of
AUD2.5 million (GBP1.5 million) at the same price per share (the
"Second Investment"), subject to the achievement of specified
performance milestones.
o At the time of any Second Investment by the BML Funds, the
Company will have the right to make or procure an investment in Rex
Pty up to its pro rata entitlement on the same terms as the BML
Funds.
o Immediately following the initial investment, the Company
will, on a fully undiluted basis, own 36% of the enlarged issued
share capital of Rex Pty and the BML Funds will jointly directly
own 64%.
o At the price per share paid by the BML Funds, the Company's
holding in Rex Pty would be valued at approximately 10p per Company
share, representing an 82% premium to the closing mid-market price
of the Company shares on 2(nd) May 2017.
-- Shareholders Deed between the Company, Rex Pty and the BML Funds:
o This deed regulates the arrangements following Completion for
the operation of Rex Pty and includes the right for the Company to
appoint a director of Rex Pty.
-- Collaborative Development Agreement between Rex Pty and
McLaren Applied Technologies Ltd, based in Woking, UK:
o This agreement is focused on the next phase of the design and
development of the REX product whilst at the same time seeking to
achieve a significant reduction in the manufacturing cost and
improvements in the product's aesthetics and ergonomics. The joint
development programme is expected to take approximately two years
to bring the upgraded REX device to the point of transfer to
manufacturing.
o Further funding is likely to be required to commercialise the
new product, which could result in further substantial dilution of
the Company's stake in Rex Pty. Were the Company unable to invest
alongside the Second Investment, its interest in Rex Pty, on a
fully undiluted basis, would reduce to 29.7%.
o Rex Pty will pay for McLaren's services, expertise and
accessing its knowhow and other intellectual property through a
combination of cash, funded through BML's equity investment in Rex
Pty, the issue of certain warrants over shares in Rex Pty (the
"McLaren Warrants"), and royalties payable at a low-to-mid single
digit percentage level of future sales (with minimum royalty
payments coming into effect from the second anniversary following
the launch of the new product).
o Were McLaren to fully exercise the McLaren Warrants, this
would decrease the Company's interest in Rex Pty to 35.3% and if
the Company were unable to invest alongside the Second Investment,
the Company's interest in Rex Pty would be diluted to 29.2%.
Effect of the Proposed Transaction on the Company
Fundamental Change of Business under AIM Rule 15
The Proposed Transaction constitutes a disposal resulting in a
fundamental change of business under the AIM Rules for Companies
and is, therefore, subject to the approval of the resolution by
Shareholders at the General Meeting.
As the Company, following Completion, will not have other
business streams apart from its minority investment in Rex Pty,
with the effect that it will cease to own or control substantially
all of its trading business and assets, the Company will be deemed
to become an AIM Rule 15 cash shell under the AIM Rules.
Related Party Transaction
The investments by the BML Funds represent a related party
transaction pursuant to Rule 13 of the AIM Rules, as BML is also
manager of One Funds Management as Trustee for Asia Pacific
Healthcare Fund II, an existing substantial shareholder in the
Company. The Independent Directors (excluding Jeremy Curnock Cook
who is not considered independent given his relationship as
Managing Director of BML) having consulted with the Company's
nominated adviser, Stifel Nicolaus Europe Limited ("Stifel"),
consider that the terms of the BML Funds' investment to be fair and
reasonable insofar as the Company's shareholders are concerned.
Board structure and corporate governance
Following Completion, responsibility for the strategic direction
and day to day management of the Rex business will be assumed by
the board and management of Rex Pty, although the Company will
continue to provide strategic input through its representative on
the Rex Pty board.
As a result of the Proposed Transaction, the Company will no
longer have the scale of activities to justify its current
organisational structure. The Board therefore intends to initiate
an accelerated evaluation of structural options for the Company,
including whether to continue trading of its shares on AIM, that
would enable it to reduce its costs while nurturing shareholders'
investment in the REX technology. As an AIM Rule 15 cash shell, the
Company will therefore have six months to make an acquisition which
represents a reverse takeover or seek the cancellation of its
admission to trading on AIM.
It is intended that substantial reductions will be made to the
Board. Crispin Simon, Chief Executive Officer, will resign from his
role as Chief Executive immediately on Completion, but will serve
as a non-executive director for a short transitional period. All of
the existing Non-Executive Directors with the exception of David
Macfarlane, Non-Executive Chairman, will resign immediately on
Completion. Mr Macfarlane has agreed to continue in his current
role, and will appoint at least one additional director following
Completion.
Financial position of the Company post-Completion
Under the Subscription Agreement, and in addition to the
potential of the Second Investment, the BML Funds have committed to
providing ongoing base cost funding to the Company, through its
investment in Rex Pty, with the quantum of such funds planned to
allow the Company to continue in operation as a going concern for a
period of three years following Completion. The amount of this
funding expected to be received by the Company on Completion is
approximately AUD721,000 (approximately GBP419,000) (the "Rex Pty
Payments"). The terms of Rex Pty Payments include certain customary
restrictions on the use of such funds.
In consideration of the funding described above, the Company,
Rex Pty and BML have agreed a three-year period (the "Standstill
Period") in which, subject to certain permitted transfers, the
Company will be unable to distribute its shares in Rex Pty.
The Board believes that, taking into account the cash reserves
available to the Company at Completion and the Rex Pty Payments,
the Company has sufficient cash resources to meet the obligations
and liabilities not assumed by Rex Pty at Completion (which
include, but are not limited to, professional advisers' fees, fees
payable to AIM, past and future tax liability, liabilities relating
to the REX business but which accrued before Completion).
Trading Update
Further to the Interim Results Announcement and the March 2017
Announcement, the Company has made further good progress with its
clinical trial programme; and product development (which includes
the project with the US Army) and commercial activities have
continued, albeit on a low investment basis.
Further details can be found in the Circular.
Waiver of payments to Directors
In the circumstances, the Non-Executive Directors, who are, in
aggregate, owed a total of approximately GBP250,000 in salaries and
director's fees, have agreed to waive repayment of these monies
owed to them.
Crispin Simon, Chief Executive Officer, is owed a total of
approximately GBP75,000 by way of unpaid salary and bonuses. In
recognition of the work undertaken by him in finalising the
Proposed Transaction, the Board has agreed that he will not waive
such arrears, but he has agreed that these monies will only become
repayable, if ever, without using any of the Rex Pty Payments
provided by Rex Pty to meet the Company's ongoing expenses, when
the Company is in a financial position to repay them (acting
properly and fairly in relation to all its creditors). If ever the
repayment of these monies would make any liquidation of the Company
insolvent (or more so) Crispin would waive the repayment. Further,
if the Company were restructured the Company has agreed to procure
the transfer of this arrangement to its successor.
Nominated Adviser
The Company's nominated adviser, Stifel, has notified the
Company of its intention to resign on 26(th) May 2017. In the event
that no alternative nominated adviser has been appointed before
that time, or other alternative arrangement had been made, the
Company's ordinary shares will therefore then be suspended with no
certainty that trading would resume at any time. If no new
nominated adviser is appointed within one month of Stifel's
resignation, the Company's admission to trading on AIM will be
cancelled.
David Macfarlane, Chairman, commented "We are pleased to have
signed these agreements which will enable the continued development
of the REX technology. Rex has made a lot of progress in respect of
product quality, clinical data and user satisfaction across a range
of neurological conditions, and I warmly thank our shareholders,
who have made this possible. I would also like to take this
opportunity to thank our nominated adviser, Stifel, for its
unstinting support over the past three years."
Crispin Simon, Chief Executive, commented "We were disappointed
not to have been able to raise funds at the PLC level, so I am
delighted that the alternative options we have been pursuing have
borne fruit. The agreements we are announcing today will enable the
continued development of the REX technology, ensure that
shareholders retain an interest in the underlying assets, and allow
Rex to continue to work towards its vision - that every day,
thousands of people get relief with REX, from the pain, discomfort
and inconvenience of severe neurological conditions."
APPIX: FURTHER DETAILS ON THE AGREEMENTS
-- Asset Transfer Agreement between the Company and its
wholly-owned Australian subsidiary Rex Bionics Pty Ltd ("Rex Pty"):
This agreement provides for the transfer by the Company of
essentially all of the Rex business and assets (but not cash) to
Rex Pty for a consideration of 2,551,286 shares in Rex Pty,
bringing the Company's total shareholding in Rex Pty to 2,551,386
shares. The transfer will include ownership of the entire issued
share capital of the Company's two other wholly-owned subsidiaries:
Rex Bionics Ltd (New Zealand), which owns the majority of the
Group's tangible and intangible assets, and Rex Bionics Inc (United
States). All intercompany debts will be waived or repaid on
Completion.
-- Subscription Agreement between the Company, Rex Pty and funds
managed by BioScience Managers Pty Ltd, a fund management company
based in Melbourne Australia: Under the terms of this agreement,
the BML Funds will together make an initial investment in Rex Pty
of AUD7.5 million (GBP4.4 million) in aggregate to acquire
4,535,797 shares, at a price per share of approximately AUD1.65.
The BML Funds have also committed to make a further investment of
AUD2.5 million (GBP1.5 million) at the same price per share (the
"Second Investment"), subject to the achievement of specified
performance milestones. At the time of the Second Investment by the
BML Funds, the Company will have the right to make or procure an
investment in Rex Pty up to its pro rata entitlement on the same
terms as the BML Funds.
Immediately following the initial investment, the enlarged
issued share capital of Rex Pty will amount to 7,087,183 shares,
equating to an equity value of AUD11.69 million (GBP6.80 million)
at the price per share paid by BML Funds. The Company will then, on
a fully undiluted basis, own 36% of the enlarged issued share
capital and the BML Funds will jointly directly own 64%. At the
price per share paid by the BML Funds, the Company's holding in Rex
Pty would be valued at approximately AUD4.21 million (GBP2.45
million), equivalent to approximately 10p per the Company share,
representing an 82% premium to the closing mid-market price of the
Company shares on 2(nd) May 2017.
The BML Funds have a mission to promote technological innovation
in Australia, specifically including healthcare. As a result, the
Company expects there to be significant investment in staff,
facilities and development programmes in Australia. In other
respects, it expects that the new Rex Pty management team will
broadly follow the strategic approach to developing and
commercialising the REX technology that has been pursued in recent
times, notably the investment in clinical data generation and the
development of Robot-Assisted Physiotherapy techniques and
protocols, as well as a continued commercial focus on the US and
Chinese markets.
-- Shareholders Deed between the Company, Rex Pty and the BML
Funds: This deed regulates the arrangements following Completion
for the operation of Rex Pty and includes the right for the Company
to appoint a director of Rex Pty as well as standard pre-emption
clauses.
-- Collaborative Development Agreement between Rex Pty and
McLaren Applied Technologies Ltd, based in Woking, UK: This
agreement is focused on the next phase of the design and
development of the REX product that builds on the clinical and
competitive advantages of the existing REX device whilst at the
same time seeking to achieve a significant reduction in
manufacturing cost and improvements in the product's aesthetics and
ergonomics.
The joint development programme is planned to take approximately
two years to bring the upgraded REX device to the point of transfer
to manufacturing. Further funding is likely to be required to
commercialise the new product, which could result in further
substantial dilution of the Company's stake in Rex Pty. Were the
Company unable to invest alongside the Second Investment, its
interest in Rex Pty would reduce to 29.7%. If McLaren had fully
exercised the warrants granted to it under this agreement (the
"McLaren Warrants") by the time of the Second Investment, and if
the Company were unable to invest alongside the Second Investment,
the Company's interest in Rex Pty would be diluted to 29.2%. To the
extent that any further funds are required to support completion of
the development programme, while the Company would have some
pre-emption protections while it holds more than 15% in Rex Pty,
its interests in Rex Pty could be further diluted. Rex Pty will pay
for McLaren's services expertise and accessing its knowhow and
other intellectual property through a combination of cash, funded
through BML's equity investment in Rex Pty, the McLaren Warrants
(which, if fully exercised, before the Second Investment or if at
the time of the Second Investment the Company were able to invest
alongside the BML Funds at its pro rata entitlement, would decrease
the Company's interest in Rex Pty to 35.3%), and royalties payable
at a low-to-mid single digit percentage level of future sales (with
minimum royalty payments coming into effect from the second
anniversary following the launch of the new product).
Inside Information
This announcement contains inside information. The person
responsible for arranging for the release of this announcement on
behalf of the Company is Peter Worrall.
A copy of this announcement has been posted on the Company's
website at www.rexbionics.com/.
For further information, please contact:
Rex Bionics Plc
Crispin Simon, Chief Executive Officer
+44 (0) 7483 167851
Stifel Nicolaus Europe Limited (NOMAD and Broker)
Jonathan Senior / Stewart Wallace / Ben Maddison
+44 (0) 20 7710 7600
Consilium Strategic Communications
Mary-Jane Elliott / Chris Welsh
rexbionics@consilium-comms.com
+44 (0) 203 709 5700
About Rex Bionics Plc
Rex Bionics is the pioneer of the "REX" that provides robotic
standing, walking and exercise support for wheelchair users; and
was founded by two British engineers with first-hand experience of
the needs of wheelchair users. REX is used by people who have
suffered a spinal cord injury, stroke or other traumatic brain
injury; and people with multiple sclerosis, muscular dystrophy and
cerebral palsy.
We are working with physiotherapists to develop the concept and
practice of Robot-Assisted Physiotherapy (RAP); and also offer REX
P, for use in the home, enabling customers to walk and stand with
their hands free - providing more work and recreation options.
Wheelchair users are at risk of developing numerous medical
complications from extended periods of sitting. By enabling them to
spend more time standing, walking and exercising, REX may offer
significant health benefits, including improved sleep and
maintenance of joint range, and a reduction in spasm, pain, common
abdominal problems and prescription drug use.
Our commitment to engineering excellence is complemented by a
commitment to clinical science and the RAPPER II clinical trial
results show high levels of practicality, safety and user
enthusiasm.
Our Vision is that every day, around the world, thousands of
people get relief with REX, from the harm - the pain, discomfort
and inconvenience - of neurological accidents and illnesses.
Rex Bionics was admitted to trading on the London Stock
Exchange's AIM in 2014. REX is not registered for At-Home use in
the United States of America.
Enquiries to (info@rexbionics.com)
This information is provided by RNS
The company news service from the London Stock Exchange
END
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