Proposed Placing of £1.7 million and Broker Option of £1.0 million

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND FOR INFORMATION PURPOSES ONLY AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, AND DOES NOT CONSTITUTE AN OFFER OF SECURITIES FOR SALE IN, INTO OR FROM THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION, DISTRIBUTION, OFFER OR SALE WOULD BE UNLAWFUL. PLEASE SEE THE IMPORTANT NOTICES SECTION OF THIS ANNOUNCEMENT.

THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE OR CONTAIN ANY INVITATION, SOLICITATION, RECOMMENDATION, OFFER OR ADVICE TO ANY PERSON TO PURCHASE AND/OR SUBSCRIBE FOR, OTHERWISE ACQUIRE OR DISPOSE OF ANY SECURITIES IN OTAQ PLC OR ANY OTHER ENTITY IN ANY JURISDICTION.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF EU REGULATION 596/2014 (WHICH FORMS PART OF DOMESTIC UK LAW PURSUANT TO THE EUROPEAN UNION (WITHDRAWAL) ACT 2018), AS AMENDED. ON PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INFORMATION IS CONSIDERED TO BE IN THE PUBLIC DOMAIN AND ANY PERSONS WHO RECEIVED INSIDE INFORMATION IN A MARKET SOUNDING ARE NO LONGER IN POSSESSION OF SUCH INSIDE INFORMATION.

 

OTAQ PLC

Proposed Placing of £1.7 million 10% Secured Convertible Loan Notes 2027

Broker Option through Dowgate Capital to allocate up to an additional
£1.0 million 10% Secured Convertible Loan Notes 2027

Waiver under Rule 9 of the City Code
on Takeovers and Mergers

 

26 June 2024

 

OTAQ PLC, (“OTAQ” or the “Company”), a highly innovative technology company targeting the aquaculture and offshore markets, announced a proposed fundraising on 17 May 2024.  A placing has been conducted by Dowgate Capital to issue £1.7 million 10% Convertible Loan Notes 2027 at par, with a potential further issue by OTAQ of up to £1.0 million further Convertible Loan Notes 2027 under a Broker Option granted by the Company to Dowgate Capital. Further details of the Fundraise, including the terms of the Notes and conditions of the Placing, are set out in this announcement and in a Circular being posted to shareholders today, which will also be available on the Company’s website at https://otaq.com/.

 

The Circular contains notice of a general meeting of the Company to be held on 12 July 2024 at which resolutions relating to the Placing will be proposed.

 

1. INTRODUCTION

 

At the time of the Company’s acquisition of OTAQ Group Limited on 31 March 2020, it was agreed with the Takeover Panel that certain Shareholders were 'acting in concert' in relation to the Company). The Concert Party, as originally constituted, which also includes the Discretionary Funds managed by Dowgate Wealth Limited and other funds managed by members of the Dowgate Group, now holds 28,438,899 Ordinary Shares representing 22.15 per cent. of the Voting Share Capital.  Recent discussions with the Takeover Panel in the context of certain wider relationships between shareholders have resulted in others being deemed to be 'acting in concert' in relation to the Company.  The Enlarged Concert Party includes: Nigel Wray and Euroblue Investments Limited (a company controlled by Mr Wray); Giles Clifford and Adam Reynolds (directors of OTAQ); and Onward Opportunities Limited, a closed-ended investment company managed by a small team headed by Laurence Hulse, who is an Investment Director of Dowgate Wealth.  The Enlarged Concert Party holds 57,141,078 Ordinary Shares representing 44.51 per cent. of OTAQ’s Voting Share Capital.

 

As set out below, under the Takeover Code, any change in the Enlarged Concert Party’s shareholding in the Company, which results in an increase in the percentage of the Voting Share Capital of the Enlarged Concert Party would result in the Enlarged Concert Party normally being required to make a mandatory cash offer to all the remaining Shareholders to acquire their Ordinary Shares in cash and at the highest price paid by any member of the Enlarged Concert Party in the preceding 12 months.

 

Certain members of the Enlarged Concert Party have given commitments to subscribe for Convertible Loan Notes in the Fundraise.  In the event that the members of the Enlarged Concert Party acquire and then exercise the conversion rights attaching to the Convertible Loan Notes, the percentage interest of the Enlarged Concert Party may increase to a maximum of 54.50 per cent. (assuming that only Notes held by the Concert Party are converted into new Ordinary Shares excluding SIP Allocations).

 

Philip Newby, Chief Executive Officer, and Dr Harald Rotsch, Chief Technology Officer, of the Company who are participants in the Company’s Share Inventive Plan, are deemed to be members of the Concert Party.  Under the SIP, any member of staff can contribute up to £150 per month under salary sacrifice arrangements to buy existing Ordinary Shares. The Company then matches this by allotting additional new Ordinary Shares on a 1:1 basis, so the maximum number of Ordinary Shares allocated to each participating employee is £300 divided by the prevailing market price. Accordingly, an illustrative 130,000 new Ordinary Shares are authorised to be allocated to each of Philip Newby and Harald Rotsch, who are each entitled under the SIP to 13 monthly Ordinary Share allocations valued at £300 each prior to June 2025. If such SIP Allocations are received in full, this would result in an increase in the aggregate shareholding of the Concert Party to an illustrative maximum of 54.66 per cent. as explained below.

 

The Company has consulted with the Takeover Panel which has agreed to waive the requirement for the Enlarged Concert Party to make a mandatory cash offer to all Shareholders under Rule 9 of the Takeover Code to all the remaining Shareholders to acquire their Ordinary Shares in cash, in the specific circumstance where those members of the Enlarged Concert Party’s aggregate shareholding increases either on conversion of Notes into new Ordinary Shares thereby resulting in an increase in the aggregate percentage holding of Ordinary Shares or as a result of the SIP allocations (the “Rule 9 Waiver”). The Rule 9 Waiver is subject to and conditional upon the approval by a vote of Independent Shareholders on a poll at a General Meeting of the Company. 

 

2. BACKGROUND TO AND REASONS FOR THE FUNDRAISE

 

About the Group

 

OTAQ is a highly innovative technology company targeting the aquaculture and offshore markets. It already has a number of established products in its portfolio and is focused on further developing its presence, customer base and cross selling opportunities within core markets both organically and via acquisition.

 

The Company’s prime focus remains the provision of technology services to the aquaculture sector, which includes technologies to support shrimp farming and to monitor and manage water quality more widely across the sector. Specifically, the aquaculture division products include a sonar device (developed for Minnowtech LLC) to scan shrimp in ponds and water quality monitoring. The Company has developed and now launched LPAS a live plankton analysis product for finfish and shellfish farmers. OTAQ also continues to target opportunities for production and sale of its Sealfence acoustic deterrent device primarily for the salmon farming sector.

 

OTAQ’s offshore division product range includes OceanSense subsea leak detection, Eagle IP camera systems and Lander seabed survey devices. The Company is also focused on the development of new products through this division, with the aim of increased cross-deployment of skills and technologies into the aquaculture arena.

 

OTAQ’s connectors division includes the manufacture of subsea electrical connectors and penetrators to operate in challenging subsea applications in the offshore oil and gas, commercial diving and renewable energy markets. The Company’s connectors products have a variety of uses including for diving chambers, survey and drilling equipment and remote operated vehicles.

 

Reasons for the Fundraise

 

The Group’s product range includes some which are relatively new (LPAS was launched in May 2024) and others which are still being developed and/or tested.  Delays in bringing new products to market and into production have contributed to the Group’s cash resources becoming stretched leading to the need for the Placing.  In these circumstances it is difficult to make reliable cash flow forecasts, leading to a relatively conservative approach being taken.  Cash generation in Q1 2024 was better than budgeted with a strong contribution from connector sales offsetting a weakness in aquaculture revenues.  Overall, the Board of Directors of the Company (the “Board”) believes that the Group’s revenue generating products, together have the potential to generate sufficient cash flow to cover all expenditure by the end of 2025.  The Fundraise addresses the Group’s anticipated working capital requirements to continue to operate as a going concern.

 

Certain of the Group’s major shareholders have made Placing commitments, demonstrating their confidence in the Group’s prospects.  These commitments result in a conflict of interest between them and the Company.  See paragraph 5. ‘Related Party involvement in the Placing’ below.

 

3. EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Publication of the Circular   26 June 2024

 

Latest time and date for receipt of completed Forms of Proxy 10.00 a.m. on 10 July 2024
and electronic proxy submissions

 

Latest time and date for CREST voting instructions 10.00 a.m. on 10 July 2024

 

General Meeting 10.00 a.m. on 12 July 2024

 

Result of General Meeting announced as soon as possible on 12 July 2024

 

Issue of the Convertible Loan Notes under the Placing  as soon as possible following the General Meeting

 

Expiry of the Broker Option 5.00 p.m. on 31 December 2024

 

Each of the times and dates above refer to London time and are subject to change. Any such change will be notified by an announcement through a Regulatory Information Service. All events listed in the above timetable following the General Meeting are conditional upon the passing of the Resolutions at the General Meeting. In addition, the Placing is conditional upon, amongst other things, the Placing Agreement (as defined below) not having been terminated in accordance with its terms and Second Admission becoming effective.

 

4. DETAILS OF THE FUNDRAISE

 

Details of the Placing and the Broker Option

 

Dowgate Capital has conditionally placed £1.7 million of Placing Convertible Loan Notes with new and existing investors.

 

In order to accommodate potential additional demand for Convertible Loan Notes, the Company has granted the Broker Option of up to £1.0 million to Dowgate Capital to enable Dowgate Capital to fulfil any additional requests for Convertible Loan Notes in excess of the £1.7 million conditionally raised in the Placing. The Broker Option is exercisable by Dowgate Capital at its absolute discretion, at any point up to 5.00 p.m. on 31 December 2024 and there is no obligation on Dowgate Capital to exercise the Broker Option or to seek to procure subscribers for any Broker Option Convertible Loan Notes pursuant to the Broker Option.  Any Broker Option Convertible Loan Notes issued pursuant to the exercise of the Broker Option will be issued on the same terms and conditions as the Placing Convertible Loan Notes but may be issued at a higher price.

 

The Company and Dowgate Capital have entered into the Placing Agreement, pursuant to which Dowgate Capital has agreed to use its reasonable endeavours to procure subscribers for the Placing Convertible Loan Notes pursuant to the Placing.  The Placing Agreement also sets out the terms of the Broker Option granted by the Company to Dowgate Capital.  The Company has agreed to pay all costs and expenses relating to the Fundraise including commissions payable to Dowgate Capital.

 

The Placing Agreement contains certain customary warranties and indemnities by the Company in favour of Dowgate Capital.  It also contains provisions entitling Dowgate Capital to terminate the Placing Agreement if, amongst other things, there is a breach of any of the warranties given by the Company which Dowgate Capital (acting reasonably) considers to be material in the context of the Fundraise or in the opinion of Dowgate Capital, there shall have occurred any 'Material Adverse Change' (as defined in the Placing Agreement).

 

The Placing Agreement is conditional upon, inter alia:

• the Resolutions being validly passed at the General Meeting; and
• the Placing Convertible Loan Notes being issued on 12 July 2024 or such later time and/or date as the Company and Dowgate Capital may agree (but in any event by no later than 31 July 2024).

 

Neither the Placing nor the Broker Option has been, nor will be, underwritten. 

 

The Fundraise will, if the Broker Option is exercised in full and the maximum principal amount of Broker Option Convertible Loan Notes are issued, result in the issue, upon conversion of all of the Convertible Loan Notes, of up 90,000,000 new Ordinary Shares, representing approximately 41.21 per cent. of the Enlarged Share Capital of the Company as at the date of the issue of the Convertible Loan Notes (excluding any SIP Allocations).

 

Details of the Convertible Loan Notes

 

The Company is proposing to issue Convertible Loan Notes in an aggregate amount of up to £2.7 million under the Fundraise. 

 

The Convertible Loan Notes will be issued pursuant to the instrument executed by the Company on 26 June 2024 (the “Convertible Loan Note Instrument”). The principal terms of the Convertible Loan Notes under the Convertible Loan Note Instrument are as follows:

• the Convertible Loan Notes will be issued with an initial maturity date of 25 June 2027, subject to optional one-year extensions upon written consent of both the Company and the noteholders, to 26 June 2028, and thereafter to 25 June 2029 (in each case as applicable, the “Maturity Date”);
• interest on the Convertible Loan Notes will accrue at a rate of 10% and shall be paid by the Company on a quarterly basis;
• the Convertible Loan Notes are convertible into Ordinary Shares, at a conversion price of 3.0 pence per Ordinary Share, in whole or in parts of no less than £25,000 (or less if it represents a Noteholder’s entire holding), (i) at any time prior to the Maturity Date upon a Noteholder’s option; or (ii) automatically upon a change of control of the Company;
• any new Ordinary Shares issued pursuant to any conversion of the Convertible Loan Notes will, once issued, rank pari passu with the Ordinary Shares in issue at that time and application for admission to trading on the AQSE Growth Market in respect of such Ordinary Shares will be made at the appropriate time.
• the Convertible Loan Notes are redeemable in cash at par plus a redemption premium of 15 per cent., and any outstanding accrued but unpaid interest, upon (i) the applicable Maturity Date (ii) a change of control of the Company;
• as detailed in the Convertible Loan Note Instrument the Convertible Loan Notes will be secured by a first ranking charge over certain of the Company’s Sealfence products, in the event of a disposal by the Company of its Sealfence products, the Noteholders will have a right to redeem their Convertible Loan Notes in cash in an aggregate amount up to 50 per cent. of the net cash proceeds received by the Company for such disposal, to be divided pro rata between such redeeming Noteholders;
• while any Convertible Loan Notes remain outstanding, the agent for the Noteholders will be entitled to appoint a non-executive director to the board of the Company. The Agent NED shall be entitled to a fee of £20,000 per annum in relation to the Board appointment; and
• the Convertible Loan Note Instrument contains customary covenants and events of default provisions.

 

Investors may subscribe for Convertible Loan Notes for an aggregate minimum amount of £1,000.00 in the Placing or the Broker Option.

 

The issue of the Convertible Loan Notes, as with the completion of both the Placing and the Broker Option, is among other things conditional on the passing of the Resolutions at the General Meeting,

 

5. CURRENT TRADING AND OUTLOOK

 

As announced on 17 May 2024, the Company expects to announce that trading in the year to 31 December 2023 was slightly ahead of management’s expectations with revenues of not less than £4.4 million (2022: £4.0 million).  The Company expects to report a reduced EBITDA loss of approximately £311,000 (2022: £331,000).  The EBITDA loss is some £66,000 higher than previous guidance, due to certain non-recuring items.  The Company continues to manage its limited cash resources with care, and it continues with scheduled repayments of the CBILS loan, which is down to £817,000.  The Company’s audited full year results to 31 December 2023 will be announced on or before 28 June 2024.

 

The Directors confirm that the above profit estimates remain valid have been properly compiled on the basis of the assumptions stated and that the basis of accounting used is consistent with the Company’s accounting policies.

 

Trading in Q1 FY24 has been encouraging, with revenues up 19 per cent. over Q1 FY23. and the Company continues to see progress across the Group.  The Offshore Products division has maintained the positive performance seen in 2023.  Aquaculture has also seen a number of positive developments.  The Company’s sonar shrimp system developed for Minnowtech LLC, is now gaining traction in its target markets.  The Company has also identified further new customer interest in the Company’s established Sealfence solution from salmon farmers in several major salmon production regions, having sold 19 Sealfence units into these core target markets in the first quarter.

 

The Company has also confirmed that following more than three years in development, OTAQ has now completed successful trials of its Live Plankton Analysis System (LPAS), and recently launched LPAS at the Aquaculture UK conference.

 

6. RELATED PARTY INVOLVEMENT IN THE PLACING

 

Dowgate Group controls 13.41 per cent. of the Total Voting Rights and is a substantial shareholder and a related party (as defined in the AQSE Rules.  Dowgate Capital, the Company’s AQSE Corporate Adviser and broker, is arranging the Placing and Dowgate Wealth Limited is the manager of Onward Opportunities Limited, which has committed to invest £500,000 in the Placing.  David Poutney, a director of and shareholder in Dowgate Group and his wife has committed to invest £300,000 in the Placing.

 

Dowgate Capital has entered into the Placing Agreement which includes the Broker Option with the Company, as described above and in the summary of the Placing Agreement which is set out in the Circular.

 

In view of Dowgate Capital’s conflict of interest arising from the above, it has not advised the Board in relation to the terms of the Convertible Loan Notes and the Board sought advice on the Terms of the Notes from Guild Financial.

 

In the context of the Group’s current negative cash flows and lack of sufficient working capital to cover expected losses until cash flow break-even is reached, it is necessary to offer potential Placees Notes on terms which reflect the high risk nature of their investment.  Consideration was given to the issue of new Ordinary Shares but in current market conditions, the discounted price at which any new shares would have to be offered would be considerably more dilutive than the Notes (if they could be placed at all).  Accordingly, the issue of the Notes represents a practicable solution for funding the Group.

 

The Board, having been so advised by Guild Financial, believes that the terms of the Placing Agreement, Broker Option and the Notes, all of which are contracts with related parties (as defined in the AQSE Rules) are fair and reasonable so far as Shareholders as a whole are concerned.

 

7. USE OF PROCEEDS

 

The Fundraise is intended to enable the Company to continue with the positive commercial momentum described above. In particular, the Independent Director considers that the Convertible Loan Notes represent an overall funding solution for the Company’s needs that would likely be less dilutive to Shareholders than performing a traditional equity fundraising in the current macroeconomic environment.

 

The Company expects to receive gross proceeds of approximately £1.7 million pursuant to the Placing and £1.0 million pursuant to the Broker Option (assuming this is exercised in full).

 

The Company intends to use the net proceeds of the Fundraise principally:

• to repay in full of the CBILS Loan, of which approximately £0.8 million remains outstanding,
• for further product development; and
• for general working capital purposes.

 

The Directors will continue to assess suitable available funding options for the Company going forward for the purposes of bolstering the Company’s working capital position and securing the funding necessary to pursue its corporate strategy.

 

4. THE TAKEOVER CODE

 

1. Information on the Enlarged Concert Party

 

Each of the persons and entities listed in the table below are together considered to be 'acting in concert' for the purposes of the Takeover Code in relation to the Company.  As at 5.00 p.m. on 24 June 2024 (being the last practicable date prior to this announcement, members of the Enlarged Concert Party have an interest in an aggregate 57,141,078 Ordinary Shares equating to an aggregate of 44.51 per cent. of the existing Voting Share Capital. 

 

Included in the Enlarged Concert Party’s shareholding are the purchase and allocation of existing Ordinary Shares and allotment of new Ordinary Shares of the value of up to £300 per month under the SIP could increase the shareholdings of Philip Newby and Dr Harald Rotsch, both members of the Enlarged Concert Party.  The number and percentage of the Total Voting Rights represented by these Ordinary Shares depends on the prevailing share price at the relevant times.  Based on an illustrative share price of an Ordinary Share of 3 pence and assuming that the SIP Allocations are made in full prior to the 2025 annual general meeting (when a resolution to renew the Rule 9 waiver in relation to subsequent SIP allocations can be proposed), an illustrative 260,000 new Ordinary Shares would be allocated to members of the Concert Party.  Assuming no new Ordinary Shares are issued save for conversions of Notes held by Concert Party members, allocation of 260,000 Ordinary Shares to members of the Concert Party over the period to the end of June 2025 would increase the Enlarged Concert Party’s shareholding to 85,734,411 Ordinary carrying 54.66 per cent. of the enlarged Total Voting Rights.  Resolutions are expected to be proposed at annual general meetings in 2025 and in later years to approve waivers of possible mandatory offers arising from SIP allocations of Ordinary Shares to members of the Concert Party in the years following each such general meeting.

 

No further SIP allocations will be made if they would trigger a mandatory offer under the Takeover Code.  The SIP allocation for May 2024 has been deferred until after the General Meeting.

 

The table below also sets out the intended participation in the Placing by certain members of the Enlarged Concert Party and their resulting shareholding upon conversion of the Convertible Loan Notes.

 

Name	Current holding	% of Existing Ordinary Shares as at the date of this Circular	CLN Sub-scription	Shares upon CLN conversion	Enlarged share-holding	max %age after Note conversion and SIP Allocation(1)	%age after full Note conversion inc. Broker Option(2)
		(%)	(£)			(%)	(%)
David Poutney and spouse	2,533,187	1.97%	300,000	10,000,000	12,533,187	7.99%	5.74%
Dr Harald Rotsch (3)	2,494,520	1.94%	-	-	2,494,520	1.59%	1.14%
Philip Newby and family (4)	1,507,080	1.17%	-	-	1,507,080	0.96%	0.69%
Dowgate Group Limited	1,181,958	0.92%	-	-	1,181,958	0.75%	0.54%
CTG Investment Limited	1,149,976	0.90%	-	-	1,149,976	0.73%	0.53%
Sarah Stoten	993,648	0.77%	-	-	993,648	0.63%	0.45%
James Serjeant and family (5)	798,734	0.62%	-	-	798,734	0.51%	0.37%
Sherron Hemsley	521,419	0.41%	-	-	521,419	0.33%	0.24%
Deborah Robinson	429,731	0.33%	-	-	429,731	0.27%	0.20%
Dr George Peter Robinson	408,859	0.32%	-	-	408,859	0.26%	0.19%
Dr Jonathan Serjeant	263,520	0.21%	-	-	263,520	0.17%	0.12%
Paul Richards	237,304	0.18%	-	-	237,304	0.15%	0.11%
Alice Poutney Wall	201,000	0.16%	-	-	201,000	0.13%	0.09%
Madeleine Poutney	150,000	0.12%	-	-	150,000	0.10%	0.07%
Chris Hyde	69,426	0.05%	-	-	69,426	0.04%	0.03%
Sammy French	50,189	0.04%	-	-	50,189	0.03%	0.02%
Nigel Gaymer	48,784	0.04%	-	-	48,784	0.03%	0.02%
Peter McKenzie	45,000	0.04%	-	-	45,000	0.03%	0.02%
Dowgate Capital - Discretionary	15,161,964	11.81%	-	-	15,161,964	9.67%	6.94%
Dowgate Wealth - Discretionary	192,600	0.15%	-	-	192,600	0.12%	0.09%
Concert Party	28,438,899	22.15%	300,000	10,000,000	38,438,899	24.51%	17.59%
Nigel Wray (6)	24,714,868	19.25%	-	-	24,714,868	15.76%	11.31%
Adam Reynolds	893,181	0.70%	-	-	893,181	0.57%	0.41%
Giles Clifford	625,000	0.49%	-	-	625,000	0.40%	0.29%
Onward Opportunities	674,663	0.53%	500,000	16,666,667	17,341,330	11.06%	7.94%
Stuart Parkinson	1,691,153	1.32%	50,000	1,666,667	3,357,820	2.14%	1.54%
Simon Carter and family (7)	103,314	0.08%			103,314	0.07%	0.05%
Enlarged Concert Party (Exc SIP Allocations)	57,141,078	44.51%	850,000	28,333,333	85,474,411	54.50%	39.12%
SIP Allocations	-	-	-	260,000	260,000	0.17%	0.12%
Enlarged Concert Party total	57,141,078	44.51%	850,000	28,333,333	85,734,411	54.66%	39.24%

 

1. Percentage shareholding on basis that all CLNs held by members of Enlarged Concert Party are converted, all other CLNs are not converted
2. Percentage shareholding on basis that all CLNs are converted
3. Shareholding could increase by 130,000 new Ordinary Shares being an illustrative number which could be allocated under the Company’s SIP prior to June 2025
4. Includes holding of 349,606 Ordinary Shares held by Mr Newby’s spouse and 15,654 held by his son.  Shareholding could increase by 130,000 new Ordinary Shares being an illustrative number which could be allocated under the Company’s SIP prior to June 2025
5. Includes 56,792 Ordinary Shares held by Mr Sergeant’s spouse, and 24,000 Ordinary Shares held by his two sons.
6. Mr Wray’s shareholding are held in Euroblue Investments, an investment vehicle owned and controlled by Mr Wray
7. Includes 37,568 Ordinary Shares held by Mr Carter’s two daughters and 28,177 Ordinary Shares held by his mother

 

Following full conversion of the Convertible Loan Notes and the SIP Allocations, and assuming no other changes to the Company’s issued share capital, the members of the Enlarged Concert Party will be interested in 85,734,411 Ordinary Shares representing 39.24 per cent. of the enlarged Total Voting Rights.

 

Assuming that the members of the Enlarged Concert Party convert their Convertible Loan Notes in full and receipt of the SIP Allocations, assuming that no other person converts any Convertible Loan Notes or exercises any options or any other right to subscribe for Ordinary Shares in the Company, the members of the Enlarged Concert Party would be interested in 85,734,411 Ordinary Shares representing 54.66 per cent. of the enlarged Total Voting Rights of the Company.  The table above sets out the respective individual interest in the Ordinary Shares of the members of the Enlarged Concert Party upon conversion of the Convertible Loan Notes.,

 

Shareholders should be aware that upon members of the Enlarged Concert Party exercising their right to convert their interests in the Convertible Loan Notes as set out above, the members of the Enlarged Concert Party will hold shares carrying more than 50 per cent. of the enlarged Total Voting Rights of the Company and (for so long as they continue to be acting in concert) may accordingly increase their aggregate interests in the Ordinary Shares without incurring any further obligations under Rule 9 to make a mandatory offer, although individual members of the Enlarged Concert Party will not be able to increase their percentage shareholding through or between a Rule 9 threshold without the consent of the Takeover Panel.

 

The Company has issued 22,499,978 Warrants to subscribe for new Ordinary Shares at a price of 12p each.  The Warrants expire on 9 November 2024.  The highest mid market price of an Ordinary Share in the 12 months preceding the date of this announcement  is 6p.  In these circumstances the likelihood of any Warrants being exercised appears to the Independent Director to be remote and in any event no waiver is being sought for any increase in the Concert Party’s percentage shareholding to the extent that it arises from the exercise of Warrants.

 

Further information on the Enlarged Concert Party is set out in the Circular.

 

2. Application of the Takeover Code

 

Under Rule 9 of the Takeover Code, any person who acquires, whether by a series of transactions over a period of time or not, an interest in shares (as defined in the Takeover Code) which when taken together with shares in which that person or persons acting in concert with that person are already interested in or acquired by persons acting in concert with him/her, carry 30 per cent. or more of the voting rights of a company which is subject to the Takeover Code or is interested in 30 per cent. or more but does not hold more than 50 per cent. of the shares carrying voting rights of such a company and acquires an interest in any additional shares carrying voting rights of that company, is normally required to make a general cash offer to all the remaining shareholders of the company to acquire their equity shares and transferable securities carrying voting rights in the company. An offer under Rule 9 of the Takeover Code must be in cash at the highest price paid by the person or the group of persons acting in concert in the preceding 12 months.

 

Accordingly, pursuant to Rule 9 of the Takeover Code, if the members of the Enlarged Concert Party (who already control over 30 per cent. of the Total Voting Rights) were to exercise any of the conversion rights attached to the Notes for which they have entered into Placing Commitments, this would result in an increase to the percentage of the Voting Share Capital which the Enlarged Concert Party controls.  As a consequence, the Enlarged Concert Party would be required to make a mandatory cash offer to all other Shareholders of the Company to acquire their Ordinary Shares, unless such obligation has been waived by the Takeover Panel.

 

3. Takeover Panel Waiver

 

In order for the Noteholders within the Enlarged Concert Party to convert their Convertible Loan Notes into new Ordinary Shares without triggering a mandatory offer obligation for the Enlarged Concert Party, the Company has consulted with the Takeover Panel and the Takeover Panel has agreed to the Rule 9 Waiver.

 

This Rule 9 Waiver is subject to the approval by a vote of Independent Shareholders on a poll at the General Meeting.  The Rule 9 Waiver Resolution seeks this approval.  Accordingly, should Independent Shareholders approve the Rule 9 Waiver Resolution, they will be waiving the requirement for the Enlarged Concert Party (and any of other members of the Enlarged Concert Party) to make a mandatory general cash offer under Rule 9 of the Takeover Code as a result of the issue of the new Ordinary Shares to those members of the Concert Party upon conversion of their Convertible Loan Notes.

 

If all Noteholders who are members of the Concert Party convert their respective holdings of Convertible Loan Notes into new Ordinary Shares and no other Notes are converted and there are no other changes to the Company’s issued share capital, then the Enlarged Concert Party would, in aggregate, hold interests in Ordinary Shares carrying a maximum of 54.66 per cent. of the Total Voting Rights (including the SIP Allocations).

 

4. Intentions of the Enlarged Concert Party

 

The Enlarged Concert Party has confirmed that it has no intention to change the Company’s plans with respect to:

(i) the composition of the Board (save for the appointment of a nominated director disclosed below), nor the Company’s or the Group's plans with respect to the continued employment of employees and management of the Company and its subsidiaries (including any material change in conditions of employment) or any material change to the balance of skills and functions of the employees and management;

(ii) the Company’s or the Group's future business and its strategic, research and development plans;

(iii) the location of the Company’s headquarters or headquarter functions or the location of the Company’s or the Group's place of business;

(iv) employer contributions into any of the Company’s or the Group's pension schemes, the accrual of benefits for existing members, nor the admission of new members;

(v) redeployment of the Company’s or the Group's fixed assets; or

(vi) the continuation of the Ordinary Shares being admitted to trading on the AQSE Growth Market.

 

In relation to (i) above, the terms of the Convertible Loan Notes include the right for Dowgate Wealth (as agent for the Noteholders) to nominate a non executive director whilst any Convertible Loan Notes remain outstanding.  Dowgate Wealth is a member of the Concert Party.

 

Your attention is drawn to the Circular which contains further information.  It will shortly be available at www.otaq.com

 

8.  RECOMMENDATION

 

Justine Dowds, the Independent Director, having been so advised by Guild Financial, considers the Fundraise and related Rule 9 Waiver to be in the best interests of the Company and Shareholders as a whole.  Accordingly she recommends that Independent Shareholders vote in favour of the resolution to approve the Rule 9 Waiver to be proposed at the General Meeting.  None of the Directors who are members of the Concert Party are entitled to vote on that resolution, as they are not Independent Shareholders.

 

The Board considers the other resolutions to be proposed at the General Meeting, which are necessary to implement the Fundraise to be in the best interests of Shareholders as a whole.  Accordingly, the Board unanimously recommends that Shareholders vote in favour of those resolutions at the General Meeting, as the Directors and their connected parties intend to do in respect of their shareholdings representing 5.07 per cent. of the Existing Ordinary Shares.

 

 

Enquiries

 

OTAQ PLC	+44 (0)1524 748028
Adam Reynolds, Non-Executive Chairman Phil Newby, Chief Executive Officer Justine Dowds, Chief Financial Officer
Dowgate Capital Limited AQSE Corporate Advisor & Broker	+44 (0)20 3903 7715
James Serjeant/Russell Cook Nicholas Chambers
Walbrook PR Limited Financial PR	+44 (0)20 7933 8780 OTAQ@walbrookpr.com
Tom Cooper / Nick Rome	07971221972 or 07748325236
Guild Financial Advisory Ltd Independent Financial Adviser
David Floyd	david.floyd@guildfin.co.uk

 

 

Important Notices

The persons responsible for this announcement are the directors of OTAQ, save in relation to (i) the shareholdings and intentions of the Enlarged Concert Party for which its members are responsible and (ii) the recommendation of the Rule 9 Waiver for which the Independent Director is responsible.

 

Dowgate Capital, which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting as AQSE Corporate Advisor and broker exclusively to the Company and to no-one else in connection with the Placing and will not be responsible to anyone (including any investors in Convertible Loan Notes) other than the Company for providing the protections afforded to its clients, nor for providing advice in relation to the Placing or any other matters referred to in this announcement.

 

Guild Financial , which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for the Independent Director and no one else in connection with the Placing and will not regard any other person (whether or not a recipient of this or not a recipient of this Circular) as its client in relation to the Placing and will not be responsible to anyone other than the Independent Director for providing the protections afforded to its clients nor for providing advice in connection with the Placing or any other matter referred to herein.

 

The content of this announcement has not been approved by an authorised person within the meaning of FSMA.

 

Any forwarding, distribution, reproduction or disclosure of this announcement in whole or in part is unauthorised. Failure to comply with this directive may result in a violation of applicable laws of other jurisdictions.

 

Cautionary statements

 

This announcement may contain and the Company may make verbal statements containing "forward-looking statements" with respect to certain of the Company's plans and its current goals and expectations relating to its future financial condition, performance, strategic initiatives, objectives and results.  Forward-looking statements sometimes use words such as "aim", "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "seek", "may", "could", "outlook" or other words of similar meaning.  By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond the control of the Company, including amongst other things, United Kingdom domestic and global economic business conditions; market-related risks such as fluctuations in interest rates and exchange rates; the policies and actions of governmental and regulatory authorities; the effect of competition, inflation, deflation, the timing effect and other uncertainties of future acquisitions or combinations within relevant industries; the effect of tax and other legislation and other regulations in the jurisdictions in which the Company and its affiliates operate; the effect of volatility in the equity capital and credit markets on the Company's profitability and ability to access capital and credit; a decline in the Company's credit ratings; the effect of operational risks; changes to existing commercial arrangements and agreements, or disputes rising in relation thereto; and the loss of key personnel.  As a result, the actual future financial condition, performance and results of the Company may differ materially from the plans, goals and expectations set forth in any forward-looking statements. Forward-looking statements contained in this announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Undue reliance should not be placed on any forward-looking statements made in this announcement by or on behalf of the Company, which speak only as of the date they are made.  Except as required by applicable law or regulation, the Company expressly disclaims any obligation or undertaking to publish any updates or revisions to any forward-looking statements contained in this announcement to reflect any changes in the Company's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.

 

The information contained in this announcement is subject to change without notice and except as required by applicable law or regulation (including to meet the requirements of the AQSE rules, MAR, the UK Prospectus Regulation rules and/or FSMA), and the Company and Dowgate Capital Limited expressly disclaim any obligation or undertaking to publish any updates or revisions to any forward-looking statements contained in this announcement to reflect any changes in the Company's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statements are based.

 

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.

 

 

Definitions

 

The following definitions apply throughout this announcemnent (unless the context requires otherwise):

“AQSE” Aquis Stock Exchange Limited, a company incorporated in England and Wales with registered company number 04309969 and a recognised investment exchange under section 290 of FSMA;

“AQSE Growth Market” the primary growth market for unlisted securities operated by AQSE;

“AQSE Rules” the rules contained in the AQSE Growth Market Access Rulebook for issuers in effect from time to time, which set out the admission requirements and continuing obligations of companies seeking admission to and whose securities are admitted to trading on the Access segment of the AQSE Growth Market issued by AQSE;

“Board” or “Board of Directors” the board of directors of the Company from time to time;

“Broker Option” the option granted by the Company allowing Dowgate Capital to elect to conditionally place the Broker Option Convertible Loan Notes, as set out in this announcement;

“Broker Option Convertible Loan Notes” the up to £1.0 million Convertible Loan Notes which may be issued by the Company pursuant to the Broker Option to be constituted by the Convertible Loan Note Instrument;

“CBILS Loan” the £0.8 million loan owed by OTAQ Aquaculture Limited to Growth Lending 2020 Limited (trading as BOOST & Co) pursuant to a loan agreement dated 3 February 2021;

“Circular” the Circular to be posted to Shareholders later today;

“Company” or “OTAQ” OTAQ plc, incorporated in England and Wales with number 11429299 and having its registered office at 8-3-4 Harpers Mill, South Road, White Cross, Lancaster, England LA1 4XF;

“Concert Party” certain shareholders of the Company who were considered to be 'acting in concert' with each other in relation to the Company for the purposes of the Takeover Code;

“Convertible Loan Note Instrument” the instrument executed on 26 June 2024 by the Company and by Dowgate Wealth (in its capacity as agent for the Noteholders) in connection with the Placing creating the Convertible Loan Notes;

“Convertible Loan Notes”, “Notes” or 10% secured Convertible Loan Notes 2027 to be created and issued by “CLNs”              the Company pursuant to the Convertible Loan Note Instrument;

“Directors” the current directors of the Company or the board of directors from time to time of the Company;

“Dowgate Capital” Dowgate Capital Limited, the Company’s placing agent, financial adviser for the purposes of the Placing and AQSE Corporate Adviser and a subsidiary of Dowgate Group Limited;

“Dowgate Group” Dowgate Group Limited, the parent company of Dowgate Capital and Dowgate Wealth, together with Dowgate Capital and Dowgate Wealth;

“Dowgate Wealth” Dowgate Wealth Limited, an investment management company and a subsidiary of Dowgate Group Limited;

“Enlarged Concert Party” those parties set out above, who are considered to be ‘acting in concert’ with each other in relation to the Company for the purposes of the Takeover Code;

“Enlarged Share Capital” the Ordinary Shares in issue upon conversion in full of the Convertible Loan Notes, as enlarged by such conversion (assuming that (i) all Convertible Loan Notes convert into new Ordinary Shares and (ii) no further Ordinary Shares are issued by the Company);

“Existing Ordinary Shares” the existing 128,405,917 Ordinary Shares in issue at the date of this announcement;

“Existing Shareholders” the holders of Existing Ordinary Shares;

“Existing Voting Share Capital” the issued ordinary share capital of the Company at the date of this announcement, being 128,405,917 Ordinary Shares;

“Form of Proxy” the form of proxy accompanying this Circular for use by Existing Shareholders at the General Meeting;

“FSMA” the UK Financial Services and Markets Act 2000, as amended;

“Fundraise” the Placing and (if exercised) the Broker Option;

“General Meeting” the general meeting of the Company to be held at 10.00 a.m. on 12 July 2024 (and any adjournment(s) of such meeting) at the Company’s offices at The Barracks, White Cross, Lancaster, LA1 4XF, notice of which is set out in the Notice of General Meeting;

“Group” the Company and each of its subsidiaries and subsidiary undertakings;

“Guild Financial” Guild Financial Advisory Limited, independent financial adviser

“Independent Director” Justine Dowds, the Chief Financial Officer of the Company and the only Director who is not a member of the Enlarged Concert Party;

“Independent Shareholders” the Shareholders other than members of the Enlarged Concert Party;

“Issue Price” £1 per £1 nominal of Convertible Loan Notes or, in relation to the Broker Option only, £1 per £1 nominal or any higher price at which CLNs may be issued;

“Last Practicable Date” 5.00 p.m. on 25 June 2024, being the last practicable time and date prior to this announcement;

“Noteholders” holders of outstanding Convertible Loan Notes from time to time;

“Notice of General Meeting” the notice of the General Meeting set out in the Circular;

“Ordinary Shares” ordinary shares of £0.01 each in the Company;

“Placing” the proposed placing of the Placing Convertible Loan Notes by the Company at the Issue Price, incorporating the Broker Option, conditional inter alia on passing of the Resolutions;

“Placing Agreement” the agreement dated 26 June 2024 entered into between the Company and Dowgate Capital appointing Dowgate Capital as the Company’s placing agent for the purposes of the Placing

“Placing Convertible Loan Notes” the £1.7 million Convertible Loan Notes which are to be issued by the Company pursuant to the Placing to be constituted by the Convertible Loan Note Instrument;

“Resolutions” the resolutions to be put to the Existing Shareholders at the General Meeting as detailed in the Notice of General Meeting and “Resolution” means any of the Resolutions;

“Rule 9 Waiver” the waiver granted by the Takeover Panel of the obligation which would otherwise arise pursuant to Rule 9 of the Takeover Code for the members of the Enlarged Concert Party to make a general offer for the entire issued share capital of the Company (other than any shares in the Company held by members of the Enlarged Concert Party) as a result of the increases in their holdings of Ordinary Shares due to (i) the conversion of the Convertible Loan Notes to be subscribed for by certain members of the Enlarged Concert Party into new Ordinary Shares or (ii) the allocation of additional Ordinary Shares pursuant to the SIP;

“Rule 9 Waiver Resolution” the ordinary resolution of the Independent Shareholders to approve the Rule 9 Waiver, to be proposed as a Resolution at the General Meeting;

“Securities Act” the US Securities Act of 1933, as amended;

“Shareholders” the holder(s) of Ordinary Shares from time to time,

“SIP” the Company’s share incentive plan

“SIP Allocations” the illustrative allocation of 260,000 Ordinary Shares pursuant to the SIP prior to 30 June 2025

“Takeover Code” the City Code on Takeovers and Mergers issued by the Takeover Panel, as amended from time to time;

“Takeover Panel” The Panel on Takeovers and Mergers;

“Total Voting Rights” The maximum number of voting rights capable of being voted in general meetings of the Company

“United Kingdom” or “UK” the United Kingdom of Great Britain and Northern Ireland;

“Voting Share Capital” the issued ordinary share capital of the Company from time to time;

“Warrants” warrants to subscribe for 22,499,978 new Ordinary Shares (on the basis of one Ordinary Share for each warrant) exercisable at 12 pence per share at any time up to 9 November 2024.