SCIENTIFIC DIGITAL IMAGING PLC Equity Fundraising & Acquisition Scientific Digital Imaging (AIM: SDI, "SDI", the "Company" or the Group ), the AIM quoted group focused on scientific and technology products for use in applications including life sciences, healthcare, astronomy, consumer manufacturing and art conservation, is pleased to announce the conditional acquisition of Astles Control Systems Limited ("Astles") for initial consideration of 3.446 million (the "Acquisition") and an equity fundraising of 3.1 million (before expenses) (the Equity Fundraising ). Highlights - Acquisition of Astles for initial consideration of 3.446 million on a debt free cash free basis, consisting of 3.336 million in cash and 0.100 million in new ordinary shares of 1 pence each in the capital of the Company ("Ordinary Shares") at a deemed price of 13 pence per Ordinary Share (the "Issue Price") with an additional earn-out of up to 1.354 million and additional payment for other net assets at completion; - Astles designs, manufactures and supplies bespoke chemical dosing systems and operates in niche markets, predominantly two piece beverage can manufacture. In addition, servicing of installed systems provides a repeat business revenue stream; - Conditional placing and subscription of 23,846,155 new Ordinary Shares at the Issue Price with institutional and other investors to raise gross proceeds of 3.1 million; - Ken Ford, Chairman of the Company has subscribed in the Placing for 250,000 Ordinary Shares and Mike Creedon, Chief Executive of the Company, has subscribed at the Issue Price for 76,924 Ordinary Shares in the Subscription; and - New Term Loan Facility to replace SDI s existing bank facilities, resulting in one new 1.16 million term loan which will be fully drawn following completion of the Acquisition. The Term Loan Facility will be at an interest rate of 4 per cent. plus the NatWest base rate which is currently 0.25 per cent and repayable over five years. Commenting on the Acquisition and the Equity Fundraising, Chairman Ken Ford said: "We are delighted to be acquiring Astles and look forward to integrating it into our existing Group. This acquisition continues our stated buy and build strategy and enables us to further diversify the products we can offer to customers as well as widening our addressable market and increasing cross selling opportunities. We are delighted by support shown by both new and existing institutional investors in the placing and we look forward to the future with confidence." Further information on the Acquisition and Equity Fundraising is set out below. General Meeting A Circular and notice convening the General Meeting, to be held at the offices of Birketts LLP at 22 Station Road, Cambridge CB1 2JB at 11.00 a.m. on 10 January 2017, will be posted to shareholders today and will be available from the Company's website at www.scientificdigitalimaging.com. The General
Meeting has been convened to consider and if thought fit approve the proposals set out in the Circular and notice. The Directors consider the proposals set out in the Circular and notice to be in the best interests of the Company and the shareholders as a whole. The Directors who hold Ordinary Shares intend to vote in favour of the Resolutions in respect of their shareholdings, representing in aggregate approximately 1.67 per cent. of the Company's current issued share capital as at the date of this announcement. Unless otherwise defined herein, capitalised terms used in this announcement shall have the same meanings as defined in the Circular containing notice of the General Meeting, a copy of which will shortly be available on the Company's website www.scientificdigitalimaging.com. FOR FURTHER INFORMATION Scientific Digital Imaging Plc Ken Ford, Chairman Mike Creedon, Chief Executive Officer www.scientificdigitalimaging.com finncap Ltd Ed Frisby/ Simon Hicks Corporate Finance Mia Gardner Corporate Broking 01223 727144 020 7220 0500 JW Communications Julia Wilson Investor & Public Relations 07818 430 877 About Scientific Digital Imaging plc: Scientific Digital Imaging plc ( SDI ) designs and manufactures scientific and technology products for use in applications including life sciences, healthcare, astronomy, consumer manufacturing and art conservation. SDI plans to continue to grow through its own technology advancements as well as strategic, complementary acquisitions. www.scientificdigitalimaging.com The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.
The following text is extracted from the Circular: 1. INTRODUCTION The Company today announced the conditional acquisition of Astles Control Systems Limited. The consideration payable by the Company is an initial consideration of 3.446 million with an additional earn-out of up to 1.354 million. The details of the conditions of the earn-out can be found in paragraph 2. The maximum consideration of 4.8 million payable will be financed by the Equity Fundraising, the issue of Consideration Shares, 0.85 million from the Company s existing cash resources and 0.75 million from the new Term Loan Facility. The Company announced today a proposed Equity Fundraising of 3.1 million (before expenses). Ken Ford, Executive Chairman of the Company, and Mike Creedon, CEO of the Company, have subscribed for 250,000 Ordinary Shares and 76,924 Ordinary Shares respectively, also at the Issue Price. In addition, the Company intends to issue Peter Astles, seller of the majority of shares in Astles, 769,231 Ordinary Shares at the Issue Price as part of the total consideration of the Acquisition. The issue of the New Shares is conditional on, inter alia, the passing of the GM Resolutions by Shareholders. The purpose of this Circular is to outline the reasons for the Equity Fundraising and the Acquisition and to explain why the Board considers the Proposals to be in the best interests of the Company and the Shareholders as a whole. The Directors unanimously recommend that you vote in favour of the GM Resolutions, as they intend to do in respect of their own beneficial holdings of Ordinary Shares which amount to, in aggregate, approximately 1.67 per cent. of the Existing Shares. 2. THE FUNDING OF THE ACQUISITION AND THE ACQUISITION SDI announced earlier today the conditional Acquisition of Astles for up to 4.8 million on a debt free cash free basis, with an additional payment for other net assets at completion. The initial consideration due of 3.446 million will be satisfied by 3.346 million paid in cash and 0.1 million by the issue of 769,231 Consideration Shares. The maximum earn-out of 1.354 million would be triggered in full by Astles reporting a profit before tax of greater than, or equal to, 1.2 million and the additional earn-out would be paid in cash following the publication of the Group s audited annual report and accounts for the year ended 30 April 2017. The maximum consideration due of 4.8 million would be funded using 0.85 million of SDI s existing cash resources, 0.1 million through the issue of the Consideration Shares, 3.1 million from the Equity Fundraising and 0.75 million provided in the form of the New Loan Facility, of which further information can be found in paragraph 3. The new Term Loan Facility will be fully drawn following completion of the Acquisition. Astles designs, manufactures, supplies and services bespoke chemical dosing systems and operates in niche markets, predominantly two piece beverage can manufacture. Astles makes sales of its chemical dosing systems via its direct sales channel and also undertakes its own maintenance and servicing for clients. Astles chemical dosing solutions include control systems, pumps, parts, sensors and maintenance. Over the 14 months to July 2016, Astles product mix comprised: Spares sales System sales for new plants or new lines in existing plants Percentage of total revenue 38 per cent. 33 per cent.
Service contracts/visits Systems sales as upgrade or replacement in existing plants 21 per cent. 8 per cent. Astles average product life is 10 years and the price of a system ranges from c. 15,000 to 90,000 (with an average price of 50,000). Astles sells its systems into a range of market sectors with approximately 85 per cent. of sales in to two piece beverage can manufacturing. Other customers include various industrial companies including companies in the automotive sector. Growth within Astles has predominantly been driven by a focus on export markets and on new factory sales opportunities. Currently exports account for c.75 per cent. of Astles turnover with sales worldwide. Astles audited accounts for the financial year ended 30 April 2016 reported revenues of 1.914 million and profit before tax of 0.873 million. Astles believes that its focus on quality and services has helped it grow and maintain its high margins and it prides itself on its service levels. The majority of Astles sales are within the canning industry and its significant customers in Astles 2016 financial year include: Rexam Beverage Can group of companies, Ball Beverage Packaging group of companies, Crown Beverage Can group of companies, Nampak group of companies, Ardagh group of companies, Stolle Europe Limited, Carnaud Metalbox group of companies and Roeslein & Associates Inc. Astles will continue to operate from its leased Princes Risborough premises with Peter Astles continuing to run Astles on completion of the Acquisition until 30 April 2017, after which he will be employed by the Company on a part time basis for a further two years. His role in this time will include the attendance of SDI Board meetings. The Acquisition is in line with SDI s strategy of selective acquisitions and the Board believes that the integration risk relating to the Acquisition to SDI and its Shareholders is low. The Acquisition will increase SDI s repeat business revenue streams and is expected to result in the Acquisition being earnings enhancing in the first full year of ownership. In addition, Astles is a current customer of Sentek, a subsidiary of SDI which designs and manufactures PH and conductivity sensors for water based applications. The Acquisition presents an opportunity to grow Sentek s sensor sales. 3. EXISTING AND NEW TERM LOAN FACILITY The Company has entered into the Term Loan Facility to fund part of the maximum consideration payable pursuant to the Acquisition. The Term Loan Facility will replace SDI s existing bank facilities, resulting in one, new 1.16 million term loan which will be fully drawn following completion of the Acquisition. The new Term Loan Facility is at an interest rate of 4 per cent. plus the NatWest base rate which is currently 0.25 per cent repayable over 5 years. 4. BACKGROUND TO AND REASONS FOR THE EQUITY FUNDRAISING The Company intends to utilise the proceeds of the Equity Fundraising to part fund the maximum consideration payable pursuant to the Acquisition and for transaction costs associated with the Equity Fundraising and Acquisition. 5. CURRENT TRADING The current trading of the Company is in line with expectations and the Company looks forward to reporting its unaudited interim results for the six months to 31 October 2016 in the second half of January 2017.
6. DETAILS OF THE EQUITY FUNDRAISING The Equity Fundraising The Company has today announced that it intends to raise 3.1 million, before expenses, through a conditional Placing and Subscription. The Placing Shares and Subscription Shares will, when issued, rank pari passu in all respects with the Existing Shares. The Company also announced today that Ken Ford, Chairman of the Company and Mike Creedon, CEO of the Company, have participated in the Equity Fundraising for 250,000 and 76,924 new Ordinary Shares respectively. On Admission, Ken Ford and Mike Creedon will be interested in 1,250,000 and 146,924 Ordinary Shares, representing approximately 1.41 per cent. and 0.17 per cent. respectively, of the Company s Enlarged Issued Share Capital. The Placing and Subscription are not underwritten. Pursuant to the Acquisition, the Company will issue Peter Astles 769,231 new Ordinary Shares at the Issue Price, representing approximately 0.87 per cent. of the Company s Enlarged Issued Share Capital. The Consideration Shares will, when issued, rank pari passu in all respects with the Existing Shares. Application will be made for the New Shares to be admitted to trading on AIM. It is expected that the Admission will become effective and dealings in the New Shares will commence at 8.00 a.m. on 12 January 2017. The Equity Fundraising is conditional upon, inter alia, i. none of the conditions to the SPA having ceased to be capable of being satisfied and no circumstances having arisen which enable the Company not to proceed with the Acquisition; ii. the passing of the GM Resolutions; iii. the Placing Agreement becoming unconditional in all other aspects (save for Admission); and iv. admission of the Placing Shares and Subscription Shares to trading on AIM becoming effective by not later than 8.00 a.m. on 12 January 2017 or such later date (being not later than 8.00 a.m. on 31 January 2017) as the Company and finncap may agree. The Placing Agreement Pursuant to the terms of the Placing Agreement, finncap, as agent for the Company, has agreed conditionally to use its reasonable endeavours to procure placees for the Placing Shares at the Issue Price. The Placing is not underwritten. The Placing Agreement contains warranties from the Company in favour of finncap in relation to, amongst other things, the accuracy of the information contained in the circular and certain other matters relating to the Group and its business. In addition, the Company has agreed to indemnify finncap in relation to certain liabilities that they may incur in respect of the Placing. The obligations of finncap under the Placing Agreement in respect of the Placing are conditional upon, amongst other things, i. the Admission becoming effective on or before 8.00 a.m. on 12 January 2017 (or such later date as the Company and finncap may agree, but not later than 31 January 2017); ii. compliance by the Company with its obligations under the Placing Agreement (in so far as they are required to be performed prior to Admission); and iii. the passing of the GM Resolutions at the General Meeting. finncap may terminate the Placing Agreement in specified circumstances, including in the event of a breach of the warranties contained in the Placing Agreement and if a force majeure event occurs prior to
the Admission. If the Placing Agreement is terminated prior to Admission, finncap shall procure that subscription monies will be returned to placees as soon as practicable. In consideration for the services to be provided to the Company by finncap in connection with the Admission and the Placing, the Company has agreed to pay finncap certain fees and commissions and certain other costs and expenses incidental to the Admission and/or the Placing. 7. TERMS OF THE ACQUISITION SDI has agreed to acquire Astles for an initial consideration of 3.446 million which will be satisfied through a cash payment of 3.346 million and the issue of 769,231 new Ordinary Shares to Peter Astles that, at the Issue Price, have a value of 0.1 million. Completion of the SPA is conditional upon, inter alia, i. the passing of the GM Resolutions at the General Meeting; and ii. the Placing Agreement having become unconditional in all respects other than any condition relating to the completion of the SPA or the application for the admission of the Consideration Shares and Placing Shares to AIM and the Placing Agreement not having been terminated. Peter Astles has agreed to a formal lock-in in respect of the Consideration Shares for a period of 12 months from completion of the SPA, following which such shares will be subject to an orderly marketing requirement. 8. RELATED PARTY TRANSACTIONS The participations of Ken Ford and Mike Creedon, as Directors of the Company, and Octopus Investments Ltd ( Octopus ) (which has subscribed for 1,153,847 Ordinary Shares pursuant to the Placing), as a Substantial Shareholder in the Company in the Equity Fundraising are considered related party transactions pursuant to AIM Rule 13 of the AIM Rules for Companies (the Related Party Transactions ). The Independent Directors consider, having consulted with finncap Ltd, that the terms of the Related Party Transactions are fair and reasonable insofar as shareholders of the Company are concerned. 9. GENERAL MEETING A notice convening the General Meeting, to be held at the offices of Birketts LLP, 22 Station Road, Cambridge CB1 2JD at 11.00 a.m. on 10 January 2017 is set out at the end of the circular at which the GM Resolutions will be proposed, as follows: RESOLUTION 1 The Directors require the authority of Shareholders in order to allot the New Shares. Resolution 1 will accordingly be proposed to authorise the Directors, pursuant to section 551 of the Act, to allot shares in the Company up to a maximum nominal value of 246,154. Resolution 1 is being proposed as an ordinary resolution and will therefore require more than 50 per cent. of the votes cast, whether in person or by proxy, to be in favour of the resolution. This authority, if granted, will be in addition to any existing authorities to allot Ordinary Shares granted to the Directors prior to the date of the circular, which will continue in full force and effect whether or not the transactions detailed in the circular are effected. This authority will expire on the date of the next annual general meeting of the Company. RESOLUTION 2
Section 561 of the Act requires that, on an allotment of equity securities for cash, such equity securities must first be offered to existing Shareholders in proportion to the number of Ordinary Shares they each hold at that time. This is known as a shareholder s pre-emption right. The New Shares are equity securities for these purposes. Accordingly, such shares cannot be allotted for cash on a non preemptive basis unless Shareholders have first waived their pre-emption rights in respect of such shares by special resolution. Resolution 2, if passed, provides a pre-emption waiver in respect of the New Shares and will be proposed to empower the Directors to allot and issue the New Shares without first offering such Ordinary Shares to existing Shareholders. Resolution 2 is being proposed as a special resolution and will therefore require not less than 75 per cent of the votes cast, whether in person or by proxy, to be in favour of the resolution. The authority, if granted, will be in addition to any existing authorities to allot Ordinary Shares free of pre-emption rights granted to the Directors prior to the date of the circular which will continue in full force and effect whether or not the transactions detailed in the circular are effected. The Board believes that proceeding with the Equity Fundraising, rather than a rights issue or open offer is the most suitable option available to the Company for financing the Acquisition and raising additional funds though the issue of Ordinary Shares. 10. ACTION TO BE TAKEN Shareholders will find a Form of Proxy enclosed with the circular for use at the General Meeting. Whether or not you intend to be present at the General Meeting, you are requested to complete and return the Form of Proxy in accordance with the instructions printed thereon as soon as possible. To be valid, completed Forms of Proxy must be received by the Company s Registrars, Share Registrars Limited, The Courtyard, 17 West Street, Farnham, Surrey GU9 7DR not later than 11.00 a.m. on 6 January 2017. Completion of the Form of Proxy will not preclude you from attending the meeting and voting in person if you so wish. Shareholders who have queries about the General Meeting or about completion of the Form of Proxy should call Share Registrars Ltd on 01252 821390. If you hold your Ordinary Shares in CREST, you may appoint proxies in respect of the General Meeting by completing and transmitting CREST proxy instructions to the Company s agent, Share Registrars Limited (CREST participant ID: 7RA36). To appoint one or more proxies or to give an instruction to a proxy (whether previously appointed or otherwise) via the CREST system, CREST messages must be received by Share Registrars Limited not later than 48 hours prior to the meeting (excluding any part of a day that is not a working day). 11. RECOMMENDATION The Directors consider the Proposals to be in the best interests of the Company and the Shareholders as a whole. Accordingly the Directors recommend that Shareholders vote in favour of the GM Resolutions to be proposed at the General Meeting as they intend to do in respect of their shareholdings, representing in aggregate approximately 1.67 per cent. of the Existing Shares.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS Latest time and date for receipt of Forms of Proxy for the General Meeting 11.00 a.m. on 6 January 2017 Date and time of General Meeting 11.00 a.m. on 10 January 2017 Admission and commencement of dealings in the New Shares 8.00 a.m. on 12 January 2017 CREST accounts credited with New Shares 12 January 2017 Completion of the Acquisition 12 January 2017 Despatch of definitive share certificates for New Shares By 27 January 2017 STATISTICS Number of Existing Shares 64,224,808 Number of Placing Shares being placed on behalf of the Company Number of Consideration Shares being issued pursuant to the SPA Number of Subscription Shares being subscribed pursuant to the Subscription 23,769,231 769,231 76,924 Enlarged Issued Share Capital following Admission 88,840,194 Issue Price Discount of Issue Price to the closing middle market price* Number of New Shares as a percentage of the Enlarged Issued Share Capital 13 pence 23.5 per cent. 27.7 per cent. * on 19 December 2016, being the last practical date prior to the announcement of the Acquisition and Placing