RedStone Connect

press release

RedstoneConnect announces conditional agreement for the acquisition of meeting room management and audio visual integrator Anders + Kern

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF REGULATION (EU) 596/2014 (MAR). ON PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

9th May 2017

RedstoneConnect plc

(“RedstoneConnect” or the “Company”)

Acquisition of meeting room management and audio visual integrator

Placing to raise up to £6.5 million

Proposed 1:100 share consolidation and capital reduction

This Announcement should be read in its entirety. Regulatory Release (RNS) can be read in full here

RedstoneConnect, a leading provider of technology and services for smart buildings and commercial spaces, is pleased to announce that it has entered into a conditional agreement to acquire the entire issued share capital of Easter Road Holdings Limited and its subsidiary, Anders + Kern U.K. Limited, a systems and solutions integrator specialising in meeting room management and audio visual (“Anders + Kern” or “A+K”) (together, the "Acquisition"), for a cash consideration of £1.4 million.

The Company is also pleased to announce a proposed placing of up to 433,333,334 new ordinary shares of 0.1 pence each (the "Ordinary Shares") in the capital of the Company (the "Placing Shares") at a price of 1.5 pence per Placing Share (the "Placing Price") to raise up to £6.5 million (before expenses) (the "Placing").  

Part of the net proceeds from the Placing will be used to finance the cash consideration of the Acquisition.  In addition, the net proceeds of the Placing will enable the RedstoneConnect group (the "Group") to accelerate investment in the ongoing development of OneSpace, its occupancy management tool, to strengthen the development of its sales and marketing channels and it will provide additional working capital for the enlarged RedstoneConnect group.

The Acquisition is in line with RedstoneConnect’s stated strategy to grow the Company’s Smart Buildings offering, both organically and by acquisition. The board of directors of the Company (the "Board") believes that the acquisition of Anders + Kern will bring significant benefits to the Group in terms of expertise in the meeting room management space, an experienced sales and marketing team alongside an established customer base and channel partner network. 

The Placing will be conducted by way of an accelerated bookbuild process, which will be launched immediately following this announcement, in accordance with the terms and conditions set out in the appendix to this announcement (the "Appendix") (which forms part of this announcement, such announcement and the Appendix together being this "Announcement").  Cantor Fitzgerald Europe ("Cantor Fitzgerald") and Whitman Howard Limited ("Whitman Howard") are acting as joint bookrunners in connection with the Placing. A placing agreement (the “Placing Agreement”) has been entered into today between the Company, Cantor Fitzgerald and Whitman Howard in connection with the Placing.

Transaction highlights and rationale

A key strategic growth priority for the Group is to broaden its Smart Buildings offering, with specific focus on the agile working and connected office space, which the Company currently addresses through its OneSpace product. 

It is anticipated that the Acquisition will bring a number of strategic benefits to RedstoneConnect, namely:

Anders + Kern is an established distributor and integrator of meeting room booking systems and audio visual solutions, which are complementary to the Group’s OneSpace solution and should expand RedstoneConnect’s customer reach for its Smart Building offering.

Anders + Kern is an established distributor and integrator of meeting room booking systems and audio visual solutions, which are complementary to the Group’s OneSpace solution and should expand RedstoneConnect’s customer reach for its Smart Building offering.

In the financial year ended 31 March 2017, Anders + Kern generated revenues of £3.37 million, gross profit of £1.14 million and adjusted EBITDA of approximately £346,000.

A+K’s experienced sales and marketing team will be consolidated with the OneSpace marketing team and RedstoneConnect will utilise the enlarged team, led by the current A+K Managing Director, Steven Black, to sell RedstoneConnect’s suite of software products.

The Acquisition will broaden RedstoneConnect’s blue-chip customer base with existing A+K clients including British Library, MacMillan, Saville, Tullow Oil and BBC Worldwide, providing further opportunity to cross-sell the Group’s products.

Following completion of the Acquisition, the Board has also decided to seek shareholder approval at the Company’s forthcoming annual general meeting, for a share consolidation based on every 100 existing ordinary share of 0.1p each being consolidated into one new ordinary share of 10p each and a capital reduction.

Commenting on the proposed Acquisition, Mark Braund, CEO of RedstoneConnect said:

The acquisition of Anders + Kern is another important strategic development for RedstoneConnect. It broadens our smart building proposition, expands both our direct and indirect sales channels and it also provides the opportunity to leverage A+K’s expertise to accelerate the development and deployment of OneSpace. We are delighted to welcome A+K’s experienced sales, marketing and technology teams into our business which will add momentum to our 'go to' market strategy.     

“I am also pleased to announce the Placing of up to £6.5 million, the proceeds of which will fund both the Acquisition and the continued implementation of our strategy.  Our focus remains on the establishment of high-margin, recurring revenues and a strong portfolio of proprietary intellectual property.  We continue to believe that we are extremely well placed to capitalise on the significant market opportunity that exists within the Smart Buildings arena.”

Information on Anders + Kern U.K. Limited

Anders + Kern is an established distributor and integrator of meeting room booking systems and audio visual solutions. As well as bringing with it experience in systems and solutions integration in meeting room management and audio visual, it is one of the leading UK resellers for Evoko, an award-winning meeting room panel provider. Critically for RedstoneConnect, the Acquisition will bring with it a sales and marketing team with experience of selling into the Smart Building market place, which RedstoneConnect is targeting with its suite of software products. The 19-strong A+K team, based in Mildenhall, Suffolk will be consolidated into the OneSpace sales and marketing team, which will be led by Steven Black, current Managing Director of A+K, with the aim to sell a broad range of products to both A+K and RedstoneConnect’s new and existing customers and to develop and drive OneSpace. A+K has a number of multinational corporations as clients, including British Library, MacMillan, Saville, Tullow Oil and BBC Worldwide, which the directors of RedstoneConnect believe will provide significant opportunity to cross-sell and up-sell the wider RedstoneConnect product offering.  

The Acquisition is to be a satisfied by the payment of cash consideration of £1.4 million, to be funded by part of the net proceeds of the Placing. Completion of the Acquisition is conditional only upon the Placing Agreement having become unconditional in all respects (save in relation to any condition relation to the acquisition agreement and Admission (as defined below) and there having been no material adverse change in the business of A+K).

For the year ended 31 March 2017, A+K had revenues of £3.37 million, gross profit of £1.14 million and adjusted EBITDA of approximately £346,000. Net assets were £0.51 million which includes freehold property, recently valued at £0.65 million, which is being acquired as part of the Acquisition.

Background to and reasons for the Placing

As highlighted at the time of the Company’s full year results in April 2017, a key part of the Board's focus is to grow the Company’s Smart Buildings offering through a combination of organic growth and acquisitions. The Board can see the opportunity for growth in the smart building space following increasing interest in agile working and the connected office space. This market is a core target market for the Group’s occupancy management software solution, OneSpace. Within this sector, the established meeting room management market is evolving with next generation and cloud technology becoming increasingly prevalent.

As mentioned, the Acquisition not only brings with it a team with significant experience in selling into the Smart Building space but also existing distribution agreements for meeting room products that are complementary to OneSpace.

There is, however, opportunity to further accelerate the development and functionality of OneSpace, especially in improving its meeting room management functionality. Therefore, approximately £1 million of the net proceeds from the Placing will be used to further develop and enhance OneSpace, with the enhanced meeting room management module anticipated to be available at the end of the third quarter of 2017.

In addition, RedstoneConnect will use part of the proceeds to enhance and expand the Group’s sales, marketing and sales channels. This is with a view to further augment the Company’s reach to potential customers for its Smart Buildings technology as well as to capture cross-selling opportunities for its integrated systems, managed services and software solutions propositions.

Finally, part of the proceeds of the Placing will be used to fund the expenses of the Acquisition and the Placing and also as working capital for the enlarged Group as A+K is integrated into the Group.         

 

Details of the Placing

Cantor Fitzgerald is acting as nominated adviser, joint broker and joint bookrunner in connection with the Placing.  Whitman Howard is acting as joint broker and joint bookrunner in connection with the Placing (together with Cantor Fitzgerald, the "Joint Bookrunners").

The Placing is subject to the terms and conditions set out in the Appendix.

Under the terms of the Placing, the Joint Bookrunners intend to place up to 433,333,334 Placing Shares at the Placing Price with existing and new institutional investors, raising gross proceeds of up to £6.5 million.

The final number of Placing Shares will be agreed by Cantor Fitzgerald, Whitman Howard and the Company at the close of the bookbuild, and the result of the Placing will be announced as soon as practicable thereafter. The timing for the close of the bookbuild and allocation of the Placing Shares shall be at the discretion of the Joint Bookrunners, in consultation with the Company. The Placing is not being underwritten.

The Placing Shares, when issued, will represent approximately 21 per cent. of the Company's enlarged issued share capital following completion of the Placing.  The Placing Price of 1.5 pence per share represents a discount of approximately 3 per cent. to the closing mid-market price of 1.55 pence per Ordinary Share on 8 May 2017, being the latest practicable date prior to the publication of this Announcement.

The Placing Shares, when issued, will be fully paid and will rank pari passu in all respects with the existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid after the date of issue.

The Placing Shares to be issued pursuant to the Placing will be issued on a non-pre-emptive basis, utilising the existing shareholder authorities obtained at the Company’s last annual general meeting.  Application has been made for the Placing Shares to be admitted to trading on the AIM market ("AIM") of London Stock Exchange plc (the "London Stock Exchange"), ("Admission").

Settlement for the Placing Shares and Admission is expected to take place on or before 8.00 a.m. on 12 May 2017.  The Placing is conditional upon, among other things, Admission becoming effective and the Placing Agreement not being terminated in accordance with its terms.  Following Admission, the Company will have 2,078,479,485 Ordinary Shares in issue.

The Appendix sets out further information relating to the Placing and the terms and conditions of the Placing.

Proposed Share Consolidation and Capital Reduction

As a result of the very large number of RedstoneConnect shares in issue, the Board believes that it would be appropriate and beneficial to both the Company and its shareholders to undertake a share consolidation. Therefore, following completion of the Acquisition and the Placing, at the Company’s next annual general meeting, the Board has decided that it will seek shareholder approval for a share consolidation, based on every 100 existing ordinary share of 0.1p each being consolidated into one new ordinary share of 10p each (the “Proposed Share Consolidation”). The Placing Shares will form part of the shares to be consolidated as part of the Proposed Share Consolidation.

The Board is of the opinion that the Proposed Share Consolidation will make investing in RedstoneConnect shares more attractive to a broader range of institutional and professional investors and other members of the investing public.  The Board also feels it appropriate to seek shareholder approval to effect a capital reduction at the same time as the Proposed Share Consolidation, as the Board believes cancellation of the legacy deferred shares (which have no voting rights or value), the Company’s share premium account and the capitalisation of the Company’s merger reserve and subsequent cancellation of the capital reduction share to be issued on such capitalisation will allow the Group to eliminate the accumulated losses and will provide distributable reserves giving greater flexibility for the payment of dividends in the future, the purchase by the Company of its own shares and for other corporate purposes, if required.

Following the Proposed Share Consolidation, there will be no material change in the proportion of the Company's ordinary share capital held as before the Proposed Share Consolidation.  Other than a change in nominal value, the new ordinary shares will carry equivalent rights under the articles of association to the existing Ordinary Shares.

Further information setting out these proposals and seeking shareholder approval to them will be circulated in the Notice of Annual General Meeting to be sent to shareholders in due course. A further announcement will be made in due course.

This Announcement should be read in its entirety 

Regulatory Release (RNS) can be read in full here

 

 

 

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