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Eve Sleep plc (EVE)
Eve Sleep plc: Proposed Placing and Approval of a waiver of Rule 9 of the
Takeover Code
23-Jan-2019 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF THE MARKET
ABUSE REGULATION (EU) NO. 596/2014.
THE INFORMATION CONTAINED IN THIS ANNOUNCEMENT IS RESTRICTED AND IS NOT FOR
PUBLICATION, RELEASE OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR
INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA, ANY PROVINCE OF CANADA,
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JURISDICTION IN WHICH SUCH PUBLICATION, RELEASE OR DISTRIBUTION WOULD BE
UNLAWFUL.
Terms used in this announcement have been defined in Appendix III or in the
text below
eve Sleep plc
("eve", the "Company" or the "Group")
Proposed Placing of 120,317,323 Ordinary Shares at 10 pence per new Ordinary
Share to
raise approximately GBP12.0 million (before expenses)
Approval of a waiver of Rule 9 of the Takeover Code
and
GBP0.9 million media for equity arrangement
Introduction
eve Sleep plc (AIM: EVE), a sleep brand focussed on UK&I and France, today
announces a conditional placing of 120,317,323 new ordinary shares of 0.1
pence each ("Ordinary Shares") in the share capital of the Company (the
"Placing Shares") at a price of 10 pence per Placing Share (the "Placing
Price") to raise approximately GBP12.0 million before expenses (the "Placing")
from existing and new investors. In addition Channel Four, which provides
advertising services to the Company and is an existing Shareholder, has
agreed that GBP0.9 million of future advertising spend by the Company with
Channel Four will, when payable, be satisfied by the issue of new Ordinary
Shares at the Placing Price over a period of up to twenty four months from
Admission . The Placing is conditional upon the passing of the Resolutions
set out in the Notice of General Meeting included in the Circular to be
distributed to Shareholders on or around the date of this Announcement.
The Placing Shares represent approximately 86.1 per cent. of the existing
share capital of the Company. Following the Placing, the Company's enlarged
share capital will be 260,052,484 Ordinary Shares ("Enlarged Share
Capital"). The Placing Shares represent approximately 46.3 per cent. of the
Enlarged Share Capital. The Placing Price represents a discount of 3.6 per
cent. to the closing mid-market price of 10.375 pence per existing Ordinary
Share on 22 January 2019, being the latest practicable date prior to the
publication of this Announcement. The Placing Shares, when issued and fully
paid, will rank pari passu in all respects with the Existing Ordinary Shares
and will rank for all dividends or other distributions declared, made or
paid after the date of issue of the Placing Shares.
Woodford, which is a key investor in the Placing, is deemed to be acting in
concert with any investment funds discretionary managed by it (including
each of the Woodford Funds). As such Woodford is deemed to be interested in
the aggregate shares in the Company held by the Woodford Funds for the
purposes of the Takeover Code. Woodford (and any person acting in concert
with it) is currently a beneficial holder of approximately 29.90 per cent.
of the Company's current issued share capital. Woodford, in its capacity as
discretionary investment manager, acting on behalf of certain of its
investment fund clients, has agreed to subscribe for 80,000,000 Placing
Shares, being an amount that would increase the percentage holding of the
Company of Woodford (and those persons acting in concert with it)
immediately following completion of the Placing to 46.83 per cent. of the
Company's Enlarged Share Capital. The Panel has agreed to a waiver of the
obligations under Rule 9 of the Takeover Code (commonly referred to as a
"Whitewash"), subject to the Whitewash Resolution being approved on a poll
at the General Meeting by Independent Shareholders who hold, in aggregate, a
simple majority of the votes cast on the Independent Shares. Without such
waiver, Woodford (and any persons acting in concert with it) would be
obliged to make a general offer to Shareholders under Rule 9 of the Takeover
Code. The Placing is conditional on the Whitewash Resolution being passed by
the relevant majority of Independent Shareholders.
The VCT Placing Shares will be allotted and unconditionally issued before
the other Placing Shares (the latter being allotted and issued conditionally
on Admission) to allow the VCT Placee to benefit from any potential tax
advantages that may be applicable pursuant to the rules of the VCT Scheme.
The VCT Placee has obtained its own independent advice in this regard and
the Company has obtained no assurance from HMRC or any other person that any
VCT relief may be, is or will continue to be available to the VCT Placee or
any other person and the Company disclaims any and all liability in this
regard.
eve will shortly send a circular to Shareholders in connection with the
Placing ("Circular"). The Circular will contain a Notice of a General
Meeting, to be held at 10 a.m. on 11 February 2019, at the offices of Peel
Hunt LLP, Moor House, 120 London Wall, EC2Y 5ET, to approve certain
Resolutions necessary to implement the proposed Placing.
Background to and reasons for the Placing
On 15 November 2018, the Company announced the results of its business
review and a trading update, as well as stating its intention to raise new
equity. The Company provided an update in respect of the planned fundraising
on 6 December 2018.
The net proceeds of the Placing (approximately GBP11.7 million) and the
proposed Channel Four future advertising spend of GBP0.9 million (as described
in the paragraph entitled Future issues of Ordinary Shares for media spend)
will, in conjunction with existing cash resources (of approximately GBP6
million as at 31 December 2018[1]), be utilised by the Company to implement
its updated strategy as described in more detail below as well as for
general working capital purposes.
Updated strategy
The purpose of the Placing is to enable the Company to implement its updated
strategy as announced on 15 November 2018.
From 10 September 2018, following the appointment of James Sturrock as Chief
Executive Officer, the Board carried out a detailed review of the Company's
business. The Company's updated strategy, which has been formulated in light
of this review, is to refocus on the core sleep markets of the UK&I and
France, which collectively are estimated to be worth approximately GBP6
billion per annum[2].
The rationale for this re-focus is twofold. First, the UK&I and France are
among the biggest sleep markets in Europe.[3] Second, despite the Company
achieving growth across the rest of Europe in the first half of the year,
the negative profit contribution from the Company trading in this region was
considered to be too great to justify continued investment.
Within the core markets of UK&I and France, the Board's revised strategy is
to transform eve from being a single product focused business to a repeat
purchase, multi-product sleep specialist, building on the Company's growing
share of the mattress market. The Board believes that this updated strategy,
together with the funds raised in the Placing, will help drive continued
revenue growth and increase conversion. It is also expected that eve's
updated, more targeted marketing strategy will help lead to significant
improvements in unit economics. Such results are expected to be facilitated
by the estimated c.40 per cent. increase in online market penetration of the
UK bedroom furniture market between 2018 and 2023.[4]
Accordingly, the Company's updated strategy will focus on three core pillars
with the intention that the Company will further grow its share of the GBP6
billion bedroom market in UK&I and France resulting in revenue growth for
the Company. The three core pillars are aimed at creating a clearer position
for the Company in the wider sleep market with a wider bedroom product range
and an increased ability for cross-selling, by investing in technology and
digital teams to improve conversion and the Company's repeat purchase
metrics, and by continued investment in a more effective return on marketing
spend. The three core pillars of the Company's strategy are:
· differentiated brand positioning - broadening the Company's current
position to become a trusted destination for a wider range of bedroom
products;
· expanded product range - focussing on carefully curated, design-led
ranges that will increase cross-selling and repeat purchases, whilst
continuing to deliver excellent product quality in the Company's mattress
range; and
· lower friction customer experience - building consumer trust in the
Company's products and services with a view to improving the conversion
rate.
The three pillars are described in more detail below.
The Company, with an estimated compound quarterly revenue growth rate of
c.17 per cent. between Q1 2016 and Q3 2018, aims to achieve further growth.
The Directors believe this revised strategy will drive improved customer
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