DJ Eve Sleep plc: Proposed Placing and Approval of a waiver of Rule 9 of the Takeover Code
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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THE INFORMATION CONTAINED IN THIS ANNOUNCEMENT IS RESTRICTED AND IS NOT FOR
PUBLICATION, RELEASE OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR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,
AUSTRALIA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR NEW ZEALAND OR ANY OTHER
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
(MORE TO FOLLOW) Dow Jones Newswires
January 23, 2019 02:02 ET (07:02 GMT)
DJ Eve Sleep plc: Proposed Placing and Approval of a -2-
life time value and, as such, offer the potential to deliver medium-term
profitability of approximately high single digit EBITDA margins.[5]
The Directors believe that an increase in current market share could have a
significant impact on revenues and cost ratios. By way of illustration,
overheads and marketing as a percentage of revenue have the potential to
decrease to under 30 per cent. based on a mattress market share of c.5 per
cent. in the targeted markets.[6]
Differentiated brand positioning
In the UK the Company's marketing strategy has been effective in driving
growth in its brand awareness and, at the same time, improving its marketing
efficiency, with unprompted brand awareness growing from 1.4 per cent. in
December 2016 to 11.2 per cent. in August 2018 and, across UK&I, marketing
as a percentage of revenue falling from approximately 60 per cent. in Q1
2017 to approximately 36 per cent. in October 2018 and remaining at below 50
per cent. for the rest of the year.[7]
eve is currently the fifth most well-known mattress brand in the UK[8] and
eighth most well-known mattress brand in France[9] and is the most searched
for mattress in a box brand in the UK and second most searched for mattress
in a box brand in France[10].
The Company plans to continue to build brand awareness in its core markets
through:
· optimised marketing, focusing on improving efficiency through different
media channel weightings throughout next year; and
· enhanced targeting, customer engagement and increased awareness through:
· efficient investment in paid media;
· growing its owned media to improve customer content; and
· further building credibility and awareness through its commercial
retail partnership channels and through brand partnership endorsements.
Expanded product range
Product range expansion has driven growth in non-mattress revenue and also
repeat ordering with online sales of non-mattress products in UK&I growing
from approximately GBP0.3 million in Q1 2017 to approximately GBP1.1 million in
Q3 2018.[11] In addition, online repeat orders in the UK have grown from
approximately 8 per cent. in Q1 2016 to approximately 12 per cent. in Q3
2018.[12]
As such, the Company plans to expand more aggressively its depth and range
of products. The Company's new mattress range is performing well and the
Company has recently launched its premium mattress. The Company also plans
to offer a more extensive, but carefully curated, bedframe product offering,
an extended textiles range, lighting, furniture and accessories and plans to
launch new products in Q1 2019, including a full baby bed and sleep range in
collaboration with the design collective Nous Vous. The Company plans to
more than double the range of products from around 22 in Q3 2018 to around
60 products by the end of 2019, with further range expansions planned beyond
that period.
The Board believes that this will help lead to increased cross-selling
opportunities and repeat purchases, thereby growing sales and reducing
customer acquisition costs and, as a result, significantly improving the
Company's unit economics.
Lower friction customer experience
The Company has recently made improvements to its customer experience which
has shown a noticeable improvement in UK conversion rates. The Directors
believe that further increasing conversion rates will have a positive effect
on marketing effectiveness and will improve the key metric of marketing as a
percentage of revenue.
The Company's plans to enhance the customer experience include:
· improving the omni-channel presence, increasing brand awareness and
credibility at the same time as allowing customers to experience the
product before making purchases;
· focussing on the online purchasing experience including improving the
search, discovery and checkout processes on the website; and
· enhancing delivery options for customers and improving post-sales
customer relationship marketing.
The Directors believe that the above enhancements to customer experience
will be a key component in driving long-term, sustainable growth.
The Company is currently reviewing its retail and partnership strategy and,
as part of that, Dreams has engaged with the Company to re-negotiate certain
commercial terms in connection with their partnership with eve. The
Company's objective is that these negotiations are resolved satisfactorily,
however discussions are ongoing.
Use of proceeds
The net proceeds of the Placing (estimated to be GBP11.7 million) and the
proposed Channel Four future advertising spend of GBP0.9 million (as described
in the section entitled Future issues of Ordinary Shares for media spend
below) will be used to support the strategy outlined in the section entitled
"Background to and reasons for the Placing" above. Within those preceding
amounts, the Directors envisage that the principal individual areas of
expenditure, and the approximate breakdown between them, will be as follows:
· to reduce cost per customer acquisition through building a
differentiated and trusted brand (which, including the proposed Channel
Four future advertising spend of GBP0.9 million, is currently expected to be
approximately between GBP4 and 4.5 million);
· to enhance the customer experience to drive conversion rate improvement
(currently expected to be approximately between GBP1.5 and 2 million);
· to broaden the product portfolio by deploying resources and working
capital, to build a defensible position in the sleep market and drive
increased cross-selling and repeat purchasing (currently expected to be
approximately between GBP2.5 and 3 million);
· to invest in internal systems to support the Company's growth, including
investing in stock management, website infrastructure, logistics and
warehouse technology (currently expected to be approximately between GBP2
and 2.5 million); and
· to augment existing net cash resources and to provide general working
capital for the business.
In applying the above amounts, the Directors will have regard to any
material changing trading patterns or conditions in the markets in which the
Group operates and its requirements and the precise actual allocation
between the above elements may be subject to appropriate adjustment up or
down.
The Company previously announced that it required GBP15 million of new equity
(assumed to be GBP14.5 million net of expenses) to fund the Company's updated
strategy. This GBP14.5 million would have provided the Company with cash
headroom on both its base case and downside case business plans looking out
to December 2020. The aggregate net proceeds of the Placing, in conjunction
with the Channel Four media for equity arrangement, amount to c.GBP12.6
million. This amount also provides the Company with headroom on its base
case business plan, and headroom on its downside case business plan when
taking into account certain mitigating actions that would, in those
circumstances, be required to be taken by the Company in Q4 2020.
Current trading and prospects[13]
In the unaudited 12 month period to 31 December 2018, the Group's revenue
was ahead of analyst expectations at c.GBP34.5 million, helped by a
successfully traded Black Friday period and early signs of conversion
improvements supported by an enhanced user experience in the fourth quarter.
UK&I revenue increased to c.GBP22.6 million and France revenue increased to
c.GBP6.8 million in the period, representing an increase of c.40 per cent. and
c.22 per cent. respectively when compared to their respective annual
revenues in 2017.
In the unaudited 10 month period to 31 October 2018, contribution after
marketing before overheads was a loss of c.GBP1.1 million in the UK&I and a
loss of c.GBP3.0 million in France over the same period. Gross margins over
this period were 53 per cent. in UK&I and 52 per cent. in France[14] whilst
return rates in the UK&I have been broadly stable at about 10 per cent. and
in France have improved from about 10 per cent. to 6.5 per cent.[15]
As part of the business review set out above, and as outlined in the
announcement made on 15 November 2018, the Company has re-evaluated its 2019
financial year priorities and expectations based on the updated strategy. In
the current year, the Company is focused on building capabilities in
customer experience and product range and optimising marketing investment.
Following a successful start to the winter sales period in the UK, unaudited
trading results for the first week of 2019 were in line with the Company's
revised expectations.
New Option Grants
Conditionally upon, and following, the implementation of the Placing, the
Company intends that all options over Ordinary Shares granted under the
Share Option Plan at the time of the Company's initial public offering in
May 2017 will be cancelled and new options over Ordinary Shares will be
granted to certain members of management and employees of the Company under
the Share Option Plan with an exercise price equal to the nominal value of
the Ordinary Shares and with a vesting period of three years.
The cancellation of options and the granting of new options, including the
number of individual grants, will be determined by the remuneration
committee of the Board conditional on and following the completion of the
(MORE TO FOLLOW) Dow Jones Newswires
January 23, 2019 02:02 ET (07:02 GMT)
DJ Eve Sleep plc: Proposed Placing and Approval of a -3-
Placing. Such grants shall be made in accordance with, and subject to, the
Share Option Plan, but it is expected that options over up to 10 per cent.
of the Enlarged Share Capital following the Placing will be granted (the New
Option Grants). It is currently intended that options over up to 16.9 per
cent. of the New Option Grants will be granted to James Sturrock, Chief
Executive Officer, and options over up to 8.5 per cent. of the New Option
Grants will be granted to Abid Ismail, Chief Financial Officer. The precise
timing of the cancellation and granting of options will be dependent on the
determination of the Company's remuneration committee following completion
of the Placing and completion of the necessary contractual documentation
related to the cancellation and grants. A further announcement will be made
in due course.
Future issues of Ordinary Shares for media spend
Channel Four, which provides advertising services to the Company and is an
existing Shareholder, has agreed with the Company that on a periodic basis
within a twenty four month period following the Placing, sums payable by the
Company in respect of media spend by it with Channel Four will be reinvested
in the Company through the issue of new Ordinary Shares at a price equal to
the Placing Price up to an aggregate amount of GBP0.9 million.
Details of the Placing
The Company has entered into the Placing Agreement with Peel Hunt on
customary terms and conditions pursuant to which, subject to the conditions
set out in the Placing Agreement, Peel Hunt has agreed to use its reasonable
endeavours (as agent for the Company) to procure placees for 120,317,323 new
Ordinary Shares at the Placing Price. The Company has received firm
commitments from Placees for all of the Placing Shares in the Placing which
will raise approximately GBP12.0 million (before expenses).
The obligations of Peel Hunt under the Placing Agreement are conditional
upon, inter alia, the Resolutions being duly passed at the General Meeting
and Admission becoming effective on or before 8.00 a.m. on 12 February 2019
(or such later time and date as the Company and Peel Hunt shall agree, not
being later than 8.30 a.m. on 26 February 2019).
The Placing Agreement contains provisions entitling Peel Hunt to terminate
the Placing Agreement at any time prior to Admission in certain
circumstances. If this right is exercised or if the conditionality in the
Placing Agreement is not satisfied, the Placing will not proceed.
The Company has agreed to pay Peel Hunt a placing commission together with
reimbursement of certain costs and expenses incurred in connection with the
Placing.
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 tax advantages
that may be available pursuant to the rules of the VCT Scheme. For more
detail see the paragraph entitled VCT investors below.
Application will be made for the Placing Shares to be admitted to trading on
AIM. Subject to the Resolutions being passed at the General Meeting, it is
expected that Admission of the Placing Shares will become effective and that
dealings will commence in the Placing Shares at 8.00 a.m. on 12 February
2019.
Related party transactions
Following Admission, Woodford, being a substantial shareholder in the
Company as defined in the AIM Rules, will have a shareholding of 121,774,848
Ordinary Shares representing 46.83 per cent. of the Enlarged Share Capital.
The participation of Woodford (or its associates) in the Placing will be a
related party transaction for the purpose of Rule 13 of the AIM Rules (the
Woodford Related Party Transaction). The Directors, having consulted with
Peel Hunt as the Company's nominated adviser, consider that the terms of the
Woodford Related Party Transaction are fair and reasonable insofar as the
Shareholders are concerned.
Following Admission, the VCT Placee, being a substantial shareholder in the
Company as defined in the AIM Rules, will have a shareholding of 38,461,295
Ordinary Shares representing 14.8 per cent. of the Enlarged Share Capital.
The participation of the VCT Placee (or its associates) in the Placing will
be a related party transaction for the purpose of Rule 13 of the AIM Rules
(the VCT Placee Related Party Transaction). The Directors, having consulted
with Peel Hunt as the Company's nominated adviser, consider that the terms
of the VCT Placee Related Party Transaction are fair and reasonable insofar
as the Shareholders are concerned.
Paul Pindar and James Sturrock, being directors of the Company and therefore
related parties to the Company as defined in the AIM Rules, have
conditionally agreed to subscribe for an aggregate of 10,200,000 Placing
Shares in the Placing as detailed below:
Name Role Number of Number of Percentage of
Placing Ordinary the Enlarged
Shares Shares Share Capital
held
following
Admission
Paul Non-executive 10,000,000 16,527,126 6.4%
Pindar[16 Chairman
]
James CEO 200,000 252,750 0.1%
Sturrock
The participation of the Directors (or their associates) in the Placing will
be a related party transaction for the purpose of Rule 13 of the AIM Rules
(the Director Related Party Transaction). The Independent Directors, having
consulted with Peel Hunt as the Company's nominated adviser, consider that
the terms of the Director Related Party Transaction are fair and reasonable
insofar as the Shareholders are concerned.
The Takeover Code
The Placing gives rise to certain considerations under the Takeover Code and
Shareholders are entitled to the protections afforded under the Takeover
Code. The Takeover Code is issued and administered by the Panel. The
Takeover Code applies to, inter alia, a company which has its registered
office in the United Kingdom and is admitted to trading on AIM.
Under Rule 9 of the Takeover Code, where any person acquires, whether by a
series of transactions over a period of time or not, an interest in shares
which (taken together with shares in which persons acting in concert with
him are interested) carry 30 per cent. or more of the voting rights of a
company which is subject to the Takeover Code, that person is normally
required to make a general offer to all the holders of any class of equity
share capital and to the holders of any other class of transferable
securities carrying voting rights in that company to acquire the balance of
their interests in the company.
Rule 9 of the Takeover Code also provides, among other things, where any
person who, together with persons acting in concert with him, is interested
in shares which in aggregate carry not less than 30 per cent. but does not
hold shares carrying more than 50 per cent. of the voting rights of a
company which is subject to the Takeover Code, and such person, or any
person acting in concert with him, acquires an additional interest in shares
which increases the percentage of shares carrying voting rights in which he
is interested, then that person is normally required to make a general offer
to all the holders of any class of equity share capital and to the holders
of any other class of transferable securities carrying voting rights in that
company to acquire the balance of their interests in the company.
An offer under Rule 9 of the Takeover Code must be in cash (or be
accompanied by a cash alternative) at not less than the highest price paid
by the person required to make the offer or any person acting in concert
with him for any interest in shares in the company during the 12 month
period prior to the announcement of the offer.
For the purposes of the Takeover Code, persons acting in concert comprise
persons who, pursuant to an agreement or understanding (whether formal or
informal), cooperate to obtain or consolidate control of a company or to
frustrate the successful outcome of an offer for a company. A person and
each of its affiliated persons will be deemed to be acting in concert all
with each other. Certain categories of person are presumed to be acting in
concert under the Takeover Code unless the contrary is established.
Immediately following Admission, Woodford (including the Woodford Funds and
any other party deemed acting in concert with it) will have acquired
interests in the Ordinary Shares carrying in aggregate 46.83 per cent. of
the voting rights of the Company which, without a waiver of the obligations
under Rule 9 of the Takeover Code, would oblige Woodford (and any party
deemed to be acting in concert with it) to make a general offer to
Shareholders under Rule 9 of the Takeover Code.
Woodford is an investment fund manager. In pursuance of their client's
investment objectives, Woodford actively invests in companies as agent for
its clients. Accordingly, Woodford will subscribe for its Placing Shares
using its clients' available cash resources.
Rule 9 Waiver
The Company has applied to the Panel for a waiver of Rule 9 of the Takeover
Code in order to permit the Placing to proceed without triggering an
(MORE TO FOLLOW) Dow Jones Newswires
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DJ Eve Sleep plc: Proposed Placing and Approval of a -4-
obligation on the part of Woodford to make a general offer to all of the
other Shareholders.
Under Note 1 on the Notes on the Dispensations from Rule 9 of the Takeover
Code, the Panel will normally waive the requirement for a general offer to
Shareholders under Rule 9 of the Takeover Code if, among other things, there
has been a vote of independent shareholders. Accordingly, the Panel has
agreed to grant a waiver of Rule 9 of the Takeover Code subject to the
Independent Shareholders approving the Whitewash Resolution on a poll at the
General Meeting. To be passed, the Whitewash Resolution will require a
simple majority of the votes cast on a poll by the Independent Shareholders.
Independent Shareholders should note that, following completion of the
Placing, Woodford (and those parties deemed to be acting in concert with it)
will not be entitled to increase its interest in the voting rights of the
Company without incurring a further obligation under Rule 9 of the Takeover
Code to make a general offer (unless a dispensation from this requirement
has been obtained from the Panel in advance).
If the Whitewash Resolution is passed by the Independent Shareholders at the
General Meeting, Woodford will not be restricted from making an offer for
the Company.
Independent Shareholders should also note that, following completion of the
Placing, Woodford (by the fact that it is deemed interested, for Takeover
Code purposes, in the aggregate shares held by its discretionary managed
investment fund clients (including the Woodford Funds and any other party
deemed acting in concert with it) will control, in aggregate, approximately
46.83 per cent. of the voting rights of the Company and that this will
increase the percentage of the Ordinary Shares that are not in public hands
(as defined in the AIM Rules). This may in turn have the effect of reducing
the liquidity of trading in the Ordinary Shares on AIM. Woodford's stake in
the voting rights of the Company will also mean that Woodford will be able,
if it so wishes, to block any special resolutions proposed at future general
meetings of the Company and requisition a general meeting to present for
vote resolutions proposed by it. Although it is not the current intention of
Woodford to seek a resolution at a general meeting of the Company to de-list
the Ordinary Shares from AIM, Woodford could, if it so wishes in the future,
propose such a resolution.
Independent advice provided to the Board
The Takeover Code requires the Board to obtain competent independent advice
regarding the merits of the transaction which is the subject of the
Whitewash Resolution, the controlling position which it will create, and the
effect which it will have on the Shareholders generally.
Accordingly, Peel Hunt, as the Company's nominated adviser, has provided
formal advice to the Board regarding the Placing and the Whitewash. Peel
Hunt confirms that it is independent of Woodford.
VCT investors
No assurance has been obtained from HMRC or any other person that a
subscription for Ordinary Shares in the Company is a "qualifying holding"
for the purpose of investment by VCTs.
The status of the Ordinary Shares as a qualifying holding for VCT purposes
will be dependent on a number of factors, including that the Ordinary Shares
are "eligible shares" and a "qualifying holding" for VCT purposes.
None of the Company nor any of the Directors nor any of the Company's
officers, employees, agents or advisers gives any warranty, representation
or undertaking that any VCT investment in the Company is a qualifying
holding (or, in the event that it is deemed to be a qualifying holding as at
the Last Practicable Date, that it will remain so). The Company does not
give any guarantee, undertaking or other assurance that it conducts or will
conduct its business in a way which ensures that the Company will meet the
requirements of a VCT Scheme. 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 any and all liability
in this regard is disclaimed in respect of the Directors, the Company and
its officers, employees, agents and advisers.
VCTs considering making a qualifying VCT investment are required to seek
their own professional advice in order that they may fully understand how
the relief legislation may apply in their individual circumstances.
Enquiries:
eve Sleep plc via M7 Communications
Ltd
James Sturrock, Chief Executive
Officer
Abid Ismail, Chief Financial Officer
Peel Hunt LLP (NOMAD and broker) +44 (0) 20 7418 8900
Dan Webster
George Sellar
Guy Pengelley
M7 Communications Ltd +44 (0) 7903 089 543
Mark Reed
The person arranging release of this Announcement on behalf of the Company
is Abid Ismail, Chief Financial Officer.
Important information
This Announcement is for information purposes only and does not itself
constitute an offer or invitation to underwrite, subscribe for or otherwise
acquire or dispose of any securities in the Company and does not constitute
investment advice. Each Placee should consult with its own advisers as to
legal, tax, business and related aspects in relation to any acquisition of
Placing Shares. The price of the shares in the Company and the income from
them (if any) may go down as well as up and investors may not get back the
full amount invested on disposal of shares.
Neither this Announcement nor any copy of it may be taken or transmitted,
published or distributed, directly or indirectly, into the United States of
America, any province of Canada, Australia, Japan, the Republic of South
Africa or New Zealand or to any persons in any of those jurisdictions or any
other jurisdiction where to do so would constitute a violation of the
relevant securities laws of such jurisdiction. Any failure to comply with
this restriction may constitute a violation of United States, Australian,
Canadian, Japanese or South African securities laws. The distribution of
this Announcement in other jurisdictions may be restricted by law and
persons into whose possession this Announcement comes should inform
themselves about, and observe any such restrictions.
This Announcement does not constitute, or form part of, any offer or
invitation to sell or issue, or any solicitation of any offer to purchase or
subscribe for any shares or other securities in the United States (including
its territories and possessions, any state of the United States and the
District of Colombia (the United States or US)), any province of Canada,
Australia, Japan, the Republic of South Africa or New Zealand or in any
jurisdiction to whom or in which such offer or solicitation is unlawful. The
Placing and the distribution of this Announcement and other information in
connection with the Placing in certain jurisdictions may be restricted by
law and persons into whose possession this Announcement, any document or
other information referred to herein, comes should inform themselves about
and observe any such restriction. Any failure to comply with these
restrictions may constitute a violation of the securities laws of any such
jurisdiction. Neither this Announcement nor any part of it nor the fact of
its distribution shall form the basis of or be relied on in connection with
or act as an inducement to enter into any contract or commitment whatsoever.
In particular, the securities of the Company (including the Placing Shares)
have not been and will not be registered under the US Securities Act of
1933, as amended (the Securities Act), or under the securities laws or with
any securities regulatory authority of any state or other jurisdiction of
the United States, and accordingly the Placing Shares may not be offered,
sold, pledged or transferred, directly or indirectly, in, into or within the
United States except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act and the
securities laws of any relevant state or jurisdiction of the United States.
Any securities referred to herein may be offered and sold only in "offshore
transactions" as defined in and pursuant to Regulation S under the US
Securities Act or otherwise in private placement transactions that are
exempt from the registration requirements under the US Securities Act. There
is no intention to register any portion of the offering in the United States
or to conduct a public offering of securities in the United States.
The Placing Shares have not been approved or disapproved by the US
Securities and Exchange Commission, any state securities commission or other
regulatory authority in the United States, nor have any of the foregoing
authorities passed upon or endorsed the merits of the Placing or the
accuracy or adequacy of this Announcement. Any representation to the
contrary is a criminal offence in the United States.
Peel Hunt LLP (Peel Hunt) is authorised and regulated in the United Kingdom
by the Financial Conduct Authority (FCA) and is acting as nominated adviser
and broker to the Company in respect of the Placing. Peel Hunt is acting for
the Company and for no-one else in connection with the Placing, and will not
be treating any other person as its client, in relation thereto and will not
be responsible for providing the regulatory protections afforded to its
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January 23, 2019 02:02 ET (07:02 GMT)
customers nor for providing advice in connection with the Placing or any
other matters referred to herein and apart from the responsibilities and
liabilities (if any) imposed on Peel Hunt by Financial Services and Markets
Act 2000 (as amended) (FSMA), any liability therefor is expressly
disclaimed. Any other person in receipt of this Announcement should seek
their own independent legal, investment and tax advice as they see fit.
Forward-looking statements
Certain information contained in this Announcement constitutes
forward-looking information. This information relates to future events or
occurrences or the Company's future performance. All information other than
information of historical fact is forward-looking information. The use of
any of the words "anticipate", "plan", "continue", "estimate", "expect",
"may", "will", "project", "should", "believe", "predict" and "potential" and
similar expressions are intended to identify forward-looking information.
This information involves known and unknown risks, uncertainties and other
factors that may cause actual results or events to differ materially from
those anticipated in such forward-looking information. No assurance can be
given that this information will prove to be correct and such
forward-looking information included in this Announcement should not be
relied upon. Forward-looking information speaks only as of the date of this
Announcement. The forward-looking information included in this Announcement
is expressly qualified by this cautionary statement and is made as of the
date of this Announcement. Neither the Company, nor Peel Hunt undertake any
obligation to publicly update or revise any forward-looking information
except as required by applicable securities laws.
Appendix I - Risk Factors
An investment in new Ordinary Shares is subject to a number of risks. Before
making an investment decision with respect to new Ordinary Shares,
prospective investors should carefully consider the risks associated with an
investment in the Company, the Company's business and the industry in which
the Company operates, in addition to all of the other information set out in
this Announcement and the Circular and, in particular, those risks described
below.
If any of the circumstances identified in the risk factors were to
materialise, the Company's business, financial condition, results of
operations and future prospects could be adversely affected and investors
may lose all or part of their investment. Certain risks of which the
Directors are aware at the date of this Announcement and the Circular and
which they consider material to prospective investors are set out in the
risk factors below. Additional risk factors which the Directors consider may
be relevant to the Company's business can be found in the Company's
Admission Document dated 15 May 2017. Copies of the Admission Document can
be obtained on the Company's website at
https://investor.evemattress.co.uk/aim-rule [1]. However, further risks and
uncertainties relating to the Company which are not currently known to the
Directors, or that the Directors do not currently deem material, may also
have an adverse effect on the Company's business, financial condition,
results of operations and future prospects. If this occurs, the price of the
Ordinary Shares may decline and investors may lose all or part of their
investment.
An investment in the Company may not be suitable for all potential
investors. Potential investors are therefore strongly recommended to consult
an independent financial adviser, authorised under FSMA, who specialises in
advising upon the acquisition of shares and other securities before making a
decision to invest.
Risks relating to the Company's business and its industry
The Company may not be successful in implementing its updated strategy
There is no guarantee that the Company will be successful in implementing
its updated strategy to focus on UK&I and France. The Company's future
business and results of operation will depend on the successful
implementation of this strategy and, in particular, upon the impact of the
measures which the Company proposes to take to increase its brand awareness,
expand its product range and improve the experience of its customers.
The Company's ability to generate sales growth is dependent upon a number of
factors, including its ability to: increase penetration through effective
marketing strategies, stronger product recognition and greater brand
awareness; successfully design, launch and develop future products to extend
its product range; provide a satisfactory customer experience; and secure
and maintain relationships with key partners in its core markets.
Implementation of the Company's strategy may place significant demands on
its management, administrative, operational, IT, financial, personnel and
other resources. The Company will need to continue to maintain, develop and
integrate its management, administrative, operational, financial and
accounting systems, internal controls and supervisory procedures. As the
Company's operations continue to expand, it may also be required to incur
further expenditure and effort to invest in its IT systems and
infrastructure and to recruit additional personnel. The Company may
experience constraints in its ability to expand, such as being required to
comply with additional legal or regulatory restrictions in its existing and
target markets. There is no assurance that the Company will be successful in
implementing its updated strategy, a lack of market acceptance of such
efforts or the Company's inability to generate satisfactory revenue to
offset its expansion costs could have a material adverse effect on its
business, financial condition, results of operations and future prospects.
The Company operates in the highly competitive mattress and wider sleep
market and may not be able to grow, or maintain, its existing market share
Participants in the sleep products market compete on price, quality, brand
recognition, product availability and product performance. The highly
competitive nature of this market means that the Company is continually
subject to the risk of (a) loss of, or failure to increase, market share,
(b) reductions in margins and (c) the inability to secure new customers.
The Company faces competition from other parties including those parties
with greater capacity and scale than the Company and those who have a more
established presence and/or reputation in the sleep market, as well as from
new market entrants. The Company's business model relies on marketing and
having sufficient resources to market its products. Competitors who have
greater resources than the Company may be more successful in marketing their
products, which may impact on the Company's ability to create, maintain or
grow a market share.
A number of competitors offer sleep products that compete directly with the
Company's products. The Company may not achieve the goals of its updated
strategy and as a result may fail to sufficiently differentiate itself from
both traditional and mattress in a box competitors. Competition from
established or new market entrants (particularly those who have an online
direct-to consumer model for mattresses) may impact the Company's sales of
its products and damage the Company's reputation and brand awareness, any of
which may have a material adverse effect on the Company's business,
financial condition, results of operations and future prospects and inhibit
the successful implementation of its updated strategy.
The Company is reliant on the success of its brand and may be subject to
reputational harm that could damage its brand
The Company's success relies significantly on the strength of its brand.
There can be no assurance that the Company will be able to continue to
develop its brand awareness in order to increase its market share, nor
maintain current levels of brand awareness.
The Company could be damaged by reputational harm if it fails to address
actual or perceived issues with its product (including product quality,
value for money, comfort, safety, aesthetics and environmental concerns),
its website, the effectiveness of its logistics operations and customer
service. In addition, the Company is exposed to risks which could undermine
the strength of the Company's brand and its reputation and goodwill, such as
negative news coverage, customer ratings and reviews (including adverse
social media commentary), poor quality control, operational failures and
customer service.
The Company may be subject to litigation, disputes, claims and complaints,
including adversarial actions, by customers, employees, suppliers,
competitors, insurers and others in the ordinary course of business.
Significant claims or a substantial number of small claims may be expensive
to defend, may divert the time and focus of management away from the
Company's operations and may result in the Company having to pay monetary
judgments, any of which could have a material adverse effect on the
Company's results of operations and financial condition. In addition,
adverse publicity or a substantial judgment against the Company related to
litigation could negatively impact its reputation, even if the Company is
not found liable. An inability to manage risks relating to its brand for any
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January 23, 2019 02:02 ET (07:02 GMT)
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