30 April 2015

Optare plc

(AIM: OPE)

Proposed cancellation of trading on AIM

Optare plc ("Optare" or the "Company") announces that it will, today, be sending a circular to Shareholders containing a notice convening a General Meeting ("GM") of the Company to seek Shareholders' approval to cancel the admission of the Company's ordinary shares of 0.1p each ("Ordinary Shares") to trading on AIM ("Cancellation").

Introduction

The Directors have recently undertaken a review of the Ordinary Shares currently being traded on AIM. Pursuant to this review, which included consultation with the Company's advisers and its major Shareholder, Ashok Leyland, your Directors have concluded that it is in the overall interests of the Company and its Shareholders if the admission of the Ordinary Shares to trading on AIM is cancelled. Pursuant to Rule 41 of the AIM Rules, the Directors have notified the London Stock Exchange of the date of the proposed Cancellation. 

As per the AIM Rules, Cancellation is conditional upon the Resolution being passed by a majority of not less than 75 per cent. of the votes cast, whether in person or by proxy, by Shareholders at the GM to be held at 10.00 a.m. on 18 May 2015.  Ashok Leyland, which holds an interest in Ordinary Shares representing 75.1 per cent. of the issued ordinary share capital of the Company at the date of this announcement, has irrevocably undertaken to vote in favour of the Resolution. Therefore, it is expected that the Resolution to approve the Cancellation will be passed at the GM.

Should Cancellation be approved by Shareholders at the GM, the Company will put in place a matched bargain trading facility to be administered by Capita IRG and which will operate shortly after Cancellation and which should facilitate Shareholders in buying and selling Ordinary Shares following Cancellation. Further information is provided below.

Expected timetable of events

Each of the times and dates above is subject to change. Dates set after the General Meeting assume that the General Meeting is not adjourned and that the Resolution is passed. Any such change will be notified by an announcement on a Regulatory Information Service.

Unless otherwise stated, all references to time in this announcement are to British Summer Time (BST).  

Reasons for the proposed Cancellation

The Board believes that the perceived benefits of an admission of securities to trading on AIM typically include access to equity capital markets, an enhanced corporate profile, a market capitalisation reasonably reflecting value residing in the Company, a means to incentivise staff and a mechanism to provide a market in the Company's Ordinary Shares. The Board has reached the view that the Company is not receiving many of these benefits, nor is there any reasonable prospect of this situation changing in the foreseeable future, for the reasons set out below.

The total number of Ordinary Shares either owned or controlled by the Board and Ashok Leyland amounts to 1,682,292,517 representing approximately 75.26 per cent. of the Ordinary Shares at the date of this announcement. Accordingly, only 24.74 per cent. of the Ordinary Shares are held by other Shareholders. 

Over time, the Company has become increasingly reliant upon Ashok Leyland, its 75.1 per cent. Shareholder.  As at the date of this announcement, Ashok Leyland continues to provide material financial support to the Company, by way of a £5.1 million short-term loan facility and a corporate guarantee of the Company's £15 million term loan with Barclays Bank PLC. In addition, the Company entered into a £1.5 million loan facility with Ashok Leyland (UAE) LLC in December 2014 in order, inter alia, to fund future product development. Ashok Leyland is also assisting the Company to benefit from the deputation of key personnel, working on export opportunities, joint buying and common sourcing strategies, working with Ashok Leyland's supply chain to benefit from enhanced purchasing power and the sourcing of components from lower cost countries. The Directors expect this co-operation to deepen in the future.

There are significant costs associated with maintaining a quotation on AIM, which are not considered commensurate with the benefits of trading on AIM, and the Board believes that these funds could be more prudently deployed in the Company's growth. 

The Board also considers that:

·      the AIM listing of the Ordinary Shares is not in reality offering investors the opportunity to trade in meaningful volumes in the market.  This has been demonstrated by the limited trading volume in the Ordinary Shares, with just 0.3 per cent. of the issued ordinary share capital of the Company having been traded daily, on average, over the last three months;

·      the Company's size (having a market capitalisation of £3.58 million as at 29 April 2015 based on a share price of 0.16 pence per Ordinary Share) and reliance on the Company's major Shareholder, Ashok Leyland, increases the difficulty of raising any further equity capital, other than from Ashok Leyland. Thus it is increasingly challenging for the Company to take advantage of what is usually a key benefit of a listing;

·      the management time and legal and regulatory burden associated with maintaining admission of the Company's Ordinary Shares to trading on AIM is disproportionate to the benefits received; and

·      given its small market capitalisation and the relatively small proportion of Ordinary Shares not owned by Ashok Leyland or the Board (being approximately 24.74 per cent. as at 30 April 2015), Optare is unlikely to benefit from any new institutional or other investor interest in the Company.

The Board has therefore concluded that the commercial disadvantages and costs of maintaining a quotation on AIM at this time in the Company's development outweigh the potential benefits and that it is therefore no longer in the Company's or its Shareholders' best interests for its Ordinary Shares to remain quoted on AIM.

Effect of Cancellation

The Directors believe that the principal effects that Cancellation would have on Shareholders are as follows:

·      there would no longer be a formal market mechanism enabling Shareholders to trade their Ordinary Shares on AIM or any other recognised market or trading exchange, and no price would be publicly quoted for the Ordinary Shares.  Accordingly, the Ordinary Shares would be more difficult to value and it is likely that it would be more difficult for a Shareholder to sell or purchase any Ordinary Shares. However, as noted above, the underlying liquidity in the Ordinary Shares is low and, in the opinion of the Directors, would be likely to remain that way for the foreseeable future. The proposal for the implementation of a matched bargain facility following the Cancellation is described below;

·      the Company would cease to have a nominated adviser and broker and would no longer be required to comply with the AIM Rules, including the obligation to announce material events, administrative changes and material and/or related party transactions, for example Board changes and changes to its capital structure; to announce interim and final results; and to obtain Shareholder approval for reverse takeovers and/or fundamental changes in the Company's business;

·      whilst the Company would no longer be required to comply with many of the corporate governance requirements applicable to companies with shares admitted to trading on AIM, the Company and the Directors intend to comply with their obligations and responsibilities under the Companies Act as appropriate for an unlisted public company, as described in further detail below; and

·      the Company would no longer be subject to the Disclosure and Transparency Rules and would therefore no longer be required to disclose major shareholdings in the Company.

However Shareholders should note inter alia that:

·      following Cancellation, as an unlisted public company, the Company would remain subject to the provisions of the Takeover Code.  The Takeover Code operates principally to ensure that shareholders are treated fairly and are not denied an opportunity to decide on the merits of a takeover and that shareholders of the same class are afforded equivalent treatment by any bidder. The Takeover Code also provides an orderly framework within which takeovers are conducted;

·      the Company would remain subject to English company law, which mandates shareholder approval for certain matters, including the issue of new shares on a non pre-emptive basis;

·      in accordance with English company law, the Directors would continue to be subject to various duties in relation to the Company, including to promote the success of the Company for the benefit of the Shareholders as a whole;

·      the Company would continue to communicate information about the Company to its Shareholders, as required by law, including by continuing to publish annual reports and accounts and holding annual general meetings and other general meetings in accordance with applicable statutory requirements and the Company's articles of association; and

·      the Company presently intends to maintain an "investors" section on the Company's website at www.optare.com providing information on any significant events or developments in which Shareholders may be interested.  Shareholders should be aware, however, that there will be no obligation on the Company to update that section of the website as presently required under the AIM Rules.

Cancellation may have either positive or negative taxation consequences for Shareholders.  Shareholders who are in any doubt about their tax position should consult with their own independent professional adviser as soon as possible.

Governance following Cancellation

The Directors' current intention is that the Company should remain a public limited company but without having its shares admitted to trading on a public market or multilateral trading facility.  

The Directors intend to continue to include at least one independent non-executive director on the Board for the foreseeable future to ensure appropriate independent judgement on issues of strategy, performance, resources and corporate governance that they consider vital to the continued success of the Group. The Company will continue to ensure that standards of corporate governance are maintained that are proportionate and appropriate to the size and nature of the Group post-Cancellation.

Cancellation Process

Under the AIM Rules, Cancellation requires the approval of Shareholders by a majority of not less than 75 per cent. of the votes cast in person or by proxy in general meeting, and the expiration of a period of not less than 20 clear Business Days from the date on which notice of the intended Cancellation is given to the London Stock Exchange.

The Company has notified the London Stock Exchange of the proposed Cancellation. Subject to the passing of the Resolution, Cancellation will occur no earlier than five clear Business Days after the GM and it is expected that trading in the Ordinary Shares on AIM will cease at the close of business on 1 June 2015, with Cancellation expected to take effect at 7.00 a.m. on 2 June 2015.

Trading in the Ordinary Shares after Cancellation

Following Cancellation, the Directors do not anticipate applying to admit the Ordinary Shares to trading and/or listing on an alternative stock exchange in the foreseeable future and, absent any further action from the Company, any transaction in Ordinary Shares undertaken after Cancellation will only be capable of being undertaken by private sale. The Directors are accordingly aware that Cancellation, should it be approved by Shareholders, will make it difficult for Shareholders to buy and sell Ordinary Shares should they wish to do so. Optare therefore intends to make available to Shareholders an off-market trading facility for the Ordinary Shares, which will be administered by Capita IRG, based on matching bargains, where buyers' and sellers' price expectations match. Under this third party facility, Shareholders or persons wishing to acquire or dispose of Ordinary Shares will be able to leave an indication with Capita IRG that they are prepared to buy or sell at an agreed price. In the event that Capita IRG is able to match that order with an opposite sell or buy instruction, it would contact both parties and then effect the bargain. 

It is currently anticipated that this matched bargain facility will be in place shortly after the date of Cancellation. More details of the facility will be made available on the Company's website at that time at www.optare.com.

The Board intends to monitor the popularity of this arrangement amongst Shareholders following Cancellation and will review it at regular intervals to consider whether it remains cost-effective and in the best interests of Shareholders as a whole. The Company's CREST trading facility will remain in place for so long as it remains economic to do so.

Current trading

In the past financial year, the double deck market grew by over 20 per cent. and the single deck market grew by approximately 5 per cent. The Company maintained its market share in the single deck segment, but the Company's overall market share fell by 1 per cent. to 11 per cent. due to the lack of a product on sale in the double deck segment.  The official launch of the Company's new Euro 6 double deck, the MetroDecker, took place in May 2014 and the Company expects to open the sales book later this year. The markets in which the Company operates continue to be characterised by intensified competition, higher level of requirements from operators and continued pressure on margins. The Directors also anticipate that increased government austerity and uncertainty due to the forthcoming UK general election in May might impact market growth. Overall, trading since the interim period end on 30 September 2014 has been in line with management's expectations, in that it has remained difficult, but with a full product range to offer to the UK market later this year, higher base volumes from the major groups expected as a result, and conversion of more export tenders, together with the continued support of Ashok Leyland, the future remains generally positive for the Company.

Resolution to be proposed at the General Meeting

In order to approve Cancellation, the Resolution will be proposed at the GM in the following terms: "That the admission of the ordinary shares of 0.1p each in the capital of the Company to trading on AIM, a market operated by London Stock Exchange plc, be cancelled and that the directors of the Company be authorised to take all steps which they consider to be necessary or desirable in order to effect such cancellation". The Resolution will be proposed as a special resolution requiring approval of not less than 75 per cent. of the votes cast, in person or by proxy, by Shareholders at the GM.

Irrevocable undertaking

An irrevocable undertaking to vote in favour of the Cancellation at the General Meeting has been received from Ashok Leyland in respect of its beneficial holding of 1,678,704,162 Ordinary Shares, representing approximately 75.1 per cent. of the total issued ordinary share capital of the Company at the date of this announcement.

Recommendation

The Directors consider Cancellation to be in the overall interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend Shareholders to vote in favour of the Resolution to be proposed at the GM as they intend to do in respect of their own beneficial holdings, amounting, in aggregate, to 3,588,355 Ordinary Shares representing approximately 0.16 per cent. of the issued ordinary share capital of the Company at the date of this announcement.

General Meeting and Cancellation from Trading on AIM

A notice of GM will be sent to Shareholders today convening a meeting at 10.00 a.m. at the offices of the Company at Hurricane Way South, Sherburn in Elmet, Leeds, North Yorkshire LS25 6PT,  on 18 May 2015. Subject to the passing of the Resolution, the delisting of the Ordinary Shares from trading on AIM is expected to take effect from 2 June 2015 and the final day upon which they will be able to be traded on AIM is expected to be 1 June 2015.

A copy of the Circular, which will include the notice of GM, will be made available on the Company's website at www.optare.com.

DEFINITIONS

The following definitions apply throughout this announcement, unless the context otherwise requires: