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Boston-based Battery Ventures and the New York-based private investment group The Blackstone Group (collectively "the investors"), propose to invest between £40 million and £60 million in LIFFE (Holdings) plc ("the investment") representing between 25 and 38 per cent. of the enlarged issued ordinary share capital of the company.
The investment is to be effected by means of a placing and open offer of 10,000,000 new ordinary shares in LIFFE (Holdings) plc at £6 per share. This will raise, subject to the approval of LIFFE's shareholders, approximately £57 million, net of expenses. Qualifying shareholders will be offered 3,333,333 of these new ordinary shares under the terms of the open offer at £6 per share. Battery Ventures and Blackstone will subscribe for 6,666,667 new ordinary shares and any new ordinary shares not taken up by qualifying shareholders under the open offer.
In addition to the investment, LIFFE intends to grant to the investors a warrant to subscribe for further ordinary shares at £12 per share which may increase the investors' shareholding to up to 40 per cent. of the resulting enlarged issued share capital of the company.
On 6 June 2000 LIFFE entered into a memorandum of understanding (MOU) with Cap Gemini Ernst & Young, one of the largest technology firms in the world. The MOU sets out the basis on which they intend to work together on strategic and business development, systems development and service delivery of LIFFE CONNECT™ and associated technology.
The investment and the grant of the warrant are subject to shareholder approval. The document, which has been posted to LIFFE shareholders today, contains a notice convening an Extraordinary General Meeting (EGM) to be held at 12:00pm on Monday 20 November at Cannon Bridge, at which LIFFE shareholders will vote on the above proposals.
LIFFE's Chairman, Brian Williamson said "Battery Ventures, Blackstone and Cap Gemini Ernst & Young share our vision of the future for financial markets and other markets based on the internet and e-commerce which have begun to create a demand for a new breed of derivatives exchanges. With the technology of LIFFE CONNECT™, and working with Cap Gemini Ernst & Young and our two investors, we believe that LIFFE will play a lead role in the markets of the future."
Chinh Chu, Senior Managing Director of The Blackstone Group commented "We are pleased that LIFFE's Board of Directors has endorsed the arrangements between LIFFE, Battery Ventures and Blackstone. LIFFE and the LIFFE CONNECT™ platform are well positioned to capitalise on the trend towards increased reliance on technological innovation in global financial markets. Together, we anticipate expanding LIFFE's presence as a futures exchange, a provider of technology solutions and a participant in emerging business to business markets".
Background
The Board of LIFFE believes that LIFFE CONNECT™ has sound commercial prospects across a range of products and markets. It has selected Cap Gemini Ernst & Young to work with LIFFE and assist with the development, operation and marketing of LIFFE CONNECT™. Coupled with this arrangement, the Board believes that the company will benefit from the investors' expertise in the technology, internet and e-commerce markets which will provide LIFFE with assistance in applying the LIFFE CONNECT™ technology to other products and markets. The investors will also provide funds that will, in addition to existing cash resources, support the Exchange's product development and marketing plans and finance the further development of LIFFE CONNECT™.
LIFFE intends to establish a new subsidiary ("LIFFE IT") and to transfer the LIFFE CONNECT™ technology and, where appropriate, LIFFE's other technology assets and intellectual property associated therewith into LIFFE IT.
Placing and Open Offer
Qualifying shareholders will be offered 3,333,333 new ordinary shares under the terms of the open offer at £6 per share. Battery Ventures and Blackstone will subscribe at £6 per share for 6,666,667 new ordinary shares and any new ordinary shares not taken up by qualifying shareholders under the open offer.
In addition to the investment, LIFFE intends to grant to the investors a warrant to subscribe for further ordinary shares at £12 per share which may increase the investors' shareholding to up to 40 per cent. of the resulting enlarged issued share capital of the company.
The placing and open offer are conditional, inter alia, on the passing of the resolutions set out in the prospectus, posted to shareholders today.
The record date for the open offer is 20 October 2000. The latest date for receiving application forms for the open offer is 15 November 2000.
Arrangements with Cap Gemini Ernst & Young
The net proceeds of the placing and open offer will be used to develop the existing exchange business and exploit technology related opportunities associated with LIFFE CONNECT™. In addition to the MOU entered into on 6 June 2000, LIFFE and Cap Gemini Ernst & Young have subsequently agreed in principle the basis on which they will work together on strategic and business development, systems development and service delivery of LIFFE CONNECT™ and associated technology. It is intended that Cap Gemini Ernst & Young should have the opportunity to take an equity stake of up to 10 per cent. in LIFFE IT on terms to be agreed.
Investor Rights and Restrictions
Following completion of the placing, the investors, together with persons acting in concert with them, will have certain rights and be subject to certain restrictions in connection with their holdings of shares in LIFFE which are contained in the proposed articles of association and placing agreement. These rights include the right to appoint two directors to the Board of LIFFE. The restrictions will cease to apply on the earlier of (i) the expiry of three years from the date of the placing agreement or (ii) the occurrence of a listing.
Staff Share Incentive Schemes
In addition to the existing Inland Revenue approved Sharesave Scheme, shareholders will be asked to authorise the implementation of certain staff share incentive schemes; up to 4,660,588 ordinary shares may be issued or issuable in respect of these schemes.
Current Trading
Since the interim statement for the six months to 30 June 2000, trading has continued in line with management's expectations and Exchange volumes in the third quarter have been slightly above the equivalent period for 1999.
Waiver under the City Code
Following the placing and open offer, the investors, together with parties deemed to be acting in concert with them, may own more than 30 per cent. of the enlarged issued share capital of the company, depending on the number of shares taken up under the open offer. Furthermore in the event that the warrant is exercised, the investors, together with persons deemed to be acting in concert with them (at the time of exercise of the warrant), may increase their holding to up to 40 per cent. in the resulting enlarged issued share capital of the company. As the investors may otherwise have an obligation under the City Code to make a general offer to all shareholders, the Panel on Takeovers and Mergers has agreed, subject to the necessary resolution being passed on a poll by independent qualifying shareholders at the Extraordinary General Meeting, to waive this requirement to make a general offer.
Notice of EGM
An EGM to approve, inter alia, the investment and waiver under the City Code will be held on 20 November 2000 at 12:00pm at Cannon Bridge House, 1 Cousin Lane, London EC4R 3XX. Proxy forms are to be returned no later than 18 November 2000 to the company's registrar.
