Announcement PDF RNS Number : 4712Y AOP Health International Management 04 May 2023 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION. THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION. FOR IMMEDIATE RELEASE. 4 May 2023 AOP LOAN CONVERSION MANDATORY CASH OFFER for SHIELD THERAPEUTICS PLC ("SHIELD") by AOP HEALTH INTERNATIONAL MANAGEMENT AG ("AOP") Summary and highlights · The boards of AOP, a company incorporated in Liechtenstein and the holder of approximately 26.99 per cent. of the issued ordinary shares of Shield, and Shield announce that AOP has requested, pursuant to a conversion notice dated 3 May 2023, the conversion of USD 9,542,019 of the convertible shareholder loan facility between Shield and AOP into 127,366,565 ordinary shares of 1.5 pence each in Shield (the "Conversion Shares") at a price of 6.01 pence per Shield Share, being a 10 per cent. discount to the average mid-market closing price of a Shield Share over the 20 Business Days prior to 3 May 2023, being the date of the Conversion request. · Pursuant to the terms of the Shareholder Loan, Shield is not required to allot Shield Shares to the extent that, following such allotment, AOP (together with its concert parties) would control 30 per cent. of the voting rights. Since the issue of the Conversion Shares would cause AOP and its concert parties to hold in excess of 30 per cent. of the voting rights of Shield, the Conversion is subject to the consent of the board of Shield. As explained below, Shield has provided its consent to the Conversion on 4 May 2023. · Following the Conversion, AOP and its concert parties will hold interests in Shield Shares representing approximately 41.9 per cent. of the voting rights in Shield. Consequently, AOP is required to make a mandatory cash offer for Shield pursuant to Rule 9 of the City Code on Takeovers and Mergers. · Accordingly, the board of AOP hereby announces the terms of a mandatory cash offer to be made by AOP to acquire the entire issued and to be issued share capital of Shield not already held by AOP or to be held by AOP pursuant to the Conversion. · The directors of Shield (excluding Dr. Christian Schweiger) (the "Recommending Shield Directors") recognise that conversion of the Shareholder Loan, and receipt of the Conversion Shares and a resulting increase in AOP's percentage shareholding in Shield, is AOP's primary goal and that the Mandatory Offer is a consequence of the Conversion. · Under the terms of the Mandatory Offer, Shield Shareholders (other than AOP) will be entitled to receive: for each Shield Share: 6.20 pence in cash · The Mandatory Offer Price of 6.20 pence per Shield Share is equal to the highest price at which AOP or its concert parties have acquired Shield Shares over the 12 months prior to the date of this Announcement. · The Mandatory Offer values the entire issued and to be issued share capital of Shield at approximately GBP 46.1 million on a fully diluted basis, inclusive of the Conversion Shares and taking into account the exercise of all outstanding options under the Shield Option Plans and any outstanding warrants issued by Shield. · The Mandatory Offer Price of 6.20 pence per Shield Share represents a discount of approximately: o 13.3 per cent. to the Closing Price of 7.15 pence per Shield Share on 3 May 2023 (being the last Business Day before the date of this Announcement); and o 10.0 per cent. to the volume-weighted average price of 6.89 pence per Shield Share between 13 December 2022 when Shield announced a debt and equity financing and 3 May 2023 (being the last Business Day before the date of this Announcement). · If, on or after the date of this Announcement and on or prior to the Unconditional Date, any dividend, distribution or other return of value is announced, declared, made or paid or becomes payable by Shield, AOP reserves the right to reduce the Consideration accordingly (save to the extent any such dividend, distribution or other return of value is or is to be received by or on behalf of AOP). In such circumstances, Shield Shareholders shall be entitled to retain any such dividend, distribution or other return of value declared, made or paid. · The Recommending Shield Directors are recommending Shield Shareholders do not accept the Mandatory Offer, but do not view the Mandatory Offer as being hostile. The Recommending Shield Directors are supportive of the Conversion and have given their consent to it. · The AOP Board confirms that the terms of the Mandatory Offer, including the Mandatory Offer Price, are final and will not be increased, except that AOP reserves the right to amend the financial terms of the Mandatory Offer: (i) if there is an announcement on or after the date of this Announcement of a possible offer or of a firm intention to make an offer by a third party offeror or potential offeror; (ii) with the agreement or consent of the Panel; or (iii) in wholly exceptional circumstances as provided for by Rule 32.2(b)(ii) of the Code. · Irrevocable undertakings not to accept the Mandatory Offer have been received from Recommending Shield Directors holding 0.97% per cent. of the issued share capital of Shield. · Jupiter Asset Management, the holder of 37,146,992 Shield Shares, representing 6.3% of the issued share capital of Shield (prior to the Conversion) have issued a letter noting the Recommending Shield Directors' recommendation not to accept the Mandatory Offer and stating that they believe the terms of the Mandatory Offer are not in the best interests of their funds' investors or Shield. · A copy of this letter will be made available on AOP's website at https://www.aop-health.com and on Shield's website at https://www.shieldtherapeutics.com/investors-and-media/results-reports-andpresentations/ by no later than 12 noon on the Business Day following this Announcement. · AOP and Shield have entered into the Relationship Agreement pursuant to which AOP has agreed amongst other things to permit Shield to continue to be able to operate independently of AOP following the Conversion and the Mandatory Offer, for so long as: (i) AOP holds at least 20 per cent. of Shield's issued share capital (irrespective of where such shares are admitted to trading); (ii) AOP holds less than 75 per cent. of Shield's issued share capital (irrespective of where such shares are admitted to trading); (iii) if Shield's shares become admitted to trading on a securities market other than AIM (the "Other Securities Market"), the mean average daily trading volume over a period of 4 months of the securities listed and traded on the Other Securities Market is less than 1.5x the mean average daily trading volume over the same period of the securities listed and traded on AIM; (iv) the share capital of Shield remains admitted to trading on AIM; (v) Shield and AOP have not agreed to terminate the Relationship Agreement; and (vi) if the share capital of Shield becomes admitted to trading on a securities market other than AIM, the existence of the Relationship Agreement is permitted by the rules applicable to that exchange. · If the Mandatory Offer does become unconditional, AOP intends for Shield to operate in materially the same way and to ensure that Shield continues to achieve its broader strategic goals. Background to and reasons for the Mandatory Offer · On 1 August 2022, Shield and AOP entered into a convertible loan agreement providing for the provision of a USD 10 million convertible loan facility to Shield. Further, on 13 December 2022, Shield and AOP agreed to extend the Shareholder Loan. Pursuant to such extension, AOP agreed to provide Shield with a further USD 10 million convertible loan facility. The Shareholder Loan permits AOP to convert any outstanding loan balances into Shield Shares, provided that Shield is not required to allot Shield Shares to the extent that, following such allotment, AOP (together with its concert parties) would control 30 per cent. or more of the voting rights. · As permitted by the Shareholder Loan, AOP has requested a conversion of a further USD 9,542,019 of the Shareholder Loan into 127,366,565 Shield Shares. · Shield has consented to the Conversion for the reasons explained further below. · AOP recognises that the Mandatory Offer is at a discount to the price at which Shield Shares could be sold on the market. On this basis, AOP acknowledges that the Mandatory Offer may not succeed. AOP notes that the Recommending Shield Directors are not recommending the Mandatory Offer and that, as detailed further below, the Recommending Shield Directors have provided irrevocable undertakings not to accept the Mandatory Offer. Shield consent to the Conversion · Under the terms of the Shareholder Loan, Shield's consent to the Conversion was required, which has been provided. In providing this consent, the Recommending Shield Directors considered the following: o the fact that the Conversion indicates a high level of belief from AOP in the value creation potential of Shield's equity; o the positive impact of the Conversion on Shield's balance sheet debt, which will be reduced from circa. USD 15 million to circa. USD 5.5 million immediately following the Conversion and the consequent positive effect on Shield's interest burden and capital structure; o the potential increased financing options available to Shield following the Conversion, including both debt and equity financing; o the dilutive impact of the Conversion on Shield's existing shareholders; and o the potential effects of AOP's increased shareholding, including in relation to the Mandatory Offer and the attractiveness of Shield to potential future investors. Recommendation · Following careful consideration, the Recommending Shield Directors are recommending that Shield Shareholders do not accept the Mandatory Offer for, among others, the following reasons: o the fact that the Mandatory Offer is a technical consequence of the Conversion; o since 2021 Shield has raised approximately GBP 63 million of financing to progress its commercialisation strategy in the U.S. and in December 2022 it also entered into the collaborative sales agreement with Viatris Inc. to accelerate revenue growth of Accrufer® in the U.S., which is estimated to have a USD 2 billion oral iron market. In Shield's business update issued on 27 April 2023, Shield reported progress in assembling the combined sales team in the U.S. and expects to have 98 sales representatives promoting Accrufer® by the middle of May 2023, which is expected to drive a significant increase in prescriptions going forwards. Further, Shield is also encouraged by recent growth in total prescription volumes, new prescription volumes and first time prescribers as also outlined in the recent business update; o Shield's unaudited cash balances at 31 March 2023 were GBP 19.2 million which Shield believes is sufficient to support its planned operations to cashflow break even, expected in Q4 of 2024; o the Mandatory Offer Price is a 13.3 per cent. discount to the share price prior to the issue of this Announcement; o the Recommending Shield Directors consequently believe Shield has the potential to drive significant value for all Shield Shareholders in the future. · The Recommending Shield Directors, who have been so advised by Peel Hunt LLP ("Peel Hunt") as to the financial terms of the Mandatory Offer, do not consider the terms of the Mandatory Offer to be fair and reasonable. In providing its advice, Peel Hunt has taken into account the commercial assessments of the Recommending Shield Directors. · Accordingly, the Recommending Shield Directors confirm that they intend to recommend unanimously that Shield Shareholders do not accept the Mandatory Offer, as they have irrevocably undertaken not to do (or procure not to be done) in respect of their own holdings over which they have control, being, in aggregate, 5,652,767 Shield Shares representing approximately 0.97% per cent. of the ordinary share capital of Shield in issue as at 3rd May 2023 (being the last Business Day before the date of this Announcement). Irrevocable Undertakings not to accept the Mandatory Offer · Shield has received irrevocable undertakings from the Recommending Shield Directors not to accept the Mandatory Offer. · On 3rd May 2023 (being the last Business Day before the date of this Announcement) these irrevocable undertakings together represented, in aggregate, 5,652,767 Shield Shares representing 0.97% per cent. of Shield's current issued share capital (prior to the Conversion). · Full details of the irrevocable undertakings, including the terms under which they cease to be binding, are set out in Appendix 3 to this Announcement. AOP intentions regarding the Shield business if the Mandatory Offer becomes unconditional · AOP is a long-term shareholder of Shield and is supportive of Shield's current strategy, its Board and management team. · AOP and Shield entered into the Relationship Agreement on 4 May 2023 to regulate the relationship between Shield and AOP, as Shield's single largest shareholder. Pursuant to the Relationship Agreement, AOP has, amongst other things: o undertaken that it shall exercise all powers and rights which it has as a shareholder of Shield to procure that all transactions between Shield and AOP and their respective associates are at arm's length and on normal commercial terms and in accordance with the related party rules set out in the AIM Rules; o agreed not to do anything which, at any time, would (i) result in Shield not being capable of carrying on its business independently of AOP or (ii) interfere in the day-to-day management of Shield or (iii) prevent the Shield Directors from managing Shield independently of AOP; and o agreed not take any steps which would cause the majority of either the executive Shield Directors or the non-executive Shield Directors to cease to be independent of AOP. · If the Mandatory Offer becomes unconditional, AOP intends to review Shield's business and operations (the "Review"). AOP notes that the Mandatory Offer has arisen, in accordance with Rule 9 of the Code, solely as a technical consequence of the Conversion. AOP has not conducted any due diligence on Shield for the purposes of making the Mandatory Offer. Therefore, the purpose of the Review would be to understand the operations of Shield and the best way of maximising value under AOP ownership. · If the Mandatory Offer becomes unconditional, AOP intends for Shield to operate in materially the same way and to ensure that Shield continues to achieve its broader strategic goals. Timetable and Condition · The AOP Board announces that the terms of the Mandatory Offer, including the Mandatory Offer Price, are final and will not be increased, except that AOP reserves the right to amend the financial terms of the Mandatory Offer: (i) if there is an announcement on or after the date of this Announcement of a possible offer or of a firm intention to make an offer by a third party offeror or potential offeror; (ii) with the agreement or consent of the Panel; or (iii) in wholly exceptional circumstances as provided for by Rule 32.2(b)(ii) of the Code. · It is intended that the Acquisition will be implemented by way of the Mandatory Offer. The Mandatory Offer is subject to the Acceptance Condition and further terms set out in Appendix 1 to this Announcement and to the full terms and the Acceptance Condition which will be set out in the Offer Document and Form of Acceptance. · As required by the Code, the Mandatory Offer is conditional only upon AOP having received acceptances in respect of Shield Shares which, together with Shield Shares it already holds, when aggregated with the Conversion Shares, will result in AOP and its concert parties holding Shield Shares carrying more than 50 per cent. of the voting rights in Shield. · It is expected that the Offer Document containing further information about the Mandatory Offer will be published and sent to Shield Shareholders as soon as practicable and, in any event, within 28 days of the date of this Announcement (unless otherwise agreed between AOP and Shield, with the consent of the Panel). · The Mandatory Offer will remain open for acceptance until 1.00 p.m. (London time) on the Unconditional Date (unless AOP has set aside the Acceleration Statement in accordance with the Code). · By specifying an Unconditional Date which is earlier than Day 60 (as defined in the Code), AOP is treated as having made an acceleration statement to which Rule 31.5 of the Code applies. In accordance with Rule 31.5(e) of the Code, AOP reserves the right to set this Acceleration Statement aside: (i) with the agreement or consent of the board of Shield; (ii) if a third party announces an offer for Shield or there is otherwise an announcement of a possible offer for Shield by a third party or an announcement which refers to the existence of a new potential offeror for Shield (whether the potential offeror is identified or not); (iii) if a third party announces a firm intention to make an offer for Shield; (iv) in the event of an increased or improved offer for Shield by AOP being recommended by the board of Shield; and (v) in wholly exceptional circumstances as provided for by Rule 31.5(e)(ii) of the Code. · Subject to the satisfaction of the Acceptance Condition and certain further terms set out in Appendix 1, the Acquisition would become or be declared unconditional during the second quarter of 2023. This summary should be read in conjunction with, and is subject to, the full text of this Announcement (including the Appendices). The Mandatory Offer will be subject to the Acceptance Condition and other terms set out in Appendix 1 and to the full terms and the Acceptance Condition to be set out in the Offer Document. Appendix 2 of this Announcement contains the sources and bases of certain information contained in this summary and this Announcement. Details of irrevocable undertakings received by Shield are set out in Appendix 3. Appendix 4 contains details of the Shield Profit Forecast. Certain terms used in this summary and this Announcement are defined in Appendix 5. Enquiries: AOP Andreas Steiner (Group CEO) Astrid Magnago (Assistant to Group CEO) Numis (Financial Adviser to AOP) Stuart Ord Freddie Barnfield Euan Brown Jack McLaren Shield Greg Madison (CEO) Hans-Peter Rudolf (CFO) Tel: +423 220 2088 Tel: +44 (0) 20 7260 1000 Tel: +44 (0) 191 511 8500 Peel Hunt (Nominated Adviser, Financial Adviser and Joint Broker to Shield) James Steel Tel: +44 (0) 20 7418 8900 Miles Cox Oliver Duckworth Edward Beazley finnCap Ltd (Joint Broker to Shield) Geoff Nash / Fergus Sullivan/ Alice Lane / Nigel Birks / Harriet Ward Tel: +44 (0) 20 7220 0563 Slaughter and May is acting as legal adviser to AOP in connection with the Mandatory Offer. Taylor Wessing LLP is acting as legal adviser to Shield in connection with the Mandatory Offer. Further information This Announcement is for information purposes only and is not intended to, and does not, constitute or form part of an offer, invitation or the solicitation of an offer to purchase or subscribe, otherwise acquire, subscribe for, sell or otherwise dispose of any securities, or the solicitation of any vote or approval in any jurisdiction, pursuant to the Mandatory Offer or otherwise, nor shall there be any sale, issuance or transfer of securities in Shield in any jurisdiction in contravention of applicable law. The Mandatory Offer will be made solely pursuant to the terms of the Offer Document, which will contain the full terms of the Acquisition, including details of how to vote in respect of the Acquisition. Any vote or other decision in respect of, or other response to, the Acquisition, should be made only on the basis of information contained in the Offer Document. This Announcement does not constitute a prospectus, prospectus equivalent document or an exempted document. If you are in any doubt about the contents of this Announcement or the action you should take, you are recommended to seek your own independent financial advice immediately from your stockbroker, bank manager, solicitor, accountant or from an independent financial adviser duly authorised under the Financial Services and Markets Act 2000 (as amended). Disclaimers Numis Securities Limited ("Numis"), which is authorised and regulated in the UK by the Financial Conduct Authority, is acting as financial adviser to AOP, and no one else, in connection with the matters set out in this Announcement, and will not be responsible to anyone other than the board of AOP for providing the protections afforded to clients of Numis nor for providing advice in relation to the contents of this Announcement or any other matter or arrangement referred to herein. Neither Numis nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Numis in connection with this Announcement, any matter, arrangement or statement contained or referred to herein or otherwise. Peel Hunt, which is authorised and regulated in the UK by the Financial Conduct Authority, is acting as nominated adviser, financial adviser and joint broker to Shield, and no one else, in connection with the matters set out in this Announcement, and will not be responsible to anyone other than the board of Shield for providing the protections afforded to clients of Peel Hunt nor for providing advice in relation to the contents of this Announcement or any other matter or arrangement referred to herein. Neither Peel Hunt nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Peel Hunt in connection with this Announcement, any matter, arrangement or statement contained or referred to herein or otherwise. finnCap, which is authorised and regulated in the UK by the Financial Conduct Authority, is acting as joint broker to Shield, and no one else, in connection with the matters set out in this Announcement, and will not be responsible to anyone other than the board of Shield for providing the protections afforded to clients of finnCap or for providing advice in relation to the contents of this Announcement or any other matter or arrangement referred to herein. Neither finnCap nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of finnCap in connection with this Announcement, any matter, arrangement or statement contained or referred to herein or otherwise. No profit forecasts, estimates or qualified benefit statements Other than the Shield Profit Forecast, no statement in this Announcement, or incorporated by reference in this Announcement, is intended as a profit forecast, profit estimate or quantified benefits statement for any period and no statement in this Announcement should be interpreted to mean that earnings or earnings per share for Shield for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per share for Shield. Overseas jurisdictions The release, publication or distribution of this Announcement in jurisdictions other than the UK may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the UK should inform themselves about, and observe, any applicable requirements. Any failure to comply with the applicable restrictions may constitute a violation of the securities laws of any such jurisdiction. To the fullest extent permitted by law, the companies and persons involved in the Mandatory Offer disclaim any responsibility or liability for the violation of such restrictions by any person. This Announcement has been prepared for the purposes of complying with English law and the Code and the information disclosed may not be the same as that which would have been disclosed if this Announcement had been prepared in accordance with the laws of jurisdictions outside of England. Copies of this Announcement and any formal documentation relating to the Mandatory Offer are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in or into or from any Restricted Jurisdiction (or any jurisdiction where to do so would violate the laws of that jurisdiction) and persons receiving such documents (including custodians, nominees and trustees) must not mail or otherwise forward, distribute or send it in or into or from any Restricted Jurisdiction. Doing so may render invalid any related purported vote in respect of the Mandatory Offer. Unless otherwise permitted by applicable law and regulation, the Mandatory Offer may not be made directly or indirectly, in or into, or by the use of mails or any means or instrumentality (including, but not limited to, facsimile, e-mail or other electronic transmission, telex or telephone) of interstate or foreign commerce of, or of any facility of a national, state or other securities exchange of any Restricted Jurisdiction and the Mandatory Offer may not be capable of acceptance by any such use, means, instrumentality or facilities. Further details in relation to overseas shareholders will be included in the Offer Document. Additional information for US investors The receipt of cash pursuant to the Mandatory Offer by a US holder of Shield Shares as consideration for the transfer of its Shield Shares pursuant to the Mandatory Offer will likely be a taxable transaction for United States federal income tax purposes and under applicable United States state and local, as well as foreign and other, tax laws. Shield Shareholders are urged to consult with legal, tax and financial advisers in connection with making a decision regarding the Mandatory Offer. Financial information included in this Announcement and the Offer Document has been or will have been prepared in accordance with accounting standards applicable in the UK that may not be comparable to financial information of US companies or companies whose financial statements are prepared in accordance with generally accepted accounting principles in the US. To the extent permitted by applicable law and in accordance with normal UK market practice, AOP or its nominees, or its brokers (acting as agents) may from time to time make certain purchases of, or arrangements to purchase, Shield Shares outside of the US other than pursuant to the Mandatory Offer, until the date on which the Mandatory Offer becomes unconditional, lapses or is otherwise withdrawn. These purchases may occur either in the open market at prevailing prices or in private transactions at negotiated prices. Any information about such purchases or arrangements to purchase shall be disclosed as required in the UK, shall be reported to a Regulatory Information Service and shall be available on the London Stock Exchange website at www.londonstockexchange.com. It may be difficult for US holders of Shield Shares to enforce their rights and any claim arising out of the US federal laws, since AOP and Shield are located in a non-US jurisdiction, and some or all of their officers and directors may be residents of a non-US jurisdiction. US holders of Shield Shares may not be able to sue a non-US company or its officers or directors in a non-US court for violations of the US securities laws. Further, it may be difficult to compel a non-US company and its affiliates to subject themselves to a US court's judgement. Forward-Looking Statements This Announcement contains certain forward-looking statements with respect to the financial condition, results of operations and business of Shield and certain plans and objectives of AOP and with respect thereto. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. These statements are based on assumptions and assessments made by AOP and Shield in light of their experience and their perception of historical trends, current conditions, future developments and other factors they believe appropriate, and therefore are subject to risks and uncertainties which could cause actual results to differ materially from those expressed or implied by those forward-looking statements. The forward-looking statements contained in this Announcement include statements relating to the expected effects of the Acquisition on AOP and Shield, the expected timing and scope of the Acquisition and other statements other than historical facts. Forward-looking statements often use words such as "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "hope", "aims", "continue", "will", "may", "should", "would", "could", or other words of similar meaning. By their nature, forward-looking statements involve risk and uncertainty, because they relate to events and depend on circumstances that will occur in the future and the factors described in the context of such forward-looking statements in this document could cause actual results and developments to differ materially from those expressed in or implied by such forward-looking statements. Forward-looking statements may include statements in relation to the following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; (ii) business and management strategies and the expans