Utilitywise Regulatory News (UTW)

Utilitywise plc

("Utilitywise" or the "Company")

Proposed Acquisition of Energy Information Centre Limited ("EIC")

Placing of 5,000,000 new Ordinary Shares at a price of 100 pence per share

Secondary Placing of 17,200,000 existing Ordinary Shares at a price of 100 pence per share

Notice of General Meeting

Utilitywise (AIM:UTW), a leading independent utility cost management consultancy, is pleased to announce the proposed acquisition of Energy Information Centre Limited, a placing of new ordinary shares of 0.1 pence each ("Ordinary Shares") by finnCap Limited to raise £5 million and a secondary placing of existing Ordinary Shares by finnCap Limited on behalf of certain directors and Hub Capital Partners to raise £17.2 million at a price of 100 pence ("Placing Price").

Highlights include:

·; Proposed Acquisition of Energy Information Centre Limited ("EIC") for total equity consideration of £15.5 million, to be satisfied by:

Ø £10.5 million in cash

Ø £5 million in new Utilitywise shares

Ø In addition, Utilitywise will repay EIC's existing mortgage debt of £1.94 million

·; Placing of £5 million in new Utilitywise shares to part fund cash consideration

Ø Placing at 100p per share, representing a discount of 6.5% to the closing mid price as at 12 June 2013, the last practible date prior to the date of this announcement

·; Consideration represents historic EV/EBITDA* multiple of 6.7x

·; Transaction expected to be earnings enhancing in first full year post acquisition, namely year to 31 July 2014

·; Adds larger enterprise expertise, increases buying options for clients and extends product offering

·; Creates one of the largest energy procurement and energy consultancy firms in the UK

* Based on EIC's unaudited management accounts for the year ended 30 April 2013

Strategic Rationale for the Acquisition:

·; Acquisition provides Utilitywise with a key 'flexible buying' capability

·; EIC's strength in Industrial & Commercial ("I&C") market complements Utilitywise's leading position in the SME market1  

Ø EIC ranked joint 3rd in the I&C market and 6th in the SME market - independent research conducted by Cornwall Energy Associates.

Ø Utilitywise ranked 6th in the I&C market and 1st in the SME market in the same survey

·; Acquisition completes Utilitywise's core product offering

·; Utilitywise's proven IP and I.T. systems expected to enhance sales focus and assist EIC to maximise its market opportunity

1  Source: Cornwall Energy Market Research Report, April 2013, prepared for UTW, based on 2012 figures for UTW and 2011 figures for competitors

Secondary Placing

In order to satisfy market demand and broaden the shareholder base of the Company, finnCap have conditionally placed, on behalf of Geoff Thompson, Adam Thompson and Andrew Richardson and their connected persons ("the Director Sellers"), and Hub Capital Partners Limited ("Hub Capital"), 17,200,000 existing Ordinary Shares ("Sale Shares") at the Placing Price for an aggregate consideration of £17.2 million ("Share Sale"). The Sale Shares will represent approximately 23.9 per cent. of the Enlarged Share Capital.

The Share Sale is conditional upon, inter alia, the Resolutions being passed at the General Meeting and Admission becoming effective on or before 8.00 a.m. on 3 July 2013 (or such later time and/or date as the Company and finnCap may agree, but in any event no later than 8.00 a.m. on 31 July 2013).

Following the Share Sale, the Director Sellers and Richard Feigen will be interested in a total of 26.2 per cent. of the Company's enlarged issued share capital at Admission. Hub Capital will hold no shares following Admission. All Ordinary Shares held by the Director Sellers subsequent to the Share Sale will be subject to a lock-in.

Geoff Thompson, CEO of Utilitywise, commented: "The acquisition of EIC creates an energy procurement and consultancy firm of real scale and adds further products and expertise to our already impressive portfolio. EIC's strength lies predominantly in the larger, Industrial & Commercial segment of the market, an area which we had identified as a strategic area of growth, which combined with our market leading position in the SME segment gives us a strong foothold across the market and an excellent platform for growth. Utilising our outstanding proprietary IT and business analysis systems and our combined product range, we believe that we can identify and target a much greater portion of the I&C market, maximise the strength of the EIC brand and, thereby, the return on this investment for our shareholders.

"Since Utilitywise listed on AiM we have carefully added strategic, complementary offerings to our business through the acquisitions of Clouds (energy management) and Aqua Veritas (water consultancy). With the addition of EIC we now have an extremely compelling portfolio of products and services to meet the diverse energy needs of clients of all sizes and the expertise to deliver them. I would like to thank shareholders for their continued support as we continue to look to the future with great confidence."

A circular will be sent today to shareholders giving notice of a general meeting of Utilitywise to be held on 2 July 2013 at 9.00 a.m. at the offices of finnCap Limited, 60 New Broad Street, London EC2M 1JJ. A copy of the circular can be found on the Company's website www.utilitywise.com.

Capitalised but undefined terms shall have the meaning given to them in the definitions appearing at the end of this announcement.

For further information:

About Utilitywise

Utilitywise is a leading independent utility cost management consultancy based in South Shields, Tyne and Wear. The company has established trading relationships with a number of major UK energy suppliers and provides services to its customers designed to assist them in achieving better value out of their energy contracts, reduced energy consumption and lower carbon footprint.

Businesses large and small rely on Utilitywise for their energy management needs. Clients range in size from high street shops to multinationals with thousands of sites and cover the whole of the UK. In total, Utilitywise manages over 35,500 energy meters which have an overall energy consumption of approaching 4 terra watt hours per annum.

Utilitywise is a UK company quoted on the AIM market of the London Stock Exchange. For more information, please visit www.utilitywise.com.

The following text has been extracted from the circular.

1. Introduction

As announced earlier today, the Company has conditionally agreed to acquire Energy Information Centre Limited for an aggregate equity consideration of £15.5 million, of which £10.5 million will be paid in cash and £5 million will be satisfied by the issue of the Consideration Shares. In addition, the Company announced that it intends to raise £5 million (before expenses) by way of a placing of 5,000,000 new Ordinary Shares at a price of 100 pence per share. The net proceeds of the Placing (approximately £4.3 million) after expenses will be used to part fund the cash consideration payable for the Target.

The Placing is conditional, inter alia, on the Directors being granted the necessary share capital authorities by Shareholders to allot and issue the Placing Shares and the Consideration Shares and a General Meeting has therefore been convened (notice of which is set out at the end of this document) for such purpose. Whilst the approval of Shareholders of the Acquisition itself is not necessary, the Acquisition itself cannot be completed without the Placing being completed.

This document explains the background to, and reasons for, the Acquisition and the Placing, why the Directors consider the Acquisition and the Placing to be in the best interests of the Company and its Shareholders as a whole and why the Directors recommend that you vote in favour of the Resolutions to be proposed at the General Meeting, notice of which is set out at the end of this document.

2. Background to the Acquisition and Placing

It has been the Directors' strategy to complement organic growth with acquisitions that enhance and broaden the Company's products and services. Since admission to trading on AIM, the Company has successfully acquired and integrated two complementary businesses; the independent energy consultancy Clouds and Aqua Veritas, a supplier of water consultancy services.

Utilitywise also recently announced the creation of a new business development and account management function including the development of a risk management and flexible buying capability, aiming to promote the Company's risk management and flexible buying solution as well as its broader energy management services. Flexible buying is an area in which Utilitywise wishes to increase the Company's presence, whether organically, via acquisition or both. EIC will provide Utilitywise with a far greater market position in this area, along with further complementary products and services, further details of which can be found in paragraph 3 below.

The Placing will part fund the cash consideration for the Acquisition. The remainder of the cash consideration will be financed via a new bank facility with The Royal Bank of Scotland plc which the Company has entered into, conditional upon, inter alia, the Placing and the Acquisition.

3. Reasons for the Acquisition

The Directors believe that a combination of Utilitywise and EIC will be a compelling business proposition in the utility procurement sector, creating one of the largest energy procurement and energy consultancy firms in the United Kingdom.

The Acquisition provides Utilitywise with a key risk management and flexible buying capability and enhances the range of energy procurement solutions provided by the Group in addition to complementing the existing consultancy and energy consumption management service offering. In independent research conducted on behalf of the Company in April 20131, EIC was ranked joint 3rd in the industrial and commercial market and 6th in the SME market. Utilitywise was ranked 6th in the industrial and commercial market and 1st in the SME market in the same survey. The combination of the two businesses will allow the Enlarged Group to offer its services across the range of customer sizes, from small SMEs to large corporates.

Approximately 43 per cent. of Utilitywise's revenues are derived from customers spending more than £50,000 per annum on gas and power. Utilitywise has already established a revised business development and account management function to service these customers and target new opportunities. The Directors believe that although EIC's revenues and profits have fallen over the past few years due to weak sales planning and execution and missed new business targets, Utilitywise's business development and account management function will help revive EIC's growth prospects. Furthermore, the Directors are of the view that the combination of EIC's service delivery capability and the customer acquisition skills at Utilitywise will drive growth.

The Acquisition is expected to be earnings enhancing in the first full financial period post Acquisition.

____________

4. Information on EIC

EIC is an energy procurement and consultancy company established in 1975 and based in Redditch and Bury St Edmunds. It is a leading provider of an innovative risk management product and other portfolio energy management products. Unaudited management accounts for the year ended 30 April 2013 show revenues of £6.9 million and EBITDA of £2.6 million. Historic EBITDA margins of approximately 39 per cent. have been generated by EIC in the past three years.

EIC offers additional procurement products to Utilitywise's offering of fixed term contracts for electricity and gas, as well as other new products and further resource for existing products.

Additional Procurement Products

·; Portfolio

Provides a group risk managed flexible contract to clients who do not qualify for such a contract individually. Enables EIC to offer flexible buying to smaller businesses including the core Utilitywise SME client base.

·; Risk Management

Offers clients individual flexible contracts operated within a risk management framework. Suitable for clients with annual energy costs of £3-4 million or more.

·; "Option" Product

Innovative "option" product whereby clients pay a premium at start of contract to secure an option exercisable at any point during the contract, allowing a fixed price customer to unfix.

New Procurement Products

·; Market Intelligence

Weekly, monthly and quarterly publications providing advice on buying and selling utilities for industries, commercial and public sectors, in addition to pricing information, trends and commentaries.

·; Bill validation

Validation of historic and current electricity and gas bills for large companies or organisations.

Additional Resource for Existing Products

·; Carbon Management

On-site energy surveys and investigations to help minimise carbon emissions as well as consultancy services. This is complementary to Clouds which offers energy reduction services, audits and carbon management services.

·; Water Services

Water management services relating to water consumption, site surveys and water quality monitoring. This builds on the products offered by Aqua Veritas, namely water bill audits, water consultancy and multi-utility reporting.

5. Terms of the Acquisition

The Company has entered into the Acquisition Agreement in relation to the sale and purchase of the entire issued share capital of the Target. The equity consideration payable for the Acquisition is £15.5 million (subject to certain adjustments as described below). In addition, Utilitywise will repay EIC's outstanding mortgage debt of £1.94 million.

The consideration payable will be satisfied by the payment by the Company of a provisional cash amount of £10.5 million, which will be payable to the Vendors on or around Completion and the allotment of the Consideration Shares to the Vendors at Completion at an issue price of 100 pence (being equal to the Placing Price). The Consideration Shares will represent 7 per cent. of the Enlarged Issued Share Capital immediately after Admission.

The Consideration Shares will rank pari passu in all respects with the issued Ordinary Shares and as a single class, including the right to receive all dividends and other distributions declared, made or paid on or after Completion. The Consideration Shares will be subject to a lock-in arrangement whereby each of the Vendors will be restricted from disposing, charging or encumbering any interest in their Consideration Shares for a period of up to 24 months after Admission, subject to certain exceptions as set out in the Acquisition Agreement. After 12 months, up to 50 per cent. of the Consideration Shares held by each Vendor can be disposed of, charged or encumbered provided always that any such disposal shall be made using finnCap (or the Company's broker at the time) and provided further that the relevant Vendor shall enter into an appropriate orderly market agreement. After the expiry of a period of 24 months from Admission, the Vendors may dispose of, charge or otherwise encumber the balance of the Consideration Shares held by each of them, provided always any such disposal shall be made using finnCap (or the Company's broker at the time) and provided further that the relevant Vendor shall enter into an appropriate orderly market agreement.

The cash consideration payable by the Company to the Vendors at Completion is subject to a post Completion adjustment (which may either be upwards or downwards) based on cash free debt free and working capital adjustments which are contained in the Acquisition Agreement. The amount of the provisional cash consideration payable by the Company to the Vendors may not be increased by more than £4,000,000 (taking into account the payment on account referred to above).

Completion of the Acquisition Agreement is conditional, inter alia, upon:

1. the Shareholders passing a resolution to authorise the Directors to allot the Consideration Shares;

2. admission of the Consideration Shares by the London Stock Exchange to AIM becoming effective;

3. the Placing Agreement having been entered into and having become unconditional in all respects (other than any condition relating to the Completion of the Acquisition Agreement or admission of the Consideration Shares) and not having being terminated; and

4. the Acquisition Agreement not having been terminated by the Company prior to Completion in accordance with its terms.

The Company has an obligation under the terms of the Acquisition Agreement to use all its reasonable endeavours to procure that the conditions referred to at items 1 to 4 (inclusive) above are satisfied as soon as practicable following execution of the Acquisition Agreement, and in any event by 31 July 2013. The Acquisition Agreement provides that, should the Company fail to satisfy those conditions, then the Vendors are entitled to receive a capped amount from the Company in respect of the costs that they have incurred in connection with the preparation of the Acquisition Agreement.

The Acquisition Agreement contains warranties and indemnities (including a tax covenant) from the Vendors in favour of the Company, which are subject to certain limitations on the Vendors' liability. Those warranties are given by the Vendors both at signing of the Acquisition Agreement and shall be repeated immediately prior to Completion. The Acquisition Agreement also provides that the Company may terminate the Acquisition Agreement during the period between signing and Completion in certain scenarios, for example, if there is a material adverse change in circumstances which has a negative financial impact on the Target (and its subsidiary undertakings). Eric Butterfield and Simon Butterfield (two of the Vendors) will also enter into restrictive covenants for a period of 3 years following Completion in the case of Eric Butterfield and 2 years following Completion in the case of Simon Butterfield.  

6. Details of the Additional Director

The Company has entered into a service agreement with Simon Butterfield under which, subject to Completion, Simon Butterfield will be appointed a director of the Company. The basic annual salary payable to Simon Butterfield will be £175,000 per annum which is to be reviewed annually (without any obligation to increase the basic salary). In addition, Simon Butterfield will be entitled to certain benefits, including a car allowance, and to receive a bonus to be determined by the Board. The service agreement may be terminated by either party giving the other not less than 12 months' prior written notice and contains provisions for early termination, without notice, in certain circumstances including if Simon Butterfield is disqualified or ceases to act as a director or commits any serious or repeated breach of any provision of the service agreement. The service agreement also provides for garden leave and that Simon Butterfield will be subject to post-termination restrictive covenants for 12 months following termination of his employment.

Upon Completion, Simon Butterfield will be allotted 2,325,000 Consideration Shares, which will represent 3.2 per cent. of the Enlarged Issued Share Capital immediately after Admission.

7. Details of the Placing

The Company has conditionally raised £5 million (before commission and expenses) through the proposed issue of the Placing Shares at the Placing Price, which represents a discount of approximately 6.5 per cent. to the middle market closing price of 107 pence per Ordinary Share on 12 June 2013, being the last practicable date prior to the publication of this document. The Placing Shares will represent approximately 7 per cent. of the Enlarged Share Capital

The Placing is conditional upon, inter alia, the Resolutions being passed at the General Meeting and Admission becoming effective on or before 8.00 a.m. on 3 July 2013 (or such later time and/or date as the Company and finnCap may agree, but in any event no later than 8.00 a.m. on 31 July 2013).

Under the terms of the Placing Agreement, finnCap has agreed to act as agent for the Company and the Director Sellers and has agreed to use its reasonable endeavours to procure placees for the Placing Shares and purchasers of the Sale Shares held by the Director Sellers (and certain of their connected persons) at the Placing Price. To the extent that Placees and/or purchasers of the Sale Shares are not procured, finnCap is not obliged to acquire any Placing Shares or Sale Shares held by Director Sellers (and certain of their connected persons). In addition to its obligations under the Placing Agreement, finnCap has agreed to act as agent for Hub Capital and has agreed to use its reasonable endeavours to procure placees for the Sale Shares held by Hub Capital at the Placing Price. The sale of the Share Shares held by Hub Capital is conditional, inter alia, on the Placing Agreement becoming unconditional and not being terminated.

The Placing Agreement contains provisions entitling finnCap to terminate the Placing and the Share Sale prior to Admission in certain circumstances. The Placing Agreement contains warranties and indemnities given by the Company and warranties given by the Director Sellers in favour of finnCap which are customary in nature.

8. Details of the Share Sale

The Selling Shareholders have conditionally agreed to sell 17,200,000 Sale Shares at the Placing Price for an aggregate consideration of £17.2 million. The Sale Shares will represent approximately 23.9 per cent. of the Enlarged Share Capital.

The sale of the Sale Shares held by the Selling Shareholders is conditional upon, inter alia, the Resolutions being passed at the General Meeting and Admission becoming effective on or before 8.00 a.m. on 3 July 2013 (or such later time and/or date as the Company and finnCap may agree, but in any event no later than 8.00 a.m. on 31 July 2013).

Following the Share Sale, the Director Sellers and Richard Feigen will be interested in a total of 26.2 per cent. of the Company's issued share capital.

The Director Sellers have each undertaken not to sell, transfer or dispose of any Ordinary Shares, held by him at Admission, for a period of 12 months following Admission. In addition, they have each agreed that for a further 12 months any sale of Ordinary Shares will be effected through finnCap (with a view to ensuring an orderly market in such shares). In each case these restrictions are subject to certain exceptions including any sale or disposal with the prior consent of the Company and finnCap. At Admission, these restrictions will apply in respect of 18,822,720 Ordinary Shares representing 26.2 per cent. of the Enlarged Share Capital.

* Includes 5,000,000 Ordinary Shares held at the date of this document by Andrea Thompson. As at Admission, Andrea Thompson will hold no Ordinary Shares.

** Includes 121,971 Ordinary Shares held by Hub Capital as at the date of this document which are being sold, subject to the conditions outlined above, on behalf of Hub Capital. The remaining 66,667 Ordinary Shares are held by Richard Feigen

9. Banking Facility Agreement

The Company has entered into a Banking Facility Agreement with RBS to provide, in part, funding for the Acquisition and for general working capital purposes. Under the terms of the Banking Facility Agreement, and subject to satisfying certain customary conditions precedent prior to Completion, RBS shall provide to the Company two revolving credit facilities totalling £10 million, in each case for a term of four years, attracting annual interest at a rate of 1.75% above LIBOR and, where relevant, a non-utilisation fee of 0.7% per annum. The Banking Facility Agreement contains certain financial covenants, to be tested quarterly. The Company has agreed to make payments of £1 million per annum in respect of the first facility, with the balance of both facilities repayable on termination.

10. Settlement and Dealings

Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM. It is expected that Admission of the Placing Shares and the Consideration Shares will occur at 8.00 a.m. on 3 July 2013.

The Placing Shares and the Consideration Shares will rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid on the Existing Ordinary Shares on or after Admission.

11. Current Trading and Prospects

Utilitywise's results for the six months to 31 January 2013 demonstrated the Company's continued ability to scale the business model and the important differentiation achieved through the on-going development of its energy management products and services. Since the announcement of its interim results, the Company has continued to progress and the Directors are confident in meeting full year expectations. Furthermore, Utilitywise's visibility over future revenue can be demonstrated by the increase in the value of contracts secured but not yet live, from £8.5 million as at 31 January 2013 to £12.9 million as at 31 May 2013.

12. Irrevocable Undertakings

Geoff Thompson, Adam Thompson, Andrew Richardson, Richard Feigen and Paul Hailes and their connected parties have irrevocably undertaken to vote in favour of the Resolutions at the General Meeting in respect of an aggregate 36,122,721 Ordinary Shares, representing approximately 58.4 per cent. of the voting rights exercisable in respect of Existing Ordinary Shares.

13. General Meeting

A notice convening the General Meeting to be held at the offices of finnCap Limited, 60 New Broad Street, London EC2M 1JJ at 9.00 a.m. on 2 July 2013 is set out at the end of this document. At the General Meeting, the Resolutions will be proposed. A summary of the Resolutions is set out below:

In Resolution 1, the Directors are seeking shareholder approval to allot up to an additional 10,037,500 new Ordinary Shares pursuant to the Placing and the Consideration Shares pursuant to the Acquisition Agreement. The Placing Shares and Consideration Shares will amount to approximately 14.0 per cent. of the Enlarged Share Capital. This approval is in addition to the authority given to the Directors at the Company's General Meeting on 2 July 2012 to allot relevant securities up to an aggregate nominal amount of £10,037.50 (and not in substitution for such authority). The authority sought to be given to the Directors, pursuant to Resolution 1, to allot shares in the capital of the Company requires an ordinary resolution of the Shareholders at a general meeting under section 551 of the Act. This authority will expire on 31 July 2013. This amounts to 16.2 per cent. of the existing issued share capital and 14 per cent. of Enlarged Share Capital immediately after Admission.

In Resolution 2, the Directors are seeking shareholder approval under section 570 of the Act to allot for cash up to 5,000,000 new Ordinary Shares in accordance with the Placing without being required first to offer such securities to Shareholders in accordance with the statutory pre-emption rights set out in section 561 of the Act. This authority will also expire on 31 July 2013. The statutory pre-emption rights set out in section 561 of the Act do not apply to the allotment of the Consideration Shares on the basis that the shares are being allotted for non-cash consideration.

DEFINITIONS

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

All references in this document to "£" or "p" are to the lawful currency of the United Kingdom.EXPECTED TIMETABLE OF PRINCIPLE EVENTS

PLACING STATISTICS