Frontier Smart Tech tells shareholders not to accept Science Group offer

Frontier Smart Technologies Group further responded to recent announcements by Science Group relating to its intention to make a cash offer for Frontier at a price of 35p per share, and subsequent posting of an offer document.

The AIM-traded firm said that, as it confirmed in its announcement on 14 June, it had received an approach from an unnamed “credible industry player” regarding a potential corporate transaction.

It said discussions were ongoing, with a view to agreeing a transaction framework, and there was “clear evidence” of buy-in to the concept at a commercial level on both sides.

However, it was also clear that there was no meaningful prospect of agreeing heads of terms, the board said, and less still entering into a definitive legal agreement, prior to the closing date of the Science Group offer on 16 July.

“The proposed transaction structure now under discussion with the industry player is a strategic investment by way of a joint venture into which Frontier would roll certain of its smart software assets,” the board said in its statement.

“Accordingly, the board of Frontier now considers it unlikely that the discussions will result in an offer for the company.”

The exact structure and ownership of the joint venture, including the assets to be transferred into it, remained subject to negotiation; as did the implied valuation and capitalisation of the joint venture.

Frontier said the establishment of a joint venture arrangement as contemplated may or may not require shareholder approval.

“The Frontier board is fully cognisant that Science Group has publicly stated that it will not support any proposals made in respect of Frontier by any alternative bidder.

“However, Science Group's stated opposition does not absolutely preclude delivery of an alternative transaction for so long as Science Group does not control more than 50% of the voting rights in Frontier.

“Furthermore, the transaction now under discussion is not directly comparable with the offer and, in the opinion of the Frontier board, if negotiations were to be successfully concluded, presents the prospect of material incremental potential value for Frontier, its shareholders including Science Group, and other stakeholders.”

The company said the potential but uncertain prospect of material incremental value arising from the ongoing joint venture discussions meant that the board was unable to express any opinion on the merits of the Science Group offer.

It said its intention was to seek to “open collaborative discussions” with Science Group and its advisers, with a view to agreeing a route forward which would preserve the potential value upside for all current Frontier shareholders.

Accordingly, the Frontier board “strongly” recommended that shareholders neither accept the Science Group offer nor sell any Frontier shares via the Panmure Gordon dealing facility until such time as it had an opportunity to consult with Science Group on the latest developments.

“A further announcement will be made as and when appropriate and in any event prior to the closing date of the Science Group offer of 16 July.”