Science Group accuses Frontier Smart Tech of 'frustrating' its takeover offer
Science Group updated the market on its ongoing takeover bid for Frontier Smart Technologies on Monday, following the latter’s announcement on Friday that suggested the “alternative approach” it was investigating with an unnamed third party could result in a joint venture, but were now “unlikely [to] result in an offer” for Frontier.
The AIM-traded Science Group asserted on Monday that its offer was the only offer for Frontier at this stage, as it announced on 1 July and posted to Frontier shareholders on 2 July.
It said Frontier's discussions regarding a further alternative new proposal from the same party were at “no more than a ‘concept’ stage”, after three weeks of “urgently seeking to clarify” that alternative approach.
The basic transaction framework had not been agreed, Science Group noted, adding that Frontier said “there is no meaningful prospect of agreeing heads of terms, less still entering into a definitive legal agreement, prior to the closing date of the Science Group Offer of 16 July”.
It said that indicated that the “potential, but uncertain” discussions were preliminary and speculative in the view of Science Group.
Frontier's operating performance and expectations for the current year remained unchanged following the “significant” downgrade it announced on 9 May, Science Group added, which resulted in Frontier's share price falling to a closing price of 13.4p.
“In summary, despite the substantial premium being offered by Science Group relative to the share price on the date of the trading update, the Frontier board [is] advising Frontier shareholders to reject the Science Group offer on the basis that at some undefined point in the future, Frontier may possibly agree a joint venture with an undefined party into which Frontier would transfer key assets,” the Science Group board said in its statement.
“The structure and terms of this hypothetical activity are currently unknown to the Frontier board and the potential value to be created and how any such value would be realised for Frontier shareholders is completely unclear.
“Furthermore, even if this ‘potential, but uncertain, prospect’ did develop, the Frontier board may or may not grant Frontier shareholders the opportunity to vote on this transfer of assets and the terms of any transaction.”
Throughout the past eight weeks, Science Group said that in its opinion Frontier had “repeatedly” taken actions which had the effect of “frustrating” the proposed acquisition of Frontier.
It said the latest ‘concept’ of a non-specific strategy being proposed by the Frontier board could be regarded similarly.
The company noted that as at 31 December, Frontier had net retained losses of $175.5m resulting from its previous strategies, and that between January 2018 and 9 May this year, the current Frontier board pursued a strategy that resulted in a share price decline of over 90%.
“At the close of trading on 5 July, Science Group held 11,879,601 shares, equivalent to 29.2% of the voting share capital of Frontier.
“Science Group reiterates its previous statements that it does not anticipate supporting any alternative ‘potential corporate transaction’.”
It said it also did not anticipate increasing the offer price, and reiterated that its offer of 35p per share represented a 161.6% premium to the closing share price on 9 May, the date of the Frontier trading update; and a 137.3% premium to the share price on 17 May, the last trading day prior to the announcement of Science Group's approach.
“Science Group also reminds Frontier shareholders that the closing date for the Science Group offer is 16 July.
“At the present time, and taking into account the Frontier announcement issued on 5 July, Science Group does not anticipate extending the offer, nor the Panmure Gordon trading facility, but retains the option to do so if considered appropriate at the sole discretion of the Science Group board
“In conclusion, Science Group encourages Frontier shareholders to accept the Science Group offer, or sell their shares through the Panmure Gordon trading facility, as soon as possible and in any event prior to the closing date of 16 July.”