Richards Butler acts for a number of smaller public company clients whose activities provide challenges as great as any of the largest conglomerates.
Many of their transactions, by virtue of their size in comparison with that of the relevant company, are extremely complex, requiring circulars, shareholder approval and compliance with regulations and laws in overseas jurisdictions, as well as in the UK.
One such client is Provalis plc (previously Cortecs plc), an integrated healthcare company that recently completed a fundraising exercise, including the publication of a prospectus, a capital reorganisation and the announcement of a capital reduction. At the same time, it was completing the buy-in of shares by one of its subsidiaries (thereby terminating the group relationship) and was also negotiating the sale of part of the business of one of its divisions.
As part of the prospectus, the company was also announcing its proposed change of name, unveiling its new corporate image (with its own complexities) and announcing its preliminary results. In addition to its full listing on the London Stock Exchange, Provalis is listed on Nasdaq and has a secondary listing on the Australian Stock Exchange.
Lee Greenbury, company secretary and director of corporate affairs at Provalis, contacted me in mid-September when we were working towards completion of the latest deal for the company: the buy-back of shares by one of its subsidiaries.
Greenbury mentioned that we would also need to meet in a few days to discuss a proposal to raise approximately £5m by way of a placing and open offer, or a rights issue, which would include a capital reorganisation and capital reduction.
Such an exercise would be necessary as the company's shares had a nominal value of 25p but were then trading at around 16p and, of course, we would not be able to issue shares at a discount.
There would also have to be shareholder approval, a circular incorporating a prospectus under the listing rules of the London Stock Exchange and we would have to ensure compliance with both Australian and US laws and regulations.
Following discussions, it was proposed to finalise all documentation by 27 October – a tight deadline, but one I felt we could meet.
My assistant Cath Painter and trainee Alex Christians began working on the circular itself and submitted various drafts of the relevant sections to Greig Middleton, the company's financial advisers and sponsors. We also began work with the Australian and US lawyers to deal with the overseas compliance issues.
The need to go to the High Court to obtain approval to the capital reduction also necessitated discussion of the proposals with counsel.
Greig Middleton was uncertain as to whether the fundraising would be completed by way of a rights issue or placing and open offer, but would either firmly place the shares pursuant to a placing (and subject to existing shareholders' rights to participate in the associated open offer) or underwrite a rights issue.
The company would, therefore, be 'guaranteed' its money. Having explained the differences between the two processes, and the fact that a placing and open offer would be quicker, cheaper (in terms of commission payable) and result in the company receiving cash sooner, why talk about a rights issue?
Under the listing rules of the London Stock Exchange, shares issued pursuant to a placing and open offer cannot be issued at a discount of more than 10% to the prevailing market price. As the company's shares were trading at approximately 16p, we only had a leeway of 1.6p in which to fix the placing/offer price.
The volatility of the market in biotech companies meant that we could not rule out a variation in the market price of more than 1.6p in the month or so that it would take us to prepare the relevant documentation. We therefore decided to proceed as though it would be
a rights issue on the basis that more would have to go into the prospectus and it would be easier to take things out at a later stage if it were possible to proceed with a placing and open offer.
Drafting meetings on the 64-page prospectus began in earnest on 27 September. At the same time, we began drafting verification notes (which ended up being 175 pages long) and preparing various drafts of documents referring to the directors' responsibilities and a full memorandum on responsibilities that needed to be circulated in time for a telephone board meeting the following week.
We circulated the first draft of the verification notes. The verification of details relating to a biotech business requires reference to scientific and medical journals and public statistics from around the world. Naturally, in the prospectus the company's directors wanted to refer to the effect of a product on a huge proportion of the world's population who may suffer from the ailment that the particular product is being developed to treat.
The Internet provided much of this information. Late night surfing of the Net for this purpose also provided some light relief from preparing the copious bundles of supporting documents.
The 'full verification meeting' had been set for Monday, 18 October. That night, Greig Middleton reported the good news that the fundraising would probably be affected by a placing and open offer rather than a rights issue.
Although this meant we had to prepare a new prospectus referring to a placing and open offer rather than a rights issue, we retained the rights issue document and ran the two document forms in tandem until a final decision was made at the end of that week. From then on until impact day on 27 October we did not look back – we existed on lots of coffee and very little sleep.
On Saturday, 23 October I spent the day reviewing the placing agreement provided by Greig Middleton's lawyers and going through various documents relating to the financing to ensure consistency with a placing and open offer rather than a rights issue. Cath and Alex worked through the weekend on the verification notes and collating supporting documents – which finally ran to 14 lever arch files.
On Sunday, the three of us sat in a conference room equipped with a TV while England took on South Africa in the Rugby World Cup. With England's fate sealed by the second half, we were able to commit our minds to the task at hand and ultimately allow ourselves another 30 minutes sleep that night.
The following day, the placing letters were due to go to placees who would subscribe for shares (to the extent the open offer was not accepted by existing shareholders) but further potential placees had yet to be visited by the chief executive and colleague in Scotland.
These visits were completed on the Monday. A visit at 1.00am from the director and assistant director of Greig Middleton, via the all-night bagel shop in Brick Lane, finalised the placing letter.
The Greig Middleton team left our office at around 4.30am and soon the dawn of the eve of 'impact day' broke. Cath and Alex soon realised there would be no sleep at all that night. Still entirely on track with our timetable, the completion board meeting started at 2.00pm that afternoon, just as had originally been scheduled some four weeks previously.
I took the directors through the 16 pages of board minutes and was joined by Cath and Alex at about 6.00pm to go through the verification notes with the directors. The next task was to speak to the US lawyers regarding registration and filing requirements in the US, an exercise that was finally completed at around 4.00am on Wednesday.
By this point, Alex had succumbed to the comfy soft furnishings of Greig Middleton's reception area and the chief executive was preparing to attend a press conference at 7.00am to launch the fundraising. The job was done on time, in accordance with the timetable settled some four weeks earlier.
Cath and I returned wearily to the office at around 5.00am to deal with the final task of speaking to the lawyers in Australia regarding the filing of the document with the Australian Stock Exchange.
I returned home and got to bed around 6.30am. As my head hit the pillow there was a great sense of relief, which was suddenly tempered by the realisation that it was only Wednesday morning and I had another client meeting at 9am.
David Boutcher is a partner and head of corporate at Richards Butler.