Page 1 of 46 RNS Number : 6454D Orca Bidco Limited 28 October 2015 Not for release, publication or distribution, in whole or in part, in or into or from any Restricted Jurisdiction or any jurisdiction where to do so would constitute a violation of the relevant laws or regulations of such jurisdiction. 28 October 2015 RECOMMENDED CASH OFFER FOR OPSEC SECURITY GROUP PLC BY ORCA BIDCO LIMITED (AN INVESTMENT VEHICLE ULTIMATELY OWNED BY FUNDS MANAGED AND ADVISED BY INVESTCORP TECHNOLOGY PARTNERS III) TO BE IMPLEMENTED BY MEANS OF A SCHEME OF ARRANGEMENT UNDER PART 26 OF THE COMPANIES ACT 2006 Summary The board of Orca Bidco Limited ("Orca") and the Independent Directors of OpSec Security Group plc ("OpSec") are pleased to announce that they have reached agreement on the terms of a recommended cash offer for the entire issued share capital of OpSec not already owned or contracted to be acquired by Orca (the "Transaction"). The Transaction is to be effected by means of a Court-sanctioned scheme of arrangement under Part 26 of the Companies Act 2006 (the "Scheme"). Under the terms of the Scheme, Scheme Shareholders will receive 55 pence in cash (the "Transaction Consideration") for each Scheme Share, valuing the entire issued share capital of OpSec at approximately 66.7 million. Orca has entered into a conditional binding arrangement with the EBT Trustee in relation to its equity holding amounting to 2,514,429 OpSec Shares, representing approximately 2.1 per cent of the Voting Shares which upon completion of the Transaction will be rolled over into 2,826,115 B ordinary shares in Orca, representing approximately 2.4 per cent of the issued ordinary share capital of Orca as at such date. It is also proposed that Optionholders release their options over OpSec Shares for new options over B ordinary shares in Orca. The proposed arrangements between Orca and the EBT Trustee and the proposed treatment of the Optionholders (together, the "Management Arrangements") are subject to approval, pursuant to Rule 16 of the Code, by the Independent Shareholders at the Independent Shareholders Meeting and to the Scheme becoming Effective.
Page 2 of 46 The Transaction Consideration represents a premium of approximately: 69 per cent to the Closing Price of 32.5 pence per OpSec Share on 29 September 2015, being the last Business Day before Orca Holdings Limited ("Orca Holdings"), the parent company of Orca, acquired 30,512,078 OpSec Shares from Herald Investment Management Limited (the "Herald Shares") and announced a possible offer for the ordinary shares of 5 pence each in the capital of OpSec not held by it; 62 per cent to the average Closing Price of 34.0 pence per OpSec Share for the 12 months prior to and including 29 September 2015, being the last Business Day before the date on which Orca Holdings acquired the Herald Shares and announced a possible offer for the OpSec Shares not already held by it; and 11 per cent to the Closing Price of 49.5 pence per OpSec Share on 27 October 2015, being the last Business Day before the date of this announcement. Orca has received irrevocable undertakings: to vote in favour of the Transaction in respect of 7,834,845 OpSec Shares representing approximately: 39.8 per cent of the Scheme Shares, being those OpSec Shares which are eligible to vote at the Court Meeting convened by the Court for the purposes of approving the Scheme; and 90.2 per cent of the Voting Shares [1], being those Voting Shares which are eligible to vote at the General Meeting convened to pass the Special Resolutions in relation to the Scheme, the Transaction and the Amended OpSec Articles, to vote in favour of the Ordinary Resolutions to approve the Management Arrangements at the Independent Shareholders Meeting in respect of 4,583,309 OpSec Shares, representing approximately 29.1 per cent of the Independent Shares, being those OpSec Shares which are eligible to vote at the Independent Shareholders Meeting [2]. Further details of the irrevocable undertakings, including the conditions to which they are subject, are set out in paragraph 6 of this announcement. The Independent Directors, Richard Cremona and Michael Angus, who have been so advised by Shore Capital, consider the terms of the Transaction to be fair and reasonable and in the best interests of Scheme Shareholders. In providing its advice to the Independent Directors, Shore Capital has taken into account the Independent Directors' commercial assessment. Accordingly, the Independent Directors have unanimously agreed to recommend that Scheme Shareholders vote in favour of the Scheme at the Court Meeting and OpSec Shareholders vote in favour of the Special Resolutions to be
Page 3 of 46 proposed at the General Meeting, as Michael Angus has irrevocably undertaken to do in respect of his own beneficial holding, amounting in aggregate to 1,468,169 OpSec Shares, representing approximately 7.5 per cent of the Scheme Shares and approximately 1.2 per cent of the Voting Shares. Richard Cremona does not hold any OpSec Shares. None of the OpSec Directors are considered independent for the purposes of the Independent Shareholders Meeting. Shore Capital considers the Management Arrangements to be fair and reasonable in so far as the Independent Shareholders are concerned and, accordingly, Shore Capital intends to recommend that Independent Shareholders vote in favour of the Ordinary Resolutions required to approve the Management Arrangements at the Independent Shareholders Meeting. Orca was established on 12 October 2015 by Orca Holdings for the purposes of effecting the Scheme and implementing the Transaction and the Management Arrangements. On 27 October 2015, Orca Holdings and Orca entered into a share for share exchange agreement (the "Orca Share Exchange Agreement") pursuant to which Orca acquired 30,512,078 OpSec Shares held by Orca Holdings in exchange for the issue to Orca Holdings by Orca of a corresponding number of ordinary shares in Orca. On 27 October 2015, Orca Holdings and Orca entered into a declaration of trust pursuant to which Orca Holdings declared that it holds its entire beneficial interest in 48,512,914 OpSec Shares on trust for Orca, such declaration of trust being in consideration of the issue to Orca Holdings of 48,512,914 ordinary shares in Orca. On 27 October 2015, Orca Holdings subsequently executed a stock transfer form to transfer the bare legal title in 48,512,914 OpSec Shares to Orca, which has yet to be stamped and registered in the statutory books of OpSec. On 27 October 2015, Orca Holdings and Orca entered into a declaration of trust pursuant to which Orca Holdings declared that it holds its entire beneficial interest in 20,000,000 Preferred Shares on trust for Orca, such declaration of trust being in consideration of the issue to Orca Holdings of 20,000,000 ordinary shares in Orca. On 27 October 2015, Orca Holdings subsequently executed a stock transfer form to transfer the bare legal title in the 20,000,000 Preferred Shares to Orca, which has yet to be stamped and registered in the statutory books of OpSec. Orca currently holds 30,512,078 OpSec Shares and the beneficial interest in 48,512,914 OpSec Shares and 20,000,000 Preferred Shares, with the legal title in respect of the beneficially held 48,512,914 OpSec Shares and the Preferred Shares held by Orca Holdings pending stamping and registration of the respective stock transfer forms. Accordingly, Orca currently holds the beneficial interest in approximately 81.70 per cent of the Voting Shares of OpSec. Orca is not a Scheme Shareholder but is permitted to vote on the Special Resolutions to be proposed at the General Meeting and has confirmed its intention to vote in favour of such resolutions. Following completion of the Transaction and assuming that the Scheme and the Management Arrangements are approved, Orca will be majority owned by Orca Holdings with a minority holding held by the EBT Trustee.
Page 4 of 46 Currently, Orca and Orca Holdings are, respectively, indirect and direct wholly owned subsidiaries of Investcorp Technology Fund III. The ultimate parent company of the Investcorp Group is Investcorp Bank B.S.C. Further details on Orca, Orca Holdings and the Investcorp Group are set out in paragraph 8 of this announcement. The Transaction is subject to a number of conditions and further terms which are set out in Appendix I of this announcement. In order to become Effective, the Scheme must be approved by a majority in number of Scheme Shareholders voting at the Court Meeting, either in person or by proxy, representing at least 75 per cent in value of the Scheme Shares voted. In addition, (i) Special Resolutions authorising, amongst other matters, the OpSec Directors to take all such action as they may consider necessary or appropriate for carrying the Scheme into full effect and adopting the Amended OpSec Articles must be passed by Voting Shareholders representing at least 75 per cent of votes cast at the General Meeting, and (ii) Ordinary Resolutions approving the Management Arrangements must be passed by Independent Shareholders representing in excess of 50 per cent of the votes cast at the Independent Shareholders Meeting. Subject to the satisfaction of the Conditions, it is expected that the Scheme will become Effective by the end of 2015. The Scheme Document, containing further details of the Transaction and the Management Arrangements will be posted to OpSec Shareholders as soon as practicable and in any event within 28 days of this announcement. On 3 July 2015, OpSec published its final results for the period ending 31 March 2015. Please see the OpSec Annual Report and Accounts 2015 on OpSec's website (http://www.opsecsecurity.com). OpSec's trading in the 6 month period to 30 September 2015 was satisfactory and in line with the expectations of the OpSec Board. Commenting on the Transaction, Richard Cremona, OpSec's Chief Executive Officer and one of the Independent Directors, said: "The Transaction gives OpSec's shareholders the opportunity to achieve a cash exit at a substantial premium to the recent market price. Once completed, OpSec will have access to significantly greater and more appropriately structured finance, increasing its ability to invest further in the OpSec Group's business. This should benefit all stakeholders including the interests and prospects of our staff". Commenting on the Transaction, Hazem Ben-Gacem, an Investcorp Group Managing Director responsible for Investcorp Technology Fund III's investment in OpSec, said: "We have been investors in OpSec for over five years and have taken a long-term view to work with OpSec and management to build shareholder value. During that time, we have supported OpSec on its organic growth initiatives and through several meaningful acquisitions. While there is still much work ahead for OpSec and management, we are excited to commit additional resources and capital to OpSec with the expectation of enhancing its competitive positioning and becoming a leading global player in the provision of anticounterfeiting solutions to brands and governments".
Page 5 of 46 The expected transaction timetable will be set out in the Scheme Document. As at the date of this announcement, Orca holds 30,512,078 OpSec Shares and the beneficial interest in 48,512,914 OpSec Shares and 20,000,000 Preferred Shares, all with equal voting rights and therefore Orca holds a beneficial interest in approximately 81.70 per cent of the Voting Shares. This summary should be read in conjunction with the full text of this announcement and the appendices. Appendix I to this announcement contains the conditions to, and certain further terms of, the Transaction. Appendix II to this announcement contains further details of the sources of information and bases of calculations set out in this announcement. Appendix III to this announcement contains definitions of certain expressions used in this summary and in this announcement. The Transaction will be subject to the Conditions, the other terms set out in this announcement and to the full terms and conditions which will be set out in the Scheme Document. Enquiries: Orca Bidco Limited Hazem Ben-Gacem Tel: +44 (0)20 7629 6600 Canaccord Genuity Limited Colin Christie and Miles Cox Tel: +44 (0)20 7523 8000 OpSec Security Group plc Michael Angus Tel: +44 (0)191 417 5434 Shore Capital and Corporate Limited Stephane Auton / Edward Mansfield / Patrick Castle Tel: +44 (0)207 408 4090 Important Notices This announcement is for information purposes only and is not intended to and does not constitute or form any part of an offer to sell or an invitation to subscribe for or purchase any securities or the solicitation of any vote or approval in any jurisdiction pursuant to the Transaction, the Management Arrangements or otherwise. The Transaction and the Management Arrangements are being made solely pursuant to the terms of the Scheme Document, which will contain the full terms and conditions of the Transaction and the Management Arrangements, including details of how to vote in respect of the Transaction and the Management Arrangements. Any response in relation to the Transaction and/or the Management Arrangements should be made only on the basis of the information contained in the Scheme Document. OpSec will prepare the Scheme Document to be distributed to OpSec Shareholders. OpSec and Orca urge OpSec Shareholders to read the Scheme Document when it becomes available as it will contain important information relating to the Transaction and the Management Arrangements. This announcement does not constitute a prospectus or a prospectus equivalent document. Canaccord Genuity Limited ("Canaccord Genuity") which is authorised and regulated in the United Kingdom by the Financial Conduct Authority is acting about:blank
Page 6 of 46 exclusively as financial adviser to Orca and Orca Holdings and no one else in connection with the Scheme and other matters described in this announcement and will not be responsible to anyone other than Orca and Orca Holdings for providing the protections afforded to clients of Canaccord Genuity or for providing advice in relation to the Scheme and other matters described in this announcement. Shore Capital and Corporate Limited ("Shore Capital") which is authorised and regulated in the United Kingdom by the Financial Conduct Authority is acting as financial adviser to OpSec and no one else in connection with the Scheme and other matters described in this announcement and will not be responsible to anyone other than OpSec for providing the protections afforded to clients of Shore Capital or for providing advice in relation to the Scheme and other matters described in this announcement. Overseas Shareholders The release, publication and distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by the laws of those jurisdictions and therefore persons into whose possession this announcement comes should inform themselves about and observe any such restrictions. Failure to comply with any such restrictions may constitute a violation of the securities laws of any such jurisdiction. This announcement has been prepared for the purpose 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 the United Kingdom. Unless otherwise determined by Orca or required by the Code, and permitted by applicable laws and regulations, copies of this announcement and any formal documentation relating to the Transaction and the Management Arrangements are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in, into or from any Restricted Jurisdiction, and persons receiving such documents (including custodians, nominees and trustees) must not mail or otherwise forward, distribute or send them in, into or from any Restricted Jurisdiction. If the Transaction is implemented by way of a Takeover Offer (unless otherwise permitted by applicable law and regulation), the Takeover 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 Takeover Offer may not be capable of acceptance by any such use, means, instrumentality of facilities. Unless otherwise determined by Orca or required by the Code, and permitted by applicable law and regulation, the Offer shall not be made available, directly or indirectly, in, into or from a Restricted Jurisdiction where to do so would violate the laws in that jurisdiction and no person may vote in favour of the offer by any such use, means, instrumentality or form within a Restricted Jurisdiction or any other jurisdiction if to do so would constitute a violation of the laws of that jurisdiction. The availability of the Transaction and the Management Arrangements to OpSec Shareholders who are not resident in the United Kingdom may be affected by the laws of the relevant jurisdiction in which they are resident. Persons who are not resident in the United Kingdom should inform themselves of, and observe, any applicable requirements. In particular, the ability of persons who are not resident
Page 7 of 46 in the United Kingdom to vote their OpSec Shares with respect to the Scheme at the Court Meeting or to execute and deliver forms of proxy appointing another to vote at the Court Meeting on their behalf, may be affected by the laws of the relevant jurisdiction in which they are located or of which they are citizens. Any failure to comply with such requirements may constitute a violation of the securities laws of any such jurisdiction. To the fullest extent permitted by applicable law, all persons involved in the Transaction and the Management Arrangements disclaim any responsibility or liability for the violation of such requirements by any person. Further details in relation to Overseas Shareholders will be contained in the Scheme Document. Notice to US Shareholders The Transaction relates to the shares of an English company that is a "foreign private issuer" (as defined in Rule 3b-4 under the US Securities Exchange Act of 1934, as amended (the "Exchange Act")) and is proposed to be made by means of a scheme of arrangement provided for and governed under English company law. A transaction effected by means of a scheme of arrangement is not subject to the tender offer rules or the proxy solicitation rules under the Exchange Act. Accordingly, the Scheme is subject to the disclosure requirements, rules and practices applicable in the United Kingdom to schemes of arrangement, which differ from the disclosure requirements of United States proxy solicitation or tender offer rules. If, in the future, Orca exercises the right to implement the Transaction by way of a Takeover Offer and determines to extend the offer into the United States, the Transaction will be made in compliance with applicable United States securities laws and regulations, including the applicable Exchange Act tender offer rules. Financial information included in this announcement and the Scheme Document has been or will be 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 United States. It may be difficult for US holders of OpSec Shares to effect service of process within the United States on Orca, OpSec and/or their respective officers and directors or to enforce their rights and any claims arising out of US federal securities laws, since Orca and OpSec 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 OpSec 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 courts' judgement. Each United States holder of OpSec Shares is urged to consult with his independent professional adviser regarding any acceptance of the Transaction and/or the Management Arrangements including, without limitation, to consider the tax consequences associated with such shareholder's election to participate in the Transaction and/or the Management Arrangements. Responsibility Statements The Orca Director and the investment committee of Investcorp Technology Fund III (comprising each of Hazem Ben-Gacem, Savio Tung, Gilbert Kamieniecky and Anand Radhakrishnan) accept responsibility for the information contained in this announcement other than the information relating to OpSec, the OpSec Group,
Page 8 of 46 the OpSec Directors, their close relatives and related trusts and companies. To the best of the knowledge and belief of the Orca Director and the investment committee of Investcorp Technology Fund III (who have taken all reasonable care to ensure that such is the case), the information contained in this announcement for which they are responsible is in accordance with the facts and does not omit anything likely to affect the import of that information. The Independent Directors accept responsibility for the information contained in this announcement relating to OpSec, the OpSec Group, the OpSec Directors, their close relatives and related trusts and companies and including, for the avoidance of doubt, the recommendation in respect of the Transaction (but not the Management Arrangements) set out in paragraph 3 of this announcement. To the best of the knowledge and belief of the Independent Directors, who have taken all reasonable care to ensure that such is the case, the information contained in this announcement for which they are responsible is in accordance with the facts and does not omit anything likely to affect the import of that information. The OpSec Directors (other than the Independent Directors) accept responsibility for the information contained in this announcement relating to OpSec, the OpSec Group, the OpSec Directors, their close relatives and related trusts and companies but excluding, for the avoidance of doubt, the recommendations set out in paragraph 3 of this announcement. To the best of the knowledge and belief of the OpSec Directors (other than the Independent Directors), who have taken all reasonable care to ensure that such is the case, the information contained in this announcement for which they are responsible is in accordance with the facts and does not omit anything likely to affect the import of that information. Cautionary Note Regarding Forward-Looking Statements This announcement contains certain forward-looking statements with respect to the financial condition, results of operations and business of OpSec and certain plans and objectives of Orca with respect thereto. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as "anticipate", "expect", "estimate", "target", "intend", "plan", "goal", "believe", "hope", "aims", "continue", "will", "may", "should", "would", "could" or other words of similar meaning. These statements are based on assumptions and assessments made by OpSec and/or Orca in light of their experience and their perception of historical trends, current conditions, future developments and other factors they believe appropriate. 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 announcement could cause actual results and developments to differ materially from those expressed in or implied by such forward-looking statements. Although it is believed that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct and you are therefore cautioned not to place undue reliance on these forward-looking statements which speak only as at the date of this announcement. Neither OpSec nor Orca assumes any obligation to update or correct the information contained in this announcement (whether as a result of new information, future events or otherwise), except as required by applicable law. There are several factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. Among the factors that
Page 9 of 46 could cause actual results to differ materially from those described in the forwardlooking statements are changes in global, political, economic, business, competitive, market and regulatory forces, future exchange and interest rates, changes in tax rates and future business combinations and dispositions. No statement in this announcement is intended as a profit forecast or estimate for any period and no statement in this announcement should be interpreted to mean that earnings or earnings per share for OpSec for current or future financial years would necessarily match or exceed the historical published earnings per share for OpSec. Dealing and Opening Position Disclosure Requirements Under Rule 8.3(a) of the Code, any person who is interested in 1 per cent or more of any class of relevant securities of an offeree company or of any paper offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any paper offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of: (i) the offeree company; and (ii) any paper offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) of the Code applies must be made by no later than 3.30 p.m. (UK time) on the 10 th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 p.m. (UK time) on the 10 th business day following the announcement in which any paper offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a paper offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure. Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1 per cent or more of any class of relevant securities of the offeree company or of any paper offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any paper offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of: (i) the offeree company; and (ii) any paper offeror, save to the extent that these details have previously been disclosed under Rule 8 of the Code. A Dealing Disclosure by a person to whom Rule 8.3(b) of the Code applies must be made by no later than 3.30 p.m. (UK time) on the business day following the date of the relevant dealing. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a paper offeror, they will be deemed to be a single person for the purpose of Rule 8.3 of the Code. Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4 of the Code). Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at http://www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and
Page 10 of 46 when any offeror was first identified. If you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure, you should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129. Electronic Communications Addresses, electronic addresses and certain information provided by OpSec Shareholders, persons with information rights and other relevant persons for the receipt of communications from OpSec may be provided to Orca during the Offer Period in connection with the Transaction and/or the Management Arrangements as requested under section 4 of Appendix 4 to the Code to comply with Rule 2.12 of the Code. Publication on Website and Availability of Hard Copies A copy of this announcement will be made available, free of charge, on the OpSec website at http://www.opsecsecurity.com by no later than 12 noon (UK time) on 28 October 2015. In accordance with Rule 30.2 of the Code, a person so entitled may request a hard copy of this announcement, free of charge, by contacting the Director of Orca on +44 (0)20 7629 6600 or the Company Secretary of OpSec on +44 (0)191 417 5434. You may also request that all future documents, announcements and information to be sent to you in relation to the Transaction and/or the Management Arrangements should be in hard copy form. Rule 2.10 Disclosure In accordance with Rule 2.10 of the Code, OpSec confirms that it has 101,212,121 issued ordinary shares of 5 pence each admitted to trading with International Securities Identification Number (ISIN) of GB0000462191. In addition, OpSec has 20,000,000 7.5 per cent redeemable preferred ordinary shares of 5 pence each which are unlisted. Rounding Certain figures included in this announcement have been subjected to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.
Page 11 of 46 Not for release, publication or distribution, in whole or in part, in or into or from any Restricted Jurisdiction or any jurisdiction where to do so would constitute a violation of the relevant laws or regulations of such jurisdiction. 28 October 2015 RECOMMENDED CASH OFFER FOR OPSEC SECURITY GROUP PLC BY ORCA BIDCO LIMITED (AN INVESTMENT VEHICLE ULTIMATELY OWNED BY FUNDS MANAGED AND ADVISED BY INVESTCORP TECHNOLOGY PARTNERS III) TO BE IMPLEMENTED BY MEANS OF A SCHEME OF ARRANGEMENT UNDER PART 26 OF THE COMPANIES ACT 2006 1 Introduction The board of Orca Bidco Limited ("Orca") and the Independent Directors of OpSec Security Group plc ("OpSec") are pleased to announce that they have reached agreement on the terms of a recommended cash offer for the entire issued share capital of OpSec not already owned or contracted to be acquired by Orca (the "Transaction"). The Transaction is to be effected by means of a Court-sanctioned scheme of arrangement under Part 26 of the Companies Act 2006. The Scheme will be effected by Orca, a company established by Orca Holdings Limited ("Orca Holdings"), for the purposes of effecting the Scheme and implementing the Transaction and the Management Arrangements. On incorporation, Orca was a wholly-owned subsidiary of Orca Holdings. On 27 October 2015, Orca Holdings and Orca entered into a share for share exchange agreement (the "Orca Share Exchange Agreement") pursuant to which Orca acquired 30,512,078 OpSec Shares held by Orca Holdings in exchange for the issue to Orca Holdings by Orca of a corresponding number of ordinary shares in Orca. Immediately following completion of the Orca Share Exchange Agreement, Orca Holdings continued to be the immediate holding company of Orca and Orca became a shareholder in OpSec. On 27 October 2015, Orca Holdings and Orca entered into a declaration of trust pursuant to which Orca Holdings declared that it holds its entire beneficial interest in 20,000,000 Preferred Shares on trust for Orca, such declaration of trust being in consideration of the issue to Orca Holdings of 20,000,000 ordinary shares in Orca. On 27 October 2015, Orca Holdings subsequently executed a stock transfer form to transfer the bare legal title in the 20,000,000 Preferred Shares to Orca, which has yet to be stamped and registered in the statutory books of OpSec. On 27 October 2015, Orca Holdings and Orca entered into a declaration of trust pursuant to which Orca Holdings declared that it holds its entire beneficial interest in 48,512,914 OpSec Shares on trust for Orca, such declaration of trust being in consideration of the issue to Orca Holdings of 48,512,914 ordinary shares in
Page 12 of 46 Orca. On 27 October 2015, Orca Holdings subsequently executed a stock transfer form to transfer the bare legal title in 48,512,914 OpSec Shares to Orca, which has yet to be stamped and registered in the statutory books of OpSec. Orca currently holds the beneficial interest in approximately 81.70 per cent of the Voting Shares of OpSec. Orca Holdings and Orca are, respectively, direct and indirect wholly owned subsidiaries of Investcorp Technology Fund III. Pursuant to the EBT Trustee Share Exchange Agreement, the OpSec Shares held by the EBT Trustee will, conditional upon the Scheme becoming Effective, be transferred to Orca in exchange for 2,826,115 B ordinary shares in Orca, representing approximately 2.4 per cent of the issued ordinary share capital of Orca as at such date. Accordingly, following completion of the Transaction and assuming that the Scheme and the Management Arrangements are approved, Orca will be majority owned by Orca Holdings with a minority holding held by the EBT Trustee. In accordance with the terms of an irrevocable deferred preferred share conversion notice provided to OpSec dated 27 October 2015 (which will be deemed to have been served immediately following the issue of the Court Order and in any event prior to the Effective Date) the Preferred Shares will be converted into OpSec Shares, on the basis of one OpSec Share for each Preferred Share in accordance with the terms of the OpSec Articles and subject to OpSec having sufficient distributable reserves at such time, it is intended that immediately following the Court Order the accrued and unpaid dividend on the Preferred Shares (as at the date of the Court Order), shall be declared and paid as an interim dividend by the OpSec Directors. 2 The Transaction It is intended that the Transaction will be effected by way of a Court-sanctioned scheme of arrangement under Part 26 of the Companies Act. The Scheme will require the approval of the Scheme Shareholders at a meeting to be convened by the Court and the subsequent sanction of the Court. Once the Scheme becomes Effective, the Scheme will be binding on all Scheme Shareholders, irrespective of whether or not they attended and/or voted in favour of the Scheme, and all OpSec Shares not already owned by Orca will be transferred to Orca. The EBT Shares and the OpSec Shares and Preferred Shares beneficially held by Orca do not form part of the Scheme. The Independent Shareholders will be asked at the Independent Shareholders Meeting to approve the Management Arrangements. Under the terms of the Scheme, which will be subject to the conditions and further terms set out in Appendix I to this announcement and those set out in the Scheme Document, upon the Scheme becoming Effective the Scheme Shares will be transferred to Orca and Scheme Shareholders will receive: for each OpSec Share 55 pence in cash The Scheme values each OpSec Share at 55 pence and OpSec's entire issued share capital at approximately 66.7 million. The terms of the Scheme represent a premium of approximately: 69 per cent to the Closing Price of 32.5 pence per OpSec Share on 29 September 2015, being the last Business Day before Orca Holdings, the parent company of Orca, acquired 30,512,078 OpSec Shares from
Page 13 of 46 Herald Investment Management Limited (the "Herald Shares") and announced a possible offer for the ordinary shares of 5 pence each in the capital of OpSec not held by it. 62 per cent to the average Closing Price of 34.0 pence per OpSec Share in the 12 months prior to and including 29 September 2015, being the last Business Day before the date on which Orca Holdings acquired the Herald Shares and announced a possible offer for the OpSec Shares not already held by it; and 11 per cent to the Closing Price of 49.5 pence per OpSec Share on 27 October 2015, being the last Business Day before the date of this announcement. The Transaction Consideration assumes that OpSec Shareholders will not receive an interim or final dividend in respect of OpSec's financial year ending 31 March 2016. If any dividend or other distribution is authorised, declared, proposed, made or paid in respect of the OpSec Shares on or after the date of this announcement and prior to the Effective Date, Orca reserves the right to adjust downwards the Transaction Consideration on an equivalent basis. Canaccord Genuity is satisfied that sufficient resources are available to Orca to satisfy, in full, the Cash Consideration payable to Scheme Shareholders under the terms of the Scheme. The expected transaction timetable will be set out in the Scheme Document. The resolutions required to implement the Scheme will be proposed to Scheme Shareholders at the Court Meeting and to Voting Shareholders at the General Meeting whilst the Management Arrangements will be proposed to Independent Shareholders at the Independent Shareholders Meeting. Once these meetings have been convened, a further announcement in that regard will be made. It is expected that, subject to satisfaction or, where relevant, waiver of the Conditions, the Scheme will become Effective by the end of 2015. Further details of the Transaction and the Management Arrangements, including the arrangements for settlement of the consideration payable to Scheme Shareholders, will be set out in the Scheme Document. 3 Recommendation The OpSec Board has determined that it is appropriate that only the Independent Directors, Richard Cremona and Michael Angus, should make a recommendation in respect of the Transaction to the OpSec Shareholders. Since Hazem Ben-Gacem and David Erlong represent the interests of Orca on the OpSec Board and Richard Fuller (Non-Executive Chairman) previously acted as an adviser to Investcorp Technology Fund III from 2010 to 2013, none of these OpSec Directors have taken part in any discussions on behalf of OpSec relating to the Transaction and/or the Management Arrangements. The Independent Directors, who have been so advised by Shore Capital, consider the terms of the Transaction to be fair and reasonable and in the best interests of Scheme Shareholders. In providing its advice Shore Capital has taken into account the commercial assessment of the Independent Directors. Accordingly, the Independent Directors intend to recommend that Scheme Shareholders vote in favour of the Scheme at the Court Meeting and OpSec Shareholders vote in favour of the Special Resolutions to be proposed at the General Meeting, as Michael Angus has irrevocably undertaken to do in respect of his own OpSec
Page 14 of 46 Shares (representing approximately 7.5 per cent of the Scheme Shares and approximately 1.2 per cent of the Voting Shares). Richard Cremona does not hold any OpSec Shares. Due to their interests in ESOS Options and due to their positions as directors of the EBT Trustee, OpSec and the Panel have agreed that the Independent Directors should not be considered independent for the purposes of the Management Arrangements. As a result, it is not appropriate for any of the OpSec Directors to make any recommendation in respect of the Management Arrangements and, in the circumstances, Shore Capital is providing such recommendation. Shore Capital considers the Management Arrangements to be fair and reasonable in so far as the Independent Shareholders are concerned and, accordingly, Shore Capital intends to recommend that Independent Shareholders vote in favour of the Ordinary Resolutions required to approve the Management Arrangements at the Independent Shareholders Meeting. Further details of the Management Arrangements are set out in paragraph 10 below. 4 Background to and reasons for the Transaction Orca recognises the significant achievements of the OpSec executive management team in investing in organic sales growth initiatives. However, a significant amount of work remains to be done to ensure that these initiatives are successful in the long-term. Moreover, Orca believes that, as a listed company, OpSec's ability to take advantage of additional organic and inorganic growth opportunities will continue to be constrained by a lack of access to the requisite levels of capital investment. Post-completion, Orca intends to work closely with the executive management team to assist OpSec in taking full advantage of future growth opportunities, including further appropriate strategic acquisitions. Investcorp Technology Fund III and/or Orca are currently exploring strategic acquisitions in complementary sectors with the intention of combining these businesses both operationally and structurally with OpSec. Some of these potential acquisitions would allow OpSec to enter new sectors and would result in a combined business of significantly greater size as well as the possibility of greater growth initiatives and efficiencies, including the potential for realising cost synergies. The underlying aim is to be an increasing participant in the optical science and anti-counterfeiting markets. Orca believes future acquisitions would require substantial new equity injections and Investcorp Bank B.S.C. and its subsidiaries are prepared to fund acquisitions allowing OpSec to take advantage of future growth opportunities. The Investcorp Group is in the process of potentially acquiring one particular business which has historically generated higher revenues and profits than OpSec and this process is at an advanced stage although it remains competitive. Orca believes that the Transaction presents an attractive opportunity for OpSec Shareholders to realise their investment in OpSec for cash, at a premium of approximately 69 per cent to the Closing Price per OpSec Share on 29 September 2015, the latest Business Day prior to the date on which Orca Holdings announced a possible offer for the OpSec Shares not already held by it, and a premium of 62 per cent to the average Closing Price per share for the 12 months prior to and including 29 September 2015. 5 Background and reasons for the recommendation of the Independent Directors As at 27 October 2015, being the latest Business Day prior to the date of this
Page 15 of 46 announcement, Orca held the beneficial interest in approximately 81.70 per cent of the Voting Shares. This, combined with the holdings of certain senior OpSec Group employees and the EBT Trustee, gives OpSec an effective free float of less than 16 per cent. The effective free float has been at this low level for some time and this lack of free float has meant that there is very limited trading volume in OpSec Shares and that on many days the shares do not trade at all. The Independent Directors believe that given this lack of liquidity, there is little merit in OpSec retaining its listing on AIM. Furthermore, OpSec operates in a consolidating industry and the Independent Directors believe there are significant growth prospects available for wellpositioned companies able to compete on a global scale. OpSec has been one of the consolidators in the industry, acquiring businesses such as Delta Labelling Limited and the holographic security business of JDS Uniphase Corporation in 2012. In considering the merits of the Scheme, the Independent Directors have also taken into account: the level of the Transaction Consideration, providing OpSec Shareholders with certainty of value at an attractive premium to the recent market price; Orca's intention to seek the cancellation of the admission to, and trading of, the OpSec Shares on AIM if the Scheme does not become Effective, which would result in the Independent Shareholders becoming minority shareholders in an unlisted company with no available market for their OpSec Shares; the confirmations received from Orca regarding the safeguarding of the existing employment rights of the OpSec Group's employees; and the level of irrevocable undertakings to vote in favour of the relevant resolutions at the Scheme Meetings, being 39.8 per cent of the Scheme Shares and 90.2 per cent of the Voting Shares [3]. The Transaction provides OpSec Shareholders with an opportunity to realise their investment in OpSec for cash at a price that represents a premium of approximately: 69 per cent to the Closing Price of 32.5 pence per OpSec Share on 29 September 2015, being the last Business Day before the date on which Orca Holdings announced a possible offer for the OpSec Shares not already held by it; and 62 per cent to the average Closing Price of 34.0 pence per OpSec Share for the 12 months prior to and including on 29 September 2015, being the last Business Day before the date on which Orca Holdings announced a possible offer for the OpSec Shares not already held by it. 6 Irrevocable undertakings Orca has also received an irrevocable undertaking to vote in favour of the relevant resolutions at the Scheme Meetings from Michael Angus, one of the Independent Directors, in respect of his entire beneficial holdings, amounting to 1,468,169 OpSec Shares and representing approximately: 7.5 per cent of the Scheme Shares; and
Page 16 of 46 1.2 per cent of the Voting Shares. Orca has received an irrevocable undertaking to vote in favour of the relevant resolutions at the Scheme Meetings from certain OpSec Group employees in respect of 1,783,367 OpSec Shares, representing approximately: 9.1 per cent of the Scheme Shares; and 1.5 per cent of the Voting Shares. Orca has received an irrevocable undertaking to vote in favour of the relevant resolutions at the Scheme Meetings and the Independent Shareholders Meeting from certain OpSec Shareholders in respect of 4,583,309 OpSec Shares, representing approximately: 23.3 per cent of the Scheme Shares; 3.8 per cent of the Voting Shares; and 29.1 per cent of the Independent Shares. Orca has received an irrevocable undertaking to vote in favour of the relevant resolutions to be proposed at the General Meeting from the EBT Trustee in respect of its entire beneficial shareholdings of 2,514,429 OpSec Shares, representing approximately 2.1 per cent of the Voting Shares. All of these irrevocable undertakings will cease to be binding: (i) if the Scheme Document is not posted on or before 28 days after the date of this announcement; (ii) if the Scheme or any resolutions of the OpSec Shareholders upon the passing of which the implementation of the Scheme is dependent are not approved by the requisite majority; or (iii) where the Acquisition is implemented by way of a Takeover Offer, the offer lapsing, being withdrawn or not becoming unconditional in all respects. In summary, Orca has received irrevocable undertakings in respect of the following: 39.8 per cent in value of the Scheme Shares eligible to vote at the Court Meeting 90.2 per cent in value of Voting Shares entitled to vote at the General Meeting to approve the Special Resolutions [4] ; and 29.1 per cent in value of the Independent Shares entitled to vote at the Independent Shareholders Meeting to approve the Ordinary Resolutions. 7 Information relating to OpSec and current trading of OpSec OpSec was incorporated in England and Wales in 1982. OpSec provides solutions to combat counterfeiting and the related problems of diversion grey marketing, online brand abuse and fraud. OpSec supplies technologies and solutions into three core markets: (i) brand protection; (ii) Government protection; and (iii) transaction cards. In addition, OpSec owns 50 per cent of 3dcd LLC, a joint venture that licences technologies for the protection of optical disks (CDs and DVDs). OpSec delivers a comprehensive suite of end-to-end solutions, including advanced physical security technologies, supply chain track and trace services, and on-line and e-commerce
Page 17 of 46 monitoring and analysis for more than 300 companies across industry sectors and 50 governments worldwide. OpSec's customers are served from its facilities in the USA, the UK, Germany, Hong Kong, the Dominican Republic and via a network of over 40 agents worldwide. On 3 July 2015, OpSec published its final results for the period ending 31 March 2015. Please see the Annual Report on OpSec's website (http://www.opsecsecurity.com). OpSec's trading in the 6 month period to 30 September 2015 was satisfactory and in line with the OpSec Directors' expectations. As anticipated, the rationalisation of the OpSec Group's production facilities was completed during the 6 month period to 30 September 2015. 8 Information relating to Orca, Orca Holdings and the Investcorp Group Orca has been established by Orca Holdings for the purposes of effecting the Transaction. Orca has not traded since incorporation, or entered into any obligations, other than in connection with the entering into and implementation of the Orca Share Exchange Agreement and related declarations of trust, the EBT Trustee Share Exchange Agreement, and the implementation and financing of the Scheme. Orca Holdings is the company that was established by Investcorp Technology Fund III for the purpose of implementing Investcorp Technology Fund III's original investment in OpSec which completed on 1 February 2010. Following completion of the Transaction, Orca Holdings will continue to be owned by Investcorp Technology Fund III. Investcorp Technology Partners III manages Investcorp Technology Fund III, the Investcorp Group technology private equity fund. Investcorp Technology Partners III has advised Investcorp Technology Fund III on growth buyouts, corporate carve-outs and investments in public and private companies in Western Europe and North America. Investcorp Technology Fund III's current investment portfolio includes several software and hardware companies in Europe and North America. Investcorp Bank B.S.C., the ultimate parent of Investcorp Group, is an alternative asset management firm. Investcorp Bank B.S.C. is listed and traded on the Bahrain Bourse. As at 30 June 2015, the Investcorp Group had over US$10.6 billion in total assets under management ("AUM"), including assets managed by third party managers where Investcorp Technology Fund III receives fees calculated on the basis of the AUM. 9 Management, employees and locations Orca attaches great importance to the skills and experience of the existing management and employees of the OpSec Group and believes that following completion of the Transaction they will benefit from greater opportunities within the OpSec Group. Accordingly, Orca has notified the OpSec Board that, following the Scheme becoming Effective, Orca intends to observe the existing employment rights, including pension rights, of all employees of the OpSec Group, at least to the extent required by applicable law.
Page 18 of 46 An important part of Investcorp Technology Fund III's strategy for OpSec is to use the business as a platform for consolidation. Accordingly, the Investcorp Group intends to pursue the acquisition of similar companies to OpSec and has identified several potential targets. Orca believes that the operations of each of the potential acquisitions currently being considered are complementary to those of the OpSec Group. As such Orca has no current intention to change the locations of the OpSec Group's place of business or to redeploy its fixed assets. No proposals currently exist to change the conditions of employment of any of the existing employees of the OpSec Group, however, there are likely to be opportunities after completion of any such complementary acquisition to seek cost efficiencies which may affect employees in various different ways, for example, through changes to working practices, changes in business processes and/or redundancies. Over time, as further businesses are acquired into the group, Orca would intend to seek additional growth and cost saving opportunities from the enlarged group which may involve the redeployment of employees, operating locations and fixed assets. Following the Effective Date, Orca is likely to implement management arrangements more suited for a private company. To date Orca has privately considered potential incentive arrangements that could involve giving participants a significant uplift in value if various financial metrics are met within a certain time period or up to a specific event as well as accelerated vesting of new options that would be granted in exchange for the current outstanding options under the ESOS. Following the completion of the Transaction and delisting of the OpSec Shares, Orca intends to continue to provide incentive arrangements to management consistent with the evolution of the business. Orca has not discussed these arrangements with management and will not do so prior to the Effective Date. 10 The Management Arrangements EBT Orca has entered into a conditional binding arrangement with the EBT Trustee (pursuant to the EBT Trustee Share Exchange Agreement) whereby the EBT Trustee will, on or about the Effective Date, transfer the EBT Shares to Orca in exchange for the issue and allotment to the EBT Trustee by Orca of 2,826,115 B ordinary shares in Orca representing, in aggregate, approximately 2.4 per cent of the issued ordinary share capital of Orca as at such date. Pursuant to Rule 16.2 of the Code, any arrangements that are being made available to the EBT Trustee which are not being made available to all OpSec Shareholders must be approved by a simple majority of the votes cast in person or by proxy by the Independent Shareholders at the Independent Shareholders Meeting. The EBT Shares shall not form part of the Scheme and accordingly the EBT Trustee will not be able to vote at the Court Meeting. The EBT Trustee will also not vote on the Ordinary Resolutions relating to the Management Arrangements to be proposed at the Independent Shareholders Meeting. However, the EBT Trustee will be entitled to vote, in respect of EBT Shares, on the resolutions proposed at the General Meeting. The EBT Trustee has irrevocably undertaken to vote in favour of the resolutions to be proposed at the General Meeting in
Page 19 of 46 respect of its entire shareholding of 2,514,429 OpSec Shares, representing approximately 2.1 per cent of the Voting Shares. OpSec Share Option Schemes There are outstanding options granted in favour of several senior employees of the OpSec Group under the ESOS, including the Independent Directors. None of these awards are currently exercisable unless certain leaver circumstances occur prior to the Long Stop Date and none are currently expected to become exercisable prior to the Long Stop Date. Each Optionholder will be invited to enter into an option exchange agreement whereby the Optionholders agree to release their ESOS Option(s) in exchange for the grant of new option(s) over B ordinary shares in Orca (an "Option Exchange Agreement"). In accordance with Rule 15 of the Code, the holders of ESOS Options will be contacted separately regarding the effect of the Scheme on their rights under the ESOS and appropriate proposals will be made to them in respect of their ESOS Options. If an Optionholder chooses not to enter into an Option Exchange Agreement, they will continue to hold Options in OpSec even once the Scheme has become Effective. It is proposed that certain amendments to the OpSec Articles be proposed for approval at the General Meeting to ensure that any OpSec Shares issued after the approval of the Scheme at the Court Meeting will: (i) be subject to the Scheme; and (ii) be automatically acquired by Orca. Pursuant to Rule 16.2 of the Code, any arrangements that are being made available to all Optionholders which are not being made available to all OpSec Shareholders must be approved by a simple majority of the votes cast in person or by proxy by the Independent Shareholders at the Independent Shareholders Meeting. Those OpSec Shareholders who are also Optionholders will not be entitled to vote on the Ordinary Resolutions relating to the Management Arrangements to be proposed at the Independent Shareholders Meeting. However, OpSec Shares held by OpSec Shareholders will form part of the Scheme and accordingly those OpSec Shareholders will be able to vote at the Scheme Meetings. Further information on the Management Arrangements will be set out in the Scheme Document. The Management Arrangements are conditional upon the Scheme becoming Effective, which includes approval of the Management Arrangements by the Independent Shareholders at the Independent Shareholders Meeting, further details of which are set out in paragraph 11 below. 11 Independent Shareholders approval of the Management Arrangements Independent Shareholders will be asked to approve the Management Arrangements by way of ordinary resolutions proposed at the Independent Shareholders Meeting. Voting at the Independent Shareholders Meeting will be by way of a poll. Orca and the EBT Trustee will not be entitled to vote on the Ordinary Resolutions. Notices to convene the Independent Shareholders Meeting will be included in the Scheme Document. Shore Capital considers the Management Arrangements to be fair and reasonable
Page 20 of 46 in so far as the Independent Shareholders are concerned. 12 Financing of the Transaction The Transaction is being financed by funds made available directly from: (i) Investcorp Technology Fund III; and (ii) Investcorp Funding Limited, a wholly owned subsidiary of Investcorp Bank B.S.C, in the form of debt financing. After completion of the Transaction permanent financing for OpSec, via additional debt and equity arrangements, will be arranged. The Investcorp Group intends to structure the financing for the business to support the organic and acquisition growth for the business and any other complementary business acquired as noted in paragraph 4 above. Full implementation of the Transaction would result in cash consideration of approximately 10.8 million becoming payable to Scheme Shareholders. Canaccord Genuity is satisfied that sufficient resources are available to Orca to satisfy, in full, the Cash Consideration payable to Scheme Shareholders under the terms of the Scheme. 13 Opening Position Disclosure On 7 October 2015, Orca Holdings made a public Opening Position Disclosure in accordance with Rule 8.1(a) of the Code giving details of all interests or short positions in, or rights to subscribe for, any relevant securities of OpSec held by Orca Holdings. However, it was not practicable in the time available to make enquiries of all persons acting in concert with Orca Holdings in order to include all relevant details in respect of such persons in the Opening Position Disclosure of Orca Holdings. Accordingly, where applicable, a further Opening Position Disclosure containing such details will be made as soon as possible in accordance with Rule 8 of the Code and Note 2(a)(i) on Rule 8 of the Code. 14 Conditions The implementation of the Transaction and the Management Arrangements will be subject to satisfaction or, where applicable, waiver of the Conditions. To become Effective, the Transaction and the Management Arrangements require, amongst other things: the approval of the Scheme by a majority in number, representing not less than 75 per cent in value, of the Scheme Shareholders; the Ordinary Resolutions being passed by the requisite majority at the Independent Shareholders Meeting; the Special Resolutions required to implement the Scheme being passed by the requisite majority at the General Meeting; the sanction of the Scheme by the Court; and the satisfaction or waiver of the other Conditions. 15 Scheme of Arrangement It is intended that the Transaction will be effected by means of a Court-sanctioned scheme of arrangement between Orca and the Scheme Shareholders under Part 26 of the Companies Act but Orca may, with the consent of the Independent Directors and the Panel, elect to implement the Transaction by way of a Takeover Offer. The purpose of the Scheme is to provide for Orca to become the owner of the whole of the issued share capital of OpSec. The Transaction will be subject to