Statement regarding Final  Possible Offer for TP Group plc
Further to the announcements by TP Group plc on 17 August 2021 and 23 August 2021, the Board of Science Group provides the following response and an update in relation to a possible offer by Science Group to acquire the entire issued and to be issued share capital of TP Group.
Science Group Shareholding
Following further share purchases in the market, as at 7am on 24 August 2021, Science Group holds 140,528,829 shares in TP Group, equivalent to approx. 18.03% of the Company’s issued voting share capital. The highest price paid by Science Group has been 6.5 pence per TP Group share.
Science Group reiterates its statement on 16 August 2021 that, if the TP Group Board continues to refuse to cooperate, and as a result Science Group is unable to make an offer for TP Group, Science Group will retain its shareholding in TP Group as a strategic investment and will adopt an active engagement strategy in relation to its investment. For the avoidance of doubt, Science Group reiterates that it is not interested in considering any offers for its stake in TP Group from third parties.
Increase in Indicative Offer
On 17 August 2021, the TP Group Board declared that Science Group’s initial indicative offer of 5.8 pence per share “significantly undervalues TP Group”. On 20 August 2021, Science Group informed the Board of TP Group of its increased shareholding, as announced on that date. In addition, Science Group increased its indicative offer, subject to certain pre-conditions including that satisfactory due diligence be completed, to
6.5 pence per TP Group share in cash (“Increased Indicative Offer”)
 Science Group reserves the right to increase its indicative offer above 6.5 pence per share if a third party announces an offer or possible offer for TP Group.
This Increased Indicative Offer represents a premium of approx. 67% to the closing share price on 6 August 2021, the last trading day prior to Science Group’s initial investment and is the same as the issue price in the TP Group fund raising in July 2017. For TP Group shareholders, the Increased Indicative Offer provides a very attractive liquidity opportunity at a substantial premium. Science Group intends to finance the acquisition from its own resources and third-party funding, which may include equity and/or debt.
On 23 August 2021, TP Group rejected the Science Group Increased Indicative Offer. Science Group has informed the TP Group Board that it does not intend to increase its indicative offer above 6.5 pence per share hence its offer of 6.5p per share is therefore final but reserves the right to do so if a third party announces an offer or possible offer for TP Group.
TP Group Strategy
The refusal of the TP Group Board to engage with Science Group is extraordinary in the context of the financial position of TP Group and the value deterioration presided over by the TP Group Board in recent years. It was the TP Group’s results for the year ended 31 December 2020, released by the TP Group Board on 15 June 2021, which included the statement that “a material uncertainty exists which may cast significant doubt on the Group’s and Parent Company’s ability to continue as a going concern”, a damning commentary repeated in the Independent Auditor’s Report in the TP Group plc 2020 Annual Report. This outcome notably contrasts with the sub-heading of the TP Group Interim Results released on 20 October 2020, approximately 10 weeks before the end of the year, which declared that the Company’s “resilient operating model continues to support growth opportunities”. The TP Group Board’s optimism for the future has been stated on multiple occasions but has consistently failed to translate into value for shareholders.
In the 17 August 2021 announcement by TP Group, Science Group also notes the statement regarding TPG Maritime, reversing a decision announced less than a month ago on 26 July 2021 after a six month formal sale process and after the new CEO had “completed a detailed review of the business” as a result of which the TP Group Board “decided to withdraw the Maritime business from sale.” Science Group cannot comment on the merits of the TPG Maritime disposal, but such strategic indecisiveness does not instil confidence in the Board of TP Group and raises questions regarding the “detailed review” reportedly undertaken.
With regard to delivering on their strategy, the TP Group Board seeks to blame the poor performance of the Company on the Covid-19 pandemic. Yet, while the performance of TP Group has been weak, Science Group has reported resilient performance over the past two years. In the first half of 2021, Science Group reported record results, with an adjusted earnings per share increase of 51% compared to the prior year and 125% compared to the first half of 2019 before the pandemic.
It is therefore ironic that, in their 17 August 2021 and 23 August 2021 announcements, TP Group highlight the acquisition of Frontier Smart Technologies (“Frontier”) by Science Group in 2019. Frontier, like TP Group, was an under-performing business, which over the past two years Science Group has transformed into a highly profitable division with good prospects for customers and employees. In summary, and in stark contrast to TP Group, Science Group has demonstrated its ability to realise value for shareholders from its acquisition strategy.
Synergies between Science Group and TP Group
According to the announcement by the TP Group Board on 17 August 2021, TP Group now aspires to become a “leading high growth, high margin, cash generative international consultancy”, effectively a description of Science Group’s services business. Furthermore, the TP Group trading update on 26 January 2021 defined the strategy as “to focus on delivering consulting, digital solutions, advanced technology and bespoke engineering”, again a description of the services provided by Science Group.
Science Group deploys highly qualified engineering and science resources (eg software, electronics, mechanical engineering, project management, physicists, mathematicians, chemists etc) across multiple market sectors and, as outlined on 10 August 2021, the TP Group operations in the Defence and Aerospace sectors would be complementary to the existing Science Group vertical market expertise. The greater scale of an enlarged consultancy operation would clearly provide a tangible synergistic opportunity through resource deployment across multiple sectors. It is incomprehensible that the TP Group Board conclude that “operational synergies do not exist” between two such similar organisations.
This is particularly relevant to TP Group employees since, on 15 June 2021, TP Group reported that the Covid pandemic impacted utilisation of consultancy skills and the TP Group Board announced on 17 August 2021 that cost reduction actions had been initiated. In contrast, Science Group is currently actively recruiting for technical and non-technical roles. The TP Group Board has a responsibility to all stakeholders, including employees.
In summary, the TP Group statement that “operational synergies do not exist” in a potential combination of TP Group and Science Group is strategically myopic.
Offer Timetable and General Meeting
TP Group shareholders should understand the offer timetable. While TP Group note that the deadline of 7 September 2021 can be extended with the consent of the Takeover Panel, the TP Group Board categorically declared on 17 August 2021 that it had “no intention of engaging with Science Group” and on 23 August 2021 rejected the Increased Indicative Offer. TP Group shareholders should understand that unless TP Group consent to such an extension being granted then it is highly improbable that such an extension would be consented to by the Takeover Panel.
In view of the poor financial position of TP Group, as reported by TP Group in the 2020 results and Annual Report, Science Group has always made clear that access to due diligence information and completion of satisfactory due diligence is necessary in order for an offer to be made. The obstructive approach adopted by the TP Group Board may well prevent TP Group shareholders being able to consider the potential Science Group offer to provide cash liquidity at an approx. 67% premium to the closing share price on the last trading day prior to Science Group’s investment.
Science Group is pleased to see that the TP Group Board acknowledge in the 17 August 2021 announcement that they are “required to convene a general meeting” to enable TP Group shareholders to consider the constitution of the TP Group plc Board. However, TP Group shareholders should note that it is likely that the date of the general meeting will be after the expiry of the offer period. Science Group will make further statements in relation to the TP Group general meeting in due course.
Pre-conditions and Important Information
The announcement by Science Group of a firm intention to make an offer, to be effected by a Scheme of Arrangement, for TP Group under Rule 2.7 of the Code would be conditional upon:
- completion of due diligence to the satisfaction of Science Group;
- the unconditional recommendation of the offer by the Board of Directors of TP Group; and
- final approval by the Board of Science Group.
These pre-conditions are not capable of being waived.
In addition, Science Group advised TP Group that its valuation assumption was based on the performance of TP Group being in line with the Cenkos’ analyst forecasts issued on 15 June 2021 and that the indicative offer was subject to other conditions (eg irrevocable undertakings; prudence in terms of professional fees; limitations on executive financial rewards; etc ) normal in such transactions. These secondary conditions are capable of being waived. On 23 August 2021, TP Group described these prudent requirements, which are not atypical in offer situations, as “substantial pre-conditions”, a description not accepted by Science Group, particularly when TP Group has appointed two sets of Financial Advisors, a highly unusual occurrence for a financially-constrained, AIM quoted small-cap company.
TP Group has not provided any feedback on any of the terms and conditions within the Science Group Indicative Offer(s) and has not provided any information on the financial performance of TP Group in any form, including not engaging on the assumptions put forward by Science Group in its valuation assumptions.
Science Group reserves the right to:
- subject to Rule 11.1 of the Code, vary the form and/or mix of the consideration to be offered for TP Group shares; and
- reduce the consideration of any offer by all or part of the amount of any dividend (or other distribution) which is paid or becomes payable by TP Group to its shareholders after the date of this announcement.