Pinnacle Staffing Group plc ("Pinnacle" or "the Company")
Related Party Transaction and Notice of General Meeting
Pinnacle Staffing Group plc is pleased to announce that it intends to acquire 100 per cent of the ordinary issued share capital of The Compliance Company (GB) Limited ("The Compliance Company") ("the Acquisition"), a company which has developed and owns the rights to database management software that specifically manages and monitors the compliance status of healthcare staff in line with industry requirements.
The Acquisition is deemed a substantial property transaction pursuant to section 190 of the Companies Act 2006, therefore requiring the approval of Shareholders in general meeting and is also classed as a related party transaction under the AIM Rules, by virtue of the fact that The Compliance Company is 100 per cent owned by David Hope, the Company's Chief Operating Officer and Finance Director, and his wife, Hannah Hope.
Shareholder approval for the Acquisition will be sought at a General Meeting which is being convened for 2:30pm on 20 May 2009. A Circular setting out the background to and reasons for the Acquisition and explaining why the Board considers that the Acquisition is in the best interest of the Company and its Shareholders as a whole together with a notice of General Meeting will be posted to Shareholders tomorrow and will also be available to download from the Company's website at www.pinnacle-staffing-group.co.uk. Definitions in this announcement shall bear the same meaning as those in the Circular to Shareholders.
The Compliance Company (GB) Limited
The business was founded by Mr and Mrs Hope in March 2008 following changes announced by NHS PASA and CQC regarding framework agreements with suppliers of social and healthcare staff. These changes significantly increased the level of compliance required for temporary and permanent staff and Mr and Mrs Hope recognised that there could be significant demand from both individuals and providers of health and social care professionals for an outsourced system to provide and maintain a comprehensive database to comply with both the NHS PASA's and CQC's stringent compliance criteria.
Trading as mymedicalcompliance.com, The Compliance Company has developed a database system that stores standing data about an individual's compliance status in line with NHS PASA and CQC requirements and allows monitoring of the details on a day-to-day basis. The system has also been designed for document storage in line with the requirements of the above. Additionally, the system provides a powerful reporting tool as it is able to interrogate the standing data to determine at what level of compliance an individual is and when this status will expire allowing users to proactively manage the compliance and training status of their workforce.
Management accounts for The Compliance Company from 21 July 2008 to 16 April 2009 show revenues of £15,479, a loss before tax of £2,191 and net liabilities of £2,091. The entire issued share capital of The Compliance Company is currently owned equally by Mr and Mrs Hope.
Background to and reasons for the Acquisition
Historically, the Company's industry compliance requirements have been handled by its in-house resource Pinnacle Recruit (a division of the Company). However since September 2008, The Compliance Company's software has been successfully trialled by Pinnacle without any formal licence or payment alongside its existing resource, on an exclusive basis, to monitor the status of its entire temporary staff. Over this time the software has become increasingly important to the business of Pinnacle and has been modified and tailored to meet the Company's exact requirements and as such all the Group's compliance requirements are now undertaken by The Compliance Company's software. The system has become a key selling point for Pinnacle when pursuing new business opportunities. Marketing of the system to third parties has now ceased.
The Board of Pinnacle have therefore determined that the Acquisition of The Compliance Company is now justified, as it provides the Group with certainty over the future use of the software, through removing the risk of its withdrawal in the absence of a formal long term licence.
Use of The Compliance Company's software has significantly reduced the cost of Pinnacle's compliance procedures whilst also improving the speed of obtaining compliance for temporary staff. The Board estimates that cost savings of approximately £166,000 per annum are being achieved through using the software largely due to a reduction in the number of staff needed to operate the Company's previous compliance function. Furthermore ownership of the software will continue to give Pinnacle control over day-to-day monitoring of its compliance systems and a tailored compliance reporting facility for branches and management.
The Directors therefore believe that the Acquisition would be in the best interests of the Company and Shareholders for the following key reasons:
the current and possibly increasing importance of The Compliance Company's software to Pinnacle;
the potential for the withdrawal of Pinnacle's right to use the software in the absence of a formal long term licence to use it;
the cost of developing alternative software and the risks of it not being developed on schedule or of it performing inadequately;
the internal operational cost savings made possible by use of the software; and
other operational benefits such as: tailored compliance reporting for Company branches and management; website access for all temporary workers that can be linked to Pinnacle's new online payroll website and improved turnaround times for temporary worker compliance.
Consideration for the Acquisition
Consideration for the Acquisition of £500,000 will be satisfied by the issue of 5,000,000 new ordinary shares in the Company (the "Consideration Shares") to David and Hannah Hope at a price of 10 pence each, being the nominal value of Pinnacle's ordinary share capital and 247 per cent. premium to the closing mid price of a Pinnacle ordinary share on 28 April 2009. The Consideration Shares will rank pari passu in all respects with the existing Ordinary Shares of the Company, save that David and Hannah Hope have agreed that for a period of 12 months following completion of the Acquisition they will not dispose of the Consideration Shares and that for a further 12 months thereafter any disposal will be made through the Company's broker in order to maintain an orderly market in the shares of Pinnacle. Following the Acquisition, David and Hannah Hope will have a beneficial holding in a total of 5,000,000 Ordinary Shares of the Company representing 5.40 per cent. of the enlarged issued share capital comprising 92,633,070 Ordinary Shares.
Completion of the Acquisition is conditional upon the approval of Shareholders at the General Meeting and admission of the Consideration Shares to trading on AIM.
In accordance with the AIM Rules, the Independent Directors of Pinnacle, being Tom Charlton, John Hodges and Lynn Young, having consulted with the Company's Nominated Adviser, Brewin Dolphin Limited, consider that the terms of the Acquisition are fair and reasonable insofar as the Company's shareholders are concerned. In advising the Board, Brewin Dolphin has taken account of the Independent Directors' commercial assessment of the Proposal.
Tom Charlton, Executive Chairman commented:
"I am delighted that Pinnacle has agreed to acquire The Compliance Company and secure the ownership of one of Pinnacle's key operating systems. In the short time Pinnacle has been using the software to monitor compliance, the value of the system has become clear in enabling Pinnacle to ensure that its workers meet the complex compliance requirements set by the NHS Purchasing and Supply Agency".
For further information please contact:
Pinnacle Staffing Group plc
Tom Charlton, Executive Chairman Tel: 01582 395900
Brewin Dolphin Limited (Nomad)
Matt Davis Tel: 0845 213 4730
Alison Barrow
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