Psion PLC
09 February 2004
9th February 2004: For immediate release
Psion to dispose of Symbian investment
for estimated £135.7 million
Psion plc ('Psion', the 'Company') announces that yesterday it agreed terms for
the sale of its 31.1% stake in wireless OS business Symbian to Nokia Oy
('Nokia') for a series of payments estimated at £135.7 million. This amount
corresponds to £436.2 million for 100% of Symbian.
Key points of the transaction include:
• Psion will receive an initial fixed payment of £93.5 million or 22.5
pence per Psion share, in cash, on completion of the deal, followed by
payments in March 2005 and March 2006. These two subsequent payments will be
equal to the total number of devices containing the Symbian operating system
sold by licensees in 2004 and 2005 respectively multiplied by 84.0 pence per
unit. Based on analyst mean consensus estimates* of 18.7 million unit sales
in 2004 and 31.5 million in 2005, these two payments would amount to £42.2
million, resulting in total estimated proceeds to Psion from these three
payments of £135.7 million or 32.7 pence per Psion share. The contingent
payment structure enables Psion to retain exposure to the performance of
Symbian in the medium-term.
• These payments correspond to 210 pence per Symbian share, which compares
with the price of 145 pence per share paid when Psion and Nokia purchased
Motorola's stake in Symbian in October 2003.
• The disposal crystallises significant value creation for Psion's
shareholders since the formation of Symbian in 1998.
• If, at any time prior to 31st December, 2005, an IPO of Symbian takes
place, and if the IPO price per share is greater than the price per Symbian
share payable by Nokia set out above, the price payable shall be increased
to the IPO price.
• The agreement with Nokia has two pre-conditions: Psion obtaining the
approval of shareholders at an Extraordinary General Meeting and Nokia
obtaining clearance from the relevant competition authorities. A circular
will be sent to shareholders in due course setting out full details of the
disposal and a notice of the Extraordinary General Meeting.
• David Potter, Chairman of Psion, has given an irrevocable undertaking to
vote in favour of the disposal in respect of his total shareholding of
approximately 12 per cent of the Company's issued share capital.
• On completion of the transaction, David Potter will step down from his
position as Chairman of the Supervisory Board of Symbian. Psion Chief
Executive Alistair Crawford will also step down from the Symbian Supervisory
Board at that time. Both will continue in their current roles at Psion.
Completing this transaction will allow Psion to focus its resources on
developing Psion Teklogix, its core business, at a time when the Board considers
there are good opportunities for its development.
David Potter, Chairman of Psion, said: 'We are proud of our role, with others,
in creating Symbian. Since its formation, the Board of Psion has seen an IPO as
a desirable objective for Symbian. The business of Symbian is now maturing and
an IPO remains feasible, but changes in the wireless industry mean that the
practicality and timing of the IPO is subject to significant uncertainty.
'As a result, the Board of Psion believes it is in the interests of Psion
shareholders to sell its interest in Symbian to Nokia on the terms that have
been negotiated.'
Alistair Crawford, Chief Executive of Psion, said: 'Psion now intends to support
Psion Teklogix's organic growth with prudent acquisitions and investments. These
acquisitions will either add to the existing activities and be justified by the
subsequent cost savings and efficiencies that will be available, or they will
accelerate the expansion of the business into adjacent markets and technologies.
'If, over time, suitable investment opportunities are not identified, Psion will
examine ways by which surplus funds can be distributed to shareholders.'
Enquiries:
Craig Breheny/ Fiona Laffan Brunswick +44 (0) 20 7404 5959
Notes to Editors
1. Further information on this transaction is attached below.
2. There will be a conference call for newswire journalists at 08.00, Monday 9th
February on +44 (0) 1452 541 076.
3. Interviews with David Potter and Alistair Crawford are available in video,
audio and text on www.psion.com and www.cantos.com.
4. Psion intends to report its financial results for the 12 months to 31st
December, 2003 on Tuesday 2nd March, 2004.
* Analyst mean consensus estimates for Symbian unit sales are equal to 18.7
million units in 2004, and 31.5 million units in 2005. This is based on publicly
available research published between April 2003 and December 2003.
Proposed disposal of Psion's shareholding in Symbian
Background to and reasons for the disposal
This disposal represents the fulfilment of a key strategic goal for Psion.
Psion's aim in creating the Symbian joint venture was to establish a world
standard operating system for the wireless market capable of handling data as
well as voice, through harnessing the energy and resources of companies who
would normally compete. That aim is now being realised as Symbian OS is seeing
commercial exploitation and volume rollout of licensee products.
However, the wireless OS market has changed radically since Symbian's formation.
The original shareholders included Nokia, Motorola and Ericsson. Since
then, Nokia has emerged as Symbian's largest shareholder and biggest single
customer. This reflects the overall increase in the advanced mobile handset
market, as well as Nokia's commitment to Symbian OS.
In 2001, Ericsson withdrew from the direct supply of the handset market by
merging its handset business with Sony to form Sony Ericsson. In October 2003,
Motorola withdrew from Symbian as a shareholder by selling is stake to Nokia and
Psion, for a valuation equivalent to £300 million for 100% of Symbian.
Since the formation of Symbian, the Board of Psion has seen an IPO as a
desirable objective for Symbian, one that would ensure its independent future.
This objective is reflected in the Symbian shareholders' agreement.
Although the business of Symbian is now maturing and an IPO remains feasible,
changes described above mean that the practicality and timing of the IPO is
subject to significant uncertainty.
In this context, the Board of Psion believes it is in the interests of Psion
shareholders to sell its interest in Symbian to Nokia on the terms that have
been negotiated.
Symbian was formed in 1998 when Nokia and Ericsson first invested in the
company. Since that date Psion has injected cash of £11.4 million and in October
2003 paid £17.4 million to acquire an additional 5.8% of Symbian equity. The
disposal crystallises significant value creation for Psion's shareholders since
the formation of Symbian. It is expected that the Substantial Shareholding
Exemption will apply and that no tax will be payable on the estimated proceeds
of £135.7m.
In addition, completing this transaction allows Psion to focus its resources on
developing Psion Teklogix, its core business, at a time when the Board considers
there are good opportunities for its development.
Summary of the Nokia Offer
The principal terms of the Nokia Offer are set out below:
Consideration The consideration under the Nokia Offer consists of:
(a) an amount of £93.5 million in cash at completion of the transfer of the
Symbian shareholding (which is equal to a price per Symbian share of 145 pence);
plus
(b) on 15th March, 2005, an amount, in cash, equal to the number of copies of
the whole or any part of Symbian OS distributed by licencees of Symbian OS
during the year ending 31st December, 2004 multiplied by 84.0 pence per copy;
plus
(c) on 15th March, 2006, an amount, in cash, equal to the number of copies of
the whole or any part of Symbian OS distributed by licencees of Symbian OS
during the year ending 31st December, 2005 multiplied by 84.0 pence per copy.
If at any time prior to 31st December, 2005 an IPO of Symbian takes place, and
if the IPO price per share (as adjusted to take account of capital contributions
to Symbian, capital or other contributions by Symbian and any share
reorganisations during the period up to the IPO) is greater than the price
payable by Nokia set out above, then the price payable shall be increased to the
IPO price. The IPO price is calculated as the 30 day average volume weighted
trading price immediately following listing.
Based on analyst mean consensus estimates of 18.7 million unit sales in 2004 and
31.5 million unit sales in 2005, the deferred payments would add up to £42.2m,
resulting in total estimated proceeds to Psion Technology Investments Limited, a
wholly owned subsidiary of Psion, of £135.7 million. This corresponds to 210
pence per Symbian share.
Conditions to be satisfied before the Nokia Offer can be made Before the Nokia
Offer can be made, the following conditions must be satisfied:
(a) Nokia receiving clearance from the relevant competition authorities; and
(b) Psion obtaining the approval of shareholders in general meeting in relation
to the disposal.
Once these conditions are satisfied Nokia is under an obligation to make the
Nokia Offer and, upon receipt of the Nokia Offer, Psion Technology Investments
Limited is under an obligation to commence the pre-emption process, which is
described later in this announcement.
The disposal is conditional on the pre-emption process having been complied
with.
If these conditions have not been satisfied by 13th November 2004, Nokia will
not be required to make the offer and accordingly the disposal will not take
place.
Continuing Group and future strategy
Psion Teklogix
Psion Teklogix is the only remaining business of the Group. It provides
solutions that enable enterprises to mobilise their business applications. It
provides rugged hardware, secure wireless networks, middleware, professional
services and customer support. Psion Teklogix solutions mobilise enterprise
information, allowing workers to gather, enter and share data in real time.
Psion Teklogix has customers in over 60 countries, typically using highly rugged
mobile solutions in difficult working environments such as docks, warehouses and
refrigeration stores. Psion Teklogix serves its customers from over 40 sales and
support offices. Customers include Cadbury Schweppes, Dell, Compaq, Nippon
Express, The Hertz Corporation, Volkswagen and Honda Europe.
Market opportunities for Psion Teklogix
Psion Teklogix has identified opportunities for growth both through organic
improvement and selectively by acquisition.
There is a considerable opportunity for growth above the rate of market growth
by taking market share from competitors.
The core competence of Psion Teklogix is the ability to understand the
customer's working environment and business processes, and to provide a mobile
solution that enables the customer to increase productivity. In the future Psion
Teklogix should be able to apply this competence more widely than the market for
solutions based on rugged computer systems.
Improving today's business operations and offering
Psion Teklogix has already embarked on improving its existing business and is
nearly two years into a program of operational and process improvement.
Key focus areas include cost reduction by outsourcing some design and
manufacture to suppliers in Asia, and standardising product platforms with
common components that reduce production and stockholding costs whilst providing
customers with a compatible product range.
Psion Teklogix is also focusing on enhancing its current customer offerings.
Actions include renewing much of its product range with major launches in 2003
and 2004 and further development of direct sales and distribution channels in
the US and in new geographies such as China, where an office was established in
2003, to grow revenues.
This program for improved efficiency and profitability has been, and is planned
to continue to be, financed from cash generated from operations.
Future strategy: Investing in new technologies to accelerate growth
Psion Teklogix has identified opportunities for investments that it may make in
new technologies that would increase the scope and competitiveness of the Psion
Teklogix offering to customers. Psion Teklogix's initial projects using RFID and
voice recognition indicate that these technologies have the potential to improve
productivity dramatically in the logistics industry.
In addition, Psion Teklogix plans to expand its successful solutions business,
providing middleware and services to enable customers to connect their mobile
workforce to their enterprise computing resources. This will exploit the
industry-standard platforms (for example Microsoft CE.NET) supported by Psion
Teklogix's new products launched in mid-2003 and to be launched in 2004 that the
large corporate customers demand.
Future strategy: Broadening markets using existing products
Psion Teklogix can leverage its global sales and support capability to expand
into complementary markets such as field service and the mobile professional
worker segment. The Netbook Pro with Windows CE, aimed at corporate users, was
launched last August, and many units have been shipped for pilot trials from
which feedback is encouraging. Additionally, there are positive results from a
viability study of Netbook with Linux for professional users with specialist
applications.
Use of proceeds Psion intends to support Psion Teklogix's organic growth with
prudent acquisitions and investments to accelerate the initiatives described
above.
These acquisitions will either add to the existing activities and be justified
by the subsequent cost savings and efficiencies that will be available, or they
will accelerate the expansion of the business into adjacent markets and
technologies.
If, over time, suitable investment opportunities are not identified, Psion will
examine ways by which surplus funds can be distributed to shareholders.
Current trading and prospects
Psion intends to report its financial results for the 12 months to 31st
December, 2003 on 2nd March, 2004. The Company expects that group financial
results for the year ending 31st December, 2003 will be in line with
management's expectations, as previously highlighted in the 15th December, 2003
trading update.
The Group has a strong balance sheet and is generating cash from its operating
activities. Net cash, excluding borrowings, at the end of December 2003, after
£17.4 million was paid to purchase the additional shares in Symbian, was
approximately £17.6 million (December 2002, £30.1 million).
As reported in Psion's interim results announcement in August 2003, the market
for Psion Teklogix products continues to improve slowly.
As reported on 15th December, 2003, Psion Teklogix's 2003 revenues and operating
profits are expected to exceed the prior year. However, Psion Teklogix's second
half profit will reflect the cost of launching key new products (the Netbook Pro
and the 7535 hand-held terminal). These products, together with others to be
announced during 2004, will form the foundation for the future growth of the
company.
In addition, after completion of the disposal, Psion will no longer be
accounting for its share of Symbian's losses (2002: £9.4 million) and will
benefit from the interest earned on the cash proceeds of the Symbian
transaction.
On 30th January, 2004, Psion completed the disposal of Psion Software. The Board
had concluded that this activity would be best developed within an organisation
that was focused on the development of personal information management and email
software for phones. A small payment was made by Psion to the purchaser but
Psion may benefit in later years from royalty income.
Information on Symbian
Symbian is a software licensing company that develops and markets Symbian OS for
the wireless OS market. In addition to Symbian's shareholders, licensees of
Symbian OS include Fujitsu, Motorola, Sanyo and Sendo. It has been reported that
Symbian sold approximately 6.5 million units of Symbian OS in calendar year
2003.
Symbian was established as a private company in June 1998 and is owned,
excluding Psion, by Ericsson, Nokia, Panasonic, Samsung, Siemens, and Sony
Ericsson.
In the year ended 31st December, 2002, Symbian reported a loss on ordinary
activities after interest and taxation of £37.2 million on turnover of £29.5
million and, at that date, had net operating assets of £24.1 million. Psion's
share of the net assets was £6.0 million and Psion's share of Symbian's net
losses after interest and taxation was £9.4 million.
Disposal process
Under the provisions of the Symbian shareholders' agreement, before any Symbian
shareholder can make or agree to make a disposal of its Symbian shares, it must
first offer to sell those shares to the other Symbian shareholders.
Accordingly, before Psion can dispose of the Symbian shareholding to Nokia, it
is required to offer its Symbian shares to the other Symbian shareholders in
accordance with the pre-emption process. The pre-emption process will not impact
the disposal process for Psion.
Under the Symbian shareholders' agreement, the purchase price and other terms in
respect of the Symbian shareholding disposal under the Nokia Offer must be the
same purchase price and other terms offered to the other Symbian shareholders
under the pre-emption process. Accordingly, Psion will be offering its Symbian
shares to the other Symbian shareholders under the pre-emption process at the
same price and on exactly the same terms and conditions as those applicable to
the Nokia Offer.
To the extent that any Symbian shares are not transferred to any of the other
Symbian shareholders pursuant to the pre-emption process, Psion will be free to
dispose of those Symbian shares to Nokia.
The pre-emption process will begin once the two conditions of the Nokia Offer
referred to above have been satisfied (unless Nokia waives the first condition
relating to clearance from the relevant competition authorities) and will take a
maximum of 6 weeks.
Irrevocable undertaking David Potter, Chairman of Psion, has given an
irrevocable undertaking to vote in favour of the disposal in respect of his
total shareholding of approximately 12 per cent of the Company's issued share
capital.
Extraordinary General Meeting
The disposal by Psion of its Symbian shareholding requires the approval of Psion
shareholders in general meeting. A circular will be sent to the shareholders in
due course setting out full details of the disposal and a notice of the
Extraordinary General Meeting.
Financial advice
Psion plc is being advised by Morgan Stanley & Co. Ltd in this matter.
This information is provided by RNS
The company news service from the London Stock Exchange
