Preference share subscription Forestry division

RNS Number : 7573Q

Obtala Limited

01 December 2016

 

01 Dec 2016

Obtala Limited

("Obtala", the "Group" or the "Company")

(AIM: OBT)

Preference share subscription into Forestry Division

Conversion of Meradell structure

Highlights

·     $14.25m investment into Argento Preference share, including $2.15m by Board members.

·     Additional potential $5m investment 'soft-circled' and currently awaiting Investment Committee approval within a major Asian based financial institution.

·     Existing Meradell financing structures to be converted into Argento Preference shares and Meradell structure unwound.

·     Currently anticipated $22.95m 2016 total investment in return for 70,322 Argento Preference shares (22.5% stake in Argento)

·     Initial targeted Preference Share raise of $10m oversubscribed and upsized to  c.$19.25m, with oversubscription at that level also.

·     Proceeds to be used to accelerate the group's 312,465ha of exotic hardwood forestry business towards full production.

·     Excess new funds above $10m to be used to expand Agricultural operations.

·     Chairman Miles Pelham to invest $1.5m, CEO Paul Dolan $250k, COO Warren Deats $250k, NED Frank Scolaro $150k.

Obtala Limited, the African focused agricultural and forestry company, is pleased to announce that it has raised a total US$14.25m cash investment into 40,728 Preference shares in Argento Limited, Obtala's 75% owned forestry subsidiary from private HNW investors, professional institutional investors and international trading houses. This is in line with the "inward investment" commentary included in our third quarter business update announced on 30 September 2016. A further $5m investment is expected to be agreed in due course.

Argento Limited will undertake a reorganization of capital and issue 75,000 Preference shares in addition to a total 237,465 issued Ordinary shares, totaling 312,465 voting shares. 

-      237,465 Ordinary shares to be directly owned by Montara Continental, Obtala's 75% owned subsidiary.

-      70,322 Preference Shares expected to be issued for cash or swapped for existing Meradell structures as below.

-      4,678 will remain available for further potential issues by Argento.

The breakdown of use of 70,322 Preference shares is as follows:

·     40,728 Preference shares have been subscribed to raise US$14.25m in new funds.

·     15,308 Preference shares have been agreed to be swapped for certain Meradell structures which raised approximately $3.7m over the course of 2016.

·     14,286 Preference shares are 'soft-circled' for a further potential $5m investment.

Terms of the Argento Preference share

Tenor                                                    Perpetual

Denomination                                  $350

Preferred Dividend                        5%

Ordinary Dividend                          Yes

Takeover ratchet                             Yes, 150% upon change of control

Drag along rights                              Yes

Tag along rights                                                Yes

Convertible period                         30^th August 2017 and perpetually onwards

Conversion property                      Either of the following, at the choice of Preference share holder:

a.    Into Argento Limited ordinary shares on 1-for-1 basis

b.    Into Obtala Limited ordinary shares on a 1-for-1435 basis

Obtala Conversion price                               20p (using deal FX rate of 1.22)

Dilution protection                         Yes

Full conversion of the 56,036 Preference shares agreed to be issued into new Obtala ordinary shares would result in the issue of a further 80,411,660 new Obtala ordinary shares, representing approximately 30.5 per cent. of Obtala's existing issued ordinary share capital.

Proceeds from the committed US$14.25m are to be received during the following settlement periods:

On or before:

31 December 2016           $4,875,000

30 March 2017                   $2,950,000

30 June 2017                      $6,425,000

Certain Directors of the Company have agreed to invest the following principal amounts on or before 30 June 2017 for Argento Preference shares:

Miles Pelham                    Chairman            $1,500,000           4,286 Argento shares    

Paul Dolan                          CEO                        $250,000              715 Argento shares        

Warren Deats                    COO                       $250,000              715 Argento shares        

Frank Scolaro                     NED                       $150,000              429 Argento shares        

The existing Meradell structures will be unwound once all conversion transfers have been concluded, expected during the first half of 2017. All Meradell holders opted for conversion into Argento Preference shares with the exception of Global Timber Investments Limited which will exercise its option to convert its holding in Meradell (1) Ltd. into 10,000,000 new ordinary shares of Obtala.  These shares represent approximately 3.80 per cent. of Obtala's existing issued ordinary share capital and will on issue represent approximately 3.66 per cent. of its enlarged issued ordinary share capital, being Global Timber's total holding of Obtala ordinary shares. Miles Pelham's interest in the Meradell structures will be converted into a further 2,500 Argento Preference shares.

Use of Proceeds for monies raised from Argento Preference share will be as follows:

First $10m - 25% to Obtala, 75% to Argento Ltd to fund:

·     Purchase of land, plant and machinery for Sawmill to be located in Nampula.

·     Lease of substantial warehouse facility to be used for timber finishing operation located near Nacala port.

·     Purchase of plant and machinery required to bring all existing concessions into production.

·     Purchase of fleet of trucks to transport timber between concessions, sawmill and port.

·     Working Capital required to deliver exponential increase in production capability in order to satisfy substantial backlog of international orders.

·     High social impact through significant levels of job creation and skills and knowledge transfer.

Proceeds thereafter - to Obtala predominately for investment into Agricultural business in Tanzania to fund:

·     Land clearance and irrigation required to increase production of seasonal crops on current 1730 hectare site from c.40 hectares in 2016 to c.200 hectares in 2017 and c.600/800 hectares in 2018.

·     Conduct comprehensive agronomic feasibility studies for large-scale orchard/plantation farming of pomegranate, avocado, mango, pineapple, banana, olives, fig and macadamia nut.

Application will made for the 10,000,000 new Obtala ordinary shares, which rank pari passu with the Company's existing issued ordinary shares, to be admitted to trading on AIM. It is expected that admission will become effective on or around 9^th December 2016. The enlarged issued share capital of the Company with voting rights attached will, following the issue, consist of 273,260,664 Ordinary Shares of 1p each with one vote per share. There are no Ordinary Shares held in Treasury. Therefore the total number of voting rights in the Company will be 273,260,664. This figure may be used by shareholders (and others with notification requirements) as the denominator for the calculations by which they will determine whether they are required to notify their interest, or a change to their interest, in the Company under the Financial Conduct Authority's Disclosure Guidance and Transparency Rules or otherwise.

Miles Pelham, Chairman of Obtala, commented "The significant investment interest received for the Argento preference share offering validates our assessment of the deep value within Obtala's Forestry asset, a value this funding has unlocked for the benefit of shareholders.

Monies received will accelerate the implementation of our plans to create an internationally recognized sustainable forestry business in Mozambique, allowing us to create a platform from which we can deliver a substantial shift in revenues. The success of the raise clearly demonstrates investor confidence in our new management team and rapidly evolving operating model.  Management attention will now immediately turn to a major expansion of operations in both Mozambique and Tanzania, as well as further developing of channels for local, regional and global sales.

I look forward to keeping all investors appraised as milestones are reached during what promises to be a dynamic and exciting 2017 for Obtala and hope that independent research will available on our Company in the next couple of months."

An interview with the Chairman discussing this announcement is available at https://www.voxmarkets.co.uk/content?id=obt_interview

Obtala Limited Miles Pelham - Chairman Paul Dolan - CEO www.obtala.com	[phone]
ZAI Corporate Finance Limited (Nomad)                 Ray Zimmerman/ Peter Trevelyan-Clark / John Treacy	[phone]
Brandon Hill Capital  (Broker)      Jonathan Evans	[phone]

This announcement contains inside information for the purposes of article 7 of the Market Abuse Regulation (EU) No. 596/2014.  In addition, market soundings (as defined in MAR) were taken in respect of the preference subscription with the result that certain persons became aware of inside information (as defined in MAR), as permitted by MAR. This inside information is set out in this Announcement. Therefore, those persons that received inside information in a market sounding are no longer in possession of such inside information relating to the Company and its securities.

 

END

 

 

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