Redemption and Proposed Continuation Vote
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AIM: OPF |
8 March 2011 |
THE OFF-PLAN FUND LIMITED
(the "Company")
Redemption of Participating Shares, Proposed Continuation Vote, Approval of New Investing Policy and Change of Name
The Company announces that it has today posted a circular to Members detailing the proposed redemption of a substantial majority of the Company's cash balances (the "Circular"). The Circular contains notice of an extraordinary general meeting (the "EGM"), at which resolutions will be proposed to give Members the option to vote on whether the Company should continue as an investing company (with a new investing policy) or whether the Company should be wound-up and its admission to AIM cancelled.
Save where the context requires otherwise, defined terms used in this announcement have the same meaning as given in the Circular. Shareholders of the Company are urged to read full details of the Proposals contained in the Circular. This announcement contains only a summary of the key terms.
Introduction
Having undertaken an orderly disposal of its assets, to date the Company has returned approximately £6 million to Participating Shareholders, following compulsory partial redemptions of Participating Shares in October 2009 and April 2010. Following the redemption in April 2010, the Company's only assets were its cash balances and the benefit of an insurance claim to recover a £1.1 million deposit paid in respect of Canon House, Wallington. The claim was settled in full and the proceeds received in November 2010. It is now intended that either all or a substantial majority of this cash, which is expected to be approximately £1.6 million on 28 March 2011 (being the date of the EGM), be returned to Members.
Rather than immediately seeking to wind up the Company, and following consultation with certain Members, the Board is inviting Members to decide whether the Company should continue or be wound up. If the Company is to continue, up to 94 per cent of its cash will be distributed amongst members through the Redemption, leaving a cash balance for the Company's reduced working capital requirements. The Company's objective on continuation would be to undertake an acquisition or acquisitions which would constitute a reverse takeover under the AIM Rules. Members beneficially holding 37.2 per cent. of the Company's share capital have irrevocably undertaken to the Company that they will vote in favour of the Continuation Resolution and related Resolutions.
The Proposals
In order for the Company to be able to continue, two thirds of Participating Shareholders either present in person or by proxy at the EGMmust vote in favour of the Continuation Resolution and certain other resolutions required to facilitate the continuation of the Company. In addition, the consent of the JFSC is required to allow the Company to continue as an operating company so the Proposals are conditional on JFSC consent.
If the Continuation Resolution and related Resolutions are not passed, or if they are passed but JFSC consent is not received, the Directors will, conditional on shareholder approval, take steps to wind-up the Company. In order for the Company to be wound up and its admission to AIM cancelled, three quarters (i.e. 75% or more)of Participating Shareholders either present in person or by proxy at the EGM must vote in favour of the Winding-up Resolution. The Winding-up Resolution, if passed, is conditional on either: (i) any of the Continuation Resolution and related Resolutions not being passed; and (ii) JFSC consent to the Proposals being refused. In the event that the Winding-up Resolution is passed and become effective, the Company will be wound up as soon as practically possible through a full redemption of all of the Participating Shares in issue, as described below.
Members should note that the in the absence of sufficient votes being received, there is a risk that neither the Continuation Resolution and related Resolutions nor the Winding-Up Resolution is passed. In such circumstances, the Company will proceed with the Alternative Redemption as detailed below and will in due course convene another meeting to consider the winding up of the Company and cancellation of its admission to trading on AIM.
Continuation
If the relevant Resolutions are passed and the JFSC's consent is obtained, it is proposed that the Company will distribute (subject to the election of Members, as described below) up to 94 per cent. of the Company's cash balance to Members (approximately £1,488,000) by way of a partial redemption of Participating Shares. Following the passing of the relevant Resolutions, up to 94 per cent. of Participating Shareholders' existing holding(s) in the Company will be redeemed at the Effective Price (the "Maximum Redemption"). The Maximum Redemption, however, is not compulsory and Members can elect to have a lower proportion of their holding redeemed should they wish to retain a greater interest in the Company following the Effective Date. The potential outcomes in the case of the Continuation Resolution (and related Resolutions) being passed, the Winding-Up Resolution being passed or neither being passed are set out below:
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Redemption upon continuation
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Upon winding up
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Alternative Redemption |
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Expected available cash as at 28 March 2011 (being the date of the EGM) |
£1,590,000* |
£1,600,000 |
£1,600,000 |
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Approximate no. of Participating Shares to be redeemed
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2,096,799 |
2,230,637 |
2,183,098 |
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Redemption price
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71p |
69.5p |
71p |
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Aproximate resulting cash redemption
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£1,488,000 |
£1,550,000 |
£1,550,000 |
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Approximate percentage of Fund's cash assets distributed |
94% |
97% |
97%
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Approximate remaining cash assets of the Fund / Retention for winding up costs |
£112,000** |
£50,000 |
£50,000 |
* £10,000 deduction for contingency purposes.
** Assuming all Participating Shareholders elect for the Maximum Redemption.
The Election Process
Members will be able to complete an election card to indicate the proportion of their holding they wish to be redeemed if the Continuation Resolution and related Resolutions are passed and the Redemption takes place. Members will have the following two options:
· Members can elect for the Maximum Redemption; or
· Members can elect for the Company to redeem a smaller portion of their holding, by indicating the exact number of shares they wish to have redeemed.
In the event that Members do not make an election and the Redemption takes place, they will be automatically deemed to have elected for the Maximum Redemption. Detailed instructions for both certificated and CREST Members are contained the Circular.
The Maximum Redemption
In light of the possibility of continuing as an investing company, the Board has considered the minimum prudent working capital requirements of the Company. If the Continuation Resolution is passed, the Board will put in place arrangements to significantly reduce the ongoing working capital requirements of the Company which, in the absence of entering into a transaction, will be not greater than £100,000 per annum. These arrangements will be put in place immediately following the EGM should the relevant Resolutions be approved by Members. Therefore, the Company would have sufficient working capital for 12 months following the EGM; however, it is proposed that the Company would seek to raise additional funds after the Effective Date, as described below.
The Directors will need to be able to confirm the cashflow solvency of the Company for a period of one year after the Redemption in order to comply with the relevant provision of Jersey Law.
Proposed Subscription
Following completion of the election process, the Directors may conclude that it would be advantageous to increase the Company's cash balances. Subject to investor demand and the passing of the relevant Resolutions, the Company may issue new ordinary shares by way of a subscription or placing immediately following conclusion of the Extraordinary General Meeting. There can be no guarantee that any such proposed subscription or placing will be successful. Certain Resolutions being proposed at the EGM will give the Directors authority to issue up to 4,000,000 ordinary shares following the Effective Date and Admission without the new pre-emption rights contained in the new Articles applying. The level of authorities to be granted pursuant to these Resolutions are greater than standard market practice, however, the Directors consider the proposed subscription as a one-off event in connection with the potential continuation of the Company. They also consider that the Company should have maximum flexibility to raise funds by way of an equity subscription.
Capital Reorganisation
In structuring the Redemption, the Board considers that should the Redemption proceed, it would be more appropriate for the Fund to have a higher number of shares in issue and, therefore, a lower share price following the Effective Date. Therefore, a capital reorganisation is being proposed under Resolution 3 which, if passed and conditional upon the Continuation Resolution being passed, will have the effect of replacing each share in issue with 10 new shares, and accordingly reducing the net asset value per share on a pro rata basis. If Resolution 3 is passed, the resulting capital reorganisation will be effected immediately following the Redemption.
Proposed investing policy
Conditional upon the Continuation Resolution and other relevant resolutions being passed at the Extraordinary General Meeting, the Company will continue as an "investing company" for the purposes of the AIM Rules but will have a new objective which would be to make an acquisition or acquisitions which would constitute a reverse takeover under Rule 14 of the AIM Rules within 12 months of the Effective Date. As such and conditional upon the Continuation Resolution and other relevant resolutions being passed, it is proposed that the Company adopts a new investing policy.
Background
The Board believes that growth in the generation of household and industrial waste has created an increasing waste disposal problem, with associated environmental and public health issues. Environmental legislation is becoming ever more stringent and the UK government has introduced fiscal legislation in the form of landfill tax to make landfill less economic and alternative disposal and treatment technologies price competitive. Accordingly, the Board believes that companies providing other treatment solutions, often using new technologies to handle the remaining waste residues could offer solutions for which there will be strong demand. Owing to the relatively high calorific value of much of the residual waste, many of these solutions and technologies focus on either the conversion of waste into a fuel or the recovery of energy from waste which may be used to create higher value products such as power, steam, hydrogen and basic chemicals.
The Board's view is that fully developed and commercially viable waste treatment processes can generate significant value, as they contribute to both solving the waste problem and reducing reliance on imported fossil fuels. Waste is increasingly considered as a sustainable and renewable source of energy, or feed stock, rather than a problem for disposal.
Accordingly, it is proposed that the Company adopts the following new investing policy:
"The Directors intend to seek to acquire a company/business or companies/businesses in the waste/waste to energy sector in exchange for the issue of Ordinary Shares. Such acquisition(s) will constitute a reverse takeover under Rule 14 of the AIM Rules and be completed within 12 months of the Effective Date. Suitable targets could be companies/businesses which have one or more of the following characteristics:
(a) established and reliable access to waste feedstock;
(b) transfer stations and/or treatment plants which have significant waste volume throughputs or the ability to process suitable volumes and types of waste; and/or
(c) the ability to operate successfully as suppliers of feed stock to the emerging new generation of plants that will depend on renewable sources of fuel.
Owing to changes in regulation, which have become more onerous over the last decade, the Board believes that following any initial transaction, the Company may be able to use a combination of cash and/or shares to acquire other complementary businesses creating economies of scale.
However, these criteria are not intended to be exhaustive and the Company may make an investment which does not fulfill all of the investment criteria or indeed may fall into the wider environment or resource sectors, if the Directors believe it is in the interests of Members as a whole to proceed with such an investment."
Any such acquisition by the Company will be required to be put to Members for their approval at the appropriate time.
Neither the Company nor any of its advisers are in discussions with any potential acquisition targets and there is no guarantee that the Company will make a successful acquisition. Under the AIM Rules, the Company will have to complete an acquisition or acquisitions constituting a reverse takeover within 12 months of the date on which the Company completed its divestment of all of its property assets (i.e. the date of the receipt of funds pursuant to the insurance claim for deposits paid in respect of Canon House, Wallington announced on 24 November 2010) or trading in the Participating Shares on AIM will be suspended for up to six months. If a reverse takeover has not been completed on the expiry of that 6 month period, the Company's admission to AIM will be cancelled. However, in the absence of there being a reasonable prospect of completing an acquisition by the date of the cancellation, the Directors will put in place arrangements for the immediate winding up of the Company. In such circumstances Members may receive little, if any, cash from the liquidation.
Change of name
In order to reflect the change in its activities, and conditional upon the Continuation Resolution and other relevant resolutions being approved, it is proposed that the Company's name is changed to Cholet Investments plc.
Status of the Company
The Company is currently structured as a CIF, under the Collective Investment Funds (Jersey) Law, 1988, and therefore regulated by the JFSC. However, the Directors believe that the Company would prove more attractive to potential reverse takeover candidates if it was to be deregulated and therefore reclassified as a Jersey registered ordinary operating company. Accordingly, and subject to JFSC consent, as part of the Proposals Members are being asked to approve the Reclassification.
There are no guarantees that the JFSC will consent to the Proposals and if they do not consent, the Directors will redeem all outstanding Participating Shares and effect an orderly winding-up of the Company.
Articles of Association
Subject to Members' approval of the Reclassification and the relevant Resolutions at the Extraordinary General Meeting, new articles of association will be adopted to reflect the updated status of the Company as an ordinary operating company. A summary of the proposed Articles can be found in the Appendix to this document.
Board changes and consultancy arrangements
Should the relevant Resolutions be passed at the Extraordinary General Meeting, as described above the operating costs of the Company will be significantly lower than those currently incurred. It is intended that in the event that such Resolutions are passed, Donald Reid will step down as a director of the Company but Roger King will continue as Non-executive Chairman and Roger Maddock will continue as a Non-executive Director. In addition, conditional on such Resolutions being passed and certain other conditions, the Board intends to appoint Brian Howard to the Board as a Non-executive Director.
Mr. Howard has held senior positions in the waste management and recycling industry for over 25 years. This included fifteen years as the Managing Director of Thames Waste Management Limited, a subsidiary of Thames Water Plc and then RWE A.G. the German multi-utility company, and nine years with Cleanaway Limited. Prior to this, having obtained a degree in Civil Engineering from University College London and a masters degree in Structural Engineering from Imperial College, he held appointments in both civil engineering consultancy and contracting companies.
More recently he has worked with the private equity group, Englefield Capital, researching and negotiating possible acquisitions and investments in this sector. Two companies were acquired successfully which had a combined annual turnover of over £40 million. He is a member of both the Institution of Civil Engineers and the Chartered Institute of Waste Management and has an MBA from the City University. Mr. Howard will be paid a fee of £10,000 per annum.
Consultancy arrangements with DCML
Subject to the passing of the Resolutions, the Company also proposes to enter into a consultancy agreement with Development Capital Management Limited ("DCML"). Pursuant to this agreement DCML will provide certain services aimed at helping the Company to achieve its investing policy.
DCML will seek to identify and deal with prospective reverse takeover candidates on behalf of the Company and more specifically, (i) to carry out initial due diligence in relation to such parties (ii) to conduct negotiations with such parties in accordance with instructions from the Company and (iii) to work with appropriate third party professional advisers appointed by the Company in relation to any specific transaction(s).
In the performance of its services, DCML will be assisted by Hilary Stone. Hilary is Honorary Research Fellow in waste management and environmental law, Imperial College London and Visiting Lecturer in Environmental Law, School of Engineering and Design Brunel University. She has extensive experience both in academic and business consultancy work in the environmental and waste management sectors, lecturing at undergraduate and post graduate levels on Environmental and Energy law and Health and Safety law together with environmental business topics including environmental management and environmental risk management. She is a Member of the DEFRA Advisory Committee on Hazardous Substances and Chairs the Gasification and Pyrolysis Group of the Renewable Energy Association. DCML will be responsible for all fees payable to Ms Stone.
In return for the provision of such services DCML will entitled to a fixed annual fee of £25,000 (plus VAT), payable quarterly in advance, over a maximum twelve month term. Subject to the Company completing a reverse takeover under the AIM Rules, DCML will also be granted an option to purchase up to three per cent of the issued share capital of the Company, at the relevant transaction price i.e. the price at which the Company issues shares pursuant to the reverse takeover. This option will be exercisable for three years following completion of the relevant deal and in the event that DCML identifies the opportunity which results in the reverse takeover it will be entitled to a fee equal to one per cent of the value of the enlarged entity, payable in shares.
The entry into of the consultancy arrangements described above between DCML and the Company is deemed to be a related party transaction under the AIM Rules. In accordance with Rule 13 of the AIM Rules, the Directors, with the exception of Roger Maddock, who is connected with DCML, having consulted with Merchant Securities Limited, the Company's nominated adviser, consider that the terms of the consultancy arrangements are fair and reasonable insofar as Members are concerned.
Orderly winding up of the Company
In the event that the relevant Resolutions are not passed at the Extraordinary General Meeting and/or the JFSC do not consent to the Proposals and the Winding-up Resolution is passed, the Board will undertake an orderly winding-up of the Company. An orderly winding up of the Company requires the following steps to be taken:
1. All Participating Shares will be redeemed at a price of 69.5 pence per Participating Share;
2. The holders of founder shares shall vote in favour of the summary winding up of the Company; and
3. The Directors will implement a summary winding up of the Company.
Assuming a cash balance of approximately £1.6 million as at the date of the EGM, the Board has estimated that the costs of this winding up process will be not greater than £50,000. This sum will be retained by the Company to fund the winding-up process, which would result in the majority of Company's cash balances being returned to Members, equivalent to approximately 69.5 pence per Participating Share or £1,550,000 million in aggregate.
If the Winding up Resolution is passed and becomes effective, the Directors will exercise their powers pursuant to Article 36.00 of the Company's Articles to redeem the entire participating share capital of the Company held by those Members on the register at 4.30 p.m. on 6 April 2011. In these circumstances, admission of the Company's participating share capital to trading on AIM would be cancelled at 7.00 a.m. on 7 April 2011.
Members should note that the in the absence of sufficient votes being received, there is a risk that neither the Continuation Resolution and related resolutions nor the Winding-Up Resolution is passed. In such circumstances, the Company will proceed with the Alternative Redemption and will in due course convene another meeting to consider the winding up of the Company and cancellation of its admission to trading on AIM.
Irrevocable undertakings
The Directors have irrevocably undertaken to the Company to vote in favour of the Continuation Resolution and related Resolutions to be proposed at the Extraordinary General Meeting, in respect of their aggregate beneficial holdings totalling 5,128 Participating Shares, representing approximately 0.23 per cent. of the Participating Shares.
In addition, certain Members representing the two largest beneficial shareholders of the Company and an additional Member holding in excess of three per cent. of the Company's issued capital have irrevocably undertaken to the Company to vote in favour of the Continuation Resolution and related Resolutions in respect of their aggregate beneficial holdings totalling 830,457 Participating Shares, representing approximately 37.2 per cent. of the existing share capital.
Copies of the Circular and EGM Notice
Copies of the Circular and accompanying EGM Notice will be available to download from the Company's website (www.offplanfund.com) later today. The EGM has been convened for 10.00 a.m. on 31 March 2011 at the offices of Fairway Group, 8th Floor, Union House, Union Street, St Helier, JE2 3RF, Jersey.
List of Contacts:
Development Capital Management
Andy Gardiner
Tom Pridmore
020 7355 7600
Merchant Securities Limited
(Nominated Adviser and Broker)
Bidhi Bhoma/Simon Clements
020 7628 2200
This information is provided by RNS