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Update on certain share/GDR buybacks

The Company provides the following update on the current status of the proposals for the Company to buyback in aggregate 26,442,944 global depository receipts, which represent ordinary shares of the Company of US$0.10 each (the “Ordinary Shares”) on a one for one basis (“GDRs”), from Phoenician Capital LLC, Mr Georges Khabbaz and Mr Andre Aour (the “Phoenician GDRs”), representing 33.08% of the Company’s voting rights (the “Phoenician Buybacks”). The Company sought to implement the Phoenician Buybacks pursuant to conditional share purchase deeds entered into by the Company and dated 23 November 2013 (the “Share Purchase Deeds”).

 

 

The Phoenician Buybacks were the subject of an RIS announcement issued by the Company on 1 October 2014 and were further described at pages 16 and 17 of the Company’s annual report for the year ended 31 December 2013. By way of a summary of the historical order of events relating to these arrangements:

(i) in March 2013, the Company agreed to repurchase the Phoenician GDRs at a consideration of $0.3 each and the aggregate consideration of $7,932,883.20 was transferred by the Company into escrow;

(ii) in November 2013, the conditional Share Purchase Deeds intended to implement the Phoenician Buybacks were entered into; and

(iii) in January 2014, the aggregate consideration funds payable pursuant to the Phoenician Buybacks were released from escrow to the relevant sellers.

The Phoenician Buybacks were not completed and the GDRs were not delivered to the Company at the time of the release of the consideration in January 2014.  The primary reason for this delay in completing the arrangements envisaged by the Share Purchase Deeds stems from the fact that, upon the Phoenician GDRs being repurchased by the Company pursuant to the Phoenician Buybacks, they would as a matter of fact have been cancelled, which cancellation would have the consequence of increasing the aggregate shareholding of Mr Tomas Mateos Werner (“TMW”), the Chief Executive of the Company, from his current holding of 29.9 per cent to 44.9 per cent.  This increase in TMW’s voting rights would trigger an obligation under Rule 9 (“Rule 9”) of the City Code on Takeovers and Mergers (the “Code”) for TMW to make a general offer for the Company.

Rule 9 requires a general offer to be made to the holders of any class of equity share capital and also to the holders of any other class of transferable securities carrying voting rights in a company which is subject to the Code (unless the Panel on Takeovers and Mergers (the “Panel”) consents otherwise) when, inter alia, any person acquires an interest in shares which, together with shares in which he and persons acting in concert with him are already interested, carry 30 per cent or more of the voting rights of the company.

The Company sought to address this Rule 9 issue by entering into certain arrangements with TMW to repurchase from Pleco Limited (“Pleco”), a company 100% indirectly owned by TMW, 11.33 million Ordinary Shares (the “Pleco Shares”) being such number of Ordinary Shares as would maintain TMW’s shareholding at its existing level of 29.9 per cent notwithstanding completion of the Phoenician Buybacks (the “Original Pleco Agreement”).  The consideration to be paid under the Original Pleco Agreement was stated only to be payable if the Company subsequently placed new shares at an issue price in excess of $0.3 per share and would have been the same price per share as subscribed on such placing.

These arrangements have now been renegotiated in relation to the consideration payable.  The Company entered into an agreement, (the “Pleco Agreement”) on 24 December 2014.  Pursuant to the Pleco Agreement, the Company agreed to repurchase the Pleco Shares from Pleco (the “Pleco Buyback”) in consideration of granting Pleco the right to subscribe at no further cost for the same number (11.33 million) of new Ordinary Shares, at a time or times in the future when the ownership of those new Ordinary Shares (and existing Ordinary Shares otherwise held by Pleco and any concert party from time to time of TMW) would not give TMW and persons acting in concert with him 30% or more of the voting rights of the Company.  This right exists until the fifth anniversary of completion of the Pleco Agreement (which it is anticipated will occur before the end of December 2014).  No cash is passing for the repurchase of the existing Ordinary Shares or the issue of the new Ordinary Shares.  Upon the Pleco Shares being repurchased by the Company pursuant to the Pleco Agreement they would, as a matter of fact, be cancelled.

The Pleco Buyback is conditional upon the repurchase by the Company of the Phoenician GDRs pursuant to the Phoenician Buybacks.

The Company put in place arrangements with Pleco, as part of the Pleco Agreement, to exchange 8,774,579 Ordinary Shares (the “Pleco Exchange Shares”) held by Pleco for the same number of GDRs to be held by the Company upon completion of the Phoenician Buybacks (the “Share Exchange”).  The effect of this arrangement is that the Company would cancel the Ordinary Shares received from Pleco (at little or no cost) and cancel only 17,668,365 of the Phoenician GDRs rather than all of the Phoenician GDRs, reducing the costs of cancellation from the maximum of approximately $650,000 to a reduced maximum of approximately $442,000.  The Company and Pleco have also agreed that the Company will indemnify Pleco against the fees (currently expected to be zero) for depositary services which may become payable as a result of Pleco holding GDRs rather than the Pleco Exchange Shares on an ongoing basis and the Company may cap the indemnity at any cancellation fee to the Depository (for the future cancellation of these GDRs) due at a future time if it has served a notice on Pleco requiring it to do so.

Discussion with the Takeover Panel

In our announcement of 1 October 2014, we noted that we were in discussions with the Panel.  These discussions related to the inadvertent triggering by the Board of an obligation to make an offer for the Company under Rule 9 as explained below.

Under the arrangements with Phoenician entered into in January 2014, Phoenician agreed to hold the voting rights attaching to the Phoenician GDRs on trust for the Company and to hold all dividends and distributions and exercise all voting rights in respect of the Phoenician GDRs in accordance with the direction of the Company.  This arrangement gave the Board, together with Ordinary Shares/GDRs held by TMW, control over an aggregate of 63.17 per cent of the voting rights of the Company resulting in the Board technically triggering an obligation under Rule 9 for the Board to make a general offer for the Company.

The Panel Executive has accepted that this breach of Rule 9 by the Board was inadvertent.  Accordingly the Panel Executive has decided that no general offer will be required to be made by the Board pursuant to Rule 9, provided that:

(i) the Company completes the repurchase of the Phoenician GDRs pursuant to the Phoenician Buybacks and in accordance with the terms of the Share Purchase Deeds and cancels the Phoenician GDRs (or the Ordinary Shares exchanged for them pursuant to the Share Exchange); and

(ii) the Company completes the repurchase and cancellation of the Pleco Shares in accordance with the terms of the Pleco Agreement.

Following the implementation of these steps, TMW would continue to hold 29.9 per cent of the voting rights of the Company and as such will be outside the remit of Rule 9.

Completion of the Phoenician Buybacks, the Pleco Buyback and the Share Exchange

The Company has therefore commenced the process of completing the Phoenician Buybacks, the Share Exchange and the Pleco Buyback and it anticipates completion before the end of December 2014. 
When the Phoenician Buybacks, the Pleco Buyback and the Share Exchange have completed, the Company will confirm the final number of shares and GDRs in issue which it anticipates would be as follows.

17,668,365 GDRs would be cancelled, leaving 37,031,635 GDRs remaining in issue.

The Ordinary Shares underlying 17,668,365 of the Phoenician GDRs (being 17,668,365 Ordinary Shares), the Pleco Shares (being 11,330,000 Ordinary Shares) and the Pleco Exchange Shares (being 8,774,579 Ordinary Shares) would be cancelled, leaving a total number of Ordinary Shares in issue of 41,927,056 of which 37,031,635 would be held by BNY Mellon as depository of the GDRs.  The balance would be held by the Company's Employee Benefit Trust, (the “EBT”), holding 4,895,421 Ordinary Shares.

The denominator for the calculation and notification of voting rights would therefore be 41,927,056

For guidance, the Company has calculated the respective percentage holdings in shares and attendant voting rights of Phoenician, TMW and the EBT as follows, pursuant to notifications previously received and taking into account the anticipated completion of the transactions notified above:

Phoenician	nil
TMW	29.9%
EBT	11.68%

The above guidance does not remove the obligation on any holder of Ordinary Shares to make such disclosures as are required by any relevant statute or regulation.

Application to the UKLA for the Company to return to trading

The Company has also today submitted an application to the UKLA for all of its GDRs to return to trading.

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