Mr. David Netherway reports
INTERNATIONAL MINING & INFRASTRUCTURE CORPORATION PLC ("IMIC") AND AFFERRO MINING INC ("AFFERRO" OR "THE COMPANY") - RECOMMENDED AGREEMENT FOR IMIC TO ACQUIRE AFFERRO
A definitive arrangement agreement has been signed between International Mining & Infrastructure Corp. PLC (IMIC) and Afferro Mining Inc. for the
proposed acquisition, on a recommended basis, by IMIC of 100 per cent of the
issued and to-be-issued share capital of Afferro pursuant to a Canadian
court-approved plan of arrangement.
Highlights
- Acquisition price per Afferro share of 120 pence per share comprising: 80 pence in cash; plus a listed two-year unsecured convertible loan note with par value of 40 pence
and carrying simple annual interest of 8 per cent; acquisition values fully diluted share capital of Afferro at
approximately $200-million (U.S.);
- Acquisition, based on par value of the loan note, representing a
premium of 104 per cent to the 10-day volume-weighted average trading price
(VWAP) of Afferro shares for trading days ended April 16, 2013, being
the date prior to IMIC's announcement of its initial proposed offer for
the company;
- Acquisition brings together Afferro's assets with IMIC's access to
an infrastructure solution and access to enhanced financing capability
to seek to unlock the latent value in Afferro's key Nkout project;
- Acquisition subject, among other things, to Afferro and IMIC
shareholder approval and other customary conditions.
David Netherway, chairman of Afferro, commented: "We are pleased to have reached this point with IMIC. We
believe that the deal offers our shareholders a unique opportunity to
realize value, particularly in light of broader market conditions. The
acquisition has been structured to provide a significant cash element,
and also a deferred element as IMIC makes progress to provide a robust
infrastructure solution for our flagship Nkout project."
Haresh Kanabar, chairman of IMIC, commented: "I am delighted that Afferro's board has acknowledged the
rationale and attractiveness of our offer by recommending it to Afferro
shareholders. The combination of IMIC and Afferro is a compelling
opportunity that brings together Afferro's iron ore assets with IMIC's
innovative infrastructure, financing and offtake solution."
Further to the announcements of April 17, 2013, and May 22, 2013, Afferro,
IMIC and IMIC's subsidiary Afferro Holdings Ltd. are pleased to announce that they have entered into a
definitive arrangement agreement pursuant to which
IMIC, through its wholly owned subsidiary, Afferro Holdings Ltd., will
acquire all of the issued and to be issued common share capital of
Afferro by way of a court-approved plan of
arrangement under the British Columbia Business Corporations Act. In addition to setting out the
framework and certain mechanics for the arrangement, pursuant to the
arrangement agreement, Afferro and IMIC have given each other certain
representations about their respective companies, groups and businesses
and have agreed to conduct their businesses in certain ways, pending
the arrangement becoming effective or being terminated. The arrangement
shall require approval of at least two-thirds of Afferro voting
shareholders and option holders voting as a single class and a simple
majority of the votes cast by Afferro share and option holders other
than certain Afferro directors or officers who are deemed under
Canadian securities laws to be interested parties. It is also subject
to approval of IMIC shareholders, approval of the Supreme Court of
British Columbia, and certain other conditions, including:
- The continued accuracy of representations and warranties;
-
Customary conditions regarding the securing of any required regulatory
approvals and absence of any prohibitions preventing the consummation
of the arrangement or other adverse actions or proceedings;
-
In the case of the obligations of IMIC:
- The absence of any event,
occurrence, development of circumstance having a material adverse
effect on Afferro;
- The holders of no more than 5 per cent of the
outstanding Afferro voting shares having exercised dissent rights;
- Afferro having unencumbered cash balances of at least $70-million (U.S.) and a
subsidiary of Afferro having deposited $70-million (U.S.) in an escrow account in
favour of Bank of American Merrill Lynch and entered into certain
related agreements;
- Afferro to have provided evidence
satisfactory to IMIC that the Djoum III licence relating to the Nkout
project has been renewed on terms covering at least a specified area
and otherwise on terms no less favourable than existing terms under
such licence.
The board of directors of Afferro has approved the acquisition of
Afferro pursuant to the arrangement and is unanimously recommending
that holders of Afferro shares vote in favour of the transaction. In
approving and recommending the arrangement, the board of directors of
Afferro received an opinion from Canaccord Genuity Ltd. that as of
the date thereof and subject to the assumptions, limitations and
qualifications set out therein, the arrangement is fair, from a
financial point of view, to the Afferro shareholders.
The directors and officers of Afferro, who in aggregate hold 6.4 per cent of the
outstanding Afferro shares and 10.7 per cent of the combined Afferro shares and
options, have undertaken to vote in favour of the transaction pursuant
to their respective voting agreements. In addition, IMIC holds 9.94 per cent of
the outstanding Afferro shares and is entitled to vote on the
arrangement.
Under the agreed terms of the arrangement, Afferro shareholders will
receive consideration comprising:
- 80 pence in cash;
-
A two-year unsecured convertible loan note with par value of 40 pence and
carrying simple annual interest of 8 per cent.
The consideration, based on par value of the loan note, represents:
- A premium of 104 per cent to the 10-day VWAP of Afferro's shares for trading
days ended April 16, 2013, being the date prior to IMIC's announcement
of its initial proposed offer terms to Afferro regarding a possible
offer;
- A premium of 92 per cent to the 10-day VWAP of Afferro's shares for trading days
ended Dec. 5, 2012, being the date prior to Afferro's initial
announcement on potential discussions regarding a takeover of the
company;
- A premium of 69 per cent to the 10-day VWAP of Afferro's shares for trading days
ended May 21, 2013, being the date prior to Afferro and IMIC's
announcement on the revised proposed terms of the offer.
Cash and option consideration
IMIC has also agreed to purchase, in cash, all of the currently issued
and outstanding stock options for 120 pence less the exercise price for each
option. The consideration values the fully diluted share capital of
Afferro at approximately $200-million (U.S.), based on 111,099,498
outstanding shares and options. In respect of the cash consideration,
the board of Afferro has received confirmation from IMIC that it
intends to finance the cash consideration through a combination of its
existing cash resources and available credit facilities.
Loan note
The loan note will be unsecured and rank pari passu with other unsecured
debt obligations of IMIC. The loan note will carry simple annual
interest of 8 per cent, which will be rolled up and paid at the end of the
24-month term. Upon maturity, the loan note together with any accrued
interest will be paid in either cash or convert to the equivalent
market value in IMIC shares at the time of conversion, at IMIC's
discretion. The loan note can be redeemed early, with accrued interest
to the date of redemption, at the option of IMIC. An application will
be made for the loan note to be listed on the Irish Stock Exchange or,
in the event that such listing cannot take place, another recognized
stock exchange.
Termination and break fees
Pursuant to the arrangement agreement, Afferro has agreed not to
solicit, pursue, facilitate or enter into any discussions regarding an
alternative transaction. Afferro has the right to enter into an
unsolicited superior proposal, subject to IMIC's right to match and the
payment of a termination fee.
Afferro will pay IMIC termination fee of $1.5-million (U.S.) in limited
circumstances including if the Afferro board changes or withdraws its
recommendation prior to the Afferro meeting or Afferro breaches certain
of its obligations relating to non-solicitation and superior proposals
or in the event it terminates the agreement to accept a superior
proposal.
In the event that the bridge loan of $60-million (U.S.) provided by Bank of
America Merrill Lynch to part finance the transaction is withdrawn or
otherwise made unavailable (other than due to an action of Afferro) and
alternative financing is not obtained or IMIC shareholders do not
approve the transaction, IMIC shall pay a termination fee of
$1.5-million to Afferro.
The arrangement agreement contains rights for both parties to agree to
terminate the proposals by mutual agreement or if Afferro shareholders
do not approve the arrangement or it does not become effective before
the outside date (other than due to a failure by that party). Each of
IMIC and Afferro also has a right to terminate in certain other
circumstances, including those referred to in the context of the break
fees and on the non-satisfaction of certain conditions.
Shareholder and regulatory approval
The proposed acquisition of Afferro by IMIC will be subject, inter alia,
to the approval of IMIC's shareholders under the reverse takeover
requirements of AIM rules for companies. In accordance
with the AIM rules, application will be made for admission of the
enlarged group to trading on AIM, following which IMIC is expected to
cease to be an investing company for the purposes of the AIM rules.
The notice of meeting containing information relating to the proposed
transaction is expected to be communicated to Afferro shareholders in
July, 2013, with the meeting of shareholders in relation to the
transaction expected to be held no later than Aug. 30, 2013. IMIC is
expected to publish an AIM admission document for the enlarged group in
July, 2013, and to seek shareholder approval for the transaction at a
meeting of IMIC shareholders to be held on or around the same date as
the Afferro meeting. Subject to the court approval in British
Columbia, Canada, and the approval of the transaction by Afferro and
IMIC shareholders and timely satisfaction of the conditions precedent,
Afferro and IMIC expect the transaction to be completed on or before Sept. 6, 2013, or such later date as may be agreed. Further details on
the timetable to be announced in due course.
Canaccord Genuity Ltd. is acting as Afferro's exclusive financial
adviser in relation to the transaction. Investec is Afferro's nominated
adviser and joint broker. RBC Capital Markets is Afferro's joint
broker.
Merrill Lynch International, a
subsidiary of Bank of America Corp., is acting exclusively for
IMIC in connection with the transaction and for no one else and will
not be responsible to anyone other than IMIC for providing the
protections afforded to its clients or for providing advice in relation
to the transaction.
WH Ireland is IMIC's nominated adviser and joint broker. Ocean Equities
Ltd. is IMIC's joint broker.
We seek Safe Harbor.
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