REG - Obtala Limited - Group Reorganisation and Fundraising

WoodboisAnnouncement

10/01/2019 07:05

RNS Number : 6884M
Obtala Limited
10 January 2019
 


THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) 596/2014.
THIS ANNOUNCEMENT IS FOR INFORMATIONAL PURPOSES ONLY, AND DOES NOT CONSTITUTE OR FORM PART OF ANY OFFER OR INVITATION TO SELL OR ISSUE, OR ANY SOLICITATION OF AN OFFER TO PURCHASE OR SUBSCRIBE FOR, ANY SECURITIES OF OBTALA LIMITED.
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO, OR TO ANY PERSON LOCATED OR RESIDENT IN, ANY JURISDICTION WHERE IT IS UNLAWFUL TO RELEASE, PUBLISH OR DISTRIBUTE THIS ANNOUNCEMENT.
 
 
10 January 2019
Obtala Limited
("Obtala", the "Group" or the "Company")
(AIM: OBT)
 
Group Reorganisation and Fundraising 
 
Obtala Limited (AIM: OBT), the African focused forestry company, is pleased to announce that it has entered into a set of agreements which the Board believes should positively impact both the Group's balance sheet and underlying business structure, whilst improving Obtala's ability to deliver on its growth strategy.
 
Highlights:
·  Disposal of the Tanzanian agricultural business to existing local partner for consideration of US$2,500,000;
·   Investment of £2.0 million by 1798 Volantis Fund Ltd ("Volantis"), a fund managed on a discretionary basis by Lombard Odier Asset Management group, via the subscription of new ordinary shares increasing the Volantis holding in Obtala to 12.9%;
·    Volantis is simultaneously investing US$5,000,000 into the Group's Internal Trade Finance note (ITF);
·    40,000,000 warrants granted to Volantis exercisable at 10p, subject to vesting requirements;
·    Volantis has the right to appoint a Non-Executive Director to the Company's Board in due course;
·   Obtala to increase its holding in its subsidiary Montara Continental Limited ("MCL") from 75% to 100% by acquiring 25% from Africa Resource Investment Limited ("ARI") for consideration of US$5,000,000; and
·    ARI to invest all cash consideration from the sale of 25% of MCL into the Group's ITF note.
Disposal of agricultural assets in Tanzania for US$2.5million
Obtala has entered into a share purchase agreement to dispose of its agricultural assets in Tanzania for a consideration of US$2,500,000 (the "Tanzanian Disposal"). The Group's subsidiaries Montara Continental Limited and Montara Limited will sell their entire holdings in Magole Agriculture Limited, Magole Land Limited, Milama Processing Company Limited and Wami Agriculture Company Limited (together the "Tanzanian Subsidiaries"), all of which are incorporated in Tanzania, to Envision Consulting (T) Limited ("Envision"), Obtala's local partner in Tanzania.
Pursuant to the terms of the Tanzanian Disposal, Envision will pay Obtala a deposit of US$250,000 by 30th January 2019 with completion payment of US$2,250,000 to be paid by 30th March 2019, subject to the preparation of, and agreement by both parties, of completion accounts and any resulting purchase price adjustment.  Envision will immediately be responsible for all operating costs arising from the Tanzanian Subsidiaries.
 
As Envision currently owns 10% or more of two of the Company's subsidiaries (Wami Agriculture Company Limited and Magole Land Limited), the Tanzanian Disposal constitutes a related party transaction in accordance with AIM Rule 13. The Group's Directors having consulted with the Company's nominated adviser, consider the terms of the Tanzanian Disposal to be fair and reasonable insofar as the Shareholders are concerned.
 
Impact on the Group and the Group's Financial Statements
The impact of the Tanzanian Disposal on the Group's Financial Statements is that, from the date that Obtala relinquishes control of the Tanzanian Subsidiaries, it will cease to consolidate the assets of the Tanzanian Subsidiaries. The assets of the Tanzanian Subsidiaries had a book value of US$2.66 million at 30 June 2018 and, based on unaudited management accounts, this figure had fallen further to circa US$2.1 million by 31st December 2018. Obtala will also cease to consolidate the Tanzanian Subsidiaries' losses.  Losses incurred by the Tanzanian Subsidiaries up to that date will continue to be consolidated into the Group results. For the year ended 31st December 2017 operating losses incurred by the Tanzanian Subsidiaries were US$1.8 million and unaudited management accounts for 31st December 2018 showed operating losses of circa US$1.2 million.  Loan capital advanced by Obtala to the Tanzanian Subsidiaries over the last 6 years of approximately US$8m will also no longer be consolidated post-sale.
 
The Tanzanian Disposal is consistent with management's strategy to focus on expanding Obtala's timber operations, particularly in West Africa, as previously announced 30th October 2018. The disposal of the Tanzanian Subsidiaries will therefore allow Obtala to allocate both human and financial resources towards the growth of the timber trading and Gabonese production divisions of the Group.
 
Institutional Investment of £2 million
 
Obtala is pleased to announce that it has raised £2million (~US$2.5m), before expenses, by way of a subscription from existing institutional shareholder Volantis (the "Subscription").
 
Pursuant to the Subscription, Obtala will issue 40,000,000 ordinary shares of £0.01 each in the Company ("Ordinary Shares") to Volantis at an issue price of 5 pence per Ordinary Share (the "Subscription Shares"). The Subscription Shares represent a discount of 12% to Obtala's closing share price on 9th January 2019.
 
Application will be made for the Subscription Shares, which will rank pari passu with the Company's existing Ordinary Shares, to be admitted to trading on AIM ("Admission"). Admission is currently expected to occur at 8.00a.m. on or around 15th January 2019.
 
Following Admission, Volantis will hold 54,000,000 Ordinary Shares in Obtala, representing 12.9% of the Group's issued share capital with voting rights.
 
Volantis will have the right to appoint a non-executive director to the Obtala Board. Further announcements regarding this board appointment will be made in due course.
 
Trade Finance Loan and Grant of Warrants
Furthermore, the Group announces that Obtala (Hong Kong) Limited, a wholly owned subsidiary, has entered into a loan agreement with Volantis for a total of US$5m (the "Loan Agreement") which is to be secured against trade receivables and qualifying timber inventory and timber purchase invoices, as well as a parent company guarantee.
 
Pursuant to the terms of the Loan Agreement, Volantis will receive interest from Obtala (Hong Kong) Limited at a rate of 11.5% per annum, to be paid semi-annually and may recall the loan at any time with 120 days' notice.
Additionally, 40,000,000 warrants over Ordinary Shares will be granted to Volantis with an exercise price of 10p per warrant. Volantis is entitled, in respect of every 1 (one) warrant held, to subscribe for 1 (one) Ordinary Share in Obtala Limited. Volantis will be entitled to exercise 50% of the warrants at any time during the period commencing on the first anniversary of the drawdown date of the aforementioned loan, and expiring on the third anniversary of the drawdown date of the Loan Agreement. Up to 50% of the warrants will also be exercisable at any time following the initial drawdown date provided that Volantis has owned 10% or more of the issued share capital of Obtala prior to exercise. 
Obtala increases holding in Montara Continental Limited from 75% to 100%
Obtala has also entered into a share purchase agreement to acquire the 25% of Montara Continental Limited that it does not currently own (the "Montara Continental Consolidation") from Africa Resource Investment Limited ("ARI") for the following consideration:
1.    Initial consideration of US$2,500,000 which is to be settled within 14 business days; and
2.    Deferred consideration of US$2,500,000 settled within 10 business days of the Group's sale of the Tanzanian Subsidiaries, as detailed above.
If the sale of the Tanzanian Subsidiaries, as detailed above, is not completed by 30th April 2019 Obtala, at its discretion, can choose to settle the deferred consideration for the Montara Continental Consolidation by either of the following:
a.    Payment of US$2,500,000; or
b.    Via the issue of 40,000,000 Ordinary Shares in Obtala to ARI ("Deferred Consideration Shares"). Should they be issued, the Deferred Consideration Shares will be issued free of all liens, charges and encumbrances and will, when/if issued and fully paid, rank pari passu in all respects with the Company's existing Ordinary Shares.
ARI is an entity whose sole legal and beneficial owner is Patrick Green, an employee of the Company from 6th June 2011 until 30th September 2018, and who most recently held the position of Head of Forestry, Mozambique.  
ARI currently owns 25% of the Group's subsidiary Montara Continental Limited. As such the Montara Continental Consolidation constitutes a related party transaction in accordance with AIM Rule 13. The Group's Directors having consulted with the Company's nominated adviser, consider the terms of the Montara Continental Consolidation to be fair and reasonable insofar as the Shareholders are concerned.
Having disposed of the agriculture business in Tanzania and narrowed the focus of the Group to timber trading and production, management believe that this is an appropriate time to similarly simplify the Group's corporate structure. Enjoying full 100% ownership of Group assets is an obvious step, and based on feedback received over the last two years, the Directors believe it will make the Group more attractive to potential investors and trade finance providers.
Obtala's Chairman Miles Pelham commented, "Today's announcement represents the culmination of hard work and negotiation over many months with the net result being the evolution of a dedicated and focussed timber production and trading business with a simplified corporate structure. In addition, we welcome a significant investment from Volantis and up to US$10m cash flowing into our trade finance vehicle, which should significantly increase the profitability of the trading division.  We hope to continue to attract funds to the ITF over the course of 2019, thereby making a material contribution to the overall profitability of the Group.
We believe these developments have the potential to be transformational for Obtala and provide the Group with the strongest possible start to 2019.  I look forward to providing our shareholders with further updates as appropriate."       
Envision's Managing Director, Abdullah Mwinyi, commented "It is with great pleasure that we take over the reins of Obtala's agricultural endeavours in Tanzania and look forward to building on the foundations laid.  We thank Obtala for many years of partnership and wish them every success with their Timber ventures on the African continent."
Total Voting Rights
Following Admission of the Subscription Shares the Company will have a total of 417,451,931 Ordinary Shares in issue with voting rights.  The Company currently holds 99,378 Ordinary Shares in Treasury and the figure of 417,352,553 Ordinary Shares may therefore be used by shareholders as the denominator for the calculation by which they will determine if they are required to notify their interest in, or change to their interest in, the Company under the FCA's Disclosure Guidance and Transparency Rules.
 




Obtala Limited
Miles Pelham - Chairman

Paul Dolan - CEO
www.obtala.com


+44 (0)20 7099 1940






 




 




Northland Capital Partners Ltd (Nomad and Broker)
David Hignell
Dugald Carlean


+44 (0)20 3861 6625




 
 




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