Hofseth BioCare ASA ("HBC" or the "Company"), a leading
Norwegian producer of healthy and high-value nutritious products
from fish offcuts, will expand its current capacity at the Midsund
Process Facility in order to optimize its current production
process and to meet the increase in demand for its products.
Accordingly, HBC will continue renting out available capacity at
one of its current production facilities at Berkåk, and rather
invest approx. NOK 40 million in two plant extensions at Midsund in
H2 2018.
The expected payback on the
investment in the Midsund plant is estimated to less than three
years, and the first extension is expected to be in operation
during summer 2018 and the second in the third quarter of 2019. For
further details on the investment, please see below under
"Consolidating operations to reduce costs and to enhance product
quality". To the benefit of HBC customers, which are mainly in the
B2B human-grade and pet-food segment, the consolidation of
activities should result in an enhanced product quality, due to
inter alia, significantly reduced time from raw material processing
to finished product.
In connection with the
capacity expansion, HBC has engaged SpareBank 1 Markets AS as
manager (the "Manager") to carry out a private placement of new
shares (the "Offer Shares") in the Company raising gross proceeds
of minimum NOK 120 million and a maximum of NOK 140 million (the
"Private Placement").
About
the private placement
- The subscription price (the "Offer Price") in the
Private Placement is set at NOK 2.25 per share, based on
negotiations between the Company and investors who have
pre-committed to subscribe for shares in the Private Placement.
Certain existing shareholders have already committed to subscribe
for the minimum subscription amount of NOK 120.4 million (including
through conversion of debt in the amount of approximately NOK 65.8
million).
- The following shareholders have entered into
pre-commitment agreements with the Company to subscribe for shares
in the Private Placement for a total of NOK 120.4 million: Alliance
Seafoods Inc. (17.1), Bonafide (25.0), Hofseth Aalesund AS (10.9),
Hofseth AS (24.7), Hofseth International AS (1.3), Hofseth
Logistics AS (2.2), Chairman Ola Holen (0.5), CEO Roger Hofseth
through Roger Hofseth AS (23.0), Hofseth North America partner Matt
Mixter through Norinvest, LLC. (1.2), Seafood Farmers of Norway AS
(13.7), and other investors (0.7).
The Company had aim to raise
a maximum of NOK 120 million, but based on received pre-commitments
at a share price of NOK 2.25, the Private Placement has been
increased to NOK 140 million. Of the net cash proceeds from the
Private Placement of minimum NOK 54.6 million (excluding the
conversion of debt), NOK 10 million will be used in connection with
an investment in a new calcium production-line at Midsund, NOK 30
million will be used in order to invest in a new spray-dryer at
Midsund, and the remaining proceeds will be used for general
purposes and working capital.
The application period for
the Private Placement is expected to start at 09:00 CET on 19 June
2018 and to close on or about 16:30 CET on 22 June 2018. The
Company may however, in consultation with the Manager, at any time
resolve to close or extend the application period at its sole
discretion and on short notice.
The Private Placement will
be directed towards existing shareholders as well as potential new
investors in Norway and internationally, in each case subject to
and in compliance with applicable exemptions from relevant
prospectus and registration requirements.
The minimum order in the
Private Placement has been set at the NOK equivalent of EUR
100.000, provided that the Company may, at its sole discretion,
receive applications for and allocate investors amounts below EUR
100,000 to the extent applicable exemptions from the prospectus
requirement pursuant to applicable regulations are available.
The completion of the
Private Placement is, inter alia, subject to the Company's
extraordinary general meeting ("EGM") resolving the share capital
increase pertaining to the Private Placement. The Company intends
to send notice of such EGM as soon as practicably possible after
the closing of the Private Placement. Shareholders representing
75.6 % of the outstanding shares have, through the pre-commitment
agreements, committed to vote in favor of the capital increase at
the Company's EGM.
Allocation of the Offer
Shares will be determined by the Company's Board of Directors, in
its sole discretion, after the closing of the application period.
Notification of the allocation is expected to be sent by the
Manager on or about 25 June 2018. The settlement date, except for
the investors who have entered into pre-commitment agreements, is
expected to be on or about 27 June 2018, and delivery of new shares
to these investors will take place on or about the same date
pursuant to a share lending agreement between Hofseth International
AS and the Manager. The settlement date for the investors who have
entered into pre-commitment agreements will be two trading days
after the EGM has resolved the Private Placement, and delivery of
new shares to these investors will take place as soon as
practicable after all conditions for the Private Placement have
been met, including that full payment has been received and the new
share capital have been registered in the Norwegian Register of
Business Enterprises.
The Company will announce
the result of the Private Placement through a stock exchange notice
expected to be published on or about Monday 25 June 2018.
The Offer Shares will be
issued on a separate ISIN from the date the capital increase has
been registered in the Norwegian Register of Business Enterprises
and until a listing prospectus (the "Prospectus") pertaining to the
Private Placement has been approved by the Norwegian Financial
Supervisory Authority and duly published in accordance with
applicable law. The Offer Shares are expected to be converted to
the Company's ordinary ISIN number and be tradable on Oslo Axess by
ultimo August 2018.
The Company and the Manager
reserve the right, at any time and for any reason, to cancel and/or
modify the terms of the Private Placement.
Repair
issue
The Board will propose to
conduct a subsequent offering of up to NOK 20 million at the same
subscription price as in the Private Placement (the "Repair
Issue"). The Repair Issue will be directed to existing shareholders
in the Company as of the end of trading on 18 June 2018, as
registered in the VPS as of the end of 20 June 2018. Existing
shareholders who do not participate in the Private Placement and
who are not resident in a jurisdiction where such offering would be
unlawful or, for jurisdictions other than Norway, would require any
prospectus, filing, registration or similar action will be
allocated non-tradable subscription rights. The existing shares in
the Company will trade exclusive of the right to participate in the
Repair Issue from and including 19 June 2018. Launch of the Repair
Issue is, inter alia, subject to the completion of the Private
Placement, shareholders at the EGM voting in favor of a resolution
to increase the Company's share capital required to carry out the
Private Placement and the Repair Issue, and approval of the
Prospectus.
Operational update
As announced on 9 May
2018, the Company processed 2,662 metric tons
(2,187MT) of salmon and trout raw material in Q1 2018, resulting in
1,092MT of finished goods. HBC had sales revenues of
NOK 14.8 million (6.4 million) in the first quarter of 2018.
Operational profit (EBITDA) for the first quarter 2018 was negative
NOK 14.9 million.
However, the Company expects
to increase its intake of salmon raw material during 2018, which is
expected to result in higher gross margins and positive EBITDA
during the third quarter. The Company has new customers within the
human nutrition industry currently placing long term orders for
shipments from summer and onwards. The new contracts, combined with
existing shipment program are expected to have positive effects on
the Company's results in 2018.
Consolidating operations to reduce costs and to enhance
product quality
As announced on 9 May
2018, HBC is seeing stronger demand for its
high-value nutritious products and at the same time opportunities
to upgrade existing machinery and improve the efficiency in
production and logistics, by simplifying and eliminating
unnecessary steps.
Accordingly, HBC plans to
invest NOK 40 million in two plant extensions to its current
facilities at Midsund. First, the Company will improve the
efficiency of the production process of high-value calcium for
human consumption. Second, the Company will purchase and implement
a new spray-dryer for the high-valued human nutrition protein
products. Currently, the raw material for human-grade protein is
spray-dried produced at HBC's factory at Berkåk, which is
sub-optimal when it comes to logistics and transportation. HBC will
rent out 100% of the capacity at Berkåk once the upgrade at Midsund
is completed. With the saved transportation costs, the Company
expects the payback on investment to be less than three years. In
addition, the consolidation of activities should result in an
enhanced product quality, due to significantly reduced time from
raw material processing to finished product.
HBC expects the new calcium
production line to be operational during Q3 2018 while the new
spray-dryer at Midsund, is expected to be installed early Q3 2019
and operational in late 2019. Hence, the Company expects all
current production to have moved from Berkåk to Midsund within 1
January 2020.
The transaction includes
debt conversion of NOK 65.8 million in trade receivables from
purchase of raw material. After the transaction the Company will
have a total of NOK 56.0 million in interest bearing debt, mainly
loans from owners (20.2 million), leasing (9.0 million), factoring
(11.2 million) and bank loans (15.6 million). Current assets will
be approx. NOK 112 million, a total balance sheet of approx. NOK
209 million and an equity ratio of approx. 55 %.
Comments from the CEO Roger
Hofseth: "We offer a range of high-quality
products today but our organization is constantly aiming to make
better products for our clients, and with the large increase in raw
material intake expected for 2018, it is the right time to
consolidate our operations, close to where our raw material is
taken in and processed. With this transaction, HBC is strengthening
its position, enabling the Company to sign new contracts and
promise on our customer's delivery programs."
The Company invites
investors to a presentation Wednesday 20 June 2018 at 11:30 hrs.
CET at the offices of SpareBank 1 Markets AS, Olav Vs gate 5, 0161
Oslo. To register, please send an e-mail to:
corporateaccess@sb1markets.no
For further information,
please contact:
Roger Hofseth, CEO of
Hofseth BioCare ASA
Mob: +47 95147941
E-mail: rh@hofseth-as.no
Jon Olav Ødegård, CFO of
Hofseth BioCare ASA
Mob: +47 93632966
E-mail: joo@hofsethbiocare.no
About Hofseth BioCare ASA:
HBC is a Norwegian biotech company that offers high-value
ingredients and finished products for humans and pets. The Company
is founded on the core values of sustainability, traceability and
optimal utilization of natural resources. Through an innovative
hydrolysis technology, HBC is able to preserve the quality of
salmon oil, proteins and calcium, prepared of fresh salmon
off-cuts. HBC's objective is to contribute to the efficient use of
marine resources and deliver quality products for ingredients and
finished consumer products in the nutrition market.
HBC's headquarters are
located in Ålesund, Norway with branches in Oslo, Chicago, Mumbai,
Palo Alto and Tokyo. HBC is listed on Oslo Stock Exchange Axess
list with ticker "HBC". See more information about the Company at
www.hofsethbiocare.com and www.facebook.com/hofsethbiocare
This information is subject
to the disclosure requirements pursuant to section 5-12 of the
Norwegian Securities Trading Act.