TIDMBAGR
RNS Number : 4912Z
Bagir Group Ltd
03 September 2018
3 September 2018
Bagir Group Ltd.
("Bagir" or the "Company")
Proposed Strategic Partnership with Shandong Ruyi and $16.5
million investment
Posting of Circular and Notice of Extraordinary General
Meeting
Bagir (AIM: BAGR), a designer, creator and provider of
innovative tailoring is pleased to announce that further to its
announcement on 23 November 2017, that it had agreed terms with
Shandong Ruyi Technology Group for a proposed investment and
strategic partnership under which Shandong Ruyi will invest $16.5
million into the Company in return for 359,560,310 New Ordinary
Shares representing 53.7 per cent of the Company's Enlarged Share
Capital. The Company has today posted a circular to its
shareholders containing further details of the Proposed Investment
and notice to convene an Extraordinary General Meeting at which the
resolutions required to enact the Proposals will be tabled.
The Proposed Investment values each New Ordinary Share at
approximately 3.5 pence per Ordinary Share and represents a premium
of 155 per cent. to the mid-price at 12:10 on 20 November 2017,
being the point at which trading in the Ordinary Shares was
suspended ahead of the announcement of the Proposed Investment on
23 November 2017.
The Board considers the Proposals and the passing of the
Resolutions to be in the best interests of the Company, its
Shareholders and its Depositary Interest Holders as a whole for the
reasons set out below:
-- The use of the investment by Shandong Ruyi, to directly
target expediting the development and expansion of the
manufacturing facility in Ethiopia, will significantly accelerate
the timetable for the operational potential in Ethiopia to be
realised enabling the facility to attract and compete for major
apparel manufacturing contracts from large international retailers
which generate an acceptable level of return to Bagir.
-- Shandong Ruyi, as a result of its significant international
textile and retail investments, is well positioned to provide the
Group with significant new commercial opportunities.
-- The strategic partnership has the potential to have a
transformational effect on the operations and the prospects of the
Group from which all Shareholders and Depositary Interest Holders
will benefit.
-- The strategic partnership with Shandong Ruyi will increase
the Company's own profile and reputation.
Accordingly, the Directors unanimously recommend that you vote
in favour of the Resolutions to be proposed at the Extraordinary
General Meeting as the Directors, who have an interest in Ordinary
Shares, have irrevocably undertaken to do in respect of their own
and connected persons beneficial shareholding.
The Extraordinary General Meeting is to be held at the offices
of N+1 Singers, One Bartholomew Lane, London EC2N 2AX at 10:00 a.m.
on 9 October 2018.
The circular will shortly be available to view at the Group's
website http://www.bagir.com/html/Rule.html.
Capitalised terms used but not defined in this announcement have
the meanings set out in the circular and in the appendix to this
announcement. Further details of the recommended Proposals,
extracted from the Circular, are set out below.
Eran Itzhak, Chief Executive Officer of Bagir said:
"We are delighted to be putting this proposal to our
shareholders as we believe it to be transformative, creating a
platform from which Bagir has the potential to become a significant
player in our market of apparel manufacturing."
For further information, please contact:
Bagir Group Ltd. via Novella on:
Eran Itzhak, Chief Executive Officer +44 (0) 20 3151 7008
Udi Cohen, Chief Financial Officer
Tessa Laws, Non-Executive Chairman
N+1 Singer
Mark Taylor
James Moat +44 (0) 20 7496 3000
Novella
Tim Robertson
Toby Andrews +44 (0) 20 3151 7008
For more information about Bagir, please visit the Company's
website: http://www.bagir.com
Introduction
The Company announced on 23 November 2017 that it had agreed
terms with Shandong Ruyi Technology Group for a proposed investment
and strategic partnership under which the Shandong Ruyi Group will
invest $16.5 million into the Company in return for 359,560,310 New
Ordinary Shares representing 53.7 per cent. of the Company's
Enlarged Share Capital.
The Directors believe that through forming this strategic
partnership with the Shandong Ruyi Group, together with the
significant increase in capital, the Proposed Investment has the
potential to transform the Company and its ability to compete and
win major apparel manufacturing contracts from the world's largest
retailers.
The Proposals are conditional, amongst other things, on: (i) the
passing by the Shareholders and Depositary Interest Holders of all
the Resolutions (except for Resolution 3) at the Extraordinary
General Meeting, including a special resolution which will give the
Directors the required authority to disapply the pre-emption rights
contained in the Articles in respect of the allotment of the New
Ordinary Shares; (ii) the Proposed Investment receiving approval
from each of the China Provincial Development and Reform
Commission, the Department of Commerce and the State Administration
of Foreign Exchange; and (iii) Admission becoming effective
following the receipt of the Cash Payment from Shandong Ruyi.
The Company has posted a circular to its Shareholders which
contains a notice to convene an Extraordinary General Meeting to
consider the Resolutions to approve the Proposals. The
Extraordinary General Meeting will be held at the offices of N+1
Singer, One Bartholomew Lane, London EC2N 2AX at 10:00 a.m. on 9
October 2018.
Your Board considers the Proposals and the passing of the
Resolutions to be in the best interests of the Company, its
Shareholders and its Depositary Interest Holders as a whole.
Accordingly, the Directors unanimously recommend that you vote in
favour of the Resolutions to be proposed at the Extraordinary
General Meeting as the Directors, who have an interest in Ordinary
Shares, have irrevocably undertaken to do in respect of their own
and connected persons beneficial shareholdings totalling 10,203,658
Ordinary Shares, representing approximately 3.29 per cent. of the
Company's issued voting share capital as at 31 August 2018. Should
any of the Resolutions (except for Resolution 3) not be passed by
the Shareholders and Depositary Interest Holders, then the SPA
conditions will not be satisfied, the Proposed Investment will
lapse and the strategic partnership with the Shandong Ruyi Group
will not be realised.
Should the Proposed Investment not proceed the Company would
need to seek alternative sources of funds in the second half of the
financial year ending 31 December 2018 to enable it to fund its
working capital needs. There can be no guarantee that such funds
would be available to the Company nor that they would be available
on terms which would not result in a substantially greater dilution
of Shareholders' interests.
Summary terms of the Proposed Investment
On 22 November 2017, the Company and Shandong Ruyi Technology
Group signed the SPA, detailing the terms of the Proposed
Investment, pursuant to which the Shandong Ruyi Group agreed,
subject to all conditions to the SPA being satisfied (or, where
applicable, waived by Bagir and/or Shandong Ruyi Technology Group),
to acquire 359,560,310 New Ordinary Shares, now agreed to be issued
by the Company to Shandong Ruyi, for $16.5 million. The Proposed
Investment values each New Ordinary Share at approximately 3.5(1)
pence per Ordinary Share and represents:
-- a premium of 155 per cent. to the mid-price at 12:10 on 20
November 2017, being the point at which trading in the Ordinary
Shares was suspended ahead of the announcement of the Proposed
Investment on 23 November 2017; and
-- approximately the same value as the issue price of the
placing completed by the Company on 22 December 2016.
([1]) Calculated using the GBP:USD exchange rate on 23 November
2017 being the date that the Proposals were announced
Immediately following Admission becoming effective, the Enlarged
Share Capital of the Company will consist of 670,103,191 Ordinary
Shares. The New Ordinary Shares, and therefore Shandong Ruyi's
interest in Ordinary Shares, will represent 53.7 per cent. of the
Enlarged Share Capital. Assuming that all outstanding Share Options
and Warrants are exercised, the New Ordinary Shares, and therefore
Shandong Ruyi's interest in Ordinary Shares, will represent 51.4
per cent of the Fully Diluted Enlarged Share Capital.
Pursuant to the terms of the SPA, the Proceeds are to be
received in two stages:
-- a Down Payment of $1.65 million, which was received on 9
January 2018. The Down Payment is repayable by the Company to the
Shandong Ruyi Group in the event that the Proposed Investment has
not become effective, with all conditions to the SPA being
satisfied (or, where applicable, waived by Bagir and/or Shandong
Ruyi Technology Group) by the Long Stop Date. The Company will not,
however, be obliged to repay the Down Payment if the Proposed
Investment does not become effective due to (i) not receiving
approval from each of the China Provincial Development and Reform
Commission and the Department of Commerce and the State
Administration of Foreign Exchange or (ii) the Shandong Ruyi Group
not paying the Cash Payment; and
-- a Cash Payment for the remaining Proceeds of $14.85 million
following satisfaction of the completion conditions to the SPA (or,
where applicable, waived by Bagir and/or Shandong Ruyi Technology
Group).
On 17 July 2018, the Company received a further advanced payment
of $1.65 million from the Shandong Ruyi Group, confirming the
Shandong Ruyi Group's commitment to the completion of the Proposed
Investment, therefore the remaining Cash Payment to be received by
the Company is $13.20 million.
Pursuant to the terms of the SPA, the Proceeds must be used by
the Company to expand its existing manufacturing facility in
Ethiopia and for working capital purposes, further details of the
Directors' intentions for the use of proceeds are set out
below.
Information on the Shandong Ruyi Group
Founded in 1972 and headquartered in Jining, Shandong, the
Shandong Ruyi Group is one of the largest textile enterprises in
China and ranks among the Top 100 Chinese multi-national companies.
The Shandong Ruyi Group predominately engages in textile offerings,
using wool, cotton, ecological fibres and synthetic fibres, and
owns a fully-integrated value chain with operations spanning across
raw materials cultivation, textiles processing, and design and sale
of brands and apparel.
The Shandong Ruyi Group operates 13 manufacturing facilities
domestically and boasts some of the largest production lines and
advanced technologies in China. The Shandong Ruyi Group also has
significant distribution with more than 5,000 points of sales (POS)
across 40 countries with a network that services a global customer
base spread across 6 continents. The Shandong Ruyi Group has over
30 subsidiaries in over 15 countries, with four listed
subsidiaries, with a combined market capitalisation of over $3
billion, in China, Japan, France and Hong Kong, being Shandong Ruyi
Woolen Garment Group Co., Limited, Renown Inc., SMCP SAS and
Trinity Limited respectively.
The Shandong Ruyi Group has recently been highly acquisitive,
making a number of acquisitions, investments, partnerships and
joint ventures domestically and internationally across its textiles
value chain to leverage their scale in China and increase the scale
of their operations internationally.
Through a range of international transactions the Shandong Ruyi
Group has secured access to commodities including cotton and wool,
acquired manufacturing capacity in large foreign markets and grown
its international brand portfolio and distribution channel.
Some of the recent notable acquisitions and/or investments made
by the Shandong Ruyi Group include:
-- SMCP SAS - The Shandong Ruyi Group acquired a controlling
stake of SMCP SAS for EUR1.4 billion in April 2016. SMCP SAS is a
high fashion conglomerate, based in France, with over 1,200 stores
across 36 countries consisting of apparel and accessories brands
Sandro, Maje and Claudie Pierlot. Following the acquisition SMCP
SAS accelerated its global expansion plans and in October 2017
listed on the Euronext Stock Exchange;
-- Invista's Apparel & Advanced Textiles business - The
Shandong Ruyi Group acquired the Apparel & Advanced Textiles
business, a US focused manufacturer and retailer with brands
including Lycra and Coolmax, from INVISTA, a subsidiary of Koch
Industries Inc., in October 2017 for $2.7 billion;
-- Aquascutum - The Shandong Ruyi Group acquired British
heritage brand Aquascutum from YGM Trading Limited for $117 million
in March 2017; and
-- Trinity Limited - The Shandong Ruyi Group acquired 51% of
Trinity Limited for HK$2.2 billion in November 2017. Trinity
Limited is a Hong Kong based businesses, listed on the Hong Kong
Stock Exchange, and operates as a menswear wholesale and retail
retailer across China, Hong Kong and Macau, Taiwan and Europe and
owns a number of international high profile brands, including
Gieves and Hawkes, Kent and Curwen, Cerrutti 1881 and D'URBAN.
In addition to acquiring controlling stakes at the retail end of
the textile value chain the Shandong Ruyi Group has also invested
heavily in manufacturing, with recent notable investments
including:
-- The Shandong Ruyi Group, in May 2017, announced a $410
million investment to renovate the vacant 1.4 million-square-foot
cotton spinning Sanyo factory in Arkansas; and
-- The Shandong Ruyi Group, in October 2017, announced it had
signed a Memorandum of Understanding with the Kano State Government
to invest $600 million in order to establish a textile industrial
park in Nigeria.
The directors of Shandong Ruyi are as follows:
Name Function
Qiu Yafu (Board Chairman and General Manager)
Qiu Dong (Director)
Cui Juyi (Director)
Wang Yan (Director)
Sun Weiying (Director)
Sun Liming (Director)
Zhou Hongrun (Director)
Incorporation and Registered Office
Shandong Ruyi was incorporated in the Republic of China and its
registered office is at Ruyi Industrial Park, Northside of the 327
Industrial Highway, Jining, China.
Financial information on Shandong Ruyi
Year ended Year ended Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December 31 December 31 December
2017 2017 2016 2016 2015 2015
RMB m $m(4) RMB 100m $m(4) RMB 100m $m(4)
------------- ------------- ------------- ------------- ------------- -------------
Revenue 36,785 5,641 29,283 4,219 23,952 3,695
Gross profit 9,874 1,522 6,166 878 4,122 631
Total Assets 69,915 10,744 57,146 8,222 37,274 5,743
Net Assets 28,583 4,396 18,747 2,693 10,151 1,570
(4) Based on the exchange rate on the respective year end
date
Shandong Ruyi Interests and market dealings in Ordinary
Shares
As at the close of business on 31 August 2018, the Shandong Ruyi
Group, and the directors of Shandong Ruyi (including any members of
such directors' respective immediate families, related trusts or
connected persons) do not hold any interest in, or right to
subscribe for, or have any short position in relation to the
Ordinary Shares.
There have been no dealings in Ordinary Shares by the Shandong
Ruyi Group and the directors of Shandong Ruyi (including any
members of such director's respective immediate families, related
trusts or connected persons) during the past 12 months other than
the Proposed Investment as detailed in this Announcement.
Shandong Ruyi's intentions regarding the Company
Shandong Ruyi does not currently intend to use its interest in
the Company to dis-continue the existing business of the Group, to
introduce any major changes to the existing operation and business
of the Company or dispose of any of the assets of the Group other
than in the ordinary course of business. Following Completion,
Shandong Ruyi will, together with the existing management of the
Group, conduct a detailed review of the operations and business
strategy of the Group with a view to improving the performance of
the Group and to developing a corporate strategy to broaden the
income stream of the Group. Subject to the result of the review,
Shandong Ruyi will consider all possible options to improve the
existing operations and business of the Group or to seek new
business opportunities to improve the Group's financial position
and prospects, including possible co-operations with the Shandong
Ruyi Group to leverage on its wide range of operations
globally.
Current trading
On 7 March 2018, the Company announced its audited annual
results for the year ended 31 December 2017. Overall revenue in the
period was lower at $51.1 million than the prior year (2016: $64.1
million) due to a slower order book during the year, particularly
with regard to development of product lines in Vietnam. Unadjusted
EBITDA in the period was $0.6 million (2016: $1.6 million)
reflecting the lower than anticipated turnover, however this was
partly offset by savings in operating costs of 16 per cent, from
2016: $10.9 million, to $9.2 million. Net cash at 31 December 2017
was $0.3 million compared to $8.6 million at 31 December 2016
following the strategic acquisition of the remaining 50% interest
in, and further investment in machinery at, the Company's Ethiopia
manufacturing facility.
In the current year, ending 31 December 2018, despite facing
continued challenging market conditions, the Group has had a
positive sales performance and the Company expects revenue for the
year to be in line with management's expectations. Whilst sales
have been positive, the Group has continued to experience
operational delays and increased production costs which are
expected to reduce profitability in the current financial year. The
increase in production costs have largely resulted from the
recruitment and training of new production line teams in Ethiopia
as a result of the increase in production capacity following the
investment in new machinery in 2017. Training of the new teams has
further led to higher than expected levels of raw material usage.
Additionally subcontractor's costs, in Vietnam and Egypt, have been
higher during a transition period where production has been moved
to more competitive costing programmes.
Looking ahead, the Group is undertaking a rationalisation of its
operations, focussing on fewer production sites and a reduction in
the Group's operational cost base. The Board expects these
measures, together with the operational cost savings identified in
the announcement on 20 November 2017, will reduce the Group's
operational cost base by approximately $5 million on an annualised
basis.
As a result, the Company expects that EBITDA for the current
financial year will be a loss of approximately $1.0 million, and
that the Company will return to profitability in the year ending 31
December 2019.
Outlook and use of proceeds
The Group continues to evolve its recovery plan, which commenced
in 2016, comprising a cost reduction strategy and operational
strategy.
Cost reduction strategy
The Group continues to make good progress reducing operating
costs across the business. As announced on 20 November 2017,
following a review, the Group has identified opportunities to
reduce the Group's overall operational cost base by approximately
$2 million on an annualised basis. This programme was anticipated
to be implemented in full during 2018.
Following further review of the Group's operations the Company
has identified further scope to increase the cost reduction
programme to approximately $5.0 million of annualised cost savings.
This is to be achieved by reducing the number of production sites
from 6 to 5, increasing the focus on Group's largest market, the
USA, together with a range of further rationalisation initiatives.
The expanded cost reduction programme has commenced and is expected
to complete by the first quarter of 2019.
Operational strategy
The Group is focused on its three core manufacturing geographies
in Vietnam, Egypt and Ethiopia. The Directors believe that the
combination of these manufacturing facilitates, in particular
Ethiopia over the medium-longer term, give the Group a competitive
advantage in the production of textiles for export to the EU and
US. This competitive advantage is centred on the facilities
benefiting from duty free status for sales into the EU and US
(except Vietnam), highly competitive production costs and local
government support for the textile industry. Under the Group's cost
reduction strategy, the Company intends to reduce the number of
third party production sites in Vietnam from three to two, continue
to manufacture from its wholly owned site in Ethiopia and from its
50:50 joint venture and subcontractor in Egypt.
During the current financial year the Company has signed a lease
extension for the building and its facilities for the Group's 50:50
joint venture manufacturing facility in Egypt, from May 2020 to
July 2022. The Company has also signed a sub-contracting agreement
with its Egypt joint venture partner, for additional production
capacity in the Egypt joint venture partner's wholly owned Egyptian
manufacturing site, locking in capacity and production costs for
500 suits and 200 trousers per working day from 2019 until July
2022. Together with the existing control rights agreement for the
Company in the 50:50 joint venture owned manufacturing facility in
Egypt until July 2022, the Directors believe that these
developments will ensure the Group's ability to fulfill volume
orders from the USA from this duty free country, at competitive
prices, supporting the USA market growth strategy.
In June 2017, the Group completed the strategic acquisition of
the remaining 50% shareholding in Nazareth Garments, the joint
venture owner of the manufacturing site in Ethiopia. This site is
considered by the Directors to be fundamental to the future growth
prospects of the Group. The facility produces suit trousers, with a
current production rate of approximately 2,500 trousers per day,
which is expected to grow to 3,200 trousers per day by the end of
the year.
The USA is the Company's largest market and the Company will
increase its focus on the USA where the average transaction size is
larger.
The Directors believe that the Proposed Investment, by one of
the largest textile manufacturers in China, reaffirms their view
that the Group's first mover advantage in Ethiopia is potentially
transformative to its medium-to-long term prospects. The Directors
believe that the restructuring initiatives taking place across the
Group will better place the Group to take advantage of the Proposed
Investment and the commercial synergies that the strategic
partnership with the Shandong Ruyi Group will offer.
The majority of the Proceeds are expected to be used to expand
the Group's existing manufacturing facility in Ethiopia. The
Directors have identified that some funds will be used to
significantly expand the suit trouser production line and to
establish a jacket production line. The Proposed Investment will
increase the Ethiopian facility's ability to produce large volume
and high value orders. The Directors believe that the expansion of
the Ethiopian facility will enable the Group to take advantage of
the interest in the facility from international retailers and
improve its ability to compete and win major apparel manufacturing
contracts.
The remaining Proceeds will be used to improve the Group's
working capital position.
Background to and reasons for the recommendation
As confirmed in July 2017, the development of the production
lines at the Group's facilities in Vietnam and Ethiopia to support
larger volumes was slower than anticipated, impacting the Group's
ability to secure larger volume orders. In September 2017, the
Company confirmed that the manufacturing costs in Vietnam had
increased which affected the Company's bottom line and the Board
reaffirmed our aim to expand the Group's manufacturing base in
Ethiopia. The Directors believe that the investment by Shandong
Ruyi, which will be targeted directly at expediting the development
and expanding the manufacturing facility in Ethiopia, will
significantly accelerate the timetable for the operational
potential in Ethiopia to be realised enabling the facility to
attract and compete for major apparel manufacturing contracts from
large international retailers which generate an acceptable level of
return to Bagir.
Following the Proposed Investment completing, a strategic
partnership will be formed between the Company and the Shandong
Ruyi Group. The Directors believe that the Shandong Ruyi Group, as
a result of its significant international textile and retail
investments, is well positioned to provide the Group with
significant new commercial opportunities, especially in the fields
of fabric design and development, and technical innovation.
The Directors also believe that the strategic partnership with
the Shandong Ruyi Group will increase the Company's own profile and
reputation which may, in turn, increase customer interest in the
Group and, in particular, its Ethiopian manufacturing facility.
Furthermore, Shandong Ruyi has committed to evaluate ways in which
it can provide additional operational support to Bagir. The
Directors believe that the knowledge of the Shandong Ruyi Group and
the Proposed Directors will improve the Group's operations and
trading performance.
The issue price of the New Ordinary Shares is at a significant
premium of 155 per cent. to the latest practicable trading price
before the announcement of the Proposed Investment on 21 November
2017. The Directors believe that this represents a sufficient
premium payable by Shandong Ruyi for the control over the Company
that their proposed shareholding would give them.
Importantly, the Directors believe that the Proposed Investment
has the potential to have a transformational effect on the
operations and the prospects of the Group from which all
Shareholders and Depositary Interest Holders will benefit.
Furthermore, should the Proposed Investment not proceed the
Company would need to seek alternative sources of funds in the
second half of the financial year ending 31 December 2018 to enable
it to fund its working capital needs. There can be no guarantee
that such funds would be available to the Company nor that they
would be available on terms which would not result in a
substantially greater dilution of Shareholders' interests.
Board composition
The Company announces that with effect from, and conditional on,
Admission, Chenran Qiu, Yuanshu Du, Kelvin Ho, Qiang Cui and Dajun
Yang will be appointed at the Extraordinary General Meeting as
directors of the Company. Furthermore, conditional on Admission,
Samuel Vlodinger will step down from their position as director of
the Company on Admission. Separately Jonathan Feldman has informed
the Board that he wishes to step down from the Board at the next
AGM, to be held on 4 September 2018, to pursue other business
opportunities. The Board have commenced a formal process to
identify a suitable successor as Non-executive External Director as
soon as possible. Once a candidate has been agreed by the Board,
the Board shall convene an Extraordinary General Meeting in order
to approve the nomination of the new Non-executive External
Director. Marc Zalcman has informed the Board, that immediately
upon the appointment of a new Non-executive External Director, he
intends to step down as director of the Company.
Therefore, the proposed Board composition following Admission
will be as follows:
Name
Chenran Qiu Non-executive Chairperson
Yuanshu Du Non-executive Director
Kelvin Ho Non-executive Director
Qiang Cui Non-executive Director
Dajun Yang Non-executive Director
Tessa Laws Independent Non-executive Director
Eran Itzhak Chief Executive Officer
Yehuda (Udi) Cohen Chief Financial Officer and Deputy CEO
Esti Maoz, Non-Executive External Director
Marc Zalcman Non-executive Director
Chenran Qiu (aged 37)
Chenran Qiu is the vice chairman of the board and the executive
president of Shandong Ruyi International Fashion Industry
Investment Holding Company Limited, responsible for the development
of the brand and international investments of the Shandong Ruyi
Group. Chenran Qiu joined the Shandong Ruyi Group in May 2007, and
was promoted to her present position as vice chairman of the board
of Shandong Ruyi International Fashion Industry Investment Holding
Company Limited in January 2017. Chenran Qiu is also currently a
director of each of Renown Incorporated which is listed on the
Tokyo Stock Exchange, SMCP S.A.S. which is listed on Euronext Paris
and Trinity Limited which is listed on the Hong Kong Stock
Exchange.
Chenran Qiu received several awards in the industry sector, such
as the "Fashion Innovation Award" of the China National Garment
Association and the "Brand Builder Award" of the Shandong
region.
Chenran Qiu received her bachelor's degree in Arts Design from
the Arts Academy of University of Suzhou in the People's Republic
of China in 2004. She further obtained a master's degree in
International Fashion Retailing from the University of Manchester
in the United Kingdom in 2006.
Yuanshu Du (aged 51)
Yuanshu Du has over 30 years experience in the international
textiles industry having joined the Shandong Ruyi Group in 1988.
Yuanshu Du has held a number of senior management positions in the
Shandong Ruyi Group including seven years as General Manager of
Shandong Ruyi Technology Group Limited and is currently General
Manger of Shandong Ruyi Woollen Garment Group Limited, subsidiary
of Shandong Ruyi listed on the Shenzhen Stock Exchange. Yuanshu Du
obtained an EMBA from Beijing University in 2007.
Kelvin Ho Cheuk Yin (aged 44)
Kelvin Ho joined the Shandong Ruyi Group in December 2017 and
serves as the Chief Strategy Officer and president of Ruyi
International Fashion (China) Financial Investment Holding Group
Limited, responsible for the strategic development and acquisitions
for the Shandong Ruyi Group. Kelvin Ho is also Executive Director
of Trinity Limited, a premium menswear retailer listed on the Hong
Kong Stock Exchange. Kelvin Ho has over 13 years of experience in
corporate finance and mergers and acquisitions. He worked in the
investment banking teams of BNP Paribas in Hong Kong and Paris
between 2004 and 2007. From July 2007 to December 2017, he worked
in the investment banking team of J.P. Morgan Securities (Asia
Pacific) Limited.
Kelvin Ho received his bachelor's degree in Economics from the
University of Hong Kong in 1995. He further obtained a master's
degree in Business Administration from the London Business School
in 2004. Kelvin Ho has earned the Chartered Financial Analyst
designation.
Qiang Cui (aged 36)
After graduating from Asia University with a Masters Degree in
Asia and International Business Strategy in 2010, Qiang Cui joined
the Shandong Ruyi Group. Qiang Cui started working for Renown Inc.,
in 2013, following its acquisition by the Shandong Ruyi Group, in a
number of roles latterly as Executive Officer. Ms Cui was appointed
Vice Chairman of Shandong Ruyi in 2017.
Dajun Yang (aged 50)
Dajun Yang graduated with an MBA from the International Trade
University of Agriculture and Technology of Dhaka in Bangladesh.
From 1998 to 2012, he held the position of Chairman and Chief
Executive Officer of UTA Fashion Management Groupe, then in 2012
the position of Chairman and CEO of UTA Brand Inv. Management Co.
Dajun Yang is author of numerous books related to the analysis of
fashion markets. With an experience of over 25 years in management
in the fashion industry,Dajun Yang is regularly consulted in
connection with investments in China by European companies. Dajun
Yang is currently a director of SMCP S.A.S., a member of the
Shandong Ruyi Group, which is listed on Euronext Paris.
The appointment of the Proposed Directors is subject to the
Company's procedure for the election of directors, as set out in
the Articles, the applicable provisions of Israeli law. Further
information on the Proposed Directors, including the disclosures
pursuant to Rule 17 and Schedule two paragraph (g) of the AIM
Rules, are outlined in the circular and will be notified to the
market at the time of their appointment to the Board.
Structure of the Proposed Investment
The Company is proposing to raise $16.5 million (before
expenses) through an investment by Shandong Ruyi, following which
Shandong Ruyi will acquire 359,560,310 New Ordinary Shares.
The New Ordinary Shares will be issued credited as fully paid
and will, on Admission, rank pari passu in all respects with the
Existing Ordinary Shares, including the right to receive all
dividends or other distributions declared, made or paid after
Admission. The New Ordinary Shares will represent approximately
53.7 per cent. of the Enlarged Share Capital.
Application will be made to the London Stock Exchange for the
admission of the Enlarged Share Capital to trading on AIM following
the conditions to the SPA being satisfied (or, where applicable,
waived by Bagir and/or Shandong Ruyi Technology Group) and the
ensuing completion of the Proposed Investment. Further
announcements on this will be made at the appropriate time.
Conditions of the Proposed Investment
Completion of the Proposed Investment is conditional upon
satisfaction (or, where applicable, waived by Bagir and/or Shandong
Ruyi Technology Group), among others, of the following
conditions:
-- the passing by the requisite majority of Shareholders and
Depositary Interest Holders of all Resolutions except for
Resolution 3;
-- the obtaining of a resignation letter from the Retiring Director; and
-- the obtaining of all necessary approvals by each of the China
Provincial Development and Reform Commission, the Department of
Commerce and the State Administration of Foreign Exchange.
Relationship Agreement
As referred to above, following Admission becoming effective,
Shandong Ruyi's interest in Ordinary Shares will represent 53.7 per
cent of the Enlarged Share Capital. Shandong Ruyi has accordingly
entered into a relationship agreement dated 31 August 2018 with the
Company and the Nominated Adviser to manage the relationship
between them.
The Relationship Agreement is conditional on Admission and comes
into force on closing of the SPA, continuing for so long as the
Shares are admitted to trading on AIM and Shandong Ruyi is
interested in 25% or more of the voting rights attaching to the
Ordinary Shares.
Under the Relationship Agreement, Shandong Ruyi undertakes to
use all its voting rights and to procure (so far as it is lawfully
able) that its associates exercise any of their voting rights to
procure that, inter alia:
-- the Group and its business shall be managed for the benefit
of the Company as a whole and independently of Shandong Ruyi and
its associates;
-- all transactions between the Company and Shandong Ruyi and
its associates will be at arm's length and on normal commercial
terms, unless otherwise approved by the Company or the shareholders
in accordance with applicable law;
-- the remuneration committee, nomination committee and audit
committee of the board shall be comprised of at least two
independent directors (as defined in the Relationship
Agreement);
-- the quorum for a board meeting to consider certain specified
reserved matters is at least two independent directors (unless
specifically permitted otherwise by applicable law) with only
independent directors entitled to vote on such matters (unless all
of the independent directors consent otherwise); and
-- the Company shall be managed in accordance the QCA Code, to the extent practicable.
In addition, Shandong Ruyi undertakes that it shall not and none
of its associates shall, inter alia:
-- take any action which would prevent or might reasonably be
expected to prevent the Group from complying with its obligations
under applicable laws, including AIM Rule 13;
-- exercise its voting rights to procure a de-listing of the
Company's shares from trading on AIM; or
-- exercise its voting rights to procure or seek to procure any
amendment to the Company's articles of association.
Each party is subject to confidentiality obligations as regards
the other parties' confidential information.
Qualification as a 'Permitted Acquisition'
Pursuant to paragraph 77.2(a) and (b) of the Articles, the
Proposed Investment would require Shandong Ruyi to make a mandatory
offer to acquire all of the remaining shares in the Company since
it involves the acquisition of shares which carry 30 per cent. or
more of the voting rights attributable to the shares.
Notwithstanding this, Articles 77.3(a) permits the independent
non-executive directors to waive this requirement should they so
determine.
Accordingly, the independent non-executive directors have
determined to consent to the Proposed Investment in the absence of
an offer by Shandong Ruyi to acquire the entire issued share
capital of the Company since they consider this to be in the best
interests of all Shareholders and Depositary Interest Holders. In
evaluating the Proposed Investment, the independent non-executive
directors considered that, whilst it would be preferable for
Shandong Ruyi to make an offer to purchase any shares from any
willing Shareholders and Depositary Interest Holders, Shandong Ruyi
was not willing to proceed with the Proposed Investment should this
be a requirement. The independent non-executive directors consider
that the potential transformational nature of the Proposed
Investment, for the reasons set out above, are sufficient so that
they recommend that all Shareholders and Depositary Interest
Holders vote in favour of the Proposed Investment and give their
consent to the Proposed Investment under paragraph 77.3(a) of the
Articles.
Irrevocable undertakings to vote in favour of the Proposed
Investment
Irrevocable undertakings to vote, or procure the vote, in favour
of all of the Resolutions have been received from Tessa Laws, Eran
Itzhak, Marc Zalcman and Samuel Vlodinger in respect of their
entire beneficial holdings of Ordinary Shares amounting, in
aggregate, to 10,203,658 Ordinary Shares, which represents
approximately 3.29 per cent. of the Existing Ordinary Shares. Udi
Cohen, Jonathan Feldman and Esti Maoz do not have any beneficial
holdings in Ordinary Shares.
Irrevocable undertakings have also been received from Barenboim
Properties Limited to vote, or procure the vote, in favour of all
of the Resolutions in respect of their entire beneficial holdings
of Ordinary Shares amounting to 65,410,095 Ordinary Shares, which
represent approximately 21.06 per cent. of the Existing Ordinary
Shares.
In total therefore, irrevocable undertakings in favour of all of
the Resolutions have been received from Shareholders and Depositary
Interest Holders controlling, in aggregate, 75,613,753 Ordinary
Shares, which represent approximately 24.35 per cent. of the
Existing Ordinary Shares.
Incentivisation
Conditional on Admission, based on the recommendation of the
Remuneration Committee, the Board has approved, subject to the
approval of Shareholders at the Extraordinary General Meeting,
payment of bonuses to key employees, including Eran Itzhak and Udi
Cohen, amounting in aggregate to $360,000. These bonuses are to
compensate and incentivise management in a fair and competitive way
for the implementation of the Proposed Investment and for leading
the reorganisation and recovery plan. The aforementioned bonuses at
the amount of $360,000 were already disclosed as provisions in the
company's annual report for the year ended 31 December 2017.
The Board have approved bonuses to the following
individuals:
Eran Itzhak - $85,832
Udi Cohen - $65,942
Applicable Israeli Law provisions
The Company has considered the Proposals in the context of
Israeli law and its Articles. The Proposals have been approved by
the Board. The following is a summary explanation of the matters
which require Shareholder approval:
The authority of the Company to issue and allot shares is
reserved to the Board at such times and on such terms and
conditions as the Board may determine, subject to the limit on the
Company's registered share capital, which may be amended by an
ordinary shareholder resolution of the Company. The registered
share capital of the Company is therefore to be increased pursuant
to Resolution 1 to enable the issue and allotment of the New
Ordinary Shares.
In addition, under the Articles, pre-emption rights apply in
respect of the New Ordinary Shares. These rights may be waived, in
accordance with the Articles, pursuant to a Special Resolution of
the Shareholders and Depositary Interest Holders.
Under Israeli law, a company's undertaking to compensate a
director with respect to his/her position in the company other than
serving on the board, requires the following approval procedure:
the remuneration committee, the board and an ordinary shareholder
resolution of the Company.
DEFINITIONS
The following definitions apply throughout this Announcement
unless the context otherwise requires:
"Admission" the admission of the New Ordinary Shares to trading
on AIM;
"AIM" the AIM market operated by the London Stock Exchange;
"AIM Rules" the AIM Rules for Companies and guidance notes published
by the London Stock Exchange from time to time;
"Articles" the Company's articles of association currently
in force;
"Cash Payment" has the meaning given to it in this Announcement;
"Company" or "Bagir" Bagir Group Ltd., a company incorporated and registered
in the State of Israel with company number 513994806;
"Companies Law" the Israeli Companies Law, 5759-1999;
"Depositary Interest holders of existing depositary interests issued
Holders" by Link Market Service Trustees Limited in respect
of Ordinary Shares;
"Directors" or "Board" the directors of the Company, or any duly authorised
committee thereof;
"Announcement" this announcement;
"Down Payment" has the meaning given to it in this Announcement;
"Euroclear" Euroclear UK & Ireland Limited, the operator of
CREST;
"Enlarged Share the issued share capital of the Company immediately
Capital" following Admission comprising the Existing Ordinary
Shares and the New Ordinary Shares;
"Existing Option the Global Incentive Option Scheme adopted by the
Plan" Board on 9 September 2013;
"Existing Ordinary the 310,542,881 Ordinary Shares in issue, all of
Shares" which are admitted to trading on AIM and being the
entire issued ordinary share capital of the Company;
"Extraordinary General the extraordinary general meeting of the Company
Meeting" to be held at the offices of N+1 Singer One Bartholomew
Lane, London EC2N 2AX at 10:00 a.m. on 9 October
2018 to consider and if thought fit pass the Resolutions,;
"FCA" UK Financial Conduct Authority;
"Form of Proxy" the form of proxy / form of direction for use in
or "Form of Direction" connection with the Extraordinary General Meeting;
"FSMA" the Financial Services and Markets Act 2000 (as
amended);
"Fully Diluted Enlarged the issued share capital of the Company, immediately
Share Capital" following Admission, assuming the full exercise
of all outstanding Warrants and Share Options, comprising
the Fully Diluted Share Capital and the New Ordinary
Shares;
"Fully Diluted Share the issued share capital of the Company assuming
Capital" the full exercise of all outstanding Warrants and
Share Options;
"Group" the Company and its subsidiaries;
"London Stock Exchange" London Stock Exchange plc;
"Long Stop Date" 31 August 2018;
"New Ordinary Shares" the 359,560,310 new Ordinary Shares to be issued
by the company pursuant to the Proposed Investment;
"Nominated Adviser" Nplus1 Singer Advisory LLP, the Company's nominated
or "N+1 Singer" adviser and broker;
"Notice of Extraordinary the notice convening the Extraordinary General Meeting
General Meeting" which is set out in the circular;;
"Ordinary Shares" the ordinary shares of 0.04 New Israeli Shekels
each in the capital of the Company;
"Proceeds" the funds to be received by the Company pursuant
to the Proposed Investment consisting of the Down
Payment and Cash Payment;
"Proposals" together the Proposed Investment and strategic partnership
between the Company and the Shandong Ruyi Group;
"Proposed Directors" Qui Chenran, Yuanshu Du, Kelvin Ho, Qiang Cui and
Dajun Yang whose appointment as directors of the
Company is due to take effect from Admission, subject
to all conditions to the SPA being satisfied (or,
where applicable, waived by Bagir and/or Shandong
Ruyi);
"Proposed Investment" the proposed acquisition of the New Ordinary Shares
for $16,500,000 pursuant to the terms of the SPA;
"QCA Code" the Corporate Governance Code for Small and Mid-Size
Quoted Companies published by the Quoted Companies
Alliance;
"Relationship Agreement" the relationship agreement dated 31 August 2018
between (1) the Company (2) Shandong Ruyi and (3)
the Nominated Adviser, further details of which
are set out in this Announcement;
"Resolutions" the resolutions set out in the Notice of Extraordinary
General Meeting;
"Retiring Director" Samuel Vlodinger whose resignation as director of
the Company is due to take effect from Admission,
subject to all conditions to the SPA being satisfied
(or, where applicable, waived by Bagir and/or Shandong
Ruyi)
"Shandong Ruyi" Shandong Ruyi Fashion Investment Holding Co., Ltd.,
a company incorporated and registered in the Republic
of China with company number 91370800267103228T;
"Shandong Ruyi Group" Shandong Ruyi and its subsidiary undertakings, associated
undertakings and any other undertaking in which
Shandong Ruyi and/or such undertakings (aggregating
their interests) have a direct or indirect interest
in 10 per cent. or more of the equity share capital;
"Shandong Ruyi Technology Shandong Ruyi Technology Group Co. Ltd, a company
Group" incorporated and registered in the Republic of China
with company number 91370800734712875Q, being a
majority owned subsidiary of Shandong Ruyi;
"Share Options" options to acquire Ordinary Shares pursuant to the
Existing Option Plan being in respect of 29,201,400
Ordinary Shares;
"Shareholders" holders of the Existing Ordinary Shares;
"SPA" the Share Purchase Agreement between (1) Shandong
Ruyi Technology Group and (2) the Company, dated
22 November 2017 setting out the terms of the Proposed
Investment;
"Special Resolution" approval of the holders of 75% of the Ordinary Shares
held by Shareholders and Depositary Interest Holders
who are in attendance and voting at the Extraordinary
General Meeting, either in person or by proxy;
"UK" the United Kingdom of Great Britain and Northern
Ireland;
"Warrants" warrants entitling the holder thereof to subscribe
for Ordinary Shares being in respect of 51,116 Ordinary
Shares as at the date of this Announcement;
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
UPDLLFLRAVIFIIT
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September 03, 2018 02:00 ET (06:00 GMT)
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