TIDMBRD
RNS Number : 0709W
BlueRock Diamonds PLC
15 August 2022
BlueRock Diamonds PLC / AIM: BRD / Sector: Natural Resources
15 August 2022
BlueRock Diamonds PLC ('BlueRock' or the 'Company')
Posting of Circular and Notice of Annual General Meeting
BlueRock Diamonds PLC, the AIM listed diamond producer, which
owns and operates the Kareevlei Diamond Mine ('Kareevlei') in the
Kimberley region of South Africa, is pleased to announce that
further to the announcement of 5 July 2022, a shareholder circular
(the 'Circular') has been published today that contains information
on the background to, and reasons for, the proposed redemption of
the GBP1,066,411 Simple Loan Note to Teichmann Company Limited
('TCL') and parties connected with TCL (together, 'Teichmann').
Subject to shareholder approval, the Simple Loan Notes will be
redeemed in consideration for the issue by the Company of the
Subscription Shares and this will be accompanied by the issue of
New Convertible Loan Notes of GBP583,746 and an amendment to the
Existing CLN, subject to the conditions set out in the Subscription
Agreement and summarised in the Circular (the 'Transaction'). The
Transaction is conditional on the passing of a Whitewash Resolution
and additional share authorities which are being proposed at an
annual general meeting of the Company ("Annual General
Meeting").
The Circular contains a notice convening an Annual General
Meeting which will be held at 10.00a.m. on 7 September 2022, will
be posted to Shareholders today and is available on the Company's
website at www.bluerockdiamonds.co.uk.
Unless otherwise indicated, all defined terms in this
announcement shall have the same meaning as described in the
Circular.
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 as it forms part of
UK domestic law by virtue of the European Union (Withdrawal) Act
2018 ('MAR'). Upon the publication of this announcement via
Regulatory Information Service ('RIS'), this inside information is
now considered to be in the public domain.
**S**
For further information, please visit BlueRock's website
www.bluerockdiamonds.co.uk or contact:
BlueRock Diamonds PLC
Mike Houston m.houston@bluerockdiamonds.co.uk
David Facey, FD dfacey@bluerockdiamonds.co.uk
SP Angel (NOMAD and Broker)
Stuart Gledhill / Caroline Rowe Tel: +44 (0)20 3470 0470
-----------------------------------
St Brides Partners Ltd (Financial
PR) bluerock@stbridespartners.co.uk
Isabel de Salis / Charlotte Page
-----------------------------------
Notes to editors:
BlueRock Diamonds is an AIM-listed diamond producer which
operates the Kareevlei Diamond Mine near Kimberley in South Africa
which produces diamonds of exceptional quality and ranks in the top
ten in the world in terms of average value per carat. The Kareevlei
licence area covers 3,000 hectares and hosts five known
diamondiferous kimberlite pipes with a combined inferred resource
of 10.4 million tonnes / 516,200 carats (February 2021); based on
its planned production of 1 million tonnes per annum, this provides
a minimum 10-year life of mine.
To Shareholders, option-holders and the holders of Existing
CLNs
Dear All
PROPOSED ISSUE OF SUBSCRIPTION SHARES, NEW CONVERTIBLE LOAN
NOTES, APPROVAL OF WAIVER GRANTED BY THE PANEL ON TAKEOVERS AND
MERGERS OF RULE 9 OF THE CITY CODE ON TAKEOVERS AND MERGERS AND
NOTICE OF ANNUAL GENERAL MEETING
1 Introduction
On 5 July 2022 the Company announced that it had entered into
the Subscription Agreement with Teichmann Company Limited and
parties connected with TCL for an aggregate GBP1,650,157 and that
the Company's subsidiary, Kareevlei, had entered into the Facility
Agreement with TSA for up to ZAR30m.
Subject to the satisfaction of a number of conditions relating
to the grant of security, the Company expects, pursuant to the
Subscription Agreement, to issue GBP1,066,411 Simple Loan Notes to
the Noteholders with the intention that, subject to independent
shareholder approval, further details of which are set out below,
the Simple Loan Notes will be redeemed in consideration for the
issue by the Company of the Subscription Shares and that this will
be accompanied by the issue of New Convertible Loan Notes of
GBP583,746 and an amendment to the Existing CLN, subject to the
conditions set out in the Subscription Agreement and summarised
below.
The Company is requesting the support of Shareholders for the
passing of the Resolutions, which are required in order to complete
the Teichmann Financing (to the extent not already completed) and
to avoid the need to redeem the Simple Loan Notes in case the
Resolutions are not passed. The Resolutions will be proposed at the
Annual General Meeting to be held on 7 September 2022.
The Teichmann Concert Party currently holds 3,785,556 Ordinary
Shares, equating to 17.4% of the issued ordinary share capital of
the Company. The total number of Ordinary Shares of the Company
immediately following issue of the Subscription Shares will be
37,011,192, of which the Teichmann Concert Party will hold
19,019,993 Ordinary Shares, representing 51.75% of the enlarged
ordinary share capital of the Company. Following the issue of the
Subscription Shares and conversion of the Existing CLNs and NCLNs
into Ordinary Shares through the allotment and issue of the
Existing Conversion Shares and the New Conversion Shares
respectively, the enlarged share capital will be 52,094,972
Ordinary Shares (assuming no other share issues and exercise of
Michael Houston's options), of which the Teichmann Concert Party
would hold 34,103,773 Ordinary Shares, representing 65.46% of the
enlarged issued ordinary share capital of the Company. The total
enlarged share capital and the Teichmann Concert Party's holding
may be further increased by the issue of shares in accordance with
the Broker Option which is further described in paragraph 5 below.
Under the Broker Option, the Teichmann Concert Party's holding
would still represent a maximum of 65.46% of the enlarged issued
ordinary share capital of the Company.
2 BACKGROUND
As announced by the Company on 1 June 2022, during the first
five months of 2022, the Kareevlei Diamond Mine experienced nearly
double its normal annual rainfall (561mm/22 inches). The wet season
extended into what are normally considered dry months, April and
May and in particular May, when the Company experienced over three
times the long-term average, and this following on from a very wet
Q1 had a significant impact on both mining development and
processing against expectations.
Mining development fell 36% (400,000 tonnes) as compared to
budget for April and May, which limited the mine's access to
quality kimberlite and necessitated the use of lower grade and more
difficult to handle material (clay content) in Kareevlei's
processing operations. Additionally, where the Company had hoped to
ramp up production at its new 1Mtpa processing plant, the
unforeseen lost days to rain and the lower-grade feed resulted in
operations being down against budget over the period March to May
by 48% on tonnes processed, 51% on grade and 74% on carats
produced.
Accordingly, while South Africa has since experienced drier
weather conditions, the delayed roll out of the Company's mining
development plan has impacted production output in Q2, and will
impact Q3 and therefore the 2022 outlook which was revised down in
the Company's announcement of 11 July 2022. In addition, as a
result of global economic conditions, the Company is facing
increased costs of production due to higher diesel prices and
increased costs of major suppliers.
As a result of fewer diamonds being produced and sold (3,570 and
2,699 carats respectively in Q2 2022 versus 5,442 and 5,106 in Q2
2021) as well as increasing costs, BlueRock's cash resources have
been depleted during what continues to be a period of heavy
investment in mining development. The Company, therefore, entered
discussions with TCL to support it through this period.
On 5 July 2022, the Company announced the Noteholders'
subscription for GBP1,066,411 Simple Loan Notes. If the Resolutions
are passed, they will be refinanced by subscription for the
Subscription Shares for GBP1,066,411 in aggregate. Further, if the
Resolutions are passed, the Noteholders will subscribe for the New
Convertible Loan Notes for GBP583,746 in aggregate and the Existing
CLN will be amended as described section 4 of part 2.
If the Resolutions are not passed, then the Simple Loan Notes
become redeemable immediately plus the greater of GBP1,000,000 and
the market value of the New Conversion Shares had they been issued.
The refinancing of the Simple Loan Notes by subscription for the
Subscription Shares, combined with the issue of the New Convertible
Loan Notes and amendment of the Existing CLN, will, therefore, save
the Company considerable liability.
The terms of the Subscription Agreement, the Simple Loan Note
Instrument, the New Convertible Loan Note Instrument and amendment
of the Existing CLN are summarised in section 4 of part 2.
The Teichmann Concert Party has been a substantial shareholder
and partner of BlueRock for a number of years now and has a good
working relationship with the Board. The Teichmann Financing will
allow the Noteholders to increase their exposure to the Kareevlei
mine which the Company believes offers considerable value to all
shareholders particularly once the current expansion project, which
the Teichmann Concert Party has helped to fund, is completed and
the mine is operating at its targeted run rate of 1m tonnes per
annum.
The Noteholders and TSA have confirmed that the NCLNs will be
funded from their existing cash resources. No management
incentivisation arrangements are agreed or proposed in connection
with the Teichmann Financing.
3 THE TEICHMANN FINANCING
Subscription Agreement, SLNs and CLNs
On 4 July 2022 the Company and Noteholders entered into the
Subscription Agreement pursuant to which GBP1,066,411 Simple Loan
Notes will be issued to the Noteholders. The SLNs are redeemable on
7 September 2022 with zero interest payable. Subject to the passing
of the Resolutions, the SLNs will be redeemed for 15,234,437 new
Ordinary Shares, issued at GBP0.07 per share, which would have the
effect of increasing the interest of the Teichmann Concert Party in
the Company's voting share capital from 17.38% as at the date of
the Circular to 51.75% (before conversion of the Existing CLN or
the New Convertible Loan Notes but assuming the exercise of Michael
Houston's options).
If the Resolutions are not approved by 7 September 2022, the
Company will be required to redeem the Simple Loan Notes at the
amount invested by the Noteholders plus the greater of GBP1,000,000
and the market value of the New Conversion Shares had they been
issued.
Subject to approval of the Resolutions, a New Convertible Loan
Note of GBP583,746 will be issued to the Noteholders, with a
conversion price of GBP0.07 and a maturity date of 30 November
2025. The SLN, the NCLN and the Existing CLN will, subject to
regulatory approval in South Africa, be secured by a charge over
the Company's shares in Kareevlei, as well as a charge over the
Company's bank accounts for the benefit of TSA, as lender under the
Facility Agreement, and the holders of the Existing CLNs, SLNs and
New CLNs.
Furthermore, and again subject to the approval of the
Resolutions, the Existing CLN of GBP1,610,000 will be amended to
provide for redemption and to run to an extended term of 30
November 2025. It will also remove applicable interest to its
maturity and amend the conversion price from 40 pence to 24.9 pence
(the commercial effect among the parties being the same due to the
treatment of interest and which will not alter the maximum number
of shares to be issued under the Existing CLN, being 6,465,247
Ordinary Shares).
If the NCLN Subscription takes place, the Company will issue
GBP583,746 of New Convertible Loan Notes to the Noteholders
convertible into Ordinary Shares at a price of GBP0.07 per
share.
The total number of Ordinary Shares of the Company immediately
following issue of the Subscription Shares and conversion of the
Existing CLNs and NCLNs into Ordinary Shares through the allotment
and issue of the Existing Conversion Shares and the New Conversion
Shares respectively would be 52,094,972 (assuming no other share
issues and exercise of Michael Houston's options), of which the
Teichmann Concert Party would hold 34,103,773 Ordinary Shares,
representing 65.46% of the enlarged issued ordinary share capital
of the Company.
Facility Agreement
On 4 July 2022, Kareevlei entered into a new extended credit
facility with its mining contractor, TSA, for up to ZAR30 million
which reduces to ZAR20 million 180 days after the effective date
(being the date on which the borrower satisfies the conditions
precedent to drawdown). Subject to South African regulatory
approvals, where relevant, the facility will be secured over the
plant, machinery, equipment and other moveable assets of Kareevlei.
Subject to South African regulatory approvals, where relevant, the
facility will also be guaranteed by the Company in favour of TSA
and secured by a charge over the Company's bank accounts for the
benefit of TSA and the holders of the Existing CLNs, SLNs and New
CLNs.
Further details of the Subscription Agreement, SLN Instrument,
NCLN Instrument and Existing CLN Amendment Deed are set out in
section 4 of part 2 of the Circular.
Further details relating to TCL, its ultimate beneficial owners
and the Teichmann Concert Party are set out in section 1 of part 2
of the Circular.
4 Other arrangements
In addition to the Teichmann Financing, the Company, its
nominated adviser SP Angel and TCL have entered into a new
Relationship Agreement. Under this agreement, TCL has the right to
appoint up to three directors to the board of the Company (as long
as this number is matched by independent directors who will retain
the casting vote) and to participate in future fundraisings to
maintain its shareholding (calculated on a fully diluted basis).
This agreement includes typical clauses on the ability of the
Company to operate independently of TCL. Further details of the
Relationship Agreement are set out in section 4 of part 2 of the
Circular.
The Company, Kareevlei, TCL and TSA have also entered into a
Governance Agreement which sets out a framework under which TCL and
other material shareholders of BlueRock and Kareevlei can appoint
directors at the Kareevlei level subject to the Company retaining
control of the operation of Kareevlei through a casting vote. The
Company and TCL are to agree terms of reference for a management
committee of Kareevlei, such committee to include an independent
technical expert. Further details of the Governance Agreement are
set out in section 4 of part 2 of the Circular.
Assuming the Resolutions are passed at the AGM to enable the
Teichmann Financing to proceed (to the extent it has not at that
time done so), it is the intention of Michael Houston, David Facey
and Tim Leslie to resign as directors, subject to suitable
replacements being identified.
5 BROKER OPTION
To provide Shareholders and other investors who were not able to
participate in the Teichmann Financing the option to subscribe for
Ordinary Shares at the issue price of 7p per share, the Company has
agreed with Teichmann to provide the Broker Option. This allows
subscriptions for up to an aggregate GBP0.3 million at 7p per share
with priority given to existing Shareholders of the Company. The
Teichmann Concert Party will subscribe for 65% of the total number
of Ordinary Shares issued under the Broker Option such that its
maximum percentage shareholding is maintained at no more than
65.46%. This has the effect of up to approximately GBP105,000 of
the Broker Option being available to Shareholders and investors
that are independent of the Teichmann Concert Party.
The maximum number of Ordinary Shares to be issued under the
terms of the Broker Option, if exercised, will be 4,285,714
Ordinary Shares.
To subscribe under the Broker Option, Shareholders should
communicate their interest to the SP Angel by 5:00 pm on 24 August
2022 via their independent financial adviser, stockbroker or other
firm authorised by the Financial Conduct Authority, as SP Angel
cannot take direct orders from individual private investors.
There is no guarantee that SP Angel will exercise the Broker
Option or that Shareholders and investors will be able to acquire
any Broker Option Shares.
6 significant shareholders
The holders of more than 3% of the Company's Ordinary Shares
following issue of the Subscription Shares, the Existing Conversion
Shares and the New Conversion Shares are set out below: .
Name of Number of Percentage Number of Percentage
Shareholder Ordinary of issued new Ordinary of issued
Shares ordinary Shares ordinary
held share following share
at 12 capital issue of capital
August of the the Existing of the
2022 Company Conversion Company
held as at Shares, the held
12 August Subscription immediately
2022 Shares and following
the New issue of
Conversion the Existing
Shares Conversion
Shares, the
Subscription
Shares and
the New
Conversion
Shares and
assuming
exercise
of Michael
Houston's
options
TCL* 2,480,262 11.4 22,753,380 43.68
--------------------- ---------------------- ------------------------ ------------------------
T3* 971,624 4.5 9,059,319 17.39
--------------------- ---------------------- ------------------------ ------------------------
Binvic (Pty)
Ltd 2,682,487 12.32 2,682,487 5.15
--------------------- ---------------------- ------------------------ ------------------------
Edale Europe
Absolute
Master Fund 1,167,500 5.36 1,167,500 2.24
--------------------- ---------------------- ------------------------ ------------------------
*Under common ownership, part of the Teichmann Concert Party
7 Related Party Transaction
TCL, and certain connected parties connected with the owners of
Teichmann Group, as a substantial Shareholder of the Company, are
each considered to be a "related party" as defined under the AIM
Rules and, accordingly, the Teichmann Financing, the Relationship
Agreement, Governance Agreement and Broker Option constitute a
related party transaction for the purposes of Rule 13 of the AIM
Rules.
The Directors independent of the Teichmann Financing, the
Relationship Agreement, Governance Agreement and Broker Option from
an AIM Rules perspective, being Michael Houston, David Facey, Tim
Leslie and Rob Croll, consider, having consulted with the Company's
nominated adviser, that the terms of the Teichmann Financing, the
Relationship Agreement, Governance Agreement and Broker Option are
fair and reasonable insofar as the Company's Shareholders are
concerned.
8 THE TAKEOVER CODE
The Teichmann Financing gives rise to certain considerations
under the Takeover Code. Brief details of the Panel, the Takeover
Code and the protections they afford are set out below.
Background
The Takeover Code is issued and administered by the Panel. The
Takeover Code applies to all takeover and merger transactions,
however effected, where the offeree company is, among other things,
a listed or unlisted public company resident in the United Kingdom,
the Channel Islands or the Isle of Man (and to certain categories
of private limited companies). The Company is a public company
whose Ordinary Shares are admitted to trading on AIM, and its
Shareholders are therefore entitled to the protections afforded by
the Takeover Code.
Under Rule 9 of the Takeover Code, where any person acquires,
whether by a series of transactions over a period of time or not,
an interest in shares which (taken together with shares already
held by that person and any interest in shares held or acquired by
persons acting in concert with him) carry 30 per cent. or more of
the voting rights of a company which is subject to the Takeover
Code, that person is normally required by the Panel to make a
general offer to all the holders of any class of equity share
capital or other class of transferable securities carrying voting
rights in that company to acquire the balance of their interests in
the company.
Similarly, Rule 9 of the Takeover Code also provides, among
other things, that where any person who, together with persons
acting in concert with him, is interested in shares which in
aggregate carry not less than 30 per cent. but not more than 50 per
cent. of the voting rights of a company which is subject to the
Takeover Code, and such person, or any person acting in concert
with him, acquires an additional interest in shares which increases
the percentage of shares carrying voting rights in which he is
interested, then such person is normally required by the Panel to
make a general offer to all the holders of any class of equity
share capital or other class of transferable securities carrying
voting rights of that company to acquire the balance of their
interests in the company.
An offer under Rule 9 of the Takeover Code must be in cash (or
with a cash alternative) and at the highest price paid within the
preceding 12 months for any interest in shares in the company by
the person required to make the offer or any person acting in
concert with him.
Shareholders should be aware that Rule 9 of the Takeover Code
further provides, among other things, that where any person who,
together with persons acting in concert with him, holds interests
in shares carrying more than 50 per cent. of the voting rights of a
company, acquires an interest in shares which carry additional
voting rights, then they will not normally be required to make a
general offer to the other shareholders to acquire their
shares.
Under the Takeover Code, a concert party arises where persons
acting together pursuant to an agreement or understanding (whether
formal or informal) co-operate to obtain or consolidate control of,
or frustrate the successful outcome of an offer for, a company
subject to the Takeover Code. Control means an interest or
interests in shares carrying, in aggregate, 30 per cent. or more of
the voting rights of the company, irrespective of whether the
holding or holdings give de facto control.
The Teichmann Concert Party
The Teichmann Concert Party is comprised of THL, TCL, T3, GFI,
Gary Teichmann, James te Riele, Kenneth Gibbs, Adrian Garvey,
Claude Holton, Brett Nicolay, Alan McKinney, Michael Houston and
Aimee te Riele. Further details of these persons are set out in
paragraph 1.1.3 of part 2 of this document.
For the purposes of Rule 9, the Takeover Panel considers the
Teichmann Concert Party to be a single entity. Given that on
completion of the Teichmann Financing the Teichmann Concert Party
will hold over 50% of the voting rights of the Company, any
transfer of shares in the Company between entities within the
Teichmann Concert Party and any further acquisitions of the
Company's shares by any member of the Teichmann Concert Party,
whether individually or collectively, will not be subject to the
restrictions of Rule 9 of the Takeover Code.
Dispensation from the requirement to make a general offer under
the Takeover Code
Immediately following issue of the Subscription Shares, the
Teichmann Concert Party will have acquired interests in the
Ordinary Shares carrying, in aggregate, 51 per cent. of the then
enlarged voting rights of the Company which, without a waiver of
the obligations under Rule 9 of the Takeover Code, would oblige the
Teichmann Concert Party (and any party deemed to be acting in
concert with the Teichmann Concert Party) to make a general offer
to Shareholders under Rule 9 of the Takeover Code. Each of the
Teichmann Concert Party member's existing and resultant interests
will comprise:
As at the date Following completion of the Teichmann Financing
of the Circular
Number % interest Number Subscription New Total shares Maximum
of Existing of of Shares Conversion following % interest
Ordinary Existing Ordinary Shares issue of in the
Shares Issued Shares Existing Potential
held Share to be Conversion Enlarged
Capital(1) issued Shares, Issued
if Subscription Share
Existing Shares and Capital
CLN New Conversion and voting
converted Shares rights
of the
Company(*)
-------------------- ----------- ---------- ------------- ----------- ---------------------- -----------
THL - - - - - - -
-------------------- ----------- ---------- ------------- ----------- ---------------------- -----------
TCL 2,480,262 11.4 4,399,355 10,284,735 5,589,028 22,753,380 43.68%
-------------------- ----------- ---------- ------------- ----------- ---------------------- -----------
T3 971,624 4.5 1,776,000 4,081,486 2,230,209 9,059,319 17.39%
-------------------- ----------- ---------- ------------- ----------- ---------------------- -----------
GFI 26,000 0.1 - - - 26,000 0.05%
-------------------- ----------- ---------- ------------- ----------- ---------------------- -----------
Claude
Holton 65,354 0.3 116,028 273,430 149,673 604,485 1.16%
-------------------- ----------- ---------- ------------- ----------- ---------------------- -----------
Alan
McKinney 54,419 0.2 96,555 227,679 124,630 503,283 0.96%
-------------------- ----------- ---------- ------------- ----------- ---------------------- -----------
Brett
Nicolay 43,612 0.2 77,309 182,465 144,617 448,003 0.86%
-------------------- ----------- ---------- ------------- ----------- ---------------------- -----------
Aimee
te Riele - - - 184,642 101,072 285,714 0.55%
-------------------- ----------- ---------- ------------- ----------- ---------------------- -----------
Gary - - - - - -
Teichmann -
-------------------- ----------- ---------- ------------- ----------- ---------------------- -----------
James - - - - - -
te Riele -
-------------------- ----------- ---------- ------------- ----------- ---------------------- -----------
Kenneth - - - - - -
Gibbs -
-------------------- ----------- ---------- ------------- ----------- ---------------------- -----------
Adrian - - - - - -
Garvey -
-------------------- ----------- ---------- ------------- ----------- ---------------------- -----------
Michael 423,589
Houston 144,285 0.7 - - - (2) 0.81%
-------------------- ----------- ---------- ------------- ----------- ---------------------- -----------
Total 3,785,556 17.4 6,465,247 15,234,437 8,339,229 34,103,773 65.46%
-------------------- ----------- ---------- ------------- ----------- ---------------------- -----------
*Note:
Includes the exercise of all Michael Houston's options but no
other share options (these are significantly out of the money) This
table does not include the effect of any shares issued in
accordance with the Broker Option though this will not impact the
maximum percentage holding of the Teichmann Concert Party
The Company has applied to the Panel for a waiver of the
obligations under Rule 9 of the Takeover Code in order to permit
the Teichmann Financing to proceed without triggering an obligation
on the part of the Teichmann Concert Party to make a general offer
to Shareholders. Under Note 1 of the Notes on the Dispensations
from Rule 9 of the Takeover Code, the Panel will normally waive the
requirement for a general offer to be made in accordance with Rule
9 of the Takeover Code (a "Rule 9 Offer") if, among other things,
the shareholders of the company who are independent of the person
who would otherwise be required to make an offer, and any person
acting in concert with him, pass an ordinary resolution approving
such a waiver on a poll at a general meeting.
Accordingly, the Panel has agreed to grant a waiver of the
obligation of the Teichmann Concert Party to make a general offer
under Rule 9 of the Takeover Code that would otherwise arise as a
result of the issue of the Subscription Shares, the Existing
Conversion Shares, the New Conversion Shares and any Broker Option
Shares to the Teichmann Concert Party, subject to Shareholders
approving the Waiver Resolution (Resolution 1) on a poll at the
Annual General Meeting. To be passed, the Waiver Resolution will
require a simple majority of the votes cast on a poll by the
Shareholders entitled to vote. Shareholders should note that if the
Waiver Resolution is passed by Shareholders at the Annual General
Meeting and the Teichmann Financing completed, the Teichmann
Concert Party, or any individual entity thereof, will not be
restricted from making an offer for the Company.
Shareholders should further note that, following completion of
the Teichmann Financing and issue of the Subscription Shares, the
Teichmann Concert Party will between them be interested in
approximately 51.75% of the then enlarged voting rights of the
Company and in approximately 65.46% of the then enlarged voting
rights of the Company following issue of the Broker Option Shares,
Existing Conversion Shares and the New Conversion Shares and
that:
-- by virtue of holding more than 50 per cent. of the Company's
voting rights, the Teichmann Concert Party will be entitled to
increase their holdings or aggregate interest in the voting rights
of the Company without incurring any obligation under Rule 9 of the
Takeover Code to make a general offer to all Shareholders to
acquire their Ordinary Shares; and
-- this will increase the percentage of the Ordinary Shares that are not in public hands.
This may in turn have the effect of reducing the liquidity of
trading in the Ordinary Shares on AIM. The Teichmann Concert
Party's stake in the voting rights of the Company will also mean
that the Teichmann Concert Party will be able, if they so wish, to
exert a controlling influence over resolutions proposed at future
general meetings of the Company.
The attention of Shareholders is drawn to the information on the
Teichmann Concert Party and the additional information required by
the Takeover Code set out in part 2 of this document.
9 INDEPENT ADVICE PROVIDED TO THE BOARD
The Takeover Code requires the Board to obtain competent
independent advice regarding the merits of the transaction which is
the subject of the Waiver Resolution, the controlling position
which it will create, and the effect which it will have on
Shareholders generally. Accordingly, SP Angel, as the Company's
independent financial adviser, has provided formal advice to the
Board regarding the Teichmann Financing. SP Angel confirms that it,
and any person who is or is presumed to be acting in concert with
it, is independent of the Teichmann Concert Party and has no
personal, financial or commercial relationship or arrangements or
understandings with the Teichmann Concert Party.
10 Annual General Meeting
Set out at the end of the Circular is a notice convening the
Annual General Meeting to be held at 10.00 am on 7 September 2022
at the offices of SP Angel, Prince Frederick House, 35-39 Maddox
Street, London W1S 2PP, at which the following resolutions will be
proposed.
10.1 The "Waiver Resolution"
The Waiver Resolution seeks approval of the waiver granted by
the Panel of the obligation that would otherwise arise on the
Teichmann Concert Party to make a general offer to shareholders of
the Company pursuant to Rule 9 of the City Code as a result of the
issue to the Teichmann Concert Party of the Subscription Shares,
the exercise of conversion rights and issue of the Existing
Conversion Shares and the New Conversion Shares under the Existing
CLN (as amended by Existing CLN Amendment Deed) and/or the NCLN,
the issue of Ordinary Shares under the Broker Option and the
exercise of Michael Houston's share options. In order to comply
with the City Code, Resolution 1 will be taken on a poll and the
Teichmann Concert Party members that own shares, all of whom are
disenfranchised from voting, have undertaken not to vote on this
Resolution.
10.2 Authority to allot
Resolution numbered 2 will be conditional on the approval of
Resolution numbered 1 and will be proposed as an ordinary
resolution to grant authority to the Directors to allot up to
34,603,940 Ordinary Shares. This resolution will give the Directors
suf cient authority to allot the Subscription Shares plus the
maximum number of Ordinary Shares that could be issued under the
Existing CLN and NCLN plus the maximum number of Ordinary Shares
that could be issued under the Broker Option.
10.3 Disapplication of pre-emption rights
Resolution numbered 3 will be conditional on the approval of
Resolutions numbered 1 and 2 and will be proposed as a special
resolution to disapply statutory pre-emption rights in respect of
the allotment of up to 34,603,940 Ordinary Shares for cash. This
number represents the Subscription Shares plus the maximum number
of new Ordinary Shares that could be issued under the Existing CLN
and New Convertible Loan Notes plus the maximum number of Ordinary
Shares that could be issued under the Broker Option.
10.4 Laying of reports and accounts
The directors of a public company are required to lay before the
shareholders in a general meeting copies of the directors' reports,
the independent auditors' report and the audited financial
statements of the Company in respect of each financial period. The
Company proposes, as an ordinary resolution, Resolution 4 to
receive the annual report and audited accounts of the Company for
the financial period ended 31 December 2021.
10.5 Appointment of directors
Resolutions 5 and 6 will be proposed as ordinary resolutions to
re-appoint Gary Teichmann as a director of the Company (he having
been appointed since the last annual general meeting) and Tim
Leslie who is retiring by rotation in accordance with the articles
of association of the Company.
10.6 Auditors re-appointment and remuneration
Shareholders will be asked in resolution 7 to confirm by
ordinary resolution the re-appointment of BDO LLP as auditors of
the Company and to grant authority to the Directors to determine
their remuneration.
Irrevocable undertakings to vote in favour of the Waiver
Resolutions have been given to the Company by the Independent
Directors in respect of their holdings of Ordinary Shares)
representing in aggregate 0.62% of the issued ordinary share
capital of the Company as at 12 August 2022 (being the last
business day prior to the publication of this document).
Irrevocable undertakings to vote in favour of the Resolutions
(other than the Waiver Resolution) have been given to the Company
by the Directors in respect of their holdings of Ordinary Shares)
representing in aggregate 0.76% of the issued ordinary share
capital of the Company as at 12 August 2022 (being the last
business day prior to the publication of this document).
Further details of these irrevocable undertakings are set out in
paragraph 2.6 of part 2 of the Circular.
11 Action to be taken by Shareholders
Whether or not you propose to attend the Annual General Meeting
in person, you are asked to complete the Proxy Form and return it
to the Company's registrars, Share Registrars Limited, 3 Millennium
Centre, Crosby Way, Farnham, Surrey, GU9 7XX so as to arrive as
soon as possible but in any event no later than 10.00 am on 7
September 2022. Completion and return of the Proxy Form will not
preclude you from attending the Annual General Meeting and voting
in person should you so wish.
12 Recommendation
Should the Resolutions not be approved at the Annual General
Meeting then, in the absence of alternative funding arrangements
being made available and based on the current anticipated cash flow
requirements of the Company, the Directors believe that current
cash resources of the Company will be insufficient to allow the
Company to continue trading, in particular as the Company will be
required to redeem the Simple Loan Notes in accordance with their
terms.
The Independent Directors, who have been so advised by SP Angel
acting as the independent adviser to the Company required for the
purposes of Rule 3 of the City Code, consider the Teichmann
Financing, including the waiver of the obligation which would
otherwise arise on TCL and the other members of the Teichmann
Concert Party to make a general offer to Shareholders to acquire
their Ordinary Shares under Rule 9 of the City Code to be fair and
reasonable and in the best interests of Independent Shareholders
and the Company as a whole.
Accordingly, the Independent Directors unanimously recommend
Independent Shareholders to vote in favour of the Waiver
Resolution, as they have irrevocably undertaken to do in respect of
the shares in the Company held by them totalling 133,559 Ordinary
Shares, being 0.62% of the issued ordinary share capital of the
Company.
Furthermore, the Directors unanimously recommend Shareholders to
vote in favour of the Resolutions (other than the Waiver
Resolution) and resolutions 4, 5, 6 and 7, as they have irrevocably
undertaken to do in respect of the shares in the Company held by
them totalling 277,844 Ordinary Shares, being 0.76% of the issued
ordinary share capital of the Company. If the Waiver Resolution is
approved, the Concert Party will not be restricted from making an
offer for the Company.
Yours faithfully
Michael Houston
Chairman
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