TIDMRPL
RNS Number : 2032G
Renewable Power and Light Plc
27 January 2010
RENEWABLE POWER & LIGHT PLC
Related Party Transactions
27 January 2010
Renewable Power & Light plc (AIM: RPL) ('RPL' or 'the Company') announces that
in conjunction with its strategy of undertaking an orderly realisation of the
remaining business and assets subject to the ongoing working capital
requirements, it proposes to enter into a sale and purchase agreement with True
North Power Group LLC ("True North") pursuant to which the Company has agreed,
subject to certain conditions including shareholder approval, to sell the entire
issued share capital of its US subsidiary RPL Holdings Inc ("RPL Holdings") to
True North for cash consideration of US$1 (the "True North SPA"), further
details of which are set out in the Circular extracted below.
True North is a company managed and controlled by Timothy Hunstad, a current
director of the Company, and Donald Verbick, a former director of the Company.
As such the proposed transaction with True North is a related party transaction
for the purpose of Rule 13 of the AIM Rules for Companies.
Upon completion of the True North SPA, the Company proposes to enter into an
agreement with True North (the "True North Service Agreement") which provides
for True North to perform certain services, if requested, in respect primarily
of the Company's presence in the United States by virtue of its ownership of RPL
Holdings, further details of which are set out in the Circular extracted below.
When aggregated with the True North SPA, the True North Services Agreement is
also a related party transaction for the purpose of Rule 13 of the AIM Rules for
Companies.
Upon completion of the True North SPA, the Company further proposes to enter
into an agreement with Carron Energy Limited ("Carron Energy") (the "Carron
Service Agreement"). Pursuant to the terms of the Carron Services Agreement,
the Company has agreed to engage Carron Energy to undertake certain services in
respect of the Company's management and administration, further details of which
are set out in the Circular extracted below.
Carron Energy is a company managed and controlled by Alexander Lambie, a current
director of the Company. As such, the Carron Services Agreement is also a
related party transaction for the purpose of Rule 13 of the AIM Rules for
Companies.
Shareholder approval of the transactions with True North are also required for
the purpose of compliance with Rules 16 and 21.1 of the City Code on Takeovers
and Mergers (the "Takeover Code") and shareholder approval of the Carron Service
Agreement is required for the purpose of compliance with Rule 16 of the Takeover
Code.
AIM Related Party
For the purpose of AIM Rule 13, Michael Reynolds and Victor Fryling, the
independent directors of the Company (the "Independent Directors") have
considered the terms of each of the True North SPA, the True North Service
Agreement and the Carron Service Agreement and having consulted with Grant
Thornton Corporate Finance, its nominated adviser, consider that the terms of
each of the agreements to be fair and reasonable as far as the Company's
shareholders are concerned.
Takeover Code Rule 16 Opinion
The Independent Directors, who have been so advised by Grant Thornton Corporate
Finance, believe that the terms of the True North SPA, the True North Service
Agreement and the Carron Service Agreement are fair and reasonable. In providing
advice to the Independent Directors, Grant Thornton Corporate Finance has taken
into account the Independent Directors' commercial assessments.
A circular convening the general meeting to seek the relevant approvals in
respect of the disposal of RPL Holdings Inc., as well the proposed transactions
with True North and the proposed service agreement with Carron will be sent to
RPL shareholders in due course, at which time a copy will be available on the
Company's website: www.rplplc.com.
The text of the circular, excluding the notice convening a general meeting of
shareholders to be held at 10.00am on 15 February 2010 is set out below.
Dealing Disclosure Requirements
Under the provisions of Rule 8.3 of the City Code on Takeovers and Mergers (the
'Code'), if any person is, or becomes, 'interested' (directly or indirectly) in
1% or more of any class of 'relevant securities' of RPL, all 'dealings' in any
'relevant securities' of that company (including by means of an option in
respect of, or a derivative referenced to, any such 'relevant securities') must
be publicly disclosed by no later than 3.30pm (London time) on the London
business day following the date of the relevant transaction.
This requirement will continue until the date on which the offer becomes, or is
declared, unconditional as to acceptances, lapses or is otherwise withdrawn or
on which the 'offer period' otherwise ends. If two or more persons act together
pursuant to an agreement or understanding, whether formal or informal, to
acquire an 'interest' in 'relevant securities' of RPL, they will be deemed to be
a single person for the purpose of Rule 8.3. Under the provisions of Rules 8.1
of the Code, all 'dealings' in 'relevant securities' of RPL by a potential
offeror, or RPL, or by any of their respective 'associates', must be disclosed
by no later than 12.00 noon (London time) on the London business day following
the date of the relevant transaction.
A disclosure table, giving details of the companies in whose 'relevant
securities' 'dealings' should be disclosed, and the number of such securities in
issue, can be found on the Takeover Panel's website at
www.thetakeoverpanel.org.uk.
'Interests in securities' arise, in summary, when a person has long economic
exposure, whether conditional or absolute, to changes in the price of
securities. In particular, a person will be treated as having an 'interest' by
virtue of the ownership or control of securities, or by virtue of any option in
respect of, or derivative referenced to, securities.
Terms in quotation marks are defined in the Code, which can also be found on the
Panel's website. If you are in any doubt as to whether or not you are required
to disclose a 'dealing' under Rule 8, you should consult the Panel.
For further information, please contact:
Renewable Power & Light plc Michael Reynolds Telephone: +44 0121
426 1777
Grant Thornton UK LLP Gerald Beaney Telephone: +44
0207 383 5100
(Nominated Adviser)
The text of the Circular (excluding the notice convening the general meeting) is
set out below.
The Company recently announced that it proposed to enter into a sale and
purchase agreement (the "True North SPA") with True North Power Group LLC ("True
North") pursuant to which the Company would agree, subject to certain
conditions, to sell the entire issued share capital of its US subsidiary RPL
Holdings Inc ("RPL Holdings") to True North (the "RPL Holdings Disposal") for
cash consideration of US$1. It is also proposed that the Company will enter into
a service agreement with True North (the "True North Service Agreement") with
effect from closing of the RPL Holdings Disposal (the RPL Disposal and the True
North Service Agreement together, the "True North Transaction").
It is also proposed that the Company will enter into a service agreement with
Carron Energy Limited ("Carron") with effect from the closing of the True North
Transaction (the "Carron Service Agreement").
The True North Transaction and the Carron Service Agreement are being pursued as
part of the Company's Investing Policy as approved by Shareholders on 19 August
2009.
In accordance with AIM Rule 15, the Company must implement its Investing Policy
by 19 August 2010 (being 12 months from the date of shareholder approval of the
Investing Policy), otherwise trading in the Company's Ordinary Shares on AIM
will be suspended in accordance with AIM Rule 40. If, following suspension of
the Ordinary Shares in accordance with AIM Rule 40, the Ordinary Shares have not
been re-admitted to trading on AIM within a further six months, the admission of
the Ordinary Shares to trading on AIM will be cancelled.
Shareholder and Regulatory Approvals
As the Company is proposing to sell a substantial non-cash asset, i.e. the
shares of RPL Holdings, to True North, a company managed and controlled by
Timothy Hunstad, a current director of the Company, and Donald Verbick, a former
director of the Company, the RPL Holdings Disposal would constitute a
substantial property transaction for the purposes of section 190 of the
Companies Act 2006 and is therefore conditional upon approval of the Company's
shareholders.
Shareholder approval of the True North Transaction is also required for the
purpose of compliance with Rules 16 and 21.1 of the City Code on Takeovers and
Mergers (the "Takeover Code") and shareholder approval of the Carron Service
Agreement is required for the purpose of compliance with Rule 16 of the Takeover
Code.
In addition, as True North is a related party of the Company as mentioned above,
and Carron is a company managed and controlled by Alexander Lambie, a current
director of the Company, the True North Transaction and the Carron Service
Agreement are related party transactions for the purposes of Rule 13 of the AIM
Rules for Companies. Michael Reynolds and Victor Fryling, the independent
directors of the Company for the purpose of the True North Transaction and
Carron Service Agreement (the "Independent Directors") having consulted with
Grant Thornton Corporate Finance consider that the terms of the True North
Transaction and Carron Service Agreement are fair and reasonable insofar as the
Company's shareholders are concerned.
The purpose of this circular is to seek shareholder approval for (i) the True
North Transaction, both generally and specifically for the purpose of compliance
with Rules 16 and 21.1 of the Takeover Code and section 190 of the Companies Act
2006, and (ii) the Carron Service Agreement for the purpose of compliance with
Rule 16 of the Takeover Code, at a general meeting ("GM") to be convened for
10.00 am on 15 February 2010.
Preliminary Approach Update and Takeover Code Approvals
Further to the announcements made on 21 November 2008, 19 December 2008 and
subsequently, the Board reconfirms that there remains one approach from a
potential offeror for the Company. The Board has sought to ascertain details of
any bid from the potential offeror, but the potential offeror has not been
forthcoming with any such details as at the date of this Circular and there can
be no certainty that any such bid will be forthcoming.
Rule 21.1 of the Takeover Code provides that during the course of an offer, or
even before the date of the offer if the Board has reason to believe that a bona
fide offer might be imminent, the Board must not without shareholder approval
take any action which may result in any offer or bona fide possible offer being
frustrated or in shareholders being denied the opportunity to decide on its
merits, including among other things, the sale of assets of a material amount.
As it is possible that the Board's strategy to proceed with the True North
Transaction could potentially frustrate any potential offer or make it less
likely that a fully-financed proposal to acquire the Company would be received,
the Company is required to seek shareholder approval of the True North
Transaction by way of an ordinary resolution at the GM for the purposes of
compliance with Rule 21.1 of the Takeover Code.
Rule 16 of the Takeover Code prohibits certain arrangements made with persons
who hold shares or rights over shares in the offeree company with favourable
conditions attached during an offer period or when one is reasonably in
contemplation, which are not being, or are not capable of being, extended to all
shareholders, unless the consent of the Takeover Panel is first obtained. As
True North is controlled by Donald Verbick, who personally holds 1,790,100
Ordinary Shares as well as options over 1,630,000 Ordinary Shares in the Company
and Timothy Hunstad, who personally holds 15,000 Ordinary Shares and options
over 1,550,000 Ordinary Shares in the Company, and Carron Energy is controlled
by Alexander Lambie who personally holds 193,175 Ordinary Shares as well as
options over 570,000 Ordinary Shares in the Company, the Takeover Panel have
indicated that they will consent to the True North Transaction and the Carron
Service Agreement provided that shareholder approval is obtained in general
meeting where the vote is a vote of independent shareholders and must be taken
on a poll, and an opinion from the Company's nominated adviser, Grant Thornton
Corporate Finance is obtained that the terms of the transactions are fair and
reasonable. For the avoidance of doubt, independent shareholders shall exclude
Timothy Hunstad, Donald Verbick, Alexander Lambie and any person acting in
concert with these individuals.
The Board will continue to evaluate the merits of any potential offer for the
Company or any transaction which would constitute a reverse take-over (as
defined by the AIM Rules for Companies). Should the Board receive a
fully-financed proposal to acquire the Company, before the GM, the Independent
Directors will consider the merits of such a proposal, in the light of the
proposed True North Transaction, taking account of the advice received from the
Company's independent financial adviser.
Background to and reasons for the True North Transaction
The Board of the Company continues to move forward to execute an orderly
realisation of the net asset value of its remaining business consistent with its
Investing Policy. The Board intends to perform this task in the shortest
possible time and at the least possible cost.
The Company currently has a wholly-owned US subsidiary called RPL Holdings Inc.
("RPL Holdings"), which in turn has one subsidiary, Power City Generating Inc.
The Board has been advised that to wind up the US business by normal shut-down
procedures will take 18 to 24 months and would incur legal and administrative
costs of approximately US$250,000 to US$400,000. During this period the US
Courts would likely require the Company to maintain cash in RPL Holdings
totalling more than US$1.5 million in the event that unknown claims might become
known. That cash amount is in addition to approximately US$1,513,000 of
identified liabilities related to RPL Holdings' office lease in Minnesota,
employee severance, taxes and other identified contract liabilities and
administrative costs.
By selling RPL Holdings to a company controlled by current management of RPL
Holdings, the Board has identified a more cost and time efficient strategy to
dispose of the US business. This should allow cash to be distributed to
shareholders at an earlier date than would be available with an alternative
strategy and thus avoid unnecessary administrative costs on the Company.
The terms of the True North SPA provide for cash to remain in the sold business
to pay identified liabilities of RPL Holdings. A reconciliation of the actual
costs compared against the projected expenses schedule will take place 60 days
after the closing of the True North Transaction, to determine amount of cash to
be paid by one party to the other to keep both parties whole. In addition, RPL
Holdings has $600,000 of deposits outstanding, related to its rail car lease.
The True North SPA requires True North to cause RPL Holdings to forward to the
Company all funds received related to these deposits, when they are received.
True North, via its acquisition of RPL Holdings, will receive the benefit of the
Minnesota office lease which runs until March 2014 as well as certain used
office equipment and furniture located in that office.
A summary of the principal terms of the True North SPA are set out below under
the heading "Principal Terms of True North Transaction".
The Board believes the net benefits of the True North Transaction, if approved,
would be to save shareholders more than US$100,000 of legal and administrative
costs and to reconcile liabilities 12 to 18 months sooner than the alternative
strategy to unwind the business. An additional benefit of the RPL Holdings
Disposal will be to have access to the US$600,000 of railcar deposits 12 to 18
months sooner, so that the funds are available for distribution to shareholders.
As Timothy Hunstad will be resigning as a director and CFO of the Company with
effect from closing of the RPL Holdings Disposal, it is proposed that the
ongoing services required by the Company for RPL Holdings in terms of year end
financial reporting, tax filing preparation and other administrative services be
performed on an ad hoc basis as needed pursuant to the True North Service
Agreement (where Mr Hunstad's knowledge of the business will be critical). Those
services required for ongoing financial reporting and administrative services
for the Company will be performed under the Carron Service Agreement.
Principal Terms of the True North Transaction
True North SPA
Pursuant to the terms of the True North SPA, the Company agrees to sell to True
North, subject to approval of the Company's shareholders and other conditions
set out in the True North SPA all of the outstanding capital stock of RPL
Holdings (the "Stock").
The consideration for the Stock will be US$1.00.
There are a number of conditions to closing, including the following:
* no litigation or other action shall have been instituted or threatened by any
government authority or other person whatsoever which shall seek to impair,
restrain, prohibit or invalidate the closing;
* no material adverse effect shall have occurred relating to the Stock, RPL
Holdings or Power City Generating, Inc. and True North shall not have received
new information concerning the business, prospects or financial condition of RPL
Holdings which is adverse in the sole determination of True North;
* True North shall be satisfied that on the date of closing RPL Holdings has
sufficient assets to cover, pay for and otherwise discharge the anticipated
disbursements of RPL Holdings as at the closing date those liabilities are
estimated to be approximately US$1,513,000;
* the Company's Independent Directors consider, having consulted its nominated
adviser that the terms of the True North SPA are fair and reasonable insofar as
the Company's shareholders are concerned in accordance with Rule 13 of the AIM
Rules for Companies;
* obtaining the consent of the shareholders of the Company for the sale of RPL
Holdings at the general meeting convened by the notice accompanying this
circular; and
* obtaining the consent of the Takeover Panel for the sale of RPL Holdings.
Assuming that shareholder approval of the RPL Holdings Disposal in accordance
with the terms of the True North SPA is obtained at the GM, it is anticipated
that the other conditions will be satisfied, and closing is anticipated to
occur, within 72 hours of the GM.
The Company provides limited representations and warranties as to, amongst other
things, authority, ownership, authorisation to enter into the transaction. True
North provides customary representations and warranties as to authority and
authorisation to enter into the transaction and covenants to discharge the
indemnified liabilities of RPL Holdings with the cash remaining in RPL Holdings
at closing. The Company's and True North's aggregate liability under the
warranties is not limited in value but any claims must be brought within 60 days
of the closing date.
The Company has provided indemnities to True North and certain parties related
to True North which, among other things, include indemnification for losses
arising out of or in connection with any material breach of any representation
or warranty made by the Company in the True North SPA. In addition, the Company
has provided an indemnity covering any third party claims made against RPL
Holdings that arise prior to the date on which the transaction closes and which
are made within 90 days after the date on which the transaction closes.
The True North SPA also provides that 60 days after the closing date, there
shall be a final accounting at which time there will be a reconciliation of the
liabilities under the True North SPA at closing against the invoices then
received. There is provision for payment to be made between the parties to take
account of any surplus or shortfall when the actual costs are reconciled with
the liabilities anticipated in the True North SPA as at the date that the
transaction closes.
It is acknowledged that RPL Holdings has placed a number of deposits, still
outstanding with third parties, amounting to approximately US$600,000. It has
been agreed that the deposits will be returned directly to the Company or to the
extent that they are returned to True North, True North shall promptly pay such
amounts to the Company.
The True North SPA is expressed to be governed by and construed in accordance
with the laws of the State of Minnesota.
True North Service Agreement
The True North Service Agreement is to be entered into at closing of the True
North SPA, and provides for True North to perform certain services, if
requested, in respect primarily of the Company's presence in the United States
by virtue of its ownership of RPL Holdings, including, amongst other things, the
following:
* administration of closing of the Company's financial books and tax filing
preparation for 2009 (and 2010 if necessary);
* accounting services including paying invoices, monthly financial statements of
the Company, and others, relating to pre-closing operations; and
* audit administration, audit preparation, fieldwork, communication with auditors,
post-fieldwork to completion of financial statements, related to pre-closing
business.
The work, fees, reimbursable expenses, payment terms and personnel of True North
assigned to provide the services are in each case to be agreed in advance
between the Company and True North.
The True North Service Agreement is expressed to be governed by and construed in
accordance with the laws of the State of Minnesota.
Principal Terms of the Carron Service Agreement
Pursuant to the terms of the Carron Services Agreement, the Company has
agreed to engage Carron to undertake certain services in respect of the
Company's management and administration, including, among other things, the
following services:
* provision of monthly management accounts;
* provision of monthly board packs;
* management of external auditors and attendant reporting to the board; and
* assistance with preparation of Half Year and Year End accounts.
A fixed charge of GBP3,500 is to be paid to Carron each month for the services.
Where additional services are required which are not specified in the Carron
Service Agreement, there is provision for additional charges to be made, such
additional charges to be agreed between the parties in writing.
The Carron Service Agreement provides that in the ordinary course either party
may give one month's prior written notice of termination, save in certain
events, including breach of the agreement, where the agreement can be
immediately terminated.
The Carron Service Agreement is expressed to be governed by and construed in
accordance with the law of England. The English courts are expressed to have
exclusive jurisdiction over any disputes or claims.
AIM Related Party
For the purpose of AIM Rule 13, the Independent Directors of the Company have
considered the terms of each of the True North SPA, the True North Service
Agreement and the Carron Service Agreement and having consulted with Grant
Thornton Corporate Finance, its nominated adviser, consider that the terms of
each of the agreements to be fair and reasonable as far as the Company's
shareholders are concerned.
Takeover Code Rule 16 Opinion
The Independent Directors, who have been so advised by Grant Thornton Corporate
Finance, believe that the terms of the True North Transaction and the Carron
Service Agreement are fair and reasonable. In providing advice to the
Independent Directors, Grant Thornton Corporate Finance has taken into account
the Independent Directors' commercial assessments.
Recommendation
The Independent Directors unanimously recommend that you vote IN FAVOUR of the
Resolutions (as set out below). Each of the Independent Directors intends to
vote IN FAVOUR of the Resolutions in respect of his own beneficial holding in
the Company amounting to, in aggregate 300,000 Ordinary Shares, representing
approximately 0.3% of the current issued Ordinary Share capital of the Company.
Your vote IN FAVOUR of the Resolutions (as set out below) is important to ensure
that the Board has the opportunity to explore all possible strategies to create
and deliver value for all of its shareholders.
Resolutions
Each of following resolutions shall be proposed as an ordinary resolution at the
GM (the "Resolutions"):
1. THAT, subject to the passing of Resolutions 2, 3 and 4 below, the True North
Transaction be and is hereby approved and that the Independent Directors of the
Company be and are hereby authorised to complete the True North Transaction and
any other agreement or deed for which the True North Transaction provides and to
make any non-material amendment, variation, waiver or extension to the terms or
conditions of the True North Transaction which the Independent Directors of the
Company consider reasonable and in the best interests of the Company and its
Shareholders to do all such other things as they consider necessary, expedient
or desirable in connection with or to facilitate the True North Transaction.
2. THAT the True North Transaction be and is hereby approved for the purpose of
compliance with Rule 16 of the Takeover Code.
3. THAT the True North Transaction be and is hereby approved for the purpose of
compliance with Rule 21.1 of the Takeover Code.
4. THAT the True North Transaction be and is hereby approved for the purpose of
section 190 of the Companies Act 2006.
5. THAT the Company entering into the Carron Service Agreement be and is hereby
approved for the purpose of compliance with Rule 16 of the Takeover Code.
The Independent Directors unanimously recommend that you vote IN FAVOUR of the
Resolutions.
Note:
This document contains certain forward-looking statements. These statements
relate to future events or future performance and reflect the Board's
expectations regarding the Company's growth, results of operations, performance
and business prospects and opportunities. Such forward-looking statements
reflect the Board's current beliefs, are based on information currently
available to the Board and are based on reasonable assumptions as of this date.
No assurance, however, can be given that the expectations will be achieved. A
number of factors could cause actual results to differ materially from the
projections, anticipated results or other expectations expressed in this
release. While the Board makes these forward-looking statements in good faith,
neither the Company, nor its Board, can guarantee that the anticipated future
results will be achieved.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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