TIDMTAN
RNS Number : 2579I
Tanfield Group PLC
22 November 2018
The information contained within this announcement is deemed by
the Company to constitute inside information under the Market Abuse
Regulation (EU) No. 596/2014. Upon the publication of this
announcement via a Regulatory Information Service ("RIS"), this
inside information is now considered to be in the public domain
Tanfield Group Plc
("Tanfield" or the "Company")
Snorkel Investment Update
The Board of Tanfield (the "Board") is updating the market on
its investment in Snorkel International Holdings LLC ("Snorkel"),
the aerial work platform business.
Business Update
Tanfield is a 49% shareholder in the equity of Snorkel following
the joint venture between Tanfield Group Plc and Xtreme
Manufacturing LLC ("Xtreme"), a Company owned by Don Ahern of Ahern
Rentals Inc ("Ahern"), relating to Snorkel, in October 2013.
As reported on 21 June 2018, Snorkel indicated to the Board that
it expected Xtreme would cause SKL Holdings to exercise its call
option at the earliest opportunity in October 2018. Yesterday, the
Board received an email attaching a call option notice in which SKL
Holdings has requested to exercise its call option to acquire
Tanfield's 49% equity in Snorkel. In the request, SKL Holdings
state that the option price to acquire the equity is $0 (nil) and
that payment of the priority amount and preferred return
(collectively "the Preferred Interest") is not required. The Board
does not agree with this statement and continues to believe that
the contractual agreements require that the Preferred Interest is
paid prior to, or in conjunction with, a call option notice and
therefore the Board does not view the call option notice as being
valid.
As reported on 20 September 2018, Charles Brooks, the former
Chief Financial Officer of Tanfield Group Plc, who had significant
input into the key documents pertaining to the joint venture
between Tanfield and Xtreme and whose employment transferred
following the joint venture to become the Chief Financial Officer
of both Snorkel and Xtreme, made assertions that the Preferred
Interest was only applicable until 30 September 2018, after which
date the value would be nil. The Board has sought clarification
from Charles Brooks as to why, if he actually believed this and did
so prior to the transaction being entered into, he did not ensure
that this was clearly explained to shareholders (1) as part of the
RNS announcement which gave a general overview of the proposed
transaction and (2) within the circular distributed prior to the
General Meeting to approve the transaction, which legally needed to
provide a comprehensive, accurate, clear and concise summary of the
terms of the transaction that was being proposed. To date, no
justifiable explanation has been provided by Charles Brooks.
The Board does not believe that either the RNS or the circular
indicate that the Preferred Interest amount is not payable and
therefore believe that both the RNS and the circular support the
Board's view that the Preferred Interest is payable prior to, or in
conjunction with, a call option notice. Furthermore, the Board is
satisfied, based on documents now in its possession, that Xtreme,
along with its legal advisors, reviewed the circular prior to
Charles Brooks releasing it on behalf of Tanfield as a detailed and
accurate representation of the proposed transaction. So far as the
Board are aware, Xtreme did not suggest any amendments to the
circular which could have indicated or inferred that the Preferred
Interest was not payable or that it had an expiry date whereby both
elements of the Preferred Interest would be expunged after 30
September 2018.
As reported on 21 June 2018, the Q1 2018 results showed a
material increase in selling, general and administrative
("SG&A") costs of 34% compared to Q1 2017. At the time, the
Board stated that it was unaware why Snorkel only decided to invest
in some key resources and functions, which it was told by Snorkel
will ensure the business is in a position to grow further and
perform better in the long term, around the time that the last
twelve month period began before SKL Holdings would be able to
exercise its call option and that in all likelihood, the material
increase would eliminate any positive option price should Xtreme
seek to exercise the option shortly after 30 September 2018.
As reported on 5 September 2018, the Q2 2018 results reported by
Snorkel included a material restatement of the Snorkel balance
sheet and a significant increase in the value of non-current
liabilities from $27m at 31 March 2018 to $79m at 30 June 2018. The
Board requested information on the reasons behind the material
restatement at the time but Snorkel have not provided a response.
Within the call option notice received yesterday, SKL Holdings
allege that the total liabilities of Snorkel amount to $108m, a
figure which is part of the call option price calculation. The
Board therefore now infer that the material balance sheet
restatement might have been undertaken in order to influence the
calculation of the option price.
On 6 November 2018, the Board contacted Don Ahern and Matthew
Elvin (CEO of Xtreme and Snorkel) to request a meeting to discuss
what their plans and aspirations for the future were. It was
suggested by them at the time that it would be best to establish
the date for the proposed meeting in early December 2018. The Board
therefore intend to follow up on the meeting request, as suggested,
in early December 2018 where it hopes a meaningful discussion can
take place surrounding the clearly different opinions relating to
the requirement to pay the Preferred Interest amount if the call
option is to be exercised and to better understand the
justification for some of the recent actions taken.
As previously stated, the Board will vigorously defend its
position that the Preferred Interest is payable prior to, or in
conjunction with, the call option notice. The Board of Tanfield has
sought - and is continuing to seek - advice in order to clearly
define the effect of the agreement on Tanfield's investment, and
will update shareholders further as and when appropriate.
Some of the information provided in this announcement is
inferred by the Board of Tanfield based on information it has been
presented with.
Investment Background
-- As reported in the Interim Results on 28 September 2018, the
Board impaired the Snorkel investment value from GBP36.3m to
GBP19.1m (US$25.3m), which it believes is underpinned by the
Preferred Interest value, made up of the contractual adjusted
priority amount (US$22.5m) and the preferred return, being 2.5%
interest charged annually on the priority amount, which at 30
September 2018 will be US$2.8m.
-- The Board reported in the 2017 Annual Report that entering
into the next phase would bring with it a level of uncertainty. In
the event that the call option is exercised after September 2018,
the Board anticipates that there will most likely be a period of
negotiation - potentially protracted - prior to any financial
realisation and the Board will need to assess the Company's
position and, if necessary, take appropriate advice and initiate an
audit at or prior to that time.
For further information:
Tanfield Group Plc 020 7220 1666
Daryn Robinson
WH Ireland Limited - Nominated Advisor / Broker
James Joyce / Chris Viggor 020 7220 1666
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
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