6th Apr 2006 07:00
Commoditrade Inc.06 April 2006 Not for release, publication or distribution in whole or in part in or into theUnited States, Canada, Japan, Australia, the Republic of Ireland or the Republic of South Africa 6 April 2006 Commoditrade Inc. ("Commoditrade" or "the Company") Proposed acquisition of the Tambelan Interest Proposed placing of 144,000,000 Ordinary Shares at 12.5 pence per share Application for admission and re-admission to trading on the AIM market The Board is pleased to announce that it has today conditionally agreed toacquire Tambelan Company Limited's interest in its contract with Sucden (UK)Limited, a UK based commodities trading firm ("the Brokerage"), in respect ofmetals trading by the Brokerage's LME Trading Team on the London Metal Exchange. Certain definitions apply throughout this announcement and your attention isdrawn to the table at the end of this announcement where these definitions areset out in full. Highlights •Commoditrade has agreed to acquire Tambelan's interest in its contract with the Brokerage for an initial aggregate consideration of £24.4 million, to be satisfied as to the payment of £14 million in cash and by the issue of 83.4 million new ordinary shares of 12.5p each. In addition, 6 million deferred consideration shares may be issued on the achievement of certain performance criteria. •The acquisition will allow Commoditrade to receive 75 per cent. of the trading profits (after certain expenses) attributable to the LME Trading Team. •Gross profits attributable to the Tambelan Agreement have grown over the last three years to £7.1 million in the year ended 31 December 2005. •The LME Trading Team is well established and successful, with an in-depth knowledge of the markets on which it is represented and has developed strong client and market relationships. •Proposed Non-Executive Board appointments - Christopher Adams who is the head LME trader at the Brokerage and Geoffrey Conway-Henderson who has over 35 years' experience in the finance industry, dealing primarily in derivatives, interest rate swaps and options. •Placing of 144,000,000 new Ordinary Shares with institutional investors at 12.5 pence per share. to satisfy the cash consideration in respect of the Acquisition, and to provide working capital for the Enlarged Group. The Placing is expected to raise £18 million gross (approximately £15.2 million net of expenses). In view of its size, the Acquisition constitutes a reverse takeover under theAIM Rules, and is conditional, inter alia, upon the approval of Shareholders atan Extraordinary General Meeting to be held on 24 April 2006. A copy of the Admission Document to be sent to Shareholders today is availableat www.commoditrade.net Commenting, Graham Butt, Chairman of Commoditrade said: "This is a transforming acquisition for Commoditrade which immediately bringsthe Company a profitable income stream. The LME trading team has built a verysuccessful track record in the metals market and we believe that the demand formetals is expected to remain strong." Commenting, Michael Overlander, Chief Executive Officer, Sucden (UK) Limited,said: "Having had a mutually successful relationship with Tambelan over the past fiveyears, we are pleased to be continuing this with Commoditrade. We believe thispresents Sucden UK with a real opportunity to further expand our LME businessand trading team in line with our aspirations across the metals markets." Enquiries:Commoditrade Inc.John BickTel: 020 7451 9800Tel: 07917 649362 Strand PartnersJames Harris/Angela PeaceTel: 020 7409 3494 W. H. IrelandTim Cofman-NicorestiTel: 0121 665 4615 This summary should be read in conjunction with the full text of thisannouncement set out below. Strand Partners Limited, which is authorised and regulated in the United Kingdomby the Financial Services Authority, is acting as nominated adviser to theCompany in connection with the proposed admission of the Enlarged Share Capitalto trading on AIM. Its responsibilities as the Company's nominated adviser underthe AIM Rules are owed solely to the London Stock Exchange and are not owed tothe Company or to any Director or to any other person in respect of his decisionto acquire shares in the Company in reliance on any part of this announcement.W.H. Ireland Limited, which is authorised and regulated in the United Kingdom bythe Financial Services Authority and is a member of the London Stock Exchange,is acting as broker to the Company in connection with the Placing and proposedadmission of the Enlarged Share Capital to trading on AIM. Strand PartnersLimited and W.H. Ireland Limited are not acting for anyone else and will not beresponsible to anyone other than the Company for providing the protectionsafforded to their clients or for providing advice in relation to the contents ofthis announcement or the Placing or the Admission of the Enlarged Share Capitalto trading on AIM. No representation or warranty, express or implied, is made byeither Strand Partners Limited or W.H. Ireland Limited as to the contents ofthis announcement, without limiting the statutory rights of any person to whomthis announcement is issued. Neither Strand Partners Limited nor W.H. IrelandLimited will be offering advice, nor will they otherwise be responsible forproviding customer protections to recipients of this announcement or foradvising them on the contents of this announcement or any other matter. Theinformation contained in this announcement is not intended to inform or berelied upon by any subsequent purchasers of Ordinary Shares (whether on or offexchange) and accordingly no duty of care is accepted in relation to them.Strand Partners Limited has approved the contents of this announcement solelyfor the purpose of section 21 of the Financial Services and Markets Act 2000.The principal place of business of Strand Partners Limited is 26 Mount Row,London W1K 3SQ. The Directors and Proposed Directors accept responsibility for the informationcontained in this announcement. Subject as aforesaid, to the best of theknowledge and belief of the Directors and Proposed Directors (who have taken allreasonable care to ensure that such is the case), such information is inaccordance with the facts and does not omit anything likely to affect the importof such information. This announcement does not constitute, or form part of, an offer or aninvitation to purchase any securities. Not for release, publication or distribution in whole or in part in or into theUnited States, Canada, Japan, Australia, the Republic of Ireland or the Republic of South Africa Commoditrade Inc. ("Commoditrade" or "the Company") Proposed acquisition of the Tambelan Interest Proposed placing by of 144,000,000 Ordinary Shares at 12.5 pence per share Application for admission and re-admission to trading on the AIM market 1. INTRODUCTIONOn 12 July 2005, Commoditrade announced that it had entered into heads ofagreement and a period of exclusivity to acquire a UK-based company engaged inthe brokerage of commodities and derivatives. On 31 October 2005, a furtherannouncement was made by the Company that negotiations in relation to theacquisition of the Brokerage were at an advanced stage. On 16 January 2006, theCompany confirmed that negotiations to acquire the Brokerage were progressingand that, in addition, it had been granted an option by Tambelan to acquireTambelan's interest in its contract with the Brokerage in respect of metalstrading by the LME Trading Team on the London Metal Exchange. The Board has made significant progress in respect of the proposed acquisitionof the Brokerage and, whilst it still believes that the Brokerage represents aviable acquisition opportunity, it has decided to terminate discussions in thisregard in order to pursue the proposed acquisition of the Tambelan Interestwhich the Directors believe will create greater value for Shareholders. TheBrokerage is regulated by the FSA and as such, an application for change ofcontroller had been submitted to the FSA which, as a result of the terminationof discussions has now been withdrawn. Accordingly, the Board is pleased to announce today that the Company hasexercised its option to acquire the Tambelan Interest for an initial aggregateconsideration of £24.4 million, to be satisfied as to the payment of £14 millionin cash and by the issue of the Consideration Shares. In addition, the DeferredConsideration Shares may be issued on the achievement of certain performancecriteria. The Directors and Proposed Directors believe that the Acquisition represents asubstantial investment opportunity which will allow Commoditrade to receive thebenefit of the revenue stream generated by the LME Trading Team pursuant to theTambelan Agreement and which will deliver enhancement of Shareholder value. TheLME Trading Team is well established and successful, with an in-depth knowledgeof the markets on which it is represented and has developed strong client andmarket relationships. This has resulted in the achievement of strong growth inthe level of profits achieved by the LME Trading Team over recent years. In order to satisfy the cash consideration in respect of the Acquisition, and toprovide working capital for the Enlarged Group, W.H. Ireland has conditionallyplaced 144,000,000 new Ordinary Shares with institutional investors at 12.5pence per share. The Placing, which is discussed further below, is expected toraise £18 million gross (approximately £15.2 million net of expenses). As the proposed acquisition of the Brokerage was of a size that would haveconstituted a reverse takeover under the AIM Rules, dealings in the ExistingOrdinary Shares were suspended, at the Board's request, on 12 July 2005 at amid-market price of 12.25 pence per share. This suspension has now been liftedfollowing the publication today of the Admission Document. In view of its size, the Acquisition constitutes a reverse takeover under theAIM Rules, and is conditional, inter alia, upon the approval of Shareholders atan extraordinary general meeting. If the Resolutions are duly passed at the EGM,the Company's existing trading facility on AIM will be cancelled and the Companywill apply for the Enlarged Share Capital to be admitted and re-admitted (as thecase may be) to trading on AIM. An irrevocable undertaking to vote in favour ofthe Resolutions has been received from Corvus in respect of 78,500,000 OrdinaryShares representing approximately 76.07 per cent. of the Company's existingordinary share capital. Graham Butt, who is the Non-Executive Chairman of the Company, is deemed to beinterested in the Acquisition by reason of his position as trust officer andshareholder of Rampart Management Inc, a company associated with Graham Porter.Accordingly, Mr Butt has not participated in the Board's deliberations withregard to the Acquisition. Shareholders should note that the Proposals are inter-conditional. It isexpected that Admission will take place and dealings in the Enlarged ShareCapital will commence on 25 April 2006. If the Placing does not proceed, Commoditrade would need to seek alternativemethods of financing in order to meet the expenses of the Proposals and itsongoing working capital requirements. Shareholders should note that if thePlacing does not proceed and the Company is unable to procure alternativesources of funding, the Company would not be able to continue to trade. 2. THE COMPANY AND ITS INVESTMENT STRATEGYCommoditrade was incorporated on 6 January 2005 in the Cayman Islands and itsshares were admitted to trading on AIM as an investment company on 8 March 2005when it raised £515,000 before expenses, by way of a placing at 5 pence pershare. The Company was established with the primary objective of building,through investment and acquisition, a group specialising in the commoditiessector. The Board believed then, and it remains their belief now, that increasedinvestor interest in the commodities sector, driven in large part by the highinvestment returns achieved in certain areas of the metals market has resultedin a climate which is favourable for making investments in or acquiringcompanies engaged in the brokerage of commodities and derivatives. Following completion of the Proposals, the Company will continue to be aninvestment company under the AIM Rules, the strategy for which is set out indetail below. The Enlarged Board intends to invest in (either by way of minority or majorityinvestment, joint venture or other partnership arrangements) or acquirecompanies (private or public) predominantly located in Europe which would havesome or all of the following characteristics: • entities which are involved in the brokerage or trading of commodities; • entities whose trading strategy or operations complement the strategy and business of the Commoditrade Group, for example where there is an opportunity to share administrative functions or cross-sell products; • fund vehicles with investment products, which offer investors exposure to commodities markets; • entities which either offer or have potential to develop trading operations or investment products within or that complement commodity markets; and • entities developing opportunities to either trade new commodity products or to develop new methods or markets to trade commodities. Accordingly, the objective of the Company continues to be the creation of agroup combining commodities expertise with complementary trading areas while atthe same time, as required, building a back office infrastructure capable ofsupporting further growth whether by acquisition or organic development ofmarket opportunities. The net proceeds of the Placing will enable the Enlarged Group to investigatepotential Transactions in the pursuit of its strategy and to provide workingcapital for the Enlarged Group. As a company whose shares are traded on AIM, theEnlarged Board will consider effecting transactions using the Company's shares(in whole or in part) as consideration. The Company's investment strategy is intended to be long-term. If, however,circumstances arise whereby an acquired business or company may be disposed ofat a suitable premium, such possibilities will be considered at the relevanttime. The Company intends to undertake up to 5 Transactions in the 24 monthperiod following Admission, depending, amongst other matters, on the performanceof businesses which have been acquired or in which the Company has made aninvestment. The Enlarged Board's preference will be to acquire 100 per cent. ofpotential Target Companies to obtain the full benefit of their growth prospects.However, equity interests of less than 100 per cent. may be considered by theEnlarged Board if the circumstances or opportunities merit consideration. In themajority of cases, the Enlarged Board's intention will be that the Company willbe an active investor and will have a representative on the board of directorsof Target Companies. Prior to any Transaction an appropriate due diligence exercise will beundertaken. This due diligence process will be tailored according to individualTarget Companies, but would normally be expected as a minimum to include theproduction of a legal due diligence report prepared by the Company's legaladvisers and a financial due diligence report prepared by the Company'saccountants. Before any final investment decision is made, the Transaction and its relatedterms must be approved by the Enlarged Board. The Enlarged Board's intentionwill be to meet on a regular basis to discuss and monitor the status of theCompany's current and potential Transactions. The Directors intend that if the Company has not completed a Transaction within36 months from Admission, they will convene an extraordinary general meeting atwhich proposals will be put to Shareholders to liquidate the assets of theCompany and distribute the proceeds amongst Shareholders. 3. INFORMATION ON TAMBELAN, THE TAMBELAN AGREEMENT AND THE ACQUISITION Tambelan was founded in 1994 by Graham Porter as an investment vehicle, one ofthe principal activities of which has been to be a metals trading business. InJanuary 2001 Tambelan entered into an agreement with the Brokerage (which wasamended in February 2002 and again in January 2004) pursuant to which Tambelanintroduced the LME Trading Team to the Brokerage and agreed to underwrite lossesgenerated by the LME Trading Team in consideration for Tambelan receiving 75 percent. of the trading profits (after certain expenses) attributable to that team. Summary of Financial InformationA financial summary of the profits attributable to the Tambelan Agreement forthe three years ended 31 December 2005 is set out below: Year ended Year ended Year ended 31 December 31 December 31 December 2003 2004 2005 £'000 £'000 £'000Revenue 3,508 8,010 10,633Gross profitattributable to theTambelan Agreement 1,840 5,072 7,117 Notes:1. Revenue comprises 75 per cent. of the trading profits earned by the LMETrading Team. 2. Gross profit attributable to the Tambelan Agreement comprises revenue less 75per cent. of the direct costs of the LME Trading Team and 100 per cent. ofbonuses paid to the LME Trading Team. 3. The gross profit attributable to the Tambelan Agreement set out aboveincludes the following amounts relating to differences arising from foreignexchange translations which have not been verified by Lee & Allen ConsultingLimited: (2003: loss £170,600; 2004: loss £131,600; 2005: gain £136,800). The financial information above has not been audited and has been extracted fromthe accounts of Tambelan and reviewed by Lee & Allen Consulting Limited. LME tradingThe Brokerage is one of 11 category one members of the LME and the LME TradingTeam makes markets in base metals in the ring as well as via telephone trading.It also trades on the LME's electronic trading platform. The LME Trading Teamgenerates income by acting as a market-maker, buying and selling the metalstraded on the exchange and also dealing as principal trader taking positionssubject to pre-set "caps and collars". Metals traded by the LME Trading Team onthe LME are copper, aluminium, nickel, zinc, lead and tin; with copper, gold andsilver also being traded on New York's Commodity Exchange Inc. Trends in tradingPursuant to the Tambelan Agreement a proportion of the Brokerage's LME tradingprofits are paid to Tambelan. Trading income is driven by market forces and maytherefore be volatile on a daily basis. Since 2003 volatility in commodityprices has resulted in an increase in trading profits generated by the LMETrading Team. The marketCommodity prices are a function of the relationship between supply, demand andspeculative trading activity. Significant growth in trading activity ofcommodity futures and options has been experienced over recent years driven byrelatively high commodity price volatility and rising base metal pricesresulting from increased demand from developing countries, and in particularChina. This in turn has led to an increase in speculative investments being madeby financial investors such as pension funds and hedge funds, which have becomekey participants in the commodity market since 2001. Since 2001, prices for the two most traded metals on the LME, aluminium andcopper, have been high, driven by insufficient supply over the period. Thesefundamentals appear to support strong trading going forward, although anincrease in supply is expected to result in some price correction in the shortto medium term. Such a price correction should see the return to the market ofcertain participants, who were driven out by the high prices, which may supportincreased trading activity. The Directors and Proposed Directors believe thatthe demand for metals is expected to remain strong in the short-term asdeveloping countries continue to experience growth and also as growth returns tothe leading industrial economies in the world. Competitive environmentThe Brokerage faces a broad range of competitors which differ significantly byactivity. The Directors believe that competitors to the Brokerage in LME tradingare the other 10 category one members of the LME. The LME Trading Team derives competitive advantage from its reputation withinthe commodity market, the expertise and in-depth market knowledge of its membersand strong long-standing relationships with its customer base. The Directorsbelieve that there are considerable barriers to entry for new potentialcompetitors arising from the regulatory environment, the requirement forregulatory capital and the restriction on the number of trading seats available. LME Trading TeamIn addition to Christopher Adams (Head of LME trading), whose details are setout in paragraph 5 below, summary details of the key members of the LME TradingTeam are set out below: Christian Daniel Saunders (aged 31, Commodity Trader)Christian joined the LME Trading Team in 2000 and currently acts as an aluminiumtrader. Prior to joining the Brokerage, Christian worked in sales at CargillInvestor Services Limited and as a trader at Billiton Metals Limited, havingstarted his career at the LME. Dean Carr (aged 28, Commodity Trader)Dean joined the LME Trading Team in 2001 and trades all base metals and options.Dean has worked as a trader since 1998, when he commenced trading aluminium atTriland Metals Limited which he joined in 1996. Tambelan AgreementUnder the terms of the Tambelan Agreement, either party can terminate thearrangement with 3 months' notice. If the Tambelan Agreement were to beterminated following completion of the Proposals, this could have a materialadverse effect on the business and operations of the Company in that no furtherincome would be received from the Brokerage following expiry of the 3 months'notice period. Subject to agreeing definitive documentation, the parent companyof the Brokerage has agreed that the Tambelan Agreement will be amended so as tobe terminable by either party on the giving of 12 months' notice (such noticenot to be given before the first anniversary of Admission). In addition, the business of Commoditrade could be adversely affected if any ofthe members of the LME Trading Team were to leave the employment of theBrokerage and cease to be subject to the provisions of the Tambelan Agreement.The Directors have obtained an assurance from the key members of the LME TradingTeam such that if the Tambelan Agreement were to be terminated by the Brokerage,those key members of the LME Trading Team would accept an offer of employmentfrom Commoditrade provided that the terms of such employment were at leastequivalent to their existing terms with the Brokerage. If the Tambelan Agreement is terminated, the Enlarged Board would seek toreplicate that arrangement with another LME ring member or seek to invest in oracquire another brokerage in order to provide a suitable alternative tradinginfrastructure for the LME Trading Team. Graham Porter is the sole shareholder of Tambelan and is also the ExecutiveChairman of Corvus, which in turn holds 76.07 per cent. of the entire issuedshare capital of Commoditrade. Accordingly, the Acquisition is classified as arelated party transaction under the AIM Rules. The Directors (other than GrahamButt who is not deemed to be independent for the purposes of the Acquisition)consider, having consulted with Strand Partners, that the terms of theAcquisition Agreement are fair and reasonable in so far as the Shareholders areconcerned. In providing its advice to the Independent Directors, Strand Partnershas taken into account the Independent Directors' commercial assessments of theAcquisition. 4. CURRENT TRADING AND PROSPECTS OF THE ENLARGED GROUPSince its incorporation in March 2005, the Company's only significant activityhas been to obtain admission to trading on AIM and to raise £515,000 beforeexpenses through the Original Placing. Save for entering into certain materialcontracts the Company has not traded since incorporation. The Company today announced its audited results for the period ended 31 December2005. The Enlarged Board is committed to continuing the investment strategy set out inthe Company's AIM admission document dated 8 March 2005, which was to create agroup that combines commodities expertise with complementary trading areaswhilst at the same time consolidating back-office systems and reducing brokerageand commission payments made outside the group. The Enlarged Board is optimisticas to the Enlarged Group's prospects based on the combination of a continuationof the Company's investment strategy, the Acquisition, the Placing and itsexpectations for further growth in profits which they hope are able to beachieved by the LME Trading Team. Since the period ended 31 December 2005 the trading results of the LME TradingTeam have been ahead of the Directors' and Proposed Directors' expectations. 5. DIRECTORS AND PROPOSED DIRECTORSDirectorsWith effect from Completion, it is proposed that Terrence Bartlett will resignas a director of the Company and that Graham Butt will become ExecutiveChairman. In addition at Completion, Christopher Adams and GeoffreyConway-Henderson will be appointed as Non-Executive Directors. Immediatelyfollowing Completion, the Enlarged Board will comprise: Graham Mark Butt (aged 44, Executive Chairman)Graham is currently a director of Fulcrum Administration LLC, and a member ofthe society of estate and trust practitioners. For over 20 years, Graham actedas an administrator, trustee and director of The Castle Trust Co. Limited groupof companies, during which time he actively invested in structured funds andhedge funds to maximise returns for high net worth clients. Graham is currentlya director of two AIM traded companies: Raven Capital Inc. and Corvus. Joanna Rebecca Barrett (aged 39, Non-Executive Director)Joanna has over 21 years' experience in the finance industry, both in the moneymarkets and metal exchanges. For the last 8 years Joanna has worked in theoffshore financial services industry specialising in the establishment andrunning of trust and fiduciary structures. This role involves acting on behalfof high net worth clients in both equity and structured finance investments.Joanna is currently a director of the AIM traded companies Raven Capital Inc.,Gable Holdings Inc. and Corvus. Proposed DirectorsChristopher Paul Adams (aged 37, Non-Executive Director)Chris is the head LME trader at the Brokerage. He rejoined the Brokerage in 2001having worked at the Brokerage from 1994 to 1999. Chris has spent the last 19years in the commodities industry, having held numerous positions at commoditytrading houses including Billiton Enthoven Metals Limited. As well as tradingfor 15 years, he has held managerial positions for 10 years. Prior to rejoiningthe Brokerage, Chris held positions at Credit Lyonnais Rouse and AIGInternational. Geoffrey David Conway-Henderson (aged 59, Non-Executive Director)Geoffrey has over 35 years experience in the finance industry, having worked inthe money markets as a broker, dealing primarily in derivatives, interest rateswaps and options. From 1973 until 1987 he was Managing Director at Harlow Meyer& Co. Following this he left to become a director of Intercapital BrokersLimited, a subsidiary of Intercapital PLC, one of the world's largestinterdealer brokers, until his retirement in October 2003. Geoffrey is currentlya director of Corvus. 6. PRINCIPAL TERMS OF THE ACQUISITIONUnder the terms of the Acquisition Agreement, the Company has conditionallyagreed to acquire the Tambelan Interest, for a consideration comprising theissue of the Consideration Shares, the payment of £14 million in cash and,subject to the achievement of certain performance criteria, the issue of theDeferred Consideration Shares. The Acquisition Agreement is conditional on (i)the passing of the Resolutions and (ii) the Placing Agreement becomingunconditional and not having been terminated in accordance with its terms priorto completion of the Proposals. 7. DETAILS OF THE PLACING AND THE INITIAL COMMITMENTThe Company is proposing to issue 144,000,000 Placing Shares pursuant to thePlacing at the Placing Price to raise approximately £15.2 million (net ofexpenses). The Placing Shares will represent approximately 38.79 per cent. ofthe Enlarged Share Capital, will be fully paid upon issue and will rank paripassu in all respects with the Existing Ordinary Shares, the ConsiderationShares, the Bonus Shares, the Fee Shares and the Brokerage Shares. The Company, the Directors, the Proposed Directors and Graham Porter haveentered into the Placing Agreement with Strand Partners and W.H. Ireland. ThePlacing is not being underwritten. The Placing Shares have been conditionallyplaced with institutions and other investors. The Placing is conditional upon,inter alia, the Placing Agreement becoming effective on 25 April 2006 (or suchlater time and date as the Company, Strand Partners and W.H. Ireland may agreebeing not later than 16 May 2006). Initial CommitmentAt the time of the Company's admission to trading on AIM on 8 March 2005,Shareholders who subscribed at 5p per Ordinary Share under the Original Placingalso committed to subscribe for an aggregate of 3,433,333 further OrdinaryShares at a price of 15p per share, conditional upon the completion of theacquisition by the Company of a Target Company. Whilst the Acquisition relates to revenues derived from a commodity tradingbusiness, it is not strictly in line with the Company's stated investmentstrategy and accordingly the obligation to subscribe for additional shares underthe Initial Commitment will not be exercised at this time. The obligation tosubscribe for shares under the Initial Commitment will continue until such timeas the Company does complete the acquisition of its first Target Company. 8. PROPOSED SHARE ISSUESBonus SharesOn completion of the Proposals, Christopher Adams will receive 12,000,000 BonusShares and each of Dean Carr and Christian Saunders will receive 2,000,000 BonusShares as part of the Board's strategy to align their and the Company'sinterests. The Bonus Shares will be subject to the lock-in arrangementsdescribed further in paragraph 9 below. Fee SharesAlso on Completion, Alex Chapman and Brian Thomlinson will receive 2,600,000 and800,000 Fee Shares respectively in consideration of introducing potential equityinvestors to the Company; Access Capital Limited will receive 800,000 Fee Sharesin consideration of the provision of financial structuring services to theCompany; Graham Butt and Geoffrey Conway-Henderson will receive 3,000,000 and1,300,000 Fee Shares respectively; and Strand Partners will receive 800,000 FeeShares as part of its fee arrangements with the Company. All of the Fee Shares (other than those to be issued to Brian Thomlinson andStrand Partners) are to be subject to the lock-in arrangements, further detailsof which are set out in paragraph 9 below. Brokerage SharesIn consideration of the parent company of the Brokerage agreeing to theProposals, in so far as they are applicable to it, Commoditrade proposes toissue 15,350,000 new Ordinary Shares to it. 9. LOCK-IN AGREEMENTS AND ORDERLY MARKET ARRANGEMENTSEach of the Directors (other than Terrence Bartlett), Geoffrey Conway-Henderson,the Vendor and Corvus (in relation to 25 per cent. of its holding of OrdinaryShares) have entered into an agreement not to dispose of any interests in thesecurities of the Company set out in such agreement ("Lock-in Agreements")within the 12 month period following Admission. In addition, such Shareholdershave also agreed not to dispose of any interests in those same securities of theCompany in the 12 month period from the anniversary of the date of Admissionunless such disposals are made through W.H. Ireland (or the Company's brokerfrom time to time) (the arrangements save for the time period being collectivelyreferred to as "Orderly Market Arrangements"). Christopher Adams, Dean Carr and Christian Saunders have each agreed to enterinto Lock-in Agreements for a period of 24 months from Admission, save incertain limited circumstances. Each of Corvus (in relation to 75 per cent. of its holding of Ordinary Shares),Kinetic Limited (a party related to Tambelan), Alex Chapman and Access CapitalLimited have agreed to enter into Orderly Market Arrangements for a period of 24months from Admission. 10. DIVIDEND POLICYThe Company has not paid a dividend since incorporation. The Directors and Proposed Directors expect that, in the short term, theanticipated revenues generated by the Tambelan Agreement will be retained by theEnlarged Group for the development and growth of the Enlarged Group. TheDirectors and Proposed Directors will review the dividend policy in light of therevenues received pursuant to the Tambelan Agreement.The declaration and payment by the Company of dividends will be dependent uponthe Company's financial condition, future prospects and other factors deemed tobe relevant at the time. This will take into account both the requirements ofthe business and the expectations of the Shareholders. 11. IRREVOCABLE UNDERTAKING FROM CORVUSCorvus, which holds in aggregate 78,500,000 Ordinary Shares, representingapproximately 76.07 per cent. of the existing ordinary share capital, hasirrevocably undertaken to vote in favour of the Proposals. 12. SETTLEMENT, DEALINGS AND CRESTCREST is a paperless settlement procedure enabling securities to be evidencedotherwise than by a certificate and transferred otherwise than by writteninstrument. CRESTCo Limited is unable to take responsibility for the electronicsettlement of shares issued by non-UK companies. Depositary Interests allow paper stock to be dematerialised and settledelectronically. The paper based stock is transferred to a nominee company underthe control of the Depositary. The Depositary then issues the DepositaryInterests to the individual shareholder's CREST account on a one-for-one basisand provides the necessary custodial service. The Depositary Interests can thenbe traded and settlement will be within the CREST system in the same way asother CREST stock. To give Shareholders the choice of whether they want to hold their OrdinaryShares in certificated or uncertificated form, the Company has chosen to adoptthe Depositary Interests facility operated by its UK Registrar. Shareholders who elect to hold their Ordinary Shares in uncertificated formthrough the Depositary Interests facility will be bound by the terms of the DeedPoll. The Company's share register will show the nominee company, Capita IRG Trustees(Nominees) Limited, as the holder of the Ordinary Shares but the beneficialinterest will remain with the Shareholder who continues to benefit from all ofthe rights attaching to the Ordinary Shares as it would have if it had been onthe register itself. The Depositary Interests will be traded and settled via theCREST system. Shareholders can withdraw their Ordinary Shares back intocertificated form at any time using standard CREST messages. Conversion into, and transfers of, Depositary Interests are subject to stampduty or stamp duty reserve tax, as appropriate, in the normal way. Accordingly, settlement of transactions in the Ordinary Shares followingAdmission may take place within the CREST system if Shareholders so wish. CRESTis a voluntary system and holders of Ordinary Shares who wish to receive andretain share certificates will be able to do so. 13. EXTRAORDINARY GENERAL MEETINGIn order to give effect to the Acquisition and to approve other elements of theProposals, an extraordinary general meeting of the Company will be convened. Asthe Acquisition constitutes a reverse takeover, Shareholder approval will berequired under the AIM Rules. 14. ADMISSION DOCUMENTThe Admission Document setting out details of the Proposals and including a notice of the EGM, accompanied by a form of proxy (or form of direction as applicable), will be posted to Shareholders today. Copies of the Admission Document will be available to the public free of charge from today at the offices of SJ Berwin LLP, 10 Queen Street Place, London EC4R 1BE and at the offices of Strand Partners Limited at 26 Mount Row, London W1K 3SQ during normal business hours on any weekday (other than Saturdays and public holidays), until one month following the date of Admission. Expected Timetable of Principal Events 2006Admission Document publication date 6 April 11.00 a.m.(CET)Latest time and date for receipt of forms of direction on 22 April 11.00 a.m.(CET)Latest time and date for receipt of forms of proxy on 22 April 11.00 a.m.(CET)Extraordinary General Meeting on 24 April Completion of the Acquisition 25 April Admission effective and dealings in the Enlarged Share Capital expected to commence on AIM 8.00 a.m. on 25 April Expected date for CREST accounts to be credited in respect of Depositary Interests 25 April Expected date for posting of the share certificates for the New Ordinary Shares (where applicable) 2 May Acquisition and Placing Statistics Number of Existing Ordinary Shares prior to completion of theProposals 103,200,000 Placing Price 12.5 pence Number of Placing Shares being issued under the Placing 144,000,000 Number of Consideration Shares being issued pursuant to theAcquisition 83,423,114 Number of Bonus Shares being issued 16,000,000 Number of Fee Shares being issued 9,300,000 Number of Brokerage Shares being issued 15,350,000 Number of Ordinary Shares in issue immediately followingAdmission 371,273,114 Number of Deferred Consideration Shares (if issued) 6,000,000 Percentage of the Enlarged Share Capital of the Company 38.79 per cent.represented by the Placing Shares* Percentage of the Fully Diluted Share Capital represented by the 37.80 per cent.Placing Shares* Percentage of the Enlarged Share Capital of the Company held by 5.28 per cent.the Directors and Proposed Directors Gross proceeds of the Placing £18 million Estimated net proceeds of the Placing £15.2 million Market capitalisation at the Placing Price £46.4 million * The Acquisition and Placing Statistics above exclude the issue of the DeferredConsideration Shares The Placing is not being made, directly or indirectly, in or into the UnitedStates, Canada, Japan, Australia, Republic of Ireland, Republic of South Africaor any other jurisdiction in which such Placing or solicitation is unlawful.Accordingly, this announcement is not being and should not be released orotherwise distributed or sent in, into or from the United States, Canada, Japan,Australia, Republic of Ireland, Republic of South Africa, or any otherjurisdiction where to do so would be in breach of any applicable law and/orregulation. The new Ordinary Shares to be allotted pursuant to the Acquisitionand the Placing have not been and will not be registered under the SecuritiesAct or under the relevant securities laws of any state or other jurisdiction ofthe United States, Canada, Japan, Australia, Republic of Ireland or Republic ofSouth Africa. Accordingly, the new Ordinary Shares to be allotted pursuant tothe Acquisition and the Placing may not (unless an exemption under theSecurities Act or other relevant securities laws is available) be offered, sold,re-sold or delivered, directly or indirectly, in, into or from the UnitedStates, Canada, Japan, Australia, Republic of Ireland, Republic of South Africaor any other jurisdiction where this would constitute a violation of therelevant laws of, or require registration thereof in, such a jurisdiction or to,or for the account or benefit of, any US persons or a person in, or resident ofCanada, Japan, Australia, Republic of Ireland or Republic of South Africa. Strand Partners Limited, which is authorised and regulated in the United Kingdomby the Financial Services Authority, is acting as nominated adviser to theCompany in connection with the proposed admission of the Enlarged Share Capitalto trading on AIM. Its responsibilities as the Company's nominated adviser underthe AIM Rules are owed solely to the London Stock Exchange and are not owed tothe Company or to any Director or to any other person in respect of his decisionto acquire shares in the Company in reliance on any part of this announcement.W.H. Ireland Limited, which is authorised and regulated in the United Kingdom bythe Financial Services Authority and is a member of the London Stock Exchange,is acting as broker to the Company in connection with the Placing and proposedadmission of the Enlarged Share Capital to trading on AIM. Strand PartnersLimited and W. H. Ireland Limited are not acting for anyone else and will not beresponsible to anyone other than the Company for providing the protectionsafforded to their clients or for providing advice in relation to the contents ofthis announcement or the Placing or the Admission of the Enlarged Share Capitalto trading on AIM. No representation or warranty, express or implied, is made byeither Strand Partners Limited or W. H. Ireland Limited as to the contents ofthis announcement, without limiting the statutory rights of any person to whomthis announcement is issued. Neither Strand Partners Limited nor W. H. IrelandLimited will be offering advice, nor will they otherwise be responsible forproviding customer protections to recipients of this announcement or foradvising them on the contents of this announcement or any other matter. Theinformation contained in this announcement is not intended to inform or berelied upon by any subsequent purchasers of Ordinary Shares (whether on or offexchange) and accordingly no duty of care is accepted in relation to them. DefinitionsThe following definitions apply throughout this announcement, unless the contextrequires otherwise:+-----------------+------------------------------------------------------------+|"Acquisition" |the proposed acquisition by Commoditrade of the Tambelan || |Interest; |+-----------------+------------------------------------------------------------+|"Acquisition |the agreement dated on or around 5 April 2006 pursuant to ||Agreement" |which Commoditrade has conditionally agreed to acquire the || |Tambelan Interest; |+-----------------+------------------------------------------------------------+|"Act" |the Companies Act 1985 (as amended); |+-----------------+------------------------------------------------------------+|"Admission" |the admission or re-admission (as the case may be) of the || |Enlarged Share Capital to trading on AIM and such admission || |of re-admission becoming effective in accordance with the || |AIM Rules; |+-----------------+------------------------------------------------------------+|"Admission |the admission document compiled in accordance with the ||Document" |Regulations and the AIM Rules; |+-----------------+------------------------------------------------------------+|"AIM" |the AIM market of the London Stock Exchange; |+-----------------+------------------------------------------------------------+|"AIM Rules" |the rules applicable to AIM as published by the London Stock|| |Exchange from time to time; |+-----------------+------------------------------------------------------------+|"Board" or |the current directors of the Company; ||"Directors" | |+-----------------+------------------------------------------------------------+|"Bonus Shares" |the 16,000,000 Ordinary Shares proposed to be issued to || |certain members of the LME Trading Team with effect from || |Admission; |+-----------------+------------------------------------------------------------+|"Brokerage" |Sucden (UK) Limited, a UK based company, regulated by the || |FSA and engaged in the brokerage of commodities and || |derivatives; |+-----------------+------------------------------------------------------------+|"Brokerage |the 15,350,000 new Ordinary Shares proposed to be allotted ||Shares" |and issued by Commoditrade to the parent company of the || |Brokerage in connection with the Proposals; |+-----------------+------------------------------------------------------------+|"Commoditrade |Commoditrade and Commoditrade Limited; ||Group" | |+-----------------+------------------------------------------------------------+|"Company" or |Commoditrade Inc., a company incorporated in the Cayman ||"Commoditrade" |Islands with registered number 143629; |+-----------------+------------------------------------------------------------+|"Completion" |completion of the Proposals; |+-----------------+------------------------------------------------------------+|"Consideration" |the allotment and issue of the Consideration Shares and the || |Deferred Consideration Shares (if any) and payment of cash || |of £14 million; |+-----------------+------------------------------------------------------------+|"Consideration |the 83,423,114 new Ordinary Shares proposed to be allotted ||Shares" |and issued by Commoditrade to Tambelan (or such persons as || |it may direct) pursuant to the Acquisition Agreement; |+-----------------+------------------------------------------------------------+|"Corvus" |Corvus Capital Inc., a company incorporated in the British || |Virgin Islands with registration number 367829 whose || |registered office is at Palm Chambers, PO Box 119, Road || |Town, Tortola, British Virgin Islands; |+-----------------+------------------------------------------------------------+|"CREST" |the computerised settlement system to facilitate the || |transfer of title to or interests in securities in || |uncertificated form, operated by CRESTCo Limited; |+-----------------+------------------------------------------------------------+|"Deed Poll" |the deed poll dated 22 February 2005 made by Capita IRG || |Trustees Limited dealing with the creation and issue of || |Depositary Interests in respect of the Company; |+-----------------+------------------------------------------------------------+|"Deferred |the 6,000,000 new Ordinary Shares proposed to be allotted ||Consideration |and issued by Commoditrade to Tambelan (or to such persons ||Shares" |as it may direct) pursuant to the Acquisition Agreement in || |the event that the net profit attributable (before the || |payment of bonuses to the LME Trading Team) under the || |Tambelan Agreement is greater than £9 million for the 12 || |month period following Admission; |+-----------------+------------------------------------------------------------+|"Depositary" |Capita Registrars acting as depository through its || |authorised and regulated associate company Capita IRG || |Trustees Limited; |+-----------------+------------------------------------------------------------+|"Depositary |interests in uncertificated form, representing Ordinary ||Interests" |Shares, that can be settled through and held in CREST; |+-----------------+------------------------------------------------------------+|"EGM" or |the extraordinary general meeting of the Company to be held ||"Extraordinary |at 30 Quai Gustave-Ador, 1207 Geneva, Switzerland at 11.00 ||General |a.m. (CET) on 24 April 2006; ||Meeting" | |+-----------------+------------------------------------------------------------+|"Enlarged |the Commoditrade Group, as enlarged by the Acquisition; ||Group" | |+-----------------+------------------------------------------------------------+|"Enlarged |the Directors (save for Terrence John Bartlett) and the ||Board" |Proposed Directors; |+-----------------+------------------------------------------------------------+|"Enlarged Share |the issued ordinary share capital of Commoditrade as ||Capital" |enlarged by the issue of the New Ordinary Shares; |+-----------------+------------------------------------------------------------+|"Existing |the 103,200,000 Ordinary Shares in issue at the date of this||Ordinary |announcement; ||Shares" | |+-----------------+------------------------------------------------------------+|"Fee Shares" |the 9,300,000 new Ordinary Shares proposed to be allotted || |and issued by Commoditrade in connection with services || |provided in relation to the Proposals; |+-----------------+------------------------------------------------------------+|"FSA" |the Financial Services Authority; |+-----------------+------------------------------------------------------------+|"Fully Diluted |the Enlarged Share Capital together with such Ordinary ||Share Capital" |Shares as would be in issue assuming the issue of the || |Deferred Consideration Shares and full exercise of all || |outstanding warrants and options granted by the Company; |+-----------------+------------------------------------------------------------+|"IFRS" |International Financial Reporting Standards; |+-----------------+------------------------------------------------------------+|"Independent |Terrence Bartlett and Joanna Barrett; ||Directors" | |+-----------------+------------------------------------------------------------+|"Initial |the commitment made at the time of the Original Placing ||Commitment" |pursuant to which the Company is able, in certain || |circumstances, to require certain persons to subscribe for || |additional Ordinary Shares; |+-----------------+------------------------------------------------------------+|"LME" |the London Metals Exchange; |+-----------------+------------------------------------------------------------+|"LME Trading |the members from time to time of the LME trading team of the||Team" |Brokerage who are set out in the Tambelan Agreement; |+-----------------+------------------------------------------------------------+|"London Stock |London Stock Exchange plc; ||Exchange" | |+-----------------+------------------------------------------------------------+|"New Ordinary |the Consideration Shares, the Commitment Shares, the Placing||Shares" |Shares, the Bonus Shares, the Fee Shares and the Brokerage || |Shares; |+-----------------+------------------------------------------------------------+|"Option" |the option granted to Commoditrade by Tambelan on 16 January|| |2006 for Commoditrade to acquire the Tambelan Interest; |+-----------------+------------------------------------------------------------+|"Ordinary |ordinary shares of 0.1 pence each in the capital of the ||Shares" |Company; |+-----------------+------------------------------------------------------------+|"Original |the placing of 10,300,000 Ordinary Shares at a placing price||Placing" |of 5 pence per share which was effected at the time of the || |Company's admission to AIM on 8 March 2005; |+-----------------+------------------------------------------------------------+|"Placees" |subscribers for Placing Shares; |+-----------------+------------------------------------------------------------+|"Placing" |the proposed placing of the Placing Shares at the Placing || |Price pursuant to the Placing Agreement; |+-----------------+------------------------------------------------------------+|"Placing |the conditional agreement between W.H. Ireland, Strand ||Agreement" |Partners, the Directors, the Proposed Directors, Graham || |Porter and the Company; |+-----------------+------------------------------------------------------------+|"Placing Price" |12.5 pence per Placing Share; |+-----------------+------------------------------------------------------------+|"Placing |the 144,000,000 new Ordinary Shares which are the subject of||Shares" |the Placing; |+-----------------+------------------------------------------------------------+|"Proposals" |together the Acquisition, the Placing, and Admission; |+-----------------+------------------------------------------------------------+|"Proposed |Christopher Adams and Geoffrey Conway-Henderson; ||Directors" | |+-----------------+------------------------------------------------------------+|"Resolutions" |the resolutions to be proposed at the EGM and reference to a|| |"Resolution" shall be construed accordingly; |+-----------------+------------------------------------------------------------+|"Shareholders" or|holders of issued Ordinary Shares; ||"Members" | |+-----------------+------------------------------------------------------------+|"Strand |Strand Partners Limited, the Company's nominated adviser; ||Partners" | |+-----------------+------------------------------------------------------------+|"Tambelan" |Tambelan Company Limited, a company incorporated in the || |British Virgin Islands with registered number 104629; |+-----------------+------------------------------------------------------------+|"Tambelan |a profit sharing agreement made between Tambelan and the ||Agreement" |Brokerage and dated on or around January 2001 (as amended in|| |February 2002 and again in January 2004); |+-----------------+------------------------------------------------------------+|"Tambelan |Tambelan's interest under the Tambelan Agreement; ||Interest" | |+-----------------+------------------------------------------------------------+|"Target Company" |entities including, but not limited to, companies, ||or "Target |partnerships and limited liability partnerships whose ||Companies" |characteristics match the Company's investment strategy as || |set out in this announcement; |+-----------------+------------------------------------------------------------+|"Transaction" or |investments in or the acquisition of an interest in a Target||"Transactions" |Company; |+-----------------+------------------------------------------------------------+|"UK" or United |the United Kingdom of Great Britain and Northern Ireland; ||Kingdom" | |+-----------------+------------------------------------------------------------+|"Vendor" |Tambelan, a company wholly owned by Graham Porter; |+-----------------+------------------------------------------------------------+|"W.H. Ireland" |W.H. Ireland Limited, the Company's broker. |+-----------------+------------------------------------------------------------+ This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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