5th Sep 2007 15:37
R.E.A.Hldgs PLC05 September 2007 R.E.A. Holdings plc - Proposed capitalisation issue=================================================== Summary-------The company announced earlier today as part of the announcement of its interimreport for the six months ended 30 June 2007 that it proposed to make acapitalisation issue to ordinary shareholders. The company now further announcesthat it is today despatching a circular (the "circular") to shareholdersproviding information regarding the proposed issue. Pursuant to the issue, it is proposed that ordinary shareholders will beallotted new preference shares on the basis of one new preference share forevery 30 ordinary shares held at the close of business on 1 October 2007. Thenew preferences shares will be issued credited as fully paid by way ofcapitalisation of share premium account. To avoid an allottee of 1,000 or fewer new preference shares being forced eitherto retain what that allottee may regard as a relatively small allotment or toincur disproportionately high selling costs in realising the allotment, it isfurther proposed that the company will (except to the extent that allotteesotherwise elect) aggregate all new preference shares comprised in allotments of1,000 or fewer new preference shares and sell the resultant aggregated holdingon behalf of the relative allottees (subject to achievement of a minimum grossprice of 100p per share as specified below). Since implementation of the proposals will require certain shareholderapprovals, a notice is set out at the end of the circular convening anextraordinary general meeting of the company, to be held on 2 October 2007, forthe purposes of considering and, if thought fit, passing the resolutionsnecessary to implement the proposals. Background----------As shareholders will be aware, the group's business consists of oil palmoperations in East Kalimantan, a province of Indonesia. The operations have beendeveloped entirely since the early 1990's and their development has involvedmajor investment by the group. Financing this investment has posed significantchallenges for the group and, for several years, the directors felt constrainedto recommend that no dividends be paid on the ordinary shares. In 2006, with the 13,000 hectares of oil palms planted over the period 1994 to2000 approaching full maturity, the directors decided that the group's cash flowcould support the resumption of ordinary dividends at a modest level and aninterim dividend in lieu of final of 1p per ordinary share was paid in respectof 2006. With the expectation of increasing crops from the group's expanding oil palmhectarage, the directors believe that it will be appropriate over timeprogressively to increase the aggregate annual rate of dividend paid. However,the group remains committed to an ambitious development programme andimplementation of that programme will entail major capital expenditure. Thedirectors are anxious to ensure that ordinary dividend payments remaincompatible with financing such expenditure. Balancing the twin objects of increasing the rate of annual ordinary dividendsand conserving cash to finance expansion, the directors have indicated in theinterim report in respect of 2007 that they anticipate declaring dividends inrespect of 2007 totalling 2p per ordinary share (of which a first interimdividend of 1p per ordinary share has been declared for payment on 5 October2007 and the directors intend that a second interim dividend in lieu of final of1p per ordinary share should be declared for payment in early 2008). The directors recognise that dividends totalling 2p per ordinary share may notfully reflect recent improvements in the group's financial position andprospects, particularly in a year in which the group is benefiting from CPOprices that are relatively high when compared with average CPO price levels ofrecent years (albeit that there can be no certainty that current CPO prices willbe maintained). The capitalisation issue is proposed with the aim of providingsome additional return to ordinary shareholders in what should prove a good yearfor the group while facilitating the preservation of the company's liquidresources. Capitalisation Issue--------------------Upon and subject to the terms and conditions described below, it is proposedthat holders of ordinary shares on the register of members at the close ofbusiness on 1 October 2007 be allotted 1,085,795 new preference shares creditedas fully paid at par by way of capitalisation of £1,085,795 standing to thecredit of the company's share premium account, on the following basis: 1 new preference share for every 30 ordinary shares held at the close of business on 1 October 2007 (and so in proportion for anygreater or lesser number of ordinary shares held) provided that fractionalentitlements to new preference shares will be aggregated and sold on terms thatthe company will be entitled to retain the proceeds of sale. The 1,085,795 new preference shares proposed to be issued pursuant to thecapitalisation issue would represent 9.5 per cent of the 11,449,624 existingpreference shares currently in issue (not including the 1,064,581 new preferenceshares that it was announced, as part of the announcement of the company'sinterim report for the six months ended 30 June 2007, that the company isproposing to issue for cash at a price of 105p per share by way of a placingwith institutional investors). Sale arrangement----------------The directors have been concerned that an ordinary shareholder receiving a smallallotment of new preference shares pursuant to the capitalisation issue mightfind it unsatisfactory to be faced with a choice between retaining what he mayregard as a relatively small investment or incurring disproportionately highselling costs in realising his allotment. Equally, the company would prefer notto add a large number of small holdings of preference shares to the company'sregister of members as the future costs to the company of doing so would, in theopinion of the directors, be disproportionate to the benefits to the company andthe members concerned. Accordingly, under the sale arrangement, it is proposed that where an ordinaryshareholder is allotted 1,000 or fewer new preference shares pursuant to thecapitalisation issue and such shareholder does not elect to retain the newpreference shares in question, the company will, subject as provided below,arrange for those preference shares to be aggregated with preference sharesallotted to other ordinary shareholders with similar allotments and placed byGuy Butler Limited with one or a small number of professional investors. Theproceeds of sale (net of dealing costs of 1/2 per cent as referred to below)will then be distributed to the original allottees of the shares so sold prorata to the numbers of shares sold on their behalf. Whilst it is impossible to predict the price at which the holdings ofparticipants in the sale arrangement will be sold, the company will endeavour toobtain the highest price reasonably realisable at the time of sale. As anindication to prospective participants, the average of the closing mid marketquotations for an existing preference share as derived from the Daily OfficialList of the London Stock Exchange on and for the four dealings day immediatelyprior to 4 September 2007 (the latest practicable date before the publication ofthe circular) was 111.5p. The company will not sell new preference shares the subject of the salearrangement at a price of less than 100p per share. If, as a result, no sale ofsuch new preference shares has been made on or before the close of business on10 October 2007, the sale arrangement will be abandoned and prospectiveparticipants in the sale arrangement will retain the new preference sharesallotted to them. The company has agreed with Guy Butler Limited a dealing commission of 1/2 percent of the gross proceeds of shares sold pursuant to the sale arrangement forthe services of Guy Butler Limited in connection with the sale arrangement, suchcommission to be borne by the participants in the arrangement. On the basis of the composition of the company's register of ordinaryshareholders as at 4 September 2007 (the latest practicable date before thepublication of the circular), 898 ordinary shareholders would be allotted 1,000or fewer new preference shares pursuant to the capitalisation issue representingin aggregate 50,917 new preference shares (being some 4.7 per cent of the newpreference shares proposed to be issued pursuant to the capitalisation issue). The directors recognise that the restriction of the sale arrangement to ordinaryshareholders who are allottees of 1,000 or fewer new preference shares pursuantto the capitalisation issue will mean that the treatment of those shareholderspursuant to the capitalisation issue will differ from that of other ordinaryshareholders. The directors consider that allottees of 1,000 or fewer newpreference shares are in a different position from other ordinary shareholdersdue to the cost implications for the company of adding a large number of smallholdings to its register of members. Elections to retain new preference shares that would otherwise be subject to thesale arrangement will be irrevocable and may only be made pursuant to theelection forms that are enclosed with the circular. Further forms of election,if required as a result of any as yet unregistered sale or other transfer ofordinary shares or any sale or other transfer following the date of thecircular, will be available on request from the company's registrars, CapitaRegistrars, of The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU(telephone: 0870 162 3121). Ordinary shareholders holding ordinary shares for a number of beneficial owners,one or more of whom will be beneficially entitled to 1,000 or fewer newpreference shares pursuant to the capitalisation issue and who wish to availthemselves of the sale arrangement, should act immediately to transfer therelevant number of ordinary shares into a separate account. Further terms-------------The new preference shares to be issued pursuant to the capitalisation issue willupon issue rank pari passu in all respects with the existing preference sharesand, in particular, will rank for dividend on 31 December 2007 as if theirdividend entitlement on that date had accrued (at the rate of 9 per cent perannum) with effect from and including 1 July 2007. The existing preferenceshares are already admitted to trading on the London Stock Exchange's market forlisted securities. No expenses of or incidental to the capitalisation issue will be charged toallottees of new preference shares and the new preference shares will beregistered by the company in the names of the allottees thereof free of stampduty and stamp duty reserve tax. New preference shares the subject of the salearrangement will be sold on terms that stamp duty or stamp duty reserve taxpayable on transfer of those shares will be borne by the purchaser(s) of theshares and not the participants in the sale arrangement. However, the dealing commission of 1/2 per cent referred to above, payable in connection with the salearrangement, will be deducted in calculating the net proceeds of sale of newpreference shares sold pursuant to the arrangement. No premium will be payable upon issue of any of the new preference shares. Conditions----------The proposals are conditional upon: • the passing of the first resolution set out in the notice ofthe extraordinary general meeting of the company convened for 2 October 2007 • admission of the new preference shares to the Official List andto trading on the London Stock Exchange's market for listed securities and suchadmissions becoming effective on or before 5.00 pm on 31 October 2007. The sale arrangement is further conditional upon the passing of the secondresolution set out in the notice of the extraordinary general meeting of thecompany convened for 2 October 2007. Risk factors------------The capitalisation issue will result in holders of ordinary shares receiving newpreference shares. The risks attaching to an investment in the preference sharesdiffer in some respects from those attached to an investment in the ordinaryshares. The existing market capitalisation of the preference share capital of thecompany is substantially less than that of the ordinary share capital and thismay be expected to remain the case for the foreseeable future. An investment inthe preference shares may therefore be more illiquid than an investment in theordinary shares. The value of an investment in any shares of the company may be affected by manyfactors including general economic conditions, levels of interest rates,political events and trends, tax laws, rates of inflation and changes orperceived changes in the group's performance and prospects. Because thepreference shares are fixed income securities, the impact of such factors on thevalue of the preference shares may differ from its impact on the ordinaryshares. Meetings--------As already noted, an extraordinary general meeting of the company has beenconvened for 12.00 noon on 2 October 2007, to be held at the London office ofthe company's solicitors, Ashurst, at Broadwalk House, 5 Appold Street, LondonEC2A 2HA. Two resolutions are set out in the notice of the meeting. Of these, the firstresolution will be proposed as an ordinary resolution and the second resolutionas a special resolution. The first resolution provides authority pursuant toarticle 154 of the company's articles of association for the directors toimplement the capitalisation issue (including, subject to the passing of thesecond resolution, the sale arrangement). The second resolution amends article156 of the articles of association of the company by adding a specific authorityin relation to the capitalisation issue to empower the directors to implementthe sale arrangement. The full text of the proposed new article 156 is set out in the secondresolution. Recommendation--------------The board considers that the proposed capitalisation issue is in the bestinterests of the company and its shareholders as a whole. The board alsoconsiders that the proposed sale arrangement and amendment of the articles ofassociation of the company are in the best interests of the company and itsshareholders as a whole. Accordingly, the board recommends all ordinary shareholders to vote in favour ofboth resolutions set out in the notice of extraordinary general meeting of thecompany convened for 2 October 2007 as the directors (and persons connected withthem within the meaning of section 346 of the Act) intend to do in respect oftheir own beneficial holdings. The beneficial holdings of the directors (and persons connected with them withinthe meaning of section 346 of the Act) comprise 997,394 ordinary shares(representing 3.1 per cent of the ordinary shares in issue). Further information-------------------Copies of the circular will be available for inspection at the Document ViewingFacility of the UK Listing Authority up to and including the date of theextraordinary general meeting convened for 2 October 2007 and may be obtainedfree of charge from the company at its registered office, First Floor, 32-36Great Portland Street, London W1W 8QX. A copy of the circular is also beingplaced on the company's website at www.rea.co.uk. Expected Timetable------------------Latest time and date for receipt of proxies for use in connection with the extraordinary general meeting 12.00 noon on 30 September 2007 Latest time and date for receipt of election forms 3.00 pm on 1 October 2007 Record date for the capitalisation issue 1 October 2007 Extraordinary general meeting 12.00 noon on 2 October 2007 Admission of new preference shares to the Official List and to trading on the London Stock Exchange effective and proposals unconditional 8.00 am on 3 October 2007 CREST accounts credited in respect of new preference shares 3 October 2007 Definitive share certificates despatched in respect of new preference shares 17 October 2007 Cheques despatched (representing net proceeds of sale of new preference shares sold pursuant to the sale arrangement despatched) 17 October 2007 Definitions-----------Unless the context otherwise requires, the following definitions applythroughout this announcement: "Act" the Companies Act 1985 (as amended) "board" the board of directors of the company "Capita Registrars" a trading division of Capita IRG Plc "capitalisation issue" the proposed capitalisation issue of 1,085,795 newpreference shares to be allotted to holders of ordinary shares, credited asfully paid by way of capitalisation of share premium account, on the basis ofone new preference share for every 30 ordinary shares held at the close ofbusiness on 1 October 2007 "company" or "REA" R.E.A. Holdings plc "CPO" crude palm oil "CREST" the relevant system (as defined in the Uncertificated SecuritiesRegulations 2001) in respect of which CRESTCo Limited is the operator "directors" directors of the company "election form" the form upon which a holder (or joint holders) of ordinaryshares who is/are (a) prospective allottee(s) of 1,000 or fewer new preferenceshares pursuant to the capitalisation issue may elect (in whole or in part) notto participate in the sale arrangement "existing preference shares" the existing issued preference shares "group" the company and its subsidiaries "London Stock Exchange" London Stock Exchange plc "new preference shares" the new preference shares proposed to be issued pursuantto the capitalisation issue "Official List" the list maintained by the Financial Services Authority inaccordance with section 74(1) of the Financial Services and Markets Act 2000 "ordinary shares" ordinary shares of 25p each in the capital of the company "preference shares" 9 per cent cumulative preference shares of £1 each in thecapital of the company "proposals" the proposals, details of which are set out in this document, forthe capitalisation issue and the sale arrangement "sale arrangement" the arrangement whereby the company will (except to theextent that allottees otherwise elect) aggregate all new preference sharescomprised in allotments of 1,000 or fewer new preference shares pursuant to thecapitalisation issue and arrange for the resultant aggregated holding to beplaced by Guy Butler Limited with one or a small number of professionalinvestors (subject to achievement of the minimum price referred to under "Salearrangement" above) "shareholders" holders of ordinary shares and/or preference shares This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
R.e.a.hldgs.