to strengthen the balance sheet to help with further finance for the capital required after theyve bought out ELM....
Those ducks are being lined up...
QUACK...QUACK
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"It is expected that if the Proposed Offer is materialised, it would involve a substantial amount of capital. The Directors therefore consider that the issue of the Convertible Bonds and the Warrants could strengthen the Group’s financial position and increase the available financial resources to prepare for the capital needs of the Group if the Proposed Offer is materialised or any other investment opportunities arise. Further announcement(s) will be made by the Company as and when appropriate in compliance with the Listing Rules in this respect."
"On 20 June 2013, after trading hours, following amicable negotiations, the Company as the issuer and Hantang Resources Investment Limited as the Subscriber entered into the Subscription Agreement in respect of the issue and subscription of the Convertible Bonds in the aggregate principal amount not exceeding HK$620,000,000 and the Warrants in the aggregate principal amount of HK$155,000,000, respectively."
REASONS FOR THE SUBSCRIPTION AGREEMENT AND USE OF PROCEEDS AND THE PRINCIPAL BUSINESS OF THE GROUP AND THE SUBSCRIBER
The Company is an investment holding company. The Group is principally engaged in the business of food and beverages, operating six restaurants and bars and three kiosks in Hong Kong at present. The Group also commenced securities trading business during the financial year ended 31 March 2012.14
Apart from the existing businesses of food and beverages and securities trading, the Group has been exploring other potential investment opportunities.
As disclosed in the Company’s circular dated 2 November 2012, since early this year, the Company has been negotiating with a mining company with the principal place of business in Africa in respect of the possible acquisition of a strategic shareholding interest in such company.
Subsequently, on 11 April 2013, the Company has entered into an indicative, non-binding, incomplete and conditional proposal with Elemental, for a possible cash offer to acquire all issued shares of Elemental for an offer price of AUD0.66 per share of Elemental (the “Proposed Offer”).
The Proposed Offer or any offer to be made by the Company, if made, may constitute a notifiable transaction for the Company under Chapter 14 of the Listing Rules. Further announcement will be made by the Company under the Listing Rules as and when appropriate.
Elemental is an advanced mining exploration and development company dual listed on the Australian Stock Exchange and the Toronto Stock Exchange. It is currently developing the Sintoukola potash project located in the Republic of Congo. Further information about Elemental should refer to its website at http://www.elementalminerals.com. Further information of the Proposed Offer is set out in the announcement of the Company dated 11 April 2013.
The Subscriber’s principal business is investing holding. Pursuant to the Subscription Agreement, the Subscriber agrees that, in respect of the Proposed Offer and its subsequent operations and establishments, the Subscriber will provide the following supports through the Subscriber Group under the principle of reasonable commercial endeavours:
(a) coordinating the loan financing arrangements to be offered by the China Development Bank for the Proposed Offer and its subsequent operations and establishments;
(b) communicating and exchanging ideas with the industry investors in the relevant areas in the PRC, and introducing strategic investors for the purpose of coordination of the Proposed Offer and its subsequent operations and establishments; and
(c) coordinating the governmental relationships between the PRC and Congo (Brazzaville), etc.15
The estimated net proceeds of the issue of Convertible Bonds (after deducting the fees and expenses) will be approximately HK$619.5 million, the net Conversion Price is equivalent to approximately HK$0.33 per Conversion Share, and the exercise in full of the Warrants would result in further net proceeds on subscription of approximately HK$155 million at any time during the Exercise Period, the net Exercise Price is equivalent to approximately HK$0.35 per Warrant Share.
The total net proceeds of the issue of Convertible Bonds and Warrants shall be approximately HK$774.5 million, which proceeds are intended to be used for funding the partial payment of the Proposed Offer or other possible future investments.
It is expected that if the Proposed Offer is materialised, it would involve a substantial amount of capital. The Directors therefore consider that the issue of the Convertible Bonds and the Warrants could strengthen the Group’s financial position and increase the available financial resources to prepare for the capital needs of the Group if the Proposed Offer is materialised or any other investment opportunities arise. Further announcement(s) will be made by the Company as and when appropriate in compliance with the Listing Rules in this respect.
Taking into account the fact that bank loans may not be favourable to the Company in view that the Group may not have sufficient assets that can be offered as securities, and the supports that the Subscriber will provide to the Company, the Directors believe this financing arrangement is in the interests of the Company and its shareholders as a whole. The Company will continuously and prudently consider other means of fundraising (including but not limited to equity fundraising) for the purposes of (i) financing any possible future investments and development of the Group and (ii) enriching the general working capital of the Company.
K2P Price at posting:
45.0¢ Sentiment: LT Buy Disclosure: Held
