TIDMDIS
RNS Number : 8489F
Distil PLC
20 July 2021
Distil PLC
Placing of, and Subscription for, 160,000,000 new Ordinary
Shares at 2 pence per share with Placing Warrants at 2 pence per
share; Investment in Ardgowan; Related Party Transactions; and
Notice of General Meeting
Distil plc (AIM:DIS), owner of premium drinks brands RedLeg
Spiced Rum, Blackwoods Gin and Vodka, TRØVE Botanical Vodka, Blavod
Black Vodka, Jago's Cream Liqueur and Diva Vodka, is pleased to
announce it has conditionally raised GBP3.2 million (before
expenses) through a Placing and Subscription (together, the
"Fundraising").
The Fundraising will allow Distil to enter into investment
arrangements with Ardgowan Distillery Company Limited ("Ardgowan")
to part fund the development of a new whisky distillery by Ardgowan
(the "Investment") and, through its subsidiary, Distil Company
Limited, enter into a Manufacturing Agreement and a Mutual Services
Agreement with Ardgowan to take advantage of the operational and
strategic opportunities presented by the Investment.
The Company has conditionally placed 87,500,000 new ordinary
shares of 0.1p each ("Ordinary Shares") in the capital of the
Company (the "Placing Shares") at a price of 2p per Placing Share
(the "Issue Price") to raise GBP1,750,000, before expenses (the
"Placing").
The Company also announces a conditional subscription of
72,500,000 Ordinary Shares of the Company (the "Subscription
Shares") at the Issue Price with existing shareholders to raise
GBP1,450,000, before expenses (the "Subscription").
Pursuant to the Placing and the Subscription, for every three
Placing Shares and every three Subscription Shares, investors will
receive two warrants (the "Placing Warrants"), exercisable at the
Issue Price for a period of twelve months from Admission. In
connection with the Placing, the Company's broker, Turner Pope
Investments (TPI) Limited ("Turner Pope"), will receive 2,625,000
warrants (the "Broker Warrants") exercisable at the Issue Price for
a period of three years from Admission.
The Subscription and Investment and the entering into the
Manufacturing Agreement and Mutual Services Agreement involve
related party transactions under the AIM Rules. The Independent
Directors, having consulted with SPARK Advisory Partners, the
Company's nominated adviser, consider that the terms of the
Investment are fair and reasonable insofar as Shareholders are
concerned.
Transaction Highlights:
-- Placing and Subscription to raise GBP3.2 million (before
expenses) through the issue of 160,000,000 new Ordinary Shares at
the Issue Price;
-- Placing Warrants to be issued on the basis of two warrants
for every three Placing Shares and Subscription Shares, exercisable
at the Issue Price for a year from Admission;
-- Roland Grain, a non-executive director of the Company, and
BERO intend to subscribe for, in aggregate, 72,500,000 Ordinary
Shares in the Subscription;
-- 87,500,000 Placing Shares have been placed by Turner Pope
with its High Net Worth private clients and certain institutional
investors;
-- The net proceeds of the fundraising will be used by Distil to
invest GBP3 million (with the option to increase this to GBP5
million) in Ardgowan in the form of a convertible loan. This loan
forms part of a total initial investment package of GBP11.4
million, which will be used by Ardgowan to build the Ardgowan
Distillery and visitor centre;
-- Immediate and longer-term benefits for the Company through
the Investment, including distilling, new product development and
small batch bottling capability, a physical 'home' for the
Company's Blackwoods and TRØVE brands and access to Ardgowan's
Master Distiller, the renowned Max Macfarlane, to help produce an
own brand malt whisky for the Company;
-- The global malt whisky market is currently worth
approximately US$7.7bn out of a total whisky market worth
approximately US$74bn annually. The Directors believe there is
significant scope for growth in the malt whisky market and see
numerous benefits through adding malt whisky to the Company's
product portfolio as well as through further collaborative
agreements with Ardgowan;
-- Ardgowan has full planning permission to build a new
distillery and convert a range of existing buildings on part of the
Ardgowan Estate, west of Glasgow near Inverkip in Scotland, to
include a separate distillery for the Company, as well as a visitor
centre and shop. The Estate, at the heart of which is Ardgowan
House, is steeped in history and the distillery development is
expected to increase its standing as an events and tourist
attraction;
-- The Placing Shares and Subscription Shares will represent
approximately 24.1 per cent. of the Enlarged Share Capital
following Admission;
-- The Issue Price represents a discount of approximately 13.0
per cent. to the Closing Price of 2.3 pence per Ordinary Share on
19 July 2021, being the last practical date prior to the date of
this announcement;
-- General meeting to approve the resolutions (the
"Resolutions") required to implement the Fundraising is to be held
at Suite 113, 3 More London Riverside, London SE1 2RE at 10.00 a.m.
on 5 August 2021. A detailed timetable of events is set out at the
bottom of this announcement.
Don, Goulding, Executive Chairman of the Company, commented
"We are delighted to announce our agreement and partnership with
Ardgowan which we see as a fantastic opportunity to add significant
growth to the business in both the short and long term.
The Ardgowan team has a wealth of experience for us to draw upon
in developing our own brand of malt whisky, positioning ourselves
in a premium category which has been in long term growth globally.
In addition, the deal provides us with the opportunity to build our
own stand-alone gin distillery, not only allowing us to create a
home for Blackwoods, but also giving us access to facilities that
will allow us to accelerate NPD across our portfolio.
The Ardgowan team's vision for the distillery and plans for the
future are exciting, and we look forward to collaborating with them
on mutually beneficial projects as this new partnership develops
and we push the Distil business into a new stage of growth and
development."
Copies of a Circular convening a General Meeting for 10.00 a.m.
on 5 August 2021 will be sent to shareholders later today, and is
available on the website of the Company at
http://www.distil.uk.com/
Extracts from the Circular are set out below:
For further information:
Distil PLC
Don Goulding, Executive Chairman Tel: +44 203 283 4006
Shaun Claydon, Finance Director
----------------------
SPARK Advisory Partners Limited
(NOMAD)
----------------------
Neil Baldwin Tel: +44 203 368 3550
Mark Brady
----------------------
Turner Pope Investments (TPI)
Ltd
(Broker)
----------------------
Andy Thacker Tel: +44 203 657 0050
James Pope
----------------------
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED
UNDER THE UK VERSION OF THE MARKET ABUSE REGULATION NO 596/2014
WHICH IS PART OF ENGLISH LAW BY VIRTUE OF THE EUROPEAN (WITHDRAWAL)
ACT 2018, AS AMED. ON PUBLICATION OF THIS ANNOUNCEMENT VIA A
REGULATORY INFORMATION SERVICE, THIS INFORMATION IS CONSIDERED TO
BE IN THE PUBLIC DOMAIN.
Extracts from the Circular:
"
1. Background to and reasons for the General Meeting
Your Board announced on 20 July 2021 that the Group had entered
into investment arrangements with Ardgowan Distillery Company
Limited. These arrangements involve Distil making a convertible
loan of up to GBP3 million (with the option to increase this to up
to GBP5 million) to Ardgowan, to part fund the development of a new
whisky distillery by Ardgowan, and, through its subsidiary Distil
Company Limited, entering into a Manufacturing Agreement and a
Mutual Services Agreement with Ardgowan to take advantage of the
operational and strategic opportunities presented by the
Investment.
In addition, and to fund the Investment, the Company proposes to
raise GBP3.2 million before fees and expenses by a placing of, and
subscription for, 160,000,000 new Ordinary Shares with existing and
new investors at an Issue Price of 2 pence per New Ordinary Share.
The Issue Price represents a discount of approximately 13.0 per
cent. to the Closing Price of 2.3 pence per Ordinary Share on 19
July 2021, being the last practical date prior to the date of the
Announcement. Placing Warrants over 107,166,665 shares will also be
issued to, inter alia, participants in the Placing and the
Subscription.
The Placing Shares and Subscription Shares will represent
approximately 24.1 per cent. of the Company's Enlarged Share
Capital. The Placing Shares have been placed, and the Subscription
Shares have been subscribed for, conditional, inter alia, on the
passing of the Resolutions being proposed at the General Meeting
and upon Admission (which is expected to become effective with
dealings in the Placing Shares and the Subscription Shares to
commence on 6 August 2021). Neither the Placing nor the
Subscription have been underwritten.
For the Placing and Subscription to proceed, the Company
requires Shareholders' approval to authorise the Directors to allot
the Placing Shares, the Subscription Shares and the Fee Shares, to
issue the Placing Warrants and Broker Warrants and to disapply
statutory pre-emption rights in relation to the issue of the
Placing Shares, the Subscription Shares, the Fee Shares, the
Placing Warrants and Broker Warrants.
I am therefore writing to provide you with details of the
Proposals, and to give you notice of the General Meeting at which
the resolutions to authorise the Directors to allot and issue the
Placing Shares, the Subscription Shares, the Fee Shares, the Broker
Warrants and the Placing Warrants, as well as Ordinary Shares
(and/or rights to subscribe for them) up to the aggregate nominal
value of GBP220,909 will be put to Shareholders. The General
Meeting is to be held at 10.00 a.m. on 5 August 2021 and the formal
notice of General Meeting is set out at the end of this
document.
2. Details of the Ardgowan Distillery and the proposed Investment
Ardgowan Estate and the Ardgowan Distillery
Ardgowan history
Ardgowan House stands on a high promontory overlooking the River
Clyde about 30 miles west of Glasgow City. Ardgowan Castle,
constructed in the late 15th century, is located on the grounds of
the Ardgowan Estate. Prior to the construction of the castle in
stone, an older wooden fort stood on the site. This fort was
reputedly conceived as a coastal watch tower, built to ward off
Viking marauders.
Robert the Bruce has a connection to Ardgowan having fought
there twice, firstly on the side of the English in taking the
castle, and then, prior to his victory at Bannockburn, on the side
of the Scots to defend it. Robert III granted to his son Sir John
Stewart the lands of Ardgowan, Inverkip in the Barony of Renfrew on
5 May 1404.
After the defeat of William Wallace's Scots army at the Battle
of Falkirk in 1298, it took Edward I six years to gain full control
of Scotland. The last stronghold of resistance to English rule was
Stirling Castle. Impatient with the lack of progress in securing
Stirling Castle, Edward ordered his chief engineer to begin work on
a new, massive siege engine called the Warwolf. The engine was
constructed in the grounds of Ardgowan Estate with oak beams hewn
from local trees. When completed, the siege engine was transported
to Stirling, and the Scottish garrison surrendered.
In the 1890s Ardgowan was associated with whisky making, the
original Ardgowan Distillery Company Limited was formed and a
whisky distillery was built in Baker Street in Greenock. The
distillery operated through the early 1900s and was converted to
make industrial alcohol before World War II. The alcohol was then
used as part of a fiery mix to fuel RAF fighter planes. The
original distillery was almost destroyed in the Greenock Blitz of 7
May 1941, when it burned for two days, its blue flames providing a
beacon for successive waves of Luftwaffe bombers. The production
plant was rebuilt in a month, although the surrounding buildings
were in ruins for the rest of the war. It finally ceased production
in 1952.
Ardgowan Distillery Company Limited was founded to resurrect the
Ardgowan connection to whisky and to create a new distillery.
Although the distillery will be new it will borrow extensively from
the history, provenance and heritage of Ardgowan Estate and
Inverkip.
Ardgowan Strategy
While Ardgowan is waiting for the distillery to be constructed
and for its own Ardgowan Single Malt whisky to come to market
(Scotch whisky has to be rested in oak casks for a minimum of three
years), it has been building a trading business that is based on
purchasing quality malts from other distilleries and blending and
bottling them under the Ardgowan "Clydebuilt" brand. These whiskies
are sold through an online store in the UK and through selected
international distribution partners.
Additional specialised products, including the Ardgowan
"Discovery" series based on interesting "discovered" casks, will be
released to attract different audiences. A quality blended whisky
comprising grain and Single Malts is also in the development
pipeline.
This strategy is to:
-- Build a loyal base of customers who are enthusiastic and supportive of the brand.
-- Create brand awareness with an online community who are
supportive of the brand and who will eventually become customers of
the Ardgowan Single Malt. Ardgowan has built a database of
supportive followers of over 28,000 as of July 2021. Online sales
from January 1 to June 30 stand at over GBP100,000 and the
returning customers' rate is over 25%.
-- Create an international network of distribution companies who
are familiar with the products, the quality, and the team and who
will move seamlessly to presenting Ardgowan Single Malt to their
customer base.
This strategy is also important from a cash flow perspective. It
will bring increasing levels of cash to the business during the
construction of the distillery and prior to the launch of the
Ardgowan Single Malt.
Quality
Ardgowan Distillery Company Limited has acquired the services of
Willie Phillips: the living whisky legend behind The Macallan
Single Malt, and Max McFarlane: another legend responsible for the
success of Highland Park Single Malt. Together they will seek to
create unique products of excellent quality that transcend the
traditional whisky categories. Their primary drivers are quality
and excellent flavour.
Water
Water is the life blood of distilleries and the local spring
that provides the Ardgowan Distillery with its pure water is part
of a network of springs that have been used since the foundation of
the estate over 600 years ago. The water from the spring is
beautifully clean and sweet - it has been analysed by Scottish
Water and the Ardgowan board believes it is perfect for producing a
classic Lowland Single Malt whisky. Other water supplies are
developed to provide backup and assurance that the distillery will
not be without water even during the driest production years.
Legend has it that Robert the Bruce camped near the spring and his
weary horse drank deeply from its sweet waters.
The Team
Ardgowan has established a strong and experienced team with
world-wide experience in the development, distilling and promotion
of whisky.
Willie Phillips was appointed as Chairman of Ardgowan in 2017.
Mr Phillips is an economics and history graduate of the University
of Glasgow and is well known within the Scotch whisky industry.
Following his appointment as an accountant at Macallan-Glenlivet
plc in 1974, he was promoted to Financial Director in 1976 and
Managing Director in 1978, occupying the last post until the
purchase of the company by Highland Distillers in 1996. During this
latter eighteen-year period his team's passionate adherence to
quality established 'The Macallan' Single Malt Scotch whisky as a
small international brand with a high reputation.
The opportunity to work with other industry experts on this
exciting project convinced Willie to return to a mainstream role in
the Scotch whisky industry. Willie's first whisky development at
Ardgowan, the 20-year-old Expedition product, took the gold medal
at the 2019 Scottish Whisky Awards.
Ardgowan has recruited, as Master Distiller, an award-winning
whisky maker, Max McFarlane. Max has worked with iconic whisky
names including Famous Grouse, Bunnahabhain, Glengoyne, Tamdhu, and
Glenrothes. He was instrumental in the rise of Highland Park, and
his name appeared prominently on their labelling before his recent
retirement. His exceptional contribution to Scotch whisky was
recognised in 2017 when he was inducted as a Keeper of the Quaich.
Working with Ardgowan, Max has created Clydebuilt Coppersmith which
won a silver medal in the 2020 Scottish Whisky Awards and a gold
medal at the 2021 Spirits Business Whisky Masters.
Ardgowan has indicated its intention to focus on exploiting the
growing global demand for Single Malt whisky, with production of
limited quantities of a 5-year-old whisky to be first released in
2028.
Founders
The founders of Ardgowan Distillery Company Limited are Martin
McAdam and Alan Baker. Martin holds a BE (Hons) in Chemical
Engineering from University College Dublin and in 2003 completed
the Advanced Management Program (AMP) at Harvard Business School.
Martin is a Fellow of the RSA and a Fellow of the Institution of
Engineers of Ireland.
In his early career Martin worked in the process control and
power industries before switching to the computer industry where he
became a founder of several successful software companies. In early
2000 he became an investor and employee in the start-up renewable
energy company Airtricity, and in 2003 he relocated to the US and
took on the role of General Manager for the North American market.
Airtricity was subsequently sold to SSE for over GBP1bn in late
2007.
Martin became a founder shareholder in Kingsbarns distillery in
Fife which was acquired by the Wemyss family in 2010. In 2016 and
2017 Martin and his team provided engineering support for the
troubleshooting and commissioning of the Adelphi Distillery on the
Ardnamurchan peninsula.
Martin was also CEO of wave energy company Aquamarine Power
until 2014. Martin has served as a non-executive director of FTSE
250 company Greencoat UK Wind Plc.
Alan Baker graduated as a Civil Engineer from the University of
Glasgow and is a Chartered Engineer. He has worked in the power
sector for over 25 years. Spending nine years with Scottish Power,
where he played a key role in the development and construction of
major power infrastructure,. These major infrastructure projects
had a capital value in excess of GBP1bn.
Alan was CEO of wind energy company Airtricity (Scotland).
In 2010, Alan co-founded 2020 Renewables which was focused on
the development, construction and operation of onshore wind
projects in the UK and raised funding in excess of GBP800m to
support the construction of projects in UK and France. Alan led the
team that sold a large French wind portfolio (under the name
Velocita Energy) and also a number of operational wind projects in
the UK in 2016.
Construction of distillery
Planning permission has been received for construction of the
Ardgowan Distillery, with an expected build time under the Ardgowan
business plan of approximately 20-24 months. Construction is
anticipated to commence once the required initial funding of
GBP11.4 million has been secured.
Based on the current business plan, the total funding package
including capital expenditure and working capital over the first 10
years of operations is approximately GBP20.5 million. On
completion, the Ardgowan Distillery will be capable of producing
almost 1 million litres of pure alcohol per year.
The Ardgowan Distillery will be built in a cluster of ancient
farm buildings on the Bankfoot site which has been at various
times, a farm steading, stables, a coal gasification plant, a
sawmill and an equestrian arena. The distillery building will be
newly built, created in a manner which is sympathetic to the
existing cut stone and brick buildings.
The rich history of the estate, combined with the spectacular
landscape and accessible transport infrastructure, provides an
excellent platform on which to build the Ardgowan brand, and to
build brand loyalty. The location of Ardgowan Estate, within 45
minutes of Glasgow by car, within 35 minutes from Glasgow airport,
15 minutes' walk from Inverkip Marina, close to the Inverkip
railway station, which has a frequent service from Glasgow, and 15
minutes from the cruise ship terminal at Greenock, make it, in the
Directors' opinion, a perfect location with easy access for
creating a quality visitor experience. Consequently, Ardgowan also
proposes to open a visitor centre, including a retail shop, at the
Ardgowan Distillery and Ardgowan's business plan anticipates that
its distillery will receive 10,000 visitors in Year 1, growing to
50,000 by Year 6.
The distillery also provides an entry point to the Clyde
Muirshiel Regional Park which is Scotland's largest regional park.
The Park incorporates the Loch Thom reservoir, named after the
civil engineer Robert Thom who designed the scheme in 1827 to
deliver water via a long aqueduct known as "The Cut" to power heavy
industry (and provide fresh water to the original Ardgowan
distillery) in Greenock. The Cut is popular with hikers and bikers
with extensive on-road and off-road trails. The elevated park
provides some of the best views in the southwest of Scotland.
The Loan
Distil's investment of up to GBP3 million (with the option to
increase this to GBP5 million) forms part of a total initial
investment package of GBP11.4 million, which will be used by
Ardgowan to build the Ardgowan Distillery and visitor centre. This
includes an equity investment of GBP7.2 million recently made by
Roland Grain, one of Distil's directors, via Grain GmbH, a company
with which he is associated, and a GBP1.2 million equity investment
from existing Ardgowan shareholders.
The Loan has the following terms:
Initial Principal amount : GBP3,000,000, to be loaned immediately on Completion.
Secondary Principal amount: GBP2,000,000, the subject of the
Loan Option, to be exercised by 31 December 2022, at Distil's
option.
Interest rate : 5% per annum, paid quarterly in arrears.
Duration : 10 years.
Conversion Terms: At any time during the term of the Loan at a
valuation of GBP30 million, which, assuming the loan outstanding is
GBP5 million, equates to approximately 14.28% of Ardgowan's fully
diluted issued share capital.
Security: With effect from Ardgowan issuing the first capital
call and during the term of the Loan until the earlier of (i)
repayment of the Loan in full, or (ii) conversion of the Loan into
Ardgowan equity Ardgowan shall procure that a sum, such being the
lower of (a) GBP250,000 and (b) an amount equal to the total
interest payable on the Loan by Ardgowan during the then current
'year' (being each period of 12 months from the date of signature
of the loan agreement) of the Loan term, is deposited and
maintained in a GBP denominated bank account in the Company's
name.
Ardgowan will pledge 10% of its annual production of malt whisky
(or other product at the discretion of Distil) to Distil during the
term of the Loan. In addition, Ardgowan has granted to Distil a
floating charge over 10% of its annual production of malt whisky
(or other product at the discretion of Distil) until the above
pledge takes effect.
Change of control: Distil can require early repayment or
conversion of the Loan if a change of control event occurs.
Under the Loan Agreement, Distil will be allowed to appoint an
observer at all Ardgowan board meetings and, once it has a
shareholding of over 10 per cent. (which would be the case once the
Loan conversion into shares in Ardgowan has occurred) it will be
allowed to appoint one Distil director to the Ardgowan board. It is
expected that Distil's Executive Chairman, Don Goulding, will
fulfil these roles.
Ardgowan's financial results
In its filed unaudited accounts for the year ended 30 June 2020
Ardgowan posted losses of GBP380,804 on turnover of GBP141,637. It
had net liabilities at that date of GBP89,544.
Rationale for entering into the Investment and other
arrangements with Ardgowan, and Distil's strategy
The Directors believe that the rationale for the Investment is
manifold:
Financial rationale
The investment will provide a yield of 5% which, once the Loan
is fully drawn down, will amount to an annualised income of
GBP250,000 (an annualised GBP150,000 until that point).
Furthermore, the Company will obtain security over 10% of
Ardgowan's annual production of malt whisky (or other product at
the discretion of Distil), and gives Distil the option at any time,
following a period of consultation, to convert this investment into
approximately a 14.28% stake in Ardgowan (assuming the loan
outstanding is GBP5 million). The nature of the Investment will
provide Distil with commercial and operational benefits for its
existing business (see below) as well as this potential opportunity
to acquire an equity stake in the business.
Relocation of Blackwoods Gin and Vodka distillation
At present, Distil's gin and vodka brand, Blackwoods , is
distilled under sub-contract in the Highlands and in England.
Relocating the entire distillation of the Blackwoods brand to a
separate, prime site Blackwoods distillery within the greater
Ardgowan site will provide a Scottish "home" for this Scottish
brand.
In addition, the Blackwoods brand is expected to have a
dedicated visitor experience through distillery tours and tastings,
display and shelf feature in the distillery shop, branding of the
Blackwoods distillery and additional labelling for tourist goods.
This facility will be used for both consumer and trade customer
visits.
The Directors expect that Blackwoods brand provenance and
profile will be enhanced, leading to incremental sales both through
existing channels and direct to consumer via the distillery
itself.
Distillery visits are the third most popular tourist activity in
Scotland attracting over 2 million visitors per annum, many of whom
purchase product and souvenirs in the distillery retail outlets.
Under its business plan, Ardgowan is seeking to attract 50,000
visitors annually by year 6. Besides providing high margin income
via on site sales, these consumers will also provide the
opportunity to link through social media to UK and international
markets and continue a direct relationship for further direct
on-line sales once visitors return home.
Line extensions for existing products
Blackwoods' line extensions in the form of special editions, new
recipes, formulations and gin styles to be developed at the
Distillery will further enhance revenue streams and profitability.
Distil will also be able to produce its Trøve Botanical Spirit and
other new liquids at the Distillery.
New Product Development ("NPD")
The development of new products is a key tenet of Distil's
long-term strategy.
The Directors believe that the Ardgowan distillery will enable
Distil to accelerate NPD through the broader use of the still in
the Distillery in the production of spirits other than the existing
'London Dry Gin' and vodka. Product development areas to be
explored will be flavoured gin and other non-aged spirits overseen
and directed by Distil's Master Distiller.
Within the Manufacturing Agreement (see below) Ardgowan will
assist, through their Whisky Distiller, the sourcing and crafting
of blended malts purchased in cask from third party distilleries.
These whiskies will be branded, owned and marketed by Distil and
sold through the Company's own distribution network. Malt whisky is
an attractive high value, high margin, high growth category.
Opportunities for the joint development of future malt whisky
products will be explored enabling Distil to further broaden its
brand portfolio once Ardgowan whisky stock has sufficiently aged
(minimum of three years). Distil expects to launch a range of
Distil branded premium malt whiskies in 2021/22.
Future collaborations
In the medium term the partnership with Ardgowan is expected to
yield further mutually beneficial operational opportunities. These
may include, inter alia,
(1) fulfilment of Distil's online sales, a core growth area
earmarked for significant expansion by the Company.
(2) small release bottling line for limited edition upscale line
extensions.
(3) under bond storage facilities.
(4) expansion of Ardgowan's geographic distribution footprint
through Distil's export network.
(5) shared marketing reach.
(6) procurement.
Funding for implementing strategy
The interest received on the Loan will be used, inter alia, to
fund increased brand advertising to increase consumer awareness,
and to develop an on-line direct to consumer online marketing and
sales fulfilment capability.
Manufacturing Agreement
The Manufacturing Agreement provides the framework under which
DCL will occupy part of the Ardgowan site and Ardgowan will
manufacture spirits and non-alcoholic liquids and blend whisky on
Distil's behalf.
The Manufacturing Agreement sets out the following key
elements:
Building works
Ardgowan has an option to take a 175 year lease of the land on
which the Ardgowan Distillery is to be sited from the Ardgowan
Estate and will grant Distil a sub-lease of one of the buildings at
the Ardgowan Distillery. Failure to grant such a sub-lease to
Distil on terms acceptable to Distil within six months of Admission
is an event of default under the Loan Agreement.
Ardgowan will seek requisite consents (such as building
regulation approvals, licences and authorisations) from relevant
authorities in respect of building works to restore the Unit and
will enter into a building contract for such restoration once such
consents have been obtained.
Ardgowan will restore the Unit to the specification agreed in
writing with Distil. As part of this restoration the Unit will be
split into 3 sections: a distillery, a product development kitchen
and a visitor experience area.
The rent and term in respect of the Unit are yet to be
agreed.
Distillery
Ardgowan will at its own cost install in the Distillery all
equipment required by Distil for the production of its
products.
Ardgowan will manufacture selected Distil's brands including
Blackwoods Gin, Blackwoods Vodka, Trøve Botanical Spirit and other
agreed products at the Distillery on an agreed pricing
structure.
Ardgowan and Distil will collaborate in developing a range of
whiskies for Distil and for these purposes Ardgowan will assist
Distil in sourcing wholesale whisky stock and will then blend it
for DCL.
Product development kitchen
This kitchen will be dedicated to the development of new
products and small batch bottling. It will be equipped and staffed
by Distil at its own cost. When it has been constructed, Ardgowan
may use the product development kitchen to develop products until
its own product development facility has been constructed.
Visitor experience area
Distil will undertake fitting out works in respect of the
visitor experience area at its own cost.
A Product Price list has been agreed on an arms' length
commercial basis.
Licence
DCL has granted to Ardgowan a non-exclusive, non-transferable,
royalty-free licence (including the right to grant sub-licences to
permitted sub-contractors) to use DCL's IPRs solely for the purpose
of performing its obligations under the Manufacturing Agreement.
For example, such a licence would permit Ardgowan to sell
Blackwoods Gin and Vodka in the Ardgowan visitor centre.
Term
The agreement continues in force unless or until the sub-lease
of the Unit is terminated or this agreement is terminated earlier
in accordance with its provisions.
Mutual Services Agreement
The Mutual Services Agreement details various services to be
provided from Distil to Ardgowan and vice versa.
The key components are as follows:
Distribution of Ardgowan Products
Distil will use its know-how, information and technical
knowledge to assist Ardgowan with the distribution and sale of its
alcoholic drink products ("Ardgowan Products"). This may include
distributing Ardgowan Products on a non-exclusive basis once DCL
has developed a website to sell products.
Distil and Ardgowan will agree arms' length terms and conditions
for the purchase, distribution and marketing of goods.
Sale of Distil Products
Ardgowan will facilitate the sale of Distil's products ("Distil
Products") in the shop to be developed at the Ardgowan Distillery.
The prices at which Ardgowan will sell the Distil Products have
been agreed on an arms' length basis.
Procurement of goods
Distil and Ardgowan may from time to time jointly procure goods
to take advantage of any cost savings for bulk purchases.
Term
This agreement will continue unless or until terminated on six
months' notice by either party. In addition, either party may
terminate this agreement on three months' notice if the provision
of Sale Services and Distribution Services (as defined in the
Mutual Services Agreement) have been terminated in full.
Any changes to terms of the Manufacturing Agreement or Mutual
Services Agreement will fall to be assessed as related party
transactions under AIM Rule 13, as will any transactions with
Ardgowan not covered by any of these Agreements.
3. Details of the Placing
The Placing has raised approximately GBP1.75 million (before
expenses) for the Company by the issue of 87,500,000 Ordinary
Shares at the Issue Price with investors.
The Placing Shares are being placed conditional, inter alia, on
the passing of the Resolutions at the General Meeting.
The Company, Turner Pope and SPARK have entered into the Placing
Agreement, pursuant to which Turner Pope has agreed to use its
reasonable endeavours to procure placees pursuant to the Placing.
The Company has agreed to pay all costs and expenses relating to
the Placing and the applications for Admission including commission
payable to Turner Pope.
The Placing Agreement contains certain warranties and
indemnities by the Company in favour of SPARK and Turner Pope. It
also contains provisions entitling SPARK and Turner Pope to
terminate the Placing Agreement if, amongst other things, a breach
of any of the warranties occurs or an event occurs which is
material in the context of the Placing.
The Placing is conditional upon, inter alia:
-- the Resolutions being duly passed at the General Meeting by 5 August 2021;
-- Admission becoming effective on or before 8.00 a.m. on 6
August 2021, or such later time and/or date as the Company, Turner
Pope and SPARK may agree, but in any event by no later than 8.00
a.m. on 31 August 2021;
-- the Placing Agreement having become unconditional in all
respects and not having been terminated; and
-- completion of the Subscription.
The Placing is not being underwritten. The Placing Shares are
expected to be allotted on 5 August 2021, with Admission expected
on 6 August 2021.
The Placing will result in the issue of 87,500,000 new Ordinary
Shares representing approximately 13.2 per cent. of the Enlarged
Share Capital. The Placing Shares, when issued and fully paid, will
rank pari passu in all respects with the Existing Ordinary Shares
on Admission.
4. Details of the Subscription
The Subscription has raised approximately GBP1.45 million for
the Company by the conditional issue of 72,500,000 Ordinary Shares
at the Issue Price to (1) Grain GmbH) and (2) BERO as set out in
section 8 below.
The Subscription is conditional upon, inter alia:
-- the Resolutions being duly passed at the General Meeting by 5 August 2021;
-- the Placing Agreement having become unconditional in all
respects and not having been terminated; and
-- Admission becoming effective on or before 8.00 a.m. on 6
August 2021 or such later time and/or date as the Company, Turner
Pope and SPARK may agree, but in any event by no later than 8.00
a.m. on 31 August 2021.
The Subscription Shares are expected to be allotted on 5 August
2021.
5. Warrants
Placing Warrants
Placees and subscribers in the Placing and Subscription have
been issued with Placing Warrants (each Placing Warrant giving the
right to subscribe for one Ordinary Share) on the basis of two
Placing Warrants for every 3 new Ordinary Shares subscribed in the
Placing or Subscription. The Placing Warrants will be exercisable
at a price of 2p per Ordinary Share at any time up to one year
following the date of admission of the Placing Shares and
Subscription Shares to trading on AIM ("Admission"). Placing
Warrants are also being issued together with the Fee Shares (see
below). In aggregate, 107,166,665 Placing Warrants have been issued
which, if exercised in full, would result in proceeds of GBP2.143
million.
Broker Warrants
As part of its fee arrangements, Turner Pope has been issued
with Broker Warrants over 2,625,000 Ordinary Shares (each Broker
Warrant giving the right to subscribe for one Ordinary Share). The
Broker Warrants will be exercisable at a price of 2p per Ordinary
Share at any time up to three years following the date of
Admission.
6. Settlement and dealings
Application has been made to the London Stock Exchange for the
Placing Shares, the Subscription Shares and the Fee Shares to be
admitted to trading on AIM. It is expected that Admission will
become effective and that dealings in the Placing Shares, the
Subscription Shares and the Fee Shares will commence on 8.00 a.m.
on 6 August 2021, subject, inter alia, to the passing of the
Resolutions at the General Meeting.
7. Use of Proceeds
The gross proceeds amount to GBP3.2 million. The expenses of the
Proposals amount to approximately GBP200,000, of which
approximately GBP185,000 will be settled in cash, and GBP15,000
will be satisfied by the issue of the Fee Shares (with Placing
Warrants attached) on the same terms as the Placing and
Subscription. The net proceeds of GBP3.0 million will be used
primarily to finance the Investment.
8. Related Party Transactions
Roland Grain is a non-executive Director of the Company and is
currently interested (via Grain GmbH) in 102,309,584 Existing
Ordinary Shares (representing 20.38% of the Company's current
issued share capital). In addition, he is also the majority
shareholder in Ardgowan following his recent investment in that
company, and he sits on Ardgowan's board of directors.
Under AIM Rule 13 of the AIM Rules for Companies, there are a
number of related party transactions:
i) the Company entering into the Loan Agreement and the related security arrangements;
ii) the Company entering into the Manufacturing Agreement and
the Mutual Services Agreement; and
iii) the participation by related parties, Grain GmbH and BERO, in the Subscription.
Mr Grain is not considered independent in relation to the
consideration of these related party transactions under AIM Rule
13. Therefore, Don Goulding, Shaun Claydon, Kate O'Connell and Mike
Keiller, being the Independent Directors, have considered these
matters in line with the AIM Rules for Companies.
i) Loan Agreement and related security arrangements with Ardgowan
The Independent Directors have considered the terms of the
Investment via the Loan Agreement and the related security
arrangements. Having consulted with SPARK Advisory Partners, the
Company's nominated adviser, the Independent Directors consider
that the terms of the Investment are fair and reasonable insofar as
Shareholders are concerned.
ii) Manufacturing and Mutual Services Agreements
The Independent Directors have considered the terms of the
Manufacturing Agreement and the Mutual Services Agreement. Having
consulted with SPARK Advisory Partners, the Company's nominated
adviser, the Independent Directors consider that the terms of the
Manufacturing and Mutual Services Agreements are fair and
reasonable insofar as Shareholders are concerned.
iii) Grain GmbH's participation in the Subscription
Name Holding of Amount subscribed Number Number of % of Ordinary
Existing in the Subscription of Subscription Ordinary Shares Share capital
Ordinary Shares held post held post
Shares Admission Admission
Grain GmbH* 102,309,584 GBP650,000 32,500,000* 134,809,584 20.34%
------------ --------------------- ----------------- ----------------- ---------------
*Grain GmbH is a company to which Mr Roland Grain is
connected.
in addition Grain GmbH will hold 21,666,666 Placing Warrants
post Admission.
The Independent Directors have considered the participation of
Grain GmbH in the Subscription. Having consulted with SPARK
Advisory Partners, the Company's nominated adviser, the Independent
Directors consider that the terms of Grain GmbH's participation in
the Subscription are fair and reasonable insofar as Shareholders
are concerned.
iv) BERO's participation in the Subscription
BERO is currently interested (via Bank of New York (Nominees)
Limited) in 66,289,231 Existing Ordinary Shares (representing
13.21% of the Company's issued share capital). As a substantial
shareholder in the Company, BERO is a related party under the AIM
Rules.
Name Holding of Amount subscribed Number of Number of % of Ordinary
Existing Ordinary in the Subscription Subscription Ordinary Share capital
Shares Shares Shares held held post Admission
post Admission
BERO* 66, 289, 231* GBP800,000 40,000,000* 106,289,231 16.04%
------------------- --------------------- -------------- ---------------- ---------------------
*held via Bank of New York (Nominees) Limited. The terms of the
Subscription are essentially the same as the terms of the
Placing.
in addition they will hold 26,666,666 Placing Warrants post
Admission
9. General Meeting
The Directors do not currently have existing authorities to
allot shares and dis-apply pre-emption rights under section 551 and
section 570 of the Act to enable the Company to allot and issue the
Placing Shares, the Subscription Shares and the Fee Shares and to
grant the Placing Warrants and Broker Warrants. Consequently, the
Company needs to first obtain approval from its Shareholders to
grant to the Board additional authority to allot the new Ordinary
Shares and grant the Placing Warrants and Broker Warrants and to
dis-apply statutory pre-emption rights which would otherwise apply
to such allotment or grant. The Company is also seeking Shareholder
authority to increase the Directors' general authority to allot
securities and dis-apply pre-emption rights pursuant to sections
551 and 570 of the Act, respectively.
A summary and brief explanation of the resolutions to be
proposed at the General Meeting is set out below. Please note that
this is not the full text of the Resolutions and you should read
this section in conjunction with the Resolutions contained in the
Notice at the end of this document. The following resolutions will
be proposed at the General Meeting:-
Resolution 1, which will be proposed as an ordinary resolution,
is to authorise the Directors to allot or issue the Placing Shares,
the Subscription Shares, the Fee Shares, the Placing Warrants, the
Broker Warrants and further new Ordinary Shares up to an aggregate
nominal value of GBP220,909; and
Resolution 2, which will be proposed as a special resolution,
and which is subject to the passing of Resolution 1, dis-applies
statutory pre-emption rights, provided that such authority shall be
limited to the Placing Shares, the Subscription Shares, the Fee
Shares, the Placing Warrants, the Broker Warrants and further
Ordinary Shares having an aggregate nominal value of GBP66,274.
In response to the COVID-19 pandemic, the UK Government has
introduced a number of measures in England aimed at controlling the
spread of the COVID-19 virus. The Board has been closely monitoring
the ongoing COVID-19 situation and, on the basis of the UK
government's roadmap out of lockdown, the General Meeting has been
arranged on the assumption that it will be able to be held as an
open, physical meeting. If the position changes, the Company will
communicate any updates on its website at www.distil.uk.com and,
where appropriate, through an announcement to the market, before
the General Meeting.
10. Action to be taken by Shareholders
A form of proxy for use at the General Meeting is enclosed.
Whether or not you intend to attend the General Meeting in person,
you are requested to complete and sign the form of proxy and return
it to the Company's Registrars at The Courtyard, 17 West Street,
Farnham, GU9 7DR, so as to arrive no later than 10.00 a.m. on 3
August 2021. The return of the form of proxy will not prevent you
from attending the General Meeting and voting in person should you
wish to do so.
11. Board Recommendations
In relation to Resolutions 1 and 2, as Mr Grain has participated
in the Subscription, he is not considered independent and as such
has not participated in the recommendation.
The Independent Directors consider that the Investment (via the
Loan Agreement and related security arrangements), the
Manufacturing Agreement, the Mutual Services Agreement, the Placing
and the Subscription and Resolutions 1 and 2 are in the best
interests of the Company and its Shareholders as a whole.
Accordingly, the Independent Directors recommend that you vote in
favour of these resolutions as they intend to do in respect to
their shareholdings of 10 million shares amounting to 1.99% of the
issued share capital.
Unless Shareholders approve both resolutions 1 and 2, the
Investment will not proceed, as the Company requires the Placing
and Subscription (which are conditional upon both Resolutions being
approved) in order to provide the funds for the Company to allow it
to make the Investment.
Yours sincerely
Don Goulding
Chairman
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
2021
Announcement of the Placing and Subscription 20 July
Posting of the Circular and the form of proxy 20 July
Latest time and date for receipt of forms of 10.00 a.m. on 3 August
proxy for the General Meeting 10.00 a.m. on 5 August
General Meeting 5 August
Announcement of the result of the General Meeting
Admission of the Placing Shares, Subscription 8.00 a.m. on 6 August
Shares and Fee Shares to trading on AIM
Expected date of despatch of definitive share by 20 August
certificates for the Placing Shares, Subscription
Shares and Fee Shares in certificated form (certificated
holders only)
Notes:
1 References to times in this document are to London time unless
otherwise stated.
2 If any of the above times or dates should change, the revised
times and/or dates will be notified to Shareholders by an
announcement on an RNS (and posted on the Company's website).
3 All events in the above timetable following the General
Meeting are conditional upon approval by the Shareholders of the
Resolutions.
PLACING STATISTICS
Existing Ordinary Shares in issue as at
the date of this Document 501,982,913
Number of Subscription Shares 72,500,000
Number of Placing Shares 87,500,000
Number of Fee Shares 750,000
Enlarged Share Capital 662,732,913
Percentage of the Enlarged Share Capital
represented by the Placing Shares and the
Subscription Shares 24.1%
Issue Price 2p
Gross proceeds of the Placing and the Subscription GBP3.2 million
Estimated net proceeds of the Placing and GBP3.0 million
the Subscription
DEFINITIONS
The following definitions apply throughout this document, unless
the context requires otherwise.
"Act" Companies Act 2006
"Admission" the admission of the Placing Shares, the
Subscription Shares and the Fee Shares
to trading on AIM and such admission becoming
effective in accordance with the AIM Rules
------------------------------------------------
"AIM" the market of that name operated by London
Stock Exchange plc
------------------------------------------------
"AIM Rules" the AIM Rules for Companies whose securities
are traded on AIM, as published by the
London Stock Exchange from time to time
------------------------------------------------
"Announcement" the notification issued by the Company
on 20 July 2021, which sets out details
of the Proposals
------------------------------------------------
"Ardgowan" Ardgowan Distillery Company Limited
------------------------------------------------
"Ardgowan Distillery" the new whisky distillery to be developed
by Ardgowan on the Ardgowan estate near
Inverkip in Scotland
------------------------------------------------
"Ardgowan Loan" or the loan of GBP3 million (which can be
"Loan" increased to GBP5 million pursuant to
the Loan Option) to Ardgowan to be made
by the Company, the subject of the Loan
Agreement
------------------------------------------------
"Articles" the Company's articles of association
------------------------------------------------
"BERO" BERO SAS, a substantial shareholder in
the Company
------------------------------------------------
"Board" or "Directors" the directors of the Company at the date
of this Document, whose names are set
out on page 8 of this Document
------------------------------------------------
"Broker Warrants" the warrants to be issued to Turner Pope,
the terms of which are set out in section
5 of the Letter from the Chairman in this
document
------------------------------------------------
"Circular" or "Document" this document dated 20 July 2021
------------------------------------------------
"Closing Price" 2.3 pence, being the closing mid-market
share price on 19 July 2021
------------------------------------------------
"DCL" Distil Company Limited, a subsidiary of
Distil
------------------------------------------------
"Distil" or "Company" Distil PLC, a company registered in England
and Wales with registered number 3727483
------------------------------------------------
"Distillery" the distillery to be developed by Ardgowan
for DCL in the Unit
------------------------------------------------
"Enlarged Share Capital" together the Existing Ordinary Shares,
the Placing Shares and the Subscription
Shares
------------------------------------------------
"Existing Ordinary the 501,982,913 Ordinary Shares in issue
Shares" as at the date hereof
------------------------------------------------
"Existing Shareholders" holders of Ordinary Shares at the date
of this document
------------------------------------------------
"Fee Shares" 750,000 new Ordinary Shares to be issued
to an adviser at the Issue Price in settlement
of amounts owed by the Company
------------------------------------------------
"FCA" the Financial Conduct Authority
------------------------------------------------
"form of proxy" the form of proxy accompanying this Document
(or otherwise available) for use at the
General Meeting
------------------------------------------------
"General Meeting" or the General Meeting of Shareholders to
"GM" be held at 10.00 a.m. on 5 August 2021
------------------------------------------------
"Group" the Company and its subsidiaries as at
the date of this Document
------------------------------------------------
"Independent Directors" Don Goulding, Shaun Claydon, Kate O'Connell
and Mike Keiller
------------------------------------------------
"Investment" the Company's proposed investment in Ardgowan
by way of the Loan and the related security
arrangements
------------------------------------------------
"Issue Price" 2p per Placing Share, Subscription Share
and Fee Share
------------------------------------------------
"Loan Agreement" the agreement dated 20 July 2021 between
(1) the Company and (2) Ardgowan for the
provision of a loan of up to GBP5 million,
comprising an initial loan of GBP3 million
(with the option for the Company to increase
this by GBP2 million pursuant to the Loan
Option) with conversion rights attached,
as more fully detailed in section 2 of
the letter from the Chairman in this Document
------------------------------------------------
"Loan Option" the option under the Loan Agreement for
Distil to loan a further sum of GBP2 million
to Ardgowan, at any point up to 31 December
2022
------------------------------------------------
"London Stock Exchange" London Stock Exchange plc
------------------------------------------------
"Manufacturing Agreement" the agreement dated 20 July 2021 between
(1) DCL and (2) Ardgowan relating to (i)
the manufacture of the Company's products,
including Blackwoods Gin, and (ii) the
operation and use of the distillery as
set out in more detail in section 2 of
the Letter from the Chairman in this document
------------------------------------------------
"Mutual Services Agreement" the agreement dated 20 July 2021 between
(1) DCL and (2) Ardgowan relating to the
manner in which the parties will collaborate
and provide services to each other, including
the development of Distil own brand of
blended malt whisky, as set out in more
detail in section 2 of the Letter from
the Chairman in this document
------------------------------------------------
"Ordinary Shares" ordinary shares of 0.1p each in the capital
of the Company
------------------------------------------------
"Placing" the conditional placing of the Placing
Shares at the Issue Price, further details
of which are set out in section 3 of the
Letter from the Chairman
------------------------------------------------
"Placing Agreement" the conditional agreement dated 20 July
2021 between (1) the Company, (2) Turner
Pope and (3) SPARK relating to the Placing
------------------------------------------------
"Placing Shares" the 87,500,000 new Ordinary Shares the
subject of the Placing
------------------------------------------------
"Placing Warrants" the warrants to be issued with the Placing
Shares, Subscription Shares and Fee Shares,
the terms of which are set out in section
5 of the Letter from the Chairman in this
document
------------------------------------------------
"Proposals" the Investment, the Manufacturing Agreement,
the Mutual Services Agreement, the Placing
and the Subscription
------------------------------------------------
"Resolutions" the resolutions set out in the notice
of General Meeting
------------------------------------------------
"SPARK" SPARK Advisory Partners Limited, the Company's
Nominated Adviser
------------------------------------------------
"Shareholders" holders of Ordinary Shares in the Company
from time to time
------------------------------------------------
"Sterling" or "GBP" the lawful currency of the UK
------------------------------------------------
"Subscription Agreements" the conditional agreements dated 20 July
2021 between the Company and (1) Grain
GmbH (a company with which Mr Roland Grain,
a non-executive director, is connected),
and (2) BERO relating to the Subscription
------------------------------------------------
"Subscription" the subscription for the Subscription
Shares by (1) Grain GmbH and (2) BERO
under the Subscription Agreements
------------------------------------------------
"Subscription Shares" the 72,500,000 new Ordinary Shares the
subject of the Subscription
------------------------------------------------
"Turner Pope" Turner Pope Investments (TPI) Limited,
the Company's brokers
------------------------------------------------
"UK" or "United Kingdom" the United Kingdom of Great Britain and
Northern Ireland
------------------------------------------------
"Unit" one of the buildings, forming part of
the Ardgowan Distillery site, to be sub-leased
by Ardgowan to DCL
------------------------------------------------
"US" or "United States" the United States of America, its territories
and possessions, any states of the United
States of America and the District of
Columbia and all other areas subject to
its jurisdiction.
------------------------------------------------
"
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END
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