TIDMEISB
RNS Number : 1466G
East Imperial PLC
17 July 2023
17 July 2023
East Imperial plc (the "Company")
Funding Update - proposed issue of GBP2.2 million 10% Secured
Convertible Loan Notes
East Imperial, the global purveyor of ultra-premium beverages,
is pleased to announce that it is proposing to raise in aggregate
GBP2.2 million (before expenses) by the issue of 10% Secured
Convertible Loan Notes ("2025 Convertible Loan Notes") to strategic
investor Wen Hua International ("WHI"), the Company's current
Chinese Mainland and Macau distribution partner (the "Proposed
Transaction"). The 2025 Convertible Loan Notes will be unlisted and
no offer or invitation is being made to shareholders more generally
to purchase, acquire or subscribe for any of the 2025 Convertible
Loan Notes in conjunction with the Proposed Transaction.
Highlights
-- Proposed issue of GBP2.2 million of 10% Secured Convertible
Loan Notes to strategic investor WHI in two tranches of
GBP1,466,666.67 and GBP733,333.33 respectively.
-- The net proceeds of the issue of the 2025 Convertible Loan
Notes will provide much needed additional working capital to
support the Company's plans for continued expansion.
-- The 2025 Convertible Loan Notes will be secured by way of a
debenture which contains fixed and floating charges over the assets
of the Company; security to be granted over the Company's wholly
owned Singapore incorporated subsidiary; and a charge to be granted
over up to 75 per cent. of the ordinary shares of GBP0.01 each in
the capital of the Company ("Ordinary Shares") held by the
Company's chief executive officer, Tony Burt.
-- No application will be made for the admission of the 2025
Convertible Loan Notes to trading on any recognised securities
exchange.
-- The holders will have the right to convert the 2025
Convertible Loan Notes, including the rolled-up 10% interest
thereon, into Ordinary Shares at a price equal to a 20% discount to
the 60 day VWAP of the Ordinary Shares as at the date of the
conversion notice, subject to a minimum price per Ordinary Share of
GBP0.01 (being the nominal value of the Ordinary Shares) (the
"Conversion Price"), at any time after the expiry of the 12 month
period commencing on the date of the instrument constituting the
2025 Convertible Loan Notes ("Convertible Loan Note Instrument")
until the redemption of the 2025 Convertible Loan Notes in
accordance with the terms of the Convertible Loan Note Instrument.
The maturity date of the 2025 Convertible Loan Notes is the first
Business Day falling twenty-four months after the date of issue of
the relevant 2025 Convertible Loan Notes.
-- The minimum Conversion Price of GBP0.01 represents a premium
of approximately 15 per cent. to the closing middle market price of
GBP0.0085 per Ordinary Share on 14 July 2023, being the latest
practicable trading day prior to the publication of this
Announcement.
-- The maximum number of new Ordinary Shares capable of being
issued in respect of the 2025 Convertible Loan Notes if all of the
2025 Convertible Loan Notes are converted and all of the rolled-up
interest thereon is converted at the minimum Conversion Price of
GBP0.01 is 264,000,000 Ordinary Shares, which would represent
approximately 43.8 per cent. of the issued share capital of the
Company.
-- The Directors are strongly of the belief that the issue of
the 2025 Convertible Loan Notes is the best available option for
securing further investment in the near term, and the funds from
the Proposed Transaction will enable the Company to meet its
ongoing working capital and capital expenditure requirements.
-- The Proposed Transaction is conditional on the passing of the
resolutions by Shareholders at the general meeting of the Company
("General Meeting") ("Resolutions") as proposed in a circular,
which will shortly be despatched to Shareholders ("Circular")
including a special resolution which will give the Directors the
required authority to disapply statutory pre-emption rights in
respect of the potential future issue of new Ordinary Shares upon
conversion of the 2025 Convertible Loan Notes.
Tony Burt, CEO of East Imperial, said:
"I'm extremely pleased to add such an important cornerstone
investor to our investor group, who brings with them unparalleled
experience and knowledge in a key strategic region for East
Imperial.
I'm delighted they share our vision for East Imperial as the
world's only true ultra-premium choice of mixer and want to
genuinely support and be a part of our continued success. We
continue to have a huge opportunity ahead of us, and I'm confident
we will deliver significant progress this year and beyond.
We will use the funds raised to capitalise on the future
opportunities ahead of us, particularly to accelerate our growth in
the strategically important US and explore further opportunities
with WHI in Asian markets with greater sales resources and some new
exciting product innovations."
Jason Ieong, CEO of WHI, said:
"Being a leading distributor of Imported Spirits & Wines in
China, we are excited to extend our business relationship with East
Imperial, the global purveyor of ultra-premium beverages. With our
support, we believe East Imperial will be able to fast-track its
global development in all strategic markets and capitalize the
premiumization trend in the beverage category globally."
1. Introduction
On 2 May 2023, the Company issued its audited full year results,
which included a statement that the cash flow forecasts prepared
rely on successful funding in the form of a debt raise in Q2 2023
to continue expansion and settle current liabilities as they fall
due.
The Company announces today that it is proposing to raise in
aggregate GBP2.2 million (before expenses) by way of the issue of
2025 Convertible Loan Notes to WHI, in two tranches of
GBP1,466,666.67 and GBP733,333.33 respectively . The 2025
Convertible Loan Notes will be unlisted and no offer or invitation
is being made to Shareholders more generally to purchase, acquire,
or subscribe for any of the 2025 Convertible Loan Notes in
conjunction with the issue.
The Directors strongly believe that the issue of the 2025
Convertible Loan Notes is the best available option for securing
further investment in the near term, and the funds from the
Proposed Transaction will enable the Company to meet its ongoing
working capital and capital expenditure requirements.
The issue of the 2025 Convertible Loan Notes is conditional on
the passing of the Resolutions by Shareholders at the General
Meeting, including a special resolution which will give the
Directors the required authority to disapply statutory pre-emption
rights in respect of the potential future issue of new Ordinary
Shares upon conversion of the 2025 Convertible Loan Notes.
The purpose of the impending Circular is to outline the reasons
for, and provide further information on, the Proposed Transaction
and to explain why the Directors believe this to be in the best
interests of the Company and its Shareholders as a whole.
In the Circular, you will nd a notice of the General Meeting at
which the Resolutions will be proposed to approve the issue of the
2025 Convertible Loan Notes. The General Meeting is expected to be
convened for 11.00 a.m. on 4 August 2023 at the offices of
Shakespeare Martineau LLP at 6th Floor, 60 Gracechurch Street,
London, EC3V 0HR.
The Directors are strongly of the belief that the Proposed
Transaction is in the best interests of the Company and its
Shareholders as a whole. The Directors also stress that it is very
important that Shareholders vote in favour of the Resolutions
proposed at the General Meeting, as those Directors who hold
Ordinary Shares intend to do. The Directors believe that if the
Resolutions are not passed at the General Meeting and the issue of
the 2025 Convertible Loan Notes does not proceed, then in the
absence of available alternative sources of funding, it is likely
that the Directors will have to consider options including ceasing
to trade or selling the business.
2. Conditional Loan Note Subscription Agreement
The Company and WHI, through its wholly owned Hong-Kong based
subsidiary, INL Investment Limited, has today entered into a
Conditional Loan Note Subscription Agreement ( " Subscription
Agreement " ) pursuant to which WHI has agreed to invest
GBP2,200,000 in two tranches of GBP1,466,666. 67 ( " Tranche 1 " )
and GBP733,333.33 ( " Tranche 2 " ) respectively, conditional on
the passing of the Resolutions by Shareholders at the General
Meeting by 31 August 2023 (or such later date as agreed by the
Company and WHI). If the Resolutions are duly passed, completion of
Tranche 1 will take place immediately following the General
Meeting, and (subject to delivery of the Singapore Share Charge and
the TB Share Charge to WHI in accordance with the Subscription
Agreement), completion of Tranche 2 will take place on the first
Business Day falling three (3) calendar months following First
Completion.
The Subscription Agreement contains customary warranties given
by WHI. Under the terms of the Subscription Agreement, following
completion of the Tranche 1 investment ( " First Completion " ) ,
WHI may in its absolute discretion appoint one director to the
board of Directors of the Company and remove any such director and
appoint a replacement, provided that WHI shall cease to be entitled
to appoint a director if (i) WHI does not validly elect to convert
at least 20% in nominal value of the 2025 Convertible Loan Notes
(taking Tranche 1 and Tranche 2 together) in accordance with the
terms of the Convertible Loan Note Instrument prior to the
Redemption Date of Tranche 2 (being the first business day falling
twenty-four months after the date of issue of the Tranche 2 notes,
the " Tranche 2 Redemption Date " ) ) or (ii) WHI validly elects to
convert at least 20% in nominal value of the 2025 Convertible Loan
Notes (taking Tranche 1 and Tranche 2 together) in accordance with
the terms of the Convertible Loan Note Instrument prior to the
Tranche 2 Redemption Date but subsequently ceases
to hold at least 7% of the fully diluted share capital of the
Company, following the Tranche 2 Redemption Date.
The Subscription Agreement also contains certain covenants in
favour of WHI in respect of (i) the Company incurring financial
indebtedness in excess of GBP50,000 without the prior written
consent of WHI, excluding the 2025 Convertible Loan Notes, (ii)
amalgamation, demerger, merger or corporate reconstruction of the
Company, excluding a change of control or other acquisition of
interests in the Company by WHI or third parties, without the prior
written consent of WHI, (iii) issuing shares or share capital (or
any instrument convertible into shares or share capital) to any
person, other than pursuant to options or warrants which are
outstanding at the First Completion or pursuant to a bona fide
employee share or share option scheme, without the prior written
consent of WHI, other than in respect of repaying all or any
amounts due under the 2025 Convertible Loan Notes, (iv) the
appointment of new Directors of the Company without the prior
written consent of WHI, other than to replace an existing Director,
(v) any substantial change to the general nature or scope of its
business as carried out on at the date of First Completion and (vi)
entry into a material acquisition or corporate joint venture
transaction, excluding for the avoidance of doubt the acquisition
of trading stock in the ordinary course of business and
distribution or equivalent commercial agreements in the ordinary
course of business, without the prior written consent of WHI. The
Company will also be responsible for paying WHI a capped amount of
GBP15,000 plus VAT (if applicable) in respect of certain costs and
expenses incurred by WHI in connection with the negotiation,
preparation and implementation of the Subscription Agreement and
the 2025 Convertible Loan Notes.
Under the terms of the Subscription Agreement, WHI has
undertaken to ensure that the Company is run independently of WHI
for the benefit of all Shareholders and that all arrangements
between WHI and the Company will be on an arm's length basis and on
normal commercial terms.
3. The Secured 2025 Convertible Loan Notes
On First Completion, the Company will enter into the Convertible
Loan Note Instrument pursuant to which the Company will create 2025
Convertible Loan Notes of an aggregate principal amount of GBP2.2
million. The issue of the 2025 Convertible Loan Notes is
conditional only upon the passing of the Resolutions at the
proposed General Meeting.
Interest shall be payable on the outstanding 2025 Convertible
Loan Notes at a rate of 10% per annum on the date of redemption or
conversion of the 2025 Convertible Loan Notes. The maturity date of
the 2025 Convertible Loan Notes is the first Business Day falling
twenty-four months after the date of issue of the relevant 2025
Convertible Loan Notes.
The Company's obligations under the 2025 Convertible Loan Notes
will initially be secured by a debenture which contains fixed and
floating charges over the assets of the Company (the
"Debenture").
On the earlier of (i) First Completion and (ii) the Business Day
falling within 45 days following the date of the Subscription
Agreement, the Company's obligations under the 2025 Convertible
Loan Notes will also be secured by (1) a share charge to be granted
over the entire issued share capital of East Imperial Pte. Ltd, the
Company's wholly owned Singapore incorporated subsidiary (the
"Singapore Share Charge") and (2) a share charge (the "TB Share
Charge" ) to be granted over : (a) on the date of creation of such
TB Share Charge, 75% of the Ordinary Shares registered in the name
of Anthony Burt (or a nominee thereof); (b) following the first
business day occurring after First Completion when the 10 day VWAP
per Ordinary Share is equal to or greater than GBP0.05 but less
than GBP0.075, 50% of the Ordinary Shares registered in the name of
Anthony Burt (or a nominee thereof); (c) following the first
business day occurring after First Completion when the 10 day VWAP
per Ordinary Share is equal to or greater than GBP0.075 but less
than GBP0.10, 25% of the Ordinary Shares registered in the name of
Anthony Burt (or a nominee thereof); and (d) following the first
business day occurring after First Completion when the 10 day VWAP
per Ordinary Share is equal to or greater than GBP0.10, 0% of the
Ordinary Shares registered in the name of Anthony Burt (or a
nominee thereof) (at which time the TB Share Charge shall terminate
and be released in accordance with its terms).
No application will be made for the admission of the 2025
Convertible Loan Notes to trading on any recognised securities
exchange.
The Convertible Loan Note Instrument gives the holders of the
2025 Convertible Loan Notes the right to convert the 2025
Convertible Loan Notes they hold into Ordinary Shares at a price
per Ordinary Share equal to a 20% discount to the 60 day VWAP of
the Ordinary Shares as at the date of the conversion notice,
subject to a minimum price per Ordinary Share of GBP0.01 (being the
nominal value of the Ordinary Shares) (the "Conversion Price"), at
any time after the expiry of the 12 month period commencing on the
date of the Convertible Loan Note Instrument until the redemption
of the 2025 Convertible Loan Notes in accordance with the terms of
the Convertible Loan Note Instrument .
The minimum Conversion Price of GBP0.01 represents a premium of
approximately 15 per cent. to the closing middle market price of
GBP0.0085 per Ordinary Share on 14 July 2023, being the latest
practicable trading day prior to the publication of this
Announcement.
The Proposed Transaction is conditional on the passing of the
Resolutions by Shareholders at the General Meeting, including a
special resolution which will give the Directors the required
authority to disapply statutory pre-emption rights in respect of
the potential future issue of new Ordinary Shares upon conversion
of the 2025 Convertible Loan Notes.
Upon the passing of the proposed Resolutions, the Company shall
issue Tranche 1 of the 2025 Convertible Loan Notes to WHI and
execute and deliver a certificate in respect of Tranche 1 of the
2025 Convertible Loan Notes.
Following publication of the Circular, a copy of the draft
Convertible Loan Note Instrument and Debenture will be available
for inspection at the Company's registered office until the time
and date of the General Meeting.
4. Potential Dilutive Effect Resulting From The Proposed
Transaction
The maximum number of new Ordinary Shares capable of being
issued in respect of the 2025 Convertible Loan Notes if all of the
2025 Convertible Loan Notes are converted and all of the rolled-up
interest thereon is converted at the minimum Conversion Price of
GBP0.01 is 264,000,000 Ordinary Shares, which would represent
approximately 43.8 per cent. of the issued share capital of the
Company.
5. General Meeting
The Directors do not currently have sufficient authority under
section 551(1)(b) of the Companies Act 2006 to issue the 2025
Convertible Loan Notes. The 2025 Convertible Loan Notes will not be
issued therefore until the Resolutions are passed at the General
Meeting. The Company will shortly dispatch the Circular to
Shareholders convening a General Meeting of the Company at which
the Resolutions summarised below will be proposed:
(A) Resolution 1, which will be proposed as an Ordinary
Resolution (this means that, for the Resolution to be passed, more
than 50 per cent. of the votes cast must be in favour of the
Resolution), is to authorise the Directors to allot the 2025
Convertible Loan Notes
(B) Resolution 2, which will be proposed as a Special Resolution
(this means that, for the Resolution to be passed, at least 75 per
cent. of the votes cast must be in favour of the Resolution), is to
disapply statutory pre-emption rights in respect of the allotment
of the equity securities under Resolution 1.
Resolution 2 is conditional on Resolution 1 being passed so
that, if Resolution 1 is not passed, neither of the Resolutions
will become effective and the issue of 2025 Convertible Loan Notes
will not be implemented.
6. Importance of Approving the Proposed Transaction
IT IS VERY IMPORTANT that Shareholders vote in favour of the
Resolutions at the General Meeting. The Directors believe that if
the Resolutions are not passed at the General Meeting and so the
issue of the 2025 Convertible Loan Notes does not proceed and in
the absence of available alternative sources of funding, is likely
that the Directors will have to consider options including ceasing
to trade or selling the business.
7. Recommendation
The Directors strongly believe that the issue of the 2025
Convertible Loan Notes is in the best interests of the Company and
its Shareholders as a whole. Accordingly, the Directors recommend
that Shareholders vote in favour of the Resolutions to be proposed
at the General Meeting as those Directors (and their associates)
intend to do in respect of their entire beneficial holdings of
Ordinary Shares.
Enquiries
East Imperial Plc
Antony Burt / Andrew Robertson - investors@eastimperial.com
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF THE UK VERSION OF REGULATION (EU) NO 596/2014 WHICH
IS PART OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT
2018, AS AMED. UPON THE PUBLICATION OF THIS ANNOUNCEMENT VIA A
REGULATORY INFORMATION SERVICE, THIS INSIDE INFORMATION IS NOW
CONSIDERED TO BE IN THE PUBLIC DOMAIN.
About East Imperial
Founded in New Zealand and Singapore in 2012, East Imperial
produces a range of ultra-premium mixers that sell throughout APAC,
the US and EMEA. Guided by a clear strategy to capitalise on the
growing demand for premiumisation across the beverage industry,
East Imperial has sold over 25 million bottles in over 20 countries
since its founding, with popular products including Old World
Tonic, Grapefruit Tonic, Yuzu Tonic and Mombasa Ginger Beer. In
2023, East Imperial won 8 medals at the coveted Tonic & Mixers
Masters Competition in London. The company was founded on the
philosophy of creating exquisite products defined by heritage,
tradition and authenticity. All products are made from the highest
quality, all-natural ingredients, reflecting East Imperial's
commitment to providing a sustainable product and minimising
environmental impacts at every stage of the manufacturing process.
For more information about East Imperial and its ultra-premium
mixers, visit eastimperial.co.uk.
About WHI
Wen Hua International (WHI) is a subsidiary of Wen Hua Hang Wine
& Spirits Co Ltd, which was originally founded in 2004, and is
located in Zhongshan, Guangdong province. Wen Hua Hang is an
exclusive first-tier wholesaler in South China, covering Guangdong,
Hainan and Guangxi provinces for Pernod Ricard.
Forward-Looking Statements
This announcement includes statements that are, or may be deemed
to be, "forward-looking statements" which reflect the Directors'
current views, interpretations, beliefs or expectations with
respect to the financial performance, business strategy and plans
and objectives of management for future operations of the Company
and its group. These statements include forward-looking statements
with respect to the Company and its group and the sector and
industry in which the business currently operates. Statements which
include the words "believes", "estimates", "plans", "projects",
"anticipates", "expects", "intends", "may", "aims", "targets",
"will", "should" or, "future", "opportunity", "potential" or, in
each case, their negatives, and similar statements of a future or
forward- looking nature identify forward-looking statements. These
forward-looking statements include matters that are not historical
facts. They appear in a number of places throughout this
announcement. Forward-looking statements may and often do differ
materially from actual results. Any forward-looking statements in
this announcement are based on certain factors and assumptions,
including the Directors' current view with respect to future events
and are subject to risks relating to future events and other risks,
uncertainties and assumptions relating to the Company's operations,
results of operations, growth strategy and liquidity. While the
Directors consider these assumptions to be reasonable based upon
information currently available, they may prove to be incorrect.
Save as required by law, the Company undertakes no obligation to
publicly release the results of any revisions to any
forward-looking statements in this announcement that may occur due
to any change in the Directors' expectations or to reflect events
or circumstances after the date of this announcement.
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END
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