TIDMRGD
RNS Number : 0058V
Real Good Food PLC
18 July 2018
GENERAL TEXT AMMENT
The following amendment(s) has (have) been made to the 'Open
Offer to raise up to GBP1 million' announcement released on
18.07.18 at 07.00 under RNS No 9944U
Under 14. Irrevocable undertakings, a table has now been
included.
All other details remain unchanged.
The full amended text is shown below.
18 July 2018
Real Good Food plc
("Real Good Food", "the Company" or "the Group")
Open Offer to raise up to GBP1 million
Rule 9 Waivers
and
Notice of General Meeting
Further to the Company's announcements on 17 May 2018 and 06
June 2018, the Company is pleased to announce details of a proposed
open offer to raise up to approximately GBP1.0 million of further
funding and the replacement of the May 2018 Loan Notes with the
Replacement CLNs which is subject to a whitewash process pursuant
to Rule 9 of the Takeover Code (the "Transaction").
A Circular in respect of the Open Offer and Whitewash will be
posted to shareholders today. The Circular also gives notice of a
General Meeting of the Company, to be held at 11.00 a.m. on 13
August 2018 at the offices of finnCap, 60 New Broad Street, London
EC2M 1JJ for Shareholders to consider these proposals.
Highlights
-- Open Offer of up to 20,115,190 Offer Shares at GBP0.05 per
Offer Share to raise up to approximately GBP1.0m;
-- The net proceeds of the Open Offer will be used to provide
future working capital to the Group;
-- Replacement of the May 2018 Loan Notes by the Replacement CLNs
o On replacement of the May 2018 Loan Notes by the Replacement
CLNs the NB Concert Party and Omnicane will have potential
interests in 112,262,354 and 110,413,954 Ordinary Shares which
could represent a maximum of 66.7 per cent. and 65.6 per cent. of
the Company's enlarged share capital respectively.
o In the absence of a waiver of the obligations under Rule 9 of
the Takeover Code, this is an amount that would require each of the
NB Concert Party and Omnicane to make general offers to
Shareholders.
-- The Panel has agreed to grant waivers of these obligations
provided that the Whitewash Resolutions (Resolutions 1 and 2) are
approved at the General Meeting on a poll by Independent
Shareholders.
Related Party Transaction
-- As each of NB, Omnicane and Downing are substantial
shareholders of the Company and have Board representation, the
replacement of the May 2018 Loan Notes by the Replacement CLNs is
deemed to be a related party transaction pursuant to the AIM Rules
for Companies. The Board considers that by replacing the May 2018
Loan Notes with the Replacement CLNs the Company avoids the higher
interest rate provisions of the May 2018 Loan Note and
substantially alleviates the pressure on the Company to source
funding in order to make any such higher interest rate payments.
Hugh Cawley and Harveen Rai, the Independent Directors of the
Company for this purpose, having consulted with the Company's
Nominated Adviser, finnCap Ltd, consider the replacement of the May
2018 Loan Notes with the Replacement CLNs to be fair and reasonable
insofar as the Company's shareholders are concerned.
Notice of General Meeting
-- A Circular to Shareholders in respect of, inter alia, the
Transaction is expected to be posted later today giving notice of a
General Meeting of the Company, which will be held at 11.00 a.m. on
13 August 2018 at the office of finnCap, 60 New Broad Street,
London EC2M 1JJ.
-- A copy of the Circular will be available on the Company's
website at www.realgoodfoodplc.com
Admission
-- Application will be made to the London Stock Exchange for up
to 20,115,190 Offer Shares to be admitted to trading on AIM. It is
expected that Admission of the New Ordinary Shares will occur at
8.00 a.m. on 17 August 2018.
Hugh Cawley, Chief Executive Officer, commented:
"We are pleased to launch the Open Offer today which allows all
Qualifying Shareholders to participate in the refinancing of the
Company. The new funding arrangements we have put in place over the
prior months of which the Open Offer and Loan Note Replacement are
part, ensure that the Company will operate with a much more robust
and sustainable financial platform, providing the certainty from
which the Board will be able to implement its plan to improve the
Group's performance."
Enquiries:
Real Good Food plc Tel: 0151 541 3790
Hugh Cawley, Chief Executive
Harveen Rai, Finance Director
finnCap Limited (Nomad and Broker) Tel: 020 7220 0500
Matt Goode / Carl Holmes / James Thompson
(Corporate Finance)
MHP Communications (Financial PR) Tel: 020 3128 8100
Reg Hoare / Katie Hunt rgf@mhpc.com
About Real Good Food
Real Good Food plc is a diversified food business serving a
number of market sectors including retail, manufacturing, foodservice
and export. The Company focuses on three main markets: Cake
Decoration (Renshaw and Rainbow Dust Colours), Food Ingredients
(R W Scott and Brighter Foods) and Premium Bakery (Haydens and
Chantilly Patisserie).
The information communicated in this announcement contains
inside information for the purposes of Article 7 of the Market
Abuse Regulation (EU) No. 596/2014.
Unless otherwise defined herein, capitalised terms used in this
announcement shall have the same meanings as defined in the
Circular.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Record Date 6.00 p.m. on 13
July 2018
Publication and posting of the Circular, the 18 July 2018
Form of Proxy and (if relevant) the Application
Form
Ex-entitlement date 7.00 a.m. on 18
July 2018
Basic Entitlements and Excess Entitlements 19 July 218
credited to stock accounts in CREST for Eligible
CREST Shareholders
Recommended latest time and date for requesting 4.30pm 3 August
withdrawal of Open Offer Entitlements from 2018
CREST
Latest time and date for depositing Open Offer 3.00 p.m. on 6
Entitlements in CREST August 2018
Latest time and date for splitting Application 3.00 p.m. on 7
Forms (to satisfy bona fide market claims only) August 2018
Latest time and date for acceptance of the 11.00 am. on 9
Open Offer and receipt of completed Application August 2018
Forms and payment in full under the Open Offer
or settlement of relevant CREST instructions
(as appropriate)
Latest time and date for receipt of Forms of 11.00am. on 9
Proxy August 2018
General Meeting 11 a.m. on 13
August 2018
Announcement of result of General Meeting and 13 August 2018
Open Offer
Admission and commencement of dealings in the 8.00 a.m. on 17
Offer Shares August 2018
CREST accounts credited in respect of Offer 17 August 2018
Shares in uncertificated form
Despatch of definitive share certificates in week commencing
respect of Offer Shares to be issued in certificated 27 August 2018
form
Notes:
(1) If any of the details contained in the expected timetable
above should change, the revised times and dates will be notified
by means of an announcement through a Regulatory Information
Service.
(2) Admission and dealings in the Offer Shares are conditional
upon the Open Offer becoming unconditional in all respects.
(3) The ability to participate in the Open Offer is subject to
certain restrictions relating to Qualifying Shareholders with
registered addresses or located or resident in countries outside
the United Kingdom, details of which are set out in paragraph 6 of
Part IV of the Circular. Subject to certain exceptions, Application
Forms will not be despatched to, and Open Offer Entitlements will
not be credited to the stock account in CREST of, Shareholders with
registered addresses in any of the Restricted Jurisdictions.
KEY STATISTICS RELATING TO THE OPEN OFFER
Number of Existing Shares 78,449,241
Number of Offer Shares 20,115,190.00
Offer Price 5 pence
Basis of Open Offer 10 Offer Shares for
every 39 Existing Shares
Gross proceeds from the Open Offer up to GBP1.0 million
Enlarged Issued Share Capital* 330,996,509
Offer Shares and Replacement CLN Shares 321.9 per cent.
as a
percentage of the Existing Shares*
Open Offer Basic Entitlements ISIN GB00BD3FVC10
Open Offer Excess Entitlements ISIN GB00BD3FVB03
* Assuming (i) take-up in full of the Open Offer by Qualifying
Shareholders, (ii) the maximum number of Ordinary Shares that may
arise on the conversion of the Replacement CLNs (and full extent of
accrued interest) that may be held by NB and Omnicare and (iii) the
maximum number of Ordinary Shares that may arise on the conversion
of the Replacement CLNs (and full extent of accrued interest) that
my be held by Downing on the basis that the Company does not
receive the remaining GBP0.15m discretionary amount from Downing
before 30 September 2018, but that no other Ordinary Shares are
issued.
The following is extracted from the Circular
1. Introduction
As detailed in the Company's announcement on 17 May 2018 (the
"Announcement"), the Company had, at that time, secured at least
GBP8.2 million (but with a maximum of GBP8.7 million) in new
financing arrangements from the Company's three major Shareholders,
NB. Ingredients Limited, Omnicane International Investment Co Ltd
via its parent company Omnicane Limited, and certain funds managed
by Downing LLP, by means of secured loan notes. As at the date of
the Circular, Omnicane and NB had each provided GBP3.30 million and
Downing had provided GBP1.95 million (of which GBP0.35 million was
part of the up to GBP0.5m additional funding that was to be
provided at the sole discretion of Downing on or before 30
September 2018) (together, the "May 2018 Loan Notes"). On 17 May
2018, the funds advanced to the Company pursuant to the May 2018
Loan Notes were used in part to fund the payment of GBP4.5 million
deferred consideration due to the vendors of Brighter Foods, and
have provided the Company with up to GBP4.2 million (depending on
whether the further GBP0.15 million is received from Downing) to
fund the Company's continuing working capital needs, including for
the build-up of inventory in advance of the Group's third quarter
in October to December 2018.
As stated in the Announcement, it was proposed that the May 2018
Loan Notes be replaced with convertible loan notes within three
months of the date of the Announcement, with the issue of such
convertible loan notes (the "Replacement CLNs") being subject to a
whitewash process pursuant to Rule 9 of the Takeover Code (as any
conversion by either the NB Concert Party or Omnicane of their
respective Replacement CLNs would increase the total voting rights
under their control to equal to or over 30 per cent. of the total
voting rights of the Company). The Company announced today that the
Takeover Panel has agreed to waive the obligation on each of the NB
Concert Party and Omnicane to make a general offer to Shareholders
under Rule 9 of the Takeover Code that could otherwise arise on
conversion of the Replacement CLNs into new Ordinary Shares,
subject to the NB Whitewash Resolution and the Omnicane Whitewash
Resolution, respectively, being approved at the General Meeting.
Accordingly, the Company is seeking the approval at the General
Meeting of, amongst other things, the Whitewash Resolutions.
The Company has also announced today that it proposes to raise
up to approximately GBP1.0 million by way of an open offer of up to
20,115,190 Offer Shares at a price of 5 pence per Ordinary Share to
Qualifying Shareholders.
Accordingly, the Company is seeking the authority of the
Shareholders to provide the Directors with the authority to allot
and issue the Offer Shares and to disapply pre-emption rights in
relation to the issue of the Offer Shares at the General Meeting,
notice of which is set out at the end of the Circular.
The Open Offer is conditional on: (i) the passing by
Shareholders of the Resolutions at the General Meeting and (ii)
Admission having become effective by no later than 8.00 a.m. on 17
August 2018 (or such time and date as the Company and finnCap may
agree, being no later than 8.00 a.m. on 31 August 2018). Subject to
all relevant conditions being satisfied it is expected that the
Offer Shares will be issued and admitted to trading on AIM on or
around 17 August 2018.
The Offer Price is at a discount of 54.5 per cent. to the
closing middle market price of 11.0 pence per Existing Share on 17
July 2018 (being the last practicable date before publication of
the Circular).
The purpose of the Circular is to explain the background to, and
the reasons for, the Resolutions and to explain why the Independent
Directors (in the case of paragraphs 19(a), (b) and (c)) and the
Directors (in the case of paragraph 19(d)) recommend that you vote
in favour of the relevant Resolutions.
2. Real Good Food plc - Nature of business
Real Good Food was incorporated in February 2003 as an
investment holding company to build, through acquisition and
organic growth, a food group focusing on the supply of a range of
chilled, frozen and ambient products to food retailers, the
foodservice sector and industrial customers.
Employing approximately 1,100 full time employees as at 31 March
2017, the Group's previous strategy was to integrate acquired
businesses into its infrastructure to achieve cross-selling
opportunities into high-growth, premium-priced, specialist markets
with higher trading margins, thereby building businesses which are
strategically attractive to third parties.
Following the disposal of Napier Brown Sugar Limited in May
2015, the Group has had a focus on three synergistic areas (or
divisions): Cake Decoration; Food Ingredients; and Premium
Bakery.
Cake Decoration
The Cake Decoration division contributed approximately GBP47.0
million of revenue and approximately
GBP6.5 million EBITDA in FY17. As at 31 March 2017 the division
employed 358 people full time. The division comprises four parts, J
F Renshaw Limited (trading as Renshaw), Rainbow Dust Colours
Limited ("RDC"), Real Good Food Europe SA (trading as Renshaw
Europe) and Renshaw US Inc. (trading as Renshaw Americas). Renshaw
manufactures and distributes a broad range of cake decorating
products such as sugarpaste, marzipan and mallows through the
mainstream, specialist retail, wholesale, foodservice and food
manufacturing channels. RDC produces a range of edible glitters,
dusts, powders and food paints, brushes and pens for the specialist
sugarcraft market. Renshaw Europe sells, markets and distributes
Renshaw and RDC products across continental Europe, and Renshaw
Americas markets the same products into the Americas.
Food Ingredients
The Food Ingredients division comprises R&W Scott which
manufactures chocolate coatings, sauces, jams and dry powder blends
for the industrial, retail, wholesale and foodservice markets and
Brighter Foods which manufactures snack bars, both branded and own
label, targeted at areas such as diet control, gluten free, lactose
free, low or no added sugar, sports nutrition, organic and fair
trade. The Food Ingredients division contributed approximately
GBP27.3 million of revenue and approximately
GBP(1.6) million of EBITDA in FY17, including the contribution
from Garretts which was then part of the division but was disposed
of in April 2018. As at 31 March 2017 the division employed 121
people full time.
Premium Bakery
Operating through the Haydens and Chantilly businesses, the
Premium Bakery division bakes premium tarts, pies and crumbles,
danish pastries, sweet buns, yum yums and doughnuts, selling to
major retail customers and through foodservice channels, and
manufactures premium quality frozen desserts (e.g. gateaux,
cheesecakes, tarts and flans) and sells them to pubs and
restaurants. It operates both an ambient and frozen supply chain
and also operates a same day consolidation service for all Waitrose
stores for both Haydens and third-party products. In FY17 the
division contributed approximately
GBP33.9 million of revenue and approximately GBP1.2 million
EBITDA. As at 31 March 2017 the division employed 520 people full
time.
3. Background to and reasons for the Rule 9 Waivers
Over the past 12 months the Company has been heavily and
repeatedly reliant upon financial support from the Major
Shareholders in order to continue trading as a going concern as the
effects of poor historic management decisions have become
progressively more apparent. Notwithstanding this the Group is
dependent upon some combination of the disposal of both its
freehold properties within the next six months and the divestment
of at least one of its business units to have sufficient working
capital for present requirements, as further detailed in paragraph
5 below. The stated rationale for the support provided by the Major
Shareholders has altered, as circumstances have changed. The
Directors believe that over the last six months it has been clear
that the Company needs longer term funding in order to have any
prospect of a financially secure and stable future. There has been
a requirement for the Major Shareholders to provide funding at
relatively short notice to support the Group's working capital
requirements and fund the payment of the deferred consideration for
Brighter Foods. Over the past year, in aggregate, the Major
Shareholders have injected/made available over GBP32.8 million to
the Company, against a backdrop of diminishing profitability,
underlined by a number of profit warnings, the last of which was
announced on 31 January 2018.
On 29 June 2017, the Group announced that it had raised up to
GBP15.5 million of expansion capital, comprising a secured loan
note instrument ("June 2017 Loan Notes") of up to GBP8.75 million
from Downing redeemable in full after three years, and attracting
interest of 6.5 per cent. per annum with a 3 per cent.
non-utilisation fee on any undrawn balance; two GBP2.0 million
secured, one-year-term loans from each of NB and Omnicane; and,
GBP2.75 million in new equity (representing 10 per cent. of the
issued share capital of the Company at that time) via a
subscription by Downing. This expansion capital was raised in the
expectation of being used to fund the expansion plans of the
Company, plans that were already well underway.
At the same time, the Company announced, inter alia, that its
expectations for EBITDA for the year to 31 March 2017 were between
GBP5.0 million and GBP5.4 million.
Just over one month later, on 1 August 2017, two further
announcements were released by the Company disclosing that:
-- during the audit process it had become apparent that two
material claims against the Company in respect of its sugar buying
arrangements had come to light;
-- certain development costs previously capitalised should more properly have been expensed;
-- the Group's consolidated EBITDA for FY17 was, as a result of
these factors, and other accruals, likely to be closer to GBP2.0
million;
-- trading conditions were slightly softer than expected in Q1 of the year to 31 March 2017;
-- delays in the investment programme, referred to above, meant
that the Board's expectation for the Group's consolidated EBITDA
for FY18 would be approximately GBP2.3 million less than previously
expected;
-- payments to Pieter Totte and Peter Salter, former directors
of the Company, and to the Company's current Interim Non-Executive
Chairman Patrick Ridgwell made in prior financial years had not
previously been disclosed as required under the AIM Rules and in
the Group's annual report and accounts as related party
transactions, or included in the notes on directors' remuneration
(although the financial impact had been reflected in the years'
results); and
-- Peter Salter, a non-executive director of the Company at that
time and chair of both the Audit and Remuneration Committees, stood
down with immediate effect.
Following this, significant Board changes were announced on 8
August 2017, through which:
-- Harveen Rai was appointed as Group Finance Director, replacing David Newman;
-- Pieter Totte, Executive Chairman, stood down with immediate
effect, with Pat Ridgwell standing in as Interim Non-Executive
Chairman;
-- Hugh Cawley was appointed as an independent Non-Executive
Director and chair of the Audit Committee; and
-- Judith MacKenzie, who had been appointed to the Board on 29
June 2017 took over as chair of the Remuneration Committee.
On 16 August 2017 NB and Omnicane, in equal measure, underpinned
a cash-collateralised overdraft facility of GBP2.0 million for
working capital purposes as, in the Board's opinion at that time,
the Company's working capital position was insufficient. This
GBP2.0 million carried an interest rate of 6.5 per cent. per annum,
reflecting the risk associated with this funding, and mirroring the
rate that Downing's cash injection on 29 June 2017 carried. At the
same time, Downing notified the Company that it would not be
subscribing for the second tranche of the June 2017 Loan Note of
GBP1.5 million, such that no more than GBP7.25 million of principal
is therefore outstanding under that particular arrangement.
On 29 August 2017 the Company announced, following a detailed
financial review by the newly appointed Finance Director, a further
downgrade to expectations of EBITDA for FY18, to approximately
GBP1.0 million. In the same announcement, it was stated that the
Major Shareholders "have confirmed that they will, if required,
provide additional funds to support the Company's working capital
requirements". Ultimately, this support would continue to be
required over the following eight months on a number of
occasions.
The Directors believe that at this stage (and indeed well before
it and since), had the Major Shareholders chosen at any point to
cease to support the business through their provision of working
capital injections, then the Board would have had to commence an
accelerated disposal process of the business and assets of the
Company and/or to conduct the Company in the interests of creditors
as a whole, rather than in the interests of Shareholders.
In parallel to running the business, the newly constituted Board
had investigatory work undertaken to establish, amongst other
things, so far as reasonably practicable, the full nature and
extent of payments made to Pieter Totte, Peter Salter and Patrick
Ridgwell in order that an appropriate announcement could be made to
Shareholders as to what had happened during their stewardship. The
broad outcome of these investigations was announced by the Company
on 14 September 2017.
On 20 September 2017, the Company announced that the Major
Shareholders were again to provide emergency funding in the form of
a GBP4.0 million short-term debt facility through additional loan
notes (the "September 2017 Loan Notes"). It was the Board's view at
that time that the EBITDA for FY18, prior to exceptional costs,
would be in the region of GBP6.5 million, based on each business
unit's own forecasts of their likely profitability. The Group's
results for FY17 were announced on 29 September 2017, reporting
EBITDA of approximately GBP1.2 million and the then Chief Executive
Officer of the Company expressed confidence in the future of the
Company on the basis of the considerable investment that had been
made. Net Debt stood at GBP16.2 million as at 31 March 2017.
Following a comprehensive review of the Company's operations to
begin the process of rebuilding profitability, the management team
further revised expectations down a month later in an announcement
on 23 October 2017. No quantum was specified but the announcement
stated that there would be a "materially reduced level of EBITDA"
and that the Company would make a loss before tax in FY18. Again,
in this announcement, the Company made reference to the continuing
support of the Major Shareholders and how they would be willing to
provide further funding should it prove necessary.
On 22 December 2017 the Company published its interim results
for the six months to 30 September 2017, reporting an EBITDA loss
of GBP1.4 million, and indicating that the remainder of the
financial year was expected to be EBITDA breakeven with Net Debt as
at 30 September 2017 being GBP35.8 million - approximately GBP20
million more indebted than six months previously. It was also
announced that, again, the Major Shareholders would support the
Company with further funding with another injection of, this time,
GBP3.0 million (the "December 2017 Loan Notes"). The Board also
announced that Chris Thomas would step down as Chief Executive
Officer, to become Non-Executive Deputy Chairman and Hugh Cawley
would take over as Chief Executive Officer, effective 1 January
2018.
On 31 January 2018, following an unexpectedly poor peak trading
period over Christmas and an initial review by the new leadership
team, revised expectations for FY18 were announced to be an EBITDA
loss of GBP3.5 million alongside reference to the Board having
formulated and begun to execute a turnaround plan. The Major
Shareholders again expressed support for the Company by offering to
provide what further capital might be required to continue as a
going concern.
Between late June 2017 and 31 January 2018 the Major
Shareholders had made available, in aggregate, GBP23.0 million of
emergency funding, in order to provide the Company with working
capital and allow it to continue to trade as a going concern.
Since 31 January 2018, there have been no further profit
warnings announced by the Company, although the Company's need for
cash has been clear, well-signposted and consistent. In order to
satisfy this cash requirement the Company disposed of the business
of Garrett Ingredients for GBP1.8 million on 23 April 2018 and
sourced a further injection of at least GBP8.2 million from the
Major Shareholders which was announced on 4 May 2018 via the May
2018 Loan Notes. At the same time the terms of a longer-term
funding package from the Major Shareholders was announced. The
documentation of that funding package was signed on 17 May 2018 and
the terms included the proposed issue of the Replacement CLNs (to
repay the May 2018 Loan Notes) and completion of Rule 9 Waivers
with respect to the NB Concert Party and Omnicane.
Since June 2017 (and not taking into account the May 2018 Loan
Notes), the Company has therefore received up to, in aggregate,
GBP27.0 million of support (in various forms) from the Major
Shareholders, as summarised in the below table. Notwithstanding
that, the Major Shareholders have also recently lent a further
GBP8.5 million to the Group (via the May 2018 Loan Notes), and it
is with this final tranche of lending that the Major Shareholders
have required the replacement of the May 2018 Loan Notes by the
Replacement CLNs.
Completion date Amount Method of funding Major
Shareholder(s)
27 March 2018 GBP4.0 million Unsecured loan NB (GBP1.7 million)
notes Omnicane (GBP1.7
million)
Downing (GBP0.6
million)
12 January 2018 GBP3.0 million Unsecured loan NB (GBP1.3 million)
notes Omnicane (GBP1.3
million)
Downing (GBP0.4
million)
20 September GBP3.0 million Loan facility and NB (GBP1.3 million)
2017 loan notes Omnicane (GBP1.3
million) Downing
(GBP1.3 million)
16 August 2017 GBP3.0 million Secured loan facility NB (GBP1.0 million)
(applied as collateral Omnicane (GBP1.0
for bank overdraft) million)
24 July 2017 GBP3.0 million Equity placing Downing
28 June 2017 GBP3.0 million Shareholder loans NB (GBP2.0 million)
Omnicane (GBP2.0
million
28 June 2017 Up to GBP8.75 Loan Notes Downing
million
GBP7.25 million
to date(1)
1 On 16 August 2017 the Company announced that Downing, at that
time, had elected not to subscribe for the second tranche of loan
notes in the sum of GBP1.5 million.
Against this backdrop, the Directors have formulated a
turnaround plan to improve the profitability of the majority of the
Group's business units, especially those which are underperforming
and/or loss-making. To supplement this turnaround plan the Group
requires additional capital which is currently expected to be
generated from some combination of the sale and leaseback of the
Company's two freehold properties and the sale of certain component
businesses of the Group. The Directors' expectations for trading in
the first half of FY19 are such that should the Company not achieve
the sale and leasebacks or divest any of the Group's business
units, the Company will have sufficient working capital only until
the end of September 2018. Furthermore, should Resolutions 1, 2 and
3 not be duly approved by the relevant Shareholders (and the May
2018 Loan Note repaid) this would accelerate the burn of the
Company's cash due to the higher rate of interest that would then
apply to the outstanding May 2018 Loan Notes (an increase in the
total annualised return to 30 per cent.) which would mean the
Company would need to raise additional funds at that time. Please
see the paragraph 5 below entitled "Working Capital" for further
information.
4. Real Good Food Plc - Strategy
Objectives
It is the intention of the Directors to restore the Company's
operations to profitability and cash generation in order to provide
returns to Shareholders. This objective may be common to any
turnaround but the Directors believe that it carries particular
relevance to the Company based on its recent history where
substantial sums have been invested (particularly by the Major
Shareholders) without any return paid or immediate prospect of
such.
The Board believes that the basic tenet of the required strategy
is to work appropriately with the management of each of the
Company's businesses in order to improve the performance of each
individual business unit, thereby increasing the return on
investment within the period but also increasing the longer-term
value of each of the constituent enterprises. However, some of the
businesses in the Company are further developed along the profit
improvement track than others - Brighter Foods is a profitable and
cash generative company in its own right, which the Board believes
requires very little adjustment or improvement, other than
continuing support and modest, expansion-related investment. The
Cake Decoration division, comprising RDC and the UK, European and
US operations of Renshaw, which the Directors believe are
potentially the most valuable enterprises, operates from a strong
position in a global niche market but recent results demonstrate
that the businesses are currently under-performing and
under-delivering against their potential; Hayden's, a well-invested
company, remains loss-making, though marked with a projected
improvement whilst R & W Scott's continues to trade in a
challenging market.
M&A Activity
The Board has no intention to acquire further businesses in the
short to medium term.
In calculating the working capital needs of the Group over the
foreseeable future, the Board has concluded that if the net value
to Shareholders of a business currently within the Group is
demonstrably greater were it to be sold in the short term than if
it were retained and turned around, then it should be considered a
candidate for sale. Garrett Ingredients was a recent example of
where the Board believed the Company would be better served
financially through the disposal of this business rather than
through its continued operation; hence the decision was taken to
dispose of that business for GBP1.8 million.
The Board believes that this is unlikely to be the case with J F
Renshaw or Brighter Foods, the profit growth potential for both of
which is considered to be substantial. Should external parties
express interest in any of the businesses of the Group, then the
Board will give any such interest due and proper consideration,
including the value equation of retention versus disposal.
Given the recent adverse publicity that the Company has
received, a variety of parties have approached the Company with a
view to exploring the possible purchases of certain of the Group's
businesses. The Board has, against that background, assumed that
some business disposals will be effected, and, although the Company
has of late received expressions of strong interest in a number of
its businesses which may or may not lead to a divestment, possibly
even in the relatively short term, there can be no certainty as to
timing or quantum nor, indeed, about achieving a value-accretive
disposal at all. Should the sale of any of its business units not
be achieved, or should any such sale not achieve the level of cash
consideration that has been assumed, there would be a cash
shortfall against the Board's forecasts.
Cash realised through other means
Other assets owned by the Group include two freehold properties,
both in Liverpool. The Board is in advanced discussions with
interested parties regarding both the Company's freehold properties
with regards to sale and lease back arrangements which are expected
to complete within the next six months. The Directors intend to
seek sufficient protections in the lease documentation to ensure
that the use of the properties remains a decision in the hands of
the Company.
Central profit improvement initiatives
In addition to the initiatives which are underway within each
business to improve the profitability of the divisions,
considerable activity has also been underway to improve the
profitability of the Group through rationalising the central
functions and ensuring that the infrastructure of the Group as a
whole is lean and fit for purpose. The central functions now
comprise the Board, finance and information technology, with just
one individual responsible for Group oversight of each of the
innovation and technical functions. This is considerably more
focused than previously and, as part of this process, a number of
employees have left or will shortly be leaving the Group.
The bulk of the central technical function is currently focused
on Renshaw and its ongoing commercial development programme.
Therefore the costs are allocated in large part to Renshaw. The
Board believes that its ability to provide technical support to a
wider base remains a significant asset in the context of a larger
group.
5. Working capital
As a result of the lack of certainty of any business disposals
or sale and lease back transactions, the Directors are of the
opinion that, even taking into account the recent May 2018 Loan
Notes or Replacement CLNs, the working capital available to the
Group is not sufficient for the Group's present requirements, which
is for at least 12 months from the publication of the Circular.
In order for the Group to have sufficient working capital for
its present requirements, the Group is dependent upon some
combination of the disposal of both of its freehold properties
within the next six months and the divestment of at least one of
its business units. If the disposals and divestment(s) were not to
occur and the Open Offer were not to be taken up by any
Shareholders, the Group is expected to have a working capital
shortfall by the end of September 2018.
Assuming that the disposals and divestments are completed at the
levels the Directors currently anticipate and GBP0.5 million net
proceeds are received from the Open Offer (but Shareholders should
note that the Open Offer is not being underwritten), the Directors
believe that the working capital available to the Group, will be
sufficient for the Group's present requirements for at least 12
months following the publication of the Circular.
Shareholders should be aware that if Resolutions 1, 2 and 3 are
not approved at the General Meeting a higher rate of interest would
apply to the principal amount of the May 2018 Loan Notes. As a
result of these higher interest rate provisions, when added to
interest already payable on the May 2018 Loan Notes, the coupon
payable by the Company would amount to a total annualised cost of
30 per cent., and the Company would not then, without further
remedial action, be able to meet its liabilities as they fell due.
In these circumstances the Directors would be forced to seek
alternative funding in order to refinance the May 2018 Loan Notes.
If the Directors were unable to find any other sources of finance,
having exhausted all other options, the Directors would have no
alternative but to apply immediately for administration or to
commence an insolvent liquidation of the Company. Existing secured
creditors of the Group would then be expected to appoint receivers
in respect of those properties subject to their security.
6. Profit Estimate
In due course, the FY18 operating results will be announced and
they will be in line with the market's expectations, as indicated
in late January this year, of an EBITDA loss before exceptional
items in the order of GBP3.5 million from continuing operations.
This constitutes a "profit estimate" for the purposes of Rule 28 of
the Takeover Code (the "Profit Estimate").
The Profit Estimate is based on:
-- the unaudited full year results of the Company for FY18; and
-- the unaudited management accounts of the Company for FY18.
The Directors confirm that the Profit Estimate remains valid and
has been properly compiled according to the bases stated above and
that the basis of accounting used is consistent with the current
accounting policies of the Group. Given that the period to which
the Profit Estimate relates has been completed, there are no other
principal assumptions underpinning the Profit Estimate.
7. Current trading
The current financial year is trading in line with management's
expectations for the full year, during which the Board expects to
see considerable operational improvements. These improvements will
arise partially as a result of the measures the Company has taken
to control and reduce costs, both centrally and within the business
units, and partially from reasserting the units' focus on the
importance of margin generation, rather than simply on revenue
growth, together with a more favourable raw material price
environment. Notwithstanding a challenging retail environment, the
Board anticipates that each business units' results will be in line
with management's expectations, with an increased focus also on
cash generation and markedly lower levels of one-off exceptional
costs.
8. Proposed appointment of non-executive directors
As the Company announced on 6 June 2018 the Board is currently
in the process of seeking to appoint two appropriately qualified
and experienced candidates as independent non-executive directors,
being part of its improved corporate governance practices. When
suitable candidates have been identified and have agreed to join
the Board, the Company will make further announcements to the
market.
9. Proposed executive management incentivisation
It is the intention of the Remuneration Committee to finalise a
new incentive plan for the executive management team of the
Company, in particular, Hugh Cawley, Chief Executive Officer and
Harveen Rai, Finance Director. This may include an option package
over Ordinary Shares or a cash bonus, tied to achieving specific
targets that drive Shareholder returns.
The terms of this incentive plan are intended to be finalised by
the end of August 2018.
10. Information on the Open Offer
Pursuant to the Open Offer the Company is proposing to raise up
to approximately GBP1.0 million (before expenses). A total of up to
20,115,190 Offer Shares are available to Qualifying Shareholders
pursuant to the Open Offer at the Offer Price, payable in full on
acceptance. Any Offer Shares not subscribed for by Qualifying
Shareholders will be available to Qualifying Shareholders under the
Excess Application Facility. The balance of any Offer Shares not
subscribed for under the Excess Application Facility will not be
allotted or issued. The Open Offer is not underwritten (in whole or
in part).
Qualifying Shareholders may apply for Offer Shares under the
Open Offer at the Offer Price on the following basis:
10 Offer Shares for every 39 Existing Shares
and so in proportion for any number of Existing Shares held by
Qualifying Shareholders on the Record Date. Entitlements of
Qualifying Shareholders will be rounded down to the nearest whole
number of Offer Shares. Fractional entitlements which would
otherwise arise will not be issued to the Qualifying Shareholders
but will be aggregated and made available under the Excess
Application Facility. The Excess Application Facility enables
Qualifying Shareholders to apply for Excess Shares in excess of
their basic Open Offer Entitlement. Not all Shareholders will be
Qualifying Shareholders. Shareholders who are located in, or are
citizens of, or have a registered office in Restricted
Jurisdictions will not qualify to participate in the Open Offer.
The attention of Overseas Shareholders is drawn to paragraph 6 of
Part IV of the Circular.
Valid applications by Qualifying Shareholders will be satisfied
in full up to their Open Offer Entitlements as shown on the
Application Form. Applicants can apply for less or more than their
basic entitlements under the Open Offer but the Company cannot
guarantee that any application for Excess Shares under the Excess
Application Facility will be satisfied as this will depend in part
on the extent to which other Qualifying Shareholders apply for less
than or more than their own Open Offer Entitlements. The Company
may satisfy valid applications for Excess Shares of applicants in
whole or in part but reserves the right not to satisfy any excess
above any Open Offer Entitlement. The Board may scale back
applications made in excess of Open Offer Entitlements on such
basis as it reasonably considers to be appropriate.
The Open Offer Entitlements and Excess CREST Open Offer
Entitlements will be enabled for settlement in CREST until 11.00
a.m. on 9 August 2018. Applications through the CREST system may be
made only by the Qualifying CREST Shareholder originally entitled
or by a person entitled by virtue of bona fide market claims. The
Offer Shares must be paid in full on application. The latest time
and date for receipt of completed Application Forms or CREST
applications and payment in respect of the Open Offer is 11.00 a.m.
on 9 August 2018. The Open Offer is not being made to certain
Overseas Shareholders, as set out in paragraph 6 of Part IV of the
Circular.
Qualifying Shareholders should note that the Open Offer is not a
rights issue and therefore any Offer Shares which are not applied
for by Qualifying Shareholders will not be sold in the market for
the benefit of the Qualifying Shareholders who do not apply under
the Open Offer. The Application Form is not a document of title, is
not a negotiable document and cannot be traded or otherwise
transferred.
Further details of the Open Offer and the terms and conditions
on which it is being made, including the procedure for application
and payment for Offer Shares, are contained in Part IV of the
Circular and in the case of Qualifying Non-CREST Shareholders, on
the accompanying Application Form.
The Open Offer is conditional upon, the Resolutions being duly
passed and becoming effective (without material amendment) at the
General Meeting and Admission becoming effective. If the Open Offer
does not proceed, the Offer Shares will not be issued and all
monies received by the Receiving Agents from applicants will be
returned to such applicants (at the applicants' risk and without
interest) as soon as possible thereafter. Any Open Offer
Entitlements and Excess CREST Open Offer Entitlements admitted to
CREST will thereafter be disabled.
The Offer Shares will be issued free of all liens, charges and
encumbrances and will, when issued and fully paid, rank pari passu
in all respects with the then Ordinary Shares, including the right
to receive all dividends and other distributions declared, made or
paid after the date of their issue.
Application will be made to the London Stock Exchange for the
admission of the Offer Shares to trading on AIM. It is expected
that Admission will occur and that dealings will commence at 8.00
a.m. on 17 August 2018 at which time it is also expected that the
Offer Shares will be enabled for settlement in CREST.
Patrick Ridgwell and the Major Shareholders have irrevocably
undertaken not to apply for any Offer Shares under the Open Offer.
Therefore, in aggregate, a minimum of 13,077,238 Offer Shares will
be available under the Excess Application Facility.
The attention of Qualifying Shareholders who have registered
addresses outside the United Kingdom, or who are citizens or
residents of countries other than the United Kingdom, or who are
holding Existing Shares for the benefit of such persons,
(including, without limitation, custodians, nominees, trustees and
agents) or who have a contractual or other legal obligation to
forward the Circular or the Application Form to such persons, is
drawn to the information which appears in paragraph 6 of Part IV of
the Circular.
In particular, Qualifying Shareholders who have registered
addresses in or who are resident in, or who are citizens of,
countries other than the UK (including, without limitation, the
United States of America), should consult their professional
advisers as to whether they require any governmental or other
consents or need to observe any other formalities to enable them to
take up their entitlements under the Open Offer.
11. The Takeover Code
The Takeover Code is issued and administered by the Panel. The
Takeover Code applies to all takeover and merger transactions,
however effected, where the offeree company is, inter alia, a
listed or unlisted public company resident in the United Kingdom
(and to certain categories of private limited companies). The
Company is a United Kingdom incorporated public company whose
Ordinary Shares are admitted to trading on AIM, and its
Shareholders are therefore entitled to the protections afforded by
the Takeover Code.
Under Rule 9 of the Takeover Code, any person who acquires an
interest (as such term is defined in the Takeover Code) in shares
which, taken together with the shares in which he and persons
acting in concert with him are interested, carry 30 per cent. or
more of the voting rights in a company that is subject to the
Takeover Code, is normally required to make a general offer to all
of the remaining shareholders to acquire their shares. Similarly,
when any person, together with persons acting in concert with him,
is interested in shares which in aggregate carry not less than 30
per cent. of the voting rights but does not hold shares carrying
more than 50 per cent. of the voting rights of such a company, a
general offer will normally be required if any further interests in
shares are acquired which increases the percentage of shares
carrying voting rights by any such person. Such an offer would have
to be made in cash at a price not less than the highest price paid
by him, or by any member of the group of persons acting in concert
with him, for any interest in shares in the company during the 12
months prior to the announcement of the offer. The Takeover Panel
may agree to waive an obligation that would otherwise arise to make
a mandatory offer under Rule 9 of the Takeover Code where that
obligation arises as a result of an issue of new shares and the
waiver is approved by independent shareholders.
NB Concert Party
Pursuant to the Takeover Code, a concert party arises when
persons, pursuant to an agreement or understanding (whether formal
or informal), co-operate to obtain or consolidate control of, or
frustrate the successful outcome of an offer for, a company.
Control means an interest or interests in shares carrying in
aggregate 30 per cent. or more of the voting rights of a company
irrespective of whether the interest or interests give de facto
control.
The Company's largest Shareholder, NB, together with Patrick
Ridgwell, Non-Executive Interim Chairman of the Company have an
aggregate holding of 22,502,354 Ordinary Shares, representing
approximately 28.7 per cent of the Existing Shares, as at 17 July
2018 (being the last practicable date prior to the publication of
the Circular). NB and Patrick Ridgwell are considered to be acting
in concert for the purposes of the Takeover Code.
Should NB convert all its Replacement CLNs (including the full
extent of the accrued interest) into Ordinary Shares, and assuming
no other Ordinary Shares are issued by the Company following the
date of the Circular (including (i) pursuant to the Replacement
CLNs that may be held by Omnicane and Downing and (ii) the Offer
Shares), then the NB Concert Party would have an interest in the
Company of 112,262,354 Ordinary Shares representing approximately
66.7 per cent. of the Company's issued share capital at that
date.
Full details of the NB Concert Party's interests on 17 July 2018
(being the last practicable date prior to publication of the
Circular) and potential interest in Ordinary Shares if NB converts
all its Replacement CLNs into Ordinary Shares are set out
below:
As at 17 July 2018 Immediately following Immediately
conversion of NB's following conversion
Replacement CLNs and of NB's Replacement
full extent of accrued CLNs and full
interest(1) extent of accrued
interest (2)
Shareholder No. of Existing % of No. of Ordinary % of Enlarged % of Enlarged
Shares Existing Shares Issued Issued Share
Shares Share Capital
Capital
NB 22,139,998 28.2 111,899,998 66.5 33.8
Patrick Ridgwell 362,356 0.5 362,356 0.2 0.1
---------------- ---------- ---------------- -------------- ----------------------
Total 22,502,354 28.7 112,262,354 66.7 33.9
---------------- ---------- ---------------- -------------- ----------------------
(1) Assuming no other Ordinary Shares are issued by the Company
following the date of the Circular (including (i) pursuant to the
Replacement CLNs that may be held by Omnicane and Downing and (ii)
the Offer Shares).
(2) Assuming no other Ordinary Shares are issued by the Company
following the date of the Circular other than (i) the maximum
number of Ordinary Shares that may arise on the conversion of the
Replacement CLNs (and full extent of accrued interest) that may be
held by NB and Omnicane (ii) the maximum number of Ordinary Shares
that may arise on the conversion of the Replacement CLNs (and full
extent of accrued interest) that may be held by Downing on the
basis that the Company does not receive the remaining GBP0.15
million discretionary amount from Downing before 30 September 2018,
and (iii) the Offer Shares).
Shareholders should be aware that if Resolutions 1 and 3 are
passed and become effective, the NB Concert Party will be able to
convert its Replacement CLNs which could result in an interest in
Ordinary Shares carrying more than 50 per cent., of the voting
rights of the Company's voting share capital. In these
circumstances, the NB Concert Party will be free to acquire further
interests in shares in the Company (including Ordinary Shares)
without being obliged to make any general offer to all Shareholders
under Rule 9 of the Takeover Code and will not be restricted from
making a general offer to all Shareholders under Rule 9 of the
Takeover Code.
Shareholders should also be aware that if Resolutions 1 and 3
are passed and become effective, NB will be able to convert its
Replacement CLNs which could result in an interest in Ordinary
Shares carrying more than 50 per cent., of the voting rights of the
Company's voting share capital. In these circumstances, NB will be
free to acquire further interests in shares in the Company
(including Ordinary Shares) without being obliged to make any
general offer to all Shareholders under Rule 9 of the Takeover Code
and will not be restricted from making a general offer to all
Shareholders under Rule 9 of the Takeover Code.
Omnicane
Should Omnicane convert all its Replacement CLNs into Ordinary
Shares (including the full extent of the accrued interest), and
assuming no other Ordinary Shares are issued by the Company
following the date of the Circular (including (i) pursuant to the
CLNs that may be held by NB and Downing and (ii) the Offer Shares),
then Omnicane would have an interest in the Company of 110,413,954
Ordinary Shares representing approximately 65.6 per cent. of the
Company's issued share capital at that date.
Full details of the Omnicane's interests on 17 July 2018 (being
the last practicable date prior to publication of the Circular) and
potential interest in Ordinary Shares if it converts all its
Replacement CLNs into Ordinary Shares are set out below:
As at 17 July 2018 Immediately following Immediately
conversion of Omnicane's following conversion
Replacement CLNs and of Omnicane's
full extent of accrued Replacement
interest(3) CLNs and full
extent of accrued
interest (4)
Shareholder No. of Existing % of No. of Ordinary % of Enlarged % of Enlarged
Shares Existing Shares Issued Issued Share
Shares Share Capital
Capital
Omnicane 20,653,954(5) 26.33 110,413,954(5) 65.6 33.4
(3) Assuming no other Ordinary Shares are issued by the Company
following the date of the Circular (including (i) pursuant to the
Replacement CLNs that may be held by NB and Downing and (ii) the
Offer Shares).
(4) Assuming no other Ordinary Shares are issued by the Company
following the date of the Circular other than the maximum number of
Ordinary Shares that may arise on the conversion of the Replacement
CLNs (and full extent of accrued interest) that may be held by
Omnicane and NB, (ii) the maximum number of Ordinary Shares that
may arise on the conversion of the Replacement CLNs (and full
extent of accrued interest) that may be held by Downing on the
basis that the Company does not receive the remaining GBP0.15
million discretionary amount from Downing before 30 September 2018,
and (iii) the Offer Shares).
(5) 20,653,954 Existing Shares are held by Omnicane's wholly
owned subsidiary Omnicane International.
Shareholders should be aware that if Resolutions 2 and 3 are
passed and become effective, Omnicane will be able to convert its
Replacement CLNs which could result in an interest in Ordinary
Shares carrying more than 50 per cent., of the voting rights of the
Company's voting share capital. In these circumstances, Omnicane
will be free to acquire further interests in shares in the Company
(including Ordinary Shares) without being obliged to make any
general offer to all Shareholders under Rule 9 of the Takeover Code
and will not be restricted from making a general offer to all
Shareholders under Rule 9 of the Takeover Code.
Rule 9 Waivers
The Panel has agreed to waive the obligation on each of the NB
Concert Party and Omnicane to make a general offer that would
otherwise arise as a result of the conversion of NB's and
Omnicane's (respectively) Replacement CLNs, subject to the approval
of the Independent Shareholders, (to be taken on a poll).
Accordingly, the Whitewash Resolutions are being proposed at the
General Meeting to approve a Rule 9 Waiver in respect of each of
the NB Concert Party and Omnicane for the future conversion of any
of the Replacement CLNs. Members of the NB Concert Party, Omnicane,
Chris Thomas and Downing will not be entitled to vote on the
Whitewash Resolutions.
12. Information on the NB Concert Party
Summary
The NB Concert Party comprises NB and Patrick Ridgwell.
NB is an investment holding company whose registered office is
at International House, St Katherine's Way, London E1W 1XB. Its
directors are Patrick Ridgwell, a director of the Company, and
Anthony Ridgwell.
At 31 March 2017, being the latest date for which financial
information on NB is publically available, NB had net assets of
approximately GBP9.5 million. For the year ended 31 March 2017, NB
reported a loss after taxation of approximately GBP4.2 million. Its
sole investment was the Ordinary Shares it holds in the
Company.
NB is a wholly owned subsidiary of Napier Brown Holdings Limited
("NBHL") an investment holding company whose registered office is
at International House, St Katherine's Way, London E1W 1XB. The
directors of NBHL are Patrick Ridgwell, Anthony Ridgwell and
Anthony Drake.
Patrick Ridgwell and Anthony Ridgwell control NBHL as a result
of controlling directly and indirectly the majority of its issued
share capital. NBHL seeks to generate a risk-adjusted return above
inflation through holding a diversified portfolio of traditional
asset classes.
At 31 March 2017, being the latest date for which financial
information on NHBL is publically available, it had consolidated
net assets of approximately GBP42.5 million. For the year ended 31
March 2017, NHBL reported consolidated turnover of approximately
GBP1.6 million and a consolidated profit after tax (and fair value
gain on investments) of approximately GBP1.8 million.
Patrick Ridgwell, aged 72, has extensive experience of the sugar
industry and other food sectors, having acquired and developed a
number of food businesses during his career. He joined Napier Brown
& Company Limited ("NBCL") in 1964, became a director in 1969
and managing director in 1972, following its acquisition of his
family interests in 1970. NBCL focused on the supply of sugar,
value- added sugar and nut products, dairy powders and sugar
derived food products. NBCL was the largest independent,
non-refining, distributor of sugar in the UK and also supplied
sugar, dairy products, blends and associated ingredients to the
food industry. The business of NBCL was listed on AIM during 2003
and subsequently merged with the Company during 2005. Patrick
Ridgwell was appointed non-executive deputy chairman of the Company
on completion of the merger and became Non- Executive Interim
Chairman on 8 August 2017.
Anthony Ridgwell, aged 46, has been working within the Napier
Brown group of companies since leaving university. He is the son of
Patrick Ridgwell. He is also a director of NB and of NBHL where he
deals with and manages their investments.
Should NB convert all of its Replacement CLNs into Ordinary
Shares, its resultant holding is not expected to have a material
impact on NBHL's financial position, including upon its earnings,
assets and liabilities.
Relationship between the NB Concert Party, the Independent
Directors and the Independent Shareholders
Patrick Ridgwell is a director of NB and NBHL and is the Interim
Non-Executive Director of the Company. Paragraph 4.3(a) of Part VI
contains details of Patrick's letter of appointment with the
Company. Anthony Ridgwell is Patrick Ridgwell's son and is also a
director of NB and NBHL.
The Group currently processes the payroll and life insurance for
certain NBHL employees for an annual fee of GBP500 excluding
VAT.
Save as disclosed above there are no relationships (personal,
financial or commercial), arrangements or understandings between
any member of the NB Concert Party and any of the Independent
Directors.
The NB Concert Party has no relationships (personal, financial
or commercial), arrangements or understandings with any of the
Independent Shareholders or any person who is, or is presumed to
be, acting in concert with any such Independent Shareholder.
Material contracts
Details of the material contracts (not being contracts entered
into in the ordinary course of business) which have been entered
into by the NB Concert Party during the period commencing on 18
July 2016 (being the date two years prior to the publication of the
Circular) and ending on 17 July 2018 (being the last practicable
date prior to the publication of the Circular) are set out in
paragraphs 6.1, 6.2, 6.3, 6.5, 6.6, 6.8, 6.9 and 6.10 of Part VI of
the Circular.
Intentions of the NB Concert Party
The NB Concert Party has confirmed that, if the NB Whitewash
Resolution is passed by the Independent Shareholders on a poll,
there is no agreement, arrangement or understanding for the
transfer of their Ordinary Shares to any third party. Save as
disclosed in paragraph 4 above in relation to the potential
disposal of certain of the Group's business units and freehold
properties, the NB Concert Party is not intending to seek any
changes in respect of: the future of the Group's businesses; any
planned investment in research and development; the continued
employment of the Group's employees and management, including any
material change in conditions of employment or balance of skills
and functions; the location of the Group's places of business,
headquarters and headquarter functions; employer contributions into
the Group's pension schemes, the accrual of benefits for existing
members and the admission of new members; any redeployment of the
fixed assets of the Group as a result of such proposals; and the
maintenance of any existing trading facilities for the relevant
securities of the Group.
13. Information on Omnicane
Omnicane International is a wholly owned subsidiary of Omnicane
Limited. Omnicane Limited, incorporated in 1926 (originally as Mon
Tresor & Mon Desert Limited until its name change to Omnicane
Limited on 9 July 2009) in Mauritius and headquartered in Port
Louis is listed on the Official List of the Stock Exchange of
Mauritius. Omnicane's primary activity consists of the cultivation
of sugarcane and the production of refined sugar, bioethanol,
thermal energy, and electricity. For the year to 31 December 2017
Omnicane generated revenues of 4.5 billion Mauritian Rupees and a
total comprehensive income for the year of 2.5 billion Mauritian
Rupees having produced 184,243 tonnes of refined sugar and
17.9 million litres of bioethanol. As at 31 December 2017 it had
net assets of 10.9 billion Mauritian Rupees and 1,577 employees.
Omnicane has operations in Mauritius, the United Kingdom, Rwanda
and Kenya.
Further information on Omnicane is available on its website:
www.omnicane.com.
Omnicane's majority shareholder is Omnicane Holdings Limited of
which Mrs Valentine Therese Marie Helene Koenig and Mrs Marie
Fernande Lise de Chazal are the ultimate controllers. Mrs Valentine
Therese Marie Helene Koenig is a Mauritian national who was born in
1946, resides in Curepipe, Mauritius and has never held any post of
employment. Mrs Marie Fernande Lise de Chazal, also a Mauritian
national, was born in 1935, resides in Curepipe, Mauritius and has
also never held any post of employment.
Should Omnicane convert all of its Replacement CLNs into
Ordinary Shares, its resultant holding is not expected to have a
material impact on Omnicane's financial position, including upon
its earnings, assets and liabilities.
Relationship between Omnicane, the Independent Directors and the
Independent Shareholders
Jacques d'Unienville is a director of Omnicane and is a
Non-Executive Director of the Company. Paragraph 4.3(e) of Part VI
contains details of Jacques' letter of appointment with the
Company.
Save as disclosed above there are no relationships (personal,
financial or commercial), arrangements or understandings between
Omnicane and any of the Independent Directors.
Omnicane has no relationships (personal, financial or
commercial), arrangements or understandings with any of the
Independent Shareholders or any person who is, or is presumed to
be, acting in concert with any such Independent Shareholder.
Material Contracts
Details of the material contracts (not being contracts entered
into in the ordinary course of business) which have been entered
into by Omnicane during the period commencing on 18 July 2016
(being the date two years prior to the publication of the Circular)
and ending on 17 July 2018 (being the latest practicable date prior
to the publication of the Circular) are set out in paragraphs 6.1,
6.2, 6.3, 6.5, 6.6, 6.8, 6.9 and 6.10 of Part VI of the
Circular.
Intentions of Omnicane
Omnicane has confirmed that, if the Omnicane Whitewash
Resolution is passed by the Independent Shareholders on a poll,
there is no agreement, arrangement or understanding for the
transfer of their Ordinary Shares to any third party. Save as
disclosed in paragraph 4 above in relation to the potential
disposal of certain of the Group's business units and two freehold
properties, Omnicane is not intending to seek any changes in
respect of: the future of the Group's businesses; any planned
investment in research and development; the continued employment of
the Group's employees and management, including any material change
in conditions of employment or balance of skills and functions; the
location of the Group's places of business, headquarters and
headquarter functions; employer contributions into the Group's
pension schemes, the accrual of benefits for existing members and
the admission of new members; any redeployment of the fixed assets
of the Group as a result of such proposals; and the maintenance of
any existing trading facilities for the relevant securities of the
Group.
14. Irrevocable undertakings
The Company has received the following irrevocable undertakings
from the following Directors and Shareholders to vote in favour of
Resolution 4 in respect of the following number of Existing
Shares:
Name Aggregate number of
Existing
Shares voted in favour % of Existing
Shares
Patrick Ridgwell 362,356 0.5
NB 22,139,998 28.2
Omnicane International 20,653,954 26.3
Downing 7,844,924 10.0
Total 51,001,232 65.0
In addition, Patrick Ridgwell, NB, Omnicane International and
Downing have irrevocably committed not to apply for any Offer
Shares under the Open Offer. Therefore, in aggregate, a minimum of
13,077,238 Offer Shares will be available under the Excess
Application Facility.
15. Independent advice provided to the Board
The Takeover Code requires the Board to obtain competent
independent advice regarding the merits of the Rule 9 Waivers which
are the subject of the Whitewash Resolutions, the increase of each
of the NB Concert Party's and Omnicane's controlling positions on
conversion of their respective Replacement CLNs and the effect it
will have on the Shareholders generally. Accordingly, finnCap, as
the Company's financial adviser, has provided formal advice to the
Board regarding the Rule 9 Waiver. finnCap confirms that it is
independent of each of NB (and the NB Concert Party) and Omnicane
and has no commercial relationship with any of them.
16. General Meeting
You will find set out at the end of the Circular a notice
convening the General Meeting to be held at 11.00 a.m. on 13 August
2018 at finnCap, 60 New Broad Street, London, EC2M 1JJ. Details of
the Resolutions which will be proposed at the General Meeting are
set out below:
Ordinary Resolutions
Resolution 1: proposes the NB Whitewash Resolution. The reasons
for this Resolution are described above.
Resolution 2: proposes the Omnicane Whitewash Resolution. The
reasons for this Resolution are described above.
(together the "Whitewash Resolutions")
In accordance with the requirements of the Takeover Panel for
granting the Rule 9 Waivers, the Whitewash Resolutions will be
taken on a poll of Independent Shareholders.
Special Resolutions
Resolution 3: proposes the resolution seeking the authority of
the Shareholders to provide the Directors with the authority to
allot and issue the Replacement CLNs and to disapply pre-emption
rights in relation thereto.
Resolution 4: proposes the resolution seeking the authority of
the Shareholders to provide the Directors with the authority to
allot and issue the Offer Shares and to disapply pre-emption rights
in relation to the issue of the Offer Shares.
17. Action to be taken
In respect of the General Meeting
A Form of Proxy is enclosed for use at the General Meeting.
Whether or not you intend to be present at the meeting you are
requested to complete, sign and return the Form of Proxy to the
Company's registrars, Link Asset Services, PXS1, 34 Beckenham Road,
Beckenham, Kent BR3 4ZF by no later than 11.00 a.m. on 9 August
2018. The completion and return of a Form of Proxy will not
preclude you from attending the meeting and voting in person should
you wish to do so.
In respect of the Open Offer
Qualifying Non-CREST Shareholders wishing to apply for Offer
Shares or the Excess Shares must complete the enclosed Application
Form in accordance with the instructions set out in paragraph 3.1
of Part IV of the Circular and on the enclosed Application Form and
return it with the appropriate payment to Link Asset Services,
Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent
BR3 4TU so as to arrive no later than 11.00 a.m. on 9 August
2018.
If you do not wish to apply for any Offer Shares under the Open
Offer, you should not complete or return the Application Form.
Shareholders are nevertheless requested to complete and return the
Form of Proxy to the Company's registrars, Link Asset Services,
PXS1, 34 Beckenham Road, Beckenham, Kent BR3 4ZF by no later than
11.00 a.m. on 9 August 2018. The completion and return of a Form of
Proxy will not preclude you from attending the meeting and voting
in person should you wish to do so.
If you are a Qualifying CREST Shareholder and do not hold any
Ordinary Shares in certificated form, no Application Form will be
sent to you. Qualifying CREST Shareholders will have Open Offer
Entitlements and Excess CREST Open Offer Entitlements credited to
their stock accounts in CREST. You should refer to the procedure
for application set out in paragraph 3.2 of Part IV of the
Circular. The relevant CREST instructions must have settled in
accordance with the instructions in paragraph 3.2 of Part IV of the
Circular by no later than 11.00 a.m. on 9 August 2018.
Qualifying CREST Shareholders who are CREST sponsored members
should refer to their CREST sponsors regarding the action to be
taken in connection with the Circular and the Open Offer.
18. Further information
Your attention is drawn to the further information set out in
Parts II to VI of the Circular, which provides additional
information on the matters set out in the Circular, and to the
Company's consolidated financial statements for FY16 and FY17,
which are incorporated by reference into the Circular and are
available at www.realgoodfoodplc.com/investor-information/. You are
advised to read the whole Circular and not merely rely on key or
summarised information in this announcement.
19. Recommendations and Opinions
Whitewashes
(a) The Independent Directors consider the Whitewash Resolutions
to be in the best interests of the Company and its Shareholders as
a whole. The Independent Directors, who have been so advised by
finnCap, consider that the Rule 9 Waivers are fair and reasonable
and in the best interests of the Independent Shareholders and the
Company as a whole. In providing advice to the Independent
Directors, finnCap has taken into account the Independent
Directors' commercial assessments.
(b) The Independent Directors unanimously recommend that
Shareholders vote in favour of the Whitewash Resolutions
(Resolutions 1 and 2). Patrick Ridgwell, who is a member of the NB
Concert Party, Jacques d'Unienville who is Chief Executive Officer
of Omnicane, Judith MacKenzie who is a Head of Public Equity at
Downing and Christopher Thomas, who was a director of NBHL until
November 2003, are not deemed to be independent for the purpose of
this recommendation.
Other Resolutions
(c) The Independent Directors consider the allotment and issue
of the Replacement CLNs to be in the best interests of the Company
and its Shareholders as a whole. Accordingly, the Independent
Directors unanimously recommend that the Shareholders also vote in
favour of Resolution 3. Patrick Ridgwell, who is a member of the NB
Concert Party, Jacques d'Unienville who is Chief Executive Officer
of Omnicane, Judith MacKenzie who is a Head of Public Equity at
Downing and Christopher Thomas, who was a director of NBHL until
November 2003, are not deemed to be independent for the purpose of
this recommendation.
(d) The Directors consider that the Open Offer is in the best
interests of the Company and the Shareholders as a whole.
Accordingly, the Directors unanimously recommend that the
Shareholders vote in favour of Resolution 4 as they intend to do in
respect of their own beneficial holdings, representing
approximately 0.8 per cent. in aggregate of the Existing
Shares.
20. Related Party Transaction
As each of NB, Omnicane and Downing are substantial shareholders
of the Company and have Board representation, the replacement of
the May 2018 Loan Notes by the Replacement CLNs is deemed to be a
related party transaction pursuant to the AIM Rules for
Companies.
The Board considers that by replacing the May 2018 Loan Notes
with the Replacement CLNs the Company avoids the higher interest
rate provisions of the May 2018 Loan Note and substantially
alleviates the pressure on the Company to source funding in order
to make any such higher interest rate payments. Hugh Cawley and
Harveen Rai, the Independent Directors of the Company for this
purpose, having consulted with the Company's Nominated Adviser,
finnCap Ltd, consider the replacement of the May 2018 Loan Notes
with the Replacement CLNs to be fair and reasonable insofar as the
Company's shareholders are concerned.
Yours sincerely
Hugh Cawley
Independent Director and Chief Executive Officer
DEFINITIONS
The following words and expressions shall have the following
meanings in the Circular unless the context otherwise requires:
"Admission" the admission of the Offer Shares to trading
on AIM becoming effective in accordance with
the AIM Rules
"Act" the Companies Act 2006, as amended
"acting in concert" shall have the meaning ascribed thereto in
the Takeover Code
"AIM" the AIM market operated by the London Stock
Exchange
"AIM Rules" the AIM Rules for Companies published by the
London Stock Exchange, as amended or reissued
from time to time
"Application Form" the personalised application form which accompanies
this Circular (where appropriate) on which
Qualifying Non-CREST Shareholders (other than
certain Overseas Shareholders) may apply for
Offer Shares under the Open Offer
"Audit Committee" the audit committee of the Company's board
of directors from time to time
"Board" the board of directors of the Company from
time to time
"Brighter Foods" Brighter Foods Limited
"Business Day" a day (other than a Saturday, Sunday or public
holiday in England) when banks in the City
of London are open for business
"Cancellation" the cancellation of the May 2018 Loan Notes
issued to the Major Shareholders
"Cancellation Deed" the loan note deed of release and cancellation
dated 1 May 2018 pursuant to which the Cancellation
will be effected
"certificated" or a share or other security not held in uncertificated
"in certificated form" form (i.e. not in CREST)
"Circular" the document posted to Shareholders on 18
July 2018 relating to the Open Offer and Rule
9 Waivers
"Company" or "Real Real Good Food plc
Good Food"
"CREST" a relevant system for paperless settlement
of trades in securities and the holding of
uncertificated securities operated by Euroclear
in accordance with the CREST Regulations
"CREST Manual" the rules governing the operation of CREST
consisting of the CREST Reference Manual,
the CREST International Manual, the CREST
Central Counterpart Service Manual, the CREST
Rules, the CREST Courier and Sorting Services
Operations Manual, the Daily Timetable, the
CREST Application Procedures and the CREST
Glossary of Terms (as updated from time to
time);
"CREST member" a person who has been admitted to CREST as
a system-member (as defined in the CREST Manual)
"CREST member account the identification code or number attached
ID" to a member account in CREST
"CREST participant" a person who is, in relation to CREST, a system-participant
(as defined in the CREST Regulations)
"CREST participant shall have the meaning given in the CREST
ID" Manual
"CREST payment" shall have the meaning given in the CREST
Manual
"CREST Regulations" the Uncertificated Securities Regulations
2001 (SI 2001/3755), including: (i) any enactment
or subordinate legislation which amends or
supersedes those regulations; and (ii) any
applicable rules made under those regulations
for the time being in force, as amended
"CREST sponsor" a CREST participant admitted to CREST as a
CREST sponsor
"CREST sponsored member" a CREST member admitted to CREST as a sponsored
member
"Directors" the existing directors of the Company whose
names are set out on page 6 of the Circular,
each a "Director"
"Downing" certain funds managed by Downing LLP
"EBITDA" earnings before interest, tax, depreciation
and amortisation (and amounts expressed in
brackets before such term shall denote a negative
amount)
"Euroclear" Euroclear UK & Ireland Limited
"Excess Application the arrangement pursuant to which Qualifying
Facility" Shareholders may apply for additional Offer
Shares in excess of their Open Offer Entitlement
in accordance with the terms and conditions
of the Open Offer
"Excess CREST Open in respect of each Qualifying CREST Shareholder,
Offer Entitlement" the entitlement (in addition to his Open Offer
Entitlement) to apply for Offer Shares pursuant
to the Excess Application Facility, which
is conditional on him taking up his Open Offer
Entitlements in full
"Excess Shares" Offer Shares applied for by Qualifying Shareholders
under the Excess Application Facility
"Existing Shares" the 78,449,241 Ordinary Shares as at 17 July
2018 (being the last practicable date prior
to the publication of the Circular)
"FCA" UK Financial Conduct Authority
"finnCap" finnCap Ltd, nominated adviser to the Company
"Form of Proxy" the form of proxy accompanying the Circular
for use at the GM
"FSMA" Financial Services and Markets Act 2000, as
amended
"FY16" the financial year of the Company ended 31
March 2016
"FY17" the financial year of the Company ended 31
March 2017
"FY18" the financial year of the Company ended 31
March 2018
"FY19" the financial year of the Company ending 31
March 2019
"Garretts" Garrett Ingredients Limited
"GM" or "General Meeting" the general meeting of the Company convened
for 11.00 a.m. at the offices of finnCap,
60 New Broad Street, London, EC2M 1JJ on 13
August 2018 by the Notice of GM and any adjournment
thereof
"Group" the Company and its subsidiaries
"Haydens" Haydens Bakery Limited
"IFRS" International Financial Reporting Standards,
as adopted for use in the European Union
"Independent Directors" Hugh Cawley and Harveen Rai
"Independent Shareholders" Shareholders other than Omnicane, the NB Concert
Party, Christopher Thomas and Downing
"Independent Shares" the Ordinary Shares held by the Independent
Shareholders
"Link Asset Services" a trading name of Link Market Services Limited,
Receiving Agent to the Company
"London Stock Exchange" London Stock Exchange plc
"Major Shareholders" NB, Omnicane and Downing
"May 2018 Loan Notes" the 12 per cent. loan notes allotted to the
Major Shareholders on 17 May 2018
"NB" NB. Ingredients Limited, a company incorporated
in England and Wales with its registered office
at c/o Napier Brown Holdings Limited, International
House, St Katharine's Way, London E1W 1BX
"NBHL" Napier Brown Holdings Limited a company incorporated
in England and Wales with its registered office
at International House, St Katherine's Way,
London E1W 1XB
"NB Concert Party" NB and Patrick Ridgwell
"NB Directors" Patrick Ridgwell and Anthony Ridgwell
"NB Whitewash Resolution" Resolution 1
"Net Debt" the net value of a company's indebtedness
less its cash and cash equivalents
"Notice of GM" the notice of the GM set out at the end of
the Circular
"Offer Price" 5 pence per Ordinary Share
"Offer Shares" up to 20,115,190 Ordinary Shares being made
available to Qualifying Shareholders pursuant
to the Open Offer
"Omnicane" Omnicane Limited, a company incorporated in
Mauritius with its registered office at 7(th)
Floor, Anglo-Mauritius House, Adolphe de Plevitz
Street, Port Louis
"Omnicane Directors" Didier Maigrot, Jacques d'Unienville, Nelson
Mirthil, Marc Hein, Pierre d'Unienville, Therry
Merven, Preetam Boodhun, Sachin Kumar Sumputh
and Valentine Lagesse
"Omnicane International" Omnicane International Investment Co Ltd,
a company incorporated in Mauritius with its
registered office at 7(th) Floor, Anglo-Mauritius
House, Adolphe de Plevitz Street, Port Louis
"Omnicane Whitewash Resolution 2
Resolution"
"Open Offer" the conditional invitation made to Qualifying
Shareholders to apply to subscribe for the
Offer Shares at the Offer Price on the terms
and subject to the conditions set out in Part
IV of the Circular and, where relevant, in
the Application Form
"Open Offer Entitlement" the basic entitlement of Qualifying Shareholders
to subscribe for Offer Shares allocated to
Qualifying Shareholders on the Record Date
pursuant to the Open Offer
"Ordinary Shares" ordinary shares of GBP0.02 each in the capital
of the Company
"Overseas Shareholders" a Shareholder with a registered address outside
the United Kingdom or who is a citizen of,
or incorporated, registered or otherwise resident
in, a country outside the United Kingdom
"Panel" or "Takeover the Panel on Takeovers and Mergers
Panel"
"Prospectus Rules" the prospectus rules published by the FCA
under section 73A of the FSMA, as amended
from time to time
"Qualifying CREST Qualifying Shareholders holding Existing Shares
Shareholders" in certificated form
"Qualifying Non-CREST Qualifying Shareholders holding Existing Shares
Shareholders" in un-certificated form
"Qualifying Shareholders" holders of Existing Shares on the register
of members of the Company at the Record Date
(but excluding, subject to certain exceptions,
any Overseas Shareholder who is located or
resident or who has a registered address in,
or who is a citizen of, the United States
of America or any other Restricted Jurisdiction)
"Record Date" the record date for the Open Offer, being
6.30 p.m. on 13 July 2018
"Receiving Agents" Link Asset Services, a trading name of Link
Market Services Limited
"Registrar" Link Market Services Limited
"Regulation S" Regulation S promulgated under the Securities
Act
"Remuneration Committee" the remuneration committee of the Company's
board of directors from time to time
"Replacement CLN Shares" the up to 236,640,000 new Ordinary Shares
to be issued to the CLN Holders in the event
that they exercise all of their rights to
convert the Replacement CLNs into Ordinary
Shares
"Replacement CLNs" the convertible loan notes to be issued by
the Company to the Major shareholders in consideration
for the cancellation of the May 2018 Loan
Notes conditional upon, amongst other things,
the passing of the Whitewash Resolutions
"Relevant Company Ordinary Shares (or derivatives referenced
Securities" thereto) and securities convertible into,
rights to subscribe for and options (including
traded options) in respect thereof, including,
for the avoidance of doubt, the Ordinary Shares
"Resolutions" the resolutions to be proposed at the General
Meeting as set out in the Notice of GM, and
each a "Resolution"
"Restricted Jurisdictions" United States of America, Canada, Australia,
Japan, the Republic of South Africa and the
Republic of Ireland and any other jurisdiction
where the extension or availability of the
Open Offer would breach any applicable law
"Rule 9 Waivers" the waiver by the Panel of any requirement
under Rule 9 of the Takeover Code for each
of the NB Concert Party and Omnicane to make
a general offer to Shareholders that would
otherwise arise as a result of conversion
of their respective Replacement CLNs
"Securities Act" the US Securities Act of 1933, as amended
"Shareholder(s)" holder(s) of Ordinary Shares
"Shareholder Loans" up to GBP8.7 million in new financing arrangements
from the Major Shareholders by means of the
May 2018 Loan Notes.
"Takeover Code" or the City Code on Takeovers and Mergers
"Code"
"UKLA" the United Kingdom Listing Authority, being
the Financial Conduct Authority in its capacity
as the competent authority for the purposes
of Part VI of FSMA
"uncertificated" or recorded on the register of members of the
"uncertificated form" Company as being held in uncertificated form
in CREST and title to which, by virtue of
the CREST Regulations, may be transferred
by means of CREST
"United Kingdom" or the United Kingdom of Great Britain and Northern
"UK" Ireland
"United States" or the United States of America, its territories
"US" and possessions and the District of Columbia
"voting rights" means all voting rights attributable to the
share capital of the Company which are currently
exercisable at a general meeting
"Whitewash Resolutions" the NB Whitewash Resolution and/or (as the
context requires) the Omnicane Whitewash Resolution,
and each a "Whitewash Resolution".
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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