TIDMTAIH
RNS Number : 0760I
Taihua Plc
25 August 2016
Taihua plc
("Taihua" or the "Company")
Open Offer & posting of a circular to Shareholders
The Company announces today the publication of a circular to
Shareholders regarding a capital raising to raise approximately
GBP715,846.55 by way of an Open Offer (the "Circular").
Introduction
The Company proposes to raise approximately GBP715,846.55
through the issue of New Ordinary Shares to Shareholders at an
issue price of 2.63 pence per New Ordinary Share.
The Issue Price represents a premium of 133.78 per cent to the
Closing Price on the Latest Practicable Date. Application will be
made to the London Stock Exchange for the New Ordinary Shares to be
admitted to trading on AIM. It is expected that Admission will
occur on 19 September 2016.
The purpose of this document is to set out the background to,
and the reasons for, the Open Offer. It explains why the Board
considers the Open Offer to be in the best interests of the Company
and its Shareholders as a whole and to provide you with details of,
and to seek your support to the Open Offer.
The details of the Open Offer are set out below, and the steps
required for Qualifying Shareholders to participate in the Open
Offer are set out in Part 2 of the Circular.
Overview of the Company
The Company is a pharmaceutical company based in China that
specializes in the cultivation of raw materials that are used in
Traditional Chinese Medicine along with the manufacture of TCM and
Homoharringtonine.
The main products of the Company are as follows:
(a) Forsythia
The Company cultivates and distributes Forsythia. Forsythia is a
raw material that is widely used in TCM as a constituent in
remedies intended to clear heat and toxins from the body and to
dissipate nodules. In 2011 and 2013 the Company acquired two
Forsythia plantations with areas the sixe of approximately 893
hectares and 1,013 hectares respectively.
(b) TCM products
The Company manufactures and distributes Bian Tong Pian and
other TCM products in China including Geng Nian An, Zao Ren An Shen
and Du Zhong Ping Ya Pian amongst others.
(c) Homoharringtonine
The Company currently manufactures and distributes
Homoharringtonine. It is used in treatments for cancer.
Background to and Reasons for the Open Offer and Use of
Proceeds
It had previously been suggested to the Board by Shareholders
that the Company should undertake a share buyback programme in
order to satisfy those Shareholders who wish to realise value in
their investment. The Board now therefore considers that it is
appropriate to conduct such a share buyback programme, the details
of which are set out below, in order to satisfy those
Shareholders.
Section 692 of the Act provides that the consideration to be
paid for any share buyback must be paid either out of distributable
profits or out of the proceeds of a fresh issue of shares made for
the purposes of the share buyback
The Company is an investment holding company. The ultimate
trading subsidiary of the Company, TNP, has profits available for
distribution. It would be possible for TNP to pay such profits up
to China Natural as its parent company by way of dividend and China
Natural could then pay those profits up to the Company by way of
dividend.
TNP is based in the PRC. The tax laws and regulations of the PRC
provide that TNP is obliged to deduct 10% withholding tax on any
dividend to be paid by it to China Natural and it must pay the
withholding tax to the Chinese tax authority before any such
dividend can be transferred to China Natural.
The Company had an accumulated loss in the amount of
approximately RMB19,328,000 by 31 December 2015. Assuming the
Company will require GBP500,000 to pay for the share buyback, this
would mean that TNP would have to make a tax payment of around
GBP273,800 in the PRC. The Directors consider that this tax burden
means that this would be an inefficient exercise and the tax costs
would outweigh the benefits to Shareholders.
Given it is not financially viable to undertake the share
buyback out of the distributable profits available in the Group,
another option for the Company is to buy back the shares out of the
proceeds of a fresh issue of shares. The Directors take the view
that the Open Offer is a suitable way to raise the funds required
to complete the proposed share buyback.
At the AGM held on 6 August 2015, Shareholders had granted the
directors the authority to allot up to 27,218,500 Ordinary Shares
on a pre-emptive basis. This authority has been renewed at the AGM
held on 12 August 2016. The Board resolved to undertake the Open
Offer by virtue of this authority. It represents a premium of
133.78 per cent to the Closing Price on the Latest Practicable
Date. The Directors believe the Open Offer will create value and be
attractive to Shareholders. The Net Asset Value of the Company as
reflected in the annual report and accounts for the period ended 31
December 2015 (the "2015 Annual Report") when attributed to each
Ordinary Share is equal to a Net Asset Value of around 16p per
Ordinary Share.
As explained in more detail below, the Open Offer is to be
underwritten by Mr Tao Ji. When considered together with the
proposed share buyback, the proposals will enable both those
Shareholders who wish to subscribe for further Ordinary Shares in
the Open Offer to do so and also those Shareholders who wish to
dispose of some or all of their Ordinary Shares in the proposed
share buyback programme to do so. The Board hopes therefore to
satisfy as many of the Shareholders as is possible.
As authorised by the resolution passed at the AGM held on 12
August 2016, the Company will make one or more market purchases of
up to 8,173,733 Ordinary Shares representing approximately 10 per
cent of the Company's issued share capital as at the date of this
Circular. The minimum price (exclusive of expenses) which may be
paid by the Company for an Ordinary Share is 1 pence per Ordinary
Share. The maximum price (exclusive of expenses) which may be paid
by the Company for an Ordinary Share shall not be more than 105% of
the average of the close middle market quotations for an Ordinary
Share as derived from the London Stock Exchange's Daily Official
List for the five business days immediately preceding the date on
which the Ordinary Share is contracted to be purchased or, in the
case of a tender offer, the terms of the tender offer are
announced.
The Directors intend to use the proceeds of the Open Offer as
follows:
-- up to GBP500,000 will be used to undertake the share buyback; and
-- the balance will be used for general working capital.
Current trading and outlook
The Company released its 2015 Annual Report on 30 June 2016. A
copy of the 2015 Annual Report is available on the Company's
website www.taihplc.com. Shareholders should read those results in
the 2015 Annual Report before making any application for the Open
Offer Shares. Highlights of the 2015 Annual Report include:
-- total Sales for 2015 were RMB 34.23m (2014: RMB 50.95m);
-- the sales of Forsythia in 2015 were RMB26.67m (2014: RMB 41.85m);
-- the sales of TCM products were RMB4.59m (2014:RMB4.87m);
-- the sales of APIs (including Paclitaxel and
Homoharringtonine) in 2015 were RMB2.97m (2014:RMB4.23m); and
-- the loss before tax was RMB30.65m (2014: a profit before tax of RMB4.50m)
In 2015, the Company concentrated efforts on the re-application
for the Chinese GMP certification. As previously announced, this
has been achieved. This, combined with the renewal of the Company's
Drug Production Permit, means that the Directors do not believe
there are any regulatory barriers to the expansion of the Company's
TCM products (including Bian Tong Pian) and sales of
Homoharringtonine.
The Company's strategy for 2016 is to leverage the
re-certification, paying particular attention to recovering its
market share in sales of Homoharringtonine and in expanding its
distribution of Bian Tong Pian.
Open Offer
The Company proposes to raise GBP715,846.55 (before expenses) by
the issue of 27,218,500 New Ordinary Shares by way of the Open
Offer, each at an Issue Price of 2.63 pence per New Ordinary Share.
The New Ordinary Shares will represent 24.98 per cent. of the
Enlarged Issued Share Capital.
Qualifying Shareholders are being offered the right to subscribe
for Open Offer Shares in accordance with the terms of the Open
Offer.
The terms and conditions of the Open Offer are set out in Part 2
of the Circular.
The Directors recognise the importance of pre-emption rights to
Shareholders and consequently 27,218,500 Open Offer Shares are
being offered to existing Shareholders by way of the Open Offer.
The Open Offer provides Qualifying Shareholders with an opportunity
to participate in the Open Offer by subscribing for their
respective Open Offer Entitlement.
Subject to the fulfillment of the conditions set out below and
in Part 2 of the Circular, Qualifying Shareholders are being given
the opportunity to subscribe for Open Offer Shares under the Open
Offer at the Issue Price, payable in full on application and free
of all expenses, pro rata to their existing shareholdings on the
following basis:
1 Open Offer Share for every 3.00300641 Existing Ordinary
Shares
held by Qualifying Shareholders and registered in their name at
the Record Date.
Open Offer Entitlement under the Open Offer will be rounded down
to the nearest whole number and any fractional entitlements to Open
Offer Shares will not be allocated and will be disregarded.
Qualifying Shareholders with holdings of Existing Ordinary Shares
in both certificated and uncertificated form will be treated as
having separate holdings for the purpose of calculating their Open
Offer Entitlement.
If you have sold or otherwise transferred all of your Existing
Ordinary Shares after the ex-entitlement Date, you are not entitled
to participate in the Open Offer.
The Open Offer is not a rights issue. Qualifying CREST
Shareholders should note that, although the Open Offer Entitlement
will be admitted to CREST and be enabled for settlement,
applications in respect of entitlement under the Open Offer may
only be made by the Qualifying Shareholder originally entitled or
by a person entitled by virtue of a bona fide market claim raised
by Euroclear's Claims Processing Unit. Qualifying Non-CREST
Shareholders should note that the Application Form is not a
negotiable document and cannot be traded. Qualifying Shareholders
should be aware that under the Open Offer, unlike in a rights
issue, any New Ordinary Shares not applied for will not be sold in
the market or placed for the benefit of Qualifying Shareholders who
do not apply under the Open Offer.
Application has been made for the Open Offer Entitlement of
Qualifying CREST Shareholders to be admitted to CREST. It is
expected that such Open Offer Entitlement will be admitted to CREST
on 26 August 2016. The Open Offer Entitlement will also be enabled
for settlement in CREST on 26 August 2016 to satisfy bona fide
market claims only. Applications through the CREST system may only
be made by the Qualifying CREST Shareholder originally entitled or
by a person entitled by virtue of a bona fide market claim.
Further details of the Open Offer and the terms and conditions
on which it is being made, including the procedure for application
and payment, are contained in Part 2 of this document and for
Qualifying Non-CREST Shareholders on the accompanying Application
Form. To be valid, Application Forms (duly completed) and payment
in full for the Open Offer Shares applied for must be received by
Capita Asset Services, Corporate Actions, the Registry, 34
Beckenham Road, Beckenham, Kent BR3 4TU, by no later than 11.00
a.m. on 16 September 2016.
Qualifying Non-CREST Shareholders will have received an
Application Form with this document which sets out their maximum
entitlement to Open Offer Shares as shown by the number of Open
Offer Entitlement allocated to them.
To enable the Company to benefit from applicable exemptions from
the requirement under the Prospectus Rules to prepare a prospectus
in connection with the Open Offer, a maximum of 27,128.500 Open
Offer Shares, representing a total consideration of approximately
GBP713,479.55 will be made available to Qualifying Shareholders
under the Open Offer, which will be conducted on the basis of 1
Open Offer Shares for every 3.00300641 Existing Ordinary Shares
held at the Record Date. The Open Offer is restricted to Qualifying
Shareholders in order to enable the Company to benefit from
exemptions from securities law requirements in certain
jurisdictions outside the United Kingdom.
Further information on the Open Offer and the terms and
conditions on which it is made, including the procedure for
application and payment, are set out in Part 2 of the Circular. For
Qualifying Non-CREST Shareholders, completed Application Forms,
accompanied by full payment, should be returned by post, or by hand
(during normal business hours only), to Capita Asset Services,
Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent
BR3 4TU so as to arrive as soon as possible and in any event so as
to be received no later than 11.00 a.m. on 16 September 2016. For
Qualifying CREST Shareholders the relevant CREST instructions must
have been settled as explained in this document by no later than
11.00 a.m. on 16 September 2016.
Other Information relating to the Open Offer
The issue of the Open Offer Shares is conditional, inter alia,
upon Admission becoming effective by no later than 8.00 a.m. on 19
September 2016 (or such later time and/or date as the Company may
agree being no later than 8.00 a.m. on 31 October 2016).
The Open Offer is subject to Admission becoming effective by
8.00 a.m. on 19 September 2016 (or such later time or date not
being later than 8.00 a.m. on 31 October 2016 as the Company may
decide).
In the event that the Open Offer does not become unconditional
by 8.00 a.m. on 19 September 2016 (or such later time and date as
the Company may decide being no later than 8.00 a.m. on 31 October
2016), the Open Offer will lapse and application monies will be
returned by post to the Applicant(s) at the Applicant's risk and
without interest, to the address set out in the Application Form,
within 14 days thereafter.
The New Ordinary Shares will, when issued and fully paid, rank
pari passu in all respects with the Existing Ordinary Shares,
including the right to receive all dividends and other
distributions declared, made or paid after the date of
Admission.
Settlement and dealings
Application will be made to the London Stock Exchange for the
New Ordinary Shares to be admitted to trading on AIM. It is
expected that such Admission will become effective and that
dealings will commence at 8.00 a.m. on 19 September 2016. Further
information in respect of settlement and dealings in the New
Ordinary Shares is set out in paragraph 7 of Part 2 of the
Circular.
Overseas Shareholders
In order to comply with the provisions of the Act, the offer of
Open Offer Shares to Overseas Shareholders who are resident in a
Restricted Jurisdiction will be made pursuant to section 562(3) of
the Act by way of an appropriate notice in the London Gazette. The
Open Offer is not being made to such Overseas Shareholders by means
of sending this document or the Application Form to them, and nor
will the stock accounts of such Overseas Shareholders who hold
existing Ordinary Shares in CREST be credited with Open Offer
Entitlement.
Information for Overseas Shareholders who have registered
addresses outside the United Kingdom or who are citizens or
residents of countries other than the United Kingdom appears in
paragraph 6 of Part 2 of the Circular which sets out the
restrictions applicable to such persons. If you are an Overseas
Shareholder, it is important that you pay particular attention to
that section of the Circular.
Underwriting arrangements and irrevocable undertaking
The Company has entered into an Underwriting Agreement with Mr
Tao Ji on the date of the Circular.
Pursuant to the Underwriting Agreement Mr Ji has committed to
subscribe for up to 20,628,582 of Open Offer Shares at the Issue
Price if any Open Offer Shares are not subscribed for by
Shareholders in accordance with their Open Offer Entitlements.
In addition to the Underwriting Agreement, Mr Tao Ji has
irrevocably undertaken to take up his full Open Offer Entitlements
which are 1,882,305 Open Offer Shares. He has also made full
payment for his Open Offer Entitlements to the Company as at the
date of the Circular.
In the event that Mr Ji is required to subscribe for the full
maximum of 20,628,582 of Open Offer Shares in accordance with the
Underwriting Agreement then, following Admission, Mr Ji will hold
28,163,461 Ordinary Shares which will represent 25.85 per cent. of
the Enlarged Share Capital assuming all Open Offer Shares are
issued.
Mr Tao Ji is a highly experienced manager and entrepreneur. Mr
Ji graduated from Xi'an Jiaotong University and again from Ecole
Centralle di Lille in Economics, Information Engineering and
Communication Engineering. Mr Ji is currently the Vice General
Manager of Changzhou Shiweiya Trading Co Limited.
Directors
The Company will be in a "closed period" pursuant to the Market
Abuse Regulations when it accepts the applications for Open Offer
Shares from Directors as it is due to publish its interim results
for the period ended 30 June 2016 before 30 September 2016. During
any such closed period, the Directors are prohibited from dealing
in any Ordinary Shares. Participation in the Open Offer would
constitute "dealing" for these purposes and therefore the Directors
are prohibited from participating in the Open Offer.
Expected Timetable Of Principal Events
2016
Record Date and time for entitlements under 5.00 p.m. on 22
the Open Offer August
--------------------------------------------------- -----------------
Announcement of the Open Offer 25 August
--------------------------------------------------- -----------------
Dispatch of this document and Application Forms 25 August
to Qualifying Non-CREST Shareholders
--------------------------------------------------- -----------------
Existing Ordinary Shares marked 'ex' entitlement 25 August
by the London Stock Exchange
--------------------------------------------------- -----------------
Open Offer Entitlements credited to CREST accounts 26 August
of Qualifying CREST Shareholders
--------------------------------------------------- -----------------
Posting of notice in the London Gazette 26 August
--------------------------------------------------- -----------------
Recommended latest time and date for requesting 4.30 p.m. on 12
withdrawal of Open Offer Entitlements from September
CREST
--------------------------------------------------- -----------------
Latest time and date for depositing Open Offer 3.00 p.m. on 13
Entitlements into CREST September
--------------------------------------------------- -----------------
Latest time and date for splitting Application 3.00 p.m. on 14
Forms (to satisfy bona fide market claims only) September
--------------------------------------------------- -----------------
Latest time and date for receipt of completed 11.00 a.m. on 16
Application Forms from Qualifying Shareholders September
and payment in full under the Open Offer or
settlement of relevant CREST instructions (as
appropriate)
--------------------------------------------------- -----------------
Expected date of Admission and commencement 19 September
of dealings in New Ordinary Shares
--------------------------------------------------- -----------------
Expected date for CREST accounts to be credited 19 September
with New Ordinary Shares
--------------------------------------------------- -----------------
Share certificates in relation to New Ordinary 26 September
Shares (where applicable) dispatched by
--------------------------------------------------- -----------------
Notes
Save for the date of publication of this document, each of the
times and dates above are subject to change. Any such change,
including any consequential change in the Open Offer Statistics
above, will be notified to Shareholders by an announcement on a
Regulatory Information Service. All times are London times and each
of the times is subject to change.
Open Offer Statistics
Closing Price1 1.125 pence
----------------------------------------------------- --------------------------------------------------
Issue Price 2.63 pence
----------------------------------------------------- --------------------------------------------------
Number of Existing Ordinary Shares in issue
on the Record Date 81,737,330
----------------------------------------------------- --------------------------------------------------
Number of Open Offer Shares 27,218,500
----------------------------------------------------- --------------------------------------------------
Open Offer Entitlement 1 Open Offer Shares for every 3.00300641 Existing
Ordinary Shares
----------------------------------------------------- --------------------------------------------------
Number of New Ordinary Shares 27,218,500
----------------------------------------------------- --------------------------------------------------
Enlarged Issued Share Capital immediately following
the Open Offer2 108,955,830
----------------------------------------------------- --------------------------------------------------
Gross proceeds of the Open Offer3 GBP715,846.55
----------------------------------------------------- --------------------------------------------------
Percentage of the enlarged issued share capital 24.98 per cent
of the Company
that the New Ordinary Shares will represent
----------------------------------------------------- --------------------------------------------------
Notes
(1) Closing Price on 24 August 2016, being the last practicable
Business Day prior to the publication of this document.
Statistics are prepared on the basis that no Ordinary Shares
will be issued following the date of this document and before the
completion of the Open Offer.
(2) Enlarged Issued Share Capital immediately following the Open
Offer assumes the maximum number of New Ordinary Shares under the
Open Offer are allotted.
(3) Gross proceeds of the Open Offer assumes the maximum number
of New Ordinary Shares under the Open Offer are allotted.
Additional information and availability of the Circular
Your attention is drawn to the entirety of the information set
out in the Circular. The Circular will be available for a period of
at least 12 months from today on the Company's website
www.taihplc.com free of charge in accordance with the requirements
of Rule 26 of the AIM Rules.
Capitalised terms used but not otherwise defined in this
announcement bear the meanings ascribed to them in the
Circular.
Enquiries:
Nicholas Lyth, Taihua plc 07769 906 686
Katy Mitchell, WH Ireland Limited +44 161 832 2174
This information is provided by RNS
The company news service from the London Stock Exchange
END
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