TIDMTAN
RNS Number : 9513M
Tanfield Group PLC
26 January 2021
The information contained within this announcement is deemed by
the Company to constitute inside information under the Market Abuse
Regulation (EU) No. 596/2014. Upon the publication of this
announcement via a Regulatory Information Service ("RIS"), this
inside information is now considered to be in the public domain
Tanfield Group Plc
("Tanfield" or the "Company")
Loan Subscription & Legal Proceedings Update
Background
-- Tanfield is a 49% shareholder in the equity of Snorkel
International Holdings LLC ("Snorkel") following the joint venture
between the Company and Xtreme Manufacturing LLC ("Xtreme") (the
"Contemplated Transaction"), a company owned by Don Ahern of Ahern
Rentals Inc, relating to Snorkel, in October 2013 .
-- The Snorkel investment is valued at GBP19.1m. The outcome of
the US and UK Proceedings referenced below could have an impact on
this valuation.
-- On 22 October 2019, the Company announced that it had
received a Summons and Complaint, filed in Nevada by subsidiaries
of Xtreme, relating to the Contemplated Transaction (the "US
Proceedings").
-- On 24 October 2019, the Company announced it had become
necessary to issue and serve a claim in the English High Court
against Ward Hadaway (the "UK Proceedings"), the solicitor acting
for the Company at the time of the Contemplated Transaction, in
order to fully protect the Company's rights pending the outcome of
the US Proceedings.
Loan Subscription
Further to the update on 30 July 2020, in which the Company
announced that it had put in place a second loan note instrument
(the "Loan") of up to GBP1m with GBP500,000 initially being
subscribed to, the Board of Tanfield (the "Board") is pleased to
announce that an additional GBP200,000 of the Loan has been
subscribed to, taking the total subscription value to GBP700,000.
The additional Loan will be used for the purpose of providing the
necessary funding for the ongoing US and UK Proceedings and other
day to day costs.
The additional Loan is unsecured, carries annual interest of 10%
which is to accrue and is repayable on the earlier of (i) 28
February 2025 or (ii) receipt of sufficient funds relating to
either the US Proceedings or the UK Proceedings. Should repayment
take place prior to 28 February 2025, a 20% early redemption
premium shall apply.
A number of existing shareholders have subscribed to the
additional Loan of GBP200,000, which constitutes a related party
transaction under Rule 13 of the AIM Rules as a result of OTK
Holding A/S and Zoar Invest Aps, which each hold approximately 14%
of the issued shares of the Company, subscribing GBP75,000 each to
the Loan. The Directors of the Company, having consulted with WH
Ireland Limited, the Company's nominated adviser, consider the
terms of the transaction to be fair and reasonable.
Following discussions with the existing shareholders, the Board
are of the opinion that further subscriptions to the Loan will take
place as necessary to ensure the Company can continue to protect
its investment in Snorkel.
US Proceedings
On 22 October 2019, the Company announced it had received a
Summons and Complaint in relation to the US Proceedings, regarding
the purported call option notice announced by the Company in
November 2018. As reported, despite the Board seeking to resolve
the dispute amicably, Snorkel and Xtreme, by filing the Summons and
Complaint, continued in their attempt to take ownership of
Tanfield's 49% investment in Snorkel for an overall nil
consideration, having not paid any consideration to Tanfield for
Xtreme's initial 51% of the joint venture and purporting that no
consideration is due to Tanfield before it can compel the Company
to transfer its remaining 49% investment to Snorkel / Xtreme. The
Board notes that Snorkel / Xtreme make this claim despite declaring
in various K-1 US tax declarations that Tanfield, via its
subsidiary HBWP Inc, contributed properties with a net fair market
value of $45,476,730 to Snorkel International Holdings LLC in
October 2013. The Board continues to believe that the contractual
agreements require that the preferred interest (valued at GBP19.1m)
is paid prior to, or in conjunction with, a call option notice.
On 30 March 2020, the Company announced that despite ongoing
attempts to resolve the dispute amicably, Snorkel and Xtreme filed
a motion in favour of their claims and against claims brought by
Tanfield, without a trial, claiming that there were no genuine
issues of material fact (the "Motion"). The Board vehemently
disagreed with the Motion and believed that it was without merit
and subsequently, on 3 April 2020, the Company announced that the
judge took the Motion under advisement and, after a review and
consideration of the record and the contract, the court determined
that there appears to be genuine issues of material fact pertaining
to the contract, its terms, and its execution and therefore the
Motion brought by Snorkel and Xtreme was denied.
The parties have been producing documents as part of the ongoing
discovery process. Despite the Board's best efforts to keep
procedural matters to the agreed timetable, there have been delays
relating to any meaningful productions of documents by Snorkel /
Xtreme. However, the Board is pleased to update that some progress
has now been made and, following exchanges between respective
counsels, further documents have recently been produced, as well as
assurances given that further document productions will soon be
forthcoming. Whilst document production is still ongoing, as a
result of the assurances received, the Board are hopeful that the
proceedings will soon proceed to the taking of depositions from
those involved in the Contemplated Transaction. The matter is
currently expected to continue to trial later in the year.
UK Proceedings
On 24 October 2019, the Company also announced it was necessary
to issue and serve a claim in the English High Court against Ward
Hadaway, the solicitor acting for the Company in 2013, in order to
fully protect the Company's rights pending the outcome of the US
Proceedings. Those proceedings seek to ensure that the Company can,
if necessary, hold Ward Hadaway to account for the firm's role in
and/or advice to Tanfield in relation to the Contemplated
Transaction.
Whilst the Board vehemently deny the claims made by Snorkel and
Xtreme in the US Proceedings, a major part of the UK Proceedings is
premised on the Company losing the US Proceedings. If that were to
happen, the UK Proceedings are, in summary, that Ward Hadaway were
retained to advise and assist the Company in connection with the
Contemplated Transaction, in particular the preparation of the
Circular and the process of obtaining the required Shareholder and
Board approval before the Contemplated Transaction could be entered
into, and that the firm was negligent and/or acted in breach of
contract in carrying out that role, the result of which has led to
the Company suffering substantial financial loss.
The parties recently agreed to amend their respective statements
of case and are currently working towards a trial later in the
year. One of the steps in the court timetable is the preparation of
expert forensic accountancy evidence which seeks to value the
Snorkel division and assets which were contributed to the joint
venture as part of the Contemplated Transaction. The Board believe
that value to have been substantial.
The Board remain hopeful that a positive outcome to either/both
the US Proceedings and UK Proceedings is possible and, so far as it
is necessary, the Company will continue to vigorously defend and
advance its position in both proceedings, whilst continuing to seek
advice. Further updates will be provided to Shareholders as and
when appropriate.
For further information:
Tanfield Group Plc 020 7220 1666
Daryn Robinson
WH Ireland Limited - Nominated Advisor / Broker
James Joyce / Lydia Zychowska 020 7220 1666
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END
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