Black Earth Farming Ltd Carries Out a Rights IssueSt Helier, Jersey, 2012-11-13 14:50 CET --
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The Board of Directors of Black Earth Farming Limited (“BEF” or the “Company”) has, with support of the authorisation from the extraordinary general meeting held on 13 November 2012, resolved to carry out a rights issue of maximum 83,067,778 new shares represented by Swedish Depository Receipts (“SDRs”) at a subscription price of SEK 6.38 with preferential rights for the existing SDR holders of BEF (the "Rights Issue"). The total issue amount corresponds to a maximum amount of approximately SEK 530 million before issue expenses.
Summary
· Three (3) existing SDRs will entitle the holder to subscribe for two (2) new shares represented by two (2) SDRs
· The subscription price is SEK 6.38 per SDR
· The subscription period will be 26 November - 7 December 2012
· Record date for participation in the Rights Issue is 20 November 2012
· BEF has received subscription undertakings from SDR holders representing in the aggregate 50.4 percent of the Rights Issue, including Vostok Nafta and Kinnevik, as well as all members of the Board of Directors and senior management of BEF who currently hold SDRs in the Company
· At full subscription maximum 83,067,778 new shares will be issued, each share represented by one (1) SDR, which represents a share capital increase of maximum USD 830,677.78 and a total issue amount of maximum approximately SEK 530 million before issue expenses1
· Approximately SEK 365 million will be used for capital expenditures and working capital relating to the PepsiCo cooperation agreement and approximately SEK 165 million for working capital of BEF to raise crop yields and lower the cost per ton of production
Background and reasons
A new management team has started to implement change in order to improve operational performance and profitability. Several key strategic initiatives have been targeted in order to improve operating performance which include; raising crop yields to lower the cost per ton of production, improving marketing and price risk management to reduce volatility as well as overhead cost reductions. Progress has been made during 2012 in terms of execution and operational management with improvements to crop yields and price risk management. The multiyear process will continue and entails higher working capital needs but is vital for improved profitability going forward. The returns on the additional working capital outlay are significant given the high sensitivity of revenue and profit to changes in crop yields and price.
New relationships with high quality domestic counterparties in addition to export sales will also be crucial for improved price risk management. As part of this BEF has entered into a strategic relationship with PepsiCo in Russia. BEF will become a significant supplier of sunflower seeds and potatoes used in the production of Frito-Lay’s potato crisps. It is also anticipated that an agreement for the supply of sugar beets will be executed in January 2013. The relationship provides BEF and PepsiCo with the opportunity to mutually benefit from a secure supplier relationship, reduced counterparty risk, lower volatility via forward pricing and future growth opportunities. The collaboration will have a significant positive impact on BEF’s business as it offers the potential to lock in forward prices for a significant quantity of its production while also diversifying into competitively advantaged higher margin irrigated crops. Please see separate press release on 22 October 2012 for additional details.
The Board of Directors and management of BEF believe that the changes and initiatives currently being undertaken are crucial to improve results going forward. In order to fund the investment and working capital needs required to fulfil the Company’s commitments towards PepsiCo and to continue to implement the operational turnaround, a strengthened equity base is proposed given the Company´s current capital structure and the inherent volatility of business. The Board of Directors has therefore decided to undertake the Rights Issue with preferential rights for existing SDR holders in the amount of approximately SEK 530 million before issue expenses.
The Rights Issue
At the extraordinary general meeting held on 13 November 2012 it was resolved to authorise the Board of Directors to resolve on a share issue up to the maximum number of shares which the Company is authorised to issue as set out in the Memorandum of Association of the Company. The Board of Directors has today resolved on the Rights Issue, comprising of maximum 83,067,778 new shares represented by SDRs at a subscription price of SEK 6.38 with preferential rights for the existing SDR holders of BEF. In the Rights Issue three (3) existing SDRs will entitle the holder to subscribe for two (2) new shares, each share with a quota value of USD 0.01 and represented by one (1) SDR. The Rights Issue will increase the Company’s share capital by a maximum of USD USD 830,677.78, from USD 1,246,016.67 to a maximum of USD 2,076,694.45.The total issue amount will amount to a maximum of approximately SEK 530 million before issue expenses. The record date for participation in the Rights Issue is 20 November 2012. For each SDR held on the record date, the SDR holders will receive two (2) subscription rights. Each three (3) subscription rights entitles the holder to subscribe for one (1) new share represented by one (1) new SDR. The first day of trading excluding subscription rights is 16 November 2012. Subscription period for the new SDRs commences on 26 November 2012 and ends on 7 December 2012. Trading in subscription rights will take place on NASDAQ OMX Stockholm between 26 November 2012 and 4 December 2012.
Prospectus
Detailed information regarding the Rights Issue will be presented in the prospectus that will be prepared and published in respect of the Rights Issue. The prospectus is expected to be published on or around 16 November 2012 and will be made available on the Company’s website.
Undertakings to Subscribe
The two largest SDR holders in BEF, Kinnevik New Ventures AB and Vostok Komi (Cyprus) Limited, together holding approximately 49.7 percent of the capital and votes, support the Rights Issue and have made commitments to subscribe for their respective pro rata share of the Rights Issue, corresponding to approximately 49.7 percent of the Rights Issue. Members of the Board of Directors and management of BEF currently holding SDRs have made commitments to subscribe for their respective pro rata share of the Rights Issue. In total, SDR holders representing 50.4 percent of the capital and votes have made commitments to subscribe for their respective pro rata share of the Rights Issue. The SDR holders commitments are conditional upon the subscription period ending on or prior to 31 December 2012. No commissions will be paid on the SDR holders subscription undertakings.
Time table for the Rights Issue
16 November 2012 Date for publication of the prospectus
16 November 2012 First day of trading excluding subscription rights
20 November 2012 Record date for participation in the Rights Issue
26 November – 4 December 2012 Trading in subscription rights
26 November – 7 December 2012 Subscription period
On or around 13 December 2012 Announcement of the outcome of the Rights Issue
Advisors
Pareto Öhman AB is financial advisor and Linklaters is legal advisor to BEF in connection with the Rights Issue.
For further information, please contact:
Erik Lystedt, Director of Investor Relations, Black Earth Farming Ltd., erik@blackearthfarming.com, tel: +44 (0) 2071 178 100
About Black Earth Farming Ltd.
Black Earth Farming Ltd. is a leading farming company, publicly listed on Nasdaq OMX Stockholm and operating in Russia. It acquires, develops and farms agricultural land assets primarily in the fertile Black Earth region in southwest Russia. Black Earth Farming has gained a strong market position in the Kursk, Tambov, Lipetsk and Voronezh areas, controlling some 310,000 hectares, of what perhaps is the world’s most fertile soil. In 2012 Black Earth Farming intends to harvest over 222,000 hectares, effectively making it one of the world’s largest public farming companies by cropped area. The Company’s main products are wheat, barley, corn, sunflower, soya and rapeseeds.
Important notice
The information in this press release is not intended, to directly or indirectly, be distributed, published or made public in Australia, Canada, Hong Kong, Japan, , Singapore, South Africa, Switzerland, the United States or any other jurisdiction where the distribution of this press release would be illegal. The distribution of this press release may be restricted by law in certain jurisdictions and persons who take part of this press release or other information set out herein should inform themselves of, and observe, any such restrictions.
The information in this press release does not constitute an offer to sell shares or solicitation of an offer to buy shares. This press release does not constitute a prospectus under the Prospectus Directive 2003/71/EC, as amended.
The information in this press release does not constitute and is not part of an offer or solicitation of an offer to buy or subscribe for securities in the United States. Securities mentioned herein have not and will not be registered in accordance with the Securities Act of 1933 (the “Securities Act”). Securities mentioned herein may not be offered or sold in the United States unless they are registered in accordance with the Securities Act or fall within an exemption in the Securities Act. There will not be any public offer in the United States regarding securities.
The information in this press release may not be forwarded or distributed to any other person and may not be reproduced in any way. The forwarding, distribution, reproduction or presentation of the information herein, partly or fully, may not be permitted. Failure to comply with these instructions may be a breach of the Securities Act or applicable laws in other jurisdictions.
1The issue expenses are estimated to amount to approximately SEK 12.3 million.
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