TIDMQIL
RNS Number : 9677K
Qannas Investments Limited
03 September 2019
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN
PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION
WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT
SECURITIES LAWS OF SUCH JURISDICTION
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
Qannas Investments Limited
("Qannas" or the "Company")
Statement re reverse takeover and suspension of share trading on
AIM
Qannas is pleased to announce that it has entered into
conditional agreements to acquire a substantial portfolio of
attractive investment assets (the "Portfolio") from a consortium of
third party vendors (the "Transaction"). The independent directors
of Qannas (being Chris Ward and Richard Prosser (the "Independent
Directors")) believe that the Transaction represents a compelling
opportunity to significantly enhance and broaden the existing
investment portfolio of Qannas with the aim of achieving greater
scale and enhanced diversification, which is intended in turn to
boost liquidity and the investor appeal of Qannas.
The Portfolio includes shareholdings in a number of publicly
traded GCC-focussed companies, in sectors such as real estate,
maritime shipping services and insurance. Further Portfolio assets
include two plots of land that have been zoned for commercial or
residential development and units of an open ended fund that Qannas
is currently invested in.
The Transaction attributes a value to the Portfolio of
approximately AED 1.5bn(1) (approximately $417m(2) ), representing
a compelling discount to the market value of the Portfolio as at 31
July 2019 of approximately AED 2.2bn (approximately $600m(2) ).
Qannas will also assume accompanying liabilities of approximately
AED 1.1bn(1) (approximately $298m(2) ). Qannas estimates that it
will issue approximately 196 million(1) new ordinary shares of no
par value ("New Qannas Shares") in consideration for the Portfolio,
dependent inter alia on Qannas' net asset value as of 31 July
2019.
The Transaction, therefore, presents Qannas with the opportunity
to acquire a Portfolio with an estimated net asset value implied by
the Transaction of approximately AED 440 million (approximately
$120m) on highly attractive terms. The Transaction and subsequent
balance of assets across the Company is consistent with the
Company's investment strategy and policy.
The Transaction is to be implemented by way of a transfer of the
legal and/or beneficial interests in the Portfolio and the
accompanying liabilities to one or more special purpose vehicles
("HoldCos") to be established in the UAE by or on behalf of the
consortium of third party vendors. The consortium of third party
vendors will thereafter procure the transfer of the HoldCos to
Qannas and/or a nominee appointed by Qannas, and Qannas will issue
the New Qannas Shares to the consortium of third party vendors pro
rata to their respective beneficial interest in and to the
Portfolio. Details of the Implementation Agreements with regard to
the Transaction and certain associated related party transactions
are set out below.
Qannas will in due course propose certain resolutions to be
approved by shareholders with regard to the Transaction.
Further announcements will be made in due course.
Reverse takeover and suspension of trading
The Transaction would, if it were to complete, comprise a
reverse takeover pursuant to Rule 14 of the AIM Rules for Companies
(the "AIM Rules") due to the size of the Transaction relative to
the Company. Accordingly, the Company's ordinary shares have been
suspended from trading on AIM this morning, 3 September 2019, with
effect from 7.30 a.m.
The Company's shares will remain suspended pending publication
of an AIM admission document. In the event that the Company is
unable to complete the Transaction on or before 3 March 2020,
admission of the Company's shares will be cancelled in accordance
with Rule 41 of the AIM Rules. The AIM admission document will set
out further details of the Portfolio and the Transaction.
Whilst the binding Implementation Agreements have been executed
in relation to the Transaction, there is further documentation to
be agreed. Due diligence with regard to the Transaction is ongoing.
Accordingly, there can be no certainty that the Transaction will be
concluded successfully. If the Transaction does not proceed for any
reason or the Implementation Agreements are terminated, the Company
will make an announcement through a regulatory information service
and trading in the Company's ordinary shares will cease to be
suspended.
Summary of the implementation agreements
On 3 September 2019, two conditional implementation agreements
(the "Implementation Agreements") were entered into between Qannas
and, amongst others, the representatives of the consortium of third
party vendors (the "Representatives") in order to set out each
party's respective rights and obligations in respect of, and the
process for, the implementation of the Transaction. Under the terms
of the Implementation Agreements, the Transaction is conditional
on: (1) the passing at a general meeting of the shareholders of
Qannas of a resolution approving the Transaction and of resolutions
to increase the authorised share capital of Qannas, allot and issue
the New Qannas Shares and amend the articles of association of
Qannas; (2) the transfer of the Portfolio and the accompanying
liabilities to the HoldCos; (3) the amendment of the existing
investment management agreement between Qannas and its investment
manager (details of the key changes are described below); and (4)
the satisfaction of certain other conditions.
On and subject to the terms of the Implementation
Agreements:
-- The parties to each Implementation Agreement have agreed to
perform certain obligations in connection with completion of the
Transaction and if any party fails to comply with a material
obligation then the non-defaulting party(ies) shall have a right to
terminate the relevant Implementation Agreement, fix a new date for
completion or proceed to completion as far as is practicable.
-- Following completion of the Transaction:
o the consortium of third party vendors will (unless Qannas
expressly consents otherwise and except for the New Qannas Shares
issued in connection with the Eagle Fee (as defined below)) be
subject to a lock-up, such that they will continue to be the
registered and beneficial owners of: (1) 100% of the New Qannas
Shares at all times from and including the closing date to and
excluding the second anniversary of the closing date; (2) 58.4% of
the New Qannas Shares at all times from and including the second
anniversary of the closing date to and excluding the third
anniversary of the closing date; and (3) 48.4% of the New Qannas
Shares all times from and including the third anniversary of the
closing date to and excluding the fourth anniversary of the closing
date; and
o save for a transfer of shares to any associated company (such
as a holding company of a member of the consortium of third party
vendors, subsidiary or any other subsidiaries of any such holding
company) and unless the consortium of third party vendors expressly
consents otherwise, Abu Dhabi Financial Group LLC ("ADFG"), as the
current holder of approximately 45 million shares in the capital of
the Company and as owner of the Company's investment manager, shall
remain as the registered and beneficial owner of any shares in the
capital of the Company held by it on the date of the Implementation
Agreements.
-- Notwithstanding the lock-up, the consortium of third party
vendors shall pledge 80 million of the New Qannas Shares as
security for certain post-completion obligations of the consortium
of third party vendors under the Implementation Agreements.
-- Qannas shall, subject to the passing of appropriate
resolutions and other regulatory obligations, change its name by no
later than 31 January 2020.
Escrow arrangement
Qannas has agreed to take on certain obligations to service the
debt to be acquired which accrue from the date of the
Implementation Agreements until completion of the Transaction. In
relation to these liabilities, on 3 September 2019, Qannas and
Eagle T2 Limited ("Eagle") entered into an escrow agreement (the
"Escrow Agreement") with the Representatives and, in its capacity
as escrow agent, Shuaa Capital PJSC ("Shuaa") (a company related to
ADFG), pursuant to which Eagle has agreed that the Vendors will
deposit with Shuaa AED 20 million (approximately $5.5m(2) ) (the
"Escrow Amount") which would otherwise be payable to it by the
Representatives as part of the Eagle Fee (see below) and may be
used to service the debt on behalf of Qannas in this period. In
exchange for Qannas agreeing to service the debt, the Vendors have
agreed that the number of New Qannas Shares to be issued will be
reduced by any amounts drawn from the Escrow Amount.
Upon completion of the Transaction, the amount of the Escrow
Amount remaining in the escrow bank will be released to Eagle. Any
amount drawn from the Escrow Amount shall be left outstanding as a
loan repayable by Qannas to Eagle. Qannas is required to repay such
loan within five days of completion of the Transaction, failing
which, Qannas will be required to pay interest on such amount at a
rate of 7% per annum which shall accrue from the due date until the
date of actual payment. This loan, should it arise, is unsecured
and has no fixed repayment date if it is not paid within five days
of completion of the Transaction.
Qannas notes that, other than any associated interest costs that
might accrue to Eagle should the loan not be repaid within 5 days
of completion of the Transaction, the Escrow Agreement will not
have an impact on the net asset value of Qannas following
completion of the Transaction. This is because the number of New
Qannas Shares to be issued pursuant to the Transaction will be
reduced to reflect the value of amounts drawn from the Escrow
Amount. This same amount will instead become payable by Qannas to
Eagle in cash.
If the Transaction does not complete, any amount remaining
undrawn from the Escrow Amount will be released to the
Representatives and Qannas will not have incurred any liability to
the Representatives or Eagle under the Escrow Agreement. The entry
into of the Escrow Agreement by Qannas is a related party
transaction pursuant to the AIM Rules as Eagle and Qannas'
investment manager, ADCM Ltd. ("ADCM"), are wholly owned
subsidiaries of ADFG. ADFG is also a substantial shareholder (as
defined in the AIM Rules) of Qannas. The Independent Directors,
having consulted with Qannas' nominated adviser, finnCap, consider
the terms of the Escrow Agreement to be fair and reasonable insofar
as the independent shareholders of Qannas are concerned.
Refinancing of commodity murabaha facilities
The Portfolio includes certain assets that are secured in favour
of Al Hilal Bank in connection with certain commodity murabaha
facilities available from Al Hilal Bank with an aggregate value of
AED 104 million (approximately $28m(2) ). These facilities will
also be acquired pursuant to the Transaction. In order to
facilitate the transfer of these assets and facilities, at the
request of the Representatives, ADFG has agreed to arrange the
refinancing of these facilities.
As a condition to ADFG agreeing to arrange such refinancing,
Qannas has agreed to provide security to ADFG or other relevant
lender under the refinanced facilities, including those assets that
are currently secured under the commodity murabaha facilities
following release, if reasonably required by ADFG, the form of
which is to be agreed with ADFG or the relevant lender. This is set
out in a deed of undertaking (the "Deed of Undertaking") between
Qannas and ADFG, amongst others, with an aggregate value of AED 104
million (approximately $28m(2) ), dated 3 September 2019. It is the
intention of the parties that such refinancing will be at no worse
than prevailing market rates.
The obligations under the Deed of Undertaking only become
effective on completion of the Transaction. If the Transaction does
not complete, Qannas will not have incurred any liability under the
Deed of Undertaking.
The refinancing of the commodity murabaha facilities and
potential provision of security by Qannas pursuant to the Deed of
Undertaking is a related party transaction pursuant to the AIM
Rules as ADFG is a related party of Qannas for the reasons set out
above. The Independent Directors, having consulted with Qannas'
nominated adviser, finnCap, consider the terms of the deed of
undertaking to be fair and reasonable insofar as the independent
shareholders of Qannas are concerned.
Transaction fees
Eagle has advised the consortium of third party vendors in
relation to the Transaction and provided advisory and financial
support to facilitate the agreement and execution of the
Transaction. Eagle is entitled to a fee payable by the
Representatives on behalf of the consortium of third party vendors
(the "Eagle Fee"). As noted above, Eagle and ADCM are both
wholly-owned subsidiaries of ADFG. Qannas is not a party to the
agreement between Eagle and the Representatives with regard to the
Eagle Fee.
The Eagle Fee is comprised of:
-- AED 20 million in cash to be paid on signing of the
transaction documents (this is the amount being deposited pursuant
to the Escrow Agreement);
-- the transfer to Eagle of 35 million New Qannas Shares on
completion which would otherwise be issued to the third party
vendors and therefore has no incrementally dilutive impact on
Qannas shareholders; and
-- further cash or in kind payments to a total of AED 31 million
in instalments over the period to June 2022.
ADCM has made the Independent Directors aware that Eagle is
advising the consortium of third party vendors and the Independent
Directors have provided their consent to any perceived conflict of
interest (as required pursuant to the existing investment
management agreement between Qannas and ADCM).
In light of the Eagle Fee, ADFG has undertaken that it and ADCM
will not participate in the shareholder vote with regard to the
Transaction. ADFG and ADCM are currently the holders of
approximately 45 million ordinary shares in the capital of the
Company representing approximately 76 per cent of its issued share
capital. Mustafa Kheriba, a director of Qannas, has not
participated in the Independent Directors' discussions with regard
to the Transaction.
Amendment of the investment management agreement between Qannas
and its investment manager
Prior to completion of the Transaction, Qannas and ADCM are
required, pursuant to the principal Implementation Agreement, to
enter into an amended and restated investment management agreement
(the "Amended and Restated IMA") pursuant to which the existing
investment management agreement between Qannas and ADCM will be
amended. The key changes to the existing investment management
agreement include provisions to the effect that:
-- the agreement will be generally updated to (i) remove
provisions that were no longer applicable and (ii) reflect the
continuation of the investment management services from ADCM to
Qannas;
-- the scope of the liability of ADCM to Qannas in certain circumstances will be widened;
-- the threshold required for termination of the agreement
without cause by the Qannas shareholders will be increased from the
approval of a majority of the shareholders to 75% of the
shareholders;
-- the notice period required to terminate the agreement will be
reduced from six months to 90 days; and
-- ADCM will no longer be entitled to a performance fee where
the agreement has been terminated by ADCM.
The entering into of the Amended and Restated IMA by Qannas and
ADCM will constitute a related party transaction pursuant to the
AIM Rules as ADCM is Qannas' investment manager and ADCM is also a
wholly owned subsidiary of ADFG, and ADFG is a substantial
shareholder (as defined in the AIM Rules) of Qannas. For these
reasons, an opinion is to be provided by the Independent Directors
pursuant to AIM Rule 13 before it is duly executed.
(1) remains subject to change, due diligence, and adjustments
due to market movements
(2) assumes AED:USD exchange rate of AED 3.675: USD 1
The person responsible for making this announcement on behalf of
the Company is Christopher Ward, Non-Executive Chairman.
For further information please contact:
Qannas Investments Limited Tel: 01534 844 806
Nadia Trehiou
ADCM Ltd. (Investment Manager) Tel: +971 2 639 0099
Mustafa Kheriba
finnCap Ltd Tel: 020 7220 0500
Henrik Persson / William Marle / James Thompson
Important notice
This announcement is for information purposes only and is not
intended to and does not constitute, or form part of, any offer or
invitation to purchase, subscribe for or otherwise acquire or
dispose of, or any solicitation to purchase or subscribe for or
otherwise acquire or dispose of, any securities in any
jurisdiction. The information in this announcement does not purport
to be full or complete and is subject to change without notice.
This announcement is not for release, publication or
distribution, in whole or in part, directly or indirectly, in, into
or from any jurisdiction where to do so would constitute a
violation of the relevant securities laws of such jurisdiction. The
securities referred to in this announcement have not and will not
be registered under the US Securities Act of 1933, as amended, or
under the securities laws of any state or other jurisdiction in the
United States. No action has been taken that would permit an
offering of securities or possession or distribution of this
announcement or any offering or publicity material relating to
securities referred to in this announcement in any jurisdiction
where action for that purpose is required.
This announcements contains "forward-looking statements", which
are statements that include words such as "targets", "plans",
"believes", "expects", "aims", "intends", "anticipates",
"estimates", "will", "may", "would", "could" or "should", or words
or terms of similar effect. Forward-looking statements involve
risks and uncertainties because they relate to future events and
circumstances which are or may be beyond the control of the
Company, and actual results or outcomes could differ materially
from those expected. Any forward-looking statements in this
announcement speak only as of the date of this announcement and,
except as required by law or regulation, the Company expressly
disclaims any obligation or undertaking to update any
forward-looking statements. Any indication in this announcement of
the price at which ordinary shares of the Company have been bought
or sold in the past cannot be relied upon as a guide to future
performance.
finnCap Ltd ("finnCap"), which is authorised and regulated in
the United Kingdom by the FCA, is acting as nominated adviser and
broker to the Company and no one else in connection with the
Transaction, and will not regard any other person as its client or
be responsible to anyone other than the Company for providing the
protections afforded to its clients or for providing advice in
relation to the Transaction or in relation to the contents of this
announcements or any transaction, arrangement or matter referred to
herein.
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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