TIDMSRX
RNS Number : 7688F
Sierra Rutile Limited
01 August 2016
DIS Statement regarding the disposal of a company or assets
Part I
Not for release, publication or distribution, in whole or in
part, directly or indirectly, in, into or from the United States or
from any other jurisdiction where to do so would constitute a
violation of the relevant laws or regulations of such
jurisdiction.
This announcement contains inside information in relation to
Sierra Rutile Limited.
FOR IMMEDIATE RELEASE 1 August 2016
Recommended proposal for the GBP215 million acquisition
of Sierra Rutile Limited by Iluka Resources Limited to be
implemented by statutory merger under the BVI Companies Act
of
Sierra Rutile Limited
with
Iluka Investments (BVI) Limited
Summary
-- The Boards of Sierra Rutile Limited ("SRL") and Iluka
Resources Limited ("Iluka") are pleased to announce that they have
reached agreement on the terms of a recommended Acquisition of all
of the issued and to be issued shares of SRL by Iluka. The
Acquisition will be implemented by merging SRL with Iluka
Investments (BVI) Limited ("Iluka Newco"), a wholly-owned BVI
incorporated subsidiary of Iluka International (West Africa) Pty
Ltd., which is an entity within the Iluka Group.
-- Under the terms of the Acquisition, SRL Shareholders will
receive 36 pence in cash for each SRL Share. The Acquisition
represents:
o a premium of 32.3 per cent. to 27.2 pence, being the 1 month
volume-weighted average price of SRL Shares to 29 July 2016 being
the Business Day immediately prior to the date of this
announcement;
o a premium of 34.7 per cent. to 26.7 pence, being the 3 month
volume-weighted average price of SRL Shares to 29 July 2016;
o a premium of 43.9 per cent. to 25.0 pence, being the 6 month
volume-weighted average price of SRL Shares to 29 July 2016;
o a premium of 80.0 per cent. to 20 pence, being the price at
which SRL undertook a share placement on 14 April 2016;
o a discount of 4.0 per cent. to the closing middle market price
of 37.5 pence per SRL Share on 28 July 2016, being the Business Day
immediately prior to the date on which SRL announced a possible
offer from Iluka; and
o a discount of 1.4 per cent. to the closing middle market price
of 36.5 pence per SRL Share on 29 July 2016, being the Business Day
immediately prior to the date of this announcement.
-- Assuming the exercise of all outstanding options under the
SRL Share Plan which have an exercise price of less than 36 pence
in cash, the Acquisition values all of the issued and to be issued
shares of SRL at approximately GBP215 million.
-- It is intended that the Acquisition will be implemented by
means of a statutory merger between SRL and Iluka Newco under
section 170 of the BVI Companies Act.
-- Pala has irrevocably undertaken to vote in favour of the
resolutions to approve the Acquisition, the Merger and all
ancillary matters relating to the implementation of the Merger as
may be proposed at the Shareholder Meeting in respect of
318,065,731 SRL Shares, representing approximately 53.39 per cent.
of the existing issued shares of SRL.
-- Neon has irrevocably undertaken to vote in favour of the
resolutions to approve the Acquisition, the Merger and all
ancillary matters relating to the implementation of the Merger as
may be proposed at the Shareholder Meeting in respect of 34,517,400
SRL Shares, representing approximately 5.79 per cent. of the
existing issued shares of SRL.
-- In aggregate, therefore, and including the irrevocable
undertakings given by the SRL Directors, Iluka and Iluka Newco have
received irrevocable undertakings to vote in favour of the
resolutions to approve the Acquisition, the Merger and all
ancillary matters relating to the implementation of the Merger as
may be proposed at the Shareholder Meeting in respect 60.15 per
cent. of the of the SRL Shares in issue on 29 July 2016.
-- The Iluka Board believes that the Acquisition provides SRL
Shareholders with certain value at a time of heightened market
volatility and uncertainty, while at the same time meeting Iluka's
strategic rationale and financial merit criteria.
-- The SRL Board, which has been so advised by Investec,
considers the terms of the Acquisition to be fair and reasonable.
In providing its advice to the SRL Board, Investec has taken into
account the commercial assessments of the SRL Board.
-- The SRL Board intends unanimously to recommend that SRL
Shareholders vote in favour of the resolutions to be proposed at
the Shareholder Meeting which is to be convened to approve the
Acquisition, and has irrevocably undertaken to vote in favour of
the resolutions to approve the Acquisition, the Merger and all
ancillary matters relating to the implementation of the Merger as
may be proposed at the Shareholder Meeting in respect of their own
beneficial shareholdings representing 5,772,463 SRL Shares and
approximately 0.97 per cent. of the existing issued shares of
SRL.
-- The SRL Board believes that the Acquisition provides
attractive certainty and liquidity for SRL and its shareholders as
a whole. There is a concentration of shareholdings amongst a small
number of SRL Shareholders and a relative lack of liquidity in SRL
Shares. The SRL Board believes that the Acquisition presents an
opportunity for all SRL Shareholders to crystallise value for their
shareholdings which may not be achieved in the near term if SRL
were to remain independent and quoted on AIM.
-- The Acquisition is conditional on approval of the Merger by a
simple majority (i.e. more than 50 per cent.) of SRL Shareholders
being obtained at a duly convened meeting.
-- It is expected that the Merger Circular will be published in
August 2016 and that, subject to the satisfaction of all relevant
Conditions, the Merger will become Effective in September or on or
before 30 November 2016 (or such other date as agreed between
Iluka, Iluka Newco and SRL).
Commenting on the Acquisition, Robert Edwards, Chairman of SRL
said:
"The SRL Board has reached agreement on the terms of a
recommended Acquisition of SRL by Iluka. The Acquisition enables
all SRL Shareholders to realise value today in cash for their
shares at an acceptable level after the management of SRL has
achieved all of its immediate goals with respect to optimising the
asset base. Iluka has an established track record in the mineral
sands sector and will be able to support SRL's longer term growth
and optimisation ambitions. We believe that the Acquisition
provides attractive certainty and liquidity for SRL and its
shareholders as a whole."
Commenting on the Acquisition, John Sisay, Chief Executive of
SRL said:
"I believe the Acquisition of SRL by Iluka will ensure the
operations in Sierra Leone will be realised to their fullest
potential. I am proud of the important milestones which have been
achieved by management and employees in recent years, in
particular, record rutile production in 2015 and H1 2016 and the
successful commissioning of the Gangama Dry Mine in May 2016. Iluka
is a financially strong and established owner with a successful
track record in the mineral sands sector who will continue the
development of SRL's long life assets. Management and employees
will benefit from Iluka's future investment in SRL and wider career
development opportunities across Iluka's global asset base. This
Acquisition demonstrates that Sierra Leone is open for business and
able to attract investment from high profile multinational
companies such as Iluka that are keen to participate in the
development and growth of the country."
Commenting on the Acquisition, Greg Martin, Chairman of Iluka
said:
"The transaction is consistent with Iluka's approach to act in a
counter-cyclical manner where appropriate, including via
transactions where strategic rationale and financial merit can be
demonstrated. It is a logical combination of complementary
businesses at this point in the mineral sands cycle.
The offer is cash based and entails Iluka absorbing SRL's modest
debt of US$60 million which would represent a pro-forma
post-acquisition gearing for Iluka (net debt / net debt + equity)
of 25 per cent. The Acquisition of SRL, along with, current Iluka
project progress, provides the potential for enhanced portfolio
flexibility which will in turn determine the level and phasing of
Iluka's future capital expenditure. Iluka will continue to
prioritise the maintenance of a strong balance sheet after an
expected peak debt in 2018 as internal projects are also funded
within that period.
Iluka believes that a disciplined approach to both capital
expenditure and cash distribution strongly influences shareholder
value creation and delivery in a cyclical industry. Iluka's
approach in both respects remains unchanged."
Commenting on the Acquisition, David Robb, Managing Director of
Iluka said:
"SRL is a long life operation, with an established position in
high grade chloride feedstock markets. Iluka is confident the
application of its industry-specific technical expertise, together
with its market access and reach, will enhance the SRL
business.
The Acquisition provides Iluka with additional, long life (20
years plus) resources of proven quality, with further potential
through resource additions, reserve optimisation and exploration.
The combination enhances Iluka's rutile portfolio position. This
enhancement sits alongside Iluka's existing position as the largest
global zircon producer.
Due diligence has been conducted on SRL's operations and Iluka
believes the offer represents an attractive risk / return profile
for shareholders across a range of scenarios. The transaction is
expected to be EPS accretive in the first full year (2017)."
This summary should be read in conjunction with the full text of
the following announcement including the Appendices. The Conditions
and certain further terms of the Acquisition are set out in
Appendix I to this announcement. Appendix II sets out the bases of
calculation and sources used in this announcement. Appendix III
contains details of the irrevocable undertakings given to Iluka.
Appendix IV contains the definitions of certain terms used in this
announcement.
Enquiries:
Person making this notification:
SRL Limited
John Nagulendran
Company Secretary +44 (0)20 7074 1800
RBC Capital Markets Financial Adviser and Joint Corporate
Broker
Richard Horrocks-Taylor +44 (0)20 7653 4000
Jonathan Hardy
Paul Betts
Investec Bank plc Nominated Adviser and Joint Corporate
Broker
Chris Sim +44 (0)20 7597 4000
Jeremy Ellis
George Price
Jonathan Wynn
Numis Securities Limited Joint Corporate Broker
John Prior +44 (0)20 7260 1000
Iluka Resources Limited
Dr Robert Porter
General Manager, Investor Relations and Corporate Affairs +61
(0)3 9255 5008
Goldman Sachs Financial Adviser to Iluka
Richard Phillips +61 (0)3 9679 1111
Peter Watson +61 (0)8 9218 1000
RBC Capital Markets is Financial Adviser to SRL. Numis
Securities Limited is Joint Corporate Broker for SRL.
Herbert Smith Freehills is retained as legal advisers to
SRL.
Ogier is retained as BVI legal advisers to SRL.
Ashurst is retained as legal advisers to Iluka.
Conyers Dill & Pearman is retained as BVI legal advisers to
Iluka.
Further information
This announcement is not intended to and does not constitute, or
form part of, any offer to sell or subscribe for or an invitation
to purchase or subscribe for any securities or the solicitation of
any vote or approval in any jurisdiction pursuant to the
Acquisition or otherwise, nor shall there be any sale, issuance or
transfer of securities of SRL in any jurisdiction in contravention
of applicable law.
Any vote in respect of the Acquisition should only be made on
the basis of the information contained in the Merger Circular,
which will contain the full terms and conditions of the Acquisition
(including details of how to vote). SRL Shareholders are advised to
read the formal documentation in relation to the Acquisition
carefully once it has been dispatched.
Please be aware that addresses, electronic addresses and certain
other information provided by SRL Shareholders, persons with
information rights and other relevant persons in connection with
the receipt of communications from SRL may be provided to Iluka
during the offer period.
Investec, which is authorised by Prudential Regulation Authority
and regulated by the Financial Conduct Authority and Prudential
Regulation Authority in the United Kingdom, is acting for SRL and
no-one else in connection with the Acquisition and will not be
responsible to anyone other than SRL for providing the protections
afforded to clients of Investec nor for providing advice in
relation to the Acquisition. Neither Investec nor any of its
subsidiaries, branches or affiliates owes or accepts any duty,
liability or responsibility whatsoever (whether direct or indirect,
whether in contract, in tort, under statute or otherwise) to any
person who is not a client of Investec in connection with this
announcement, any statement contained herein or otherwise.
Goldman Sachs is acting for Iluka and no-one else in connection
with the Acquisition and will not be responsible to anyone other
than Iluka for providing the protections afforded to clients of
Goldman Sachs nor for providing advice in relation to the
Acquisition. Neither Goldman Sachs nor any of its subsidiaries,
branches or affiliates owes or accepts any duty, liability or
responsibility whatsoever (whether direct or indirect, whether in
contract, in tort, under statute or otherwise) to any person who is
not a client of Goldman Sachs in connection with this announcement,
any statement contained herein or otherwise.
Overseas jurisdictions
The release, publication or distribution of this announcement in
or into jurisdictions other than the United Kingdom may be
restricted by law and therefore persons into whose possession this
announcement comes who are not resident in the United Kingdom
should inform themselves about and observe any applicable
restrictions. SRL Shareholders who are in any doubt regarding such
matters should consult an appropriate independent adviser in the
relevant jurisdiction without delay. Any failure to comply with
such restrictions may constitute a violation of the securities laws
of any such jurisdiction.
This announcement has been prepared for the purposes of
complying with the AIM Rules and the relevant procedural
requirements of the articles of association of SRL and the
information disclosed may not be the same as that which would have
been disclosed if this announcement had been prepared in accordance
with the laws of jurisdictions outside the United Kingdom.
Additional information for US investors in SRL
These materials are not for distribution, directly or
indirectly, in or into the United States (including its territories
and possessions, any State of the United States and the District of
Columbia). These materials do not constitute or form a part of any
offer or solicitation to purchase or subscribe for securities in
the United States.
Shareholders in the United States should note that the
Acquisition relates to the shares of a BVI company and is proposed
to be made by means of a merger provided for under, and governed
by, BVI law. Neither the proxy solicitation nor the tender offer
rules under the US Securities Exchange Act of 1934, as amended (the
"US Exchange Act"), will apply to the Merger. Moreover the Merger
will be subject to the disclosure requirements, rules and practices
applicable in the BVI to statutory mergers, which differ from the
disclosure requirements of the US proxy solicitation rules and
tender offer rules. Financial information included in this
announcement and the Merger Circular has been or will be prepared
in accordance with International Financial Reporting Standards
adopted for use by the European Union and may not be comparable to
financial information of US companies or companies whose financial
statements are prepared in accordance with generally accepted
accounting principles in the United States.
SRL is incorporated under the laws of the BVI, Iluka under the
laws of Australia and Iluka Newco under the laws of the BVI. The
vast majority of the officers and directors of SRL and Iluka are
residents of countries other than the United States. It may not be
possible to sue SRL, Iluka, Iluka Newco or their respective
officers or directors in a non-US court for violations of US
securities laws. It may be difficult to compel SRL, Iluka or Iluka
Newco or their respective affiliates to subject themselves to the
jurisdiction and judgment of a US court.
The Acquisition is expected to be made in accordance with, and
in reliance on, certain applicable laws of the United States,
including section 14(e) of the US Exchange Act and Regulation 14E
thereunder, as exempted thereunder by Rule 14d-1(c). The
Acquisition is not expected to be subject to the requirements of
Regulation 14D of the US Exchange Act and as such, is not expected
to be submitted to, nor reviewed by, the US Securities and Exchange
Commission.
To the extent permitted by applicable law, and to the extent
permitted by normal UK practice and Rule 14e-5 under the US
Exchange Act, Iluka or its nominees, or its brokers (acting as
agents), may from time to time make certain purchases of, or
arrangements to purchase, SRL Shares outside of the United States,
other than pursuant to the Acquisition, until the date on which the
Acquisition becomes Effective, lapses or is otherwise withdrawn. If
such purchases or arrangements to purchase are made they will be
made outside the United States and will comply with applicable law,
including the US Exchange Act. In addition, the financial advisers
to SRL may also engage in ordinary course trading activities in the
securities of SRL until the date on which the Acquisition becomes
Effective, lapses or is otherwise withdrawn, which may include
purchases or arrangements to purchase such securities. These
purchases may occur either in the open market at prevailing prices
or in private transactions at negotiated prices. Any information
about such purchases will be disclosed as required in the UK, will
be reported to the Regulatory Information Service of the London
Stock Exchange and will be available on the London Stock Exchange
website at
http://www.londonstockexchange.com/exchange/news/market-news/market-news-home.html.
Forward-looking statements
This announcement may contain certain forward-looking
statements, including statements regarding Iluka, Iluka Newco and
SRL's plans, objectives and expected performance. Such statements
relate to events and depend on circumstances that will occur in the
future and are subject to risks, uncertainties and assumptions.
There are a number of factors which could cause actual results and
developments to differ materially from those expressed or implied
by such forward-looking statements, including among others, the
enactment of legislation or regulation that may impose costs or
restrict activities; the re-negotiation of contracts or licences;
fluctuations in demand and pricing in the mining industry;
fluctuations in exchange controls; changes in government policy and
taxations; industrial disputes; and war and terrorism. These
forward-looking statements speak only as at the date of this
announcement.
Mineral resource Competent Person
The mineral resource information in this announcement, in
relation to SRL, has been reviewed and approved for release by Mr
Mark Button, NHDip, MMRM, Pr.Sci.Nat. who has 25 years' experience
in mineral commodities, of which 15 years is specific to mineral
resource estimation, and is currently an independent contractor
providing consulting services to SRL. Mr Button has sufficient
experience in relation to the style of mineralisation and type of
deposit under consideration to qualify as a Competent Person as
defined in the 2012 Edition of the "Australasian Code for Reporting
of Exploration Results, Mineral Resources and Ore Reserves". Mr
Button has consented to the inclusion of this mineral resource
information in the form and context in which it appears.
Application of the Code
SRL is a company incorporated and registered in the BVI and, as
such, is not subject to the jurisdiction of the UK Takeover Panel
or the Code.
Shareholders are reminded that SRL's articles of association
require certain offers to be made on terms that would be required
by the Code, save to the extent that the SRL Board otherwise
determines. The Panel on Takeovers and Mergers does not, however,
have responsibility for ensuring compliance with the Code in
respect of the Acquisition and is not able to answer shareholders'
queries in relation to SRL, Iluka, Iluka Newco or the Acquisition.
However, the SRL Board intends to take into account guidance issued
by the Panel on Takeovers and Mergers in connection with the
exercise of its discretion.
In particular, the SRL Board has confirmed to Iluka and Iluka
Newco that it does not intend to require announcements pursuant to
Rule 8 of the Code containing details of interests or short
positions in, or rights to subscribe for, any relevant securities
of a party to an offer and announcements pursuant to Rule 8 of the
Code containing details of dealings in interests in relevant
securities of a party to an offer (as referred to in the Code) to
be made by shareholders in accordance with Rule 8 of the Code.
Shareholders are reminded that public disclosures consistent with
the provision of Rule 8.3 of the Code should not be e-mailed to the
Panel on Takeovers and Mergers.
Publication of this announcement
A copy of this announcement will be available, subject to
restrictions relating to persons resident in certain restricted
jurisdictions on http://www.iluka.com and
http://www.sierra-rutile.com.
The contents of Iluka's website and SRL's website are not
incorporated into and do not form part of this announcement.
Part II
1. Introduction
The Boards of SRL and Iluka are pleased to announce that they
have reached agreement on the terms of a recommended Acquisition of
all of the issued and to be issued shares of SRL by Iluka.
2. Summary of terms
Under the terms of the Acquisition, SRL Shareholders will be
entitled to receive:
in respect of each 36 pence in cash
SRL Share
Assuming the exercise of all outstanding Options under the SRL
Share Plan which have an exercise price of less than 36 pence in
cash, the Acquisition values all of the issued and to be issued
shares of SRL at approximately GBP215 million.
Under the terms of the Acquisition, SRL Shareholders will
receive 36 pence in cash for each SRL Share. The Acquisition
represents:
o a premium of 32.3 per cent. to 27.2 pence, being the 1 month
volume-weighted average price of SRL Shares to 29 July 2016 being
the Business Day immediately prior to the date of this
announcement;
o a premium of 34.7 per cent. to 26.7 pence, being the 3 month
volume-weighted average price of SRL Shares to 29 July 2016;
o a premium of 43.9 per cent. to 25.0 pence, being the 6 month
volume-weighted average price of SRL Shares to 29 July 2016;
o a premium of 80.0 per cent. to 20 pence, being the price at
which SRL undertook a share placement on 14 April 2016;
o a discount of 4.0 per cent. to the closing middle market price
of 37.5 pence per SRL Share on 28 July 2016, being the Business Day
immediately prior to the date on which SRL announced a possible
offer from Iluka; and
o a discount of 1.4 per cent. to the closing middle market price
of 36.5 pence per SRL Share on 29 July 2016, being the Business Day
immediately prior to the date of this announcement.
It is intended that the Acquisition will be implemented by means
of a statutory merger between SRL and Iluka Newco under section 170
of the BVI Companies Act, further details of which are contained in
section 11 below.
3. Background to and reasons for the Acquisition
The Iluka Board believes that the Acquisition provides SRL
Shareholders with certain value at a time of heightened market
volatility and uncertainty, while at the same time meeting Iluka's
strategic rationale and financial merit criteria.
SRL is one of the major and established producers of rutile,
currently producing approximately 130,000 tonnes per annum, with
expansion potential. The operation has a long life resource base
which will supplement Iluka's position as a high grade chloride
feedstock supplier.
Iluka's industry-specific expertise, market knowledge, access
and reach, coupled with its financial capacity, will provide a
platform to secure the longevity and profitability of SRL's mining
and processing operations in Sierra Leone and ensure it continues
to provide important employment, community and other socio-economic
benefits to the country.
4. Recommendation
The SRL Board, which has been so advised by Investec, considers
the terms of the Acquisition to be fair and reasonable. In
providing its advice, Investec has taken into account the
commercial assessments of the SRL Board.
The SRL Board believes that the terms of the Acquisition are in
the best interests of SRL Shareholders as a whole and intends
unanimously to recommend that SRL Shareholders vote in favour of
the resolutions to be proposed at the Shareholder Meeting which is
to be convened to approve the Acquisition. The SRL Directors have
irrevocably undertaken to do the same in respect of their own
beneficial shareholdings in SRL, which amount in aggregate to
5,772,463 SRL Shares, representing approximately 0.97 per cent. of
the existing issued shares of SRL.
5. Background to and reasons for the recommendation
The SRL Board believes that the Acquisition enables all SRL
Shareholders to realise value today in cash for their shares at an
acceptable level after the management of SRL has achieved all of
its immediate goals with respect to optimising the asset base.
Following an extended period of uncertainty in the mineral sands
market and volatility in its share price, SRL's recent operational
and financial performance has been strong. It has also made
positive progress in strengthening its balance sheet, including
raising $20 million in new equity at 20 pence per share in April
2016. These positive developments have been reflected in the very
recent share price increase, which has been broadly in line with
SRL's mining peer group companies on AIM. There is a concentration
of shareholdings amongst a small number of SRL Shareholders and a
relative lack of liquidity in SRL Shares. The SRL Board believes
that the Acquisition presents an opportunity for all SRL
Shareholders to crystallise value for their shareholdings which may
not be achieved in the near term if SRL were to remain independent
and quoted on AIM. Iluka has an established track record in the
mineral sands sector and will be able to support SRL's longer term
growth and optimisation ambitions. The SRL Board believes that the
Acquisition provides attractive certainty and liquidity for SRL and
its shareholders as a whole.
6. Shareholder Irrevocable Undertakings to vote in favour of the Acquisition
Pala has irrevocably undertaken to vote in favour of the
resolutions to approve the Acquisition, the Merger and all
ancillary matters relating to the implementation of the Merger as
may be proposed at the Shareholder Meeting in respect of
318,065,731 SRL Shares, representing approximately 53.39 per cent.
of the existing issued shares of SRL; and
Neon has irrevocably undertaken to vote in favour of the
resolutions to approve the Acquisition, the Merger and all
ancillary matters relating to the implementation of the Merger as
may be proposed at the Shareholder Meeting in respect of 34,517,400
SRL Shares, representing approximately 5.79 per cent. of the
existing issued shares of SRL,
(together the "Shareholder Irrevocable Undertakings").
In aggregate, therefore, and including the irrevocable
undertakings given by the SRL Directors, Iluka and Iluka Newco have
received irrevocable undertakings to vote in favour of the
resolutions to approve the Acquisition, the Merger and all
ancillary matters relating to the implementation of the Merger as
may be proposed at the Shareholder Meeting in respect 60.15 per
cent. of the of the SRL Shares in issue on 29 July 2016.
Further details of the Shareholder Irrevocable Undertakings
(including the circumstances in which they will cease to be
binding) are set out in Appendix III and will be set out in the
Merger Circular.
7. Management and employees
Iluka values the specific knowledge and expertise of members of
the SRL senior management team, and it will discuss what interest
such management may have in being involved with SRL, directly or
indirectly, following the Acquisition. While Iluka will undertake a
review of key senior operational positions to ensure the best team
possible is in place to operate SRL's assets, it is not anticipated
that there would be any material change to current employment
levels.
Furthermore, Iluka is also committed to preserving employment
benefits that SRL's operations provide to surrounding local
communities and the country of Sierra Leone. Following the
Acquisition, Iluka would look to provide SRL's workforce with
career development opportunities including the potential for high
performing employees to have the opportunity to work across
multiple assets within Iluka's global portfolio.
8. Information on Iluka Group
Iluka is a mineral sands company involved in the exploration,
project development, mining, processing and marketing of mineral
sands products. Iluka's objective is to create and deliver value
for shareholders. Iluka is the largest producer of zircon globally
and a significant producer of the higher grade titanium dioxide
products of rutile and ilmenite. Iluka's operations are located in
Australia with previous operations in Virginia, U.S.A which have
recently been idled. Iluka has several potential mineral sands
developments at various stages of evaluation in Australia, the
U.S.A., Sri Lanka and Brazil. Iluka also has an international
marketing and sales capability. Iluka owns an in-perpetuity iron
ore royalty over certain mining tenements in Australia, operated by
BHP Billiton Limited. Iluka employs approximately 850 people. The
corporate office is located in Perth, Western Australia. Iluka is
listed on the Australian Securities Exchange (ASX code: ILU) and
has a market capitalisation as at 29 July 2016, being the last
business day prior to this announcement, of A$2,939 million
(US$2,234 million, GBP1,689 million). For further information on
Iluka visit http://www.iluka.com.
9. Information on SRL, its current trading and prospects
SRL is a leading, multi-mine, mineral sands company, operating
low cost assets and developing a portfolio of growth projects in
the south west of Sierra Leone, with its primary commodity mined
being rutile, a titanium feedstock. It has an established operating
history spanning approximately 50 years and a projected mine life
of 50 years at current output rates with one of the largest rutile
deposits in the world and a JORC-Compliant Mineral Resource for
measured, indicated and inferred resources for the SRL mine of
866.9 million tonnes with 0.94 per cent. rutile, 0.20 per cent.
Ilmenite and 0.08 per cent. Zircon (as at 30 September 2015).
SRL produced 126,021 tonnes of rutile in 2015. SRL's rutile
services a variety of end uses, and is, for example, used in the
pigment, titanium sponge and welding industries. The price of
rutile itself has varied significantly over recent years and may
continue to do so in the future.
SRL also produces ilmenite, which is used in pigment
production.
On 15 July 2016 SRL published an operational update and reported
on the second quarter of 2016, including current trading and
prospects. As stated in the announcement, rutile production for
2016 was expected to be at the upper end of previously stated
guidance of between 120,000 and 135,000 tonnes driven by the
continued strong demand from customers, with 96 per cent. of
maximum targeted sales volumes already contracted for 2016. The
Gangama Dry Mine continues to outperform budgeted performance
criteria since its successful commissioning at the end of May 2016,
with steady state operations expected to be achieved in Q3
2016.
Since the last operational update, SRL has also agreed a monthly
loan repayment schedule with the Government of Sierra Leone,
further to the deferral of the repayment of SRL's loan from the
Government announced on 31 March 2016, which as at 31 December 2015
amounted to $22 million. As a result of this agreement, the loan
will be repaid in 23 equal instalments of EUR1 million commencing
from December 2016 with a final instalment of EUR660,000 payable in
November 2018, instead of the previous semi-annual repayment
profile.
SRL is incorporated in the BVI with its issued shares traded on
the AIM market of the London Stock Exchange. SRL's ticker symbol is
SRX.
10. SRL Share Plan
Participants in the SRL Share Plan will be sent letters
explaining the effect of the Acquisition on the Options under the
SRL Share Plan and appropriate proposals will be made to such
participants in due course. Options may be exercised under the SRL
Share Plan as provided for in the rules. Options which are not
exercised prior to the time required by the rules of the SRL Share
Plan shall lapse upon the Merger becoming Effective.
The Merger will extend to any SRL Shares which are
unconditionally allotted and issued before the Merger Record Time
to satisfy the exercise of Options under the SRL Share Plan.
11. The Merger
It is intended that the Acquisition will be implemented by means
of a statutory merger pursuant to the provisions of Part IX of the
BVI Companies Act.
The constituent companies of the Merger will be Iluka Newco and
SRL, with Iluka Newco being the surviving company.
Upon the Merger, Iluka International (West Africa) Pty Ltd., the
sole shareholder of Iluka Newco, will be the owner of all of the
issued shares of Iluka Newco as the surviving company.
All the issued shares of SRL shall be cancelled in connection
with the Merger. In consideration for this, the SRL Shareholders
(other than any SRL Shareholders who dissent pursuant to section
179 of the BVI Companies Act) will receive cash on the basis set
out in section 2 of this announcement.
The Merger has been approved by the SRL Directors and also needs
to be approved by the SRL Shareholders. SRL Directors will call a
meeting of the SRL Shareholders. A simple majority of SRL
Shareholders entitled to vote and voting (in person or by proxy) at
the Shareholder Meeting is all that is required to approve the
Merger.
A SRL Shareholder may exercise statutory dissent rights as set
out in section 179 of the BVI Companies Act in respect of the
Merger. On the exercise by a SRL Shareholder of his right to
dissent, such shareholder ceases to have any rights of a member
except the right to be paid fair value for his or her shares.
The exercise by any SRL Shareholder of their dissent rights will
not prevent, hinder or delay the completion of the Acquisition as
the process for dissenting shareholders will be conducted outside
of the Acquisition process.
As soon as the Merger becomes Effective:
-- the separate corporate existence of SRL shall cease;
-- Iluka Newco will assume all of the rights, privileges,
immunities, powers, objects and purposes of SRL;
-- all assets of every description and the business of SRL will
immediately vest in Iluka Newco;
-- Iluka Newco will become liable for all claims, debts,
liabilities and obligations of SRL; and
-- as the non-surviving company, SRL will be struck off the
register of companies held by the Registrar of Corporate
Affairs.
The Merger will also need to be approved by the directors and
shareholder of Iluka Newco.
The Merger is also subject to certain Conditions and certain
further terms referred to in Appendix I of this announcement and to
be set out in the Merger Circular.
If the Merger is approved and the other Conditions have been
satisfied or waived, the Articles of Merger will be executed and
filed for registration with the Registrar of Corporate Affairs and,
upon registration of the Articles of Merger, the Merger will become
Effective. Once the Merger becomes Effective, it will be binding on
all SRL Shareholders, whether or not they voted at the Shareholder
Meeting and, if they did vote, whether or not they voted in favour
of or against the resolutions proposed at such meeting.
Further information will be provided in the Merger Circular as
to how to vote at the Shareholder Meeting and how SRL Shareholders
will receive the Merger consideration, as this will depend on
whether the SRL Shares are represented by share certificates, the
SRL Shares are held in uncertificated form or if the SRL Shares are
held by the SRL Shareholder's broker, bank or other nominee.
If the Merger is not approved or the other Conditions are not
satisfied or waived, SRL Shareholders will not receive any payment
for SRL Shares pursuant to the Merger. Instead, the SRL Shares will
continue to be admitted to trading on AIM, provided that SRL
continues to meet the rules and requirements of AIM.
12. Financing of the Acquisition
Pursuant to the Merger Implementation Agreement, Iluka has
warranted to SRL that it has sufficient cash resources available to
it to satisfy, in full, the cash consideration payable under the
Acquisition.
13. De-listing
Applications will be made to AIM in compliance with the AIM
Rules to cancel the SRL Shares from trading on AIM upon the Merger
becoming Effective. When the Merger becomes Effective, the
Depositary Interests will be cancelled. At that point any share
certificates in respect of the Depositary Interests will cease to
be valid and the Depositary Interests held in CREST will be
cancelled.
14. Acquisition-related arrangements
SRL, Iluka and Iluka Newco have entered into the Merger
Implementation Agreement in relation to the Acquisition, which
contains provisions regarding the implementation of the Acquisition
and certain assurances and confirmations between them, including
the obligation on Iluka Newco (guaranteed by Iluka) to pay the
consideration due under the Acquisition. A summary of the Merger
Implementation Agreement is set out below and further information
regarding the Merger Implementation Agreement will be included the
Merger Circular:
-- Guarantee and indemnity by Iluka: Iluka has unconditionally
and irrevocably guaranteed to SRL the performance of Iluka Newco's
obligations under the Merger Implementation Agreement and the
Merger (including but not limited to the payment of all monies
payable by Iluka Newco). Iluka has also agreed to indemnify SRL
from and against any and all losses suffered or incurred by SRL and
arising from the failure of Iluka Newco to comply with any of its
obligations, or discharge any of its liabilities under the Merger
Implementation Agreement.
-- Conditions: the Acquisition will be made subject to the
Conditions and on the terms contained in Appendix I to this
announcement and on the further terms and conditions to be set out
in the Merger Circular. SRL, Iluka and Iluka Newco have agreed to
use their reasonable endeavours to ensure and procure that each
condition for which it is responsible is satisfied as soon as
reasonably practicable and not take any action or refrain from
taking any action (except as required by law) which may prevent the
conditions being satisfied (and in respect of the antitrust
condition Iluka has agreed to use its reasonable endeavours to
satisfy such condition and has agreed to take certain prescribed
steps set out in the Merger Implementation Agreement regarding its
satisfaction).
-- Conduct of Business: SRL has agreed to conduct its business
in the ordinary course and in substantially the same manner as
conducted in the previous 12 months.
-- Termination: the Merger Implementation Agreement may be
terminated if: agreed by the parties; the SRL Board changes or
withdraws its recommendation or fails to make the recommendation;
the Merger does not become Effective on or by 30 November 2016 (or
such other date as agreed) or SRL Shareholder approval is not
obtained one Business Day before that date; the German Antitrust
Authority initiates phase II proceedings in relation to the Merger;
the Conditions cannot be satisfied; if an insolvency event occurs
in respect of SRL, Iluka or Iluka Newco; or if SRL enters into a
definitive agreement with a competing bidder on more favourable
terms after Iluka shall have been given the opportunity to match
the terms being offered by such competing bidder.
15. Expected timetable
Further details of the Merger will be contained in the Merger
Circular which will be sent to SRL Shareholders as soon as
practicable and in any event before 23 August 2016.
Further details on the timetable for implementation of the
Merger will be set out in the Merger Circular, which will also
include the notice of the Shareholder Meeting and specify the
necessary actions to be taken by SRL Shareholders. It is expected
that the Merger Circular will be posted on or before 23 August 2016
and that the Shareholder Meeting will be held in September
2016.
Subject to satisfaction of the relevant Conditions as set out in
Appendix I to this announcement, the Merger is expected to become
Effective in September 2016 or on or before 30 November 2016 (or
such other date as agreed between Iluka, Iluka Newco and SRL).
Appendix I
CONDITIONS AND CERTAIN FURTHER TERMS OF THE ACQUISITION
Part 1 Conditions of the Acquisition
1. The Merger will be conditional on:
-- SRL Shareholder approval being obtained at the Shareholder Meeting.
-- The Acquisition not being expressly prevented or prohibited
by any order, decision or ruling of any court, tribunal or
regulatory authority of competent jurisdiction.
-- No material adverse change, in respect of certain regulatory
events or a cessation of production for an extended period of time,
as defined in the Merger Implementation Agreement.
-- Certain specified events with regard to SRL not occurring
prior to the closing of the Acquisition, including but not limited
to, an alteration of SRL share capital, insolvency or any action
which would otherwise be prohibited by Rule 21.1 of the Code were
it to be applicable to the Acquisition.
-- The warranties given by SRL, Iluka or Iluka Newco, (which are
generally limited to standard title and capacity warranties) in
each case being true and correct in all material respects.
-- The Acquisition having obtained clearance under the German
Act Against Restraints of Competition (Gesetz gegen
Wettbewerbsbeschränkungen, (GWB)), as amended, and which shall
occur on the sooner of (a) the German Antitrust Authority having
taken a decision to clear the Acquisition, or (b) all applicable
waiting periods with respect thereto having expired or been
terminated without the German Antitrust Authority having prohibited
the Acquisition.
Part 2 Certain further terms of the Acquisition
1. The Merger, and any dispute or claim arising out of, or in
connection with the Merger, will be governed by BVI law. Any
dispute or claim arising out of, or in connection with, the
Acquisition, the Merger Implementation Agreement or the irrevocable
undertakings (whether contractual or non-contractual in nature)
will be governed by English law and will be subject to the
jurisdiction of the Courts of England and Wales.
2. SRL Shares and Depositary Interests will be cancelled under the Merger.
3. Iluka and SRL reserve the right to elect to implement the
Merger by means of tender offer, offer, scheme of arrangement, plan
of arrangement or consolidation.
Appendix II
BASES OF CALCULATIONS and sources of information
1. References to the value of the Acquisition assume the number
of issued shares of SRL to be 595,786,674. References to the value
of the Acquisition assuming the exercise of all outstanding Options
(which have an exercise price of less than 36 pence in cash) are
based upon the SRL Shares currently in issue as referred to above,
and the 11,550,000 SRL Shares which are at 29 July 2016 (being the
latest practicable date prior to the publication of this
announcement) the subject of Options granted under the SRL Share
Plan (which have an exercise price of less than 36 pence in
cash).
2. Unless otherwise stated, all prices and closing prices for
SRL Shares are closing middle market quotations derived from
AIM.
Appendix III
irrevocable undertakings
Part 1 Pala Shareholder Irrevocable Undertaking
1. Iluka and Iluka Newco have received an irrevocable commitment
from Pala in respect of its beneficial holdings in SRL Shares
representing in aggregate approximately 53.39 per cent. of SRL's
issued shares as at 29 July 2016 (being the last Business Day prior
to the date of this announcement). This commitment is subject to
certain limitations and exceptions as described below.
2. This commitment requires Pala, amongst other things, to vote
(or, where the Depositary holds Pala's SRL Shares on Pala's behalf,
to procure that the Depositary votes) in favour of the resolutions
to approve the Acquisition, the Merger and all ancillary matters
relating to the implementation of the Merger as may be proposed at
the Shareholder Meeting.
3. The Shareholder Irrevocable Undertaking given by Pala will
cease to be binding on the earliest to occur of the following:
-- if the Merger Implementation Agreement is terminated in
accordance with its terms and Iluka does not make or announce an
intention to make an alternative acquisition (where the price to be
received by Pala is not less than the price per SRL Share offered
pursuant to the Merger and such alternative acquisition is
recommended by the SRL Board) within five Business Days of the
Merger Implementation Agreement being terminated;
-- if otherwise agreed in writing by Pala, Iluka and Iluka Newco;
-- the Merger does not become Effective on or before the date
which is six months after the date on which this announcement is
issued; or
-- if Iluka or Iluka Newco withdraws or announces that it does
not intend to make or proceed with the Merger and does not make or
announce an intention to make an alternative acquisition (where the
price to be received by Pala is not less than the price per SRL
Share offered pursuant to the Merger and such alternative
acquisition is recommended by the SRL Board) within five Business
Days of the withdrawal of the Merger or announcement of its
intention not to make or proceed with the Merger (as
applicable)).
Part 2 Neon Shareholder Irrevocable Undertaking
1. Iluka and Iluka Newco have received an irrevocable commitment
from Neon in respect of its beneficial holdings in SRL Shares
representing in aggregate approximately 5.79 per cent. of SRL's
issued shares as at 29 July 2016 (being the last Business Day prior
to the date of this announcement). This commitment is subject to
certain limitations and exceptions as described below.
2. This commitment requires Neon, amongst other things, to vote
(or, where a third party holds Neon's SRL Shares on Neon's behalf,
to procure that the third party votes) in favour of the resolutions
to approve the Acquisition, the Merger and all ancillary matters
relating to the implementation of the Merger as may be proposed at
the Shareholder Meeting.
3. The Shareholder Irrevocable Undertaking given by Neon will
cease to be binding on the earliest to occur of the following:
-- if the Merger Implementation Agreement is terminated in
accordance with its terms and Iluka does not make or announce an
intention to make an alternative acquisition (where the price to be
received by Neon is not less than the price per SRL Share offered
pursuant to the Merger and such alternative acquisition is
recommended by the SRL Board) within five Business Days of the
Merger Implementation Agreement being terminated;
-- if otherwise agreed in writing by Neon, Iluka and Iluka Newco;
-- the Merger does not become Effective on or before the date
which is six months after the date on which this announcement is
issued;
-- if Iluka or Iluka Newco withdraws or announces that it does
not intend to make or proceed with the Merger and does not make or
announce an intention to make an alternative acquisition (where the
price to be received by Neon is in cash and not less than the price
per SRL Share offered pursuant to the Merger and such alternative
acquisition is recommended by the SRL Board) within five Business
Days of the withdrawal of the Merger or announcement of its
intention not to make or proceed with the Merger (as applicable));
or
-- if any person other than Iluka or Iluka Newco or any person
acting in concert with Iluka announces prior to the date which is
six months after the date on which this announcement is issued a
firm intention to make an offer that could result in such person
acquiring all the share capital of SRL (other than that already
owned or agreed to be acquired by the person making such offer or
its associates) at a price and / or in exchange for such number of
shares (or other securities) that in Neon's reasonable opinion
represents an increase in value for SRL Shareholders when compared
to the Merger.
Part 3 Director irrevocable undertakings
1. Iluka and Iluka Newco have received irrevocable commitments
from the SRL Directors in respect of their entire beneficial
holdings in SRL Shares representing in aggregate approximately 0.97
per cent. of SRL's issued shares as at 29 July 2016 (being the last
Business Day prior to the date of this announcement). This
commitment is subject to certain limitations and exceptions as
described below.
2. This commitment requires the SRL Directors, amongst other
things, to vote (or, where the Depositary holds the SRL Director's
SRL Shares on their behalf, to procure that the Depositary votes)
in favour of resolutions to approve the Acquisition, the Merger and
all ancillary matters relating to the implementation of the Merger
as may be proposed at the Shareholder Meeting.
3. The irrevocable undertakings given by the SRL Directors will
cease to be binding on the earliest to occur of the following:
-- if the Merger Implementation Agreement is terminated in
accordance with its terms and Iluka does not make or announce an
intention to make an alternative acquisition (where the price to be
received by the SRL Directors is not less than the price per SRL
Share offered pursuant to the Merger and such alternative
acquisition is recommended by the SRL Board) within five Business
Days of the Merger Implementation Agreement being terminated;
-- if otherwise agreed in writing by the SRL Directors, Iluka and Iluka Newco;
-- the Merger does not become Effective on or before the date
which is six months after the date on which this announcement is
issued; or
-- if Iluka or Iluka Newco withdraws or announces that it does
not intend to make or proceed with the Merger and does not make or
announce an intention to make an alternative acquisition (where the
price to be received by the SRL Director is not less than the price
per SRL Share offered pursuant to the Merger and such alternative
acquisition is recommended by the SRL Board) within five Business
Days of the withdrawal of the Merger or announcement of its
intention not to make or proceed with the Merger (as
applicable).
Appendix IV
DEFINITIONS
The following definitions apply throughout this announcement
unless the context requires otherwise:
"Acquisition" the proposed acquisition
by Iluka of all of the
issued and to be issued
shares of SRL to be implemented
by means of the Merger
"AIM" the AIM market of the
London Stock Exchange
"AIM Rules" the AIM Rules for Companies
being the rules of the
London Stock Exchange
governing admission to
and the operation of AIM
"Articles of Merger" the articles of merger
executed by the SRL Directors
and Iluka Newco Directors
in accordance with section
171 of the BVI Companies
Act
"Business Day" a day (other than a Saturday
or Sunday) on which banks
are open for general business
in London, Perth and the
BVI
"BVI" the British Virgin Islands
"BVI Companies Act" the BVI Business Companies
Act (as amended from time
to time)
"Closing Date" the third Business Day
after the date on which
all Conditions have been
satisfied or waived, and
in any event no later
than the sixth Business
Day after such date (or
such other date as agreed
between SRL and Iluka)
"Code" the City Code on Takeovers
and Mergers
"Conditions" the conditions to the
implementation of the
Acquisition (including
the Merger) which are
set out in Appendix I
to this announcement and
to be set out in the Merger
Circular
"CREST" the relevant system (as
defined in the Uncertificated
Securities Regulations
2001 (SI 2001/3755)) in
respect of which Euroclear
UK & Ireland Ltd is the
operator
"Depositary" Computershare Investor
Services PLC
"Depositary Interests" the interests representing
SRL Shares issued through
the Depositary
"Effective" in the context of the
Acquisition means the
Merger having become effective
pursuant to its terms
"Effective Date" the date on which the
Merger becomes Effective
"German Antitrust German Federal Cartel
Authority" Office (Bundeskartellamt)
(FCO)
"Goldman Sachs" Goldman Sachs Australia
Pty Ltd of Level 17, 101
Collins Street, Melbourne
VIC 3000
"Iluka" Iluka Resources Limited
incorporated in Australia
with registered address
at Level 23, 140 St Georges
Terrace, Perth, WA 6000
"Iluka Board" the board of directors
of Iluka
"Iluka Group" Iluka Resources Limited
and its subsidiaries
"Iluka Newco" Iluka Investments (BVI)
Limited incorporated in
the British Virgin Islands
with its registered office
at Commerce House, Wickhams
Cay 1, Road Town, Tortola,
British Virgin Islands
VG1110
"Iluka Newco Directors" the board of directors
of Iluka Newco
"Investec" Investec Bank plc
"London Stock Exchange" London Stock Exchange
plc
"Merger" the merger of Iluka Newco
and SRL pursuant to the
provisions of sections
170 and 171 of the BVI
Companies Act and the
Plan of Merger, with Iluka
Newco being the surviving
company thereof.
"Merger Circular" the document to be sent
to SRL Shareholders setting
out, amongst other things,
the Merger, the Plan of
Merger and notices convening
the Shareholder Meeting,
and the required Shareholder
Resolutions
"Merger Implementation the agreement dated 31
Agreement" July 2016 between Iluka,
SRL and Iluka Newco and
relating, among other
things, to the implementation
of the Acquisition
"Merger Record Time" 6:00 p.m. London time
on the Business Day immediately
preceding the Closing
Date
"Neon" Neon Liberty Capital Management
LLC
"Option" a right to acquire SRL
Shares under the SRL Share
Plan
"Pala" Pala Investments Limited
"Plan of Merger" the plan of merger under
section 170 of the BVI
Companies Act in respect
of the Merger, to be included
in the Merger Circular
"Registrar of Corporate the Registrar of Corporate
Affairs" Affairs of the British
Virgin Islands
"Regulatory Information a Regulatory Information
Service" Service that is approved
by the Financial Conduct
Authority
"Shareholder Irrevocable as defined in Part II,
Undertakings" Section 6 of this announcement
"Shareholder Meeting" the meeting of SRL Shareholders
to be convened by the
SRL Board, notice of which
will be set out in the
Merger Circular, to consider
and if thought fit approve
the Merger and the Plan
of Merger (with or without
amendment) including any
adjournment thereof
"Shareholder Resolutions" resolutions of the SRL
Shareholders to approve
the Plan of Merger and
other transactions contemplated
by the Merger Implementation
Agreement
"SRL" SRL Limited, a company
limited by shares incorporated
in the BVI, whose registered
office is at Trinity Chambers,
P.O. Box 4301, Road Town
Tortola, British Virgin
Islands
"SRL Board" or "SRL the board of directors
Directors" of SRL and "SRL Director"
means any of them
"SRL Share Plan" the Sierra Rutile Limited
Share Option Plan (as
amended)
"SRL Shareholders" holders of SRL Shares
"SRL Shares" no par value shares of
SRL
"UK" or "United Kingdom" the United Kingdom of
Great Britain and Northern
Ireland
"United States", "US" the United States of America,
or "U.S.A" its territories and possessions,
any State of the United
States of America, the
District of Columbia,
and all other areas subject
to its jurisdiction
"US Exchange Act" the US Securities Exchange
Act of 1934, as amended
"GBP" or "Sterling" pounds sterling, the lawful
currency for the time
being of the UK and references
to "pence" and "p" shall
be construed accordingly
This information is provided by RNS
The company news service from the London Stock Exchange
END
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