TIDMTSG
RNS Number : 9608X
Trans-Siberian Gold PLC
03 May 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 LAWS OR
REGULATION OF SUCH JURISDICTION
3 May 2019
Trans-Siberian Gold plc
("TSG", the "Company", or the "Group")
Proposed Share Buyback
The Company is proposing to buy back 22,894,565 existing shares
from two of the major shareholders within UFG Asset Management
("UFG") at an attractive discount to the market price. As part of
the transaction further shares will be sold by the same
shareholders to other members of the UFG Group, Directors and to
new investors. The Share sales, together with the buy back, will
reduce the dominance by UFG of the share register and benefit
shareholders as a whole.
The Company is awaiting the execution of a facility agreement by
the Company's wholly owned subsidiary ZAO Trevozhnoye Zarevo ("TZ")
with VTB Bank. The Directors expect that this will occur shortly.
The term loan facility, of up to RUB 800 million (approximately GBP
9.4 million) will be utilised by the Group to fund the Buyback .
The Directors believe that the effect of the proposed buyback will
result in a more efficient capital structure for the Company, while
maintaining a strong balance sheet and continuing with the Dividend
Policy.
The Buyback is conditional on the Company finalising the debt
financing and on obtaining shareholder approval pursuant to the
Companies Act 2006. The Share Sale is conditional on completion of
the Buyback.
On 2 May 2019 Trans-Siberian Gold plc (TSG.LN) entered into
conditional agreements with each of Destin Investment Management
Limited ("Destin") and UFG Private Equity Fund I, L.P ("UFG PE Fund
I") (together the "Selling Shareholders") to acquire approximately
21 per cent. of the Company's issued share capital by means of an
off-market share buyback at a price of 33p per share (the
"Buyback"). The Buyback represents a discount of 42% to the closing
middle market price of a TSG share yesterday.
Further shares, representing approximately 10.4 per cent. of the
Company's issued share capital, will be sold by the Selling
Shareholders to other members of the UFG Group and to new
investors, which includes participation by the Directors (the
"Secondary Sale"), which together with the Buyback will reduce the
dominance by UFG of the share register and benefit shareholders as
a whole.
The prescribed term for the life of UFG PE Fund I has already
been extended and is expected to expire soon. Destin's investment
objectives have evolved since 2008 (when its founder died) and it
also now seeks to realise some of the returns from its investment
in the Company.
Highlights
-- Under the Buyback, the Company proposes to buyback a total of
22,894,565 existing Ordinary Shares (the "Buyback Shares") for an
aggregate purchase price of GBP 7.56 million out of the Company's
existing distributable profits.
-- The Buyback price of GBP0.33 per ordinary share represents a
discount of 42% to the closing middle market price of a TSG share
yesterday.
-- The Buyback is expected to deliver earning per share
accretion for the benefit of all remaining Shareholders
-- The Buyback delivers proactive management of TSG's share
ownership avoiding a potential on-market overhang over a protracted
period of time
-- TSG maintains its commitment to future dividend payments
-- UFG, in aggregate, will remain TSG's largest shareholder
-- The Selling Shareholders are prohibited from making further
disposals for a period of 6 months from completion of the
Buyback
-- The Buyback is subject to approval by shareholders at a
general meeting of TSG which is expected to be held in early June
2019
Alexander Dorogov, Chief Executive Officer of TSG,
commented:
"UFG has always been an incredibly supportive shareholder in TSG
and I know that will continue. This transaction creates a great
opportunity for TSG. It gives us the opportunity to acquire shares
at an attractive discount in a carefully managed way so as to avoid
market turbulence and provides significant flexibility in the
management of our capital base to create value for all our
shareholders."
Background to and Reasons for the Buyback
Having been long-term and supportive shareholders, the Selling
Shareholders have expressed a desire to reduce their shareholdings
in the Company for logical reasons. The prescribed term for the
life of UFG PE Fund I has already been extended and is expected to
expire soon. With the goodwill of its underlying investors and
management, UFG PE Fund I has remained a Shareholder but now seeks
to reduce its shareholding given the maturity of its
investment.
Destin is a privately-owned investment vehicle. The
beneficiaries of Destin also have a controlling interest in the
general partner of UFG PE Fund I. Destin's investment objectives
have evolved and it also now seeks to realise some of the returns
from its investment in the Company.
The reason for implementing the Buyback and the Secondary Sale
is to reduce the Selling Shareholders' share ownership of TSG and
consequently reduce UFG's total shareholding in TSG.
Destin and UFG PE Fund I currently own approximately 13.86 per
cent. and 28.07 per cent. respectively of the Company's issued
share capital. Following the sale of the Buyback Shares and the
Sale Shares, Destin and UFG PE Fund I will own approximately 4.5
per cent. and 9.0 per cent. respectively of the Company's issued
share capital (the Buyback Shares are expected to be held in
treasury once repurchased by the Company and have been excluded
from the calculation of the number of ordinary shares).
The Buyback would result in the Company acquiring, at a
discount, 22,894,565 existing Ordinary Shares representing
approximately 20.8 per cent. of TSG's issued share capital.
Immediately following the Buyback, the Buyback Shares will be held
in treasury.
The Board believes that the Selling Shareholders' desire to
reduce their shareholdings in the Company provides a significant
opportunity to take the next step towards diversifying the
ownership of the Company and create the conditions for increased
liquidity in the trading of the Company's Shares.
Details of the Buyback
The Company has entered into conditional off-market share
buyback agreements with each of Destin and UFG PE Fund I to
purchase 22,894,565 Shares in aggregate at a price of GBP0.33 per
Share from the Selling Shareholders ("Buyback Agreements"). The
Buyback Price represents a discount of approximately 42 per cent.
to the closing price of GBP0.57 per Share on 2 May 2019 (being the
last trading day prior to this announcement).
The Buyback is conditional upon: (a) the Company obtaining the
necessary financing to fund the Buyback ("Financing Condition");
and (b) receiving the approval of Shareholders at a General Meeting
in accordance with the requirements of the Companies Act 2006.
The consideration for the Buyback will be satisfied in cash,
from the Company's existing distributable profits, and will be
funded by utilising certain existing and expected new debt
facilities available to the Group.
The effect of the Buyback, if approved by Shareholders, and the
Secondary Sale (further details are set out below) would be to
reduce UFG's total shareholding in TSG to approximately 77 per
cent. of the Company's issued share capital.
The Board firmly believes that the Buyback will be highly
beneficial for TSG and is in the best interests of all
Shareholders. In particular, it delivers:
Proactive management of the Company's share ownership
The Directors believe the Buyback is an important step to manage
the ownership of the Company. The Selling Shareholders have been
long-term investors and now seek to partially realise their
investment. The concentrated share-ownership and limited liquidity
in the trading of the Company's Shares makes an on-market sale
impractical. Further, the Buyback avoids a potential on-market
overhang on the Shares over a protracted period of time.
Control of a significant amount of shares providing it with
flexibility in the management of its capital base
The Company is purchasing the Buyback Shares at a significant
discount to current market value. To some extent the price reflects
the limited liquidity in the trading of the Company's Shares which
makes an on-market sale impractical. However it is also an
efficient means of returning capital to Shareholders as a
significant number of Shares can be bought back within a relatively
short period of time.
Creating the conditions and potential for more liquidity in the
trading of its Shares
If the Financing Condition is satisfied and shareholder approval
is obtained, the Buyback Shares will be acquired by the Company and
held in treasury. At an appropriate time, the Directors may seek to
increase liquidity in the trading of the Shares and widen the
Company's share-ownership via the re-issue of Shares held in
treasury. Whilst there are no current intentions to do this it
could be done through a scrip dividend or placement of Shares.
EPS accretion
In addition, the Buyback, if approved by Shareholders, is
expected to increase EPS as the Buyback would have the mechanical
impact of reducing the number of shares constituting the
denominator in the calculation to a greater extent than the cost of
the debt will reduce earnings.
Financing of the Buyback
The Board has given careful consideration to the financing of
the Buyback, including the impact on the Group's gearing, in the
light of what the Board deems to be a prudent, long-term capital
structure for TSG. The Company will fund the consideration of
GBP7.56m payable under the Buyback Agreements by using certain
existing and expected new debt facilities available to the TSG
Group.
The Directors anticipate that a new term loan facilities
agreement between the Company's wholly-owned subsidiary ZAO
Trevozhnoye Zarevo ("TZ") and VTB Bank ("VTB") will be entered into
shortly (the "New Facilities"), whereby VTB is expected to agree to
provide TZ with term facilities in an amount up to 800 million
(approximately GBP9.4 million) for a four-year term. The New
Facilities are expected to be utilised by TZ to repay certain of
its indebtedness to the Company and the funds then to be utilised
by the Company (which is not expected to be a party to the new
facilities agreement) to fund the Buyback and to pay associated
costs and expenses. The interest rate (payable monthly) under the
agreement is expected to be 10.7 per cent per annum, subject to
increase by VTB in the event of an increase in: (a) the base rate
of the Bank of Russia; or (b) the rate applicable to zero-coupon
yield OFZ (bonds) with a maturity of three years, as published on
the official website of the Bank of Russi a. The loan is expected
to be repayable in quarterly instalments, commencing in the fifth
quarter following the date of the agreement.
The New Facilities are expected to be secured by way of a
mortgage of real estate and land lease rights of TZ in at the
Asacha Gold Mine in favour of VTB. Drawdown of funds is expected to
be conditional, inter alia, on the state registration of the
mortgage over certain TZ fixed assets in accordance with the
existing loans by VTB to TZ entered into in 2017.
The agreement is expected to provide for mandatory and voluntary
prepayment provisions within the range typically found in
financings of this nature and to permit TZ to cancel voluntarily
and prepay any part of the loan.
In addition, the agreement is expected to contain customary
representations and events of default. Further, the agreement is
expected to contain certain information undertakings, business
restrictions and financial covenants. It is anticipated that the
agreement will be governed by the laws of the Russian
Federation.
Conclusion of the agreement for the New Facilities will satisfy
the Financing Condition.
The Buyback is expected to increase leverage (Net
Debt/Shareholder funds). However, in the light of the Group's
historical and ongoing cash generation capability, the Board
believes that this debt level is prudent.
Related Party Transaction
The Buyback is classified under the AIM Rules as a "Related
Party Transaction" since the Selling Shareholders each hold more
than 10 per cent. of the Shares in the Company and therefore
constitute "substantial shareholders" as defined in the AIM
Rules.
Charles Ryan, Robert Sasson and Florian Fenner have associations
with the Selling Shareholders and are buying, or are connected with
the purchasers of, the Shares in the Secondary Sale. Alexander
Dorogov and Stewart Dickson will purchase Shares in the Secondary
Sale, as set out in the table below. Accordingly, for the purposes
of the AIM Rules, these directors are not considered to be
independent of the Buyback. Lou Naumovski is an independent
director ("Independent Director").
The Independent Director considers, having consulted with the
Company's nominated adviser, Arden Partners, that the terms of the
Related Party Transaction are fair and reasonable insofar as the
Company's shareholders are concerned.
Details of the Secondary Sale
Contemporaneously with the Buyback Agreements, the Selling
Shareholders have entered into conditional sale and purchase
agreements ("SPAs") to sell 11,478,410 Ordinary Shares at the
Buyback Price to certain existing Shareholders and new investors
which include certain Directors. Further details are set out
below.
Shares held at the Sale Shares Post-transaction Shareholdings
date of this document being purchased (1)
-------------------------------------------- ----------------- ------------------------------------
% of
Issued Number
Number of Ordinary Share Number of of Ordinary % of Issued
Shares Capital Ordinary Shares Shares Share Capital
--------------------------------- --------- ----------------- ------------- -------------------
KST Beteiligungs
AG (2) - - 4,721,403 4,721,403 5.4
UFG Special
Situations
Fund L.P (3) 23,141,018 21.03 2,869,999 26,011,017 29.8
Charles Ryan 6,076,306 5.52 2,295,682 8,371,988 9.6
Vadim Ognestsikov 1,372,211 1.25 499,999 1,872,210 2.1
Robert Sasson 709,279 0.64 399,999 1,109,278 1.3
Adrian Parkinson 481,290 0.44 199,999 681,289 0.8
Dominic Reed - - 151,514 151,514 0.2
Alexander Dorogov - - 229,567 229,567 0.3
Eugene Antonov - - 80,249 80,249 0.1
FELDI Limited(4) - - 29,999 29,999 0.0
----------- --------- ----------------- ------------- -------------------
Notes:
(1) The Buyback Shares expected to be held in treasury have been
excluded from the calculation of the number of Ordinary Shares in
issue and the percentage of issued share capital.
(2) Mr. Fenner is a director and substantial shareholder of KST Beteiligungs AG
(3) Messrs Ryan and Fenner are controlling persons of UFG
Special Situations Fund L.P., being in aggregate the holders of 98%
shares of the General Partner of the UFG Special Situations Fund
L.P.
(4) Mr. Dickson is a director and substantial shareholder of FELDI Limited
The Secondary Sale pursuant to the SPAs is conditional upon the
completion of the Buyback. The Secondary Sale Shares represent 10.4
per cent. of TSG's issued share capital as at 2 May 2019.
Following completion of the Buyback and Secondary Sale, the
Selling Shareholders will be subject to a lock-in undertaking for 6
months, with customary exceptions, in respect of their remaining
shareholding in the Company. The Company is not a party to the
Secondary Sale and will not receive any proceeds from the Secondary
Sale. The table below sets out the Selling Shareholders' holdings
before and after the Buyback and Secondary Sale.
Shares held at Shares being sold Post-transaction Shareholdings
the date of this pursuant to the (1)
document Buyback and Secondary
Sale
------------------------------ ----------------------- ------------------------------------
Number Number
of Ordinary % of Issued Number of Ordinary of Ordinary % of Issued
Shares Share Capital Shares Shares Share Capital
------------- --------------- ----------------------- ------------- -------------------
UFG Private
Equity
Fund I,
L.P 30,887,775 28.07 23,011,387 7,876,388 9.0
Destin
Investment
Management
Limited 15,250,461 13.86 11,361,588 3,888,873 4.5
------------- --------------- ----------------------- ------------- -------------------
Notes:
(1) The Buyback Shares expected to be held in treasury have been
excluded from the calculation of the number of Ordinary Shares in
issue and the percentage of issued share capital.
General Meeting
The Buyback requires shareholder approval as an off-market
purchase pursuant to section 694 of the Companies Act 2006 (the
"Act") and in accordance with the Company's Articles of
Association. Subject to first satisfying the Financing Condition,
the Board will therefore convene a General Meeting, At the General
Meeting, in accordance with the Act, an ordinary resolution, will
be proposed to seek such authority and to approve the Buyback.
The Board will recommend that shareholders vote in favour of the
resolutions to be proposed at the General Meeting.
S
Contacts:
TSG
Stewart Dickson +44 (0) 7799 694195
Arden Partners plc
Paul Shackleton / Alex Penney (Corporate
Finance)
Tim Dainton / Fraser Marshall (Equity Sales) +44 (0) 207 894 7000
Hudson Sandler (Financial PR)
Charlie Jack / Katerina Parker +44 (0) 207 796 4133
About TSG
TSG is focused on low cost, high grade mining operations and
stable gold production from its 100% owned Asacha Gold Mine in Far
East Russia. The Company also holds the licence for the development
and exploration of the Rodnikova deposit, one of the largest gold
fields in South Kamchatka.
Additional information is available from the Company's website:
www.trans-siberiangold.com
Market Abuse Regulations
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ('MAR'). Upon the
publication of this announcement via Regulatory Information Service
('RIS'), this inside information is now considered to be in the
public domain.
Disclaimer
This announcement contains "forward-looking statements" - that
is, statements related to future, not past, events. In this
context, forward-looking statements often address our expected
future business and financial performance, and often contain words
such as "expects," "anticipates," "intends," "plans," "believes,"
"seeks," "should" or "will." Forward-looking statements by their
nature address matters that are, to different degrees, uncertain.
For us, uncertainties arise from the behaviour of financial and
metals markets, fluctuations in interest and/or exchange rates and
metal prices; and from numerous other matters of national, regional
and global scale, including those of a political, economic,
business, competitive or regulatory nature. These uncertainties may
cause our actual future results to be materially different that
those expressed in our forward-looking statements.
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
MSCUUSRRKUAVRUR
(END) Dow Jones Newswires
May 03, 2019 02:00 ET (06:00 GMT)
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