Afarak Group has received a request on the 21stSeptember 2018 from shareholder LNS Ltd (formerly known with the name Kermas Resources Ltd), representing over 10 % of shares and voting rights, to convene an extraordinary meeting of shareholders.
The content of the request is:
“The presenter of the request, who at the time of the request owns more than one-tenth of all shares of Afarak Group Plc (hereinafter “Afarak”) is putting forward a request to the Board of Directors of Afarak, pursuant to Chapter 5 Paragraph 4 of the Limited Liability Companies Act, to convene without delay and Extraordinary General Meeting of Afarak to address the following issue:
Authorising the Board of Directors to decide on the repurchase of Afarak’s own shares
LNS proposes that Afarak’s Extraordinary General Meeting would resolve to authorise the Board of Directors of Afarak (“Board”) to plan, decide and to execute the swap of Afarak’s shares by a voluntary takeover bid to be made by Afarak to Afarak’s shareholders in accordance with the Finnish Securities Markets Act (“Takeover Bid”) as proposed below.
Background of the proposal
In LNS’s view, there is not enough liquidity in the Helsinki and London Stock Exchanges to allow larger shareholders to exit, hence LNS proposes that Afarak’s Extraordinary General Meeting would resolve to authorise the Board to plan, decide and to execute the Takeover Bid in order to create a window of opportunity to those shareholders who would like to exit from Afarak.
After the execution of the Takeover Bid Afarak Group would have only those shareholders remaining who either have decided to continue as current shareholders in Afarak or who alternatively have decided to transfer to be new shareholders in Afarak Holdings Ltd.
LNS’s view is that after the execution of the Takeover Bid Afarak Group would be in a better position due to the fact that the remaining shareholders would be committed and interested in the long-term development of Afarak Group. Currently some shareholders of the Company have had difficulties to find common understanding in various issues involving the Company, and in the long run the Company’s businesses might suffer because of this.
LNS also believes that the current share price in the market is at least partially based on factors that are not directly related to the Company’s business performance, but nevertheless suggests to use it as a basis for the Takeover Bid. Therefore in LNS’s justified view, the reasonable price offered per share to the shareholders in the potential Takeover Bid would be at least EUR 0.90 per share and not more than EUR 1.15 per share.
The cash consideration in the Takeover Bid of at least EUR 0.90 per share and not more than EUR 1.15 per share corresponds to a premium of approximately 15.4 percent to the closing price of the shares of Afarak (EUR 0.78) on Nasdaq Helsinki on 18 September 2018.
Alternatively, Afarak would be able to pay the consideration in securities i.e. shares of Afarak Holdings Ltd owned by Afarak; with an exchange ratio of 1:1 in such a way that against one (1) Afarak share the consideration would be one (1) existing share in Afarak Holdings Ltd currently owned by Afarak.
In order to ensure equal treatment of Afarak’s shareholders, the Takeover Bid should naturally be directed to all of the shareholders of Afarak.
In the event of the General Meeting’s decision in accordance with the this proposal, Afarak would have to, inter alia, draw up a prospectus in accordance with the Finnish Securities Markets Act and have it approved by the Financial Supervisory Authority in order to carry out the Takeover Bid. The prospectus for the Takeover Bid would contain, inter alia, the detailed terms of the Takeover Bid and instructions to shareholders, in accordance with which the shareholders could, if they so wished, offer their Shares to Afarak for acquisition.
LNS states its support to proposal and additionally state that it undertakes to use its right to offer its shares for acquisition by Afarak in the possible Takeover Bid in such a way that against one (1) Afarak share the consideration shall be one (1) existing share in Afarak Holdings Ltd. The willingness expressed and support given by LNS naturally significantly reduces the amount of funds required for the potential acquisition of the shares in the possible Takeover Bid.
Proposal for a conditional authorisation given to the Board of Directors
LNS proposes that the Afarak Group Plc’s General Meeting would decide to conditionally authorise Afarak Group Plc’s Board to acquire Afarak Group Plc’s shares as follows:
Content of the authorisation
The Board of Directors of Afarak Group Plc (“Afarak”) is authorised to decide on the acquisition of a maximum of 31,500,000 own shares (“Shares”) by a voluntary takeover bid (“Takeover Bid”) made to Afarak’s shareholders in accordance with the Finnish Securities Markets Act so that:
- The share offer price to be paid by Afarak in the Takeover Bid shall be at least EUR 0.90 per share and not more than EUR 1.15 per share. Alternatively, Afarak shall be able to pay the consideration in securities i.e. shares of Afarak Holdings Ltd owned by Afarak; with an exchange ratio of 1:1 in such a way that against one (1) Afarak share the consideration would be one (1) share in Afarak Holdings Ltd (“Share Offer Price”).
- Each shareholder of Afarak who wants to participate in the Takeover Bid shall have the right to choose either the cash consideration or the share consideration as a payment of the Share Offer Price.
Each shareholder of Afarak shall also have the right not to participate in the Takeover Bid and to continue as a shareholder in Afarak.
- The total amount of cash consideration in the Takeover Bid to be paid by Afarak shall be limited to EUR 28,404,000.00. However, the Board at its discretion shall have the right to waive this limitation.
- Shares acquired by Afarak are cancelled as part of the settling of the implementation sale, initially on the settlement date, meaning that the Shares will not be held by Afarak. Thus, the restrictions set out in the Finnish Limited Liability Companies Act on the acquisition of own shares, under which an acquisition of own shares shall not be made so that the amount of shares in the possession of the company exceeds 10 per cent of all shares, does not restrict the making of the Takeover Bid.
- The Shares are acquired using Afarak’s unrestricted equity.
- The payment of the Share Offer Price shall take place by the end of March 2019, if practically possible.
- The authorisation is proposed to include the right for the Board to decide on all other matters related to the Takeover Bid.
- The authorisation is proposed to remain valid until 31 May 2019.
The decision concerning the authorisation requires a qualified majority of at least two thirds of the votes cast and shares represented at the meeting.
Conditionality of the authorisation
The authorisation granted to the Board is conditional on the fulfilment of all of the following conditions:
- Afarak receives a legally valid preliminary ruling provided by the Central Tax Board according to which the provisions of Section 29 of the Finnish Act on Assessment Procedure on disguised dividend does not apply to the acquisition of own shares by Afarak in the Takeover Bid, meaning that the taxation of a shareholder taking part in the Takeover Bid was carried out in Finland normally in accordance with provisions on the taxation of capital gains;
- Afarak receives the required funding for the acquisition of the shares in the Takeover Bid on market terms which are approved by the Board; and
- The Financial Supervisory Authority approves the offer document drawn up by Afarak with respect to Takeover Bid in accordance with the Securities Markets Act.
The Board of Directors of Afarak Group will discuss the received letter of request in the manner provided by the Finnish Companies Act.