St Helier, Jersey, 2012-10-22 07:30 CEST (GLOBE NEWSWIRE) --
The Board of Directors of Black Earth Farming Ltd (“BEF”) intends to propose a SEK 530 million rights issue subject to shareholder approval at an extraordinary general meeting to be held on 13 November 2012. The proceeds will be used to fund investments related to the Strategic Cooperation Agreement with PepsiCo announced on 22 October 2012 (please see separate press release for full details) as well as working capital needs of the current business. The major shareholders, consisting of Investment AB Kinnevik (“Kinnevik”) and Vostok Nafta Investment Ltd (“Vostok Nafta”) as well as senior management and board members holding shares (representing a total holding of 50.2 percent of the shares through their respective subsidiaries), have declared their intention to vote in favour of the issue and undertake to subscribe for their pro rata share of the rights issue.
Rights Issue Summary
- BEF’s Board of Directors intends to propose a share issue of approximately SEK 530 million, with preferential rights for the Company´s shareholders, to fund investments relating to the Strategic Cooperation Agreement with PepsiCo and working capital needs of the business in order to raise operating performance and improve profitability.
- The rights issue is subject to approval by an extraordinary general meeting to be held on 13 November 2012.
- BEF’s largest shareholders, including Kinnevik and Vostok Nafta as well as senior management and board members holding shares, together representing 50.2 percent of the votes and capital, have indicated their intention to vote in favour of the rights issue and undertake to subscribe for their pro rata share of the rights issue.
- The full terms of the rights issue, including subscription price, and further details regarding use of proceeds will be announced on 14 November 2012.
- Provided that the rights issue is approved by the extraordinary general meeting, the subscription period is expected to run from 26 November to 7 December 2012.
Background and Reasons
A new management team has started to implement change in order to improve operational performance and profitability. Several key strategic initiatives have been targeted in order to improve operating performance which include; raising crop yields to lower the cost per ton of production, improving marketing and price risk management to reduce volatility as well as overhead cost reductions. Progress has been made during 2012 in terms of execution and operational management with improvements to crop yields and price risk management. The multiyear process will continue and entails higher working capital needs but is vital for improved profitability going forward. The returns on the additional working capital outlay are significant given the high sensitivity of revenue and profit to changes in crop yields and price.
New relationships with high quality domestic counterparties in addition to export sales will also be crucial for improved price risk management. As part of this BEF has entered into a strategic relationship with PepsiCo in Russia. BEF will become a significant supplier of sunflower seeds and potatoes used in the production of Frito-Lay’s potato crisps as well as sugar beets for other PepsiCo products. The relationship provides BEF and PepsiCo with the opportunity to mutually benefit from a secure supplier relationship, reduced counterparty risk, lower volatility via forward pricing and future growth opportunities. The collaboration will have a significant positive impact on BEF´s business as it offers the potential to lock in forward prices for a significant quantity of its production while also diversifying into competitively advantaged higher margin irrigated crops. Please see separate press release on 22 October 2012 for additional details.
The Board of Directors and management of BEF believe that the changes and initiatives currently being undertaken are crucial to improve results going forward. In order to fund the investment and working capital needs required to fulfil the Company’s commitments towards PepsiCo and to continue to implement the operational turnaround, a strengthened equity base is proposed given the Company´s current capital structure and the inherent volatility of business. The Board of Directors therefore propose, subject to approval by an extraordinary general meeting, to undertake a new share issue with preferential rights for existing shareholders in the amount of approximately SEK 530 million before issue expenses.
Working Capital Facility
As previously announced on 11 July 2012, BEF entered into a loan agreement with its main shareholders, Kinnevik and Vostok Nafta, for a USD 25 million working capital facility. The majority was repaid during August and September as the harvest and sales of 2012 crops commenced wherefore USD 1 million of the facility was utilised as of 30 September. The parties have agreed that the amount outstanding if any will be used as partial payment to subscribe for their pro rata share of the rights issue.
The Rights Issue
An extraordinary general meeting will be held on 13 November 2012, at which the Board of Directors of BEF intends to propose resolutions amending the Company’s articles of association and authorising the issue of new shares. This will permit the board of directors to decide on the rights issue amounting to approximately SEK 530 million. Further details regarding the extraordinary general meeting and the Board of Directors’ proposal for the extraordinary general meeting can be found on the Company’s website www.blackearthfarming.com.
A complete timetable for the rights issue will be communicated in connection with the board of directors’ resolution on the rights issue and detailed information regarding the rights issue will be presented in the prospectus that will be prepared and published for the rights issue.
Undertakings to Subscribe
The largest shareholders in Black Earth Farming, including Investment AB Kinnevik and Vostok Nafta Investment Ltd support the rights issue and have made commitments to subscribe for their respective pro rata shares in the rights issue. Members of the BEF Board of Directors and management currently holding shares have also declared their intention to subscribe for their pro rata share of the rights issue. In total, shareholders representing 50.2 percent of the capital and votes have declared their intention to subscribe in the rights issue.
Preliminary Time Table for the Rights Issue
16 November 2012 Estimated date for publication of the prospectus
16 November 2012 First day of trading excluding subscription rights
20 November 2012 Record date for participation in the Rights Issue
26 November – 4 December 2012 Trading in subscription rights
26 November – 7 December 2012 Subscription period
Around 13 December 2012 Announcement of the outcome of the Rights Issue
Advisors
Pareto Öhman AB is financial advisor and Linklaters is legal advisor to BEF in connection with the Rights Issue.
About the Company
Black Earth Farming Ltd. is a leading farming company, publicly listed on Nasdaq OMX Stockholm and operating in Russia. It acquires, develops and farms agricultural land assets primarily in the fertile Black Earth region in southwest Russia. Black Earth Farming has gained a strong market position in the Kursk, Tambov, Lipetsk and Voronezh areas, controlling some 310,000 hectares of what perhaps is the world’s most fertile soil. In 2012 Black Earth Farming intends to harvest over 222,000 hectares, effectively making it one of the world’s largest public farming companies by cropped area. The Company’s main products are wheat, barley, corn, sunflower, soya and rapeseeds.
For further information please contact:
Erik Lystedt, Director of Investor Relations, Black Earth Farming Ltd.,
erik@blackearthfarming.com, tel: +44 (0) 2071 178 100
Important notice
The information in this press release is not intended, to directly or indirectly, be distributed, published or made public in Australia, Hong Kong, Japan, Canada, Switzerland, Singapore, South Africa, the United States or any other jurisdiction where the distribution of this press release would be illegal. The distribution of this press release may be restricted by law in certain jurisdictions and persons who take part of this press release or other information set out herein should inform themselves of, and observe, any such restrictions.
The information in this press release does not constitute an offer to sell shares or solicitation of an offer to buy shares. This press release does not constitute a prospectus under the Prospectus Directive 2003/71/EC.
The information in this press release does not constitute and is not part of an offer or solicitation of an offer to buy or subscribe for securities in the United States. Securities mentioned herein have not and will not be registered in accordance with the Securities Act of 1933 (the “Securities Act”). Securities mentioned herein may not be offered or sold in the United States unless they are registered in accordance with the Securities Act or fall within an exemption in the Securities Act. There will not be any public offer in the United States regarding securities.
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