TIDMRPL
RNS Number : 5109K
Renewable Power and Light Plc
21 April 2010
Renewable Power & Light plc
("RPL" or "the Company")
21 April 2010
Posting of Annual Report and Accounts, Shareholder Circular
and Notice of General Meeting
The Company announces today that it has posted its Annual Report and Accounts
and Notice of AGM for the year ended 31 December 2009 to shareholders.
The Company also announces that a circular convening a general meeting of
shareholders has also been posted to shareholders ("the Circular") in respect of
the requisition made by Thalassa Holdings Limited and CityPoint Holdings Limited
(together "Thalassa"), two shareholders who together control 29.8% of the shares
in the Company for the purpose of proposing resolutions to replace the Company's
board of directors (other than Timothy Hunstad) with nominees of Thalassa (the
"Resolutions"). The receipt of this requisition from Thalassa was announced by
the Company on 31 March 2010.
The Directors unanimously recommend that shareholders vote AGAINST the
Resolutions. Each of the Directors intends to vote AGAINST all of the
Resolutions in respect of his own beneficial holding in the Company amounting
to, in aggregate 508,175 Ordinary Shares, representing approximately 0.57% of
the current issued Ordinary Share capital of the Company.
Key Information set out in the Circular
- Thalassa has shown a pattern of behaviour trying to gain control of the
Company by attempting to influence board composition rather than paying full
value to shareholders
- Despite repeated requests, Thalassa has failed to provide the Company and
its shareholders with sufficient information regarding its proposed investing
policy to enable them to make an informed decision
- Thalassa's actions have caused repeated delay and, in the Board's view,
resulted in a decrease in shareholder value while the Company has been in a
state of uncertainty, unable to implement its existing previously approved
investing policy with no adequate proposals for a new investing policy
- Pursuant to the requirements of the AIM Rules, the Company's shares will be
suspended from trading on AIM on 19 August 2010, and de-listed from AIM six
months thereafter, if a new investing policy is not only adopted, but also
implemented, prior to those dates
- If the Company is de-listed from AIM, the liquidity and marketability of
the Company's shares would be severely reduced and the value of any such shares,
the Board believes, would be adversely affected as a consequence. Under these
circumstances, the Company would no longer be subject to the AIM Rules and there
would be limited restrictions on the manner in which Thalassa and the proposed
new board can control the business and operations of the Company, and
independent minority shareholders would have very limited protections in respect
of their interests.
- As Thalassa holds 29.8% of the shares in the Company, and Novus Capital,
another major shareholder in the Company, has a 26.9% holding, the resolutions
will be passed, and the Board will be replaced by Thalassa's nominees, if Novus
Capital votes in favour of the resolutions. Accordingly, the Board believes
that it may be replaced at the general meeting regardless of how any other
shareholders vote their shares.
- a vote against the resolutions will send a message to the proposed new
board of sharholders' displeasure with how Thalassa has sought to control the
future direction of the Company.
An extract of the Circular regarding the requisitioned general meeting is set
out below.
Both the AGM and the general meeting, will be held at 10 Dominion Street,
London, EC2M 2EE on 18 May 2010. The AGM will take place at 10.00 a.m. and the
general meeting will take place at 11.00 a.m. or one hour after the conclusion
or adjournment of the AGM, whichever shall be later.
The full Circular and notice for the requisitioned general meeting, as well as
the Company's Annual Report and Accounts and Notice of AGM are available to be
downloaded from the Company's website (www.rplplc.com).
For further information, please contact:
Renewable Power & Light plc
Timothy Hunstad Telephone: + 1 952 746 0393
Grant Thornton Corporate Finance
(Nominated Adviser)
Gerald Beaney Telephone: +44 207 383 5100
Extract of the Circular set out below, excluding the enclosures and the notice:
"To the holders of Ordinary Shares
Notice of Requisitioned General Meeting
and
Unanimous Recommendation of Your Board to Vote Against the Proposed Resolutions
Dear Shareholder
Background to Requisition of General Meeting
Thalassa Holdings Limited and CityPoint Holdings Limited (together "Thalassa"),
two shareholders who together control 29.8% of the shares in the Company, served
a notice on the Company on 16 March 2010 to requisition a general meeting for
the purpose of replacing the existing board (other than Timothy Hunstad) with
their nominees and to propose a new investing policy for the Company (the "First
Requisition"). After the Company advised Thalassa that it considered its
proposed new investing policy was inadequate and did not comply with the AIM
Rules, Thalassa withdrew the First Requisition and served a further notice on
the Company on 30 March 2010 to requisition a general meeting on the same terms,
save that the proposal to approve a new investing policy had been removed from
the requisition altogether (the "Second Requisition").
As required by the Companies Act 2006, a statement by Thalassa which accompanied
the Second Requisition (the "Members' Statement") has also been enclosed with
this Circular. Your Board believes that a number of statements in the Members'
Statement are incorrect and misleading, as will be discussed in further detail
later in this Circular.
The purpose of this Circular is to give notice of the general meeting ("GM"), as
requisitioned by the Second Requisition, to be convened for 18 May 2010 at 11.00
a.m. or one hour after the conclusion or adjournment of the AGM convened for the
same day, whichever shall be later. Notice of the GM is set out at the end of
this Circular.
As Thalassa holds 29.8% of the shares in the Company, and Novus Capital, another
major shareholder in the Company, has a 26.9% holding, the resolutions will be
passed, and your Board (other than Timothy Hunstad) will be replaced by
Thalassa's nominees, if Novus Capital votes in favour of the resolutions.
Accordingly, your Board believes that it will in fact be replaced at the GM
regardless of how any other shareholders vote their shares.
In the face of this virtual inevitability, your Board could have chosen to
resign and simply hand control of the direction of the Company over to its major
shareholders. However, as the additional information and safeguards for the
benefit of all shareholders which the Board has repeatedly requested from
Thalassa were not forthcoming, the Board considers it to be its duty to ensure
that all shareholders have the benefit of the information in this Circular so
that they can make as informed a decision regarding their voting intentions and
their shareholding in the Company going forward as is possible in the
circumstances, given Thalassa has not yet provided any meaningful indication of
its future strategy for the Company.
While unlikely to affect the outcome of the GM, your vote against the
resolutions could however send a message to the proposed new board of your
displeasure with how they have sought to control the direction of the Company
going forward.
For the reasons set out in this Circular, the board of RPL plc unanimously
recommends that you vote against the resolutions at the GM.
All defined terms in this Circular are defined terms used and defined in
previous circulars issued by the Company
KEY INFORMATION
- Thalassa has shown a pattern of behaviour trying to gain control of the
Company by attempting to influence board composition rather than paying full
value to shareholders
- Despite repeated requests, Thalassa has failed to provide the Company and
its shareholders with sufficient information regarding its proposed investing
policy to enable them to make an informed decision
- Thalassa's actions have caused repeated delay and, in your Board's view,
resulted in a decrease in shareholder value while the Company has been in a
state of uncertainty, unable to implement its existing previously approved
investing policy with no adequate proposals for a new investing policy
- Pursuant to the requirements of the AIM Rules, the Company's shares will be
suspended from trading on AIM on 19 August 2010, and de-listed from AIM six
months thereafter, if a new investing policy is not only adopted, but also
implemented, prior to those dates
- If the Company is de-listed from AIM, the liquidity and marketability of
the Company's shares would be severely reduced and the value of any such shares,
the Board believes, would be adversely affected as a consequence. Under these
circumstances, the Company would no longer be subject to the AIM Rules and there
would be limited restrictions on the manner in which Thalassa and the proposed
new board can control the business and operations of the Company, and
independent minority shareholders would have very limited protections in respect
of their interests.
- As Thalassa holds 29.8% of the shares in the Company, and Novus Capital,
another major shareholder in the Company, has a 26.9% holding, the resolutions
will be passed, and the Board will be replaced by Thalassa's nominees, if Novus
Capital votes in favour of the resolutions. Accordingly, the Board believes
that it may be replaced at the GM regardless of how any other shareholders vote
their shares.
- Your vote against the resolutions will send a message to the proposed new
board of your displeasure with how Thalassa has sought to control the future
direction of the Company.
Current Board
The Board is currently comprised of two executive and two non-executive
directors. Details of their roles and their background are set out below.
The three directors proposed to be removed by Thalassa at the GM have indicated
their willingness to continue to implement the currently approved investing
strategy or a new strategy working together with the Company's shareholders,
including nominees of Thalassa. However, as set out further below, despite
making repeated invitations to Thalassa for board representation alongside the
current Board, and requests for additional information on its proposed investing
policy, nothing has been forthcoming from Thalassa other than the First
Requisition and the Second Requisition.
Michael Gainey Reynolds (aged 61) - Non-executive Chairman
Mr. Reynolds is a senior power industry professional, with a career spanning
over 30 years, much of it occupying executive positions in some of Europe's
largest power utilities. From 2004 to April 2006, Mr. Reynolds was Chairman of
Carron Energy, a company formed to acquire Uskmouth Power Station, a 363 MW net
coal fired power station near Newport in South Wales. From 2000 to 2003, Mr.
Reynolds was Chief Executive Officer of Endesa Europe, responsible for all of
Endesa's European operations. His principal achievements were the setting up of
a European management team, the successful EUR8 billion expansion of the European
business base, consisting of 10,000 MW of power asset acquisitions. Between
1997 and 2000, Mr. Reynolds was president and Chief Executive Officer of Sithe
Energies Europe, the power subsidiary of Vivendi. He established Sithe Europe
and formed a team to expand Vivendi's European, Middle East and Africa energy
portfolio. From 1996 to 1997, Mr. Reynolds was European Director for National
Power, responsible for all other National Power's business development and asset
management operation on mainland Western Europe, Central and Eastern Europe and
North Africa. Mr. Reynolds holds a Bachelor of Science in Chemical Engineering
(Honours) and a Post Graduate Diploma in Business Studies, both from Birmingham
University.
Victor James Fryling (aged 62) Interim President and Chief Executive Officer
Mr. Fryling has over 30 years experience in the energy industry. Until 2000 he
was the President and Chief Operating Officer of NYSE listed CMS Energy ("CMS"),
a US$18 billion diversified energy company, and owner of Consumers Energy. At
CMS for over 16 years, he held various officer positions including Regulatory
Affairs, Strategic and Financial Planning, Investor Relations, and Chief
Financial Officer. In 2001, Mr. Fryling became the President of the North
American Division of Renewable Energy Systems Inc. ("RES"), the global wind farm
business of the McAlpine family. Under his guidance for three years, RES became
profitable and grew significantly in both assets and operating profits. It is
currently one of the most successful renewable energy companies in North
America. In 2005 he became Chairman of the North American business. Mr.
Fryling holds degrees in Business Administration and Finance from Wayne State
University, USA.
Timothy Patrick Hunstad (aged 52) - Vice President and Chief Financial Officer
Mr. Hunstad is a finance professional with over 25 years of energy industry
experience with both public and private companies. During this time, Mr.
Hunstad has had significant experience in managing complex projects from
initiation through to completion. Mr. Hunstad also has significant experience
in matters related to acquisitions and divestitures, financing, regulatory
compliance and investor relations. From 2000 to 2006, Mr. Hunstad provided
financial and management consulting services to the energy industry on matters
related to regulatory permitting, transmission and fuel planning, financing,
procurement, construction management, coordination of internal and external
consultants and evaluation of private placements and acquisitions. From 1996 to
1999, Mr. Hunstad was Vice-President and Chief Financial Officer of Cogeneration
Corporation of America. He was responsible for all aspects of the company's
financial management from its emergence from bankruptcy in 1996 through to the
sale of the company in 1999. From 1992 to 1996, Mr. Hunstad held a number of
management positions with NRG Energy Inc. Mr. Hunstad holds a Bachelors degree
from Concordia College (Moorhead, Minnesota, USA) and a Masters in Business
Administration from the University of South Dakota, USA.
Alexander Scott Lambie(aged 54) -Non-executive Director
Mr. Lambie, the Chief Executive Officer of the Welsh Power Group Limited and
Carron Energy Limited, has over 30 years experience in the commercial arena of
energy, specifically in oil, gas and electricity. In December 2003, he left
Endesa Europa to focus on the development of Carron Energy, a company which he
founded in February 2003 to target the acquisition of generation assets in the
UK and Europe. Mr. Lambie has significant private and public company
experience, having held directorships in various companies including Amsterdam
Power Exchange from 2001 to 2004 and Endesa Netherlands and Endesa France from
2002 to 2004. He has also held senior executive positions with Endesa SA,
British Gas, National Power Plc, Amec Plc, Dawson International Inc and George
Wimpey Plc and was a member of the Supervisory Board of the Amsterdam Power
Exchange and on Endex, the futures exchange. Mr. Lambie has wide experience in
bottom line management, corporate development, business planning and large scale
merger and acquisitions including post acquisition integration. Mr. Lambie has
been actively involved in the privatisation and opening up of energy markets
starting with the privatisation of the Central Electricity Generating Board in
the UK through to the un-bundling of integrated energy utilities in the
Netherlands, France, Germany and Spain.
Summary of Events
We have set out below a summary of the key events which have led to the Second
Requisition and the GM being convened.
Adoption and Implementation of Existing Investing Policy
On 19 August 2009, the Company's shareholders approved its current investing
policy (the "Investing Policy") in connection with the proposed sale of its
Elmwood and Massena power plants (the "Plant Disposal") and its "mothballed"
biodiesel production equipment (the "Biodiesel Facility Disposal"). As these
transactions constituted a fundamental disposal under the AIM Rules, the Company
became an investing company and was required to adopt an investing policy which
complied with the AIM Rules.
The Investing Policy was unanimously approved by the shareholders who voted at
the meeting, which gave your Board a clear and unambiguous mandate on the future
direction of the Company.
The Company's existing, shareholder approved, Investing Policy is set out below,
as it was described in the Company's circular to shareholders dated 29 July 2009
for the purpose of approving the Plant Disposal, the Biodiesel Facility Disposal
and the Investing Policy (a full copy of which is available on the Company's
website www.rplplc.com):
"In December 2008, the details of the Board's strategy to maximise and realise
value for shareholders was announced. The strategy had three key elements:
· Return of an initial 10 pence per Ordinary Share to shareholders via a
capital distribution;
· Execution of the ongoing asset sale processes; and
· An orderly realisation of the net value of the remaining business for
shareholders, considering the remaining assets and liabilities of the Company
and the ongoing working capital requirements.
With the initial return of 10 pence per Ordinary Share completed in February
2009 and assuming completion of the Plant Disposal, the remaining business of
the Company will be to dispose of the Biodiesel Facility (if the Biodiesel
Facility Disposal has not already taken place) and complete RPL Holdings'
obligations under the rail car lease which expires in October 2009 and
potentially to consummate a transaction for the Company's net operating loss tax
carryforwards.
As soon as practicable after completion of the Plant Disposal, the Board will
determine the appropriate level and timing of a further capital distribution to
shareholders, taking into consideration the timing of the Plant Disposal of the
Biodiesel Facility Disposal and the other working capital requirements of the
Company. It is intended that the proceeds of the Plant Disposal (and of the
Biodiesel Facility Disposal, as and when it takes place) will form part of this
proposed capital distribution to shareholders.
In addition, the Company intends to take steps to reduce overheads and preserve
cash (including staffing levels, board composition, and other appropriate
measures). This evaluation of working capital requirements will include the need
to fund termination/severance liabilities as well as any ongoing contingencies
as a result of the Plant Disposal.
The Company considers the October termination of the rail car lease as the date
when steps will be taken to commence the winding up approval process which may
take up to 12 months to complete depending on the working capital requirements
of the Company.
It is likely that there will be an interim capital distribution and a final
capital distribution. The timing of the distributions has not been determined
but it is currently anticipated that, assuming closing of the Plant Disposal has
occurred, the interim distribution will be made as early as October 2009 to
release the funds from the Plant Disposal.
The Company will seek the approval of shareholders prior to making any capital
distribution and/or winding up of the Company, including for the purposes of
complying with Rule 21.1 of the Takeover Code if required (in the event the
Company is in an "offer period" as defined in the Takeover Code).
Following approval of the Investment Policy by the shareholders at the GM,
pursuant to AIM Rule 15, the Company must implement the Investing Policy within
12 months of such approval, otherwise trading in the Company's Ordinary Shares
on AIM will be suspended in accordance with AIM Rule 40. If following suspension
of the Ordinary Shares in accordance with AIM Rule 40, the Ordinary Shares have
not been re-admitted to trading on AIM within six months, the admission of the
Ordinary Shares to trading on AIM will be cancelled."
Since the approval of Investing Policy, the Board diligently continued to
implement it, in particular by:
- Streamlining the board with the departures of Mr Donald Verbick
(Senior-Vice President) and Mr Mark Draper (Non Executive Director) on 24
September 2009
- Completing the Plant Disposal
- Completing the Biodiesel Facility Disposal
- Completing a second return of capital of 8p per share in December 2009
- Conceiving, negotiating and seeking to implement the proposed True North
Transaction (as further discussed below) throughout the period from November
2009 to February 2010, the True North Transaction having been announced on 28
January 2010.
All of the above, save for the True North Transaction, had been publicly
announced at the time Thalassa acquired its major shareholding in the Company in
January 2010.
Thalassa acquires its stake
Thalassa acquired its combined stake of 29.8% of the Company on 18 January 2010.
Thalassa announced on 19 January 2010 that the price paid was 3p per share, and
that "additional consideration, of up to 1p per share, may be due if RPL's net
assets are subsequently found and announced to be greater than 3.75p per share."
The announcement also confirmed that Thalassa and CityPoint are deemed to be
acting in concert under the Takeover Code.
It is your Board's view that this acquisition was executed with the intention of
Thalassa seeking to obtain control of the Board, and the future direction of the
Company, notwithstanding the existing shareholder approved Investing Policy that
was in place.
Announcement of True North Transaction
The proposed transaction with True North Power Group LLC ("True North")
represented an opportunity to extinguish the existing contractual liabilities of
the Company's US subsidiary RPL Holdings Inc., ("RPL Holdings") by selling RPL
Holdings to True North, a company controlled by current and former management of
RPL Holdings. Your Board believes that this would have enabled the Company to
become a clean cash shell with minimal liabilities and would have achieved a
speedier return of capital to shareholders.
The principal terms of the True North Transaction were set out in the circular
posted to shareholders on 28 January 2010 (the "True North Circular"). A copy
of the True North Circular can be viewed on the Company's website at
www.rplplc.com.
It should be emphasised that the fairness of the True North Transaction was
considered by the Board in consultation with Grant Thornton Corporate Finance
acting as Nominated Adviser for the purposes of the AIM Rules. Grant Thornton
Corporate Finance also stated that in their opinion, the terms of the True North
Transaction were fair and reasonable for the purposes of Rule 16 of the Takeover
Code.
Discussions with Thalassa
Following the announcement of the True North Transaction, Thalassa advised the
Board that it had concerns about the transaction and was not minded to vote in
favour of it. As the Board had devoted considerable effort and resources to
negotiate the True North Transaction, the Board was keen not to waste that
investment of shareholder funds without a bona fide better alternative.
Accordingly, in accordance with the principles of good corporate governance the
Board felt it appropriate to enter into a dialogue with Thalassa in order to
clarify any matters regarding the Company's historic operations and strategy as
previously approved by the Company's shareholders and to assist their
understanding of the commercial rationale behind the transaction.
The Independent Directors (as defined in the True North Circular) concluded that
it would be in shareholders' interests to provide such information that would
encourage Thalassa to vote in favour of these resolutions, as recommended to all
shareholders. Whilst the board considered that there was adequate information
in the public domain, it entered into a non-disclosure agreement with Thalassa
(the "NDA").
After the provision of such information, Mr Soukop, a director of Thalassa, told
the Company that Thalassa would not be voting in favour of the True North
Transaction as, in his view, the True North Circular did not contain all the
information that shareholders should have been provided with and he was unhappy
with the $1.513 million of costs to be incurred in discharging RPL Holdings'
liabilities, which was disclosed in the Circular.
The Company's share price declined by approximately 25% between 8 February and
11 February 2010. In order to eliminate any rumours and speculation regarding
the Company's cash position, the Company decided to clarify the Company's cash
position to the market and, accordingly, it made an announcement on 12 February
2010 with this information.
In light of subsequent events described below it is your Board's belief that
Thalassa had no intention of ever approving the True North Transaction, or any
other transaction proposed by the current Board, unless and until they
controlled the board.
"Thalassa Offer"
On 12 February 2010, the final business day prior to the general meeting to
approve the True North Transaction, the Company received a letter from Thalassa
purporting to make an offer to acquire RPL Holdings, the Company's US subsidiary
which was proposed to be sold to True North pursuant to the True North
Transaction (the "Thalassa Offer").
The Thalassa Offer is discussed below.
Thalassa Announcement on 12 February 2010
Later on 12 February 2010, Thalassa made a public announcement that it had
received material non-public information which had led it to decide to vote
against the True North Transaction.
In that announcement Thalassa also alleged there was insufficient information in
the True North Circular. The Board is, and remains, of the view that all
material information was included in the True North Circular or was available in
the public domain by virtue of prior regulatory notifications.
The Board therefore believes that Thalassa's statement was irresponsible and
misleading, designed to leave the incorrect impression with other shareholders
of the Company that Thalassa had received considerable non-public material
information. The Board is also of the view that Thalassa's statements amounted
to a breach of the NDA, which demonstrated to the Board the approach which
Thalassa takes to complying with contractual obligations. Given subsequent
events, Thalassa made no further mention whatsoever of the fact that it had made
the Thalassa Offer for RPL Holdings.
In this announcement Thalassa also stated its intention to block any future cash
distributions. As a shareholder holding more than 25% of the voting rights in
the Company, Thalassa is able to block certain aspects of the existing Investing
Policy, as a special resolution requiring 75% approval would be required to
return further capital to shareholders or to put the Company into liquidation.
This announcement therefore suggested that Thalassa was against the Company's
existing shareholder approved Investing Policy from the time it acquired its
shareholding in the Company.
True North General Meeting
At the general meeting held on 15 February 2010, the True North Transaction was
not approved by shareholders.
First Requisition
On 16 March 2010, the Company received the First Requisition and Members'
Statement.
The First Requisition was subsequently withdrawn following the Company's
announcement on 17 March that it did not consider Thalassa's proposed investing
policy contained in the First Requisition complied with the AIM Rules.
Further Discussions
Following the First Requisition, further discussions were held with a view to
bringing nominees of the Company's major shareholders onto the Board without the
need for a general meeting, and any appointments made could then have been
confirmed at the AGM.
As part of the proposals to appoint such shareholder nominees to the board, the
Company requested certain safeguards, including:
- the appointment of independent non-executives at the same time
- an indication as to remuneration expectations, if any, of their proposed
nominees; and
- the provision of further information regarding Thalassa's new investing
policy proposed to be adopted
Your Board and Grant Thornton considered that a new investing policy should be
put to shareholders at the same time as the proposals for a board change at the
AGM (thereby saving the expense of an additional shareholder meeting to consider
the adoption of a new investing policy). Your Board believes this to be
fundamental as a matter of corporate governance, because Thalassa, together with
Novus Capital, would be in a position to approve any ordinary resolution.
Accordingly your Board believes that the remaining shareholders of the Company
must have a clear (and AIM Rules-compliant) description of the proposed
investing policy so they could make an informed decision on their vote to
appoint (or re-appoint) directors at the AGM.
Repeated requests were made during this period for information regarding the new
investing policy but none has been provided.
Thalassa Second Requisition
On 30 March 2010, Thalassa served the Second Requisition, in which the proposal
for a new investing policy was removed altogether and no mention was made as to
a future strategy for the Company. This appeared contrary to the previously
announced Thalassa view that the current investing policy is to be changed.
Your Board's Response to Recent Events and Members' Statement
Your Board considers Thalassa's conduct since acquiring its shareholding has
been aggressive and unresponsive and not what should be expected from a public
company that is aware that directors need to have regard to the interests of
all shareholders and stakeholders.
Your Board believes that Thalassa's announcements and the Members' Statement
contain certain inaccuracies and misleading statements and omissions and has set
out a detailed response to certain of these issues below.
The Thalassa Offer
Thalassa stated in its announcement of 17 March that its proposal to replace the
board of RPL was reached following the Company's general meeting to consider the
True North Transaction , "most importantly because the board of RPL failed to
inform shareholders that they had received, prior to that general meeting, a
competing and substantially higher offer for RPL's US subsidiary, at a 100,000%
premium to the $1 price that the board of RPL was recommending." (the "Thalassa
Offer")
The Company received a letter from Thalassa which contained the Thalassa Offer
made by Thalassa on 12 February, the last business day prior to the general
meeting held on 15 February. The Thalassa Offer was promptly and duly considered
by the Independent Directors of the Company in accordance with their fiduciary
duties.
The headline consideration in the Thalassa Offer was stated to be "not less than
$1,001"; hence the factual, but sensationalist, reference to the "100,000%
premium" in the 17 March announcement, but which in the Board's view, misleads
shareholders as to the true economic effect of the Thalassa Offer when compared
to the True North Transaction.
This proposed $1,000 increase in the cash consideration was only a fraction of
the amount the Company would have had to incur in considering, re-negotiating,
executing and seeking shareholder approval for the Thalassa Offer. Such costs,
consisting of legal, accounting and other professional fees, and the additional
costs of paying the US-based employees for an additional period, make it easy
to see why your Board concluded the Thalassa Offer, coming as it did on the last
business day prior to the GM, should not be pursued or communicated to
shareholders. Even the cost of holding a further meeting would have been
several multiples of the supposed "premium" on the value of the Thalassa Offer.
Moreover, the Thalassa Offer was not legally binding and subject to certain
conditions. Therefore the Board believes the statement in the Members'
Statement that the Thalassa Offer was "on exactly the same terms" as the
transaction with True North is misleading. The terms of the True North
Transaction included detailed provisions on how existing contractual liabilities
of RPL Holdings (approximately US$1.5 million as set out in the True North
Circular) were to be dealt with, which was the key aspect of the transaction,
not the nominal value of the cash consideration.
Taking into account the significant additional costs and time lag involved, as
well as the uncertainty of the outcome of the Thalassa Offer, your Board
concluded that the Thalassa Offer was not in the best interests of shareholders
as a whole or likely to promote the success of the Company. Your Board
therefore believes it did not in any way act otherwise than in accordance with
its fiduciary duties as directors, contrary to the assertion made in the
Members' Statement.
If Thalassa had wanted all shareholders to know about the existence of the
Thalassa Offer, it seems strange that Thalassa did not mention it in its
announcement made on 12 February 2010 which was after the Thalassa Offer was
made. The inference drawn by your Board is that Thalassa did not have any
intention of ever proceeding with the Thalassa Offer to acquire RPL Holdings,
and would have served the First Requisition and the Second Requisition, whether
or not your Board had advised shareholders of the existence of the Thalassa
Offer.
Adoption of New Investing Policy
The First Requisition contained a resolution purporting to approve a new
investing policy in generic terms which was inadequate and does not comply with
the AIM Rules. The AIM Rules provide that a company's investing policy must be
sufficiently precise and detailed to allow the assessment of it, and, if
applicable, the significance of any proposed changes to the policy:
"[an investing policy] must contain as a minimum:
- assets or company in which it can invest;
- the means or strategy by which the investing policy will be achieved;
- whether such investments will be active or passive and, if applicable, the
length of time that investments are likely to be held for;
- how widely it will spread its investments and its maximum exposure limits,
if applicable;
- its policy in relation to gearing and cross-holdings, if applicable;
- details of investing restrictions, if applicable; and
- the nature of returns it will seek to deliver to shareholders and, if
applicable, how long it can exist before making an investment and/or before
having to return funds to shareholders."
As an AIM company itself, Thalassa could reasonably be expected to be aware of
these requirements. Nevertheless Thalassa did not mention in its announcement
of the First Requisition that a further shareholders' meeting would need to be
convened for this purpose. This is, in your Board's view, misleading given
Thalassa implies that it would be beneficial for the current board (other than
Timothy Hunstad) to resign in order to save the Company and its shareholders the
time and expense of convening a meeting.
The Second Requisition, rather than including more information about the
adoption of the new investing policy, removed all reference to it, seeking
instead solely to take control of the direction of the Board without giving any
further information to shareholders about its intentions.
Following the First Requisition, your Board made a number of requests for
Thalassa to provide further information on its proposed investing policy but no
such information has yet been provided. Your Board is concerned that
shareholders do not, and will not, have sufficient information about the
proposed new directors' strategy for the Company on which they can make an
informed decision on whether to vote in favour of replacing the majority of the
current Board.Your Board believes that withholding such information will be to
the detriment of minority shareholders. Thalassa has not, for example, provided
any explanation as to whether it believes a US presence is still required for
the Company in light of the fact all of its US assets have been sold.
If Thalassa is successful in replacing your Board then a further general meeting
would be required to approve a new investing policy. Your Board again
re-iterates its request for Thalassa to provide full details of its proposed new
investment policy as a matter of urgency and well in advance of the date of the
GM so that shareholders may make an informed decision on how to vote at the GM.
It should be stressed that your Board is not opposed to a new investing policy
if that is what the majority of its shareholders support as your Board wishes to
maximise shareholder value. It stands by its previous strategy as having been
the most appropriate way to preserve and maximise shareholder value but your
Board is and has been willing to listen to shareholders about alternative
strategies. It is however concerned that all requests for further information
as to what that investing policy should be have gone unanswered.
Thalassa Delay & Timing Implications
If the Company's investing policy is not implemented prior to 19 August 2010
(being 12 months from the date of shareholder approval of the Company's existing
investing policy) then trading in the Company's ordinary shares on AIM will be
suspended in accordance with AIM Rule 40. If following suspension of the
ordinary shares in accordance with AIM Rule 40, the ordinary shares have not
been re-admitted to trading on AIM, within a further six months, the admission
of the ordinary shares to trading on AIM will be cancelled. The adoption of
a new investing policy does not restart this timeline.
Your Board believes that the failure of Thalassa to mention in any of its
announcements or to the Board whether it is capable of implementing its proposed
new investing policy within the time frame mandated by the AIM Rules is, in the
Board's view, an important omission from its public announcements.
Following the voting down of the True North Transaction, your Board have been
concerned about this impending deadline under AIM Rule 40 and the need for the
Company to consider proposals from Thalassa for a new investing policy as soon
as possible in order to preserve shareholder value. Your Board believes that as
every month passes with no progress made towards implementing a shareholder
approved investing policy, it reduces available time and resources.
Accordingly, as set out in the Company's announcement on 15 February, a letter
to Thalassa on 19 February and thereafter, the Company has made numerous
requests of Thalassa and its advisers to provide proposals for a new investing
policy.
Your Board is concerned that the extensive delay in approving and implementing a
new investing policy may lead to a point when the AIM Rules will no longer apply
to the Company, to the detriment of minority shareholders in the Company.
If the Company is de-listed from AIM,the liquidity and marketability of the
Company's shares would be severely reduced and the value of any such shares, the
Board believes, would be adversely affected as a consequence. Under these
circumstances, the Company would no longer be subject to the AIM Rules and there
would be limited restrictions on the manner in which Thalassa and the proposed
new board can control the business and operations of the Company, and
independent minority shareholders would have very limited protections in respect
of their interests.
Tactics to Gain Control
In order to acquire control of the Company by the more conventional means of
making a formal offer to remaining shareholders to acquire their shares,
Thalassa would have been required to pay at least 3p per share in accordance
with the Takeover Code. As at 15 April 2010, the latest practicable date prior
to the posting of this Circular, the Company's closing share price on AIM was
1.625p. Your Board would unanimously recommend an offer made by Thalassa at 3p
per share.
Instead, your Board believes that in light of Thalassa's actions it is
reasonable to believe that its ulterior motive is, and has been since it
acquired its shareholding in the Company, to gain control of the Company without
having to make an offer to all shareholders to acquire their shares.
The tactics employed by Thalassa to achieve this goal have included:
- stake-building by acquiring 29.8% of the Company (just below the 30%
threshold at which a mandatory offer under the Takeover Code would have been
required to be made at a price of at least 3p per share)
- announcing on 12 February that it would use its voting rights to prevent
the implementation of the current Investing Policy and would be focussing on a
revised strategy for the Company
- not providing further information about its intentions on a future
strategy for the Company despite repeated requests for this information
- serving requisitions to remove the majority of the board
- seeking to retain Timothy Hunstad as a director but making no direct
contact with him regarding his future role in the Company
Consequently, the current Board do not believe that they are being replaced (or,
in the case of Mr Hunstad, retained) for the reasons alleged in the Members'
Statement, but rather because this behaviour is consistent with the past
business conduct employed by certain public companies in which Mr Soukop was a
director to seek to take control of the direction of those companies, rather
than making an offer to acquire the remaining shares in those companies.
Your Board have always sought to make the best decisions in the interests of all
shareholders. We therefore regrettably cannot recommend the appointment of
Thalassa's nominees.
Resolutions
You will find set out at the end of this document a notice convening the
requisitioned GM to be held on 18 May 2010 at 11.00 a.m. or one hour after the
conclusion or adjournment of the AGM convened for the same day, whichever shall
be later, at Ten Dominion Street, London, EC2M 5EE. Each of the resolutions
shall be proposed as an ordinary resolution at the GM (the "Resolutions"):
1. THAT Mr Charles Duncan Soukop be and is hereby appointed as a
director of the Company with immediate effect.
2. THAT Mr Peter Redmond be and is hereby appointed as a director of the
Company with immediate effect.
3. THAT Mr Robert Porter be and is hereby appointed as a director of the
Company with immediate effect.
4. THAT Mr Michael G Reynolds be and is hereby removed from office as a
director of the Company with immediate effect.
5. THAT Mr Victor J Fryling be and is hereby removed from office as a
director of the Company with immediate effect.
6. THAT Mr Alexander S Lambie be and is hereby removed from office as a
director of the Company with immediate effect.
The Directors unanimously recommend that you vote AGAINST the Resolutions.
How to Vote on the Resolutions
Shareholders are requested to complete and return the enclosed Form of Proxy for
use at the GM in accordance with the instructions printed thereon so as to
arrive at the address printed thereon as soon as possible and in any event not
later than 3.00pm, on 14 May 2010. Completion of a Form of Proxy will not
prevent you from attending the GM and voting in person should you so wish.
If you wish to attend the meeting, please remember to bring with you to the
meeting your poll card, which is the tear off section above the form of proxy,
in order that you may use this to vote at the meeting. Blank poll cards will
also be available at the meeting.
Recommendation
The Directors unanimously recommend that you vote AGAINST the Resolutions. Each
of the Directors intends to vote AGAINST all of the Resolutions in respect of
his own beneficial holding in the Company amounting to, in aggregate 508,175
Ordinary Shares, representing approximately 0.57% of the current issued Ordinary
Share capital of the Company.
Your vote AGAINST the Resolutions is important to ensure that the Directors have
the opportunity to explore all possible strategies to create and deliver value
for all of its shareholders.
As Thalassa holds 29.8% of the shares in the Company, and Novus Capital has a
26.9% holding, the resolutions will be passed, and your Board (other than
Timothy Hunstad) will be replaced by Thalassa's nominees, if Novus Capital votes
in favour of the resolutions. Accordingly, the Board believes that it will in
fact be replaced at the GM regardless of how any other shareholders vote their
shares.
While the outcome of the GM may be a foregone conclusion, your vote against the
resolutions could however send a message to the proposed new board of your
displeasure with how Thalassa has sought to control the direction of the Company
going forward.
In any event, on behalf of each of the current members of the Board I would like
to take this opportunity to thank the vast majority of shareholders for their
genuine support and confidence they have provided to the Board.
We sincerely hope that the Company is able to generate value for all
shareholders following the GM, though unfortunately we have serious doubts that
this will be the case.
Yours faithfully
Michael G Reynolds
Chairman
Note:
This document contains certain forward-looking statements. These statements
relate to future events or future performance and reflect the Board's
expectations regarding the Company's growth, results of operations, performance
and business prospects and opportunities. Such forward-looking statements
reflect the Board's current beliefs, are based on information currently
available to the Board and are based on reasonable assumptions as of this date.
No assurance, however, can be given that the expectations will be achieved. A
number of factors could cause actual results to differ materially from the
projections, anticipated results or other expectations expressed in this
release. While the Board makes these forward-looking statements in good faith,
neither the Company, nor its Board, can guarantee that the anticipated future
results will be achieved."
This information is provided by RNS
The company news service from the London Stock Exchange
END
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