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IPSA GROUP PLC - Proposal for Disposal of Assets and Notice of General Meeting

Release Date: 02/02/2016 09:15
Code(s): IPS     PDF:  
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Proposal for Disposal of Assets and Notice of General Meeting

IPSA GROUP PLC
(Incorporated and registered in England and Wales)
(Registration Number 5496202)
AIM Share Code IPSA ISIN GB00BOCJ3F01
JSE Share Code IPS ISIN GB00BOCJ3F01
("IPSA" or "the Company")

Proposal for Disposal of Assets and Notice of General Meeting

Further to the announcement dated 28 January 2016, IPSA announces that it has
today posted a circular to shareholders of the company, outlining the rationale behind
the Disposal and calling a General Meeting of shareholders.

The General Meeting will be held at the offices of WH Ireland Limited at 24 Martin
Lane, London EC4R 0DR at 2.30 p.m. on 16 February 2016. The circular will shortly
be    made   available    for   review on the Company’s  website at
www.ipsagroup.co.uk/investors.

Proposed Disposal of Subsidiary and Related Matters
Shareholders will be aware that trading in our shares on AIM was suspended on 24
September 2015 when the Company announced that it was unable to publish its
financial statements for the year ended 31 March 2015 by 30 September 2015 as
required by AIM Rule 19 pending publication of its Annual Report and Accounts.
The Board has stated in recent announcements that the Company is dependent on
the forbearance of its creditors. Our efforts have continued to seek ways to secure
the survival of the Company for the benefit of all shareholders and I am writing to
you now to bring you up to date and to explain to you our proposals for the near
future for IPSA.

On 28 January 2016 we announced that we had conditionally agreed to sell our 100
per cent. interest in Blazeway, the company which owns our sole operating asset
in Newcastle, Kwa Zulu Natal, South Africa through its wholly owned South African
subsidiary, NewCogen, to Sloane Corporation, a privately owned company. The
sale consideration is cash of £50,000 and non-cash of £1,816,000 in the form of
the assumption of certain indebtedness of the Company equivalent in total to
consideration of £1,866,000. The Disposal, if consummated, represents a disposal
of the Company’s sole operating asset and is therefore a fundamental disposal
under AIM Rule 15, which would result in the Company being classified as an AIM
Rule 15 cash shell, which would require the Company within six months of the
Disposal to make an acquisition or acquisitions which will constitute a reverse
takeover under AIM Rule 14.

The net proceeds of the Disposal after costs will be applied in settlement of a
proportion of the Company’s current creditors. Following the Disposal, the
Company will retain some residual assets in the form of the balance of plant
associated with its former TG50D5 gas turbines which were sold to Rurelec PLC in
June 2013 and a receivable from Rurelec PLC.

The purpose of this letter is therefore to give you more information regarding the
Disposal and to seek your approval to it.
Sale of Blazeway
The Company previously announced that its working capital was extremely tight
and it has been reliant on the forbearance of its creditors and facing the possibility
that the Company may be put into administration. As a result of the failure of one
of NewCogen’s gas turbines in November 2015, the working capital and creditor
position have deteriorated still further.

Following a marketing exercise conducted by IPSA to seek a buyer of all of or a
significant interest in NewCogen, which to date has not resulted in any offer acceptable
to the Company, an unsolicited offer has been received from Sloane Corporation which
has agreed to assume responsibility for settling the majority of the Company’s creditors
with a few exceptions including Ethos. The latter has been notified that the Company
intends to honour its payment obligations through the sale of balance of plant held in
storage in Italy and from the balance of funds still owed to the Company by Rurelec
PLC.

The principal terms of the Disposal are as follows:
-   initial upfront cash consideration of £50,000 for the Company’s shares in
    Blazeway, payable on execution of the SPA, which sum will be converted to a
    loan to the Company in the event that the sale is not consummated as a result of
    any condition precedent not being satisfied;
-   Sloane Corporation has already paid a further £50,000 in satisfaction of certain of
    NewCogen’s outstanding liabilities, which sum will be converted to a loan to
    NewCogen in the event that the sale is not consummated as aforesaid;
-   Sloane Corporation has agreed to deposit on execution of the SPA the sum of
    £280,000 into escrow with the Company’s nominated adviser to be drawn down
    and used to settle creditors and obligations of NewCogen up to this amount both
    prior to and following completion of the Disposal; and
-   Sloane Corporation has formally undertaken through covenants in the SPA and
    through agreements reached with third party creditors of the Company to assume
    liability for up to £1,866,000 of existing creditors of the Company.
-   the Disposal is conditional upon:
     - requisite approval from Shareholders of the Disposal;
     - the approval of IDC under the terms of the loan agreement between
       NewCogen and IDC;
     - the formal assumption by Sloane Corporation of £1,866,000 of indebtedness of
       the Company, which assumption is subject to those creditors’ consent.

If Shareholders do not approve the Disposal, the Company and NewCogen will enter into
loan agreements with Sloane Corporation to repay all sums provided under the
arrangements described above.

As noted above, the conditional agreement to dispose of the Company’s interest in
Blazeway is subject, inter alia, to the approval by Shareholders of the resolution to that
effect which will be tabled at the forthcoming General Meeting.

Sloane Corporation is managed by Peter Earl, an experienced company director with
over twenty years’ experience in the power industry. The Directors believe that the sale
of Blazeway will preserve jobs at the operating power plant in Newcastle, which is an
area of high unemployment in South Africa.
Peter Earl, a former director of the Company, wholly owns Sloane Corporation. As
Peter Earl left the IPSA board in July 2015, the transaction will be treated as a related
party transaction under the AIM Rules. The Directors consider, having consulted with
WH Ireland Limited, the Company’s nominated adviser, that the terms of the
transaction are fair and reasonable insofar as Shareholders are concerned.

In the year ended 31 March 2014, the audited loss before tax of Blazeway was
£2,011,155 and net assets were negative £2,411,115. In the year ended 31 March
2015, the unaudited loss of Blazeway was £227,529 and the net assets were negative
£2,638,644.

In the absence of other funding solutions in the available timeframe, the Company has
concluded that the sale of Blazeway is the only way to avoid having to place NewCogen
into business rescue, which in turn would result in a likely administration for IPSA.
Whilst the financial position of IPSA will remain critical following the proposed sale as
a result of the amount owed to Ethos of approximately £3.2 million, the Company will
focus its attention in the near term on seeking to satisfy its remaining creditors from
the sale of the balance of plant and the collection of the funds owing by Rurelec PLC.

AIM Rule 15 Cash Shell
On completion of the proposed Disposal, the Company will be deemed to be an AIM
Rule 15 cash shell for the purposes of the AIM Rules and will have six months in which
to make an acquisition or acquisitions which will constitute a ‘reverse takeover’ under
AIM Rule 14.

Recommendation
The Directors consider that the Disposal is in the best interests of the Company and
Shareholders as a whole. Accordingly, the Directors recommend that you vote in
favour of the Resolution at the General Meeting as they intend to do so in respect of
their own beneficial holdings amounting in aggregate to 50,000 Ordinary Shares
representing 0.05 per cent. of issued Ordinary Shares. In addition, the Company has
received voting undertakings in support of the Resolution from Shareholders
representing a further 29.57 per cent. of the issued Ordinary Shares.


                                     DEFINITIONS

In this announcement, the following expressions shall have the following meanings,
unless the context otherwise requires:

“AIM Rules”                       the AIM Rules for Companies published from time
                                  to time by London Stock Exchange PLC;

“AIM”                             the market of that name operated by London
                                  Stock Exchange PLC;

“Blazeway”                        Blazeway Engineering Limited, a wholly owned
                                  subsidiary of the Company registered in England
                                  and Wales with registration number 05356014;

the “Board” or the “Directors”    the directors of the Company;
“Company” or “IPSA”              IPSA Group PLC, a company registered in England
                                 and Wales with number 05496202;

“Disposal”                       the proposed disposal of the Company’s interest in
                                 Blazeway to Sloane Corporation as described in
                                 this announcement document;

“Ethos”                          Ethos Energy Italia S.P.A., the major creditor of the
                                 Company;

“General Meeting”                the general meeting of Shareholders
                                 convened for 16 February 2016, notice of which
                                 is set out in the Circular, which was posted to
                                 shareholders on 1 February 2016;

“Group”                          the Company and its subsidiaries;

“IDC”                            The Industrial Development Corporation of
                                 South Africa Limited, a provider of loan finance to
                                 NewCogen;

“NewCogen”                       Newcastle Co-generation (Pty) Limited, the
                                 Company’s South African operating subsidiary
                                 owned through Blazeway;

“Ordinary Shares”                the Company’s ordinary shares of 2 pence each;

“Resolution”                     the resolution to be proposed at the General
                                 Meeting;

“Shareholders”                   holders of the Ordinary Shares;

“Sloane Corporation”             Sloane Corporation Limited, a company registered
                                 in England and Wales with registration number
                                 07518886; and

“SPA”                            the sale and purchase agreement dated 27 January
                                 2016 between IPSA and Sloane Corporation.



                 EXPECTED TIMETABLE OF PRINCIPAL EVENTS

                                                                                 2016

Posting of the Notice of General Meeting and Forms of Proxy             on 1 February

Latest time and date for receipt of Forms of Proxy          2.30 p.m. on 12 February

General Meeting of the Company                              2.30 p.m. on 16 February


ENDS
2 February 2016
                           For further information contact:

  Mark Otto, Acting CEO                             +27 (84) 219 2000
  IPSA Group PLC

  James Joyce / James Bavister                      +44 (0) 20 7220 1666
  W H Ireland Ltd

  Riaan van Heerden,                                +27 (0) 21 887 9602
  PSG Capital (Pty) Ltd.

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