Proposed Reverse Takeover, Placing and GM
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THIS ANNOUNCEMENT IS NOT AN ADMISSION DOCUMENT OR A PROSPECTUS AND DOES NOT CONSTITUTE OR FORM PART OF AN OFFER TO SELL OR ISSUE OR A SOLICITATION OF AN OFFER TO SUBSCRIBE FOR OR BUY ANY SECURITIES WHERE SUCH OFFER WOULD BREACH ANY APPLICABLE LAW OR REGULATION. INVESTORS SHOULD NOT PURCHASE OR SUBSCRIBE FOR ANY TRANSFERRABLE SECURITIES REFERRED TO IN THIS ANNOUNCEMENT EXCEPT IN COMPLIANCE WITH APPLICABLE SECURITIES LAWS. BEFORE ANY PURCHASE OR SUBSCRIPTION OF SHARES, PERSONS VIEWING THIS ANNOUNCEMENT SHOULD ENSURE THAT THEY FULLY UNDERSTAND AND ACCEPT THE RISKS WHICH ARE SET OUT HEREIN AND WILL BE SET OUT IN THE ADMISSION DOCUMENT WHEN PUBLISHED.
COPIES OF THE ADMISSION DOCUMENT WILL, FOLLOWING PUBLICATION, BE AVAILABLE DURING NORMAL BUSINESS HOURS ON ANY DAY (EXCEPT SATURDAYS, SUNDAYS AND PUBLIC HOLIDAYS) FROM THE REGISTERED OFFICE OF THE COMPANY AND ON THE COMPANY'S WEBSITE.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014.
15 July 2021
("SigmaRoc", the "Company" and, together with its subsidiaries, the "Existing Group")
Proposed Acquisition of Nordkalk Oy Ab
Proposed Placing of up to 305,882,352 new Ordinary Shares at 85 pence per share
Admission of the Enlarged Share Capital to trading on AIM
Notice of General Meeting
SigmaRoc, the AIM quoted buy-and-build construction materials group, is pleased to announce that it has conditionally agreed to acquire the entire issued capital of Nordkalk Oy Ab ("Nordkalk"), a wholly-owned subsidiary of Rettig Group Oy Ab ("Rettig Group"), for a total consideration of approximately €470 million subject to certain adjustments including in respect of cash, debt and working capital (approximately £402 million) (the "Consideration") (the "Acquisition").
The Company intends to raise approximately £260 million (before expenses) via the issue of up to 305,882,352 new ordinary shares of £0.01 each in the capital of the Company ("Ordinary Shares") at a price of 85 pence per share (the "Placing Price") (the "Placing"). The Consideration will be satisfied by a combination of €270 million (approximately £231 million) from the proceeds of the Placing, the drawdown of €150 million (approximately £128 million) under a new £305 million banking facility (the "New Facility"), and the issue of the €50 million (approximately £43 million) new Ordinary Shares to Rettig Group at the Placing Price (the "Consideration Shares"). Rettig Group has undertaken not to dispose of the Consideration Shares for a period of 12 months from the date of Admission and for the following 12 month period, they will only dispose of their holdings through Peel Hunt LLP and Liberum Capital Limited.
The Acquisition comprises a reverse takeover for the purposes of Rule 14 of the AIM Rules for Companies and as such is conditional upon, inter alia, Shareholder approval.
The Company values its retail investor base and will therefore be providing private and other investors the opportunity to participate on the same terms as other subscribers in the Placing, via the PrimaryBid platform (the "Retail Offer"). The Retail Offer is a separate offer and will launch shortly hereafter, pursuant to a separate announcement.
Nordkalk was established in 1898 as a limestone developer in Finland and has since expanded across Northern Europe to become the leading limestone company in the region. Nordkalk develops limestone-based solutions for agricultural, construction and chemical industries and its main products are crushed limestone, limestone powder, quicklime and hydrated lime. Nordkalk delivers raw materials to numerous industries, and its solutions contribute to clean air and water, as well as the productivity of agricultural land. Nordkalk is a self-sustaining profitable business, with a long-term track record, operating in stable and developed jurisdictions such as Finland, Sweden, and Poland. Nordkalk generated €67 million underlying EBITDA and €61 million net operating cash flow for the year ended 31 December 2020 and has achieved EBITDA margins in excess of 15 per cent. for the last 15 years, with an underlying FY2020 EBITDA margin of 24.2 per cent.
Further information on Nordkalk is set out in the Further Information section below.
· The Acquisition is expected to be significantly earnings enhancing in its first full year of ownership and the Consideration represents a purchase price of 7x underlying FY20 EBITDA.
· The Placing is being conducted through an accelerated bookbuild process which will be launched immediately following this announcement in accordance with the terms of conditions set out in Appendix III to this announcement. Peel Hunt LLP, Liberum Capital Limited and Numis Securities Limited are acting as joint bookrunners (the "Joint Bookrunners") to the Placing. Strand Hanson Limited is acting as Nominated and Financial Adviser to the Company.
· Use of proceeds from the Placing:
· £231 million will be used to part fund the Acquisition;
· £29 million will be utilised to provide additional working capital for the Enlarged Group and fund, inter alia, costs incurred pursuant to the Acquisition and Admission.
· Certain Directors of SigmaRoc intend to subscribe for approximately £0.64 million in aggregate of new Ordinary Shares in the Placing at the Placing Price.
· The Company has received irrevocable commitments from the Directors and irrevocable commitments or letters of intent from certain existing Shareholders in respect of, in aggregate, 171,365,452 Ordinary Shares, representing approximately 61.23 per cent. of the existing share capital, to vote in favour of Resolutions 1 and 2, and in certain cases, Resolution 5, at the General Meeting.
Benefits of the Acquisition for the Enlarged Group:
· The Board believes the Acquisition will represent the cornerstone for a new Northern Europe business platform, offering immediate scale and revenue diversification.
· Through a number of strategies, including improving Nordkalk's sales mix to focus on higher-value products and efficiency gains from planned improvement programmes, the Enlarged Group will be targeting organic revenue growth of approximately 5 per cent. per annum, EBITDA margins in excess of 20 per cent. and return on invested capital of approximately 15 per cent.
· The Enlarged Group would have a strong balance sheet with net debt expected to be less than 2x FY2021 pro forma EBITDA, with a New Facility on commercially attractive rates being provided to refinance existing debt and part fund the Acquisition led by the Company's existing supportive lender, Santander. The Company will amortise £75 million of this debt in the first four years following the Acquisition.
· The Enlarged Group would be a market-leading quarried materials group in Northern Europe, operating across six platforms, with 37 quarries and 76 operations across 13 countries, pro forma total assets of £740 million, over 1 billion tonnes of Reserves and Resources, and approximately 1,760 employees.
· The Enlarged Group would provide a diversified mix of products, supplying over 17.8Mt of material per year to customers, with 15.2Mt of both aggregates and specialist, higher value products, being supplied to mainstream applications such as construction, and 2.6Mt being supplied to specialist high margin tailored operations, such as the metals, pulp & paper and chemical industries.
· SigmaRoc has built a solid track record of acquiring and improving asset-and-reserves-backed businesses, successfully delivering both organic and external growth. This has been shown through the 10 acquisitions made over the course of the last five years, with an increase of in excess of 450 per cent. in market capitalisation and an increase in EPS of in excess of 300 per cent.
· A retained, committed Board and management team, with proven experience in the construction materials sector, including the acquisition and integration of businesses on scale, contributing significant existing knowledge to enhance Nordkalk's operations.
· Significant operational experience via the retention of Nordkalk's management team, bringing over 60 years' experience in operating and maintaining assets in the sector. Given their specialised experience, Nordkalk's management team is expected to be involved in appraising future acquisition opportunities and SigmaRoc's management will work with them to drive increased operational efficiencies which the Directors believe can be achieved.
· The Company is seeking shareholder approval to implement a Long Term Incentive Plan to ensure alignment of management and shareholders' interests. The plan will be subject to meeting EPS growth and total shareholder return criteria, with first vesting attainable following the financial year end 31 December 2023. Further information on the LTIP is set out below.
· The Enlarged Group is expected to be significantly cash generative with a targeted cash conversion ratio of approximately 95 per cent. delivered from a continued disciplined approach to working capital management, with CAPEX expected to be below depreciation, resulting in a free cash flow target for the Enlarged Group of £60 million per annum.
· The Company estimates that there are approximately 9,000 minerals producers and over 15,000 production sites located in the key countries that the Company is targeting, where there is currently a significant opportunity for consolidation and expansion of the Enlarged Group's European footprint and mineral resource base.
· The Board intends to use the free cash flow generated from the combined operations to fund further acquisitions, where the Board expects the Company to: (i) develop potential further transactions that may arise from divestments or disposals at major cement and heavy building materials companies; and (ii) pursue the acquisition of quality and niche market assets.
The Acquisition constitutes a reverse takeover of the Company pursuant to Rule 14 of the AIM Rules for Companies and completion is therefore conditional on, inter alia, the approval of Shareholders at the General Meeting and the passing of the Resolutions numbered 1 and 2 as set out in the Admission Document. It is currently anticipated that an Admission Document, including a Notice of General Meeting, will be published tomorrow on the Company's website and will be posted to Shareholders. The General Meeting will be held at 11.00 a.m. on 2 August 2021 at the offices of the Company at 56 Queen Anne Street, London W1G 8LA, United Kingdom.
In addition to shareholder approval, the Acquisition is conditional on the Company receiving the Polish Competition Office Clearance, which the Board expects to take approximately four to six weeks from filing. Consequently, investors should note that this will result in an extended settlement period with admission to trading of the of the new Ordinary Shares only occurring once the Polish Competition Office Clearance has been obtained and Acquisition completes.
The Placing Shares are not being made available to the public. The Bookbuild will be closed at the discretion of the Bookrunners.
The issue of Placing Shares to the Directors and directors of SigmaRoc's subsidiary companies will constitute a related party transaction pursuant to Rule 13 of the AIM Rules for Companies by virtue of their status as Directors of the Company.
Defined and technical terms used throughout this announcement have the meanings set out in Appendix I to this announcement unless the context requires otherwise. Appendix II to this announcement contains certain Risk Factors in relation to the Acquisition and the Enlarged Group which should be carefully considered.
Commenting on the Acquisition, Max Vermorken, CEO of SigmaRoc, said:
"The Acquisition of Nordkalk, Northern Europe's leading limestone products company, is a great stepping stone in the evolution of our group, expanding our footprint across Northern European markets. We have agreed to purchase a high-quality business at what we believe is the right point in the cycle and at an attractive valuation. The Acquisition meets all of our stringent investment criteria as a self-contained and asset-backed business, which will bring the Group significant earnings growth and cash generation. We look forward to helping Nordkalk and its experienced management team on its path to continued success, as we seek to perpetuate its 120-year history, name and success."
Commenting on the Acquisition, David Barrett, Executive Chairman of SigmaRoc, said:
"Nordkalk is a great business with a substantial asset footprint spanning across Northern Europe. It is a business with a long history of success and much future potential. This Acquisition would create numerous new opportunities for SigmaRoc to capitalise on in the months and years ahead. I am delighted with the Rettig family's commitment, agreeing to become a shareholder of SigmaRoc. This is a strong sign of confidence in the future of our Group."
Information on SigmaRoc is available on the Company's website at: www.sigmaroc.com.
For further information, please contact:
Tel: +44 (0) 207 002 1080
Strand Hanson Limited (Nominated and Financial Adviser)
James Spinney / James Dance / Rob Patrick
Tel: +44(0) 207 409 3494
Peel Hunt (Joint Bookrunner and Co-Broker)
Mike Bell / Ed Allsopp / Charlie Batten
Syndicate & Broking
Jock Maxwell Macdonald / Sohail Akbar / John Welch
Tel: +44 (0) 20 7418 8900
Liberum Capital (Joint Bookrunner and Co-Broker)
Neil Patel / Jamie Richards / Benjamin Cryer
William Hall / Cara Murphy
Tel: +44 (0) 203 100 2000
Numis Securities (Joint Bookrunner)
Tel: +44 (0) 20 7260 1000
Richard Thomas / Jamie Loughborough
Howard Seymour / Hannah Boros
Tel: +44 (0) 207 002 1080
This announcement does not constitute, or form part of, any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any securities in the United States, Canada, Australia, Japan or the Republic of South Africa or in any other jurisdiction in which such offer or solicitation is unlawful, prior to registration, exemption from registration or qualification under the securities laws of any jurisdiction. The distribution of this announcement and other information in connection with the Placing and Admission in certain jurisdictions may be restricted by law and persons into whose possession this announcement, any document or other information referred to herein comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. Neither this announcement nor any part of it nor the fact of its distribution shall form the basis of or be relied on in connection with or act as an inducement to enter into any contract or commitment whatsoever.
Strand Hanson Limited (the "Nominated Adviser"), which is authorised and regulated by the FCA in the United Kingdom, is acting as Nominated Adviser and Financial Adviser to the Company. The Nominated Adviser has not authorised the contents of, or any part of, this announcement, and no liability whatsoever is accepted by the Nominated Adviser for the accuracy of any information or opinions contained in this announcement or for the omission of any material information. The responsibilities of the Nominated Adviser as the Company's Nominated Adviser under the AIM Rules for Companies and the AIM Rules for Nominated Advisers are owed solely to London Stock Exchange plc and are not owed to the Company or to any director or shareholder of the Company or any other person, in respect of its decision to acquire shares in the capital of the Company in reliance on any part of this announcement, or otherwise
Peel Hunt LLP is authorised and regulated by the FCA in the United Kingdom and is acting exclusively for the Company and no one else in connection with the Placing, and Peel Hunt LLP will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Placing or any other matters referred to in this announcement.
Liberum Capital Limited is authorised and regulated by the FCA in the United Kingdom and is acting exclusively for the Company and no one else in connection with the Placing, Liberum Capital Limited will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Placing or any other matters referred to in this announcement.
Numis Securities Limited is authorised and regulated by the FCA in the United Kingdom and is acting exclusively for the Company and no one else in connection with the Placing, and Numis Securities Limited will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Placing or any other matters referred to in this announcement.
This Announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014, as it forms part of UK law by virtue of the European Union Withdrawal Act 2018 ("MAR"), encompassing information relating to the Proposals described above, and is disclosed in accordance with the Company's obligations under Article 17 of MAR. In addition, market soundings (as defined in MAR) were taken in respect of the Placing with the result that certain persons became aware of inside information (as defined in MAR), as permitted by MAR. This inside information is set out in this Announcement. Therefore, upon publication of this announcement, those persons that received such inside information in a market sounding are no longer in possession of such inside information relating to the Company and its securities.
This Announcement does not constitute a recommendation concerning any investor's option with respect to the Placing. Each investor or prospective investor should conduct his, her or its own investigation, analysis and evaluation of the business and data described in this Announcement and publicly available information. The price and value of securities can go down as well as up. Past performance is not a guide to future performance.
No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by the Nominated Adviser or Joint Bookrunners or by any of their respective affiliates or agents as to, or in relation to, the accuracy or completeness of this announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefor is expressly disclaimed.
This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will", or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include matters that are not historical facts. They appear in a number of places throughout this announcement and include statements regarding the directors' current intentions, beliefs or expectations concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies and the Company's markets. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual results and developments could differ materially from those expressed or implied by the forward-looking statements. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements in this announcement are based on certain factors and assumptions, including the directors' current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's operations, results of operations, growth strategy and liquidity. Whilst the directors consider these assumptions to be reasonable based upon information currently available, they may prove to be incorrect. Save as required by applicable law or regulation, the Company undertakes no obligation to release publicly the results of any revisions to any forward-looking statements in this announcement that may occur due to any change in the directors' expectations or to reflect events or circumstances after the date of this announcement.
Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this announcement.
Information to Distributors
UK Product Governance Requirements
Solely for the purposes of the UK's implementation of Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II, and in particular paragraph 3.2.7R regarding the responsibilities of UK Manufacturers under the Product Governance requirements contained within Chapter 3 of the FCA Handbook Product Intervention and Product Governance Sourcebook (the "UK Product Governance Requirements") and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the UK Product Governance Requirements) may otherwise have with respect thereto, the Placing Shares have been subject to a product approval process, which has determined that the Placing Shares are: (i) compatible with an end target market of (a) retail investors, (b) investors who meet the criteria of professional clients and (c) eligible counterparties, each as defined in UK Product Governance Requirements; and (ii) eligible for distribution through all distribution channels as are permitted by UK Product Governance Requirements (the "UK Target Market Assessment"). Notwithstanding the UK Target Market Assessment, distributors should note that: the price of the Placing Shares may decline and investors could lose all or part of their investment; the Placing Shares offer no guaranteed income and no capital protection; and an investment in the Placing Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom.
The UK Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Placing.
For the avoidance of doubt, the UK Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to, the Placing Shares.
Each distributor is responsible for undertaking its own target market assessment in respect of the Placing Shares and determining appropriate distribution channels.
EU Product Governance Requirements
Solely for the purposes of the product governance requirements contained within MiFID II and Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II (the "EU Product Governance Requirements") and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the EU Product Governance Requirements) may otherwise have with respect thereto, the Placing Shares have been subject to product approval process, which has determined that the Placing Shares are: (i) compatible with an end target market of (a) retail investors, (b) investors who meet the criteria of professional clients and (c) eligible counterparties, each as defined in EU Product Governance Requirements; and (ii) eligible for distribution through all distribution channels as are permitted by EU Product Governance Requirements (the "EU Target Market Assessment"). Notwithstanding the EU Target Market Assessment, distributors should note that: the price of the Placing Shares may decline and investors could lose all or part of their investment; the Placing Shares offer no guaranteed income and no capital protection; and an investment in the Placing Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom.
The EU Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Placing.
Furthermore, it is noted that, notwithstanding the UK Target Market Assessment and the EU Target Market Assessment, the Joint Bookrunners will only procure investors who meet the criteria of professional clients and eligible counterparties. For the avoidance of doubt, the EU Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the Placing Shares.
Each distributor is responsible for undertaking its own target market assessment in respect of the Placing Shares and determining appropriate distribution channels.
This announcement is not for publication or distribution, directly or indirectly, in or into the United States of America. This announcement is not an offer of securities for sale into the United States. The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States, except pursuant to an applicable exemption from registration. No public offering of securities is being made in the United States.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Publication of the Admission Document 16 July 2021
Latest time for receipt of proxy forms for the General Meeting 11.00 a.m. on 29 July 2021
General Meeting 11.00 a.m. on 2 August 2021
Polish Competition Office Clearance expected by Late August 2021
Expected timing for completion of the Acquisition Late August 2021
Issue of New Ordinary Shares Late August 2021
Admission and dealings commence in the Enlarged Share Capital on AIM Late August 2021
CREST accounts credited by Late August 2021
Despatch of definitive share certificates, where applicable, by within 10 business
days of Admission
Each of these times and dates is subject to change, particularly depending on the timing of the Polish Competition Office Clearance and are at the absolute discretion of the Company, the Nominated Adviser and the Joint Bookrunners. Any changes to the expected timetable will be notified by the Company through an RIS. References to times are to London, UK times.
BACKGROUND TO, AND REASONS FOR, THE PROPOSALS
At its inception in 2016, the Company set out its buy and build strategy in the construction materials sector, seeking to build a diversified stream of income, sourcing stability and growth from niche markets and sectors, presenting what the Board believed was the opportunity to build a significant Northern Europe focused construction materials business in less than five years. To date, the Company has delivered on this buy and build strategy by making 10 acquisitions over the last five years, applying a decentralised operating model, to allow maximal autonomy to its platforms, which are focused on serving the needs of niche and localised markets.
Since Admission in early 2017, the Company has delivered growth through a combination of identifying and executing suitable acquisitions at attractive valuations, generating further value through improvements in operational efficiency, synergies and cross-selling, whilst ensuring the Existing Group's gearing level was maintained at reasonable levels, thereby delivering an increase in earnings per share of over 300 per cent. over the last five years.
The Directors believe that the Acquisition represents a continuation of this model and a transformational step change for SigmaRoc, adding a new platform to create a market leading Northern European quarried materials group, providing a major entry point to attractive new end-user markets, with high value add characteristics, supplying the construction, environmental, agricultural, metals, pulp and chemical industries.
The Acquisition is expected to be significantly earnings enhancing in its first full year of ownership by SigmaRoc and the Directors believe that there is the potential for increased efficiencies in the existing Nordkalk business to further drive earnings growth as well as the opportunity to sell its products via the Existing Group's existing sales channels.
The Directors further believe that the Acquisition represents an opportunity to acquire high quality and well-managed assets, providing the Company with an additional strong operating platform and stable cash flows, from which SigmaRoc can further execute its growth strategy, both organically and via further acquisitions. This strategy is intended to see the Company grow a diversified stream of income, sourcing a combination of growth acquisitions and stable cash flows from local markets across Europe and is consistent with the Company's 'Invest, Improve, Integrate, Innovate' strategy.
INFORMATION ON NORDKALK
Nordkalk was established in 1898 as a limestone developer in Finland and has since expanded across Northern Europe to become the leading limestone company in the region. In 2020, Nordkalk employed approximately 817 people and operated 23 quarrying sites (of which four are currently dormant) in six countries. Nordkalk operates at more than 30 different locations across Finland, Sweden, Norway, Poland, Estonia, Germany and Turkey, with its main sites and the majority of its €276 million revenue in 2020 being derived from markets in Finland (49 per cent.), Sweden (23 per cent.) and Poland (22 per cent.). Nordkalk's main products are crushed limestone, limestone powder, quicklime, hydrated lime and Wollastonite.
History of Nordkalk
Nordkalk was incorporated in 1898 as a joint-stock company under the laws of Finland. Nordkalk was registered in the Finnish Trade Register on 27 November 2002.
A summary timeline of key events in Nordkalk's development is set out below:
1898 Incorporation of joint-stock company, Pargas Kalkbergs Aktiebolag ('PKA'), established in Pargas. The name was later changed to Partek. Nordkalk remained part of the Partek group until February 2003.
1907 Rettig Group acquires shares in PKA
1910 Operations begin in Lappeenranta, Finland
1980s Leading producer in the Nordic region - expansion into Sweden
1990s Leading producer around the Baltic Sea - expansion into Estonia and Poland
2000s Leading producer in Northern Europe
2003 Nordkalk becomes an independent company, owned by private equity led Capman and Ahlström Capital (26 per cent. each), with Rettig Group retaining a minority stake
2006 Capman sold its 26 per cent. stake in Nordkalk to Rettig Group and Ahlström Capital
2007 Commencement of operations at NorFraKalk joint venture in Norway
2009 Ahlström Capital sells its shareholding, with Rettig Group becoming the largest shareholder, holding approximately 49 per cent. of Nordkalk's equity alongside a group of industrial and institutional investors
2010 In August 2010, Rettig Group acquired full ownership of Nordkalk
2017 Nordkalk expands operations through Nordeka Maden joint venture in Eskibalikli, Turkey
2019 Paul Gustavsson appointed CEO, reorganisation and efficiency enhancement programme initiated
Nordkalk has demonstrated a consistent record of profitability throughout industry and economic cycles, having achieved EBITDA margins in excess of 15 per cent. for the last 15 years, with an underlying FY2020 EBITDA margin of 24.2 per cent. In 2019, Nordkalk's CEO, Paul Gustavsson joined the Nordkalk Group and implemented the NICO programme alongside longstanding CFO and Deputy CEO, Marcel Gestranius. NICO ran from Q1 2019 to Q4 2020 and was an internal performance improvement programme, driving significant improvements in efficiency and played a key role in EBITDA margin improvements from approximately 17 per cent. over 2016 to 2018, to 24.2 per cent. underlying EBITDA in 2020. Following NICO, management have introduced the '3P Programme', which focusses on improvements in Price, Production and Procurement, which is an ongoing initiative.
Summary of Nordkalk's assets
Nordkalk currently operates 19 active quarries across Finland, Sweden, Poland, Norway, Estonia and Turkey, as well as multiple associated and downstream businesses, including kilns, grinding, slaking and granulation plants (Table 1 below provides a summary of the Nordkalk Group's active operating sites by country). There are further sites that are either dormant or identified for development to expand reserves. The Nordkalk Group has estimated total Reserves of 262Mt and Resources of 577Mt across its quarrying assets and land.
Nordkalk's operations in Finland and Sweden include a series of downstream activities that utilise both raw material extracted from Nordkalk's quarries in-country and imported materials via its port and wharf infrastructure from both within and outside the Nordkalk Group. Nordkalk owns 12 wharves in Finland and Sweden and has access to over 20 ports or wharves across its operations, of which several can accommodate over 30kt DWT vessels. While the majority of product is sold in the country of production, this network enables it to transport product and materials between its operations, allowing the Nordkalk Group to provide a diverse range of products, which are tailored to a customer's quality and grading specifications and requirements. The Nordkalk Group also operates eight offices across 10 countries, including Russia, Ukraine and Lithuania, to coordinate sales and marketing.
Nordkalk also operates specialist processing facilities that produce value added products and ensure maximum use of all waste materials and flotation plants, which allow for impurity removal, leaving concentrated high value calcite products. Where possible, Nordkalk seeks to support local communities through providing water and heat derived from its operations, as well as minimising local water use by recycling process water from operations.
Table 1: summary of Nordkalk's active operating sites by country
Finland represents Nordkalk's largest country of operations, extracting over 4Mtpa of limestone and generating 49 per cent. of the Nordkalk Group's revenue in 2020. Nordkalk operates a combination of integrated and standalone sites in Finland, with two active underground and six active open pit quarries, where production levels in 2020 ranged from circa 50kt per year at its smallest quarries, up to approximately 2Mt per year at its largest sites, Lappeenranta and Parainen.
In Finland, Nordkalk's product portfolio and customer base is predominately geared towards construction, paper, agriculture, industrial and environmental applications. In 2020, sales to the construction sector accounted for approximately 65 per cent. by volume, with sales of higher margin product, predominantly to the pulp and paper industry, representing approximately 15 per cent. by volume.
Nearly all volumes produced are sold locally in Finland with an additional approximate 5 per cent. of revenues being derived via imports from other group businesses. One of the Nordkalk Group's largest customers in Finland is CRH, which is the sole producer of cement in Finland, where Nordkalk supplies its Finnsementti cement plants. Finnsementti has plant located near Nordkalk's Parainen and Lappeenranta quarries and Nordkalk supplies the raw limestone materials for cement manufacturing.
At the Nordkalk Group's sites in Finland, it operates a variety of kilns, including parallel flow regenerative kilns, long rotary kilns and shaft kilns, which are used to heat raw crushed limestone to produce quicklime, and one slaking plant (for more information on limestone processing see paragraph entitled "Limestone and the Limestone Market" below).
Nordkalk's internal estimates indicate that its quarries in Finland have total mineral Reserves of 88Mt with 223Mt of Resources subject, inter alia, to permitting. Summaries of Nordkalk's largest extractive assets in-country are set out below.
Operations at the Lappeenranta quarry commenced in 1910 and it is Nordkalk's largest production site in Finland. The site is located in the southeast of Finland and hosts deposits of the rare limestone mineral, Wollastonite, a naturally occurring white, needle-like calcium silicate mineral, which is used as a raw material in a number of applications, including producing plastics, paints and coatings, and in certain ceramic and friction materials. The operations on site include a grinding plant, two auxiliary flotation plants and a sales office. The site predominantly serves the paper industry through its SKOY joint venture and also supplies CRH's Finnsementti cement plants.
Nordkalk estimates that the mineral Reserves at Lappeenranta are 30Mt with an additional 100Mt of Resources. Lappeenranta's key products are Wollastonite, quicklime, and calcite, with the existing estimated Reserves indicating a life of quarry of approximately 15 years.
Nordkalk's Resources in the north-western corner of the Lappeenranta quarry require capital investment to strip overburden and remove storage silos. South-eastern resources are readily accessible with the possibility immediately to push back the pit rim by 100m or more, sufficient to sustain the operation for an additional five to six years and provide time to prepare the north-western corner for production. There is long-term potential indicated by the planned exploitation of 93Mt of mineral by underground mining. Whilst no feasibility engineering has been completed and permits have not yet been obtained, the Directors do not expect such underground expansion to be required for several decades given the current Reserves and more accessible Resources available at the quarry.
The average annual extraction rate at Lappeenranta is between 1.6Mtpa and 2Mtpa, which is processed through an underground crusher operation. The quarry employs approximately 65 people and generally leases its machinery with service contracts, thereby reducing capital costs and the requirement to maintain specialist mechanics and electricians for maintenance.
Nordkalk holds a 51 per cent. interest in the SKOY joint venture with Omya, which is based at Lappeenranta and uses limestone extracted from the quarrying operations to produce high specification ground calcium carbonate (GCC) material for pulp and paper, with Omya being responsible for sales, marketing, technology and research & development.
The Parainen quarry is located in the small town of Pargas on an island in the Baltic Sea to the southwest of Finland, about 15km south of Turku. The quarry commenced operations in 1898 and is a mature operation, with 10 benches having been excavated to a depth of approximately 130m below sea level. In 2020, over 2Mt quarried rock was extracted from the Parainen quarry and Nordkalk's estimated life of quarry is 18 years from estimated Reserves of 38Mt, with 7.5Mt of Resources.
The operations employ approximately 51 people and include a grinding plant and a long rotary kiln, which produce limestone, limestone powder, quicklime and aggregates for the construction, water treatment and agricultural industries. There is a port located near to site which is owned and operated by Nordkalk and Pargas is also the location of Nordkalk's headquarters, which employs approximately 66 non-operational staff and include a research and development team. Nordkalk primarily leases the operating equipment on-site with service contacts.
The Tytyri quarry is an underground operation located in the south-central town of Lohja, which is 50km west of Helsinki on the shore of Lake Lohjan. The processing facilities also draw material from the nearby Mustio quarry operated by the Nordkalk Group. The Tytyri quarry has two zones; Torma, from which rock powders for the paper industry and fillers and fertilizers are extracted, and Solhelm, where quicklime, hydrated lime and rock powders are extracted. Nordkalk estimates Tytyri and Mustio have an estimated life of quarry of 10 years from a combined 2.6Mt of Reserves, and the quarries have Resources estimated at 9.5Mt.
Nordkalk operates several other active quarries including; Vimpeli, Sipoo, and Vampula, which deliver in aggregate approximately 0.15Mtpa to local customers and operate on campaigns lasting approximately 1-2 months at a time to satisfy local demands.
The Louhi underground quarry was put into care and maintenance in 2018 due to poor profitability and would require renewal of the relevant permits to enable recommencement of operations. The Nordkalk Group also owns the Kolari and Siikainen quarries, which are non-operational.
In Sweden, Nordkalk operates a total of four active open pit mines, a quarry that is currently on care and maintenance, and two greenfield sites. The Nordkalk Group's most significant asset in Sweden is the Gotland site, which produced approximately 1.4Mt of limestone in 2020, with the other quarrying operations being relatively small. Nordkalk estimates that there are a total of 31Mt of Reserves and approximately 127Mt of Resources attributable to its Swedish operations.
Of the limestone production from Nordkalk's Swedish operations in 2020 approximately 75 per cent. of the volume is sold into the local Swedish market, with the majority of exported product being shipped to Finland from Nordkalk's network of six wharves in-country. Approximately 80 per cent. of the Nordkalk Group's produced limestone product in Sweden is sold to construction, mining, agricultural and chemical industries, with the remaining higher-margin product being supplied to industries such as pulp & paper or energy & water.
Nordkalk has a joint venture in place with Movab in which Nordkalk has a 19.5 per cent. equity stake. Movab is a market leader in Sweden for lime softening of lakes, rivers, streams and wetland, including the restoration of environments that have been historically polluted from industrial activity.
Gotland (Klinthagen and Storugns)
Nordkalk's primary extraction site in Sweden is the Klinthagen limestone open cast quarry, which is located on the north of the Swedish island of Gotland, in the Baltic Sea. The quarry is located adjacent to a processing plant and the Storugns seaport, which is also owned by Nordkalk. The operations employ approximately 66 staff (including joint venture operations) and delivers a variety of products to market, primarily segmented by size fractions.
The Klinthagen quarry has been historically extracting various grade material at approximately 1.4-1.6Mtpa, but the extraction rate is expected to reduce to approximately 0.8Mtpa from 2022 onwards, with additional volume being derived from other Nordkalk sites and sources. The Klinthagen quarry is located adjacent to the port of Storugns, which is owned and operated by Nordkalk, as well as the Kalkproduktion Storugns AB (KPAB) operations, which is a joint venture between Nordkalk (67 per cent.) and Lhoist Group (33 per cent.). KPAB produces quicklime from raw crushed limestone extracted from the Klinthagen quarry through calcination in a parallel flow regenerative kiln, which has a capacity of 500 tonnes quicklime production per day and which is predominantly sold into the steel making industry.
Following approvals being obtained in March 2021, there are currently sufficient Reserves to continue producing limestone at Gotland until 2026, with Nordkalk estimating a total of 4.85Mt limestone Reserves and 13.7Mt of limestone Resources at Klinthagen. Nordkalk has an expansion plan to obtain additional permits required to increase its Reserves and extend the life of the Klinthagen quarry to 2033-34, producing at a rate of 0.8Mtpa, which is an ongoing process. Nordkalk has also acquired greenfield sites which have Resources of 100Mt, which could materially increase Reserves on the island, however, certain environmental and technical challenges relating to use of these sites have been identified (including species protection and transport logistics).
There is currently a limited supply of the high quality (low sulphur) material required by Nordkalk's customers using its product in the steel manufacturing process, with 1.8Mt of limestone material being steel grade and the permit to access this limestone material is currently pending. In the short term, Nordkalk is sourcing steel grade product from the Verdalskalk joint venture operations in Norway (see Norway section below for more information), to supply one of KPAB's major customers in the steel industry, which has alleviated the supply pressure at the Klinthagen site while permitting is obtained. In addition, in the medium term, given its high value, steel grade limestone material can be shipped to the Storugns port from other sites to be processed, both within and outside of the Nordkalk Group's operations, such as Nordkalk's joint venture operations in Verdalskalk in Norway.
Forsby and Köping
The Forsby quarry and Köping processing operations are located in central Sweden, to the west of Stockholm on the Köping river. Nordkalk employs approximately 45 staff across its Forsby and Köping operations, operating a quarry, a grinding plant, a kiln, a slaking plant, a sales office and a wharf.
The Köping operations extract limestone from the Forsby quarry and its estimated life of quarry from 12Mt of Reserves is 78 years. The operations' end products include limestone, limestone powder, quicklime and slaked lime, which are sold primarily to the steel and paper & pulp industries, with nearly all of its products being sold locally into the Swedish market from its on-site wharf infrastructure. The limestone calcinated in the kiln is predominantly limestone derived from Nordkalk's Klinthagen quarry on Gotland and the Verdalskalk joint venture quarry in Norway. The majority of the Forsby derived limestone is used to produce aggregates and powder for local consumption.
The Uddagården quarry is located approximately 4km northeast of the town of Falköping which itself is 110km northeast of Gothenburg in southern Sweden. Nordkalk estimates a Reserve of 12Mt at the Uddagården quarry defined by the permit area, which is estimated to be sufficient for at least 90 years of production.
Nordkalk also operates the Ignaberga quarry, which employs eight people and primarily produces limestone and limestone powder, and the Orsa quarry, which is not currently operational.
In Poland, Nordkalk operates three quarries, where the primary site is the Miedzianka quarry, producing approximately 6.0Mtpa of limestone per annum, along with two smaller operations, Slawno and Wolica.
Miedzianka is located approximately 20km to the west of the city of Kielce in Poland and is comprised of the mature Ostrówka quarry and a relatively new quarry to the west, Ołowianka. Nordkalk employs approximately 162 staff at its Miedzianka operations. The Ostrówka pit has 26.3Mt fully permitted Reserves, including 6.0Mt that were recently added on the south wall following the recent relocation of the dewatering system. The Ołowianka pit has recently secured permits over an additional 8.5Mt of Reserves, providing the operation with a total of 34.8Mt of Reserves, or nearly six years of production at current rates. Nordkalk has identified several possible routes for expansion to increase Reserves and the lives of its quarrying operations at Miedzianka by accessing up to an estimated 67Mt of Resources and a total long term potential of a combined 147Mt of mineral, which are subject to obtaining the relevant permits and in some cases the acquisition of additional land and local residences, or potentially infrastructure relocation.
The limestone and aggregates products produced from the Miedzianka quarries are used in the construction, steel, glass and sugar, agriculture, and environmental industries. Miedzianka is well connected to local infrastructure, including a direct rail connection. In 2019, Nordkalk entered into a long-term partnership agreement with ArcelorMittal in Germany, whereby Nordkalk exports raw limestone material by rail from Miedzianka to one of ArcelorMittal's steel production plants, located in Eisenhüttenstadt, where Nordkalk produces high quality quicklime products for use in the steel making process through two Nordkalk operated kilns located on-site.
Wolica has Reserves of 14Mt, providing an estimated life of quarry in excess of 50 years, with 114Mt of Resources for expansion. Slawno has Reserves of 3Mt, with an estimated 10 year life of quarry and Resources of 4Mt. Wolica and Slawno employ approximately 25 and 53 staff respectively. The quarries also have downstream business activities including grinding and specialised value-added production for lime granulation, which is a specialised process that produces product suitable for sale into the fertiliser and fodder agricultural industries.
Nordkalk's operations in Poland are connected to customers and other Nordkalk operations via rail links which connect to port infrastructure at Szczecin, where Nordkalk operates a grinding plant. Over 60 per cent. of sales by volume in Poland are to the construction industry, with higher-margin sales to the agricultural industry representing approximately 7 per cent. by volume.
Nordkalk operates three quarries in Estonia, with total average extraction rates of 0.7Mtpa.
Nordkalk has an office and a production plant with grinding and a shaft kiln located in the village of Rakke in central Estonia, which processes limestone extracted from its quarry in the nearby village of Karinu. The Karinu quarry has estimated Reserves of 1.8Mt and a further 2.3Mt identified as greenfield Resources. Rakke produces ground limestone products and quicklime, with its products being sold into the agricultural, construction and environmental sectors. Nordkalk employs approximately 49 people across its Rakke and Karinu operations.
The Vasalemma quarry is located approximately 30km southwest of the capital Tallinn on a property covering approximately 355 hectares. Nordkalk estimates permitted Reserves of 12Mt with 14Mt of Resources potentially being accessible via expansion onto state owned land, which will require operating permits to be granted. The current estimated Reserves are expected to provide approximately 50 years of production.
The Kurevere quarry is located on the western side of Estonia and produces limestone. The mineralogy at the Kurevere site includes dolomite, which is typically used in refractory brisk, as a fluxing agent in blast furnaces and in pH control and gasification cleaning, due to its high magnesium content.
Kurevere's Reserves are estimated to be 8Mt within the limits of the current permits, with an additional 16Mt of Resources requiring permits to exploit. The life of quarry of the permitted open pit is estimated at 32 years with a possible expansion of an additional 99 years. The quarry employs approximately 15 people.
Norway provides Nordkalk with access to high grade and extensive minerals via the Verdal quarry, which has port side infrastructure. Nordkalk holds a 10 per cent. equity interest in the Verdalskalk joint venture, with Lhoist holding 35 per cent. and Franzefoss holding 55 per cent. The quality of the limestone material extracted from the Verdal quarry is such that it can be used in the production of high quality PCC. The quarrying operations provide Nordkalk with access to approximately 3,000Mt minerals, which can be shipped to other Nordkalk sites and is currently being transported to its Köping site for processing.
Nordkalk has a 50 per cent. interest in Norwegian joint venture company, NorFraKalk, which is 50 per cent. owned by Franzefoss, and built a circular parallel flow regenerative kiln at the Verdal site in 2007. The NorFraKalk operations process materials extracted from the Verdal quarry and produce quicklime, which is predominately used in the paper industry.
In Turkey, Nordkalk operates through a joint venture company, Nordeka Maden A.Ş., which was set up in 2017 with local company Dereli Maden Granit Maden A.Ş. The JV owns the Eskibaliki quarry in the Biga district of Çanakkale, in the province of Marmara, located in the northwest of Turkey. Since the commission of a new crushing line at the end of 2018, the quarry is able to produce up to 2.5Mtpa. Nordkalk estimates the Reserves at Eskibaliki at 75Mt with 14Mt of Resources. The quarry has historically produced approximately 0.8Mtpa which has been sold to local markets, being situated within trucking distance of a number of municipalities and only 8km from the Sea of Marmora.
Other countries of operation
Nordkalk operates small sales offices in Germany, Ukraine, Lithuania and Russia, across which it employs a total of approximately 10 staff.
The change of control of Nordkalk's Russian Subsidiary, is subject to FAS Competition Clearance, for which the Existing Group will shortly make the appropriate filings. On account of both Nordkalk's Russian Subsidiary and Nordkalk's Ukrainian Subsidiaries being wholly-owned by NK East Oy, NK East Oy will be carved out of the companies in the Nordkalk Group being acquired pursuant to the Nordkalk Share Purchase Agreement and shall instead be acquired pursuant to the NK East Share Purchase Agreement. The acquisition of NK East Oy is conditional upon receipt of the FAS Competition Clearance and shall be for a consideration of €1.
Nordkalk's Reserves and Resources
The Existing Group classifies its mineral Reserves and Resources using the PERC classification system where practicable, which follows the CRIRSCO international reporting template classification categories. Nordkalk's mineral Resources and Reserves, which are set out in Table 2 below, are classified using the United Nations Framework Classification for Resources.
UNFC is a classification tool that can be applied to the sustainable development of mineral resources, including limestone. UNFC is a principles-based system in which the products of a resource project are classified on the basis of the three fundamental criteria of environmental-socio-economic viability (E), technical feasibility (F), and degree of confidence in the estimate (G), using a numerical coding system. Combinations of these criteria create a three-dimensional system. Categories (e.g. E1, E2, E3) and, in some cases, sub-categories (e.g. E1.1) are defined for each of the three criteria.
Estimated Mineral Duration*
Average 3-year production
Reserves and Resources
Note (*): estimated mineral duration is calculated, in the first column, using the average production from the last three years applied to the aggregate Reserves and, in the second column, the sum of the Reserves and the Resources divided by the average three year production rate. These estimates are indicative only and comprise an average per country, each of which has a diverse composition of underlying sites.
Table 2: summary of Nordkalk's Reserves, Resources and estimated mineral duration of its quarries as at 31 December 2020.
CO2 Emissions, Environmental, Social and Governance
Nordkalk's kilns produce CO2 emissions predominantly through the calcination reaction. Whilst a substantial amount of CO2 produced is ultimately reabsorbed during a product's life through the process of re-carbonation, Nordkalk is required to balance its CO2 emissions from its kilns via the European Trading System. The ETS was established by the European Commission in 2005 to aide with the global decarbonisation drive. The system provides a financial incentive for companies to keep their CO2 emissions to a minimum, whereby companies are assigned Emission Unit Allowances which limit the amount of greenhouse gases they can emit. In 2020, Nordkalk's operations incurred a EUA deficit of 92kt, and this deficit is expected to increase to approximately 221kt in 2021, with Nordkalk having previously accrued credits to balance the deficit each year until 2024 based on Nordkalk's current operations. A large number of contracts with customers include a price adjustment mechanism relating to CO2 costs.
Nordkalk has prepared a roadmap to transition towards a fossil fuel free group by 2035 and achieve carbon neutral production within Nordkalk's kilns by 2045, with several measures being planned to reduce Nordkalk's carbon footprint over time. Nordkalk is ISO14001 compliant and approximately 10 per cent. of Nordkalk's products are used in sustainable and environmentally friendly applications, including environmental lime for water purification, soil decontamination and depollution, and fertiliser products. Nordkalk has allocated 145 hectares of land for protection and restoration. In addition, the residual process heat from kiln operations is applied in several installations to heating networks, providing approximately 59,000MWh in 2020, replacing the requirement for approximately 5.9 million litres of heating oil, having saved 80GWh of energy since 2015.
Nordkalk has a focus on the safety and wellbeing of its staff and are ISO18001 and 45001 accredited. Nordkalk also employs a relatively diverse workforce for the industry, with a female employee ratio of up to 23 per cent. in its various countries of operation. Wherever possible, it seeks to support local communities, with up to 76 per cent. of purchasing being conducted locally and the remainder of products being sourced as nearby as possible. Nordkalk has various facilities in place at a quarry site to produce clean ground water from quarrying operations that is then supplied to the local municipality as drinking water.
Nordkalk has established and documented structured and clear governance procedures that and are controlled through certified management systems, which are subject to external audit. The Company also is a key participating member of regional and global professional associations, including EuLA and uses a Global Reporting Initiative and United Nations Sustainable Development Group based framework, which is publicly disclosed and reviewed independently by KPMG.
LIMESTONE AND THE LIMESTONE MARKET
Limestone is a sedimentary rock composed primarily of the calcite and aragonite minerals, both of which are formed from calcium carbonate with a chemical composition of CaCO3. Calcium carbonate is a key raw material in the production of cement, concrete aggregates, quicklime and several other products. In 2020, the primary applications of limestone products in the European industries included, iron and steel (33 per cent.), construction and engineering (22 per cent.), metals and mining (12 per cent.), environmental protection (11 per cent.) and agriculture (6 per cent.).
Limestone, a carbonate rock, is predominantly a product of deposits from seawater, where it is formed by layers of minerals, fine sediment and skeletons of marine organisms being transformed through lithification. Carbonate rocks are found across every continent, having formed throughout geologic history and continuing to form through coral reefs and at the base of shallow seas. Limestone products come in the form of unprocessed limestone (crushed rocks and powder), quicklime (calcium oxide produced through calcination), slaked lime (calcium hydroxide, in powder and granulated form through hydration of lime), and other naturally occurring minerals, such as Wollastonite (calcium silicate). Following extraction from quarries, limestone ore (CaCO3) undergoes crushing and screening in order to separate the ore into different size fractions. The crushed ore can then be further treated by calcination, which comprises the thermal decomposition of the raw limestone in a kiln, leading to the removal of carbon dioxide (CO2), to produce a quicklime (CaO) product (also known as lime). Quicklime can then be hydrated (or 'slaked') by adding water and producing a calcium hydroxide or slaked lime product (Ca(OH)2).
Lime can go through a further processing stage of re-carbonation, whereby CO2 released from the calcination process is injected back into the process to create PCC. In addition, re-carbonation naturally occurs in end use quicklime products, with the level of reabsorption varying by the industry application. Quicklime used in pulp and paper reabsorbs 93 per cent. within five years and 85 per cent. in the first year following the calcination process. The construction, steel and environmental industries reabsorb approximately 92 per cent., 56 per cent. and 66 per cent. of process emitted CO2, respectively within the first five years following calcination.
Limestone is a versatile commodity, used across a broad range of industries including paper & pulp, plastics, agriculture, water treatment, construction and steel manufacturing. The construction industry, including steel making, represents the largest proportion of the use of limestone. Its use in the construction industry is vital, playing a key role in road construction, infrastructure, concrete and other building materials. Some of the key characteristics of limestone include durability, weather resistance, heat conductivity and low cost, making it an ideal base material for the construction sector.
In the iron and steel industry, limestone products are used in various forms and applications, including as a fluxing material (to promote fluidity in smelting of ores and to remove impurities), as a de-sulphurising agent (limestone reacts with sulphur to form calcium sulphide which goes into slag), coating of moulds of pig casting machines, neutralizing of acidic water, water treatment, waste water (effluent) treatment, flue gas treatment, and sludge and sewage treatment. The European iron and steel limestone industry is forecasted to grow significantly over the short to medium term, with European market volume set to increase from 195 million tonnes in 2021 to 240 million tonnes in 2026.
In the paper & pulp industry, limestone is a vital product used in the causticising cycle and paper pigmentation processes. Quicklime is used in the closed chemical circulation of a modern pulp mill, with approximately 250kg of quicklime being required to produce one tonne of pulp. The pulp industry also uses lime products (quicklime, slaked lime and limestone powder) in effluent treatment. In the paper and cardboard industries, lime-based coating pigments and fillers such as GCC (ground calcium carbonate), which is made from concentrated and fine-ground calcium carbonate, and PCC (precipitated calcium carbonate), which is made from quicklime and predominantly used as filler in fine paper such as copy paper, where brightness and opacity are important qualities. The European pulp & paper limestone industry market volume is forecasted to increase from 41 million tonnes in 2021 to 51 million tonnes in 2026.
In agriculture, limestone products are used in fertilisers to increase fertility, improving a plant's ability to absorb nutrients, and also for soil stabilisation by quickly raising pH levels in soil. Limestone fodder products, containing the high purity limestone, are used to provide a source of calcium to livestock.
Limestone has many varied applications in the treatment of water, including processing drinking water, purification of waste water and the neutralisation of industrial waste water. In drinking water and waste water treatment, lime products are used to raise the pH level of the water and to adjust alkalinity. In waste water treatment, lime is also used to precipitate phosphorus and metals and to stabilise the sludge build up. The European chemical limestone industry is forecasted to grow from 7 million tonnes in 2021 to over 9 million tonnes in 2026.
In 2020, the key product segments in the limestone market by turnover in Europe were: limestone (24 per cent.), slaked lime (21 per cent.), aggregates (20 per cent.), limestone powder (14 per cent.) and fodder (13 per cent.).
Demand for limestone is largely influenced by construction activity, most prominently in cement, building and steel manufacturing which, prior to COVID-19, was on an upward trajectory globally, predominantly due to developing countries driving to invest in their infrastructure. However, the significant supply chain disruption, labour shortages and country-wide closures of construction sites as COVID-19 restrictions were imposed to varying degrees across the world, meant that global activity in the construction industry was materially reduced.
The global limestone market is expected to grow at a CAGR of 4.4 per cent. from 2020 to 2027, reaching a market size of US$102.7 billion in 2027. This is anticipated to be driven by the economic rebound following the COVID-19 pandemic and the resumption of the trend of developing countries investing into infrastructure that was seen prior to the pandemic. The increasing urbanisation, growing disposable incomes, expanded government investment into infrastructure and improving technological advancements, are all likely to support market growth.
Over the medium term, the primary driver of demand in the limestone market is the growing need for the material in the construction industry. Rising infrastructure developments globally are expected to fuel the market. In Europe, where the value of the limestone market is forecast to expand, construction output is expected to grow 3 per cent. per annum until 2023. More specifically, the Eastern European market has a positive outlook owing to infrastructure investments aided by the provision of EU subsidies while in Germany the construction industry is expected to be worth circa US$500 billion by 2024, with projects such as the construction of the Fehmarn underwater tunnel between Germany and Denmark likely to contribute to the growth of the limestone market.
Other industries within Europe are also expecting to experience growth such as steel production which is expected to grow 4 per cent. per annum until 2025, partly because of a relaxation of restrictions on the steel market, contributing to an anticipated increased demand for limestone over the medium term. Industries such as environmental protection are anticipating CAGR of 4.8 per cent. between 2021 and 2026, driven by the environmentally friendly nature of the material which requires no toxic chemicals or glues used when producing stones made from limestone.
On the supply-side, the European market is fragmented with four lead suppliers, Lhoist, Nordkalk, Carmeuse and CRH, which supply in aggregate 8.3 per cent. of limestone products by value. The market is highly competitive with the presence of established players with recognised brand names. This combined with the current abundance of the material suggest that there should be a steady supply of the material in the medium term. However, supply in the short term is expected to be restricted as rising economic instability, surging unemployment and potential future COVID-19 related travel restrictions, which are expected to hinder the supply chain in the post-pandemic period.
Limestone prices have been relatively stable in recent years, but with limestone being a non-renewable resource as well as the gradual reduction in its storage capacity over time, it is expected that raw materials prices are likely to rise in the long term. This potential price rise over time is enhanced by the growing average haul distances and therefore associated costs as quarries, near to the large consumers of limestone such as the US, are depleted, leading to imports coming from further afield. Additional detail on the specific limestone markets in the countries and markets where Nordkalk is active are set out below.
Sweden is the largest country in Northern Europe with a land area of approximately 450,000km2. In 2020, Sweden's population was recorded at 10.3 million and the country had a GDP of US$537.61 billion. Sweden has a current credit rating of AAA, as issued by both S&P and DBRS Morningstar, which ranks it amongst the lowest risk jurisdictions for investment globally. Sweden is a member of the EU and, according to the World Bank's "Doing Business" report for 2020, the country ranked 10th out of 190 economies for ease of doing business. Sweden has an open economy, a record of facilitation of innovation and an efficient business environment coupled with one of the lowest corporate tax rates in the EU at 20.6 per cent. from 2021 onwards.
The limestone market in Sweden shows promising signs with limestone consumption expected to increase by 5.46 per cent. in 2021, with a forecast CAGR of 5.3 per cent. between 2021-2026 to €1.9 billion. The market is expected to promptly return to pre-COVID-19 levels by 2022, with a market value of US$1.6 billion.
Finland is one of the world's northernmost countries, bordering Sweden and Russia. The country is one of the most sparsely populated countries in Europe, with a population of 5.5 million in 2020 and a size of approximately 390,909km2. In 2020, Finland's GDP was US$271 billion and the country currently has a credit rating of AA+, as issued by both S&P and Fitch Ratings, illustrating a very low credit risk. Finland is a member of the EU and, according to the Global Innovation Index, Finland ranked number one out of 131 economies for the third year in a row for its business environment and, according to the World Bank's "Doing Business" report for 2020, ranked 20th out of 190 economies for ease of doing business. Finland has a transparent regulatory environment, skilled workforce and welcoming approach to foreign investment.
The limestone market's output in Finland is expected to grow at a CAGR of 4.74 per cent. between 2021 and 2026, to reach a market size of US$824 million in 2021 to 2026. This growth is significantly aided by the implementation of the Main Grid Development Plan which includes an investment of €1.2 billion and the construction of 30 new substations, 3,000km of transmission and distribution lines, and the installation of power transformers, cable towers and safety systems expected to be installed by 2025.
Poland is a country in central Europe, sharing its maritime borders with Denmark and Sweden. It is approximately 313,000km2. In 2020, Poland's population was recorded at 37.9 million, with a GDP of US$594.18 billion. Poland has a current credit rating of A-, as issued by Fitch Ratings denoting low credit risk. Poland is a member of the EU and, according to the World Bank's "Doing Business" report for 2020, the country ranked 40th out of 190 economies for ease of doing business.
As with many countries in Europe, the Polish limestone market, which experienced a CAGR of 4.3 per cent. between 2017 and 2019, was on an upward trajectory prior to COVID-19. In 2021, the limestone market, is estimated to be worth €1.7 billion. This growth was led by the construction industry, where specific sectors within construction such as the residential construction sector were seeing CAGR of 6.7 per cent. from 2015 to 2019 and the infrastructure construction sector which was estimated to be worth €13.6 billion in 2019 and had posted a CAGR of 4 per cent. from 2016 to 2019. The post-pandemic recovery is forecast to return to this positive trajectory, with Poland's construction industry projected to record a CAGR of 6.6 per cent., reaching €59.9 billion by 2024.
The Baltics comprise Estonia, Latvia and Lithuania and are bounded on the west and north by the Baltic Sea. The three countries cover an area of approximately 175,000km2 and, in 2020, had a combined population of 5.94 million. S&P's credit ratings are as follows: Estonia: AA-; Lativia: A+; Lithuania: A+.
The limestone market, although negatively impacted due to COVID-19, as much of Europe was, is not expected to suffer to the same extent as other markets in Europe. This is based on the positive underlying growth momentum prior to the pandemic as well as the less drastic lockdowns imposed by their governments. The Baltics' limestone market growth is powered by the civil engineering industry which expanded in Estonia and Lithuania by 20.2 per cent. and 23.4 per cent. in Q1 2020, respectively.
Norway has coastlines at the North Sea and the North Atlantic Ocean. It is approximately 385,208km2. In 2020, Norway's population was recorded at 5 million, with a GDP of US$363.09 billion. Norway has a current credit rating of AAA, as issued by both S&P and DBRS Morningstar, which ranks it amongst the lowest risk jurisdictions for investment globally. Norway is a member of the EEA and NATO and according to the World Bank's "Doing Business" report for 2020, the country ranked 9th out of 190 economies for ease of doing business.
Prior to the COVID-19 pandemic, Norway's limestone market was growing at a significant rate, much of which was being driven by the construction industry, which saw sales of limestone products grow at a CAGR of 4.59 per cent. from 2016 to 2019. Despite the dip in 2020 due to the COVID-19 pandemic, this growth trajectory is expected to return, with the 2021 forecasted consumption value of limestone to be US$307.54 million, an increase of 4.34 per cent. from the previous year. The need for limestone in Norway is expected to increase from 2021 onwards, facilitated by the government's focus on upgrading the country's transport infrastructure as well as their focus on renewable energy through the "green transition package" under which the government plans to spend US$7.7 billion on transport infrastructure and US$384.5 million on renewable energy infrastructure.
Summary of Nordkalk's competition
Nordkalk is a diversified and vertically integrated business operating in 10 countries in Northern Europe, with a focus on Finland, Sweden and Poland, which accounted for, in aggregate, 94 per cent. of its 2020 revenue. Nordkalk is ranked the number one limestone products producer in Finland, Norway, Poland and Sweden and is ranked in the top three for quicklime products in Estonia, Finland and Sweden. Nordkalk is estimated to have a 1.6 per cent. market share in the European limestone market.
A European Commission report notes that the majority of European limestone manufacturing enterprises are small, family-owned and operate at a local level, save for a few large companies, including Carmeuse and CRH, Lhoist and Nordkalk which are regarded as industry leaders in Europe. These four businesses were estimated in 2021 to retain an aggregate market share of 8.3 per cent., with the next eight largest companies by market share holding an aggregate 2.3 per cent. It has been reported that there is significant price competition in the limestone market.
In recent years, the European limestone industry has become more concentrated, due to an increase in mergers and acquisitions, and businesses exiting the marketplace. Furthermore, operators have noted tightening environmental protections increasing costs and administrative burden for quarrying has resulted in smaller companies struggling to operate lime production facilities competitively in the market.
Including Nordkalk, which has a market share of 1.6 per cent., the largest four companies in the European limestone market accounted for 8.3 per cent. of limestone products by value. Brief descriptions of its four largest competitors are set out below:
· Carmeuse is a family-owned company, operating primarily in the limestone and quicklime markets, which Nordkalk competes with primarily in the quicklime sector. However, its operations are more focused in Southern European countries. Carmeuse is estimated to have a 1.5 per cent. market share in the European limestone market.
· Lhoist is an international family-owned company developing limestone, dolomitic limestone and other minerals. Lhoist achieved revenue from European operations of approximately €1 billion and global revenue of €2.4 billion in 2019. Lhoist retains the largest market share (4.3 per cent.) in the European limestone market. Lhoist is Nordkalk's most significant competitor in Finland, which represents approximately half of Nordkalk's revenues.
· CRH is a public company, listed on the London and Irish Stock Exchanges. CRH is a diversified conglomerate, which achieved total revenue of US$28 billion in 2020 (of which US$9 billion was derived from Europe), and employs 76,600 people across 29 countries. It produces materials which support the manufacture and supply of aggregates, lime, cement, ready-mixed concrete, concrete products and asphalt. CRH is estimated to have a 1.0 per cent. market share in the European Limestone market and competes with Nordkalk primarily in the Polish market.
· In Sweden, Nordkalk competes primarily with SMA Mineral, a Swedish family-owned company with limestone and quicklime operations, which does not have a significant presence in the wider European market.
In the construction materials and aggregates sector more generally, the major operators, including LafargeHolcim, HeidelbergCement AG, CRH and Cemex S.A.B. de C.V., dominate the southern and western European economies, however retain significantly less presence in the Nordic and Baltic regions. There is, therefore, opportunity for the Enlarged Group to increase its wider footprint in the construction materials and aggregates sector in the Nordic and Baltic region, in markets with relatively less competition from majors.
SUMMARY FINANCIAL INFORMATION AND CURRENT TRADING OF NORDKALK
The following financial information has been extracted from the audited company accounts of Nordkalk and has been included to provide an overview of the recent trading history of Nordkalk:
Nordkalk's consolidated (IFRS)
% of revenue
Other incomes / expenses
Share of results, EAI
Depreciation & amortisation
Net working capital
In the first half of 2021, Nordkalk generated revenues of £126.5 million (€144.6 million) and EBITDA of £31.3 million (€36.0 million), representing an increase of 8 per cent. and 17 per cent. respectively over the same first half period in 2020. Nordkalk management have confirmed that the revenues and EBITDA trend remain encouraging and in-line with expectations and that margins remain strong and in-line with budgets.
PRINCIPAL TERMS AND CONDITIONS OF THE ACQUISITION
The Company has conditionally agreed to acquire the entire issued share capital of Nordkalk pursuant to the Nordkalk Share Purchase Agreement.
The Nordkalk Share Purchase Agreement is conditional upon, inter alia: (i) the passing of Resolutions 1 and 2 at the General Meeting; (ii) the Company having received the Polish Competition Office Clearance; and (iii) Admission (of both the Placing Shares and the Consideration Shares).
The Nordkalk Group which shall be transferred pursuant to the Nordkalk Share Purchase Agreement shall not include NK East Oy, which is the holding company of Nordkalk's Russian Subsidiary and Nordkalk's Ukrainian Subsidiaries.
Those subsidiaries shall be acquired by the Company pursuant to the separate NK East Share Purchase Agreement. The NK East Share Purchase Agreement shall be conditional upon the receipt of FAS Competition Clearance. Once such condition is fulfilled, the Company may purchase NK East Oy for a consideration of €1.
Accordingly, the transfer of NK East Oy (and, accordingly, Nordkalk's Russian Subsidiary and Nordkalk's Ukrainian Subsidiaries) to the Company is expected to occur following Admission.
POLISH COMPETITION OFFICE CLEARANCE AND FAS COMPETITION CLEARANCE
In addition to shareholder approval, the Acquisition is conditional on the Company receiving the Polish Competition Office Clearance, for which the Company will shortly make the necessary filings with the Polish Competition Office. The Polish Competition Office will have one month to issue a decision concerning the Company's initial filings, however the Polish Competition Authority usually asks questions in respect of submitted documentation (generally twice or more - depending on the scope of information provided and on the person who is the case handler) and such questions suspend the deadline to issue the decision. The Company has not identified any overlapping markets in Poland, therefore, the Board would expect competition clearance in Poland to take approximately four to six weeks from filing.
Furthermore, the acquisition of NK East Oy (which owns the entire issued share capital of Nordkalk's Russian Subsidiary and Nordkalk's Ukrainian Subsidiaries) pursuant to the NK East Share Purchase Agreement is conditional upon receipt by the Company of FAS Competition Clearance. The Board expects this to take up to three months, which is the maximum statutory time for FAS review.
CURRENT TRADING AND FUTURE PROSPECTS
SigmaRoc generated revenues of £84.8 million and underlying EBITDA of £14.9 million in the first half of 2021, representing a like-for-like (adjusted to include pre-acquisition results of subsequently acquired businesses) increase of 13 per cent. and 14 per cent. respectively over the same period in 2020.
Nordkalk generated revenues of £126.5 million (€144.6 million) and EBITDA of £31.3 million (€36.0 million), representing an increase of 8 per cent. and 17 per cent. respectively over the same first half period in 2020.
SigmaRoc earnings per share for the 6 month period ended 30 June 2021 is expected to be approximately 2.5 pence. Revenues and EBITDA trends remain in-line with management's expectations and the Existing Group recorded strong margins and cash generation in H1 2021.
The Directors are confident in the current business activities and future prospects of the Enlarged Group and believe that, following Acquisition, with the assistance of SigmaRoc, the existing management of Nordkalk will be able to continue their focus on maximising profitability through sales growth into higher margin value added products, production efficiencies and cost savings. The free cash flow generated from the Enlarged Group will be prioritised as follows:
(i) maintaining Adjusted Leverage Ratio at or below 2.0x on an annual basis;
(ii) de-leveraging the New Facilities; and
(iii) investing in growth CAPEX and earnings accretive M&A to increase revenue and improve EBITDA margins.
FINANCING OF THE ACQUISITION
The total Consideration payable to the Seller under the Acquisition Agreements is approximately €470 million subject to certain adjustments including in respect of cash, debt and working capital (approximately £402 million).
The Consideration will be satisfied by the Company by:
· the application of €270 million (approximately £231 million) from the proceeds of the Placing;
· the drawdown of €150 million (approximately £128 million) under the New Facility; and
· the issue of the €50 million (approximately £43 million) Consideration Shares to Rettig Group at the Placing Price.
The New Facility is being provided to the Company by several major UK and European banks, led by Banco Santander S.A. London and BNP Paribas (as arrangers), and comprises: (i) the Term Loan, which is a five year term loan of £205 million to part finance the Acquisition, refinance the Existing Facility and to pay the financing costs; and (ii) the RCF, which is a revolving credit facility of £100 million for general corporate purposes. A £100 million uncommitted accordion is applied to the RCF.
The Term Loan has a 12 month capital repayment holiday and then £4 million is repayable by the Company per quarter from September 2022, which increases to £6 million per quarter from September 2023 and £8.75 million per quarter from September 2024.
Interest will be applied on amounts drawn down under the New Facility at a rate of 2.35 per cent. over SONIA at a 1.5x to 2.0x Adjusted Leverage Ratio and 2.60 per cent. over SONIA at a 2.0x to 2.5x Adjusted Leverage Ratio.
In consideration for the New Facility, the Company and a number of its key trading entities incorporated in England and Wales, including SigmaFin Limited, shall grant first ranking debentures to Santander. A security interest agreement (which is a Jersey law equivalent of a share pledge) shall be granted over the shares that SigmaFin Limited holds in Ronez. A Belgian law-governed first ranking share pledge will be granted over the shares of the Company's various Belgian subsidiaries (including CDH) in addition to a moveable assets pledge and a mortgage over Belgian real estate, each granted by CDH Développement SA. Following completion of the Acquisition, security shall also be taken from key members of the Nordkalk Group (including, but not limited to, a Polish law governed mortgage deed over Polish real estate and a Finnish law governed security agreement over the shares in the Finnish subsidiaries).
Pursuant to the New Facility, the Company has also given certain covenants to Santander that its maximum Adjusted Leverage Ratio shall not exceed 3.5x, reducing to 3.25x in December 2022 and 3.0x in December 2023 and minimum interest cover ratio of 4.0x. It also includes a customary suite of corporate activities which would require Santander's consent.
THE RETAIL OFFER
The Retail Offer is being arranged by PrimaryBid through the PrimaryBid platform (https://primarybid.com) and the other terms and conditions of the Retail Offer will be made available to Retail Offerees on the PrimaryBid platform. The maximum amount (before expenses) which may be raised pursuant to the Retail Offer will be £6.5 million (before expenses).
The Retail Offer is conditional on the Acquisition, the Placing and Admission (and accordingly, is also conditional upon the receipt of the Polish Competition Office Clearance) and is being undertaken to facilitate potential retail participation in the Company. The Retail Shares will be issued credited as fully paid and will, when issued, rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared paid or made after Admission.
The Retail Offer Shares will be issued pursuant to separate share authorities which will be requested at the General Meeting.
The proceeds of the Retail Offer will be used for general working capital purposes by the Company.
ADOPTION OF THE LTIP
To cater for discretionary share based incentive awards to selected employees, the Company will be seeking shareholder approval (pursuant to Resolution 5 at the General Meeting) to implement the LTIP, which shall be referred to as the "SigmaRoc PLC Performance Share Plan".
Pursuant to the LTIP, the Remuneration Committee may grant awards to acquire Ordinary Shares as conditional share awards or as nil (or nominal) cost options. The Remuneration Committee may also decide to grant cash-based awards of an equivalent value to share-based awards or to satisfy share-based awards in cash, although it does not currently intend to do so. Awards shall comprise a single part unless the Remuneration Committee determines that an award shall comprise a number of distinct parts in which case each part shall be treated as if it were a separate award for the purposes of the LTIP.
Subject to Admission and shareholder approval for the LTIP, the first awards under the LTIP (the "Initial Awards") would be granted at or shortly following Admission. The Initial Awards would be granted to the Company's Executive Directors and to no fewer than three other senior employees. The Initial Awards would in aggregate be granted over up to 25,620,000 Ordinary Shares including in respect of a proposed Initial Award at the Placing Price to the Chief Executive equating to a total of 9,581,880 Ordinary Shares.
The performance vesting of 75 per cent. of each Initial Award (the "EPS Part") will be dependent on the Company's adjusted earnings per share performance for the Company's financial year ending 31 December 2023 ("EPS 2023"). No portion of the EPS Part would performance vest unless EPS 2023 is at least 6.0 pence, rising on a straight-line basis to full performance vesting of the EPS Part if the EPS 2023 is 8.0 pence or higher.
The performance vesting of the remaining 25 per cent. of each Initial Award (the "TSR Part") will be dependent on the Company's total shareholder return ("TSR") performance over a three year period commencing on Admission relative to the TSR performance over the same period of the constituents of the AIM 100 Index as at Admission. No portion of the TSR Part would performance vest unless the Company's relative TSR performance was median ranking performance for which one quarter of the TSR Part would performance vest rising on a straight line basis to full performance vesting of the TSR Part for the Company's relative TSR performance ranking upper quartile or better. The Company's starting TSR for such purposes would be determined by reference to the Placing Price and in the case of the comparator group members the three months preceding. The end TSRs for such purposes would be determined by reference to a three month averaging period ending on the last day of the three year measurement period.
Awards shall ordinarily vest on such normal vesting date specified for the award or, if later, when the Remuneration Committee determines the extent to which any performance conditions and/or additional conditions have been satisfied. The normal vesting date in respect of awards to Executive Directors shall not be earlier than the third anniversary of the grant of the award.
The Initial Awards will be granted on terms that they comprise three equal distinct parts, which would face the same performance conditions as described above but the normal vesting dates set for the Initial Awards would be that the first part had a normal vesting date of the third anniversary of Admission, the second part on the fourth anniversary of Admission and the third part on the fifth anniversary of Admission.
The extent of vesting of awards for Executive Directors will be subject to performance conditions set by the Remuneration Committee. Performance conditions may also apply in the case of awards to others but need not do so.
The Remuneration Committee may grant subsequent awards within six weeks following the Company's announcement of its financial results for any annual or six month period. The Remuneration Committee may also grant awards at any other time when it considers there to be exceptional circumstances which justify the granting of awards (for example, in the case of recruitment). An employee may not receive such subsequent awards in any financial year in respect of Ordinary Shares having a market value in excess of 150 per cent. of their annual base salary in that financial year.
In addition to the above the LTIP will also include customary terms and conditions for a performance scheme of this nature. A summary of the principal terms of the LTIP will be set out in the Admission Document.
The adoption of the LTIP and the grants thereunder will constitute a related party transaction pursuant to Rule 13 of the AIM Rules.
Conditional on Admission, Garth Palmer will be appointed to the Board as an Executive Director and he will act as Chief Financial Officer for the Enlarged Group. Dean Masefield will simultaneously step down from his position on the Board as Finance Director, but will remain with the Enlarged Group, assuming responsibility for the Existing Group's operations as Deputy CFO, covering the Enlarged Group's UK and Belgium platforms.
The Company has also commenced a search and selection process to identify an additional Non-Executive Board member and will make such an appointment within twelve months of Admission.
IRREVOCABLE UNDERTAKINGS AND LETTERS OF INTENT
The Company has received irrevocable undertakings from the Directors that they will, or will procure that the legal Shareholders will, vote in favour of the Resolutions 1 and 2 at the General Meeting in respect of 3,954,494 Ordinary Shares, representing, in aggregate, approximately 1.41 per cent. of the Existing Ordinary Shares.
In addition, the Company has also received the following irrevocable undertakings and letters of intent from certain other Shareholders to vote in favour of Resolutions 1 and 2 in respect of the following number of Ordinary Shares:
Irrevocable or letter of intent
Name of holder
Number of Ordinary Shares
Percentage of voting rights over Existing Ordinary Shares
BGF Investments LP*
Hermco Property Limited*
Letter of intent
Hargreave Hale Limited*
Letter of intent
Hanover Catalyst Fund
Letter of intent
M&G Investment Management*
Letter of intent
MI Chelverton UK Equity Growth Fund
Letter of intent
Slater Investments Ltd*
Huntress Nominees Limited*
* - denotes Shareholders that provided to the Company irrevocable undertakings or letters of intent to vote in favour of Resolution 5.
Accordingly, in aggregate, the Company has received irrevocable undertakings and letters of intent to vote in favour of Resolutions 1 and 2 in respect of 171,365,452 Ordinary Shares representing approximately 61.23 per cent. of the Existing Ordinary Shares in issue as at the date of this announcement. The Company has also received irrevocable undertakings and letters of intent to vote in favour of Resolution 5 in respect of 143,777,126 Ordinary Shares representing approximately 51.37 per cent. of the Existing Ordinary Shares in issue as at the date of this announcement.
LOCK-INS AND ORDERLY MARKET ARRANGEMENTS
The Seller has undertaken to the Company in the Nordkalk Share Purchase Agreement that it will not dispose of any interest in the Ordinary Shares held by them for a period of 12 months from the date of Admission and, for the 12 months following that period, that they will only dispose of their holdings through Peel Hunt and Liberum Capital and in such manner as they may direct so as to maintain an orderly market in the Ordinary Shares. The Company has undertaken to the Nominated Adviser and Joint Bookrunners not to give any consent or waiver, or to modify the terms of the lock-in provisions in the Nordkalk Share Purchase Agreement, without the prior consent of the Nominated Adviser and Joint Bookrunners.
In total, 50,276,521 Ordinary Shares representing 7.81 per cent. of the Enlarged Share Capital at Admission (assuming full take-up of the Retail Offer by Retail Offerees) are subject to the restrictions on disposals described in this paragraph.
APPENDIX I - DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS
"Acquisition" the proposed acquisition by the Company of the entire issued share capital of Nordkalk and certain of its outstanding shareholder loans pursuant to the Acquisition Agreements, which constitutes a reverse takeover pursuant to Rule 14 of the AIM Rules for Companies
"Acquisition Agreements" both (i) the Nordkalk Share Purchase Agreement; and (ii) the NK East Share Purchase Agreement
"Admission" the re-admission of the Enlarged Share Capital to trading on AIM becoming effective in accordance with Rule 6 of the AIM Rules for Companies
"Admission Document" the admission document which is expected to be published by SigmaRoc tomorrow in respect of the Acquisition and the Enlarged Group, pursuant to Rule 14 of the AIM Rules for Companies
"Adjusted Leverage Ratio" net debt divided by underlying EBITDA
"AIM" AIM, a market operated by the London Stock Exchange
"AIM Rules for Companies" the AIM rules for companies published by the London Stock Exchange from time to time
"Baltics" a geographical area compromising Estonia, Latvia and Lithuania and is bounded on the west and north by the Baltic Sea
"Benelux" a collective name for Belgium, the Netherlands and Luxembourg
"B-Mix" collectively, B-Mix Beton NV, J&G Overslag en Kraanbedrijf BV and Top Pomping NV
"Board" the directors of the Company
"CAGR" compound annual growth rate
"Calcinor" Calcinor, S.A.
"Carmeuse" Carmeuse Holding S.A.
"Carrières du Boulonnais" or SAS Carrières du Boulonnais, part of Groupe Carrières du
"CdB" Boulonnais (Groupe CB)
"Casters" Casters Beton NV
"CCP" CCP Building Products Limited
"CDH" or "Carrières du Hainaut" CDH Développement SA together with its wholly owned subsidiaries Carrières du Hainaut SCA and CDH International SCA
"Company" or "SigmaRoc" SigmaRoc plc, a public limited company incorporated under the laws of England and Wales with registered number 05204176, whose registered office is at 7-9 Swallow Street, London W1B 4DE, United Kingdom
"Consideration" the approximate €470 million subject to certain adjustments including in respect of cash, debt and working capital aggregate consideration for the Acquisition pursuant to the Share Purchase Agreement
"Consideration Shares" the 50,276,521 new Ordinary Shares to be issued by the Company to the Seller as part of the consideration due pursuant to the Nordkalk Share Purchase Agreement
"COVID-19" the disease caused by SARS-CoV-2, the coronavirus that emerged in December 2019
"CREST" the relevant system (as defined in the CREST Regulations) for paperless settlement of share transfers and holding shares in uncertificated form which is administered by Euroclear
"CREST Regulations" the Uncertificated Securities Regulations 2001 (S.I. 2001 No. 3755) (as amended)
"CRH" CRH plc (LON: CRH) (ISE:CRG) is an international group of diversified building materials businesses headquartered in Dublin, Ireland
"CRIRSCO" Committee for Mineral Reserves International Reporting Standards
"Directors" the directors of the Company
"EBITDA" earnings before interest, tax, depreciation and amortisation
"EEA" European Economic Area
"Enlarged Group" the Existing Group on Admission, i.e. as enlarged by the Acquisition and having acquired the Nordkalk Group
"Enlarged Share Capital" the issued Ordinary Shares upon Admission, comprising the Existing Ordinary Shares and the New Ordinary Shares
"EPS" Earnings Per Share
"ESG" environmental, social and governance
"ETS" European Trading Systems
"EU" the European Union
"EUA" Emission Unit Allowances
"EuLA" European Lime Association
"EUWA" The European Union (Withdrawal) Act 2018
"Executive Directors" the executive Directors of the Company, who are currently David Barrett, Max Vermorken and Dean Masefield and who, as at Admission, will be David Barrett, Max Vermorken and Garth Palmer
"Existing Facility" the Syndicated Senior credit facility of up to £125 million, provided by several major UK and European banks, led by Santander UK
"Existing Group" the Company and its subsidiary undertakings
"Existing Ordinary Shares" the 279,876,576 Ordinary Shares in issue
"FAS" Federal Antimonopoly Service of the Russian Federation
"FAS Competition Clearance" the approval by the FAS of the change of control of Nordkalk's Russian Subsidiary
"FCA" the Financial Conduct Authority
"Finnsementti" Finnsementti Oy, a subsidiary company of CRH
"Franzefoss" Franzefoss AS, a Norwegian construction materials group
"GD Harries" GDH (Holdings) Limited, or a subsidiary of
"GDH" Granulat du Hainaut SA
"GDP" Gross Domestic Product
"General Meeting" the general meeting of the Company to be held on 2 August 2021 at 11 a.m. at the offices of the Company at 56 Queen Anne Street, London W1G 8LA United Kingdom, the notice of which will be set out in the Admission Document
"Greenbloc" the Existing Group's cement free ultra-low carbon precast product range
"HMRC" Her Majesty's Revenue and Customs
"ISO14001" the international standard for environmental management systems, designed by the International Organisation for Standardisation (ISO)to help businesses and other organisations to reduce their environmental impact
"ISO 18001 and 45001" the international standards for health and safety management systems designed by the ISO
"Joint Bookrunners" each of Peel Hunt, Liberum Capital and Numis Securities
"KPAB" Kalkproduktion Storugns AB, a joint venture between Nordkalk (67 per cent.) and Lhoist (33 per cent.), which produces quicklime from raw crushed limestone extracted from the Klinthagen quarry
"LafargeHolcim" Holcim Ltd (SIX: HOLN) (XPAR: HOLN), operating as LafargeHolcim, a multinational producer of construction materials
"Lenders" several major UK and European banks, led by Banco Santander S.A. London and BNP Paribas (as arrangers)
"LH Agreement" the agreement between LafargeHolcim and the Company pursuant to which the Company assumed control of LafargeHolcim's quarrying operations at the Carrières du Hainaut's Belgian site
"Lhoist" Lhoist S.A., a family-owned lime, dolomite and mineral products business, headquartered in Belgium
"Liberum Capital" Liberum Capital Limited of Ropemaker Place, Level 12, 25 Ropemaker Street, London EC2Y 9LY, United Kingdom
"London Stock Exchange" London Stock Exchange plc
"LTIP" the long term incentive plan which is proposed to be adopted by the Company subject to shareholder approval, to be known as the SigmaRoc Performance Share Plan
"NATO" North Atlantic Treaty Organization
"New Facility" the new syndicated senior secured credit facilities of up to £305 million, provided by the Lenders, which comprises the Term Loan and RCF and which will replace the Existing Facility
"New Ordinary Shares" together, the Placing Shares, and the Consideration Shares and the Retail Offer Shares (if any)
"NICO programme" the "New, Inspiring, Cooperative and Open" internal performance improvement programme launched by Nordkalk in early 2019
"NK East Oy" a company in the Nordkalk Group incorporated and registered in Finland, which is the holding company of Nordkalk's Russian Subsidiary and Nordkalk's Ukrainian Subsidiaries
"Nominated Adviser" Strand Hanson Limited of 26 Mount Row London W1K 3SQ, United Kingdom
"Non-Executive Directors" the Non-Executive Directors, currently being Simon Chisholm, Jacques Emsens, Tim Hall and Garth Palmer and who, on Admission, shall be Simon Chisholm, Jacques Emsens and Tim Hall
"Nordkalk Group" Nordkalk and its subsidiary undertakings
"Nordkalk's Russian Subsidiary" OOO Nordkalk
"Nordkalk Share Purchase Agreement"
the agreement dated 15 July 2021 made between the Company and the Seller pursuant to which the Company has conditionally agreed to purchase from the Seller the entire issued share capital of Nordkalk
"Nordkalk's Ukrainian Subsidiaries" Nordkalk Ukraine TOV and NK Prykarpattya TOV
"Numis Securities" Numis Securities Limited of 10 Paternoster Square, London, EC4M 7LT, United Kingdom
"NorFraKalk" NorFraKalk SA, a Norway incorporated joint venture company equally owned by Nordkalk and Franzefoss
"Nordic" a region comprising Finland, Iceland, Norway, Denmark, Sweden, and the Faroe Islands
"Nordkalk" Nordkalk Oy Ab
"Nordkalk Group" Nordkalk and its subsidiary companies and undertakings
"Omya" Omya AG
"NK East Share Purchase Agreement" the conditional agreement between the Company and Nordkalk dated 15 July 2021, pursuant to which the Company may acquire NK East Oy for €1
"Option Plan" the option plan adopted by the Company in 2016
"Ordinary Shares" ordinary shares of £0.01 each in the capital of the Company
"Panel" the Panel on Takeovers and Mergers
"Peel Hunt" Peel Hunt LLP of 7th Floor 100 Liverpool Street, London, EC2M 2AT, United Kingdom
"PERC" Pan European Reserves and Resources Reporting Committee which administers the PERC Code
"PERC Code" the code of that name for the reporting of exploration results, mineral resources and mineral reserves and which sets out minimum standards, recommendations and guidelines for the United Kingdom, Ireland and Europe, as administered by PERC
"Placing" the conditional placing of the Placing Shares by the Joint Bookrunners at the Placing Price pursuant to the Placing Agreement
"Placing Agreement" the conditional agreement dated 15 July 2021 and made between the Company, the Nominated Adviser and the Joint Bookrunners relating to the Placing
"Placing Price" 85 pence per Placing Share or Retail Offer Share
"Placing Shares" the up to 305,882,352 new Ordinary Shares to be issued by the Company pursuant to the Placing
"Polish Competition Office" the Office of Competition and Consumer Protection in Poland
"Polish Competition Office Clearance" the clearances that SigmaRoc is required to obtain from the Polish Competition Office in order to complete the Acquisition and for Admission to occur
"Poundfield Precast" Poundfield Precast Limited
"PPG" the Existing Group's Precast Products Group platform based in the UK
"PrimaryBid" PrimaryBid Limited, a company incorporated in England and Wales with registered number 08092575
"Proposals" together, the Acquisition, the Placing and Admission
"QCA Code" the QCA Corporate Governance Code published by the Quoted Companies Alliance from time to time
"RCF" a revolving credit facility of £100 million provided by the Lenders to the Company
"Resolutions" the resolutions to be proposed at the General Meeting
"Retail Offer" the separate PrimaryBid offer of up to 7,650,000 Retail Offer Shares to be issued to Retail Offerees at the Placing Price
"Retail Offerees" PrimaryBid's clients who are resident in the UK, from whom PrimaryBid may determine to accept applications in the Retail Offer
"Retail Offer Shares" up to 7,650,000 new Ordinary Shares to be issued under the Retail Offer
"Rettig Group" Rettig Group Oy Ab
"ROIC" return on invested capital, a profitability or performance ratio that aims to measure the percentage return that a company earns on invested capital
"Ronez" Ronez Limited, the Existing Group's Channel Islands based business
"RTO Option Plan" the option plan adopted by the Company in 2016, which was conditional upon the acquisition of Ronez
"S&P" S&P Global Inc. (NYSE:SPGI)
"Santander" Banco Santander, S.A. (LON: BNC), a multinational banking group operating as Santander Group
"Santander UK" the UK branch of the Santander business
"Shareholder" a holder of Ordinary Shares
"SEDOL" Stock Exchange Daily Official List
"Seller" the sole shareholder of Nordkalk, being Rettig Group
"SigmaGSY" SigmaGSY Limited, the Existing Group's shipping business
"SKOY" Suomen Karbonaatti Oy, a joint venture company between Nordkalk (51 per cent.) and Omya Oy (49 per cent.), a subsidiary of Switzerland-based industrial minerals company Omya
"SMA Mineral" SMA Mineral AB
"SONIA" Sterling Overnight Index Average
"Stone Holdings" Stone Holdings S.A.
"Term Loan" a five year term loan of £205 million provided by the Lenders to the Company to part finance the Acquisition and to pay financing costs
"UK" the United Kingdom of Great Britain and Northern Ireland
"UK MAR" the UK version of the EU Market Abuse Regulation (596/2014) as it forms part of the retained EU law as defined in the EUWA
"UK Prospectus Regulation" the UK version of the Prospectus Regulation as it forms part of EU retained law by virtue of the EUWA
"underlying" in relation to stated financial figures, such as EBITDA, earnings per share and profit before tax, underlying figures are stated before acquisition related expenses, certain finance costs, redundancy and reorganisation costs, impairments, amortisation of acquisition intangibles and share option expense
"UNFC" United Nations Framework Classification for Resources
"Verdalskalk" Verdalskalk AS, a joint venture company incorporated in Norway, in which Nordkalk holds a 10 per cent. equity interest
"World Bank" the World Bank Group
GLOSSARY OF TECHNICAL TERMS
°C degrees Celsius
°F degrees Fahrenheit
aggregate aggregates are small rock fragments (typically 0.08mm to 80mm in diameter) of mineral origin. Aggregates come in different types: maritime, fluvial and terrestrial. They may be sand, gravel or crushed gravel. Aggregates, mixed with water and cement, are essential for the production of concrete
aragonite a carbonate mineral, one of the three most common naturally occurring crystal forms of calcium carbonate
asphalt a mixture of bitumen and mineral aggregates used in the construction of road and car park surfaces
Bluestone a high value blue coloured decorative limestone extracted from the Existing Group's CDH quarry, which has distinct characteristics and is a Global Heritage Resource
Ca(OH)2 calcium hydroxide or slaked lime, produced by adding water to quicklime
CaCO3 or calcium carbonate calcium carbonate, a substance found in sedimentary rocks such as limestone, predominately in the crystalline forms of calcite and aragonite
calcination a heating process whereby a substance is purified and, as used specifically in this announcement, the transformation of limestone to lime
calcite is a carbonate mineral and the most stable polymorph of calcium carbonate
calcium silicate a lightweight, porous, chalky material, which is used for insulation, being suitable for temperatures up to 1200°F (649°C), as an anticaking agent in food production and as an antacid
CaO or calcium oxide calcium oxide, otherwise known as quicklime or lime
CAPEX capital expenditure
CaS or calcium sulphide calcium sulphide, a substance produced in steel manufacturing when limestone reacts with sulphur, which goes into slag
causticising a reaction in which sodium carbonate in green liquor reacts with calcium hydroxide from the slaker to form sodium hydroxide and calcium carbonate
cement cement is a hydraulic bonding agent which is obtained by heating, then grinding, a mixture of limestone and clay. Most cements are made from clinker and additives and are usually used in the form of a powder. Cement sets when mixed with water. Combined with sand and aggregates (sand or gravel), it turns into rock-hard concrete or mortar
CO2 carbon dioxide
concrete concrete is a building material made by mixing water, aggregates and sand with a binding agent (usually cement) and, if necessary, with additives. This mixture is made on building sites and in factories
DWT deadweight tonnage, a measure of how much weight a ship can carry. It is the sum of the weights of cargo, fuel, fresh water, ballast water, provisions, passengers and crew
dolomite an anhydrous calcium magnesium carbonate mineral with a chemical composition of CaMg(CO3)2
E1, E2, etc. a resource product classification tool of environmental-social-economic viability, as administered by UNFC (see Mineral Reserves and Potential Reserves of Part I of the Admission Document)
F1, F2, etc. a resource product classification tool of technical viability, as administered by UNFC (see Mineral Reserves and Potential Reserves of Part I of the Admission Document)
G1, G2, etc. a resource product classification tool of confidence in an estimate, as administered by UNFC (see Mineral Reserves and Potential Reserves of Part I of the Admission Document)
GCC ground calcium carbonate
Ha a hectare is a non-SI metric unit of area equal to a square with 100-metre sides (1hm2), or 10,000m2, and is primarily used in the measurement of land
H2O the chemical formula for water
igneous rock a rock that has formed through the cooling and solidification of magma or lava
kt thousand tonnes
ktpa thousand tonnes per annum
licence, lease or permit any form of licence, permit, lease or other entitlement granted by the relevant Government department in accordance with its mining legislation that confers on the holder certain rights to explore for and/or extract minerals that might be contained in the land, or ownership title that may prove ownership of the minerals
lime or quicklime a limestone product with the chemical formula CaO, produced by heating limestone at high temperatures in kilns, which has a range of uses, including in the production of iron and steel, paper and pulp production, treatment of water and flue gases and in the mining industry
limestone is a sedimentary rock composed primarily of the calcite and aragonite minerals, both of which are formed from calcium carbonate
Mt million tonnes
Mtpa million tonnes per annum
MWh megawatt-hour, a unit for measuring power that is equal to 1,000 kilowatts of electricity being used continuously for one hour
PCC precipitated calcium carbonate
pH a logarithmic scale used to measure of how acidic/basic a solution is. The pH scale ranges from 0 to 14, with 7 being neutral. pHs of less than 7 indicate acidity, whereas a pH of greater than 7 indicates a base
slag the silicon dioxide and metal oxide mixture left over as a by-product of extracting metal from its ore during the smelting process
slaking the process of adding water to calcium oxide (quicklime) to produce calcium hydroxide (slaked lime or hydrated lime)
Reserves in the case of Nordkalk, the estimate of reserves which represents a 'commercial project' pursuant to the UNFC classification system, where the relevant permitting has been approved and the E1, F1 and G1 or G2 criteria under UNFC are met. In the case of the Existing Group, Reserves represent the estimate of the part of a Resource that has more certainty and considers non geological factors such as permitting, feasibility assessments, social and environmental factors, and also factors diluting materials and allowances for losses, which may occur when the material is mined or extracted
Resources a concentration or occurrence of solid material of economic interest in or on the Earth's crust in such form, grade or quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade or quality, continuity and other geological characteristics are known, estimated or interpreted from specific geological evidence and knowledge, including sampling. In the case of Nordkalk, Resource estimates represent the estimate of potential reserves where the E2, F2 and G1, G2 or G3 criteria under UNFC classification are met. In the case of the Existing Group, Resources represent the estimate of the potentially viable mineable minerals
tpa tonnes per annum
tph tonnes per hour
wharves plural of wharf, a structure on the shore of a harbour or on the bank of a river or canal where ships may dock to load and unload cargo or passengers
Wollastonite a naturally occurring mineral which is a chemical combination of calcium, silicon and oxygen. It is formed when limestone, or other high-calcium rocks, undergo high temperature and pressure changes sometimes in the presence of silica-bearing fluids such as in skarns or contact metamorphic rocks
APPENDIX II - RISK FACTORS
Investing in and holding Ordinary Shares involves financial risk. Prospective investors in the Ordinary Shares should carefully review all of the information contained in the Admission Document and should pay particular attention to the following risks associated with an investment in the Ordinary Shares, the Enlarged Group's business and the industry in which it participates prior to making an investment decision.
The risk factors set out below, which are not set out in any order of priority, apply to the Enlarged Group as at the date of this announcement.
The risks and uncertainties described below are not an exhaustive list, are not set out in any order of priority and do not necessarily comprise all, or explain all, of the risks associated with the Enlarged Group and the industry in which it participates or an investment in the Ordinary Shares. They comprise the material risks and uncertainties in this regard that are known to the Existing Group and should be used as guidance only. Additional risks and uncertainties relating to the Enlarged Group and/or the Ordinary Shares that are not currently known to the Existing Group, or which the Existing Group currently deems immaterial, may arise or become (individually or collectively) material in the future, and may have a material adverse effect on the Enlarged Group's business, results of operations, financial condition and prospects. If any such risk or risks should occur, the price of the Ordinary Shares may decline and investors could lose part or all of their investment. There can be no certainty that the Enlarged Group will be able to implement successfully its growth strategy as is detailed in this document. No representation is or can be made as to the future performance of the Enlarged Group and there can be no assurance that the Enlarged Group will achieve its objectives.
Prospective investors should consider carefully whether an investment in the Ordinary Shares is suitable for them in the light of the information in the Admission Document and their personal circumstances. Prospective investors should consult a legal adviser, an independent financial adviser or a tax adviser for legal, financial or tax advice if they do not understand any part of the Admission Document.
RISKS RELATING TO THE ACQUISITION
Conditions to the Acquisition Agreements, including the Polish Competition Office Clearance and FAS Competition Clearance
The Acquisition as a whole is conditional upon, amongst other things, the successful completion of the Placing, the Resolutions numbered 1 and 2 being passed at the General Meeting, the Polish Competition Office Clearance and Admission. There can be no assurance that this condition and the other conditions to the Nordkalk Share Purchase Agreement (summarised in Part II of the Admission Document) will be satisfied and that the Acquisition will complete by the long stop date, or at all.
In addition to Shareholder approval, the Acquisition is conditional on the Company receiving the Polish Competition Office Clearance, for which the Company will shortly make the necessary filings with the Polish Competition Office. The Polish Competition Office will have four weeks to issue a decision concerning the Company's initial filings, however as the Polish Competition Authority usually asks questions in relation to the submitted documentation and such questions suspend the deadline to issue the decision, the Board has received advice and would expect competition clearance in Poland to take approximately four to six weeks from filing (in the event that there are no overlapping markets). There is no guarantee that the Polish Competition Office Clearance will be forthcoming or be granted.
Furthermore, the acquisition by the Company of NK East Oy (which owns the entire issued share capital of Nordkalk's Russian Subsidiary and Nordkalk's Ukrainian Subsidiaries) pursuant to the NK East Share Purchase Agreement is subject to and conditional upon FAS Competition Clearance being granted. If it is not granted, the Company will have the right to ask for a carve-out of Nordkalk's Russian Subsidiary form NK East Oy to complete the transaction. If any of the conditions to the Nordkalk Share Purchase Agreement are not satisfied by the Long Stop Date being 31 December 2021, the Acquisition will lapse, neither the Acquisition nor the Placing will complete and Admission of the Enlarged Share Capital will not occur.
If any of the conditions to the NK East Share Purchase Agreement are not satisfied by the Long Stop Date being 30 June 2022 the Company will not acquire NK East Oy.
The Company will have spent significant amount of time and money on fees which will not be recoverable.
There are limitations to the protection afforded to the Company pursuant to the warranties and indemnities contained in the Acquisition Agreements
Warranties and indemnities under the Nordkalk Share Purchase Agreement are subject to stringent limitations and are limited in scope (as will be described in detail in Part II of the Admission Document). Warranty and indemnity insurance has been obtained by the Company from RiskPoint in order to minimise the risks associated with as many of the aforementioned limitations as can be covered. The warranty and indemnity policy is subject to certain limitations including an overall limitation of liability of €125,000,000, a retention of €1,500,000 and individual claims limitations of €500,000 in respect of general warranties, other than tax warranties which are subject to an individual limitation of €250,000. The policy also contains time limitations of 36 months to bring a claim in respect of general warranties and 84 months for tax and fundamental warranties. Fundamental warranties are capped at the sale price with the first €125,000,000 covered under the W&I policy and the remainder being given by the Rettig group for 84 months. However, the warranty and indemnity policy includes certain exclusions in respect of warranties and areas that the Company will not be insured against, including pensions underfunding and the pensions indemnity (save in respect of the Nordkalk defined contribution scheme, further details of which are summarised below). As a result, the Company and may be exposed under certain circumstances.
Should all relevant breaches fall below the retention amount for the insurance or should individual claims fall beneath the de minimis levels noted above or should such breaches be excluded from the coverage in the policy, the liability in relation to such breaches will sit with the Existing Group. Accordingly, the Company may incur substantial losses if a warranty breach occurs or a matter arises which is subject to indemnity and which is not fully covered by insurance or due to the occurrence of other matters not protected by warranties and indemnities under the Acquisition Agreement, which could have a material adverse effect on the Enlarged Group's business results of operations and financial condition.
As stated above, the terms of the insurance will not cover pension underfunding or a claim under the pensions indemnity contained in the Nordkalk Share Purchase Agreement (save in respect of the Nordkalk defined contribution scheme). The Company has investigated Nordkalk's pension arrangements as part of its due diligence. The Company is not aware of any short falls or additional liabilities, although it cannot guarantee that this is the case and the Company is reliant on the accuracy of the information provided to it by Nordkalk. Information on Nordkalk's arrangements in Norway have not been provided. The arrangements vary depending on jurisdiction and a brief overview is as follows:
Nordkalk has no pension plan in Estonia and therefore, the public health and pension insurance scheme applies. Social tax of 33 per cent. must be paid by an employer on all salary related payments the employer makes to its employees. An amount of social tax of 33 per cent consists of a public pension scheme contribution of 20 per cent. and of a public health insurance contribution of 13 per cent. There is also an additional public pension scheme available. The additional public scheme is funded by two contributions: a contribution of 2 per cent is withheld from all salary related payments the employer makes to the employee and a contribution of 4 per cent is provided by the state. The contribution of 4 per cent by the state decreases the public pension scheme contribution of 20 per cent to 16 per cent. An employer is not required to separately to contribute to the additional public pension scheme. Individuals may substitute accession to the additional public pension scheme with investments at the specific bank account with the purpose of pension investments.
All employees are covered by statutory pension insurance in accordance with the Employees Pensions Act (395/2006, as amended), which is a defined benefit scheme. The contribution percentages are defined yearly. In 2021, employees were required to contribute 7.15 per cent. of their salary (under 53 and over 62 years) or 8.65 per cent. (between 53 and 62 years). Nordkalk's contribution is approximately 17 per cent. in accordance with the law.
Nordkalk also operates a defined contribution scheme for approximately 5 persons, being current and former management based in Finland. The employees' contributions are decided yearly, being approximately one month's salary and Nordkalk's contribution is approximately 20 per cent. of the employee's contribution.
Nordkalk Sp maintains two pension schemes for its employees: (1) an Employee Capital Plan (PPK), which is a mandatory scheme allowing additional retirement savings; Nordkalk Sp maintains the plan under statutory rules, providing a minimum statutory contribution financed by the employer (1.5 per cent. of gross remuneration) and contribution financed by the participant (2 per cent. of gross remuneration). No additional contributions are financed by the employer; (2) an Employee Pension Plans (PPE) which is an additional scheme allowing additional retirement savings; Nordkalk Sp contributes PLN 100 (approximately €22) per month per each employee.
In Sweden, pensions are defined through collective agreements. The ITP pension plan (for white-collar workers) and the SAF-LO pension plan (for blue-collar workers) apply to Nordkalk AB, pursuant to the collective bargaining agreements in place. All employees are covered by these pension plans except the CEO who has a separate, defined contributions plan where he receives pension contributions of 15 per cent. of his salary.
No information on pensions in Norway have been provided by Nordkalk.
The due diligence carried out in respect of Nordkalk and the Enlarged Group may not have revealed all relevant facts or uncovered significant liabilities
While the Company conducted due diligence, such as legal, tax, financial and technical, in respect of the Acquisition with the objective of identifying any material issues that may affect its decision to proceed with the Acquisition, there can be no assurance that all such issues have been identified. The Company also used information revealed during the due diligence process to formulate its business and operational planning. During the due diligence process, the Company is only able to rely on the information that was made available to it. Any information that was provided or obtained from available sources may not have been accurate at the time of delivery and/or remained accurate during the due diligence process and in the run-up to the Acquisition. Whilst the Company is of the opinion that sufficient information has been made available for its purposes based upon its current knowledge of the Nordkalk Group, there can be no assurance that the due diligence undertaken was adequate or accurate or revealed all relevant facts or uncovered all significant liabilities. If the due diligence investigation failed to identify key information in respect of the Nordkalk Group, or if the Company considered certain material risks to be commercially acceptable, the Company may be forced to write-down or write-off assets in respect of the Nordkalk Group, which may have a material adverse effect on the Enlarged Group's business, financial condition or results of operations. In addition, following the Acquisition, the Company may be subject to significant, previously undisclosed liabilities in respect of the Nordkalk Group that were not known or identified during due diligence and which could have a material adverse effect on the Enlarged Group's business, financial condition and results of operations. In addition, whilst the Company's technical advisers were able to visit Nordkalk's major sites of operation, given COVID-19 related restrictions, it was not possible to complete site visits to all of Nordkalk's assets.
In particular, information relating to the joint ventures to which members of the Nordkalk Group are a party has been difficult to ascertain, due to restricted information rights and existing confidentiality restrictions in the joint venture arrangements which the relevant Nordkalk entity is subject to. The Board considers the risks in relation to this relatively minor in the context of the Enlarged Group.
Furthermore, as is customary when investigating companies for the purposes of an acquisition, as part of its due diligence the Company has uncovered a variety of matters in the Nordkalk Group which could be improved upon (which span a variety of areas including but not limited to employment, property, land title registration, competition, data protection and IP protection). The Company and the Board assess these matters as minor in the context of the Acquisition and their intention is to address these post Admission to the extent it is considered prudent to do so in the context of the Enlarged Group.
Whilst the Company has received a form of contractual comfort pursuant to the warranties and indemnities contained in the Nordkalk Share Purchase Agreement and has certain protections under the warranty and indemnity insurance, there is no guarantee that such arrangements will provide adequate compensation for the Company for any loss or liability arising from any undisclosed liabilities, issues or defects that may arise in relation to Nordkalk. Further the warranty and indemnity insurance does not cover any issues in relation to the title to shares of Nordkalk. Nor is there any guarantee that any loss or liability incurred is capable of being recovered in full under the terms of the insurance policy. This could have a material adverse effect on the financial position of the Enlarged Group.
Nordkalk's results may not match the Board's expectations
If the results and cash flows generated by Nordkalk are not in line with the Company's expectations, it may materially impact on the financial performance of the Enlarged Group which could have an adverse effect on the Enlarged Group's financial position and share price. In addition, any goodwill that arises on the Acquisition may be required to be written down, which, while having no cash impact, could have an adverse effect on the Enlarged Group's financial position and share price.
There can be no assurance that the Enlarged Group will realise the anticipated benefits of the Acquisition
The Enlarged Group may not realise the anticipated benefits from the Acquisition or may encounter difficulties in achieving the anticipated benefits. The Enlarged Group is subject to all of the risks set forth in this "Risk Factors" section which may impact the Enlarged Group's ability to realise the benefits its Directors believe will result from the Acquisition. In addition, if the future financial performance and cash flows generated by the Enlarged Group are not in line with the Directors' expectations, or the mineral resource is not of the quality, or is not present in the volumes that the Directors expect, it may significantly affect the financial performance of the Enlarged Group. This could reduce the potential benefits arising from the Acquisition, adversely affect the market price of the Ordinary Shares, or have a material adverse effect on the Enlarged Group's business, financial condition, operating results and prospects.
Written agreements between Nordkalk and key customers and key suppliers are lacking and several material agreements between Nordkalk and key suppliers have expired
Certain material suppliers of Nordkalk, including those in the top 20 suppliers for 2020 and 2021 to date, are supplying Nordkalk without legally binding written agreements. Whilst these suppliers have been operating in this way for some time, there is a risk that in the absence of written terms there may be disagreements as to the terms of supply or the supply may be terminated or discontinued without notice. In addition, certain agreements with key suppliers and customers have expired. It has been confirmed by Nordkalk that deliveries have continued on the basis of the customer's or supplier's terms under the expired agreements and that extension negotiations would usually take place approximately three months before the end of the contractual term. However, there is a risk that any such extension may not be capable of being agreed and as such the relevant supplier or customer may no longer be legally bound to perform their obligations under the relevant agreement. Following completion of the Acquisition, the Company will be taking steps to seek to ensure that all key suppliers and customers are legally bound by written agreements.
Nordkalk AB is involved in a major dispute with the Swedish state
Nordkalk AB, Nordkalk's main operating subsidiary in Sweden, is involved in a dispute with the Swedish state as claimant, in which Nordkalk AB has claimed damages from the Swedish state in the amount of SEK 2,368,379,000 (approximately £198 million).
On 1 April 2020, Nordkalk AB filed a claim for compensation for economic loss due to land use restrictions as a result of the Swedish government's designation of a piece of land as environmentally protected pursuant to a Natura 2000 decision (Nacka District Court case no. M2296-20). The counterparty is the Swedish State, which is represented by the Legal, Financial and Public Procurement Agency.
In June 2014, Nordkalk AB was granted a permit for limestone quarrying on the company-owned property known as Bunge Ducker 1:64 (case no. M 366-13) by the Land and Environmental Court. The permit allowed a maximum quarrying of 2.5Mtpa of limestone until the limestone deposit on the property ends, which was expected to take about 25 years. The permit decision was appealed. On 31 August 2015, before the Land and Environmental Court of Appeal had ruled in the appealed case, the Government designated Bunge Ducker 1:64 (including the limestone deposit) as a Natura 2000 area. Within a Natura 2000 area, biodiversity is considered worthy of protection and no environmentally damaging interventions can be made. In a judgment on 11 September 2018, the Land and Environment Court of Appeal revoked the June 2014 permit with direct reference to the fact that the alleged limestone quarry now was designated as a Natura 2000 area according to the Government decision. Nordkalk AB appealed to the Supreme Court which, in a decision on 1 April 2019, refused leave to appeal and the Land and Environmental Court of Appeal's judgment gained legal force. The case is ongoing. Depending on the duration and outcome, legal costs may be incurred in making the claim. Although it is usual for each party in litigation to bear its own costs, Swedish case law has precedent to support that in cases such as this, the State may be responsible for Nordkalk's costs, albeit this is at the determination of the court. Notwithstanding this, it is a term of the Nordkalk Share Purchase Agreement that the costs of the litigation will be split 30:70 (SigmaRoc : the Seller) and any award or damages granted by the court will be split in the same proportions. In the event that the Company wishes to withdraw from the claim it is agreed that the Company shall have no right to any awards or damages which will be for the Seller only. In the event that the Company wishes to withdraw from the claim and does not grant the Seller consent to continue with proceedings on its own, the Company shall pay to Seller a fee equal to €3,500,000 (from which amount any proceeds already paid to the Seller from divestments of Idle Gotland Plots shall be deducted).
There are inherent environmental risks in the sector that the Enlarged Group operates
Quarrying operations have inherent risks and liabilities associated with damage to the environment and the disposal of waste products occurring as a result of exploration and production. Environmental and safety legislation and regulation (e.g. in relation to reclamation, disposal of waste products, pollution and protection of the environment, protection of wildlife and otherwise relating to environmental protection) is frequently changing and is generally becoming more restrictive with a heightened degree of responsibility for companies and their directors and employees and more stringent enforcement of existing laws and regulations. Future changes (which may include additional areas being protected pursuant to a Natura 2000 designation) could impose significant costs and burdens on the Enlarged Group (the extent of which cannot be predicted) both in terms of compliance and potential penalties, liabilities and remediation. Investor sentiment may also change and there is a risk that investors turn away from sectors which have potentially negative environmental impacts. Breach of any environmental obligations could result in penalties and civil liabilities and/or suspension of operations, any of which could adversely affect the Enlarged Group. Further, approval may be required for any material plant modifications or additional land clearing and for ground disturbing activities. Delays in obtaining such approvals could result in the delay to anticipated exploration programmes or mining activities.
The Enlarged Group will need to apply for new permits to maintain or increase the level of future production at several of its sites of operation, where the permitting application processes may be adversely affected or ultimately fail due to environmental concerns, including protected species and complaints from local inhabitants. Any environmental issues encountered will likely increase the expense and timeline for the permitting process and decrease the ultimate likelihood of success. In particular, the Klinthagen mine (located on Gotland, Sweden) is nearing the end of its current Reserves, and Nordkalk has already encountered difficulties obtaining permits for land on Gotland due to environmental issues.
There may also be unforeseen environmental liabilities resulting from quarrying activities, which may be costly to remedy. If the Enlarged Group is unable to fully remedy an environmental problem, it may be required to stop or suspend relevant operations or enter into interim compliance measures pending completion of the required remedy. The potential exposure may be significant and could have a material adverse effect on the Enlarged Group. The Enlarged Group is currently evaluating the costs of insurance for environmental risks (including potential liability for pollution or other hazards as a result of the disposal of waste products occurring from production).
Whilst the Company has carried out appropriate legal, financial and technical due diligence on Nordkalk, it has not been able to fully assess certain aspects of the Nordkalk business, or visit every site of operation, including a full assessment of Nordkalk's compliance with applicable environmental laws and regulations or visit every site of operation. Whilst appropriate warranties and other comfort, where possible, has been sought from the Sellers in the Acquisition Agreement, there can be no guarantee that Nordkalk is not later found to be in breach of applicable law and regulation and may be requested to remedy any such breaches at its own cost or else may incur additional liabilities (including fines and censures) in respect of the same.
In particular, a number of sites in Sweden have been registered as contaminated properties in the national register of contaminated properties, including the Storugns and Köping ports and there is therefore a potential financial liability attached to this registration. In Sweden, registration is automatic for any site with operations that contaminate or could potentially contaminate the land.
Environmental hazards may exist on the properties in which the Enlarged Group holds interests that are unknown to the Company and that have been caused by previous or existing owners or operators of the properties. To the extent the Enlarged Group is subject to environmental liabilities, the payment of any liabilities or the costs that may be incurred to remedy environmental impacts would reduce funds otherwise available for operations. However, compensation can often be claimed from previous landowners if they were the polluters.
Certain financing arrangements are subject to change of control provisions
Certain of the financing arrangements which have been entered into by members of the Nordkalk Group contain change of control clauses which will require the consent of the third party or otherwise permit unilateral termination. To the extent that the Company wishes to keep these financing arrangements in place following completion of the Acquisition, the Company will require the consent of third parties, which may not be forthcoming.
There is a put option in NKD Holding Oy's Shareholders' Agreement
The shareholders' agreement relating to NKD Holding Oy, details of which are contained in paragraph 16.2(b) of Part VI of this document contain a put option on Nordkalk. At any time after 12 October 2032 (being the fifteenth anniversary of the agreement's effective date of 12 October 2017) NKD Holding Oy's other shareholder, an Estonian company named Debalma OÜ (which holds 49 per cent. of the issued share capital of NKD Holding Oy) has the right to demand that Nordkalk acquires the shares in NKD Holding Oy owned by Debalma OÜ, at an option price which will be calculated based on the mechanism included in the NKD Holding Oy's Shareholders' Agreement.
Land owned by the Nordkalk Group may be adversely impacted by the construction of a motorway in Poland
The Polish government is planning to construct a motorway in Poland (the S12 motorway) which may impact the northern part of the Slawno deposit. The Company has been able to ascertain from due diligence that Nordkalk owns two plots of land and is intending to buy further plots (and extend a mining permit), which may be impacted by the construction of the S12 motorway. The construction of the motorway may involve the expropriation of Nordkalk's land, thereby impacting the ability of this site to operate. The construction may also provide an opportunity for the Enlarged Group to provide the materials for the construction.
Nordkalk is currently in a dispute with a third party regarding certain patents
Nordkalk is currently in a dispute with a third party relating to the use of a number of patents relating to machinery used to produce a specific product. The third party alleges that the patents are based upon technology derived from the third party and is willing to file for an invalidation of the patents in question. The Company understands that Nordkalk disputes this claim and the use of the patent is subject to ongoing negotiations between the parties. Whilst the Company assesses this to be a minor matter, it may be forced to spend fees and resources on defending any claim (should a formal claim be instigated) and there can be no guarantee that it would be successful in doing so. Should the patents in question be invalidated, competitors and other third parties would be able to use the technology freely and therefore manufacture or produce similar or competing products.
RISKS RELATING TO THE ENLARGED GROUP AND ITS BUSINESS
Mineral Resource and Mineral Reserve estimates and Nordkalk's use of the United Nations Framework Classification (UNFC) Mineral Resource and Mineral Reserve categorisation
In addition to the above, the Enlarged Group's reported Resources are estimates based on external geologist review of sites and geological data and consider a range of assumptions. In addition, Resource estimates can be based on limited sampling and consequently may be uncertain because the samples may not be representative. There are numerous uncertainties inherent in estimating Resources and Reserves, including factors beyond the control of the Enlarged Group. The estimation of Resources is a subjective process and the accuracy of any such estimates is a function of the quality of available data and of engineering and geological interpretation and judgment. Results of drilling, material testing, production, evaluation of mine plans and exploration activities subsequent to the date of any estimate may justify revision (up or down) of such estimates. There is no assurance that the entirety of the Resources can be economically quarried. Mineral Reserves have more certainty and consider non geological factors such as permitting, feasibility assessments, yield, social and environmental factors. Lower market prices, increased production costs, reduced recovery rates and other factors may render parts of the Enlarged Group's Resources unviable to exploit and may result in revision of its estimates from time to time. Reserve data is not indicative of future results of operations. If in the future, the Enlarged Group's actual Resources and Reserves prove to be less than the current estimates, other than as a result of depletion through production, the Enlarged Group's results of operations and financial condition may be materially and adversely affected. The Company and the Directors cannot give any assurance that the estimated Reserves will be recovered as the Enlarged Group proceeds through production or that they will be recovered at the volume, grade and rates estimated.
Furthermore, Nordkalk uses the United Nations Framework Classification (UNFC) mineral Resource and mineral Reserve categorisation and reporting standard over the more commonly-used Committee for Mineral Reserves International Reporting Standards (CRIRSCO) based disclosure standard for mineral Resource and mineral Reserve estimates. The UNFC is a public domain standard that has gained traction with European governments. The UNFC is typically used for public reporting of national mineral inventories and as a generic classification framework. If estimates of mineral Reserves and mineral Resources are to be re-classified using the more technically detailed CRIRSCO standard in the future, revised modelling and planning will be required and may affect the assessment of the minerals which may result in the downward adjustment of available mineral Reserves. Nordkalk is reliant on mineral Reserves to extract limestone and any reduction to Reserves is likely to reduce the economic life of a quarry until such time as additional Reserves can be accessed, which could materially impact the longevity of the Enlarged Group's operations at quarrying sites where there is a low level of Reserves and significant planned extraction rates.
The operations of the Enlarged Group require planning permission permits and licences
The operations of the Enlarged Group require licences, permits and in some cases renewals of existing licences and permits from various governmental authorities. They also require appropriate planning permissions to apply to the area of the Enlarged Group's operations. Planning consents are required in order to extract the Enlarged Group's mineral reserves and build and update the construction and operation of concrete and asphalt plants. Planning applications can take years to be determined and, consequently, planning permissions can be costly to obtain and may ultimately not be successful. The granting of planning permissions normally attaches conditions on operating hours, emissions, discharges, restoration etc. They can be subject to appeal from both national and local lobby groups and ultimately to the public enquiry. There are risks that applications are unsuccessful or are delayed at sites where reserves become critical. Further the Enlarged Group's ability to obtain, sustain or renew licences and permits and other licences and permits that are required by it on applicable terms is subject to changes in regulations and policies and to the discretion of the applicable governmental authorities.
In particular, the Klinthagen quarry is nearing the end of its current Reserves and its proposed continuing operation and/or expansion is subject to receiving requisite permits and consents. The Miedzianka site, which represents the vast majority of extraction in Poland and generates the most revenues in country, currently has Reserves that are estimated to last six years following recently acquired additional permitting but requires ongoing work for further permitting and expansion.
There is no guarantee that the Enlarged Group will obtain or be granted or retain the requisite planning or permits to carry on its planned operations, which failure could have a material adverse effect on parts of the Enlarged Group's business.
The Enlarged Group is subject to a broad range of laws, regulations and standards
The Enlarged Group will be subject to a broad range of laws, regulations and standards, including those relating to employment, pensions, data protection, land and water use pollution, protection of the public, protection of the environment and the handling of waste materials, mineral production, exports, taxes and other matters.
Future changes in applicable laws, regulations, standards and changes in their enforcement or regulatory interpretation could result in changes in legal requirements or in the terms of existing permits or agreements applicable to the Enlarged Group or its properties, which could have a material adverse impact on the Enlarged Group's current operations and future projects. In particular, environmental regulations and standards are becoming increasingly stringent. Existing and possible future environmental legislation, regulations and actions could cause significant expense, capital expenditures, restrictions and delays in the Enlarged Group's activities, the extent of which cannot be predicted and which may well be beyond the capacity of the Enlarged Group to fund.
It is the Enlarged Group's policy to require that all of its subsidiary undertakings, employees, suppliers and sub-contractors comply with applicable laws, regulations and standards. However, violations of such laws, regulations and standards, in particular environmental laws, could result in restrictions on the operations of the Enlarged Group's sites, damages, fines or other sanctions, increased costs of compliance with potential reputational damage and potential loss of future contracts.
The enlarged Group may assume responsibility for restoration costs
Upon cessation of any quarrying operations, the Enlarged Group may assume responsibility for costs associated with restoring the operational sites by taking reasonable and necessary steps in accordance with generally accepted environmental practices. Any environmental permits held by the Enlarged Group may also specify commitments to specific restoration activities on a site. However, some restoration provisions can be advantages to the company, such as restoring excavations as inert landfill sites or tourist/commercial attractions such as water parks or nature reserves.
There is uncertainty as to the impact on the Enlarged Group of government spending
The Enlarged Group will be largely dependent on government spending on improving public infrastructure, buildings and services. Governments may decide to reduce present or future investment in transport, health or other construction projects or other areas in which the Enlarged Group can compete for work to supply building materials to contractors. Any reduction in such investment and funding may have an adverse effect on the Enlarged Group's future revenues and profitability, however the Enlarged group has a diverse portfolio of products, services and customers.
Nordkalk's customers may cease to continue trading with Nordkalk or may reduce their level of demand
Several customers of Nordkalk have contracts which are set to expire, can be terminated, or can be renegotiated in 2021 or 2022. This could impact Nordkalk's revenues and its profitability levels. However, contracts are typically concluded for one or two years and renewed thereafter. Moreover, Nordkalk's top ten customers in terms of turnover only represented 32.7 per cent. of Nordkalk's total revenues in 2019, and this has not changed materially since then. The risk of impact on the Enlarged Group's profitability is therefore fairly low.
The Enlarged Group is active in a competitive industry
The industry in which the Enlarged Group operates is intensely competitive. The Enlarged Group will compete with numerous other local and international companies, including potentially larger competitors with access to greater financial, technical and other resources than the Company, which may give them a competitive advantage. In addition, actual or potential competitors may be strengthened through the acquisition of additional assets and interests and competition could adversely affect the Company's ability to acquire suitable additional assets in the future. The Company's success will depend on its ability to develop the assets of the Enlarged Group and in addition, select and acquire additional targets in accordance with its acquisition strategy and there can be no assurance that the Company will continue to be able to compete successfully with its rivals.
The Enlarged Group is subject to competition law
As part of its due diligence, the Company has become aware that certain clauses which are contained in a very small selection of contracts which members of the Nordkalk Group have entered into may be considered to be anti-competitive. In the event that the relevant Nordkalk entities were found to be in breach of local competition laws, it could result in damages and fines. The Company intends to address the clauses in question following completion of the Acquisition to ensure proper compliance with local law and regulation.
The Enlarged Group is subject to changes in energy prices and costs of raw materials
Raw materials such as cement, bitumen, fuel, utilities and explosives are sourced from other third party suppliers. Raw material can be subject to limited availability and price fluctuation. Factors such as currency fluctuations, production prices, logistics, adverse weather conditions, social instability, and force majeure events have the potential to disrupt, raw material supplies and impact prices of the Enlarged Group's principal sources of raw materials.
Numerous factors could affect product prices, including supply and demand
Market prices of the Enlarged Group's products and services could be affected by numerous factors which are beyond the control of the Enlarged Group, including local demand, national economic and political events, international economic trends, inflation and deflation, currency exchange fluctuation, speculative activity and the political and economic conditions of the jurisdictions in which SigmaRoc operates. The combined effect of these factors is difficult to predict and an investment in the Company could be affected adversely by changes in economic, political, administrative, taxation or other regulatory factors, in any jurisdiction in which the Enlarged Group may operate.
The Enlarged Group is reliant on third parties who may default
The Enlarged Group is reliant on its supply chain, particularly in relation to the supply energy, raw materials and delivery of products to customers. If a contractor or supplier failed financially or was responsible for late or inadequate delivery or poor quality of materials then it could damage the relevant part of the Enlarged Group's reputation and/or cause downtime and/or delays; potentially incurring financial losses to the extent not covered by the Enlarged Group's insurance or the suppliers insurance.
The Board may be unable to find appropriate acquisition targets and/or integrate future acquisitions
The Enlarged Group may acquire other assets if suitable opportunities become available. Any future acquisition poses integration and other risks which may affect the Enlarged Group's results or operations. To the extent that suitable opportunities arise, the Company may seek to expand its business through the identification and acquisition of, or significant investments in, complementary companies, assets, products and services. There can be no assurance that the Company will identify suitable acquisitions or opportunities, obtain the financing necessary to complete and support such acquisitions or acquire businesses on satisfactory terms, or that any business acquired will prove to be profitable. In addition, the acquisition and integration of independent companies can be complex, costly and time-consuming involving a number of possible problems and risks, including possible adverse effects on the Enlarged Group's operating results, diversion of management's attention, failure to retain personnel, failure to maintain customer service levels, disruption to relationships with customers and other third parties, risks associated with unanticipated events or liabilities and difficulties in the assimilation of the operations, technologies, systems, services and products of the acquired companies. No assurance can be given that the Enlarged Group will be able to manage future acquisitions profitably or to integrate such acquisitions successfully without additional costs, delays or other problems and any failure to achieve successful integration of such acquisitions could have a material adverse effect on the results of operations or financial condition of the Enlarged Group. If the Enlarged Group is unable to attract and retain key officers, managers and technical personnel to adequately effect any such acquisitions and integration, the Enlarged Group's ability to execute its business strategy successfully could be materially and adversely affected. The current Directors and Management team have experience of integration since inception and operate a decentralised model, where often intensive and risky integration of aspects such as IT systems into a single global solution are not required.
The Enlarged Group is dependent on key and skilled personnel
The Enlarged Group's future success is substantially dependent on the continued services and continuing contributions of its directors, senior management and other key personnel. In particular the Enlarged Group is dependent on the continued employment and performance of the Enlarged Group's management team. The loss of the services of any of the Company's executive officers or other key employees could have a material adverse effect on the Enlarged Group's business.
The Enlarged Group's operations require individuals with a high degree of technical and/or professional skills and experienced equipment and quarrying trade professionals. The Enlarged Group may encounter significant competition for qualified management and skilled workers and will be in competition with other quarry operations and other local industries. If the Enlarged Group is unable to attract and retain an adequate number of skilled workers, a decrease in productivity or an increase in costs may have an adverse effect on the Enlarged Group's operations, results and its financial condition.
The Enlarged Group may incur significant costs in the event of unsuccessful transactions
There is a risk that the Enlarged Group may incur substantial legal, financial and advisory expenses arising from unsuccessful transactions which may include public offer and transaction documentation, legal, accounting, operational and other due diligence.
The Company may require future financing
The Company may need to seek additional sources of financing to implement its growth strategy. There can be no assurance that the Company will be able to raise those funds, whether on acceptable terms or at all. Given that the Enlarged Group operates in a sector which has potentially negative impacts upon the environment, investment may be less readily available. If further financing is obtained by issuing new equity securities or convertible debt securities other than on a pro rata basis to existing Shareholders, the existing Shareholders may be diluted and the new securities may carry rights, privileges and preferences superior to the Ordinary Shares. The Company may seek further debt finance to fund all or part of any future acquisition. There can be no assurance that the Company will be able to raise those debt funds, whether on acceptable terms or at all. If debt financing is obtained, the Company's ability to raise further finance and its ability to operate its business may be subject to restrictions.
The Company is subject to the risks and liabilities associated with possible accidents, injuries or deaths on its properties
Quarrying, like many other extractive natural resource industries, is subject to potential risks and liabilities due to accidents that could result in serious injury or death. The impact of such accidents could affect the profitability of the operations, cause an interruption to operations, lead to a loss of licences and permits, affect the reputation of the Company and its ability to obtain further licences, damage community relations and reduce the perceived appeal of the Company as an employer. There is no assurance that the Company has been or will at all times be in full compliance with all laws and regulations or hold, and be in full compliance with, all required health and safety permits. The potential costs and delays associated with compliance with such laws, regulations and permits could prevent the Company from proceeding with the development of a project or the operation or further development of a project, and any non-compliance therewith may adversely affect the Company's operations, financial condition and results of operations. Amendments to current laws, regulations and permits governing operations and activities of companies in this sector, or more stringent implementation thereof, could have a material adverse impact on the Company and cause increases in expenses, capital expenditures or production costs, reduction in levels of production at producing properties, delays in the development of new quarrying properties, or increases in abandonment costs.
The Enlarged Group may become involved in litigation
Whilst the Enlarged Group has no material outstanding litigation, save as disclosed in this Document, there can be no guarantee that the current or future actions of the Enlarged Group will not result in litigation. The quarrying industry, as with all industries, is subject to legal claims, both with and without merit, in particular in relation to environmental and health and safety liability. Defence and settlement costs can be substantial, even with respect to claims that have no merit. Due to the inherent uncertainty of the litigation process, there can be no assurance that the resolution of any particular legal proceeding will not have an adverse effect on the Enlarged Group's financial position or results of operations.
The Enlarged Group may have to make claims under its Insurance
The Directors believe that the Enlarged Group has robust, comprehensive and adequate insurance cover but recognise that a claim could be made against a group company which exceeds the limits of insurance cover or is in respect of a matter that is uninsurable. In those circumstances the Enlarged Group could suffer financial loss.
The payment by the Enlarged Group's insurers of any insurance claims may result in increases in the premiums payable by the Enlarged Group for its insurance cover and adversely affect the Enlarged Group's financial performance. In the future, some or all of the Enlarged Group's insurance coverage may become unavailable or prohibitively expensive.
Loss of IT systems and dependence on key software supplier
The Enlarged Group will be dependent on IT systems for the delivery of its business which will be vulnerable to damage or interruption from flood, fire, power loss, telecommunications failure and similar events. Failure of these systems could cause financial loss to the Enlarged Group as well as damage to its brand and reputation. Certain of the Enlarged Group's software is bespoke and the software is not subject to an escrow arrangement. If no such arrangement is put in place and the supplier ceases to support the software, it could have an impact on the Enlarged Group's operations and the Enlarged Group could suffer financial loss.
There may be exchange rate risks
The Placing Shares are priced in Sterling and will be quoted and traded in Sterling. In addition, any dividends the Company may pay will be declared and paid in sterling. Accordingly, Shareholders resident in non-UK jurisdictions are subject to risks arising from adverse movements in the value of their local currencies against Sterling, which may reduce the value of the Placing Shares, as well as that of any dividend paid.
Investment in AIM-listed securities
Investment in shares traded on AIM is perceived to involve a higher degree of risk and be less liquid than investment in companies whose shares are listed on the Official List. An investment in the Ordinary Shares may be difficult to realise. Prospective investors should be aware that the value of an investment in the Company may go down as well as up and that the market price of the Ordinary Shares may not reflect the underlying value of the Company. Investors may therefore realise less than, or lose all of, their initial investment.
There may not be sufficient liquidity in the market for the Ordinary Shares in order for investors to sell their Ordinary Shares.
The Ordinary Shares will be traded on AIM rather than the Official List. It may be more difficult for an investor to realise his or her investment in an AIM-quoted company than a company whose securities are listed on the Official List. Whilst the Company is applying for the admission of the Enlarged Share Capital to trading on AIM, there can be no assurance that an active trading market will develop, or if developed, that it will be maintained.
AIM is a market for emerging or smaller, growing companies and may not provide the liquidity normally associated with the Official List or other exchanges. The future success of AIM and liquidity in the market for the Ordinary Shares cannot be guaranteed. In particular, the market for the Ordinary Shares may be, or may become, relatively illiquid and therefore the Ordinary Shares may be or may become difficult to sell.
An investment in the Company may not be suitable for all recipients of this document. Accordingly, investors are strongly advised to consult an independent financial adviser authorised for the purposes of FSMA.
Share price volatility
The trading price of the Ordinary Shares may be subject to wide fluctuations in response to a range of events and factors, such as variations in operating results, announcements of technological innovations or new products and services by the Enlarged Group or its competitors, changes in financial estimates and recommendations by securities analysts, the share price performance of other companies that investors may deem comparable to the Enlarged Group, the general market perception of construction and materials companies, news reports relating to trends in the Enlarged Group's markets, legislative changes in the Enlarged Group's sector, ESG-related investment trends, and other factors outside of the Enlarged Group's control. Such events and factors may adversely affect the trading price of the Ordinary Shares, regardless of the performance of the Enlarged Group. Prospective investors should be aware that the value of the Ordinary Shares could go down as well as up and investors may therefore not recover their original investment especially as the market in the Ordinary Shares may have limited liquidity.
Lock-in and orderly market arrangements
Whilst the Seller has agreed to lock-in and orderly market arrangements in respect of Ordinary Shares held by it, a significant proportion of the Company's Enlarged Share Capital will not be subject to lock-in arrangements and in any event after the existing lock-in and orderly market arrangements cease to apply there will be no contractual restriction on the sale of the Ordinary Shares held by the Seller.
The payment of dividends will depend on the Enlarged Group's future acquisition strategy and available cash resources. The Company does not have any current intentions to pay out dividends in the short to medium term. The dividend policy set out in paragraph 23 of Part I of the Admission Document should not be construed as a dividend forecast. The Company's ability to pay dividends will depend on the level of distributions, if any, received from its operating subsidiaries. There can be no guarantee that the Enlarged Group's objectives will be achieved, and it will depend on the earnings and the Company's financial condition, current and anticipated cash needs and such other factors as the Directors consider appropriate. The Company's subsidiaries may also, from time to time, be subject to restrictions or their ability to make distributions, including any regulatory, fiscal and other restrictions. If a dividend is paid in the future, any change in the tax treatment of dividends or interest received by the Company may reduce the level of yield received by Shareholders.
The Company has issued share options to, amongst others, certain Directors and employees. The Company may, in the future, issue further share options to subscribe for new Ordinary Shares to certain employees, Directors, senior management and consultants of the Enlarged Group. The exercise of any such share options and any warrants (should any be granted in the future) would result in a dilution of the shareholdings of other investors.
Any change in the Company's tax status or in taxation legislation could affect the Company's ability to provide returns to Shareholders. Statements in this document concerning the taxation of investors in Ordinary Shares are based on current tax law and practice which is subject to change. The taxation of an investment in the Company depends on the individual circumstances of investors.
Forward looking statements
Historical facts, information gained from historical performance, present facts, circumstances and information and assumptions from all or any of these are not a guide to the future. Statements as to the Enlarged Group's aims, targets, plans and intentions and any other forward looking statement referred to or contained herein are no more than that and do not comprise forecasts. Any such forward looking statements are based on assumptions and estimates and involve risks, uncertainties and other factors which may cause the actual results, outcome, financial condition, performance, achievements or findings of the Enlarged Group to be materially different from any future results, performances or achievements expressed or implied by such forward looking statements.
It should be noted that the factors listed above are not intended to be exhaustive and do not necessarily comprise all of the risks to which the Enlarged Group is or may be exposed or all those associated with an investment in the Company. In particular, the Company's performance is likely to be affected by changes in market and/or economic conditions, political, judicial, and administrative factors and in legal, accounting, regulatory and tax requirements in the areas in which it operates and holds its major assets. There may be additional risks and uncertainties that the Directors do not currently consider to be material or of which they are currently unaware which may also have an adverse effect upon the Enlarged Group.
If any of the risks referred to in this Appendix II crystalise, the Enlarged Group's business, financial condition, results or future operations could be materially adversely affected. In such case, the price of its Ordinary Shares could decline and investors may lose all or part of their investment.
APPENDIX III - TERMS AND CONDITIONS OF THE PLACING
The terms and conditions contained in this Announcement, including this Appendix (together the "Announcement") (the "Terms and Conditions") and the information comprising this Announcement are restricted and are not for publication, release or distribution, in whole or in part, directly or indirectly, in or into the United States, Canada, Australia, New Zealand, the Republic of South Africa, or Japan, or any other state or jurisdiction in which such release, publication or distribution would be unlawful. The Terms and Conditions and the information contained herein is not intended to and does not contain or constitute an offer of, or the solicitation of an offer to buy or subscribe for, securities to any person in the United States, Canada, Australia, New Zealand, the Republic of South Africa or Japan, or any other state or jurisdiction in which such an offer would be unlawful.
Important information for invited Placees only regarding the Placing
Members of the public are not eligible to take part in the Placing. This Announcement and the Terms and Conditions set out in this Announcement are for information purposes only and are directed only at persons in Member States who are "qualified investors" in such Member State within the meaning of Article 2(e) of the EU Prospectus Regulation or the United Kingdom within the meaning of the UK Prospectus Regulation ("Qualified Investors"). In addition, in the United Kingdom, this Announcement and the Terms and Conditions are directed only at (i) Qualified Investors who have professional experience in matters relating to investments falling within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO"), and/or (ii) Qualified Investors who are high net worth companies, unincorporated associations or other bodies within the meaning of Article 49(2)(a) to (d) of the FPO; and/or (iii) persons to whom it may otherwise be lawfully communicated (each a "Relevant Person"). No other person should act or rely on this Announcement and persons distributing this Announcement must satisfy themselves that it is lawful to do so. By accepting the Terms and Conditions each Placee represents and agrees that it is a Relevant Person. This Announcement and the Terms and Conditions set out herein must not be acted on or relied on by persons who are not Relevant Persons. Any investment or investment activity to which this Announcement and the Terms and Conditions set out herein relate is available only to Relevant Persons and will be engaged in only with Relevant Persons. This Announcement does not itself constitute an offer for sale or subscription of any securities in the Company.
The Placing Shares have not been and will not be registered under the US Securities Act or under the applicable securities laws of any state or other jurisdiction of the United States, and may not be offered, sold, taken up, resold, transferred or delivered, directly or indirectly within, into or in the United States, except pursuant to an applicable exemption from the registration requirements of the US Securities Act and in compliance with the securities laws of any relevant state or other jurisdiction of the United States. There will be no public offer of the Placing Shares in the United States. The Placing Shares are being offered and sold only outside the United States in "offshore transactions" as defined in, and in accordance with Regulation S of the US Securities Act ("Regulation S").
The Placing Shares have not been approved or disapproved by the US Securities and Exchange Commission, any state securities commission or other regulatory authority in the United States, nor have any of the foregoing authorities passed upon or endorsed the merits of the Placing or the accuracy or the adequacy of this Announcement. Any representation to the contrary is a criminal offence in the United States.
This Announcement does not constitute an offer to sell or issue, or the solicitation of an offer to buy or subscribe for, securities in any jurisdiction in which such offer or solicitation is unlawful and, in particular, is not for publication or distribution in or into the United States, Canada, Australia, New Zealand, the Republic of South Africa or Japan, nor in any country or territory where to do so may contravene local securities laws or regulations. The distribution of this Announcement (or any part of it or any information contained within it) in other jurisdictions may be restricted by law and therefore persons into whose possession this Announcement (or any part of it or any information contained within it) comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities law of any such jurisdictions. The Ordinary Shares have not been and will not be registered under the US Securities Act nor under the applicable securities laws of any state of the United States or any province or territory of Canada, Australia, New Zealand, the Republic of South Africa or Japan. Accordingly, the Shares may not be offered or sold directly or indirectly in or into or from the United States, Canada, Australia, New Zealand, the Republic of South Africa or Japan or to any resident of the United States, Canada, Australia, New Zealand, the Republic of South Africa or Japan. No public offering of securities is being made in the United States. The Shares have not been approved or disapproved by the US Securities and Exchange Commission, any state securities commission or any other regulatory authority in the United States, nor have any of the foregoing authorities passed upon or endorsed the accuracy or adequacy of this Announcement. Any representation to the contrary is a criminal offence in the United States.
Each Placee should consult with its own advisers as to legal, tax, business, financial and related aspects of a purchase of and/or subscription for the Placing Shares.
Each Placee will be deemed to have read and understood this Announcement in its entirety and to be making such offer on these terms and conditions, and to be providing the representations, warranties, acknowledgements and undertakings, contained in these terms and conditions. In particular each such Placee represents, warrants and acknowledges to each of the Company, the Nominated Adviser and the Joint Bookrunners that:
(a) it is a Relevant Person (as defined above) and undertakes that it will purchase and/or subscribe for, hold, manage or dispose of any Placing Shares that are allocated to it for the purposes of its business;
(b) it is acquiring the Placing Shares for its own account or acquiring the Placing Shares for an account with respect to which it has sole investment discretion and has the authority to make, and does make the representations, warranties, indemnities, acknowledgments, undertakings and agreements contained in this Announcement;
(c) in the case of any Placing Shares subscribed for by it as a financial intermediary as that term is used in Article 5 of the EU Prospectus Regulation or the UK Prospectus Regulation (as applicable), any Placing Shares purchased and/or subscribed for by it in the Placing will not be subscribed for and/or purchased on a non-discretionary basis on behalf of, nor will they be subscribed for and/or purchased with a view to their offer or resale to, persons in a Member State or the United Kingdom (as applicable) other than Qualified Investors, or in circumstances which may give rise to an offer of securities to the public other than an offer or resale in the United Kingdom or in a Member State to Qualified Investors, or in circumstances in which the prior consent of the Nominated Adviser and the Joint Bookrunners has been given to each such proposed offer or resale; and
(d) it understands (or if acting for the account of another person, such person has confirmed that such person understands) the resale and transfer restrictions set out in this Announcement; and
(e) it is not a US Person (as defined in, and in accordance with Regulation S) and it, and any accounts it represents, (i) is, or at the time the Placing Shares are acquired will be, outside the United States and is not acquiring the Placing Shares for the account or benefit of any US Person (as defined in, and in accordance with Regulation S) or any other person located in the United States, (ii) is acquiring the Placing Shares in an "offshore transaction" (as defined in, and in accordance with Regulation S) and (iii) will not offer or sell, directly or indirectly, any of the Placing Shares except in an "offshore transaction" as defined in, and in accordance with Regulation S or in the United States pursuant to an exemption from, or in a transaction not subject to, the registration requirements under the US Securities Act.
Persons (including, without limitation, nominees and trustees) who have a contractual or other legal obligation to forward a copy of this Announcement, of which these terms and conditions form part, should seek appropriate advice before taking any action.
Neither the Nominated Adviser, Peel Hunt, Liberum Capital or Numis Securities nor any of their affiliates, agents, directors, officers or employees, make any representation to any Placees regarding an investment in the Placing Shares.
Each of Peel Hunt, Liberum Capital and/or Numis Securities, as applicable, may require a Placee to agree to such further terms and/or conditions and/or give such additional warranties and/or representations and/or undertakings as it (in its absolute discretion) sees fit and/or may require any such Placee to execute a separate placing letter (for the purposes of this Announcement, a "Placing Letter"). The terms of this Announcement will, where applicable, be deemed to be incorporated into that Placing Letter.
Details of the Placing
The Nominated Adviser and the Joint Bookrunners have entered into the Placing Agreement with the Company and the Directors, under which the Joint Bookrunners have agreed, on the terms and subject to the conditions set out therein, and undertaken to use their reasonable endeavours to procure, as the Company's agents for the purpose of the Placing, subscribers for the Placing Shares at the Placing Price.
The Placing is conditional upon, amongst other things, Admission becoming effective, the Acquisition Agreement becoming unconditional and the Placing Agreement not being terminated in accordance with its terms, as detailed further below.
The Placing Shares are and will be credited as fully paid and will rank pari passu in all respects with the existing issued Ordinary Shares, including the right to receive all dividends and other distributions (if any) declared, made or paid on or in respect of the Ordinary Shares after the date of issue of the Placing Shares to the relevant Placees.
Application for admission to trading
Application has been or will be made to the London Stock Exchange for Admission of the Placing Shares to be issued pursuant to the Placing and the re-admission of the Enlarged Share Capital to trading on AIM.
The Placing and the Acquisition are interconditional and are both subject to, inter alia, Shareholder approval at the General Meeting. The Acquisition Agreement itself is also conditional upon receipt of the Polish Competition Office Clearance. Should these conditions not be satisfied, Admission will not occur.
It is anticipated that the Polish Competition Office Clearance will be received during August 2021 and the Company currently expects to be in a position to complete the Acquisition (and therefore for Admission to occur) in late August 2021. However, the Joint Bookrunners will confirm to Placees when the expected date of Admission shall be once the Polish Competition Office Clearance is received.
The Placing Shares will not be admitted to trading on any stock exchange other than AIM.
No offering document or prospectus has been or will be submitted to be approved by the FCA or submitted to the London Stock Exchange in relation to the Proposals and no such prospectus is required (in accordance with the UK Prospectus Regulation and/or the EU Prospectus Regulation) to be published and Placees' commitments will be made solely on the basis of the information contained in this Announcement released by the Company today and subject to the further terms set forth in the trade confirmation or contract note to be provided to individual prospective Placees.
Each Placee, by accepting a participation in the Placing, agrees that the content of this Announcement and all other publicly available information previously or simultaneously published by the Company by notification to a Regulatory Information Service or otherwise filed by the Company is exclusively the responsibility of the Company and confirms that it has neither received nor relied on any other information, representation, warranty, or statement made by or on behalf of the Company, the Nominated Adviser, Peel Hunt, Liberum Capital or Numis Securities, or any other person and none of the Company, Peel Hunt, Liberum Capital, Numis Securities, or any of their respective affiliates will be liable for any Placee's decision to participate in the Placing based on any other information, representation, warranty or statement which the Placees may have obtained or received. Each Placee acknowledges and agrees that it has relied on its own investigation of the business, financial or other position of the Company in accepting a participation in the Placing. Nothing in this paragraph should exclude or limit the liability of any person for fraudulent misrepresentation by that person.
The Joint Bookrunners will today commence the bookbuilding process in respect of the Placing (the "Bookbuild") to determine both demand by Placees for participation in the Placing. No commissions will be paid to Placees or by Placees in respect of any Placing Shares.
The Joint Bookrunners and the Company shall be entitled to effect the Placing by such alternative method to the Bookbuild as they may, in their absolute discretion, determine.
Participation in, and principal terms of, the Placing
1. Each of Peel Hunt, Liberum Capital and Numis Securities, (whether through itself or any of its affiliates) is arranging the Placing as placing agent and broker of the Company for the purpose of each using its reasonable endeavours to procure Placees at the Placing Price for the Placing Shares.
2. Participation in the Placing will only be available to persons who may lawfully be, and are, invited to participate by either Peel Hunt, Liberum Capital and/or Numis Securities. Peel Hunt, Liberum Capital and/or Numis Securities, and/or their respective affiliates may participate in the Placing as principals (and are each entitled to enter bids as principal in the Bookbuild).
3. The Bookbuild will establish the number of Placing Shares to be issued and will be agreed between the Joint Bookrunners and the Company following completion of the Bookbuild in respect of the Placing Shares and will be recorded in a term sheet entered into between them (the "Term Sheet"). The number of Placing Shares and to be issued and the Placing Price will be announced on a Regulatory News Service following completion of the Bookbuild.
4. To bid in the Bookbuild, Placees should communicate their bid by telephone or in writing to their usual sales contact at any of the Joint Bookrunners. Each bid should state the number of Placing Shares for which the prospective Placee wishes to subscribe. Bids may be scaled down by the Joint Bookrunners on the basis referred to in paragraph 13 below.
5. A bid in the Bookbuild will be made on the terms and subject to the conditions in this Announcement and will be legally binding on the Placee on behalf of which it is made and except with the Joint Bookrunners' consent will not be capable of variation or revocation after the time at which it is submitted. Each Placee will also have an immediate, separate, irrevocable and binding obligation, owed to the Company and the Joint Bookrunners, to pay to them (or as the Joint Bookrunners may direct) in cleared funds an amount equal to the product of the Placing Price and the number of Placing Shares that such Placee has agreed to subscribe for and the Company has agreed to allot and issue to that Placee. Each prospective Placee's obligations will be owed to the Company and the Joint Bookrunners.
6. The Bookbuild in respect of the Placing is expected to close no later than 4.30 p.m. on 16 July 2021, but the Bookbuild may be closed earlier or later at the discretion of the Joint Bookrunners and the Company. The Joint Bookrunners may, in agreement with the Company, accept bids, either in whole or in part, that are received after the Bookbuild has closed.
7. This Annoucement gives details of the terms and conditions of, and the mechanics of participation in, the Placing. No commissions will be paid to Placees or by Placees in respect of any Placing Shares.
8. Each Placee's commitment will be made solely on the basis of the information set out in Announcement. By participating in the Placing, Placees will be deemed to have read and understood these Terms and Conditions and the rest of this Announcement in its entirety and to be participating and making an offer for the Placing Shares on these terms and conditions. Each Placee will be deemed to have read and understood these Terms and Conditions in their entirety and to be making such offer on the Terms and Conditions and to be providing the representations, warranties and acknowledgements and undertakings contained in these Terms and Conditions.
9. The Placing Price will be a fixed price of 85 pence per Placing Share.
10. An offer for Placing Shares, which has been communicated by a prospective Placee to Peel Hunt, Liberum Capital and/or Numis Securities, shall not be capable of withdrawal or revocation without the consent of Peel Hunt, Liberum Capital and/or Numis Securities (as applicable).
11. Each Placee's allocation will be confirmed to Placees orally or in writing by Peel Hunt, Liberum Capital or Numis Securities as soon as practicable following the close of the Bookbuild. The terms of this Announcement will be deemed incorporated by reference therein. The oral or written confirmation to such Placee will constitute an irrevocable legally binding commitment upon such person (who will at that point become a Placee) in favour of Peel Hunt, Liberum Capital, Numis Securities (as applicable), and the Company, under which it agrees to subscribe for and/or acquire the number of Placing Shares allocated to it at the Placing Price on the terms and conditions set out in this Announcement and in accordance with the Company's articles of association. Except as required by law or regulation, no press release or other announcement will be made by Peel Hunt, Liberum Capital, Numis Securities, or the Company using the name of any Placee (or its agent), in its capacity as Placee (or agent), other than with such Placee's prior written consent.
12. Each Placee will have an immediate, separate, irrevocable and binding obligation, owed to Peel Hunt, Liberum Capital or Numis Securities (as agent for the Company), as applicable, to pay in cleared funds immediately on the settlement date, in accordance with the registration and settlement requirements set out below, an amount equal to the product of the Placing Price and the number of Placing Shares such Placee has agreed to take up.
13. The Joint Bookrunners may choose to accept bids, either in whole or in part, on the basis of allocations determined in agreement with the Company and may scale down any bids for this purpose on such basis as they may determine. The Joint Bookrunners may also, notwithstanding paragraphs 4 and 5 above, and subject to prior agreement with the Company, allocate Placing Shares after the time of any initial allocation to any person submitting a bid after that time The Company reserves the right (upon agreement with the Joint Bookrunners) to reduce or seek to increase the amount to be raised pursuant to the Placing at its discretion.
14. Irrespective of the time at which a Placee's allocation pursuant to the Placing is confirmed, settlement for all Placing Shares under the Placing will be required to be made at the times and on the basis explained below under "Registration and Settlement".
15. All obligations under the Bookbuild and Placing will be subject to fulfilment or (where applicable) waiver of, amongst other things, the conditions referred to below under "Conditions of the Placing" and to the Placing Agreement not being terminated on the basis referred to below under "Right to terminate under the Placing Agreement".
16. By participating in the Bookbuild, each Placee will agree that its rights and obligations in respect of the Placing will terminate only in the circumstances described below and will not be capable of rescission or termination by the Placee.
17. To the fullest extent permissible by law, none of the Company, the Nominated Adviser, Peel Hunt, Liberum Capital and Numis Securities, or any of their respective affiliates shall have any liability to Placees (or to any other person whether acting on behalf of a Placee or otherwise) under these terms and conditions. In particular, none of the Company, the Nominated Adviser, Peel Hunt, Liberum Capital and Numis Securities, or any of their respective affiliates shall have any liability (including to the fullest extent permissible by law, any fiduciary duties) in respect of Peel Hunt's, Liberum Capital's and/or Numis Securities' conduct of the Bookbuild. Each Placee acknowledges and agrees that the Company is responsible for the allotment of the Placing Shares to the Placees, and neither the Nominated Adviser, Peel Hunt, Liberum Capital nor Numis Securities, shall have any liability to Placees for the failure of the Company to fulfil those obligations.
18. Peel Hunt, Liberum Capital and Numis Securities shall, following consultation with, and on approval of such allocations by, the Company, be entitled to allocate Placing Shares at their respective discretions to Placees in respect of their allocations of Placing Shares.
Conditions of the Placing
The Nominated Adviser's and the Joint Bookrunners' obligations under the Placing Agreement are conditional on, inter alia:
(a) the Company procuring that the Admission Document and the Form of Proxy are sent to each Shareholder who is entitled to receive notice of the General Meeting subject to such exceptions as are permitted by the Companies Act and the Company's articles of association;
(b) Resolutions 1 and 2 at the General Meeting having been duly passed by the requisite majority;
(c) the Acquisition Agreement: (i) not having lapsed or been terminated and (ii) having become unconditional in all respects, including in respect of the Polish Competition Office Clearance, (save for: (a) Admission and (b) any conditions relating to the Placing Agreement having become unconditional or not having terminated prior to Admission) and having been completed in accordance with its terms;
(d) the Company allotting, subject only to Admission, the Placing Shares in accordance with the Placing Agreement and the Consideration Shares in accordance with the Placing Agreement and the Acquisition Agreement; and
(e) Admission of both the Placing Shares and Consideration Shares taking place not later than 8.00 a.m. on the date on whcih the Acquisition is expected to complete (as agreed between the Company, the Nominated Adviser and the Joint Bookrunners).
The Placing Agreement contains certain warranties and representations from the Company and an indemnity from the Company for the benefit of the Nominated Adviser and the Joint Bookrunners. The Placing Agreement contains certain conditions to be satisfied (or, where permitted, waived or extended in writing by the Nominated Adviser and the Joint Bookrunners) on or prior to Admission, including there having been no material adverse change, the warranties being true and accurate and not misleading (in the opinion of the Nominated Adviser and Joint Bookrunners) and the performance by the Company of its obligations under the Placing Agreement.
None of the Company, the Directors, the Nominated Adviser and the Joint Bookrunners owes any fiduciary duty to any Placee in respect of the representations, warranties, undertakings or indemnities in the Placing Agreement.
If: (i) any of the conditions contained in the Placing Agreement, including those described above, are not fulfilled or waived by the Nominated Adviser and the Joint Bookrunners by the time or date where specified (or such later time or date as the Company, the Nominated Adviser, Peel Hunt, Liberum Capital and Numis Securities may agree), or (ii) the Placing Agreement is terminated as described below, the Placing will lapse and the Placees' rights and obligations hereunder in relation to the Placing Shares shall cease and terminate at such time and each Placee agrees that no claim can be made by the Placee in respect thereof.
The Nominated Adviser and the Joint Bookrunners may, in their respective absolute discretion, waive, or extend the period for compliance with the whole or any part of any of the Company's obligations in relation to the conditions in the Placing Agreement, save that, inter alia, the condition relating to the Acquisition Agreement being unconditional and Admission taking place may not be waived and the period for compliance with such conditions may not be extended. Any such extension or waiver will not affect Placees' commitments as set out in this Announcement.
None of the Nominated Adviser, the Joint Bookrunners nor the Company (as the case may be) shall have any liability to any Placee (or to any other person whether acting on behalf of a Placee or otherwise) in respect of any decision they may make as to whether or not to waive or to extend the time and/or date for the satisfaction of any condition to the Placing nor for any decision they may make as to the satisfaction of any condition or in respect of the Placing generally and by participating in the Placing each Placee agrees that any such decision is within the respective absolute discretions of the Joint Bookrunners.
Right to terminate under the Placing Agreement
The Nominated Adviser and the Joint Bookrunners may, jointly or separately, in their respective absolute discretions, at any time before Admission terminate the Placing Agreement by giving notice to the Company and/or the other as the case may be, in certain circumstances, including, inter alia:
(a) in the opinion of any of the Nominated Adviser and Peel Hunt, Liberum Capital and/or Numis Securities ) (acting in good faith), the warranties given by the Company to the Nominated Adviser, Peel Hunt, Liberum Capital and Numis Securities are not true and accurate or have become misleading (or would not be true and accurate or would be misleading if they were repeated at any time before Admission) by reference to the facts subsisting at the time when the notice referred to above is given; or
(b) in the opinion of any of the Nominated Adviser, Peel Hunt, Liberum Capital and/or Numis Securities (acting in good faith), the Company fails to comply with any of its obligations under the Placing Agreement and that failure is material in the context of the Proposals; or
(c) in the opinion of any of the Nominated Adviser, Peel Hunt, Liberum Capital and/or Numis Securities (acting in good faith), there has been a development or event (or any development or event involving a prospective change of which the Company is, or might reasonably be expected to be, aware) which will or is likely to have a material adverse effect on the operations, condition (financial, operational, legal or otherwise), prospects, management, results of operations, financial position, business or general affairs of the Company or the Group, or the Enlarged Group respectively, whether or not foreseeable and whether or not arising in the ordinary course of business; or
(d) there has been a change in national or international financial, political, economic or stock market conditions (primary or secondary); an incident of terrorism, outbreak or escalation of hostilities, war, declaration of martial law or any other calamity or crisis (including any material worsening in, or material escalation in the response to, the COVID-19 pandemic); a suspension or limitation in trading of securities generally on any stock exchange or minimum or maximum prices for trading have been fixed or a maximum range for prices has been required by any stock exchange or by order of any regulatory or governmental authority; any change in currency exchange rates or exchange controls or a disruption of settlement systems or clearance services or a material disruption in commercial banking, any declaration of a banking moratorium, or any adverse change or prospective adverse change of tax affecting the Shares or the allotment, issue, delivery of transfer thereof; which taken solely or together with any other matter set out herein, would be likely in the opinion of either of the Nominated Adviser, Peel Hunt, Liberum Capital and/or Numis Securities (acting in good faith) to materially prejudice the success of the Placing.
The rights and obligations of the Placees shall terminate only in the circumstances described in these Terms and Conditions and in the Placing Agreement and will not be subject to termination by the Placee or any prospective Placee at any time or in any circumstances. By participating in the Placing, Placees agree that the exercise by either the Nominated Adviser, Peel Hunt, Liberum Capital and/or Numis Securities of any right of termination or other discretion under the Placing Agreement shall be within the absolute discretion of either the Nominated Adviser, Peel Hunt, Liberum Capital and/or Numis Securities, and that it need not make any reference to Placees and that it shall have no liability to Placees whatsoever in connection with any such exercise or decision not to exercise. Placees will have no rights against, the Nominated Adviser, Peel Hunt, Liberum Capital and/or Numis Securities, the Company, nor any of their respective afﬁliates, directors or employees under the Placing Agreement pursuant to the Contracts (Rights of Third Parties) Act 1999 (as amended).
Registration and settlement
Settlement of transactions in the Placing Shares (ISIN: GB00BYX5K988) following Admission will take place within CREST. Each Placee allocated Placing Shares in the Placing will be sent a trade confirmation or contract note stating the number of Placing Shares allocated to it at the Placing Price, the aggregate amount owed by such Placee to Peel Hunt, Liberum Capital and Numis Securities (as agent for the Company), as applicable, and settlement instructions. Each Placee agrees that it will do all things necessary to ensure that delivery and payment is completed in accordance with either the CREST or certificated settlement instructions that it has in place with Peel Hunt, Liberum Capital or Numis Securities (as applicable).
The expected date of settlement in respect of the Placing Shares will be communicated to you by Peel Hunt, Liberum or Numis Securities (as the case may be) and settlement will be in accordance with the instructions set out in the trade confirmation.
Interest is chargeable daily on payments not received from Placees on the due date in accordance with the arrangements set out above at the rate of two percentage points above LIBOR as determined by Peel Hunt, Liberum Capital and/or Numis Securities.
Each Placee is deemed to agree that, if it does not comply with these obligations, Peel Hunt, Liberum Capital or Numis Securities may sell any or all of the Placing Shares allocated to that Placee on such Placee's behalf and retain from the proceeds, for Peel Hunt's, Liberum Capital's or Numis Securities' account and benefit (as agent for the Company) as applicable, an amount equal to the aggregate amount owed by the Placee plus any interest due. The relevant Placee will, however, remain liable and shall indemnify Peel Hunt, Liberum Capital or Numis Securities (as agent for the Company) as applicable, on demand for any shortfall below the aggregate amount owed by it and may be required to bear any stamp duty or stamp duty reserve tax or securities transfer tax (together with any interest or penalties) which may arise upon the sale of such Placing Shares on such Placee's behalf. By communicating a bid for Placing Shares to Peel Hunt, Liberum Capital or Numis Securities, each Placee confers on Peel Hunt, Liberum Capital and Numis Securities all such authorities and powers necessary to carry out any such sale and agrees to ratify and confirm all actions which Peel Hunt, Liberum Capital and/or Numis Securities lawfully takes in pursuance of such sale.
If Placing Shares are to be delivered to a custodian or settlement agent, Placees should ensure that the trade confirmation or contract note is copied and delivered immediately to the relevant person within that organisation.
Insofar as Placing Shares are registered in a Placee's name or that of its nominee or in the name of any person for whom a Placee is contracting as agent or that of a nominee for such person, such Placing Shares should, subject as provided below, be so registered free from any liability to UK stamp duty or stamp duty reserve tax or securities transfer tax. Placees will not be entitled to receive any fee or commission in connection with the Placing.
Representations, warranties and further terms
By participating in the Placing each Placee (and any person acting on such Placee's behalf) irrevocably makes the following representations, warranties, acknowledgements, agreements and undertakings (as the case may be) to the Company, the Nominated Adviser, the Joint Bookrunners, namely that, each Placee (and any person acting on such Placee's behalf):
1. represents and warrants that it has read and understood this Announcement, including this Announcement, in its entirety and that its subscription for and/or purchase of Placing Shares is subject to and based upon all the terms, conditions, representations, warranties, acknowledgements, agreements and undertakings and other information contained in this Announcement and herein and not in reliance on any information given or any representations, warranties or statements made at any time by any person in connection with Admission, the Company, the Placing, the Acquisition or otherwise, other than the information contained in this Announcement, and undertakes not to redistribute or duplicate this Announcement or any part of it;
2. acknowledges that the content of this Announcement and, when published, the Admission Document is exclusively the responsibility of the Company, and that none of the Nominated Adviser, Peel Hunt, Liberum Capital or Numis Securities, nor their respective affiliates or any person acting on either of their behalves has or shall have any liability for any information, representation or statement contained in this Announcement and, when published, the Admission Document or any information previously or concurrently published by or on behalf of the Company, and will not be liable for any Placee's decision to participate in the Placing based on any information, representation or statement contained in this Announcement and, when published, the Admission Document or otherwise. Each Placee further represents, warrants and agrees that the only information on which it is entitled to rely and on which such Placee has relied in committing itself to acquire the Placing Shares is contained in this Announcement, such information being all that it deems necessary to make an investment decision in respect of the Placing Shares and that it has neither received nor relied on any other information given or representations, warranties or statements made by the Nominated Adviser, the Joint Bookrunners, the Company, or any of their respective directors, officers or employees or any person acting on behalf of any of them, or, if received, it has not relied upon any such information, representations, warranties or statements (including any management presentation that may have been received by any prospective Placee or any material prepared by the research department of either the Nominated Adviser, Peel Hunt, Liberum Capital or Numis Securities (the views of such research departments not representing and being independent from those of the Company and the respective corporate finance departments of the Nominated Adviser, Peel Hunt, Liberum Capital and Numis Securities and not being attributable to the same)), and neither the Nominated Adviser, Peel Hunt, Liberum Capital, Numis Securities nor the Company will be liable for any Placee's decision to accept an invitation to participate in the Placing based on any other information, representation, warranty or statement. Each Placee further acknowledges and agrees that it has relied solely on its own investigation of the business, financial or other position of the Company in deciding to participate in the Placing and it will not rely on any investigation that the Nominated Adviser, Peel Hunt, Liberum Capital and/or Numis Securities, their affiliates or any other person acting on its or their behalf has or may have conducted;
3. acknowledges that none of the Nominated Adviser, the Joint Bookrunners, the Company nor any of their respective affiliates or any person acting on behalf of any of them has provided it, and will not provide it, with any material regarding the Placing Shares or the Company other than this Announcement; nor has it requested any of the Nominated Adviser, Peel Hunt, Liberum Capital, Numis Securities, the Company, their respective affiliates or any person acting on behalf of any of them to provide it with any such information and acknowledge that they have read and understood this Announcement;
4. acknowledges that no offering document or prospectus has been or will be prepared in connection with the Placing and it has not received and will not receive a prospectus or other offering document in connection with the Placing;
5. represents and warrants that it has neither received nor relied on any confidential price sensitive information concerning the Company in accepting this invitation to participate in the Placing;
6. acknowledges that neither the Nominated Adviser, Peel Hunt, Liberum Capital nor Numis Securities has any duties or responsibilities to it, or its clients, similar or comparable to the duties of "best execution" and "suitability" imposed by the Conduct of Business Sourcebook in the FCA's Handbook of Rules and Guidance and that neither the Nominated Adviser, Peel Hunt, Liberum Capital nor Numis Securities is acting for them or their clients and that each of the Nominated Adviser, Peel Hunt, Liberum Capital and Numis Securities will not be responsible for providing protections to it or its clients;
7. has the funds available to pay in full for the Placing Shares for which it has agreed to subscribe and/or purchase and that it will pay the total amount due by it in accordance with the terms set out in this Announcement and, as applicable, as set out in the trade settlement or the contract note on the due time and date;
8. acknowledges that the Nominated Adviser, Peel Hunt, Liberum Capital, Numis Securities nor any of their affiliates or any person acting on behalf of either the Nominated Adviser, Peel Hunt, Liberum Capital or Numis Securities or any such affiliate has or shall have any liability for this Announcement and, when published, the Admission Document, any publicly available or filed information or any representation relating to the Company, provided that nothing in this paragraph excludes the liability of any person for fraudulent misrepresentation made by that person;
9. acknowledges that none of the Nominated Adviser, Peel Hunt, Liberum Capital, Numis Securities, the ultimate holding company of either the Nominated Adviser, Peel Hunt, Liberum Capital or Numis Securities nor any direct or indirect subsidiary undertakings of such holding company, nor any of their respective directors and employees shall be liable to Placees for any matter arising out of the Nominated Adviser's, Peel Hunt's, Liberum Capital's and/or Numis Securities' role as placing agent (where applicable) or otherwise in connection with the Placing and that where any such liability nevertheless arises as a matter of law each Placee will immediately waive any claim against any of such persons which it may have in respect thereof;
10. understands, and each account it represents has been advised that (i) the Placing Shares have not been and will not be registered under the US Securities Act or under the securities laws of any state or other jurisdiction of the United States and are being offered in a transaction not involving any public offering in the United States, (ii) the Placing Shares are being offered and sold pursuant to Regulation S under the US Securities Act or in a transaction exempt from or not subject to the registration requirements under the US Securities Act; and (iii) the Placing Shares may not be reoffered, resold, pledged or otherwise transferred except in accordance with Regulation S under the US Securities Act or pursuant to an exemption from or in a transaction not subject to the registration requirements under the US Securities Act;
11. represents and warrants that it is not a US Person (as defined in, and in accordance with Regulation S) and that it, and any accounts it represents, (i) is, or at the time the Placing Shares are acquired will be, outside the United States and is not acquiring the Placing Shares for the account or benefit of any US Person or any other person located in the United States, (ii) is acquiring the Placing Shares in an "offshore transaction" (as defined in, and in accordance with Regulation S) and (iii) will not offer or sell, directly or indirectly, any of the Placing Shares except in an "offshore transaction" as defined in, and in accordance with Regulation S or in the United States pursuant to an exemption from, or in a transaction not subject to, the registration requirements under the US Securities Act;
12. will not distribute, forward, transfer or otherwise transmit this Announcement and, when published, the Admission Document, any information contained within it or any other materials concerning the Placing (including any electronic copies thereof), in or into the United States;
13. acknowledges that the offer of the Placing Shares may involve tax consequences, and that the contents of this Announcement and, when published, the Admission Document do not contain tax advice or information. The Placee acknowledges that it must retain its own professional advisors to evaluate the tax, financial and any and all other consequences of an investment in the Placing Shares;
14. represents and warrants that it will notify any transferee to whom it subsequently reoffers, resells, pledges or otherwise transfers the Placing Shares of the foregoing restrictions on transfer and resale;
15. unless otherwise specifically agreed in writing with the Nominated Adviser, Peel Hunt, Liberum Capital and/or Numis Securities, represents and warrants that neither it nor the beneficial owner of such Placing Shares will be a resident of the United States, Canada, Australia, New Zealand, Japan or the Republic of South Africa or any other jurisdiction in which it is unlawful to make or accept an offer to acquire the Placing Shares;
16. acknowledges that the Placing Shares have not been and will not be registered under the securities legislation of the United States, Canada, Australia, New Zealand, Japan or the Republic of South Africa or any other jurisdiction in which it is unlawful to make or accept an offer to acquire the Placing Shares and, subject to certain exceptions, may not be offered, sold, taken up, renounced or delivered or transferred, directly or indirectly, within those jurisdictions;
17. represents and warrants that the issue or transfer to it, or the person specified by it for registration as holder, of Placing Shares will not give rise to a liability under any of sections 67, 70, 93 or 96 of the Finance Act 1986 (depositary receipts and clearance services) and that the Placing Shares are not being acquired in connection with arrangements to issue depositary receipts or to transfer Placing Shares into a clearance system;
18. represents and warrants that: (i) it has complied with its obligations under the Criminal Justice Act 1993 and MAR; (ii) in connection with money laundering and terrorist financing, it has complied with its obligations under the Proceeds of Crime Act 2002 (as amended), the Terrorism Act 2000 (as amended), the Terrorism Act 2006 and the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017; and (iii) it is not a person: (a) with whom transactions are prohibited under the Foreign Corrupt Practices Act of 1977 (as amended) or any economic sanction programmes administered by, or regulations promulgated by, the Office of Foreign Assets Control of the U.S. Department of the Treasury; (b) named on the Consolidated List of Financial Sanctions Targets maintained by HM Treasury of the United Kingdom; or (c) subject to financial sanctions imposed pursuant to a regulation of the European Union or a regulation adopted by the United Nations (together, the "Regulations"); and, if making payment on behalf of a third party, that satisfactory evidence has been obtained and recorded by it to verify the identity of the third party as required by the Regulations and has obtained all governmental and other consents (if any) which may be required for the purpose of, or as a consequence of, such purchase, and it will provide promptly to Peel Hunt, Liberum Capital and/or Numis Securities such evidence, if any, as to the identity or location or legal status of any person which Peel Hunt, Liberum Capital and/or Numis Securities may request from it in connection with the Placing (for the purpose of complying with such Regulations or ascertaining the nationality of any person or the jurisdiction(s) to which any person is subject or otherwise) in the form and manner requested by Peel Hunt, Liberum Capital and/or Numis Securities on the basis that any failure by it to do so may result in the number of Placing Shares that are to be purchased by it or at its direction pursuant to the Placing being reduced to such number, or to nil, as Peel Hunt, Liberum Capital and/or Numis Securities may decide in their sole discretion;
19. represents and warrants that it is acquiring the Placing Shares for its own account or acquiring the Placing Shares for an account with respect to which it has sole investment discretion and has the authority to make, and does make the representations, warranties, indemnities, acknowledgments, undertakings and agreements contained in this Announcement;
20. if it is a financial intermediary, as that term is used in Article 5 of the Prospectus Regulation or the UK Prospectus Regulation (as applicable), represents and warrants that the Placing Shares subscribed for and/or purchased by it in the Placing will not be subscribed for and/or purchased on a non-discretionary basis on behalf of, nor will they be acquired with a view to their offer or resale to, persons in the United Kingdom or in a Member State (as applicable) in circumstances which may give rise to an offer to the public other than an offer or resale in the United Kingdom or in a Member State to Qualified Investors, or in circumstances in which the prior consent of Peel Hunt, Liberum Capital and/or Numis Securities has been given to each such proposed offer or resale;
21. represents and warrants that it has not offered or sold and will not offer or sell any Placing Shares to persons prior to Admission except to persons whose ordinary activities involve them acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their business or otherwise in circumstances which have not resulted in, and which will not result in, an offer to the public in the United Kingdom, Switzerland or a Member State;
22. represents and warrants that it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) relating to the Placing Shares in circumstances in which section 21(1) of FSMA does not require approval of the communication by an authorised person;
23. represents and warrants that it has complied and will comply with all applicable provisions of MAR with respect to anything done by it in relation to the Placing Shares in, from or otherwise involving, the United Kingdom or the European Economic Area (as applicable);
24. unless otherwise specifically agreed with Peel Hunt, Liberum Capital and/or Numis Securities in writing, represents and warrants that it is a Qualified Investor;
25. represents and warrants that it is a person: (i) who has professional experience in matters relating to investments falling within Article 19(1) of the FPO; or (ii) falling within Article 49(2)(A) to (D) ("High Net Worth Companies, Unincorporated Associations, etc.") of the FPO; or (iii) are persons to whom it may otherwise be lawfully communicated;
26. if the Placee is a natural person, such Placee is not under the age of majority (18 years of age in the United Kingdom) on the date of such Placee's agreement to subscribe for and/or purchase Placing Shares under the Placing and will not be any such person on the date that such subscription and/or purchase is accepted;
27. is aware of and acknowledges that it is required to comply with all applicable provisions of FSMA with respect to anything done by it in, from or otherwise involving, the United Kingdom;
28. represents and warrants that it and any person acting on its behalf is entitled to subscribe for and/or acquire the Placing Shares under the laws of all relevant jurisdictions and that it has all necessary capacity and has obtained all necessary consents and authorities and taken any other necessary actions to enable it to commit to this participation in the Placing and to perform its obligations in relation thereto (including, without limitation, in the case of any person on whose behalf it is acting, all necessary consents and authorities to agree to the terms set out or referred to in this Announcement) and will honour such obligations;
29. where it is subscribing for and/or acquiring Placing Shares for one or more managed accounts, represents and warrants that it is authorised in writing by each managed account: (a) to subscribe for and/or acquire the Placing Shares for each managed account; (b) to make on its behalf the representations, warranties, acknowledgements, undertakings and agreements in this Announcement, of which this Announcement forms part; and (c) to receive on its behalf any investment letter relating to the Placing in the form provided to it by Peel Hunt, Liberum Capital and/or Numis Securities;
30. undertakes that it (and any person acting on its behalf) will make payment to Peel Hunt, Liberum Capital and/or Numis Securities for the Placing Shares allocated to it in accordance with this Announcement, including this Announcement, on the due time and date as will be notified to it by Peel Hunt, Liberum and/or Numis, failing which the relevant Placing Shares may be placed with other parties or sold as Peel Hunt, Liberum Capital and/or Numis Securities (as the case may be) may in their sole discretion determine and without liability to such Placee and it will remain liable and will indemnify Peel Hunt, Liberum Capital and/or Numis Securities (as the case may be) on demand for any shortfall below the net proceeds of such sale and the placing proceeds of such Placing Shares and may be required to bear the liability for any stamp duty or stamp duty reserve tax or security transfer tax (together with any interest or penalties due pursuant to or referred to in these terms and conditions) which may arise upon the placing or sale of such Placee's Placing Shares on its behalf;
31. acknowledges that none of the Nominated Adviser, Peel Hunt, Liberum Capital, Numis Securities, any of their affiliates, or any person acting on behalf of either the Nominated Adviser, Peel Hunt, Liberum Capital or Numis Securities or any such affiliate, is making any recommendations to it, advising it regarding the suitability of any transactions it may enter into in connection with the Placing and that participation in the Placing is on the basis that it is not and will not be treated for these purposes as a client of the Nominated Adviser, Peel Hunt, Liberum Capital and/or Numis Securities and that neither Peel Hunt, Liberum Capital nor Numis Securities have any duties or responsibilities to it for providing the protections afforded to their clients or customers or for providing advice in relation to the Placing nor in respect of any representations, warranties, undertakings or indemnities contained in the Placing Agreement nor for the exercise or performance of any of their rights and obligations thereunder including any rights to waive or vary any conditions or exercise any termination right;
32. undertakes that the person whom it specifies for registration as holder of the Placing Shares will be (i) itself or (ii) its nominee, as the case may be. None of the Nominated Adviser, Peel Hunt, Liberum Capital, Numis Securities nor the Company will be responsible for any liability to stamp duty or stamp duty reserve tax resulting from a failure to observe this requirement. Each Placee and any person acting on behalf of such Placee agrees to participate in the Placing and it agrees to indemnify the Company, the Nominated Adviser, Peel Hunt, Liberum Capital and Numis Securities in respect of the same;
33. acknowledges that these terms and conditions and any agreements entered into by it pursuant to these terms and conditions and any non-contractual obligations arising out of or in connection with such agreement shall be governed by and construed in accordance with the laws of England and Wales and it submits (on behalf of itself and on behalf of any person on whose behalf it is acting) to the exclusive jurisdiction of the English courts as regards any claim, dispute or matter (including non-contractual matters) arising out of any such contract, except that enforcement proceedings in respect of the obligation to make payment for the Placing Shares (together with any interest chargeable thereon) may be taken by the Company, the Nominated Adviser, Peel Hunt, Liberum Capital and/or Numis Securities in any jurisdiction in which the relevant Placee is incorporated or in which any of its securities have a quotation on a recognised stock exchange;
34. acknowledges that time shall be of the essence as regards to its obligations pursuant to this Announcement;
35. agrees that the Company, the Nominated Adviser, Peel Hunt, Liberum Capital and Numis Securities and their respective affiliates and others will rely upon the truth and accuracy of the foregoing representations, warranties, acknowledgements and undertakings which are given to Peel Hunt, Liberum Capital and Numis Securities on their own behalf and on behalf of the Company and are irrevocable and are irrevocably authorised to produce this Announcement and, when published, the Admission Document, or a copy thereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby;
36. agrees to indemnify on an on demand, after-tax basis and hold, the Company, the Nominated Adviser, Peel Hunt, Liberum Capital and Numis Securities and their respective affiliates harmless from any and all costs, claims, liabilities and expenses (including legal fees and expenses) arising out of or in connection with any breach of the representations, warranties, acknowledgements, agreements and undertakings in this Announcement and further agrees that the provisions of this Announcement shall survive after completion of the Placing;
37. acknowledges that no action has been or will be taken by any of the Company, the Nominated Adviser, Peel Hunt, Liberum Capital, Numis Securities or any person acting on behalf of the Company, the Nominated Adviser, Peel Hunt, Liberum Capital or Numis Securities that would, or is intended to, permit a public offer of the Placing Shares in any country or jurisdiction where any such action for that purpose is required;
38. acknowledges that it is an institution that has knowledge and experience in financial, business and international investment matters as is required to evaluate the merits and risks of subscribing for and/or acquiring the Placing Shares. It further acknowledges that it is experienced in investing in securities of this nature and in this sector and is aware that it may be required to bear, and it, and any accounts for which it may be acting, are able to bear, the economic risk of, and is able to sustain, a complete loss in connection with the Placing. It has relied upon its own examination and due diligence of the Company and its associates taken as a whole, and the terms of the Placing, including the merits and risks involved;
39. acknowledges that its commitment to subscribe for and/or purchase Placing Shares on the terms set out herein and in the trade confirmation or contract note will continue notwithstanding any amendment that may in future be made to the terms of the Placing and that Placees will have no right to be consulted or require that their consent be obtained with respect to the Company's conduct of the Placing;
40. acknowledges that the Nominated Adviser, Peel Hunt, Liberum Capital and/or Numis Securities or any of their affiliates acting as an investor for its own account may take up shares in the Company and in that capacity may retain, purchase or sell for its own account such shares and may offer or sell such shares other than in connection with the Placing;
41. represents and warrants that, if it is a pension fund or investment company, its subscription and/or purchase of Placing Shares is in full compliance with all applicable laws and regulation;
42. to the fullest extent permitted by law, it acknowledges and agrees to the disclaimers contained in the announcement, including this Announcement;
43. acknowledges that the allocation of Placing Shares (in respect of the Placing shall be determined by Peel Hunt, Liberum Capital and Numis Securities after consultation with, and the approval of the Company and the Nominated Adviser, (so far as is practicable) and Peel Hunt, Liberum Capital and Numis Securities may scale back any placing commitment on such basis as they, with the approval of the Company, may determine (which may not be the same for each Placee);
44. irrevocably appoints any Director and any director or duly authorised employee or agent of Peel Hunt, Liberum Capital or Numis Securities to be its agent and on its behalf (without any obligation or duty to do so), to sign, execute and deliver any documents and do all acts, matters and things as may be necessary for, or incidental to, its subscription for and/or purchase of all or any of the Placing Shares allocated to it in the event of its own failure to do so;
45. the Company reserves the right to make inquiries of any holder of the Placing Shares or interests therein at any time as to such person's status under the U.S. federal securities laws and to require any such person that has not satisfied the Company that holding by such person will not violate or require registration under the U.S. securities laws to transfer such Placing Shares or interests in accordance with the Articles (as amended from time to time);
46. if it is acting as a "distributor" (for the purposes of UK MiFIR Product Governance Requirements):
(1) it acknowledges that the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of Chapters 9A or 10A respectively of the FCA Handbook Conduct of Business Sourcebook; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the Placing Shares and each distributor is responsible for undertaking its own target market assessment in respect of the Placing Shares and determining appropriate distribution channels;
(2) notwithstanding any Target Market Assessment undertaken it confirms that, other than where it is providing an execution-only service to investors, it has satisfied itself as to the appropriate knowledge, experience, financial situation, risk tolerance and objectives and needs of the investors to whom it plans to distribute the Placing Shares and that it has considered the compatibility of the risk/reward profile of such Placing Shares with the end target market; and
(3) it acknowledges that the price of the Placing Shares may decline and investors could lose all or part of their investment; the Placing Shares offer no guaranteed income and no capital protection; and an investment in the Placing Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom; and
47. the Company, the Nominated Adviser, Peel Hunt, Liberum Capital and Numis Securities will rely upon the truth and accuracy of the foregoing representations, warranties, undertakings and acknowledgements. The Placee agrees to indemnify on an on demand, after-tax basis and hold each of, the Company, the Nominated Adviser, Peel Hunt, Liberum Capital and Numis Securities and their respective affiliates harmless from any and all costs, claims, liabilities and expenses (including legal fees and expenses) arising out of any breach of the representations, warranties, undertakings, agreements and acknowledgements in this Announcement.
The representations, warranties, acknowledgments and undertakings contained in this Announcement are given to the Nominated Adviser, Peel Hunt, Liberum Capital, Numis Securities, the Company (as the case may be) and are irrevocable and shall not be capable of termination in any circumstances.
The agreement to settle a Placee's subscription and/or purchase (and/or the subscription and/or purchase of a person for whom such Placee is contracting as agent) free of stamp duty and stamp duty reserve tax depends on the settlement relating only to a subscription and/or purchase by it and/or such person direct from the Company for the Placing Shares in question. Such agreement assumes that the Placing Shares are not being subscribed for and/or acquired in connection with arrangements to issue depositary receipts or to transfer the Placing Shares into a clearance service. If there are any such arrangements, or the settlement relates to any other subsequent dealing in the Placing Shares, stamp duty or stamp duty reserve tax may be payable, for which neither the Company, nor the Nominated Adviser, nor Peel Hunt nor Liberum Capital nor Numis Securities will be responsible, and the Placee to whom (or on behalf of whom, or in respect of the person for whom it is participating in the Placing as an agent or nominee) the allocation, allotment, issue or delivery of Placing Shares has given rise to such UK stamp duty or stamp duty reserve tax undertakes to pay such UK stamp duty or stamp duty reserve tax forthwith and to indemnify on an on demand, after-tax basis and to hold harmless the Company, the Nominated Adviser, Peel Hunt, Liberum Capital and Numis Securities in the event that any of the Company, the Nominated Adviser, Peel Hunt, Liberum Capital or Numis Securities has incurred any such liability to UK stamp duty or stamp duty reserve tax. If this is the case, each Placee should seek its own advice and notify the Nominated Adviser, Peel Hunt, Liberum Capital and/or Numis Securities accordingly.
In addition, Placees should note that they will be liable for any stamp duty and all other stamp, issue, securities, transfer, registration, documentary or other duties or taxes (including any interest, fines or penalties relating thereto) payable outside the UK by them or any other person on the subscription and/or purchase by them of any Placing Shares or the agreement by them to subscribe for and/or purchase any Placing Shares.
Each Placee, and any person acting on behalf of the Placee, acknowledges that neither the Nominated Adviser, Peel Hunt, Liberum Capital nor Numis Securities owes any fiduciary or other duties to any Placee in respect of any representations, warranties, undertakings or indemnities in the Placing Agreement.
When a Placee or person acting on behalf of the Placee is dealing with Peel Hunt, Liberum Capital or Numis Securities, any money held in an account with Peel Hunt, Liberum Capital and/or Numis Securities on behalf of the Placee and/or any person acting on behalf of the Placee will not be treated as client money within the meaning of the rules and regulations of the FCA made under the FSMA. The Placee acknowledges that the money will not be subject to the protections conferred by the client money rules. As a consequence, this money will not be segregated from Peel Hunt, Liberum Capital or Numis Securities money in accordance with the client money rules and will be used by Peel Hunt, Liberum Capital or Numis Securities in the course of its own business and the Placee will rank only as a general creditor of Peel Hunt, Liberum Capital or Numis Securities.
All times and dates in this Admission Document may be subject to amendment. Peel Hunt, Liberum Capital and/or Numis Securities shall notify the Placees and any person acting on behalf of the Placees of any changes.
Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser.
Supply and disclosure of information
If the Nominated Adviser, the Joint Bookrunners or the Company or any of their agents request any information about a Placee's agreement to subscribe for and/or acquire Placing Shares under the Placing, such Placee must promptly disclose it to them and ensure that such information is complete and accurate in all respects.
Each Placee acknowledges that it has been informed that, pursuant to GDPR the Company and/or the Registrar will, hold personal data (as defined in GDPR) relating to past and present Shareholders. Personal data will be retained on record for a period exceeding seven years after it is no longer used (subject to any limitations on retention periods set out in applicable law). The Registrar will process such personal data at all times in compliance with GDPR and shall only process for the purposes set out in the Company's privacy notice (the "Purposes") which is available for consultation on the Company's website at www.sigmaroc.com (the "Privacy Notice") which include to:
(a) process its personal data to the extent and in such manner as is necessary for the performance of its obligations under its respective service contracts, including as required by or in connection with the Placee's holding of Placing Shares, including processing personal data in connection with credit and anti-money laundering checks on it;
(b) communicate with it as necessary in connection with its affairs and generally in connection with its holding of Placing Shares;
(c) comply with the legal and regulatory obligations of the Company and/or the Registrar; and
(d) process its personal data for the Registrar's internal administration.
Where necessary to fulfil the Purposes, the Company will disclose personal data to:
(a) third parties located outside of the United Kingdom if necessary for the Registrar to perform its functions, or when it is within its legitimate interests, and in particular in connection with the holding of Placing Shares; or
(b) its affiliates, the Registrar and their respective associates, some of which may be located outside the United Kingdom.
Any sharing of personal data between parties will be carried out in compliance with the GDPR and as set out in the Privacy Notice.
Becoming registered as a holder of Placing Shares, a person becomes a data subject (as defined under GDPR). In providing the Registrar with information, the Placee hereby represents and warrants to the Company and the Registrar that: (i) it complies in all material aspects with its data controller obligations under GDPR, and in particular, it has notified any data subject of the Purposes for which personal data will be used and by which parties it will be used and it has provided a copy of the Privacy Notice; and (ii) where consent is legally competent and/or required under GDPR the Placee has obtained the consent of any data subject to the Company, the Registrar and their respective affiliates and group companies, holding and using their personal data for the Purposes (including the explicit consent of the data subjects for the processing of any sensitive personal data for the Purposes).
Each Placee acknowledges that by submitting personal data to the Registrar (acting for and on behalf of the Company) where the Placee is a natural person he or she has read and understood the terms of the Privacy Notice.
Each Placee acknowledges that by submitting personal data to the Registrar (acting for and on behalf of the Company) where the Placee is not a natural person it represents and warrants that:
(a) it has brought the Privacy Notice to the attention of any underlying data subjects on whose behalf or account the Placee may act or whose personal data will be disclosed to the Company as a result of the Placee agreeing to subscribe for and/or purchase Placing Shares; and
(b) the Placee has complied in all other respects with all applicable data protection legislation in respect of disclosure and provision of personal data to the Company.
Where the Placee acts for or on account of an underlying data subject or otherwise discloses the personal data of an underlying data subject, he/she/it shall, in respect of the personal data it processes in relation to or arising in relation to the Placing:
(a) comply with all applicable data protection legislation;
(b) take appropriate technical and organisational measures against unauthorised or unlawful processing of the personal data and against accidental loss or destruction of, or damage to the personal data;
(c) if required, agree with the Company and the Registrar, the responsibilities of each such entity as regards relevant data subjects' rights and notice requirements; and
(d) immediately on demand, fully indemnify each of the Company and the Registrar and keep them fully and effectively indemnified against all costs, demands, claims, expenses (including legal costs and disbursements on a full indemnity basis), losses (including indirect losses and loss of profits, business and reputation), actions, proceedings and liabilities of whatsoever nature arising from or incurred by the Company and/or the Registrar in connection with any failure by the Placee to comply with the provisions set out above.
The rights and remedies of the Nominated Adviser, the Joint Bookrunners and the Company under these terms and conditions are in addition to any rights and remedies which would otherwise be available to each of them and the exercise or partial exercise of one will not prevent the exercise of others.
On application, if a Placee is an individual, that Placee may be asked to disclose in writing or orally his nationality. If a Placee is a discretionary fund manager, that Placee may be asked to disclose in writing or orally the jurisdiction in which its funds are managed or owned. All documents provided in connection with the Placing will be sent at the Placee's risk. They may be sent by post to such Placee at an address notified by such Placee to the Nominated Adviser and the Joint Bookrunners.
Each Placee agrees to be bound by the Articles (as amended from time to time) once the Placing Shares which the Placee has agreed to subscribe for and/or acquire pursuant to the Placing have been acquired by the Placee. The contract to subscribe for and/or acquire Placing Shares under the Placing and the appointments and authorities mentioned in this Announcement will be governed by, and construed in accordance with, the laws of England and Wales. For the exclusive benefit of the Nominated Adviser, the Joint Bookrunners and the Company, each Placee irrevocably submits to the jurisdiction of the courts of England and Wales and waives any objection to proceedings in any such court on the ground of venue or on the ground that proceedings have been brought in an inconvenient forum. This does not prevent an action being taken against a Placee in any other jurisdiction.
In the case of a joint agreement to subscribe for and/or acquire Placing Shares under the Placing, references to a Placee in these terms and conditions are to each of the Placees who are a party to that joint agreement and their liability is joint and several.
The Nominated Adviser, the Joint Bookrunners and the Company expressly reserve the right to modify the Placing (including, without limitation, its timetable and settlement) at any time before allocations are determined. The Placing is subject to the satisfaction of the conditions contained in the Placing Agreement and to the Placing Agreement not having been terminated.