IPSA Group PLC Proposal for Disposal of Assets and Notice of GM (7127N)

TIDMIPSA

RNS Number : 7127N

IPSA Group PLC

01 February 2016

IPSA Group PLC

("IPSA" or the "Company")

Proposal for Disposal of Assets

and

Notice of General Meeting

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

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

For further information contact:

 
 Mark Otto, Acting CEO 
  IPSA Group PLC                   [phone] 
 
   James Joyce / James Bavister      [phone] 
   W H Ireland Ltd                   1666 
 
   Riaan van Heerden, 
   PSG Capital (Pty) Ltd.            [phone] 
 

Proposed Disposal of Subsidiary and Related Matters

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

On 28 January 2016 we announced that we had conditionally agreed to sell our 100 per cent. interest in Blazeway, the company which owns our sole operating asset in Newcastle, Kwa Zulu Natal, South Africa through its wholly owned South African subsidiary, NewCogen, to Sloane Corporation, a privately owned company. The sale consideration is cash of GBP50,000 and non-cash of GBP1,816,000 in the form of the assumption of certain indebtedness of the Company equivalent in total to consideration of GBP1,866,000. The Disposal, if consummated, represents a disposal of the Company's sole operating asset and is therefore a fundamental disposal under AIM Rule 15, which would result in the Company being classified as an AIM Rule 15 cash shell, which would require the Company within six months of the Disposal to make an acquisition or acquisitions which will constitute a reverse takeover under AIM Rule 14.

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

The purpose of this letter is therefore to give you more information regarding the Disposal and to seek your approval to it.

Sale of Blazeway

The Company previously announced that its working capital was extremely tight and it has been reliant on the forbearance of its creditors and facing the possibility that the Company may be put into administration. As a result of the failure of one of NewCogen's gas turbines in November 2015, the working capital and creditor position have deteriorated still further.

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

The principal terms of the Disposal are as follows:

-- initial upfront cash consideration of GBP50,000 for the Company's shares in Blazeway, payable on execution of the SPA, which sum will be converted to a loan to the Company in the event that the sale is not consummated as a result of any condition precedent not being satisfied;

-- Sloane Corporation has already paid a further GBP50,000 in satisfaction of certain of NewCogen's outstanding liabilities, which sum will be converted to a loan to NewCogen in the event that the sale is not consummated as aforesaid;

-- Sloane Corporation has agreed to deposit on execution of the SPA the sum of GBP280,000 into escrow with the Company's nominated adviser to be drawn down and used to settle creditors and obligations of NewCogen up to this amount both prior to and following completion of the Disposal; and

-- Sloane Corporation has formally undertaken through covenants in the SPA and through agreements reached with third party creditors of the Company to assume liability for up to GBP1,866,000 of existing creditors of the Company.

   --     the Disposal is conditional upon: 

- requisite approval from Shareholders of the Disposal;

- the approval of IDC under the terms of the loan agreement between NewCogen and IDC;

- the formal assumption by Sloane Corporation of GBP1,866,000 of indebtedness of the Company, which assumption is subject to those creditors' consent.

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

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

Sloane Corporation is managed by Peter Earl, an experienced company director with over twenty years' experience in the power industry. The Directors believe that the sale of Blazeway will preserve jobs at the operating power plant in Newcastle, which is an area of high unemployment in South Africa.

Peter Earl, a former director of the Company, wholly owns Sloane Corporation. As Peter Earl left the IPSA board in July 2015, the transaction will be treated as a related party transaction under the AIM Rules. The Directors consider, having consulted with WH Ireland Limited, the Company's nominated adviser, that the terms of the transaction are fair and reasonable insofar as Shareholders are concerned.

In the year ended 31 March 2014, the audited loss before tax of Blazeway was GBP2,011,155 and net assets were negative GBP2,411,115. In the year ended 31 March 2015, the unaudited loss of Blazeway was GBP227,529 and the net assets were negative GBP2,638,644.

In the absence of other funding solutions in the available timeframe, the Company has concluded that the sale of Blazeway is the only way to avoid having to place NewCogen into business rescue, which in turn would result in a likely administration for IPSA. Whilst the financial position of IPSA will remain critical following the proposed sale as a result of the amount owed to Ethos of approximately GBP3.2 million, the Company will focus its attention in the near term on seeking to satisfy its remaining creditors from the sale of the balance of plant and the collection of the funds owing by Rurelec PLC.

AIM Rule 15 Cash Shell

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

Recommendation

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

DEFINITIONS

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

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

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

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

   the "Board" or the "Directors"     the directors of the Company; 

"Company" or "IPSA" IPSA Group PLC, a company registered in England and Wales with number 05496202;

"Disposal" the proposed disposal of the Company's interest in Blazeway to Sloane Corporation as described in this announcement document;

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

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

   "Group"                                         the Company and its subsidiaries; 

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

February 01, 2016 13:24 ET (18:24 GMT)

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

   "Ordinary Shares"                       the Company's ordinary shares of 2 pence each; 
   "Resolution"                                 the resolution to be proposed at the General Meeting; 
   "Shareholders"                            holders of the Ordinary Shares; 

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

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

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

2016

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

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

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

ENDS

This information is provided by RNS

The company news service from the London Stock Exchange

END

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February 01, 2016 13:24 ET (18:24 GMT)