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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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Biofutures | LSE:BIP | London | Ordinary Share | GB00B12B4T47 | ORD 1P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 7.025 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
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0 | 0 | N/A | 0 |
RNS Number:1877L Biofutures International plc 30 October 2006 Immediate Release 30 October 2006 Biofutures International plc Proposed acquisition of Zurex Corporation Sdn. Bhd. Placing of 44,200,000 Placing Shares at 25p per share Adoption of Long Term Incentive Plan Application for admission of Enlarged Share Capital to AIM Notice of Extraordinary General Meeting Biofutures International plc ("the Company"), a company established to invest in or acquire assets, businesses or companies in the renewable fuels industry, located in Asia and Europe, announces the proposed acquisition of Zurex Corporation Sdn. Bhd. ("Zurex"). *Proposed acquisition of Zurex, a Malaysian company founded in November 2005 which holds a licence to produce biodiesel derived from palm oil in Malaysia *Consideration for the acquisition is the allotment and issue by the Company to the vendors of 66,670,000 Ordinary Shares, which at a price of 25p per share, values Zurex at approximately #16.67 million *The size of the site on which, the plant is expected to commence operations with a capacity of 200,000 tonnes per annum, is large enough to provide sufficient suitable land to expand the Plant to 1,000,000 tonnes per annum capacity *Placing of 44,200,00 Placing Shares,which, at a price of 25p per share to raise #11,050,000 before expenses *Utilisation of placing proceeds to acquire the site and to commence construction of the plant *Acquisition constitutes a reverse takeover under AIM rules and is therefore conditional upon Shareholder approval *Reverse takeover requires cancellation of the Company's shares on AIM and an application for the enlarged share capital to be admitted to trading on AIM Commenting on the proposed acquisition and subsequent re-listing of the Company's shares to trading on AIM, Nicholas Gee, Executive Chairman of Biofutures International, said: "Biofutures International was founded and admitted to AIM earlier this year for the purpose of establishing and investing in businesses within the Asian and European renewable fuels industries. The acquisition of Zurex, less than six months after listing on AIM, represents an excellent opportunity for the Company to commence operating in the substantial renewable energies market and to fulfill the brief outlined to shareholders at the time of our flotation." For further information: Nicholas Gee Biofutures International plc 0207 4665000 Joseph Marffy Ruegg & Co Limited 0207 584 3663 Buchanan Communications Mark Edwards/Suzanne Brocks 0207 466 5000 Copies of theAdmission document will be available to the public free of charge from the date of this document until the date which is one month after Admission, from the offices of DLA Piper, at 3 Noble Street, London EC2V 7EE during normal business hours (Saturdays and Sundays excepted). ACQUISITION AND PLACING STATISTICS Consideration Shares to be issued 66,670,000 Gross proceeds raised by the Placing (assuming all the Placing Shares are issued) #11,050,000 Estimated net proceeds of the Placing receivable by the Company #10,080,000 Placing Shares to be issued 44,200,000 Total number of New Ordinary Shares to be issued 110,870,000 Placing Price 25p Number of Ordinary Shares in issue immediately following completion of the Acquisition and the Placing 147,730,000 Percentage of Enlarged Share Capital represented by the Consideration Shares 45.13% Percentage of Enlarged Share Capital represented by the Placing Shares 29.92% Existing Ordinary Shares as a percentage of the Enlarged Share Capital 24.95% Market capitalisation of the Company at the Placing Price on Admission #36,932,500 EXPECTED TIMETABLE OF PRINCIPAL EVENTS Publication of the admission document 30 October 2006 Latest time and date for receipt of completed Forms of Proxy for the EGM 11 a.m. on 21 November 2006 Extraordinary General Meeting 11 a.m. on 23 November 2006 Completion of the Acquisition 24 November*2006 Admission effective and expected commencement of dealings on AIM in the Ordinary Shares 24 November 2006 Expected date for CREST accounts to be credited 24 November 2006 Dispatch of definitive share certificates by no later than 8 December 2006 Introduction The Company's shares were suspended from trading on AIM on 1 June 2006 following press speculation concerning the possible acquisition of a biodiesel plant in Malaysia. On 28 July 2006, the Company announced that it had entered into a conditional agreement to acquire Zurex, a Malaysian company formed in November 2005 which holds a license to produce biodiesel derived from palm oil in Malaysia. Zurex has also entered into a contract with Palm Oil Industrial Clutter Sabah Sdn. Bhd. ("POIC"), an entity set up to acquire the Site on which it intends to construct a 200,000 tonnes per annum biodiesel plant. The Company today announces that it intends, by way of a placing of 44,200,000 Placing Shares, at a price of 25p per share, to raise #11,050,000 before expenses. The expected net proceeds of the Placing of #10,080,000 will be applied to acquire the Site and to commence construction of the Plant. The consideration for the Acquisition is the allotment and issue by the Company to the Vendors of 66,670,000 Ordinary Shares, credited as paid up at the Placing Price which values Zurex at approximately #16.67 million. The Acquisition will constitute a reverse takeover under the AIM Rules and is therefore conditional (inter alia) upon the approval of Shareholders in a general meeting. A reverse takeover also involves the cancellation of the Company's shares from trading on AIM and a new application to be made for the Enlarged Share Capital to be admitted to trading on AIM. Following Completion, the Concert Party (all of the shareholders of Zurex) will be the beneficial owners of 66,670,000 Ordinary Shares in the Company, representing approximately 45.13 per cent. of the Enlarged Share Capital (assuming that all of the Placing Shares are issued). Shareholders will also therefore be asked to vote on a resolution to approve a Waiver by the Panel of any obligation on the part of members of the Concert Party to make a general offer to Shareholders under Rule 9 of the Takeover Code arising from the issue to members of the Concert Party of the Consideration Shares pursuant to the Acquisition Agreement. Information on Biofutures Biofutures was incorporated on 17 February 2006 and admitted to trading on AIM on 5 May 2006. Biofutures is an investment company and has been seeking to establish, invest in or acquire assets, businesses or companies in the Asian and European renewable fuels industries. As at 29 September 2006 Biofutures had cash at bank of #2,403,407. Background to and reasons for the Acquisition and the Placing Since IPO Admission the Directors have been reviewing various options in line with the Company's investment and acquisition strategy. The Directors believe that the Acquisition will allow Shareholders to participate in the Enlarged Group which combines Zurex's right to acquire the Site and licence to manufacture palm oil biodiesel, with the Company's ability to access the capital markets. The proceeds of the Placing together with the Company's existing cash resources will enable the construction of the Plant to commence. The Directors believe that the Site can accommodate the construction of further plant taking the total capacity of the Site up to a capacity of 1 million tonnes of palm oil biodiesel per annum subject to any consent that may be required. Biodiesel market Biodiesel has been in commercial production in Europe since 1991 and in the United States since 1998. In this time, it has emerged as a "clean" and "renewable" alternate fuel that boasts a number of advantages over conventional mineral diesel and other fuel options: * renewable fuel, non-toxic and rapidly biodegradable * produces almost 80 per cent. less lifecycle CO2 emissions than mineral diesel * helps toward lower particulate exhaust emissions and reduces carcinogenic impact * improves lubricity, even in blends with low-sulphur diesel * higher cetane number than mineral diesel, thus ensuring quick engine start-up in cold climates * can be used without modification to the engine * in a low percentage blend, it can be supplied using the existing fuel supply infrastructure through standard diesel pump equipment * Its high flashpoint makes it a safer fuel to handle than any conventional fuel Major Markets The European market is currently the most well developed biodiesel market due to the legislative environment for use of renewable fuels in road transport and the implied growth this legislation demands. It also has distributor support and consumer acceptance. Germany, France and Italy are the largest consumer markets among the Member States of the EU. As such Europe is currently the main target market. An EU directive of 5.75 per cent. biofuels consumption by 2010 should push demand from 6 million tonnes to nearly 14 million tonnes per annum in Europe. The Directors believe the rapid development of other geographical markets, including those in Asia and the USA (the latter intends to raise biofuels use to 4 per cent. by 2012) will continue over the next 18 months. The location of the Plant in Malaysia offers the Enlarged Group significant advantages in accessing these alternative markets. Malaysia is the world's largest palm oil producer and is geographically well-placed for all biodiesel markets in Europe, the USA and Asia. Based on the legislative targets of various countries, global biodiesel demand is expected by the Directors to at least treble by 2010. Feedstock Biodiesel can be produced from a variety of feedstocks including vegetable oils such as rapeseed oil, sunflower oil, palm oil, soybean oil, coconut oil, jatropha, tallow and waste cooking oil. In Europe, over 75 per cent. of biodiesel production volume utilises rapeseed oil as a feedstock. The Enlarged Group intends to use palm oil which has a far higher yield per acre than any other current vegetable oil and which is abundant in its proposed area of operation. However, the Plant will be capable of using other feedstocks, subject to the Enlarged Group obtaining a variation to the terms of the manufacturing licence which currently only permits biodiesel to be manufactured from palm oil. There can be no assurances that such licence will be granted. Despite the EU 6.5 per cent. import tariff and recent tax changes in Germany, the European market is still the most commercially attractive due to the relative prices of palm oil feedstock compared with domestic EU feedstock of rapeseed oil. Blending Biodiesel may be utilised in a pure form (B100) or blended with mineral diesel in a variety of proportions. B5 (a blend containing 5 per cent. biodiesel and 95 per cent. mineral diesel) is commonly supplied in Europe. The Directors and Proposed Directors anticipate that as the European renewable fuels targets are raised, the commonly supplied blend ratio is also likely to rise. It is also anticipated that the end market for most of the palm oil biodiesel produced by the Plant in the early stage will be sold into the B5 (distribution to all motorists through high street filling stations) and B5+ (usually for distribution to centrally fuelled fleets) markets. In some market segments there is a requirement to deliver biodiesel to European standard EN14214. Biofutures intends to produce palm oil biodiesel to EN14214 specification with the exception of the cold filter plugging point (CFPP). For retail blends of B5 biodiesel or below, the CFPP properties of the blend become indistinguishable from those of the petroleum diesel fuel in the blend. Thus the blend meets the required diesel specification. In practice most biodiesel is sold blended with petroleum diesel, typically in B5 and B20 proportions. Such biodiesel blends have been used in a variety of climates, including extreme cold, without cold flow problems. By-product The production of palm oil biodiesel yields glycerine as a by-product equivalent to approximately 11.7 percent. by volume of biodiesel produced. Glycerine is a bulk commodity chemical with a wide variety of end uses, primarily in the food, healthcare and pharmaceutical industries. Historically the glycerine market has been volatile and is currently experiencing over-supply. The Directors believe that the demand for glycerine will grow as supply becomes more stable, market prices fall and it becomes accepted as a substitute for other products such as sorbitol. However, in view of the currently uncertain nature of the glycerine market, the Company does not intend to construct a pharmaceutical grade glycerine distillation unit before the Plant becomes operational. The Company intends periodically to review the position and will commission a pharmaceutical grade glycerine distillation unit when it is considered economically justified to do so. Bank Finance The net proceeds of the Placing of approximately #10,080,000 and together with the existing cash resources of #2.4 million will provide sufficient working capital to the Company for the twelve months following Admission. However, the Directors and Proposed Directors have estimated that the total cost of construction of the Plant is #40 million and therefore the Company will need to obtain additional finance in order to complete the construction of the Plant. The Directors and Proposed Directors have been in discussions with various banks. The Directors and Proposed Directors believe that the Company will obtain bank finance on acceptable terms and they aim to achieve this by early 2007. The Company will not commit to expenditure beyond its cash resources unless and until sufficient bank funding is in place to fund fully the construction of the Plant and working capital requirements during the construction period. If sufficient bank facilities are not entered into, and other forms of financing are not found, the Company may decide not to proceed further with the construction of the Plant and instead to seek, subject to obtaining POIC's permission, to sell its rights to the development of the Plant to a third party and to return its remaining cash resources to Shareholders or obtain Shareholder consent to make an alternative investment. Estimated project costs including use of proceeds of the Placing In combination with bank finance and the Company's existing cash reserves, it is the Directors' current intention to use the proceeds of the Placing as follows: #m Purchase of the Site 4.0 Construction contract 6.2 Site buildings and IT 4.0 Process infrastructure 6.0 Construction, engineering and commissioning 1.5 Additional infrastructure relating to POIC 2.3 Working capital 12.0 Contingency 4.0 40.0 Strategy Biofutures' commercial strategy is to process palm oil (being the lowest cost pure feedstock) for the production of biodiesel. By selecting a production site in Malaysia the Directors believe this will achieve both security of palm oil supplies and geographical accessibility to a choice of key sales markets, namely the Far East, Europe and the USA. The Site has also been selected for its location within a developing key palm oil logistic hub with a deep water port. The Company intends to sell 100 per cent. palm methyl ester (B100 biodiesel) to wholesalers, blenders or petroleum refiners who will then blend the Company's biodiesel (and possible other biodiesels) with petroleum diesel to produce blends such as B5 to the relevant market fuel standard. The Directors have been in discussions with Lurgi, one of the world's market leaders in the construction of biodiesel plants, and will deploy proven technology in the Company's Plant. Regarding construction, commission and expansion of the Plant, the Company will call on the skills of its experienced oil industry capital project management team, whilst concurrently building operations and marketing teams. The size of the Site, on which the Plant is expected to commence operations with a capacity of 200,000 tonnes per annum, is large enough to provide sufficient suitable land to expand the Plant to 1,000,000 tonnes per annum capacity should demand and economics dictate and subject to obtaining any necessary regulatory consents. Following Admission, the Company will seek to put in place feedstock supply and product off-take agreements as market conditions and the approaching Plant commissioning date dictate. As at the date of Admission, the Company has assumed no revenue from by-product streams given the recent decline in glycerine prices and has no current intention to construct a pharmaceutical grade glycerine distillation unit. Principal Terms of the Acquisition On 28 July 2006, the Company entered into the Acquisition Agreement with the Vendors whereby the Company conditionally agreed to acquire the entire issued share capital of Zurex. Under the terms of the Acquisition Agreement the Company has agreed to issue and allot, on Completion, the Consideration Shares to the Vendors credited fully paid at the Placing Price which values Zurex at approximately #16.67 million. No cash consideration will be paid. The Vendors have given certain commercial warranties relating to Zurex. The Acquisition is conditional, inter alia, on the passing of the Resolutions. Upon Completion, the Proposed Directors (being two of the Vendors) will be appointed as non-executive directors of the Company. The Consideration Shares will represent 45.13 per cent. of the Enlarged Share Capital and will, when issued, rank pari passu in all respects with the other Ordinary Shares then in issue, including all rights to all dividends and other distributions declared, made or paid following Admission. Directors, Proposed Directors and Senior Management Brief biographical details of the Directors and Proposed Directors are set out below. Directors Nicholas Wilding Gee, (aged 43), Executive Chairman Nicholas Gee graduated with a 1st class honours degree in chemical engineering from the University of Birmingham, and holds an MBA with distinction from Warwick Business School. He established Cobalt Blue in June 2004 to pursue investment opportunities in the oil and gas exploration and production sector, and in this regard has worked internationally with large and small oil and gas operating and service companies. Prior to this he held a number of senior roles in the oil and gas service sector. Between 2000 and 2004 he was Vice President of Weatherford International, driving substantial growth in their international sales. He began his career as a petroleum engineer with BP working in oil and gas exploration and production. Julie Patricia Pomeroy, (aged 51), Finance Director Julie Pomeroy graduated with an honours degree in Physics from Birmingham University. She is a Chartered Accountant and in addition holds tax and treasury qualifications. Julie was Group Finance Director of Carter & Carter Group plc until October 2005 having joined in 2002 to help grow and float the business. She had previously been Chief Financial Officer of Weston Medical Group plc and prior to this, Julie worked at East Midlands Electricity plc as Director of Corporate Finance. Since leaving Carter & Carter she has been following a portfolio finance director career working with growing businesses. Phillip John Carter, (aged 44), Non-executive Director Phillip Carter graduated with an honours degree in chemistry from Southampton University. He founded Carter & Carter Limited in 1992, since which time he has driven the group's substantial growth, both in the UK and overseas, and has overseen a number of successful acquisitions and their successful integration. Carter & Carter Group plc was floated on the Official List of the London Stock Exchange in February 2005. Prior to establishing Carter & Carter Limited, he worked in a number of sales and marketing roles at ICI before becoming European Business Development Manager of the Paints Division of ICI. Christopher Ronald Price, (aged 45), Non-executive Director and Senior Independent Director Christopher Price graduated with an honours degree in accounting and economics from Southampton University. He qualified as a Chartered Accountant in 1986. He has considerable experience of managing financial matters within SME's. More recently, he has worked in senior financial roles within multinational corporations operating in the IT industry, embracing wide-ranging general management responsibilities on a pan-European basis. He has occupied his current position, Finance Director of Epson UK Limited, since 2001, during which time that company has enjoyed growth in both its home and export markets. Proposed Directors Wong Kai Fatt (aged 41), Non-executive Director Kai Fatt holds a degree in computer science and a doctorate in pharmacy and healthcare administration from the University of Louisiana. He is currently on the board of eAssetManagement SB, Fullerton Investment Ltd, Ethical Plantations SB, Medi-Flex Ltd and a number of inactive private companies. Prior to this, he held a number of senior roles in the financial services sector and has published works in the area of healthcare and equity investment research. No fee is payable to Wong Kai Fatt for his services as a non-executive director Wong Kai Fatt is engaged as an executive director of Zurex and is required to devote all his time and attention to the business of the Company. Mr Kai Fatt is entitled to an annual gross salary of #30,000. Lim Kwee Gee (aged 33), Non-executive Director Kwee Gee holds a degree in computer science from The National University of Singapore. He is currently on the board of ANC Group Pte Ltd, I-Invest Pte Ltd and Medi-Flex Ltd. His previous directorships include ECO Water Ltd, Labis Resources SB and Tropical Interest SB among others. Prior to this, he held a number of senior analytical roles in the financial services sector. No fee is payable to Lim Kwee Gee for his services as a non-executive director. Senior Management Wayne Rudd (aged 40), Projects Manager Wayne Rudd is a professional business manager who is currently chief executive officer and board member of TubeFuse Applications, a Shell Technology Ventures company. Wayne joined Weatherford International as Vice President in 1999, a position he held for six years, operating various multi national business units that underwent growth both organically and via acquisition. Wayne has strong capital project management experience having previously worked in various locations around the world on several large capital petroleum projects. He worked in this capacity for Halliburton, Statoil and Shell having started his career with NEI Parsons. Wayne acts as a consultant to the Company. Iain Stewart Anderson Young (aged 47), Commercial Manager Iain Young graduated with an honours degree in civil engineering from the University of Glasgow, and holds an MBA from Warwick Business School. Since 2003, he has been investigating biofuels, biodiesel technology, biofuels feedstock and transport fuel markets. Prior to this he was consultant to the oil & gas exploration sector in project management and project commercial risk management. Prior to this he was Managing Director of Allomax Limited, an engineering consultancy started up to provide oil field development support to oil companies large and small. He began his career as a petroleum engineer with BP working in oil and gas exploration and production. Iain has historically acted as a consultant to the Company, but following Admission, will become an employee. Yong Khai Weng (aged 35), Operations Manager Jack Yong graduated with an honours degree in chemical engineering from the University of Malaya in 1997 and has worked in the palm phytochemicals industry in Malaysia since. From 2003, he worked as Factory Manager for Supervitamins Sdn Bhd managing both a phytonutrients extraction plant and a biodiesel plant. Prior to this he worked as Assistant Production Manager for Carotech Sdn Bhd in the production, R&D and marketing of phytonutrients and biodiesel. See Keat Tatt (aged 42) Project Financial Controller See Keat Tatt graduated from the University of Melbourne, Australia in 1984 and qualified as a Chartered Accountant in 1988. He has considerable experience managing financial affairs in the Asia Pacific Region. Most recently he has worked in senior finance roles within US multinationals in the oilfield services industry, including Sperry Sun and Weatherford International. His work embraced wide ranging general and financial management responsibilities on an Asia Pacific regional basis. Lock-ins and Orderly Market Arrangements Immediately following Admission, the Directors and Proposed Directors will be interested in, in aggregate, 64,487,380 Ordinary Shares, representing approximately 43.65 per cent. of the Enlarged Share Capital. The Directors have each undertaken to the Company and Hichens, Harrison, subject to certain exceptions in accordance with the AIM Rules (including the ability to accept a take-over offer for the Company or to give irrevocable undertakings to accept the same), not to and to procure that their persons connected with them do not dispose or agree to dispose of any Ordinary Shares in which they are interested at any time before the first anniversary of Admission. The Lock-In Persons other than the Directors have each undertaken to the Company and Hichens, Harrison that they will not and shall procure that persons connected with them will not dispose of or agree to dispose of any interest in the Ordinary Shares held by them immediately following Admission for a period ending on the later of 24 months from the date of Admission, or the date on which the Plant produces not less than 15,000 tonnes of biodiesel per month for a period of three consecutive months except with the consent of Hichens, Harrison (which can be withheld at the absolute discretion of Hichens, Harrison) or in certain limited circumstances (including the ability to accept a take-over offer for the Company or give an irrevocable undertakings to accept the same). In addition to the restrictions on the sale of Ordinary Shares described above, each Lock-In Person has undertaken for the 12 months immediately following the expiry of their respective lock-in periods to effect and to procure that persons connected with them effect sales or disposals only through Hichens, Harrison with a view to maintaining an orderly market in the Ordinary Shares. Current Trading and Prospects Since IPO Admission, Biofutures has sought an appropriate acquisition target in line with its investment strategy,whilst minimising operating expenses. The Company's strategy is to establish, invest in or acquire assets, businesses or companies in the Asian and European renewable fuels industries. The Company at IPO Admission raised #2.9 million net of expenses and since then has incurred costs of approximately #215,000 in evaluating the project to build and operate the Plant and has made an interest free loan of #382,000 to Zurex under the terms of the Acquisition Agreement so that Zurex can make the first payment under the terms of the Land Acquisition Agreement. In addition, the Company has made a first payment of 418,200 Euros to Lurgi for materials required to build the Plant. Zurex has completed important work in establishing the feasibility of the project to build, commission and operate the Plant on the Site. The Directors believe that Zurex is a suitable acquisition for the Company and falls within the Company's strategy. The Directors and Proposed Directors expect that the construction of the Plant will be completed by October 2008. Subject to obtaining the necessary finance, it is their intention to increase the plant capacity from 200,000 tonnes to 1 million tonnes per annum on the Site but not before the Plant has been constructed and become fully operational. Competition Given the potential for growth in the biodiesel and biofuels markets, it is likely that the market will become increasingly competitive. The Directors anticipate that the number of biodiesel projects coming to fruition over the next few years will be substantial. The main competitive factors in the international biodiesel market are largely determined by the legislative environment in each geographical market, in particular, whether the relevant country has implemented a transport fuel tax regime or imposes production quotas. The key competitive factors are: *Quality management: consistent product quality and satisfaction of EN 14214 specifications (being the European biofuels quality specifications set by the European Committee for Standardisation); and *Production and delivery costs. For blended biodiesel, it is not yet clear at what volume of biodiesel production demand will become saturated, but when that is reached, the Directors believe that competition will move towards a price based system, given that it is essentially a commodity product. In 2008 the UK will introduce its Renewable Transport Fuels Obligations (RTFO) scheme which the Directors believe will boost European demand as UK refineries seek to meet their obligations. The Company will also be affected by local competition at the Lahad Datu site in Malaysia, as there are other biodiesel producers establishing plants on the POIC site. Initially the Directors and Proposed Directors believe that the only competition with these companies will be for certain supplies and trained local staff. However, as the Company and each of these producers develop their operations they will be in direct competition with each other and other participants in the biodiesel production market in Asia, Europe and the USA. While the Directors and Proposed Directors believe that the anticipated size and growth of the biodiesel market is sufficient to accommodate a large number of new producers, they are conscious of the need to exploit the Company's first mover advantage by securing firm commitments for delivery of biodiesel well in advance of first production. Dividend Policy The Company intends to use future cash generated from the sale of palm oil biodiesel, after the Plant has been built and is operational, to expand production capacity at the Site. Thereafter the Directors and Proposed Directors intend to commence the payment of dividends when it becomes commercially prudent to do so, subject to the availability of sufficient distributable profits and having regard to the need to retain sufficient funds to finance development of the Enlarged Group's activities. The City Code on Takeovers and Mergers The issue of the Consideration Shares to members of the Concert Party gives rise to certain considerations under the Takeover Code. Brief details of the Takeover Code and the protections this affords Shareholders are described below. The Takeover Code is issued and administered by the Panel. The Takeover Code applies to all takeovers and merger transactions, however effected, where the offeree company is, inter alia, a listed or unlisted public company resident in the UK, the Channel Islands or the Isle of Man or falls within certain categories of private limited companies. Biofutures is such a company and its Shareholders are entitled to the protection afforded by the Takeover Code. Under Rule 9 of the Takeover Code ("Rule 9"), where any person acquires, whether by a series of transactions over a period of time or by one specific transaction, an interest in shares which (taken together with shares in which persons acting in concert with him are interested) carry 30 per cent. or more of the voting rights of a company that is subject to the Takeover Code, that person is normally required by the Panel to make a general offer in cash to the shareholders of that company to acquire the balance of the equity share capital of the company at the highest price paid by him or any person acting in concert with him in the previous 12 months. The Panel, which has been consulted by Ruegg & Co on behalf of the Company, has deemed that the six individual shareholders of Zurex, as vendors of a private company, to be acting in concert for the purposes of the Takeover Code. Immediately following Admission and Completion, the members of the Concert Party will be interested in 66,670,000 Ordinary Shares, representing a maximum of 45.13 per cent. of the Enlarged Share Capital. Following completion of the Acquisition, the members of the Concert Party will between them be interested in Ordinary Shares carrying 30 per cent. or more of the Company's voting share capital but will not hold shares carrying more than 50 per cent. of such voting rights and for so long as they continue to be treated as acting in concert any further increase in that aggregate interest in Ordinary Shares will be subject to the provisions of Rule 9 of the Takeover Code. The Directors believe that it is appropriate for the Company to carry out the Acquisition and the Placing and to issue the Consideration Shares to members of the Concert Party. However, the Directors would not be prepared to approve the Acquisition or the Placing in circumstances that would lead to the Concert Party or any member of it becoming obliged to make a general offer to acquire all of the Ordinary Shares not held by the Concert Party or such member. It is for this reason that the Directors have decided to seek the Waiver from the Panel from the obligation on the Concert Party (or any member of it) to make a general offer to Shareholders under Rule 9 as a result of the issue to them of the Consideration Shares. The Panel has agreed, subject to the Waiver Resolution being passed on a poll by the Shareholders, to grant the Waiver. The Waiver is conditional upon the Waiver Resolution being approved by the holders of the Existing Ordinary Shares, all of whom are independent of the Concert Party, voting on a poll at the EGM. Unless the Waiver is approved by Shareholders, the issue to members of the Concert Party of Consideration Shares would give rise to an obligation on the Concert Party to make a general offer to all Shareholders under Rule 9 of the Takeover Code. Intentions of the Concert Party Save for the appointment of the Proposed Directors on Admission, no member of the Concert Party is proposing any changes to the Board and the members of the Concert Party have confirmed their intention that, following the issue to them of the Consideration Shares, the business of the Company would be allowed to continue in substantially the same manner, with no major changes to the business and no likely repercussions on employment and locations of the Enlarged Group's places of business. The members of the Concert Party have also confirmed that the existing employment rights, including pension rights (where relevant), of all employees of the Enlarged Group would be maintained. The Placing The Company has conditionally placed a total of 44,200,000 Placing Shares at the Placing Price, to raise #11,050,000 before expenses of approximately #970,000, for the Company. The Placing is conditional, inter alia, upon: (a) the passing of the Resolutions; (b) the Placing Agreement becoming unconditional (save for Admission) and not having been terminated in accordance with its terms prior to Admission; and (c) Admission having become effective on or before 8.00 a.m. on 24 November 2006 (or such later date as Hichens, Harrison and the Company may agree, not being later than 7 December 2006). The Placing is not being underwritten in whole or in part by Hichens, Harrison or any other party. The Placing Shares will represent 29.92 per cent.of the Enlarged Share Capital and will, when issued, rank pari passu in all respects with the other Ordinary Shares then in issue, including all rights to all dividends and other distributions declared, made or paid following Admission. Application will be made for the Enlarged Share Capital to be admitted to trading on AIM. It is expected that trading in the Enlarged Share Capital will commence on 24 November 2006. Long Term Incentive Plan The Directors propose, subject to Shareholder approval, that the Company adopts the LTIP to incentivise the Company's Directors and senior management. Corporate Governance The Directors and Proposed Directors recognise the importance of sound corporate governance and intend to observe the requirements of the Code of Best Practice, as published by the Committee on Corporate Governance (commonly known as the "Combined Code") to the extent they consider appropriate in light of the Company's size, stage of development and resources. Due to the size and nature of the Company it does not currently comply with all the provisions of the Combined Code. The Company has an audit committee and a remuneration committee. The members of the audit committee and the remuneration committee as at the date of this document are the non-executive directors of the Company namely Phillip Carter and Christopher Price. Phillip Carter is the chairman of the remuneration committee and Christopher Price is the chairman of the audit committee. The constitutions of these committees will remain unchanged post Admission. In the light of the size of the Board, the Directors and Proposed Directors do not consider it necessary to establish a nomination committee, however this will be kept under regular review. The Company has adopted a model code for dealings in shares by directors and senior employees which is appropriate for an AIM company. The Directors and Proposed Directors will comply with Rule 21 of the AIM Rules relating to directors' dealings and will take all reasonable steps to ensure compliance by the Enlarged Group's applicable employees. CREST CREST is a paperless settlement procedure enabling securities to be evidenced otherwise than by a certificate and transferred otherwise than by written instrument. The Articles contain certain provisions concerning the transfer of shares which are consistent with the transfer of shares in dematerialised form in CREST under the CREST Regulations. The existing Ordinary Shares are currently enabled for settlement through CREST. Accordingly, settlement of transactions in the Ordinary Shares following Admission may take place within the CREST system if relevant Shareholders so wish. CREST is a voluntary system and holders of Ordinary Shares who wish to receive and retain share certificates will be able to do so. Extraordinary General Meeting Set out at the end of this document is a notice convening the Extraordinary General Meeting of the Company to be held at the offices of DLA Piper UK LLP at 3 Noble Street, London EC2V 7EE on 23 November 2006 at which the following resolutions will be proposed: * Resolution 1 is an ordinary resolution to increase the authorised share capital of the Company; * Resolution 2 is an ordinary resolution to approve the Acquisition for the purposes of the AIM rules; * Resolution 3 is an ordinary resolution to approve the waiver of the obligation under Rule 9 of the Takeover Code by the Panel in respect of the issue of the Consideration Shares to members of the Concert Party; * Resolution 4 is an ordinary resolution to authorise the Directors to allot the Placing Shares, Consideration Shares and a limited number of Ordinary Shares; * Resolution 5 is an ordinary resolution to approve the Long Term Incentive Plan; and * Resolution 6 is a special resolution to authorise the Directors to issue the Placing Shares and a limited number of Ordinary Shares otherwise than on a pre-emptive basis. Resolution 3 will be voted on by a poll of Shareholders. The attention of Shareholders is also drawn to the voting intentions of the Directors set out in paragraph titled Recommendation below. Recommendation The Directors, having been so advised by Ruegg & Co, believe that the Proposals and the Resolutions are fair and reasonable and in the best interests of the Company and its Shareholders. Consequently the Directors recommend that Shareholders vote in favour of the Resolutions to be proposed at the Extraordinary General Meeting as those Directors, who are also Shareholders, intend to do in respect of their own beneficial holdings of Ordinary Shares and those of their connected persons which amount, in aggregate, to 16,685,000 Ordinary Shares representing 45.3 per cent. of the Existing Ordinary Shares. In providing advice to the Directors, Ruegg & Co has taken into account the Directors' commercial assessments. INFORMATION ON ZUREX AND THE SITE Introduction Zurex was incorporated on 29 November 2005 to establish a large scale 200,000 tonnes per annum palm oil biodiesel plant at POIC Lahad Datu, Sabah, Malaysia. Zurex's strategy is to produce palm oil biodiesel from the abundant feedstock of refined and crude palm oil in Malaysia and on the sale of palm oil biodiesel to regional (Asia Pacific) and EU markets. The Enlarged Group anticipates continuous production of palm oil biodiesel by October 2008. Location of the Plant Zurex has paid a non-refundable deposit of RM 2,613,600 (approximately #382,000) to acquire a 50 acre plot within Phase 1 of POIC's Lahad Datu site. This deposit was funded through an interest free loan from Biofutures pursuant to the terms of the Acquisition Agreement. POIC is developing the Lahad Datu site as part of a federal and local government long-term initiative which commenced in 2005 to ensure Malaysia retains the downstream economic value derived from its palm oil crop. Phase 1 of the development is for the preparation of a 500 acre site planned to be ready for operations by 2007. Lahad Datu has been designated as the country's third port of delivery for palm oil futures and is currently the centre of the palm oil industry in the Sabah province, Borneo. Sabah produces 30 per cent. of Malaysian palm oil and there are palm oil refineries close to the site. The site is adjacent to a designated oleo-chemicals handling deep water port, is surrounded by more than 100 palm oil mills and is home to companies which produce more than 5 million tonnes of palm and palm kernel oil per annum. POIC's remit is to develop the Lahad Datu site and the surrounding infrastructure to ensure the establishment and long-term growth of Lahad Datu as the principal palm oil industrial cluster within the ASEAN region. The Directors and the Proposed Directors believe that the location of the Plant at Lahad Datu affords a strong competitive advantage due to its close proximity to an existing supply of palm oil and a deep water port that can facilitate further supply as well as large volume export. The Site affords sufficient space to increase the proposed plant capacity from 200,000 tonnes per year to at least 1 million tonnes per year. Construction of the Plant On completion of the Placing and Acquisition Agreement, Zurex aims to complete its contract negotiations with JJ-Lurgi Engineering Sdn. Bhd. (a 50.0 per cent. associate company of Lurgi AG) to supply the components for construction of the Plant. Lurgi has indicated that it expects to be able to commence delivery of components within 12 months of signing the contract. The Directors and Proposed Directors believe that Lurgi's quotation for carrying out the works will be approximately #6.2 million. It is expected that construction of the Plant will be completed by October 2008. Lurgi has been building biodiesel plants for over 15 years and is one of the world's market leaders. It has constructed over 20 plants in Europe, mainly Germany and more than 25 of its plants are in operation worldwide. Lurgi has also constructed a plant in Batam Indonesia which uses palm oil. Licences and approvals Zurex has obtained the following consents and licences to enable the construction of the Plant: (a) a manufacturing licence from the Ministry of International Trade and Industry, Malaysia (b) a 100 per cent. five year tax exemption from the Malaysian Industrial Development Authority. Zurex is currently carrying out a compulsory environmental impact assessment for submission to and approval by the Department of Environment. Immediately prior to commencement of the construction of the Plant, Zurex will also be applying to the local authorities for approval for the Plant's building plan, certificate of fitness for occupation and for other business related licences which are inappropriate for application at this time. There can be no assurance that these approvals will be granted. Infrastructure, energy, water supply and drainage The Lahad Datu site is expected to be ready for operations in 2007 by which time the adjacent Lahad Datu port, which has a sheltered harbour of depth reaching in excess of 12.5 metres, will have been expanded to have more jetty, bulking and stevedoring facilities. Although there is currently an adequate electricity supply in the region, interruptions to power supply are not uncommon. Sabah Electricity is in the process of increasing the power supply to the region, partly in anticipation of the development of the Lahad Datu site. The Company intends to have its own power generation facilities at the Site. Water production capacity in Lahad Datu is 56.0 million litres per day (MLD). Expansion plans are in place by the local water department to increase output to meet the projected 2010 demand of 68.0 MLD. A centralised effluent treatment plant will be constructed by POIC to treat industrial effluent. The Enlarged Group will build its own water treatment plant at the Site to meet the standards of the POIC plant. Transport arrangements The existing Lahad Datu Port adjacent to the Site is managed by Sabah Ports Berhad. It has one of the deepest harbours in Sabah with depths in excess of 12.5 metres less than half a kilometre from shore. Port services include container handling and dry and bulk cargo handling. While Sabah Ports Berhad has plans to improve its capacity and facilities, POIC has plans to construct its own jetty in anticipation of the needs of factories. Lahad Datu regional airport is serviced by Air Asia. The Site is accessible by paved internal roads that connect with the main highway network in Borneo. Feedstock Zurex has obtained several letters of intent from suppliers of palm oil in Sabah, Malaysia and the Directors believe that sufficient palm oil feedstock for the Plant will be readily available. Palm oil is the lowest cost pure biodiesel feedstock and is significantly cheaper than rapeseed oil, the principal biodiesel feedstock used in Europe. It is typically priced around US$200 a tonne less than rapeseed oil. Off-take Zurex has signed an off-take agreement with Gori & Partners Private Limited for up to 5,000 tonnes a month of its biodiesel production which equates to 30 per cent. of planned production.The Directors expect to sign further off-take agreements before construction of the Plant is completed. Tax incentives Zurex has been granted "Pioneer Status" offering it tax-free status for a period of five years from the date of commercial production of palm oil biodiesel from the Plant. HISTORICAL FINANCIAL INFORMATION OF ZUREX CORPORATION SDN.BHD. Introduction The financial information on Zurex Corporation Sdn. Bhd. within this section has been prepared solely for the purpose of the AIM Admission Document of Biofutures International plc. Responsibility The Directors and Proposed Directors of Biofutures International plc are responsible for preparing the financial information and the contents of the document in which it is included. Principal activities and general information The company has the objective to engage in the manufacture of palm oil biodiesel. The company did not commence its business activities during the period from incorporation to 30 June 2006. The company is a private limited liability company, incorporated and domiciled in Malaysia. The registered office of the Company is located at 23B, Room B, Jalan 52/1, 46200 Petaling Jaya, Selangor Darul Ehsan and the principal place of business is located at Suite E-06-04, Plaza Mon't Kiara, 2, Jalan kiara, 50480 Kuala Lumpur. Principal accounting policies (a) Basis of preparation The financial information on Zurex Corporation Sdn. Bhd. has been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. The financial information has been prepared on the historical cost basis. It should be noted that accounting estimates and assumptions are used in the preparation of the financial information. Although these estimates are based on management's best knowledge of current events and actions, actual results may ultimately differ from those estimates. (b) Property, plant and equipment and depreciation Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Depreciation is computed on the straight line basis to write off cost of property, plant and equipment over their estimated economic lives. The residual value and the useful life of an asset is reviewed at every balance sheet date and, if expectations differ from previous estimates, the change for current and future periods are adjusted. The principal annual depreciation rate used is as follows:- Office equipment 20% The policy for the recognition and measurement of impairment loss is in accordance with note (d). (c) Income tax Income tax on the profit or loss for the period comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the period and is measured using the tax rates that have been enacted at the balance sheet date. Deferred tax is provided for, using the liability method, on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts in the financial statements. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that the taxable profit will be available against which the deductible temporary differences and deferred tax asset are recognised for all deductible temporary differences, unused tax losses and unused tax credits can be utilised. Deferred tax is not recognised if the temporary differences arise from goodwill or negative goodwill or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit. Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realized or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is recognised in the income statement, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also charged or credited directly in equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or negative goodwill. (d) Impairment of assets The carrying value of assets are reviewed for impairment when there is an indication that the assets might be impaired. Impairment is measured by comparing the carrying values of the assets with their recoverable amounts. The recoverable amount is the higher of net realisable value and value in use, which is measured by reference to discounted future cash flows. Recoverable amounts are estimated for individual assets, or if it is not possible, for the cash-generating unit. An impairment loss is charged to the income statement immediately, unless the asset is carried at revaluation amount in which case, the impairment loss is treated as a revaluation decrease to the extent of revaluation surplus previously recognised for the same assets. Subsequent increase in the recoverable amount of an asset is treated as reversal of the previous impairment loss and is recognised to the extent of the carrying amount of the asset that would have determined (net of amortisation and depreciation) had no impairment loss been recognised. The reversal is recognised in the income statement immediately. (e) Financial instruments Financial instruments carried on the balance sheet include cash and bank balances. The particular recognition methods adopted are disclosed in the individual accounting policy statements associated with each item. Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument classified as liability are reported as expense or income. Distributions to holders of financial instruments classified as equity are charged directly to equity. Financial instruments are offset when the company has legally enforceable right to set off the recognised amounts and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. (f) Cash and cash equivalents Cash and cash equivalents comprise of bank balances. Cash equivalents are highly liquid investments which are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. (g) Equity Share capital is determined using the nominal value of shares that have been issued. Accumulated losses include all current results as disclosed in the income statement. (h) Financial liabilities The company's financial liabilities include amounts due to a director. Financial liabilities are recognised when the company becomes a party to the contractual agreements of the instrument. (i) Foreign currencies Transactions in foreign currencies are translated into Malaysian Ringgits (RM), the currency in which the company normally reports, at the rates of exchange ruling at the dates of transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into RM at the rates of exchange ruling at that date. Gains and losses in the period arising on exchange are dealt with in the income statement. All amounts in the financial information have been converted into United Kingdom pounds sterling (#) from Malaysian Ringgits (RM) at the fixed exchange rate of RM6.68:#1, being the exchange rate at 30 June 2006. No losses or gains have therefore been recognised on translation. Income statement for the period from incorporation, 29 November 2005, to 30 June 2006 Period from 29 November 2005 Notes to 30 June 2006 # Continuing operations Revenue - Other income 3 15 Administrative expenses (372,046) _______ Loss before taxation (372,031) Tax 4 - _______ Loss for the period from continuing operations (372,031) ====== Balance sheet as at 30 June 2006 Notes 2006 # Assets Non current assets Property, plant and equipment 5 105 Current assets Cash and bank balance 3,173 ______ Total assets 3,278 ===== Equity and liabilities Current liabilities Amount due to a director 6 1,159 _____ Total liabilities 1,159 _____ Equity Share capital 7 374,150 Accumulated losses (372,031) _______ Total equity attributable to shareholders of the company 2,119 _____ Total equity and liabilities 3,278 ===== Statement of change in equity Share Accumulated capital losses Total # # # Changes in equity for period ended 30 June 2006 Loss for the period (372,031)(372,031) ________ ________ _______ Total recognised income and expenses for the period - (372,031)(372,031) Issue of share capital 374,150 374,150 _______ _______ _______ Balance at 30 June 2006 carried forward 374,150 (372,031) 2,119 ====== ======= ====== Cash flow statement from incorporation, 29 November 2005, to 30 June 2006 Period from 29 November 2005 Notes to 30 June 2006 # Cash flow from operating activities Loss before taxation (372,031) Adjustments for: Interest income (15) ________ Operating cash flow before working capital changes (372,046) Increase in amounts due to a director 1,159 ________ Net cash used in operating activities (370,887) ________ Cash flows from investing activities Interest received 15 Purchase of property, plant and equipment (105) _______ Net cash used in investing activities (90) _______ Cash flows from financing activities Proceeds from issue of ordinary shares 374,150 _______ Net cash generated from financing activity 374,150 _______ Net increase in cash and cash equivalents 3,173 Cash and cash equivalents at 29 November 2005 - _______ Cash and cash equivalents at 30 June 2006 3,173 ======= Notes to the financial information 1 Segmental Information (a) Primary reporting format - business segment: As defined under International Accounting Standard 14 (IAS14), the only material business segment the company has is the objective to engage in the manufacture of biodiesel. (b) Secondary reporting format - geographical segment: Under the definitions contained in IAS 14, the only material geographic segments that the company has operated in during the period is Malaysia. 2 Revenue There was no revenue generated by the company during the period. 3 Other income Other income in the period represents bank interest received. 4 Taxation Period from 29 November 2005 to 30 June 2006 # Current and deferred tax - ====== The charge for the period can be reconciled to the loss per the income statement as follows: Period from 29 November 2005 to 30 June 2006 # Loss before taxation (372,031) ======= Tax on loss at UK corporation tax rate of 19% (111,609) Unrelieved tax losses carried forward 111,609 ________ Total current tax - ======= 5 Property, plant and equipment Office equipment # Cost As at 29 November 2005 - Additions 105 _______ As at 30 June 2006 105 _______ Net book value As at 30 June 2006 105 _______ 6 Creditors: amounts falling due within one year Creditors: amounts falling due within one year represents an amount which is due to a director which is unsecured, interest free and has no fixed term of repayment. 7 Share capital 2006 # Authorised: Ordinary shares of RM1 each At date 29 November 2005 14,966 Created during the period 733,334 _______ At 30 June 2006 748,300 ======= Issued and fully paid: Ordinary shares of RM1 each At 29 November 2005 - Issued during the period 374,150 ________ At 30 June 2006 374,150 ======= At the date of incorporation the company's authorised share capital was RM100,000 divided into 100,000 ordinary shares of RM1 each. On 17 January 2006 the company increased its authorised share capital to RM5,000,000 by the creation of 4,900,000 ordinary shares of RM1 each. The fully paid up share capital of the company at its incorporation date was 2 ordinary shares of RM1 each. On 17 January 2006 the fully paid up share capital was increased by issuing 2,499,998 of RM1 each at par. 8 Employee information The company has not employed any staff since the date of its incorporation. 9 Financial instruments The carrying amounts of financial assets and liabilities of the company at the balance sheet date approximated their fair values. 10 Comparative information There is no comparative figure for the company as this is the first set of such financial statements being prepared. 11 Risk management objectives and policies The company is exposed to a variety of financial risks which result from its operating. The company risk management is coordinated by the board of directors, and focuses on actively securing the companies short to medium term cash flows by minimizing the exposure to financial markets. (a) Cash flow and fair value interest rate risks Cash flow is managed by means of ensuring sufficient cash and cash equivalents are held to support the trading activities of the company. The cash and cash equivalents are invested such that the maximum available interest rate is achieved with nominal rate. The company currently has no financial liabilities with floating interest rates. The fair value of cash and cash equivalents is considered to be not materially different to carrying amounts. This information is provided by RNS The company news service from the London Stock Exchange END ACQMRBPTMMMTBTF
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