Proposed cancellation of trading on AIM (4863T)

TIDMSQB

RNS Number : 4863T

Squarestone Brasil Limited

07 December 2011

7 December 2011

SQUARESTONE BRASIL LIMITED

("Squarestone Brasil", the "Company" or "the Group")

Proposed cancellation of trading on AIM

Notice of Extraordinary General Meeting

and

Notice of Meeting of Warrant Holders

The Company today announces that it intends to apply to cancel the trading of its Shares and Warrants on AIM. Accordingly, the Board is proposing to convene an Extraordinary General Meeting and a Meeting of Warrant Holders to put to Shareholders a special resolution and to put to Warrant Holders an extraordinary resolution to cancel admission of the Company's Shares and Warrants to trading on AIM respectively.

Pursuant to the AIM Rules for Companies, the Cancellation of each of the Shares and Warrants is conditional upon, (i) the approval of not less than 75 per cent. of the votes cast by Shareholders (whether present in person or by proxy) at the Extraordinary General Meeting; and (ii) the approval of not less than 75 per cent. of the votes cast by Warrant Holders (whether present in person or by proxy) at the Meeting of Warrant Holders.

In the event that Shareholders and Warrant Holders each approve the Cancellation, it is anticipated that the last day of dealings in the Shares and Warrants will be 13 January 2012 and that the effective date of the Cancellation will be 16 January 2012.

BACKGROUND TO AND REASONS FOR THE CANCELLATION

The Company will have to raise further funds to continue to take advantage of the opportunities in the Brazilian shopping mall market. The outlook for raising new equity funding for the foreseeable future through the AIM market remains extremely bleak, given continuing concerns over the European sovereign debt crisis and uncertain global macroeconomic conditions. This removes one of the key attractions for maintaining a quotation on AIM.

Conversely, through the marketing activities undertaken by the Company, it is clear that private equity investors remain focused on the Brazilian market and, in particular, the retail sector. However, it is clear that major private equity investors are not interested in investing in public equities (such as the Shares), but wish to make direct investments into Brazil at the underlying asset level. The Company's public quotation on AIM has therefore proved to have little practical value for many potential investors approached by the Company and has been a hindrance.

The Board believes that the medium term outlook for Brazil and, in particular, the retail sector within the country, remains positive. With a population of 194 million people, an under-provision of retail facilities and a rapidly growing middle class, with disposable income and an appetite for consumer goods, the Board is confident that growth in the retail sector will continue. This is underlined by The Westfield Group's recent announcement about entering the Brazilian shopping mall market and many other overseas investors are seeking to do likewise. The Board believes that good value remains to be realised from the Golden Square Mall Project, as the project gets closer to opening and as the project is thereby de-risked. The Board also believes that there is value in the Company's development and operating platform.

The Company will require additional operational working capital and the Company will be seeking the support of its existing Shareholders in the short-term. The Board feels that, taking into account the apparent lack of value attributed to the AIM quotation, and the size and revenues of the Company, the ongoing costs and regulatory requirements of a quotation on AIM can no longer be justified, and that greater Shareholder value will ultimately be derived by operating the Company's business without this burden. In addition, as noted above, the Board believes that the Cancellation will provide the Company with greater flexibility to seek private equity investment in the short to medium term.

The Board has accordingly concluded that it is in the best interests of Shareholders and Warrant Holders as a whole that the Cancellation be approved.

CANCELLATION

The Company has applied to the London Stock Exchange pursuant to Rule 41 of the AIM Rules for Companies for the Cancellation and it is expected that, subject to the approval of Shareholders at the Extraordinary General Meeting and Warrant Holders at the Meeting of Warrant Holders, the Cancellation will become effective on 16 January 2012. It is not the intention of the Company to support any off-market or matched bargain facilities in the Shares or the Warrants although certain stockbrokers or market intermediaries may be able to offer such services to Shareholders and Warrant Holders.

If the resolution to cancel the trading of the Shares is passed but the resolution to cancel the trading of the Warrants is not passed, it is likely that the Company's nominated adviser would consider that the Warrants were no longer appropriate for trading on AIM (as the underlying Shares were no longer admitted to trading on AIM) and accordingly would resign on the cancellation of the trading of the Shares. In such circumstances, pursuant to the AIM Rules for Companies, trading in the Warrants would be suspended with cancellation of admission occurring one month later if a replacement nominated adviser had not been appointed in the meantime.

If the Cancellation becomes effective, it is the intention of the Board to maintain the Company's CREST facility post-delisting, at least for an interim period. Following the Cancellation becoming effective Shareholders and Warrant Holders will, therefore, be able to maintain their holdings of Shares and Warrants via the facilities of the CREST system. The Company may canvas the views of Shareholders and Warrant Holders following the Cancellation to see if the CREST facility can be cancelled in order to further reduce the overhead expenses of the Company.

PRINCIPAL EFFECTS OF THE CANCELLATION

The principal effects of the Cancellation, should it be approved by Shareholders and Warrant Holders, would include (amongst others):

-- there would be no public stock market on which Shareholders and Warrant Holders can trade their Shares or Warrants and the liquidity of the Shares and Warrants will therefore become very limited;

   --      no price would be publicly quoted for the Shares or Warrants; 

-- the Company will no longer be subject to the AIM Rules for Companies after the Cancellation and, accordingly, it will not (amongst other things) be required to retain a nominated adviser or to comply with the requirements of AIM in relation to annual accounts, half yearly reports and the disclosure of price sensitive information; and

-- the Company will no longer be required to comply with the rules and corporate governance requirements to which companies admitted to trading on AIM are subject.

TAKEOVER CODE

Following the Cancellation, the Company will remain subject to the Takeover Code for a period of ten years on the basis that the Company's place of central management and control remains in the UK, the Channel Islands or the Isle of Man. However, if at any time during that period the Takeover Panel determines that the Company's place of central management and control is no longer in the UK, the Channel Islands or the Isle of Man, the Takeover Code would cease to apply to the Company, and the Company's minority shareholders would no longer benefit from the protections afforded to them by the Takeover Code.

AMENDMENT TO WARRANT TERMS

The Company is also taking the opportunity of the Meeting of Warrant Holders to propose a variation to the terms of the Warrants. Under the proposed amendment, the period during which the Warrants can be exercised will be amended with the effect that the subscription period will expire on the later of, (i) the date being 180 calendar days after the "Project Completion Date", and (ii) 12 April 2013.

The "Project Completion Date" shall mean the date on which, (i) the construction of the Golden Square Mall Project shall have achieved substantial completion, as evidenced by the receipt of all permits required for tenants to occupy and use the space in the project, and all work to be performed under the construction contract shall have been satisfied, subject only to punch-list items and (ii) retail stores representing eighty per cent. (80%) of the gross leasable area of the project have commenced the payment of monthly rent under binding leases, which in the aggregate constitute eighty per cent. (80%) of the projected monthly gross rental income for the project.

Due to the potential delay in the completion date of the Golden Square Mall Project as a result of the structural failure of part of the pre-cast concrete frame, as announced by the Company on the 31 October 2011, it is proposed to extend the subscription period for the Warrants so that Warrant Holders will have the potential opportunity to realise value on their Warrants following the completion of the Golden Square Mall Project.

The amendment of the terms of the Warrants may only be effected by way of an extraordinary resolution of Warrant Holders. Resolution 2 to be proposed at the Meeting of Warrant Holders will implement the changes to the terms of the Warrants outlined above.

A copy of the amended warrant instrument showing these proposed changes is available for inspection on the Investor Relations section of the Company's website at www.squarestone.com.br.

EXTRAORDINARY GENERAL MEETING AND MEETING OF WARRANT HOLDERS

An Extraordinary General Meeting of Shareholders is being convened for 11.00 a.m. on 6 January 2012 to be held at 1(st) Floor, Royal Chambers, St. Julian's Avenue, St. Peter Port, Guernsey GY1 3JX at which a special resolution to approve the cancellation of admission of the Shares to AIM, will be proposed.

A Meeting of Warrant Holders is being convened for 11.10 a.m. on 6 January 2012, or as soon thereafter as the Extraordinary General Meeting shall have concluded, to be held at 1(st) Floor, Royal Chambers, St. Julian's Avenue, St. Peter Port, Guernsey GY1 3JX at which an extraordinary resolution to approve, (i) the cancellation of admission of the Warrants to AIM, and (ii) the amendment to the terms of the Warrants (as summarised in the document), will be proposed.

All capitalised terms are as defined in the circular.

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

The following dates and times are indicative and may be subject to change:

 
 Dispatch of this document, the notice of                         7 December 2011 
  Extraordinary General Meeting and the Forms 
  of Proxy 
 Latest time and date for the receipt of                  11.00 a.m. on 4 January 
  EGM Forms of Proxy                                                         2012 
 Latest time and date for the receipt of                  11.10 a.m. on 4 January 
  Warrant Holder Meeting Forms of Proxy                                      2012 
 Time and date of Extraordinary General                   11.00 a.m. on 6 January 
  Meeting                                                                    2012 
 Time and date of Meeting of Warrant Holders              11.10 a.m. on 6 January 
                                                      2012 (or as soon thereafter 
                                                     as the Extraordinary General 
                                                    Meeting shall have concluded) 
 Expected last day of dealing in the Shares                       13 January 2012 
  and Warrants 
 Expected date of cancellation of the Shares              7.00 a.m. on 16 January 
  and Warrants from trading on AIM                                           2012 
 

For further information contact:

 
 Squarestone Brasil                   Tel: [phone] 
 Robert Sloss, interim Joint CEO      Email: [e-mail] 
  Tim Barlow, interim Joint CEO 
 
 Liberum Capital (Nominated Adviser   Tel: [phone] 
  and Broker) 
 Chris Bowman 
  Christopher Britton 
 
 Kreab Gavin Anderson (PR Adviser)    Tel: [phone] 
 James Benjamin                       Email: [e-mail] 
  Natalie Biasin 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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