Spicers has entered what it says is a binding implementation agreement which would end the ongoing dispute between the two groups of shareholders.
Motivation for the deal comes from Spicers frustration at its current inability to raise capital and make major acquisitions. Chairman Robert Kaye says, “There will be no winners unless these issues are rationally confronted and resolved.”
The agreement is with The Trust Company (RE Services) – which looks after the $285m PaperlinX Step-Up Preference Securities, and if it gets the nod from both group existing equity holders and preference security holders will result in the hybrid shareholders taking just over two thirds ownership of the business at 68.3 per cent.
If the deal goes through both chairman Robert Kaye and non-executive director Michael Barker will resign from the Board to enable shareholders to nominate their own directors, with the company setting up an immediate search for three new directors.
The company says, “Simplifying the capital structure is a key pillar of the Spicers Board’s plans to unlock value for both sets of security holders and to put Spicers on a more sound and sustainable footing for the future. The Spicers Board believes that now is the right time for such a transaction, following the Company’s withdrawal from European operations in 2015 and a subsequent return to overall profitability in the 2016 financial year.
Kaye says, “The Board recognises the sustained period of uncertainty experienced by Spicers stakeholders. Legacy conflicts between respective sets of security holders restrict Spicers’ ability to raise capital, pay dividends and for the market to determine the true value of the business. This in turn significantly limits Spicers’ commercial and financial options.”
“If successful, the Proposed Transaction would result in current SPS unitholders owning more than two-thirds of the combined equity of the Company. We believe this is an optimal ratio, which provides the best opportunity to accommodate both sets of security holders, and offers value to both ordinary shareholders and SPS unitholders.”
“Spicers has come through an exceptional period of disruption in core paper markets and its previous European operations. We are starting to see a clear way ahead at last, but the legacy issue of a complex capital structure still stands in the company’s way”, Kaye.
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