Takeover Offer by Co-Investor Capital Partners Pty Limited for D2 Marketing Limited
Apr 07 2010 - ASX Release
The Directors of Co-Investor Capital Partners Pty Limited (Co-Investor) and D2 Marketing Limited (D2 or Company) are pleased to announce that they have reached agreement on the terms of a takeover offer to be made by Co-Investor or an entity nominated by Co-Investor for all of the shares in D2 (Offer) not already held by Co-Investor. Co-Investor and its associates have today converted 5,500,000 convertible notes and accrued interest owing on the convertible notes and currently have a voting interest in 86.89% of D2 shares.
A subcommittee of the D2 Board comprising the Independent Directors, Mr Paul Tobin and Mr Thomas O’Brien, has been established to consider the Offer (Bid Committee). Following consideration of the Offer, and subject to receipt of a report of the Independent Expert concluding that the Offer is fair and reasonable, the Bid Committee:
- unanimously support the proposed Offer; and
- will recommend that D2 shareholders accept the Offer,
in the absence of a superior proposal.
The Directors, being all of the Directors of D2 other than Mr Roger Sharp, intend to accept the Offer in relation to D2 shares they or their associates own.
Under the Offer, Co-Investor (or an entity nominated by Co-Investor) will offer 0.6 cents for every D2 share. The Offer is subject only to a No Prescribed Occurrences condition.
The Bid Committee intend to engage an Independent Expert, PKF, to provide a report to D2 shareholders as to whether the Offer is fair and reasonable.
The Company had previously announced its intention to raise $6.25 million through a rights issue, to be underwritten by Co-Investor. Since obtaining shareholder approval for the issue, several factors have delayed the issue and made it impractical to proceed on the terms previously proposed:
- settlement of the dispute with LCW Private Equity Limited (LCW), the cash component of which was provided to the Company by Co-Investor through an increase to its short term loan facility;
- the lag in financial performance whereby the benefits of the recent restructuring process have not yet flowed to the profit results, resulting in marginal profitability at the half year, and a significant downgrade in full year earnings guidance;
- a significant increase in the funding required by the Company, as a result of the Company’s financial underperformance and LCW settlement; and
- a working capital deficit due to delays in the recapitalisation process.
As a consequence of these factors, were the Company to proceed with its planned rights issue, the size of that issue would need to be materially enlarged. On balance, having considered all of the options available to D2 in the prevailing circumstances and subject to receipt of a report of the Independent Expert concluding that the Offer is fair and reasonable, the Bid Committee believe the current proposal is superior and in shareholders’ best interests.
The Executive Chairman of D2, Mr. Roger Sharp, who is also the Managing Director of Co-Investor, will continue to manage D2 during the period of the offer however will absent himself from Board discussions on the Offer.
Mr Peter Hynd, Investment Director of Co-Investor, said:
“The Company’s restructuring and recapitalisation process has been difficult and protracted, with Co-Investor emerging as the Company’s principal equity and debt funder through a combination of senior secured debt and a fully-diluted shareholding of 86.7% upon conversion of its convertible notes.
Whilst good progress has been made over the last nine months, there remains work to be done for the Company to achieve consistent profitability, and it is now clear that the company will need significant additional funding. Our assessment is that the best course of action is for the Company to be delisted with the restructuring and refinancing process to be completed as a private company.
This Offer provides existing shareholders with an opportunity to realise value for their holdings.”
Mr Paul Tobin, Independent Director of D2, said:
“Over the past 9 months, the Company has worked tirelessly to finalise the second phase of its recapitalisation program to enable its shares to resume trading on ASX. It has recently become clear that the financial turnaround will take longer than initially anticipated and that the Company will require significant further funding.
Given there remains significant uncertainty in relation to the timing and outcomes of the restructure, the Bid Committee believe that the Offer provides the best opportunity for shareholders to realise value for their investment in the Company.”
Supporting the agreed nature of the bid, Co-Investor and D2 have entered into an Implementation Agreement to govern their mutual relationship in relation to the bid and the process the parties will follow in implementing the Offer.
D2 shareholders should await receipt of a joint booklet that contains a Bidder’s Statement from Co-Investor and the Target’s Statement from D2 that is expected to be despatched in the week beginning on 26 April 2010. Co-Investor and D2 will keep D2 shareholders informed of all important developments.