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Definitive Arrangement Agreement signed between IMIC and Afferro for the proposed acquisition of Afferro

Definitive Arrangement Agreement signed between IMIC and Afferro for the proposed acquisition, on a recommended basis, by IMIC of 100% of the issued and to be issued share capital of Afferro pursuant to a Canadian court-approved plan of arrangement

  • Acquisition price per Afferro share of 120p per share comprising:
    • 80p in cash (the “Cash Consideration”); plus
    • a listed 2-year unsecured convertible loan note with par value of 40p and carrying simple annual interest of 8% (the “Loan Note”)
  • The acquisition values the fully diluted share capital of Afferro at approximately US$200 million
  • The acquisition, based on par value of the Loan Note, represents a premium of 104% to the 10-day volume weighted average trading price (“VWAP”) of Afferro shares for trading days ended 16 April 2013, being the date prior to IMIC’s announcement of its initial proposed offer for the Company
  • The acquisition brings together Afferro’s assets with IMIC’s access to an infrastructure solution and access to enhanced financing capability to seek to unlock the latent value in Afferro’s key Nkout Project
  • The acquisition is subject, amongst other things, to Afferro and IMIC shareholder approval and other customary conditions

David Netherway, Chairman of Afferro, commented: “We are pleased to have reached this point with IMIC. We believe that the deal offers our shareholders a unique opportunity to realise value, particularly in light of broader market conditions. The acquisition has been structured to provide a significant cash element, and also a deferred element as IMIC makes progress to provide a robust infrastructure solution for our flagship Nkout Project.”

Haresh Kanabar, Chairman of IMIC, commented: “I am delighted that Afferro’s Board has acknowledged the rationale and attractiveness of our offer by recommending it to Afferro shareholders. The combination of IMIC and Afferro is a compelling opportunity that brings together Afferro’s iron ore assets with IMIC’s innovative infrastructure, financing and offtake solution.”

Further to the announcements of 17 April 2013 and 22 May 2013, Afferro, IMIC and IMIC’s subsidiary Afferro Holdings Ltd. (together, the “Parties”) are pleased to announce that they have entered into a definitive arrangement agreement (the “Agreement”) pursuant to which IMIC, through its wholly owned subsidiary, Afferro Holdings Ltd., will acquire all of the issued and to be issued common share capital of Afferro (“Afferro Shares”) by way of a court approved plan of arrangement under the British Columbia Business Corporations Act (the “Arrangement”, or the “Transaction”). In addition to setting out the framework and certain mechanics for the arrangement, pursuant to the Arrangement Agreement, Afferro and IMIC have given each other certain representations about their respective companies, groups and businesses and have agreed to conduct their businesses in certain ways, pending the arrangement becoming effective or being terminated. The Arrangement shall require approval of at least two thirds of Afferro voting shareholders and option holders voting as a single class and a simple majority of the votes cast by Afferro share and option holders other than certain Afferro directors or officers who are deemed under Canadian securities laws to be “interested parties”. It is also subject to approval of IMIC shareholders, approval of the Supreme Court of British Columbia, and certain other conditions, including:


  • the continued accuracy of representations and warranties
  • customary conditions regarding the securing of any required regulatory approvals and absence of any prohibitions preventing the consummation of the Arrangement or other adverse actions or proceedings
  • in the case of the obligations of IMIC, (a) the absence of any event, occurrence, development of circumstance having a material adverse effect on Afferro, (b) the holders of no more than 5% of the outstanding Afferro voting shares having exercised dissent rights, (c) Afferro having unencumbered cash balances of at least US$70M and a subsidiary of Afferro having deposited US$70M in an escrow account in favour of Bank of American Merrill Lynch and entered into certain related agreements, and (d) Afferro shall have provided evidence satisfactory to IMIC that the Djoum III Licence relating to the Nkout Project has been renewed on terms covering at least a specified area and otherwise on terms no less favourable than existing terms under such Licence.

The Board of Directors of Afferro has approved the acquisition of Afferro pursuant to the Arrangement and is unanimously recommending that holders of Afferro Shares vote in favour of the Transaction. In approving and recommending the Arrangement, the Board of Directors of Afferro received an opinion from Canaccord Genuity Limited that as of the date thereof and subject to the assumptions, limitations and qualifications set out therein, the Arrangement is fair, from a financial point of view, to the Afferro shareholders.

The Directors and officers of Afferro, who in aggregate hold 6.4% of the outstanding Afferro Shares and 10.7% of the combined Afferro Shares and options, have undertaken to vote in favour of the Transaction pursuant to their respective voting agreements. In addition, IMIC holds 9.94% of the outstanding Afferro Shares and is entitled to vote on the Arrangement.

Under the agreed terms of the Arrangement, Afferro shareholders will receive consideration (the “Consideration”) comprising:

80p in cash, plus
  • a 2-year unsecured convertible loan note with par value of 40p and carrying simple annual interest of 8%.
  • The Consideration, based on par value of the Loan Note, represents:
  • a premium of 104% to the 10-day VWAP of Afferro’s shares for trading days ended 16 April 2013, being the date prior to IMIC’s announcement of its initial proposed offer terms to Afferro regarding a possible offer;
  • a premium of 92% to the 10-day VWAP of Afferro’s shares for trading days ended 5 December 2012, being the date prior to Afferro’s initial announcement on potential discussions regarding a takeover of the Company; and
  • a premium of 69% to the 10-day VWAP of Afferro’s shares for trading days ended 21 May 2013, being the date prior to Afferro and IMIC’s announcement on the revised proposed terms of the Offer.

Cash and Option Consideration

IMIC has also agreed to purchase, in cash, all of the currently issued and outstanding stock options for 120p less the exercise price for each option. The Consideration values the fully diluted share capital of Afferro at approximately US$200 million, based on 111,099,498 outstanding shares and options. In respect of the cash consideration, the Board of Afferro has received confirmation from IMIC that it intends to fund the cash consideration through a combination of its existing cash resources and available credit facilities.

Loan Note

The Loan Note will be unsecured and rank pari passu with other unsecured debt obligations of IMIC. The Loan Note will carry simple annual interest of 8%, which will be rolled up and paid at the end of the 24-month term. Upon maturity, the Loan Note together with any accrued interest will be paid in either cash or convert to the equivalent market value in IMIC shares at the time of conversion, at IMIC’s discretion. The Loan Note can be redeemed early, with accrued interest to the date of redemption, at the option of IMIC. An application will be made for the Loan Note to be listed on the Irish Stock Exchange or, in the event that such listing cannot take place, another recognised stock exchange.

Termination and Break Fees

Pursuant to the Arrangement Agreement, Afferro has agreed not to solicit, pursue, facilitate or enter into any discussions regarding an alternative transaction. Afferro has the right to enter into an unsolicited superior proposal, subject to IMIC’s right to match and the payment of a termination fee.

Afferro will pay IMIC termination fee of US$1,500,000 in limited circumstances including if the Afferro board changes or withdraws its recommendation prior to the Afferro meeting or Afferro breaches certain of its obligations relating to non-solicitation and superior proposals or in the event it terminates the agreement to accept a superior proposal.

In the event that the bridge loan of US$60 million provided by Bank of America Merrill Lynch to part finance the Transaction is withdrawn or otherwise made unavailable (other than due to an action of Afferro) and alternative financing is not obtained or IMIC shareholders do not approve the Transaction, IMIC shall pay a termination fee of US$1,500,000 to Afferro.

The arrangement agreement contains rights for both parties to agree to terminate the proposals by mutual agreement or if Afferro shareholders do not approve the arrangement or it does not become effective before the outside date (other than due to a failure by that party). Each of IMIC and Afferro also has a right to terminate in certain other circumstances, including those referred to in the context of the break fees and on the non-satisfaction of certain conditions.

Shareholder and Regulatory Approval

The proposed acquisition of Afferro by IMIC will be subject, inter alia, to the approval of IMIC’s shareholders under the reverse takeover requirements of AIM Rules for Companies (“AIM Rules”). In accordance with the AIM Rules, application will be made for Admission of the enlarged group to trading on AIM, following which IMIC is expected to cease to be an Investing Company for the purposes of the AIM Rules.

The Notice of Meeting containing information relating to the proposed Transaction is expected to be communicated to Afferro shareholders in July 2013, with the meeting of shareholders in relation to the Transaction expected to be held no later than 30 August 2013. IMIC is expected to publish an AIM Admission Document for the enlarged group in July 2013 and to seek shareholder approval for the transaction at a meeting of IMIC shareholders to be held on or around the same date as the Afferro Meeting. Subject to the Court approval in British Columbia, Canada and the approval of the Transaction by Afferro and IMIC shareholders and timely satisfaction of the conditions precedent, Afferro and IMIC expect the Transaction to be completed on or before 6 September 2013, or such later date as may be agreed. Further details on the timetable to be announced in due course.


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