NGX will be a public unlisted company immediately following the Demerger and will not be listed on ASX
Sovereign to Demerge Standalone Graphite Projects. (Credit: Chris Wiedenhoff from Pixabay)
Sovereign Metals Limited (ASX:SVM; AIM:SVML) (the Company or Sovereign) is pleased to announce that it intends to undertake a demerger (Demerger) whereby Sovereign’s Malawian graphite projects being the Nanzeka Project, Malingunde Project, Duwi Project and Mabuwa Project (Graphite Projects) are to be demerged through NGX Limited (NGX), a wholly-owned subsidiary of the Company, allowing Sovereign to focus on the development of the Kasiya Rutile Project (Kasiya) while unlocking value in its Graphite Projects for shareholders.
Sovereign proposes, subject to shareholder approval, to demerge the Graphite Projects via a spin-out of NGX and in-specie distribution of NGX fully paid ordinary shares (NGX Shares) to Sovereign shareholders by issuing one (1) NGX Share for every eleven (11) Sovereign shares (SVM Shares) held (Distribution), allowing Sovereign shareholders to retain exposure to the value and upside of the Graphite Projects.
Upon completion of the Demerger, NGX intends to seek admission to the official list of the ASX. NGX will undertake a capital raising to satisfy the ASX admission requirements.
NGX will be the offeror of the NGX Shares under the IPO. A prospectus will be issued by NGX for the IPO capital raising which will be made available when the NGX Shares are offered. Anyone wishing to acquire NGX Shares as part of the IPO offer will need to complete the application form that will accompany the prospectus.
Sovereign will seek shareholder approval to enable the Company to demerge its Graphite Projects to NGX. In consideration for the Demerger, NGX will issue 42,807,000 NGX Shares at a deemed issue price of $0.20 per NGX Share. Sovereign will then reduce its capital by an amount equal to the value of the approximately 42.8 million NGX Shares to be returned to Sovereign shareholders on a pro rata basis through an equal capital reduction (Capital Reduction) to be effected through the Distribution. Eligible Shareholders1 will receive a pro rata distribution of one (1) NGX Share for every eleven (11) SVM Shares held at the Record Date.
If the Capital Reduction is approved, the share capital of the Company will be reduced by approximately $8,561,400.
The terms of the Capital Reduction are the same for each Eligible Shareholder. At the date of this announcement, the Company has 470,875,023 Shares on issue. No additional Shares will be issued as a result of the Capital Reduction. On the basis that no further Shares are issued, no Options are exercised and no Performance Rights are converted, the Company will have 470,875,023 Shares on issue at the Record Date.
The number of SVM Shares held by Shareholders will not change, and Shareholders will retain their SVM Shares in the Company following the Capital Reduction. However, if the Capital Reduction is implemented, the value of the SVM Shares may be less than the value of the SVM Shares held prior to the Capital Reduction because, after the Capital Reduction, the Company will not retain an interest in NGX and the Graphite Projects. The rights attaching to SVM Shares will not be altered by the Capital Reduction.
Given the Capital Reduction is an equal reduction and the Company will still have positive net assets following the Capital Reduction, the Directors consider the Capital Reduction is fair and reasonable to Sovereign shareholders as a whole.
Fractional entitlements will be rounded down to the nearest whole number. Based on there being 470,825,023 SVM Shares on issue on the record date, approximately 42,807,000 NGX Shares would be distributed to Eligible Shareholders.
Each Eligible Shareholder’s name will be entered on the register of members of NGX with each Eligible Shareholder being deemed to have consented to becoming a NGX shareholder and being bound by its constitution. Eligible Shareholders will not be required to pay any consideration for the NGX Shares distributed to them under the Distribution.
An Eligible Shareholder’s entitlement to NGX Shares will be based on the number of SVM Shares held at the record date. Eligible Shareholders will thereby retain direct ownership of the Company and will also receive direct ownership of NGX. NGX will demerge from Sovereign and seek a listing on ASX.
The Distribution will only proceed if the Company obtains shareholder approval under the Corporations Act for the Capital Reduction.
No cash outflow from Sovereign to NGX is expected as part of the Demerger, other than applicable Sovereign expenses to affect the Demerger.
Source: Company Press Release