Shareholders Circular

Transcription

1 Shareholders Circular 17th November 2015 This Circular is being issued by Medserv p.l.c. (C28847) with registered office at Medserv, Port of Marsaxlokk, Birzebbugia, Malta (the Company or Medserv ) pursuant to the requirements of the provisions of Chapter 6 of the Listing Rules in connection with the Acquisition of the METS Group, the increase in authorised share capital and the authority to the board of directors to issue and allot ordinary shares and to withdraw/restrict shareholders pre-emption rights.

2 IMPORTANT INFORMATION THIS IS AN IMPORTANT DOCUMENT AND SHAREHOLDERS WILL BE REQUESTED TO VOTE ON ALL OF THE ISSUES AND MATTERS DESCRIBED HEREIN AT THE EGM. IN THE EVENT THAT SHAREHOLDERS RECEIVING THIS DOCUMENT ARE IN ANY DOUBT AS TO THE IMPORT OF THIS DOCUMENT OR AS TO ANY ACTION REQUIRED OF THEM THEY ARE URGED TO CONSULT THEIR INDEPENDENT ADVISERS. This Circular contains information about the resolutions that are being proposed for adoption at the forthcoming extraordinary general meeting of shareholders scheduled for the 3 December 2015 (the EGM ). It is being dispatched to all shareholders entitled to attend and vote at that meeting to enable them to understand better the nature of the resolutions that are to be considered at the EGM and to provide the necessary information about the resolutions to assist shareholders make a properly informed decision. This Circular is being dispatched in compliance with Listing Rules of the Listing Authority and particularly in compliance with the requirements for such a Circular in terms of Listing Rules 6.1.1, 6.1.2, and Where any or all of the securities of the Company have been sold or transferred by the addressee of this Circular, then the Circular and any other relevant documents should be passed to the person through whom the sale or transfer was effected for transmission to the purchaser or transferee. Since this Circular is not exempt under the provisions of Listing Rule 6.4, the approval of the Listing Authority for the publication and circulation of this Circular has been sought and was duly obtained on 16th November This Circular is intended to explain to shareholders the import of the special business that is required to be addressed at the EGM and to provide them with sufficient explanation to enable them to make informed decisions. THE RESOLUTIONS The EGM shall be considering the following resolutions with respect to special business for approval. This is set out in the notice convening the EGM (the Notice ): Ordinary Resolution Resolution 1 1. To approve the Acquisition by Medserv M.E. Limited, a subsidiary of the Company, of the entire issued share capital of the following companies: a) Middle East Tubular Services Limited, a limited liability company incorporated under the laws of the British Virgin Islands (BVI) and having a branch registered in Sharjah, United Arab Emirates (METS); b) Middle East Tubular Services (Iraq) Limited, a limited liability company incorporated under the laws of the BVI and having a branch registered in Iraq (METS Iraq); and c) Middle East Tubular Services LLC, FZC, a limited liability free zone company registered in the Sohar Free Zone, The Sultanate of Oman, (METS Oman) METS, METS Iraq and METS Oman shall be collectively referred to as the METS Group. which Acquisition will take place through the Acquisition of the entire issued capital of the holding company to be newly incorporated in the BVI (Holdco) in accordance with the share purchase agreement dated 8 October

3 Extraordinary Resolutions Resolution 2 2. To increase the authorised share capital of the Company from 5,000,000 divided into 50,000,000 shares of 0.10 each share to 12,000,000 divided into 120,000,000 shares of 0.10 each share and thus to delete Article 4.1 of the Memorandum of Association in its entirety and substitute it by the following: The authorised share capital of the Company is 12,000,000 divided into 120,000,000 shares of 0.10c each. Resolution 3 3. To authorise the board of directors (with full powers of delegation), for a period of two (2) years, to issue and allot such number of unissued equity securities in the Company up to the maximum amount set by the authorised share capital (as increased pursuant to Resolution 2 above) on such terms and conditions as may be determined by the Board of Directors and to authorise the board of directors to restrict or withdraw the statutory pre-emption rights of the Company s shareholders for as long as the said board remains authorised to issue and allot equity securities in terms of this resolution. DIRECTORS RECOMMENDATION The Directors make their unqualified recommendation to shareholders to vote in favour of the resolutions being submitted to their vote in the extraordinary general meeting, and in their opinion the transactions described in this document are in the best interests of the Company. RESPONSIBILITY STATEMENT As at the date of this Circular, the board of directors of the Company is composed of Mr Anthony S. Diacono, Mr Anthony J. Duncan, Mr Joseph F.X. Zahra, Mr Joseph Zammit Tabona and Mr Charles Daly (together the Directors ). All of the Directors accept responsibility for the information contained in this document. To the best of the knowledge and belief of the Directors who have taken all reasonable care to ensure that such is the case, the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information. PART A ACQUISITION OF THE METS GROUP INTRODUCTION Reference is made to the company announcement issued by the Company on the 8th October 2015 (Ref: 120/2015), wherein it was announced that the Company had entered into a share purchase agreement on the 8th October 2015 (SPA) for the Acquisition of the entire issued share capital of the following companies (the Acquisition ): a) Middle East Tubular Services Limited, a limited liability company incorporated under the laws of the British Virgin Islands (BVI) and having a branch registered in Sharjah, United Arab Emirates, (METS); b) Middle East Tubular Services (Iraq) Limited, a limited liability company incorporated under the laws of the BVI and having a branch registered in Iraq, (METS Iraq); and c) Middle East Tubular Services LLC, FZC, a limited liability free zone company registered in the Sohar Free Zone, The Sultanate of Oman, (METS Oman). METS, METS Iraq and METS Oman shall be collectively referred to as the METS Group. Each of the said companies shall be individually referred to as the METS Companies. The SPA contains a number of conditions which must be satisfied by both the Company and the Sellers (as hereunder defined) before the Acquisition be completed. One of the said conditions is that the shareholders of the Company approve the Acquisition in general meeting. In terms of the SPA, such approval by the shareholders is to be obtained by no later than the 23 February For the purposes of this Circular and for the ease of reference, the METS Companies are collectively referred to as the METS Group. It ought to be noted, however, that the METS Companies are not currently organised as a group of companies. It is only on acquisition by Medserv that the METS Companies will form part of a group of companies. 2

4 1. THE METS GROUP BUSINESS The METS Group provides an integrated approach to Oil Country Tubular Goods (OCTG) handling, inspection and repairs based in their three Middle East locations, in total occupying an area of 292,000 square metres. The following are the services provided in each site: Hamriyah Free Zone, Emirate of Sharjah, UAE offering handling & storage, inspection and machine shop services; Khor Al Zubair, Basra, Iraq offering handling & storage, inspection and machine shop services; Sohar Free Zone, Sultanate of Oman offering handling & storage and inspection services. The handling and storage services in the UAE and Oman represent a major income to the METS Group a service also representing a core competence to the Medserv group of companies ( Group or the Medserv Group ). Additionally, the inspection services fit in well with Medserv s aspirations and previous skills. The machine shops in UAE and Iraq provide a high margin step-out into a complimentary service area for Medserv and an excellent growth prospect for the existing and new clients to Medserv. The METS Group is a strong regional player with limited competition due to it holding VAM and API licenses, (certifications designed for the more technically demanding thread connections required by today s high pressure, high temperature wells). More specifically, the METS Group provides the following services: A duty free import storage facility for OCTG, Line Pipe, Oilfield Equipment and Steel Products, Inventory Management, Customs Clearance, Transportation Services, OCTG Machine Shop Services, OCTG Inspection Services, Pipe Cleaning and Coating Services, and Pipe Handling Services including container loading, pre-sling for shipping, bundling of tubing, stencilling and tally. Import & Storage METS has 130,000 square meters of storage area at its facility in the Hamriyah Free Zone and provides a full importation service for OCTG, line pipe, oilfield equipment, steel products and accessories. The client import service includes customs clearances from the UAE ports and borders, port handling, pipe transportation, pipe handling and pipe storage in our yards. METS handles large volume import shipments of break bulk and containerized cargo including heavy lift, out of gauge materials and complete oil rig packages. Clients are provided with general condition receiving reports for all imports and full inventory reports for materials in storage. Export METS provide the following export services to customers Loading of customer supplied transport FOT at its facility with customs clearance service for duty paid and temporary exit goods for local delivery within the UAE; Overland transport and customs clearance service to Middle East destinations; International Sea and Air freight services through its appointed Freight Forwarding Company; Load-Out Services for specialized project cargo, oilfield equipment and drill rig packages; Container loading for pipe and equipment; and Packing Service, Pipe Bundling, and Pre-Sling of pipe cargo. OCTG Machine Shop and Inspection Services METS provides its customers with a one-stop pipe service centre for API tubular products, offering its customers 24 hours machine shop and inspection services from its Hamriyah base. The services include: Re-threading of OCTG and Drill Pipes; Manufacture of Pup Joints to customer requirements. Computerized Torque Make/Break; Pipe Cleaning, Coating and Refurbishment; Phosphate Anti Galling connection coating; and Casing and Drill Pipe Inspection. 3

5 2. STATEMENT OF SPECIAL TRADE FACTORS OR RISKS The following considerations should be taken into account by Shareholders before considering the resolutions referred to in the Notice: Dependence on Key Personnel The performance of the METS Group business is, to a certain extent, dependent upon the efforts and abilities of a number of key individuals including those identified below. If one or more such key individuals were in future to be unable or unwilling to continue in his present position and a replacement not be found in the short term, the financial performance of the business could be negatively impacted. Completion of the Acquisition of the METS Group The Completion of the Acquisition is subject to various conditions which may not be satisfied or waived, including a) Medserv raising sufficient financing for the settlement of the balance of the purchase consideration by the 16 February 2016 or such later date as may be agreed, and b) the Sellers procuring that certain senior employees continue in employment for a period of two years and procuring that the METS Group be formally organised as a group through the incorporation of a company in the BVI and the transfer of the METS Group to the said holding company. There is no guarantee that these conditions will be satisfied (or waived), in which case the Acquisition, whilst approved by the shareholders, may not be completed and the deposit of USD3,000,000 may, in certain circumstances, be forfeited. Integration of the METS Group within the Medserv Group The Company may be unable to successfully complete or integrate the Acquisition into its business. The Company s future growth is expected to be, in part, attributable to the Acquisition of the METS Group and the success of this Acquisition is dependent upon obtaining the integration of the operations of such business. Successful integration of the Acquisition is generally dependant on the Group s ability to effect any necessary changes in operations or personnel resulting from the Acquisition. It may also expose the Medserv Group to new risks, including: a) difficulties in integrating and operating businesses in geographies that are new to the Medserv Group; b) difficulties integrating the METS Group business in a cost-effective manner; c) unforeseen legal, regulatory, contractual, employment or other issues or expenses arising out of the Acquisition; d) potential disruptions to the Group s on-going business caused by the Acquisitions, including pressure on management s time and resources; and e) the METS Group s business failure to meet the Medserv Group s expectations or business plans. The occurrence of any of these risks could have an adverse impact on the Medserv Group s growth, which could have a material adverse effect on its business, prospects, financial condition and results of operations. Competition The success of the future growth of the METS Group depends, inter alia, on it being able to retain and increase their client base. If this does not result at the level anticipated by the Directors, the financial and operating results of the METS Group business may be materially adversely affected. The exact scope of increased competition and any adverse effect on the METS Group results of operations will depend on a variety of factors, including business strategies, operational capabilities and financial resources of potential competitors. 3. DETAILS OF THE TRANSACTION The Company has registered a subsidiary company with the name Medserv M.E. Limited (the Purchaser ) for the purpose of acquiring and holding the issued share capital of the METS Group. In addition, in order to provide for an efficient transfer of the shares in the METS Group, the Sellers have agreed to incorporate a holding company in the British Virgin Islands which company shall act as a parent company to the METS Group ( Holdco ). Upon satisfaction of all conditions precedent, the Sellers have agreed to transfer the issued share capital of Holdco to Medserv M.E. Limited. 4

6 Date 8 October 2015 Parties SELLERS: (1) Pentagon Freight Services plc, a company incorporated and registered in England and Wales with company registration number whose registered office is at Pentagon House, Unit 1.02 Crayfields Industrial Estate, Main Road, Orpington Kent, BR5 3HP; and (2) Milestone Overseas Holdings Limited, a company incorporated and registered in the British Virgin Islands with company registration number whose registered office is at International Trust Building, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands PURCHASER: Medserv M.E. Limited, a company incorporated and registered in Malta with company registration number C72250 whose registered office is at Malta Freeport, Port of Marsaxlokk, Birzebbugia, BBG 3011, Malta; and GUARANTOR: Medserv p.l.c. Terms & Conditions As a result of the share purchase agreement, the Sellers have agreed to sell, and the Purchaser has agreed to acquire, the entire issued capital of the METS Group, subject to the terms and conditions set out therein, for a purchase price of USD46,000,000. A deposit of USD3,000,000 has been paid by the Purchaser and shall be forfeited by the Purchaser in favour of the Sellers should it fail to complete the following conditions: a) the approval by the shareholders of the Company of the Acquisition by the 23 February 2016; and b) the raising of financing for the purpose of settling the balance of the consideration due to the Sellers by the 16 February 2016, that is, USD43,000,000. The deposit shall be refunded to the Purchaser in the event that the Purchaser has fulfilled its conditions but the Sellers have failed to complete the following conditions prior to the 23 February 2016: a) the incorporation of Holdco and the transfer of the METS Group to Holdco; and b) the Sellers procuring that two of the senior management of the METS Group agree to continue in employment for a period of 2 years. In addition, the Sellers are required to make certain changes to the lease agreement entered into by METS Iraq over the site in Basra prior to the 23 February 2016, the non-satisfaction of which would give the right to the Purchaser to terminate the agreement however in so doing, the Purchaser would not be entitled to a refund of the deposit. The share purchase agreement contains a number of warranties and indemnities provided by the Sellers. The raising of a claim under the indemnities and for a breach of warranties is subject to specific limitations, including time limitations and financial caps. Medserv p.l.c. has agreed to guarantee the obligations undertaken by the Purchaser Medserv M.E. Limited in the share purchase agreement. Subject to the fulfillment of all the conditions set out above, the Company expects that completion of the transaction and therefore the payment of the balance of the purchase price and the transfer of the shares in the METS Group to Medserv M.E. Limited will take place on the 23rd February 2016 or on such other date as may be agreed between the parties. Consideration and how it is being satisfied The purchase price of the Acquisition is in aggregate USD46,000,000, which is expected to be financed through a mix of debt and equity financing. The debt financing is expected to take place through the issuance by the Company of unsecured bonds in respect of which the Company shall apply to the Listing Authority in Malta for its admissibility to listing on the regulated market of the Malta Stock Exchange. Value of gross assets of METS Group USD 23,978,164, as at 30 April 2015 Additionally, the Company is expected to make a rights issue of ordinary shares to its shareholders and to the extent of those rights not taken up by shareholders or their transferees, to third parties Profits attributable to METS Group USD 3,026,927, for the year ended 30 April 2015 Details of key individuals important to METS Group The Sellers have identified the following persons as being important to the METS Group: a) Mr Gareth McMurray (Regional Manager); and b) Mr Peter John Howes (General Manager). The Sellers have undertaken to procure that these persons will continue in employment with the METS Group for a period of 2 years following completion of the Acquisition. 5

7 4. EFFECT OF THE ACQUISITION ON THE EARNINGS, ASSETS, LIABILITIES AND TRADING PROSPECTS OF MEDSERV The Acquisition presents an opportunity for the Medserv Group to increase its scope of services to customers and to enter the wellestablished Middle Eastern oil and gas service industry in a region where extraction costs are comparatively low. Medserv considers the METS Group to fit with its longer-term strategy of increasing its geographical spread and product spread as well as to continue to grow its customer portfolio of international oil and gas companies and subcontractors. Similar to Medserv, the METS Group operates in growth countries. The Acquisition will also present Medserv with cross selling opportunities. Medserv will be looking at selling its services within the Middle East region, as well as, introducing and marketing METS services to markets currently serviced by Medserv, primarily North Africa and the Eastern Mediterranean rim countries. Services between the METS Group and Medserv do intersect but whereas Medserv concentrates on the offshore oil and gas industry, the METS Group tends to support the onshore oil and gas industry. Synergies are expected to be achieved by combining the two groups. METS generated 21,474,254 (USD24,057,607 1 ) combined revenue (net of inter-company sales) during the last financial year ended 30 April The combined net profit after tax generated by the METS Group during the said year was of 2,701,890 (USD3,026, ) whilst the combined earnings before interest, tax, depreciation and amortisation ( EBITDA ) for the same financial year was of 4,580,426 (USD5,131, ). Before taking into account any synergies, Medserv expects that the METS Group would at least continue to operate at this level of performance post-acquisition. As at 30 April 2015, METS Group s combined net assets stood at 18,517,033 (USD20,744, ) of which 10,884,602 (USD12,194, ) represented tangible fixed assets (mainly comprising Machinery, Tools & Equipment and Leasehold Improvements) and 7,103,804 (USD7,958, ) of working capital, including 3,033,667 (USD3,398, ) of cash and cash equivalents. The METS Group does not avail itself of any bank borrowings or other forms of long-term debt. The Acquisition will be mainly financed through the issue of unsecured bonds and of new shares through a rights issue. In the event of the transaction being successfully completed, Medserv s consolidated financial statements will include the METS Group as fully owned subsidiaries. Medserv, through Medserv M.E. Limited, will become entitled to all dividend income that may be declared by the METS Group. Medserv will also be required to meet the cost of servicing the debt raised to finance the transaction. At a group level, Medserv s assets and liabilities will include assets and liabilities of the METS Group and the debt raised for the purposes of the Acquisition. The Company s share capital will also reflect the additional equity issued. Furthermore, Medserv would need to carry out a detailed Purchase Price Allocation exercise whereby the purchase consideration is allocated to the fair value of all identifiable net assets acquired as at the date of Acquisition with the residual being goodwill. This will necessitate the determination of the fair value of the identifiable assets and liabilities assumed of the METS Group, as well as, any identifiable intangible assets (such as contracts in place, brand value) arising in connection with the Acquisition. The latter would then be amortised over the remaining useful life of such assets whilst any goodwill recognised in the books of Medserv would need to be tested for impairment at least annually. 5. SELECTED FINANCIAL INFORMATION The METS Group compiles annual financial statements for each of the individual entities namely, METS Oman, METS Iraq and METS, in accordance with International Financial Reporting Standards and are presented in United States Dollar ( USD ) except for the financial statements of METS Oman which are presented in Rial Omani ( RO ). The METS Companies do not prepare consolidated financial statements, however for the purposes of this transaction, the METS Group prepared combined financial statements for the financial year ended 30 April 2015 including comparatives for the previous financial year. Both the financial statements of the individual METS Companies and the combined financial statements referred to above have been audited in accordance with International Standards on Auditing. 6 1 All figures quoted in Euro have been translated from USD to Euro using the exchange rate prevailing as at 30 September 2015 of USD:1EUR (Source: European Central Bank) for information purpose only.

8 5.1 AUDITED FINANCIAL STATEMENTS OF EACH OF THE METS COMPANIES Extracts from the audited financial statements of each of the METS Companies for the financial years ended 30 April 2013 to 2015 are set out below. The figures presented for METS Oman have been converted to USD using the effective exchange rate of RO:1USD, which represents the rate at which the Rial Omani is pegged to the United States Dollar less conversion costs. OMAN OPERATION Middle East Tubular Services LLC (FZC) Extracts from Statements of Comprehensive Income For the year ended 30 April Revenue 8,606 7,818 7,077 Operating profit 3,545 3,147 2,642 Profit before tax 3,651 3,205 2,579 Profit for the year 3,651 3,205 2,579 Middle East Tubular Services LLC (FZC) Extracts from Statements of Financial Position As at 30 April ASSETS Non-current 1,600 1,360 1,435 Current 9,218 5,524 2,729 Total assets 10,817 6,884 4,165 EQUITY Total equity 9,567 5,916 2,710 LIABILITIES Non-current Current 1, ,443 Total liabilities 1, ,454 Total equity and liabilities 10,817 6,884 4,165 Middle East Tubular Services LLC (FZC) Extracts from Statements of Cash Flow For the year ended 30 April Net cash generated from operating activities 1, ,592 Net cash used in investing activities (391) (653) (1,038) Net cash generated from/(used in) financing activities - (13) 24 Net movement in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of year 1,

9 IRAQ OPERATION Middle East Tubular Services (Iraq) Limited Extracts from Statements of Comprehensive Income For the year ended 30 April Revenue 8,934 10,650 7,844 Operating profit 825 2,322 3,366 Profit before tax 799 2,162 3,206 Profit for the year 799 2,162 3,206 Middle East Tubular Services (Iraq) Limited Extracts from Statements of Financial Position As at 30 April ASSETS Non-current 8,595 8,797 9,061 Current 2,919 1,879 2,719 Total assets 11,513 10,676 11,780 EQUITY Total equity 4,159 3,360 1,199 LIABILITIES Non-current 6,502 6,403 9,505 Current ,076 Total liabilities 7,354 7,316 10,581 Total equity and liabilities 11,513 10,676 11,780 Middle East Tubular Services (Iraq) Limited Extracts from Statements of Cash Flow For the year ended 30 April Net cash generated from operating activities 494 3,645 3,424 Net cash generated used in investing activities (693) (549) (5,505) Net cash generated from/(used in) financing activities 98 (3,102) 2,236 Net movement in cash and cash equivalents (101) (6) 156 Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of year

10 SHARJAH OPERATION Middle East Tubular Services Limited Extracts from Statements of Comprehensive Income For the year ended 30 April Revenue 13,615 13,452 14,496 Operating profit/(loss) (1,396) (51) 876 Profit/(loss) before tax (1,423) (198) 796 Profit/(loss) for the year (1,423) (198) 796 Middle East Tubular Services Limited Extracts from Statements of Financial Position As at 30 April ASSETS Non-current 9,734 10,247 13,667 Current 5,699 4,252 3,931 Total assets 15,433 14,499 17,598 EQUITY Total equity 7,214 8,645 8,842 LIABILITIES Non-current ,683 Current 7,690 5,398 4,073 Total liabilities 8,219 5,854 8,755 Total equity and liabilities 15,433 14,499 17,598 Middle East Tubular Services Limited Extracts from Statements of Cash Flow For the year ended 30 April Net cash generated from/(used in) operating activities (818) Net cash generated from/(used in) investing activities (476) (857) 313 Net cash generated from/(used in) financing activities 1,895 1,982 (1,600) Net movement in cash and cash equivalents 602 1,219 (323) Cash and cash equivalents at beginning of the year 1, Cash and cash equivalents at end of year 1,929 1,

11 5.2 COMBINED AUDITED FINANCIAL STATEMENTS OF THE METS GROUP Extracts from the combined audited financial statements of the METS Group for the financial year ended 30 April 2015 including comparatives for the financial year 2014 are set out below. Middle East Tubular Services Group Extracts from Combined Statements of Comprehensive Income For the year ended 30 April USD'000 USD'000 Revenue 24,058 26,681 Operating profit 3,080 5,488 Profit before tax 3,027 5,168 Profit for the year 3,027 5,168 Middle East Tubular Services Group Extracts from Combined Statements of Financial Position As at 30 April USD'000 USD'000 ASSETS Non-current 13,362 13,937 Current 10,616 7,394 Total assets 23,978 21,331 EQUITY Total equity 20,745 17,725 LIABILITIES Non-current Current 2,657 3,123 Total liabilities 3,234 3,606 Total equity and liabilities 23,978 21,331 Middle East Tubular Services Group Extracts from Combined Statements of Cash Flow For the year ended 30 April USD'000 USD'000 Net cash generated from operating activities 3,281 7,599 Net cash used in investing activities (1,459) (1,561) Net cash used in financing activities (508) (4,818) Net movement in cash and cash equivalents 1,314 1,221 Cash and cash equivalents at beginning of the year 2, Cash and cash equivalents at end of year 3,399 2,084 Note: Certain figures in the above tables may not add up due to rounding differences 10

12 6. STATEMENTS REQUIRED IN TERMS OF LISTING RULES , , AND The Company is not aware of any person other than Directors of the Company who, directly or indirectly, currently owns, or will, as a result of the transaction own, five per cent (5%) or more of the Company s capital. 6.2 The Company is not aware of any existing, pending or threatened legal or arbitration proceedings involving the METS Group which may have a significant effect on Medserv Group s financial position. 6.3 There has been no significant change in Medserv Group s financial or trading position and, to the extent known to the Company, in the financial and trading position of each of METS Oman, METS Iraq and METS, since the end of the last financial year for which audited financial statements have been published. 6.4 The total emoluments receivable by the Directors of the Company will not be varied as a result of the transactions contemplated herein. PART B INCREASE IN AUTHORISED SHARE CAPITAL & AMENDMENT TO THE MEMORANDUM OF ASSOCIATION The purpose of this resolution is to increase the authorised share capital of the Company from 5,000,000 divided into 50,000,000 shares of 0.10 each share to 12,000,000 divided into 120,000,000 shares of 0.10 each share. This represents a percentage increase of 140%. In order to enable the bonus issue and rights issue described below to take effect, it is necessary for the authorised share capital to be increased. It is therefore being proposed that Article 4.1 of the Memorandum of Association of the Company be deleted in its entirety and substituted by the following: The authorised share capital of the Company is 12,000,000 divided into 120,000,000 shares of 0.10c each. This resolution requires the approval of the shareholders at a general meeting through the passing of an extraordinary resolution. PART C AUTHORITY TO DIRECTORS TO ALLOT SECURITIES (BONUS ISSUE & RIGHTS ISSUE) & WAIVE/RESTRICT PRE-EMPTION RIGHTS In order to give flexibility to the Company in connection with the issuance of equity securities (which in terms of the Memorandum and Articles of Association of the Company is defined to mean shares in the Company of whatever class and other securities of the Company affording the holder thereof a right to subscribe for, or to convert the securities into, shares in the Company ), the Board of Directors is proposing that the Company in general meeting provides the authority to the Directors to issue Equity Securities up to the maximum value of the authorised share capital, which upon the passing of the Resolution 1 will be increased to 12,000,000 divided into 120,000,000 ordinary shares of a nominal value of 0.10 each. On the basis of the issued share capital of the Company as at the date of this Circular, the maximum number of shares which the directors would be entitled to issue is 94,999,996 ordinary shares of a nominal value of 0.10c each (79.16% of the issued share capital as at the date of this Circular). The Directors have the intention to use this general authority as follows: a) BONUS ISSUE: to capitalise 2,000,000 from the Company s retained earnings account; In the company announcement dated 30 October 2015 (ref: 22/2015), the Board of Directors of the Company recommended the issuance of a bonus share issue to its Members in the following proportion: (4:5, 4 bonus shares for every 5 ordinary shares held). It is proposed that such issue will take place by means of the capitalisation of the Company s retained earnings and the bonus shares will be issued and allotted to those members registered on the register of the Central Securities Depository of the Malta Stock Exchange as at the record date of 30 October The Company shall round up to the nearest share any fractional entitlements of 0.5 or more of a share and shall round down to the nearest share a fractional entitlement of less than 0.5 of a share, in both cases such that each fractional entitlement shall be consolidated into one integral share. The bonus shares, as and when issued, shall rank pari passu with the existing ordinary issued share capital of the Company with respect to voting, dividends and other distributions whether on winding up or otherwise. 11

13 The bonus shares shall be issued in uncertificated form and shall be maintained in book-entry form at the Central Securities Depository of the Malta Stock Exchange ( CSD ). The bonus shares shall accordingly be evidenced by a book-entry in the register of shareholders held by the CSD. The bonus shares are expected to be issued on or around 9 December The Directors will be seeking authorisation from the Listing Authority for the bonus shares to be considered admissible to listing and trading on a regulated market. In addition, application will also be made to the Malta Stock Exchange, as a regulated market, for the bonus shares to be admitted to the Official List of the Malta Stock Exchange upon allocation. The bonus shares are expected to be admitted to listing shortly after allocation on or around 9 December Dealings in the Bonus Shares on the Official List of the Malta Stock Exchange are expected to commence shortly following admission to listing as aforesaid. The Directors consider that the issue of bonus shares will have the benefit of increasing the liquidity and volume of the Company s ordinary share capital, and do not envisage any particular risks arising as a result of an increase in share capital. b) RIGHTS ISSUE: to make a rights issue for the purposes of part financing the settlement of the balance of the purchase price of the METS Group Acquisition; As set out in Part A of this Circular, the Directors intend to finance the payment of the balance of the purchase consideration of the METS Group Acquisition (that is, USD43,000,000) through the issuance and listing of unsecured bonds on the regulated market of the Malta Stock Exchange and through a rights issue. Accordingly, the directors expect to make a rights issue with the purpose of raising at least 15,000,000 through the issuance of ordinary shares to its shareholders. This resolution provides the framework to the Directors to part finance the settlement of the METS Group Acquisition. Before making the rights issue the directors will be required to apply to the Listing Authority to grant authorisation for the admissibility to listing of the new ordinary shares issued and to approve the prospectus which is required to be issued by the Company. The rights issue shares, as and when issued, shall rank pari passu with the existing ordinary issued share capital of the Company with respect to voting, dividends and other distributions whether on winding up or otherwise. The rights issue shares shall be issued in uncertificated form and shall be maintained in book-entry form at the Central Securities Depository of the Malta Stock Exchange ( CSD ). The said shares shall accordingly be evidenced by a book-entry in the register of shareholders held by the CSD. The bonus shares are expected to be issued on or around 4 February The Directors will be seeking authorisation from the Listing Authority for the rights shares to be considered admissible to listing and trading on a regulated market. In addition, application will also be made to the Malta Stock Exchange, as a regulated market, for the shares to be admitted to the Official List of the Malta Stock Exchange upon allocation. The shares are expected to be admitted to listing shortly after allocation on or around 4 February Dealings in the Bonus Shares on the Official List of the Malta Stock Exchange are expected to commence shortly following admission to listing as aforesaid. The Directors consider that the rights issue will have the benefit of providing the funds to the Company to part finance the METS Group Acquisition and increasing the capital base of the Company. The increase in capital per se should not present any particular risks other than those identified in connection with the METS Group Acquisition. The above mentioned dates are indicative and may be subject to change as set out in the prospectus to be issued by the Company in anticipation of the rights issue. Balance of Unissued and Authorised Equity Securities The Directors shall exercise the right to issue any remaining unissued but authorised Equity Securities (that is, after the issuance of the bonus shares and the rights issue) if they deem it in the best interests of the Company as a whole to issue however as at the date of this Circular there are no specific intentions to issue such Equity Securities. Validity Period This authorisation is valid for a maximum period of two (2) years from the date of the adoption of this extraordinary resolution. Directors Authority to Restrict or Withdraw Statutory Pre-Emption Rights The Board of Directors is proposing that it be granted the authority by the Company in General Meeting to restrict or withdraw the statutory pre-emption rights of the Company s Equity Securities holders. Such restriction or withdrawal is required if, for example, new Equity Securities are to be issued to a strategic investor. There is no intention of the Company, as at the date of this Circular, to exercise this right to restrict/withdraw shareholders pre-emption rights. Whereas such authority would always be exercised in the best interest of the Company, a restriction or withdrawal of these rights can lead to a dilution of existing shareholders. 12

14 7. DOCUMENTS AVAILABLE FOR INSPECTION Certified copies of the following documents will be available for inspection at the Company s registered office for a period of fourteen (14) days from the date of publication of this Circular: 7.1 the constitutional documents of each of the companies forming the METS Group; 7.2 the Memorandum and Articles of Association of the Company; 7.3 the share purchase agreement in respect of the acquisition of the METS Group; 7.4 the audited annual financial statements of each of METS Companies for the financial years ended 30 April 2013, 30 April 2014 and 30 April 2015; 7.5 the combined audited financial statements of the METS Group for the financial years ended 30 April 2015 and 30 April 2014; 7.6 the audited annual financial statements of the Company for the period ended 31 December 2014 and the unaudited half yearly financial report of the Company for the six month period 30 June 2015; and 7.7 this Circular. 13

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