Pan Pacific Aggregates PLC
02 May 2008
Pan Pacific Aggregates PLC
2 May 2008
Pan Pacific Aggregates Plc ('the Company' or 'PPA')
Circular to Shareholders regarding Proposed Acquisition, Fundraising, Increase
in Share capital, Share Consolidation and amendment to Share Scheme rules
The Board of Pan Pacific Aggregates Plc has today posted to shareholders a
circular containing, inter alia, a notice of Shareholders' general meeting
together with details of a proposed acquisition, fundraising, increase in
authorised share capital, share consolidation and amendment to Share Scheme
rules. The principal part of the text is reproduced below:
'PAN PACIFIC AGGREGATES PLC
7 Devonshire Square
To: The Shareholders
Date: 2 May 2008
You will find enclosed with this letter a notice (the 'Notice') convening a
Shareholders' meeting of Pan Pacific Aggregates Plc (the 'Company') to be held
on 27 May 2008 at the offices of Hammonds LLP, 7 Devonshire Square, London, EC2M
4YH at 10.00 am (the 'Meeting').
The purpose of the Meeting is for Shareholders to authorise the issue of
additional ordinary shares of the Company ('Shares') by the Directors for the
purposes of a proposed acquisition and fundraising (details of which are set out
in this letter) and to authorise the required increase in the authorised share
capital of the Company. Shareholders will also be asked to approve a resolution
to consolidate every ten ordinary Shares of £0.001 each in the capital of the
Company ('Existing Ordinary Shares') into one ordinary Share of £0.01 each ('
Consolidated Share') and to approve amendments to one of the Company's share
The Company has agreed in principle to acquire certain assets located close to
its existing principal place of business.
The Company was established to consolidate the mineral claims over land situated
on the Sechelt Peninsula, British Columbia, Canada and to develop these claims
in order to produce industrial minerals and construction aggregates with the aim
of serving local and global markets.
In order to further these aims, the Company has been in negotiations with
Columbia National Investments Ltd ('CNI') in relation to certain of its
aggregates and quarrying assets. The Company and CNI have entered into
non-binding heads of agreement whereby CNI intends to sell, and the Company
proposes to acquire, 100 per cent. of the share capital of two companies wholly
owned by CNI (the 'Acquisition'). The two entities are:
• Pumptown Quarry Inc. ('Pumptown'). This company operates a rock and
gravel quarry and an associated equipment and truck rental business; and
• CNI Equipment Ltd ('CNI Equipment'). This company, which leases and
operates quarrying equipment, would, by the time of the Acquisition, have also
assumed the responsibilities of lessee of other equipment currently leased by
Pumptown and Columbia National Forest Products Ltd, a company owned by Steve and
Herb Dunton (see the paragraph entitled 'Proposed new directors & CNI' below for
The consideration for the proposed Acquisition would be 80,000,000 Existing
Ordinary Shares (or 8,000,000 Consolidated Shares) and a cash payment of
CAN$400,000 at completion.
Information on the Acquisition
Pumptown has a rock and gravel quarry located in Abbotsford in British Columbia.
Historically these operations were included within CNI's overall results.
Unaudited management accounts for the period from 1 June 2007 to 31 March 2008
show total revenues of CAN$ 2,275,637 and an operating profit, after sale of
processed gravel and rock, of CAN$ 606,425. According to those accounts, the
total assets of Pumptown as at 31 March 2008 amounted to CAN$ 2,508,440, with
total liabilities of CAN$ 1,902,014, including a mortgage of CAN$ 1.6 million
secured on the quarry business.
CNI Equipment leases and operates certain quarrying equipment. On completion of
the Acquisition, it will also assume the obligations of lessee of other
equipment currently leased by Pumptown and Columbia National Forest Products
Ltd. CNI Equipment's unaudited management accounts for the period 1 September
2007 to 31 March 2008 show total revenues of CAN$ 32,077 and profit before tax
of CAN$ 18,752. According to those accounts, the total assets of CNI Equipment
as at 31 March 2008 amounted to CAN$ 406,706 with total liabilities of CAN$
387,954. The leases being transferred from Pumptown and Colombia National
Forest Products Ltd will, on completion, be operating leases and are therefore
not expected to impact on the enlarged Group's balance sheet. There are no
significant profits attributable to the leases being transferred from Columbia
National Forest Products Ltd. The profits from the leases being transferred
from Pumptown are currently accounted for in the accounts of Pumptown as
described above. The leased equipment includes excavators, trucks, bulldozers
and fixed quarrying equipment such as rock crushing and screening equipment. The
Company intends to utilise the equipment on both its own and third party
quarries and on appropriate remunerative third party assignments such as road
clearing with local authorities.
The detailed terms of the Acquisition are currently being negotiated and it is
anticipated that a binding agreement will be entered into with CNI shortly.
Completion of the Acquisition will be conditional on the passing of Resolutions
1 and 3 as set out in the Notice, which are required to be passed to authorise
the allotment of the Shares to be issued to CNI as part consideration under the
Acquisition. If issued on the date of this document, such Shares would be
equivalent to approximately 75 per cent. of the existing issued share capital,
comprising 106,587,847 Existing Ordinary Shares, or approximately 43 per cent.
of the enlarged issued share capital following completion of the Acquisition.
Proposed new directors & CNI
It is anticipated that the two owners of CNI, Steve and Herb Dunton, will join
the Board of the Company as non-executive directors following completion of the
Brothers Herb and Steve Dunton have been business partners since shortly after
high school graduation in the late 1970's. In 1988, after working together on
various house building and land assembly projects, they began to collaborate in
the real estate investment and development business.
Herbert James Dunton
Herb is President and co-founder of CNI, a land acquisition and development
company incorporated in British Columbia in 1992. He is a practising lawyer and
member of the Law Society of British Columbia and the Canadian Bar Association.
Herb was born and raised in Victoria, B.C., and graduated from Summit Pacific
College with a diploma in Theology, and Vanguard University in southern
California with a Bachelor's degree in History and Political Science. He
received his LL.B. (law degree) from the University of British Columbia.
Robert Stephen Dunton
Known by the name of Steve, Robert Stephen Dunton is the CEO and co-founder of
CNI and has worked at CNI since its formation.
Steve was born and raised in Victoria, B.C. He has been asked to serve as a
business advisor, facilitator, and public speaker to business leaders and
not-for-profit organisations locally and abroad and to government leaders in
Each of Herb and Steve Dunton are expected to enter into a letter of appointment
with the Company providing for him to become a non-executive director of the
Company immediately following the completion of the Acquistion for an initial
term of one year, following which either party may terminate the appointment on
three months' notice, not to expire earlier than the end of such intial term.
Neither of Herb and Steve Dunton will receive a fee in relation to their
appointment, but they will be entitled to reimbursement of their reasonable
The proposed new directors and the Acquisition would provide the Company with
the expertise, resources and equipment to allow it to support the development of
the enlarged Group whilst also providing some positive cash-flow.
In the unlikely event that the Acquisition fails to complete, the Board would
still intend to proceed with the increase in authorised share capital,
Fundraising, Consolidation and amendments to its share option scheme as
In order to integrate Pumptown and CNI Equipment, and to assist in the
development of the enlarged Group, the Company will be seeking to raise further
funds ('Fundraising') through, inter alia, the issue of its Shares. The
Fundraising will be conditional on the passing of Resolutions 1 and 4 being
proposed at the Meeting. Resolution 4 authorises the directors to allot Shares
for cash with an aggregate nominal amount of up to £154,151, other than on a
pro-rata basis to existing Shareholders. In addition to allowing options to be
granted under the Company's share option scheme (as described below), this
authority would allow the Directors to allot up to 8,000,000 Consolidated Shares
under the Fundraising.
Consolidation of share capital
The Company also proposes to consolidate the share capital of the Company so
that every ten Existing Ordinary Shares will be consolidated into one
Consolidated Share (the 'Consolidation'). Whenever as a result of the
Consolidation any Shareholder would become entitled to a fraction of a Share,
the articles of association of the Company provide that the Board may on behalf
of such Shareholders deal with the fractions as it thinks fit. In particular,
but without limitation, the Board may sell the Shares representing the fractions
for the best price reasonably obtainable to any person (including, where lawful,
the Company) and distribute the net proceeds of sale in due proportion among
those Shareholders (except that any amount otherwise due to a Shareholder, being
less than £10, may be retained for the benefit of the Company).
The Directors consider that the Consolidation and the resultant increase in the
price per Share will make the Consolidated Shares more attractive to investors.
Variation of share options
The Company has previously adopted two share option schemes, the Pan Pacific
Aggregates Plc Unapproved Share Option Scheme (the 'Pre-Float Scheme') and the
Pan Pacific Aggregates Plc Unapproved Share Option Scheme No. 2 (the 'No. 2
Scheme'). The Pre-Float Scheme was used to grant options prior to the flotation
of the Company on AIM, whereas the No. 2 Scheme was used to grant options after
the flotation of the Company. Options were granted under the Pre-Float Scheme
just before the flotation of the Company and under the No. 2 Scheme just after
the flotation of the Company. None of those share options have been exercised.
The rules of the No. 2 Scheme currently include a 5 per cent. (in relation to
that Scheme and any other executive share option scheme of the Company) and a 10
per cent. (in relation to that Scheme and any other employees' share scheme of
the Company) dilution limit (i.e. options to subscribe may not be granted over
more than 5 per cent. and 10 per cent. respectively of the issued ordinary share
capital of the Company in aggregate in any rolling 10 year period). The rules of
the No. 2 Scheme also provide that options will not normally be exercisable
within 3 years of grant.
In order to incentivise management, the Board, with the approval of the
remuneration committee, after holding a discussion with the Company's largest
shareholder, has proposed the following:
• all options previously granted by the Company under the Pre-Float
Scheme and the No. 2 Scheme which have not otherwise lapsed will be cancelled.
No further options will be granted under the Pre-Float Scheme;
• the rules of the No. 2 Scheme will be amended to replace the existing
dilution limits with a limit providing that in each case options to subscribe
may not be granted over more than 11 per cent. of the issued ordinary share
capital of the Company in aggregate in any rolling 10 year period; and
• the rules of the No. 2 Scheme will be amended to remove the provision
stating that options will not normally become exercisable within 3 years of
grant, although the remuneration committee may still choose to make the exercise
of an option subject to a performance target and/or a vesting schedule.
Under the rules of the No. 2 Scheme, the proposed amendments to the rules
require the approval of Shareholders by ordinary resolution.
Five resolutions are proposed for Shareholders to consider at the Meeting and
the enclosed Notice sets these out in full (the 'Resolutions'). By way of
• Resolution 1 increases the nominal amount of the authorised share
capital of the Company by the sum of £200,000 from £550,000 (divided into
550,000,000 Existing Ordinary Shares) to £750,000 (divided into 750,000,000
Existing Ordinary Shares). This is to accommodate future issues of Shares under
the Fundraising, the Acquisition and under the No. 2 Scheme;
• Resolution 2 proposes that every 10 Existing Ordinary Shares in the
capital of the Company will be consolidated into one Consolidated Share, and
that the Board may, on behalf of the Shareholders, deal with any fractions of
Shares as it thinks fit in accordance with article 4.2 of the Company's articles
• Resolution 3 gives the Directors authority to allot and grant options
to subscribe for Shares up to an aggregate nominal amount of £80,000 in
accordance with section 80 of the Companies Act 1985 (the 'Act') for the
purposes of the Acquisition.
• Resolution 4 gives the Directors authority to allot and grant options
to subscribe for Shares for cash in an aggregate nominal amount of £154,151
without having to offer the Shares to existing Shareholders on a pre-emptive
basis. This authority is required to allow the Fundraising to be undertaken and
options under the No. 2 Scheme to be granted; and
• Resolution 5 provides that the rules of the No.2 Scheme are amended as
set out above.
The above authority and power provided by Resolutions 3 and 4 are in addition to
the Directors' existing general authority to allot Shares up to a nominal amount
of £21,160, which was granted at the last annual general meeting on 3 May 2007.
The Resolutions will be proposed at the Meeting, which will be held at the
offices of Hammonds LLP, 7 Devonshire Square, London EC2M 4YH on 27 May 2008 at
10.00 am. A form of proxy is enclosed. Whether or not a Shareholder intends to
be present at the Meeting, the Shareholder is requested to complete, sign and
return the form of proxy to the Company's registrar, Computershare Investor
Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY, to be received
no later than 48 hours before the time appointed for the holding of the Meeting.
Please read carefully the notes enclosed at the end of this document.
Your Board of Directors considers that the Acquisition, the Fundraising, the
Consolidation and the amendments to the No. 2 Scheme are critical to the success
of the Company for the reasons stated above and accordingly are in the best
interests of the Company and most likely to promote the success of the Company
for the benefit of its Shareholders as a whole. The Directors unanimously
recommend that you vote in favour of all the proposed Resolutions as they and
their associates intend to do in respect of their own beneficial holdings and
associated holdings, amounting to 5,460,002 Existing Ordinary Shares
representing approximately 5.1 per cent. of the issued share capital of the
Pan Pacific Aggregates Plc'
Pan Pacific Aggregates Plc
William Voaden Tel: 020 7096 9580
Hanson Westhouse Limited
Louis Castro Tel: 020 7601 6100
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