Highly Dilutive Transaction to Insiders to Finance Investment in Undisclosed Related Party Not in Best Interests of the Company or Shareholders
TORONTO, Nov. 18, 2014 /CNW/ - Meson Capital Partners LLC who, together with certain of its affiliates ("Meson"), collectively represent one of the largest common shareholdings of Aberdeen International (TSX: AAB) ("Aberdeen" or the "Company") with current ownership of approximately 9% of Aberdeen's outstanding common shares today announced that it sent a letter to the President and CEO and the Board of Directors of Aberdeen as well as the TSX in response to pending transactions.
Meson believes that recently proposed transactions, which include a highly dilutive private placement to insiders and a transaction with an undisclosed related party, African Thunder Platinum Ltd., are not in the best interests of the Company or its shareholders and demands they be ceased immediately on their currently proposed terms.
The full text of letter follows:
November 18, 2014
DELIVERED BY E-MAIL
The Board of Directors of Aberdeen International Inc.
65 Queen Street West, Suite 815
Toronto, Ontario M5H 2M5
Attention: David Stein, President and CEO
Dear Mr. Stein:
I regret to be forced to file a public letter but your unwillingness to engage with me after repeated attempts has left me no alternative to address our concerns.
On November 11, 2014, Aberdeen International Inc. (the "Company") announced a $2 million private placement consisting of 10 million units comprised of one common share and one warrant each, to be sold for $0.20 per unit. Based on a Black-Scholes calculation using a 65% implied volatility (which is consistent with the Company's most recent financial statements), these five-year, $0.30 strike warrants are worth $0.09 each. If this proposed offering is completed, it would result in share dilution of 20 million shares or 23% of the approximately 87 million common shares currently outstanding. Assuming the warrants are valued (using Black Scholes) at $0.09 the effective consideration for the 10 million shares would be $0.11 or a 45% discount to the current market price of $0.20.
By way of background, between our fund and affiliates, we own approximately 7.8 million common shares of the Company, representing approximately 9.0% of the Company's currently issued and outstanding common shares. Based on the Company's press release of September 16, 2014, that indicated a NAV for the Company of $0.39 per common share, we believe that these shares are highly undervalued relative to the assets of the Company. We have significantly increased our stake over the last two months as we believe that the upcoming liquidity event with Landmark Equity Advisors, LLC previously announced by the Company should provide a number of capital allocation opportunities that may benefit shareholders.
On three occasions commencing on November 12, 2014, you received a term sheet reflecting significantly superior terms of $0.20 with only 0.5 of a $0.30 five year warrant per share or 25% less implied dilution and half the discount to the market price implied by the offering currently proposed by the Company. I understand that you rejected this superior offer and indicated that the deal was already spoken for by insiders of the Company.
Further troubling to us in connection with this private placement is the proposed transaction announced on the evening of November 14, 2014 whereby the Company would invest in African Thunder Platinum Ltd ("ATP"). From our research, ATP appears to be a related party to the Company, a fact that was not disclosed in the Company's press release announcing the transaction. ATP's parent company appears to be Great Lakes Capital Management Inc. which includes five of the seven Aberdeen board members (David Stein, Stan Bharti, Michael Hoffman, George Faught, and Bruce Humphrey) on its board and shares the same CEO as Aberdeen: David Stein.
We demand that you immediately cease the proposed $2 million private placement on its currently proposed terms for the following reasons:
1) You have a standing offer from us, an arms-length independent shareholder, with substantially superior terms.
2) The proposed offering, which you indicated in a phone conversation on November 13, 2014 would be subscribed for substantially by insiders and affiliates of the Company, would seem to violate TSX rules as it grants 23% of the total shares to insiders, in excess of the TSX's requirement for shareholder approval for private placements during any six-month period to insiders representing more than 10% of outstanding shares.
3) Your inadequate and misleading disclosure in connection with your involvement in potential related party transactions needs to be properly investigated so that all of your shareholders have a better understanding of your intentions for the Company.
Assuming the board has determined that it is in the best interests of the Company to pursue a financing transaction and assuming the Company would take action to better inform its shareholders of its plans, I would hope that the board would consider proceeding with this superior offer that would meet the same business objectives while at the same time being less dilutive to shareholders. Alternatively we would support a rights offering so that all shareholders may participate pro rata. Either of these alternatives would be substantially more accretive to shareholders than the proposed offering.
As a board you are required to act in the best interests of the Company. I am hopeful that you will take this duty seriously and reconsider your options before proceeding with a potentially illegal, dilutive and value destroying transaction.
Meson Capital Partners LLC
cc. Julie K. Shin, Director at Toronto Stock Exchange
Stan Bharti, Director
George D. Faught, Director
Bruce R. Humphrey, Director
Pierre Stewart Pettigrew, Director
Bernard Raymond Wilson, Director
Michael L. Hoffman, Director
About Meson Capital Partners LLC
Meson Capital Partners LLC, founded by Ryan Morris is a fund advisor that focuses on value and special situation opportunities founded in 2009. Meson has a track record of improving both governance and operations at publicly traded companies.
Cautionary Statement Regarding Forward-Looking Information
Certain information in this press release may constitute "forward-looking information", as such term is defined in applicable Canadian securities legislation, about the objectives and intentions of Meson as they relate to Aberdeen and Aberdeen shareholders and other matters. All statements other than statements of historical fact may be forward-looking information. Material factors or assumptions that were applied in providing forward-looking information, include, but are not limited to, Aberdeen's future growth potential, its results of operations, future cash flows, the future performance and business prospects and opportunities of Aberdeen and the current general regulatory environment and economic conditions remaining unchanged. Should any factor affect Aberdeen or Meson in an unexpected manner, or should assumptions underlying the forward-looking information prove incorrect, the actual results or events may differ materially from the results or events predicted. All of the forward-looking information reflected in this press release is qualified by these cautionary statements.
SOURCE: Meson Capital Partners LLC
For further information: Media Contacts: Ryan Morris President, Meson Capital Partners LLC, [email protected], 415-758-0365