Last checked at 2 Oct 2009 07:00
Upstream Marketing and Communications Inc.
("UPS" or the "Company")
Disposal of Business
Adoption of Investment Strategy
Change of Name
The Board of Upstream Marketing and Communications Inc. is pleased to announce that it has entered into a conditional agreement for the proposed disposal of Upstream Asia Limited and Camber Communications Limited (together "UAL"), the Company's wholly-owned BVI subsidiaries, to Asset Pioneer Limited (the "Buyer").
The Disposal is subject to Shareholder approval which will be sought at an Extraordinary General Meeting which is being convened for 26 October 2009, as this disposal would result in a fundamental change of business by the Group pursuant to Rule 15 of the AIM Rules. In addition, at the General Meeting, Shareholders will be asked to approve the Company's proposed investing policy following Completion in accordance with AIM Rule 15.
Commenting, Stephen Smith, Non-Executive Chairman of UPS, said: -
"The proposed sale by UPS of its public relations businesses is a positive development for shareholders. The historic performance of those businesses has been disappointing and has had an adverse effect on UPS's share price. The Board did not foresee performance improving markedly and has been considering various options to realize the value of the public relations businesses and make better use of shareholders' funds.
The businesses and the Upstream brand are being sold, and UPS's current CEO, David Ketchum, will continue in the business with a new strategic partner, Next Fifteen Communications Group plc ("Next Fifteen"). This sale was viewed as the best option to realize value for the businesses. We wish David and Next Fifteen well in this new chapter for Upstream.
The Company will use the sale proceeds to seek out investment opportunities in the natural resources sector in order to maximize value for shareholders. To reflect this change in strategic direction, the Company proposes to change its name to Hameldon Resources Limited."
Enquiries:
Upstream Marketing and Communications
David Ketchum
+852 2973 0222
Mr Nikul Sarin
+44 207 399 4381
Strand Partners Limited
James Harris/Angela Peace
+44 207 409 3494
The Board of UPS is pleased to announce that it has entered into a conditional sale agreement to sell the entire issued share capital of Upstream Asia Limited and Camber Communications Limited, the Company's wholly-owned BVI subsidiaries, to Asset Pioneer Limited for US$1,100,000 comprising cash of US$900,000 and the assumption of US$200,000 worth of liabilities by the Buyer ("Disposal").
UAL comprises all the existing public relations businesses of UPS. On completion of the Disposal, UPS will have no remaining interest in the public relations business and its sole asset will be the proceeds of the Disposal net of costs.
The Disposal constitutes a fundamental change of business of the Company under Rule 15 of the AIM Rules for Companies. Accordingly, completion of the Disposal is conditional, amongst other things, on the approval of Shareholders at an Extraordinary General Meeting of the Company, to be convened for 26 October 2009.
Your Board is also seeking Shareholder approval at the EGM to its proposed new investing strategy because, following the Disposal, the Company will be classified under the AIM Rules as an investing company.
1. Proposed Disposal
Following the appointment of Stephen Smith and Ilyas Khan to the Board on 6 June 2008, an independent committee of the Board was formed to consider the Company's current business and strategy. The committee considered, amongst other things, the Company's share price which has fallen since the reverse takeover of Upstream Asia Limited completed in October 2006 and the Company's poor financial performance generally together with its outlook for the future. The committee concluded that the Company's and the Shareholders' interests would be best served by disposing of UAL, the Company's public relations business, and adopting a new investing strategy to invest in businesses which would be expected to provide a greater enhancement in Shareholder value over the longer term.
Principal Terms of the Disposal
The Company has agreed to sell to the Buyer the entire issued share capital of Upstream Asia Limited and Camber Communications Limited, representing the Company's entire public relations business. The Buyer will pay to the Company US$900,000 in cash on completion and the Buyer will assume responsibility for US$200,000 worth of liabilities associated with the operations of UPS.
The Company has provided customary warranties as to its title to the shares in UAL (and its subsidiaries) and its authority to enter into the sale agreement. The Company has not given any warranties as to the trading of UAL. In addition the Company has agreed to indemnify the Buyer in respect of any liabilities of UAL, that have not been disclosed to the Buyer, and which were incurred by the Company's non-executive directors. Similarly, the Buyer has agreed to indemnify the Company against any liabilities that the Company may incur in respect of the UAL businesses.
Completion of the Disposal is conditional upon, amongst other things:
The conditions must be satisfied on or before 31 October 2009 failing which the agreement for the Disposal will lapse.
Financial contribution of UAL
Since UPS is an investment holding company, almost all of its profits and losses have been attributable to UAL. In the year ended 31 December 2008, UPS made a consolidated profit before tax of US$0.331 million (audited) (of which US$0.350 million came from the sale of the news release business) and in the six months to 30 June 2009 a loss before tax of US$0.402 (unaudited), in both cases almost entirely attributable to UAL. The unaudited net asset value of UAL as at 30 June 2009 was US$1.770 million, a decrease from US$3.451 million as at 31 December 2008.
2. Related Parties and sale on
The Buyer is wholly owned by Jane McGuire Ketchum who is both a director of UPS and a substantial shareholder, holding 14.61 per cent of the issued share capital of the Company. Jane McGuire Ketchum is married to David Ketchum, a director and substantial shareholder holding 14.87 per cent of the issued share capital of the Company. Under the AIM Rules the Buyer is, therefore, a related party.
The Buyer has conditionally agreed that upon completion of its acquisition of Upstream Asia Limited, Upstream Asia Limited will sell its shares in Upstream Limited, Upstream Asia (Singapore) Pte Ltd and Upstream Australia Pty Ltd (together "Target Companies") to Bite Asia Holdings Limited ("Ultimate Buyer"), which is owned as to 55% by Next Fifteen Communications Group plc (AIM: NFC.L) ("Next Fifteen") and as to 45% by the Buyer. The Buyer and Next Fifteen will enter into an option deed providing for Next Fifteen to acquire the Buyer's shares in the Ultimate Buyer over a five-year period, the pricing of which will depend upon the profitability of the Ultimate Buyer.
The consideration for the sale by the Buyer to the Ultimate Buyer of the Target Companies will be US$900,000 in cash plus payment of the US$200,000 worth of liabilities that the Buyer has assumed from UPS. This is an identical price to the sale by the Company to the Buyer of UAL including their respective subsidiaries. The reason for this is that, as described above, all of the revenue and profits of UAL are attributable to the Target Companies.
The Company is not selling UAL and its subsidiaries direct to the Ultimate Buyer because, amongst other reasons, of the Ultimate Buyer's requirements as follows:
(i) for a comprehensive package of warranties and indemnities from the Company; instead those warranties and indemnities are being given by the Buyer. One of the Board's objectives for the Disposal was to ensure that the Company was clear of liabilities relating to the public relations business following completion; this would not have been possible had the Company given the warranties and indemnities requested; and
(ii) that it does not want to acquire Upstream Asia Limited or any subsidiaries of Upstream Asia Limited other than the Target Companies nor does it wish to acquire Camber Communications Limited or its subsidiaries, as no revenues or profits are attributable to such companies. Upstream Asia Limited will be required by the Ultimate Buyer to wind up or dissolve the eight UAL companies not acquired by the Ultimate Buyer as soon as reasonably practicable after the sale to the Ultimate Buyer is completed. As a consequence these costs will be borne by the Buyer rather than the Company.
As a further condition of the sale to the Ultimate Buyer, David Ketchum will be required to be released from his existing service agreement with the Company and will enter into a service agreement with the Ultimate Buyer as well as providing a limited guarantee as to the warranties provided by the Buyer and also restrictive covenants in favour of the Ultimate Buyer. Jane McGuire Ketchum will also provide a similar guarantee and restrictive covenants in favour of the Ultimate Buyer.
In light of the above the Board (excluding David and Jane McGuire Ketchum) ("Independent Directors") having consulted with Strand Partners Limited, the Company's nominated adviser, unanimously consider the terms of the Disposal to be fair and reasonable insofar as the Company's Shareholders are concerned. In providing its advice, Strand Partners Limited has taken into account the Independent Directors' commercial assessments.
3. The Company's operations following the Disposal
Following the Disposal the Company will have no material liabilities other than its general overheads and expenses (including expenses incurred in relation to the Disposal).
The Company intends to use the funds available to it following the Disposal to provide working capital for the day-to-day administration of the Company and to make investments in accordance with its proposed investing strategy, further details of which are set out in paragraph 4 below.
4. Proposed investing strategy
The Company's proposed investing strategy is to acquire holdings in natural resources, minerals, metals and/or oil & gas companies which the Directors believe are undervalued and where one or more such transactions have the potential to create value for Shareholders. The Company expects to be an active investor but it will depend on the terms of each transaction.
If approved, the Company would seek to acquire interests in natural resources, minerals, metals, and/or oil & gas projects such as (without limit) exploration permits and licences, mining and production licences or processing and development projects, which may be achieved through acquisitions, partnerships or joint venture arrangements. Such investments may result in the Company acquiring the whole or part of a company or project. The Company's investments may take the form of equity, joint venture debt, convertible instruments, licence rights, or other financial instruments as the Directors deem appropriate.
The Directors believe that their broad collective experience in the areas of natural resources, acquisitions, accounting, corporate and financial management together with the opinion of consultant experts in the evaluation and exploitation of natural resources, minerals or metals projects, which will assist them in the identification and evaluation of suitable opportunities, will enable the Company to achieve its objectives. Where the Directors consider it necessary, internationally recognised competent persons will be commissioned to prepare reports on the projects being considered by the Company. The Directors may undertake the initial project assessments themselves with additional independent technical advice as required.
If the investing strategy is approved, there is no limit on the number of projects into which the Company may invest, and the Company will consider possible opportunities anywhere in the world, with a particular focus on Africa, South America, Australasia and central and eastern Europe. The Company intends to be an active investor.
Returns to shareholders are expected to be by way of dividends and growth in the value of the Company's shares. It is the Board's current intention to hold Investments for the long term.
The Company will have to make an acquisition or acquisitions which constitute a reverse takeover under the AIM Rules or otherwise implement its investing strategy within 12 months of the EGM, failing which the Company's Ordinary Shares would then be suspended from trading on AIM. If the Company's investing strategy has not been implemented within 18 months of the EGM then the admission to trading on AIM of the Company's Ordinary Shares would be cancelled and the Directors will convene a general meeting of the Shareholders to consider whether to continue seeking investment opportunities or to wind up the Company and distribute any surplus cash back to Shareholders.
5. Change of Name
At the EGM the Board will propose to change the name of the Company to better reflect the Company's new strategic direction. It is proposed that the name of the Company be changed to Hameldon Resources Limited.
6. EGM
The Disposal constitutes a transaction by the Company resulting in a fundamental change of business for the purpose of Rule 15 of the AIM Rules, and accordingly completion of the Disposal and the adoption of the investing policy following completion requires the consent of the Shareholders at an extraordinary general meeting.
A circular convening the EGM will be despatched later today. It is intended that the EGM will be convened for 10.00 a.m. (Dubai time) on 26 October 2009 to be held at Suite 1701, City Tower 2, Sheikh Zayed Road, Dubai, UAE.