A Quick Look at Keybridge Capital’s Off-market Takeover Bid for Yowie Group Ltd

An investment and financial services group, Keybridge Capital Limited (ASX: KBC) has a diversified portfolio of listed and unlisted investments/loan assets. As at 31st March 2019, the company’s unaudited after-tax Net Asset Backing was $0.0853 per share.

The company recently made a conditional off-market takeover bid for all of the fully paid ordinary shares in Yowie Group Ltd (ASX: YOW) (Yowie) for a consideration of 9.2 cents per share, representing a significant premium to the volume weighted average price (VWAP) of Yowie Shares over the past one, two and three months. The company has already lodged its Bidder’s Statement with ASIC to acquire all the ordinary shares in Yowie Group Ltd.

The company’s main purpose behind this offer is to protect the value of its investment in Yowie and to allow it to address the issues causing these losses within Yowie.

Keybridge Capital became the large shareholder in Yowie in early 2018, and since then, it has been trying to engage with the Board of Yowie to address the matters that Keybridge feels have been and still are the cause of the operating losses (US$27 million since 1 July 2015) incurred by Yowie. However, these attempts have essentially been rebuffed by the Yowie Board. As per the off-market takeover bid, the offer consideration would be paid in either cash or a combination of cash and Keybridge’s listed Convertible Redeemable Promissory Notes. This is subject to the overall level of acceptances by Yowie Shareholders.

Keybridge Capital believes that Yowie is a company that has systemic issues at the Board, management and operations level, which have led to a substantial loss in the shareholder value in recent years. This has manifested in the total comprehensive losses of A$27 million incurred since 1 July 2015 (when the Yowie Share price was $1.035). Although Yowie’s current Board has announced that they are seeking to deal with the issues that have caused these losses, after more than a year in the office, there does not seem to be a realistic prospect of Yowie becoming profitable in the near term. Yowie has suffered significant losses, which is accompanied by a calamitous share price decline from a closing price of $1.06 on 16 May 2016 to a closing price of 7 cents prior to the date of announcement of Keybridge’s takeover offer (on 13 March 2019). Keybridge has now determined to make this takeover offer in order to make changes at the Board, management and operational levels to address the issues causing these losses.

In February 2019, the company completed a $3.6 million capital raising via the issue of 3,598,953 Convertible Redeemable Promissory Notes (ASX: KBCPA) (CRPNs) at a face value of $1.00 each to professional/institutional investors. The funds raised will be applied towards the investment capital base of Keybridge.

As at 31st March 2019, the company had net assets of $13.440 million, which includes cash of $5.946 million. KBC currently holds 40,756,512 ordinary shares of Yowie Group, representing voting power of 18.717%.

At the time of writing, i.e. on 29th April 2019 AEST 02:00 PM, the stock of the company is trading at a price of A$0.053, with a market capitalisation of ~A$8.82 million.


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