Exergen merger with Cape Range Ltd

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In May 2013 Exergen, a privately owned company, announced that it had entered into a binding agreement to merge with the voluntarily suspended Cape Range Ltd. At the time, Exergen had 45,393,158 shares which had been issued.

Terms of agreement

The completion of the agreement would result in a major restructuring of the new Exergen's shareholdings. In addition to the 45,393,158 existing shares, a further 40 million shares would be issued to Exergen's existing shareholders ahead of the merger. Prior to the nmerger Exergen shareholders would have 85,393,158 shares. Then it is proposed Cape Range shareholders would be issued with 1 share for every two Exergen shares. This would add 42,696,579 new shares being issues. It is also proposed that a further 15 million shares be sold to "raise a minimum of $3,000,000 at an issue price of at least $0.20."

Following this it is proposed that Cape Range issue 412.5 million Cape Range shares comprising:

• "162.5 million fully paid ordinary shares at settlement; and

• 250 million shares (Deferred Consideration Shares) to be issued upon satisfaction of the following milestones in relation to the Pre-Commercial Demonstration Plant (PCDP):

• 125 million shares upon the execution of a lease with EBAC at Commercial Road, Morwell, Victoria and a site services deed with EBAC [Energy Brix Australia]] for the supply of services, including making available infrastructure to enable the construction, operation and maintenance of the PCDP; and

• 125 million shares upon the award of a government grant under a current joint Commonwealth and Victorian government initiative."

The implementation of agreement, Cape Range stated, "will result in the potential issue to Exergen shareholders of up to 412.5 million Cape Range shares, or approximately 87.7% of the expanded issued capital of Cape Range."

In a report analysing the proposed deal, RSM Bird Cameron Corporate noted that "current Exergen shareholders Elphinstone Nominees Pty Ltd and Albrecht will have an interest in CAG of 20.1% and 20.8% at settlement of the acquisition of Exergen, 22.0% and 22.8% should the Tranche 1 Deferred Consideration Shares be issued and 22.9% and 23.7% should both the Tranche 1 and Tranche 2 Deferred Consideration Shares be issued. Whilst neither shareholder will control CAG they are likely to have the ability to significantly influence the future direction of CAG."

RSM Bird noted that these percentage shareholding figures excluded consideration of any allocation to directors after the merger.

RSM Bird also noted that under the deal it was proposed that "18,500,000 performance rights to Mr Trevor Bourne (Exergen's Chief Executive Officer) at settlement (“Performance Rights”), which convert into fully paid ordinary CAG shares upon the achievement of the Performance Milestones."

Timeline

• May 16, 2013: Exergen announced that it had entered into a Binding Heads of Agreement to merge with Cape Range, an ASX listed company which was in voluntary suspension.
• July 12, 2013: Cape Range releases the notice of general meeting with the independent experts report on the proposed merger appended.

Articles and resources

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